Annual Report
2023
UBS Group
Our external reporting approach
The scope and content of our external reports are determined by Swiss legal and regulatory requirements, accounting
standards, relevant stock and debt listing rules, including regulations promulgated by 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.
At the center of our external reporting approach is the annual report of the UBS Group, which consists of disclosures for
UBS Group AG and its consolidated subsidiaries. Due to the acquisition of the Credit Suisse Group in 2023 and our Group
structure as of 31 December 2023, we also provide separate annual reports for UBS AG and for Credit Suisse AG, on a
sub-consolidated basis. The aforementioned three annual reports are the basis for the corresponding 2023 SEC Form
20-F filings for each entity.
Annual Reports
Sustainability Report
Standalone legal entity reports
Pillar 3 Report
Annual Reports
The UBS Group Annual Report 2023, UBS AG Annual Report 2023 and Credit Suisse AG Annual Report 2023 include
the consolidated financial statements of UBS Group AG, UBS AG and Credit Suisse AG, respectively, and together provide
comprehensive information about our Group, including strategy, businesses, financial and operating performance, and
other key information.
The consolidated financial statements of UBS Group AG and UBS AG have been prepared in accordance with IFRS
Accounting Standards. The sections within “Risk, capital, liquidity and funding, and balance sheet“ include certain
audited financial information, which forms part of the consolidated financial statements. The UBS Group and UBS AG
reports are presented in US dollars.
The consolidated financial statements of Credit Suisse AG have been prepared in accordance with US generally accepted
accounting principles (GAAP). The Credit Suisse AG report is presented in Swiss francs.
The UBS Group Annual Report 2023 is partly translated into German, with the German translation available under
“Annual reporting” at ubs.com/investors.
Sustainability Report
The UBS Group Sustainability Report 2023 provides disclosures on environmental, social and governance topics for the
UBS Group, UBS AG, Credit Suisse AG. UBS Switzerland AG, UBS Europe SE. Selected information on environmental,
social and governance is also included in our annual reports.
Standalone reports of UBS Group AG and significant regulated entities
We publish separate statutory financial statements 2023 of UBS Group AG, which are the basis for our appropriation of
profit and the proposed distribution of dividends, subject to shareholder approval at the Annual General Meeting. We
also publish standalone reports for UBS AG, UBS Switzerland AG, Credit Suisse AG and Credit Suisse (Schweiz) AG.
Selected financial and regulatory key figures for our significant regulated subsidiaries and sub-groups are also included
in this report.
Pillar 3 Report of UBS Group AG including significant regulated entities and sub-groups
The Pillar 3 Report as of 31 December 2023 provides detailed quantitative and qualitative information about risk, capital,
leverage and liquidity and funding for the UBS Group and prudential key figures and regulatory information for our
significant regulated subsidiaries and sub-groups. Scopes subject to disclosure are UBS Group AG consolidated, UBS AG
consolidated and standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated, UBS Americas Holding LLC
consolidated, Credit Suisse AG consolidated and standalone, Credit Suisse (Schweiz) AG consolidated and standalone,
Credit Suisse International standalone, Credit Suisse Holdings (USA), Inc. consolidated.
Contents
Letter to shareholders
2
9 Our key figures
12 Our Board of Directors
14 Our Group Executive Board
16 Our evolution
1 Our strategy, business model and
environment
17 Acquisition and integration of Credit Suisse
19 Our strategy
21 Targets, capital guidance and ambitions
22 Our businesses
32 Our environment
36 How we create value for our stakeholders
50 Regulation and supervision
55 Regulatory and legal developments
61 Risk factors
2 Financial and
operating performance
74 Accounting and financial reporting
75 Group performance
84 Global Wealth Management
87 Personal & Corporate Banking
90 Asset Management
Investment Bank
92
94 Non-core and Legacy
95 Group Items
3 Risk, capital, liquidity and funding,
and balance sheet
97 Risk management and control
158 Capital, liquidity and funding, and balance sheet
4 Corporate governance
and compensation
184 Corporate governance
222 Compensation
5 Financial
statements
271 Consolidated financial statements
6 Significant regulated subsidiary and sub-
group information
413
Financial and regulatory key figures for our significant
regulated subsidiaries and sub-groups
7 Additional
regulatory information
417 UBS Group AG consolidated supplemental disclosures
required under SEC regulations
A Appendix
425 Alternative performance measures
430 Abbreviations frequently used in our financial reports
432
433 Cautionary statement
Information sources
Dear shareholders,
2023 was a defining moment in the 162-year history of UBS. The acquisition of the Credit Suisse Group (Credit Suisse)
was momentous as the first-ever combination of two global systemically important financial institutions (G-SIFIs). As that
extraordinary weekend in March 2023 unfolded, the Swiss financial center was a source of worry, even embarrassment,
for many in the country. One of its largest banks was on the brink of collapse after years of reputational and financial
distress. Two days later, with UBS, the government found a Swiss solution that will benefit our stakeholders and
strengthen Switzerland’s role as a global leader in wealth management.
Thanks to our strategy focused on delivering outstanding client services, sustainable profitability, financial strength and
sound risk management, we were able to answer the call to help stabilize the financial system at home and abroad. The
Swiss government did not have to execute a resolution plan under the too-big-to-fail regulation, nationalize Credit Suisse
or call a foreign bank to the rescue. Aside from the idiosyncratic failure of Credit Suisse, the resilience of UBS and other
large institutions is a testament to the substantial regulatory reforms introduced, and coherently implemented, over the
past decade.
The transaction succeeded not just in restoring financial stability and preventing contagion. We are confident it will also
create enduring value for you, our shareholders. The acquisition vaulted us into a new league by giving us a highly
complementary footprint in our key markets and increased scale and capabilities. To that end, the acquisition has
accelerated – not changed – our existing strategy.
By adding client assets equivalent to seven to ten years’ worth of organic growth, the acquisition solidified our primacy
as a leading and truly global wealth manager and the leading bank in Switzerland, with stronger asset management and
investment bank franchises. The scale we achieve with the combination and the efficiencies we expect to create will
enable us to deepen our relationships with clients at every level in every geography. And as we position our firm to deliver
sustainably higher returns and long-term growth, we are committed to maintaining our UBS culture at the heart of
everything we do.
Building on a proven track record
Following the transaction, the Board of Directors asked Sergio Ermotti, who had previously served as Group CEO from
2011 to 2020, to return in April 2023. Sergio has committed to stay at least until the completion of the integration
process, if not longer. Additionally, he is supported by an executive team with a proven track record in managing and
executing complex restructuring and a qualified and experienced Board of Directors.
We recognize the extraordinary responsibility with which we have been entrusted with the Credit Suisse acquisition.
Although we expect to forego until 2027 the levels of profitability we have previously delivered, it reinforces the promising
long-term trajectory for our firm, our clients, our industry and the communities where we live and work.
The need to build scale and efficiencies to enhance capabilities and services for clients, often through inorganic growth,
is a reality for every company in every industry, and we are no exception. Dating back to its founding as The Bank in
Winterthur in 1862, UBS can claim a heritage of consolidation encompassing more than 500 different firms, from
cantonal and regional banks that needed saving, to wealth managers and Wall Street brokerages. Many of these
enterprises contribute to the DNA of today’s UBS. Credit Suisse, adding its own legacy brands such as Schweizerische
Kreditanstalt, First Boston, Bank Leu and Swiss Volksbank, joins a family of historic franchises, including PaineWebber,
S.G. Warburg, Swiss Bank Corporation and Union Bank of Switzerland, to name just a few.
Integration at pace
Since the acquisition closed in June 2023, we have been off to a strong start in enabling Credit Suisse’s market-
competitive franchises and talented people to flourish and make us even stronger. Our immediate focus was on stabilizing
Credit Suisse’s client base and employees. At the same time, we began swiftly executing our integration plans, which we
aim to substantially complete by the end of 2026.
We made significant progress on these ambitions in 2023. We decided to integrate Credit Suisse (Schweiz) AG, following
a careful review of strategic options, and defined the new Non-core and Legacy perimeter.
Annual Report 2023 | Letter to shareholders
2
We experienced robust momentum in our client win-back initiatives, as evidenced by net new assets of USD 77 billion in
Global Wealth Management and USD 77 billion of net new deposits across Global Wealth Management and Personal &
Corporate Banking since the close. This enabled us to terminate and hand back Swiss government support at the end of
August. We also repaid Credit Suisse’s emergency liquidity facilities, generating substantial funding cost efficiencies. We
were also encouraged by the high demand for our first additional tier 1 capital bond issue since the acquisition.
The support that investors extended to us during 2023 has given us confidence and energy as we embark on the next
phase of the integration. Total shareholder returns in 2023 were 56%1 including dividends, compared to a 7% return
for the Swiss Market Index2 and 20% for the STOXX Europe 600 / Banks.3 In addition, our cost of funding improved,
with 5-year credit default swap spreads for UBS AG tightening from 78 basis points at year-end 2022 to 53 basis points
at year-end 2023.
In 2024, we will continue to restructure and optimize the assets we acquired. Completing the merger of our significant
legal entities by the end of the third quarter of 2024, subject to regulatory approvals, is a key step in enabling us to
unlock the next phase of the cost, capital and funding synergies that we expect to realize in 2025 and 2026.
Our financial performance and capital position in 2023
UBS achieved underlying profitability in 2023, despite the fact that Credit Suisse was, and remains, structurally loss
making. Following the publication of our unaudited fourth quarter 2023 financial report on 6 February 2024, we have
refined our acquisition-date fair value estimates. This has resulted in certain adjustments to our financials. Full-year profit
before tax therefore stood at USD 28.7 billion, including USD 27.7 billion of negative goodwill. Capital strength is a key
pillar of our strategy, and we remain committed to maintaining a balance sheet for all seasons. Our common equity tier 1
(CET1) capital ratio increased to 14.4% at year-end, comfortably above our guidance as we expect to maintain a CET1
capital ratio of around 14% throughout the integration timeline. Our year-end CET1 ratio supports us in building capacity
for higher capital returns while, at the same time, it prepares us to absorb integration charges as we integrate Credit
Suisse. The CET1 leverage ratio was 4.6%, also in excess of our guidance. We maintained healthy liquidity buffers with
a liquidity coverage ratio of 216% and a net stable funding ratio of 125%.
Setting UBS’s trajectory for years to come
UBS today boasts an appealing business mix that stands out among global peers. The integration of Credit Suisse has
further shifted us toward Global Wealth Management, Asset Management and Personal & Corporate Banking. Over a
third of our risk-weighted assets (RWA) are dedicated to our Global Wealth Management and Asset Management
businesses, which are attractive from a risk, growth and capital perspective. These businesses generated 60% of our
revenues in 2023. Roughly another third of our RWA are in Personal & Corporate Banking in Switzerland, a prosperous,
stable and well-diversified economy with low historic credit losses.
In the Investment Bank, we have gained accretive expertise in global banking in key sectors such as technology, health-
care and financial sponsors. In markets, we bolstered our capabilities in services that are most relevant to our clients,
including execution and research coverage. While we now have a broader and more diversified business, we reduced the
overall weighting of the Investment Bank to no more than 25% of group RWA.
Our complementary footprints in Asia Pacific have reinforced our leading position in the fastest-growing wealth market.
With USD 645 billion in invested assets in Global Wealth Management, we have scale as the largest wealth manager in
the region, supported by our premium brand, a strong Investment Bank with leading research capabilities and our
significant China presence. We expect Global Wealth Management margins in the region to eventually exceed 40% as
we capture the benefits of our leadership positions and integration-related synergies.
In the US, our other key wealth management growth market, we have scope to improve our profitability, also thanks to
our strengthened investment bank and asset management franchises. In addition, over the next three years, we will build
out our core banking infrastructure in the US to provide clients with a more comprehensive loan and deposit offering,
and roll out more products and services to ultra high net worth, family and institutional wealth clients.
We will further leverage our advisory capabilities in the US through our global Chief Investment Office platform. Our
international clients who have interests in the US will benefit from better access to our American advisors and products.
These actions will help produce mid-teen profit margins by the end of 2026 and put us in a position to explore
opportunities to further narrow the gap to our peers.
1 Total shareholder returns based on shares in Swiss francs
2 Swiss Market Index SMI TR (SMIC), source: SIX Group AG
3 Based on delta price, source: FactSet
Annual Report 2023 | Letter to shareholders
3
Colm Kelleher
Chairman of the Board of Directors
Sergio P. Ermotti
Group Chief Executive Officer
Fit for the future
We intend to remain at the forefront of technological change, providing a more personalized, relevant, on-time and
seamless experience for our clients. We will continue to invest and innovate to benefit our clients and shareholders.
While we remain focused on providing world-class digital-led solutions, recent geopolitical, macroeconomic and societal
shifts have highlighted the relevance of our core values such as superior service, security and stability. We are convinced
that technology will continue to boost our ability to help our clients manage risks and capture opportunities in good
times as well as during moments of economic uncertainty and geopolitical instability.
Most importantly, however, it will be our employees that determine our future success as they continue to shape our
bank for clients and shareholders today and generations to come. We want our employees to be able to build long and
successful careers, driving innovation for our stakeholders. Investing in our people and culture therefore remains a key
priority. Together with Credit Suisse, we invested more than USD 100 million in training activities in 2023.
Our targets and capital returns
While our financial progress in the integration of Credit Suisse will not be delivered in a straight line, our ambitions are
clear. We aim to realize an underlying return on CET1 capital of around 15% and a cost-to-income ratio of less than
70% as we exit 2026. By the end of 2028, we endeavor to achieve a return on CET1 capital of around 18%. We expect
the execution of our integration plans and the run-down of Non-core and Legacy to result in around USD 13 billion in
gross cost saves by the end of 2026, with around 45% of the cumulative gross cost reductions expected by the end of
2024. This will provide us with capacity to invest in talent, products and services, and reinforce the resilience of our
infrastructure.
As we follow through on the integration, we remain focused on client retention and win-back initiatives, while also
taking actions to improve capital efficiency. We will aim to capture around USD 100 billion of net new assets per annum
through 2025, building to around USD 200 billion per annum by 2028 and surpassing USD 5 trillion of invested assets in
Global Wealth Management by the end of 2028.
In 2023, we bought back USD 1.3 billion of our shares before the acquisition required us to temporarily suspend share
repurchases. In 2024, we expect to repurchase up to USD 1 billion of our shares, commencing after the completion of
the merger of UBS AG and Credit Suisse AG, which is expected to occur by the end of the second quarter of 2024.
At the upcoming Annual General Meeting (AGM), the Board of Directors intends to propose an ordinary dividend per
share of USD 0.70 for the 2023 financial year, a 27% year-on-year increase. We remain committed to progressive
dividends and are accruing for a mid-teen percentage increase in the dividend per share for the 2024 financial year. Our
goal is for share repurchases to exceed our pre-acquisition levels by 2026.
Annual Report 2023 | Letter to shareholders
4
Our sustainability ambition
We remain steadfast in our ambition to be a global leader in sustainability. This is underpinned by our continued
commitment to supporting our clients in the transition to a low-carbon world, leading by example in our own operations,
and sharing our lessons learned along the way.
Recognizing the acquisition of Credit Suisse has increased our exposures to certain carbon-intensive sectors, we have
expanded our Sustainability & Climate Risk framework and associated processes to reflect the full suite of activities of the
combined business and ensure a consistent approach. We have also moved swiftly to transition portfolios in carbon-
intensive sectors that do not align with our approach and risk appetite into Non-Core and Legacy to be managed off our
balance sheet over time.
In addition, we have established new baselines and set decarbonization targets for 2030 across seven key sectors: fossil
fuels, power generation, iron and steel, cement, Swiss residential real estate, Swiss commercial real estate, and shipping,
using the latest science-based pathways available to us. We believe these targets are among the most ambitious in the
industry. By way of example, our target for the fossil fuel sector is to reduce our absolute financed emissions by 70%
from the 2021 baseline to 2030.
We are proud of the progress we have made so far. We remain committed to our ambition to achieve net-zero
greenhouse gas (GHG) emissions across our scope 1 and 2, and specified scope 3 activities by 2050, with decarbonization
targets for 2025, 2030 and 2035. At the same time, we fully acknowledge we have more work to do, in phasing in
additional scope 3 activities and further embedding our new targets. For more information, please refer to our UBS Group
Sustainability Report 2023.
By working collectively, philanthropists and public and private organizations have the potential to create lasting change
and maximize a positive impact for people and planet. To this end, we also provide comprehensive advice, insights and
execution services, working with our clients and finding ways to tackle some of the world’s most pressing social and
environmental problems. We aim to mobilize USD 1 billion in philanthropic capital and positively impact more than
26.5 million people by 2025 (cumulative total since 2021).
In 2023, the UBS Optimus network of foundations raised USD 328 million in donations, including UBS matching
contributions, and committed USD 306 million in grants from Optimus. Our engagement addressed humanitarian crises
around the globe in 2023. Optimus also continued to distribute the USD 56 million raised for the Ukraine Relief Fund
launched in 2022. To date, USD 43 million has been granted to our partners on the ground.
Lessons learned
The failure of Credit Suisse and some US regional financial institutions in the first half of 2023 will unquestionably provide
global investors, managers, policymakers and regulators alike with important lessons. Most of the post-mortems from
regulators and expert bodies since March 2023 have devised specific recommendations in the areas of supervision, stress
testing, liquidity and accountability. We endorse many of these targeted adjustments and will continue to actively
contribute to this discussion.
But having analyzed the causes of Credit Suisse’s troubles following the takeover, we have some clear takeaways. First,
there can be no regulatory solution for a broken business model. That is a job for executives and managers who must
also be held accountable by engaged shareholders. And second, trust cannot be regulated.
Furthermore, it was not a lack of capital that forced Credit Suisse into a historic weekend rescue. The capital requirements
for G-SIFIs have been transformed over the past 15 years, bolstering the resilience of the world’s largest banks and the
safety of the financial system. Effective loss-absorbing capacity increased around 20-fold since the 2008 global financial
crisis, and at our firm now is around USD 200 billion.
The fact that we were in a position to rescue Credit Suisse, despite both firms operating under the same regulatory
regime, shows the framework and capital requirements were not the problem. This has also been confirmed by various
international and domestic experts. Therefore, we welcome the ongoing analysis by the Swiss parliamentary commission
into the collapse of Credit Suisse, so that appropriate and focused actions can be taken both in respect of how regulation
is potentially fine-tuned and subsequently implemented.
Annual Report 2023 | Letter to shareholders
5
A pillar for Switzerland
There has been much debate about our size relative to the Swiss economy and its impact on competition. We are
convinced that our size and business model are fit for the purpose for which they are intended: to act as an engine of
credit creation and prosperity to our clients and the economies we serve.
It is important to consider the composition and risk profile of the balance sheet, as not every position represents the same
risk. We hold around 20% of total assets in high-quality liquid assets and another 15% in private client mortgages, which
bear very low risk. When looking at the risk profile of a balance sheet, it is crucial to look at risk-weighted assets, which
totaled around USD 547 billion at year-end and are expected to further decrease. We expect our Group RWA to be at
around USD 510 billion by the end of 2026, which are supported by our strong capital position, including around
USD 200 billion of loss-absorbing capacity.
The collapse of Credit Suisse unleashed an extraordinary race for clients, talent and market share in the Swiss banking
market. This is the ultimate proof that the competition provided by both domestic and foreign banks active in Switzerland
is robust.
Over the past decade, UBS, Credit Suisse and our combined staff paid around CHF 25 billion in Swiss taxes and bought
some CHF 3.5 billion in goods and services in Switzerland as well. Last year we collectively offered more than 2,300
trainee positions – a number we pledge to maintain in 2024 as well.
We are convinced that the acquisition will make us an even better diversified and stronger pillar in Switzerland, and an
even more reliable economic partner, employer and taxpayer in the communities where we operate.
The 2024 Annual General Meeting
At the upcoming AGM, we are proposing Gail Kelly for election to the Board of Directors as Dieter Wemmer will not
stand for re-election after eight years of Board membership. We thank him for his invaluable collaboration and significant
contribution to the strong governance at our firm. Gail has an outstanding reputation as one of the most influential
voices in the Asia-Pacific financial industry and an acknowledged leader. She is recognized as an excellent bank CEO who
successfully navigated a merger. You will also be asked to vote on our first combined UBS Group Sustainability Report
and the proposed increase in dividends.
We are excited about our long-term value proposition. Our strategy is clear and augmented by the acquisition of Credit
Suisse. We have an opportunity to create an even better experience for clients while generating sustainably higher returns
on capital and allowing us to provide you, our shareholders, with attractive shareholder returns.
Thank you for your support in one of the most decisive years in our history. We look forward to your feedback and to
welcoming you to the 2024 AGM, which will take place on 24 April in Basel, Switzerland.
Yours sincerely,
Colm Kelleher
Sergio P. Ermotti
Chairman of the Board of Directors
Group Chief Executive Officer
Annual Report 2023 | Letter to shareholders
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 in UBS AG and Credit
Suisse 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
PO 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
PO 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
PO Box 43006
Providence, RI, 02940-3006, USA
Shareholder online inquiries:
www.computershare.com/us/
investor-inquiries
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
More information about future publication dates is available at
ubs.com/global/en/investor-relations/events/calendar.html
Publisher: UBS Group AG, Zurich, Switzerland | ubs.com
Language: English
© UBS 2024. The key symbol and UBS are among the registered and
unregistered trademarks of UBS. All rights reserved.
Our key figures
As of or for the year ended
17.5
34,563
35,393
31.12.22
31.12.23
31.12.21
12.6
14.1
29
24,930
9,604
7,630
2.25
(148)
26,058
9,484
7,457
2.06
13.3
14.9
12.8
17.0
14.6
3.3
72.1
74.5
20.2
2.3
40,834
27,748
1,037
38,806
28,739
27,849
8.45
37.4
41.3
4.1
42.3
4.2
2.9
95.0
87.2
3.0
265.0
USD m, except where indicated
Group results
Total revenues
Negative goodwill
Credit loss expense / (release)
Operating expenses
Operating profit / (loss) before tax
Net profit / (loss) attributable to shareholders
Diluted earnings per share (USD)1
Profitability and growth2,3,4
Return on equity (%)
Return on tangible equity (%)
Underlying return on tangible equity (%)5
Return on common equity tier 1 capital (%)
Underlying return on common equity tier 1 capital (%)5
Return on leverage ratio denominator, gross (%)
Cost / income ratio (%)6
Underlying cost / income ratio (%)5,6
Effective tax rate (%)
Net profit growth (%)
Resources2
Total assets
Equity attributable to shareholders
Common equity tier 1 capital7
Risk-weighted assets7
Common equity tier 1 capital ratio (%)7
Going concern capital ratio (%)7
Total loss-absorbing capacity ratio (%)7
Leverage ratio denominator7
Common equity tier 1 leverage ratio (%)7
Liquidity coverage ratio (%)8
Net stable funding ratio (%)
Other
Invested assets (USD bn)3,9,10
Personnel (full-time equivalents)
Market capitalization11,12
Total book value per share (USD)11
Tangible book value per share (USD)11
1 Refer to “Share information and earnings per share” in the “Consolidated financial statements” section of this report for more information. 2 Refer to the “Targets, capital guidance and ambitions” section of this
report for more information about our performance targets. 3 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method. 4 Profit or loss information
for 2023 includes seven months (June to December 2023, inclusive) of Credit Suisse data for the return measures. 5 Refer to the “Group performance” section of this report for more information about underlying
results. 6 Negative goodwill is not used in the calculation as it is presented in a separate reporting line and is not part of total revenues. 7 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. 8 The disclosed ratios represent averages for the fourth quarter of each year presented, which were
calculated based on an average of 63 data points in the fourth quarter of 2023, 63 data points in the fourth quarter of 2022 and 66 data points in the fourth quarter of 2021. Refer to the “Capital, liquidity and
funding, and balance sheet” section of this report for more information. 9 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. 10 Starting with the second quarter of 2023, invested assets include invested assets from
associates in the Asset Management business division, to better reflect the business strategy. Comparative figures have been restated to reflect this change. 11 Refer to “UBS shares” in the “Capital, liquidity and
funding, and balance sheet” section of this report for more information. 12 In the second quarter of 2023, the calculation of market capitalization was amended to reflect total shares issued multiplied by the share
price at the end of the period. The calculation was previously based on total shares outstanding multiplied by the share price at the end of the period. Market capitalization has been increased by USD 7.8bn as of
31 December 2022 and by USD 5.5bn as of 31 December 2021 as a result.
1,117,182
60,662
45,281
302,209
15.0
20.0
34.7
1,068,862
4.2
155.5
118.5
1,104,364
56,876
45,457
319,585
14.2
18.2
33.0
1,028,461
4.4
163.7
119.8
1,717,246
86,108
78,485
546,505
14.4
16.9
36.5
1,695,403
4.6
215.7
124.7
5,714
112,842
107,355
26.83
24.49
3,981
72,597
65,608
18.30
16.28
4,614
71,385
66,684
17.84
15.97
3.4
73.6
21.1
13.7
Adjustment made within the IFRS 3 measurement period after publication of the fourth quarter 2023
report
The acquisition of the Credit Suisse Group in the second quarter of 2023 resulted in provisional negative goodwill of
USD 28.9bn. Following the publication of the unaudited fourth quarter 2023 report on 6 February 2024, UBS has
refined its acquisition-date fair value estimates in accordance with the 12-month measurement period requirements
provided by IFRS 3, Business Combinations. This has resulted in an adjustment of USD 1.2bn, decreasing the negative
goodwill to USD 27.7bn. As a result, 2023 operating profit before tax and 2023 net profit attributable to shareholders
decreased by USD 1.2bn, basic earnings per share decreased by USD 0.38 to USD 8.83 and diluted earnings per share
decreased by USD 0.36 to USD 8.45. In addition, the CET1 capital ratio decreased to 14.4% from 14.5%.
› Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section
of this report for more information
Annual Report 2023
9
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 Group Items. 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. Our underlying results are APMs and are non-GAAP financial
measures.
› Refer to the ”Group performance” section of this report and to “Alternative performance measures” in the appendix to this report
for additional information about underlying results
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 excluding the Credit Suisse AG sub-group”
UBS Group AG and its consolidated subsidiaries
All UBS Group entities, excluding the Credit Suisse AG
sub-group
“UBS Group excluding Credit Suisse” and “UBS sub-group” All UBS Group entities, excluding Credit Suisse AG and its
“UBS AG,” “UBS AG consolidated“ and “UBS AG sub-
group”
consolidated subsidiaries, Credit Suisse Services AG, and
other small former Credit Suisse Group entities now
directly held by UBS Group AG
UBS AG and its consolidated subsidiaries
“Pre-acquisition UBS”
UBS before the acquisition of the Credit Suisse Group
“Credit Suisse AG,” “Credit Suisse AG consolidated”
and “Credit Suisse AG sub-group”
Credit Suisse AG and its consolidated subsidiaries
“Credit Suisse Group” and “Credit Suisse Group AG
consolidated”
Credit Suisse Group AG and its consolidated subsidiaries,
before the acquisition by UBS
“Credit Suisse” and “Credit Suisse sub-group”
Credit Suisse AG, its consolidated subsidiaries, Credit
Suisse Services AG, and other small former Credit Suisse
Group entities now directly held by UBS Group AG
“UBS Group AG” and “UBS Group AG standalone”
UBS Group AG on a standalone basis
“Credit Suisse Group AG” and “Credit Suisse Group AG
standalone”
Credit Suisse Group AG on a standalone basis
“UBS AG standalone”
UBS AG on a standalone basis
“Credit Suisse AG standalone”
Credit Suisse AG on a standalone basis
“UBS Switzerland AG”
“UBS Europe SE consolidated”
“UBS Americas Holding LLC”
“Pre-acquisition Global Wealth Management”
“UBS AG Global Wealth Management”
“Wealth Management (Credit Suisse)”
UBS Switzerland AG on a standalone basis
UBS Europe SE and its consolidated subsidiaries
UBS Americas Holding LLC and its consolidated
subsidiaries
The UBS Global Wealth Management business division
before the acquisition of the Credit Suisse Group (data, if
any, from before the date of the acquisition of the Credit
Suisse Group)
The Global Wealth Management business division of UBS
AG and its consolidated subsidiaries
The Wealth Management business division of Credit
Suisse AG and its consolidated subsidiaries
Annual Report 2023
10
Terms used in this report, unless the context requires otherwise (continued)
“Pre-acquisition Personal & Corporate Banking”
“UBS AG Personal & Corporate Banking”
“Swiss Bank (Credit Suisse)”
“Pre-acquisition Asset Management”
“UBS AG Asset Management”
“Asset Management (Credit Suisse)”
“Pre-acquisition Investment Bank”
“UBS AG Investment Bank”
“Investment Bank (Credit Suisse)”
“1m”
“1bn”
“1trn”
The Personal & Corporate Banking business division
before the acquisition of the Credit Suisse Group (data, if
any, from before the date of the acquisition of the Credit
Suisse Group)
The Personal & Corporate Banking business division of
UBS AG and its consolidated subsidiaries
The Swiss Bank business division of Credit Suisse AG and
its consolidated subsidiaries
The Asset Management business division before the
acquisition of the Credit Suisse Group (data, if any, from
before the date of the acquisition of the Credit Suisse
Group)
The Asset Management business division of UBS AG and
its consolidated subsidiaries
The Asset Management business division of Credit Suisse
AG and its consolidated subsidiaries
The Investment Bank business division before the
acquisition of the Credit Suisse Group (data, if any, from
before the date of the acquisition of the Credit Suisse
Group)
The Investment Bank business division of UBS AG and its
consolidated subsidiaries
The Investment Bank business division of Credit Suisse AG
and its consolidated subsidiaries
One million, i.e., 1,000,000
One billion, i.e., 1,000,000,000
One trillion, i.e., 1,000,000,000,000
In this report, unless the context requires otherwise, references to any gender shall apply to all genders.
Annual Report 2023
11
Our Board of Directors
1. Colm Kelleher
Chairman of the Board of Directors / Chairperson of the
Corporate Culture and Responsibility Committee /
Chairperson of the Governance and Nominating Committee
2. Lukas Gähwiler
Vice Chairman of the Board of Directors /
member of the Governance and Nominating Committee /
member of the Risk Committee
3. Julie G. Richardson
Chairperson of the Compensation Committee /
member of the Risk Committee
4. Mark Hughes
Chairperson of the Risk Committee / member of the
Corporate Culture and Responsibility Committee
5. Jeremy Anderson
Senior Independent Director / Chairperson of the
Audit Committee / member of the Governance and
Nominating Committee
6. Nathalie Rachou
Member of the Governance and Nominating Committee /
member of the Risk Committee
7. Fred Hu
Member of the Governance and Nominating Committee
8. Dieter Wemmer
Member of the Audit Committee /
member of the Compensation Committee
9. Jeanette Wong
Member of the Audit Committee /
member of the Compensation Committee
10. William C. Dudley
Member of the Corporate Culture and
Responsibility Committee / member of the Risk Committee
11. Claudia Böckstiegel
Member of the Corporate Culture and
Responsibility Committee
12. Patrick Firmenich
Member of the Audit Committee / member of the
Corporate Culture and Responsibility Committee
4
5
6
7
8
10
11
12
9
2
1
3
The Board of Directors of UBS Group AG (the BoD), led by 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. It is also respon-
sible 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 re-
sponsibility 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 Group Executive Board (GEB) members.
12–13
Our Group Executive Board
UBS Group AG operates under a strict dual-board structure, as mandated by Swiss banking law, and therefore the BoD delegates the
management of the business to the GEB. As of 31 December 2023, the GEB, under the leadership of the Group CEO, consisted of
16 members. It has executive management responsibility for the steering of the Group and its business, develops the strategies of the
Group, business divisions and Group Items, 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 the members of the BoD and the GEB
10
4
2
3
11
12
13
5
1
6
14
15
7
16
9
8
1. Sergio P. Ermotti
Group Chief Executive Officer
2. Naureen Hassan
President UBS Americas
3. Suni Harford
President Asset Management
4. Robert Karofsky
President Investment Bank
5. Iqbal Khan
President Global Wealth Management
6. Sabine Keller-Busse
President Personal & Corporate Banking and
President UBS Switzerland
7. Beatriz Martin Jimenez
Head Non-core and Legacy and
President UBS Europe, Middle East and Africa
8. Barbara Levi
Group General Counsel
9. Edmund Koh
President UBS Asia Pacific
10. Mike Dargan
Group Chief Operations and Technology Officer
11. Stefan Seiler
Head Group Human Resources &
Group Corporate Services
12. Michelle Bereaux
Group Integration Officer
13. Todd Tuckner
Group Chief Financial Officer
14. Christian Bluhm
Group Chief Risk Officer
15. Markus Ronner
Group Chief Compliance and Governance Officer
16. Ulrich Körner
CEO of Credit Suisse AG
14 –15
Our evolution
Since our origins in the mid-19th century, more than 500 different firms 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. Since 1964, we have been building our strong presence in the Asia Pacific
region, where we are by far the largest wealth manager,1 with asset management and investment banking capabilities.
After incurring significant losses in the 2008 financial crisis, we sought to return to our roots, emphasizing a client-centric
model that requires less risk-taking and capital. In 2011, we started a strategic transformation of our business model to
focus on our traditional businesses: wealth management globally, and personal and corporate banking in Switzerland.
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, our Germany-headquartered
European subsidiary. In 2019, we merged UBS Limited, our UK-headquartered subsidiary, into UBS Europe SE.
2023 was another defining moment in our 162-year history as we acquired the Credit Suisse Group, a global systemically
important financial institution and a major wealth manager headquartered in Switzerland that was founded in 1856. The
acquisition followed a request from the Swiss Federal Department of Finance, the Swiss National Bank and the Swiss
Financial Market Supervisory Authority (FINMA) to UBS Group AG and Credit Suisse Group AG to duly consider the
acquisition in order to restore necessary confidence in the stability of the Swiss economy and banking system and to
serve the best interests of the shareholders and stakeholders of UBS and Credit Suisse.
The acquisition strengthened our position today as a leading and truly global wealth manager, the leading bank in
Switzerland, a global, large-scale and diversified asset manager, and a focused investment bank.
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
› Refer to the “Acquisition and integration of Credit Suisse” section of this report for more information
The legal structure of the UBS Group
UBS Group AG
100%
UBS AG (sub-)consolidated
Credit Suisse AG (sub-)consolidated
UBS AG
100%
Credit Suisse AG
100%
98%
UBS
Switzerland AG
UBS Americas
Holding LLC
UBS Europe SE
UBS Asset
Management AG
Other non-US
subsidiaries¹
Credit Suisse
(Schweiz) AG
Credit Suisse
Holdings (USA), Inc.
Credit Suisse
International²
100%
UBS Americas Inc.
100%
Other
subsidiaries
Other
participations
UBS Business
Solutions AG
Credit Suisse
Services AG5
UBS Bank USA
UBS Business
Solutions US LLC
UBS Financial
Services Inc.
UBS Securities LLC ³
Other US
subsidiaries 4
1 Other non-US subsidiaries are generally held either directly by UBS AG or indirectly through UBS Switzerland AG or UBS Asset Management AG. 2 Of which 98% held by Credit Suisse AG and 2% held by UBS
Group AG. 3 Of which 99% directly held by UBS Americas Inc. and 1% held by UBS Americas Holding LLC. 4 Other US subsidiaries are generally held either directly by UBS Americas Inc. or indirectly through
UBS Financial Services Inc. 5 And other small former Credit Suisse Group entities now directly held by UBS Group AG.
1 Asian Private Banker, 23 January 2024.
Annual Report 2023
16
Our strategy, business model
and environment
Management report
Acquisition and integration of Credit Suisse
Acquisition of Credit Suisse
On 12 June 2023, UBS Group AG acquired Credit Suisse Group AG, succeeding by operation of Swiss law to all assets
and liabilities of Credit Suisse Group AG, and became the direct or indirect shareholder of all of the former direct and
indirect subsidiaries of Credit Suisse Group AG (the Transaction).
The acquisition followed a request from the Swiss Federal Department of Finance, the Swiss National Bank and the Swiss
Financial Market Supervisory Authority (FINMA) to both firms to duly consider the Transaction in order to restore necessary
confidence in the stability of the Swiss economy and banking system and to serve the best interests of the shareholders
and stakeholders of UBS and Credit Suisse. As a result of further negotiations and supported by distinct government
guarantees and measures, the firms subsequently entered into a merger agreement on 19 March 2023.
Upon the completion of the Transaction, each outstanding registered Credit Suisse Group AG share converted to the
right to receive, subject to the payment of certain fees to the Credit Suisse Depositary in the case of Credit Suisse
American depositary shares (ADS), a merger consideration consisting of 1/22.48 UBS Group AG shares. In aggregate,
Credit Suisse Group AG shareholders received 5.1% of the outstanding UBS Group AG shares on the acquisition date,
with a purchase price of USD 3.7bn.
UBS has accounted for the acquisition as a business combination under IFRS 3, Business Combinations, applying the
acquisition method of accounting.
› Refer to “Note 1 Summary of material accounting policies” and “Note 2 Accounting for the acquisition of the Credit Suisse Group”
in the “Consolidated financial statements” section of this report
Integration of Credit Suisse
We are successfully executing our integration plans. We have stabilized the franchise and successfully won back, retained
and grown client assets, as we have been entrusted with USD 77bn of net new assets since the acquisition. We achieved
underlying profitability, which enabled us to pay down the extraordinary liquidity support and to voluntarily terminate
the loss protection agreement guaranteed by the Swiss government, reducing our funding costs by around USD 550m
per quarter. On 22 March 2024, Credit Suisse (Schweiz) AG repaid loans drawn under the Emergency Liquidity Assistance
(ELA) facility, reducing the amount of loans outstanding under the ELA from CHF 38bn to CHF 19bn as of that date. We
achieved around USD 4bn in exit rate gross cost savings as of the end of 2023 compared with the full year 2022 for UBS
and the Credit Suisse Group combined. We established the perimeter for Non-core and Legacy, and our strategy for the
wind-down of Non-core and Legacy led to reductions of USD 12bn in risk-weighted assets, nearly 80% of which came
from unwinds. We also provided important clarity for all of our stakeholders as we finalized our target operating model
and initiated the restructuring phase. We aim to substantially complete the integration by the end of 2026.
Beginning with the third quarter of 2023, we report five business divisions, reflecting the way we manage our businesses
and engage with clients: Global Wealth Management, Personal & Corporate Banking, Asset Management, the Investment
Bank, and Non-core and Legacy. We separately report Group Items.
Non-core and Legacy includes positions and businesses not aligned with our strategy and policies. Those consist of the
assets and liabilities that prior to the acquisition were reported as part of the Capital Release Unit (Credit Suisse) and
certain assets and liabilities of the Investment Bank (Credit Suisse), Wealth Management (Credit Suisse), Swiss Bank
(Credit Suisse) and Asset Management (Credit Suisse) divisions, as well as of the Corporate Center (Credit Suisse). Also
included are the remaining assets and liabilities of UBS’s Non-core and Legacy Portfolio, previously reported in Group
Functions, and smaller amounts of assets and liabilities of UBS’s business divisions that we have assessed as not strategic
in light of the acquisition of the Credit Suisse Group.
Legal structure integration
In December 2023, the Board of Directors of UBS Group AG approved the merger of UBS AG and Credit Suisse AG, and
both entities entered into a definitive merger agreement. The completion of the merger is subject to regulatory approvals
and is expected to occur by the end of the second quarter of 2024. We also expect to complete the transition to a single
US intermediate holding company in the second quarter of 2024 and the planned merger of UBS Switzerland AG and
Credit Suisse (Schweiz) AG in the third quarter of 2024.
Annual Report 2023 | Our strategy, business model and environment | Acquisition and integration of Credit Suisse
17
Completing the mergers of our significant legal entities is a critical step in enabling us to unlock the next phase of the
cost, capital and funding synergies that we expect to realize in 2025 and 2026. These significant-legal-entity mergers are
a prerequisite for the first wave of client migrations and will enable us to begin streamlining and decommissioning legacy
Credit Suisse platforms in the second half of 2024.
Material weaknesses in internal control over financial reporting of the Credit Suisse Group
As a registrant with the US Security and Exchange Commission (the SEC), UBS Group is subject to requirements under
the Sarbanes–Oxley Act of 2002 with respect to financial reporting. This requires us to perform system and process
evaluation and testing of internal control over financial reporting to enable management to assess the effectiveness of
our internal controls. A material weakness is a deficiency or a combination of deficiencies in internal control over financial
reporting such that there is a reasonable possibility that a material misstatement of a registrant’s financial statements will
not be prevented or detected on a timely basis.
In March 2023, prior to acquisition by UBS, the Credit Suisse Group and Credit Suisse AG disclosed that their respective
management had identified three material weaknesses in internal control over financial reporting, as a result of which
each of Credit Suisse Group and Credit Suisse AG concluded that, as of 31 December 2022, their internal control over
financial reporting was not effective and, for the same reasons, had reached the same conclusion regarding their internal
control over financial reporting as of 31 December 2021. The material weaknesses identified by Credit Suisse related to
the failure to design and maintain an effective risk assessment process to identify and analyze the risk of material
misstatements in Credit Suisse financial statements and the failure to design and maintain effective monitoring activities
relating to (i) providing sufficient management oversight over the internal control evaluation process to support the
company’s internal control objectives; (ii) involving appropriate and sufficient management resources to support the risk
assessment and monitoring objectives; and (iii) assessing and communicating the severity of deficiencies in a timely
manner to those parties responsible for taking corrective action. These material weaknesses contributed to an additional
material weakness, as the Credit Suisse Group’s management did not design and maintain effective controls over the
classification and presentation of the consolidated statement of cash flows under US Generally Accepted Accounting
Principles (“US GAAP”). Specifically, certain control activities over the completeness and the classification and
presentation of non-cash items in the consolidated statement of cash flows were not performed on a timely basis or at
the appropriate level of precision. This material weakness resulted in the revisions to Credit Suisse Group’s consolidated
financial statements for the three years ended 31 December, 2021 as disclosed in its 2021 Annual Report.
Following the identification of the material weaknesses, Credit Suisse management initiated a remediation program and
further enhanced its processes and controls over financial reporting, with the key remediation steps to date as follows.
With respect to the material weakness relating to the US GAAP consolidated statement of cash flows, Credit Suisse
management performed a review of the process to produce the statement, including a third-party review and, as a result,
enhanced controls within the process and implemented additional controls, including senior management reviews. Based
on the work completed to date, Credit Suisse management has assessed that the changes to internal control made to
address the material weakness relating to the classification and presentation of the consolidated statement of cash flows
are designed effectively, but that additional time is required to conclude that these controls are operating effectively on
a sustainable basis.
With respect to the material weaknesses on risk assessment of internal control and severity assessment of control
deficiencies, Credit Suisse has implemented an enhanced severity assessment framework and additional management
oversight of severity assessments. The changes to the severity assessment process include updated training and guidance
on the assessment of the severity of control deficiencies as well as increased management oversight and quality assurance
over these assessments. In addition, Credit Suisse has augmented its risk assessment process and increased its testing of
controls. UBS has determined to complete remediation of the internal control risk identification and severity assessment
weaknesses by integrating Credit Suisse into the UBS internal control risk assessment and evaluation framework in 2024.
The operating effectiveness of the risk and severity assessment processes will be assessed based on an evaluation of the
2024 risk assessment and control testing process. In light of the above, Credit Suisse management has concluded that
the material weaknesses at Credit Suisse were not fully remediated at 31 December 2023.
The material weaknesses result in a risk that a material error may not be detected by Credit Suisse’s internal controls that
could result in a material misstatement to Credit Suisse’s reported financial results, which are consolidated in UBS Group
AG’s results.
Annual Report 2023 | Our strategy, business model and environment | Acquisition and integration of Credit Suisse
18
Following the acquisition, UBS commenced a review of the processes and systems giving rise to the material weaknesses
and the remediation program. In addition to the measures taken by Credit Suisse to remediate the material weaknesses
described above, UBS has taken measures to mitigate the risk that internal control deficiencies at Credit Suisse could
result in material misstatements to the UBS Group financial statements. UBS has separately tested Credit Suisse internal
controls deemed higher risk, established processes for production, control and review of IFRS financial data from Credit
Suisse’s US GAAP based accounting systems for inclusion in the UBS Group consolidation process (including a separate
process for preparation and control of the UBS Group consolidated statement of cash flows), and conducted detailed
asset level valuation and substantiation reviews in connection with its purchase accounting.
Under guidance published by the SEC, companies are permitted to exclude the processes and controls of certain acquired
businesses from their assessment of internal control over financial reporting during the year of acquisition. Accordingly,
UBS has excluded Credit Suisse entities from UBS management’s assessment of internal control over financial reporting
as of 31 December 2023.
Our strategy
UBS – who we are
UBS is a leading and truly global wealth manager, enhanced by synergetic investment banking and asset management
capabilities, and the leading bank in Switzerland. We enable people, institutions and corporations to achieve their goals
by providing financial advice and solutions. We have a unique capital-generative and well-diversified business model with
a strong competitive position in our target markets and an attractive long-term outlook on return on capital. Our business
model, our strong culture, our respected brand with over 160 years of history and our capital prudence have made it
possible to both grow profits and deliver high return on equity.
We are focused on driving sustainable long-term growth while maintaining risk and cost discipline
Our objective is to generate value for our shareholders and clients by driving sustainable long-term structural growth, as
well as capital returns. To accomplish this, we are building on our scale, content and solutions, while remaining disciplined
on capital, risk and costs. Maintaining a balance sheet for all seasons remains the foundation of our success. This will
give us the capacity to invest strategically and will enable us to deliver against our financial targets and commercial
ambitions, which are outlined in the “Targets, capital guidance and ambitions” section of this report.
We benefit from an attractive business mix, with more than one-third of our risk-weighted assets (RWA) in our global
asset-gathering Global Wealth Management and Asset Management business divisions, which are structurally attractive
from the risk, growth and capital consumption perspectives and generate more than half of our revenues. Roughly
another third of our RWA are in Personal & Corporate Banking in Switzerland, an attractive, stable and well-diversified
economy with low historic credit losses. Furthermore, we operate a capital-efficient Investment Bank business division,
which is limited to less than 25% of Group RWA (excluding Non-core and Legacy).
Moreover, we are aiming to maximize our impact and that of our clients to create long-term sustainable value. We also
have a responsibility toward the communities we serve and our employees. We have outlined selected environmental,
social and governance (ESG) aspirations, which should support our financial and commercial targets.
The acquisition of the Credit Suisse Group is accelerating our strategy
The acquisition of the Credit Suisse Group enhances our client franchises by increasing scale while adding complementary
capabilities and gaining talent. Our strategic focus remains on building out our leading global investment platform. The
acquisition of the Credit Suisse Group enables us to combine and optimize our resources and to target investments that
enable us to provide superior levels of client service. Our geographical growth segments will remain the Americas and
Asia Pacific, with Switzerland remaining our home market. The acquisition of the Credit Suisse Group will further shift
our business mix toward wealth management, asset management and our Swiss business. The acquisition also
strengthens our investment banking capabilities, without compromising our model, as the Investment Bank will consume
a limited share of the Group’s RWA.
Annual Report 2023 | Our strategy, business model and environment | Acquisition and integration of Credit Suisse
19
We have a global, diversified business model
Our invested assets of more than USD 5trn are regionally diversified across the globe. We give our clients access to a
broader, more relevant and customizable range of solutions, which, together with our thought leadership and
capabilities, position us well to become their partner of choice. Our strategic ambitions are a reflection of the outlook on
long-term demographic and social trends affecting wealth distribution, product demand and client experience.
Regionally, more than half of our wealth management clients’ invested assets are in the US, which is the largest wealth
pool globally, with solid wealth generation. Here we are a top player, and we are focused on improving scale and
profitability by deepening our relationships with core clients and by building out our digital-supported capabilities and
banking platform.
In Asia Pacific, which is the fastest-growing wealth market, we are by far the largest wealth manager,1 and we are
building on that scale to drive growth. We are further developing our businesses in China and working to offer our
capabilities in a more cohesive way to our clients in Southeast Asia.
In EMEA, we are focused on improving profitability and driving focused growth by optimizing our domestic footprint and
providing holistic coverage for entrepreneurs.
Finally, in Switzerland, we have a highly integrated business and aim to reinforce our position as the leading bank. We
are driving our digital transformation, improving the client experience and focusing on capturing selected growth
opportunities.
Our growth plans are underpinned by cross-divisional collaboration
We want to serve our clients as one firm. The collaboration between our business divisions is critical to the success of our
strategy and is a source of competitive advantage. This collaboration also provides further revenue growth potential and
enables us to better meet client needs in our core wealth and global family and institutional wealth (GFIW) segments
alike. Our Asset Management business division provides clients with a broad offering and exclusive access to premium
personalized services, while our investment banking capabilities support our growth plans across the client franchise with
unique insights, execution, and risk management. Close collaboration between our businesses adds value for clients,
including access to private markets, alternatives and ESG products, and we are continuously striving to enhance our
holistic client offering.
Clients are at the center of everything we do
Helping clients to achieve their financial and personal goals is the essence of what we do. We aim to differentiate our
service by delivering a client experience that is personalized, relevant, on-time and seamless. This is our promise to clients.
With evolving client needs, we are adapting by making our wealth coverage more needs-based, digital and effective. In
wealth management, our focus remains on our core wealth and GFIW clients, while expanding our coverage of
entrepreneurs, women and the next generation of wealthy individuals. We are launching and scaling digitally
customizable services, enhancing personally advised wealth with digital support, and expanding our custom offerings for
GFIW to cater for the different needs of our clients.
› Refer to “Clients” in the “How we create value for our stakeholders” section of this report for more information
Sustainability drives our ambitions
We partner with our clients to help them mobilize their capital toward a more sustainable world. Our aim is to meet
clients’ demands for credible sustainable offerings. We want to be the financial provider of choice for clients that wish
to mobilize capital toward the achievement of the United Nations Sustainable Development Goals and the orderly
transition to a low-carbon economy, including in Switzerland, where, as the leading bank, we are helping to finance this
transition.
We are investing in our technology as an enabler for client experience, simplicity and efficiency
The trusted and personal relationship with our clients across our businesses is evolving. Today, our clients expect us to
provide our services more seamlessly across the firm in a personalized, relevant and timely fashion, with increasing
demand for services that are digital first and available anytime and anywhere. This presents an opportunity for us to fully
embrace technology, through which we aim to differentiate the firm.
We continue to invest in technology, such as Artificial Intelligence, with the goals of improving efficiency and
effectiveness, driving and enhancing growth and better serving our clients. We believe the continued optimization of our
processes, our platforms, our organization and our capital resources will help us to achieve this.
1 Asian Private Banker, 23 January 2024.
Annual Report 2023 | Our strategy, business model and environment | Our strategy
20
Targets, capital guidance and ambitions
In February 2024, we announced our performance targets and capital guidance for the Group, based on our execution
of the integration of Credit Suisse to date and the completion of our annual business planning process. We have also set
ambitions for each of the business divisions that collectively are building blocks toward achieving our targets.
The graphic below shows our updated financial targets, capital guidance and long-term ambitions.
Financial
targets
Capital
guidance
Ambitions
long term
~15%
Underlying return on
CET1¹ capital
2026 exit rate
~14%
CET1¹ capital ratio
~18%
Reported return on
CET1¹ capital
by 2028
<70%
Underlying cost / income
ratio
2026 exit rate
>4.0%
CET1¹ leverage ratio
>5trn
Invested assets in Global
Wealth Management, in USD
by 2028
1 Common equity tier 1.
We also aim to deliver exit rate gross cost savings of approximately USD 13bn by the end of 2026 compared with the full
year 2022 for the combined organizations. Gross cost savings will create capacity to reinvest for growth and to enhance
the resilience of our infrastructure.
We expect Group risk-weighted assets (RWA) to be around USD 510bn by the end of 2026, assuming constant foreign
exchange rates, including an estimated USD 25bn day-1 increase for the finalization of Basel III in 2025 (of which
USD 10bn in Non-core and Legacy) and an increase of around USD 10bn in our core businesses from the alignment of
Credit Suisse’s risk models to those of UBS. We expect to offset these increases with RWA reductions in Non-core and
Legacy, with the remaining portfolio there representing around 5% of Group RWA at the end of 2026. We also expect
a further net decrease in RWA of around USD 15bn resulting from business-led actions to optimize returns on RWA in
our core businesses.
Additionally, we expect up to USD 1bn of funding cost savings by 2026 compared with 2023 levels.
Our business divisions aim to achieve the following.
– Global Wealth Management: surpass USD 5trn of invested assets over the next five years, with around USD 100bn of
net new assets annually through 2025, building to around USD 200bn annually by 2028, and an underlying cost /
income ratio of less than 70% by the end of 2026 (exit rate).
– Personal & Corporate Banking: an underlying cost / income ratio of less than 50% by the end of 2026 (exit rate).
– Asset Management: an underlying cost / income ratio of less than 70% by the end of 2026 (exit rate).
– The Investment Bank: an underlying return on attributed equity of approximately 15% through the cycle, while
operating with no more than 25% of the Group’s RWA (excluding Non-core and Legacy).
– Non-core and Legacy: an underlying pre-tax loss of less than USD 1bn (exit rate), underlying costs of less than USD 1bn
(exit rate) and a share of around 5% of Group RWA, all by the end of 2026.
Our aspirations on environmental, social and governance (ESG) matters are set forth in “Our focus on sustainability and
climate” in the “How we create value for our stakeholders” section of this report.
Performance against targets, capital guidance and ambitions is taken into account when determining variable
compensation.
› 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
Annual Report 2023 | Our strategy, business model and environment | Targets, capital guidance and ambitions
21
Our businesses
We operate through five business divisions: Global Wealth Management, Personal & Corporate Banking, Asset
Management, the Investment Bank and Non-core and Legacy. Our global reach and the breadth of our expertise are the
major assets setting us apart from our competitors. Our Group functions are support and control functions that provide
services to the Group. Virtually all costs incurred by the support and control functions are allocated to the business
divisions, leaving a residual amount that we refer to as Group Items in our segment reporting. Disclosures in this report
may refer to Group functions as Group Items.
We see joint efforts as key to our growth, both within and between business divisions. We combine our strengths to
provide our clients with better, innovative solutions and differentiated offerings, for example, our Global Family &
Institutional Wealth offering with integrated global coverage.
Global Wealth Management
We are a leading and truly global wealth manager and strive to help our clients pursue what matters most to them. We
are focused on serving the needs of ultra high and high net worth individuals through trusted relationships with our
advisors, while expanding our specialized services. We offer clients our global reach, our advisory approach led by the
Chief Investment Office (the CIO) and access to our platform with its broad array of solutions, alongside our premium
brand.
The acquisition of the Credit Suisse Group extended our leading global position, by contributing approximately
USD 680bn in invested assets and more than 1,500 client advisors globally to our business,1 across all regions.
Organizational changes
During the first half of 2023, we took several steps to simplify our organizational structure into four regions: Americas,
EMEA, Asia Pacific and Switzerland. We also unified key solutions and functions under global leads. This will facilitate
further convergence and simplification of our global operating model, while retaining the flexibility for local and regional
differences.
In June 2023, the new Global Wealth Management leadership team overseeing the combined business division following
the acquisition of the Credit Suisse Group was announced, including the creation of a new business unit, Global Wealth
Management Strategic Clients, which is focused on enabling and delivering to our strategic clients globally, working in
partnership with our regional business leaders and supported by senior client coverage teams.
How we do business
Our distinctive approach to wealth management helps our clients pursue what matters most to them by offering advice,
expertise and solutions, and delivering on our client promise.
Our advice to clients is led by our global CIO, which produces the UBS House View, identifying investment opportunities
designed to protect and increase our clients’ wealth over the long term. CIO views drive investment recommendations
for advisory clients and investment decisions for discretionary clients representing more than USD 1.6trn in fee-generating
assets globally. Since September 2023, the full breadth of CIO content has been made available to clients and advisors
across the entire firm, including Credit Suisse.
We make available to clients a broad range of securities and investment products. In addition to traditional equity and
fixed-income securities, our investment specialists source and craft a range of investment products, including separately
managed accounts (SMAs), structured products, sustainable- and impact-investing products, and alternative investments.
Our alternative investments offering gives clients access to private markets, including equity, real estate and other real
assets, and investments in private equity funds and hedge funds. We offer our own private equity multi-manager
investments and enable clients to access selected single-manager funds and open-ended programs.
To complement this advice, we provide clients with advice on wealth planning, sustainability-focused and impact
investing, and corporate and banking services. Our specialist teams also advise on art and collecting, family strategy and
governance, philanthropy, next generation, and wealth transition.
Our Global Family & Institutional Wealth service model, in collaboration with the Investment Bank, provides specialized
services to meet the needs of family offices and ultra high net worth clients. For clients with institutional-level trading,
execution and clearing needs, our Unified Global Markets offers access to the full capabilities of the Global Markets
business of the Investment Bank.
Annual Report 2023 | Our strategy, business model and environment | Our businesses
22
In Asia Pacific and Switzerland, the Direct Investment Insights function on our online banking platform enables clients to
trade directly based on CIO insights via their smartphones and other digital devices. Advice Compass enables advisors to
conveniently identify the most relevant ideas and solutions for clients during one-to-one meetings. It should be noted
that the aforementioned products relate to the UBS AG sub-group only.
To provide our clients with the full breadth of investment management products and solutions, our Global Lending Unit
offers extensive mortgage, securities-based and structured lending expertise, catering to sophisticated client lending
needs.
› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for more
information about sustainability matters
Chief Investment Office-led value chain
Clients
Listening to our clients’ views and considering their risk profiles and their investment goals
Ideas in a
UBS House View
context
Well-researched
investment advice,
thought leadership.
Design of solutions
Solutions aligned with
the UBS House View:
discretionary and advisory
mandates, alternatives,
structured solutions, etc.
Communications
Transmission to clients
and advisors.
Implementation
and execution
Positioning of solutions
by advisors, seamless
execution. Tailored advice
to clients.
The investment advice for and management of more than USD 1.6trn in fee-generating assets globally,
underpinned by robust risk management.
Note: The Chief Investment Office develops a clear, concise and consistent investment assessment, the UBS House View, consisting of strategic asset allocation and
tactical asset allocation.
Our newly established Global Wealth Management Strategic Clients unit aims to deliver the best advice and guidance to
our strategic client segments, including business owners, female clients, the next generation of wealthy clients, athletes
and entertainers, and multi-cultural investors. To this end, we have developed a dedicated approach and resources with
specialized teams supporting our clients in achieving their goals.
We are investing in our operating platforms and tools to better serve our clients’ needs, improve their experience, enhance
overall advisor productivity and improve our operational resilience. We aim to make our services faster and more
responsive and offer more convenience to our clients. For example, our Global Wealth Management clients have invested
more than USD 9bn in UBS My Way, our discretionary mandate solution that enables clients to customize their portfolio
themselves via the UBS mobile banking app. Additionally, we continue to broaden our offering across asset classes and
themes, collaborating with best-in-class managers across the most relevant strategies. We are making continuous
improvements to our direct-to-client digital offerings and have rolled out innovative new solutions, such as UBS My Way
on mobile, a next-generation discretionary mandate solution that now enables clients to tailor their investments within
their risk profile to their individual preferences via their mobile devices.
We also closely collaborate across business divisions to deliver our best capabilities to clients. Joint efforts with the
Investment Bank, Asset Management and selected external partners enable us to offer clients broad access to financing,
global capital markets and bespoke portfolio solutions. For example, in the US market, the SMA initiative with Asset
Management continues to gain momentum, with USD 158bn in assets under management.
Annual Report 2023 | Our strategy, business model and environment | Our businesses
23
Competition
Our main competitors fall into two categories: competitors with a strong position in the Americas but more limited global
footprints, such as Morgan Stanley, JPMorgan Chase and Bank of America; and competitors with international footprints
but with a smaller presence than UBS in the US, such as Julius Baer, BNP Paribas and HSBC. We also compete with fintech
firms in some regions and products. We have strong positions in the largest region (the US) and the fastest-growing
regions (Asia Pacific and the Middle East). The size of our global franchise, bespoke cross-divisional solutions and premium
brand and reputation set us apart and would be difficult to replicate.
2023 selected highlights
As of or for the year ended 31 December 2023
USD 132bn of net new assets
Best Global
Private Bank
(PWM / The Banker, 2023)
USD 7bn of net interest
income, 32% of growth
USD 3.85trn in invested assets
85% of our clients are very or
extremely satisfied with UBS,
up 2% year on year
(UBS client survey)
Integrated UBS House View
across all Global Wealth
Management platforms
1 As of 30 June 2023.
Personal & Corporate Banking
As the leading bank in Switzerland, we provide a comprehensive range of financial products and services to private,
corporate and institutional clients. Personal & Corporate Banking is the core of our bank in Switzerland, the only country
where we operate in all of our business areas. We are fully committed to our home market, as our leading position in
Switzerland is crucial in terms of sustaining our global brand and the stability of our profits. Drawing on a broad network
of branches and highly qualified client advisors, complemented by modern digital banking services and customer service
centers, we are able to serve more than one-third of Swiss households and more than 90% of large Swiss corporations.
Organizational changes
Following the acquisition of Credit Suisse Group AG in June 2023 and based on a thorough strategic review, UBS
announced on 31 August 2023 its decision to fully integrate Credit Suisse (Schweiz) AG with UBS Switzerland AG
through a merger of the two banks. The legal merger of the two entities is expected to be completed in the third quarter
of 2024.
The Swiss Bank (Credit Suisse) division is being integrated into Personal & Corporate Banking, and the newly combined
Swiss business is led by the President UBS Switzerland and President Personal & Corporate Banking. For the time being,
the Credit Suisse brand will remain in use in Switzerland and the Swiss Bank (Credit Suisse) division will continue to offer
comprehensive advice and a wide range of financial solutions to private, corporate and institutional clients primarily
domiciled in Switzerland. The Swiss Bank (Credit Suisse) private clients business franchise serves high net worth, affluent,
retail and small business clients. In addition, consumer finance services are provided through the BANK-now subsidiary
and credit card brands through our investment in Swisscard AECS GmbH. The corporate and institutional clients business
of Swiss Bank (Credit Suisse) serves large corporate clients, small and medium-sized enterprises, institutional clients,
financial institutions, and commodities traders. Part of the Swiss Bank (Credit Suisse) private clients business is expected
to be shifted to Global Wealth Management as part of the integration progress.
Annual Report 2023 | Our strategy, business model and environment | Our businesses
24
How we do business
We provide our personal banking clients with access to a comprehensive, life-cycle-based offering. This includes 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 planning services. In 2023, UBS was named “Best
Bank in Switzerland” by Euromoney for the ninth time since 2012. Personal & Corporate Banking works closely with
Global Wealth Management to provide our clients with access to leading wealth management services.
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, leasing, and traditional financing. We
offer transaction banking solutions for payment and cash management services, trade and export finance, and global
custody solutions for institutional clients.
Personal & Corporate Banking works 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.
In 2023, we continued to support our clients’ sustainability ambitions. In the corporate client segment, we further
expanded our client-centric approach and focused on supporting our clients by advising them as part of a strategic
dialogue and launching a sustainability-linked loan for multi-national corporations. We also took positive steps in
providing transparency and sustainability insights to our private clients. With the launch of the carbon tracker in the UBS
key4 mobile banking app, clients can see an estimated carbon footprint for their purchases with UBS credit and debit
cards and through UBS TWINT, helping them navigate the carbon footprints of their purchases in a relatively simple
manner.
› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for more
information about sustainability matters
We are building stronger relationships with our clients during the life cycle of their property ownership and providing
services along the value chain. With our strategic partner Baloise, we offer Houzy, a leading homeowner platform in
Switzerland with a nationwide network of qualified craftsmen and comprehensive services through buying, renovation,
maintenance and sale of property. Services relating to property transactions and promotion financing are provided
through our partner, Brixel. Our exclusive partnership with SMG Swiss Marketplace Group enables us to extend our
ecosystem network to Switzerland’s largest real estate portals, such as Homegate and Immoscout24.
Our operations and our competitors
We operate primarily in our Swiss home market, where we are organized into 10 regions, covering distinct Swiss
economic areas. We operate a multi-channel approach, and we are constantly developing our digital and remote
channels.
In Personal Banking, our main competitors are the cantonal banks, Raiffeisen, PostFinance 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 the corporate and institutional business, the 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. We also support
the international business activities of our Swiss corporate clients through local hubs in New York, Frankfurt, Singapore
and the Hong Kong SAR in competition with globally active foreign banks. No other Swiss bank offers its corporate clients
local banking capabilities abroad.
2023 selected highlights
As of or for the year ended 31 December 2023
Best Bank in
Switzerland
(Euromoney, 2023)
Best Private Bank
Switzerland
(Euromoney, 2023)
Market Leader
Trade Finance
Switzerland
(Euromoney, 2023)
Market Leader
Cash Management
Switzerland
(Euromoney, 2023)
>90%
of large Swiss corporations
served¹
> A third
of Swiss households served²
1 Based on approximately 200 largest Swiss companies. 2 Number of Swiss households served by UBS divided by the total number of Swiss households according
to the Swiss Federal Statistics Office.
Annual Report 2023 | Our strategy, business model and environment | Our businesses
25
Asset Management
Asset Management is a global, large-scale and diversified asset manager. We offer investment capabilities and styles
across all major traditional and alternative asset classes, as well as advisory support to institutions, wholesale
intermediaries and our Global Wealth Management clients.
Our strategy is focused on capitalizing on the areas where we have a leading position and differentiated capabilities
(including alternatives, sustainability, indexed customization, separately managed accounts (SMAs) and key markets in
Asia Pacific) in order to further drive profitable growth, while building on our strong business division partnerships across
the Group.
Organizational changes
The acquisition of the Credit Suisse Group
Following UBS’s acquisition of the Credit Suisse Group in 2023, we are now one of the leading Europe-based asset
managers, with total invested assets of USD 1.6trn. The combination of our highly complementary businesses strengthens
our positioning across key asset classes and growth markets, with greater scale in customized indexing, an enhanced
offering in alternative investments (including a leading credit franchise) and an increased presence in the US and Asia.
We are bringing our two organizations operationally together, with a clear goal to provide our clients with the full breadth
of our combined offering while ensuring a seamless transition and exceptional service.
Other organizational changes
In October 2023, we completed the sale of our 51% stake in UBS Hana Asset Management Co., Ltd. to Hana Securities,
after that firm exercised its buyout option. Hana Securities now owns 100% of UBS Hana Asset Management Co., Ltd.
In addition, we completed the acquisition of the 40% minority interest in our real estate joint venture with Aventicum
and now own 100% of the business. In December 2023, we announced the sale of our Brazilian real estate fund
management business to Patria Investments; the transaction is subject to the approval of the investors in the relevant
funds and customary anti-trust approvals. We also transferred the management of our three funds in Mexico to Catena
Activos Alternativos and, with this sale, exited the asset management business in this market.
How we do business
We offer clients a wide range of investment products and services across all major traditional and alternative asset classes,
in the form of segregated, pooled or advisory mandates, as well as registered investment funds in various jurisdictions.
Our capabilities include equities, fixed income, hedge funds (single- and multi-manager), real estate and private markets,
and indexed and alternative beta strategies, including exchange-traded funds (ETFs), as well as sustainable- and impact-
investing products and solutions.
We also draw on the breadth of our capabilities to offer asset allocation and currency investment strategies across the
risk–return spectrum, customized multi-asset solutions, and advisory and fiduciary services.
We continue to develop our award-winning1 Indexed business globally, with a focus on customization, and provide client
solutions across equities, fixed income and commodities, as well as sustainability-focused products. Our offering also
includes a wide range of ETFs in Europe, Switzerland and Asia.
In our Real Estate & Private Markets business, we continue to build on our global scale, leading core capabilities and
highly differentiated sustainable-investing and specialized-thematic offering, including our Cold Storage, Energy Storage
and Life Sciences strategies. We also continue to expand our leading multi-manager capabilities across real estate,
infrastructure and private equity, including the development of new products to meet the growing demand from wealth
management clients.
Sustainable and impact investing remain key areas of interest for our clients. In 2023, we further expanded our offering
across asset classes and themes, including new net-zero ambition products. We launched our first sustainability-focused
fund of hedge funds strategy, created in close collaboration with Global Wealth Management. We also partnered again
with Aon to launch the UBS Global Emerging Markets Equity Climate Transition Fund, which tilts toward emerging market
companies supporting the transition to a low-carbon economy, while factoring in important social considerations.
Stewardship is a fundamental element of our sustainability strategy. In 2023, we sharpened our five-year climate
engagement program’s focus and also aligned our voting policy to our evolved climate engagement objectives. In
addition, to support our increasing focus on natural capital, we became a founding member of the Nature Action 100
collaborative engagement initiative and joined the Principles for Responsible Investment’s Stewardship Advisory
Committee for its initiative on nature.
› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for more
information about sustainability matters
Annual Report 2023 | Our strategy, business model and environment | Our businesses
26
We also continue to build on our joint efforts with the other business divisions, enabling our teams to draw on the best
ideas, solutions and capabilities from across the firm in order to deliver high-quality investment performance and
experiences for our clients. For example, in 2023 we continued to expand our separately managed accounts (SMA)
offering as part of our joint initiative with Global Wealth Management in the US. In support of this initiative, we launched
the SMA Hub, a new self-service portal that enables financial advisors to generate custom client reports or proposals in
only minutes.
Geographically, we are building on our extensive and long-standing presence in the Asia Pacific region, including China,
where we continue to capitalize on our on- and offshore products and market presence, including our joint ventures.
To support our growth, we are focused on disciplined execution of our operational excellence initiatives. This includes
further automation, simplification, process optimization and offshoring or nearshoring of selected activities,
complemented by continued enhancements to our platform and development of our analytics and data capabilities. One
example is our Portfolio Engineering & Trading initiative, which will streamline trading and portfolio implementation
across our active and index capabilities through an integrated technology architecture. It will harmonize processes and
enable further scalability of customization across asset classes.
Our operations and our competitors
Our business division is organized into five areas: Client Coverage; Investments; Real Estate & Private Markets; Products;
and the COO area. We cover the main asset management markets globally, and have a local presence in 25 locations
across four regions: the Americas; Asia Pacific; EMEA; and Switzerland. We have nine main hubs: Chicago; the Hong
Kong SAR; London; New York; Shanghai; Singapore; Sydney; Tokyo; and Zurich.
Our main competitors are global firms with wide-ranging capabilities and distribution channels, such as AllianceBernstein,
Allianz Asset Management, Amundi, BlackRock, DWS, Franklin Templeton, Invesco, J.P. Morgan Asset Management,
Morgan Stanley Investment Management, Schroders, SSGA Funds Management and T. Rowe Price, as well as firms with
a specific market or asset-class focus.
2023 selected highlights
As of or for the year ended 31 December 2023
USD 1.6trn
total invested assets
No.1
Europe-based
index player
Second largest
asset manager
of SI¹ assets
(Morningstar)
USD 213bn
assets invested in
alternatives³
USD 14.3bn
net new money from the
SMA² initiative
No.1 collateralized
loan obligation
manager
(Creditflux)
1 Sustainable investing. 2 Separately managed accounts. 3 Hedge fund businesses, real estate and private markets.
1 Best ESG Fund House (Passive), ESG Clarity Awards 2023; Best ESG Emerging Market Equity Fund (Passive), ESG Clarity Awards 2023.
Annual Report 2023 | Our strategy, business model and environment | Our businesses
27
Investment Bank
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 focused 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 the Group’s
capabilities to our clients. We do so with a disciplined approach to balance sheet deployment and costs.
Our priority is providing high-quality execution and seamless client service, through an integrated, solutions-led approach,
with disciplined growth in the advisory and execution businesses, while accelerating our digital transformation. In Global
Banking, we position ourselves as trusted advisors via our client coverage and ability to provide access to the wider suite
of UBS’s capabilities. In Global Markets, we enable clients to buy, sell and finance securities on capital markets worldwide
and to manage their risks and liquidity.
Organizational changes
The acquisition of the Credit Suisse Group
The acquisition of the Credit Suisse Group represented an acceleration of the Investment Bank’s existing growth strategy,
reinforcing and strengthening our coverage and presenting a powerful opportunity to enhance capabilities and client
relevance in key products and regions.
An ambitious integration timeline for the Investment Bank has been set, and significant progress has been made with
the creation of the newly established Non-core and Legacy division, which has started the process of divesting assets.
We are working at pace to migrate clients and positions to the UBS platform and have concluded our workforce plans
for the combined Investment Bank.
The Credit Suisse franchise helps us to build a more sustainable market share in a range of products and markets. It will
enhance our capabilities, core products and services and enable us to deliver these products and services to an expanded
institutional and corporate client base. The Investment Bank will be better positioned to serve Global Wealth
Management, offering differentiated investment banking capabilities, and further enhance the connectivity with ultra
high net worth and Global Family & Institutional Wealth clients.
The combination is expected to drive changes in our future revenue footprint. Our increased scale will enhance our
competitive positioning within each region and product set and rebalance our footprint. The Investment Bank has
historically been strong in both equities and in the Asia Pacific region, while having a smaller footprint across fixed
income, global banking, and the Americas. The integration of the Investment Bank (Credit Suisse) strengthens our
presence in the Americas, particularly in global banking, and represents an acceleration of our growth strategy in the
region.
In Global Markets, we see the potential to gain market share in cash equities. We will also aim to capture market share
in global equity derivatives, with a specific focus on flow derivatives, quantitative investment strategies and corporate
derivatives.
In Switzerland and EMEA, the combination will reinforce our strong position in our domestic market. Meanwhile, in Asia
Pacific, there is a complementarity between UBS’s strength in China and Australia and Credit Suisse’s broader capabilities
across Southeast Asia.
Other organizational changes
In June 2023, Michael Ebert joined the Investment Bank Management Forum as Head of Credit Suisse for the Investment
Bank, as well as Head of Americas for the Investment Bank. In August 2023, Marco Valla joined the Investment Bank
Management Forum as Co-Head of Global Banking.
In October 2023, we launched our Strategic Insights and Advisory team in Global Banking, our content and advisory
offering that brings together the expertise of the UBS Strategic Insights group and the Credit Suisse Corporate Insights
group.
In December 2023, we announced the formation of our Executive Client Group, which is aimed at advising our clients at
the C-suite level on strategic matters and is intended to drive a broad array of transactions to enhance the impact of our
Global Banking coverage teams.
Annual Report 2023 | Our strategy, business model and environment | Our businesses
28
How we do business
Our business division consists of two areas: Global Banking and Global Markets, which are supported by Investment Bank
Research. Our global coverage model utilizes our international industry expertise and product capabilities to meet clients’
emerging needs.
Our Global Banking business advises clients on strategic business opportunities, such as mergers, acquisitions and related
strategic matters, and helps them raise capital, in both 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 equities 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. We provide flexible, innovative and bespoke access to solutions, from market and insight tools to
trading strategies and execution.
Our Investment Bank Research business continues to publish research based on primary data to concentrate on data-
driven outcomes and offers clients differentiated content about major financial markets and securities around the globe,
with analysts based in more than 20 countries and with coverage of more than 3,400 stocks in 49 different countries1.
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.
The Investment Bank offers our clients global advice and access to the world’s primary, secondary and private capital
markets, including through an extensive array of sustainability-focused advice, products, research and events. The
Investment Bank is focused on meeting clients’ needs, including those with respect 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.
In Global Markets, we develop products and solutions designed to meet clients’ specific and increasingly detailed ESG
objectives. In carbon emissions solutions, our clients continued to access solutions that are linked to the recently launched
UBS Constant Maturity Commodity Index emissions index, as well as those that are available via our execution and
clearing capabilities for carbon emissions futures. We continued to scale the number of portfolio certificates linked to a
range of sustainability and climate investment themes, despite challenging market conditions throughout 2023.
UBS is a founding member of Carbonplace, a marketplace platform that seeks to build infrastructure to scale voluntary
carbon markets, with the aim of enabling firms such as UBS to offer clients the ability to buy, sell, hold and retire voluntary
carbon credits.
In Global Banking, ESG is a core component of many corporate business strategies and a key tool in achieving
sustainability in business and corporate operating models. As pressure from regulators and other key stakeholder groups,
such as customers, investors and employees, is increasing, so is the need for transformation. The ESG Advisory group
provides the necessary lens helping UBS’s clients assess ESG topics throughout the corporate life cycle.
UBS arranged USD 53.7bn in green, social, sustainability and sustainability-linked themed (GSSS) bonds through 102
deals during 2023.1 We also solidified our market position in the Swiss franc-denominated market with a combined
market share of nearly 50%.1 We have also built a strong position in the ESG-labelled local debt market in Brazil.
Our independent ESG research team collaborates with UBS sector analysts and UBS Evidence Lab primary research
experts, providing data-driven insights into ESG-relevant questions. The ESG research team works to identify touchpoints
between markets, society and the environment, and to respond to ESG issues as they move to the center of investors’
agendas. UBS sector lead analysts authored a variety of our flagship ESG Sector Radar reports, as well as a broad range
of ESG Company Radar reports.
Our ESG Company Radar research reports, which we launched in 2022, assess the impact of ESG factors at company
level, and we continued to see a very positive client response to those reports. Other types of ESG content include
thematic and cross-sectoral collaborations, ESG Keys (which covers sustainable investing topics), and an increasing
number of regional perspectives from our expanded ESG team, which works out of our offices in New York, London, the
Hong Kong SAR, Tokyo and Sydney.
› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for more
information about sustainability matters
Annual Report 2023 | Our strategy, business model and environment | Our businesses
29
Our digital strategy harnesses technology to provide access to sources of unique, global liquidity, personalized advice and
differentiated content. The Investment Bank strives to be the digital investment bank of the future, focused on delivering
innovation-led solutions, and efficiencies for our clients. As the world around us changes, our digital capabilities aim to
harness emerging technologies and create new products and solutions, which enable our clients to adapt to evolving
market structures and achieve their investment goals.
Our ambition to be the most client-focused, efficient and data-driven investment bank is being realized through the
simplification of technology architecture, increased speed and quality of delivery and the attraction of best-in-class talent.
As we look forward to the continued evolution of our digital capabilities, we will see increased adoption of technologies,
such as generative artificial intelligence, the consistent re-use of platforms and products, and the continued drive to make
progress in our overall strategic imperatives, with regard to a new, combined Investment Bank.
Joint efforts between the Investment Bank and the other business divisions (for example, our work with Global Wealth
Management on our new Global Family & Institutional Wealth coverage) and, externally, strategic partnerships (for
example, UBS BB jointly with Banco do Brasil, focused on Latin America) continue to be key strategic priorities.
Partnerships with Global Wealth Management and Asset Management enable us to provide clients with broad access to
financing, global capital markets and portfolio solutions. 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.
Our operations and our competitors
Our two business areas, Global Banking and Global Markets, are organized globally by product. Our business is regionally
diversified, with a presence in more than 30 countries. We cover the main investment banking markets globally, and
have major financial hubs across four regions: the Americas; Asia Pacific; EMEA; and Switzerland.
Our global reach gives attractive options for growth. In the Americas, the largest investment banking fee pool globally,
we continue to 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.
Competing firms operate in many of our markets, but our strategy differentiates us, with our 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 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.
2023 selected highlights
As of or for the year ended 31 December 2023
Record full-year
per for mance in Financing
with revenues of
USD 1.98bn, up 9% on 2022
Our Private Funds
Group was ranked the
most active placement
firm globally for 2023
(Private Equity International)
Best Investment Bank
for Asia, Best Bank for
Australia and Best M&A
House Asia
(FinanceAsia, 2023)
No. 1 ranking in Asia
Pacific M&A in 4Q23,
with a 9.2% share of
wallet (Dealogic)³
Strongest full-year
eFX¹ performance on
record, with revenues
up 19% on 2022²
Arranged USD 54bn in
GSSS-themed bonds
through >100 deals
during 2023
1 Foreign exchange products that are traded over electronic platforms. 2 Record is from 2013 onward. 3 Combined with UBS AG and Credit Suisse AG.
1 Statement relates to the UBS AG sub-group only.
Annual Report 2023 | Our strategy, business model and environment | Our businesses
30
Non-core and Legacy
In 2023, we created Non-core and Legacy, which includes positions and businesses not aligned with our strategy and
policies. Those consist of the assets and liabilities reported as part of the former Capital Release Unit (Credit Suisse) and
certain assets and liabilities of the former Investment Bank (Credit Suisse), Wealth Management (Credit Suisse), Swiss
Bank (Credit Suisse) and Asset Management (Credit Suisse) divisions, as well as of the former Corporate Center (Credit
Suisse). Non-core and Legacy also includes the remaining assets and liabilities of UBS’s Non-core and Legacy Portfolio,
previously reported in Group Functions (now renamed to Group Items), and smaller amounts of assets and liabilities of
UBS’s business divisions that we have assessed as not strategic in light of the acquisition of the Credit Suisse Group.
At the end of the second quarter of 2023, the positions included in Non-core and Legacy represented USD 83.8bn of
risk-weighted assets (RWA) and USD 208.7bn of leverage ratio denominator (LRD). Since then, Non-core and Legacy has
made significant progress against its capital reduction goals by reducing RWA by USD 11.8bn, or 14%, to USD 72.0bn
and reducing the LRD by USD 71.6bn, or 34%, to USD 137.1bn, by the end of 2023.
Our key priorities and operations
We are actively reducing the assets of Non-core and Legacy in order to reduce operating costs and financial resource
consumption, and to enable us to simplify infrastructure. Incremental costs or losses may arise in connection with the
reduction of such assets and liabilities.
Our key priorities are as follows.
– Reduce RWA and LRD, freeing up capital for the UBS Group. We aim to achieve a share of around 5% of Group RWA
by the end of 2026. Non-core and Legacy will continue to actively pursue acceleration of the natural roll-off through
active unwinds when economically accretive.
– Reduce operating costs and financial resource consumption by simplifying and decommissioning infrastructure,
accelerate integration where accretive, and minimize the size of the legal entity footprint.
– Protect the client franchise by partnering with colleagues across the business divisions.
Non-core and Legacy includes assets, operating expenses and funding costs related to the following Credit Suisse
businesses: loans primarily related to corporate bank and emerging markets, the residual securitized products businesses,
the macro trading business including rates and foreign exchange, the legacy life-finance business, the equities portfolio,
including the remaining prime services businesses, electronic trading, equity swaps, share back-lending positions, legacy
structured renewables-linked positions and the residual credit business. Non-core and Legacy also includes residual trades
from businesses exited by the pre-integration UBS Investment Bank, mainly in 2012. The portfolio additionally
encompasses positions relating to legal matters arising from businesses transferred to it at the time of its formation.
Group functions
Our Group functions are support and control functions that provide services to the Group, focusing on effectiveness, risk
mitigation and efficiency.
How we are organized
Our Group functions include the following major areas: Group Services (which consists of the Group Operations and
Technology Office, Corporate Services, Compliance, Regulatory & Governance, Finance, Risk Control, Human Resources,
Communications & Branding, Legal, the Group Integration Office, Group Sustainability and Impact, and Chief Strategy
Office) and Group Treasury.
Group Services
The vast majority of the support and control functions are fully aligned or shared among the business divisions, where they
have full management responsibility. By keeping the activities of the businesses and support and control functions closely
aligned, we improve efficiency and create a working environment built on accountability and collaboration. Virtually all costs
incurred by the support and control functions are allocated to the business divisions, leaving a residual amount that we refer
to as Group Items in our segment reporting in accordance with IFRS Accounting Standards. Certain activities are retained
centrally, where not directly related to the businesses, such as group hedging and own debt 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.
Group Treasury
Group Treasury manages balance sheet structural risk (e.g., interest rate, structural foreign exchange and collateral
risks), as well as the risks associated with our liquidity, capital and funding portfolios. Group Treasury serves all five
business divisions, and its risk management is integrated into the Group risk governance framework.
Organizational changes
As a result of the acquisition of the Credit Suisse Group, Corporate Center (Credit Suisse), including Treasury, has become
a part of Group Items. In addition, the former Non-core and Legacy Portfolio unit was transferred to the new Non-core
and Legacy business division.
Annual Report 2023 | Our strategy, business model and environment | Our businesses
31
Our environment
Market environment
Global economic developments in 20231
The global economy was resilient in 2023, in spite of the steep interest rate rises by major central banks designed to curb
inflation from the multi-decade highs reached in 2022.
Global growth slowed only slightly, to 3.2%, in 2023, down from 3.4% in 2022. This partly reflected the strength of the
US economy, where growth withstood higher interest rates, tightening bank lending standards, and mediocre real
income growth. US GDP growth increased to 2.5% in 2023, up from 1.9% in 2022, as job security and relatively strong
balance sheets encouraged higher spending by middle-income consumers. Economies in Europe also expanded in 2023,
though at a slower pace. Growth in the Eurozone slowed to 0.5% in 2023, down from 3.4% in 2022, as the European
Central Bank (the ECB) repeatedly raised interest rates. Growth in the Swiss economy slowed to 0.7% in 2023, down
from 2.7% in 2022. UK GDP growth slowed to 0.1% in 2023, down from 4.3% in 2022, as high inflation and interest
rate rises also limited growth.
Growth in China increased to 5.2% in 2023, compared with 3% in 2022, when its economy was slowed by pandemic
restrictions that were in place until late in that year. However, cautious spending by domestic consumers meant that the
rebound in growth was weaker than had been expected. Growth in India remained robust at 7% in 2023, down only
slightly from 7.2% in 2022.
Inflation eased across developed economies, especially in the second half of 2023, as supply chains continued to recover
from COVID-19 disruptions, energy prices were lower than 2022 and central bank interest rate rises increased the cost
of borrowing. US consumer price inflation slowed to an annual 3.4% in December 2023, from 6.4% in January 2023.
Inflation decelerated even more markedly in the Eurozone, to 2.9% year over year in December 2023, compared with
8.5% in January 2023. This trend enabled the Federal Reserve and the ECB to signal late in 2023 that monetary tightening
had probably come to an end.
The MSCI All Country World Index returned a 22.2% gain in 2023, with close to half of that gain coming in the final two
months of the year. The S&P 500 rose by 26.3%, lifted by optimism that innovations in artificial intelligence will boost
profits and hopes that the Federal Reserve will cut rates swiftly in response to falling inflation. The FANG+ index, which
tracks the 10 most traded US tech stocks, increased 96% over the year. The MSCI Japan was the best-performing major
market in local currency terms in 2023, with a return of 28.6%, its highest in a decade. In Europe, the MSCI EMU returned
18.8%. Although the Swiss and UK markets lagged behind global stocks, both ended the year in positive territory, with
returns of 5.3% and 7.7%, respectively. The weakest performance by a major market came from the MSCI China, which
lost 10.7% amid disappointment over the pace of the economic recovery from pandemic restrictions and more limited-
than-expected stimulus.
Economic and market outlook for 20241
Our baseline scenario for 2024 is for a soft landing in the US and subdued but positive growth in the Eurozone. We
expect growth in China to enter a new normal of lower, but potentially higher-quality, growth.
We believe inflation will continue falling toward central bank targets, and, as a result, we believe policymakers will feel
confident enough to lower interest rates starting around the middle of 2024. We expect cuts from the Federal Reserve,
the ECB, the Swiss National Bank and the Bank of England. In contrast, with Japanese deflation coming to an end, we
expect the Bank of Japan to raise rates into positive territory for the first time since late 2015.
With regard to growth, we expect the US to slow to a sustainable long-term rate of growth, due to declining housing
affordability and the withdrawal of some government support measures that helped households during the COVID-19
pandemic. However, middle-income consumers still appear to have spending power, as well as relatively strong balance
sheets, and we expect demand for labor to remain resilient. Overall, we expect US GDP growth to remain positive, at
around 1.1% in 2024. We expect growth to be weak in the Eurozone, at 0.6%, due to the lagged effect of higher
interest rates. We also expect UK GDP to increase by 0.6% in 2024, while GDP growth in Switzerland is expected to
increase to 1.2% in 2024.
Geopolitical events and elections also have the potential to play an outsized role in 2024. The US presidential election,
the ongoing Israel–Hamas and Russia–Ukraine wars, and the tension between the US and China could all affect markets
globally. In addition, more than four billion people in more than 40 countries are set to go to the polls in 2024, including
in the US, India and, potentially, the UK.
1 Based on sources: Haver Analytics, CEIC, National Statistic and UBS.
Annual Report 2023 | Our strategy, business model and environment | Our environment
32
Industry trends
Although our industry has been significantly affected by various regulatory developments in 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 markets and macroeconomic and geopolitical
conditions.
Digitalization
Digitalization continues to accelerate in our industry. Clients demand a seamless and personalized technology experience
that involves both innovative and sustainable solutions. The rising rate of digital adoption can be seen across all regional,
demographic and client segments. The ascent of artificial intelligence (AI) has created an opportunity to significantly
improve both employee efficiency and client service. Financial institutions are finding ways to accelerate the adoption of
AI in a risk- and regulatory-compliant manner and with ethical considerations in place. As a result, the shift from
digitalizing and automating existing processes to digital-as-default solutions is well underway, while also taking into
consideration human interaction, a component that continues to be an important competitive factor.
Keeping pace with emerging technologies is key; themes such as generative AI have progressed significantly and are
expected to continue growing at pace. Generative AI offers the potential to democratize the use of AI well beyond data
scientists, broadening the scope for its application and its associated benefits. As the technology evolves, so does the
associated risk landscape, but the focus remains on safeguarding our clients and their data, with the evolution of AI
governance as an area of strategic importance.
Digital communication, with clients and employees alike, has established new remote ways of working, enabling financial
services providers to attract an even wider array of talent than before. The digitalization of the financial services sector
has led to a structural shift in the workforce: more and better engineers are required to keep banks at the forefront of
technology.
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 AI enabling banks to address client needs in an even more targeted manner. In
a consistently connected, open, and location-independent financial services ecosystem, the focus lies on adopting open-
source technology, including cloud-native and modular architecture, to drive innovation and open exchange.
An open-finance environment combined with a shift in business models from in-person to digital channels bears the risk
of increased digital vulnerability. Clients and other stakeholders expect ethical, responsible and secure data management
practices. This makes the protection of the firm’s data and the optimization of its cybersecurity capabilities a continued
priority and focus.
Distributed ledger technology applications, including digital cash solutions, are gradually being adopted by the banking
industry. Decentralized finance solutions are expected to mature over the coming years and may reshape our industry.
They provide opportunities to overcome friction within the existing financial system, increase banking efficiency, broaden
access to underserved communities and make previously unviable products or services available to the financial services
sector. They also further enable early-stage concepts, such as Web 3.0 and the metaverse, which could lead to an
enhanced digital user experience.
Sustainability
The continued decarbonization of the global economy will require governments, regulators, all industries and consumers
to move in the same direction. A series of recent legislative acts, including the rollout of the Inflation Reduction Act in
the US and the EU’s Green Deal Industrial Plan, along with rising regulatory requirements, encourage investment into
sustainable solutions, including infrastructure.
Meanwhile, policymakers and regulators increasingly require corporations to embed and disclose environmental, social
and governance considerations. For example, the EU’s Corporate Sustainability Reporting Directive, which came into
force in 2023, is intended to provide greater transparency and reliability of information to investors.
During 2023, flows into sustainable funds remained modestly positive, while traditional funds faced outflows impacted
by the equity and bond market volatility and worsening geopolitical tensions.1 Throughout the year investors also
expanded their sustainable investment allocations into alternative asset classes, including hedge funds, real estate and
infrastructure. Following the subdued issuances in 2022, green, social, sustainability and sustainability-linked (GSSS) bond
supply rebounded in 2023.
Our view is that the long-term growth trajectory for sustainable finance plays to our strengths, as we continue to build
on our offering and develop the innovative products and solutions that our institutional and private clients need both to
manage the risks and capture the opportunities presented by the transition to a low-carbon economy.
› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for more
information about sustainability matters
Annual Report 2023 | Our strategy, business model and environment | Our environment
33
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 the sector, where technology-supported and data-driven solutions are progressively enabling a
more personalized, relevant, on-time and seamless client experience. These services often focus on convenience,
flexibility, transparency and personalization, and drive toward holistically addressing clients’ needs and facilitating
community building. Therefore, our industry needs to evolve, as clients measure us against new standards.
While the industry’s overall focus still remains on digital-led solutions, recent geopolitical, macroeconomic and societal
shifts have highlighted values such as security, trust, stability and a credible plan toward a sustainable future, leading to
an increased demand in investment, financing and advisory products and services that fit clients’ own sustainability
preferences and ambitions.
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, capital constraints (e.g., due to pressure on asset prices in a higher-
interest-rate environment), a push for cost efficiencies and increasing scale advantages resulting from fixed technology
costs and regulatory requirements. Many stakeholders in the financial services sector continue to seek increasing exposure
and access to regions with attractive growth profiles, such as Asia and other emerging markets, through local acquisitions
or partnerships, as well as acquiring new capabilities addressing changes in market dynamics and overall client demands.
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.
While banks already face increasing challenges from digitalization needs and intensified competition, potential tightening
in macroeconomic and geopolitical conditions across major economies may create further pressure.
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. We have recently observed a growing supply of private credit
from private debt funds, facilitating an industry shift in lending volumes for high-yield lending products. 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 sector could pose a larger competitive threat, given their strong client franchises and access
to client data, if they decide to broaden the scope of their services. While fintech firms continue to gain momentum,
recent macroeconomic developments have slowed this trend, as funding appetite and valuations have trended
downward. Although we expect the industry to recover in the future, we do not expect a material disruption to our asset-
gathering businesses. As fintech firms mature, their success will inevitably depend on their ability to navigate our
regulatory landscape, build customer trust and maintain innovation. The trend for forging partnerships between new
entrants and incumbent banks will therefore continue, as technology and innovation help banks overcome new
challenges.
Wealth development2
General overview of wealth development2
As of the end of 2022, global financial wealth is estimated at USD 255trn and is expected to continue to grow. After
more than a decade of steady expansion, the growth of global financial wealth slowed for the first time in 2022,
decreasing to USD 255trn, a 3.5% decrease compared with 2021. The decrease was mainly driven by various
macroeconomic and geopolitical factors. However, this decrease is expected to be temporary, and wealth development
is projected to continue in an upward trajectory in the coming years.
Challenges such as persistent inflation, the resulting rise in interest rates (which contributed to lower equity market
performance) and a weaker-than-expected recovery in China, as well as geopolitical tensions and armed conflicts,
persisted throughout 2023. However, global financial wealth is expected to continue growing at an average of 5% per
year until 2027.
Almost half of the world’s financial wealth was concentrated in the Americas (48%), followed by Asia Pacific (28%),
Europe (21%) and the Middle East and Africa (3%).
Looking at our invested assets, almost half of those were concentrated in the Americas (49%), while the remaining half
was almost equally distributed between Asia Pacific, Europe and the Middle East and Africa (approximately 17% per
region).
Annual Report 2023 | Our strategy, business model and environment | Our environment
34
Wealth segment view3
At the beginning of 2023, wealth was still highly concentrated. Approximately one-third of global high net worth
individual (HNWI) wealth was controlled by 1% of the HNWI population (those with wealth in excess of USD 30m).
Around a quarter of global HNWI wealth was held by 9% of the HNWI population (those with wealth ranging from
USD 5m to USD 30m), while the remainder of the HNWI wealth was held by 90% of the HNWI population, i.e., those
with wealth between USD 1m and USD 5m.
Specifically, when looking at the billionaire wealth segment, wealth recovered from its post-pandemic fall, growing by
9% in nominal terms, while the billionaire population rose by 7% globally.4
Wealth transfer5
Between 2020 and 2030, more than USD 18trn of collective wealth is expected to be transferred globally by individuals
with USD 5m or more in net worth to their next-in-line heirs or spouses.6 North America and Europe are the regions with
the largest expected wealth transfers, with the US alone responsible for approximately 60% of all transfers.
When looking at the billionaire wealth segment, based on the findings of UBS’s latest Billionaire Ambitions Report, for
the first time in 10 years new billionaires in the 12 months to April 2023 accumulated more wealth through inheritance
than entrepreneurship. This is expected to increase during the next 20 to 30 years, as more than 1,000 billionaires pass
an estimated USD 5.2trn to their heirs. This is of great significance, as this new generation of billionaires has fresh views
about business, investments and philanthropy. Many are redirecting the large pools of private wealth they control to new
business opportunities, and possibly away from their families’ businesses.4
While this wealth transfer poses a challenge for wealth managers to retain current assets, it also creates opportunities to
capture new assets from competitors, as well as to start building relationships with the next generation and to cater to
their evolving needs. UBS provides clients with tailored services and solutions depending on client profiles and
jurisdictions, while facilitating succession planning, a highly significant and challenging topic for many clients.7
Female investors
Today, women are creating wealth faster than ever before and doing so at a faster pace than men, due to factors such
as shifting global wealth distribution, cultural attitudes, intergenerational wealth transfers and a rise in businesses owned
by women. This trend will likely gain further momentum in the years to come. In 2022, 12% of all billionaires worldwide
were women, worth a total of USD 1.56trn, an increase of 2% compared with the prior year.3 To address this segment,
UBS has created a dedicated approach tailored to female investors, adapting its offering to the specific needs of each
client. UBS was recently highly commended in the Best Private Bank for Wealthy Women category at the PWM / The
Banker 2023 awards.
Entrepreneurs
With an expected compounded annual growth rate of 6% between 2020 and 2025, entrepreneurs represent the largest
and fastest-growing contributors to the global wealth management revenue pool and are expected to account for almost
one-third of total wealth management revenues by 2025.8
We are addressing the opportunities entrepreneurs present by leveraging our global footprint and capabilities to address
their evolving needs at every stage of the business life cycle. Additionally, we have created the Industry Leader Network,
an exclusive peer-to-peer entrepreneur network that offers opportunities for connecting through content-rich events,
through a dedicated digital platform and through regular information exchanges.
Long-term investment trends resilient in the face of market uncertainty
2023 saw turbulence in the global financial markets, as a combination of varying expectations about the level of interest
rates, inflation, and geopolitical tensions caused equity and fixed income performance to fluctuate several times across
the course of the year. There was increased investor appetite for fixed income, accompanied by outflows from equity
funds.
Inflation has decreased across most major markets globally, and while hopes of a softer landing have risen, inflation
remains above target, including in the US. This continues to be a challenge across Europe, given continued low growth.
In our view, despite the uncertainty, the opportunity has significantly improved for investors looking to build diversified,
risk-aware portfolios, and the long-term trend toward shifts into illiquid alternatives that can deliver compelling longer-
term, risk-adjusted returns and into low-cost, efficient passive strategies across liquid markets has not changed. The
breadth of our investment expertise and capabilities enables us to find the right solutions for clients as the environment
evolves.
1 Global Sustainable Fund Flows: Q4 2023 in Review, Morningstar.
2 Based on BCG’s Global Wealth Report 2023, which refers to the 2022 financial year; wealth concentration is based on financial assets by regions, and excludes real assets and liabilities.
3 Wealth Management Top Trends 2023, Capgemini, considering HNWI financial wealth and population in Europe, Asia Pacific and North America; the HNWI population defined as individuals with investable assets
greater than USD 1m, excluding primary residence, collectibles, consumables and consumer durables.
4 UBS Billionaire Ambitions Report 2023, November 2023.
5 Preservation and Succession: Family Wealth Transfer 2021, Wealth-X.
6 Women as the next wave of growth in US wealth management, McKinsey (July 2020); quoting that in 70% of cases where widows inherit wealth, they change their banking relationship within a year.
7 UBS Investor Watch, October 2022.
8 McKinsey Global Wealth Pools, 2020, UBS analysis; client types considered are high-income employees, self-employed professionals, entrepreneurs, multi-generation families and retirees.
Annual Report 2023 | Our strategy, business model and environment | Our environment
35
How we create value for our stakeholders
Clients
Our clients are the heart of our business. We are committed to building and sustaining long-term relationships based on
mutual respect, trust and integrity. Understanding our clients’ needs and expectations enables us to best serve their
interests and to create value for them.
A combined firm with expanded reach and capabilities for clients
With the acquisition of the Credit Suisse Group in 2023, our client offering, expertise and geographical reach have
expanded significantly.
The wealth management businesses of UBS AG and Credit Suisse AG have largely complementary footprints across
locations and client segments, that support one of the core pillars of our client value proposition in Global Wealth
Management: the ability to serve clients regardless of where they are and what they need. Following the acquisition, all
of our Global Wealth Management clients now have access to the UBS House View by our Chief Investment Office. We
are continuing to align our wealth management product and solution offerings, helping clients to grow, protect and
transfer their wealth.
We are the leading bank In Switzerland, leveraging the strength of the newly combined Swiss business to broaden our
services and to promote innovation to our clients. The legal merger of two entities, Credit Suisse (Schweiz) AG and UBS
Switzerland AG, is expected to be completed in the third quarter of 2024, with the Swiss Bank (Credit Suisse) division
being integrated into Personal & Corporate Banking. We are taking on the integration with the utmost care and intend
to spend the time needed to achieve the best possible outcome for our clients, our employees and the Swiss financial
center.
Following the acquisition of the Credit Suisse Group, we are bringing together our highly complementary asset
management businesses and enhancing the value that we provide to clients through expanded capabilities across key
asset classes and growth markets. This includes greater scale in customized indexing, an enhanced offering in alternatives
including a leading credit franchise, and an increased presence in the US and Asia.
The acquisition of the Credit Suisse Group strengthens the Investment Bank’s coverage. It deepens our capabilities in
core products and services, enabling us to deliver services to a broader institutional- and corporate-client base, while
bringing us critical mass in key markets. The Investment Bank will also be better positioned to serve Global Wealth
Management clients, offering differentiated investment banking capabilities and further enhancing connectivity with
ultra high net worth and Global Family & Institutional Wealth clients.
Engaging with our clients
Our clients’ needs and their preferred communication channels continually evolve. Our objective is to engage with clients
in the ways most convenient for them. 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, and we have established
a mix of hybrid and in-person events.
Global Wealth Management interacted with clients via various settings in 2023, from personalized private briefings with
subject matter experts to segment-specific virtual and in-person 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. We proactively engaged with
clients to reassure them about the acquisition and highlighted the benefits of the combined organization. This was done
through individual meetings and calls, and, as the acquisition progressed, we were able to open up some of our flagship
events and conferences to clients of the combined firm.
Personal & Corporate Banking holds regular client events (leveraging a number of formats, such as webcasts and in-
person, virtual or hybrid events), covering a wide range of topics. In 2023, we enhanced our digital engagement strategies
to reach more clients and strengthen relationships with existing ones. We utilize various channels, including social media,
online displays, and search engines.
In Asset Management, we had a consistent program of client events and engagement activities throughout 2023. These
included our flagship conferences, such as the annual UBS Reserve Management Seminar, and we held our first global
in-person outlook roadshow in multiple locations across the world. Alongside this, our teams continued the high level of
interaction with clients globally, supported by digital tools and our publication of macro insights. We also hosted a broad
range of hybrid events, including our investment series, to help our clients better understand market challenges and
opportunities, and we continued to engage with clients through our social media and online channels.
Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders
36
The Investment Bank hosted more than 180 investor conferences and educational seminars globally in 2023, covering a
broad range of macro, sector, regional and regulatory topics. Almost all of those conferences were held virtually. 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, and UBS Live
Desk, built within the UBS Neo platform, provides clients with a stream of fast-paced commentary from UBS traders. The
UBS Analytical Research Community (UBS-ARC) is a proprietary, interconnected research network of industry leaders,
subject matter specialists, executives, academics and analysts in the Americas region.
How we measure client satisfaction
We continue to 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.
Personal & Corporate Banking1 has conducted annual surveys of clients in Switzerland since 2008, consistently covering
most private and corporate-client segments annually since 2015. In Asset Management, we have an integrated process
to record and manage client feedback through our client relationship management tool, and we also conduct regular
surveys. The Investment Bank closely monitors client satisfaction via individual product coverage points. Direct client
feedback is actively captured and tracked in our systems. The Investment Bank also closely monitors external surveys,
which provide feedback across a range of investment banking services.
1 Refers to UBS AG Personal & Corporate Banking.
Investors
We aim to create sustainable, long-term value for our investors by executing our strategy, growth and integration plans
while maintaining risk and cost discipline, and delivering attractive shareholder returns through the cycle.
Investor base
Our investor base is well diversified. A substantial proportion of our institutional shareholders are based in the US, the
UK and Switzerland.
› Refer to the “Corporate governance” section of this report for more information about disclosed shareholdings
Alignment of interests
We aim to align the interests of our employees with those of our equity and debt investors, and 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
We are focused on driving sustainable long-term growth while maintaining risk and cost discipline
Our objective is generating value for all of our stakeholders by driving sustainable growth across the cycle. In the short
term, our main priorities are the integration of Credit Suisse, positioning the firm for efficient long-term growth by right-
sizing the cost base, optimizing the balance sheet and investing strategically in order to achieve our long-term growth
ambitions. By the end of 2026 and beyond, this will enable us to deliver significant value for all our stakeholders and
remain a reliable economic partner, employer and taxpayer in the communities where we operate. Moreover, we are
aiming to maximize our impact and that of our clients to create long-term sustainable value.
Our primary measurement of the Group’s financial performance 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, capital guidance and ambitions” section of this report for more information
› Refer to “Our focus on sustainability and climate” in this section for more information about our environmental, social and
governance aspirations
Balancing resilience, growth and attractive capital returns
Capital strength is a key pillar of our strategy, and we are committed to maintaining a balance sheet for all seasons. This
includes our strong capitalization, in line with our capital guidance of maintaining a CET1 capital ratio of around 14%
and a CET1 leverage ratio of greater than 4.0%.
We are committed to investing for sustainable growth. Our balance sheet provides ample capacity for return-accretive,
sustainable growth. We plan to fund this growth organically from the capital released from the unwinding of the Non-
core and Legacy business division, as well as capital optimization measures in our core divisions.
Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders
37
We intend to distribute excess capital to shareholders, in the form of a progressive dividend and share buybacks. For the
2023 financial year, the Board of Directors plans to propose a dividend to UBS Group AG shareholders of USD 0.70 per
share, a 27% increase year on year. We remain committed to progressive dividends and are accruing for a mid-teen
percentage increase in the dividend per share for the 2024 financial year. We are committed to distributing excess capital
to shareholders in the form of share repurchases and plan to reinstate share repurchases of up to USD 1bn during 2024,
commencing after the completion of the merger between UBS AG and Credit Suisse AG, which is expected by the end
of the second quarter of 2024. It is our ambition for share repurchases in 2026 to exceed the 2022 levels of USD 5.6bn.
› Refer to “UBS shares” in the “Risk, 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 investors interested in sustainability topics
relevant to UBS and wider society.
› Refer to the first part of the “Corporate governance” section of this report and “Information policy” in that same section for more
information
› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for more
information
Employees
We are dedicated to being a world-class employer and a place where people can unlock their full potential. Our
employees execute our business strategy and deliver the products and services our clients need. We therefore continued
to invest in measures to strengthen our culture in 2023 and to provide a framework for employee growth and well-being
within our overarching people management approach.
Our workforce in a nutshell¹
Men
59%
67,938
115,038
employees
Women
41%
47,100
18%
61%
21%
age <30
age 30–50
age >50
32%
23%
24%
20%
Switzerland
Americas
Asia Pacifi c
EMEA
52
countries
166
nationalities
171
languages
spoken
8.5
years of service,
on average
1 Calculated as of 31 December 2023 on a head-count basis of 115,038 internal employees only (112,842 FTE). The number of external staff as of
31 December 2023 was 25,619 (workforce count).
Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders
38
The three keys and our corporate culture
Our culture, which is the foundation of our identity, is based on our three keys to success: our Pillars, Principles and
Behaviors. Together, these keys drive our business decisions and our people management processes. Generally speaking,
the employee cultures of UBS and Credit Suisse are based on similar foundations: integrity, collaboration and high levels
of engagement are the norm for both organizations. In the second half of 2023, familiarizing our new colleagues with
our three keys principles and building a unified culture across our combined organization were top priorities. A culture
integration forum was established to oversee and support the cultural integration efforts across the combined firm.
Employee integration progressed throughout 2023, starting with senior leadership decisions and continuing down to
individual teams, seeking to bring talented individuals together in a fair, consistent and meritocratic approach. Those
efforts, and the employee engagement and development initiatives that support the integration, will continue, and even
increase, in 2024.
Culture-building behavior is promoted through a number of Group-wide, divisional and regional initiatives. One example
is Three Keys on Air. In 2023, this Group-wide series of webcast employee events highlighted key aspects of our culture,
including maximizing performance, psychological safety in high-performing teams and excellence in risk management.
In addition, the Group Franchise Awards (GFA) program recognizes employees for cross-divisional collaboration and for
suggesting innovative or simplification ideas. In 2023, more than 1,800 ideas were submitted for consideration. The
global peer-to-peer appreciation program (called Kudos) makes it easy for employees to recognize and appreciate their
colleagues’ above-and-beyond behavior. This serves to promote excellence and increase engagement and employee
satisfaction. In 2023, our employees gave nearly 439,000 Kudos recognitions. Credit Suisse employees participated in
Recognizing and Valuing Excellence (RAVE), a similar peer-to-peer recognition program. The GFA program and Kudos
will be rolled out to the entire organization starting in 2024.
› Refer to ubs.com/global/en/our-firm/our-culture.html for details about our three keys to success
› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for more
information
Hiring, developing and retaining talent
We hired a total of 11,435 external candidates across the combined firm in 2023 and developed more than 3,700
graduates and other trainees, apprentices and interns around the globe. We actively promote multi-year apprenticeship
programs in Switzerland and the UK, along with summer internship programs in the US, EMEA, Asia Pacific and
Switzerland.
In 2023, most employees were eligible to work partially from home, depending on their role, regulatory restrictions and
location, as well as divisional or functional requirements. Already similar, the hybrid-working programs of the UBS sub-
group and the Credit Suisse sub-group will be aligned over the course of the integration. These measures, along with
options such as part-time working, job sharing and partial retirement, help us attract and retain diverse top talent.
› Refer to ubs.com/global/en/careers/awards.html for employer ratings and recognitions
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
Total
As of
% change from
31.12.23
31.12.22
31.12.21
31.12.22
27,638
26,024
27,638
22,686
8,970
13,085
631
34,880
112,842
21,819
21,032
16,489
14,342
6,234
7,823
285
19,947
72,597
21,317
20,537
15,618
14,091
6,051
7,826
215
20,359
71,385
27
24
68
58
44
67
121
75
55
Talent management and development
We want our employees to be able to build long and successful careers. Our systematic approach to talent management
includes annual talent and succession reviews that help ensure we have strong talent pipelines and succession plans.
Group-wide talent programs are offered across the organization and supplemented by specific programs in the business
divisions, business areas or functions and regions. Programs range from those targeting senior leaders to those targeting
junior talent, in addition to those open to women and employees from diverse backgrounds.
Internal mobility is a key component of our approach, with line managers expected to support individual development
and mobility. In 2023, 38.8% of all open roles at our firm were filled by internal candidates. Employees can explore career
paths, search for jobs and short-term rotations, and connect with mentors on our Career Navigator platform. Credit
Suisse employees are expected to have full access during 2024.
Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders
39
All internal training is delivered via our UBS University platform. Our offering includes client advisor certification and
regulatory, business, and line manager training, alongside modules on topics such as sustainable finance, data literacy,
and well-being. Credit Suisse employees transitioned onto the UBS University platform in January 2024. Across the
combined firm in 2023, employees completed more than 2.3 million learning activities (including mandatory training) for
an average of 1.91 training days per employee. Together with Credit Suisse we invested more than USD 100m in training
activities in 2023.
Performance management
Our performance management approach (MyImpact) reflects our strategy and supports our high-performance culture.
We consider both performance and behavior-related objectives because we value what an employee accomplishes and
how our Behaviors (accountability with integrity, collaboration and innovation) are demonstrated. Regular check-ins,
along with an embedded feedback app, enable employees to give and receive ongoing feedback, supporting continuous
improvement.
Credit Suisse employees were fully integrated into this performance management approach before the start of year-end
reviews, and the same process was applied across the entire organization. Active involvement from managers and matrix
managers, along with feedback from across the combined organization, ensured a consistent and fair performance
review approach.
Fair and equitable pay
Fair and consistent pay practices are designed to ensure employees are appropriately rewarded for their contribution. We
pay for performance, and we take pay equity seriously. We have embedded clear commitments in our global
compensation policies and practices. We regularly conduct internal reviews and independent external audits on pay
equity, and our statistical analyses show a differential between men and women in similar roles across our major locations
of less than 1%. Beginning in 2020, UBS was certified (through 2023) by the EQUAL-SALARY Foundation for our human
resources (HR) practices, including compensation, in Switzerland, the US, the UK, the Hong Kong SAR and Singapore,
covering more than two-thirds of our global employee population.
All of our HR policies are global, and we apply the same standards across all locations. Furthermore, we review our
approach and policies annually to support our continuous improvement. We also aim to ensure that all employees are
paid at least a living wage.1 We regularly assess employees’ salaries against local living wages, using benchmarks defined
by the Fair Wage Network. In 2023, all employees’ salaries were at or above the respective benchmarks.
› Refer to the “Compensation” section of this report for more information
Diversity, equity and inclusion
Our employee diversity, equity and inclusion (DE&I) strategy is built on four pillars: how we hold ourselves accountable,
how we hire, how we develop talent and how we build a culture of belonging. We leverage all four pillars as we move
toward achieving our ambitious gender and ethnic diversity aspirations and creating an inclusive culture for all.
In 2020, we outlined specific intentions to increase our female and ethnic minority representation, especially among
management. We aspire to have by 2025 30% of Director level and above roles globally held by women and 26% of
Director level and above roles in the US and the UK held by ethnic minority talent, along with additional regional
aspirations. Our DE&I aspirations remain unchanged for the combined organization and the Credit Suisse DE&I aspirations
have been retired.
As of the end of 2023, women accounted for 40.9% of our workforce and 29.5% of our Director level and above
population, up from 27.8% in 2022 and 26.7% in 2021.2 Women also held 30.5% of management positions, of which
22.6% were in revenue-generating functions. Furthermore, 37.5% of members of the Group Executive Board (the GEB)
and 33.3% of members of the Board of Directors (the BoD) were women, as were 30.3% of senior managers who
reported directly to a member of the GEB.
Due to variations in legal requirements and other factors, we take a country-specific approach to increasing
representation of ethnic minorities and place particular focus on making progress in the UK and the US. As of the end of
2023, employees from ethnic minority backgrounds held 24.3% of Director level and above roles in the UK, up from
23.4% in 2022 and 21.9% in 2021. In the same year, employees from ethnic minority backgrounds held 25.1% of
Director level and above roles in the US, up from 20.5% in 2022 and 20.1% in 2021.
Our 64 employee networks are vital to building a sense of belonging and strengthening our inclusive culture. The Credit
Suisse sub-group and the UBS sub-group employee networks were integrated by the end of 2023, enabling us to combine
programming and resources, and to extend our networks’ impact to a much larger audience.
We build connections with colleagues and clients with disabilities through our association with The Valuable 500, a global
collective of companies actively supporting disability inclusion. Initiatives in 2023 included training for employees and HR
specialists, sponsoring disability-focused employee networks and groups, and further increasing physical and digital
accessibility for employees and clients alike.
› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, and
ubs.com/diversity for more information about DE&I at UBS
Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders
40
Employee engagement and support
We regularly conduct employee life-cycle surveys, analyses of specific business issues and short “pulse” surveys to learn
about employees’ views and concerns. One such pulse survey, conducted across the combined organization in November
2023, found that 87% of respondents reported experiencing a professional and respectful work environment, and 83%
reported that their function collaborates well with different areas. Furthermore, 77% of respondents felt empowered to
make decisions and 86% felt able to speak up and raise concerns.3 All of these results are above the financial services
benchmark.4
We are committed to being a responsible employer, and that includes supporting our employees’ overall health and well-
being. Social, physical, mental and financial well-being elements are woven into our HR policies and practices, as well as
into initiatives to increase awareness and educate employees. In early 2023, UBS became a founding partner of
#WorkingWithCancer to better support employees who are impacted by cancer. During the second half of the year, we
provided information and support to help employees adapt to changes related to the acquisition of the Credit Suisse
Group.
› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for more
information about our workforce, our people management approach and relevant data
1 Excluding our US-based financial advisors as their compensation is primarily based on a formulaic approach.
2 For all data in the DE&I section of this report, 2023 data reflects the combined organization, and prior-year data reflects pre-acquisition UBS only, unless otherwise stated.
3 The result shown is the sum of respondents that “strongly agree” and “agree.”
4 Benchmarks provided by Ipsos Karian and Box as of the third quarter of 2023.
Society
With a clear focus on people, planet and partnerships, Social Impact has continued to be a strong differentiator for the
firm, with our activities underpinning our sustainability strategy. With our acquisition of the Credit Suisse Group and the
ongoing integration, we will continue to put clients and people first across the combined organization and help clients
maximize their impact locally and globally. Credit Suisse’s long-standing commitment to society and philanthropic support
to communities complements and strengthens our global impact footprint.
Our vision is to contribute to and scale an impact economy, an economy that values the well-being of all people and the
planet. This means building partnerships that drive greater impact transparency, more impact ventures and innovative
ways of financing and paying for impact.
Philanthropy services and collective impact
We believe that by working collectively, philanthropists and public and private organizations have the potential to create
lasting change and maximize a positive impact for people and planet. We provide comprehensive advice, insights and
execution services, working with our clients and finding ways to tackle some of the world’s most pressing social and
environmental problems. We aim to mobilize USD 1bn in philanthropic capital and positively impact more than
26.5 million people by 2025 (cumulative total since 2021).
Collective impact
The power of philanthropic partnerships will be critical in achieving systemic scalable change. We have three Collectives,
where philanthropists, led by our in-house philanthropy team, are working together, bringing together their efforts, skills
and resources during a two-year learning journey. By combining our expertise and investor capital, our aim is to fund
initiatives that address (i) child protection, (ii) climate change and (iii) health- and education-related issues. Each Collective
provides investors with an opportunity to work alongside peers and expert practitioners to achieve systemic change.
Helping our clients structure their philanthropy: donor-advised funds
Donor-advised funds offer clients an alternative charitable-giving vehicle to set up their own foundations, offering greater
choice and personalization, and are managed in line with their usual investment approach. Their charitable donations
can be invested within the parameters they select (such as capital, growth or income), helping them to grow their fund
to give grants at a later date. Administration fees are borne by UBS. UBS offers these services in Switzerland, Singapore
and the UK, and in 2023 they were launched in the Hong Kong SAR, with USD 318m in donations in 2023.1
UBS Global Visionaries
Through our UBS Global Visionaries program, we aim to (i) create opportunities for clients and prospective clients to
connect with leading social entrepreneurs and (ii) help the best entrepreneurs focusing on social and environmental issues
to scale their positive change by expanding their network, building capacity and raising awareness about their work.
Since the program started in 2016, we have onboarded and supported 85 entrepreneurs to accelerate their impact.
Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders
41
The UBS Optimus network of foundations
The UBS Optimus network of foundations also aims to contribute to an impact economy that meets the long-term needs
of children and preserves the natural environment. It connects clients with programs that are making a measurable, long-
term difference to the most serious and enduring social and environmental problems. It has been operating for 24 years
now and it is focused on incubating impact ventures, scaling impact through partnerships and achieving impact
transparency. In 2023, the UBS Optimus network of foundations had a presence in nine global locations. It is now working
on harmonizing the Credit Suisse program portfolio. This effort includes Credit Suisse’s four corporate foundations
supporting the Americas, EMEA, Asia Pacific and Switzerland.
In 2023, the UBS Optimus network of foundations raised USD 328m in donations, including UBS matching contributions,
and committed USD 306m in grants from the foundations.1
Highlights in 2023
Social and blended finance
The UBS Optimus network of foundations is actively developing larger-scale investment vehicles, in partnership with other
parts of UBS, by using a blended finance approach. In 2023, it secured major investor commitments for a USD 100m
SDG Outcomes blended finance initiative with Bridges Outcomes Partnerships, British International Investment (the UK’s
development finance institution) and the US International Development Finance Corporation. These anchor investors
participated alongside private investors, including Legatum, family offices (such as the Tsao Family Office) and other high
net worth individuals.
Emergency philanthropy
The UBS Optimus network of foundations and UBS Social Impact teams raise funds and support partners providing
emergency relief in response to disaster situations, and we sometimes launch dedicated appeals to support these efforts.
In 2023, the UBS Optimus network of foundations raised and started to distribute more than USD 25m for the Turkey
and Syria earthquake, the Hawaiian wildfires, flooding in Pakistan and Italy, and people affected by the humanitarian
crisis in Israel and Gaza. The UBS Optimus network of foundations also continued to distribute the USD 56m raised for
the Ukraine Relief Fund launched in 2022. To date, USD 43m has been granted to our partners on the ground.
UBS’s charitable contributions
Communities
We aim to maximize our impact in local communities. We recognize that our long-term success depends on the health
and prosperity of the communities that we are part of. We have a strategic focus on education and the development of
skills, as we believe these topics are where our resources can make the most impact. We regard our long-term investment
in these areas as central to furthering the economic and social inclusion of people that our activities support.
Our direct cash contributions (including through partnerships in the communities that we operate in) and UBS’s affiliated
foundations in Switzerland, as well as contributions to the UBS Optimus network of foundations, amounted to USD 63m
in 2023.
› Refer to “Charitable contributions” in the Supplement to the UBS Group Sustainability Report 2023, available under “Annual
reporting” at ubs.com/investors, for an overview of UBS’s charitable contributions in 2023
Employee volunteering
Our well-established employee volunteering model has been adapted to meet the needs of our new hybrid ways of
working, with both face-to-face and virtual opportunities to support our local communities. We have global targets for
employee engagement through volunteering, which are built bottom-up and on a best-efforts basis. In 2023, we
successfully engaged 38% of our global workforce in volunteering, and 45% of the 199,633 volunteer hours were skills-
based.2
Volunteering not only has a positive impact on our NGO partners and the populations they serve, it also contributes to
corporate culture and creates a sense of belonging. UBS and Credit Suisse regional employee volunteering teams started
to offer joint assignments in July 2023 to support team-building efforts across the firm.
1 Figures provided for the UBS Optimus network of foundations and donor-advised funds are based on unaudited management accounts and information available as of January 2024. Audited financial statements for
the UBS Optimus network of foundations and donor-advised foundation entities are produced and available per local market regulatory guidelines.
2 Reported numbers only account for UBS employee volunteers, Credit Suisse volunteers that participated in joint volunteering events are not reflected in the reported numbers.
Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders
42
Our focus on sustainability and climate
At UBS, we are committed to working toward the 17 United Nations Sustainable Development Goals (the SDGs) and the
orderly transition to a low-carbon economy, as well as assisting our clients to do so. Finance has an important role to
play as companies and individuals consider how best to approach the transition to a more sustainable global economy.
As the world shifts to a low-carbon economy, the regulatory environment continues to evolve, as do the associated
capital-raising and investment opportunities.
Our Code of Conduct and Ethics
In our Code of Conduct and Ethics (the Code), the Board of Directors (the BoD) and the Group Executive Board (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, communities
and investors. We aspire to play our part in creating a fairer and more prosperous society, championing a healthier
environment and addressing inequalities. This ethos is in line with our external commitments, such as our pledge to help
make progress toward the SDGs. Following a substantial revision of the Code in 2021, we made further adjustments in
our 2022 and 2023 reviews of it, mainly focused on clarifying, simplifying and aligning language used.
› Refer to the Code of Conduct and Ethics of UBS, available at ubs.com/code, for more information
Our sustainability and impact governance
Sustainability activities, including climate, are overseen at the highest level of UBS, by the BoD and the GEB, and are
grounded in our Code.
› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for more
information about sustainability activities
The BoD is responsible for setting UBS’s values and standards for the purpose of ensuring that the Group’s obligations
to shareholders and other stakeholders are met. The Chairman of the BoD, together with the Group CEO, takes
responsibility for UBS’s reputation and is closely involved in and responsible for ensuring effective communication with
shareholders and other stakeholders, including government officials, regulators and public organizations. All BoD
committees have specific responsibilities pertaining to environmental, social and governance (ESG) matters. For example,
the Compensation Committee is responsible for ESG-related compensation topics, the Risk Committee supervises the
integration of ESG in risk management, the Governance and Nominating Committee supports the Board in establishing
best practices in corporate governance and the Audit Committee has oversight of the control framework underpinning
ESG metrics.
The Corporate Culture and Responsibility Committee (the CCRC) of the BoD is the body primarily responsible for
corporate culture, responsibility and sustainability. The CCRC oversees our Group-wide sustainability and impact strategy
and key activities across environmental and social topics. This includes climate, nature and human rights. Annually, it
considers and approves our sustainability and impact objectives. Each year, the CCRC considers and approves our
sustainability and impact objectives. The CCRC’s 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 UBS’s corporate culture. The CCRC is also responsible for conducting the annual review process for the
Code and for proposing amendments to the BoD. This review process includes a prior review of the Code by the GEB
and is led by the Group CEO.
The Group CEO has delegated responsibility for setting the sustainability and impact strategy and developing Group-
wide sustainability and impact objectives, in agreement with fellow GEB members, to the GEB Lead for Sustainability and
Impact, Beatriz Martin Jimenez. On behalf of the GEB, the GEB Lead for Sustainability and Impact proposes the strategy
and objectives to the CCRC. Progress against strategy and the associated targets are reviewed at least once a year by the
GEB and the CCRC. The GEB Lead for Sustainability and Impact also manages the Group Sustainability and Impact (GSI)
organization and, together with our Chief Sustainability Officer (the CSO), co-chairs our Sustainability and Climate Task
Force (the SCTF), which oversees the implementation of the Group’s sustainability activities and its climate action plan,
including its net-zero program. Senior representatives from across our firm, including from the business divisions, Risk,
Compliance and Finance, attend the SCTF’s regular meetings. Both the GEB Lead for Sustainability and Impact and the
CSO attend the meetings of the CCRC.
The GEB also resolves overarching matters relating to sustainability and climate risks, including risk management
framework, policies, and disclosure.
› Refer to “Board of Directors” in the “Corporate governance” section of this report for more information about the CCRC
Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders
43
Group Sustainability and Impact
The GSI organization consists of the Chief Sustainability Office and the Social Impact Office, headed by the CSO and the
Head Social Impact, respectively. The CSO is responsible for driving the implementation of the Group-wide sustainability
and impact strategy, net-zero strategy across all in-scope activities, and the ESG data strategy. In addition, the CSO has
responsibility for supporting the business divisions and Group Items in the design of sustainability frameworks,
implementation of sustainability regulations and development of training on sustainability. The CSO also manages
external relationships, industry advocacy and the annual sustainability disclosure.
The Head Social Impact is responsible for driving and implementing the social impact strategy, including Community
Impact, Philanthropy Services and UBS Global Visionaries. Reporting to the Head Social Impact, the regional Heads of
Social Impact and Philanthropy are responsible for extending the reach of and maximizing the impact of our social impact
activities locally, nationally and globally. In addition, they have responsibility for all our programs’ operations and risk
management, client engagement, and employee volunteering.
Progress made in implementing Group-wide sustainability and impact objectives is reported as part of UBS’s annual
sustainability disclosure. UBS is certified against the ISO 14001 standard for its products, services and activities in all
business divisions and locations. To this extent, UBS seeks to continuously improve environmental and sustainability
performance, as well as pollution prevention across UBS. The GSI governance and framework document complements
the Code, and together they govern UBS’s environmental management system, according to ISO 14001.
› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for more
information about our sustainability and impact governance
Our sustainability and impact strategy
To help us maximize our impact, we focus on three key areas to drive the sustainability transition: planet, people and
partnerships.
– Planet: We acknowledge that achieving the orderly transition to a low-carbon economy is highly ambitious.
Nonetheless, we are committed to doing our part, which is why the shift to a lower-carbon future is a priority for UBS
and a key focus of our sustainability strategy.
– 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 help change
on a global scale.
› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for more
information about how UBS is advancing sustainability in the financial sector and beyond
Our approach to climate
Our approach to climate outlines three key objectives to support our overarching ambitions.
Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders
44
Our approach to climate
Ambition
We will support clients through the world’s transition to a low-carbon economy and embed considerations of
climate change risks and opportunities in our bank for the benefi t of our stakeholders, now and in the future .
Supporting our clients’
low-carbon transition
Reducing our climate
impact
Managing the risks of climate
change to our business
– Mobilizing capital toward an
– Minimizing our own
Key objectives
of our approach
to climate
Current metrics
and targets
orderly transition to a
low-carbon economy.
– Aligning our in-scope
lending and investment
portfolios to the objectives
of the Paris Agreement.
– Supporting the transition of
our fi nancing and investing
clients to low-carbon and
climate-resilient business
models.
– Embedding climate
considerations into our
fi nancing, investment and
capital markets offering.
– Address our fi nanced emissions
by aligning specifi ed sectors to
decarbonization pathways.
– Aim to align, by 2030, 20% of
UBS AG Asset Management’s
total assets under
management with net zero.1
– USD 400bn invested assets in
sustainable investments in UBS
AG by 2025.2
– Disclosure of facilitated
emissions for selected carbon-
intensive sectors.
operational footprint and
utilizing resources in an
effi cient and sustainable way.
– Identifying, measuring, monitor-
ing, managing and reporting
sustainability and climate risks
(including nature-related risks).
– Measuring and managing
– Applying sustainability and
climate risk appetite as codifi ed
in UBS Group’s Sustainability and
Climate Risks Policy.
– Continue integrating sustainability
and climate risk regulatory
requirements into fi nancial risk
management and stress-test
frameworks.
– Ensuring the sustainability and
climate risk framework is embed-
ded into our activities at Group and
legal entity level compliance, the
Credit Suisse integration strategy
and UBS’s target operating model.
– Exposure to climate-sensitive
sectors (transition and
physical).
– Exposure to nature-related
risks.
– Climate-related materiality
assessment.
our travel footprint, including
reduction of air-travel-related
emissions.
– Engaging our suppliers on
emissions reductions and
managing our supply chain
responsibly.
– Minimize our scope 1 and 2
emissions through energy
ef fi ciencies and by switching
to more sustainable energy
sources. After which, procure
credible carbon removal credits to
neutralize any residual emissions
down to zero by 2025.³
– Reduction of our own energy
consumption by 15% from 2019
levels by 2025.
– 100% renewable electricity
coverage.
– Offset historical emissions from
own operations back to 2000 by
2025.4
– Engage with our GHG key
ven dors, for 100% of them to
declare their emissions and set
net-zero-aligned goals by 2026,
and reduce their scope 1 and 2
emissions in line with net-zero
trajectories by 2035.5
Key enablers
Governance and
accountabilities
Engagement and
partnerships
Training and
culture
Climate data
and analytics
1 This Pre-acquisition UBS aspiration will be reassessed in 2024. 2 As part of the integration of Credit Suisse, UBS has retired the Pre-acquisition UBS sus-
tainable investing aspiration of USD 400bn in SI invested assets. 3 Scope 2 emissions are market-based emissions. The remaining scope 1 and 2 emissions may
be in excess of the approximately 5–10% residuals required for net zero (per the defi nition of a “net-zero target” by the ESRS E1 Climate Change per delegated act,
adopted on 31 July 2023), which is our ambition for 2050. In 2024, we will be reviewing our 2025 scope 1 and 2 target for achievability for the combined organization
and alignment with latest guidance. 4 Target applies to UBS Group excluding Credit Suisse. 5 In 2024, we may review our targets for GHG key vendors for
the combined organization and alignment with the latest guidance. Our GHG key vendors are those vendors that collectively account for more than 50% of
our estimated vendor GHG emissions.
Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders
45
We understand the deep interrelationships that exist between climate and nature. Our approach to climate, including
our ambition to achieve net zero, also forms part of our approach toward managing nature-related risks and
opportunities.
› Refer to the UBS Group Climate and Nature Report 2023, available at ubs.com/sustainability-reporting, for a full description of
UBS’s approach to climate and nature
Our approach to sustainable finance
We are committed to supporting our clients’ sustainability ambitions, whether they focus on reducing the carbon
emissions footprint of their business or portfolios or seek to encourage a more equitable and more prosperous society.
› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for more
information about our sustainability and impact strategy and activities
Defining sustainable finance
It is important to set out how we define sustainable finance, as no uniformly accepted definition currently exists in the
industry. We consider sustainable finance to include any financial product or service (including both investing and
financing solutions) that aims to explicitly align with and / or contribute to sustainability-related objectives, while targeting
market-rate risk-adjusted financial returns. Sustainability-related objectives may include, but are not limited to, the SDGs
identified in the United Nations 2030 Agenda for Sustainable Development.
Our approach to sustainable finance is also reflected in the Group sustainable investing framework, which specifically
defines “sustainability focus” and “impact investing” products.
Both categories reflect a defined and explicit sustainability intention of the underlying investment strategy. This
intentionality differentiates them from traditional investment products or those that consider sustainability-related aspects
but do not actively and explicitly pursue any specific sustainability objective, such as ESG integration or exclusions-only
approaches.
Investment approaches
UBS’s definition 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
related to investment performance
– May use ESG tools, but these do
not drive the strategy
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
Our sustainable finance ambitions
Through our sustainable finance product and service offerings, we target four key objectives in serving our clients.
– The power of choice: we want to give our investing clients the choices they need to meet their specific sustainability
objectives.
– An orderly transition: we aim to support our clients in their transition to a low-carbon economy, for instance by offering
innovative sustainable financing and investment solutions.
– Managing risks and identifying opportunities: we offer research and thematic insights, as well as data and analytics
services. Combined with targeted advice, these are designed to help clients better understand and mitigate risks and
identify new opportunities.
– Making sustainable finance an everyday topic: we want to make sustainability topics tangible throughout our
interactions with clients. To help us do that, we provide support in the form of tools, platforms and education.
Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders
46
Sustainable fi nance ambitions
In accordance with our ambitions, our sustainable
fi nance product offering is evolving across four areas:
Investing
Financing
Research and advisory
Sustainable investing
solutions for private and
institutional investors
Sustainable fi nancing
solutions for real estate
and corporate purposes
Solutions guiding our
clients on their sustainability
transition journey
Data, platforms and
client Interactions
ESG analytics, scoring, reporting,
tools and client support through
our interactions
Sustainable finance
We continued to support the sustainability ambitions of our corporate and institutional clients via our financing solutions.
We helped facilitate USD 53.7bn of green, social, sustainability and sustainability-linked bond deals, such as structuring
and support of Western Australia Treasury Corporation’s inaugural AUD 1.9bn green bond. We introduced sustainability-
linked loans for multi-national corporations and further supported our clients with ESG advisory services and tools, such
as the renovation and subsidies calculators for clients in Switzerland.
Sustainable investing
Similarly to the overall markets, our sustainable investing (SI) invested assets continued to grow in 2023. We continued
to expand the SI product offering for our clients, including, among others, new net-zero ambition portfolios, sustainable
hedge funds and private-market impact solutions, as well as low-carbon investing modules.
› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for more
information about our approach to sustainable investing and financing
Sustainable investments1
USD bn, except where indicated
Total invested assets (UBS Group)
of which: total invested assets (UBS AG)
Sustainable investments (UBS AG)2
Sustainability focus3
Impact investing4
For the year ended
31.12.22
3,980.9
3,980.9
31.12.23
5,714.1
4,504.7
270.4
21.8
246.9
19.2
31.12.21
4,614.5
4,614.5
222.7
28.1
% change from
31.12.22
44
13
10
14
292.3
Total sustainable investments5,6,7
SI proportion of total invested assets (%)8
1 The table above details UBS AG Sustainable Investing Invested Assets (IA) and the evolution thereof. This table does not contain any Credit Suisse products and associated IA classified under the Credit Suisse
Sustainable Investing Framework (SIF). Credit Suisse IA in accordance with the SIF are reported separately as figures are not directly comparable with the UBS figures due to material differences in the underlying
sustainable investment frameworks and definitions being applied. Refer to “Appendix 3 – Entity-specific disclosures for Credit Suisse AG” in the UBS Group Sustainability Report 2023, available under “Annual
reporting” at ubs.com/investors, for more information. 2 We focus our sustainable investment reporting on those investment strategies exhibiting an explicit sustainability intention. 3 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. 4 Strategies that have explicit
intentions of generating measurable, verifiable and positive sustainability outcomes. Impact generated is attributable to investor action and/or contributions. 5 Certain products have been reclassified during 2023
for reasons including, but not limited to, an evolving regulatory environment, periodic monitoring of the product shelf, and developing internal classification standards. Impact of these movements on sustainable
investment invested assets was a net reduction by USD 7bn in UBS AG Global Wealth Management Americas and a net reduction by USD 6bn in UBS AG Asset Management. 6 In line with general market practice,
IA reported for sustainable investments include limited amounts of instruments not classified as sustainable investment, including cash and cash-like instruments that each fund and portfolio hold for liquidity
management purposes, as well as, subject to clear, limiting restrictions, client-directed investments included in sustainable investing mandates managed by UBS Asset Management. 7 The impact investing and total
sustainable investments (UBS AG) disclosures for 31 December 2022 and 31 December 2021 reporting periods have been restated to remove investments that were duplicated in the disclosed values. As a result, the
values disclosed for 31 December 2022 and 31 December 2021 for both categories have each decreased by USD 1.6bn and USD 0.4bn, respectively. 8 Total invested assets (UBS AG) are used to calculate the SI
proportion.
266.0
250.8
5.4
6.5
6.7
10
This was also reflected in our clients’ continued interest in SI solutions. Over the course of 2023, UBS AG’s SI invested
assets rose to USD 292.3bn as of 31 December 2023, compared with USD 266bn at the end of 2022, representing a
year-on-year increase of 10%. A combination of factors contributed to this growth, including new product launches, net
new money inflows as well as market performance. SI invested assets accounted for 6.5% of UBS’s total invested assets
at year-end 2023.
› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for more
information about our approach to sustainable investing and financing
Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders
47
Managing sustainability and climate risks
Helping to further the Group’s broader sustainability goals with due consideration to our responsibility to manage risk,
we manage sustainability and climate risk under a pragmatic and robust policy. That policy incorporates our risk
management framework and related standards and guidelines and applies to our own operations, our balance sheet,
our clients’ assets and our supply chain.
Our approach to managing sustainability, climate and nature-related risk helps us identify and manage potential adverse
impacts on the climate, on the environment and to human rights, as well as the associated risks affecting our clients and
us. We define sustainability and climate risk as the risk that UBS negatively impacts, or is impacted by, climate change,
natural capital, human rights, and other ESG matters. Sustainability and climate risks may manifest as credit, market,
liquidity and / or non-financial risks for UBS, resulting in potential adverse financial, liability and / or reputational impacts.
These risks extend to the value of investments and may also affect the value of collateral (e.g., real estate). Climate risks
can arise from either changing climate conditions (physical risks) or from efforts to mitigate climate change (transition
risks). 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.
› Refer to “Sustainability and climate risk” in the “Risk management and control” section of this report
› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for a full description
of our sustainability and climate risk policy framework
Our aspirations and progress
We work with a long-term focus on providing appropriate returns to our stakeholders in a responsible manner. We are
committed to providing transparent aspirations or targets and reporting on the progress made against them. Following
the acquisition of the Credit Suisse Group, our exposure increased accordingly, so we reviewed our aspirations.
Amendments that arose from this review process were considered by the GEB and the CCRC. This table reflects the
overall outcomes of this process with more detailed information provided in the UBS Group Sustainability Report 2023.
› Refer to the UBS Group Sustainability Report 2023, available under “Annual Reporting” at ubs.com/investors, for more detailed
information on our aspirations and our progress
Our aspirations and progress
Our priorities
Our aspirations or targets
Planet, people,
partnerships
Planet
Sustainable investments.1
Following the acquisition of the Credit Suisse Group, we
refined the UBS Group lending sector decarbonization
targets to reflect the activities of the combined
organization and evolving standards and methodologies.2
Reduce emissions intensity associated with UBS in-scope
lending by 2030 from 2021 levels for:
– Swiss residential real estate by 45%;
– Swiss commercial real estate by 48%;
– power generation by 60%;
– iron and steel by 27%; and
– cement by 24%.
Reduce absolute financed emissions associated with UBS
in-scope lending by 2030 from 2021 levels for:
– fossil fuels by 70%.
Continue disclosing in-scope ship finance portfolios
according to the Poseidon Principles decarbonization
trajectories with the aim of aligning therewith.3
Aim, by 2030, to align 20% of UBS AG Asset
Management’s total assets under management (AuM)
with net zero. This pre-acquisition UBS aspiration will be
reassessed in 2024.5
Our progress in 2023
Increased invested assets in sustainable investments in UBS AG to
USD 292.3bn (compared with USD 266bn in 2022).
Calculated progress against pathways for revised targets.4
Changes in emissions intensity associated with UBS in-scope lending (end of
2022 vs. 2021 baseline):
– Swiss residential real estate reduced by 6%;
– Swiss commercial real estate increased by 2%;
– power generation reduced by 13%;
– iron and steel reduced by 4%; and
– cement reduced by 1%.
Changes in absolute financed emissions associated with UBS in-scope
lending (end of 2022 vs. 2021 baseline) for:
– fossil fuels reduced by 29%.
In-scope ship finance portfolio remains below the existing International
Maritime Organization (IMO 50) decarbonization trajectory.
Aligned 2.9% of UBS AG Asset Management’s total AuM with net zero.
Minimize our scope 1 and 2 emissions through energy
efficiencies and switching to more sustainable energy
sources. After which, procuring credible carbon removal
credits to neutralize any residual emissions down to zero
by 2025.6
Reduced net GHG footprint for scope 1 and 2 emissions by 21% and energy
consumption by 8% (compared with 2022); continued replacing fossil fuel
heating systems and monitored delivery of contracted carbon removal
credits; achieved 96% renewable electricity coverage in line with RE100
despite challenging market conditions.
Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders
48
Offset historical emissions back to the year 2000 by
sourcing carbon offsets (by year-end 2021) and by
offsetting credit delivery and full retirement in registry (by
year-end 2025). The scope is UBS Group excluding Credit
Suisse.
Continued to follow up on credit delivery and retirement of sourced
portfolio.
Engage with our greenhouse gas (GHG) key vendors, for
100% of them to declare their emissions and set net
zero-aligned goals by 2026, and reduce their scope 1 and
2 emissions in line with net-zero trajectories by 2035.7
We invited the vendors that accounted for 67% of our annual vendor spend
to disclose their environmental performance through CDP’s Supply Chain
Program, with 70% of the invited vendors completing their disclosures in the
CDP platform.
65% of GHG key vendors (defined as those vendors that collectively account
for more than 50% of our estimated vendor GHG emissions) have declared
their emissions on CDP and set net-zero-aligned goals.
People
(aspirations)
By 2025, 30% of worldwide roles at Director level and
above held by women.
Increased to 29.5% (2022: 27.8%) of worldwide roles at Director level and
above held by women.
By 2025, 26% of US roles at Director level and above
held by employees from ethnic minority backgrounds.
Increased to 25.1% (2022: 20.5%) of US roles at Director level and above
held by employees from ethnic minority backgrounds.
By 2025, 26% of UK roles at Director level and above
held by employees from ethnic minority backgrounds.
Increased to 24.3% (2022: 23.4%) of UK roles at Director level and above
held by employees from ethnic minority backgrounds.
By 2025, 4% of UK roles at Director level and above held
by black employees.
Stable at 2.1% (2022: 2.2%).
By 2025, 25% of Americas financial advisor / client
advisor roles held by women (UBS Group excluding
Credit Suisse).
By 2025, 18.8% of US financial advisor / client advisor
roles held by employees from racial / ethnic minority
backgrounds (UBS Group excluding Credit Suisse).
Increased to 16.8% (2022: 16.6%).
Decreased to 12.2% (2022: 12.4%).
Raise USD 1bn in donations to our client philanthropy
foundations and funds and reach 26.5 million
beneficiaries by 2025 (cumulative for 2021–2025).
Achieved a UBS Optimus network of foundations donation volume of
USD 328.0m in 2023, totaling USD 763.9m since 2021 (both figures include
UBS matching contributions).8
Partnerships
Continue to position UBS as a leading facilitator of
discussion, debate and idea generation.
Drive standards, research and development, and
product development.
Reached 7 million beneficiaries in 2023 and 18.5 million beneficiaries across
our social impact activities since 2021.
Delivered a variety of insights, including through interviews with subject-
matter experts, individual research reports and comprehensive white papers,
via the UBS Sustainability and Impact Institute, including key publications The
Rise of the Impact Economy and Rethink, rebuild, reimagine.
