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UBS
UBS
#147
Rank
HK$1.106 T
Marketcap
๐Ÿ‡จ๐Ÿ‡ญ Switzerland
Country
HK$350.34
Share price
-5.92%
Change (1 day)
43.33%
Change (1 year)
๐Ÿฆ Banks๐Ÿ’ณ Financial services
Categories
  1. UBS
  2. Annual Reports (20-F)
  3. Submitted on 2022-03-07

UBS - 20-F annual report


Text size:
00016105200001114446--12-31--12-31FYFYFALSEFALSE20212021FALSEFALSETRUEFALSEFALSEFALSEFALSE24/02/202224/02/2022SwitzerlandDavid KellyInternational Financial Reporting Standards203719 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1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM
20-F
 
(Mark One)
 
 
 
 
☐
 
REGISTRATION
 
STATEMENT
 
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
 
 
 
 
☑
 
ANNUAL REPORT
 
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 2021
OR
 
 
 
 
☐
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
 
to
 
.
 
OR
 
 
 
 
☐
 
SHELL COMPANY REPORT
 
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
UBS Group AG
Commission file number:
1-36764
UBS AG
 
Commission file number:
1-15060
 
 
(Exact Name of Registrants as Specified in Their Respective Charters)
Switzerland
 
(Jurisdiction of Incorporation or Organization)
 
UBS Group AG
Bahnhofstrasse 45
,
CH-8001
Zurich
, Switzerland
 
(Address of Principal Executive Office)
UBS AG
Bahnhofstrasse 45
,
CH-8001
Zurich
,
Switzerland
 
and
Aeschenvorstadt 1, CH-4051 Basel, Switzerland
(Address of Principal Executive Offices)
 
David Kelly
600 Washington
 
Boulevard
Stamford, CT
 
06901
Telephone: (
203
)
719 3000
(Name, Telephone,
 
E-mail and/or Facsimile number and Address of Company Contact Person)
 
Securities registered or to be registered pursuant to Section 12(b) of
 
the Act:
Please see page 3.
Securities registered or to be registered pursuant to Section 12(g) of
 
the Act:
Please see page 3.
Securities for which there is a reporting obligation pursuant to Section 15(d)
 
of the Act:
Please see page 3.
 
 
 
2
Indicate the number of outstanding shares of each of each issuer’s
 
classes of capital or common stock as of 31 December 2021:
 
 
UBS Group AG
Ordinary shares, par value CHF 0.10 per share:
 
3,702,422,995
 
ordinary shares
(including 302,815,328 treasury shares)
UBS AG
Ordinary shares, par value CHF 0.10 per share:
3,858,408,466
 
ordinary shares
(none of which are treasury shares)
 
Indicate by check mark if the registrants are well-known seasoned
 
issuers, as defined in Rule 405 of the Securities Act.
 
 
UBS Group AG
Yes
☐
 
No
☑
 
UBS AG
Yes
☐
 
No
☑
 
If this report is an annual or transition report, indicate by check mark if the registrants are not
 
required to file reports pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 
Yes
☐
 
 
No
☑
Note — Checking the box above will not relieve any registrant required to
 
file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 from their obligations under those
 
Sections.
 
 
Indicate by check mark whether the Registrants (1) have filed all reports required
 
to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
 
(or for such shorter period that the Registrants were required
to file such reports) and (2) have been subject to such filing requirements for the past 90
 
days.
 
Yes
☑
 
 
No
☐
 
Indicate by check mark whether the registrants have submitted electronically
 
every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of
 
this chapter) during the preceding 12 months (or for such
shorter period that the registrants were required to submit such files).
 
Yes
 
☑
 
 
No
☐
 
Indicate by check mark whether the registrant is a large accelerated
 
filer, an accelerated filer,
 
or a non-accelerated filer or an
emerging growth company.
 
See definition of “accelerated filer and large accelerated filer” and
 
“emerging growth company” in
Rule 12b-2 of the Exchange Act.
 
(Check One):
 
 
 
UBS Group AG
 
 
Large accelerated filer
☑
 
Accelerated filer
☐
 
Non-accelerated filer
☐
 
Emerging growth company
☐
 
 
 
UBS AG
 
 
Large accelerated filer
☐
 
Accelerated filer
☐
 
 
Non-accelerated filer
☑
Emerging growth company
☐
 
Indicate by check mark whether the registrant has filed a report on
 
and attestation to its management’s assessment of
 
the
effectiveness of its internal control over financial reporting under
 
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared
 
or issued its audit report.
 
UBS Group AG
Yes
☑
 
No
☐
 
UBS AG
Yes
☑
 
No
☐
 
 
 
 
 
 
Indicate by check mark which basis of accounting the registrants have used
 
to prepare the financial statements included in this
filing.
 
 
U.S. GAAP
☐
 
 
International Financial Reporting Standards
as issued by the International Accounting
Standards Board
 
☑
 
 
Other
☐
 
 
If “Other” has been checked in response to the previous question, indicate by
 
check mark which financial statement item the
registrants have elected to follow.
 
Item 17
☐
 
 
Item 18
☐
 
 
 
3
If this is an annual report, indicate by check mark whether the registrants are shell companies
 
(as defined in Rule 12b-2 of the
Exchange Act)
 
Yes
☐
 
 
No
☑
 
 
Securities registered or to be registered
 
pursuant to Section 12(b) of the Act:
UBS Group AG
Title of each class
Trading
symbol(s)
Name of each
exchange on
which registered
Ordinary Shares (par value of CHF 0.10 each)
 
UBS
New York
 
Stock
Exchange
UBS AG
Title of each class
Trading
symbol(s)
Name of each
exchange on
which registered
ETRACS Alerian Midstream Energy Index ETN due June 21, 2050
AMNA
NYSE Arca
ETRACS Alerian Midstream Energy High Dividend Index
 
ETN due July 19, 2050
AMND
NYSE Arca
ETRACS Alerian Midstream Energy Total
 
Return Index ETN due October 20, 2050
AMTR
NYSE Arca
ETRACS Alerian MLP Index ETN Series B due July 18, 2042
AMUB
NYSE Arca
ETRACS Quarterly Pay 1.5x Leveraged MVIS BDC Index ETN due June 10,
 
2050
BDCX
NYSE Arca
E-TRACS MVIS Business Development Companies Index ETN due
 
April 26, 2041
BDCZ
NYSE Arca
ETRACS Monthly Pay 1.5x Leveraged Closed-End Fund Index
 
ETN due June 10, 2050
CEFD
NYSE Arca
E-TRACS Bloomberg Commodity Index Total
 
Return Series B due October 31, 2039
DJCB
NYSE Arca
ETRACS 2x Leveraged MSCI USA ESG Focus TR ETN due September 15,
 
2061
ESUS
NYSE Arca
UBS AG FI Enhanced Large Cap Growth ETN due
 
June 19, 2024
FBGX
NYSE Arca
ETRACS 2x Leveraged IFED Invest with the Fed TR Index ETN due September
 
15, 2061
FEDL
NYSE Arca
UBS AG FI Enhanced Europe 50 ETN due February 12, 2026
FIEE
NYSE Arca
UBS AG FI Enhanced Global High Yield
 
ETN due March 3, 2026
FIHD
NYSE Arca
ETRACS Monthly Pay 2xLeveraged US High Dividend Low Volatility
 
ETN Series B due
October 21, 2049
HDLB
NYSE Arca
ETRACS IFED Invest with the Fed TR Index ETN due September 15,
 
2061
IFED
NYSE Arca
ETRACS 2x Leveraged US Value
 
Factor TR ETN due February 9, 2051
IWDL
NYSE Arca
ETRACS 2x Leveraged US Growth Factor TR ETN due February 9, 2051
IWFL
NYSE Arca
ETRACS 2x Leveraged US Size Factor TR ETN due February 9, 2051
IWML
NYSE Arca
E-TRACS Alerian MLP Infrastructure Index Series B due April 2, 2040
MLPB
NYSE Arca
ETRACS Quarterly Pay 1.5x Leveraged Alerian MLP Index ETN due
 
June 10, 2050
MLPR
NYSE Arca
ETRACS 2x Leveraged MSCI US Momentum Factor TR ETN due February
 
9, 2051
MTUL
NYSE Arca
ETRACS Monthly Pay 1.5x Leveraged Mortgage REIT ETN due June 10, 2050
MVRL
NYSE Arca
ETRACS Monthly Pay 2xLeveraged Preferred Stock ETN due September
 
25, 2048
PFFL
NYSE Arca
ETRACS Linked to the NYSE® Pickens Core Midstream Index due August 20,
 
2048
PYPE
NYSE Arca
ETRACS 2x Leveraged MSCI US Quality Factor TR ETN due February
 
9, 2051
QULL
NYSE Arca
ETRACS 2x Leveraged US Dividend Factor TR ETN due February
 
9, 2051
SCDL
NYSE Arca
ETRACS Monthly Pay 2xLeveraged US Small Cap High Dividend
 
ETN Series B due
November 10, 2048
SMHB
NYSE Arca
E-TRACS CMCI Total Return
 
ETN Series B due April 5, 2038
UCIB
NYSE Arca
ETRACS 2x Leveraged MSCI US Minimum Volatility
 
Factor TR ETN due February 9, 2051
USML
NYSE Arca
Securities registered or to be registered
 
pursuant to Section 12(g) of the Act:
 
None
 
Securities for which there is a reporting obligation
 
pursuant to Section 15(d) of the Act:
 
None
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
Cautionary Statement:
Refer to the
Cautionary Statement Regarding Forward
 
-Looking Statements
 
section in the Annual
Report 2021 (page 586).
 
Cross-reference table
 
Set forth below are the respective items of SEC Form 20-F,
 
and the locations in this document where the corresponding
information can be found.
 
 
●
 
Annual Report
 
refers to the Annual Report 2021 of UBS Group AG and UBS AG annexed
 
hereto, which forms an
integral part hereof.
 
●
 
Supplement
refers to certain supplemental information contained in this forepart of
 
the Form 20-F,
 
starting on page
10 following the cross-reference table.
 
●
 
Financial Statements
refers to the consolidated financial statements of either UBS Group AG or UBS AG, or both,
depending upon the context, contained in the Annual Report.
 
In the cross-reference table below,
 
page numbers refer to either the Annual Report or the Supplement, as noted.
 
Please see page 9 of the Annual Report for definitions of terms used in this Form
 
20-F relating to UBS.
 
Form 20-F item
 
Response or location in this filing
Item 1
.
 
Identity of Directors,
Senior Management and
Advisors.
Not applicable.
Item 2
.
 
Offer Statistics and
Expected Timetable.
Not applicable.
Item 3.
 
Key Information
B – Capitalization and
Indebtedness.
Not applicable.
C – Reasons for the Offer and
Use of Proceeds.
Not applicable.
D – Risk Factors.
Annual Report,
 
Risk factors
(63-73).
Item 4
.
 
Information on the Company.
A – History and Development of
the Company
1-3: Annual Report,
Corporate information
and
Contacts
(6). The registrants' agent is
David Kelly, 600 Washington
 
Boulevard, Stamford, CT
 
06901.
4: Annual Report,
Our evolution
(14);
Our strategy
(16-19);
Our businesses
(21-32);
Note 30 to each set of Financial Statements (
Changes in organization and acquisitions
and disposals of subsidiaries and businesses
) (396 and 528)
5-6: Refer to our management discussion and analysis for a description of material
acquisitions and divestitures in Annual Report,
Our businesses
(21-32), as applicable,
Note 12 to each set of Financial Statements (
Property,
 
equipment and software)
 
(324
and 455) and
Note 30 to each set of Financial Statements (
Changes in organization and
acquisitions and disposals of subsidiaries and businesses
) (396 and 528).
7: Nothing to disclose.
8: Annual Report,
Information sources
 
(585).
B – Business Overview.
1, 2 and 5: Annual Report,
Our strategy, business model and environment
 
(16-73), Note
2a to each set of Financial Statements (
Segment reporting)
(308-309 and 439-440)
and
Note 2b to each set of Financial Statements (
Segment reporting by geographic location
 
)
(310 and 441). See also Supplement (10).
3: Annual Report,
Seasonal characteristics
(82).
4: Not applicable.
6: None.
7: Information as to the basis for these statements normally accompanies the
 
statements,
except where marked in the report as a statement based upon publicly
 
available
information or internal estimates, as applicable.
 
Annual Report,
Our businesses
(21-32),
as applicable.
8: Annual Report,
Regulation and supervision
(56-58)
and
 
Regulatory and legal
developments
 
(59-62).
Supplement (11).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5
C – Organizational Structure.
Annual Report,
Our evolution
(14)
 
and
Note 29 to each set of Financial Statements
(
Interests in subsidiaries and other entities)
(391-395 and 523-527).
D – Property, Plant and
Equipment.
Annual Report,
Property, plant and
 
equipment
(558 and 570)
,
Note 1, 7) to each set of
Financial Statements (
Summary of material accounting policies: Property,
 
equipment and
software
) (305 and 436), Note 12 to each set of Financial Statements (
Property,
equipment and software)
 
(324 and 455).
Information required by SEC
Regulation S-K Part 1400
Annual Report,
Information required
 
under SEC regulation S-K: Subpart 1400
(559-564
and 571-577),
Loss history statistics
(130), and Note 9 to each set of Financial Statements
(
Financial Statements at amortized cost and other positions in scope of expected
 
credit
loss measurement)
 
(317-321 and 448-452).
Item 4A
.
 
Unresolved Staff
Comments.
None.
Item 5
.
 
Operating and Financial Review and Prospects.
A – Operating Results.
1: Annual Report,
Our key figures
(8),
 
UBS AG consolidated key figures
(404)
, Targets,
aspirations and capital guidance
(20),
Our businesses
(21-32),
Group performance
(77-
83), financial and
operating performance by business division and Group Functions (84-
95), Note 2a to each set of Financial Statements (
Segment reporting)
(308-309
 
and 439-
440), and
 
Selected financial data
(554-557 and 566-569).
2: Not applicable
3: Annual Report,
Risk factors
(63-73),
Capital management
(151-168),
Currency
Management
(182) and Note 26 to each set of Financial Statements (
Hedge Accounting)
(373-376
 
and 505-508).
4:
Annual Report,
Our environment
(33-37),
Regulation and supervision
(56-58),
Regulatory and legal developments
(59-62),
Accounting and financial reporting
 
(76),
Note 1b to each set of Financial Statements (
Changes in accounting policies,
comparability and other adjustments
) (307 and 438).
A discussion on the results for the year 2020 compared with 2019
 
can be found on UBS
annual report 2020 filed with the SEC in Form 20-F on March 5, 2021, under
Financial
and operating performance
and under
Financial statements
 
of UBS Group AG and UBS
AG.
 
B – Liquidity and Capital
Resources.
1: Annual Report,
Risk factors
(63-73)
,
Group performance
(77-83)
,
financial and
operating performance by business division and Group
 
Functions (84-95),
Seasonal
characteristics
 
(82),
Interest rate risk in the banking book
 
(135-138),
Capital,
liquidity
and funding, and balance sheet
(150-185)
, Asset encumbrance
(174),
Note 23 to each set
of Financial Statements (
Restricted and transferred financial assets)
(366-368 and 498-
500)
 
and Note 29(b) to each set of Financial Statements (
Interests in associates and joint
ventures
) (393 and 525).
2: Annual Report,
Capital,
liquidity and funding, and balance sheet
(150-185),
 
Currency
Management
(182), Note 10 to each set of Financial Statements (
Derivative instruments)
(322-323
 
and 453-454), Note 11 to each set of Financial
 
Statements (
Financial assets
measured at fair value through
 
other comprehensive income
) (324 and 455), Note 15 to
each set of Financial Statements (
Amounts due to banks and customer deposits,
and
Amounts due to banks, customer deposits,
 
and funding from UBS Group
 
AG
,
respectively
)
(327 and 458), Note 16 to each set of Financial Statements (
Debt issued
designated at fair value)
(328 and 459), Note 17 to each set of Financial Statements
(
Debt issued measured at amortized cost
) (329 and 460), and Note 26 to each set of
Financial Statements (
Hedge Accounting
) (373-376 and 505-508).
3:
 
Annual Report,
Material cash requirements
 
(180),
Liquidity and funding management
(169-172), Note 24 to each set of Financial Statements (
Maturity analysis of financial
liabilities
) (369 and 501), and Note 12 to each set of Financial Statements (
Property,
equipment and software)
 
(324 and 455).
Liquidity and capital management is undertaken at UBS as an integrated asset and
liability management function. While we believe our 'working capital' is sufficient
 
for the
company's present requirements, it is our opinion that, as a bank, our liquidity
 
coverage
ratio (LCR) is the more relevant measure. For more information see, Annual
 
Report,
Liquidity coverage ratio
 
(171).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
C—Research and Development,
Patents and Licenses, etc.
Not applicable.
D—Trend Information.
 
Annual Report,
Our businesses
(21-32),
Our environment
(33-37),
Regulatory and legal
developments
 
(59-62),
Risk factors
(63-73),
Financial and operating performance
 
(76-
95) and
Top and emerging
 
risks
(102).
E—Critical Accounting
Estimates
Not applicable.
Item 6.
 
Directors, Senior Management and Employees.
A – Directors and Senior
Management.
1, 2 and 3: Annual Report,
Board of Directors
(199-215) and
Group Executive Board
(216-222).
4, 5: None.
B – Compensation.
1: Annual Report,
Compensation
(227-272), Note 1a, 4) to each set of Financial
Statements (
Share-based and other deferred
 
compensation plans
) (303 and 434), Note 28
to each set of Financial Statements (
Employee benefits: variable compensation)
 
(387-390
and 519-522) and Note 31 to each set of Financial Statements (
Related parties)
(397-398
and 529-531).
 
2: Annual Report,
Compensation
(227-272), Note 27 to each set of Financial Statements
(
Post-employment benefit plans)
(377-386
 
and 509-518).
C – Board practices.
1: Annual Report,
Board of Directors
(199-215). The term of office for members of the
Board of Directors and its Chairman expires after completion of the next
 
Annual General
Meeting. The next Annual General Meeting is scheduled on 6 April 2022.
2: Annual Report,
Compensation
(227-272),
Clauses on change of control
 
(223), and
Note 31 to each set of Financial Statements (
Related parties
) (397-398 and 529-531).
3: Annual Report,
Audit Committee
 
(209)
 
and
Compensation Committee
(210).
Refer to the Supplement (15) for information on UBS AG's Board of Directors' executive
sessions.
D—Employees.
 
Annual Report,
 
Employees
(44-46), and
Selected financial data
(554-557 and 566-569).
 
 
During 2021, business-aligned operations were moved from Group
 
Functions into the
respective business divisions, resulting in a shift of personnel from Group
 
Functions to
the business divisions. Comparative figures have been restated accordingly
 
for both UBS
Group AG and UBS AG on the tables below.
 
UBS group AG (consolidated) personnel by business division and Group Functions:
 
As of
Full-time equivalents
31.12.21
31.12.20
31.12.19
Personnel (full-time equivalents)
71,385
71,551
68,601
Global Wealth Management
24,093
24,200
25,067
Personal & Corporate Banking
5,791
6,021
6,022
Asset Management
2,693
2,642
2,582
Investment Bank
7,665
7,552
7,423
Group Functions
31,144
31,136
27,507
 
UBS AG (consolidated) personnel by business division and Group Functions:
 
As of
Full-time equivalents
31.12.21
31.12.20
31.12.19
Personnel (full-time equivalents)
47,067
47,546
47,005
Global Wealth Management
22,986
23,039
23,982
Personal & Corporate Banking
4,993
5,131
5,156
Asset Management
2,375
2,351
2,314
Investment Bank
5,854
5,713
5,672
Group Functions
10,859
11,312
9,880
 
E—Share Ownership.
1 and 2: Annual Report,
Compensation
(227-272), Note 28 to each set of Financial
Statements (
Employee benefits: variable compensation
) (387-390 and 519-522) and Note
31b to each set of Financial Statements (
Equity holdings of key management personnel
)
 
(397
 
and 529).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7
Item 7.
 
Major Shareholders and Related Party Transactions.
A—Major Shareholders.
 
Annual Report,
Group structure and shareholders
(191),
 
Share capital structure
 
(192-
196)
 
and
 
Voting
 
rights, restrictions and representation
(197).
 
The number of shares of UBS Group AG held by the respective shareholders listed on
page 191 of the Annual Report registered in the UBS share register with 3% or more
 
of
total share capital as of 31 December 2021 is as follows:
 
Shareholder
Number of shares held
Chase Nominees Ltd., London
329,276,739
DTC (Cede & Co.), New York
214,183,469
Nortrust Nominees Ltd., London
177,762,902
 
According to the mandatory FMIA disclosure notifications filed with UBS Group
 
AG and
SIX, the following entities disclosed holding of more than 3% of the total share
 
capital of
UBS Group AG, with the following number of shares:
 
Shareholder
Number of shares held
Norges Bank, Oslo on 24 July 2019
115,997,262
BlackRock Inc., New York
 
on 26 May 2020
181,261,629
Artisan Partners Limited Partnership,
Milwaukee on 18 November 2020
121,591,630
Massachusetts Financial Services Company,
 
on
22 June 2021
116,145,996
Dodge & Cox International Stock Fund, on 24
January 2022
111,816,261
 
The number of shares of UBS AG held by UBS Group AG as of 31 December 2021 was
3,858,408,466 shares.
 
B—Related Party Transactions.
 
Annual Report,
Loans granted to GEB members
(270)
, Loans granted to BoD members
(270)
 
and
 
Note 31 to each set of Financial Statements (
Related parties
)
 
(397-398 and
529-531).
C—Interests of Experts and
Counsel.
 
Not applicable.
Item 8
.
 
Financial Information.
A—Consolidated Statements
and Other Financial
Information.
 
1, 2, 3, 4, 6: Please see Item 18 of this Form 20-F.
 
5: Not applicable.
7: Information on material legal and regulatory proceedings is in Note 18 to
 
each set of
Financial Statements (
Provisions and contingent liabilities
) (330-335
 
and 461-466).
 
For developments during the year, please see also the
 
note
Provisions and contingent
liabilities
 
in the Consolidated Financial Statements section in our respective
 
quarterly
reports for the First, Second and Third Quarters 2021, filed on Forms 6-K
 
dated April 27,
2021 (UBS Group AG) and April 30, 2021 (UBS AG), July 20, 2021 (UBS Group
 
AG)
and July 23, 2021 (UBS AG) and October 26, 2021 (UBS Group AG) and October
 
29,
2021 (UBS AG), respectively; as well as the
Provisions and contingent liabilities
 
section
in the Fourth Quarter 2021 Report, filed on Form 6-K dated February
 
1, 2022. The
disclosures in each such Quarterly Report speak only as of their respective
 
dates.
8: Annual Report,
 
Letter to Shareholders
(
2-4
)
, Our strategy
(16-19),
Investors
 
(43),
Dividend distribution
(182)
, Distributions to shareholders
(195).
B—Significant Changes.
 
Annual Report, Note 34 to each set of Financial Statements (
Events after the reporting
period
)
 
(400 and 533).
Item 9
.
 
The Offer and Listing.
A – Offer and Listing Details.
1, 2, 3, 5, 6, 7: Not applicable.
4: Annual Report,
Listing of UBS Group AG shares
(185).
 
B—Plan of Distribution.
Not applicable.
C—Markets.
 
Cover page (3).
Annual Report,
Listing of UBS Group AG shares
 
(185),
Shares and participation
certificates
(194-195).
D—Selling Shareholders.
Not applicable.
E—Dilution.
 
Not applicable.
F—Expenses of the Issue.
 
Not applicable.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8
Item 10
.
 
Additional Information.
A—Share Capital.
 
Not applicable.
B—Memorandum and Articles
of Association.
1: Supplement (15).
2: Annual Report,
Compensation governance
(236-237),
Compensation for the
Board of
Directors
(258-260).
Supplement (14-15).
3: Annual Report,
Share
capital structure
(192-196),
Shareholders' participation rights
(197-198),
Elections and terms of office
 
(207). Supplement (12-15).
4: Supplement (13).
5: Annual Report,
Shareholders' participation rights
 
(197-198). Supplement (13).
6: Annual Report,
Transferability,
 
voting rights and nominee registration
 
(196),
Shareholders' participation rights
 
(197-198). Supplement (12).
7: Annual Report,
Change of control and defense measures
 
(223).
8: Annual Report,
Significant Shareholders
(191).
9: Supplement (12-16).
10:
Supplement (12-16).
C—Material Contracts.
 
The Terms & Conditions
 
of the several series of capital instruments issued to date, and to
be issued pursuant to Deferred Capital Contingent Plans, are exhibits 4.1
 
through 4.21 to
this Form 20-F.
 
These notes are described under
Swiss SRB total loss-absorbing capacity
framework
 
on page 152-153 of the Annual Report and
Our deferred compensation plans
on page 252 of the Annual Report.
 
The Asset Transfer Agreement by which
 
certain assets and liabilities of UBS AG were
transferred to UBS Switzerland AG is filed as Exhibit 4.22, and is described
 
under
Joint
liability of UBS Switzerland AG
 
on page 536 of the Annual Report.
 
D—Exchange Controls.
 
Other than in relation to economic sanctions, there are no restrictions under
 
the Articles
of Association of UBS Group AG or UBS AG, nor under Swiss law,
 
as presently in force,
that limit the right of non-resident or foreign owners to hold UBS’s
 
securities freely.
There are currently no Swiss foreign exchange controls or other Swiss laws restricting
 
the
import or export of capital by UBS or its subsidiaries, nor restrictions affecting
 
the
remittance of dividends, interest or other payments to non-resident holders
 
of UBS
securities. The Swiss federal government may impose sanctions on particular
 
countries,
regimes, organizations or persons which may create restrictions
 
on exchange of control.
A current list, in German, French and Italian, of such sanctions can be found at
www.seco-admin.ch
. UBS may also be subject to sanctions regulations from other
jurisdictions where it operates imposing further restrictions.
E—Taxation.
 
Supplement (16-18).
F—Dividends and Paying
Agents.
 
Not applicable.
G—Statement by Experts.
 
Not applicable.
H—Documents on Display.
 
UBS files periodic reports and other information with the Securities and Exchange
Commission. You
 
may read and copy any document that we file with the SEC on the
SEC’s website,
www.sec.gov
. Much of this information may also be found on the UBS
website at
www.ubs.com/investors
.
I—Subsidiary Information.
 
Not applicable.
Item 11
.
 
Quantitative and Qualitative Disclosures About Market Risk.
(a) Quantitative Information
About Market Risk.
 
Annual Report,
Market risk
(131-139).
(b) Qualitative Information
About Market Risk.
 
Annual Report,
Market risk
(131-139).
(c) Interim Periods.
 
Not applicable.
 
Item 12.
 
Description of Securities Other than Equity Securities.
A – Debt Securities
Not applicable.
 
B – Warrants and
 
Rights
Not applicable.
 
C – Other Securities
Not applicable.
 
D – American Depositary Shares
Not applicable.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9
Item 13
.
 
Defaults, Dividend
Arrearages and Delinquencies.
There has been no material default in respect of any indebtedness of UBS or any of
 
its
significant subsidiaries or any arrearages of dividends or any other
 
material delinquency
not cured within 30 days relating to any preferred stock of UBS Group AG or any of its
significant subsidiaries.
Item 14.
 
Material Modifications
to the Rights of Security Holders
and Use of Proceeds.
None.
Item 15.
 
Controls and Procedures.
 
(a)
 
Disclosure Controls and
Procedures
Annual Report,
US disclosure requirements
(226), and
Exhibit 12 to this Form 20-F.
(b) Management’s Annual
Report on Internal Control over
Financial Reporting
Annual Report,
Management’s
 
report on internal control
 
over financial reporting
 
(276
and 406).
(c) Attestation Report of the
Registered Public Accounting
Firm
Annual Report,
Report of Independent Registered Public Accounting
 
Firm
(277
 
and 407).
(d) Changes in Internal Control
over Financial Reporting
None.
Item 16A.
 
Audit Committee
Financial Expert.
Annual Report,
Audit Committee
(209) and
Differences from corporate
 
governance
standards relevant
 
to US-listed companies
(190).
All Audit Committee members have accounting or related financial management
expertise and, in compliance with the rules established pursuant to the US Sarbanes-
Oxley Act of 2002, at least one member, the Chairperson
 
Jeremy Anderson, qualifies as a
financial expert.
Item 16B.
 
Code of Ethics.
Annual Report,
Code of Conduct and Ethics
(48) UBS's Code of Conduct and Ethics
("the Code") is published on our website under
https://www.ubs.com/code
.The UBS
Code of Business Conduct does not include a waiver option, and no waiver
 
from any
provision of the Code was granted to any employee in 2021.
Item 16C.
 
Principal Accountant
Fees and Services.
Annual Report,
Auditors
 
(224-225).
None of the non-audit services so disclosed were approved by the Audit Committee
pursuant to paragraph (c) (7)(i)(C) of Rule 2-01 of Regulation S-X.
Item 16D.
 
Exemptions from the
Listing Standards for Audit
Committees.
Not applicable.
Item 16E.
 
Purchases of Equity
Securities by the Issuer and
Affiliated Purchasers.
Annual Report,
Holding of UBS Group AG shares
 
(184).
UBS Group AG completed on 2 February 2021 its three-year share repurchase
 
program
launched in March 2018. As announced on 26 January 2021, UBS Group AG launched
 
in
February 2021 a new three-year share repurchase program of up to CHF 4 billion
 
until
the 2024 AGM. Further, UBS announced on
 
February 1, 2022 its intention to commence
a new 2022 repurchase program of up to USD 6 billion over two years,
 
and expects to
execute up to USD 5 billion of share repurchases under both the existing 2021
 
and the
new 2022 share buyback program by the end of 2022.
Item 16F.
 
Changes in
Registrant’s Certifying
Accountant.
Not applicable.
Item 16G.
 
Corporate
Governance.
Annual Report,
 
Differences from corporate
 
governance standards relevant
 
to US-listed
companies
 
(190).
Item 16H.
Mine Safety
Disclosure.
Not applicable.
Item 16I.
Disclosure Regarding
Foreign Jurisdictions that
Prevent Inspections
Not applicable.
Item 17.
 
Financial Statements.
Not applicable.
Item 18.
 
Financial Statements.
Annual Report,
Financial statements
(273-546),
Significant regulated subsidiary and
sub-group information
(547-549) and
Additional regulatory information
 
(551-576).
Item 19.
 
Exhibits
Supplement (19-20).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10
Supplemental information
 
Item 4. Information on the Company
B – Business Overview
 
Item 4.B.2.
 
Geographic breakdown of revenues
 
The operating regions
 
shown in the
 
table below correspond
 
to the regional
 
management structure of
 
the Group. The
 
allocation
of
 
operating
 
income
 
to
 
these
 
regions
 
reflects,
 
and
 
is
 
consistent
 
with,
 
the
 
basis
 
on
 
which
 
the
 
business
 
is
 
managed
 
and
 
its
performance is
 
evaluated. These
 
allocations involve
 
assumptions and
 
judgments that
 
management considers
 
to be
 
reasonable,
and may be refined to reflect changes in estimates or management structure.
 
 
The main principles of the
 
allocation methodology are that client revenues are
 
attributed to the domicile of the
 
client, and trading
and portfolio management revenues are
 
attributed to the country
 
where the risk is
 
managed. This revenue attribution is
 
consistent
with the
 
mandate of
 
the regional
 
Presidents. Certain
 
revenues, such
 
as those
 
related to
 
Non-core and
 
Legacy Portfolio
 
within
Group Functions, are managed at a Group level. These revenues are included
 
in the
Global
 
column.
 
 
 
USD billion
Business Division
FY
Americas
Asia Pacific
EMEA
Switzerland
Global
Total
Global Wealth
Management
2021
10.7
2.9
4.0
1.9
0.0
19.4
2020
9.0
2.7
3.6
1.7
0.0
17.0
2019
9.1
2.2
 
3.4
 
1.6
 
0.1
 
16.4
 
Personal &
Corporate Banking
2021
0.0
0.0
0.0
4.3
0.0
4.3
2020
0.0
 
0.0
 
0.0
 
3.7
 
0.0
 
3.7
 
2019
0.0
 
0.0
 
0.0
 
3.7
 
0.0
 
3.7
 
Asset Management
2021
0.6
0.5
0.5
0.8
0.0
2.6
2020
0.7
0.5
0.5
0.7
0.6
3.0
2019
0.5
 
0.4
 
0.4
 
0.6
 
(0.0)
1.9
 
Investment Bank
2021
3.2
3.0
2.5
0.8
(0.0)
9.5
2020
3.3
2.7
2.4
0.8
0.0
9.2
2019
2.5
2.1
2.0
0.7
(0.0)
7.3
Group Functions
2021
0.0
0.0
0.0
0.0
(0.4)
(0.4)
2020
0.0
0.0
0.0
0.0
(0.5)
(0.5)
2019
0.0
 
0.0
 
0.0
 
0.0
 
(0.4)
(0.4)
Group
2021
14.5
6.5
7.0
7.9
(0.3)
35.5
2020
13.0
6.0
6.5
6.9
0.1
32.4
2019
12.0
4.7
5.8
6.7
(0.3)
28.9
 
 
 
11
Disclosure Pursuant To
 
Section 219 of the Iran Threat Reduction And Syrian
 
Human Rights Act
 
Section 219 of the US Iran Threat Reduction and Syria Human Rights Act of
 
2012 (“ITRA”) added Section 13(r) to the US
Securities Exchange Act of 1934, as amended (the “Exchange Act”) requiring
 
each SEC reporting issuer to disclose in its
annual and, if applicable, quarterly reports whether it or any of its affiliates
 
have knowingly engaged in certain activities,
transactions or dealings relating to Iran or with the Government of Iran
 
or certain designated natural persons or entities
involved in terrorism or the proliferation of weapons of mass destruction during
 
the period covered by the report. The required
disclosure may include reporting of activities not prohibited by US or other
 
law, even if conducted outside
 
the US by non-US
affiliates in compliance with local law.
 
Pursuant to Section 13(r) of the Exchange Act, we note the following for
 
the period
covered by this annual report:
 
UBS has a Group Sanctions Policy that prohibits transactions involving
 
sanctioned countries, including Iran, and sanctioned
individuals and entities. However, UBS maintains
 
one account involving the Iranian government under the auspices of the
United Nations in Geneva after agreeing with the Swiss government that
 
it would do so only under certain conditions. These
conditions include that payments involving the account must: (1) be made within
 
Switzerland; (2) be consistent with paying
rent, salaries, telephone and other expenses necessary for its operations
 
in Geneva; and (3) not involve any Specially
Designated Nationals (SDNs) blocked or otherwise restricted under US or
 
Swiss law. In 2021, the gross revenues
 
for this UN-
related account were approximately USD 19,034.19. We
 
do not allocate expenses to specific client accounts in a way that
enables us to calculate net profits with respect to any individual account. UBS AG intends to
 
continue maintaining this account
pursuant to the conditions it has established with the Swiss Government and
 
consistent with its Group
 
Sanctions Policy.
 
As previously reported, UBS had certain outstanding legacy trade finance arrangements
 
issued on behalf of Swiss client
exporters in favor of their Iranian counterparties. In February 2012 UBS ceased accepting
 
payments on these outstanding
export trade finance arrangements and worked with the Swiss government
 
who insured these contracts (Swiss Export Risk
Insurance "SERV").
 
On December 21, 2012, UBS and the SERV
 
entered into certain Transfer and Assignment
 
Agreements
under which SERV
 
purchased all of UBS's remaining receivables under or in connection with Iran
 
-related export finance
transactions. Hence, the SERV
 
is the sole beneficiary of said receivables. There was no financial activity
 
involving Iran in
connection with these trade finance arrangements in 2021, and no gross revenue
 
or net profit.
 
In connection with these trade finance arrangements, UBS has maintained one
 
existing account relationship with an Iranian
bank.
 
 
This account was established prior to the US designation of this bank and maintained due
 
to the existing trade finance
arrangements.
 
In 2007, following the designation of the bank pursuant to sanctions issued by the US, UN and
 
Switzerland, the
account was blocked under Swiss law and remained subject to blocking
 
requirements until January 2016. Client assets as of 31
December 2021 were CHF 3,097.40. There have been no transactions involving
 
this account. The gross revenues to report for
2021 are CHF 2.35.
 
From August to December 2021, UBS processed six payments in connection
 
with Iran under an international program
designed to provide equitable access to COVID-19 vaccines, and UBS anticipates
 
that such activity may continue, There were
no revenues or profits associated with these transactions. In addition,
 
two payments were received by UBS under the same
international program in January and June 2021.
 
 
12
Item 10.
 
Additional Information.
B—Memorandum and Articles of Association.
 
 
Please see the Articles of Association of UBS Group AG and of UBS AG (Exhibits
 
1.1 and 1.2, respectively,
 
to this Form 20-
F) and the Organization Regulations of UBS Group AG and UBS AG (Exhibit
 
1.3 and 1.4, respectively,
 
to this Form 20-F).
 
 
Set forth below is a summary of the material provisions of the Articles of Association
 
of UBS Group AG (which we call the
“Articles” throughout this document), Organization
 
Regulations of UBS Group AG (which we call the “Organization
Regulations” throughout this document) and relevant Swiss laws, in particular
 
the Swiss Code of Obligations, relating to our
shares. This description does not purport to be complete and is qualified
 
in its entirety by references to Swiss law,
 
including
Swiss company law,
 
and to the Articles and Organization Regulations.
 
 
The Articles of Association and Organization Regulations of UBS AG are substantially
 
similar to the Articles and
Organization Regulations of UBS Group AG, so the following
 
description applies equally to UBS AG, except where indicated
that it refers to only one of the companies.
 
The principal legislation under which UBS Group AG and UBS AG operate, and under
 
which the ordinary shares of UBS
Group AG are issued, is the Swiss Code of Obligations.
 
The shares are registered shares with a par value of CHF 0.10 per share. The shares are fully
 
paid up, and there is no liability of
shareholders to further capital calls by the company.
 
The shares rank
pari passu
 
in all respects with each other, including
voting rights, entitlement to dividends, liquidation proceeds in case of
 
the liquidation of the company,
 
subscription or
preemptive rights in the event of a share issue (
Bezugsrechte
) and preemptive rights in the event of the issuance of equity-
linked securities (
Vorwegzeichnungsrechte
).
 
Each share carries one vote at our shareholders’ meetings. Voting
 
rights may be exercised only after a shareholder has been
recorded in our share register as a shareholder with voting rights. Registration with
 
voting rights is subject to certain
restrictions. See “Share Register and Transfer
 
of Shares” below.
 
 
The Articles provide that we may elect not to print and deliver certificates in respect
 
of registered shares. Shareholders may,
however, following registration in the
 
share register, request at any time that we issue a written statement
 
in respect of their
shares; however, the shareholder has no entitlement
 
to the printing and delivery of share certificates
 
Shares and Shareholders
Share Register and Transfer of Shares
 
 
UBS Group AG’s share register is kept
 
by UBS Shareholder Services, P.O.
 
Box, CH-8098 Zurich, Switzerland. Shareholder
Services is responsible for the registration of the global shares. It is split into two parts
 
– a Swiss register, which is maintained
by UBS Group, acting as Swiss share registrar,
 
and a US register, which is maintained by Computershare
 
Trust Company NA,
c/o Computershare Investor Services, P.O.
 
Box 505000, Louisville, KY 40233-5000, United States (US), as US transfer
 
agent.
 
Swiss law and the Articles of Association of UBS Group AG and UBS AG require
 
UBS to keep a share register in which the
names, addresses and nationality (for legal persons, the registered office)
 
of the owners (and beneficial owners) of registered
shares are recorded. The main function of the share register is to record
 
shareholders entitled to vote and participate in general
meetings, or to assert or exercise other rights related to voting rights.
 
The transfer of shares which exist in the form of intermediary-held
 
securities is effected by entries in securities accounts in
accordance with applicable law.
 
The transfer of uncertificated securities is effected by way of
 
a written declaration of
assignment and requires notice to the issuer.
 
In order to register shares in the share register,
 
a purchaser must file a share registration form with the share register.
 
Failing
such registration, the purchaser may not vote at or participate in shareholders’
 
meetings, but will be entitled to dividends, pre-
emptive and priority subscription rights, and liquidation proceeds.
 
Swiss law distinguishes between registration with and without voting rights.
 
Shareholders must be registered in the share
register as shareholders with voting rights in order to vote and participate
 
in general meetings or to assert or exercise other
rights related to voting rights. A purchaser of shares will be recorded
 
in our share register with voting rights upon disclosure of
its name and nationality (and for legal persons, the registered office).
 
However, we may decline a registration with voting
rights if the shareholder does not declare that it has acquired the shares in its own name and
 
for its own account. If the
shareholder refuses to make such declaration, it will be registered as a shareholder
 
without voting rights.
 
 
There is no limitation under Swiss law or our Articles on the right of non-Swiss residents
 
or nationals to own or vote our
shares.
 
13
General Meeting
 
 
Under Swiss law, annual
 
ordinary shareholders’ meetings must be held within six months after the
 
end of our financial year,
which is 31 December. Shareholders’
 
meetings may be convened by the Board of Directors (BoD) or,
 
if necessary, by the
statutory auditors, with twenty-days’ advance notice. The BoD is further required
 
to convene an extraordinary shareholders’
meeting if so resolved by a shareholders’ meeting or if so requested by shareholders
 
holding in aggregate at least 10% of our
nominal share capital. Shareholders representing shares with an aggregate
 
par value of at least CHF 62,500 have the right to
request that a specific proposal be put on the agenda and voted upon at the next
 
shareholders’ meeting. A shareholders’
meeting is convened by publishing a notice in the Swiss Official Commercial
 
Gazette (
Schweizerisches Handelsamtsblatt
) at
least 20 days prior to such meeting. An invitation will be sent to all registered shareholders.
 
The Articles do not require a minimum number of shareholders to be present in
 
order to hold a shareholders’ meeting.
 
 
Unless otherwise provided by law or the Articles (as indicated in this section),
 
resolutions require the approval of an “absolute
majority” of the votes cast, excluding blank and invalid ballots, at a shareholders’
 
meeting. Shareholders’ resolutions requiring
a vote by absolute majority include:
 
 
●
 
Amendments to the Articles (except for the changes requiring a higher quorum
 
as indicated below);
●
 
Elections of directors, Chairman of the BoD, members of the compensation
 
committee and statutory auditors;
●
 
Election of the independent proxy;
●
 
Approval of the management report and the consolidated financial statements;
●
 
Approval of the annual financial statements and the resolution on
 
the use of the balance sheet profit (declaration of
dividend);
●
 
Approval of the compensation for the BoD and the Group Executive Board (GEB)
 
of UBS Group AG, including the
approval of the maximum aggregate amount of compensation of the members of
 
the BoD for the period until the next
Annual General Meeting (AGM), the maximum aggregate amount of
 
fixed compensation of the GEB members for the
following financial year and the aggregate amount of variable compensation
 
of the GEB members for the preceding
financial year, with the exception of
 
a supplementary amount of up to 40% of the average of total annual
compensation paid or granted to the GEB during the previous three years for persons
 
joining or promoted within the
GEB;
●
 
Decisions to discharge directors and management from
 
liability for matters disclosed to the shareholders’ meeting;
and
●
 
Passing resolutions on matters which are by law or by the Articles reserved to the
 
shareholders’ meeting (e.g., the
ordering of an independent investigation into the specific matters proposed
 
to the shareholders’ meeting).
 
Under Swiss corporate law,
 
a resolution passed by at least two thirds of votes represented and an absolute majority of
 
the par
value of the shares represented is required in order to approve:
 
●
 
A change in our stated purpose in the Articles;
●
 
The creation of shares with preferential voting rights;
●
 
A restriction on transferability or registration of shares;
●
 
An increase in authorized or contingent capital or the creation of reserve capital
 
in accordance with Swiss banking
law;
●
 
An increase in share capital funded by equity capital, against contribution
 
in kind or to fund acquisitions in kind and
the granting of special privileges;
●
 
Changes to pre-emptive rights;
●
 
A change of domicile of the corporation; or
●
 
Dissolution of the corporation.
 
Under the Articles, a resolution passed at a shareholders’ meeting with a supermajority
 
of at least two thirds of the votes
represented at such meeting is required to:
 
●
 
Change the limits on BoD size in the Articles;
●
 
Remove one-fourth or more of the members of the BoD; or
●
 
Delete or modify these supermajority requirements.
 
At shareholders’ meetings, a shareholder can be represented by his or her
 
legal representative or under a written power of
attorney by another shareholder eligible to vote or,
 
under a written or electronic power of attorney,
 
by the independent proxy.
Votes
 
are taken electronically, by
 
written ballot or by a show of hands. Shareholders representing at least 3% of the votes
represented may always request that a vote or election take place electronically
 
or by
 
a written ballot.
 
 
UBS AG follows the abovementioned statutory quorum rules in lieu of the quorum
 
requirement of Rule 14.10(f)(3) of Cboe
BZX Exchange, Inc.
 
 
14
Net Profits and Dividends
 
 
Swiss law requires that at least 5% of the annual net profits of a corporation
 
must be retained as general reserves until these
equal 20% of the corporation’s paid
 
-up share capital. Any net profits remaining are at the disposal of the shareholders’
meeting, except that, if an annual dividend exceeds 5% of the nominal
 
share capital, then 10% of such excess must be retained
as general reserves, unless such corporation qualifies as a holding company.
 
 
Under Swiss law, dividends
 
may be paid out only if the corporation has sufficient distributable profits from
 
previous business
years or if the reserves of the corporation are sufficient to allow distribution
 
of a dividend. In either event, dividends may be
paid out only after approval by the shareholders’ meeting. The BoD may propose
 
to the shareholders that a dividend be paid
out. The auditors must confirm that the dividend proposal of the BoD conforms
 
with statutory law.
 
Dividends are usually due and payable after the shareholders’ resolution relating
 
to the allocation of profits has been passed.
Under Swiss law, the statute of
 
limitations in respect of dividend payments is five years.
 
 
Preemptive Rights
 
 
Under Swiss law, any share
 
issue, whether for cash or non-cash consideration or for no consideration,
 
is subject to the prior
approval of the shareholders’ meeting. Shareholders of a Swiss corporation
 
have certain preemptive rights to subscribe for new
issues of shares in proportion to the nominal amount of shares held. The Articles or
 
a resolution adopted at a shareholders’
meeting with a supermajority of at least two-thirds of the votes represented
 
and an absolute majority of the nominal value of
the shares represented at the meeting may,
 
however, limit or suspend preemptive rights in certain
 
limited circumstances.
 
Notices
 
 
Notices to shareholders are made by publication in the Swiss Official
 
Gazette of Commerce. The BoD may designate further
means of communication for publishing notices to shareholders.
 
 
Mandatory Tender
 
Offer
 
 
Under the applicable provisions of the Swiss Financial Market Infrastructure
 
Act, anyone who directly or indirectly or acting in
concert with third parties acquires more than 33 1/3% of the voting rights of
 
a Swiss-listed company will have to submit a
takeover bid to all remaining shareholders. A waiver from the mandatory
 
bid rule may be granted by our supervisory authority.
If no waiver is granted, the mandatory takeover bid must be made pursuant
 
to the procedural rules set forth in the Swiss
Financial Market Infrastructure Act and implementing ordinances.
 
Board of Directors
 
Borrowing Power
 
 
Neither Swiss law nor the Articles restrict in any way our power to borrow and raise funds, provided
 
that any such borrowing
is entered into on arms’ length terms.
 
Swiss law requires that the Articles determine the amount of loans that UBS Group
 
AG, as a listed company, may grant
 
to
members of its BoD. The Articles restrict UBS Group AG's ability to grant
 
loans to BoD members as follows: First, loans to
the independent members of the BoD shall be made in accordance with the
 
customary business and market conditions. Second,
loans to the non-independent members of the BoD shall be made in the ordinary
 
course of business on substantially the same
terms as those granted to UBS employees. Third, the total amount of such
 
loans shall not exceed CHF 20 million per member.
 
Conflicts of Interests
 
 
Swiss law does not have a general provision on conflicts of interests. However,
 
the Swiss Code of Obligations requires
directors and members of senior management to safeguard the interests of the corporation
 
and, as such, imposes a duty of care
and a duty of loyalty on directors and officers. This rule is generally
 
understood as disqualifying directors and senior officers
from participating in decisions that directly affect them.
 
Directors and officers are personally liable to the corporation for any
breach of these provisions. In addition, Swiss law contains a provision under
 
which payments made to a shareholder or a
director or any person associated therewith, other than at arm’s
 
length, must be repaid to us if the shareholder or director was
acting
 
in bad faith.
 
 
In addition, our Organization Regulations provide that,
 
subject to exceptional circumstances in which the best interests of UBS
dictate that the member of the BoD or senior management with a conflict of interest
 
shall not participate in the discussions and
decision-making involving the interest at stake, the member of the BoD or senior
 
management with a conflict of interest shall
participate in discussions and a double vote (meaning a vote with and a vote
 
without the conflicted individual) shall take place.
A binding decision on the matter requires the same outcome in both votes.
 
 
 
 
 
15
Retirement of Board members
 
There is no age-limit requirement for retirement of the members of the BoD. The term
 
of office for each Board member is one
year, and no Board member may serve for
 
more than 10 consecutive terms of office. In exceptional circumstances
 
the Board
can extend this limit.
 
Executive sessions
 
UBS AG's Organization Regulations require one-third of the members
 
of the Board of Directors of UBS AG to be
independent. While neither Swiss law applicable to UBS AG nor the Organization
 
Regulations require regularly scheduled
meetings of UBS AG's independent directors, the Organization
 
Regulations of UBS Group AG require independent members
of the Board of Directors of UBS Group AG to meet, without the participation
 
of the Chairman, at least twice a year.
 
All
members of UBS Group AG’s Board
 
of Directors are also members of UBS AG’s Board
 
of Directors and all meetings of UBS
Group AG’s Board of Directors are
 
held as combined meetings with the UBS AG's Board of Directors. As a result,
 
the practice
currently in place at UBS AG is that the independent members regularly meet in sessions of
 
independent members only.
 
In
addition to these joint meetings, standalone meetings of UBS AG’s
 
Board of Directors are held regularly
 
to discuss and agree
on finance, risk, compliance, operational risk, regulatory and other
 
topics related to UBS AG.
 
The Company
Repurchase of Shares
 
 
Swiss law limits a corporation’s ability
 
to hold or repurchase its own shares. We
 
and our Swiss subsidiaries may only
repurchase shares if we have sufficient free reserves to pay the purchase
 
price and if the aggregate nominal value of the shares
does not exceed 10% of our nominal share capital. Repurchases for cancellation
 
purposes approved by the shareholders’
meeting are exempted from the 10% threshold. Furthermore, such own
 
shares must be disclosed as negative items in our
shareholders’ equity.
 
Such shares held by us or our Swiss subsidiaries do not carry any rights to vote at shareholders’ meetings.
 
Sinking fund provisions
There are no provisions in the Swiss law or in the Articles requiring the company
 
to put resources aside for the exclusive
purpose of redeeming bonds or repurchasing shares.
 
Registration and Business Purpose
 
 
UBS Group AG was incorporated and registered as a corporation limited
 
by shares (
Aktiengesellschaft
) under the laws of
Switzerland. UBS Group AG was entered into the commercial register of
 
Canton Zurich on 10 June 2014 under the registration
number CHE-395.345.924 and has its registered domicile in Zurich,
 
Switzerland. The business purpose of UBS Group AG, as
set forth in article 2 of its Articles, is the acquisition, holding, management
 
and sale of direct and indirect participations in
enterprises of any kind, in particular in the area of banking, financial, advisory,
 
trading and service activities in Switzerland
and abroad. UBS Group may establish enterprises of any kind in
 
Switzerland and abroad, hold equity interests in these
companies, and conduct their management. UBS Group is authorized
 
to acquire, mortgage and sell real estate and building
rights in Switzerland and abroad. UBS Group may provide loans, guarantees and other
 
types of financing and security for
group companies and borrow and invest capital on the money and capital markets.
 
UBS AG was incorporated and registered as a corporation limited by shares (
Aktiengesellschaft
) under the laws of Switzerland.
It is entered into the commercial registers of Canton Zurich and Canton
 
Basel-City under the registration number CHE-
101.329.561 and has registered domiciles in Zurich and Basel, Switzerland.
 
The business purpose of UBS AG, as set forth in
article 2 of its Articles of Association, is the operation of a bank, with a scope of operations extending
 
to all types of banking,
financial, advisory,
 
trading and service activities in Switzerland and abroad. UBS AG is a wholly owned subsidiary of
 
UBS
Group AG.
 
Duration and Liquidation
 
 
UBS Group AG and UBS AG have unlimited duration.
 
 
Under Swiss law, we may be dissolved
 
at any time by a shareholders’ resolution which must be passed by a supermajority
 
of at
least two-thirds of the votes represented and an absolute majority of the nominal value
 
of the shares represented at the meeting.
Dissolution by law or court order is possible, for example, if we become bankrupt.
 
 
Under Swiss law, any surplus arising
 
out of a liquidation (after the settlement of all claims of all creditors) is distributed
 
to
shareholders in proportion to the paid-up nominal value of shares held.
 
 
16
Other
 
 
Ernst & Young Ltd
, Aeschengraben 9, CH-4051
Basel, Switzerland
, PCAOB number
1460
, have been appointed as statutory
auditors and as auditors of the consolidated accounts of both UBS Group AG
 
and UBS AG. The auditors are subject to election
by the shareholders at the ordinary general meeting on an annual basis.
 
 
E—Taxation.
 
 
This section outlines the material Swiss tax and US federal income tax consequences
 
of the ownership of UBS Group AG's
ordinary shares (defined as "UBS ordinary shares " in this section) by a US holder (as defined
 
below) who holds UBS ordinary
shares as capital assets. This discussion addresses only US federal income
 
taxation and Swiss income and capital taxation and
does not discuss all of the tax consequences that may be relevant to holders
 
in light of their individual circumstances, including
other foreign tax consequences, state or local tax consequences, estate and gift
 
tax consequences, and tax consequences arising
under the Medicare contribution tax on net investment income or the
 
alternative minimum tax.
 
It is designed to explain the
major interactions between Swiss and US taxation for US persons who
 
hold UBS ordinary shares.
 
 
The discussion does not address the tax consequences to persons who hold
 
UBS ordinary shares in particular circumstances,
such as tax-exempt entities, banks, financial institutions, life insurance
 
companies, broker-dealers, traders in securities that
elect to use a mark-to-market method of accounting for securities holdings,
 
holders that actually or constructively own 10% or
more of the total combined voting power of the voting stock of UBS Group
 
AG or of the total value of stock of UBS Group
AG, holders that hold UBS ordinary shares as part of a straddle or a hedging or conversion
 
transaction, holders that purchase or
sell UBS ordinary shares as part of a wash sale for tax purposes or holders whose
 
functional currency for US tax purposes is
not the US dollar. This discussion also
 
does not apply to holders who acquired their UBS ordinary shares through a tax-
qualified retirement plan, nor generally to unvested UBS ordinary shares
 
held under deferred compensation arrangements.
 
 
If a partnership (or other entity treated as a partnership) holds UBS ordinary shares,
 
the US federal income tax treatment of a
partner will generally depend on the status of the partner and the tax treatment
 
of the partnership. A partner in a partnership
holding the UBS ordinary shares should consult its tax advisor with regard to
 
the US federal income tax treatment of an
investment in the ordinary shares.
 
The discussion is based on the tax laws of Switzerland and the United States,
 
including the US Internal Revenue Code of 1986,
as amended, its legislative history,
 
existing and proposed regulations under the Internal Revenue Code, published rulings
 
and
court decisions, as in effect on the date of this document, as well as the Convention
 
between the United States of America and
the Swiss Confederation for the Avoidance
 
of Double Taxation with
 
Respect to Taxes on Income,
 
which we call the “Treaty,”
all of which may be subject to change or change in interpretation, possibly with
 
retroactive effect.
 
 
For purposes of this discussion, a “US holder” is any beneficial owner of UBS ordinary
 
shares that is for US federal income
tax purposes:
 
 
●
 
A citizen or resident of the United States;
●
 
A domestic corporation or other entity taxable as a corporation;
●
 
An estate, the income of which is subject to US federal income tax without regard to its source;
 
or
●
 
A trust, if a court within the United States is able to exercise primary supervision over
 
the administration of the trust
and one or more US persons have the authority to control all substantial decisions of
 
the trust.
 
Holders of UBS ordinary shares are urged to consult their tax advisors
 
regarding the US federal, state and local and the Swiss
and other tax consequences of owning and disposing of
 
these shares in their particular circumstances.
 
 
 
(a) Ownership of UBS Ordinary Shares - Swiss Taxation
 
 
Dividends and Distributions
 
Dividends paid by UBS Group AG to a holder of UBS ordinary shares (including dividends on
 
liquidation proceeds and stock
dividends) are in principle subject to a Swiss federal withholding tax
 
at a rate of 35%.
 
 
Under the Capital Contribution Principle, the repayment of capital
 
contributions, including share premiums made by the
shareholders after December 31, 1996 is in principle no longer subject to Swiss withholding
 
tax if certain requirements
regarding the booking of these capital contributions are met.
 
 
Swiss companies listed on a Swiss stock exchange such as UBS Group AG can repay
 
reserves from capital contributions to
their shareholders without deduction of Swiss withholding tax only
 
if they distribute at least the same amount of taxable
dividends. For this reason UBS Group AG pays half of the dividend
 
from capital contribution reserves and half of the dividend
from taxable dividends which is subject to 35% Swiss withholding
 
tax.
 
 
 
17
A US holder resident in the US that qualifies for Treaty
 
benefits may apply for a refund of the withholding tax withheld in
excess of the 15% Treaty rate (or for a full refund
 
in case of qualifying retirement arrangements). The claim for refund must be
filed with the Swiss Federal Tax
 
Administration, Eigerstrasse 65, CH-3003 Berne, Switzerland no later than
 
December 31 of
the third year following the end of the calendar year in which the income subject to withholding
 
was due. The form used for
obtaining a refund is one of the Swiss Tax Forms
 
82 (82 C for US companies; 82 E for other US entities; 82 I for individuals;
82 R for regulated investment companies), which may be obtained
 
from the Swiss Federal Tax
 
Administration at the address
above or downloaded from the web page of the Swiss Federal tax Administration.
 
The form must be filled out in triplicate with
each copy duly completed and signed before a notary public in the United
 
States. The form must be accompanied by evidence
of the deduction of withholding tax withheld at the source.
 
 
A US holder resident outside the US may be eligible for a withholding
 
tax reclaim. If the US holder is resident in Switzerland,
a full reclaim based on the Swiss withholding tax Act is possible provided all necessary
 
conditions are met. A US holder
resident neither in the US nor in Switzerland may be eligible for a partial reclaim provided
 
that a Treaty between Switzerland
and the country of residence is applicable and that all necessary conditions
 
are met.
 
Transfers of UBS Ordinary
 
Shares
 
The purchase or sale of UBS ordinary shares, whether by Swiss resident or non
 
-resident holders (including US holders), may
be subject to a Swiss securities transfer stamp duty of up to 0.15%
 
calculated on the purchase price or sale proceeds if it occurs
through or with a bank or other securities dealer as defined in the Swiss Federal Stamp
 
Tax Act in Switzerland
 
or the
Principality of Liechtenstein. In addition to the stamp duty,
 
the sale of UBS ordinary shares by or through a member of a
recognized stock exchange may be subject to a stock exchange levy.
 
 
Capital gains realized by a US holder upon the sale of UBS ordinary shares are not subject to Swiss income
 
or gains taxes,
unless such US holder holds such shares as business assets of a Swiss business operation
 
qualifying as a permanent
establishment for the purposes of the Treaty.
 
In the latter case, gains are taxed at ordinary Swiss individual or corporate income
tax rates, as the case may be, and losses are deductible for purposes of Swiss income taxes. Furthermore,
 
a US holder who is an
individual resident in Switzerland and holds such shares as business assets (as he qualifies
 
as a professional trader of securities
as per Swiss tax law) may be liable to Swiss income taxes on gains.
 
 
 
(b) Ownership of UBS Ordinary Shares - US Federal Income
 
Taxation
 
 
The tax treatment of the UBS ordinary shares will depend in part on whether or not UBS Group
 
AG is classified as a passive
foreign investment company,
 
or PFIC, for US federal income tax purposes. Except as discussed below under
 
“—Passive
Foreign Investment Company (PFIC) Rules”, this discussion assumes that UBS Group
 
AG is not classified as a PFIC for
United States federal income tax purposes.
 
Dividends and Distributions
 
A US holder will include in gross income and treat as a dividend the gross amount
 
of any distribution paid, before reduction
for Swiss withholding taxes, by UBS Group AG out of its current or accumulated
 
earnings and profits (as determined for US
federal income tax purposes), other than certain pro-rata distributions
 
of UBS ordinary shares,
 
when the distribution is actually
or constructively received by the US holder.
 
Distributions in excess of current and accumulated earnings and profits (as
determined for US federal income tax purposes) will be treated as a return
 
of capital to the extent of the US holder’s basis in its
UBS ordinary shares and thereafter as capital gain. However,
 
UBS Group AG does not expect to calculate earnings and profits
in accordance with US federal income tax principles. Accordingly,
 
a US holder should expect to generally treat distributions
we make on UBS ordinary shares as dividends.
 
 
Dividends paid to a noncorporate US holder that constitute qualified dividend
 
income will be taxable to the holder at
preferential rates, provided that the holder has a holding period in the shares of
 
more than 60 days during the 121-day period
beginning 60 days before the ex-dividend date and meets other holding period
 
requirements. Dividends paid by UBS Group
AG with respect to the ordinary shares will generally be qualified as dividend
 
income provided that, in the year that the US
holder receives the dividend, the UBS ordinary shares are readily tradable
 
on an established securities market in the United
States. The UBS ordinary shares are listed on the New York
 
Stock Exchange, and UBS Group AG therefore expects that
dividends will be qualified dividend income.
 
 
For US federal income tax purposes, a dividend will include a distribution
 
characterized under Swiss law as a repayment of
capital contributions if the distribution is made out of current or accumulated
 
earnings and profits, as described above.
 
 
 
 
 
18
Dividends will generally be income from sources outside the United States for foreign
 
tax credit limitation purposes, and will
generally be "passive" income for purposes of computing the foreign tax credit allowable
 
to the holder. However,
 
if (a) we are
50% or more owned, by vote or value, by US persons and (b) at least 10% of our
 
earnings and profits are attributable to
sources within the US, then for foreign tax credit purposes, a portion of our dividends
 
would be treated as derived from sources
within the US. With respect to any dividend paid
 
for any taxable year, the US source ratio of our dividends
 
for foreign tax
credit purposes would be equal to the portion of our earnings and profits from sources
 
within the United States for such taxable
year, divided by the total amount of our
 
earnings and profits for such taxable year. Special rules apply
 
in determining the
foreign tax credit limitation with respect to dividends that are subject to preferential
 
rates. The dividend will not be eligible for
the dividends-received deduction generally allowed to US corporations in
 
respect of dividends received from other US
corporations.
 
In the case of dividends that are paid in Swiss francs, the amount of the dividend distribution
 
included in income of a US
holder will be the US dollar value of the Swiss franc payments made, determined
 
at the spot Swiss franc/US dollar rate on the
date such dividend distribution is includible in the income of the US holder,
 
regardless of whether the payment is in fact
converted into US dollars. Generally,
 
any gain or loss resulting from currency exchange fluctuations during the period from
 
the
date the dividend payment is included in income to the date such dividend
 
payment is converted into US dollars will be treated
as ordinary income or loss and will not be eligible for the special tax rate applicable
 
to qualified dividend income. Such gain or
loss will generally be income or loss from sources within the United States for
 
foreign tax credit limitation purposes.
 
 
Subject to US foreign tax credit limitations, the nonrefundable Swiss tax withheld and
 
paid over to Switzerland will be
creditable or deductible against the US holder’s US federal
 
income tax liability. To
 
the extent a reduction or refund of the tax
withheld is available to a US holder under the laws of Switzerland or under the Treaty,
 
the amount of tax withheld that is
refundable will not be eligible for credit against the US holder’s US federal
 
income tax liability, whether
 
or not the refund is
actually obtained. See “(a) Ownership of UBS Ordinary Shares – Swiss Taxation”
 
above, for the procedures for obtaining a tax
refund.
 
Transfers of UBS Ordinary
 
Shares
 
A US holder that sells or otherwise disposes of UBS ordinary shares generally will recognize
 
capital gain or loss for US federal
income tax purposes equal to the difference between
 
the US dollar value of the amount realized and its tax basis, determined in
US dollars, in such UBS ordinary shares. Capital gain of a non-corporate
 
US holder is generally taxed at preferential rates if
the UBS ordinary shares were held for more than one year.
 
The gain or loss will generally be income or loss from sources
within the United States for foreign tax credit limitation purposes. A US holder will not
 
be allowed a foreign tax credit in
respect of any stamp duty or stock exchange levy that is imposed upon a transfer of
 
UBS ordinary shares.
 
Passive Foreign Investment Company (PFIC)
 
Rules
 
UBS Group AG believes that UBS ordinary shares should not currently be
 
treated as stock of a PFIC for US federal income tax
purposes, and does not expect to become a PFIC in the foreseeable future.
 
However, this conclusion is a factual determination
made annually and thus may be subject to change. It is therefore possible that
 
UBS Group AG could become a PFIC in a future
taxable year.
 
In general, UBS Group AG will be a PFIC with respect to a US holder if, for any taxable year
 
in which the US
holder held UBS ordinary shares, either (i) at least 75% of the gross income of
 
UBS Group AG for the taxable year is passive
income or (ii) at least 50% of the value, determined on the basis of a quarterly
 
average, of UBS’s assets is attributable to
 
assets
that produce or are held for the production of passive income (including cash). If
 
UBS Group AG were to be treated as a PFIC,
gain realized on the sale or other disposition of UBS ordinary shares would in general
 
not be treated as capital gain. Instead,
unless a US holder elects to be taxed annually on a mark-to-market basis with
 
respect to its UBS ordinary shares, such gain and
certain “excess distributions” would be treated as having been realized ratably
 
over the holder’s holding period for the shares
and generally would be taxed at the highest tax rate in effect for
 
each such year to which the gain was allocated, together with
an interest charge in respect of the tax attributable to each such year.
 
With certain exceptions, a holder’s UBS ordinary
 
shares
will be treated as stock in a PFIC if UBS Group AG was a PFIC at any time during the holder’s
 
holding period in the UBS
ordinary shares. In addition, dividends received from UBS Group AG would
 
not be eligible for the preferential tax rate
applicable to qualified dividend income if UBS Group AG were to be
 
treated as a PFIC either in the taxable year of the
distribution or the preceding taxable year,
 
but would instead be taxable at rates applicable to ordinary income.
 
 
19
Item 19.
 
Exhibits.
 
Exhibit
number
Description
1.1
1.2
. (Incorporated by reference to Exhibit 1.2 to UBS's
Annual Report on Form 20-F for the fiscal year ended December 31, 2019)
 
1.3
1.4
2(b)
Instruments defining the rights of the holders of long-term debt issued by
 
UBS Group AG and its subsidiaries.
We agree to furnish
 
to the SEC upon request, copies of the instruments, including indentures, defining
 
the rights of
the holders of our long-term debt and of our subsidiaries’ long-term debt.
2(d)
4.1
(Incorporated by reference to Exhibit 4.2 to UBS AG's Annual Report on Form 20
 
-F for the fiscal year
ended December 31, 2012)
4.2
. (Incorporated by
reference to Exhibit 4.3 to UBS AG's Annual Report on Form 20-F for the fiscal
 
year ended December 31, 2014)
4.3
. (Incorporated by reference to Exhibit 4.4 to UBS AG's Annual Report on Form 20
 
-F for the fiscal
year ended December 31, 2014)
4.4
. (Incorporated by reference to Exhibit 4.6 to UBS AG's Annual Report on Form 20
 
-F for the fiscal
year ended December 31, 2014)
4.5
. (Incorporated by reference to Exhibit 4.8 to UBS's Annual Report on Form
 
20-F for the fiscal year ended
December 31, 2015)
4.6
 
(Incorporated by reference to Exhibit 4.15 to UBS's Annual Report on Form 20-F for
 
the fiscal year
ended December 31, 2017)
4.7
 
(Incorporated by reference to Exhibit 4.16 to UBS's Annual Report
on Form 20-F for the fiscal year ended December 31, 2017)
4.8
. (Incorporated by reference to Exhibit 4.17 to UBS's
Annual Report on Form 20-F for the fiscal year ended December 31, 2018)
 
 
 
 
20
4.9
. (Incorporated by reference to Exhibit 4.18 to UBS's
Annual Report on Form 20-F for the fiscal year ended December 31, 2018)
4.10
. (Incorporated by reference to Exhibit 4.19 to UBS's Annual Report on Form 20
 
-F for the fiscal year
ended December 31, 2018)
4.11
 
(Incorporated by reference to Exhibit 4.17 to UBS's Annual Report on Form 20-F for the fiscal
 
year
ended December 31, 2019)
 
4.12
(Incorporated by reference to Exhibit 4.18 to UBS's Annual Report on
 
Form 20-F for the fiscal
year ended December 31, 2019)
 
4.13
(Incorporated by reference to Exhibit 4.19 to UBS's Annual Report on Form 20-F for the fiscal
 
year
ended December 31, 2019)
 
4.14
. (Incorporated by reference to Exhibit 4.19 to UBS's Annual Report on Form 20
 
-F for the fiscal year
ended December 31, 2020)
4.15
. (Incorporated by reference to Exhibit 4.20 to UBS's Annual Report on Form 20-F for
 
the fiscal year
ended December 31, 2020)
4.16
. (Incorporated by reference to Exhibit 4.21 to UBS's Annual Report on Form 20-F for
 
the fiscal year
ended December 31, 2020)
4.17
. (Incorporated by reference to Exhibit 4.22 to UBS's Annual Report on Form 20
 
-F for the fiscal year
ended December 31, 2020)
4.18
 
4.19
 
4.20
 
4.21
 
4.22
(Incorporated by
reference to Form 6-K of UBS AG filed on June 17, 2015)
8
Significant Subsidiaries of UBS Group AG.
Please see Note 29 to each set of Financial Statements (
Interests in subsidiaries and other entities),
 
on pages 391-
395 and 523-527 of the Annual Report.
12
13
15.1
15.2
101
Interactive Data Files (sections of the Annual Report formatted in inline XBRL (Extensible
 
Business Reporting
Language)). Furnished electronically herewith.
 
 
 
 
 
 
 
 
 
21
SIGNATURES
 
 
The registrants hereby certify that they meet all
 
of the requirements for filing on Form 20-F and
 
that
 
they have duly caused the undersigned to sign this
 
annual report on their behalf.
 
 
UBS Group AG
 
 
_/s/ Ralph Hamers _______________
Name: Ralph Hamers
Title: Group Chief Executive Officer
 
 
_/s/ Kirt Gardner__________________
Name: Kirt Gardner
Title: Group Chief Financial Officer
 
 
_/s/ Christopher Castello ___________
Name: Christopher Castello
Title: Group Controller and Chief Accounting Officer
 
 
 
 
UBS AG
 
 
_/s/ Ralph Hamers ________________
Name: Ralph Hamers
Title: President of the Executive Board
 
 
_/s/ Kirt Gardner__________________
Name: Kirt Gardner
Title: Chief Financial Officer
 
 
_/s/ Christopher Castello____________
Name: Christopher Castello
Title: Controller and Chief Accounting Officer
 
 
 
Date: March 7, 2022
 
 
UBS_AR_2021p22i0.gif
 
 
 
UBS Group AG
 
and UBS AG
Annual Report 2021
 
 
UBS_AR_2021p23i1.jpgUBS_AR_2021p23i0.jpg
 
 
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 UBS Group AG, which consists of disclosures
for UBS
 
Group AG and
 
its consolidated subsidiaries.
 
We also
provide
 
a
 
combined
 
annual
 
report
 
for
 
UBS
 
Group
 
AG
 
and
UBS AG
 
consolidated,
 
which
 
additionally
 
includes
 
the
consolidated
 
financial
statements
 
of
 
UBS
 
AG
,
 
as
well
 
as
supplemental disclosures required under SEC regulations, and
is the basis for our SEC Form 20-F filing.
 
Annual Reports
The
 
202
1
 
Annual
 
Reports
 
(the
 
UBS
 
Group
 
AG
 
Annual
Report 2021 and
 
the combined
 
UBS Group
 
AG and UBS
 
AG
Annual
 
Report
 
2021)
 
include
 
the
 
consolidated
 
financial
statements of
 
UBS Group
 
AG and
 
UBS AG, respectively,
 
and
provide comprehensive information about our firm,
 
including
our strategy, businesses, financial
 
and operating
 
performance,
and
 
other key
 
information. The
 
reports
 
are
 
presented
 
in US
dollars.
 
The
 
UBS
 
Group
 
AG
 
Annual
 
Report
 
2021
 
is
 
partly
translated into German,
 
with the German
 
translation available
as
 
of
 
1
1
 
March
 
202
2
 
under
 
“Annual
 
reporting”
 
at
ubs.com/investors.
The
 
consolidated
 
financial
 
statements
 
of
 
UBS
 
Group
 
AG
and
 
UBS
 
AG
 
have
 
been
 
prepared
 
in
 
accordance
 
with
International
 
Financial
 
Reporting
 
Standards
 
(IFRS).
 
The
sections
 
within
 
“Risk,
 
capital,
 
liquidity
 
and
 
funding,
 
and
balance sheet“
 
include certain
 
audited financial
 
information,
which forms
 
part of
 
the consolidated
 
financial statements.
 
The
Annual Reports also include the
 
statutory financial statements
of UBS
 
Group AG,
 
which are
 
the basis
 
for our appropriation
of retained earnings and a potential distribution of dividends,
subject
 
to
 
shareholder
 
approval
 
at
 
the
 
Annual
 
General
Meeting.
Sustainability Report
The
S
ustainability
R
eport
,
 
which
 
will
 
be
 
available
 
from
11 March 2022, provides disclosures on environmental, social
and governance topics for UBS Group.
Standalone reports of significant group entities
We
 
publish separate
 
standalone reports
 
of significant
 
group
e
ntities
 
for
 
UBS
 
AG
 
and
 
UBS
 
Switzerland
 
AG.
 
Selected
financial and regulatory
 
key figures for
 
these entities, as
 
well
as for UBS Europe SE and UBS Americas Holding LLC, are also
included
 
in
 
our
 
annual
 
reports.
 
The
 
UBS
 
Europe
 
SE
 
2021
financial
 
statements
 
and
 
complementary
 
disclosures
 
will
 
be
published on our website in the first half of 2022.
Pillar 3 Report
The
 
Pillar
 
3
Report
provides
 
detailed
 
quantitative
 
and
qualitative
 
information
 
about
 
risk,
 
capital,
 
leverage
 
and
liquidity
 
for
 
UBS
 
Group
 
and
 
prudential
 
key
 
figures
 
and
regulatory
 
information
 
for
UBS
 
AG
 
standalone,
UBS Switzerland AG standalone, UBS Europe SE consolidated
and UBS Americas Holding LLC consolidated.
We
 
provide
 
our
 
combined
 
Annual
 
Report,
 
the
 
Pillar 3
 
Report,
 
standalone
 
reports
 
of
 
significant
 
group
entities and
 
the Sustainability
 
Report as
 
web disclosures
 
at
ubs.com/investors
. Alternatively,
 
we provide
the
 
QR code on
 
the right
 
for rapid
 
access to
 
the above-mentioned
 
reports and
 
further information
 
on
investor relations-related topics.
 
 
 
UBS_AR_2021p24i0.gif
 
 
 
UBS_AR_2021p25i0.gif
 
 
 
UBS_AR_2021p26i0.gif
 
 
 
UBS_AR_2021p27i0.gif
 
 
 
 
 
 
 
 
 
 
 
 
 
Contents
2
7
8
10
12
14
1
Our strategy, business model and
environment
16
20
21
33
38
56
59
63
2
Financial and
 
operating performance
76
77
84
87
90
92
94
95
3
Risk, capital, liquidity and funding,
and balance sheet
98
150
 
 
4
Corporate governance
 
and compensation
190
228
5
Financial
 
statements
283
413
6
Significant regulated subsidiary and sub-
group information
548
7
Additional
regulatory information
553
565
Appendix
579
582
585
586
 
 
 
Annual Report 2021 | Letter to shareholders
2
Dear shareholders,
2021
 
was
 
the
 
second
 
year
 
shaped
 
by
 
the
 
pandemic,
 
which
challenged and affected every aspect of
 
society – from healthcare
to
 
economics,
 
to
 
politics,
 
to
 
human
 
interactions.
 
UBS’s
performance in
 
2021 speaks
 
to our
 
resilience, our
 
progress
 
and
our future path. In
 
2022 we intend to continue
 
making progress
on our
 
strategic goals,
 
and we
 
remain
 
dedicated to
 
our clients,
shareholders, employees and society.
 
The
 
current
 
geopolitical
 
situation
 
has
 
led
 
to
 
heightened
volatility across
 
global markets.
 
We are
 
shocked by
 
the violence
and tragedy caused by
 
Russia’s invasion of Ukraine.
 
Our hearts go
out to those affected and those who are suffering.
 
We
 
are
 
working
 
to
 
implement
 
sanctions
 
imposed
 
by
Switzerland, the US,
 
the EU, the
 
UK and others
 
– all of
 
which have
announced unprecedented levels of
 
sanctions against Russia and
certain Russian entities
 
and nationals. These
 
events, together with
counter-sanctions and other measures
 
taken by Russia,
 
will have
ongoing effects on the markets and the global economy.
2021 backdrop and our financial performance
Despite
 
the
 
continuing
 
pandemic,
 
market
 
conditions
 
were
constructive in 2021, with positive
 
investor sentiment throughout
the year. Growth rebounded, with
 
the global economy
 
expanding
6.1% after
 
contracting 3.1%
 
in 2020.
 
Global equities
 
delivered
total returns of 18.5%.
 
Economic, social and geopolitical
 
tensions
increased
 
during
the
 
year,
 
raising
 
questions
 
around
 
the
sustainability and shape of
 
the recovery.
 
The pandemic adversely
impacted certain economic sectors, while supply chains and labor
markets remained
 
challenging. A
 
potential resurgence
 
in global
inflation and tight labor
 
markets in many countries could
 
lead to
more
 
restrictive
 
monetary
 
policy,
 
and
 
this
 
has
 
become
 
an
additional concern for the market.
Within
 
this
 
environment,
 
we
 
delivered
 
a
 
strong
 
financial
performance in 2021.
 
We had the
 
highest pre-tax and net
 
profit
in 15 years, a 17.5% return
 
on CET1 capital and a 14.1% return
on tangible equity.
 
We maintained our
 
cost / income ratio
 
under
74%,
 
which is
 
in line
 
with 2020
 
and more
 
than six
 
percentage
points better than the two years before that. For the second year
in
 
a
 
row,
 
we
 
exceeded
 
all
 
our
 
targets,
 
with
 
all
 
regions
 
and
businesses
 
contributing
 
to
 
our
 
performance.
 
We
 
deepened
 
our
relationships
 
with
 
clients,
 
resulting
 
in
 
high
 
levels
 
of
 
activity
 
and
strong
 
flows across
 
all
 
our
 
segments. This
 
business
 
momentum
led to our highest revenues in over a decade.
 
Our results
 
included two exceptional
 
items. The first
 
item is a
loss of USD 861 million
 
that we incurred in the
 
first half of 2021
on
 
the
 
default
 
of
 
a
 
US-based
 
client
 
of
 
our
 
prime
 
brokerage
business. We have conducted a thorough
 
review, we have put in
place
 
appropriate
 
measures
 
to
 
strengthen
 
our
 
relevant
 
risk
management processes, and we have reflected
 
the matter in our
annual
 
performance
 
assessment
 
and
 
compensation
 
processes.
The second item
 
occurred in the
 
fourth quarter of
 
2021, when we
took additional
 
provisions of
 
EUR 650 million,
 
bringing the
 
total
to
 
EUR 1.1
 
billion
 
for
 
the
 
French
 
cross-border
 
matter.
 
As
announced in December 2021, we
 
have filed an appeal
 
with the
French
 
Supreme
 
Court
 
regarding
 
the
 
decision
 
of
 
the
 
Court
 
of
Appeal.
 
This
 
enables
 
us
 
to
 
thoroughly
 
assess
 
the
 
verdict
 
of
 
the
Court
 
of
 
Appeal
 
and
 
to
 
determine
 
the
 
next
 
steps
 
in
 
the
 
best
interests of our stakeholders.
 
Our purpose and strategic direction
In
 
2021,
 
we
 
reconfirmed
 
and
 
continued
 
to
 
implement
 
our
strategy. Last April, we introduced our purpose “Reimagining the
power of investing.
 
Connecting people for
 
a better world,”
 
which
unites all of UBS behind
 
a common goal. It´s the
 
starting point for
every strategic
 
decision; it
 
will shape our
 
future, help
 
us capture
opportunities
 
and
 
allow
 
us
 
to
 
grow
 
from
 
our
 
already
 
strong
position.
 
Our vision
 
is to
 
convene THE
 
global ecosystem
 
for
 
investing:
where
 
thought
 
leadership
 
is
 
impactful,
 
people
 
and
 
ideas
 
are
connected,
 
and
 
opportunities
 
are
 
brought
 
to
 
life.
 
In
 
order
 
to
achieve
 
this
 
vision,
 
we
 
identified
 
five
 
strategic
 
imperatives:
(i) supporting,
 
growing
 
and
 
aligning
 
our
 
network
 
of
 
clients,
connections and contributors;
 
(ii) increasing our focus
 
by playing
where
 
we
 
are
 
positioned
 
to
 
win;
 
(iii) enabling
 
technology
 
and
making
 
it
 
our
 
differentiator;
 
(iv) becoming
 
simpler
 
and
 
more
efficient
 
so
 
it
 
is
 
easier
 
for
 
our
 
clients
 
to
 
bank
 
with
 
us;
 
and
(v) mobilizing employees behind
 
our vision and
 
acting as one
 
firm.
Supporting clients, society and employees
We retained our
 
clients’ trust as they continued
 
to turn to us for
our content, advice and
 
solutions. This resulted in
 
USD 107 billion
in
 
net
 
new
 
fee-generating
 
assets
 
in
 
wealth
 
management
 
and
USD 48 billion of net new money in Asset Management. We also
helped clients finance
 
businesses, homes
 
and other
 
liquidity needs
by
 
extending
 
USD 28
 
billion
 
of
 
net
 
new
 
loans
 
to
 
clients
 
across
wealth
 
management
 
and
 
personal
 
banking.
 
We
 
now
 
manage
over
 
USD 4.6
 
trillion in
 
assets on
 
behalf of
 
our
 
clients.
 
And we
increased
 
our
 
philanthropic
 
activities,
 
both
 
with
 
and
 
for
 
clients
and as a firm.
 
At UBS,
 
we are
 
committed to
 
supporting the
 
communities in
which we work, to understand
 
the issues they face,
 
and develop
long-term
 
partnerships
 
to
 
catalyze
 
positive
 
change
 
in
 
people’s
lives.
 
We
 
focus
 
our
 
efforts
 
on
 
social
 
inequalities
 
by
 
supporting
education
 
and
 
skills
 
development
 
as
 
areas
 
where
 
we
 
can
 
drive
sustainable
 
change.
 
We
 
also
 
enable
 
our
 
employees
 
to
 
support
their
 
communities
 
through
 
volunteering
 
by
 
partnering
 
with
organizations
 
such
 
as
 
Powercoders
 
in
 
Switzerland,
 
which
 
trains
refugees in
 
computer science
 
and information
 
technology skills.
The pandemic meant we continued to provide COVID-19
 
relief to
the
 
most
 
vulnerable
 
in
 
2021,
 
including
 
recovery
 
and
 
rebuilding
efforts through our
 
community partners. Currently,
 
to help victims
of
 
the
 
war
 
in
 
Ukraine,
 
UBS
 
Optimus
 
Foundation
 
and
 
our
Community
 
Impact
 
teams
 
are
 
providing
 
emergency
 
relief
 
to
refugees
 
through
 
the
 
International
 
Rescue
 
Committee
 
and
 
are
matching the
 
first USD 5
 
million of
 
donations from
 
employees and
clients, creating a combined impact of USD 10 million.
 
 
UBS_AR_2021p31i1.jpgUBS_AR_2021p31i0.jpg
 
3
 
Axel A. Weber
Chairman of the Board of Directors
Ralph A.J.G. Hamers
Group Chief Executive Officer
 
 
 
Due to the ongoing pressure placed on
 
employees by closures,
restrictions
 
and lockdowns,
 
we implemented
 
new
 
ways to
 
help
employees
 
through
 
these
 
difficult
 
times.
 
We
 
offered
 
tools
 
and
resources to support employees’ physical, mental and social well-
being, and provided
 
extra flexibility for
 
child and elderly
 
care. As
a result
 
of our
 
experience during
 
the pandemic,
 
we are
 
developing
more
 
permanent
 
ways
 
of
 
flexible
 
working
 
for
 
our
 
employees,
while supporting
 
a safe
 
return to
 
our offices
 
as economies
 
reopen.
 
We believe a hybrid
 
approach will support
 
a better work /
 
life
balance and make
 
us a more
 
attractive employer, appealing
 
to a
more
 
diverse
 
pool
 
of
 
applicants,
 
such
 
as
 
working
 
parents,
caregivers and
 
those in
 
continuing education.
 
Moreover, flexible
working, by the nature of its emphasis
 
on technology and virtual
collaboration, encourages an innovative
 
mindset across our firm
 
–
which is a
 
big part of our
 
strategy. In addition, we
 
are reshaping
our future real estate footprint, reducing the number of buildings
and square meters
 
we occupy,
 
while also investing
 
in our
 
locations
to
 
reimagine
 
our
 
workplace
 
and
 
support
 
our
 
sustainability
ambitions.
Capturing growth opportunities
After introducing
 
our purpose
 
and strategy
 
on a
 
page, we
 
took
steps to ensure UBS is
 
well positioned to capture
 
the areas we see
as having the greatest
 
growth potential. For example,
 
regionally,
we expect most wealth will be created in the US and Asia Pacific.
As a result,
 
we have identified
 
these as key
 
growth markets and
we have prioritized investments
 
in those regions. EMEA
 
continues
to be a core
 
region for us and
 
important to our global
 
footprint,
and a region
 
where we can
 
improve profitability and
 
drive focused
growth.
 
And
 
in
 
Switzerland,
 
we
 
are
 
further
 
building
 
on
 
our
position as a digital leader.
 
Affluent
 
clients
 
and
 
entrepreneurs
 
are
 
expected
 
to
 
generate
high
 
revenue
 
growth.
 
So
 
we
 
are
 
also
 
expanding
 
into
 
new
segments
 
to
 
reach
 
a
 
much
 
broader
 
set
 
of
 
clients.
 
Our
 
plans
 
to
acquire
 
Wealthfront,
 
announced
 
in
 
January
 
2022,
 
will
 
help
 
us
deliver
 
a
 
digital
 
wealth
 
management
 
offering
 
to
 
Millennial
 
and
Gen Z affluent investors in the
 
US, allow us to expand our
 
wallet
share, lower the cost to serve and drive long-term growth.
 
Technology plays a large part
 
in how we grow and
 
deliver the
personalized, relevant, on-time and
 
seamless services that clients
expect.
 
That
 
is
 
why
 
we
 
are
 
further
 
investing
 
in
 
digitalization,
including artificial intelligence, data and
 
analytics – areas we have
already been building up for years. We will digitalize what can be
made digital
 
and become
 
more agile
 
to deliver
 
faster. While
 
not
increasing our total expenditure on technology, we are increasing
the
 
amount
 
we
 
spend
 
on
 
our
 
strategic
 
priorities.
 
Our aim
 
is to
deliver around
 
USD 1
 
billion in-year
 
gross cost
 
saves by
 
2023 in
order to fund our growth initiatives.
Leading in sustainability – our path to Net Zero
Over the
 
years, UBS has
 
established itself as
 
a recognized
 
leader
for sustainability in the financial
 
sector. Recent ratings such as the
Dow Jones Sustainability
 
Index and CDP
 
have reconfirmed this.
 
To
maximize impact
 
and direct
 
capital to
 
where
 
it is
 
needed most,
we focus on three areas: (i) Planet, where
 
we are making climate
a
 
clear
 
priority
 
as
 
we
 
shift
 
toward
 
a
 
lower
 
carbon
 
future;
 
(ii)
People,
 
where
 
we
 
are
 
taking
 
action,
 
both
 
within
 
our
 
own
workplace
 
and
 
within
 
wider
 
society,
 
to
 
promote
 
a
 
diverse,
equitable
 
and
 
inclusive
 
society; and
 
(iii)
 
Partnerships,
 
where
 
we
are
 
uniting
 
with
 
others
 
and
 
bringing
 
people
 
together
 
around
common
 
goals
 
to
 
achieve
 
greater
 
impact.
 
To
 
meet
 
our
 
impact
goals,
 
we started
 
assigning all
 
Group
 
Executive Board
 
members
environmental, social
 
and governance (ESG)-related
 
objectives in
2021.
Sustainability
 
is not
 
just something
 
we focus
 
on because
 
we
think
 
it
 
is
 
the
 
right
 
thing
 
to
 
do.
 
We
 
also
 
have
 
a
 
duty:
 
to
 
help
private
 
clients
 
protect
 
and
 
grow
 
their
 
wealth,
 
to
 
help
 
firms
transition to sustainable ways
 
of doing business,
 
to ensure clients’
long
-
term
 
success
 
and
 
to
 
support
 
them
 
in
 
fulfilling
 
their
responsibility to
 
society. We
 
strongly believe
 
that this
 
is the
 
best
way to
 
remain profitable
 
and attractive
 
to clients,
 
investors and
talent in the long term. We are
 
seeing an ever-increasing demand
in
 
sustainable
 
investing
 
–
 
invested
 
assets
 
in
 
sustainability-focus
and
 
impact
 
strategies
 
increased
 
78%
 
in
 
2021
 
–
 
and
 
we
 
will
continue to meet this need by growing our offering.
 
 
UBS_AR_2021p32i0.gifUBS_AR_2021p32i1.jpg
Annual Report 2021 | Letter to shareholders
4
In
 
2021,
 
we
 
published
 
our
 
Net-Zero
 
and
 
Beyond
 
statement,
which sets out our commitment to transition our firm to net zero
and
 
help
 
our
 
clients
 
meet
 
their
 
transition
 
targets
 
by
 
2050.
 
We
have
 
developed
 
and
 
are
 
transparently
 
disclosing
 
a
 
climate
 
road
map
 
with
 
intermediate
 
targets
 
for
 
2025,
 
2030
 
and
 
2035.
 
The
“Say-on-Climate” advisory vote at the upcoming Annual General
Meeting (the AGM) is a key milestone on
 
our journey to net zero,
reflecting
 
our commitment
 
to our
 
shareholders having
 
their say
on our firm’s climate
 
roadmap. Furthermore, we strongly
 
believe
in cross-company and cross-industry collaboration when it comes
to achieving net
 
zero. As
 
such, we are
 
a founding member
 
of both
the Net Zero Asset
 
Managers Initiative and the Net-Zero
 
Banking
Alliance.
 
Updated targets and ambitions to create value across
stakeholders
We
 
are
 
aiming
 
to
 
create
 
sustainable
 
value
 
through
 
the
 
cycle.
Reflecting our improved operating performance over the last two
years,
 
we
 
updated
 
our
 
financial
 
targets
 
and
 
kept
 
our
 
capital
guidance
 
unchanged,
 
including
 
deploying
 
up
 
to
 
one-third
 
of
Group
 
risk-weighted
 
assets
 
(RWA)
 
and
 
leverage
 
ratio
denominator
 
(LRD)
 
in
 
the
 
Investment
 
Bank.
 
In
 
addition,
 
we
outlined selected commercial and
 
ESG aspirations to support the
achievement of these targets.
 
First, for society
 
at large, we
 
are committed to
 
building a better
world
 
through
 
our
 
sustainability
 
focus
 
and
 
the
 
numerous
commitments you can find in our 2021 Annual and Sustainability
Reports. For example,
 
we aim to reach
 
net-zero emissions across
our business
 
by 2050
 
and net-zero
 
emissions resulting
 
from our
own operations
 
by 2025.
 
We will also
 
help our
 
clients do
 
good,
as we aspire to raise USD 1 billion in philanthropy assets to reach
25 million
 
beneficiaries and
 
we are
 
targeting USD 400
 
billion in
sustainability-focus and impact investments by 2025.
 
Second,
 
for
 
our
 
clients,
 
we
 
will
 
assess
 
how
 
we
 
are
 
doing
through
 
our
 
commercial
 
aspirations.
 
We
 
are
 
optimistic
 
that
 
we
can maintain growth rates from net new fee-generating assets of
5% and
 
above over
 
the cycle.
 
As a
 
result,
 
we aspire
 
to surpass
USD 5 trillion, and then USD 6 trillion, in
 
invested assets as clients
entrust us with managing their investments.
 
And third, we are targeting a 15–18% return on CET1 capital.
This
 
is
 
significantly
 
higher
 
than
 
our
 
previous
 
target
 
range
 
and
reflects
 
the
 
progress
 
we have
 
made
 
over
 
the last
 
two
 
years. To
consistently achieve this, we are targeting a cost /
 
income ratio of
70–73%. We
 
have ambitious
 
growth plans
 
across our
 
franchise
and
 
are
 
retaining
 
our
 
target
 
to
 
grow
 
profits
 
in
 
global
 
wealth
management by 10–15% over the cycle.
 
Our capital returns today and in the future
Reflecting
 
the
 
step-up
 
in
 
profitability,
 
we
 
are
 
proposing
 
to
increase the dividend
 
to USD 0.50 per
 
share for the
 
2021 financial
year,
 
and
 
to
 
have
 
a
 
progressive
 
cash
 
dividend
 
thereafter.
Additional excess capital will be used to buy back our shares, and
we
 
repurchased
 
USD 2.6
 
billion
 
of
 
shares
 
in
 
2021.
 
Given
 
our
strong capital position, we are looking to
 
repurchase up to USD 5
billion in 2022.
Proposed elections to the Board of Directors
Axel
 
A.
 
Weber
 
is
 
reaching
 
the
 
ten-year
 
term
 
limit
 
set
 
in
 
our
Organization Regulations
 
as the
 
Chairman of the
 
Board and
 
will
therefore
 
be
 
stepping
 
down
 
in
 
April
 
2022.
 
On
 
20 November
2021, the Board of Directors of UBS Group AG announced that
 
it
will
 
nominate
 
Colm
 
Kelleher
 
as
 
the
 
new
 
Chairman
 
and
 
Lukas
Gähwiler as
 
the new Vice
 
Chairman for election
 
to the
 
Board at
the AGM on 6 April 2022.
Virtual AGM in 2022
To
 
protect the
 
health of
 
shareholders and
 
employees, in
 
light of
the COVID-19 pandemic and continued uncertainty, the Board of
Directors
 
has
 
decided
 
that
 
the
 
2022
 
AGM
 
will
 
be
 
held
 
as
 
a
webcast. As
 
such, it
 
will not
 
be possible
 
to physically
 
attend the
AGM.
 
Nevertheless,
 
we
 
look
 
forward
 
to
 
your
 
feedback
 
and
 
to
welcoming you to this year’s virtual AGM on 6 April.
 
Thank you for your ongoing support.
 
 
 
 
 
 
 
Yours sincerely,
 
 
 
 
 
Axel A. Weber
 
Ralph A.J.G. Hamers
 
Chairman of the
 
Group Chief Executive Officer
 
Board of Directors
 
 
 
5
 
 
 
 
 
 
 
6
Corporate information
UBS Group AG
 
is incorporated and domiciled in Switzerland
 
and operates
under Art. 620ff. of the Swiss Code of Obligations
 
as an Aktiengesellschaft, a
corporation limited by shares. Its registered office is at Bahnhofstrasse
 
45,
CH-8001 Zurich, Switzerland, telephone +41-44-234
 
11 11, and its corporate
identification number is CHE-395.345.924.
 
UBS Group AG was incorporated
on 10 June 2014 and was established in 2014
 
as the holding company of the
UBS Group. UBS Group AG shares are listed on the SIX Swiss
 
Exchange and
on the New York Stock Exchange (ISIN: CH0244767585; CUSIP: H42097107).
UBS Group AG owns 100% of the outstanding shares
 
of UBS AG.
UBS 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. The addresses and telephone
 
numbers of the
two registered offices of UBS AG are: Bahnhofstrasse 45, CH-8001
 
Zurich,
Switzerland, telephone +41-44-234 11 11;
 
and Aeschenvorstadt 1, CH-4051
Basel, Switzerland, telephone +41-61-288
 
50 50. The corporate identification
number is CHE-101.329.561. UBS AG is
 
a bank. The company was formed on
29 June 1998, when Union Bank of Switzerland
 
(founded in 1862) and
Swiss Bank Corporation (founded in 1872)
 
merged to form UBS AG.
Contacts
Switchboards
For all general inquiries
ubs.com/contact
 
Zurich +41-44-234 1111
London +44-207-567 8000
New York +1-212-821 3000
Hong Kong SAR +852-2971 8888
Singapore +65-6495 8000
Investor Relations
UBS’s Investor Relations team manages
relationships with institutional investors,
research analysts and credit rating agencies.
ubs.com/investors
Zurich +41-44-234 4100
New York +1-212-882 5734
 
Media Relations
UBS’s Media Relations team manages
relationships with global media and
journalists.
ubs.com/media
Zurich +41-44-234 8500
mediarelations@ubs.com
London +44-20-7567 4714
 
ubs-media-relations@ubs.com
New York +1-212-882 5858
 
mediarelations@ubs.com
Hong Kong SAR +852-2971 8200
sh-mediarelations-ap@ubs.com
Office of the Group Company Secretary
The Group Company Secretary handles
inquiries directed to the Chairman or to other
members of the Board of Directors.
UBS Group AG, Office of the
 
Group Company Secretary
P.O.
 
Box, CH-8098 Zurich, Switzerland
sh-company-secretary@ubs.com
Zurich +41-44-235 6652
Shareholder Services
UBS’s Shareholder Services team, a unit
 
of the Group Company Secretary’s office,
manages relationships with shareholders
and the registration of UBS Group AG
registered shares.
UBS Group AG, Shareholder Services
P.O.
 
Box, CH-8098 Zurich, Switzerland
sh-shareholder-services@ubs.com
Zurich +41-44-235 6652
US Transfer Agent
For global registered share-related
 
inquiries in the US.
Computershare Trust Company NA
 
P.O.
 
Box 505000
 
Louisville, KY 40233-5000, USA
Shareholder online inquiries:
www-us.computershare.com/
investor/contact
Shareholder website:
computershare.com/investor
Calls from the US
 
+1-866-305-9566
Calls from outside the US
 
+1-781-575-2623
TDD for hearing impaired
+1-800-231-5469
TDD for foreign shareholders
+1-201-680-6610
Corporate calendar UBS Group AG
Publication of the Sustainability Report 202
1
:
 
Friday, 11 March 2022
 
Annual General Meeting 2022 (webcast):
 
Wednesday, 6 April 2022
 
Publication of the first quarter 2022 report:
 
Tuesday,
 
26 April 2022
 
Publication of the second quarter 2022 report:
 
Tuesday,
 
26 July 2022
 
Publication of the third quarter 2022 report:
 
Tuesday,
 
25 October 2022
 
Corporate calendar UBS AG
Publication of the
 
first q
uarter 202
2
 
report:
 
Friday
,
29
 
April
 
202
2
 
Publication of the second
quarter 202
2
 
report:
 
Friday, 2
9
 
July 202
2
 
 
Additional publication dates of quarterly and
 
annual reports
 
will be made available as part of the corporate
 
calendar of UBS AG at
ubs.com/investors.
Imprint
Publisher: UBS Group AG, Zurich, Switzerland | ubs.com
Language: English
© UBS 2022. The key symbol and UBS are among
 
the registered and
unregistered trademarks of UBS. All rights reserved.
 
 
UBS_AR_2021p35i0.gif
 
7
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual Report 2021
8
Our key figures
 
As of or for the year ended
USD million, except where indicated
31.12.21
31.12.20
31.12.19
1
Group results
Operating income
 
35,542
 
32,390
 
28,889
Operating expenses
 
26,058
 
24,235
 
23,312
Operating profit / (loss) before tax
 
9,484
 
8,155
 
5,577
Net profit / (loss) attributable to shareholders
 
7,457
 
6,557
 
4,304
Diluted earnings per share (USD)
2
 
2.06
 
1.77
 
1.14
Profitability and growth
3
Return on equity (%)
 
12.6
 
11.3
 
7.9
Return on tangible equity (%)
 
14.1
 
12.8
 
9.0
Return on common equity tier 1 capital (%)
 
17.5
 
17.4
 
12.4
Return on risk-weighted assets, gross (%)
 
12.0
 
11.7
 
11.0
Return on leverage ratio denominator, gross (%)
4
 
3.4
 
3.4
 
3.2
Cost / income ratio (%)
 
73.6
 
73.3
 
80.5
Effective tax rate (%)
 
21.1
 
19.4
 
22.7
Net profit growth (%)
 
13.7
 
52.3
 
(4.7)
Resources
3
Total assets
 
1,117,182
 
1,125,765
 
972,194
Equity attributable to shareholders
 
60,662
 
59,445
 
54,501
Common equity tier 1 capital
5
 
45,281
 
39,890
 
35,535
Risk-weighted assets
5
 
302,209
 
289,101
 
259,208
Common equity tier 1 capital ratio (%)
5
 
15.0
 
13.8
 
13.7
Going concern capital ratio (%)
5
 
20.0
 
19.4
 
20.0
Total loss-absorbing capacity ratio (%)
5
 
34.7
 
35.2
 
34.6
Leverage ratio denominator
4,5
 
1,068,862
 
1,037,150
 
911,322
Common equity tier 1 leverage ratio (%)
4,5
 
4.24
 
3.85
 
3.90
Going concern leverage ratio (%)
4,5
 
5.7
 
5.4
 
5.7
Total loss-absorbing capacity leverage ratio (%)
5
 
9.8
 
9.8
 
9.8
Liquidity coverage ratio (%)
6
 
155
 
152
 
134
Net stable funding ratio (%)
6
 
119
 
119
111
Other
Invested assets (USD billion)
7
 
4,596
 
4,187
 
3,607
Personnel (full-time equivalents)
 
71,385
 
71,551
 
68,601
Market capitalization
8
 
61,230
 
50,013
 
45,661
Total book value per share (USD)
8
 
17.84
 
16.74
 
15.07
Total book value per share (CHF)
8
 
16.27
 
14.82
 
14.59
Tangible book value per share (USD)
8
 
15.97
 
14.91
 
13.28
Tangible book value per share (CHF)
8
 
14.56
 
13.21
 
12.86
1 Refer to the “Accounting
 
and financial reporting” and “Consolidated financial statements”
 
sections of this report for information about
 
the restatement of comparative information, where applicable.
 
2 Refer to
“Share information and earnings per share” in
 
the “Consolidated financial statements” section of
 
this report for more information.
 
3 Refer to the “Targets,
 
aspirations and capital guidance” section of
 
this report
for more information about our performance targets.
 
4 Leverage ratio denominators and leverage
 
ratios for year 2020 do not
 
reflect the effects of the temporary
 
exemption that applied from 25 March
 
2020 until
1 January 2021
 
and was
 
granted by
 
FINMA in
 
connection with
 
COVID-19. Refer
 
to the
 
“Regulatory and
 
legal developments”
 
section of
 
our Annual
 
Report 2020
 
for more
 
information.
 
5 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.
 
6 The final Swiss
 
net stable funding ratio
(NSFR) regulation became effective on 1 July 2021. Prior to this date,
 
the NSFR was based on estimated pro forma reporting. Refer
 
to the “Capital, liquidity and funding, and balance sheet” section of this report
 
for
more information.
 
7 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.
 
8 Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information.
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
our Group
 
Functions. We
 
use APMs
 
to provide
 
a more
 
complete picture
 
of our
 
operating performance
 
and to
 
reflect
management’s view of the fundamental drivers of our business
 
results. A definition of each APM, the method used to calculate it
 
and
the
 
information
 
content are
 
presented
 
under
 
“Alternative performance
 
measures”
 
in
 
the appendix
 
to
 
this
 
report.
 
Our APMs
 
may
qualify as non-GAAP measures as defined by US Securities and Exchange Commission (SEC) regulations.
1
2
 
4
Terms used in this report, unless the context requires otherwise
“UBS,” “UBS Group,” “UBS Group AG consolidated,” “Group,”
“the Group,” “we,” “us” and “our”
UBS Group AG and its consolidated subsidiaries
“UBS AG consolidated”
 
UBS AG and its consolidated subsidiaries
“UBS Group AG” and “UBS Group AG standalone”
 
UBS Group AG on a standalone basis
“UBS AG” and “UBS AG standalone”
 
UBS AG on a standalone basis
“UBS Switzerland AG” and “UBS Switzerland AG standalone”
UBS Switzerland AG on a standalone basis
“UBS Europe SE consolidated”
 
UBS Europe SE and its consolidated subsidiaries
“UBS Americas Holding LLC” and
 
“UBS Americas Holding LLC consolidated”
UBS Americas Holding LLC and its consolidated subsidiaries
In this report, unless the context requires otherwise, references to any gender shall apply to all genders.
UBS_AR_2021p38i0.jpg
 
10
Our Board of Directors
 
 
The
 
Board
 
of
 
Directors
 
(the
 
BoD)
 
of
 
UBS
 
Group
 
AG, under
 
the
leadership
 
of the
 
Chairman,
 
consists
 
of between
 
6 and
 
12 members
as per our Articles
 
of Association.
 
The BoD decides
 
on the strategy
of the Group
 
upon recommendation
 
by the Group
 
Chief Executive
Officer (the
 
Group CEO)
 
and is responsible
 
for the overall
 
direction,
supervision
 
and control of the
 
Group and its management,
 
as well
as
 
for
 
supervising
 
compliance
 
with
 
applicable
 
laws,
 
rules
 
and
regulations. The BoD exercises oversight over UBS Group AG and
its
 
subsidiaries and
 
is
 
responsible for
 
establishing a
 
clear
 
Group
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,
 
approves
 
all financial
 
statements
 
for
issue
,
 
and
 
appoints
 
and
 
removes
 
all
 
Group
 
Executive
 
Board
(GEB) members.
UBS_AR_2021p39i1.jpgUBS_AR_2021p39i0.jpg
 
11
 
1
Axel A. Weber
 
Chairman of the Board of Directors / Chairperson
 
of the
Corporate Culture and Responsibility Committee
 
/
Chairperson of the Governance and Nominating
 
Committee
2
Fred Hu
 
Member of the Governance and Nominating
 
Committee /
 
member of the Risk Committee
3
Claudia Böckstiegel
 
Member of the Board of Directors
4
Patrick Firmenich
 
Member of the Audit Committee / member of
 
the
 
Corporate Culture and Responsibility Committee
5
Reto Francioni
 
Member of the Compensation Committee
 
/
 
member of the Risk Committee
6
Jeremy Anderson
 
Vice Chairman and Senior Independent Director
 
/
 
Chairperson of the Audit Committee /
 
member of the Governance and Nominating
 
Committee
7
Julie G. Richardson
 
Chairperson of the Compensation Committee
 
/
member of the Governance and Nominating
 
Committee /
member of the Risk Committee
8
Nathalie Rachou
 
Member of the Risk Committee
9
William C. Dudley
 
Member of the Corporate Culture and
Responsibility Committee / member of the Governance
 
and
Nominating Committee / member of the Risk
 
Committee
10
Jeanette Wong
 
Member of the Audit Committee / member of
 
the
Compensation Committee / member of the Corporate
 
Culture
and Responsibility Committee
11
Mark Hughes
 
Chairperson of the Risk Committee /
 
member of the Corporate Culture and Responsibility
 
Committee
12
Dieter Wemmer
 
Member of the Audit Committee /
 
member of the Compensation Committee /
 
member of the Governance and Nominating
 
Committee
 
UBS_AR_2021p40i0.jpgUBS_AR_2021p40i1.jpg
 
12
Our Group Executive Board
1
Ralph A.J.G. Hamers
 
Group Chief Executive Officer
2
Mike Dargan
 
Group Chief Digital and Information Officer
3
Tom Naratil
 
Co-President Global Wealth Management and
 
President UBS Americas
4
Christian Bluhm
 
Group Chief Risk Officer
5
Sabine Keller-Busse
 
President Personal & Corporate Banking
 
and
 
President UBS Switzerland
6
Edmund Koh
 
President UBS Asia Pacific
7
Markus Ronner
 
Group Chief Compliance and Governance
 
Officer
8
Suni Harford
 
President Asset Management
9
Barbara Levi (since 1 November 2021)
Group General Counsel
10
Robert Karofsky
 
President Investment Bank
11
Iqbal Khan
Co-President Global Wealth Management and
 
President UBS Europe, Middle East and Africa
12
Kirt Gardner
Group Chief Financial Officer
13
Markus U. Diethelm (until 31 October
 
2021)
Group General Counsel
 
 
UBS_AR_2021p41i0.jpg
 
13
 
 
 
UBS
 
Group
 
AG operates
 
under a
 
strict dual
 
board
 
structure,
 
as
mandated by Swiss
 
banking law, and therefore the
 
BoD delegates
the management
 
of the
 
business to
 
the GEB. Under
 
the leadership
of the Group CEO,
 
the GEB was comprised of 12
 
members as of
31 December 2021 and has executive management responsibility
for the steering
 
of the Group
 
and its business. It
 
assumes overall
responsibility
 
for
 
developing
 
the
 
strategies
 
of
 
the
 
Group,
 
the
business divisions and
 
Group Functions, and implements
 
the BoD-
approved strategies.
›
 
Refer to “Board of Directors” and “Group Executive
 
Board”
 
in the “Corporate governance” section
 
of this report or
 
to
ubs.com/bod
 
and
ubs.com/geb
 
for the full biographies of
 
our BoD and GEB members
 
UBS_AR_2021p42i0.gif
 
14
Our evolution
Since
 
our
 
origins
 
in
 
the
 
mid
-
19th
 
century,
many
 
financial
institutions
 
have
 
become
 
part
 
of
 
the
 
history
 
of
 
our
 
firm
 
and
helped shape our development. 1998 was a major turning point:
two of the
 
three largest Swiss
 
banks, Union Bank
 
of Switzerland
and
 
Swiss
 
Bank
 
Corporation
 
(SBC),
 
merged
 
to
 
form
 
UBS.
 
Both
banks
 
were
 
well
 
established
 
and
 
successful
 
in
 
their
 
own
 
right.
Union Bank of Switzerland had grown organically to become
 
the
largest Swiss
 
bank. In
 
contrast, SBC
 
had grown
 
mainly through
strategic partnerships and acquisitions, including S.G. Warburg in
1995.
In 2000, we acquired PaineWebber,
 
a US brokerage and asset
management firm with roots going back to 1879, establishing us
as a significant player in the
 
US. Over the past 50 years, we have
also built
 
a strong
 
presence in
 
the Asia Pacific
 
region, where
 
we
are the
 
largest private
 
bank
1
, with
 
access to
 
asset management
and investment banking capabilities.
After incurring significant losses
 
in the 2008 financial
 
crisis, we
started
 
a
 
strategic
 
transformation
 
in
 
2011
 
toward
 
a
 
business
model
 
focused
 
on
 
our
 
traditional
 
businesses
:
 
wealth
management
,
 
and
 
personal
 
and
 
corporate
 
banking
 
in
Switzerland.
 
We
 
sought
 
to
 
revert
 
to
 
our
 
roots,
 
emphasizing a
client-centric model that requires less risk-taking and
 
capital, and
we successfully
 
completed that
 
transformation.
Today, we are
 
a leading
 
truly global
 
wealth manager,
2
 
with over
USD 3.3
 
trillion in
 
invested assets,
 
a leading
 
Swiss personal
 
and
corporate
 
bank,
 
a
large
-
scale
 
and
 
diversified
 
global
 
asset
manager,
 
and a focused investment bank.
In
 
2014,
 
we
 
began
 
adapting
 
our
 
legal
 
entity
 
structure
 
in
response
 
to
 
too-big-to-fail
 
requirements
 
and
 
other
 
regulatory
initiatives.
 
First,
 
we
 
established
 
UBS
 
Group
 
AG
 
as
 
the
 
ultimate
parent holding
 
company for
 
the Group.
 
In 2015,
 
we transferred
personal
 
and
 
corporate
 
banking
 
and
 
Swiss
-
booked
 
wealth
management businesses
 
from UBS
 
AG to
 
the newly
 
established
UBS
 
Switzerland
 
AG.
 
That
 
same
 
year
 
we
 
set
 
up
 
UBS
 
Business
Solutions
 
AG
 
as
 
the
 
Group’s
 
service
 
company.
 
In
 
2016,
 
UBS
Americas Holding LLC became
 
the intermediate holding company
for our US
 
subsidiaries and our
 
wealth management subsidiaries
across
 
Europe
 
were
 
merged
 
into
 
UBS
 
Europe
 
SE.
 
In
 
2019,
 
we
merged UBS Limited,
 
our UK-headquartered subsidiary,
 
into UBS
Europe SE, our Germany-headquartered European subsidiary.
The chart
 
below gives
 
an overview
 
of our
 
principal legal
 
entities
and our legal entity structure.
›
 
Refer to
ubs.com/history
 
for more information
›
 
Refer to the “Risk factors” and “Regulatory
 
and legal
developments”
 
sections
 
of this report for more information
 
1
 
Digital Wealth Management in Asia Pacific, KPMG 2021.
2
 
Statements of market position for Global Wealth Management are based on UBS’s
 
internal estimates and publicly available information about competitors’ invested assets.
 
 
The legal structure of the UBS Group
 
 
 
 
Our strategy,
business
 
model and
environment
Management report
 
1
 
 
Our strategy, business model and environment
 
| Our strategy
16
Our strategy
Our purpose
As the world’s leading wealth manager,
1
 
we have an opportunity
to make a difference for
 
our clients,
 
our employees,
 
and society
 
at
large.
It
 
all
 
starts
 
with
 
our
 
purpose:
Reimagining
 
the
 
power
 
of
investing.
 
Connecting
 
people
 
for
 
a
 
better
 
world.
 
Our
purpose unites
 
us behind
 
a common
 
goal, provides
 
direction on
the way forward and helps us build on our strengths.
We
 
will
 
reimagine
 
the
 
power
 
of
 
investing
 
by
 
developing
solutions that change how people look at finance and investing.
The power
 
of investing
 
can support
 
achieving one’s
 
personal
aspirations,
 
whether
 
through
 
buying
 
a
 
home,
 
growing
 
a
company, supporting future financial goals or having an impact.
We
 
will
 
connect
 
people,
 
both
 
internally
 
and
 
externally,
 
to
convene
 
an
 
ecosystem
 
where
 
ideas
 
and
 
opportunities
 
come
together to be successful and to make a difference.
We will
 
help build a
 
better world by
 
thinking sustainably
 
and
creating opportunities that
 
help reduce, rather
 
than contribute to,
inequalities.
 
Sustainability is at the core of our purpose
We know finance has a powerful influence on the
 
world. At UBS,
we are reimagining the power of
 
people and investments, to
 
help
create
 
a
 
better
 
world
 
for
 
everyone:
 
a
 
fairer
 
society,
 
a
 
more
prosperous
 
economy
 
and
 
a
 
healthier
 
environment.
 
We
 
are
partnering
 
with
 
our
 
clients
 
to
 
help
 
them
 
mobilize
 
their
 
capital
toward
 
a
 
more
 
sustainable
 
world.
 
It
 
is
 
why
 
we
 
have
 
put
sustainability
 
at
 
the
 
heart
 
of
 
our
 
own
 
purpose.
 
To
 
help
 
us
maximize our
 
impact and
 
direct capital
 
to where
 
it is
 
needed most,
we
 
are
 
focusing
 
on
 
three
 
key
 
areas
 
to
 
drive
 
the
 
sustainability
transition: planet, people, partnerships.
Planet:
 
We
 
are
 
making
 
climate
 
a
 
clear
 
priority
 
as
 
we
 
shift
toward
 
a
 
lower-carbon future.
 
We
 
will
 
provide
 
transparency on
our milestones
 
along the
 
way to
 
make sure
 
our progress
 
can be
tracked. We are
 
not only focused
 
on our own
 
journey; we are
 
also
supporting our clients in their own transitions.
People:
 
Through our
 
interactions, we
 
are working
 
to address
wealth
 
inequality,
 
sharpening
 
the
 
focus
 
of
 
our
 
client
 
and
corporate philanthropy, and
 
our employee-led community
 
affairs
activities centered on health and education.
Partnerships:
 
By
 
working
 
in
 
partnership
 
with
 
other
 
thought
leaders and standard setters,
 
our goal is to
 
make an impact on a
truly global scale. To create change, we realize that
 
all of us have
to
 
unite
 
around
 
common
 
goals.
 
That
 
is
 
why
 
we
 
engage
 
with
regulators,
 
policymakers
 
and
 
others
 
to
 
create
 
standards
 
and
support research and development across the financial sector.
Our promise to our clients
Helping
 
clients to
 
achieve
 
their financial
 
goals is
 
the essence
 
of
what we
 
do. We
 
aim to
 
differentiate our
 
service by
 
delivering a
client experience that is:
–
 
Personalized:
 
Our products
 
and services
 
are as
 
personal as
 
our
clients’ needs.
–
 
Relevant:
 
What
 
we
 
deliver
 
to
 
our
 
clients
 
is
 
relevant
 
and
matters to them.
–
 
On-time:
 
Clients
 
set
 
the
 
pace
 
and
 
can
 
act
 
on
 
opportunities
anytime and anywhere.
–
 
Seamless:
 
Interacting
with
 
us
 
is
 
simple,
 
seamless,
 
and
intuitive.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1
Based on Euromoney’s Award for Excellence, published on 10 September 2021:
euromoney.com/article/28teruws4k57c6h8c83k3/awards/awards
 
-for-excellence/worlds-best-bank-for-wealth-management-2021-ubs
.
 
 
UBS_AR_2021p45i0.gif
 
17
Convening THE global ecosystem for investing
We are at our
 
best when our clients are able
 
to access all of UBS
through a single relationship, to
 
get a differentiated, personalized
experience, and
 
when they
 
are connected
 
to other
 
areas of
 
the
firm, to providers, and to other clients with similar goals.
With
 
our
 
global
 
footprint
 
and
 
USD 4.6
 
trillion
 
in
 
invested
assets, combined with
 
our thought
 
leadership, we not
 
only attract
clients, but are also interesting to external contributors.
We
 
are
 
uniquely
 
positioned
 
to
 
be
 
the
 
orchestrator
 
of
 
this
ecosystem. We
 
are a gateway
 
to a large
 
and diverse
 
client base,
we
 
have
 
strong
 
relationships
 
with
 
contributors
 
and
 
we
 
are
 
a
thought leader in
 
the industry.
 
This positions us
 
to curate
 
offerings
and
 
opportunities
 
in
 
the
 
ecosystem,
 
while
 
leveraging
 
our
networks, data,
 
and analytics,
 
to provide
 
ultimate matchmaking
between clients and contributors.
That is why our
 
vision is to convene
 
THE global ecosystem for
investing
 
–
 
where
 
thought
 
leadership
 
is
 
impactful,
 
people
 
and
ideas are connected, and opportunities are brought to life.
 
 
 
 
 
UBS_AR_2021p46i2.gifUBS_AR_2021p46i1.gifUBS_AR_2021p46i0.gifUBS_AR_2021p46i4.gifUBS_AR_2021p46i3.gif
Our strategy, business model and environment
 
| Our strategy
18
Our strategic imperatives
Five strategic imperatives will help us deliver on
 
our strategy, bring our purpose to life, fulfill our client promise and achieve our
 
vision.
Behind these are a set of initiatives that will develop UBS along our strategic direction.
 
 
Clients, connections, contributors – delivering the power of investing
UBS is a firm that attracts clients, employees and thought leaders who have the power to enable change and
bring ideas to life, and who have capacity to do a lot of good. By bringing the best of UBS to our clients in a
seamless experience, growing our ecosystem and encouraging connections across it, we can deliver the full
power of investing to our clients. Client needs can be more broadly met. Our clients and the trust they place in us
will be put at the center of everything we do. Clients will benefit from having us as a trusted guide and thought
partner, having all our products and
 
services available at their fingertips and getting a differentiated and
personalized experience.
 
 
Focus – play where we are positioned to win
We intend to maintain our position as a leading global wealth manager and to build on this strength. We will
prioritize our efforts where we can add the most value and make a difference. To
 
achieve this we are working to
reduce duplication and reallocate resources as necessary,
 
all while growing our position as the world’s leading
wealth manager.
 
 
Technology
 
– make technology our differentiator
We will use our investments in technology to deliver a seamless client experience as part of our client promise.
We have been building our technology foundations over past years. We will move forward by focusing on how
clients experience UBS every day, becoming more
 
agile and focusing on outcomes through a modular approach.
With this mind, we intend to transform the way we use and consider technology, thinking about it as a
differentiator for us.
 
 
Simplification and efficiency – increase ease of doing business and enable our journey
We can make it easier for our clients to do business with us, as well as for our employees to make decisions and
take responsibility.
 
We intend to further streamline and standardize our functions, processes, entities and general
ways of doing business to increase efficiency and increase capacity to invest for future growth.
 
 
Culture – mobilize employees behind our future vision and act as one firm
We already have a strong, inclusive culture, grounded in our three keys to
 
success: our Pillars, Principles and
Behaviors. We will further strengthen our culture so we can do more and do it better.
 
Our purpose will unite us.
We will act as one firm, with common values and ambitions. In order to be successful on our journey,
 
we will
further develop our cultural priorities.
 
 
 
 
 
19
Leveling up technology
Introduction
The world is
 
faster,
 
more digital and
 
more data-driven
 
than ever
before,
 
with
 
clients
 
increasingly
 
demanding
 
service
s
 
that
are
 
digital first, anytime
 
and anywhere,
 
and underpinned by
 
first-class
technology.
 
In
 
addition,
 
the
 
financial
 
industry
 
ecosystem
 
is
constantly
 
evolving,
 
becoming
 
even
 
more
 
competitive,
 
open,
connected and location-independent every day.
This presents an
 
opportunity for
 
us to fully
 
embrace technology
and make it a
 
differentiator for our
 
firm. Doing so is
 
central to our
client promise
 
to deliver
 
a client
 
experience that
 
is personalized,
relevant, on-time and seamless.
To support
 
our ambitions,
 
we have
 
appointed a
 
Group Chief
Digital and Information
 
Officer to the
 
Group Executive Board. To
guide our digital transformation and
 
to enhance the way we
 
live
up to our
 
client promise, we
 
have also established
 
a Leveling up
strategy based
 
on five
 
key pillars:
 
Agile@UBS; quarterly
 
business
reviews
 
and
 
digital
 
roadmaps;
 
modern
 
tech;
 
automation;
 
and
engineering excellence (digital culture).
Agile@UBS
In order
 
to deliver
 
digital solutions
 
faster and
 
remain responsive
and adaptable, we
 
are introducing a unified
 
agile approach across
the whole firm.
 
To support
 
this, we
 
have developed
 
a robust
 
framework and
rollout plan, which
 
includes clearly
 
defined role
 
profiles, a
 
bespoke
playbook and a dedicated academy training suite.
Currently
,
 
we
 
have
 
10,000
 
employees
 
across
 
the
 
firm
 
transitioning
 
to
 
the
 
new
 
Agile@UBS
 
ways
 
of
 
working
 
and
 
we
expect this to increase
 
to more than 20,000 by
 
the end of 2022.
Relevant resources
 
and training
 
will also
 
be available
 
to all
 
staff,
enabling everyone to apply agile principles to their work, thereby
helping to deliver an even better client experience.
 
Quarterly business reviews and digital roadmaps
 
Quarterly business reviews (QBRs)
 
and digital roadmaps help
 
us to
manage our
 
technology investment portfolio
 
in a
 
more strategic
and flexible way. The QBRs serve as a
 
forum to agree on the
 
most
important objectives that
 
align with our
 
strategy and are
 
intended
to
 
ensure
 
we deliver
 
more
 
frequent
 
and
 
valuable outcomes
 
for
our clients. The digital roadmaps help us
 
to keep investment and
design
 
decisions
 
aligned
 
to
 
our
 
client
 
promise
 
and
 
our
 
longer-
term vision.
 
Modern tech
We
 
believe the
 
bank of
 
the future
 
will leverage
 
a lean,
 
modern
tech estate and
 
Cloud-based applications. Modern tech
 
makes a
shorter
 
time
 
to
 
market
 
possible,
 
removes
 
dependencies,
accelerates
 
digitalization
 
and
 
facilitates
 
connection
 
with
 
the
financial
 
industry
 
ecosystem
 
to
 
provide
 
better
 
and
 
faster
 
client
services.
 
In
 
line
 
with
 
our
 
modern
 
tech
 
ambitions,
 
we
 
migrated
 
over
1,000
 
applications
 
to
 
the Cloud
 
during
 
2021 and
 
established a
governance
 
framework
 
to
 
identify
 
and
 
decommission
 
legacy
technologies.
Automation
To
 
achieve
 
our
 
vision,
 
we
 
are
 
building
 
a
 
best-on-street
development and technology operations experience, powered by
modern development tools and automation techniques.
 
We have also introduced
 
a new Artificial Intelligence,
 
Data and
Analytics (ADA) center of expertise. ADA will bring together data
scientists and
 
analytics experts
 
from across
 
the firm
 
to ensure
 
a
consistent firm-wide approach to these topics. ADA will also help
empower
 
our
 
strategy
 
and
 
ecosystem,
 
using
 
AI
 
and
 
machine
learning for the benefit of our clients.
Engineering excellence (digital culture)
To succeed in making technology a differentiator for our firm, we
must attract and retain the best engineers, which is only
 
possible
by
 
creating
 
and
 
fostering
 
an
 
engineering
 
and
 
digital
 
culture
 
of
excellence.
 
Best-in-class tech
 
learning journeys
 
and curricula
 
for
our engineers, a respected
 
Certified and Distinguished Engineers
framework, an effective
 
hiring strategy, and targeted competency
assessments and development plans for our
 
technical staff will be
implemented to support this ambition.
 
›
 
Refer to the “Our businesses”
 
section of this report for more
information about how we deploy our technology
 
approach in
our businesses
 
 
 
 
 
 
UBS_AR_2021p48i0.jpgUBS_AR_2021p48i0.jpgUBS_AR_2021p48i0.jpg
Our strategy, business model and environment
 
| Targets, aspirations and
 
capital guidance
20
Targets, aspirations and capital guidance
We aim
 
to create sustainable
 
value through the
 
cycle. Reflecting
our improved
 
operating performance
 
over the
 
last two
 
years, in
February
 
2022
 
we
updated
 
our
 
financial
 
targets,
which
 
had
previously been set in January 2020.
In
 
addition,
 
we
 
have
 
outlined
 
selected
 
commercial
 
and
environmental,
 
social
 
and
 
governance
 
(ESG)
 
aspirations,
 
which
support these targets.
Our
 
capital
 
guidance
 
remains
 
unchanged.
 
We
 
intend
 
to
operate
 
with
 
a
 
CET1
 
capital
 
ratio
 
of
 
around
 
13%
 
and
 
a
 
CET1
leverage
 
ratio
 
of
 
greater
 
than
 
3.7%.
 
The
 
Investment
 
Bank
 
is
expected
 
to
 
represent
 
up
 
to
 
one-third
 
of
 
Group
 
risk-weighted
assets (RWA) and liquidity ratio denominator (LRD).
Performance against targets,
 
aspirations and capital
 
guidance
is taken into account when determining variable compensation.
The
 
table
 
below
 
shows
 
our
 
updated
 
financial
 
targets
 
and
aspirations,
 
based on reported results.
›
 
Refer to “Society” and “Our focus on sustainability
 
and climate”
in the “How we create value for our stakeholders”
 
section and
to the “Corporate governance” section
 
of this report for more
information about ESG
›
 
Refer to the “Compensation” section
 
of this report for more
information about variable compensation
›
 
Refer to “Alternative performance
 
measures” in the appendix to
this report for definitions of and further information
 
about our
performance measures
Targets
 
and aspirations
ESG
Selected aspirations
Commercial
Selected aspirations
Financial
Targets
 
 
 
Net-zero
own operations
(scopes
 
1 and 2) by 2025
USD 235 billion invested assets
aligned to net zero
by 2030, Asset Management
USD 1 billion philanthropy donations
to reach 25 million beneficiaries
raised by 2025
USD 400 billion invested assets
in sustainability-focus and impact
investing
1
 
by 2025
More than USD 6 trillion
invested assets across Global Wealth
Management, Asset Management and
Personal & Corporate Banking
More than 5% growth
2
in net new fee-generating assets
 
of Global Wealth Management
15–18%
return on CET1 capital
70–73%
cost / income ratio
10–15%
2
growth in Global Wealth Management
profit before tax
 
 
1
 
Sustainability-focus and impact investing: sustainability focus is strategies
 
where sustainability is an explicit part of the investment
 
guidelines, universe, selection, and
 
/ or investment process; impact investing is
strategies that have an explicit intention to generate measurable, verifiable,
 
positive sustainability outcomes. Impact generated is attributable to investor action and / or contribution.
 
2
 
Over the cycle.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21
Our businesses
Delivering one ecosystem
We
 
operate
 
through
 
four
 
business
 
divisions:
 
Global
 
Wealth
Management, Personal &
 
Corporate Banking, Asset
 
Management
and the Investment Bank. Our
 
global reach
 
and the
 
breadth of
 
our
expertise are
 
major assets
 
setting us
 
apart from our
 
competitors.
 
We
 
see
 
joint
 
efforts
 
as
 
key
 
to
 
our
 
growth,
 
both
 
within
 
and
between business divisions.
 
We aim
 
to unlock the
 
power of one
UBS through our
 
innovative solutions
 
and differentiated offerings.
We
 
are
 
at our
 
best when
 
we combine
 
our strengths
 
to provide
our clients more comprehensive and better solutions through, for
example,
 
a
 
Unified
 
Global
 
Markets
 
team
 
across
 
Global
 
Wealth
Management
 
and
 
the
 
Investment
 
Bank,
 
and
 
a
 
Global
 
Family
O
ffice
 
joint
 
venture
.
 
Initiatives
 
such
 
as
 
the
Group
 
Franchise
Awards
 
encourage employees to look for ways to connect across
teams and offer the whole firm to our clients.
 
How we deliver the whole firm to our clients – examples
 
Wealth management platforms
In all locations outside the Americas, we utilize
 
the Wealth Management Platform, which is
 
shared
between Global Wealth Management and Personal
 
& Corporate Banking in Switzerland.
 
This platform
can be navigated intuitively and supports
 
strong advice capabilities across all channels, helping our clients
to benefit from a broader universe of products and services,
 
simplified onboarding, and a better banking
experience. In the Americas, our clients
 
benefit from the Wealth Management Americas Platform,
 
as well
as our innovative partnership with Broadridge, which
 
is aimed at improving productivity and the user
experience by revamping the technology used for our
 
advisors’ workstations.
 
Separately managed accounts
 
In the US, we combined portfolio management
 
and execution resources within Asset Management
during 2020. Alongside this, we introduced a new
 
approach where Global Wealth Management clients
can access selected separately managed account
 
(SMA) strategies in the Americas with no
 
additional
management fees. This transformative
 
move allows our advisors to focus on delivering
 
the best ideas,
solutions and capabilities to our clients, regardless of
 
where they originate in the firm.
 
Shifts and referrals
To ensure that our clients are best served according to their needs and foster growth by offering a
universal bank delivery model in Switzerland,
 
we have introduced a holistic collaboration framework
 
for
Personal & Corporate Banking. We systematically
 
initiate client shifts from Personal Banking to
 
Global
Wealth Management when the clients’ investing
 
needs become sufficiently complex. In addition,
 
we
encourage our client advisors to continuously
 
generate leads for services provided by other business
divisions. Typical examples are corporate and institutional clients being introduced to Asset
 
Management
for mandate solutions or to the Investment Bank
 
for capital market transactions, thus providing
 
access to
our global expertise,
 
and entrepreneurs being introduced to Global Wealth Management,
 
ensuring
holistic coverage of their corporate and private
 
needs.
Global Family Office
Our Global Family Office unit brings together
 
the capabilities of Global Wealth Management,
 
Asset
Management and the Investment Bank to
 
leverage growth opportunities and deliver holistic
 
solutions. It
provides customized, institutional-style services to wealthy
 
families and individuals seeking access to
equity markets and advisory services,
 
and assisting clients with raising capital from public
 
and private
markets.
Global Lending Unit
As a further step in serving the financing
 
and lending needs of all UBS clients worldwide,
 
we set up a
division-agnostic Global Lending Unit in 2020. Its
 
key objective is delivering lending capabilities
 
to clients
of both the Investment Bank and Global
 
Wealth Management. The unit provides product expertise to
clients through collaboration with Investment
 
Bank bankers and Global Wealth Management
 
advisors. It
is organized with a regional focus by grouping existing
 
regional resources and competencies to best serve
respective markets and clients.
 
Unified Global Markets team
We are continuing to develop a strategic partnership
 
between Global Wealth Management and the
Investment Bank that is focused on growth – in our
 
ultra high net worth, middle market institutions
 
and
public finance businesses – and identifying
 
synergies across the supporting infrastructure. This
 
important
initiative includes a Unified Global Markets team,
 
integrating risk management systems
 
and simplifying
our regional operating processes.
 
 
Our strategy, business model and environment
 
| Our businesses
22
Global Wealth Management
As
 
a
 
leading
 
truly
 
global
 
wealth
 
manager,
1
 
with
 
over
 
USD 3.3
trillion in
 
invested assets, our
 
goal is to
 
provide tailored
 
financial
services,
 
advice
 
and
 
investable
 
solutions
 
to
 
wealthy
 
individuals
and
 
families
 
around
 
the
 
world.
 
The
 
spectrum
 
of
 
our
 
services
ranges
 
from
 
investment
 
management
 
to
 
estate
 
planning
 
and
corporate
 
finance
 
advice,
 
in
 
addition
 
to
 
specific
 
wealth
management
 
products
 
and
 
services.
 
The
 
business
 
is
 
managed
globally across the regions.
 
 
Organizational changes
As part
 
of the
 
Group-wide creation
 
of the
 
Artificial Intelligence,
Data
 
and Analytics
 
center of
 
expertise
 
in October
 
2021,
 
Global
Wealth
 
Management
 
established
 
the
 
Smart
 
Technologies
 
&
Advanced
 
Analytics
 
Team.
 
Leveraging
 
our
 
Evidence
 
Lab
Innovations
 
team’s
 
experience
 
and
 
expertise,
 
the
 
Smart
Technologies
 
& Advanced Analytics Team
 
focuses on developing
a
 
smart
 
ecosystem
 
that
 
applies
 
artificial
 
intelligence,
 
advanced
analytics and data science to empower
 
our advisors with insights
and tools that
 
help them anticipate
 
client needs and
 
deepen client
relationships.
 
On
 
1 July 2021,
 
the Global
 
Wealth
 
Management Operations
team was
 
formally integrated
 
into Global
 
Wealth Management,
following
 
the
 
Group-wide
 
decision
 
to
 
move
 
each
 
of
 
the
 
firm’s
business-aligned Operations
 
teams into
 
their respective
 
divisions
in
 
order
 
to
 
become
 
even
 
more
 
client-centric,
 
agile
 
and
 
digital,
while creating a seamless experience for our clients.
 
We
 
continually
 
review
 
all
 
our
 
businesses
 
for
 
growth
opportunities, future potential and
 
efficiency. As a result,
 
in 2021,
we
 
completed
 
the
 
sale
 
of
 
our
 
domestic
 
wealth
 
management
business in Austria.
 
We also announced
 
our intention to
 
sell our
domestic wealth
 
management business
 
in Spain.
 
As part
 
of the
latter sale, the parties aim to
 
negotiate a cooperation agreement
to
 
provide
 
clients
 
with
 
access
 
to
 
selected
 
UBS
 
products
 
and
services. We expect this deal to
 
close in the third quarter of
 
2022.
In
 
December
 
2021,
 
we
 
signed
 
an
 
agreement
 
to
 
sell
 
UBS
 
Swiss
Financial
 
Advisers
 
AG,
 
a
 
Switzerland-based
 
SEC-registered
investment advisor and FINMA-licensed securities firm
 
that offers
US clients tailored investment solutions. On 26 January 2022, we
entered into
 
an agreement
 
to acquire
 
Wealthfront, an
 
industry-
leading
 
digital
 
wealth
 
management
 
provider.
 
This
 
acquisition
 
is
aligned
 
with
 
our growth
 
strategy in
 
the Americas,
 
will broaden
our
 
reach
 
among
 
affluent
 
investors
 
and
 
add
 
a
 
new
 
digital-first
offering,
 
increasing our distribution capabilities.
Our focus
We
 
serve
 
high
 
net
 
worth
 
and
 
ultra
 
high
 
net
 
worth
 
individuals,
families and family offices worldwide,
 
as well as affluent clients
 
in
selected markets. Our
 
dedicated Global Family
 
Office unit
 
works
with ultra high
 
net worth individuals and
 
their families to
 
deliver
bespoke solutions
 
using the
 
best of
 
our global
 
capabilities from
the Investment Bank and Asset Management.
 
Already a
 
market leader
 
in the
 
ultra high
 
net worth
 
segment
outside the US,
1
 
we are also executing our strategy to be
 
the firm
of
 
choice
 
for
 
the
 
wealthiest
 
clients
 
in
 
the
 
US,
 
many
 
of
 
whom
already have relationships with UBS. Our global footprint enables
us to
 
capture growth
 
in the
 
largest and
 
fastest-growing
 
wealth
markets (the US and Asia Pacific, respectively).
 
Our
 
Chief
 
Investment
 
Office
 
(CIO)
 
celebrated
 
its
 
10th
anniversary in the
 
first quarter of
 
2021. Growing from
 
just three
employees in 2011 to over
 
1,100 by year-end 2021, our CIO has
a presence in
 
18 locations
 
and is
 
responsible for investment
 
advice
and management of more than USD 3.3 trillion in assets globally.
 
Our CIO’s
 
insights provide
 
the foundation
 
for the
 
global UBS
ecosystem,
 
which
 
connects
 
clients
 
with
 
content
 
and
 
solutions.
Close
 
integration
 
between
 
idea
 
generation
 
and
 
product
development results in CIO-aligned solutions delivering real value
to
 
clients
 
and
spurr
ing
 
innovations
 
such
 
as
 
the
 
investment
modules in
UBS Manage
 
Advanced [My
 
Way]
. In
 
Asia the
Direct
Investment
 
Insights
 
function
 
in
 
our
 
online
 
banking
 
platform
enables
 
clients
 
to
 
trade
 
directly
 
based
 
on
 
CIO
 
insights
 
via
 
their
smartphones or devices.
 
By
 
making
 
operational
 
processes
 
more
 
efficient,
 
we
 
also
enhance
 
advisor
 
productivity.
 
Our
 
investment
 
in
 
operating
platforms and tools that support our clients and advisors is
 
aimed
at better serving our
 
clients’ needs and improving
 
efficiency. As of
31 December
 
2021,
 
more
 
than 85%
 
of
 
invested
 
assets
 
outside
the Americas were booked on our strategic
 
Wealth Management
Platform
.
In
 
the
 
US,
 
in
 
collaboration
 
with
 
software
 
provider
Broadridge,
 
we are
 
building
 
the
Wealth
 
Management
 
Americas
 
Platform
,
for
 
which
 
we
 
continue
 
software
 
delivery,
with
full
conversion targeted for 2023. The development of our platforms
is happening
 
alongside enhancements
 
to our digital
 
capabilities,
for the benefit of our clients and advisors.
 
›
 
Refer to “Clients” in the “How
 
we create value for our
stakeholders” section and to “Leveling
 
up technology” in the
“Our strategy” section of this report for more information
 
about
innovation and digitalization
How we operate
Our
 
global
 
footprint
 
and
 
presence
 
in
 
the
 
world’s
 
largest
 
and
fastest-growing
 
markets
 
position
 
us
 
well
 
to
 
serve
 
clients
 
with
global interests and
 
demands. They also
 
make broad access
 
across
solutions and geographies
 
in different market conditions
 
possible.
The US
 
is our
 
largest market,
 
accounting for
 
around half
 
of our
invested
 
assets.
 
We
 
are
 
the largest
 
private
 
bank in
 
Asia Pacific
2
 
and
 
one
 
of
 
the
 
largest
 
in
 
Latin
 
America,
1
 
in
 
terms
 
of
 
invested
assets.
In Switzerland, we
 
hold the leading
 
market position
1
 
and can
deploy the
 
full range
 
of UBS’s
 
products and
 
services. Our
 
domestic
footprint
 
in
 
Western
 
and
 
Central
 
Europe,
 
the
 
Middle
 
East,
 
and
Africa enables us to provide locally tailored offerings and
 
ensures
we are close to our clients.
In
 
April
 
2021,
 
we
 
opened
 
a
 
wealth
 
management
 
advisory
office in Doha, Qatar,
 
as a further sign of our commitment to the
Middle East, an important and growing region for us.
 
 
 
 
 
1
Statements of market position for Global Wealth Management are based on UBS’s
 
internal estimates and publicly available information about competitors’ invested assets.
 
2
 
Digital Wealth Management in Asia Pacific, KPMG 2021.
 
 
 
 
23
Joint efforts
 
with the
 
Investment Bank,
 
Asset Management
 
and
selected external partners
 
enable us to
 
offer clients broad
 
access
to
 
financing,
 
global
 
capital
 
markets
 
and
 
bespoke
 
portfolio
solutions.
 
For
 
example,
 
in
 
the
 
Americas,
 
our
 
Private
 
Markets
OneBank Partnership has
 
established one centralized
 
function to
manage
 
the
 
origination
 
and
 
distribution
 
of
 
all
 
private
 
markets
transactions, side
 
by side
 
with the
 
cross-divisional origination
 
of
the
 
Investment Bank’s
 
Global Banking
 
business.
 
Additionally, to
ensure
 
we
 
a
re
 
placing
 
resources
 
close
 
to
 
clients,
 
dedicated
investment
 
bankers
 
are
 
now
 
embedded
 
in
 
G
lobal
W
ealth
Management’s Private Wealth Services Hubs across the US.
 
These
investment bankers work
 
side by side
 
with our financial
 
advisors
to
 
drive
 
focused,
 
proactive
 
coverage
 
of
 
investment
 
banking
business from our wealthiest clients.
 
›
 
Refer to “
Delivering one ecosystem
” in this section for examples
of the joint efforts of the business divisions
 
Our competitors
 
fall into
 
two categories:
 
peers with
 
a strong
position in the Americas but
 
more limited global footprints, such
as
 
Morgan
 
Stanley
 
and
 
JP
 
Morgan;
 
and
 
peers
 
with
 
similar
international
 
footprints
 
and
 
operating
 
models,
 
but
 
with
significantly smaller presences than UBS in the US, such as Credit
Suisse and Julius Baer. We have strategically built strong positions
in the
 
fastest-growing client segment
 
(ultra high
 
net worth) and
region
 
(Asia
 
Pacific).
 
The
 
size
 
and
 
the
 
diversification
 
of
 
our
footprint, as well
 
as our premium
 
brand and reputation,
 
would be
difficult and expensive to replicate.
What we offer
Our distinctive
 
approach
 
to wealth
 
management
 
is designed
 
to
help our clients pursue what matters most to them.
We
 
aim
 
to
 
offer
 
clients
 
the
 
best
 
solutions,
 
services
 
and
expertise
 
globally.
 
Our
 
experts
 
provide
 
thought
 
leadership,
investment analysis
 
and investment
 
strategies, and
 
develop and
source solutions for our clients.
 
The CIO provides our
UBS House
View
,
 
identifying
 
investment
 
opportunities
 
designed
 
to
 
protect
and increase our clients’ wealth over the longer term.
Regional
 
client
 
strategy
 
teams
 
use
 
direct
 
client
 
feedback,
findings from
 
periodic
Investor Watch
 
surveys and
 
insights from
the Smart Technologies
 
& Advanced
 
Analytics Team
 
to deepen
 
our
understanding
 
of
 
clients’
 
needs.
 
Our
 
product
 
specialists
 
deliver
inves
tment
 
solutions
,
including
 
our
 
flagship
 
investment
mandates, as well
 
as innovative
 
long-term themes
 
and sustainable
investment offerings.
 
Clients
 
benefit
 
from
 
our
 
comprehensive
 
expertise,
 
including
wealth
 
planning,
 
investing,
 
sustainability
 
and
 
impact
 
investing,
philanthropy,
 
corporate
 
and
 
banking
 
services,
 
as
 
well
 
as
 
family
advisory
 
services.
 
We
 
also
 
offer
 
extensive
 
mortgage,
 
securities-
based and structured lending expertise.
In 2020, we became the first
 
major global financial institution
to make sustainable
 
investments the preferred solution
 
for private
clients
 
investing
 
globally.
 
This
 
focus
 
led
 
to
 
high
 
levels
 
of
 
client
activity in
 
2021 and reflected
 
both our own
 
belief in sustainable
and
 
impact
 
investing
 
from
 
a
 
performance
 
perspective
 
and
increased
 
client
 
demand
 
for
 
relevant
 
advice
 
and
 
solutions.
 
Our
discretionary
 
offerings
 
aligned
 
to
 
our
s
ustainable
 
investing
 
strategic
 
asset
 
allocation
 
exceeded
 
USD 30
 
billion
 
in
 
invested
assets as of 31 December 2021.
Our
 
clients
 
accounted
 
for
 
75%
 
(USD 647
 
million)
 
of
 
MPM
Capital’s Oncology Impact
 
Fund 2 (OIF
 
2), which closed in
 
2021,
following the record-setting success of the
 
UBS Oncology Impact
Fund (OIF 1) in
 
2016. UBS clients
 
invested more than
 
USD 1 billion
across both
 
Funds. OIF 2
 
is one
 
of the
 
largest dedicated
 
impact
investment funds in biotech history.
1
 
›
 
Refer to the Sustainability Report 2021,
 
available from 11 March
2022 under “Annual reporting” at
ubs.com/investors
, for more
information about sustainability matters
 
We also continue
 
to broaden our offering
 
across asset classes
and
 
themes,
 
collaborating
 
with
 
external
 
partners,
 
such
 
as
Rockefeller
 
Asset
 
Management,
 
Rethink
 
Impact
 
and
 
Bridge
Investment Group, to provide clients with access to differentiated
sustainable and impact investing opportunities.
We constantly
 
work on
 
responding swiftly
 
to changing
 
client
needs
 
and
 
further
 
differentiating
 
our
 
leading
 
discretionary
 
and
advisory mandate offerings. As part
 
of our long-term cooperation
with
 
Partners
 
Group,
 
we
 
have
 
enhanced
 
our
 
offering
 
by
broadening
 
access
 
to
 
private
 
equity.
 
Clients
 
can
 
diversify
 
their
mandates into
 
private equity
 
by accessing
 
fully paid-in
 
solutions
provided by Partners Group and UBS.
In
 
2020,
 
we
 
launched
UBS
 
Manage
 
Advanced
 
[My
 
Way]
,
 
a
solution
 
enabling
 
clients
 
to
 
truly
 
individualize
 
their
 
portfolios.
Based
 
on
 
strong
 
momentum,
 
client
 
demand
 
and
 
inflows,
 
we
intend to expand this solution into other markets.
›
 
Refer to “Clients” in the “How
 
we create value for our
stakeholders” section and “Leveling up
 
technology” in the “Our
strategy” section of this report for more information
 
about
innovation and digitalization
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1
 
Based on a review of healthcare thematic funds using data from PitchBook as of August 2021; impact investing definitions may vary.
 
 
UBS_AR_2021p52i0.gif
Our strategy, business model and environment
 
| Our businesses
24
 
 
25
Personal & Corporate Banking
As
 
a
 
leading
 
Swiss
 
personal
 
and
 
corporate
 
bank,
 
we
 
provide
comprehensive
 
financial
 
products
 
and
 
services
 
to
 
private,
corporate and institutional clients. Personal & Corporate Banking
is the core of our universal bank in Switzerland.
Organizational changes
On
 
1 July
 
2021,
 
the
 
Personal
 
&
 
Corporate
 
Banking
 
Operations
team was formally integrated into Personal & Corporate
 
Banking,
following
 
the
 
Group-wide
 
decision
 
to
 
move
 
each
 
of
 
the
 
firm’s
business-aligned Operations
 
teams into
 
their respective
 
divisions
in
 
order
 
to
 
become
 
even
 
more
 
client-centric,
 
agile
 
and
 
digital,
while creating a seamless experience for our clients.
 
Our focus
Continu
ed
 
innovation
 
and
 
constant
 
customer
 
focus
 
are
 
the
factors that differentiate us, as a market
 
leader across all business
areas we strive to grow at a rate higher than the market. We aim
to be digital at the core: our
 
client promise is to bring the bank
 
to
the app, enabling a user experience
 
that is personalized, relevant,
on-time
 
and
 
seamless.
 
Even
 
before
 
the
 
COVID-19
 
pandemic,
digitalization had become a major part of
 
our everyday lives. The
pandemic has increased its relevance and accelerated the pace of
technological change.
To
 
drive
 
this
 
transformation,
 
we
 
need
 
to
 
better
 
connect
business and
 
technology, focus
 
on the
 
needs of
 
our clients,
 
and
empower our
 
teams end to
 
end; in
 
other words, we
 
need to be
agile.
 
The agile
 
transformation is
 
essential for
 
every part
 
of our
organization.
 
Agile
 
is
 
not
 
new
 
to
 
us
 
–
 
we
 
previously
 
gained
experience with the
Digital Factory
 
and
Lighthouses
 
– but we are
now scaling it to
 
the next level. In 2021,
 
we set up a new
 
virtual
Agile Delivery Organization
.
 
›
 
Refer to “Clients” in the “How we create value
 
for our
stakeholders” section and “Leveling up
 
technology”
 
in the “Our
strategy” section of this report for more information
 
about
innovation and digitalization
 
In 2021,
 
we brought
 
additional sustainable
 
finance solutions
to
 
the
 
market.
 
We
 
introduced
Green
 
Mortgages
 
brokered
 
via
key4
, the first Swiss
 
real estate platform for investment
 
properties
offering
 
sustainable
 
mortgages
 
in
 
Switzerland.
 
In
 
addition,
 
we
now offer Swiss retail
 
clients
Renovation Mortgages
 
that provide
preferential interest rates
 
to support energy-efficient
 
renovations
and construction. On the investment side, we complemented our
UBS Vitainvest
 
product family
 
with a
 
passive solution,
 
making it
possible
 
to
 
invest
 
for
 
retirement
 
in
 
a
 
sustainable
 
way
 
through
Swiss third-pillar pension funds and vested benefits accounts. We
also launched the innovative
UBS Sustainability Analytics
 
offering,
helping
institutional
 
clients
 
to
 
achieve
 
full
 
transparency
 
by
screening their portfolios with regard to sustainability aspects.
›
 
Refer to the Sustainability Report 2021,
 
available from 11 March
2022 under “Annual reporting” at
ubs.com/investors
, for more
information about sustainability-related topics
 
We
 
collaborate
 
with
 
other
 
companies
 
to
 
better
 
satisfy
 
our
clients’
 
diverse needs. For example, in 2021, we
 
started a project
with
 
Swiss
 
fintech
 
start-up
 
Yokoy
 
to
 
provide
 
extensive
 
cash
management
 
services
 
to
corporate
 
clients,
 
from
 
automated
generation of expense reports to validation of supplier invoices.
 
How we operate
We operate
 
primarily
 
in our Swiss
 
home market.
 
With our Personal
Banking and
 
Corporate & Institutional Clients business areas,
 
we
are
 
organized into
 
10
 
regions, covering
 
distinct Swiss
 
economic
areas. Due to increasing client demand for remote access
 
and the
increased offering via
 
our in-demand digital and remote
 
channels,
in the first quarter
 
of 2021 we reduced our
 
branch network by
 
44
branches
 
to 195
 
branches.
 
This followed
 
the closure
 
of 28
 
branches
in 2020.
We also
 
support
 
the international
 
business
 
activities
 
of our
 
Swiss
corporate
 
clients
 
through
 
local
 
hubs
 
in
 
New
 
York,
 
Frankfurt,
Singapore and
 
Hong
 
Kong
 
SAR.
 
No
 
other
 
Swiss bank
 
offers its
corporate clients
 
local banking
 
capabilities
 
abroad.
In
 
Personal Banking,
 
our
 
main
 
competitors are
 
Credit
 
Suisse,
PostFinance, Raiffeisen,
 
cantonal banks,
 
and
 
other
 
regional and
local
 
Swiss
 
banks;
 
we
 
also
 
face
 
competition from
 
international
neobanks and other national digital market participants. Areas of
competition
 
are
 
basic
 
banking
 
services,
 
mortgages
 
and
 
foreign
exchange, as
 
well as investment
 
mandates and
 
funds.
In
 
Corporate
 
&
 
Institutional
 
Clients,
 
Credit
 
Suisse,
 
cantonal
banks and globally active
 
foreign banks are our main competitors.
We
 
compete in
 
basic banking
 
services, cash management, trade
and
export
 
finance,
 
asset
 
servicing,
 
investment
 
advice
 
for
institutional clients, corporate finance and lending, and
 
cash and
securities
 
transactions
 
for banks.
 
 
UBS_AR_2021p54i0.gif
Our strategy, business model and environment
 
| Our businesses
26
What we offer
Our personal banking
 
clients have access
 
to a comprehensive,
 
life-
cycle-based
 
offering,
 
a
 
broad
 
range
 
of
 
basic
 
banking
 
products,
from
 
payments
 
to
 
deposits,
 
cards,
 
and
 
convenient
 
online
 
and
mobile
 
banking,
 
as
 
well
 
as
 
lending
 
(predominantly
 
mortgages),
investments and retirement services. This is
 
complemented by our
UBS
 
KeyClub
 
reward
 
program,
 
which
 
provides
 
clients
 
in
Switzerland with exclusive and attractive offers (some from third-
party
 
partners).
 
We
 
work
 
closely
 
with
 
Global
 
Wealth
Management to provide our clients with access to leading private
banking and wealth management services.
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.
We
 
work
 
closely
 
with
 
the
 
Investment
 
Bank
 
to
 
offer
 
capital
market and
 
foreign exchange
 
products, hedging
 
strategies, and
trading
 
capabilities,
 
as
 
well
 
as
 
corporate
 
finance
 
advice.
 
In
cooperation with
 
Asset Management,
 
we also
 
provide fund
 
and
portfolio management solutions.
›
 
Refer to “
Delivering one ecosystem
” in this section for examples
of the joint efforts of the business divisions
 
 
 
 
 
 
27
Asset Management
Asset
 
Management
 
is
 
a
 
large-scale
 
and
 
diversified
 
global
 
asset
manager,
 
with
 
USD 1.2
 
trillion
 
in
 
invested
 
assets.
 
We
 
offer
investment capabilities and
 
styles across all
 
major traditional and
alternative asset
 
classes, as
 
well as
 
advisory support to
 
institutions,
wholesale intermediaries and Global Wealth Management clients
around the world.
Organizational changes
Following the sale of our majority stake in 2020, in 2021 we sold
our remaining
 
minority investment
 
(48.8%) in Clearstream
 
Fund
Centre
 
AG
 
(previously
 
Fondcenter
 
AG)
 
to
 
Deutsche
 
Börse
 
AG.
Long-term commercial cooperation arrangements
 
remain in place
for
 
the
 
provision
 
of
 
services
 
by
 
Clearstream
 
to
 
UBS,
 
including
collaboration on jointly servicing banks and insurance
 
companies.
On 1 July 2021, the Asset Management
 
Operations team was
formally integrated
 
into Asset
 
Management, following
 
the Group-
wide
 
decision
 
to
 
move
 
each
 
of
 
the
 
firm’s
 
business-aligned
Operations
 
teams
 
into
 
their
 
respective
 
divisions
 
in
 
order
 
to
become even more client-centric, agile and digital, while creating
a seamless experience for our clients.
 
Our focus
Our
 
strategy
 
is
 
focused
 
on
 
capitalizing
 
on
 
the
 
areas
 
where
 
we
have
 
a
 
leading
 
position
 
and
 
differentiated
 
capabilities,
 
so
 
as
 
to
drive further profitable growth and scale.
 
Sustainable and impact investing remains a key area, as clients
increasingly
 
seek
 
solutions
 
that
 
combine
 
their
 
investment
 
goals
with sustainability objectives. We are continuing the
 
expansion of
our
 
world-class
 
capabilities
 
through:
 
product
 
and
 
service
innovation; dedicated research;
 
integrating environmental, social
and
 
governance
 
(ESG)
 
factors
 
into
 
our
 
investment processes
 
by
leveraging
 
our
 
proprietary
 
analytics;
 
and
 
active
 
corporate
engagement.
 
During
 
2021,
 
we
 
enhanced
 
our
 
ESG
 
methodology
 
and
 
data
sets, deepened the
 
integration of carbon
 
data into
 
our investment
processes,
 
and
 
worked
 
to
 
expand
 
our
 
ESG
 
integration
 
across
alternative
 
asset
 
classes.
 
We
 
also
 
increased
 
the
 
entire
 
range
 
of
UBS sustainable exchange-traded funds
 
(ETFs), which represented
USD 40 billion in invested assets
 
as of 31 December 2021. These
ETFs
 
provide
 
exposure
 
to
 
various asset
 
classes
 
with
 
significantly
lower carbon
 
intensity compared
 
with their
 
respective market
 
cap-
weighted parent
 
indices and
 
help investors
 
to both
 
reduce their
climate risks and benefit from opportunities arising from the shift
toward a lower-carbon economy.
In addition, we
 
continued to expand
 
our Climate Aware
 
suite
of
 
products
 
and
 
our
 
Climate
 
Aware
 
invested
 
assets
 
grew
 
to
USD 23
 
billion,
 
a
 
53%
 
increase
 
year
 
on
 
year.
 
Our
 
sustainability
focus and impact invested assets totaled
 
USD 172 billion, a 77%
increase year on year.
As
 
a
 
founding
 
member
 
of
 
the
 
Net
 
Zero
 
Asset
 
Managers
1
 
initiative, we published an
 
interim target and have
 
committed to
align USD 235
 
billion of invested
 
assets by
 
2030. We
 
are one of
the largest
 
and most
 
diversified firms
 
to have
 
set a
 
2030 target
and we
 
continue to
 
work with
 
our clients,
 
standard setters
 
and
industry bodies to
 
help develop
 
the new methodologies,
 
tools and
data needed by investors to effect further change.
›
 
Refer to the Sustainability Report 2021,
 
available from 11 March
2022 under “Annual reporting” at
ubs.com/investors
, for more
information about sustainability matters
 
In
 
response
 
to
 
the
 
increasing
 
importance
 
of
 
private
 
markets
and
 
alternative
 
investments,
 
we
 
are
 
building
 
on
 
our
 
existing
expertise in these areas, including our real estate and hedge fund
businesses, as well as
 
our capabilities across
 
infrastructure, private
equity and private debt.
 
We
 
also
 
continue
 
to
 
develop
 
our
 
award-winning
2
 
indexed
businesses
 
globally,
 
including
 
ETFs
 
in
 
Europe,
 
Switzerland
 
and
Asia. We focus on sustainable
 
investing across our index product
range
 
and
 
provide
 
customization
 
while
 
leveraging
 
our
 
highly
scalable platform.
 
›
 
Refer to “Clients” in the “How we create value
 
for our
stakeholders” section and to “Leveling
 
up technology” in the
“Our strategy”
 
section of this report for more information
 
about
innovation and
 
digitalization
 
Geographically,
 
we
 
are
 
building
 
on
 
our
 
extensive
 
and
 
long-
standing presence in the Asia Pacific region.
 
In China, one of the
world’s fastest-growing asset management markets,
 
we continue
to
 
invest
 
in
 
our
 
leading
 
presence
 
and
 
products,
 
both
 
on-
 
and
off-shore, and are ranked as the number one foreign manager of
inbound invested assets in Greater China.
3
 
In the
 
rapidly evolving
 
and attractive
 
wholesale segment,
 
we
aim
 
to
 
significantly
 
expand
 
our
 
market
 
share
 
through
 
a
combination
 
of
 
measures:
 
a
 
continued
 
increase
 
in
 
the
 
share
 
of
clients’
 
business;
 
expansion
 
of
 
our
 
strategic
 
partnerships
 
with
distributors; the
 
build-out of
 
our client
 
service and product
 
shelf
offerings;
 
and
 
the
 
launch
 
of
 
new
 
white-labeling
 
and
implementation capabilities.
 
 
 
 
 
 
 
1
netzeroassetmanagers.org
 
2
 
Passive Manager of the Year in the Insurance Asset
 
Risk EMEA Awards, January 2021 and ranked fourth
 
largest ETF provider in Europe as of December 2021 (source: ETFGI).
3
Ranking compiled by Broadridge in October 2021.
 
 
UBS_AR_2021p56i0.jpg
Our strategy, business model and environment
 
| Our businesses
28
We
 
also
 
continue
 
our
 
joint
 
efforts
 
with
 
the
 
other
 
business
divisions, in particular with Global
 
Wealth Management, enabling
our
 
teams to
 
draw
 
on
 
the best
 
ideas,
 
solutions
 
and capabilities
from
 
across
 
the
 
firm
 
in
 
order
 
to
 
deliver
 
superior
 
investment
performance
 
and
 
experiences
 
for
 
our
 
clients.
 
For
 
example,
 
the
separately
 
managed
 
accounts
 
initiative
 
with
 
Global
 
Wealth
Management
 
in
 
the
 
US
 
generated
 
USD 27
 
billion
 
in
 
net
 
new
money inflows
 
in 2021
 
and USD 127
 
billion in
 
invested assets.
 
This
firmly
 
positions
 
us
 
to
 
capture
 
attractive
 
opportunities
 
in
 
other
channels by
 
leveraging our
 
world-class expertise
 
and capabilities
to meet growing client demand.
 
›
 
Refer to “
Delivering one ecosystem
” in this section for examples
of the joint efforts of the business divisions
 
To
 
support
 
our
 
growth,
 
we
 
are
 
focused
 
on
 
disciplined
execution
 
of
 
our
 
operational
 
excellence
 
initiatives.
 
This
 
includes
further
 
automation,
 
simplification,
 
process
 
optimization
 
and
offshoring /
 
nearshoring of
 
selected activities,
 
complemented by
continued modernization
 
of our
 
platform and development
 
of our
analytics and data capabilities.
How we operate
Our business division
 
is organized into
 
five areas: Client
 
Coverage,
Investments, Real Estate
 
& Private Markets,
 
Products and the
 
COO
(Operations).
 
We cover
 
the main
 
asset management
 
markets globally,
 
and
have
 
a
 
local
 
presence
 
in
 
23
 
locations
 
across
 
four
 
regions:
 
the
Americas, Asia Pacific,
 
EMEA and Switzerland.
 
We have nine
 
main
hubs: Chicago, New York,
 
London, Zurich, Singapore,
 
Hong Kong
SAR,
 
Shanghai, Tokyo and Sydney.
 
Our
 
main
 
competitors
 
are
 
global
 
firms
 
with
 
wide-ranging
capabilities and distribution
 
channels, such
 
as Amundi,
 
BlackRock,
DWS,
 
Goldman
 
Sachs
 
Asset
 
Management,
 
Invesco,
 
JPMorgan
Asset
 
Management,
 
Morgan
 
Stanley
 
Investment
 
Management
and Schroders,
 
as
 
well as
 
firms with
 
a
 
specific market
 
or
 
asset-
class focus.
What we offer
We offer clients a wide
 
range of investment products
 
and services
in
 
different
 
asset
 
classes,
 
in
 
the
 
form
 
of
 
segregated,
 
pooled
 
or
advisory
 
mandates,
 
as
 
well
 
as
 
registered
 
investment
 
funds
 
in
various jurisdictions.
Our
 
traditional
 
and
 
alternative
 
capabilities
 
include
 
equities,
fixed income,
 
hedge funds,
 
real estate
 
and private
 
markets, and
indexed
 
and
 
alternative
 
beta
 
strategies
 
(including
 
exchange-
traded
 
funds),
 
as
 
well
 
as
 
sustainable
 
and
 
impact
 
investing
products and solutions.
Our Investment Solutions
 
business draws on
 
the breadth of
 
our
capabilities
 
to
 
offer:
 
asset
 
allocation
 
and
 
currency
 
investment
strategies across the risk–return
 
spectrum; customized multi-asset
solutions,
 
advisory
 
and
 
fiduciary
 
services;
 
and
 
multi-manager
hedge fund solutions and advisory services.
 
 
 
 
 
29
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 targeted rates
 
and credit platform.
We
 
use our
 
data-driven
 
research
 
and
 
technology capabilities
 
to
help clients
 
adapt to
 
evolving market
 
structures and
 
changes in
regulatory,
 
technological, economic and competitive landscapes.
Aiming
 
to
 
deliver
 
market-leading
 
solutions
 
by
 
using
 
our
intellectual capital and electronic platforms, we work closely with
Global Wealth
 
Management, Personal &
 
Corporate Banking and
Asset Management to
 
bring the best
 
of UBS’s capabilities
 
to our
clients.
 
We
 
do
 
so
 
with
 
a
 
disciplined
 
approach
 
to
 
balance
 
sheet
deployment and costs.
 
 
Organizational changes
In February 2021, we announced that Piero Novelli,
 
Co-President
Investment Bank,
 
would step down,
 
and, effective
 
1 April 2021,
Robert
 
Karofsky,
 
Co-President
 
Investment
 
Bank,
 
was
 
appointed
sole President Investment Bank.
On
 
1 July
 
2021,
 
the
 
Investment
 
Bank
 
Operations
 
team
 
was
formally
 
integrated
 
into
 
the
 
Investment
 
Bank,
 
following
 
the
Group-wide decision to move each of the firm’s business-aligned
Operations
 
teams
 
into
 
their
 
respective
 
divisions
 
in
 
order
 
to
become even more client-centric, agile and digital, while creating
a seamless experience for our clients.
In
 
January
 
2022,
 
Global
 
Research
 
and
 
the
 
Strategic
 
Insights
team, formerly part of Evidence Lab Innovations, were integrated
into the Investment Bank as Investment
 
Bank Research. This new
setup has better aligned our research coverage with the needs of
our
 
clients,
 
while
 
continuing
 
to
 
provide
 
research
 
and
 
analytical
services across the firm.
Our focus
Our priority
 
is provi
 
ding seamless
 
client
 
service and
 
high-quality
execution, through disciplined growth in
 
the capital-light advisory
and
 
execution
 
businesses,
 
while
 
accelerating
 
our
 
digital
transformation.
 
We
 
aspire
 
to
 
provide
 
best-in-class
 
services
 
and
solutions to our corporate, institutional and wealth management
clients through
 
an integrated,
 
solutions-led approach.
 
In Global
Banking,
 
we position
 
ourselves as
 
trusted advisors
 
via our
 
deep
client coverage and ability to
 
provide
 
access to the full capabilities
of UBS.
Our
 
global
 
coverage
 
model
 
utilizes
 
our
vast
 
international
industry expertise and product
 
capabilities to meet the
 
emerging
needs of clients. We
 
provide clients with excellence in
 
execution,
financing
 
and
 
structured
 
solutions
 
through
 
our
 
Global
 
Markets
franchise.
 
In
 
Global
 
Markets,
 
our
 
sharpest
 
competitive
 
edge
comes from coordinating
 
our services across
 
a wide range
 
of asset
classes and products. We provide
 
nimble, innovative and bespoke
access
 
to
 
solutions,
 
from
 
market
 
and
 
insight
 
tools
 
to
 
trading
strategies and execution.
Investment Bank Research continues to publish research based
on
 
primary
 
data
 
to
 
concentrate
 
on
 
data-driven
 
outcomes
 
and
offer
 
clients
 
key
 
insights
 
on
 
securities
 
and
 
themes
 
in
 
major
financial
 
markets
 
around
 
the
 
globe.
 
In
 
April
 
2021,
 
Research
entered into a strategic partnership
 
with Lynk Global, an artificial-
intelligence-driven
 
knowledge-as-a-service
 
platform,
 
to
 
help
clients
 
make
 
better,
 
more
 
informed
 
investment
 
and
 
business
decisions. In September 2021, we
 
announced a strategic research
redistribution
 
agreement
 
with
Wind,
 
the
 
leading
 
financial
information provider in China, to offer onshore content to clients
who invest
 
through Wind. Investment
 
Bank Research
 
was also a
founding
 
partner
 
and
 
investor
 
in
 
Visible
 
Alpha,
 
a
 
model
aggregation platform that
 
is now firmly
 
embedded in many
 
of the
workflows of our core clients.
Our digital strategy harnesses technology
 
to provide access to
a
 
wide
 
range
 
of
 
sources
 
of
 
global
 
liquidity
 
and
 
differentiated
content. The Investment Bank strives to be the digital investment
bank of
 
the future,
 
taking our
 
best ideas
 
and turning
 
them into
reality,
 
with
 
innovation-led
 
businesses
 
driving
 
efficiencies
 
and
solutions.
We
 
aim
 
to
 
develop
 
new
 
products
 
and
 
solutions
consistent
 
with
 
our
 
capital-efficient
 
business
 
model,
 
which
 
are
most
 
often
 
related
 
to
 
new
 
technologies
 
or
 
changing
 
market
standards.
 
In
 
February
 
2021,
 
we
 
announced
 
the
 
creation
 
of
 
a
 
single
Digital
 
Platforms
 
function
 
within
 
the
 
Investment
 
Bank
 
across
Global Markets and
 
Global Banking, utilizing
 
digital competencies
to
 
benefit
 
all
 
products
 
and
 
maximizing
 
the
 
return
 
on
 
our
technology
 
spend
 
in
 
close
 
partnership
 
with
 
Group
 
Technology.
Digital Platforms
 
combines product expertise with deep technical
know-how, aiming to reduce the number
 
of systems and increase
automation,
 
maximizing
 
client
 
impact,
 
revenue
 
and
 
digital
adoption. The
Digital Platforms
 
function was an
 
early adopter of
Agile@UBS
,
 
an
 
evolution
 
of
 
the
 
historically
 
close
 
collaboration
with
 
our
 
Chief Data
 
and Information
 
Office, creating
 
long-lived
teams that learn and continuously
 
improve,
 
which in turn attracts
the best talent.
Our
Investment
 
Bank
 
Accelerated
 
Digital
 
Agile
 
Platform
Transformation
 
initiatives form
 
the basis
 
of our
 
digital roadmap,
with
the
ambition
of
hav
ing
 
a
 
simplified
 
and
 
ultra
-
modern
technology landscape that is
 
secure and stable,
 
where we re-use
more
 
of
 
everything
 
and
 
where
 
the
 
platforms
 
work
 
together
 
to
drive progress toward our overall strategic imperatives.
›
 
Refer to “Clients” in the “How we create value
 
for our
stakeholders” section and to “Leveling
 
up technology” in the
“Our strategy” section of this report for more information
 
about
innovation and digitalization
 
 
 
Our strategy, business model and environment
 
| Our businesses
30
Our
 
global
 
reach
 
gives
 
attractive
 
options
 
for
 
growth.
 
In
 
the
Americas,
 
the
 
largest
 
investment
 
banking
 
fee
 
pool
 
globally,
 
we
focus on increasing market share in our
 
core Global Banking and
Global
 
Markets
 
businesses.
 
In
 
Asia
 
Pacific,
 
opportunities
 
arise
mainly from
 
expected market internationalization
 
and growth
 
in
China,
 
where
 
we
 
plan
 
to
 
grow
 
by
 
strengthening
 
our
 
presence,
both
 
onshore
 
and
 
offshore.
 
In
 
EMEA,
 
we
 
plan
 
to
 
leverage
 
our
strong base and brand recognition even further.
Joint
 
efforts
 
between
 
the
 
Investment
 
Bank
 
and
 
the
 
other
business
 
divisions
 
(for
 
example,
 
our
 
work
 
with
 
Global
 
Wealth
Management on the Unified Global
 
Markets team and the Global
Lending Unit) and, externally, strategic partnerships (for example,
UBS
 
BB
 
jointly
 
with
 
Banco do
 
Brasil,
 
focused on
 
Latin
 
America)
continue to be key strategic priorities. We expect
 
these initiatives
to
 
continue
 
to
 
lead
 
to
 
growth
 
by
 
delivering
 
global
 
products
 
to
each region, leveraging
 
our global connectivity
 
across borders and
sharing and strengthening our best client relationships.
 
›
 
Refer to “
Delivering one ecosystem
” in this section for examples
of the joint efforts of the business divisions
How we operate
Our business
 
division consists
 
of two
 
areas: Global
 
Banking and
Global
 
Markets
,
 
supported
 
by
 
Investment
 
Bank
 
Research.
Governed
 
by
 
the
 
Executive,
 
Operating,
 
Risk,
 
and
 
Asset
 
and
Liability
 
forums,
 
each
 
business
 
area
 
is
 
organized
 
globally
 
by
product.
 
Our
 
geographically
 
balanced
 
business
 
has
 
a
 
global
reach,
 
with a presence
 
in more
 
than 30
 
countries and
 
offices in
ten major
 
financial
 
hubs.
Competing
 
firms
 
operate
 
in
 
many
 
of
 
our
 
markets,
 
but
 
our
strategy differentiates us, with its focus on
 
leadership in the areas
where
 
we have
 
chosen to
 
compete, and
 
a
 
business model
 
that
leverages
 
talent and
 
technology rather
 
than balance
 
sheet. Our
main
 
competitors
 
are
 
the
 
major
 
global
 
investment
 
banks
 
(e.g.,
Morgan Stanley, Credit Suisse
 
and Goldman Sachs) and corporate
investment banks (e.g., Bank
 
of America, Barclays, Citigroup,
 
BNP
Paribas, Deutsche Bank
 
and JPMorgan Chase).
 
We also compete
with
 
boutique
 
investment
 
banks
 
and
 
fintech
 
firms
 
in
 
certain
regions and products.
Joint
 
efforts
 
with
 
Global
 
Wealth
 
Management
 
and
 
Asset
Management
 
enable
 
us
 
to
 
provide
 
clients
 
with
 
broad
 
access to
financing, global capital markets and portfolio solutions.
›
 
Refer to “
Delivering one ecosystem
” in this section for examples
of the joint efforts of the business divisions
What we offer
Our Global Banking business advises clients
 
on strategic business
opportunities,
 
such as mergers, acquisitions and related
 
strategic
matters, and helps them raise
 
capital, both on public and private
markets, to fund their activities.
 
Our
 
Global
 
Markets
 
business
 
enables
 
clients
 
to
 
buy,
 
sell
 
and
finance securities
 
on capital
 
markets worldwide,
 
and to
 
manage
their
 
risks
 
and
 
liquidity.
 
We
 
distribute,
 
trade,
 
finance
 
and
 
clear
cash
 
equity
 
and
 
equity-linked
 
products,
 
as
 
well
 
as
 
structuring,
originating and
 
distributing new
 
equity and
 
equity-linked issues.
From origination and distribution to managing risk and providing
liquidity in foreign
 
exchange, rates, credit
 
and precious metals,
 
we
help clients to realize their financial goals.
 
Our
 
Investment
 
Bank
 
Research
 
business
 
offers
 
clients
differentiated
 
content
about
 
major
 
financial
 
markets
 
and
securities around
 
the globe,
 
with coverage
 
of over
 
3,000 stocks
in 24
 
countries. The
 
Strategic Insights
 
team provides
 
timely and
relevant
 
information
 
and
 
insights
 
to
 
help
 
clients
 
quickly
 
make
decisions regarding their most important questions.
We
 
seek
 
to
 
develop
 
new
 
products
 
and
 
solutions
 
consistent
with our capital-efficient business model, typically related to new
technologies or changing market standards.
 
›
 
Refer to “Clients” in the “How we create value
 
for our
stakeholders” section and to “Leveling
 
up technology” in the
“Our strategy” section of this report for more information
 
about
innovation and digitalization
 
 
 
 
UBS_AR_2021p59i0.gif
 
31
The Investment
 
Bank is
 
focused on
 
meeting the
 
needs of
 
clients
with
 
regard
 
to
 
environmental,
 
social
 
and
 
governance
 
(ESG)
considerations
 
and
 
sustainable
 
finance,
 
helping
to
reshape
business
 
models
 
and
 
investment
 
opportunities
 
and
 
to
 
develop
sustainable finance products and solutions
 
across the Investment
Bank. Since
 
2005, we
 
have addressed
 
increasing client
 
demand
for
 
sustainable
 
investing
by
providing
 
thematic
 
and
 
sector
research
 
and
 
investment
 
solutions
 
through
 
socially
 
responsible
and
 
impact
 
exchange-traded
 
funds
 
and
 
index-linked
 
notes.
 
In
addition,
 
we
 
offer
 
capital-raising
 
and
 
strategic
 
advisory
 
services
globally to companies that make positive contributions to climate
change
 
mitigation
 
and
 
adaptation.
 
We
 
provide
 
advice
 
on
innovative financing strategies, guiding clients through
 
inaugural
green issuances and
 
positioning them in
 
multi-currency markets.
In
 
September
 
2021,
 
we
 
announced
 
the
 
formation
 
of
 
our
 
ESG
Advisory team
 
in Global
 
Banking, aiming
 
to support
 
our clients’
sustainability
 
strategies.
 
As
 
part
 
of
 
the
 
Group’s
 
net-zero
commitments, the Investment Bank has developed science-based
intermediate emission targets for 2030 for its lending business in
priority sectors (fossil fuels and power generation).
 
In June 2021,
we
 
announced
 
the
 
inaugural
 
launch
 
of
 
two
 
senior
 
unsecured
green bonds under our Green Funding Framework.
›
 
Refer to the “Taking action on a net-zero future – our climate
 
report” section of the Sustainability Report
 
2021, available from
11 March 2022 under “Annual reporting” at
ubs.com/investors
,
for more information about the Investment
 
Bank’s targets for its
lending business
 
 
 
 
 
 
 
 
Our strategy, business model and environment
 
| Our businesses
32
Group Functions
Group
 
Functions
 
provides
 
services
 
to
 
the
 
Group,
 
focusing
 
on
effectiveness,
 
risk mitigation and efficiency. Group Functions also
includes the Non-core and Legacy Portfolio unit.
How we are organized
Group Functions
The
 
major
 
areas
 
within
 
Group
 
Functions
 
are
Group
Services
 
(
which
consist
s
 
of
Technology,
 
Corporate
 
Services,
 
Human
Resources,
 
Finance, Legal,
 
Risk Control,
 
Compliance, Regulatory
&
 
Governance
,
 
Communications
 
&
 
Branding
,
 
and
Group
Sustainability
 
and
 
Impact),
 
Group
 
Treasury
 
,
 
and
 
Non-core
 
and
Legacy Portfolio.
 
In
 
recent
 
years
,
 
we
 
have
 
aligned
 
support
 
functions
 
and
business
 
divisions.
 
The
 
vast
 
majority
 
of
 
such
 
functions
 
are
 
fully
aligned or shared among business
 
divisions, where they have full
management
 
responsibility.
 
By
 
keeping
 
the
 
activities
 
of
 
the
businesses and support
 
functions close,
 
we increase
 
efficiency and
create
 
a
 
working
 
environment
 
built
 
on
 
accountability
 
and
collaboration.
 
On 1
 
July
 
2021,
 
following
 
the Group
 
-wide decision
 
to
 
move
each
 
of
 
the
 
firm’s
 
business-aligned
 
Operations
 
teams
 
into
 
their
respective divisions
 
in order
 
to become
 
even more
 
client-centric,
agile
 
and
 
digital,
 
while
 
creating
 
a
 
seamless
 
experience
 
for
 
our
clients, each of the Operations
 
teams were formally moved out
 
of
Group
 
Functions
 
and
 
integrated
 
into
 
the
 
respective
 
business
divisions.
Non-core and Legacy Portfolio, a small residual set of activities
in Group Treasury
 
and certain other
 
costs that are
 
mainly related
to
 
deferred
 
tax
 
assets
 
and
 
costs
 
relating
 
to
 
our
 
legal
 
entity
transformation program are all retained centrally.
 
Group Treasury
Grou
p
Treasury
 
manages
balance
 
sheet
structural
 
risk
(e
.
g.,
 
interest
 
rate,
 
structural
 
foreign
 
exchange
 
and
 
collateral
 
risks)
and
 
the
 
risks
 
associated
 
with
 
our
 
liquidity
 
and
 
funding
portfolios.
 
Group
 
Treasury
 
serves
 
all
 
business
 
divisions
 
and
 
its
risk
 
management
 
is integrated
 
into
 
the Group
 
risk
 
governance
framework.
 
Non-core and Legacy Portfolio
Non-core
 
and
 
Legacy
 
Portfolio
 
manages
 
legacy
 
positions
 
from
businesses
 
exited
 
by
 
the
 
Investment
 
Bank,
 
following
 
a
 
largely
passive wind-down strategy. Overseen by a committee chaired by
the
 
Group
 
Chief
Financial
Officer
,
 
its
portfolio
 
also
 
includes
positions
 
relating
 
to
 
legal
 
matters
 
arising
 
from
 
businesses
transferred to it at the time of its formation.
›
 
Refer to “Note 18 Provisions and contingent
 
liabilities” in the
“Consolidated financial statements” section
 
of this report for
more information about litigation, regulatory and
 
similar
matters
 
 
33
Our environment
 
Market climate
Global economic developments in 2021
2021
 
was
 
a
 
positive
 
year
 
for
 
the
 
global
 
economy
 
and
 
most
markets. Growth rebounded,
 
with the global
 
economy expanding
6.1%,
 
after
 
contracting
 
3.0%
 
in
 
2020.
 
The
 
recovery
 
was
 
also
broad
 
based,
 
with
 
all
 
major
 
nations
 
experiencing
 
a
 
revival
 
in
demand as pandemic restrictions
 
were gradually relaxed
 
and the
policies of major central banks remained supportive.
 
Swiss GDP increased
 
3.5% in 2021,
 
after decreasing 2.5%
 
in
2020. US GDP grew 5.7%, after decreasing 3.4%. The Eurozone
economy
 
expanded
 
5.2%,
 
after
 
contracting
 
6.5%
 
in
 
the
 
prior
year. UK GDP
 
increased 7.2% in 2021,
 
after a decrease
 
of 9.4%
in 2020.
China’s economy
 
grew 8.1%,
 
up from
 
2.2% in
 
2020, although
momentum slowed toward
 
the end of
 
2021 and into
 
2022. Other
leading Asian economies recovered strongly in 2021, with India’s
GDP growing 8.7%, Singapore’s
 
GDP increasing 7.6% and South
Korea’s
 
GDP
 
expanding
 
3.9%.
 
Japan
 
experienced
 
less
 
growth,
with GDP increasing 1.7% after a 4.5% contraction in 2020.
Growth
 
in
 
the
 
top
 
emerging
 
markets
 
was
 
mixed,
 
with
 
a
moderate 1.7% growth
 
rate in Thailand
 
and 3.7% in
 
Indonesia,
compared with a more
 
robust 5.3% in
 
Mexico and 4.5%
 
in Brazil.
 
Elevated inflation emerged
 
as a
 
concern through 2021
 
in much
of the world, as the pandemic continued to disrupt supply chains
and shift patterns of demand. By the end of
 
the year, US inflation
was
 
running
 
at
 
the
 
fastest
 
pace
 
since
 
1982
 
on
 
a
 
year-on-year
basis.
 
This
 
caused
 
the
 
US
 
Federal
 
Reserve
 
to
 
move
 
toward
monetary
 
tightening,
 
announcing
 
a
 
scaling
 
back
 
of
 
asset
purchases and pointing toward rate rises. Inflation was contained
in
 
Switzerland, at
 
0.6%
 
for the
 
year,
 
but
 
climbed swiftly
 
in the
Eurozone,
 
from
 
0.3%
 
in
 
2020
 
to
 
2.6%
 
in
 
2021.
 
Meanwhile,
prices in Japan declined 0.2% in 2021, having been flat in 2020.
 
Financial
 
markets
,
 
both
 
equities
 
and
 
fixed
 
income
,
 
were
resilient in the
 
face of continuing
 
waves of COVID-19 infections.
Global equities delivered total
 
returns of 18.5% in
 
2021. The US
outperformed
:
 
MSCI
 
USA
 
delivered
 
total
 
returns
 
of
 
27%,
outperforming the MSCI
 
All Country
 
World index by
 
8 percentage
points
 
and
 
taking
 
its
 
share
 
of
 
the
 
global
 
index’s
 
market
capitalization to a
 
record level of
 
48%. The Eurozone,
 
Japanese,
Swiss and UK equity markets
 
all gained ground. China, however,
was an underperformer: after
 
reaching a record high
 
in February
2021,
 
MSCI
 
China declined
 
over the
 
rest
 
of
 
the year,
 
driven by
increased
 
regulation
 
on
 
the
 
technology
 
and
 
property
 
sectors,
energy
 
shortages,
 
and
 
a
 
slowing
 
economy.
 
The
 
index
 
delivered
negative
 
returns
 
of
 
22.4%
 
in
 
2021,
 
negatively
 
impacting
 
the
performance of the MSCI Emerging Markets
 
index overall, which
decreased 2.5% in 2021.
 
Government
 
bond
 
markets
 
were
 
also
 
resilient,
 
especially
against a backdrop of
 
historically high inflation. The
 
yield on 10-
year US Treasuries
 
ended the year
 
at 1.5%, only
 
a modest
 
increase
from
 
0.9%
 
at
 
the
 
start
 
of
 
the
 
year.
 
With
 
inflation
 
rising,
 
but
nominal yields staying
 
low, US real yields
 
traded as low as
 
minus
1.2%,
 
the
 
lowest
 
level
 
since
 
the
 
inception
 
of
 
the
 
Treasury
inflation-protected securities
 
(TIPS) market
 
in 1997.
 
The yield
 
on
10-year German Bunds remained negative through 2021, ending
the year at minus 0.18%.
 
 
Our strategy, business model and environment
 
| Our environment
34
Industry trends
Although
 
our
 
industry
 
has
 
been
 
heavily
affected
 
by
 
various
regulatory
 
developments
 
over
 
the
 
past
 
decade
,
technological
transformation
 
and
 
changing
 
client
 
expectations
are
 
further
 
emerging
 
as
 
key
 
drivers
 
of
 
change
 
today,
 
increasingly
 
affecting
the competitive landscape,
 
as well as
 
our products, service
 
models
and operations. In parallel,
 
our industry continues to
 
be materially
driven
 
by
 
changes
 
in
 
financial
 
market
 
and
 
macroeconomic
conditions.
Client expectations
 
As technology
 
progresses, clients
 
more rapidly
 
redefine the
 
way
they live, work and interact
 
with others. This is reshaping
 
clients’
expectations
 
toward
 
financial
 
services
 
firms,
 
as
 
their
 
reference
points are increasingly influenced by experiences with companies
outside our sector,
 
where technology-supported and
 
data-driven
solutions
 
are
 
progressively
 
enabling
 
a
 
more
 
seamless
 
and
improved
 
client
 
experience.
 