Co-organized, with the Institute of International Finance, the second
Wolfsberg Forum for Sustainable Finance.
Co-led financial-sector-specific working group of the Taskforce on Nature-
related Financial Disclosures (the TNFD) and supported the launch of the
TNFD framework.
Co-chaired the UNEP FI Principles for Responsible Banking Nature working
group that developed initial guidance on nature target setting for financial
institutions.
1 As part of the integration of Credit Suisse, UBS has retired the pre-acquisition UBS sustainable investing aspiration of USD 400bn in SI invested assets. 2 While we continue to take steps to align our business
activities to our targets, it is important to note that progress towards our targets may not be linear and that the realization of our own targets and aspirations is dependent on various factors which are outside of our
direct influence. We will continue to adjust our approach in line with external developments and evolving best practices for the financial sector and climate science. Refer to the Supplement to the UBS Group
Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for more information about parts of the value chain within sectors covered by metrics and targets. Metrics are based on gross
exposure, which includes total loans and advances to customers, fair value loans and guarantees, and irrevocable loan commitments. Exclusions from the scope of analysis primarily include financial services, credit
card and other exposure to private individuals. 3 As part of our ship finance strategy, ships in scope of Poseidon Principles (PP) are assessed on criteria which aim at aligning portfolios to the PP decarbonization
trajectories. The PP are a framework for assessing and disclosing, on an annual basis, the climate alignment of in-scope ship finance portfolios to the ambition of the International Maritime Organization (the IMO),
including its 2023 Revised GHG Strategy for GHG emissions from international shipping to decrease to net zero by or around 2050 (compared with 2008 levels). 4 Refer to the “Environment” section of the UBS
Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for further information. The inherent one-year time lag between the as-of date of our lending exposure and the as-of date
of emissions can be explained by two factors: corporations disclose their emissions in annual reporting only a few months after the end of a financial year; and specialized third-party data providers take up to nine
months to collect disclosed data and make it available to data users. Consequently, the baselines for our decarbonization targets are calculated on year-end 2021 lending exposure and 2020 emissions data. Our 2022
emissions actuals are based on year-end 2022 lending exposure and 2021 emissions data. For asset financing (e.g., real estate, shipping) there is no time lag, and exposure and emissions actuals refer to the same
year. 5 The 20% alignment goal amounted to USD 235bn at the time of pre-acquisition Asset Management’s commitment in 2021. By 2030, the weighted average carbon intensity of funds is to be 50% below the
carbon intensity of the respective 2019 benchmark. 6 Scope 2 emissions are market-based emissions. The remaining scope 1 and 2 emissions may be in excess of the approximately 5–10% residuals required for net
zero (per the definition of a “net-zero target” by the ESRS E1 Climate Change per delegated act, adopted on 31 July 2023), which is our ambition for 2050. In 2024, we will be reviewing our 2025 scope 1 and 2
target for achievability for the combined organization and alignment with latest guidance. 7 In 2024, we may review our targets for GHG key vendors for the combined organization and alignment with latest
guidance. Our GHG key vendors are those vendors that collectively account for more than 50% of our estimated vendor GHG emissions. 8 Figures provided for the UBS Optimus network of foundations are based on
unaudited management accounts and information available as of January 2024. Audited financial statements for UBS Optimus network of foundations entities are produced and available per local market regulatory
guideline.
Cautionary note: We have developed methodologies that we use to set our climate-related targets and identify climate-related risks and which underly the metrics that are disclosed in this report. Standard-setting
organizations and regulators continue to provide new or revised guidance and standards, as well as new or enhanced regulatory requirements for climate disclosures. Our disclosed metrics are based upon data available
to us, including estimates and approximations where actual or specific data is not available. We intend to update our disclosures to comply with new guidance and regulatory requirements as they become applicable
to UBS. Such updates may result in revisions to our disclosed metrics, our methodologies and related disclosures, which may be substantial, as well as changes to the metrics we disclose.
Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders
49
Reporting to our stakeholders on our sustainability strategy and activities
Further information about our sustainability efforts and commitments is provided in the UBS Group Sustainability Report
2023, available under “Annual reporting” at ubs.com/investors. The content of the UBS Group Sustainability Report 2023
has been prepared in accordance with Global Reporting Initiative (GRI) standards, with the German rules implementing
the EU Directive on disclosure of non-financial and diversity information (2014/95/EU) and the Swiss Code of Obligations
(Art. 964a et. seq.). UBS is in the process of implementing a combined and aligned sustainability-and-climate-risk dataset
across UBS Group and including Credit Suisse AG. For this reason, UBS will publish UBS Group and Credit Suisse AG
sustainability and climate risk metrics required pursuant to FINMA Circular 2016/1 “Disclosure – banks”, Annex 5, in a
supplement to the UBS Group Annual Report and the UBS Group Sustainability Report in line with the publication timeline
for the semi-annual Pillar 3 disclosures in the third quarter of 2024. All climate- and nature-related information contained
in the UBS Group Sustainability Report 2023 is also made available through a separate UBS Group Climate and Nature
Report 2023. The latter report follows the structure recommended by the Task Force on Climate-related Financial
Disclosures (the TCFD) and also leverages the framework of the Taskforce on Nature-related Financial Disclosures (the
TNFD). Our reporting on sustainability has been reviewed on a limited assurance basis by Ernst & Young Ltd against the
GRI Standards.
› Refer to the UBS Group Sustainability Report 2023, available 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 the Swiss Code of
Obligations (Art. 964a et. Seq.), and for information about the disclosures of UBS AG and UBS Europe SE pursuant to Art. 8 of the
EU Taxonomy Regulation
› Refer to “Sustainability and climate risk” in the “Risk management and control” section of this report, for the UBS AG
sustainability and climate risk metrics disclosures as required by FINMA Circular 2016/1 "Disclosure – banks," Annex 5
Regulation and supervision
As a financial services provider based in Switzerland, the UBS Group 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 we conduct business. Through UBS AG, Credit Suisse AG, UBS Switzerland AG and Credit Suisse (Schweiz) AG, which
are 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 capital adequacy and risk diversification rules, liquidity,
internal control systems, business conduct, and corporate governance. 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 systemically important bank (an SIB), we are subject to capital and total loss-absorbing
capacity (TLAC) requirements that are based on both risk-weighted assets and the leverage ratio denominator, and are
among the most stringent in the world. We are also subject to Swiss SIB liquidity requirements and to minimum long-
term funding requirements.
› Refer to the “Risk, 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 (TBTF) requirements
› Refer to “Liquidity coverage ratio” in the “Risk, capital, liquidity and funding, and balance sheet” section of this report for more
information about liquidity coverage ratio requirements
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, UBS AG and Credit Suisse AG are subject to the Bank Holding
Company Act, pursuant to which the Federal Reserve Board has supervisory authority over our US operations.
Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders
50
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 (the OCC). Credit Suisse AG New York
Branch is authorized and supervised by the New York Department of Financial Services. UBS AG and Credit Suisse
International are registered as swap dealers with the Commodity Futures Trading Commission (the CFTC), and UBS AG,
Credit Suisse AG and Credit Suisse International are registered as securities-based swap dealers 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 (CCAR) stress testing and capital
planning process, and resolution planning and governance. Credit Suisse Holdings (USA), Inc., the intermediate holding
company for Credit Suisse’s US operations, is subject to the same Federal Reserve Board requirements and is expected to
be integrated into UBS Americas Holding LLC in June 2024.
UBS Bank USA, a Federal Deposit Insurance Corporation (FDIC)-insured depository institution subsidiary, is licensed and
regulated by state regulators in Utah and is also supervised by the FDIC.
UBS Financial Services Inc., UBS Securities LLC and several other US subsidiaries of UBS, as well as US subsidiaries of Credit
Suisse Holdings (USA), Inc., 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. Certain of our activities
in the US are subject to regulation by the Consumer Financial Protection Bureau.
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 (the BoE), 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, UBS AG London Branch, which serves as a global booking center for our Investment
Bank. Our regulated subsidiaries that provide asset management services, including Credit Suisse Asset Management Ltd,
are authorized and regulated by the FCA. UBS Asset Management Life Ltd, Credit Suisse International, Credit Suisse
Securities (Europe) Limited and Credit Suisse (UK) Limited are authorized and regulated by the FCA and subject to the
authority of the PRA.
Regulation and supervision in Germany and the EU
UBS Europe SE, headquartered in Germany, is subject to the direct supervision of the European Central Bank (the ECB),
as well as to continued conduct, consumer protection and anti-money-laundering-related supervision by the German
Federal Financial Supervisory Authority (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.
Credit Suisse AG has four banking subsidiaries in Europe: in Italy, Credit Suisse (Italy) S.p.A. is supervised by the Bank of
Italy and the Commissione Nazionale per le Società e la Borsa (Consob); in Spain, Credit Suisse Bank (Europe) SA is
supervised by the Bank of Spain, the Comisión Nacional del Mercado de Valores (the CNMV) and the Servicio Ejecutivo
de la Comisión de Prevención del Blanqueo de Capitales e Infracciones Monetarias (Sepblac); in Luxembourg, Credit
Suisse (Luxembourg) S.A. is supervised by the Commission de Surveillance du Secteur Financier (the CSSF), the
Commissariat aux Assurances (the CAA) and the Banque de Luxembourg; and in Germany, Credit Suisse
(Deutschland) AG is supervised by BaFin and the Bundesbank. Credit Suisse (Luxembourg) S.A. operates branches in
France, Ireland and Portugal and is subject to conduct supervision by authorities in all those countries. Credit Suisse Bank
(Europe) S.A. operates branches in France, Italy, the Netherlands and Sweden and is subject to conduct supervision by
authorities in all those countries.
We expect to wind down or consolidate the European banking subsidiaries of Credit Suisse AG into UBS Europe SE in
accordance with the intermediate EU parent undertaking requirement, which in agreement with the ECB is to be
implemented by June 2025.
Regulation and supervision in Asia Pacific
We operate in numerous locations in Asia Pacific, including Singapore, the Hong Kong SAR, mainland China, Australia
and Japan. The operations in these locations are subject to regulation and supervision by local financial regulators. Our
Asia Pacific regional hubs are in Singapore and the Hong Kong SAR.
In Singapore, UBS AG Singapore Branch, UBS Securities Pte Ltd, UBS Asset Management (Singapore) Ltd and Credit
Suisse Securities (Singapore) Pte Limited are supervised by the Monetary Authority of Singapore and the Singapore
Exchange. Credit Suisse AG Singapore Branch and Credit Suisse (Singapore) Limited are supervised by the Monetary
Authority of Singapore.
Annual Report 2023 | Our strategy, business model and environment | Regulation and supervision
51
In the Hong Kong SAR, UBS AG Hong Kong Branch and Credit Suisse AG Hong Kong Branch are supervised by the Hong
Kong Monetary Authority. UBS Securities Hong Kong Limited, UBS Securities Asia Limited, UBS Asset Management (Hong
Kong) Limited, Credit Suisse (Hong Kong) Limited and Credit Suisse Securities (Hong Kong) Limited are supervised by the
Hong Kong Securities and Futures Commission. In addition, UBS Securities Hong Kong Limited and Credit Suisse (Hong
Kong) Limited are supervised by Hong Kong Exchanges and Clearing Limited.
In mainland China, we have multiple licenses to operate the respective business lines of UBS AG and Credit Suisse AG,
and the various entities are subject to regulation by a number of different government agencies. The People’s Bank of
China oversees China’s macro capital markets policies and ensures coordinated supervisory approaches by the National
Administration of Financial Regulation (the China Banking and Insurance Regulatory Commission until May 2023), the
China Securities Regulatory Commission and a number of exchanges.
In Australia, UBS AG Australia Branch and Credit Suisse AG Sydney Branch are supervised by the Australian Prudential
Regulation Authority, the Australian Securities and Investments Commission, the Australian Transaction Reports and
Analysis Centre, the Reserve Bank of Australia, and the Australian Securities Exchange. UBS Securities Australia Ltd, UBS
Asset Management Limited and Credit Suisse Equities (Australia) Limited are supervised by the Australian Securities and
Investments Commission, the Australian Transaction Reports and Analysis Centre and the Australian Securities Exchange.
In Japan, UBS Securities Japan Co., Ltd. and Credit Suisse Securities (Japan) Limited are supervised by the Financial Services
Agency and the Japan Exchange Group. UBS AG Tokyo Branch and Credit Suisse AG Tokyo Branch are supervised by the
Financial Services Agency and the Bank of Japan. UBS SuMi TRUST Wealth Management Co., Ltd. is supervised by the
Financial Services Agency and the Japanese Ministry of Finance. UBS Asset Management (Japan) Ltd and UBS Japan
Advisors Inc. are supervised by the Financial Services Agency.
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 Swiss Banking Act and 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 reputational 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 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 otherwise be stabilized.
In 2013, FINMA stated its preference for a single point of entry (an SPE) strategy for globally active SRBs, such as UBS,
with a bail-in at the group holding company level. UBS has made structural, financial and operational changes to facilitate
an SPE strategy and is confident that a resolution of the bank is operationally executable and legally enforceable. In 2023,
UBS acquired the Credit Suisse Group and merged Credit Suisse Group AG into UBS Group AG. UBS Group AG subsumed
all the capital and loss-absorbing instruments of Credit Suisse Group AG with the acquisition. A bail-in remains
operationally executable for the combined UBS Group and an SPE resolution strategy remains the preferred strategy for
UBS.
FINMA evaluates the recovery and resolution plans of Swiss SRBs on a regular basis. In its most recent assessment, which
was published in April 2023 and based on year-end 2022 information, FINMA re-confirmed that UBS’s Swiss emergency
plan is effective, that the recovery plan has been approved and that UBS fulfills all resolvability criteria. The same was
confirmed for Credit Suisse. This assessment did not reflect the combined organization and the respective plans will need
to be amended and approved for the new and combined Group. FINMA will review its resolvability assessment of the
combined UBS Group as the integration progresses. A new, interim assessment is expected to be published by FINMA at
the end of the second quarter of 2024.
Annual Report 2023 | Our strategy, business model and environment | Regulation and supervision
52
Crisis management framework
The UBS Group’s crisis management framework assigns responsibility and actions depending on the nature of the stress
incident and the scale of the response needed.
– For incident, risk and crisis management, the Group Crisis Task Force works with incident management teams that
provide monitoring and early-warning indicators at the 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 (the GEB) and the Board of Directors (the BoD) would evaluate and decide upon the need
to activate the Global Recovery Plan (the GRP) if a stress event reached a severity requiring activation based on the
GRP’s recovery risk indicators.
– FINMA has the authority to determine whether the point of non-viability (the PONV), as defined by Swiss law, has
been reached and, as part of the resolution plan, 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.
UBS crisis management framework
Incident management
Risk and crisis management
Recovery and resolution
Governance body
Execution body
Group Crisis Task Force
GEB and BoD
Incident management teams
Global task forces
Recovery task forces
Support / infrastructure
Business as usual
Business continuity management teams
s
s
e
r
t
s
f
o
l
e
v
e
L
Plans
Monitoring and early-
warning indicators
Crisis
management
protocols and
playbooks
Contingency
funding plans
Recovery
plans
Resolution
strategies
Point of non-viability
Operational risk
framework triggers
Recovery
triggers
Liquidity
triggers
Scale of response needed
Recovery
Resolution
Credit Suisse AG and its subsidiaries also maintain a separate crisis management framework, including processes,
governance and responsibilities, which will be in place as long as those legal entities exist and are subject to standalone
recovery and resolution requirements. The standards and processes applied have been harmonized with the UBS
framework to the extent possible.
Global Recovery Plan
The GRP provides a tool to restore financial strength if UBS comes under severe capital or liquidity stress. Quantitative
and qualitative triggers are monitored daily and are subject to predefined governance and escalation processes. Recovery
options are linked to owners and checklists, with the objectives of preserving capital, raising capital or liquidity, or
disposing of or winding down businesses.
Annual Report 2023 | Our strategy, business model and environment | Regulation and supervision
53
Global Resolution Strategy
FINMA is required to produce a global resolution plan for UBS. The plan includes setting out measures that FINMA can
take to resolve UBS in an orderly manner if the Group enters resolution. 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 the bailing in of the TLAC-
eligible senior unsecured bonds at the UBS Group AG level. An internal recapitalization of undercapitalized subsidiaries
would be executed simultaneously with losses transmitted to UBS AG or Credit Suisse AG, and, ultimately, UBS
Group AG. Post-resolution restructuring measures could include disposals or wind-down of businesses and assets.
Local recovery and resolution plans
The Swiss emergency plans demonstrate 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 operating the Swiss-booked business
in separate legal entities and by maintaining sufficient capital and liquidity to ensure their continued operation. Until the
merger of Credit Suisse (Schweiz) AG into UBS Switzerland AG, UBS will maintain two separate Swiss emergency plans
to cater for differences in the organizational setup and differences in infrastructure.
The US resolution plans set out the steps that could be taken to resolve the US intermediate holding companies (the US
IHCs) i.e., UBS Americas Holding LLC and Credit Suisse Holdings (USA), Inc., and their subsidiaries if they suffered material
financial distress and the UBS Group was unable or unwilling to provide financial support. As required by US regulations,
our US plans contemplate that the US IHCs will commence US bankruptcy proceedings. Prior to this, the plans envisage
the US IHCs downstreaming financial resources to their respective subsidiaries to facilitate an orderly wind-down or
disposal of businesses. Following the expected integration of Credit Suisse Holdings (USA), Inc. into UBS Americas Holding
LLC in 2024, only the resolution plan of UBS Americas Holding LLC will be maintained.
UBS Europe SE updates a local recovery plan annually based on ECB requirements, and resolution planning information
and capabilities based on Single Resolution Board requirements. On the basis of such information, the Internal Resolution
Team, composed of members of the Single Resolution Board, produces a resolution plan for UBS Europe SE. In addition,
several Credit Suisse subsidiaries in Europe will maintain local recovery plans until the Credit Suisse entities are integrated
into the UBS intermediate parent undertaking.
UBS operates a UK banking subsidiary with Credit Suisse International, which is subject to the UK Resolvability Assessment
Framework (the UK RAF). Under the UK RAF, Credit Suisse International is required to assess its recovery planning and
resolvability planning capabilities against the standards defined in the UK RAF on an annual basis and confirm its
compliance to the BoE and PRA.
Other local recovery and resolution plans exist for various Group entities and jurisdictions.
Regulatory trends
In 2023, regulatory policy was strongly impacted by the banking turmoil in March, with financial stability concerns
returning to the forefront, followed by renewed discussions around the effectiveness of too-big-to-fail / resolution
frameworks and subsequent initial lessons drawn being discussed throughout the year. While the reviews by
supranational standard-setters and in Switzerland generally upheld the appropriateness of the international regulatory
and resolution frameworks, certain themes requiring further attention were identified with additional analyses ongoing.
The digitalization of banking and corresponding policy responses continued throughout 2023, with attention paid to
systemic risks, market integrity, investor protection and cross-border aspects related to digital assets. Initial policy efforts
started on decentralized finance. In the meantime, most major central banks increased their engagement related to
central bank digital currencies. New capabilities and wider adoption of artificial intelligence (AI) have resulted in increased
regulatory focus on the topic, particularly regarding sound governance frameworks, safety and fairness. The large-scale
use of both traditional and non-traditional data by AI models has given rise to questions around the adequacy of existing
data legislation and in some jurisdictions will likely result in enhanced protections. Separately, many jurisdictions
continued to make data more available across sectors, with a focus on open finance.
Sustainable finance and climate-related financial risks remained a key focus for policymakers in 2023, where we observed
noteworthy activity in the areas of corporate and product disclosures for climate-related financial risks, specifically relating
to banks’ governance, strategy, and risk management, as well as efforts to standardize and harmonize regulations across
different jurisdictions. Policymakers advanced guidelines related to nature and biodiversity topics by intensifying the focus
on disclosures, risk management, and quantification methodologies. Furthermore, we observed ongoing regulatory policy
related to net-zero financing while transition planning started to become an important focus topic for policymakers. On
the topic of products regulation, regulatory initiatives continued to focus on carbon and carbon markets and addressing
issues related to greenwashing. Lastly, we saw increased regulatory attention paid to solutions related to social impact
investing and blended finance.
Annual Report 2023 | Our strategy, business model and environment | Regulation and supervision
54
The national implementation of the Basel III requirements continued to be an important focus area. The authorities in
Switzerland issued rules to implement the final standards into Swiss law, and US banking regulators launched a public
consultation in 2023. Switzerland has confirmed the effective date for the revised rules as 1 January 2025. Although the
EU is still targeting implementation by January 2025, the UK and the US have delayed the application until July 2025,
with the US also including a three-year transition timeline. Differences in the implementation timelines and in the content
of the provisions remain a challenge for globally active banks.
In addition, regulatory authorities continued to refine existing regulations, including efforts to strengthen the anti-money-
laundering guidelines on beneficial ownership and work on enhancing third-party risk management with operational
resilience remaining a key issue. The focus on retail investor protection sharpened, in particular in asset management. In
the US, retail investor protection features became a component of an ongoing broader equity market reform. In the UK,
reviews of the Senior Managers and Certification Regime focused on determining whether the regime delivers against
its original aim and how it can be improved. Finally, in light of increasing risks, non-bank financial intermediation
remained a topic of concern with national and supranational policymakers.
We believe the continued 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. We trust that our strengthened
position as a combined organization will allow us to cope with any potential challenges.
› Refer to the “Regulatory and legal developments” and the “Risk, capital, liquidity and funding, and balance sheet” sections of this
report for more information
Regulatory and legal developments
Developments related to the acquisition of the Credit Suisse Group and the banking turmoil in March 2023
Key developments in Switzerland
Based on the emergency ordinance issued by the Swiss Federal Council in connection with the acquisition of the Credit
Suisse Group on 16 March 2023, as amended on 19 March 2023, (the Emergency Ordinance), UBS Group AG entered
into a loss protection agreement (an LPA) with the Swiss Confederation, with an effective date of 12 June 2023. As part
of this agreement, the Swiss Confederation would have borne up to CHF 9bn of losses, if realized, on a designated
portfolio of Credit Suisse’s non-core assets after the first CHF 5bn of losses, which would have been borne by UBS.
Under the Emergency Ordinance, UBS AG and Credit Suisse AG also had access to additional liquidity assistance loans,
the Emergency Liquidity Assistance Plus (ELA+) loans, provided by the Swiss National Bank (the SNB) of up to CHF 100bn
on a combined basis, with the loans under the facility having preferential rights in bankruptcy proceedings. The Credit
Suisse Group was also allowed to borrow up to an additional CHF 100bn from the SNB backed by a Swiss federal default
guarantee, the Public Liquidity Backstop (the PLB), with the loans having preferential rights in bankruptcy proceedings.
On 11 August 2023, UBS Group AG voluntarily terminated the LPA and the PLB. After reviewing all assets covered by
the LPA since the closing of the Transaction in June 2023 and taking the appropriate fair value adjustments, UBS
concluded that the LPA was no longer required. All loans under the PLB were fully repaid by the Credit Suisse Group as
of the end of May 2023 and Credit Suisse AG fully repaid the outstanding ELA+ loans on 10 August 2023. As of
31 December 2023, Credit Suisse (Schweiz) AG had a total of CHF 38bn outstanding under the Emergency Liquidity
Assistance facility, which is fully collateralized by Swiss mortgages.
In parallel with the measures taken by the Swiss Confederation in March 2023, the Swiss Financial Market Supervisory
Authority (FINMA) also ordered a write-off of CHF 15.8bn principal amount of Credit Suisse Group AG’s additional tier 1
(AT1) instruments.
In May 2023, the Swiss Federal Department of Finance mandated a group of experts on banking stability to assess the
role of banks and the legal and regulatory framework related to the stability of the Swiss financial center. The
corresponding report, published in September 2023, concluded that Swiss capital regulations are working as intended
and that there is no need for a major revision. However, the report sees a need for reforms with regard to banking
supervision and proposes that the relevant authorities be granted broader powers. Furthermore, the report suggests
improvements regarding liquidity regulations, including a proposal to extend the supply of liquidity in the case of a crisis.
The report also suggests that Swiss authorities should make improvements with regard to crisis preparation and
management.
Annual Report 2023 | Our strategy, business model and environment | Regulation and supervision
55
In June 2023, the Swiss Parliament formed a parliamentary inquiry committee that is mandated to investigate the
legitimacy, expediency and effectiveness of the management of the competent authorities and bodies in the context of
the events involving the Credit Suisse Group. The committee will report to the Swiss Parliament on the results of its
investigation and will propose measures to remedy any identified deficiencies. We expect the results to be published in
the fourth quarter of 2024. The conclusions by the inquiry committee may include potentially significant
recommendations, which could result in more stringent regulation.
In December 2023, FINMA published a report on the case of Credit Suisse that analyzed the development of Credit Suisse
in recent years and examined its supervisory work with the bank. In addition, FINMA noted in its report a number of
lessons to be learned, calling for a stronger legal basis, specifically for instruments such as a Senior Managers Regime,
the power to impose fines, and more stringent rules regarding corporate governance. Furthermore, FINMA explained
that it will adapt its supervisory approach in certain areas and will step up its review of whether stabilization measures
are ready to be implemented.
The findings of the group of experts and the lessons drawn by FINMA include recommendations that could result in more
stringent regulation, and will be considered by the Swiss Federal Council in its next report on systemically important
banks, which is to be presented by April 2024.
Key developments in the US
In May 2023, the Federal Reserve Board and the Federal Deposit Insurance Corporation (the FDIC) released reports that
covered the circumstances leading to the closing of certain banking organizations following the events in the banking
market in March 2023. The reports noted shortcomings in the supervisory agencies’ execution of examination programs,
including escalation of supervisory issues and staffing. They also raised concerns related to the regulatory framework,
including the Federal Reserve’s Tailoring Rule and other topics, such as interest rate risk management. UBS expects these
developments to impact the regulatory environment in the US, where UBS has significant operations.
In November 2023, the FDIC approved a final rule to implement a special assessment to recover losses incurred by the
Deposit Insurance Fund in connection with the failures of Silicon Valley Bank and Signature Bank in March 2023. The
assessment is based on the estimated uninsured deposits of each depository institution at the end of 2022. The
assessment will be collected over an eight-quarter period that started in January 2024. In the fourth quarter of 2023,
UBS Bank USA recorded a charge for the full amount of its estimated assessment of USD 60m.
Key developments at the supranational level
In October 2023, the Basel Committee on Banking Supervision (the BCBS) released a report on the causes of the 2023
banking turmoil. The BCBS argues that while the distress of various banks in March 2023 reflected idiosyncratic factors,
recurring themes can be grouped into three broad categories: bank risk-management practices and governance
arrangements; strong and effective supervision; and robust regulatory standards.
Also in October 2023, the Financial Stability Board (the FSB) identified in a review several areas related to the effective
operationalization and implementation of the international resolution framework that merit further attention as part of
future work, but concluded that recent events demonstrate the soundness of the framework.
No concrete changes to the Basel standards or the FSB framework are proposed at this stage, but the follow-up work is
particularly focused on strengthening supervisory effectiveness, liquidity risk, interest rate risk in the banking book and
the effectiveness of the resolution frameworks.
Developments regarding capital and liquidity adequacy and TBTF frameworks
Developments related to liquidity adequacy
In September 2023, the Swiss Federal Council adopted a dispatch and draft legislation on the introduction of a public
liquidity backstop for systemically important banks (SIBs), which was initially implemented as part of the Emergency
Ordinance. The proposed legislative changes aim to establish the public liquidity backstop as part of ordinary law in order
to enable the Swiss government and the SNB to support an SIB domiciled in Switzerland with liquidity in the process of
resolution, in line with other financial centers. The introduction of the public liquidity backstop is intended to increase
the confidence of market participants in the ability of SIBs to be successfully recapitalized and remain solvent in a crisis.
Furthermore, the draft legislation provides that SIBs will pay the Swiss Confederation an annual fee to mitigate a potential
impact on competition and to compensate the Swiss Confederation for its guarantee to the SNB of the public liquidity
backstop, if required.
In addition to the public liquidity backstop, the proposed legislative changes would enact into ordinary law additional
provisions contained in the Emergency Ordinance, including mandated clawback of variable compensation in the event
that government support is provided to an SIB.
Annual Report 2023 | Our strategy, business model and environment | Regulatory and legal developments
56
The legislative changes are expected to come into force by January 2025, at the earliest, as in November 2023, the Swiss
Parliament suspended discussions on the public liquidity backstop until the presentation of the Swiss Federal Council’s
report on systemically important banks.
Furthermore, FINMA communicated in the third quarter of 2023 the liquidity requirements arising from the revisions to
the Swiss Liquidity Ordinance, with the aim of strengthening the resilience of SIBs in Switzerland. The affected legal
entities of the UBS Group are compliant with these requirements, which became effective on 1 January 2024.
Developments related to capital adequacy
In July 2023, US banking regulators, including the Federal Reserve Board, the FDIC and the Office of the Comptroller of
the Currency (the OCC), issued a public consultation on a proposal that would implement the final components of the
Basel III capital standards for US banking organizations and foreign-owned intermediate holding companies, such as UBS
Americas Holding LLC and Credit Suisse Holdings (USA), Inc. Among other matters, the proposed rules would end the
use of the internal model approach for credit risk by the largest banking organizations and would introduce instead a
new standardized approach. In addition, the proposed rules for operational risks would replace the advanced
measurement approach with a standardized measure. The proposal calls for a three-year transition period, starting on
1 July 2025, and full implementation by 1 July 2028. We currently estimate that the proposed rule changes would result
in increased capital requirements for our US-based intermediate holding companies if implemented as proposed.
In November 2023, the Swiss Federal Council adopted amendments to the Capital Adequacy Ordinance (the CAO) for
banks to incorporate the final Basel III standards adopted by the BCBS in Swiss law. The amended CAO will enter into
force on 1 January 2025. The final degree of alignment between the Swiss implementation and those in other jurisdictions
remains uncertain at this stage. Although EU legislators target implementation by January 2025, the implementation
timelines in the UK and the US have been delayed until July 2025. The Swiss Federal Department of Finance will inform
the Swiss Federal Council about the status of international implementation by the end of July 2024. We currently estimate
that the revised Basel III framework will lead to a further net increase in risk-weighted assets of approximately USD 25bn,
of which USD 10bn is in Non-core and Legacy. This estimate is based on static balances, before taking into account
mitigating actions, as well as not reflecting the impact of the output floor, which is phased in over time.
Developments related to TBTF frameworks
In August 2023, the Federal Reserve Board and the FDIC issued joint proposals on long-term debt requirements and
resolution planning guidance for large banks. The long-term debt proposal would require certain large bank-holding
companies, intermediate holding companies and insured depositories with USD 100bn or more in total assets to maintain
a minimum amount of long-term debt, intended to enhance the resilience and resolvability of such organizations. Large
banking organizations would also be prohibited from certain activities that could complicate the resolution or would lead
to contagion risks. If the proposals are implemented, UBS Bank USA would be subject to the long-term debt requirement,
which would be incremental to the requirements already imposed upon its parent organization, UBS Americas Holding
LLC. The resolution planning guidance proposed by US banking regulators would cover our US-based entities and calls
for certain enhancements in the requirements of the submitted resolution plans.
In November 2023, the FSB published the 2023 list of global systemically important banks (G-SIBs). UBS has been moved
from Bucket 1 to Bucket 2, corresponding to an increased FSB common equity tier 1 capital surcharge requirement of
1.5% from 1.0%, effective from 1 January 2025. Credit Suisse has been removed from the list. As UBS is subject to
higher requirements under the Swiss CAO, the change does not affect the capital requirements applicable to UBS.
In February 2024, the FSB published its Peer Review of Switzerland, which examines Switzerland’s implementation of the
FSB’s TBTF reforms for G-SIBs. The review states that although Swiss authorities have made important steps toward
implementing an effective TBTF regime for G-SIBs, additional steps can be taken to further strengthen the Swiss TBTF
framework. Recommendations include increasing supervisory resources, strengthening early intervention powers and
enhancing the recovery and resolution regime.
Annual Report 2023 | Our strategy, business model and environment | Regulatory and legal developments
57
Developments regarding climate-related financial risks and sustainable finance
In 2023, the Swiss National Council discussed the revision of the Act on the Reduction of CO2 Emissions (the CO2 Act),
which contains measures to halve greenhouse gas emissions by 2030 compared with 1990. The proposal is based on
supplementing the existing CO2 Act with additional incentives to reduce emissions in different industry sectors of the
economy. For the financial sector, it contains a provision mandating FINMA and the SNB to regularly assess climate-
related financial risks in the financial sector and to report the results, as well as potential measures, to the Swiss
government. FINMA is currently collecting the data from the financial sector in order to be able to carry out the
assessment in 2024. It is expected that the proposal will be formally adopted by the Swiss Parliament in spring 2024.
In June 2023, the Swiss electorate voted in favor of the new Climate and Innovation Act (the CI Act). The CI Act defines
a net-zero-by-2050 target for Switzerland, including interim targets for selected sectors of the Swiss economy covering
scope 1 and 2 emissions. In addition, each Switzerland-domiciled company is required to set a net-zero target by
1 January 2025. The CI Act also contains provisions for public funding to replace aged heating systems in buildings and
for application of innovative technologies within companies. Article 9 of the CI Act requires the financial sector to make
an effective contribution to the transition to net zero and sets the general goal of the alignment of financial resources to
climate-friendly outcomes. Specific measures to achieve the targets will be proposed in the CO2 Act.
In December 2023, the Swiss Parliament added a provision on greenwashing to the Unfair Competition Act under which
companies are required to make truthful and clear statements in relation to their climate impact that can be substantiated
by objective and verifiable bases.
Also in December 2023, the Swiss Federal Council announced that it intends to further improve climate transparency for
financial products and to further develop the voluntary Swiss Climate Scores (the SCS), which were introduced in 2022.
The SCS provide investors with information about the extent to which their financial investments are compatible with
climate goals. The updated SCS, which will apply from 1 January 2025, will continue to prescribe disclosures by financial
institutions on climate alignment and climate change mitigation characteristics of financial products and will newly
prescribe disclosure of exposures to renewable energy. UBS has committed to the voluntary use of the SCS.
In October 2023, the Federal Reserve Board, the OCC and the FDIC approved guidance on the principles for climate-
related financial risk management. The final principles describe how climate-related risks can be addressed in the
management of traditional financial risks. The principles cover six areas: governance; policies, procedures and limits;
strategic planning; risk management; data, risk measurement and reporting; and scenario analysis. The guidance applies
to our US-based operations. UBS is evaluating the guidance to ensure the principles are addressed by the relevant Group
practices.
In June 2023, the International Sustainability Standards Board (the ISSB) finalized its first set of requirements for corporate
disclosures regarding sustainability matters: IFRS S1 and IFRS S2. IFRS S1 addresses the disclosure of a company’s
sustainability-related risks and opportunities. IFRS S2 addresses the disclosures for the governance processes, controls
and procedures an entity uses to monitor, manage and oversee climate-related risks and opportunities and the entity’s
strategy for managing risks and opportunities. The standards incorporate the recommendations of the Task Force on
Climate-related Financial Disclosures (the TCFD). These ISSB standards have been available for use from January 2024
onward. UBS’s implementation of the standards will depend, among other factors, on whether the standards are adopted
in jurisdictions in which UBS files financial reports.
In October 2023, the EU finalized the first set of cross-sectoral European Sustainability Reporting Standards (the ESRS)
under the Corporate Sustainability Reporting Directive. In addition to general disclosures and requirements, the ESRS set
out disclosure requirements, which are subject to a materiality assessment that is contingent on external assurance,
effectively allowing companies to focus on reporting sustainability factors that are material to their businesses. Companies
that were previously subject to the Non-Financial Reporting Directive and large non-EU listed companies with more than
500 employees, including UBS, are required to begin reporting under the ESRS for the 2024 financial year, with the first
reports to be published in 2025. The European Commission will develop and adopt additional sector-specific reporting
standards by June 2026.
In March 2024, the US Securities and Exchange Commission (the SEC) released the final rules regarding climate-related
disclosures for investors. The rules will require certain firms, including UBS, to disclose qualitative and quantitative
information on the firm’s exposures to climate-related risks and risk management practices. The rules are anticipated to
be effective for filings for the 2025 financial year.
Annual Report 2023 | Our strategy, business model and environment | Regulatory and legal developments
58
Other developments in Switzerland
In June 2023, the Swiss electorate voted in favor of the introduction of a minimum corporate tax rate of 15% applicable
to companies with a consolidated turnover of more than EUR 750m, as stipulated by the Global Anti-Base Erosion Model
Rules (Pillar Two) of the Organisation for Economic Co-operation and Development. In December 2023, the Swiss Federal
Council decided on a partial adoption in Switzerland, by way of an ordinance, and, as a result, a domestic minimum top-
up tax regime became effective from 1 January 2024, ensuring a Swiss local minimal tax burden of at least 15%.
Switzerland will not implement any top-up tax regime in 2024 with respect to non-Swiss taxation below 15%. The Swiss
Federal Council will further observe international developments and decide at a later stage if and when any top-up tax
with respect to non-Swiss taxation below 15% will be introduced in Switzerland. UBS does not expect the implementation
of global minimum taxation in Switzerland to materially impact its effective tax rate.
In August 2023, the Swiss Federal Council launched a consultation on a bill to strengthen the Swiss anti-money-
laundering framework, with the aim of reinforcing the integrity and competitiveness of Switzerland as a financial and
business location. The measures aim to comply with the international standards of the Financial Action Task Force (the
FATF). Among other matters, key elements of the proposal include the introduction of a non-public register managed by
the Federal Department of Justice and Police containing information about the beneficial owners of companies and other
legal entities in Switzerland, as well as due diligence requirements for activities with an increased risk of money
laundering. In the context of the Swiss anti-money-laundering framework, the FATF also acknowledged in October 2023
the progress made by Switzerland, especially with the revision of the Anti-Money Laundering Act adopted in March 2021.
In November 2023, the Swiss Federal Council adopted an amendment to the Financial Market Infrastructure Act that
enacts a measure aimed at protecting the Swiss stock exchange infrastructure into Swiss law with effect from 1 January
2024. This ruling followed the EU’s decision to withdraw equivalence for the Swiss stock exchange regulation in 2019.
The protective measure enables EU firms to trade Swiss shares on the Swiss trading venues, even without EU equivalence.
In the event of equivalence recognition by the EU, the measure may be deactivated at any time.
In the first quarter of 2023, the Swiss Federal Council implemented the remaining measures of the 9th and 10th sanctions
packages imposed by the EU against Russia in December 2022 and February 2023, respectively. The measures include
additional export restrictions and more detailed reporting obligations with regard to frozen assets.
In August 2023, the Swiss Federal Council adopted the EU’s 11th package of sanctions against Russia, which was partially
adopted by Switzerland in June 2023 by expanding the sanction lists. As part of the 11th sanctions package, the EU has
created a specific legal basis for an instrument to prevent the evasion of sanctions. The Swiss Federal Council emphasized
its determination to take effective action against the evasion of sanctions and will examine the implementation of this
instrument in the event of its actual application by the EU. In addition, Switzerland joined the EU in imposing sanctions
at Moldova’s request and against Belarus, in view of its continued involvement in Russia’s ongoing military aggression
against Ukraine.
In September 2023, the Swiss Federal Council issued sanctions measures in connection with the delivery of Iranian drones
to Russia. The sale, supply, export and transit of components used in the construction and production of drones is now
prohibited. In January 2024, the Swiss Federal Council adopted the measures of the EU’s 12th sanctions package relevant
to Switzerland, following the expansion of the sanction lists by Switzerland in December 2023. The measures include
import bans on certain goods that generate significant revenue for Russia, as well as certain bans in the financial and
services sectors. In February 2024, the Federal Department of Economic Affairs, Education and Research adopted
measures of the EU’s 13th sanctions package, which target, among others, individuals, entities and organizations that
are operating in Russia’s military-industrial complex and that are involved in supplying defense equipment from the
Democratic People’s Republic of Korea, as well as officials from the occupied territories of Ukraine.
UBS’s sanctions programs are designed to comply with sanctions across multiple jurisdictions, including those imposed
by the United Nations, Switzerland, the EU, the UK and the US.
The revised Swiss Federal Data Protection Act and the corresponding Data Protection Ordinance entered into force on
1 September 2023. The revised law represents a fundamental reform that strengthens the rights of consumers regarding
their data by enhancing the transparency and accountability rules for companies processing data, among other measures.
In addition, it seeks to align Swiss data protection law with the EU General Data Protection Regulation, in order to ensure
continued cross-border transmission of data with EU Member States.
Other developments in the US
In October 2023, the Federal Reserve Board, the FDIC and the OCC adopted revisions to their regulations implementing
the Community Reinvestment Act (the CRA). The CRA encourages banks to meet the credit needs of the communities in
which they do business, with a focus on low- and moderate-income communities. The final rule will implement separate
evaluations for retail lending, retail services and products, community development financing, and community
development services for banks with over USD 2bn in total assets. For large banks with over USD 10bn in total assets,
the evaluation of retail services and products will cover digital delivery systems. The final rule also updates requirements
on the reporting of exposures. The rule has an implementation date of 1 April 2024, with additional phase-in periods for
general provisions and reporting that extend out to April 2027. UBS Bank USA expects a modest level of increased
monitoring and reporting requirements.
Annual Report 2023 | Our strategy, business model and environment | Regulatory and legal developments
59
In October 2022, the SEC adopted rules requiring US national securities exchanges, including the New York Stock
Exchange (the NYSE) and Nasdaq, to adopt listing standards that require issuers to adopt and enforce a policy to recover
from executive officers incentive compensation received based on attainment of a financial reporting measure in the
event that the issuer is required to prepare an accounting restatement of financial statements due to material non-
compliance with financial reporting requirements. The SEC approved the listing standards promulgated by the NYSE and
Nasdaq in June 2023 and the clawback policy requirement came into effect as of 1 December 2023. Under the listing
standards, an issuer must recover the amount of incentive-based compensation that would not have been received if it
had been determined based on the restated financial information. UBS Group AG, UBS AG and Credit Suisse AG each
have securities listed on US national securities exchanges and have adopted a policy to comply with the listing standards.
In September 2023, the new rules from the SEC to enhance and standardize disclosure requirements related to
cybersecurity incidents and cybersecurity risk management, strategy and governance became effective. Among other
changes, the rules require foreign private issuers, including UBS Group AG, UBS AG and Credit Suisse AG, to annually
report material information regarding their cybersecurity risk management, strategy and governance on Form 20-F. The
Form 20-F disclosures are applicable with annual reports for fiscal years ending on or after 15 December 2023.
Other developments in Europe
US securities markets will transition to one business day after the trade date (T+1) settlement of most transactions in May
2024. In October 2023, the European Securities and Markets Authority (ESMA) launched a call for evidence on shortening
the standard settlement cycle for securities transactions from two business days after the trade date (T+2) to T+1. ESMA
aims to perform an assessment of the costs and benefits linked to the potential reduction of the securities settlement
cycle in the EU and intends to submit the results of its assessment to the European Commission and publish a final report
in the fourth quarter of 2024, at the latest. The UK Treasury has also established an Accelerated Settlement Taskforce to
consider whether the UK should follow the US and transition to a T+1 settlement. The UK task force is expected to
publish its findings in 2024, with further work expected during 2024. UBS is implementing and testing required
enhancements based on the US rules and will prepare for further implementation according to the evolving rules and
market practice in the UK, the EU and Switzerland.
In May 2023, the European Commission presented draft legislative proposals aimed at empowering retail investors to
make investment decisions that are aligned with their needs and preferences and ensuring that they are treated fairly
and duly protected. The proposals also aim to encourage greater participation in EU capital markets and to enable a
greater volume of funds to flow more easily into EU capital markets. The package revises EU capital markets rules, which,
once agreed and in force, could have significant implications and require significant implementation efforts by UBS across
business divisions.
In June 2023, legislators in the EU reached a provisional agreement on amendments to the Capital Requirements
Regulation and the Capital Requirements Directive. The provisional agreement includes, alongside measures to implement
the remaining elements of the Basel III standard, a framework that would require non-EU firms to establish a physical
presence within the EU when providing certain banking services to EU-domiciled clients and counterparties (including
deposit-taking and commercial lending), unless they are subject to an exemption. The changes will affect the cross-border
provision of certain banking services and will require UBS to adapt its approaches to providing such services to clients in
the EU. The requirement is expected to become effective in late 2026, with grandfathering provisions for contracts already
in existence at the date of introduction.
In December 2023, the Swiss Confederation and the UK signed a mutual recognition agreement (an MRA) for financial
services to facilitate cross-border financial activities. The MRA is supplemented by measures to enhance supervisory
cooperation and coordination. The MRA envisages a memorandum of understanding between FINMA and the Bank of
England on resolution arrangements, and it is expected to enable Swiss banks to provide cross-border investment services
to high net worth UK-domiciled clients and to broadly allow UK and Swiss over-the-counter derivatives counterparties to
choose whether to rely on Swiss or UK risk mitigation rules (except for physically settled foreign exchange swaps and
forwards). The agreement is expected to apply from 2026, depending on the completion of parliamentary approval in
both countries.
Annual Report 2023 | Our strategy, business model and environment | Regulatory and legal developments
60
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.
Strategy, management and operational risks
UBS’s acquisition of Credit Suisse Group AG exposes UBS to heightened litigation risk and regulatory scrutiny and
entails significant additional costs, liabilities and business integration risks
UBS acquired Credit Suisse Group AG under exceptional circumstances of volatile financial markets and the continued
outflows and deteriorating overall financial position of Credit Suisse, in order to avert a failure of Credit Suisse and thus
damage to the Swiss financial center and to global financial stability. The acquisition was effected through a merger of
Credit Suisse Group AG with and into UBS Group AG, with UBS Group AG succeeding to all assets and all liabilities of
Credit Suisse Group AG, becoming the direct or indirect shareholder of the former direct and indirect subsidiaries of
Credit Suisse Group AG. Therefore, on a consolidated basis, all assets, risks and liabilities of the Credit Suisse Group
became a part of UBS. This includes all ongoing and future litigation, regulatory and similar matters arising out of the
business of the Credit Suisse Group, thereby materially increasing UBS’s exposure to litigation and investigation risks, as
described in further detail below.
We have incurred substantial transaction fees and costs in connection with the transaction and will continue to incur
substantial integration and restructuring costs. In addition, we may not realize all of the expected cost reductions and
other benefits of the transaction. We may not be able to successfully execute our strategic plans or to achieve the
expected benefits of the acquisition of the Credit Suisse Group. The success of the transaction, including anticipated
benefits and cost savings, will depend, in part, on the ability to successfully integrate the operations of both firms rapidly
and effectively, while maintaining stability of operations and high levels of service to customers of the combined franchise.
Our ability to successfully integrate Credit Suisse will depend on a number of factors, some of which are outside of our
control, including our ability to:
– combine the operations of the two firms in a manner that preserves client service, simplifies infrastructure and results
in operating cost savings;
– reverse outflows of deposits and client invested assets at Credit Suisse, particularly in its Wealth Management division
and in Switzerland, and to attract additional deposits and other client assets to the combined firm;
– achieve cost reductions at the levels and in the time frame we plan;
– enhance, integrate and, where necessary, remediate risk management and financial control and other systems and
frameworks, including to remediate the material weaknesses in Credit Suisse’s internal controls over financial
reporting;
– simplify the legal structure of the combined firm in an expedited manner, through the planned mergers of UBS AG
and Credit Suisse AG and of UBS Switzerland AG and Credit Suisse (Schweiz) AG, as well as the creation of a single
intermediate holding company (an IHC) for the combined firm in the US, other entity mergers and consolidations and
asset dispositions, including obtaining regulatory approvals and licenses required to implement such changes;
– retain staff and to reverse attrition of staff in certain of Credit Suisse’s business areas;
– successfully execute the wind-down of the assets and liabilities in our Non-core and Legacy division and release capital
and resources for other purposes; and
– resolve outstanding litigation, regulatory and similar matters, including matters relating to Credit Suisse, on terms that
are not significantly adverse to the UBS Group, as well as to successfully remediate outstanding regulatory and
supervisory matters and meet other regulatory commitments.
Further investigation and planning for integration is taking place, and risks that we do not currently consider to be
material, or of which we are not currently aware, could also adversely affect us.
The level of success in the absorption of Credit Suisse, in the integration of the two groups and their businesses,
particularly in the area of the Swiss domestic bank, as well as the domestic and international wealth management
businesses, the execution of the planned strategy regarding cost reductions and divestment of any non-core assets, and
the level of resulting impairments and write-downs, may impact the operational results, share price and the credit rating
of UBS entities. The past financial performance of each of UBS Group AG and Credit Suisse may not be indicative of their
future financial performance. In addition, the financial effects of management decisions and transactions will likely differ
between UBS Group and Credit Suisse as a result of the application of the acquisition method of accounting under IFRS
by UBS Group, including valuation adjustments recorded by UBS Group, as well as other differences between US GAAP
accounting principles applied by Credit Suisse and IFRS Accounting Standards applied by UBS Group. The combined
Group will be required to devote significant management attention and resources to integrating its business practices
and support functions. The diversion of management’s attention and any delays or difficulties encountered in connection
with the transaction and the coordination of the two companies’ operations could have an adverse effect on the business,
financial results, financial condition or the share price of the combined Group following the transaction. The coordination
process may also result in additional and unforeseen expenses.
Annual Report 2023 | Our strategy, business model and environment | Risk factors
61
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 2008 financial crisis, investigations into our cross-border private banking services,
criminal resolutions of London Interbank Offered Rates (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. The Credit Suisse Group was more recently subject to significant
litigation and regulatory matters and to financial losses that adversely affected its reputation and the confidence of clients,
which played a significant role in the events leading to the acquisition of the Credit Suisse Group in March 2023. These
events, or 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.
Operational risks affect our business
Our businesses depend on our ability to process a large number of transactions, many of which are complex, across
multiple and diverse markets in different currencies, to comply with requirements of many different legal and regulatory
regimes to which we are subject and to prevent, or promptly detect and stop, unauthorized, fictitious or fraudulent
transactions. We also rely on access to, and on the functioning of, systems maintained by 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
processes, platforms 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. The acquisition of the Credit Suisse Group may elevate
these risks, particularly during the first phases of integration, as the firms have historically operated under different
procedures, IT systems, risk policies and structures of governance.
As a significant proportion of our staff have been and will continue working from outside the office, we have faced, and
will continue to face, new challenges and operational risks, including maintenance of supervisory and surveillance
controls, as well as increased fraud and data security risks. While we have taken measures to manage these risks, these
measures could prove not to be effective.
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 (AI) 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 AI tools may adversely affect their functioning and result
in errors and other operational risks.
Financial services firms have increasingly 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 steal or destroy data, which may result in business disruption or the corruption or loss of data at UBS’s
locations or those of third parties. Cyberattacks by hackers, terrorists, criminal organizations, nation states and extremists
have also increased in frequency and sophistication. Current geopolitical tensions have also led to increased risk of
cyberattack from foreign state actors. In particular, the Russia–Ukraine war and the imposition of significant sanctions
on Russia by Switzerland, the US, the EU, the UK and others has resulted and may continue to result in an increase in the
risk of cyberattacks. Such attacks may occur on our own systems or on the systems that are operated by external service
providers, may be attempted through the introduction of ransomware, 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. Cybersecurity risks also
have increased due to the widespread use of digital technologies, cloud computing and mobile devices to conduct
financial business and transactions, as well as due to generative AI, which increases the capabilities of adversaries to
mount sophisticated phishing attacks, for example, through the use of deepfake technologies, and presents new
challenges to the protection of our systems and networks and the confidentiality and integrity of our data. During the
first quarter of 2023, a third-party vendor, ION XTP, suffered a ransomware attack, which resulted in some disruption to
our exchange-traded derivatives clearing activities, although we restored our services within 36 hours, using an available
alternative solution. 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.
Annual Report 2023 | Our strategy, business model and environment | Risk factors
62
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. The acquisition of the Credit Suisse
Group may elevate and intensify these risks, as would-be attackers have a larger potential target in the combined bank
and differences in systems, policies, and platforms could make threat detection more difficult. In addition, the
implementation of the large-scale technological change program that is necessary to integrate the combined bank’s
systems at pace may also result in increased risks. Once a particular attack is detected, time may be required to investigate
and assess the nature and extent of the attack, and to restore and test systems and data. If a successful attack occurs at
a service provider, as we have recently experienced, we may be dependent on the service provider’s ability to detect the
attack, investigate and assess the attack and successfully restore the relevant systems and data. A successful breach or
circumvention of security of our systems or data or those of a service provider could have significant negative
consequences for us, including disruption of our operations, misappropriation of confidential information concerning us
or our clients, damage to our systems, financial losses for us or our clients, 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 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 the objective of fully meeting regulatory expectations for our programs. Failure to maintain and implement
adequate programs to combat money laundering, terrorist financing or corruption, or any failure of our programs in
these areas, could have serious consequences both from legal enforcement action and from damage to our 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 to the war in 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.
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 disruption in the infrastructure that supports our businesses and the communities in which we operate. This may
include 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.
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. In the recent past, the Credit Suisse Group has suffered very significant losses from the default of the US prime
brokerage client, the losses in supply chain finance funds (SCFF) managed by it, as well as other matters. As a result of
these, Credit Suisse is subject to significant regulatory remediation obligations to address deficiencies in its risk
management and control systems, that continue following the merger.
Annual Report 2023 | Our strategy, business model and environment | Risk factors
63
We regularly 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 Non-core and Legacy, that, in many cases, are illiquid and may deteriorate
in value. The acquisition of the Credit Suisse Group has increased, materially, the portfolio of business that is outside of
our risk appetite and subject to exit that will be managed in the Non-core and Legacy segment.
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 aforementioned factors. 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.
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 members of the Group Executive Board (GEB), as well as certain other employees. UBS will also be required to
introduce and enforce provisions requiring UBS to recover from GEB members and certain other executives a portion of
performance-based incentive compensation in the event that the UBS Group or another entity with securities listed on a
US national securities exchange, is required to restate its financial statements as a result of a material error.
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. This risk is
intensified by elevated levels of attrition among Credit Suisse employees. 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.
Annual Report 2023 | Our strategy, business model and environment | Risk factors
64
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, Credit Suisse
AG, UBS Switzerland AG, Credit Suisse (Schweiz) AG, UBS Americas Holding LLC, Credit Suisse Holdings (USA) Inc., UBS
Europe SE and Credit Suisse International, are subject to laws and regulations that require the entities to maintain
minimum levels of capital and liquidity, that restrict dividend payments, that authorize regulatory bodies to block or
reduce the flow of funds from those subsidiaries to UBS Group AG or that 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 Board of Governors of the Federal Reserve System limited capital distributions by bank
holding companies and intermediate holding companies. Restrictions and regulatory actions 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 us 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.
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.
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, war, or acts of terrorism, the imposition of sanctions, global trade or global supply chain disruptions,
including energy shortages and food insecurity, changes in monetary or fiscal policy, changes in trade policies or
international trade disputes, significant inflationary or deflationary price changes, disruptions in one or more concentrated
economic sectors, natural disasters, pandemics or local and regional civil unrest. Such developments can have
unpredictable and destabilizing effects.
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.
As a result of significant volatility in the market, our businesses may experience a decrease in client activity levels and
market volumes, which would adversely affect our ability to generate transaction fees, commissions and margins,
particularly in Global Wealth Management and the Investment Bank. 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, primarily 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
therefore may reduce transaction-based income and may also impede our ability to manage risks.
Annual Report 2023 | Our strategy, business model and environment | Risk factors
65
Health emergencies, including pandemics and measures taken by governmental authorities to manage them, may have
effects such as labor market displacements, supply chain disruptions, and inflationary pressures, and 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, disruptions in real estate markets, increased unemployment,
increased credit and counterparty risk, and operational challenges, as we saw with the COVID-19 pandemic. Such
economic or market disruptions, including inflationary pressures, may lead to reduced levels of 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 a consequent decline in invested assets would also
reduce recurring fee income in our Global Wealth Management and Asset Management businesses, as we experienced
in the second quarter of 2022. These factors and other consequences of a health emergency may negatively affect our
financial condition, including possible constraints on capital and liquidity, as well as resulting in a higher cost of capital,
and possible downgrades to our credit ratings.
Geopolitical events: Terrorist activity and escalating armed conflict in the Middle East, as well as the continuing Russia–
Ukraine war, may have significant impacts on global markets, exacerbate global inflationary pressures and slow global
growth. In addition, the ongoing conflicts may continue to cause significant population displacement, and lead to
shortages of vital commodities, including energy shortages and food insecurity outside the areas immediately involved in
armed conflict. Governmental responses to the armed conflicts, including, with respect to the Russia–Ukraine war,
coordinated successive sets of sanctions on Russia and Belarus, and Russian and Belarusian entities and nationals, and
the uncertainty as to whether the ongoing conflicts will widen and intensify, may continue to have significant adverse
effects on the market and macroeconomic conditions, including in ways that cannot be anticipated. If individual countries
impose restrictions on cross-border payments or trade, or other exchange or capital controls, or change their currency
(for example, if one or more countries should leave the Eurozone, as a result of the imposition of sanctions on individuals,
entities or countries, or escalation of trade restrictions and other actions between the US, or other countries, and China),
we could suffer adverse effects on our business, losses from enforced default by counterparties, be unable to access our
own assets or be unable to effectively manage our 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, trade restrictions, or 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.
The extent to which ongoing conflicts, current inflationary pressures and 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 effects of the current conditions on our clients, 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 and 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, which have increased substantially as a result of the Credit Suisse acquisition,
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, a return to 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.
Annual Report 2023 | Our strategy, business model and environment | Risk factors
66
Interest rate trends and changes could negatively affect our financial results
UBS’s businesses are sensitive to changes in interest rate trends. A prolonged period of low or negative interest rates,
particularly in Switzerland and the Eurozone, adversely affected the net interest income generated by UBS’s Personal &
Corporate Banking and Global Wealth Management businesses prior to 2022. Actions that UBS took to mitigate adverse
effects on income, such as the introduction of selective deposit fees or minimum lending rates, contributed to outflows
of customer deposits (a key source of funding for UBS), net new money outflows and a declining market share in its
Swiss lending business.
During 2022, interest rates increased sharply in the US and most other markets, including a shift from negative to positive
central bank policy rates in the Eurozone and Switzerland, as central banks responded to higher inflation. Higher interest
rates generally benefit UBS’s net interest income. However, as returns on alternatives to deposits increase with rising
interest rates, such as returns on money market funds, UBS experienced outflows from customer deposits and shifts of
deposits from lower-interest account types to accounts bearing higher interest rates, such as savings and certificates of
deposit, starting with effects in the US, where rates had rapidly increased. In addition, higher-for-longer interest rates,
such as those experienced in 2023, have led to similar shifts in euro and Swiss franc deposits. Sustained higher interest
rates also may adversely affect our credit counterparties. Customer deposit outflows could require UBS to obtain
alternative funding, which would likely be more costly than customer deposits.
Our shareholders’ equity and capital are also affected by changes in interest rates.
Currency fluctuation may have an adverse effect on our profits, balance sheet and regulatory capital
We are subject to currency fluctuation risks as a substantial portion of our assets and liabilities are denominated in
currencies other than our Group presentation currency, the US dollar. 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 CET1 capital and the CET1 capital ratio. Accordingly, changes in foreign exchange rates
may adversely affect our profits, balance sheet, and capital, leverage and liquidity coverage ratios.
Regulatory and legal risks
Material legal and regulatory risks arise in the conduct of our business
As a global financial services firm operating in more than 50 countries, we are subject to many different legal, tax and
regulatory regimes, including extensive regulatory oversight, and are exposed to significant liability risk. We are subject
to a large number of claims, disputes, legal proceedings and government investigations, and we expect that our ongoing
business activities will continue to give rise to such matters in the future. In addition, as noted above, UBS inherited claims
against Credit Suisse entities as part of the acquisition, including matters that may be material to the operating results of
the combined Group such as the ongoing SCFF matter. 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 4.5bn by the court of first instance in
France. This award was reduced to an aggregate of EUR 1.8bn by the Court of Appeal, and, in a further appeal, the
French Supreme Court referred the case back to the Paris Court of Appeal to reconsider the amount after a new trial.
Litigation, regulatory and similar matters may also result in non-monetary penalties and consequences. Among other
things, a guilty plea to, or conviction of, a crime (including as a result of termination of the Deferred Prosecution
Agreement Credit Suisse entered into with the US Department of Justice in 2021 to resolve its Mozambique matter)
could have material consequences for UBS.
Resolution of regulatory proceedings has required 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.
Our settlements with governmental authorities in connection with foreign exchange, LIBOR and other benchmark interest
rates starkly 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.
Annual Report 2023 | Our strategy, business model and environment | Risk factors
67
Credit Suisse and UBS have become the target of lawsuits, and may become the target of further litigation, in connection
with the merger transaction and / or the regulatory and other actions taken in connection with the merger transaction,
all of which could result in substantial costs. Since the close of the acquisition, various litigation claims have been lodged
against UBS under Swiss merger law alleging that Credit Suisse Group AG shareholders received disadvantaged treatment
in the acquisition. In addition, numerous cases have been lodged against the Swiss Financial Market Supervisory Authority
(FINMA) in respect of the write-down of the Credit Suisse Group’s additional tier 1 (AT1) bonds ordered by FINMA. UBS
Group AG, as the successor to Credit Suisse Group AG, is participating in proceedings as an aggrieved party. The
cumulative effects of the litigations to which UBS has succeeded and the claims related to the acquisition and the
circumstances surrounding it, may have material adverse consequences for the combined Group.
We continue to be in active dialogue with regulators concerning the actions we are taking to improve our operational
risk management, risk control, anti-money-laundering, data management and other frameworks, and otherwise 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 have been subject to significant regulatory requirements, including recovery and
resolution planning, changes in capital and prudential standards, changes in taxation regimes as a result of changes in
governmental administrations, new and revised market standards and fiduciary duties, as well as new and developing
environmental, social and governance (ESG) standards and requirements. 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. Regulatory reviews of the events leading to
the failures of US banks and our acquisition of Credit Suisse in 2023, as well as regulatory measures to complete the
implementation of the Basel 3 standards, may increase capital, liquidity and other requirements applicable to banks,
including UBS. 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.
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.
Resolvability and resolution and recovery planning: We have moved significant operations into subsidiaries to improve
resolvability and meet other regulatory requirements, and this has resulted in substantial implementation costs, increased
our capital and funding costs and reduced operational flexibility. For example, we have transferred all of our US
subsidiaries under a US intermediate holding company to meet US regulatory requirements and have 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 liquidity requirements 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.
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.
The authorities in Switzerland and internationally are working on lessons learned from the Credit Suisse and the US
regional bank failures, which might result in additional requirements regarding resolution planning and early intervention
tools for authorities.
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.
Annual Report 2023 | Our strategy, business model and environment | Risk factors
68
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. In connection with the acquisition
of the Credit Suisse Group, FINMA has permitted Credit Suisse entities to continue to apply certain prior interpretations
and has provided supervisory rulings on the treatment of certain items for RWA or capital purposes. In general, these
interpretations require that UBS phase out the treatment over the next several years. In addition, FINMA has agreed that
the additional capital requirement applicable to Swiss SRBs, which is based on market share in Switzerland and leverage
ratio denominator (LRD), will not increase as a result of the acquisition of the Credit Suisse Group before the end of
2025. The phase-out or end of these periods will likely increase our overall capital requirements, and such increase may
be substantial.
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 US Securities and Exchange Commission (SEC) Regulation Best Interest, which is
intended to enhance and clarify the duties of brokers and investment advisers to retail customers, and 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 has 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.
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, Credit Suisse AG, UBS Switzerland AG and Credit
Suisse (Schweiz) AG, if there is justified concern that an 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, UBS Switzerland AG, Credit Suisse AG or Credit Suisse (Schweiz) 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.
Annual Report 2023 | Our strategy, business model and environment | Risk factors
69
If restructuring proceedings are opened with respect to UBS Group AG, UBS AG, UBS Switzerland AG, Credit Suisse AG
or Credit Suisse (Schweiz) 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, write down or convert into equity
the other debt instruments of the entity subject to proceedings. 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 capital instruments of the entity subject to restructuring
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.
Developments in sustainability, climate, environmental and social standards and regulations may affect our business
and impact our ability to fully realize our goals
We have set ambitious goals for ESG 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 aspirations 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 and expectations, industry and scientific practices,
regulatory taxonomies, and disclosure obligations addressing these matters are relatively immature and are rapidly
evolving. In addition, there are significant limitations in the data available to measure our climate and other goals.
Although we have defined and disclosed our goals based on the standards existing at the time of disclosure, there can
be no assurance (i) that the various ESG regulatory and disclosure regimes under which we operate will not come into
conflict with one another, (ii) that the current standards will not be interpreted differently than our understanding or
change in a manner that substantially increases the cost or effort for us to achieve such goals or (iii) that additional data
or methods, whether voluntary or required by regulation, may substantially change our calculation of our goals and
ambitions. It is possible that such goals may prove to be considerably more difficult or even impossible to achieve. The
evolving standards may also require us to substantially change the stated goals and ambitions. 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 an increased risk of litigation or other adverse action.
While ESG regulatory regimes and international standards are being developed, including to require consideration of ESG
risks in investment decisions, some jurisdictions, notably in the US, have developed rules restricting the consideration of
ESG factors in investment and business decisions. Under these anti-ESG rules, companies that are perceived as boycotting
or discriminating against certain industries may be restricted from doing business with certain governmental entities. Our
businesses may be adversely affected if we are considered as discriminating against companies based on ESG
considerations, or if further anti-ESG rules are developed or broadened.
Material weaknesses of Credit Suisse controls over financial reporting
In March 2023, prior to the acquisition by UBS Group AG, the Credit Suisse Group and Credit Suisse AG disclosed that
their management had identified material weaknesses in internal control over financial reporting as a result of which, the
Credit Suisse Group and Credit Suisse AG had concluded that, as of 31 December 2022, their internal control over
financial reporting were not effective, and for the same reasons, reached the same conclusion regarding 31 December
2021. A material weakness is a deficiency or a combination of deficiencies in internal controls over financial reporting
such that there is a reasonable possibility that a material misstatement of a registrant’s financial statements will not be
prevented or detected on a timely basis. The material weaknesses result in a risk that a material error may not be detected
by Credit Suisse’s internal controls that could result in a material misstatement to Credit Suisse’s reported financial results,
which are consolidated with UBS Group AG’s results.
Annual Report 2023 | Our strategy, business model and environment | Risk factors
70
The material weaknesses that were identified relate to the failure to design and maintain an effective risk assessment
process to identify and analyze the risk of material misstatements in our financial statements and the failure to design
and maintain effective monitoring activities relating to (i) providing sufficient management oversight over the internal
control evaluation process to support Credit Suisse internal control objectives; (ii) involving appropriate and sufficient
management resources to support the risk assessment and monitoring objectives; and (iii) assessing and communicating
the severity of deficiencies in a timely manner to those parties responsible for taking corrective action. These material
weaknesses contributed to an additional material weakness, as the Credit Suisse Group management did not design and
maintain effective controls over the classification and presentation of the consolidated statement of cash flows under US
GAAP.
Credit Suisse subsequently started a remediation program to address the identified material weaknesses and has
implemented additional controls and procedures Based on the work completed to date, Credit Suisse management has
assessed that the changes to internal control made to address the material weakness relating to the classification and
presentation of the consolidated statement of cash flows are effective in design, but that additional time is required to
conclude that these controls and processes are operating effectively on a sustainable basis. The remaining material
weaknesses at Credit Suisse relate to the risk and severity assessment of internal controls. Credit Suisse has implemented
an enhanced severity assessment framework and additional management oversight of severity assessments. UBS has
determined to remediate the internal control risk identification weakness by integrating Credit Suisse into the UBS internal
control risk assessment and evaluation framework in 2024. The operating effectiveness of the of both the risk and severity
assessment processes will be assessed based on an evaluation of the 2024 risk assessment and control testing process.
In light of the above, Credit Suisse management has concluded that these material weaknesses were not fully remediated
at 31 December 2023.
In addition, since the acquisition, UBS has commenced a review of the processes and systems giving rise to the material
weaknesses and the remediation program undertaken. This review is ongoing, and UBS and Credit Suisse expect to adopt
and implement further controls and procedures following the completion of the review. In the course of this review, UBS
and Credit Suisse may become aware of facts that cause UBS to broaden the scope of the review.
UBS Group AG management and UBS AG management have assessed that, as of 31 December 2023, UBS’s internal
control over financial reporting was effective. Under guidance published by the SEC, companies are permitted to exclude
the processes and controls certain acquired businesses from their assessment of internal control over financial reporting
during the year of acquisition. Accordingly, UBS Group AG has excluded Credit Suisse entities, from UBS Group AG and
UBS AG management’s assessments of internal control over financial reporting as of 31 December 2023.
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 IFRS Accounting Standards. 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 (DTAs), 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 assumptions, which encompass historical experience, expectations of the future
and other factors, are regularly evaluated to determine their continuing relevance based on current conditions. Using
different assumptions could cause the reported results to differ. Changes in assumptions, or failure to make the changes
necessary to reflect evolving market conditions, may have a significant effect on the financial statements in the periods
when changes occur. Estimates of provisions may be subject to a wide range of potential outcomes and significant
uncertainty. For example, the broad range of potential outcomes in our legal proceedings in France and in a number of
Credit Suisse’s legal proceedings increase 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.
Changes to IFRS Accounting Standards or interpretations thereof may cause future reported results and financial positions
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 ECL regime 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 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, 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.
Annual Report 2023 | Our strategy, business model and environment | Risk factors
71
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. 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
capital ratios, the imposition of risk add-ons or capital buffers, and the application of additional capital, liquidity and
similar requirements to subsidiaries. Our capital and leverage ratios are driven primarily by RWA, LRD and eligible capital,
all of which may fluctuate based on a number of factors, some of which are outside of our control. 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 that change the level of goodwill, changes in temporary
differences related to DTAs included in capital, adverse currency movements affecting the value of equity, prudential
adjustments that may be required due to the valuation uncertainty associated with certain types of positions, changes in
regulatory 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.
RWA are driven by our business activities, by changes in the risk profile of our exposures, by changes in our foreign
currency exposures and foreign exchange rates, and by regulation. For instance, substantial market volatility, a widening
of credit spreads, adverse currency movements, increased counterparty risk, deterioration in the economic environment
or increased operational risk could result in an increase in RWA. 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 finalization of the Basel III framework and Fundamental Review of the Trading Book promulgated by the
BCBS, which 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 LRD is driven by, among other things, the level of client activity, including
deposits and loans, foreign exchange rates, interest rates, other market factors and changes in required liquidity. Many
of these factors are wholly or partly outside of our control.
The effect of taxes on our financial results is significantly influenced by tax law changes and reassessments of our
deferred tax assets and, also, operating losses of certain entities with no associated tax benefit
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 or decrease in the US federal corporate tax
rate. Furthermore, based on prior years’ tax losses and deductible temporary differences, we have recognized 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. 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.
Annual Report 2023 | Our strategy, business model and environment | Risk factors
72
Our full-year effective tax rate would be impacted if aggregate tax expenses in respect of profits from branches and
subsidiaries without loss coverage differ from what is expected or if certain branches and subsidiaries incur operating
losses that we cannot benefit from through the income statement. In particular, operating 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, would 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.
We may incur material future tax liabilities in connection with the acquisition of the Credit Suisse Group
In the past, the Credit Suisse Group has recorded significant impairments of the tax value of its participations in
subsidiaries below their tax acquisition costs. As a result of the acquisition of the Credit Suisse Group, tax acquisition
costs of participations held by Credit Suisse Group AG and its subsidiaries have been transferred to the UBS Group. UBS
Group AG and its subsidiaries may become subject to additional Swiss tax on future reversals of such impairments for
Swiss tax purposes. Reversals of prior impairments may occur to the extent that the net asset value of the previously
impaired subsidiary increases, e.g., as a result of an increase in retained earnings. Although it is difficult to quantify this
additional future tax exposure, as various potential mitigants (e.g., transfers of assets and liabilities, business activities,
subsidiary investments, as well as other restructuring measures within the combined Group in the course of the
integration) exist, it may be material.
Liquidity and funding risk
Liquidity and funding management are critical to UBS’s ongoing performance
The viability of our business depends on the availability of funding sources, and our success depends on our ability to
obtain funding at times, in amounts, for tenors and at rates that enable us to efficiently support our asset base in all
market conditions. Our funding sources have generally been stable, but could change in the future because of, among
other things, general market disruptions or widening credit spreads, which could also influence the cost of funding. A
substantial part of our liquidity and funding requirements are met using short-term unsecured funding sources, including
retail and wholesale deposits and the regular issuance of money market securities. A change in the availability of short-
term funding could occur quickly.
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 certain of its subsidiaries, as well as the power of resolution authorities
to bail in TLAC instruments and other debt obligations, and uncertainty as to how such powers will be exercised, caused
and may still cause a further increase in UBS’s cost of funding, and could potentially increase the total amount of funding
required, in the absence of other changes in its business.
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 the Moody’s Investors Service Ltd. 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 acquisition of the Credit Suisse Group has elevated these risks
and may cause these risks to intensify. Upon the close of the acquisition in June 2023, Fitch Ratings Ireland Limited
downgraded the Long-Term Issuer Default Ratings (IDRs) of UBS Group AG to “A” from “A+” and of UBS AG to “A+”
from “AA–“. Fitch Ratings Ltd. also upgraded Credit Suisse AG’s Long-Term IDR to “A+” from “BBB+”.
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. 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. In an actual stress situation, however, our funding
outflows could exceed the assumed amounts. Further, UBS is subject to increased liquidity requirements related to too-big-
to-fail (TBTF) measures under the direction of FINMA, which became effective on 1 January 2024.
Annual Report 2023 | Our strategy, business model and environment | Risk factors
73
Financial and operating
performance
Management report
Accounting and financial reporting
Critical accounting estimates and judgments
In preparing our financial statements in accordance with IFRS Accounting Standards, 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 the following (note references below are found in the “Consolidated financial
statements” section of this report):
– provisional amounts of identifiable assets acquired and liabilities assumed in connection with the acquisition of the
Credit Suisse Group (refer to “Note 2 Accounting for the acquisition of Credit Suisse Group”);
– expected credit loss measurement (refer to “Note 20 Expected credit loss measurement”);
– fair value measurement (refer to “Note 21 Fair value measurement”);
– income taxes (refer to “Note 9 Income taxes”);
– provisions and contingent liabilities (refer to “Note 18 Provisions and contingent liabilities”);
– post-employment benefit plans (refer to “Note 27 Post-employment benefit plans”);
– goodwill (refer to Note 13 Goodwill and intangible assets”); and
– consolidation of structured entities (refer to “Note 29 Interests in subsidiaries and other entities”).
› Refer to “Note 1 Summary of material accounting policies” in the “Consolidated financial statements” section of this report and to
the “Risk factors” section of this report for more information
Adjustment made within the IFRS 3 measurement period after publication of the fourth quarter 2023 report
The acquisition of the Credit Suisse Group in the second quarter of 2023 resulted in provisional negative goodwill of
USD 28.9bn. Following the publication of the unaudited fourth quarter 2023 report on 6 February 2024, UBS has refined
its acquisition-date fair value estimates in accordance with the 12-month measurement period requirements provided by
IFRS 3, Business combinations. This has resulted in an adjustment of USD 1.2bn, decreasing the negative goodwill to
USD 27.7bn. As a result, 2023 operating profit before tax and 2023 net profit attributable to shareholders decreased by
USD 1.2bn, basic earnings per share decreased by USD 0.38 to USD 8.83 and diluted earnings per share decreased by
USD 0.36 to USD 8.45. In addition, the CET1 capital ratio decreased to 14.4% from 14.5%.
› Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of
this report for more information
Non-adjusting post balance sheet event
In March 2024, we have entered into agreements with entities and funds managed by affiliates of Apollo Global
Management (collectively, Apollo) and Atlas SP Partners (Atlas) to conclude the investment management agreement
under which Atlas has managed Credit Suisse’s retained portfolio of assets of its former securitized products group
(SPG). Following this agreement, the assets previously managed by Atlas will be managed in Non-core and Legacy. The
parties have also agreed to conclude the transition services agreement under which Credit Suisse has provided services
to Atlas. In addition, Credit Suisse AG has entered into an agreement to transfer to Apollo approximately USD 8bn of
senior secured asset-based financing. As part of the loan transfer, Credit Suisse AG will extend a one-year USD 750m
swingline facility to the borrowers under the transferred financing facilities. In UBS Group, we expect to recognize a net
gain in the first quarter of 2024 of around USD 0.3bn and Credit Suisse AG is expected to recognize a net loss of around
USD 0.9bn from the conclusion of the investment management agreement and assignment of the loan facilities. The
differences reflect adjustments UBS Group made under IFRS as part of the purchase price allocation at the closing of the
acquisition of Credit Suisse Group, as well as provisions in the second and third quarter of 2023 that are not recognized
under Credit Suisse AG’s US GAAP accounting policies.
Annual Report 2023 | Financial and operating performance | Accounting and financial reporting
74
Group performance
Income statement
USD m
Net interest income
Other net income from financial instruments measured at fair value through profit or loss
Net fee and commission income
Other income
Total revenues
Negative goodwill
Credit loss expense / (release)
Personnel expenses
General and administrative expenses
Depreciation, amortization and impairment of non-financial assets
Operating expenses
Operating profit / (loss) before tax
Tax expense / (benefit)
Net profit / (loss)
Net profit / (loss) attributable to non-controlling interests
Net profit / (loss) attributable to shareholders
Comprehensive income
Total comprehensive income
Total comprehensive income attributable to non-controlling interests
Total comprehensive income attributable to shareholders
For the year ended
31.12.22
31.12.23
6,621
7,517
18,966
1,459
34,563
31.12.21
6,705
5,850
22,387
452
35,393
29
(148)
17,680
5,189
2,061
24,930
9,604
1,942
7,661
32
7,630
3,167
18
3,149
18,387
5,553
2,118
26,058
9,484
1,998
7,486
29
7,457
5,119
13
5,106
% change from
31.12.22
10
54
14
(74)
18
41
96
82
56
199
(55)
264
(49)
265
811
19
816
7,297
11,583
21,570
384
40,834
27,748
1,037
24,899
10,156
3,750
38,806
28,739
873
27,866
16
27,849
28,857
22
28,836
Annual Report 2023 | Financial and operating performance | Group performance
75
Selected financial information of our business divisions and Group Items
USD m
Total revenues as reported
of which: accretion of PPA adjustments on financial
instruments and other effects
of which: losses related to investment in SIX Group
Total revenues (underlying)
Negative goodwill
Credit loss expense / (release)
Operating expenses as reported
of which: integration-related expenses
of which: acquisition-related costs
of which: amortization from newly recognized intangibles
resulting from the acquisition of the Credit Suisse Group
Operating expenses (underlying)
Operating profit / (loss) before tax as reported
Operating profit / (loss) before tax (underlying)
For the year ended 31.12.23
Global Wealth
Management
21,190
Personal &
Corporate
Banking
8,436
Asset
Management
2,639
Investment
Bank
8,661
Non-core and
Legacy1
741
Group Items1
(833)
Negative
goodwill
719
(190)
20,661
147
17,454
988
16,466
3,589
4,048
1,013
(317)
7,741
501
4,787
383
65
4,338
3,148
2,902
583
(35)
2,639
8,078
741
(798)
0
2,321
205
190
8,515
692
193
5,290
1,772
27,748
6
440
438
202
2,116
318
522
7,823
(44)
64
3,518
(4,741)
(2,969)
(200)
(1,279)
(603)
27,748
USD m
Total revenues as reported
of which: net gain from disposals
of which: gains from sales of subsidiary and business
of which: losses in the first quarter of 2022 from
transactions with Russian counterparties
of which: litigation settlement
of which: gain from sales of real estate
Global Wealth
Management
18,967
Personal &
Corporate
Banking
4,302
219
Asset
Management
2,961
848
For the year ended 31.12.22
Investment
Bank
8,717
Non-core and
Legacy1
237
Group Items1
(622)
(93)
62
Total revenues (underlying)
Credit loss expense / (release)
Operating expenses as reported
Operating profit / (loss) before tax as reported
Operating profit / (loss) before tax (underlying)
1 During 2023, Non-core and Legacy became a separate reportable segment and Group Functions has been renamed Group Items. Prior periods have been restated to reflect these changes.
18,748
0
13,989
4,977
4,758
8,810
(12)
6,832
1,897
1,990
2,114
0
1,564
1,397
550
4,302
39
2,452
1,812
1,812
175
2
104
131
69
68
(690)
1
(12)
(611)
(679)
Total
40,834
2,280
(508)
39,062
27,748
1,037
38,806
4,478
202
65
34,061
28,739
3,963
Total
34,563
848
219
(93)
62
68
33,459
29
24,930
9,604
8,500
Integration-related expenses by business division and Group Items
USD m
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy1
Group Items1
Total net integration-related expenses
of which: personnel expenses
of which: general and administrative expenses
of which: depreciation, amortization and impairment of non-financial assets
For the year ended
31.12.23
988
383
205
692
1,772
438
4,478
2,192
1,436
850
1 During 2023, Non-core and Legacy (previously reported within Group Functions) became a separate reportable segment and Group Functions has been renamed Group Items. Prior periods have been restated to
reflect these changes.
Annual Report 2023 | Financial and operating performance | Group performance
76
2023 compared with 2022
The acquisition of the Credit Suisse Group had a significant impact on the results for 2023, including the recognition of
negative goodwill, impacts from accretion of purchase price allocation (PPA) adjustments on financial instruments, and
integration-related costs. As the integration of the UBS and Credit Suisse businesses continues, from the third quarter of
2023 onward, a new business division, Non-core and Legacy, became a reportable segment containing assets and
liabilities that have been assessed as not strategic in light of the acquisition.
› Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of
this report for more information
Underlying results
In addition to reporting our results in accordance with IFRS Accounting Standards, we report underlying results that
exclude items of profit or loss that management believes are not representative of the underlying performance.
In 2023, underlying revenues exclude accretion of PPA adjustments on financial instruments measured at amortized cost,
including off-balance sheet positions and other related effects, arising from the acquisition of the Credit Suisse Group.
Accretion of PPA adjustments on financial instruments is accelerated when the related financial instrument is terminated
or disposed of before its contractual maturity. No adjustment is made for accretion of PPA adjustments on financial
instruments within the Non-core and Legacy due to the nature of the business model. Underlying revenues also exclude
losses relating to our investment in SIX Group.
Underlying expenses exclude integration-related expenses that are temporary, incremental and directly related to the
integration of Credit Suisse into UBS, including costs of internal staff and contractors substantially dedicated to
integration activities, retention awards, redundancy costs, incremental expenses from the shortening of useful lives of
property, equipment and software, and impairment charges relating to these assets. Classification as integration-related
expenses does not affect the timing of recognition and measurement of those expenses or the presentation thereof in
the income statement. Integration-related expenses incurred by Credit Suisse also included expenses associated with
restructuring programs that existed prior to the acquisition.
Acquisition-related costs consist of costs directly attributable to the acquisition of the Credit Suisse Group and mainly
include consulting and legal fees.
Results
In 2023, reported net profit attributable to shareholders increased by USD 20,219m to USD 27,849m, which included
negative goodwill of USD 27,748m relating to the acquisition of the Credit Suisse Group and a net tax expense of
USD 873m.
Operating profit before tax increased by USD 19,135m to USD 28,739m, primarily reflecting negative goodwill and an
increase in total revenues, partly offset by higher operating expenses and net credit loss expenses. Operating expenses
increased by USD 13,876m, or 56%, to USD 38,806m, largely due to the consolidation of Credit Suisse expenses of
USD 10,598m, and included integration-related expenses of USD 4,478m. This increase was mainly driven by a
USD 7,219m increase in personnel expenses and a USD 4,967m increase in general and administrative expenses.
Depreciation, amortization and impairment of non-financial assets increased by USD 1,689m. Net credit loss expenses
were USD 1,037m, compared with USD 29m in 2022. Total revenues increased by USD 6,271m, or 18%, to
USD 40,834m, driven by the consolidation of Credit Suisse revenues of USD 7,566m, and included USD 2,280m of
accretion resulting from PPA adjustments on financial instruments and other effects. Total combined net interest income
and other net income from financial instruments measured at fair value through profit or loss increased by USD 4,743m
and net fee and commission income increased by USD 2,604m. These increases were partly offset by a USD 1,075m
decrease in other income, largely attributable to the prior year including a gain of USD 848m in Asset Management on
the sale of our shareholding in our Japanese real estate joint venture, Mitsubishi Corp.-UBS Realty Inc.
Underlying results 2023 vs 2022
For 2023, underlying results exclude negative goodwill of USD 27,748m, USD 2,280m of accretion impacts resulting
from PPA adjustments on financial instruments and other effects, as well as losses of USD 508m from our investment in
SIX Group. We have also excluded from operating expenses integration-related expenses of USD 4,478m, acquisition-
related costs of USD 202m and USD 65m of amortization from newly recognized intangibles resulting from the
acquisition of the Credit Suisse Group.
On an underlying basis, profit before tax decreased by USD 4,537m, or 53%, to USD 3,963m, reflecting a USD 9,131m
increase in underlying operating expenses and an increase in net credit loss expenses of USD 1,008m, partly offset by a
USD 5,603m increase in underlying total revenues.
Annual Report 2023 | Financial and operating performance | Group performance
77
Total revenues
Net interest income and other net income from financial instruments measured at fair value through profit or loss
Total combined net interest income and other net income from financial instruments measured at fair value through
profit or loss increased by USD 4,743m to USD 18,880m, mainly driven by the consolidation of USD 4,302m of Credit
Suisse revenues, and included USD 1,533m of accretion of PPA adjustments on financial instruments and other effects.
Personal & Corporate Banking increased by USD 3,381m to USD 6,066m, largely attributable to the consolidation of
USD 2,451m of Credit Suisse revenues, and included USD 917m of accretion of PPA adjustments on financial instruments
and other effects. The remaining increase was mainly driven by higher deposit margins, which resulted from higher
interest rates, and higher loan revenues, partly offset by lower deposit fees. 2022 included a benefit from the Swiss
National Bank deposit exemption. Excluding accretion effects, underlying net interest income was USD 4,387m.
Global Wealth Management increased by USD 1,969m to USD 8,324m, largely attributable to the consolidation of
USD 1,718m of Credit Suisse revenues, and included USD 671m of accretion of PPA adjustments on financial instruments
and other effects. The remaining increase was mainly driven by higher deposit margins, resulting from higher interest
rates, partly offset by the effects of shifts to lower-margin deposit products. Excluding accretion effects, underlying net
interest income was USD 6,294m.
Non-core and Legacy increased by USD 273m to USD 391m, mainly due to the transfer of assets and liabilities into Non-
core and Legacy following the acquisition of the Credit Suisse Group. Revenues included net gains from position marks
and unwinds, along with net carry from securitized products and credit products.
Investment Bank decreased by USD 734m to USD 5,035m, despite the consolidation of USD 34m of Credit Suisse
revenues. The decrease was mainly attributable to lower revenues in the Derivatives & Solutions business, mostly driven
by Equity Derivatives, Rates and Foreign Exchange, due to lower levels of both volatility and client activity. This was partly
offset by an increase in Financing, reflecting higher client balances.
› Refer to “Note 4 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
31.12.22
31.12.23
31.12.21
% change from
31.12.22
USD m
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 and other
Other net income from financial instruments measured at fair value through profit or loss
Total
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
3,527
3,770
11,583
18,880
8,324
6,965
1,359
6,066
5,304
762
(2)
5,035
391
(935)
5,218
1,403
7,517
14,137
6,355
5,273
1,082
2,685
2,191
494
(23)
5,769
118
(767)
5,274
1,431
5,850
12,555
5,341
4,244
1,097
2,557
2,120
437
(13)
5,067
7
(404)
(32)
169
54
34
31
32
26
126
142
54
(92)
(13)
232
22
Asset Management
Investment Bank2
Non-core and Legacy
Group Items
1 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. 2 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.
Net fee and commission income
Net fee and commission income increased by USD 2,604m to USD 21,570m and included USD 747m of accretion of PPA
adjustments on financial instruments, which was included in other fee and commission income, mainly in the Investment
Bank.
Fees for portfolio management and related services increased by USD 1,614m to USD 10,673m, largely due to the
consolidation of USD 1,583m of Credit Suisse revenues.
Excluding the consolidation of Credit Suisse revenues, investment fund fees decreased by USD 212m, driven by Global
Wealth Management and Asset Management, mainly reflecting negative market performance.
Excluding the consolidation of Credit Suisse revenues, net brokerage fees decreased by USD 204m, driven by lower levels
of client activity in Global Wealth Management and lower market volumes of cash equities in Execution Services in the
Investment Bank.
› Refer to “Note 5 Net fee and commission income” in the “Consolidated financial statements” section of this report for more
information
Annual Report 2023 | Financial and operating performance | Group performance
78
Other income
Other income decreased by USD 1,075m to USD 384m, largely due to a USD 380m decrease in share of net profits from
associates and joint ventures, which included USD 508m losses relating to our investment in SIX Group, partly offset by
higher recognition of recurring share of net profits. These losses reflected UBS’s share of impairments taken by SIX Group
on its investment in Worldline and on goodwill related to its Bolsas y Mercados Españoles (BME) subsidiary. This was
partly offset by USD 174m of mortgage servicing rights fees, attributable to the consolidation of Credit Suisse revenues,
as well as a USD 62m increase in gains recognized on repurchases of UBS’s own debt instruments. In contrast, in 2022,
other income included gains from disposals of associates and subsidiaries, including a gain of USD 848m in Asset
Management on the sale of our shareholding in our Japanese real estate joint venture, Mitsubishi Corp.-UBS Realty Inc.,
gains in Global Wealth Management of USD 133m on the sale of our domestic wealth management business in Spain,
USD 86m on the sale of UBS Swiss Financial Advisers AG and USD 41m on the sale of our US alternative investments
administration business.
› Refer to “Note 6 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 gains from disposals of associates and subsidiaries
Credit loss expense / release
Total net credit loss expenses were USD 1,037m in 2023, reflecting net credit loss expenses of USD 593m related to
stage 1 and 2 positions and net credit loss expenses of USD 445m related to credit-impaired (stage 3 and purchased
credit-impaired) positions. Expected credit loss (ECL) expenses of USD 593m for the performing loans were predominantly
attributable to the initial recognition of ECL allowances and provisions after the date of the acquisition of the Credit
Suisse Group. Credit-impaired net expenses amounted to USD 445m, of which USD 325m was within the Credit Suisse
portfolio and USD 120m was within the UBS portfolio. As per IFRS 9, no ECL allowances and provisions had to be
recognized on the acquisition date for credit-impaired exposures, after the fair valuation as per the PPA.
› Refer to “Note 10 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 m
For the year ended 31.12.23
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items1
Total
For the year ended 31.12.22
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items1
Total
For the year ended 31.12.21
Global Wealth Management
Personal & Corporate Banking
Performing positions
Credit-impaired positions
Stages 1 and 2
Stage 3
Purchased
Total
108
290
1
110
78
5
593
(5)
27
0
6
0
1
29
(28)
(62)
27
183
(1)
78
91
0
378
5
12
0
(18)
2
0
0
(1)
(24)
13
27
0
2
25
0
67
147
501
0
190
193
6
1,037
0
39
0
(12)
2
1
29
(29)
(86)
Asset Management
Investment Bank
Non-core and Legacy
Group Items1
0
0
Total
(148)
(123)
1 Starting with the third quarter of 2023, Non-core and Legacy became a separate reportable segment and Group Functions has been renamed Group Items. Prior periods have been restated to reflect these changes.
1
(34)
0
0
(34)
0
0
(25)
1
0
0
Annual Report 2023 | Financial and operating performance | Group performance
79
Operating expenses
Personnel expenses
Personnel expenses increased by USD 7,219m to USD 24,899m, mainly due to the consolidation of Credit Suisse expenses
of USD 6,330m, and included integration-related expenses of USD 2,192m covering post-employment benefit plans,
awards granted to employees to support retention and operational stability, severance expenses, and the alignment of
Credit Suisse processes to the UBS variable compensation framework. Salaries and variable compensation increased by
USD 5,843m due to the aforementioned effects and also salary adjustments, higher variable compensation, and foreign
currency effects. Social security costs also increased by USD 529m. Pension and other post-employment benefit plans
increased by USD 567m as a result of the aforementioned factors and included an increase in the pension plan obligation
of the Swiss pension plan of Credit Suisse following the decision to align that Swiss pension plan to UBS’s Swiss pension
plan, which resulted in a pre-tax loss of USD 245m (CHF 207m) in the fourth quarter of 2023 and an offsetting gain in
other comprehensive income due to the asset ceiling.
› Refer to the “Compensation” section of this report for more information
› Refer to “Note 7 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
General and administrative expenses
General and administrative expenses increased by USD 4,967m to USD 10,156m, largely due to the consolidation of
Credit Suisse expenses of USD 3,000m, and included total integration-related expenses of USD 1,436m, mainly from
higher consulting and real estate costs, as well as acquisition-related costs of USD 202m, also mainly related to consulting
fees. Excluding the aforementioned effects, general and administrative expenses increased by USD 1,050m, mainly due
to a USD 665m increase in provisions related to the US residential mortgage-backed securities litigation matter, as well
as an increase in technology costs of USD 190m.
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 8 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 of non-financial assets
Depreciation, amortization and impairment of non-financial assets increased by USD 1,689m to USD 3,750m, largely due
to the consolidation of Credit Suisse expenses of USD 1,268m, and included total integration-related expenses of
USD 850m, mainly attributable to impairment and accelerated depreciation of right-of-use assets associated with real
estate leases, as well as a USD 206m impairment of software projects in progress resulting from a reprioritization of
software development activity in the context of the acquisition. Excluding the aforementioned effects, depreciation,
amortization and impairment of non-financial assets increased by USD 146m, mainly due to higher depreciation of
internally developed software, reflecting a higher level of capitalized costs.
Operating expenses
USD m
Personnel expenses
of which: salaries
of which: variable compensation
of which: performance awards
of which: financial advisors1
of which: other
% change from
31.12.22
41
56
24
24
1
444
51
96
133
93
82
Depreciation, amortization and impairment of non-financial assets
56
Total operating expenses
1 Consists of cash and deferred compensation awards and is based on compensable revenues and firm tenure using a formulaic approach. It also includes expenses related to compensation commitments with financial
advisors entered into at the time of recruitment that are subject to vesting requirements. 2 Consists of expenses related to contractors, social security, post-employment benefit plans, and other personnel expenses.
Refer to “Note 7 Personnel expenses” in the “Consolidated financial statements” section of this report for more information.
For the year ended
31.12.22
17,680
7,045
7,954
3,205
4,508
241
2,681
5,189
348
4,841
2,061
24,930
31.12.23
24,899
10,997
9,845
3,986
4,549
1,310
4,058
10,156
809
9,347
3,750
38,806
31.12.21
18,387
7,339
8,280
3,190
4,860
229
2,768
5,553
911
4,642
2,118
26,058
of which: net expenses for litigation, regulatory and similar matters
of which: other general and administrative expenses
of which: other personnel expenses2
General and administrative expenses
Tax
Income tax expenses of USD 873m were recognized for the Group in 2023, representing an effective tax rate of 3.0%,
compared with USD 1,942m for 2022, which represented an effective tax rate of 20.2%. The income tax expenses for
2023 included Swiss tax expenses of USD 1,035m and a non-Swiss net tax benefit of USD 162m.
The Swiss tax expenses included current tax expenses of USD 883m in respect of taxable profits of UBS Switzerland AG
and other Swiss entities and deferred tax expenses of USD 152m that primarily related to the amortization of deferred
tax assets (DTAs), as deductions related to temporary differences were made against profits.
Annual Report 2023 | Financial and operating performance | Group performance
80
The non-Swiss net tax benefit included current tax expenses of USD 684m that related to expenses of USD 100m in
respect of US corporate alternative minimum tax (CAMT) and USD 584m in respect of other taxable profits of non-Swiss
subsidiaries and branches. However, these were more than offset by a net deferred tax benefit of USD 846m that primarily
related to a benefit of USD 754m in respect of remeasurements of DTAs, which included USD 480m in respect of net
upward revaluations of DTAs for certain entities in connection with the Group’s business planning process and USD 274m
in respect of an increase in DTAs that resulted from 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. In addition, the net deferred tax
benefit included a benefit of USD 100m in respect of the recognition of DTAs for tax credits carried forward in respect
of CAMT, which was partly offset by a net deferred tax expense of USD 8m.
The low effective tax rate for the year of 3.0% primarily reflects that the negative goodwill gain that was recorded in the
income statement did not result in any tax expense, as well as the aforementioned tax benefit of USD 754m in respect
of the remeasurement of DTAs. However, these benefits were partly offset by the impact of operating losses that were
incurred by certain entities, reflecting integration-related expenses and restructuring costs, that did not result in any tax
benefits because they cannot be offset with profits of other group entities and they did not result in any DTA recognition.
If further such operating losses are incurred in 2024, the Group’s tax expense for the year may be significantly higher
than the Group’s structural rate of 23% but, the Group’s effective tax rate is expected to decrease towards the structural
rate in subsequent years, as such losses decrease.
› Refer to “Note 9 Income taxes” in the “Consolidated financial statements” section of this report for more information
› Refer to the “Risk factors” section of this report for more information
Total comprehensive income attributable to shareholders
In 2023, total comprehensive income attributable to shareholders was USD 28,836m, reflecting net profit of
USD 27,849m, which included the recognition of negative goodwill on the acquisition of the Credit Suisse Group of
USD 27,748m, and other comprehensive income (OCI), net of tax, of USD 986m.
Foreign currency translation OCI was USD 1,456m, mainly due to the significant strengthening of the Swiss franc (10%)
and the euro (3%) against the US dollar.
OCI related to cash flow hedges was USD 1,275m, mainly reflecting net losses on hedging instruments that were
reclassified from OCI to the income statement.
Defined benefit plan OCI, net of tax, was positive USD 40m. Total net pre-tax OCI related to the Credit Suisse Swiss
pension plan was positive USD 217m. This reflected losses of USD 1,161m from the defined benefit obligation (DBO)
remeasurement, more than offset by an increase in the plan assets of USD 443m and a decrease in the effect of the asset
ceiling under IFRS Accounting Standards of USD 935m. These changes include an increase in the pension plan obligation
of the Swiss pension plan of Credit Suisse following the decision to align the Swiss pension scheme to that of UBS, which
resulted in a pre-tax loss of USD 245m (CHF 207m) in the fourth quarter of 2023 and an offsetting gain in OCI due to
the asset ceiling. Total pre-tax OCI related to the UBS Swiss pension plan was negative USD 93m, reflecting losses of
USD 3,285m from the DBO remeasurement, almost entirely offset by an increase in the plan assets of USD 791m and a
decrease in the effect of the asset ceiling under IFRS Accounting Standards of USD 2,401m. The DBO remeasurement
loss of USD 3,285m was mainly driven by a loss of USD 2,358m due to a decrease in the applicable discount rate and an
experience loss of USD 1,140m, reflecting the effects of differences between the previous actuarial assumptions and
what actually occurred. These losses were partly offset by gains of USD 366m resulting from a decrease in the expected
rate of interest credit on retirement savings.
Total pre-tax OCI related to our non-Swiss pension plans was negative USD 15m, mostly driven by the UK and German
pension plans, which recorded negative net pre-tax OCI of USD 41m and USD 16m, respectively, partly offset by the US
pension plans, which had a positive OCI of USD 45m, and the remaining pension plans.
OCI related to own credit on financial liabilities designated at fair value was negative USD 1,769m, primarily due to a
tightening of our own credit spreads.
› Refer to “Statement of comprehensive income” in the “Consolidated financial statements” section of this report for more
information
› Refer to “Note 21 Fair value measurement” in the “Consolidated financial statements” section of this report for more information
about own credit on financial liabilities designated at fair value
› Refer to “Note 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
Annual Report 2023 | Financial and operating performance | Group performance
81
Sensitivity to interest rate movements
As of 31 December 2023, we estimated that a parallel shift in yield curves by +100 basis points could lead to a combined
increase in annual net interest income from our banking book of approximately USD 1.8bn in the first year after such a
shift. Of this increase, approximately USD 1.1bn, USD 0.4bn and USD 0.1bn would result from changes in Swiss franc,
US dollar and euro 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 1.9bn in the first year after such a shift, showing similar
currency contributions as for the aforementioned increase in rates.
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 2023 applied to our banking book. These estimates further
assume no change to balance sheet size and product mix, stable foreign exchange rates, and no specific management
action. These estimates do not represent a forecast of net interest income variability.
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 95.0%, compared with 72.1%, mainly reflecting an increase in operating expenses, partly
offset by an increase in total revenues. The operating loss incurred by Credit Suisse entities is reflected in the overall
increase of the ratio for the UBS Group. On an underlying basis, the cost / income ratio was 87.2%, compared with
74.5%, mainly reflecting an increase in operating expenses on an underlying basis, partly offset by an increase in total
revenues on an underlying basis.
Return on common equity tier 1 capital
The annualized return on our common equity tier 1 (CET1) capital was 42.3%, compared with 17.0%, reflecting a
USD 20,219m increase in net profit attributable to shareholders, with a partly offsetting effect driven by a USD 20.9bn
increase in average CET1 capital. On an underlying basis, the return on CET1 capital was 4.2%, compared with 14.6%.
CET1 capital
CET1 capital increased by USD 33.0bn to USD 78.5bn as of 31 December 2023, predominantly due to an operating profit
before tax (excluding negative goodwill) of USD 1.0bn, the acquisition of the Credit Suisse Group, which resulted in an
increase of USD 34.9bn as of the acquisition date (including transitional CET1 PPA adjustments of USD 5.0bn, net of tax),
an increase in eligible DTAs on temporary differences of USD 1.9bn and positive effects from foreign currency translation
of USD 1.5bn, partly offset by dividend accruals of USD 2.2bn, current tax expenses of USD 1.6bn, share repurchases of
USD 1.3bn under our share repurchase programs, amortization of transitional CET1 PPA adjustments (interest rate and
own credit) of USD 0.7bn (net of tax), and an increase in compensation- and own share-related capital components of
USD 0.3bn.
Risk-weighted assets
Risk-weighted assets (RWA) increased by USD 226.9bn to USD 546.5bn, primarily due to a USD 237.7bn increase
resulting from the acquisition of the Credit Suisse Group. Excluding that acquisition, RWA decreased by USD 10.8bn,
primarily driven by decreases of USD 19.0bn due to asset size and other movements and USD 3.7bn due to model updates
and methodology changes, partly offset by an increase of USD 11.8bn due to currency effects.
CET1 capital ratio
Our CET1 capital ratio increased to 14.4% from 14.2%, reflecting the aforementioned increase in CET1 capital, partly
offset by a USD 226.9bn increase in RWA.
Annual Report 2023 | Financial and operating performance | Group performance
82
Leverage ratio denominator
During 2023, the leverage ratio denominator (LRD) increased by USD 666.9bn to USD 1,695.4bn, primarily due to a
USD 644.4bn increase resulting from the acquisition of the Credit Suisse Group. Excluding that acquisition, the LRD
increased by USD 53.8bn due to currency effects, partly offset by USD 31.3bn due to asset size and other movements.
CET1 leverage ratio
Our CET1 leverage ratio increased to 4.6% from 4.4%, due to the aforementioned increase in CET1 capital, partly offset
by the USD 666.9bn increase in the LRD.
Personnel
The number of personnel employed was 138,462 (workforce count) as of 31 December 2023, a net increase of 50,246
compared with 31 December 2022, predominantly due to the onboarding of Credit Suisse staff to the UBS Group. The
number of internal personnel employed as of 31 December 2023 was 112,842 (full-time equivalents), a net increase of
40,245 compared with 31 December 2022, and included 39,032 (full-time equivalents) employed by the Credit Suisse
sub-group. The number of external staff was approximately 25,619 (workforce count), a net increase of 10,001 compared
with 31 December 2022.
Equity, CET1 capital and returns
USD m, 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 (%)
Underlying return on tangible equity (%)
Return on CET1 capital (%)
Underlying return on CET1 capital (%)
As of or for the year ended
31.12.23
31.12.22
31.12.21
27,849
7,630
7,457
86,108
7,515
78,593
107
78,485
37.4
41.3
4.1
42.3
4.2
56,876
6,267
50,609
5,152
45,457
13.3
14.9
12.8
17.0
14.6
60,662
6,378
54,283
9,003
45,281
12.6
14.1
17.5
Annual Report 2023 | Financial and operating performance | Group performance
83
Global Wealth Management
Global Wealth Management
USD m, except where indicated
Results
Net interest income
Recurring net fee income2
Transaction-based income2
Other income
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit / (loss) before tax
Underlying results
Total revenues as reported
of which: gains from sales of subsidiary and business
of which: accretion of PPA adjustments on financial instruments and other effects
of which: losses related to investment in SIX Group
Total revenues (underlying)2
Credit loss expense / (release)
Operating expenses as reported
of which: integration-related expenses 2
Operating expenses (underlying)2
of which: expenses for litigation, regulatory and similar matters
Business division operating profit / (loss) before tax as reported
Business division operating profit / (loss) before tax (underlying)2
Performance measures and other information
Pre-tax profit growth (year-on-year, %)2
Cost / income ratio (%)2
Average attributed equity (USD bn)
Return on attributed equity (%)2
Financial advisor compensation3
Net new fee-generating assets (USD bn)2
Fee-generating assets (USD bn)2
Net new assets (USD bn)2
Net new money (USD bn)2
Invested assets (USD bn)2
Loans, gross (USD bn)4
Customer deposits (USD bn)4
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)2,5
Advisors (full-time equivalents)
As of or for the year ended
31.12.23
31.12.221
% change from
31.12.22
6,965
10,793
3,569
(137)
21,190
147
17,454
3,589
21,190
719
(190)
20,661
147
17,454
988
16,466
122
3,589
4,048
(27.9)
82.4
22.8
15.8
4,548
n.m.
1,619
131.7
65.0
3,850
284.3
466.9
0.4
10,027
5,273
10,282
3,137
275
18,967
0
13,989
4,977
18,967
219
18,748
0
13,989
13,989
244
4,977
4,758
4.1
73.8
20.0
24.9
4,508
60.1
1,271
89.2
40.5
2,815
225.0
348.2
0.3
9,215
32
5
14
12
25
(28)
12
10
25
18
(50)
(28)
(15)
14
1
27
37
26
34
9
Underlying performance measures
Pre-tax profit growth (year-on-year, %)2
Cost / income ratio (%)2
1 Information reflects Global Wealth Management as reported on in the Annual Report 2022. 2 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.
We started to report fee-generating assets and net new fee-generating assets on a consolidated basis, including Credit Suisse data, from the fourth quarter of 2023 onward. 3 Relates to licensed professionals with
the ability to provide investment advice to clients in the Americas. Consists of cash and deferred compensation awards and is based on compensable revenues and firm tenure using a formulaic approach. It also
includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements. Recruitment loans to financial advisors were USD 1,754m
as of 31 December 2023. 4 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.
5 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures. Excludes loans to financial advisors.
(14.9)
79.7
1.6
74.6
2023 compared with 2022
Results
Profit before tax decreased by USD 1,388m, or 28%, to USD 3,589m, mainly due to higher operating expenses, largely
driven by the acquisition of the Credit Suisse Group, partly offset by higher total revenues. The prior year included a
USD 133m gain from the sale of our domestic wealth management business in Spain, an USD 86m gain from the sale of
UBS Swiss Financial Advisers AG and a USD 41m gain from the sale of our US alternative investments administration
business. Underlying profit before tax was USD 4,048m, after excluding USD 719m of accretion of purchase price
allocation (PPA) adjustments on financial instruments and other effects, losses of USD 190m related to our investment in
SIX Group and integration-related expenses of USD 988m.
Annual Report 2023 | Financial and operating performance | Global Wealth Management
84
Total revenues
Total revenues increased by USD 2,223m, or 12%, to USD 21,190m, largely driven by the consolidation of Credit Suisse
revenues, and included the aforementioned USD 719m of accretion of PPA adjustments on financial instruments and
other effects. The increase was partly offset by the aforementioned losses of USD 190m, as well as the aforementioned
gains from the sales in 2022. Excluding accretion effects and the aforementioned losses, underlying total revenues were
USD 20,661m.
Net interest income increased by USD 1,692m, or 32%, to USD 6,965m, largely attributable to the consolidation of Credit
Suisse net interest income, and included USD 672m of accretion of PPA adjustments on financial instruments and other
effects, with the remaining increase mainly driven by higher deposit margins, resulting from higher interest rates, partly
offset by the effects of shifts to lower-margin deposit products. Excluding accretion effects, underlying net interest
income was USD 6,293m.
Recurring net fee income increased by USD 511m, or 5%, to USD 10,793m, mainly driven by the consolidation of Credit
Suisse recurring net fee income, partly offset by negative market performance.
Transaction-based income increased by USD 432m, or 14%, to USD 3,569m, mainly driven by the consolidation of Credit
Suisse transaction-based income, and included USD 47m of accretion of PPA adjustments on financial instruments and
other effects, partly offset by lower levels of client activity, particularly in Americas and Asia Pacific. Excluding accretion
effects, underlying transaction-based income was USD 3,522m.
Other income was negative USD 137m, compared with positive other income of USD 275m, mainly as 2022 included
gains from the sales of our domestic wealth management business in Spain, UBS Swiss Financial Advisers AG and our US
alternative investments administration business. 2023 included the aforementioned losses of USD 190m related to our
investment in SIX Group. Excluding these losses of USD 190m, underlying other income was positive USD 53m.
Credit loss expense / release
Net credit loss expenses were USD 147m, compared with net expenses of USD 0m, reflecting net credit loss expenses of
USD 108m related to stage 1 and 2 positions and net credit loss expenses of USD 40m related to credit-impaired (stage 3
and purchased credit-impaired) positions. Stage 1 and 2 expected credit loss (ECL) expenses of USD 108m were
predominantly attributable to the initial recognition of ECL allowances and provisions on the date of the acquisition of
the Credit Suisse Group.
Operating expenses
Operating expenses increased by USD 3,465m, or 25%, to USD 17,454m, largely due to the consolidation of Credit
Suisse expenses, integration-related expenses and higher technology expenses. In addition, 2023 included a charge of
USD 60m for the special assessment by the US Federal Deposit Insurance Corporation (the FDIC) to recover losses incurred
by the Deposit Insurance Fund in connection with the failures of Silicon Valley Bank and Signature Bank. These effects
were partly offset by lower provisions for litigation, regulatory and similar matters. Excluding integration-related expenses
of USD 988m, underlying operating expenses were USD 16,466m.
Pre-tax profit growth
Pre-tax profit growth was negative 27.9%, compared with positive 4.1%.
Cost / income ratio
The cost / income ratio increased to 82.4% from 73.8%, as higher operating expenses more than offset higher total
revenues.
Invested assets
Invested assets increased by USD 1,035bn, or 37%, to USD 3,850bn, mainly driven by the consolidation of Credit Suisse
invested assets, positive market performance (excluding interest and dividends, which are now included in net new assets)
of USD 249bn, net new asset inflows of USD 132bn and positive foreign currency effects of USD 34bn, partly offset by
a reclassification of USD 38bn related to non-strategic relationships and a transfer of USD 5bn to Non-core and Legacy.
Loans
Loans increased by USD 59.3bn to USD 284.3bn, mainly driven by the consolidation of Credit Suisse loans and positive
foreign currency effects, partly offset by net new loan outflows of USD 20.7bn.
› Refer to the “Risk management and control” section of this report for more information
Annual Report 2023 | Financial and operating performance | Global Wealth Management
85
Customer deposits
Customer deposits increased by USD 118.7bn to USD 466.9bn, mainly driven by the consolidation of Credit Suisse
customer deposits, net inflows into fixed-term deposit products, and positive foreign currency effects, partly offset by
continued shifts into money market funds and US-government securities.
Regional breakdown of performance measures
As of or for the year ended 31.12.23
USD bn, except where indicated
Total revenues (USD m)
Operating profit / (loss) before tax (USD m)
Operating profit / (loss) before tax underlying (USD m)
Cost / income ratio (%)4
Cost / income ratio underlying (%)4
Loans, gross
Net new loans
Net new money4
Net new assets4
Fee-generating assets4
Invested assets4
Advisors (full-time equivalents)
Americas1
10,386
Switzerland2
2,829
1,057
1,057
89.7
89.7
97.35
(8.2)
5.4
43.4
933
1,888
6,117
1,209
1,214
57.1
56.9
76.9
(1.9)
23.3
29.9
173
663
988
EMEA2
4,424
1,196
1,207
72.7
72.5
63.4
(3.7)
4.9
15.0
361
649
Asia Pacific2
3,003
661
669
77.4
77.2
45.8
(6.8)
32.6
44.6
152
645
1,737
1,101
Global3
548
(534)
(99)
0.9
0.0
(1.3)
(1.3)
1
5
84
Global Wealth
Management
21,190
3,589
4,048
82.4
79.7
284.3
(20.7)
65.0
131.7
1,619
3,850
10,027
1 Including the following business units: United States and Canada; and Latin America. 2 In the third quarter of 2023, the invested assets of Global Financial Intermediaries were transferred from EMEA and Asia
Pacific to the Switzerland region, to better align it to the management structure. These changes were applied prospectively and had no impact on previous periods. 3 Includes minor functions, which are not included
in the four regions individually presented in this table, and also includes impacts from accretion of purchase price allocation adjustments on financial instruments and other effects and integration-related expenses.
4 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method. 5 Loans include customer brokerage receivables, which are presented in a separate reporting
line on the balance sheet.
Regional comments: 2023 compared with 2022
Americas
Profit before tax decreased by USD 691m to USD 1,057m. Total revenues decreased by USD 248m, or 2%, to
USD 10,386m, driven by lower net interest income, transaction-based income and other income, partly offset by the
consolidation of Credit Suisse revenues in 2023. In addition, 2023 included the aforementioned charge of USD 60m for
the special assessment by the FDIC. The cost / income ratio increased to 89.7% from 83.7%. Loans decreased 4%
compared with 2022, to USD 97.3bn, mainly reflecting USD 8.2bn of net new loan outflows. Net new asset inflows were
USD 43.4bn.
Switzerland
Profit before tax increased by USD 392m to USD 1,209m. Total revenues increased by USD 970m, or 52%, to
USD 2,829m, driven by the transfer of the Global Financial Intermediaries business to the Switzerland region, as well as
the consolidation of Credit Suisse revenues in 2023. The cost / income ratio increased to 57.1% from 55.2%. Loans
increased 71% compared with 2022, to USD 76.9bn, as USD 1.9bn of net new loan outflows were offset by the transfer
of the Global Financial Intermediaries business to the Switzerland region, as well as the consolidation of Credit Suisse
loans. Net new asset inflows were USD 29.9bn.
EMEA
Profit before tax decreased by USD 294m to USD 1,196m. Total revenues increased by USD 511m, or 13%, to
USD 4,424m, largely driven by the consolidation of Credit Suisse revenues, partly offset by the transfer of the Global
Financial Intermediaries business to the Switzerland region. In addition, 2022 included gains from the aforementioned
sales. The cost / income ratio increased to 72.7% from 61.9%. Loans increased 46% compared with 2022, to
USD 63.4bn, driven by the consolidation of Credit Suisse loans and partly offset by the transfer of the Global Financial
Intermediaries business to the Switzerland region, as well as USD 3.7bn of net new loan outflows. Net new asset inflows
were USD 15.0bn.
Asia Pacific
Profit before tax decreased by USD 282m to USD 661m. Total revenues increased by USD 447m, or 17%, to USD 3,003m,
mainly driven by the consolidation of Credit Suisse revenues and increases in net interest income. The cost / income ratio
increased to 77.4% from 63.2%. Loans increased 33% compared with 2022, to USD 45.8bn, driven by the consolidation
of Credit Suisse loans, partly offset by USD 6.8bn of net new loan outflows. Net new asset inflows were USD 44.6bn.
Global
Operating loss before tax was USD 534m, mainly including USD 964m of integration-related expenses and losses of
USD 190m related to our investment in SIX Group, partly offset by USD 719m of accretion of PPA adjustments on
financial instruments and other effects.
Annual Report 2023 | Financial and operating performance | Global Wealth Management
86
Personal & Corporate Banking
Personal & Corporate Banking – in Swiss francs
CHF m, except where indicated
Results
Net interest income
Recurring net fee income2
Transaction-based income2
Other income
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit / (loss) before tax
Underlying results
Total revenues as reported
of which: accretion of PPA adjustments on financial instruments and other effects
of which: losses related to investment in SIX Group
Total revenues (underlying)2
Credit loss expense / (release)
Operating expenses as reported
of which: integration-related expenses 2
of which: amortization from newly recognized intangibles resulting from the acquisition of the Credit Suisse Group
Operating expenses (underlying)2
of which: expenses for litigation, regulatory and similar matters
Business division operating profit / (loss) before tax as reported
Business division operating profit / (loss) before tax (underlying)2
Performance measures and other information
Pre-tax profit growth (year-on-year, %)2
Cost / income ratio (%)2
Average attributed equity (CHF bn)
Return on attributed equity (%)2
Loans, gross (CHF bn)
Customer deposits (CHF bn)
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)2,3
As of or for the year ended
31.12.23
31.12.221
% change from
31.12.22
4,727
1,349
1,663
(198)
7,541
450
4,267
2,824
7,541
896
(267)
6,912
450
4,267
337
58
3,872
(8)
2,824
2,591
63.6
56.6
13.9
20.3
283.6
273.0
0.9
2,087
812
1,154
46
4,099
36
2,337
1,726
4,099
4,099
36
2,337
2,337
(12)
1,726
1,726
8.8
57.0
8.8
19.5
142.9
167.2
0.8
126
66
44
84
83
64
84
69
83
66
(31)
64
50
57
98
63
Underlying performance measures
Pre-tax profit growth (year-on-year, %)2
Cost / income ratio (%)2
1 Information reflects Personal & Corporate Banking as reported on in the Annual Report 2022. 2 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.
3 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures.
57.0
50.1
11.1
56.0
Annual Report 2023 | Financial and operating performance | Personal & Corporate Banking
87
2023 compared with 2022
Results
Profit before tax increased by CHF 1,098m, or 64%, to CHF 2,824m, mainly due to the acquisition of the Credit Suisse
Group. Underlying profit before tax was CHF 2,591m, after excluding CHF 896m of accretion of purchase price allocation
(PPA) adjustments on financial instruments and other effects, losses of CHF 267m related to our investment in SIX Group,
integration-related expenses of CHF 337m, and CHF 58m of amortization from newly recognized intangibles resulting
from the acquisition of the Credit Suisse Group.
Total revenues
Total revenues increased by CHF 3,442m, or 84%, to CHF 7,541m, mainly due to the consolidation of Credit Suisse
revenues, and included CHF 896m of accretion of PPA adjustments on financial instruments and other effects. The
remaining increase largely reflected increases across almost all income lines, predominantly in net interest income, partly
offset by the aforementioned losses of CHF 267m in other income. Excluding the aforementioned accretion effects,
underlying total revenues were CHF 6,912m.
Net interest income increased by CHF 2,640m, or 126%, to CHF 4,727m, largely attributable to the consolidation of
Credit Suisse net interest income, and included CHF 811m of accretion of PPA adjustments on financial instruments and
other effects, with the remaining increase mainly driven by higher deposit margins, which resulted from higher interest
rates, and higher loan revenues, partly offset by lower deposit fees. 2022 included a benefit from the Swiss National
Bank deposit exemption. Excluding accretion effects, underlying net interest income was CHF 3,916m.
Recurring net fee income increased by CHF 537m, or 66%, to CHF 1,349m, mainly attributable to the consolidation of
Credit Suisse recurring net fee income, with the remaining increase mostly driven by higher revenues from account and
custody fees.
Transaction-based income increased by CHF 509m, or 44%, to CHF 1,663m, largely attributable to the consolidation of
Credit Suisse transaction-based income, and included CHF 85m of accretion of PPA adjustments on financial instruments
and other effects, with the remaining increase mainly driven by higher income from Corporate & Institutional Clients.
Excluding accretion effects, underlying transaction-based income was CHF 1,578m.
Other income was negative CHF 198m, compared with positive other income of CHF 46m, mainly reflecting the losses
of CHF 267m related to our investment in SIX Group.
Credit loss expense / release
Net credit loss expenses were CHF 450m, compared with net expenses of CHF 36m, reflecting net credit loss expenses
related to stage 1 and 2 positions and net credit loss expenses related to credit-impaired (stage 3 and purchased credit-
impaired) positions. Stage 1 and 2 expected credit loss (ECL) expenses were predominantly attributable to the initial
recognition of ECL allowances and provisions on the date of the acquisition of the Credit Suisse Group.
Operating expenses
Operating expenses increased by CHF 1,930m, or 83%, to CHF 4,267m, largely due to the consolidation of Credit Suisse
expenses, with the remaining increase mostly reflecting integration-related expenses, as well as higher technology
expenses and accruals for variable compensation. Excluding integration-related expenses of CHF 337m and CHF 58m of
amortization from newly recognized intangibles resulting from the acquisition of the Credit Suisse Group, underlying
operating expenses were CHF 3,872m.
Cost / income ratio
The cost / income ratio decreased to 56.6% from 57.0%, as an increase in total revenues more than offset an increase
in operating expenses.
Annual Report 2023 | Financial and operating performance | Personal & Corporate Banking
88
Personal & Corporate Banking – in US dollars
USD m, except where indicated
Results
Net interest income
Recurring net fee income2
Transaction-based income2
Other income
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit / (loss) before tax
Underlying results
Total revenues as reported
of which: accretion of PPA adjustments on financial instruments and other effects
of which: losses related to investment in SIX Group
Total revenues (underlying)2
Credit loss expense / (release)
Operating expenses as reported
of which: integration-related expenses 2
of which: amortization from newly recognized intangibles resulting from the acquisition of the Credit Suisse Group
Operating expenses (underlying)2
of which: expenses for litigation, regulatory and similar matters
Business division operating profit / (loss) before tax as reported
Business division operating profit / (loss) before tax (underlying)2
Performance measures and other information
Pre-tax profit growth (year-on-year, %)2
Cost / income ratio (%)2
Average attributed equity (USD bn)
Return on attributed equity (%)2
Loans, gross (USD bn)
Customer deposits (USD bn)
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)2,3
As of or for the year ended
31.12.23
31.12.221
% change from
31.12.22
5,304
1,511
1,859
(238)
8,436
501
4,787
3,148
8,436
1,013
(317)
7,741
501
4,787
383
65
4,338
(9)
3,148
2,902
73.8
56.7
15.5
20.3
336.9
324.3
0.9
2,191
852
1,212
48
4,302
39
2,452
1,812
4,302
4,302
39
2,452
2,452
(13)
1,812
1,812
4.7
57.0
9.3
19.5
154.6
180.8
0.8
142
77
53
96
95
74
96
80
95
77
(31)
74
60
67
118
79
Underlying performance measures
Pre-tax profit growth (year-on-year, %)2
Cost / income ratio (%)2
1 Information reflects Personal & Corporate Banking as reported on in the Annual Report 2022. 2 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation
method. 3 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures.
6.9
57.0
60.2
56.0
Annual Report 2023 | Financial and operating performance | Personal & Corporate Banking
89
Asset Management
Asset Management
USD m, except where indicated
Results
Net management fees2
Performance fees
Net gain from disposals
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit / (loss) before tax
Underlying results
Total revenues as reported
of which: net gain from disposals 3
Total revenues (underlying)4
Credit loss expense / (release)
Operating expenses as reported
of which: integration-related expenses 4
Operating expenses (underlying)4
of which: expenses for litigation, regulatory and similar matters
Business division operating profit / (loss) before tax as reported
Business division operating profit / (loss) before tax (underlying)4
Performance measures and other information
Pre-tax profit growth (year-on-year, %)4
Cost / income ratio (%)4
Average attributed equity (USD bn)
Return on attributed equity (%)4
Gross margin on invested assets (bps)4,5
Underlying performance measures
Pre-tax profit growth (year-on-year, %)4
Cost / income ratio (%)4
Information by business line / asset class
Net new money (USD bn)4
Equities
Fixed Income
of which: money market
Multi-asset & Solutions
Hedge Fund Businesses
Real Estate & Private Markets
Total net new money excluding associates6
of which: net new money excluding money market
Associates7
Total net new money5
Invested assets (USD bn)4
Equities
Fixed Income
of which: money market
Multi-asset & Solutions
Hedge Fund Businesses
Real Estate & Private Markets
Total invested assets excluding associates
of which: passive strategies
Associates7
Total invested assets5
As of or for the year ended
31.12.23
31.12.221
% change from
31.12.22
2,507
104
27
2,639
0
2,321
318
2,639
2,639
0
2,321
205
2,116
8
318
522
(77.3)
88.0
2.0
15.6
19
(5.0)
80.2
(4.0)
17.8
22.3
2.2
(4.2)
2.7
14.6
(7.7)
1.1
15.7
644
445
134
274
57
156
1,577
715
72
1,649
2,050
64
848
2,961
0
1,564
1,397
2,961
848
2,114
0
1,564
1,564
1
1,397
550
35.7
52.8
1.7
81.2
27
(46.6)
74.0
(12.8)
36.5
26.3
(1.3)
2.3
0.2
24.8
(1.6)
7.7
32.5
456
296
119
155
55
102
1,064
443
24
1,088
22
63
(97)
(11)
48
(77)
(11)
25
48
35
(77)
(5)
19
41
51
13
77
3
54
48
61
205
52
Annual Report 2023 | Financial and operating performance | Asset Management
90
Asset Management (continued)
USD m, except where indicated
Information by region
Invested assets (USD bn)4
Americas
Asia Pacific5
Europe, Middle East and Africa (excluding Switzerland)
Switzerland
Total invested assets5
As of or for the year ended
31.12.23
31.12.221
% change from
31.12.22
402
211
354
682
1,649
298
173
263
354
1,088
35
22
35
93
52
Information by channel
Invested assets (USD bn)4
55
Third-party institutional
53
Third-party wholesale
35
UBS’s wealth management businesses
Associates7
205
Total invested assets5
52
1 Information reflects Asset Management as reported on in the Annual Report 2022. 2 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. 3 Only includes items that are deemed material. 4 Refer to “Alternative
performance measures” in the appendix to this report for the definition and calculation method. 5 Starting with the second quarter of 2023, net new money and invested assets include net new money and invested
assets from associates, to better reflect the business strategy. Comparative figures have been restated to reflect this change. 6 A net new money inflow of USD 4.1bn was recognized in the fourth quarter of 2022
for the provision of hedge fund services to Global Wealth Management Americas. 7 The invested assets and net new money amounts reported for associates are prepared in accordance with their local regulatory
requirements and practices.
939
177
461
72
1,649
606
116
342
24
1,088
2023 compared with 2022
Results
Profit before tax decreased by USD 1,079m, or 77%, to USD 318m, primarily due to 2022 including a gain of USD 848m
from the sale of our shareholding in the Mitsubishi Corp.-UBS Realty Inc. joint venture. Excluding integration-related
expenses of USD 205m, underlying profit before tax was USD 522m.
Total revenues
Total revenues decreased by USD 322m, or 11%, to USD 2,639m, primarily due to 2022 including the aforementioned
gain of USD 848m. The decrease was partly offset by higher revenues due to the consolidation of Credit Suisse revenues
and net gain from disposals of USD 27m, mainly from the completion of the sale of a majority stake in UBS Hana Asset
Management Co., Ltd.
Net management fees increased by USD 457m, or 22%, to USD 2,507m, largely due to the consolidation of Credit Suisse
net management fees, partly offset by negative market performance, continued margin compression and negative pass-
through fees, with the corresponding offset in performance fees.
Performance fees increased by USD 40m, or 63%, to USD 104m, mainly attributable to the consolidation of Credit Suisse
performance fees, the effect of the aforementioned pass-through fees and increases in Hedge Fund Businesses, partly
offset by decreases in Real Estate & Private Markets and Equities.
Operating expenses
Operating expenses increased by USD 757m, or 48%, to USD 2,321m, mainly reflecting the consolidation of Credit Suisse
expenses. The increase was also due to integration-related expenses, adverse foreign currency effects and increases in
technology expenses, control function expenses, and outsourcing costs, partly offset by lower personnel expenses.
Excluding integration-related expenses of USD 205m, underlying operating expenses were USD 2,116m.
Cost / income ratio
The cost / income ratio increased to 88.0% from 52.8%, reflecting both higher operating expenses and lower total
revenues.
Invested assets
Invested assets increased by USD 561bn to USD 1,649bn, reflecting the consolidation of Credit Suisse invested assets,
positive market performance of USD 108bn, positive foreign currency effects of USD 51bn and positive net new money
of USD 16bn, partly offset by a reduction of USD 24bn related to divestments, primarily the sale of UBS Hana Asset
Management Co., Ltd., and a reduction of USD 5bn due to the elimination of the cross-investments of the UBS Asset
Management sub-group and the Credit Suisse Asset Management sub-group, as UBS policy does not allow for double
counting of assets within the same reporting segment. Excluding money market flows and associates, net new money
was negative USD 8bn.
Annual Report 2023 | Financial and operating performance | Asset Management
91
Investment performance
As of year-end 2023, Morningstar assigned a four- or five-star rating to 61% of our retail and institutional funds assets
under management (AuM) (both actively managed and passive), on an AuM-weighted basis. Furthermore, 51% of our
actively managed open-ended retail and institutional funds 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 2023
In %
% of UBS Asset Management fund assets rated as 4- or 5-star1,2
Total traditional
investments
61
Equities
70
Fixed Income
52
Multi-asset
38
% of UBS Asset Management fund assets above peer median over a 3-year investment period1,3
1 Morningstar® Essentials Quantitative Star Rating & Rankings; © Morningstar 2024, extract date 10 January 2024. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and / or its
content providers; (2) may not be copied or distributed; (3) is not warranted to be accurate, complete or timely; and (4) does not constitute advice of any kind, whether investment, tax, legal or otherwise. User is
solely responsible for ensuring that it complies with all laws, regulations and restrictions applicable to it. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use
of this information, except where such damages or losses cannot be limited or excluded by law in your jurisdiction. Past performance is no guarantee of future results. For more detailed information about the
Morningstar Rating, including its methodology, please go to: https://s21.q4cdn.com/198919461/files/doc_downloads/othe_disclosure_materials/MorningstarRatingforFunds.pdf. 2 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. Universe is approximately 37% of all active and passive traditional assets of Asset Management
(Equities, Fixed Income excluding money market, and Multi-asset) as of 31 December 2023. 3 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 and institutional funds 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. Universe is approximately 29% of all active traditional assets of Asset Management (Equities, Fixed Income excluding money market, and Multi-asset) as of 31 December 2023.
34
65
51
53
Investment Bank
Investment Bank
USD m, except where indicated
Results
Advisory
Capital Markets
Global Banking
Execution Services
Derivatives & Solutions
Financing
Global Markets
of which: Equities
of which: Foreign Exchange, Rates and Credit
Total revenues
Credit loss expense / (release)
Operating expenses
Business division operating profit / (loss) before tax
Underlying results
Total revenues as reported
of which: accretion of PPA adjustments on financial instruments
of which: losses in the first quarter of 2022 from transactions with Russian counterparties
Total revenues (underlying)2
Credit loss expense / (release)
Operating expenses as reported
of which: integration-related expenses 2
Operating expenses (underlying)2
of which: expenses for litigation, regulatory and similar matters
Business division operating profit / (loss) before tax as reported
Business division operating profit / (loss) before tax (underlying)2
Performance measures and other information
Pre-tax profit growth (year-on-year, %)2
Cost / income ratio (%)2
Average attributed equity (USD bn)
Return on attributed equity (%)2
As of or for the year ended
31.12.23
31.12.221
% change from
31.12.22
746
1,649
2,395
1,578
2,707
1,981
6,265
4,546
1,720
8,661
190
8,515
(44)
8,661
583
8,078
190
8,515
692
7,823
78
(44)
64
(102.3)
98.3
13.8
(0.3)
733
854
1,587
1,643
3,665
1,822
7,129
4,970
2,160
8,717
(12)
6,832
1,897
8,717
(93)
8,810
(12)
6,832
6,832
122
1,897
1,990
(27.9)
78.4
13.0
14.6
2
93
51
(4)
(26)
9
(12)
(9)
(20)
(1)
25
(1)
(8)
25
15
(36)
(97)
7
Underlying performance measures
Pre-tax profit growth (year-on-year, %)2
Cost / income ratio (%)2
1 Information reflects the Investment Bank as reported on in the Annual Report 2022. 2 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.
(43.0)
77.6
(96.8)
96.8
Annual Report 2023 | Financial and operating performance | Asset Management
92
2023 compared with 2022
Results
Loss before tax was USD 44m, compared with profit before tax of USD 1,897m in 2022, mainly due to higher operating
expenses associated with the acquisition of the Credit Suisse Group, and included integration-related expenses, as well
as lower total revenues. Excluding USD 583m of accretion of purchase price allocation (PPA) adjustments on financial
instruments and integration-related expenses of USD 692m, underlying profit before tax was USD 64m.
Total revenues
Total revenues decreased by USD 56m, or 1%, to USD 8,661m, due to lower Global Markets revenues, which decreased
by USD 864m, or 12%, partly offset by higher Global Banking revenues, which increased by USD 808m, or 51%. Prior-
year total revenues included USD 93m of losses in the first quarter of 2022 from transactions with Russian counterparties.
The consolidation of Credit Suisse revenues included USD 583m of accretion of PPA adjustments on financial instruments.
Excluding the aforementioned accretion effects, underlying total revenues were USD 8,078m.
Global Banking
Global Banking revenues increased by USD 808m, or 51%, to USD 2,395m, mainly due to the consolidation of Credit
Suisse revenues, and included USD 580m of accretion of PPA adjustments on financial instruments. Excluding accretion
effects, underlying Global Banking revenues increased by USD 228m, or 14%. The relevant market fee pool1,2 decreased
16%.
Advisory revenues increased by USD 13m, or 2%, to USD 746m, mainly due to higher merger and acquisition transaction
revenues. The relevant global fee pool2 decreased 25%.
Capital Markets revenues increased by USD 795m, or 93%, to USD 1,649m, partly due to the consolidation of Credit
Suisse revenues, and included USD 580m of the aforementioned accretion effects. Excluding accretion effects, underlying
Capital Markets revenues increased by USD 215m, or 25%, mainly due to prior-year mark-to-market losses. Capital
Markets fee-pool-comparable revenues increased 2% year on year. The relevant global fee pool1,2 decreased 7%.
Global Markets
Global Markets revenues decreased by USD 864m, or 12%, to USD 6,265m, primarily driven by lower Derivatives &
Solutions revenues.
Execution Services revenues decreased by USD 65m, or 4%, to USD 1,578m, due to lower market volumes in Cash
Equities, partly offset by higher revenues from foreign exchange products that are traded over electronic platforms.
Derivatives & Solutions revenues decreased by USD 958m, or 26%, to USD 2,707m, mostly driven by Equity Derivatives,
Rates and Foreign Exchange, due to lower levels of both volatility and client activity.
Financing revenues increased by USD 159m, or 9%, to USD 1,981m, reflecting higher client balances.
Equities
Global Markets Equities revenues decreased by USD 424m, or 9%, to USD 4,546m, mainly driven by lower Equity
Derivatives and Cash Equities revenues.
Foreign Exchange, Rates and Credit
Global Markets Foreign Exchange, Rates and Credit revenues decreased by USD 440m, or 20%, to USD 1,720m, primarily
driven by lower Foreign Exchange and Rates revenues.
Credit loss expense / release
Net credit loss expenses were USD 190m, compared with net releases of USD 12m, reflecting net credit loss expenses of
USD 110m related to stage 1 and 2 positions and net credit loss expenses of USD 80m related to credit-impaired (stage 3
and purchased credit-impaired) positions. Stage 1 and 2 expected credit loss (ECL) expenses of USD 110m were
predominantly attributable to the initial recognition of ECL allowances and provisions on the date of the acquisition of
the Credit Suisse Group.
Operating expenses
Operating expenses increased by USD 1,683m, or 25%, to USD 8,515m, largely due to integration-related expenses, the
consolidation of Credit Suisse expenses, and higher technology expenses. Excluding integration-related expenses of
USD 692m, underlying operating expenses were USD 7,823m.
Cost / income ratio
The cost / income ratio increased to 98.3% from 78.4%, reflecting both higher operating expenses and lower total
revenues.
1 UBS fee-pool-comparable revenues consist of revenues from: merger-and-acquisition-related transactions; Equity Capital Markets, excluding derivatives; Leveraged Capital Markets, excluding the impact of mark-to-
market movements on loan portfolios; and Debt Capital Markets, excluding revenues related to debt underwriting of UBS instruments.
2 Source: Dealogic, as of 29 December 2023.
Annual Report 2023 | Financial and operating performance | Investment Bank
93
Non-core and Legacy
Non-core and Legacy1
USD m
Results
Total revenues
Credit loss expense / (release)
Operating expenses
Operating profit / (loss) before tax
Underlying results
Total revenues as reported
of which: litigation settlement
Total revenues (underlying)3
Credit loss expense / (release)
Operating expenses as reported
of which: integration-related expenses 3
Operating expenses (underlying)3
of which: expenses for litigation, regulatory and similar matters
Operating profit / (loss) before tax as reported
Operating profit / (loss) before tax (underlying)3
As of or for the year ended
31.12.23
31.12.222
% change from
31.12.22
212
212
323
741
193
5,290
(4,741)
741
741
193
5,290
1,772
3,518
637
(4,741)
(2,969)
237
2
104
131
237
62
175
2
104
104
(12)
131
69
Performance measures and other information
Average attributed equity
Risk-weighted assets (USD bn)
Leverage ratio denominator (USD bn)
1 Starting with the third quarter of 2023, Non-core and Legacy represents a separate reportable segment and includes positions and businesses not aligned with our strategy and policies. 2 Information reflects
Non-core and Legacy Portfolio as reported on in Group Functions in the Annual Report 2022. 3 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.
5.2
72.0
137.1
1.1
13.0
6.3
390
454
Composition of Non-core and Legacy1
USD bn
Exposure category
Equities
Macro
Loans
Securitized products
Credit
High-quality liquid assets
Operational risk
Other
Total
RWA
Total assets
LRD
31.12.23
31.12.22
31.12.23
31.12.22
31.12.23
31.12.22
3.1
9.3
11.2
13.5
2.8
30.0
2.0
72.0
1.9
1.0
10.1
13.0
20.0
55.7
13.0
26.2
5.2
50.5
2.3
172.9
9.3
2.2
1.8
13.4
13.4
24.8
14.8
27.6
4.9
50.5
1.1
137.1
2.4
2.1
1.8
6.3
1 During the fourth quarter of 2023, we have revised allocations and aligned methodologies across UBS and Credit Suisse.
2023 compared with 2022
Results
Loss before tax was USD 4,741m, compared with profit before tax of USD 131m. Excluding integration-related expenses
of USD 1,772m, underlying loss before tax was USD 2,969m.
Total revenues
Total revenues increased by USD 504m to USD 741m, mainly due to the transfer of assets and liabilities into Non-core
and Legacy following the acquisition of the Credit Suisse Group. Revenues included net gains from position marks and
unwinds, along with net carry from securitized products and credit products.
Credit loss expense / release
Net credit loss expenses were USD 193m, compared with net expenses of USD 2m, reflecting net credit loss expenses of
USD 78m related to stage 1 and 2 positions and net credit loss expenses of USD 116m related to credit-impaired (stage 3
and purchased credit-impaired) positions. Stage 1 and 2 expected credit loss (ECL) expenses of USD 78m were
predominantly attributable to the initial recognition of ECL allowances and provisions on the date of the acquisition of
the Credit Suisse Group.
Annual Report 2023 | Financial and operating performance | Non-core and Legacy
94
Operating expenses
Operating expenses were USD 5,290m, compared with USD 104m, and included integration-related expenses of
USD 1,772m, driven by onerous contract provisions, real estate impairments and personnel costs. Excluding integration-
related expenses, underlying operating expenses were USD 3,518m.
Risk-weighted assets and leverage ratio denominator
Risk-weighted assets increased by USD 70.8bn to USD 83.8bn at the end of the second quarter of 2023, mainly driven
by the transfer of assets and liabilities into Non-core and Legacy following the acquisition of the Credit Suisse Group.
Similarly, the leverage ratio denominator increased by USD 202.4bn to USD 208.7bn at the end of the second quarter of
2023. Since then, Non-core and Legacy has made significant progress against its capital reduction goals by reducing risk-
weighted assets by USD 11.8bn, or 14%, to USD 72.0bn and reducing the leverage ratio denominator by USD 71.6bn,
or 34%, to USD 137.1bn.
Group Items
Group Items1
USD m
Results
Total revenues
Credit loss expense / (release)
Operating expenses
Operating profit / (loss) before tax
Underlying results
Total revenues as reported
of which: accretion of PPA adjustments on financial instruments
of which: gain from sales of real estate
Total revenues (underlying)3
Credit loss expense / (release)
Operating expenses as reported
of which: integration-related expenses 3
of which: acquisition-related costs
Operating expenses (underlying)3
of which: expenses for litigation, regulatory and similar matters
As of or for the year ended
31.12.23
31.12.222
% change from
31.12.22
34
109
34
16
(833)
6
440
(1,279)
(833)
(35)
(798)
6
440
438
202
(200)
(622)
1
(12)
(611)
(622)
68
(690)
1
(12)
(12)
(27)
(1,279)
(603)
6
(611)
(679)
109
Operating profit / (loss) before tax as reported
Operating profit / (loss) before tax (underlying)3
(11)
1 Starting with the third quarter of 2023, Group Items reflects the integration of Group Functions and the Corporate Center (Credit Suisse) and excludes UBS’s Non-core and Legacy Portfolio, which was previously
reported within Group Functions. 2 Information reflects Group Functions as reported on in the Annual Report 2022, excluding Non-core and Legacy Portfolio. 3 Refer to “Alternative performance measures” in the
appendix to this report for the definition and calculation method.
2023 compared with 2022
Results
Loss before tax was USD 1,279m, compared with a loss of USD 611m, mainly due to the acquisition of the Credit Suisse
Group. Excluding USD 35m of accretion of purchase price allocation adjustments on financial instruments, integration-
related expenses of USD 438m and acquisition-related costs of USD 202m, underlying loss before tax was USD 603m,
compared with USD 679m in 2022, excluding a gain of USD 68m from the sale of real estate.
Income from Group hedging and own debt, including hedge accounting ineffectiveness, was net positive USD 247m,
compared with net negative income of USD 375m. The results in the prior year were driven by mark-to-market effects
on portfolio-level economic hedges due to rising interest rates and cross-currency-basis widening. Income related to
centralized Group Treasury risk management was negative USD 256m, compared with negative USD 4m in 2022.
In addition, 2023 included a USD 272m increase in funding costs related to deferred tax assets, partly offset by
remeasurement losses in 2022 of USD 46m on properties held for sale.
Annual Report 2023 | Financial and operating performance | Non-core and Legacy
95
Risk, capital, liquidity and
funding, and balance sheet
Management report
Audited information according to IFRS 7 and IAS 1
Risk and capital disclosures provided in line with the requirements of IFRS 7, Financial Instruments: Disclosures, and IAS 1,
Presentation of Financial Statements, form part of the financial statements included in the “Consolidated financial
statements” section of this report and are audited by the independent registered public accounting firm Ernst & Young
Ltd, Basel. This information is marked as “Audited” within this section of the report.
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.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet
96
Risk management and control
Table of contents
98
99
100
101
103
Overview of risks arising from our business activities
Risk categories
Top and emerging risks
Risk governance
Risk appetite framework
Internal risk reporting
107
106
106 Model risk management
Risk measurement
Credit risk
110
126 Market risk
Country risk
Sustainability and climate risk
Non-financial risk
137
135
153
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
97
Risk management and control
Overview of risks arising from our business activities
Key risks by business division and Group Items
Business divisions and Group Items
Key financial risks arising from business activities
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items
Credit risk from collateralized lending primarily against securities, private equity and hedge fund interest,
investors’ uncalled capital commitments, and residential and commercial real estate, other real assets
such as ships and aircraft, as well as from derivatives trading. Also includes corporate lending and other
unsecured lending.
Market risk from municipal securities and taxable fixed-income securities. Interest rate risk in the
banking book related to Global Wealth Management is transferred to and managed by Group Treasury.
Credit risk from mortgages (owner-occupied and income-producing), secured and unsecured corporate
lending, commodity trade finance, trade and export finance, consumer finance, and lending to banks and
other regulated clients, as well as a small amount of derivatives trading activity.
Minimal contribution to market risk. Interest rate risk in the banking book related to Personal &
Corporate Banking is transferred to and managed by Group Treasury.
Credit risk and market risk on client assets invested in Asset Management funds can impact
management and performance fees and cause heightened fund outflows, liquidity risk and losses on our
seed capital and co-investments.
Small amounts of credit and market risk for on-balance sheet items.
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 risk arising from large, less-liquid structured financing transactions, including some with
residential and commercial real estate collateral, a material corporate loan portfolio and a counterparty
credit trading portfolio with lending against securities collateral and derivatives.
Market risk from structured trades, large portfolios of loans and securitized products, and both complex
and simple credit, interest rate and equity derivative transactions.
Credit and market risk arising from management of the Group’s balance sheet, capital, profit or loss
and liquidity portfolios.
Structural risk arising from asset and liability management and liquidity and funding risk (managed by
Group Treasury).
Non-financial risks consist of compliance risks (including employment and conduct risks), financial crime, operational risk (including model risks and cyber-
and information-security risks), legal risks and reputational risks. These 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 Items.
› Refer to “Risk categories” in this section for more information about other financial and non-financial risks relevant to UBS
Key risk developments
Upon the legal close of the acquisition of the Credit Suisse Group, we have applied existing UBS prudent risk management
practices to material risks of Credit Suisse. Positions and businesses not aligned with the core strategy and policies of UBS
have been ring-fenced in the Non-core and Legacy business division, with the aim of ensuring a timely and orderly wind-
down. UBS’s transactional approval authorities were applied to Credit Suisse and a set of risk standards and escalation
protocols were put in place to ensure the application of the UBS risk appetite to the combined organization. Our risk
governance continued to operate along our three lines of defense, and our organizational structure has been adapted,
with the aim of facilitating robust oversight of the combined business throughout the integration. A significant portion
of our risk policies have been reviewed and harmonized. We are continuing to focus on aligning our policies while moving
toward a fully integrated risk framework, which is expected to be achieved by the end of 2025.
Due to the acquisition of the Credit Suisse Group, we saw an increase in total net credit loss expenses to USD 1,037m
and an increase in credit-impaired exposure to USD 6.4bn. Our banking products exposure increased to USD 1,179bn
and our traded products exposure increased to USD 64bn. For UBS Group excluding Credit Suisse, market risk remained
at low levels, as a result of our focus on managing tail risks, while Credit Suisse continues with the strategic migration of
positions to UBS and de-risking within Non-core and Legacy.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
98
Risk categories
We categorize the risk exposures of our business divisions and Group Items 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 divisions
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 consideration.
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 that would occur if an issuer to which we are exposed through tradable
securities or derivatives referencing the issuer was subject to a credit-related event.
Investment risk: issuer risk associated with positions held as financial investments.
Country risk: the risk of loss resulting from country-specific events. This includes the risk of sovereign
default and also 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.
Sustainability and climate risk: the risk that UBS negatively impacts, or is impacted by, climate
change, natural capital, human rights, and other environmental, social and governance 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,
business and non-financial risks for UBS resulting in potential adverse financial, liability and reputational
impacts. These risks extend to the value of investments and may also affect the value of collateral (e.g.,
real estate).
Business divisions and
Group Treasury
Risk Control
Business divisions
Risk Control
Business divisions
Risk Control
Treasury risk: the risks associated with asset and liability management and our liquidity and funding
positions, as well as structural exposures including pension risks.
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.
Interest rate risk in the banking book: the risk to the firm’s capital and earnings arising from the
adverse effects of interest rate movements on the firm’s banking book positions. The risk is
transferred from the originating business divisions, i.e., Global Wealth Management and Personal &
Corporate Banking, to Group Treasury to risk manage this centrally and benefit from Group-wide
netting while leaving the business divisions with margin management.
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) 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. For example, changes in
the competitive landscape, client behavior or market conditions can potentially have a negative impact.
Business divisions
Risk Control
and Finance
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
99
Risk managed by
Independent
oversight by
Non-financial risks
Compliance risk: the risk of failure to comply with laws, rules and regulations, internal policies and
procedures, and the firm’s Code of Conduct and Ethics.
Business divisions
Employment risk: the risks arising from acts inconsistent with laws, rules and regulations or the
firm’s human resources policies governing employment practices, discrimination, compensation and
employee-related taxes and benefits.
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.
Financial crime risk: the risk of failure to prevent financial crime (including money laundering, terrorist
financing, sanctions or embargo violations, internal and external fraud, bribery, and corruption).
Business divisions and
Financial Crime
Prevention
Group Compliance,
Regulatory &
Governance (GCRG)
Human Resources
GCRG
GCRG
Operational risk: the risk resulting from inadequate or failed internal processes, people or systems, or
from external causes (deliberate, accidental or natural).
Business divisions
GCRG
Cybersecurity and information-security risk: the risk of a malicious internal or external act, or a
failure of IT hardware or software, or human error, leading to a material impact on confidentiality,
integrity or availability of UBS’s data or information systems.
Business divisions and
the Group Operations
and Technology Office
GCRG
Model risk: the risk of adverse consequences (e.g., financial loss, due to legal matters, operational
loss, biased business decisions, or reputational damage) resulting from decisions based on incorrect /
inadequate or misused model outputs and reports.
Model owner
Risk Control
Legal risk: 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; and (iv) being
party to a claim or investigated by an external regulator or authority in respect of any of the above (and
the risk of loss of attorney–client privilege in the context of any such claim).
Business divisions
Legal
Reputational risk: the risk of an unfavorable perception of UBS or a decline in the firm’s reputation
from the point of view of clients, shareholders, regulators, employees or the general public, which may
lead to potential financial loss and / or loss of market share.
All businesses and
functions
All control functions
Top and emerging risks
The top and emerging risks disclosed below reflect those that we currently think have the potential to materialize within
one year and which could significantly affect the Group. Investors should also carefully review all information set out in
the “Risk factors” section of this report, where we discuss these and other material risks that we consider could have an
effect on our ability to execute our strategy and may affect our business activities, financial condition, results of operations
and business prospects.
– We remain watchful of a range of geopolitical developments and political changes in a number of countries, as well
as international tensions arising from the Russia–Ukraine war, conflicts in the Middle East and US–China trade relations.
Geopolitical tensions will continue to create uncertainty and complicate the energy price outlook. We are closely
watching elections in several key markets in 2024.
– Inflation has abated to some extent in major Western economies, though there are still concerns regarding future
developments, and central banks’ monetary policy is in the spotlight. The potential for “higher-for-longer” interest
rates raises the prospect of a global recession, particularly as the growth of China’s economy has been muted. This
combination of factors translates into a more uncertain and volatile environment, which increases the risk of financial
market disruption.
– 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, these macroeconomic factors are
considered in the development of stress-testing scenarios for our ongoing risk management activities.
– We are monitoring the downturn in the commercial real estate sector. Adverse effects on valuations from higher
interest rates and structural decline in demand for office and retail space may trigger broader impacts given bank and
non-bank lenders’ material balance sheet exposure to the sector.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
100
– We are exposed to substantial changes in the regulation of our businesses that could have a material adverse effect
on our business, as discussed in the “Regulatory and legal developments” section of this report and in “Regulatory
and legal risks” in the “Risk factors” section of this report.
– 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.
– Global geopolitical trends increase the likelihood of external state-driven cyber activity. Alongside a general trend
toward more sophisticated forms of ransomware and other cyber threats, there is a risk of business disruption or
corruption or loss of data. Additionally, as a result of the dynamic and material nature of recent geopolitical and
environmental events and 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 us. 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
– Sustainability and climate risks continue to be in the focus of regulators and stakeholders, with further emphasis put
on measurement of nature-related risk and management of greenwashing risks in 2023. To address these emerging
risks, UBS has enhanced its nature-related risk methodology and established guidelines for sustainable lending, bonds
and GHG Emissions Trading to address potential greenwashing risks.
› Refer to “Sustainability and climate risk” in this section of the report for more information
› Refer to “Appendix 2 – Governance” to the UBS Group Sustainability Report 2023, available under “Annual reporting” at
ubs.com/investors, for a full description of our sustainability and climate risk policy framework
– In addition, industry guidelines and regulations are emerging simultaneously in various jurisdictions, leading to an
increased risk of divergence, which in turn increases the risk that UBS may not comply with all relevant regulations.
› Refer to “Sustainability and climate risk” and “Non-financial risk” sections of this report
– New risks continue to emerge. For example, client demand for distributed ledger technology, blockchain-based assets
and virtual currencies creates new risks, to which we currently have limited exposure and for which relevant control
frameworks are continuously enhanced and implemented.
Risk governance
Our risk governance framework operates along three lines of defense.
Our first line of defense, business management, owns its risks and is accountable for maintaining effective processes and
systems to manage them in compliance with applicable laws, rules and regulations, as well as internal standards, 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 Chief
Executive Officer (the Group CEO). Control functions provide independent oversight, challenge financial and non-financial
risks arising from the firm’s business activities, and establish independent frameworks for risk assessment, measurement,
aggregation, control and reporting, protecting against non-compliance with applicable laws, rules and regulations.
Our third line of defense, Group Internal Audit (GIA), reports to the Chairman and to the Audit Committee. This function
assesses the design and operating effectiveness and sustainability of processes to define risk appetite, governance, risk
management, internal controls, remediation activities and processes to comply with legal and regulatory requirements
and internal governance standards.
The key roles and responsibilities for risk management and control are shown in the chart below and described further
below.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
101
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
Group function
Heads
Group Integration
Office / Group
Sustainability and
Impact / Group
Operations and
Technology Office² /
Group Treasury
Divisional
Presidents
Audited
Risk governance
Board of Directors
Risk
Committee
Audit
Committee
Corporate Culture and
Responsibility Committee
Governance and
Nominating Committee
Compensation
Committee
Group Internal Audit (third line of defense)
Group Executive Board (acting as risk council)
Group Chief Executive Officer
First line of
defense
(business and
Group functions
management)
Group Risk
Control
Divisional,
regional and legal
entity Presidents
Group Chief
Risk Officer
(CRO)
Second line of defense (Group functions¹ – control functions)
Group
Compliance,
Regulatory &
Governance
(GCRG)
Group Chief
Compliance
and
Governance
Officer
Group
Finance
Group
Legal
Group Chief
Financial
Officer (CFO)
Group
General
Counsel
Group Human
Resources
and Group
Corporate
Services
Head Group
Human
Resources &
Group Corporate
Services
Central Risk
functions
Central GCRG
functions
Central Finance
functions
Central Legal
functions
HR functions
Global Market
Risk CRO / Trea-
sury CRO
Divisional CROs
(incl. CRO
Sustainability) /
IB Chief Credit
Officer
Divisional Heads
Compliance &
Operational Risk
Control (C&ORC)
Divisional CFOs
Divisional
General Counsels
HR Business
Partners
(divisional /
Group functions)
Regional / legal
entity Presidents
Regional / legal
entity CROs
Regional / legal
entity Heads
GCRG / C&ORC
Regional / legal
entity CFOs
Regional / legal
entity General
Counsels
HR regions
1 Our Group functions are support and control functions that provide services for the business divisions and include the following major areas: Group Services
(which consists of the Group Operations and Technology Office, Corporate Services, Compliance, Regulatory & Governance, Finance, Risk Control, Human
Resources, Communications & Branding, Legal, the Group Integration Office, Group Sustainability and Impact, and Chief Strategy Office) and Group Treasury.
2 Including the Cyber Information Security Office. ▲
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 CEO has responsibility and accountability for the management and performance of the Group, has risk
authority over transactions, positions and exposures, and allocates risk authority delegated by the BoD to the business
divisions and Group functions.
The business division Presidents and Group functional heads are responsible for the operation and management of their
business divisions and Group functions, including controlling the risk appetite of the business divisions.
The regional Presidents ensure cross-divisional collaboration in their regions and are mandated to inform the GEB about
any regional activities and issues that may give rise to actual or potentially material regulatory or reputational concerns.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
102
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, risk reporting, and taking decisions on
transactions, positions, exposures, portfolio limits and allowances in accordance with the risk control authorities
delegated to the Group CRO.
The Group Chief Compliance and Governance Officer is responsible for developing the Group’s risk management and
control framework (including taxonomies and risk appetite) for non-financial risks, as well as implementing independent
control frameworks for these risks.
The Group Chief Financial Officer (the Group CFO) is responsible 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 and controlling UBS’s tax affairs, treasury and capital
management, including regulatory ratios, asset and liability management, and developing UBS’s inorganic strategy
(mergers and acquisitions) in collaboration with the GEB.
The Group Chief Operations and Technology Officer is responsible for driving Group-wide digitalization, delivering
technology services, infrastructure and operations, including cybersecurity and information security, for our clients and
employees, and providing Group-wide data governance.
The Group General Counsel manages the Group’s legal affairs, ensuring effective and timely assessment of legal matters
impacting the Group or its businesses, and managing and reporting all litigation matters.
The Head Group Human Resources & Group Corporate Services defines and executes a human resources strategy aligned to UBS’s
objectives, supplies real estate infrastructure and controls supply and demand management activities.
The Group Integration Officer develops UBS’s integration strategy with regard to Credit Suisse within agreed design
principles and in accordance with UBS’s strategy and coordinates with integration teams to ensure coherent and
consistent execution of integration plans and milestones.
GIA independently assesses the soundness of UBS’s risk and control culture and reliability of financial and operational
information. GIA also assesses the design, operating effectiveness and sustainability of processes to define strategy and
risk appetite, governance processes, risk management, internal controls, remediation activities and processes to comply
with legal and regulatory requirements and internal 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 significant entities of the Group. Designated entity risk officers
oversee and control financial and non-financial risks for significant entities of UBS as part of the entity control framework,
which complements the Group’s risk management and control framework.
Risk appetite framework
We have a defined Group-level risk appetite, covering 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 risk that we are willing to accept or wish to
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. 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, which is 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 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 a standardized set of quantitative firm-wide non-financial risk appetite objectives established at the
Group and business division levels. Non-financial risk events exceeding predetermined risk tolerances, expressed as
percentages of UBS’s total operating income, must be escalated as per the firm-wide escalation framework.
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 identify potential risk concentrations.
The status of our quantitative 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.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
103
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. The former UBS risk appetite framework is applied to the combined
UBS Group.
Risk appetite framework
Risk appetite framework
Risk appetite statements
Risk principles, governance, roles and responsibilities
Risk objectives, measures and controls
– Risk management and control principles
– Code of Conduct and Ethics
– Total Reward Principles
– Organization regulations / policies
– Roles and responsibilities
– Group-wide risk appetite objectives
– Non-financial risk appetite objectives
– Risk measurement frameworks
– Authorities and limits
Risk reporting and disclosure, including internal, regulatory and external reporting
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.
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. They help to create a solid foundation for promoting risk awareness, leading to appropriate risk-taking and
the establishing of robust risk management and control processes. These principles are supported by a range of initiatives
covering employees at all levels, for example the UBS House View on Leadership, which is a set of explicit expectations
that establishes consistent leadership standards across UBS, and our Principles of Good Supervision, which establish clear
expectations of managers and employees regarding supervisory responsibilities, specifically: to take responsibility; to
know and organize their business; to know their employees and what they do; to create a good risk culture; and to
respond to and resolve issues.
› Refer to “Employees” in the “How we create value for our stakeholders” section 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
Risk management and control principles
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 encourage 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. We are committed to ensuring there is appropriate training and communication to staff and legal entity
representatives, including information about new regulatory requirements.
Mandatory training programs cover various compliance-related 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.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
104
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, risk profile, and the level of capital returns to shareholders.
In the annual business planning process, UBS’s business strategy is reviewed, the risk profile that our operations and
activities result in is assessed, and that risk profile is stressed. We use both scenario-based stress tests and economic
capital risk measurement techniques to assess the effects of severe stress events at a firm-wide level. These
complementary frameworks capture exposures to material risks across our business divisions and Group Items.
The BoD has approved the following risk appetite objectives for the combined UBS Group.
› Refer to “Risk measurement” in this section for more information about our stress testing and economic capital measures
Quantitative risk appetite objectives
Quantitative risk appetite objectives
Minimum capital objectives
CET1 capital is sufficient to meet
minimum RWA-based capital
requirements even if a severe stress
event were to occur.
Minimum leverage ratio objectives
CET1 capital is sufficient to meet
minimum leverage-ratio-based capital
requirements even if a severe stress
event were to occur.
Earnings objectives
Losses do not exceed average
historical earnings even if a severe
stress event were to occur.
Liquidity objectives
Ensure that the firm has sufficient
liquidity to survive a severe three-
month idiosyncratic and market-
wide liquidity stress event without
government support, allowing for
discrete management actions.
Solvency objectives
CET1 capital plus contingent capital
is sufficient to ensure that the
probability of loss for the firm’s debt
holders is consistent with the firm’s
target credit rating.
Funding objectives
Ensure that the firm has sufficient
long-term funding to maintain
franchise assets at a constant level
under stressed market conditions for
up to one year without government
support, allowing for discrete
management actions.
Risk capacity
Projected earnings
adjusted to reflect
business risk
Capital
adjusted to reflect
stress impact on capital-
relevant elements
Risk exposure
Economic capital measures
earnings-at-risk, capital-at-risk, risk-based capital
Stress measures
combined stress test
Credit risk
Country risk
Market risk¹
Non-financial risk
Liquidity and
funding risk
Structural foreign-
exchange risk
Pension risk
Granular limit framework
1 Includes interest rate risk. Refer to “Risk categories” in this section for more information.
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 expenses. We also consider capital impacts under stress from deferred tax assets, pension plan assets and
liabilities, and accruals for capital returns to shareholders.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
105
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, which are cascaded to businesses and portfolios.
These limits aim to ensure that our 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.
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.
Since the acquisition of the Credit Suisse Group, the Group Risk Summary report provides a monthly overview of the
combined risk profile across UBS AG and Credit Suisse AG, covering both financial and non-financial risks. The report
recently also included the status of our risk appetite objectives and the results of firm-wide stress testing. With respect
to financial risks, the Group Risk Summary includes a view of aggregated risk exposures, to the extent metrics are broadly
comparable. The Group Risk Summary is distributed internally to the BoD, the GEB and senior members of Risk Control
and GIA. In parallel, respective senior management continues to be informed about the two parent banks’ risks in more
detail via the UBS AG Risk Report (formerly the Group Risk Report), the Credit Suisse AG Financial Risk Report and the
Credit Suisse AG Non-Financial Risk Report.
Monthly divisional risk reports are 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.
Model risk management
Introduction
We rely on models to inform 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 or misused models.
Model governance framework
Our model governance framework establishes requirements for identifying, measuring, monitoring, reporting, controlling
and mitigating model risk. All the models that we use are subject to governance and controls throughout their life cycles,
with rigor, depth and frequency determined by the model’s materiality and complexity. 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, all our models are independently validated.
Once validated and approved for use, a model is subject to ongoing model monitoring and regular 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.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
106
Our model risk governance framework follows our overarching risk governance framework, with the three lines of
defense (LoD) assigned as follows.
– First LoD: individuals responsible for development, maintenance and appropriate use of the models, within business
units and Group functions.
– Second LoD: individuals responsible for independent review of and effective challenge to the models, the Model Risk
Management & Control function headed by the Chief Model Risk Officer.
– 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.
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
procedures
The text below describes the scenario-based stress testing and economic capital measures of UBS AG on a consolidated
basis during 2023. As part of the ongoing integration of Credit Suisse, we have made significant progress in the
evaluation and alignment of our stress testing and economic capital approaches and results. We will continue to integrate
our risk methodologies and measurements as Credit Suisse portfolios migrate to UBS infrastructure.
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 economic capital 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.
The 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. Following the existing UBS AG scenario governance, 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.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
107
We provide detailed stress loss analyses to the Swiss Financial Market Supervisory Authority (FINMA) and regulators of
our legal entities in accordance with their requirements.
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.
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
macroeconomic and market variables in each scenario to stress the key risk drivers of our portfolios. 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, risk-weighted assets, the leverage ratio denominator 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 2023, the binding scenario for CST was the internal stagflationary geopolitical crisis scenario. This scenario assumes
that a geopolitical event leads to economic regionalization and fears of prolonged stagflation. Central banks signal a firm
commitment to price stability and continue to tighten monetary policy, triggering a broad rise in interest rates and
impacting economic activity and asset values.
As part of the CST framework, we routinely monitored three additional stress scenarios throughout 2023:
– The global crisis scenario assumes a fall in global trade, which particularly hits China and leads to a hard landing.
Combined with political, solvency and liquidity concerns, this results in a sharp sell-off of emerging markets sovereign
debt and some emerging markets default. The macroeconomic and market impacts amplify concerns about peripheral
European sovereign debt, causing Greece and Cyprus to default.
– The global depression scenario explores a global risk-off market with a combination of political, solvency and liquidity
concerns around emerging markets sovereign debt, causing several large emerging markets to default. Several
European economies also default, and some leave the Eurozone. A negative feedback loop between collapsing
demand, declining asset values and commodity prices, and disruption in the banking system leads to a deep and
prolonged recession across the globe.
– 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.
Portfolio-specific stress tests are measures tailored to the risks of specific portfolios. Our portfolio stress loss measures are
derived from data on past events, but also include forward-looking elements (e.g., we derive the expected market
movements in our liquidity-adjusted stress metric using a combination of historical market behavior, based on an analysis
of historical events, and forward-looking analysis, including consideration of defined scenarios that have never occurred).
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 minimum capital ratios) and works backward to identify macroeconomic scenarios and / or
idiosyncratic events 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 optimal 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
› Refer to “Note 20 Expected credit loss measurement” in the “Consolidated financial statements” section of this report for more
information about scenarios used for expected credit loss measurement
Economic capital measures
We complement the scenario-based CST measures with economic capital stress measures to calculate and aggregate
risks using statistical techniques to derive stress events at chosen confidence levels.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
108
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). RBC measures the potential capital impairment from an extreme stress event at a 99.9% confidence level.
Portfolio and position limits
UBS maintains a comprehensive set of risk limits across its major risk portfolios. These portfolio limits are set based on
our risk appetite and periodically reviewed and adjusted as part of the business planning process.
Firm-wide stress and statistical metrics are complemented by more granular portfolio and position limits, triggers and
targets. Combining these measures provides a comprehensive framework for control of the key risks of our business
divisions, as well as significant legal entities.
UBS AG and Credit Suisse AG apply limits to a variety of exposures at the 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 counterparty- and 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.
Since the legal close of the acquisition of the Credit Suisse Group in June 2023, UBS has implemented a set of combined
portfolio limits applied to UBS Group AG to oversee the aggregate risk profile, while UBS AG and Credit Suisse AG
continue to operate under their existing risk management and limit frameworks until the merger of the two entities in
the second quarter of 2024. This initial set of combined limits was further reviewed and extended to cover additional
main risk portfolios of the Group in January 2024.
› Refer to “Credit risk” in this section for more information about counterparty limits
› Refer to “Risk appetite framework” in this section for more information about the risk appetite framework
Risk concentrations
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, for example, 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., it 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 “Credit risk” and “Market risk” in this section for more information about the composition of our portfolios
› Refer to the “Risk factors” section of this report for more information
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
109
Credit risk
Audited | Main sources of credit risk
– Global Wealth Management credit risk arises from collateralized lending, primarily against securities, private equity
and hedge fund interest, investors’ uncalled capital commitments, residential and commercial real estate, and other
real assets such as ships and aircraft, as well as from derivatives trading. In addition, risk also arises from its corporate
lending and other unsecured lending.
– A substantial portion of lending exposure arises from Personal & Corporate Banking, which offers mortgage loans,
secured mainly by owner-occupied properties and income-producing real estate, as well as corporate loans, and
therefore depends on the performance of the Swiss economy and real estate market.
– The Investment Bank’s credit exposure arises mainly from lending, derivatives trading and securities financing.
Derivatives trading and securities financing are mainly investment grade. Loan underwriting activity can be lower rated
and gives rise to temporary concentrated exposure.
– Credit risk within Non-core and Legacy relates to large, less-liquid structured financing transactions, including some
with residential and commercial real estate collateral, a material corporate loan portfolio and a counterparty credit
trading portfolio with lending against securities collateral and derivatives.
Credit loss expense / release
Total net credit loss expenses were USD 1,037m in 2023, reflecting net credit loss expenses of USD 593m related to
stage 1 and 2 positions and net credit loss expenses of USD 445m related to credit-impaired (stage 3 and purchased
credit-impaired) positions. Expected credit loss (ECL) expenses of USD 593m for the performing loans were predominantly
attributable to the initial recognition of expected credit loss allowances and provisions after the date of the acquisition
of the Credit Suisse Group. Credit-impaired net expenses amounted to USD 445m, of which USD 325m was within the
Credit Suisse portfolio and USD 120m was within the UBS portfolio. As per IFRS 9, no ECL allowances and provisions had
to be recognized at the acquisition date for credit-impaired exposures, after the fair valuation as per the purchase price
allocation.
› Refer to “Note 1 Summary of material accounting policies,” “Note 10 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
Credit loss expense / (release)
Performing positions
Credit-impaired positions
Total
Stage 3
Purchased
Stages 1 and 2
13
27
0
2
25
0
67
108
290
1
110
78
5
593
27
183
(1)
78
91
0
378
USD m
For the year ended 31.12.23
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items1
Total
For the year ended 31.12.22
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items1
Total
For the year ended 31.12.21
(29)
(28)
Global Wealth Management
(86)
(62)
Personal & Corporate Banking
1
0
Asset Management
(34)
(34)
Investment Bank
0
0
Non-core and Legacy
Group Items1
0
0
Total
(148)
(123)
1 Starting with the third quarter of 2023, Non-core and Legacy became a separate reportable segment and Group Functions has been renamed Group Items. Prior periods have been restated to reflect these changes.
147
501
0
190
193
6
1,037
(1)
(24)
1
0
0
0
(25)
0
39
0
(12)
2
1
29
5
12
0
(18)
2
0
0
(5)
27
0
6
0
1
29
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
110
Audited | Overview of measurement, monitoring and management techniques
– 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 Board of Directors and are delegated to the Group CEO, the Group Chief Risk Officer (the 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, sub-portfolio or counterparty levels for sector
exposure, country risk and specific product exposures.
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 ECL measurement requirements of IFRS Accounting Standards.
Internally, we put credit risk exposures into two broad categories: banking products and traded products. Banking
products include drawn loans, guarantees and 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.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
111
Banking and traded products exposure in our business divisions and Group Items
USD m
Banking products1,2
Gross exposure
of which: loans and advances to customers (on-balance sheet)
of which: guarantees and loan commitments (off-balance sheet)
Traded products2,3,4
Gross exposure
of which: over-the-counter derivatives
of which: securities financing transactions
of which: exchange-traded derivatives
Other credit lines, gross5
Total credit-impaired exposure, gross1
of which: stage 3
of which: PCI
Total allowances and provisions for expected credit losses
of which: stage 1
of which: stage 2
of which: stage 3
of which: PCI
USD m
Banking products1,2
Gross exposure
of which: loans and advances to customers (on-balance sheet)
of which: guarantees and loan commitments (off-balance sheet)
Traded products2,3
Gross exposure
of which: over-the-counter derivatives
of which: securities financing transactions
of which: exchange-traded derivatives
Other credit lines, gross5
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core
and Legacy
Group
Items
Total
31.12.23
409,711
279,360
21,344
481,821
336,916
58,618
1,700
13
59
96,878
16,993
36,094
50,223
8,106
3,149
138,884
1,179,217
155 641,542
18,569 137,834
11,812
8,397
371
3,045
70,130
1,681
1,012
668
390
166
66
98
59
4,748
4,116
19
613
88,279
3,045
2,640
405
1,234
372
255
590
16
0
0
0
0
0
0
0
0
1
1
0
0
0
47,630
12,400
23,044
12,186
4,714
5
127
469
408
61
358
133
78
146
1
31.12.22
1,169
290
879
271
20
16
158
77
2
2
0
8
7
0
0
0
64,191
24,913
23,434
15,844
163,256
6,367
4,352
2,014
2,261
700
416
993
153
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core
and Legacy
Group
Items
Total
334,621
219,385
13,147
236,508
154,643
28,610
1,454
(1)
0
76,585
12,754
12,920
804
10
3
37,182
687,152
1,212 388,003
62,163
7,483
8,328
6,416
0
1,912
12,084
320
304
0
15
23,092
0
0
0
0
0
34,370
11,218
17,055
6,097
6,105
0
109
43,018
17,938
17,055
8,024
41,390
Total credit-impaired exposure, gross1
of which: stage 3
of which: PCI
Total allowances and provisions for expected credit losses
2,455
2,455
0
1,091
259
267
564
0
1 IFRS 9 gross exposure for banking products includes the following financial assets in scope of expected credit loss measurement: balances at central banks, amounts due from banks, loans and advances to customers,
other financial assets at amortized cost, guarantees and irrevocable loan commitments. 2 Internal management view of credit risk, which differs in certain respects from IFRS Accounting Standards. 3 As counterparty
risk for traded products is managed at counterparty level, no further split between exposures in the Investment Bank, Non-core and Legacy, and Group Items is provided. 4 Credit Suisse traded products are presented
before reflection of the impact of the purchase price allocation performed under IFRS 3, Business Combinations, following the acquisition of the Credit Suisse Group by UBS. The acquisition date adjustment is less
than USD 1bn and, if applied, would lead to a reduction in our reported traded products exposure. 5 Unconditionally revocable committed credit lines.
of which: stage 1
of which: stage 2
of which: stage 3
of which: PCI
1,380
1,380
0
701
138
156
406
0
312
312
0
168
49
54
64
0
757
757
0
215
68
57
90
0
6
6
0
3
0
0
3
0
0
0
0
0
0
0
0
0
0
0
0
4
4
0
0
0
Banking products
› 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 10 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 Accounting Standards
› Refer to “Note 14 Other assets” in the “Consolidated financial statements” section of this report for more details
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
112
Global Wealth Management
Gross banking products exposure within Global Wealth Management increased by USD 75bn to USD 410bn in 2023 due
to the acquisition of the Credit Suisse Group.
Our Global Wealth Management loan portfolio is mainly secured by securities (Lombard loans) and by residential real
estate. Most of our USD 182bn of Lombard loans, including traded products collateralized by securities, were of high
quality, with 93% rated as investment grade based on our internal ratings. Moreover, Lombard loans are typically
uncommitted, short-term in nature and can be canceled immediately if the collateral quality deteriorates and margin calls
are not met. Lending values in the Lombard book are derived by applying discounts to the pledged collateral’s market
value in line with a possible adverse change in market value over a given close-out period and confidence level. Less-
liquid or more volatile collateral will typically have larger haircuts. In 2023, the Lombard book, including traded products,
increased by approximately 19% due to the acquisition of the Credit Suisse Group, with no material losses recorded.
The mortgage book (residential and commercial real estate) increased by approximately 31% due to the acquisition of
the Credit Suisse Group, mainly driven by higher volumes of mortgage loans within the Swiss residential and commercial
real estate portfolios.
Other financing represents approximately 12% of the total banking products exposures and is consolidated in a corporate
and other portfolio that more than doubled in 2023, mainly due to the acquisition of the Credit Suisse Group. Through
this acquisition, Other financing now includes ship, yacht and export financing totaling USD 10bn, as well as an expanded
corporate lending portfolio of USD 5bn.
› Refer to “Lending secured by real estate” and “Lombard lending” in this section for further information about these types of
lending
Global Wealth Management
Personal & Corporate Banking
Collateralization of Loans and advances to customers1
USD m, except where indicated
Secured by collateral
Residential real estate
Commercial / industrial real estate
Cash
Equity and debt instruments
Other collateral 2
Subject to guarantees
Uncollateralized and not subject to guarantees
Total loans and advances to customers, gross
Allowances
Total loans and advances to customers, net of allowances
Collateralized loans and advances to customers in % of total loans and advances to customers, gross (%)
1 Collateral arrangements generally incorporate a range of collateral, including cash, securities, real estate and other collateral. For the purpose of this disclosure, UBS applies a risk-based approach that generally
prioritizes collateral according to its liquidity profile. In the case of loan facilities with funded and unfunded elements, the collateral is first allocated to the funded element. Credit Suisse applies a risk-based approach
that generally prioritizes real estate collateral and prioritizes other collateral according to its liquidity profile. In the case of loan facilities with funded and unfunded elements, the collateral is proportionately allocated.
2 Includes but is not limited to life insurance contracts, rights in respect of subscription or capital commitments from fund partners, inventory, gold and other commodities.
31.12.23
271,890
80,051
8,370
36,163
120,672
26,634
2,180
5,290
279,360
(184)
279,176
97.3
31.12.22
216,993
62,200
4,955
30,514
107,253
12,071
144
2,247
219,385
(138)
219,247
98.9
31.12.23
295,954
235,878
45,050
3,919
5,072
6,034
6,999
33,963
336,916
(984)
335,932
87.8
31.12.22
138,851
110,500
19,795
3,036
2,228
3,293
2,758
13,034
154,643
(559)
154,084
89.8
Personal & Corporate Banking
Gross banking products exposure within Personal & Corporate Banking increased by USD 245bn to USD 482bn in
2023 due to the acquisition of the Credit Suisse Group. As illustrated in the “Personal & Corporate Banking:
distribution of banking products exposure across internal UBS ratings and loss given default (LGD) buckets” table
below, the majority was classified as investment grade and a significant portion of the exposure is categorized in the
lowest LGD bucket, i.e., 0–25%.
As of 31 December 2023, 88% of loans and advances to customers were secured by collateral, mainly residential and
commercial property. Of the total unsecured amount, 81% related to cash-flow-based lending to corporate
counterparties and 3% related to lending to public authorities.
Our Swiss corporate banking products take-and-hold portfolio exposure was USD 93bn (CHF 78bn) and increased by
USD 57bn compared with 2022 due to the acquisition of the Credit Suisse Group. The portfolio 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.
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 11bn (CHF 9bn) as of 31 December
2023, compared with USD 7bn (CHF 7bn) in 2022, due to the acquisition of the Credit Suisse Group. A considerable part
of the exposure correlates with commodity prices.
› Refer to “Credit risk models” in this section for more information about loss given default, rating grades and rating agency
mappings
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
113
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 (including loans on self-used commercial real estate), totaling USD 352bn
(CHF 297bn), mainly originate from Personal & Corporate Banking, but also from Global Wealth Management Region
Switzerland.
As illustrated in the “Swiss mortgages: distribution of exposure across exposure segments and loan-to-value (LTV)
buckets” table below, USD 262bn (CHF 220bn) of these mortgage loans related to residential properties that the
borrower was either occupying or renting out, with full recourse to the borrower. USD 70bn (CHF 59bn) related to
income-producing real estate. Of the aggregate amount of Swiss residential mortgages, 99.9% 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
99% would remain covered by the real estate collateral even if the value assigned to that collateral were to decrease
30%.
Personal & Corporate Banking: distribution of banking products exposure across internal UBS ratings and loss given
default (LGD) buckets1
USD m, except where indicated
31.12.22
31.12.23
LGD buckets
Internal UBS rating2
Investment grade
Sub-investment grade
of which: 6−9
of which: 10−13
Exposure
293,090
109,084
93,684
15,400
0–25%
184,710
37,295
34,424
2,871
26–50% 51–75%
19,583
83,321
76–100%
5,477
43,077
18,859
39,199
16,275
3,878
2,584
9,853
3,786
6,067
Weighted
average
LGD (%)
25
38
34
61
Weighted
average
LGD (%)
28
35
35
36
Exposure
123,358
62,219
56,774
5,445
Defaulted / Credit-impaired
Banking products exposure1
30
1 Excluding balances at central banks and Group Treasury reallocations and for Credit Suisse including only loans and advances to customers and guarantees and loan commitments presented before reflection of the
impact of the purchase price allocation adjustments. 2 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.
186,957
128,412
222,273
405,592
15,446
39,462
1,380
1,020
2,015
3,419
268
116
29
42
45
Personal & Corporate Banking: loans uncollateralized and not subject to guarantees, by industry sector
31.12.23
31.12.22
Construction
Financial institutions
Hotels and restaurants
Manufacturing
Private households
Public authorities
Real estate and rentals
Retail and wholesale
Services
Other
Exposure, gross
USD m
452
10,294
247
5,092
5,429
861
1,643
4,555
4,606
784
%
1.3
30.3
0.7
15.0
16.0
2.5
4.8
13.4
13.6
2.3
33,963
100.0
USD m
172
3,878
135
1,715
1,473
416
547
2,230
2,242
226
13,034
%
1.3
29.8
1.0
13.2
11.3
3.2
4.2
17.1
17.2
1.7
100.0
Swiss mortgages: distribution of exposure across exposure segments and loan-to-value (LTV) buckets1
USD bn, except where indicated
31.12.23
31.12.222
Exposure segment
Residential mortgages
Income-producing real estate
Corporates
Other segments
Mortgage-covered exposure
Mortgage-covered exposure 31.12.222
Exposure
as a % of row total
Exposure
as a % of row total
Exposure
as a % of row total
Exposure
as a % of row total
Exposure
as a % of total
Exposure
LTV buckets
31–50%
51–60%
61–70%
71–80% 81–100% >100%
70.8
27
18.1
26
4.2
21
0.3
23
93.4
27
46.7
19.5
7
4.0
6
0.9
5
0.1
6
24.5
7
11.4
8.7
3
1.5
2
0.5
2
0.0
2
10.7
3
4.7
2.1
1
0.2
0
0.3
1
0.0
1
2.5
1
1.2
0.3
0
0.0
0
0.2
1
0.0
1
0.4
0
0.3
0.1
0
0.1
0
0.2
1
0.0
0
0.5
0
0.1
≤30%
160.4
61
46.0
66
13.4
68
0.8
67
220.4
63
113.2
Total
261.6
100
70.0
100
19.8
100
1.1
100
352.3
100
177.5
Total
144.0
100
21.9
100
10.6
100
1.0
100
177.5
100
26
1 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-or-equal-to-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. 2 Comparative
period has been restated to reflect a change in the measure used to disclose Swiss mortgages exposures.
as a % of total
100
64
0
6
3
0
1
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
114
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.
Gross banking products exposure increased by USD 20bn to USD 97bn in 2023 due to the acquisition of the Credit Suisse
Group. As illustrated in the “Investment Bank: distribution of banking products exposure across internal UBS ratings and
loss given default (LGD) buckets” table below, banking products exposure is approximately equally split between
investment grade and sub-investment grade and the vast majority had an estimated LGD below 50%.
In the Investment Bank, mandated temporary loan underwriting exposure as of the end of 2023 was USD 2.1bn,
compared with USD 2.6bn at the end of the prior year. USD 50m of commitments had not yet been distributed as
originally planned as of 31 December 2023. Loan underwriting exposures are classified as held for trading, with fair
values reflecting market conditions at the end of 2023.
› 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 m, except where indicated
31.12.22
31.12.23
LGD buckets
Internal UBS rating2
Investment grade
Sub-investment grade
of which: 6−9
of which: 10−13
Defaulted / Credit-impaired
Exposure
28,309
33,530
18,956
14,574
462
0–25%
5,570
8,534
4,664
3,870
332
26–50%
16,658
16,853
7,815
9,038
112
51–75%
2,849
76–100%
3,232
6,219
6,019
200
14
1,924
458
1,466
4
Weighted
average
LGD (%)
40
30
22
40
27
Weighted
average
LGD (%)
37
23
17
32
21
Exposure
15,878
15,522
9,174
6,348
312
Banking products exposure1
30
14,436
1 Excluding balances at central banks and Group Treasury reallocations and for Credit Suisse including only loans and advances to customers and guarantees and loan commitments presented before reflection of the
impact of the purchase price allocation adjustments. 2 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.
62,301
31,712
33,623
5,160
9,083
34
Investment Bank: banking products exposure, by geographical region1
Asia Pacific
Latin America
Middle East and Africa
North America
Switzerland
Rest of Europe
31.12.23
31.12.22
USD m
5,405
791
413
40,542
168
14,983
%
8.7
1.3
0.7
65.1
0.3
24.0
USD m
4,766
1,209
183
15,409
461
9,684
%
15.0
3.8
0.6
48.6
1.5
30.5
Exposure1
1 Excluding balances at central banks and Group Treasury reallocations and for Credit Suisse including only loans and advances to customers and guarantees and loan commitments presented before reflection of the
impact of the purchase price allocation adjustments.
31,712
62,301
100.0
100.0
Investment Bank: banking products exposure, by industry sector1
31.12.23
31.12.22
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
USD m
5,281
1,752
843
17,543
8,220
1,548
1,356
2,491
5,667
8,234
1,160
8,206
%
8.5
2.8
1.4
28.2
13.2
2.5
2.2
4.0
9.1
13.2
1.9
13.2
USD m
4,409
583
363
14,587
1,361
878
259
1,685
1,654
2,324
499
3,110
%
13.9
1.8
1.1
46.0
4.3
2.8
0.8
5.3
5.2
7.3
1.6
9.8
Exposure1
1 Excluding balances at central banks and Group Treasury reallocations and for Credit Suisse including only loans and advances to customers and guarantees and loan commitments presented before reflection of the
impact of the purchase price allocation adjustments.
31,712
62,301
100.0
100.0
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
115
Non-core and Legacy
Gross banking products exposure in Non-core and Legacy increased by USD 49bn to USD 50bn in 2023, mainly due to
the acquisition of the Credit Suisse Group. This included positions and businesses not aligned with the Group’s strategy
and policies.
In Non-core and Legacy, mandated temporary loan underwriting exposure as of the end of 2023 was USD 1.0bn. These
commitments had not yet been distributed as originally planned as of 31 December 2023. Loan underwriting exposures
are classified as held for trading, with fair values reflecting market conditions at the end of 2023.
› Refer to “Balance sheet assets” in the “Capital, liquidity and funding, and balance sheet” section of this report for more
information
› Refer to “Our businesses” in the “Our strategy, business model and environment” section of this report for more information
› Refer to “Non-core and Legacy” in the “Financial and operating performance” section of this report for more information
Group Items
Gross banking products exposure within Group Items, which arises primarily in connection with treasury activities,
increased by USD 102bn to USD 139bn in 2023, primarily due to the acquisition of the Credit Suisse Group and an
increase for UBS AG from Group Treasury reflecting higher levels of high-quality liquid assets held, funding provided to
Credit Suisse and an increase in sponsored repo clearing.
› 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 Items” section of this report for more information
Traded products
Audited | Counterparty credit risk (CCR) arising from traded products, which include OTC derivatives, ETD exposures and
SFTs, originating in the Investment Bank, Non-core and Legacy, 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. 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 sectors. Such portfolio limits are monitored and reported
to senior management.
Trading in OTC derivatives is conducted through central counterparties where practicable. Where central counterparties
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 or similar master netting agreements, which generally
allow for close-out and netting of transactions in case of default, subject to applicable law. For certain counterparties,
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. 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. Non-cash collateral typically consists of well-rated government debt
or other collateral acceptable to Risk Control and permitted by applicable regulations. Regulations on margining
uncleared OTC derivatives have generally expanded the scope of bilateral derivatives activity subject to initial margining
and increased the amounts of initial margin received from, and posted to, certain bilateral trading counterparties,
resulting in lower close-out risk over time.
In the tables below, 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.
› Refer to “Note 11 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
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
116
Investment Bank, Non-core and Legacy, and Group Treasury: traded products exposure
SFTs
USD m
31.12.23
OTC derivatives
ETDs
Total
Total exposure, before deduction of credit valuation adjustments and hedges
Less: credit valuation adjustments and allowances1
Less: credit protection bought (credit default swaps, notional)
Net exposure after credit valuation adjustments, allowances and hedges
1 Credit valuation adjustments and allowances are deducted only for UBS Group excluding Credit Suisse
12,400
(24)
(327)
12,049
23,044
(1)
0
23,044
12,186
0
0
12,186
47,630
(24)
(327)
47,279
Total
31.12.22
34,370
(35)
(109)
34,226
Investment Bank, Non-core and Legacy, and Group Treasury: distribution of net OTC derivatives and SFT exposure
across internal UBS ratings and loss given default (LGD) buckets
USD m, except where indicated
31.12.22
Internal UBS rating1
Net OTC derivatives exposure
Investment grade
Sub-investment grade
of which: 6−9
of which: 10−12
of which: 13 and defaulted
Total net OTC derivatives exposure, after credit valuation adjustments
and hedges
Net SFT exposure
Investment grade
31.12.23
LGD buckets
Exposure
0–25% 26–50% 51–75% 76–100%
10,709
1,341
1,081
37
223
179
8,080
1,251
1,199
57
39
16
3
504
372
17
115
330
221
3
106
451
449
1
0
12,049
235
8,584
1,580
1,650
Weighted
average
LGD (%)
48
65
69
33
50
50
Exposure
10,757
318
285
28
5
11,075
Weighted
average
LGD (%)
48
72
76
41
23
49
40
71
41
373
Sub-investment grade
Total net SFT exposure
17,055
1 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.
238
23,044
51
19,367
96
2,795
91
681
0
200
71
45
22,807
200
19,317
2,700
591
44
16,682
Investment Bank, Non-core and Legacy, 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
Exposure
Net OTC derivatives exposure
Net SFT exposure
31.12.23
31.12.22
31.12.23
31.12.22
USD m
1,638
349
236
4,555
1,029
4,243
12,049
%
13.6
2.9
2.0
37.8
8.5
35.2
100.0
USD m
1,249
117
615
2,200
1,055
5,839
11,075
%
11.3
1.1
5.6
19.9
9.5
52.7
100.0
USD m
2,840
67
437
3,243
3,939
12,517
23,044
%
12.3
0.3
1.9
14.1
17.1
54.3
100.0
USD m
4,906
34
483
3,177
466
7,988
17,055
%
28.8
0.2
2.8
18.6
2.7
46.8
100.0
Investment Bank, Non-core and Legacy, and Group Treasury: net OTC derivatives and SFT exposure, by industry sector
Banks
Chemicals
Electricity, gas, water supply
Financial institutions, excluding banks
Manufacturing
Mining
Public authorities
Retail and wholesale
Transport, storage and communication
Other
Exposure
Net OTC derivatives exposure
Net SFT exposure
31.12.23
31.12.22
31.12.23
31.12.22
USD m
1,829
19
116
8,577
51
17
993
20
174
255
12,049
%
15.2
0.2
1.0
71.2
0.4
0.1
8.2
0.2
1.4
2.1
100.0
USD m
1,288
71
118
8,614
97
20
655
29
115
69
11,075
%
11.6
0.6
1.1
77.8
0.9
0.2
5.9
0.3
1.0
0.6
100.0
USD m
3,008
0
0
16,143
0
0
3,890
0
3
0
23,044
%
13.1
0.0
0.0
70.1
0.0
0.0
16.9
0.0
0.0
0.0
100.0
USD m
869
0
0
14,865
0
0
1,320
0
0
0
17,055
%
5.1
0.0
0.0
87.2
0.0
0.0
7.7
0.0
0.0
0.0
100.0
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
117
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.
The calculation of affordability takes into account interest payments, minimum amortization requirements and potential
property maintenance costs in relation to gross income or rental income for rental properties. The imputed interest rate
is set at 5% per annum, independently of the current interest rate environment.
For residential properties occupied by the borrower, the maximum LTV for the standard approval process is 80%. For
income-producing real estate (IPRE), the maximum LTV allowed within the standard approval process ranges from 30–
75%, 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 IPRE, and, in some cases, an additional external valuation.
Separate models provided by a market-leading external vendor are used to derive property valuations for owner-occupied
residential properties (ORPs) and IPRE. We estimate the current value of an ORP using regression models (hedonic models)
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
regularly over the lifetime of the loan using region-specific real estate price indices or hedonic valuation. The price indices
are sourced from external vendors and subject to internal benchmarking. We use these valuations regularly to compute
indexed LTV for all ORPs. Portfolio-specific monitoring systems consider these along with other risk measures (e.g., rating
and behavioral information) to identify higher-risk loans.
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).
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 45–80%. 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 related third parties. 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
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
118
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 a possible adverse change in market 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 market 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 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 market 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, structured hedging, bespoke protection and
other instruments to actively manage credit risk. 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.
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, which are 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 11 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 bi-lateral agreements with
counterparties, including payment netting. In relation to the exchange of cash or securities, transactions can be settled
on a delivery-versus-payment basis.
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 payment-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 (the EL). 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 EL, statistical loss and stress loss.
› Refer to the 31 December 2023 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
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
119
Key features of our main credit risk models1
Portfolio in scope
Probability of default
Sovereigns and central banks
Banks and other financial
institutions
Funds
Large corporates and
internationals
Enterprises in Switzerland
Commodity traders
Ship finance
Owner-occupied mortgages &
other wealth-management
financing
Income producing real estate
mortgages
Lombard lending and
concentrated equity based
lending (CEL)
Credit cards, consumer loans and
leases in Switzerland
Other portfolios
Loss given default
Investment Bank – all
counterparties
Swiss corporate and mortgage
lending portfolios
Ship finance
International residential
mortgages & other wealth-
management financing
Lombard lending and
concentrated equity based
lending (CEL)
Credit cards, consumer loans and
leases in Switzerland
Major asset classes
Central governments and
central banks, Corporates:
other lending
Banks & Securities dealer,
Corporates: other lending
Corporates: other lending
Corporates: other lending
Corporates: other lending,
Retail: other retail
Corporates: specialized
lending
Corporates: specialized
lending
Retail: residential
mortgages, Corporates:
other lending
Retail: residential
mortgages, Corporates:
specialized lending
Retail: other retail,
Corporates: other lending
(CEL)
Retail: qualifying revolving
retail and other retail,
Corporates: other lending
Corporates: other lending,
Public sector entities and
Multilateral development
banks, Corporate:
specialized lending
Across the asset classes
Corporates: other lending,
Corporates: specialized
lending, Retail: residential
mortgages
Corporates: specialized
lending
Retail: residential
mortgages, Retail: other
retail, Corporates: other
lending
Retail: other retail,
Corporates: other lending
(CEL)
Retail: qualifying revolving
retail and other retail,
Corporates: other lending
Exposure at default
Banking products
Across the asset classes
Traded products
Across the asset classes
Model
approach
Number of
main models Main drivers
Number of
years of loss
data
Scorecard
Scorecard
Scorecard
Scorecard,
market data
Scorecard
Scorecard
Scorecard
Scorecard
Scorecard
Simulation
approach based
on historical
returns
Political, institutional and economic indicators including
qualitative factors
Financial data including balance sheet ratios, profit and
loss data and qualitative factors
Financial data and ratios constructed from it (such as net
asset value, volatility of returns), qualitative factors
Financial data including balance sheet ratios and profit
and loss, market data and qualitative factors
Financial data including balance sheet ratios and profit
and loss, behavioral data and qualitative factors
Financial data including balance sheet ratios and profit
and loss, as well as non-financial criteria. Volume,
liquidity and duration of financed commodity
transactions
Freight rates, ship market values, operational expenses
and group information
Behavioral data, affordability relative to income, property
type, loan-to-value, assets and qualitative factors
Loan-to-value, debt-service-coverage, financial data (for
large corporates only), behavioral data and qualitative
factors
2
8
7
3
2
2
1
5
3
Lending value ratio, collateral asset class, historical asset
returns, counterparty factors
3
Scorecard
3 Client type and characteristics and behavioral data
Scorecard,
pooled rating
approach,
rating template
Statistical
model
Statistical
model
Statistical
model
Statistical
model
Simulation
approach based
on historical
returns
Statistical
model
Statistical
model
Statistical
model
Financial data including balance sheet ratios and profit
and loss, market data and qualitative factors. Separate
models for Commercial Real Estate loans, Debt REITs,
Mortgage originators, Public sector entities and
Multilateral development banks/Supranationals
Counterparty and facility specific, including industry
segment, region, collateral, seniority, legal environment,
bankruptcy procedures and macro-economic factors
6
4
Collateral type and client segment, Loan-to-value, time
since last valuation, location indicator
4
1 Loan-to-value of ship and financial collaterals
3 Loan-to-value, market value shock
Loan-to-value, collateral asset class and liquidity,
historical asset returns, counterparty factors
Collateral, accrued interests, client & product
characteristics, changes in original payment plan
Facility type and product type, commitment type,
headroom, and client characteristics
Product specific market drivers, e.g. interest rates.
Separate models for OTC/ETD and SFT that generate the
simulation of risk factors used for the credit exposure
measure
3
3
11
4
>15
>15
>15
>15
>20
>20
>20
>10
>20
>10
>8
>15
>20
>10
>20
>10
>10
>8
>8
n/a
1 Table captures the model landscape of UBS Group AG, which also includes the models that are only applied to Credit Suisse.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
120
Audited |
Internal UBS rating scale and mapping of external ratings
Internal UBS rating
0 and 1
2
3
4
5
6
7
8
9
10
11
12
13
Counterparty is in default
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 Caa2
Caa3 to C
S&P mapping
AAA
AA+ to AA–
A+ to A–
BBB+ to BBB
BBB–
BB+
BB
BB–
B+
B
B–
CCC+ to CCC
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 CCC
CCC- to C
D
Probability of default
Probability of default (PD) estimates the likelihood of a counterparty defaulting on its contractual obligations over the next
12 months and is assessed using rating tools tailored to the various categories of counterparties. The “Key features of
our main credit risk models” table above gives an overview of the approaches used for our main asset classes and presents
the main drivers of the PD.
The ratings of major credit rating agencies, and their mapping to the UBS 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 periodically reviewed mapping to our internal rating scale.
Exposure at default
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, while 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.
For traded products, we derive EAD by modeling the range of possible exposure outcomes at various points in time using a
simulation based on a scenario-consistent technique. 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.
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
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 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 risk-weighted asset (RWA) calculation, floors are applied to LGD in
line with regulation.
Expected loss
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.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
121
IFRS 9 – ECL credit risk models
Expected credit loss
Expected credit loss (ECL) is defined as the difference between contractual cash flows and those UBS expects to receive,
discounted at the effective interest rate (EIR) or contractual interest rate. 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 (TTC) 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 (PIT) 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.
Comparison of Basel III EL and IFRS 9 ECL credit risk models
The IFRS 9 ECL concept has a number of key differences from our Basel III credit risk models, both in the loss estimation
process and the result thereof. Most notably, regulatory Basel III EL parameters are TTC / downturn estimates, which
might include a margin of conservatism, while IFRS 9 ECL parameters are typically PIT, reflecting current economic
conditions and future outlook. The table below summarizes the main differences. Stage 1 and 2 ECL expenses in 2023
were USD 593m and respective allowances and provisions as of 31 December 2023 were USD 1,115m. This included
ECL allowances and provisions of USD 923m related to positions under the Basel III advanced internal ratings-based
(A-IRB) approach. Basel III EL for non-defaulted positions was USD 1,620m.
› 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
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 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)
EAD is the amount we expect a counterparty to owe us at
the time of a possible default. For banking products, EAD
equals the book value as of the reporting date; for traded
products, the vast majority of EAD is modeled. For lending,
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.
In the absence of a significant increase in credit risk (an 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. For loan commitments, a credit
conversion factor is applied to model expected future drawdowns
over the life of the transaction without including downturn
assumptions and the prepayment factor. In both cases, the time
period is capped at 12 months, unless an SICR has occurred.
Probability of
default
(PD)
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.
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.
› Refer to “Stress testing” in this section for more information about our stress testing framework
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
122
Credit risk model confirmation
Our approach to model confirmation involves both quantitative methods, such as 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. In addition, changes in market, regulatory and business
practices are assessed.
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.
› Refer to “Model risk management” in this section for more information
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 derive a predicted distribution of the number of defaults. The observed number of defaults is compared with
the upper tail of the predicted distribution. If the observed number of defaults is higher than a given upper tail quantile,
we conclude there is evidence that the model may underpredict the number of defaults. Based on historical long-run
average default rates and, if required, additional margin of conservatism, we also derive PD calibration targets and a
lower boundary. As a general rule, follow-up actions, such as a recalibration of the rating tool, are defined if the portfolio
average PD lies below the derived lower boundary.
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, follow-up actions, such as a recalibration of the models, are taken.
CCFs, used for the calculation of EAD for undrawn facilities, 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, follow-up actions, such as an update of the relevant
CCFs, are performed.
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 2023.
In Personal & Corporate Banking and Global Wealth Management for UBS AG’s models, we recalibrated the risk
parameters for the income-producing real estate mortgages in Switzerland and implemented a model update for the
Swiss corporate PD model. In addition, we recalibrated the PD and LGD models for the commodity trade finance business
within Personal & Corporate Banking and updated the LGD model for corporate clients and financial institutions. In
Global Wealth Management, we also implemented a model update for the standard Lombard model.
In the Investment Bank, new PD models for UBS AG for banks, corporations, insurance companies and managed funds
went live. In addition, certain RWA multipliers were recalibrated as a result of improvements to models.
Within Credit Suisse, updated models for the Swiss income-producing real estate portfolio (IPRE LGD, private client IPRE
PD and corporate client IPRE PD) were rolled out. In addition, dedicated A-IRB models were introduced for the Swisscard
credit card portfolio, as well as the BANK-now consumer loans and car leasing portfolios, which had previously been
treated on a pooled basis.
Where required, changes to models and model parameters were approved by FINMA before being made.
› Refer to “Risk-weighted assets” in the “Capital, liquidity and funding, and balance sheet” section of this report for more
information about the effect of the changes to models and model parameters on credit risk RWA
Future credit risk-related regulatory capital developments
In December 2017, the Basel Committee on Banking Supervision (the BCBS) announced the finalization of the Basel III
framework. In November 2023, the Swiss Federal Council published the national implementation of the final Basel III
standards, which is expected to enter into force by January 2025. 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). In addition, revisions to the credit valuation adjustment (CVA) framework were
published in November 2023, 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
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
123
Credit policies for distressed assets
Non-performing
Audited | In line with the regulatory definition, we report a claim as non-performing when: (i) it is more than 90 days past
due; (ii) it is subject to restructuring proceedings, where preferential conditions concerning interest rates, subordination,
tenor, etc. have been granted in order to avoid default of the counterparty (forbearance); (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 have been made when due. If one claim
against a counterparty is defaulted on, generally all claims against the counterparty are treated as defaulted.
An instrument is classified as credit-impaired if the counterparty is classified as defaulted and / or the instrument is
identified as purchased credit-impaired (PCI). An instrument is PCI 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 PCI), 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.
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 (e.g., we expect to fully recover
the exposures via collateral held).
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.
The total combined on- and off-balance sheet coverage ratio was at 22 basis points as of 31 December 2023, 1 basis
point higher than on 31 December 2022. The combined stage 1 and 2 ratio of 11 basis points was 1 basis point higher
than on 31 December 2022; the stage 3 ratio was 21%, 1 percentage point lower than on 31 December 2022 and PCI
ratio was 7%.
› The majority of the credit-impaired exposure relates to loans and advances in our Swiss domestic business. Refer to “Note 10
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
and the calculation of the coverage ratio
› Refer to “Note 14 Other assets” in the “Consolidated financial statements” section of this report for more details
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
124
Exposure categorization
Performing
Non-performing
Stage 1
Stage 2
(significant increase in credit risk)
Stage 3¹
(credit-impaired)
Credit exposures with no significant
increase in the risk of default since
initial recognition
Credit exposures with a significant
increase in the risk of default since
initial recognition
Credit exposures that are classified
as in default
0–30 days past due
31–90 days past due
91–180 days
past due
(certain exposures)
Purchased credit-impaired (PCI)
Credit exposures classified as PCI at initial recognition
for which the credit situation has subsequently improved
1 Excluding purchased credit-impaired instruments.
Loss history statistics
USD m, except where indicated
Banking products, core exposure and off-balance sheet, gross1
of which: amounts due from banks and loans and advances to customer (gross)
Credit-impaired exposure, gross (stage 3 & PCI)
of which: credit-impaired amounts due from banks and loans and advances to customer (stage 3 & PCI)
Non-performing amounts due from banks and loans and advances to customer
ECL allowances and provisions for credit losses3
of which: core loan exposure (all stages)
of which: amounts due from banks and loans and advances to customer (all stages)
of which: amounts due from banks and loans and advances to customer (stage 3 & PCI)
Write-offs (stage 3 & PCI)
of which: write-offs for amounts due from banks and loans and advances to customer
More than 90 days past due (more
than 180 days for certain exposures)
Forbearance / credit restructuring
Credit exposures where concessions
exceeding our risk tolerance have
been granted under imminent
payment default or in default
Credit exposures where full collection
of initial contractual claims has been
doubtful since initial recognition
31.12.21
31.12.22
31.12.23
517,8662
509,0242
966,469
662,715 402,801 414,099
2,610
2,455
2,150
2,012
2,387
2,333
1,165
1,091
1,132
1,043
857
789
572
474
137
95
118
74
(148)
29
6,367
5,445
5,806
2,261
2,097
1,710
990
93
78
1,037
31.12.20
497,3132
396,049
3,778
2,945
3,176
1,468
1,426
1,076
703
356
348
694
31.12.19
423,7712
340,003
3,113
2,309
2,466
1,029
987
770
559
142
122
78
Credit loss expense / (release)4
Ratios
Credit-impaired amounts due from banks and loans and advances to customer as a percentage of amounts due
from banks and loans and advances to customer (gross)
Non-performing amounts due from banks and loans and advances to customer as a percentage of amounts due
from banks and loans and advances to customer (gross)
ECL allowances for amounts due from banks and loans and advances to customer as a percentage of amounts
due from banks and loans and advances to customer (gross)
Write-offs as a percentage of average amounts due from banks and loans and advances to customer (gross)
outstanding during the period
1 Includes amounts due from banks, core loan exposure (Loans and advances to customers and Loans to financial advisors) and off-balance sheet items defined as guarantees and loan commitments. 2 Comparatives
have been restated to include amounts due from banks 3 Includes provisions for ECL of guarantees and loan commitments and allowances for securities financing transactions. 4 Includes credit loss expense /
(release) for other financial assets at amortized cost, guarantees, loan commitments, and securities financing transactions.
0.5
0.0
0.5
0.8
0.2
0.2
0.6
0.7
0.1
0.3
0.6
0.3
0.7
0.2
0.0
0.0
0.9
0.7
0.0
0.8
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
125
Market risk
Audited | Main sources of market risk
Market risks arise from both trading and non-trading business activities.
– Trading market risks are primarily in the Investment Bank, Non-core and Legacy and, to a lesser extent, Global Wealth
Management. In the Investment Bank, these risks are mainly connected with primary debt and equity underwriting, as
well as securities and derivatives trading for market-making and client facilitation. In Non-core and Legacy market risks
are mainly from structured trades, large portfolios of loans and securitized products and both complex and simple
credit, interest rate and equity derivative transactions. In Global Wealth Management, they are from our municipal
securities trading business.
– Non-trading market risks arise predominantly in the form of interest rate and foreign exchange risks connected with
personal banking and lending in our wealth management businesses, the Swiss business of our Personal & Corporate
Banking business division, 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 high-quality liquid assets (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 and Group Treasury at granular levels in the various
business lines, reflecting the nature and magnitude of the market risks.
– Management value-at-risk (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 and Treasury Risk Control functions.
– Our primary portfolio measures of market risk are liquidity-adjusted stress loss and VaR. Both are subject to limits that
are approved by the Board of Directors (the BoD). Market risk measurement for Credit Suisse portfolios can differ from
UBS Group excluding Credit Suisse, as set out below.
– 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 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. 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 the 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 CRO Treasury function applies a holistic risk framework, setting the appetite for treasury-related risk-taking activities
across the Group. Key elements of the framework include an overarching regulatory (interest rate risk in the banking
book, IRRBB) delta economic value of equity (EVE) target, set by the BoD. Limits are also set by the BoD to balance the
effect of foreign exchange movements on our common equity tier 1 (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
Market risk stress loss
The measurement and management of market risks include 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.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
126
Liquidity-adjusted stress
Liquidity-adjusted stress is our primary stress loss measure for Group-wide market risk. The framework captures the
economic losses that could arise under specified stress scenarios. 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 liquidity-adjusted stress are calibrated to reflect the time needed to reduce or hedge the
risk of positions in each major risk factor in a stressed environment. 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.
Stress-based limits apply at several levels of the organizational hierarchy. Liquidity-adjusted stress 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, quantifying 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 from which VaR is estimated is derived from our internally developed
VaR model, which simulates returns over the holding period for risk factors our trading positions are sensitive to, and
subsequently quantifies the profit / loss effect of these risk factor returns on our trading positions. Systematic commodity,
credit, equity, foreign exchange rate and interest rate risk factor returns are based on a pure historical simulation
approach. UBS Group excluding Credit Suisse uses an unweighted five-year look-back window, and Credit Suisse uses
an exponentially weighted two-year window. Modeling idiosyncratic and specific risks for equity and credit risk factors
using historical simulation is challenging, due to the limited availability of continuous good-quality historical data.
Wherever possible, Credit Suisse uses historical simulation to model specific risk; however, both UBS Group excluding
Credit Suisse and Credit Suisse rely upon factor models to distinguish systematic and idiosyncratic returns. UBS Group
excluding Credit Suisse simulates idiosyncratic returns through a Monte Carlo simulation, aggregating the sum of
systematic and residual returns in such a way that systematic and residual risk are consistently captured. Credit Suisse
uses the available distribution of idiosyncratic returns to determine an extreme scenario for a given risk factor’s specific
risk. The resultant Credit Suisse VaR and extreme scenario loss for a given risk factor are aggregated using a zero-
correlation assumption. Correlations among risk factors are implicitly captured via historical simulation approaches. 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, the factor returns are modeled
using absolute returns, proportional or logarithmic returns. Risk factor return distributions are updated fortnightly for
UBS Group excluding Credit Suisse and weekly for Credit Suisse.
Risk factor returns are converted into profit or loss values via sensitivities and full revaluation grids sourced from front-
office systems, enabling us to capture material non-linear effects. Credit Suisse uses full revaluation models for its financial
products that are materially sensitive to the risks of co-factor movements (e.g., basket options). Both UBS Group excluding
Credit Suisse and Credit Suisse use VaR models for internal management purposes and for determining market risk risk-
weighted assets (RWA), although the two use cases consider different confidence levels and time horizons. For internal
management purposes, risk limits are established and exposures measured using VaR at a 95% confidence level for UBS
Group excluding Credit Suisse and 98% for Credit Suisse, 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 requirements under Basel III involves 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.
Additionally, the portfolio populations for management and regulatory VaR are 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.
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%). For
SVaR, both UBS Group excluding Credit Suisse and Credit Suisse identify the most significant one-year period of financial
stress from a historical dataset covering the period from 1 January 2007 to the present. SVaR is computed at least once
a week.
› Refer to the 31 December 2023 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
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
127
Management VaR for the period
UBS Group excluding Credit Suisse continued to maintain management VaR at low levels, with average VaR increasing
to USD 15m from USD 11m in 2023, mainly driven by the Investment Bank’s Global Markets business.
Credit Suisse’s average management VaR stood at USD 29m as of the end of 2023, decreasing in the second half of
2023 due to continued strategic migration of positions to UBS and de-risking within Non-core and Legacy.
Audited |
Management value-at-risk (1-day, 95% confidence, 5 years of historical data) of our business divisions and Group
Items excluding Credit Suisse components by general market risk type1
For the year ended 31.12.23
USD m
Total management VaR
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items
Diversification effect2,3
USD m
Total management VaR
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Group Functions (including Non-core and Legacy Portfolio)
Diversification effect2,3
Min.
7
1
0
0
5
1
3
Min.
6
1
0
0
6
3
Max.
Average
25
2
0
0
23
2
6
31.12.23
19
2
0
0
18
1
5
(7)
15
1
0
0
14
1
4
(6)
Equity
3
19
9
11
0
0
0
9
0
1
(1)
Interest
rates
9
21
12
19
Credit
spreads
3
19
6
7
Average (per business division and risk type)
Foreign
exchange
1
10
2
2
Commodities
1
10
3
3
1
0
0
12
1
4
(5)
2
0
0
5
1
3
(4)
0
0
0
2
0
1
(1)
0
0
0
3
0
0
0
For the year ended 31.12.22
Max.
Average
18
2
0
0
17
5
31.12.22
9
1
0
0
8
5
(5)
11
1
0
0
10
4
(5)
Equity
2
17
6
6
0
0
0
6
1
(1)
Interest
rates
8
18
10
10
Credit
spreads
4
9
5
4
Average (per business division and risk type)
Foreign
exchange
2
11
3
3
Commodities
2
7
3
3
1
0
0
9
4
(3)
1
0
0
5
3
(4)
0
0
0
3
1
(1)
0
0
0
3
0
0
Management value-at-risk (1-day, 98% confidence, 2 years of historical data) of the Credit Suisse components of our
business divisions and Group Items by general market risk type1,4
For the year ended 31.12.23
USD m
Min.
Max.
Average
Total management VaR
20
46
29
Equity
9
17
13
13
31.12.23
21
Interest
rates
10
40
17
12
Credit
spreads
13
34
20
13
Average (per business division and risk type)
Foreign
exchange
0
5
2
1
Commodities
0
3
1
0
2
0
0
0
18
0
0
Global Wealth Management
0
Personal & Corporate Banking
0
Asset Management
0
Investment Bank
Non-core and Legacy5
1
0
Group Items
Diversification effect2,3
0
1 Statistics at individual levels may not be summed to deduce the corresponding aggregate figures. The minima and maxima for each level may occur on different days, and, likewise, the value-at-risk (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. 2 The difference between the sum of the standalone VaR for the business divisions and Group Items and the total VaR.
3 As the minima and maxima for different business divisions and Group Items occur on different days, it is not meaningful to calculate a portfolio diversification effect. 4 In the second quarter of 2023, Credit Suisse
AG consolidated introduced an enhanced approach to measure management VaR for individual risk types. The enhanced approach is applied to each risk type using a collection of risk factors included within the
respective risk type only, ignoring the cross-risk effects. This change in the measurement approach for individual risk types particularly affected standalone management VaR for equity risk and foreign exchange risk,
with no impact on the total management VaR. 5 Non-core and Legacy management VaR consists of exposures of the previously reported Capital Release Unit (Credit Suisse) and Investment Bank (Credit Suisse).
10
0
0
0
17
2
(9)
1
0
0
0
13
0
(1)
1
0
0
0
13
2
2
2
0
0
0
19
0
(1)
10
0
0
0
23
2
(7)
0
0
0
0
2
0
0
16
1
0
1
36
3
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
128
VaR limitations
Audited | Actual realized market risk losses may differ from those implied by VaR for a variety of reasons.
– VaR is calibrated to a specified level of confidence and may not indicate potential losses beyond this confidence level.
– 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.
– 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.
– The choice of a longer historical 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 datasets avoids the smoothing effect of
longer datasets used for VaR. In addition, the ability to select a one-year period outside of recent market history allows
for a wider variety of potential loss events. Therefore, although the significant period of stress during the 2007–2009
financial crisis is no longer contained in the look-back window 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.
We recognize that no single measure can encompass all risks associated with a position or portfolio. 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 comprehensive stress-testing framework.
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 additional regulatory capital.
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, so as to provide a like-for-like comparison.
A backtesting exception occurs when backtesting revenues are lower than the previous day’s backtesting VaR.
UBS Group excluding Credit Suisse: development of regulatory backtesting revenues¹ and actual trading revenues²
against backtesting VaR³ (1-day, 99% confidence)
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
USD m
125
100
75
50
25
0
(25)
(50)
Backtesting revenues
Actual trading revenues
Backtesting VaR (1-day, 99% confidence = 1% negative tail)
1 Excludes non-trading revenues, such as valuation reserves, commissions and fees, and revenues from intraday trading. 2 Includes backtesting revenues and revenues
from intraday trading. 3 Based on Basel III regulatory VaR, excludes CVA positions and their eligible hedges, which are subject to the standalone CVA charge.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
129
Credit Suisse: development of regulatory backtesting revenues¹ and actual trading revenues² against backtesting VaR3, 4
(1-day, 99% confidence)
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
USD m
125
100
75
50
25
0
(25)
(50)
(600)
(700)
Backtesting revenues
Actual trading revenues
Backtesting VaR (1-day, 99% confidence = 1% negative tail)
1 Excludes non-trading revenues, such as valuation reserves, commissions and fees, and revenues from intraday trading. 2 Includes backtesting revenues and
revenues from intraday trading. 3 Based on Basel III regulatory VaR, excludes CVA positions and their eligible hedges, which are subject to the standalone CVA
charge. 4 Two negative VaR backtesting exceptions were recorded for Credit Suisse AG consolidated in June and July, driven by fair value adjustments to certain
positions in the trading inventory as a result of the acquisition of the Credit Suisse Group by UBS, reflecting purchase price allocation, which do not count against
the total exceptions relevant for the capital multiplier.
Statistically, given the 99% confidence level, two or three backtesting exceptions a year can be expected. More than four
exceptions could indicate that the VaR model is not performing appropriately, as could too few exceptions over a long
period. However, as noted for VaR limitations above, a sudden increase (or decrease) in market volatility relative to the
volatility observed in the look-back 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 and regulators.
For UBS Group excluding Credit Suisse, the number of negative backtesting exceptions within a 250-business-day
window decreased to zero at the end of 2023 from one at the end of 2022. For Credit Suisse, the number of negative
backtesting exceptions within a 250-business-day window increased to three at the end of 2023 from one at the end of
2022.
The Swiss Financial Market Supervisory Authority (FINMA) VaR multiplier derived from backtesting exceptions for market
risk RWA was unchanged compared with 2022, at 3.0, for both UBS Group excluding Credit Suisse and Credit Suisse.
VaR model confirmation
In addition to the 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
VaR model developments in 2023
Audited | In the fourth quarter of 2023, we amended the Credit Suisse credit spread VaR model by significantly enhancing
the coverage of single-name-issuer bond and CDS spread curves. Although the model change is considered significant
from a risk management perspective, the quantitative impact on risk management VaR was not material. No material
changes were made to UBS Group excluding Credit Suisse VaR model in 2023.
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). In December 2022, the Swiss State
Secretariat for International Finance changed the expected date on which the final Basel III guidelines are to enter into
force, from 1 July 2024 to 1 January 2025. As a result, the Swiss implementation timeline would be aligned to the
currently expected implementation timeline in the EU. In November 2023, the Swiss Federal Council adopted
amendments to the Capital Adequacy Ordinance (the CAO) for banks to incorporate the final Basel III standards adopted
by the BCBS in Swiss law. The Federal Department of Finance (FDF) will inform the Federal Council again about the status
of international implementation by the end of July 2024.
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
the trading book and the 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.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
130
In September 2021, FINMA mandated UBS Group excluding Credit Suisse 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, which started in
late 2019. The integration of time decay into the regulatory VaR model for UBS Group excluding Credit Suisse, which
would replace the add-on, went live in January 2024.
› 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
Sources of interest rate risk in the banking book
Audited | IRRBB arises from balance sheet positions such as amounts due from 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.
Our largest banking book interest rate exposures arise from customer deposits and lending products in Global Wealth
Management and Personal & Corporate Banking, as well as from debt issuance, liquidity buffers and interest rate hedges
in Group Treasury. The inherent interest rate risks stemming from Global Wealth Management and Personal & Corporate
Banking are generally transferred to Group Treasury, to manage them centrally together with our modeled interest rate
duration assigned to equity, goodwill and real estate. This makes the netting of interest rate risks across different sources
possible, 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 HQLA 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 and HQLA hedged with external interest rate swaps are
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.
– EVE sensitivity to yield curve moves is calculated as changes in the present value of future cash flows irrespective of
accounting treatment. These yield curve moves are also the key risk factors for statistical and stress-based measures,
e.g., VaR and stress scenarios, as well as the regulatory interest rate scenarios. These are measured and reported daily.
The regulatory IRRBB EVE exposure is the most adverse regulatory interest rate scenario that is netted across currencies.
It excludes the sensitivity from additional tier 1 (AT1) capital instruments (as per specific FINMA requirements) and the
modeled interest rate duration assigned to equity, goodwill and real estate. UBS also applies granular internal interest
rate shock scenarios to its banking book positions to monitor its specific risk profile.
– Net interest income (NII) sensitivities to yield curve moves are calculated as changes of baseline NII over a set time
horizon, which we internally compute by assuming interest rates in all currencies develop according to their market-
implied forward rates and assuming constant business volumes and product mix and no specific management actions.
The sensitivities are measured and reported monthly.
We actively manage IRRBB, with the aim of reducing the volatility of NII subject to limits and triggers for EVE and NII
exposure at consolidated and significant legal entity levels.
The Group Asset and Liability Committee (the 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 embedded interest rate options.
The average repricing maturity of non-maturing deposits and loans is determined via target replication portfolios designed
to protect product margins. 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.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
131
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. We use derivatives
to hedge interest rate risks in the banking book and these reflect changes in interest rates as an immediate fair value
gain or loss, recognized either in the income statement or through OCI. Where hedged items are accrual accounted, we
aim to minimize accounting asymmetries by applying hedge accounting to reflect the economic hedge relationship.
In a rising rate scenario, we would have an initial decrease in shareholders’ equity as a result of fair value losses on our
derivatives recognized in OCI, while we would expect higher NII over time as rates increase. The effect on CET1 capital
would be much lower, as gains and losses on interest rate swaps designated as cash flow hedges are not recognized for
regulatory capital purposes.
Accounting and capital effect of changes in interest rates1
Loans and deposits at amortized cost2,3
Other financial assets and liabilities measured at amortized cost2
Debt issued measured at amortized cost2,3
Receivables and payables from securities financing transactions2
Financial assets at fair value not held for trading
Financial assets at fair value through other comprehensive income
Derivatives designated as cash flow hedges
Derivatives designated as fair value hedges5
Derivatives transacted as economic hedges
Timing
Gradual
Gradual
Gradual
Gradual
Immediate
Immediate
Immediate
Immediate
Immediate
Recognition
Income statement / OCI
Income statement
Income statement
Income statement
Income statement
Income statement
OCI
OCI4
Income statement
Income statement
Shareholders’ equity
Losses
Gains
CET1 capital
Gains
Losses
1 Refer to the “Reconciliation of equity under IFRS Accounting Standards 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. 2 For fixed-rate financial instruments, changes in interest rates affect the income statement when these instruments roll over and
reprice. 3 For hedge-accounted items, a fair value adjustment is applied in line with the treatment of the hedging derivatives. 4 Excluding hedge ineffectiveness that is recognized in the income statement in
accordance with IFRS Accounting Standards. 5 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.
Economic value of equity sensitivity
Audited | The EVE sensitivity in the banking book to a +1-basis-point parallel shift in yield curves was negative USD 30.1m
as of 31 December 2023, compared with negative USD 25.0m as of 31 December 2022. This excludes the sensitivity of
USD 4.9m from AT1 capital instruments (as per specific FINMA requirements) in contrast to general BCBS guidance. The
exposure in the banking book of the UBS Group increased in 2023, due to the acquisition of the Credit Suisse Group
and interest rate risk hedges of the recent AT1 capital instrument issuances.
The majority of our interest rate risk in the banking book is a reflection of the net asset duration that we run to offset
our modeled sensitivity of net USD 24.3m (31 December 2022: USD 19.6m) assigned to our equity, goodwill and real
estate, with the aim of generating a stable NII contribution. Of this, USD 17.6m and USD 5.6m are attributable to the US
dollar and the Swiss franc portfolios, respectively (31 December 2022: USD 14.0m and USD 4.8m, respectively).
In addition to the sensitivity mentioned above, we calculate the six interest rate shock scenarios prescribed by FINMA.
The “Parallel up” scenario, assuming all positions were fair valued, was the most severe and would have resulted in a
change in EVE of negative USD 5.7bn, or 6.1%, of our tier 1 capital (31 December 2022: negative USD 4.6bn, or 7.9%),
which is well below the 15% threshold as per the BCBS supervisory outlier test for high levels of interest rate risk in the
banking book.
The immediate effect on our tier 1 capital in the “Parallel up” scenario as of 31 December 2023 would have been a
decrease of USD 0.9bn, or 0.9% (31 December 2022: USD 0.4bn, or 0.6%), reflecting the fact that the vast majority of
our banking book is accrual accounted or subject to hedge accounting. The “Parallel up” scenario would subsequently
have a positive effect on NII, assuming a constant balance sheet.
UBS also applies granular internal interest rate shock scenarios to its banking book positions to monitor the banking
book’s specific risk profile.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
132
Net interest income sensitivity
The main NII sensitivity in the banking book resides in Global Wealth Management and Personal & Corporate Banking.
We assign a target duration to our investment of equity portfolio, and Group Treasury actively manages the residual
IRRBB. This sensitivity is assessed using a number of scenarios assuming parallel and non-parallel shifts in yield curves,
with various degrees of severity, and we have set and monitor thresholds for the NII sensitivity to immediate parallel
shocks of –200 and +200 basis points under the assumption of constant balance sheet volume and structure.
› 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 m
Scenarios
+1 bp
Parallel up2
Parallel down2
Steepener3
Flattener4
Short-term up5
Short-term down6
USD m
Scenarios
+1 bp
Parallel up2
Parallel down2
Steepener3
Flattener4
Short-term up5
Effect on EVE1 – FINMA
31.12.23
GBP
0.1
16.2
(29.2)
(11.9)
14.0
19.4
USD
(26.0)
(5,027.2)
5,216.0
(1,037.0)
(124.2)
(2,171.3)
Other
0.2
(0.9)
2.8
Total
(30.1)
(5,680.2)
5,875.7
(33.8)
(1,401.1)
30.8
23.9
105.2
(2,194.7)
(21.8)
2,312.1
(26.8)
2,331.9
Effect on EVE1 – FINMA
31.12.22
GBP
0.1
33.2
(45.4)
(28.2)
32.6
42.2
USD
(20.4)
(3,944.3)
4,074.9
(1,027.4)
94.4
Other
(0.1)
Total
(25.0)
(26.3)
(4,629.1)
21.9
4,841.7
(3.3)
(2.5)
(1,408.7)
344.0
(1,519.0)
(13.8)
(1,539.2)
EUR
(0.6)
(119.3)
124.3
(13.1)
(5.0)
(39.4)
41.8
EUR
(0.7)
(117.0)
148.1
(92.8)
74.1
34.3
Effect on EVE1 – BCBS
Additional tier 1 (AT1) capital
instruments
4.9
Total
(25.2)
904.6
(4,775.5)
(1,044.5)
4,831.3
93.4
109.6
486.3
(1,307.6)
214.8
(1,708.4)
(507.8)
1,824.1
Effect on EVE1 – BCBS
Additional tier 1 (AT1) capital
instruments
3.4
Total
(21.6)
649.7
(3,979.4)
(699.8)
4,141.9
(46.8)
(1,455.5)
189.9
438.6
533.9
(1,100.6)
CHF
(3.7)
(548.9)
561.8
(305.3)
189.6
(27.3)
26.5
CHF
(4.0)
(574.6)
642.3
(257.0)
145.4
(83.0)
Short-term down6
1 Economic value of equity. 2 Rates across all tenors move by ±150 bps for Swiss franc, ±200 bps for euro and US dollar, and ±250 bps for pound sterling. 3 Short-term rates decrease and long-term rates increase.
4 Short-term rates increase and long-term rates decrease. 5 Short-term rates increase more than long-term rates. 6 Short-term rates decrease more than long-term rates.
1,658.5
1,227.6
1,683.1
(455.5)
(33.1)
(42.5)
13.4
86.9
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
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.
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 11 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 and investment fund units
Audited | We make direct investments in a variety of entities and buy equity holdings in both listed and unlisted companies,
with the aim of supporting our business activities and delivering strategic value to UBS. This includes investments in
exchange and clearing house memberships, as well as minority investments in early-stage fintechs and technology
companies via UBS Next. 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 or regulation to buy, securities and units from investment vehicles that we have sold to clients.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
133
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 2023, we held equity investments and investment fund units totaling USD 7.2bn, of which USD 4.8bn
was classified as Financial assets at fair value not held for trading and USD 2.4bn 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
more information about the classification of financial instruments
Debt investments
Audited | Debt investments classified as Financial assets measured at fair value through other comprehensive income as of
31 December 2023 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 other
comprehensive income 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 other comprehensive income had a fair
value of USD 2.2bn as of 31 December 2023, compared with USD 2.2bn as of 31 December 2022.
› Refer to “Note 21 Fair value measurement” in the “Consolidated financial statements” section of this report for more information
› Refer to “Economic value of equity 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
Pension risk
We provide a number of pension plans for past and current employees, some classified as defined benefit pension plans
under IFRS Accounting Standards, which can have a material effect on our equity under IFRS Accounting Standards 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
financial statements” section of this report for more information about defined benefit plans
UBS own share exposure
Group Treasury holds UBS Group AG shares to hedge future share delivery obligations related to employee share-based
compensation awards, and also holds shares purchased under the share repurchase program. In addition, the Investment
Bank holds a limited number of UBS Group AG shares, primarily in its capacity as a market-maker with regard to UBS
Group AG shares and related derivatives, and to hedge certain issued structured debt instruments.
› Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
134
Country risk
Country risk framework
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: (i) sovereign risk, which is the ability and willingness of a government to honor its
financial commitments; (ii) 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 (iii) “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 assign a country rating to each country, which reflects our view of its 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 regarding foreign countries. A country risk limit (i.e., maximum
aggregate exposure) applies to exposures 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.
Our country risk framework differs across UBS Group, and alignment is part of the ongoing integration of Credit Suisse.
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.
Country risk exposure
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 classify 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, for UBS Group excluding Credit Suisse
the trading inventory is also shown. Issuer risk on securities such as bonds and equities, as well as risk relating to
underlying reference assets for derivative positions, is classified under trading inventory. The trading inventory is managed
on a net basis, and the value of long positions is netted against that of 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,
potentially offsetting benefits of certain hedges and short positions across issuers are not recognized.
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 potential exposure values. Within banking products and traded
products, risk-reducing effects of credit protection are generally 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.
In the case of derivatives, we show the counterparty’s risk potential exposure against the counterparty’s country of risk
(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 risk of the issuer of the reference asset
(presented within the trading inventory for UBS Group excluding Credit Suisse only). 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.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
135
CDSs are primarily bought and sold in relation to our trading businesses, and, to a much lesser degree, used to hedge
credit valuation adjustments. 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 several 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 (ISDA) determination committees (composed of various ISDA member firms) based on the terms of the CDS
and the facts and circumstances surrounding the event.
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
2023 compared with 31 December 2022.
Compared with the prior year, our net exposure generally increased due to the acquisition of the Credit Suisse Group.
The list of our top 20 countries remained broadly unchanged, with five new entries (Ireland, Spain, Brazil, Qatar and the
Cayman Islands) at the bottom of the list, with the exposure to each of those five not exceeding USD 4.0bn. Based on
the sovereign rating categories, as of 31 December 2023, 83% of our emerging market country exposure was rated
investment grade, compared with 87% as of 31 December 2022.
Israel
As of 31 December 2023, our direct country risk exposure to Israel was USD 439m, mainly from lending and collateralized
over-the-counter derivates exposure within the Investment Bank. Our direct exposure to Gulf Cooperation Council
countries was USD 6.8bn. We have limited direct exposure to Egypt, Jordan and Lebanon, and we have no direct exposure
to Iran, Iraq or Syria.
Russia
Our direct country risk exposure to Russia contributed USD 256m to our total emerging market exposure of USD 44.5bn
as of 31 December 2023. This included loans and trade finance exposures in Non-core and Legacy and Personal &
Corporate Banking, as well as aviation finance in Global Wealth Management.
We had no material direct country risk exposures to Belarus or to Ukraine as of 31 December 2023 and no material
reliance on Russian, Belarusian or Ukrainian collateral.
Top 20 country risk net exposures, by product type
USD m
United States
United Kingdom
Germany
Luxembourg
Japan
Australia
France
Singapore
Canada
China
Netherlands
South Korea
Hong Kong SAR
Sweden
Italy
Ireland
Spain
Brazil
Qatar
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
31.12.23
234,226
33,934
14,151
25,034
14,338
8,168
4,844
4,025
2,369
5,720
3,490
1,147
2,636
1,152
2,501
3,068
2,456
2,380
2,296
31.12.222
31.12.23
31.12.222
81,875
10,887
8,255
2,717
13,251
1,365
2,056
3,038
274
1,347
1,074
388
938
158
628
48
630
568
96
35,853
22,602
10,364
959
5,446
4,765
5,444
3,555
3,293
918
2,989
1,764
959
1,628
801
388
649
673
28
27,559
19,786
6,959
280
8,559
5,834
3,980
3,767
3,730
1,379
3,767
1,042
1,843
1,322
703
113
201
249
97
Trading inventory
(securities and potential
benefits / remaining
exposure from derivatives)
Net long per issuer3
31.12.23
31.12.222
33,331
1,666
6,118
169
571
2,038
4,453
4,827
5,431
3,144
941
3,228
1,007
1,490
238
69
325
332
302
29,499
1,490
4,901
427
410
1,696
4,605
5,332
3,827
1,983
1,123
2,466
885
803
161
38
200
240
448
Total
Net of hedges1
31.12.23
303,410
31.12.222
138,933
58,202
30,634
26,161
20,354
14,972
14,740
12,405
11,093
9,781
7,420
6,139
4,602
4,269
3,540
3,525
3,431
3,385
2,627
32,163
20,115
3,423
22,221
8,895
10,641
12,137
7,832
4,709
5,964
3,896
3,666
2,283
1,492
199
1,032
1,057
641
Cayman Islands
Total top 204
1 Before deduction of IFRS 9 ECL allowances and provisions. 2 Comparative period has been restated to reflect a change in the measure used to disclose country risk exposures. 3 Trading inventory exposures are
for UBS Group excluding Credit Suisse only. 4 Excluding Switzerland and supranationals, global funds for UBS Group excluding Credit Suisse, and shipping finance exposures for Credit Suisse.
369,892
129,693
103,391
543,115
281,735
60,700
91,340
69,832
1,958
2,425
166
170
315
152
100
436
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
136
Emerging markets¹ net exposure², by internal UBS country rating category
USD m
Investment grade
Sub-investment grade
Total
31.12.23
31.12.223
36,851
7,654
44,505
21,996
3,173
25,169
1 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. 2 Net of credit
hedges (for banking products and for traded products); net long per issuer (for trading inventory) for UBS Group excluding Credit Suisse only. Before deduction of IFRS 9 ECL allowances and provisions. 3 Comparative
period has been restated to reflect a change in the measure used to disclose country risk exposures.
Sustainability and climate risk
Managing sustainability and climate risk is a key component of our corporate responsibility. We define sustainability and
climate risk as the risk that UBS negatively impacts, or is impacted by, climate change, natural capital, human rights, and
other environmental, social and governance (ESG) matters. Sustainability and climate risks may manifest as credit, market,
liquidity, business and non-financial risks for UBS, resulting in potential adverse financial, liability and reputational
impacts.
Group Risk Control is responsible for our firm-wide sustainability and climate risk framework and the management of
exposure to sustainability and climate (financial) risks on an ongoing basis as a second line of defense, while our Group
Compliance, Regulatory & Governance function monitors the adequacy of our control environment for non-financial
risks, applying independent control and oversight. We manage sustainability and climate risk under a dedicated risk
management framework.
Our firm-wide sustainability and climate risk management framework and related policy standards and guidelines
underpin our management practices and control principles, enabling us to identify and manage potential adverse impacts
on the climate, the environment and human rights, as well as the associated risks affecting us and our clients while
supporting the transition toward a net-zero future. Overseen by senior management, the framework applies to the
balance sheet, our own operations and our supply chain. In 2023, we worked to revise this framework and our processes
across UBS, following the acquisition of the Credit Suisse Group.
Recognizing that it is imperative to have a consistent approach to managing sustainability and climate risk across the
combined Group, we have merged the sustainability and climate risk teams under the Sustainability CRO. We also
developed a combined Group policy for sustainability and climate risks, including risk appetite standards. Furthermore,
we continued to work toward consolidating our sustainability and climate risk metrics and quantitative approaches across
the combined entity, while enhancing our analytical capabilities and further integrating sustainability and climate risk
considerations into traditional financial and non-financial risks, for example, by enriching our risk management processes
and reporting around nature-related risks.
The current inventory of quantitative sustainability and climate risk metrics, including exposure to carbon-related assets,
climate-sensitive sectors and nature-related risks for UBS Group excluding Credit Suisse is disclosed in this section. UBS
is in the process of implementing a combined and aligned sustainability-and-climate-risk dataset across UBS Group and
including Credit Suisse AG. For this reason, UBS will publish UBS Group and Credit Suisse AG sustainability and climate
risk metrics required pursuant to FINMA Circular 2016/1 “Disclosure – banks", Annex 5, in a supplement to the UBS
Group Annual Report 2023 and the UBS Group Sustainability Report 2023, in line with the publication timeline for the
semi-annual Pillar 3 disclosures in the third quarter of 2024.
› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for more
information about our sustainability and climate risk investment approach
› Refer to “Sustainability and climate risk policy framework” in the Supplement to the UBS Group Sustainability Report 2023,
available under “Annual reporting” at ubs.com/investors, for more information
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
137
Sustainability and climate risk management framework
1
Identifi cation and
measurement
Sustainability and climate risks are identifi ed
and their materiality is measured
– Annual sustainability and climate risk
materiality assessment1
– Sustainability and climate risk heatmaps,
sector-level1
– Scenario-based climate and nature-
related analysis and stress-testing
exercises, including the development of a
stress-testing framework2
– Sustainability and climate risk scorecards,
company-level3
4
Risk reporting
and disclosure
Key sustainability and climate risks
considerations are included in internal
reporting and external disclosures
– Sustainability and climate risk content
included in the UBS Group, divisional
and relevant regional and legal entity
risk reports1
– External disclosures of sustainability and
climate risk in annual and sustainability
reports¹
Related toolkit
1 Implemented, further development underway.
3 Under development.
2
Monitoring and risk
appetite setting
Sustainability and climate risk exposures,
emerging risks and regulations are monitored
and metrics reported internally to enable risk
appetite setting
– Monitoring of sustainability and climate
risks (including regulatory monitoring)
– Sustainability and climate risk metrics1
– Qualitative sustainability and climate
risk appetite1
– Quantitative sustainability and climate
risk appetite1
3
Risk management
and control
Management and control processes ensure
that material sustainability and climate risks
are identifi ed, measured, monitored and
escalated in a timely manner
– Integrate sustainability and climate risk
considerations into decision-making
processes and related policies1
– Build in-house capacity to enhance risk
management, including specialized
training and further research and
development of tools1
– Centralize and execute ESG data
strategy1
2 Overview of scenario analysis and stress-testing exercises disclosed, further development underway.
Risk identification and measurement
On an annual basis, an assessment of the materiality of sustainability- and climate-driven risks is carried out in accordance
with the ISO 14001 standard for environmental management systems.
We aim to identify sustainability and climate risks at divisional and cross-divisional levels, both through the assessment
mentioned above and, increasingly, by integrating them into the firm-wide traditional risk identification and
measurement process. This approach is also applied to significant Group entities under UBS Group AG.
Our risk identification methodologies collectively define UBS’s materiality-driven approach, focus areas and key risk
drivers. The outputs of these efforts define our sustainability and climate risk management strategy by:
– identifying concentrations of climate- and nature-sensitive exposures that may make UBS vulnerable to financial and
non-financial risks, enabling prioritization of resources toward enhanced risk quantification and subsequent
management actions;
– supporting the delivery of a client-centric business strategy, where we assist clients with their sustainability transition
(e.g., low-carbon transition) finance, identifying clients that could benefit from sustainability-focus UBS products and
services; and
– providing information to senior management to support more-informed decision-making on sustainability- and
climate-driven risks, along with providing decision-useful information to stakeholders through our external disclosures.
› Refer to “Managing sustainability and climate risks” in the UBS Group Sustainability Report 2023, available under “Annual
reporting” at ubs.com/investors, for more information
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
138
Transition risk
Climate-driven transition risks arise from the efforts to mitigate the effects of climate change. They cover the financial
impact on our clients or on UBS itself through the credit worthiness of our counterparties or the value of collateral
we hold. The financial impacts from climate transition risk could materialize through three key risk factors:
– climate policies, affecting operating expenses (e.g., carbon taxes), analyzed both directly and indirectly;
– low-carbon technologies and their potential for disruption, affecting capital expenditure requirements and / or market
share due to low-cost competition; and
– shifts in consumer or investor sentiment, affecting revenues (shifts in consumer demand) or market-perceived value.
To calculate our exposure to climate transition risks, we have analyzed economic sectors within our classification
taxonomy with a view to define segments that share similar characteristics in their vulnerability to the risk factors
identified above. The approach consists of grouping companies into these segments under an adverse risk scenario. This
scenario is defined as an immediate and disorderly approach toward meeting the well-below-2˚C Paris goal over the zero-
to-three-year time horizon (reflecting the business planning horizon). The outcome of this process is a sector-level
transition risk heatmap, where the risk ratings ranging from “Low” to “High”, and “climate-sensitive” include the top
three ratings (Moderate, Moderately High and High).
The transition risk heatmap shows that, at the end of 2023, UBS Group excluding Credit Suisse exposure to climate-
sensitive sectors and related activities was relatively stable. Climate-driven transition-risk-sensitive exposure accounted
for 12.1% of total customer lending exposure (up from 11.7% in 2022), mainly driven by an increase in exposure to
commercial real estate in Switzerland. This risk exposure can be associated with the passage of the Climate and Innovation
Act in Switzerland and the expected zero-to-three-year impact on energy-efficiency rules in the commercial real estate
sector. A slight reduction in exposure can be observed in the fossil fuels trading and mining conglomerates sectors.
› Refer to “Managing sustainability and climate risks” in the UBS Group Sustainability Report 2023, available under “Annual
reporting” at ubs.com/investors, for more information
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
139
Climate risk heatmap (transition risk) for UBS Group excluding Credit Suisse1,2,3
In USD billion
Agriculture
0.01
Fossil fuels
0.06
Industrials
1.99
57.44 (12.02%)
Low
3.02 (0.63%)
Not classifi ed
3.37 (0.71%)
3.88
High
High
Utilities
1.31
Utilities
0.22
Fossil fuels
1.37
Agriculture
2.21
477.89 USD bn4,5,6
Total exposure
Metals and mining
2.61
Transportation
3.06
Real estate
25.51
74.85
42.21 (8.83%)
Moderately
Moderately
high
high
High
Industrials 1.99
1.64
0.35
Chemicals
Cement or concrete manufacture
Fossil fuels 0.06
0.04
0.02
Coal
Shale gas
Utilities 1.31
1.31
Power production: regulated and high-carbon fuels
Agriculture 0.01
0.01
Livestock – beef extensive grazing
Moderately high
Real Estate 25.51
23.12
2.40
Commercial real estate
Development and management of real estate
Industrials 7.21
3.24
2.12
0.97
0.82
0.06
Machinery and related parts manufacturing
Pharmaceuticals
Consumer durables manufacturing
Plastics and petrochemicals manufacture
Chemicals
Metals and Mining 2.61
2.06
0.28
0.28
Mining conglomerates (including trading)
Production of other mined metals and raw materials
Production of steel and iron
Agriculture 2.21
2.21
Food and beverage production
Transportation 3.06
1.66
0.64
0.51
0.09
0.09
0.07
Airlines – cargo
Transportation parts and equipment supply
Land-based shipping high-carbon (trucks)
Sea-based shipping (high-carbon fuels)
Automobile manufacture (high-carbon fuels)
Airlines – commercial
Fossil Fuels 1.37
0.81
0.32
0.16
0.08
Wholesale and trading: crude oil and natural gas
Integrated oil and gas
Conventional oil (on-/offshore)
Gas processing (including LNG)
Utilities 0.22
0.16
0.06
Wastewater treatment
Power production: regulated and high-carbon fuels
359.37 (75.20%)
Moderately low
Sovereigns
0.09
Metals and mining
0.16
Utilities
0.45
Industrials
7.21
Moderate
Fossil Fuels 4.07
3.74
0.17
0.16
Wholesale and trading: refi ned petroleum products
Transportation and storage (gas)
Downstream oil and gas distribution
Transportation 0.57
0.55
0.02
Passenger ships
Automobile manufacture (high-carbon fuels)
Fossil fuels
4.07
12.48 (2.61%)
27.93
Moderate
Moderate
Real estate
3.64
Transportation
0.57
Agriculture
1.73
Industrials
1.77
Real Estate 3.64
1.91
1.63
0.07
0.03
Construction – non-infrastructure
Commercial real estate
Development and management of real estate
Construction of buildings and related activities
Industrials 1.77
0.98
0.67
0.09
0.02
Other consumer goods manufacturing
Clothing manufacture
Plastics and petrochemicals manufacture
Machinery and related parts manufacturing
Agriculture 1.73
1.50
0.15
0.07
0.01
0.01
Food and beverage wholesale/retail
Crops – high emissions intensity
Other agricultural services
Food and beverage production
Livestock – other
Utilities 0.45
0.33
0.11
0.01
Grid operation and transmission
Waste disposal and recycling
Wholesale and trading: electricity and power
Metals and Mining 0.16
0.12
0.03
0.01
Metal ore mining not elsewhere classifi ed
Production of other mined metals and raw materials
Production of steel and iron
Sovereigns 0.09
0.09
Sovereigns
1 Total customer lending exposure consists of total loans and advances to customers and guarantees, as well as irrevocable loan commitments (within the scope of expected credit loss) and is based on consolidated and standalone IFRS numbers. Total and subtotal exposure calculation is subject to rounding to two decimal
places, hence potential deviation from actual. 2 UBS continues to collaborate to resolve methodological and data challenges, and seeks to integrate both impacts to and dependency on a changing natural and climatic environment, in how it evaluates risks and opportunities. 3 Climate- and nature-related risks are scored
between 0 and 1, based on sustainability and climate risk transmission channels, as outlined in the Supplement to the UBS Group Sustainability Report 2023. Risk ratings represent a range of scores across fi ve-rating categories: low, moderately low, moderate, moderately high, and high. The climate- or nature-sensitive
exposure metrics are determined based upon the top three of the fi ve rated categories: moderate to high. 4 Methodologies for assessing climate- and nature-related risks are emerging and may change over time. As the methodologies, tools, and data availability improve, we will further develop our risk identifi cation and
measurement approaches. Lombard lending rating is assigned based on the average riskiness of loans. 5 The credit exposure includes portfolio adjustment bookings, which are either directly impacting the metrics, and have been refl ected in the heatmaps, or are impact assessed and immaterial to the metrics representation.
6 Not classifi ed represents the portion of UBS’s business activities where methodologies and data are not yet able to provide a rating, e.g. private Individuals.
140–141
The graph below shows that the majority of UBS Group excluding Credit Suisse exposure is rated moderately
low, and climate-sensitive exposure accounts for 12.1% of the total customer lending exposure, driven by
UBS's lending footprint in industrialized countries. The majority of exposure is concentrated in lower-risk sec-
tors, such as residential real estate and fi nancial services.
Climate risk heatmap (transition risk) for UBS Group excluding Credit Suisse1,2,3
In USD billion
3.02 (0.63%)
Not classifi ed
57.44 (12.02%)
Low
3.37 (0.71%)
High
42.21 (8.83%)
Moderately high
12.48 (2.61%)
Moderate
Transition risk
477.89 USD bn4,5
Total exposure
359.37 (75.20%)
Moderately low
Transition risk, by sector and geographic classifi er of market maturity6
Marker size indicates relative exposure magnitude
Colour indicates transition risk level
Residential real estate
Commercial real estate
Financial services
Private individuals
Services and technology
Agriculture
Fossil fuels
Metals and mining
Lombard
Sovereigns
Transportation
Real estate (other)
Industrials
Utilities
Financial services
Residential real estate
Industrials
Commercial real estate
Agriculture
Fossil fuels
Private individuals
Lombard
Services and technology
Sovereigns
Metals and mining
Utilities
Transportation
Real estate (other)
d
e
z
i
l
a
i
r
t
s
u
d
n
I
i
g
n
g
r
e
m
E
Low
Sector score
Lower risk
Sector transition risk7
High
Higher risk
1 Total customer lending exposure consists of total loans and advances to customers and guarantees, as well as irrevocable loan commitments (within the scope of expected credit loss) and is based on consolidated and standalone IFRS numbers. Total and subtotal exposure calculation is subject to rounding to two
decimal places, hence potential deviation from actual. 2 UBS continues to collaborate to resolve methodological and data challenges, and seeks to integrate both impacts to and dependency on a changing natural and climatic environment, in how it evaluates risks and opportunities. 3 Climate- and nature-related
risks are scored between 0 and 1, based on sustainability and climate risk transmission channels, as outlined in the Supplement to the UBS Group Sustainability Report 2023. Risk ratings represent a range of scores across fi ve-rating categories: low, moderately low, moderate, moderately high, and high. The climate- or
nature-sensitive exposure metrics are determined based upon the top three of the fi ve rated categories: moderate to high. 4 Methodologies for assessing climate- and nature-related risks are emerging and may change over time. As the methodologies, tools, and data availability improve, we will further develop our
risk identifi cation and measurement approaches. Lombard lending rating is assigned based on the average riskiness of loans. 5 Not classifi ed represents the portion of UBS’s business activities where methodologies and data are not yet able to provide a rating, e.g. private Individuals. 6 Market maturity is refl ected
in the internal country classifi cation to facilitate identifi cation of diversifi cation of policy stringency across developing and industrialised countries. 7 Displayed ratings represent exposure-weighted averages for a given sector scope.
142–143
Physical risk
Climate-driven physical risks arise from acute hazards, which are increasing in severity and frequency, and chronic climate
risks arise from an incrementally changing climate. These effects may include increased temperature and sea-level rise,
and the gradual changes may affect productivity and property values and increase the severity and frequency of acute
hazards.
Our physical risk heatmap methodology groups together corporate counterparties based on exposure to key physical risk
factors (risk segmentation), by rating sectoral, sub-sectoral and geographical vulnerabilities to climate-driven physical
risks. These vulnerabilities were identified using a proprietary in-house UBS model. The model, developed in 2023, is a
significant advancement from the historical physical risk heatmapping methodology that UBS published in 2021 and
2022. By leveraging over a billion data points, UBS analyzed cross-sector information on asset-level data (sub-company
level), third-party climate hazard ratings through geospatial datasets, and academic insights into how hazards and
production methods may be aggravated or complementary (transmission channels). The analyses were then quantitatively
aggregated across assets, transmission channels (including value chains) and hazards at a sub-sector / country or sub-
country level of granularity.
The refined heatmap methodology shows that our physical risk vulnerability remained, on average, moderately low year
on year. Given UBS’s business profile, the key drivers for UBS’s climate-sensitive lending (physical risk) are financial
intermediation activities and, collectively, the services, agriculture and transportation sectors. In its current state, the
model takes a conservative approach in its key assumptions, limiting full incorporation of geographical and sectorial
sources of variability, which may either further amplify or mitigate financial vulnerability. We are committed to addressing
these and other limitations by continuously improving the modeling approach in parallel with the industry, as it continues
to standardize the disclosure of physical climate risk data, integrates regionalized scientific climate models, specializes in
its impact on sectors and assets, and collaborates with a view to more informed decision-making. More specifically, in
2024 and beyond, UBS will seek to expand its use of vendor data through both diversification and refinement, further
address the limitations presented due to key assumptions in the model, and develop approaches to address data
limitations in other types of assets (e.g., real estate). We will also explore the link between the changing climate and
nature-related financial risks, which may result in intensified compounding vulnerabilities. Companies and activities that
depend on natural-capital assets may be adversely affected by a changing climate, whose relationships have proven to
either reduce or augment ecosystem services like fresh water or biodiversity.
The physical risk heatmap below shows that, at the end of 2023, UBS Group excluding Credit Suisse exposure to climate-
sensitive sectors was 9.7% (up from 8.4% in 2022). This increase was driven by exposure to the services sector, which
includes financial services activities in emerging markets. Most of the climate-sensitive physical risk exposure is located in
countries that have high adaptive capacity to physical risk hazards, which is an important aspect to consider when
assessing the 9.7% exposure to physical risk.
› Refer to “Managing sustainability and climate risks” in the UBS Group Sustainability Report 2023, available under “Annual
reporting” at ubs.com/investors, for more information
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
144
Climate risk heatmap (physical risk) for UBS Group excluding Credit Suisse1,2,3
In USD billion
3.02 (0.63%)
Not classifi ed
0.00 (0.00%)
High
10.26 (2.15%)
Moderately high
224.25(46.92%)
Low
35.92 (7.52%)
Moderate
Physical risk
477.89
Total exposure
USD bn4,5
204.45 (42.78%)
Moderately low
Physical risk, by sector and country adaptive capacity
Marker size indicates relative exposure magnitude
Colour indicates physical risk level
Low
6
y
t
i
c
a
p
a
c
e
v
i
t
p
a
d
a
y
r
t
n
u
o
C
Private individuals
Lombard
Commercial real estate
Residential real estate
Sovereigns
Fossil fuels
Real estate (other)
High
Low
Sector score
Lower risk
Financial services
Climate-sensitivity threshold
Industrials
Metals and mining
Services and technology
Agriculture
Transportation
Utilities
Sector physical risk7
High
Higher risk
1 Total customer lending exposure consists of total loans and advances to customers and guarantees, as well as irrevocable loan commitments (within the scope of expected credit loss) and is based on consolidated and standalone IFRS numbers. Total and subtotal exposure calculation is subject to rounding to two
decimal places, hence potential deviation from actual. 2 UBS continues to collaborate to resolve methodological and data challenges, and seeks to integrate both impacts to and dependency on a changing natural and climatic environment, in how it evaluates risks and opportunities. 3 Climate- and nature-related
risks are scored between 0 and 1, based on sustainability and climate risk transmission channels, as outlined in the Supplement to the UBS Group Sustainability Report 2023. Risk ratings represent a range of scores across fi ve-rating categories: low, moderately low, moderate, moderately high, and high. The climate- or
nature-sensitive exposure metrics are determined based upon the top three of the fi ve rated categories: moderate to high. 4 Methodologies for assessing climate- and nature-related risks are emerging and may change over time. As the methodologies, tools, and data availability improve, we will further develop our
risk identifi cation and measurement approaches. Lombard lending rating is assigned based on the average riskiness of loans. 5 Not classifi ed represents the portion of UBS’s business activities where methodologies and data are not yet able to provide a rating, e.g. private Individuals. 6 Country adaptive capacity is
represented by a sector exposure weighted-average based on the sovereign's segment score for the country of risk. 7 Displayed ratings represent exposure-weighted averages for a given sector scope.
145–146
Nature-related risks
Nature-related risks refer to how humans and organizations depend on and impact the natural environment. Natural
resources are referred to as natural capital that, in combination, provides the ecosystem services that benefit people and
the planet. Below we describe our understanding of how UBS’s business model may depend on or impact those services,
resulting in financial and non-financial risk for UBS.
Biodiversity is presented as a function of various natural-capital assets providing life on earth with a range of services
(ecosystem services), categorized and rated for its role in the development of medicines, technologies and more. UBS‘s
development of insights in biodiversity, among other nature-related risks, is discussed in the context of improving data
and methodology. Similar to the collaborative effort that UBS has made on climate-related risks in earlier years, we have
contributed to global efforts to raise awareness of and exchange knowledge about nature-related risk assessment
methodologies. UBS has made these contributions through its role as a member of the Taskforce on Nature-related
Financial Disclosures since 2021 and the United Nations Environment Programme Finance Initiative (the UNEP FI) working
group on nature-related risks (since 2018). As a key member of the UNEP FI working group, UBS has supported the
development of a methodology to assess nature-related risks from both the dependency and impact perspectives to the
natural environment. UBS took part in the collaborative work to develop the Exploring Natural Capital Opportunities,
Risks and Exposure toolkit (ENCORE), which has been a central input to UBS’s initial nature-related risk analysis. The UNEP
FI coordinated this working group in partnership with the World Conservation Monitoring Centre, Global Canopy, the
Swiss State Secretariat for Economic Affairs and the Swiss Federal Office for the Environment.
In 2022, we initially piloted a quantification approach for nature-related risks solely based on dependency of our clients
on the natural environment, using the ENCORE methodology. This approach enabled us to assess vulnerability to nature-
sensitive economic activities by our clients, which may drive financial risks for UBS, such as reduced creditworthiness of
our clients or the value of companies’ debt or of equity posted as collateral for lending activities. In 2023, we expanded
the definition of our “nature-sensitive metric” to now include both dependencies and impacts on nature, its assets, and
the ecosystem services nature provides to sustain human activities. Our methodology assigns ratings on the same scale
and granularity as our climate-driven sector-level heatmaps. As in the case of the climate-driven heatmap assumptions,
UBS takes a conservative approach in assigning the overall nature-sensitive risk rating to each of the UBS industry codes.
The key assumption here is driven by taking the higher of the two values between the ENCORE-defined impact and the
dependency ratings.
Our enhanced nature-related risk heatmap below shows that at the end of 2023, UBS Group excluding Credit Suisse
exposure to nature-sensitive sectors was 15.1% (up from 14.4% in 2022) of our total customer lending exposure.
Sensitivity is driven by sectors that either have a high impact or a high dependency on the natural environment. These
include metals and mining, utilities, and agriculture. Our business activities are concentrated in Lombard lending and the
financial services sector, which are rated as relatively low. A strong correlation can be observed between climate risk
sensitivity (both transition risk and physical risk) and nature-related risks, with a heightened correlation identified in
climate-sensitive sectors.
› Refer to “Managing sustainability and climate risks” in the UBS Group Sustainability Report 2023, available under “Annual
reporting” at ubs.com/investors, for more information
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
147
Climate risk heatmap (nature risk) for UBS Group excluding Credit Suisse1,2,3,4
In USD billion
4.62 (0.97%)
High
3.02 (0.63%)
Not classifi ed
4.21 (0.88%)
Moderately high
63.14 (13.21%)
Moderate
6.10 (1.28%)
Moderately low
Nature risk
477.89
Total exposure
USD bn5,6
Nature-related risk, by sector and alignment to average of transition and physical risk
Marker size indicates relative exposure magnitude
Color indicates Nature-related risk level
High
k
s
i
r
e
t
a
m
i
l
c
e
g
a
r
e
v
A
Utilities
Agriculture
Industrials
Commercial
Commerical real estate
Transportation
Metals and mining
Sovereigns
Financial services
Lombard
Real estate (other)
Fossil fuels
Services and technology
Residential real estate
396.80 (83.03%)
Low
Private individuals
Not classifi ed
Low
Low
Sector nature-related risk7
High
Sector score
Lower risk
Higher risk
1 Total customer lending exposure consists of total loans and advances to customers and guarantees, as well as irrevocable loan commitments (within the scope of expected credit loss) and is based on consolidated and standalone IFRS numbers. Total and subtotal exposure calculation is subject to rounding to two
decimal places, hence potential deviation from actual. 2 UBS continues to collaborate to resolve methodological and data challenges, and seeks to integrate both impacts to and dependency on a changing natural and climatic environment, in how it evaluates risks and opportunities. 3 Climate- and nature-related
risks are scored between 0 and 1, based on sustainability and climate risk transmission channels, as outlined in the Supplement to the UBS Group Sustainability Report 2023. Risk ratings represent a range of scores across fi ve-rating categories: low, moderately low, moderate, moderately high, and high. The climate- or
nature-sensitive exposure metrics are determined based upon the top three of the fi ve rated categories: moderate to high. 4 Nature-related risk metric methodology has been further strategically enhanced, as part of an ongoing collaboration between UBS and UNEP-FI. 5 Methodologies for assessing climate- and
nature-related risks are emerging and may change over time. As the methodologies, tools, and data availability improve, we will further develop our risk identifi cation and measurement approaches. Lombard lending rating is assigned based on the average riskiness of loans. 6 Not classifi ed represents the portion of
UBS’s business activities where methodologies and data are not yet able to provide a rating, e.g. private Individuals. 7 Displayed ratings represent exposure-weighted averages for a given sector scope.
148–149
Climate scenario analysis
We use scenario-based approaches to assess our exposure to physical and transition risks stemming from climate change.
We have introduced a series of assessments performed through industry collaborations in order to harmonize approaches
for addressing methodological and data gaps. We have performed top-down balance sheet stress testing (across pre-
acquisition UBS), as well as a targeted bottom-up analysis of specific sector exposures covering short-, medium- and long-
term time horizons.
The work performed includes regulatory scenario analysis and stress-test exercises, including the Climate Risk Stress Test
of the European Central Bank, which is used to assess banks’ preparedness for dealing with financial and economic
shocks stemming from climate risk; and the Bank of England 2021 Climate Biennial Exploratory Scenario: Financial risks
from climate change, which has enabled UBS to assess management actions in response to different scenario results, as
well as perform counterparty-level analysis.
While these exercises showed mild losses and low exposure to climate risk for the entities in scope, the analysis enabled
UBS to enhance climate risk scenario analysis and stress testing, further developing our capabilities for assessing risks and
vulnerabilities from climate change.
In 2023, we further advanced our capabilities surrounding internal climate risk scenario analysis and stress testing for
UBS Group excluding Credit Suisse. We enhanced and refined our climate risk scenarios, with a focus on both transition
and physical risk projections across 30 years. Furthermore, we have been developing additional corresponding climate
risk models to amend the coverage of major risk types and have enhanced consistent modeling approaches in the
context of real estate energy performance and location-specific physical risks. For details on Credit Suisse’s approach
to climate scenario analysis, refer to the UBS Group Sustainability Report 2023.
› Refer to “Managing sustainability and climate risks” in the UBS Group Sustainability Report 2023, available under “Annual
reporting” at ubs.com/investors, for more information
› Refer to “Entity-specific disclosures for Credit Suisse AG” in the UBS Group Sustainability Report 2023, available under “Annual
reporting” at ubs.com/investors, for more information
Monitoring and risk appetite setting
As a part of the sustainability and climate risk monitoring process, we have developed methodologies and metrics to
assess our ongoing exposure to carbon-related assets and climate-sensitive sectors. In developing our metrics, we consider
the inputs and guidance provided by standard-setting organizations, as well as new or enhanced regulatory requirements
for climate disclosures. In 2023, we continued working on methodologies covering climate transition, physical and
nature-related risk. Examples of such enhancements include issuer and traded risk products in our risk monitoring and
reporting capabilities. We have newly expanded reporting scopes and enhanced methodologies, which, together with
the underlying metrics, are illustrated in the table below.
› Refer to “Climate-related materiality assessment” in the UBS Group Sustainability Report 2023, available under “Annual
reporting” at ubs.com/investors, for more information
The table below includes climate- and nature-related risk metrics for UBS Group excluding Credit Suisse and UBS AG on
standalone basis, as well as for UBS Switzerland AG and UBS Europe SE, both on a standalone basis. Respective climate-
and nature-related risk metrics will be published for UBS Group and Credit Suisse AG in a supplement to the UBS Group
Annual Report 2023 and the UBS Group Sustainability Report 2023, in line with the publication timeline for the semi-
annual Pillar 3 disclosures in the third quarter of 2024.
Carbon-related assets proportion of total customer lending exposure for UBS Group excluding Credit Suisse decreased
to 7.2% in 2023 from 7.5% in 2022. In 2023, the share of climate-sensitive sectors for UBS Group excluding Credit
Suisse was 12.1% for transition risk and 9.7 % for physical risk of our total customer lending exposure.
The main driver for transition risk was an increase in exposure to commercial real estate in Switzerland. This risk exposure
was associated with the passing of the Climate and Innovation Act in Switzerland and the expected zero-to-three-year
impact on energy-efficiency rules in the commercial real estate sector. The key driver for physical risk was exposure to
the services sector, which includes financial services activities in emerging markets. Most of the climate-sensitive physical
risk exposure was located in countries that have high levels of capacity to adapt to physical risk hazards.
The year-end 2023 exposure to nature-sensitive sectors of the UBS Group was 15.1% of the total customer lending
exposure. For nature-related risk, sensitivity was driven by sectors that either have a high impact or a high dependency
on the natural environment. These include metals and mining, utilities, and agriculture. Our business activities are
concentrated in Lombard lending and the financial services sector, which are rated as having relatively low sensitivity to
nature risk. A strong correlation can be observed between climate risk sensitivity (both transition and physical) and nature-
related risks, with a heightened correlation in climate-sensitive sectors.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
150
Risk management – climate- and nature-related metrics
Climate- and nature-related metrics (USD bn)1, 2
Carbon-related assets UBS Group excluding Credit Suisse1, 2, 3, 4, 5
Carbon-related assets proportion of total customer lending exposure, gross (%) 1, 2, 3, 4, 5
Carbon-related assets: UBS AG (standalone) 1, 2, 3, 4, 5
Carbon-related assets: UBS Switzerland AG (standalone) 1, 2, 3, 4, 5
Carbon-related assets: UBS Europe SE (standalone) 1, 2, 3, 4, 5
Exposure to climate-sensitive sectors, transition risk UBS Group excluding Credit Suisse1, 2, 4, 5, 6
Climate-sensitive sectors, transition risk, proportion of total customer lending exposure, gross (%) 1, 2, 4, 5, 6
Exposure to climate-sensitive sectors, transition risk: UBS AG (standalone) 1, 2, 4, 5, 6
Exposure to climate-sensitive sectors, transition risk: UBS Switzerland AG (standalone) 1, 2, 4, 5, 6
Exposure to climate-sensitive sectors, transition risk: UBS Europe SE (standalone) 1, 2, 4, 5, 6
Exposure to climate-sensitive sectors, transition risk: Traded products, UBS Group excluding Credit Suisse1, 2, 4, 5, 6, 7
Exposure to climate-sensitive sectors, transition risk: Issuer risk, UBS Group excluding Credit Suisse1, 2, 4, 5, 6, 8
Exposure to climate-sensitive sectors, physical risk UBS Group excluding Credit Suisse1, 2, 4, 5, 6
Climate-sensitive sectors, physical risk, proportion of total customer lending exposure, gross (%) 1, 2, 4, 5, 6
Exposure to climate-sensitive sectors, physical risk: UBS AG (standalone) 1, 2, 4, 5, 6
Exposure to climate-sensitive sectors, physical risk: UBS Switzerland AG (standalone) 1, 2, 4, 5, 6
Exposure to climate-sensitive sectors, physical risk: UBS Europe SE (standalone) 1, 2, 4, 5, 6
Exposure to climate-sensitive sectors, physical risk: Traded products, UBS Group excluding Credit Suisse1, 2, 4, 5, 6, 7
Exposure to climate-sensitive sectors, physical risk: Issuer risk, UBS Group excluding Credit Suisse1, 2, 4, 5, 6, 8
Exposure to nature-related risks UBS Group excluding Credit Suisse1, 4, 5, 6, 9
Exposure to nature-related risks, proportion of total customer lending exposure, gross (%) 1, 4, 5, 6, 9
Exposure to nature-related risks: UBS AG (standalone) 1, 4, 5, 6, 9
Exposure to nature-related risks: UBS Switzerland AG (standalone) 1, 4, 5, 6, 9
Exposure to nature-related risks: UBS Europe SE (standalone) 1, 4, 5, 6, 9
For the year ended
31.12.23
31.12.22
31.12.21
% change from
31.12.22
34.2
7.2
8.5
26.6
0.0
58.1
12.1
9.9
47.5
0.0
0.9
4.6
46.2
9.7
52.7
15.7
0.0
7.2
15.7
72.0
15.1
14.4
56.3
0.1
33.6
7.5
8.6
24.6
0.0
52.5
11.7
9.2
41.2
0.0
38.0
8.4
44.8
14.8
0.0
64.6
14.4
12.0
49.8
0.0
36.0
7.8
9.9
25.6
0.0
52.4
11.4
9.6
41.1
0.0
36.7
8.0
42.1
16.0
0.0
67.3
14.7
12.7
49.7
0.0
1.7
(1.5)
8.0
(25.7)
10.6
7.8
15.1
(0.1)
21.4
17.7
5.8
122.3
11.4
20.1
13.0
205.1
1.2
Exposure to nature-related risks: Traded products, UBS Group excluding Credit Suisse1, 5, 7, 9
Exposure to nature-related risks: Issuer risk, UBS Group excluding Credit Suisse1, 5, 8, 9
1 Methodologies for assessing climate- and nature-related risks are emerging and may change over time. As the methodologies, tools, and data availability improve, we will further develop our risk identification and
measurement approaches. Lombard lending rating is assigned based on the average riskiness of loans. 2 Metrics are calculated and restated based on the 2023 methodology, across three years of reporting, 2021–
2023. 3 As defined by the Task Force on Climate-related Financial Disclosures (the TCFD), in its expanded definition published in 2021, UBS defines carbon-related assets through industry-identifying attributes of
the firm’s banking book. UBS further includes the four non-financial sectors addressed by the TCFD, including, but not limited to, fossil fuel extraction, carbon-based power generation, transportation (air, sea, rail,
and auto manufacture), metals production and mining, manufacturing industries, real estate development, chemicals, petrochemicals, and pharmaceuticals, building and construction materials and activities, forestry,
agriculture, fishing, food and beverage production, as well as including trading companies that may trade any of the above (e.g., oil trading or agricultural commodity trading companies). This metric is agnostic of risk
rating, and therefore may include exposures of companies that may be already transitioning or adapting their business models to climate risks, unlike UBS climate-sensitive-sectors methodology, which takes a risk-
based approach to defining material exposure to climate impacts. 4 Total customer lending exposure consists of total loans and advances to customers and guarantees, as well as irrevocable loan commitments
(within the scope of expected credit loss) and is based on consolidated and standalone IFRS numbers. The credit exposure includes portfolio adjustment bookings, which are either directly impacting the metrics, and
have been reflected in the heatmaps, or are impact assessed and immaterial to the metrics representation. 5 UBS continues to collaborate to resolve methodological and data challenges, and seeks to integrate both
impacts to and dependency on a changing natural and climatic environment in how it evaluates risks and opportunities. 6 Climate- and nature-related risks are scored between 0 and 1, based on sustainability and
climate risk transmission channels, as outlined in the Supplement to the UBS Group Sustainability Report 2023. Risk ratings represent a range of scores across five-rating categories: low, moderately low, moderate,
moderately high, and high. The climate- or nature-sensitive exposure metrics are determined based upon the top three of the five rated categories: moderate to high. 7 Traded products are newly disclosed for 2023.
Risk exposures consist of receivables from securities financing transactions, cash collateral receivables on derivative instruments and financial assets measured at amortized cost. 8 Issuer risk, is newly disclosed for
2023. Risk exposures consist of high-quality liquid assets assets, debt securities, bonds and liquidity buffer securities. 9 Nature-related risk metric methodology has been further strategically enhanced, as part of an
ongoing collaboration between UBS and UNEP FI.
3.5
The table below presents a view of UBS’s risk profile and year-on-year changes, when compared with 2022, within sectors
and across climate- and nature-related risks. It shows UBS Group excluding Credit Suisse’s total exposure to and trends
in each sector, followed by an exposure-weighted risk rating, the trend in the underlying quantitative score year on year,
and, finally, the total absolute exposure, rated as moderate, moderately high or high, within that sector. This is presented
for all three risk types. Exposures may appear under one or more of the risk types and, therefore, cannot be added
together; this is because the methodologies are distinct in their approach and application.
Overall, UBS Group excluding Credit Suisse had a moderate or moderately low outlook across the three risk categories
as of the end of 2023. We found that most year-on-year fluctuations were driven by an increase in lending and changes
in the risk profile relating to commercial real estate activities, especially in Switzerland. The changes in the risk profile can
be attributed to regulatory action in Switzerland regarding climate policies.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
151
Risk exposures by sector for UBS Group excluding Credit Suisse1, 2, 3, 4, 5
Transition risk
Physical risk
Nature-related risk8
2023
transition
risk
climate-
sensitive
exposure
(USD
bn)5
2022–
2023
weighted
average
transition
risk trend6
Weighted
average
physical risk
rating 20237
2022 risk-
rating
category6
2023
physical
risk
climate-
sensitive
exposure
(USD
bn)5
Weighted
average nature-
related risk
rating 20237
2023
nature-
related
risk
climate-
sensitive
exposure
(USD
bn)5
2022–
2023
weighted
average
nature-
related
risk trend6
2023
exposure
(USD bn)
2022–
2023
exposure
trend6
Weighted
average
transition risk
rating 20237
0.30
3.72
60.72
0.25
0.32
0.17
4.55
0.21
0.35
1.71
2.08
2.63
3.73
2.12
↑
↑
↑
↓
↓
↑
↓
↑
↑
↑
↑
↑
↑
↑
Moderate
Moderately high
Moderately low
Moderately high
Moderately high
Moderate
Moderately high
High
High
High
Moderately low
Moderately high
Moderately high
Moderately high
→
→
↓
→
→
→
→
→
→
→
→
→
→
→
0.23
3.72
0.00
0.25
0.32
0.17
4.55
0.21
0.35
1.71
0.00
2.63
3.26
2.12
Moderate
Moderate
Moderate
Moderate
Moderately low
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
Moderate
→
→
→
→
→
→
→
↓
→
→
→
→
→
→
0.08
2.08
High
Moderate
17.47
Low
0.16
0.00
0.17
0.57
0.18
0.13
0.39
0.53
1.58
0.59
0.89
Moderately high
High
Moderately low
Moderate
High
High
Moderately high
Moderate
Moderate
Moderately high
Moderate
→
→
→
→
→
→
→
→
→
↓
→
→
→
→
0.30
3.71
0.06
0.24
0.32
0.00
4.44
0.21
0.35
1.71
0.82
2.55
3.72
2.10
Sector / Sub-sector
Agriculture
Agriculture, fishing and forestry
Food and beverage
Financial services
Financial services
Fossil fuels
Downstream refining, distribution
Integrated oil and gas
Midstream transport, storage
Trading fossil fuels
Upstream extraction
Industrials
Cement or concrete manufacture
Chemicals manufacture
Electronics manufacture
Goods and apparel manufacture
Machinery manufacturing
Pharmaceuticals manufacture
→
→
↑
↓
↓
→
→
→
→
→
→
→
→
→
→
Low
0.91
2.77
2.90
0.91
0.51
0.28
0.00
0.00
0.00
0.00
0.00
0.00
0.00
19.10
122.76
↓
→
↑
→
→
→
→
→
↓
→
→
→
↓
↑
↑
→
→
→
→
→
→
Moderate
Moderate
Not classified
Not classified
Not classified
Moderately low
Moderately low
Moderately low
Moderately high
2.06
0.43
0.59
2.06
0.12
0.59
0.05
0.37
0.39
2.06
0.43
0.25
0.42
2.87
0.00
4.40
24.75
0.00
4.58
55.09
176.70
Moderate
Moderate
Moderate
Moderately low
Moderately low
Low
Moderate
High
Moderately high
Moderately high
Moderate
Moderately high
Moderately high
Moderately low
Low
Moderately high
Moderate
Moderately low
Plastics and petrochemicals
manufacture
Metals and mining
Mining conglomerates (incl.
trading)
Mining and quarrying
Production of metals
Private lending
Lombard
Private lending, credit cards,
others9
Real estate
Development and management
Commercial real estate
Residential real estate
Services and technology
Services and technology
Sovereigns
Sovereigns
Transportation
Air transport
Automotive
Rail freight
Road freight
Transit
Transportation parts and
equipment supply
Water transport
Utilities
Power generation
Waste treatment
Not classified9
Grand total
1 Methodologies for assessing climate- and nature-related risks are emerging and may change over time. As the methodologies, tools, and data availability improve, we will further develop our risk identification and
measurement approaches. Lombard lending rating is assigned based on the average riskiness of loans. 2 Metrics are calculated and restated based on the 2023 methodology, across three years of reporting, 2021–
2023. 3 Total customer lending exposure consists of total loans and advances to customers and guarantees, as well as irrevocable loan commitments (within the scope of expected credit loss), and is based on
consolidated and standalone IFRS Accounting Standards numbers. The credit exposure includes portfolio adjustment bookings, which are either directly impacting the metrics, and have been reflected in the heatmaps,
or are impact assessed and immaterial to the metrics representation. 4 UBS continues to collaborate to resolve methodological and data challenges, and seeks to integrate both impacts to and dependency on a
changing natural and climatic environment in how it evaluates risks and opportunities. 5 Climate- and nature-related risks are scored between 0 and 1, based on sustainability and climate risk transmission channels,
as outlined in the Supplement to the UBS Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors. Risk ratings represent a range of scores across five-rating categories: low,
moderately low, moderate, moderately high, and high. The climate- or nature-sensitive exposure metrics are determined based upon the top three of the five rated categories: moderate to high. 6 As a material
change in risk profile (discrete risk score, weighted average per sub-sector) is considered a >5% shift up, or down, year on year. Similarly, for absolute exposure. 7 Displayed ratings represent exposure-weighted
averages for a given sector scope. 8 Nature-related risk metric methodology has been further strategically enhanced, as part of an ongoing collaboration between UBS and UNEP FI. 9 Not classified represents the
portion of UBS’s business activities where methodologies and data are not yet able to provide a rating, e.g., private individuals.
Moderately high
Moderate
Low
Moderately high
Moderately low
Moderately high
Moderate
Moderate
Moderately high
Moderate
High
Moderately high
Not classified
Moderate
Moderately high
Moderately low
Not classified
Moderately low
Moderate
Moderate
Not classified
Moderately low
Moderate
Moderate
Moderate
Moderate
Moderate
Moderately high
Moderately high
Moderate
Moderately high
1.73
0.27
0.12
477.89
1.73
0.02
0.00
71.97
1.36
0.05
0.00
46.18
1.71
0.27
0.00
58.05
1.58
0.36
0.39
0.43
0.54
1.72
0.41
0.49
0.51
0.23
1.72
0.11
0.00
0.51
0.00
1.72
0.41
0.50
0.51
0.59
Moderate
Moderate
4.58
26.71
0.00
→
→
→
→
→
→
→
→
→
→
→
→
→
→
→
→
↑
↑
→
→
Moderately low
↓
→
→
→
→
↑
→
→
→
↓
→
→
→
↑
↑
↑
0.65
0.64
0.65
0.64
0.34
0.64
0.65
0.64
Moderate
Moderate
Moderate
→
→
→
11.24
10.49
↓
→
→
→
→
→
↑
↑
0.09
0.04
0.00
Low
→
→
→
→
→
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
152
Non-financial risk
Non-financial risk is the risk of undue monetary loss and / or non-monetary adverse consequences resulting from
inadequate or failed internal processes, people and / or systems, failure to comply with laws and regulations and internal
policies and procedures, or external events (deliberate, accidental or natural) that have an impact on UBS, its clients or
its markets.
Key developments
We have identified nine non-financial risk themes as being currently key to us. These are:
– governance and legal structure integration;
– financial and regulatory reporting;
– operational resilience, stability and cybersecurity;
– data life cycle;
– investor protection and market interaction;
– strategic growth initiatives and cross-divisional interaction;
– the evolving nature of anti-money laundering (AML), know your client (KYC), sanctions, anti-bribery and corruption
(ABC), and fraud;
– employee conduct, capacity and culture; and
– environmental, social and governance (ESG) risks.
UBS continues to actively manage the non-financial risks emerging from the acquisition of the Credit Suisse Group,
including the current operation of dual corporate structures, and the scale, pace and complexity of the required
integration activities. These activities continue to be managed by the program run by our Group Integration Office. The
integration of Credit Suisse requires data to be migrated into the UBS environment and we aim to ensure that we have
robust controls to preserve data integrity, quality and availability to mitigate data migration risks and to meet regulatory
expectations.
Through this period of change, we place an increased focus on maintaining and enhancing our control environment and
continue to cooperate with regulators in relation to the submission and execution of implementation plans to meet
regulatory expectations, including remediation requirements applicable to Credit Suisse AG. In addition, the Group is
closely monitoring non-financial risk indicators to detect any potential for adverse impacts on the control environment.
There is an increased risk of cyber-related operational disruption to business activities at our locations and / or those of
third-party suppliers due to operating an enlarged group of entities. This is combined with the increasingly dynamic threat
environment, which is intensified by current geopolitical factors and evidenced by the increased volumes and
sophistication of cyberattacks against financial institutions globally.
Cyberattacks on third-party vendors have affected our operations in the past and continue to be a source of residual risk
to our business. We remain on heightened alert to respond to and mitigate elevated cyber- and information-security
threats. During the first quarter of 2023, a third-party vendor, ION XTP, suffered a ransomware attack, which resulted in
some disruption to our exchange-traded derivatives clearing activities, although we restored our services within 36 hours,
using an available alternative solution. Following a post-incident review, we are improving our frameworks for managing
third parties that support our important business services and are taking actions to enhance our cyber-risk assessments
and controls over third-party vendors. We continue to invest in improving our technology infrastructure and
information-security governance to improve our defense, detection and response capabilities against cyberattacks.
In addition, we are working to enhance our operational resilience to address these heightened risks and to meet
regulatory deadlines through 2026. We are implementing a global framework designed to drive enhancements in
operational resilience across all business divisions and relevant jurisdictions, as well as working with the third parties,
including vendors, that are of critical importance to our operations to assess their operational resilience against our
standards.
The increasing interest in data-driven advisory processes, and use of artificial intelligence (AI) and machine learning, is
opening up new questions related to the fairness of AI algorithms, data life-cycle management, data ethics, data privacy
and security, and records management. In addition, new risks continue to emerge, such as those that result from the
demand from our clients for distributed ledger technology, blockchain-based assets and cryptocurrencies; however, we
currently have limited exposure to such risks, and relevant control frameworks for them are implemented and reviewed
on a regular basis as they evolve.
Competition to find new business opportunities, products and services across the financial services sector, both for firms
and for customers, is increasing, particularly during periods of market volatility and economic uncertainty. Thus, suitability
risk, product selection, cross-divisional service offerings, quality of advice and price transparency remain areas of
heightened focus for UBS and for the industry as a whole.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
153
Evolving ESG regulations and major legislation, such as the Consumer Duty regulation in the United Kingdom, 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 have required adjustments to control
processes.
Cross-border risk (including unintended permanent establishment) remains an area of regulatory attention for global
financial institutions, including a focus on market access, such as third-country market access into the European Economic
Area, and taxation of US persons. We maintain a series of controls designed to address these risks, and we are increasing
the number of controls that are automated.
Financial crime, including money laundering, terrorist financing, sanctions violations, fraud, bribery and corruption,
continues to present a major risk, as technological innovation and geopolitical developments increase the complexity of
doing business and heightened regulatory attention continues. An effective financial crime prevention program therefore
remains essential, and we continue to focus on strategic enhancements to our global AML, KYC and sanctions programs.
Money laundering and financial fraud techniques are becoming increasingly sophisticated, and geopolitical volatility
makes the sanctions landscape more complex. The extensive and continuously evolving sanctions arising from the Russia–
Ukraine war require constant attention to prevent circumvention risks, while the conflicts in the Middle East may increase
terrorist-financing risks.
Achieving fair outcomes for our clients, upholding market integrity and cultivating the highest standards of employee
conduct are of critical importance to us. We maintain a conduct risk framework across our activities, which is designed
to align our standards and conduct with these objectives and to retain momentum on fostering a strong culture. On
5 January 2024, we integrated the UBS and Credit Suisse conduct risk frameworks to align our handling of conduct risk
across the firm.
In September 2022, the US Securities and Exchange Commission (the SEC) and the Commodity Futures Trading
Commission (the CFTC) issued settlement orders relating to communications recordkeeping requirements in our US
broker-dealers and our registered swap dealers. In response to shortcomings identified in that context, we continued
work on a global remediation program started in 2022.
Non-financial risk framework
We follow a Group-wide non-financial risk framework that establishes requirements for identifying, managing, assessing
and mitigating operational, compliance and financial crime risks to achieve an agreed balance between risk and return.
It is built on the following pillars:
– classifying inherent risks through 19 non-financial risk taxonomies, which define the universe of material non-financial
risks that can arise as a consequence of our business activities and external factors;
– performing control assurance activities, including self-assessing the design and operating effectiveness of controls,
first- and second-line-of-defense control reviews and independent control testing;
– defining the non-financial risk appetite (including a financial risk appetite statement at the Group, UBS AG and
business division levels for non-financial risk events) through quantitative metrics and thresholds and qualitative
measures, and assessing risk exposure against appetite;
– assessing inherent and residual risk through risk assessment processes and determining whether additional
remediation plans are required to address identified deficiencies; and
– proactively and sustainably remediating identified control deficiencies.
Divisional Presidents are accountable for the effectiveness of non-financial risk management and for the robustness of
the front-to-back control environment within their business divisions, and legal-entity-responsible executives are in charge
of non-financial 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 this responsibility, by
confirming completeness and effectiveness of the control environment and non-financial risk management within their
Group functions. Collectively, divisional Presidents, central Group function heads and legal-entity-responsible executives
are in charge of implementing the non-financial risk framework.
Compliance & Operational Risk Control (C&ORC) is responsible for providing an independent and objective view of the
adequacy of non-financial risk management across the Group, and ensuring that compliance risk, financial crime risk and
operational risk are understood, owned and managed in accordance with our risk appetite. C&ORC business- or function-
aligned teams sit within the Group Compliance, Regulatory & Governance function, reporting to the Group Chief
Compliance and Governance Officer, who is a member of the Group Executive Board.
The non-financial risk framework forms the common basis for managing and assessing compliance risk, financial crime
risk and operational risk, and there are additional C&ORC activities intended to ensure we are able to demonstrate
compliance with applicable laws, rules and regulations.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
154
Group Compliance, Regulatory & Governance started working under integrated governance in June 2023, and progress
has been made with the rolling out of the non-financial risk framework methodology and standards, which will be further
aligned during 2024. To date, a unified non-financial risk framework policy and selected related guidance documents for
the combined organization have been rolled out, with data, reporting and risk assessments being manually combined,
or presented separately, until systems and processes are fully aligned.
In 2023, we successfully executed on the framework enhancements designed in 2022, with, for example, several cycles
of risk appetite assessments performed on the basis of the Group-wide non-financial risk appetite statements across all
taxonomies. We focused on improving effectiveness by simplifying and digitalizing the non-financial risk framework and
respective processes.
All functions within UBS are required to periodically assess the design and operating effectiveness of key internal non-
financial risk controls. The output of these reviews supports the assessment and testing scope 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 non-
financial 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 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.
Cybersecurity
Risk management and strategy
Cyber- and information security risk is the risk that a malicious internal or external act, or a failure of IT hardware or
software, or human error may have a material impact on confidentiality, integrity, or availability of UBS’s data or
information systems.
Cybersecurity is a key operational risk facing UBS and we devote considerable resources to establishing and maintaining
processes for assessing, identifying and managing cybersecurity risk through our global workforce and cyber-operations
centers around the world.
› Refer to “Risk governance” in this section for information about our approach to risk management, including our risk governance
framework
Governance
In line with our overall non-financial risk management framework, we take a cross-functional approach to addressing
cybersecurity risk, with the Group Operations and Technology Office (GOTO), business divisions, Group Compliance,
Regulatory & Governance (GCRG), Group Risk Control, Group Legal, and Group Internal Audit all playing key roles. Our
risk control framework follows the three-lines-of-defense model. GOTO establishes the policies and procedures designed
to safeguard our information systems and the information those systems collect and process. The business divisions,
together with GOTO, are then responsible for implementing those policies and procedures as part of the first line of
defense. Group Compliance, Regulatory & Governance (GCRG) leads the second line of defense, by convening and
consulting with additional control functions to provide independent oversight, and challenges the first line’s cybersecurity
framework and implementation. As the third line of defense, Group Internal Audit conducts independent reviews and
validates the first-line and second-line processes and functions.
The Cyber- and Information Security Committee (the CIS-C) is the primary decision-making body with oversight of and
accountability for the Group-wide cyber- and information security (CIS) program. The committee is jointly chaired by the
Group Chief Operations and Technology Officer and the Group Chief Compliance and Governance Officer. The Head
Group Internal Audit is a standing guest. The committee meets on a monthly basis and serves as a platform for interaction
across all business divisions, Group functions and the three lines of defense for the identification and effective governance
of CIS strategy, risks and regulatory obligations. The CIS-C governance structure is intended to streamline decision-
making and, where necessary, escalation to the Board of Directors (the BoD) and Group Executive Board (GEB), who
maintain overall responsibility for overseeing UBS.
Because Credit Suisse and UBS still have separate digital platforms, Credit Suisse maintained much of its pre-acquisition
cyber- and information security governance during 2023, but was increasingly aligned to the UBS CIS risk governance
framework. Credit Suisse’s CIS program is led by the Credit Suisse Chief Information Security Officer, who reports to the
Credit Suisse Chief Technology Officer and the UBS Group Chief Information Security Officer (the Group CISO). In
addition, the Credit Suisse Chief Technology Officer and Credit Suisse Chief Operations Officer report to the Group Chief
Operations and Technology Officer.