These
 
services
 
often
 
focus
 
on
convenience
 
and
 
personalization,
 
and
 
drive
 
toward
 
holistically
addressing
 
clients’
 
needs
 
and
 
facilitating
 
community
 
building.
Therefore
 
our
 
franchise
 
needs
 
to
 
evolve,
 
as
 
clients
 
measure
 
us
against new standards.
Sustainability
Markets
 
around
 
the
 
world
 
are
 
undergoing
 
a
 
profound
transformation as company business models evolve and investors
factor
 
in
 
the
 
transition
 
to
 
a
 
low-carbon
 
economy
 
and
 
other
sustainable themes with regard to investment risk and return.
 
Shifting societal
 
values and
 
greater regulation
 
are supporting
client
 
demand.
 
Investors
 
are
 
adding
 
sustainable
 
investing
strategies to
 
their portfolios,
 
with the
 
fastest growth
 
around funds
focused on
 
climate. Industry
 
inflows into
 
sustainable funds
 
have
accelerated during
 
the COVID-19
 
pandemic and
 
the sustainable
investing market share remains above pre-pandemic levels.
 
Our view is that this trend
 
plays to UBS’s strengths, as
 
we have
been at the forefront
 
of sustainable finance for
 
over two decades,
making
 
us
 
well
 
placed
 
to
 
continue
 
developing
 
the
 
innovative
products and solutions our institutional and private clients need.
›
 
Refer to the Sustainability Report 2021,
 
available from 11 March
2022 under “Annual reporting” at
ubs.com/investors
, for more
information about sustainability matters
Digitalization
Digitalization in the financial
 
services industry is accelerating
 
and
has
 
been
 
given
 
further
 
momentum
 
by
 
the
 
ongoing
 
COVID-19
pandemic. Banks have
 
demonstrated their ability
 
to take on
 
a vast
increase
 
in
 
the
 
number
 
of
 
clients
 
switching
 
to
 
digital
 
channels
while
 
ensuring
 
operational
 
resilience.
As
 
a
 
result,
 
c
lients
 
increasingly trust
 
digital solutions
 
and are
 
now demanding
 
even
more seamless, personalized digital products and services
 
tailored
to
 
their
 
needs.
 
Regional
 
and
 
demographic
 
differences
 
in
 
the
acceptance and
 
use of digital
 
technologies are
 
narrowing across
all
 
client segments,
 
thus increasing
 
the number
 
of digital
 
users.
This
 
trend
 
requires
 
financial
 
institutions
 
to
 
focus
 
even
 
more
 
on
fully
 
digital
 
and
 
digitally
 
enhanced
 
service
 
models
 
and
 
digitally
enabled ecosystems.
 
As governments
 
reacted to
 
the outbreak
 
of the
 
pandemic by
impos
ing
 
restrictions
 
on
 
physical
interactions,
 
digital
communication,
 
with
 
clients
 
and
 
employees
 
alike,
 
established
new remote ways of working,
 
which are expected to also
 
be used
by some companies
 
in post-pandemic scenarios,
 
enabling them
 
to
attract
 
an
 
even
 
wider
 
array
 
of
 
talent
 
than
 
before.
 
The
digitalization
 
of
 
the
 
financial
 
services
 
industry
 
has
 
led
 
to
 
a
structural shift
 
in the
 
workforce: more
 
and better
 
engineers are
required to
 
keep banks at
 
the forefront
 
of technology, thus
 
setting
them into direct competition with technology companies beyond
the borders of the financial sector.
Continuous
 
investment
 
in
 
technology
 
is
 
driving
 
automation
and simplification
 
of labor-intensive processes,
 
improving banks’
operational efficiency and freeing up resources
 
to focus on client
needs.
 
Decision
 
making
 
is
 
becoming
 
increasingly
 
data-driven,
with advanced analytics
 
and artificial intelligence
 
enabling banks
to address client needs in an even more targeted manner.
 
Nascent
 
technologies,
 
such
 
as
 
distributed
 
ledger
 
technology,
are expected
 
to mature
 
over the
 
coming years
 
and are
 
likely to
reshape
 
our
 
industry.
 
They
 
provide
 
opportunities
 
to
 
overcome
existing financial system
 
frictions, broaden access
 
to underbanked
communities
 
and
 
make previously
 
unviable
 
products or
 
services
available to the financial services industry.
Consolidation
Many regions
 
and businesses
 
in the
 
financial services
 
sector are
still highly fragmented. We expect further consolidation, with the
key
 
drivers
 
being
 
ongoing
 
margin
 
pressure,
 
a
 
push
 
for
 
cost
efficiencies
 
and
 
increasing
 
scale
 
advantages
 
resulting
 
from
 
the
fixed
 
costs
 
of
 
technology,
 
and
 
regulatory
 
requirements.
 
Many
banks
 
currently
 
seek
 
increasing
 
exposure
 
and
 
access
 
to
 
regions
with attractive growth
 
profiles, such as Asia
 
and other emerging
markets, through local acquisitions or partnerships.
 
The increased
focus on
 
core capabilities
 
and geographical
 
footprint, as
 
well as
the
 
ongoing
 
simplification
 
of
 
business
 
models
 
to
 
reduce
operational and compliance
 
risks, is
 
likely to
 
drive further
 
disposals
of non-core
 
businesses and
 
assets. The
 
impact of
 
the COVID-19
pandemic
 
may
 
further
 
accelerate
 
consolidation,
 
as
 
banks
 
face
increasing
 
threats
 
from
 
digitalization,
 
low
 
interest
 
rates
 
and
intensified competition.
 
 
 
35
New competitors
Our competitive environment is
 
evolving. In addition
 
to traditional
competitors in
 
the asset-gathering
 
businesses, new
 
entrants are
targeting selected parts of
 
the value chain. However, we have
 
not
yet seen a fundamental unbundling
 
of the value chain and client
relationships,
 
which
 
might
 
ultimately
 
result
 
in
 
the
further
disintermediation
 
of
 
banks
 
by
 
new
 
competitors.
 
Over
 
the
 
long
term, we believe large platform companies
 
entering the financial
services industry could
 
pose a significant
 
competitive threat, given
their
 
strong
 
client
 
franchises
 
and
 
access
 
to
 
client
 
data,
 
if
 
they
decide
 
to broaden
 
the scope
 
of their
 
services. Fintech
 
firms are
gaining
 
momentum,
which
 
has
 
been
accelerated
 
by
 
the
COVID-19 pandemic, causing
 
increased use of
 
remote solutions.
However,
 
such
 
firms
 
have
 
not
 
to
 
date
 
materially
 
disrupted
 
our
asset-gathering
 
businesses.
 
The
 
trend
 
for
 
forging
 
partnerships
between
 
new
 
entrants
 
and
 
incumbent
 
banks
 
is
 
continuing,
 
as
technology and innovation help banks overcome new challenges.
 
Regulation
Although the
 
impact of
 
the COVID-19
 
pandemic is
 
still evident,
regulators are re-focusing their attention toward policy areas that
were
 
already
 
in
 
motion
 
before
 
the
 
pandemic
 
started,
 
including
prudential
 
regulation
 
and anti-money
 
laundering (AML),
 
and to
emerging
 
policy
 
topics,
 
particularly
 
in
 
the
 
areas
 
of
 
digital
innovation and environmental, social and governance (ESG).
Sustainable
 
finance
 
and
 
climate
 
risk
were
 
a
 
key
 
focus
 
of
policymakers in
 
2021, with
 
the United
 
Nations Climate
 
Change
Conference
 
(COP26)
 
acting
 
as
 
a
 
catalyst
 
for
 
action.
 
We
 
expect
further
 
policy
 
developments,
 
including
 
in
 
the
 
areas
 
of
 
climate-
related disclosures, climate-related financial risks and ESG.
 
The
 
acceleration
 
of
 
the
 
digital finance
 
agenda,
 
which
 
in
 
part
resulted from
 
the COVID-19
 
pandemic, continues
 
to trigger
 
action
from regulators and
 
this will likely
 
further intensify. Among
 
such
action,
 
we
 
expect
 
further
 
progress
 
on
 
the
 
regulation
 
of
cryptoassets and stablecoins,
 
as well as on
 
the ongoing work on
central bank digital currencies and digital engagement practices.
The national implementation
 
of the Basel
 
framework remains
another
 
important
 
focus
 
area,
 
but
 
there
 
is
 
a
 
significant
 
risk
 
of
divergence in
 
the timing
 
of implementation,
 
as well
 
as the
 
content
of
 
the
 
provisions.
 
EU
 
authorities
 
have
 
proposed
 
a
 
package
 
of
measures aimed at implementing the remaining
 
Basel III elements
by 2025, i.e., two years after
 
the timeline envisaged by the Basel
Committee
 
on
 
Banking
 
Supervision,
 
while
 
the
 
authorities
 
in
Switzerland and the
 
UK are expected
 
to consult on
 
their approach
in 2022. Implementation
 
in Switzerland is
 
expected in 2024
 
and
in the UK no earlier
 
than March 2023. Implementation in
 
the US
is still uncertain.
 
In
 
addition,
 
regulatory
 
authorities
 
continue
 
to
 
refine
 
existing
regulations,
 
including the finalization
 
of the Swiss
 
too-big-to-fail
framework,
 
with
 
a
 
current
 
focus
 
on
 
additional
 
liquidity
requirements for systemically important banks. The regulators are
also
 
advancing
 
the
 
regulatory
 
framework
 
in
 
key
 
policy
 
areas,
including
 
anti-money
 
laundering,
 
operational
 
resilience
 
and
outsourcing arrangements, and putting an emerging policy focus
on diversity and inclusion.
 
Finally,
 
central
 
banks
 
and
 
regulators
 
continue
 
to
 
learn
 
the
lessons
 
from
 
the
 
COVID-19
 
pandemic.
 
An
 
important
 
area
 
of
concern
 
is
 
understanding
 
the
 
effects
 
of
 
contagion
 
in
 
financial
markets, particularly financial stability
 
risks emanating from non-
bank financial institutions.
Many
 
of
 
these
 
developments
 
are
 
taking
 
place
 
in
 
an
environment
 
characterized
 
by
 
significant
 
political
 
uncertainties,
including
 
geopolitical
 
tensions
 
that
 
could
 
pose
 
additional
challenges to
 
the provision of
 
cross-border financial services
 
and
rapidly evolving societal
 
expectations toward financial
 
institutions.
We believe
 
the adaptations
 
made to
 
our business
 
model and
our
 
proactive
 
management
 
of
 
regulatory
 
change
 
put
 
us
 
in
 
a
strong
 
position
 
to
 
absorb
 
upcoming
 
changes
 
to
 
the
 
regulatory
environment.
›
 
Refer to the “Regulatory and legal developments”
 
and “Capital,
liquidity and funding, and balance sheet”
 
sections of this report
for more information
Wealth creation
1
 
Despite the economic tumult related to the pandemic, the global
high
 
net
 
worth
 
individual
 
population
 
and
 
financial
 
wealth
increased in 2020 6.3% and 7.6%, respectively.
 
The
 
United
 
States
 
continued
 
to
 
lead,
 
with
 
high
 
net
 
worth
individual wealth
 
growth of
 
12.3%; in
 
Asia Pacific,
 
such wealth
expanded 8.4% and in
 
Europe 4.5%. In line with
 
previous trends,
the ultra
 
high net
 
worth individual
 
segment led
 
wealth growth,
with an average
 
of 9.1%. Today,
 
44% of global
 
financial wealth
is
 
concentrated
 
in
 
North
 
America,
 
followed
 
by
 
Asia
 
(26%)
 
and
Europe (21%).
2
 
By
 
segment,
 
approximately
 
a
 
third
 
of
 
global
 
high
 
net
 
worth
individual wealth
 
is held
 
by individuals
 
with wealth
 
in excess
 
of
USD 30
 
million,
 
23%
 
by
 
individuals
 
with
 
wealth
 
ranging
 
from
USD 5 million to USD 30 million
 
and the remaining approximately
43%
 
is within
 
the wealth
 
segment between
 
USD 1 million
 
and
USD 5 million.
 
Wealth
 
is being
 
created at
 
a faster
 
rate for
 
a number
 
of key
client groups, including
 
female clients and
 
entrepreneurs. We also
see significant
 
wealth transition
 
to the
 
next generation
 
over the
coming decade.
The outlook for
 
wealth remains positive,
 
with North America,
Asia (excluding Japan)
 
and Western Europe
 
expected to account
for 87% of
 
new financial
 
wealth growth
 
worldwide between
 
now
and 2025.
2
 
Wealth transfer
Demographic
 
and
 
socioeconomic
 
developments
 
continue
 
to
generate shifts in wealth. Over the next 10 to 15 years, the “next
gen,” composed of individuals
 
currently between the ages
 
of 20
and
 
50,
 
will
 
be
 
an
 
influential
 
driver
 
of
 
future
 
growth,
 
as
 
those
people
 
accumulate
 
significant
 
financial
 
wealth
 
from
 
inheritance
or liquidity events.
2
 
 
 
 
 
1
All the figures are from
 
the Capgemini World
 
Wealth Report 2021
 
unless otherwise stated and
 
refer to the 2020
 
financial year.
 
The Capgemini World
 
Wealth Report 2021 defines
 
wealth segmentation as
 
follows:
those with wealth of greater than USD 30 million are classified as ultra high net worth individuals; USD 1–30 million for high net
 
worth individuals.
2
Based on BCG Global Wealth Report 2021. Wealth concentration is based on financial assets by regions
 
and excludes real assets and liabilities.
Our strategy, business model and environment
 
| Our environment
36
As
 
a
 
group,
 
next
 
gens
 
have
 
a
 
longer
 
investment
 
horizon,
 
a
greater appetite for risk
 
and often a desire
 
to use wealth to
 
create
a positive societal impact alongside investment
 
returns. As shown
in
 
the Wealth-X
 
report “World
 
Ultra
 
Wealth Report
 
2021,”
 
the
proportion of
 
ultra-wealthy women
 
has also
 
been on
 
a gradual
upward
 
trend
 
in
 
recent
 
years,
 
reflecting
 
changing
 
cultural
attitudes
 
and
 
growth
 
in
 
female
 
entrepreneurship,
 
as
 
well
 
as
wealth transfers between generations.
 
We
 
are
 
responding
 
to
 
the
 
evolving
 
wealth
 
landscape
 
with a
framework that addresses all aspects
 
of our clients’ financial lives,
called
UBS Wealth Way
. It begins with discovery
 
questions and a
conversation with clients about
 
what is most important
 
to them.
We
 
help
 
clients
 
organize
 
their
 
financial
 
life
 
along
 
three
 
key
strategies:
Liquidity
 
to
 
help
 
provide
 
cash
 
flow
 
for
 
short-term
expenses;
Longevity
 
for
 
long-term needs;
 
and
Legacy
 
for
 
needs
that go beyond their own and help improve
 
the lives of others, a
key part of wealth transfer planning.
Search for yield
Since
 
the beginning
 
of
 
the COVID-19
 
pandemic, investors
 
have
faced a very different investment landscape when compared with
the
 
last
 
decade,
 
with
 
higher
 
rates
 
of
 
economic
 
growth
 
in
developed markets and most notably higher inflation.
 
Nevertheless,
 
we expect
 
changes in
 
monetary policies
 
of
 
the
central banks of
 
Switzerland and
 
Europe, which have
 
kept interest
rates
 
at
 
historically
 
low
 
levels,
 
to
 
be
 
gradual.
 
The
 
US
 
Federal
Reserve has quickly adjusted to a higher-rate
 
path, but the overall
expected rates remain low
 
in a historical context.
 
Therefore, while
this will
 
create new
 
opportunities for
 
investors in
 
the bond
 
and
equity markets, the overall low-yield environment will continue.
 
As a result, investors searching for sustainable high returns for
the longer term
 
continue to diversify
 
into illiquid alternatives
 
(e.g.,
private equity, property, hedge funds and
 
infrastructure) that can
deliver
 
compelling
 
risk-adjusted
 
returns.
 
At
 
the
 
same
 
time,
investors continue to look
 
for low-cost, efficient
 
passive strategies
across
 
liquid
 
equity
 
markets.
 
We
 
believe
 
the
 
breadth
 
of
 
Asset
Management’s investment
 
expertise enables
 
us to
 
find the
 
right
solutions for clients across asset classes and regions.
 
 
 
 
37
Our response to COVID-19
In 2021,
 
the COVID-19
 
pandemic, which
 
had caused
 
a globally
unprecedented situation in 2020, continued to affect UBS and its
employees and
 
required our
 
ongoing focus
 
on safeguarding
 
the
well-being
 
of
 
our
 
employees
 
and
 
their
 
families,
 
on
 
serving
 
our
clients and ensuring operational continuity.
The rebound in economic activity in 2021 and
 
expectations of
further
 
economic
 
recovery
 
was
 
accompanied
 
by
 
the
 
spread
 
of
new variants that resulted
 
in all-time high numbers of
 
COVID-19
infections and associated disruption.
 
Our support for clients and the economies in which we
operate
We
 
continued
 
to
 
support
 
our
 
clients
 
with
 
advice
 
needed
 
to
manage their assets and liabilities, along with actively developing
investment solutions and global insights.
The program established
 
by the Swiss
 
Federal Council in
 
March
2020
 
to
 
support
 
small
 
and
 
medium-sized
 
entities
 
(SMEs)
 
by
guaranteeing
 
loans
 
granted
 
by
 
banks
 
closed
 
on
 
31 July
 
2020.
Outstanding
 
commitments
 
of
 
loans
 
granted
 
by
 
UBS
 
under
 
the
program
 
amounted
 
to
 
CHF 2.2
 
billion
 
on
 
31 December
 
2021,
with a total amount drawn of CHF 1.6 billion,
 
compared with the
peak commitments of CHF
 
3.3 billion and the
 
corresponding total
amount
 
drawn
 
of
 
CHF 1.7
 
billion
 
as
 
of
 
31 July
 
2020.
 
No
 
net
economic profits
 
have been
 
made since
 
the launch
 
of the
 
program
in 2020.
In
 
the
 
US,
 
we
 
continued
 
to
 
support
 
the
 
lending
 
programs
created under the CARES Act
 
for small businesses. Working with
a
 
partner,
 
we
 
provided
 
loans
 
of
 
USD 1.1
 
billion
 
under
 
the
Paycheck
 
Protection
 
Program
 
until
 
the
 
program
 
expired
 
in
 
May
2021. We donated around
 
USD 1 million of fees earned
 
on such
loans in 2021
 
to COVID-19
 
relief efforts
 
and around USD 2
 
million
in 2020.
Our support for communities
 
Following
 
earlier
 
donations
 
to
 
various
 
COVID-19-related
 
aid
projects
 
that
 
support
 
communities
 
across
 
regions
 
in
 
which
 
we
operate
,
 
and
 
recognizing
 
the
 
critical
 
importance
 
of
 
ensuring
access to COVID-19
 
vaccines globally, in 2021
 
UBS partnered with
Gavi, the global
 
vaccine alliance, to
 
raise funds for
 
its COVID-19
Vaccines
 
Global
 
Access
 
(COVAX)
 
facility
.
U
BS
 
Optimus
Foundation raised USD 2 million from clients for the Gavi COVAX
facility,
 
which,
 
with
 
matching
 
funds
 
from
 
UBS
 
and
 
the
 
Bill
 
&
Melinda
 
Gates
 
Foundation,
 
will
 
support
 
COVID-19
 
vaccinations
for
more
 
than
800,000
 
people
 
in
 
low
-
 
an
d
 
middle
-
income
countries.
More
 
recently,
 
we
 
have
 
committed
 
to
 
a
 
range
 
of
 
relief
programs in India
 
through the UBS
 
Optimus Foundation COVID-
19
 
Response
 
Fund.
 
Following
 
the
 
first
 
tranche
 
in
 
the
 
second
quarter
 
of
 
2021,
 
which
 
focused
 
on
 
the
 
delivery
 
of
 
oxygen
 
and
other medical supplies to those most in need,
 
the current tranche
centers
 
around
 
building
 
healthcare
 
worker
 
capacity
 
across
underserved
 
and
 
remote
 
locations,
 
as
 
well
 
as
 
supporting
 
the
mental health
 
of children
 
and young
 
people to
 
help them
 
cope
with the effects of the COVID-19 pandemic.
Our support for employees
Throughout
 
2021,
 
we
 
continued
 
to
 
prioritize
 
the
 
health
 
and
safety of
 
our employees
 
and clients
 
and to
 
adapt our
 
processes
related to office
 
work and
 
in-person meetings
 
in line
 
with country-
and location-specific developments.
Due to
 
the ongoing
 
pressure placed
 
on employees
 
by closed
workplaces and
 
schools, restricted
 
activities and
 
varying degrees
of lockdown, we continued with a
 
range of supportive measures
throughout 2021.
 
The offer
 
to our employees
 
included a
 
variety
of
 
tools
 
and
 
resources
 
to
 
support
 
employees’
 
physical,
 
mental,
financial and social
 
well-being, as well as
 
continuing flexibility to
manage various work / life demands.
Effects of the COVID-19 pandemic on our financial and
capital position
The negative
 
effects of
 
the COVID-19
 
crisis on
 
our financial and
capital
 
positions
 
remained
 
limited
 
in
 
2021,
 
despite
 
the
uncertainties caused by the pandemic.
 
We
 
maintained
 
a
 
strong
 
capital
 
and
 
liquidity
 
position
 
in
 
the
face of the COVID-19 pandemic.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Our strategy, business model and environment
 
| How we create value for our stakeholders
38
How we create value for our stakeholders
Stakeholder
 
group
Stakeholder needs:
what our stakeholders expect from us
Value proposition:
how we create value for our
stakeholders
Key topics discussed:
what was important to our
stakeholders in 2021
Stakeholder engagement:
how we engage with our stakeholders
Clients
Advice on a broad range of products
and services from trusted advisors
A mix of personal interaction with our
advisors in combination with digital
service anywhere and anytime
(convenient, seamless digital banking is
the expectation)
Top-quality solutions and the highest
standards in terms of asset safety, data
and information security,
confidentiality,
 
and privacy
A combination of global reach and local
capabilities targeting positive
investment outcomes
Competitively priced products and
services, risk management,
 
and liquidity
 
Delivering tailored advice and
customized solutions, using our
intellectual capital and digital platforms
Building long-term personalized
relationships with our clients
Developing new products, solutions
and strategic partnerships in response
to clients’ evolving needs,
 
including in
the digital age
Providing access to global capital
markets and bespoke financing
solutions
Meeting increasing sustainable
investment and private markets
demand from clients
Investment performance in
 
light of the
continued low-interest-rate
environment coupled with the threat of
rising inflation
Holistic goal-based financial planning
Sustainable finance and investing
opportunities
Data privacy and security
Products and services, including those
around digital banking
 
The need for even more personal advice
following the start of the COVID-19
pandemic
Individualized client meetings
Requests for regular client feedback,
feedback monitoring and complaint
handling
 
Primarily virtual client events and
conferences, including information on
key developments and opportunities
Client satisfaction surveys
Increasing levels of digital interaction
with clients
Investors
Disciplined execution of our strategy
leading to attractive capital returns
through dividends and share
repurchases
Comprehensive and clear disclosures on
quantitative and qualitative data
necessary to make informed investment
decisions
Recognizing and proactively addressing
strategic opportunities and challenges
Executing our strategy with discipline
and agility as the external environment
evolves, while aiming to deliver cost-
and capital-efficient growth
Providing transparent, timely and
reliable public disclosures
Strategic plans and updated targets
following the change of CEO in late
2020
Structural growth in and return
potential of our businesses
Cost efficiency and ability to generate
positive operating leverage
Ability to protect or even grow
revenues in a low-for-longer interest
rate environment
Incorporation of ESG factors into the
business model, compensation and risk
management
Financial reports, investor and analyst
conference calls, and webcasts, as well
as media updates on our performance
or other disclosures
General meetings of shareholders
Investor and analyst meetings
Digital interactions with investors as a
result of COVID-19 pandemic
restrictions, with limited impact on pre-
pandemic meeting schedules and
participation, given reliable virtual
solutions; the 2021 Annual General
Meeting was held virtually
Employees
A global, world-class employer, with
the expertise and breadth of
opportunity to empower people to
develop successful careers
 
A collaborative, engaging, supportive
and inclusive workplace culture
An environment that provides a sense
of belonging and the opportunities to
positively impact clients, shareholders
and society
 
Skill and career development
opportunities, including future-skills
development, and rewards for
performance and impact
Hiring great talent and investing in
development, now and for the future
 
Effective, fair people management and
compensation policies and practices
 
A strong workplace culture that aligns
with our purpose and values, enabling
employees to develop their careers and
unlock their full potential
Holistic support, including health and
well-being initiatives, that empowers
employees and fosters resilience
Comprehensive workforce data
analytics enable making better and
faster decisions to meet business needs
 
Our corporate culture, aligned to
purpose and enabled by our three keys
to success
A clear commitment to fair pay
A performance management process
that supports our strategic priorities
Hybrid working options for employees
 
Strategic focus on diversity, equity and
inclusion
A more agile future; accelerating new
ways of working
Regular CEO and GEB communications
and events, along with senior
leadership, regional and functional
sessions with employees
Employee surveys and other virtual
employee engagement activities
Group Franchise Awards and the Kudos
peer-to-peer recognition program
Health and well-being offerings,
employee volunteering and network
opportunities, flexible and hybrid-
working arrangements
 
Society
Facilitation of economic development
that is sustainable for the planet and
humankind
Maximization of our positive effects
and minimization of any negative
effects on society and the environment
Proactive management of the
environmental and societal impacts of
our businesses
Promoting significant and lasting
improvements to the well-being of
communities in which we operate
Taking an active role in the transition of
our economy toward environmentally
and socially sustainable solutions
Advising clients to align their business
models with ESG parameters and the
UN Sustainable Development Goals
Sustainable finance
Our climate strategy
Our client and corporate philanthropy
efforts
Reducing inequalities in our local
communities
Community investments and
partnerships with social institutions
Interaction with NGOs
Participation in forums and round
tables, as well as industry-, sector-
 
and
topic-specific debates
Dialogues with regulators and
governments
 
Support of COVID-19-related aid
projects across our communities
 
 
 
39
Clients
Our clients
 
are
 
the heart
 
of our
 
business. We
 
are
 
committed to
building and sustaining
 
long-term relationships based
 
on mutual
respect, trust and integrity.
 
Understanding our clients’ needs and
expectations enables us to best serve their interests and to create
value for them.
Our clients and what matters most to them
There is no typical UBS client. Our clients have varying needs, but
each
 
of
 
them
 
expects
 
outstanding
 
advice
 
and
 
service,
 
a
 
wide
range of choices, and an excellent client experience.
Global Wealth
 
Management focuses
 
on serving
 
the unique
 
and
sophisticated needs
 
of high
 
net worth
 
and ultra
 
high net
 
worth
individuals,
 
families
 
and
 
family
 
offices
 
worldwide,
 
as
 
well
 
as
affluent
 
clients
 
in
 
selected
 
markets.
 
We
 
give
 
them
 
access
 
to
outstanding
 
advice,
 
service
 
and
 
investment
 
opportunities
 
from
around the
 
globe, delivered
 
by experts they
 
can trust
 
and based
on the expertise
 
and insights of our
 
Chief Investment Office (the
CIO). Using a holistic,
 
goals-based approach to
 
financial planning,
we
 
deliver
 
a
 
personalized
 
wealth
 
management
 
experience
 
and
work side by side
 
with clients to
 
help them realize
 
their ambitions.
Our client-facing advisors and
 
the global teams supporting
 
them
focus on
 
developing
 
long-term client
 
relationships,
 
which
 
often
span generations. Clients look to us for expertise in helping them
to grow, protect
 
and transfer
 
their wealth, as
 
well as
 
helping them
make some
 
of the
 
most important
 
decisions in
 
their lives.
 
From
significant liquidity events
 
to professional milestones
 
and personal
turning
 
points,
 
we
 
aim
 
to
 
give
 
clients
 
the
 
confidence
 
to
 
move
forward and achieve their
 
goals. Through extensive research into
clients’
 
preferences
 
and
 
goals,
 
and
 
broader
 
analysis
 
of
 
investor
sentiment globally, we
 
constantly evolve our
 
offerings to meet
 
the
shifting priorities of
 
today’s wealthy
 
clients. This
 
includes investing
in digital capabilities and developing
 
products to help clients fund
their
 
lifestyles
 
and
 
manage
 
their
 
cash
 
flow,
 
as
 
well
 
as
 
offering
guidance on how they
 
can create a lasting
 
and positive impact
 
for
their communities
 
and the causes
 
they care about
 
most. We are
the
 
leading
 
global
 
wealth
 
manager
 
for
 
clients
 
interested
 
in
sustainable
 
investing,
1
 
with
 
a
 
commitment
 
to
 
developing
solutions that enable clients to
 
align their financial goals
 
and their
personal values.
 
›
 
Refer to “Global Wealth Management”
 
in the “Our businesses”
section of this report for more information about
 
sustainable
investment offerings
 
Personal & Corporate
 
Banking serves a
 
total of approximately
2.6 million
 
individual clients and
 
over 100,000
 
corporate clients,
companies
 
ranging
 
from
 
start-ups
 
to
 
multi-nationals,
 
including
specialized entities, such
 
as pension funds
 
and insurers, real
 
estate
companies,
 
commodity
 
traders
 
and
 
banks.
 
Our
 
clients
 
include
more
 
than
 
30%
 
of
 
Swiss
 
households,
 
more
 
than
 
90%
 
of
 
the
largest 250 Swiss corporations and more than 50% of midsize to
large pension funds in Switzerland. They look for financial advice
based on their needs
 
at each stage of
 
their individual or corporate
journey. We
 
aim to
 
deliver outstanding
 
advice to
 
all via
 
a multi-
channel approach. Clients have
 
access to digital banking,
 
a wide
network
 
of
 
branches
 
and
 
remote
 
advice.
 
These
 
channels
 
are
designed to
 
deliver a
 
superior, convenient
 
client experience
 
with
24/7
 
availability, security
 
and
 
value for
 
money,
 
resulting
 
in
 
high
levels of client satisfaction. Clients are also offered a broad range
of
 
products
 
and
 
services
 
in
 
all
 
relevant
 
areas:
 
basic
 
banking,
investing,
 
financing
 
(including
 
mortgages),
 
retirement
 
planning,
cash management, trade and export finance, global custody, and
company
 
succession, among
 
others.
 
Additionally, they
 
have full
access
 
to
 
the
 
solutions
 
of
 
the
 
Investment
 
Bank,
 
Asset
Management and Global Wealth Management.
In
 
Asset
 
Management,
 
we
 
deliver
 
investment
 
products
 
and
services directly to approximately 2,800 clients around the world,
including
 
sovereign
 
institutions,
 
central
 
banks,
 
supranational
corporations, pension
 
funds
 
and
 
insurers,
 
as
 
well
 
as
 
to
 
Global
Wealth Management and its clients,
 
wholesale intermediaries
 
and
financial
 
institutions.
 
By
 
building
 
long-term,
 
personalized
relationships
 
with
 
our
 
clients
 
and
 
partners,
 
underpinned
 
by
disciplined execution,
 
we aim to achieve a deep understanding of
their needs and
 
to earn
 
their trust. We
 
combine our global
 
scale
with the independent
 
thinking of our distinct
 
investment teams
 
to
utilize innovative ideas,
 
drawing on the breadth and depth of our
investment
 
capabilities,
 
across
 
traditional
 
and alternative,
 
active
 
and
indexed,
 
to deliver
 
the solutions
 
that clients
 
need.
 
The
 
Investment
 
Bank
 
provides
 
corporate,
 
institutional
 
and
wealth
 
management
 
clients
 
with
 
expert
 
advice,
 
financial
solutions,
 
execution
 
and
 
access
 
to
 
the
 
world’s
 
capital
 
markets.
Our business
 
model is
 
specifically built
 
around our
 
clients and
 
their
needs.
 
Corporate
 
clients
 
can
 
access
 
advisory
 
services,
 
debt
 
and
equity
 
capital market
 
solutions, and
 
bespoke
 
financing through
our
 
reshaped
 
Global
 
Banking
 
business.
 
Our
 
Global
 
Markets
business focuses on helping institutional clients
 
engage with local
markets
 
around
 
the
 
world,
 
offering
 
equities
 
and
 
equity-linked
products,
 
and
 
foreign
 
exchange,
 
rates
 
and
 
credit
 
products
 
and
services.
 
Our
 
equities
 
and
differentiated
content
 
offering
 
is
underpinned
 
by
 
Investment
 
Bank
 
Research.
 
The
 
differentiated
nature of
 
our research provides
 
access to
 
insight-ready data
 
sets
for
 
thousands
 
of
 
companies,
 
and
 
aims
 
to
 
give
 
clients
 
an
informational
 
edge.
In
 
2021,
approximately
 
45,000
 
research
reports were produced, with more than six million reads.
 
 
 
 
 
 
 
1
Euromoney Private Banking and Wealth Management Survey 2021: Overall Global Results.
 
 
 
Our strategy, business model and environment
 
| How we create value for our stakeholders
40
We know the security and confidentiality of our clients’
 
data is
of utmost importance to
 
them, as it
 
is for UBS.
 
That is why
 
we put
the highest
 
priority on
 
having comprehensive
 
measures in
 
place
that
 
are
 
designed
 
to
 
ensure
 
that client
 
data
 
confidentiality
 
and
integrity are
 
maintained. We
 
continually assess
 
and improve
 
our
control environment to mitigate
 
emerging cyber threats and
 
meet
expanding legal
 
and regulatory
 
expectations. Investments
 
in our
IT platforms preserve and improve
 
our IT security standards, with
a focus on giving clients secure access to their data via our digital
channels
 
and
 
protecting
 
that
 
data
 
from
 
unauthorized
 
access.
Although the
 
level of
 
sophistication and
 
the impact
 
and volume
of cyberattacks continue to grow
 
worldwide, we are ever vigilant,
maintaining
 
a
 
strong
 
and
 
agile
 
cybersecurity
 
and
 
information
security program to mitigate and
 
manage cyber risk by providing
robust, consistent, secure and resilient business processes.
Enhancing the client experience through innovation and
digitalization
We
streamline
 
and
 
simplify
interactions
 
with
 
clients
 
through
front-to-back digitalization and innovations.
In Global Wealth Management, we develop and deploy digital
tools that enhance the value
 
of human relationships, a factor
 
that
differentiates UBS. Clients expect
 
the convenience and speed
 
that
technology
 
offers but,
 
simultaneously, they
 
feel
 
that
 
a
 
personal
experience with
 
advisors is
 
more important
 
than ever.
 
Our advisors
use state-of-the-art
 
digital tools to
 
spend more
 
time with clients
and
 
better
 
evaluate
 
the
 
full
 
scope
 
of
 
their
 
financial
 
lives.
 
Our
clients appreciate
 
digital tools
 
that improve
 
their experience,
 
for
example, easy ways
 
to view their
 
portfolios or access
 
research that
is tailored to
 
their needs. They
 
also want multiple
 
ways in which
to interact with their
 
advisors. The COVID-19 pandemic,
 
and the
associated need for
 
physical distancing, has
 
led clients to
 
embrace
the
 
use
 
of
 
digital and
 
mobile
 
tools
 
more
 
than
 
ever
 
before.
 
We
continue to
 
introduce new
 
and better
 
tools to
 
meet and
 
exceed
clients’
 
expectations.
 
For
 
example,
 
our
UBS
 
Manage
 
Advanced
[My
 
Way]
 
app
 
offers
 
clients
 
in
 
selected
 
markets
 
an
 
at-a-glance
comprehensive view of their investment portfolio. With access to
more
 
than
 
60
 
professionally
 
managed
 
investment
 
modules
(building
 
blocks),
 
it
 
is
 
underpinned
 
by
 
continuous
 
portfolio
monitoring and
 
risk management.
 
The app
 
is interactive;
 
clients
can
 
work
 
with
 
their
 
advisors
 
on
 
a
 
tablet
 
to
 
design
 
their
 
own
portfolio, easily
 
including elements
 
such as
 
sustainable investing
and themes
 
to reflect
 
their individual
 
preferences and
 
priorities.
Based on the strong
 
momentum, client demand and inflows, we
intend
 
to
 
scale
 
up
 
and
 
further
 
develop
UBS
 
Manage
 
Advanced
[My
 
Way]
.
 
In
 
2021,
 
the
Direct
 
Investment
 
Insights
 
digital
investment service was
 
introduced in
 
Asia and
 
rolled out
 
in Europe
and
 
Switzerland.
 
This
 
service
 
provides
 
timely,
 
relevant
 
and
actionable investment insights and ideas from
 
the CIO directly to
clients’
 
mobile
 
and
 
desktop
 
devices,
 
linking
 
insights
 
with
execution
 
in
 
our
 
e-banking
 
and
 
mobile
 
app.
 
In
 
the
 
US,
 
we
announced
 
the
 
development
 
of
 
a
 
digital-led,
 
scalable
 
advice
model
 
for
 
affluent
 
clients.
 
As
 
a
 
trusted
 
brand
 
with
 
premium
content,
 
we see opportunities
 
to deliver
 
our expertise
 
to a broader
set of clients, combining digital experience with human advice.
 
In
Switzerland, our
UBS Mobile Banking
 
app has been enhanced so
clients can now
 
see relevant investment
 
views and access
 
our real-
time
 
quote
 
capabilities
 
before
 
logging
 
in.
 
At
 
a
 
broader
 
level,
progress continues on
 
our multi-year strategy
 
to serve clients
 
from
two platforms: the
Wealth Management Americas
 
Platform
 
in the
US and the
Wealth Management Platform
 
outside the US.
Personal
 
&
 
Corporate
 
Banking
 
continued
 
to
 
develop
 
simple,
smart,
 
secure
 
and
 
sustainable
 
solutions
 
in
 
2021,
 
reflecting
 
our
digital transformation progress. In May 2021,
 
we launched a new
Remote Sales &
 
Advice (RSA) unit
 
to offer Personal
 
Banking clients
more
 
flexibility
 
in
 
the
 
way
 
they
 
bank
 
through
 
extended
 
service
times and the option to receive professional advice
 
remotely. The
new RSA approach was
 
also successfully piloted for
 
Corporate &
Institutional
 
clients.
 
Following
 
the
 
excellent
 
results
 
of
 
the
 
2020
pilot, we initiated a
 
Switzerland-wide rollout of
UBS Multibanking
 
for corporate clients, an offering that integrates
 
third-party banks
for
 
full
 
transparency
 
across
 
accounts
 
and
 
convenient
 
payment
execution
 
via a
 
single platform.
 
To assist
 
clients throughout
 
the
onboarding phase, we
 
established a virtual
 
support team for
 
the
multi-banking
 
solution.
 
Moreover,
 
in
 
response
 
to
 
the
 
growing
number
 
of
 
client-support
 
requests
 
via
 
UBS
 
channels,
 
email
 
and
telephone,
 
we
 
introduced
 
the
UBS
 
Conversational
 
Platform
,
 
an
end-to-end platform enabling clients to get the right answers for
their issues quickly without a lot of interaction with call agents or
client advisors. To accelerate innovation in the payment business,
we announced our
UBS Virtual Credit Cards
, a new generation of
purely
 
digitally available
 
cards that
 
can be
 
used in
 
online shops
and
 
receive
 
deposits
 
from
 
TWINT, Apple
 
Pay,
 
Samsung
 
Pay
 
and
Google Pay. Since its introduction, more
 
than 30,000 virtual cards
have
 
been
 
issued.
 
For
 
banking
 
packages
,
 
we
 
have
 
launched
UBS me
 
to
 
replace
 
the
 
previous
 
pre-defined
 
banking
 
bundles.
Clients can
 
now put
 
together their
 
individual package
 
based on
their
 
own
 
needs
 
and
 
preferences,
 
and
 
are
 
only
 
charged
 
for
solutions they actually need. Our
UBS Atrium
 
mortgage platform
for
 
investment
 
properties
 
has
 
been
 
integrated
 
into
 
the
key4
 
brand, creating
 
a true
 
multi-channel and
 
multi-product offering.
As
 
a
 
result
 
of
 
the
 
integration,
 
clients
 
can
 
benefit
 
from
 
digital
offering
 
capabilities
 
of
 
the
 
innovative
 
mortgage
 
platform
 
for
owner
-
occupied
 
residential
 
property.
 
In
 
addition,
 
the
Green
Mortgage
 
for
 
income-producing
 
properties
 
is
 
available
 
via
key4
 
and offers
 
a financial advantage
 
on financing
 
to borrowers
 
who
hold recognized sustainability certificates. To
 
give clients access to
market-leading solutions beyond banking,
 
we have expanded our
network
 
of
 
partnerships.
 
We
 
have
 
joined
 
forces
 
with
 
a
 
Swiss
fintech
 
start-up to
 
provide corporate
 
clients with
 
extensive cash
management
 
functionalities,
 
from
 
automated
 
generation
 
of
expense
 
reports
 
to
 
validation
 
of
 
supplier
 
invoices.
 
To
 
make
progress in our
 
journey toward being
 
more agile, we
 
set up a
 
new
virtual
 
organization
 
as
 
a
 
collaboration
 
between
 
Personal
 
&
Corporate
 
Banking,
 
Global
 
Wealth
 
Management
 
and
 
the
 
Chief
Digital
 
and
 
Information
 
Office:
 
the
Agile
 
Delivery
 
Organization
.
With
 
more than
 
26
 
agile end-to-end
 
delivery
 
crews
 
focused
 
on
our clients’ needs, we are empowering teams, removing silos
 
and
evolving
 
toward
 
an
 
integrated
 
setup
 
to
 
deliver
 
responsive,
adaptable and
 
innovative products.
 
With sustainability
 
being a
 
top
strategic priority
 
for our
 
business and
 
our client
 
proposition, we
have
 
continuously
 
expanded
 
our
 
sustainability
 
agenda.
 
Our
platform for
 
volunteer work,
UBS Helpetica
, has
 
so far
 
received
286 project ideas
 
and published more than
 
180 projects with
 
over
70
 
non-profit
 
partners
 
across
 
its
 
focus
 
topics:
 
the environment,
social
 
issues,
 
education
 
and
 
entrepreneurship.
 
An
 
example
 
of
further
 
progress
 
in
 
our
 
sustainability
 
journey
 
came
 
when
 
the
UBS Strategy Funds
 
were repositioned toward
UBS Strategy Funds
Sustainable
 
in
 
2021,
 
which
 
led
 
to
 
the
 
transfer
 
of
 
a
 
significant
amount of existing custody assets to sustainable solutions.
 
 
 
41
In Asset
 
Management, we
 
are accelerating
 
our investment
 
in
digitalization.
 
We
 
have
 
extended
 
our
 
digital
 
client
 
relationship
management
 
pilot
 
tools,
 
technologies
 
and
 
data
 
capabilities
 
to
enhance the
 
experience of,
 
and service
 
for,
 
our clients,
 
to foster
innovation and to support alpha generation. For
 
example, we will
soon
 
launch
 
a
 
scalable
 
platform
 
to
 
ena
ble
 
more
 
efficient
development
 
and
 
management
 
of
 
theme-based
 
investment
products to meet growing
 
client demand. We continue
 
to expand
the
 
suite
 
of
 
tools
 
used
 
by
 
our
 
Quantitative
 
Evidence
 
&
 
Data
Science
 
team,
 
who
 
utilize
 
alternative
 
and
 
traditional
 
data
combined with statistical modeling to enhance and augment our
fundamental and systematic
 
investment processes.
 
To simplify
 
and
enhance our client servicing, we are introducing improvements in
client and data analytics.
The Investment Bank
 
strives to be the digital
 
investment bank
of the
 
future, with
 
innovation-led businesses
 
driving efficiencies
and solutions. In February 2021, we announced the creation of a
Digital
 
Platforms
 
function
 
within
 
the
 
Investment
 
Bank
 
across
Global
 
Markets
 
and
 
Global
 
Banking,
 
to
 
work
 
on
 
exponential
transformation
 
through
 
experimentation,
 
innovation,
 
and
external partnerships.
 
The
Digital Platforms
 
function is
 
critical to
deliver
ing
 
on
 
our
 
client
 
promise.
 
In
 
Global
 
Markets,
 
our
Technology-Enhanced Sales (TES)
 
teams work in close partnership
with
our
 
Data
 
Intelligence,
 
Group
 
Technology,
 
and
 
Client
Coverage teams
 
to embed
 
our data
 
and technology
 
capabilities
across all client
 
teams and enhance our
 
client service.
TES
 
allows
clients to
 
choose where
 
and how
 
we deliver
 
content and
 
uses data
modeling
 
to
 
customize
 
the
 
content
 
they
 
receive.
UBS
 
Neo
,
 
our
award-winning multi-channel platform and
 
enterprise ecosystem
for
 
digital
 
clients,
 
lets
 
our
 
professional
 
and
 
institutional
 
clients
access
 
a
 
comprehensive
 
suite of
 
products and
 
services
 
covering
the
 
full investment
 
life
 
cycle. Historically,
 
most clients
 
used only
one or two of the capabilities available to
 
them via
UBS Neo
. We
have
 
now
 
transformed
 
the
 
client
 
experience
 
through
 
a
 
new
personalized version
 
of the
 
platform, including
 
the launch
 
of an
app
 
store.
Investment
 
Bank
 
DigiOps
,
 
our
 
Operations
 
team
working
 
in
 
collaboration
 
with
 
Group
 
Technology
 
on
 
digital
innovation projects, is enhancing the
 
client experience through a
digital
 
platform
 
that continues
 
to
 
make progress
 
on
 
simplifying
Operation’s
 
technology
 
infrastructure,
 
increasing
 
front-to-back
efficiency
 
and
 
enhancing
 
our
 
decision
 
making
 
and relevance
 
to
clients. New non-bank
 
competitors have secured
 
a foothold
 
in our
markets,
 
while
 
fintech
 
firms
 
have
 
carved
 
out
 
and
 
dominated
entirely new
 
segments. In
 
response, we
 
created a
 
team focused
on
 
strategic
 
investments
 
and
 
fundamentally
 
new
 
market
infrastructure.
 
By
 
utilizing
 
distributed
 
ledger
 
technology,
 
Global
Markets is
 
transforming the
 
business models
 
of products
 
where
the Investment Bank has been
 
strong historically. One example is
 
UBS Gold
, our
 
global physical
 
gold transaction
 
network of
 
retail
investors,
 
gold
 
merchants,
 
institutional
 
investors
 
and
 
vault
providers that enables
 
clients to buy
 
and sell at
 
interbank prices.
A tokenized
 
representation of
 
underlying physical
 
gold provides
fractional
 
ownership
 
with
 
low-friction
 
transactional
 
capability.
Our vision
 
is to
 
accelerate the
 
tokenization of
 
financial products
traded
 
by UBS
 
clients. In
 
November 2021,
 
the Investment
 
Bank
helped
SIX
 
Group
 
to
 
launch
 
the
 
first
ever
 
Swiss
 
franc
-
denominated
 
digital
 
bond
 
offering,
 
which
 
is
 
listed,
 
traded
 
and
settled
 
on
 
the
 
newly
 
established
 
SIX
 
Digital
 
Exchange.
 
Global
Banking has also prioritized the client experience.
Global Banking
Data &
 
Analytics Lab
 
uses data
 
science, predictive
 
analytics and
quantitative models to develop solutions for our businesses.
UBS-
GUARD
 
applies
 
data
 
science
 
and
 
predictive
 
analytics
 
to
 
Global
Banking
 
business
 
users,
 
predicting
the
risk
 
of
 
companies
becoming
 
the
 
targets
 
of
 
activists,
 
identifying
 
deal opportunities
and helping navigate
 
client pitches. Our
SPAC database
 
is a fully
automated
 
database
 
of
 
in-market
 
special
 
purpose
 
acquisition
companies
 
(SPACs)
 
created
 
to
 
match
 
SPACs
 
with
 
potential
acquisition targets and
 
help increase efficiency and
 
collaboration
across sectors and regions.
Engaging with our clients
We
 
use
 
a
 
variety
 
of
 
channels
 
to
 
engage
 
with
 
clients,
 
including
regular client relationship and service meetings, as well as various
corporate
 
roadshows
 
and
 
dedicated
 
events.
 
Digital
 
interaction
with clients increased as the pandemic continued.
 
Global Wealth Management interacted with clients via various
settings in 2021, from personalized private briefings
 
with subject
matter experts
 
to segment-specific
 
virtual events
 
and large-scale
initiatives.
 
We
 
utilize
 
marketing
 
campaigns,
 
events,
 
advertising,
publications
 
and
 
digital-only
 
solutions
 
to
 
help
 
drive
 
greater
awareness of UBS
 
among prospective clients
 
and reinforce trust-
based relationships between advisors and clients.
Personal
 
&
Corporate
 
Banking
 
holds
 
regular
 
client
 
events
(mostly webcasts
 
and virtual
 
or hybrid
 
events since
 
the onset
 
of
the
 
COVID-19
 
pandemic),
 
covering
 
a
 
wide
 
range
 
of
 
topics.
 
In
2021, we
 
increasingly engaged
 
with clients
 
via online
 
channels,
such
 
as
 
social
 
media,
 
online
 
displays
 
and
 
search
 
engines,
 
and
further decreased our use of traditional out-of-home channels.
In Asset Management, we have a consistent program of client
events
 
and
 
engagement
 
activities
 
throughout
 
the
 
year.
 
This
includes our flagship
 
conferences, such
 
as the annual
UBS Reserve
Management
 
Seminar
,
and
 
we
 
held
 
our
 
inaugural
 
Alternatives
Conference
 
in 2021.
 
Alongside this, our
 
teams continued
 
the high
level of interaction
 
with clients
 
globally in 2021,
 
facilitated by new
digital tools,
 
and our
 
publication of
 
macro insights
 
and thought
leadership to provide
 
timely insights into
 
rapidly evolving markets.
We
 
also
 
hosted
 
a
 
broad
 
range
 
of
 
virtual
 
events,
 
including
 
our
Nobel
 
Perspectives
 
webinar
 
series,
 
to
 
help
 
our
 
clients
 
better
understand market challenges and investment opportunities, and
we continued
 
to engage
 
with clients
 
through our
 
social media
 
and
online channels.
 
 
Our strategy, business model and environment
 
| How we create value for our stakeholders
42
The Investment
 
Bank hosted
 
over 170
 
investor conferences
 
and
educational seminars globally in 2021, covering a broad range of
macro, sector, regional and
 
regulatory topics. Almost all of
 
those
conferences
 
were
 
held
 
virtually.
 
More
 
than
 
40,000
 
clients
 
took
part in
 
such events
 
in 2021,
 
providing insight
 
and access
 
to our
own opinion
 
leaders, policymakers
 
and leading
 
industry experts.
We
 
leverage our intellectual capital and relationships and use our
execution
 
capabilities,
 
differentiated
 
research
 
content,
 
bespoke
solutions, client
 
franchise model
 
and global
 
platform to
 
expand
coverage across a broad set of clients.
UBS Neo Question Bank
 
is
the largest global database of market
 
-related questions asked by
professional
 
investors,
 
while
UBS
 
Live
 
Desk
,
built
 
within
 
the
UBS Neo
 
platform,
 
provides
 
clients
 
with
 
a
 
stream
 
of
 
fast-paced
commentary from UBS traders.
How we measure client satisfaction
We use multiple techniques
 
to regularly assess our
 
achievements
and the satisfaction of our clients.
Global
 
Wealth
 
Management
 
is increasingly
 
using
 
technology
and
 
analytics
 
capabilities
 
to
 
collect
 
and
 
respond
 
to
 
client
feedback. Our
 
digital client
 
feedback tool
 
lets clients
 
submit, via
mobile and the web,
 
input about overall
 
satisfaction with advisors
and
 
UBS,
 
and
 
share
 
key
 
topics
 
they
 
wish
 
to
 
discuss
 
with
 
their
advisors. Advisors and their
 
teams have seamless, real-time
 
access
to
 
client
 
feedback,
 
enabling
 
them
 
to
 
be
 
highly
 
responsive.
 
The
tool is available in
 
the US and Asia Pacific,
 
as well as most EMEA
countries.
Personal &
 
Corporate Banking
 
has conducted
 
annual surveys
of
 
clients
 
in
 
Switzerland
 
since
 
2008,
 
consistently
 
covering
 
all
private and corporate
 
client segments
 
annually since
 
2015. Clients
provide
 
feedback
 
on
 
their
 
satisfaction
 
with
 
regard
 
to
 
various
topics (e.g.,
 
UBS overall,
 
branches, client
 
advisors, products
 
and
services)
 
and indicate
 
further
 
product
 
or
 
advisory needs.
 
Survey
responses are
 
distributed to
 
client advisors,
 
who follow
 
up with
each
 
respondent
 
individually.
 
In
 
2021,
 
we
 
had
 
an
 
all-time
 
high
client satisfaction
 
and net
 
promoter score
 
(NPS), and
 
achieved a
77% follow-up rate with survey participants.
The
 
Quality Feedback
 
system in
 
Global
 
Wealth Management
and Personal & Corporate Banking provides a comprehensive
 
and
systematic
 
platform
 
to
 
receive
 
and
 
process
 
client
 
feedback
 
and
suggestions. We
 
receive feedback
 
in various
 
forms and
 
through
different
 
channels,
 
including
 
in
 
writing,
 
electronically,
 
orally
 
to
client
 
advisors
 
and staff
 
in our
 
branches
 
and
 
other client
 
touch
points,
 
via
 
social
 
media
 
channels,
 
and
 
via
 
the
 
Swiss
 
Banking
Ombudsman.
 
Client
 
feedback,
 
including
 
complaints
 
and
suggestions, is vitally important, as
 
it shows direct and unfiltered
client needs, supports
 
the development and introduction
 
of new
products and
 
services and
 
hence fosters
 
the optimization
 
of our
offering in
 
a client-focused
 
manner. By
 
addressing client
 
feedback,
we
 
aim
 
to
 
strengthen
 
client
 
relationships,
 
improve
 
client
satisfaction and
 
make tangible improvements
 
to our services.
 
By
sharing their views, clients contribute
 
to quality improvements at
all
 
levels.
 
We
 
aim
 
to
 
respond
 
to
 
each
 
individual
 
who
 
provides
feedback. In 2021, key topics
 
and enhancements centered mostly
around
 
digital
 
banking
 
functionalities,
 
digital
 
client
 
onboarding
and the reorganization of UBS’s branches and services.
In Asset
 
Management, we
 
have an
 
integrated process
 
to record
and
 
manage
 
client
 
feedback
 
through
 
our
 
client
 
relationship
management tool. We also conduct regular surveys, covering our
wholesale and institutional clients
 
globally, inviting them to
 
assess
their satisfaction
 
with our
 
client service,
 
products and
 
solutions,
as well as
 
other factors relevant
 
to their investments.
 
The results
are
 
analyzed
 
to
 
identify
 
focus
 
areas
 
for
 
improvement
 
and
 
our
client
 
relationship
 
managers
 
follow
 
up
 
with
 
respondents
 
to
address specific feedback where required.
The
 
Investment
 
Bank
 
closely
 
monitors
 
client
 
satisfaction
 
via
individual
 
product
 
coverage
 
points.
 
Direct
 
client
 
feedback
 
is
actively
 
captured
 
and
 
tracked
 
in
 
our
 
systems.
 
Internal
 
regional
forums
 
serve
 
as
 
a
 
platform
 
for
 
senior
 
management
 
to
 
discuss
client
 
relationships,
 
possibilities
 
for
 
improvement,
 
potential
opportunities
 
and
 
specific
 
client
 
issues.
 
Other
 
processes
 
are
 
in
place to enable consolidated findings to
 
be shared within UBS as
appropriate. The
 
Investment Bank
 
also closely
 
monitors external
surveys,
 
which
 
provide
 
feedback
 
across
 
a
 
range
 
of
 
investment
banking services. We
 
continue to
 
make progress in
 
simplifying our
technology
 
infrastructure,
 
focusing
 
on
 
increasing
 
front-to-back
efficiency
 
and
 
enhancing
 
our
 
decision
 
making
 
and relevance
 
to
clients. In
 
November 2021,
 
we launched
 
the first
 
Annual Global
Markets Client Survey
 
to gauge
 
our clients’ experience
 
of UBS
 
and
the products and services that are
 
important to them, measuring
client
 
satisfaction
 
and
 
loyalty.
In
 
2021,
 
over
 
49%
 
of
 
Global
Markets clients surveyed
 
expected to increase
 
their market share
with
 
UBS
 
in
 
the
 
next
 
six
 
months.
 
When
 
ranking
 
the
 
most
important
 
factor
in
 
choosing
 
a
 
market
 
partner,
r
elationship
management
 
coverage
 
and
 
connectivity
 
were
 
a
 
priority,
 
further
underlining
 
the
 
importance
 
of
 
our
 
people.
 
When
 
asked
 
about
future capabilities, our clients ranked highly the need for profiled
personalization
 
of
 
products
 
and
services,
underlining
 
the
importance of our
Digital Platforms
 
and our
TES
 
initiative.
 
We
 
thoroughly
 
evaluate
 
the
 
feedback
 
we
 
receive,
 
including
complaints from clients,
 
and take measures
 
to address key
 
themes
identified.
 
For example,
 
in 2021,
 
Personal &
 
Corporate Banking
clients
 
expressed
 
an
 
increasing
 
need
 
for
 
security
 
and
 
trust.
 
The
ongoing optimization and
 
digitalization of products
 
has been well
received
 
by
 
clients
 
across
 
all
 
segments.
 
However,
 
in
 
light
 
of
ongoing branch closures, clients would
 
like further digitalization.
Furthermore,
 
feedback
in
dicated
 
that
 
clients
 
developed
 
high
 
levels
 
of
 
acceptance
 
for
 
telephone
 
or
 
video
 
advice
 
and
 
were
increasingly satisfied with the service received via Global
 
Banking.
 
 
 
43
Investors
We aim to create sustainable,
 
long-term value for
 
our investors by
executing
 
our
 
strategy
 
with
 
discipline,
 
maintain
 
risk
 
and
 
cost
discipline, and deliver attractive shareholder returns.
 
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
Driving growth while maintaining risk and cost discipline
We
 
are
 
focusing
 
on
 
growth,
 
as
 
we
 
expand
 
into
 
new
 
client
segments
 
and
 
accelerate
 
our
 
strategic
 
technology
 
investments.
Across the firm, we intend to maintain
 
our risk and cost discipline
to support our
 
growth plans, with
 
continual enhancement of
 
day-
to-day efforts.
We are
 
aiming to
 
create sustainable
 
value through
 
the cycle.
To
 
accomplish
 
this,
 
we
 
have
 
outlined
 
selected
 
commercial
 
and
environmental,
 
social
 
and
 
governance
 
(ESG)
 
aspirations,
 
which
should support our financial targets.
Our
 
primary
 
measurement
 
of
 
performance
 
for
 
the
 
Group
 
is
return on common
 
equity tier 1 (CET1),
 
as regulatory capital
 
is our
binding
 
constraint
 
and
 
drives
 
our
 
ability
 
to
 
return
 
capital
 
to
shareholders.
›
 
Refer to the “Targets, aspirations and capital guidance” section
of this report for more information
Active capital management to enable growth and deliver
attractive shareholder returns
Our first priority
 
is ensuring that
 
we can maintain
 
a strong balance
sheet.
 
This
 
includes
 
our
 
strong
 
capitalization,
 
in
 
line
 
with
 
our
capital
 
guidance
 
of
 
maintaining
 
a
 
CET1
 
capital
 
ratio
 
of
 
around
13% and a CET1 capital leverage ratio of greater than 3.7%.
As a second priority, we consider opportunities for investment
in growth.
Our
 
third
 
priority
 
is
 
returning
 
capital
 
to
 
shareholders
 
in
 
the
form
 
of
 
dividends,
 
and
 
we
intend
 
to
 
pay
 
progressive
 
cash
 
dividends. For 2021,
 
the Board of
 
Directors intends to
 
propose a
dividend to UBS Group AG shareholders of USD 0.50 per share.
After
 
these
 
three
 
priorities
 
have
 
been
 
met,
 
we
 
intend
 
to
distribute
 
excess
 
capital
 
to
 
shareholders
 
via
 
share
 
buybacks.
 
In
2021,
 
we
 
bought
 
back
 
USD 2.6
 
billion
 
of
 
our
 
shares.
 
Looking
ahead, we intend to buy
 
back up to USD 5 billion
 
of shares by the
end of 2022.
 
›
 
Refer to “UBS shares” in the “Capital, liquidity
 
and funding, and
balance sheet”
 
section of this report for more information
Communications
Our Investor Relations (IR) function is
 
the primary point of contact
between UBS and our shareholders. Our senior management and
IR regularly interact
 
with institutional investors,
 
financial analysts
and
 
other
 
market
 
participants,
 
such
 
as
 
credit
 
rating
 
agencies.
Clear,
 
transparent
 
and
 
relevant
 
disclosures,
 
and
 
regular
 
direct
interactions with existing and prospective
 
shareholders, form the
basis for our
 
communications. The IR
 
team relays the views
 
of and
feedback
 
on
 
UBS
 
from
 
institutional
 
investors
 
and
 
other
 
market
participants to our senior management.
IR
 
and
 
our
 
Corporate
 
Responsibility
 
function
 
work
 
together
and interact
 
with any
 
investors interested
 
in sustainability
 
topics
relevant to UBS and wider society.
›
 
Refer to the first nine pages
 
of the “Corporate governance”
section of this report and “Information policy”
 
in that same
section for more information
 
›
 
Refer to the Sustainability Report 2021,
 
available from 11 March
2022 under “Annual reporting” at
ubs.com/investors
, for more
information
 
UBS_AR_2021p72i0.gif
Our strategy, business model and environment
 
| How we create value for our stakeholders
44
Employees
At UBS, we know the meaning of long-term commitment; to our
clients, investors, employees,
 
communities and society.
 
With our
employees,
 
this
 
commitment
 
is
 
personal.
 
We
 
are
 
dedicated
 
to
being a world-class employer
 
where our employees can
 
leverage
and
 
continually enhance
 
their skills,
 
partnering
 
with
 
clients and
colleagues on solutions that make a real difference.
 
Our people
 
leadership approach
 
aligns with
 
our strategy
 
and
our purpose, as both
 
rely on engaged
 
and empowered individuals
to drive them forward. Our
 
employees are the key to
 
realizing our
ambitions.
 
Reimagining
 
the
 
power
 
of
 
people
 
and
 
making
connections are at the heart of what we
 
do. Every day, our global
team
 
connects
 
people
 
with
 
innovative
 
ideas
 
and
 
opportunities
that lead to better results
 
for UBS and for
 
our clients, as well as
 
to
progress in society.
Our purpose drives our strategy and culture
Our
 
purpose
 
articulates
 
why
 
we
 
do
 
what
 
we
 
do
 
and
 
why
 
it
matters.
 
Our
 
culture
 
affects
 
how
 
we
 
do
 
things
 
and
 
is
 
firmly
grounded in
 
our three
 
keys to success:
 
our
Pillars, Principles
 
and
Behaviors
. To help ensure that
 
our culture advances our
 
strategic
goals, we updated our
 
three keys to
 
success in 2021 to
 
reflect our
purpose,
 
client
 
promise
 
and
 
strategic
 
imperatives.
 
For
 
the
 
past
decade, these keys
 
have defined
 
how we work
 
together and what
we stand for, as
 
a firm and as
 
individuals. They continue to
 
drive
daily
 
business
 
decisions
 
and
 
are
 
integrated
 
into
 
our
 
people
management processes.
›
 
Refer to the Sustainability Report 2021,
 
available from 11 March
2022 under “Annual reporting” at
ubs.com/investors
, for more
information about our Pillars,
 
Principles and Behaviors
 
We
 
promote
 
culture-building
 
behavior
 
through
 
a
 
number
 
of
global,
 
regional and divisional initiatives. Notably, since 2016, our
Group Franchise Awards
 
(GFA) program has rewarded employees
for
 
promoting
 
cross-divisional
 
collaboration
 
and
 
innovation.
 
A
related
 
idea-sharing
 
site
 
enables
 
employees
 
to
 
cooperate
 
on
solutions
 
for
 
operational,
 
client
 
service,
 
sustainability
 
and
technology challenges.
 
Nearly 6,000
 
ideas have
 
been submitted
since
 
its
 
launch,
 
with
 
approximately
 
450
 
ideas
 
implemented
 
or
supported for future implementation.
A
 
peer-to-peer
 
recognition
 
program
 
instituted
 
in
 
late
 
2020
encourages
employees
 
to
 
recognize
 
colleagues’
 
exemplary
behavior.
 
Called
Kudos
,
 
this
 
initiative
 
serves
 
to
 
bring
 
teams
together
 
and
 
increase
 
motivation,
 
engagement
 
and
 
employee
satisfaction,
with
 
a
 
total
 
of
around
4
20
,000
messages
 
of
recognition given since the program was launched.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
45
Leadership,
 
engagement and culture
 
Connecting
 
people
 
with
 
transformative
 
ideas
 
and
 
becoming
 
a
more
 
agile
 
organization
 
starts
 
with
 
our
 
leaders.
 
In
 
2021,
 
we
updated
 
our
House
 
View
 
on
 
Leadership
 
to
 
reflect
 
the
 
behavior
that we
 
expect every
 
leader to
 
demonstrate toward
 
employees,
clients
 
and
 
business
 
activities.
 
Leaders
 
at
 
all
 
levels
 
are
 
also
expected
 
to
 
foster
 
simplification,
 
empowerment
 
and
accountability
 
in
 
their
 
teams
 
to
 
support
 
our
 
ongoing
transformation.
Key to maintaining a strong culture are listening to employees
and
 
acting
 
on
 
their
 
feedback.
 
Launched
 
in
 
mid-2021,
 
our
 
new
employee-listening strategy
 
uses Group-wide
 
surveys conducted
by
 
an
 
external
 
provider
 
to
 
measure
 
indicators
 
such
 
as
 
line
manager
 
effectiveness,
 
and
 
in-depth
 
research
 
to
 
solve
 
specific
business
 
issues.
 
As an
 
example,
 
an
 
Organizational
 
Health
 
Index
assesses
 
firm-wide
 
alignment
 
with
 
strategic
 
goals,
 
working
practices
 
and
 
adaptability.
 
Employee
 
responses
 
in
 
2021
 
directly
influenced
 
the
 
development
 
of
 
our
 
purpose,
 
our
 
new
performance management approach
 
and our increased
 
focus on
innovation, sustainability and impact.
›
 
Refer to the Sustainability Report 2021,
 
available from 11 March
2022 under “Annual reporting” at
ubs.com/investors
, for more
information about our management practices,
 
and to the
foldout page of this report for more information
 
about our
purpose
Toward a more agile future
 
Driven
 
by our
 
strategic
 
imperatives
 
and
 
in
 
response
 
to
 
evolving
client
 
needs,
 
we
 
are
 
accelerating
 
the
 
adoption
 
of
 
new
 
ways
 
of
working together. In particular, agile working practices, and agile
teams
 
where
 
th
ey
 
make
 
sense,
 
will
 
enable
 
us
 
to
 
be
more
responsive,
 
adaptive and
 
innovative in
 
everything we
 
do. Multi-
disciplinary
 
teams
 
working
 
across
 
the
 
firm
 
will
 
create
 
better
outcomes
 
for
 
clients
 
and
 
improve
 
our
 
employees’
 
work
experience. In 2021,
 
we launched a
 
first wave of the
Agile@UBS
 
program ahead
 
of a broader
 
implementation in 2022.
 
Currently,
we have
 
10,000 employees
 
transitioning to
 
the new
Agile@UBS
 
ways of working
 
by the end
 
of the first
 
quarter of 2022
 
and we
are
 
on
 
track
 
to
 
have
 
over
 
20
,000
 
employees
 
working
 
in
Agile@UBS
 
by the
 
end of
 
2022.
 
Participants’ experiences,
 
along
with coaching
 
and specialized training
 
delivered through
 
the Agile
Academy
 
within
 
our
 
UBS
 
University,
 
will
 
enable
 
us
 
to
systematically
 
roll
 
out
Agile@UBS
 
to
 
more business
 
areas
 
going
forward.
 
Our commitment to diversity, equity and inclusion (DE&I)
In our experience,
 
diverse teams better
 
understand and relate
 
to
our
 
equally
 
diverse
 
clients
and
 
their
needs
.
 
Furthermore,
employees
 
with
 
different
 
backgrounds
 
and
 
experiences
 
drive
innovation and
 
better decision making.
 
Our aim,
 
therefore, is to
shape
 
a
 
diverse
 
and
 
inclusive
 
organization
 
that
 
is
 
innovative,
provides
 
outstanding
 
service
 
to
 
our
 
clients
 
and
 
offers
 
equitable
opportunities so that all employees may thrive.
Our
 
broad
 
approach
 
encompasses
 
a
 
range
 
of
 
aspects,
including
 
inclusive
 
leadership,
 
gender,
 
ethnicity,
 
LGBTQ+
 
and
disability.
 
Along
 
with
 
a
 
concerted
 
focus
 
on
 
building
 
inclusive
leadership
 
skills,
 
increasing
 
gender
 
and
 
ethnic
 
diversity
,
 
and
ensuring equitable
 
policies and practices
 
were priorities in
 
2021.
Regarding gender, we aspire to
 
have 30% of Director and
 
above
roles
 
held by
 
women by
 
2025. At
 
the end
 
of 2021,
 
that figure
stood
 
at
 
26.7%,
 
up
 
from
 
26.0%
 
in
 
2020.
 
Similarly,
 
our
 
2025
aspiration is to achieve a 26% representation of ethnic minorities
at Director level
 
and above in
 
the UK and
 
the US. As
 
of the end
of 2021, this figure was 20.1% in the US and 21.3% in the UK.
 
Initially launched in
 
Switzerland in 2016,
 
our global
UBS Career
Comeback
 
program continues to help us increase
 
our pipeline of
female leaders. To date, the program
 
has helped 196 women and
19 men relaunch their careers.
 
In
 
addition
 
to
 
strategic
 
initiatives,
 
each
 
year
 
we
 
sponsor
numerous
 
activities
 
to
 
promote
 
inclusivity
 
and
 
a
 
culture
 
of
belonging.
 
Chief among
 
them are
 
activities
 
provided by
 
our 48
employee networks
 
across the
 
firm. Employee
 
volunteers regularly
host educational
 
events and
 
initiatives focused
 
on gender, culture,
ethnicity,
 
LGBTQ+
 
/
 
Pride,
 
disability,
 
veterans,
 
parenting,
 
elder
care
 
and
 
other
 
topics.
 
Our
 
employee
 
networks
 
also
 
raise
 
the
visibility of employees’
 
needs and help
 
shape our DE&I
 
program,
local benefits
 
offerings, and
 
more. Disability
 
is a
 
key focus
 
area:
as such, the firm became
 
a member of The Valuable 500 in
 
2021,
committing to make disability inclusion
 
part of the firm’s
 
business
leadership agenda.
›
 
Refer to
ubs.com/diversity
 
for more information about our DE&I
priorities, commitments and progress
 
 
Personnel by region
As of
% change from
Full-time equivalents
31.12.21
31.12.20
31.12.19
31.12.20
Americas
21,317
21,394
21,036
0
of which: USA
20,537
20,528
20,232
0
Asia Pacific
15,618
15,353
13,956
2
Europe, Middle East and Africa (excluding Switzerland)
14,091
13,899
12,918
1
of which: UK
6,051
6,069
5,704
0
of which: rest of Europe (excluding Switzerland)
7,826
7,652
7,048
2
of which: Middle East and Africa
215
178
166
21
Switzerland
20,359
20,904
20,691
(3)
Total
71,385
71,551
68,601
0
 
 
 
Our strategy, business model and environment
 
| How we create value for our stakeholders
46
Practices that help us remain an employer of choice
 
Compensating employees fairly
 
and consistently is
 
key to
 
ensuring
equal opportunities.
 
We pay
 
for performance,
 
and we
 
take pay
equity
 
seriously.
 
A strong
 
commitment to
 
both
 
is embedded
 
in
our compensation policies, and we conduct both internal reviews
and independent external audits as
 
quality checks. If we uncover
gaps that cannot be explained by business
 
factors or appropriate
personal
 
factors
 
–
 
such
 
as
 
experience,
 
role,
 
responsibility,
performance
 
or
 
location –
 
we explore
 
the root
 
causes
 
of
 
those
gaps and address them. Additionally,
 
our regular monitoring and
review processes also allow us to maintain our certification status
with the EQUALSALARY Foundation
 
for our equal
 
pay practices in
Switzerland, the US, the UK, Hong Kong SAR and
 
Singapore. The
firm
 
also
 
successfully
 
completed
 
an
 
equal
 
pay
 
analysis
 
in
Switzerland
 
in
 
2020,
 
as
 
required
 
by
 
the
 
Swiss
 
Federal
 
Act
 
on
Gender Equality. The results of the analysis confirmed that
 
we are
fully
 
compliant
 
with
 
Swiss
 
equal
 
pay
 
standards.
 
These
 
holistic
certifications
 
are
 
a
 
testament
 
to
 
our
 
well-established
 
equal
opportunity
 
environment
 
and
 
the
 
strength
 
of
 
our
 
human
resources practices,
 
including performance and
 
reward. In 2021,
we
 
continued
 
to
 
monitor
 
pay
 
fairness
 
and
 
addressed
 
any
unexplained gaps to ensure
 
that all employees are
 
paid fairly.
 
All
employees
 
have
 
access
 
to
 
competitive
 
benefits,
 
including
insurance, retirement and personal leave.
›
 
Refer to the “Compensation” section
 
of this report for more
information about compensation-related
 
topics
 
Meeting employees’ needs while improving services for clients
 
Working both from
 
home and from
 
the office became
 
the norm
for
 
many
 
employees
in
 
2021
,
 
with
 
surveys
 
indicating
 
strong
support for
 
continued flexibility.
 
Following a
 
global analysis
 
that
considered
 
factors
 
such as
 
regulation,
 
risk
 
and productivity,
 
we
determined that
 
approximately 75%
 
of our
 
employees could
 
be
eligible to
 
work in a
 
hybrid setup. In
 
addition to
 
fostering better
work
 
/ life
 
balance,
 
a
 
hybrid model
 
makes
 
us a
 
more
 
attractive
employer to
 
a wider pool
 
of applicants,
 
such as
 
early-career talent,
working parents and
 
those in continuing
 
education. The
 
emphasis
on
 
technology
 
and
 
virtual
 
collaboration
 
also
 
sparks
 
innovative
thinking that
 
will make us
 
more agile
 
and further improve
 
client
service.
 
We
 
are
 
implementing
 
hybrid
 
working
 
on
 
a
 
country-by-
country
 
basis,
 
along
 
with
 
wide-ranging
 
support
 
to
 
ensure
 
that
employees, teams and our culture all continue to thrive.
 
Health and well-being
 
Supporting employee health
 
and well-being remained a
 
priority in
2021.
 
We
 
are
 
committed
 
to
 
helping
 
employees
 
thrive
 
in
 
their
current
 
roles
 
and
 
deliver
 
sustainable
 
performance
 
over
 
time.
Regular
 
“pulse”
 
surveys
 
gauged
 
employees’
 
views
 
on
 
remote
work, stress, communication
 
and other
 
aspects. Resources to
 
help
employees
 
support
 
holistic
 
well-being
 
featured
 
a
 
bespoke
eLearning
 
curriculum,
 
physical
 
and
 
mental
 
health
 
initiatives,
volunteering opportunities, increased benefits offerings in certain
locations, and financial education.
Employee representation
We
 
maintain
 
an
 
open
 
dialogue
 
with
 
our
 
formal
 
employee
representation groups,
 
all of
 
which are
 
in Europe,
 
as part
 
of our
commitment
 
to
 
being
 
a
 
responsible
 
employer.
 
These
 
groups
represent
 
17
 
countries
 
and
 
consider
 
issues
 
that
 
may
 
affect
 
our
performance, operations and
 
prospects. Collectively, these
 
groups
represent approximately 49% of our global workforce.
Attracting, developing and retaining the best talent
 
Fostering an
 
agile and
 
connected workforce
 
is a
 
priority for
 
the
near term. We therefore need to have processes in place that are
designed
 
to
 
ensure
 
that
 
we
 
have
 
the
 
best
 
people,
 
in
 
the
 
right
roles,
 
at
 
the
 
right
 
time,
 
to
 
achieve
 
our
 
strategic
 
goals.
Comprehensive
 
workforce
 
data
 
dashboards
 
help
 
us
 
analyze
 
all
aspects
 
of
 
the
 
employee
 
life
 
cycle,
 
including
 
recruitment,
performance
 
management,
 
training,
 
internal
 
mobility
 
and
attrition,
 
along with
 
demographic and
 
diversity aspects,
 
such as
gender
 
and
 
ethnicity.
 
This
 
helps
 
us
 
identify
 
trends
 
quickly
 
and
make fact-based decisions grounded in human resources data.
 
Throughout
 
2021,
 
we
 
hired
 
new
 
talent
 
where
 
necessary
 
to
launch or expand businesses
 
and to fill gaps
 
in our workforce. We
recruit
 
for
 
potential
 
and
 
cultural
 
fit,
 
hiring
 
beyond
 
immediately
relevant
 
skills
 
to
 
include
 
the
 
person’s
 
experience,
 
competencies
and digital aptitude.
 
We hired a
 
total of 9,363
 
external candidates
in 2021,
 
adding more
 
than 1,700
 
graduates and
 
other trainees,
apprentices
 
and
 
interns
 
through
 
our
 
various
 
junior
 
talent
programs. We
 
invest in
 
young talent
 
in every
 
region, supporting
national apprenticeship programs in Switzerland
 
and the UK and
summer internship programs
 
in many
 
locations.
 
In Singapore, UBS
worked
 
with
 
the
 
government
 
to
 
set
 
up
 
a
 
program
 
to
 
support
ongoing employability
 
during the
 
pandemic and
 
to increase
 
the
resilience
 
of
 
regional
 
banking
 
infrastructure.
 
Our
 
approach
 
has
garnered numerous external
 
accolades in 2021,
 
including a top-
50
ranking
 
in
 
the
World’s
 
Most
 
Attractive
 
Employer
s
 
from
employer-branding experts
 
Universum, for
 
the 13th
 
consecutive
year.
›
 
Refer to
ubs.com/employerawards
for more information about
our most recent employer rewards
 
Focusing on performance and development
 
Resetting
 
the
 
firm’s
 
strategic
 
course
 
sparked
 
a
 
comprehensive
review of our
 
performance management practices
 
in 2021. As
 
a
result, we introduced a new approach called
MyImpact
 
that aims
to better support our strategic
 
priorities and reinforce our culture,
as
 
well
 
as
 
making
 
our
 
year-end
 
review,
 
objective
 
setting
 
and
employee feedback processes simpler and more transparent.
Key to our
 
talent management strategy
 
is offering employees
opportunities
 
to build
 
interesting
 
careers.
 
Our innovative
 
digital
Career
 
Navigator
 
platform,
 
which
 
now
 
features
 
short
-
term
rotation opportunities,
 
promotes internal
 
mobility across
 
teams,
functions
 
and
 
business
 
divisions.
 
Employees
 
can
 
explore
 
career
paths, search for jobs
 
and connect with colleagues
 
while allowing
our recruiters
 
to more easily
 
source internal talent.
 
The tool
 
also
identifies
 
potential
 
competency
 
gaps
 
and
 
automatically
recommends
 
appropriate
 
training.
 
Since
 
inception,
Career
Navigator
 
has helped 47,600 employees
 
search for short-term job
opportunities
 
or
 
find
 
internal
 
experts,
 
discover
 
possible
 
career
paths and
 
match themselves
 
to open
 
roles. More
 
than 160,000
skills were added to
 
our employee skills-sharing platform in
 
2021.
Our
 
in-house
 
UBS
 
University
 
plays
 
a
 
central
 
role
 
in
 
fostering
diversity of
 
thought within
 
the firm,
 
and in
 
building employees’
skills
 
for
 
use
 
now
 
along
 
with
 
capabilities
 
for
 
the
 
future.
 
Our
offering
 
includes
 
line
 
manager
 
and
 
leadership
 
development,
advisory and
 
sales training,
 
and industry-leading
 
certification for
client advisors,
 
as well
 
as data
 
literacy, agile
 
working and
 
health
and
 
well-being
 
topics.
 
Altogether
 
in
 
2021,
 
our
 
permanent
employees
 
completed
 
more
 
than
 
1,425,000
 
learning
 
activities,
including mandatory training
 
on compliance, business
 
and other
topics, resulting in an average of more
 
than two training days per
employee.
 
47
Society
The
 
world’s social
 
and environmental
 
problems are
 
too big
 
and
complex
 
to
 
tackle
 
alone.
 
Lasting
 
change
 
can
 
only
 
be
 
achieved
when philanthropists
 
and public
 
and private
 
organizations work
collectively to maximize
 
positive impact for
 
people and the
 
planet.
 
Our
 
clients
 
can
 
maximize
 
the
 
positive
 
effect
 
of
 
their
 
giving
through
 
our
 
diverse
 
social
 
impact
 
offering:
UBS
 
Philanthropy
Services and the
 
grant-making UBS Optimus
 
Foundation, as well
as UBS Global Visionaries and UBS Community Impact.
Reimagining client philanthropy
With nearly
 
70 philanthropy
 
experts around
 
the globe,
 
we help
clients
 
to maximize
 
their
 
impact
 
locally,
 
nationally and
 
globally.
We have
 
partnered for
 
more than
 
two decades
 
with clients
 
and
their
 
families
 
by
 
using
 
an
 
investment-based
 
approach
 
and
connecting
 
them
 
to
 
an
 
international
 
network
 
of
 
expertise
 
and
support.
To best serve
 
our clients, we
 
base our approach
 
on three pillars:
Advice,
 
Insights
 
and Execution.
Advice
 
–
 
consulting with
 
clients
who
 
are
 
considering
 
setting
 
up
 
their
 
first
 
charitable
 
fund
 
and
guiding them on
 
tax-efficient giving, thus
 
maximizing the value
 
of
charitable
 
giving.
Insights
 
–
 
connecting
 
our
 
clients
 
to
 
a
 
global
network of
 
experts, both
 
within and
 
outside UBS
 
(e.g., through
insight
 
trips,
 
publications,
 
events
 
with
 
fellow
 
philanthropists,
thought
 
leaders
 
and
 
social
 
entrepreneurs,
 
such
 
as
 
UBS
 
Global
Visionaries).
Execution
 
– providing clients with flexible options for
managing their philanthropic giving,
 
including structures such as
our donor-advised
 
funds
 
(DAFs) and our new
UBS Collectives
, and
supporting curated programs via UBS Optimus Foundation.
Donor-advised funds
A DAF
 
offers clients
 
an easy,
 
flexible and
 
efficient alternative
 
to
setting up their own foundation. UBS has offered DAF services in
the US
 
for some
 
time, and
 
in 2014
 
we established a
 
DAF in
 
the
UK, which has
 
since had over
 
GBP 450 million in
 
donations. The
UBS
 
Philanthropy
 
Foundation
 
was
 
launched
 
in
 
Switzerland
 
in
2020: it has raised more than USD 10 million in donations and in
its first year of operations
 
launched its first thematic fund,
 
which
is dedicated to the environment.
UBS Optimus Foundation
With
 
a
 
track
 
record
 
of
 
over
 
two
 
decades
,
UBS
 
Optimus
Foundation is recognized globally
 
as both a
 
philanthropic thought
leader and
 
a pioneer
 
in the
 
social finance
 
space, through
 
which
we leverage solutions to mobilize
 
private capital in new and
 
more
efficient ways. The
 
foundation uses an evidence-based
 
approach
and
 
focuses
 
on
 
programs
 
that
 
have
 
the
 
potential
 
to
 
be
transformative,
 
scalable
 
and
 
sustainable.
 
It
 
conducts
 
extensive
due diligence
 
and only
 
recommends what
 
it considers
 
to be
 
the
most innovative programs that have the capacity to achieve long-
term, measurable impact.
 
UBS also makes
 
matching contributions
to the foundation, to help our clients’ donations go even further.
 
The
UBS
 
Collectives
 
also
 
utilize
 
an
 
evidence-based
 
approach
and bring together philanthropists to pool their funds,
 
share their
expertise and achieve a longer-term impact. The
Collectives
 
are a
three-year learning journey during which philanthropists follow a
curriculum, network with peers and engage in
 
programs with the
goals of preventing
 
family separation, mitigating
 
climate change
and
 
funding
 
programs
 
linked
 
to
 
measurable
 
results.
 
In
 
2021,
USD 21 million in
 
funding was raised for
 
this long-term systems-
level change approach.
UBS Global Visionaries
The
 
private
 
sector
 
has
 
a
 
crucial
 
role
 
to
 
play
 
in
 
supporting
innovative,
 
sustainable
 
solutions
 
to
 
some
 
of
 
the
 
world’s
 
most
pressing
 
problems.
 
This
 
is
 
why
 
we
 
launched
 
the
 
UBS
 
Global
Visionaries
 
program
 
in
 
2016
 
with
 
two
 
main
 
goals:
 
(i) to
 
create
opportunities for our clients and prospective clients to connect in
person (or
 
virtually) with
 
leading social
 
entrepreneurs; and
 
(ii)
 
to
help
 
our
 
UBS
 
Global
 
Visionaries
 
scale
 
their
 
positive
 
change
 
by
expanding
 
their
 
global
 
network,
 
building
 
capacity
 
and
 
raising
awareness about their work. Since the program
 
started, we have
supported
63
 
entrepreneurs
 
across
 
the
 
globe,
 
who
 
all
 
work
toward
 
achieving
 
a
 
variety
 
of
 
the
 
UN
 
Sustainable
 
Development
Goals.
 
At
 
the
 
end
 
of
 
2021,
 
20
 
of
 
those
 
entrepreneurs
 
were
engaged in
 
the program
 
as active
 
Global Visionaries,
 
more than
60
 
prospective
 
clients
 
and
 
clients
 
had
 
been
 
directly
 
connected
with
 
them,
 
and
 
80
 
events
 
hosted
 
by
 
UBS
 
at
 
which
 
they
 
were
featured speakers. Over 29,000 stakeholders (such as prospective
clients
,
 
clients
 
and
 
employees
)
 
part
icipated
 
in
 
these
 
events.
Feedback
 
from
 
our
 
clients
 
shows
 
this
 
gives
 
them
 
new
 
ways
 
to
engage
i
n
 
their
 
passions
 
and
 
learn
 
about
 
new
 
topics
 
or
technologies. In
 
return, our
 
UBS Global
 
Visionaries benefit
 
from
clients sharing their skills, experience and contacts.
UBS Community Impact
We
 
are
 
committed to
 
supporting the
 
communities in
 
which we
work. Our employees,
 
clients and shareholders
 
expect us to
 
play
our part in addressing social issues – and we believe it is the right
thing to do. Direct cash contributions, including
 
support through
our Community
 
Impact program,
 
UBS’s affiliated
 
foundations in
Switzerland, the
 
UBS Foundation
 
of Economics
 
in Society
 
at the
University
 
of
 
Zurich
 
and
 
contributions
 
to
 
UBS
 
Optimus
Foundation,
 
amounted
 
to
 
a
 
total
 
of
 
USD 59
 
million
 
in
 
2021.
During
 
2021,
 
we
 
focused
 
on
 
addressing
 
social
 
and
 
wealth
inequality
 
in
 
our local
 
communities through
 
education
 
and
 
skill
building. Given the ongoing impact of the pandemic in 2021, we
continued to
 
provide some
 
COVID-19 relief
 
to support the
 
most
vulnerable, as
 
well as
 
supporting recovery
 
and rebuilding
 
efforts
through our community partners.
Following the announcement
 
of UBS’s purpose in
 
April 2021,
we undertook a review of our global Community Impact strategy
in light of UBS’s new sustainability commitment. We will increase
our focus on education and skills with the implementation of our
revised strategy in 2022.
UBS’s overall
 
charitable contributions
 
are measured
 
using the
industry
-
leading
 
Business
 
Investment
 
for
 
Soci
etal
 
Impact
 
framework (B4SI). This includes cash, employee time, and in-kind
support.
›
 
 
Refer to “UBS’s charitable contributions”
 
in the “What” section
of the Sustainability Report 2021,
 
available from 11 March 2022
under “Annual reporting” at
ubs.com/investors
, for more
information
 
Our strategy, business model and environment
 
| How we create value for our stakeholders
48
Our focus on sustainability and climate
Our
 
commitment
 
to
 
sustainability
 
starts
 
with
 
our
 
purpose.
 
We
know finance has a powerful influence on the world. At UBS, we
reimagine the
 
power of people
 
and investment, to
 
help create a
better
 
world
 
for
 
everyone:
 
a
 
fairer
 
society,
 
a
 
more
 
prosperous
economy
 
and
 
a
 
healthier
 
environment.
 
That
 
is
 
why
 
we
 
partner
with our clients to
 
help them mobilize their
 
capital toward a more
sustainable world and why we
 
have put sustainability at the
 
heart
of our own business.
We are
 
guided by
 
the goal
 
of being
 
the financial
 
provider of
choice
 
for
 
clients
 
that
 
want
 
to
mobilize
 
capital
 
toward
 
the
achievement of the
 
17 Sustainable Development
 
Goals (the SDGs)
of the United Nations
 
(the UN) and
 
the orderly transition to
 
a low-
carbon economy. We are advancing toward
 
2030, the designated
deadline to achieve
 
the SDGs. The
 
SDGs focus on
 
issues such as
climate
 
change,
 
equality
 
and
 
healthcare
 
–
 
major
 
challenges
 
for
our world now and over the coming years.
To help us
 
maximize our impact
 
and direct capital
 
to where it
is needed
 
most, we
 
are focusing
 
on three
 
key areas
 
to drive
 
the
sustainability transition: planet, people, partnerships.
 
–
 
Planet:
 
Climate
 
is
 
a
 
clear
 
focus
 
for
 
us
 
as
 
we
 
shift
 
toward
 
a
lower-carbon future.
 
We have
 
committed to
 
achieving net-zero
greenhouse
 
gas
 
emissions
 
resulting
 
from
 
all
 
aspects
 
of
 
our
business by 2050.
–
 
People:
 
We believe in a diverse,
 
equitable and inclusive society.
We are
 
taking action to
 
get there, within
 
our own workplace
and beyond.
–
 
Partnerships:
 
By
 
working
 
in
 
partnership
 
with
 
other
 
thought
leaders and standard
 
setters, our goal
 
is to achieve impact
 
on
a truly global scale.
›
 
Refer to the Sustainability Report 2021,
 
available from 11 March
2022 under “Annual reporting” at
ubs.com/investors
, for more
information about how UBS is advancing
 
sustainability in the
financial sector and beyond
Our sustainability and impact governance
Sustainability
 
activities,
 
including
 
sustainable
 
finance,
 
are
overseen
 
at
 
the highest
 
level
 
of UBS
 
,
 
by the
 
Board
 
of
 
Directors
(the
 
BoD)
 
and
 
the
 
Group
 
Executive
 
Board
 
(the
 
GEB),
 
and
 
are
grounded in our Code of Conduct and Ethics (the Code).
 
Code of Conduct
 
and Ethics
In our Code of Conduct and Ethics, the BoD and the GEB set out
the principles and practices that define
 
our ethical standards and
the
 
way
 
we
 
do
 
business
,
 
which
 
appl
y
 
to
 
all
 
aspects
 
of
 
our
business. All employees must affirm annually that they have
 
read
and will adhere to
 
the Code and other key
 
policies, supporting a
culture
 
where
 
ethical
 
and
 
responsible
 
behavior
 
is
 
part
 
of
 
our
everyday
 
operations.
 
In
 
our
 
Code
 
we
 
make
 
a
 
commitment
 
to
acting with the
 
long term in
 
mind and creating
 
value for clients,
employees and shareholders. We aspire to do our
 
part to create a
fairer,
 
more
 
prosperous
 
society,
 
championing
 
a
 
healthier
environment and addressing
 
inequalities at their
 
root. This ethos
underpins
 
our
 
purpose
 
and
 
is
 
in
 
line
 
with
 
our
 
external
commitments,
 
such
 
as
 
our
 
pledge
 
to
 
help
 
making
 
progress
toward the SDGs.
 
In
 
2021,
 
we
 
revised
 
the
 
Code
 
in
 
line
 
with
 
our
 
focus
 
on
simplification,
 
making it shorter,
 
sharper and better
 
aligned to our
strategic imperatives.
›
 
Refer to the Code of Conduct and Ethics
 
of UBS, available at
ubs.com/code
, for more information
Board of Directors and Group Executive Board
The BoD is
 
responsible for setting
 
UBS’s values and
 
standards to
ensure the Group’s obligations to stakeholders are met. Both the
Chairman
 
of
 
the
 
BoD
 
and
 
the
 
Group
 
CEO
 
play
 
a
 
key
 
role
 
in
safeguarding
 
our
 
reputation
 
and
 
ensuring
 
we
 
communicate
effectively with all of our stakeholders.
 
The
 
BoD’s
 
Corporate
 
Culture
 
and
 
Responsibility
 
Committee
(the
 
CCRC)
 
is
 
the
 
UBS
 
body
 
primarily
 
responsible
 
for
 
corporate
culture, responsibility
 
and sustainability.
 
The CCRC
 
oversees our
sustainability
 
and
 
impact
 
strategy
 
and
 
activities
 
and
 
approves
Group-wide sustainability and impact objectives. The
 
Group CEO
has delegated to the GEB lead for
 
sustainability and impact, Suni
Harford, the responsibility for setting the
 
firm’s sustainability and
impact strategy, in agreement with fellow GEB members.
The GEB sets the overall risk appetite for the firm and resolves
overarching
 
matters
 
relating
 
to
 
sustainability
 
and
 
climate
 
risks,
including
 
risk management
 
framework, policies,
 
and
 
disclosure.
Group
 
Risk
 
Control
 
is
 
responsible
 
for
 
the
 
development
 
and
implementation
 
of
 
principles
 
and
 
an
 
appropriate
 
independent
control framework for sustainability and climate risks within UBS,
and the integration of
 
the principles and the framework
 
into the
firm’s overall risk management and risk appetite frameworks.
 