› Refer to “Cybersecurity governance” in “Board of Directors” in the “Corporate governance” section of this report for more
information
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
155
Our cyber- and information security program
Our CIS program is led by the Group CISO, who reports both to the Group Chief Operations and Technology Officer and
the Group Chief Compliance and Governance Officer. The CIS program is designed to identify, prevent, detect and
respond to CIS events, with the goal of maintaining the integrity and availability of our technology infrastructure and the
confidentiality and integrity of our information. Our Group CISO, senior management within GOTO, as well as
management personnel overseeing the CIS program, all have substantial relevant expertise in the areas of cyber- and
information security. Our CIS program includes the following elements:
– Threat intelligence: We systematically gather threat information and monitor threat alerts from external sources. Our
cyber-threat intelligence team analyzes such information and uses it to enhance existing defense capabilities, to
respond to identified threats and to adjust our cybersecurity strategy where needed.
– Preventative and detection controls: We use layered firm-wide controls to prevent and detect cyberattacks. Defenses
include system hardening, firewalls, intrusion prevention and detection systems, and other controls. External network
connections are identified and recorded in an inventory. Access rights are defined for information assets, and IT systems
and applications enforce authentication. We maintain access controls and approval processes designed to prevent
unauthorized access.
– Cyber-defense and incident response capabilities: The Cybersecurity Operations Center is responsible for providing
24/7/365 real-time monitoring, detection and response capabilities for cybersecurity threats and attacks. Incidents
assessed as having the potential to adversely affect our critical operations are subject to mandatory management
notification. If assessed as potentially significant, cybersecurity and data incidents are managed under our crisis
management framework.
– Education and training: All UBS staff, including the external workforce, receive appropriate CIS awareness training,
commensurate with their roles and responsibilities.
– Third-party risk: Vulnerabilities in the cyber-risk environment of third parties represent a particular threat to our CIS
and our ability to maintain our business services. We follow a risk-based approach to assess and mitigate cybersecurity
risks related to third parties. Third-party services and processes are monitored and checked on an ongoing basis, with
appropriate supervision from the CIS-C. This is a key component of our third-party risk management program,
notwithstanding the challenges we face in imposing the same levels of protection to the systems and data of third
parties that we rely on ourselves.
– Monitoring and testing: Effective incident response and problem management processes are complemented by
vulnerability assessments, penetration and testing engagements based on specific threat scenarios that simulate tactics,
techniques and procedures that might be used against our systems, as mandated by our policy regulations. This
includes testing by internal and external red teams. Actual security-related events are directly correlated with threat
scenarios to monitor and detect potential threats, such as network-intrusion and malware-driven events. Our deployed
security measures are designed with the objective to isolate and contain threats that are detected to allow for effective
incident response and analysis.
Our cybersecurity assessment framework
Our cybersecurity assessment framework includes internal and external cybersecurity risk assessments for applications
and bank processes alongside a structured risk assessment process of third-party service providers. These processes are
designed, along with our security capabilities, to support business objectives and priorities.
We conduct assessments to evaluate and test our cybersecurity program, and provide guidance on operating and
improving the CIS program, including the design and operational effectiveness of the security and resiliency of our
information systems. Our assessments, along with our threat intelligence capabilities, are used to assess and prioritize
programs to improve our security, our incident response capabilities and our operational resilience. As the cyber-threat
landscape evolves at an increasing pace, we seek to enhance our cybersecurity controls to meet developing threats. We
have ongoing programs that are intended to increase our cybersecurity maturity across various dimensions, including
governance, identification, protection and detection, as well as cyberattack response and recovery, and risk from third-
party service providers.
We recognize that we will never be able to completely eliminate the risk of a future cyberattack, but, by using a risk-
based approach, we work toward reducing the likelihood of a successful attack and toward mitigation of the potential
business impact of such an attack.
The BoD, its Risk Committee and the GEB receive regular presentations and reports throughout the year from our Group
Chief Operations and Technology Officer and our Group CISO on internal and external cybersecurity developments,
threats and risks. In addition, on a quarterly basis, the BoD receives reports on the performance of cybersecurity risk
appetite metrics, including metrics on vulnerabilities and third-party cybersecurity risks and incidents, and is notified
promptly if a Board-level cybersecurity risk limit is breached. The Risk Committee of the BoD and the GEB also receive
regular updates on CIS strategy, risks and alignment with regulatory requirements.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
156
Operational resilience and incident response
Our business continuity and resilience framework is designed to limit the disruption cybersecurity events cause to our
business activities. In accordance with the firm’s cyber-incident response framework, the CIS-C, including the incident
response team, tracks, documents, responds to and analyzes cybersecurity threats and incidents, including those
experienced by the firm’s third-party service providers that may impact the firm. Additionally, we maintain established
procedures for responding to, and escalating, cybersecurity and other system availability incidents. These are regularly
practiced, including tabletop exercises up to and including the GEB and BoD levels.
Our cybersecurity and data confidentiality contingency plans include event playbooks and escalation procedures designed
to support a structured assessment of potential incidents and timely escalation and reporting of incidents based on the
assessed potential impact. Incidents assessed to have the potential to adversely affect our critical operations are subject
to mandatory management notification. If assessed as potentially significant, cybersecurity and data incidents are
managed under our crisis management framework, which provides pre-established cross-functional task forces to
manage the incident, ensure appropriate and timely regulatory, market and client communications and robust oversight
by management, with escalation frameworks to inform and ensure oversight by the GEB and the BoD.
› Refer to “Crisis management framework” in the “Regulation and supervision” section of this report for more information about
our crisis management framework
Advanced measurement approach model
The non-financial 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 operational risk regulatory capital using the advanced
measurement approach (AMA) in accordance with Swiss Financial Market Supervisory Authority (FINMA) and
international requirements. In 2023, we introduced an aggregation of the AMAs for UBS AG and Credit Suisse AG to
report on total operational-risk-related risk-weighted assets (RWA) for the UBS Group. The related diversification effect,
agreed with FINMA, resulted in a USD 10bn reduction for reported RWA from the second quarter of 2023 onward.
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 UBS AMA is leveraged for entity-specific internal capital adequacy assessment processes.
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 purposes.
Initial model outputs driven by the 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.
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.
The AMA is expected to be replaced by the standardized 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.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control
157
Capital, liquidity and funding, and balance sheet
Table of contents
159
159
160
163
167
168
170
170
170
171
172
173
173
173
173
177
179
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
Liquidity and funding management
Strategy, objectives and governance
Liquidity and funding stress testing
Funding management
Liquidity coverage ratio
Too-big-to-fail liquidity requirements
Net stable funding ratio
Balance sheet and off-balance sheet
Balance sheet
Off-balance sheet
Cash flows
180
Currency management
180
UBS shares
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet
158
Capital management
Capital management objectives, planning and activities
Capital management objectives
Audited | An adequate level of common equity tier 1 (CET1) capital and 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 CET1 capital and TLAC position 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 2023, our CET1 capital ratio was 14.4% and our CET1 leverage ratio 4.6%, 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, consistent with our capital guidance,
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 November 2023, the Swiss Federal Council adopted amendments to the Capital Adequacy Ordinance (the CAO)
for banks to incorporate the final Basel III standards adopted by the BCBS into Swiss law. The amended CAO will enter
into force on 1 January 2025. The final degree of alignment between the Swiss implementation and those in other
jurisdictions remains uncertain at this stage. Although EU legislators target implementation by January 2025, the
implementation timelines in the UK and the US have been delayed until July 2025. The Swiss Federal Department of
Finance will inform the Swiss Federal Council about the status of international implementation by the end of July 2024.
We currently estimate that the revised Basel III framework, including the FRTB, will lead to a further increase in risk-
weighted assets (RWA) of approximately USD 25bn, of which USD 10bn is in Non-core and Legacy. This estimate is based
on static balances and on our current understanding of the relevant standards before taking into account mitigating
actions and not reflecting the impact of the output floor, which is phased in over time. It may change as a result of new
or updated regulatory interpretations, appropriate conservatism in model calibration, the implementation of Basel III
standards into national law, changes in business growth, market conditions and other factors. The core business-led
reductions in RWA, coupled with the run-down of positions in the Non-core and Legacy business division during 2024
and 2025, are expected to more than offset the effects of revised Basel III standards.
› Refer to the “Our strategy” and “Targets, capital guidance and ambitions” 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
Capital planning and activities
Audited | We manage our balance sheet, RWA, leverage ratio denominator (LRD) and TLAC ratio levels based on our
regulatory requirements, within our internal limits and targets, and our externally provided guidance. Our strategic focus
is on achieving an optimal attribution and use of financial resources between our business divisions and Group Items, 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 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
› Refer to “Economic capital measures” in the “Risk management and control” section of this report for more information about
capital-at-risk
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management
159
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 2023
Pillar 3 Report. The Pillar 3 Report also includes information relating to our significant regulated subsidiaries and sub-
groups (UBS AG consolidated, UBS AG standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated,
UBS Americas Holding LLC consolidated, Credit Suisse AG consolidated, Credit Suisse AG standalone, Credit Suisse
(Schweiz) AG consolidated, Credit Suisse (Schweiz) AG standalone, Credit Suisse International standalone and Credit
Suisse Holdings (USA), Inc. consolidated) as of 31 December 2023 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 UBS AG consolidated Annual Report 2023, 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 (TBTF) provisions applicable to Swiss SRBs.
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. RWA calculations are based on the applicable rules and models approved by the Swiss Financial Market
Supervisory Authority (FINMA) for the respective legal entities.
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);
– 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
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management
160
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 and LRD add-on requirements for UBS were both unchanged at 0.72% of RWA and 0.25% of LRD, resulting in
add-ons of 1.44% of RWA and 0.50% of LRD. As a result of the acquisition of the Credit Suisse Group, the UBS Group
will be subject to higher TBTF capital requirements for market share and LRD after an appropriate transition period to be
agreed with FINMA. The phase-in of these increased capital requirements will commence from the end of 2025 and will
be completed by the beginning of 2030, at the latest.
The Swiss countercyclical capital buffer, at a maximum level of 2.5% on risk-weighted positions that are directly or
indirectly backed by residential properties in Switzerland, increased our minimum CET1 capital requirement by 33 basis
points as of 31 December 2023. We also continued to apply countercyclical buffer requirements introduced in other
BCBS member jurisdictions, which resulted in an additional buffer requirement of 14 basis points as of 31 December
2023. Overall, countercyclical capital buffers contributed 47 basis points to our minimum CET1 capital requirement as of
31 December 2023.
The UBS going concern requirements include the FINMA Pillar 2 capital add-on of USD 800m related to supply chain
finance funds matter at Credit Suisse. This Pillar 2 capital add-on results in an additional CET1 capital ratio requirement
of 15 basis points and an additional CET1 leverage ratio requirement of 5 basis points as of 31 December 2023.
The total going concern capital requirements applicable are 14.92% of RWA (including countercyclical buffer
requirements) and 5.05% of LRD. Furthermore, of the total going concern capital requirement of 14.92% of RWA, at
least 10.62% must be met with CET1 capital, while a maximum of 4.3% can be met with high-trigger loss-absorbing
AT1 capital instruments (and our existing outstanding low-trigger AT1 capital instruments, which qualify until their first
call date as mentioned above).
Similarly, of the total going concern leverage ratio requirement of 5.05%, at least 3.55% must be met with CET1 capital,
while a maximum of 1.5% can be met with high-trigger loss-absorbing AT1 capital instruments (and our existing
outstanding low-trigger AT1 capital instruments, which qualify until their first call date as mentioned above).
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.
In November 2022, the Swiss Federal Council adopted amendments to the Banking Act and the Banking Ordinance,
which entered into force as of 1 January 2023. The amendments replaced the resolvability discount on the gone concern
capital requirements for systemically important banks (SIBs), including UBS, with reduced base gone concern capital
requirements equivalent to 75% of the total going concern requirements (excluding countercyclical buffer requirements
and the Pillar 2 add-on). In addition, as of July 2024, FINMA will have the authority to impose a surcharge of up to 25%
of the total going concern capital requirements (excluding countercyclical buffer requirements and the Pillar 2 add-on)
based on obstacles to an SIB’s resolvability identified in future resolvability assessments. Our total gone concern
requirements remained substantially unchanged in 2023.
Our gone concern requirements can be reduced when higher-quality capital instruments (CET1 capital, low-trigger
loss-absorbing AT1 or certain low-trigger tier 2 capital instruments) are used to meet gone concern requirements. As of
31 December 2023, UBS did not use any higher-quality capital instruments to fulfill gone concern requirements.
From 1 January 2022 onward, the gone concern requirement after potential reduction for the use of higher-quality capital
instruments has been floored at 10.0% and 3.75% for the RWA- and LRD-based requirements, respectively.
In this report, we refer to the RWA-based gone concern requirements as gone concern loss-absorbing capacity
requirements and the RWA-based gone concern ratio is referred to as the gone concern loss-absorbing capacity ratio.
The table below provides the RWA- and LRD-based requirements and information as of 31 December 2023.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management
161
Swiss SRB going and gone concern requirements and information
As of 31.12.23
USD m, except where indicated
Required going concern capital
Total going concern capital
Common equity tier 1 capital
of which: minimum capital
of which: buffer capital
of which: countercyclical buffer
Maximum additional tier 1 capital
of which: additional tier 1 capital
of which: additional tier 1 buffer capital
Eligible going concern capital
Total going concern capital
Common equity tier 1 capital
Total loss-absorbing additional tier 1 capital3
of which: high-trigger loss-absorbing additional tier 1 capital
of which: low-trigger loss-absorbing additional tier 1 capital
Required gone concern capital
Total gone concern loss-absorbing capacity4,5,6
of which: base requirement including add-ons for market share and LRD
Eligible gone concern capital
Total gone concern loss-absorbing capacity
Total tier 2 capital
of which: non-Basel III-compliant tier 2 capital
TLAC-eligible senior unsecured debt
Total loss-absorbing capacity
Required total loss-absorbing capacity
Eligible total loss-absorbing capacity
RWA
in %
14.921
10.62
4.50
5.50
0.47
4.30
3.50
0.80
16.90
14.36
2.54
2.32
0.22
81,530
58,031
24,593
30,058
2,580
23,500
19,128
4,372
92,377
78,485
13,892
12,678
1,214
10.73
10.737
58,613
58,613
19.60
0.10
0.10
19.50
107,106
538
538
106,567
25.64
36.50
140,143
199,483
LRD
in %
5.051
3.552
1.50
2.00
1.50
1.50
5.45
4.63
0.82
0.75
0.07
3.75
3.757
6.32
0.03
0.03
6.29
8.80
11.77
85,570
60,139
25,431
33,908
25,431
25,431
92,377
78,485
13,892
12,678
1,214
63,578
63,578
107,106
538
538
106,567
149,148
199,483
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
Leverage ratio denominator
1,695,403
1 Includes applicable add-ons of 1.59% for risk-weighted assets (RWA) and 0.55% for leverage ratio denominator (LRD), of which 15 basis points for RWA and 5 basis points for LRD reflect the Swiss Financial
Market Supervisory Authority (FINMA) Pillar 2 capital add-on of USD 800m related to the supply chain finance funds matter at Credit Suisse. 2 Our minimum CET1 leverage ratio requirement of 3.55% consists of
a 1.5% base requirement, a 1.5% base buffer capital requirement, a 0.25% LRD add-on requirement, a 0.25% market share add-on requirement based on our Swiss credit business and a 0.05% Pillar 2 capital
add-on related to the supply chain finance funds matter at Credit Suisse. 3 Includes outstanding low-trigger loss-absorbing additional tier 1 capital instruments, which are available under the Swiss systemically
relevant bank framework to meet the going concern requirements until their first call date. As of their first call date, these instruments are eligible to meet the gone concern requirements. 4 A maximum of 25% of
the gone concern requirements can be met with instruments that have a remaining maturity of between one and two years. Once at least 75% of the minimum gone concern requirement has been met with
instruments that have a remaining maturity of greater than two years, all instruments that have a remaining maturity of between one and two years remain eligible to be included in the total gone concern capital.
5 From 1 January 2023, the resolvability discount on the gone concern capital requirements for systemically important banks (SIBs) has been replaced with reduced base gone concern capital requirements equivalent
to 75% of the total going concern requirements (excluding countercyclical buffer requirements and the Pillar 2 add-on). 6 As of July 2024, FINMA will have the authority to impose a surcharge of up to 25% of the
total going concern capital requirements should obstacles to an SIB’s resolvability be identified in future resolvability assessments. 7 Includes applicable add-ons of 1.08% for RWA and 0.38% for LRD.
546,505
Transitional purchase price allocation adjustments for regulatory capital
As part of the acquisition of the Credit Suisse Group, the assets acquired and liabilities assumed, including contingent
liabilities, were recognized at fair value as of the acquisition date in accordance with IFRS 3, Business Combinations. The
purchase price allocation (PPA) fair value adjustments required under IFRS 3 are recognized as part of negative goodwill
and include effects on financial instruments measured at amortized cost, such as fair value impacts from interest rates
and own credit, that are expected to accrete back to par through the income statement as the instruments are held to
maturity. Similar own-credit-related effects have also been recognized as part of the PPA adjustments on financial
liabilities measured at fair value. As agreed with FINMA, a transitional CET1 capital treatment has been applied for certain
of these fair value adjustments, given the substantially temporary nature of the IFRS-3-accounting-driven effects. As such,
equity reductions under IFRS Accounting Standards of USD 5.9bn (pre-tax) and USD 5.0bn (net of tax) as of the
acquisition date have been neutralized for CET1 capital calculation purposes, of which USD 1.0bn (net of tax) relates to
own-credit-related fair value adjustments. The transitional treatment is subject to linear amortization and will reduce to
nil by 30 June 2027. In 2023, the amortization of transitional CET1 PPA adjustments (interest rate and own credit) was
USD 0.7bn (net of tax).
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management
162
Total loss-absorbing capacity
Swiss SRB going and gone concern information
USD m, except where indicated
Eligible going concern capital
Total going concern capital
Total tier 1 capital
Common equity tier 1 capital
Total loss-absorbing additional tier 1 capital
of which: high-trigger loss-absorbing additional tier 1 capital
of which: low-trigger loss-absorbing additional tier 1 capital
Eligible gone concern capital
Total gone concern loss-absorbing capacity
Total tier 2 capital
of which: low-trigger loss-absorbing tier 2 capital
of which: non-Basel III-compliant tier 2 capital
TLAC-eligible senior unsecured debt
Total loss-absorbing capacity
Total loss-absorbing capacity
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
Leverage ratio denominator
Capital and loss-absorbing capacity ratios (%)
Going concern capital ratio
of which: common equity tier 1 capital ratio
Gone concern loss-absorbing capacity ratio
Total loss-absorbing capacity ratio
Leverage ratios (%)
Going concern leverage ratio
of which: common equity tier 1 leverage ratio
Gone concern leverage ratio
Total loss-absorbing capacity leverage ratio
31.12.23
31.12.22
92,377
92,377
78,485
13,892
12,678
1,214
107,106
538
0
538
106,567
58,321
58,321
45,457
12,864
11,675
1,189
46,991
2,958
2,422
536
44,033
199,483
105,312
546,505
1,695,403
319,585
1,028,461
16.9
14.4
19.6
36.5
5.4
4.6
6.3
11.8
31.12.23
86,639
(531)
(965)
(3,039)
(97)
(5,750)
(894)
(2,186)
(713)
3,109
1,291
(89)
(368)
(2,240)
4,316
3
78,485
18.2
14.2
14.7
33.0
5.7
4.4
4.6
10.2
31.12.22
57,218
(342)
(311)
(4,077)
(64)
(5,754)
(150)
(2,287)
(471)
4,234
(523)
(105)
(201)
(1,683)
(29)
45,457
Audited |
Reconciliation of equity under IFRS Accounting Standards to Swiss SRB common equity tier 1 capital
USD m
Total equity under IFRS Accounting Standards
Equity attributable to non-controlling interests
Defined benefit plans, net of tax
Deferred tax assets recognized for tax loss carry-forwards
Deferred tax assets for unused tax credits
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, net of tax
Own credit related to (gains) / losses on derivative financial instruments that existed at the balance sheet date
Prudential valuation adjustments
Accruals for dividends to shareholders
Transitional CET1 purchase price allocation adjustments, net of tax
Other
Total common equity tier 1 capital
1 Includes goodwill related to significant investments in financial institutions of USD 20m as of 31 December 2023 (31 December 2022: USD 20m) presented on the balance sheet line Investments in associates.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management
163
Total loss-absorbing capacity and movement
Our total loss-absorbing capacity increased by USD 94.2bn to USD 199.5bn as of 31 December 2023.
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 equity under IFRS Accounting Standards to CET1
capital is provided in the “Reconciliation of equity under IFRS Accounting Standards to Swiss SRB common equity tier 1
capital” table.
Our CET1 capital increased by USD 33.0bn to USD 78.5bn as of 31 December 2023, predominantly due to an operating
profit before tax (excluding negative goodwill) of USD 1.0bn, the acquisition of the Credit Suisse Group, which resulted
in an increase of USD 34.9bn as of the acquisition date (including transitional CET1 purchase price allocation adjustments
of USD 5.0bn, net of tax), an increase in eligible deferred tax assets on temporary differences of USD 1.9bn, primarily in
connection with our business planning process and an election to capitalize compensation-related costs for US tax
purposes, and positive effects from foreign currency translation of USD 1.5bn, partly offset by dividend accruals of
USD 2.2bn, current tax expense of USD 1.6bn, share repurchases of USD 1.3bn under our share repurchase programs,
amortization of transitional CET1 PPA adjustments (interest rate and own credit) of USD 0.7bn (net of tax), and an
increase in compensation- and own shares-related components of USD 0.3bn.
› Refer to “UBS shares” in this section for more information about our share repurchase programs
Our loss-absorbing AT1 capital increased by USD 1.0bn to USD 13.9bn, mainly reflecting two issuances of AT1 capital
instruments of USD 3.5bn and positive impacts from interest rate risk hedge, foreign currency translation and other
effects. These increases were partly offset by USD 3.0bn equivalent of AT1 capital instruments that ceased to be eligible
as going concern capital when we issued notice of redemption of the instruments during 2023.
AT1 capital instruments issued from the beginning of the fourth quarter of 2023 are currently subject to write-down
upon occurrence of a trigger event or a viability event. The notes provide, however, that, following approval of a minimum
amount of conversion capital by UBS Group AG’s shareholders at the 2024 Annual General Meeting, upon the occurrence
of a trigger event or a viability event, the notes will be converted into UBS Group AG ordinary shares rather than being
subject to a write-down.
Gone concern loss-absorbing capacity and movement
Audited | Our total gone concern loss-absorbing capacity increased by USD 60.1bn to USD 107.1bn as of 31 December 2023
and included USD 106.6bn of TLAC-eligible senior unsecured debt.
The increase of USD 60.1bn mainly reflected the acquisition of the Credit Suisse Group, as USD 53.6bn equivalent of
TLAC-eligible senior unsecured debt instruments originally issued by the Credit Suisse Group were assumed as gone
concern capital by the UBS Group, and new issuances of USD 13.4bn equivalent of TLAC-eligible senior unsecured debt
instruments. The aforementioned increases were partly offset by the redemption of USD 6.0bn equivalent of TLAC-
eligible senior unsecured debt instruments, amortization of a USD 0.8bn senior unsecured debt instrument that ceased
to be TLAC-eligible as its residual time to maturity fell below one year, and a partial repurchase of two TLAC-eligible
senior unsecured debt instruments under a tender offer (in light of the acquisition of the Credit Suisse Group, UBS
announced on 22 March 2023 a tender offer to repurchase two TLAC-eligible senior unsecured debt instruments, both
issued on 17 March 2023, with an initial nominal amount totaling EUR 2.8bn, at their respective re-offer prices; the
nominal amounts of the two instruments bought back under the tender offer totaled an equivalent of USD 0.8bn). In
addition, a USD 2.4bn low-trigger loss-absorbing tier 2 capital instrument ceased to be eligible as gone concern capital
as it had less than one year to maturity.
Loss-absorbing capacity and leverage ratios
Our CET1 capital ratio increased to 14.4% from 14.2%, reflecting the aforementioned increase in CET1 capital, partly
offset by a USD 226.9bn increase in RWA.
Our CET1 leverage ratio increased to 4.6% from 4.4% due to the increase in CET1 capital, partly offset by a USD 666.9bn
increase in the LRD.
Our gone concern loss-absorbing capacity ratio increased to 19.6% from 14.7%, due to an increase in gone concern
loss-absorbing capacity of USD 60.1bn, partly offset by the aforementioned increase in RWA.
Our gone concern leverage ratio increased to 6.3% from 4.6%, driven by the aforementioned increase in gone concern
loss-absorbing capacity, partly offset by the increase in the LRD.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management
164
Swiss SRB total loss-absorbing capacity movement
USD m
Going concern capital
Common equity tier 1 capital as of 31.12.22
Operating profit before tax excluding negative goodwill
Current tax (expense) / benefit
Share repurchase program
Foreign currency translation effects, before tax
Compensation- and own share-related capital components
Deferred tax assets on temporary differences
Accruals for proposed dividends to shareholders
CET1 capital acquired from Credit Suisse Group as of the acquisition date
Transitional CET1 purchase price allocation adjustments as of the acquisition date, net of tax
Amortization of transitional CET1 purchase price allocation adjustments, net of tax
Other
Common equity tier 1 capital as of 31.12.23
Loss-absorbing additional tier 1 capital as of 31.12.22
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
Loss-absorbing additional tier 1 capital as of 31.12.23
Total going concern capital as of 31.12.22
Total going concern capital as of 31.12.23
Gone concern loss-absorbing capacity
Tier 2 capital as of 31.12.22
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
Tier 2 capital as of 31.12.23
TLAC-eligible senior unsecured debt as of 31.12.22
TLAC-eligible senior unsecured debt acquired from Credit Suisse
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
Debt bought back under the tender offer
Interest rate risk hedge, foreign currency translation and other effects
TLAC-eligible senior unsecured debt as of 31.12.23
Total gone concern loss-absorbing capacity as of 31.12.22
Total gone concern loss-absorbing capacity as of 31.12.23
Total loss-absorbing capacity
Total loss-absorbing capacity as of 31.12.22
Total loss-absorbing capacity as of 31.12.23
Additional information
Swiss SRB
45,457
991
(1,567)
(1,279)
1,473
(285)
1,919
(2,240)
29,874
5,005
(689)
(174)
78,485
12,864
3,455
(3,023)
596
13,892
58,321
92,377
2,958
(2,437)
17
538
44,033
53,556
13,403
(5,971)
(791)
(792)
3,128
106,567
46,991
107,106
105,312
199,483
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.
Consequently, 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, 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.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management
165
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
24bn and our CET1 capital by USD 2.6bn as of 31 December 2023 (31 December 2022: USD 13bn and USD 1.4bn,
respectively) and decreased our CET1 capital ratio by 13 basis points (31 December 2022: 13 basis points).
Conversely, a 10% appreciation of the US dollar against other currencies would have decreased our RWA by USD
21bn and our CET1 capital by USD 2.4bn (31 December 2022: USD 12bn and USD 1.3bn, respectively) and increased
our CET1 capital ratio by 13 basis points (31 December 2022: 13 basis points).
Leverage ratio denominator
Our leverage ratio is also sensitive to foreign exchange 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 114bn as of 31 December 2023 (31 December 2022: USD 63bn) and decreased our CET1 leverage ratio by 15 basis
points (31 December 2022: 12 basis points). Conversely, a 10% appreciation of the US dollar against other currencies
would have decreased our LRD by USD 103bn (31 December 2022: USD 57bn) and increased our CET1 leverage ratio by
15 basis points (31 December 2022: 12 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.
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 liabilities” in the “Consolidated financial statements” section of this report. We have
employed for this purpose the advanced measurement approach (AMA) methodology that we use when determining
the capital requirements associated with operational risks, based on a 99.9% confidence level over a 12-month horizon.
The methodology takes into consideration UBS and industry experience for the AMA operational risk categories to which
those matters correspond, as well as the external environment affecting risks of these types, in isolation from other areas.
On this 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 4.0bn as of 31 December 2023. This estimate is not related
to and does not take into account any provisions recognized for any of these matters and does not constitute a subjective
assessment of our actual exposure in any of these matters.
› Refer to “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 more
information
Capital and capital ratios of our significant regulated subsidiaries
UBS Group AG is a holding company conducting substantially all operations through UBS AG, Credit Suisse AG and
subsidiaries thereof. UBS Group AG, UBS AG and Credit Suisse 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 2023 Pillar 3 Report, available under “Pillar 3 disclosures” at ubs.com/investors, for more capital and
other regulatory information about our significant regulated subsidiaries and sub-groups
Joint liability of UBS AG and UBS Switzerland AG
In June 2015, upon the transfer of the Personal & Corporate Banking and Global Wealth Management businesses booked
in Switzerland from UBS AG to UBS Switzerland AG, UBS AG and UBS Switzerland AG assumed joint liability for
obligations transferred to UBS Switzerland AG and existing at UBS AG, respectively. Under certain circumstances, the
Swiss Banking Act and FINMA’s Banking Insolvency Ordinance authorize FINMA to modify, extinguish or convert to
common equity liabilities of a bank in connection with a resolution or insolvency of such bank.
The joint liability amounts have declined as obligations matured, terminated or were novated following the transfer date.
As of 31 December 2023, the liability of UBS Switzerland AG amounted to CHF 2.8bn (USD 3.3bn), a decrease of
CHF 1.2bn (USD 1.0bn) compared with 31 December 2022. The respective liability of UBS AG has been substantially
extinguished.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management
166
Risk-weighted assets
RWA development in 2023
During 2023, RWA increased by USD 226.9bn to USD 546.5bn, primarily due to a USD 237.7bn increase resulting from
the acquisition of the Credit Suisse Group. Excluding that acquisition, RWA decreased by USD 10.8bn, primarily driven
by decreases of USD 19.0bn due to asset size and other movements and USD 3.7bn due to model updates and
methodology changes, partly offset by an increase of USD 11.8bn due to currency effects.
› Refer to the 31 December 2023 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
Movement in risk-weighted assets, by key driver
USD bn
Credit and counterparty credit risk3
Non-counterparty-related risk4
Market risk
Operational risk
Total
1 Includes the Pillar 3 categories “Asset size,” “Credit quality of counterparties,” “Acquisitions and disposals” and “Other.” For more information, refer to the 31 December 2023 Pillar 3 Report, available under
“Pillar 3 disclosures” at ubs.com/investors. 2 Reflects the RWA acquired from the Credit Suisse Group as on 30 June 2023. Subsequent changes in this portfolio in the second half of 2023 are shown under currency
effects, model updates and methodology changes or asset size and other changes. 3 Includes settlement risk, credit valuation adjustments, equity and investments in funds exposures in the banking book, and
securitization exposures in the banking book. 4 Non-counterparty-related risk includes deferred tax assets recognized for temporary differences, property, equipment, software and other items.
(0.2)
(5.0)
(3.7)
11.8
RWA as of
31.12.22
200.5
24.2
13.5
81.4
319.6
of which:
Acquisition of
the Credit
Suisse Group
on 30.6.23 2
152.4
6.7
9.5
69.0
237.7
Asset size and
other1
132.3
9.3
8.1
69.0
218.8
RWA as of
31.12.23
345.3
34.4
21.4
145.4
546.5
Model updates
and
methodology
changes
1.5
Currency
effects
11.0
0.8
Credit and counterparty credit risk
Credit and counterparty credit risk RWA increased by USD 144.8bn to USD 345.3bn as of 31 December 2023, primarily
due to a USD 152.4bn increase resulting from the acquisition of the Credit Suisse Group.
Excluding that acquisition, credit and counterparty credit risk RWA decreased by USD 7.6bn, driven by a USD 20.1bn
decrease related to asset size and other movements, mainly due to lower RWA in Non-core and Legacy, primarily driven
by an accelerated roll-off arising from our actions to actively unwind the portfolio, in addition to the natural roll-off, as
well as lower RWA from loans in Global Wealth Management and Personal & Corporate Banking. These decreases were
partly offset by currency effects of USD 11.0bn and an increase of USD 1.5bn from model updates and methodology
changes, driven by increases related to various updates, most notably due to updates for private equity and hedge fund
financing trades, as well as for derivatives and securities financing transaction models, partly offset by decreases related
to the recalibration of certain multipliers as a result of our improvements to models.
› Refer to “Credit risk” in the “Risk management and control” section of this report for more information about credit and
counterparty credit risk developments
› Refer to the 31 December 2023 Pillar 3 Report, available under “Pillar 3 disclosures” at ubs.com/investors, for more information
about credit and counterparty credit risk developments
Non-counterparty-related risk
Non-counterparty-related risk RWA increased by USD 10.1bn, primarily due to a USD 6.7bn increase resulting from the
acquisition of the Credit Suisse Group. Excluding that acquisition, non-counterparty-related risk RWA increased by
USD 3.4bn, mainly driven by higher RWA from deferred taxes on temporary differences.
Market risk
Market risk RWA increased by USD 7.9bn to USD 21.4bn as of 31 December 2023, primarily due to a USD 9.5bn increase
resulting from the acquisition of the Credit Suisse Group. Excluding that acquisition, market risk RWA decreased by
USD 1.6bn, driven by a decrease of USD 1.4bn from asset size and other movements and a decrease of USD 0.2bn related
to ongoing parameter updates of the value-at-risk (VaR) model. FINMA approved the integration of time decay into
regulatory VaR and stressed VaR, which went live on 12 January 2024.
› Refer to “Market risk” in the “Risk management and control” section of this report for more information about market risk
developments
› Refer to the 31 December 2023 Pillar 3 Report, available under “Pillar 3 disclosures” at ubs.com/investors, for more information
about market risk developments
Operational risk
Operational risk RWA increased by USD 64.0bn to USD 145.4bn as of 31 December 2023, primarily due to a USD 69.0bn
increase resulting from the acquisition of the Credit Suisse Group. The aggregation of the advanced measurement
approach (AMA) model considering diversification effects resulted in a USD 10.0bn reduction in RWA, of which
USD 5.0bn was reflected in the acquisition balance of the Credit Suisse Group and USD 5.0bn was included as a model
update.
› Refer to “Advanced measurement approach model” in the “Risk management and control” section of this report for more
information about the AMA model
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management
167
Outlook
We expect that model updates will result in an RWA increase of around USD 10bn in 2024 and 2025, primarily as a result
of the migration of Credit Suisse portfolios to UBS models. The extent and timing of RWA changes may vary as model
updates are completed and receive regulatory approval, along with changes in the composition of the relevant portfolios.
In addition, we currently estimate that the revised Basel III framework, including the Fundamental Review of the Trading
Book, will lead to a further increase in RWA of approximately USD 25bn, of which USD 10bn is in Non-core and Legacy.
This estimate is based on static balances and on our current understanding of the relevant standards before taking into
account mitigating actions and not reflecting the impact of the output floor, which is phased in over time. It may change
as a result of new or updated regulatory interpretations, appropriate conservatism in model calibration, the
implementation of Basel III standards into national law, changes in business growth, market conditions and other factors.
The core business-led reductions in RWA, coupled with the run-down of positions in the Non-core and Legacy business
division, are expected to more than offset the effects of model updates and revised Basel III standards in 2024 and 2025.
Risk-weighted assets, by business division and Group Items
USD bn
Credit and counterparty credit risk2
Non-counterparty-related risk3
Market risk
Operational risk
Total
Credit and counterparty credit risk2
Non-counterparty-related risk3
Market risk
Operational risk
Total
Credit and counterparty credit risk2
Non-counterparty-related risk3
Market risk
Operational risk
Total
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Non-core and
Legacy1
Group
Items1
Total
RWA
90.4
6.8
1.7
57.5
156.5
68.4
5.9
1.6
37.6
113.5
22.1
0.9
0.1
19.9
43.0
137.8
3.4
0.1
19.5
160.8
64.9
1.9
0.0
9.1
75.9
72.9
1.5
0.1
10.4
84.9
31.12.23
65.0
3.8
12.5
25.0
7.6
0.8
0.1
7.2
15.6
106.3
31.12.22
3.0
0.6
3.2
6.7
57.7
3.7
10.1
21.3
92.8
31.12.23 vs 31.12.22
4.5
0.2
0.1
4.1
8.9
7.3
0.1
2.4
3.7
13.5
34.3
2.5
5.1
30.0
72.0
2.2
0.0
0.7
10.1
13.0
32.2
2.5
4.5
19.9
59.0
10.2
17.1
1.9
6.2
35.3
4.3
12.1
1.1
17.6
5.8
4.9
0.8
6.2
17.7
345.3
34.4
21.4
145.4
546.5
200.5
24.2
13.5
81.4
319.6
144.8
10.1
7.9
64.0
226.9
1 Starting with the third quarter of 2023, Non-core and Legacy represents a separate reportable segment and Group Functions has been renamed Group Items. Prior periods have been revised to reflect these changes.
Operational Risk RWA was fully allocated to Non-core and Legacy as of 31.12.2022. 2 Includes settlement risk, credit valuation adjustments, equity exposures in the banking book, investments in funds and
securitization exposures in the banking book. 3 Non-counterparty-related risk includes deferred tax assets recognized for temporary differences (31 December 2023: USD 16.4bn; 31 December 2022: USD 11.4bn),
as well as property, equipment, software and other items (31 December 2023: USD 18bn; 31 December 2022: USD 12.9bn).
Leverage ratio denominator
During 2023, the LRD increased by USD 666.9bn to USD 1,695.4bn, primarily due to a USD 644.4bn increase resulting
from the acquisition of the Credit Suisse Group. Excluding that acquisition, the LRD increased by USD 53.8bn due to
currency effects, partly offset by USD 31.3bn due to asset size and other movements.
Movement in leverage ratio denominator, by key driver
USD bn
On-balance sheet exposures (excluding derivatives and securities financing transactions)1
Derivatives
Securities financing transactions
Off-balance sheet items
Deduction items
Total
1 Reflects the LRD acquired from the Credit Suisse Group as at 30 June 2023. Subsequent changes in this portfolio in the second half of 2023 are shown under currency effects or asset size and other changes.
Asset size and
other
463.7
37.7
65.5
43.0
3.3
613.1
of which: Acquisition of
the Credit Suisse Group
as on 30.6.23 1
464.2
48.8
63.5
64.6
3.4
644.4
LRD as of
31.12.22
816.0
90.3
98.6
34.4
(10.8)
1,028.5
Currency
effects
49.5
0.1
1.4
2.5
0.3
53.8
LRD as of
31.12.23
1,329.2
128.1
165.4
79.9
(7.2)
1,695.4
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management
168
The LRD movements described below exclude currency effects.
On-balance sheet exposures (excluding derivatives and securities financing transactions) increased by USD 463.7bn,
primarily due to a USD 464.2bn increase resulting from the acquisition of the Credit Suisse Group. Excluding that
acquisition, on-balance sheet exposures decreased by USD 0.5bn, mainly due to lower lending balances, partly offset by
higher central bank balances and trading portfolio assets.
Derivatives exposures increased by USD 37.7bn, primarily due to a USD 48.8bn increase resulting from the acquisition of
the Credit Suisse Group. Excluding that acquisition, derivative exposures decreased by USD 11.0bn, mainly reflecting
market-driven movements and lower trading volumes across products.
Securities financing transactions exposures increased by USD 65.5bn, primarily due to a USD 63.5bn increase resulting
from the acquisition of the Credit Suisse Group. Excluding that acquisition, security financing transactions increased by
USD 2.0bn.
Off-balance sheet items exposures increased by USD 43.0bn, primarily due to a USD 64.6bn increase resulting from the
acquisition of the Credit Suisse Group. Excluding that acquisition, off-balance sheet items exposures decreased by
USD 21.6bn, mainly due to a decrease in loan commitments in Non-core and Legacy, following the accounting
reclassification of loan commitments from accrual to fair value.
› Refer to “Balance sheet and off-balance sheet” in this section for more information about balance sheet movements
Leverage ratio denominator by business division and Group Items
USD bn
On-balance sheet exposures
Derivatives
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
Total
On-balance sheet exposures
Derivatives
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
Total
On-balance sheet exposures
Derivatives
Securities financing transactions
Off-balance sheet items
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy1
Group Items1
Total
428.3
8.1
36.4
20.3
(4.7)
488.4
364.8
5.4
20.5
8.8
(5.2)
394.4
63.5
2.7
15.9
11.5
442.4
3.0
28.3
38.5
4.3
516.6
223.4
1.5
10.8
16.6
(0.2)
252.1
219.0
1.6
17.6
21.9
31.12.23
217.2
90.3
39.9
18.3
(0.4)
365.2
31.12.22
189.5
80.0
40.4
6.9
(0.4)
316.6
5.8
0.0
0.1
0.2
(1.2)
4.9
4.0
0.0
0.1
(1.2)
2.9
31.12.23 vs. 31.12.22
1.8
0.0
0.0
0.2
27.6
10.3
(0.6)
11.4
95.0
23.6
17.7
1.6
(0.7)
137.1
2.9
2.5
0.9
0.0
0.0
6.3
92.1
21.1
16.8
1.6
140.5
1,329.2
3.1
43.1
1.1
(4.5)
183.2
31.3
0.9
26.0
2.1
(3.9)
56.3
109.2
2.2
17.1
(1.0)
128.1
165.4
79.9
(7.2)
1,695.4
816.0
90.3
98.6
34.4
(10.8)
1,028.5
513.2
37.9
66.8
45.5
Items deducted from Swiss SRB tier 1 capital
3.6
666.9
Total
1 Starting with the third quarter of 2023, Non-core and Legacy represents a separate reportable segment and Group Functions has been renamed Group Items. Prior periods have been revised to reflect these changes.
(0.7)
130.9
(0.7)
126.9
4.5
264.5
0.0
48.6
0.5
94.0
0.0
2.0
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management
169
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 risk. This section provides information about liquidity and funding regulatory
requirements, governance, management (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.
Following the completion of the acquisition of the Credit Suisse Group, Credit Suisse became part of the overall liquidity
and funding management of the UBS Group. Credit Suisse now leverages the market access of UBS and engages in
secured intercompany transactions to facilitate funding between entities.
The UBS Group is managed as an aggregate of UBS AG and Credit Suisse AG. The subsections on liquidity and funding
stress testing and funding management describe the management implemented at UBS AG. The underlying frameworks
and models have been materially aligned and are subject to further alignment as the integration progresses. For details
on the management of Credit Suisse AG, please refer to the Credit Suisse AG Annual Report 2023.
Strategy, objectives and governance
Audited | Our management of liquidity and funding has the overall objective of protecting our business franchises and
prudently managing our internal and regulatory liquidity and funding requirements. We measure liquidity and funding
risk using internal and regulatory models and metrics. We define and implement internal stress testing across different
time horizons, scenarios and currencies to ensure we have sufficient liquidity and funding, while remaining compliant
with regulatory requirements, primarily expressed through 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).
Liquidity and funding limits and other indicators (including early-warning indicators) are set at Group and, where
appropriate, at legal entity and business-division levels. Key limits (under BoD authority) and indicators linked to
these limits are reviewed and reconfirmed at least once a year by the BoD, the GEB, the Group ALCO, the Group
Chief Financial Officer, the Group Chief Risk Officer and the Group Treasurer, taking into consideration the Group’s
business strategy and risk appetite. Treasury Risk Control provides independent oversight over liquidity and funding
risk.
› Refer to the “Corporate governance” and “Risk management and control” sections of this report for more information
Group Treasury monitors and oversees the implementation and execution of our liquidity and funding strategy and
manages liquidity and funding risk within the limits and other relevant indicators, thereby adhering to the internal risk
appetite and regulatory requirements. This includes close control of both our cash and collateral, including our high-
quality liquid assets (HQLA), and centralizes the Group’s access to wholesale cash markets in Group Treasury. To
complement our business-as-usual management, Group Treasury maintains a Contingency Funding Plan and contributes
to plans for recovery and resolution to define procedures throughout the crisis continuum. Group Treasury reports on
the Group’s liquidity and funding status and position, at least monthly, to the Group ALCO and the Risk Committee of
the BoD.
Liquidity and funding stress testing
Audited | Our liquidity and funding risk management aims to ensure that the firm has sufficient liquidity and funding to
survive a severe idiosyncratic and market-wide liquidity and funding stress event without government support, allowing
for discrete management actions.
Group Treasury maintains a diversified, high-quality pool of unencumbered liquid assets under Treasury control. The
liquid asset portfolio is managed dynamically, so as to operate at all times within the internal risk appetite and other
relevant Group and subsidiary liquidity and funding requirements.
Our liquidity and funding stress testing covers two main stress scenarios: a combined (market and idiosyncratic) scenario
and a structural market-wide scenario. We continuously refine stress-testing assumptions.
› Refer to “Risk measurement” in the “Risk management and control” section of this report for more information about stress
testing
› Refer to “Liquidity and funding stress testing” in the “Liquidity and funding management” section of the Credit Suisse AG Annual
Report 2023 for more information about liquidity and funding stress testing at Credit Suisse AG
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management
170
Combined (market and idiosyncratic) scenario
In this scenario, UBS faces the consequences of both a severely deteriorated macroeconomic and financial market
environment and a UBS-specific event, resulting in an acute loss of liquidity over a relatively short period of time. This
scenario represents severe yet plausible events encompassing both market-wide and idiosyncratic elements, in which,
however, franchise client relationships are materially maintained.
The risk appetite objective of this stress test is to ensure that UBS keeps a cumulative liquidity surplus on each day in the
three-month stress horizon. The liquidity gap is assessed by modeling the stressed liquidity value of the liquidity buffer
and stressed liquidity inflows and outflows under the scenario.
Structural market-wide scenario
In this scenario, UBS is subject to a significant deterioration of macroeconomic and financial market conditions globally,
resulting in a requirement for long-term funding to survive the liquidity drain and support the franchise of the business.
Macroeconomic shocks result in deteriorated financial market conditions over the scenario horizon of one year. UBS is
assumed to be affected equally relative to other global financial institutions.
The risk appetite objective of this stress test is to ensure that UBS maintains a positive cumulative behavioral liquidity gap
across the 3-month, 6-month, 9-month and 12-month tenors. The liquidity gap is assessed by modeling the stressed
liquidity value of the liquidity buffer, and stressed liquidity inflows and outflows under the scenario.
Funding management
Audited | Group Treasury monitors our funding position, including concentration risk, aiming to ensure that we maintain a
well-balanced and diversified liability structure. Our funding management team looks to create the optimal liability
structure to finance our businesses in a reliable and cost-efficient manner. Our funding activities are planned by analyzing
the overall liquidity and funding requirements, 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 an ongoing basis. The
Funding Plan is developed by Group Treasury and approved by the Group ALCO.
› Refer to “Balance sheet and off-balance sheet” in this section for more information about the development of our short- and
long-term debt during 2023
Global Wealth Management and Personal & Corporate Banking provide significant, cost-efficient and stable sources of
funding. These include deposits and debt issued through the Swiss central mortgage institutions and UBS’s covered bond
programs, 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 UBS to source funding from institutional
and private investors who are active in Europe, the US and Asia Pacific. 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 our global liquidity and funding framework to govern the liquidity management of our branches and subsidiaries.
Group Treasury meets 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 aims to incentivize that we have the right balance of assets and
liabilities in currencies and tenors.
Credit ratings
Credit ratings can affect the cost and availability of funding, especially from wholesale unsecured sources. Our credit
ratings can also influence the performance of some of our businesses and the levels of client and counterparty confidence.
Rating agencies take into account a range of factors when assessing creditworthiness and setting credit ratings. These
include the company’s strategy, its business position and franchise value, stability and quality of earnings, capital
adequacy, risk profile and management, liquidity management, diversification of funding sources, asset quality, and
corporate governance. Credit ratings reflect the opinions of the rating agencies and can change at any time.
In evaluating our liquidity and funding requirements, we consider the potential effect of a reduction in 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 to counterparties
from contractual obligations related to over-the-counter (OTC) derivative positions and other obligations. Based on our
credit ratings as of 31 December 2023, in the event of a one-notch reduction in our long-term credit ratings, we would
have been required to provide USD 0.5bn in cash or other collateral. In the event of a two-notch reduction, it would have
been USD 0.9bn and for a three-notch downgrade USD 1.4bn. In the two- and three-notch scenarios the collateral
requirements predominantly relate to OTC derivative positions.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management
171
In March 2023, following the announcement of the planned acquisition of the Credit Suisse Group, rating agencies took
the following actions regarding UBS Group AG’s ratings: S&P Global Ratings Europe Limited (S&P) placed its “A–”‘ Long-
term Issuer Credit Rating on Negative outlook, Fitch Ratings Ireland Limited (Fitch) placed its “A+” Long-Term Issuer
Default Rating (IDR) on Rating Watch Negative and Moody’s Investors Service Limited (Moody’s) changed the outlook on
its “A3” Long-term Issuer Default Rating to Negative. Upon the close of the acquisition in June 2023, Fitch downgraded
UBS Group’s Long-Term IDR to A from A+ and changed the outlook to Stable, while Moody’s changed the outlook on
UBS Group’s Long-term IDR to Positive. In February 2024, S&P affirmed their ratings and outlook for UBS Group.
› Refer to “Liquidity and funding management are critical to UBS’s ongoing performance” in the “Risk factors” section of this report
for more information
› Refer to “Funding Management” in the “Liquidity and funding management” section of the Credit Suisse AG Annual Report 2023
for more information about funding management at Credit Suisse AG
Contingency Funding Plan
Audited | We maintain our Contingency Funding Plan as a preparation and action plan, aiming to ensure we maintain
sufficient liquidity to meet payment obligations in a period of liquidity and funding stress. The plan specifies the processes,
tools and responsibilities that we have available to effectively manage liquidity and funding through these periods. Our
funding diversification and global scope help to protect our liquidity position in the event of a crisis. Our contingent
funding sources include our HQLA portfolios, available Central Bank eligible non-HQLA collateral for liquidity facilities at
several major central banks, contingent reductions of trading portfolio assets, and other actions available to the
management.
Liquidity coverage ratio
The LCR measures the short-term resilience of a bank’s liquidity profile by assessing whether sufficient HQLA are available
to meet 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 in subsidiaries and branches are excluded from the calculation of Group HQLA. On this basis, USD 42.3bn of
assets were excluded from our daily average Group HQLA for the fourth quarter of 2023. 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 2023 was 215.7%, compared with 163.7% in the fourth quarter of
2022, remaining above the prudential requirement communicated by FINMA.
The movement in the average LCR was primarily driven by an increase in HQLA of USD 177.0bn to USD 415.6bn, primarily
related to Credit Suisse HQLA and higher cash available from debt issued and customer deposits in UBS Group excluding
Credit Suisse. The increase in HQLA was partly offset by a USD 46.8bn increase in net cash outflows to USD 192.8bn,
largely attributable to Credit Suisse’s net cash outflows related to customer deposits and credit commitments. These
outflows were partly offset by lower outflows from customer deposits of UBS Group excluding Credit Suisse.
› Refer to the 31 December 2023 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 bn, except where indicated
High-quality liquid assets
Total net cash outflows2
146.0
Liquidity coverage ratio (%)3
163.7
1 Calculated based on an average of 63 data points in the fourth quarter of 2023 and 63 data points in the fourth quarter of 2022. 2 Represents the net cash outflows expected over a stress period of 30 calendar
days. 3 Calculated after the application of haircuts and inflow and outflow rates, as well as, where applicable, caps on Level 2 assets and cash inflows.
Average 4Q221
238.6
Average 4Q231
415.6
192.8
215.7
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management
172
Too-big-to-fail liquidity requirements
The too-big-to-fail (TBTF) liquidity requirements communicated by the Swiss Financial Market Supervisory Authority
(FINMA) in the third quarter of 2023 became effective on 1 January 2024. The affected legal entities of the UBS Group
are compliant with these requirements.
Net stable funding ratio
The 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), as numerator, and required stable funding (RSF), as denominator. 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 assets based on their 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%.
As of 31 December 2023, the NSFR increased 4.9 percentage points to 124.7%, remaining above the prudential
requirement communicated by FINMA.
Available stable funding increased by USD 365.0bn to USD 926.4bn, predominantly driven by the acquisition of the
Credit Suisse Group, mainly reflecting debt issued, customer deposits and regulatory capital. The increase in UBS Group
excluding Credit Suisse was predominantly driven by higher customer deposits and debt issued.
Required stable funding increased by USD 274.7bn to USD 743.2bn, substantially reflecting the acquisition of the Credit
Suisse Group. This balance predominantly includes lending assets and, to a lesser extent, trading portfolio assets and
derivative balances. Required stable funding in UBS Group excluding Credit Suisse increased, mainly driven by higher
lending assets, including currency effects, and higher trading portfolio assets.
› Refer to the 31 December 2023 Pillar 3 Report, available under “Pillar 3 disclosures” at ubs.com/investors, for more information
about the NSFR
› Refer to the “Significant regulated subsidiary and sub-group information” section of this report for more information about the
NSFR of UBS AG and UBS Switzerland AG
Net stable funding ratio
USD bn, except where indicated
Available stable funding (ASF)
Required stable funding (RSF)
Net stable funding ratio (%)
31.12.23
926.4
743.2
124.7
31.12.22
561.4
468.5
119.8
Balance sheet and off-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. Refer to the “Consolidated financial
statements” section of this report for more information about the development of our financial position. For more
information about the effects of the acquisition of the Credit Suisse Group on our balance sheet and off-balance sheet,
refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements”
section of this report.
Balance sheet
Balance sheet assets
As of 31 December 2023, balance sheet assets totaled USD 1,717.2bn, an increase of USD 612.9bn compared with
31 December 2022, which was mainly driven by the acquisition of the Credit Suisse Group, which contributed
USD 604.1bn in June 2023.
Cash and balances at central banks increased by USD 144.7bn to USD 314.1bn. The acquisition of the Credit Suisse
Group in June 2023 contributed USD 93.0bn, mainly in balances with the Swiss National Bank (the SNB) and the Federal
Reserve. Excluding the effects of that acquisition, balances with central banks increased by USD 51.7bn during 2023,
driven by inflows from higher customer deposits, lower lending and net new issuances of short-term debt and debt issued
designated at fair value, as well as currency effects. These inflows were partly offset by repayment of funding from the
SNB and other outflows.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management
173
Lending assets increased by USD 259.0bn to USD 661.0bn, predominantly reflecting the acquisition of the Credit Suisse
Group, which added USD 260.8bn in June 2023. Excluding the increase from the addition in June, Lending assets
decreased by USD 1.8bn during 2023, mainly reflecting net new loan outflows of USD 37.0bn, partly offset by currency
effects. Securities financing transactions at amortized cost increased by USD 31.2bn to USD 99.0bn, of which
USD 26.2bn related to balances acquired from the Credit Suisse Group in June 2023. Excluding the effects of that
acquisition, the increase mainly reflects net new excess cash reinvestment trades. Trading assets increased by USD 61.7bn
to USD 169.6bn, including USD 56.2bn reflecting the acquisition of the Credit Suisse Group in June 2023. Excluding the
additions from that acquisition, the increase mainly reflected higher inventory held to hedge client positions and market-
driven movements, partly offset by the wind-down of the Credit Suisse business in Non-Core and Legacy.
Derivatives and cash collateral receivables on derivative instruments increased by USD 41.1bn to USD 226.2bn. The
increase related mainly to the acquisition of the Credit Suisse Group, which added USD 83.0bn in June 2023, including
USD 20.9bn of cash collateral receivables. Excluding the effects of that acquisition, balances decreased by USD 42bn,
mainly in Derivatives & Solutions and Financing in the Investment Bank, predominantly reflecting decreases in foreign
exchange contracts, where the contracts in place at the end of 2023 had lower fair values than the contracts in place at
the end of 2022, as well as decreases in interest rate contracts, mainly reflecting valuation effects due to decreases in
long-term interest rates. In addition, the unwinding of the Credit Suisse business in Non-core and Legacy contributed to
the decrease.
Other financial assets measured at amortized cost increased by USD 12.2bn to USD 65.5bn, mostly related to the
acquisition of the Credit Suisse Group, which added USD 13.4bn, reflecting finance lease receivables, as well as cash
collateral provided to exchanges and clearing houses to secure securities trading activity through those counterparties.
Other financial assets measured at fair value increased by USD 44.3bn to USD 106.3bn. Excluding the effects of the
acquisition of the Credit Suisse Group, which added USD 54.2bn in June 2023, balances decreased by USD 9.9bn, mainly
reflecting the wind-down of the Credit Suisse business in Non-core and Legacy, partly offset by higher securities financing
transactions measured at fair value in Group Treasury. Non-financial assets increased by USD 15.3bn to USD 54.5bn,
mainly driven by positions acquired from the Credit Suisse Group, which were USD 16.8bn as of the acquisition date and
mainly included leased and owned properties and equipment, investments in associates, and prepaid expenses, as well
as physical holdings of precious metals.
Assets
USD bn
Cash and balances at central banks
Lending1
Securities financing transactions at amortized cost
Trading assets
Derivatives and cash collateral receivables on derivative instruments
Brokerage receivables
Other financial assets measured at amortized cost
Other financial assets measured at fair value2
Non-financial assets
Total assets
of which: Credit Suisse3
As of
31.12.23
314.1
661.0
99.0
169.6
226.2
21.0
65.5
106.3
54.5
1,717.2
583.2
31.12.22
169.4
402.0
67.8
107.9
185.1
17.6
53.3
62.0
39.2
1,104.4
% change from
31.12.22
85
64
46
57
22
20
23
71
39
55
1 Consists of loans and advances to customers and amounts due from banks. 2 Consists of Financial assets at fair value not held for trading and Financial assets measured at fair value through other comprehensive
income. 3 Refer to "Note 2 Accounting for the acquisition of the Credit Suisse Group" in the "Consolidated financial statements" section of this report for more information.
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, and assets held in certain jurisdictions to comply
with explicit minimum local asset maintenance requirements.
Assets that cannot be pledged as collateral represent assets that are not encumbered but by their nature are not
considered available to secure funding or meet collateral needs.
All other assets are presented as Unencumbered. This category consists of cash and securities readily realizable in the
normal course of business, which include our high-quality liquid assets and unencumbered positions in our trading
portfolio. In addition, unencumbered assets include loans and advances to customers and amounts due from banks.
Unencumbered assets that are considered to be available to secure funding at the legal entity level may be subject to
restrictions that limit the total amount of assets available to the Group as a whole.
› Refer to “Note 23 Restricted and transferred financial assets” in the “Consolidated financial statements” section of this report for
more information
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
174
Asset encumbrance as of 31 December 2023
USD bn
Balance sheet
Cash and balances at central banks
Amounts due from banks
Receivables from securities financing transactions measured at amortized cost
Cash collateral receivables on derivative instruments
Loans and advances to customers
Other financial assets measured at amortized cost
Total financial assets measured at amortized cost
Financial assets at fair value held for trading
Derivative financial instruments
Brokerage receivables
Financial assets at fair value not held for trading
Total financial assets measured at fair value through profit or loss
Financial assets measured at fair value through other comprehensive income
Non-financial assets
Total balance sheet assets as of 31 December 2023
Total balance sheet assets as of 31 December 2022
Off-balance sheet
Fair value of securities accepted as collateral as of 31 December 2023
Fair value of securities accepted as collateral as of 31 December 2022
Total balance sheet assets and off-balance sheet securities accepted as collateral as of
31 December 2023
of which: Credit Suisse 3
Encumbered
Assets
otherwise
restricted and
not available to
secure funding
Unencumbered
assets
Assets that
cannot be
pledged as
collateral
Assets pledged
as collateral
Total Group
1.0
127.4
7.61
136.0
83.71
3.11
86.8
222.8
77.5
382.3
331.8
605.1
134.3
0.4
2.9
9.5
0.3
4.7
17.8
0.2
18.2
18.4
1.8
0.0
38.0
27.3
5.3
5.6
312.8
18.2
512.2
43.5
886.7
85.8
45.0
130.7
0.4
25.8
1,043.6
697.1
189.0
96.6
0.1
99.0
40.5
9.7
149.4
176.1
21.0
37.7
234.8
28.6
412.9
302.5
314.1
21.2
99.0
50.1
639.8
65.5
1,189.8
169.6
176.1
21.0
104.0
470.8
2.2
54.5
1,717.2
1,104.4
576.6
434.0
43.3
7.0
1,232.62
401.0
412.9
129.1
2,293.8
671.3
Total balance sheet assets and off-balance sheet securities accepted as collateral as of
31 December 2022
1,538.4
1 Includes assets pledged as collateral that may be sold or repledged by counterparties. The respective amounts are disclosed in “Note 23 Restricted and transferred financial assets” in the “Consolidated financial
statements” section of this report. 2 Includes high-quality liquid assets (31 December 2023: 443.0bn; 31 December 2022: 238.6bn). 3 Refer to "Note 2 Accounting for the acquisition of the Credit Suisse Group"
in the "Consolidated financial statements" section of this report for more information.
793.72
302.5
409.3
33.0
Balance sheet liabilities
Total liabilities as of 31 December 2023 were USD 1,630.6bn, an increase of USD 583.5bn compared with 31 December
2022, which was mainly driven by the acquisition of the Credit Suisse Group.
Short-term borrowings increased by USD 68.2bn to USD 109.5bn. The acquisition of the Credit Suisse Group added
USD 112.9bn in June 2023, including USD 97.2bn of funding from the SNB. Excluding the effects of the addition of
Credit Suisse balances, short-term borrowings decreased by USD 44.7bn, mainly driven by the repayment of USD 56.5bn
of funding from the Swiss National Bank. This decrease was partly offset by net new issuances of commercial paper and
certificates of deposit in Group Treasury, as well as an increase in funding obtained from the US Federal Home Loan
Banks. Securities financing transactions at amortized cost increased by USD 10.2bn to USD 14.4bn, mainly driven by the
acquisition of the Credit Suisse Group, which added USD 11.9bn in June 2023.
Customer deposits increased by USD 266.9bn to USD 792.0bn. The acquisition of the Credit Suisse Group contributed
USD 183.1bn in June 2023. Excluding the effects of that acquisition, the increase of USD 83.8bn was mainly due to
currency effects of approximately USD 31.3bn and net inflows into fixed-term deposit products in Global Wealth
Management and Personal & Corporate Banking, partly offset by continued shifts into money market funds and US-
government securities.
Debt issued designated at fair value and long-term debt issued measured at amortized cost increased by USD 169.0bn
to USD 327.6bn. The increase mainly related to the acquisition of the Credit Suisse Group, which added USD 150.1bn
to the Group. Excluding the effects of the acquisition of the Credit Suisse Group, Debt issued designated at fair value
and long-term debt issued measured at amortized cost increased by USD 18.9bn, mainly reflecting net new issuances of
Debt issued designated at fair value in Derivatives & Solutions, as well as net new issuances of senior unsecured debt,
including total loss-absorbing capacity (TLAC)-eligible instruments, and loss-absorbing tier 1 capital instruments.
In December 2023, we announced our intention to call one high-trigger loss-absorbing tier 1 capital instrument of
USD 2.5bn, which was redeemed in January 2024.
› Refer to “Capital management” in this section for more information
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
175
Derivatives and cash collateral payables on derivative instruments increased by USD 42.4bn to USD 233.8bn, including
USD 78.7bn recognized in June 2023 with the acquisition of the Credit Suisse Group, of which USD 10.9bn was cash
collateral payables. Excluding that acquisition, balances decreased by USD 36.3bn, reflecting the same drivers as on the
asset side.
Other financial liabilities measured at amortized cost increased by USD 11.3bn to USD 20.9bn. The balances of USD 8.0bn
added with the acquisition of Credit Suisse Group in June 2023 mainly included accrued expenses and lease liabilities.
Excluding the effects of that acquisition, balances increased mainly due to higher interest accruals. Non-financial liabilities
increased by USD 14.1bn to USD 26.3bn. The increase mainly related to the acquisition of the Credit Suisse Group, which
added USD 13.8bn in June 2023, mainly representing provisions and contingent liabilities, compensation-related liabilities
and deferred tax liabilities.
Equity
Equity attributable to shareholders increased by USD 29,232m to USD 86,108m as of 31 December 2023.
The increase of USD 29,232m was mainly driven by total comprehensive income attributable to shareholders of
USD 28,836m, reflecting net profit of USD 27,849m, which included the recognition of negative goodwill on the
acquisition of the Credit Suisse Group of USD 27,748m, and other comprehensive income (OCI) of USD 986m. OCI mainly
included OCI related to foreign currency translation of USD 1,456m, cash flow hedge OCI of USD 1,275m and negative
OCI related to own credit on financial liabilities designated at fair value of USD 1,769m. In addition, deferred share-based
compensation awards of USD 1,097m were expensed in the income statement, increasing share premium.
Net treasury share activity increased equity by USD 745m. This was mainly due to the consideration of USD 3,547m used
to acquire the Credit Suisse Group, largely offset by share repurchases with an acquisition cost of USD 1,279m under
our 2022 share repurchase program and purchases of USD 1,258m from the market to hedge our share delivery
obligations related to employee share-based compensation awards.
These increases were partly offset by distributions to shareholders of USD 1,679m, reflecting a dividend payment of
USD 0.55 per share.
In the second quarter of 2023, we canceled 62,548,000 shares purchased under our 2021 share repurchase program, as
approved by shareholders at the 2023 Annual General Meeting (the AGM). The cancellation of shares resulted in
reclassifications within equity but had no net effect on our total equity attributable to shareholders.
At the 2023 AGM, the shareholders also approved the change of the share capital currency of UBS Group AG from the
Swiss franc to the US dollar. As a result, the nominal value per share has changed from CHF 0.10 to USD 0.10, resulting
in a reclassification between share capital and capital contribution reserve (presented as share premium in the
consolidated financial statements). Total equity reported was not affected by this change.
› Refer to the “Group performance” and “Consolidated financial statements” sections of this report for more information about OCI
› Refer to the “Reconciliation of equity under IFRS Accounting Standards to Swiss SRB common equity tier 1 capital” table in this
section for more information about the effects of OCI on common equity tier 1 capital
› Refer to “UBS shares” in this section for more information about our share repurchase programs
Liabilities and equity
USD bn
Short-term borrowings1,2
Securities financing transactions at amortized cost
Customer deposits
Debt issued designated at fair value and long-term debt issued measured at amortized cost2
Trading liabilities
Derivatives and cash collateral payables on derivative instruments
Brokerage payables
Other financial liabilities measured at amortized cost
Other financial liabilities designated at fair value
Non-financial liabilities
Total liabilities
of which: Credit Suisse 3
31.12.22
41.3
4.2
525.1
158.6
29.5
191.3
45.1
9.6
30.2
12.3
1,047.1
% change from
31.12.22
165
243
51
107
16
22
(6)
118
(2)
114
56
As of
31.12.23
109.5
14.4
792.0
327.6
34.2
233.8
42.5
20.9
29.5
26.3
1,630.6
475.7
0.3
13.2
(4.8)
74.9
2.5
86.1
0.5
86.6
1,717.2
Share capital
Share premium
Treasury shares
Retained earnings
Other comprehensive income4
51
Total equity attributable to shareholders
55
Equity attributable to non-controlling interests
51
Total equity
Total liabilities and equity
55
1 Consists of short-term debt issued measured at amortized cost and amounts due to banks, which includes amounts due to central banks. 2 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. 3 Excludes USD 57.5bn of debt instruments previously issued by Credit Suisse Group AG (transferred to UBS Group AG as part of the acquisition of the Credit Suisse Group), USD 14.8bn of
borrowings from UBS AG, USD 3.4bn of fiduciary placements where UBS Switzerland AG acts as the fiduciary, and other minor intercompany positions. Refer to “Note 2 Accounting for the acquisition of the Credit
Suisse Group” in the “Consolidated financial statements” section of this report for more information. 4 Excludes other comprehensive income related to defined benefit plans and own credit, which is recorded
directly in Retained earnings.
0.3
13.5
(6.9)
50.0
(0.1)
56.9
0.3
57.2
1,104.4
14
(2)
(30)
50
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
176
Asset funding UBS Group
USD bn, except where indicated
As of 31 December 2023
Cash, balances at central banks and
amounts due from banks
Securities financing transactions at amortized cost
Trading assets
Brokerage receivables
Loans and advances to customers
Other
335
99
170
21
640
276
Assets
Liabilities
and equity
s
t
i
s
o
p
e
d
r
e
m
o
t
s
u
C
124% coverage
USD 152bn
surplus
109
14
34
43
792
128
199
134
87
Short-term borrowings
Securities financing transactions at amortized cost
Trading liabilities
Brokerage payables
241
Demand deposits
186
Retail savings / deposits
41
Sweep deposits
324
Time deposits
Debt issued designated at fair value
Long-term debt issued measured at
amortized cost¹
Other (including net derivative liability)
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.
Liabilities by product and currency
USD bn
Short-term borrowings
of which: amounts due to banks
of which: short-term debt issued1,2
Securities financing transactions at amortized cost
Customer deposits
of which: demand deposits
of which: retail savings / deposits
of which: sweep deposits
of which: time deposits
Debt issued designated at fair value and long-term debt issued measured at amortized
cost2
Trading liabilities
Derivatives and cash collateral payables on derivative instruments
Brokerage payables
Other financial liabilities measured at amortized cost
Other financial liabilities designated at fair value
Non-financial liabilities
Total liabilities
of which: Credit Suisse3
All currencies
31.12.23 31.12.22
109.5
41.3
71.0
11.6
38.5
29.7
14.4
4.2
525.1
792.0
240.9 180.8
186.1 149.3
41.0
69.2
324.0 125.7
158.6
29.5
191.3
45.1
9.6
30.2
12.3
1,047.1
327.6
34.2
233.8
42.5
20.9
29.5
26.3
1,630.6
475.7
of which: USD
31.12.23 31.12.22
23.3
4.2
19.0
3.6
226.6
47.1
24.6
69.2
85.7
49.2
20.4
28.8
7.8
311.8
57.4
28.9
41.0
184.4
98.4
12.1
160.4
32.3
4.9
11.4
4.7
577.7
185.8
12.6
181.0
31.5
11.3
6.8
13.2
810.9
176.8
USD equivalent
of which: CHF
31.12.23 31.12.22
3.8
41.5
3.7
41.1
0.1
0.3
0.0
2.4
198.5
328.0
114.9
71.4
152.6 119.0
0.0
8.1
0.0
60.5
16.9
0.8
3.8
0.4
1.6
0.1
1.5
227.6
44.7
1.1
9.9
0.7
3.9
0.1
4.2
436.5
185.5
of which: EUR
31.12.23 31.12.22
4.4
1.1
3.3
0.2
53.6
37.3
5.6
0.0
10.6
8.3
3.1
5.2
3.3
80.6
38.3
4.5
0.0
37.8
29.6
8.1
15.8
3.2
1.0
3.8
2.9
122.6
69.6
9.3
26.7
2.4
2.0
3.5
4.4
210.0
66.6
1 Short-term debt issued consists of certificates of deposit, commercial paper, acceptances and promissory notes, and other money market paper. 2 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. 3 Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of this report for more information.
Off-balance sheet
In the normal course of business, we enter into transactions where, pursuant to IFRS Accounting Standards, 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.
The following paragraphs provide more information about certain off-balance sheet arrangements. Additional off-
balance sheet information is primarily provided in Notes 10, 11, 18, 20, 21h, 23 and 29 in the “Consolidated financial
statements” section of this report and in the 31 December 2023 Pillar 3 Report, available under “Pillar 3 disclosures” at
ubs.com/investors.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
177
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 2023, the net exposure (i.e., gross values
less sub-participations) from guarantees and similar instruments was USD 43.9bn, compared with USD 20.6bn as of
31 December 2022. The increase of USD 23.3bn was mainly driven by the acquisition of the Credit Suisse Group and an
increase in sponsored repo clearing in Group Treasury. Fee income from issuing guarantees compared with total net fee
and commission income is insignificant for both 2023 and 2022.
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 irrevocable loan commitments range in maturity from one month to three years. During 2023,
Irrevocable loan commitments increased by USD 51.6bn to USD 91.6bn and Committed unconditionally revocable credit
lines increased by USD 121.9bn to USD 163.3bn, with both predominantly driven by the acquisition of the Credit Suisse
Group. Forward starting reverse repurchase agreements increased by USD 14.6bn to USD 18.4bn, mainly reflecting
fluctuations in levels of business division activity in short-dated securities financing transactions.
Off-balance sheet
USD bn
Guarantees1,2
Irrevocable loan commitments1
Committed unconditionally revocable credit lines
Forward starting reverse repurchase agreements
1 Guarantees and irrevocable loan commitments are shown net of sub-participations. 2 Includes guarantees measured at fair value through profit or loss.
As of
31.12.23
43.9
91.6
163.3
18.4
31.12.22
20.6
40.0
41.4
3.8
% change from
31.12.22
113
129
294
385
If customers fail to meet their obligations, our maximum exposure to credit risk is generally 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 2023, we recognized net credit loss expenses of USD 142m related to irrevocable
loan commitments, guarantees and other credit facilities in the scope of expected credit loss measurement, compared
with net credit loss releases of USD 3m in 2022. Provisions recognized for irrevocable loan commitments, guarantees and
other credit facilities in the scope of expected credit loss measurement were USD 350m as of 31 December 2023,
compared with USD 201m as of 31 December 2022.
› Refer to “Note 10 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
For certain obligations, we enter into partial sub-participations to mitigate various risks from guarantees and irrevocable
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. Generally, 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.
We also provide representations, warranties and indemnifications to third parties in the normal course of business.
Support provided to non-consolidated investment funds
In 2023, 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 currently 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 8bn for privileged client deposits in the event that a Swiss bank or securities dealer becomes
insolvent. As of 31 December 2023, FINMA estimates our share in the deposit insurance system to be CHF 1.8bn. This
represents a contingent payment obligation and exposes us to additional risk. As of 31 December 2023, 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 2023 from any other material scheme.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
178
Material cash requirements
The Group’s material cash requirements as of 31 December 2023 are represented by the residual contractual maturities
for non-derivative and non-trading financial liabilities included in the table presented in “Note 24b Maturity analysis of
financial liabilities on an undiscounted basis” in the “Consolidated financial statements” section of this report. Included
in the table are debt issued designated at fair value (USD 149.8bn) and debt issued measured at amortized cost
(USD 279.3bn). 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 24b Maturity analysis of financial liabilities on an undiscounted
basis” in the “Consolidated financial statements” section of this report. Refer to “Guarantees, loan commitments and
similar arrangements” in this section for more information.
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.
› Refer to “Liquidity and funding management” in this section for more information
Cash and cash equivalents
As of 31 December 2023, cash and cash equivalents totaled USD 340.3bn, an increase of USD 145.0bn compared with
31 December 2022, driven by net cash inflows from investing and operating activities and positive foreign exchange
effects, largely reflecting the depreciation of the US dollar against the Swiss franc in 2023. These effects were partly
offset by net cash outflows used in financing activities in amount of USD 58.3bn.
Operating activities
Net cash inflows from operating activities were USD 86.1bn in 2023, compared with USD 14.6bn in 2022. The net change
in operating assets and liabilities of 88.3bn was mainly driven by a USD 52.8bn increase in customer deposits, a
USD 27.9bn decrease in loans and advances to customers and a USD 9.9bn change in financial assets and liabilities at
fair value not held for trading and other financial assets and liabilities. These effects were partly offset by smaller
movements in other operating assets and liabilities and adjustments to remove the net impact of non-cash effects in the
balance sheet, such as foreign currency effects.
Investing activities
Investing activities resulted in a net cash inflow of USD 103.2bn in 2023, compared with a net outflow of USD 12.4bn
in 2022, primarily reflecting the effect of cash acquired upon the acquisition of the Credit Suisse Group in the amount
of USD 108.5bn, partly offset by outflows from purchases of debt securities measured at amortized cost of USD 3.8bn.
Financing activities
Financing activities resulted in a net cash outflow of USD 58.3bn in 2023, compared with an outflow of USD 9.1bn in 2022,
mainly due to the repayment of USD 56.5bn of funding from the Swiss National Bank, net cash used to repurchase treasury
shares of USD 2.8bn and a dividend distribution to shareholders of USD 1.7bn. These outflows were partly offset by net
issuance proceeds from short-term debt measured at amortized cost of USD 3.2bn and from debt designated at fair value
and long-term debt measured at amortized cost of USD 0.3bn.
› 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 bn
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
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the end of the year
For the year ended
31.12.23
31.12.22
86.1
103.2
(58.3)
14.0
145.0
340.3
14.6
(12.4)
(9.1)
(5.7)
(12.6)
195.3
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
179
Currency management
Strategy, objectives and governance
Group Treasury focuses on three main areas of currency risk management: (i) currency-matched funding and investment
of non-US-dollar assets and liabilities; (ii) the sell-down of foreign currency IFRS Accounting Standards 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 across three scopes: UBS
Group AG consolidated, UBS AG consolidated and Credit Suisse AG consolidated.
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.
UBS Group AG consolidated and UBS AG consolidated apply net investment hedge accounting to non-US-dollar core
investments, while Credit Suisse AG consolidated applies it to its non-Swiss Franc core investments to balance the effect
of foreign exchange movements on both common equity tier 1 (CET1) capital and the CET1 capital ratio.
› Refer to “Note 1 Summary of 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
Sell-down of non-US-dollar reported profits and losses
Income statement items of group entities 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 Accounting Standards) arising in UBS AG and its
branches and sells or buys the profit or loss for US dollars on a monthly basis. UBS AG subsidiaries and Credit Suisse AG
branches and subsidiaries follow a similar monthly sell-down process into their own functional currencies. The retained
earnings in subsidiaries and branches with a functional currency other than the US dollar are integrated and managed as
part of the UBS Group’s net investment hedge accounting program.
Hedging of anticipated non-US-dollar profits and losses
The Group Asset and Liability Committee 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 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 Computershare will be paid dividends in US dollars.
› Refer to the UBS Group AG Standalone financial statements and regulatory information for the year ended 31 December 2023 for
more information about the proposed dividend distribution of UBS Group AG for the 2023 financial year
UBS shares
UBS Group AG shares
Audited | As of 31 December 2023, equity attributable to shareholders under IFRS Accounting Standards amounted to
USD 86,108m, represented by 3,462,087,722 shares issued. Shares issued decreased by 62,548,000 shares in 2023 as the
shares acquired under the 2021 share repurchase program after 18 February 2022 were canceled by means of a capital
reduction, as approved by shareholders at the 2023 Annual General Meeting (the AGM).
In the second quarter of 2023, the share capital currency of UBS Group AG was changed from the Swiss franc to the US
dollar, as approved by shareholders at the 2023 AGM. As a result, the nominal value per share has changed from CHF 0.10
to USD 0.10, resulting in a reclassification between share capital and capital contribution reserve (presented as share
premium in the consolidated financial statements).
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Currency management
180
Each share 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 “Share information and earnings per share” in the “Consolidated financial statements” section of this report for more
information about the conversion of our share capital currency in 2023, which was approved by shareholders at the 2023 AGM
› Refer to the “Corporate governance” section of this report for more information about UBS shares
UBS Group share information
Shares issued
Treasury shares1
of which: related to share repurchase program 2021
of which: related to share repurchase program 2022
Shares outstanding
Basic earnings per share (USD)2
Diluted earnings per share (USD)2
Equity attributable to shareholders (USD m)
Less: goodwill and intangible assets (USD m)
Tangible equity attributable to shareholders (USD m)
Ordinary cash dividends per share (USD)3,4
Total book value per share (USD)
Tangible book value per share (USD)
Share price (USD)5
As of or for the year ended
31.12.23
3,462,087,722
253,233,437
120,506,008
3,208,854,285
31.12.22
3,524,635,722
416,909,010
62,548,000
233,901,950
3,107,726,712
8.83
8.45
86,108
7,515
78,593
0.70
26.83
24.49
31.01
2.34
2.25
56,876
6,267
50,609
0.55
18.30
16.28
18.61
% change from
31.12.22
(2)
(39)
(48)
3
278
276
51
20
55
27
47
50
67
Market capitalization (USD m)6
1 Based on a settlement date view. 2 Refer to “Share information and earnings per share” in the “Consolidated financial statements” section of this report for more information. 3 Dividends and / or distributions
out of the capital contribution reserve are normally approved and paid in the year subsequent to the reporting period. 4 Refer to “Statement of proposed appropriation of total profit and dividend distribution out of
total profit and capital contribution reserve” in the “UBS Group AG standalone financial statements” section of the UBS Group AG Standalone financial statements and regulatory information for the year ended
31 December 2023 report, available under “Holding company and significant regulated subsidiaries and sub-groups” at ubs.com/investors, for more information. 5 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. 6 The calculation of market capitalization has been amended in the second quarter of 2023 to reflect total shares
issued multiplied by the share price at the end of the period. The calculation was previously based on total shares outstanding multiplied by the share price at the end of the period. Market capitalization has been
increased by USD 7.8bn as of 31 December 2022 as a result.
107,355
65,608
64
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 share repurchase programs. As of 31 December 2023, we
held a total of 253,233,437 treasury shares (31 December 2022: 416,909,010).
Our 2021 share repurchase program was concluded on 29 March 2022 with the purchase of an additional 87.7m shares
in 2022 for an acquisition cost of USD 1,637m (CHF 1,516m). The 177.8m shares repurchased under this program from
its inception until 18 February 2022 for a total acquisition cost of USD 3,022m (CHF 2,775m) were canceled by means
of a capital reduction in 2022, as approved by shareholders at the 2022 AGM. The remaining 62,548,000 shares
purchased under the 2021 program were canceled by means of a capital reduction in 2023, as approved by shareholders
at the 2023 AGM.
On 31 March 2022, we commenced a new, 2022 share repurchase program of up to USD 6bn. Shares acquired under
this program totaled 298.5m as of 31 December 2023 for a total acquisition cost of USD 5,245m (CHF 5,010m). A total
of 178m shares repurchased under this program and originally intended for cancellation purposes were repurposed for
the acquisition of the Credit Suisse Group and 176m shares were transferred to Credit Suisse Group shareholders in an
exchange of shares as consideration for the acquisition of the Credit Suisse Group. The remaining 121m shares, with a
total acquisition cost of USD 2,277m (CHF 2,138m), are intended to be canceled by means of a capital reduction, pending
approval by the shareholders at a future AGM.
A new, two-year share repurchase program of up to USD 6bn was approved by shareholders at the 2023 AGM. We have
temporarily suspended repurchases under the share repurchase programs due to the acquisition of the Credit Suisse
Group, but we plan to repurchase up to USD 1bn of our shares in 2024, commencing after the completion of the merger
of UBS AG and Credit Suisse AG.
Treasury shares held to hedge our share delivery obligations related to employee share-based compensation awards
totaled 131m shares as of 31 December 2023 (31 December 2022: 119m). Share delivery obligations related to employee
share-based compensation awards totaled 196m shares as of 31 December 2023 (31 December 2022: 178m) and are
calculated on the basis of undistributed notional share awards, taking applicable performance conditions into account.
Treasury shares held are delivered to employees at exercise or vesting. As of 31 December 2023, up to 122m
UBS Group AG shares (31 December 2022: 122m) could have been issued out of conditional capital to satisfy share
delivery obligations of any future employee share option programs or similar awards.
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | UBS shares
181
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.
Treasury share purchases
Share repurchase programs1
Other treasury shares purchased2
Average price in
USD
Average price
in USD
20.66
19.73
35,343,000
Number of shares
Number of shares
28,143,000
Month of purchase3
January 2023
February 2023
March 2023
April 2023
May 2023
June 2023
July 2023
August 2023
September 2023
October 2023
25.92
November 2023
28.39
December 2023
1 UBS has an active share repurchase program to buy back up to USD 6bn of its own shares over the two-year period started in March 2022 and ending at the latest on 29 March 2024. The share buybacks were
transacted in Swiss francs on a separate trading line on the SIX Swiss Exchange. A new, two-year share repurchase program of up to USD 6bn was approved by shareholders at the 2023 AGM. However, we have
temporarily suspended repurchases under the share repurchase programs due to the acquisition of the Credit Suisse Group. 2 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 509,075 UBS Group AG shares during the year and held 13,478,820 UBS Group AG shares
as of 31 December 2023. 3 Based on the transaction date of the respective treasury share purchases.
23,305,000
3,820,000
16,401,362
8,598,638
21.71
21.64
Remaining volume of
2022 share repurchase
program in USD m
at month-end
1,453
1,453
755
755
755
755
755
755
755
755
755
755
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
Listing of UBS Group AG shares
For the year ended
31.12.22
2,433,051
9,579
186,468
743
31.12.23
2,102,613
8,377
170,875
684
31.12.21
2,514,259
9,899
137,366
545
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 2023, the average daily trading volume of UBS Group AG shares was 8.4m shares on SIX and 0.7m 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, 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
Trading exchange
SIX / NYSE
SIX Swiss Exchange
New York Stock Exchange
UBSG
UBS
Bloomberg
UBSG SW
UBS UN
Reuters
UBSG.S
UBS.N
Security identification codes
ISIN
CH0244767585
Valoren
CUSIP
24 476 758
CINS H42097 10 7
Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | UBS shares
182
Corporate governance and
compensation
Management report
Audited information according to the Swiss law and applicable regulatory
requirements and guidance
Disclosures provided are in line with the requirements of the Swiss Code of Obligations (tables containing such
information are marked as “Audited” throughout this section), as well as other applicable regulations and guidance.
Annual Report 2023 | Corporate governance and compensation
183
Corporate governance
Table of contents
185
186
187
191
193
209
218
218
220
Corporate governance
Group structure and shareholders
Share capital structure
Shareholders’ participation rights
Board of Directors
Group Executive Board
Change of control and defense measures
Auditors
Information policy
Annual Report 2023 | Corporate governance and compensation | Corporate governance
184
Corporate governance
UBS Group AG is subject to, and complies with, all relevant Swiss legal and regulatory requirements regarding corporate
governance, including the SIX Swiss Exchange’s Directive on Information relating to Corporate Governance (the SIX Swiss
Exchange Corporate Governance Directive) and the standards established in the Swiss Code of Best Practice for Corporate
Governance.
Following a revision of the Swiss Code of Obligations that entered into force on 1 January 2023, the correspondingly
amended Articles of Association of UBS Group AG (the AoA) were approved by the Annual General Meeting (the AGM)
on 5 April 2023. The key amendments of the AoA are amendment of the threshold to convene extraordinary general
meetings, the introduction of the basis to hold hybrid and virtual general meetings, and changes in connection with the
external mandates of the Board of Directors (the BoD) and the Group Executive Board (the GEB), as well as compensation-
related changes and clarifications with regards to publications and notices.
As a non-US 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 BoD based on Art. 716b of the Swiss Code of Obligations
and Art. 25 and 27 of the AoA, constitute UBS Group AG’s primary corporate governance guidelines.
› Refer to the Articles of Association of UBS Group 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/content/dam/
serag/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
nyseguide.srorules.com/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 US companies. The key 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 of Obligations, the BoD submits its proposals for a
shareholder vote at 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, 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
Annual Report 2023 | Corporate governance and compensation | Corporate governance
185
Group structure and shareholders
Operational Group structure
As of 31 December 2023, the operational structure of the UBS Group is composed of the Global Wealth Management,
Personal & Corporate Banking, Asset Management, the Investment Bank, and Non-core and Legacy business divisions,
as well as Group functions. After the acquisition of the Credit Suisse Group in June 2023, its global divisions (Wealth
Management (Credit Suisse), the Investment Bank (Credit Suisse), Swiss Bank (Credit Suisse) and Asset Management
(Credit Suisse)) were integrated into the Group.
› Refer to the “Our businesses” section of this report for more information about our business divisions and Group functions
› Refer to “Financial and operating performance” and to “Note 3a Segment reporting” in the “Consolidated financial statements”
section of this report for more information
› Refer to the “Our evolution” section 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. All Credit Suisse
Group AG shares were exchanged for shares in UBS Group AG in June 2023 based on a share exchange.
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 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 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 who directly, indirectly or acting in concert with third parties, acquires or disposes
of shares in a company listed in Switzerland or holds other purchase or sale positions relating to such shares, and, thereby,
directly, indirectly or in concert with third parties reaches, falls below or exceeds one of the following percentage
thresholds: 3, 5, 10, 15, 20, 25, 331⁄3, 50 or 662⁄3% of the voting rights in such company, regardless of whether or not
such rights may be exercised, must notify the company and the Swiss stock exchange on which such shares are listed.
Nominee companies that cannot autonomously decide how voting rights are exercised are not required to notify the
company and such stock exchange if they reach, exceed or fall below the aforementioned thresholds.
Shareholders subject to FMIA disclosure notifications
According to the mandatory FMIA disclosure notifications filed with UBS Group AG and SIX Swiss Exchange (SIX), as of
31 December 2023, the following entities held more than 3% of the total voting rights of UBS Group AG: Norges Bank,
Oslo, which disclosed a holding of 4.79% on 4 December 2023; BlackRock Inc., New York, which disclosed a holding of
5.01% on 30 November 2023; and Artisan Partners Limited Partnership, Milwaukee, which disclosed a holding of 3.03%
on 29 March 2023.
In accordance with the FMIA, the aforementioned holdings are calculated in relation to the voting rights associated with
the total share capital of UBS Group AG entered into the commercial register at the time of the respective disclosure
notification.
Information on disclosures under
participants/significant-shareholders.html.
the FMIA
is available at
ser-ag.com/en/resources/notifications-market-
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.
Annual Report 2023 | Corporate governance and compensation | Corporate governance
186
Share capital structure
Ordinary share capital
On 5 April 2023, the AGM approved the conversion of the share capital currency of UBS Group AG from the Swiss franc
to the US dollar. To obtain a Swiss franc nominal value per share equaling USD 0.10 after the conversion, the AGM also
approved a CHF 25,896,416.16056 reduction of the ordinary share capital, and this reduction resulted in a corresponding
allocation to the capital contribution reserve on UBS Group AG’s standalone financial statements. At the end of 2023,
UBS Group AG had 3,462,087,722 issued shares with a nominal value of USD 0.10 each, equating to a share capital of
USD 346,208,772.20.
Under Swiss company law, shareholders must approve, in a general meeting of shareholders, any increase or reduction
in the ordinary share capital, the creation of conditional share capital or the introduction of a capital band. In addition,
under the Swiss Banking Act, shareholders of a Swiss top holding company of a financial group or of a Swiss bank must
approve, in a general meeting of shareholders, the introduction of conversion capital or reserve capital.
In 2023, the shareholders of UBS Group AG were asked to approve a reduction of share capital by way of canceling
62,548,000 registered shares repurchased under the 2021 share repurchase program.
In 2023, the shareholders of UBS Group AG were not asked to approve the creation of conditional capital or the
introduction of conversion capital, capital band or reserve capital. As of the date of this report, UBS Group AG has no
conversion capital, capital band or reserve capital.
No shares were issued out of UBS Group AG’s existing conditional capital in 2023, as there were no employee options
or stock appreciation rights outstanding.
Following the permanent write down of Credit Suisse Group AG’s additional tier 1 (AT1) instruments in March 2023,
UBS Group AG has issued AT1 instruments with terms that provide for an equity conversion feature (instead of the
existing write-down feature) as soon as UBS Group AG has a minimum amount of conversion capital in place. In relation
to AT1 instruments with equity conversion features, the BoD will propose at the 2024 AGM that the shareholders approve
the introduction of conversion capital in a maximum amount equivalent to 700 million shares.
› Refer to “Share information and earnings per share” in the “Consolidated financial statements” section of this report for
information about the conversion of the share capital currency
Distribution of UBS Group AG shares
As of 31 December 2023
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
5,000,001–34,620,877 (1%)
1–2%
2–3%
3–4%
4–5%
Over 5%
Shareholders registered
Number
68,848
114,217
63,425
5,924
483
96
23
2
0
1
0
11
%
27.2
45.1
25.1
2.3
0.2
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Shares registered
Number
2,667,746
% of shares issued
0.1
49,049,169
177,203,347
136,419,449
135,910,660
198,179,947
246,038,682
98,317,626
0
134,570,286
0
256,797,945
1,435,154,8572
2,026,932,865
3,462,087,722
1.4
5.1
3.9
3.9
5.7
7.1
2.8
0.0
3.9
0.0
7.4
Total shares registered
Shares not registered3
58.5
100.0
Total
1 On 31 December 2023, the US securities clearing organization DTC (Cede & Co.), New York, was registered with 7.42% of all UBS shares issued and is not subject to the 5% voting limit as a securities clearing
organization. 2 Of the total shares registered, 115,991,129 shares did not carry voting rights. 3 Shares not entered in the UBS share register as of 31 December 2023.
253,020
100.0
100.0
41.5
Annual Report 2023 | Corporate governance and compensation | Corporate governance
187
Conditional share capital
At year-end 2023, the following conditional share capital was available to UBS Group AG’s BoD.
– A maximum of USD 38,000,000 represented by up to 380,000,000 fully paid registered shares with a nominal value
of USD 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 by UBS Group AG or another member
of the Group 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 USD 12,170,583 represented by 121,705,830 fully paid registered shares with a nominal value of
USD 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 AoA for more information about the terms and conditions of the issue of shares out of existing
conditional capital. The AoA are available at ubs.com/governance
› Refer to the “Our evolution” section of this report for more information
Conditional capital of UBS Group AG
As of 31 December 2023
Employee equity participation plans
Conversion rights / warrants granted in connection with bonds
Total
Maximum number of shares to
be issued
121,705,830
Year approved by Extra-
ordinary General Meeting
2014
380,000,000
501,705,830
2014
% of shares issued
3.52
10.98
14.49
Capital band, conversion capital and reserve capital
As of 31 December 2023, UBS Group AG had not introduced any capital band, any conversion capital or any reserve
capital.
› Refer to “Ordinary share capital” in this section for more information about a proposal for the shareholders to approve the
introduction of conversion capital at the 2024 AGM
Changes in capital
In accordance with IFRS Accounting Standards, Group equity attributable to shareholders was USD 86.1bn as of
31 December 2023 (2022: USD 56.9bn; 2021: USD 60.7bn). The equity of UBS Group AG shareholders was represented
by 3,462,087,722 issued shares as of 31 December 2023 (31 December 2022: 3,524,635,722; 31 December 2021:
3,702,422,995 shares).
› Refer to “Statement of changes in equity” in the “Consolidated financial statements” section of this report for more information
about changes in shareholders’ equity over the last three years
Ownership
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 UBS share register as “shareholders with voting
rights” are entitled to exercise voting rights.
› Refer to “Shareholders’ participation rights” in this section for more information
Annual Report 2023 | Corporate governance and compensation | Corporate governance
188
As of 31 December 2023, 1,319,163,728 UBS Group AG shares were registered in the UBS share register and carried
voting rights, 115,991,129 shares were registered in the UBS share register without voting rights, and 2,026,932,865
shares were not registered in the UBS share register. As of the same date, all such 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.
Shareholders, legal entities and nominees: type and geographical distribution
As of 31 December 2023
Individual shareholders
Legal entities
Nominees, fiduciaries
Total shares registered
Shares not registered
Total
Americas
of which: USA
Asia Pacific
Europe, Middle East and Africa
of which: Germany
of which: UK
of which: rest of Europe
of which: Middle East and Africa
Switzerland
Total shares registered
Shares not registered
Total
Shareholders registered
Number
248,076
4,777
167
253,020
%
98.0
1.9
0.1
100.0
253,020
100.0
Individual shareholders
Legal entities
Nominees
Total
Number
1,849
1,313
6,043
14,792
4,586
5,501
4,274
431
225,392
%
0.7
0.5
2.4
5.8
1.8
2.2
1.7
0.2
89.1
Number
112
66
87
264
40
8
209
7
4,314
%
0.0
0.0
0.0
0.1
0.0
0.0
0.1
0.0
1.7
Number
77
72
10
44
4
6
32
2
36
%
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Number
2,038
1,451
6,140
15,100
4,630
5,515
4,515
440
229,742
%
0.8
0.6
2.4
6.0
1.8
2.2
1.8
0.2
90.8
248,076
98.0
4,777
1.9
167
0.1
253,020
100.0
At year-end 2023, UBS owned 253,233,437 UBS Group AG shares, which corresponded to 7.31% of the total share
capital of UBS Group AG. At the same time, UBS had acquisition positions relating to 273,216,729 voting rights of UBS
Group AG and disposal positions relating to 211,212,648 such rights, corresponding to 7.89% and 6.10% of the total
voting rights of UBS Group AG, respectively. Of the disposal positions, 196,620,932 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.
Employee share ownership
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. 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. The Equity Ownership Plan (the EOP) is a mandatory deferral plan for all employees that
are subject to deferral requirements (regulatory-driven or total compensation greater than USD / CHF 300,000) but do
not receive LTIP awards. EOP recipients receive a portion of their deferred performance award in notional shares (or
notional funds for employees in Investment Areas within Asset Management). GEB members and most Managing
Directors reporting to the GEB and their direct reports at MD level1 receive the equity-based Long-Term Incentive Plan
(the LTIP) instead of the EOP. Both the EOP and LTIP include employment conditions and malus conditions that allow 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.
Underlining our emphasis on sustainable performance and risk management, and to support delivering on our ambitious
integration goals and business / financial targets, LTIP awards will only vest if predetermined performance conditions are
met.
On 31 December 2023, UBS employees held at least 7.4% of UBS shares outstanding (including approximately 5.36%
in unvested deferred 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 2023, at least 25.2% of all employees held UBS shares through the firm’s employee share participation plans.
› Refer to the “Compensation” section of this report for more information
1 Excluding all Managing Directors in Asset Management Investment Areas who will continue to receive the Fund Ownership Plan instead of LTIP.
Annual Report 2023 | Corporate governance and compensation | Corporate governance
189
Trading restrictions in UBS shares
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.
Shareholders, legal entities and nominees: type and geographical distribution (continued)
As of 31 December 2023
Individual shareholders
Legal entities
Nominees, fiduciaries
Total shares registered
Shares not registered
Total
Americas
of which: USA
Asia Pacific
Europe, Middle East and Africa
of which: Germany
of which: UK
of which: rest of Europe
of which: Middle East and Africa
Switzerland
Total shares registered
Shares not registered
Total
Shares registered
Number
374,815,823
480,301,558
580,037,476
1,435,154,857
2,026,932,865
3,462,087,722
Total
Number of shares
407,897,203
398,608,229
31,509,533
284,667,169
21,815,340
203,293,435
57,819,476
1,738,918
711,080,952
1,435,154,857
2,026,932,865
3,462,087,722
%
10.8
13.9
16.8
41.5
58.5
100.0
%
11.8
11.5
0.9
8.2
0.6
5.9
1.7
0.1
20.5
41.5
58.5
100.0
Legal entities
Number of shares
57,732,878
49,919,559
8,396,840
26,433,295
2,126,558
152,510
23,861,879
292,348
387,738,545
480,301,558
0
480,301,558
%
1.7
1.4
0.2
0.8
0.1
0.0
0.7
0.0
11.2
13.9
13.9
Nominees
Number of shares
348,096,597
347,889,103
5,581,441
218,929,280
8,451,911
186,227,060
24,095,431
154,878
7,430,158
580,037,476
0
580,037,476
%
10.1
10.0
0.2
6.3
0.2
5.4
0.7
0.0
0.2
16.8
16.8
Individual shareholders
Number of shares
2,067,728
799,567
17,531,252
39,304,594
11,236,871
16,913,865
9,862,166
1,291,692
315,912,249
374,815,823
0
374,815,823
%
0.1
0.0
0.5
1.1
0.3
0.5
0.3
0.0
9.1
10.8
10.8
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). 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.
UBS Group AG shares are listed on the SIX Swiss Exchange and also 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 of this report for more information
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 2024 AGM, the BoD is proposing to shareholders for approval a dividend of USD 0.70 per share for the 2023
financial year. Shareholders whose shares are held through SIX SIS AG will receive dividends in Swiss francs, based on an
exchange rate published on the day prior to the ex-dividend date. Shareholders holding shares through The Depository
Trust Company in New York or 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 24 April 2024, the payment of USD 0.70 (or the Swiss franc equivalent) per share will be
made on 3 May 2024 to holders of shares on the record date 2 May 2024. The shares will be traded ex-dividend as of
30 April 2024 and, accordingly, the last day on which the shares may be traded with entitlement to receive the dividend
will be 29 April 2024.
In January 2023, the BoD announced a new two-year share repurchase program. At the 2023 AGM, the shareholders
authorized the BoD to repurchase shares for cancellation purposes in an aggregate value of up to USD 6bn until the
2025 AGM. Any shares repurchased 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. In the interim period, 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 2 of the Swiss Code of Obligations.
Annual Report 2023 | Corporate governance and compensation | Corporate governance
190
Looking ahead, the 2022 share repurchase program will be concluded at the end of its two-year term by end of March
2024, and the repurchased shares are intended to be canceled by means of a capital reduction, pending approval by the
shareholders at a future AGM. In 2024, we plan to repurchase up to USD 1bn of our shares commencing after the
completion of the merger of UBS AG and Credit Suisse AG under the new 2023 share repurchase program approved by
the shareholders at the 2023 AGM.
› Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information about
the share repurchase programs
Transferability, voting rights and nominee registration
We do not apply any restrictions or limitations on the transferability of UBS Group AG shares. Voting rights may be
exercised without any restrictions by shareholders entered into the UBS share register if they expressly render a declaration
of beneficial ownership according to the provisions of the AoA.
We have special provisions for the registration of nominees. Nominees are entered in the UBS 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
Convertible bonds and options
As of 31 December 2023, there were no conditional capital securities or convertible bonds outstanding requiring the
issuance of new shares. However, as of the same date, AT1 instruments issued by UBS Group AG in an aggregate principal
amount of USD 3.5bn were outstanding, and such instruments have terms that provide for an equity conversion feature
(instead of the existing write-down feature) as soon as UBS Group AG has a minimum amount of conversion capital in
place.
› Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information about our outstanding
capital instruments
As of 31 December 2023, there were no employee options or stock appreciation rights outstanding. Option-based
compensation plans are sourced by issuing new shares out of UBS Group AG’s conditional capital. As of 31 December
2023, UBS Group AG had USD 12,170,583 in conditional share capital 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 of this report for
more information about outstanding options and stock appreciation rights
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 into 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, the GEB and internal and external
auditors.
Voting rights, restrictions and representation
We place no restrictions on share ownership and voting rights. However, pursuant to general principles formulated by
the BoD, nominees, 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 if they agree to
disclose, upon our request, beneficial owners holding 0.3% or more of all issued UBS Group AG shares. This 5% limit
has been implemented to avoid large shareholders being entered in the UBS share register via nominee companies so as
to exercise influence without directly registering their shares with UBS. An exception to the 5% voting limit rule is in
place for securities clearing organizations, such as The Depository Trust Company in New York.
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.
Annual Report 2023 | Corporate governance and compensation | Corporate governance
191
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 AoA or by granting a written power
of attorney to a third person of their choice (which does not need to be a shareholder) 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.
› Refer to article 14 of the AoA, 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 a majority of the votes represented, 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 a 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, creating conditional capital or introducing a capital band or reserve capital 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 represented. 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.
Convocation of general meetings of shareholders
The AGM must be held within six months of the close of the financial year (i.e., 31 December). In 2024, the AGM will
take place on 24 April.
Extraordinary general meetings (EGMs) may be convened whenever the BoD or the auditors consider it necessary.
Shareholders individually or jointly representing at least 5% 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 the AoA, shareholders individually or jointly representing shares with an aggregate minimum nominal value
of USD 62,500 may submit requests for items to be placed on the agenda for consideration at the next general meeting
of shareholders or for motions relating to agenda items to be included in the notice to convene the general meeting.
In January of each year, the invitation to submit such agenda items or motions relating to agenda items is published in
the Swiss Official Gazette of Commerce and at ubs.com/agm. Requests for motions relating to agenda items and 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 no later than the deadline published by UBS Group AG, 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 such requests
from shareholders, which are published together with the motions from the BoD.
Registrations in the UBS share register
The UBS share register, where around 254,000 UBS Group AG shareholders are directly registered as of 28 March 2024,
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.
Annual Report 2023 | Corporate governance and compensation | Corporate governance
192
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 234,000 US shareholders are indirectly registered via nominee companies as of 28 March
2024. 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 such
closure does not affect the tradability of such shares at any time, irrespective of any issued voting instructions.
› Refer to article 5 of our AoA, available at ubs.com/governance, for more information about the general rules for entry into the
UBS share register
Board of Directors
The Board of Directors of UBS Group AG (the BoD), 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.
Members of the Board of Directors
At the AGM on 5 April 2023, Colm Kelleher, was re-elected as Chairman of the Board and Lukas Gähwiler, Jeremy
Anderson, Claudia Böckstiegel, William C. Dudley, Patrick Firmenich, Fred Hu, Mark Hughes, Nathalie Rachou, Julie G.
Richardson, Dieter Wemmer and Jeanette Wong were re-elected as members of the BoD. At that same AGM, Julie G.
Richardson, Dieter Wemmer and Jeanette Wong were re-elected as members of the Compensation Committee. ADB
Altorfer Duss & Beilstein AG was re-elected as independent proxy agent. Following their election, the BoD appointed
Lukas Gähwiler as Vice Chairman and Jeremy Anderson as Senior Independent Director of UBS Group AG. On 12 January
2024, the BoD announced that Dieter Wemmer would not stand for re-election at the forthcoming AGM, after serving
on the BoD for eight years, and that Gail Kelly would be nominated for election to the BoD at the same AGM. She served
as the Group CEO and Managing Director for two banks in Australia, St. George Bank (2002 to 2007) followed by
Westpac Banking Corporation (2008 to 2015). Gail Kelly acted as Senior Global Advisor for UBS from 2016 to 2023.
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 without commercial purpose. As of 31 December 2023, no member of the BoD reached
any of these thresholds.
The following biographies provide information about the BoD members who were in office after the 2023 AGM and the
Group Company Secretary. In addition to information on mandates, the biographies include information on memberships
or other activities or functions, as required by the SIX Swiss Exchange Corporate Governance Directive.
No member of the BoD currently carries out operational management tasks within the Group. All members of the BoD
are therefore non-executive members. Except for Lukas Gähwiler, no member of the BoD has carried out operational
management tasks within the Group over the past three years.
As a result of the acquisition of the Credit Suisse Group in 2023, to ensure compliance with our governance principles
and to facilitate a smooth integration into UBS, Lukas Gähwiler was appointed chairman of the board of Credit Suisse
AG, Jeremy Anderson was appointed vice chairman of that board and Mark Hughes a member of it.
Annual Report 2023 | Corporate governance and compensation | Corporate governance
193
Colm Kelleher
Chairman of the Board of Directors and non-executive member of
the Board since 2022
– Chairperson of the Corporate Culture and Responsibility Committee
Education
– Master’s degree, modern history, the University of Oxford
– Fellow of the Institute of Chartered Accountants in England and
since 2022
– Chairperson of the Governance and Nominating Committee since
2022
Wales
Listed company boards
– Member of the Board of Norfolk Southern Corporation (chair of the
Nationality: Irish | Year of birth: 1957
risk and finance committee)
Colm Kelleher was elected Chairman of UBS in April 2022. He served as
President of Morgan Stanley until retiring from that firm in 2019,
overseeing both the
Institutional Securities Business and Wealth
Management. Before that, he was Co-President and then President of
Morgan Stanley Institutional Securities. During the global financial crisis,
he held the position of CFO and Co-Head Corporate Strategy from 2007
to 2009. Mr. Kelleher is a well-respected leader in the financial services
sector. His 30-year career with Morgan Stanley attests to his solid
leadership experience in banking and excellent relationships around the
world. He has a deep understanding of the global banking landscape and
broad banking experience across all the geographic regions and major
business areas in which UBS operates.
Professional experience
2016 – 2019
President, Morgan Stanley, responsible for Institutional
Securities and Wealth Management
CEO of Morgan Stanley International, Morgan Stanley
President, Institutional Securities, Morgan Stanley
Co-President, Institutional Securities, Morgan Stanley
CFO and Co-Head Corporate Strategy, Morgan Stanley
Head Global Capital Markets, Morgan Stanley
Co-Head Fixed Income, Europe, Morgan Stanley
Various roles, Morgan Stanley
2011 – 2016
2013 – 2015
2010 – 2012
2007 – 2009
2006 – 2007
2004 – 2006
1989 – 2004
Other activities and functions
– Chairman of the Board of Directors of UBS AG
– Member of the Board of Directors of the Bretton Woods Committee
– Member of the Board of the Swiss Finance Council
– Member of the International Monetary Conference
– Member of the Board of the Bank Policy Institute
– Member of the Board of Americans for Oxford
– Visiting Professor of Banking and Finance, Loughborough Business
School
– Member of the European Financial Services Round Table
– Member of the European Banking Group
– Member of the International Advisory Council of the China Securities
Regulatory Commission
– Member of the Chief Executive’s Advisory Council (Hong Kong)
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
– CEO, Chairman
Annual Report 2023 | Corporate governance and compensation | Corporate governance
194
Lukas Gähwiler
Jeremy Anderson
Vice Chairman and non-executive member of the Board since 2022
– Member of the Governance and Nominating Committee since 2023
– Member of the Risk Committee since 2023
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
Nationality: Swiss | Year of birth: 1965
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
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
2004 – 2006
2002 – 2004 Member of the Group Management Board and Head of
2006 – 2011
1985 – 2002
1980 – 1985
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 (chair of the risk committee)
Other activities and functions
– Vice Chairman of the Board of Directors of Credit Suisse AG
– Member of the Board of Directors of UBS AG
– Trustee of the UK’s Productivity Leadership Group
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
Lukas Gähwiler brings a wealth of industry experience and an in-depth
understanding of UBS to the Board. He served as Chairman of the Board of
UBS Switzerland AG for five years and was a member of the Group Executive
Board of UBS and President UBS Switzerland from 2010 to 2016, responsible
for the private clients, wealth management, corporate and institutional
clients, investment banking, and asset management businesses in UBS’s
home market. Before joining UBS, Mr. Gähwiler worked for Credit Suisse for
over twenty years, his last role being Chief Credit Officer, Global Private and
Corporate Banking. In addition to his leadership and industry experience
across all parts of the banking business, his strong connections and network,
particularly in Switzerland, are instrumental for the firm.
Professional experience
2017 – 2022 Chairman of the Board of Directors of UBS Switzerland AG
2010 – 2016 Member of the Group Executive Board, UBS and President
UBS Switzerland
2003 – 2010 Chief Credit Officer, Global Private and Corporate Banking,
Credit Suisse
2002 – 2003 Head Credit Risk Management, Corporate Clients
Switzerland, Credit Suisse
1998 – 2001 Chief of Staff to CEO, Private and Corporate Clients,
Credit Suisse
1990 – 1998 Various senior front office roles in Corporate Clients in
Switzerland and North America, Credit Suisse
1981 – 1986 Client Advisor Retail and Wealth Management, St.Galler
Kantonalbank
Education
– Advanced Management Program, Harvard Business School
– MBA program, International Bankers School, New York
– Bachelor’s degree, business administration, University of Applied
Sciences, St. Gallen
Non-listed company boards
– Vice Chairman of the Board of Directors of Pilatus Aircraft Ltd
– Member of the Board of Directors of Ringier AG
Other activities and functions
– Chairman of the Board of Directors of Credit Suisse AG
– Vice Chairman of the Board of Directors of UBS AG
– Member of the Board and Board Committee of economiesuisse
– Chairman of the Employers Association of Banks in Switzerland
– Member of the Board of Directors of the Swiss Employers Association
– Member of the Board of Directors and the Board of Directors
Committee of the Swiss Bankers Association
– Member of the Board of the Swiss Finance Council
– Member of the Board of Trustees of Avenir Suisse
Key competencies
– Banking (wealth management, asset management, personal and
corporate banking) and insurance
– Finance, audit, accounting
– Risk management, compliance and legal
– Human resources management, including compensation
Leadership experience
– CEO, Chairman
Annual Report 2023 | Corporate governance and compensation | Corporate governance
195
Claudia Böckstiegel
William C. Dudley
Non-executive member of the Board since 2021
– Member of the Corporate Culture and Responsibility Committee
Non-executive member of the Board since 2019
– Member of the Corporate Culture and Responsibility Committee
since 2022
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 Roche 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 and environment, patents, audit and risk advisory, compliance, and
sustainability.
since 2019
– Member of the Risk Committee since 2019
Nationality: American (US) | Year of birth: 1953
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.
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
Professional experience
2009 – 2018
2007 – 2009
2006
2002 – 2005
President and CEO, Federal Reserve Bank of New York
Executive Vice President and Head Markets Group,
Federal Reserve Bank of New York
Senior advisor (part-time), Goldman Sachs Group
Partner and Director US Economic Research Group,
Goldman Sachs Group
1996 – 2002 Managing Director and Director US Economic Research
1983 – 1996
Group, Goldman Sachs Group
Economist at Goldman Sachs Group, Morgan Guaranty
Trust Company, and Board of Governors of the Federal
Reserve System
Education
– Master’s degree, law, Universities of Mannheim and Heidelberg
– Master of Laws (LL.M.), Georgetown University, Washington, DC
Listed company boards
– Member of the Enlarged Executive Committee of Roche Holding AG
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
– Member of the Advisory Board of Suade Labs
Other activities and functions
– Member of the Board of Directors of UBS AG
Key competencies
– Finance, audit, accounting
– Risk management, compliance and legal
– Regulatory authority, central bank
– Environmental, social and governance (ESG)
Leadership experience
– Executive board leadership
Other activities and functions
– Member of the Board of Directors of UBS AG
– 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
– Chairman 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
– Environmental, social and governance (ESG)
Leadership experience
– CEO, Chairman
Annual Report 2023 | Corporate governance and compensation | Corporate governance
196
Patrick Firmenich
Fred Hu
Non-executive member of the Board since 2021
– Member of the Audit Committee since 2021
– Member of the Corporate Culture and Responsibility Committee
since 2021
Nationality: Swiss | Year of birth: 1962
Patrick Firmenich was Chairman of the Board of Firmenich International
SA, a privately owned fragrances and flavorings company, from 2016 to
2023 and its CEO for 12 years. In 2023, he became Vice Chairman of dsm
firmenich, a listed company. He has demonstrated his entrepreneurial
leadership by significantly advancing the Firmenich group’s global position
through organic and in-organic growth and succeeded in transforming
the organization to continuously 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
2016 – 2023
2014 – 2016
2002 – 2014
2001 – 2002
1997 – 2001
1993 – 1997
1990 – 1993
1988 – 1989
1988
1984 – 1986
Chairman of the Board of Firmenich International SA
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
Education
– Master’s degree, law, University of Geneva, admitted to the bar
in Geneva
– MBA, INSEAD Fontainebleau
Listed company boards
– Vice Chairman of the Board of dsm firmenich (chair of the nomination
committee)
Other activities and functions
– Member of the Board of Directors of UBS AG
– Member of the Board of Directors of INSEAD and INSEAD World
Foundation
– Member of the Advisory Council of the Swiss Board Institute
Key competencies
– Finance, audit, accounting
– Risk management, compliance and legal
– Human resources management, including compensation
– Environmental, social and governance (ESG)
Leadership experience
– CEO, Chairman
Non-executive member of the Board since 2018
– Member of the Governance and Nominating Committee since 2020
Nationality: Chinese | Year of birth: 1963
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. Mr. Hu has a
profound understanding of China’s economy and rapidly developing
financial system, and a 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
2010 – date
2008 – 2010
2004 – 2008
Founder, Chairman and 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,
China, Goldman Sachs
2000 – 2003 Managing Director and Chief Economist and Strategist,
Greater China, Goldman Sachs
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 (chair of the nomination committee)
Non-listed company boards
– Chairman of Primavera Capital Ltd
Other activities and functions
– Member of the Board of Directors of UBS AG
– Trustee of the China Medical Board
– 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
Annual Report 2023 | Corporate governance and compensation | Corporate governance
197
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 Governance and Nominating Committee since 2022
– Member of the Risk Committee since 2020
since 2020
Nationality: Canadian, British and American (US) | Year of birth: 1958
Mark Hughes is a highly experienced professional in the financial services
sector, having spent more than 35 years working for RBC (the Royal Bank
of Canada) in Canada, 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.
Nationality: French | Year of birth: 1957
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
2014 – 2018
Group Chief Risk Officer and member Group Executive
Committee, RBC
Deputy Chief Risk Officer, RBC
COO, RBC Capital Markets, RBC
Head of Global Credit, RBC
Head of Debt Products, RBC
Senior Vice President and General Manager USA, RBC
Senior Vice President Financial Services, RBC
Various positions, RBC
2013
2008 – 2013
2001 – 2008
1999 – 2001
1998 – 1999
1997 – 1998
1982 – 1996
Education
– Bachelor of Laws (LL.B.), University of Leeds
– MBA, finance, University of Manchester
Other activities and functions
– Member of the Board of Directors of UBS AG
– Member of the Board of Directors of UBS Americas Holding LLC
– Member of the Board of Directors of Credit Suisse AG
– Chair of the Board of Directors of the Global Risk Institute
– 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
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
– 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)
Non-listed company boards
– Member of the Board of the African Financial Institutions Investment
Platform
Other activities and functions
– Member of the Board of Directors of UBS AG
– Member of the Board of Directors of Fondation Léopold Bellan
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
Annual Report 2023 | Corporate governance and compensation | Corporate governance
198
Julie G. Richardson
Dieter Wemmer
Non-executive member of the Board since 2017
– Chairperson of the Compensation Committee since 2019
– Member of the Risk Committee since 2017
Non-executive member of the Board since 2016
– Member of the Audit Committee since 2019
– Member of the Compensation Committee since 2018
Nationality: American (US) | Year of birth: 1963
Nationality: Swiss and German | Year of birth: 1957
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 Chase,
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, a leading cloud monitoring
firm and a cyber insurance company.
Dieter Wemmer began his highly successful 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
has deep experience across a broad range of highly relevant topics. Mr.
Wemmer brings to the BoD knowledge covering accounting, finance and
audit, including capital markets, investments and risk management, as well as
asset management. His know-how includes hands-on experience in mergers
and acquisitions, and management of large organizations with a focus on
strategy.
Professional experience
2012 – 2014
2003 – 2012
1998 – 2003
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 positions 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)
Non-listed company boards
– Member of the Board of Fivetran
– Member of the Board of Coalition, Inc.
– Member of the Board of Checkout.com (stepped down in January
2024)
Other activities and functions
– Member of the Board of Directors of UBS AG
Key competencies
– Investment banking, capital markets
– Risk management, compliance and legal
– Human resources management, including compensation
– Technology, cybersecurity
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 Board of Directors of UBS AG
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
Annual Report 2023 | Corporate governance and compensation | Corporate governance
199
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. He has
held a broad range of leadership roles across the Group in
Switzerland, the US and Japan, including COO EMEA for Asset
Management and COO of Group Internal Audit. Since 2015, he
has supported the Chairmen of the Board of Directors as Group
Company Secretary and Chief of Staff.
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
Other activities and functions
– Chairman of the Board of Directors of the Savoy Baur en
Ville, Zurich
Jeanette Wong
Non-executive member of the Board since 2019
– Member of the Compensation 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
that 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 FX, Fixed Income and emerging markets
business. She brings extensive experience from serving as a member of
the board of directors of two high-value listed companies.
Professional experience
2008 – 2019
2003 – 2008
2003
1997 – 2002
1986 – 1997
Group Executive institutional banking business,
DBS Bank, Singapore
CFO, DBS Bank, Singapore
Chief Administration Officer, DBS Bank, Singapore
Country Manager Singapore, JPMorgan, Singapore
Various roles in Global Markets and Emerging Markets
Sales and Trading business, Asia, JPMorgan, Singapore
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 of GIC Pte Ltd
– Member of the Board of Jurong Town Corporation
– Member of the Board of PSA International
– Member of the Board of Pavilion Capital Holdings Pte Ltd
Other activities and functions
– Member of the Board of Directors of UBS AG
– 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
– Environmental, social and governance (ESG)
Leadership experience
– Executive board leadership
Annual Report 2023 | Corporate governance and compensation | Corporate governance
200
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
Organizational principles and structure
Following each AGM, the BoD meets to appoint one or more Vice Chairmen, a Senior Independent Director, the BoD
committee members (other than the Compensation Committee members, who are elected by the shareholders) and the
respective committee Chairpersons. At the same meeting, the BoD appoints the Group Company Secretary, who,
pursuant to the Organization Regulations, acts as secretary to the BoD and its committees.
Pursuant to the AoA and the Organization Regulations, the BoD meets as often as business requires, but it must meet at
least six times a year. The presence of either the Chairman, one of the Vice Chairmen or the Senior Independent Director,
as well as the majority of the members of the BoD, is required to pass valid BoD resolutions. In 2023, a majority of
meetings were held in person. During 2023, a total of 33 BoD meetings were held, 14 of which were attended by GEB
members. The average participation in the BoD meetings was 99%. In addition to the BoD meetings attended by GEB
members, the Group CEO regularly attended some of the meetings of the BoD without the participation of other GEB
members. The meetings had an average duration of 87 minutes.
The acquisition of the Credit Suisse Group led to a significant increase in the number of ad hoc calls and meetings. In the
period leading up to the announcement, to support the BoD’s decision making, and afterwards, to provide oversight for
the integration of Credit Suisse, 28 extra meetings or calls were held. In the second half of the year, the respective tasks
were folded back into the standard meeting cycle. In 2023 the BoD held a total of 61 meetings, which lasted for
approximately 100 hours.
The BoD held a two-day strategy workshop, which focused on the integration of Credit Suisse, included updates from
each business division and region and focused on the planning for the first 90 days after the legal close of UBS’s
acquisition of the Credit Suisse Group.
Board of Directors
Members in 2023
Colm Kelleher, Chairman
Lukas Gähwiler
Jeremy Anderson
Claudia Böckstiegel
William C. Dudley
Patrick Firmenich
Fred Hu
Mark Hughes
Nathalie Rachou
Julie G. Richardson
Dieter Wemmer
Jeanette Wong
Meeting attendance
without GEB1
Meeting attendance
with GEB2
Key responsibilities include:
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 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
the Group’s 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
19/19
19/19
19/19
19/19
19/19
19/19
18/19
19/19
19/19
19/19
19/19
19/19
100%
100%
100%
100%
100%
100%
14/14
14/14
100%
100%
14/14
100%
14/14
100%
14/14
100%
14/14
100%
95%
14/14
100%
100%
100%
100%
100%
100%
14/14
100%
14/14
100%
14/14
100%
14/14
100%
13/14
93%
1 Additionally, nine calls and meetings took place in 2023. 2 Additionally, nine calls and meetings took place in 2023.
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. 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 for non-executive board members of all significant
group entities was held and included representatives from the Credit Suisse legal entities.
Annual Report 2023 | Corporate governance and compensation | Corporate governance
201
Performance assessment
In spring 2024, the BoD self-assessment was conducted in-house, with an in-depth questionnaire, and it confirmed that
the BoD operated efficiently and effectively. Every third year, an external assessment of the effectiveness of the BoD is
performed. The most recent external review was conducted in 2022 and concluded that the BoD and its committees
operate effectively, in line with best practices, and meet the highest standards also in comparison with leading
international peers. The next external review will take place in 2025.
BoD committees
The committees listed below assist the BoD in fulfilling 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 twice a year in the case of the Corporate Culture and Responsibility
Committee (the CCRC) and the Governance and Nominating Committee. Topics of common interest or affecting more
than one committee are discussed at joint committee meetings.
During 2023, a total of 10 joint committee meetings were held. The Audit Committee met four times with the Risk
Committee and three times with the CCRC. The Risk Committee met twice with the CCRC and once with the
Compensation Committee.
Audit Committee
Throughout 2023, the Audit Committee consisted of the same four independent BoD members. 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 2023, all members
of the Audit Committee 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.
During 2023, the Audit Committee held 14 committee meetings, with a participation rate of 100%. The meetings had
an average duration of approximately 120 minutes. Additional attendees included the Group CFO, the Group Controller,
the Chief Accounting Officer, the Head Group Internal Audit (GIA) and the external auditors. The Chairman of the BoD,
the Vice Chairman and the Group CEO attended most meetings. The Chairperson and the committee continued to
maintain regular contact with core supervisory authorities.
Audit Committee
Members in 2023
Meeting attendance Key responsibilities include:
Jeremy Anderson (Chairperson)
Patrick Firmenich
Dieter Wemmer
Jeanette Wong
14/14
14/14
100%
100%
14/14
100%
14/14
100%
The function of the Audit Committee is to support the BoD 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
.
Annual Report 2023 | Corporate governance and compensation | Corporate governance
202
Compensation Committee
Throughout 2023, the Compensation Committee consisted of the same three independent members. In addition to the
key responsibilities indicated in the table below, the Compensation Committee reviews the compensation disclosures
included in this report.
During 2023, the Compensation Committee held eight meetings, with a participation rate of 96%. The meetings had an
average duration of approximately 95 minutes. All meetings in 2023 were held in the presence of the Chairman, the
respective Group CEOs and external advisors. In 2023, the Chairperson met regularly with core supervisory authorities.
› Refer to “Compensation for the Board of Directors” in the “Compensation” section of this report for more information about the
Compensation Committee’s decision-making procedures
Compensation Committee
Members in 2023
Meeting attendance1 Key responsibilities include:
Julie G. Richardson (Chairperson)
Dieter Wemmer
Jeanette Wong
8/8
8/8
7/8
100%
100%
88%
The Compensation Committee is responsible for:
(i)
supporting the BoD in its duties to set guidelines on compensation and benefits;
(ii) approving the total compensation for the Chairman and the non-independent BoD members;
(iii) proposing, upon proposal of the Chairman, financial and non-financial performance targets
and objectives for the Group CEO for approval by the BoD 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 BoD, as well as informing the BoD 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 BoD; and
(vi) proposing, upon proposal of the Group CEO, the individual total compensation for the other
GEB members for approval by the BoD.
› Refer to the Organization Regulations of UBS Group AG,
available at ubs.com/governance, for more information
1 Additionally, the Compensation Committee held three ad hoc calls.
Corporate Culture and Responsibility Committee
Throughout 2023, the CCRC consisted of the same five independent BoD members. The Chairman chaired the
committee. Additional attendees included the Group CEO, the Group Chief Risk Officer, the GEB Lead for Sustainability
and Impact, the Group General Counsel and the Chief Sustainability Officer. During 2023, five meetings were held, with
a participation rate of 100%. The average duration of each of the meetings was approximately 75 minutes.
Corporate Culture and Responsibility Committee
Members in 2023
Meeting attendance Key responsibilities include:
Colm Kelleher (Chairperson)
Claudia Böckstiegel
William C. Dudley
Patrick Firmenich
Mark Hughes
5/5
5/5
5/5
5/5
5/5
100%
100%
100%
100%
100%
The CCRC supports the BoD 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 CCRC’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
.
Annual Report 2023 | Corporate governance and compensation | Corporate governance
203
Governance and Nominating Committee
Before the 2023 AGM, the Governance and Nominating Committee, chaired by the Chairman, consisted of four
independent members and, after the AGM, the Vice Chairman joined the committee. During 2023, six meetings were
held, with a participation rate of 100%. The average duration of each of the meetings was approximately 30 minutes.
The Group CEO attended meetings as appropriate.
Governance and Nominating Committee
Members in 2023
Meeting attendance1 Key responsibilities include:
Colm Kelleher (Chairperson)
Lukas Gähwiler2
Jeremy Anderson
Fred Hu
Nathalie Rachou
6/6
4/4
6/6
6/6
6/6
100%
100%
100%
100%
100%
The function of the Governance and Nominating Committee is to support the BoD in fulfilling its
duty to establish best practices in corporate governance across the Group, including conducting a
BoD assessment, establishing and maintaining a process for appointing new BoD and GEB
members, as well as for the annual performance assessment of the BoD.
› Refer to the Organization Regulations of UBS Group AG,
available at ubs.com/governance, for more information
1 Additionally, the Governance and Nominating Committee held one ad hoc call. 2 Lukas Gähwiler became a member of this committee after the 2023 AGM; indicated are his attended and total meetings.
Risk Committee
In 2023, the Risk Committee consisted of four independent members before the AGM. After the AGM, the Vice Chairman
joined the committee. During 2023, the Risk Committee held 10 committee meetings, with a participation rate of 100%.
The average duration of each of the meetings was approximately 130 minutes. The Chairman of the BoD, the Vice
Chairman, the Group CEO, the Group CFO, the Group Chief Risk Officer, the Group Chief Operations and Technology
Officer, the Group Treasurer, the Group Chief Compliance and Governance Officer, the Group General Counsel, the
Head GIA, and the external auditors attended the meetings as required. In 2023, the Chairperson and the full committee
met with core supervisory authorities.
Risk Committee
Members in 2023
Meeting attendance1
Key responsibilities include:
Mark Hughes (Chairperson)
10/10
100%
Lukas Gähwiler2
William C. Dudley
Nathalie Rachou
8/8
100%
10/10
100%
The function of the Risk Committee is to oversee and support the BoD in fulfilling its duty to set
and supervise an appropriate risk management and control framework in the areas of:
(i)
financial and non-financial risks;
(ii) balance sheet, treasury and capital management, including funding,
10/10
100%
liquidity and equity attribution.
Julie G. Richardson
10/10
100%
› Refer to the Organization Regulations of UBS Group AG,
available at ubs.com/governance, for more information
1 Additionally, the Risk Committee held two ad hoc calls. 2 Lukas Gähwiler became a member of this committee after the 2023 AGM; indicated are his attended and total meetings.
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.
In 2023, the Special Committee was chaired by Jeremy Anderson, with Colm Kelleher, Lukas Gähwiler, Claudia
Böckstiegel, Nathalie Rachou and Julie G. Richardson as its members. Its primary purpose is to oversee activities related
to key litigation and investigation matters, review management’s respective proposals and provide to the BoD
recommendations for decisions. Additional attendees included the Group CEO and the Group General Counsel. During
2023, three meetings of the Special Committee were held.
In 2023, the Strategy Committee was chaired by Colm Kelleher, with William C. Dudley, Fred Hu, Julie Richardson and
Dieter Wemmer as its members. Lukas Gähwiler became a member of this committee after the 2023 AGM. The primary
purpose of this committee is to support management and the BoD with regard to the assessment of strategic
considerations and to prepare decisions on behalf of the BoD. During 2023, two meetings of the Strategy Committee
were held early in the year in relation to the acquisition of the Credit Suisse Group. The Group CEO and other members
of the GEB and management participated in these meetings as required.
Annual Report 2023 | Corporate governance and compensation | Corporate governance
204
Roles and responsibilities of the Chairman of the Board of Directors
At the 2023 AGM, Colm Kelleher was re-elected as the full-time Chairman of the BoD. The Chairman coordinates tasks
within the BoD, calls BoD meetings and sets the meeting agendas. He presides over all general meetings of shareholders,
chairs the Governance and Nominating Committee, as well as the CCRC, 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, regulators 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 stakeholders” section of this report for information about our Pillars,
Principles and Behaviors
In 2023, the Chairman met regularly with core supervisory authorities of 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 BoD and the committees.
Lukas Gähwiler was appointed as Vice Chairman following the 2022 AGM. Jeremy Anderson was re-appointed the Senior
Independent Director and has held that post since 2020. The Vice Chairman is required to lead meetings of the BoD in
the temporary absence of the Chairman. Together with the Governance and Nominating Committee, either the Senior
Independent Director or the Vice Chairman is tasked with the ongoing monitoring and the annual evaluation of the
Chairman. The Vice Chairman also represents UBS on behalf of the Chairman in meetings with internal or external
stakeholders. In particular, Lukas Gähwiler represents UBS across a broad range of associations and industry bodies in
Switzerland.
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 2023, two independent BoD meetings were held with an average
participation rate of 95% and an average duration of approximately 105 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.
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 BoD members to be independent. For this purpose,
independence is determined in accordance with FINMA Circular 2017/1 “Corporate governance – banks” and the NYSE
rules.
In 2023, our BoD met the standards of the Organization Regulations for the percentage of directors who are considered
independent under the criteria described above. No current BoD member has either an employment contract or a
significant business connection to UBS or any of its subsidiaries. No BoD member currently carries out operational
management tasks within the Group. Except for the Vice Chairman, no BoD member has carried out operational
management tasks within the Group over the past three years.
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 of this report for more information
Annual Report 2023 | Corporate governance and compensation | Corporate governance
205
Checks and balances: the Board of Directors and the 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 powers. 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. 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.
Skills, expertise and training of the Board of Directors
The BoD is well-diversified and 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. The Governance
and Nominating Committee maintains a competencies and experience matrix to identify gaps in the competencies and
experiences considered most relevant to the BoD, taking into consideration the firm’s business exposure, risk profile,
strategy and geographic reach.
In recent years, the composition of the BoD has been systematically shaped along the identified requirements. The
appointment of a new Chairman and Vice Chairman in 2022, as well as the nomination of Gail Kelly in January 2024,
were important elements in this continuous process. We maintain and update a list of potential candidates for UBS Group
AG.
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
– human resources management, including compensation
– technology, cybersecurity
– regulatory authority, central bank
– environmental, social and governance (ESG)
Leadership experience
– experience as a 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 composition of the BoD after the 2023 AGM, the BoD 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, we consider the continuous education of our BoD members to be an important priority and support their
attendance to various training sessions. In addition to a comprehensive induction program for new BoD members,
continuous training and topical deep dives are part of the BoD agenda.
Cybersecurity governance
Cybersecurity as one of the inherently highest and most rapidly evolving non-financial risks is a key focus for the BoD. It
is primarily covered by the Risk Committee through a combination of (i) regular reporting as part of the monthly risk
reports and quarterly technology risk updates, and (ii) dedicated deep-dives on specific cybersecurity topics, including
summaries and assessments of actual cybersecurity incidents in the industry, assessments of the firm’s security posture
and related continuous improvement measures. In addition, the BoD members receive periodic updates from the Group
Chief Information Security Office on key cybersecurity threats and incidents across the globe and industries, and the Risk
Committee regularly organizes education and training sessions, including cyber exercises, for all BoD members.
› Refer to “Risk governance” in the “Risk management and control” section of this report for information about our risk
governance framework
› Refer to “Non-financial risk” in the “Risk management and control” section of this report for information about cybersecurity
Annual Report 2023 | Corporate governance and compensation | Corporate governance
206
Terms of office¹
Geographic diversity ²
Gender³
2
8
2
0
< 3 years
3 – 6 years
7 – 9 years
> 9 years
33%
Switzerland
25%
Europe and the UK
25% USA / Canada
17% Asia
67% male
33%
female
0
2
4
6
8
10
12
Competencies and experience 4
Key competencies
Banking 5 and insurance
Investment banking, capital markets
Finance, audit, accounting
Risk management, compliance and legal
HR management, including compensation
Technology, cybersecurity
Regulatory authority, central bank
ESG 6
Leadership experience
0
2
4
6
8
10
12
Chief executive officer or chairman
Executive board 7
1 Terms of office until the 2024 AGM. 2 In the case of dual-nationals, the domicile applies. 3 In accordance with the 30% gender quota of the revised Swiss Corporate Law.
4 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. 5 Wealth management, asset management, and personal and corporate
banking. 6 Environmental, social and governance. 7 For example, a CFO, chief risk officer or COO of a listed company.
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.
In 2022, the GEB launched several strategic initiatives with the close involvement of the BoD and with the aim of further
strengthening internal succession planning at UBS. This included the early identification of talents and their systematic
development, including international and cross-divisional rotations. The succession plans for the GEB and the
management layers below it are managed under the lead of the Group CEO and are reviewed and approved by the BoD.
Moreover in 2023, to cater to the challenges posed by the acquisition of the Credit Suisse Group, the composition of the
GEB was complemented with new members.
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 smooth and effective succession at the GEB level and the appointments of internal talent as new GEB members
demonstrates the strength of the succession planning at UBS. The BoD and the GEB remain committed to the continuous
focus on developing a high-quality bench of succession candidates at all levels in the organization.
Annual Report 2023 | Corporate governance and compensation | Corporate governance
207
Board of Directors’ succession planning process
Strategy / Environment
Onboarding
Existing board composition
Succession
planning process
AGM election
Search
Selection
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 receives regular comprehensive reports covering financial, capital, funding,
liquidity, regulatory, compliance and legal developments, as well as performance against plan and forecasts for the
remainder of the year. For important developments, BoD members are also updated by the GEB in between meetings. In
addition, the Chairman receives the meeting material and minutes of the GEB meetings.
BoD members may request from other BoD or GEB members any information about matters concerning the Group that
they require in order to fulfill their duties. When these requests are raised outside BoD meetings, such requests must go
through the Group Company Secretary and be addressed to the Chairman.
The BoD is supported in discharging 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, resourcing
requirements and other important developments. GIA issues an annual Activity Report, which is provided to the Chairman
and the Audit Committee to support their assessment of GIA’s effectiveness.
› Refer to “Group Internal Audit” in this section for more information
› Refer to “Internal risk reporting” in the “Risk management and control” section of this report for information about reporting to
the BoD
Annual Report 2023 | Corporate governance and compensation | Corporate governance
208
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 2023, the GEB, under the leadership of the Group CEO, consisted of 16 members. It has executive
management responsibility for the steering of the Group and its business, develops 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 establishing and supervising the implementation of risk management and control
principles, as well as for managing the risk profile of the Group, as determined by the BoD and the Risk Committee.
In 2023, the GEB held a total of 57 meetings.
› 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
On 29 March 2023, the BoD named Sergio P. Ermotti as its new Group CEO, effective 5 April 2023. The BoD made the
decision in light of UBS’s new priorities following its planned acquisition of the Credit Suisse Group. Sergio P. Ermotti
had been the Group CEO from 2011 to 2020. Ralph Hamers, who had succeeded Sergio P. Ermotti in 2020, agreed to
step down and remained at UBS during a transition period to ensure a successful closure of the transaction and a smooth
handover. At the time of his re-appointment as Group CEO, Sergio P. Ermotti was Chairman of Swiss Re and remained
in that post until his resignation therefrom on 30 April 2023 to facilitate an orderly transition at Swiss Re.
On 24 April 2023, UBS announced that Christian Bluhm had agreed to remain in his role as Group Chief Risk Officer and
member of the GEB for the foreseeable future, considering the planned acquisition of the Credit Suisse Group, therefore
delaying the handover to Damian Vogel that was originally planned for 1 May 2023.
On 9 May 2023, UBS Group AG announced a new operating model and changes to the GEB: CEO of Credit Suisse Group
AG, Ulrich Körner, would join the GEB and Todd Tuckner would succeed Sarah Youngwood as Group CFO; both
appointments came into effect at the close of the transaction on 12 June 2023. With immediate effect on 9 May 2023,
Beatriz Martin Jimenez was named Head Non-core and Legacy and President UBS Europe, Middle East and Africa,
Michelle Bereaux was named Group Integration Officer, and Stefan Seiler was appointed Head Group Human Resources
& Group Corporate Services.
On 24 January 2024, UBS announced that Suni Harford would step down, and Aleksandar Ivanovic was appointed
President Asset Management effective 1 March 2024. It was also announced that Beatriz Martin Jimenez would take on
the responsibility as GEB Lead for Sustainability and Impact from Suni Harford, effective 1 March 2024.
As a result of the acquisition of the Credit Suisse Group in 2023, and to ensure compliance with our governance principles
and to facilitate a smooth integration into UBS, in June 2023, Michelle Bereaux and Stefan Seiler were elected as members
of the board of Credit Suisse AG.
The biographies below provide information about the GEB members in office as of 31 December 2023. The biographies
of Ralph Hamers and Sarah Youngwood can be found on pages 187 and 192 of the UBS Group AG Annual Report 2022,
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 our AoA 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 one time at the request of the company and more than eight mandates in associations,
charitable organizations, foundations, trusts and employee welfare foundations without commercial purpose. On
31 December 2023, no member of the GEB reached the aforementioned thresholds.
Responsibilities and authorities of the Asset and Liability Committee
The Asset and Liability Committee of UBS Group AG (the GALCO) is responsible for managing assets and liabilities in line
with the strategy, risk appetite, regulatory commitments and the interests of shareholders and other stakeholders. The
GALCO proposes the framework for capital management, capital allocation, and liquidity and funding risk, and proposes
limits and indicators for the Group to the BoD for approval. It oversees the balance sheet management of the Group, its
business divisions and Group functions. In 2023, the GALCO held 10 meetings.
Management contracts
We have not entered into management contracts with any companies or natural persons that do not belong to the
Group.
Annual Report 2023 | Corporate governance and compensation | Corporate governance
209
Sergio P. Ermotti
Michelle Bereaux
Group Chief Executive Officer, member of the GEB from 2011 to
2020 and since April 2023
Nationality: Swiss | Year of birth: 1960
Sergio P. Ermotti has been Group CEO of UBS Group AG and President of
the Executive Board of UBS AG since April 2023. He was also the Group
CEO from 2011 to 2020. He re-joined UBS from Swiss Re, where he was
Chairman of the Board of Directors until April 2023. Prior to joining UBS
in 2011, he was at UniCredit Group, where from 2007 to 2010 he served
as Group Deputy Chief Executive Officer and Head of Corporate &
Investment Banking and Private Banking, prior to that he served as Head
of the Markets & Investment Banking Division. Between 1987 and 2004,
he held various positions at Merrill Lynch & Co. in the areas of equity
derivatives and capital markets. He became Co-Head of Global Equity
Markets and a member of the Executive Management Committee for
Global Markets & Investment Banking in 2001.
Professional experience
2023 – date
Group CEO, UBS Group AG, and President of the
Executive Board, UBS AG
Chairman of the Board of Directors, Swiss Re
2021 – 2023
2020 – 2021 Member of the Board of Directors, Swiss Re
2011 – 2020
2011 – 2011
2007 – 2010
2005 – 2007
1987 – 2004
Group Chief Executive Officer, UBS
Chairman and CEO UBS Group Europe, Middle East and
Africa, and member of the Group Executive Board, UBS
Group Deputy Chief Executive Officer and
Head Corporate & Investment Banking and Private
Banking, UniCredit
Head Markets & Investment Banking Division, UniCredit
Various senior management positions, Merrill Lynch & Co
Group Integration Officer, member of the GEB since May 2023
Nationality: British and Trinidadian & Tobagonian | Year of birth: 1964
Michelle Bereaux was appointed Group Integration Officer in May 2023
and is responsible for the development and execution of our integration
strategy, working closely with all GEB members and integration
workstream leads. Ms. Bereaux has been at UBS for more than 25 years
and has held various leadership roles across the firm. She has served as
both COO and Head HR for our Investment Bank, has successfully led
multiple firm-wide cost and transformation projects, and, most recently,
served as COO and UK Country Head of Asset Management. She brings
both a wealth of transformation experience and a strong legal, HR,
investment banking and asset management background to lead our
integration efforts.
Professional experience
May 2023 – date Group Integration Officer, UBS Group AG and UBS AG
2021 – 2023
2020 – 2023
2018 – 2020
2015 – 2018
2011 – 2014
2011 – 2011
2009 – 2010
Country Head UBS Asset Management UK and CEO
Asset Management UK Ltd
COO, UBS Asset Management
Head of Group Efficiency and Cost Management, UBS
Business Solutions AG
Non-Executive Director and Chairman Remuneration
Committee, UBS Limited
Global Head Human Resources, UBS Investment Bank
Global Strategic Projects at CEO Management Office,
UBS Investment Bank
Chief of Staff and Joint Global COO, UBS Investment
Bank
Education
– Swiss-certified banking expert
– Advanced Management Programme, the University of Oxford
Education
– Law, the University of Cambridge
– Politics, Economics and Law, the University of Buckingham
Listed company boards
– Member of the Board of Ermenegildo Zegna N.V. (Lead Non-Executive
Director)
Other activities and functions
– Member of the Executive Board of UBS AG
– Member of the Board of Directors of Credit Suisse AG
Non-listed company boards
– Member of the Board of Società Editrice del Corriere del Ticino SA
Other activities and functions
– President of the Executive Board of UBS AG
– Member of the Board of Innosuisse, the Swiss Innovation Agency
– Member of Institut International D’Etudes Bancaires
– Member of the WEF International Business Council and Governor of
the Financial Services / Banking Community
– Member of the MAS International Advisory Panel
– Member of the Board of the Institute of International Finance
– Member of the Board of the Swiss-American Chamber of Commerce
Annual Report 2023 | Corporate governance and compensation | Corporate governance
210
Christian Bluhm
Mike Dargan
Group Chief Risk Officer, member of the GEB since 2016
Nationality: Swiss and German | Year of birth: 1969
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
2016 – date
2012 – 2015
Group Chief Risk Officer, UBS Group AG, and Chief Risk
Officer, 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
2004 – 2008
2001 – 2004
Education
– Master’s degree, mathematics and informatics, and doctorate,
mathematics, University of Erlangen-Nuremberg
Non-listed company boards
– Chairman of the Board of Christian Bluhm Photography AG
Other activities and functions
– Member of the Executive Board of UBS AG
– Member of the Foundation Board International Financial Risk Institute
Group Chief Operations and Technology Officer, member of the
GEB since 2021
Nationality: British | Year of birth: 1977
Mike Dargan was appointed Group Chief Operations and Technology
Officer in May 2023 and is responsible for delivering digital platforms,
technology services, infrastructure, and operations, including cyber and
information security. Previously, he was Group Chief Digital and
Information Officer (CDIO), after leading our Group Technology function
since joining UBS in 2016. In addition to this remit, he was also GEB
sponsor for our digital assets strategy and a sponsor of artificial
intelligence and our agile transformation, which were integrated into his
area of responsibility in 2023. Prior to joining UBS, he held various senior
roles in technology, corporate strategy and investment banking at
Standard Chartered Bank, Merrill Lynch, and Oliver Wyman.