Group Sustainability
 
and Impact
The
 
Group
 
Sustainability
 
and
 
Impact
 
(GSI)
 
organization
 
was
created
 
in
 
2021
 
to
 
support
 
the
 
GEB
 
lead
 
for
 
sustainability
 
and
impact
 
with
 
carrying
 
out
 
her
 
responsibilities.
 
GSI
 
comprises
 
the
Chief Sustainability and
 
Social Impact
 
offices, headed by
 
the Chief
Sustainability Officer
 
(the CSO)
 
and the
 
Head Social
 
Impact. The
CSO is responsible
 
for driving the
 
implementation of the
 
Group-
wide sustainability and
 
impact strategy,
 
including reporting on
 
our
progress
 
toward
 
net
 
zero,
 
and
 
the
 
execution
 
thereof
 
by
 
the
business divisions and Group Functions.
 
The Head Social Impact
 
is
responsible
 
for
 
driving
 
and
 
implementing
 
our
 
social
 
impact
strategy,
 
including
 
UBS
 
Community
 
Impact,
 
UBS
 
Philanthropy
Services
 
and
 
UBS
 
Global Visionaries.
 
Progress
 
toward the
 
firm’s
sustainability and impact strategy, including climate strategy,
 
and
associated
 
targets is
 
reviewed at
 
least annually
 
by the
 
GEB and
the CCRC.
 
 
 
 
49
Sustainability
 
Risk,
 
Finance,
 
Compliance
 
and Legal functions
The
 
Chief
 
Risk
 
Officer
 
for
 
Sustainability
 
oversees
 
sustainability
activities relating
 
to risk, including
 
the climate risk
 
program, and
supports
 
the
 
GEB
 
by
 
providing
 
leadership
 
on
 
sustainability
 
in
cooperation with the business divisions and Group Functions.
The
 
Sustainability
 
Chief
 
Financial
 
Officer,
 
a
 
member
 
of
 
the
Group Finance function, ensures
 
that sustainability considerations
are embedded into
 
the firm’s financial
 
decision-making processes,
supports the
 
expanding external
 
sustainability disclosures
 
arising
from
 
both
 
new
 
regulatory
 
requirements
 
and
 
voluntary
commitments
 
made
 
by
 
our
 
firm,
 
and
 
oversees
 
the
 
continued
development
 
of
 
the
 
firm’s
 
financial
 
control
 
environment
 
that
underpins our disclosures.
The Sustainability Expert Group
 
within the GCRG function was
established
 
in
 
2021
 
due
 
to
 
the
 
strategic
 
importance
 
of
sustainability to UBS, the rapidly evolving
 
nature of the regulatory
and policy agenda
 
in this area,
 
and GCRG’s desire
 
to ensure the
firm
 
is
 
able
 
to
 
interact
 
effectively
 
and
 
proactively
 
with
 
policy-
makers,
 
the
 
regulatory
 
supervisors
 
of
 
the
 
Group
 
and
 
other
relevant stakeholders.
The
 
global
 
environmental, social
 
and governance
 
(ESG)
 
legal
team
 
within
 
the
 
Group
 
General
 
Counsel
 
function
 
advises
 
the
business on sustainability-related
 
risks across UBS’s operations.
 
It
plays an important role in advising the business teams on existing
and
 
emerging
 
rules
 
and
 
regulations
 
governing
 
sustainable
investing and sustainable lending.
›
 
Refer to “Board of Directors” in the “Corporate
 
governance”
section of this report for more information about
 
the CCRC
›
 
Refer to the Sustainability Report 2021,
 
available from 11 March
2022 under “Annual reporting” at
ubs.com/investors
, for more
information about our governance
 
of sustainability and impact
Our approach to sustainable finance
The UN estimates the gap in
 
funding needed to achieve the SDGs
by 2030 at USD 2.5 trillion to USD 3 trillion annually,
1
 
with some
experts
 
putting
 
the
 
number
 
even
 
higher.
 
We
 
recognize
 
this
 
as
both a challenge for
 
society and an opportunity
 
for our clients.
 
As
a global financial institution, we
 
have a role in reaching
 
the SDGs,
by directing capital to where it is needed the most.
Our
 
clients
 
turn
 
to
 
us
 
for
 
advice
 
on
 
how
 
they
 
can
 
help
 
to
finance
 
the
 
transition
 
to
 
a
 
low-carbon
 
economy,
 
support
sustainable
 
finance,
 
align
 
their
 
investments
 
with
 
their
 
personal
values,
 
and
 
better
 
risk
 
manage
 
their
 
portfolios
 
and
 
businesses.
They want
 
to take
 
advantage of
 
these opportunities,
 
while also
managing
 
the
 
risks
 
associated
 
with
 
this
 
transformational
challenge.
 
Our
 
clients’
 
growing
 
interest
 
in
 
sustainable
 
finance
 
is
 
clearly
shown
 
in
 
a
 
number
 
of
 
key
 
surveys.
 
According
 
to
 
a
 
global
 
UBS
Investor
 
Sentiment
 
survey,
2
 
66%
 
of
 
investors
 
see
 
sustainable
investing as
 
highly important
 
to their
 
portfolio strategy.
 
When it
comes
 
to
 
business
 
owners,
 
61%
 
believe
 
sustainability
 
could
generate
 
more
 
revenue
,
 
57%
 
believe
 
it
 
could
 
improve
 
client
relationships
 
and
 
55%
believe
 
it
 
could
 
do
 
the
 
same
 
for
relationships with employees.
A global survey published
 
in 2021 titled “Resetting
 
the agenda
How
 
ESG
 
is
 
shaping
 
our
 
future”
3
 
found
 
that
 
three-quarters
 
of
institutional
 
investors
 
agree
 
that
 
the
 
COVID-19
 
pandemic
 
will
accelerate
 
the
 
general
 
interest
 
in
 
ESG
 
and
 
capital
 
inflows
 
into
sustainable investments over the
 
next three to five
 
years. Of those
surveyed, 65%
 
plan to
 
integrate ESG
 
into at
 
least 25%
 
of their
assets under
 
management for
 
the next
 
12 months.
 
Importantly,
almost
 
three-quarters
 
of
 
survey
 
respondents
 
agreed
 
that
investments integrating
 
ESG factors
 
performed better
 
financially
than equivalent traditional investments in the three years prior to
2020.
We are committed
 
to serving our
 
clients’ growing sustainable
finance needs and expectations. More
 
fundamentally, we believe
sustainable finance is the
 
future of finance. Recognition
 
of impact
on
 
financial
 
performance,
 
regulatory
 
developments,
 
evolving
societal
 
norms,
 
investor
 
demand
 
and
 
consumer
 
preference
 
are
factors
 
that
 
contribute
 
to
 
drive
 
the
 
continued
 
evolution
 
of
mainstream
 
investing
 
toward
 
more
 
holistic
 
long-term-oriented
approaches.
 
We are looking to create more
 
scalable sustainable and impact
investing solutions that
 
deliver competitive financial
 
returns, and
to advise
 
our corporate
 
clients on risks
 
to their business
 
models,
while driving positive outcomes.
 
Fundamentally, for the benefit
 
of
our clients, we are helping to shape
 
the landscape of sustainable
finance by using thought leadership, innovation and partnerships
to support them in their sustainability efforts.
›
 
Refer to the Sustainability Report 2021,
 
available from 11 March
2022 under “Annual reporting” at
ubs.com/investors
, for more
information about our sustainability and
 
impact strategy and
activities
›
 
Refer to the sub-section below for more information
 
about our
climate governance, strategy, risk management, and metrics
 
and
targets and to the UBS Climate Report 2021,
 
available from
11 March 2022 under “Annual reporting” at
ubs.com/investors
,
for the full UBS climate disclosures
Defining sustainable
 
finance
Sustainable finance refers broadly to any form of financial service
that
 
aims
 
to
 
achieve
 
positive
 
sustainability
 
outcomes,
 
including
through the integration
 
of ESG
 
criteria into
 
business or
 
investment
decisions. This encompasses sustainable
 
investing and sustainable
financing
 
solutions.
 
Sustainable
 
finance
 
has
 
long
 
been
 
a
 
topic
firm-wide
 
and
 
there
 
is
 
now
 
a
 
sharpened
 
understanding
 
in
 
the
market
 
of
 
its
 
importance,
 
accelerated
 
by
 
factors
 
such
 
as
 
the
COVID-19
 
pandemic
 
and
 
a
 
changing
 
climate.
 
Our
 
aim
 
is
 
to
continue to help
 
our clients meet their
 
investment and financing
objectives through sustainable finance.
 
 
 
 
 
 
1
un.org/sustainabledevelopment/sg-finance-strategy
 
2
About the survey: UBS surveyed 3,004 investors and 1,202 business owners with at least USD
 
1 million in investable assets (for investors) or at least USD 1 million in annual
 
revenue and at least one employee other
than themselves (for business owners), between 28 September and 18 October 2021. The global sample was split across 15 locations:
 
Argentina, Brazil, Mainland China, France, Germany, Hong Kong SAR, Italy, Japan,
Mexico, Russia, Singapore, Switzerland, the UAE, the
 
UK and the US.
3
 
The survey was conducted
 
by the Economist Intelligence Unit,
 
commissioned by UBS, and
 
surveyed 450 institutional investors working
 
in asset and wealth management
 
firms, corporate pension
 
funds, endowment
funds, family offices, government agencies, hedge funds,
 
insurance companies, pension funds, sovereign wealth funds and reinsurers
 
in North America, Europe and Asia Pacific.
 
 
UBS_AR_2021p78i0.gif
Our strategy, business model and environment
 
| How we create value for our stakeholders
50
Sustainable
 
investment
Sustainable investment
 
(SI) focuses
 
on investment
 
decisions that
seek to make a difference, while generating competitive financial
returns. SI
 
strategies aim
 
to better
 
risk manage
 
portfolios in
 
line
with 21st-century
 
challenges and
 
/ or
 
to align
 
investments with
investors’
 
sustainability
 
values,
 
while
 
also
 
targeting
 
improved
portfolio risk and return characteristics.
We have
 
long recognized
 
that clients
 
and other
 
stakeholders
need
 
transparency
 
about
 
the
 
sustainability
 
objectives
 
of
 
our
various investment products. During 2021, the European Union’s
Sustainable Finance Disclosure
 
Regulation (the SFDR)
 
provided the
first formal, comprehensive legislative
 
framework establishing an
important
 
marker
 
for
 
the
 
industry’s
 
efforts
 
in
 
this
 
area.
Consequently, we have further evolved our own definitions of SI,
which now include the following two categories.
–
 
Sustainability
 
focus:
 
strategies
 
that
 
have
 
explicit
 
sustainable
intentions
 
or
 
objectives
 
that
 
drive
 
the
 
strategy.
 
Underlying
investments may contribute to positive sustainability
 
outcomes
through products / services / use of proceeds.
–
 
Impact
 
investing:
 
investment
 
strategies
 
that
 
have
 
an
 
explicit
intention
 
of
 
generating
 
measurable,
 
verifiable,
 
positive
sustainability
 
outcomes.
 
Impact
 
generated
 
is
 
attributable
 
to
investor action and / or contribution.
ESG integration
 
and exclusion
We also identify two approaches that consider ESG factors in the
investment process
 
to varying
 
degrees,
 
but which
 
on their
 
own
are not considered sustainable investment.
–
 
ESG
 
integration
:
 
considers
 
ESG
 
factors
 
alongside
 
traditional
financial
 
metrics
 
to
 
assess
 
the
 
risk-return
 
profile
 
in
 
the
investment
 
process.
 
This
 
approach
 
is
 
rapidly
 
becoming
 
an
industry
 
standard,
 
as
 
the
 
inclusion
 
of
 
such
 
factors
 
has
 
been
shown to benefit overall investment
 
risk-return considerations.
 
–
 
Exclusion
: when
 
individual companies
 
or entire
 
industries are
excluded from
 
portfolios because
 
their activities
 
do not
 
meet
certain
 
ESG
 
criteria and
 
/ or
 
do
 
not
 
align
 
with
 
the
 
values of
clients and / or UBS.
 
 
 
Sustainable
 
financing
We
 
offer
 
products
 
and
 
solutions,
 
including
 
access
 
to
 
capital
markets,
 
to
 
clients
 
looking
 
to
 
finance
 
assets
 
that
 
demonstrate
sustainability
 
characteristics
 
and /
 
or
 
support the
 
transition to
 
a
low-carbon economy. Financing
 
activities can be
 
on-balance sheet
(such as
 
loans and
 
mortgages) or
 
off-balance sheet (such
 
as access
to
 
debt
 
and
 
equity
 
markets).
 
We
 
also
 
provide
 
advice
 
on
 
ESG
factors
 
(both
 
financial
 
and
 
non-financial),
 
such
 
as
 
integrated
disclosure requirements.
We
 
use
 
regulatory
 
and
 
market
 
standards
 
where
 
these
 
are
available; for
 
example, in
 
the debt
 
capital markets
 
business, we
refer
 
to
 
the
 
International
 
Capital
 
Market
 
Association
 
(ICMA)
Green, Social or
 
Sustainability-Linked Bond Principles.
 
Where such
guidelines
 
or
 
standards
 
are
 
not
 
available,
 
we
 
aim
 
to
 
align
 
with
market
 
best
 
practice.
 
This
 
is
 
the case,
 
for
 
example,
 
with
 
equity
capital markets activities.
Our established sustainability and climate risk
 
(SCR, previously
known at UBS
 
as environmental
 
and social
 
risk, or
 
ESR) framework
is used to analyze
 
potential transactions and client
 
relationships in
order to
 
limit any
 
negative impact
 
on the environment
 
and society.
Moreover,
 
as
 
one
 
of
the
 
world’s
 
largest
 
asset
 
gathering
businesses,
 
we
 
are
 
in
 
a
 
privileged
 
position
 
to
 
leverage
 
the
experience
 
gained
 
from
 
our
 
Climate
 
Aware
 
framework,
established
 
in 2019
 
by our
 
Asset Management
 
business, to
 
the
benefit of our financing clients.
›
 
Refer to the “Key achievements in 2021”
 
chart in the
Sustainability Report 2021, available from 11
 
March 2022 under
“Annual reporting” at
ubs.com/investors
 
 
In
 
2021,
 
we
 
noted
 
continued
 
strong
 
momentum
 
in
 
our
sustainable
 
finance
 
activities. SI
 
assets
 
grew
 
to
 
USD 251
 
billion,
compared with USD 141
 
billion in 2020,
 
and assets subject
 
to ESG
integration
 
and
 
to
 
exclusions
 
grew
 
to
 
USD 813
 
billion
 
in
 
2021,
compared
 
with
 
USD 645
 
billion
 
in
 
2020.
 
Jointly,
 
SI
 
assets
 
and
assets subject
 
to ESG integration
 
and to exclusions
 
reached over
23% of client
 
invested assets, up
 
from 18.8% in
 
2020. In addition
to generally supportive
 
markets, the growth
 
was driven by
 
client
demand,
 
our
 
focus
 
on
 
advancing
 
sustainable
 
solutions,
 
and
converting traditional funds to sustainable ones.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
51
UBS total invested assets
1,2
For the year ended
% change from
USD billion, except where indicated
GRI
31.12.2021
31.12.20
31.12.19
31.12.20
Sustainable investments
Sustainability focus
3
FS11
222.7
127.7
46.4
74.4
Impact investing
4
FS11
28.5
13.1
9.1
117.1
Total sustainable investments
5
251.2
140.8
55.5
78.4
SI proportion of total invested assets (%)
5.5
3.4
1.5
ESG integration
6
FS11
558.0
512.8
372.3
8.8
Exclusion
7
FS11
255.1
132.2
52.2
93.0
Total ESG integration and exclusion
FS11
813.2
645.0
424.5
26.1
ESG integration and exclusion proportion of total invested assets (%)
FS11
17.7
15.4
11.8
UBS total invested assets
4,596.2
4,187.2
3,606.6
9.8
1
 
We are refocusing our sustainable investment reporting on those investment strategies exhibiting an
 
explicit sustainability intention. ESG integration and exclusion approaches,
 
although considering ESG aspects in
the investment process,
 
are in and
 
of themselves not
 
considered sustainable investment
 
strategies.
 
2
 
FS represents the
 
performance indicators defined
 
in the Financial
 
Services Sector Supplement
 
of the Global
Reporting Initiative (GRI) reporting framework.
 
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. Examples
 
include Global Wealth Management’s
 
Discretionary Manage SI mandate
 
solution and Asset Management’s
 
strategies such as its
 
Global Sustainable Equities
product.
 
4
 
Strategies that have explicit intentions of generating measurable, verifiable and positive
 
sustainability outcomes. Impact generated is attributable to investor action and /
 
or contributions. Examples include
Global Wealth Management’s Oncology Impact funds and Asset Management’s Global Engage for Impact Equity funds.
 
5
 
In 2021, UBS converted funds to the sustainability focus and impact investment categories,
in line with corresponding
 
changes to the funds’
 
underlying investment policies.
 
The main impact
 
was on sustainability
 
focus and impact strategies
 
in Asset Management
 
of USD 38 billion
 
and sustainability focus
fund conversions in Global Wealth Management.
 
6
 
Strategies that integrate ESG factors into the
 
fundamental financial analysis to improve risk /
 
return.
 
7
 
Strategies that avoid investments in companies
 
that do
not meet certain ESG criteria and / or do not align with the values of clients and / or UBS. The enhancement of the UBS ESG exclusion policy to include a broader set of exclusions in the third quarter of 2021 was
 
the
main driver (>50%) of the increase in exclusion assets in 2021.
 
 
Our offering
 
to clients
Our
 
private
 
clients
 
benefit
 
from
 
fully
 
diversified
 
sustainable
portfolios,
 
as
 
well
 
as
 
advisory
 
options.
 
In
 
2020,
 
we
 
made
sustainable investments
 
the preferred
 
solution for
 
private clients
investing
 
globally.
 
In
 
July
 
2021,
 
we
 
expanded
 
our
 
sustainable
investing offering
 
with a
 
new advisory
 
solution that
 
enables clients
to
 
tailor
 
their
 
sustainable
 
investments
 
to
 
their
 
personal
preferences.
 
In
 
2021,
 
our
 
flagship
 
SI
 
mandates,
 
based
 
on
 
our
sustainable investing strategic asset allocation (SI SAA), exceeded
USD 30 billion under management.
Our institutional clients benefit from the holistic integration of
ESG
 
factors into
 
the investment
 
decision-making
 
process across
the entire suite of investment funds and strategies. Underpinning
our
 
ESG
 
integration
 
activities
 
is
 
a
 
robust
 
stewardship
 
program,
including engagement
 
and proxy
 
voting.
 
We have
 
continued to
build
 
on
 
our
 
position
 
as
 
a
 
leading
 
provider
 
of
 
sustainable
exchange-traded funds (ETFs), launching 17 new sustainable
 
ETFs
in 2021,
 
including a
 
full suite
 
of benchmarks
 
aligned with
 
the Paris
Agreement.
 
We
 
remain
 
firmly
 
positioned
 
as
 
Europe’s
 
second-
largest sustainable ETF-provider,
 
with an SI
 
asset base of
 
USD 40
billion as of 31 December 2021.
Our retail clients in Switzerland
 
have access to appropriate and
relevant SI products.
 
Interest in SI
 
solutions continued
 
to be
 
strong
in
 
2021.
UBS
 
ManageTM
 
SI
,
a
 
Global
 
Wealth
 
Management
product, represented almost 70% of Personal Banking’s
 
mandate
sales. In addition, 47%
 
of total custody
 
assets in Personal
 
Banking
are composed of sustainable investments.
 
For our
 
Swiss corporate
 
and institutional
 
clients, supplier
 
and
producer transactions in commodity
 
trade finance are monitored
according
 
to
 
our
 
SCR
 
standards.
 
Furthermore,
 
our
 
sustainable
finance
 
advice
 
extends
 
to
 
strategic
 
positioning
 
of
 
business
models, disclosure practices and benchmarking.
Our
 
corporate
 
clients
 
benefit
 
from
 
a
 
range
 
of
 
financing
 
and
advisory solutions
 
at all
 
stages on
 
their
 
sustainability journey.
 
In
2021, Global Banking, within
 
our Investment Bank, set
 
up an ESG
Advisory
 
team
 
to
 
assist
 
established
 
corporate
 
clients
 
with
 
the
integration
 
of
 
ESG
 
risks
 
and
 
opportunities
 
into
 
their
 
decisions
related to strategy, operations
 
and financing, thereby supporting
their
 
positioning in
 
the financial
 
markets.
 
They also
 
help
 
young
ESG-driven companies
 
with the raising
 
of private and
 
/ or public
financing.
›
 
Refer to the Sustainability Report 2021,
 
available from 11 March
2022 under “Annual reporting” at
ubs.com/investors
, for more
information about our sustainable investing
 
and financing
offering, including financing solutions, advisory
 
and research
and insights
Managing sustainability and climate risks
At UBS, SCR is defined as the risk that
 
UBS is negatively impacted
by
 
or
negatively
impacts
 
climate
 
change,
 
loss
 
of
 
biodiversity,
human rights infringements, and other environmental, social and
governance matters. We apply an SCR policy framework with the
aim of identifying
 
and managing potential
 
adverse impacts on
 
the
environment and
 
/ or
 
to human
 
rights, as
 
well as
 
the associated
environmental and social risks
 
to which our clients’ and
 
our own
assets are exposed.
 
›
 
Refer to “Sustainability and climate
 
risk” in the “Risk
management and control” section of this
 
report for more
information
 
 
 
 
Our strategy, business model and environment
 
| How we create value for our stakeholders
52
Our sustainability targets and progress
We work with a
 
long-term focus on
 
providing appropriate returns
to all
 
of our
 
stakeholders in
 
a responsible
 
manner.
 
To
 
underline
our commitment,
 
we provide
 
transparent targets
 
and report
 
on
progress
 
made
 
against
 
them
 
wherever
 
possible.
 
In
 
2021,
 
we
included new targets, in particular pertaining to our commitment
to becoming a net-zero
 
bank. Our targets, as
 
set out below,
 
can
therefore
 
only
 
partly
 
be
 
compared
 
with
 
what
 
we
 
set
 
out
 
in
previous years.
Our key targets
Planet, people, partnerships
–
 
USD 400 billion
 
invested assets
 
in sustainable
 
investments by
2025.
Planet
–
 
Set decarbonization targets for 2030 for financing
 
of the fossil
fuel,
 
power
 
generation
 
and
 
real
 
estate
 
sectors
 
(from
 
2020
levels):
–
 
reduce
 
absolute
 
financed
 
emissions
 
associated
 
with
 
UBS
loans to fossil fuel companies by 71%;
–
 
reduce
 
emissions
 
intensity
 
associated
 
with
 
UBS
 
loans
 
to
power generation companies by 49%;
–
 
reduce emissions
 
intensity of
 
UBS’s commercial
 
real estate
lending portfolio by 44%; and
–
 
reduce
 
emissions
 
intensity
 
of
 
UBS’s
 
residential
 
real
 
estate
lending portfolio by 42%.
–
 
Align USD 235
 
billion of
 
invested assets
 
to net
 
zero by
 
2030
(Asset Management).
–
 
A
chieve
 
net
-
zero
emissions
 
across
 
discretionary
 
client
portfolios by 2050.
–
 
Achieve net-zero emissions resulting from our own operations
(scopes
 
1 and 2) by 2025; cut energy consumption by 15% by
2025 (compared with 2020).
–
 
Offset historical
 
emissions back
 
to the
 
year 2000
 
by sourcing
carbon offsets (achieved by the end of
 
2021) and by offsetting
credit
 
delivery
 
and
 
full
 
retirement
 
in
 
registry
 
(by
 
the
 
end
 
of
2025).
–
 
Engage with our key vendors on targeting net zero by 2035.
People
–
 
30% global female representation
 
at Director level and above
by 2025.
–
 
26%
 
US
 
ethnic
 
minority
 
representation
 
at
 
Director
 
level
 
and
above by 2025.
–
 
26%
 
UK
 
ethnic minority
 
representation
 
at
 
Director
 
level
 
and
above by 2025.
–
 
Raise
 
USD 1
 
billion
 
in
 
donations
 
to
 
our
 
client
 
philanthropy
foundations
 
and
 
funds
 
and
 
reach
 
25
 
million
 
beneficiaries
 
by
2025 (cumulative for 2021–2025).
–
 
Support
 
one
 
million
 
beneficiaries
 
through
 
our
 
community
impact activities by 2025 (cumulative for 2020–2024).
Partnerships
–
 
Establish UBS as a leading facilitator of discussion, debate and
idea generation.
–
 
Drive
 
standards,
 
research
 
and
 
development,
 
and
 
product
development
 
through
 
partnerships
 
across
 
the
 
financial
ecosystem.
›
 
Refer to the Sustainability Report 2021,
 
available from 11 March
2022 under “Annual reporting” at
ubs.com/investors
, for more
information about UBS’s sustainability achievements in 2021
 
and
our progress on key targets
Taking climate action
1
 
Our climate
 
governance
As
 
part
 
of
 
its
 
annual
 
approval
 
of
 
our
 
sustainability
 
and
 
impact
objectives, the CCRC
 
also oversees UBS’s
 
climate strategy, as
 
set
by the GEB. During its six meetings throughout the course
 
of the
year,
 
the
 
CCRC
 
reviews
 
the
 
GEB’s
 
activities
 
in
 
executing
 
our
climate
 
strategy
 
and,
 
jointly
 
with
 
the
 
BoD’s
 
Risk
 
Committee,
evaluates the
 
progress of
 
our climate
 
risk program.
 
The committee
also
 
reviews
 
the
 
alignment
 
of
 
our
 
climate
 
disclosures
 
with
 
the
recommendations of
 
the Task
 
Force on
 
Climate-related Financial
Disclosures (the TCFD).
 
We
 
manage
 
these
 
annual
 
plans
 
and
 
goals
 
through
 
our
 
ISO
14001-certified
 
environmental
 
management
 
system
 
(the
 
EMS),
with management accountabilities across
 
our firm. The
 
EMS helps
us
 
reduce
 
environmental
 
risks,
 
seize
 
market
 
opportunities,
 
and
continually
 
improve
 
our
 
environmental,
 
climate
 
and
 
resource-
efficiency performance.
In
 
May
 
2021,
 
we
 
established
 
a
 
net-zero
 
task
 
force
 
to
 
help
progress toward our ambition
 
of reaching net zero
 
by 2050. The
GEB lead for
 
sustainability and impact
 
chairs the task
 
force. Senior
representatives from across our firm, including from the business,
risk and finance, attend the task force’s monthly meetings.
 
›
 
Refer to the UBS Climate Report 2021,
 
available from 11 March
2022 under “Annual reporting” at
ubs.com/investors
, for UBS’s
full climate disclosures
 
 
 
 
 
 
1
 
This sub-section provides key information from the UBS Climate Report 2021, which contains our full
 
climate disclosures and follows the recommendations provided by the TCFD. The Climate Report
 
is available
from 11 March 2022 under “Annual reporting” at
ubs.com/investors
, integrated in the UBS Sustainability Report 2021 or as a standalone document.
 
 
UBS_AR_2021p81i0.gif
 
53
Our climate
 
strategy
In
 
April 2021,
 
we
 
committed
 
to achieving
 
net-zero
 
greenhouse
gas emissions
 
resulting from
 
all aspects of
 
our business by
 
2050
(scope 1,
 
2
 
and
 
3
 
emissions).
 
We
 
are
 
publishing
 
our
 
journey
toward this ambition in our climate roadmap.
Our climate strategy
 
covers two
 
main areas: managing
 
climate-
related
 
financial
 
risks
 
and
acting
 
for
 
a
 
low
-
carbon
 
future
.
Underpinning these two areas are four strategic pillars.
 
 
 
1. Protecting our clients’ assets
As
 
a
 
global
 
financial
 
institution,
 
it
 
is
 
our
 
responsibility
 
to
 
help
clients navigate through the challenges of the transition
 
to a low-
carbon economy. We help our clients assess, manage and protect
their
 
assets
 
from
 
climate-related
 
risks
 
by
 
offering
 
innovative
products and
 
services in
 
investment, financing and
 
research. We
work
 
collaboratively
 
across
 
our
 
industry
 
and
 
with
 
our
 
clients,
ensuring they
 
have access
 
to best practice,
 
robust science-based
approaches,
 
standardized
 
methodologies,
 
and
 
quality
 
data
 
for
measuring
 
and
 
mitigating
 
climate
 
risks.
 
Our
 
activities
 
include
engaging on climate topics
 
with the companies we
 
invest in. For
example,
 
our
Asset
 
Management
 
business
 
division
 
has
implemented an
 
engagement program
 
with 46
 
companies from
the
 
oil
 
and
 
gas,
 
electric
 
and
 
other
 
utilities,
 
metals
 
and
 
mining,
construction materials, chemicals,
 
and automotive sectors.
 
During
2021, we also supported 70 climate-related resolutions.
2. Protecting our own assets
We
 
seek
 
to
 
protect
 
our
 
assets
 
by
 
limiting
 
our
 
risk
 
appetite
 
for
carbon-related
 
assets.
 
We
 
use
 
scenario-based
 
stress-testing
approaches
 
and
 
other
 
forward-looking
 
portfolio
 
analyses
 
to
estimate
 
our
 
vulnerability
 
to
 
climate-related
 
risks.
 
As
 
of
31 December
 
2021,
 
we
 
had
 
reduced
 
our
 
lending
 
exposure
 
to
carbon-related
 
assets
 
to
 
9.9%
 
(USD 45.6
 
billion)
 
of
 
our
 
total
customer
 
lending exposure.
 
This was
 
down
 
from
 
10.4% at
 
the
end of 2020 and 10.7% at the end of 2019.
3. Reducing our climate impact
We
 
are
 
committed
 
to
 
achieving
 
net-zero
 
emissions
 
in
 
our
 
own
operations
 
(scopes
 
1
 
and
 
2)
 
by
 
2025
 
by
 
replacing
 
fossil
 
fuel
heating
 
systems,
 
maintaining
 
our
 
100%-renewable
 
electricity
coverage
 
and
 
investing
 
in
 
credible
 
carbon
 
removal
 
projects
(including
 
negative
 
emissions
 
technology).
 
We
 
will
 
also
compensate for our
 
historical scope 1 and
 
2 emissions back
 
to the
year
 
2000
 
by
 
using
 
credible
 
and
 
clear
 
carbon
 
offsets
 
and
investments
 
in
 
nature-based
 
solutions.
 
Furthermore,
 
we
 
are
currently
 
working
 
to
 
understand
 
and
 
quantify
 
the
 
scope 3
emissions
 
in
 
our
 
supply
 
chain.
 
We
 
are
 
engaging
 
with
 
our
 
key
vendors on targeting net zero by 2035.
4. Mobilizing capital
We mobilize private and institutional capital through investments
that
 
help
 
the
 
world
 
mitigate
 
and
 
adapt
 
to
 
climate
 
change. We
were
 
the
 
first
 
major
 
global
 
financial
 
institution
 
to
 
have
 
made
sustainable
 
investments
 
the
 
preferred
 
solution
 
for
 
our
 
private
clients
 
wishing
 
to
 
invest
 
globally.
 
We
 
also
 
support
 
our
 
goal
 
of
mobilizing capital as
 
a lender and
 
corporate advisor. For
 
corporate
clients, we support
 
the issuance
 
of green, social,
 
sustainability and
sustainability
-
linked
 
bonds
–
 
and
 
the
 
raising
 
of
 
capital
 
in
international
 
capital
 
markets
 
–
 
in
 
line
 
with
 
recognized
 
market
guidelines,
 
such
 
as
 
the
 
ICMA
 
Green
 
Bond
 
Principles.
 
We
 
also
extend green and
 
sustainable loans in
 
line with the
 
Loan Market
Association.
 
In
 
2021,
 
we
 
began
 
offering
 
borrowers
Green
Mortgages
 
via
 
the
key4
 
platform,
 
the
 
first
 
Swiss
 
real
 
estate
platform
 
for
 
investment
 
properties
 
that
 
promotes
 
sustainable
mortgages.
›
 
Refer to the UBS Climate Report 2021,
 
available from 11 March
2022 under “Annual reporting” at
ubs.com/investors
, for a full
description of UBS’s climate strategy
 
 
Our strategy, business model and environment
 
| How we create value for our stakeholders
54
Our management of climate risks
 
Climate
 
risks
 
can
 
arise
 
from
 
either
 
changing
 
climate
 
conditions
(physical
 
risks)
 
or
 
from
 
efforts
 
to
 
mitigate
 
climate
 
change
(transition risks). The physical
 
and transition risks from
 
a changing
climate contribute
 
to a
 
structural change
 
across economies
 
and,
consequently, can
 
affect banks
 
and the
 
financial sector
 
through
financial and non-financial impacts.
In
 
March
 
2020,
 
Group
 
Risk
 
Control
 
established
 
our
 
firm’s
climate risk program to further integrate climate risk in the firm’s
risk
 
management
 
framework
 
and
 
standard
 
processes.
The
program
 
follows
 
a
 
multi-year
 
roadmap
 
to
 
address
 
regulatory
expectations and is engaging with stakeholders and experts both
internally
 
and
 
externally
 
to
 
further
develop
 
climate
 
risk
methodologies,
 
to
 
deliver
 
on
 
ongoing
 
climate
 
stress
 
testing
exercises
 
and
 
to
 
build
 
capacity
 
to
 
respond
 
to
 
climate
 
risk
management expectations.
We
 
currently
 
identify
 
and
 
manage
 
climate
 
risks
 
in
 
our
 
own
operations, our balance sheet, client assets and the supply
 
chain.
To
 
protect
 
our
 
clients’ and
 
our
 
own
 
assets
 
from
 
climate-related
risks, in
 
2021, we
 
continued to
 
drive the
 
integration of
 
climate-
related risk into our standard risk management framework.
 
We further integrated climate
 
risk in:
 
(i) risk identification and
measurement
;
 
(ii)
 
monitoring
 
and
 
risk
 
appetite
 
setting
;
 
(iii) management and
 
control; and (iv)
 
reporting processes across
the organization.
›
 
Refer to “Sustainability and climate
 
risk” in the “Risk
management and control” section of this
 
report
›
 
Refer to the UBS Climate Report 2021,
 
available from 11 March
2022 under “Annual reporting” at
ubs.com/investors
, for a full
description of UBS’s management of climate risks
Our climate-related metrics and targets
For
 
many
 
years,
 
we
 
have
 
been
 
developing
 
methodologies
 
that
enable
 
us
 
to
 
disclose
 
climate-related
 
metrics
 
more
 
robustly
 
and
transparently. Most recently, regulators and standard setters have
provided more guidance
 
on metrics. We firmly
 
aim to keep
 
pace
with
 
these
 
new
 
developments
 
and
 
requirements
 
and
 
further
evolve our
 
climate-related metrics. This
 
commitment remains,
 
as
does our determination to continue
 
leading the way in efforts to
mitigate climate change.
UBS supports the goals
 
of the Paris Agreement,
 
which includes
aligning
 
our
 
own
 
operations
 
and
 
business
 
activities
 
with
 
a
pathway
 
of
 
a
 
five-step
 
net-zero
 
plan
 
to:
 
(i) measure
 
carbon
emissions;
 
(ii) define
 
a
 
roadmap
 
and
 
set
 
targets;
 
(iii) reduce
climate
 
impact;
 
(iv) finance
 
climate
 
action
 
and
 
support
 
the
transition of our clients; and (v) communicate and engage.
›
 
Refer to the UBS Climate Report 2021,
 
available from 11 March
2022 under “Annual reporting” at
ubs.com/investors
, for a full
description of UBS’s net-zero targets, including baselines and
pathways
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
55
Climate-related metrics 2021
For the year ended
% change from
31.12.21
31.12.20
31.12.19
31.12.20
Risk management
 
Carbon-related assets (USD billion)
1,2
45.6
45.4
40.1
0.4
of which: UBS AG (standalone)
3
7.0
7.6
7.5
(8.7)
of which: UBS Switzerland AG (standalone)
3
37.9
37.1
31.9
2.4
Proportion of total customer lending exposure, gross (%)
9.9
10.4
10.7
Total exposure to climate-sensitive sectors, transition risk (USD billion)
2,4
37.5
37.5
33.4
0.0
of which: UBS AG (standalone)
3
4.6
5.4
5.8
(15.9)
of which: UBS Switzerland AG (standalone)
3
32.8
31.7
27.3
3.4
Proportion of total customer lending exposure, gross (%)
8.2
8.6
9.0
Total exposure to climate-sensitive sectors, physical risk (USD billion)
2,4
25.5
26.2
25.6
(2.8)
of which: UBS AG (standalone)
3
10.8
11.5
13.1
(6.1)
of which: UBS Switzerland AG (standalone)
3
13.6
13.5
11.7
1.4
Proportion of total customer lending exposure, gross (%)
5.6
6.0
6.9
Identified significant climate-related financial risk on balance sheet
5
None
None
None
Opportunities
Number of green, sustainability, and sustainability-linked bond deals
6
98
29
26
237.9
Total deal value of green, sustainability, and sustainability-linked bond deals (USD billion)
6
63.3
19.3
15.6
UBS apportioned deal value of above (USD billion)
13.2
5.7
3.4
Stewardship – voting
Number of climate-related resolutions voted upon
7
89
50
44
78.0
Proportion of supported climate-related resolutions (%)
78.6
88.0
81.8
Own operations
(reporting period: July to June)
Net GHG footprint (1,000 metric tons CO
2
e)
8
30
75
104
(60.0)
Change from baseline 2004 (%)
(92.0)
(79.0)
(71.2)
Share of renewable electricity (%)
100
85
72
1 The carbon-related assets
 
metric has been updated to
 
cover the four non-financial groups
 
as defined by the TCFD,
 
i.e., energy, transportation,
 
materials and buildings,
 
and agriculture, food and for
 
est products.
 
2 Includes total
loans and advances to customers and guarantees as well as irrevocable loan commitments (within the scope of expected credit loss).
 
3 Based on standalone IFRS numbers.
 
4 Climate-sensitive sectors are defined as those business
activities that are rated as having high,
 
moderately high or moderate vulnerability
 
to transition risks and physical risks.
 
For more details, refer
 
to the “UBS lending to climate-sensitive sectors”
 
table under “Sustainability and climate
risk” in the “Risk management
 
and control” section of this report
 
and “Climate scenario analysis” in the
 
“What” section of the Sustainability Report
 
2021, available from 11 March 2022
 
under “Annual reporting” at
ubs.com/investors
.
Physical risk number includes USD 4 billion of
 
loans backed by real estate in
 
regions with elevated physical climate risks.
 
Global Wealth Management corporate lending
 
to customers represents 1.1% of all on- and
 
off-balance sheet
loans and advances to customers,
 
and is excluded from the climate-sensitive
 
sectors analysis in 2021.
 
5
 
M
ethodologies for assessing climate-related financial risk are
 
emerging and may change over time,
 
as described in the UBS
Climate Report 2021, available from 11 March
 
2022 under “Annual reporting” at
ubs.com/investors
.
 
6
Such as, but not limited to, ICMA Green Bond
 
Principles, Sustainability Bond Principles, and Sustainability-linked Bond Principles.
 
7 This excludes proposals related to Japanese companies that included changes to
 
the companies’ articles of association. 2021 numbers include shareholder and management
 
proposals, 2020 and 2019 numbers shareholder proposals
only. This reflects the increasingly common market
 
practice of climate-related proposals being presented by management.
 
8 Net greenhouse gas (GHG) footprint equals gross
 
GHG emissions minus GHG reductions from renewable
electricity and CO
2
e offsets (gross GHG
 
emissions include: direct GHG emissions
 
by UBS; indirect GHG
 
emissions associated with the generation
 
of imported / purchased
 
electricity (grid average emission
 
factor), heat or steam;
 
and
other indirect GHG emissions associated with business travel, paper consumption and waste disposal).
 
A breakdown of our GHG emissions (scopes 1, 2 and 3) is provided in appendix
 
4 to the Sustainability Report 2021, available from
11 March 2022 under “Annual reporting” at
ubs.com/investors
.
 
 
Reporting to our stakeholders on our sustainability
strategy and activities
Information about all our
 
sustainability efforts and commitments
is
 
provided
 
in
 
our
 
Sustainability
 
Report
 
2021,
 
available
 
under
“Annual
 
reporting”
 
at
ubs.com/investors
.
 
The
 
content
 
of
 
the
Sustainability Report 2021 has been prepared in accordance with
Global Reporting Initiative (GRI) Standards
 
(the “comprehensive”
option) and with the
 
German rules implementing the
 
EU Directive
on
 
disclosure
 
of
 
non-financial
 
and
 
diversity
 
information
(2014/95/EU). Our
 
reporting on sustainability
 
has been
 
reviewed
on a limited assurance basis by Ernst & Young Ltd
 
against the GRI
Standards.
›
 
Refer to the Sustainability Report 2021,
 
available from 11 March
2022 under “Annual reporting” at
ubs.com/investors
, for an
overview of non-financial disclosures in accordance
 
with the
German rules implementing EU Directive 2014/95
 
and for
information on UBS AG and UBS Europe SE
 
disclosures pursuant
to EU Taxonomy Art. 8
 
Our strategy, business model and environment
 
| Regulation and supervision
56
Regulation and supervision
As a financial
 
services
 
provider based
 
in Switzerland,
 
UBS is subject
to
 
consolidated
 
supervision
 
by
 
the
 
Swiss
 
Financial
 
Market
Supervisory Authority
 
(FINMA). Our entities are also regulated
 
and
supervised
 
by
 
authorities
 
in
 
each
 
country
 
where
 
they
 
conduct
business.
 
Through UBS AG
 
and UBS Switzerland
 
AG, both licensed
as banks
 
in Switzerland,
 
UBS may
 
engage in
 
a full
 
range of
 
financial
services
 
activities in
 
Switzerland and
 
abroad,
 
including personal
banking,
 
commercial
 
banking,
 
investment
 
banking
 
and
 
asset
management.
 
As
 
a
 
global
 
systemically
 
important
 
bank
 
(
a
G
-
SIB),
 
as
designated
 
by
 
the
 
Financial
 
Stability
 
Board,
 
and
 
a
 
systemically
relevant bank
 
(an SRB)
 
in Switzerland,
 
we are
 
subject to
 
stricter
regulatory
 
requirements
 
and
 
supervision
 
than
 
most
 
other
 
Swiss
banks.
 
›
 
Refer to the “Our evolution” section
 
of this report for more
information
›
 
Refer to the “Regulatory and legal developments”
 
and “Risk
factors” sections of this report for more information
Regulation and supervision in Switzerland
Supervision
UBS
 
Group
 
AG
 
and
 
its
 
subsidiaries are
 
subject
 
to
 
consolidated
supervision by
 
FINMA
 
under
 
the
 
Swiss Banking
 
Act
 
and
 
related
ordinances, which
 
impose standards for
 
matters such as minimum
capital,
 
liquidity,
 
risk
 
concentration
 
and
 
internal
 
organization
standards. FINMA
 
meets
 
its
 
statutory supervisory
 
responsibilities
through licensing, regulation,
 
supervision, and enforcement. It
 
is
responsible for prudential
 
supervision
 
and mandates audit
 
firms to
perform regulatory
 
audits and
 
other supervisory
 
tasks on
 
its behalf.
Capital adequacy and liquidity regulation
As an
 
internationally
 
active Swiss
 
SRB, we
 
are subject
 
to capital
 
and
total loss-absorbing
 
capacity requirements that are based on both
RWA and LRD and
 
are among the most
 
stringent in
 
the world. We
are also subject to short-term liquidity coverage ratio rules and to
long-term minimum
 
funding requirements.
›
 
Refer to the “Capital, liquidity and funding,
 
and balance sheet”
section of this report for more information about
 
the Swiss SRB
framework and the Swiss too-big-to-fail
 
requirements
›
 
Refer to “Liquidity coverage ratio” in the
 
“Capital, liquidity and
funding, and balance sheet” section of
 
this report for more
information about liquidity coverage ratio
 
requirements
 
›
 
Refer to the “Regulatory and legal developments”
 
section of this
report for more information about the introduction of
 
the net
stable funding ratio
 
 
›
 
Refer to “Industry trends” in the “Our environment”
 
section of
this report for more information about revisions of the
 
Swiss
too-big-to-fail liquidity framework
 
Regulation and supervision outside Switzerland
Regulation and supervision in the US
In the
 
US, UBS
 
is subject
 
to regulation
 
and supervision
 
by the
 
Board
of Governors of
 
the Federal
 
Reserve System (the
 
Federal Reserve
Board) under a
 
number of laws. UBS
 
Group AG and
 
UBS AG are
both subject
 
to the Bank
 
Holding Company
 
Act, pursuant
 
to which
the Federal
 
Reserve Board
 
has supervisory authority
 
over the
 
US
operations
 
of both UBS
 
Group AG and
 
UBS AG.
 
In
 
addition
 
to
 
being
 
a
 
financial
 
holding
 
company
 
under
 
the
Bank Holding Company Act, UBS AG has US branches, which are
authorized and supervised by the
 
Office of the Comptroller of
 
the
Currency.
 
UBS AG
 
is
 
registered
 
as
 
a
 
swap
 
dealer
 
with
 
the
Commodity
 
Futures
 
Trading
 
Commission
 
(the
 
CFTC)
 
and
 
as
 
a
securities-based
 
swap
 
dealer
 
with
 
the
 
Securities
 
and
 
Exchange
Commission (the SEC).
 
UBS Americas Holding LLC, the
 
intermediate holding company
for
 
our
 
operations
 
in
 
the
 
US
 
outside
 
of
 
the
 
UBS
 
AG
 
branch
network,
 
as
 
required
 
under
 
the
 
Dodd–Frank
 
Act,
 
is
 
subject
 
to
requirements established by the
 
Federal Reserve Board related
 
to
risk-based
 
capital,
 
liquidity,
 
the
 
Comprehensive
 
Capital
 
Analysis
and
 
Review
 
stress
 
testing
 
and
 
capital
 
planning
 
process,
 
and
resolution planning and governance.
UBS
 
Bank
 
USA,
 
a
 
Federal
 
Deposit
 
Insurance
 
Corporation-
insured depository institution subsidiary, is licensed and regulated
by state regulators in Utah.
 
UBS Financial
 
Services Inc.,
 
UBS Securities
 
LLC and several
 
other
US subsidiaries of
 
UBS are
 
subject to
 
regulation by
 
a
 
number of
different government agencies
 
and
 
self-regulatory organizations,
including the SEC, the Financial Industry
 
Regulatory Authority,
 
the
CFTC,
 
the
 
Municipal
 
Securities
 
Rulemaking
 
Board
 
and
 
national
securities
 
exchanges,
 
depending on
 
the nature
 
of their business.
Regulation and supervision in the UK
Our regulated
 
UK operations
 
are mainly
 
subject to
 
the authority
of the Prudential Regulation Authority (the PRA), which is part of
the
 
Bank
 
of
 
England,
 
and
 
the Financial
 
Conduct
 
Authority
 
(the
FCA).
 
We
 
are
 
also
 
subject
 
to
 
the
 
rules
 
of
 
the
 
London
 
Stock
Exchange
 
and
 
other
 
securities
 
and
 
commodities
 
exchanges
 
of
which UBS AG is a member.
UBS AG has a
 
UK-registered branch in
 
London, which serves
 
as
a global
 
booking center
 
for our
 
Investment Bank.
 
Our regulated
subsidiaries in the UK that
 
provide asset management services are
authorized and regulated mainly by the FCA, with one entity also
subject to the authority of the PRA.
Regulation and supervision in Germany / the EU
UBS Europe SE is
 
subject to the
 
direct supervision of the
 
European
Central
 
Bank,
 
as
 
well
 
as
 
to
 
continued
 
conduct,
 
consumer
protection and
 
anti-money laundering-related
 
supervision by the
German
 
Federal
 
Financial
 
Supervisory
 
Authority
 
(the
 
BaFin)
 
and
supervisory
 
support
 
by
 
the
 
German
 
Bundesbank.
 
The
 
entity
 
is
subject to
 
EU and
 
German laws and
 
regulations. UBS
 
Europe SE
maintains
 
branches
 
in
 
Denmark,
 
France, Italy,
 
Luxembourg,
 
the
Netherlands,
 
Poland,
 
Spain,
 
Sweden
 
and
 
Switzerland,
 
and
 
is
subject to
 
conduct supervision
 
by authorities
 
in all
 
those countries.
 
 
 
57
Regulation and supervision in Asia Pacific
We operate in
 
13 locations in
 
Asia Pacific and are
 
subject to the
regulation
 
and supervision
 
by local
 
financial
 
regulators.
 
Our regional
hubs
 
are Singapore
 
and Hong
 
Kong SAR.
In
 
Singapore,
 
we
 
conduct
 
our
 
operations
 
primarily
 
through
UBS AG Singapore Branch and UBS Securities Pte. Ltd., which are
supervised
 
by
 
the
 
Monetary
 
Authority
 
of
 
Singapore
 
and
 
the
Singapore Exchange.
UBS AG Hong
 
Kong Branch is
 
primarily supervised by
 
the Hong
Kong Monetary
 
Authority. UBS
 
Securities Hong
 
Kong Limited,
 
UBS
Securities Asia Limited and UBS Asset Management (Hong Kong)
Limited are primarily supervised by the Hong Kong Securities and
Futures
 
Commission.
 
In
 
addition,
 
UBS
 
Securities
 
Hong
 
Kong
Limited is supervised
 
by the Hong
 
Kong Stock Exchange
 
and the
Hong Kong Futures Exchange.
In Mainland
 
China, UBS
 
has multiple
 
licenses to
 
operate its
 
core
business
 
lines
,
 
and
 
the
 
various
 
UBS
 
entities
 
are
 
subject
 
to
regulation
 
by
 
a
 
number
 
of
 
different
 
government
 
agencies.
 
The
People’s
 
Bank
 
of
 
China
 
oversees
 
the
 
macro
 
capital
 
markets
policies
 
and ensures
 
coordinated supervisory
 
approaches
 
by the
China
 
Banking
 
and Insurance
 
Commission,
 
the
 
China Securities
and Regulatory Commission, and the exchanges.
Financial crime prevention
Combating money laundering
 
and terrorist financing
 
has been a
major
 
focus
 
of
 
many
 
governments
 
in
 
recent
 
years.
 
Laws
 
and
regulations, including
 
the US Bank
 
Secrecy Act,
 
require effective
policies,
 
procedures
 
and
 
controls
 
to
 
detect,
 
prevent
 
and
 
report
money laundering and
 
terrorist financing, and
 
the verification of
client
 
identities.
 
Failure
 
to
 
introduce
 
and
 
maintain
 
adequate
programs to prevent
 
money laundering
 
and terrorist financing
 
can
result in significant legal and reputation risk and fines.
We are also subject
 
to laws and
 
regulations prohibiting corrupt
or
 
illegal
 
payments
 
to
 
government
 
officials
 
and
 
other
 
persons,
including the US Foreign
 
Corrupt Practices Act and
 
the UK Bribery
Act.
 
We
 
maintain
 
policies,
 
procedures
 
and
 
internal
 
controls
intended to comply with those regulations.
›
 
Refer to “Non-financial risk” in the “Risk
 
management and
control” section of this report for more information
Data protection
We are subject
 
to regulations concerning the
 
use and protection
of
 
customer,
 
employee,
 
and
 
other
 
personal
 
and
 
confidential
information.
 
This
 
includes
 
provisions
 
under
 
Swiss
 
law,
 
the
 
EU
General Data Protection Regulation (the GDPR) and laws of other
jurisdictions.
›
 
Refer to the “Risk factors” section of
 
this report for more
information about regulatory change
Recovery and resolution
Swiss too-big-to-fail (TBTF) legislation
 
requires each Swiss
 
SRB to
establish
 
an
 
emergency
 
plan
 
to
 
maintain
 
systemic
 
functions
 
in
case
 
of
 
impending
 
insolvency.
 
In
 
response
 
to
 
these
 
Swiss
requirements,
 
and
 
similar
 
ones
 
in
 
other
 
jurisdictions,
 
UBS
 
has
developed
 
recovery
 
plans
 
and
 
resolution
 
strategies,
 
as
 
well
 
as
plans
 
for
 
restructuring
 
or
 
winding
 
down
 
businesses
 
if
 
the
 
firm
could not be stabilized otherwise.
 
In 2013, FINMA stated its
 
preference for a single point
 
of entry
(SPE) strategy for globally active SRBs, such as
 
UBS, with a bail-in
at
 
the
 
group
 
holding-company
 
level.
 
UBS
 
has
 
made
 
structural,
financial and operational changes
 
to facilitate an SPE
 
strategy and
is
 
confident
 
that
 
a
 
resolution
 
of
 
the
 
bank
 
is
 
operationally
executable
 
and
 
legally
 
enforceable.
 
FINMA
 
published
 
its
 
most
recent
 
assessment
 
of
 
Swiss
 
SRBs’
 
emergency
 
and
 
recovery
 
and
resolution plans
 
in March 2021,
 
which confirmed
 
that our Swiss
emergency plan
 
is effective,
 
subject to
 
further reduction
 
of joint
and
 
several
 
liabilities.
 
Since
 
the
 
previous
 
assessment,
 
UBS
 
has
reduced
 
its
 
joint
 
and
 
several
 
liabilities
 
to
 
the
 
requested
 
level.
FINMA acknowledged progress
 
made in UBS’s
 
overall resolvability,
by building up the necessary capabilities or removing obstacles to
the implementation of the resolution strategy.
 
UBS’s crisis management framework
Our crisis management framework
 
includes three key governance
bodies (see chart
 
on the following
 
page), which take
 
responsibility
and action depending on
 
the nature of the
 
stress incident and the
scale of the response needed.
–
 
For
 
incident,
 
risk
 
and
 
crisis
 
management,
 
the
 
Group
 
Crisis
Management
 
Committee
 
works
 
with
 
incident
 
management
teams that provide monitoring and early-warning indicators at
local / regional
 
level, without needing
 
to activate protocols
 
at
the Group
 
level. If
 
a local
 
response is
 
insufficient, global
 
task
forces and
 
crisis management teams
 
provide decision-making
guidance
 
and
 
coordination,
 
including
 
crisis
 
management
plans,
 
protocols
 
and
 
playbooks,
 
and
 
contingency
 
funding
plans.
–
 
The Group Executive
 
Board and the
 
Board of
 
Directors would
evaluate
 
and
 
decide
 
upon
 
the
 
need
 
to
 
activate
 
the
 
Global
Recovery
 
Plan
 
(the
 
GRP)
 
if
 
a
 
stress
 
event
 
reached
 
a
 
severity
requiring that, based on the GRP’s risk indicators.
–
 
FINMA
 
has
 
the
 
authority
 
to
 
determine
 
whether
 
the
 
point
 
of
non-viability
 
(PONV)
 
as
 
defined
 
by
 
Swiss
 
law
 
(referred
 
to
 
as
“impending insolvency” in the Banking Act) has been reached
and, in
 
such cases,
 
as part
 
of the
 
resolution strategy,
 
has the
power
 
to
 
order
 
the
 
bail-in
 
of
 
creditors
 
to
 
recapitalize
 
and
stabilize the
 
Group, limit
 
payments of
 
dividends and
 
interest,
alter our
 
legal structure,
 
take actions
 
to reduce
 
business risk,
and order a restructuring of the bank.
 
UBS_AR_2021p86i0.gif
Our strategy, business model and environment
 
| Regulation and supervision
58
 
 
 
Global Recovery Plan
 
The
 
GRP
 
gives
 
senior
 
management
 
a
 
tool
 
to
 
restore
 
financial
strength if UBS comes under severe capital and liquidity stress.
 
Quantitative
 
and qualitative
 
triggers are
 
monitored daily
 
and
subject
 
to
 
predefined
 
governance
 
and
 
escalation
 
processes.
Recovery
 
options
 
are
 
linked
 
to
 
owners
 
and
 
checklists
 
with
 
the
objectives
 
being
 
capital
 
preservation,
 
capital
 
raising
 
and
 
raising
funding,
 
and disposal or wind-down of businesses.
Global Resolution Strategy
FINMA
 
is responsible
 
for developing
 
the resolution
 
strategy
 
for UBS.
The planning
 
includes
 
measures
 
that
 
FINMA
 
can take
 
to resolve
 
UBS
in an
 
orderly manner
 
if the
 
Group enters
 
into resolution.
 
FINMA
 
has
the ultimate authority
 
and responsibility
 
to execute the resolution,
in
 
cooperation with
 
the
 
Swiss
 
National
 
Bank,
 
the
 
Swiss
 
Federal
Department of Finance and
 
other key authorities. The
 
SPE bail-in
strategy would
 
involve writing
 
down the Group’s
 
remaining equity
and additional
 
tier 1
 
and tier
 
2 instruments,
 
as well
 
as bail-in
 
of total
loss-absorbing (TLAC)-eligible
 
senior unsecured bonds at
 
the UBS
Group
 
AG
 
level.
 
An
 
internal recapitalization
 
of
 
undercapitalized
subsidiaries
 
would be made
 
simultaneously
 
with losses
 
transmitted
to
 
UBS
 
AG
 
and,
 
ultimately,
 
UBS
 
Group
 
AG.
 
Post-resolution
restructuring
 
measures
 
could
 
include
 
disposal
 
and winding
 
down
 
of
businesses
 
and assets.
 
FINMA
 
noted that
 
we have
 
already
 
taken key
preparatory
 
steps
 
and
 
made
 
good
 
progress
 
regarding
 
global
resolvability.
 
Local recovery and resolution plans
The Swiss
 
emergency plan
 
demonstrates how
 
UBS’s systemically
important
 
functions
 
and
 
critical
 
operations
 
in
 
Switzerland
 
can
continue if
 
the UBS
 
Group cannot
 
be restructured. This
 
is achieved
mainly
 
by
 
maintaining
 
UBS
 
Switzerland
 
AG
 
as
 
a
 
separate
 
legal
entity.
 
FINMA
 
has
 
confirmed
 
that
 
the
 
Swiss
 
emergency
 
plan
 
is
effective,
 
subject
 
to
 
further
 
reduction
 
of
 
joint
 
and
 
several
liabilities.
The US resolution
 
plan sets out
 
the steps that
 
could be taken
to
 
resolve
 
the
 
UBS
 
Americas
 
Holding
 
LLC
 
group
 
if
 
it
 
suffered
material
 
financial
 
distress
 
and
 
the
 
UBS
 
Group
 
was
 
unable
 
or
unwilling
 
to
 
provide
 
financial
 
support.
 
As
 
required
 
by
 
US
regulations, our US plan
 
contemplates that UBS
 
Americas Holding
LLC
 
will
 
commence
 
US
 
bankruptcy
 
proceedings.
 
Prior
 
to
commencement
 
thereof,
 
the
 
plan
 
envisages
 
UBS
 
Americas
Holding LLC down-streaming financial
 
resources to subsidiaries to
facilitate orderly wind-down or disposal of businesses.
Following
 
the
 
cross-border
 
merger
 
of
 
UBS
 
Limited
 
into
UBS Europe SE,
 
the enlarged
 
European operating
 
subsidiary has
developed
 
resolution
 
plans
 
based
 
on
 
Single
 
Resolution
 
Board
requirements.
 
Given
 
the
 
relatively
 
small
 
size
 
of
 
UBS
 
Europe
 
SE
compared
 
with
 
the
 
overall
 
Group,
 
emphasis
 
is
 
placed
 
on
 
the
recovery
 
plan and
 
the resolution
 
strategy for
 
the UBS
 
Group to
provide
 
the
 
tools
 
necessary
 
to
 
recapitalize
 
and
 
restructure
 
the
entity in case of material financial distress.
Other
 
local
 
recovery
 
and
 
resolution
 
plans
 
exist
 
for
 
various
Group entities and jurisdictions.
 
59
Regulatory and legal developments
Developments regarding Sanctions and Export Controls
As
 
a
 
result
 
of
 
the
 
Russian
 
invasion
 
of
 
Ukraine
 
on
 
24 February
2022,
 
Switzerland,
 
the
 
US,
 
the
 
EU,
 
the
 
UK
 
and
 
others
 
have
announced unprecedented levels
 
of sanctions
 
and other
 
measures
against
 
Russia
 
and
 
certain
 
Russian
 
entities
 
and
 
nationals.
 
UBS’s
policy
 
is
 
to
 
comply
 
with
 
all
 
applicable
 
laws,
 
including
 
sanctions
and export
 
controls, in
 
the jurisdictions
 
in which
 
it operates.
 
At
present,
 
numerous
 
complex
 
regimes
 
are
 
developing
 
rapidly
 
in
response
 
to the
 
escalating conflict
 
and UBS
 
is working
 
carefully
and assiduously
 
to comply
 
with all
 
relevant requirements
 
and to
address their potential consequences.
Developments regarding the too-big-to-fail regulation
In March 2021,
 
the Swiss Financial Market
 
Supervisory Authority
(FINMA)
 
published
 
its
 
annual
 
assessment
 
of
 
the
 
recovery
 
and
resolution plans of
 
systemically important financial
 
institutions in
Switzerland. The report shows that FINMA approved UBS’s group
recovery plan and assessed its
 
Swiss Emergency Plan as effective.
It also
 
highlighted that
 
UBS made
 
further progress
 
in improving
its global
 
resolvability by
 
building up
 
the necessary
 
capabilities and
removing
 
obstacles
 
to
 
the
 
implementation
 
of
 
the
 
resolution
strategy, while pointing out areas for further improvement.
In June 2021, the
 
Swiss Federal Council issued the
 
results of its
bi-annual
 
review
 
of
 
the
 
Swiss
 
too-big-to-fail
 
regulatory
framework.
 
The
 
Swiss
 
Federal
 
Council
 
concluded
 
that
 
no
fundamental
 
changes
 
to
 
the
 
framework
 
are
 
needed.
 
Potential
areas for
 
adjustment identified
 
include further
 
tightening of
 
the
liquidity
 
requirements
 
for
 
systemically
 
important
 
banks
 
and
 
the
alignment of incentive systems to support a bank’s resolvability.
In September 2021,
 
the Swiss Federal
 
Department of Finance
launched
 
a
 
consultation
 
on
 
proposed
 
revisions
 
to
 
the
 
Swiss
Liquidity Ordinance, with
 
the aim of
 
strengthening the
 
resilience
of systemically important banks
 
in Switzerland. As proposed,
 
the
revisions
 
would
 
increase
 
the
 
regulatory
 
minimum
 
liquidity
requirements for
 
systemically important banks,
 
including UBS.
 
The
final rule is expected to be published later this year.
Reactivation of the Swiss countercyclical buffer
 
In January 2022,
 
the Swiss
 
Federal Council decided,
 
at the request
of
 
the SNB,
 
to reactivate
 
the countercyclical
 
capital buffer,
 
at a
maximum
 
level
 
of
 
2.5%
 
on
 
risk-weighted
 
positions
 
that
 
are
directly
 
or
 
indirectly
 
backed
 
by
 
residential
 
properties
 
in
Switzerland. This is
 
expected to increase
 
our common equity
 
tier
1 (CET1) minimum capital requirement by approximately 30 basis
points. The reactivated
 
countercyclical capital buffer
 
will become
effective on 30 September 2022.
International developments regarding capital regulation
In
 
March
 
2021,
 
US
 
banking
 
regulators,
 
including
 
the
 
Federal
Reserve
 
Board
 
(the
 
FRB),
 
the
 
OCC
 
and
 
the
 
Federal
 
Deposit
Insurance
 
Corporation
 
(the
 
FDIC)
 
decided
 
not
 
to
 
extend
 
the
temporary
 
exclusion
 
of
 
central
 
bank
 
deposits
 
and
 
US
 
Treasury
securities
 
from
 
the
 
leverage
 
exposure
 
calculation
 
for
 
the
supplementary leverage ratio
 
beyond March 2021.
 
The temporary
exemption was applicable to UBS Americas Holding LLC (UBSAH)
with
 
respect
 
to
 
US
 
regulatory
 
capital
 
requirements.
 
In
 
addition,
the
 
Federal
 
Reserve
 
announced
 
that
 
the
 
limits
 
on
 
capital
distributions imposed
 
during the
 
COVID-19 pandemic
 
would be
removed after
 
30 June 2021. As
 
a result,
 
capital distributions by
UBSAH
 
will
 
generally
 
be
 
permitted
 
for
 
as
 
long
 
as
 
it
 
meets
regulatory capital
 
requirements, including
 
the incremental
 
stress
capital buffer set by the FRB as part of its Comprehensive Capital
Analysis and Review stress test (CCAR). Following the completion
of
 
the
 
annual
 
Dodd–Frank
 
Act Stress
 
Tests
 
(DFAST)
 
and
 
CCAR,
UBSAH
 
was
 
assigned
 
a
 
stress
 
capital
 
buffer
 
(an
 
SCB)
 
of
 
7.1%
(previously 6.7%) under the SCB rule as of 1 October 2021.
In
 
July
 
2021,
 
the
 
European
 
Central
 
Bank
 
announced
 
its
decision
to
 
remove
 
COVID
-
19
-
related
 
restrictions
 
on
 
capital
distributions
 
and
 
share
 
buybacks
 
by
 
banks
 
with
 
effect
 
from
1 October 2021.
In October 2021,
 
the European Commission
 
(the EC) published
a legislative proposal
 
to amend the
 
EU’s prudential rules
 
for banks
to implement the remaining elements
 
of Basel III and revised rules
on
 
resolution.
 
Once
 
finalized,
 
the
 
EC
 
envisages
 
that
 
these
requirements are likely to take effect
 
beginning in 2025 and UBS
Europe SE will be subject to these final provisions.
In addition,
 
the proposal,
 
which may
 
be adjusted
 
in the
 
political
process
 
and
 
is
 
expected
 
to
 
be
 
finalized
 
by
 
the
 
end
 
of
 
2023,
includes
 
a
 
requirement
 
that
 
certain
 
banking
 
and
 
investment
services must be provided
 
through a branch in
 
the EU. UBS Group
entities currently provide such
 
services in the EU
 
on a cross-border
basis. UBS will
 
assess the final
 
requirements to determine
 
whether
changes are required ahead
 
of the new framework entering
 
into
force.
Swiss stamp duty and withholding tax
In June 2021, the Swiss Parliament approved
 
an extension of the
current
 
withholding
 
tax
 
exemption
 
for
 
total
 
loss-absorbing
capacity instruments, including
 
additional tier 1, from
 
2021 until
the end of 2026.
In
 
December
 
2021,
 
the
 
Swiss
 
Parliament
 
also
 
adopted
 
a
legislation that
 
will abolish
 
the withholding
 
tax on bond
 
interest
payments (for bonds issued from the beginning of 2023 onward)
and will
 
eliminate the
 
securities transfer
 
stamp tax
 
on domestic
bonds.
 
However,
 
the
 
withholding
 
tax
 
on
 
interest
 
paid
 
on
 
bank
deposits
 
of
 
natural
 
persons
 
with
 
tax
 
domicile
 
in
 
Switzerland
 
is
maintained.
 
The
 
reform
 
intends
 
to
 
strengthen
 
the
 
debt
 
capital
market
 
in
 
Switzerland,
 
and
 
is
 
expected
 
to
 
take
 
effect
 
in
 
2023,
subject to an optional referendum.
 
 
Our strategy, business model and environment
 
| Regulatory and legal developments
60
OECD corporate tax reform
In October 2021, the G20
 
endorsed the final political agreement
on the
 
two-pillar solution
 
reached by
 
the OECD
 
/ G20
 
Inclusive
Framework on
 
Base Erosion
 
and Profit
 
Shifting (BEPS).
 
The two-
pillar solution
 
consists of Pillar 1,
 
which provides
 
taxing rights to
the
 
market
 
jurisdiction
 
from
 
where
 
the
 
profits
 
are
 
derived, and
Pillar 2, which introduces a
 
minimum corporate tax rate of
 
15%.
The G20 called for all the
 
rules to enter into force
 
at a global level
by 2024,
 
with some
 
to be
 
implemented in
 
2023. At
 
the time
 
of
publication
 
in
 
October
 
2021,
 
137
 
of
 
the
 
141
 
members
 
of
 
the
Framework had agreed to the reform and planned to incorporate
the new
 
rules into
 
their respective
 
national legislation,
 
including
Switzerland. As financial services are expected to be out of scope
of Pillar 1, UBS will primarily be affected by Pillar 2.
 
The impact of
the
 
reform
 
on
 
UBS
 
will
 
depend
 
on
 
implementation
 
by
 
the
adhering countries of the reform.
In January 2022,
 
the Swiss Federal
 
Council presented the
 
key
aspects
 
of
 
the
 
implementation
 
in
 
Switzerland.
 
The
 
relevant
changes will
 
require a constitutional
 
amendment, which triggers
a mandatory referendum.
 
The government aims
 
to implement the
minimum tax rate as of 1 January 2024.
Revision of the Swiss Anti-Money-Laundering Act
In
 
March
 
2021,
 
the Swiss
 
Parliament
 
granted final
 
approval
 
for
the
 
revision
 
of
 
the
 
Swiss
 
Anti-Money-Laundering
 
(AML)
 
Act,
which incorporates
 
several but
 
not all,
 
of the
 
recommendations
from the enhanced follow-up process of
 
the Financial Action Task
Force on Money
 
Laundering (the FATF). The revision will
 
introduce
into
 
Swiss
 
law
 
further
 
specifications
 
of
 
the
 
obligation
 
to
 
file
suspicious
 
activity
 
reports
 
and
 
increase
 
the
 
frequency
 
of
 
client
data
 
reviews.
 
It
 
will also
 
improve
 
transparency
 
by incorporating
additional legal
 
requirements for
 
associations with
 
elevated risks
of
 
terrorist
 
financing.
 
However,
 
the
 
FATF’s
 
recommendation
 
to
extend the
 
scope of
 
the Swiss
 
AML Act
 
to advisors
 
(e.g., attorneys,
fiduciaries,
 
and
 
tax
 
advisors)
 
was
 
not
 
adopted
 
by
 
the
 
Swiss
Parliament.
 
On 1 October 2021, the Federal Council issued a
 
draft revision
of
 
the
 
Anti-Money-Laundering
 
Ordinance
 
(AMLO)
 
to
 
detail
 
the
implementation of
 
the changes.
 
The consultation
 
on the
 
AMLO
ended
 
on
 
17 January
 
2022,
 
and
 
the
 
revisions
 
are
 
expected
 
to
enter into
 
force by
 
mid-2022. UBS
 
is in
 
the process
 
of adjusting
its AML processes to reflect the new requirements.
Developments regarding environmental, social and
governance matters
2021
 
saw
 
a
 
significant
 
number
 
of
 
sustainability-related
 
policy
developments, with a
 
particular focus on
 
disclosure requirements,
across various jurisdictions.
In
 
March
 
2021,
 
the
 
EU
 
Sustainable
 
Finance
 
Disclosures
Regulation
 
(the
 
SFDR)
 
came
 
into
 
effect.
 
The
 
regulation
 
defines
standards regarding, among other matters, how investors should
be
 
informed
 
about
 
sustainability
 
risks
 
and
 
how
 
the
 
impact
 
of
investments on the environment and society should be disclosed.
This
 
regulation
 
concerns
 
any
 
prospectus
 
of
 
UBS’s
 
EU-domiciled
and EU-marketed funds.
In
 
April
 
2021,
 
the
 
EC
 
published
 
a
 
legislative
 
proposal
 
for
 
a
revised
 
Non-Financial
 
Reporting
 
Directive
 
(NFRD)
 
requiring
 
firms
to publish enhanced information
 
about their activities
 
with regard
to environmental, social and governance (ESG)-related matters.
In
 
July
 
2021,
 
the
 
EC
 
adopted
 
regulations
 
prescribing
 
the
content,
 
methodology
 
and
 
presentation
 
of
 
climate-related
disclosures
 
that
 
are
 
required
 
under
 
Art.
 
8
 
of
 
the
 
EU
 
Taxonomy
Regulation.
 
As
 
part
 
of
 
their
 
non-financial
 
reporting,
 
credit
institutions will be
 
required to disclose
 
a green asset
 
ratio covering
the banking book and
 
certain trading portfolios, as well
 
as other
key
 
performance
 
indicators
 
(KPIs),
 
including
 
the
 
proportion
 
of
green
 
taxonomy-aligned
 
off-balance
 
sheet
 
exposures
 
and
 
fees
and
 
commission income.
 
Starting with
 
the annual
 
reporting
 
for
2021, taxonomy-eligible
 
assets are
 
required to
 
be disclosed;
 
the
remaining
 
set
 
of
 
KPIs
 
is
 
to
 
be
 
fully
 
phased
 
in
 
for
 
our
 
annual
reporting
 
for
 
2025.
 
These
 
disclosure
 
requirements
 
will
 
apply
 
to
UBS AG and UBS Europe SE.
In August
 
2021, the
 
Swiss Federal
 
Council decided
 
to introduce
mandatory
 
reporting
 
requirements
 
for
 
large
 
Swiss
 
companies
based
 
on
 
the
 
recommendations
 
of
 
the
 
Financial
 
Stability
 
Board
(the FSB) Task
 
Force on Climate-related
 
Financial Disclosures (the
TCFD).
 
A
 
consultation
 
on
 
the draft
 
proposal
 
is
 
planned
 
in
 
mid-
2022,
 
with
 
mandatory
 
requirements
 
expected
 
to
 
apply
 
to
 
the
2023 annual reporting. Our disclosures
 
are already largely aligned
with
 
the
 
2017
 
TCFD
 
recommendations
 
and
 
we
 
expect
 
to
 
fully
implement those by the end of 2022.
In November 2021,
 
the Swiss Federal
 
Council published several
recommendations
 
to
 
increase
 
transparency
 
regarding
 
climate-
related
 
information
 
and
 
reporting
 
in
 
the
 
Swiss
 
financial
 
center,
including that: i)
 
financial market
 
participants use comparable
 
and
meaningful climate compatibility
 
indicators to create
 
transparency
for all financial products and client portfolios; and ii) the financial
sector
 
joins
 
international
 
net-zero
 
alliances.
 
UBS
 
has
 
joined
 
the
Glasgow
 
Financial
 
Alliance
 
for
 
Net
 
Zero
 
(GFANZ)
 
and
 
is
participating in an industry-wide
 
working group led by
 
the Swiss
Federal
 
Department
 
of
 
Finance
 
(the
 
FDF)
 
to
 
develop
 
climate
compatibility
 
indicators.
 
The
 
Swiss
 
Federal
 
Council
 
has
 
also
instructed
 
the
 
FDF
 
to
 
work
 
with
 
the
 
Department
 
of
 
the
Environment,
 
Transport,
 
Energy
 
and
 
Communications
 
(DETEC)
and
 
FINMA
 
to
 
jointly
 
assess,
 
by
 
the
 
end
 
of
 
2022,
 
whether
 
any
changes to financial
 
market rules may
 
help avoid greenwashing,
and, if necessary, to propose binding guidelines.
 
In November 2021, FINMA issued guidance on preventing and
combating
 
greenwashing in
 
the context
 
of sustainability-related
collective
 
investment
 
schemes.
 
The
 
guidance
 
sets
 
out
 
FINMA’s
expectations
 
regarding:
 
the
 
advertised
 
sustainability
characteristics
 
in
 
fund
 
documents
 
of
 
respective
 
Swiss
 
collective
investment
 
schemes;
 
appropriate
 
organizational
 
structures
 
of
institutions
 
that
 
manage
 
sustainability-related
 
Swiss
 
or
 
foreign
collective
 
investment
 
schemes;
 
and
 
the
 
integration
 
of
 
ESG
considerations into the process of advising clients.
 
In
 
November
 
2021,
 
the
 
Swiss
 
Environmental
 
Commission
 
of
the
 
Council
 
of
 
States
 
agreed
 
to
 
start
 
work
 
on
 
an
 
indirect
counterproposal
 
to
 
the
 
“Glacier
 
Initiative.”
 
Both
 
the
 
original
initiative and the counterproposal aim to embed
 
in national law a
net-zero
 
target
 
to
 
be
 
achieved
 
by
 
2050.
 
The
 
Environmental
Commission of the National Council
 
will formulate a draft
 
in early
2022, but the public vote will not take place before 2023.
In
 
November
 
2021,
 
the
 
Basel Committee
 
on
 
Banking
Supervision (the BCBS) issued a consultation on
 
Principles for the
effective management and
 
supervision of climate-related
 
financial
risks.
 
The
 
consultation
 
paper proposes
 
18
 
principles
 
to
 
improve
climate-related
 
financial
 
risk
 
management
 
by
 
banks
 
and
supervisors.
 
The
 
proposal
 
states
 
that
 
banks
 
should
 
incorporate
climate risks into their capital
 
and liquidity adequacy assessments.
 
 
 
61
In
 
November
 
2021,
 
the
 
International
 
Financial
 
Reporting
Standards (IFRS) Foundation Trustees announced
 
the creation of a
new
 
standard-setting
 
board,
 
the
 
International
 
Sustainability
Standards
 
Board
 
(ISSB),
 
which
 
will
 
be
 
tasked
 
with
 
developing a
comprehensive global baseline for
 
sustainability-related disclosure
standards
 
that
 
will
 
provide
 
investors
 
and
 
other
 
capital
 
market
participants
 
with
 
information
 
about
 
companies’
 
sustainability-
related
 
risks
 
and
 
opportunities
 
in
 
order
 
to
 
help
 
them
 
make
informed decisions.
In
 
December
 
2021,
 
the
 
Swiss
 
Federal
 
Council
 
opened
 
the
consultation
 
on
 
the
 
revised
 
CO
2
 
Act
 
following
 
its
 
rejection
 
in
 
a
public vote earlier
 
in 2021. The
 
new proposal contains
 
measures
to reduce carbon
 
emissions for the
 
period from 2025
 
to 2030 and
mandates
 
FINMA
 
and
 
the
 
Swiss
 
National
 
Bank
 
to
 
report
 
on
climate-related financial risks.
In
 
December
 
2021,
 
the
 
Federal
 
Council
 
specified
 
new
 
due
diligence requirements
 
to implement the
 
counterproposal to the
Responsible
 
Business
 
Initiative.
 
The
 
changes
 
to
 
the
 
Code
 
of
Obligations
 
require
 
large
 
Swiss
 
companies
 
to
 
report
 
on
 
risks
 
of
their
 
business
 
activities
 
in
 
the
 
areas
 
of
 
the
 
environment,
 
social
issues,
 
employee concerns,
 
human rights,
 
and the
 
fight against
corruption,
 
as
 
well as
 
on
 
the measures
 
taken
 
to
 
mitigate
 
these
risks. Companies active in sensitive areas with a risk of child labor
and conflict
 
minerals must
 
comply with
 
additional due
 
diligence
and reporting
 
obligations. The
 
details of
 
these requirements
 
are
outlined in a separate ordinance. The
 
new provisions entered into
force on
 
1 January 2022.
 
The law grants
 
companies one
 
year to
adapt to the new obligations.
 
These will therefore be applied
 
for
the first time in the 2023 financial year.
In
 
December
 
2021,
 
the
 
US
 
Office
 
of
 
the
 
Comptroller
 
of
 
the
Currency (the OCC)
 
issued a consultation
 
on supervisory guidance
regarding
 
firms’
 
climate
 
risk
 
management
 
practices.
 
While
 
the
proposal broadly aligns
 
with that
 
issued by the
 
BCBS in November,
it also represents the first
 
step of US banking
 
regulators regarding
expectations of supervised firms in their
 
capacity to measure and
control exposures to potential climate change issues.
Starting with our
 
2021 annual reporting,
 
we comply with
 
the
revised
 
FINMA
 
Circular
 
2016/1
 
“Disclosure
–
 
banks,”
 
which
includes climate risk-related
 
disclosure requirements. We
 
provide
information
 
required by
 
Art. 8
 
of
 
the EU
 
Taxonomy Regulation,
starting with the
 
disclosure of taxonomy-eligible
 
assets of UBS
 
AG
and UBS Europe SE on a standalone basis for year-end 2021.
Developments regarding digitalization and innovation in
finance
Regulatory discussions on various
 
aspects of digital
 
innovation in
finance
 
and,
 
in
 
particular,
 
virtual
 
assets
 
have
 
increased
 
and
continued to evolve. However, national regulatory approaches on
the subject still differ widely.
 
In
 
June
 
2021,
 
the
 
BCBS
 
consulted
 
on
 
an
 
approach
 
to
 
the
prudential
 
treatment
 
of
 
virtual
 
assets
 
as
 
part
 
of
 
a
 
multi-year
process to develop internationally aligned prudential rules.
In
 
October
 
2021,
 
the
 
Committee
 
on
 
Payments
 
and
 
Market
Infrastructures
 
and
 
the
 
International
 
Organization
 
of
 
Securities
Commissions (IOSCO) consulted
 
on guidance proposing
 
that the
Principles for Financial Market Infrastructures should also
 
apply to
systemically important stablecoin arrangements.
In
 
October
 
2021,
 
the FATF
 
updated
 
its
 
2019
 
Guidance for
 
a
risk-based
 
approach
 
to
 
virtual
 
assets
 
and
 
virtual
 
asset
 
service
providers
 
(VASPs),
 
who
 
are
 
subject
 
to
 
the
 
same
 
relevant
 
FATF
measures that
 
apply to
 
financial institutions.
 
The guidance
 
aims
to
 
help
 
countries
 
and
 
VASPs
 
understand
 
their
 
obligations
regarding
 
anti-money
 
laundering
 
and
 
terrorist
 
financing
 
and
effectively implement the FATF’s requirements.
In
 
November
 
2021,
 
EU
 
legislators
 
made
 
further
 
progress
toward agreement
 
on the
 
Markets in
 
Crypto-Assets Regulation,
which
 
aims
 
to
 
establish
 
a
 
comprehensive
 
EU-wide
 
regulatory
framework for
 
the issuance
 
of, and
 
provision of
 
services related
to, various types of virtual assets.
 
The legislation is expected to be
finalized by mid-2022.
 
In
 
November
 
2021,
 
the
 
US
 
President’s
 
Working
 
Group
 
on
Financial Markets released a paper on stablecoins recommending
that US Congress enact
 
legislation to restrict issuers
 
of stablecoins
to supervised, deposit-taking banks. In the absence of legislation,
the
 
US Financial
 
Stability Oversight
 
Council could
 
designate the
activity
 
as
 
systemically
 
important
 
and
 
place
 
them
 
under
 
the
authority of the Federal Reserve.
 
In 2021,
 
several central
 
banks continued
 
their efforts
 
to actively
explore
 
central
 
bank
 
digital
 
currencies
 
(CBDC),
 
including
 
with
each
 
other,
 
with
 
the
 
BIS
 
Innovation
 
Hub
 
network
 
and
 
with
commercial
 
banks.
 
For
 
example,
 
UBS
 
participated
 
in
 
SNB-
 
and
Swiss Infrastructure and Exchange (SIX)-led
 
CBDC projects named
Helvetia
 
and
 
Jura.
 
The
 
introduction
 
of
 
CBDC
 
could
 
potentially
have
 
a
 
significant
 
impact
 
on
 
the
 
financial
 
sector,
 
though
 
the
implications
 
are
 
not
 
yet
 
fully
 
understood.
 
In
 
January
 
2022,
 
the
Federal
 
Reserve
 
released its
 
discussion paper
 
on
 
CBDC, seeking
public
 
input
 
on
 
the
 
advantages
 
and
 
disadvantages
 
of
 
these
products and the preservation
 
of monetary and financial
 
stability
while complementing existing means of payment.
 
In February
 
2022, the
 
Swiss Federal
 
Council published
 
its report
on framework conditions for digital finance
 
in Switzerland, which
includes
 
measures
 
linked
 
to
 
12
 
prioritized
 
action
 
areas.
 
The
Federal
 
Department
 
of
 
Finance
 
will
 
implement
 
the
 
measures
 
in
2022
 
and
 
subsequent
 
years
 
in
 
close
 
coordination
 
with
 
relevant
stakeholders, including
 
the private
 
sector. Among
 
the policy
 
topics
addressed
 
are
 
open
 
finance,
 
artificial
 
intelligence,
 
distributed
ledger
 
technology, cybersecurity,
 
green
 
fintech, the
 
Cloud,
 
data
sharing and cross-border data flows.
Operational resilience and cybersecurity
In
 
2021,
 
there
 
were
 
several
 
regulatory
 
developments
 
on
operational resilience and cybersecurity.
In
 
March
 
2021,
 
the
 
BCBS
 
published
 
its
 
Principles
 
for
Operational
 
Resilience
 
(the
 
BCBS
 
Principles),
 
providing
 
global
standards intended
 
to strengthen
 
the ability
 
of banks
 
to absorb
operational
 
risk-related
 
events
 
that
 
could
 
cause
 
significant
operational failures or widescale disruption in financial markets.
In March 2021,
 
the Prudential Regulation
 
Authority (the PRA)
and
 
the
 
Financial
 
Conduct
 
Authority
 
(the
 
FCA)
 
published
 
their
final rules
 
on the
 
UK operational
 
resilience framework.
 
The new
rules require firms to
 
identify their important
 
business services, set
impact tolerances for such
 
and commence testing against
 
severe
but plausible scenarios by
 
31 March 2022. Firms are
 
expected to
introduce
 
any
 
required
 
resilience
 
reinforcements
 
by
 
31 March
2025. The
 
rules in
 
the UK
 
will apply
 
to UBS
 
AG London
 
Branch
and other Group entities that provide services to UBS AG London
Branch.
 
 
Our strategy, business model and environment
 
| Regulatory and legal developments
62
In the fourth quarter of 2021, both the Monetary Authority of
Singapore
 
and
 
the
 
Hong
 
Kong
 
Monetary
 
Authority
 
issued
consultations
 
on
 
proposed
 
rules
 
to
 
incorporate
 
the
 
BCBS
Principles
 
for
 
Operational
 
Resilience
 
into
 
their
 
regulatory
 
and
supervisory
 
frameworks.
 
Rules
 
in
 
the
 
UK,
 
Singapore
 
and
 
Hong
Kong SAR are broadly aligned to the BCBS Principles.
UBS
 
established
 
a
 
global
 
Enhanced
 
Operational
 
Resilience
program in
 
August 2020
 
with the
 
aim of
 
ensuring implementation
and alignment
 
with key
 
regulatory requirements
 
on operational
resilience.
 
In November
 
2021, the
 
US banking
 
regulators, including
 
the
FRB,
 
the
 
OCC
 
and
 
the
 
FDIC
 
published
 
final
 
rules
 
regarding
computer
 
security
 
incident
 
reporting
 
requirements,
 
including
thresholds and timing, that apply to supervised banks and service
providers and become effective in April 2022.
In
 
January
 
2022,
 
the
 
Swiss
 
Federal
 
Council
 
initiated
 
a
consultation on a proposal to introduce a reporting obligation
 
for
cyberattacks
 
on
 
critical
 
infrastructures,
 
including
 
banks.
 
The
proposal defines
 
the tasks
 
of the
 
National Cybersecurity
 
Centre,
the designated
 
central recipient
 
of the
 
reports. The
 
consultation
will
 
last
 
until
 
14 April
 
2022.
 
Once
 
finalized,
 
UBS
 
will
 
need
 
to
adjust its reporting processes accordingly.
Developments regarding the relationship between
Switzerland and the European Union
In May
 
2021, the
 
Swiss Federal
 
Council terminated
 
negotiations
on
 
the
 
Institutional
 
Framework
 
Agreement
 
(the
 
IFA)
 
between
Switzerland and
 
the European
 
Union (the
 
EU) due to
 
substantial
differences
 
of opinion
 
regarding
 
key
 
aspects of
 
the agreement.
The IFA would
 
have formed
 
a mutually
 
agreed basis to
 
consolidate
and
 
further
 
develop
 
Switzerland’s
 
bilateral
 
market
 
access
approach with
 
the EU. As
 
a result, the
 
EU is unlikely
 
to be ready
to
 
conclude
 
new
 
market
 
access
 
agreements
–
 
including
 
on
financial services – with Switzerland in the near future.
In
 
November
 
2021,
 
the
 
Swiss
 
Federal
 
Council
 
decided
 
to
extend the existing measure protecting the Swiss stock exchange
infrastructure
 
(which
 
was due
 
to
 
expire on
 
31 December
 
2021)
until
 
31 December
 
2025
 
and
 
to
 
open
 
a
 
consultation
 
on
incorporating
 
this
 
measure
 
into
 
the
 
Financial
 
Market
Infrastructure
 
Act.
 
In
 
the
 
absence
 
of
 
mutual
 
recognition
 
of
equivalence
 
by
 
both
 
Swiss
 
and
 
EU
 
authorities,
 
the
 
measure
requires EU
 
investment firms
 
to trade
 
Swiss equities
 
on Swiss
 
stock
exchanges. UBS
 
had previously
 
adjusted its
 
internal processes
 
to
reflect this measure.
Revision of the Swiss Banking Act
In December 2021,
 
the Swiss Parliament
 
adopted a revision of
 
the
Banking
 
Act.
 
The
 
legislative
 
amendment
 
aims
 
to
 
strengthen
depositor
 
protection
 
and
 
promote
 
financial
 
system
 
stability
 
by
reducing the time needed to pay out
 
protected deposits through
the
 
depositor
 
protection
 
scheme
 
in
 
the
 
event
 
a
 
bank
 
enters
bankruptcy.
 
Among other measures,
 
it will also
 
require banks
 
to
deposit 50% of the contribution obligations in securities or Swiss
francs. The
 
revision also
 
introduces amendments
 
with regard
 
to
insolvency law
 
and segregation,
 
in particular
 
the introduction
 
of
a
 
more
 
detailed
 
and
 
solid
 
legal
 
basis
 
for
 
bail-in,
 
including
 
the
ranking of claims
 
subject to bail
 
in, ensuring legal certainty
 
for the
operationalization of a
 
bail-in. The new
 
provisions also provide for
the
 
subordination
 
of
 
bail-in-bonds,
 
with
 
the
 
exception
 
of
 
such
bail-in-bonds issued by
 
a holding company
 
if other debt
 
ranking
pari passu does
 
not exceed 5%
 
of the total
 
bail-in-bond debt. The
revised Banking Act
 
will enter into
 
force at the
 
beginning of 2023.
We
 
expect moderate
 
costs for
 
all Switzerland-based
 
UBS Group
entities that are within the scope of the revision.
 
Review of restrictions on the business model of
PostFinance AG
In
 
January
 
2021,
 
the
 
Swiss
 
Federal
 
Council
 
announced
 
that
 
it
intends
 
to
 
privatize
 
PostFinance
 
AG,
 
a
 
Swiss
 
systemically
important bank, which is held by the state-owned Swiss
 
Post AG.
As
 
a
 
result,
 
the
 
prohibition
 
on
 
PostFinance
 
AG
 
granting
mortgages and other types
 
of loans would be
 
lifted, among other
changes. As the envisaged changes
 
require a revision
 
of the Post
Organization Act,
 
the Swiss
 
Parliament will
 
ultimately decide
 
on
any changes.
In June 2021,
 
the Swiss Federal
 
Council submitted a
 
dispatch
to
 
the
 
Swiss
 
Parliament.
 
If
 
the
 
revision
 
passes
 
the
 
legislative
process,
 
which
 
is
 
expected
 
to
 
start
 
in
 
2022,
 
the
 
reform
 
could
further intensify competition in the Swiss mortgage market.
Registration under the US security-based swaps
regulations
In
 
October
 
2021,
 
FINMA
 
and
 
the
 
US
 
Securities
 
and
 
Exchange
Commission (the SEC) finalized
 
a memorandum of understanding
relating
 
to
 
cooperation
 
in
 
oversight
 
of
 
Swiss
 
entities
 
registered
under the
 
SEC’s security-based
 
swaps regulations.
 
The SEC
 
also
published
 
a
 
substituted
 
compliance
 
order
 
modifying
 
the
application
 
of
 
certain
 
of
 
its
 
regulations
 
for Swiss
 
security-based
swap dealers. Under
 
SEC regulations, UBS
 
AG has been
 
registered
as a security-based swap dealer since 1 November 2021.
Developments regarding LIBOR
In March
 
2021, the FCA
 
confirmed that the
 
one-week and two-
month
 
US
 
dollar
 
London
 
Interbank
 
Offered
 
Rate
 
(USD
 
LIBOR)
settings, along
 
with all
 
GBP,
 
EUR, CHF,
 
and JPY
 
LIBOR settings,
would, immediately
 
after 31 December 2021,
 
either cease to
 
be
provided by
 
any administrator
 
or no
 
longer be
 
representative of
the
 
underlying
 
market.
 
The
 
FCA
 
further
 
confirmed
 
that
 
the
remaining
 
USD
 
LIBOR
 
settings
 
will
 
cease
 
immediately
 
after
30 June 2023.
In October 2021,
 
the FRB issued
 
guidance that banks
 
should,
with
 
limited
 
exceptions,
 
cease
 
to
 
enter
 
into
 
new
 
contracts
referencing USD
 
LIBOR as soon
 
as practicable
 
and, in
 
any event,
no later than 31 December 2021.
 
 
63
Risk factors
Certain
 
risks,
 
including
 
those
 
described
 
below,
 
may
 
affect
 
our
ability to execute
 
our strategy or our
 
business activities, financial
condition, results of operations and
 
prospects. We are inherently
exposed to
 
multiple risks, many
 
of which
 
may become apparent
only with
 
the benefit
 
of hindsight.
 
As a
 
result, risks
 
that we
 
do
not
 
consider
 
to
 
be
 
material,
 
or
 
of
 
which
 
we
 
are
 
not
 
currently
aware, could
 
also adversely
 
affect us.
 
Within each category,
 
the
risks that we consider to be most material are presented first.
 
Market, credit and macroeconomic risks
Performance in the financial services industry is affected by
market conditions and the macroeconomic climate
Our
 
businesses
 
are
 
materially
 
affected
 
by
 
market
 
and
macroeconomic
 
conditions.
 