Professional experience
May 2023 – date Group Chief Operations and Technology Officer, UBS
2021 – 2023
2021 – date
2016 – 2021
2015 – 2016
2014 – 2015
2013 – 2014
2009 – 2013
2005 – 2009
Group AG, and Chief Operations and Technology
Officer, UBS AG
Group CDIO, UBS Group AG, and CDIO, UBS AG
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
Education
– Master’s degree, politics, philosophy and economics,
St. John’s College, the University of Oxford
Other activities and functions
– Member of the Executive Board of UBS AG
– Member of the Board of Directors and President of the Executive
Board of UBS Business Solutions AG
– Member of the Board of UBS Optimus Foundation
Annual Report 2023 | Corporate governance and compensation | Corporate governance
211
Suni Harford
Naureen Hassan
President Asset Management, member of the GEB since 2019
(until 29 February 2024)
Nationality: American (US) | Year of birth: 1962
Suni Harford was appointed President Asset Management in 2019 and
stepped down in February 2024. She was the Chair of UBS Optimus
Foundation from 2019 to 2024. Ms. Harford was the UBS GEB Lead for
Sustainability and Impact from 2021 to 2024. 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 joined UBS
in 2017, bringing with her a broad experience from across the industry,
including in research, client coverage and risk management, and
successfully
investments
capabilities, driving performance for its clients.
led UBS Asset Management’s
integrated
President UBS Americas, member of the GEB since October 2022
Nationality: American (US) | Year of birth: 1971
Naureen Hassan was appointed President UBS Americas and CEO of UBS
Americas Holding LLC in 2022. She joined UBS from the Federal Reserve
Bank of New York, where she was COO and First Vice President. After
starting her career at McKinsey & Company, Ms. Hassan held various
business transformation, strategy and operational leadership roles at
Charles Schwab Corporation and was a member of that company’s
Executive Committee. Subsequently, as Chief Digital Officer at Morgan
Stanley Wealth Management, she led the digital strategy and executed
digital transformation of the wealth management business to grow the
business, improve client experience and increase financial advisor
effectiveness and efficiency.
Professional experience
2019 – Feb.
2024
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.
2017 – 2019
2008 – 2017
2004 – 2008
Education
– Bachelor’s degree, physics and mathematics, Denison University, Ohio
– MBA, Tuck School of Business, Dartmouth College, New Hampshire
Other activities and functions
– Member of the Executive Board of UBS AG
– Chairman of the Board of Directors of UBS Asset Management AG
– Chair of the Board of UBS Optimus Foundation
– Member of the Board of Directors of the Bob Woodruff Foundation
Professional experience
2022 – date
President UBS Americas, UBS Group AG and UBS AG,
and CEO, UBS Americas Holding LLC
First Vice President and COO, Federal Reserve
Bank of New York
Chief Digital Officer, Wealth Management,
Morgan Stanley
Executive Vice President, Investor Services, Charles
Schwab Corporation
Senior Vice President, Advisor Services Client Experience
& Strategic Integration, Charles Schwab Corporation
COO and Board Director, Charles Schwab Bank
Various senior positions, Charles Schwab Corporation
2021 – 2022
2016 – 2020
2014 – 2016
2012 – 2014
2010 – 2012
2003 – 2010
Education
– Bachelor’s degree, economics, Princeton University
– Master’s degree, business administration, Stanford University
Graduate School of Business
Other activities and functions
– Member of the Executive Board of UBS AG
– Member of the Board and CEO of UBS Americas Holding LLC
– Member of the Board of the Securities Industry and Financial Markets
Association (stepped down in January 2024)
– Member of the Board of Governors of FINRA (as of February 2024)
– Member of the Board of Ownership Works
– Member of the Board of the American Swiss Foundation
– Member of the Board and Executive Committee of The Partnership for
New York City
Annual Report 2023 | Corporate governance and compensation | Corporate governance
212
Robert Karofsky
Sabine Keller-Busse
President Investment Bank, member of the GEB since 2018
Nationality: American (US) | Year of birth: 1967
Robert Karofsky was appointed Co-President of the Investment Bank in
2018 and reshaped that division, realigning efforts around clients’
evolving needs, focusing resources on opportunities for profitable growth
and reinvesting in UBS’s digital transformation. He became sole President
of the Investment Bank in 2021 and was President UBS Securities LLC from
2015 to 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.
President Personal & Corporate Banking and
President UBS Switzerland, member of the GEB since 2016
Nationality: Swiss and German | Year of birth: 1965
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 as 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.
Professional experience
2021 – date
2018 – 2021
2015 – 2021
2014 – 2018
2011 – 2014
2008 – 2010
2005 – 2008
President Investment Bank, UBS Group AG and UBS AG
Co-President Investment Bank, UBS
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
Education
– Bachelor’s degree, economics, Hobart and William Smith Colleges,
New York
– MBA, finance and statistics, University of Chicago’s Booth School of
Business
Other activities and functions
– Member of the Executive Board of UBS AG
– Member of the Board of UBS Americas Holding LLC
– Member of the Board of UBS Optimus Foundation
Professional experience
2021 – date
President Personal & Corporate Banking and
President UBS Switzerland, UBS Group AG
President of the Executive Board, UBS Switzerland AG
President UBS Europe, Middle East and Africa, UBS
Group COO of UBS and President of the Executive
Board, UBS Business Solutions AG
Member of the Executive Board of UBS AG
Group Head Human Resources, UBS
COO UBS Switzerland, UBS
2021 – date
2019 – 2021
2018 – 2021
2016 – 2021
2014 – 2017
2010 – 2014
Education
– Master’s degree, economic sciences, University of St. Gallen
– Ph.D., economic sciences (Dr. oec.), University of St. Gallen
Listed company boards
– Member of the Board of Zurich Insurance Group
Other activities and functions
– President of the Executive Board of UBS Switzerland AG
– Chairwoman of the Foundation Board of the UBS Pension Fund
– 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
– Member of the Board of Trustees of the Swiss Entrepreneurs
Foundation
Annual Report 2023 | Corporate governance and compensation | Corporate governance
213
Iqbal Khan
Edmund Koh
President Global Wealth Management, member of the GEB since
2019
President UBS Asia Pacific, member of the GEB since 2019
Nationality: Singaporean | Year of birth: 1960
Nationality: Swiss | Year of birth: 1976
Iqbal Khan has been President Global Wealth Management since October
2022 and was President UBS Europe, Middle East and Africa from 2021
to 2023. From 2019 until September 2022, he was Co-President Global
Wealth Management. Mr. Khan joined Ernst & Young in 2001, holding
numerous leadership positions and becoming a very young executive and
a partner of the firm’s Swiss arm; when leaving Ernst & Young, 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
2022 – date
President Global Wealth Management, UBS Group AG
and UBS AG
2021 – May 2023 President UBS Europe, Middle East and Africa, UBS
2019 – 2022
2015 – 2019
2013 – 2015
2011 – 2013
2009 – 2011
2001 – 2009
Co-President Global Wealth Management, UBS
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 (LL.M.),
University of Zurich
Other activities and functions
– Member of the Executive Board of UBS AG
– Member of the Board of UBS Optimus Foundation
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. He joined UBS from Taiwan-based Ta Chong Bank,
where he served as President and Director. Before working for DBS Bank
in Singapore, Mr. Koh was CEO for Prudential Assurance and Alverdine
Pte Ltd, both companies based in Singapore.
Professional experience
2019 – date
2016 – 2018
2012 – 2018
President UBS Asia Pacific, 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, Singapore
– Member of the Board of Curbside Pte Ltd, Singapore
– Member of the Board of the Philanthropy Asia Alliance Ltd, Singapore
Other activities and functions
– Member of the Executive Board of UBS AG
– 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, Singapore
– Member of the Board of Trustee of the Cultural Matching Fund,
Singapore
– Member of University of Toronto’s International Leadership
Council for Asia
Annual Report 2023 | Corporate governance and compensation | Corporate governance
214
Ulrich Körner
Barbara Levi
CEO of Credit Suisse AG, member of the GEB since June 2023
Group General Counsel, member of the GEB since 2021
Nationality: Swiss and German | Year of birth: 1962
Nationality: Italian | Year of birth: 1971
Ulrich Körner was appointed CEO of Credit Suisse AG in June 2023, when
the Credit Suisse Group AG was acquired by UBS Group AG. Prior to the
acquisition, he was CEO of Credit Suisse Group AG. Before that he was
CEO Asset Management at Credit Suisse Group AG. From 2009 to 2020,
he held various leadership positions, such as President Asset Management,
President UBS Europe, Middle East and Africa, and Group COO, at UBS
Group AG and was a member of the Group Executive Board. With his
knowledge of both organizations, Mr. Körner will be responsible for
ensuring Credit Suisse’s operational continuity and client focus while
supporting the integration process.
Barbara Levi has been Group General Counsel since 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
June 2023 – date
2022 – June 2023
2021 – 2022
2019 – 2020
2009 – 2020
2015 – 2019
2014 – 2015
2011 – 2015
2009 – 2013
2002 – 2009
CEO of Credit Suisse AG, UBS Group AG
Group CEO of Credit Suisse Group AG, Credit Suisse
CEO Asset Management, Credit Suisse
Senior Advisor to the Group CEO, UBS
Member of the Group Executive Board, UBS
President Asset Management and President UBS
Europe, Middle East and Africa, UBS
CEO Global Asset Management, UBS
CEO UBS Group Europe, Middle East and Africa, UBS
Group COO, UBS
Various senior management positions, Credit Suisse
Education
– Master’s degree, economics, University of St. Gallen
– Doctorate, economics, University of St. Gallen
Listed company boards
– Vice President of the Board of Lyceum Alpinum Zuoz AG
Professional experience
2021 – date
2021
2020 – 2021
2019
2016 – 2019
2014 – 2016
2013 – 2014
2009 – 2013
Group General Counsel, UBS Group AG, and General
Counsel, UBS AG
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
– Law degree, University of Milan
– Master of Laws (LL.M.), banking, corporate and finance law, Fordham
University School of Law, New York
Other activities and functions
– Member of the Executive Board of UBS AG
– Member of the Board of Directors of the European General Counsel
Association
– Member of the Legal Committee of the Swiss-American Chamber of
Commerce
Annual Report 2023 | Corporate governance and compensation | Corporate governance
215
Beatriz Martin Jimenez
Markus Ronner
Head Non-core and Legacy and President UBS Europe, Middle East
and Africa, member of the GEB since May 2023
Group Chief Compliance and Governance Officer,
member of the GEB since 2018
Nationality: Spanish | Year of birth: 1973
Nationality: Swiss | Year of birth: 1965
Beatriz Martin Jimenez became Head Non-core and Legacy, as well as
President UBS Europe, Middle East and Africa of UBS Group AG, in May
2023. She has also been the UBS Chief Executive for the UK since 2019.
Her previous UBS roles included Group Treasurer for UBS Group AG, Chief
Transformation Officer for UBS Group AG, COO for UBS Investment Bank,
and Chief of Staff to the CEO for UBS Investment Bank. Before joining
UBS in 2012, Ms. Martin held various roles in fixed income sales and
trading at Morgan Stanley and Deutsche Bank. With her experience in
markets, Ms. Martin has a deep understanding of the industry and has
built an extensive network and credentials globally, in addition to her
restructuring experience, as well as a thorough knowledge of our
Investment Bank.
Professional experience
2023 – date
Head Non-core and Legacy and President UBS Europe,
Middle East and Africa, UBS Group AG and UBS AG
2020 – June 2023 Group Treasurer, UBS Group AG
2019 – date
2022 – 2023
2015 – 2020
2015 – 2019
2012 – 2015
1996 – 2012
UK Chief Executive, UBS AG London Branch
Chief Transformation Officer, UBS Group AG
COO, UBS Investment Bank
UK COO, UBS AG London Branch and UBS Limited
Chief of Staff to CEO, UBS Investment Bank
Various positions in Global Markets, Morgan Stanley
and Deutsche Bank
Markus Ronner has been Group Chief Compliance and Governance
Officer since 2018. He has been with UBS for more than 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 the control of all non-financial risks,
governmental and regulatory affairs, and investigations and governance
matters. From 2022 until October 2023, he served as Chairman of UBS
Switzerland AG, the leading Swiss universal bank.
Professional experience
2018 – date
Group Chief Compliance and Governance Officer, UBS
Group AG, and Chief Compliance and Governance
Officer UBS AG
2022 – Oct. 2023 Chairman of UBS Switzerland AG
2012 – 2018
2011 – 2013
2010 – 2011
2009 – 2010
2007 – 2009
2001 – 2007
Head Group Regulatory and Governance, UBS
Manager Group-wide too-big-to-fail program, UBS
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
– Member of the Executive Board of UBS AG
Education
– Masters in Business Administration, Universidad Autónoma de Madrid,
Madrid
– Erasmus Exchange programme, Hochschule für Bankwirtschaft,
Frankfurt
Non-listed company boards
– Member of the Leadership Council, TheCityUK, London (stepped
down in February 2024)
Other activities and functions
– Member of the Executive Board of UBS AG
– Member of the Supervisory Board of UBS Europe SE
– Member of the Advisory Board of the Frankfurt School of Finance &
Management
Annual Report 2023 | Corporate governance and compensation | Corporate governance
216
Stefan Seiler
Todd Tuckner
Group Chief Financial Officer, member of the GEB since May 2023
Nationality: American (US) | Year of birth: 1965
Todd Tuckner was appointed to the GEB of UBS Group AG in May 2023
and became Group CFO after the acquisition of the Credit Suisse Group
in June 2023. He was previously CFO and Head Business Performance and
Risk Management for our Global Wealth Management business. Mr.
Tuckner joined UBS in 2004 after working for KPMG for 17 years and has
since held various leadership roles across the Group Finance function. He
brings both an in-depth knowledge of UBS and experience across multiple
areas of finance, including tax, controlling, accounting, reporting, risk
management and business advisory.
Professional experience
June 2023 –
date
Group CFO, UBS Group AG and CFO, UBS AG
2020 – 2023
2016 – 2021
2012 – 2019
2009 – 2012
2004 – 2009
1987 – 2004
CFO and Head Business Performance and Risk
Management, Global Wealth Management, UBS
Group Controller and Chief Accounting Officer, UBS
Group Finance COO, UBS
Group Head Tax & Accounting Policy, UBS
Group Head Tax – Americas, UBS
Various management positions, KPMG LLP, New York
Education
– Bachelor’s degree, economics, Princeton University
– MBA, accounting, New York University
Other activities and functions
– Member of the Executive Board of UBS AG
Head Group Human Resources & Group Corporate Services,
member of the GEB since May 2023
Nationality: Swiss | Year of birth: 1974
Stefan Seiler has been Head Group Human Resources & Group Corporate
Services of UBS Group AG and UBS AG since May 2023. He leads the
combined Group Human Resources and Corporate Services function,
ensuring effective and efficient alignment of our people, real estate and
vendor management strategies. He started his career at the Swiss Military
Academy at ETH Zurich and, after working for Credit Suisse from 2002 to
2006, he returned to the Swiss Military Academy as Department Head of
Leadership and Communication. Mr. Seiler joined UBS in 2011 and
became Group Head HR in 2018 after gaining experience as Head HR for
Switzerland and Group Functions, as well as Global Head Talent and
Recruiting. During his career, he has lived in Switzerland, the UK, the US
and Singapore.
Professional experience
May 2023 – date Head Group Human Resources & Group Corporate
2018 – 2023
2016 – 2018
2014 – 2016
2012 – 2016
2011 – 2012
2010 – 2011
2006 – 2011
2002 – 2006
Services, UBS Group AG and Head Human Resources &
Corporate Services, UBS AG
Group Head Human Resources, UBS
Global Head Talent & Recruiting, UBS
Head HR UBS Switzerland and Global Head HR Group
Control & CEO Functions, UBS
Head HR UBS Switzerland, UBS
Global Head HR Corporate Center, UBS
Visiting Professor, Nanyang Business School, Singapore
Department Head of Leadership and Communication,
Swiss Military Academy, ETH Zurich
Assessment specialist, HR Transformation Manager and
Global Lead for Human Capital Management
Implementation Group Functions, Credit Suisse, Zurich
and New York
Education
– Master of Science (lic. Phil.), Educational Psychology, University of
Fribourg
– PhD in Educational Psychology, University of Fribourg
Other activities and functions
– Member of the Executive Board of UBS AG
– Member of the Foundation Board of the UBS Swiss Pension Fund
– Member of the Board of Directors of Credit Suisse AG
– Member of the UBS Center for Economics in Society at the University
of Zurich Foundation Council
– Chairman of the Foundation Board of the Swiss Finance Institute
– Member of the IMD Foundation Board
– Adjunct Professor for Leadership and Strategic Human Resource
Management, Nanyang Technological University (NTU), Singapore
Annual Report 2023 | Corporate governance and compensation | Corporate governance
217
Change of control and defense measures
Our Articles of Association (the AoA) do not provide any measures for delaying, deferring or preventing a 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, anyone 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.
Clauses on change of control
Neither the terms regulating the BoD members’ mandate nor any employment contracts with GEB members or employees
holding key functions within the Group 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 for more information
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 supervises the
effectiveness of audit work.
› Refer to “Board of Directors” in this section for more information about the Audit Committee
External independent auditors
The 2023 Annual General Meeting (the AGM) re-elected Ernst & Young Ltd (EY) as auditors for the Group for the 2023
financial year. The audit of the Group encompasses the consolidated results of Credit Suisse AG and its subsidiaries from
the date of its acquisition on 12 June 2023. EY assumes virtually all auditing functions according to laws, regulatory
requests and the AoA. Robert Jacob is the EY 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.
PricewaterhouseCoopers AG served as auditors for Credit Suisse entities for the 2023 financial year. Following the
election of auditors at the 2024 AGM, UBS Group intends to cause EY to be appointed as the auditors of Credit Suisse
AG and its subsidiaries for the 2024 financial year.
During 2023, the Audit Committee held 14 meetings with the external auditors.
Review of UBS Group AG audit engagement
Mazars has been appointed as auditors of UBS Europe SE, an indirect subsidiary of UBS Group AG, as EU rules require to
rotate its external auditors in the 2024 financial year. In connection with this required change, and in consideration of
governance best practices, the BoD 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. In early 2022, based on the
results of this assessment, the BoD decided to retain EY as the Group’s external auditors.
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.
Annual Report 2023 | Corporate governance and compensation | Corporate governance
218
Fees paid to external independent auditors
UBS Group AG and its subsidiaries (for 2023 including UBS AG and Credit Suisse AG) paid the following fees (including expenses) to
their external independent auditors.
USD m
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)
Total audit
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
All other fees
Total non-audit
1 As published in the Annual Report 2022 for UBS Group AG prior to the acquisition of the Credit Suisse Group.
For the year ended
31.12.23
31.12.221
82
5
87
11
6
5
0
3
6
20
49
7
56
11
6
5
0
2
1
14
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 above. In addition, EY received USD 31m in 2023 (USD 35m in 2022) 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 2023 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 2023, after the acquisition of the Credit Suisse Group, GIA operated with an average headcount of 1,009 full-
time equivalent employees, including Credit Suisse employees.
Annual Report 2023 | Corporate governance and compensation | Corporate governance
219
GIA supports the BoD in discharging its governance responsibilities by taking a dynamic approach to audit, issue assurance
and risk assessment, drawing attention to key risks in order to drive action to prevent unexpected loss or damage to the
firm’s reputation. To support the achievement of UBS’s objectives, GIA independently, objectively and systematically
assesses the:
(i)
(ii)
soundness of the Group’s risk and control culture;
reliability and integrity of financial and operational information, including whether activities are properly, accurately
and completely recorded, and the quality of underlying data and models; and
(iii) design, operating effectiveness and sustainability of:
– processes to define strategy and risk appetite, as well as the overall adherence to the approved strategy;
– governance processes;
– risk management, including whether risks are appropriately identified and managed;
– internal controls, specifically whether they are commensurate with the risks taken;
– remediation activities; and
– processes to comply with legal and regulatory requirements, internal policies, and the Group’s constitutional
documents and contracts.
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. 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.
Information policy
We provide regular information to our shareholders and to the wider financial community.
Financial reports for UBS Group AG are expected to be published on the following dates:
First quarter 2024
Second quarter 2024
Third quarter 2024
7 May 2024
31 July 2024
30 October 2024
The annual general meetings of the shareholders of UBS Group AG will take place on the following dates:
2024
2025
24 April 2024
11 April 2025
› Refer to the corporate calendar available at ubs.com/investors for the dates of the publication of financial reports and other key
dates, including the dates of the publication of UBS AG’s financial reports
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.
Annual Report 2023 | Corporate governance and compensation | Corporate governance
220
We make our publications available to all shareholders simultaneously to provide them with equal access to our financial
information.
Our annual and quarterly publications are available in a fully digital and .pdf format at ubs.com/investors, under “Financial
information.” We no longer provide printed copies of our Annual Report and our Compensation Report in any language.
› 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 of this report for more information
› Refer to “Corporate information” and “Contacts” 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;
– consistency within each reporting period and between reporting periods;
– simplicity that allows readers to gain a good understanding of the performance of our businesses;
– relevance, by focusing not only on what is required by regulation or statute but also on what is relevant to our
stakeholders; and
– best practice that leads to improved standards.
We regard the continuous improvement of our disclosures as an ongoing commitment.
Financial reporting policies
We report our Group’s results for each financial quarter, including a breakdown of results by business division and
disclosures or key developments relating to risk management and control, capital, liquidity and funding management.
Each quarter, we publish quarterly financial reports for UBS Group AG, on the same day as the earnings releases.
The consolidated financial statements of UBS Group AG and UBS AG are prepared in accordance with International
Financial Reporting Standards as issued by the International Accounting Standards Board.
› Refer to “Note 1 Summary of material accounting policies” in the “Consolidated financial statements” section of this report for
more information about the basis of accounting
We are committed to maintaining the transparency of our reported results and 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.
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 2023. 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. Management has excluded Credit Suisse, which UBS acquired in
2023, from the scope of its assessment of internal control over financial reporting, as permitted by SEC guidance for
acquired businesses.
› Refer to the “Consolidated financial statements” section of this report for more information
Annual Report 2023 | Corporate governance and compensation | Corporate governance
221
Compensation
Table of contents
223
227
231
233
240
248
255
258
Compensation
2023 key compensation themes
Say-on-pay
Compensation philosophy and governance
Compensation for GEB members
Group compensation
Compensation for the Board of Directors
Supplemental information
Advisory vote | Corporate governance and compensation | Compensation
222
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.
Throughout 2023, the BoD Compensation Committee continued to oversee the compensation process, aiming to ensure
that reward reflects performance, risk-taking is appropriate and employees’ interests are aligned with those of our
stakeholders. As the Chairperson of the Compensation Committee, I am pleased to present our Compensation Report
for 2023.
A cornerstone year in terms of integrating Credit Suisse while achieving underlying profitability
2023 was one of the most defining years in the firm’s long history with the acquisition of the Credit Suisse Group. Our
accomplishments and achievements in 2023 were extensive. Our strategy, focused on delivering outstanding client
services, sustainable profitability, financial strength and sound risk management, supported the successful navigation
through a period of significant change and uncertainty. The acquisition of the Credit Suisse Group further expands our
market leading client franchise and creates significant value for our shareholders.
– We were called on to acquire the Credit Suisse Group and have subsequently stabilized their client franchise, risk
management and operations. We have further grown our combined franchise through new client acquisition and
share-of-wallet gains, as well as the continued success of our client retention and client win-back strategy. Clients
have entrusted us with USD 77bn of net new assets since the closing of the acquisition and have relied on our advice
in a challenging geopolitical environment. We have made significant progress with the integration, strengthening our
position as a leading global wealth manager, including completing the acquisition within three months, making key
management appointments and taking steps toward an integrated and unified bank.
– While focused on the intense work of integrating Credit Suisse, we achieved underlying profitability at Group level
despite the challenging macroeconomic environment marked by global concerns about interest rates and economic
growth. We stayed close to our clients, helping them to navigate uncertainties and maintaining their trust in our
products and offerings.
– We have formulated our strategy and integration goals for the next three years and indicated what an even stronger
UBS can sustainably deliver in the long term. While there is much to be done, we have set out the course to successfully
deliver on our integration plans and have assembled the resources and talent to make that happen.
We are optimistic about our future as we build an even stronger version of the UBS that was called upon to stabilize the
Swiss financial system in March 2023 and one that all of our key stakeholders can be proud of.
› Refer to the “Acquisition and integration of Credit Suisse” section of this report for further details about our integration efforts
Executing an integrated one firm approach to performance, promotion and compensation
– We executed an integrated year-end process with all employees subject to one unified system leveraging the long-
standing UBS approach to performance, promotion and compensation. This is a significant milestone for our
combined firm, and is aimed at accelerating our cultural journey.
– In terms of aligning the cultures of the two firms, our performance management approach – with its focus on
impact and outcomes, consideration of both objectives and behaviors (reflecting both the what and the how),
emphasis on sustainable high performance, and the resulting link to compensation decisions – is paramount to
employees understanding what matters most and working together to deliver the firm’s strategic and integration
objectives.
– In line with our existing commitment to fair pay and diversity, equity and inclusion, we took great care to support
fairness and equity across the organization, with a focus on like-for-like outcomes for comparable roles and
performance across the Group.
– In light of the ongoing integration of Credit Suisse, we also considered the complexity of the transaction, as well
as the need to retain key talent, support pay fairness across the entire organization and stabilize the franchise
during the integration period via our compensation decisions. While many of the synergies of the transaction relate
to rightsizing the overall headcount of the company, the upside potential of the transaction will not be realized if
we cannot also retain the right talent throughout the organization during the transition and thereafter.
Advisory vote | Corporate governance and compensation | Compensation
223
Key acquisition-related accomplishments
In 2023, we made tremendous progress with the integration of Credit Suisse. Following the announcement of the
acquisition of the Credit Suisse Group, we focused on stabilizing the client franchise, managing risks and bringing
operational stability to Credit Suisse. Key accomplishments include the following.
– Closing the transaction in three months.
– Delivering an early repayment of the Public Liquidity Backstop and Emergency Liquidity Assistance Plus and returning
the Loss Protection Agreement.
– Achieving around USD 4bn in exit rate gross cost savings (compared with full year 2022 for combined UBS and Credit
Suisse), as we restructured our operations and continued to optimize our cost base by leveraging synergies between
the combined entities.
– Accelerating the wind-down of Non-core and Legacy by reducing risk-weighted assets by USD 12bn since finalizing its
perimeter in the second quarter of 2023, releasing over USD 1.5bn of common equity tier 1 (CET1) capital.
– Re-composing and augmenting the Group Executive Board (the GEB) to successfully support the integration.
Financial Performance
Our performance in 2023 reflected the costs from the integration of Credit Suisse, the challenging operating conditions
for the financial industry, and the uncertainty and market volatility resulting from continued geopolitical tensions. On a
consolidated basis, reported profit before tax was USD 28,739m, including USD 27,748m of negative goodwill related
to the acquisition, as well as integration-related expenses of USD 4,478m, and negative goodwill related pull to par
accretion and other purchase price allocation effects. On an underlying basis, pre-tax profit for the combined businesses
was USD 3,963m.
› Refer to the “Financial and operating performance” section of this report for further details about the Group and business
division performance
Profi t before tax
Return on CET1 capital
Cost / income ratio
USD bn
(59%)
199%
28.7
in %
(12.8ppts)
25.3ppts
42.3
in %
15.1ppts
22.9ppts
95.0
9.6
2022
4.0
4.5
2023
Group
reported
2023
Group
under -
lying¹
2023
UBS AG
cons.
reported²
17.0
2022
2023
Group
reported
4.2
2023
Group
under -
lying¹
7.6
2023
UBS AG
cons.
reported²
72.1
2022
87.2
86.2
2023
Group
reported
2023
Group
under -
lying¹
2023
UBS AG
cons.
reported²
Group performance award pool
GEB performance award pool
Per capita GEB performance award pool
USD bn
CHF m
CHF m
(14%)
5.3
4.5
3.3
0.9
1.1
34%
(6%)
81.1
108.3
6.6
6.2
2022
UBS
pool
2022
CS³
2022 pro
forma
UBS / CS
pools
2023
Group
pool
2022
2023
2022
2023
1 UBS underlying results exclude items of profi t or loss that management believes are not representative of the underlying performance. 2 Includes
UBS AG and its consolidated subsidiaries. For context, the UBS AG consolidated results are on a reported basis and therefore include integration-related
expenses of USD 1,392m. 3 Includes Credit Suisse variable incentive compensation pool of USD 1.1bn (CHF 1.0bn) as well as other variable compensation
awards of total USD 944m (CHF 899m, including retentions (CHF 367m), transformation awards (CHF 350m), attrition-related retentions (shares / cash
CHF 68m) and supplemental cash allowance awards (CHF 114m)). Source: Credit Suisse Group Compensation Report 2022. Swiss franc amounts have
been translated into US dollars at the currency exchange rate reported in the UBS Group fourth quarter 2022 report of CHF / USD 1.05.
Advisory vote | Corporate governance and compensation | Compensation
224
Commitment to return capital to shareholders
Capital strength is a key pillar of our strategy, and we remain committed to maintaining a balance sheet for all seasons.
The year-end CET1 capital ratio was 14.4%, and the CET1 leverage ratio was 4.6%, both in excess of our guidance of
~14% and >4.0%, respectively. For 2023, the Board of Directors plans to propose a dividend to UBS Group AG
shareholders of USD 0.70 per share. We remain committed to progressive dividends and are accruing for a mid-teen
percentage increase in the dividend per share for the 2024 financial year.
In 2023, we bought back USD 1.3bn of shares before we announced the acquisition, at which point we paused our share
repurchases. In 2024, we expect to repurchase up to USD 1bn of shares, commencing after the merger of the UBS AG
and Credit Suisse AG legal entities, which is expected before the end of the second quarter of the year. Our ambition is
for share repurchases to exceed our pre-acquisition levels by 2026.
2023 Group performance award pool
Over the past years, our performance award pool has consistently reflected our pay-for-performance philosophy and our
disciplined approach in managing compensation over business cycles and in alignment to shareholder interests.
Accordingly, we carefully assessed the financial results and excluded both the positive and negative one-time financial
impacts of the acquisition of the Credit Suisse Group.
The table below provides more information on the key factors we considered for the UBS sub-group and the Credit Suisse
sub-group when determining the performance award pool. Overall, it was important to balance like-for-like pay
outcomes for comparable roles and performance to support the long-term value creation of the integrated franchise.
2023 Group performance award pool development
UBS sub-group
– Reflects our usual pay-for-performance approach beginning with the financial results for the UBS sub-group.
– In addition to financial business performance, we regularly consider individual business-related measures, risk and remediation
activities as well as competitive market considerations.
Credit Suisse
sub-group
– Given the extraordinary circumstances, we were not able to apply our usual process to determine the Credit Suisse pool. We
considered other factors, such as the need to retain key talent to support realization of the value of our investment, support pay
fairness across the entire organization and stabilize the franchise during the integration period.
– We also considered that 2022 compensation for the Credit Suisse Group reflected a significantly reduced variable compensation
pool compared with 2021 awards including other variable compensation.
We further balanced our performance award pool decisions with specific retention awards delivered in both deferred
cash and deferred equity. As in most merger situations, these retention awards were a necessary step to support the
protection of the client franchise, risk management and operational stability. Furthermore, to support our client win-back
strategy and promote client growth, we also introduced a client-acquisition and retention award for certain producers,
which is fully deferred and the final value is linked to the retention of client assets. Retention efforts were targeted and
limited to certain client roles and critical roles necessary to support operational stability. Overall, the amounts of
USD 736m are modest by industry standards for an integration of this magnitude. These awards account for 3% of our
total personnel expenses recognized in 2023.
The UBS compensation framework and approach provides competitive pay for performance, further supporting
operational stability going forward. Our decisions continue to reflect our diligent approach to considering a balanced
allocation of profit between shareholders and employees over the cycle, as well as supporting strong capital returns,
including reflecting the appropriate risk awareness in our business decisions.
Based on the factors above, the 2023 group performance award pool was USD 4.5bn, a reduction of 14% compared
with the pro forma aggregate 2022 pool of USD 5.3bn for the combined entities (which includes the UBS performance
award pool, the Credit Suisse variable incentive compensation pool and other variable compensation awards related to
the 2022 performance year).
The GEB pool overall increased by 34% to CHF 108m, which reflected the changes in GEB composition to support the
merger, including the addition of four GEB members. The GEB per capita performance award decreased by 6% compared
with the previous year.
Separately, we are also grateful for certain members of the BoD who took on additional board roles in significant
subsidiary entities. These nominations were critical to providing strong governance and oversight of the newly acquired
subsidiaries, particularly prior to the merger of these legal entities with their UBS counterparts. This approach ensures
parent company board representation that otherwise would not have existed and promotes governance in line with UBS
Group AG’s governance principles.
Advisory vote | Corporate governance and compensation | Compensation
225
Continuity of our overall compensation framework
Following a comprehensive annual review, we confirmed that our Total Reward Principles and overall compensation
framework continue to be aligned with our purpose and remain relevant to the Group’s commitment to delivering long-
term shareholder value. It is imperative that our pay approach equally recognizes and supports the economic and cultural
integration of Credit Suisse to create long-term value for the combined firm.
Overall, the compensation framework for all employees, including the GEB, remains broadly unchanged. With respect to
the equity component of our deferred compensation plan, we have historically granted the GEB equity with performance
conditions and a payout that varies depending on the performance of the company (the Long-Term Incentive Plan (LTIP)),
while other employees have received shares with time vest requirements only (the Equity Ownership Plan (EOP)). During
the integration period, we have expanded the group that will receive LTIP (in replacement of EOP) to include Managing
Directors (MDs) reporting to the GEB and their direct reports at MD level. This will further align the long-term focus of a
broader group of senior leaders with shareholders while supporting appropriate risk taking and awareness.
Going forward, we will continue to monitor market practice and regulatory developments and, as part of our annual
review, make any modifications required to ensure our Total Reward Principles and compensation framework remain
aligned with the interests of our shareholders.
The 2024 Annual General Meeting
At the 2024 AGM on 24 April, we will seek your support on the following compensation-related items:
– the maximum aggregate amount of compensation for the BoD for the period from the 2024 AGM to the 2025 AGM;
– the retroactive incremental amount of compensation for the BoD for the period from the 2023 AGM to 2024 AGM
– the maximum aggregate amount of fixed compensation for the GEB for 2025;
– the aggregate amount of variable compensation for the GEB for 2023; and
– shareholder endorsement in an advisory vote for this Compensation Report.
On behalf of the Compensation Committee and the BoD, I thank you again for your feedback and we respectfully ask
for your continued support at the upcoming AGM.
Julie G. Richardson
Chairperson of the Compensation Committee of the
Board of Directors
Advisory vote | Corporate governance and compensation | Compensation
226
2023 key compensation themes
The feedback that we seek from our shareholders about 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 2023 and
feedback about our
compensation framework. The below summarizes key compensation themes for 2023 and provides answers to the
questions we most frequently receive from shareholders.
received overall positive
Summary of 2023 key compensation themes / responses to frequently asked questions
How did the failure of the Credit Suisse Group impact deferred compensation of Credit Suisse Group
employees?
On 19 March 2023, we announced the acquisition of the Credit Suisse Group. Until that date, the value of the
outstanding deferred compensation of Credit Suisse Group employees had already been negatively impacted by the
significant decline in the price of Credit Suisse Group shares.
Furthermore, on 23 May 2023, the Federal Department of Finance (the FDF) issued an order canceling or reducing the
outstanding unvested variable remuneration for the top levels of management of the Credit Suisse Group. In addition,
the Swiss Financial Market Supervisory Authority (FINMA) ordered the cancellation of outstanding contingent capital
awards (CCA) in line with the write-down of Credit Suisse additional tier 1 (AT1) debt.
The following charts provide an overview of the total change in the value of Credit Suisse deferred compensation awards
in accordance with share price movements and the FDF- and FINMA-canceled amounts.
– Approximately CHF 2.8bn (a decrease of 75% compared with the initial grant value) of deferred compensation was
lost by Credit Suisse Group employees. After the cancellations, CHF 947m remained outstanding, including awards
that continued to be at risk, subject to the achievement of performance conditions, and subject to malus or clawback
provisions.
– Of the CHF 2.8bn mentioned above, approximately CHF 1.4bn (a decrease of 94% compared with the initial grant
value) of deferred compensation was lost by Credit Suisse Group employees impacted by the FDF- and FINMA-related
cancellations, leaving a remaining value of CHF 87m (including awards that continued to be at risk as described above).
Change in the value of Credit Suisse Group deferred compensation awards
All awards of former Credit Suisse Group employees
CHF m
−75%
3,735
2,372
61
356
947
Value of deferred
compensation
awards at grant price
Change in value due to
share price movements¹
FDF-canceled amounts¹
FINMA-canceled
CCA amounts²
Remaining amount of
deferred
compensation awards3
Awards in scope of FDF- and FINMA-related cancellations
CHF m
1,497
993
−94%
61
356
Value of deferred
compensation
awards at grant price
Change in value due to
share price movements¹
FDF-canceled amounts¹
FINMA-canceled
CCA amounts²
87
Remaining amount of
deferred
compensation awards3
Notes:
Unless otherwise stated, all data are based on awards outstanding per 18 May 2023.
1 Based on the 19th March 2023 merger offer share price of CHF 0.76. 2 Value of CCA write-down amounts are based on CCA valuation as at 28 February
2023. 3 Includes awards that continued to be at risk, subject to the achievement of performance conditions, and subject to malus or clawback provisions.
Overall, these reductions of CHF 2.8bn in the value of deferred compensation demonstrate the impact of negative
business developments, risk events and share price movements.
Advisory vote | Corporate governance and compensation | Compensation
227
What is the impact of the Federal Department of Finance order on UBS?
On 11 August 2023, UBS voluntarily terminated the CHF 9bn loss protection agreement (the LPA) and the public liquidity
backstop (the PLB) with the Swiss National Bank of up to CHF 100bn, guaranteed by the Swiss government. After
reviewing all assets covered by the LPA since the closing of the transaction involving the acquisition of the Credit Suisse
Group in June 2023 and taking the appropriate fair value adjustments, UBS concluded that the LPA was no longer
required.
All loans under the PLB were fully repaid by the Credit Suisse Group as of the end of May 2023 and Credit Suisse AG
fully repaid outstanding Emergency Liquidity Assistance Plus loans on 10 August 2023.
Due to the termination of the LPA and release of the guarantee, the implementation of the UBS-related FDF order was
no longer required. Nevertheless, our analysis had confirmed that the key aspects related to the remuneration system
requirements under the FDF order were already embedded in our Total Reward Principles and compensation framework.
This relates in particular to consideration of both financial and non-financial performance, including risk considerations.
Why is UBS seeking retroactive approval for an incremental Board of Directors compensation amount of
CHF 2.2m?
As a result of the integration of Credit Suisse, in 2023 we expanded the roles of certain members of the Board of Directors
of UBS Group AG (the BoD) to take on additional responsibilities in the boards of directors of significant subsidiary
entities. These nominations were and remain critical to providing strong governance and oversight of the subsidiaries, in
a manner consistent and in compliance with UBS Group AG’s governance principles, as well as to facilitating the
integration of Credit Suisse entities into UBS. As the integration progresses, we will continue to review the composition
of the boards of directors of significant entities. Without these appointments, UBS would not have had parent company
board representation on these significant subsidiary entities and would have had difficulty maintaining legally required
independent roles across all entities.
– Lukas Gähwiler was appointed as chairman of Credit Suisse AG.
– Jeremy Anderson was nominated as vice chairman of Credit Suisse AG and chair of the audit committee of Credit
Suisse AG and, in addition, appointed as a member of the board of directors of Credit Suisse International (UK).
– Mark Hughes was appointed as a member of the board of directors of Credit Suisse AG, a member of the risk
committee of Credit Suisse AG and, effective 1 December 2023, chair of the risk committee of that board. In addition,
Mr. Hughes was appointed as a member of the board of directors of UBS Americas Holding LLC.
Considering the significant increase in the scope, responsibility and complexity of their mandate, these three BoD
members will be entitled to receive additional board fees aligned with other non-executive directors on the respective
subsidiary entity boards.
Neither the acquisition of the Credit Suisse Group nor the appointments to subsidiary board roles were anticipated when
the maximum amount for BoD fees of CHF 13m was submitted at the 2023 Annual General Meeting (the AGM). As a
result, while the spend for the BoD of UBS Group AG is within the approved amount, at the 2024 AGM we will request
that the shareholders approve a retroactive incremental amount of CHF 2.2m for the period from the 2023 AGM to the
2024 AGM to support the additional subsidiary board fees amount that exceeds the original approval at the 2023 AGM.
The payment of these subsidiary board fees is therefore subject to shareholder approval.
As a reminder, shareholders of UBS Group AG and Credit Suisse Group AG had approved at their respective 2023 AGM
an aggregate amount for board of director compensation of combined total CHF 26m. The estimated total BoD spend
in the period from the 2023 AGM to the 2024 AGM is CHF 18.1m, of which CHF 15.2m for the Board of Directors of
UBS Group AG (as shown in the chart below) and the remaining amount for the board of directors of Credit Suisse Group
AG (pre-merger close) and Credit Suisse AG (post-merger close). As a result, the overall BoD spend is CHF 7.9m lower
compared with the combined approved aggregate amount.
Approved UBS Group AG BoD compensation and spend for the period from the 2023 AGM to the 2024 AGM
CHF m
12.5
2.7
15.2
15.2
2.2
13.0
Proposed retroactive
incremental amount
at 2024 AGM
Approved amount at
2023 AGM¹
Spend for UBS
Group AG BoD fees
Planned spend for significant
subsidiary entity board fees
of UBS Group AG members
Total spend
Approved / proposed
amounts
1 Does not include the amount of CHF 13m for Credit Suisse Group AG BoD fees approved at Credit Suisse AGM 2023.
Advisory vote | Corporate governance and compensation | Compensation
228
How did UBS adjust reported financial results to calculate the Group and GEB performance award pools as
well as the LTIP 2020/21 valuation?
The Compensation Committee determined to use UBS sub-group results as the starting point but made adjustments to
exclude both the positive and negative one-time financial impacts of the acquisition of the Credit Suisse Group. The specific
adjustments include the impact of gains on the transaction, which means the negative goodwill, or gain, of USD 27.7bn
had no impact on the Group and GEB performance award pools or the 2020 LTIP achievement level. Other adjustments
relate to factors such as integration- and acquisition-related costs, increased CET1 capital requirements, and the exclusion
of certain unplanned one-off items that would otherwise not have occurred, including higher litigation costs. These
cumulative negative adjustments from reported results reflect the rigorous internal review as well as the judgment of the
Compensation Committee. We have applied these adjustments in our considerations of pay and performance across the
Group, including for the GEB, and, as a net result, the achievement level of the 2020/21 LTIP is below the maximum of
100%.
What is the impact of the integration on outstanding deferred compensation plans across both entities?
After the acquisition, the outstanding deferred compensation of both UBS and Credit Suisse employees generally
continues to vest according to the original plan delivery schedule and subject to applicable performance conditions.
UBS conducted a detailed review of Credit Suisse’s deferred compensation plans and aligned the performance metrics to
those of UBS deferred compensation plans where applicable. Furthermore, where applicable, share-based plans of Credit
Suisse were converted reflecting the merger conversion rate, to align with the Credit Suisse shareholder experience.
This approach underlines our philosophy to align the interests of employees with those of shareholders. Furthermore, it
demonstrates a consistent treatment of employees with outstanding deferred compensation awards and ultimately
supports operational stability and the economic and cultural integration of Credit Suisse.
What retention activities have supported the integration of Credit Suisse into UBS?
Performance management and reward play an important part in supporting the economic and cultural integration of
Credit Suisse into UBS. We have therefore reviewed our Total Reward Principles and confirmed that they remain fully
aligned with our purpose and support our strategic objectives. In the short-to-medium term, they also enable UBS to
drive the economic and cultural integration of Credit Suisse and the long-term value creation of the combined firm.
Furthermore, we have swiftly implemented an integrated performance and reward year-end process for the combined
firm, which supports our sustainable high performance culture and reflects our well-established approach to pay for
performance. The compensation decisions for all employees were governed by the same Total Reward Principles. This
integrated approach supported a one-firm employee experience and our emphasis on like-for-like outcomes for
comparable performance and roles.
To support operational stability, manage risks and protect the client franchise, we have deployed specific additional
measures. Retention awards were delivered in both deferred cash and deferred equity awards. Furthermore, to support
our client win-back strategy and promote client growth, we also introduced a client acquisition and retention award for
certain producers, which is fully deferred and the final value is linked to the retention of client assets. Retention efforts
were targeted and limited to certain client roles and critical roles necessary to support operational stability. Overall, the
amounts of USD 736m are modest by industry standards for an integration of this magnitude. These retention awards
account for 3% of our total personnel expenses recognized in 2023.
In addition, we provided indications of 2023 incentive levels to a number of Credit Suisse employees, primarily in client-
facing roles, to emphasize that their compensation going forward would reflect appropriate levels of pay for performance.
The UBS compensation framework and approach provides competitive pay for performance, further supporting stability
going forward. Beyond financial compensation-related measures, our merger-related activities included non-financial
aspects, such as a broad-based communication approach with Credit Suisse employees.
How did UBS support employees during the integration process?
Supporting employee health and well-being remained a priority in 2023. Resources to support holistic well-being included
a range of programs, benefits and workplace resources, along with a bespoke eLearning curriculum that aimed to help
our employees manage their health, foster well-being, strengthen their resilience and support the sustainability of the
organization. In the context of the integration of Credit Suisse, we expanded our offering to include guidelines and
instructor-led sessions on managing organizational change, uncertainty and resilience.
In 2023, we announced that existing social plans or support during redundancy at UBS and Credit Suisse had been
aligned globally (where applicable) to ensure that all employees were treated equally.
As an example, employees in the Swiss labor market affected by the restructuring are entitled to a program with a key
focus on redeployment within UBS, and we have significantly increased the budget for education and training. Outside
of the Swiss labor market, we provide severance payments that are governed by location-specific severance policies. At
a minimum, we offer severance terms which comply with the applicable local laws. In many locations, we may provide
severance packages negotiated with our local social partners that go beyond these minimum legal requirements or offer
additional time in order to find a new position. In certain locations, we may also offer redeployment support from our
internal recruiters or via external outplacement firms for employees affected by redundancies.
Advisory vote | Corporate governance and compensation | Compensation
229
Did UBS change the compensation framework for 2023?
We are convinced that our compensation framework remains best-in-class for our industry. Therefore, it remained broadly
unchanged for 2023. The compensation approach reflects a substantial deferral into equity- and debt-based vehicles that
support alignment with our shareholders and debtholders. Furthermore, the vesting period over five years remains one
of the longest in the industry, providing for long employment and performance conditions.
For 2023, we will award the equity-aligned portion of compensation as part of the Long-Term Incentive Plan (LTIP, as a
replacement for the EOP) for the GEB and Managing Directors (MDs) reporting to the GEB and their direct reports at MD
level. These senior leaders receive the equity portion of their 2023 performance award in LTIP to support delivering on
our ambitious integration goals and business / financial targets. This further mitigates the need for a distinct integration
award typical for a transaction of this nature.
What has changed in the 2023 LTIP (awarded in 2024)?
We maintain our overall LTIP with the same two equally weighted performance metrics (reported RoCET1 and relative
Total Shareholder Return (rTSR)) over a three-year performance period, while making adjustments to the performance
range of the RoCET1 metric.
For the 2023 LTIP award (granted in 2024), the reported RoCET1 metric reflects the impact of the acquisition and our
ambitious integration objectives, as well as the communicated financial ambitions over the cycle. As a consequence, we
continue to use the reported basis for our RoCET1 metric, as this also considers the underlying business results and
integration costs. For the 2023 performance year, we awarded the LTIP at a value of 50% of the maximum, to further
align the maximum opportunity with the stretching nature of our financial ambitions.
The maximum reported RoCET1 of 10% corresponds with a 100% payout aligned with our stretch target. In contrast,
the minimum reported RoCET1 of 5% corresponds with a 33% payout aligned with sustainable results in the context of
the integration. Below the threshold of 5% reported RoCET1, the award is subject to full forfeiture.
The unchanged rTSR performance range of ±25 percentage points of UBS TSR compared with a peer group index TSR
continues to demonstrate our ambition of delivering attractive relative returns to shareholders. The peer group consists
of all listed Global Systemically Important Banks, which were independently defined by the Financial Stability Board in
2023, and reflects companies with a comparable risk profile and impact on the global economy.
During the integration period, we have expanded the group that will receive LTIP to include Managing Directors (MDs)
reporting to the GEB and their direct reports at MD level. We will continue to review the LTIP design, including the
RoCET1 performance range, in consideration of our integration progress and financial ambitions.
What is the achievement level of the LTIP granted in 2021 for 2020 performance?
The deferred portion of the performance award granted in 2021 (for the 2020 financial performance year) to members
of the GEB and selected senior management was in part delivered through the LTIP award. The three-year performance
period concluded at the end of 2023, with the 2020 LTIP achieving 92.55% of the maximum opportunity (of up to
100%).
As explained above, the Compensation Committee made certain adjustments to the financial results used to determine
the 2020 LTIP achievement level. As noted, if the Compensation Committee had not made these adjustments but had
applied reported UBS Group AG financial results, the achievement level would have been 100%.
We believe alignment of our senior leadership with our shareholders is important for long-term success. Our LTIP is
designed to support alignment of compensation with the execution of our strategy, financial performance and long-term
growth.
Performance achievement for the 2020 LTIP awarded in 2021
Performance
metrics
RoCET1
(Weight: 50%)
rTSR
(Weight: 50%)
Performance metric outcome
2020 LTIP achievement level
Threshold
6%
Maximum
18%
Threshold
33%
Maximum
100%
Outcome:
15.3%
−25ppts
+25ppts
Outcome
below
threshold:
full forfeiture
Outcome:
+75.36ppts
Outcome
above
maximum:
achievement
capped at
100%
Achievement:
85.1%
33%
100%
Achievement:
100%
Overall achievement:
92.55%
Overall 2020 LTIP achievement level
Advisory vote | Corporate governance and compensation | Compensation
230
Say-on-pay
Say-on-pay votes at the AGM
In line with the Swiss Code of Obligations, we seek binding shareholder approval for the aggregate compensation
awarded to the Group Executive Board (the GEB) and the Board of Directors (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.
The table below outlines our compensation proposals, including supporting rationales, that we plan to submit to the
2024 Annual General Meeting (the AGM) for binding votes, in line with the Swiss Code of Obligations and our Articles
of Association.
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 GEB fixed compensation and BoD compensation
At the 2022 AGM, the shareholders approved a maximum aggregate fixed compensation amount of CHF 33.0m for GEB
members for the 2023 performance year. This budget reflects base salaries, role-based allowances in response to EU
Capital Requirements Directive V, and estimated standard contributions to retirement benefit plans, as well as
other benefits. The aggregate fixed compensation paid in 2023 to GEB members was below the approved amount for
2023.
At the 2023 AGM, the shareholders approved a maximum aggregate amount of compensation of CHF 13.0m for the
members of the BoD for the period from the 2023 AGM to the 2024 AGM. At the 2024 AGM, we will ask shareholders
to exceptionally approve a retroactive incremental amount of CHF 2.2m of BoD compensation for the period from the
2023 AGM to the 2024 AGM as outlined below.
› Refer to “2023 total compensation for the GEB members” in the “Compensation for GEB members” section of this report
› Refer to “Remuneration details and additional information for BoD members” in the “Compensation for the Board of Directors”
section of this report
Advisory vote | Corporate governance and compensation | Compensation
231
Compensation-related proposals for binding and advisory votes at the 2024 AGM
Item
Approved at the 2023
AGM
BoD proposals for the
2024 AGM
Rationale
GEB variable
compensation
Shareholders approved
CHF 81,100,000 for the
2022 financial year1,2,3
(vote “for”: 87.1%)
GEB fixed
compensation
Shareholders approved
CHF 33,000,000 for the
2024 financial year1,2,3
(vote “for”: 89.3%)
BoD
compensation
n. a.
The BoD proposes an
aggregate amount of
variable compensation of
CHF 108,286,300 for the
members of the GEB for
the 2023 financial year.
In 2023, we added four GEB members to successfully support the integration. The
GEB performance award pool takes into account the changes in GEB composition
and reflects the significant progress in the integration, including bringing
operational stability to Credit Suisse after the announcement of the acquisition. It
also reflects that the Group achieved underlying profitability following the closing
of the acquisition and maintained the Group’s strong capital position. On a per
capita basis, the GEB performance award pool decreased by 6%.
The BoD proposes a
maximum aggregate
amount of fixed
compensation of
CHF 33,000,000 for the
members of the GEB for
the 2025 financial year.
The proposed amount is unchanged compared with last year despite the increase
in the number of GEB members in 2023. It further reflects unchanged base salaries
for the Group CEO and other GEB members.
Besides the base salaries, the amount also includes estimated standard contributions
to retirement benefit plans, as well as other benefits. The proposed amount provides
flexibility in light of potential changes of GEB composition or roles, competitive
considerations as well as other factors (e.g., changes in FX rates or benefits).
The BoD proposes an
incremental amount of
compensation of
CHF 2,200,000 for the
members of the BoD for
the period from the 2023
AGM to the 2024 AGM.
As a result of the integration of Credit Suisse, in 2023 we expanded the roles of
certain members of the Board of Directors of UBS Group AG to take on additional
responsibilities in the boards of directors of significant subsidiary entities. These
nominations are critical to providing strong governance and oversight of the
subsidiaries, in a manner consistent and in compliance with UBS Group AG’s
governance principles, as well as to facilitating the integration of Credit Suisse
entities into UBS.
Neither the acquisition of the Credit Suisse Group nor the appointments to
subsidiary board roles were anticipated when the maximum amount for BoD fees
of CHF 13m was submitted at the 2023 AGM. As a result, while the spend for the
BoD of UBS Group AG is within the approved amount, we propose that
shareholders approve a retroactive incremental amount of CHF 2.2m for the period
from the 2023 AGM to the 2024 AGM to support the additional subsidiary board
fees amount that exceeds the original approval at the 2023 AGM.
As a reminder, shareholders of UBS Group AG and Credit Suisse Group AG had
approved at their respective 2023 AGM an aggregate amount for board of director
compensation of combined total CHF 26m. The estimated total BoD spend in the
period from the 2023 AGM to the 2024 AGM is CHF 18.1m, of which CHF 15.2m
for the Board of Directors of UBS Group AG and the remaining amount for the
board of directors of Credit Suisse Group AG (pre-merger close) and Credit Suisse
AG (post-merger close). As a result, the overall BoD spend is CHF 7.9m lower
compared with the combined approved aggregate amount.
The proposed amount reflects all BoD fees, including the total compensation of the
Chairman and the Vice Chairman role, as well as subsidiary fees of certain UBS
Group AG members for their mandates in significant subsidiary entities. The overall
amount is higher compared with the previous period which reflects the fees to
certain BoD members for their continued critical roles in the board of directors of
significant subsidiary entities. It also includes a higher fee for the Chairman to reflect
the significantly increased scope, responsibility and complexity following the
acquisition of Credit Suisse. The fees for other BoD members including the Vice
Chairman remain unchanged.
Our Total Reward Principles and overall compensation framework continue to be
aligned with our purpose and remain relevant to the Group’s commitment to
delivering long-term shareholder value. It is imperative that our pay approach
equally recognizes and supports the economic and cultural integration of Credit
Suisse to create long-term value for the combined firm. Overall, the compensation
framework for all employees, including the GEB, remains broadly unchanged and
our decisions continue to reflect our diligent approach to considering a balanced
allocation of profit between shareholders and employees over the cycle, as well as
supporting strong capital returns, including reflecting the appropriate risk
awareness in our business decisions.
Shareholders approved
CHF 13,000,000 for the
period from the 2023
AGM to the 2024
AGM1,2,4
(vote “for”: 88.0%)
The BoD proposes a
maximum aggregate
amount of compensation
of CHF 16,500,000 for the
members of the BoD for
the period from the 2024
AGM to the 2025 AGM.
Advisory vote
on the
Compensation
Report
Shareholders approved the
UBS Group AG
Compensation Report
2022 in an advisory vote
(vote “for”: 85.6%)
The BoD proposes that the
UBS Group AG
Compensation Report
2023 be ratified in an
advisory vote.
1 Local currencies are converted into Swiss francs at the 2023 performance award currency exchange rates. 2 Excludes the portion related to the legally required employer’s social security contributions. 3 As stated
in “Group Executive Board” in the “Corporate governance” section of this report, 16 GEB members were in office on 31 December 2023 and twelve GEB members were in office on 31 December 2022. 4 Twelve BoD
members were in office on 31 December 2023 and on 31 December 2022.
Advisory vote | Corporate governance and compensation | Compensation
232
Compensation philosophy and governance
Our compensation philosophy
Total Reward Principles
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. These guiding
principles underpin our approach to compensation and define our compensation framework. Following a comprehensive
review in 2023, we concluded that our Total Reward Principles and compensation framework are well aligned with our
purpose and support our strategic imperatives. This aims to ensure that the interests of our employees are aligned with
those of our clients and other stakeholders. In the short-to-medium term, they also enable UBS to drive the economic
and cultural integration of Credit Suisse and the long-term value creation of the combined firm.
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, 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
promote development and our ways of
working
The setting of clear objectives, as well as a thorough evaluation of what was achieved and how it was
achieved, combined with effective communication, promotes clarity, accountability and establishes 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
adequate 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 members and Managing Directors reporting to the GEB and their direct
reports at Managing Director level (as applicable))
– Equity Ownership Plan (all other employees, as applicable)
Cash
Note: illustrative
Longer-term
Shorter-term
Pension
and
benefits
Advisory vote | Corporate governance and compensation | Compensation
233
Compensation governance
Board of Directors and Compensation Committee
The Board of Directors (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 Articles of Association (the AoA).
As determined in the AoA and the firm’s Organization Regulations, the Compensation Committee supports the BoD with
its duties to set guidelines on compensation and benefits, to oversee implementation thereof, to approve certain
compensation and to scrutinize executive performance. The Compensation Committee consists of independent BoD
members, who are elected annually by shareholders at the Annual General Meeting (the AGM), and is responsible for
governance and oversight of our compensation process and practices. This includes the alignment between pay and
performance, and ensuring that the compensation framework supports appropriate risk awareness and management, as
well as appropriate risk-taking. In 2023, 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.
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 BoD members and
members of the Group Executive Board (the GEB);
– reviews performance award funding throughout the year and proposes, upon proposal of the Group CEO, the final
annual Group performance award pool to the BoD for approval;
– upon proposal of the Group CEO, reviews the performance framework for 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, for the Group CEO, proposes the financial and non-financial performance targets and
objectives, the performance assessment and the total compensation for approval by the BoD;
– approves the total compensation for the Chairman and the non-independent BoD members;
– upon proposal of the Chairman, proposes the remuneration / fee framework for independent BoD members for
approval by the BoD;
– upon proposal of the Chairman and the Group CEO, approves the remuneration / fee frameworks for external
supervisory board members of Significant Group Entities and is informed of remuneration / fee frameworks for external
supervisory board members of Significant Regional Entities;
– proposes to the BoD for approval the annual compensation report and approves other material public disclosures on
UBS compensation matters; and
– proposes to the BoD, for approval by the AGM, the maximum aggregate amounts of BoD compensation and GEB
fixed compensation and the aggregate amount of variable compensation for the GEB.
The Compensation Committee is required to meet at least four times each year. All meetings in 2023 were held in the
presence of the Chairman, the respective Group CEOs and external advisors. In addition, three ad hoc calls took place,
most of which were attended by the Chairman and 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 2023, the members of the
Compensation Committee were Julie G. Richardson (Chairperson), Dieter Wemmer and Jeanette Wong.
› Refer to “Board of Directors” in the “Corporate governance” section of this report for more information
Advisory vote | Corporate governance and compensation | Compensation
234
External advisors
The Compensation Committee may retain external advisors to support it in fulfilling its duties. In 2023, 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 UBS’s human resources department in relation
to compensation for employees, including advisory services and secondments to UBS on benefits and year-end
compensation activities. Willis Towers Watson holds no other compensation-related mandates with UBS.
The Risk Committee’s role in compensation
The Risk Committee, a committee of the BoD, works closely with the Compensation Committee with the goal of ensuring
that our compensation framework appropriately reflects risk awareness and management, and supports 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 Risk Control and Compliance and
Operational Risk in compensation and reviews risk-related aspects of the compensation process.
› Refer to ubs.com/governance for more information
Compensation Committee 2023 / 2024 key activities and timeline
May
April
July
Sept
Oct¹
Nov
Dec¹
Jan
Mar
Strategy, policy and governance
Total Reward Principles
Integration-related compensation matters
Sustainability / ESG, pay fairness and diversity, equity & inclusion (DE&I) in the
compensation process
Compensation disclosure and stakeholder communication matters
AGM reward-related items
Compensation Committee governance
Annual compensation review
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 formulaic
compensation arrangements
Board of Directors remuneration
Compensation framework
Compensation framework and deferred compensation matters
Risk and regulatory
Risk management in the compensation approach
Joint meeting with the BoD Risk Committee
Regulatory activities impacting employees and engagement with regulators
1 The Compensation Committee held two meetings in October and December 2023.
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 and
Vice Chairman of the BoD
Compensation Committee
Compensation Committee1
Other BoD members
Compensation Committee and Chairman of the BoD
Group CEO
Compensation Committee and Chairman of the BoD
Other GEB members
Compensation Committee and Group CEO
BoD1
BoD1
BoD1
Key Risk Takers (KRTs) /
senior employees
Respective GEB member and functional management
team
Individual compensation for KRTs and senior employees:
Group CEO
1 Aggregate variable compensation and maximum aggregate amount of fixed compensation for the GEB, as well as maximum aggregate remuneration for the BoD, are subject to shareholder approval.
Advisory vote | Corporate governance and compensation | Compensation
235
Environmental, social and governance considerations
Environmental, social and governance objectives in the compensation process
Our compensation determination process considers environmental, social and governance (ESG) objectives in objective
setting, performance award pool funding, performance evaluation and individual compensation decisions.
ESG-related objectives have been embedded in our Pillars and Principles since they were established in 2011. In 2021,
we introduced explicit sustainability objectives in the non-financial goal category of the Group CEO and GEB performance
scorecards. In 2023, we further enhanced the GEB performance scorecard framework by establishing separate
Environmental & Sustainability and People & Governance categories. The objectives in these categories are linked to our
sustainability 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 2023, including climate-related goals under the
priority “Planet.” Sustainability objectives are assessed for each GEB member on an individual basis, directly impacting
their respective performance assessments and compensation decisions.
The determination of the Group performance award pool funding also takes into account ESG factors. Aside from
financial performance, an assessment of progress is made against objectives linked to our focus areas of Planet, People
(including progress made against our diversity aspirations) and Partnerships, alongside other key non-financial
considerations. Therefore, ESG is taken into consideration when the Compensation Committee assesses performance
and compensation of each GEB member. Additionally, the assessment impacts the overall performance award pool for
the Group.
Going forward, we will continue to review and refine the role of ESG considerations in our performance and
compensation framework, to ensure they remain aligned to our strategic priorities and the sustainable growth of
shareholder value.
› 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 this report for more information
› Refer to ubs.com/gri for more information about ESG-related topics
Fair and equitable pay
Pay equity and equal opportunity are fundamental to achieving our purpose. The diversity of our employees in terms of
experiences, perspectives and backgrounds is critical to our success. Factors such as gender, race, ethnicity or part-time
status should not impact opportunities available to our employees.
Fair and consistent pay practices are designed to ensure that employees are appropriately rewarded for their contribution.
We pay for performance, and we take pay equity seriously. We have embedded clear commitments in our global
compensation policies and practices. We regularly conduct internal reviews and independent external audits on pay
equity, and our statistical analyses show a differential between men and women in similar roles across our major locations
of less than 1%.
In 2020, we completed an equal pay analysis in Switzerland, as required by the Swiss Federal Act on Gender Equality.
The results confirmed that we are fully compliant with Swiss equal pay standards. Beginning in 2020, UBS was certified
(through 2023) by the EQUAL-SALARY Foundation for our HR practices, including compensation, in Switzerland, the US,
UK, the Hong Kong SAR and Singapore, covering more than two-thirds of our global employee population. All of our HR
policies are global, and we apply the same standards across all locations. Furthermore, we review our approach and
policies annually to support our continuous improvement. In 2023, we fully integrated former Credit Suisse Group
employees into all of our fair pay practices and continued to monitor and improve our pay equity position in our leading
countries.
We also aim to ensure that all employees are paid at least a living wage. We regularly assess employees’ salaries against
local living wages, using benchmarks defined by the Fair Wage Network. Excluding our US financial advisor staff (as their
compensation is primarily based on a formulaic approach), our analysis in 2023 showed that employees’ salaries were at
or above the respective benchmarks.
Advisory vote | Corporate governance and compensation | Compensation
236
Our aspirations and progress
Following the acquisition of the Credit Suisse Group, our exposure increased accordingly, so we reviewed our aspirations.
Amendments that arose from this review process were considered by the Group Executive Board and the UBS Group
Board of Directors’ Corporate Culture and Responsibility Committee. This table reflects the overall outcomes of this
process with more detailed information provided in the UBS Group Sustainability Report 2023.
Our priorities
Our aspirations or targets
Our progress in 2023
Planet, people,
partnerships
Planet
Sustainable investments.1
Following the acquisition of the Credit Suisse Group, we
refined the UBS Group lending sector decarbonization
targets to reflect the activities of the combined
organization and evolving standards and methodologies.2
Reduce emissions intensity associated with UBS in-scope
lending by 2030 from 2021 levels for:
– Swiss residential real estate by 45%;
– Swiss commercial real estate by 48%;
– power generation by 60%;
– iron and steel by 27%; and
– cement by 24%.
Reduce absolute financed emissions associated with UBS
in-scope lending by 2030 from 2021 levels for:
– fossil fuels by 70%.
Continue disclosing in-scope ship finance portfolios
according to the Poseidon Principles decarbonization
trajectories with the aim of aligning therewith.3
Aim, by 2030, to align 20% of UBS AG Asset
Management’s total assets under management (AuM)
with net zero. This pre-acquisition UBS aspiration will be
reassessed in 2024.5
Increased invested assets in sustainable investments in UBS AG to
USD 292.3bn (compared with USD 266bn in 2022).
Calculated progress against pathways for revised targets.4
Changes in emissions intensity associated with UBS in-scope lending (end
of 2022 vs. 2021 baseline):
– Swiss residential real estate reduced by 6%;
– Swiss commercial real estate increased by 2%;
– power generation reduced by 13%;
– iron and steel reduced by 4%; and
– cement reduced by 1%.
Changes in absolute financed emissions associated with UBS in-scope
lending (end of 2022 vs. 2021 baseline) for:
– fossil fuels reduced by 29%.
In-scope ship finance portfolio remains below the existing International
Maritime Organization (IMO 50) decarbonization trajectory.
Aligned 2.9% of UBS AG Asset Management’s total AuM with net zero.
Minimize our scope 1 and 2 emissions through energy
efficiencies and switching to more sustainable energy
sources. After which, procuring credible carbon removal
credits to neutralize any residual emissions down to zero
by 2025.6
Reduced net GHG footprint for scope 1 and 2 emissions by 21% and
energy consumption by 8% (compared with 2022); continued replacing
fossil fuel heating systems and monitored delivery of contracted carbon
removal credits; achieved 96% renewable electricity coverage in line with
RE100 despite challenging market conditions.
Offset historical emissions back to the year 2000 by
sourcing carbon offsets (by year-end 2021) and by
offsetting credit delivery and full retirement in registry (by
year-end 2025). The scope is UBS Group excluding Credit
Suisse.
Continued to follow up on credit delivery and retirement of sourced
portfolio.
Engage with our greenhouse gas (GHG) key vendors, for
100% of them to declare their emissions and set net
zero-aligned goals by 2026, and reduce their scope 1 and
2 emissions in line with net-zero trajectories by 2035.7
We invited the vendors that accounted for 67% of our annual vendor
spend to disclose their environmental performance through CDP’s Supply
Chain Program, with 70% of the invited vendors completing their
disclosures in the CDP platform.
65% of GHG key vendors (defined as those vendors that collectively
account for more than 50% of our estimated vendor GHG emissions)
have declared their emissions on CDP and set net-zero-aligned goals.
People
(aspirations)
By 2025, 30% of worldwide roles at Director level and
above held by women.
Increased to 29.5% (2022: 27.8%) of worldwide roles at Director level
and above held by women.
By 2025, 26% of US roles at Director level and above
held by employees from ethnic minority backgrounds.
Increased to 25.1% (2022: 20.5%) of US roles at Director level and
above held by employees from ethnic minority backgrounds.
By 2025, 26% of UK roles at Director level and above
held by employees from ethnic minority backgrounds.
Increased to 24.3% (2022: 23.4%) of UK roles at Director level and
above held by employees from ethnic minority backgrounds.
By 2025, 4% of UK roles at Director level and above held
by black employees.
Stable at 2.1% (2022: 2.2%).
By 2025, 25% of Americas financial advisor / client
advisor roles held by women (UBS Group excluding Credit
Suisse).
By 2025, 18.8% of US financial advisor / client advisor
roles held by employees from racial / ethnic minority
backgrounds (UBS Group excluding Credit Suisse).
Increased to 16.8% (2022: 16.6%).
Decreased to 12.2% (2022: 12.4%).
Raise USD 1bn in donations to our client philanthropy
foundations and funds and reach 26.5 million
beneficiaries by 2025 (cumulative for 2021–2025).
Achieved a UBS Optimus network of foundations donation volume of
USD 328.0m in 2023, totaling USD 763.9m since 2021 (both figures
include UBS matching contributions).8
Reached 7 million beneficiaries in 2023 and 18.5 million beneficiaries
across our social impact activities since 2021.
Advisory vote | Corporate governance and compensation | Compensation
237
Partnerships
Continue to position UBS as a leading facilitator of
discussion, debate and idea generation.
Drive standards, research and development, and
product development.
Delivered a variety of insights, including through interviews with subject-
matter experts, individual research reports and comprehensive white
papers, via the UBS Sustainability and Impact Institute, including key
publications The Rise of the Impact Economy and Rethink, rebuild,
reimagine.
Co-organized, with the Institute of International Finance, the second
Wolfsberg Forum for Sustainable Finance.
Co-led financial-sector-specific working group of the Taskforce on Nature-
related Financial Disclosures (the TNFD) and supported the launch of the
TNFD framework.
Co-chaired the UNEP FI Principles for Responsible Banking Nature working
group that developed initial guidance on nature target setting for financial
institutions.
1 As part of the integration of Credit Suisse, UBS has retired the pre-acquisition UBS sustainable investing aspiration of USD 400bn in SI invested assets. 2 While we continue to take steps to align our business
activities to our targets, it is important to note that progress towards our targets may not be linear and that the realization of our own targets and aspirations is dependent on various factors which are outside of our
direct influence. We will continue to adjust our approach in line with external developments and evolving best practices for the financial sector and climate science. Refer to the Supplement to the UBS Group
Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for more information about parts of the value chain within sectors covered by metrics and targets. Metrics are based on gross
exposure, which includes total loans and advances to customers, fair value loans and guarantees, and irrevocable loan commitments. Exclusions from the scope of analysis primarily include financial services, credit
card and other exposure to private individuals. 3 As part of our ship finance strategy, ships in scope of Poseidon Principles (PP) are assessed on criteria which aim at aligning portfolios to the PP decarbonization
trajectories. The PP are a framework for assessing and disclosing, on an annual basis, the climate alignment of in-scope ship finance portfolios to the ambition of the International Maritime Organization (the IMO),
including its 2023 Revised GHG Strategy for GHG emissions from international shipping to decrease to net zero by or around 2050 (compared with 2008 levels). 4 Refer to the “Environment” section of the UBS
Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for further information. The inherent one-year time lag between the as-of date of our lending exposure and the as-of date
of emissions can be explained by two factors: corporations disclose their emissions in annual reporting only a few months after the end of a financial year; and specialized third-party data providers take up to nine
months to collect disclosed data and make it available to data users. Consequently, the baselines for our decarbonization targets are calculated on year-end 2021 lending exposure and 2020 emissions data. Our
2022 emissions actuals are based on year-end 2022 lending exposure and 2021 emissions data. For asset financing (e.g., real estate, shipping) there is no time lag, and exposure and emissions actuals refer to the
same year. 5 The 20% alignment goal amounted to USD 235bn at the time of pre-acquisition Asset Management’s commitment in 2021. By 2030, the weighted average carbon intensity of funds is to be 50%
below the carbon intensity of the respective 2019 benchmark. 6 Scope 2 emissions are market-based emissions. The remaining scope 1 and 2 emissions may be in excess of the approximately 5–10% residuals
required for net zero (per the definition of a “net-zero target” by the ESRS E1 Climate Change per delegated act, adopted on 31 July 2023), which is our ambition for 2050. In 2024, we will be reviewing our 2025
scope 1 and 2 target for achievability for the combined organization and alignment with latest guidance. 7 In 2024, we may review our targets for GHG key vendors for the combined organization and alignment
with latest guidance. Our GHG key vendors are those vendors that collectively account for more than 50% of our estimated vendor GHG emissions. 8 Figures provided for the UBS Optimus network of foundations
are based on unaudited management accounts and information available as of January 2024. Audited financial statements for UBS Optimus network of foundations entities are produced and available per local
market regulatory guideline.
Cautionary note: We have developed methodologies that we use to set our climate-related targets and identify climate-related risks and which underly the metrics that are disclosed in this report. Standard-setting
organizations and regulators continue to provide new or revised guidance and standards, as well as new or enhanced regulatory requirements for climate disclosures. Our disclosed metrics are based upon data available
to us, including estimates and approximations where actual or specific data is not available. We intend to update our disclosures to comply with new guidance and regulatory requirements as they become applicable
to UBS. Such updates may result in revisions to our disclosed metrics, our methodologies and related disclosures, which may be substantial, as well as changes to the metrics we disclose.
› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting“ at ubs.com/investors, for more
information
Build a diverse, equitable and inclusive workplace
Increasing our gender and ethnic diversity is a strategic priority. We want to support and enable more women to build
long and satisfying careers with UBS, and we are committed to increasing the representation of women at senior levels.
Equally, investing in attracting, supporting and advancing our ethnically diverse employees is a key focus for the firm. We
take a multi-pronged approach, examining the process, culture and organization design elements around hiring,
promoting and retaining women and ethnic minority background employees at all levels, and senior management are
accountable for driving change.
Efforts towards progressing our aspirations are considered in the determination of the annual performance award pool
and included in the sustainability objectives under “People and Governance” and “Environmental and Sustainability” for
the GEB, as outlined in the table above.
› Refer to the “People and culture make the difference“ section of the UBS Group AG Sustainability Report 2023, available under
“Annual reporting” at ubs.com/investors, for more information about DE&I
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 decreases as financial
performance increases. In years of strong financial performance, this prevents 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.
Advisory vote | Corporate governance and compensation | Compensation
238
Our performance award pool funding framework is based on Group and business division performance, including
achievements against defined performance measures. For the avoidance of doubt, we have excluded the positive and
negative financial impacts generated by the acquisition of the Credit Suisse Group (such as the negative goodwill of
USD 27.7bn) from consideration in our performance award pool determination process. In assessing performance, we also
consider relative performance versus peers, market competitiveness of our pay position, as well as progress against our
strategic and integration 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 accountability for significant events.
The funding for Group functions is linked to overall Group performance and also reflects factors such as headcount and
workforce location. For each functional area, quantitative and qualitative assessments evaluate service quality, risk
management and financial achievements.
Our decisions regarding the total Group performance award pool 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.
In 2023, in light of the acquisition of the Credit Suisse Group, we have also considered the complexity of the transaction
as well as the need to retain key talent and stabilize the franchise during the integration period. Furthermore, and in line
with our existing commitment to fair pay and diversity, equity and inclusion, we took great care to support fairness and
equity across the organization, with a focus on like-for-like outcomes for comparable roles and performance across the
Group. Overall, this further supports our sustainable high performance culture and reflects our well-established approach
to pay for performance. As the integration progresses, we may consider further adjustments in the future to support
near-term targets and progress toward the completion of the integration.
Before making its final proposal to the BoD, the Compensation Committee considers the Group CEO’s proposals and can
apply a positive or negative adjustment to the performance award pool.
› Refer to “2023 Group performance outcomes” in the “Group compensation” section of this report
› Refer to the “Group performance” section of this report for more information about our results
Performance award funding process – illustrative overview
Financial
performance
Risk
adjustment
Quantitative and qualitative adjustments
Consultation of
Group CEO with
GEB members
CompCo / BoD
governance and
decision
1
Business
division
financial
performance
2
Risk-adjusted
business
division
performance
award pool
3
4
5
Strategic /
integration /
business
division
measures
Qualitative,
risk, regulatory
and
sustainability
assessment
Relative
performance
versus peers
Market
position
and trends
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
Predetermined business division-specific funding rates are applied to risk-adjusted performance, which excludes
items that are not reflective of the underlying business performance.
Strategic / integration /
business division
measures
Each division is assessed based on specific measures (e.g., net new fee generating assets, return on attributed
equity). In the short-to-medium term, to support the economic and cultural integration of Credit Suisse and the
creation of long-term value of the combined firm for our shareholders, our decision making also reflects the prog-
ress on and the complexity of the transaction, including the need to retain key talent, support pay fairness across
the entire organization, and stabilize the franchise during the integration period.
Qualitative, risk,
regulatory and
sustainability
assessment
Decision-making considers the firm’s risk profile and the extent to which operational risks and audit issues have
been identified and resolved. Diversity, equity and inclusion and other ESG metrics and the impact of litigation
and regulatory costs are also considered. 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 verifies that
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 final proposal to the BoD.
Advisory vote | Corporate governance and compensation | Compensation
239
Compensation for GEB members
GEB compensation framework
In 2023, the Compensation Committee reviewed the GEB compensation framework and concluded that it remains well
suited to support the alignment of compensation with the execution of our strategy, sustainable performance and the
delivery of our integration goals. The chart below illustrates the compensation elements, pay mix and key features for
GEB members. Of the annual performance award, 20% is paid in the form of cash and 80% is deferred over a period of
five years,1 with 50% of the annual performance awards granted under the Long-Term Incentive Plan (the LTIP) and 30%
under the Deferred Contingent Capital Plan (the DCCP).
› Refer to “Our deferred compensation plans” in the “Group compensation” section of this report for more information
2023 compensation framework for GEB members (illustrative example)
GEB1
DCCP
30%
Key features
30%
~17%
– 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 the CET1 capital ratio falls below 10% (i.e., a trigger event)
– 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
– 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%
Base
salary
2023 2024
grant
year
year
1
year
2
year
3
year
4
year
5
1 Performance awards to GEB members who are SMF / MRT are subject to additional deferral and vesting requirements.
› 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
Advisory vote | Corporate governance and compensation | Compensation
240
Pay-for-performance safeguards for GEB members
Performance
award caps
Delivery and
deferral
– 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 annual fixed compensation rate and at seven times
for the other GEB members). Going forward, the GEB, including the Group CEO, will be subject to a cap of seven times their annual fixed
compensation rate.
– Cap of 20% of performance award in cash
– 80% of performance awards are at risk of forfeiture
– Long-term deferral over five years (or longer for certain regulated GEB members)
– Alignment with shareholders (through the LTIP) and bondholders (through the DCCP)
– Final payout of equity-based LTIP award (50% of performance award) subject to absolute and relative performance conditions (three-
Contract
terms
Other
safeguards
year performance period)
– No severance terms
– Notice period between six and twelve months
– Share ownership requirements
– No hedging allowed
– GEB variable compensation subject to clawback in line with US regulatory requirements
1 The Compensation Committee may consider adjustments to profit for items that are not reflective of underlying performance including integration items.
Effective 2 October 2023, we have implemented a clawback policy for current and former GEB members based on the
US Securities and Exchange Commission (SEC) requirement for listed companies on US national securities exchanges /
associations. This clawback policy is applied if UBS is required to prepare an accounting restatement of financial
statements due to material non-compliance with financial reporting requirements. In that event, UBS would consider
recovering the amount of variable compensation that exceeds the amount that would have been determined based on
the restated financial statements (the final amount will be determined at the discretion of the Compensation Committee).
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 all GEB members including the Group CEO 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, including
privately held shares. At the end of 2023, all GEB members met their share ownership requirements, except for those
appointed within the last three years, who still have time to build up and meet the required share ownership.
As of 31 December 2023, our GEB members held shares with an aggregate value of approximately USD 388m.
Share ownership requirements
Group CEO
min. 1,000,000 shares
Other GEB members
min. 500,000 shares
GEB base salary and role-based allowance
Must be built up within five years from their appointment and retained throughout
their tenure
Each GEB member receives a fixed base salary, which is reviewed annually by the Compensation Committee. The 2023
annual base salary for the Group CEO role was CHF 2.5m and has remained unchanged since 2011. The other GEB
members each received a base salary of CHF 1.5m (or local currency equivalent), also unchanged since 2011.
Regarding the fixed compensation of the former members of the Credit Suisse Executive Board (the ExB), after the
acquisition and considering the change in roles of former ExB members, we have reduced their fixed compensation
following their contractual notice period to align with UBS fixed compensation levels for below Group Executive Board
(GEB) employees. For the former CEO of Credit Suisse Group AG, who became a GEB member after the acquisition, the
fixed compensation was also reduced to align with UBS fixed compensation levels for other GEB members.
Over the course of 2023, two GEB members held a UK Senior Management Function (an SMF) role for one of our UK
entities and one GEB member was identified as a UK-regulated Material Risk Taker (an MRT). In addition to base salary,
a role-based allowance was part of their fixed compensation.
At the Annual General Meeting (the AGM), the 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
Advisory vote | Corporate governance and compensation | Compensation
241
Caps on the GEB performance award pool
The size of the GEB performance award pool may not exceed 2.5% of the Group’s profit before tax. This limits the overall
GEB compensation based on the firm’s profitability. For 2023, the total GEB performance award pool was CHF 108.3m
and below the 2.5% cap, when applying profit before tax on an adjusted basis to exclude both the positive and negative
one-time financial impacts of the Credit Suisse acquisition (as explained in the 2023 key compensation themes section
of this report). These adjustments from reported results reflect the rigorous internal review as well as the judgment of
the Compensation Committee.
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 (at communicated value) is capped at five times his
annual fixed compensation rate. Granted performance awards (at communicated value) of other GEB members are
capped at seven times their annual fixed compensation rate. For 2023, performance awards (at communicated value)
granted to all GEB members including the Group CEO were, on average, 3.8 times their fixed compensation (in Swiss
franc terms, excluding one-time replacement awards, benefits and contributions to retirement plans). Going forward,
the GEB, including the Group CEO, will be subject to a cap of seven times their annual fixed compensation rate.
› Refer to “Performance award pool funding” in the “Compensation philosophy and governance” section of this report for more
information
GEB employment contracts
GEB members’ employment contracts do not include severance terms and are subject to a notice period of between six
and twelve 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 2023
performance year.
Bank of America
Barclays
BlackRock
BNP Paribas
Citigroup
Deutsche Bank
Goldman Sachs
HSBC
JPMorgan Chase
Julius Baer
Morgan Stanley
Standard Chartered
State Street
Advisory vote | Corporate governance and compensation | Compensation
242
GEB performance assessments
We assess each GEB member’s performance against a set of Group financial targets, non-financial objectives and
Behaviors. For 2023, we revised the non-financial objectives to increase focus on the integration. Specifically, we updated
and consolidated the categories to focus on delivering integration- and strategy-related initiatives, client centricity, risk
and regulatory, environmental and sustainability, and people- and governance-related objectives. This approach
continues to foster a focus on GEB priorities, including delivering the integration objectives and the success of the Group,
and promotes strong individual accountability.
The Compensation Committee exercises its judgment with respect to the performance achieved relative to the prior year,
our strategic plan and our 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.
Overview of the GEB compensation determination process
The compensation for the Group CEO and the other GEB members is governed by a rigorous process under Compensation
Committee and BoD oversight. The chart below shows how compensation for all GEB members is determined.
The Compensation Committee is involved at all stages of the performance and total compensation decision-making
process for the Group CEO and the other GEB members, 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 Integration and Strategy, Clients,
Risk and Regulatory, Environmental
and Sustainability and People and
Governance.
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,
proposes 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,
proposes 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) and
compensation market benchmarks
and trends.
Proposes to the BoD for approval:
–
–
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.
Advisory vote | Corporate governance and compensation | Compensation
243
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 2023.
Financial measures
(60%)
– Group profit before tax
– Group cost / income ratio
– Group return on CET1 capital
Non-
financial
measures
(30%)
Integration and Strategy
– Progress on Group strategic and integration priorities
– Delivery on division- / function-specific strategic programs and initiatives
Clients
– Foster delivery of the whole firm to our clients
– Promoting collaboration across the combined organization
– Delivery on specific key client initiatives
Risk and Regulatory
– Operating within risk appetite
– Progress on delivering on risk initiatives and regulatory commitments
Environmental and
Sustainability
– Refer to the “Planet” and “Partnership” sections in the ”Our aspirational goals and progress” table in
the ”Environmental, Social and Governance considerations” section of this report
People and Governance
– Progress toward meeting 2025 ambitions for female representation and for ethnic minority
representation (as per ESG disclosure)
– People development, mobility, turnover and succession plan metrics
– Employee listening / sentiment results and feedback on engagement and culture
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 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
Advisory vote | Corporate governance and compensation | Compensation
244
2023 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 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
Sergio Ermotti joined UBS on 1 April 2023 and took on accountability as Group CEO on 5 April 2023. The Board of Directors
(the BoD) recognizes Mr. Ermotti’s excellent performance in a defining year in UBS’s history and strong progress in delivering
on integration priorities. He was instrumental in quickly stabilizing the client franchise, managing risks, and bringing
operational stability to Credit Suisse after the announcement of the acquisition. He successfully led the closing of the
transaction in three months, the early repayment of the Public Liquidity Backstop and Emergency Liquidity Assistance Plus
and the termination of the Loss Protection Agreement. His vision, drive and ambition for this transaction have resulted in
an ambitious integration plan. Throughout the year, Mr. Ermotti was an extremely effective ambassador internally and
externally for the combined firm and the significant value we can deliver in the future for all our stakeholders.
While the 2023 financial results were impacted by the acquisition of the Credit Suisse Group, we achieved underlying
profitability following the closing of the acquisition and maintained the Group’s strong capital position with both the CET1
capital ratio and the CET1 leverage ratio in excess of our guidance. Our capital strength enabled us to buy back USD 1.3bn
of shares in 2023 and to propose to the shareholders a dividend of USD 0.70 per share, a 27% increase year-on-year.
The BoD also acknowledges that Mr. Ermotti was a role model in promoting client centricity. He personally remained
engaged with clients and focused the organization on serving clients and putting them at the heart of everything we do.
This resulted in strong momentum with our clients as evidenced by positive net new money and net new deposits across
Global Wealth Management and Personal & Corporate Banking since the closing of the acquisition in 2023.
Further, Mr. Ermotti set a clear tone from the top on risk culture and risk management. He demonstrated a strong
oversight on risk remediation items including addressing those resulting from the integration, challenged appropriately
and kept the Group focused on adhering to our well-established risk management and control principles.
Mr. Ermotti swiftly and successfully re-composed the Group Executive Board (the GEB) to effectively manage the
ambitious integration targets. He also took decisive action to stabilize the organization on the people side and to focus
on maintaining operational stability, protecting the client franchise and managing risks. In addition, Mr. Ermotti made it
a priority to drive cultural aspects into the combined organization by personally championing the Three Keys culture
program. He also continued to successfully progress on the Group’s sustainability strategy with its key focus areas Planet
(including net zero commitments), People (including progress on diversity, equity and inclusion ambitions) and
Partnerships.
As explained above, the Compensation Committee made certain adjustments to the financial results used to determine
the Group CEO performance award for 2023. If the Compensation Committee had not made these adjustments but had
applied reported UBS Group AG financial results, i.e., including all acquisition-related effects, the achievement level for
the Group PBT and RoCET1 performance measures would have been 100% and the weighted assessment score across
all financial performance measures would have been higher. This would not have been representative of the achievements
versus the targets defined for the 2023 performance year prior to the acquisition.
The table below illustrates the assessment criteria used to evaluate the achievements of Mr. Ermotti in 2023.
Financial performance
Weight
Performance
measures
2023 Results
UBS Group
(underlying)
UBS AG
consolidated
(reported)
Achieve-
ment1
Weighted
assess-
ment
2023 commentary
20%
Group PBT
USD 4.0bn
USD 4.5bn
79%
16%
– Profit before tax declined and was below target as higher
operating expenses more than offset higher revenues,
primarily due to the operating loss incurred by Credit Suisse
entities.
20%
Group C/I ratio
87.2%
86.2%
92%2
18%
– The cost / income ratio increased and was below its
performance target as higher operating expenses was only
partly offset by an increase in total revenues.
20%
RoCET1
4.2%
7.6%
78%
16%
– RoCET1 declined and was below its performance target,
reflecting lower net profit due to operating loss incurred by
Credit Suisse entities and higher average CET1 capital.
1 Achievement score capped at 100% and based on UBS sub-group (reported) results adjusted for integration-related effects (as explained above). 2 For the assessment of the cost / income ratio, the
percentage change of result versus plan is subtracted from the maximum achievement level (100%).
Advisory vote | Corporate governance and compensation | Compensation
245
Performance assessment for the Group CEO (continued)
Non-financial performance and Behaviors
Weight
Performance
measures
Achieve-
ment
2023 commentary
Weighted
assess-
ment
30%
Non-financial
objectives
Excellent
contribution
27%
The evaluation of each non-financial objective considers quantitative metrics that are assessed
against internal targets / plan.
(Integration and
Strategy,
Clients, Risk and
Regulatory,
Environmental
and
Sustainability,
People and
Governance)
– Stabilized Credit Suisse, completed closure of the transaction in three months, defined a
detailed integration plan and developed a comprehensive strategic plan for the next three
years.
– Delivered early voluntary termination of the Loss Protection Agreement and the Public
Liquidity Backstop, repaid the Credit Suisse Emergency Liquidity Assistance Plus loan.
– Achieved underlying profitability following closing of the acquisition, maintained a balance
sheet for all seasons and strong capital position.
– Prioritized personal engagement with clients to support stabilizing the client franchise,
building trust and confidence in the combined firm.
– Promoted a strong risk management and control culture across the combined organization,
remained focused on risk remediation and made progress with the litigation portfolio.
– Effectively re-composed the GEB and managed leadership transitions, supported strong
Group-wide senior leader succession and talent pipeline.
– Championed the Three Keys Culture program to support a successful long-term integration
of Credit Suisse.
– Made progress on group diversity, equity and inclusion ambitions.
See ESG metrics and progress in separate table in this report.
10%
Behaviors
(Accountability
with integrity,
Collaboration,
Innovation)
Exemplary
behavior
10%
The assessment of the Behavior objectives is qualitative and has resulted in the following
summary assessment.
– Acted as a role model for the UBS behaviors. Led by example and demonstrated exemplary
accountability, decisiveness and determination to achieve strong and sustainable short- and
long-term results.
– Strengthened collaboration across the combined organization to focus on client needs,
stabilize the franchise and progress with the ambitious integration targets.
– Continuously challenged the organization to think differently about the business evolution,
accelerated the process of moving Artificial Intelligence technology from experimentation to
implementation.
Total weighted assessment
(maximum 100%)
87%
The BoD approved the proposal by the Compensation Committee to grant Mr. Ermotti a performance award of
CHF 12.25m, resulting in a total compensation for 2023 of CHF 14.1m (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 2.45m) in cash and the remaining 80% (CHF 9.8m) subject to deferral and forfeiture provisions, as well as meeting
performance conditions over the next five years.
Advisory vote | Corporate governance and compensation | Compensation
246
2023 total compensation for the GEB members
At the 2024 AGM, shareholders will vote on the aggregate 2023 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 “Deferred compensation” in the “Supplemental information” section of this report for more information about the
vesting of outstanding awards for GEB members
› Refer to “Provisions of the Articles of Association related to compensation” in the “Supplemental Information” section of this
report for more information
Audited |
Total compensation for GEB members
CHF, except where indicated
USD (for reference)1
For the
year
Base salary
Contribution
to retirement
benefit plans
Benefits2
Total fixed
compensa-
tion
Performance
award
under LTIP4
Cash3
Performance
award
under
DCCP5
Total
variable
compensa-
tion
Total fixed
and vari-
able com-
pensation6
Total fixed
compensa-
tion
Total
variable
compensa-
tion
Total fixed
and vari-
able com-
pensation6
Highest Paid Executive (for 2023 Sergio Ermotti and for 2022 Ralph Hamers excluding replacement awards)7
14,395,317
2023
12,250,000
2,450,000
3,675,000
6,125,000
1,875,000
2,145,317
186,240
84,078
2,368,204
13,522,709
15,890,913
2022
2,500,000
242,239
198,378
2,940,617
1,940,000
4,850,000
2,910,000
9,700,000
12,640,617
Aggregate of all GEB members (excluding replacement awards)7,8,9,10,11,12
2023
28,677,051
2,120,421
1,238,708
32,036,180 21,398,036 54,305,166 32,583,098 108,286,300
140,322,480
35,364,567 119,536,663 154,901,230
2022
23,318,410
1,796,872
693,473
25,808,756 16,220,000 40,550,000 24,330,000
81,100,000
106,908,756
1 Swiss franc amounts have been translated into US dollars for reference at the 2023 performance award currency exchange rate of CHF / USD 1.10389. 2 All benefits are valued at market price. 3 For GEB members
who are also MRTs or SMFs, the cash portion includes blocked shares. 4 LTIP awards for performance year 2023 were awarded at a value of 50.00% of maximum which reflects our best estimate of the value of the
award. The maximum number of shares is determined by dividing the awarded amount by the estimated value of the award at grant, divided by CHF 24.435 or USD 27.936, the average closing price of UBS shares
over the last ten trading days leading up to and including the award date in February. 5 The amounts reflect the amount of the notional additional tier 1 (AT1) capital instrument excluding future notional interest.
6 Excludes the portion related to the legally required employer’s social security contributions for 2023 and 2022, which are estimated at grant at CHF 7,291,554 and CHF 4,675,424, respectively, of which CHF 897,679
and CHF 841,402, respectively, are for the highest-paid GEB member (excluding replacement awards). The legally required employees’ social security contributions are included in the amounts shown in the table
above, as appropriate. 7 The 2022 total compensation of Sarah Youngwood, the former Group CFO, including both the one-time replacement awards of her compensation forfeited upon joining UBS as well as her
compensation for the 2022 performance year, amounts to a total of CHF 13,475,863 (which makes her the highest paid executive for 2022 including replacement awards). 8 As stated in “Group Executive Board”
in the “Corporate governance” section of this report, 16 GEB members were in office on 31 December 2023 and twelve GEB members were in office on 31 December 2022. 9 Includes compensation paid under
employment contracts during notice periods for GEB members who stepped down during the respective years. 10 Includes compensation for newly appointed GEB members for their time in office as GEB members
during the respective years. 11 Base salary may include role-based allowances in line with market practice in response to regulatory requirements. 12 For 2022, the one-time replacement awards of CHF 7,206,683
for Sarah Youngwood and CHF 65,229 for Naureen Hassan are not included in the above table; including these, the 2022 total aggregate compensation of all GEB members is CHF 114,180,668.
Total realized compensation for the Group CEO
The realized compensation for the Group CEO 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. Ermotti, including a comparison with his total awarded compensation.
Total realized compensation vs awarded compensation for Sergio Ermotti
CHF
Awarded
Total awarded
fixed and variable
Cash award2
compensation3
For the year
20231
14,125,000
0
1 Includes compensation for 9 months as Sergio Ermotti joined UBS in April 2023. 2 Excludes dividend / interest payments. 3 Excludes contributions to retirement benefit plans and benefits. Includes social security
contributions paid by Sergio Ermotti but excludes the portion related to the legally required social security contributions paid by UBS.
Realized
Total realized
fixed and variable
compensation
1,875,000
Performance
award under
equity plans2
0
Performance
award under
DCCP2
0
Base salary
1,875,000
Advisory vote | Corporate governance and compensation | Compensation
247
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’ interests. In 2023, our
compensation framework remained broadly unchanged. 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, 2023 role-based allowances
consisted of a cash portion and, where applicable, a blocked UBS share award.
Pensions and benefits
We provide access to a range of benefit plans, such as retirement benefits and health insurance, aiming to provide
financial protection in case of significant life events, and support our employees’ well-being and diverse needs. Retirement
and other benefits are set in the context of local market practice and regularly reviewed for competitiveness.
Pension plan rules in any one location are generally the same for all employees in similar circumstances, including GEB
members and other management. Under the Switzerland Pension Fund rules of UBS legal entities, there are no enhanced
or supplementary pension contributions for the GEB. The CEO of Credit Suisse AG, who became a GEB member after
the legal close of the acquisition, participates in the Switzerland Pension Fund for Credit Suisse legal entities.
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.
Our deferred compensation plans
Underlining our emphasis on sustainable performance and risk management, and our focus on achieving our 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 mandatory deferral framework, is transparent and well
suited to implementing our compensation philosophy and delivering sustainable performance. This aligns the interests of
our employees and shareholders and appropriately links compensation to longer-term sustainable performance.
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., more stringent deferral requirements
and 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, 3.8 years for MDs receiving LTIP and 3.5 years for
other employees. Additionally, from time to time, we may utilize alternative deferred compensation arrangements to
remain competitive in specific business areas.
Advisory vote | Corporate governance and compensation | Compensation
248
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.
Upon vesting of the notional share awards, we fulfill our share delivery obligations by delivering treasury shares purchased
in the market.
› Refer to “Note 28 Employee benefits: variable compensation” in the “Consolidated financial statements” section of this report for
more information
› Refer to the “Supplemental information” section of this report for more information about MRTs and SMFs
Variable compensation elements by employee category
Deferred compensation elements
Employee category
Cash
LTIP
EOP
DCCP
GEB members and Managing Directors reporting to the GEB and
their direct reports at Managing Director level (as applicable)
Employees subject to mandatory deferral framework
1
1
1 Employees in investment areas within Asset Management typically receive notional funds (Fund Ownership Plan, previously named AM EOP) in lieu of
EOP / LTIP to align their compensation more closely with fund performance, industry standards and regulatory requirements.
Long-Term Incentive Plan
The Long-Term Incentive Plan (the LTIP) granted for 2023 performance is a mandatory deferral plan for GEB members
and Managing Directors (MDs) reporting to the GEB and their direct reports at MD level.1 These senior leaders receive
the equity portion of their 2023 performance award in LTIP to support delivering on our ambitious integration goals and
business / financial targets. This further mitigates the need for a distinct integration award typical for a transaction of this
nature. For the 2023 performance year, we awarded the LTIP to 18 GEB members and 940 MDs in office during 2023,
at a value of 50.0% of the maximum, to further align the maximum opportunity with the stretching nature of our
financial ambitions.
The performance metrics of the share-based LTIP awards are average reported 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 reported RoCET1 metric (50% weighting) with a performance range of 5% to 10% reflects the
impact of the acquisition and our ambitious integration objectives, as well as the communicated financial ambitions over
the cycle:
– the maximum reported RoCET1 of 10% corresponds with a 100% payout aligned with our stretch target;
– the minimum reported RoCET1 of 5% corresponds with a 33% payout aligned with sustainable results in the context
of the integration; and
– the linear payout between the threshold and maximum levels supports our focus on delivering sustainable performance
without encouraging excessive risk-taking.
The rTSR performance metric (50% weighting) over the three-year period further aligns the interests of employees with
those of shareholders. This 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):
– the maximum payout outcome is reached when rTSR is 25 percentage points or more above the index, to mitigate the
potential for excessive risk-taking;
– there is zero payout if rTSR is 25 percentage points or more below the index; and
– the linear payout between the threshold and maximum levels further supports appropriate risk-taking
This G-SIBs index is independently determined by the Financial Stability Board (excluding the UBS Group), our index
includes all publicly traded G-SIBs and reflects companies with a comparable risk profile and impact on the global
economy. The index is equally weighted, calculated in Swiss francs and maintained by an independent index provider, so
as to ensure independence of the TSR calculation.
1 Excluding MDs in Asset Management Investment Areas who will continue to receive the Fund Ownership Plan (FOP) instead of the LTIP
Advisory vote | Corporate governance and compensation | Compensation
249
G-SIBs that are listed companies1
Agricultural Bank of China
Bank of America
Bank of China
Bank of Communications
Bank of New York Mellon
Barclays
BNP Paribas
China Construction Bank
Citigroup
Deutsche Bank
1 As of November 2023. Excludes the UBS Group.
Goldman Sachs
Groupe Crédit Agricole
HSBC
ICBC
ING
JPMorgan Chase
Mitsubishi UFJ FG
Mizuho FG
Morgan Stanley
Royal Bank of Canada
Santander
Société Générale
Standard Chartered
State Street
Sumitomo Mitsui FG
Toronto-Dominion
Wells Fargo
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 (i.e., years 3, 4 and 5 after grant) and will cliff-vest for other award recipients
after the performance period (i.e., year three after grant), although longer deferral periods may apply for regulated GEB
and other 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.
– Achievement levels are a
percentage of the maximum
opportunity of the LTIP and
cannot exceed 100%.
– Full forfeiture for performance
below the predefined threshold
levels.
– UK Senior Management Function
holders (SMFs) and UK Material
Risk Takers (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 (<5%)
Threshold (5%) up to
maximum (<10%)
Maximum and above (>10%)
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 ppts)
Threshold (–25 ppts) up to
maximum (+25 ppts)
Maximum and above (>+25 ppts)
Full forfeiture
(payout 0%)
Partial vest
(payout between 33% and <100%)
Full vest
(payout 100%)
Performance achievement of the 2020 LTIP granted in 2021
The 2020 LTIP was granted in 2021 (for 2020 performance) at a fair value of 65.9% of a maximum of 100%. The final
performance achieved is 92.55% of a maximum of 100%. This achievement reflects the outcome of the two equally
weighted performance metrics, RoCET1 and rTSR, both measured over the three-year performance period from 1 January
2021 to 31 December 2023. The achievement level of this 2020 LTIP award (granted in 2021) applies to 13 current GEB
members and 68 other plan participants.
We achieved a three-year average RoCET1 performance of 15.3% against the performance range of 6% to 18%, and
an rTSR performance of +75.36 percentage points versus the index of listed G-SIBs.
As explained above, the Compensation Committee made certain adjustments to the financial results used to determine
the 2020 LTIP achievement level. As noted, if the Compensation Committee had not made these adjustments but had
applied reported UBS Group AG financial results, i.e., including all acquisition-related effects, the achievement level for
the RoCET1 metric would have been 100%.
For GEB members, the first of the three equal installments of the 2020 LTIP vests on 28 March 2024 and the second and
third installments will vest in March 2025 and 2026; while for selected senior management, the 2020 LTIP cliff vests on
28 March 2024 (later dates may apply for regulated employees).
Advisory vote | Corporate governance and compensation | Compensation
250
Performance achievement for the 2020 LTIP awarded in 2021
Performance
metrics
RoCET1
(Weight: 50%)
rTSR
(Weight: 50%)
Performance metric outcome
2020 LTIP achievement level
Threshold
6%
Maximum
18%
Threshold
33%
Maximum
100%
Outcome:
15.3%
−25ppts
+25ppts
Outcome
below
threshold:
full forfeiture
Outcome:
+75.36ppts
Outcome
above
maximum:
achievement
capped at
100%
Achievement:
85.1%
33%
100%
Achievement:
100%
Overall achievement:
92.55%
Overall 2020 LTIP achievement level
Equity Ownership Plan / Fund Ownership Plan
The Equity Ownership Plan (the EOP) is the deferred compensation plan for employees that are subject to deferral
requirements but do not receive LTIP awards. For the 2023 performance year, we granted EOP awards to 4,661
employees.
Delivering sustainable results is a key objective for UBS. Our EOP creates a direct link with shareholder returns as a notional
equity award and has no upward leverage. This approach promotes growth and sustainable performance. EOP awards
generally vest over three years.
In place of EOP, employees in investment areas within Asset Management receive some or all of their EOP in the form of
notional funds (the Fund Ownership Plan (the FOP), previously named AM EOP) to align their compensation more closely
with industry standards. This plan is generally delivered in cash and vests over three years.
› Refer to “Vesting of outstanding awards granted in prior years subject to performance metrics and thresholds” in the
“Supplemental information” section of this report for more information
Deferred Contingent Capital Plan
The 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 2023 performance year, we granted DCCP
awards to 5,562 employees.
The DCCP is consistent with 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, as 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 2024 was 4.6% for awards denominated in Swiss
francs and 8.3% for awards denominated in US dollars. These interest rates are based on the current market rates for
similar AT1 capital instruments issued by the 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 1.97bn 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
Advisory vote | Corporate governance and compensation | Compensation
251
Contribution of the Deferred Contingent Capital Plan to our loss-absorbing capacity1
USD m, 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 (%)
1 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.
31.12.23
31.12.22
1,935
0.4
1,794
0.6
Other variable compensation components
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 that 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;
– awards granted to employees hired late in the year to replace performance awards that they would have earned at
their previous employer 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, sign-on awards may be offered to candidates 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.
To support operational stability, manage risks and protect the client franchise, we have deployed specific additional
measures. Retention awards were delivered in both deferred cash and deferred equity awards. Furthermore, to support
our client win-back strategy and promote client growth, we also introduced a client acquisition and retention award for
certain producers, which is fully deferred and the final value is linked to the retention of client assets. Retention efforts
were targeted and limited to certain client roles and critical roles necessary to support operational stability. Overall, the
amounts of USD 736m are modest by industry standards for an integration of this magnitude. These retention awards
account for 3% of our total personnel expenses recognized in 2023.
Employees outside of the GEB that 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.
Replacement awards and forfeitures
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 attract external top talent, market practice dictates that we consider replacing their forfeited compensation
from their prior employer. In select situations and based on careful consideration, we replace the lost compensation of
senior hires. The replacement awards are subject to UBS’s harmful acts provisions. Their value is subject to independent
review as part of the “Report of the statutory auditor on the compensation report” to support the like-for-like nature of
the replacement and to confirm that these awards do not represent sign-on payments (i.e., there are no “golden hellos”).
Based on a thorough review of available documentation, we aim to mirror the type, conditions and timing of the forfeited
compensation, based on actual facts and circumstances. Replacement awards can include cash payments and / or
deferred awards, including EOP share awards and DCCP awards. Where payments are made in cash, there is typically a
clawback period if the employee leaves UBS voluntarily within 12 months of the start of employment. The replacement
awards do not exceed the commercial or fair value of the compensation actually forfeited by the individual and, in case
of GEB members, are disclosed transparently. The total 2023 forfeitures of USD 1,903m of previously awarded deferred
compensation offset the 2023 total sign-on payments, replacement payments and guarantees of USD 216m.
Advisory vote | Corporate governance and compensation | Compensation
252
Sign-on payments, replacement payments, guarantees and severance payments
USD m, except where indicated
Total sign-on payments1
of which: Key Risk Takers2
Total replacement payments3
of which: Key Risk Takers2
Total guarantees4
of which: Key Risk Takers2
Total severance payments1,5
of which: Key Risk Takers2
Total 2023
of which: non-deferred
cash
of which: deferred
compensation
awards
Total 2022
Number of beneficiaries
0
0
145
65
71
51
485
0
0
29
9
32
20
485
0
0
116
56
40
31
0
0
0
110
32
43
26
233
2023
0
0
422
34
39
15
4,389
2022
1
0
452
19
49
9
1,745
8
1 GEB members are not eligible for sign-on or severance payments. Sign-on awards exclude one-time payments for junior associate hires into the Investment Bank. Including these, the total sign-on payments are
USD 4m for 2023 and USD 1m for 2022. All one-time payments for junior associate hires are subject to a 12-month clawback condition. 2 Expenses for Key Risk Takers are full-year amounts for individuals in office
on 31 December 2023. Key Risk Takers as defined by UBS, including all employees with a total compensation exceeding USD / CHF 2.5m (Highly Paid Employees). 3 No GEB member received a replacement payment
in 2023. In 2022, amounts include replacement payments for two GEB members. Total amounts include awards granted 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. 4 No GEB member received a guarantee in 2023 or 2022. 5 Includes legally obligated and standard severance payments, as well as payments in lieu
of notice.
34
7
1
0
7
Forfeitures1
USD m, except where indicated
Total forfeitures
of which: former GEB members
Total 2023
Total 2022
1,903
0
188
3
of which: Key Risk Takers2
12
1 For notional share awards (excluding Credit Suisse legacy plan awards), forfeitures are calculated as units forfeited during the year, valued at the share price on 31 December 2023 (USD 30.90) for 2023. The 2022
data is valued using the share price on 31 December 2022 (USD 18.67). For LTIP the forfeited units reflect the fair value awarded at grant. For the notional funds awarded to Asset Management employees under the
AM EOP/FOP, this represents the forfeiture credits recognized in 2023 and 2022. For the DCCP, the fair value at grant of the forfeited awards during the year is reflected. Credit Suisse legacy awards (including Credit
Suisse notional fund awards) are calculated using value at grant and include the explicit adjustments resulting from the cancellation and reduction order issued by the Federal Department of Finance (FDF) of Switzerland.
The 2022 data excludes Credit Suisse legacy award forfeitures. All values shown exclude DCCP interest and CCA coupon forfeitures. Numbers presented may differ from the effect on the income statement in accordance
with IFRS. 2 Key Risk Takers as defined by UBS, including all employees with a total compensation exceeding USD / CHF 2.5m (Highly Paid Employees) and excluding former GEB members who forfeited awards in
2023 or 2022.
293
Employee share ownership
According to available records on employee shareholdings, including unvested deferred compensation, as of
31 December 2023, employees held at least USD 7.9bn of UBS shares (of which approximately USD 5.3bn were
unvested), representing approximately 7.4% 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 this report 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 consists of cash compensation and deferred compensation awards, determined using a formulaic
approach based on production.
The monthly cash compensation is determined using an overall percentage rate for each financial advisor. It reflects a
percentage of the compensable production that each financial advisor generates during that month. Compensable
production is generally based on transaction revenue and investment advisory fees and may reflect further adjustments.
The percentage rate generally varies based on the level of the production and firm tenure, supporting growth and
alignment with the investment strategy and goals of our clients.
Financial advisors may also be granted annual deferred compensation. These amounts generally vest over a six-year
period. The annual deferred compensation amount reflects their overall percentage rate and production, as previously
outlined.
Cash compensation 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.
Financial advisors may also participate in additional programs to support promoting and developing their business or
supporting the transition of client relationships where appropriate.
Advisory vote | Corporate governance and compensation | Compensation
253
2023 Group performance outcomes
Performance awards granted for the 2023 performance year
The “Variable compensation” table below shows the amount of variable compensation awarded to employees for the
2023 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 compensation
USD m, 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: Fund Ownership Plan
Variable compensation – performance award pool
Variable compensation – financial advisors1
Variable compensation – other2
Total variable compensation
Expenses recognized
in the IFRS
Accounting
Standards income
statement
2023
2022
2,859
2,276
523
155
180
164
24
364
202
129
11
21
3,382
3,761
784
2,640
3,799
169
Expenses deferred to
future periods3
2023
2022
0
777
263
312
160
41
777
1,236
384
0
605
310
245
30
20
605
1,290
237
Adjustments3
2023
3334
2022
(18)4
27
58
33 5
55 5
0
3 5
0
0
(6) 5,6
0
360
0
(190)7
Total
2023
3,192
1,327
2022
2,259
1,026
452
493
318
65
568
375
43
41
Number of beneficiaries8
2022
2023
97,265
59,570
5,489
4,177
5,448
954
371
4,349
4,042
4,206
14
295
97,290
5,804
59,590
6,245
40
0
(146)7
4,519
4,997
978
3,285
5,089
260
7,927
6,608
2,398
2,131
170
(106)
10,495
8,634
1 Financial advisor compensation consists of cash and deferred compensation awards and is based on compensable revenues and firm tenure using a formulaic approach. It also includes expenses related to
compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements. 2 Consists of retention awards granted to Credit Suisse employees to support the
completion of the transaction and the early phase of the integration, replacement payments, forfeiture credits, severance payments, retention plan payments and interest expense related to the Deferred Contingent
Capital Plan. 3 Estimates as of 31 December 2023 and 2022. Actual amounts to be expensed in future periods may vary; e.g., due to forfeiture of awards. 4 Includes the 2023 cash bonus liability recognized as
of the date of the acquisition of Credit Suisse, of USD 351m, relating to pre-acquisition service as well as currency translation adjustments. 5 Represents estimated post-vesting transfer restriction and permanent
forfeiture discounts. 6 Adjustments for LTIP include a difference of USD 53m between the estimated amount to be expensed under IFRS 2 and the communicated value included in the performance award pool.
7 Included in expenses deferred to future periods is an amount of USD 190m (2022: USD 146m) 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. 8 Excludes awards that are part of Variable compensation – other.
2023 performance award pool and expenses
The performance award pool, which includes performance-based variable awards for 2023, was USD 4.5bn, reflecting
an increase of 38% compared with 2022 (or a reduction of 14% compared with the pro forma aggregate 2022 pool of
USD 5.3bn for the combined entities, which includes the UBS performance award pool, the Credit Suisse variable
incentive compensation pool and other variable compensation awards related to the 2022 performance year).
Performance award expenses for 2023 increased to USD 4.0bn, mainly reflecting increased performance award expenses
accrued in the performance year as a result of the acquisition of the Credit Suisse Group. The “Performance award pool
and expenses” table below compares the performance award pool with performance award expenses.
Performance award pool and expenses
USD m, except where indicated
Performance award pool1
of which: expenses deferred to future periods and adjustments 2,3
Performance award expenses accrued in the performance year
2023
4,519
1,137
3,382
2022
3,285
645
2,640
% change
38
76
28
Performance award expenses related to prior performance years
Total performance award expenses recognized for the year4
1 Excluding employer-paid taxes and social security. 2 Estimate as of the end of the performance year. Actual amounts expensed in future periods may vary, e.g., due to forfeiture of awards. 3 Refer to details in
the preceding "Variable compensation" table for more information. 4 Refer to “Note 28 Employee benefits: variable compensation” in the “Consolidated financial statements” section of this report for more
information
3,205
3,986
604
566
24
7
Advisory vote | Corporate governance and compensation | Compensation
254
Compensation for the Board of Directors
Chairman of the BoD
Under the leadership of the Chairman, Colm Kelleher, 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
the work of all BoD committees. 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.
As an independent director, the Chairman’s total compensation for the period from Annual General Meeting (AGM) to
AGM consists of a fixed fee without any variable component, which is delivered 50% in cash and 50% in shares (blocked
for four years). For the current period, from the 2023 AGM to the 2024 AGM, his fixed fee was CHF 4.7m and consisted
of a cash payment of CHF 2.35m and a share component of CHF 2.35m, consisting of 96,173 UBS shares at CHF 24.435
per share. The share component aligns the Chairman’s pay with the Group’s long-term performance. The Chairman does
not receive performance awards, severance payments or pension contributions in addition to his fixed fee, but, given the
full-time nature of his role, he is eligible for employee conditions on UBS products and services. Effective from the 2024
AGM, we will increase the Chairman’s annual fixed fee to CHF 5.5m, to reflect the significantly increased scope,
responsibility and complexity following the acquisition of the Credit Suisse Group.
› Refer to “Board of Directors” in the “Corporate governance” section of this report for more information about the responsibilities
of the Chairman
Vice Chairman of the BoD
As the Vice Chairman of the BoD, Lukas Gähwiler leads the BoD in the absence of the Chairman and, together with the
Senior Independent Director, he also supports the Chairman in all aspects of corporate governance and oversight across
the Group. In particular, he represents UBS across a broad range of associations and industry bodies in Switzerland. In
2023, Lukas Gähwiler took on additional responsibilities as the chairman of the board of Credit Suisse AG, a subsidiary
of UBS Group AG. This nomination is critical to provide strong governance and oversight of the subsidiary, in a manner
consistent and in compliance with UBS Group AG governance principles, and also to facilitate the integration of Credit
Suisse AG into UBS.
The Vice Chairman’s total compensation for his services in the UBS Group AG Board for the period from AGM to AGM
consists of a fixed fee without any variable component, which is delivered 50% in cash and 50% in shares (blocked for
four years). For the current period, from the 2023 AGM to the 2024 AGM, his fixed fee was CHF 1.5m, excluding benefits
and pension fund contributions. The fixed fee consisted of a cash payment of CHF 0.75m and a share component of
CHF 0.75m, consisting of 30,693 UBS shares at CHF 24.435 per share.
As a non-independent director, Mr. Gähwiler is entitled to pension fund contributions. Including these, his total reward
for his service as Vice Chairman for the current period was CHF 1,881,368.
Serving in a subsidiary board is a substantial increase in the scope, responsibility and complexity of his mandate and was
urgently required to support the merger. Therefore, Mr. Gähwiler will be entitled to receive an additional board member
fee aligned with his role as Chairman of Credit Suisse AG and with other non-executive directors on the respective
subsidiary entities. The payment of this subsidiary board fee is subject to shareholder approval as part of an incremental
amount at the 2024 AGM.
The Vice Chairman’s fee for his services in the Credit Suisse AG board for the period from AGM to AGM consists of a
fixed fee without any variable component, which is delivered 100% in cash. For the current period, from the 2023 AGM
to the 2024 AGM, his total reward for his services as chairman in the Credit Suisse AG board was CHF 1,000,000.
The Vice Chairman is not eligible for performance awards, severance terms or supplementary contributions to pension
plans. The pension contributions and benefits for the Vice Chairman, in his capacity as non-independent director, are
consistent with all UBS employees and aligned with local market practice.
› Refer to “Board of Directors” in the “Corporate governance” section of this report for more information about the responsibilities
of the Vice Chairman
› Refer to “Say-on-pay” section of this report for more information about compensation-related proposals at the AGM 2024
Advisory vote | Corporate governance and compensation | Compensation
255
Other BoD members
BoD members, except the Chairman and Vice Chairman, receive fixed fees for their services on the BoD and its
committees. These fees are unchanged from the last AGM-to-AGM period. BoD members do not receive performance
awards, severance payments, benefits or pension contributions (the benefit eligibility of the Chairman and that of the
Vice Chairman are described above).
BoD members other than the Chairman and the Vice Chairman 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. 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.
In 2023, in order to facilitate the integration of Credit Suisse into UBS, two independent BoD members served on the
boards of directors of subsidiaries. UBS Group AG Board members who have additional roles on the boards of significant
subsidiary entities receive respective fees for the significant increase in the scope, responsibility and complexity of their
mandates. These fees are aligned with other non-executive directors of the respective subsidiary entities. The payment
of these subsidiary board fees is subject to shareholder approval as part of an incremental amount at the 2024 AGM.
The total remuneration of other UBS Group AG members, including fees from subsidiaries, is summarized in the
“Remuneration details and additional information for BoD members” table below.
At each AGM, shareholders are invited to approve the aggregate amount of BoD remuneration, including the
compensation for the Chairman and Vice Chairman, which applies until the next AGM. The chart and the tables below
provide details on the fee structure for the BoD members.
Remuneration framework for UBS Group AG BoD members
CHF
Annual fixed fees¹
Chairman
Vice Chairman
Fees for other BoD members²
Fixed base fee
Senior Independent Director
2023 AGM to 2024 AGM
Pay mix
Delivery
4,700,000
1,500,000
300,000
150,000
Blocked
shares
50%
Audit Committee
Compensation Committee
Governance and Nominating Committee
Corporate Culture and Responsibility
Committee
Risk Committee
Chair
300,000
200,000
350,000
Member
200,000
100,000
100,000
50,000
200,000
Cash
50%
AGM-
to-AGM
period
grant
year
year 1 year 2 year 3 year 4
1 The Chairman and the Vice Chairman do not receive committee or other fees in addition to their annual fixed fee. Their fixed fee is
delivered 50% in cash and 50% in shares (blocked for four years). See above for the benefit eligibility of the Chairman and Vice Chairman.
2 At least 50% of the total amounts must be used to purchase UBS shares, which are blocked for four years, but other BoD members can elect to
use 100% of their remuneration to purchase blocked UBS shares.
Approval governance for BoD compensation
The Chairperson of the Compensation Committee proposes and the Compensation Committee approves the
compensation of the Chairman and that of the Vice Chairman 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.
The fee structure for the other 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 BoD member compensation remains appropriate and thus
unchanged.
› Refer to “Compensation Governance” in the “Compensation philosophy and governance” section of this report for more
information about the remuneration responsibilities of the BoD and Compensation Committee
Advisory vote | Corporate governance and compensation | Compensation
256
Audited |
Remuneration details and additional information for BoD members
Period 2023 AGM to 2024 AGM
CHF, except where indicated
e
e
t
t
i
m
m
o
C
n
o
i
t
a
s
n
e
p
m
o
C
e
e
t
t
i
m
m
o
C
t
i
d
u
A
C
Name, function1
Colm Kelleher, Chairman9
Lukas Gähwiler, Vice
Chairman9
Jeremy Anderson, Senior
Independent Director
Claudia Böckstiegel, member
William C. Dudley, member
Patrick Firmenich, member
M
Fred Hu, member
Mark Hughes, member
Nathalie Rachou, member
Julie G. Richardson, member
Dieter Wemmer, member
Jeanette Wong, member
C
M
M
M
M
i
g
n
i
t
a
n
m
o
N
d
n
a
e
e
t
t
i
e
c
n
a
n
m
r
e
m
v
o
o
G
C
C
e
e
t
t
i
m
m
o
C
k
s
i
R
Base fee
4,700,000
Committee
fee(s)
Additional
payments2
Benefits3
12,830
Total4
4,712,830
Share
percentage5
50
Number of
shares6,7
96,173
Subsidiary
entity board
fees8
Total
including
subsidiary
fees
4,712,830
e
e
t
t
i
d
n
a
m
m
o
C
y
t
i
l
i
e
r
u
t
l
u
C
b
e
i
t
s
a
n
r
o
o
p
p
r
s
o
e
C
R
C
M
1,500,000
381,368
1,881,368
50
30,693
1,000,000
2,881,368
M
M
M
M
M
M
M
M
300,000
400,000
150,000
M
C
M
M
300,000
300,000
300,000
300,000
300,000
300,000
300,000
300,000
300,000
50,000
250,000
250,000
100,000
400,000
300,000
400,000
300,000
300,000
850,000
350,000
550,000
550,000
400,000
700,000
600,000
700,000
600,000
600,000
12,494,198
13,792,316
100
50
50
100
100
50
50
50
100
100
26,624
893,215
1,743,215
7,161
11,254
16,672
12,105
14,323
12,277
14,323
23,549
18,194
350,000
550,000
550,000
400,000
795,677
1,495,677
600,000
700,000
600,000
600,000
15,183,090
16,760,560
Aggregate of all BoD members 2023/2024
Aggregate of all BoD members 2023/2024 in USD (for reference)10
Period 2022 AGM to 2023 AGM
CHF, except where indicated
e
e
t
t
i
m
m
o
C
t
i
d
u
A
C
Name, function1
Colm Kelleher, Chairman9
Lukas Gähwiler, Vice
Chairman9
Jeremy Anderson, Senior
Independent Director
Claudia Böckstiegel, member
William C. Dudley, member
Patrick Firmenich, member
M
Fred Hu, member
Mark Hughes, member
Nathalie Rachou, member
Julie G. Richardson, member
Dieter Wemmer, member
Jeanette Wong, member
M
M
e
e
t
t
i
m
m
o
C
n
o
i
t
a
s
n
e
p
m
o
C
C
M
M
e
e
t
t
i
d
n
a
m
m
o
C
y
t
i
l
i
e
r
u
t
l
u
C
b
e
i
t
s
a
n
r
o
o
p
p
r
s
o
e
C
R
C
e
e
t
t
i
d
n
a
m
m
o
C
e
g
c
n
n
i
t
a
a
n
n
r
e
m
v
o
o
G
N
C
i
M
M
M
M
M
M
M
e
e
t
t
i
m
m
o
C
k
s
i
R
M
C
M
M
Committee
fee(s)
Additional
payments2
Base fee
4,700,000
1,500,000
Benefits3
86,494
Total4
4,786,494
379,010
1,879,010
300,000
400,000
150,000
300,000
300,000
300,000
300,000
300,000
300,000
300,000
300,000
300,000
50,000
250,000
250,000
100,000
400,000
300,000
400,000
300,000
300,000
Subsidiary
entity board
fees
Total
including
subsidiary
fees
Share
percentage5
50
Number of
shares6,7
116,961
50
50
50
50
100
100
50
50
50
50
100
37,328
21,152
8,709
13,687
26,130
14,722
17,419
14,931
17,419
14,931
22,127
850,000
350,000
550,000
550,000
400,000
700,000
600,000
700,000
600,000
600,000
12,565,504
Aggregate of all BoD members 2022/2023
Legend: C = Chairperson of the respective Committee, M = Member of the respective Committee
1 Twelve BoD members were in office on 31 December 2023 and on 31 December 2022. 2 These payments are associated with the Senior Independent Director role. 3 For the period from the 2023 AGM to the
2024 AGM, benefits amount is an estimate. For the Vice Chairman, the benefits include the portion related to UBS’s contribution to the statutory pension scheme. 4 Excludes UBS’s portion related to the legally
required social security contributions, which for the period from the 2023 AGM to the 2024 AGM (including the Chairman, Vice Chairman and UBS Group AG members with a role in subsidiaries) is estimated at grant
at CHF 1,000,000 and which for the period from the 2022 AGM to the 2023 AGM was estimated at grant at CHF 731,329. The legally required social security contributions paid by the independent BoD members are
included in the amounts shown in this table, as appropriate. 5 For the Chairman and Vice Chairman, fees are paid 50% in cash and 50% in blocked UBS shares. Other BoD members must use a minimum of 50% of
their fees to purchase UBS shares, which are blocked for four years. 6 For 2023, UBS shares were valued at CHF 24.435 (average closing price of UBS shares over the last 10 trading days leading up to and including
the grant date). For 2022, UBS shares were valued at CHF 20.092 (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.
7 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.
8 The payment of the subsidiary board fees for the period 2023 AGM to 2024 AGM are subject to shareholder approval as part of an incremental amount at the 2024 AGM. 9 The Chairman and the Vice Chairman
do not receive committee fees in addition to their annual fixed fee. 10 Swiss franc amounts have been translated into US dollars for reference at the 2023 performance award currency exchange rate of CHF /
USD 1.10389.
Advisory vote | Corporate governance and compensation | Compensation
257
Supplemental information
Fixed and variable compensation for GEB members
Fixed and variable compensation for GEB members1,2,3
CHF m, except where indicated
Total compensation
Amount5
Number of beneficiaries
Fixed compensation5,6
Cash-based
Equity-based
Variable compensation
Cash7
Total for 2023
Not deferred
Amount
%
Amount
137
18
29
27
2
108
21
21
19
2
79
16
48
27
21
%
35
93
20
Deferred4
Amount
89
2
87
%
65
7
80
Total for 2022
Amount
104
15
23
21
2
81
16
Long-Term Incentive Plan (LTIP)8
Deferred Contingent Capital Plan (DCCP)8
1 The figures include all GEB members in office during the respective years. 2 Includes compensation paid under the employment contract during the notice period for GEB members who stepped down during the
respective years. 3 Includes compensation for newly appointed GEB members for their time in office as a GEB member during the respective years. 4 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 Accounting Standards. 5 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. 6 Includes base salary and role-based allowances,
rounded to the nearest million. 7 Includes allocation of vested but blocked shares, in line with the remuneration section of the UK Prudential Regulation Authority Rulebook. 8 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.
54
33
40
24
41
24
Regulated staff
Key Risk Takers
Key Risk Takers (KRTs) are defined as those employees that, 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 working 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 2023, in addition to GEB members, 1,038 employees were classified as KRTs throughout the UBS Group globally,
including all employees with a total compensation exceeding USD / CHF 2.5m (Highly Paid Employees), who may not
have been identified as KRTs during the performance year. Compared with 2022, the increase in the number of KRTs
has been driven by the inclusion of Credit Suisse employees in the identification process.
In line with regulatory requirements, the performance of employees identified as KRTs during the performance year is
evaluated by the control functions. 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 predetermined threshold where standard deferral rates apply). 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 m, except where indicated
Total compensation
Amount
Number of beneficiaries
Fixed compensation4,5
Cash-based
Equity-based
Variable compensation
Total for 2023
Amount
Not deferred
%
Amount
1,801
1,038
668
665
3
1,133
100
1,147
37
37
0
63
668
665
3
479
%
64
100
Deferred2
Amount
654
0
42
654
Total for 20223
Amount
1,292
699
438
435
3
855
%
36
0
58
479
Cash6
Long-Term Incentive Plan (LTIP) / Equity Ownership
Plan (EOP) / Fund Ownership Plan (FOP)7
Deferred Contingent Capital Plan (DCCP)7
1 Includes employees with a total compensation exceeding USD / CHF 2.5m (Highly Paid Employees), excludes payments made to individuals related to their time as GEB member. 2 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 Accounting Standards. 3 The 2022 data excludes Credit Suisse. 4 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. 5 Includes base salary
and role-based allowances. 6 Includes allocation of vested but blocked shares, in line with regulatory requirements where applicable. 7 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.
396
258
306
196
396
258
22
14
479
353
27
Advisory vote | Corporate governance and compensation | Compensation
258
Deferred compensation of the GEB and KRTs
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 2023. For notional funds, it is determined using the latest available market price for the underlying
funds at year-end 2023, and for deferred cash plans, it is determined based on the outstanding amount of cash owed to
award recipients.
Deferred compensation of the GEB and KRTs1,2,3
USD m, except where indicated
GEB
Deferred Contingent Capital Plan
Equity Ownership Plan (including notional funds
and Credit Suisse legacy plans)
Long-Term Incentive Plan
KRTs
Deferred Contingent Capital Plan
Equity Ownership Plan (including notional funds)
Long-Term Incentive Plan
Credit Suisse legacy plans
Relating to awards
for 20234
Relating to
awards for prior
years5
36
0
60
258
183
213
0
117
57
262
925
1,344
180
195
Total
153
57
322
1,183
1,527
393
195
of which: exposed to
ex post explicit and /
or implicit adjustments
Total deferred
compensation
year-end 20226
Total amount of
deferred compensation
paid out in 20237
100%
100%
100%
100%
100%
100%
100%
111
45
160
1,104
1,210
184
n/a
14
29
27
133
415
74
52
Total GEB and KRTs
1 Based on the specific plan vesting and reflecting the economic value of the outstanding awards (grant value for legacy Credit Suisse notional funds), 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. 2 Refer to “Note 27 Employee benefits: variable compensation” in the “Consolidated financial statements” section of this report for more information. 3 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. 4 Where applicable, amounts are translated into US dollars at the performance award currency exchange rate. LTIP values reflect the fair value awarded at grant. 5 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 2023. LTIP values reflect the fair value
awarded at grant. 6 The 2022 data excludes Credit Suisse legacy awards. 7 Valued at distribution price and FX rate for all awards distributed in 2023 (this excludes interests on DCCP).
3,830
3,080
2,814
744
750
The table below shows the value of actual ex post explicit and implicit adjustments to outstanding deferred compensation
in the 2023 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.
GEB and KRTs ex post explicit and implicit adjustments to deferred compensation
USD m
GEB
Deferred Contingent Capital Plan
Equity Ownership Plan (including notional funds and Credit Suisse legacy
plans, if applicable)
Long-Term Incentive Plan
KRTs
Deferred Contingent Capital Plan
Equity Ownership Plan (including notional funds)
Long-Term Incentive Plan
Credit Suisse legacy plans
Ex post explicit adjustments
to unvested awards1
31.12.23
31.12.22
Ex post implicit adjustments
to unvested awards2
31.12.23
31.12.22
0
(1)
0
(2)
(6)
0
(285)
0
0
0
(8)
(4)
(1)
n/a
0
25
119
0
530
82
(108)
0
9
25
0
129
38
n/a
Total GEB and KRTs
1 For notional share awards (excluding Credit Suisse legacy plan awards), ex post explicit adjustments are calculated as units forfeited during the year, valued at the share price on 31 December 2023 (USD 30.9) for
2023 (which may differ from the expense recognized in the income statement in accordance with IFRS). The 2022 data is valued using the share price on 31 December 2022 (USD 18.67). For LTIP, the forfeited units
reflect the fair value awarded at grant. For the notional funds awarded to employees in investment areas within Asset Management under the FOP, this represents the forfeiture credits recognized in 2023 and 2022.
For DCCP, the fair value at grant of the forfeited awards during the year is reflected. Credit Suisse legacy plan awards (including Credit Suisse notional fund awards) are calculated using value at grant and include the
explicit adjustments resulting from the cancellation and reduction order issued by the Federal Department of Finance (FDF) of Switzerland. The 2022 data excludes Credit Suisse legacy award forfeitures. All values
shown exclude DCCP interest and CCA coupon forfeitures. 2 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 while Credit Suisse legacy plans are calculated based on comparing the value at 31 December 2023 to the value at 31 December 2022. The amount for UBS notional funds is calculated using the
mark-to-market change during 2023 and 2022. The 2022 data excludes implicit adjustments related to the Credit Suisse legacy awards. For the GEB members who were appointed to the GEB during 2023, awards
have been fully reflected in the GEB categories.
(294)
(13)
648
201
Advisory vote | Corporate governance and compensation | Compensation
259
Material Risk Takers
For relevant EU- or UK-regulated entities, we identify individuals who are deemed to be Material Risk Takers (MRTs) based
on sectorial and / or 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 2023, UBS identified 1,321 MRTs in relation to its relevant EU or UK entities. The increase in the number
of MRTs compared with last year has been driven by the MRT population identified in relation to Credit Suisse legal
entities.
Subject to individual or legal-entity level proportionality considerations, variable compensation awarded to MRTs is subject
to additional deferral and other requirements. For CRD-relevant entities, these include 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 2023 are subject to 6- or 12-month blocking periods
post vesting and do not pay out dividends or interest during the deferral period.
Additionally, MRTs are subject to a maximum ratio between fixed and variable pay. Across EU locations, the maximum
variable to fixed compensation ratio is set to 200%, based on approval through relevant shareholder votes.
For UK-regulated MRTs, the maximum ratio was set by UBS taking into account the business activities and prudential and
conduct risks of the relevant legal entities. In addition, the maximum ratios were set considering the scenario that the
relevant legal entities might exceed their financial objectives.
The maximum ratio for all UK-regulated MRTs was approved by the compensation committees of the relevant entities in
December 2023.
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, thus contributing 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.
UK Senior Managers and Certification Regime
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 that
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 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.
Advisory vote | Corporate governance and compensation | Compensation
260
2023 Group personnel expenses
The number of personnel employed as of 31 December 2023 increased by 40,241 to 112,842 (full-time equivalents)
compared with 31 December 2022.
The table below shows our total personnel expenses for 2023, including salaries, pension expenses, social security
contributions, variable compensation and other personnel costs. Variable compensation includes cash performance
awards paid in 2024 for the 2023 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 2023 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 Accounting Standards:
– a reduction for expenses deferred to future periods (amortization of unvested awards granted in 2024 for the 2023
performance year) and accounting adjustments; and
– an addition for the 2023 amortization of unvested deferred awards 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 Accounting Standards expenses in both 2023 and 2024. The expenses
related to prior performance years and total expenses recognized in 2023 include deferred compensation granted under
Credit Suisse Group compensation plans in previous years, which have to be expensed from 2023 onward due to the
integration of Credit Suisse into UBS.
› Refer to “Note 7 Personnel expenses” and “Note 28 Employee benefits: variable compensation” in the “Consolidated financial
statements” section of this report for more information
Personnel expenses
USD m
Salaries1
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: Fund Ownership Plan
Variable compensation – performance awards
Variable compensation – financial advisors2
Variable compensation – other3
Total variable compensation4
Contractors
Social security
Pension and other post-employment benefit plans5
Other personnel expenses
Total personnel expenses
Expenses recognized in the IFRS Accounting Standards income statement
Related to the
performance year 2023
10,997
Related to prior
performance years
0
Total expenses
recognized in
2023
10,997
Total expenses
recognized in
2022
7,045
Total expenses
recognized in
2021
7,339
2,859
523
155
180
164
24
3,382
3,761
784
7,927
334
1,362
1,361
862
(52)
656
330
241
40
46
604
788
526
1,918
0
111
0
27
2,807
1,179
485
421
204
69
3,986
4,549
1,310
9,845
334
1,473
1,361
890
2,260
2,373
945
437
349
43
116
3,205
4,508
241
7,954
323
944
794
621
817
363
297
73
84
3,190
4,860
229
8,280
381
978
833
576
22,843
2,056
24,899
17,680
18,387
1 Includes role-based allowances. 2 Financial advisor compensation consists of cash and deferred compensation awards and is based on compensable revenues and firm tenure using a formulaic approach. It also
includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements. 3 Consists of existing deferred awards and retention
awards granted to Credit Suisse employees as well as replacement payments, forfeiture credits, severance payments, retention plan payments and interest expense related to the Deferred Contingent Capital Plan.
4 Refer to “Note 28 Employee benefits: variable compensation” in the “Consolidated financial statements” section of this report for more information. 5 Refer to “Note 27 Post-employment benefit plans” in the
“Consolidated financial statements” section of this report for more information.
Advisory vote | Corporate governance and compensation | Compensation
261
Deferred compensation
Vesting of outstanding awards granted in prior years subject to performance metrics and thresholds
The tables below show the extent to which the performance metrics and thresholds for awards granted in prior years
have been met and the related vesting in 2024.
Long-Term Incentive Plan (LTIP) 2019 (performance period 2020–2022)
Performance metrics
Performance achievement1
Vesting
Return on common equity tier 1 capital
(RoCET1) and relative Total Shareholder
Return (rTSR)
The overall achievement level is 98% of
the maximum opportunity (of up to
100%), based on outcomes for rTSR
(weighted 50%) and RoCET1 (weighted
50%).
– For GEB, the first and second installments vested in 2023 and
2024, respectively, and the remaining tranche will vest in 2025
accordingly. As outlined in our 2019 Compensation Report, up to
CHF 7.3m, or 30%, of the 2019 LTIP awards at grant for GEB
members active in March 2017 continues to be at risk and directly
linked to the final resolution of the French cross-border matter.
– For other select senior management, the full award vested in
2023.
1 As disclosed in our Compensation Report 2019, LTIP awards for the 2019 performance year were awarded at a value of 62.25% of maximum, which reflected our best estimate of the fair value of the award. The
maximum number of shares was determined by dividing the awarded amount by the fair value of the award at the date of grant, divided by CHF 12.919 or USD 13.141, the average closing price of UBS shares over
the last ten trading days leading up to and including the grant date.
Long-Term Incentive Plan (LTIP) 2020 (performance period 2021–2023)
Performance metrics
Performance achievement1
Vesting
Return on common equity tier 1 capital
(RoCET1) and relative Total Shareholder
Return (rTSR)
The overall achievement level is 92.55%
of the maximum opportunity (of up to
100%), based on outcomes for rTSR
(weighted 50%) and RoCET1 (weighted
50%).
– For GEB, the first installment will vest in 2024 and the remaining
tranches will vest in 2025 and 2026 accordingly.
– For other select senior management, the full award will vest in
2024.
1 As disclosed in our Compensation Report 2020, LTIP awards for the 2020 performance year were awarded at a value of 65.90% of maximum, which reflected our best estimate of the fair value of the award. The
maximum number of shares was determined by dividing the awarded amount by the fair value of the award at the date of grant, divided by CHF 13.89 or USD 15.411, the average closing price of UBS shares over
the last ten trading days leading up to and including the grant date.
› Refer to “Performance achievement of the 2020 LTIP granted in 2021” in the “Group compensation” section of this report for more
information
The below EOP and DCCP thresholds have been set to support the sustainability of the organization and represent
minimum performance levels to retain the awards.
Equity Ownership Plan (EOP) 2018 / 2019, EOP 2019 / 2020, EOP 2020 / 2021 and EOP 2021 / 2022
Thresholds
Threshold achievement1
Vesting
Return on common equity tier 1 capital
(RoCET1) and divisional return on
attributed equity
The Group and divisional thresholds have
been satisfied.
The following installments vest in full:
– for EOP 2018 / 2019, the third and final installment for the GEB
members, and certain other employes
– for EOP 2019 / 2020, the second installment for SMFs
– for EOP 2020 / 2021, the second installment for all other
employees covered under the plan; and
– for EOP 2021 / 2022, the first installment for all other employees
covered under the plan.
1 Performance may be adjusted for disclosed items generally not representative of underlying business performance.
Deferred Contingent Capital Plan (DCCP) 2018 / 2019
Thresholds
Threshold achievement1
Vesting
Common equity tier 1 (CET1) capital ratio,
viability event and, additionally for GEB,
Group profit before tax
The thresholds have been satisfied.
– DCCP 2018 / 2019 vests in full.
1 Performance may be adjusted for disclosed items generally not representative of underlying business performance.
Advisory vote | Corporate governance and compensation | Compensation
262
Outstanding Credit Suisse Group awards granted in prior years subject to performance conditions
The tables below show the extent to which the performance metrics and thresholds for awards granted by the Credit
Suisse Group in prior years have been met and the related impact of the 2023 results.
As a result of the acquisition by UBS Group AG of Credit Suisse Group AG, many of the financial measurements applicable
to legacy Credit Suisse Group awards are no longer available or are not fully comparable to previous performance periods,
therefore revised metrics have been adopted as set out in the table below.
Performance Share Awards (PSA) 2016/2017, 2017/2018, 2018/2019, 2019/2020, 2020/2021, 2021/2022
Thresholds
Amended threshold
Threshold achievement1
2023 impact
Under the legacy Credit Suisse Group
plan rules, negative adjustment if:
– Credit Suisse Group AG has
negative RoE or
– divisional pre-tax loss
Negative adjustment if reported UBS
Group AG return on CET1 capital
(RoCET1) is negative.
The amended threshold has been
satisfied.
No negative adjustment applied in
respect of PSAs outstanding on
31 December 2023.
1 Performance may be adjusted for disclosed items generally not representative of underlying business performance.
Strategic Delivery Plan Awards (SDP) 2021/2022
Thresholds
Amended threshold
Threshold achievement1
2023 impact
Under the legacy Credit Suisse Group
plan rules, cancellation in full if either:
– CET1 capital ratio is below a
statutory minimum on
31 December 2022, 2023 or 2024
– Leverage ratio is below 3.7% on
31 December 2022, 2023 or 2024
Cancellation in full if reported UBS
Group AG CET1 ratio is less than 7%
on 31 December 2023 or 2024
The amended threshold has been
satisfied.
No cancellation of SDP awards based
on 2023 financial results.
1 Performance may be adjusted for disclosed items generally not representative of underlying business performance.
Transformation Awards share component 2022/23
Share price condition and
performance metrics
Amended threshold
Performance achievement
2023 impact
Under legacy Credit Suisse Group
plan rules:
– Underlying UBS Group AG RoCET1
of 8% minimum (FY 2025)
– Credit Suisse Group share price of
CHF 3.82 (on 31 December 2025)
– UBS Group AG share price of
CHF 85.87 (on 31 December 2025)
Not applicable, share price condition
and performance metric only apply
for 2025.