A
 
market
 
downturn
 
and
 
weak
macroeconomic
 
conditions
 
can be
 
precipitated
 
by
 
a
 
number of
factors, including geopolitical events, such as international
 
armed
conflicts, the
 
imposition of
 
sanctions, global
 
trade or
 
global supply
chain disruptions, changes in
 
monetary or fiscal
 
policy, changes in
trade
 
policies
 
or
 
international
 
trade
 
disputes,
 
significant
inflationary
 
or
 
deflationary
 
price
 
changes,
 
disruptions
 
in
 
one
 
or
more
 
concentrated
 
economic
 
sectors,
 
natural
 
disasters,
pandemics,
 
civil unrest,
 
acts of
 
violence, war
 
or terrorism.
 
Such
developments can have unpredictable and destabilizing effects.
 
For example, as a
 
result of the Russian
 
invasion of Ukraine on
24 February
 
2022
 
and
 
the
 
ongoing
 
hostilities,
 
Switzerland,
 
the
US, the EU, the UK and others have announced sanctions against
certain Russian
 
banks, companies
 
and individuals,
 
as well
 
as the
Russian Central
 
Bank, and
 
have announced
 
that certain
 
Russian
banks
 
will
 
be
 
barred
 
from
 
using
 
the
 
Society
 
for
 
Worldwide
Interbank
 
Financial
 
Telecommunication
 
(SWIFT)
 
messaging
system. In
 
addition, it
 
is estimated
 
that one
 
million people
 
have
been displaced
 
inside Ukraine and
 
many of
 
those displaced
 
may
seek
 
refuge
 
in
 
Poland
 
and
 
other
 
neighboring
 
countries,
 
as
 
the
conflict continues these
 
numbers are likely to
 
increase. The scale
of
 
the
 
conflict
 
and
 
the
 
unprecedented
 
speed
 
and
 
extent
 
of
sanctions
 
may
 
produce
 
many
 
of
 
the
 
effects
 
described
 
above,
including in ways that cannot now be anticipated.
Adverse
 
changes
 
in
 
interest
 
rates,
 
credit
 
spreads,
 
securities
prices,
 
market
 
volatility
 
and
 
liquidity,
 
foreign
 
exchange
 
rates,
commodity
 
prices,
 
and
 
other
 
market
 
fluctuations,
 
as
 
well
 
as
changes
 
in
 
investor
 
sentiment,
 
can
 
affect
 
our
 
earnings
 
and
ultimately our financial and capital positions. As financial
 
markets
are
 
global
 
and
 
highly
 
interconnected,
 
local
 
and
 
regional
 
events
can have
 
widespread effects well
 
beyond the
 
countries in
 
which
they occur.
 
Any of
 
these developments
 
may adversely
 
affect our
business or financial results.
If
 
individual
 
countries
 
impose
 
restrictions
 
on
 
cross-border
payments, trade, or other exchange or
 
capital controls, or change
their currency (for example, if one or more countries should leave
the
 
Eurozone
 
or
 
as
 
result
 
of
 
the
 
imposition
 
of
 
sanctions
 
on
individuals,
 
entities
 
or
 
countries),
 
we
 
could
 
suffer
 
losses
 
from
enforced default by counterparties,
 
be unable to access our
 
own
assets, or be unable to effectively manage our risks.
Should the
 
market experience
 
significant volatility, a
 
decrease
in
 
business and
 
client activity
 
and market
 
volumes could
 
result,
which would
 
adversely affect
 
our ability
 
to generate
 
transaction
fees,
 
commissions
 
and
 
margins,
 
particularly
 
in
 
Global
 
Wealth
Management and the Investment Bank, as we experienced in the
fourth quarter
 
of 2018. A
 
market downturn would
 
likely reduce
the volume and valuation of assets that
 
we manage on behalf of
clients, which would reduce recurring fee income that
 
is charged
based on
 
invested assets
 
in Global
 
Wealth Management
 
and Asset
Management and performance-based
 
fees in Asset
 
Management.
Such a downturn could also cause a decline in the value of assets
that we own and account for as investments or
 
trading positions.
In addition, reduced market liquidity or volatility may
 
limit trading
opportunities
 
and
 
may
 
therefore
 
reduce
 
transaction-based
income and may also impede our ability to manage risks.
We could be
 
materially affected if
 
a crisis develops,
 
regionally
or
 
globally,
 
as
 
a
 
result
 
of
 
disruptions
 
in
 
markets
 
due
 
to
macroeconomic
 
or
 
political
 
developments,
 
or
 
as
 
a
 
result
 
of
 
the
failure
 
of
 
a
 
major
 
market
 
participant.
 
Over
 
time,
 
our
 
strategic
plans
 
have
 
become
 
more
 
heavily
 
dependent
 
on
 
our
 
ability
 
to
generate
 
growth
 
and
 
revenue
 
in
 
emerging
 
markets,
 
including
China, causing us to be
 
more exposed to the
 
risks associated with
such markets.
Global
 
Wealth
 
Management
 
derives
 
revenues
 
from
 
all
 
the
principal
 
regions,
 
but
 
has
 
a
 
greater
 
concentration
 
in
 
Asia
 
than
many
 
peers
 
and
 
a
 
substantial
 
presence
 
in
 
the
 
US,
 
unlike
 
many
European peers.
 
The Investment
 
Bank’s business
 
is more
 
heavily
weighted to Europe and Asia than our peers, while its derivatives
business
 
is
 
more
 
heavily
 
weighted
 
to
 
structured
 
products
 
for
wealth
 
management
 
clients,
 
in
 
particular
 
with
 
European
 
and
Asian
 
underlyings.
 
Our
 
performance
 
may
 
therefore
 
be
 
more
affected by political, economic
 
and market developments in
 
these
regions
 
and
 
businesses
 
than
 
some
 
other
 
financial
 
service
providers.
 
 
Our strategy, business model and environment
 
| Risk factors
64
Our results of operations and financial condition may be
adversely affected by the COVID-19 pandemic and the response
to it
The COVID-19
 
pandemic and
 
the governmental measures
 
taken
to manage it, as well as labor
 
market displacements, supply chain
disruptions, and inflationary pressures, may continue to adversely
affect
 
global
 
and
 
regional
 
economic
 
conditions,
 
resulting
 
in
contraction
 
in
 
the
 
global
 
economy,
 
substantial
 
volatility
 
in
 
the
financial markets, crises in markets
 
for goods and services,
 
as well
as significant
 
disruptions in
 
certain regional
 
real estate
 
markets,
increased unemployment, increased
 
credit and counterparty risk,
and
 
operational
 
challenges.
 
Governments
 
and
 
central
 
banks
around
 
the world
 
reacted
 
to
 
the economic
 
crisis caused
 
by
 
the
pandemic by
 
implementing stimulus
 
and liquidity
 
programs and
cutting
 
interest
 
rates
 
and
 
have
 
begun
 
to
 
phase
 
out
 
pandemic
relief.
 
In
 
addition,
 
while
 
vaccination
 
campaigns
 
have
 
had
significant success
 
in some
 
regions and
 
a number
 
of economies
are recovering, outbreaks in locations where vaccination rates are
low
 
or
 
vaccines
 
are
 
unavailable
 
on
 
a
 
large
 
scale, as
 
well as
 
the
spread of new variants of COVID-19, create uncertainty around a
sustainable recovery. Resurgence of the
 
pandemic, ineffectiveness
of
 
vaccines
 
and
 
continuance
 
or
 
imposition
 
of
 
new
 
pandemic
control measures
 
may result
 
in additional
 
adverse effects
 
on the
global economy
 
negatively affecting
 
UBS’s results
 
of operations
and financial condition.
 
The COVID-19 pandemic affected all of UBS’s
 
businesses, and
these effects
 
could be greater
 
in the future
 
if adverse conditions
persist or
 
worsen. These
 
effects included
 
declines in
 
some asset
prices,
 
spikes
 
in
 
volatility,
 
inflationary
 
pressures,
 
supply
 
chain
disruptions,
 
lower
 
or
 
negative interest
 
rates,
 
widening
 
of
 
credit
spreads
 
and
 
credit
 
deterioration.
 
These
 
effects
 
have
 
resulted
 
in
decreases in the valuation of
 
loans and commitments, an
 
increase
in the allowance
 
for credit losses
 
and lower valuations
 
of certain
classes
 
of
 
trading
 
assets.
 
While
 
many
 
of
 
these
 
effects
 
have
reversed as economies have reopened
 
and economic stimulus has
been
 
maintained, or
 
were offset
 
by high
 
levels
 
of client
 
activity
and
 
by
 
improved
 
asset
 
prices
 
in
 
many
 
sectors
 
in
 
2021,
 
these
favorable
 
conditions
 
may
 
not
 
persist.
 
In
 
particular,
 
real
 
estate
markets in some regions may be significantly disrupted
 
as a result
of
 
repeated
 
temporary
 
closures
 
of
 
business,
 
sheltering-in-place
directives,
 
and
 
remote
 
work
 
protocols
 
enacted
 
to
 
respond
 
to
seasonal increases in infection rates of COVID-19.
 
Should
 
inflationary
 
pressures
 
or
 
other
 
adverse
 
global
 
market
conditions
 
persist,
 
or
 
should
 
the
 
pandemic
 
lead
 
to
 
additional
economic
 
or
 
market
 
disruptions,
 
we
 
may
 
experience
 
reduced
client activity
 
and demand
 
for our
 
products and
 
services, increased
utilization of
 
lending commitments,
 
significantly increased
 
client
defaults, continued
 
and increasing
 
credit and
 
valuation losses
 
in
our
 
loan
 
portfolios,
 
loan
 
commitments
 
and
 
other
 
assets,
 
and
impairments of other financial assets.
 
A
 
fall
 
in
 
equity
 
markets
 
and
 
consequent
 
decline
 
in
 
invested
assets
 
would
 
also
 
reduce
 
recurring
 
fee
 
income
 
in
 
our
 
Global
Wealth Management
 
and Asset
 
Management businesses.
 
These
factors and other consequences of
 
the COVID-19 pandemic may
negatively
 
affect
 
our
 
financial
 
condition,
 
including
 
possible
constraints
 
on
 
capital
 
and
 
liquidity,
 
as
 
well
 
as
 
a
 
higher
 
cost
 
of
capital, and possible downgrades to our credit ratings.
The
 
extent
 
to
 
which
 
the
 
pandemic,
 
and
 
the
 
related
 
adverse
economic conditions, affect
 
our businesses, results
 
of operations
and
 
financial
 
condition,
 
as
 
well
 
as
 
our
 
regulatory
 
capital
 
and
liquidity ratios, will
 
depend on future
 
developments, including the
scope and duration of the pandemic
 
and any recovery period, the
adequacy
 
of
 
vaccine
 
distribution
 
plans
 
and
 
execution
 
of
 
those
plans,
 
as
 
well as
 
the efficacy
 
of
 
vaccines
 
against
 
potential
 
virus
variants, future actions
 
taken by governmental
 
authorities, central
banks and
 
other third
 
parties in
 
response to
 
the pandemic,
 
and
the
 
effects
 
on
 
our
 
customers,
 
counterparties,
 
employees
 
and
third-party service providers.
Our credit risk exposure to clients, trading counterparties and
other financial institutions would increase under adverse or other
economic conditions
Credit risk
 
is an
 
integral part
 
of many
 
of our
 
activities, including
lending, underwriting and
 
derivatives activities. Adverse
 
economic
or
 
market
 
conditions,
 
or
 
the
 
imposition
 
of
 
sanctions
 
or
 
other
restrictions on clients, counterparties or financial
 
institutions, may
lead
 
to
 
impairments
 
and
 
defaults
 
on
 
these
 
credit
 
exposures.
Losses may
 
be exacerbated
 
by declines
 
in the
 
value of
 
collateral
securing
 
loans
 
and
 
other
 
exposures.
 
In
 
our
 
prime
 
brokerage,
securities
 
finance
 
and
 
Lombard
 
lending
 
businesses,
 
we
 
extend
substantial
 
amounts
 
of
 
credit
 
against
 
securities
 
collateral,
 
the
value
 
or
 
liquidity of
 
which
 
may decli
 
ne rapidly.
 
Market
 
closures
the imposition of exchange controls, sanctions or other measures
may limit our ability to settle existing transactions or to realize on
collateral, which may result in unexpected increases in exposures.
Our Swiss mortgage and
 
corporate lending portfolios are
 
a large
part of our
 
overall lending. We
 
are therefore
 
exposed to the
 
risk
of
 
adverse
 
economic
 
developments
 
in
 
Switzerland,
 
including
property
 
valuations
 
in
 
the
 
housing
 
market,
 
the
 
strength
 
of
 
the
Swiss
 
franc
 
and
 
its
 
effect
 
on
 
Swiss
 
exports,
 
prevailing
 
negative
interest
 
rates
 
applied
 
by
 
the
 
Swiss
 
National
 
Bank,
 
economic
conditions within
 
the Eurozone
 
or the
 
EU, and
 
the evolution
 
of
agreements
 
between
 
Switzerland
 
and
 
the
 
EU
 
or
 
European
Economic
 
Area,
 
which
 
represent
 
Switzerland’s
 
largest
 
export
market.
 
We
 
have
 
exposures
 
related
 
to
 
real
 
estate
 
in
 
various
countries,
 
including
 
a
 
substantial
 
Swiss
 
mortgage
 
portfolio.
Although
 
we
 
believe
 
this
 
portfolio
 
is
 
prudently
 
managed,
 
we
could
 
nevertheless
 
be
 
exposed
 
to
 
losses
 
if
 
a
 
substantial
deterioration in the Swiss real estate market were to occur.
 
As we experienced
 
in 2020, under
 
the IFRS
 
9 expected credit
loss (ECL) regime, credit loss expenses may increase rapidly at the
onset
 
of
 
an
 
economic
 
downturn
 
as
 
a
 
result
 
of
 
higher
 
levels
 
of
credit impairments (stage 3), as
 
well as higher ECL from
 
stages 1
and 2. Substantial increases in
 
ECL could exceed expected
 
loss for
regulatory
 
capital
 
purposes
 
and
 
adversely
 
affect
 
our
 
common
equity tier 1 (CET1) capital and regulatory capital ratios.
Interest rate trends and changes could negatively affect our
financial results
The
 
low
 
or
 
negative
 
interest
 
rate
 
environment,
 
particularly
 
in
Switzerland and the
 
Eurozone, may further
 
erode interest margins
and
 
adversely
 
affect
 
the
 
net
 
interest
 
income
 
generated
 
by
 
the
Personal &
 
Corporate Banking
 
and Global
 
Wealth Management
businesses. The Swiss National Bank permits
 
Swiss banks to make
deposits
 
up to
 
a
 
threshold
 
at
 
zero
 
interest.
 
Any reduction
 
in or
limitation
 
on
 
the
 
use
 
of
 
this
 
exemption
 
from
 
the
 
otherwise
applicable negative interest
 
rates would exacerbate
 
the effect of
negative interest rates in Switzerland on our business.
 
 
 
 
65
Low
 
and
 
negative
 
interest
 
rates
 
may
 
also
 
affect
 
customer
behavior and
 
hence our
 
overall balance
 
sheet structure.
 
Mitigating
actions that we have taken, or
 
may take in the future,
 
such as the
introduction of
 
selective deposit
 
fees or
 
minimum lending
 
rates,
have
 
resulted
 
and
 
may
 
further
 
result
 
in
 
the
 
loss
 
of
 
customer
deposits (a key
 
source of
 
funding for
 
us), net new
 
money outflows
and
 
a
 
declining
 
market
 
share
 
in
 
our
 
Swiss
 
lending
 
business.
Interest rates in
 
the US and
 
some other markets
 
are expected to
increase as
 
central banks
 
respond to
 
higher inflation.
 
As returns
for alternatives to deposits,
 
such as money
 
market funds, increase
with
 
interest
 
rates,
 
we
 
may
 
experience
 
outflows
 
of
 
customer
deposits
 
or
 
a
 
higher
 
cost
 
of
 
deposit
 
funding
 
if
 
customers
 
shift
from deposits to alternative products.
Our
 
shareholders’
 
equity
 
and
 
capital
 
are
 
also
 
affected
 
by
changes in interest rates.
 
In particular, the calculation
 
of our Swiss
pension plan’s net defined benefit assets and liabilities is
 
sensitive
to
 
the applied
 
discount
 
rate and
 
to
 
fluctuations in
 
the value
 
of
pension plan
 
assets. Any
 
further reduction
 
in interest
 
rates may
lower the
 
discount rates
 
and result
 
in pension
 
plan deficits
 
as a
result of the long duration
 
of corresponding liabilities. This could
lead to a corresponding reduction in our equity and CET1 capital.
Currency
 
fluctuation may have an adverse effect on our profits,
balance sheet and regulatory capital
 
We are subject to currency
 
fluctuation risks. Although
 
our change
from
 
the
 
Swiss
 
franc
 
to
 
the
 
US
 
dollar
 
as
 
our
 
functional
 
and
presentation currency
 
in 2018
 
reduces our
 
exposure to
 
currency
fluctuation
 
risks
 
with
 
respect
 
to
 
the
 
Swiss
 
franc,
 
a
 
substantial
portion of our assets and liabilities are denominated in currencies
other than the US
 
dollar. Additionally,
 
in order to hedge
 
our CET1
capital
 
ratio,
 
our
 
CET1
 
capital
 
must
 
have
 
foreign
 
currency
exposure, which
 
leads to currency
 
sensitivity.
 
As a consequence,
it is
 
not possible
 
to simultaneously fully
 
hedge both
 
the amount
of
 
capital and
 
the capital
 
ratio. Accordingly,
 
changes in
 
foreign
exchange rates
 
may adversely
 
affect our
 
profits, balance sheet
 
and
capital, leverage and liquidity coverage ratios.
 
Regulatory and legal risks
Material legal and regulatory risks arise in the conduct of our
business
As
 
a
 
global
 
financial
 
services
 
firm
 
operating
 
in
 
more
 
than
 
50
countries,
 
we are
 
subject
 
to many
 
different
 
legal,
 
tax and
 
regulatory
regimes, including
 
extensive regulatory
 
oversight, and are
 
exposed
to
 
significant liability
 
risk.
 
We
 
are
 
subject to
 
a
 
large
 
number of
claims, disputes,
 
legal proceedings
 
and government
 
investigations,
and we expect
 
that our ongoing
 
business activities
 
will continue
 
to
give rise to such matters in the future. The extent of our
 
financial
exposure
 
to
 
these
 
and
 
other
 
matters
 
is
 
material
 
and
 
could
substantially
 
exceed
 
the level
 
of provisions
 
that
 
we have
 
established.
We
 
are
 
not
 
able
 
to
 
predict
 
the
 
financial
 
and
 
non-financial
consequences
 
these matters
 
may have when
 
resolved.
 
We
 
may
 
be
 
subject to
 
adverse
 
preliminary determinations or
court
 
decisions
 
that may
 
negatively
 
affect
 
public
 
perception
 
and our
reputation, result in prudential actions
 
from regulators, and cause
us to record additional provisions for such matters even when we
believe
 
we
 
have
 
substantial
 
defenses
 
and
 
expect
 
to
 
ultimately
achieve a
 
more favorable
 
outcome. This
 
risk is
 
illustrated by
 
the
award of
 
aggregate penalties and damages of
 
EUR 4.5 billion by
the court of first
 
instance in France.
 
This award was reduced
 
to an
aggregate of EUR 1.8 billion
 
by the Court of Appeal, and UBS has
further appealed
 
this judgment.
 
Resolution of regulatory proceedings may require us
 
to obtain
waivers
 
of
 
regulatory
 
disqualifications
 
to
 
maintain
 
certain
operations; may entitle regulatory authorities to limit, suspend or
terminate licenses and regulatory authorizations; and may permit
financial
 
market
 
utilities
 
to
 
limit,
 
suspend
 
or
 
terminate
 
our
participation
 
in
 
them.
 
Failure
 
to
 
obtain
 
such
 
waivers,
 
or
 
any
limitation, suspension
 
or termination of licenses, authorizations
 
or
participations,
 
could have
 
material adverse
 
consequences
 
for us.
Our settlements
 
with governmental
 
authorities in
 
connection
with foreign
 
exchange, London
 
Interbank Offered
 
Rates (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.
 
We continue to be in active dialog with
 
regulators concerning
the
 
actions
 
we
 
are
 
taking
 
to
 
improve
 
our
 
operational
 
risk
management,
 
risk
 
control,
 
anti
-
money
 
laundering,
 
data
management and other frameworks, and otherwise seek to
 
meet
supervisory expectations, but there can
 
be no assurance that our
efforts will have the desired effects. As a result of this history, our
level
 
of
 
risk
 
with
 
respect
 
to
 
regulatory
 
enforcement
 
may
 
be
greater than that of some of our peers.
 
Substantial changes in regulation may adversely affect our
businesses and our ability to execute our strategic plans
Since
 
the
 
financial
 
crisis
 
of
 
2008,
 
we
 
are
 
subject
 
to
 
significant
regulatory
 
requirements,
 
including
 
recovery
 
and
 
resolution
planning, changes in capital and
 
prudential standards, changes in
taxation
 
regimes
 
as
 
a
 
result
 
of
 
changes
 
in
 
governmental
administrations, as well as new and
 
revised market standards and
fiduciary duties. Notwithstanding attempts
 
by regulators to align
their
 
efforts,
 
the
 
measures
 
adopted
 
or
 
proposed
 
for
 
banking
regulation
 
differ
 
significantly
 
across
 
the
 
major
 
jurisdictions,
making it
 
increasingly difficult
 
to manage a
 
global institution.
 
In
addition, Swiss regulatory changes with
 
regard to such matters as
capital
 
and
 
liquidity
 
have
 
often
 
proceeded
 
more
 
quickly
 
than
those in other major 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 strategy, business model and environment
 
| Risk factors
66
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.
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.
 
We expect our
 
risk-weighted assets (RWA)
 
to further increase
as the effective date for additional capital standards promulgated
by the Basel Committee
 
on Banking Supervision (the
 
BCBS) draws
nearer.
 
Increases
 
in capital
 
and liquidity
 
standards
 
could significantly
curtail
 
our
 
ability
 
to
 
pursue
 
strategic
 
opportunities
 
or
 
to
 
return
capital to shareholders.
Market
 
regulation
 
and
 
fiduciary
 
standards:
Our
 
wealth
 
and
asset
 
management
 
businesses
 
operate
 
in
 
an
 
environment
 
of
increasing
 
regulatory
 
scrutiny
 
and
 
changing
 
standards
 
with
respect to fiduciary and other standards of care and the focus on
mitigating or eliminating conflicts of interest between a manager
or advisor and the
 
client, which require effective implementation
across the global systems
 
and processes of investment
 
managers
and
 
other
 
industry
 
participants.
 
For
 
example,
 
we
 
have
 
made
material changes to
 
our business
 
processes, policies and
 
the terms
on which
 
we interact
 
with these
 
clients in
 
order to
 
comply with
SEC Regulation
 
Best Interest,
 
which is
 
intended to
 
enhance and
clarify
 
the
 
duties
 
of
 
brokers
 
and
 
investment
 
advisers
 
to
 
retail
customers, the Volcker Rule, which limits our
 
ability to engage in
proprietary
 
trading,
 
as
 
well
 
as
 
changes
 
in
 
European
 
and
 
Swiss
market
 
conduct regulation.
 
Future
 
changes in
 
the regulation
 
of
our duties to
 
customers may require us
 
to make further
 
changes
to our
 
businesses, which
 
would result
 
in additional
 
expense and
may adversely
 
affect our
 
business. We
 
may also
 
become subject
to
 
other
 
similar
 
regulations
 
substantively
 
limiting
 
the
 
types
 
of
activities
 
in
 
which
 
we
 
may
 
engage
 
or
 
the
 
way
 
we
 
conduct
 
our
operations.
In many instances, we provide services on
 
a cross-border basis,
and we are
 
therefore sensitive to
 
barriers restricting market
 
access
for third-country
 
firms. In
 
particular, efforts
 
in the
 
EU to
 
harmonize
the regime for third-country firms to access the European market
may have the effect of creating new barriers that adversely affect
our
 
ability
 
to
 
conduct
 
business
 
in
 
these
 
jurisdictions
 
from
Switzerland. In addition, a
 
number of jurisdictions are
 
increasingly
regulating
 
cross-border
 
activities
 
based
 
on
 
determinations
 
of
equivalence of
 
home country regulation,
 
substituted compliance
or
 
similar
 
principles
 
of
 
comity.
 
A
 
negative
 
determination
 
with
respect to Swiss equivalence could limit
 
our access to the market
in those
 
jurisdictions and
 
may negatively
 
influence our
 
ability to
act as
 
a global
 
firm. For
 
example, the
 
EU declined
 
to extend
 
its
equivalence determination
 
for Swiss exchanges,
 
which lapsed as
of 30 June 2019.
 
UBS experienced cross-border outflows
 
over a number of
 
years
as
 
a
 
result
 
of
 
heightened
 
focus
 
by
 
fiscal
 
authorities
 
on
 
cross-
border investment and fiscal
 
amnesty programs, in anticipation
 
of
the
 
implementation
 
in
 
Switzerland
 
of
 
the
 
global
 
automatic
exchange of tax information, and as a result of
 
the measures UBS
has implemented in
 
response to these
 
changes. Further changes
in local tax laws
 
or regulations and their enforcement,
 
additional
cross-border
 
tax
 
information
 
exchange
 
regimes,
 
national
 
tax
amnesty or
 
enforcement programs
 
or similar
 
actions may
 
affect
our clients’ ability or willingness to do business with us and could
result in additional cross-border outflows.
 
 
 
67
If we experience financial difficulties, FINMA has the power to
open restructuring or liquidation proceedings or impose
protective measures in relation to UBS Group AG, UBS AG or
UBS Switzerland AG, and such proceedings or measures may
have a material adverse effect on our shareholders and creditors
Under
 
the
 
Swiss
 
Banking
 
Act,
 
FINMA
 
is
 
able
 
to
 
exercise
 
broad
statutory
 
powers
 
with
 
respect
 
to
 
Swiss banks
 
and
 
Swiss parent
companies of
 
financial groups,
 
such as
 
UBS Group
 
AG, UBS
 
AG
and
 
UBS
 
Switzerland
 
AG,
 
if
 
there
 
is
 
justified
 
concern
 
that
 
the
entity is over-indebted, has serious liquidity problems or, after the
expiration
 
of
 
any
 
relevant
 
deadline,
 
no
 
longer
 
fulfills
 
capital
adequacy requirements. Such powers include ordering protective
measures,
 
instituting
 
restructuring
 
proceedings
 
(and
 
exercising
any
 
Swiss
 
resolution
 
powers
 
in
 
connection
 
therewith),
 
and
instituting
 
liquidation
 
proceedings,
 
all
 
of
 
which
 
may
 
have
 
a
material
 
adverse
 
effect
 
on
 
shareholders
 
and
 
creditors
 
or
 
may
prevent
 
UBS
 
Group
 
AG,
 
UBS
 
AG
 
or
 
UBS
 
Switzerland
 
AG
 
from
paying dividends or making payments on debt obligations.
UBS would have
 
limited ability to
 
challenge any such
 
protective
measures, and creditors and
 
shareholders would also have
 
limited
ability under Swiss
 
law or in
 
Swiss courts to
 
reject them, seek
 
their
suspension, or challenge
 
their imposition,
 
including measures that
require or result in the deferment of payments.
If
 
restructuring
 
proceedings
 
are
 
opened
 
with
 
respect
 
to
 
UBS
Group AG, UBS
 
AG or UBS
 
Switzerland AG, the
 
resolution powers
that FINMA
 
may exercise
 
include the
 
power to:
 
(i) transfer all
 
or
some of the assets, debt and other
 
liabilities, and contracts of the
entity
 
subject
 
to
 
proceedings
 
to
 
another
 
entity;
 
(ii) stay
 
for
 
a
maximum
 
of
 
two
 
business
 
days
 
(a)
 
the
 
termination
 
of,
 
or
 
the
exercise of rights to terminate,
 
netting rights, (b) rights to
 
enforce
or
 
dispose
 
of
 
certain
 
types
 
of
 
collateral
 
or
 
(c)
 
rights
 
to
 
transfer
claims, liabilities or
 
certain collateral, under
 
contracts to which
 
the
entity
 
subject to
 
proceedings is
 
a
 
party; and
 
/ or
 
(iii) partially or
fully
 
write
 
down
 
the
 
equity
 
capital
 
and
 
regulatory
 
capital
instruments and,
 
if such
 
regulatory capital
 
is fully
 
written down,
convert debt instruments of
 
the entity subject to
 
proceedings into
equity. Shareholders and
 
creditors would have
 
no right to
 
reject,
or to
 
seek the
 
suspension of,
 
any restructuring
 
plan pursuant to
which such resolution
 
powers are exercised.
 
They would have
 
only
limited
 
rights
 
to
 
challenge
 
any
 
decision
 
to
 
exercise
 
resolution
powers
 
or
 
to
 
have
 
that
 
decision
 
reviewed
 
by
 
a
 
judicial
 
or
administrative process or otherwise.
Upon
 
full or
 
partial write-down
 
of
 
the equity
 
and
 
regulatory
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.
 
We may be unable to fully realize our sustainability, climate,
environmental and social goals, which could damage our
business prospects, reputation and lead to increased regulatory
scrutiny and increased risk of litigation
We
 
have
 
set
 
ambitious
 
goals
 
for
 
environmental,
 
social
 
and
governance
 
matters.
 
These
 
goals
 
include
 
our
 
ambitions
 
for
environmental
 
sustainability in
 
our
 
operations, including
 
carbon
emissions, in the business we do with clients
 
and in products that
we offer.
 
They also include goals or ambitions for diversity in
 
our
workforce and
 
supply chain, and
 
support for the
 
United Nations
Sustainable Development
 
Goals. There
 
is substantial
 
uncertainty
as
 
to
 
the
 
scope
 
of
 
actions
 
that
 
may
 
be
 
required
 
of
 
us,
governments and
 
others to
 
achieve
 
the goals
 
we have
 
set, and
many
 
of
 
our
 
goals
 
and
 
objectives
 
are
 
only
 
achievable
 
with
 
a
combination
 
of
 
government
 
and
 
private
 
action.
 
National
 
and
international
 
standards,
 
industry
 
and
 
scientific
 
practices,
 
and
regulatory
 
taxonomies
 
and
 
disclosure
 
obligations
 
addressing
these matters
 
are in
 
a state
 
of rapid
 
development. Although we
have defined and disclosed our
 
goals based on the standards that
exist
 
today,
 
there
 
can
 
be
 
no
 
assurance
 
that
 
the
 
various
 
ESG
regulatory
 
and
 
disclosure
 
regimes
 
under
 
which
 
we operate
 
will
not
 
come
 
into
 
conflict
 
with
 
one
 
another
 
or
 
that
 
the
 
current
standards
 
will
 
not
 
be
 
interpreted
 
differently
 
than
 
our
understanding or change in a manner that substantially increases
the cost or
 
effort for us
 
to achieve such
 
goals or that
 
such goals
may prove to be considerably more difficult or even impossible to
achieve. If
 
we are
 
not able
 
to achieve
 
the goals
 
we have
 
set, or
can only do so at significant expense to our business, we may fail
to meet regulatory expectations, incur
 
damage to our reputation
or be exposed to risk of litigation or other adverse action.
 
 
Our strategy, business model and environment
 
| Risk factors
68
Our financial results may be negatively affected by changes to
assumptions and valuations, as well as changes to accounting
standards
We prepare
 
our consolidated financial
 
statements in accordance
with
 
International
 
Financial
 
Reporting
 
Standards
 
(IFRS).
 
The
application
 
of
 
these
 
accounting
 
standards
 
requires
 
the
 
use
 
of
judgment based on
 
estimates and assumptions
 
that may involve
significant uncertainty at the time they are made.
 
This is the case,
for
 
example,
 
with
 
respect
 
to
 
the
 
measurement
 
of
 
fair
 
value
 
of
financial instruments,
 
the recognition
 
of deferred
 
tax assets,
 
the
assessment of the impairment of goodwill, expected credit losses
and estimation
 
of provisions
 
for litigation,
 
regulatory and
 
similar
matters. Such judgments, including the underlying estimates and
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
 
proceeding in
 
France increases
 
the uncertainty
 
associated
with
 
assessing
 
the
 
appropriate
 
provision.
 
If
 
the
 
estimates
 
and
assumptions in
 
future periods
 
deviate from
 
the current
 
outlook,
our financial results may also be negatively affected.
 
Changes
 
to
 
IFRS
 
or
 
interpretations
 
thereof
 
may
 
cause
 
future
reported
 
results
 
and
 
financial
 
position
 
to
 
differ
 
from
 
current
expectations, or
 
historical results
 
to differ
 
from those
 
previously
reported
 
due
 
to
 
the
 
adoption
 
of
 
accounting
 
standards
 
on
 
a
retrospective basis.
 
Such changes
 
may also
 
affect our
 
regulatory
capital and ratios.
 
For example, the introduction
 
of the expected
credit loss
 
(ECL) framework
 
under IFRS
 
9 in
 
2018 fundamentally
changed
 
how credit
 
risk arising
 
from
 
loans, loan
 
commitments,
guarantees and certain revocable facilities
 
is accounted for. Under
the regime, credit loss expenses may increase rapidly at the onset
of
 
an
 
economic
 
downturn
 
as
 
a
 
result
 
of
 
higher
 
levels
 
of
 
credit
impairments (stage 3), as well as higher ECL from stages 1 and 2,
only gradually diminishing
 
once the economic
 
outlook improves.
As we observed in
 
2020, this effect may be
 
more pronounced in
a
 
deteriorating
 
economic
 
environment.
 
Substantial
 
increases
 
in
ECL
 
could
 
exceed
 
expected
 
loss
 
for
 
regulatory
 
capital
 
purposes
and adversely affect
 
our CET1 capital
 
and regulatory capital
 
ratios.
 
We may be unable to maintain our capital strength
Capital
 
strength
 
enables
 
us to
 
grow
 
our
 
businesses
 
and absorb
increases in
 
regulatory and
 
capital requirements.
 
It reassures
 
our
clients and stakeholders, allows
 
us to maintain our
 
capital return
policy and contributes to our credit
 
ratings. Our capital ratios are
driven
 
primarily
 
by
 
RWA,
 
the
 
leverage
 
ratio
 
denominator
 
and
eligible capital, all of
 
which may fluctuate based on
 
a number of
factors,
 
some
 
of
 
which
 
are
 
outside
 
our
 
control.
 
Our
 
ability
 
to
maintain our capital ratios is subject
 
to numerous risks, including
the
 
financial
 
results of
 
our
 
businesses,
 
the effect
 
of
 
changes
 
to
capital
 
standards,
 
methodologies
 
and
 
interpretations
 
that
 
may
adversely affect the calculation of our CET1 ratios, the imposition
of risk add-ons
 
or capital buffers,
 
and the
 
application of additional
capital,
 
liquidity
 
and
 
similar
 
requirements
 
to
 
subsidiaries.
 
The
results
 
of
 
our
 
businesses
 
may
 
be
 
adversely
 
affected
 
by
 
events
arising
 
from
 
other
 
risk
 
factors
 
described
 
herein.
 
In
 
some
 
cases,
such as litigation
 
and regulatory risk
 
and operational risk
 
events,
losses
 
may
 
be
 
sudden
 
and
 
large.
 
These
 
risks
 
could
 
reduce
 
the
amount of capital available for return to shareholders and
 
hinder
our ability
 
to achieve
 
our capital
 
returns target
 
of a
 
progressive
cash dividend coupled with a share repurchase program.
Our eligible capital
 
may be reduced
 
by losses recognized
 
within
net
 
profit
 
or
 
other
 
comprehensive
 
income.
 
Eligible
 
capital
 
may
also
 
be
 
reduced
 
for
 
other
 
reasons,
 
including acquisitions
 
which
change
 
the
 
level
 
of
 
goodwill, changes
 
in
 
temporary
 
differences
related to deferred tax assets
 
included in capital, adverse currency
movements affecting the
 
value of equity,
 
prudential adjustments
that may be required due
 
to the valuation uncertainty associated
with
 
certain
 
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.
 
We
 
have
 
significantly
reduced
 
our
 
market
 
risk
 
and
 
credit
 
risk
 
RWA
 
in
 
recent
 
years.
However,
 
increases
 
in
 
operational
 
risk
 
RWA,
 
particularly
 
those
arising
 
from
 
litigation,
 
regulatory
 
and
 
similar
 
matters,
 
and
regulatory
 
changes in
 
the calculation
 
of RWA, as
 
well as regulatory
add-ons
 
to RWA,
 
have offset
 
a substantial
 
portion
 
of this
 
reduction.
Changes in
 
the calculation of
 
RWA, the
 
imposition of additional
supplemental
 
RWA
 
charges
 
or
 
multipliers
 
applied
 
to
 
certain
exposures
 
and
 
other
 
methodology
 
changes,
 
as
 
well
 
as
 
the
implementation
 
of the capital standards
 
promulgated by the Basel
Committee on
 
Banking Supervision, which
 
are proposed
 
to
 
take
effect in 2023,
 
are expected
 
to increase
 
our RWA.
The
 
leverage
 
ratio
 
is
 
a
 
balance
 
sheet-driven
 
measure
 
and
therefore limits balance sheet-intensive activities, such as
 
lending,
more than
 
activities that
 
are less
 
balance sheet
 
intensive, and
 
it
may
 
constrain
 
our
 
business
 
even
 
if
 
we
 
satisfy
 
other
 
risk-based
capital requirements. Our leverage ratio denominator is
 
driven by,
among other things, the level of client activity, including deposits
and loans, foreign
 
exchange rates, interest
 
rates and other
 
market
factors. Many of these factors are
 
wholly or partly outside of our
control.
 
 
 
69
The effect of taxes on our financial results is significantly
influenced by tax law changes and reassessments of our
deferred tax assets
 
Our effective
 
tax rate
 
is highly sensitive
 
to our performance,
 
our
expectation of
 
future profitability
 
and any
 
potential increases
 
or
decreases in statutory
 
tax rates, such as
 
any potential increase
 
in
the US
 
federal corporate
 
tax rate.
 
Further,
 
based on
 
prior years’
tax
 
losses,
 
we
 
have
 
recognized
 
deferred
 
tax
 
assets
 
(DTAs)
reflecting the probable
 
recoverable level based
 
on future taxable
profit
 
as
 
informed
 
by
 
our
 
business
 
plans.
 
If
 
our
 
performance
 
is
expected
 
to
 
produce
 
diminished
 
taxable
 
profit
 
in
 
future
 
years,
particularly in the US,
 
we may be required
 
to write down all or
 
a
portion
 
of
 
the
 
currently
 
recognized
 
DTAs
 
through
 
the
 
income
statement in excess of anticipated amortization.
 
This would have
the effect of increasing our effective
 
tax rate in the year in which
any
 
write-downs
 
are
 
taken.
 
Conversely,
 
if
 
we
 
expect
 
the
performance of entities in
 
which we have unrecognized tax
 
losses
to improve, particularly in the US or
 
the UK, we could potentially
recognize
 
additional
 
DTAs.
 
The
 
effect
 
of
 
doing
 
so
 
would be
 
to
reduce our effective tax rate in years
 
in which additional DTAs are
recognized and
 
to increase
 
our effective
 
tax rate in
 
future years.
Our effective tax
 
rate is also
 
sensitive to any
 
future reductions
 
in
statutory tax rates, particularly
 
in the US, which would
 
cause the
expected
 
future
 
tax
 
benefit
 
from
 
items
 
such
 
as
 
tax
 
loss
 
carry-
forwards
 
in
 
the
 
affected
 
locations
 
to
 
diminish
 
in
 
value.
 
This,
 
in
turn,
 
would
 
cause
 
a
 
write-down
 
of
 
the
 
associated
 
DTAs.
 
For
example,
 
the
 
reduction
 
in
 
the
 
US
 
federal
 
corporate
 
tax
 
rate
 
to
21%
 
from
 
35%
 
introduced
 
by
 
the
 
US
 
Tax
 
Cuts
 
and
 
Jobs
 
Act
resulted in a USD 2.9 billion net write-down in the
 
Group’s DTAs
in
 
the
 
fourth
 
quarter
 
of
 
2017.
 
Conversely,
 
an
 
increase
 
in
 
US
corporate
 
tax
 
rates
 
would
 
result
 
in
 
an
 
increase
 
in
 
the
 
Group’s
DTAs.
We
 
generally
 
revalue
 
our
 
DTAs
 
in
 
the
 
fourth
 
quarter
 
of
 
the
financial
 
year
 
based
 
on
 
a
 
reassessment
 
of
 
future
 
profitability
taking into account our updated business plans. We consider the
performance
 
of
 
our
 
businesses
 
and
 
the
 
accuracy
 
of
 
historical
forecasts,
 
tax
 
rates
 
and
 
other
 
factors
 
in
 
evaluating
 
the
recoverability of our DTAs, including the remaining tax loss carry-
forward
 
period
 
and
 
our
 
assessment
 
of
 
expected
 
future
 
taxable
profits
 
over
 
the
 
life
 
of
 
DTAs.
 
Estimating
 
future
 
profitability
 
is
inherently
 
subjective
 
and
 
is
 
particularly
 
sensitive
 
to
 
future
economic,
 
market
 
and
 
other
 
conditions,
 
which
 
are
 
difficult
 
to
predict.
 
Our results
 
in past
 
years have
 
demonstrated
 
that changes
 
in
the recognition of
 
DTAs can have a
 
very significant effect on
 
our
reported results. Any
 
future change in
 
the manner in
 
which UBS
remeasures DTAs could affect UBS’s effective tax rate, particularly
in the year in which the change is made.
Our full-year
 
effective tax
 
rate could
 
change if
 
aggregate tax
expenses
 
in
 
respect
 
of
 
profits
 
from
 
branches
 
and
 
subsidiaries
without loss coverage differ from
 
what is expected, or if branches
and subsidiaries generate tax
 
losses that we cannot
 
benefit from
through the
 
income statement. In
 
particular, losses
 
at entities or
branches
 
that
 
cannot
 
offset
 
for
 
tax
 
purposes
 
taxable
 
profits
 
in
other group
 
entities, and
 
which do
 
not result
 
in additional
 
DTA
recognition, may
 
increase our
 
effective tax
 
rate. In
 
addition, tax
laws or the
 
tax authorities in
 
countries where we
 
have undertaken
legal
 
structure
 
changes
 
may
 
cause
 
entities
 
to
 
be
 
subject
 
to
taxation as permanent
 
establishments or may
 
prevent the transfer
of
 
tax
 
losses
 
incurred
 
in
 
one legal
 
entity
 
to
 
newly
 
organized
 
or
reorganized subsidiaries or affiliates or may impose limitations on
the
 
utilization
 
of
 
tax
 
losses
 
that
 
relate
 
to
 
businesses
 
formerly
conducted
 
by
 
the
 
transferor.
 
Were
 
this
 
to
 
occur
 
in
 
situations
where there were
 
also limited planning
 
opportunities to utilize
 
the
tax losses in the originating entity, the DTAs associated with such
tax
 
losses
 
may
 
be
 
required
 
to
 
be
 
written
 
down
 
through
 
the
income statement.
Changes in tax law may materially affect our
 
effective tax rate,
and,
 
in
 
some
 
cases,
 
may
 
substantially
 
affect
 
the
 
profitability
 
of
certain activities. In addition, statutory
 
and regulatory changes, as
well
 
as
 
changes to
 
the
 
way in
 
which
 
courts and
 
tax authorities
interpret tax laws,
 
including assertions that
 
we are required
 
to pay
taxes
 
in
 
a
 
jurisdiction
 
as
 
a
 
result
 
of
 
activities
 
connected
 
to
 
that
jurisdiction
 
constituting
 
a
 
permanent
 
establishment
 
or
 
similar
theory, and changes in our assessment of uncertain tax positions,
could cause the
 
amount of taxes
 
we ultimately pay
 
to materially
differ from the amount accrued.
Strategy, management and operation
 
al risks
Operational risks affect our business
Our businesses
 
depend on our
 
ability to
 
process a
 
large number
of transactions, many
 
of which are
 
complex, across multiple
 
and
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 products
 
that rely on
 
these technologies. Our
 
operational risk
management and control systems
 
and processes are
 
designed to
help ensure that the
 
risks associated with
 
our activities –
 
including
those
 
arising
 
from
 
process
 
error,
 
failed
 
execution,
 
misconduct,
unauthorized
 
trading,
 
fraud,
 
system
 
failures,
 
financial
 
crime,
cyberattacks,
 
breaches
 
of
 
information
 
security,
 
inadequate
 
or
ineffective
 
access
 
controls
 
and
 
failure
 
of
 
security
 
and
 
physical
protection –
 
are appropriately
 
controlled. If
 
our internal controls
fail or
 
prove ineffective
 
in identifying and
 
remedying these
 
risks,
we could
 
suffer operational
 
failures that
 
might result
 
in material
losses,
 
such
 
as
 
the
 
substantial
 
loss
 
we
 
incurred
 
from
 
the
unauthorized trading incident announced in September 2011.
As
 
a
 
significant
 
proportion
 
of
 
our
 
staff
 
have
 
been
 
and
 
will
continue working
 
from outside
 
the offices
 
as a
 
consequence of
the
 
COVID-19
 
pandemic,
 
we
 
have
 
faced,
 
and
 
will
 
continue
 
to
face,
 
new
 
challenges
 
and
 
operational
 
risks,
 
including
maintenance of
 
supervisory and
 
surveillance controls,
 
as well
 
as
increased
 
fraud
 
and
 
data
 
security
 
risks.
 
While
 
we
 
have
 
taken
measures to manage these risks, such measures
 
have never been
tested on the
 
scale or duration
 
that we are
 
currently experiencing,
and there is risk that
 
these measures will prove not
 
to have been
effective in the current unprecedented operating environment.
 
 
Our strategy, business model and environment
 
| Risk factors
70
We use automation as
 
part of our efforts
 
to improve efficiency,
reduce
 
the
 
risk
 
of
 
error
 
and
 
improve
 
our
 
client
 
experience.
 
We
intend to expand the use of robotic processing, machine learning
and artificial intelligence to further these
 
goals. Use of these tools
presents their
 
own risks,
 
including the
 
need for
 
effective design
and
 
testing;
 
the
 
quality
 
of
 
the
 
data
 
used
 
for
 
development
 
and
operation of machine learning and
 
artificial intelligence tools may
adversely
 
affect their
 
functioning and
 
result
 
in
 
errors and
 
other
operational risks.
For financial institutions, cybersecurity
 
risks have increased due
to the
 
widespread use
 
of digital
 
technologies, cloud
 
computing
and mobile
 
devices to
 
conduct financial
 
business and
 
transactions.
In
 
addition,
 
cyberattacks
 
by
 
hackers,
 
terrorists,
 
criminal
organizations, nation states and extremists have also increased in
frequency
 
and
 
sophistication.
 
Current
 
geopolitical
 
tensions
 
also
may lead
 
to increased
 
risk of
 
cyberattack from
 
foreign state
 
actors.
In particular,
 
the Russian
 
invasion of
 
Ukraine and
 
the imposition
of significant sanctions on Russia by Switzerland,
 
the US, the EU,
the
 
UK
 
and
 
others
 
may
 
result
 
in
 
an
 
increase
 
in
 
the
 
risk
 
of
cyberattacks.
 
We
 
and
 
other
 
financial
 
services
 
firms
 
have
 
been
 
subject
 
to
breaches of
 
security and
 
to cyber-
 
and other
 
forms of
 
attack, some
of which are sophisticated and targeted
 
attacks intended to gain
access to
 
confidential information
 
or systems,
 
disrupt service
 
or
destroy
 
data.
 
These
 
attacks
 
may
 
be
 
attempted
 
through
 
the
introduction of
 
viruses or
 
malware, phishing
 
and other
 
forms of
social engineering, distributed denial of service attacks and other
means. These attempts may occur directly, or using equipment or
security passwords of our employees,
 
third-party service providers
or
 
other
 
users.
 
In
 
addition
 
to
 
external
 
attacks,
 
we
 
have
experienced
 
loss
 
of
 
client
 
data
 
from
 
failure
 
by
 
employees
 
and
others
 
to
 
follow
 
internal
 
policies
 
and
 
procedures
 
and
 
from
misappropriation of
 
our data
 
by employees
 
and others.
 
We may
not
 
be
 
able
 
to
 
anticipate,
 
detect
 
or
 
recognize
 
threats
 
to
 
our
systems
 
or
 
data
 
and
 
our
 
preventative
 
measures
 
may
 
not
 
be
effective to prevent an attack or a security breach. In the event
 
of
a security breach,
 
notwithstanding our preventative
 
measures, we
may not immediately detect a particular breach or attack. Once a
particular attack is detected,
 
time may be required
 
to investigate
and
 
assess
 
the
 
nature
 
and
 
extent
 
of
 
the
 
attack.
 
A
 
successful
breach or circumvention
 
of security of our
 
systems or data could
have
 
significant
 
negative
 
consequences
 
for
 
us,
 
including
disruption
 
of
 
our
 
operations,
 
misappropriation
 
of
 
confidential
information
 
concerning
 
us
 
or
 
our
 
customers,
 
damage
 
to
 
our
systems, financial losses
 
for us or
 
our customers, violations
 
of data
privacy and
 
similar laws,
 
litigation exposure
 
and damage
 
to our
reputation.
 
We
 
may
 
be
 
subject
 
to
 
enforcement
 
actions
 
as
regulatory
 
focus
 
on
 
cybersecurity
 
increases
 
and
 
regulators
 
have
announced
 
new
 
rules,
 
guidance
 
and
 
initiatives
 
on
 
ransomware
and other cybersecurity-related issues.
We are subject
 
to complex and
 
frequently changing laws
 
and
regulations governing the protection of
 
client and personal data,
such as the EU General Data Protection Regulation. Ensuring that
we comply with applicable laws and regulations
 
when we collect,
use
 
and
 
transfer
 
personal
 
information
 
requires
 
substantial
resources
 
and
 
may
 
affect
 
the
 
ways
 
in
 
which
 
we
 
conduct
 
our
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
 
the
Russian invasion of
 
Ukraine, increase our
 
cost of monitoring and
complying with sanctions requirements and increase the risk that
we will not
 
identify in a
 
timely manner client
 
activity that is
 
subject
to a sanction.
As a
 
result of
 
new and
 
changed regulatory
 
requirements and
the
 
changes
 
we
 
have
 
made
 
in
 
our
 
legal
 
structure,
 
the
 
volume,
frequency and
 
complexity of
 
our regulatory
 
and other
 
reporting
has
 
remained
 
elevated.
 
Regulators
 
have
 
also
 
significantly
increased expectations regarding
 
our internal reporting
 
and data
aggregation, as well as management
 
reporting. We have incurred
and continue to
 
incur significant
 
costs to implement
 
infrastructure
to
 
meet
 
these
 
requirements.
 
Failure
 
to
 
meet
 
external
 
reporting
requirements accurately and in a timely
 
manner or failure to meet
regulatory
 
expectations
 
of
 
internal
 
reporting,
 
data
 
aggregation
and management reporting could result in enforcement action or
other adverse consequences for us.
In
 
addition,
 
despite
 
the
 
contingency
 
plans
 
that
 
we
 
have
 
in
place, our
 
ability to
 
conduct business
 
may be
 
adversely affected
by a disruption in
 
the infrastructure that supports
 
our businesses
and
 
the
 
communities
 
in
 
which
 
we
 
operate.
 
This
 
may
 
include
 
a
disruption due to natural disasters,
 
pandemics, civil unrest, war
 
or
terrorism
 
and
 
involve
 
electrical, communications,
 
transportation
or other services that we
 
use or that are
 
used by third parties with
whom we conduct business.
 
 
 
 
71
We may not be successful in the ongoing execution of our
strategic plans
We
 
have
 
transformed
 
UBS
 
to
 
focus
 
on
 
our
 
Global
 
Wealth
Management
 
business
 
and
 
our
 
universal
 
bank
 
in
 
Switzerland,
complemented by Asset
 
Management and a
 
significantly smaller
and more capital-efficient Investment Bank; we
 
have substantially
reduced the risk-weighted assets and leverage ratio denominator
usage in Group
 
Functions; and made
 
significant cost reductions.
Risk remains that going
 
forward we may
 
not succeed in
 
executing
our
 
strategy
 
or
 
achieving
 
our
 
performance
 
targets,
 
or
 
may
 
be
delayed
 
in
 
doing
 
so.
 
Macroeconomic
 
conditions,
 
geopolitical
uncertainty,
 
changes
 
to
 
regulatory
 
requirements
 
and
 
the
continuing costs
 
of meeting
 
these requirements
 
have prompted
us to
 
adapt
 
our
 
targets and
 
ambitions
 
in
 
the past
 
and we
 
may
need to do so again in the future.
To achieve our strategic plans, we expect to continue
 
to make
significant
 
expenditures
 
on
 
technology
 
and
 
infrastructure
 
to
improve
 
client
 
experience,
 
improve
 
and
 
further
 
enable
 
digital
offerings and increase efficiency. We also may seek to implement
our
 
strategy
 
through
 
acquisitions
 
or
 
strategic
 
partnerships
 
to
expand
 
or
 
improve
 
our
 
product
 
offerings
 
or
 
target
 
additional
client
 
segments.
 
Our
 
investments
 
in
 
new
 
technology
 
and
 
our
acquisitions and
 
strategic partnerships
 
may not
 
fully achieve
 
our
objectives or improve
 
our ability to
 
attract and retain
 
customers.
In
 
addition,
 
we
 
face
 
competition
 
in
 
providing
 
digitally
 
enabled
offerings from both
 
existing competitors and
 
new financial service
providers
 
in
 
various
 
portions
 
of
 
the
 
value
 
chain.
 
For
 
example,
technological
 
advances
 
and
 
the
 
growth
 
of
 
e-commerce
 
have
made
 
it possible
 
for e-commerce
 
firms and
 
other companies
 
to
offer products and services that were traditionally offered only by
banks. These
 
advances have
 
also allowed financial
 
institutions and
other
 
companies
 
to
 
provide
 
digitally
 
based
 
financial
 
solutions,
including electronic
 
securities
 
trading, payments
 
processing and
online automated
 
algorithmic-based investment
 
advice at
 
a low
cost to their customers. We may have
 
to lower our prices, or risk
losing customers as a
 
result. Our ability to
 
develop and implement
competitive
 
digitally enabled
 
offerings and
 
processes will
 
be an
important factor in our ability to compete.
As
 
part
 
of
 
our
 
strategy,
 
we
 
seek
 
to
 
improve
 
our
 
operating
efficiency, in part by controlling our costs. We may not be able to
identify feasible
 
cost reduction
 
opportunities that
 
are consistent
with our business goals and cost reductions may be realized later
or
 
may
 
be
 
smaller
 
than
 
we
 
anticipate.
 
Higher
 
temporary
 
and
permanent
 
regulatory
 
costs
 
and
 
higher
 
business
 
demand
 
than
anticipated
 
have
 
partly
 
offset
 
cost
 
reductions
 
and
 
delayed
 
the
achievement
 
of
 
our
 
past
 
cost
 
reduction
 
targets,
 
and
 
we
 
could
continue to be challenged in
 
the execution of our ongoing
 
efforts
to improve operating efficiency.
Changes
 
in
 
our
 
workforce
 
as
 
a
 
result
 
of
 
outsourcing,
nearshoring, offshoring, insourcing
 
or staff reductions
 
or, changes
which
 
arise
 
from the
 
introduction
 
of
 
work
 
from home
 
or
 
other
flexible
 
ways
 
of
 
working
 
or
 
agile
 
work
 
methodologies
 
may
introduce new operational risks that, if
 
not effectively addressed,
could
 
affect our
 
ability
 
to
 
achieve
 
cost and
 
other benefits
 
from
such changes, or could result in operational losses.
 
As
 
we
 
implement
 
effectiveness
 
and
 
efficiency
 
programs,
 
we
may
 
also
 
experience
 
unintended
 
consequences,
 
such
 
as
 
the
unintended
 
loss
 
or
 
degradation
 
of
 
capabilities
 
that
 
we
 
need
 
in
order to maintain
 
our competitive position,
 
achieve our targeted
returns
 
or
 
meet
 
existing
 
or
 
new
 
regulatory
 
requirements
 
and
expectations.
 
We depend on our risk management and control processes to
avoid or limit potential losses in our businesses
 
Controlled risk-taking is a major
 
part of the business
 
of a financial
services firm. Some
 
losses from risk-taking activities
 
are inevitable,
but to be successful over time,
 
we must balance the risks we take
against
 
the
 
returns
 
generated.
 
Therefore,
 
we
 
must
 
diligently
identify, assess, manage and
 
control our risks, not only in normal
market
 
conditions
 
but
 
also
 
as
 
they
 
might
 
develop
 
under
 
more
extreme,
 
stressed conditions,
 
when concentrations
 
of exposures
can lead to severe losses.
 
We have not always been able to
 
prevent serious losses arising
from
 
risk
 
management
 
failures
 
and
 
extreme
 
or
 
sudden
 
market
events.
 
We
 
recorded
 
substantial
 
losses
 
on
 
fixed-income
 
trading
positions in the
 
2008 financial crisis, in
 
the unauthorized trading
incident in 2011
 
and, more recently,
 
positions resulting from
 
the
default of a US prime brokerage client. We revise and strengthen
our risk management and control frameworks to
 
seek to address
identified
 
shortcomings.
 
Nonetheless,
 
we
 
could
 
suffer
 
further
losses in the future if, for example:
–
 
we do not
 
fully identify the
 
risks in our portfolio,
 
in particular
risk concentrations and correlated risks;
–
 
our
 
assessment
 
of
 
the
 
risks
 
identified,
 
or
 
our
 
response
 
to
negative trends, proves
 
to be untimely,
 
inadequate, insufficient
or incorrect;
 
–
 
our
 
risk
 
models
 
prove
 
insufficient
 
to
 
predict
 
the
 
scale
 
of
financial risks the bank
 
faces;
 
–
 
markets move in
 
ways that we
 
do not expect
 
– in terms
 
of their
speed,
 
direction,
 
severity
 
or
 
correlation
 
–
 
and
 
our
 
ability
 
to
manage
 
risks
 
in
 
the
 
resulting
 
environment
 
is,
 
therefore,
affected;
 
–
 
third
 
parties
 
to
 
whom
 
we
 
have
 
credit
 
exposure
 
or
 
whose
securities we hold
 
are severely affected
 
by events
 
and we suffer
defaults and impairments beyond the
 
level implied by our risk
assessment; or
 
–
 
collateral or other security provided by
 
our counterparties and
clients proves inadequate to cover their obligations at
 
the time
of default.
 
 
 
We
 
also
 
hold
 
legacy
 
risk
 
positions,
 
primarily
 
in
 
Group
Functions,
 
that,
 
in
 
many
 
cases,
 
are
 
illiquid
 
and
 
may
 
again
deteriorate in value.
We also manage risk
 
on behalf of
 
our clients. The performance
of assets we hold for our clients may be adversely affected by the
same
 
factors
 
mentioned
 
above.
 
If
 
clients
 
suffer
 
losses
 
or
 
the
performance of their
 
assets held with
 
us is
 
not in
 
line with relevant
benchmarks against which
 
clients assess
 
investment performance,
we may suffer
 
reduced fee income and
 
a decline in
 
assets under
management, or withdrawal of mandates.
Investment positions, such as equity investments made as part
of strategic initiatives
 
and seed investments
 
made at the
 
inception
of
 
funds
 
that
 
we manage,
 
may also
 
be
 
affected
 
by market
 
risk
factors. These investments
 
are often not
 
liquid and generally
 
are
intended or required to be
 
held beyond a normal trading
 
horizon.
Deteriorations in
 
the fair
 
value of
 
these positions
 
would have
 
a
negative effect on our earnings.
 
 
Our strategy, business model and environment
 
| Risk factors
72
We may not be successful in implementing changes in our
wealth management businesses to meet changing market,
regulatory and other conditions
 
In recent years, inflows
 
from lower-margin segments and markets
have been replacing
 
outflows from higher-margin
 
segments and
markets,
 
in
 
particular
 
for
 
cross-border
 
clients.
 
This
 
dynamic,
combined with
 
changes in
 
client product
 
preferences as
 
a result
of which
 
low-margin products
 
account for
 
a larger
 
share of
 
our
revenues than in the past, has put downward pressure on Global
Wealth Management’s margins.
 
We
 
are
 
exposed
 
to
 
possible
 
outflows
 
of
 
client
 
assets
 
in
 
our
asset-gathering
 
businesses
 
and
 
to
 
changes
 
affecting
 
the
profitability
 
of
 
Global
 
Wealth
 
Management,
 
in
 
particular.
Initiatives
 
that
 
we
 
may
 
implement
 
to
 
overcome
 
the
 
effects
 
of
changes in the business environment on our profitability, balance
sheet
 
and
 
capital
 
positions
 
may
 
not
 
succeed
 
in
 
counteracting
those
 
effects
 
and
 
may
 
cause
 
net
 
new
 
money
 
outflows
 
and
reductions in client deposits, as happened with our balance sheet
and capital optimization program
 
in 2015. There
 
is no assurance
that we will
 
be successful
 
in our
 
efforts to offset
 
the adverse
 
effect
of these or similar trends and developments.
We may be unable to identify or capture revenue or competitive
opportunities, or retain and attract qualified employees
The
 
financial
 
services
 
industry
 
is
 
characterized
 
by
 
intense
competition,
 
continuous
 
innovation,
 
restrictive,
 
detailed,
 
and
sometimes fragmented
 
regulation and
 
ongoing consolidation.
 
We
face
 
competition
 
at
 
the
 
level
 
of
 
local
 
markets
 
and
 
individual
business
 
lines,
 
and
 
from
 
global
 
financial
 
institutions
 
that
 
are
comparable to us in their
 
size and breadth, as well
 
as competition
from new
 
technology-based market
 
entrants, which may
 
not be
subject
 
to
 
the
 
same
 
level
 
of
 
regulation.
 
Barriers
 
to
 
entry
 
in
individual
 
markets
 
and
 
pricing
 
levels
 
are
 
being
 
eroded
 
by
 
new
technology. We expect
 
these trends to continue and competition
to increase.
 
Our competitive strength
 
and market
 
position could
be
 
eroded
 
if
 
we
 
are
 
unable
 
to
 
identify
 
market
 
trends
 
and
developments, do not respond
 
to such trends and
 
developments
by
 
devising
 
and
 
implementing adequate
 
business
 
strategies, do
not adequately
 
develop or
 
update our
 
technology including
 
our
digital channels
 
and tools,
 
or are
 
unable to
 
attract or
 
retain the
qualified people needed.
The
 
amount and
 
structure
 
of our
 
employee
 
compensation
 
is
affected not only by our business results,
 
but also by competitive
factors and regulatory considerations.
 
In response to the demands of various
 
stakeholders, including
regulatory
 
authorities
 
and
 
shareholders,
 
and
 
in
 
order
 
to
 
better
align the
 
interests of
 
our staff
 
with other
 
stakeholders, we
 
have
increased
 
average
 
deferral
 
periods
 
for
 
stock
 
awards,
 
expanded
forfeiture
 
provisions
 
and,
 
to
 
a
 
more
 
limited
 
extent,
 
introduced
clawback
 
provisions
 
for
 
certain
 
awards
 
linked
 
to
 
business
performance.
 
We
 
have
 
also
 
introduced
 
individual
 
caps
 
on
 
the
proportion of fixed to variable pay for the Group Executive Board
(GEB) members, as well as certain other employees.
 
Constraints
 
on
 
the
 
amount
 
or
 
structure
 
of
 
employee
compensation, higher
 
levels of
 
deferral, performance
 
conditions
and
 
other
 
circumstances
 
triggering
 
the
 
forfeiture
 
of
 
unvested
awards may
 
adversely affect
 
our ability
 
to retain
 
and attract
 
key
employees, particularly
 
where we
 
compete with
 
companies that
are not subject to these constraints.
 
The loss of key staff and
 
the
inability
 
to
 
attract
 
qualified
 
replacements
 
could
 
seriously
compromise our ability to
 
execute our strategy and
 
to successfully
improve our operating and control environment, and could affect
our
 
business performance.
 
Swiss law
 
requires
 
that
 
shareholders
approve the
 
compensation of
 
the Board
 
of Directors
 
(the BoD)
 
and
the
 
GEB
 
each
 
year.
 
If
 
our
 
shareholders
 
fail
 
to
 
approve
 
the
compensation for the GEB or the BoD, this
 
could have an adverse
effect on our ability to retain
 
experienced directors and our senior
management.
Our reputation is critical to our success
Our
 
reputation
 
is
 
critical
 
to
 
the
 
success
 
of
 
our
 
strategic
 
plans,
business
 
and
 
prospects.
 
Reputational
 
damage
 
is
 
difficult
 
to
reverse,
 
and
 
improvements
 
tend
 
to
 
be
 
slow
 
and
 
difficult
 
to
measure. In the
 
past, our reputation has
 
been adversely affected
by
 
our
 
losses
 
during
 
the
 
financial
 
crisis,
 
investigations
 
into
 
our
cross-border
 
private
 
banking
 
services,
 
criminal
 
resolutions
 
of
LIBOR-related
 
and
 
foreign
 
exchange
 
matters,
 
as
 
well
 
as
 
other
matters. We believe that reputational damage as a result of
 
these
events
 
was an
 
important
 
factor in
 
our
 
loss
 
of
 
clients and
 
client
assets
 
across
 
our
 
asset-gathering
 
businesses.
 
New
 
events
 
that
cause reputational
 
damage could
 
have a
 
material adverse
 
effect
on our results of operation and financial condition, as well as our
ability to achieve our strategic goals and financial targets.
As UBS Group AG is a holding company, its operating results,
financial condition and ability to pay dividends and other
distributions and / or to pay its obligations in the future depend
on funding, dividends and other distributions received directly or
indirectly from its subsidiaries, which may be subject to
restrictions
UBS Group
 
AG’s ability
 
to pay
 
dividends and
 
other distributions
and to pay its obligations in the
 
future will depend on the level of
funding, dividends
 
and other
 
distributions, if
 
any,
 
received from
UBS AG and other subsidiaries. The
 
ability of such subsidiaries to
make loans
 
or distributions,
 
directly
 
or indirectly,
 
to UBS
 
Group
AG
 
may
 
be
 
restricted
 
as
 
a
 
result
 
of
 
several
 
factors,
 
including
restrictions
 
in
 
financing
 
agreements
 
and
 
the
 
requirements
 
of
applicable
 
law
 
and
 
regulatory,
 
fiscal
 
or
 
other
 
restrictions.
 
In
particular,
 
UBS
 
Group
 
AG’s
 
direct
 
and
 
indirect
 
subsidiaries,
including
 
UBS
 
AG,
 
UBS Switzerland
 
AG,
 
UBS Americas
 
Holding
LLC and UBS Europe
 
SE, are subject
 
to laws and regulations
 
that
restrict dividend
 
payments, authorize
 
regulatory bodies
 
to block
or reduce the flow of funds from
 
those subsidiaries to UBS Group
AG, or
 
could affect
 
their ability
 
to
 
repay
 
any loans
 
made to,
 
or
other investments
 
in, such
 
subsidiary by
 
UBS Group AG
 
or another
member
 
of
 
the
 
Group.
 
For
 
example,
 
in
 
the
 
early
 
stages
 
of
 
the
COVID-19
 
pandemic,
 
the
 
European
 
Central
 
Bank
 
ordered
 
all
banks under its
 
supervision to
 
cease dividend
 
distributions and
 
the
Federal
 
Reserve
 
Board
 
has
 
limited
 
capital
 
distributions
 
by
 
bank
holding
 
companies
 
and
 
intermediate
 
holding
 
companies.
Restrictions
 
and
 
regulatory
 
actions
 
of
 
this
 
kind
 
could
 
impede
access
 
to
 
funds
 
that
 
UBS
 
Group
 
AG
 
may
 
need
 
to
 
meet
 
its
obligations or
 
to pay dividends
 
to shareholders.
 
In addition, UBS
Group AG’s right to
 
participate in a distribution of
 
assets upon a
subsidiary’s
 
liquidation
 
or
 
reorganization
 
is
 
subject
 
to
 
all
 
prior
claims of the subsidiary’s creditors.
Our capital instruments
 
may contractually prevent
 
UBS Group
AG from proposing the distribution of
 
dividends to shareholders,
other
 
than
 
in
 
the
 
form
 
of
 
shares
 
and
 
from
 
engaging
 
in
repurchases
 
of
 
shares,
 
if
 
we
 
do
 
not
 
pay
 
interest
 
on
 
these
instruments.
 
 
 
73
Furthermore,
 
UBS
 
Group
 
AG
 
may
 
guarantee
 
some
 
of
 
the
payment obligations
 
of certain
 
of the
 
Group’s subsidiaries
 
from
time
 
to
 
time.
 
These
 
guarantees
 
may
 
require
 
UBS
 
Group
 
AG
 
to
provide substantial funds
 
or assets
 
to subsidiaries or
 
their creditors
or
 
counterparties
 
at
 
a
 
time
 
when
 
UBS
 
Group
 
AG
 
is
 
in
 
need
 
of
liquidity to fund its own obligations.
The credit ratings of UBS Group AG or its subsidiaries used for
funding purposes could be lower than the ratings of
 
the Group’s
operating
 
subsidiaries,
 
which
 
may
 
adversely
 
affect
 
the
 
market
value of the securities and other obligations of UBS Group
 
AG or
those subsidiaries on a standalone basis.
Liquidity and funding 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,
 
gener
al
 
market
disruptions or widening
 
credit spreads, which could
 
also influence
the cost of
 
funding. A substantial
 
part of our
 
liquidity and funding
requirements
 
are
 
met
 
using
 
short-term
 
unsecured
 
funding
sources,
 
including retail
 
and wholesale
 
deposits and
 
the regular
issuance of money
 
market securities. A
 
change in the
 
availability
of short-term funding could occur quickly.
The addition of loss-absorbing debt as a component of capital
requirements, the regulatory
 
requirements to maintain
 
minimum
TLAC at UBS’s holding
 
company and at
 
subsidiaries, as well
 
as the
power
 
of
 
resolution
 
authorities
 
to
 
bail
 
in
 
TLAC
 
and
 
other
 
debt
obligations,
 
and
 
uncertainty
 
as
 
to
 
how
 
such
 
powers
 
will
 
be
exercised, will increase
 
our cost of
 
funding and could
 
potentially
increase the total amount
 
of funding required, in
 
the absence of
other changes in our business.
Reductions
 
in
 
our
 
credit
 
ratings
 
may
 
adversely
 
affect
 
the
market value of the securities
 
and other obligations and increase
our
 
funding
 
costs,
 
in
 
particular
 
with
 
regard
 
to
 
funding
 
from
wholesale unsecured
 
sources, and
 
could affect
 
the availability of
certain kinds of
 
funding. In addition,
 
as experienced in
 
connection
with Moody’s
 
downgrade of
 
UBS AG’s
 
long-term debt
 
rating in
June 2012,
 
rating downgrades
 
can require
 
us to
 
post additional
collateral
 
or
 
make
 
additional
 
cash
 
payments
 
under
 
trading
agreements. Our credit ratings,
 
together with our capital strength
and
 
reputation,
 
also
 
contribute
 
to
 
maintaining
 
client
 
and
counterparty
 
confidence,
 
and
 
it
 
is
 
possible
 
that
 
rating
 
changes
could influence the performance of some of our businesses.
The requirement to maintain a liquidity coverage ratio of
 
high-
quality
 
liquid
 
assets
 
to
 
estimated
 
stressed
 
short-term
 
net
 
cash
outflows,
 
and
 
other
 
similar
 
liquidity
 
and
 
funding
 
requirements,
oblige us to
 
maintain high
 
levels of overall
 
liquidity, limit
 
our ability
to
 
optimize
 
interest
 
income and
 
expense,
 
make
 
certain
 
lines
 
of
business less attractive
 
and reduce our overall
 
ability to generate
profits.
 
In
 
particular,
 
UBS
 
AG
 
is
 
subjected
 
to
 
increased
 
liquidity
coverage requirements under the
 
direction of FINMA. Regulators
may consider it
 
necessary to increase
 
these requirements in
 
light
of the anticipated economic stresses
 
resulting from the COVID-19
pandemic.
 
The
 
liquidity
 
coverage
 
ratio
 
and
 
net
 
stable
 
funding
ratio requirements are
 
intended to ensure that
 
we are not overly
reliant
 
on short-term
 
funding and
 
that we
 
have sufficient
 
long-
term
 
funding
 
for
 
illiquid
 
assets.
 
The
 
relevant
 
calculations
 
make
assumptions about the
 
relative likelihood and
 
amount of outflows
of funding and available sources of additional funding in market-
wide and firm-specific
 
stress situations.
 
There can be
 
no assurance
that in an actual stress
 
situation our funding outflows would
 
not
exceed the assumed amounts.
 
 
 
 
 
 
 
Financial and
operating
performance
Management report
 
2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial and operating performance | Accounting and financial reporting
76
Accounting and financial reporting
Critical accounting estimates and judgments
In
 
preparing
 
our
 
financial
 
statements
 
in
 
accordance
 
with
International Financial Reporting
 
Standards (IFRS), as
 
issued by the
International
 
Accounting
 
Standards
 
Board
 
(the
 
IASB),
 
we
 
apply
judgment and make estimates and assumptions that may involve
significant
 
uncertainty
 
at
 
the time
 
they are
 
made. We
 
regularly
reassess
 
those
 
estimates
 
and
 
assumptions,
 
which
 
encompass
historical
 
experience,
 
expectations
 
of
 
the
 
future
 
and
 
other
pertinent factors,
 
to determine
 
their continuing
 
relevance based
on current conditions, and update them as
 
necessary. Changes in
estimates
 
and
 
assumptions
 
may
 
have
 
significant
 
effects
 
on
 
the
financial
 
statements.
 
Furthermore,
 
actual
 
results
 
may
 
differ
significantly from
 
our estimates, which
 
could result
 
in significant
losses to the Group, beyond what we expected or provided for.
 
Key areas
 
involving a
 
high degree
 
of judgment
 
and areas
 
where
estimates
 
and
 
assumptions
 
are
 
significant
 
to
 
the
 
consolidated
financial statements include:
–
 
expected credit loss measurement;
–
 
fair value measurement;
–
 
income taxes;
–
 
provisions and contingent liabilities;
–
 
post-employment benefit plans;
–
 
goodwill; and
 
–
 
consolidation of structured entities.
›
 
Refer to “Note 1a Material accounting
 
policies” in the
“Consolidated financial statements” section
 
of this report for
more information
›
 
Refer to the “Risk factors” section of
 
this report for more
information
 
Significant accounting and financial reporting changes in
2021
Amendments to IFRS as a consequence of
Interest Rate
Benchmark Reform
 
Effective
 
from
 
1 January
 
2021,
 
we
 
have
 
adopted
Interest
 
Rate
Benchmark
 
Reform
 
–
 
Phase
 
2,
 
Amendments
 
to
 
IFRS 9,
 
IAS 39,
IFRS 7,
 
IFRS 4
 
and
 
IFRS 16
,
 
addressing
 
a
 
number
 
of
 
issues
 
in
financial reporting
 
areas that
 
arise when
 
interbank offered
 
rates
(IBORs) are reformed
 
or replaced,
 
in particular
 
in the
 
area of
 
hedge
accounting.
 
The
 
amendments
 
also
 
introduced
 
additional
disclosure
 
requirements
 
covering
 
how
we
 
are
 
managing
 
the
 
transition to
 
alternative benchmark
 
rates, our
 
progress as
 
of the
reporting date and the risks to which we are
 
exposed because of
the transition.
›
 
Refer to “Note 1b Changes in accounting
 
policies, comparability
and other adjustments” and “Note 25 Interest
 
rate benchmark
reform” in the “Consolidated financial statements”
 
section of
this report for more information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
77
Group performance
Income statement
For the year ended
% change from
USD million
31.12.21
31.12.20
31.12.19
31.12.20
Net interest income
 
6,705
 
5,862
 
4,501
 
14
Other net income from financial instruments measured
 
at fair value through profit or loss
 
5,850
 
6,960
 
6,842
 
(16)
Credit loss (expense) / release
 
148
 
(694)
 
(78)
Fee and commission income
 
24,372
 
20,961
 
19,110
 
16
Fee and commission expense
 
(1,985)
 
(1,775)
 
(1,696)
 
12
Net fee and commission income
 
22,387
 
19,186
 
17,413
 
17
Other income
 
452
 
1,076
 
212
 
(58)
Total operating income
 
35,542
 
32,390
 
28,889
 
10
Personnel expenses
 
18,387
 
17,224
 
16,084
 
7
General and administrative expenses
 
5,553
 
4,885
 
5,288
 
14
Depreciation, amortization and impairment of non-financial
 
assets
2,118
2,126
1,940
 
0
Total operating expenses
 
26,058
 
24,235
 
23,312
 
8
Operating profit / (loss) before tax
 
9,484
 
8,155
 
5,577
 
16
Tax expense / (benefit)
 
 
1,998
 
1,583
 
1,267
 
26
Net profit / (loss)
 
7,486
 
6,572
 
4,310
 
14
Net profit / (loss) attributable to non-controlling interests
 
29
 
15
 
6
 
92
Net profit / (loss) attributable to shareholders
 
7,457
 
6,557
 
4,304
 
14
Comprehensive income
Total comprehensive income
 
5,119
 
8,312
 
5,091
 
(38)
Total comprehensive income attributable to non-controlling interests
 
13
 
36
 
2
 
(64)
Total comprehensive income attributable to shareholders
 
5,106
 
8,276
 
5,089
 
(38)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial and operating performance | Group performance
78
2021 compared with 2020
Results
In
 
202
1
,
net
 
profit
 
attributable
 
to
 
shareholders
increased
 
by
USD 900 million, or 14%, to
 
USD 7,457 million, which included
 
a
net tax expense of USD 1,998 million.
Profit before
 
tax increased
 
by USD 1,
 
329 million,
 
or 16%,
 
to
USD 9,484
 
million,
 
reflecting
 
higher
 
operating
 
income,
 
partly
offset
 
by an
 
increase
 
in operating
 
expenses.
 
Operating
 
income
increased by USD
 
3,152 million, or 10%, to USD 3
 
5,542 million,
mainly
 
reflecting
 
a
 
USD 3,201
 
million
 
increase
 
in
 
net
 
fee
 
and
commission
 
income.
 
Net
 
credit
 
loss
 
releases
 
were
 
USD 148
million,
 
compared
 
with
 
net
 
credit
 
loss
 
expenses
 
of
 
USD 694
million in
 
2020.
 
This was partly
 
offset by
 
USD 624 million
 
lower
other income and
 
a USD 267 million
 
decrease in total
 
combined
net
 
interest
 
income
 
and
 
other
 
net
 
income
 
from
 
financial
instruments
 
measured
 
at
 
fair
 
value
 
through
 
profit
 
or
 
loss.
Operating
 
expenses
 
increased
 
by USD
 
1,823
 
million,
 
or 8%,
 
to
USD
 
2
6
,
058
 
million.
 
This
increase
was
 
mai
nly
 
driven
 
by
USD
 
1,
1
63
 
million
high
er
personnel
 
expenses
 
and
USD
 
668
million higher
 
general and
 
administrative
 
expenses.
Operating income
Operating
 
income
 
increased
 
by
 
USD 3,152
 
million,
 
or
 
10%,
 
to
USD 35,542 million.
Net interest income and other net income from financial
instruments measured at fair value through profit or loss
Total
 
combined net
 
interest income
 
and other
 
net income
 
from
financial instruments measured at fair value through profit or
 
loss
decreased by USD 267 million to USD 12,555 million.
The
 
Investment
 
Bank
de
creased
 
by
USD
 
57
6
 
million
 
to
USD 5,067 million,
 
largely driven
 
by a
 
USD 713
 
million decrease
in our Financing business in Global Markets, primarily reflecting a
loss of
 
USD 861 million
 
incurred in
 
the first
 
half of
 
2021 on
 
the
default
 
of
 
a
 
US-based
 
client
 
of
 
our
 
prime
 
brokerage
 
business,
partly
 
offset
 
by
 
higher
 
capital
 
markets
 
financing
 
revenues
.
 
Derivatives & Solutions increased by USD 169 million,
 
mainly due
to higher revenues from
 
equity derivatives, partly offset
 
by lower
income from foreign exchange, rates and credit products.
Group
 
Functions
 
recognized
 
negative
 
income
 
of
 
USD 397
million, compared with negative income of USD 302 million. This
was largely
 
due to
 
USD 113 million
 
lower net
 
income in
 
Group
Treasury,
 
mainly
reflecting
 
net
 
effects
 
related
 
to
 
accounting
asymmetries,
 
including
 
hedge
 
accounting
 
ineffectiveness,
 
partly
offset
 
by
 
lower
 
negative
 
revenues
 
related
 
to
 
centralized
 
Group
Treasury
 
risk
 
management
 
services.
 
In
 
addition,
 
2021
 
included
valuation
 
gains
 
of
 
USD 58
 
million
 
on
 
auction
 
rate
 
securities
 
in
Non-core and Legacy Portfolio, compared with
 
valuation losses of
USD 9 million in the prior year.
 
Global Wealth
 
Management increased
 
by USD 302
 
million to
USD 5,341 million,
 
mainly driven
 
by higher
 
net interest
 
income,
largely reflecting growth
 
in lending revenues
 
from higher volumes
and margins, partly offset by
 
lower deposit revenues, mainly due
to
 
lower
 
US
 
dollar
 
interest
 
rates
 
and
 
despite
 
higher
 
deposit
volumes.
Personal & Corporate
 
Banking increased by
 
USD 98 million to
USD 2,557
 
million,
 
mainly
 
due
 
to
 
higher
 
net
 
interest
 
income,
driven by proactive deposit management.
›
 
Refer to “Note 3 Net interest income and
 
other net income from
financial instruments measured at fair value through
 
profit or
loss” in the “Consolidated financial statements”
 
section of this
report for more information
 
Net interest income and other net income from financial instruments measured at fair value through profit or loss
For the year ended
% change from
USD million
31.12.21
31.12.20
31.12.19
31.12.20
Net interest income from financial instruments measured
 
at amortized cost and fair value through other
comprehensive income
 
5,274
 
4,563
 
3,490
 
16
Net interest income from financial instruments measured
 
at fair value through profit or loss
 
1,431
 
1,299
 
1,011
 
10
Other net income from financial instruments measured
 
at fair value through profit or loss
 
5,850
 
6,960
 
6,842
 
(16)
Total
 
12,555
 
12,822
 
11,343
 
(2)
Global Wealth Management
 
5,341
 
5,039
 
4,913
 
6
of which: net interest income
 
4,244
 
4,027
 
3,947
 
5
of which: transaction-based income from foreign exchange and other
 
intermediary activity
 
1
 
1,097
 
1,012
 
966
 
8
Personal & Corporate Banking
 
 
2,557
 
2,459
 
2,436
 
4
of which: net interest income
 
 
2,120
 
2,049
 
1,992
 
3
of which: transaction-based income from foreign exchange and other
 
intermediary activity
 
1
 
437
 
409
 
443
 
7
Asset Management
 
(13)
 
(16)
 
(13)
 
(16)
Investment Bank
 
2
 
5,067
 
5,643
 
4,189
 
(10)
Global Banking
 
596
 
585
 
414
 
2
Global Markets
 
4,471
 
5,057
 
3,775
 
(12)
Group Functions
 
(397)
 
(302)
 
(182)
 
31
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
79
Net fee and commission income
Net fee
 
and commission
 
income increased
 
by USD 3,201
 
million
to USD 22,387 million.
Fees for
 
portfolio management and
 
related services increased
by
 
USD 1,753
 
million
 
to
 
USD 9,762
 
million,
 
driven
 
by
 
Global
Wealth
 
Management,
 
reflecting
 
higher
 
average
 
fee-generating
assets,
 
due
 
to
 
positive
 
market
 
performance
 
and
 
net
 
new
 
fee-
generating assets.
Investment
 
fund
 
fees
 
increased
 
by
USD
 
501
 
million
 
to
USD 5,790 million, mainly driven by
 
Global Wealth Management,
reflecting
 
higher
 
average
 
fee-generating
 
assets.
 
Management
fees in Asset
 
Management increased on
 
a higher average
 
invested
asset base, partly offset by lower performance-based fee income,
compared with the particularly high levels in 2020.
Underwriting fees increased by USD 378 million to USD 1,463
million,
 
largely
 
driven
 
by
 
higher
 
equity
 
underwriting
 
revenues
from public offerings in the Investment Bank.
 
M&A and corporate finance fees increased by
 
USD 366 million
to
 
USD 1,102
 
million,
 
primarily
 
reflecting
 
higher
 
revenues
 
from
M&A
 
transactions
 
in
 
our
 
Global
 
Banking
 
business
 
in
 
the
Investment Bank, due
 
to an
 
increase in
 
the number
 
of transactions
that closed in 2021.
Net brokerage fees
 
increased by
 
USD 265 million to
 
USD 4,123
million
,
 
reflecting
higher
 
levels
 
of
 
client
 
activity
 
in
 
the
 
Cash
Equities
 
business
 
of
 
the
 
Investment
 
Bank,
 
as
 
well
 
as
 
in
 
Global
Wealth Management.
›
 
Refer to “Note 4 Net fee and commission
 
income” in the
“Consolidated financial statements” section
 
of this report for
more information
Other income
Other income decreased
 
by USD 624 million to
 
USD 452 million,
mainly
 
driven by
 
lower
 
gains
 
from
 
disposals
 
of
 
subsidiaries
 
and
associates, largely
 
reflecting a
 
USD 37 million
 
gain from
 
the sale
of our remaining minority investment in
 
Clearstream Fund Centre
AG (previously Fondcenter AG) in 2021, compared with a gain of
USD 631
 
million
 
from
 
the
 
partial
 
sale
 
of
 
Fondcenter
 
AG
 
(now
Clearstream
 
Fund
 
Centre
 
AG)
 
in
2020
.
In
 
2021
,
 
we
 
also
recognized
 
a
 
gain
 
of
 
USD 100
 
million
 
from
 
the
 
sale
 
of
 
our
domestic wealth management business in Austria
 
and income of
USD 51 million
 
related to a
 
legacy bankruptcy claim.
 
In the prior
year,
 
we
 
recognized
 
a
 
USD 215
 
million
 
gain
 
from
 
the
 
sale
 
of
intellectual
 
property
 
rights
 
associated
 
with
 
the
 
Bloomberg
Commodity Index family.
›
 
Refer to “Note 5 Other income” in the “Consolidated
 
financial
statements”
 
section of this report for more information
›
 
Refer to “Note 30 Changes in organization
 
and acquisitions and
disposals of subsidiaries and businesses”
 
in the “Consolidated
financial statements” section of this
 
report for more information
about the sale of our remaining investment
 
in Clearstream Fund
Centre AG and the sale of our domestic wealth
 
management
business in Austria
Credit loss expense / release
Total net
 
credit loss
 
releases were
 
USD 148 million,
 
compared with
net
 
credit
 
loss
 
expenses
 
of
 
USD 694
 
million
 
in
 
the
 
prior
 
year,
reflecting net
 
releases of
 
USD 123 million related
 
to stage 1 and
2 positions
 
and net
 
releases of
 
USD 25 million
 
related to
 
credit-
impaired (stage 3) positions.
›
 
Refer to “Note 9 Financial assets at amortized
 
cost and other
positions in scope of expected credit loss measurement”
 
and
“Note 20
 
Expected credit loss measurement” in the
“Consolidated financial statements” section
 
of this report for
more information about credit loss expenses
 
/ releases
›
 
Refer to the “Risk factors” section of
 
this report for more
information
 
 
Credit loss (expense) / release
USD million
Global
 
Wealth
 
Management
Personal &
 
Corporate
 
Banking
Asset
Management
Investment
 
Bank
Group
 
Functions
Total
For the year ended 31.12.21
Stages 1 and 2
 
28
 
62
 
0
 
34
 
0
 
123
Stage 3
 
1
 
24
 
(1)
 
0
 
0
 
25
Total credit loss (expense) / release
 
29
 
86
 
(1)
 
34
 
0
 
148
For the year ended 31.12.20
Stages 1 and 2
 
(48)
 
(129)
 
0
(88)
 
0
(266)
Stage 3
 
(40)
 
(128)
 
(2)
(217)
 
(42)
(429)
Total credit loss (expense) / release
 
(88)
 
(257)
 
(2)
 
(305)
 
(42)
 
(694)
For the year ended 31.12.19
Stages 1 and 2
 
3
 
23
 
0
 
(4)
 
0
 
22
Stage 3
 
(23)
 
(44)
 
0
 
(26)
 
(7)
 
(100)
Total credit loss (expense) / release
 
(20)
 
(21)
 
0
 
(30)
 
(7)
 
(78)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial and operating performance | Group performance
80
Operating expenses
Operating
 
expenses
 
increased
 
by
 
USD 1,823
 
million,
 
or
 
8%,
 
to
USD 26,058 million.
Personnel expenses
Personnel
 
expenses
 
increased
 
by
USD
 
1,1
63
 
million
 
to
USD
 
1
8
,
387
 
million,
 
including
net
r
estructuring
 
expenses
 
of
USD 200
 
million,
 
compared
 
with
 
USD 106
 
million
 
in
 
the
 
prior
year.
 
Total
 
restructuring expenses in
 
2021 are net
 
of curtailment
gains
 
of
USD
 
80
 
million,
 
which
 
represent
 
a
 
reduction
 
in
 
the
defined benefit obligation
 
(DBO) related to
 
the Swiss pension
 
plan
resulting
 
from
 
a
 
decrease
 
in
 
headcount
 
following
 
restructuring
activities.
Financial advisor
 
compensation increased
 
by USD 769
 
million
to
USD
 
4,860
 
million
,
due
 
to
 
an
 
increase
 
in
 
compensable
revenues.
Salary
 
costs
 
increased
 
by
USD
 
316
 
million
 
to
USD
 
7,
339
 
million, mainly driven
 
by foreign
 
currency translation
 
effects and
higher restructuring expenses.
Social
 
security
 
expenses
 
increased
 
by
USD
 
79
 
million
 
to
USD 978 million, broadly in line with higher salary expenses.
›
 
Refer to the “Compensation” section
 
of this report for more
information
›
 
Refer to “Note 6 Personnel expenses,” “Note
 
27 Post-
employment benefit plans” and “Note 28
 
Employee benefits:
variable compensation” in the “Consolidated
 
financial
statements”
 
section of this report for more information
General and administrative expenses
General
 
and
 
administrative
 
expenses
 
increased
 
by
 
USD 668
million to USD 5,553 million,
 
mainly driven by a USD 740
 
million
(EUR 650
 
million) increase
 
in litigation
 
provisions for
 
the French
cross-border
 
matter
 
and
 
USD 106
 
million
 
higher
 
IT
 
expenses.
These
 
effects
 
were
 
partly
 
offset
 
by
 
lower
 
consulting
 
fees
 
and
outsourcing costs.
Net expenses for the
 
UK and German bank
 
levies were USD 58
million
 
in
 
2021 and
 
included a
 
USD 16
 
million
 
credit
 
related to
prior years.
 
In 2020, net
 
expenses for
 
the UK
 
and German
 
bank
levies were
 
USD 55 million
 
and included
 
a USD 27
 
million credit
related to prior years.
 
We
 
believe
 
that
 
the
 
industry
 
continues
 
to
 
operate
 
in
 
an
environment
 
in
 
which
 
expenses
 
associated
 
with
 
litigation,
regulatory
 
and
 
similar
 
matters
 
will
 
remain
 
elevated
 
for
 
the
foreseeable future, and
 
we continue to
 
be exposed to
 
a number
of significant
 
claims and
 
regulatory matters.
 
The outcome
 
of many
of
 
these
 
matters,
 
the
 
timing
 
of
 
a
 
resolution,
 
and
 
the
 
potential
effects of
 
resolutions on
 
our future
 
business, financial
 
results or
financial condition are extremely difficult to predict.
›
 
Refer to “Note 7 General and administrative
 
expenses” and
“Note 18 Provisions and contingent liabilities”
 
in the
“Consolidated financial statements” section
 
of this report for
more information
Depreciation, amortization and impairment
Depreciation,
 
amortization
 
and
 
impairment
 
of
 
non-financial
assets
 
decreased
 
by USD 8
 
million
 
to USD 2,118
 
million, mainly
driven
 
by
 
lower
 
impairment
 
expenses
 
on
 
internally
 
generated
software,
 
a decrease
 
in
 
depreciation
 
expenses
 
related
 
to leased
properties
 
and
 
lower
 
amortization
 
of
 
intangible
 
assets,
 
partly
offset
 
by
 
higher
 
depreciation
 
expenses
 
on
 
internally
 
generated
software.
›
 
Refer to “Note 12 Property, equipment and software” and
“Note
 
13 Goodwill and intangible assets”
 
in the “Consolidated
financial statements”
 
section of this report for more information
 
Operating expenses
For the year ended
% change from
USD million
31.12.21
31.12.20
31.12.19
31.12.20
Personnel expenses
 
 
18,387
 
17,224
 
16,084
 
7
of which: salaries
 
7,339
 
7,023
 
6,518
 
4
of which: variable compensation
 
3,419
 
3,429
 
3,001
 
0
of which: relating to current year
 
1
 
2,979
 
2,634
 
2,352
 
13
of which: relating to prior years
 
2
 
440
 
795
5
650
 
(45)
of which: financial advisor compensation
 
3
 
4,860
 
4,091
 
4,043
 
19
of which: other personnel expenses
 
4
 
2,768
 
2,680
 
5
 
2,521
 
3
General and administrative expenses
 
 
5,553
 
4,885
 
5,288
 
14
of which: net expenses for litigation, regulatory and similar
 
matters
 
911
197
165
 
363
of which: other general and administrative expenses
 
4,642
4,688
5,122
 
(1)
Depreciation, amortization and impairment of non-financial
 
assets
2,118
2,126
1,940
 
0
Total operating expenses
 
26,058
 
24,235
 
23,312
 
8
1 Includes expenses relating to performance awards and other variable compensation for the respective performance year.
 
2 Consists of amortization of prior years’ awards relating to performance awards and other
variable compensation.
 
3 Financial advisor compensation consists of formulaic compensation based directly on compensable revenues generated by financial
 
advisors and supplemental compensation calculated on
the basis of financial advisor
 
productivity, firm tenure,
 
assets and other variables.
 
It also includes expenses related
 
to compensation commitments with financial
 
advisors entered into at the
 
time of recruitment that
are subject
 
to vesting
 
requirements.
 
4 Consists of
 
expenses related
 
to contractors,
 
social security,
 
post-employment benefit
 
plans, and
 
other personnel
 
expenses. Refer
 
to “Note 6
 
Personnel expenses”
 
in the
“Consolidated financial statements” section of this report for more information.
 
5 During 2020, UBS modified the conditions for
 
continued vesting of certain outstanding deferred compensation awards for qualifying
employees, resulting in an expense of approximately USD 280 million, of which USD 240 million is disclosed
 
within Variable compensation and USD 40 million within Other personnel expenses in this table.
 
 
 
81
Tax
Income
 
tax
 
expenses
 
of
 
USD 1,998 million
 
were
 
recognized
 
for
the Group
 
in 2021, representing
 
an effective
 
tax rate of
 
21.1%,
compared
 
with
 
USD 1,583 million
 
for
 
2020,
 
which
 
represented
an effective tax rate of 19.4%.
 
The income tax expenses for
 
2021
included Swiss tax
 
expenses of USD 714
 
million and non-Swiss
 
tax
expenses of USD 1,284 million.
The
 
Swiss
 
tax
 
expenses
 
included
 
current
 
tax
 
expenses
 
of
USD 680 million related to taxable profits of UBS Switzerland AG
and other Swiss entities.
 
They also included deferred tax
 
expenses
of
USD
 
34
 
million,
 
which
 
reflect
 
movements
 
in
 
temporary
differences.
 
The non-Swiss
 
tax expenses
 
included current
 
tax expenses
 
of
USD 884
 
million
 
related
 
to
 
taxable
 
profits
 
earned
 
by
 
non-Swiss
subsidiaries
 
and
 
branches
 
and
 
net
 
deferred
 
tax
 
expenses
 
of
USD 400
 
million.
 
Expenses
 
of
 
USD 734
 
million,
 
which
 
primarily
relate
d
 
to
 
the
 
amortization
 
of
 
deferred
 
tax
 
assets
 
(DTAs)
previously recognized in relation to tax losses carried forward and
deductible
 
temporary
 
differences
 
of
 
UBS
 
Americas
 
Inc.,
 
were
partly
 
offset
 
by
 
a
 
benefit
 
of
 
USD 334
 
million
 
in
 
respect
 
of
 
the
remeasurement
 
of
 
DTAs.
 
This
 
benefit
 
included
 
upward
revaluations
 
of
 
DTAs
 
of
 
USD 152
 
million
 
for
 
certain
 
entities,
primarily in connection with our
 
business planning process. It also
included USD 113 million
 
in respect of
 
additional DTA recognition
that primarily
 
related to
 
the contribution of
 
real estate
 
assets by
UBS
 
AG
 
to
 
UBS
 
Americas
 
Inc.
 
and
 
UBS
 
Financial
 
Services
 
Inc.,
which
 
allowed
 
the
 
full
 
recognition
 
of
 
DTAs
 
in
 
respect
 
of
 
the
associated
 
historic
 
real
 
estate
 
costs
 
that
 
were
 
previously
capitalized for US tax purposes
 
under elections that were made
 
in
the fourth quarter of
 
2018. In addition,
 
it included USD 69
 
million
in
 
respect
 
of
 
an
 
increase
 
in
 
the
 
expected
 
value
 
of
 
future
 
tax
deductions for deferred compensation
 
awards, due to
 
an increase
in the Group’s share price during the year.
The pre-tax expense that was recognized in the year in respect
of the increase in litigation provisions
 
for the French cross-border
matter did not result in any tax benefit.
 
Excluding
 
any
 
potential
 
effects
 
from
 
the
 
remeasurement
 
of
DTAs
 
in
 
connection
 
with
 
next
 
year’s
 
business
 
planning
 
process
and any potential US corporate
 
tax rate changes or other
 
material
jurisdictional
 
statutory
 
tax
 
rate
 
changes
 
that
 
could
 
be
 
enacted
during the year, we expect a tax rate for 2022 of around 24%.
›
 
Refer to “Note 8 Income taxes” in
 
the “Consolidated financial
statements”
 
section of this report for more information
›
 
Refer to the “Risk factors” section of
 
this report for more
information
Total comprehensive income attributable to shareholders
In 2021, total comprehensive income attributable
 
to shareholders
was USD 5,106 million, reflecting net profit of USD 7,457 million
and
 
negative
 
other comprehensive
 
income
 
(OCI),
 
net of
 
tax, of
USD 2,351 million.
OCI
 
related
 
to
 
cash
 
flow
 
hedges
 
was
 
negative
 
USD 1,675
million, mainly
 
reflecting net
 
gains on
 
hedging instruments
 
that
were reclassified from
 
OCI to the
 
income statement
 
as the
 
hedged
forecast cash flows affected profit or loss.
Foreign
 
currency
 
translation
 
OCI
 
was
negative
 
USD
 
535
 
million, mainly due to the weakening of the euro (7%), the Swiss
franc (3%) and the Japanese yen (10%) against the US dollar.
OCI
 
associated
 
with
 
financial
 
assets
 
measured
 
at
 
fair
 
value
through
 
OCI
 
was
 
negative
 
USD 157
 
million,
 
primarily
 
reflecting
net unrealized losses
 
of USD 203
 
million following increases
 
in the
relevant US dollar long-term interest rates.
OCI related
 
to cost
 
of hedging
 
was negative
 
USD 26 million,
mainly driven
 
by a
 
tightening of
 
the US dollar
 
/ euro
 
cross-currency
basis that decreased the fair value of the cross-currency swaps.
Defined
 
benefit
 
plan
 
OCI,
 
net
 
of
 
tax,
 
was
 
negative
 
USD 5
million.
 
Total
 
net
 
pre-tax
 
OCI related
 
to
 
the Swiss
 
pension
 
plan
was
 
negative
 
USD 336
 
million.
 
This
 
was
 
mainly
 
driven
 
by
 
an
extraordinary
 
employer
 
contribution
 
of
USD
 
2
54
 
million
 
that
increased the gross plan assets and a pension plan curtailment of
USD 80 million that reduced the DBO against profit or
 
loss. These
effects led to an offsetting
 
OCI loss, as no
 
net pension asset could
be recognized on the balance sheet as of
 
31 December 2021 due
to
 
the
 
asset
 
ceiling.
 
As
 
announced
 
in
 
2018,
 
UBS
 
agreed
 
to
mitigate
 
the
 
effects
 
from
 
changes
 
to
 
the
 
Swiss
 
pension
 
plan
implemented
 
in
 
2019
 
by
 
contributing
 
up
 
to
 
CHF 720
 
million
(USD 790 million at the closing exchange rate as of 31 December
2021)
 
in
 
three
 
installments
 
in
 
2020,
 
2021
 
and
 
2022.
 
The
extraordinary contribution of
 
USD 254 million in the
 
first quarter
of 2021
 
reflected the second installment paid (first installment
 
in
the first quarter of 2020: USD 235 million).
Total pre-tax
 
OCI related
 
to our
 
non-Swiss pension
 
plans was
positive USD 339
 
million, mainly
 
driven by
 
the UK
 
pension plan,
which recorded positive
 
net pre-tax OCI
 
of USD 207 million.
 
The
positive OCI in
 
the UK plan
 
reflected gains of
 
USD 277 million due
to
 
a
 
positive
 
return
 
on
 
plan
 
assets,
 
partly
 
offset
 
by
 
losses
 
of
USD
 
71
 
million
 
from
 
remeasurement
 
of
 
the
DBO
.
The
 
DBO
remeasurement
 
effect
 
was
 
mainly
 
driven
 
by
 
a
 
loss
 
of
 
USD 316
million
 
due to
 
an increase
 
in the
 
applicable inflation
 
rate and
 
a
USD
 
59
 
million
 
experience
 
loss
 
repres
enting
 
the
 
effects
 
of
differences between the previous actuarial
 
assumptions and what
actually occurred, partly
 
offset by a
 
USD 319 million gain
 
due to
an increase in the applicable discount rate.
OCI related
 
to own credit
 
on financial liabilities
 
designated at
fair value was positive USD 46
 
million, primarily reflecting effects
from time decay.
›
 
Refer to “Statement of comprehensive income”
 
in the
“Consolidated financial statements” section
 
of this report for
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
 
 
 
Financial and operating performance | Group performance
82
Sensitivity to interest rate movements
As of 31 December 2021, we estimate
 
that a parallel shift in yield
curves by +100 basis points could lead to a combined increase
 
in
annual
 
net
 
interest
 
income
 
of
 
approximately
 
USD 1.8
 
billion
 
in
Global Wealth
 
Management and
 
Personal &
 
Corporate Banking
in the first year after
 
such a shift. Of this
 
increase, approximately
USD 1.2 billion and USD 0.2 billion would result
 
from changes in
US
 
dollar
 
and
 
Swiss
 
franc
 
interest
 
rates,
 
respectively.
 
A
 
parallel
shift in yield curves
 
by –100 basis points
 
could lead to a
 
combined
decrease in annual net interest income of approximately USD 0.8
billion in
 
Global Wealth
 
Management and Personal
 
& Corporate
Banking in
 
the first
 
year after
 
such a shift,
 
predominantly driven
by positions denominated in US dollars.
These
 
estimates
 
are
 
based
 
on
 
a
 
hypothetical
 
scenario
 
of
 
an
immediate change in
 
interest rates, equal
 
across all currencies and
relative to implied forward rates as of 31 December 2021 applied
to our banking book. These
 
estimates further assume no change
to
 
balance
 
sheet
 
size
 
and
 
structure,
 
constant
 
foreign
 
exchange
rates and no specific management action.
Seasonal characteristics
Our
 
revenues
 
may
 
show
 
seasonal
 
patterns,
 
notably
 
in
 
the
Investment
 
Bank
 
and
 
transaction-based
 
revenues
 
for
 
Global
Wealth
 
Management,
 
and
 
typically
 
reflect
 
the
 
highest
 
client
activity levels in the first
 
quarter, with lower levels throughout the
rest
 
of
 
the
 
year,
 
especially
 
during
 
the
 
summer
 
months
 
and
 
the
end-of-year holiday season.
 
Key figures
 
Below
 
we
 
provide
 
an
 
overview
 
of
 
selected
 
key
 
figures
 
of
 
the
Group. For further
 
information about
 
key figures related
 
to capital
management,
 
refer
 
to
 
the
 
“Capital,
 
liquidity
 
and
 
funding,
 
and
balance sheet” section of this report.
Cost / income ratio
The
 
cost
 
/
 
income
 
ratio
 
was
 
73.6%,
 
compared
 
with
 
73.3%,
reflecting
higher
 
operating
 
expenses
,
 
with
 
a
partly
 
offset
ting
effect
 
driven
 
by
 
an
 
increase
 
in
 
operating
 
income.
 
The
 
cost
 
/
income
 
ratio
 
is
 
measured
 
based
 
on
 
income
 
before
 
credit
 
loss
expenses or releases.
Common equity tier 1 capital
Common equity tier 1 (CET1) capital increased by USD 5.4 billion
to USD 45.3
 
billion, mainly as
 
a result
 
of operating profit
 
before
tax
 
of
USD
 
9.5
 
billion,
a
USD
 
0.
5
 
billion
increase
 
in
 
eligible
deferred
 
tax
 
assets
 
on
 
temporary
 
differences,
 
a
 
USD 0.4
 
billion
decrease in
 
deduction of goodwill
 
resulting from
 
the sale of
 
our
remaining
 
minority
 
investment
 
in
 
Clearstream
 
Fund
 
Centre
 
AG
(previously
 
Fondcenter
 
AG)
 
and
 
an
 
increase
 
of
 
USD 0.2
 
billion
related
 
to
 
the launch
 
of
 
our new
 
operational partnership
 
entity
with
 
Sumitomo
 
Mitsui
 
Trust
 
Holdings,
 
Inc.
 
These
 
effects
 
were
partly offset
 
by dividend
 
accruals of
 
USD 1.7 billion,
 
current
 
tax
expenses
 
of
 
USD 1.6
 
billion,
 
share
 
repurchases
 
under
 
our share
repurchase program of USD 0.6 billion, negative foreign currency
effects of
 
USD 0.6 billion, compensation-
 
and own share
 
-related
capital components of USD 0.4 billion,
 
and negative effects from
defined benefit plans of USD 0.2 billion.
Our
 
share
 
repurchases
 
in
 
2021
 
decreased
 
CET1
 
capital
 
by
USD 0.6
 
billion,
 
reflecting
 
shares
 
repurchased
 
under
 
our
 
share
repurchase programs
 
of USD 2.6
 
billion, partly
 
offset by
 
the use
of the
 
capital reserve
 
for potential share
 
repurchases of
 
USD 2.0
billion.
 
The
 
capital
 
reserve
 
for
 
potential
 
share
 
repurchases
 
was
fully utilized during 2021.
Return on CET1 capital
Our return on CET1 capital (RoCET1) was 17.5%, compared with
1
7
.
4
%,
reflecting
 
a
USD
 
900
 
m
illion
in
crease
 
in
 
net
 
profit
attributable to shareholders,
 
with a partly offsetting effect driven
by USD 5.0 billion higher average CET1 capital.
Risk-weighted assets
R
isk
-
weighted
 
assets
 
(RWA)
 
increased
 
by
USD
 
13.1
 
billion
 
to
USD
 
302
.
2
 
billion,
primarily
 
driven
 
by
 
increases
 
of
USD
 
12.0
billion in credit and counterparty
 
credit risk RWA, USD 1.0 billion
in operational risk RWA and USD 0.9 billion in non-counterparty-
related
 
risk. These
 
increases were
 
partly offset
 
by a
 
decrease of
USD 0.8 billion in market risk RWA.
Common equity tier 1 capital ratio
Our CET1 capital ratio increased
 
1.2 percentage points to 15.0%,
reflecting a USD 5.4
 
billion increase in
 
CET1 capital
 
that was
 
partly
offset by the aforementioned increase in RWA.
Leverage ratio denominator
The
 
leverage
 
ratio
 
denominator
 
(the
 
LRD)
 
increased
 
by
 
USD 32
billion
 
(excluding
 
the
 
temporary
 
exemption
 
that
 
applied
 
from
25 March
 
2020
 
until
 
1 January
 
2021
 
and
 
was
 
granted
 
by
 
the
Swiss
 
Financial
 
Market
 
Supervisory
 
Authority
 
(
FINMA)
)
 
to
USD 1,069 billion,
 
driven by
 
asset size
 
and other
 
movements of
USD 54 billion, partly offset by a decrease due to currency effects
of USD 23 billion.
 
Common equity tier 1 leverage ratio
Our
 
CET1
 
leverage
 
ratio
 
increased
 
to
 
4.24%
 
from
 
3.85
%
(excluding the temporary exemption that
 
applied from 25 March
2020
 
until
 
1 January
 
2021
 
and was
 
granted
 
by
 
FINMA),
 
as
 
the
aforementioned
 
USD 5.4
 
billion
 
increase
 
in
 
CET1
 
capital
 
was
partly offset by the aforementioned increase in the LRD.
 
Going concern leverage ratio
Our going
 
concern leverage ratio
 
increased to
 
5.7% from
 
5.4%
(excluding the temporary exemption that
 
applied from 25 March
2020
 
until
 
1 January
 
2021
 
and was
 
granted
 
by
 
FINMA),
 
as
 
the
USD 4.3 billion
 
increase in
 
our going
 
concern capital
 
was partly
offset by the aforementioned increase in the LRD.
 
Personnel
The number of personnel
 
employed as of 31 December
 
2021 was
broadly stable at 71,385 (full-time equivalents), a net decrease of
166 compared with 31 December 2020.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
83
Return on equity and CET1 capital
As of or for the year ended
USD million, except where indicated
31.12.21
31.12.20
31.12.19
Net profit
Net profit attributable to shareholders
 
7,457
 
6,557
 
4,304
Equity
 
Equity attributable to shareholders
 
60,662
 
59,445
 
54,501
Less: goodwill and intangible assets
6,378
6,480
6,469
Tangible equity attributable to shareholders
54,283
52,965
48,032
Less: other CET1 deductions
9,003
13,075
12,497
CET1 capital
45,281
39,890
35,535
Return on equity
Return on equity (%)
12.6
11.3
7.9
Return on tangible equity (%)
14.1
12.8
9.0
Return on common equity tier 1 capital (%)
17.5
17.4
12.4
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial and operating performance | Global Wealth Management
84
Global Wealth Management
Global Wealth Management
1
As of or for the year ended
% change from
USD million, except where indicated
31.12.21
31.12.20
31.12.20
Results
Net interest income
4,244
4,027
5
Recurring net fee income
2
11,170
9,372
19
Transaction-based income
2
3,836
3,576
7
Other income
168
159
5
Income
19,419
17,134
13
Credit loss (expense) / release
29
(88)
Total operating income
19,449
17,045
14
Total operating expenses
14,665
13,026
13
Business division operating profit / (loss) before tax
4,783
4,019
19
Performance measures and other information
Financial advisor variable compensation
3,4
4,382
3,589
22
Compensation commitments with recruited financial advisors
3,5
479
502
(5)
Pre-tax profit growth (year-on-year, %)
2
19.0
18.3
Cost / income ratio (%)
2
75.5
76.0
Average attributed equity (USD billion)
6
18.8
17.1
10
Return on attributed equity (%)
2,6
25.4
23.6
Risk-weighted assets (USD billion)
6
99.8
87.2
15
Leverage ratio denominator (USD billion)
6,7
399.6
371.2
8
Goodwill and intangible assets (USD billion)
5.0
5.1
(1)
Net new fee-generating assets (USD billion)
2
106.9
40.8
Fee-generating assets (USD billion)
2
1,482
1,277
16
Fee-generating asset margin (bps)
2
82.6
86.2
Net new money (USD billion)
2
111.1
43.3
Invested assets (USD billion)
2
3,303
3,016
10
Loans, gross (USD billion)
8
234.1
213.1
10
Customer deposits (USD billion)
8
369.8
348.0
6
Recruitment loans to financial advisors
3
1,830
1,872
(2)
Other loans to financial advisors
3
623
697
(11)
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
2,9
0.2
0.4
Advisors (full-time equivalents)
9,329
9,575
(3)
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the
 
retrospective adoption of new accounting standards or changes in accounting policies, and events after
the reporting period.
 
2 Refer to “Alternative performance measures” in the appendix
 
to this report for the definition
 
and calculation method.
 
3 Relates to licensed professionals with the
 
ability to provide investment
advice to
 
clients in
 
the Americas.
 
4 Financial advisor
 
variable compensation
 
consists of
 
formulaic compensation
 
based directly
 
on compensable
 
revenues generated
 
by
 
financial advisors
 
and supplemental
compensation calculated on
 
the basis of
 
financial advisor productivity,
 
firm tenure, new
 
assets and other
 
variables.
 
5 Compensation commitments with
 
recruited financial advisors
 
represent expenses related
 
to
compensation commitments granted to financial advisors at the time of recruitment that are subject to vesting requirements.
 
6 Refer to the “Capital, liquidity and funding, and balance sheet” section of this report
for more information.
 
7 The leverage ratio denominator
 
calculated as of the respective date in 2020 does not
 
reflect the effects of the temporary exemption that applied from
 
25 March 2020 until 1 January 2021
and was granted by FINMA in connection
 
with COVID-19. Refer to the “Regulatory and
 
legal developments” section of our Annual Report 2020 for
 
more information.
 
8 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.
 
9 Refer to the “Risk management
 
and control” section of this report
 
for
more information about (credit-)impaired exposures. Excludes loans to financial advisors.
 
 
 
85
2021 compared with 2020
Results
Profit
 
before
 
tax
 
increased
 
by
 
USD 764
 
million,
 
or
 
19%,
 
to
USD 4,783
 
million,
 
driven
 
by
 
higher
 
operating
 
income,
 
partly
offset by
 
higher operating
 
expenses, which
 
included a
 
USD 657
million increase in litigation provisions for
 
the French cross-border
matter.
Operating income
Total
 
operating income increased by USD 2,404
 
million, or 14%,
to
 
USD 19,449
 
million,
 
driven
 
by
 
increases
 
across
 
all
 
operating
income lines.
Net
 
interest
 
income
 
increased
 
by
 
USD 217
 
million
 
to
USD 4,244 million, mostly
 
reflecting growth
 
in loan
 
revenues from
higher
 
volumes
 
and
 
margins,
 
partly
 
offset
 
by
 
lower
 
deposit
revenues, mainly due to lower US
 
dollar interest rates and despite
higher deposit volumes.
Recurring
 
net
 
fee
 
income
 
increased
 
by
 
USD 1,798
 
million
 
to
USD 11,170
 
million,
 
primarily
 
driven
 
by
 
higher
 
average
 
fee-
generating assets, reflecting
 
positive market performance
 
and net
new fee-generating assets.
Transaction
 
-based
 
income
 
increased
 
by
 
USD 260
 
million
 
to
USD 3,836 million, reflecting higher
 
levels of client activity in
 
the
Americas, EMEA and Switzerland.
Other income
 
increased by USD 9
 
million to USD 168
 
million,
primarily driven
 
by a
 
gain of
 
USD 100 million
 
related to
 
the sale
of our domestic
 
wealth management business
 
in Austria to
 
LGT.
2020 included a
 
gain of USD 60
 
million from the
 
sale of a
 
majority
stake in Fondcenter AG (now Clearstream Fund Centre AG).
Net
 
credit
 
loss
 
releases
 
were USD 29
 
million,
 
compared
 
with
net expenses of USD 88 million. Stage 1 and 2 credit
 
loss releases
were USD 28
 
million, largely resulting
 
from a partial
 
release of a
post-model adjustment of USD 12 million during the year,
 
as well
as
 
model
 
updates.
 
Stage 3
 
net
 
credit
 
loss
 
releases
 
were
 
USD 1
million.
Operating expenses
Total
 
operating
 
expenses
 
increased
 
by
 
USD 1,639
 
million
 
to
USD 14,665
 
million.
 
This
 
was
 
mainly
 
driven
 
by
 
an
 
increase
 
in
financial
 
advisor
 
variable
 
compensation,
 
reflecting
 
higher
compensable
 
revenues,
 
and
 
by
 
the
 
aforementioned
 
USD 657
million increase in litigation provisions for
 
the French cross-border
matter.
 
Pre-tax profit growth
Pre-tax profit growth in 2021 was 19.0%, compared with 18.3%
in 2020. Our target range is 10–15% over the cycle.
Cost / income ratio
The
 
cost
 
/
 
income
 
ratio
 
decreased
 
to
 
75.5%
 
from
 
76.0%,
reflecting positive operating leverage.
 
Fee-generating assets
Fee-generating assets
 
increased
 
by USD 205
 
billion,
 
or 16%,
 
to
USD 1,482
 
billion,
 
predominantly
 
driven
 
by
 
net
 
new
 
fee-
generating
 
assets
 
of
 
USD 106.9
 
billion,
 
with
 
inflows
 
across
 
all
regions,
 
and
 
net
 
positive
 
market
 
performance
 
and
 
foreign
currency effects of USD 98.0 billion.
Loans
Loans
 
increased
 
by
 
USD 21.0
 
billion,
 
or
 
10%,
 
to
 
USD 234.1
billion,
 
primarily
 
driven
 
by
 
net
 
new
 
loans
 
of
 
USD 25.1
 
billion,
partly offset
 
by USD 3.0
 
billion from
 
negative foreign
 
exchange
effects
 
and
 
USD 1.1
 
billion
 
from
 
the
 
reclassification
 
of
 
loans
 
to
disposal
 
groups
 
held
 
for
 
sale
 
in
 
connection
 
with
 
the
 
upcoming
sales of our domestic wealth
 
management business in Spain and
UBS
 
Swiss
 
Financial
 
Advisers
 
AG.
 
Net
 
new
 
loans
 
were
 
largely
driven
 
by
 
an
 
increase
 
in
 
Lombard
 
loans
 
and
 
mortgages.
 
Loan
penetration was stable at 7.1% in 2021.
›
 
Refer to the “Risk management and control”
 
section of this
report for more information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial and operating performance | Global Wealth Management
86
Regional breakdown of performance measures
As of or for the year ended 31.12.21
USD billion, except where indicated
Americas
1
Switzerland
EMEA
2
Asia Pacific
Global Wealth
Management
3
Total operating income (USD million)
 
10,672
 
1,906
 
3,953
 
2,901
 
19,449
Total operating expenses (USD million)
 
8,671
 
1,156
 
3,141
 
1,664
 
14,665
Operating profit / (loss) before tax (USD million)
 
2,001
 
750
 
812
 
1,237
 
4,783
Cost / income ratio (%)
4
 
81.4
 
60.8
 
79.6
 
57.4
 
75.5
Loans, gross
 
92.0
5
 
43.2
 
49.6
 
48.6
 
234.1
Net new loans
 
19.6
 
2.3
 
3.8
 
(0.5)
 
25.1
Loan penetration (%)
4,6
 
5.0
 
15.3
 
7.6
 
9.3
 
7.1
Fee-generating assets
4
 
900
 
130
 
334
 
116
 
1,482
Net new fee-generating assets
4
 
64.3
 
10.6
 
18.8
 
13.7
 
106.9
Invested assets
4
 
1,842
 
283
 
654
 
521
 
3,303
Net new money
4
 
60.3
 
0.7
 
24.5
 
26.4
 
111.1
Advisors (full-time equivalents)
 
6,218
 
685
 
1,494
 
852
 
9,329
1 Including the following business units:
 
United States and Canada; and
 
Latin America.
 
2 Including the following business
 
units: Europe; Central & Eastern
 
Europe, Greece and Israel;
 
and Middle East and Africa.
 
3 Including minor functions, which are not
 
included in the four regions individually presented
 
in this table, with USD 16
 
million of total operating income,
 
USD 34 million of total operating expenses,
 
USD 17 million
of operating loss before tax, USD 0.6 billion
 
of loans, USD 0.0 billion of net new
 
loan outflows, USD 1 billion of fee-generating assets, USD 0.5 billion
 
of net new fee-generating asset outflows, USD 3 billion of
 
invested
assets, USD 0.8 billion of net new money outflows and 80 advisors in 2021.
 
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.
 
6 Loans, gross as a percentage of invested assets.
 
Regional comments: 2021 compared with 2020
 
Americas
Profit
 
before
 
tax
 
increased
 
by
 
USD 641
 
million
 
to
 
USD 2,001
million.
 
Operating
 
income
 
increased
 
by
 
USD 1,645
 
million
 
to
USD 10,672
 
million,
 
driven
 
by
 
higher
 
recurring
 
net
 
fee,
 
net
interest
 
and
 
transaction-based
 
income.
 
The
 
cost
 
/
 
income
 
ratio
decreased
 
to
 
81.4%
 
from
 
84.4%.
 
Loans
 
increased
 
27%
 
to
USD 92 billion, reflecting USD 19.6 billion
 
of net new loans. Fee-
generating
 
assets
 
increased
 
19%
 
to
 
USD 900
 
billion,
 
mainly
driven
 
by
 
positive
 
market
 
performance
 
and
 
net
 
new
 
fee-
generating assets of USD 64.3 billion.
Switzerland
Profit before tax
 
increased by USD 108
 
million to USD 750
 
million.
This
 
included
 
an
 
USD 85
 
million
 
increase
 
in
 
litigation provisions
for the
 
French cross-border
 
matter.
 
Operating income
 
increased
by USD 206 million to USD 1,906 million, mainly driven by
 
higher
recurring net fee, net interest and transaction-based income. The
cost
 
/
 
income
 
ratio
 
decreased
 
to
 
60.8%
 
from
 
61.7%.
 
Loans
increased
 
3%
 
to
 
USD 43
 
billion,
 
driven
 
by
 
net
 
new
 
loans
 
of
USD 2.3 billion, partly offset by negative foreign currency effects.
Fee-generating assets
 
increased 17%
 
to USD 130
 
billion, mainly
driven by
 
net new
 
fee-generating assets of
 
USD 10.6 billion
 
and
net positive market performance and foreign currency effects.
EMEA
Profit
 
before
 
tax
 
decreased
 
by
 
USD
 
145
 
million
 
to
 
USD
 
812
million,
 
driven
 
by
 
a
 
USD 572
 
million
 
increase
 
in
 
litigation
provisions for
 
the French cross
 
-border matter.
 
Operating income
increased by USD 397 million to
 
USD 3,953 million, due to higher
recurring net fee income and other
 
income, which was driven by
the
 
aforementioned
 
gain
 
from
 
the
 
sale of
 
our
 
domestic
 
wealth
management
 
business
 
in
 
Austria, as
 
well as
 
higher
 
transaction-
based income.
 
The cost
 
/ income ratio
 
increased to
 
79.6% from
72.7%. Loans
 
increased 3%
 
to USD 50
 
billion, mainly
 
reflecting
USD 3.8 billion of net new loans,
 
partly offset by negative foreign
currency
 
effects
 
and
 
the
 
aforementioned
 
reclassification
 
of
USD 0.7
 
billion
 
of
 
loans
 
to
 
disposal
 
groups
 
held
 
for
 
sale.
 
Fee-
generating assets increased 9% to USD 334 billion, mainly driven
by
 
net
 
new
 
fee-generating
 
assets
 
of
 
USD 18.8
 
billion
 
and
 
net
positive market performance and foreign currency effects.
 
Asia Pacific
Profit
 
before
 
tax
 
increased
 
by
 
USD 176
 
million
 
to
 
USD 1,237
million.
 
Operating
 
income
 
increased
 
by
 
USD 166
 
million
 
to
USD 2,901
 
million,
 
mostly
 
driven
 
by
 
recurring
 
net
 
fee
 
and
 
net
interest income. The cost
 
/ income ratio decreased
 
to 57.4% from
61.2%. Loans decreased
 
2% to USD 49
 
billion, driven by
 
negative
foreign
 
currency effects
 
and net
 
new
 
loan outflows
 
of
 
USD 0.5
billion,
 
as clients
 
reduced their
 
debts in
 
light of
 
market uncertainty.
Fee-generating assets
 
increased 13%
 
to USD 116
 
billion, mainly
driven by net new fee-generating assets of USD 13.7 billion.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
87
Personal & Corporate Banking
Personal & Corporate Banking – in Swiss francs
1
As of or for the year ended
% change from
CHF million, except where indicated
31.12.21
31.12.20
31.12.20
Results
Net interest income
1,941
1,916
1
Recurring net fee income
2
774
676
15
Transaction-based income
2
1,079
985
10
Other income
110
74
49
Income
3,904
3,650
7
Credit loss (expense) / release
79
(243)
Total operating income
3,984
3,407
17
Total operating expenses
2,397
2,233
7
Business division operating profit / (loss) before tax
1,587
1,175
35
Performance measures and other information
Average attributed equity (CHF billion)
3
8.4
8.3
1
Return on attributed equity (%)
2,3
19.0
14.1
Pre-tax profit growth (%) (year-on-year, %)
2
35.1
(18.0)
Cost / income ratio (%)
2
61.4
61.2
Net interest margin (bps)
2
140
142
Risk-weighted assets (CHF billion)
3
66.7
63.8
4
Leverage ratio denominator (CHF billion)
3,4
221.7
219.9
1
Business volume for Personal Banking (CHF billion)
2
184
179
3
Net new business volume for Personal Banking (CHF billion)
2
5.3
11.6
Net new business volume growth for Personal Banking (%)
2
3.0
6.9
Active Digital Banking clients in Personal Banking (%)
2,5
70.3
66.1
Active Digital Banking clients in Corporate & Institutional
 
Clients (%)
2
79.3
77.9
Mobile Banking log-in share in Personal Banking (%)
2
73.5
68.0
Client assets (CHF billion)
2
751
702
7
Loans, gross (CHF billion)
139.3
136.4
2
Customer deposits (CHF billion)
162.1
161.1
1
Secured loan portfolio as a percentage of total loan portfolio, gross (%)
2
92.7
92.9
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
2,6
0.9
1.1
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after
the reporting period.
 
2 Refer to “Alternative
 
performance measures” in the
 
appendix to this report
 
for the definition and
 
calculation method.
 
3 Refer to the “Capital,
 
liquidity and funding, and
 
balance sheet”
section of this report for more information.
 
4 The leverage ratio denominator calculated
 
as of the respective date in 2020
 
does not reflect the effects of the temporary
 
exemption that applied from 25 March
 
2020
until 1 January 2021
 
and was granted by
 
FINMA in connection with
 
COVID-19. Refer to
 
the “Regulatory and legal
 
developments” section of our
 
Annual Report 2020 for
 
more information.
 
5 In 2021, 86.4% of
clients of Personal Banking were “activated users”
 
of Digital Banking (i.e., clients who had logged
 
into Digital Banking at least once in the course of their
 
relationship with UBS).
 
6 Refer to the “Risk management
and control” section of this report for more information about (credit-)impaired exposures.
 
 
Financial and operating performance | Personal & Corporate Banking
88
2021 compared with 2020
Results
Profit
 
before
 
tax
 
increased
 
by
 
CHF
 
41
2
 
million,
 
or
 
35%,
 
to
CHF 1,587
 
million,
 
reflecting
 
higher
 
operating
 
income,
 
partly
offset by higher operating expenses.
Operating income
Total operating income increased by CHF 577 million, or 17%, to
CHF 3,984
 
million,
 
reflecting
 
net
 
credit
 
loss
 
releases,
 
compared
with net credit loss expenses in the
 
prior year, as well as increases
across all income lines.
Net interest income increased by CHF 25 million to CHF 1,941
million, mainly driven by proactive deposit management.
Recurring
 
net
 
fee
 
income
 
increased
 
by
 
CHF 98
 
million
 
to
CHF 774 million, primarily driven by
 
higher custody, mandate and
investment
 
fund
 
fees,
 
resulting
 
from
 
an
 
increase
 
in
 
average
custody assets, reflecting
 
net new
 
investment product inflows
 
and
positive market performance.
Transaction-based
 
income
 
increased
 
by
 
CHF 94
 
million
 
to
CHF 1,079 million,
 
largely driven
 
by higher
 
revenues from
 
credit
card
 
and
 
foreign
 
exchange
 
transactions,
 
reflecting
 
a
 
continued
increase in spending on travel and leisure by clients following the
easing
 
of
 
COVID-19-related
 
restrictions
 
in
 
certain
 
countries
relative
 
to
 
2020.
 
The
 
third
 
quarter
 
of
 
2020
 
included
 
a
 
CHF 17
million gain related to the sale of an equity investment.
Other income increased by CHF 36 million to CHF 110 million,
mostly driven by a gain of CHF 26 million from the sale of several
small properties in the second quarter of 2021.
Net
 
credit
 
loss
 
releases
 
were
 
CHF 79
 
million,
 
compared
 
with
net expenses
 
of CHF 243
 
million. Stage 1
 
and 2
 
credit loss
 
releases
were CHF 57
 
million, largely
 
resulting from
 
a partial
 
release of
 
a
post-model adjustment during the
 
year, as well
 
as model updates.
Prior-year stage 1
 
and 2
 
net
 
credit loss
 
expenses
 
were CHF 123
million, which mainly reflected
 
expenses for selected exposures
 
to
large
 
Swiss
 
corporate
 
clients,
 
small
 
and
 
medium-sized
 
entities,
financial intermediaries, and, to a lesser extent, real estate. These
modeled
 
expected
 
losses
 
were
 
predominantly
 
driven
 
by
 
the
update
 
to
 
the
 
forward-looking
 
scenarios
 
and
 
their
 
associated
weightings, factoring in updated macroeconomic assumptions to
reflect
 
the
 
effects
 
of
 
the
 
COVID
-
19
 
pandemic.
 
Stage
 
3
 
net
releases
 
were
 
CHF 23
 
million,
 
compared
 
with
 
net
 
expenses
 
of
CHF
 
120
 
million
,
 
which
includ
ed
 
expenses
 
of
 
CHF
 
54
 
million
related
 
to
 
a
 
case
 
of
 
fraud
 
at
 
a
 
commodity
 
trade
 
finance
counterparty.
Operating expenses
Total operating expenses increased by CHF 164 million, or
 
7%, to
CHF 2,397
 
million,
 
mostly
 
driven
 
by
 
a
 
CHF 76
 
million
 
(USD 83
million) increase in
 
litigation provisions
 
for the French
 
cross-border
matter,
 
as
 
well as
 
higher
 
investments
 
in
 
technology and
 
higher
variable compensation.
 
Cost / income ratio
The cost / income
 
ratio slightly increased to
 
61.4% from 61.2%,
reflecting
 
higher
 
operating
 
expenses,
 
partly
 
offset
 
by
 
higher
income.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
89
Personal & Corporate Banking – in US dollars
1
As of or for the year ended
% change from
USD million, except where indicated
31.12.21
31.12.20
31.12.20
Results
Net interest income
2,120
2,049
3
Recurring net fee income
2
846
725
17
Transaction-based income
2
1,178
1,054
12
Other income
119
79
50
Income
4,263
3,908
9
Credit loss (expense) / release
86
(257)
Total operating income
4,349
3,651
19
Total operating expenses
2,618
2,392
9
Business division operating profit / (loss) before tax
1,731
1,259
37
Performance measures and other information
Average attributed equity (USD billion)
3
9.2
8.9
3
Return on attributed equity (%)
2,3
18.9
14.2
Pre-tax profit growth (%) (year-on-year, %)
2
37.5
(12.6)
Cost / income ratio (%)
2
61.4
61.2
Net interest margin (bps)
2
142
143
Risk-weighted assets (USD billion)
3
73.2
72.1
1
Leverage ratio denominator (USD billion)
3,4
243.2
248.3
(2)
Business volume for Personal Banking (USD billion)
2
202
202
0
Net new business volume for Personal Banking (USD billion)
2
5.8
12.3
Net new business volume growth for Personal Banking (%)
2
2.9
7.1
Active Digital Banking clients in Personal Banking (%)
2,5
70.3
66.1
Active Digital Banking clients in Corporate & Institutional
 
Clients (%)
2
79.3
77.9
Mobile Banking log-in share in Personal Banking (%)
2
73.5
68.0
Client assets (USD billion)
2
824
793
4
Loans, gross (USD billion)
152.8
154.0
(1)
Customer deposits (USD billion)
177.8
181.9
(2)
Secured loan portfolio as a percentage of total loan portfolio, gross (%)
2
92.7
92.9
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
2,6
0.9
1.1
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting
 
policies, and events after
the reporting period.
 
2 Refer to “Alternative
 
performance measures” in the appendix
 
to this report for
 
the definition and calculation
 
method.
 
3 Refer to the “Capital, liquidity
 
and funding, and balance sheet”
section of this report for more information.
 
4 The leverage ratio denominator calculated as
 
of the respective date in 2020 does
 
not reflect the effects of the temporary exemption
 
that applied from 25 March 2020
until 1 January 2021
 
and was granted by
 
FINMA in connection with COVID
 
-19. Refer to the “Regulatory
 
and legal developments” section of
 
our Annual Report 2020
 
for more information.
 
5 In 2021, 86.4% of
clients of Personal Banking were “activated users” of Digital Banking
 
(i.e., clients who had logged into Digital Banking
 
at least once in the course of their relationship with UBS).
 
6 Refer to the “Risk management
and control” section of this report for more information about (credit-)impaired exposures.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial and operating performance | Asset Management
90
Asset Management
Asset Management
1
As of or for the year ended
% change from
USD million, except where indicated
31.12.21
31.12.20
31.12.20
Results
Net management fees
2
2,320
1,950
19
Performance fees
260
455
(43)
Net gain from disposal of an associate / a subsidiary
37
571
(93)
Credit loss (expense) / release
(1)
(2)
Total operating income
2,616
2,974
(12)
Total operating expenses
1,586
1,519
4
Business division operating profit / (loss) before tax
1,030
1,455
(29)
Performance measures and other information
Average attributed equity (USD billion)
3
2.0
2.0
1
Return on attributed equity (%)
3,4
51.8
74.2
Pre-tax profit growth (year-on-year, %)
4
(29.2)
173.6
Cost / income ratio (%)
4
60.6
51.0
Risk-weighted assets (USD billion)
3
6.9
6.9
(1)
Leverage ratio denominator (USD billion)
3,5
2.9
5.8
(51)
Goodwill and intangible assets (USD billion)
1.2
1.2
(2)
Net margin on invested assets (bps)
4
9
16
(42)
Gross margin on invested assets (bps)
4
23
32
(29)
Information by business line / asset
 
class
Net new money (USD billion)
4
Equities
10.3
65.1
Fixed Income
22.7
7.3
of which: money market
(3.1)
(7.4)
Multi-asset & Solutions
6.8
6.6
Hedge Fund Businesses
5.7
(1.1)
Real Estate & Private Markets
(0.6)
2.3
Total net new money
44.9
80.1
of which: net new money excluding money market
48.0
87.5
Invested assets (USD billion)
4
Equities
580
506
15
Fixed Income
285
274
4
of which: money market
92
97
(5)
Multi-asset & Solutions
193
172
12
Hedge Fund Businesses
55
48
15
Real Estate & Private Markets
98
93
5
Total invested assets
1,211
1,092
11
of which: passive strategies
540
457
18
Information by region
Invested assets (USD billion)
4
Americas
287
254
13
Asia Pacific
190
181
5
Europe, Middle East and Africa (excluding Switzerland)
334
294
14
Switzerland
399
363
10
Total invested assets
1,211
1,092
11
Information by channel
Invested assets (USD billion)
4
Third-party institutional
707
648
9
Third-party wholesale
145
128
13
UBS’s wealth management businesses
359
316
13
Total invested assets
1,211
1,092
11
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after
the reporting period.
 
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 Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for
 
more information.
 
4 Refer to “Alternative performance
measures” in the
 
appendix to this
 
report for the
 
definition and
 
calculation method.
 
5 The leverage
 
ratio denominator
 
calculated as of
 
the respective
 
date in 2020
 
does not reflect
 
the effects of
 
the temporary
exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in
 
connection with COVID-19. Refer to the “Regulatory and legal developments” section of our Annual Report
 
2020 for
more information.
 
 
 
 
 
 
 
 
91
2021 compared with 2020
Results
Profit
 
before
 
tax
 
decreased
 
by
 
USD 425
 
million,
 
or
 
29%,
 
to
USD 1,030 million. This reflected
 
a gain of USD 571 million
 
from
the sale
 
of a
 
majority stake
 
in Fondcenter
 
AG (now
 
Clearstream
Fund
 
Centre
 
AG)
 
in
 
the
 
third
 
quarter
 
of
 
2020
 
and
 
a
 
gain
 
of
USD 37
 
million
 
related
 
to
 
the
 
sale
 
of
 
our
 
remaining
 
minority
investment in
 
Clearstream Fund
 
Centre AG (previously
 
Fondcenter
AG)
 
to
 
Deutsche
 
Börse
 
AG
 
in
 
the
 
second
 
quarter
 
of
 
2021.
Excluding
 
these
 
gains,
 
profit
 
before
 
tax
 
increased
 
by
 
USD 109
million, or 12%, to USD 993 million, reflecting positive operating
leverage.
›
 
Refer to “Note 30 Changes in organization
 
and acquisitions and
disposals of subsidiaries and businesses”
 
in the “Consolidated
financial statements” section of this report
 
for more information
about the aforementioned sales
Operating income
Total operating income decreased
 
by USD 358 million, or
 
12%, to
USD 2,616
 
million.
 
Excluding
 
the
 
aforementioned
 
gains
 
from
sales,
 
total
 
operating
 
income
 
increased
 
by
 
USD 176
 
million,
 
or
7%.
Net management fees increased by
 
USD 370 million, or 19%,
to
 
USD 2,320
 
million
 
on
 
a
 
higher
 
average
 
invested
 
asset
 
base,
reflecting a
 
combination of
 
a constructive
 
market backdrop
 
and
strong net new money generation.
Performance
 
fees
 
decreased
 
by
 
USD 195
 
million
 
to
 
USD 260
million,
 
mainly
 
in
 
our
 
Hedge
 
Fund
 
Businesses
 
and
 
our
 
Equities
business,
 
compared
 
with
 
the
 
particularly
high
 
levels
 
of
performance fees in 2020.
Operating expenses
Total
 
operating expenses increased by USD
 
67 million, or 4%, to
USD 1,586
 
million,
 
mainly
 
driven
 
by
 
higher
 
personnel
 
expenses
and foreign
 
currency effects,
 
partly offset
 
by lower
 
general and
administrative expenses.
Cost / income ratio
The
 
cost
 
/
 
income
 
ratio
 
was
 
60.6%,
 
compared
 
with
 
51.0%
 
in
2020. Excluding
 
the aforementioned
 
gains from
 
sales, the cost
 
/
income ratio was 61.5%, compared with 63.2% in 2020.
Invested assets
Invested
 
assets
 
increased
 
to
 
USD 1,211
 
billion
 
from
 
USD 1,092
billion, reflecting positive market performance of USD 102 billion
and
 
net
 
new
 
money
 
inflows
 
of
 
USD 45
 
billion,
 
partly
 
offset
 
by
negative
 
foreign
 
currency
 
effects
 
of
 
USD 28
 
billion.
 
Excluding
money market flows, net new money was USD 48 billion.
Investment
 
performance
2021
 
saw
 
risk
 
assets
 
perform
 
strongly
 
and
 
subdued
 
market
volatility.
 
Expansive
 
monetary
 
policy
 
supported
 
a
 
continued,
broad economic recovery
 
across the globe.
 
Shortages in supplies
to
 
meet
 
heightened
 
global
 
demand led
 
to
 
higher energy
 
prices
and strong
 
inflation over the
 
year,
 
and central
 
banks, led by
 
the
US
 
Federal
 
Reserve,
 
started
 
to
 
reconsider
 
their
 
future
 
monetary
policy.
 
As of year-end 2021, Morningstar assigned a four-
 
or five-star
rating to
 
64% of
 
our retail
 
and institutional
 
funds (both
 
actively
managed and
 
passive), on
 
an assets
 
under management
 
(AuM)-
weighted basis. Furthermore,
 
55% of
 
our actively managed
 
open-
ended retail funds
 
and actively managed
 
institutional AuM (which
account in total for 44% of our relevant AuM)
 
are ranked, on an
AuM-weighted basis
 
over a
 
three-year investment period,
 
above
their respective peer median.
 
 
Investment performance as of 31 December 2021
In %
Total traditional
investments
Equities
Fixed income
Multi-asset
% of UBS Asset Management fund assets rated as 4- or 5-star
1,2
64
66
65
49
% of UBS Asset Management above peer median over a 3-year
 
investment period
2,3
55
48
61
65
1 Percentage of AuM to which Morningstar has assigned a four- or five-star rating. AuM reflect the AuM
 
of Asset Management’s retail and institutional funds (both actively managed and passive) across all domiciles
for which Asset Management owns the investment performance, i.e., Asset Management is either
 
the sole portfolio manager or co-portfolio manager. Source:
 
Morningstar (Morningstar® Essentials Quantitative Star
Rating & Rankings;
 
© 2022 Morningstar).
 
Universe is approximately
 
31% of all
 
active and passive
 
traditional assets of
 
Asset Management (Equities,
 
Fixed Income excluding
 
money market, and
 
Multi-asset) as of
31
December 2021.
 
2 Morningstar® Essentials Quantitative Star Rating & Rankings; © 2022 Morningstar. All Rights Reserved. The information contained herein: (i) is proprietary to Morningstar and / or its content
providers; (ii) may not be copied or
 
distributed; and (iii) is not warranted
 
to be accurate, complete
 
or timely. Neither Morningstar
 
nor its content providers are responsible
 
for any damages or losses arising
 
from any
use
 
of
 
this
 
information.
 
Past
performance
 
is
 
no
 
guarantee
 
of
 
future
 
results.
 
For
 
more
 
detailed
 
information
 
about
 
the
 
Morningstar
 
Rating,
 
including
 
its
 
meth
odology,
 
refer
 
to:
https://s21.q4cdn.com/198919461/files/doc_downloads/othe_disclosure_materials/MorningstarRatingforFunds.pdf.
 
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
 
funds across
 
all domiciles
 
and actively
 
managed institutional
 
AuM for
 
which Asset
 
Management owns
 
the investment
 
performance, i.e.,
 
Asset
Management is either the
 
sole portfolio manager or
 
co-portfolio manager.
 
Source: Morningstar (Morningstar®
 
Essentials Quantitative Star Rating
 
& Rankings; © 2022
 
Morningstar) extract date
 
11 January 2022,
eVestment extract date 4
 
February 2022, KGAST extract
 
date 4 February 2022. Universe
 
is approximately 44% of all
 
active traditional assets of Asset
 
Management (Equities, Fixed Income
 
excluding money market,
and Multi-asset) as of 31 December 2021.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial and operating performance | Investment Bank
92
Investment Bank
Investment Bank
1
As of or for the year ended
% change from
USD million, except where indicated
31.12.21
31.12.20
31.12.20
Results
Advisory
988
634
56
Capital Markets
2,170
1,744
24
Global Banking
3,158
2,378
33
Execution Services
2
1,894
1,857
2
Derivatives & Solutions
3,422
3,609
(5)
Financing
979
1,674
(42)
Global Markets
6,296
7,141
(12)
of which: Equities
4,581
4,502
2
of which: Foreign Exchange, Rates and Credit
 
1,715
2,638
(35)
Income
9,454
9,519
(1)
Credit loss (expense) / release
34
(305)
Total operating income
9,488
9,214
3
Total operating expenses
6,858
6,732
2
Business division operating profit / (loss) before tax
2,630
2,482
6
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
3
5.9
216.6
Average attributed equity (USD billion)
4
13.0
12.6
3
Return on attributed equity (%)
3,4
20.3
19.7
Cost / income ratio (%)
3
72.5
70.7
Risk-weighted assets (USD billion)
4
92.2
94.3
(2)
Return on risk-weighted assets, gross (%)
3
10.0
10.0
Leverage ratio denominator (USD billion)
4,5
319.2
315.5
1
Return on leverage ratio denominator, gross (%)
3,5
2.9
3.1
Goodwill and intangible assets (USD billion)
0.1
0.2
(14)
Average VaR (1-day, 95% confidence, 5 years of historical data)
11
12
(9)
1 Comparative
 
figures in this
 
table may differ
 
as a result
 
of adjustments following
 
organizational changes,
 
restatements due to
 
the retrospective
 
adoption of
 
new accounting
 
standards or changes
 
in accounting
policies, and events
 
after the reporting
 
period.
 
2 Execution &
 
Platform, which was
 
disclosed in
 
previous periods,
 
has been renamed
 
Execution Services.
 
3 Refer to
 
“Alternative
 
performance measures”
 
in the
appendix to this report for the definition and calculation method.
 
4 Refer to the “Capital, liquidity and funding, and balance
 
sheet” section of this report for more information.
 
5 The leverage ratio denominators
calculated as of the respective dates in
 
2020 do not reflect the effects
 
of the temporary exemption that
 
applied from 25 March 2020 until
 
1 January 2021 and was
 
granted by FINMA in connection
 
with COVID-19.
Refer to the “Regulatory and legal developments” section of our Annual Report 2020 for more information.
 
 
 
93
2021 compared with 2020
Results
Profit
 
before
 
tax
increased
 
by
 
USD
 
14
8
 
million,
 
or
 
6%,
 
to
USD 2,630
 
million,
 
driven
 
by
 
higher
 
operating
 
income,
 
partly
offset by higher operating expenses.
Operating income
Total
 
operating income increased
 
by USD 274 million,
 
or 3%, to
USD 9,488 million,
 
reflecting higher
 
revenues in
 
Global Banking
and net
 
credit loss
 
releases compared with
 
net credit
 
loss expenses
in 2020, partly offset by lower revenues in Global Markets.
Global Banking
Global Banking revenues
 
increased by USD 780
 
million, or 33%,
to
 
USD 3,158
 
million,
 
driven
 
by
 
Capital
 
Markets
 
and
 
Advisory
revenues, and compared
 
with an overall global
 
fee pool increase
of 39%.
Advisory revenues
 
increased
 
by USD 354
 
million, or
 
56%, to
USD 988 million, largely
 
due to
 
higher revenues from
 
an increased
number
 
of
 
merger
 
and
 
acquisition
 
transactions
 
that
 
closed
 
in
2021,
 
and compared with a 64% increase in the global fee pool.
 
Capital
 
Markets
 
revenues
 
increased
 
by
 
USD 426
 
million,
 
or
24%, to USD 2,170
 
million, mainly reflecting a
 
USD 358 million,
or
 
52%,
 
increase
 
in
 
Equity
 
Capit
al
 
Markets
 
(ECM)
 
revenues,
compared with an increase in the global ECM fee pool of 34%.
Global Markets
Global Markets revenues decreased by USD 845 million, or 12%,
to USD 6,296
 
million, driven
 
by lower
 
revenues in
 
our Financing
and
 
Derivatives
 
&
 
Solutions
 
businesses,
 
partly
 
offset
 
by
 
higher
revenues in Execution Services.
Execution
 
Services
 
revenues
 
increased
 
by
 
USD 37
 
million,
 
or
2%,
 
to
 
USD 1,894
 
million.
 
Revenue
 
increases
 
in
 
cash
 
equities
were partly offset by decreases from other products.
 
Derivatives
 
&
 
Solutions
 
revenues
 
decreased
 
by
 
USD 187
million,
 
or
 
5%,
 
to
 
USD 3,422
 
million,
 
mainly
 
due
 
to
 
the
 
third
quarter of 2020 including
 
a USD 215 million gain from
 
the sale of
intellectual
 
property
 
rights
 
associated
 
with
 
the
 
Bloomberg
Commodity Index family. Excluding that gain, revenues
 
increased
by USD 28 million, or 1%.
Financing revenues decreased by USD 695 million, or 42%,
 
to
USD 979 million,
 
predominantly due
 
to an
 
USD 861 million
 
loss
incurred
 
in
 
the
 
first
 
half
 
of
 
2021
 
on
 
the
 
default
 
of
 
a
 
US-based
client
 
of
 
our
 
prime
 
brokerage
 
business.
 
Excluding
 
that
 
loss,
revenues increased by USD 166 million, or 10%.
 
›
 
Refer to “Note 21 Fair value measurement”
 
in the “Consolidated
financial statements”
 
section of this report for more information
about the loss in the prime brokerage business
 
Global Markets Equities revenues increased by USD 79 million,
or 2%, to USD 4,581 million. Equity derivatives and cash equities
products
 
revenues increased,
 
while Financing
 
revenues included
the aforementioned loss in our prime brokerage business.
 
Global Markets
 
Foreign Exchange,
 
Rates and
 
Credit revenues
decreased
 
by
 
USD 923
 
million,
 
or
 
35%,
 
to
 
USD 1,715
 
million,
compared with strong revenues in 2020.
Credit loss expense / release
Net credit
 
loss releases
 
were USD 34
 
million, primarily
 
related to
stage 1 and 2 positions, resulting from model updates, as well as
a partial net release
 
of a post-model adjustment
 
during the year.
Prior-year net
 
credit loss
 
expenses were
 
USD 305 million,
 
driven
by the effects of the COVID-19 pandemic.
 
Operating expenses
Total operating expenses increased by USD 126 million,
 
or 2%, to
USD 6,858 million, largely driven by foreign currency effects.
 
Cost / income ratio
The
 
cost
 
/
 
income
 
ratio
 
increased
 
to
 
72.5%
 
from
 
70.7%,
 
as
income decreased by 1% compared with a strong prior year, and
operating expenses increased by 2%.
Risk-weighted assets
Risk-weighted assets (RWA) decreased
 
by USD 2 billion,
 
or 2%, to
USD 92
 
billion,
 
primarily
 
due
 
to
 
a
 
USD 3
 
billion
 
decrease
 
in
operational risk RWA and a
 
USD 1 billion decrease in
 
market risk
RWA, partly
 
offset by a
 
USD 2 billion increase
 
in credit risk
 
RWA
due to higher loans and loan commitments.
›
 
Refer to the “Capital, liquidity and funding,
 
and balance sheet”
section of this report for more information
Leverage ratio denominator
The leverage ratio
 
denominator increased
 
by USD 4
 
billion, or
 
1%,
to
 
USD 319
 
billion,
 
mainly reflecting
 
a
 
USD 9 billion
 
increase in
on
-
balance
 
sheet
 
exposures
,
 
partly
 
offset
 
by
 
a
 
USD
 
4
 
billion
decrease
 
in
 
derivative
 
and
 
securities
 
financing
 
transaction
exposures.
›
 
Refer to the “Capital, liquidity and funding,
 
and balance sheet”
section of this report for more information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial and operating performance | Group Functions
94
Group Functions
Group Functions
1
As of or for the year ended
% change from
USD million, except where indicated
31.12.21
31.12.20
31.12.20
Results
Total operating income
(360)
(494)
(27)
Total operating expenses
330
567
(42)
Operating profit / (loss) before tax
(689)
(1,060)
(35)
of which: Group Treasury
(446)
(341)
31
of which: Non-core and Legacy Portfolio
(79)
(269)
(71)
of which: Group Services
(165)
(450)
(63)
Additional information
Risk-weighted assets (USD billion)
2
30.1
28.7
5
Leverage ratio denominator (USD billion)
2,3
104.0
96.2
8
1 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after
the reporting period.
 
2 Refer to the “Capital, liquidity and funding,
 
and balance sheet” section of this report
 
for more information.
 
3 The leverage ratio
 
denominator calculated as of the respective date
 
in 2020
does not
 
reflect the
 
effects of
 
the temporary
 
exemption that
 
applied from
 
25 March
 
2020 until
 
1 January
 
2021 and
 
was granted
 
by FINMA
 
in connection
 
with COVID
 
-19. Refer
 
to the
 
“Regulatory and
 
legal
developments” section of our Annual Report 2020 for more information.
 
 
2021 compared with 2020
Results
Group Functions
 
recorded
 
a loss
 
before
 
tax of
 
USD 689 million,
compared with a loss of USD 1,060 million.
 
Group Treasury
The
 
Group
 
Treasury
 
result
 
was
 
negative
 
USD 446
 
million,
compared with negative USD 341 million.
Income
 
from
 
accounting
 
asymmetries,
 
including
 
hedge
accounting
 
ineffectiveness,
 
was
 
net
 
negative
 
USD 341
 
million,
compared with net positive of USD 6 million.
 
Revenues
 
related
 
to
 
centralized
 
Group
 
Treasury
 
risk
management
 
services
 
were
 
negative
 
USD 63
 
million,
 
compared
with
 
negative
 
USD 279
 
million.
 
The
 
increased
 
expense
 
in
 
2020
was
 
driven
 
by
 
additional
 
liquidity
 
costs
 
related
 
to
 
COVID-19
market stress in the first half of that year.
Operating
 
expenses
 
decreased
 
by
 
USD 30
 
million
 
to
 
USD 42
million.
 
Non-core and Legacy Portfolio
The
 
Non-core
 
and
 
Legacy
 
Portfolio
 
result
 
was
 
negative
 
USD 79
million, compared with negative USD 269 million. This result was
partly due
 
to valuation
 
gains of
 
USD 58 million
 
on our
 
USD 1.6
billion
 
portfolio
 
of
 
auction
 
rate
 
securities
 
(ARS),
 
compared
 
with
valuation
 
losses
 
of
 
USD 9
 
million
 
in
 
2020.
 
Our
 
remaining
exposures
 
to
 
ARS
 
were
 
all
 
rated
 
investment
 
grade
 
as
 
of
31 December 2021. In
 
addition, 2021 included
 
income of USD 51
million related to a legacy bankruptcy claim, while 2020 included
a
 
credit
 
loss
 
expense
 
of
 
USD 42
 
million
 
on
 
an
 
energy-related
exposure.
Group Services
The
 
Group
 
Services
 
result
 
was
 
negative
 
USD 165
 
million,
compared
 
with
 
negative
 
USD 450
 
million.
 
There
 
were
 
lower
expenses relating to our legal entity transformation
 
program and
decreased
 
funding
 
costs
 
on
 
deferred
 
tax
 
assets.
 
Also,
 
2020
included real estate costs
 
of USD 72 million related to
 
early lease
terminations
 
and
 
associated
 
provisions,
 
an
 
impairment
 
of
internally generated software of USD 67 million, and expenses of
USD 54 million related to the modification of certain outstanding
deferred compensation awards.
›
 
Refer to the “Group performance” section
 
and “Note 1b Changes
in accounting policies, comparability
 
and other adjustments” in
the “Consolidated financial statements”
 
section of this report for
more information about the modification
 
of deferred
compensation awards
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
95
Selected financial information of our business
divisions and Group Functions
Performance of our business divisions and Group Functions
1
For the year ended 31.12.21
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
 
Manage-
ment
Investment
Bank
Group
Functions
Total
Operating income
 
 
19,449
 
4,349
 
2,616
 
9,488
 
(360)
 
35,542
of which: gain from the sale of UBS’s domestic wealth management business
 
in Austria
100
100
Operating expenses
 
 
14,665
 
2,618
 
1,586
 
6,858
 
330
 
26,058
of which: net restructuring expenses
 
2
 
87
 
17
 
17
 
74
 
21
 
216
Operating profit / (loss) before tax
 
 
4,783
 
1,731
 
1,030
 
2,630
 
(689)
 
9,484
For the year ended 31.12.20
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
 
Manage-
ment
Investment
Bank
Group
Functions
Total
Operating income
 
 
17,045
 
3,651
 
2,974
 
9,214
 
(494)
 
32,390
of which: net gain from the sale of a majority stake in Fondcenter AG
60
571
631
of which: gain on the sale of intellectual property rights
215
215
of which: net gains from properties sold or held for sale
64
64
of which: valuation gain on auction rate securities in the fourth quarter of
 
2020
 
3
134
134
of which: gain related to investment in associates
6
19
26
of which: gain on the sale of equity investment measured
 
at fair value through profit or loss
4
18
22
Operating expenses
 
 
13,026
 
2,392
 
1,519
 
6,732
 
567
 
24,235
of which: acceleration of expenses in relation to outstanding deferred
 
compensation awards in
the third quarter of 2020
 
4
46
3
22
229
58
359
of which: expenses associated with terminated real estate
 
leases
72
72
of which: impairment of internally generated software
 
5
67
67
of which: net restructuring expenses
 
72
 
5
 
6
 
24
 
0
 
107
Operating profit / (loss) before tax
 
 
4,019
 
1,259
 
1,455
 
2,482
 
(1,060)
 
8,155
For the year ended 31.12.19
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
 
Manage-
ment
Investment
Bank
Group
Functions
Total
Operating income
 
 
16,353
 
3,715
 
1,938
 
7,269
 
(385)
 
28,889
of which: net foreign currency translation losses
 
6
(35)
(35)
of which: net losses from properties held for sale
(29)
(29)
Operating expenses
 
 
12,955
 
2,274
 
1,406
 
6,485
 
192
 
23,312
of which: impairment of goodwill
110
110
of which: net restructuring expenses
 
68
 
17
 
33
 
168
 
(2)
 
284
Operating profit / (loss) before tax
 
 
3,397
 
1,441
 
532
 
784
 
(577)
 
5,577
1 The components
 
of operating income
 
and operating expenses
 
disclosed in this
 
table are items
 
that are not recurring
 
or necessarily representative
 
of the underlying
 
business performance for
 
the reporting period
specified.
 
2 Includes curtailment gains of USD 80
 
million, which represent a reduction in the defined benefit
 
obligation related to the Swiss pension plan resulting
 
from a decrease in headcount following restructuring
activities.
 
3 Reflects a valuation gain recognized in the fourth quarter of 2020 as a result of a recovery in underlying market conditions, following a change
 
in valuation methodology. This gain was more than offset
by valuation losses recognized earlier in the year.
 
4 Reflects the accelerated expense recognized in the third quarter of 2020 when the conditions for continued vesting of certain outstanding deferred compensation
awards were modified. This
 
amount
 
includes approximately USD 80
 
million of accelerated expense
 
that would otherwise have
 
been recognized in the
 
fourth quarter of 2020.
 
The full year effect
 
was an expense of
approximately USD 280 million (Global Wealth Management: USD 30 million, Asset Management:
 
USD 10 million, Investment Bank: USD 180 million, Group Functions: USD 60 million).
 
5 Relates to impairment of
internally generated software resulting
 
from a decision in the fourth
 
quarter of 2020 to not
 
proceed with an internal busines
 
s
 
transfer from UBS Switzerland
 
AG to UBS AG.
 
6 Relates to the disposal
 
or closure of
foreign operations.
 
 
 
 
 
 
 
Risk, capital,
liquidity and
funding, and
balance sheet
Management report
 
3
Audited information according to IFRS 7 and IAS 1
Risk and
 
capital disclosures provided
 
in line
 
with the
 
requirements of
 
International Financial Reporting
 
Standard 7
 
(IFRS 7),
Financial
Instruments:
 
Disclosures,
and
 
International
 
Accounting
 
Standard
 
1
 
(IAS
 
1),
Presentation
 
of
 
Financial
 
Statements,
form
 
part
 
of
 
the
financial
 
statements
 
included
 
in
 
the
 
“Consolidated
 
financial
 
statements”
 
section
 
of
 
this
 
report
 
and
 
audited
 
by
 
the
 
independent
registered public accounting firm Ernst & Young Ltd, Basel. This information is marked as “Audited”
 
within this section of the report.
The
 
risk profile
 
of
 
UBS AG
 
consolidated does
 
not differ
 
materially from
 
that of
 
UBS Group
 
AG consolidated.
 
Audited information
provided in the “Risk management and control” and “Capital, liquidity and funding, and
 
balance sheet” sections applies to both UBS
Group AG consolidated and UBS AG consolidated.
 
Signposts
The
Audited |
signpost that is displayed at the beginning
 
of a section, table or chart indicates that
 
those items have been audited. A triangle
 
symbol –
p
 
–
indicates the end of the audited section, table
 
or chart.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
99
Risk management and control
 
Overview of risks arising from our business activities
The scale of
 
our activities
 
depends on the
 
capital available to
 
cover
risks,
 
the
 
size
 
of
 
our
 
on-
 
and
 
off-balance
 
sheet
 
assets
 
via
 
their
contribution to our
 
capital, leverage and
 
liquidity ratios, and
 
our
risk appetite.
Despite
 
our
 
credit
 
book
 
growing
 
over
 
the course
 
of
 
2021,
 
our
overall
 
credit
 
risk
 
profile
 
was
 
broadly
 
unchanged
,
 
and
 
we
continued
 
to manage market
 
risks at generally
 
low levels.
Operational resilience, conduct and the prevention of financial
crime remain key focus topics.
 
 
 
 
Key risks by business division and Group Functions
Business divisions and Group Functions
Key risks arising from business activities
Global Wealth Management
Credit risk
 
from lending against securities collateral, including
 
derivative trading activity, and lending
against residential and commercial real estate collateral, as
 
well as corporate and other lending
 
Market risk
 
from municipal securities and taxable fixed-income
 
securities
Personal & Corporate Banking
Credit risk
 
from retail business, mortgages, secured and unsecured corporate
 
lending, commodity trade
finance, lending to banks and other regulated clients,
 
as well as a small amount of derivatives trading
activity
 
Minimal contribution to
market risk
Asset Management
Small amounts of credit and market risk for on-balance
 
sheet items
 
Investment Bank
Credit risk
 
from lending (take-and-hold, as well as temporary
 
loan underwriting activities), derivatives
trading and securities financing
 
Market risk
 
from primary underwriting activities and
 
secondary trading
Group Functions
Credit
 
and
market risk
 
arising from management of the Group’s balance
 
sheet, capital, profit or loss
and liquidity portfolios
Non-financial risks,
 
which include operational, financial crime,
 
compliance,
 
conduct,
 
model, and reputational risks, are an inevitable consequence
 
of being
in business and can arise as a result of our past
 
and current business activities across all business
 
divisions and Group Functions.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
100
Risk categories
We
 
categorize the
 
risk exposures
 
of
 
our
 
business divisions
 
and
 
Group
 
Functions as
 
outlined
 
in
 
the
 
table
 
below.
 
Our risk
 
appetite
framework is designed to capture all risk categories.
›
 
Refer to “Risk appetite framework” in this
 
section for more information
 
Risk managed by
Independent
oversight by
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.
Settlement risk:
 
the risk of loss resulting from transactions that involve
 
exchange of value (e.g.,
security versus cash) where we must deliver without
 
first being able to determine with certainty
 
that
we will receive the countervalue.
Loan underwriting risk:
 
the risk of loss arising during the holding
 
period of financing transactions
that are intended for further distribution.
Step-in risk:
 
the risk that UBS may decide to provide financial
 
support to an unconsolidated entity
that is facing stress in the absence of, or in excess of,
 
any contractual obligations to provide such
support.
p
Business management
Risk Control
Audited |
Market risk
 
(traded and non-traded):
 
the risk of loss resulting from adverse movements
 
in
market variables. Market variables include observable
 
variables, such as interest rates, foreign exchange
rates, equity prices, credit spreads and commodity (including
 
precious metal) prices, as well as variables
that may be unobservable or only indirectly observable,
 
such as volatilities and correlations. Market risk
includes issuer risk and investment risk.
Issuer risk:
 
the risk of loss from changes in fair value resulting from
 
credit-related events affecting
an issuer to which we are exposed through tradable securities
 
or derivatives referencing the issuer.
Investment risk:
 
issuer risk associated with positions held
 
as financial investments.
p
Business management
and Group Treasury
Risk Control
Country risk:
 
the risk of losses resulting from country-specific events.
 
Includes transfer risk, which
involves a country’s authorities preventing or restricting
 
the payment of an obligation, as well
 
as
systemic risk events arising from country-specific political
 
or macroeconomic developments.
Business management
Risk Control
Sustainability and climate risk
(previously known at UBS as environmental and social
 
risk):
 
the risk
that UBS is negatively impacted by or negatively
 
impacts climate change, loss of biodiversity, human
rights infringements, or other environmental,
 
social or governance (ESG) matters. Climate
 
risks can arise
from either changing climate conditions (physical
 
risks) or from efforts to mitigate climate change
(transition risks). Sustainability and climate risks
 
may manifest as credit, market, liquidity and operational
risks for UBS, resulting in potential adverse financial,
 
liability and reputation impacts. They
 
may also
negatively impact the value of investments.
Business management
Risk Control
Treasury risk:
 
the market risks that arise from structural
 
exposures, including pension risks, and the risk
of insufficient funding or liquidity.
Group Treasury
Risk Control
Audited |
Liquidity risk:
 
the risk that the firm will not be able to
 
efficiently meet both expected and
unexpected current and forecast cash flows and collateral
 
needs without affecting either daily
operations or the financial condition of the
 
firm.
p
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.
p
Structural foreign exchange risk:
 
the risk of decreases in our capital due to changes
 
in foreign
exchange rates with an adverse translation
 
effect on capital held in currencies other than the US
dollar.
Pension risk:
 
the risk of a negative impact on our capital
 
as a result of deteriorating funded status
from decreases in the fair value of assets held in defined
 
benefit pension funds and / or changes in
the value of defined benefit pension obligations
 
due to changes in actuarial assumptions
 
(e.g.,
discount rate, life expectancy, rate of pension increase, etc.) and / or changes
 
to plan designs.
Group Treasury and
Human Resources
Risk Control
and Finance
Business risk:
 
the potential negative impact on earnings
 
from lower-than-expected business volumes
and / or margins, to the extent they are not offset by a decrease
 
in expenses.
Business management
Finance and Risk Control
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
101
Risk managed by
Independent
oversight by
Non-financial risks
Operational risk:
 
the risk resulting from inadequate or failed internal
 
processes, people or systems, or
from external causes (deliberate, accidental
 
or natural), that have an impact (either financial
 
or non-
financial) on UBS, its clients or the markets in
 
which it operates. Events may be direct financial losses
 
or
indirect, in the form of revenue forgone as a result of business
 
suspension. They may also result in
damage to our reputation and to our franchise that
 
has longer-term financial consequences.
Business management
Group Compliance,
Regulatory &
Governance (GCRG)
Legal risk:
 
the financial or reputational implications resulting
 
from the risk of: (i) being held liable for
a breach of applicable laws, rules or regulations; (ii) being
 
held liable for a breach of contractual or
other legal obligations; (iii) an inability or failure to
 
enforce or protect contractual rights or non-
contractual rights sufficiently to protect UBS’s interests, including
 
the risk of being party to a claim in
respect of any of the above (and the risk of loss
 
of attorney–client privilege in the context
 
of any such
claim); (iv) a failure to adequately develop, supervise
 
and resource legal teams or adequately supervise
external legal counsel advising on business
 
legal risk and other matters; and (v)
 
a failure to adequately
manage any potential, threatened and commenced
 
litigation and legal proceedings, including civil,
criminal, arbitration and regulatory proceedings,
 
and / or litigation risk or any dispute or investigation
that may lead to litigation or threat of any litigation.
Legal
Employment risk:
 
the risk incurred by the firm by not adhering
 
to the applicable employment law,
regulatory requirements and human resources practices, as well as our
 
own internal standards. Such
risk is managed by business management,
 
with independent overview by Human Resources.
Human Resources
Cybersecurity and information security risk:
 
the risk of a malicious internal or
 
external act leading
to a material impact on confidentiality, integrity or availability of UBS data
 
or information systems.
Cyberattacks are manifestations of a cyber threat into
 
an act of aggression or criminal activity causing
financial, regulatory or reputational harm or loss.
Business management
and Chief Digital and
Information Office
(CDIO)
GCRG
Conduct risk:
 
the risk that the conduct of the firm or its
 
individuals unfairly impacts clients or
counterparties, undermines the integrity of the
 
financial system or impairs effective competition
 
to the
detriment of consumers.
Business management
GCRG
Compliance risk:
 
the risk incurred by the firm by not adhering to
 
the applicable laws, rules and
regulations, and our own internal standards.
Business management
GCRG
Financial crime risk:
 
the risk that UBS fails to detect criminal
 
activities, including internal and
 
external
theft and fraud, money laundering, bribery
 
and corruption, and fails to comply with sanctions
 
and
embargoes, or fails to report or respond to requests from relevant authorities
 
related to these matters.
Business management,
Financial Crime
Prevention (FCP), and
GCRG COO
GCRG
Model risk:
 
the risk of adverse consequences via
 
financial loss or non-financial impact
 
(e.g., poor
business and / or strategic decision making,
 
or damage to the firm’s reputation) resulting from decisions
based on incorrect or misused model outputs and
 
reports. Model risk may result from a number of
sources: inputs, methodology, implementation or use.
Model owner
Risk Control
Reputational risk:
 
the risk of damage to our reputation from the point
 
of view of our stakeholders,
such as clients, shareholders and staff, and the general
 
public.
All businesses and
functions
All control functions
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
102
Top and emerging risks
The top and emerging risks disclosed below reflect those that we
currently think
 
have the
 
potential to
 
materialize within
 
one year
and which
 
could significantly
 
affect the
 
Group. Investors
 
should
also carefully
 
review all information
 
set out in
 
the “Risk factors”
section of this report, where
 
we discuss these and other material
risks
 
that
 
we
 
consider
 
could
 
have
 
an
 
effect
 
on
 
our
 
ability
 
to
execute
 
our
 
strategy
 
and
 
may
 
affect
 
our
 
business
 
activities,
financial condition, results of operations and business prospects.
–
 
The
 
COVID-19
 
pandemic,
 
and
 
its
 
impact
 
on
 
growth,
employment,
 
debt
 
dynamics
 
and
 
supply
 
chains,
 
remains
 
an
important driver of risk,
 
and we expect this
 
to be the case for
at
 
least
 
the
 
near
 
future.
 
The
 
Omicron
 
variant
 
continues
 
to
spread,
 
and
 
there
 
is
 
uncertainty
 
about
 
when
 
restrictions
introduced in many countries will be eased.
–
 
There continue to
 
be concerns regarding
 
a resurgence in
 
global
inflation,
 
and
 
the
 
timing
 
and
 
extent
 
of
 
central
 
bank
 
policy
responses
 
(i.e.,
 
interest
 
rate
 
hikes
 
and
 
the
 
tapering
 
of
quantitative
 
easing)
 
will
 
be
 
an
 
area
 
of
 
focus
 
in
 
the
 
coming
months.
 
There
 
are
 
related
 
concerns
 
about
 
increasing
 
energy
and other
 
commodity prices
 
in a
 
number of
 
countries, while
mounting global supply chain stresses and tight labor markets
are
 
creating
 
negative
 
pressure
 
on
 
growth.
 
China
 
is
 
facing
several challenges, including a slowing economy following the
post-pandemic boom.
–
 
We remain
 
watchful of
 
a range
 
of geopolitical
 
developments
in
 
Europe
 
and
 
Asia
 
and
 
political
 
changes
 
in
 
a
 
number
 
of
countries.
 
Our
 
current
 
focus
 
is
 
on
 
the
 
Russian
 
invasion
 
of
Ukraine.
 
Our
 
current
 
direct
 
exposure
 
to
 
Russia,
 
Ukraine
 
and
Belarus
 
is
 
limited,
 
as
 
is
 
our
 
exposure
 
to
 
peripheral
 
European
countries
.
However,
 
market
 
closures,
 
the
 
imposition
 
of
exchange controls, sanctions
 
or other measures
 
may limit our
ability to settle existing
 
transactions or to realize on
 
collateral,
which
 
may
 
result
 
in
 
unexpected
 
increases
 
in
 
exposures.
 
In
addition,
 
we
 
have
 
significant
 
country
 
risk
 
exposure
 
to
 
major
economies,
 
which
 
could
 
also
 
be
 
affected,
 
including
 
the
 
US,
China, Switzerland, Germany, the UK and France.
–
 
We are exposed to a
 
number of macroeconomic issues,
 
as well
as general market conditions. As noted in “Market, credit and
macroeconomic
 
risks”
 
in
 
the
 
“Risk
 
factors”
 
section
 
of
 
this
report, these external pressures may have a significant adverse
effect
 
on
 
our
 
business
 
activities
 
and
 
related
 
financial
 
results,
primarily
 
through
 
reduced
 
margins
 
and
 
revenues,
 
asset
impairments
 
and
 
other
 
valuation
 
adjustments.
 
Accordingly,
these
 
macroeconomic
 
factors
 
are
 
considered
 
in
 
the
development
 
of
 
stress
 
testing
 
scenarios
 
for
 
our
 
ongoing
 
risk
management activities.
–
 
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.
–
 
Cyber threats continue to
 
evolve at pace, not least
 
due to the
Russian
 
invasion
 
of
 
Ukraine,
 
and
 
can
 
impact
 
the industry,
 
as
well as
 
critical infrastructure
 
which it relies
 
on. More
 
recently,
ransomware attacks
 
with a
 
possible widespread
 
impact have
increased
 
significantly.
 
Additionally,
 
as
 
a
 
result
 
of
 
the
operational complexity of
 
all our businesses,
 
we are continually
exposed
 
to
 
operational
 
resilience
 
scenarios
 
such
 
as
 
process
error, failed execution, system failures and fraud.
–
 
Conduct
 
risks
 
are
 
inherent
 
in
 
our
 
businesses.
 
Achieving
 
fair
outcomes
 
for
 
our
 
clients,
 
upholding
 
market
 
integrity
 
and
cultivating the
 
highest standards
 
of employee
 
conduct are
 
of
critical importance to UBS. Management of conduct risks is an
integral part of our risk management framework.
–
 
Financial
 
crime
 
–
 
including
 
money
 
laundering,
 
terrorist
financing, sanctions violations, fraud, bribery and corruption –
presents
 
significant
 
risk.
 
Heightened
 
regulatory
 
expectations
and attention require investment in people and systems, while
emerging technologies and changing geopolitical
 
risks further
increase the complexity of identifying and preventing financial
crime
.
Refer
 
to
 
“Non
-
financial
 
risk”
 
in
 
this
section
 
and
“Strategy,
 
management
 
and
 
operational
 
risks”
 
in
 
the
 
“Risk
factors” section of this report for more information.
–
 
Environmental, social
 
and governance
 
(ESG) risks
 
are a
 
growing
area
 
of
 
focus
 
for
 
regulators
 
and
 
other
 
stakeholders
,
 
in
particular
 
climate
 
risks
 
and
 
concerns
 
about
 
greenwashing,
where
 
UBS
 
may
 
be
 
subject
 
to
 
reputational
 
risk
 
if
 
not
 
fully
aligned
 
with
 
the
 
stated
 
purpose
 
of
 
the
 
firm.
 
New
 
standards
and rules are developing in several
 
jurisdictions with the risk of
divergent rules increasing and leading to an increased risk
 
that
UBS
 
may
 
not
 
comply
 
with
 
all
 
relevant
 
regulations.
 
Refer
 
to
“Non-financial risk” in this section.
 
 
 
UBS_AR_2021p131i0.gif
 
103
Risk governance
Our
 
risk
 
governance
 
framework
 
operates
 
along
 
three
 
lines
 
of
defense.
 
Our first
 
line of
 
defense, business
 
management, owns
 
its risk
exposures and is
 
accountable for maintaining effective
 
processes
and
 
systems
 
to
 
manage
 
its
 
risks
 
in
 
compliance
 
with
 
applicable
laws,
 
external
 
regulations
 
and
 
internal
 
requirements,
 
including
identifying control weaknesses and inadequate processes.
Our second line of defense, control functions, is separate
 
from
the
 
business
 
and
 
reports
 
directly
 
to
 
the
 
Group
 
CEO.
 
Control
functions provide independent oversight,
 
challenge financial and
non-financial risks
 
arising from the
 
firm’s business
 
activities, and
establish
 
independent
 
frameworks
 
for
 
risk
 
assessment,
measurement,
 
aggregation
 
and
 
reporting,
 
protecting
 
against
non-compliance with applicable laws and regulations.
Our third line of
 
defense, Group Internal Audit, reports
 
to the
Chairman and to the
 
Audit Committee. This function
 
assesses the
design and operating effectiveness and sustainability
 
of processes
to
 
define
 
risk
 
appetite,
 
governance,
 
risk
 
management,
 
internal
controls, remediation activities
 
and processes to
 
comply with legal
and
 
regulatory
 
requirements
 
and
 
internal
 
governance
requirements.
The
 
key
 
roles
 
and
 
responsibilities
 
for
 
risk
 
management
 
and
control
 
are
 
shown
 
in
 
the
 
chart
 
below
 
and
 
described
 
on
 
the
following pages.
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
104
Audited
 
|
The
 
Board
 
of
 
Directors
 
(the
 
BoD)
 
approves
 
the
 
risk
management and control framework of the Group, including the
Group
 
and
 
business
 
division
 
overall
 
risk
 
appetite.
 
The
 
BoD
 
is
supported
 
by
 
its
 
Risk
 
Committee,
 
which
 
monitors and
 
oversees
the
 
Group’s
 
risk
 
profile
 
and
 
the
 
implementation
 
of
 
the
 
risk
framework approved
 
by the BoD,
 
and approves
 
the Group’s risk
appetite methodology.
 
The Corporate Culture
 
and Responsibility
Committee (the CCRC) helps the BoD
 
meet its duty to safeguard
and
 
advance
 
UBS’s
 
reputation
 
for
 
responsible
 
and
 
sustainable
conduct,
 
reviewing
 
stakeholder
 
concerns
 
and
 
expectations
pertaining
 
to
 
UBS’s
 
societal
 
contribution
 
and
 
corporate
 
culture.
The
 
Audit
 
Committee
 
assists
 
the
 
BoD
 
with
 
its
 
oversight
 
duty
relating to financial
 
reporting and internal
 
controls over financial
reporting,
 
and
 
the
 
effectiveness
 
of
 
whistleblowing
 
procedures
and the external and internal audit functions.
The
Group
 
Executive Board
 
(the GEB) has overall responsibility
for establishing and
 
implementing a risk
 
management and control
framework in the Group,
 
managing the risk profile
 
of the Group
as a whole.
The
Group
 
Chief
 
Executive
 
Officer
 
has
 
responsibility
 
and
accountability
 
for the
 
management
 
and performance
 
of the
 
Group,
has risk authority over
 
transactions, positions and exposures, and
allocates
 
business
 
divisions
 
and
 
Group
 
Functions
 
risk
 
limits
approved by
 
the BoD.
The
business division Presidents
and
 
Group function heads
are
responsible for the
 
operation and management
 
of their business
divisions,
 
including
 
controlling the
 
dedicated
 
financial
 
resources
and risk appetite of the business division.
The
regional
 
Presidents
 
are
 
responsible
 
for
 
cross
-
divisional
collaboration in their
 
regions and
 
are mandated
 
to inform
 
the GEB
about
 
any
 
activities
 
/
 
issues
 
that
 
may
 
give
 
rise
 
to
 
actual
 
or
potentially material regulatory or reputational concerns.
The
Group Chief
 
Risk Officer
 
(the Group
 
CRO) is
 
responsible
for
 
developing
 
the
 
Group’s
 
risk
 
management
 
and
 
control
framework (including
 
risk principles
 
and risk
 
appetite) for
 
credit,
market,
 
country,
 
treasury,
 
model
 
and
 
sustainability
 
and
 
climate
risks. This
 
includes risk
 
measurement and
 
aggregation, portfolio
controls
 
and
 
risk reporting.
 
The
 
Group
 
CRO
 
sets
 
risk limits
 
and
approves credit and
 
market risk transactions
 
and exposures. Risk
Control is
 
also the
 
central function
 
for model
 
risk management
and control
 
for all
 
models used
 
in UBS.
 
A framework
 
of policies
and authorities support the risk control process.
The
Group
 
Chief
 
Compliance
 
and
 
Governance
 
Officer
 
is
responsible
 
for
 
developing
 
the
 
Group’s
 
operational
 
risk
framework,
 
which
 
sets
 
the
 
general
 
requirements
 
for
identification,
 
management,
 
assessment
 
and
 
mitigation
 
of
operational risk,
 
and for
 
ensuring that
 
all non-financial
 
risks are
identified, owned and managed according to the operational risk
appetite objectives, supported by an effective control framework.
The
Group
 
Chief
 
Financial
 
Officer
 
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
 
UBS’s tax
 
affairs, as
well as treasury
 
and capital management,
 
including funding and
liquidity risk and UBS’s regulatory capital ratios.
 
The
Group
 
General Counsel
 
is
 
responsible for
 
managing the
Group’s legal
 
affairs (including litigation involving UBS),
 
ensuring
effective
 
and timely
 
assessment
 
of legal
 
matters
 
impacting
 
the
 
Group
or its
 
businesses,
 
and managing
 
and reporting
 
all litigation
 
matters.
The
Head of
 
Human Resources
 
is responsible for
 
independent
oversight
 
and challenge
 
of employment-related
 
risks.
Group
 
Internal
 
Audit
 
(GIA)
 
independently
 
assesses
 
the
effectiveness of processes to define
 
strategy and risk appetite
 
and
overall
 
adherence
 
to
 
the
 
approved
 
strategy.
 
It
 
also
 
assesses
 
the
effectiveness
 
of
 
governance
 
processes
 
and
 
risk
 
management,
including compliance with legal and regulatory requirements and
internal
 
governance
 
documents.
 
The
 
Head
 
GIA
 
reports
 
to
 
the
Chairman of the BoD.
 
GIA also has a
 
functional reporting line to
the BoD Audit Committee.
Some
 
of
 
these
 
roles
 
and
 
responsibilities
 
are
 
replicated
 
for
certain significant legal entities of the Group. The
legal entity risk
officers
 
are responsible for
 
independent oversight and
 
control of
financial
 
and
 
non-financial
 
risks
 
for
 
certain
 
significant
 
legal
entities of the
 
Group as part
 
of the
 
legal entity control
 
framework,
which
 
complements
 
the
 
Group’s
 
risk
 
management
 
and
 
control
framework.
p
 
 
 
 
 
 
 
 
UBS_AR_2021p133i0.gif
 
105
Risk appetite framework
We have a
 
defined Group-level
 
risk appetite,
 
covering
 
all financial
 
and non-financial
 
risk types,
 
via a complementary
 
set of qualitative
 
and
quantitative
 
risk appetite
 
statements.
 
This is reviewed
 
and recalibrated
 
annually and
 
presented to
 
the BoD for
 
approval.
 
Our
 
risk
 
appetite
 
is
 
defined
 
at
 
the
 
aggregate
 
Group
 
level
 
and
reflects the types of
 
risk that we are
 
willing to accept or avoid.
 
It
is set via complementary qualitative and quantitative risk
 
appetite
statements
 
defined
 
at
 
a
 
firm-wide
 
level
 
and
 
is
 
embedded
throughout
 
our
 
business
 
divisions
 
and
 
legal
 
entities
 
by
 
Group,
business division
 
and legal
 
entity policies,
 
limits and
 
authorities.
We are subject to consolidated supervision
 
by the Swiss Financial
Market
 
Supervisory
 
Authority
 
(FINMA)
 
and
 
related
 
ordinances,
which
 
impose,
 
among
 
other
 
requirements,
 
minimum
 
standards
for capital, liquidity,
 
risk concentration and internal organization.
Our risk appetite
 
is reviewed
 
and recalibrated
 
annually,
 
with the
aim of ensuring that risk-taking at every level of the organization
is
 
in
 
line
 
with
 
our
 
strategic
 
priorities,
 
our
 
capital
 
and
 
liquidity
plans,
 
our
Pillars,
 
Principles
 
and
Behaviors
,
 
and
 
minimum
regulatory
 
requirements.
 
The
 
“Risk
 
appetite
 
framework”
 
chart
below
 
shows
 
the
 
key
 
elements
 
of
 
the
 
framework,
 
described
 
in
detail in this section.
Qualitative risk appetite statements aim to
 
ensure we maintain
the desired
 
risk culture.
 
Quantitative risk
 
appetite objectives
 
are
designed
 
to
 
enhance
 
UBS’s
 
resilience
 
against
 
the
 
effect
s
 
of
potential
 
severe
 
adverse
 
economic or
 
geopolitical
 
events. These
risk appetite objectives cover
 
UBS’s minimum capital and
 
leverage
ratios, solvency,
 
earnings, liquidity,
 
and funding,
 
and are
 
subject
to periodic review, including the
 
yearly business planning process.
 
These
 
objectives
 
are
 
complemented
 
by
 
operational
 
risk
appetite
 
objectives,
 
which
 
are
 
set
 
for
 
each
 
of
 
our
 
non-financial
risk
 
categories,
 
including
 
market
 
conduct,
 
theft,
 
fraud,
 
data
confidentiality and technology
 
risks. A standardized
 
financial firm-
wide operational risk appetite
 
has been established
 
at Group level
and is embedded
 
throughout our business
 
divisions. Operational
risk events exceeding predetermined risk tolerances, expressed as
percentages of UBS’s operating income, must be escalated as per
the
 
firm-wide
 
escalation
 
framework
 
to
 
the
 
respective
 
business
division President or higher, as appropriate.
The
 
quantitative
 
risk
 
appetite
 
objectives
 
are
 
supported
 
by
 
a
comprehensive suite
 
of risk
 
limits set
 
at a
 
portfolio level
 
to monitor
specific portfolios and to control potential risk concentrations.
 
The status
 
of risk
 
appetite objectives is evaluated each
 
month
and reported
 
to the
 
BoD and
 
the GEB.
 
As our
 
risk appetite may
change
 
over
 
time,
 
portfolio
 
limits
 
and
 
associated
 
approval
authorities
 
are subject
 
to periodic
 
reviews and
 
changes, particularly
in the context
 
of our annual
 
business
 
planning process.
 
Our risk
 
appetite framework
 
is governed
 
by a single
 
overarching
policy and conforms
 
to the Financial Stability
 
Board’s Principles
 
for
an Effective
 
Risk Appetite
 
Framework.
 
›
 
Refer to “Risk principles and risk culture”
 
and “Quantitative risk
appetite objectives” on the following
 
pages for more
information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
106
Risk principles and risk culture
Maintaining a
 
strong
 
risk culture
 
is a
 
prerequisite
 
for success
 
in
today’s
 
highly
 
complex
 
operating
 
environment
 
and
 
a
 
source
 
of
sustainable
 
competitive
 
advantage.
 
Placing
 
prudent
 
and
disciplined
 
risk-taking
 
at
 
the
 
center
 
of
 
every
 
decision
 
has
 
three
principal
 
goals:
 
delivering
 
unrivaled
 
client
 
satisfaction;
 
creating
long-term
 
value
 
for
 
stakeholders;
 
and
 
making
 
UBS
 
one
 
of
 
the
world’s most attractive companies to work for.
Our
 
risk
 
appetite
 
framework
 
combines
 
all
 
the
 
important
elements of our
 
risk culture, expressed
 
in our
Pillars, Principles and
Behaviors
, our risk management and control principles, our Code
of Conduct and Ethics, and our Total Reward Principles. Together,
these
 
aim
 
to
 
align
 
our
 
decisions
 
with
 
the
 
Group’s
 
strategy,
principles and
 
risk appetite.
 
They help
 
create a
 
solid foundation
for promoting
 
risk awareness,
 
leading to
 
appropriate risk-taking
and
 
the
 
establishing
 
of
 
robust
 
risk
 
management
 
and
 
control
processes. These principles are supported by a range of initiatives
covering employees at all levels, for example
 
the
UBS House View
on Leadership
, which
 
is a
 
set of
 
explicit expectations
 
for leaders
that
 
establishes
 
consistent
 
leadership
 
standards
 
across
 
UBS.
Another
 
example
 
is
 
our
 
Principles
 
of
 
Good
 
Supervision,
 
which
establish clear
 
expectations of
 
managers and
 
employees regarding
supervisory
 
responsibilities,
 
specifically:
 
to
 
take
 
responsibility;
 
to
know and organize
 
their business; to
 
know their employees
 
and
what they do;
 
to create a
 
good risk culture;
 
and to respond
 
to and
resolve issues.
 