No impact. Share price condition and
performance metric only apply for
2025.
– Credit Suisse Group RoTE of
between 5% and 7.5% (FY 2025)
– Credit Suisse Group cost base
between CHF 15bn threshold and
CHF 14bn (FY 2025)
All outstanding Contingent Capital Awards (CCAs) granted in previous years
Thresholds / conditions
Threshold / conditions outcome
Vesting
Credit Suisse CET1 capital ratio, Credit
Suisse viability event, Credit Suisse
contingency event
Viability event triggered during 2023.
All outstanding CCAs were canceled on 16 May 2023.
Advisory vote | Corporate governance and compensation | Compensation
263
Audited |
Share ownership / entitlements of GEB members1
Name, function
Sergio Ermotti, Group Chief Executive Officer
Ralph A.J.G. Hamers, former Group Chief Executive Officer
Michelle Bereaux, Group Integration Officer
Christian Bluhm, Group Chief Risk Officer
Mike Dargan, Group Chief Operations and Technology Officer
Suni Harford, President Asset Management
Naureen Hassan, President UBS Americas
Robert Karofsky, President Investment Bank
Sabine Keller-Busse, President Personal & Corporate Banking and President UBS Switzerland
Iqbal Khan, President Global Wealth Management
Edmund Koh, President UBS Asia Pacific
Ulrich Körner, CEO of Credit Suisse AG
Barbara Levi, Group General Counsel
Beatriz Martin Jimenez, Head Non-core and Legacy and President UBS EMEA
Markus Ronner, Group Chief Compliance and Governance Officer
Stefan Seiler, Head Group Human Resources & Group Corporate Services
Todd Tuckner, Group Chief Financial Officer
Sarah Youngwood, former Group Chief Financial Officer
Total
Number of
unvested
shares / at
risk2
1,218,685
-
-
349,441
100,618
-
715,033
707,979
408,308
386,141
1,226,219
1,028,210
48,861
0
1,116,181
1,037,028
998,319
973,150
1,118,165
960,301
906,095
724,865
314,134
-
462,894
407,195
381,209
-
642,528
586,283
270,359
-
Number of
vested shares
1,220,864
Total number
of shares
2,439,549
Potentially
conferred
voting
rights in %
0.185
-
-
5,238
0
-
51
0
56,024
17,955
128,081
44,202
0
0
446,655
364,914
460,442
566,106
32,287
0
530,000
579,937
15,126
-
76,075
45,818
81,823
-
3,129
0
0
-
-
-
354,679
100,618
-
715,084
707,979
464,332
404,096
1,354,300
1,072,412
48,861
0
1,562,836
1,401,942
1,458,761
1,539,256
1,150,452
960,301
1,436,095
1,304,802
329,260
-
538,969
453,013
463,032
-
645,657
586,283
270,359
-
-
-
0.023
0.008
-
0.054
0.046
0.035
0.026
0.103
0.070
0.004
0.000
0.118
0.092
0.111
0.101
0.087
0.063
0.109
0.085
0.025
-
0.041
0.030
0.035
-
0.049
0.038
0.020
-
219,246
338,962
558,208
0.042
-
-
299,729
-
-
0
-
-
299,729
10,146,854
3,389,519
13,536,373
-
-
0.020
1.026
on
31 December
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
0.593
1 Includes all vested and unvested shares of GEB members, including those held by related parties. No options were held in 2023 and 2022 by any GEB member or any of its related parties. Refer to “Note 27 Employee
benefits: variable compensation” in the “Consolidated financial statements” section of this report for more information. 2 Includes shares granted under variable compensation plans with forfeiture provisions. For
the 2019/20 and 2020/21 LTIP awards, the values reflect the final value. For all other LTIP awards, the values reflect the fair value awarded at grant. The actual number of shares vesting in the future will be calculated
under the terms of the plans. Refer to “Group compensation” in the “Compensation” section of this report for more information about the plans.
7,460,322
1,624,170
9,084,492
2022
Audited |
Total of all vested and unvested shares of GEB members1,2
Shares on 31 December 2023
13,536,373
3,389,519
3,215,832
3,063,794
2,210,296
1,063,396
542,441
Total of which: vested
of which: vesting
2024
2025
2026
2027
2028
Shares on 31 December 2022
9,084,492
1,624,170
1,572,210
1,952,123
2,020,881
1,281,201
599,733
2023
2024
2025
2026
2027
2029
51,095
2028
34,174
1 Includes shares held by related parties. 2 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.
Advisory vote | Corporate governance and compensation | Compensation
264
Audited |
Number of shares of BoD members1
Name, function
Colm Kelleher, Chairman
Lukas Gähwiler, Vice Chairman2
Jeremy Anderson, Senior Independent Director
Claudia Böckstiegel, member
William C. Dudley, member
Patrick Firmenich, member
Fred Hu, member
Mark Hughes, member
Nathalie Rachou, member
Julie G. Richardson, member
Dieter Wemmer, member
Jeanette Wong, member
on 31 December
2023
Number of shares held
456,045
Voting rights in %
0.035
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
339,084
342,248
283,907
140,812
119,660
16,523
7,814
80,333
66,646
53,405
27,275
112,265
97,543
65,916
48,497
46,057
31,126
155,623
138,204
147,251
132,320
115,567
93,440
1,732,045
0.022
0.026
0.019
0.011
0.008
0.001
0.001
0.006
0.004
0.004
0.002
0.009
0.006
0.005
0.003
0.003
0.002
0.012
0.009
0.011
0.009
0.009
0.006
0.131
Total
0.090
1 Includes blocked and unblocked shares held by BoD members, including those held by related parties. No options were granted in 2023 and 2022. 2 Includes 127,386 unvested shares granted under variable
compensation plans with forfeiture provisions as part of Lukas Gähwiler’s compensation for his executive roles previously held at UBS.
1,385,516
2022
Audited |
Total of all blocked and unblocked shares of BoD members1
Shares on 31 December 2023
1,732,0452
674,707
275,425
263,853
192,544
325,516
Total
of which:
unblocked
of which: blocked until
2024
2025
2026
2027
Shares on 31 December 2022
1,385,516
472,981
207,155
250,165
262,671
192,544
1 Includes shares held by related parties. 2 Includes 127,386 unvested shares granted under variable compensation plans with forfeiture provisions as part of Lukas Gähwiler’s compensation for his executive roles
previously held at UBS.
2023
2024
2025
2026
Audited |
Loans granted to GEB members
Pursuant to article 38 of the Articles of Association of UBS Group AG (the AoA), 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 20m per GEB
member.
CHF, except where indicated1
Name, function
Ulrich Körner, CEO of Credit Suisse AG (highest loan in 2023)
Christian Bluhm, Group Chief Risk Officer (highest loan in 2022)
Aggregate of all GEB members
on 31 December
Loans2,3,4
USD
(for reference)
Loans2,3,4
2023
2022
2023
2022
12,490,000
14,839,119
6,927,000
50,980,299
30,752,035
60,568,674
1 Swiss franc and US dollar amounts disclosed represent local currency amounts translated at the relevant year-end closing exchange rate. 2 All loans granted are secured loans. 3 Excludes two unused uncommitted
credit facilities in 2023 of CHF 11,840,766 (USD 14,067,847) that have been granted to two GEB members. No unused uncommitted credit facilities in 2022. 4 No loans have been granted to related parties of the
GEB members at conditions not customary in the market.
Advisory vote | Corporate governance and compensation | Compensation
265
Audited |
Loans granted to BoD members
Pursuant to article 33 of the AoA, loans to independent BoD members are made in the ordinary course of business at
general market conditions. The Vice Chairman, given the full-time nature of his role, 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.
Such loans 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 20m per BoD member.
CHF, except where indicated1
Aggregate of all BoD members
on 31 December
2023
2022
Loans2,3,4
690,000
0
USD
(for reference)
Loans2,3,4
819,775
1 Swiss franc and US dollar amounts disclosed represent local currency amounts translated at the relevant year-end closing exchange rate. 2 All loans granted are secured loans. 3 CHF 690,000 (USD 819,775) for
Claudia Böckstiegel (independent BoD member) in 2023 and no loans in 2022. 4 No loans have been granted to related parties of the BoD members at conditions not customary in the market.
Audited |
Compensation paid to former BoD and GEB members1
The compensation and benefits in the table below relate to payments made to former BoD and GEB members. Variable compensation paid to GEB members who stepped down during
the respective years is included in the GEB performance award pool (see table “Total compensation for GEB members“)
CHF, except where indicated2, 4
Former BoD members
Aggregate of all former GEB members3
Aggregate of all former BoD and GEB members
For the year
Compensation
2023
2022
2023
2022
2023
2022
0
0
0
0
0
0
Benefits
3,493
0
676,342
89,657
679,835
89,657
USD
(for reference)2
Total
4,150
803,548
807,698
Total
3,493
0
676,342
89,657
679,835
89,657
1 Compensation or remuneration that is related to the former members’ activity on the BoD or GEB or that is not at market conditions. 2 Swiss franc and US dollar amounts disclosed represent local currency amounts
translated at the relevant year-end closing exchange rate. 3 Includes benefit payments in 2023 for three former GEB members and in 2022 to two former GEB members. 4 Excludes the portion related to the legally
required employer’s social security contributions for 2023 and 2022, however, the legally required employees’ social security contributions are included in the amounts shown in the table above, as appropriate.
Advisory vote | Corporate governance and compensation | Compensation
266
GEB and BoD member mandates outside the Group
In line with the Swiss Code of Obligations, we disclose the mandates of GEB and BoD members outside of the Group in
the tables below. Further information on background and biographies, including mandates in UBS entities, are available
in the “Corporate governance” section of this report.
Audited |
BoD member mandates outside the Group
Name, function
Colm Kelleher, Chairman
Lukas Gähwiler, Vice Chairman
Jeremy Anderson, Senior Independent Director
Claudia Böckstiegel, member
William C. Dudley, member
Patrick Firmenich, member
Mandates
– Member of the Board of Norfolk Southern Corporation (chair of the risk and finance committee)
– Member of the Board of Directors of the Bretton Woods Committee
– Member of the Board of the Swiss Finance Council
– Member of the International Monetary Conference
– Member of the Board of the Bank Policy Institute
– Member of the Board of Americans for Oxford
– Visiting Professor of Banking and Finance, Loughborough Business School
– Member of the European Financial Services Round Table
– Member of the European Banking Group
– Member of the International Advisory Council of the China Securities Regulatory Commission
– Member of the Chief Executive’s Advisory Council (Hong Kong)
– Vice Chairman of the Board of Directors of Pilatus Aircraft Ltd
– Member of the Board of Directors of Ringier AG
– Member of the Board and Board Committee of economiesuisse
– Chairman of the Employers Association of Banks in Switzerland
– Member of the Board of Directors of the Swiss Employers Association
– Member of the Board of Directors and the Board of Directors Committee of the Swiss Bankers
Association
– Member of the Board of the Swiss Finance Council
– Member of the Board of Trustees of Avenir Suisse
– Member of the Board of Prudential plc (chair of the risk committee)
– Trustee of the UK’s Productivity Leadership Group
– Member of the Enlarged Executive Committee of Roche Holding AG
– Member of the Board of Treliant LLC
– Member of the Advisory Board of Suade Labs
– 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
– Chairman of the Bretton Woods Committee Board of Directors
– Member of the Board of the Council for Economic Education
– Vice Chairman of the Board of dsm firmenich (chair of the nomination committee)
– Member of the Board of Directors of INSEAD and INSEAD World Foundation
– Member of the Advisory Council of the Swiss Board Institute
Fred Hu, member
– Non-executive Chairman of the Board of Yum China Holdings (chair of the nomination and
Mark Hughes, member
Nathalie Rachou, member
Julie G. Richardson, member
Dieter Wemmer, member
Jeanette Wong, member
governance committee)
– Member of the Board of ICBC (chair of the nomination committee)
– Chairman of Primavera Capital Ltd
– Trustee of the China Medical Board
– 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.
– Chair of the Board of Directors of the Global Risk Institute
– Senior advisor to McKinsey & Company
– 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)
– Member of the Board of the African Financial Institutions Investment Platform
– Member of the Board of Directors of Fondation Léopold Bellan
– Member of the Board of Yext (chair of the audit committee)
– Member of the Board of Datadog (chair of the audit committee)
– Member of the Board of Fivetran
– Member of the Board of Coalition, Inc.
– Member of the Board of Checkout.com (stepped down in January 2024)
– Member of the Board of Ørsted A/S (chair of the audit and risk committee)
– Chairman of Marco Capital Holdings Limited, Malta and subsidiaries
– Member of the Board of Prudential plc
– Member of the Board of Singapore Airlines Limited
– 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
– Member of the Board of Pavilion Capital Holdings Pte Ltd
– Chairman of the CareShield Life Council
– Member of the Securities Industry Council
– Member of the Board of Trustees of the National University of Singapore
› Refer to “Board of Directors” in the “Corporate governance” section of this report for more information
Advisory vote | Corporate governance and compensation | Compensation
267
Audited |
GEB member mandates outside the Group
Name, function
Mandates
Sergio Ermotti, Group Chief Executive Officer
– Member of the Board of Ermenegildo Zegna N.V. (Lead Non-Executive Director)
– Member of the Board of Società Editrice del Corriere del Ticino SA
– Member of the Board of Innosuisse, the Swiss Innovation Agency
– Member of Institut International D’Etudes Bancaires
– Member of the WEF International Business Council and Governor of the Financial
Services / Banking Community
– Member of the MAS International Advisory Panel
– Member of the Board of the Institute of International Finance
– Member of the Board of the Swiss-American Chamber of Commerce
Michelle Bereaux, Group Integration Officer
– None
Christian Bluhm, Group Chief Risk Officer
– Chairman of the Board of Christian Bluhm Photography AG
– Member of the Foundation Board International Financial Risk Institute
Mike Dargan, Group Chief Digital and Information Officer
– None
Suni Harford, President Asset Management
– Member of the Board of Directors of the Bob Woodruff Foundation
Naureen Hassan, President UBS Americas
– Member of the Board of the Securities Industry and Financial Markets Association
Robert Karofsky, President Investment Bank
Sabine Keller-Busse, President Personal & Corporate Banking and
President UBS Switzerland
(stepped down in January 2024)
– Member of the Board of Governors of FINRA (as of 16 February 2024)
– Member of the Board of Ownership Works
– Member of the Board of the American Swiss Foundation
– Member of the Board and Executive Committee of The Partnership for New York
City
– None
– Member of the Board of Zurich Insurance Group
– Chairwoman of the Foundation Board of the UBS Pension Fund
– 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
– Member of the Board of Trustees of the Swiss Entrepreneurs Foundation
Iqbal Khan, President Global Wealth Management and
President EMEA
– None
Edmund Koh, President Asia Pacific
Ulrich Körner, CEO of Credit Suisse AG
Barbara Levi, Group General Counsel
– 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, Singapore
– Member of the Board of Curbside Pte Ltd, Singapore
– Member of the Board of the Philanthropy Asia Alliance Ltd., Singapore
– 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,
Singapore
– Member of the Board of Trustee of the Cultural Matching Fund, Singapore
– Member of University of Toronto’s International Leadership
Council for Asia
– Vice President of the Board of Lyceum Alpinum Zuoz AG
– Member of the Board of Directors of the European General Counsel Association
– Member of the Legal Committee of the Swiss-American Chamber of Commerce
Beatriz Martin Jimenez, Head Non-core and Legacy and
President UBS EMEA
– Member of the Advisory Board of the Frankfurt School of Finance & Management
– Member of the Leadership Council, TheCityUK, London (stepped down in February
Markus Ronner, Group Chief Compliance and Governance Officer
Stefan Seiler,
Head Group Human Resources & Group Corporate Services
2024)
– None
– Member of the UBS Center for Economics in Society at the University of Zurich
Foundation Council
– Chairman of the Foundation Board of the Swiss Finance Institute
– Member of the IMD Foundation Board
– Adjunct Professor for Leadership and Strategic Human Resource Management,
Nanyang Technological University (NTU), Singapore
Todd Tuckner, CFO
– None
› Refer to “Group Executive Board” in the “Corporate governance” section of this report for more information
Advisory vote | Corporate governance and compensation | Compensation
268
Provisions of the Articles of Association related to compensation
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 AoA.
Say on pay
In line with article 43 of the AoA, 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, 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 that 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
Advisory vote | Corporate governance and compensation | Compensation
269
Ernst & Young Ltd
Aeschengraben 27
P.O. Box
CH-4002 Basel
Phone:
www.ey.com/ch
+41 58 286 86 86
To the General Meeting of
UBS Group AG, Zurich
Opinion
Basel, 27 March 2024
We have audited the Compensation Report of UBS Group AG (the Company) for the year ended 31 December 2023. The audit was limited to the
information pursuant to Art. 734a-734f of the Swiss Code of Obligations (CO) in the tables marked “audited” of the Compensation report:
Approved GEB fixed compensation and BoD compensation, Total compensation for GEB Members, Remuneration details and additional
information for BoD members, Share ownership / entitlements of GEB members, Number of shares of BoD members, Loans granted to GEB
members, Loans granted to BoD members, Compensation paid to former BoD and GEB members and GEB and BoD member mandates outside the
Group.
In our opinion, the information pursuant to Art. 734a-734f CO in the Compensation report complies with Swiss law and the Company’s articles of
incorporation.
Basis for opinion
We conducted our audit in accordance with Swiss law and Swiss Standards on Auditing (SA-CH). Our responsibilities under those provisions and
standards are further described in the “Auditor’s responsibilities for the audit of the Compensation Report” section of our report. We are
independent of the Company in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, 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.
Other information
The Board of Directors is responsible for the other information. The other information comprises the information included in the annual report,
but does not include the tables referenced above in the Compensation Report, the consolidated financial statements, the stand-alone financial
statements and our auditor’s reports thereon.
Our opinion on the Compensation Report does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the Compensation Report, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the audited financial information in the Compensation Report, 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.
Board of Directors’ responsibilities for the Compensation Report
The Board of Directors is responsible for the preparation of a Compensation Report in accordance with the provisions of Swiss law and the
Company's articles of incorporation, and for such internal control as the Board of Directors determines is necessary t o enable the preparation of a
Compensation Report that is free from material misstatement, whether due to fraud or error. The Board of Directors is also responsible for
designing the compensation system and defining individual compensation packages.
Auditor's responsibilities for the audit of the Compensation Report
Our objectives are to obtain reasonable assurance about whether the information pursuant to Art. 734a-734f CO is 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 and SA-CH will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of this Compensation Report.
As part of an audit in accordance with Swiss law and SA-CH, we exercise professional judgment and maintain professional scepticism throughout
the audit. We also:
Identify and assess the risks of material misstatement in the Compensation Report, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis f or our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from er ror, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit 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 Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made.
We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, actions taken to eliminate threats or safeguards applied.
Ernst & Young Ltd
Maurice McCormick
Licensed audit expert
(Auditor in charge)
Eveline Hunziker
Licensed audit expert
Advisory vote | Corporate governance and compensation | Compensation
270
Financial statements
Consolidated financial statements
11
12
13
14
15
16
17
18
19
21
22
Table of contents
272 Management’s report on internal control over financial
273
274
276
283
reporting
Reports of the statutory auditor / independent registered
public accounting firm
Report of independent registered public accounting firm
on internal control over financial reporting
Report of independent registered public accounting firm
on the financial statements
Statutory auditor’s report on the audit of the consolidated
financial statements
290 UBS Group AG consolidated financial statements
330
330
334
336
336
338
339
339
340
340
353
290
290
291
292
293
295
297
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
299 Notes to the UBS Group AG consolidated financial
statements
1
Summary of material accounting policies
Accounting for the acquisition of the Credit Suisse
Group
Segment reporting
Segment reporting by geographic location
Income statement notes
4
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
299
316
322
324
325
325
325
326
326
327
327
2
3a
3b
5
6
7
8
9
Balance sheet notes
10
Financial assets at amortized cost and other
positions in scope of expected credit loss
measurement
Derivative instruments
Property, equipment and software
Goodwill and intangible assets
Other assets
Customer deposits
Debt issued designated at fair value
Debt issued measured at amortized cost
Provisions and contingent liabilities
Other liabilities
354 Additional information
354
20
366
380
381
384
387
387
390
398
402
406
407
408
409
410
410
Expected credit loss measurement
Fair value measurement
Offsetting financial assets and financial liabilities
Restricted and transferred financial assets
26
27
29
28
23
24 Maturity analysis of assets and 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 Accounting
31
32
33
30
Standards and Swiss GAAP
Annual Report 2023 | Financial statements | Consolidated financial statements
271
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 are designed to provide
reasonable assurance regarding the preparation and fair presentation of published financial statements in accordance
with IFRS Accounting Standards, as issued by the International Accounting Standards Board (IASB). UBS’s internal control
over financial reporting include those policies and procedures that:
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 2023
UBS management has assessed the effectiveness of UBS’s internal control over financial reporting as of 31 December
2023 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 2023, UBS’s internal controls over financial reporting were effective. Management has excluded Credit
Suisse, which UBS acquired in 2023, from the scope of its assessment of internal control over financial reporting, as
permitted by SEC guidance for acquired businesses. The total assets of Credit Suisse as of 31 December 2023 represented
approximately 34% of UBS total assets as of such date, and revenues associated with Credit Suisse for the period from
acquisition to 31 December 2023 represented approximately 19% of UBS revenues for the year ended 31 December
2023.
Credit Suisse material weaknesses
A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting such that
there is a reasonable possibility that a material misstatement of a registrant’s financial statements will not be prevented
or detected on a timely basis.
Prior to the acquisition by UBS, Credit Suisse Group AG and Credit Suisse AG had each identified certain material
weaknesses in their internal controls over financial reporting, as a result of which they had concluded that, as of
31 December 2022, Credit Suisse Group’s and Credit Suisse AG’s internal controls over financial reporting were not
effective and, for the same reasons, had reached the same conclusion regarding the situation as of 31 December 2021.
The material weaknesses identified related to the failure to design and maintain an effective risk assessment process to
identify and analyze the risk of material misstatements in Credit Suisse financial statements and the failure to design and
maintain effective monitoring activities relating to (i) providing sufficient management oversight over the internal control
evaluation process to support the company’s internal control objectives; (ii) involving appropriate and sufficient
management resources to support the risk assessment and monitoring objectives; and (iii) assessing and communicating
the severity of deficiencies in a timely manner to those parties responsible for taking corrective action. These material
weaknesses contributed to an additional material weakness, as the Credit Suisse Group management did not design and
maintain effective controls over the classification and presentation of the consolidated statement of cash flows under US
GAAP. Specifically, certain control activities over the completeness and the classification and presentation of non-cash
items in the consolidated statement of cash flows were not performed on a timely basis or at the appropriate level of
precision. This material weakness resulted in the revisions to Credit Suisse Group’s consolidated financial statements for
the three years ended 31 December 2021, as disclosed in its 2021 Annual Report.
› Refer to “Material weaknesses in internal control over financial reporting of the Credit Suisse Group” in the “Acquisition and
integration of Credit Suisse” section of this report for additional information about the material weaknesses at Credit Suisse
The effectiveness of UBS’s internal control over financial reporting as of 31 December 2023 has been audited by Ernst &
Young Ltd, UBS’s independent registered public accounting firm, as stated in their Report of the independent registered
public accounting firm on internal control over financial reporting, Report of the independent registered public
accounting firm on internal control over financial reporting, which expresses an unqualified opinion on the effectiveness
of UBS’s internal control over financial reporting as of 31 December 2023.
Annual Report 2023 | Financial statements | Consolidated financial statements
272
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
Report of the independent registered public accounting firm on the consolidated financial statements and internal control
over financial reporting Report of the independent registered public accounting firm on internal control over financial
reporting of UBS Group are included in our filing on 28 March 2024 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 of UBS Group AG
Statutory auditor’s report on the audit of the consolidated financial statements, in addition to the aforementioned
reports, is included in our Annual Report 2023 available on our website and filed on 28 March 2024 with all other
relevant non-US exchanges.
Annual Report 2023 | Financial statements | Consolidated financial statements
273
Ernst & Young Ltd
Aeschengraben 27
P.O. Box
4002 Basel
Phone: +41 58 286 86 86
www.ey.com/en_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 2023,
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 2023, based on the COSO criteria.
As indicated in the accompanying Management’s report on internal control over financial reporting, management’s
assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the
internal controls of Credit Suisse AG, which is included in the 2023 consolidated financial statements of the Group
and constituted approximately 34% of total assets as of December 31, 2023 and approximately 19% of revenues for
the year then ended. Our audit of internal control over financial reporting of the Group and our conclusion above did
not include an evaluation of the internal control over financial reporting of Credit Suisse AG.
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 2023 and 2022, 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 2023, and the related notes
and our report dated 27 March 2024 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.
Annual Report 2023 | Financial statements | Consolidated financial statements
274
2
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, 27 March 2024
Annual Report 2023 | Financial statements | Consolidated financial statements
275
Ernst & Young Ltd
Aeschengraben 27
P.O. Box
4002 Basel
Phone: +41 58 286 86 86
www.ey.com/en_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 2023 and 2022, 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 2023, 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 2023 and 2022, and the results of its
operations and its cash flows for each of the three years in the period ended 31 December 2023, in conformity
with the IFRS Accounting 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 2023, 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 27 March 2023
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.
Annual Report 2023 | Financial statements | Consolidated financial statements
276
2
Purchase price allocation over Credit Suisse acquisition
Description of
the Matter
As described in Note 2 to the consolidated financial statements, the Group acquired Credit
Suisse Group AG (CS) on 12 June 2023. The transaction has been accounted for as a
business combination under IFRS 3 and accordingly, the assets acquired, and liabilities
assumed from CS were recorded at fair value as of the acquisition date, resulting in the
recognition of negative goodwill of USD 27.7 billion. Purchase price allocation (PPA)
adjustments were recognized on financial instruments and other asset and liability
categories, including litigation provisions and contingent liabilities to derive the fair values.
Additionally, the Group has begun to recognize the accretion of fair value adjustments
applied to certain financial instruments that will be recognized over their expected lives in the
income statement.
Auditing the Group’s fair value estimate of certain assets and liabilities, particularly financial
instruments and litigation provisions and contingent liabilities, was complex due to the
significant judgment required by management in developing the estimates due to illiquid
instruments with unobservable market inputs, uncertain expected future cash flows, complex
underlying collateral, and the uncertain amount and probability that an outflow of resources
will be required for certain litigation matters. Additionally, auditing the Group’s calculation of
accretion of certain fair value adjustments was complex due to judgments around the
appropriate methodology applied (including whether certain assets/liabilities should be
subject to accretion), operational challenges and changes in credit conditions or maturity of
an underlying in terms of treating defaults or repayments, in part or in whole. These factors
contributed to a high degree of auditor judgment and effort in performing procedures and
evaluating audit evidence obtained.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness
of the Group’s process for estimating the fair value of certain financial instruments and other
asset and liability categories, and estimating the litigation provisions and contingent liabilities,
including management’s controls over: 1) completeness of input data, 2) review and
approval of the PPA valuation, 3) process for determining litigation provisions and contingent
liabilities upon acquisition, 4) monitoring and reporting of potential triggers of a PPA
reassessment, and 5) calculating and recording PPA accretion.
To test the significant PPA adjustments, our audit procedures included, among others, the
assessment of management’s methodology and significant assumptions used in measuring
the fair value of the acquired financial instruments and other asset and liability categories,
and litigation provisions and contingent liabilities, including the use of valuation specialists
for certain financial instruments. For example, we involved our specialists to, on a sample
basis, assess the valuation methodology, and perform independent fair value adjustment
calculations to compare to the Group’s estimates. Additionally, we tested, on a sample basis,
completeness and accuracy of the underlying data provided by management that was used
in the valuations. Lastly, we searched for and evaluated information that corroborates or
contradicts management’s selected assumptions.
Annual Report 2023 | Financial statements | Consolidated financial statements
277
3
Regarding accretion, our audit procedures included assessing UBS’ accretion policy, testing
that the policy was appropriately implemented, and on a sample basis, testing the
completeness and accuracy of accretion calculations.
We also assessed management’s disclosure regarding the accounting for the acquisition of
Credit Suisse Group AG (within Note 2 to the consolidated financial statements).
Valuation of complex or illiquid instruments at fair value
Description of
the Matter
At 31 December 2023, 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
478,966 million and USD 426,635 million, respectively, 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,
brokerage payables 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 current macroeconomic influences on valuation techniques and
inputs, such as geopolitics and inflation. The valuation techniques that required especially
complex judgment 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
associated extrapolation, interpolation or calibration of curves using limited and proxy data
points. Examples of such inputs included unobservable credit spreads and bond prices, and
volatility.
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 instrument 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. We used independent
models and inputs and compared 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).
Annual Report 2023 | Financial statements | Consolidated financial statements
278
4
Legal provisions and contingent liabilities
Description of
the Matter
At 31 December 2023, the Group’s provisions for litigation, regulatory and similar matters and
contingent liabilities (legal provisions) were USD 7,852 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.
Auditing management’s assessment of legal provisions 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 inquiries
regarding cross-border wealth management businesses (Note 18b A.1), mortgage-related
matters (Note 18b B.1), tax and securities law matters (Note 18b B.2), customer account
matters (Note 18b B.6), and supply chain finance funds matters (Note 18b B.11). The legal
provisions for these matters are based on management’s estimation of the amount and
likelihood of the occurrence of certain scenarios.
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 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, 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 (within Note 18 to the
consolidated financial statements).
Annual Report 2023 | Financial statements | Consolidated financial statements
279
5
Recognition of deferred tax assets
Description of
the Matter
At 31 December 2023, the Group’s deferred tax assets (“DTAs”) were USD 10,682 million
(see Note 9 to the consolidated financial statements). DTAs are recognized to the extent it is
probable that taxable profits will be available, against which applicable 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 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 recognition of the Group’s DTAs was complex
due to the highly judgmental nature of estimating future taxable profits. Estimating future
profitability is inherently subjective as it is sensitive to future economic, market and other
conditions, which are difficult to predict, such as the impact of geopolitics, inflation, and
interest rates. Specifically, some of the more subjective key macro-economic assumptions
used included gross domestic product growth rates, equity market performance, and interest
rate expectations.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness
of management’s controls over 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 9 to the consolidated financial statements).
Expected credit losses
Description of
the Matter
At 31 December 2023, the Group’s allowances and provisions for expected credit losses
(“ECL”) were USD 2,261 million. As explained in Notes 1, 10 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 loan commitments not measured at fair value. ECL is
also recognized on the undrawn portion of committed unconditionally 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,
Annual Report 2023 | Financial statements | Consolidated financial statements
280
6
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, related post-model adjustments, and the
credit risk models used to estimate stage 1 and stage 2 ECL. The macroeconomic
including persisting geopolitical tensions and inflation,
developments during 2023,
contributed to further uncertainty and complexity in estimating ECL. As a result, the ECL
estimation required higher management judgment, specifically within the following two areas:
(i) scenario selection, including assumptions about the scenario severity, underlying
macroeconomic variables, 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 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 adjustments. 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
How We
Addressed the
Matter in Our
Audit
Annual Report 2023 | Financial statements | Consolidated financial statements
281
7
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 disclosure regarding financial assets at amortized cost and
other positions in scope of expected credit loss measurement (within Notes 1, 10 and 20 to
the consolidated financial statements).
Ernst & Young Ltd
We have served as the Group’s auditor since 1998.
Basel, Switzerland
27 March 2024
Annual Report 2023 | Financial statements | Consolidated financial statements
282
Ernst & Young Ltd
Aeschengraben 27
P.O. Box
CH-4002 Basel
Phone:
www.ey.com/en_ch
+41 58 286 86 86
To the General Meeting of
UBS Group AG, Zurich
Basel, 27 March 2024
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 2023 and 31 December 2022, 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 2023, 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 2023 and 31 December 2022, and of its
consolidated financial performance and its consolidated cash flows for each of the three years in the period
ended 31 December 2023 in accordance with IFRS Accounting Standards and comply with Swiss law.
Basis for opinion
We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISA) and Swiss
Standards on Auditing (SA-CH). 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, together with the
requirements of the Swiss audit profession, as well as those of the International Ethics Standards Board for
Accountants’
International
Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
for Professional Accountants (including
International Code of Ethics
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.
Annual Report 2023 | Financial statements | Consolidated financial statements
283
2
Purchase price allocation over Credit Suisse acquisition
Area of focus As described in Note 2 to the consolidated financial statements, the Group acquired Credit
Suisse Group AG (CS) on 12 June 2023. The transaction has been accounted for as a
business combination under IFRS 3 and accordingly, the assets acquired, and liabilities
assumed from CS were recorded at fair value as of the acquisition date, resulting in the
recognition of negative goodwill of USD 27.7 billion. Purchase price allocation (PPA)
adjustments were recognized on financial instruments and other asset and liability
categories, including litigation provisions and contingent liabilities to derive the fair values.
Additionally, the Group has begun to recognize the accretion of fair value adjustments
applied to certain financial instruments that will be recognized over their expected lives in
the income statement.
Auditing the Group’s fair value estimate of certain assets and liabilities, particularly financial
instruments and litigation provisions and contingent liabilities, was complex due to the
significant judgment required by management in developing the estimates due to illiquid
instruments with unobservable market inputs, uncertain expected future cash flows,
complex underlying collateral, and the uncertain amount and probability that an outflow of
resources will be required for certain litigation matters. Additionally, auditing the Group’s
calculation of accretion of certain fair value adjustments was complex due to judgments
around the appropriate methodology applied (including whether certain assets/liabilities
should be subject to accretion), operational challenges and changes in credit conditions or
maturity of an underlying in terms of treating defaults or repayments, in part or in whole.
These factors contributed to a high degree of auditor judgment and effort in performing
procedures and evaluating audit evidence obtained.
Our audit
response
We obtained an understanding, evaluated the design and tested the operating effectiveness
of the Group’s process for estimating the fair value of certain financial instruments and other
asset and liability categories, and estimating the litigation provisions and contingent
liabilities, including management’s controls over: 1) completeness of input data, 2) review
and approval of the PPA valuation, 3) process for determining litigation provisions and
contingent liabilities upon acquisition, 4) monitoring and reporting of potential triggers of a
PPA reassessment, and 5) calculating and recording PPA accretion.
To test the significant PPA adjustments, our audit procedures included, among others, the
assessment of management’s methodology and significant assumptions used in measuring
the fair value of the acquired financial instruments and other asset and liability categories,
and litigation provisions and contingent liabilities, including the use of valuation specialists
for certain financial instruments. For example, we involved our specialists to, on a sample
basis, assess the valuation methodology, and perform independent fair value adjustment
calculations to compare to the Group’s estimates. Additionally, we tested, on a sample
basis, completeness and accuracy of the underlying data provided by management that
was used in the valuations. Lastly, we searched for and evaluated information that
corroborates or contradicts management’s selected assumptions.
Regarding accretion, our audit procedures included assessing UBS’ accretion policy,
testing that the policy was appropriately implemented, and on a sample basis, testing the
completeness and accuracy of accretion calculations.
Annual Report 2023 | Financial statements | Consolidated financial statements
284
3
We also assessed management’s disclosure regarding the accounting for the acquisition
of Credit Suisse Group AG (within Note 2 to the consolidated financial statements).
Valuation of complex or illiquid instruments at fair value
Area of focus At 31 December 2023, 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
478,966 million and USD 426,635 million, respectively, 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,
brokerage payables 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 current macroeconomic influences on valuation
techniques and inputs, such as geopolitics and inflation. The valuation techniques that
required especially complex judgment 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 associated extrapolation, interpolation or calibration of curves using limited and proxy
data points. Examples of such inputs included unobservable credit spreads and bond prices,
and volatility.
Our audit
response
We obtained an understanding, evaluated the design and tested the operating effectiveness
of the controls over management’s financial instrument 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. We used independent
models and inputs and compared 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).
Legal provisions and contingent liabilities
Area of focus At 31 December 2023, the Group’s provisions for litigation, regulatory and similar matters
and contingent liabilities (legal provisions) were USD 7,852 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
Annual Report 2023 | Financial statements | Consolidated financial statements
285
4
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.
Auditing management’s assessment of legal provisions 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 inquiries
regarding cross-border wealth management businesses (Note 18b A.1), mortgage-related
matters (Note 18b B.1), tax and securities law matters (Note 18b B.2), customer account
matters (Note 18b B.6), and supply chain finance funds matters (Note 18b B.11). The legal
provisions for these matters are based on management’s estimation of the amount and
likelihood of the occurrence of certain scenarios.
Our audit
response
We obtained an understanding, evaluated the design and tested the operational
effectiveness of management’s controls over the legal provision 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, 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 (within Note 18 to
the consolidated financial statements).
Recognition of deferred tax assets
Area of focus At 31 December 2023, the Group’s deferred tax assets (“DTAs”) were USD 10,682 million
(see Note 9 to the consolidated financial statements). DTAs are recognized to the extent it is
probable that taxable profits will be available, against which applicable 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 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 recognition of the Group’s DTAs was complex
due to the highly judgmental nature of estimating future taxable profits. Estimating future
profitability is inherently subjective as it is sensitive to future economic, market and other
conditions, which are difficult to predict, such as the impact of geopolitics, inflation, and
interest rates. Specifically, some of the more subjective key macro-economic assumptions
used included gross domestic product growth rates, equity market performance, and interest
rate expectations.
Annual Report 2023 | Financial statements | Consolidated financial statements
286
5
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 9 to the consolidated financial statements).
Expected Credit Loss
Area of focus At 31 December 2023, the Group’s allowances and provisions for expected credit losses
(“ECL”) were USD 2,261 million. As explained in Notes 1, 10 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 loan commitments not measured at fair value. ECL is
also recognized on the undrawn portion of committed unconditionally 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, related post-model adjustments, and the
credit risk models used to estimate stage 1 and stage 2 ECL. The macroeconomic
developments during 2023,
tensions and inflation,
contributed to further uncertainty and complexity in estimating ECL. As a result, the ECL
estimation required higher management judgment, specifically within the following two areas:
(i) scenario selection, including assumptions about the scenario severity, underlying
macroeconomic variables, 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.
including persisting geopolitical
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
Annual Report 2023 | Financial statements | Consolidated financial statements
287
Our audit
response
6
collateral and other credit enhancements or expected payouts from bankruptcy proceedings
for unsecured claims and, where applicable, time to realization of collateral and the seniority
of claims.
We obtained an understanding, evaluated the design and tested the operating effectiveness
of management’s controls over the ECL estimate, including management’s choice of 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 adjustments. 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 disclosure regarding financial assets at amortized cost
and other positions in scope of expected credit loss measurement (within Notes 1, 10 and
20 to the consolidated financial statements).
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 of UBS Group AG and UBS AG, the standalone financial statements of UBS Group AG, the
compensation report1, and our auditor’s reports thereon.
Our opinions on the consolidated financial statements of UBS Group AG and UBS AG, the standalone
financial statements of UBS Group AG and the compensation report1 do not cover the other information in
the annual report and we do not express any form of assurance conclusion thereon.
1 Specifically, the following tables in the compensation report: “Share ownership/entitlements of GEB members," "Total of all vested
and unvested shares of GEB members," "Number of shares of BoD members," and "Total of all blocked and unblocked shares of
BoD Members.”
Annual Report 2023 | Financial statements | Consolidated financial statements
288
7
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.
Board of Directors’ responsibilities for the consolidated financial statements
The Board of Directors is responsible for the preparation of the consolidated financial statements, which
give a true and fair view in accordance with IFRS Accounting Standards 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, ISA and SA-CH will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the consolidated financial statements is located
on EXPERTsuisse’s website at: https://www.expertsuisse.ch/en/audit-report. 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 PS-CH 890, we confirm that an internal control
system exists, which has been designed for the preparation of the 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.)
Annual Report 2023 | Financial statements | Consolidated financial statements
289
UBS Group AG consolidated financial statements
Primary financial statements and share information
Audited |
Income statement
USD m
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 and other
Net interest income
Other net income from financial instruments measured at fair value through profit or loss
Fee and commission income
Fee and commission expense
Net fee and commission income
Other income
Total revenues
Negative goodwill
Credit loss expense / (release)
Personnel expenses
General and administrative expenses
Depreciation, amortization and impairment of non-financial assets
Operating expenses
Operating profit / (loss) before tax
Tax expense / (benefit)
Net profit / (loss)
Net profit / (loss) attributable to non-controlling interests
Net profit / (loss) attributable to shareholders
Earnings per share (USD)
Basic
Diluted
Note
31.12.23
31.12.22
31.12.21
For the year ended
4
4
4
4
4
5
5
5
6
2
20
7
8
12, 13
9
31,743
(28,216)
3,770
7,297
11,583
23,766
(2,195)
21,570
384
40,834
27,748
1,037
24,899
10,156
3,750
38,806
28,739
873
27,866
16
27,849
11,782
(6,564)
1,403
6,621
7,517
20,789
(1,823)
18,966
1,459
34,563
8,533
(3,259)
1,431
6,705
5,850
24,372
(1,985)
22,387
452
35,393
29
(148)
17,680
5,189
2,061
24,930
9,604
1,942
7,661
32
7,630
18,387
5,553
2,118
26,058
9,484
1,998
7,486
29
7,457
8.83
8.45
2.34
2.25
2.14
2.06
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
290
Statement of comprehensive income
USD m
Comprehensive income attributable to shareholders
Net profit / (loss)
Other comprehensive income that may be reclassified to the income statement
Foreign currency translation
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
Financial assets measured at fair value through other comprehensive income
Net unrealized gains / (losses), before tax
Net realized (gains) / losses reclassified to the income statement from equity
Reclassification of financial assets to Other financial assets measured at amortized cost2
Income tax relating to net unrealized gains / (losses)
Subtotal financial assets measured at fair value through other comprehensive income, net of tax
Cash flow hedges of interest rate risk
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
Cost of hedging
Cost of hedging, before tax
Income tax relating to cost of hedging
Subtotal cost of hedging, net of tax
Total other comprehensive income that may be reclassified to the income statement, net of tax
Other comprehensive income that will not be reclassified to the income statement
Defined benefit plans
Gains / (losses) on defined benefit plans, before tax
Income tax relating to defined benefit plans
Subtotal defined benefit plans, net of tax
Own credit on financial liabilities designated at fair value
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
Total other comprehensive income that will not be reclassified to the income statement, net of tax
Total other comprehensive income
Total comprehensive income attributable to shareholders
Comprehensive income attributable to non-controlling interests
Net profit / (loss)
Total other comprehensive income that will not be reclassified to the income statement, net of tax
Total comprehensive income attributable to non-controlling interests
Total comprehensive income
Net profit / (loss)
Other comprehensive income
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
For the year ended
Note
31.12.23
31.12.22
31.12.21
27,849
7,630
7,457
26
26
27
21
3,762
(2,320)
58
(28)
(17)
1,4561
7
(3)
0
4
(323)
1,905
(308)
1,2753
(19)
0
(19)
2,715
110
(70)
40
(1,850)
82
(1,769)4
(1,729)
(894)
337
32
(4)
4
(525)
(440)
1
449
(3)
6
(5,758)
(159)
1,124
(4,793)
45
0
45
(5,267)
(73)
63
(10)
867
(71)
796
786
(1,076)
498
(2)
10
35
(535)
(203)
(9)
55
(157)
(992)
(1,073)
390
(1,675)
(32)
6
(26)
(2,393)
2
(7)
(5)
46
0
46
42
986
28,836
(4,481)
3,149
(2,351)
5,106
16
5
22
32
(14)
18
29
(16)
13
27,866
991
2,715
(1,723)
28,857
7,661
(4,494)
(5,267)
772
3,167
7,486
(2,367)
(2,393)
26
5,119
Total comprehensive income
1 Mainly reflects a significant strengthening of the Swiss franc and the euro against the US dollar. 2 Effective 1 April 2022, a portfolio of assets previously classified as Financial assets measured at fair value through
other comprehensive income was reclassified to Other financial assets measured at amortized cost. Refer to Note 14a for more information. 3 Mainly reflects net losses on hedging instruments that were reclassified
from OCI to the income statement. 4 Mainly reflects a tightening of our own credit spreads.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
291
Balance sheet
USD m
Assets
Cash and balances at central banks
Amounts due from banks
Receivables from securities financing transactions measured at amortized cost
Cash collateral receivables on derivative instruments
Loans and advances to customers
Other financial assets measured at amortized cost
Total financial assets measured at amortized cost
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
Total financial assets measured at fair value through profit or loss
Financial assets measured at fair value through other comprehensive income
Investments in associates
Property, equipment and software
Goodwill and intangible assets
Deferred tax assets
Other non-financial assets
Total assets
of which: Credit Suisse
Liabilities
Amounts due to banks
Payables from securities financing transactions measured at amortized cost
Cash collateral payables on derivative instruments
Customer deposits
Debt issued measured at amortized cost
Other financial liabilities measured at amortized cost
Total financial liabilities measured at amortized cost
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
Total financial liabilities measured at fair value through profit or loss
Provisions and contingent liabilities
Other non-financial liabilities
Total liabilities
of which: Credit Suisse 1
Equity
Share capital
Share premium
Treasury shares
Retained earnings
Other comprehensive income recognized directly in equity, net of tax
Equity attributable to shareholders
Equity attributable to non-controlling interests
Total equity
Total liabilities and equity
Note
31.12.23
31.12.22
314,148
169,445
10
10, 22
10, 22
10
10, 14a
21
11, 21, 22
21
21
21
29b
12
13
9
14b
21,161
99,039
50,082
639,844
65,498
1,189,773
169,633
51,263
176,084
21,037
104,018
470,773
2,233
2,373
17,849
7,515
10,682
16,049
14,792
67,814
35,032
387,220
53,264
727,568
107,866
36,742
150,108
17,576
59,796
335,347
2,239
1,101
12,288
6,267
9,389
10,166
1,717,246
1,104,364
2
583,197
22
22
15
17
19a
21
11, 21, 22
21
16, 21
19b, 21
18a
19c
70,962
14,394
41,582
792,029
237,817
20,851
1,177,633
34,159
192,181
42,522
128,289
29,484
426,635
12,250
14,089
11,596
4,202
36,436
525,051
114,621
9,575
701,481
29,515
154,906
45,085
73,638
30,237
333,381
3,243
9,040
1,630,607
1,047,146
2
475,670
346
13,216
(4,796)
74,880
2,462
86,108
531
86,639
304
13,546
(6,874)
50,004
(103)
56,876
342
57,218
1,717,246
1,104,364
1 Excludes USD 57.5bn of debt instruments previously issued by Credit Suisse Group AG (transferred to UBS Group AG as part of the acquisition of the Credit Suisse Group), USD 14.8bn of borrowings from UBS AG,
USD 3.4bn of fiduciary placements where UBS Switzerland AG acts as the fiduciary, and other minor intercompany positions.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
292
Cancellation of treasury shares related to the 2018–2021 share repurchase program
(16)
Statement of changes in equity
USD m
Balance as of 31 December 2020
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)4
Total comprehensive income for the year
of which: net profit / (loss)
of which: OCI, net of tax
Balance as of 31 December 2021
Acquisition of treasury shares
Delivery of treasury shares under share-based compensation plans
Other disposal of treasury shares
Cancellation of treasury shares related to the 2021 share repurchase program
(18)
(1,502)
3,022
(1,502)
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)
Total comprehensive income for the year
of which: net profit / (loss)
of which: OCI, net of tax
Balance as of 31 December 2022
716
13
(834)3
(15)
4
(834)3
69
0
3
8,415
7,630
786
304
13,546
(6,874)
50,004
Purchase price consideration for Credit Suisse Group acquisition, before consideration of share-based compensation
awards5
Impact of share-based compensation awards from Credit Suisse Group acquisition5
Impact of the settlement of pre-existing relationships from Credit Suisse Group acquisition5
Acquisition of treasury shares
Delivery of treasury shares under share-based compensation plans
Other disposal of treasury shares
Cancellation of treasury shares related to the 2021 share repurchase program6
(7)
Share
capital
338
Share
premium
16,753
Retained
earnings
38,776
Treasury
shares
(4,068)
(3,521)2
789
812
2,044
(1,792)
(675)
7
(236)
643
(88)
(651)3
(7)
182
322
15,928
(763)
(1)
(4,675)
(6,262)2
879
1642
2,928
(61)
(3,070)2
970
1962
1,115
619
162
(858)
10
(554)
1,097
19
(839)3
11
49
(49)
537
346
13,216
(4,796)
(651)3
18
1
7,499
7,457
42
43,851
(554)
(839)3
150
(1)
26,121
27,849
(1,729)
74,880
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
Share capital currency change
New consolidations / (deconsolidations) and other increases / (decreases)
Total comprehensive income for the year
of which: net profit / (loss)
of which: OCI, net of tax
Balance as of 31 December 2023
1 Excludes other comprehensive income related to defined benefit plans and own credit, which is recorded directly in Retained earnings. 2 Includes treasury shares acquired and disposed of by the Investment Bank
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. These acquisitions and disposals are reported based on the sum
of the net monthly movements. 3 Reflects the payment of an ordinary cash dividend of USD 0.55 (2022: USD 0.50, 2021: USD 0.37) per dividend-bearing share. Swiss tax law requires Switzerland-domiciled
companies with shares listed on a Swiss stock exchange to pay no more than 50% of dividends from capital contribution reserves, with the remainder required to be paid from retained earnings. 4 Includes the
effects related to the launch of UBS’s operational partnership entity with Sumitomo Mitsui Trust Holdings, Inc. in 2021. 5 Refer to Note 2 for more information. 6 Reflects the cancellation of 62,548,000 shares
purchased under UBS’s 2021 share repurchase program as approved by shareholders at the 2023 Annual General Meeting. Swiss tax law 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. 7 Includes an increase of USD 45m related to the
issuance of high-trigger loss-absorbing additional tier 1 capital with an equity conversion feature. 8 Includes an increase of USD 285m in the second quarter of 2023 due to the acquisition of the Credit Suisse Group.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
293
Other comprehensive
income recognized
directly in equity,
net of tax1
7,647
of which:
foreign currency
translation
5,188
of which:
financial assets at
fair value through OCI
151
of which:
cash flow
hedges
2,321
Non-controlling
interests
319
Total equity
attributable to
shareholders
59,445
(3,521)
114
88
0
643
(88)
Total equity
59,765
(3,521)
114
88
0
643
(88)
(1,301)
(4)
(1,305)
(18)
(2,393)
(2,393)
5,236
(69)
(3)
(5,267)
(5,267)
(103)
(150)
2,715
2,715
2,462
0
(18)
(157)
(1,675)
(157)
(7)
(1,675)
628
0
(3)
6
6
(4)
(69)
(4,793)
(4,793)
(4,234)
(535)
(535)
4,653
(525)
(525)
4,128
0
(150)
1,456
1,456
5,584
4
4
(1)
1,275
1,275
(3,109)
(7)
0
1
182
5,106
7,457
(2,351)
60,662
(6,262)
115
163
0
716
13
(1,668)
(15)
0
0
4
3,149
7,630
(4,481)
56,876
3,547
162
(61)
(3,070)
112
206
0
1,097
19
(1,679)
11
0
(1)
0
53
28,836
27,849
986
86,108
(7)
0
1
193
5,119
7,486
(2,367)
61,002
(6,262)
115
163
0
716
13
(1,677)
(15)
0
0
(3)
3,167
7,661
(4,494)
57,218
3,547
162
(61)
(3,070)
112
206
0
1,097
19
(1,683)
11
0
(1)
0
224
28,857
27,866
991
86,639
12
13
29
(16)
340
(9)
(7)
18
32
(14)
342
(4)
1728
22
16
5
531
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
294
Share information and earnings per share
Ordinary share capital
As of 31 December 2023, UBS Group AG had 3,462,087,722 issued shares (31 December 2022: 3,524,635,722 shares).
In the second quarter of 2023, the share capital currency of UBS Group AG was changed from the Swiss franc to the
US dollar, as approved by shareholders at the 2023 Annual General Meeting (the AGM). As a result, the nominal value
per share has changed from CHF 0.10 to USD 0.10, resulting in a reclassification between share capital and capital
contribution reserve (presented as share premium in the consolidated financial statements) and leading to a share capital
of USD 346,208,772.20. Shares issued decreased by 62,548,000 shares and share capital decreased by USD 7m in 2023,
as the shares acquired under the 2021 share repurchase program were canceled by means of a capital reduction, as
approved by shareholders at the 2023 AGM.
Conditional share capital
As of 31 December 2023, the following conditional share capital was available to the Board of Directors (the BoD) of
UBS Group AG.
– A maximum of USD 38,000,000 represented by up to 380,000,000 fully paid registered shares with a nominal value
of USD 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 by UBS Group AG or another member
of the Group 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 USD 12,170,583 represented by 121,705,830 fully paid registered shares with a nominal value of
USD 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.
Capital band, conversion capital and reserve capital
As of 31 December 2023, UBS Group AG had not introduced any capital band, any conversion capital or any reserve
capital.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
295
Share repurchase programs
In February 2021, UBS initiated a share repurchase program of up to CHF 4bn which concluded on 29 March 2022. A
total of 177,787,273 shares repurchased under this program for a total acquisition cost of USD 3,022m (CHF 2,775m)
were canceled by means of a capital reduction in 2022, as approved by shareholders at the 2022 AGM. Remaining
62,548,000 shares purchased under the 2021 program for a total acquisition cost of USD 1,115m (CHF 1,035m) were
canceled by means of a capital reduction in the second quarter of 2023, as approved by shareholders at the 2023 AGM.
In March 2022, UBS commenced a new two-year share repurchase program of up to USD 6bn. Under this program, UBS
repurchased 64.6m shares in 2023 for a total acquisition cost of USD 1,300m (CHF 1,202m). A total of 178m shares
repurchased under the 2022 program and originally intended for cancellation purposes were repurposed for the
acquisition of the Credit Suisse Group and 176m shares were transferred to Credit Suisse Group shareholders in an
exchange of shares as consideration for the acquisition of the Credit Suisse Group. UBS also intends to cancel the
remaining shares purchased under the 2022 program by means of a capital reduction, pending approval by shareholders
at a future AGM.
A new, two-year share repurchase program of up to USD 6bn was approved by shareholders at the 2023 AGM. However,
repurchases under the share repurchase programs were temporarily suspended due to the acquisition of the Credit Suisse
Group.
Shares outstanding
Shares issued
Balance at the beginning of the year
Shares canceled
Balance at the end of the year
Treasury shares
Balance at the beginning of the year
Acquisitions
Disposals
Cancellation of second trading line treasury shares
Shares transferred to Credit Suisse Group shareholders as consideration for the acquisition of the Credit Suisse
Group4
Balance at the end of the year
Shares outstanding
Basic and diluted earnings (USD m)
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
As of or for the year ended
31.12.23
31.12.22
31.12.21
3,524,635,722
(62,548,000)1
3,462,087,722
3,702,422,995
(177,787,273)2
3,524,635,722
3,859,055,395
(156,632,400)3
3,702,422,995
416,909,010
138,791,939
(64,270,031)
(62,548,000)1
302,815,328
359,378,093
(67,497,138)
(177,787,273)2
307,477,002
214,270,175
(62,299,449)
(156,632,400)3
(175,649,481)
253,233,437
3,208,854,285
416,909,010
3,107,726,712
302,815,328
3,399,607,667
27,849
0
27,849
7,630
0
7,630
7,457
0
7,457
Weighted average shares outstanding
Weighted average shares outstanding for basic EPS5
Effect of dilutive potential shares resulting from notional employee shares, in-the-money options and warrants
outstanding6
Weighted average shares outstanding for diluted EPS
3,152,579,449
3,260,938,561
3,482,963,682
143,416,753
3,295,996,202
136,531,654
3,397,470,215
144,277,693
3,627,241,375
Earnings per share (USD)
Basic
Diluted
8.83
8.45
2.34
2.25
2.14
2.06
Potentially dilutive instruments7
Employee share-based compensation awards
Other equity derivative contracts
Total
1 Reflects the cancellation of shares purchased under UBS’s 2021 share repurchase program as approved by shareholders at the 2023 Annual General Meeting (the AGM). 2 Reflects the cancellation of shares
purchased under UBS’s 2021 share repurchase program as approved by shareholders at the 2022 AGM. 3 Reflects the cancellation of shares purchased under UBS’s 2018–2021 share repurchase program as
approved by shareholders at the 2021 AGM. 4 Refer to Note 2 for more information. 5 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. 6 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. 7 Reflects potential shares that could dilute basic earnings per share in the future, but were not dilutive for the periods presented.
5,886,945
6,553,051
12,439,996
2,807,589
2,831,228
5,638,817
4,182,799
1,690,247
5,873,046
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
296
Statement of cash flows
USD m
Cash flow from / (used in) operating activities
Net profit / (loss)
Non-cash items included in net profit and other adjustments:
Depreciation, amortization and impairment of non-financial assets
Credit loss expense / (release)
Share of net (profits) / loss 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
Negative goodwill1
Other net adjustments2
Net change in operating assets and liabilities:2,3
Amounts due from banks and amounts due to banks
Receivables from securities financing transactions measured at amortized cost
Payables from securities financing transactions measured at amortized cost
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
Net cash flow from / (used in) operating activities
Cash flow from / (used in) investing activities
Cash and cash equivalents acquired upon the acquisition of the Credit Suisse Group1
Purchase of subsidiaries, associates and intangible assets
Disposal of subsidiaries, associates and intangible assets
Purchase of property, equipment and software
Disposal of property, equipment and software
Net (purchase) / redemption of financial assets measured at fair value through other comprehensive income
Purchase of debt securities measured at amortized cost
Disposal and redemption of debt securities measured at amortized cost
Net cash flow from / (used in) investing activities
Statement of cash flows (continued)
For the year ended
31.12.22
31.12.23
31.12.21
27,866
7,661
7,486
3,750
1,037
348
(694)
(102)
8,534
(27,748)
(15,175)
3,291
(3,503)
(2,014)
96
27,877
52,786
3,674
(5,962)
9,938
3,920
(1,852)
86,0684
108,510
(4)
121
(1,685)
65
30
(14,244)
10,435
103,228
2,061
2,118
29
(32)
494
(1,470)
(16,587)
(148)
(105)
434
(230)
100
5,844
3,802
(1,088)
5,690
(1,247)
76
3,529
(8,692)
8,006
6,019
5,678
257
(1,582)
14,647
(3)
1,730
(1,643)
161
(699)
(30,792)
18,799
(12,447)
2,148
(1,565)
(751)
(3,312)
(27,460)
29,825
(10,516)
8,115
19,609
3,010
(1,134)
31,425
(1)
593
(1,841)
295
(750)
(4,922)
4,507
(2,119)
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
297
Statement of cash flows (continued)
Table continues below.
USD m
Cash flow from / (used in) financing activities
Repayment of Swiss National Bank funding
Net issuance (repayment) of short-term debt measured at amortized cost
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
Net cash flow from / (used in) financing activities
Total cash flow
Cash and cash equivalents at the beginning of the year
Net cash flow from / (used in) operating, investing and financing activities
Effects of exchange rate differences on cash and cash equivalents2
Cash and cash equivalents at the end of the year5
of which: cash and balances at central banks 6
of which: amounts due from banks 6
of which: money market paper 6,7
Additional information
Net cash flow from / (used in) operating activities includes:
Interest received in cash
For the year ended
31.12.22
31.12.23
31.12.21
(56,516)
3,169
(2,779)
(1,679)
109,735
(109,471)
(721)
(58,262)
195,321
131,035
13,955
340,311
314,065
19,227
7,018
(12,249)
(6,006)
(1,668)
79,115
(67,670)
(617)
(9,094)
207,875
(6,895)
(5,659)
195,321
169,363
13,450
12,508
(3,093)
(3,341)
(1,301)
98,272
(79,909)
(282)
10,345
173,531
39,651
(5,307)
207,875
192,706
13,942
1,227
44,581
15,718
11,163
Interest paid in cash
Dividends on equity investments, investment funds and associates received in cash8
1 Consideration for the acquisition of the Credit Suisse Group was non-cash in entirety and included UBS‘s ordinary shares of USD 3,547m. Refer to Note 2 for more information about the acquisition of the Credit
Suisse Group. 2 Foreign currency translation and foreign exchange effects on operating assets and liabilities and on cash and cash equivalents are presented within the Other net adjustments line. Does not include
foreign currency hedge effects related to foreign exchange swaps. 3 Effective from 2023, UBS has refined the presentation in the statement of cash flows and now presents cash flows from Loans and advances to
customers, Customer deposits, Receivables from securities financing transactions measured at amortized cost and Payables from securities financing transactions measured at amortized cost as separate lines. The
presentation change has had no effect on Net cash flows from / (used in) operating activities. Prior periods have been aligned with this change in presentation. 4 Includes cash receipts from the sale of loans and
loan commitments of USD 4,289m within the Non-core and Legacy business division. 5 USD 4,944m, USD 4,253m and USD 3,408m of Cash and cash equivalents (mainly reflected in Amounts due from banks) were
restricted as of 31 December 2023, 31 December 2022 and 31 December 2021, respectively. Refer to Note 23 for more information. Cash and cash equivalents as of 31 December 2023 includes USD 149,645m
related to Credit Suisse. 6 Includes only balances with an original maturity of three months or less. 7 Money market paper is included in the balance sheet under Financial assets at fair value not held for trading
(31 December 2023: USD 6,345m; 31 December 2022: USD 6,048m; 31 December 2021: USD 1,066m), Other financial assets measured at amortized cost (31 December 2023: USD 415m; 31 December 2022:
USD 6,459m; 31 December 2021: USD 141m) and Financial assets at fair value held for trading (31 December 2023: USD 259m; 31 December 2022: USD 2m; 31 December 2021: USD 20m). 8 Includes dividends
received from associates reported within Net cash flow from / (used in) investing activities.
35,969
1,907
8,198
2,531
2,296
4,707
Changes in liabilities arising from financing activities
USD m
Balance as of 1 January 2022
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
139,155
(14,333)
(10,201)
(3,526)
(6,675)
Swiss
National Bank
funding3
of which:
short-term 1
43,098
(12,249)
(1,173)
(1,173)
of which:
long-term 2
96,057
(2,084)
(9,028)
(2,353)
Debt issued
designated at fair
value
73,799
13,782
(13,944)
(1,394)
(12,550)
Over-the-
counter debt
instruments4
2,128
(253)
(190)
(115)
(75)
Total
215,082
(804)
(24,335)
(5,035)
(12,625)
(6,675)
of which: foreign currency translation
of which: fair value changes
of which: hedge accounting and other effects
Balance as of 31 December 2022
Changes arising upon the acquisition of the Credit Suisse Group5
Cash flows
Non-cash changes
189,943
257,418
(53,083)
22,308
11,195
8,679
2,434
416,586
132,953
1 Debt with an original contractual maturity of less than one year. 2 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. 3 Included in balance sheet line Amounts due to banks. 4 Included in balance sheet line Other financial liabilities designated at fair value. 5 Refer to Note 2 for more information
about the acquisition of the Credit Suisse Group.
1,684
4,872
(1,109)
178
(99)
172
105
5,625
4,060
73,638
44,909
(520)
10,262
1,780
8,507
(25)
114,621
110,491
5,062
7,644
5,291
29,676
5,303
3,169
381
408
97,146
(56,516)
4,224
4,224
2,380
199,288
45,640
2,353
237,817
46,884
(27)
38,530
1,245
Balance as of 31 December 2023
of which: Credit Suisse 5
128,289
37,154
44,854
44,854
(6,675)
84,945
105,188
1,893
7,263
4,882
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
298
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.
300
300
300
301
301
301
305
305
305
305
306
310
310
310
a) Material accounting policies
Basis of accounting
1) Consolidation and business combinations
2) Financial instruments
a. Recognition
b. Classification, measurement and presentation
c. Loan commitments and financial guarantees
d.
e. Derecognition
Interest income and expense
f.
Fair value of financial instruments
g. Allowances and provisions for expected
credit losses
h. Restructured and modified financial assets
i. Offsetting
j. Hedge accounting
311
311
312
312
313
313
313
314
314
315
3) Fee and commission income and expenses
4) Share-based and other deferred compensation plans
5) Post-employment benefit plans
6)
7)
8) Property, equipment and software
Income taxes
Investments in associates
9) Goodwill and other separately identifiable intangible
assets
10) Provisions and contingent liabilities
11) Foreign currency translation
12) UBS Group AG shares held (treasury shares)
315
b) Changes in accounting policies, comparability
and other adjustments
315
c)
IFRS Accounting Standards and Interpretations
to be adopted in 2024 and later and other
changes
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
299
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 21 March 2024, the Financial
Statements were authorized for issue by the UBS Group AG Board of Directors (the BoD).
Basis of accounting
The Financial Statements have been prepared in accordance with IFRS Accounting Standards, as issued by the
International Accounting Standards Board (the IASB), and are presented in US dollars.
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 Accounting Standards 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:
– provisional amounts of identifiable assets acquired and liabilities assumed for the acquisition of the Credit Suisse Group (refer to item 1 in this Note and
to Note 2);
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 9);
–
–
–
– provisions and contingent liabilities (refer to item 10 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 9 in this Note and to Note 13); and
–
consolidation of structured entities (refer to item 1 in this Note and to Note 29).
1) Consolidation and business combinations
Consolidation
The Financial Statements include 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 the 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.
› 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
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
300
Note 1 Summary of material accounting policies (continued)
Business combinations
Business combinations are accounted for using the acquisition method, as prescribed by IFRS 3, Business Combinations.
Under this method, any excess of the acquisition-date amounts of the identifiable net assets acquired over the fair value
of the consideration transferred results in negative goodwill that is recognized in the income statement on the date of
the acquisition, with transaction costs expensed as incurred. Provisional amounts of identifiable assets acquired, liabilities
assumed and purchase consideration determined as of the acquisition date may be subject to adjustments within a
maximum of one year from the acquisition date (referred to in this report as measurement period adjustments).
The amount of non-controlling interests, if any, is measured at the non-controlling interest’s proportionate share of the
acquiree’s identifiable net assets.
Critical accounting estimates and judgments
When complete information about all relevant facts and circumstances of the acquisition date is not practically available to UBS at the time when the initial
acquisition accounting was applied in the period of acquisition, the amounts that form part of the business combination accounting are considered provisional
and subject to further measurement period adjustments if new information about facts and circumstances existing on the date of the acquisition is obtained
within one year from the acquisition date. In addition, the use of valuation techniques, modeling assumptions and estimates of unobservable market inputs
in determining fair values require significant judgment and could affect the provisional amounts of identifiable assets acquired, liabilities assumed and
purchase consideration, thereby affecting the resulting goodwill / negative goodwill arising from the business combination.
› Refer to Note 2 for more information relating to the acquisition of the Credit Suisse Group
2) Financial instruments
a. Recognition
UBS generally recognizes financial instruments when it becomes a party to contractual provisions of an instrument.
However, UBS does not recognize assets received in transfers that do not qualify for derecognition by the transferor
(applying derecognition principles under IFRS Accounting Standards as described in item 2e below). UBS applies
settlement date accounting to all standard purchases and sales of non-derivative financial instruments.
UBS may act 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
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 fair value
through other comprehensive income (FVOCI) if it is held within a business model with the objective of both collecting
contractual cash flows and selling financial assets.
All other financial assets are measured at fair value through profit or loss (FVTPL), including those held for trading or
those managed on a fair value basis, except for derivatives designated in certain hedge accounting relationships (refer to
item 2j in this Note for more information).
Business model assessment and contractual cash flow characteristics
UBS determines the nature of a business model by considering the way financial assets are managed to achieve a
particular business objective at the time an asset is recognized.
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. This assessment includes contractual cash flows that may vary due to environmental, social and governance
(ESG) triggers.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
301
Note 1 Summary of material accounting policies (continued)
Financial liabilities
Financial liabilities measured at amortized cost
Debt issued measured at amortized cost includes contingent capital instruments issued prior to November 2023 that
contain contractual provisions under which the principal amounts would be written down 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. Issuances after November 2023 include a contractual equity
conversion feature with the same triggers, i.e., a CET1 ratio breach or FINMA viability event. When the debt is issued in
US dollars, these conversion features are classified as equity and are accounted for in Share premium separately from the
amortized cost debt host.
When the legal bail-in mechanism for write-down or conversion into equity does not form part of the contractual terms
of issued debt instruments, it does not affect the accounting classification of these instruments as debt or equity.
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.
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 that are not closely related and which significantly impact the
cash flows of the instrument and / or are managed on a fair value basis (refer to the table below for more information).
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 below.
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;
– amounts due from 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
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,
see below in this table.
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.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
302
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
FVTPL
Held for
trading
Mandatorily
measured at
FVTPL – Other
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 derivatives (ETD) and over-the-counter
(OTC)-cleared derivatives that are legally settled on a daily
basis or economically 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).
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.
Financial assets mandatorily measured at FVTPL that are
not held for trading include:
– certain structured instruments, certain commercial
loans, and receivables from securities financing
transactions that are managed on a fair value basis;
– loans managed on a fair value basis, including those
hedged with credit derivatives;
– certain debt securities held as HQLA and managed on a
fair value basis;
– certain investment fund holdings and assets held to
hedge delivery obligations related to cash-settled
employee compensation plans;
– brokerage receivables, for which contractual cash flows
do not meet the SPPI criterion because the aggregate
balance is accounted for as a single unit of account,
with interest being calculated on the individual
components;
– auction rate securities, for which contractual cash flows
do not meet the SPPI criterion because interest may be
reset at rates that contain leverage;
– equity instruments; and
– assets held under unit-linked investment contracts.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
303
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;
– sweep deposits;
– payables from securities financing transactions;
– non-structured debt issued;
– subordinated debt;
– commercial paper and certificates of deposit; and
– cash collateral payables on derivative instruments.
Measured at
FVTPL
Held for trading
Financial liabilities held for trading include:
Designated at
FVTPL
– 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).
Financial liabilities designated at FVTPL include:
– issued hybrid debt instruments, primarily 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.
Interest income generated from client deposits
derecognized pursuant to certain deposit sweep programs
is presented within Net interest income from financial
instruments measured at fair value through profit or loss
and other.
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
economically net settled on a daily basis, which are
presented within Cash collateral payables on derivative
instruments.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
304
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 4 for more information
e. Derecognition
Financial assets
UBS derecognizes a transferred financial asset, or a portion of a financial asset, if the purchaser has obtained 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.
› Refer to 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 recorded in the
income statement.
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 a variation
margin on a daily basis represents a legal or economic settlement, which results in derecognition of the associated
derivatives.
› Refer to Note 22 for more information
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
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
305
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 21f.
› 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
ECL 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 credit impaired (PCI).
PCI 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.
Consistent with the requirements of IFRS 3 and IFRS 9, immediately after the application of the acquisition method to
the business combination, acquired financial instruments carried at amortized cost or FVOCI that are not deemed credit
impaired are classified as stage 1 financial instruments and a maximum 12-month ECL is recognized, resulting in a
carrying amount of the respective financial instruments below their acquisition-date fair value.
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 the “Risk management and control” section of this report for more information
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
306
Note 1 Summary of material accounting policies (continued)
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 Basel III advanced internal ratings-based
(A-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.
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,
considering expected repayments, interest payments and 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.
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.
Estimation of expected credit losses
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 judgment 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 the chosen particular narratives with the related macroeconomic variables will materialize.
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:
– gross domestic product (GDP) growth rates, given their significant effect on borrowers’ performance;
– unemployment rates, given their significant effect on private clients’ ability to meet contractual obligations;
– house price indices, given their significant effect on mortgage collateral valuations;
– interest rates, given their significant effect on counterparties’ abilities to service debt;
– consumer price indices, given their overall relevance for companies’ performance, private clients’ purchasing power
and economic stability; and
– equity indices, given that they are an important factor in UBS’s corporate rating tools.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
307
Note 1 Summary of material accounting policies (continued)
Scenario generation, review process and governance
A team of economists, which is part of Group Risk Control, develops the forward-looking macroeconomic assumptions
with involvement from a broad range of experts.
The scenarios, their weights 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 (the GMGC), 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.
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 an 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.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
308
Note 1 Summary of material accounting policies (continued)
SICR thresholds
Internal rating at origination
of the instrument
0–3
4–8
9–13
Rating downgrades /
SICR trigger
3
2
1
› Refer to the “Risk management and control” section of this report for more details about UBS’s internal rating system
Irrespective of the SICR assessment based on default probabilities, credit risk is generally deemed to have significantly
increased for an instrument if 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, where applicable. 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.
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 the 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 that may significantly
affect ECL. The models are governed by UBS’s model validation controls and approved by 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
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
309
Note 1 Summary of material accounting policies (continued)
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.
› Refer to the “Risk management and control” section of this report for more information
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
j. Hedge accounting
The Group applies hedge accounting requirements of IFRS 9 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 not permitted 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 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 Interest income
from financial instruments measured at amortized cost and fair value through other comprehensive income or Interest
expense from financial instruments measured at amortized cost 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.
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.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
310
Note 1 Summary of material accounting policies (continued)
Interest Rate Benchmark Reform
UBS continued hedge accounting during the period of uncertainty before existing interest rate benchmarks were replaced
with alternative risk-free interest rates. During this period, UBS assumed that the current benchmark rates would continue
to exist, such that forecast transactions were 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, UBS applied the requirements of Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and
IFRS 16 (Interest Rate Benchmark Reform – Phase 2), where applicable.
› Refer to Note 26 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 PIT 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 PIT services when it has fully provided the service to the client. Where the contract
requires services to be provided over time, income is recognized on a systematic basis over the life of the agreement.
Consideration received is allocated to the separately identifiable performance obligations in a contract. Owing to the
nature of UBS’s business, contracts that include multiple performance obligations are typically those that are considered
to include a series of similar performance obligations fulfilled over time with the same pattern of transfer to the client,
e.g., management of client assets and custodial services. As a consequence, UBS is not required to apply significant
judgment in allocating the consideration received across the various performance obligations.
PIT 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 revenues as Fee and commission expense, and those that are related to
personnel, general and administrative expenses, or depreciation and amortization, which are presented within 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 5 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.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
311
Note 1 Summary of material accounting policies (continued)
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
5) Post-employment benefit plans
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.
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 tax assets (DTAs) and deferred tax liabilities (DTLs) are recognized for temporary differences between the
carrying amounts and tax bases of assets and liabilities that will result in deductible or taxable amounts, respectively in
future periods. DTAs may also arise from other sources, including unused tax losses and unused tax credits. DTAs and
DTLs 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.
DTAs 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, DTAs are only recognized to the
extent that 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 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) with respect to current taxes they are intended to
be settled net or realized simultaneously.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
312
Note 1 Summary of material accounting policies (continued)
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.
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 DTAs, including the
remaining tax loss carry-forward period, and its assessment of expected future taxable profits in the forecast period used for recognizing DTAs. 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 that the value of UBS’s DTAs may be affected, with effects primarily recognized through the income
statement.
In addition, judgment is required to assess the expected value of uncertain tax positions and the related probabilities, including interpretation of tax laws,
the resolution of any income tax-related appeals and litigation.
› Refer to Note 9 for more information
7) Investments in associates
Interests in entities where UBS has significant influence over the financial and operating policies of these entities but does
not have control are classified as investments in associates and accounted for under the equity method of accounting.
Typically, UBS has significant influence when it holds, or has the ability to hold, between 20% and 50% of an entity’s
voting rights. Investments in associates are initially recognized at cost, and the carrying amount is increased or decreased
after the date of acquisition to recognize the Group’s share of the investee’s comprehensive income and any impairment
losses. The net investment in an associate is impaired if there is objective evidence of a loss event and the carrying amount
of the investment in the associate exceeds its recoverable amount.
› Refer to Note 29 for more information
8) 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 9 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
9) Goodwill and other separately identifiable intangible assets
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 of a cash-generating unit.
Negative goodwill, generally determined based on the difference between the (provisional) fair values for the identifiable
assets acquired and liabilities assumed and consideration transferred, is recognized in the income statement on the
acquisition date.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
313
Note 1 Summary of material accounting policies (continued)
Separately from goodwill, UBS recognizes identifiable intangible assets acquired in a business combination that were not
previously recognized in the financial statements of the acquiree. Amortization of these intangible assets is recognized
on a straight-line basis over their estimated useful life. These assets are tested for impairment at the appropriate cash-
generating-unit level.
Critical accounting estimates and judgments
UBS‘s methodology for goodwill impairment testing is based on a model that is most sensitive to the following key assumptions: (i) forecasts of earnings
available to shareholders (typically estimated on a discrete basis for years one to three but could extend up to five years, as permitted under IFRS Accounting
Standards, in order to reflect facts and circumstances specific to a cash-generating unit); (ii) changes in the discount rates; and (iii) changes in the long-term
growth rate.
Earnings available to shareholders are estimated on the basis of forecast results, which are part of the business plan approved by the BoD. The discount rates
and growth rates are determined using external information, 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 3 and 13 for more information
10) 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 leave, and are recognized 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. Consistent
with this presentational approach, fair value of loans commitments and financial guarantees acquired through a business
combination is also presented in Provisions.
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.
Contingent liabilities, more specifically in relation to litigations, recognized in a business combination are initially
measured at fair value. Subsequently, they are measured at the higher of the initial fair value and the amount that would
be recognized in accordance with the requirements for provisions outlined above, until the contingency is resolved.
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, the timing and the 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 the amount of any potential outflows.
› Refer to item 1 in this Note, Note 2 and Note 18 for more information
11) 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.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
314
Note 1 Summary of material accounting policies (continued)
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
12) 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.
b) Changes in accounting policies, comparability and other adjustments
New or amended accounting standards
IFRS 17, Insurance Contracts
Effective from 1 January 2023, UBS has adopted 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. The adoption has had no material effect on the Group’s financial statements.
Amendments to IAS 12, Income Taxes
In May 2023, the IASB issued amendments to IAS 12, Income Taxes, in relation to top-up taxes on income under Global
Anti-Base Erosion Rules that is imposed under legislation that has been enacted or substantively enacted to implement
the Pillar Two model rules published by the Organisation for Economic Co-operation and Development.
Certain countries in which the Group operates had enacted such legislation by 31 December 2023, including Switzerland,
which introduced a tax with effect from 1 January 2024 that is expected to be a qualified domestic minimum top-up tax,
and other countries (including Germany, France and Italy) also introduced top-up taxes in respect of a non-domestic
group’s worldwide operations with effect from 1 January 2025. Moreover, it is expected that other countries will enact
such legislation in 2024.
The amendments to IAS 12 introduced an exception, whereby deferred tax assets and deferred tax liabilities should not
be recognized or disclosed in respect of top-up taxes, which has been applied for the purposes of these financial
statements.
An assessment was performed of the Group’s potential exposure to top-up taxes under legislation that was enacted or
substantively enacted to implement the Pillar Two model rules by 31 December 2023, reflecting country-by-country
reporting and, also, the corporate tax expenses of Group entities for recent years and those expected in future years. This
assessment indicated that the Group’s profits in future years are expected to be almost entirely earned in countries with
corporate tax expenses that are at a tax rate of 15% or more and will not, therefore, be subject to top-up taxes.
Consequently, the Group is not expected to have a material annual exposure to top-up taxes for future years under this
legislation.
c) IFRS Accounting Standards and Interpretations to be adopted in 2024 and later and other changes
Other amendments to IFRS Accounting Standards
The IASB has issued a number of minor amendments to IFRS Accounting Standards, effective from 1 January 2024 and
later. These amendments are not expected to have a significant effect on the Group when they are adopted.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
315
Note 2 Accounting for the acquisition of the Credit Suisse Group
The transaction
On 12 June 2023, UBS Group AG acquired Credit Suisse Group AG, succeeding by operation of Swiss law to all assets
and liabilities of Credit Suisse Group AG, and became the direct or indirect shareholder of all of the former direct and
indirect subsidiaries of Credit Suisse Group AG (the Transaction).
The acquisition followed a request from the Swiss Federal Department of Finance, the Swiss National Bank and the Swiss
Financial Market Supervisory Authority (FINMA) to both firms to duly consider the Transaction in order to restore necessary
confidence in the stability of the Swiss economy and banking system and to serve the best interests of the shareholders
and stakeholders of UBS and Credit Suisse. The firms subsequently entered into a merger agreement on 19 March 2023.
Upon the completion of the Transaction, each outstanding registered Credit Suisse Group AG share converted to the
right to receive, subject to the payment of certain fees to the Credit Suisse Depositary in the case of Credit Suisse
American depositary shares, a merger consideration consisting of 1/22.48 UBS Group AG shares. In aggregate, Credit
Suisse Group AG shareholders received 5.1% of the outstanding UBS Group AG shares on the acquisition date, with a
purchase price of USD 3.7bn.
Accounting principles: conversion from US GAAP to IFRS Accounting Standards of the Credit Suisse Group
and IFRS 3 purchase price allocation
The acquisition of the Credit Suisse Group constitutes a business combination under IFRS 3, Business Combinations, and
is required to be accounted for by applying the acquisition method of accounting.
As part of the acquisition method of accounting, the assets and liabilities of the Credit Suisse Group have been converted
from US generally accepted accounting principles (GAAP) to IFRS Accounting Standards. The most material conversion
impact arose from the different derivative netting rules, resulting in an increase in Total assets of USD 70bn, with no
impact on Equity. Other conversion adjustments arose from the removal of the Swiss pension surplus and the different
methods used to calculate expected credit losses.
› Refer to Note 20 for more information about the expected credit losses recognized as an additional measurement adjustment
following the acquisition date
Remeasurement of assets, liabilities and off-balance sheet arrangements at the acquisition date as part of
the IFRS 3 purchase price allocation
Financial instruments
The financial assets and liabilities of the Credit Suisse Group have been remeasured to fair value as of the acquisition
date, resulting in the provisional fair values disclosed below, with negative fair value adjustments of USD 14.9bn,
including USD 4.8bn recognized on financial instruments that are classified at fair value through profit or loss and fair
value adjustments of USD 10.1bn recognized on financial instruments at amortized cost and off-balance sheet
commitments and guarantees. Fair value adjustments on financial instruments measured at fair value on the acquisition
date were primarily driven by a change in management’s view of the principal and most advantageous markets and to
reflect additional liquidity adjustments.
In particular, material fair value adjustments have been made regarding the Credit Suisse Group lending portfolio,
including mortgages and corporate lending, to bring the financial instruments from amortized cost to fair value. Fair
value adjustments applied to amortized-cost financial instruments and lending arrangements that are fair valued through
profit or loss will generally accrete to par over their expected lives through Interest income from financial instruments
measured at amortized cost and fair value through other comprehensive income, Fee and commission income and Other
net income from financial instruments measured at fair value through profit or loss in the income statement if the
instruments continue to be held.
› Refer to Note 21 for more information
Adjustments have also been made to other asset and liability categories, with new intangible assets of USD 0.9bn and
additional litigation provisions and contingent liabilities of USD 5.4bn recognized as detailed below. Furthermore, Credit
Suisse Group goodwill has been derecognized, the fair value of its internally generated software has been marked down
in consideration of how market participants would value acquired software, and its real estate held and leased has been
revalued.
With the acquisition date of 12 June 2023, for convenience the Credit Suisse Group was consolidated from 31 May 2023,
as the impact of transactions and activities in the period from 31 May 2023 to 12 June 2023 on the consolidated financial
statements was not material.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
316
Note 2 Accounting for the acquisition of the Credit Suisse Group (continued)
Intangible assets
Included in Intangible assets is a fair value of USD 0.9bn for core deposits and customer relationship intangibles, which
were recognized as part of the acquisition of the Credit Suisse Group. These assets were not previously recognized in the
financial statements of the Credit Suisse Group. The fair value of the core deposits intangible asset was determined using
the after-tax cost savings method under the income approach. After-tax cost savings were estimated by comparing the
cost of the existing deposits (including the cost of maintaining them) to the cost of obtaining alternative funds from a
mix of diversified funding sources available to market participants. The core deposits intangible asset represents the
present value of the after-tax cost savings expected to be realized over the remaining useful life of the deposits. The fair
value of the customer relationship intangible asset was determined using the multi-period excess earnings method (an
income-based valuation methodology), by discounting estimated after-tax excess earnings attributable to existing
customer relationships over their remaining useful lives. Both intangible asset valuations include assumptions consistent
with how a market participant would estimate fair values, such as growth and attrition rates and projected fee and
interest income, as well as related costs to service the relationships and deposits, and discount rates.
Also included in Intangible assets are mortgage-servicing rights (MSRs) of USD 0.4bn, which represent the right to
perform specified mortgage-servicing activities on behalf of third parties, generating income through servicing fees. The
MSRs were valued using a discounted cash flow model.
Additional provisions and contingent liabilities
Included in Provisions and contingent liabilities is USD 5.4bn for additional litigation provisions and contingent liabilities,
which includes USD 1.6bn for litigation provisions, in addition to the existing USD 1.3bn provision previously recorded by
the Credit Suisse Group to reflect management’s assessment of the associated probability, timing and amount
considering new information, and USD 3.8bn contingent liabilities for certain obligations in respect of litigation,
regulatory and similar matters identified in the purchase price allocation. The timing and actual amount of outflows
associated with litigation matters are uncertain. UBS has continued to assess the development of these obligations and
the amount and timing of potential outflows. The USD 3.8bn contingent liabilities reflects an increase of USD 0.8bn from
the previously reported USD 3.0bn, with an additional USD 45m increase in litigation provisions recognized, following
publication of the UBS Group fourth quarter report as detailed in the table on the following page.
In addition, UBS has also recognized USD 4.5bn for fair value adjustments on acquired loan commitments and guarantees
recognized under IFRS Accounting Standards as a consequence of the acquisition, of which USD 2.3bn is included in
Provisions and contingent liabilities and USD 2.2bn is included as fair value loan commitments within Derivative financial
instruments liabilities, consistent with the classification of financial assets that arise from drawdowns of these loan
commitments.
› Refer to “IFRS 3 measurement period adjustments in the third and fourth quarters of 2023 for the acquisition of the Credit Suisse
Group” in this Note
› Refer to Note 18 for more information
Determination of the purchase price consideration
Credit Suisse Group ordinary shares outstanding, 12 June 2023
Exchange ratio (1 to 22.48)
UBS ordinary shares
UBS ordinary share price
Purchase price consideration, before consideration of share-based compensation awards
Purchase price consideration, before consideration of share-based compensation awards using an exchange rate of 1.101
Impact of share-based compensation awards2
Purchase price consideration, after consideration of share-based compensation awards
Settlement of pre-existing relationships
Provisional purchase price consideration, after consideration of pre-existing relationships
Measure
Number of shares (m)
Ratio
Number of shares (m)
CHF
CHF m
USD m
USD m
USD m
USD m
USD m
3,949
0.04
176
18.35
3,223
3,547
162
3,710
135
3,845
Net cash and cash equivalents acquired with the Credit Suisse Group (included in cash flows from investing activities)
of which: cash and balances at central banks
of which: amounts due from banks
of which: money market paper
108,510
93,012
12,601
2,897
1 The purchase price consideration is reflected as a reduction to treasury shares of the Group at their weighted average cost, with the difference between the fair value of UBS shares on the closing date and the
weighted average cost of treasury shares in the UBS Group balance sheet on the closing date taken as an adjustment to share premium. As of 12 June 2023, this resulted in a total purchase price of approximately
USD 3.7bn, based on the UBS Group AG share price on 12 June 2023 and before considering the effect of pre-existing relationships. 2 Represents the value of share-based compensation awards outstanding to
Credit Suisse employees attributable to the service period completed on the date of acquisition.
USD m
USD m
USD m
USD m
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
317
Note 2 Accounting for the acquisition of the Credit Suisse Group (continued)
IFRS 3 measurement period adjustments for the acquisition of the Credit Suisse Group
The acquisition of Credit Suisse AG was made without the ordinary due diligence procedures and outside the
conventional time frame for an acquisition of this scale and nature. As such, complete information about all relevant
facts and circumstances of the acquisition date were not practically available to UBS at the time when the initial acquisition
accounting was applied for the purpose of the UBS Group second quarter 2023 report, third quarter 2023 report and
fourth quarter 2023 report. Due to the complexity and size of the transaction and the integration process, it is possible
that new information about relevant facts and circumstances of the acquisition date becomes available to the
management after the date of issuance of these financial statements. Consequently, the amounts that form part of the
business combination accounting are considered provisional and may be subject to further measurement period
adjustments if new information about the facts and circumstances existing on the date of the acquisition is obtained
within one year from the acquisition date.
In the second half of 2023, in light of the additional information about circumstances existing on the acquisition date that
became available to the management, IFRS 3 measurement period adjustments were made in Non-core and Legacy,
reflecting additional decisions to sell acquired loans and off-balance sheet loan commitments. In addition, further IFRS 3
measurement period adjustments have been made to the acquisition date fair value of certain loans and off-balance sheet
loan commitments following a detailed review in Non-core and Legacy, Personal & Corporate Banking and Global Wealth
Management, and to litigation contingent liabilities in Non-core and Legacy.
Additionally, several presentational changes resulted in a reclassification of financial assets reported at fair value not held
for trading to financial assets at fair value held for trading in the acquisition date balance sheet to align with presentational
approaches followed by the UBS Group.
Previously reported financial information has been revised for these effects as set out in the table below.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
318
Note 2 Accounting for the acquisition of the Credit Suisse Group (continued)
Effect of measurement period and presentation adjustments on the acquisition date balance sheet
The table below sets out the identifiable net assets attributable to the acquisition of the Credit Suisse Group as of the
acquisition date and includes the effects of adjustments on the acquisition date balance sheet made during the
measurement period and detailed below.
USD m
Purchase price consideration, after consideration of share-based compensation awards
Credit Suisse Group net identifiable assets on the acquisition date
Assets
Cash and balances at central banks
Amounts due from banks
Receivables from securities financing transactions measured at amortized cost
Cash collateral receivables on derivative instruments
Loans and advances to customers
Other financial assets measured at amortized cost
Total financial assets measured at amortized cost1
Financial assets at fair value held for trading
Derivative financial instruments
Brokerage receivables
Financial assets at fair value not held for trading
Total financial assets measured at fair value through profit or loss
Financial assets measured at fair value through other comprehensive income1
Investments in associates
Property, equipment and software
Intangible assets
Deferred tax assets
Other non-financial assets
Total assets
Liabilities
Amounts due to banks
Payables from securities financing transactions measured at amortized cost
Cash collateral payables on derivative instruments
Customer deposits
Debt issued measured at amortized cost
Other financial liabilities measured at amortized cost
Total financial liabilities measured at amortized cost
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
Total financial liabilities measured at fair value through profit or loss
Provisions and contingent liabilities
Other non-financial liabilities
Total liabilities
Non-controlling interests
Fair value of net assets acquired
Settlement of pre-existing relationships
Provisional negative goodwill resulting from the acquisition
1 Refer to Note 10 for information about credit quality of financial assets, including purchased credit-impaired positions.
As previously
reported in the
second quarter 2023
report
93,012
Measurement period
adjustments
Reference
number
13,590
26,194
20,878
261,839
13,440
428,954
35,046
62,162
366
61,305
158,879
0
1,657
6,055
1,287
942
6,892
604,667
107,617
11,911
10,939
183,119
110,491
7,992
432,070
5,711
66,091
316
44,909
7,574
124,601
11,052
3,888
571,611
(285)
32,771
135
28,925
2, 4
2
2, 3
3
(14,620)
(12)
(14,632)
21,191
(7,106)
14,085
(88)
56
(579)
1,691
2
2, 4
1,691
(1,107)
13
598
(1,177)
(1,177)
3,710
Revised
93,012
13,590
26,194
20,878
247,219
13,428
414,322
56,237
62,162
366
54,199
172,964
0
1,569
6,055
1,287
998
6,892
604,088
107,617
11,911
10,939
183,119
110,491
7,992
432,070
5,711
67,782
316
44,909
7,574
126,292
9,945
3,901
572,209
(285)
31,594
135
27,748
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
319
Note 2 Accounting for the acquisition of the Credit Suisse Group (continued)
The table below provides details of the measurement period adjustments shown above.
Reference
Measurement period adjustment
2
3
4
The application of measurement period adjustments to the accounting for the acquisition of the Credit Suisse Group resulted in the
following classification and measurement changes in accordance with IFRS 9 in 2023, with respective application in the acquisition date
balance sheet:
– USD 14.3bn of loans and advances to customers and USD 12m of other financial assets measured at amortized cost in Non-core and
Legacy previously reported in the UBS Group second quarter 2023 report as accounted for on an amortized-cost basis were
reclassified in the UBS Group third and fourth quarter 2023 reports to financial assets measured at fair value held for trading;
– USD 27.5bn notional value of loan commitments and a corresponding USD 2.0bn fair value, previously not subject to ongoing
remeasurement at fair value, were reclassified to derivative loan commitments measured at fair value through profit or loss in the UBS
Group third quarter 2023 report; and
– USD 0.3bn of derivative liabilities decreased, with a corresponding decrease of USD 0.3bn in financial assets measured at fair value
held for trading in the acquisition date balance sheet, in the UBS Group fourth quarter 2023 report.
As a consequence of the classification and measurement adjustments, USD 0.1bn of stage 1 and 2 expected credit losses have been
reversed from the income statement and, accordingly, a USD 0.1bn increase in net profit recognized in the second quarter of 2023.
Additionally, interest income of USD 0.2bn for the quarter ended 30 September 2023 (USD 0.1bn for the quarter ended 30 June 2023)
was reclassified from Interest income from financial instruments measured at amortized cost and fair value through other
comprehensive income to Net interest income from financial instruments measured at fair value through profit or loss and other, with
no impact on Net interest income.
A reclassification of USD 7.1bn of financial assets reported at fair value not held for trading to financial assets at fair value held for
trading was performed in the fourth quarter of 2023 to align with the presentation approach followed by the UBS Group.
After the publication of the UBS Group fourth quarter 2023 report and following the completion of detailed assessments and reviews of
acquisition date fair values, several measurement period adjustments were approved by management, mainly resulting in the following
changes:
– a USD 0.3bn decrease in the fair value for loans and advances to customers measured at amortized cost as of 31 May 2023 mainly
following individual counterparty credit assessments; and
– a USD 0.9bn increase in provisions and contingent liabilities related to litigation recognized in accordance with IFRS 3 as of 31 May
2023 following further comprehensive reviews, including of additional information, which impact the assessment of possible and
probable outcomes as of the acquisition date. USD 0.8bn of the USD 0.9bn increase relates to contingent liabilities, with the
remaining USD 45m from litigation provisions.
These changes have resulted in a net USD 1.2bn reduction to negative goodwill resulting from the acquisition compared with the
amount originally published in the UBS Group second quarter 2023 report.
Determination of negative goodwill
The acquisition of the Credit Suisse Group on 12 June 2023 resulted in provisional negative goodwill of USD 27.7bn. This
negative goodwill represents the difference between the fair values for the identifiable assets acquired and liabilities
assumed, except for amounts related to leases and employee benefits, which have been determined by applying the
requirements in IFRS 16 and IAS 19, respectively, and consideration transferred.
The USD 27.7bn provisional negative goodwill is USD 1.2bn lower than the previously reported USD 28.9bn provisional
negative goodwill following further measurement period adjustments concluded after publication of the UBS Group
fourth quarter 2023 report as detailed in the table above.
The negative goodwill has been recognized as of the acquisition date in the income statement on a separate line, Negative
goodwill. The pre-tax gain arising from negative goodwill on the acquisition of the Credit Suisse Group did not result in
any tax expense.
Acquisition-related costs to effect the acquisition
UBS incurred certain acquisition-related costs to effect the acquisition. These consisted primarily of advisory, legal and
consulting fees. These costs were expensed as incurred. In 2023, a total of USD 0.2bn was included in General and
administrative expenses in the income statement.
Derecognition of loans and loan commitments
During the second half of 2023, the Group recognized gains on the early termination and natural roll-off, accelerated by
actions to actively unwind the portfolio in Non-core and Legacy on loans and loan commitments of USD 0.1bn and
USD 0.6bn, respectively.
Pro forma financial information
From the date of acquisition until 31 December 2023, the Credit Suisse Group contributed USD 7.6bn of net revenues
and an overall net loss of USD 3.5bn to the net profit of the UBS Group. For illustration purposes, the pro forma net
revenues and net loss for the UBS Group for the year ended 31 December 2023 if the business combination had taken
place on 1 January 2023 are estimated as USD 46.1bn and USD 2.1bn, respectively.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
320
Note 2 Accounting for the acquisition of the Credit Suisse Group (continued)
This pro forma information is based on the actual annual results of the consolidated UBS Group, as reported (including
Credit Suisse for the seven months since the acquisition), and the Credit Suisse US GAAP results for the first five months
of 2023, adjusted for the estimated effect of conversion to IFRS Accounting Standards and the effects from purchase
price allocation adjustments under IFRS 3, Business Combinations.
The pro forma net revenues and net loss exclude the impact from negative goodwill recognized from the acquisition of
the Credit Suisse Group of USD 27.7bn and certain items recognized by the Credit Suisse Group in 2023 prior to the
acquisition date, including a gain from the write-down of additional tier 1 (AT1) capital notes of USD 16.4bn, a goodwill
impairment charge, mostly related to Wealth Management (Credit Suisse), of USD 1.4bn and a gain from the reversal of
contingent compensation award accruals of USD 0.4bn. These items are considered non-recurring and therefore not
representative of the normal course of business.
The pro forma net revenues and net loss do not purport to represent what UBS’s actual results of operations would have
been had the transaction occurred on the date indicated, nor are they necessarily indicative of future results of operations.
The pro forma net revenues and net loss also do not consider any potential impacts of current market conditions on
revenues, assets or liabilities. Nor do they reflect expense efficiencies, asset dispositions or business reorganizations that
are or may be contemplated, or any cost or revenue synergies, including further potential restructuring actions, associated
with the acquisition of the Credit Suisse Group.
Segment reporting – integration of UBS’s and Credit Suisse’s businesses and establishment of Non-core and
Legacy
Prior to the third quarter of 2023, UBS’s businesses were organized globally into four business divisions (Global Wealth
Management, Personal & Corporate Banking, Asset Management and the Investment Bank), each qualifying as a
reportable segment, and Group Functions. Credit Suisse’s businesses were organized globally into five reportable
segments (Wealth Management (Credit Suisse), Swiss Bank (Credit Suisse), Asset Management (Credit Suisse), the
Investment Bank (Credit Suisse) and the Capital Release Unit (Credit Suisse)), and the Corporate Center (Credit Suisse).
As the integration of the UBS and Credit Suisse businesses continues, beginning with the third quarter of 2023, the
Group reports five business divisions, each of which qualify as a reportable segment: Global Wealth Management,
Personal & Corporate Banking, Asset Management, the Investment Bank, and Non-core and Legacy.
Non-core and Legacy includes positions and businesses not aligned with the Group’s strategy and policies. Those consist
of the assets and liabilities reported as part of the former Capital Release Unit (Credit Suisse) and certain assets and
liabilities of the former Investment Bank (Credit Suisse), Wealth Management (Credit Suisse), Swiss Bank (Credit Suisse)
and Asset Management (Credit Suisse) divisions, as well as of the former Corporate Center (Credit Suisse). Also included
are the remaining assets and liabilities of UBS’s Non-core and Legacy Portfolio, previously reported in Group Functions,
and smaller amounts of assets and liabilities of UBS’s business divisions that have been assessed as not strategic in light
of the acquisition of the Credit Suisse Group.
Group Functions has been renamed Group Items and excludes UBS’s former Non-core and Legacy Portfolio and includes
certain of the assets and liabilities of the former Corporate Center (Credit Suisse).
The above reflects how financial information is presented effective from the third quarter of 2023 in the internal
management reports to the Group Executive Board, which is considered the “chief operating decision-maker” pursuant
to IFRS 8, Operating Segments.
Information for prior periods has been revised and presents Non-core and Legacy separately from Group Items.
As UBS executes its integration plans, the expectation is that allocation methodologies for profit and loss and balance
sheet to the business divisions and into Group Items will continue to be reviewed and refined.
› Refer to Note 3 for more information
› Refer to the “Acquisition and integration of Credit Suisse” section and the “Our businesses” section for more information about
Non-core and Legacy and other changes in the composition of reportable segments in 2023
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
321
Note 2 Accounting for the acquisition of the Credit Suisse Group (continued)
Pre-existing relationships
As of 12 June 2023, UBS had the following pre-existing relationships with the Credit Suisse Group.
USD m
Cash collateral receivables on derivative instruments
Derivative financial instruments
Debt instruments issued by the Credit Suisse Group and held by UBS
Total assets
Cash collateral payables on derivative instruments
Derivative financial instruments
Total liabilities
Treasury shares
Total equity
Total net pre-existing relationships
7
1,476
98
1,581
572
813
1,385
(61)
(61)
135
Such balances are eliminated in the consolidated financial statements.
Retention awards of approximately USD 0.5bn were offered to selected employees of the Credit Suisse Group prior to
the acquisition date to support the completion of the transaction and the early phase of integration. These awards were
contingent on the completion of the acquisition and are delivered 50% in cash (in general vesting 60 days from the
completion of the acquisition) and 50% in shares (in general vesting on the first anniversary of the completion of the
acquisition). Vesting periods are longer for certain regulated employees. Expenses associated with these awards are
recognized between the date of acquisition and the applicable vesting dates and were USD 0.3bn in 2023.
Note 3a Segment reporting
UBS’s businesses are organized globally into five business divisions: Global Wealth Management, Personal & Corporate
Banking, Asset Management, the Investment Bank, and Non-core and Legacy. All five business divisions are supported
by Group Items and qualify as reportable segments for the purpose of segment reporting. Together with Group Items,
the five business divisions reflect the management structure of the Group.
– Global Wealth Management provides financial services, advice and solutions to private wealth clients. Its offering
ranges from investment management to estate planning and corporate finance advice, in addition to specific wealth
management and banking products and services.
– Personal & Corporate Banking serves its private, corporate, and institutional clients’ needs, from banking to
retirement, financing, investments and strategic transactions, in Switzerland, through its branch network and digital
channels.
– Asset Management is a global, large-scale and diversified 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.
– 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 research, 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.
– Non-core and Legacy includes positions and businesses not aligned with the Group’s strategy and policies. Those
consist of the assets and liabilities that prior to the acquisition were reported as part of the Capital Release Unit (Credit
Suisse) and certain assets and liabilities of the Investment Bank (Credit Suisse), Wealth Management (Credit Suisse),
Swiss Bank (Credit Suisse) and Asset Management (Credit Suisse) divisions, as well as of the Corporate Center (Credit
Suisse). Also included are the remaining assets and liabilities of UBS’s Non-core and Legacy Portfolio, previously
reported in Group Functions (now renamed to Group Items), and smaller amounts of assets and liabilities of UBS’s
business divisions that have been assessed as not strategic in light of the acquisition of the Credit Suisse Group.
– Our Group functions are support and control functions that provide services to the Group. Virtually all costs incurred
by the support and control functions are allocated to the business divisions, leaving a residual amount that we refer
to as Group Items in our segment reporting. Group functions is made up of the following major areas: Group Services
(which consists of the Group Operations and Technology Office, Corporate Services, Compliance, Regulatory &
Governance, Finance, Risk Control, Human Resources, Communications & Branding, Legal, the Group Integration
Office, Group Sustainability and Impact, and Chief Strategy Office) and Group Treasury.
Financial information about the five business divisions and Group Items 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.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
322
Note 3a Segment reporting (continued)
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 function, 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.
USD m
For the year ended 31 December 2023
Total revenues
Negative goodwill
Credit loss expense / (release)
Operating expenses
Operating profit / (loss) before tax
Tax expense / (benefit)
Net profit / (loss)
Additional information
Total assets
Additions to non-current assets
of which Credit Suisse 3
USD m
For the year ended 31 December 2022
Total revenues
Credit loss expense / (release)
Operating expenses
Operating profit / (loss) before tax
Tax expense / (benefit)
Net profit / (loss)
Additional information
Total assets
Additions to non-current assets
USD m
For the year ended 31 December 2021
Total revenues
Credit loss expense / (release)
Operating expenses
Operating profit / (loss) before tax
Tax expense / (benefit)
Net profit / (loss)
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy1 Group Items1
Negative
goodwill2
UBS
21,190
8,436
2,639
8,661
741
(833)
147
17,454
3,589
501
4,787
3,148
0
2,321
318
190
8,515
(44)
193
5,290
(4,741)
6
440
(1,279)
27,748
27,748
469,240
2,584
1,795
Global
Wealth
Management
470,526
3,279
3,020
Personal &
Corporate
Banking
21,804
709
626
399,348
530
3
172,862
3,062
3,062
183,465
550
550
Asset
Management
Investment
Bank
Non-core and
Legacy1 Group Items1
18,967
0
13,989
4,977
4,302
39
2,452
1,812
2,9614
0
1,564
1,397
8,717
(12)
6,832
1,897
237
2
104
131
(622)
1
(12)
(611)
40,834
27,748
1,037
38,806
28,739
873
27,866
1,717,246
10,714
9,056
UBS
34,563
29
24,930
9,604
1,942
7,661
388,530
42
Global
Wealth
Management
235,226
13
Personal &
Corporate
Banking
17,348
1
391,320
34
13,367
0
58,574
1,970
1,104,364
2,060
Asset
Management
Investment
Bank
Non-core and
Legacy1
Group Items1
19,419
(29)
14,665
4,783
4,263
(86)
2,618
1,731
2,617
1
1,586
1,030
9,454
(34)
6,858
2,630
60
0
138
(79)
(419)
0
191
(611)
UBS
35,393
(148)
26,058
9,484
1,998
7,486
Additional information
Total assets5
Additions to non-current assets
1 As of or for the year ended 31 December 2023, Non-core and Legacy (previously reported within Group Functions) became a separate reportable segment and Group Functions has been renamed Group Items. Prior
periods have been revised to reflect these changes. 2 Negative goodwill arising from the acquisition of the Credit Suisse Group is not allocated to the business divisions, as it relates to the Group. For further details,
refer to Note 2. 3 Non-current assets acquired with the Credit Suisse Group are included in additions to non-current assets. Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
4 Includes an USD 848m gain in Asset Management related to the sale of UBS‘s shareholding in Mitsubishi Corp.-UBS Realty Inc. 5 During 2022, UBS refined the methodology applied to allocate balance sheet
resources from Group Items to the business divisions, with prospective effect. If the new methodology had been applied as of 31 December 2021, balance sheet assets allocated to business divisions would have been
USD 26bn higher, of which USD 14bn would have related to the Investment Bank.
1,117,182
2,091
346,431
30
225,370
16
395,235
56
25,153
0
25,639
1
99,354
1,989
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
323
Note 3b Segment reporting by geographic location
The operating regions shown in the table below correspond to the regional management structure of the Group. The
geographic analysis of non-current assets is based on the location of the entity in which the given assets are recorded.
The allocation of total revenues by geographical region for the Credit Suisse sub-group is not available on the same
allocation basis as for the UBS Group for 2023 and the cost to develop this information would be excessive, therefore,
as permitted under IFRS 8, the respective information is not disclosed. UBS AG and Credit Suisse AG disclose total
revenues by geographical region in their annual reports according to their respective allocation methodologies.
› Refer to “UBS AG consolidated financial information” in the “Consolidated financial statements” section of the UBS AG Annual
Report 2023 for more information on total revenues by geographical region for UBS AG
› Refer to the Credit Suisse AG consolidated financial statements, available under “Annual reports” at credit-suisse.com/about-
us/en/investor-relations.html, for more information on total revenues by geographical region for Credit Suisse AG
Total non-current assets
Americas1
Asia Pacific
Europe, Middle East and Africa (excluding Switzerland)
Switzerland
Global
Total
1 Predominantly related to the USA.
31.12.23
31.12.22
31.12.21
USD bn
Share %
USD bn
Share %
USD bn
Share %
9.4
1.7
3.3
13.3
0.0
27.7
34
6
12
48
0
100
8.9
1.5
2.9
6.3
0.0
19.7
46
8
15
32
0
100
9.0
1.5
2.9
7.1
0.0
20.5
44
7
14
35
0
100
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
324
Income statement notes
Note 4 Net interest income and other net income from financial instruments measured at fair value through
profit or loss
USD m
Net interest income from financial instruments measured at fair value through profit or loss and other
Other net income from financial instruments measured at fair value through profit or loss1
Total net income from financial instruments measured at fair value through profit or loss and other
For the year ended
31.12.23
3,770
11,583
15,353
31.12.22
1,403
7,517
8,920
31.12.21
1,431
5,850
7,281
Net interest income
Interest income from loans and deposits2
Interest income from securities financing transactions measured at amortized cost3
Interest income from other financial instruments measured at amortized cost
Interest income from debt instruments measured at fair value through other comprehensive income
Interest resulting from derivative instruments designated as cash flow hedges
Total interest income from financial instruments measured at amortized cost and fair value through other comprehensive income
Interest expense on loans and deposits4
Interest expense on securities financing transactions measured at amortized cost5
Interest expense on debt issued
Interest expense on lease liabilities
Total interest expense from financial instruments measured at amortized cost
Total net interest income from financial instruments measured at amortized cost and fair value through other comprehensive income
Total net interest income from financial instruments measured at fair value through profit or loss and other
Total net interest income
1 Includes net losses from financial liabilities designated at fair value of USD 4,843m (net gains of USD 17,037m in 2022 and net losses of USD 6,582m in 2021). This complementary “of which” information for
financial liabilities designated at fair value excludes fair value changes on 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. Net gains / (losses) from financial
liabilities designated at fair value included net losses of 2,045m (net gains of USD 4,112m and net losses of USD 2,068m in 2022 and 2021, respectively) from financial liabilities related to unit-linked investment
notes issued by UBS’s Asset Management business. These gains / (losses) are fully offset within Other net income from financial instruments measured at fair value through profit or loss by the fair value change on
the financial assets hedging the unit-linked investment contracts, which are not disclosed as part of Net gains / (losses) from financial liabilities designated at fair value. 2 Consists of interest income from cash and
balances at central banks, amounts due from 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. 3 Includes negative interest, including fees, on payables from securities financing transactions measured at amortized cost. 4 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, amounts due from banks, and cash collateral receivables
on derivative instruments. 5 Includes negative interest, including fees, on receivables from securities financing transactions measured at amortized cost.
28,569
3,948
1,187
103
(2,064)
31,743
15,011
1,968
11,072
166
28,216
3,527
3,770
7,297
9,612
1,378
545
74
173
11,782
2,579
1,089
2,803
92
6,564
5,218
1,403
6,621
6,488
513
284
115
1,133
8,533
523
1,102
1,533
102
3,259
5,274
1,431
6,705
Total combined net interest income and other net income from financial instruments measured at fair value through
profit or loss increased by USD 4,743m to USD 18,880m, mainly driven by the consolidation of USD 4,302m of Credit
Suisse revenues, and included USD 1,533m of accretion from purchase price allocation (PPA) adjustments on financial
instruments and other effects. Accretion from PPA adjustments is included within Interest income from loans and
deposits.
Note 5 Net fee and commission income
USD m
Underwriting fees
M&A and corporate finance fees
Brokerage fees
Investment fund fees
Portfolio management and related services
Other
Total fee and commission income1
of which: recurring
of which: transaction-based
of which: performance-based
Fee and commission expense
Net fee and commission income
For the year ended
31.12.23
31.12.22
31.12.21
568
840
3,542
4,837
10,673
3,306
23,766
15,911
7,761
94
2,195
21,570
579
804
3,484
4,942
9,059
1,920
20,789
14,229
6,492
68
1,823
18,966
1,463
1,102
4,382
5,790
9,762
1,874
24,372
15,410
8,692
269
1,985
22,387
1 For the year ended 31 December 2023, reflects third-party fee and commission income of USD 13,753m for Global Wealth Management, USD 2,733m for Personal & Corporate Banking, USD 3,325m for Asset
Management, USD 3,955m for the Investment Bank, negative USD 128m for Group Items and USD 128m for Non-core and Legacy (for the year ended 31 December 2022: USD 12,990m for Global Wealth Management,
USD 1,654m for Personal & Corporate Banking, USD 2,840m for Asset Management, USD 3,296m for the Investment Bank, USD 10m for Group Items and USD 0m for Non-core and Legacy; for the year ended
31 December 2021: USD 14,545m for Global Wealth Management, USD 1,644m for Personal & Corporate Banking, USD 3,337m for Asset Management, USD 4,814m for the Investment Bank, USD 33m for Group
Items and USD 0m for Non-core and Legacy). For the year ended 31 December 2023, Non-core and Legacy (previously reported within Group Functions) represents a separate reportable segment and Group Functions
has been renamed Group Items. Prior periods have been revised to reflect these changes.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
325
Note 5 Net fee and commission income (continued)
Total net fee and commission income increased by USD 2,604m to USD 21,570m, largely attributable to
the consolidation of USD 3,010m of Credit Suisse revenues.
Included in Other is USD 747m of accretion of purchase price allocation (PPA) adjustments on financial instruments
measured at amortized cost, including off-balance sheet positions and other related effects, arising from the acquisition
of the Credit Suisse Group. Accretion of PPA adjustments on financial instruments is accelerated when the related
financial instrument is terminated or disposed of before its contractual maturity.
Note 6 Other income
USD m
Associates, joint ventures and subsidiaries
Net gains / (losses) from acquisitions and disposals of subsidiaries1
Net gains / (losses) from disposals of investments in associates and joint ventures
Share of net profits of associates and joint ventures
Total
Net gains / (losses) from disposals of financial assets measured at fair value through other comprehensive income
Income from properties4
Net gains / (losses) from properties held for sale
Other6
Total other income
For the year ended
31.12.23
31.12.22
31.12.21
24
4
(348)3
(319)
3
39
12
6487
384
148
8442
32
1,024
(1)
20
24
3918
1,459
(11)
41
105
135
9
23
1005
1859
452
1 Includes foreign exchange gains / (losses) reclassified from other comprehensive income related to the disposal or closure of foreign operations. Refer to Note 30 for more information about UBS’s acquisitions and
disposals of subsidiaries and businesses. 2 Includes an USD 848m gain related to the sale of UBS’s shareholding in Mitsubishi Corp.-UBS Realty Inc. 3 Includes a USD 508m share of proportionate impairment
losses reflected in the SIX Group profit and loss, of which USD 317m reported in Personal and Corporate Banking and USD 190m reported in Global Wealth Management. 4 Includes rent received from third parties.
5 Mainly relates to the sale of a property in Basel. 6 Includes gains of USD 160m related to the repurchase of UBS‘s own debt instruments (compared with gains of USD 98m in 2022 and losses of USD 60m in 2021).
7 Includes USD 174m of mortgage servicing rights fee income from the Credit Suisse Group. 8 Mainly relates to a portion of the total USD 133m gain on the sale of UBS’s domestic wealth management business in
Spain of USD 111m (with the remaining amount disclosed within Net gains / (losses) from acquisitions and disposals of subsidiaries), income of USD 111m related to a legacy litigation settlement and a legacy
bankruptcy claim, and gains of USD 98m related to the repurchase of UBS’s own debt instruments (compared with losses of USD 60m in 2021). 9 Includes a gain of USD 100m from the sale of UBS’s domestic
wealth management business in Austria.
Note 7 Personnel expenses
USD m
Salaries1
Variable compensation2
of which: performance awards
of which: financial advisors 3
of which: other
Contractors
Social security
Post-employment benefit plans4
of which: defined benefit plans
of which: defined contribution plans
Other personnel expenses
Total personnel expenses
For the year ended
31.12.22
31.12.21
7,045
7,954
3,205
4,508
241
323
944
794
437
357
621
7,339
8,280
3,190
4,860
229
381
978
833
470
363
576
31.12.23
10,997
9,845
3,986
4,549
1,310
334
1,473
1,361
847
514
890
24,899
17,680
18,387
1 Includes role-based allowances. 2 Refer to Note 28 for more information. 3 Consists of cash and deferred compensation awards and is based on compensable revenues and firm tenure using a formulaic approach.
It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements. 4 Refer to Note 27 for more information.
Includes curtailment gains of USD 29m for the year ended 31 December 2023 (for the year ended 31 December 2022: USD 20m; for the year ended 31 December 2021: USD 80m), which represent a reduction in the
defined benefit obligation related to the Swiss pension plans resulting from a decrease in headcount following restructuring activities.
Personnel expenses increased by USD 7,219m to USD 24,899m, mainly due to the consolidation of Credit Suisse expenses
of USD 6,330m, and included integration-related expenses of USD 2,192m covering post-employment benefit plans,
awards granted to employees to support retention and operational stability, severance expenses, and the alignment of
Credit Suisse processes to the UBS variable compensation framework.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
326
Note 8 General and administrative expenses
USD m
Outsourcing costs
Technology costs
Consulting, legal and audit fees
Real estate and logistics costs
Market data services
Marketing and communication
Travel and entertainment
Litigation, regulatory and similar matters1
Other
Total general and administrative expenses
For the year ended
31.12.23
31.12.22
31.12.21
1,492
1,851
1,619
1,342
684
408
278
809
1,6732
10,156
896
1,146
592
605
419
265
172
348
746
893
1,055
540
634
417
242
72
911
788
5,189
5,553
1 Reflects the net increase, including recoveries from third parties, in provisions for litigation, regulatory and similar matters recognized in the income statement. Refer to Note 18 for more information. 2 Includes
USD 296m attributable to setting up a provision related to onerous contracts.
General and administrative expenses increased by USD 4,967m to USD 10,156m, largely due to the consolidation of
Credit Suisse expenses of USD 3,000m, and included total integration-related expenses of USD 1,436m, mainly from
higher consulting and real estate costs, as well as acquisition-related costs of USD 202m, also mainly related to consulting
fees.
Note 9 Income taxes
USD m
Tax expense / (benefit)
Swiss
Current
Deferred
Total Swiss
Non-Swiss
Current
Deferred
Total non-Swiss
Total income tax expense / (benefit) recognized in the income statement
Income tax recognized in the income statement
For the year ended
31.12.22
31.12.23
31.12.21
883
152
1,035
684
(846)
(162)
873
730
(15)
715
718
509
1,227
1,942
680
34
714
884
400
1,284
1,998
The Swiss current tax expenses related to taxable profits of UBS Switzerland AG and other Swiss entities.
The Swiss deferred tax expenses primarily related to the amortization of deferred tax assets (DTAs), as deductions related
to temporary differences were made against profits.
The non-Swiss current tax expenses related to expenses of USD 100m in respect of US corporate alternative minimum
tax (CAMT) and USD 584m in respect of other taxable profits of non-Swiss subsidiaries and branches.
The non-Swiss net deferred tax benefit primarily related to a benefit of USD 754m in respect of remeasurements of DTAs,
which included USD 480m in respect of net upward revaluations of DTAs for certain entities in connection with the
Group’s business planning process and USD 274m in respect of an increase in DTAs that resulted from 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. In addition, the net deferred tax benefit also included a benefit of USD 100m in respect of the recognition
of DTAs for tax credits carried forward in respect of CAMT, which was partly offset by a net deferred tax expense of
USD 8m.
The low effective tax rate for the year of 3.0% primarily reflected that the negative goodwill gain that was recorded in
the income statement did not result in any tax expense, as well as the aforementioned tax benefit of USD 754m in respect
of the remeasurement of DTAs. However, these benefits were partly offset by the impact of operating losses that were
incurred by certain entities, reflecting integration-related expenses and restructuring costs, that did not result in any tax
benefits because they cannot be offset with profits of other group entities and they did not result in any DTA recognition.
If further such operating losses are incurred in 2024, the Group’s tax expense for the year may be significantly higher
than the Group’s structural rate of 23%, but the Group’s effective tax rate is expected to decrease towards the structural
rate in subsequent years, as such losses decrease.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
327
Note 9 Income taxes (continued)
USD m
Operating profit / (loss) before tax
of which: Swiss
of which: non-Swiss
For the year ended
31.12.22
9,604
4,425
5,178
1,729
31.12.23
28,739
32,300
(3,561)
5,317
31.12.21
9,484
3,334
6,150
1,755
Income taxes at Swiss tax rate of 18.5% for 2023, 18% for 2022 and 18.5% for 2021
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 income1
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
Income tax expense / (benefit)
1 The reconciling item for non-taxable and lower-taxed income for 2023 primarily reflects that the negative goodwill gain that was recorded in the income statement in relation to the acquisition of Credit Suisse did
not result in any tax expense.
(224)
1,584
(401)
(5,730)
1,651
(87)
(1)
(1,288)
26
25
873
234
124
(179)
(278)
510
(40)
(10)
(342)
(5)
231
1,998
284
74
(217)
(335)
429
(41)
13
(217)
0
222
1,942
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 above and explained below.
Component
Description
Non-Swiss tax rates
differing from the
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 tax recognized directly in equity
A net tax expense of USD 314m was recognized in Other comprehensive income (2022: net benefit of USD 1,116m) and
a net tax benefit of USD 19m was recognized in Share premium (2022: net benefit of USD 13m).
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
328
Note 9 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, as well as 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
2023, this exception was not considered to apply to any taxable temporary differences.
USD m
Deferred tax assets1
Tax loss carry-forwards
Unused tax credits
Temporary differences
of which: related to real estate costs capitalized for US tax
purposes
of which: related to compensation and benefits
of which: related to cash flow hedges
of which: other
Total deferred tax assets
of which: related to the US
of which: related to other locations
31.12.23
31.12.22
Gross
19,070
95
11,159
2,703
1,795
765
5,896
30,324
Valuation
allowance
(16,078)
0
(3,564)
0
(471)
(139)
(2,954)
(19,642)
Recognized
2,992
95
7,595
2,703
1,324
626
2,942
10,6822
9,023
1,659
Gross
12,708
0
5,814
2,485
1,194
947
1,188
18,522
Valuation
allowance
(8,720)
0
(414)
0
(175)
0
(238)
(9,134)
Recognized
3,988
0
5,400
2,485
1,018
947
950
9,3892
8,294
1,095
Deferred tax liabilities
Total deferred tax liabilities
1 After offset of DTLs, as applicable. 2 As of 31 December 2023, the Group recognized DTAs of USD 426m (31 December 2022: USD 471m) in respect of entities that incurred losses in either the current or preceding
year.
325
236
In general, US federal tax losses incurred prior to 31 December 2017 can be carried forward for 20 years. US federal tax
losses incurred after that date can be carried forward indefinitely, although the utilization of such losses is limited to 80%
of the entity’s future year taxable profits. UK tax losses can also be carried forward indefinitely; they can shelter up to
either 25% or 50% of future year taxable profits, depending on when the tax losses arose. 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 m
Within 1 year
From 2 to 5 years
From 6 to 10 years
From 11 to 20 years
No expiry
Total
of which: related to the US 1
of which: related to the UK
of which: related to other locations
1 Related to UBS AG’s US branch.
31.12.23
342
10,839
7,114
1,818
44,222
64,335
12,354
37,773
14,208
31.12.22
231
2,184
11,106
1,610
16,960
32,091
13,350
14,332
4,409
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
329
Balance sheet notes
Note 10 Financial assets at amortized cost and other positions in scope of expected credit loss measurement
The tables below 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
Private clients with
mortgages
Lending to private clients secured by
owner-occupied real estate and
personal account overdrafts of those
clients
Sensitive to the Swiss GDP, 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 Swiss GDP, 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
Lombard
Loans secured by pledges of marketable
securities, guarantees and other forms
of collateral (including concentration in
hedge funds, private equity and unlisted
equities), as well as unsecured recourse
lending
Credit cards
Credit card solutions in Switzerland and
the US
Commodity trade
finance
Working capital financing of commodity
traders, generally extended on a self-
liquidating transactional basis
Sensitive to GDP developments,
unemployment levels, CDS indices,
seasonality, business cycles and collateral
values (diverse collateral, including real
estate and other collateral types)
– Personal & Corporate Banking
– Investment Bank
– Global Wealth Management
– Non-core and Legacy
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
Sensitive to equity and debt markets (e.g.,
changes in collateral values)
– Global Wealth Management
– Non-core and Legacy
Sensitive to unemployment levels
– Personal & Corporate Banking
– Global Wealth Management
– Personal & Corporate Banking
Sensitive primarily to the strength of
individual transaction structures and
collateral values (price volatility of
commodities), as the primary source for
debt service is directly linked to the
shipments financed
Consumer financing
Consumer loans and car leasing
Sensitive to unemployment levels
– Personal & Corporate Banking
Ship financing
Ship financing mainly includes bulk
carriers, oil tankers, containers and
liquefied natural gas carriers
Sensitive to real GDP, earnings of tankers
and earnings of bulk carriers
– Global Wealth Management
– Non-core and Legacy
Aircraft financing
Corporate aircraft financing
Sensitive to collateral values
– Global Wealth Management
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 GDP development, CDS
indices, the interest rate environment,
price and volatility risks in financial
markets, regulatory and political risk, and
collateral values (diverse collateral,
including real estate and other collateral
types)
– Non-core and Legacy
– Personal & Corporate Banking
– Investment Bank
– Global Wealth Management
– Non-core and Legacy
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
330
Note 10 Financial assets at amortized cost and other positions in scope of expected credit loss measurement
(continued)
The tables below provide ECL exposure and ECL allowance and provision information about financial instruments and
certain non-financial instruments that are subject to ECLs.
USD m
Financial instruments measured at amortized cost
Cash and balances at central banks
Amounts due from banks
Receivables from securities financing transactions measured at
amortized cost
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
of which: Ship / aircraft financing
of which: Consumer financing
Other financial assets measured at amortized cost
of which: Loans to financial advisors
Total financial assets measured at amortized cost
Financial assets measured at fair value through other comprehensive
income
Total on-balance sheet financial assets in scope of ECL requirements
of which: Credit Suisse2
Off-balance sheet (in scope of ECL)
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
Unconditionally revocable loan commitments
of which: Real estate financing
of which: Large corporate clients
of which: SME clients
of which: Lombard
of which: Credit cards
Irrevocable committed prolongation of existing loans
Total off-balance sheet financial instruments and other credit lines
Total allowances and provisions
of which: Credit Suisse2
31.12.23
Carrying amount1
Total
314,148
21,161
Stage 1
314,025
21,107
Stage 2
18
17
Stage 3
0
0
0
99,039
99,039
0
50,082
50,082
24,408
611,019
639,844
268,616 256,614 10,695
92,084 5,367
97,817
25,671 3,182
30,084
22,155 2,919
25,957
3
156,353 156,299
438
1,564
25
5,662
273
8,920
92
2,795
968
64,311
79
2,422
25,410
1,189,773 1,159,583
2,041
5,727
9,214
2,982
65,498
2,615
0
0
2,869
929
270
700
754
50
39
22
4
38
158
114
3,027
PCI
106
38
0
0
1,548
378
97
532
129
0
0
18
17
57
61
0
1,753
ECL allowances
Stage 2
(26)
(1)
Stage 1
0
(6)
Stage 3
0
0
Total
(48)
(12)
(2)
0
(1,698)
(209)
(103)
(575)
(402)
(41)
(42)
(130)
(51)
(59)
(151)
(49)
(1,911)
(2)
0
(423)
(62)
(41)
(105)
(71)
(13)
(6)
(18)
(48)
(22)
(41)
(4)
(473)
0
(473)
(277)
0
0
(289)
(97)
(31)
(70)
(42)
(11)
(11)
(1)
(3)
(17)
(10)
(1)
(326)
0
(326)
(109)
0
0
(862)
(39)
(21)
(312)
(277)
(17)
(24)
(111)
0
(20)
(94)
(44)
(956)
0
(956)
(314)
2,233
2,233
1,192,006 1,161,816
0
25,410
443,354 433,789 6,935
0
3,027
0
1,753
878 1,753
0
(1,911)
(855)
Total
46,191
9,267
2,839
22,922
5,045
2,037
91,643
50,696
18,444
163,256
15,846
17,139
11,658
77,618
10,458
4,608
324,141
Total exposure
Stage 2
Stage 1
44,487
1,495
8,138 1,023
337
2,469
46
22,876
0
5,045
2,027
9
4,297
87,080
46,708 3,881
Stage 3
151
89
31
0
0
0
218
59
18,444
160,456
15,033
16,678
11,253
77,618
9,932
4,593
315,060
0
2,654
813
454
375
0
522
11
8,456
0
146
0
8
29
1
4
4
519
ECL provisions
Stage 2
(22)
(13)
(5)
(3)
0
0
(51)
(41)
Stage 1
(28)
(11)
(4)
(8)
0
(1)
(117)
(94)
Stage 3
(23)
(7)
(5)
0
(1)
0
(14)
(12)
Total
(73)
(31)
(14)
(12)
(1)
(1)
(178)
(149)
PCI
58
17
2
0
0
0
48
48
0
0
0
0
0
0
0
0
106
0
(95)
(14)
(23)
(38)
0
(10)
(4)
(350)
(2,261)
106 (1,018)
0
(78)
(11)
(17)
(33)
0
(8)
(4)
(226)
(700)
(392)
0
(17)
(3)
(6)
(5)
0
(2)
0
(90)
(416)
(143)
0
0
0
0
0
0
0
0
(37)
(993)
(330)
PCI
(22)
(5)
0
0
(123)
(11)
(11)
(89)
(13)
0
0
0
(1)
0
(5)
0
(156)
0
(156)
(156)
PCI
0
0
0
0
0
0
4
(2)
0
0
0
0
0
0
0
0
3
(153)
(153)
187,519 183,235 3,894
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances. 2 Refer to Note 2 for more information about the acquisition of the
Credit Suisse Group.
285
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
331
Note 10 Financial assets at amortized cost and other positions in scope of expected credit loss measurement
(continued)
USD m
31.12.22
Financial instruments measured at amortized cost
Cash and balances at central banks
Amounts due from banks
Receivables from securities financing transactions measured at amortized cost
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
Total financial assets measured at amortized cost
Financial assets measured at fair value through other comprehensive income
Total on-balance sheet financial assets within the scope of ECL requirements
Off-balance sheet (within the scope of ECL)
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
169,402
169,445
14,792
14,792
67,814
67,814
35,032
35,032
387,220
370,095
156,930 147,651
46,470 43,112
12,226 10,733
13,903 12,211
132,287 132,196
1,420
3,261
52,704
2,357
709,839
2,239
712,078
Stage 2
44
1
0
0
15,587
8,579
3,349
1,189
1,342
0
382
0
413
128
16,044
0
16,044
1,834
3,272
53,264
2,611
727,568
2,239
729,807
Total exposure
Stage 1
Total
19,805
22,167
2,883
3,663
1,124
1,337
11,833 10,513
2,376
2,376
2,121
2,121
39,996
37,531
23,611 21,488
3,801
39,521
8,528
4,304
4,442
7,854
8,900
327
4,600
105,258
3,801
41,390
8,711
4,578
4,723
7,855
9,390
327
4,696
112,050
Stage 2
2,254
721
164
1,320
0
0
2,341
2,024
0
1,833
183
268
256
0
487
0
94
6,522
Stage 3
0
0
0
0
1,538
699
9
303
351
91
31
11
147
126
1,685
0
1,685
Stage 3
108
58
49
0
1
0
124
99
0
36
0
5
26
1
3
0
2
270
Total
(12)
(6)
(2)
0
(783)
(161)
(41)
(130)
(251)
(26)
(36)
(96)
(86)
(59)
(889)
0
(889)
Total
(48)
(26)
(5)
(12)
(1)
(1)
(111)
(93)
0
(40)
(6)
(4)
(19)
0
(7)
0
(2)
(201)
(1,091)
ECL allowances
Stage 1
0
(5)
(2)
0
(129)
(27)
(17)
(24)
(26)
(9)
(7)
(6)
(17)
(7)
(154)
0
(154)
Stage 2
(12)
(1)
0
0
(180)
(107)
(23)
(14)
(22)
0
(10)
0
(6)
(2)
(199)
0
(199)
ECL provisions
Stage 1
(13)
(2)
(1)
(8)
0
(1)
(59)
(49)
0
(32)
(6)
(1)
(16)
0
(5)
0
(2)
(106)
(259)
Stage 2
(9)
(3)
(1)
(4)
0
0
(52)
(45)
0
(8)
0
(2)
(3)
0
(2)
0
0
(69)
(267)
Stage 3
0
0
0
0
(474)
(28)
0
(92)
(203)
(17)
(19)
(90)
(63)
(51)
(537)
0
(537)
Stage 3
(26)
(21)
(3)
0
(1)
0
0
0
0
0
0
0
0
0
0
0
0
(26)
(564)
Irrevocable committed prolongation of existing loans
Total off-balance sheet financial instruments and credit lines
Total allowances and provisions
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
332
Note 10 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 and consumer financing) is not material;
– 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 two and three years in Switzerland, with long dated maturities in the US, and corporate lending between
one and two years with related loan commitments up to four 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.
The total combined on- and off-balance sheet coverage ratio was 22 basis points as of 31 December 2023, 1 basis point
higher than on 31 December 2022. The combined stage 1 and 2 ratio of 11 basis points, 1 basis point higher than on
31 December 2022; the stage 3 ratio was 21%, 1 percentage point lower than as of 31 December 2022, and the PCI
ratio was 7%.
On-balance sheet
Private clients with mortgages
Real estate financing
Total real estate lending
Large corporate clients
SME clients
Total corporate lending
Lombard
Credit cards
Commodity trade finance
Ship / aircraft financing
Consumer financing
Other loans and advances to customers
Loans to financial advisors
Total other lending
Total1
Total
Gross carrying amount (USD m)
Stage 3
Stage 2
968
10,792
290
5,398
1,258
16,190
1,012
3,252
1,031
2,961
2,042
6,213
67
15
63
449
133
26
4
276
58
110
105
1,419
159
80
589
2,373
3,889
24,777
Stage 1
268,825 256,675
97,920
92,124
366,745 348,800
25,775
30,660
22,226
26,359
57,019
48,001
156,394 156,312
1,571
5,681
8,968
2,817
39,293
2,426
220,442 217,068
644,206 613,869
2,083
5,858
9,265
3,041
41,136
2,665
31.12.23
PCI
389
108
497
620
142
762
0
0
18
17
57
320
0
412
1,671
Total
8
11
9
188
153
172
3
200
223
56
195
21
185
21
27
Stage 1
2
4
3
41
32
37
1
40
32
54
79
10
17
7
7
ECL coverage (bps)
Stage 2 Stage 1&2
6
7
6
60
45
53
2
87
34
55
135
11
20
9
11
90
57
79
215
141
180
7,616
253
365
99
1,559
39
122
210
117
Stage 3
399
713
472
3,083
2,689
2,884
2,487
3,801
8,333
0
3,422
3,981
2,793
4,376
2,329
PCI
283
980
434
1,429
893
1,329
0
0
6
315
7
0
0
8
737
Off-balance sheet
Total corporate lending
Private clients with mortgages
Real estate financing
Total real estate lending
Large corporate clients
SME clients
PCI
0
0
0
242
0
221
0
0
0
0
0
0
0
0
Total2
0
Total on- and off-balance sheet3
675
1 Includes Loans and advances to customers and Loans to financial advisors, which are presented on the balance sheet line Other financial assets measured at amortized cost. 2 Excludes Forward starting reverse
repurchase and securities borrowing agreements. 3 Includes on-balance sheet exposure, gross and off-balance sheet exposure (notional) and the related ECL coverage ratio (bps).
Stage 1
Total
9,505
9,782
16,281
17,107
25,786
26,889
71,524
77,103
15,868
16,762
87,392
93,865
86,173
86,173
9,932
10,458
4,628
4,640
1,053
1,053
153
153
42,325
42,578
39,887
39,174
184,944 183,438
305,697 296,616
949,904 910,485
Lombard
Credit cards
Commodity trade finance
Ship / aircraft financing
Consumer financing
Financial intermediaries and hedge funds
Other off-balance sheet commitments
Gross exposure (USD m)
Stage 2
261
826
1,088
5,357
812
6,170
0
522
13
0
0
253
411
1,199
8,456
33,233
ECL coverage (bps)
Stage 2 Stage 1&2
6
9
8
24
37
26
0
10
6
26
0
3
5
3
10
11
Stage 3
15
0
15
157
80
236
1
4
0
0
0
0
263
268
519
4,408
Stage 3
40
0
40
1,217
640
1,022
0
0
0
0
0
0
453
486
717
2,140
Stage 1
5
8
7
17
29
19
0
8
5
26
0
3
4
2
8
7
PCI
0
0
0
65
2
67
0
0
0
0
0
0
39
39
106
1,777
Total
6
9
8
26
40
29
0
10
6
26
0
3
7
3
11
22
27
44
40
111
196
122
0
35
151
0
0
142
111
85
107
114
Total other lending
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
333
Note 10 Financial assets at amortized cost and other positions in scope of expected credit loss measurement
(continued)
On-balance sheet
Private clients with mortgages
Real estate financing
Total real estate lending
Large corporate clients
SME clients
Total corporate lending
Lombard
Credit cards
Commodity trade finance
Other loans and advances to customers
Loans to financial advisors
Total other lending
Total1
Gross carrying amount (USD m)
31.12.22
Total
157,091
46,511
203,602
12,356
14,154
26,510
132,313
1,869
3,367
20,342
2,670
160,561
390,672
Stage 1
147,678
43,129
190,807
10,757
12,237
22,994
132,205
1,427
3,266
19,525
2,364
158,787
372,588
Stage 2
8,686
3,372
12,059
1,204
1,364
2,567
0
393
0
748
130
1,270
15,896
Stage 3
727
9
736
395
553
949
108
50
101
68
176
503
2,188
Gross exposure (USD m)
Total
10
9
10
105
177
144
2
190
285
21
221
16
22
ECL coverage (bps)
Stage 2
123
70
108
120
161
142
0
256
0
38
124
114
114
Stage 1
2
4
2
22
22
22
1
46
18
7
28
3
4
Stage 1&2
9
9
9
32
36
34
1
91
18
8
33
4
8
Stage 3
381
232
379
2,325
3,664
3,106
1,580
3,779
8,901
3,769
2,870
4,016
2,398
Off-balance sheet
Total corporate lending
Private clients with mortgages
Real estate financing
Total real estate lending
Large corporate clients
SME clients
Stage 3
1,183
0
1,288
1,263
304
903
0
0
0
0
0
0
Total2
980
Total on- and off-balance sheet3
2,242
1 Includes Loans and advances to customers and Loans to financial advisors, which are presented on the balance sheet line Other financial assets measured at amortized cost. 2 Excludes Forward starting reverse
repurchase and securities borrowing agreements. 3 Includes on-balance sheet exposure, gross and off-balance sheet exposure (notional) and the related ECL coverage ratio (bps).
Lombard
Credit cards
Commodity trade finance
Financial intermediaries and hedge funds
Other off-balance sheet commitments
Stage 1&2
4
6
6
32
43
34
1
7
3
9
9
6
16
10
Stage 1
6,296
9,779
16,075
28,950
6,525
35,475
12,918
8,900
2,459
14,177
11,454
49,907
101,457
474,045
Total
6,535
10,054
16,589
32,126
7,122
39,247
12,919
9,390
2,459
15,841
11,803
52,412
108,249
498,921
Stage 2
236
275
511
3,013
499
3,513
0
487
0
1,664
346
2,498
6,522
22,418
Stage 3
3
0
3
163
98
260
1
3
0
0
3
7
270
2,458
Stage 1
4
7
6
18
30
20
1
5
3
7
8
5
10
5
ECL coverage (bps)
Stage 2
18
0
2
165
214
172
0
36
0
25
68
33
106
112
Total
5
6
6
38
47
40
2
7
3
9
11
7
19
21
Total other lending
Note 11 Derivative instruments
Overview
Over-the-counter (OTC) derivative contracts are usually traded under a standardized International Swaps and Derivatives
Association (ISDA) master agreement or other recognized local industry-standard master agreements between UBS and
its counterparties. Terms are negotiated directly with counterparties and the contracts have industry-standard settlement
mechanisms prescribed by ISDA or similar industry-standard solutions. 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 introduced 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.
Exchange-traded derivatives (ETD) are standardized in terms of their amounts and settlement dates, and are bought and
sold on regulated exchanges. 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
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
334
Note 11 Derivative instruments (continued)
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
permitted 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
Derivative instruments
USD bn
Interest rate
of which: forwards (OTC)4
of which: swaps (OTC)
of which: options (OTC)
of which: futures (ETD)
of which: options (ETD)
Credit derivatives
of which: credit default swaps (OTC)
of which: total return swaps (OTC)
Foreign exchange
of which: forwards (OTC)
of which: swaps (OTC)
of which: options (OTC)
Equity / index
of which: swaps (OTC)
of which: options (OTC)
of which: futures (ETD)
of which: options (ETD)
of which: client-cleared transactions (ETD)
Commodities
of which: swaps (OTC)
of which: options (OTC)
of which: futures (ETD)
of which: forwards (ETD)
of which: client-cleared transactions (ETD)
Other5
Total derivative instruments,
based on netting under IFRS Accounting Standards6
of which: Credit Suisse7
31.12.23
31.12.22
Derivative
financial
assets
55.6
Derivative
financial
liabilities
52.9
Notional
amounts related
to derivative
financial assets
and liabilities1,2
3,524.1
Other
notional
amounts1,3
20,073.9
Derivative
financial
assets
39.8
Derivative
financial
liabilities
37.5
Notional
amounts related
to derivative
financial assets
and liabilities1,2
2,080.3
0.1
37.7
17.7
0.0
4.0
3.8
0.1
78.7
18.7
52.2
7.7
35.5
6.6
4.9
15.4
8.3
2.0
0.9
0.6
0.0
0.2
0.4
0.1
32.6
20.0
0.0
4.7
4.4
0.3
89.9
24.1
58.1
7.6
41.4
9.2
9.0
14.3
8.2
1.6
0.7
0.3
0.0
0.3
1.6
122.4
2,532.2
1,331.6 16,601.3
2,066.7
843.7
96.1
180.4
178.7
95.0
86.6
8.5
16.4
13.7
3.4
274.9
269.6
3.7
6,913.3
2,152.0
3,809.7
944.4
1,396.8
273.3
245.2
876.6
142.9
50.0
42.3
31.5
116.5
0.2
25.2
14.2
0.0
1.0
0.9
0.1
85.5
26.5
49.6
9.3
22.2
5.3
2.8
9.0
5.1
1.4
0.5
0.4
0.0
0.2
0.2
0.0
19.8
17.5
0.0
1.2
1.0
0.2
88.5
28.6
50.4
9.2
26.1
6.6
4.4
8.1
7.0
1.4
0.7
0.3
0.0
0.3
0.1
72.3
607.1
1,392.5
8.3
73.9
71.0
1.2
6,079.8
1,763.6
3,233.0
1,073.2
885.8
217.5
140.6
526.7
132.3
38.6
29.1
47.7
49.8
Other
notional
amounts1,3
11,255.4
792.7
9,728.6
606.3
127.7
40.1
38.4
63.4
52.2
11.2
17.6
16.4
176.1
47.4
192.2
53.5
12,368.5
2,194.1
20,365.8
6,337.4
150.1
154.9
9,301.8
11,376.5
1 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.
2 Notional amounts of client-cleared ETD and OTC transactions through central clearing counterparties are not disclosed, as they have significantly different risk profile. 3 Other notional amounts relate to derivatives
that are cleared through either a central counterparty or an exchange and settled on a daily basis (except for OTC derivatives settled through collateralized-to-market arrangements, which are presented under Derivative
financial assets and Derivative financial liabilities). 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 any of the periods presented. 4 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. 5 Includes mainly derivative loan commitments measured at FVTPL, as well as unsettled purchases and sales of non-
derivative financial instruments for which the changes in the fair value between trade date and settlement date are recognized as derivative financial instruments. 6 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. 7 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
335
Note 11 Derivative instruments (continued)
On a notional amount basis, approximately 50% of OTC interest rate contracts held as of 31 December 2023
(31 December 2022: 46%) mature within one year, 30% (31 December 2022: 32%) within one to five years and 20%
(31 December 2022: 22%) after five years.
Notional amounts of interest rate contracts cleared through either a central counterparty or an exchange that are legally
settled or economically net 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 increased by USD 8.8trn compared with 31 December 2022,
mainly reflecting the acquisition of the Credit Suisse Group and lower compression activity, partly offset by lower business
volume primarily due to the unwinding of Credit Suisse business.