›
 
Refer to the foldout pages of this report for
 
more information
about our Pillars, Principles and Behaviors
›
 
Refer to the Code of Conduct and Ethics
 
of UBS at
ubs.com/code
 
for more information
Risk management and control principles
Protection of financial strength
Protecting UBS’s financial strength by controlling our risk
 
exposure and avoiding potential risk
concentrations at individual exposure levels,
 
at specific portfolio levels and at an aggregate firm-wide
level across all risk types
Protection of reputation
Protecting our reputation through a sound risk culture characterized
 
by a holistic and integrated view of
risk, performance and reward, and through full compliance
 
with our standards and principles, particularly
our Code of Conduct and Ethics
Business management accountability
Maintaining management accountability, whereby business management owns
 
all risks assumed
throughout the Group and is responsible for the continuous
 
and active management of all risk exposures
to provide for balanced risk and return
Independent controls
Independent control functions that monitor the
 
effectiveness of the businesses’ risk management
 
and
oversee risk-taking activities
Risk disclosure
Disclosure of risks to senior management, the BoD,
 
investors, regulators, credit rating agencies and other
stakeholders with an appropriate level of comprehensiveness
 
and transparency
 
Whistleblowing
 
policies
 
and
 
procedures
 
exist
 
to
 
support
 
an
environment where staff are comfortable
 
raising concerns. There
are multiple
 
channels via which
 
individuals may, either
 
openly or
anonymously,
 
escalate
 
suspected
 
breaches
 
of
 
laws,
 
regulations,
rules
 
and
 
other
 
legal
 
requirements,
 
our
 
Code
 
of
 
Conduct
 
and
Ethics, policies, or relevant professional
 
standards. Our program is
designed to ensure that whistleblowing concerns
 
are investigated
and
 
that
 
appropriate
 
and
 
consistent
 
action
 
is
 
taken.
 
We
 
are
committed
 
to
 
ensuring
 
appropriate
 
training
 
for
 
and
communication
 
to
 
staff
 
and
 
legal
 
entity
 
representatives
 
are
available
 
on
 
an
 
ongoing
 
basis,
 
including
 
with
 
regard
 
to
 
new
regulatory requirements.
Mandatory
 
training
 
programs
 
cover
 
various
 
compliance
 
and
risk-related
 
topics,
 
including
 
operational
 
risk
 
and
 
anti-money
laundering. Additional specialized training is provided
 
depending
on employees’
 
specific roles
 
and responsibilities,
 
e.g.,
 
credit risk
and market risk
 
training for those
 
working in trading
 
areas. Failure
to
 
complete
 
mandatory
 
training
 
sessions
 
within
 
an
 
appropriate
timeframe can
 
lead to
 
consequences, including
 
disciplinary action.
Our operational risk and conduct risk frameworks
 
aim to identify
and manage financial, regulatory
 
and reputational risks,
 
as well as
risks to clients and markets.
 
Quantitative risk appetite objectives
Our quantitative
 
risk appetite
 
objectives
 
aim
 
to
 
ensure
 
that our
aggregate
 
risk
 
exposure
 
remains
 
within
 
desired
 
risk
 
capacity,
based on capital and business plans. The specific
 
definition of risk
capacity for each
 
objective is aimed
 
at ensuring we
 
have sufficient
capital, earnings, funding
 
and liquidity
 
to protect
 
our businesses
and
 
exceed
 
minimum
 
regulatory
 
requirements
 
under
 
a
 
severe
stress event. The risk appetite objectives are evaluated during the
annual business planning process
 
and approved by
 
the BoD. The
comparison
 
of
 
risk
 
exposure
 
with
 
risk
 
capacity
 
is
 
a
 
key
consideration
 
in
 
decisions
 
on
 
potential
 
adjustments
 
to
 
the
business
 
strategy
 
and
 
risk
 
profile
 
of
 
UBS
 
and
 
capital
 
returns
 
to
shareholders.
The annual
 
business planning
 
process reviews
 
UBS’s business
strategy,
 
assesses
 
the
 
risk
 
profile
 
our
 
operations
 
and
 
activities
result in,
 
and stress tests
 
that risk profile.
 
We use both
 
scenario-
based stress
 
tests and
 
statistical risk measurement
 
techniques to
assess effects
 
of severe
 
stress events
 
at a
 
firm-wide level.
 
These
complementary frameworks capture
 
exposures to
 
all material risks
across our business divisions and Group Functions.
 
›
 
Refer to “Risk measurement” in this section
 
for more
information about our stress testing and statistical
 
stress
frameworks
 
UBS_AR_2021p135i0.gif
 
107
 
 
 
Our risk
 
capacity is
 
underpinned by
 
performance targets
 
and
capital guidance as per our business plan. When determining our
risk capacity
 
in case
 
of a
 
severe stress
 
event, we
 
estimate projected
earnings
 
under
 
stress,
 
factoring
 
in
 
lower
 
expected
 
income
 
and
also lower expenses.
 
We also consider
 
capital impacts
 
under stress
from deferred
 
tax assets,
 
pension plan
 
assets and
 
liabilities, and
accruals for capital returns to shareholders.
Risk
 
appetite
 
objectives
 
define
 
the
 
aggregate
 
risk
 
exposure
acceptable
 
at
 
the
 
firm-wide
 
level,
 
given
 
our
 
risk
 
capacity.
 
The
maximum acceptable
 
risk exposure
 
is supported
 
by a
 
full set
 
of
risk limits, triggers and targets, which are cascaded to businesses
and
 
portfolios.
 
These
 
limits,
 
triggers
 
and
 
targets
 
aim
 
to
 
ensure
that our total risks remain in line with risk appetite.
Risk
 
appetite
 
statements
 
at
 
the
 
business
 
division
 
level
 
are
derived from
 
the firm-wide
 
risk appetite.
 
They may
 
also include
division-specific strategic goals
 
related to that
 
division’s activities
and
 
risks. Risk
 
appetite
 
statements are
 
also set
 
for certain
 
legal
entities, which must
 
be consistent with
 
the firm-wide risk
 
appetite
framework
 
and
 
approved
 
in
 
accordance
 
with
 
Group
 
and
 
legal
entity regulations.
 
Differences may
 
exist
 
that reflect
 
the specific
nature, size, complexity and regulations applicable
 
to the relevant
legal entity.
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
108
Internal risk reporting
Comprehensive and transparent reporting of
 
risks is central
 
to our
risk governance
 
framework’s control and
 
oversight responsibilities
and
 
required
 
by
 
our
 
risk
 
management
 
and
 
control
 
principles.
Accordingly,
 
risks are
 
reported at
 
a frequency
 
and level of
 
detail
commensurate with the extent
 
and variability of the
 
risk and the
needs
 
of
 
the
 
various
 
governance
 
bodies,
 
regulators
 
and
 
risk
authority holders.
The
 
Group
 
Risk
 
Report
 
provides
 
a
 
detailed
 
qualitative
 
and
quantitative monthly
 
overview of
 
developments in
 
financial and
non-financial risks at the firm-wide level, along with
 
breakdowns
of
 
risks
 
at
 
the
 
divisional
 
level,
 
including
 
the
 
status
 
of
 
our
 
risk
appetite objectives and the results of
 
firm-wide stress testing. The
Group Risk
 
Report is
 
distributed internally
 
to the
 
BoD and
 
the GEB,
and senior members of Risk Control, GIA, Finance and Legal. Risk
reports
 
are also
 
produced for
 
significant Group
 
entities (entities
subject
 
to
 
enhanced
 
standards
 
of
 
corporate
 
governance)
 
and
significant branches.
Granular divisional
 
risk reports
 
are provided
 
to the
 
respective
business
 
division
 
CROs
 
and
 
business
 
division
 
Presidents.
 
This
monthly reporting
 
is supplemented
 
with daily
 
or weekly reports,
at various levels
 
of granularity, covering
 
market and credit
 
risks for
the
 
business
 
divisions
 
to
 
enable
 
risk
 
officers
 
and
 
senior
management to monitor and control the Group’s risk profile.
Our internal
 
risk
 
reporting
 
covers
 
financial
 
and non-financial
 
risks
and is
 
supported by risk data
 
and measurement systems that are
also
 
used
 
for
 
external
 
disclosure
 
and
 
regulatory
 
reporting.
Dedicated
 
units
 
within
 
Risk
 
Control
 
assume
 
responsibility
 
for
measurement,
 
analysis and
 
reporting
 
of risk and
 
for overseeing
 
the
quality
 
and
 
integrity
 
of
 
risk-related
 
data.
 
Our
 
risk
 
data
 
and
measurement
 
systems
 
are
 
subject
 
to
 
periodic
 
review
 
by
 
GIA,
following a
 
risk-based
 
audit approach.
 
 
 
109
Model risk management
 
Introduction
We
 
rely
 
on
 
models
 
to
 
derive
 
risk
 
management
 
and
 
control
decisions,
 
to
 
measure
 
risks
 
or
 
exposures,
 
value
 
instruments
 
or
positions, conduct stress
 
testing, assess adequacy
 
of capital, and
manage clients’
 
assets and
 
our own
 
assets. Models
 
may also
 
be
used
 
to
 
measure
 
and
 
monitor
 
compliance
 
with
 
rules
 
and
regulations,
 
for
 
surveillance
 
activities,
 
or
 
to
 
meet
 
financial
 
or
regulatory reporting requirements.
 
Model risk is defined as
 
the risk of adverse consequences
 
(e.g.,
financial losses
 
or reputational
 
damage) resulting
 
from incorrect
models.
Model governance framework
Our
 
model
 
governance
 
framework establishes
 
requirements
 
for
identifying,
 
measuring,
 
monitoring,
 
reporting,
 
controlling
 
and
mitigating model risks. All
 
the models that we use
 
are subject to
governance
 
and
 
controls
 
throughout
 
their
 
life
 
cycles.
 
This
 
is
designed
 
to
 
ensure
 
that
 
risks
 
arising
 
from
 
model
 
use
 
are
identified,
 
understood,
 
managed,
 
monitored,
 
controlled
 
and
reported
 
on
 
both
 
a
 
model-specific
 
and
 
an
 
aggregated
 
level.
Before
 
they
 
can
 
be
 
granted
 
approval
 
for
 
use
 
from
 
the
 
model
sponsor,
 
all
 
our models
 
are
 
independently validated
 
across
 
four
model
 
risk
 
dimensions:
 
(i) model
 
input;
 
(ii) model
 
methodology;
(iii) model implementation; and (iv) model use.
 
Once
 
validated
 
and
 
approved
 
for
 
use,
 
a
 
model
 
is
 
subject
 
to
ongoing
 
model
 
performance
 
monitoring
 
and
 
annual
 
model
confirmation, ensuring that the model is only
 
used if it continues
to
 
be
 
found
 
fit
 
for
 
purpose.
 
All
 
models
 
are
 
subject
 
to
 
periodic
model re-validation, with
 
rigor, depth and frequency
 
determined
by the model’s materiality and complexity.
Our model risk
 
governance framework follows
 
our overarching
risk governance framework, with the three lines of defense (LoD)
assigned as follows.
–
 
First LoD:
 
model sponsors,
 
model owners,
 
model developers,
and model users
–
 
Second
 
LoD:
 
Chief
 
Model
 
Risk
 
Officer,
 
Model
 
Risk
Management & Control
–
 
Third LoD: Group Internal Audit
 
An important difference
 
as compared
 
with how LoD
 
are usually
defined in financial and non-financial risk
 
is that some models are
owned by traditionally second LoD functions, such
 
as risk control,
finance or compliance.
Model risk appetite framework and statement
The
 
model
 
risk
 
appetite
 
framework
 
sets
 
out
 
the
 
model
 
risk
appetite statement, defines the relevant
 
metrics and lays out how
appropriate adherence is assessed.
Model oversight
Model oversight committees and forums
 
ensure that model risk is
overseen
 
at
 
different
 
levels
 
of
 
the
 
organization,
 
appropriate
model risk management
 
and control actions
 
are taken and,
 
where
necessary, escalated to the next level.
 
The Group
 
Model Governance
 
Committee is
 
our most
 
senior
oversight and escalation
 
body for
 
all models
 
in scope
 
of our model
governance
 
framework.
 
It
 
is
 
co-chaired
 
by
 
the
 
Group CRO
 
and
the Group CFO and is
 
responsible for: (i) reviewing and approving
changes to the framework;
 
(ii) approving the model risk
 
appetite
statement;
 
(iii) overseeing
 
adherence
 
to
 
the
 
UBS
 
model
 
risk
governance framework; and (iv) monitoring
 
model risk at a
 
firm-
wide level.
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
110
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.
p
 
›
 
Refer to “Credit risk,” “Market risk” and “Non-financial
 
risk” in
this section for more information about model
 
confirmation
procedures
Stress testing
We perform stress
 
testing to
 
estimate losses that
 
could result from
extreme
 
yet
 
plausible
 
macroeconomic
 
and
 
geopolitical
 
stress
events to
 
identify,
 
better understand
 
and manage
 
our potential
vulnerabilities and risk
 
concentrations. Stress testing
 
has a
 
key role
in our
 
limits framework at
 
the firm-wide, business
 
division, legal
entity and portfolio
 
levels. Stress test results
 
are regularly reported
to
 
the
 
BoD
 
and
 
the
 
GEB.
 
As
 
described
 
in
 
“Risk
 
appetite
framework,”
 
stress
 
testing,
 
along with
 
statistical loss
 
measures,
has
 
a
 
central
 
role
 
in
 
our
 
risk
 
appetite
 
and
 
business
 
planning
processes.
Our
 
stress
 
testing
 
framework
 
has
 
three
 
pillars:
 
(i) combined
stress tests; (ii) an extensive set of portfolio-
 
and risk type-specific
stress tests; and (iii) reverse stress testing.
Our
combined stress testing
 
(CST) framework is
 
scenario-based
and
 
aims
 
to
 
quantify
 
overall
 
firm-wide
 
losses
 
that
 
could
 
result
from
 
various
 
potential
 
global
 
systemic
 
events.
 
The
 
framework
captures
 
all
 
material
 
risks,
 
as
 
covered
 
in
 
“Risk
 
categories.”
Scenarios
 
are
 
forward-looking
 
and
 
encompass
 
macroeconomic
and
 
geopolitical
 
stress
 
events
 
calibrated
 
to
 
different
 
levels
 
of
severity.
 
We
 
implement
 
each
 
scenario
 
through
 
the
 
expected
evolution of market indicators and economic variables under that
scenario
 
and
 
then
 
estimate
 
the
 
overall
 
loss
 
and
 
capital
implications were the scenario
 
to occur. At least
 
once a year, the
Risk Committee
 
approves the
 
most relevant
 
scenario, known
 
as
the binding scenario, for use as the main
 
scenario for regular CST
reporting and for monitoring risk
 
exposure against our minimum
capital, earnings and leverage ratio objectives in our risk appetite
framework.
 
We
 
provide
 
detailed
 
stress
 
loss
 
analyses
 
to
 
FINMA
 
and
regulators
 
of
 
our
 
legal
 
entities
 
in
 
accordance
 
with
 
their
requirements.
 
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.
 
For
 
example,
 
lower
 
GDP
growth and rising interest rates may reduce the income of clients
we have lent money to, which changes the credit risk parameters
for
 
probability
 
of
 
default,
 
loss
 
given
 
default
 
and
 
exposure
 
at
default,
 
and
 
results
 
in
 
higher
 
predicted
 
credit
 
losses
 
within
 
the
stress scenario.
 
We also
 
capture the
 
business risk
 
resulting from
lower
 
fee,
 
interest
 
and
 
trading
 
income
 
net
 
of
 
lower
 
expenses.
These
 
effects
 
are
 
measured
 
for
 
all
 
businesses
 
and
 
material
 
risk
types to calculate
 
the aggregate estimated effect
 
of the scenario
on
 
profit
 
or
 
loss,
 
other comprehensive
 
income,
 
RWA,
 
LRD and,
ultimately,
 
capital
 
and
 
leverage
 
ratios.
 
The
 
assumed
 
changes
 
in
macroeconomic variables are updated
 
periodically to account for
changes in the current and possible future market environment.
In 2021, the binding
 
scenario for CST was
 
the internal
Global
Crisis scenario
, which is characterized by a deterioration of global
economic conditions leading to sovereign
 
defaults in Europe and
a global recession.
 
The scenario was
 
updated over the
 
course of
2021
 
to
 
incorporate
 
current
 
risks
 
related
 
to
COVID
-
19
,
 
in
particular
 
macroeconomic
 
assumptions,
 
such
 
as
 
deteriorating
GDP and rising unemployment
.
 
Continued weakness in economic
data
 
and
 
tensions
 
between
 
European
 
countries
 
about
 
debt
mutualization undermines market confidence in the sustainability
of peripheral
 
debt, leading
 
to a
 
sharp spike
 
in bond
 
yields. Italy,
Spain,
 
Portugal
 
and
 
Cyprus
 
receive
 
bailout
 
packages,
 
on
 
the
condition
 
of
 
substantial
 
debt
 
restructuring,
 
while
 
Greece
 
leaves
the
 
Eurozone.
 
In
 
addition
 
to
 
the
 
effects
 
of
 
COVID-19,
 
the
macroeconomic
 
impact
 
is
 
severe,
 
as
 
is
 
the
 
immediate
 
market
impact.
 
Weak
 
consumer
 
and
 
business
 
confidence
 
and
 
a
 
fall
 
in
global trade as
 
a result of
 
protectionism lead to
 
a global recession.
China
 
is
 
hit
 
severely
 
by
 
trade
 
protectionism
 
and
 
a
 
confidence
shock, which lead to a hard landing
.
 
 
 
 
111
As part
 
of the
 
CST framework,
 
we routinely
 
monitored three
additional stress scenarios throughout 2021:
–
 
The
 
US Monetary Crisis
 
scenario
 
explores a loss of
 
confidence
in the
 
US, which
 
leads to
 
a sell-off
 
of US
 
dollar-denominated
assets, sparking an abrupt
 
and substantial depreciation of
 
the
US dollar. The US economy
 
is hit hard, financial markets
 
enter
a
 
period
 
of
 
high
 
volatility
 
and
 
other
 
industrialized
 
countries
replicate
 
the
 
cyclical
 
pattern
 
of
 
the
 
US.
 
Regional
 
inflation
trends
 
diverge
 
as
 
the
 
US
 
experiences
 
significant
 
inflationary
pressures while other developed markets experience deflation.
–
 
The
 
Severe Global Interest Rate Steepening
scenario explores a
sharp and persistent rise
 
in inflation leading
 
to a significant
 
rise
in long-term interest rates and a
 
period of market turbulence.
Economic activity slows across the globe as
 
both business and
household
 
sentiment
 
collapse,
 
while
 
credit
 
conditions
deteriorate.
 
Despite
 
weakness
 
in
 
activity,
 
inflation
 
remains
stubbornly
 
high,
 
forcing
 
central
 
banks
 
to
 
begin
 
hiking
 
their
policy rates and thereby prolonging the weakness in
 
economic
activity and asset prices.
–
 
The
 
Extreme
 
Coronavirus
scenario
 
explores
 
a
 
resurgence
 
of
COVID-19 and subsequent
 
containment policies, which
 
lead to
a severe global
 
downturn with long-term
 
scarring impacts. The
lack
 
of
 
adherence
 
to
 
containment
 
measures
 
leads
 
to
 
rapid
resurgences in the number of cases and
 
fatalities, which force
countries to
 
enforce increasingly
 
stringent lockdown
 
policies.
Vaccines prove to be ineffective in the
 
near term, due to either
logistical constraints
 
of vaccine distribution,
 
vaccine hesitancy
or virus variants undermining the efficacy of current vaccines.
 
 
We
 
have
 
updated
 
the
 
binding
 
stress
 
scenario
 
in
 
our
 
CST
framework for
 
2022. The
 
updated Global
 
Crisis scenario reflects
the
 
weaker
 
fiscal
 
conditions
 
resulting
 
from
 
the
 
COVID-19
pandemic, which leads
 
to sovereign defaults in
 
several emerging
markets. The scenario continues to
 
assume a Eurozone crisis and
a hard landing in China.
Portfolio-specific stress tests
 
are measures tailored to
 
the risks
of
 
specific
 
portfolios.
 
Our
 
portfolio
 
stress
 
loss
 
measures
 
are
derived
 
from
 
data
 
on
 
past
 
events,
 
but
 
also
 
include
 
forward-
looking
 
elements
 
(
e.g.,
 
we
 
derive
 
the
 
expected
 
market
movements
 
in
 
our
 
liquidity-adjusted
 
stress
 
metric
 
using
 
a
combination of
 
historical market
 
behavior, based
 
on an
 
analysis
of
 
historical
 
events,
 
and
 
forward-looking
 
analysis,
 
including
consideration of defined scenarios not
 
modeled on any historical
events). Results of portfolio-specific stress tests may be subject to
limits to explicitly
 
control risk-taking or
 
may be monitored
 
without
limits to identify vulnerabilities.
Reverse
 
stress
 
testing
 
starts
 
from
 
a
 
defined
 
stress
 
outcome
(e.g.,
 
a
 
specified
 
loss
 
amount,
 
reputational
 
damage,
 
a
 
liquidity
shortfall
 
or
 
a
 
breach
 
of
 
regulatory
 
capital
 
ratios)
 
and
 
works
backward to
 
identify economic
 
or financial
 
scenarios that
 
could
result
 
in
 
such
 
an
 
outcome.
 
As
 
such,
 
reverse
 
stress
 
testing
 
is
intended to complement scenario-based
 
stress tests by assuming
“what if” outcomes
 
that could extend
 
beyond the range
 
normally
considered,
 
and
 
thereby
 
potentially
 
challenge
 
assumptions
regarding severity and plausibility.
 
We also routinely
 
analyze the effect
 
of increases
 
or decreases
in interest rates and changes in the structure of yield curves.
Within
 
Group
 
Treasury,
 
we
 
also
 
perform
 
stress
 
testing
 
to
determine the
 
optimum asset
 
and liability
 
structure, enabling
 
us
to
 
maintain
 
an
 
appropriately
 
balanced
 
liquidity
 
and
 
funding
position under
 
various scenarios.
 
These scenarios
 
differ from
 
those
outlined
 
above,
 
because
 
they
 
focus
 
on
 
specific
 
situations
 
that
could
 
generate
 
liquidity
 
and
 
funding
 
stress,
 
as
 
opposed
 
to
 
the
scenarios used
 
in the CST
 
framework, which focus
 
on the effect
on profit or loss and capital.
›
 
Refer to “Credit risk” and “Market risk” in this section
 
for more
information about stress loss measures
›
 
Refer to the “Capital, liquidity and funding,
 
and balance sheet”
section of this report for more information about
 
stress testing
Statistical measures
We
 
complement
 
the
 
scenario-based
 
CST
 
measures
 
with
 
our
statistical stress framework to calculate and aggregate risks using
statistical techniques to derive stress events at chosen confidence
levels.
This framework is
 
used to
 
derive a
 
loss distribution, considering
effects on both income and expenses, based on the simulation
 
of
historically
 
observed
 
financial
 
and
 
economic
 
risk
 
factors
 
in
combination
 
with
 
the
 
firm’s
 
actual
 
earnings
 
and
 
relevant
 
risk
exposures.
 
From
 
that,
 
we
 
determine
 
earnings-at-risk
 
(EaR),
measuring
 
the potential
 
shortfall
 
in earnings
 
(i.e.,
 
the
 
deviation
from forecast earnings) at a 95% confidence
 
level and evaluated
over
 
a
 
one-year horizon.
 
EaR
 
is used
 
for
 
the assessment
 
of
 
the
earnings objectives in our risk appetite framework.
We extend the EaR measure, incorporating
 
the effects of gains
and losses
 
recognized through
 
other comprehensive
 
income, to
derive
 
a
 
distribution
 
of
 
potential
 
effects
 
of
 
stress
 
events
 
on
common equity tier 1
 
capital. From
 
this distribution, we
 
derive our
capital-at-risk (CaR) buffer measure at a 95%
 
confidence level to
assess our capital and
 
leverage ratio risk
 
appetite objectives, and
derive our CaR solvency
 
measure at a 99.9%
 
confidence level to
assess our solvency risk appetite objective.
We use
 
the CaR
 
solvency measure
 
as a
 
basis for
 
deriving the
contributions of the business divisions to risk-based capital (RBC),
which is
 
a component of
 
our equity attribution
 
framework. RBC
measures the potential capital impairment from an
 
extreme stress
event at a 99.9% confidence level.
›
 
Refer to the “Capital, liquidity and funding,
 
and balance sheet”
section of this report for more information about
 
the equity
attribution framework
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
112
Portfolio and position limits
UBS maintains a
 
comprehensive set of
 
risk limits across
 
its major
risk
 
portfolios.
 
These
 
portfolio
 
limits
 
are
 
set
 
based
 
on
 
our
 
risk
appetite
 
and
 
periodically
 
reviewed
 
and
 
adjusted
 
as
 
part
 
of
 
the
business planning process.
Firm-wide
 
stress and
 
statistical metrics
 
are
 
complemented by
more granular
 
portfolio and
 
position limits,
 
triggers and
 
targets.
Combining
 
these
 
measures
 
provides
 
a
 
comprehensive
 
control
framework
 
to
 
apply
 
to
 
our
 
business
 
divisions,
 
as
 
well
 
as
 
the
significant legal
 
entities, as
 
relevant to
 
the key
 
risks arising
 
from
their businesses.
We apply
 
limits to
 
a variety
 
of exposures
 
at portfolio
 
level, using
statistical
 
and
 
stress-based
 
measures,
 
such
 
as
 
value-at-risk,
liquidity-adjusted stress, loan underwriting limits, economic value
sensitivity and portfolio default simulations for loan books. These
are complemented
 
with a set
 
of controls for
 
net interest income
sensitivity, mark-to-market
 
losses on
 
available-for-sale portfolios,
and
 
the
 
effect
 
of
 
foreign
 
exchange
 
movements
 
on
 
capital
 
and
capital ratios.
Portfolio
 
measures
 
are
 
supplemented
 
with
 
position-level
controls. Risk measures for position controls are based on market
risk
 
sensitivities
 
and
 
counterparty-level
 
credit
 
risk
 
exposures.
Market risk sensitivities include sensitivities to
 
changes in general
market
 
risk
 
factors
 
(e.g.,
 
equity
 
indices,
 
foreign
 
exchange
 
rates
and interest rates)
 
and sensitivities to
 
issuer-specific factors (e.g.,
changes in
 
an issuer’s
 
credit spread
 
or default
 
risk). We
 
monitor
numerous
 
market
 
and
 
treasury
 
risk
 
controls
 
on
 
a
 
daily
 
basis.
Counterparty measures
 
capture the
 
current and
 
potential future
exposure to an individual counterparty, considering collateral and
legally enforceable netting agreements.
 
›
 
Refer to “Credit risk” in this section for more information
 
about
counterparty limits
 
›
 
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 the provider of
 
the hedge
and market liquidity where the hedge might be traded. Particular
attention is given
 
to identification of
 
wrong-way risk and
 
risk on
risk. Wrong-way risk
 
is defined as
 
a positive correlation
 
between
the size of
 
the exposure and the
 
likelihood of a
 
loss. Risk on
 
risk
is when a position and
 
its risk mitigation can be impacted
 
by the
same event.
For non-financial risks, risk concentrations may result from,
 
for
example,
 
a single
 
operational
 
risk issue
 
that is
 
large on
 
its
 
own
(i.e., has
 
the potential
 
to produce
 
a single
 
high-impact loss
 
or a
number
 
of
 
losses
 
that
 
together are
 
high
 
impact)
 
or
 
related
 
risk
issues that may link together to create a high impact.
Risk concentrations
 
are subject
 
to increased
 
oversight by
 
Group
Risk Control
 
and Group
 
Compliance, Regulatory
 
& Governance,
and
 
assessed
 
to
 
determine
 
whether
 
they
 
should
 
be
 
reduced
 
or
mitigated,
 
depending
 
on
 
the
 
available
 
means
 
to
 
do
 
so.
 
It
 
is
possible
 
that
 
material
 
losses
 
could
 
occur
 
on
 
financial
 
or
 
non-
financial
 
risks,
 
particularly
 
if
 
the
 
correlations
 
that
 
emerge
 
in
 
a
stressed environment differ
 
markedly from those
 
envisaged by risk
models.
p
 
›
 
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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
113
Credit risk
Key developments
In
 
Global
 
Wealth
 
Management
,
 
the
 
Lombard
 
and
 
mortgage
books showed
 
significant growth
 
primarily in
 
the Americas
 
over
the course of 2021,
 
while keeping a stable
 
risk profile with regard
to concentrations and with no material losses.
Across
 
the
 
firm,
 
our
 
lending
 
portfolios performed
 
well,
 
with
c
redit
 
loss
 
expenses
 
below
 
expectations
.
 
Nevertheless,
 
we
continue to
 
be exposed
 
to the development
 
of the global
 
economy
and
 
the
 
effects of
 
the
 
ongoing and
 
highly
 
uncertain COVID-19
pandemic.
 
We incurred a loss of USD 861 million in the
 
first half of 2021
on
 
the
 
default
 
of
 
a
 
US-based
 
client
 
of
 
our
 
prime
 
brokerage
business. We have conducted a thorough review and put in
 
place
appropriate
 
measures
 
to
 
strengthen
 
our
 
relevant
 
client
onboarding and
 
risk management
 
and control
 
processes. Across
the items
 
identified for
 
remediation and
 
beyond, we
 
have made
changes to our organization to drive wider improvements in both
first and
 
second lines
 
of defense.
 
Our prime
 
brokerage business
remains a strategic element of UBS’s offering.
Credit loss expense / release
Total
 
net
 
credit
 
loss
 
releases
 
were
 
USD 148
 
million
 
in
 
2021,
compared with net credit loss expenses of USD 694 million in the
prior
 
year,
 
reflecting
 
net
 
releases
 
of
 
USD 123
 
million
 
related
 
to
stage 1 and 2 positions
 
and net releases of
 
USD 25 million related
to credit-impaired (stage 3) positions.
Stage 1
 
and
 
2
 
net
 
credit
 
loss
 
releases
 
of
 
USD 123
 
million
 
in
2021 included a partial net
 
release of a post-model adjustment
 
of
USD 68
 
million,
 
due
 
to
 
the
 
continued
 
positive
 
trend
 
in
macroeconomic
 
scenario
 
input
 
data
 
during
 
the
 
year,
 
a
 
USD 45
million
 
net
 
release
 
from
 
a
 
number
 
of
 
model
 
and
 
methodology
changes,
 
a
 
residual
 
USD 10
 
million
 
net
 
release
 
from
remeasurements
 
within
 
the
 
loan
 
book,
 
and
 
derecognized
transactions, partially
 
offset by
 
expenses from
 
new transactions.
Stage 3 net
 
releases of USD 25
 
million were
 
recognized across a
number
 
of
 
defaulted
 
positions,
 
primarily
 
corporate
 
lending
positions in Personal & Corporate Banking.
›
 
Refer to “Note 1 Summary of material accounting
 
policies,”
“Note 9 Financial assets at amortized cost
 
and other positions in
scope of expected credit loss measurement” and “Note
 
20
Expected credit loss measurement”
 
in the “Consolidated
 
financial
statements”
 
section of this report for more information about
IFRS 9 and expected credit losses
Audited |
 
Main sources of credit risk
 
–
 
Global
 
Wealth
 
Management
 
predominant
ly
 
conduct
s
 
securities-based (Lombard) lending and mortgage lending.
 
–
 
A substantial portion of lending exposure arises from Personal
&
 
Corporate
 
Banking,
 
which
 
offers
 
mortgage
 
loans,
 
secured
mainly
 
by
 
residential
 
properties
 
and
 
income-producing
 
real
estate, as
 
well as
 
corporate loans,
 
and therefore
 
depends on
the performance of the Swiss economy.
–
 
The
 
Investment
 
Bank’s
 
credit
 
exposure
 
arises
 
mainly
 
from
lending,
 
derivatives
 
trading
 
and
 
securities
 
financing.
Derivatives
 
tra
ding
 
and
 
securities
 
financing
 
are
mainly
investment
 
grade.
 
Loan
 
underwriting
 
activity
 
can
 
be
 
lower
rated and give rise to temporary concentrated exposure.
–
 
Credit
 
risk
 
within
 
Non-core
 
and
 
Legacy
 
Portfolio
 
relates
 
to
derivative transactions and securitized positions.
p
 
 
 
Credit loss (expense) / release
USD million
Global
 
Wealth
 
Management
Personal &
 
Corporate
 
Banking
Asset
Management
Investment
 
Bank
Group
 
Functions
Total
For the year ended 31.12.21
Stages 1 and 2
 
28
 
62
 
0
 
34
 
0
 
123
Stage 3
 
1
 
24
 
(1)
 
0
 
0
 
25
Total credit loss (expense) / release
 
29
 
86
 
(1)
 
34
 
0
 
148
For the year ended 31.12.20
Stages 1 and 2
 
(48)
 
(129)
 
0
(88)
 
0
(266)
Stage 3
 
(40)
 
(128)
 
(2)
(217)
 
(42)
(429)
Total credit loss (expense) / release
 
(88)
 
(257)
 
(2)
 
(305)
 
(42)
 
(694)
For the year ended 31.12.19
Stages 1 and 2
 
3
 
23
 
0
 
(4)
 
0
 
22
Stage 3
 
(23)
 
(44)
 
0
 
(26)
 
(7)
 
(100)
Total credit loss (expense) / release
 
(20)
 
(21)
 
0
 
(30)
 
(7)
 
(78)
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
114
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 BoD
and
 
are
 
delegated
 
to
 
the
 
Group
 
CEO,
 
the
 
Group
 
CRO
 
and
divisional
 
CROs,
 
based
 
on
 
risk
 
exposure
 
amounts,
 
internal
credit rating and potential for losses.
–
 
Limits apply
 
not only
 
to the
 
current outstanding
 
amount but
also
 
to
 
contingent
 
commitments
 
and
 
the
 
potential
 
future
exposure of traded products.
–
 
The
 
Investment
 
Bank
 
monitoring,
 
measurement
 
and
 
limit
framework
 
distinguishes
 
between
 
exposures
 
intended
 
to
 
be
held to maturity (take-and-hold
 
exposures) and those intended
for distribution or risk transfer (temporary exposures).
–
 
We
 
use
 
models
 
to
 
derive
 
portfolio
 
credit
 
risk
 
measures
 
of
expected loss, statistical loss and stress
 
loss at Group-wide and
business division levels, and to establish portfolio limits.
–
 
Credit
 
risk
 
concentrations
 
can
 
arise
 
if
 
clients
 
are
 
engaged
 
in
similar
 
activities,
 
located
 
in
 
the
 
same
 
geographical
 
region
 
or
have comparable economic
 
characteristics, e.g., if
 
their ability
to meet contractual obligations would be
 
similarly affected by
changes
 
in
 
economic,
 
political
 
or
 
other
 
conditions.
 
To
 
avoid
credit
 
risk
 
concentrations,
 
we
 
establish
 
limits
 
/
 
operational
controls that constrain
 
risk concentrations
 
at portfolio and
 
sub-
portfolio
 
levels
 
for
 
sector
 
exposure,
 
country
 
risk
 
and
 
specific
product exposures.
p
 
Credit risk profile of the Group
The exposures detailed
 
in this
 
section are based
 
on management’s
view
 
of
 
credit
 
risk,
 
which
 
differs
 
in
 
certain
 
respects
 
from
 
the
expected credit loss (ECL) measurement requirements of IFRS.
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.
Banking products
Breakdowns of banking products
 
exposures in the “Banking
 
and
traded
 
products
 
exposure
 
in
 
our
 
business
 
divisions
 
and
 
Group
Functions”
 
table
 
on
 
the
 
next
 
page
 
reflect
 
the
 
total
 
exposures
within
 
the
 
scope
 
of
 
ECL
 
requirements
 
and
 
are
 
gross
 
before
allowances and provisions for ECL and credit hedges. Guarantees
and
 
loan
 
commitments are
 
shown on
 
a notional
 
basis, without
applying credit conversion factors.
›
 
Refer to “Note 1 Summary of material accounting
 
policies” in the
“Consolidated financial statements” section
 
of this report for
more information about our accounting policy
 
for allowances
and provisions for ECL
›
 
Refer to “Note 9 Financial assets at amortized
 
cost and other
positions in scope of expected credit loss measurement”
 
and
“Note 20 Expected credit loss measurement” in the
“Consolidated financial statements” section
 
of this report for
more information about ECL measurement requirements
 
under IFRS
›
 
Refer to “Note 14a Other financial assets
 
measured at amortized
cost” in the “Consolidated financial
 
statements” section of this
report for more details
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
115
Banking and traded products exposure in our business divisions and Group Functions
31.12.21
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
 
Management
Investment
 
Bank
Group
Functions
Total
Banking products
1,2
Gross exposure
337,266
229,334
1,520
59,352
65,514
692,985
of which: loans and advances to customers (on-balance sheet)
228,598
152,847
0
13,720
3,445
398,611
of which: guarantees and loan commitments (off-balance sheet)
10,772
29,737
0
14,994
4,947
60,450
Traded products
2,3
Gross exposure
9,582
783
0
35,950
46,314
of which: over-the-counter derivatives
7,186
766
0
9,767
17,719
of which: securities financing transactions
0
0
0
18,566
18,566
of which: exchange-traded derivatives
2,396
17
0
7,617
10,030
Other credit lines, gross
4
12,947
24,174
0
3,629
28
40,778
Total credit-impaired exposure, gross (stage 3)
1
729
1,617
0
264
0
2,610
Total allowances and provisions for expected credit losses (stages 1 to 3)
264
709
0
188
4
1,165
of which: stage 1
89
126
0
64
4
282
of which: stage 2
41
146
0
34
0
220
of which: stage 3 (allowances and provisions for credit-impaired
 
exposures)
135
438
0
90
0
662
31.12.20
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
 
Management
Investment
 
Bank
Group
Functions
Total
Banking products
1,2
Gross exposure
300,368
227,139
3,374
56,237
52,199
639,317
of which: loans and advances to customers (on-balance sheet)
208,324
153,975
1
13,964
4,324
380,589
of which: guarantees and loan commitments (off-balance sheet)
10,153
28,814
0
15,936
3,550
58,453
Traded products
2,3
Gross exposure
9,919
1,201
0
40,215
51,335
of which: over-the-counter derivatives
6,946
1,182
0
11,236
19,364
of which: securities financing transactions
0
0
0
21,753
21,753
of which: exchange-traded derivatives
2,973
19
0
7,227
10,218
Other credit lines, gross
4
12,201
24,950
0
2,952
31
40,134
Total credit-impaired exposure, gross (stage 3)
1
1,324
1,997
0
450
7
3,778
Total allowances and provisions for expected credit losses (stages 1 to 3)
318
842
1
298
10
1,468
of which: stage 1
103
130
0
70
3
306
of which: stage 2
54
216
0
63
0
333
of which: stage 3 (allowances and provisions for credit-impaired
 
exposures)
160
497
1
165
6
829
1 ECL gross exposure including other financial
 
assets at amortized cost, but excluding cash,
 
receivables from securities financing transactions,
 
cash collateral receivables on derivative
 
instruments, financial assets at
FVOCI, irrevocable committed prolongation
 
of existing loans and
 
unconditionally revocable committed credit lines
 
and forward starting reverse repurchase
 
and securities borrowing agreements.
 
2 Internal management
view of credit risk,
 
which differs in certain
 
respects from IFRS.
 
3 As counterparty
 
risk for traded
 
products is managed at
 
counterparty level, no
 
further split between exposures
 
in the Investment Bank
 
and Group
Functions is provided.
 
4 Unconditionally revocable committed credit lines.
 
 
Global Wealth Management
Gross
 
banking
 
products
 
exposure
 
within
 
Global
 
Wealth
Management increased to USD 337 billion from USD 300 billion.
 
Our
 
Global
 
Wealth
 
Management
 
loan
 
portfolio
 
is
 
mainly
secured
 
by
 
securities
 
(Lombard
 
loans)
 
and
 
by
 
residential
 
real
estate. Most Lombard loans were of high quality, with
 
93% rated
as
 
investment
 
grade
 
based
 
on
 
our
 
internal
 
ratings,
 
and
 
are
typically short term in nature, with an average loan-to-value (LTV)
of 46%.
 
Moreover, Lombard
 
loans can
 
be canceled
 
immediately
if the collateral quality deteriorates and
 
margin calls are not met.
In 2021, the Lombard book, including traded products, increased
approximately 10%,
 
while keeping
 
a stable
 
risk profile
 
with regard
to collateral concentrations
 
with no material
 
losses. The increase
was
 
mainly
 
driven
 
by
 
higher
 
loan
 
volumes
 
in
 
the
 
US
 
that
 
are
collateralized by highly liquid and
 
diversified securities. The share
of
 
non-standard Lombard
 
loans, for
 
example
 
with less
 
liquid or
concentrated
 
collateral,
 
was stable
 
at
 
approximately
 
4%
 
of
 
the
total Lombard book.
The mortgage book increased by approximately 8%, driven by
higher volumes of mortgage loans
 
in the US residential
 
real estate
portfolios (average LTV 51%).
Other
 
financings
 
and
 
non-standard
 
loans
 
represent
approximately 3%
 
of the
 
total banking
 
products exposures
 
and
are consolidated in a corporate and other portfolio
 
that increased
approximately
 
57%
 
in
 
2021,
 
mainly
 
driven
 
by
 
private
 
equity
subscription
 
facilities
 
in
 
the
 
US,
 
which
 
are
 
mostly
 
investment
grade rated.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
116
Global Wealth Management and Personal & Corporate Banking loans and advances to customers, gross
1
Global Wealth Management
Personal & Corporate Banking
USD million
31.12.21
31.12.20
31.12.21
31.12.20
Secured by residential real estate
58,655
60,021
110,041
111,554
Secured by commercial / industrial real estate
3,338
3,273
18,878
19,623
Secured by cash
34,175
22,722
3,114
2,860
Secured by securities
115,901
104,652
2,214
2,003
Secured by guarantees and other collateral
14,138
15,605
7,435
6,942
Unsecured loans and advances to customers
2,391
2,051
11,166
10,994
Total loans and advances to customers, gross
228,598
208,324
152,847
153,975
Allowances
(168)
(190)
(574)
(676)
Total loans and advances to customers, net of allowances
228,431
208,134
152,273
153,299
1 Collateral arrangements generally incorporate
 
a range of collateral, including
 
cash, securities, real estate
 
and other collateral. UBS applies a
 
risk-based approach that generally prioritizes collateral
 
according to its
liquidity profile. In 2021, the collateral allocation was refined
 
to reflect additional cash collateral and custody accounts
 
that are also available as security for
 
certain on-balance sheet lending. This resulted in an
 
increase
in loans secured by cash, with an offsetting reduction in loans secured by residential real estate and loans secured by securities.
 
Personal
 
& Corporate
 
Banking
 
Gross
 
banking
 
products
 
exposure
 
(excluding
 
exposure
 
re-
allocated
 
from
 
Group
 
Treasury)
 
within
 
Personal
 
&
 
Corporate
Banking
 
was
 
largely
 
unchanged
 
in
 
our
 
reporting
 
currency
 
at
USD
 
18
6
 
billion
(CHF
 
170
billion)
,
 
compared
with
 
USD
 
187
billion
 
(CHF 165
 
billion).
 
Net
 
banking
 
products
 
exposure
 
was
USD
 
186
billion
 
(CHF
 
16
9
 
billion)
,
compared
 
with
 
USD
 
1
86
 
billion
 
(CHF
 
16
5
 
billion)
,
 
of
 
which
 
approximately
65
%
 
was
classified
 
as investment
 
grade,
 
unchanged
 
from
 
2020.
 
Around
50% of
 
the exposure
 
is categorized
 
in the
 
lowest
 
LGD bucket
 
,
i.e.,
 
0–25%,
 
similar
 
to
 
2020.
 
Personal
 
&
 
Corporate
 
Banking’s
gross
 
loan
 
portfolio
 
was
 
USD
 
15
3
 
billion
 
(CHF
 
13
9
 
billion)
 
compared
 
with
 
USD 154
 
billion
 
(CHF 136
 
billion)
 
in 2020.
 
This
portfolio
 
is predominantly
 
denominated
 
in Swiss
 
francs and
 
the
increase in
 
Swiss franc term
 
s
 
was more than offset
 
by the effect
of the US dollar appreciating
 
.
 
As of 31 December
 
2021, 93% of
this
 
portfolio
 
was
 
secured
 
by
 
collateral,
 
mainly
 
residential
 
and
commercial
 
property.
 
Of
 
the
 
total
 
unsecured
 
amount,
 
83%
related
 
to cash
 
flow-based
 
lending
 
to corporate
 
counterparties
and
 
4%
 
related
 
to
 
lending
 
to public
 
authorities.
 
Based
 
on our
internal ratings,
 
50% of the unsecured
 
loan portfolio
 
was rated
as investment
 
grade, compared
 
with 45% in
 
2020.
The improved macroeconomic
 
environment for most
 
industries
along with
 
the supporting
 
measures of
 
the Swiss
 
Government and
Cantons, such as
 
COVID-19 loans, short-time
 
work compensation
and
 
subsidies,
 
as
 
well
 
as
 
our
 
careful
 
risk
 
management,
 
led
 
to
numerous credit loss releases during 2021.
 
Our
 
Swiss
 
corporate
 
banking
 
products
 
portfolio,
 
which
 
was
USD 36
 
billion
 
(CHF 33
 
billion)
 
compared
 
with
 
USD 35
 
billion
(CHF 31 billion)
 
in 2020,
 
consists of
 
loans, guarantees
 
and loan
commitments to multi-national and domestic counterparties. The
small and
 
medium-sized entity
 
(SME) portfolio,
 
in particular,
 
is well
diversified across industries. However, such companies
 
are reliant
on
 
the
 
domestic
 
economy
 
and
 
the
 
economies
 
to
 
which
 
they
export, in particular the EU and
 
the US. In addition, the change
 
in
the EUR / CHF exchange rate is an important
 
risk factor for Swiss
corporate clients.
Our commodity trade finance portfolio focuses on energy and
base-metal trading
 
companies,
 
where the related
 
commodity price
risk
 
is
 
hedged
 
to
 
a
 
large
 
extent
 
by
 
the
 
commodity trader.
 
The
majority of
 
limits in
 
this business
 
are uncommitted, transactional
and
 
short-term
 
in
 
nature.
 
Our
 
portfolio
 
size
 
was
 
USD 8
 
billion
(CHF 7
 
billion)
 
as
 
of
 
31 December 2021,
 
compared with
 
USD 6
billion (CHF
 
5 billion) in
 
2020, with the
 
increase in
 
exposure mainly
driven by
 
the strong
 
appreciation
 
of commodity
 
prices in
 
2021.
Our exposure to
 
banks consists primarily
 
of contingent claims
and was USD 6 billion (CHF 5 billion), unchanged compared with
2020.
The
 
delinquency ratio
 
was 0.3%
 
for
 
the
 
corporate
 
portfolio,
compared with 0.4% at the end of 2020.
 
›
 
Refer to “Credit risk models” in this section
 
for more information
about loss given default, rating grades and
 
rating agency
mappings
Swiss mortgage loan portfolio
Our
 
Swiss
 
mortgage
 
loan
 
portfolio
 
secured
 
by
 
residential
 
and
commercial real estate in Switzerland
 
continues to be our largest
loan
 
portfolio.
 
These
 
mortgage
 
loans,
 
totaling
 
USD 167
 
billion
(CHF 152
 
billion),
 
mainly
 
originate
 
from
 
Personal
 
&
 
Corporate
Banking,
 
but
 
also
 
from
 
Global
 
Wealth
 
Management
 
Region
Switzerland. Of these mortgage
 
loans, USD 152 billion (CHF 138
billion)
 
related
 
to
 
residential
 
properties
 
that
 
the
 
borrower
 
was
either
 
occupying
 
or
 
renting
 
out,
 
with
 
full
 
recourse
 
to
 
the
borrower.
 
Of
 
this
 
USD 152
 
billion
 
(CHF 138
 
billion),
 
USD 110
billion
 
(CHF 100 billion)
 
is related
 
to properties
 
occupied by
 
the
borrower, with an average
 
LTV ratio of 52%,
 
compared with 54%
as of
 
31 December 2020.
 
The average
 
LTV
 
for newly
 
originated
loans for
 
this portfolio
 
was 64%,
 
compared with
 
67% in
 
2020.
The
 
remaining
 
USD
 
4
2
 
bi
llion
 
(CHF
 
38
 
billion)
 
of
 
the
 
Swiss
residential
 
mortgage
 
loan
 
portfolio
 
related
 
to
 
properties
 
rented
out by
 
the borrower
 
and the
 
average LTV
 
of that
 
portfolio was
52%, compared with 53%
 
as of 31 December 2020.
 
The average
LTV
 
for
 
newly
 
originated
 
Swiss
 
residential
 
mortgage
 
loans
 
for
properties rented out by
 
the borrower was 55%, compared
 
with
56% in 2020.
As
 
illustrated
 
in
 
the
 
“Swiss
 
mortgages:
 
distribution
 
of
 
net
exposure at default (EAD) across exposure segments and loan-to-
value (LTV) buckets” table
 
on the following
 
page, more than
 
99%
of
 
the
 
aggregate
 
amount
 
of
 
Swiss
 
residential
 
mortgage
 
loans
would continue to be covered by the real estate
 
collateral even if
the value
 
assigned to
 
that collateral were
 
to decrease 20%,
 
and
more than 98%
 
would remain covered
 
by the
 
real estate collateral
even if the
 
value assigned
 
to that
 
collateral were to
 
decrease 30%.
In this
 
table, the
 
amount of
 
each mortgage loan
 
is allocated
 
across
the LTV buckets to indicate the portion at
 
risk at the various value
levels shown; for example, a loan of 75 with an LTV ratio of 75%
(i.e., a collateral value of 100) would result in allocations of
 
30 in
the less-than-30%
 
LTV bucket, 20
 
in the
 
31–50% bucket,
 
10 in
the 51–60% bucket, 10 in
 
the 61–70% bucket and 5 in
 
the 71–
80% bucket.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
117
Personal & Corporate Banking: distribution of banking products exposure across internal UBS ratings and loss given
default (LGD) buckets
1
USD million, except where indicated
31.12.21
31.12.20
LGD buckets
Weighted
average
LGD (%)
Weighted
average
LGD (%)
Internal UBS rating
2
Exposure
0–25%
26–50%
51–75%
76–100%
Exposure
Investment grade
121,520
68,547
41,738
9,347
1,889
27
121,386
26
Sub-investment grade
63,141
24,301
25,306
11,646
1,888
34
63,266
33
of which: 6−9
57,955
22,540
23,195
10,513
1,706
34
58,141
33
of which: 10−13
5,185
1,760
2,110
1,133
181
36
5,125
35
Defaulted / Credit-impaired
 
1,617
32
1,332
252
0
42
1,997
41
Total exposure before deduction of allowances and provisions
186,278
92,880
68,376
21,245
3,777
29
186,648
29
Less: allowances and provisions
(674)
(795)
Net banking products exposure
1
185,604
185,853
1 Excluding balances at central banks and Group Treasury
 
reallocations.
 
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.
 
Personal & Corporate Banking: unsecured loans by industry sector
31.12.21
31.12.20
USD million
%
USD million
%
Construction
166
1.5
157
1.4
Financial institutions
2,786
25.0
2,553
23.2
Hotels and restaurants
119
1.1
133
1.2
Manufacturing
1,555
13.9
1,572
14.3
Private households
1,488
13.3
1,648
15.0
Public authorities
419
3.8
472
4.3
Real estate and rentals
574
5.1
498
4.5
Retail and wholesale
1,971
17.7
1,756
16.0
Services
1,908
17.1
1,896
17.3
Other
180
1.6
309
2.8
Exposure, gross
11,166
100.0
10,994
100.0
 
Swiss mortgages: distribution of net exposure at default (EAD) across exposure segments and loan-to-value (LTV)
buckets
USD billion, except where indicated
31.12.21
31.12.20
LTV buckets
Exposure segment
≤30%
31–50%
51–60%
61–70%
71–80%
81–100%
>100%
Total
Total
Residential mortgages
Net EAD
89.0
38.6
10.2
4.6
1.2
0.2
0.1
143.9
143.9
as a % of row total
62
27
7
3
1
0
0
Income-producing real estate
Net EAD
14.5
5.7
1.3
0.5
0.2
0.0
0.0
22.2
22.8
as a % of row total
65
25
6
2
1
0
0
Corporates
Net EAD
7.1
2.6
0.7
0.4
0.2
0.1
0.0
10.9
10.8
as a % of row total
65
23
6
3
1
1
0
Other segments
Net EAD
0.6
0.2
0.0
0.0
0.0
0.0
0.0
0.9
0.8
as a % of row total
68
20
5
3
2
2
0
Mortgage-covered exposure
Net EAD
111.2
47.0
12.2
5.5
1.5
0.3
0.1
177.9
178.3
as a % of total
63
26
7
3
1
0
0
Mortgage-covered exposure 31.12.20
Net EAD
108.8
47.3
13.0
6.4
2.0
0.5
0.2
178.3
as a % of total
61
27
7
4
1
0
0
100
 
Asset Management
Gross banking products exposure within Asset Management was
USD 1.5 billion as of 31
 
December 2021, compared with USD
 
3.4
billion
 
as
 
of
 
31 December
 
2020.
 
The
 
reduction
 
was
 
driven
 
by
lower allocated balances at central banks.
 
Investment Bank
The
 
Investment
 
Bank’s
 
lending
 
activities
 
are
 
largely
 
associated
with corporate
 
and non-bank
 
financial institutions.
 
The business
is broadly
 
diversified across industry
 
sectors, but concentrated
 
in
North America.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
118
The
 
gross
 
banking
 
products
 
exposure
 
including
 
balances
 
at
central banks and
 
Group Treasury
 
reallocations was USD 59
 
billion
as
 
of
 
31 December
 
2021,
 
compared
 
with
 
USD 56
 
billion
 
as
 
of
31 December 2020.
 
Gross banking
 
products exposure
 
excluding
balances
 
at
 
central
 
banks
 
and
 
Group
 
Treasury
 
reallocations
decreased to USD 35 billion from
 
USD 37 billion, mostly driven by
decreases in irrevocable loan commitments.
 
Based on our internal
ratings,
 
53%
 
of
this
gro
ss
 
banking
products
exposure
 
was
classified
 
as
 
investment
 
grade.
 
The
 
vast
 
majority
 
of
 
the
 
gross
banking products exposure had an estimated LGD below 50%.
 
Our
 
loan
 
underwriting
 
business’s
 
overall
 
ability
 
to
 
distribute
risk
 
remained
 
sound.
Total
mandated
t
emporary
 
loan
underwriting exposure ended 2021 at USD 6.6
 
billion, compared
with
USD
 
4.
9
billion
 
at
 
the
 
end
 
of
 
the
prior
year
.
 
Loan
underwriting exposures are classified as held for trading,
 
with fair
values reflecting market conditions at the end of 2021.
›
 
Refer to “Credit risk models” in this section
 
for more information
about LGD, rating grades and rating
 
agency mappings
 
Investment Bank: distribution of banking products exposure across internal UBS ratings and loss given default (LGD)
buckets
1
USD million, except where indicated
31.12.21
31.12.20
LGD buckets
Weighted
average
LGD (%)
Weighted
average
LGD (%)
Internal UBS rating
2
Exposure
0–25%
26–50%
51–75%
76–100%
Exposure
Investment grade
18,302
6,486
7,673
3,069
1,073
36
19,303
36
Sub-investment grade
16,250
5,022
6,111
5,020
97
20
16,785
17
of which: 6−9
10,467
3,269
2,163
4,938
97
14
12,030
11
of which: 10−13
5,783
1,753
3,948
82
0
31
4,756
30
Defaulted / Credit-impaired
264
58
196
9
0
33
450
53
Banking products exposure
1
34,815
11,566
13,981
8,098
1,170
28
36,538
27
1 Excluding balances at central banks and Group Treasury
 
reallocations.
 
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.
 
 
 
Investment Bank: banking products exposure by geographical region
1
31.12.21
31.12.20
USD million
%
USD million
%
Asia Pacific
5,154
14.8
7,216
19.7
Latin America
1,327
3.8
1,584
4.3
Middle East and Africa
212
0.6
428
1.2
North America
16,282
46.8
15,462
42.3
Switzerland
453
1.3
720
2.0
Rest of Europe
11,387
32.7
11,129
30.5
Exposure
1
34,815
100.0
36,538
100.0
1 Excluding balances at central banks and Group Treasury reallocations.
 
 
Investment Bank: banking products exposure by industry sector
1
31.12.21
31.12.20
USD million
%
USD million
%
Banks
4,908
14.1
5,846
16.0
Chemicals
645
1.9
876
2.4
Electricity, gas, water supply
359
1.0
448
1.2
Financial institutions, excluding banks
13,353
38.4
14,570
39.9
Manufacturing
1,692
4.9
1,681
4.6
Mining
1,024
2.9
1,558
4.3
Public authorities
619
1.8
1,273
3.5
Real estate and construction
1,581
4.5
1,421
3.9
Retail and wholesale
2,793
8.0
2,041
5.6
Technology and communications
3,736
10.7
3,443
9.4
Transport and storage
414
1.2
445
1.2
Other
3,691
10.6
2,937
8.0
Exposure
1
34,815
100.0
36,538
100.0
1 Excluding balances at central banks and
 
Group Treasury reallocations.
 
Clearing houses are now classified under Financial institutions,
 
excluding banks (31 December 2021: USD 1,196
 
million; 31 December 2020:
USD 1,440 million).
 
 
 
119
Group Functions
Gross banking products exposure
 
within Group Functions, which
arises primarily in connection with treasury activities,
 
increased by
USD 13 billion
 
to USD 66
 
billion from
 
balances at
 
central banks.
The
 
cash
 
inflow
 
was
 
generated
 
mainly
 
from
 
lower
 
funding
consumption
 
by
 
the
 
Investment
 
Bank,
 
shifts
 
within
 
the
 
high-
quality liquid asset (HQLA) portfolio from securities
 
into cash, and
net
 
new
 
issuances
 
of
 
long-term
 
debt
 
issued
 
measured
 
at
amortized cost.
›
 
Refer to “Balance sheet assets” in the “Capital,
 
liquidity and
funding, and balance sheet” section of
 
this report for more
information
›
 
Refer to the “Group Functions”
 
section of this report for
 
more information
Traded products
Audited
 
|
 
Counterparty
 
credit
 
risk
 
(CCR)
 
arising
 
from
 
traded
products, which include OTC
 
derivatives, ETD exposures
 
and SFTs,
originating
 
in
 
the
 
Investm
ent
 
Bank
,
Non
-
core
 
and
 
Legacy
Portfolio,
 
and Group
 
Treasury
 
,
 
is generally
 
managed on
 
a close-
out
 
basis.
 
This
 
takes
 
into
 
account
 
possible
 
effects
 
of
 
market
movements
 
on
 
the
 
exposure
 
and
 
any
 
associated
 
collateral
 
over
the time
 
it would
 
take to
 
close out
 
our positions. In
 
the Investment
Bank,
 
limits
 
are
 
applied
 
to
 
the
 
potential
 
future
 
exposure
 
per
counterparty,
 
with
 
the
 
size
 
of
 
the
 
limit
dependent
 
on
 
the
counterparty’s creditworthiness
 
(as determined
 
by Risk
 
Control).
Limit
 
frameworks
 
are
 
also
 
used
 
to
 
control
 
overall
 
exposure
 
to
specific classes or
 
categories of
 
collateral on a
 
portfolio level. Such
portfolio
 
limits
 
are
 
monitored
 
and
 
reported
 
to
 
senior
management.
 
Trading
 
in
 
OTC
 
derivatives
 
is
 
conducted
 
through
 
central
counterparties
 
(CCPs)
 
where
 
practicable.
 
Where
 
CCPs
 
are
 
not
used, we
 
have clearly
 
defined policies
 
and processes
 
for trading
on a bilateral
 
basis. Trading is
 
typically conducted under bilateral
International Swaps
 
and Derivatives
 
Association (ISDA)
 
or similar
master
 
netting
 
agreements,
 
which generally
 
allow for
 
close-out
and netting
 
of transactions
 
in case
 
of default,
 
subject to
 
applicable
law.
 
For
 
most
 
major
 
market
 
participant
 
counterparties,
 
we
 
use
two-way collateral
 
agreements under
 
which either
 
party can
 
be
required to
 
provide collateral
 
in the
 
form of
 
cash or
 
marketable
securities
 
when
 
the
 
exposure
 
exceeds
 
specified
 
levels.
 
This
collateral typically consists
 
of well-rated government
 
debt or other
collateral
 
permitted
 
by
 
applicable
 
regulations.
 
For
 
certain
counterparties, an
 
initial margin
 
is taken
 
to cover
 
some or
 
all of
the
 
calculated
 
close-out
 
exposure.
 
This
 
is
 
in
 
addition
 
to
 
the
variation
 
margin
 
taken
 
to
 
settle
 
changes
 
in
 
market
 
value
 
of
transactions. Regulations on margining
 
uncleared OTC derivatives
continue to evolve. These generally expand
 
the scope of bilateral
derivatives
 
activity
 
subject
 
to
 
margining.
 
They
 
will
 
also
 
result
 
in
greater amounts
 
of initial
 
margin received
 
from, and
 
posted to,
certain bilateral trading counterparties than had been required in
the past. These changes should result in lower close-out risk over
time.
p
 
In the tables on the following page, OTC
 
derivatives exposures
are generally
 
presented as
 
net positive
 
replacement values
 
after
the application of legally enforceable netting agreements and
 
the
deduction of cash
 
and marketable securities
 
held as collateral.
 
SFT
exposures
 
are
 
reported
 
taking
 
into
 
account
 
collateral
 
received,
and ETD exposures take into account collateral margin calls.
The
 
“Banking
 
and
 
traded
 
products exposure
 
in
 
our
 
business
divisions
 
and
 
Group
 
Functions”
 
table
 
in
 
this
 
section
 
provides
information on the split by divisions and products, and the tables
on the next page provide information about the OTC
 
derivatives,
SFT
 
and
 
ETD
 
exposures
 
of
 
the
 
Investment
 
Bank,
 
Non-core
 
and
Legacy Portfolio, and Group Treasury.
›
 
Refer to “Note 10
 
Derivative
 
instruments”
 
in the “Consolidated
financial
 
statements”
 
section of this report for more information
about OTC derivatives settled through central
 
counterparties
›
 
Refer to “Note 22
 
Offsetting
 
financial
 
assets
 
and financial
 
liabilities”
in the “Consolidated
 
financial
 
statements”
 
section of this report
for more information about the effect of netting
 
and collateral
arrangements on derivative exposures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
120
Investment Bank, Non-core and Legacy Portfolio and Group Treasury:
 
traded products exposure
USD million
OTC derivatives
SFTs
ETDs
Total
Total
31.12.21
31.12.20
Total exposure, before deduction of credit valuation adjustments and hedges
9,767
18,566
7,617
35,950
40,215
Less: credit valuation adjustments and allowances
(34)
0
0
(34)
(54)
Less: credit protection bought (credit default swaps, notional)
(119)
0
0
(119)
(126)
Net exposure after credit valuation adjustments, allowances and hedges
9,615
18,566
7,617
35,797
40,035
 
Investment Bank, Non-core and Legacy Portfolio and Group Treasury:
 
distribution of net OTC derivatives and SFT
exposure across internal UBS ratings and loss given default (LGD) buckets
USD million, except where indicated
31.12.21
31.12.20
LGD buckets
Weighted
average
LGD (%)
Weighted
average
LGD (%)
Internal UBS rating
1
Exposure
0–25%
26–50%
51–75%
76–100%
Exposure
Net OTC derivatives exposure
Investment grade
9,297
272
7,770
704
552
47
10,436
49
Sub-investment grade
317
44
54
131
88
59
620
55
of which: 6−9
249
25
53
90
81
62
487
55
of which: 10−12
46
0
1
39
7
64
114
62
of which: 13 and defaulted
22
19
0
3
0
14
19
12
Total net OTC derivatives exposure, after credit valuation adjustments
and hedges
9,615
317
7,824
835
639
48
11,056
49
Net SFT exposure
Investment grade
17,937
159
15,655
1,812
310
40
21,155
40
Sub-investment grade
629
0
296
50
283
69
598
59
Total net SFT exposure
18,566
159
15,951
1,862
593
41
21,753
40
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.
 
 
Investment Bank, Non-core and Legacy Portfolio and Group Treasury:
 
net OTC derivatives and SFT exposure
by geographical region
Net OTC derivatives exposure
Net SFT exposure
31.12.21
31.12.20
31.12.21
31.12.20
USD million
%
USD million
%
USD million
%
USD million
%
Asia Pacific
1,586
16.5
2,139
19.3
5,380
29.0
5,123
23.6
Latin America
111
1.2
162
1.5
20
0.1
18
0.1
Middle East and Africa
112
1.2
263
2.4
360
1.9
939
4.3
North America
1,830
19.0
2,539
23.0
4,473
24.1
4,778
22.0
Switzerland
688
7.2
667
6.0
559
3.0
1,329
6.1
Rest of Europe
5,288
55.0
5,286
47.8
7,774
41.9
9,566
44.0
Exposure
9,615
100.0
11,056
100.0
18,566
100.0
21,753
100.0
 
Investment Bank, Non-core and Legacy Portfolio and Group Treasury:
 
net OTC derivatives and SFT exposure
by industry sector
Net OTC derivatives exposure
Net SFT exposure
31.12.21
31.12.20
31.12.21
31.12.20
USD million
%
USD million
%
USD million
%
USD million
%
Banks
1
986
10.3
1,877
17.0
1,654
8.9
1,653
7.6
Chemicals
14
0.1
10
0.1
0
0.0
0
0.0
Electricity, gas, water supply
103
1.1
127
1.2
0
0.0
0
0.0
Financial institutions, excluding banks
1
7,174
74.6
6,742
61.0
15,866
85.5
18,049
83.0
Manufacturing
50
0.5
68
0.6
0
0.0
0
0.0
Mining
51
0.5
12
0.1
0
0.0
0
0.0
Public authorities
810
8.4
1,339
12.1
926
5.0
2,050
9.4
Retail and wholesale
22
0.2
44
0.4
0
0.0
0
0.0
Transport, storage and communication
255
2.6
481
4.3
0
0.0
0
0.0
Other
150
1.6
356
3.2
120
0.6
1
0.0
Exposure
9,615
100.0
11,056
100.0
18,566
100.0
21,753
100.0
1 Clearing houses have been reclassified from Banks to Financial institutions, excluding banks.
 
Prior-period numbers have been restated accordingly
 
 
 
121
Credit risk mitigation
Audited |
 
We actively manage credit
 
risk in our portfolios by
 
taking
collateral against exposures and by utilizing credit hedging.
p
 
Lending secured by real estate
Audited |
 
We use
 
a scoring
 
model as
 
part of
 
a standardized
 
front-
to-back process
 
for credit
 
decisions on
 
originating or
 
modifying
Swiss mortgage
 
loans. The
 
model’s two
 
key factors
 
are
 
the LTV
ratio and an affordability calculation relative to gross income.
p
 
The
 
calculation
 
of
 
affordability
 
takes
 
into
 
account
 
interest
payments,
 
minimum
 
amortization
 
requirements,
 
potential
property maintenance costs and, for
 
rental properties, the level of
rental income. Interest
 
payments are estimated
 
using a predefined
framework, which
 
considers the
 
potential for
 
significant interest
rates increases over the
 
lifetime of the
 
loan. The interest
 
rate is set
at 5% per annum in the context of the current environment.
For
 
residential
 
properties
 
occupied
 
by
 
the
 
borrower,
 
the
maximum LTV for the
 
standard approval process is
 
80% and 60%
for holiday homes and luxury
 
real estate. For other properties,
 
the
maximum
 
LTV
 
allowed
 
within
 
the
 
standard
 
approval
 
process
ranges from 30% to 80%, depending on
 
the type and age of the
property, and the amount of renovation work needed.
 
Audited |
 
The value
 
we assign
 
to each
 
property is
 
based on
 
the
lowest
 
value
 
determined
 
from
model
-
derived
 
valuations,
 
the
purchase
 
price,
 
an asset
 
value for
 
income-producing
 
real estate
(IPRE),
 
and,
 
in
 
some
 
cases,
 
an
 
additional
 
external
 
valuation
 
for
owner-occupied residential properties (ORPs).
p
 
Two separate
 
models
 
provided
 
by
 
a
 
market-leading
 
external
vendor are used to
 
derive property valuations for
 
ORPs and IPRE.
We estimate the
 
current value of
 
an ORP using
 
a regression model
(a hedonic model) based on statistical comparison
 
against current
transaction
 
data.
 
We
 
derive
 
the
 
value
 
of
 
a
 
property
 
from
 
the
characteristics
 
of
 
the
 
real
 
estate
 
itself,
 
as
 
well
 
as
 
those
 
of
 
its
location.
 
In addition
 
to the
 
initial valuation,
 
values for
 
ORPs are
updated
 
quarterly
 
over
 
the
 
lifetime
 
of
 
the
 
loan
 
using
 
region-
specific real
 
estate price
 
indices. The
 
price indices
 
are sourced
 
from
an
 
external
 
vendor
 
and
 
subject
 
to
 
internal
 
validation
 
and
benchmarking.
 
We
 
use
 
these
 
valuations
 
quarterly
 
to
 
compute
indexed LTV
 
for all
 
ORPs. A
 
portfolio-specific monitoring
 
system
considers these
 
along with
 
other risk
 
measures (e.g.,
 
rating and
behavioral information)
 
to identify
 
higher-risk loans and
 
triggers
an assessment
 
and reappraisal
 
by client
 
advisors and
 
credit officers
as needed.
For IPRE, the capitalization rate
 
model is used to determine
 
the
property
 
valuation
 
by
 
discounting
 
estimated
 
sustainable
 
future
income
 
using
 
a
 
capitalization
 
rate
 
based
 
on
 
various
 
attributes.
These
 
attribu
tes
 
consider
 
regional
and
 
specific
 
property
characteristics,
 
such
 
as
 
market
 
and
 
location
 
data
 
(e.g.,
 
vacancy
rates),
 
benchmarks
 
(e.g.,
 
for
 
running
 
costs)
 
and
 
certain
 
other
standardized input
 
parameters (e.g.,
 
property condition).
 
Updated
information regarding rental income from
 
IPRE is requested from
the
 
client
 
at
 
least
 
once
 
every
 
three
 
years.
 
Our
 
portfolio-specific
monitoring system alerts
 
us to changes
 
in rental income
 
and other
risk
 
measures
 
(e.g.,
 
LTV,
 
rating,
 
behavioral
 
information),
 
and
triggers
 
an
 
assessment
 
and
 
reappraisal
 
by
 
client
 
advisors
 
and
credit officers as needed.
To take
 
market developments
 
into account
 
for these
 
models,
the
 
external
 
vendor
 
regularly
 
updates
 
the
 
parameters
 
and
 
/
 
or
refines
 
the
 
architecture
 
for
 
each
 
model.
 
Model
 
changes
 
and
parameter updates are subject to the same validation procedures
as our internally developed models.
 
Audited
 
|
 
We
 
similarly
 
apply
 
underwriting
 
guidelines
 
for
 
our
Global
 
Wealth
 
Management
 
Region
 
Americas
 
mortgage
 
loan
portfolio,
 
taking
 
into
 
account
 
loan
 
affordability
 
and
 
collateral
sufficiency.
 
LTV
 
standards
 
are
 
defined
 
for
 
the
 
various
 
mortgage
types,
 
such
 
as
 
residential
 
mortgages
 
or
 
investment
 
properties,
based on associated risk factors, such as property type, loan
 
size,
and
 
purpose.
 
The
 
maximum
 
LTV
 
allowed
 
within
 
the
 
standard
approval
 
process
 
ranges from
45
% to
80
%. In
 
addition
 
to
 
LTV,
other
 
credit
 
risk
 
metrics,
 
such
 
as
 
debt-to-income
 
ratios,
 
credit
scores
 
and
 
required
 
client
 
reserves,
are
also
part
 
of
 
our
underwriting guidelines.
A
 
risk
 
limit
 
framework
 
is
 
applied
 
to
 
the
 
Global
 
Wealth
Management
 
Region
 
Americas
 
mortgage
 
loan
 
portfolio.
 
Limits
are
 
set
 
to
 
govern
 
exposures
 
within
 
LTV
 
categories,
 
geographic
concentrations,
 
portfolio
 
growth
 
and
 
high-risk
 
mortgage
segments,
 
such as interest-only loans. These limits are
 
monitored
by a specialized
 
credit risk
 
monitoring team
 
and reported to
 
senior
management. Supplementing this limit framework is a real estate
lending policy
 
and procedures
 
framework, set
 
up to
 
govern real
estate
 
lending
 
activities.
 
Quality
 
assurance
 
and
 
quality
 
control
programs monitor
 
compliance with
 
mortgage underwriting
 
and
documentation requirements.
 
For
 
our
 
mortgage
 
loan
 
portfolio
 
in
 
the
 
Global
 
Wealth
Management regions of
 
EMEA and Asia
 
Pacific, we apply
 
global
underwriting
 
guidelines
 
with
 
regional
 
variations
 
to
 
allow
 
for
regulatory
 
and
 
market
 
differentials.
 
As
 
in
 
other
 
regions,
 
the
underwriting
 
guidelines
 
take
 
into
 
account
 
affordability
 
and
collateral sufficiency. Affordability is
 
assessed at a stressed
 
interest
rate using,
 
for residential
 
real estate,
 
the borrowers’
 
sustainable
income and declared liabilities,
 
and for commercial real estate the
quality and sustainability of rental
 
income. For interest-only loans,
a declared
 
and evidenced
 
repayment strategy
 
must be
 
in place.
The applicable LTV for each mortgage is based on the quality and
liquidity
 
of
 
the
 
property
 
and
 
assessed
 
against
 
valuations
 
from
bank-appointed
 
third-party
 
valuers.
 
Maximum
 
LTV
 
varies
 
from
30
% to
70
%, depending
 
on the
 
type and
 
location of
 
the property,
as
 
well
 
as
 
other
 
factors.
 
Collateral
 
sufficiency
 
is
 
often
 
further
supported by personal guarantees from the borrower. The overall
portfolio is centrally assessed against a
 
number of stress scenarios
to ensure that exposures
 
remain within predefined stress
 
limits.
p
 
›
 
Refer to “Swiss mortgage loan portfolio”
 
in this section for more
information about LTV in our Swiss mortgage portfolio
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
122
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.
 
H
aircuts
 
for
 
ma
rketable
securities are calculated
 
to cover possible
 
change in value
 
over a
given close-out
 
period and
 
confidence level.
 
Less liquid
 
or more
volatile collateral will typically have larger haircuts.
We assess concentration and
 
correlation risks across collateral
posted
 
at
 
a
 
counterparty
 
level,
 
and
 
at
 
a
 
divisional
 
level
 
across
counterparties. We
 
also perform targeted Group-wide reviews of
concentration.
 
Concentration
 
of
 
collateral
 
in
 
single
 
securities,
issuers
 
or
 
issuer
 
groups,
 
industry
 
sectors,
 
countries,
 
regions
 
or
currencies may result
 
in higher risk and
 
reduced liquidity. In such
cases, the
 
lending value
 
of the
 
collateral, margin
 
call and
 
close-
out levels are adjusted accordingly.
p
 
Exposures and
 
collateral values
 
are
 
monitored daily,
 
with
 
the
aim
 
of
 
ensuring
 
that
 
the
 
credit
 
exposure
 
is
 
always
 
within
 
the
established
 
risk
 
tolerance.
 
A
 
shortfall
 
occurs
 
when
 
the
 
lending
value
 
drops
 
below
 
the
 
exposure;
 
if
 
it
 
exceeds
 
a
 
defined
 
trigger
level,
 
a
 
margin
 
call
 
is
 
initiated,
 
requiring
 
the
 
client
 
to
 
provide
additional collateral, reduce the
 
exposure or take other
 
action to
bring
 
exposure
 
in
 
line
 
with
 
the
 
agreed
 
lending
 
value
 
of
 
the
collateral.
 
If
 
a
 
shortfall
 
increases
 
and
 
exceeds
 
a
 
further
 
trigger
level, or the
 
shortfall is not
 
corrected within the
 
required period,
a close-out
 
is initiated,
 
through which
 
collateral is
 
liquidated, open
derivative positions are closed and guarantees are called.
We
 
conduct
 
stress
 
testing
 
of
 
collateralized
 
exposures
 
to
simulate
 
market
 
events
 
that
 
reduce
 
collateral
 
value,
 
increase
exposure
 
of
 
traded
 
products,
 
or
 
do
 
both.
 
For
 
certain
 
classes of
counterparties,
 
limits
 
on
 
such
 
calculated
 
stress
 
exposures
 
are
applied
 
and
 
controlled
 
at
 
a
 
counterparty
 
level.
 
Also,
 
portfolio
limits are applied across certain businesses or collateral types.
 
›
 
Refer to “Stress loss” in this section for more
 
information about
our stress testing
Credit hedging
Audited |
 
We use
 
single-name credit
 
default swaps
 
(CDSs),
 
credit-
index CDSs, bespoke protection and other instruments to
 
actively
manage
 
credit
 
risk
 
in
 
the
 
Investment
 
Bank
 
and
 
Non-core
 
and
Legacy Portfolio. The
 
aim is to reduce
 
concentrations of risk from
specific
 
counterparties,
 
sectors
 
or
 
portfolios
 
and,
 
for
 
CCR,
 
the
profit
 
or
 
loss
effect
 
arising
 
from
 
changes
 
in
 
credit
 
valuation
adjustments (CVAs).
We have
 
strict guidelines
 
with regard
 
to taking
 
credit hedges
into
 
account
 
for
 
credit
 
risk
 
mitigation
 
purposes.
 
For
 
example,
when
 
monitoring
 
exposures
 
against
 
counterparty
 
limits,
 
we
 
do
not
 
usually
apply
 
certain
 
credit
 
risk
mitigants
,
 
such
 
as
 
proxy
hedges (credit
 
protection on
 
a correlated
 
but different
 
name) or
credit
-
index
CDSs
,
 
to
 
reduce
 
counterparty
 
exposures
.
 
Buying
credit protection
 
also creates
 
credit exposure
 
with regard
 
to the
protection
 
provider.
 
We
 
monitor
 
and
 
limit
 
exposures
 
to
 
credit
protection providers, and also
 
monitor the effectiveness of
 
credit
hedges
 
as
 
part
 
of
 
our
 
overall
 
credit
 
exposures
 
to
 
the
 
relevant
counterparties.
 
Trading
 
with
 
such
 
counterparties
 
is
 
typically
collateralized.
 
For
 
credit
 
protection
 
purchased
 
to
 
hedge
 
the
lending portfolio,
 
this includes
 
monitoring mismatches
 
between
the maturity
 
of credit
 
protection purchased
 
and the
 
maturity of
the associated loan. Such mismatches result in basis risk and may
reduce the effectiveness of the credit
 
protection. Mismatches are
routinely
 
reported
 
to
 
credit
 
officers
 
and
 
mitigating
 
actions
 
are
taken when necessary.
p
 
›
 
Refer to “Note 10 Derivative instruments”
 
in the “Consolidated
financial statements”
 
section of this report for more information
Mitigation of settlement risk
To mitigate
 
settlement risk, we reduce actual settlement volumes
by
us
ing
 
multi
-
lateral
and
 
bilateral
 
agreements
 
with
counterparties, including payment netting.
Foreign exchange transactions are
 
our most significant source
of
 
settlement
 
risk.
 
We
 
are
 
a
 
member
 
of
 
Continuous
 
Linked
Settlement
 
(CLS), an
 
industry utility
 
that provides
 
a multi-lateral
framework
 
to
 
settle
 
transactions
 
on
 
a
 
delivery-versus-payment
basis,
 
th
us
 
reducing
 
foreign
 
exchange
-
related
 
settlement
 
risk
relative
 
to
 
the
 
volume
 
of
 
business.
 
However,
 
mitigation
 
of
settlement
 
risk
 
through
 
CLS
 
and
 
other
 
means
 
does
 
not
 
fully
eliminate
 
credit
 
risk
 
in
 
foreign
 
exchange
 
transactions
 
resulting
from
 
changes
 
in
 
exchange
 
rates
 
prior
 
to
 
settlement,
 
which
 
is
managed as
 
part of
 
our overall
 
credit
 
risk management
 
of OTC
derivatives.
 
Credit risk models
Basel III – A-IRB credit risk models
Audited |
 
We have
 
developed tools
 
and models
 
to estimate
 
future
credit losses that may be implicit in our current portfolio.
Exposures
 
to
 
individual
 
counterparties
 
are
 
measured
 
using
three
 
generally
 
accepted
 
parameters:
 
PD,
 
EAD
 
and
 
LGD.
 
For
 
a
given credit facility, the product of these three parameters results
in
 
the
 
expected
 
loss.
 
These
 
parameters
 
are
 
the
 
basis
 
for
 
the
majority of our internal measures of credit
 
risk, and key inputs for
regulatory capital calculation under
 
the advanced internal
 
ratings-
based
 
(A-IRB)
 
approach of
 
the Basel III
 
framework.
 
We also
 
use
models
 
to
 
derive
 
the
 
portfolio credit
 
risk
 
measures
 
of
 
expected
loss, statistical loss and stress loss.
p
 
The “Key features of our main credit risk
 
models” table on the
next page shows the number
 
and key features of the models
 
we
use to derive PD, LGD and
 
EAD for our main portfolios and asset
classes,
 
and is
 
followed
 
by
 
more detailed
 
explanations
 
of
 
these
models and parameters.
 
›
 
Refer to the 31 December 2021 Pillar 3
 
Report,
 
available under
“Pillar 3 disclosures” at
ubs.com/investors
,
 
for more information
about the regulatory capital calculation
 
under the advanced
internal ratings-based approach
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
123
Key features of our main credit risk models
Portfolio in scope
Asset class
Model
approach
Number of
main models
Main drivers
Number of
years of loss
data
1
Probability of
default
Sovereigns and central banks
Central governments and
central banks
Scorecard
1
Political, institutional and economic indicators
>10
Owner-occupied mortgages in
Switzerland and the US
Retail: residential
mortgages
Scorecard
2
Behavioral data, affordability relative to income,
property type, loan-to-value. Separate models for
mortgages in Switzerland and the US
27
Income-producing real estate
mortgages
Retail: residential
mortgages,
 
Corporates: specialized
lending
Scorecard
1
Loan-to-value, debt service coverage, financial data
(for large corporates only), behavioral data. Weights
of risk drivers differ between corporate and private
clients
27
Lombard lending
Retail: other
 
Merton type
1
Loan-to-value, historical asset returns, behavioral
data
15
Small and medium-sized
enterprises
Corporates: other lending
Scorecard
1
Financial data including balance sheet ratios and
profit and loss, behavioral data. Weights of risk
drivers differ depending on the corporate client sub-
segment
27
Credit cards in Switzerland
Retail: qualifying
revolving retail and other
retail,
Corporates: other lending
Scorecard
1
Client type and characteristics (revolver, transactor,
new client, dormant client), and behavioral data
14
Banks
Banks and securities
dealers
Scorecard
4
Financial data including balance sheet ratios and
profit and loss. Separate models for banks –
developed markets, banks – emerging markets,
 
broker-dealers and investment banks, and private
banks
14
Commodity traders
Corporates: specialized
lending
Scorecard
1
Financial data including balance sheet ratios and
profit and loss, as well as non-financial criteria
23
Aircraft financing
Corporates: other lending
Scorecard
1
Loan-to-value, AuM, strength of legal framework of
source of wealth, and behavioral factors
15
Large corporates
Corporates: other lending
Scorecard /
market data
3
Financial data including balance sheet ratios and
profit and loss, and market data. Separate rating
tools for corporates with publicly traded and highly
liquid stocks (market intelligence tool), private
corporates, and leveraged corporates
14
Other portfolios
Corporates: other
lending,
Public-sector entities and
multi-lateral development
banks
Scorecard /
pooled rating
approach /
rating
template
9
Financial data and/or historical portfolio performance
for pooled ratings. Separate models for hedge funds,
managed funds, insurance companies, commercial
real estate loans, debt REITs, mortgage originators,
public-sector entities and multi-lateral development
banks / supranationals
14
Loss given default
Owner-occupied mortgages in
Switzerland and the US
Retail: residential
mortgages
Statistical
model
2
Loan-to-value, time since last valuation. Separate
models for mortgages in Switzerland and the US
11
Income-producing real estate
mortgages
Retail: residential
mortgages, Corporates:
specialized lending
Statistical
model
1
Loan-to-value, time since last valuation, property
type, location indicator
11
Lombard lending
Retail: other
Statistical
model,
simulation
1
Historical observed loss rates
13
Small and medium-sized
enterprises
Corporates: other lending
Statistical
model
2
Separate models for mortgage and non-mortgage
LGDs. Mortgage models: loan-to-value, time since
last valuation, property type, location indicator. Non-
mortgage models: historical observed loss rates
11–17
Investment Bank – all
counterparties
Across the asset classes
Statistical
model
2
Counterparty and facility specific, including industry
segment, collateral, seniority, legal environment and
bankruptcy procedures. Specific model for sovereign
LGDs based on econometric modeling of past default
events using GDP per capita, government debt, and
other quantitative and qualitative factors such as the
share of multi-lateral debt service, the size of the
banking sector and institutional quality
5–10
Exposure at default
Banking products
Across the asset classes
Statistical
model
3
Separate models based on exposure type (committed
credit lines, revocable credit lines, contingent
products)
>10
Traded products
Across the asset classes
Statistical
model
2
Product-specific market drivers, e.g., interest rates.
Separate models for OTC derivatives, ETDs and SFTs
that generate the simulation of risk factors used for
the credit exposure measure
n/a
1 For sovereign and Investment Bank PD models, the length of internal portfolio history is
 
shown in “Number of years of loss data.”
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
124
Audited |
 
Internal UBS rating scale and mapping of external ratings
Internal UBS rating
1-year PD range in %
Description
Moody’s Investors
Service mapping
S&P mapping
Fitch mapping
0 and 1
0.00–0.02
Investment grade
Aaa
AAA
AAA
2
0.02–0.05
Aa1 to Aa3
AA+ to AA–
AA+ to AA–
3
0.05–0.12
A1 to A3
A+ to A–
A+ to A–
4
0.12–0.25
Baa1 to Baa2
BBB+ to BBB
BBB+ to BBB
5
0.25–0.50
Baa3
BBB–
BBB–
6
0.50–0.80
Sub-investment grade
Ba1
BB+
BB+
7
0.80–1.30
Ba2
BB
BB
8
1.30–2.10
Ba3
BB–
BB–
9
2.10–3.50
B1
B+
B+
10
3.50–6.00
B2
B
B
11
6.00–10.00
B3
B–
B–
12
10.00–17.00
Caa1 to Caa3
13
>17
Ca to C
CCC to C
CCC to C
Counterparty is in default
 
Default
Defaulted
D
D
p
 
 
Probability of default
PD
 
estimates
 
the
 
likelihood of
 
a
 
counterparty defaulting
 
on
 
its
contractual obligations over
 
the next
 
12
 
months. PD
 
ratings are
used for
 
credit risk measurement and
 
are an
 
important input for
determining
 
credit risk
 
approval authorities.
 
For calculating
 
RWA, a
three-basis-point
 
PD floor is
 
applied to banks,
 
corporates
 
and retail
exposures,
 
as required under the Basel
 
III framework.
 
We apply an
eight-basis-point
 
PD floor
 
for Swiss
 
owner-occupied
 
mortgages
 
and
a four-basis-point
 
PD floor for
 
Lombard loans.
PD
 
is
 
assessed
 
using
 
rating
 
tools
 
tailored
 
to
 
the
 
various
categories
 
of
 
counterparties.
 
Statistically
 
developed
 
scorecards,
based on key attributes
 
of the obligor, are
 
used to determine PD
for many
 
corporate clients
 
and loans
 
secured by
 
real estate.
 
Where
available, market data may also
 
be used to derive the
 
PD for large
corporate counterparties. For low-default portfolios, we take into
account available relevant external default data when developing
rating tools. For
 
Lombard loans,
 
our rating approach
 
uses Merton-
type historical
 
return-based model
 
simulations taking
 
into account
potential
 
changes in
 
securities collateral
 
value. These
 
categories
are also calibrated to our internal
 
credit rating scale (masterscale),
designed
 
to
 
ensure
 
a
 
consistent
 
assessment
 
of
 
default
probabilities
 
across
 
counterparties.
 
Our
 
masterscale
 
expresses
one-year default probabilities determined
 
using our various rating
tools by means of distinct classes, with each class incorporating a
range
 
of
 
default
 
probabilities.
 
Counterparties
 
move
 
between
rating classes as our assessment of their PD changes.
The ratings of major credit rating agencies, and their mapping
to
 
our
 
masterscale
 
and
 
internal
 
PD
 
bands,
 
are
 
shown
 
in
 
the
“Internal UBS rating scale and mapping of external ratings” table
above. For Moody’s
 
and S&P, the
 
mapping is based on
 
the long-
term average of one-year default
 
rates available from these rating
agencies, with Fitch ratings
 
being mapped to the equivalent
 
S&P
ratings. For each
 
external rating category,
 
the average default
 
rate
is compared
 
with our
 
internal PD
 
bands to
 
derive a
 
mapping to
our internal rating
 
scale. Our
 
internal rating of
 
a counterparty
 
may
thus diverge from
 
one or more
 
of the correlated
 
external ratings
shown in the
 
table. Observed defaults
 
by rating agencies
 
may vary
through economic
 
cycles, and
 
we do
 
not necessarily
 
expect the
actual number of defaults in
 
our equivalent rating band to
 
equal
the rating agencies’ average
 
in any given period.
 
We periodically
assess
 
the
 
long-term
 
average
 
default
 
rates
 
of
 
credit
 
rating
agencies’ ratings and
 
adjust their mapping to
 
our masterscale as
needed to reflect any material changes.
Exposure at default
EAD is
 
the amount
 
we expect
 
to be
 
owed by
 
a counterparty
 
at
the time
 
of possible
 
default. We
 
derive EAD
 
from current exposure
to the counterparty and possible future exposure development.
The EAD of
 
an on-balance
 
sheet loan
 
is its
 
notional amount.
 
For
off
-
balance
 
sheet
co
mmitments
that
 
are
 
not
 
drawn,
 
credit
conversion factors (CCFs) are used in order to obtain an expected
on
-
balance
 
sheet
 
amount.
 
Such
 
CCFs
 
are
 
based
 
on
 
historical
observations
.
To
 
comply
 
with
 
regulatory
 
guidance,
 
we
 
floor
individual observed CCF values at zero in the CCF model; i.e., we
assume
 
that the
 
drawn EAD
 
will be
 
no less
 
than the
 
drawn amount
one year prior
 
to default.
 
For traded products, we derive EAD
 
by modeling the range of
possible
 
exposure
 
outcomes
 
at various
 
points
 
in time
 
using scenario
and statistical techniques.
 
We assess the net amount that may be
owed to us or
 
that we may owe
 
to others, taking
 
into account
 
the
effect of market movements
 
over the potential time it would take
to
 
close
 
out
 
positions. For
 
ETDs,
 
calculation of
 
EAD
 
takes
 
into
account
 
collateral
 
margin
 
calls.
 
When
 
measuring
 
individual
counterparty
 
exposure
 
against
 
credit
 
limits,
 
we
 
consider
 
the
maximum likely exposure measured to a high level of confidence.
However, when aggregating exposures
 
to different counterparties
for
 
portfolio
 
risk
 
measurement
 
purposes,
 
we
 
use
 
the
 
expected
exposure to each counterparty
 
at a given time period (usually one
year) generated
 
by the same
 
model.
 
 
 
125
We
 
assess
 
exposures
 
where
 
there
 
is
 
a
 
material
 
correlation
between the factors driving the credit quality of the counterparty
and
 
those
 
driving
 
the
 
potential
 
future
 
value
 
of
 
our
 
traded
products
 
exposure
 
(wrong-way
 
risk),
 
and
 
we
 
have
 
established
specific controls to mitigate such risks.
 
Loss given default
LGD is
 
the magnitude
 
of the
 
likely loss
 
if there
 
is a
 
default. Our
LGD estimates, which consider downturn conditions, include loss
of principal,
 
interest and
 
other amounts (such
 
as workout
 
costs,
including
 
the
 
cost
 
of
 
carrying
 
an
 
impaired
 
position
 
during
 
the
workout
 
process)
 
less
 
recovered
 
amounts.
 
We
 
determine
 
LGD
based
 
on
 
the
 
likely
 
recovery
 
rate
 
of
 
claims
 
against
 
defaulted
counterparties, which
 
depends on
 
the type
 
of counterparty
 
and
any
 
credit
 
mitigation
due
 
to
 
collateral
 
or
 
guarantees.
 
Our
estimates
 
are
 
supported
 
by
 
internal
 
loss
 
data
 
and
 
external
information,
where
 
available.
If
we
 
hold
 
collateral,
 
such
 
as
marketable securities or a mortgage on a property, LTV
 
ratios are
typically
 
a
 
key
 
parameter
 
in
 
determining
 
LGD.
 