Note 12 Property, equipment and software
At historical cost less accumulated depreciation
USD m
Historical cost
Balance at the beginning of the year
Balance recognized upon the acquisition of the Credit Suisse Group4
Additions
Disposals / write-offs5
Reclassifications
Foreign currency translation
Balance at the end of the year
Accumulated depreciation
Balance at the beginning of the year
Depreciation
Impairment6
Disposals / write-offs5
Reclassifications
Foreign currency translation
Balance at the end of the year
Net book value
Net book value at the beginning of the year
Net book value at the end of the year
of which: Credit Suisse 4
Owned
properties and
equipment1
Leased
properties and
equipment2
11,587
2,975
212
(428)
1,392
972
16,710
7,425
830
189
(420)
673
510
9,207
4,162
7,503
3,060
4,459
1,941
100
(67)
6
174
6,613
1,714
722
125
(66)
5
45
2,545
2,746
4,068
1,647
Software
9,944
949
92
(1,295)
1,728
309
11,726
5,699
1,469
279
(1,296)
9
152
6,312
4,245
5,414
805
Projects in
progress
1,136
190
1,393
0
(1,923)
68
863
1,136
8637
120
20233
20223
27,127
6,055
1,796
(1,791)
1,203
1,523
35,913
14,839
3,022
593
(1,783)
686
708
18,064
12,288
17,849
5,631
27,113
2,057
(501)
(1,223)
(319)
27,127
14,225
2,033
3
(497)
(761)
(164)
14,839
12,888
12,288
1 Includes leasehold improvements and IT hardware. 2 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 2023 was USD 878m (2022: USD 614m). 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 4 and 19a, respectively. There were no
material gains or losses arising from sale-and-leaseback transactions in 2023 and in 2022. 3 The total reclassification amount for the respective periods represents net reclassifications from / to Other non-financial
assets. 4 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group. 5 Includes write-offs of fully depreciated assets. 6 Impairment charges recorded in 2023 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 of which USD 26m for Global Wealth Management, USD 8m for Personal & Corporate Banking,
USD 6m for Asset Management, USD 246m for Group Items and USD 307m for Non-core and Legacy. 7 Consists of USD 542m related to software and USD 322m related to Owned properties and equipment.
Note 13 Goodwill and intangible assets
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 reported in Note 3a, 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 acquisition of PaineWebber Group, Inc. 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
with the carrying amount of the respective CGU. UBS determines the recoverable amount of the respective CGUs based
on their value in use. An impairment charge is recognized if the carrying amount exceeds the recoverable amount.
The acquisition of the Credit Suisse Group in 2023 resulted in negative goodwill, which was recognized in the income
statement on the date of the acquisition. No goodwill related to the acquisition of the Credit Suisse Group was recognized
on the balance sheet.
› Refer to Note 2 for more information about the acquisition of the Credit Suisse Group
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
336
Note 13 Goodwill and intangible assets (continued)
As of 31 December 2023, total goodwill recognized on the balance sheet was USD 6.0bn, of which USD 3.7bn was
carried by the Global Wealth Management Americas CGU, USD 1.2bn was carried by the Global Wealth Management
Switzerland and International CGU, and USD 1.1bn was carried by Asset Management. Based on the impairment testing
methodology described below, UBS concluded that the goodwill balances as of 31 December 2023 allocated to these
CGUs were not impaired. For each of the CGUs, the recoverable amount substantially exceeded the carrying value as of
31 December 2023 and there was no indication of a significant risk of goodwill impairment based on the testing
performed as of 31 December 2023.
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
the third-year profit, the discount rate and the long-term growth rate, as well as the implied perpetual capital growth.
For the Global Wealth Management Americas CGU, the methodology is consistently applied, however, the forecast
period was extended from three to five years (with a terminal value thereafter) in 2023 to provide for the CGU’s specific
planning assumptions, namely the ongoing investments in the core banking infrastructure in the US to enhance the
product capabilities and offerings in this market in the mid-term. The extension of the forecast period from three to five
years did not trigger, defer or avoid an impairment of goodwill as of 31 December 2023.
The carrying amount for each CGU is determined by reference to the Group’s equity attribution framework. Within this
framework, 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 Items to the business divisions), their goodwill and
their intangible assets, as well as attributed equity related to certain common equity tier 1 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 is currently
considered a 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.
Assumptions
Valuation parameters used within the Group’s impairment test model are linked to external market information, where
applicable. The model used to determine the recoverable amount is most sensitive to changes in the forecast earnings
available to shareholders in years one to three, to changes in the discount rates and to changes in the long-term growth
rate. The applied long-term growth rate is based on long-term economic growth rates for different regions worldwide.
Earnings available to shareholders are estimated on the basis of forecast results, which are part of the business plan
approved by the Board of Directors.
The discount rates are determined by applying a capital asset pricing model-based approach, as well as considering
quantitative and qualitative inputs from both internal and external analysts and the view of management. 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 GDP growth rate forecasts.
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 Accounting Standards 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
Discount rates
Growth rates
31.12.23
9.5
9.5
9.0
31.12.22
10.5
9.4
9.5
31.12.23
3.8
3.4
3.3
31.12.22
3.8
3.6
3.4
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
337
Note 13 Goodwill and intangible assets (continued)
USD m
Historical cost
Balance at the beginning of the year
Acquisition of the Credit Suisse Group2
Additions
Disposals3
Foreign currency translation
Balance at the end of the year
Accumulated amortization and impairment
Balance at the beginning of the year
Amortization
Impairment / (reversal of impairment)
Disposals3
Foreign currency translation
Balance at the end of the year
Net book value at the end of the year
Goodwill
Intangible
assets1
2023
2022
6,043
0
0
(10)
10
6,043
0
0
0
0
0
6,043
1,598
1,287
6
(30)
102
2,964
1,374
134
0
(30)
13
1,491
1,473
7,641
1,287
6
(40)
112
9,006
1,374
134
0
(30)
13
1,491
7,515
7,739
0
0
(22)
(76)
7,641
1,360
26
(1)
0
(11)
1,374
6,267
of which: Global Wealth Management Americas
of which: Global Wealth Management Switzerland and International
of which: Personal & Corporate Banking
of which: Asset Management
of which: Investment Bank
of which: Non-core and Legacy
3,740
1,225
0
1,167
135
0
1 Intangible assets mainly include customer relationships, core deposits, contractual rights and the fully amortized branch network intangible asset recognized in connection with the acquisition of PaineWebber
Group, Inc. in 2000. 2 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group. 3 Reflects the derecognition of goodwill allocated to business and intangible assets held by entities
that have been disposed of. Refer to Note 30 for more information.
3,712
1,182
0
1,149
0
0
3,748
1,236
908
1,149
135
339
36
55
908
0
135
339
The table below presents estimated aggregated amortization expenses for intangible assets.
USD m
Estimated aggregated amortization expenses for:
2024
2025
2026
2027
2028
Thereafter
Not amortized due to indefinite useful life
Total
Note 14 Other assets
a) Other financial assets measured at amortized cost
USD m
Debt securities
Loans to financial advisors
Fee- and commission-related receivables
Finance lease receivables
Settlement and clearing accounts
Accrued interest income
Other
Total other financial assets measured at amortized cost
of which: Credit Suisse 2
Intangible assets
211
194
181
173
161
551
3
1,473
31.12.22
44,594
2,611
1,812
1,315
1,175
1,259
499
53,264
31.12.23
45,057
2,615
2,619
6,288
338
3,163
5,4181
65,498
11,378
1 Predominantly includes cash collateral provided to exchanges and clearing houses to secure securities trading activity through those counterparties. 2 Refer to Note 2 for more information about the acquisition of
the Credit Suisse Group.
Effective from 1 April 2022, UBS has reclassified a portfolio of financial assets from Financial assets measured at fair value
through other comprehensive income with a fair value of USD 6.9bn (the Portfolio) to Other financial assets measured at
amortized cost.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
338
Note 14 Other assets (continued)
The Portfolio’s cumulative fair value losses of USD 449m pre-tax and USD 333m post-tax, previously recognized in Other
comprehensive income, have been removed from equity and adjusted against the value of the assets on the
reclassification date, so that the Portfolio is measured as if the assets had always been classified at amortized cost, with
a value of USD 7.4bn as on 1 April 2022. The reclassification had no effect on the income statement. The reclassified
Portfolio is made up of high-quality liquid assets, primarily US government treasuries and US government agency
mortgage-backed securities, held and separately managed by UBS Bank USA. The accounting reclassification has arisen
as a direct result of the transformation of UBS’s Global Wealth Management Americas business, which has significantly
impacted UBS Bank USA. This includes initiatives approved by the Group Executive Board to significantly grow and extend
the business, as disclosed on 1 February 2022 during UBS’s fourth quarter 2021 earnings presentation. Over the two
years preceding the reclassification date, UBS Bank USA’s deposit base grew by more than 100% generating substantial
cash balances, with a number of new products being launched, including new deposit types that are longer in duration,
additional lending and a broader range of customer segments targeted. Following the commencement of these activities
and the announcement made in the first quarter of 2022, the Portfolio is no longer held in a business model to collect
the contractual cash flows and sell the assets but is instead solely held to collect the contractual cash flows until the
assets mature, requiring a reclassification of the Portfolio in line with IFRS 9 with effect from 1 April 2022.
b) Other non-financial assets
USD m
Precious metals and other physical commodities
Deposits and collateral provided in connection with litigation, regulatory and similar matters1
Prepaid expenses
Current tax assets
VAT, withholding tax and other tax receivables
Properties and other non-current assets held for sale
Other
Total other non-financial assets
of which: Credit Suisse2
1 Refer to Note 18 for more information. 2 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
Note 15 Customer deposits
USD m
Demand deposits
Retail savings / deposits
Sweep deposits
Time deposits1
Total customer deposits
of which: Credit Suisse2
31.12.23
5,930
2,726
2,080
1,456
1,327
188
2,342
16,049
7,099
31.12.23
240,942
186,087
41,045
323,955
792,029
236,049
31.12.22
4,471
2,205
1,076
182
1,286
369
578
10,166
31.12.22
180,822
149,310
69,223
125,696
525,051
1 Includes customer deposits in UBS AG Jersey Branch and Credit Suisse AG Guernsey Branch placed by UBS Switzerland AG on behalf of its clients. 2 Refer to Note 2 for more information about the acquisition of
the Credit Suisse Group.
Customer deposits increased mainly due to the acquisition of Credit Suisse, net inflows into time deposit products, and
positive foreign currency effects, partly offset by continued shifts into money market funds and US-government securities.
In addition, customers continued to shift funds from demand and sweep deposits into time deposits.
Note 16 Debt issued designated at fair value
USD m
Issued debt instruments
Equity-linked1
Rates-linked
Credit-linked
Fixed-rate
Commodity-linked
Other
of which: debt that contributes to total loss-absorbing capacity
Total debt issued designated at fair value2
of which: issued by UBS AG standalone with original maturity greater than one year3
of which: issued by Credit Suisse AG standalone with original maturity greater than one year3
of which: issued by Credit Suisse International standalone with original maturity greater than one year3
31.12.23
31.12.22
41,901
16,276
2,170
6,538
4,294
2,459
1,959
73,638
57,750
60,573
28,883
7,730
20,541
3,844
6,718
4,629
128,289
73,544
29,948
1,471
1 Includes investment fund unit-linked instruments issued. 2 Of which Credit Suisse: USD 37.2bn as of 31 December 2023. 3 Based on original contractual maturity without considering any early redemption
features. As of 31 December 2023, 100% of the balance was unsecured in UBS AG standalone (31 December 2022: 100%), 100% was unsecured in Credit Suisse AG standalone and 65% was unsecured in Credit
Suisse AG International.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
339
Note 17 Debt issued measured at amortized cost
USD m
Short-term debt1
of which: Credit Suisse
Senior unsecured debt
of which: contributes to total loss-absorbing capacity (TLAC)
of which: issued by UBS AG standalone with original maturity greater than one year
of which: issued by Credit Suisse AG standalone with original maturity greater than one year
Covered bonds
Subordinated debt
of which: eligible as high-trigger loss-absorbing additional tier 1 capital instruments
of which: eligible as low-trigger loss-absorbing additional tier 1 capital instruments
of which: eligible as low-trigger loss-absorbing tier 2 capital instruments
of which: eligible as non-Basel III-compliant tier 2 capital instruments
Debt issued through the Swiss central mortgage institutions
Other long-term debt
Long-term debt2
of which: Credit Suisse 3
31.12.22
29,676
59,965
42,073
17,892
0
16,017
9,882
1,189
2,422
536
8,962
84,945
31.12.23
38,530
1,245
147,547
101,939
18,446
24,609
5,214
17,644
10,744
1,214
0
538
27,377
1,506
199,288
45,640
237,817
Total debt issued measured at amortized cost4,5
1 Debt with an original contractual maturity of less than one year, includes mainly certificates of deposit and commercial paper. 2 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. 3 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group. 4 Net of
bifurcated embedded derivatives, the fair value of which was not material for the periods presented. 5 Except for Covered bonds, Debt issued through the Swiss central mortgage institutions and Other long-term
debt, 100% of the balance was unsecured as of 31 December 2023.
114,621
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 a decrease of USD 3.0bn as of 31 December 2023 and a decrease of USD 6.1bn as of 31 December
2022, 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. Materially all the subordinated
debt instruments outstanding as of 31 December 2023 pay a fixed rate of interest.
› Refer to Note 24 for maturity information
Note 18 Provisions and contingent liabilities
a) Provisions
The table below presents an overview of total provisions and contingent liabilities.
USD m
Provisions related to expected credit losses (IFRS 9, Financial Instruments)1
Provisions related to Credit Suisse loan commitments (IFRS 3, Business Combinations)2
Provisions related to litigation, regulatory and similar matters (IAS 37, Provisions, Contingent Liabilities and Contingent Assets)
Acquisition-related contingent liabilities (IFRS 3, Business Combinations)2
Restructuring, real-estate and other provisions (IAS 37, Provisions, Contingent Liabilities and Contingent Assets)
Total provisions and contingent liabilities
of which: Credit Suisse 2
1 Refer to Note 10 for more information. 2 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
31.12.23
350
1,924
4,020
3,832
2,123
12,250
9,681
31.12.22
201
2,586
456
3,243
The table below presents additional information for provisions under IAS 37, Provisions, Contingent Liabilities and
Contingent Assets.
USD m
Balance at the beginning of the year
Provisions recognized upon the acquisition of the Credit Suisse Group5
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 and other movements
Balance at the end of the year
of which: Credit Suisse 5
Total 2023
3,042
3,637
2,444
(365)
(2,759)
145
6,144
3,762
1 Consists of provisions for losses resulting from legal, liability and compliance risks. 2 Consists of USD 448m of provisions for onerous contracts related to real estate as of 31 December 2023 (31 December 2022:
USD 28m) and USD 294m of personnel-related restructuring provisions as of 31 December 2023 (31 December 2022: USD 102m). 3 Mainly includes provisions for reinstatement costs with respect to leased
properties. 4 Mainly includes provisions related to onerous contracts and employee benefits. 5 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
Restructuring2
130
68
1,031
(129)
(370)
12
741
519
Real estate3
129
108
12
(1)
(15)
27
259
114
Other4
197
578
492
(137)
(29)
21
1,123
918
Litigation,
regulatory and
similar matters1
2,586
2,883
909
(97)
(2,344)
85
4,020
2,210
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
340
Note 18 Provisions and contingent liabilities (continued)
Restructuring provisions relate to onerous contracts for property and personnel-related provisions. 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. Personnel-related restructuring
provisions are generally used within a short period of time. The level of personnel-related provisions can change when
natural staff attrition reduces the number of people affected by a restructuring event, and therefore results in lower
estimated costs.
Other provisions mainly include provisions related to onerous contracts, employee benefits and operational risks. Onerous
contracts are recognized for certain contractual arrangements where the costs exceed the economic benefits expected
to be received.
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 events, it is probable that an outflow of resources will be required, and the amount
can be reliably estimated. Where these factors are otherwise satisfied, a provision may be established for claims that have
not yet been asserted against the Group, but are nevertheless expected to be, based on the Group’s experience with similar
asserted claims. If any of those conditions is not met, such matters result in contingent liabilities. If the amount of an
obligation cannot be reliably estimated, a liability exists that is not recognized even if an outflow of resources is probable.
Accordingly, no provision is established even if the potential outflow of resources with respect to such matters could be
significant. Developments relating to a matter that occur after the relevant reporting period, but prior to the issuance of
financial statements, which affect management’s assessment of the provision for such matter (because, for example, the
developments provide evidence of conditions that existed at the end of the reporting period), are adjusting events after the
reporting period under IAS 10 and must be recognized in the financial statements for the reporting period.
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 to the Group 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 subject to confidentiality obligations
that preclude such 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; or (b) we have established a provision but expect disclosure of
that fact to prejudice seriously our position with other parties in the matter because it would reveal the fact that UBS
believes an outflow of resources to be probable and reliably estimable.
With respect to certain litigation, regulatory and similar matters for which we have established provisions, we are able to
estimate the expected timing of outflows. However, the aggregate amount of the expected outflows for those matters
for which we are able to estimate expected timing is immaterial relative to our current and expected levels of liquidity
over the relevant time periods.
The aggregate amount provisioned for litigation, regulatory and similar matters as a class is disclosed in the “Provisions”
table in Note 18a above. It is not practicable to provide an aggregate estimate of liability for our litigation, regulatory
and similar matters as a class of contingent liabilities beyond what has been identified as a consequence of the acquisition
of Credit Suisse as set out below. 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.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
341
Note 18 Provisions and contingent liabilities (continued)
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.
Matters related to Credit Suisse entities are separately described herein. The amounts shown in the table below reflect
the provisions recorded under IFRS Accounting Standards accounting principles. In connection with the acquisition of
Credit Suisse, UBS Group AG additionally has reflected in its purchase accounting under IFRS 3 a further valuation
adjustment of USD 3.8bn reflecting an updated estimate of outflows relating to contingent liabilities for all present
obligations included in the scope of the acquisition at fair value upon closing, even if it is not probable that they will
result in an outflow of resources, significantly decreasing the recognition threshold for litigation liabilities beyond those
that generally apply under IFRS Accounting Standards and US GAAP.
Provisions used in conformity with designated purpose include USD 1.4bn recorded in Non-core and Legacy from the
settlement of the action by the DOJ under the Financial Institutions Reform, Recovery and Enforcement Act of 1989
related to UBS’s issuance, underwriting and sale of US residential mortgage-backed securities in 2006 and 2007.
Provisions for litigation, regulatory and similar matters by business division and in Group Items1
USD m
Balance at the beginning of the year
Provisions recognized upon the acquisition of the Credit Suisse Group3
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 and other movements
Balance at the end of the year
of which: Credit Suisse 3
Global Wealth
Total 2023
Management
2,586
1,182
2,883
87
909
133
(97)
(8)
(2,344)
(199)
85
41
4,020
1,235
2,210
15
1 Provisions, if any, for the matters described in items A2, B8 and B10 of this Note are recorded in Global Wealth Management; provisions, if any, for the matters described in items B1, B2, B3, B4, B5, B6, B7, B9,
B11 and B12 of this Note are recorded in Non-core and Legacy; provisions, if any, for the matters described in items B13 and B14 of this Note are recorded in Group Items. Provisions, if any, for the matters described
in items A1 and A4 of this Note are allocated between Global Wealth Management and Personal & Corporate Banking; and provisions, if any, for the matters described in item A3 are allocated between the Investment
Bank and Group Items. 2 Starting with the third quarter of 2023, Non-core and Legacy represents a separate reportable segment and Group Functions has been renamed Group Items. Prior periods have been
revised to reflect these changes. 3 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
and Legacy2 Group Items2
158
4
2
(29)
(1)
0
134
2
Asset
Management
8
0
8
0
(1)
(1)
15
2
Investment
Bank
308
2
81
(3)
(106)
12
294
8
771
2,789
684
(48)
(2,036)
26
2,186
2,182
Non-core
Personal &
Corporate
Banking
159
1
1
(10)
0
6
157
1
A. Litigation, regulatory and similar matters involving UBS AG and subsidiaries
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.
Since 2013, UBS (France) S.A., UBS AG and certain former employees have been under investigation in France in relation
to UBS’s cross-border business with French clients. In connection with this investigation, the investigating judges ordered
UBS AG to provide bail (“caution”) of EUR 1.1bn.
In 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 3.7bn on
UBS AG and UBS (France) S.A. and awarded EUR 800m of civil damages to the French state. A trial in the Paris Court of
Appeal took place in March 2021. In 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 3.75m, the confiscation of EUR
1bn, and awarded civil damages to the French state of EUR 800m. UBS appealed the decision to the French Supreme
Court. The Supreme Court rendered its judgment on 15 November 2023. It upheld the Court of Appeal‘s decision
regarding unlawful solicitation and aggravated laundering of the proceeds of tax fraud, but overturned the confiscation
of EUR 1bn, the penalty of EUR 3.75m and the EUR 800m of civil damages awarded to the French state. The case has
been remanded to the Court of Appeal for a retrial regarding these overturned elements. The French state has reimbursed
the EUR 800m of civil damages to UBS AG.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
342
Note 18 Provisions and contingent liabilities (continued)
Our balance sheet at 31 December 2023 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.
2. Madoff
In relation to the Bernard L. Madoff Investment Securities LLC (BMIS) investment fraud, UBS AG, UBS (Luxembourg) S.A.
(now UBS Europe SE, Luxembourg branch) and certain other UBS subsidiaries have been subject to inquiries by a number
of regulators, including the Swiss Financial Market Supervisory Authority (FINMA) and the Luxembourg Commission de
Surveillance du Secteur Financier. Those inquiries concerned two 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 in liquidation. The
documentation establishing both funds identifies UBS entities in various roles, including custodian, administrator,
manager, distributor and promoter, and indicates that UBS employees serve as board members.
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 2.1bn,
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 2bn.
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 125m of payments alleged to be fraudulent conveyances and
preference payments. In 2016, the bankruptcy court dismissed these claims against the UBS entities. In 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.
3. 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 141m 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. UBS and the other banks have resolved those individual matters.
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 2022, the court denied plaintiffs’ motion for class certification. In March 2023, the court granted
defendants’ summary judgment motion, dismissing the case. Plaintiffs have appealed.
LIBOR and other benchmark-related regulatory matters: Numerous government agencies conducted investigations
regarding potential improper attempts by UBS, among others, to manipulate LIBOR and other benchmark rates at certain
times. UBS reached settlements or otherwise concluded investigations relating to benchmark interest rates with the
investigating authorities. UBS 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.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
343
Note 18 Provisions and contingent liabilities (continued)
LIBOR and other benchmark-related civil litigation: A number of putative class actions and other actions are pending in
the federal courts in New York against UBS and numerous other banks on behalf of parties who transacted in certain
interest rate benchmark-based derivatives. Also pending in the US and in other jurisdictions are a number of other actions
asserting losses related to various products whose interest rates were linked to LIBOR and other benchmarks, 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 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, Commodity Exchange Act claims, and
state common law claims, and again dismissed the antitrust claims in 2016 following an appeal. In 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. 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. The Second Circuit denied the petition to appeal. In 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. In September 2022, the court
granted defendants’ motion to dismiss the complaint in its entirety, while allowing plaintiffs the opportunity to file an
amended complaint. Plaintiffs filed an amended complaint in October 2022, and defendants moved to dismiss the
amended complaint. In October 2023, the court dismissed the amended complaint with prejudice. In January 2024,
plaintiffs appealed the dismissal to the Ninth Circuit Court of Appeals. Defendants filed their response to the appeal in
March 2024.
Other benchmark class actions in the US:
Yen LIBOR / Euroyen TIBOR – In 2017, the court dismissed one Yen LIBOR / Euroyen TIBOR action in its entirety on
standing grounds. In 2020, the appeals court reversed the dismissal and, subsequently, plaintiffs in that action filed an
amended complaint focused on Yen LIBOR. In 2022, the court granted UBS’s motion for reconsideration and dismissed
the case against UBS. The dismissal of the case against UBS could be appealed following the disposition of the case
against the remaining defendant in the district court.
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 2019. Plaintiffs appealed. In 2021,
the Second Circuit granted the parties’ joint motion to vacate the dismissal and remand the case for further proceedings.
Plaintiffs filed a third amended complaint in November 2022 and defendants moved to dismiss the amended complaint
in January 2023.
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.
GBP LIBOR – The court dismissed the GBP LIBOR action in 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 were
granted in 2021. Plaintiffs filed an amended complaint, which defendants moved to dismiss later in 2021. In March 2022,
the court granted defendants’ motion to dismiss that complaint, and in February 2024, the Second Circuit affirmed the
district court’s dismissal. Similar class actions have been filed concerning European government bonds and other
government bonds.
In 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 172m.
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 2023 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.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
344
Note 18 Provisions and contingent liabilities (continued)
4. 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 2023 reflected a provision with respect to matters described in this item 4 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.
B. Litigation regulatory and similar matters involving Credit Suisse entities
1. Mortgage-related matters
Government and regulatory related matters: DOJ RMBS settlement – In January 2017, Credit Suisse Securities (USA) LLC
(CSS LLC) and its current and former US subsidiaries and US affiliates reached a settlement with the US Department of
Justice (DOJ) related to its legacy Residential Mortgage-Backed Securities (RMBS) business, a business conducted through
2007. The settlement resolved potential civil claims by the DOJ related to certain of those Credit Suisse entities’ packaging,
marketing, structuring, arrangement, underwriting, issuance and sale of RMBS. Pursuant to the terms of the settlement
a civil monetary penalty was paid to the DOJ in January 2017. The settlement also required the Credit Suisse entities to
provide certain levels of consumer relief measures, including affordable housing payments and loan forgiveness, and the
DOJ and Credit Suisse agreed to the appointment of an independent monitor to oversee the completion of the consumer
relief requirements of the settlement. Credit Suisse continues to evaluate its approach toward satisfying its remaining
consumer relief obligations, and Credit Suisse currently anticipates that it will take much longer than the five-year period
provided in the settlement to satisfy in full its obligations in respect of these consumer relief measures, subject to risk
appetite and market conditions. Credit Suisse expects to incur costs in relation to satisfying those obligations. The amount
of consumer relief Credit Suisse must provide also increases after 2021 pursuant to the original settlement by 5% per
annum of the outstanding amount due until these obligations are settled. The monitor publishes reports periodically on
these consumer relief matters.
Civil litigation: Repurchase litigations – CSS LLC and/or certain of its affiliates have also been named as defendants in
various civil litigation matters related to their roles as issuer, sponsor, depositor, underwriter and/or servicer of RMBS
transactions. These cases currently include repurchase actions by RMBS trusts and/or trustees, in which plaintiffs generally
allege breached representations and warranties in respect of mortgage loans and failure to repurchase such mortgage
loans as required under the applicable agreements. The amounts disclosed below do not reflect actual realized plaintiff
losses to date or anticipated future litigation exposure. Unless otherwise stated, these amounts reflect the original unpaid
principal balance amounts as alleged in these actions and do not include any reduction in principal amounts since
issuance.
DLJ Mortgage Capital, Inc. (DLJ) is a defendant in New York state court in: (i) one action brought by Asset Backed
Securities Corporation Home Equity Loan Trust, Series 2006-HE7, in which plaintiff alleges damages of not less than USD
374m in an amended complaint filed in August 2019; in January 2020, DLJ filed a motion to dismiss, which the court
granted in part and denied in part in December 2023, dismissing with prejudice all notice-based claims; in February 2024,
the parties filed notices of appeal; (ii) one action brought by Home Equity Asset Trust, Series 2006-8, in which plaintiff
alleges damages of not less than USD 436m; (iii) one action brought by Home Equity Asset Trust 2007-1, in which plaintiff
alleges damages of not less than USD 420m; in December 2018, the court denied DLJ’s motion for partial summary
judgment in this action, which was affirmed on appeal; in March 2022, the New York State Court of Appeals reversed
the decision and ordered that DLJ’s motion for partial summary judgment be granted; a non-jury trial in the action was
held between January and February 2023, and a decision is pending; (iv) one action brought by Home Equity Asset Trust
2007-2, in which plaintiff alleges damages of not less than USD 495m; and (v) one action brought by CSMC Asset-
Backed Trust 2007-NC1, in which no damages amount is alleged. These actions are at various procedural stages.
DLJ was also a defendant in one action brought by Home Equity Asset Trust Series 2007-3, in which plaintiff alleged
damages of not less than USD 206m. In March 2022, DLJ and the plaintiff executed an agreement to settle this action.
In November 2023, the Minnesota state court approved the settlement through a trust instruction proceeding brought
by the trustee of the plaintiff trust. The New York state court dismissed the underlying action with prejudice in January
2024.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
345
Note 18 Provisions and contingent liabilities (continued)
2. Tax and securities law matters
In May 2014, Credit Suisse AG entered into settlement agreements with several US regulators regarding its US cross-
border matters. As part of the agreements, Credit Suisse AG, among other things, engaged an independent corporate
monitor that reports to the New York State Department of Financial Services. As of July 2018, the monitor concluded
both his review and his assignment. Credit Suisse AG continues to report to and cooperate with US authorities in
accordance with Credit Suisse AG’s obligations under the agreements, including by conducting a review of cross-border
services provided by Credit Suisse’s Switzerland-based Israel Desk. Most recently, Credit Suisse AG has provided
information to US authorities regarding potentially undeclared US assets held by clients at Credit Suisse AG since the May
2014 plea. Credit Suisse AG continues to cooperate with the authorities. In March 2023, the US Senate Finance
Committee issued a report criticizing Credit Suisse AG’s history regarding US tax compliance. The report called on the
DOJ to investigate Credit Suisse AG’s compliance with the 2014 plea.
In February 2021, a qui tam complaint was filed in the Eastern District of Virginia, alleging that Credit Suisse AG had
violated the False Claims Act by failing to disclose all US accounts at the time of the 2014 plea, which allegedly allowed
Credit Suisse AG to pay a criminal fine in 2014 that was purportedly lower than it should have been. The DOJ moved to
dismiss the case, and the Court summarily dismissed the suit. The case is now on appeal with the US Federal Court of
Appeals for the Fourth Circuit.
3. Rates-related matters
Regulatory matters: Regulatory authorities in a number of jurisdictions, including the US, UK, EU and Switzerland, have
for an extended period of time been conducting investigations into the setting of LIBOR and other reference rates with
respect to a number of currencies, as well as the pricing of certain related derivatives. These ongoing investigations have
included information requests from regulators regarding LIBOR-setting practices and reviews of the activities of various
financial institutions, including Credit Suisse Group AG, which was a member of three LIBOR rate-setting panels (US
Dollar LIBOR, Swiss Franc LIBOR and Euro LIBOR). Credit Suisse is cooperating fully with these investigations.
Regulatory authorities in a number of jurisdictions, including WEKO, the European Commission (Commission), the South
African Competition Commission and the Brazilian Competition Authority have been conducting investigations into the
trading activities, information sharing and the setting of benchmark rates in the foreign exchange (including electronic
trading) markets. Credit Suisse continues to cooperate with ongoing investigations.
Credit Suisse Group AG, Credit Suisse AG and Credit Suisse Securities (Europe) Limited (CSSEL) received a Statement of
Objections and a Supplemental Statement of Objections from the Commission in July 2018 and March 2021, respectively,
alleging that Credit Suisse entities engaged in anticompetitive practices in connection with their foreign exchange trading
business. In December 2021, the Commission issued a formal decision imposing a fine of EUR 83.3m. In February 2022,
Credit Suisse appealed this decision to the EU General Court.
The reference rates investigations have also included information requests from regulators concerning supranational,
sub-sovereign and agency (SSA) bonds and commodities markets. Credit Suisse Group AG and CSSEL received a
Statement of Objections from the Commission in December 2018, alleging that Credit Suisse entities engaged in
anticompetitive practices in connection with their SSA bonds trading business. In April 2021, the Commission issued a
formal decision imposing a fine of EUR 11.9m. In July 2021, Credit Suisse appealed this decision to the EU General Court.
Civil litigation:
USD LIBOR litigation – Beginning in 2011, certain Credit Suisse entities were named in various putative class and individual
lawsuits filed in the US, alleging banks on the US dollar LIBOR panel manipulated US dollar LIBOR to benefit their
reputation and increase profits. All remaining matters have been consolidated for pre-trial purposes into a multi-district
litigation in the US District Court for the Southern District of New York (SDNY).
In a series of rulings between 2013 and 2019 on motions to dismiss, the SDNY (i) narrowed the claims against the Credit
Suisse entities and the other defendants (dismissing antitrust, Racketeer Influenced and Corrupt Organizations Act (RICO),
Commodity Exchange Act, and state law claims), (ii) narrowed the set of plaintiffs who may bring claims, and (iii)
narrowed the set of defendants in the LIBOR actions (including the dismissal of several Credit Suisse entities from various
cases on personal jurisdiction and statute of limitation grounds). After a number of putative class and individual plaintiffs
appealed the dismissal of their antitrust claims to the United States Court of Appeals for the Second Circuit (Second
Circuit), in December 2021, the Second Circuit affirmed in part and reversed in part the district court’s decision and
remanded the case to the SDNY.
Separately, in May 2017, the plaintiffs in three putative class actions moved for class certification. In February 2018, the
SDNY denied certification in two of the actions and granted certification over a single antitrust claim in an action brought
by over-the-counter purchasers of LIBOR-linked derivatives.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
346
Note 18 Provisions and contingent liabilities (continued)
USD ICE LIBOR litigation – In August 2020, members of the ICE LIBOR panel, including Credit Suisse Group AG and
certain of its affiliates, were named in a civil action in the US District Court for the Northern District of California, alleging
that panel banks manipulated ICE LIBOR to profit from variable interest loans and credit cards. In December 2021, the
court denied plaintiffs’ motion for preliminary and permanent injunctions to enjoin panel banks from continuing to set
LIBOR or automatically setting the benchmark to zero each day, and in September 2022, the court granted defendants’
motions to dismiss. In October 2022, plaintiffs filed an amended complaint. In November 2022, defendants filed a motion
to dismiss the amended complaint. In October 2023, the court dismissed the amended complaint with prejudice without
leave to amend. Plaintiffs have appealed.
CHF LIBOR litigation – In February 2015, various banks that served on the Swiss franc LIBOR panel, including Credit Suisse
Group AG, were named in a civil putative class action lawsuit filed in the SDNY, alleging manipulation of Swiss franc
LIBOR to benefit defendants’ trading positions. After defendants’ motion to dismiss for lack of subject matter jurisdiction
was granted and plaintiffs successfully appealed, in July 2022, Credit Suisse entered into an agreement to settle all claims.
In February and September 2023, respectively, the court entered orders granting preliminary and final approval to the
agreement to settle all claims.
Foreign exchange litigation – Credit Suisse Group AG and affiliates as well as other financial institutions have been named
in civil lawsuits relating to the alleged manipulation of foreign exchange rates.
Credit Suisse AG, together with other financial institutions, was named in a consolidated putative class action in Israel,
which made allegations similar to the consolidated class action. In April 2022, Credit Suisse entered into an agreement
to settle all claims. The settlement remains subject to court approval.
Treasury markets litigation – CSS LLC, along with over 20 other primary dealers of US treasury securities, was named in
a number of putative civil class action complaints in the US relating to the US treasury markets. These complaints generally
alleged that the defendants colluded to manipulate US treasury auctions, as well as the pricing of US treasury securities
in the when-issued market, with impacts upon related futures and options, and that certain of the defendants
participated in a group boycott to prevent the emergence of anonymous all-to-all trading in the secondary market for
treasury securities. In March 2022, the SDNY granted defendants’ motion to dismiss and dismissed with prejudice all
claims against the defendants, and in February 2024, the Second Circuit affirmed the district court’s dismissal.
SSA bonds litigation – Credit Suisse Group AG and certain of its affiliates, together with other financial institutions, were
named in two Canadian putative class actions, which allege that defendants conspired to fix the prices of SSA bonds sold
to and purchased from investors in the secondary market. One putative class action was dismissed against Credit Suisse
in February 2020. In October 2022, in the second action, Credit Suisse entered into an agreement to settle all claims. The
settlement remains subject to court approval.
Credit default swap auction litigation – In June 2021, Credit Suisse Group AG and affiliates, along with other banks and
entities, were named in a putative class action complaint filed in the US District Court for the District of New Mexico
alleging manipulation of credit default swap (CDS) final auction prices. In April 2022, defendants filed a motion to dismiss.
In June 2023, the court granted in part and denied in part defendants’ motion to dismiss. In November 2023, defendants
filed a motion to enforce the previous CDS settlement with the SDNY. In January 2024, the SDNY ruled that, to the
extent claims in the New Mexico action arise from conduct prior to 30 June 2014, those claims are barred by the SDNY
settlement. In February 2024, the plaintiffs filed a notice of appeal of the SDNY decision.
4. OTC trading cases
Interest rate swaps litigation: Credit Suisse Group AG and affiliates, along with other financial institutions, have been
named in a consolidated putative civil class action complaint and complaints filed by individual plaintiffs relating to interest
rate swaps, alleging that dealer defendants conspired with trading platforms to prevent the development of interest rate
swap exchanges. The individual lawsuits were brought by TeraExchange LLC, a swap execution facility, and affiliates;
Javelin Capital Markets LLC, a swap execution facility, and an affiliate; and trueEX LLC, a swap execution facility, which
claim to have suffered lost profits as a result of defendants’ alleged conspiracy. All interest rate swap actions have been
consolidated in a multi-district litigation in the SDNY.
Defendants moved to dismiss the putative class and individual actions, and the SDNY granted in part and denied in part
these motions.
In February 2019, class plaintiffs in the consolidated multi-district litigation filed a motion for class certification. In March
2019, class plaintiffs filed a fourth amended consolidated class action complaint. In January 2022, Credit Suisse entered
into an agreement to settle all class action claims. The settlement remains subject to court approval. In December 2023,
the SDNY denied the motion for class certification. In January 2024, class plaintiffs filed a petition for leave to appeal the
denial of class certification.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
347
Note 18 Provisions and contingent liabilities (continued)
Credit default swaps litigation: In June 2017, Credit Suisse Group AG and affiliates, along with other financial institutions,
were named in a civil action filed in the SDNY by Tera Group, Inc. and related entities (Tera), alleging violations of antitrust
law in connection with the allegation that CDS dealers conspired to block Tera’s electronic CDS trading platform from
successfully entering the market. In July 2019, the SDNY granted in part and denied in part defendants’ motion to dismiss.
In January 2020, plaintiffs filed an amended complaint. In April 2020, defendants filed a motion to dismiss. In August
2023, the court granted the motion, dismissing all claims with prejudice. Plaintiffs have appealed.
Stock loan litigation: Credit Suisse Group AG and certain of its affiliates, as well as other financial institutions, were
originally named in a number of civil lawsuits in the SDNY, certain of which are brought by class action plaintiffs alleging
that the defendants conspired to keep stock-loan trading in an over-the-counter market and collectively boycotted certain
trading platforms that sought to enter the market, and certain of which are brought by trading platforms that sought to
enter the market alleging that the defendants collectively boycotted the platforms. In January 2022, Credit Suisse entered
into an agreement to settle all class action claims. In February 2022, the court entered an order granting preliminary
approval to the agreement to settle all class action claims. The settlement remains subject to final court approval.
In October 2021, in a consolidated civil litigation brought in the SDNY by entities that developed a trading platform for
stock loans that sought to enter the market, alleging that the defendants collectively boycotted the platform, the court
granted defendants’ motion to dismiss. In October 2021, plaintiffs filed a notice of appeal. In March 2023, the Second
Circuit affirmed the decision granting defendants’ motion to dismiss.
Odd-lot corporate bond litigation: In April 2020, CSS LLC and other financial institutions were named in a putative class
action complaint filed in the SDNY, alleging a conspiracy among the financial institutions to boycott electronic trading
platforms and fix prices in the secondary market for odd-lot corporate bonds. In October 2021, the SDNY granted
defendants’ motion to dismiss. Plaintiffs have appealed.
5. ATA litigation
Since November 2014, a series of lawsuits have been filed against a number of banks, including Credit Suisse AG and,
in two instances, Credit Suisse AG, New York Branch, in the US District Court for the Eastern District of New York (EDNY)
and the SDNY alleging claims under the United States Anti-Terrorism Act (ATA) and the Justice Against Sponsors of
Terrorism Act. The plaintiffs in each of these lawsuits are, or are relatives of, victims of various terrorist attacks in Iraq and
allege a conspiracy and/or aiding and abetting based on allegations that various international financial institutions,
including the defendants, agreed to alter, falsify or omit information from payment messages that involved Iranian parties
for the express purpose of concealing the Iranian parties’ financial activities and transactions from detection by US
authorities. The lawsuits allege that this conduct has made it possible for Iran to transfer funds to Hezbollah and other
terrorist organizations actively engaged in harming US military personnel and civilians. In January 2023, the United States
Court of Appeals for the Second Circuit affirmed a September 2019 ruling by the EDNY granting defendants’ motion to
dismiss the first filed lawsuit. In October 2023, the United States Supreme Court denied plaintiffs’ petition for a writ of
certiorari. In February 2024, plaintiffs filed a motion to vacate the judgment in the first filed lawsuit. Of the other seven
cases, four are stayed, including one that was dismissed as to Credit Suisse and most of the bank defendants prior to
entry of the stay, and in three plaintiffs have filed amended complaints, including two that were dismissed prior to the
court allowing plaintiffs to replead.
6. Customer account matters
Several clients have claimed that a former relationship manager in Switzerland had exceeded his investment authority in
the management of their portfolios, resulting in excessive concentrations of certain exposures and investment losses.
Credit Suisse AG is investigating the claims, as well as transactions among the clients. Credit Suisse AG filed a criminal
complaint against the former relationship manager with the Geneva Prosecutor’s Office upon which the prosecutor
initiated a criminal investigation. Several clients of the former relationship manager also filed criminal complaints with
the Geneva Prosecutor’s Office. In February 2018, the former relationship manager was sentenced to five years in prison
by the Geneva criminal court for fraud, forgery and criminal mismanagement and ordered to pay damages of
approximately USD 130m. Several parties appealed the judgment. In June 2019, the Criminal Court of Appeals of Geneva
ruled in the appeal of the judgment against the former relationship manager, upholding the main findings of the Geneva
criminal court. Several parties appealed the decision to the Swiss Federal Supreme Court. In February 2020, the Swiss
Federal Supreme Court rendered its judgment on the appeals, substantially confirming the findings of the Criminal Court
of Appeals of Geneva.
Civil lawsuits have been initiated against Credit Suisse AG and/or certain affiliates in various jurisdictions, based on the
findings established in the criminal proceedings against the former relationship manager.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
348
Note 18 Provisions and contingent liabilities (continued)
In Singapore, in the civil lawsuit brought against Credit Suisse Trust Limited, a Credit Suisse AG affiliate, in May 2023,
the Singapore International Commercial Court issued a first instance judgment finding for the plaintiffs and directing the
parties’ experts to agree on the amount of the damages award according to the calculation method and parameters
adopted by the court. As the parties’ experts were unable to agree on the amount of the damages, following court
directions, the parties filed their proposed draft orders with supporting documents in August 2023. In September 2023,
the court ruled that the damages under its May 2023 judgment are USD 742.73m, excluding post-judgment interest.
This figure does not exclude potential overlap with the Bermuda proceedings against Credit Suisse Life (Bermuda) Ltd.,
which are currently being appealed. The court ordered the parties to ensure that there shall be no double recovery in
relation to this award and any sum recovered in the Bermuda proceedings. Credit Suisse Trust Limited has appealed the
judgment and has applied for a stay of execution pending that appeal. In November 2023, the court granted a stay of
execution of its May 2023 judgment pending appeal on the condition that damages awarded and post-judgment interest
accrued are paid into court deposit within 21 days, which condition was satisfied.
In Bermuda, in the civil lawsuit brought against Credit Suisse Life (Bermuda) Ltd., a Credit Suisse AG affiliate, trial took
place in the Supreme Court of Bermuda in November and December 2021. The Supreme Court of Bermuda issued a first
instance judgment in March 2022, finding for the plaintiff. In May 2022, the Supreme Court of Bermuda issued an order
awarding damages of USD 607.35m to the plaintiff. In May 2022, Credit Suisse Life (Bermuda) Ltd. appealed the decision
to the Bermuda Court of Appeal. In July 2022, the Supreme Court of Bermuda granted a stay of execution of its judgment
pending appeal on the condition that damages awarded were paid into an escrow account within 42 days, which
condition was satisfied. In June 2023, the Bermuda Court of Appeal issued its judgment confirming the award issued by
the Supreme Court of Bermuda and upholding the Supreme Court of Bermuda’s finding that Credit Suisse Life (Bermuda)
Ltd. had breached its contractual and fiduciary duties, but overturning the Supreme Court of Bermuda’s finding that
Credit Suisse Life (Bermuda) Ltd. had made fraudulent misrepresentations. In July 2023, Credit Suisse Life (Bermuda) Ltd.
filed its notice of motion for leave to appeal to the Judicial Committee of the Privy Council and applied for a stay of
execution of the Bermuda Court of Appeal’s judgment pending the outcome of the appeal to the Judicial Committee of
the Privy Council on the condition that the damages awarded remain within the escrow account and that interest be
added to the escrow account calculated at the Bermuda statutory rate of 3.5%. A hearing on the applications for leave
to appeal and stay of execution took place in December 2023. Further, in December 2023, USD 75m was released from
the escrow account and paid to plaintiffs. In February 2024, the Bermuda Court of Appeal granted leave to appeal and
ordered that the current stay shall continue pending determination of the appeal to the Judicial Committee of the Privy
Council until and unless the plaintiffs provide a top tier bank guarantee for the remaining judgment debt of USD 536.64m
plus interest.
In Switzerland, civil lawsuits have commenced against Credit Suisse AG in the Court of First Instance of Geneva, with
statements of claim served in March 2023.
7. Mozambique matter
Credit Suisse has been subject to investigations by regulatory and enforcement authorities, as well as civil litigation,
regarding certain Credit Suisse entities’ arrangement of loan financing to Mozambique state enterprises, Proindicus S.A.
and Empresa Moçambicana de Atum S.A. (EMATUM), a distribution to private investors of loan participation notes (LPN)
related to the EMATUM financing in September 2013, and certain Credit Suisse entities’ subsequent role in arranging
the exchange of those LPNs for Eurobonds issued by the Republic of Mozambique. In 2019, three former Credit Suisse
employees pleaded guilty in the EDNY to accepting improper personal benefits in connection with financing transactions
carried out with two Mozambique state enterprises.
In October 2021, Credit Suisse reached settlements with the DOJ, the US Securities and Exchange Commission (SEC), the
UK Financial Conduct Authority (FCA) and FINMA to resolve inquiries by these agencies, including findings that Credit
Suisse failed to appropriately organize and conduct its business with due skill and care, and manage risks. Credit Suisse
Group AG entered into a three-year Deferred Prosecution Agreement (DPA) with the DOJ in connection with the criminal
information charging Credit Suisse Group AG with conspiracy to commit wire fraud and consented to the entry of a
Cease and Desist Order by the SEC. Under the terms of the DPA, UBS Group AG (as successor to Credit Suisse Group
AG) must continue compliance enhancement and remediation efforts agreed by Credit Suisse, report to the DOJ on those
efforts for three years and undertake additional measures as outlined in the DPA. If the DPA’s conditions are complied
with, the charges will be dismissed at the end of the DPA’s three-year term. In addition, CSSEL entered into a Plea
Agreement and pleaded guilty to one count of conspiracy to violate the US federal wire fraud statute. CSSEL is bound by
the same compliance, remediation and reporting obligations under the DPA. The total monetary sanctions paid to the
DOJ and SEC, taking into account various credits and offsets, was approximately USD 275m. Under the terms of the
resolution with the DOJ, Credit Suisse also paid USD 22.6m in restitution to eligible investors in the 2016 Eurobonds
issued by the Republic of Mozambique.
In connection with the resolution with the FCA, Credit Suisse paid a penalty of approximately USD 200m and, further to
an agreement with the FCA, forgave USD 200m of debt owed to Credit Suisse by Mozambique.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
349
Note 18 Provisions and contingent liabilities (continued)
The FINMA decree concluding its enforcement proceeding, ordered the bank to remediate certain deficiencies. Credit
Suisse’s implementation of the measures required under the FINMA decree has been reviewed by an independent third
party appointed by FINMA, which review recommends some enhancements to the measures that Credit Suisse has
implemented. FINMA also arranged for certain existing transactions to be reviewed by the same independent third party
on the basis of specific risk criteria, and required enhanced disclosure of certain sovereign transactions.
In February 2019, certain Credit Suisse entities, three former employees and several other unrelated entities were sued
in the English High Court by the Republic of Mozambique seeking a declaration that the sovereign guarantee issued in
connection with the ProIndicus loan syndication was void, and damages. Credit Suisse entities subsequently filed cross
claims against several entities controlled by Privinvest Holding SAL (Privinvest) that acted as the project contractor,
Iskandar Safa, the owner of Privinvest, and several Mozambique officials. In addition, several of the banks that
participated in the ProIndicus loan syndicate brought claims against Credit Suisse entities seeking a declaration that Credit
Suisse is liable to compensate them for alleged losses suffered as a result of any invalidity of the sovereign guarantee or
damages stemming from the alleged loss. In September 2023, Credit Suisse, the Republic of Mozambique, and certain
of the lenders in the ProIndicus syndicate entered into a settlement agreement that, with the subsequent settlement with
Privinvest entities referred to below, resolved all claims involving Credit Suisse entities in the English High Court.
In February 2022, Privinvest and Iskandar Safa brought a defamation claim in a Lebanese court against CSSEL and Credit
Suisse Group AG and in November 2022, a Privinvest employee who was the lead negotiator on behalf of the Privinvest
entities in relation to the Mozambique transactions, also brought a defamation claim in the same court against those
entities. In November 2023, UBS Group AG (as successor to Credit Suisse Group AG), the Credit Suisse entities, Privinvest
and Iskandar Safa entered into an agreement to settle all claims among them in the English High Court and in Lebanon.
8. Cross-border private banking matters
Credit Suisse offices in various locations, including the UK, the Netherlands, France and Belgium, have been contacted
by regulatory and law enforcement authorities that are seeking records and information concerning investigations into
Credit Suisse’s historical private banking services on a cross-border basis and in part through its local branches and banks.
Credit Suisse has conducted a review of these issues, the UK and French aspects of which have been closed, and is
continuing to cooperate with the authorities.
9. ETN-related litigation
XIV litigation: Since March 2018, three class action complaints were filed in the SDNY on behalf of a putative class of
purchasers of VelocityShares Daily Inverse VIX Short Term Exchange Traded Notes linked to the S&P 500 VIX Short-Term
Futures Index due December 4, 2030 (XIV ETNs). In August 2018, plaintiffs filed a consolidated amended class action
complaint, naming Credit Suisse Group AG and certain affiliates and executives, which asserts claims for violations of
Sections 9(a)(4), 9(f), 10(b) and 20(a) of the US Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Sections
11 and 15 of the US Securities Act of 1933 and alleges that the defendants are responsible for losses to investors following
a decline in the value of XIV ETNs in February 2018. Defendants moved to dismiss the amended complaint in November
2018. In September 2019, the SDNY granted defendants’ motion to dismiss and dismissed with prejudice all claims
against the defendants. In October 2019, plaintiffs filed a notice of appeal. In April 2021, the Second Circuit issued an
order affirming in part and vacating in part the SDNY’s September 2019 decision granting defendants’ motion to dismiss
with prejudice. In July 2022, plaintiffs filed a motion for class certification. In March 2023, the court denied plaintiffs’
motion to certify two of their three alleged classes and granted plaintiffs’ motion to certify their third alleged class. In
March 2023, defendants moved for reconsideration and filed a petition for permission to appeal the court’s class
certification decision to the Second Circuit. In April 2023, plaintiffs filed a motion seeking leave to amend their complaint.
In May 2023, plaintiffs filed a renewed motion for class certification, which defendants have opposed. In January 2024,
the court issued an order denying plaintiffs’ motion to amend. In March 2024, the court denied plaintiffs’ renewed
motion to certify two of the three alleged classes, without prejudice, and denied defendants’ motion for reconsideration
on the certification of the third alleged class.
DGAZ litigation: In January 2022, Credit Suisse AG was named in a class action complaint filed in the SDNY brought on
behalf of a putative class of short sellers of VelocityShares 3x Inverse Natural Gas Exchange Traded Notes linked to the
S&P GSCI Natural Gas Index ER due February 9, 2032 (DGAZ ETNs). The complaint asserts claims for violations of Section
10(b) of the US Securities Exchange Act of 1934 and Rule 10b-5 thereunder and alleges that Credit Suisse is responsible
for losses suffered by short sellers following a June 2020 announcement that Credit Suisse would delist and suspend
further issuances of the DGAZ ETNs. In July 2022, Credit Suisse AG filed a motion to dismiss. In March 2023, the court
granted Credit Suisse AG’s motion to dismiss. In May 2023, the court entered an order dismissing the case with prejudice.
In February 2024, the Second Circuit affirmed the district court’s dismissal.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
350
Note 18 Provisions and contingent liabilities (continued)
10. Bulgarian former clients matter
Credit Suisse AG has been responding to an investigation by the Swiss Office of the Attorney General (SOAG) concerning
the diligence and controls applied to a historical relationship with Bulgarian former clients who are alleged to have
laundered funds through Credit Suisse AG accounts. In December 2020, the SOAG brought charges against Credit Suisse
AG and other parties. Credit Suisse AG believes its diligence and controls complied with applicable legal requirements
and intends to defend itself vigorously. The trial in the Swiss Federal Criminal Court took place in the first quarter of
2022. In June 2022, Credit Suisse AG was convicted in the Swiss Federal Criminal Court of certain historical organizational
inadequacies in its anti-money laundering framework and ordered to pay a fine of CHF 2m. In addition, the court seized
certain client assets in the amount of approximately CHF 12m and ordered Credit Suisse AG to pay a compensatory claim
in the amount of approximately CHF 19m. In July 2022, Credit Suisse AG appealed the decision to the Swiss Federal
Court of Appeals.
11. SCFF
Credit Suisse has received requests for documents and information in connection with inquiries, investigations,
enforcement and other actions relating to the supply chain finance funds (SCFF) matter by FINMA, the FCA and other
regulatory and governmental agencies. The Luxembourg Commission de Surveillance du Secteur Financier is reviewing
the matter and has commissioned a report from a third party. Credit Suisse is cooperating with these authorities.
In February 2023, FINMA announced the conclusion of its enforcement proceedings against Credit Suisse in connection
with the SCFF matter. In its order, FINMA reported that Credit Suisse had seriously breached applicable Swiss supervisory
laws in this context with regard to risk management and appropriate operational structures. While FINMA recognized
that Credit Suisse has already taken extensive organizational measures based on its own investigation into the SCFF
matter, particularly to strengthen its governance and control processes, and FINMA is supportive of these measures, the
regulator has ordered certain additional remedial measures. These include a requirement that the most important
(approximately 500) business relationships must be reviewed periodically and holistically at the Credit Suisse Executive
Board level, in particular for counterparty risks, and that Credit Suisse must set up a document defining the responsibilities
of approximately 600 of its highest-ranking managers. The latter of these measures has been made applicable UBS Group.
Separate from the enforcement proceeding regarding Credit Suisse, FINMA has opened four enforcement proceedings
against former managers of Credit Suisse.
In May 2023, FINMA opened an enforcement proceeding against Credit Suisse in order to confirm compliance with
supervisory requirements in response to inquiries from FINMA’s enforcement division in the SCFF matter.
The Attorney General of the Canton of Zurich has initiated a criminal procedure in connection with the SCFF matter and
several fund investors have joined the procedure as interested parties. In such procedure, while certain former and active
Credit Suisse employees, among others, have been named as accused persons, Credit Suisse itself is not a party to the
procedure.
Certain civil actions have been filed by fund investors and other parties against Credit Suisse and/or certain officers and
directors in various jurisdictions, which make allegations including mis-selling and breaches of duties of care, diligence
and other fiduciary duties.
12. Archegos
Credit Suisse has received requests for documents and information in connection with inquiries, investigations and/or
actions relating to Credit Suisse’s relationship with Archegos Capital Management (Archegos), including from FINMA
(assisted by a third party appointed by FINMA), the DOJ, the SEC, the US Federal Reserve, the US Commodity Futures
Trading Commission (CFTC), the US Senate Banking Committee, the Prudential Regulation Authority (PRA), the FCA,
COMCO, the Hong Kong Competition Commission and other regulatory and governmental agencies. Credit Suisse is
cooperating with the authorities in these matters.
In July 2023, the US Federal Reserve and the PRA announced resolutions of their investigations of Credit Suisse’s
relationship with Archegos. UBS Group AG, Credit Suisse AG, Credit Suisse Holdings (USA) Inc., and Credit Suisse AG,
New York Branch entered into an Order to Cease and Desist with the Board of Governors of the Federal Reserve System.
Under the terms of the order, Credit Suisse paid a civil money penalty of USD 269m and agreed to undertake certain
remedial measures relating to counterparty credit risk management, liquidity risk management and non-financial risk
management, as well as enhancements to board oversight and governance.
CSI and CSSEL entered into a settlement agreement with the PRA providing for the resolution of the PRA’s investigation,
following which the PRA published a Final Notice imposing a financial penalty of GBP 87m on CSI and CSSEL for breaches
of various of the PRA’s Fundamental Rules.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
351
Note 18 Provisions and contingent liabilities (continued)
FINMA also entered a decree dated 14 July 2023 announcing the conclusion of its enforcement proceeding, finding that
Credit Suisse had seriously violated financial market law in connection with its business relationship with Archegos and
ordering remedial measures directed at Credit Suisse AG and UBS Group AG, as the legal successor to Credit Suisse
Group AG. These include a requirement that UBS Group AG apply its restrictions on its own positions relating to individual
clients throughout the financial group, as well as adjustments to the compensation system of the entire financial group
to provide for bonus allocation criteria that take into account risk appetite. FINMA also announced it has opened
enforcement proceedings against a former Credit Suisse manager in connection with this matter.
Civil actions relating to Credit Suisse’s relationship with Archegos have been filed against Credit Suisse and/or certain
officers and directors, including claims for breaches of fiduciary duties.
13. Credit Suisse financial disclosures
Credit Suisse Group AG and certain directors, officers and executives have been named in securities class action
complaints pending in the SDNY. These complaints, filed on behalf of purchasers of Credit Suisse shares, additional tier
1 capital notes (“AT1 notes”), and other securities in 2023, allege that defendants made misleading statements
regarding: (i) customer outflows in late 2022; (ii) the adequacy of Credit Suisse’s financial reporting controls; and (iii) the
adequacy of Credit Suisse’s risk management processes, and include allegations relating to Credit Suisse Group AG’s
merger with UBS Group AG. Many of the actions have been consolidated, and a motion to dismiss has been filed and
remains pending. One additional action, filed in October 2023, has been stayed pending a determination on whether it
should be consolidated with the earlier actions.
Credit Suisse has received requests for documents and information from regulatory and governmental agencies in
connection with inquiries, investigations and/or actions relating to these matters, as well as for other statements regarding
Credit Suisse’s financial condition, including from the SEC, the DOJ and FINMA. Credit Suisse is cooperating with the
authorities in these matters.
14. Merger-related litigation
Certain Credit Suisse Group AG affiliates and certain directors, officers and executives have been named in class action
complaints pending in the SDNY. One complaint, brought on behalf of Credit Suisse shareholders, alleges breaches of
fiduciary duty under Swiss law and civil RICO claims under United States federal law. In February 2024, the court granted
defendants’ motions to dismiss the civil RICO claims and conditionally dismissed the Swiss law claims pending defendants’
acceptance of jurisdiction in Switzerland. In March 2024, having received consents to Swiss jurisdiction from all
defendants served with the complaint, the court dismissed the Swiss law claims against those defendants. Additional
complaints, brought on behalf of holders of Credit Suisse additional tier 1 capital notes (“AT1 noteholders”) allege
breaches of fiduciary duty under Swiss law, arising from a series of scandals and misconduct, which led to Credit Suisse
Group AG’s merger with UBS Group AG, causing losses to shareholders and AT1 noteholders. The motion to dismiss the
first of these complaints was granted in March 2024 on the basis that Switzerland and not New York is the most
appropriate forum for litigation.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
352
Note 19 Other liabilities
a) Other financial liabilities measured at amortized cost
USD m
Other accrued expenses
Accrued interest expenses
Settlement and clearing accounts
Lease liabilities
Other
Total other financial liabilities measured at amortized cost
of which: Credit Suisse1
1 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
b) Other financial liabilities designated at fair value
USD m
Financial liabilities related to unit-linked investment contracts
Securities financing transactions
Over-the-counter debt instruments and other
Total other financial liabilities designated at fair value
of which: Credit Suisse1
1 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
c) Other non-financial liabilities
USD m
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 liabilities1
Current tax liabilities
Deferred tax liabilities
VAT, withholding tax and other tax payables
Deferred income
Other
Total other non-financial liabilities
of which: Credit Suisse2
1 Includes liabilities for payroll taxes and untaken vacation. 2 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
31.12.23
3,270
6,692
1,519
5,502
3,868
20,851
8,386
31.12.23
15,992
7,416
6,076
29,484
5,114
31.12.23
9,746
1,709
1,483
4,723
796
1,035
1,460
325
1,120
635
802
14,089
4,672
31.12.22
1,760
1,949
1,075
3,334
1,457
9,575
31.12.22
13,221
15,333
1,684
30,237
31.12.22
6,822
1,614
1,463
2,680
469
596
1,071
236
592
235
84
9,040
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
353
Additional information
Note 20 Expected credit loss measurement
a) Expected credit losses in the period
Total net credit loss expenses were USD 1,037m in 2023, reflecting net credit loss expenses of USD 593m related to stage 1
and 2 positions and net credit loss expenses of USD 445m related to credit-impaired (stage 3 and purchased credit-impaired)
positions. Expected credit loss (ECL) expenses of USD 593m for performing loans were predominantly attributable to the
initial recognition of ECL allowances and provisions after the date of the acquisition of the Credit Suisse Group. Credit-
impaired net expenses amounted to USD 445m, of which USD 325m was within the Credit Suisse portfolio and USD 120m
was within the UBS portfolio. As per IFRS 9, no ECL allowances and provisions had to be recognized at acquisition date for
credit-impaired exposures, after the fair valuation as per the purchase price allocation.
› Refer to Note 20b for more information regarding changes to ECL models, scenarios, scenario weights and the post-model
adjustments and to Note 20c for more information regarding the development of ECL allowances and provisions
Credit loss expense / (release)
Performing positions
Credit-impaired positions
Total
Stage 3
Purchased
Stages 1 and 2
13
27
0
2
25
0
67
108
290
1
110
78
5
593
27
183
(1)
78
91
0
378
USD m
For the year ended 31.12.23
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items1
Total
For the year ended 31.12.22
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items1
Total
For the year ended 31.12.21
(29)
(28)
Global Wealth Management
(86)
(62)
Personal & Corporate Banking
1
0
Asset Management
(34)
(34)
Investment Bank
0
0
Non-core and Legacy
Group Items1
0
0
Total
(148)
(123)
1 Starting with the third quarter of 2023, Non-core and Legacy became a separate reportable segment and Group Functions has been renamed Group Items. Prior periods have been restated to reflect these changes.
147
501
0
190
193
6
1,037
(1)
(24)
1
0
0
0
(25)
5
12
0
(18)
2
0
0
0
39
0
(12)
2
1
29
(5)
27
0
6
0
1
29
b) Changes to ECL models, scenarios, scenario weights and key inputs
Refer to Note 1a for information about the principles governing 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 outputs and to reach conclusions regarding post-model adjustments.
Model changes
During 2023, 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 22m increase in ECL allowances. This included
an increase of USD 13m in Global Wealth Management related to Large corporate clients and an USD 14m increase in
Personal & Corporate Banking related to lending to Large corporate clients and SME clients.
Scenario and key input updates
During 2023, the scenarios and related macroeconomic factors were updated from those applied at the end of 2022 by
considering the prevailing economic and political conditions and uncertainty. The review focused on events that
significantly changed the economic outlook during the year: the inflation outlook and economic growth in Europe, and
rising global interest rates due to central banks adopting more restrictive monetary policies. ECLs for Credit Suisse AG
positions were calculated based on Credit Suisse AG’s models, including the same scenario and scenario weight inputs
as for UBS’s existing business activity.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
354
Note 20 Expected credit loss measurement (continued)
Baseline scenario: 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 benchmarks, such as those from Bloomberg
Consensus, Oxford Economics and the International Monetary Fund World Economic Outlook. The expectation for 2024 is
that global growth slows down under the weight of monetary policy tightening and continued pressure on real purchasing
power due to high, though falling, inflation, and fading fiscal support. Unemployment rates are forecast to increase slightly
from their 2023 levels. Interest rates are expected to remain high, given the persistence of inflationary pressures, leading to
a less optimistic outlook for house prices worldwide, including Switzerland.
Mild debt crisis scenario: The first hypothetical downside scenario is the mild debt crisis scenario. At the beginning of the
second quarter of 2023, UBS replaced the global crisis scenario applied at the end of 2022 and at the end of the first quarter
of 2023 with the mild debt crisis scenario. Economic, market and political developments suggested that the scenario suite
should be rebalanced by reintroducing a mild downside scenario. The mild debt crisis scenario covers similar risks, but the
assumptions are milder than the global crisis scenario. Therefore, the scenario shocks are less severe. It assumes that political,
solvency and liquidity concerns cause a sell-off of sovereign debt in emerging markets and the peripheral Eurozone. The
global economy and financial markets are negatively affected, and central banks are assumed to ease their monetary policy.
Stagflationary geopolitical crisis scenario: The second downside scenario is aligned with the 2024 Group binding stress
scenario and was updated in 2023 to reflect expected risks, resulting in minimal changes. Geopolitical tensions cause an
escalation of security concerns and undermine globalization. The ensuing economic regionalization leads to a surge in global
commodity prices and further disruptions of supply chains and raises the specter of prolonged stagflation. Central banks
are forced to further tighten monetary policy to contain inflationary pressures. The severe interest rate and house price
assumptions in the scenario had a substantive impact on model-based ECL allowances for loans secured by mortgages in
Switzerland and the US. These effects were partly offset by post-model adjustment releases related to loans secured by
mortgages. Refer to the section below on “Scenario weights and post-model adjustments” for more details.
Asset price inflation scenario: The upside scenario is based on positive developments, such as an easing of geopolitical
tensions across the globe and a rebound in Chinese economic growth. A combination of lower commodity prices, effective
monetary policies and easing supply chain disruptions helps to reduce inflation. Improved consumer and business sentiment
lead to a global economic rebound, enabling central banks to normalize interest rates, which causes asset prices to increase
significantly.
The table below details the key assumptions for the four scenarios applied as of 31 December 2023.
Scenario weights and post-model adjustments
The scenario weights did not change during 2023, but the scenario suite was adjusted in the second quarter of 2023 to
replace one of the two severe downside scenarios with a mild downside scenario. The mild debt crisis, developed in early
2023, was introduced in the scenario suite with the same weight as the more severe global crisis scenario, i.e., 15%, to
balance a somewhat more optimistic outlook with milder scenario assumptions. The weights were kept unchanged for
the stagflationary geopolitical crisis, baseline and asset price inflation scenarios, i.e., 25%, 60% and 0%, respectively.
The weights are shown in the table below.
However, unquantifiable risks continue to be relevant, as the geopolitical risks remained high in 2023, and the impact
on the world economy from escalations with unforeseeable consequences could be severe. In the near term, this
uncertainty relates primarily to developments in the Russia–Ukraine and Middle East conflicts. Models, which are based
on supportable statistical information from past experiences regarding interdependencies of macroeconomic factors and
their implications for credit risk portfolios, cannot comprehensively reflect such extraordinary events, such as a pandemic
or a fundamental change in the world political order. Rather than creating multiple additional scenarios to attempt to
gauge these risks and applying model parameters that lack supportable information and cannot be robustly validated,
management continued to also apply post-model adjustments.
Total stage 1 and 2 allowances and provisions were USD 1,115m as of 31 December 2023 and included post-model
adjustments of USD 326m (31 December 2022: USD 131m). Overlays are to cover for uncertainty levels and are materially
unchanged, including the geopolitical situation, for Credit Suisse models that may not comprehensively reflect market
events and to align model outputs for Credit Suisse with those of UBS for dedicated segments.
Economic scenarios and weights applied
ECL scenario
Asset price inflation
Baseline
Mild debt crisis
Stagflationary geopolitical crisis
Global crisis
Assigned weights in %
31.12.23
0.0
60.0
15.0
25.0
0.0
31.12.22
0.0
60.0
0.0
25.0
15.0
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
355
Note 20 Expected credit loss measurement (continued)
Scenario assumptions
31.12.23
Real GDP growth (% change)
United States
Eurozone
Switzerland
Consumer price index (% change)
United States
Eurozone
Switzerland
Unemployment rate (end-of-period level, %)
United States
Eurozone
Switzerland
Fixed income: 10-year government bonds (change in yields, basis points)
USD
EUR
CHF
Equity indices (% change)
S&P 500
EuroStoxx 50
SPI
Swiss real estate (% change)
Single-Family Homes
Other real estate (% change)
United States (S&P / Case–Shiller)
Eurozone (House Price Index)
Scenario assumptions
31.12.22
Real GDP growth (% change)
United States
Eurozone
Switzerland
Consumer price index (% change)
United States
Eurozone
Switzerland
Unemployment rate (end-of-period level, %)
United States
Eurozone
Switzerland
Fixed income: 10-year government bonds (change in yields, basis points)
USD
EUR
CHF
Equity indices (% change)
S&P 500
EuroStoxx 50
SPI
Swiss real estate (% change)
Single-Family Homes
Other real estate (% change)
United States (S&P / Case–Shiller)
Eurozone (House Price Index)
One year
Three years cumulative
Asset price
inflation
Baseline
Mild debt
crisis
Stagflationary
geopolitical
crisis
Asset price
inflation
Baseline
Mild debt
crisis
Stagflationary
geopolitical
crisis
4.0
3.0
3.0
2.5
2.3
2.1
3.0
6.0
1.6
13
20
25
20.0
20.0
15.0
6.6
8.1
7.0
0.1
0.5
1.4
2.3
2.0
1.5
4.4
6.9
2.3
(82)
(90)
(41)
15.3
12.0
4.6
(1.6)
(1.7)
(1.2)
(0.1)
(0.2)
(0.4)
6.3
8.2
2.9
(215)
(185)
(73)
(26.6)
(26.4)
(24.5)
(4.8)
(5.6)
(4.8)
10.0
9.6
5.8
9.2
10.6
4.1
270
225
195
(51.5)
(51.6)
(51.6)
9.1
6.2
6.6
8.1
7.4
6.2
3.0
6.0
1.5
37
58
63
51.7
46.6
39.2
(1.5)
(4.4)
(18.5)
14.0
0.6
0.6
(8.6)
(5.9)
(20.0)
(8.4)
19.7
15.4
4.4
2.9
4.4
7.1
6.1
4.3
4.4
6.8
2.3
(78)
(78)
(34)
28.1
22.9
15.9
0.8
5.8
6.4
0.6
(0.1)
0.3
2.3
1.8
0.8
7.7
9.0
3.8
(155)
(140)
(28)
(12.2)
(16.6)
(11.2)
(3.0)
(5.2)
(5.2)
(4.4)
(5.7)
(4.9)
15.8
14.8
10.7
11.8
11.8
5.0
245
195
180
(45.6)
(47.2)
(47.2)
(28.6)
(30.2)
(12.9)
One year
Three years cumulative
Asset price
inflation
Baseline
Stagflationary
geopolitical
crisis
Global
crisis
Asset price
inflation
Baseline
Stagflationary
geopolitical
crisis
Global
crisis
4.0
3.0
3.0
2.5
2.3
2.1
3.0
6.0
1.7
25
20
25
20.0
17.0
14.0
6.6
7.8
7.0
(0.3)
0.6
0.7
2.6
5.0
1.6
3.9
7.0
2.3
(6)
48
46
7.4
17.2
5.6
1.1
(4.5)
(2.7)
(4.8)
(5.6)
(4.8)
10.0
9.6
5.8
9.2
10.9
4.3
235
250
220
(51.5)
(51.6)
(51.6)
(6.4)
(8.5)
(6.7)
(0.5)
(0.7)
(1.8)
10.0
11.9
4.4
(326)
(271)
(210)
(50.0)
(50.0)
(46.0)
9.1
6.2
6.6
8.1
7.4
6.2
3.0
6.0
1.5
70
58
63
51.7
42.9
37.9
3.2
2.5
3.5
6.5
9.6
3.9
5.3
7.1
2.6
(13)
45
57
22.8
29.2
19.3
(4.4)
(5.7)
(4.9)
15.8
14.8
10.7
11.8
12.2
5.1
205
220
205
(45.6)
(47.2)
(47.2)
(1.8)
(8.3)
(3.7)
1.2
(0.7)
(1.6)
9.4
13.0
4.9
(291)
(247)
(160)
(27.9)
(39.3)
(32.9)
(16.7)
(19.9)
14.0
2.3
(32.9)
(23.9)
(12.8)
(8.4)
(19.3)
(8.9)
19.1
15.4
(0.6)
2.0
(35.8)
(14.7)
(32.7)
(17.5)
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
356
Note 20 Expected credit loss measurement (continued)
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:
– the effect of selecting and updating forward-looking scenarios and the respective weights;
– origination of new instruments during the period;
– the effect of passage of time (lower residual lifetime PD and the effect of discount unwind) as the ECL on an instrument
for the remaining lifetime decreases (all other factors remaining the same);
– derecognition of instruments in the period;
– change in individual asset quality of instruments;
– movements from a maximum 12-month ECL to the recognition of lifetime ECL (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.
The table below explains the changes in the ECL allowances and provisions for on- and off-balance sheet financial
instruments and credit lines within the scope of ECL requirements between the beginning and the end of the period due
to the factors listed above.
Development of ECL allowances and provisions
USD m
Balance as of 31 December 2022
Remeasurements with stage transfers2
Acquisition of Credit Suisse AG portfolios
Net movement from new and derecognized transactions1
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
Remeasurements without stage transfers3
PCI
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(67)
(11)
(9)
(16)
(11)
(20)
(22)
0
0
Movements with profit or loss impact5
(67)
Movements without profit or loss impact (write-off, FX and other)6
(86)
Balance as of 31 December 2023
(153)
1 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. 2 Represents the remeasurement between 12-month and lifetime ECL due to stage transfers. 3 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.
4 Represents the change in the allowances and provisions related to changes in models and methodologies. 5 Includes ECL movements from new and derecognized transactions, remeasurement changes, and model
and methodology changes. 6 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: Sovereign
of which: Loans to financial advisors
Total
(1,091)
(541)
14
(4)
1
18
(2)
1
(1)
0
(507)
(12)
(35)
(223)
(167)
(69)
1
1
17
3
(1)
(42)
65
(7)
(37)
(7)
(22)
(1,037)
(132)
(2,261)
Stage 3
(564)
0
7
0
0
7
0
0
0
0
(400)
(12)
(16)
(220)
(115)
(38)
0
0
14
(3)
(1)
(8)
44
(18)
0
(8)
0
(378)
(50)
(993)
Stage 2
(267)
0
9
3
3
3
0
0
0
0
(149)
(3)
(27)
(21)
(59)
(39)
0
(1)
12
16
3
(1)
1
(8)
(15)
0
(8)
(136)
(13)
(416)
Stage 1
(259)
(541)
(2)
(7)
(2)
8
(2)
1
(1)
0
42
2
8
17
6
8
0
2
58
1
5
(18)
31
39
0
1
(14)
(457)
17
(700)
Model changes4
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
357
Note 20 Expected credit loss measurement (continued)
Movements with profit or loss impact: Stages 1 and 2 ECL allowances and provisions increased on a net basis by
USD 1,037m:
– Acquisition of Credit Suisse AG portfolios: Expected credit loss (ECL) expenses of USD 541m for performing loans were
attributable to the initial recognition of ECL stage 1 allowances and provisions as of the date of the acquisition of the
Credit Suisse Group.
– Net movement from new and derecognized transactions includes stage 1 expenses of USD 2m and stage 2 releases
of USD 9m: Stage 1 expenses are mainly driven by expenses on the corporate lending portfolios, partly offset by
releases on the real estate portfolios. Stage 2 releases are predominately driven by the real estate and corporate
lending portfolios.
– Remeasurements with stage transfers include USD 149m expenses in stage 2, following a number of corporate and
real estate lending credit reviews and transfer to stage 2 for the Credit Suisse AG portfolio after the date of the
acquisition.
– Model changes: refer to Note 20b for more information.
Movements without profit or loss impact: Stages 1 and 2 allowances decreased by USD 4m, almost entirely driven by FX.
Stage 3 and PCI allowances increased by USD 136m, driven by FX and other movements of USD 229m, partly offset by
net write-offs of USD 93m.
Development of ECL allowances and provisions
USD m
Balance as of 31 December 2021
Remeasurements with stage transfers2
Net movement from new and derecognized transactions1
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
Remeasurements without stage transfers3
Stage 3
(662)
(2)
0
0
(2)
0
0
0
0
(46)
0
0
(21)
(22)
(3)
0
0
48
1
0
41
14
(8)
0
(6)
0
Movements with profit or loss impact5
0
Movements without profit or loss impact (write-off, FX and other)6
99
Balance as of 31 December 2022
(564)
1 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. 2 Represents the remeasurement between 12-month and lifetime ECL due to stage transfers. 3 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.
4 Represents the change in the allowances and provisions related to changes in models and methodologies. 5 Includes ECL movements from new and derecognized transactions, remeasurement changes, and model
and methodology changes. 6 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: Sovereigns
of which: Loans to financial advisors
Total
(1,165)
(7)
(6)
(3)
8
(1)
(6)
0
0
(65)
(10)
7
(33)
(23)
(6)
0
1
13
(12)
13
32
(6)
(15)
(8)
(3)
30
(29)
104
(1,091)
Stage 2
(220)
16
0
2
11
0
3
2
0
(39)
(12)
8
(28)
(2)
(4)
0
(1)
(27)
(18)
10
2
(9)
(12)
(8)
(1)
1
(49)
1
(267)
Stage 1
(282)
(21)
(6)
(5)
(1)
(1)
(8)
(2)
0
20
3
(1)
16
2
1
0
2
(8)
5
3
(11)
(10)
5
0
3
29
20
3
(259)
Model changes4
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
358
Note 20 Expected credit loss measurement (continued)
As explained in Note 1a, the assessment of a significant increase in credit risk (an 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 2023 – classification by trigger
USD m
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: Lombard
of which: Financial intermediaries and hedge funds
of which: Loans to financial advisors
of which: Credit cards
of which: Consumer financing
of which: Commodity trade finance
of which: Other
Stage 2
(416)
(97)
(35)
(133)
(60)
(11)
(5)
(1)
(13)
(19)
(1)
(40)
of which:
PD layer
(221)
(69)
(23)
(54)
(27)
0
(4)
0
0
(9)
0
(36)
of which:
watch list
(123)
(5)
(2)
(77)
(24)
(11)
0
0
0
0
(1)
(4)
of which:
≥30 days
past due
(71)
(22)
(10)
(2)
(10)
0
(1)
(1)
(13)
(11)
0
(1)
As per IFRS, the Credit Suisse acquisition date in June 2023 represented the benchmark for determining “significant
deterioration of credit risk” for Credit Suisse exposures, and accordingly, UBS did only recognize stage 1 ECL allowances
and provisions for performing loans at acquisition date. As of 31 December 2023, stage 2 allowances and provisions for
Credit Suisse exposures were largely driven by prolonged and re-confirmed affiliation to the credit watchlist.
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 Accounting Standards.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
359
Note 20 Expected credit loss measurement (continued)
Maximum exposure to credit risk
USD bn
Financial assets measured at
amortized cost on the balance sheet
Cash and balances at central banks
Amounts due from banks4
Receivables from securities financing transactions
measured at amortized cost
Cash collateral receivables on derivative instruments5,6
Loans and advances to customers
Other financial assets measured at amortized cost
Total financial assets measured at amortized cost
Financial assets measured at fair value
through other comprehensive income – debt
Total maximum exposure to credit risk
reflected on the balance sheet within the scope of ECL
of which: Credit Suisse7
Guarantees8
Irrevocable loan commitments
Forward starting reverse repurchase and securities
borrowing agreements
Committed unconditionally revocable credit lines
Total maximum exposure to credit risk not
reflected on the balance sheet within the scope of ECL
of which: Credit Suisse7
Collateral1,2
Credit enhancements1
31.12.23
Maximum
exposure to
credit risk
Cash
collateral
received
Collateralized
by equity
and debt
instruments
Secured by
real estate
Other
collateral3
Netting
Credit
derivative
contracts
Guarantees
and sub-
participations
Exposure to
credit risk
after collateral
and credit
enhancements
314.1
21.2
99.0
50.1
639.8
65.5
1,189.8
2.2
1,192.0
443.4
46.1
91.5
18.4
163.2
319.2
186.9
0.0
0.0
40.2
0.1
40.4
40.4
12.7
2.9
0.5
20.3
23.7
21.4
0.2
95.6
131.9
0.8
228.5
228.5
51.6
21.4
3.2
18.4
58.5
101.6
60.3
0.2
2.8
38.9
5.7
47.5
372.9
0.1
373.0
373.0
150.2
0.3
2.2
47.5
18.4
3.4
17.1
17.6
6.2
32.9
32.9
32.9
10.1
0.0
0.0
0.0
0.0
0.1
0.4
20.1
11.1
26.6
10.9
0.0
0.0
0.5
0.5
31.12.22
Collateral1,2
Credit enhancements1
0.3
11.9
314.1
20.5
0.7
17.2
44.1
58.8
12.1
455.4
2.2
457.6
191.1
13.3
62.3
0.0
56.2
131.8
71.5
12.1
9.3
4.6
5.9
4.4
14.8
11.3
Maximum
exposure to
credit risk
Cash
collateral
received
Collateralized
by equity
and debt
instruments
Secured by
real estate
Other
collateral3
Credit
derivative
contracts
Guarantees
and sub-
participations
Exposure to
credit risk
after collateral
and credit
enhancements
2.2
0.0
0.1
0.0
2.4
0.9
67.8
64.5
22.9
Netting
169.4
14.7
169.4
14.8
33.6
0.1
33.7
19.6
1.3
23.4
115.9
0.5
181.0
197.8
0.0
197.9
35.0
387.2
53.3
727.6
USD bn
Financial assets measured at
amortized cost on the balance sheet
Cash and balances at central banks
Amounts due from banks4
Receivables from securities financing transactions
measured at amortized cost
Cash collateral receivables on derivative instruments5,6
Loans and advances to customers
Other financial assets measured at amortized cost
Total financial assets measured at amortized cost
Financial assets measured at fair value
through other comprehensive income – debt
Total maximum exposure to credit risk
reflected on the balance sheet within the scope of ECL
Guarantees8
Irrevocable loan commitments
Forward starting reverse repurchase and securities
borrowing agreements
Committed unconditionally revocable credit lines
Total maximum exposure to credit risk not
55.7
reflected on the balance sheet within the scope of ECL
1 Of which: USD 3,824m for 31 December 2023 (31 December 2022: USD 1,372m) relates to total credit-impaired financial assets measured at amortized cost and USD 237m for 31 December 2023 (31 December
2022: USD 113m) to total off-balance sheet financial instruments and credit lines for credit-impaired positions. 2 Collateral arrangements generally incorporate a range of collateral, including cash, equity and debt
instruments, real estate and other collateral. For the purpose of this disclosure, UBS applies a risk-based approach that generally prioritizes collateral according to its liquidity profile. In the case of loan facilities with
funded and unfunded elements, the collateral is first allocated to the funded element. Credit Suisse applies a risk-based approach that generally prioritizes real estate collateral and prioritizes other collateral according
to its liquidity profile. In the case of loan facilities with funded and unfunded elements, the collateral is proportionally allocated. 3 Includes but is not limited to life insurance contracts, rights in respect of subscription
or capital commitments from fund partners, leasing items, mortgage loans, inventory, gold and other commodities. 4 Amounts due from 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. 5 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. 6 The amount shown in the “Netting” column represents the netting potential not recognized on the
balance sheet. Refer to Note 22 for more information. 7 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group. 8 Guarantees collateralized by equity and debt instruments include
certain overnight repurchase and reverse repurchase transactions where UBS acts as a sponsoring member for eligible clients when clearing through the Fixed Income Clearing Corporation (FICC). As part of this
arrangement, UBS guarantees FICC for prompt and full payment and performance of the clients‘ respective obligations under the FICC rules. The Group minimizes its liability under these guarantees by obtaining a
security interest in the cash or high-quality securities collateral that the clients place with the clearing house; therefore, the risk of loss is expected to be remote.
12.1
17.3
51.3
265.8
268.0
7.7
27.8
181.0
9.3
3.1
197.9
0.1
1.3
729.8
22.1
39.9
33.7
1.2
0.2
23.4
2.0
6.5
3.0
1.8
1.0
0.0
20.2
3.8
41.4
3.8
8.2
107.2
14.7
24.4
22.9
22.9
2.2
0.0
7.5
0.1
1.6
3.3
0.5
0.2
0.0
3.0
3.0
0.0
6.2
6.0
0.1
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
360
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 m
31.12.23
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total gross
carrying
amount
ECL
allowances
Rating category1
Financial assets measured at amortized cost
Cash and balances at central banks
of which: stage 1
of which: stage 2
of which: PCI
Amounts due from banks
of which: stage 1
of which: stage 2
of which: PCI
Receivables from securities financing transactions
of which: stage 1
Cash collateral receivables on derivative instruments
of which: stage 1
Loans and advances to customers
of which: stage 1
of which: stage 2
of which: stage 3
of which: PCI
Other financial assets measured at amortized cost
of which: stage 1
of which: stage 2
of which: stage 3
of which: PCI
30,334
0
0
30,171
627
627
0
0
2,215
251,462
61,936
251,462 61,936
0
0
15,454
0
0
0
0
0
0
1,081
1,589
1,081 15,453 2,210 1,589
0
0
15,544
43
0
43
0
792
780
12
5
0
0
0
0
45,838
1,091
6,397
45,838 30,171 6,397 15,544 1,091
198
6,425
8,009
5,117
198
8,009 30,334 6,425 5,117
41,557
6,428 288,117 180,889 119,191
6,428 286,683 178,059 109,996 30,276
0 1,428 2,829 9,171 11,269
0
0
0
0
12
24
0
0
1,163
25,755
9,662
2,875
841
25,755 25,788 2,854 9,113
321
548
0
0
1
0
44,844
338,572 451,886 199,428 151,103
0
6
25,875
21
0
0
87
0
0
0
0
0
Net carrying
amount
(maximum
exposure to
credit risk)
314,148
314,025
18
106
21,161
21,107
17
38
99,039
99,039
50,082
50,082
639,844
611,019
24,408
2,869
1,548
65,498
64,311
968
158
61
1,189,773
2,233
1,192,006
128
314,197
0 314,025
43
0
128
128
43
21,174
0 21,113
18
0
43
43
0
99,041
0 99,041
0
50,082
0 50,082
641,542
0 611,443
0 24,697
3,731
1,671
65,648
1 64,352
978
0
253
253
66
64
5,849 1,191,683
3,731
1,629
318
5,360
(48)
0
(26)
(22)
(12)
(6)
(1)
(5)
(2)
(2)
0
0
(1,698)
(423)
(289)
(862)
(123)
(151)
(41)
(10)
(94)
(5)
(1,911)
0
(1,911)
Total financial assets measured at amortized cost
On-balance sheet financial instruments
Financial assets measured at FVOCI – debt instruments
Total on-balance sheet financial instruments
1 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.
161
339,794 452,736 199,428 151,264
2,233
5,849 1,193,916
0
44,844
1,222
850
0
0
Off-balance sheet positions subject to expected credit loss by rating category
USD m
31.12.23
Rating category1
Off-balance sheet financial instruments
Guarantees
of which: stage 1
of which: stage 2
of which: stage 3
of which: PCI
Irrevocable loan commitments
of which: stage 1
of which: stage 2
of which: stage 3
of which: PCI
Forward starting reverse repurchase and securities borrowing agreements
Total off-balance sheet financial instruments
Credit lines
Committed unconditionally revocable credit lines
of which: stage 1
of which: stage 2
of which: stage 3
Irrevocable committed prolongation of existing loans
of which: stage 1
of which: stage 2
of which: stage 3
0–1
2–3
4–5
6–8
9–13
Total carrying
amount
(maximum
exposure to
credit risk)
Credit-
impaired
(defaulted)
ECL provision
5,916
10,961
39
0
0
31,936
861
0
1
19,661
17,805
1,882
9,421
17,805 10,922 9,310 5,054 1,398
484
111
0
0
0
0
1
0
0
1,722
14,006
24,050
1,722 31,936 23,989 19,079 10,354
583 3,652
0
0
0
15,888
0
0
0
2
42,899
62
0
0
84
33,554
0
0
0
10,152
29,679
0
0
8,206
33,783
207
0
0
151
56
266
0
0
218
48
0
473
17,739
403
0
1,803
2,659 108,395
5,648
28,669
2,659 107,992 28,188 16,921 4,696
952
481
0
0
501
1,045
493
9
0
6,149
818
0
0
0
4
1,251
4 1,803 1,045 1,249
2
0
0
0
18,990
0
0
2,663 110,197
0
0
29,714
146
0
0
146
4
0
0
4
150
46,191
44,487
1,495
151
58
91,643
87,080
4,297
218
48
18,444
156,278
163,256
160,456
2,654
146
4,608
4,593
11
4
167,864
(73)
(28)
(22)
(23)
0
(178)
(117)
(51)
(14)
4
0
(251)
(95)
(78)
(17)
0
(4)
(4)
0
0
(99)
Total credit lines
1 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.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
361
Note 20 Expected credit loss measurement (continued)
Financial assets subject to credit risk by rating category
USD m
31.12.22
Rating category1
Financial assets measured at amortized cost
Cash and balances at central banks
of which: stage 1
of which: stage 2
Amounts due from banks
of which: stage 1
of which: stage 2
of which: stage 3
Receivables from securities financing transactions
measured at amortized cost
of which: stage 1
Cash collateral receivables on derivative instruments
of which: stage 1
Loans and advances to customers
of which: stage 1
of which: stage 2
of which: stage 3
Other financial assets measured at amortized cost
of which: stage 1
of which: stage 2
of which: stage 3
0–1
2–3
4–5
6–8
9–13
877
168,525
877
168,525
0
0
862
12,257
862 12,257
0
0
0
0
0
0
0
860
860
0
0
0
0
0
440
440
0
0
56
0
56
379
378
1
0
27,158
15,860
27,158 15,860
10,613
12,977
10,613 12,977
214,473
721
8,870
15,207
721
8,870 15,207
147
4,157
7,138
147
4,157
7,138
6,491
21,939
74,732
68,356
6,491 212,980 66,114 68,034 16,605
5,334
2,242
0
0
450
447
336
427
114
20
0
0
23,693
85,671
1,493
0
0
0
16,632
29,011
29,011 16,630
2
0
273,076
6,698
0
6,600
6,317
283
0
101,136
0
0
242,660
Credit-
impaired
(defaulted)
Total gross
carrying
amount
ECL
allowances
169,457
0
0 169,402
0
56
0
14,798
0 14,797
1
0
0
0
2,012
0
67,816
0 67,816
0
35,033
0 35,033
388,003
0 370,224
0 15,767
2,012
53,350
0 52,721
419
0
210
210
728,457
2,222
2,012
210
(12)
0
(12)
(6)
(5)
(1)
0
(2)
(2)
0
0
(783)
(129)
(180)
(474)
(86)
(17)
(6)
(63)
(889)
0
(889)
Net carrying
amount
(maximum
exposure to
credit risk)
169,445
169,402
44
14,792
14,792
1
0
67,814
67,814
35,032
35,032
387,220
370,095
15,587
1,538
53,264
52,704
413
147
727,568
2,239
729,807
Total financial assets measured at amortized cost
On-balance sheet financial instruments
Financial assets measured at FVOCI – debt instruments
Total on-balance sheet financial instruments
1 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.
840
273,916
92
101,228
2,239
730,696
1,307
243,966
0
85,671
0
23,693
0
2,222
Off-balance sheet positions subject to expected credit loss by rating category
USD m
31.12.22
Rating category1
Off-balance sheet financial instruments
Guarantees
of which: stage 1
of which: stage 2
of which: stage 3
Irrevocable loan commitments
of which: stage 1
of which: stage 2
of which: stage 3
Forward starting reverse repurchase and securities borrowing agreements
Total off-balance sheet financial instruments
Credit lines
Committed unconditionally revocable credit lines
of which: stage 1
of which: stage 2
of which: stage 3
Irrevocable committed prolongation of existing loans
of which: stage 1
of which: stage 2
of which: stage 3
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)
4,772
5,961
44
0
14,912
7,252
3,049
7,252 5,917 3,812 2,229
821
0
10,097
1,025
596
429
960
0
0
0
0
1,770
6,107
6,986
1,770 14,789 6,818 9,625 4,529
472 1,578
168
0
0
0
11
7,132
11,769
123
0
2
20,874
0
1,007
14,153
0
0
2,781
11,803
108
0
0
108
124
0
0
124
0
233
15,918
10,162
705
0
1,939
2,288
3,739
9,247
2,288 15,213 8,960 9,631 3,429
310
287
0
0
0
0
392
7
1,489
380
7 1,938 1,411
11
78
1
0
0
0
0
0
4,131
10,736
17,857
2,295
531
0
868
864
4
0
11,030
36
0
0
36
2
0
0
2
37
22,167
19,805
2,254
108
39,996
37,531
2,341
124
3,801
65,964
41,390
39,521
1,833
36
4,696
4,600
94
2
46,086
(48)
(13)
(9)
(26)
(111)
(59)
(52)
0
0
(159)
(40)
(32)
(8)
0
(2)
(2)
0
0
(42)
Total credit lines
1 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.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
362
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 models
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 10.
Sustainability and climate risk
Sustainability and climate risk may negatively affect clients or portfolios due to direct or indirect transition costs, or
exposure to physical risks in locations likely to be impacted by climate change. Such effects could lead to a deterioration
in credit worthiness, which in turn would have an impact on ECLs.
While some macroeconomic indicators used in the current PD models could be influenced by climate change, UBS
currently does not use a specific sustainability and climate risk scenario in addition to the typically four general economic
scenarios applied to derive the weighted-average ECL. The rationale for the approach at this point in time is the
significance of model risks and challenges in calibration and probability weight assessment given the paucity of data.
Instead, UBS focuses on the process of vetting clients and business transactions and takes individual actions, where
transition risk is deemed to be a significant driver of a counterparty’s credit worthiness. This review process may lead to
a downward revision of the counterparty’s credit rating, or the adoption of risk mitigating actions, and hence affect the
individual contribution to ECLs.
At the portfolio level, UBS has started to use stress loss assumptions to assess the extent to which sustainability and
climate risk may affect the quality of the loans extended to small and medium-sized entities, large corporate clients and
financial institutions. Initial tests were based on a set of assumptions presented by external parties (such as the Bank of
England) and complemented by internally derived climate pathway scenarios. Such analysis undertaken during 2022 and
reassessed during 2023 concluded that the counterparties are not expected to be significantly impacted by physical or
transition risks, mainly as there are no material risk concentrations in high-risk sectors. The analysis of the corporate loan
book has also shown that any potential significant impacts from transition costs or physical risks would materialize over
a time horizon that exceeds in most cases the contractual lifetime of the underlying assets. Based on current information
on regulatory developments, this would also apply to the portfolio of private clients’ mortgages and real estate financing,
given the long lead times for investments in upgrading housing stock.
As a result of the aforementioned factors, it was assessed that the magnitude of any impact of sustainability and climate
risk on the weighted-average ECL would not be material as of 31 December 2023. Therefore, no specific post-model
adjustment was made in this regard.
› Refer to “Sustainability and climate risk” in the “Risk management and control” section of this report
› Refer to “Our focus on sustainability and climate” in the “Our strategy, business model and environment” section of this report
› Refer to “UBS AG consolidated supplemental disclosures required under SEC regulations” for the maturity profile of UBS’s core
loan book
Forward-looking scenarios
Depending on the scenario selection and related macroeconomic 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, e.g., 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.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
363
Note 20 Expected credit loss measurement (continued)
Potential effect on stage 1 and stage 2 positions from changing key parameters as of 31 December 2023
USD m
Change in key parameters
Fixed income: Government bonds (absolute change)
–0.50%
+0.50%
+1.00%
Unemployment rate (absolute change)
–1.00%
–0.50%
+0.50%
+1.00%
Real GDP growth (relative change)
–2.00%
–1.00%
+1.00%
+2.00%
House Price Index (relative change)
–5.00%
–2.50%
+2.50%
+5.00%
Equity (S&P500, EuroStoxx, SMI) (relative change)
–10.00%
–5.00%
+5.00%
+10.00%
100% Baseline
100%
Stagflationary
geopolitical crisis
100% Mild debt
crisis Weighted average
(7)
8
17
(6)
(3)
3
7
49
25
(20)
(39)
17
8
(7)
(11)
4
2
(2)
(3)
(164)
186
396
(144)
(77)
90
189
84
40
(37)
(71)
249
120
(105)
(204)
10
5
(5)
(8)
(7)
10
23
(8)
(4)
4
8
73
36
(35)
(63)
25
12
(9)
(19)
8
3
(3)
(5)
(21)
25
59
(22)
(12)
14
28
58
30
(26)
(50)
53
24
(20)
(38)
6
2
(2)
(4)
Sensitivities can be more meaningfully assessed in the context of coherent scenarios with consistently developed
macroeconomic factors. The table above 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.
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 and stage allocation
Potential effect on stage 1 and stage 2 positions from changing scenario weights or moving to an ECL lifetime calculation as of 31 December 2023
Scenarios
USD m, except where indicated
Segmentation
Private clients with mortgages
Real estate financing
Large corporate clients
SME clients
Ship financing
Consumer financing / credit cards
Other segments
Total
Actual ECL allowances
and provisions,
including staging (as
per Note 10)
Weighted average
Pro forma ECL allowances and provisions, including staging
and assuming application of 100% scenario weighting
100% Stagflationary
geopolitical crisis
100% Baseline
100% Mild debt crisis
Pro forma ECL
allowances and
provisions, assuming
all positions being
subject to lifetime ECL
Weighted average
(161)
(88)
(368)
(188)
(48)
(74)
(189)
(1,115)
(66)
(53)
(282)
(158)
(46)
(71)
(157)
(832)
(816)
(293)
(533)
(274)
(50)
(81)
(269)
(2,317)
(81)
(49)
(419)
(226)
(49)
(75)
(197)
(1,095)
(409)
(196)
(645)
(296)
(125)
(186)
(368)
(2,225)
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
364
Note 20 Expected credit loss measurement (continued)
Potential effect on stage 1 and stage 2 positions from changing scenario weights or moving to an ECL lifetime calculation as of 31 December 2022
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
Weighted average
100% Baseline
100% Asset price
inflation
100%
Stagflationary
geopolitical crisis 100% Global crisis Weighted average
(136)
(43)
(136)
(86)
(125)
(526)
(25)
(26)
(97)
(67)
(114)
(329)
(13)
(22)
(84)
(66)
(111)
(295)
(523)
(176)
(199)
(162)
(145)
(1,204)
(184)
(30)
(174)
(97)
(153)
(638)
(473)
(126)
(235)
(153)
(281)
(1,267)
Scenarios
USD m, except where indicated
Segmentation
Private clients with mortgages
Real estate financing
Large corporate clients
SME clients
Other segments
Total
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 above, the ECLs for stage 1 and stage 2 positions would have been USD 832m (31 December
2022: USD 329m) instead of USD 1,115m (31 December 2022: USD 526m) if ECLs had been determined solely on the
baseline scenario. The weighted-average ECL therefore amounted to 134% (31 December 2022: 160%) of the baseline
value. The effects of weighting each of the four scenarios 100% are shown in the table above.
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 above with the indication that the ECL
allowances and provisions for stage 1 and stage 2 positions would have been USD 2,225m, if all non-impaired positions
across the portfolio had been measured for lifetime ECLs irrespective of their actual SICR status. This amount compares
with actual stage 1 and 2 allowances and provisions of USD 1,115m as of 31 December 2023.
Maturity profile
The maturity profile is an important driver in ECLs, in particular for transactions in stage 2. A transfer of a transaction
into stage 2 may therefore have a significant effect on ECLs. The current maturity profile of most lending books is
relatively short.
Lending to large corporate clients is generally between one and two years, with related loan commitments up to four
years. Real estate lending is generally between two and three years in Switzerland, with long dated maturities in the US.
Lombard-lending contracts typically have average contractual maturities of 12 months or less, and include callable
features.
A significant portion of our lending to SME clients and Real estate financing is documented under multi-purpose credit
agreements, which allow for various forms of utilization but are unconditionally cancelable by UBS at any time: (i) 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; (ii) 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.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
365
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 Accounting Standards. 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.
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
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 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
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
366
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.
During 2023, and for Credit Suisse for the period between the acquisition date and 31 December 2023, assets and
liabilities that were transferred from Level 2 to Level 1, or from Level 1 to Level 2, and were held for the entire reporting
period were not material. Level 3 assets increased by USD 26.5bn as of 31 December 2023, compared to 31 December
2022, following the acquisition of the Credit Suisse Group, including the reclassification of financial assets from amortized
cost to fair value through profit or loss in the second half of 2023 (with retrospective adjustment of the acquisition date
balance sheet), mainly reflecting USD 19bn of traded loans, including USD 5bn of securitized lending facilities, a USD 6bn
loan with securitization collateral and USD 3bn of revolving loan facilities, that were deemed unobservable.
Further, in the fourth quarter of 2023, UBS prospectively amended its approach to testing for observability as part of an
accounting methodology alignment following the acquisition of the Credit Suisse Group. This methodological change
enhances UBS’s assessment of sensitivities to unobservable valuation parameters. Application of the new methodology
as of 31 December 2022 would have resulted in USD 1.3bn lower Level 3 liabilities (as of 31 December 2023 the balance
of affected liabilities in Level 3 was USD 1.9bn), with an offsetting impact to Level 2 liabilities.
In addition, the levelling of USD 2.4bn of financial assets at fair value held for trading (loans) from the Credit Suisse sub-
group was finalized in compliance with the new aligned methodology. This has been reflected retrospectively to the
acquisition balance sheet date of 31 May 2023, resulting in a USD 2.4bn increase in Level 3 Financial assets at fair value
held for trading (loans) and a USD 17m increase in Level 3 Derivative financial liabilities as of 31 May 2023, with an
offsetting effect in Level 2 assets and liabilities, respectively.
Determination of fair values from quoted market prices or valuation techniques1
USD m
Financial assets measured at fair value on a recurring basis
Financial assets at fair value held for trading
of which: Equity instruments
of which: Government bills / bonds
of which: Investment fund units
of which: Corporate and municipal bonds
of which: Loans
of which: Asset-backed securities
Derivative financial instruments
of which: Foreign exchange
of which: Interest rate
of which: Equity / index
of which: Credit
of which: Commodities
Brokerage receivables
Financial assets at fair value not held for trading
of which: Financial assets for unit-linked investment contracts
of which: Corporate and municipal bonds
of which: Government bills / bonds
of which: Loans
of which: Securities financing transactions
of which: Asset-backed securities
of which: Auction rate securities
of which: Investment fund units
of which: Equity instruments
31.12.23
31.12.22
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
118,975
102,602
6,995
8,392
28,045
1,403
8,763
1,124
984 12,801
22,613
169,633
96,241
321 104,325 83,074
5,496
73 15,830
6,673
9,645
129
1,284 15,069
3,837 19,618 23,456
248
133
10,138
789
950
596
976 6,363
0 1,179
261
22
112
0
3
622
172,903
347 78,060
0 55,190
0 34,174
3,456
0
1,869
1
2,559
176,084
253 78,659
407 55,597
1,299 35,473
3,969
1,883
513
13
769 147,875
575 84,881
0 39,345
1 21,542
0
719
0 1,334
1,488 107,866
126 83,988
18 6,464
61 7,330
541 7,880
628 1,807
397
114
1,464 150,108
2 85,458
460 39,805
653 22,195
318 1,038
30 1,365
0
21,037
0
21,037
0
17,576
0
17,576
30,717
15,877
64,865
7
62 16,722
4,801
14,306
0
4,252
0 36,857
1,525
0
0
0
548
367
38
105
8,435
3,725
2,258
104,018
215 17,000
26,572
0 15,884 13,071
59,796
29,498
0 13,072
1
230 14,366
35 14,101
0 16,741
0 19,107 13,103 3,638
736 4,337
0 3,602
114 7,704
0 7,590
0
0
0
0
0 1,326 1,326
0
190 1,063
307
849
792
57
6,510
52 36,909
1,704
180
1,208
1,208
1,592
678
3,0972
3,241
566
0
Financial assets measured at fair value through other comprehensive income on a recurring basis
Financial assets measured at fair value through other comprehensive income
of which: Commercial paper and certificates of deposit
of which: Corporate and municipal bonds
68
0
68
2,165
1,948
207
0
0
0
2,233
1,948
276
57
2,182
0 1,878
278
57
0
2,239
0 1,878
335
0
Non-financial assets measured at fair value on a recurring basis
Precious metals and other physical commodities
Non-financial assets measured at fair value on a non-recurring basis
Other non-financial assets3
Total assets measured at fair value
of which: Credit Suisse4
5,930
0
0
0
0
5,930
4,471
31
31
0
0
0
0
4,471
110
110
156,312
478,966
7,015 91,133 26,455 124,603
289,015
33,639
128,110 207,269
6,788 342,166
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
367
Note 21 Fair value measurement (continued)
Determination of fair values from quoted market prices or valuation techniques (continued)1
USD m
Financial liabilities measured at fair value on a recurring basis
Financial liabilities at fair value held for trading
of which: Equity instruments
of which: Corporate and municipal bonds
of which: Government bills / bonds
of which: Investment fund units
Derivative financial instruments
of which: Foreign exchange
of which: Interest rate
of which: Equity / index
of which: Credit
of which: Commodities
of which: Loan commitments measured at FVTPL
Financial liabilities designated at fair value on a recurring basis
Brokerage payables designated at fair value
Debt issued designated at fair value
31.12.23
31.12.22
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
27,684
18,266
28
8,559
832
6,315
248
4,981
905
118
161
34,159
92 18,606
5,071
62
9,464
0
954
4
23,578
16,521
5,823
352
36 4,643
706
84
5,880
1,141
114
29,515
78 16,951
27 4,707
1 6,587
3 1,229
185,815
771
457 89,394
0 52,673
0 38,046
4,081
0
1,437
0
135
0
5,595
192,181
36 89,887
246 52,920
3,333 41,380
4,700
1,458
1,172
619
21
1,037
1,684 154,906
640 152,582
24 88,508
587 87,897
0 37,429
116 37,545
0 24,963 1,184 26,148
279 1,199
0
920
52 1,361
0 1,309
43
24
19
0
0
0
42,522
0
42,522
113,012
15,276
128,289
0
0
45,085
0
45,085
63,111
10,527
73,638
Other financial liabilities designated at fair value
of which: Financial liabilities related to unit-linked investment contracts
of which: Securities financing transactions
of which: Over-the-counter debt instruments and other
0
26,878
0 15,992
7,416
0
3,471
0
2,606
29,484
0 15,992
7,416
0
6,076
2,606
0
29,547
0 13,221
0 15,333
993
0
691
30,237
0 13,221
0 15,333
691 1,684
Total liabilities measured at fair value
of which: Credit Suisse4
28,454
426,635
2,355 85,859 10,305 98,519
374,542
23,638
24,219 296,148
13,015 333,381
1 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.
2 Includes a USD 0.6bn investment in Pfandbriefbank schweizerischer Hypothekarinstitute AG. UBS holds 20% of the entity’s voting rights but cannot exercise significant influence given the governance structure of
the entity. 3 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. 4 Refer
to Note 2 for more information about the acquisition of the Credit Suisse Group.
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 generated from industry-standard yield
curve modeling techniques and models. The option pricing model may be implemented using a closed-form analytical
formula or other mathematical techniques (e.g., binomial tree or Monte Carlo simulation).
Where available, valuation techniques use market-observable assumptions and inputs. If such data is not available, inputs
may be derived by reference to similar assets in active markets, from recent prices for comparable transactions or from
other observable market data. In such cases, the inputs selected are based on historical experience and practice for similar
or analogous instruments, derivation of input levels based on similar products with observable price levels, and knowledge
of current market conditions and valuation approaches.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
368
Note 21 Fair value measurement (continued)
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 recognized as standard
within the 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 21e for more information. The discount curves used by the
Group incorporate the funding and credit characteristics of the instruments to which they are applied.
Financial instruments excluding derivatives: valuation and classification in the fair value hierarchy
Product
Valuation and classification in the fair value hierarchy
Government bills
and bonds
Valuation
– Generally valued using prices obtained directly from the market.
– Instruments not priced directly using active-market data are valued using discounted cash flow
valuation techniques that incorporate market data for similar government instruments.
Corporate and
municipal bonds
Traded loans and
loans measured at
fair value
Fair value hierarchy
– Generally traded in active markets with prices that can be obtained directly from these markets,
resulting in classification as Level 1, while the remaining positions are classified as Level 2 and Level 3.
Valuation
– Generally valued using prices obtained directly from the market for the security, or similar securities,
adjusted for seniority, maturity and liquidity.
– When prices are not available, instruments are valued using discounted cash flow valuation
techniques incorporating the credit spread of the issuer or similar issuers.
– For convertible bonds without directly comparable prices, issuances may be priced using a convertible
bond model.
Fair value hierarchy
– Generally classified as Level 1 or Level 2, depending on the depth of trading activity behind price
sources.
– Level 3 instruments have no suitable pricing information available.
Valuation
– Valued directly using market prices that reflect recent transactions or quoted dealer prices, where
available.
– Where no market price data is available, loans are valued by relative value benchmarking using
pricing derived from debt instruments in comparable entities or different products in the same entity,
or by using a credit default swap valuation technique, which requires inputs for credit spreads, credit
recovery rates and interest rates.
– Securitization lending facilities are valued using a discounted cashflow analysis that incorporates
adjustments for any bespoke features of the loan and collateral. 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.
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, or where the unit or underlying investments are illiquid
are classified as Level 3.
Asset-backed
securities (ABS)
Valuation
Fair value hierarchy
Auction rate
securities (ARS)
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.
– 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.
– 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.
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.
– Equity securities less actively traded will be classified as Level 2 and illiquid positions as Level 3.
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.
Financial assets for
unit-linked
investment
contracts
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
369
Note 21 Fair value measurement (continued)
Product
Securities
financing
transactions
Brokerage
receivables and
payables
Financial liabilities
related to unit-
linked investment
contracts
Precious metals
and other physical
commodities
Debt issued
designated at fair
value
Commercial paper
and certificates of
deposit
Valuation and classification in the fair value hierarchy
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.
Valuation
– Physical assets are valued using the spot rate observed in the relevant market.
Fair value hierarchy
– Generally traded in active markets with prices that can be obtained directly from these markets,
resulting in classification as Level 1.
Valuation
– The risk management and the valuation approaches for these instruments are closely aligned with
the equivalent derivatives business and the underlying risk, and the valuation techniques used for
this component are the same as the relevant valuation techniques described below.
Fair value hierarchy
– The observability is closely aligned with the equivalent derivatives business and the underlying risk.
Valuation
– Generally valued using discounted cash flow valuation techniques incorporating the spread of the
issuer or similar issuers over the underlying currency risk-free curve.
Fair value hierarchy
– Due to the short-dated nature of the positions and liquid underlying pricing inputs they are generally
classified as Level 2.
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 11 for more information about derivative instruments
Derivative product
Valuation and classification in the fair value hierarchy
Interest rate
contracts
Valuation
– Interest rate swap contracts are valued by estimating future interest cash flows and discounting those
cash flows using a rate that reflects the appropriate funding rate for the position being measured.
The yield curves used to estimate future index levels and discount rates are generated using market-
standard yield curve models using interest rates associated with current market activity. The key
inputs to the models are interest rate swap rates, forward rate agreement rates, short-term interest
rate futures prices, basis swap spreads and inflation swap rates.
– Interest rate option contracts are valued using various market-standard option models, using inputs
that include interest rate yield curves, inflation curves, volatilities and correlations.
– When the maturity of an interest rate swap or option contract exceeds the term for which standard
market quotes are observable for a significant input parameter, the contracts are valued by
extrapolation from the last observable point using standard assumptions or by reference to another
observable comparable input parameter to represent a suitable proxy for that portion of the term.
Fair value hierarchy
– The majority of interest rate swaps are classified as Level 2, as the standard market contracts that
form the inputs for yield curve models are generally traded in active and observable markets.
– Options are generally treated as Level 2, as the calibration process enables the model output to be
validated to active-market levels. Models calibrated in this way are then used to revalue the portfolio
of both standard options and more exotic products.
– Interest rate swap or option contracts are classified as Level 3 when the terms exceed standard
market-observable quotes.
– Exotic options for which appropriate volatility or correlation input levels cannot be implied from
observable market data are classified as Level 3.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
370
Note 21 Fair value measurement (continued)
Derivative product
Valuation and classification in the fair value hierarchy
Credit derivative
contracts
Valuation
Fair value hierarchy
– 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.
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.
– 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
Loan commitments
measured at FVTPL
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.
Valuation
– Valued directly using market prices that reflect recent transactions or quoted dealer prices, where
available.
– Where no market price data is available, loan commitments 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.
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.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
371
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.
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. In
accordance with IFRS, no day-1 profit or loss reserves were recognized on positions acquired with the Credit Suisse Group
and no significant new positions were originated between the acquisition date and 31 December 2023.
Deferred day-1 profit or loss reserves
USD m
Reserve balance at the beginning of the year
Profit / (loss) deferred on new transactions
(Profit) / loss recognized in the income statement
Foreign currency translation
Reserve balance at the end of the year
2023
422
260
(278)
0
404
2022
418
299
(295)
0
422
2021
269
459
(308)
(2)
418
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 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
Own credit adjustments on financial liabilities designated at fair value
USD m
Recognized during the period:
Realized gain / (loss)
Unrealized gain / (loss)
Total gain / (loss), before tax
USD m
Recognized on the balance sheet as of the end of the period:
Unrealized life-to-date gain / (loss)
of which: debt issued designated at fair value
of which: other financial liabilities designated at fair value
Included in Other comprehensive income
For the year ended
31.12.22
31.12.23
31.12.21
8
(1,858)
(1,850)
1
866
867
(14)
60
46
31.12.23
31.12.22
31.12.21
(1,287)
(1,297)
10
556
453
103
(315)
(347)
32
Own credit adjustments on financial liabilities designated at fair value includes a life-to-date loss of USD 974m attributable
to Credit Suisse.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
372
Note 21 Fair value measurement (continued)
Credit valuation adjustments
In order to measure the fair value of OTC derivative instruments, including funded derivative instruments that are
classified as Financial assets at fair value not held for trading, CVAs are 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, considering all exposures with
that counterparty, and is dependent on the expected future value of exposures, default probabilities and recovery rates,
applicable collateral or netting arrangements, break clauses, funding spreads, and other contractual factors.
Funding valuation adjustments
FVAs reflect the costs and benefits of funding associated with uncollateralized and partially collateralized derivative
receivables and payables and are calculated as the valuation effect from moving the discounting of the uncollateralized
derivative cash flows from 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.
Debit valuation adjustments
A DVA is estimated to incorporate own credit in the valuation of derivatives where an FVA is not already recognized. The
DVA calculation is effectively consistent with the CVA framework, being determined for each counterparty, considering
all exposures with that counterparty and taking into account collateral netting agreements, expected future mark-to-
market movements and UBS’s credit default spreads.
Other valuation adjustments
Instruments that are measured as part of a portfolio of combined long and short positions are valued at mid-market levels
to ensure consistent valuation of the long- and short-component risks. A liquidity valuation adjustment is then made to
the overall net long or short exposure to move the fair value to bid or offer as appropriate, reflecting current levels of
market liquidity. The bid–offer spreads used in the calculation of this valuation adjustment are obtained from market
transactions and other relevant sources and are updated periodically.
Uncertainties associated with the use of model-based valuations are incorporated into the measurement of fair value
through the use of model reserves. These reserves reflect the amounts that the Group estimates should be deducted
from valuations produced directly by models to 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.
Other valuation adjustment reserves on the balance sheet
USD m
Credit valuation adjustments1
Funding and debit valuation adjustments
Other valuation adjustments
of which: liquidity
of which: model uncertainty
1 Amount does not include reserves against defaulted counterparties.
31.12.23
(145)
(116)
(2,654)
(2,051)
(603)
As of
31.12.22
(33)
(46)
(839)
(311)
(529)
31.12.21
(44)
(47)
(913)
(341)
(571)
Credit valuation adjustments and Funding and debit valuation adjustments include USD 108m and USD 34m respectively,
attributable to the Credit Suisse Group. Liquidity and model uncertainty adjustments in Credit Suisse amount to USD
1,741m and USD 181m, respectively.
e) 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 2023 and
unobservable, and a range of values for those unobservable inputs.
The range of values represents the highest- and lowest-level inputs used in the valuation techniques. Therefore, the range
does not reflect the level of uncertainty regarding a particular input or an assessment of the reasonableness of the
Group’s estimates and assumptions, but rather the different underlying characteristics of the relevant assets and liabilities
held by the Group. The ranges will therefore vary from period to period and parameter to parameter based on
characteristics of the instruments held at each balance sheet date. Furthermore, the ranges of unobservable inputs may
differ across other financial institutions, reflecting the diversity of the products in each firm’s inventory.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
373
Note 21 Fair value measurement (continued)
Valuation techniques and inputs used in the fair value measurement of Level 3 assets and liabilities
Fair value
Assets
Liabilities
Valuation
technique(s)
Significant
unobservable
input(s)1
Range of inputs
31.12.23
31.12.22
low
high
weighted
average2
low high
weighted
average2
unit1
31.12.23 31.12.22
USD bn
Financial assets and liabilities at fair value held for trading and Financial assets at fair value not held for trading
Corporate and municipal
bonds
31.12.23 31.12.22
1.5
0.8
0.1
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
Option model
Discounted expected
cash flows
Relative value to
market comparable
Relative value to
market comparable
Bond price equivalent
5
126
99
14
112
85
Discount margin
135
491
463
412
412
Loan price equivalent
1
120
88
30
100
97
Credit spread
19 2,681
614
200
200
200
Credit spread
162 1,849
318
145
1,350
322
Gap risk
0
2
0
Credit spread
135
205
150
115
196
144
Net asset value
Price
Traded loans, loans
measured at fair value,
loan commitments and
guarantees
22.0
1.7
0.0
0.0
Auction rate securities
1.2
1.3
Investment fund units3
0.8
0.3
0.0
0.0
Equity instruments3
Debt issued designated at
fair value4
Other financial liabilities
designated at fair value
Derivative financial instruments
3.4
0.9
0.1
0.1
15.3
10.5
2.6
0.7
Discounted expected
cash flows
Funding spread
51
201
23
175
Interest rate
0.4
0.5
0.2
0.1 Option model
Credit
0.5
0.3
0.6
0.3
Discounted expected
cash flows
Volatility of interest
rates
Volatility of inflation
IR-to-IR correlation
Credit spreads
Credit correlation
Credit volatility
45
1
4
154
6
100
1 2,421
66
50
60
60
75
143
9
565
Bond price equivalent
2
242
3
277
Recovery rates
14
100
Option model
Credit spreads
26 2,159
Equity / index
1.3
0.7
3.3
1.2 Option model
Equity dividend yields
Volatility of equity
stocks, equity and
other indices
Equity-to-FX
correlation
Equity-to-equity
correlation
0
17
0
20
4
142
4
120
(40)
77
(29)
84
(50)
100
(25)
100
Loan commitments
points
measured at FVTPL
1 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). 2 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. 3 The range of inputs is not disclosed, as there is a dispersion of values given the diverse nature of the
investments. 4 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, as well as rates-linked
and credit-linked notes, all of which have embedded derivative parameters that are considered to be unobservable. The equivalent derivative instrument parameters for debt issued or embedded derivatives for over-
the-counter debt instruments are presented in the respective derivative financial instruments lines in this table.
market comparable Loan price equivalent
Relative value to
1.0
102
35
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
374
points
basis
points
points
basis
points
basis
points
%
basis
points
basis
points
basis
points
%
%
basis
points
%
%
points
%
basis
points
%
%
%
%
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
Bond price
equivalent
Loan price
equivalent
Credit spread
Discount margin
Funding spread
Volatility
Recovery Rate
Gap risk
Description
– 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 or a loan commitment, 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 and other credit sensitive products 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.
– The projected recovery rate reflects the estimated recovery that will be realized given expected defaults, it is an analogous
pricing input for corporate or sovereign credits. Reduction in recovery rates will result in lower expected cash flows into the
structure upon the default of the instruments. In general, a significant increase / (decrease) in the recovery rate in isolation
would result in significantly higher / (lower) fair value for the respective underlying cash security. The impact of a change in
recovery rate on a credit derivative position will depend on whether credit protection has been bought or sold. Recovery rate
is ultimately driven by the value recoverable from collateral held after default occurs relative to the outstanding exposure at
that point.
– Gap risk is a risk of unexpected large declines in the underlying collateral values occurring between collateral settlement
dates. Gap risk is a significant unobservable input for structures that exhibit market risk to significant price moves in the
reference asset, generally related to certain financing or principal protection trade features. In general, for assets / (liabilities)
with a significant unobservable input of gap risk, an increase in gap risk in isolation would decrease / (increase) the fair value.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
375
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.
– 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.
f) 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 interrelationships 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.
The increase in Traded loans sensitivity to favorable and unfavorable changes is due to an increase in Level 3 loan balances
from Credit Suisse including, securitization warehouse facilities, a loan with securitization collateral and revolving loan
facilities that are deemed unobservable.
Sensitivity of fair value measurements to changes in unobservable input assumptions1
USD m
Traded loans, loans measured at fair value and guarantees
Securities financing transactions
Auction rate securities
Asset-backed securities
Equity instruments
Investment fund units
Loan commitments measured at FVTPL
Interest rate derivatives, net
Credit derivatives, net
Foreign exchange derivatives, net
Equity / index derivatives, net
Other
Total
of which: Credit Suisse 3
31.12.23
31.12.22
Favorable
changes
6352
Unfavorable
changes
(600)2
Favorable
changes
19
Unfavorable
changes
(12)
30
67
39
430
135
313
217
140
5
521
281
(32)
(21)
(36)
(413)
(137)
(343)
(103)
(131)
(4)
(443)
(276)
2,815
2,034
(2,538)
(1,890)
33
46
27
183
19
0
18
3
10
361
20
738
(37)
(46)
(27)
(161)
(21)
0
(12)
(4)
(5)
(330)
(41)
(696)
1 Sensitivity of issued and over-the-counter debt instruments is reported with the equivalent derivative or Other. 2 Sensitivity increased due to a traded loan L3 balance increase (see note 21(c)) and includes
refinements applied in estimating valuation uncertainty across various parameters. 3 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
g) Level 3 instruments: movements during the period
The table below presents additional information about material Level 3 assets and liabilities measured at fair value on a
recurring basis. Level 3 assets and liabilities may be hedged with instruments classified as Level 1 or Level 2 in the fair value
hierarchy, and, as a result, realized and unrealized gains and losses included in the table may not include the effect of related
hedging activity. Furthermore, the realized and unrealized gains and losses presented in the table are not limited solely to
those arising from Level 3 inputs, as valuations are generally derived from both observable and unobservable parameters.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
376
Note 21 Fair value measurement (continued)
As noted above, Level 3 assets overall increased following the acquisition of the Credit Suisse Group, mainly reflecting
acquired traded loans that were deemed unobservable and, to a lesser extent, also reflecting the aligning UBS’s
accounting methodology for testing unobservable inputs.
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
Credit
Suisse
Level 3
assets and
liabilities
acquired1
Net gains /
losses
included in
compre-
hensive
income 2
of which:
related to
instruments
held at the
end of the
period Purchases
Sales Issuances Settlements
Transfers
into
Level 3
Transfers
out of
Level 3
Foreign
currency
translation
26.2
0.4
1.1
23.1
1.4
0.2
0.5
0.2
4.2
0.8
0.0
2.1
4.5
0.2
1.7
0.3
2.0
8.5
2.1
Balance
at the
beginning
of the
USD bn
period
For the twelve months ended 31 December 20233
Financial assets at fair value held for
trading
of which: Equity instruments
of which: Corporate and municipal
bonds
of which: Loans
Derivative financial instruments –
assets
of which: Interest rate
of which: Equity / index
of which: Credit
Financial assets at fair value not held
for trading
of which: Loans
of which: Auction rate securities
of which: Equity instruments
Derivative financial instruments –
liabilities
of which: Interest rate
of which: Equity / index
of which: Credit
of which: Loan commitments
measured at FVTPL
Debt issued designated at fair value
Other financial liabilities designated at
fair value
of which: Investment fund units
of which: Corporate and municipal
bonds
of which: Loans
Derivative financial instruments –
assets
of which: Interest rate
of which: Equity / index
of which: Credit
Financial assets at fair value not held
for trading
of which: Loans
of which: Auction rate securities
of which: Equity instruments
Derivative financial instruments –
liabilities
of which: Interest rate
of which: Equity / index
of which: Credit
For the twelve months ended 31 December 2022
Financial assets at fair value held for
trading
1.5
0.1
0.5
0.6
1.5
0.5
0.7
0.3
3.7
0.7
1.3
0.8
1.7
0.1
1.2
0.3
0.0
10.5
0.7
2.3
0.0
0.6
1.4
1.1
0.5
0.4
0.2
4.2
0.9
1.6
0.7
2.2
0.3
1.5
0.3
14.2
Balance
at the
end
of the
period
22.6
0.3
1.3
19.6
2.6
0.4
1.3
0.5
8.4
2.3
1.2
3.1
5.6
0.2
3.3
0.6
1.0
15.3
(0.9)
(0.1)
(0.2)
(0.7)
(0.2)
(0.0)
(0.1)
(0.1)
0.2
0.3
0.0
(0.0)
(0.4)
(0.0)
0.2
0.0
(0.6)
1.0
(0.5)
(0.0)
(0.1)
(0.4)
(0.1)
(0.0)
0.0
(0.0)
0.1
0.3
0.0
(0.1)
0.1
(0.0)
0.6
0.0
(0.5)
0.8
1.1
0.1
0.6
0.1
0.0
0.0
0.0
0.0
2.1
0.6
0.0
0.5
0.0
0.0
(0.0)
0.0
0.0
0.0
(4.5)
(0.2)
(0.8)
(2.7)
(0.0)
0.0
0.0
0.0
(2.2)
(0.4)
(0.1)
(0.4)
(0.0)
0.0
(0.0)
0.0
0.0
0.0
3.6
0.0
0.0
3.6
1.0
0.2
0.6
0.1
0.0
(0.0)
0.0
0.0
2.0
0.1
1.2
0.1
0.1
3.7
(5.6)
0.0
0.0
(5.6)
(0.8)
(0.3)
(0.2)
(0.2)
(0.0)
(0.0)
0.0
(0.0)
(2.0)
(0.1)
(0.9)
(0.1)
(0.5)
(5.1)
2.3
0.2
0.1
2.0
0.3
0.1
0.1
0.1
0.8
0.4
0.0
0.1
0.4
0.1
0.2
0.1
0.0
1.0
(1.1)
(0.1)
(0.0)
(0.8)
(0.7)
(0.2)
(0.3)
(0.0)
(0.3)
(0.2)
0.0
0.0
(0.7)
(0.2)
(0.3)
(0.1)
(0.0)
(4.5)
0.0
0.0
0.0
0.0
0.0
(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
(0.0)
0.0
0.0
0.0
0.2
(0.2)
0.0
(0.1)
0.0
2.6
(0.3)
(0.0)
(0.0)
(0.1)
0.6
0.3
0.2
0.1
0.1
(0.0)
0.1
0.0
(0.3)
(0.0)
(0.0)
(0.1)
0.3
0.3
0.1
(0.1)
0.1
(0.0)
0.0
0.0
0.3
0.0
0.3
0.0
0.0
0.0
0.0
0.0
0.7
0.4
0.0
0.1
(1.8)
(0.0)
(0.6)
(1.1)
0.0
0.0
0.0
0.0
(1.2)
(0.4)
(0.3)
(0.1)
0.5
0.0
0.0
0.5
0.4
0.0
0.4
0.0
0.1
0.1
0.0
0.0
0.0
0.0
0.0
0.0
(0.7)
(0.2)
(0.3)
(0.2)
(0.0)
0.0
0.0
0.0
0.7
0.1
0.4
0.0
0.1
0.0
0.1
0.0
0.2
0.1
0.0
0.1
(0.3)
(0.0)
(0.0)
(0.2)
(0.0)
(0.1)
(0.0)
0.1
(0.3)
(0.3)
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)
1.5
0.1
0.5
0.6
1.5
0.5
0.7
0.3
3.7
0.7
1.3
0.8
(0.8)
(0.3)
(0.4)
(0.1)
(2.2)
(0.4)
(0.0)
(0.3)
(0.0)
(1.8)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.1
0.1
0.8
0.1
4.7
(0.9)
(0.0)
(0.7)
(0.1)
(3.1)
0.3
0.0
0.1
0.1
0.7
(0.2)
(0.0)
(0.2)
(0.0)
(3.4)
(0.1)
(0.0)
(0.0)
(0.0)
(0.3)
1.7
0.1
1.2
0.3
10.5
Debt issued designated at fair value
Other financial liabilities designated at
fair value
1 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group. 2 Net gains / losses included in comprehensive income are recognized in Net interest income and Other net income from
financial instruments measured at fair value through profit or loss in the Income statement, and also in Gains / (losses) from own credit on financial liabilities designated at fair value, before tax in the Statement of
comprehensive income. 3 Total Level 3 assets as of 31 December 2023 were USD 33.6bn (31 December 2022: USD 6.8bn). Total Level 3 liabilities as of 31 December 2023 were USD 23.6bn (31 December 2022:
USD 13.0bn).
(0.1)
(0.1)
(0.1)
(0.0)
(0.0)
0.7
0.0
0.0
0.8
0.0
0.0
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
377
Note 21 Fair value measurement (continued)
h) 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 Accounting Standards.
Maximum exposure to credit risk
USD bn
Financial assets measured at
fair value on the balance sheet1
Financial assets at fair value
held for trading – debt instruments2,3
Derivative financial instruments4
Brokerage receivables
Financial assets at fair value not
held for trading – debt instruments5
Total financial assets measured at fair value
of which: Credit Suisse6
Guarantees
31.12.23
Collateral
Credit enhancements
Maximum
exposure to
credit risk
Cash
collateral
received
Collateralized
by equity and
debt
instruments
Secured by
real estate
Other
collateral
Netting
Credit
derivative
contracts
Guarantees
and sub-
participations
Exposure to
credit risk
after collateral
and credit
enhancements
54.6
176.1
21.0
83.3
335.0
114.2
0.1
6.4
20.5
41.7
68.6
32.9
0.0
156.4
0.0
0.0
0.0
0.0
0.2
156.6
42.0
0.0
0.0
0.0
54.6
13.3
0.5
41.3
109.8
39.3
0.0
0.0
0.1
31.12.22
Collateral
Credit enhancements
Maximum
exposure to
credit risk
Cash
collateral
received
Collateralized
by equity and
debt
instruments
Secured by
real estate
Other
collateral
Credit
derivative
contracts
Guarantees
and sub-
participations
Exposure to
credit risk
after collateral
and credit
enhancements
Netting
USD bn
Financial assets measured at
fair value on the balance sheet1
Financial assets at fair value
held for trading – debt instruments2,3
Derivative financial instruments4
Brokerage receivables
Financial assets at fair value not
held for trading – debt instruments5
33.4
61.0
Total financial assets measured at fair value
Guarantees
0.0
1 The maximum exposure to loss is generally equal to the carrying amount and subject to change over time with market movements. 2 For the purpose of this disclosure, collateral and credit enhancements were
not considered as these positions are generally managed under the market risk framework. 3 Does not include investment fund units. 4 The amount shown in the “Netting” column represents the netting potential
not recognized on the balance sheet. Refer to Note 22 for more information. 5 Does not include unit-linked investment contracts and investment fund units. Financial assets at fair value not held for trading
collateralized by equity and debt instruments consisted of structured loans and reverse repurchase and securities borrowing agreements. 6 Refer to Note 2 for more information about the acquisition of the Credit
Suisse Group.
44.8
229.0
0.2
16.5
150.1
17.6
16.5
10.7
0.3
5.9
17.3
11.4
34.6
0.0
0.2
133.5
133.5
0.0
0.0
0.0
0.0
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
378
Note 21 Fair value measurement (continued)
i) Financial instruments not measured at fair value
The table below provides the estimated fair values of financial instruments not measured at fair value.
Financial instruments not measured at fair value
Carrying
amount
31.12.23
Fair value
Carrying
amount
31.12.22
Fair value
USD bn
Assets
Cash and balances at central banks
Amounts due from banks
Receivables from securities financing
transactions measured at amortized cost
Cash collateral receivables on derivative
instruments
Loans and advances to customers
Other financial assets measured at amortized
cost
Liabilities
Amounts due to banks
Payables from securities financing
transactions measured at amortized cost
Cash collateral payables on derivative
instruments
Customer deposits
Total
314.1
21.2
99.0
50.1
639.8
65.5
71.0
14.4
41.6
792.0
Carrying
amount
approximates
fair value1
Level 1
Level 2
Level 3
Total
Total
Carrying
amount
approximates
fair value1
Level 1
Level 2
Level 3
Total
314.0
19.7
93.6
50.1
196.9
0.0
0.0
0.0
0.0
0.0
0.1
1.2
3.9
0.0
0.2
314.1
21.2
169.4
14.8
1.5
99.0
67.8
0.0
54.5
0.0
382.2
50.1
633.7
35.0
387.2
169.4
14.0
64.3
35.0
134.3
0.1
0.0
0.0
0.0
0.0
0.0
0.7
1.8
0.0
0.0
169.4
14.8
1.7
67.8
0.0
45.9
0.0
194.7
35.0
374.9
13.2
13.9
33.9
2.6
64.0
53.3
12.9
10.3
25.1
2.5
50.8
62.7
8.1
41.5
694.1
0.0
0.0
0.0
0.0
8.3
5.9
0.0
98.7
0.0
71.0
11.6
0.4
14.4
4.2
0.0
0.0
41.5
792.9
36.4
525.1
8.9
3.5
36.4
491.3
0.0
0.0
0.0
0.0
2.7
0.7
0.0
33.6
0.0
11.6
0.0
0.0
0.0
4.2
36.4
524.8
Debt issued measured at amortized cost
Other financial liabilities measured at
amortized cost2
6.2
0.0
1 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). 2 Excludes lease liabilities.
114.6
241.3
237.8
113.5
216.3
15.4
98.1
15.2
24.7
15.3
13.4
0.0
0.0
0.1
0.0
0.0
1.7
6.2
6.2
0.0
0.0
0.0
The fair values included in the table above have been calculated for disclosure purposes only. The valuation techniques
and assumptions described below relate only to the fair value of UBS’s financial instruments not measured at fair value.
Other institutions may use different methods and assumptions for their fair value estimations, and therefore such fair
value disclosures cannot necessarily be compared from one financial institution to another. The following principles were
applied when determining fair value estimates for financial instruments not measured at fair value.
– For financial instruments with remaining maturities greater than three months, the fair value was determined from
quoted market prices, if available.
– Where quoted market prices were not available, the fair values were estimated by discounting contractual cash flows
using current market interest rates or appropriate yield curves for instruments with similar credit risk and maturity.
These estimates generally include adjustments for counterparty credit risk or UBS’s own credit.
– For short-term financial instruments with remaining maturities of three months or less, the carrying amount, which is
net of credit loss allowances, is generally considered a reasonable estimate of fair value.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
379
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 below 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 below do not purport to represent their actual credit
risk exposure.
Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements
Assets subject to netting arrangements
Netting recognized on the balance sheet
Netting potential not recognized on
the balance sheet3
Gross assets
before netting
Netting with
gross liabilities2
Net assets
recognized
on the
balance
sheet
Assets after
consideration
of
netting
potential
Financial
liabilities
Collateral
received
Assets not
subject to netting
arrangements4
Assets
recognized
on the
balance
sheet
Total assets
Total assets
after
consideration
of netting
potential
Total assets
recognized
on the
balance
sheet
93.7
172.4
47.3
(12.7)
(3.3)
80.9
169.1
(1.5)
(133.0)
(79.2)
(29.8)
0.3
6.3
0.0
47.3
(29.7)
(3.2)
14.5
129.8
(92.6)
37.2
(2.0)
(35.3)
0.0
128.7
443.2
(92.6)
(108.6)
36.1
334.6
(2.0)
(166.2)
(34.1)
(147.4)
0.0
21.0
60.8
147.4
33.5
85.6
84.4
327.2
(11.1)
(2.5)
49.6
144.9
(3.0)
(110.9)
(46.4)
(28.5)
0.3
5.5
0.0
33.5
(20.9)
(1.9)
10.6
(76.8)
8.7
(1.5)
(7.3)
0.0
(76.8)
(90.4)
7.6
236.8
(1.5)
(136.3)
(6.1)
(84.1)
0.0
16.4
18.1
7.0
2.7
66.7
0.8
94.6
18.2
5.2
1.5
51.0
0.1
76.0
18.4
13.3
17.2
66.7
0.8
115.6
18.5
10.7
12.1
51.0
0.1
92.3
99.0
176.1
50.1
104.0
36.9
429.2
67.8
150.1
35.0
59.8
7.7
312.8
As of 31.12.23, USD bn
Receivables from securities financing
transactions measured at amortized cost
Derivative financial instruments
Cash collateral receivables on
derivative instruments1
Financial assets at fair value
not held for trading
of which: reverse
repurchase agreements
Total assets
As of 31.12.22, USD bn
Receivables from securities financing
transactions measured at amortized cost
Derivative financial instruments
Cash collateral receivables on
derivative instruments1
Financial assets at fair value
not held for trading
of which: reverse
repurchase agreements
Total assets
1 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. 2 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 below. Netting in this column for reverse repurchase agreements presented within the lines “Receivables
from securities financing transactions measured at amortized cost” 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 measured at amortized cost” and “Other financial liabilities designated at fair value” lines in the liabilities table presented below. 3 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. 4 Includes assets not subject to enforceable netting arrangements and other out-of-scope items.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
380
Note 22 Offsetting financial assets and financial liabilities (continued)
Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements
Liabilities subject to netting arrangements
Netting recognized on the balance sheet
Netting potential not recognized
on the balance sheet3
Net
liabilities
recognized
on the
balance
sheet
Netting with
gross assets2
Liabilities
after
consideration
of netting
potential
Financial
assets
Collateral
pledged
Gross
liabilities
before
netting
25.2
185.1
(12.5)
(3.3)
12.6
181.8
(0.8)
(133.0)
(11.8)
(35.0)
39.8
0.0
39.7
(23.2)
(3.2)
102.1
100.0
352.1
(92.8)
(92.8)
(108.6)
9.3
7.2
243.5
(2.7)
(2.7)
(159.7)
(4.8)
(4.5)
(54.8)
14.1
150.3
(11.1)
(2.5)
3.0
147.8
(1.3)
(110.9)
(1.8)
(26.2)
34.9
0.0
34.9
(20.0)
(1.9)
92.5
92.1
291.7
(76.9)
(76.9)
(90.4)
15.6
15.3
201.3
(3.2)
(3.2)
(135.3)
(12.4)
(12.1)
(42.3)
0.0
13.9
13.3
1.8
0.0
29.1
0.0
10.7
13.0
0.0
0.0
23.7
Liabilities not
subject
to netting
arrangements4
Liabilities
recognized
on the
balance
sheet
Total liabilities
Total
liabilities
after
consideration
of netting
potential
Total
liabilities
recognized
on the
balance
sheet
1.8
10.4
1.8
20.2
0.2
34.2
1.2
7.1
1.6
14.6
0.1
24.5
1.8
24.3
15.2
22.0
0.2
63.2
1.2
17.8
14.5
14.6
0.1
48.1
14.4
192.2
41.6
29.5
7.4
277.7
4.2
154.9
36.4
30.2
15.3
225.8
As of 31.12.23, USD bn
Payables from securities financing
transactions measured at amortized cost
Derivative financial instruments
Cash collateral payables on
derivative instruments1
Other financial liabilities
designated at fair value
of which: repurchase agreements
Total liabilities
As of 31.12.22, USD bn
Payables from securities financing
transactions measured at amortized cost
Derivative financial instruments
Cash collateral payables on
derivative instruments1
Other financial liabilities
designated at fair value
of which: repurchase agreements
Total liabilities
1 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. 2 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 above. Netting in this column for repurchase agreements presented within the lines “Payables from securities financing transactions
measured at amortized cost” 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 measured at amortized cost” and “Financial assets at fair value not held for trading” lines in the assets table presented above. 3 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. 4 Includes liabilities not subject to enforceable netting arrangements and other out-of-scope items.
Note 23 Restricted and transferred financial assets
This Note provides information about restricted financial assets (Note 23a), transfers of financial assets (Note 23b and
23c) and financial assets that are received as collateral with the right to resell or repledge these assets (Note 23d).
a) Restricted financial assets
Restricted financial assets consist of assets pledged as collateral against an existing liability or contingent liability and
other assets that are otherwise explicitly restricted such that they cannot be used to secure funding.
Financial assets pledged as collateral mainly include pledged mortgage loans, which serve as collateral for existing
liabilities against the Swiss National Bank (the SNB) in relation to the Emergency Liquidity Assistance facility, against loans
from Swiss mortgage institutions and US Federal Home Loan Banks, and in connection with the issuance of covered
bonds. Of these pledged mortgage loans, approximately USD 7.5bn as of 31 December 2023 could be withdrawn or
used for future liabilities or covered bond issuances without breaching existing collateral requirements (31 December
2022: approximately USD 3.1bn). Existing liabilities in relation to the Emergency Liquidity Assistance facility against the
SNB were USD 44.9bn as of 31 December 2023 (31 December 2022: USD 0bn). Liabilities against Swiss central mortgage
institutions and US Federal Home Loan Banks, and for existing covered bond issuances were USD 45.5bn as of 31
December 2023 (31 December 2022: USD 9.0bn).
Other financial assets are pledged as collateral in relation to securities lending transactions and in repurchase transactions,
which are generally entered into under standard market agreements. For securities lending, the cash received as collateral
may be more or less than the fair value of the securities loaned, depending on the nature of the transaction. For
repurchase agreements, the fair value of the collateral sold under an agreement to repurchase is generally in excess of
the cash borrowed.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
381
Note 23 Restricted and transferred financial assets (continued)
Other restricted financial assets include assets protected under client asset segregation rules, assets held under unit-linked
investment contracts to back related liabilities to the policy holders and 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 m
Financial assets pledged as collateral
Cash and balances at central banks1
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
Total financial assets pledged as collateral
31.12.23
31.12.22
of which: assets
pledged as
collateral that
may be sold or
repledged by
counterparties
of which: assets
pledged as
collateral that
may be sold or
repledged by
counterparties
Restricted
financial assets
51,263
2,110
6,299
57,377
15,195
1,509
3,432
77,513
36,742
1,220
2,685
Restricted
financial assets
1,041
83,689
127,362
3,099
7,561
222,752
Other restricted financial assets
Amounts due from banks
Financial assets at fair value held for trading
Cash collateral receivables on derivative instruments
Loans and advances to customers
Other financial assets measured at amortized cost
Financial assets at fair value not held for trading
Financial assets measured at fair value through other comprehensive income
Other
Total other restricted financial assets
Total financial assets pledged and other restricted financial assets3
of which: Credit Suisse4
1 Assets pledged to the depositor protection system in Switzerland following new requirements that became effective in 2023. 2 Predominantly includes cash collateral provided to exchanges and clearing houses to
secure securities trading activity through those counterparties. 3 Does not include assets placed with central banks related to undrawn credit lines and for payment, clearing and settlement purposes (31 December
2023: USD 9.8bn; 31 December 2022: USD 5.9bn). 4 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
2,874
184
9,539
275
4,7242
18,229
1,846
354
38,025
260,777
114,611
3,689
162
5,155
1,127
815
14,478
1,842
44
27,312
104,825
In addition to the table above, USD 7.1bn were placed at central banks to meet local statutory minimum reserve
requirements as of 31 December 2023 (31 December 2022: USD 4.4bn).
In addition to restrictions on financial assets, UBS Group AG and its subsidiaries are, in certain cases, subject to regulatory
requirements that affect the transfer of dividends and capital within the Group, as well as intercompany lending.
Supervisory authorities also may require entities to measure capital and leverage ratios on a stressed basis, such as the
Federal Reserve Board’s Comprehensive Capital Analysis and Review (CCAR) process, which may limit the relevant
subsidiaries’ ability to make distributions of capital based on the results of those tests.
Supervisory authorities generally have discretion to impose higher requirements or to otherwise limit the activities of
subsidiaries.
Non-regulated subsidiaries are generally not subject to such requirements and transfer restrictions. However, restrictions
can also be the result of different legal, regulatory, contractual, entity- or country-specific arrangements and / or
requirements.
› Refer to the “Financial and regulatory key figures for our significant regulated subsidiaries and sub-groups” section of this report
for financial information about significant regulated subsidiaries of the Group
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
382
Note 23 Restricted and transferred financial assets (continued)
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.
Transferred financial assets subject to continued recognition in full
USD m
Financial assets at fair value held for trading that may be sold or repledged by counterparties
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
Total financial assets transferred
of which: Credit Suisse1
1 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
31.12.23
31.12.22
Carrying amount
of transferred
assets
51,263
Carrying amount of
associated liabilities
recognized
on balance sheet
23,765
Carrying amount
of transferred
assets
36,742
Carrying amount of
associated liabilities
recognized
on balance sheet
16,470
2,110
6,299
59,672
6,739
1,976
5,928
31,669
391
1,220
2,685
40,647
1,050
2,302
19,822
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
Financial assets at fair value held for trading that may be sold or repledged by counterparties include securities lending
and repurchase agreements in exchange for cash received, securities lending agreements in exchange for securities
received and other financial asset transfers.
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 included in the table above have full recourse to UBS.
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 included 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 that are not subject 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 2023 and as of 31 December 2022.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
383
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 2023
and 31 December 2022 was not material. Life-to-date losses reported in prior periods primarily relate to legacy positions
in securitization vehicles that 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 m
Fair value of assets received that can be sold or repledged1
of which: Credit Suisse3
31.12.23
Fair value of assets
received that can be
sold or repledged
576,596
88,068
of which: sold
or repledged2
382,313
26,697
31.12.22
Fair value of assets
received that can be
sold or repledged
434,023
of which: sold
or repledged2
331,805
1 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.
2 Does not include off-balance sheet securities (31 December 2023: USD 29.1bn; 31 December 2022: USD 9.9bn) 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. 3 Refer to Note 2 for more information about the acquisition of the Credit Suisse Group.
Note 24 Maturity analysis of assets and liabilities
a) Maturity analysis of carrying amounts 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 a third party could require UBS to pay.
Derivative financial instruments and financial assets and liabilities at fair value held for trading are presented in the Due
within 1 month column; however, 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 presented in 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 presented in the Perpetual /
Not applicable column. 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 presented in the Perpetual / Not applicable column.
Non-financial assets and liabilities with no contractual maturity are generally included in the Perpetual / Not applicable
column.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
384
Note 24 Maturity analysis of assets and liabilities (continued)
USD bn
Assets
Total financial assets measured at amortized cost
Amounts due from banks
Loans and advances to customers
Other financial assets measured at amortized cost
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
Total assets
of which: Credit Suisse
Liabilities
Total financial liabilities measured at amortized cost
Customer deposits
Debt issued measured at amortized cost
of which: non-subordinated
of which: subordinated
Total financial liabilities measured at fair value through
profit or loss1
Debt issued designated at fair value
Total non-financial liabilities
Total liabilities
of which: Credit Suisse
Guarantees, loan commitments and forward starting transactions2
Irrevocable loan commitments
Guarantees
Forward starting reverse repurchase and securities borrowing
agreements
Irrevocable committed prolongation of existing loans
Total
of which: Credit Suisse
Due within
1 month
Due between
1 and 3
months
Due between
3 and 12
months
Due between
1 and 2 years
Due between
2 and 5 years
Due over
5 years
Perpetual /
Not
applicable
31.12.23
645.9
18.8
177.9
12.3
417.6
50.8
0.1
12.3
1,075.9
346.4
748.7
618.2
10.1
7.6
2.5
308.3
17.0
17.8
1,074.7
328.0
90.7
46.3
18.4
2.5
157.9
70.1
57.7
1.1
34.0
1.8
12.2
12.2
1.1
71.0
37.5
97.0
76.5
14.7
14.7
14.0
13.8
4.5
115.6
34.3
88.3
0.8
77.5
5.2
9.9
9.9
1.0
0.2
99.3
50.2
115.1
72.7
34.3
31.8
2.5
30.0
28.8
0.2
145.3
40.6
125.6
0.0
118.5
6.3
8.4
8.4
0.1
1.3
135.3
32.7
49.8
15.9
31.1
30.8
0.3
31.2
28.8
0.3
81.3
19.9
136.8
0.3
116.6
19.8
12.6
12.6
0.0
1.2
150.6
59.9
88.7
8.4
73.2
72.8
0.3
18.0
15.9
0.7
107.4
27.3
135.5
0.2
115.3
20.0
5.3
5.3
0.0
1.1
142.0
44.2
66.4
0.3
62.5
62.5
0.0
25.2
24.0
0.4
91.9
25.2
4.8
4.8
38.4
43.2
12.2
12.0
12.0
12.0
2.5
14.5
0.3
0.5
0.4
0.0
0.0
0.8
1.4
0.0
1.3
1.8
0.0
0.0
0.0
0.0
31.12.22
0.0
0.0
0.0
USD bn
Assets
Total financial assets measured at amortized cost
Amounts due from banks
Loans and advances to customers
Other financial assets measured at amortized cost
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
Total assets
Liabilities
Total financial liabilities measured at amortized cost
Customer deposits
Debt issued measured at amortized cost
of which: non-subordinated
of which: subordinated
Total financial liabilities measured at fair value through
profit or loss1
Debt issued designated at fair value
Total non-financial liabilities
Total liabilities
Due within
1 month
Due between
1 and 3
months
Due between
3 and 12
months
Due between
1 and 2 years
Due between
2 and 5 years
Due over
5 years
Perpetual /
Not
applicable
422.6
13.4
139.4
8.7
300.2
24.6
0.3
7.6
730.7
521.9
463.0
6.6
4.6
2.0
265.9
9.3
7.2
795.1
28.7
0.7
16.3
4.2
10.0
10.0
0.9
39.6
40.0
28.3
8.8
8.8
13.8
12.3
3.0
56.7
34.4
0.6
28.3
2.8
7.8
7.8
0.9
0.2
43.4
49.6
23.8
23.3
23.3
16.3
15.9
65.9
78.7
0.0
74.9
3.0
3.6
3.6
0.1
82.4
20.5
7.5
11.9
9.5
2.4
19.6
19.3
40.1
70.4
0.0
55.5
14.8
9.9
9.9
0.0
2.0
82.3
35.1
2.2
31.1
30.6
0.5
7.3
6.9
92.7
0.1
72.9
19.7
2.0
2.0
0.0
0.4
95.1
23.4
0.3
21.9
21.9
10.5
10.0
42.4
33.9
1.9
1.9
29.0
31.0
11.1
11.1
11.1
2.1
13.2
Total
1,189.8
21.2
639.8
65.5
470.8
104.0
2.2
54.5
1,717.2
583.2
1,177.6
792.0
237.8
220.2
17.6
426.6
128.3
26.3
1,630.6
475.7
91.6
46.3
18.4
4.6
161.0
70.1
Total
727.6
14.8
387.2
53.3
335.3
59.8
2.2
39.2
1,104.4
701.5
525.1
114.6
98.6
16.0
333.4
73.6
12.3
1,047.1
Guarantees, loan commitments and forward starting transactions2
Irrevocable loan commitments
Guarantees
Forward starting reverse repurchase and securities borrowing
agreements
4.7
Irrevocable committed prolongation of existing loans
Total
70.9
0.3
1 As of 31 December 2023 and 31 December 2022, the contractual redemption amount at maturity of debt issued designated at fair value through profit or loss and other financial liabilities measured at fair value
through profit or loss was not materially different from the carrying amount. 2 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 11 for more
information.
39.3
22.4
40.0
22.4
4.7
70.1
3.8
0.4
0.0
0.4
0.3
0.0
3.8
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
385
Note 24 Maturity analysis of assets and liabilities (continued)
b) Maturity analysis of financial liabilities on an undiscounted basis
The table below provides an analysis of financial liabilities on an undiscounted basis, including all cash flows relating to
principal and future interest payments. The residual contractual maturities for non-derivative and non-trading financial
liabilities are based on the earliest date on which UBS could be contractually required to pay. Derivative positions and
trading liabilities, predominantly made up of short sale transactions, are presented in 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.
USD bn
Financial liabilities recognized on balance sheet1
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
Total financial liabilities measured at amortized cost
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
Total financial liabilities measured at fair value through
profit or loss
Total
of which: Credit Suisse
Guarantees, loan commitments and forward starting transactions
Irrevocable loan commitments7
Guarantees
Forward starting reverse repurchase and securities
borrowing agreements7
Irrevocable committed prolongation of existing loans
Total
of which: Credit Suisse
USD bn
Financial liabilities recognized on balance sheet1
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
Total financial liabilities measured at amortized cost
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
Total financial liabilities measured at fair value through
profit or loss
Total
Due within
1 month
Due between
1 and 3
months
Due between
3 and 12
months
Due between
1 and 2 years
Due between
2 and 5 years
Due over
5 years
Perpetual /
Not
applicable
31.12.23
60.2
5.0
41.6
619.5
10.7
7.7
0.1
744.7
34.2
192.2
42.5
17.1
22.2
308.2
1,052.9
315.9
90.7
46.3
18.4
2.5
157.9
70.1
2.7
3.2
77.6
16.4
0.2
0.1
100.2
14.3
0.2
14.6
114.8
33.9
4.2
3.7
75.4
38.8
0.9
0.8
123.1
30.1
1.2
31.3
154.3
42.8
0.3
2.0
17.6
37.4
1.2
0.9
58.5
32.1
2.3
34.5
93.0
21.7
4.4
0.9
9.9
87.8
3.3
2.1
106.3
17.4
2.1
19.5
125.7
30.8
0.0
0.0
0.3
75.6
4.2
2.5
80.0
38.7
1.6
40.3
120.4
29.0
12.4
12.4
12.4
0.5
0.4
0.0
0.0
0.8
1.4
0.0
1.3
1.8
0.0
0.0
0.0
0.0
31.12.22
0.0
0.0
0.0
Due within
1 month
Due between
1 and 3
months
Due between
3 and 12
months
Due between
1 and 2 years
Due between
2 and 5 years
Due over
5 years
Perpetual /
Not
applicable
6.3
3.3
36.4
463.1
6.8
4.7
0.1
520.7
29.5
154.9
45.1
9.4
27.1
266.0
786.8
2.6
0.3
28.5
9.4
0.1
0.1
40.9
12.4
1.4
13.8
54.7
1.9
0.4
24.5
24.8
0.5
0.5
52.1
16.1
0.4
16.4
68.6
0.3
0.3
8.0
14.4
0.5
0.5
23.6
19.7
0.4
20.0
43.6
0.6
0.0
2.4
37.9
1.3
1.3
42.3
7.1
0.5
7.6
49.8
0.3
28.0
1.4
1.4
29.7
18.8
0.8
19.6
49.3
11.9
11.9
343.5
1,064.7
11.9
Total
71.7
14.8
41.6
800.4
279.3
17.4
6.5
1,225.2
34.2
192.2
42.5
149.8
29.7
448.3
1,673.5
474.1
91.6
46.3
18.4
4.6
161.0
70.1
Total
11.7
4.4
36.4
526.9
133.4
8.5
3.8
721.2
29.5
154.9
45.1
83.4
30.6
0.3
0.4
39.3
22.4
Guarantees, loan commitments and forward starting transactions
Irrevocable loan commitments7
Guarantees
Forward starting reverse repurchase and securities
borrowing agreements7
4.7
Irrevocable committed prolongation of existing loans
Total
70.9
0.3
1 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. 2 The time-bucket Perpetual / Not applicable includes perpetual loss-absorbing additional tier 1 capital instruments. 3 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. 4 Contractual maturities of financial liabilities at fair value held for trading are: USD 32.3bn due within 1 month (31 December
2022: USD 27.8bn), USD 1.8bn due between 1 month and 1 year (31 December 2022: USD 1.7bn) and USD 0bn due between 1 and 5 years (31 December 2022: USD 0bn). 5 Includes USD 1,195m (31 December
2022: USD 46m) 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 100.1bn (31 December 2022: USD 34.4bn) is presented in Note 11 under notional amounts. 6 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. 7 Excludes derivative loan
commitments and forward starting reverse repurchase agreements measured at fair value (see footnote 5).
40.0
22.4
4.7
70.1
3.8
0.0
0.0
0.4
3.8
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
386
Note 25 Interest rate benchmark reform
During 2023, the Group largely completed the transition of the USD London Interbank Offered Rate (LIBOR) contracts.
The transition of the largest remaining non-derivative exposure, the US mortgage portfolio of approximately USD 9bn as
of 31 December 2022, was substantially completed, with these contracts automatically converting to term Secured
Overnight Financing Rate (SOFR) from their next interest rate reset date following the cessation of the respective USD
LIBOR rates, i.e., 30 June 2023. Corporate loans granted by the Investment Bank and the Investment Bank (Credit Suisse),
as well as Wealth Management (Credit Suisse), have now also been transitioned to alternative rates, with approximately
USD 1bn (predominantly attributable to positions acquired through the acquisition of the Credit Suisse Group) relying on
synthetic LIBOR rates. The Group will continue to focus on the transition of the remaining synthetic LIBOR rate exposures
to alternative rates in 2024.
In August 2022, to facilitate the transition of derivatives linked to the USD LIBOR Swap Rate, the Group adhered to the
June 2022 Benchmark Module of the ISDA 2021 Fallbacks Protocol on the USD LIBOR Swap Rate. As of 31 December
2023, the transition of these USD LIBOR-linked derivatives had been materially accomplished.
The table below sets out the contracts that remained as of 31 December 2022. No contracts are included as of
31 December 2023 given transition has largely completed as noted above.
Carrying value of non-derivative financial instruments
Measure
31.12.221
USD LIBOR
benchmark rates
Total non-derivative financial assets
Total non-derivative financial liabilities
Trade count of derivative financial instruments
Total derivative financial instruments
Off-balance sheet exposures
4,6065
Total irrevocable loan commitments
1 As of 31 December 2022, non-USD balances and trade counts were minimal. 2 Includes USD 1bn of loans related to revolving multi-currency credit lines, where IBOR transition efforts are complete, except for
USD LIBOR. The remaining balances as of 31 December 2022 primarily related to US mortgages and corporate lending. 3 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. 4 Includes approximately 2,000 contracts having a contractual maturity after 30 June 2023, with the last USD LIBOR fixing occurring before
30 June 2023. No further contractual fixing is required for these contracts. 5 Includes approximately USD 3bn of loan commitments that can be drawn in different currencies; however, only USD LIBOR transition
efforts remained open as of 31 December 2022.
USD m
USD m
Trade count
14,2692
1,1383
32,0064
USD m
In addition, as of 31 December 2023 the Group had approximately USD 4bn equivalent of 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, respectively. Furthermore, certain benchmark bonds
publicly issued by the Group reference rates indirectly derived from IBORs, if they are not called on their respective call
dates. Confirmation of interest rate calculation mechanics will be communicated in advance of any rate resets, if
applicable.
Note 26 Hedge accounting
Derivatives designated in hedge accounting relationships
The Group applies hedge accounting to interest rate risk and foreign exchange risk, including structural foreign exchange
risk related to net investments in foreign operations.
› Refer to “Market risk” in the “Risk management and control” section of this report for more information about how risks arise
and how they are managed by the Group
Hedging instruments and hedged risk
Interest rate swaps are designated in fair value hedges or cash flow hedges of interest rate risk arising solely from changes
in benchmark interest rates. Fair value changes arising from such risk are usually the largest component of the overall
change in the fair value of the hedged position in transaction currency.
Cross-currency swaps are designated as fair value hedges of foreign exchange risk. 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 the 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 designated in cash flow hedges after the trade date, in which case the hedge ratio designated is
determined based on the swap sensitivity.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
387
Note 26 Hedge accounting (continued)
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 loans to customers (including long-term fixed-rate mortgage loans in Swiss francs), debt securities held,
customer deposits, or debt issued to floating cash flows by entering into interest rate swaps that either pay fixed and
receive floating cash flows or that receive fixed and pay floating cash flows. The floating future cash flows are based on
the following benchmark rates: Secured Overnight Financing Rate (SOFR), Effective Federal Funds Rate (EFFR), Swiss
Average Rate Overnight (SARON), Euro Interbank Offered Rate (EURIBOR), Euro Short-Term Rate (ESTR), Sterling
Overnight Index Average (SONIA), AUD London Interbank Offered Rate (AUD LIBOR), Tokyo Overnight Average Rate
(TONA), Singapore Overnight Rate Average (SORA) and Norwegian Krona Overnight Index Swap (NOK OIS).
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 15 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.
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 instruments denominated in currencies other than the US dollar to US dollars. The hedge
designations also involve intragroup debt instruments that are eliminated upon consolidation but FX gains and losses
impact consolidated profit or loss.
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 one to three months, the hedge relationship is
terminated and new designations are made to reflect any changes in the net investments in foreign operations.
Economic relationship between hedged item and hedging instrument
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 the trade date 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.
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.
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.
In hedges of net investments in foreign operations, 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.
Hedge ineffectiveness from financial instruments measured at fair value through profit or loss is recognized in Other net
income from financial instruments measured at fair value through profit or loss.
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.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
388
Note 26 Hedge accounting (continued)
All hedges: designated hedging instruments and hedge ineffectiveness
USD m
Interest rate risk
Fair value hedges
Cash flow hedges
Foreign exchange risk
Fair value hedges2
Hedges of net investments in foreign operations
As of or for the year ended
31.12.23
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
246,909
97,834
33,877
38,668
3
3
468
17
51
0
291
1,270
2,275
(337)
132
(2,317)
(2,311)
358
(151)
2,320
(36)
21
(19)
3
As of or for the year ended
31.12.22
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
USD m
Interest rate risk
Fair value hedges
Cash flow hedges
Foreign exchange risk
Fair value hedges2
18
Hedges of net investments in foreign operations
(1)
1 Amounts used as the basis for recognizing hedge ineffectiveness for the period. 2 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.
(5,195)
(5,813)
(1,088)
336
20,566
14,009
92,415
75,304
1,105
(337)
5,169
5,760
(27)
(53)
3
529
845
7
0
2
0
5
Fair value hedges: designated hedged items recognized on balance sheet1
USD m
Loans and advances to customers
Carrying amount of designated loans
of which: accumulated amount of fair value hedge adjustment
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
Other financial assets measured at amortized cost – debt securities
Carrying amount of designated debt securities
of which: accumulated amount of fair value hedge adjustment
Customer deposits
Carrying amount of customer deposits
of which: accumulated amount of fair value hedge adjustment
Debt issued measured at amortized cost
Carrying amount of designated debt issued
of which: accumulated amount of fair value hedge adjustment
31.12.23
31.12.22
Interest rate
risk
FX risk
Interest rate
risk
FX risk
14,270
(1,249)
(51)
4,577
(180)
61,107
457
(179)
6,333
(109)
8,972
50
156,507
22,329
(2,976)
68,529
(6,057)
20,566
1 In addition, as of 31 December 2023 UBS designated in fair value hedges of FX risk USD 12bn of intragroup debt instruments which are not recognized on consolidated balance sheet but FX gains and losses on
these instruments impact consolidated profit or loss. No such designations were in place as of 31 December 2022.
Fair value hedges: profile of the timing of the nominal amount of the hedging instrument
USD bn
Interest rate swaps
Cross-currency swaps
USD bn
Interest rate swaps
Cross-currency swaps
Due within
1 month
1
1
Due within
1 month
0
0
Due between
1 and 3 months
7
2
Due between
1 and 3 months
4
1
31.12.23
Due between
3 and 12 months
29
2
31.12.22
Due between
3 and 12 months
10
2
Due between
1 and 5 years
142
22
Due between
1 and 5 years
53
12
Due after
5 years
68
7
Due after
5 years
26
5
Total
247
34
Total
92
21
Cash flow hedge reserve on a pre-tax basis
USD m
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
Total other comprehensive income recognized directly in equity related to cash flow hedges, on a pre-tax basis
31.12.23
(2,319)
(1,487)
(3,806)
31.12.22
(4,692)
(540)
(5,232)
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
389
Note 26 Hedge accounting (continued)
Foreign currency translation reserve on a pre-tax basis
USD m
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
Total other comprehensive income recognized directly in equity related to hedging instruments designated as net investment hedges, on a pre-tax
basis
31.12.23
(2,063)
266
31.12.22
284
266
(1,798)
550
Interest rate benchmark reform
In 2023, the Group applied the relief provided by Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and
IFRS 7), published by the International Accounting Standards Board in September 2019, to its hedges in US dollars and
Singapore dollars until they transitioned to alternative reference rate (ARR) designations in May 2023 and June 2023,
respectively. The transition of fair value hedges took place following the IBOR transition for swaps with LCH (formerly
the London Clearing House), with hedge relationships continuing in accordance with Interest Rate Benchmark Reform –
Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16). Cash flow hedge relationships were discontinued
and replaced with new ARR designations in May 2023.
As of 31 December 2023, there were no hedge relationships where the designated risk is LIBOR and maturing after the
cessation date of the applicable interest rate benchmarks. The table below provides details on the hedging instruments
in such hedge relationships as of 31 December 2022.
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 and IFRS 7 related to
interest rate benchmark reform
› Refer to Note 25 for more information about the transition progress
Hedging instruments referencing LIBOR
USD m
Interest rate risk
Fair value hedges
Cash flow hedges
Note 27 Post-employment benefit plans
a) Defined benefit plans
31.12.22
Carrying amount
Derivative
financial
assets
Derivative
financial
liabilities
0
0
0
0
Notional
amount
20,383
2,179
UBS has established defined benefit plans for its employees in various jurisdictions in accordance with local regulations
and practices. The major plans are in Switzerland, the UK, the US and Germany. The level of benefits depends on the
specific plan rules.
Swiss pension plans
The Swiss pension plans consist of the UBS Swiss plan and the Credit Suisse Swiss plan, covering employees of UBS Group
AG in Switzerland and employees of companies in Switzerland that have close economic or financial ties with UBS Group
AG, and exceed the minimum benefit requirements under Swiss pension law. The Swiss plans offer retirement, disability
and survivor benefits and are governed by Pension Foundation Boards. The responsibilities of these boards are defined
by Swiss pension law and the plan rules. The UBS Swiss plan covers contributions for all salary levels. The Credit Suisse
Swiss plan covers contributions up to a salary of CHF 138,180 (USD 164,169), and contributions above that salary go
into the Credit Suisse Swiss 1e plan, which is accounted for under IFRS Accounting Standards as a defined contribution
plan.
Savings contributions to the Swiss plans are paid by both the employer and the employee. For the UBS Swiss plan,
depending on the age of the employee, UBS pays a savings contribution that ranges between 6.5% and 27.5% of the
contributory base salary and between 2.8% and 9% of the contributory variable compensation. Employees can choose
the level of savings contributions paid by them, which vary between 2.5% and 13.5% of the contributory base salary
and between 0% and 9% of the contributory variable compensation, depending on age and choice of savings
contribution category. For the Credit Suisse Swiss plan, depending on the age of the employee, UBS pays a savings
contribution that ranges between 7.5% and 25.0% of the contributory base salary and 6% of the contributory variable
compensation. Employees can choose the level of savings contributions paid by them, which vary between 5.0% and
14.0% of the contributory base salary and between 3% and 9% of the contributory variable compensation, depending
on age and choice of savings contribution category. UBS also pays risk contributions that are used to fund disability and
survivor benefits.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
390
Note 27 Post-employment benefit plans (continued)
The plans offer 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 they can
also continue employment and remain active members of the plan until the age of 70. Employees can 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, employee and employer contributions made to the
participant’s retirement savings account, and interest accrued. The annual interest rate credited to participants is
determined by the Pension Foundation Boards at the end of each year.
Although the Swiss plans are based on a defined contribution promise under Swiss pension law, they are accounted for
as defined benefit plans under IFRS Accounting Standards, primarily because of the obligation to accrue interest on the
participants’ retirement savings accounts and the payment of lifetime pension benefits.
Actuarial valuations in accordance with Swiss pension law are performed regularly. Should an underfunded situation on
this basis occur, the Pension Foundation Board of the respective plan is required to take the necessary measures to ensure
that full funding can be expected to be restored within a maximum period of 10 years. If a Swiss plan were to become
significantly underfunded on a Swiss pension law basis, additional employer and employee contributions could be
required. In this situation, the risk is shared between employer and employees, and the employer is not legally obliged to
cover more than 50% of the additional contributions required. As of 31 December 2023, the technical funding ratio in
accordance with Swiss pension law was 119.2% at 0.5% technical interest rate for the UBS Swiss plan and 124.0% at
1.62% technical interest rate for the Credit Suisse Swiss plan (UBS Swiss plan 31 December 2022: 119.0% at 0.5%
technical interest rate).
The investment strategies of the Swiss plans comply with Swiss pension law, including the rules and regulations relating
to diversification of plan assets, and are derived from the risk budget defined by the Pension Foundation Boards based
on regularly performed asset and liability management analyses. The Pension Foundation Boards strive for a medium-
and long-term balance between assets and liabilities.
As of 31 December 2023, the Swiss plans were in surplus situations on an IFRS Accounting Standards measurement basis,
as the fair value of the plan assets exceeded the defined benefit obligation (DBO) by USD 6,332m for the UBS Swiss plan
and USD 3,150m for the Credit Suisse Swiss plan (UBS Swiss plan 31 December 2022: USD 7,848m, Credit Suisse Swiss
plan 31 May 2023: USD 3,772m). 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 2023 and 31 December 2022, the estimated future economic benefit of the UBS Swiss plan was zero and
hence no net defined benefit asset was recognized on the balance sheet; as of 31 December 2023 a net defined benefit
asset of USD 88m was recognized by UBS for prepaid contributions held at the Credit Suisse Swiss plan (31 May 2023:
USD 77m).
The regular employer contributions in 2024 are estimated at USD 549m for the UBS Swiss plan and USD 283m for the
Credit Suisse Swiss plan.
Changes to the Credit Suisse Swiss pension plan
In December 2023, the Pension Foundation Board of the Credit Suisse Swiss plan decided to align the Swiss pension
scheme to that of the UBS Swiss plan, effective as of 1 January 2027. On that date, the Credit Suisse Swiss plan will
adopt the plan rules of the UBS Swiss plan. The Credit Suisse Swiss 1e plan will remain in place as of this date, but will
be closed for further contributions. In accordance with IFRS Accounting Standards, these decisions and related mitigating
measures led to an increase in UBS’s pension obligations in Switzerland resulting in a one-time pre-tax loss of USD 245m
(CHF 207m) and an offsetting gain in other comprehensive income in the fourth quarter of 2023 with no impact on
equity and CET1 capital.
UK pension plans
UBS maintains two major pension plans in the UK. The UBS UK plan is a career-average revalued earnings scheme, and
the Credit Suisse UK plan is a final salary pension scheme. In both plans benefits increase automatically based on UK
price inflation, subject to defined caps. The normal retirement age for most participants is 60 or 65. The plans provide
guaranteed lifetime pension benefits to participants upon retirement. The UK plans have been closed to new entrants
for more than 20 years and participants are no longer accruing benefits for current or future service. Instead, employees
participate in the UK defined contribution plans.
The governance responsibility for each UK plan lies jointly with the Pension Trustee Board of the respective plan and UBS.
Both plans invest in diversified portfolios of financial assets. The UBS UK plan assets include swaps to hedge the risk
between expected and actual longevity.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
391
Note 27 Post-employment benefit plans (continued)
In 2019, UBS and the UBS UK Pension Trustee Board entered an arrangement whereby a collateral pool was established
to provide security for the UBS UK pension fund. The value of the collateral pool as of 31 December 2023 was USD 260m
(31 December 2022: USD 292m) 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 funding contribution.
The employer contributions to the UBS UK plan reflect agreed-upon funding contributions, determined based on the
most recent actuarial valuation using assumptions agreed by the Pension Trustee Board and UBS. In 2023, UBS made
funding contributions of USD 19m to the UBS UK plan (2022: USD 5m). The employer contributions in 2024 are estimated
at USD 19m for the UBS UK plan, subject to regular funding reviews during the year.
No contributions were paid to the Credit Suisse UK plan in 2023 or are planned for 2024. The trustees of the Credit
Suisse UK Pension Fund have agreed to meet the cost of the active members’ contributions into the Credit Suisse UK
defined contribution plan from the pension assets of the Credit Suisse UK defined benefit plan, which amounted to
USD 7m in 2023, and such payments are expected to continue in 2024.
US defined benefit plans
There are two main UBS US pension plans and two main Credit Suisse US defined benefit plans, each of which has a
normal retirement age of 65. All main plans were closed to new entrants more than 20 years ago. Since they closed, new
employees have participated in defined contribution plans.
One of the UBS 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 UBS defined benefit plan, retirement
benefits accrue based on the career-average earnings of each individual plan participant. Former employees with vested
benefits can take a lump sum payment or a lifetime annuity. In one of the Credit Suisse defined benefit plans, benefits
are accrued based on compensation and credited service. The other Credit Suisse defined benefit plan provides unfunded
health-care benefits for eligible retired employees.
As required under applicable pension laws, the pension plans have fiduciaries who, together with UBS, are responsible
for the governance of the plans. Each plan’s fiduciaries are responsible for the investment decisions with respect to the
plan assets. The plan assets of the funded plans are invested in diversified portfolios of financial assets.
The employer contributions in 2024 are estimated at USD 12m for the UBS US plans and at USD 10m for the Credit
Suisse US plans.
German pension plans
There are two major unfunded UBS defined benefit plans in Germany. 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 as of June 2021
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 in 2024 are estimated at USD 14m for the UBS German plans.
There are no major Credit Suisse defined benefit plans in Germany.
Financial information by plan
The tables below 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.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
392
Note 27 Post-employment benefit plans (continued)
Defined benefit plans
USD m
Defined benefit obligation at the beginning of the year
Defined benefit obligation recognized upon the acquisition of the Credit Suisse Group
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 2
Past service cost related to plan amendments
Curtailments
Benefit payments
Termination benefits
Other movements
Foreign currency translation
Defined benefit obligation at the end of the year
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
Fair value of plan assets recognized upon the acquisition of the Credit Suisse Group
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
Fair value of plan assets at the end of the year
Surplus / (deficit)
Asset ceiling effect at the beginning of the year
Asset ceiling effect recognized upon the acquisition of the Credit Suisse Group
Interest expense on asset ceiling effect
Asset ceiling effect excluding interest expense and foreign currency translation on
asset ceiling effect
Foreign currency translation
Asset ceiling effect at the end of the year
Net defined benefit asset / (liability) of major plans
Net defined benefit asset / (liability) of remaining plans
Total net defined benefit asset / (liability)
of which: Net defined benefit asset
of which: Net defined benefit liability 3
Swiss plans
31.12.231 31.12.22
27,398
22,272
0
15,142
416
567
344
680
257
370
(4,151)
4,446
3
76
UK plans
31.12.231 31.12.22
4,105
0
0
67
0
(1,474)
(6)
2,166
954
1
139
0
195
(79)
US and German plans
31.12.231 31.12.22
1,740
0
5
35
0
(267)
1
1,375
1,025
5
88
0
37
(2)
0
2,886 (4,666)
512
1,484
0
245
(20)
(29)
(1,454)
(2,309)
0
21
(5)
0
(513)
3,516
44,922
22,272
24,007 11,927
0
20,915 10,345
44,922 22,272
0
33,975
0
(3,248)
485
685
257
(1,454)
(12)
(2)
(567)
30,119
7,848
6,577
0
135
0
30,119
18,914
1,234
916
690
370
(2,309)
(19)
2
4,485
54,404
9,482
7,848
3,695
225
128 (1,575)
107
146
0
0
0
0
(123)
(125)
0
0
0
0
137
(408)
2,166
3,467
65
97
1,655
656
1,715 1,445
3,467 2,166
0
4,297
0
(1,312)
70
5
0
(123)
0
0
(450)
2,488
321
0
0
0
0
2,488
1,499
153
173
12
0
(125)
(1)
0
165
4,364
897
0
0
0
51
(279)
(12)
11
0
0
0
0
(177)
(111)
0
0
0
0
14
(28)
2,368
1,375
330
169
904
528
678
1,134
1,797 1,011
363
1,329
0
(223)
31
16
0
(111)
(3)
0
0
1,039
(335)
0
0
0
571
1,039
824
66
70
29
0
(177)
(6)
0
4
1,849
(519)
0
0
0
Total
31.12.231 31.12.22
33,242
25,813
0
17,121
420
573
446
907
257
370
(5,891)
4,678
(2)
(5)
3,064 (6,520)
631
1,619
0
245
(20)
(29)
(1,687)
(2,611)
0
21
(5)
0
(949)
3,667
50,756
25,813
24,435 12,160
2,558 1,184
23,763 12,469
50,186 25,449
363
39,601
0
(4,782)
586
706
257
(1,687)
(16)
(2)
(1,017)
33,646
7,834
6,577
0
135
571
33,646
21,236
1,453
1,159
732
370
(2,611)
(27)
2
4,654
60,616
9,860
7,848
3,695
225
1,189
(54)
7,848
(14)
(100)
(114)
355
(469)
1 Including Credit Suisse from 31 May 2023. 2 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. 3 Refer to Note 19c.
(3,336)
963
9,394
466
(173)
293
1,088
(795)
(3,336)
963
9,394
88
1,189
(54)
7,848
0
0
0
0
(335)
0
0
0
(519)
0
0
0
897
0
0
0
321
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
393
Note 27 Post-employment benefit plans (continued)
Income statement – expenses related to defined benefit plans1
USD m
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
Termination benefits
Other movements
Net periodic expenses recognized in net profit for major plans
Net periodic expenses recognized in net profit for remaining plans3
Swiss plans
31.12.232 31.12.22
416
567
UK plans
31.12.232 31.12.22
0
1
US and German plans
31.12.232 31.12.22
5
5
Total
31.12.232 31.12.22
420
573
680
(916)
225
19
245
(29)
21
(2)
811
344
(485)
135
12
0
(20)
0
0
402
139
(173)
0
1
0
0
0
0
(32)
67
(70)
0
0
0
0
0
0
(3)
88
(70)
0
6
0
0
0
0
30
35
(31)
907
(1,159)
0
3
0
0
0
0
12
225
27
245
(29)
21
(2)
808
38
847
446
(586)
135
16
0
(20)
0
0
411
25
437
Total net periodic expenses recognized in net profit
1 Refer to Note 7. 2 Including Credit Suisse from 31 May 2023. 3 Includes differences between actual and estimated performance award accruals.
Other comprehensive income – gains / (losses) on defined benefit plans
USD m
For the year ended
Remeasurement of defined benefit obligation
of which: change in discount rate 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) 2
Return on plan assets excluding interest income
Asset ceiling effect excluding interest expense and foreign currency translation
Total gains / (losses) recognized in other comprehensive income for major plans
Swiss plans
31.12.231 31.12.22
4,151
(4,446)
UK plans
31.12.231 31.12.22
1,474
(195)
US and German plans
31.12.231 31.12.22
267
(37)
Total
31.12.231 31.12.22
5,891
(4,678)
(3,278) 5,414
(165) 1,451
(51)
317
(3,495) 7,183
0
0
479
(718)
0
(162)
0
(33)
38
0
79
0
123
0
5
1
(1,484)
(512)
(146)
(107)
1,234
3,336
124
(3,248)
(1,189)
(285)
153
(1,312)
0
(41)
0
162
1
(9)
0
10
12
66
0
28
(5)
(82)
(1)
48
(11)
(223)
0
43
39
470
79
(152)
118
(800)
4
16
(1,619)
(631)
1,453
3,336
111
(4,782)
(1,189)
(80)
Total gains / (losses) recognized in other comprehensive income for remaining plans
Total gains / (losses) recognized in other comprehensive income3
(73)
1 Including Credit Suisse from 31 May 2023. 2 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. 3 Refer to the “Statement of comprehensive income.”
110
(2)
7
The table below provides information about the duration of the DBO and the timing for expected benefit payments.
Duration of the defined benefit obligation (in years)1
Maturity analysis of benefits expected to be paid
USD m
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
Swiss plans
UK plans
31.12.23
31.12.22
31.12.23
31.12.22
US and German plans
31.12.23
31.12.22
13.1
13.1
15.1
13.7
8.3
7.9
3,056
5,149
7,671
12,080
10,513
34,221
1,294
2,657
3,977
6,743
6,223
22,446
182
337
563
1,032
1,066
4,339
107
234
384
667
667
2,570
221
412
558
847
632
925
123
232
335
502
388
516
1 The duration of the defined benefit obligation represents a weighted average across UBS and Credit Suisse plans.
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
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
394
Note 27 Post-employment benefit plans (continued)
The tables below show the significant actuarial assumptions used in calculating the DBO at the end of the year.
Significant actuarial assumptions of defined benefit plans1
In %
Discount rate
Rate of pension increase
Rate of interest credit on retirement savings
Swiss plans
UK plans
US plans
German plans
31.12.23
31.12.22
31.12.23
31.12.22
31.12.23
31.12.22
31.12.23
31.12.22
1.48
0.00
2.54
2.34
0.00
3.39
4.79
2.94
0.00
5.02
3.08
0.00
4.75
0.00
6.282
4.92
0.00
5.732
3.28
2.10
0.00
3.81
2.20
0.00
1 Represents weighted average across UBS and Credit Suisse plans. 2 Only applicable to one of the UBS US pension plans.
Mortality tables and life expectancies for major plans
Country
Switzerland
UK
USA
Germany
Country
Switzerland
UK
USA
Germany
Mortality table
BVG 2020 G with CMI 2022 projections1
S3PA with CMI 2022 projections2
Pri-2012 with MP-2021 projection scale
Dr. K. Heubeck 2018 G
Mortality table
BVG 2020 G with CMI 2022 projections1
S3PA with CMI 2022 projections2
Pri-2012 with MP-2021 projection scale
Dr. K. Heubeck 2018 G
Life expectancy at age 65 for a male member currently
aged 65
aged 45
31.12.23
31.12.22
31.12.23
31.12.22
21.8
22.23
22.0
20.8
21.7
23.5
22.0
20.6
23.5
23.43
23.4
23.5
23.4
24.6
23.3
23.4
Life expectancy at age 65 for a female member currently
aged 65
aged 45
31.12.23
31.12.22
31.12.23
31.12.22
23.5
24.04
23.5
24.2
23.5
25.0
23.4
24.0
25.1
25.74
24.8
26.4
25.1
26.4
24.8
26.3
1 In 2022, BVG 2020 G with CMI 2021 projections was used. 2 In 2022, S3PA with CMI 2021 projections was used. 3 UK Credit Suisse plan male aged 65: 23.1 years and aged 45: 24.3 years. 4 UK Credit
Suisse plan female aged 65: 24.7 years and aged 45: 26.1 years.
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 m
Discount rate
Increase by 50 basis points
Decrease by 50 basis points
Rate of pension increase
Increase by 50 basis points
Decrease by 50 basis points
Rate of interest credit on retirement savings
Increase by 50 basis points
Decrease by 50 basis points
Life expectancy
Increase in longevity by one additional year
Swiss plans
UK plans
31.12.23
31.12.22
31.12.23
31.12.22
US and German plans
31.12.23
31.12.22
(2,365)
2,668
1,894
–2
334
(334)
1,315
(1,128)
1,269
877
–2
178
(178)
593
(243)
272
204
(189)
–3
–3
108
(141)
157
127
(118)
–3
–3
65
(91)
98
10
(9)
9
(8)
64
(51)
55
4
(3)
9
(8)
39
1 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. 2 As the assumed rate of pension
increase was 0% as of 31 December 2023 and as of 31 December 2022, a downward change in assumption is not applicable. 3 As the UK plans do not provide interest credits on retirement savings, a change in
assumption is not applicable.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
395
Note 27 Post-employment benefit plans (continued)
Fair value of plan assets
The tables below provide information about the composition and fair value of plan assets of the major defined benefit
plans.
Composition and fair value of plan assets
Swiss defined benefit plans
31.12.23
31.12.22
USD m
Cash and cash equivalents
Equity securities
Domestic
Foreign
Bonds
Domestic, AAA to BBB–
Foreign, AAA to BBB–
Real estate / property
Domestic
Foreign
Investment funds
Equity
Domestic
Foreign
Bonds1
Domestic, AAA to BBB–
Domestic, below BBB–
Foreign, AAA to BBB–
Foreign, below BBB–
Real estate
Domestic
Foreign
Other
Other investments
Total fair value of plan assets
Total fair value of plan assets
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
Fair value
Quoted
in an active
market
1,205
Other
0
0
0
24
2,132
100
51
0
0
Total
1,205
24
2,132
100
51
0
0
6,195
1,017
6,195
1,017
1,376
8,317
0
2,196
1,376
10,513
7,952
1
13,497
1,249
1,906
537
1,960
667
38,817
0
0
0
0
0
79
3,373
569
15,586
7,952
1
13,497
1,249
1,906
616
5,333
1,236
54,404
31.12.23
54,404
666
211
72
827
108
534
Plan asset
allocation %
Fair value
Plan asset
allocation %
1
0
0
0
0
13
3
2
24
12
0
20
4
0
0
17
4
100
2
0
4
0
0
11
2
3
19
15
0
25
2
4
1
10
2
100
Quoted
in an active
market
326
0
0
0
0
0
0
Other
0
Total
326
0
0
0
0
0
0
0
0
3,783
919
3,783
919
743
4,964
3,760
0
6,031
1,062
0
0
1,540
624
19,049
0
2,171
0
0
0
0
0
0
3,547
651
11,071
743
7,134
3,760
0
6,031
1,062
0
0
5,086
1,275
30,119
31.12.22
30,119
337
50
27
871
90
76
1 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. 2 Bank accounts at UBS encompass accounts in the name of the Swiss pension funds. 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. 3 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 2023 and 31 December 2022. Net of collateral, derivative financial instruments
amounted to negative USD 33m as of 31 December 2023 (31 December 2022: negative USD 8m).
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
396
Note 27 Post-employment benefit plans (continued)
Composition and fair value of plan assets (continued)
UK defined benefit plans
USD m
Cash and cash equivalents
Bonds1
Domestic, AAA to BBB–
Domestic, below BBB–
Foreign, AAA to BBB–
Foreign, below BBB–
Investment funds
Equity
Domestic
Foreign
Bonds1
Domestic, AAA to BBB–
Domestic, below BBB–
Foreign, AAA to BBB–
Foreign, below BBB–
31.12.23
31.12.22
Fair value
Plan asset
allocation %
Fair value
Plan asset
allocation %
Quoted
in an active
market
225
3,619
7
509
0
9
234
310
6
97
93
Other
0
0
0
0
0
0
3
0
38
0
0
0
Total
225
3,619
7
509
0
12
234
348
6
97
93
Quoted
in an active
market
104
Other
0
Total
104
1,729
0
297
7
19
366
367
1
90
114
0
0
0
0
3
0
90
0
0
0
1,729
0
297
7
22
366
457
1
90
114
5
83
0
12
0
0
5
8
0
2
2
4
69
0
12
0
1
15
18
0
4
5
Real estate
Domestic
Foreign
Other
61
16
64
(947)
Repurchase agreements
20
Other investments
Total fair value of plan assets
4,364
1 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.
61
4
64
(947)
15
4,306
64
36
(280)
(612)
94
2,488
64
6
(280)
(612)
66
2,336
3
1
(11)
(25)
4
100
1
0
1
(22)
0
100
0
31
0
0
27
151
0
12
0
0
5
58
US and German defined benefit plans
USD m
Cash and cash equivalents
Equity
Domestic
Foreign
Bonds1
Domestic, AAA to BBB–
Domestic, below BBB–
Foreign, AAA to BBB–
Foreign, below BBB–
Investment funds
Equity
Domestic
Foreign
Bonds1
Domestic, AAA to BBB–
Domestic, below BBB–
Foreign, AAA to BBB–
Foreign, below BBB–
31.12.23
31.12.22
Fair value
Plan asset
allocation %
Fair value
Plan asset
allocation %
Quoted
in an active
market
32
Other
0
Total
32
54
23
308
3
51
2
51
82
552
172
75
9
0
0
0
0
0
0
0
18
300
41
14
0
54
23
308
3
51
2
51
100
853
213
89
9
Quoted
in an active
market
7
Other
0
Total
7
55
24
359
4
74
3
27
33
266
109
2
5
0
0
0
0
0
0
0
0
0
0
0
0
55
24
359
4
74
3
27
33
266
109
2
5
2
3
1
17
0
3
0
3
5
46
12
5
1
1
5
2
35
0
7
0
3
3
26
10
0
0
Real estate
Domestic
Foreign
Other
10
2
52
(3)
Other investments
Total fair value of plan assets
1,849
1 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.
1
2
51
(8)
1,461
11
0
54
6
1,039
0
0
54
5
1,027
9
0
0
5
388
1
0
3
0
100
1
0
5
1
100
11
0
0
1
12
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
397
Note 27 Post-employment benefit plans (continued)
b) Defined contribution plans
UBS sponsors several 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, which may include direct contributions and matching
contributions. Employer contributions to defined contribution plans are recognized as an expense and were USD 386m
for the UBS plans and USD 128m for the Credit Suisse plans in 2023 (2022: USD 357m for the UBS plans).
› Refer to Note 7 for more information
c) Related-party disclosure
UBS is the principal provider of banking services for the pension funds of UBS and Credit Suisse in Switzerland. In this
capacity, UBS is engaged to execute most of the pension funds’ banking activities. These activities can include, but are
not limited to, trading, securities lending and borrowing and derivative transactions. The non-Swiss pension funds do not
have a similar banking relationship with UBS. During 2023, UBS received USD 35m in fees for banking services from the
major UBS plans and USD 11m from the major Credit Suisse plans (2022: USD 36m from the major UBS plans). As of
31 December 2023, the major UBS plans held USD 417m in UBS shares and major Credit Suisse plans held USD 26m
(31 December 2022: Major UBS plans held USD 265m).
› 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 funds
Note 28 Employee benefits: variable compensation
a) Plans offered
The Group has several share-based and other deferred compensation plans that align the interests of Group Executive
Board (GEB) members and other employees with the interests of investors.
Share-based 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 below.
› Refer to Note 1a item 4 for a description of the accounting policy related to share-based and other deferred compensation plans
Mandatory deferred compensation plans
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: return on common equity tier 1 (CET1) capital and relative total shareholder return, which
compares the total shareholder return (TSR) of UBS with the TSR of an index consisting of listed Global Systemically
Important Banks as determined by the Financial Stability Board (excluding UBS). The final number of shares vest over
three years following the performance period for GEB members, and cliff-vest in the year following the performance
period for selected senior management.
Equity Ownership Plan / Fund Ownership Plan
The Equity Ownership Plan (EOP) is the deferred share-based compensation plan for employees outside of the GEB that
are subject to deferral requirements. EOP awards generally vest over three years.
Certain Asset Management employees receive some or all of their EOP in the form of notional funds (Fund Ownership
Plan or FOP, previously named AM EOP). This plan is generally delivered in cash and vests over three years. The amount
delivered depends on the value of the underlying investment funds at the time of vesting.
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 in cash or a perpetual, marketable AT1 capital instrument. DCCP awards generally bear
notional interest paid annually (except for certain regulated employees) and vest in full after five years. 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 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 if the Group’s CET1
capital ratio falls below a defined threshold. In addition, GEB members forfeit 20% of DCCP awards for each loss-making
year during the vesting period.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
398
Note 28 Employee benefits: variable compensation (continued)
Deferred compensation plans awarded to employees of Credit Suisse
Awards granted in connection with the acquisition
Retention awards were offered to selected employees of the Credit Suisse Group prior to the acquisition date to support
the completion of the transaction and the early phase of integration. These awards were contingent on the completion
of the acquisition and are delivered 50% in cash (in general vesting 60 days from the completion of the acquisition) and
50% in shares (in general vesting on the first anniversary of the completion of the acquisition). Vesting periods are longer
for certain regulated employees.
Existing compensation plans offered to employees of Credit Suisse before the acquisition
Credit Suisse offered a range of compensation plans to its employees. Generally, outstanding deferred awards continue
to vest according to their original terms. Awards referenced to shares of Credit Suisse Group were converted into units
over UBS Group shares according to the exchange ratio applied to the merger transaction (1 share in UBS for 22.48
shares in Credit Suisse).
Unvested awards that contributed to compensation expenses in 2023 and continue to be expensed over the future service
period include upfront cash awards, share awards and other deferred awards settled in cash. These awards were granted
for the main purpose of employee retention.
Upfront cash awards are subject to repayment (clawback) by the employee in the event of voluntary resignation,
termination for cause or other specified events within three years from the grant date. The expense is recognized over
the three-year service period according to the clawback provisions.
Share awards that were granted as part of the annual performance incentive typically vest over three years with one third
of the award vesting on each of the three anniversaries of the grant date.
Financial advisor variable compensation
In line with market practice for US wealth management businesses, the compensation for US financial advisors in Global
Wealth Management consists of cash compensation and deferred compensation awards, determined using a formulaic
approach based on production.
Cash compensation reflects a percentage of the compensable production that each financial advisor generates.
Compensable production is generally based on transaction revenue and investment advisory fees and may reflect further
adjustments. The percentage rate generally varies based on the level of the production and firm tenure.
Financial advisors may also be granted annual deferred compensation. These amounts generally vest over a six-year
period. The annual deferred compensation amount reflects the overall percentage rate and production.
Cash compensation 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.
Financial advisors may also participate in additional programs to support promoting and developing their business or
supporting the transition of client relationships where appropriate. 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.
Share delivery obligations
Share delivery obligations related to employee share-based compensation awards were 196m shares as of 31 December
2023 (31 December 2022: 178m shares). Share delivery obligations are calculated on the basis of undistributed notional
share awards, taking applicable performance conditions into account.
As of 31 December 2023, UBS held 131m treasury shares (31 December 2022: 119m) that were available to satisfy share
delivery obligations.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
399
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 that were
recognized in the financial year ended 31 December 2023, as well as expenses that were deferred and will be recognized
in the income statement for 2024 and later. Deferred expenses related to compensation plans granted to employees of
Credit Suisse in 2023 and earlier years are presented under Variable compensation – other. The expense recognized in
2023 associated with these awards was USD 335m for retention awards granted in connection with the acquisition and
USD 412m for outstanding deferred compensation plans that existed on the date of acquisition.
The majority of expenses deferred to 2024 and later that are related to the 2023 performance year pertain to awards
granted in February 2024. The total unamortized compensation expense for unvested share-based awards granted up to
31 December 2023 will be recognized in future periods over a weighted average period of 2.2 years.
Variable compensation
USD m
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: Fund Ownership Plan
Variable compensation – performance awards
Variable compensation – financial advisors2
of which: non-deferred cash
of which: deferred share-based awards
of which: deferred cash-based awards
of which: compensation commitments with recruited financial advisors
Variable compensation – other3
Total variable compensation
Expenses recognized in 2023
Expenses deferred to 2024 and later1
Related to the
2023
performance
year
2,859
Related to prior
performance
years
(52)
523
155
180
164
24
3,382
3,761
3,440
110
169
42
784
656
330
241
40
46
604
788
(4)
87
245
459
526
7,927
1,918
Related to the
2023
performance
year
0
Related to prior
performance
years
0
777
263
312
160
41
777
1,236
0
113
301
822
384
2,398
757
245
451
34
27
757
3,300
0
209
1,029
2,062
583
4,640
Total
2,807
1,179
485
421
204
69
3,986
4,549
3,436
197
414
502
1,310
9,8454
Total
0
1,534
509
763
193
68
1,534
4,536
0
321
1,331
2,884
968
7,037
1 Estimate as of 31 December 2023. Actual amounts to be expensed in future periods may vary; e.g., due to forfeiture of awards. 2 Financial advisor compensation consists of cash and deferred compensation
awards and is based on compensable revenues and firm tenure using a formulaic approach. It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment
that are subject to vesting requirements. 3 Consists of existing deferred awards and retention awards granted to Credit Suisse employees as well as replacement payments, forfeiture credits, severance payments,
retention plan payments and interest expense related to the Deferred Contingent Capital Plan. 4 Includes USD 1,094m in expenses related to share-based compensation (performance awards: USD 689m; other
variable compensation: USD 208m; financial advisor compensation: USD 197m). A further USD 169m in expenses related to share-based compensation was recognized within other expense categories included in
Note 7 (salaries: USD 4m related to role-based allowances; social security: USD 137m; other personnel expenses: USD 27m related to the Equity Plus Plan). Total personnel expense related to share-based equity-
settled compensation excluding social security was USD 1,087m.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
400
Note 28 Employee benefits: variable compensation (continued)
Variable compensation (continued)
Expenses recognized in 2022
Expenses deferred to 2023 and later1
Related to the
2022
performance
year
0
Related to prior
performance
years
0
605
310
245
30
20
605
1,290
0
122
588
580
237
797
393
299
50
56
797
1,097
0
123
311
662
215
Total
0
1,359
560
654
71
74
1,359
3,942
0
302
1,224
2,416
430
5,731
Total
0
1,421
577
628
83
133
1,421
3,419
0
269
806
2,344
397
5,238
754
250
408
42
54
754
2,652
0
180
636
1,836
193
3,599
624
184
329
33
78
624
2,323
0
146
495
1,682
182
3,129
USD m
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: Fund Ownership Plan
Variable compensation – performance awards
Variable compensation – financial advisors2
of which: non-deferred cash
of which: deferred share-based awards
of which: deferred cash-based awards
of which: compensation commitments with recruited financial advisors
Variable compensation – other3
Total variable compensation
Related to the
2022
performance
year
2,276
Related to prior
performance
years
(16)
364
202
129
11
21
2,640
3,799
3,481
104
185
29
169
581
235
219
32
95
566
709
0
62
215
432
71
Total
2,260
945
437
349
43
116
3,205
4,508
3,481
166
400
461
241
1 Estimate as of 31 December 2022. Actual amounts to be expensed in future periods may vary; e.g., due to forfeiture of awards. 2 Financial advisor compensation consists of cash and deferred compensation
awards and is based on compensable revenues and firm tenure using a formulaic approach. It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment
that are subject to vesting requirements. 3 Consists of replacement payments, forfeiture credits, severance payments, retention plan payments and interest expense related to the Deferred Contingent Capital Plan.
4 Includes USD 703m in expenses related to share-based compensation (performance awards: USD 480m; other variable compensation: USD 56m; financial advisor compensation: USD 166m). A further USD 88m in
expenses related to share-based compensation was recognized within other expense categories included in Note 7 (salaries: USD 4m related to role-based allowances; social security: USD 61m; other personnel
expenses: USD 23m related to the Equity Plus Plan). Total personnel expense related to share-based equity-settled compensation excluding social security was USD 716m.
6,608
1,346
7,9544
2,131
Expenses recognized in 2021
Expenses deferred to 2022 and later1
Related to the
2021
performance
year
0
Related to prior
performance
years
0
Variable compensation (continued)
USD m
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: Fund Ownership Plan
Variable compensation – performance awards
Variable compensation – financial advisors2
of which: non-deferred cash
of which: deferred share-based awards
of which: deferred cash-based awards
of which: compensation commitments with recruited financial advisors
Variable compensation – other3
Total variable compensation
Related to the
2021
performance
year
2,383
Related to prior
performance
years
(10)
405
183
140
54
29
2,788
4,175
3,858
106
170
41
191
412
180
158
19
56
402
685
(6)
51
202
438
38
Total
2,373
817
363
297
73
84
3,190
4,860
3,853
157
372
479
229
7,155
1,125
8,2804
2,109
1 Estimate as of 31 December 2021. Actual amounts expensed may vary; e.g., due to forfeiture of awards. 2 Financial advisor compensation consists of cash and deferred compensation awards and is based on
compensable revenues and firm tenure using a formulaic approach. It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to
vesting requirements. 3 Consists of replacement payments, forfeiture credits, severance payments, retention plan payments and interest expense related to the Deferred Contingent Capital Plan. 4 Includes
USD 651m in expenses related to share-based compensation (performance awards: USD 435m; other variable compensation: USD 59m; financial advisor compensation: USD 157m). A further USD 85m in expenses
related to share-based compensation was recognized within other expense categories included in Note 7 (salaries: USD 5m related to role-based allowances; social security: USD 64m; other personnel expenses:
USD 16m related to the Equity Plus Plan). Total personnel expense related to share-based equity-settled compensation excluding social security was USD 641m.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
401
Note 28 Employee benefits: variable compensation (continued)
c) Outstanding share-based compensation awards
Share and performance share awards
Movements in outstanding share-based awards to employees during 2023 and 2022 are provided in the table below.
Movements in outstanding share-based compensation awards
Outstanding, at the beginning of the year
Share obligations assumed at merger date
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
Number of shares
2023
181,907,200
Weighted average
grant date fair value
(USD)
15
Number of shares
2022
180,578,561
Weighted average
grant date fair value
(USD)
13
14,535,612
63,907,823
(54,365,846)
(7,076,202)
198,908,588
102,697,819
20
20
14
18
17
62,203,770
(54,639,882)
(6,235,249)
181,907,200
102,364,973
18
12
15
15
The total carrying amount of the liability related to cash-settled share-based awards as of 31 December 2023 and
31 December 2022 was USD 64m and USD 43m, 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.
Note 29 Interests in subsidiaries and other entities
a) Interests in subsidiaries
UBS defines its significant subsidiaries as those entities that, either individually or in aggregate, contribute significantly to
the Group’s financial position or results of operations, based on a number of criteria, including the subsidiaries’ equity
and 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 2023. 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 and Credit
Suisse AG operate through a global branch network and a significant proportion of their business activity is conducted
outside Switzerland, including in the UK, the US, Singapore, the Hong Kong SAR and other countries. UBS Europe SE has
branches and offices in a number of EU Member States, including Germany, France, Italy, Luxembourg and Spain. Share
capital is provided in the currency of the legally registered office.
Individually significant subsidiaries of UBS Group AG as of 31 December 2023
Company
UBS AG
Registered office
Zurich and Basel, Switzerland
UBS Business Solutions AG1
Credit Suisse AG
Credit Suisse Services AG
Zurich, Switzerland
Zurich, Switzerland
Zurich, Switzerland
1 UBS Business Solutions AG holds subsidiaries in China, India, Israel and Poland.
Share capital in million
Equity interest accumulated in %
USD
CHF
CHF
CHF
385.8
1.0
4,399.7
1.0
100.0
100.0
100.0
100.0
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
402
Note 29 Interests in subsidiaries and other entities (continued)
Individually significant subsidiaries of UBS AG as of 31 December 20231
Company
Registered office
UBS Americas Holding LLC
Wilmington, Delaware, USA
UBS Americas Inc.
Wilmington, Delaware, USA
UBS Asset Management AG
Zurich, Switzerland
Primary business
Group Items
Group Items
Asset Management
UBS Bank USA
UBS Europe SE
Salt Lake City, Utah, USA
Frankfurt, Germany
Global Wealth Management
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
2,900.02
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
1 Includes direct and indirect subsidiaries of UBS AG. 2 Consists of common share capital of USD 1,000 and non-voting preferred share capital of USD 2,900,000,000. 3 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 Credit Suisse AG as of 31 December 2023
Company
Registered office
Credit Suisse International
London, United Kingdom
Primary business
Non-core and Legacy
Credit Suisse (Schweiz) AG
Zurich, Switzerland
Personal & Corporate Banking
Credit Suisse Holdings (USA), Inc.
Wilmington, United States
Investment Bank
1 UBS Group AG owns the remaining 2.4%.
Share capital in million
USD
CHF
USD
7,267.5
100.0
0.0
Equity interest accumulated in %
97.61
100.0
100.0
Other subsidiaries
The table below lists other direct and indirect subsidiaries of UBS AG and Credit Suisse 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 and Credit Suisse AG as of 31 December 2023
Company
Banco de Investimentos Credit Suisse (Brasil) S.A.
Registered office
São Paulo, Brazil
BANK-now AG
Credit Suisse (Hong Kong) Limited
Credit Suisse (UK) Limited
Credit Suisse (USA), Inc.
Credit Suisse Bank (Europe), S.A.
Credit Suisse Funds AG
Primary business
Investment Banking
Personal & Corporate Banking
Investment Banking
Horgen, Switzerland
Hong Kong, China
London, United Kingdom
Global Wealth Management
Wilmington, United States
Spain, Madrid
Zurich, Switzerland
Investment Banking
Investment Banking
Asset Management
Credit Suisse Securities (Europe) Limited
London, United Kingdom
Non-core and Legacy
Credit Suisse Securities (Japan) Limited
Tokyo, Japan
Investment Banking
Credit Suisse Securities (USA) LLC
Credit Suisse Services (USA) LLC
DLJ Mortgage Capital, Inc.
Wilmington, United States
Non-core and Legacy
Wilmington, United States
Group Items
Wilmington, United States
Non-core and Legacy
UBS Asset Management (Americas) Inc.
Wilmington, Delaware, USA
Asset Management
UBS Asset Management Life Ltd
UBS Business Solutions US LLC
London, United Kingdom
Asset Management
Wilmington, Delaware, USA
Group Items
UBS Fund Management (Switzerland) AG
Basel, Switzerland
Asset Management
UBS (Monaco) S.A.
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
Sydney, Australia
Hong Kong SAR, China
Tokyo, Japan
Tokyo, Japan
Investment Bank
Investment Bank
Investment Bank
Global Wealth Management
1 Includes a nominal amount relating to redeemable preference shares.
Share capital in million
164.8
BRL
Equity interest
accumulated in %
100.0
CHF
HKD
GBP
USD
EUR
CHF
USD
JPY
USD
USD
USD
USD
GBP
USD
CHF
EUR
AUD
HKD
JPY
JPY
30.0
8,192.9
245.2
0.0
18.0
7.0
9.6
78,100.0
0.0
0.0
0.0
0.0
15.0
0.0
1.0
49.2
0.31
2,841.6
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
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 2023 and 2022, 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 currently 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.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
403
Note 29 Interests in subsidiaries and other entities (continued)
b) Interests in associates and joint ventures
As of 31 December 2023 and 31 December 2022, 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 m
Carrying amount at the beginning of the year
Additions
Acquisition of the Credit Suisse Group
Reclassifications
Share of comprehensive income
of which: share of net profit / (loss) 1
of which: share of other comprehensive income 2
Share of changes in retained earnings
Dividends received
Foreign currency translation
Carrying amount at the end of the year
of which: associates
of which: SIX Group AG, Zurich
of which: other associates
of which: joint ventures
2023
1,101
1
1,569
(33)
(365)
(348)
(17)
(1)
(90)
192
2,373
2,164
1,646
519
209
2022
1,243
3
0
(44)
(41)
32
(73)
0
(31)
(30)
1,101
1,098
954
144
3
1 For 2023, consists of negative USD 383m from associates, partly offset by USD 34m from joint ventures (for 2022, consists of USD 27m from associates and USD 5m from joint ventures). 2 For 2023, consists of
negative USD 17m from associates (for 2022, consists of negative USD 73m from associates).
c) Unconsolidated structured entities
UBS is considered to sponsor another entity if, in addition to ongoing involvement with that entity, it had a key role in
establishing that entity or in bringing together relevant counterparties for a transaction facilitated by that entity. During
2023, 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 2023
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.
As a consequence of the acquisition of the Credit Suisse Group and the resulting increase in interests in structured
entities, interests in client vehicles sponsored by UBS are presented separately to other vehicles sponsored by third parties,
to clearly distinguish the different types of entities that UBS is involved with. Further, bonds issued by US government-
sponsored entities included within Group Treasury’s HQLA portfolio have been excluded given UBS does not absorb
significant risk and third-party funding vehicles of large multi-nationals have been excluded as they are no longer
considered structured entities. Prior periods have been restated to reflect these changes.
The increase in interests held in structured entities primarily relates to financial assets at fair value in the Non-core and
Legacy business division.
Sponsored unconsolidated structured entities in which UBS did not have an interest at year-end
During 2023 and 2022, the Group did not earn material income from sponsored unconsolidated SEs in which UBS did
not have an interest at year-end.
During 2023 and 2022, UBS and third parties did not transfer any assets into sponsored securitization vehicles created in
those years. UBS and third parties transferred assets, alongside deposits and debt issuances (which are assets from the
perspective of the vehicle), of USD 0.5bn and USD 0.5bn, respectively, into sponsored client vehicles created in 2023
(2022: USD 1bn and USD 3bn, 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 137bn (31 December 2022: USD 38bn).
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
404
Note 29 Interests in subsidiaries and other entities (continued)
Interests in unconsolidated structured entities
USD m, 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
Total assets
Derivative financial instruments
Total liabilities
Assets held by the unconsolidated structured entities in
which UBS had an interest (USD bn)
USD m, 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
Total assets
Securitization
vehicles1
2,086
Client
vehicles sponsored
by UBS2
58
31.12.23
Investment
funds
9,653
Other vehicles
sponsored by third
parties3
325
2
0
1,645
0
202
3,935
7
7
705
174
0
0
0
0
232
27
27
36
68
312
497
0
1
10,531
590
590
2767
0
246
579
0
0
1,151
0
0
18
Securitization
vehicles1,2
263
Client
vehicles sponsored
by UBS2
2
31.12.22
Investment
funds
5,884
Other vehicles
sponsored by third
parties3
0
3
0
0
0
0
266
160
0
0
0
0
162
115
119
225
0
2
6,345
0
0
0
0
0
0
Total
12,122
244
558
2,720
0
203
15,848
623
623
Total
6,149
278
119
225
0
3
6,773
Maximum
exposure to loss4
12,122
244
558
2,720
0
453
16,098
98
98
Maximum
exposure to loss4
6,149
278
119
225
0
252
7,023
1
1
35
35
Derivative financial instruments
Total liabilities
Assets held by the unconsolidated structured entities in
which UBS had an interest (USD bn)
1 Includes loans with a high LTV and credit-impaired loans to pre-securitization warehouse structured entities managed by third parties, as well as securities issued by securitization structured entities sponsored by
both UBS and third parties. 2 Client vehicles sponsored by UBS are structured entities that do not qualify as a securitization in line with regulatory requirements and are not considered an investment fund. Effective
from 31 December 2023, bonds issued by US government-sponsored entities included in Group Treasury‘s HQLA and interests in third-party funding vehicles of large multi-nationals have been excluded, with prior
periods restated. The restatement resulted in a decrease in interests in securitization vehicles of USD 852m and a decrease in interests in client vehicles of USD 5,057m as of 31 December 2022. There was a
corresponding decrease in assets held by securitization vehicles in which UBS has an interest of USD 11bn and a decrease in assets held by client vehicles in which UBS has an interest of USD 105bn as of 31 December
2022. 3 Other vehicles sponsored by third parties are structured entities that do not qualify as a securitization in line with regulatory requirements and are not considered an investment fund. Interests in other
vehicles sponsored by third parties included loans with a high LTV and credit-impaired loans provided to third-party structured entities. 4 For the purpose of this disclosure, maximum exposure to loss amounts do
not consider the risk-reducing effects of collateral or other credit enhancements. 5 Represents the principal amount outstanding. 6 Represents the market value of total assets. 7 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. 8 Represents the carrying amount of UBS's interest in other vehicles sponsored
by third parties.
798
798
763
763
1397
0
0
2
2
395
26
0
The Group retains or purchases interests in unconsolidated SEs in the form of direct investments, financing, guarantees,
letters of credit and 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 given SE, with this subject to change over time with
market movements. Guarantees, letters of credit and credit derivatives are an exception, with the given 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 above 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 given
unconsolidated SE or risk-reducing effects of collateral or other credit enhancements.
In 2023 and 2022, the Group did not provide support, financial or otherwise, to any unconsolidated SE when not
contractually obligated to do so, nor does the Group currently have any intention to do so in the future.
In 2023 and 2022, 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 or loss,
which were generally 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 2023 and 31 December 2022, the Group held interests, both retained and acquired, in various
securitization vehicles that relate to financing, underwriting, secondary market and derivative trading activities. In addition
to the interests disclosed in the table above, the Group manages the assets of certain securitization vehicles and receives
fees based, in whole or in part, on the asset value of the vehicles. Interest in such vehicles, acquired as part of the
acquisition of the Credit Suisse Group, is not represented by the on-balance sheet fee receivable but rather by the future
exposure to variable fees. The total assets of such vehicles were USD 26bn as of 31 December 2023, and have been
excluded from the table above.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
405
Note 29 Interests in subsidiaries and other entities (continued)
The numbers outlined in the table above may differ from the securitization positions presented in the 31 December 2023
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 Accounting Standards carrying amount
within the table above 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 2023 Pillar 3 Report, available under “Pillar 3 disclosures” at ubs.com/investors, for more information
Interests in client vehicles sponsored by UBS
UBS-sponsored 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 2023 and 31 December 2022, the Group retained interests in client vehicles sponsored by UBS 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 above, the Group manages the
assets of various pooled investment funds and receives fees based, in whole or in 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 511bn and
USD 292bn as of 31 December 2023 and 31 December 2022, respectively, and have been excluded from the table above.
The Group did not have any material exposure to loss from these interests as of 31 December 2023 or as of 31 December
2022.
Interests in other vehicles sponsored by third parties
Interests in other vehicles sponsored by third parties include loans with a high LTV and credit-impaired loans provided to
third-party structured entities acquired as part of the acquisition of the Credit Suisse Group.
Note 30 Changes in organization and acquisitions and disposals of subsidiaries and businesses
Acquisitions of subsidiaries and businesses
Acquisition of Credit Suisse Group
On 12 June 2023, UBS Group AG acquired Credit Suisse Group AG, succeeding by operation of Swiss law to all assets
and liabilities of Credit Suisse Group AG, and became the direct or indirect shareholder of all of the former direct and
indirect subsidiaries of Credit Suisse Group AG.
› Refer to the “Acquisition and integration of Credit Suisse” section of this report and Note 2 for more information
Disposals of subsidiaries and businesses
Sale of UBS Hana Asset Management Co., Ltd.
In the fourth quarter of 2023, UBS completed the sale of its 51% stake in UBS Hana Asset Management Co., Ltd. to
Hana Securities. Upon completion of the sale, UBS recorded a pre-tax gain of USD 23m (net of a foreign currency
translation loss) in Asset Management which was recognized in Other income.
Changes in organization
Legal structure integration
In December 2023, the Board of Directors of UBS Group AG approved the merger of UBS AG and Credit Suisse AG, and
both entities entered into a definitive merger agreement. The completion of the merger is subject to regulatory approvals
and is expected to occur by the end of the second quarter of 2024.
UBS also expects to complete the transition to a single US intermediate holding company in the second quarter of 2024
and the planned merger of UBS Switzerland AG and Credit Suisse (Schweiz) AG in the third quarter of 2024.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
406
Note 31 Related parties
Related parties of the Group are:
– associates (entities that are under the significant influence of the Group);
– joint ventures (entities in which UBS shares control with another party);
– post-employment benefit plans for the benefit of UBS employees;
– key management personnel and close family members of key management personnel; and
– entities over which key management personnel or their close family members have solely or jointly a direct or indirect
significant influence.
Key management personnel are those persons having authority and responsibility for planning, directing, and controlling
the activities of the Group, directly or indirectly. The Group considers the members of the Board of Directors (the BoD)
and the Group Executive Board (the GEB) to constitute key management personnel.
a) Remuneration of key management personnel
The Vice Chairman of the BoD has a specific management employment contract and receives pension benefits upon
retirement. Total remuneration of the Chairman and the Vice Chairman of the BoD and all GEB members is included in
the table below.
Remuneration of key management personnel
USD m, 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
Total
31.12.23
31.12.22
31.12.21
35
24
36
3
1
63
162
27
17
25
2
1
45
118
31
17
26
3
1
45
124
Total (CHF m)4
1 May include role-based allowances in line with market practice and regulatory requirements. 2 The cash portion may also include blocked shares in line with regulatory requirements. 3 Compensation expense is
based on the share price on grant date taking into account performance conditions. Refer to Note 28 for more information. For GEB members, share-based compensation for 2023, 2022 and 2021 was entirely
composed of LTIP awards. For the Chairman of the BoD the share-based compensation for 2023, 2022 and 2021 was entirely composed of UBS shares. 4 Swiss franc amounts disclosed represent the respective US
dollar amounts translated at the applicable performance award currency exchange rates (2023: USD / CHF 0.91; 2022: USD / CHF 0.96; 2021: USD / CHF 0.92).
114
113
147
The independent members of the BoD, including the Chairman, 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 independent members of the BoD amounted to USD 11.7m (CHF 10.6m) in 2023, USD 11.1m (CHF 10.7m)
in 2022 and USD 7.5m (CHF 6.9m) in 2021.
b) Equity holdings of key management personnel
Equity holdings of key management personnel1
31.12.23
31.12.22
Number of UBS Group AG shares held by members of the BoD, GEB and parties closely linked to them2
1 No options were held in 2023 and 2022 by non-independent members of the BoD and any GEB member or any of its related parties. 2 Excludes shares granted under variable compensation plans with forfeiture
provisions.
3,009,686
5,121,564
Of the share totals above, no shares were held by close family members of key management personnel on 31 December
2023 and 31 December 2022. 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 2023 and 31 December 2022. As of
31 December 2023, no member of the BoD or GEB was the beneficial owner of more than 1% of the shares in UBS
Group AG.
c) Loans, advances, mortgages and deposit balances with key management personnel
The non-independent members of the BoD and GEB members are granted loans, fixed advances and mortgages in the
ordinary course of business on substantially the same terms and conditions that are available to other employees,
including interest rates and collateral, and neither involve more than the normal risk of collectability nor contain any other
unfavorable features for the firm. Independent BoD members are granted loans and mortgages in the ordinary course of
business at general market conditions.
Outstanding balances with key management personnel were as follows.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
407
Note 31 Related parties (continued)
Loans, advances and mortgages to key management personnel1
USD m, except where indicated
Balance at the beginning of the year
Balance at the end of the year2
2023
33
61
2022
34
33
Balance at the end of the year (CHF m)2,3
1 All loans are secured loans. 2 There were USD 14m (CHF 12m) unused uncommitted credit facilities as of 31 December 2023 and no unused uncommitted credit facilities as of 31 December 2022. 3 Swiss franc
amounts disclosed represent the respective US dollar amounts translated at the relevant year-end closing exchange rate.
31
52
In addition, there were USD 24m (CHF 21m) outstanding deposit balances with key management personnel as of
31 December 2023.
d) Other related-party transactions with entities controlled by key management personnel
In 2023 and 2022, UBS did not enter into transactions with entities, over whom UBS’s key management personnel or
their close family members have solely or jointly a direct or indirect significant influence and as of 31 December 2023,
31 December 2022 and 31 December 2021, there were no outstanding balances related to such transactions.
Furthermore, in 2023 and 2022, such entities 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 2023 and 2022, and therefore also
received no fees.
e) Transactions with associates and joint ventures
Loans to and outstanding receivables from associates and joint ventures
USD m
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 m
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
2023
217
824
(796)
26
271
263
2022
251
402
(438)
1
217
209
As of or for the year ended
31.12.23
31.12.22
190
24
106
11
138
4
90
7
Note 32 Invested assets and net new money
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 (FINMA).
Invested assets
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’s total invested assets and net new money, as both business divisions are
independently providing a service to their respective clients, and both add value and generate revenue.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
408
Note 32 Invested assets and net new money (continued)
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’s assets were
already with UBS.
In 2023 UBS has changed its accounting policy for net new money and invested assets to include its share of net new
money and invested assets from associates, to better reflect the business strategy and aligned with the equity method
accounting applied to these entities. Comparative figures in the tables below have been restated to reflect this change,
resulting in an increase to invested assets as of 31 December 2022 of USD 24bn and an increase to net new money for
2022 of USD 8bn, all relating to Asset Management.
Invested assets and net new money
USD bn
Fund assets managed by UBS
Discretionary assets
Other invested assets
Total invested assets2
of which: double counts
Net new money2
1 Comparative figures have been restated to include net new money and invested assets from associates. 2 Includes double counts.
Development of invested assets
USD bn
Total invested assets at the beginning of the year2
Net new money
Market movements3
Foreign currency translation
Other effects
of which: acquisitions / (divestments)
of which: Credit Suisse acquisition
Total invested assets at the end of the year2
1 Comparative figures have been restated to include net new money and invested assets from associates. 2 Includes double counts. 3 Includes interest and dividend income.
As of or for the year ended
31.12.23
31.12.221
624
1,996
3,094
5,714
461
80
2023
3,981
80
428
91
1,134
1,180
1,205
5,714
390
1,464
2,127
3,981
340
76
20221
4,614
76
(596)
(74)
(40)
(19)
0
3,981
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
Closing exchange rate
As of
Average rate1
For the year ended
31.12.23
31.12.22
31.12.23
31.12.22
31.12.21
1.19
1.10
1.28
0.71
1.08
1.07
1.21
0.76
1.12
1.08
1.25
0.70
1.05
1.05
1.23
0.76
1.09
1.18
1.37
0.91
1 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
twelve 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. Accordingly, the weighted average rates for the full
year 2023 consider income and expenses from Credit Suisse’s operations generated since UBS’s acquisition of the Credit Suisse Group. Weighted average rates for individual business divisions may deviate from the
weighted average rates for the Group.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
409
Note 34 Events after the reporting period
Adjustment made within the IFRS 3 measurement period after publication of the fourth quarter 2023 report
The acquisition of the Credit Suisse Group in the second quarter of 2023 resulted in provisional negative goodwill of
USD 28.9bn. Following the publication of the unaudited fourth quarter 2023 report on 6 February 2024, UBS has refined
its acquisition-date fair value estimates in accordance with the 12-month measurement period requirements provided by
IFRS 3, Business Combinations. This has resulted in an adjustment of USD 1.2bn, decreasing the negative goodwill to
USD 27.7bn. As a result, 2023 operating profit before tax and 2023 net profit attributable to shareholders decreased by
USD 1.2bn, basic earnings per share decreased by USD 0.38 to USD 8.83 and diluted earnings per share decreased by
USD 0.36 to USD 8.45.
› Refer to Note 2 for more information
Non-adjusting post balance sheet events
On 22 March 2024, Credit Suisse (Schweiz) AG repaid loans drawn under the Emergency Liquidity Assistance (ELA)
facility, reducing the amount of loans outstanding under the ELA from CHF 38bn to CHF 19bn as of that date.
In March 2024, Credit Suisse has entered into agreements with entities and funds managed by affiliates of Apollo Global
Management (collectively, Apollo) and Atlas SP Partners (Atlas) to conclude the investment management agreement
under which Atlas has managed Credit Suisse’s retained portfolio of assets of its former securitized products group
(SPG). Following this agreement, the assets previously managed by Atlas will be managed in Non-core and Legacy. The
parties have also agreed to conclude the transition services agreement under which Credit Suisse has provided services
to Atlas. In addition, Credit Suisse AG has entered into an agreement to transfer to Apollo approximately USD 8bn of
senior secured asset-based financing. As part of the loan transfer, Credit Suisse AG will extend a one-year USD 750m
swingline facility to the borrowers under the transferred financing facilities. UBS Group expects to recognize a net gain
in the first quarter of 2024 of around USD 0.3bn from the conclusion of the investment management agreement and
assignment of the loan facilities.
Note 35 Main differences between IFRS Accounting Standards and Swiss GAAP
The consolidated financial statements of UBS Group AG are prepared in accordance with IFRS Accounting Standards.
The Swiss Financial Market Supervisory Authority (FINMA) requires financial groups presenting financial statements under
IFRS Accounting Standards to provide a narrative explanation of the main differences between IFRS Accounting Standards
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 Accounting Standards 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 Accounting Standards, all entities that are controlled by the holding entity are consolidated. Under Swiss
GAAP, controlled entities deemed immaterial to a group or those held only temporarily are exempt from consolidation,
but instead are recorded as participations accounted for under the equity method of accounting or as financial
investments measured at the lower of cost or market value.
2. Classification and measurement of financial assets
Under IFRS Accounting Standards, 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 particular 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 Accounting Standards. 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.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
410
Note 35 Main differences between IFRS Accounting Standards and Swiss GAAP (continued)
3. Fair value option applied to financial liabilities
Under IFRS Accounting Standards, 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 Accounting Standards 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 those exposures that are in
the ECL scope of both frameworks, IFRS Accounting Standards and Swiss GAAP.
For the small residual exposures within the scope of Swiss GAAP ECL requirements, which are not subject to ECL under
IFRS Accounting Standards due to classification differences, UBS applies alternative approaches.
– For exposures for which Pillar 1 internal ratings-based models are applied to measure credit risk, ECL 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, as appropriate. For detailed information on regulatory EL, refer to the “Risk management and
control” section of this report.
– For exposures for which the Pillar 1 standardized approach is used to measure credit risk, ECL is determined using a
portfolio approach that derives a conservative probability of default (PD) and a conservative loss given default (LGD)
for the entire portfolio.
5. Hedge accounting
Under IFRS Accounting Standards, 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.
6. Business combinations, goodwill and intangible assets
Under IFRS Accounting Standards, business combinations are accounted for using the acquisition method, as prescribed
by IFRS 3, Business Combinations. Goodwill and intangible assets with indefinite useful lives acquired in a business
combination are not amortized but tested annually for impairment. Negative goodwill is recognized in the income
statement.
Under Swiss GAAP, assets and liabilities acquired in a business combination are generally recorded at market value.
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. If acquisition-date amounts of the net assets acquired exceed the market value of the consideration
transferred, incremental provisions are recognized for expected cash outflows related to taking over control of the
business, e.g. for expected restructuring. Any remaining negative goodwill is recognized in the income statement.
7. Post-employment benefit plans
Swiss GAAP permit the use of IFRS Accounting Standards or Swiss accounting standards for post-employment benefit
plans, with the election made on a plan-by-plan basis.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
411
Note 35 Main differences between IFRS Accounting Standards and Swiss GAAP (continued)
UBS has elected to apply 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 Accounting Standards. Key differences between Swiss GAAP and IFRS Accounting Standards
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 Accounting Standards 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 Accounting Standards 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 Standards are
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 Accounting Standards, 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 Accounting Standards, 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 Accounting Standards, derivative assets, derivative liabilities and related cash collateral not settled to market
are reported on a gross basis unless the restrictive netting requirements under IFRS Accounting Standards 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 Accounting Standards, 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 negative goodwill 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 Accounting
Standards.
Annual Report 2023 | Consolidated financial statements | UBS Group AG consolidated financial statements
412
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 information3
Income statement
Total operating income4
Total operating expenses
Operating profit / (loss) before tax
Net profit / (loss)
Balance sheet
Total assets
Total liabilities
Total equity
Capital5
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 denominator5
Risk-weighted assets
Leverage ratio denominator
Supplementary leverage ratio denominator
Capital and leverage ratios (%)5
Common equity tier 1 capital ratio
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 ratio
Total loss-absorbing capacity leverage ratio
Gone concern capital coverage ratio
Liquidity coverage ratio5
High-quality liquid assets (bn)
Net cash outflows (bn)
Liquidity coverage ratio (%)
Net stable funding ratio5
Total available stable funding (bn)
Total required stable funding (bn)
Net stable funding ratio (%)
UBS AG
(consolidated)
USD
IFRS Accounting Standards
Swiss SRB rules
31.12.23
31.12.22
UBS AG
(standalone)
USD
Swiss GAAP
Swiss SRB rules
(phase-in)
31.12.23
31.12.22
UBS Switzerland AG
(standalone)
CHF
UBS Europe SE
(consolidated)
EUR
UBS Americas Holding
LLC
(consolidated)
USD
Swiss GAAP
Swiss SRB rules
31.12.23
31.12.22
IFRS Accounting
Standards
EU regulatory rules
31.12.23 31.12.221
US GAAP
US Basel III rules
31.12.23 31.12.222
33,532
29,011
4,521
3,315
34,886
25,927
8,960
7,116
13,832
12,040
1,792
1,515
15,759
8,505
7,253
7,157
9,655
5,816
3,839
3,133
8,760
5,458
3,302
2,707
1,156,016
1,100,448
55,569
1,105,436
1,048,496
56,940
558,527
505,650
52,877
504,767
447,406
57,361
314,231
298,305
15,926
315,657
300,164
15,493
44,130
12,498
56,628
538
42,929
11,841
54,770
2,958
52,553
12,498
65,051
533
53,995
11,841
65,836
2,949
12,515
5,000
17,515
12,586
5,393
17,978
54,458
111,086
46,991
101,761
54,452
119,504
46,982
112,818
11,176
28,691
11,267
29,245
1,180
885
295
213
46,981
42,894
4,087
2,625
600
3,225
3,225
2,5226
5,747
1,158
794
364
262
13,045
12,964
81
(110)
13,575
13,015
560
(153)
47,978
44,360
3,617
194,258
169,319
24,939
201,777
176,973
24,804
2,441
600
3,041
3,041
2,1306
5,171
14,081
2,837
16,919
202
17,120
7,4007
24,3197
10,536
5,082
15,618
131
15,749
7,4007
23,0187
333,979
317,823
1,104,408 1,029,561
354,083
643,939
332,864
575,461
107,097
330,515
107,208
332,280
12,382
45,079
10,726
41,818
73,096
184,015
208,242
70,324
193,837
214,543
19.3
23.1
23.4
33.3
9.2
8.1
15.0
22.2
22.4
32.7
8.1
7.3
21.2
26.1
26.1
46.4
7.2
22.8
28.3
28.3
48.2
7.3
12.8
12.4
13.2
11.9
13.5
17.2
32.0
5.3
9.9
13.2
17.0
33.3
5.1
10.1
254.5
134.3
189.7
602.6
503.8
119.6
14.8
18.4
16.2
19.8
11.7
16.4
11.7
16.8
26.8
27.3
5.3
8.7
5.4
8.8
10.1
11.4
112.5
117.1
130.0
50.4
260.28
279.8
304.9
91.711
101.6
53.6
191.2
254.4
280.2
90.8
76.3
53.6
142.59
222.7
166.1
134.111
88.9
62.4
142.4
221.7
162.3
136.6
18.9
12.8
148.7
13.9
10.6
131.5
20.6
13.1
158.7
13.7
7.9
172.8
28.0
18.9
147.7
107.910
81.710
132.110
26.3
18.3
143.5
Other
Joint and several liability between UBS AG and
UBS Switzerland AG (bn)12
1 Comparative figures have been restated to align with the regulatory reports as submitted to the European Central Bank (the ECB). 2 Comparative information has been aligned with UBS Americas Holding LLC’s
final 2022 audited financial statements, which included an increase in provisions related to US residential mortgage-backed securities litigation. 3 The financial information disclosed does not represent financial
statements under the respective GAAP / IFRS Accounting Standards. 4 The total operating income includes credit loss expense or release. 5 Refer to the 31 December 2023 Pillar 3 Report, available under “Pillar
3 disclosures” at ubs.com/investors, for more information. 6 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. 7 Consists of eligible long-term debt that meets the conditions specified in 12 CFR 252.162 of the final TLAC rules. Total loss-absorbing capacity is the sum of tier 1 capital and
eligible long-term debt. 8 In the fourth quarter of 2023, the liquidity coverage ratio (the LCR) of UBS AG was 260.2%, remaining above the prudential requirements communicated by FINMA. 9 In the fourth
quarter of 2023, the LCR of UBS Switzerland AG, which is a Swiss SRB, was 142.5%, remaining above the prudential requirement communicated by FINMA in connection with the Swiss Emergency Plan. 10 The net
stable funding ratio requirement became effective as of 1 July 2021 and related disclosures came into effect in the second quarter of 2023. 11 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. 12 Refer
to the “Capital, liquidity and funding, and balance sheet” section of our Annual Report 2023 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.
4
3
Annual Report 2023 | Significant regulated subsidiary and sub-group information
413
UBS Group AG is a holding company and conducts substantially all of its operations through UBS AG, Credit Suisse AG
and subsidiaries thereof. UBS Group AG, UBS AG and Credit Suisse AG have contributed a significant portion of their
respective capital to, and provide substantial liquidity to, such subsidiaries. Many of these subsidiaries are subject to
regulations requiring compliance with minimum capital, liquidity and similar requirements. The table in this section
summarizes the regulatory capital components and capital ratios of our significant regulated subsidiaries and sub-groups
determined under the regulatory framework of each subsidiary’s or sub-group’s home jurisdiction.
› Refer to “Capital and capital ratios of our significant regulated subsidiaries” in the “Capital, liquidity and funding, and balance
sheet” section of this report for more information
› Refer to “Note 23 Restricted and transferred financial assets” in the “Consolidated financial statements” section of this report for
more information
Supervisory authorities generally have discretion to impose higher requirements or to otherwise limit the activities of
subsidiaries. Supervisory authorities also may require entities to measure capital and leverage ratios on a stressed basis
and may limit the ability of an entity to engage in new activities or take capital actions based on the results of those tests.
In June 2023, the Federal Reserve Board released the results of its 2023 Dodd–Frank Act Stress Test (DFAST). UBS’s US
intermediate holding company, UBS Americas Holding LLC, and Credit Suisse’s intermediate holding, Credit Suisse
Holdings (USA), Inc., exceeded the minimum capital requirements under the severely adverse scenario. Following the
completion of the annual DFAST and the Comprehensive Capital Analysis and Review (CCAR), UBS Americas Holding
LLC was assigned a stress capital buffer (an SCB) of 9.1% (previously 4.8%) under the SCB rule as of 1 October 2023,
resulting in a total common equity tier 1 (CET1) capital requirement of 13.6%. Credit Suisse Holdings (USA), Inc. was
assigned an SCB of 7.2% (previously 9.0%), resulting in a total CET1 capital requirement of 11.7%.
Additional information on the above entities is provided in the 31 December 2023 Pillar 3 report, which is available under
“Pillar 3 disclosures” at ubs.com/investors.
Annual Report 2023 | Significant regulated subsidiary and sub-group information
414
All values in million, except where
indicated
Financial and regulatory requirements
As of or for the year ended
Financial information3
Income statement
Total operating income4
Total operating expenses
Operating profit / (loss) before tax
Net profit / (loss)
Balance sheet
Total assets
Total liabilities
Total equity
Capital5
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 denominator5
Risk-weighted assets
Leverage ratio denominator
Supplementary leverage ratio
denominator
Capital and leverage ratios (%)5
Common equity tier 1 capital ratio
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 ratio
Total loss-absorbing capacity leverage
ratio
Gone concern capital coverage ratio
Liquidity coverage ratio5
High-quality liquid assets (bn)
Net cash outflows (bn)
Liquidity coverage ratio (%)
Net stable funding ratio5
Total available stable funding (bn)
Total required stable funding (bn)
Net stable funding ratio (%)
Credit Suisse AG
(consolidated)
Credit Suisse AG
(standalone)
CHF
US GAAP
Swiss SRB rules
CHF
Swiss GAAP
Swiss SRB rules
(phase-in)1
Credit Suisse
(Schweiz) AG
(consolidated)
Credit Suisse
(Schweiz) AG
(standalone)
Credit Suisse
International
(standalone)
Credit Suisse
Holdings (USA), Inc.
(consolidated)
CHF
CHF
US GAAP
Swiss SRB rules
Swiss GAAP
Swiss SRB rules1
USD
IFRS Accounting
Standards
UK regulatory rules
USD
US GAAP
US Basel III rules
31.12.23
31.12.22 31.12.23
31.12.22 31.12.23
31.12.22 31.12.23
31.12.22 31.12.23 31.12.22 31.12.23 31.12.222
18,862
22,122
(3,260)
(4,041)
15,198
18,529
(3,331)
(7,273)
4,166
11,678
(7,512)
10,126
5,726
18,714
(12,988)
(12,565)
452,507
414,391
38,116
530,039
481,563
48,476
257,935
231,554
26,381
378,363
362,108
16,255
3,806
3,146
660
596
4,455
3,025
1,430
1,191
1,397
3,133
(1,736)
(1,793)
2,327
2,658
(331)
(685)
227,143
216,018
11,125
215,407
202,478
12,929
122,259 182,672
107,296 164,768
17,904
14,963
38,187
458
40,987
13,856
33,346
458
32,262
13,891
11,051
3,100
12,492
3,100
10,396
3,100
11,724
3,100
12,688
1,200
14,609
1,200
38,646
54,843
33,805
46,153
14,151
15,592
13,496
14,824
13,888
15,809
38,284
42,930
38,216
43,139
9,040
10,000
9,066
10,000
4,586
4,586
0
13,888
3
15,812
2,113
5,400
(3,369)
(3,354)
28,202
18,341
9,861
9,387
522
9,909
78
9,987
3,000
3,895
10,455
(6,543)
(9,063)
57,452
44,245
13,207
12,405
523
12,928
109
13,037
3,500
76,930
97,773
72,021
89,292
23,191
25,592
22,562
24,824
18,474
20,398
12,909
16,428
181,690
524,968
249,953
653,551
182,772
288,610
263,844
456,691
83,254
253,818
88,602
243,946
82,611
251,692
88,949
242,288
60,646
35,438
78,135 126,360
12,979
29,484
44,632
65,298
21.0
21.3
16.4
21.9
18.2
18.5
12.2
17.5
13.3
17.0
14.1
17.6
12.6
16.3
13.2
16.7
42.3
39.1
27.9
28.9
27.3
27.9
35.8
39.2
39.2
52.1
17.8
24.1
26.1
26.1
33.6
12.5
34,370
78,593
72.3
76.4
77.0
23.1
33.6
28.8
27.8
29.0
29.2
7.8
19.8
16.4
7.4
14.7
8.4
15.0
11.7
10.1
143.4
130.7
5.6
9.1
6.4
10.5
5.4
9.0
6.1
10.2
23.6
16.1
10.2
5.4
142.6
53.8
265.16
287.1
213.1
134.7
120.0
81.2
147.7
342.8
289.3
118.5
67.3
17.1
393.67
160.3
121.6
131.810
50.1
40.2
124.6
207.5
224.0
92.610
52.1
34.4
151.38
128.5
118.7
108.3
32.4
27.4
118.2
151.2
126.2
119.8
52.0
34.9
149.39
32.4
27.8
116.6
126.8
116.7
108.710
149.4
123.2
121.310
15.4
6.0
280.3
30.4
24.2
125.6
25.5
16.6
150.4
49.3
38.7
127.5
12.6
6.6
195.1
15.3
8.6
179.1
17.4
11.9
150.1
Other
Joint and several liability between Credit
Suisse AG standalone and Credit Suisse
(Schweiz) AG standalone (bn)11
1 Swiss GAAP statutory accounting rules for banks allow the use of certain US GAAP accounting rules, such as current expected credit loss (the CECL) requirements. 2 Comparative information has been aligned
with Credit Suisse Holdings (USA), Inc. standalone’s final second quarter of 2023 financial statements. 3 The financial information disclosed does not represent financial statements under the respective GAAP / IFRS
Accounting Standards. 4 The total operating income includes credit loss expense or release. 5 Refer to the 31 December 2023 Pillar 3 Report, available under “Pillar 3 disclosures” at ubs.com/investors, for more
information. 6 In the fourth quarter of 2023, the liquidity coverage ratio (the LCR) of Credit Suisse AG consolidated was 265.1%, remaining above the prudential requirements communicated by FINMA. 7 In the
fourth quarter of 2023, the LCR of Credit Suisse AG standalone was 393.6%, remaining above the prudential requirements communicated by FINMA. 8 In the fourth quarter of 2023, the LCR of Credit Suisse
(Schweiz) AG consolidated was 151.3%, remaining above the prudential requirements communicated by FINMA. 9 In the fourth quarter of 2023, the LCR of Credit Suisse (Schweiz) AG standalone was 149.3%,
remaining above the prudential requirements communicated by FINMA. 10 Based on Art. 17h para. 3 and 4 of the Liquidity Ordinance, Credit Suisse AG standalone is allowed to fulfill the minimum NSFR of 100%
by taking into consideration any excess funding of Credit Suisse (Schweiz) AG standalone, and Credit Suisse AG standalone has an NSFR requirement of at least 80% without taking into consideration any such excess
funding. Credit Suisse (Schweiz) AG must always fulfill the NSFR of at least 100% on a standalone basis. 11 The liabilities were fully collateralized through cash deposits from Credit Suisse AG.
0.5
0.6
Annual Report 2023 | Significant regulated subsidiary and sub-group information
415
Additional regulatory
information
Table of contents
417 UBS Group AG consolidated supplemental
disclosures required under SEC regulations
417 A – Introduction
417
B – Selected financial data
Selected Information
417
417 Dividends received from investments in subsidiaries
418
Balance sheet data
418 C – Information about the company
Property, plant and equipment
418
419 D – Information required by Subpart 1400 of
Regulation S-K
Selected statistical information
419
419 Average balances and interest rates
421 Analysis of changes in interest income and expense
423 Deposits
423 Uninsured deposits
424
Investments in debt instruments
Loan portfolio
424
424 Allowance for credit losses
Annual Report 2023 | Additional regulatory information
416
UBS Group AG consolidated supplemental disclosures
required under SEC regulations
A – Introduction
The following pages contain supplemental UBS Group AG disclosures that are required under US Securities and Exchange
Commission (SEC) regulations. UBS Group AG’s consolidated financial statements have been prepared in accordance
with IFRS Accounting Standards as issued by the International Accounting Standards Board (the IASB) and are
denominated in US dollars.
On 12 June 2023, UBS Group AG acquired Credit Suisse Group AG, succeeding by operation of Swiss law to all assets
and liabilities of Credit Suisse Group AG, and became the direct or indirect shareholder of all of the former direct and
indirect subsidiaries of Credit Suisse Group AG. The acquisition of the Credit Suisse Group constitutes a business
combination under IFRS 3, Business Combinations, and is required to be accounted for by applying the acquisition method
of accounting. With the acquisition date of 12 June 2023, for convenience the Credit Suisse Group was consolidated
from 31 May 2023, as the impact of transactions and activities in the period from 31 May 2023 to 12 June 2023 on the
consolidated financial statements was not material.
› Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of
this report for more information
B – Selected financial data
Selected information
Ordinary cash dividends declared per share (CHF)1,2
As of or for the year ended
31.12.23
31.12.22
31.12.21
0.50
0.47
Ordinary cash dividends declared per share (USD)1,2
1 Dividends and / or distributions out of the capital contribution reserve are normally approved and paid in the year subsequent to the reporting period. Beginning in 2020, dividends have been declared in US dollars.
The Swiss franc equivalent amount for the 2023 dividend will be determined after the Annual General Meeting using the exchange rate applicable on that date and is therefore not provided in this table. 2 Refer to
“Statement of proposed appropriation of total profit and dividend distribution out of total profit and capital contribution reserve” in the “UBS Group AG standalone financial statements” section of the UBS Group
AG Standalone financial statements and regulatory information for the year ended 31 December 2023 report, available under “Holding company and significant regulated subsidiaries and sub-groups” at
ubs.com/investors, for more information.
0.70
0.55
0.50
Dividends received from investments in subsidiaries
In 2023, UBS Group AG received dividends of USD 6,269m (2022: USD 4,373m; 2021: USD 4,672m) from its subsidiaries.
This includes dividends received from its Credit Suisse subsidiaries since the acquisition of Credit Suisse Group AG on
12 June 2023. Dividends disclosed have been translated to US dollars from the functional currency of the entity paying
the dividend, using the closing exchange rate of the month the dividend was received.
Annual Report 2023 | Additional regulatory information | UBS Group AG consolidated supplemental disclosures required under SEC regulations
417
Balance sheet data
USD m
Assets
Cash and balances at central banks
Amounts due from banks
Receivables from securities financing transactions at amortized cost
Cash collateral receivables on derivative instruments
Loans and advances to customers
Other financial assets measured at amortized cost
Total financial assets measured at amortized cost
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
Total financial assets measured at fair value through profit or loss
Financial assets measured at fair value through other comprehensive income
Investments in associates
Property, equipment and software
Goodwill and intangible assets
Deferred tax assets
Other non-financial assets
Total assets
Liabilities
Amounts due to banks
Payables from securities financing transactions at amortized cost
Cash collateral payables on derivative instruments
Customer deposits
Debt issued measured at amortized cost
Other financial liabilities measured at amortized cost
Total financial liabilities measured at amortized cost
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
Total financial liabilities measured at fair value through profit or loss
Provisions
Other non-financial liabilities
Total liabilities
Equity attributable to shareholders
Equity attributable to non-controlling interests
Total equity
Total liabilities and equity
31.12.23
31.12.22
31.12.21
314,148
169,445
192,817
21,161
99,039
50,082
639,844
65,498
1,189,773
169,633
51,263
176,084
21,037
104,018
470,773
2,233
2,373
17,849
7,515
10,682
16,049
14,792
67,814
35,032
387,220
53,264
727,568
107,866
36,742
150,108
17,576
59,796
335,347
2,239
1,101
12,288
6,267
9,389
10,166
15,480
75,012
30,514
397,761
26,209
737,794
130,821
43,397
118,142
21,839
60,080
330,882
8,844
1,243
12,888
6,378
8,876
10,277
1,717,246
1,104,364
1,117,182
70,962
14,394
41,582
792,029
237,817
20,851
1,177,633
34,159
192,181
42,522
128,289
29,484
426,635
12,250
14,089
11,596
4,202
36,436
525,051
114,621
9,575
701,481
29,515
154,906
45,085
73,638
30,237
333,381
3,243
9,040
13,101
5,533
31,798
542,007
139,155
9,001
740,595
31,688
121,309
44,045
73,799
30,074
300,916
3,518
11,151
1,630,607
1,047,146
1,056,180
86,108
531
86,639
56,876
342
57,218
60,662
340
61,002
1,717,246
1,104,364
1,117,182
C – Information about the company
Property, plant and equipment
As of 31 December 2023, UBS operated in about 923 business and banking locations worldwide, of which approximately
38% were in Switzerland, 39% in the Americas, 12% in the rest of Europe, the Middle East and Africa, and 11% in Asia
Pacific. Of the business and banking locations in Switzerland, 23% were owned directly by UBS, with the remainder,
along with most of UBS’s offices outside Switzerland, being held under commercial leases. These premises are subject to
continuous maintenance and upgrading and are considered suitable and adequate for current and anticipated operations.
Annual Report 2023 | Additional regulatory information | UBS Group AG consolidated supplemental disclosures required under SEC regulations
418
D – Information required by Subpart 1400 of Regulation S-K
Selected statistical information
The tables below set forth selected statistical information regarding the Group’s banking operations extracted from its
financial statements. Unless otherwise indicated, average balances for the years ended 31 December 2023, 31 December
2022 and 31 December 2021 are calculated from monthly data. From 31 May 2023 to 31 December 2023, the
calculation includes the effect of the acquisition of the Credit Suisse Group. Unless otherwise indicated, the distinction
between domestic (Swiss) and foreign (non-Swiss) is generally based on the booking location.
Average balances and interest rates
The tables below set forth average interest-earning assets and average interest-bearing liabilities, along with the average
yield, for 2023, 2022 and 2021. Refer to “Note 4 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 about interest income and interest expense.
For the year ended
USD m, except where indicated
Assets
Balances at central banks
Domestic
Foreign
Amounts due from banks
Domestic
Foreign
Receivables from securities financing transactions measured
at amortized cost1
Domestic
Foreign
Loans and advances to customers
Domestic
Foreign
Financial assets at fair value1,2
Domestic
Foreign
Other interest-earning assets
Domestic
Foreign
Total interest-earning assets3
Net interest income on swaps
Interest income on off-balance sheet securities and other
Interest income and average interest-earning assets
Non-interest-earning assets5
Total average assets
31.12.23
31.12.22
31.12.21
Average
balance
Interest
income
Average
yield (%)
Average
balance
Interest
income
Average
yield (%)
Average
balance
Interest
income
Average
yield (%)
113,953
100,608
3,592
14,993
1,777
4,297
68
619
10,978
81,085
344
3,339
345,812
173,161
10,422
8,974
7,352
214,671
210
9,672
357
2,730
42,809
2,672
744
46,2244
12,574
81,284
1,160,061
1,160,061
333,210
1,493,271
1.6
4.3
1.9
4.1
3.1
4.1
3.0
5.2
2.9
4.5
2.8
3.4
3.7
4.0
92
595
50
8
30
1,105
3,187
4,829
50
2,113
125
858
13,043
1,804
677
15,5254
99,777
88,267
2,966
12,345
6,431
70,942
223,970
160,509
5,892
151,504
8,226
63,107
893,936
893,936
299,488
1,193,424
0.1
0.7
1.7
0.1
0.5
1.6
1.4
3.0
0.8
1.4
1.5
1.4
1.5
1.7
98,804
71,529
3,158
13,074
(105)
(31)
40
12
9,435
79,297
(28)
234
3,211
2,700
11
1,203
121
298
7,666
1,552
472
9,6894
228,070
160,902
10,006
169,267
7,477
47,040
898,059
898,059
298,224
1,196,284
(0.1)
0.0
1.3
0.1
(0.3)
0.3
1.4
1.7
0.1
0.7
1.6
0.6
0.9
1.1
1 Reverse repurchase agreements are presented on a gross basis and therefore, for the purpose of this disclosure, do not reflect the effect of netting permitted under IFRS Accounting Standards. 2 Includes financial
assets at fair value held for trading, financial assets at fair value not held for trading, financial assets at fair value through other comprehensive income and brokerage receivables. 3 Non-taxable positions and
amounts were not material for the years presented. 4 For the purpose of this disclosure, negative interest income on assets is presented as a reduction to interest income, while in the consolidated income statement
negative interest income on assets is presented as interest expense. Refer to “Note 4 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. 5 Mainly includes derivative financial instruments, equity instruments at fair value held for trading and financial assets for unit-linked
investment contracts.
Annual Report 2023 | Additional regulatory information | UBS Group AG consolidated supplemental disclosures required under SEC regulations
419
Average balances and interest rates (continued)
For the year ended
USD m, except where indicated
Liabilities and equity
Amounts due to banks
Domestic
Foreign
Payables from securities financing transactions measured at
amortized cost1
Domestic
Foreign
Customer deposits
Domestic
of which: demand deposits
of which: savings and sweep deposits
of which: time deposits
Foreign
of which: demand deposits
of which: savings and sweep deposits
of which: time deposits
Commercial paper
Domestic
Foreign
Other short-term debt issued measured at amortized cost
Domestic
Foreign
Long-term debt issued measured at amortized cost
Domestic
Foreign
Financial liabilities at fair value (excluding debt issued
designated at fair value)1,2
Domestic
Foreign
Debt issued designated at fair value
Domestic
Foreign
Other interest-bearing liabilities
Domestic
Foreign
31.12.23
31.12.22
31.12.21
Average
balance
Interest
expense
Average
interest
rate (%)
Average
balance
Interest
expense
Average
interest
rate (%)
Average
balance
Interest
expense
Average
interest
rate (%)
42,049
5,386
1,385
137
7,874
17,065
350,102
161,596
140,716
47,790
283,952
44,435
75,871
163,647
1
22,108
322
12,023
112,466
32,387
419
157,558
10,513
93,902
382
890
2,401
754
328
1,321
9,656
736
2,187
6,733
0
1,159
4
610
4,125
1,900
13
5,760
391
4,566
3.3
2.5
4.9
5.2
0.7
0.5
0.2
2.8
3.4
1.7
2.9
4.1
0.0
5.2
1.3
5.1
3.7
5.9
3.1
3.7
3.7
4.9
10,733
3,255
3,357
13,351
3
43
40
289
(82)
272,926
(149)
147,903
6
119,685
60
5,337
1,819
246,072
120
66,987
111,130
578
67,955 1,121
1
20,452
366
11,927
0
256
4
124
67,462
22,929
1,946
439
291
139,657
9,278
63,470
11
1,392
127
1,283
0.0
1.3
1.2
2.2
0.0
(0.1)
0.0
1.1
0.7
0.2
0.5
1.7
0.0
1.3
1.2
1.0
2.9
1.9
3.7
1.0
1.4
2.0
10,369
2,897
(32)
18
(0.3)
0.6
4,786
14,161
1
209
289,096
160,019
126,290
2,786
232,165
82,226
99,847
50,092
292
24,461
13
18,473
(290)
(273)
4
(20)
107
(31)
81
58
0
33
0
37
67,916
27,820
1,789
491
421
137,268
9,905
60,388
3
13
48
429
0.0
1.5
(0.1)
(0.2)
0.0
(0.7)
0.0
0.0
0.1
0.1
0.0
0.1
(0.1)
0.2
2.6
1.8
0.8
0.0
0.5
0.7
2,832
39,197
1,190,157
90
1,618
35,088
3,132
707
38,9273
3.2
4.1
2.9
2,883
38,938
927,347
0.5
1.1
0.9
2,884
34,943
938,259
(0.2)
0.3
0.3
Total interest-bearing liabilities
Swap interest on hedged debt issued and other swaps
Interest expense on off-balance sheet securities and other
Interest expense and average interest-bearing liabilities
Non-interest-bearing liabilities4
Total liabilities
Total equity
Total average liabilities and equity
Net interest income
Net yield on interest-earning assets
1 Repurchase agreements are presented on a gross basis and therefore, for the purpose of this disclosure, do not reflect the effect of netting permitted under IFRS Accounting Standards. 2 Includes financial liabilities
at fair value held for trading, other financial liabilities designated at fair value and brokerage payables designated at fair value. 3 For the purpose of this disclosure, negative interest expense on liabilities is presented
as a reduction to interest expense, while in the consolidated income statement negative interest income on liabilities is presented as interest income. Refer to “Note 4 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. 4 Mainly includes derivative financial instruments, equity
instruments at fair value held for trading and financial liabilities related to unit-linked investment contracts.
1,190,157
230,664
1,420,822
72,450
1,493,271
927,347
208,049
1,135,396
58,028
1,193,424
938,259
198,130
1,136,389
59,895
1,196,284
7,297
6,621
6,705
0.3
0.7
0.6
0.7
1.0
3.3
(7)
105
2,954
(765)
795
2,9853
14
432
8,142
40
723
8,9043
The percentage of total average interest-earning assets attributable to foreign activities was 57% for 2023 (2022: 61%;
2021: 60%). The percentage of total average interest-bearing liabilities attributable to foreign activities was 56% for
2023 (2022: 60%; 2021: 59%). All assets and liabilities are translated into US dollars at uniform month-end rates. Interest
income and expense are translated at monthly average rates.
Average rates earned and paid on assets and liabilities can change from period to period, based on the changes in interest
rates in general, but are also affected by changes in the currency mix included in the assets and liabilities. Tax-exempt
income is not recorded on a tax-equivalent basis. For all three years presented, tax-exempt income is considered to be
insignificant, and the effect from such income is therefore negligible.
Annual Report 2023 | Additional regulatory information | UBS Group AG consolidated supplemental disclosures required under SEC regulations
420
Analysis of changes in interest income and expense
The tables below provide information, by categories of interest-earning assets and interest-bearing liabilities, about the
changes in interest income and expense due to changes in volume and interest rates for the year ended 31 December
2023 compared with the year ended 31 December 2022, and for the year ended 31 December 2022 compared with the
year ended 31 December 2021. The change in average volume represents the change in the current average balance
compared to the average balance from the prior year with respect to the average rate of the prior year. The change in
average rate represents the difference between the net change in interest income and expense and the change in average
volume.
USD m
Interest income from interest-earning assets
Balances at central banks
Domestic
Foreign
Amounts due from banks
Domestic
Foreign
Receivables from securities financing transactions measured at amortized cost
Domestic
Foreign
Loans and advances to customers
Domestic
Foreign
Financial assets at fair value
Domestic
Foreign
Other interest-earning assets
Domestic
Foreign
Interest income
Domestic
Foreign
Total interest income from interest-earning assets
Net interest income on swaps
Interest income on off-balance sheet securities and other
2023 compared with 2022
2022 compared with 2021
Increase / (decrease)
due to changes in1
Average
volume
Average
interest rate
Net
change
Increase / (decrease)
due to changes in
Average
volume
Average
interest rate
14
86
11
3
23
162
1,706
380
12
884
66
247
1,832
1,762
3,594
1,670
3,616
7
608
291
2,072
5,528
3,765
148
6,675
166
1,625
7,810
18,361
26,171
1,684
3,702
18
611
314
2,234
7,234
4,145
160
7,559
232
1,872
9,642
20,123
29,765
867
67
30,699
(1)
0
(2)
(1)
9
(25)
(57)
(7)
(4)
(124)
12
102
(43)
(55)
(98)
198
626
12
(3)
49
896
34
2,135
43
1,034
(8)
458
328
5,147
5,475
Net
change
197
626
10
(4)
58
871
(23)
2,128
39
910
4
560
285
5,092
5,377
253
205
5,836
Total interest income
1 In 2023, the Swiss franc and the euro strengthened significantly against the US dollar. This effect is included within the variances disclosed in this table.
Annual Report 2023 | Additional regulatory information | UBS Group AG consolidated supplemental disclosures required under SEC regulations
421
Analysis of changes in interest income and expense (continued)
USD m
Interest expense on interest-bearing liabilities
Amounts due to banks
Domestic
Foreign
Payables from securities financing transactions measured at amortized cost
Domestic
Foreign
Customer deposits
Domestic
of which: demand deposits
of which: savings and sweep deposits
of which: time deposits
Foreign
of which: demand deposits
of which: savings and sweep deposits
of which: time deposits
Commercial paper
Domestic
Foreign
Other short-term debt issued measured at amortized cost
Domestic
Foreign
Long-term debt issued measured at amortized cost
Domestic
Foreign
Financial liabilities at fair value (excluding debt issued designated at fair value)
Domestic
Foreign
Debt issued designated at fair value
Domestic
Foreign
Other interest-bearing liabilities
Domestic
Foreign
Interest expense
Domestic
Foreign
Total interest expense on interest-bearing liabilities
Swap interest on hedged debt issued and other swaps
Interest expense on off-balance sheet securities and other
2023 compared with 2022
2022 compared with 2021
Increase / (decrease)
due to changes in1
Average
volume
Average
interest rate
Net
change
Increase / (decrease)
due to changes in
Average
volume
Average
interest rate
9
28
54
80
464
(14)
1
477
280
(40)
(183)
503
0
21
(1)
1
1,298
181
5
178
17
615
0
3
1,846
1,387
3,233
1,373
65
288
521
2,021
917
320
784
7,556
656
1,792
5,109
0
882
1
485
881
1,280
(3)
4,190
247
2,668
76
1,183
4,883
18,832
23,715
1,382
93
342
601
2,485
903
321
1,261
7,836
616
1,609
5,612
0
903
0
486
2,179
1,461
2
4,368
264
3,283
76
1,186
6,729
20,219
26,948
3,092
(16)
30,025
(1)
2
0
(12)
2
21
0
(19)
6
6
9
(9)
0
(5)
0
(13)
(12)
(86)
(1)
0
(3)
22
0
12
(15)
(74)
(89)
Net
change
35
25
39
80
208
125
2
80
1,713
151
497
1,064
0
223
5
87
158
(52)
36
23
39
92
206
104
2
99
1,707
145
488
1,073
0
228
5
100
170
34
8
1,379
7
1,379
82
832
21
316
567
4,710
5,277
79
854
21
328
552
4,636
5,188
805
(73)
5,920
Total interest expense
1 In 2023, the Swiss franc and the euro strengthened significantly against the US dollar. This effect is included within the variances disclosed in this table.
Annual Report 2023 | Additional regulatory information | UBS Group AG consolidated supplemental disclosures required under SEC regulations
422
Deposits
The table below analyzes average deposits and average rates on each deposit category for the years ended 31 December
2023, 31 December 2022 and 31 December 2021. For the purpose of this disclosure, foreign deposits represent deposits
from depositors who are based outside of Switzerland. Deposits by foreign depositors in domestic offices were
USD 92,784m as of 31 December 2023 (31 December 2022: USD 59,744m; 31 December 2021: USD 77,011m).
31.12.23
31.12.22
31.12.21
USD m, except where indicated
Due to banks
Domestic
Demand deposits
Time deposits
Total domestic
Foreign
Demand deposits
Time deposits
Total foreign
Total due to banks1
Customer deposits
Domestic
Demand deposits
Savings and sweep deposits
Time deposits
Total domestic
Foreign
Demand deposits
Savings and sweep deposits
Time deposits
Total foreign
Total customer deposits
1,355
29,827
31,183
9,331
6,922
16,253
47,435
119,782
127,017
45,708
292,508
86,249
89,569
165,728
341,546
634,054
0.0
4.0
3.8
1.1
3.3
2.0
3.2
0.6
0.2
2.6
0.8
0.8
2.5
4.1
2.9
1.9
908
2,793
3,700
5,774
4,513
10,288
13,988
95,866
109,039
8,825
213,730
119,024
121,776
64,468
305,267
518,997
(0.3)
0.5
0.3
(0.1)
0.8
0.3
0.3
927
3,026
3,953
5,414
3,899
9,313
13,266
(0.1)
101,338
0.0
0.2
0.0
0.1
0.5
1.8
0.6
0.3
114,792
8,371
224,502
140,906
111,345
44,507
296,758
521,260
(0.5)
0.0
(0.1)
(0.6)
0.5
(0.1)
(0.1)
(0.2)
0.0
(0.4)
(0.1)
(0.1)
0.1
0.1
0.0
0.0
1 For the purpose of this table, the distinction between foreign and domestic deposits is based on the domicile of the depositor, while foreign and domestic deposits disclosed in previous tables are based on the
booking location.
Uninsured deposits
From the combined total of Due to banks and Customer deposits as of 31 December 2023, total estimated uninsured
deposits were USD 670bn (31 December 2022: USD 362bn; 31 December 2021: USD 392bn). Uninsured deposits are
deposits that are in excess of local deposit insurance or protection scheme limits in the key locations in which UBS
operates, calculated based on the respective local regulations, as well as deposits in uninsured accounts. The main deposit
insurance schemes applicable to UBS deposits are the Swiss depositor protection scheme in Switzerland (which protects
applicable deposits up to a maximum of CHF 100,000 per client and per bank or securities firm), the Compensation
Scheme of German Banks in combination with the Deposit Protection Fund of the Association of German Banks in
Germany (which protects applicable deposits up to a maximum of EUR 5m per client and EUR 50m per business) and the
Federal Deposit Insurance Corporation (the FDIC) scheme in the Americas (which protects applicable deposits up to a
maximum of USD 250,000 per depositor, per insured bank, for each account ownership category).
The table below presents the maturity of estimated uninsured time deposits as of 31 December 2023. Where a depositor
holds multiple accounts that in aggregate are in excess of a deposit insurance or protection limit, the insured amount is
first allocated to the account with the shortest time to maturity.
USD m
Within 3 months
3 to 6 months
6 to 12 months
Over 12 months
Uninsured time deposits1
270,332
36,505
30,923
14,441
Total uninsured time deposits as of 31 December 2023
1 Amounts are estimated based on the methodologies defined in each local jurisdiction. As of 31 December 2023, there were no US time deposits subject to the FDIC scheme that were in excess of the FDIC insurance
limit.
352,202
Annual Report 2023 | Additional regulatory information | UBS Group AG consolidated supplemental disclosures required under SEC regulations
423
Investments in debt instruments
The table below presents the carrying amount and weighted average yield of debt instruments presented within Financial
assets measured at fair value through other comprehensive income and Other financial assets measured at amortized
cost on the balance sheet by contractual maturity bucket. The yield for each range of maturities is calculated by dividing
the annualized interest income by the average balance of the investment per contractual maturity bucket. The maturity
information presented does not consider any early redemption features, and debt instruments without fixed maturities
are not included.
Within 1 year
1 to 5 years
5 to 10 years
Over 10 years
Carrying
amount
Yield (%)
Carrying
amount
Yield (%)
Carrying
amount
Yield (%)
Carrying
amount
Yield (%)
Total carrying
amount
10
2,151
2,161
4,369
1,433
5,803
7,964
0.86
4.65
1.97
1.54
72
72
289
8,096
12,927
21,312
21,384
2.56
1.56
2.17
2.27
1,569
4,005
3,405
8,979
8,979
2.57
2.03
2.37
6,662
2,302
8,964
8,964
2.87
3.78
10
2,223
2,233
8,520
18,772
17,765
45,057
47,290
USD m, except where indicated
Debt instruments measured at fair value through
other comprehensive income
Government bills / bonds
Corporate and other
Subtotal as of 31 December 2023
Debt securities measured at amortized cost
Asset-backed securities
Government bills / bonds
Corporate and other
Subtotal as of 31 December 2023
Total as of 31 December 2023
Loan portfolio
The table below provides the maturity profile of UBS’s core loan portfolio as of 31 December 2023. The contractual
maturity is based on carrying amounts and includes the effect of callable features. For loans due after one year, a
breakdown between fixed and adjustable or floating interest rates is also provided.
USD m
Within 1 year
1 to 5 years
5 to 15 years
31.12.23
Over 15 years
Total
of which: over 1 year
Private clients with mortgages
Real estate financing
Large corporate clients
SME clients
Lombard
Credit cards
Commodity trade finance
Ship / aircraft financing
Consumer financing
Other loans and advances to customers
Loans to financial advisors
Total
42,480
44,321
14,005
16,665
141,085
2,041
5,547
1,197
1,050
21,063
92
289,547
140,574
36,024
13,778
7,036
14,424
0
180
5,643
1,671
15,791
711
235,831
57,091
16,992
2,299
2,209
844
0
0
2,373
261
4,096
1,497
87,662
28,472
480
2
47
1
0
0
0
0
102
316
29,419
268,616
97,817
30,084
25,957
156,353
2,041
5,727
9,214
2,982
41,052
2,615
642,459
Fixed rate
142,780
39,754
5,195
6,349
10,426
0
90
189
1,932
7,072
2,524
216,310
Adjustable or
floating rate
83,356
13,743
10,884
2,943
4,843
0
90
7,827
0
12,916
0
136,602
Allowance for credit losses
For the years ended 31 December 2023, 31 December 2022 and 31 December 2021, the ratio of net charge-offs (i.e.,
write-offs of expected credit loss allowances to gross carrying amount of the average loans outstanding) during the
period was not material for UBS’s core loan portfolio, both on an overall basis and on an individual loan category basis.
Total write-offs for 31 December 2023 were USD 93m (31 December 2022: USD 95m; 31 December 2021: USD 137m).
Refer to the coverage ratio tables in “Note 10 Financial assets at amortized cost and other positions in scope of expected
credit loss measurement” in the “Consolidated financial statements” section of this report for the ratio of expected credit
loss allowances to total loans outstanding at each period end.
Annual Report 2023 | Additional regulatory information | UBS Group AG consolidated supplemental disclosures required under SEC regulations
424
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. A number of APMs are reported in the discussion of the financial and
operating performance of the external reports (annual, quarterly and other reports). APMs are used to provide a more
complete picture of operating performance and to reflect management’s view of the fundamental drivers of the 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. These APMs may qualify as non-GAAP measures as defined by US Securities and
Exchange Commission (SEC) regulations.
APM label
Calculation
Information content
Active Digital Banking clients in
Corporate & Institutional Clients (%)
– Personal & Corporate Banking
Active Digital Banking clients in
Personal Banking (%)
– Personal & Corporate Banking
Active Mobile Banking clients in
Personal Banking (%)
– Personal & Corporate Banking
Cost / income ratio (%)
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 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 via the
mobile app 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 operating expenses divided by total
revenues.
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
proportion of active Mobile 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
efficiency of the business by comparing operating
expenses with gross income.
Fee and trading income for Corporate &
Institutional Clients (USD and CHF)
– Personal & Corporate Banking
Calculated as the total of recurring net fee and
transaction-based income for Corporate &
Institutional Clients.
This measure provides information about the amount
of fee and trading income for Corporate &
Institutional Clients.
Annual Report 2023 | Appendix
425
APM label
Calculation
Information content
Fee-generating assets (USD)
– Global Wealth Management
Fee-pool-comparable revenues (USD)
– the Investment Bank
Calculated as the sum of discretionary and
nondiscretionary wealth management portfolios
(mandate volume) and assets where generated
revenues are predominantly of a recurring nature, i.e.,
mainly investment, mutual, hedge and private-market
funds where we have a distribution agreement,
including client commitments into closed-ended
private-market funds from the date that recurring
fees are charged. Assets related to our Global
Financial Intermediaries business are excluded, as are
assets of sanctioned clients.
Calculated as the total of revenues from: merger-and-
acquisition-related transactions; Equity Capital
Markets, excluding derivatives; Leveraged Capital
Markets, excluding the impact of mark-to-market
movements on loan portfolios; and Debt Capital
Markets, excluding revenues related to debt
underwriting of UBS instruments.
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. Assets of sanctioned clients are excluded from
fee-generating assets.
This measure provides information about the amount
of revenues in the Investment Bank that are
comparable with the relevant global fee pools.
Gross margin on invested assets (bps)
– Asset Management
Calculated as total revenues (annualized as applicable)
divided by average invested assets.
This measure provides information about the total
revenues of the business in relation to invested assets.
Calculated as impaired loan portfolio divided by total
gross loan portfolio.
This measure provides information about the
proportion of impaired loan portfolio in the total gross
loan portfolio.
Impaired loan portfolio as a percentage
of total loan portfolio, gross (%)
– Global Wealth Management,
Personal & Corporate Banking
Integration-related expenses (USD)
Invested assets (USD and CHF)
– Global Wealth Management,
Personal & Corporate Banking,
Asset Management
Investment products for Personal
Banking (USD and CHF)
– Personal & Corporate Banking
Generally include costs of internal staff and
contractors substantially dedicated to integration
activities, retention awards, redundancy costs,
incremental expenses from the shortening of useful
lives of property, equipment and software, and
impairment charges relating to these assets.
Classification as integration-related expenses does not
affect the timing of recognition and measurement of
those expenses or the presentation thereof in the
income statement. Integration-related expenses
incurred by Credit Suisse also included expenses
associated with restructuring programs that existed
prior to the acquisition.
Calculated as the sum of managed fund assets,
managed institutional assets, discretionary and
advisory wealth management portfolios, fiduciary
deposits, time deposits, savings accounts, and wealth
management securities or brokerage accounts.
Calculated as the sum of investment funds (including
UBS Vitainvest third-pillar pension funds, as well as
money market funds), mandates and third-party life
insurance operated in Personal Banking.
Net interest margin (bps)
– Personal & Corporate Banking
Calculated as net interest income (annualized as
applicable) divided by average loans.
Net new assets (USD)
– Global Wealth Management
Net new assets growth rate (%)
– Global Wealth Management
Net new fee-generating assets (USD)
– Global Wealth Management
Calculated as the net amount of inflows and outflows
of invested assets (as defined in UBS policy) recorded
during a specific period, plus interest and dividends.
Excluded from the calculation are movements due to
market performance, foreign exchange translation,
fees, and the effects on invested assets of strategic
decisions by UBS to exit markets or services.
Calculated as the net amount of inflows and outflows
of invested assets (as defined in UBS policy) recorded
during a specific period (annualized as applicable),
plus interest and dividends, divided by total invested
assets at the beginning of the period.
This measure provides information about expenses
that are temporary, incremental and directly related to
the integration of Credit Suisse into UBS.
This measure provides information about the volume
of client assets managed by or deposited with UBS for
investment purposes.
This measure provides information about the volume
of investment funds (including UBS Vitainvest third-
pillar pension funds, as well as money market funds),
mandates and third-party life insurance operated 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
development of invested assets during a specific
period as a result of net new asset flows, plus the
effect of interest and dividends.
This measure provides information about the growth
of invested assets during a specific period as a result
of net new asset flows.
Calculated as the net amount of fee-generating asset
inflows and outflows, including dividend and interest
inflows into mandates and outflows from mandate
fees paid by clients during a specific period. Excluded
from the calculation are the effects on fee-generating
assets of strategic decisions by UBS to exit markets or
services.
This measure provides information about the
development of fee-generating assets during a
specific period as a result of net flows, excluding
movements due to market performance and foreign
exchange translation, as well as the effects on fee-
generating assets of strategic decisions by UBS to exit
markets or services.
Annual Report 2023 | Appendix
426
APM label
Calculation
Information content
Net new investment products for
Personal Banking (USD and CHF)
– Personal & Corporate Banking
Net new money (USD)
– Global Wealth Management,
Asset Management
Net new money growth rate (%)
– Global Wealth Management
Net profit growth (%)
Operating expenses (underlying)
(USD)
Operating profit / (loss) before tax
(underlying) (USD)
Pre-tax profit growth (%)
– Global Wealth Management,
Personal & Corporate Banking,
Asset Management,
the Investment Bank
Pre-tax profit growth (underlying) (%)
– Global Wealth Management,
Personal & Corporate Banking,
Asset Management,
the Investment Bank
Recurring net fee income
(USD and CHF)
– Global Wealth Management,
Personal & Corporate Banking
Return on attributed equity1 (%)
Calculated as the net amount of inflows and outflows
of investment products during a specific period.
Calculated as the net amount of inflows and outflows
of invested assets (as defined in UBS policy) recorded
during a specific period. Excluded from the calculation
are movements due to market performance, foreign
exchange translation, dividends, interest and fees, as
well as the effects on invested assets of strategic
decisions by UBS to exit markets or services. Net new
money is not measured for Personal & Corporate
Banking.
Calculated as the net amount of inflows and outflows
of invested assets (as defined in UBS policy) recorded
during a specific period (annualized as applicable)
divided by total invested assets at the beginning of
the period.
Calculated as the change in net profit attributable to
shareholders from continuing operations between
current and comparison periods divided by net profit
attributable to shareholders from continuing
operations of the comparison period.
Calculated by adjusting operating expenses as
reported in accordance with IFRS Accounting
Standards for items that management believes are
not representative of the underlying performance of
the businesses.
› Refer to the “Group performance” section of this
report for more information
Calculated by adjusting operating profit / (loss) before
tax as reported in accordance with IFRS Accounting
Standards for items that management believes are
not representative of the underlying performance of
the businesses.
› Refer to the “Group performance” section of this
report for more information
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 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. Net profit before tax attributable
to shareholders from continuing operations excludes
items that management believes are not
representative of the underlying performance of the
businesses and also excludes related tax impact.
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 the
development of investment products during a specific
period as a result of net new investment product
flows.
This measure provides information about the
development of invested assets during a specific
period as a result of net new money flows.
This measure provides information about the growth
of invested assets during a specific period as a result
of net new money flows.
This measure provides information about profit
growth since the comparison period.
This measure provides information about the amount
of operating expenses, while excluding items that
management believes are not representative of the
underlying performance of the businesses.
This measure provides information about the amount
of operating profit / (loss) before tax, while excluding
items that management believes are not
representative of the underlying performance of the
businesses.
This measure provides information about pre-tax
profit growth since the comparison period.
This measure provides information about pre-tax
profit growth since the comparison period, while
excluding items that management believes are not
representative of the underlying performance of the
businesses.
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
capital1 (%)
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 equity1 (%)
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,
gross1 (%)
Calculated as annualized total revenues divided by
average leverage ratio denominator.
This measure provides information about the revenues
of the business in relation to the leverage ratio
denominator.
Annual Report 2023 | Appendix
427
APM label
Return on tangible equity1 (%)
Calculation
Information content
Calculated as annualized net profit attributable to
shareholders divided by average equity attributable to
shareholders less average goodwill and intangible
assets.
This measure provides information about the
profitability of the business in relation to tangible
equity.
Tangible book value per share
(USD)
Calculated as equity attributable to shareholders less
goodwill and intangible assets divided by the number
of shares outstanding.
This measure provides information about tangible net
assets on a per-share basis.
Total book value per share
(USD)
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.
Total revenues (underlying)
(USD)
Transaction-based income
(USD and CHF)
– Global Wealth Management,
Personal & Corporate Banking
Underlying cost / income ratio (%)
Underlying net profit growth (%)
Underlying return on common equity
tier 1 capital1 (%)
Underlying return on tangible equity1
(%)
Calculated by adjusting total revenues as reported in
accordance with IFRS Accounting Standards for items
that management believes are not representative of
the underlying performance of the businesses.
› Refer to the “Group performance” section of this
report for more information
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.
Calculated as underlying operating expenses (as
defined above) divided by underlying total revenues
(as defined above).
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. Net profit
attributable to shareholders from continuing
operations excludes items that management believes
are not representative of the underlying performance
of the businesses and also excludes related tax
impact.
Calculated as annualized net profit attributable to
shareholders divided by average common equity tier 1
capital. Net profit attributable to shareholders
excludes items that management believes are not
representative of the underlying performance of the
businesses and also excludes related tax impact.
Calculated as annualized net profit attributable to
shareholders divided by average equity attributable to
shareholders less average goodwill and intangible
assets. Net profit attributable to shareholders excludes
items that management believes are not
representative of the underlying performance of the
businesses and also excludes related tax impact.
This measure provides information about the amount
of total revenues, while excluding items that
management believes are not representative of the
underlying performance of the businesses.
This measure provides information about the amount
of the non-recurring portion of net fee and
commission income, together with other net income
from financial instruments measured at fair value
through profit or loss.
This measure provides information about the
efficiency of the business by comparing operating
expenses with total revenues, while excluding items
that management believes are not representative of
the underlying performance of the businesses.
This measure provides information about profit
growth since the comparison period, while excluding
items that management believes are not
representative of the underlying performance of the
businesses.
This measure provides information about the
profitability of the business in relation to common
equity tier 1 capital, while excluding items that
management believes are not representative of the
underlying performance of the businesses.
This measure provides information about the
profitability of the business in relation to tangible
equity, while excluding items that management
believes are not representative of the underlying
performance of the businesses.
1 Profit or loss information for 2023 includes seven months (June to December 2023, inclusive) of Credit Suisse data for the return measures.
This is a general list of the APMs used in our financial reporting. Not all of the APMs listed above may appear in
this particular report.
Annual Report 2023 | Appendix
428
Information related to underlying return on common equity tier 1 (CET1) capital and underlying return on tangible
equity (%)
USD m
Underlying operating profit / (loss) before tax
Underlying tax expense / (benefit)
NCI
Underlying net profit / (loss)
Underlying net profit / (loss), annualized
Tangible equity
Average tangible equity
CET1 capital
Average CET1 capital
Underlying return on tangible equity (%)
Underlying return on common equity tier 1 capital
As of or for the year ended
31.12.23
3,963
1,194
16
2,753
2,753
78,593
67,435
78,485
65,763
4.1
4.2
31.12.22
8,500
1,909
32
6,559
6,559
50,609
51,249
45,457
44,856
12.8
14.6
Annual Report 2023 | Appendix
429
Abbreviations frequently used in our financial reports
A
ABS
AG
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
CDS
CEA
CEO
CET1
CFO
CGU
CHF
CIO
C&ORC
asset-backed securities
Aktiengesellschaft
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
credit default swap
Commodity Exchange Act
Chief Executive Officer
common equity tier 1
Chief Financial Officer
cash-generating unit
Swiss franc
Chief Investment Office
Compliance & Operational
Risk Control
CRM
CST
CUSIP
CVA
D
DBO
DCCP
DE&I
DFAST
DM
DOJ
DTA
DVA
E
EAD
EB
EC
ECB
ECL
EGM
EIR
EL
EMEA
EOP
EPS
ESG
ESR
ETD
ETF
EU
EUR
EURIBOR
EVE
EY
F
FA
FCA
FDIC
FINMA
FMIA
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
diversity, equity and
inclusion
Dodd–Frank Act Stress Test
discount margin
US Department of Justice
deferred tax asset
debit valuation adjustment
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
environmental and social
risk
exchange-traded derivatives
exchange-traded fund
European Union
euro
Euro Interbank Offered Rate
economic value of equity
Ernst & Young Ltd
financial advisor
UK Financial Conduct
Authority
Federal Deposit Insurance
Corporation
Swiss Financial Market
Supervisory Authority
Swiss Financial Market
Infrastructure Act
FSB
FTA
FVA
FVOCI
FVTPL
FX
G
GAAP
GBP
GCRG
GDP
GEB
GHG
GIA
GRI
G-SIB
H
HQLA
I
IAS
IASB
IBOR
IFRIC
IFRS
Accounting
Standards
IRB
IRRBB
ISDA
ISIN
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
pound sterling
Group Compliance,
Regulatory & Governance
gross domestic product
Group Executive Board
greenhouse gas
Group Internal Audit
Global Reporting Initiative
global systemically
important bank
high-quality liquid assets
International Accounting
Standards
International Accounting
Standards Board
interbank offered rate
International Financial
Reporting Interpretations
Committee
Accounting Standards
issued by the IASB
internal ratings-based
interest rate risk in the
banking book
International Swaps and
Derivatives Association
International Securities
Identification Number
Annual Report 2023 | Appendix
430
Abbreviations frequently used in our financial reports (continued)
T
TBTF
TCFD
TIBOR
TLAC
TTC
U
USD
V
VaR
VAT
too big to fail
Task Force on Climate-
related Financial Disclosures
Tokyo Interbank Offered
Rate
total loss-absorbing capacity
through the cycle
US dollar
value-at-risk
value added tax
K
KRT
L
LAS
LCR
LGD
LIBOR
LLC
LoD
LRD
LTIP
LTV
M
M&A
MRT
N
NII
NSFR
NYSE
O
OCA
OCI
OECD
OTC
P
PCI
PD
PIT
PPA
P&L
Q
QCCP
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
R
RBC
RbM
REIT
RMBS
RniV
RoCET1
RoU
rTSR
RWA
S
SA
mergers and acquisitions
Material Risk Taker
SA-CCR
net interest income
net stable funding ratio
New York Stock Exchange
own credit adjustment
other comprehensive
income
Organisation for Economic
Co-operation and
Development
over-the-counter
purchased credit impaired
probability of default
point in time
purchase price allocation
profit or loss
Qualifying central
counterparty
SAR
SDG
SEC
SFT
SI
SIBOR
SICR
SIX
SME
SMF
SNB
SOR
SPPI
SRB
SRM
SVaR
risk-based capital
risk-based monitoring
real estate investment trust
residential mortgage-
backed securities
risks not in VaR
return on CET1 capital
right-of-use
relative total shareholder
return
risk-weighted assets
standardized approach or
société anonyme
standardized approach for
counterparty credit risk
Special Administrative
Region of the People’s
Republic of China
Sustainable Development
Goal
US Securities and Exchange
Commission
securities financing
transaction
sustainable investing or
sustainable investment
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
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.
Annual Report 2023 | Appendix
431
Information sources
Reporting publications
Annual publications
UBS Group Annual Report: Published in English, this report provides descriptions of: the Group strategy and performance;
the strategy and performance of the business divisions and Group Items; risk, treasury and capital management; corporate
governance; the compensation framework, including information about compensation for the Board of Directors and
the Group Executive Board members; and financial information, including the financial statements.
“Auszug aus dem Geschäftsbericht”: This publication provides a German translation of selected sections of the UBS
Group Annual Report.
Compensation Report: This report discusses the 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
(“Vergütungsbericht”) and represents a component of the UBS Group Annual Report.
Sustainability Report: Published in English, the Sustainability Report provides disclosures on environmental, social and
governance topics related to the UBS Group. It also provides certain disclosures related to diversity, equity and inclusion.
Quarterly publications
Quarterly financial report: This report provides an update on performance and strategy (where applicable) for the
respective quarter. It is available in English.
The annual and quarterly publications are available in .pdf and online formats at ubs.com/investors, under “Financial
information.” Starting with the Annual Report 2022, printed copies, in any language, of the aforementioned annual
publications are no longer provided.
Other information
Website
The “Investor Relations” website at ubs.com/investors provides the following information about UBS: results-related news
releases; financial information, including results-related filings with the US Securities and Exchange Commission (the
SEC); information for shareholders, including UBS share price charts, as well as data and dividend information, and for
bondholders; the corporate calendar; and presentations by management for investors and financial analysts. Information
is available online in English, with some information also available in German.
Results presentations
Quarterly results presentations are webcast live. Recordings of most presentations can be downloaded from
ubs.com/presentations.
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
UBS files periodic reports with and submits other information to 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
wraparound document. Most sections of the filing can be satisfied by referring to the UBS Group 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 filed with
the SEC is available on the SEC’s website: sec.gov. Refer to ubs.com/investors for more information.
Annual Report 2023 | Appendix
432
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. In particular, terrorist activity and conflicts in the Middle East,
as well as the continuing Russia–Ukraine war, may have significant impacts on global markets, exacerbate global inflationary pressures, and slow global growth.
In addition, the ongoing conflicts may continue to cause significant population displacement, and lead to shortages of vital commodities, including energy
shortages and food insecurity outside the areas immediately involved in armed conflict. Governmental responses to the armed conflicts, including, with respect
to the Russia–Ukraine war, coordinated successive sets of sanctions on Russia and Belarus, and Russian and Belarusian entities and nationals, and the uncertainty
as to whether the ongoing conflicts will widen and intensify, may continue to have significant adverse effects on the market and macroeconomic conditions,
including in ways that cannot be anticipated. UBS’s acquisition of the Credit Suisse Group has materially changed our outlook and strategic direction and
introduced new operational challenges. The integration of the Credit Suisse entities into the UBS structure is expected to take between three and five years and
presents significant risks, including the risks that UBS Group AG may be unable to achieve the cost reductions and other benefits contemplated by the transaction.
This creates significantly greater uncertainty about forward-looking statements. Other 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 execution of its strategic plans, including its cost
reduction and efficiency initiatives and its ability to manage its levels of risk-weighted assets (RWA) and leverage ratio denominator (LRD), liquidity coverage ratio
and other financial resources, including changes in RWA assets and liabilities arising from higher market volatility and the size of the combined Group; (ii) the
degree to which UBS is successful in implementing changes to its businesses to meet changing market, regulatory and other conditions, including as a result of
the acquisition of the Credit Suisse Group; (iii) increased inflation and interest rate volatility in major markets; (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, currency exchange rates,
deterioration or slow recovery in residential and commercial real estate markets, the effects of economic conditions, including increasing inflationary pressures,
market developments, 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 adverse changes in UBS’s
credit spreads and credit ratings of UBS, Credit Suisse, sovereign issuers, structured credit products or credit-related exposures, as well as availability and cost of
funding to meet requirements for debt eligible for total loss-absorbing capacity (TLAC), in particular in light of the acquisition of the Credit Suisse Group;
(vi) changes in central bank policies or the implementation of financial legislation and regulation in Switzerland, the US, the UK, the EU 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 in response to legal and regulatory requirements and any additional requirements
due to its acquisition of the Credit Suisse Group, or other developments; (viii) UBS’s ability to maintain and improve its systems and controls for complying with
sanctions in a timely manner 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, including as a result of its acquisition of the Credit Suisse Group, as well as the amount of capital available for return
to shareholders; (xiii) the effects on UBS’s business, in particular cross-border banking, of sanctions, tax or regulatory developments and of possible changes in
UBS’s policies and practices; (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 both nation states and non-
nation-state actors targeting financial institutions; (xix) restrictions on the ability of UBS Group AG and UBS 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 for UBS to achieve goals relating
to climate, environmental and social matters, as well as the evolving nature of underlying science and industry and the possibility of conflict between different
governmental standards and regulatory regimes; (xxii) the ability of UBS to access capital markets; (xxiii) the ability of UBS to successfully recover from a disaster
or other business continuity problem due to a hurricane, flood, earthquake, terrorist attack, war, conflict (e.g., the Russia–Ukraine war), pandemic, security
breach, cyberattack, power loss, telecommunications failure or other natural or man-made event, including the ability to function remotely during long-term
disruptions such as the COVID-19 (coronavirus) pandemic; (xxiv) the level of success in the absorption of Credit Suisse, in the integration of the two groups and
their businesses, and in the execution of the planned strategy regarding cost reduction and divestment of any non-core assets, the existing assets and liabilities
of Credit Suisse, the level of resulting impairments and write-downs, the effect of the consummation of the integration on the operational results, share price
and credit rating of UBS – delays, difficulties, or failure in closing the transaction may cause market disruption and challenges for UBS to maintain business,
contractual and operational relationships; and (xxv) the effect that these or other factors or unanticipated events, including media reports and speculations, 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 US Securities and Exchange Commission (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 the UBS Group AG
and UBS AG Annual Reports on Form 20- F for the year ended 31 December 2023. 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.
Websites | In this report, any website addresses are provided solely for information and are not intended to be active links. UBS is not incorporating the contents
of any such websites into this report.
Annual Report 2023 | Appendix
433
UBS Group AG
P.O. Box
CH-8098 Zurich
ubs.com