For
 
low-default
portfolios, where available,
 
we take into
 
account relevant external
default data in
 
the rating tool
 
development. In RWA
 
calculation,
a regulatory
 
LGD floor
 
of 10%
 
is applied
 
for exposures
 
secured
by residential properties. Additionally,
 
we apply a 25% LGD floor
for Lombard loans in Global Wealth Management outside Region
Americas
 
and
 
a
 
20%
 
LGD
 
floor
 
for
 
Lombard
 
loans
 
in
 
Global
Wealth Management Region Americas.
 
All other LGDs
 
are subject
to a 5% floor.
Expected loss
Credit
 
losses
 
are
 
an
 
inherent
 
cost
 
of
 
doing
 
business
 
and
 
the
occurrence and amount of
 
credit losses can be
 
erratic. We use the
concept of expected loss to quantify future credit losses that may
be implicit in
 
our current portfolio.
 
The expected loss for
 
a given
credit
 
facility
 
is
 
a
 
product
 
of
 
the
 
three
 
components
 
described
above,
 
i.e., PD, EAD
 
and LGD. We
 
aggregate the expected
 
loss for
individual counterparties
 
to derive
 
expected portfolio
 
credit losses.
Expected
 
loss
 
(EL)
 
for
 
regulatory
 
and
 
internal
 
risk
 
control
purposes
 
is
 
a
 
statistical
 
measure
 
used
 
to
 
estimate
 
the
 
average
annual costs we expect to experience
 
from positions that become
impaired.
 
EL
 
is
 
the
 
basis
 
for
 
quantifying
 
credit
 
risk
 
in
 
all
 
our
portfolios. We use a statistical
 
modeling approach to estimate
 
the
loss profile of each of our credit portfolios over a one-year period
to
 
a
 
specified
 
level
 
of
 
confidence.
 
The
 
mean
 
value
 
of
 
this
 
loss
distribution is the
 
expected loss. EL
 
provides an indication
 
of the
level of
 
risk in
 
our portfolio
 
and it
 
may change
 
over time.
 
Some
parameters have to be estimated on a conservative basis
 
in order
to
 
meet
 
the
 
regulatory
 
requirements
 
for
 
banks
 
applying
 
the
internal ratings-based approach to determine RWA.
IFRS 9 – ECL credit risk models
 
Comparison of Basel III EL and IFRS 9 ECL credit risk models
The IFRS 9 expected
 
credit loss (ECL) concept
 
has a number of
 
key
differences from our standard
 
credit risk models, both in the loss
estimation
 
process
 
and
 
the
 
r
esult
 
thereof.
Most
 
notably,
regulatory
 
Basel
 
III
 
EL
 
parameters
 
are
 
through
-
the
-
cycle
 
/
downturn
 
estimates,
 
which
 
might
 
include
 
a
 
margin
 
of
conservatism, while
 
IFRS 9 ECL parameters
 
are typically
 
point-in-
time, reflecting
 
current economic conditions
 
and future outlook.
The
 
table
 
on
 
the
 
next
 
page
 
summarizes
 
the
 
main
 
differences.
Stage 1
 
and
 
2
 
ECL
 
releases
 
in
 
2021
 
were
 
USD 123
 
million
 
and
respective
 
allowances
 
and
 
provisions
 
as
 
of
 
31 December
 
2021
were
 
USD
 
50
3
 
mi
llion
.
 
This
 
includes
 
ECL
 
allowances
 
and
provisions
 
of
 
USD
 
436
 
million
 
related
 
to
 
positions
 
under
 
the
Basel III advanced internal ratings-based approach. Basel III EL
 
for
non-defaulted positions increased
 
by USD 34 million to
 
USD 919
million.
›
 
Refer to “Note 1 Summary of material accounting
 
policies” in the
“Consolidated financial statements” section
 
of this report for
more information about our accounting policy
 
for allowances
and provisions for ECL including key definitions
 
relevant for the
ECL calculation under IFRS 9
Expected credit loss
 
ECL are defined as the difference between contractual cash
 
flows
and
 
those
 
UBS
 
expects
 
to
 
receive,
 
discounted
 
at
 
the
 
effective
interest rate (EIR). For
 
loan commitments and
 
other credit facilities
in
 
scope
 
of
 
ECL
 
requirements,
 
expected
 
cash
 
shortfalls
 
are
determined
 
by
 
considering
 
expected
 
future
 
drawdowns.
 
Rather
than focusing
 
on an
 
average through-the-cycle
 
expected annual
loss,
 
the
 
purpose
 
of
 
ECL
 
is
 
to
 
estimate
 
the
 
amount
 
of
 
losses
inherent
 
in
 
a
 
portfolio
 
based
 
on
 
current
 
conditions
 
and
 
future
outlook (a point-in-time
 
measure), whereby such a
 
forecast has to
include all
 
information available
 
without undue
 
cost and
 
effort,
and
 
address
 
multiple
 
scenarios
 
where
 
there
 
is
 
perceived
 
non-
linearity between changes
 
in economic conditions
 
and their effect
on
 
credit
 
losses.
 
From
 
a
 
credit
 
risk
 
modeling
 
perspective,
 
ECL
parameters
 
are
 
generally
 
derivations
 
of
 
the factors
 
assessed
 
for
regulatory Basel III EL.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
126
The table below shows the main differences between the two expected loss measures.
 
Basel III EL (advanced internal
 
ratings-based approach)
IFRS 9 ECL
Scope
The Basel III advanced internal ratings-based
 
(A-IRB)
approach applies to most credit risk exposures. It includes
transactions measured at amortized cost, at fair value
through profit or loss and at fair value through OCI,
including loan commitments and financial guarantees.
The IFRS 9 ECL calculation mainly applies to financial
 
assets
measured at amortized cost and debt instruments
 
measured at fair
value through OCI, as well as loan commitments
 
and financial
guarantees not at fair value through profit or loss.
12-month versus
lifetime expected
loss
The Basel III A-IRB approach takes into account expected
losses resulting from expected default events occurring
within the next 12 months.
In the absence of a significant increase in credit risk
 
(SICR), a
maximum 12-month ECL is recognized to reflect lifetime
 
cash
shortfalls that will result if a default event occurs in
 
the 12 months
after the reporting date (or a shorter period if the
 
expected lifetime
is less). Once an SICR event has occurred, a lifetime
 
ECL is
recognized considering expected default events
 
over the life of the
transaction.
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 book value as of the reporting date; for traded
products, such as securities financing transactions,
 
EAD is
modeled. EAD is expected to remain constant over
 
a 12-
month period. For loan commitments, a credit
 
conversion
factor is applied to model expected future drawdowns
 
over
the 12-month period, irrespective of the actual maturity
 
of a
particular transaction. The credit conversion factor includes
downturn adjustments.
EAD is generally calculated on the basis of the
 
cash flows that are
expected to be outstanding at the individual
 
points in time during
the life of the transaction, discounted to the reporting
 
date using
the effective interest rate. For loan commitments, a credit
conversion factor is applied to model expected
 
future drawdowns
over the life of the transaction without including
 
downturn
assumptions. In both cases, the time period
 
is capped at 12
months, unless an SICR has occurred.
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.
 
For
 
example,
 
for
 
our
 
loan
underwriting
 
portfolio,
 
we
 
apply
 
a
 
global
 
market
 
event
 
under
which,
 
simultaneously,
 
the
 
market
 
for
 
loan
 
syndication
 
freezes,
market
 
conditions
 
significantly
 
worsen,
 
and
 
credit
 
quality
deteriorates.
 
Similarly,
 
for
 
Lombard
 
lending
 
we
 
use
 
a
 
range
 
of
scenarios
 
representing
 
instantaneous
 
market
 
shocks
 
to
 
all
collateral
 
and
 
exposure
 
positions,
 
taking
 
into
 
consideration
liquidity and potential concentration.
 
The portfolio-specific stress
test for
 
our mortgage
 
lending business
 
in Switzerland
 
reflects a
multi-year
 
event,
 
and
 
the
 
overarching
 
stress
 
test
 
for
 
global
wholesale
 
and
 
CCR
 
exposure
 
to
 
corporations
 
uses
 
a
 
one-year
global stress event
 
and takes into
 
account exposure concentration
to single counterparties.
 
›
 
Refer to “Stress testing” in this section for
 
more information
about our stress testing framework
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
127
Credit risk model confirmation
Our approach
 
to model
 
confirmation involves
 
both quantitative
methods,
 
e.g.,
 
monitoring
 
compositional
 
changes
 
in
 
portfolios
and results
 
of backtesting,
 
and qualitative
 
assessments, such
 
as
feedback from users on model output as a practical
 
indicator of a
model’s performance and reliability.
Material changes
 
in portfolio
 
composition may
 
invalidate the
conceptual soundness of a
 
model. We therefore perform
 
regular
analyses
 
of the evolution of portfolios to identify such changes in
the structure
 
and credit
 
quality of
 
portfolios. This
 
includes analyses
of changes
 
in key
 
attributes, changes
 
in portfolio
 
concentration
measures and changes in RWA.
 
›
 
Refer to “Risk measurement” in this section
 
for more
information about our approach to model confirmation
procedures
Backtesting
We
 
monitor
 
the
 
performance
 
of
 
models
 
by
 
backtesting
 
and
benchmarking them, with
 
model outcomes compared with
 
actual
results, based on our internal experience
 
and externally observed
results. To
 
assess the predictive power
 
of credit exposure models
for traded
 
products,
 
such as
 
OTC derivatives
 
and ETD
 
products,
we statistically compare predicted future
 
exposure distributions at
different forecast horizons with realized values.
 
For
 
PD,
 
we
 
use
 
statistical
 
modeling
 
to
 
derive
 
a
 
predicted
distribution of
 
the number
 
of defaults.
 
The observed
 
number of
defaults
 
is
 
compared
 
with
 
this
 
distribution,
 
letting
 
us
 
derive
 
a
statistical level of confidence in the
 
model conservatism. We
 
also
derive a lower and upper limit for the average
 
default rate. If the
portfolio average
 
PD lies
 
outside the
 
derived interval,
 
the rating
tool is, as a general rule, recalibrated.
For
 
LGD,
 
backtesting
 
statistically
 
tests
 
whether
 
the
 
mean
difference between the observed
 
and predicted LGD is
 
zero. If the
test fails,
 
there is
 
evidence that
 
our predicted
 
LGD is
 
too low.
 
In
such cases, and where these differences
 
are outside expectations,
models are recalibrated.
 
Main credit risk models backtesting by regulatory asset class
Length of time series
used for the calibration
(in years)
Actual rates in %
Estimated average rates
at the start of
2021 in %
Average of last
5 years
1
Min. of last
5 years
2
Max. of last
5 years
2
Probability of default
3
Central governments and central banks
>10
4
0.00
0.00
0.00
0.22
Banks and securities dealers
>10
0.13
0.00
0.53
0.69
Public-sector entities, multi-lateral development banks
>10
0.04
0.00
0.21
0.21
Corporates: specialized lending
>10
0.36
0.14
0.60
1.24
Corporates: other lending
>10
0.27
0.20
0.33
0.46
Retail: residential mortgages
>20
0.22
0.16
0.28
0.54
Retail: other
>10
0.02
0.00
0.10
0.25
Loss given default
 
Central governments and central banks
>10
42.49
Banks and securities dealers
>10
48.69
Public-sector entities, multi-lateral development banks
>10
24.55
Corporates: specialized lending
>10
0.19
0.00
0.92
22.77
Corporates: other lending
>10
18.12
0.46
27.00
38.28
Retail: residential mortgages
>20
0.58
0.00
0.92
21.34
Retail: other
 
>10
1.77
0.00
17.90
26.64
Credit conversion factors
Corporates
>10
21.06
6.93
37.91
38.72
1 Average of
 
all observations
 
over the last
 
five years.
 
2 Minimum /
 
maximum annual average
 
of observations
 
in any single
 
year from the
 
last five years.
 
Yearly averages
 
are only calculated
 
where five or
 
more
observations occurred during that year.
 
3 Average PD estimation is based on all
 
rated clients in the portfolio.
 
4 Sovereign PD model is calibrated to UBS
 
masterscale, length of time series shows
 
span of internal
history for this portfolio.
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
128
CCFs,
 
used
 
for
 
the
 
calculation
 
of
 
EAD
 
for
 
undrawn
 
facilities
with
 
corporate
 
counterparties,
 
are
 
dependent
 
on
 
several
 
credit
facility
 
contractual
 
dimensions.
 
We
 
compare
 
the
 
predicted
amount
 
drawn with
 
observed historical
 
use
 
of
 
such facilities
 
by
defaulted counterparties. If any statistically significant deviation
 
is
observed, the relevant CCFs are redefined.
 
The “Main
 
credit risk
 
models backtesting
 
by regulatory
 
asset
class”
 
table
 
on
 
the
 
previous
 
page
 
compares
 
the
 
current
 
model
calibration for PD,
 
LGD and CCFs
 
with historical observed
 
values
over the last five years.
 
Changes to models and model parameters during the period
As
 
part
 
of
 
our
 
continuous
 
efforts
 
to
 
enhance
 
models
 
to
 
reflect
market
 
developm
ents
 
and
 
newly
 
available
 
data
,
 
w
e
 
updat
ed
 
several models in 2021.
In Personal & Corporate Banking, we introduced a new model
for credit card exposures, new rating models for the
 
public-sector
entities portfolio and a
 
new LGD and
 
CCF model for
 
the industrial
goods leasing portfolio.
In Global Wealth
 
Management, a new
 
model was introduced
for the aircraft financing portfolio.
 
F
or
 
the
 
income
-
producing
 
real
 
estate
 
mortgages
,
 
w
e
recalibrated the
 
risk parameters
 
and for mortgages
 
in Switzerland,
we updated the LGD model.
In
 
the
 
Investment
 
Bank,
 
a
 
new
 
LGD
 
model
 
for
 
leveraged
finance
 
was
 
introduced
 
and
 
the
 
multi-nationals
 
and
 
financials
LGD was recalibrated.
In
 
Group
 
Functions,
 
we
 
extended
 
the
 
use
 
of
 
internal
 
Group
models to the
 
sovereign portfolio of
 
the Group Liquidity
 
Reserve
(GLR). Additionally, further
 
exposures in GLR (e.g.,
 
covered bonds)
have been moved to the standardized approach.
For CCR models, we recalibrated
 
the market parameters in the
SFT model. The
 
transition from LIBOR
 
required a number
 
of model
changes
 
for
 
CCR
 
models,
 
for
 
traded
 
products
 
to
 
be
 
able
 
to
consume the new alternative reference rate curves.
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,
with an
 
implementation date
 
of 1 January
 
2023. We
 
expect the
Swiss
 
regulations
 
to
 
come
 
into
 
force
 
in
 
2024.
 
The
 
updated
framework makes
 
a number
 
of revisions
 
to the
 
internal ratings-
based (IRB) approaches, namely:
 
(i) removing the option of
 
using
the A-IRB
 
approach for
 
certain asset
 
classes (including
 
large and
medium-sized
 
corporate
 
clients,
 
and
 
banks
 
and
 
other
 
financial
institutions); (ii) placing floors
 
on certain model
 
inputs under the
IRB
 
approach,
 
e.g.,
 
PD
 
and
 
LGD;
 
and
 
(iii) introducing
 
various
requirements to reduce RWA variability (e.g.,
 
for LGD).
The published
 
framework has a
 
number of
 
requirements that
are
 
subject
 
to
 
national
 
discretion.
 
Also,
 
revisions
 
to
 
the
 
credit
valuation adjustment (CVA) framework were published, including
the
 
removal
 
of
 
the
 
advanced
 
CVA
 
approach.
 
UBS
 
has
 
a
 
close
dialogue
 
with
 
FINMA
 
to
 
discuss
 
in
 
detail
 
the
 
implementation
objectives
 
and
 
prepare
 
for
 
a
 
smooth
 
transition
 
of
 
the
 
capital
regime for credit risk.
 
›
 
Refer to “Capital management objectives,
 
planning and
activities” in the “Capital, liquidity and
 
funding, and balance
sheet” section of this report for more information about
 
the
development of RWA
›
 
Refer to “Risk measurement” in this section
 
for more
information about our approach to model confirmation
procedures
›
 
Refer to the “Regulatory and legal developments”
 
and “Risk
factors” sections of this report for more information
Credit policies for distressed assets
The “Exposure categorization”
 
chart on the
 
next page shows
 
how
we
 
categorize
 
banking
 
products
 
and
securities
 
financing
transactions as
 
non-performing, defaulted
 
/ credit
 
-impaired
 
and
purchased or originated credit-impaired.
Non-performing
Audited |
 
In line with the regulatory definition, we report a claim as
non-performing when: (i) it is more than
 
90 days past due; (ii) it
 
is
subject
 
to
 
restructuring
 
proceedings,
 
where
 
preferential
conditions
 
concerning
 
interest
 
rates,
 
subordination,
 
tenor,
 
etc.
have been
 
granted in order
 
to avoid default
 
of the
 
counterparty
(forbearance);
 
(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.
 
 
 
UBS_AR_2021p157i0.gif
 
129
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 or
 
originated credit-impaired
 
(POCI). An
instrument is POCI if it has been purchased at a deep discount to
its
 
carrying
 
amount
 
following
 
a
 
risk
 
event
 
of
 
the
 
issuer
 
or
originated with a defaulted counterparty. Once
 
a financial asset is
classified
 
as
 
defaulted
 
/
 
credit-impaired
 
(except
 
POCI),
 
it
 
is
reported as
 
a stage 3
 
instrument and
 
remains as
 
such unless
 
all
past due amounts have
 
been rectified, additional payments
 
have
been
 
made
 
on
 
time,
 
the
 
position
 
is
 
not
 
classified
 
as
 
credit-
restructured, and
 
there is
 
general evidence
 
of credit
 
recovery. A
three-month probation period is applied before
 
a transfer back to
stages 1 or 2
 
can be triggered.
 
However, most instruments
 
remain
in stage 3 for a longer
 
period. As of 31 December 2021,
 
we had
no instruments classified as POCI on our books.
p
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
130
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.
p
 
Loss history statistics
An instrument
 
is classified
 
as credit-impaired
 
if the
 
counterparty
has
 
defaulted.
 
This
 
also
 
includes
 
credit-impaired
 
exposures
 
for
which no
 
loss has
 
occurred or
 
for which
 
no allowance
 
has been
recognized
 
(for example
 
because we
 
expect to
 
fully recover
 
the
exposures via collateral held).
 
The
 
“Loss
 
history
 
statistics”
 
table
 
below
 
provides
 
a
 
five-year
history of credit
 
loss experience for
 
loans and advances
 
to banks
and customers, and ratios of those credit losses relative to
 
credit-
impaired and
 
non-performing loans
 
and advances
 
to banks
 
and
customers.
 
For
 
2017,
 
the
 
amounts
 
are
 
based
 
on
 
IAS 37
 
and
IAS 39; for 2018 and onward, the amounts are based on IFRS 9.
›
 
The majority of the credit-impaired exposure relates to
 
loans
and advances in our Swiss domestic business.
 
Refer to “Note 9
Financial assets at amortized cost and other
 
positions in scope of
expected credit loss measurement” and “Note 20
 
Expected credit
loss measurement” in the “Consolidated financial
 
statements”
section of this report for more information about
 
ECL
measurement
›
 
Refer to “Note 14a Other financial assets
 
measured at amortized
cost” in the “Consolidated financial
 
statements” section of this
report for more details
 
Loss history statistics
USD million, except where indicated
31.12.21
IFRS 9
31.12.20
IFRS 9
31.12.19
IFRS 9
31.12.18
IFRS 9
31.12.17
IAS 37, IAS 39
Loans and advances to banks and customers (gross)
414,099
396,049
340,003
338,000
342,604
Credit-impaired loans and advances to banks and customers
2,150
2,945
2,309
2,300
1,104
Non-performing loans and advances to banks and customers
2,387
3,176
2,466
2,419
2,149
ECL allowances and provisions for credit losses
1,2
1,165
1,468
1,029
1,054
712
of which: allowances for loans and advances to banks and customers
1
857
1,076
770
780
678
Write-offs
137
356
142
210
101
of which: write-offs for loans and advances to banks and customers
118
348
122
192
101
Credit loss (expense) / release
3
148
(694)
(78)
(118)
(131)
Ratios
Credit-impaired loans and advances to banks and customers as
 
a percentage of loans and advances to banks
and customers (gross)
0.5
0.7
0.7
0.7
0.3
Non-performing loans and advances to banks and customers as
 
a percentage of loans and advances to banks
and customers (gross)
0.6
0.8
0.7
0.7
0.6
ECL allowances for loans and advances to banks and customers as a percentage
 
of loans and advances to
banks and customers (gross)
0.2
0.3
0.2
0.2
0.2
Write-offs as a percentage of average loans and advances to banks
 
and customers (gross) outstanding during
the period
0.0
0.1
0.0
0.1
0.0
1 Includes collective loan loss
 
allowances for 31 December
 
2017. Until 31 December
 
2017 did not include allowances
 
for other receivables (USD
 
19 million).
 
2 Includes provisions for ECL
 
of guarantees and loan
commitments and allowances
 
for securities
 
financing transactions.
 
3 Includes credit
 
loss (expense) /
 
release for other
 
financial assets at
 
amortized cost,
 
guarantees, loan
 
commitments, and
 
securities financing
transactions.
 
 
131
Market risk
Key developments
Market
 
risk remained
 
at low
 
levels as
 
a
 
result
 
of
 
our continued
focus on managing
 
tail risks. Average
 
management value-at-risk
(VaR)
 
(1-day, 95%
 
confidence level) decreased to USD 11
 
million
from USD 13 million in 2020, mainly as a result of
 
the Investment
Bank’s
 
equities
 
trading
 
business.
 
The
 
number
 
of
 
negative
backtesting
 
exceptions
 
within
 
a
 
250-business-day
 
window
increased to
 
4 from
 
3 by
 
the end
 
of 2021.
 
As these
 
backtesting
exceptions
 
remained
 
below
 
5,
 
the
 
FINMA
 
VaR
 
multiplier
 
for
market risk RWA remained unchanged
 
at 3.0 as of 31 December
2021.
Audited |
 
Main sources of market risk
 
Market
 
risks
 
arise
 
from
 
both
 
trading
 
and
 
non-trading
 
business
activities.
–
 
Trading
 
market
 
risks
 
are mainly
 
connected
 
with
 
primary
 
debt and
equity underwriting
 
and
 
securities and
 
derivatives trading
 
for
market-making
 
and client
 
facilitation
 
in our Investment
 
Bank, as
well as
 
the remaining
 
positions
 
in Non-core
 
and Legacy
 
Portfolio
in Group
 
Functions
 
and our
 
municipal
 
securities
 
trading
 
business
in Global Wealth
 
Management.
–
 
Non-trading
 
market
 
risks
 
arise
 
predominantly
 
in
 
the
 
form
 
of
interest
 
rate
 
and
 
foreign
 
exchange
 
risks
 
connect
ed
 
with
personal
 
banking
 
and
 
lending
 
in
 
our
 
wealth
 
management
business, our Swiss
 
personal and corporate
 
banking business,
the Investment Bank’s lending business,
 
and treasury activities.
–
 
Group
 
Treasury
 
assumes
 
market
 
risks
 
in
 
the
 
process
 
of
managing
 
interest
 
rate
 
risk,
 
structural
 
foreign
 
exchange
 
risk
and the Group’s liquidity and funding profile, including HQLA.
–
 
Equity and debt investments can also give rise to market
 
risks,
as
 
can
 
some
 
aspects
 
of
 
employee
 
benefits,
 
such
 
as
 
defined
benefit pension schemes.
p
 
Audited |
 
Overview of measurement, monitoring and
management techniques
 
–
 
Market risk limits are set for the Group, the business divisions,
Group Treasury and Non-core and Legacy Portfolio at granular
levels
 
in
 
the
 
various business
 
lines,
 
reflecting
 
the nature
 
and
magnitude of the market risks.
–
 
Management VaR
 
measures exposures
 
under the
 
market risk
framework,
 
including
 
trading
 
market
 
risks
 
and
 
some
 
non-
trading market risks. Non-trading
 
market risks not included
 
in
VaR
 
are
 
also
 
covered
 
in
 
the
 
risks
 
controlled
 
by
 
Market
 
&
Treasury Risk Control, as set out below.
–
 
Our
 
primary
 
portfolio
 
measures
 
of
 
market
 
risk
 
are
 
liquidity-
adjusted
 
stress
 
(LAS)
 
loss
 
and
 
VaR.
 
Both
 
are
 
common
 
to
 
all
business divisions and
 
subject to
 
limits that
 
are approved
 
by the
Board of Directors (the BoD).
–
 
These
 
measures
 
are
 
complemented
 
by
 
concentration
 
and
granular limits for general and specific market
 
risk factors. Our
trading
 
businesses
 
are
 
subject
 
to
 
multiple
 
market
 
risk
 
limits,
which
 
take
 
into
 
account
 
the
 
extent
 
of
 
market
 
liquidity
 
and
volatility,
 
available
 
operational
 
capacity,
 
valuation
 
uncertainty
and, for our single-name exposures, issuer credit quality.
–
 
Trading
 
market
 
risks
 
are
 
managed
 
on
 
an
 
integrated
 
basis
 
at
portfolio
 
level. As
 
risk factor
 
sensitivities change
 
due to
 
new
transactions, transaction
 
expiries or
 
changes in
 
market levels,
risk factors
 
are dynamically
 
rehedged to
 
remain within
 
limits.
Thus
 
we
 
do
 
not
 
generally
 
seek
 
to
 
distinguish
 
in
 
the
 
trading
portfolio between specific positions and associated hedges.
–
 
Issuer
 
risk
 
is
 
controlled
 
by
 
limits
 
applied
 
at
 
business
 
division
level
 
based
 
on
 
jump-to-zero
 
measures,
 
which
 
estimate
maximum
 
default
 
exposure
 
(the
 
default
 
event
 
loss
 
assuming
zero recovery).
–
 
Non-trading foreign exchange
 
risks are
 
managed under
 
market
risk limits, with the exception
 
of Group Treasury management
of consolidated capital activity.
 
 
Our Market &
 
Treasury Risk Control
 
function applies a
 
holistic
risk
 
framework,
 
set
ting
 
the
 
appetite
 
for
 
treasury
-
related
 
risk
-
taking
 
activities
 
across
 
the
 
Group.
 
A
 
key
 
element
 
of
 
the
framework is
 
an overarching
 
economic value sensitivity
 
limit, set
by the
 
BoD. Th
 
is limit
 
is linked
 
to
 
the
 
level
 
of Basel III
 
common
equity
 
tier 1
 
(CET1)
 
capital,
 
and takes
 
into account
 
risks arising
from interest rates,
 
foreign exchange and
 
credit spreads. Also,
 
the
sensitivity
 
of
 
net
 
interest
 
income
 
to
 
changes
 
in
 
interest
 
rates
 
is
monitored against targets set by the Group CEO, so as
 
to analyze
the outlook and volatility
 
of net interest income
 
based on market-
expected interest rates. Limits
 
are also set by
 
the BoD to balance
the effect
 
of foreign
 
exchange movements
 
on our
 
CET1
 
capital
and
 
CET1
 
capital
 
ratio.
 
Non-trading
 
interest
 
rate
 
and
 
foreign
exchange
 
risks
 
are
 
included
 
in
 
Group-wide
 
statistical
 
and
 
stress
testing metrics, which flow into our risk appetite framework.
Equity
 
and
 
debt
 
investments
 
are
 
subject
 
to
 
a
 
range
 
of
 
risk
controls,
 
including
 
preapproval of
 
new
 
investments
 
by
 
business
management
 
and
 
Risk
 
Control
 
and
 
regular
 
monitoring
 
and
reporting.
 
They
 
are
 
also
 
included
 
in
 
Group-wide
 
statistical
 
and
stress testing metrics.
p
 
›
 
Refer to “Currency management” in the “Capital,
 
liquidity and
funding, and balance sheet” section of
 
this report for more
information about Group Treasury’s management of foreign
 
exchange risks
›
 
Refer to the “Capital, liquidity and funding,
 
and balance sheet”
section of this report for more information about
 
the sensitivity
of our CET1 capital and CET1 capital ratio
 
to currency
movements
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
132
Market risk stress loss
We measure and
 
manage market risks through
 
a comprehensive
framework of non
 
-statistical measures and
 
related limits,
 
as well
as VaR. This
 
includes an extensive set of
 
stress tests and scenario
analyses,
 
continuously
 
evaluated
 
to
 
ensure
 
that
 
losses
 
resulting
from
 
an
 
extreme
 
yet
 
plausible
 
event
 
do
 
not
 
exceed
 
our
 
risk
appetite.
Liquidity-adjusted stress
LAS is our
 
primary stress loss
 
measure for Group-wide
 
market risk.
The LAS framework captures
 
the economic losses that could arise
under specified stress scenarios. This is partially done
 
by replacing
the standard 1-day and
 
10-day holding period assumptions used
for
 
management
 
and
 
regulatory
 
VaR
 
with
 
liquidity-adjusted
holding
 
periods,
 
as
 
explained
 
below.
 
Shocks
 
are
 
applied
 
to
positions based
 
on expected
 
market movements
 
in the
 
liquidity-
adjusted holding periods resulting from the specified scenario.
The holding
 
periods used
 
for LAS are
 
calibrated to reflect
 
the
time needed to
 
reduce or
 
hedge the
 
risk of
 
positions in
 
each major
risk
 
factor
 
in
 
a
 
stressed
 
environment,
 
assuming
 
maximum
utilization
 
of
 
the
 
relevant
 
position
 
limits.
 
We
 
apply
 
minimum
holding
 
periods,
 
regardless
 
of
 
observed
 
liquidity
 
levels,
as
identification
 
of
 
and
 
reaction
 
to
 
a
 
crisis
 
may
 
not
 
always
 
be
immediate.
The expected
 
market movements
 
are
 
derived using
 
historical
market
 
behavior
(
based
 
on
 
analysis
 
of
 
historical
 
events
)
 
and
forward
-
looking
 
analysis
 
includ
ing
 
consideration
 
of
 
defined
scenarios that have not occurred in the past.
LAS
-
based
 
limits
 
appl
y
 
at
several
levels:
 
Group,
 
business
division,
 
Group
 
Treasury
 
and
 
Non-core
 
and
 
Legacy
 
Portfolio;
business area; and
 
sub-portfolio. LAS is also
 
the core market risk
component of our combined stress test framework and therefore
integral to our overall risk appetite framework.
›
 
Refer to “Risk appetite framework” in this
 
section for more
 
information
›
 
Refer to “Stress testing” in this section for
 
more information
about our stress testing framework
Value-at-risk
VaR definition
Audited |
 
VaR is a statistical
 
measure of market
 
risk, representing the
potential
 
market
 
risk
 
losses
 
over
 
a
 
set
 
time
 
horizon
 
(holding
period)
 
at
 
an
 
established
 
level
 
of
 
confidence.
 
VaR
 
assumes
 
no
change in the
 
Group’s trading positions over
 
the set time
 
horizon.
We
 
calculate
 
VaR
 
daily.
 
The
 
profit
 
or
 
loss
 
distribution
 
VaR
 
is
derived from our
 
internally developed
 
VaR model, which
 
simulates
returns over the
 
holding period for
 
those risk factors
 
our trading
positions are sensitive to, and subsequently quantifies the profit /
loss effect
 
of these
 
risk factor
 
returns on
 
trading positions.
 
Risk
factor
 
returns
 
associated
 
with
 
general
 
interest
 
rate,
 
foreign
exchange and commodities risk
 
factor classes are based on
 
a pure
historical
 
simulation
 
approach,
us
ing
a
 
five
-
year
 
look
-
back
window. Risk factor returns
 
for selected issuer-based risk factors,
e.g., equity price and credit
 
spreads, are split into systematic and
residual
 
issuer-specific
 
components
 
using
 
a
 
factor
 
model
approach. Systematic
 
returns are
 
based on
 
historical simulation,
and
 
residual
 
returns
 
on
 
a
 
Monte
 
Carlo
 
simulation.
 
VaR
 
model
profit
 
or
 
loss distribution
 
is derived
 
from
 
the
 
sum of
 
systematic
and residual
 
returns in
 
such a
 
way that
 
we consistently
 
capture
systematic and
 
residual risk.
 
Correlations among
 
risk factors
 
are
implicitly
 
captured
 
via
 
a
 
historical
 
simulation
 
approach.
 
When
modeling
 
risk
 
factor
 
returns
 
we
 
consider
 
the
 
stationarity
properties
 
of
 
the
 
historical
 
time
 
series
 
of
 
risk
 
factor
 
changes.
Depending on the stationarity properties of
 
the risk factors within
a given
 
factor class,
 
we model
 
the factor
 
returns using
 
absolute
returns or logarithmic returns.
 
Risk factor return distributions
 
are
updated fortnightly.
Our VaR
 
model does
 
not
 
have full
 
revaluation
 
capability, but
we source full revaluation grids
 
and sensitivities from front-office
systems, enabling us
 
to capture material
 
non-linear profit or
 
loss
effects.
We
 
use
 
a
 
single
 
VaR
 
model
 
for
 
both
 
internal
 
management
purposes
 
and
 
determining
 
market
risk
R
WA,
 
although
 
we
consider
 
different
 
confidence
 
levels
 
and
 
time
 
horizons.
 
For
internal
 
management
 
purposes,
 
we
 
establish
 
risk
 
limits
 
and
measure exposures
 
using VaR
 
at a
95
% confidence
 
level with
 
a
1-day
 
holding
 
period, aligned
 
to
 
the
 
way we
 
consider
 
the risks
associated with
 
our trading
 
activities. The
 
regulatory measure of
market risk used to
 
underpin the market risk
 
capital requirement
under Basel III requires
 
a measure equivalent
 
to a
99
% confidence
level using a 10-day holding
 
period. To calculate a 10-day
 
holding
period
 
VaR,
 
we
use
10
-
day
 
risk
 
factor
 
returns,
with
all
observations equally weighted.
Additionally,
 
the
 
portfolio
 
population
 
for
 
management
 
and
regulatory
 
VaR
 
is
 
slightly
 
different.
 
The
 
one
 
for
 
regulatory
 
VaR
meets
 
regulatory
 
requirements
 
for
 
inclusion
 
in
 
regulatory
 
VaR.
Management
 
VaR
 
includes
 
a
 
broader
 
range
 
of
 
positions.
 
For
example,
 
regulatory
 
VaR
 
excludes
 
credit
 
spread
 
risks
 
from
 
the
securitization
 
portfolio,
 
which
 
are
 
treated
 
instead
 
under
 
the
securitization approach for regulatory purposes.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
133
We also use
 
stressed VaR (SVaR)
 
for the calculation
 
of market
risk RWA. SVaR uses broadly the
 
same methodology as regulatory
VaR and is
 
calculated using the
 
same population, holding
 
period
(10-day) and
 
confidence level
 
(
99
%). Unlike
 
regulatory VaR,
 
the
historical
 
data
 
set
 
for
 
SVaR
 
is
 
not
 
limited
 
to
 
five
 
years,
 
instead
covering from 1 January
 
2007 to the
 
present. In deriving
 
SVaR, we
seek the largest 10-day holding period VaR for the current Group
portfolio across
 
all
 
one-year look-back
 
windows from
 
1 January
2007 to the present. SVaR is computed weekly.
p
 
›
 
Refer to the 31 December 2021 Pillar 3
 
Report, available under
“Pillar 3 disclosures” at
ubs.com/investors
, for more information
about the regulatory capital calculation
 
under the advanced
internal ratings-based approach
Management VaR for the period
The tables below show
 
minimum, maximum, average and
 
period-
end management VaR
 
by business division and Group
 
Functions,
and
 
by
 
general
 
market
 
risk
 
type.
 
We
 
continued
 
to
 
maintain
management VaR
 
at low
 
levels, with
 
average VaR
 
decreasing to
USD 11 million from USD 13 million in 2020.
 
 
Audited |
 
Management value-at-risk (1-day, 95% confidence, 5 years of historical data) of our business divisions and Group
Functions by general market risk type
1
For the year ended 31.12.21
USD million
Equity
Interest
rates
Credit
spreads
Foreign
exchange
Commodities
Min.
1
7
5
1
2
Max.
35
13
11
9
5
Average
7
9
7
3
3
31.12.21
8
11
7
6
3
Total management VaR, Group
4
36
11
12
Average (per business division and risk type)
Global Wealth Management
1
3
1
2
0
1
2
0
0
Personal & Corporate Banking
0
0
0
0
0
0
0
0
0
Asset Management
0
0
0
0
0
0
0
0
0
Investment Bank
3
36
11
11
7
9
7
3
3
Group Functions
4
8
5
4
0
4
4
1
0
Diversification effect
2,3
(6)
(5)
0
(5)
(5)
(1)
0
For the year ended 31.12.20
USD million
Equity
Interest
rates
Credit
spreads
Foreign
exchange
Commodities
Min.
3
6
5
2
2
Max.
29
11
11
7
6
Average
10
8
7
4
4
31.12.20
6
8
8
3
3
Total management VaR, Group
8
31
13
11
Average (per business division and risk type)
Global Wealth Management
0
2
1
1
0
1
1
0
0
Personal & Corporate Banking
0
0
0
0
0
0
0
0
0
Asset Management
0
0
0
0
0
0
0
0
0
Investment Bank
7
32
12
10
10
7
6
4
4
Group Functions
4
7
5
6
0
4
3
1
0
Diversification effect
2,3
(5)
(8)
0
(4)
(4)
(1)
0
1 Statistics at individual levels may not be
 
summed to deduce the corresponding aggregate
 
figures. The minima
 
and maxima for each level may well occur
 
on different days, and likewise,
 
the VaR for each
 
business
line or risk type, being driven by the extreme loss tail of the corresponding distribution of simulated profits and
 
losses for that business line or risk type, may well be driven by different days in the
 
historical time series,
rendering invalid the simple summation of figures to arrive at the aggregate total.
 
2 Difference between the sum of the standalone VaR for the business divisions and Group Functions and the VaR for the Group as
a whole.
 
3 As the minima and maxima for different business divisions and Group Functions occur on different days, it is not meaningful
 
to calculate a portfolio diversification effect.
 
p
 
 
 
UBS_AR_2021p162i0.gif
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
134
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.
This may happen due to the number of risk factors included in
the VaR model needing to be limited.
 
–
 
Effects
 
of extreme
 
market movements
 
are subject to
 
estimation
errors, which
 
may result
 
from non-linear risk
 
sensitivities, and
the potential for actual volatility and correlation levels to differ
from assumptions implicit in VaR calculations.
–
 
Using a
 
five-year window
 
means sudden
 
increases in
 
market
volatility will tend
 
not to increase VaR
 
as quickly as the
 
use of
shorter
 
historical observation
 
periods, but
 
such increases
 
will
affect VaR
 
for a longer
 
period of
 
time. Similarly,
 
after periods
of increased volatility, as markets stabilize,
 
VaR predictions will
remain
 
more conservative
 
for a
 
period of
 
time influenced
 
by
the length of the historical observation period.
 
 
SVaR is subject to the limitations noted for VaR above, but the
use of one-year data sets avoids the smoothing effect of the five-
year
 
data
 
set
 
used
 
for
 
VaR
 
and
 
the
 
absence
 
of
 
the
 
five-year
window gives a longer history of potential loss events. Therefore,
although
 
the significant
 
period of
 
stress
 
during
 
the
 
2007–2009
financial
 
crisis
 
is
 
no
 
longer
 
contained
 
in
 
the
 
historical
 
five-year
period used for management and regulatory
 
VaR, SVaR continues
to use
 
that data.
 
This approach aims
 
to reduce
 
the procyclicality
of the regulatory capital requirements for market risks.
We recognize
 
that no
 
single measure
 
can encompass
 
all risks
associated
 
with
 
a
 
position
 
or
 
portfolio.
 
Thus
 
we
 
use
 
a
 
set
 
of
metrics with both overlapping and complementary characteristics
to
 
create
 
a
 
holistic
 
framework
 
that
 
aims
 
to
 
ensure
 
material
completeness
 
of
 
risk
 
identification
 
and
 
measurement.
 
As
 
a
statistical aggregate risk measure, VaR supplements
 
our liquidity-
adjusted stress and comprehensive stress testing frameworks.
We also
 
have a
 
framework to
 
identify and
 
quantify potential
risks not
 
fully captured by
 
our VaR model
 
and refer to
 
such risks
as risks not in VaR.
 
The framework underpins these potential risks
with regulatory capital, calculated as a multiple of regulatory VaR
and stressed VaR.
p
 
Backtesting of VaR
VaR backtesting is a performance measurement process
 
in which
a 1-day VaR prediction is compared with the realized 1-day profit
or
loss
 
(P&L)
.
 
We
 
compute
 
backtesting
 
VaR
 
using
 
a
 
99%
confidence level and 1-day holding period for the regulatory
 
VaR
population. Since
 
99% VaR
 
at UBS
 
is defined
 
as a
 
risk measure
that
 
operates
 
on
 
the
 
lower
 
tail
 
of
 
the
 
P&L
 
distribution,
 
99%
backtesting
 
VaR
 
is
 
a
 
negative
 
number.
 
Backtesting
 
revenues
exclude
 
non-trading
 
revenues,
 
such
 
as
 
valuation
 
reserves,
 
fees
and commissions, and revenues from intraday trading, to provide
for
 
a
 
like-for-like
 
comparison.
 
A
 
backtesting
 
exception
 
occurs
when
 
backtesting
 
revenues
 
are
 
lower
 
than
 
the
 
previous
 
day’s
backtesting VaR.
 
 
 
 
 
 
 
135
Statistically, given the
 
99% confidence level,
 
2 or 3
 
backtesting
exceptions a year can be expected. More than 4 exceptions could
indicate
 
that the
 
VaR model
 
is not
 
performing appropriately,
 
as
could too few
 
exceptions over a
 
long period. However,
 
as noted
for
 
VaR
 
limitations
 
above,
 
a
 
sudden
 
increase
 
(or
 
decrease)
 
in
market volatility
 
relative to
 
the five-year
 
window could lead
 
to a
higher
 
(or
 
lower)
 
number
 
of
 
exceptions.
 
Therefore,
 
Group-level
backtesting
 
exceptions
 
are
 
investigated,
 
as
 
are
 
exceptional
positive backtesting revenues, with
 
the results reported to
 
senior
business
 
management,
 
the
 
Group
 
CRO
 
and
 
the
 
Group
 
Chief
Market & Treasury Risk Officer.
 
Internal and external auditors and
relevant regulators are also informed of backtesting exceptions.
The “Group: development
 
of regulatory backtesting
 
revenues
and actual trading
 
revenues against
 
backtesting VaR” chart
 
on the
previous page
 
shows the
 
12-month development
 
of backtesting
VaR against the Group’s backtesting
 
revenues and actual trading
revenues for
 
2021. The
 
chart shows
 
both the
 
99% and
 
the 1%
backtesting
 
VaR.
 
The
 
asymmetry
 
between
 
the
 
negative
 
and
positive tails is due to the long gamma risk profile historically
 
run
in the Investment Bank.
The actual
 
trading revenues
 
include backtesting
 
and intraday
revenues.
The number of
 
negative backtesting exceptions
 
within a 250-
business-day window increased
 
to 4
 
from 3
 
by the
 
end of the
 
year.
As
 
these
 
backtesting
 
exceptions
 
remained
 
below
 
5,
 
the
 
FINMA
VaR multiplier for market
 
risk RWA remained unchanged
 
at 3.0 as
of 31 December 2021.
 
VaR model confirmation
As well
 
as for
 
regulatory-purposes backtesting
 
described above,
we conduct extended
 
backtesting for internal
 
model confirmation
purposes. This includes
 
observing model performance
 
across the
entire
 
P&L
 
distribution
 
(not just
 
the tails),
 
and at
 
multiple levels
within the business division hierarchies.
›
 
Refer to “Risk measurement” in this section
 
for more
information about our approach to model confirmation
procedures
VaR model developments in 2021
Audited
 
|
 
There
 
were
 
no
material
 
changes
 
to
 
the
 
VaR
 
model
in 2021.
p
 
Future market risk-related regulatory capital developments
 
In
 
January
 
2019,
 
the
 
Basel
 
Committee
 
on
 
Banking
 
Supervision
(the BCBS) published the final
 
standards on the minimum capital
requirements
 
for
 
market
 
risk
 
(the
 
Fundamental
 
Review
 
of
 
the
Trading
 
Book).
 
We
 
do
 
not
 
expect
 
these
 
standards
 
to
 
become
mandatory
 
in
 
Switzerland
 
until
 
after
 
the
 
BCBS
 
target
 
effective
date of 1 July 2024.
Key
 
elements
 
of
 
the
 
revised
 
market
 
risk
 
framework
 
include:
(i) changes
 
to
 
the
 
internal
 
model-based
 
approach,
 
including
changes
 
to
 
the
 
model approval
 
and
 
performance
 
measurement
process; (ii) changes to
 
the standardized approach
 
with the aim
 
of
it being
 
a credible
 
fallback method
 
for an
 
internal model-based
approach; and (iii) a revised boundary between trading book and
banking
 
book.
 
UBS
 
maintains
 
a
 
close
 
dialogue
 
with
 
FINMA
 
to
discuss
 
the
 
implementation
 
objectives
 
in
 
more
 
detail
 
and
 
to
provide a smooth transition of the capital regime for market risk.
In
 
September
 
2021
 
FINMA
 
mandated
 
UBS
 
to
 
hold
 
an
 
RWA
add-on for
 
the omission
 
of time
 
decay in
 
regulatory VaR
 
and SVaR.
The
 
add-on
 
reflects
 
the
 
outcome
 
of
 
discussions
 
with
 
FINMA
regarding our regulatory
 
VaR model,
 
which started in
 
late 2019.
The
 
integration
 
of
 
time
 
decay
 
into
 
the
 
regulatory
 
VaR
 
model,
which would replace the add-on, is subject to
 
further discussions
between FINMA and UBS.
›
 
Refer to “Risk-weighted assets” in the “Capital,
 
liquidity and
funding, and balance sheet” section of
 
this report for more
information about the development
 
of RWA including the
regulatory add-on
›
 
Refer to “Risk measurement” in this section
 
for more
information about our approach to model confirmation
procedures
›
 
Refer to the “Regulatory and legal developments”
 
and “Risk
factors” sections of this report for more information
Interest rate risk in the banking book
Interest rate risk in the banking book disclosure
Our financial reports’
 
interest rate risk
 
in the
 
banking book (IRRBB)
disclosure
 
is
 
aligned
 
to
 
the
 
Pillar 3
 
requirements
 
set
 
by
 
FINMA
Circular “2019/2 Interest Rate
 
Risk – Banks,”
 
which sets minimum
standards
 
for measuring,
 
managing,
 
monitoring and
 
controlling
IRRBB. In particular, the economic value of equity (EVE) sensitivity
is assessed under the six
 
regulatory rate-shock scenarios set in
 
the
FINMA
 
circular,
 
which
 
are
 
currency-specific
 
and
 
not
 
subject
 
to
flooring.
Sources of interest rate risk in the banking book
Audited |
 
IRRBB arises
 
from
 
balance sheet
 
positions such
 
as
Loans
and
 
advances
 
to
 
banks
,
Loans
 
and
 
advances
 
to
 
customers
,
Financial assets at
 
fair value not held
 
for trading
,
Financial assets
measured
 
at
 
amortized
 
cost
,
Customer
 
deposits
,
Debt
 
issued
measured
 
at
 
amortized
 
cost
,
 
and
 
derivatives,
 
including
 
those
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.
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
136
Our
 
largest
 
banking
 
book
 
interest
 
rate
 
exposures
 
arise
 
from
customer
 
deposits
 
and
 
lending
 
products
 
in
 
Global
 
Wealth
Management
 
and
 
Personal
 
&
 
Corporate
 
Banking.
 
The
 
inherent
interest
 
rate
 
risks
 
are
 
generally
 
transferred
 
from
 
Global
 
Wealth
Management
 
and
 
Personal
 
&
 
Corporate
 
Banking
 
to
 
Group
Treasury,
 
to
 
manage
 
them
 
centrally. This
 
enables
 
the netting
 
of
interest
 
rate
 
risks
 
across
 
different
 
sources,
 
while
 
leaving
 
the
originating
 
businesses
 
with
 
commercial
 
margin
 
and
 
volume
management. The residual interest
 
rate risk is mainly
 
hedged with
interest rate swaps, to the vast majority of which we apply hedge
accounting.
 
Short-term
 
exposures
 
and
 
high-quality
 
liquid
 
assets
classified as
Financial assets at
 
fair value not
 
held for trading
 
are
hedged with derivatives
 
accounted for on
 
a mark-to-market basis.
Long-term
 
fixed-rate
 
debt
 
issued
 
is
 
hedged
 
with
 
interest
 
rate
swaps designated in fair value hedge accounting relationships.
Risk management and governance
IRRBB
 
is
 
measured
 
using
 
several
 
metrics,
 
the
 
most
 
relevant
 
of
which are the following.
–
 
Interest
 
rate
 
sensitivities
 
to
changes
 
in
 
yield
 
curves
 
are
 
calculated as changes in the present value of
 
future cash flows
irrespective of
 
accounting treatment.
 
These are
 
also the
 
key risk
factors for statistical and stress-based measures, e.g., value-at-
risk
 
and
 
stress
 
scenarios
 
(including
 
EVE
 
sensitivity),
 
and
 
are
measured
 
and
 
reported
 
daily.
 
EVE
 
sensitivity
 
is
 
the
 
exposure
arising from the most adverse regulatory interest rate scenario
after
 
netting
 
across
 
currencies.
As
 
well
 
as
 
the
 
regulatory
measure,
we
appl
y
 
an
 
internal
 
EVE
 
sensitivity
 
me
tric
that
includes
 
additional
 
tier 1
 
(AT1)
 
capital
 
instruments
 
and
modeled
 
interest
 
rate
 
duration
 
assigned
 
to
 
equity,
 
goodwill
and real estate.
–
 
Net interest
 
income (NII) sensitivity
 
assesses NII
 
change over a
set
 
time
 
horizon
 
compared
 
with
 
baseline
 
NII,
 
wh
ich
we
internally calculate by
 
assuming interest rates
 
in all currencies
develop according
 
to their
 
market-implied forward
 
rates and
assum
ing
 
constant
 
business
 
volumes
 
and
 
no
 
specific
management actions.
 
This internally
 
calculated
 
NII sensitivity,
which,
 
unlike
 
the
 
FINMA
 
Pillar 3
 
disclosure
 
requirements,
includes
 
the
 
contribution
 
from cash
 
held
 
at
 
central
 
banks, is
measured and reported monthly.
 
We actively
 
manage IRRBB,
 
aiming to
 
reduce the
 
volatility of
NII, while keeping the EVE
 
sensitivity within set internal risk
 
limits.
EVE and
 
NII sensitivity
 
are monitored
 
against limits
 
and triggers,
at consolidated and
 
significant legal entity
 
levels. We also
 
assess
the sensitivity of EVE and NII under stressed market conditions by
applying a suite
 
of parallel
 
and non-parallel interest
 
rate scenarios,
as well as specific economic scenarios.
The Group
 
Asset and
 
Liability Committee
 
(ALCO) and,
 
where
relevant,
 
ALCOs
 
at
 
a
 
legal
 
entity
 
level
 
perform
 
independent
oversight over the management of IRRBB,
 
which is also subject to
Group Internal Audit and model governance.
›
 
Refer to “Group Internal Audit” in the “Corporate
 
governance”
section of this report and to “Risk measurement”
 
in this section
for more information
Key modeling assumptions
The cash flows
 
from customer deposits
 
and lending products
 
used
in calculation
 
of EVE
 
sensitivity exclude
 
commercial margins
 
and
other spread
 
components, are
 
aggregated by
 
daily time
 
buckets
and are
 
discounted using
 
risk-free
 
rates. Our
 
external issuances
are
 
discounted
 
using
 
UBS’s
 
senior
 
debt
 
curve,
 
and
 
capital
instruments are modeled
 
to the
 
first call date.
 
NII sensitivity, which
includes commercial
 
margins, is
 
calculated over
 
a one-year
 
time
horizon, assuming constant balance sheet structure and volumes,
and
 
considers
 
the
 
flooring
 
effect
 
of
 
embedded
 
interest
 
rate
options.
The average
 
repricing maturity
 
of non-maturing
 
deposits and
loans is determined via
 
replication portfolio strategies designed
 
to
protect
 
product
 
margin.
 
Optimal
 
replicating
 
portfolios
 
are
determined
 
at
 
granular
 
currency-
 
and
 
product-specific
 
levels
 
by
simulating
 
and
 
applying
 
a
 
real-world
 
market
 
rate
 
model
 
to
historically calibrated client rate and volume models.
We
 
use
 
an
 
econometric
 
prepayment
 
model
 
to
 
forecast
prepayment
 
rates on
 
US mortgage
 
loans
 
in UBS
 
Bank USA
 
and
agency
 
mortgage-backed
 
securities
 
(MBSs)
 
held
 
in
 
various
liquidity
 
portfolios
 
of
 
UBS
 
Americas
 
Holding
 
LLC
 
consolidated.
These prepayment rates are used to forecast both mortgage loan
and MBS
 
balances under
 
various macroeconomic
 
scenarios. The
prepayment model is used for
 
a variety of purposes, including
 
risk
management and regulatory
 
stress testing. Swiss
 
mortgages and
fixed-term deposits generally do not carry similar
 
optionality, due
to prepayment and early redemption penalties.
p
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
137
Effect of interest rate changes on shareholders’ equity and
CET1 capital
The “Accounting and
 
capital effect
 
of changes in
 
interest rates”
table below shows
 
the effects on
 
shareholders’ equity and
 
CET1
capital of
 
gains and
 
losses from
 
changes in
 
interest rates
 
in the
main banking
 
book positions.
 
For instruments held
 
at fair
 
value,
changes in interest rates result
 
in an immediate fair value gain or
loss, recognized
 
either in
 
the income statement
 
or through
 
OCI.
Typically,
 
increases
 
in
 
interest
 
rates
 
would
 
lead
 
to
 
immediate
reductions
 
in the value of our long-term
 
assets held at fair value,
but
 
we
 
would
 
expect
 
such
 
reductions
 
to
 
be
 
offset
 
over
 
time
through higher NII on core banking products.
For assets and
 
liabilities measured at
 
amortized cost, changes
in interest
 
rates do
 
not result
 
in changes
 
in the
 
carrying amount
of
 
the
 
instruments,
 
but
 
could
 
affect
 
the
 
amount
 
of
 
interest
income or expense
 
recognized over time
 
in the income
 
statement.
 
In
 
addition
 
to
 
the
 
differing
 
accounting
 
treatments,
 
banking
book
 
positions
 
have
 
different
 
sensitivities
 
to
 
different
 
points on
yield
 
curves.
 
For example,
 
portfolios of
 
debt securities,
 
whether
measured
 
at
 
amortized
 
cost
 
or
 
at
 
fair
 
value,
 
and
 
interest
 
rate
swaps, whether designated as cash flow hedges
 
or transacted as
economic
 
hedges,
 
are
 
generally
 
more
 
sensitive
 
to
 
changes
 
in
longer-duration interest rates, whereas deposits and
 
a significant
portion
 
of loans
 
contributing
 
to NII
 
are more
 
sensitive to
 
short-
term rates.
 
These factors
 
are important,
 
as yield
 
curves may
 
not
shift on
 
a parallel
 
basis and
 
could, for
 
example, exhibit
 
an initial
steepening followed by a flattening over time.
Due to
 
the accounting
 
treatment and
 
yield curve
 
sensitivities
outlined above, in a rising rate scenario we would expect to have
an initial decrease in shareholders’ equity,
 
as a result of fair value
losses recognized
 
in OCI.
 
This would
 
be compensated
 
over time
by increased
 
NII, as
 
increases in
 
interest rates
 
affect the
 
shorter
end
 
of
 
the
 
yield
 
curve
 
in
 
particular.
 
The
 
effect
 
on
 
CET1
 
capital
would
 
be less
 
pronounced, as
 
gains
 
and
 
losses
 
on
 
interest
 
rate
swaps
 
designated
 
as
 
cash
 
flow
 
hedges
 
are
 
not
 
recognized
 
for
regulatory
 
capital
 
purposes.
 
Fair
 
value
 
losses
 
on
 
instruments
designated at fair value should be offset by economic hedges.
 
Accounting and capital effect of changes in interest rates
1
Recognition
Shareholders’ equity
CET1 capital
Timing
Income statement / OCI
Gains
Losses
Gains
Losses
Loans and deposits at amortized cost
2,3
Gradual
Income statement
l
l
l
l
Other financial assets and liabilities measured at amortized
 
cost
2
Gradual
Income statement
l
l
l
l
Debt issued measured at amortized cost
2,3
Gradual
Income statement
l
l
l
l
Receivables and payables from securities financing transactions
2
Gradual
Income statement
l
l
l
l
Financial assets at fair value not held for trading
Immediate
Income statement
l
l
l
l
Financial assets at fair value through other comprehensive income
Immediate
OCI
l
l
l
Derivatives designated as cash flow hedges
Immediate
OCI
4
l
l
Derivatives designated as fair value hedges
5
Immediate
Income statement
l
l
l
l
Derivatives transacted as economic hedges
Immediate
Income statement
l
l
l
l
1 Refer to the “Reconciliation of IFRS equity to Swiss SRB
 
common equity tier 1 capital” table in the “Capital, liquidity and
 
funding, and balance sheet” section of this report for more information about the
 
differences
between shareholders’ equity and CET1 capital.
 
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.
 
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.
 
 
Net interest income sensitivity
The NII sensitivity of Global
 
Wealth Management and Personal &
Corporate
 
Banking
 
is
 
assessed
 
using
 
a
 
number
 
of
 
scenarios
assuming
 
parallel
 
and
 
non-parallel
 
shifts
 
in
 
yield
 
curves,
 
with
various
 
degrees
 
of
 
severity.
 
The
 
results
 
are
 
compared
 
with
 
a
baseline
 
NII,
 
calculated
 
assuming
 
that
 
interest
 
rates
 
in
 
all
currencies
 
develop
 
according
 
to
 
their
 
market-implied
 
forward
rates and under
 
the assumption
 
of constant business
 
volumes and
no specific management actions.
In
 
addition
 
to
 
the
 
above
 
scenario
 
analysis,
 
we
 
monitor
 
NII
sensitivity to
 
immediate parallel
 
shocks of
 
–200 and
 
+200 basis
points
 
against the
 
defined
 
thresholds,
 
under
 
the assumption
 
of
constant balance sheet volume and structure.
As of 31 December 2021, the projected NII was approximately
14% lower
 
than the
 
baseline NII
 
under a
 
parallel shock
 
of –200
basis points,
 
whereas under
 
a parallel
 
+200-basis-point shock
 
it
was approximately 57% higher than the baseline NII.
To shelter our
 
NII level from
 
the persistently low
 
and negative
interest rate environment, in particular in Swiss francs, we rely on
self-funding our
 
lending businesses
 
through our
 
deposit base
 
in
Global Wealth Management
 
and Personal &
 
Corporate Banking,
along
 
with
 
appropriate
 
additional
 
adjustments
 
to
 
our
 
interest
rate-linked
 
product
 
pricing. The
 
loss of
 
such equilibrium
 
on the
balance sheet, for example
 
due to unattractive pricing relative
 
to
peers
 
for
 
either
 
mortgages
 
or
 
deposits,
 
could
 
lead
 
to
 
our
 
NII
decreasing
 
in
 
a
 
persistently
 
low
 
and
 
negative
 
interest
 
rate
environment.
 
As
 
we
 
assume
 
constant
 
business
 
volumes,
 
these
risks do not appear in the aforementioned interest rate scenarios.
Moreover,
 
should
 
the
 
low
 
and
 
negative
 
interest
 
rate
environment
 
worsen,
our
 
NII
could
come
 
under
additional
pressure and we could face additional costs for holding our Swiss
franc
 
HQLA portfolio.
 
A reduction
 
of
 
the Swiss
 
National
 
Bank’s
deposit exemption threshold for banks would also reduce
 
our NII,
as
 
we
 
might
 
not
 
be
 
able
 
to
 
offset
 
higher
 
costs
 
for
 
our
 
cash
holdings,
 
for
 
example
 
by
 
passing
 
on
 
some
 
of
 
the
 
costs
 
to
 
our
depositors.
 
Should
 
euro
 
interest
 
rates
 
also
 
decline
 
further,
 
that
could likewise increase liquidity costs and put NII
 
generated from
euro-denominated loans and deposits under
 
pressure. Depending
on the overall economic
 
and market environment, sustained and
significant
 
negative
 
rates
 
could
 
also
 
lead
 
to
 
Global
 
Wealth
Management
 
and
 
Personal
 
&
 
Corporate
 
Banking
 
clients
 
paying
down their loans, along
 
with reducing any excess
 
cash they hold
with us
 
as deposits.
 
That would
 
reduce the
 
underlying business
volume and lower our NII accordingly.
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
138
The NII impact of a net decrease in deposits would depend on
various factors,
 
including the
 
currency, its
 
interest rate
 
level and
the
 
balance
 
sheet
 
situation, as
 
the
 
impact
 
could be
 
offset by
 
a
reduction
 
in
 
negative-yielding
 
liquidity
 
portfolios
 
or
 
require
alternative funding. If funding were required, the cost would also
significantly depend on term and nature of replacement funding,
whether
 
such
 
funding
 
is
 
raised
 
in
 
wholesale
 
markets
 
or
 
from
swapping
 
with
 
available
 
other
 
currency-denominated
 
funding.
Furthermore,
 
imbalances
 
leading
 
to
 
an
 
excess
 
deposit
 
position
could require additional investments at negative yields,
 
which our
excess deposit
 
balance charging
 
mechanisms might
 
not be
 
able
to sufficiently compensate for.
Economic value sensitivity
Audited
 
|
 
Interest
 
rate
 
risk
 
in
 
the
 
banking
 
book
 
is
 
subject
 
to
 
a
regulatory EVE
 
sensitivity threshold
 
of
15
% of tier 1
 
capital. The
exposure
 
is
 
calculated
 
as
 
the
 
theoretical
 
change
 
in
 
the
 
present
value
 
of
 
the
 
banking
 
book
 
under
 
the
 
most
 
adverse
 
of
 
the
 
six
FINMA interest rate scenarios.
As
 
of
 
31 December
 
2021,
 
the
 
interest
 
rate
 
sensitivity
 
of
 
our
banking book to a +1-basis-point parallel shift in yield curves was
negative
 
USD
29.9
 
million,
 
compared
 
with
 
negative
 
USD
27.2
million as of
 
31 December 2020. The
 
change in the
 
interest rate
sensitivity was driven
 
by the execution of
 
transactions in the first
quarter
 
of
 
2021
 
that were
 
aimed at
 
protecting our
 
net interest
income should interest
 
rates decrease. The
 
reported interest rate
sensitivity
 
excludes
 
the
 
AT1
 
capital
 
instruments,
 
as
 
per
 
FINMA
Pillar 3
 
disclosure
 
requirements,
 
with
 
a
 
sensitivity
 
of
 
USD
4.5
million per
 
basis point,
 
and our
 
equity, goodwill
 
and real
 
estate,
with a modeled sensitivity of USD
22.1
 
million per basis point, of
which
 
USD
15.6
 
million
 
and
 
USD
5.5
 
million
 
are
 
attributable to
the US dollar and the Swiss franc portfolios, respectively.
The
 
most
 
adverse
 
of
 
the
 
six
 
FINMA
 
interest
 
rate
 
scenarios
would
 
be
 
the
 
“Parallel
 
up”
 
scenario,
 
which
 
would
 
result
 
in
 
a
change
 
in
 
the
 
economic
 
value
 
of
 
equity
 
of
 
negative
 
USD
6.0
billion,
 
representing
 
a
 
pro
 
forma
 
reduction
 
of
10.0
%
 
of
 
tier 1
capital, which would
 
be well below
 
the regulatory outlier
 
test of
15
% of
 
tier 1 capital.
 
The immediate
 
effect of
 
the “Parallel
 
up”
scenario
 
on
 
tier 1
 
capital
 
as
 
of
 
31 December
 
2021
 
would
 
be
 
a
reduction of
1.8
%, or USD
1.1
 
billion, arising from the
 
part of our
banking book that is measured at fair value through profit or loss
and
 
from
Financial assets
 
measured
 
at
 
fair value
 
through
 
other
comprehensive
 
income
.
 
Over
 
time
 
this
 
scenario
 
would
 
have
 
a
positive effect on net interest income.
p
 
›
 
Refer to “Note 11 Financial assets measured
 
at fair value
through other comprehensive income”
 
in the “Consolidated
financial statements”
 
section of this report for more information
›
 
Refer to the “Group performance”
 
section of this report for more
information about sensitivity to interest rate
 
movements
 
Audited |
 
Interest rate risk – banking book
USD million
+1 bp
Parallel up
1
Parallel down
1
Steepener
2
Flattener
3
Short-term up
4
Short-term down
5
CHF
(5.1)
(724.1)
806.3
(254.3)
117.1
(158.7)
162.5
EUR
(1.1)
(196.6)
231.9
(69.0)
37.4
(24.1)
27.4
GBP
0.1
33.3
(32.8)
(31.1)
35.3
45.4
(43.7)
USD
(23.5)
(5,068.3)
4,124.2
(821.4)
(362.3)
(2,165.9)
2,315.6
Other
(0.4)
(85.8)
19.9
(3.7)
(34.5)
(59.6)
3.8
Total effect on economic value of equity as per Pillar 3 requirement as of
31.12.21
(29.9)
(6,041.4)
5,149.5
(1,179.6)
(207.0)
(2,362.9)
2,465.6
Additional tier 1 (AT1) capital instruments
4.5
853.4
(928.4)
(9.6)
197.1
531.5
(553.3)
Total including AT1 capital instruments as of 31.12.21
(25.4)
(5,188.0)
4,221.1
(1,189.2)
(10.0)
(1,831.4)
1,912.3
1 Rates across all tenors move by ±150 bps for
 
Swiss franc, ±200 bps for euro and US dollar and ±250 bps for
 
pound sterling.
 
2 Short-term rates decrease and long-term rates increase.
 
3 Short-term rates increase
and long-term rates decrease.
 
4 Short-term rates increase more than long-term rates.
 
5 Short-term rates decrease more than long-term rates.
p
 
 
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 10 Derivative instruments”
 
in the “Consolidated
financial statements” section of this
 
report for more information
about our hedges of net investments
 
in foreign operations
Equity investments
Audited |
 
We make direct investments
 
in a variety
 
of entities and
 
buy
equity holdings in
 
both listed
 
and unlisted companies,
 
for a
 
variety
of purposes, including investments
 
such as exchange and
 
clearing
house
 
memberships
 
held
 
to
 
support our
 
business activities.
 
We
may also make investments in
 
funds that we manage in
 
order to
fund
 
or
 
seed
 
them
 
at
 
inception
 
or
 
to
 
demonstrate
 
that
 
our
interests
 
align
 
with
 
those
 
of
 
investors.
 
We
 
also
 
buy,
 
and
 
are
sometimes
 
required
 
by
 
agreement
 
to
 
buy,
 
securities
 
and
 
units
from funds that we have sold to clients.
 
 
 
139
The fair value of equity
 
investments tends to be influenced by
factors specific
 
to the
 
individual investments.
 
Equity investments
are generally
 
intended to
 
be held
 
for the
 
medium or
 
long term
and may be subject to lock-up
 
agreements. For these reasons, we
generally
 
do
 
not
 
control
 
these
 
exposures
 
by
 
using
 
market
 
risk
measures
 
applied
 
to
 
trading
 
activities.
 
However,
 
such
 
equity
investments are subject to a different range of controls, including
preapproval
 
of
 
new
 
investments
 
by
 
business
 
management
 
and
Risk
 
Control,
 
portfolio
 
and
 
concentration
 
limits,
 
and
 
regular
monitoring
 
and reporting
 
to
 
senior
 
management. They
 
are also
included in
 
our Group-wide
 
statistical and
 
stress testing
 
metrics,
which flow into our risk appetite framework.
As
 
of
 
31 December
 
2021,
 
we
 
held
 
equity
 
investments
 
and
investment fund units totaling USD
3.0
 
billion, of which USD
1.8
billion was
 
classified as
Financial assets
 
at fair
 
value not
 
held for
trading
 
and USD
1.2
 
billion as
Investments in associates
.
p
 
›
 
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 OCI
 
as of
 
31 December 2021
 
were measured
at fair
 
value with
 
changes in
 
fair value
 
recorded through
Equity
,
and can broadly
 
be categorized
 
as money market
 
instruments and
debt securities primarily
 
held for statutory,
 
regulatory or liquidity
reasons.
The
 
risk
 
control
 
framework
 
applied
 
to
 
debt
 
instruments
classified as
Financial assets
 
measured at
 
fair value
 
through OCI
 
depends
 
on
 
the nature
 
of
 
the instruments
 
and the
 
purpose
 
for
which we
 
hold them.
 
Our exposures
 
may be
 
included in
 
market
risk
 
limits
 
or
 
be
 
subject
 
to
 
specific
 
monitoring
 
and
 
interest
 
rate
sensitivity
 
analysis.
 
They
 
are
 
also
 
included
 
in
 
our
 
Group-wide
statistical
 
and
 
stress
 
testing
 
metrics,
 
which
 
flow
 
into
 
our
 
risk
appetite framework.
 
Debt instruments classified as
Financial assets measured at fair
value
 
through
 
OCI
 
had
 
a
 
fair
 
value
 
of
 
USD
8.8
 
billion
 
as
 
of
31
 
December
 
2021
 
compared
 
with
USD
 
8.3
 
billion
 
as
 
of
31 December 2020.
p
 
›
 
Refer to “Note 21 Fair value measurement”
 
in the “Consolidated
financial statements”
 
section of this report for more information
›
 
Refer to “Economic value sensitivity” in
 
this section for more
information
›
 
Refer to “Note 1 Summary of material accounting
 
policies” in the
“Consolidated financial statements” section
 
of this report for
more information about the classification
 
of financial
instruments
Pension risk
We
 
provide
 
a
 
number
 
of
 
pension
 
plans
 
for
 
past
 
and
 
current
employees, some
 
classified as
 
defined benefit
 
pension plans
 
under
IFRS that can have
 
a material effect on
 
our IFRS equity and CET1
capital.
Pension risk is
 
the risk that
 
defined benefit plans’
 
funded status
might
 
decrease,
 
negatively
 
affecting
 
our
 
capital.
 
This
 
can
 
result
from
 
falls
 
in
 
the
 
value
 
of
 
a
 
plan’s
 
assets
 
or
 
in
 
the
 
investment
returns, increases in defined benefit obligations,
 
or combinations
of the above.
Important risk factors affecting the fair value of pension plans’
assets include
 
equity market
 
returns, interest
 
rates, bond
 
yields,
and real estate prices. Important risk factors affecting the present
value
 
of
 
expected
 
future
 
benefit
 
payments
 
include
 
high-grade
bond yields, interest rates, inflation rates, and life expectancy.
Pension risk is included in our Group-wide statistical and stress
testing metrics, which flow into our risk appetite framework. The
potential effects are
 
thus captured in the
 
post-stress capital ratio
calculations.
 
›
 
Refer to “Note 1 Summary of material accounting
 
policies”
 
and
“Note 27 Post-employment benefit plans”
 
in the “Consolidated
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
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
140
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:
 
sovereign risk,
 
which is
 
the
ability
 
and
 
willingness
 
of
 
a
 
government
 
to
 
honor
 
its
 
financial
commitments; transfer
 
risk, which
 
arises
 
if a
 
counterparty or
 
issuer
cannot
 
acquire
 
foreign
 
currencies
 
following
 
a
 
moratorium
 
by
 
a
central
 
bank on
 
foreign exchange
 
transfers; or
 
“other” country
risk. “Other” country risk may
 
manifest itself through, on the
 
one
hand, increased and multiple counterparty and issuer default
 
risk
(systemic risk)
 
and, on
 
the other
 
hand, events
 
that may
 
affect a
country’s
standing,
 
such
 
as
 
adverse
 
shocks
 
affecting
 
political
stability or institutional
 
and / or
 
legal frameworks. We
 
have a well-
established risk control framework to assess the risk profiles
 
of all
countries where we have exposure.
We assign a country rating to each country, which reflects our
view of the country’s creditworthiness and of the probability of a
country
 
risk
 
event
 
occurring.
 
Country
 
ratings
 
are
 
mapped
 
to
statistically
 
derived
 
default
 
probabilities
,
 
described
 
under
“Probability
 
of
 
default”
 
in
 
this
 
section.
 
We
 
use
 
this
 
internal
analysis
 
to
 
set
 
the
 
credit
 
ratings
 
of
 
governments
 
and
 
central
banks, estimate the probability of a transfer event occurring, and
establish
 
rules
on
 
how
 
aspects
 
of
 
country
 
risk
 
should
 
be
incorporated
 
in
 
counterparty
 
ratings
 
of
 
non-sovereign
 
entities
domiciled in the respective country.
Country ratings
 
are also
 
used to
 
define our
 
risk appetite
 
and
risk
 
exposure
 
to
 
foreign
 
countries.
 
A
 
country
 
risk
 
limit
 
(i.e.,
maximum
 
aggregate
 
exposure)
 
applies
 
to
 
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.
For internal measurement and control
 
of country risk, we also
consider the financial effect of
 
market disruptions arising prior to,
during and
 
after a
 
country crisis.
 
These may
 
take the
 
form of
 
a
severe
 
deterioration
 
in
 
a
 
country’s
 
debt,
 
equity
 
or
 
other
 
asset
markets
 
or
 
a
 
sharp
 
depreciation
 
of
 
its
 
currency.
 
We
 
use
 
stress
testing
 
to
 
assess
 
potential
 
financial
 
effects
 
of
 
severe
 
country or
sovereign
 
crises.
 
This involves
 
the developing
 
of
 
plausible
 
stress
scenarios
 
for
 
combined
 
stress
 
testing
 
and
 
the
 
identification
 
of
countries
 
that
 
may
 
potentially
 
be
 
subject
 
to
 
a
 
crisis
 
event,
determining
 
potential
 
losses
 
and
 
making
 
assumptions
 
about
recovery
 
rates
 
depending
 
on
 
the
 
types
 
of
 
credit
 
transactions
involved and their
 
economic importance to
 
the affected countries.
Our exposures to market risks
 
are subject to regular
 
stress tests
covering major
 
global scenarios,
 
which are
 
also used
 
for combined
stress
 
testing,
 
where
 
we
 
apply
 
market
 
shock
 
factors
 
to
 
equity
indices, interest
 
rates and
 
currency rates
 
in all
 
relevant countries
and consider the potential liquidity of the instruments.
Country risk exposure
Country risk exposure measure
The
 
presentation
 
of
 
country
 
risk
 
follows
 
our
 
internal
 
risk
 
view,
where the basis for measuring exposures
 
depends on the product
category in which
 
we classified the
 
exposures. In addition
 
to the
classification
 
of
 
exposures
 
into
 
banking
 
products
 
and
 
traded
products,
 
covered
 
in
 
“Credit
 
risk
 
profile
 
of
 
the
 
Group”
 
in
 
this
section, in the
 
trading inventory
 
we classify issuer
 
risk on
 
securities
such as bonds
 
and equities, as
 
well as risk
 
relating to underlying
reference assets for derivative positions.
 
As we manage the
 
trading inventory on
 
a net basis, we
 
net the
value
 
of
 
long
 
positions
 
against
 
short
 
positions
 
with
 
the
 
same
underlying issuer. Net exposures are, however, floored at zero per
issuer in the figures presented in the following tables. As a result,
we
 
do
 
not
 
recognize
 
potentially
 
offsetting
 
benefits
 
of
 
certain
hedges and short positions across issuers.
We
 
do
 
not
 
recognize
 
any
 
expected
 
recovery
 
values
 
when
reporting
 
country
 
exposures
 
as
 
exposure
 
before
 
hedges,
 
except
for
 
risk-reducing
 
effects
 
of
 
master
 
netting
 
agreements
 
and
collateral held in
 
either cash or
 
portfolios of diversified
 
marketable
securities,
 
which
 
we
 
deduct
 
from
 
the
 
positive
 
exposure
 
values.
Within
 
banking
 
products
 
and
 
traded
 
products,
 
risk-reducing
effects
 
of credit
 
protection are taken
 
into account
 
on a
 
notional
basis when determining the net of hedge exposures.
Country risk exposure allocation
In general, exposures
 
are shown against
 
the country of domicile
of the contractual
 
counterparty
 
or the issuer
 
of the security.
 
For
some
 
counterparties
 
whose
 
economic
 
substance
 
in
 
terms
 
of
assets
 
or
 
source
 
of
 
revenues
 
is
 
primarily
 
located
 
in
 
a
 
different
country,
 
the exposure
 
is allocated
 
to the
 
risk domicile
 
of those
assets or
 
revenues.
We apply a
 
specific approach for
 
banking products exposures
to branches of banks that are located in a country other than the
legal entity’s domicile.
 
In such cases,
 
exposures are recorded
 
in full
against
 
the
 
country
 
of
 
domicile
 
of
 
the
 
counterparty
 
and
additionally
 
in
 
full
 
against
 
the
 
country
 
wh
ere
 
the
 
branch
 
is
located.
In
 
the
 
case
 
of
 
derivatives,
 
we
 
show
 
counterparty
 
risk
associated
 
with
 
positive
 
replacement
 
value
 
(PRV)
 
against
 
the
counterparty’s
 
country
 
of
 
domicile
 
(presented
 
within
 
traded
products). In
 
addition, risk
 
associated
 
with an
 
instantaneous
 
fall
in
 
value
 
of
 
underlying
 
reference
 
assets
 
to
 
zero
 
(assuming
 
no
recovery) is
 
shown against
 
the country
 
of domicile
 
of the
 
issuer
of the
 
reference asset
 
(presented
 
within trading
 
inventory).
 
This
approach
 
allows
 
us
 
to
 
capture
 
both
 
counterparty
 
and,
 
where
applicable,
 
issuer
 
elements
 
of
 
risk
 
arising
 
from
 
derivatives
 
and
applies comprehensively for all derivatives, including single-name
credit default swaps (CDSs)
 
and other credit derivatives.
 
 
 
 
141
CDSs are primarily
 
bought and
 
sold in relation
 
to our trading
businesses,
 
and,
 
to a
 
much lesser
 
degree,
 
used to
 
hedge credit
valuation
 
adjustments
 
(CVAs).
 
Holding
 
CDSs
 
for
 
credit
 
default
protection
 
does
 
not
 
necessarily
 
protect
 
the
 
buyer
 
of
 
protection
against losses, as
 
contracts only pay
 
out under certain
 
scenarios.
The effectiveness of our CDS
 
protection as a hedge of default
 
risk
is
 
influenced
 
by
 
a
 
number
 
of
 
factors,
 
including
 
the
 
contractual
terms under
 
which a given
 
CDS was written.
 
Generally, only the
occurrence of credit
 
events as
 
defined by
 
the CDS contract’s
 
terms
(which
 
may
 
include,
 
among
 
other
 
events,
 
failure
 
to
 
pay,
restructuring
 
or
 
bankruptcy)
 
result
s
 
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
2021 compared with 31 December 2020.
Compared
 
with
 
the
 
prior
 
year,
 
our
 
net
 
exposure
 
to
 
the
 
UK
increased by
 
USD 8.8 billion,
 
driven by
 
central bank
 
exposures due
to treasury activities.
 
Net exposure to
 
the US increased
 
by USD 6.3
billion, solely driven by
 
banking products, largely related
 
to nostro
balances
 
at
 
the
Federal
 
Reserve
 
due
 
to
t
reasury
a
ctivities,
mortgages and Investment Bank loans. Those increases in the US
were partly offset by
 
tradable assets related to treasury
 
activities.
Net
 
exposure
 
to
 
Australia
 
increased
 
by
 
USD
 
2.9
 
billion,
predominantly
 
driven
 
by
 
trading
 
inventory
 
due
 
to
 
loan
underwriting projects
 
and central
 
bank exposures.
 
Net exposure
to
 
Germany
 
decreased
 
by
 
USD 2.8
 
billion,
 
driven
 
by
 
trading
inventory due to
 
loan underwriting projects
 
and sovereign issuer
risk.
 
Net
 
exposure
 
to
 
China
 
decreased
 
by
 
USD 2.0
 
billion,
predominantly driven
 
by trading
 
inventory across
 
issuer risk
 
and
margin loans, as
 
well as banking
 
products.
 
Net exposure to
 
France
decreased by
 
USD 1.0 billion,
 
driven by
 
trading inventory
 
due to
treasury activities.
Based on
 
the sovereign
 
rating categories,
 
as of
 
31 December
2021,
 
84% of our emerging
 
market country exposure was
 
rated
investment grade, compared with 83% as of
 
31 December 2020.
Russia
 
Our direct
 
country risk
 
exposure
 
to Russia
 
contributed USD 634
million to our total
 
emerging market exposure of USD 20.9
 
billion
as of 31 December 2021. This
 
includes trade finance exposures in
Personal
 
&
 
Corporate
 
Banking,
 
a
 
single
 
loan
 
in
 
the
 
Investment
Bank with a
 
non-Russian entity with key
 
facilities spread globally
including Russia and
 
the Commonwealth of
 
Independent States,
Nostro
 
and
 
cash
 
accounts
 
balances,
 
issuer
 
risk
 
on
 
trading
inventory within the
 
Investment Bank, and
 
derivatives within the
Investment Bank. These exposures have been reduced since year-
end 2021.
 
Not included
 
in this
 
figure
 
are net
 
assets held
 
in our
Russian subsidiary,
 
with a net asset value
 
of USD 51 million. UBS
is
 
also
 
currently
 
monitoring
 
settlement
 
risk
 
on
 
certain
 
open
transactions with Russian
 
banks and non
 
-bank counterparties or
Russian
underlyings
,
 
as
market
 
closures,
 
the
 
imposition
 
of
exchange
 
controls,
 
sanctions
 
or
 
other
 
measures
 
may
 
limit
 
our
ability
 
to
 
settle
 
existing
 
transactions
 
or
 
to
 
realize
 
on
 
collateral,
which may result in unexpected increases in exposures.
As
 
of
 
3 March
 
2022,
 
UBS
 
also
 
had
 
approximately
 
USD 0.2
billion
 
exposure
 
arising
 
from
 
reliance
 
on
 
Russian
 
assets
 
as
collateral
 
on
 
Lombard
 
lending
 
and
 
other
 
secured
 
financing
 
in
Global Wealth Management.
 
As of
 
3 March 2022,
 
we identified
 
a small
 
number of
 
Global
Wealth
 
Management
 
clients
 
subject
 
to
 
the
 
recently
 
introduced
sanctions,
 
with total loans outstanding of under USD 10 million.
 
Our market
 
risk exposure
 
to
 
Russia as
 
of 3 March
 
2022 was
limited.
 
We had no material direct country
 
risk exposures to Ukraine or
to Belarus
 
as of
 
31 December 2021
 
and no
 
material reliance
 
on
Ukrainian or to Belarusian
 
collateral within our
 
Lombard portfolio.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
142
Top
 
20 country risk net exposures by product type
USD million
Total
Banking products
(loans, guarantees, loan
 
commitments)
Traded products
(counterparty risk from derivatives
and securities financing)
after master netting agreements
and net of collateral
Trading inventory
(securities and potential
benefits / remaining
exposure from derivatives)
Net of hedges
1
Net of hedges
1
Net of hedges
Net long per issuer
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
United States
116,388
110,041
79,647
62,950
8,371
9,786
28,371
37,305
United Kingdom
34,837
26,083
24,788
16,154
7,465
8,541
2,585
1,388
Japan
14,764
14,974
10,572
5,625
3,508
2,972
684
6,378
Germany
10,564
13,336
3,397
2,447
1,232
1,217
5,934
9,672
Singapore
8,993
8,950
3,110
3,875
2,557
2,431
3,326
2,644
Australia
6,397
3,465
2,674
1,475
1,786
1,329
1,937
661
France
6,301
7,344
1,356
1,306
1,711
1,409
3,235
4,628
China
5,344
7,392
1,823
2,553
830
1,010
2,691
3,828
Canada
3,933
3,792
1,199
1,483
1,044
832
1,689
1,477
Luxembourg
3,453
3,292
2,438
2,128
58
145
958
1,019
Hong Kong SAR
3,388
2,840
1,914
1,498
367
395
1,107
946
Netherlands
3,020
3,048
1,183
656
830
782
1,007
1,610
South Korea
2,479
2,259
462
426
418
526
1,599
1,307
Sweden
1,617
2,326
647
657
194
260
776
1,410
Thailand
1,469
1,494
208
146
26
41
1,235
1,306
Austria
1,220
1,664
265
197
97
616
858
851
Norway
1,215
1,669
25
22
206
337
983
1,310
India
1,119
903
991
727
87
86
41
90
Monaco
1,022
1,016
984
994
28
17
10
5
Brazil
915
1,119
488
474
40
88
387
557
Total
2
228,438
217,006
138,171
105,793
30,853
32,819
59,414
78,394
1 Before deduction of IFRS 9 ECL allowances and provisions.
 
2 Excluding Switzerland, supranationals and global funds.
 
Emerging markets¹ net exposure² by internal UBS country rating category
USD million
31.12.21
31.12.20
Investment grade
17,608
19,580
Sub-investment grade
3,261
4,005
Total
20,869
23,585
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). Before deduction of IFRS
 
9 ECL allowances and provisions.
 
143
Sustainability and climate risk
Sustainability risk
Sustainability and
 
climate risk
 
(SCR, previously
 
known at
 
UBS as
environmental and
 
social risk,
 
or ESR)
 
is defined
 
as the
 
risk that
UBS
 
is
 
negatively
 
impacted
 
by
 
or
negatively
impacts
 
climate
change, loss of biodiversity, human rights infringements, or other
environmental, social or governance
 
(ESG) matters. Sustainability
and
 
climate
 
risks
 
may
 
manifest
 
as
 
credit,
 
market,
 
liquidity
 
or
operational risks for
 
UBS and can
 
result in financial
 
or reputational
impacts for the firm.
 
They may also negatively
 
impact the value of
investments. The
 
management of sustainability
 
and climate
 
risks
is gaining importance amid a global
 
drive to meet the Sustainable
Development
 
Goals
 
(the
 
SDGs)
 
and
 
transition
 
to
 
net
 
zero,
 
as
defined
 
by
 
the
 
Paris
 
Agreement.
 
In
 
addition,
 
regulators
 
across
jurisdictions
 
increasingly
seek
 
to
 
understand
 
the
 
potential
financial impacts of climate change. Our broad and wide-ranging
SCR
 
policy framework
 
governs client
 
and
 
supplier relationships,
applies
 
firm-wide
 
to
 
all
 
activities,
 
and
 
is
 
integrated
 
in
management practices
 
and control principles.
 
The SCR
 
framework
is
 
embedded
 
in
 
our
 
standard
 
risk,
 
compliance
 
and
 
operations
processes and applied through:
–
 
risk identification and measurement;
–
 
risk monitoring and appetite setting;
–
 
risk management and control; and
–
 
risk reporting.
 
 
The
 
aforementioned
 
processes
 
include
 
client
 
onboarding,
transaction due
 
diligence, product
 
development and
 
investment
decision
 
processes,
 
own
 
operations,
 
supply chain
 
management,
and
 
portfolio
 
reviews.
 
This
 
framework
 
is
 
geared
 
toward
identifying clients,
 
transactions or
 
suppliers potentially
 
in breach
of our standards or
 
otherwise subject to significant
 
controversies
related to sustainability, human rights or climate change.
›
 
Refer to “Sustainability and climate
 
risk policy framework” in
appendix 6 to the Sustainability Report
 
2021, available from
11 March 2022 under “Annual reporting” at
ubs.com/investors
,
for more information
Climate risk
Climate
 
risk
 
can
 
arise
 
either
 
from
 
changing
 
climate
 
conditions
(physical
 
risks)
 
or
 
from
 
efforts
 
to
 
mitigate
 
climate
 
change
(transition risks). The physical
 
and transition risks from
 
a changing
climate contribute
 
to a
 
structural change
 
across
 
economies and
consequently can affect banks and the financial
 
sector as a whole
through financial and non-financial impacts.
 
In order to protect our clients’ assets and our own assets from
climate-related risks,
 
we have established
 
a climate
 
risk program
to further
 
integrate climate
 
risk into
 
the firm’s risk
 
management
framework and standard processes. The program follows a multi-
year roadmap to address regulatory expectations and is engaging
with
 
stakeholders and
 
experts across
 
the
 
firm and
 
externally
 
to
further
 
develop
 
climate
 
risk
 
methodologies,
 
deliver
 
on
 
climate
stress test exercises, and build
 
capacity to respond to climate
 
risk
management expectations.
We
 
currently
 
identify
 
and
 
manage
 
climate
 
risk
 
in
 
our
 
own
operations, our balance sheet, client assets and the supply
 
chain.
We
 
have
 
continually
 
reduced
 
our
 
exposure
 
to
 
carbon-related
assets
 
and
advanced
 
our
 
multi
-
year
 
efforts
 
to
 
develop
methodologies that
 
enable robust
 
and transparent
 
disclosure of
climate metrics. This work supports our efforts to
 
ensure that we
are
 
prepared
 
to
 
respond
 
to
increased
 
climate
 
risk
-
related
regulatory
 
requirements,
 
align
 
our
 
disclosure
 
with
 
the
 
Financial
Stability
 
Board’s
Task
 
Force
 
on
 
Climate
-
related
 
Financial
Disclosures (the
 
TCFD) recommendations
 
and collaborate
 
within
the financial sector to close gaps.
 
We
 
approach
 
climate
 
risk
 
identification
 
through
 
climate
 
risk
heatmaps,
 
developed
 
in
 
collaboration
 
with
 
the
 
United
 
Nations
Environment
Programme
 
Finance
Initiative
 
(UNEP
 
FI)
 
TCFD
working group.
 
As part of this effort, we have
 
defined an inventory of climate-
sensitive sectors based on elevated climate risk ratings defined by
the
 
TCFD,
 
regulators
 
and
 
rating
 
agencies.
 
We
 
initially
 
disclosed
our exposure
 
to climate
 
sensitive sectors
 
(transition risks)
 
in our
Annual Report
 
2020. Over
 
the course
 
of 2021,
 
we have
 
refined
the
 
disclosure
 
of
 
transition
 
risks
 
and
 
introduced
 
an
 
initial
disclosure of
 
physical risks.
 
We summarize
 
our current
 
exposure
to climate-sensitive sectors for both risk
 
types in the table on the
next page.
 
Exposures may
 
appear either under
 
one or under
 
both of the
risk
 
types, as
 
the physical
 
and transition
 
risk methodologies
 
are
distinct
 
in
 
their
 
approach
 
and
 
application
 
and
 
should
 
not
 
be
added up
 
as one
 
total exposure
 
figure. Climate
 
risk analysis
 
is a
novel area of research, and, as the methodologies,
 
tools and data
availability improve, we will further develop our risk identification
and measurement approaches.
›
 
Refer to “Taking action on a net-zero future – our climate
report” in the Sustainability Report 2021,
 
available from
11 March 2022 under “Annual reporting” at
ubs.com/investors
,
for more information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
144
UBS lending to climate-sensitive sectors
1
Climate-sensitive exposure:
 
elevated transition risks,
 
as of 31.12.21
2
Climate-sensitive exposure:
 
elevated physical risks,
 
as of 31.12.21
2
USD million, except where indicated
Trend (%) 2019–2021
Gross exposure
3
Share of total in %
Trend (%) 2019–2021
Gross exposure
3
Share of total in %
Climate-sensitive sector
4
Aerospace and defense
¯
831
0.18
¯
338
0.07
Automotive
¯
703
0.15
¯
1,042
0.23
Business services
¯
853
0.19
Chemicals
¯
1,112
0.24
¯
991
0.22
Constructions and materials
¯
3,637
0.79
¯
302
0.07
Consumer products and retail
®
355
0.08
­
650
0.14
Entertainment, leisure and services
¯
1,308
0.28
Food and beverage
®
2
0.00
­
1,334
0.29
Industrial materials
¯
121
0.03
¯
243
0.05
Information technology
¯
274
0.06
Machinery and equipment
­
1,040
0.23
­
2,732
0.60
Medical equipment and services
­
408
0.09
Mining
¯
2,920
0.64
­
1,153
0.25
Oil and gas
¯
5,823
1.27
¯
5,538
1.21
Pharmaceuticals/biotechnology
­
1,400
0.30
®
814
0.18
Plastic and rubber
¯
299
0.07
¯
280
0.06
Primary materials
®
13
0.00
®
320
0.07
Real estate management
¯
18,029
3.93
­
528
0.12
Sovereigns and financials
¯
4,371
0.95
Transportation and equipment
¯
849
0.18
¯
419
0.09
Utilities
¯
375
0.08
­
1,579
0.34
Total, climate-sensitive sectors
2
¯
37,510
8.17
¯
25,476
5.55
Total, all sectors
459,061
100.00
459,061
100.00
1 Not additive across transition risks and physical risks.
 
2 Global Wealth Management corporate lending to customers represents 1.1% of all on- and off-balance sheet loans and
 
advances to customers, and is not
rated.
 
3 Reported as IFRS9 expected credit loss (ECL) calculation, and represents both on-balance sheet: total loans and advances to customers and off-balance sheet: guarantees and irrevocable loan commitments
(within the scope of ECL). Physical risk exposures include
 
USD ~4 billion in loans backed by real estate.
 
4 The table includes only those sector exposures that are defined as climate-sensitive. Climate-sensitive sectors
defined as business activities rated as
 
having high, moderately high or
 
moderate vulnerability to transition
 
and physical risks. Transition
 
risk methodology was initially developed
 
in collaboration with UNEP
 
FI TCFD
working group and disclosed in
 
Phase II “From disclosure
 
to action – a
 
guide to implementing the TCFD
 
framework within financial institutions”
 
report. Physical risk methodology
 
is based on country,
 
sectoral and
value chain risk factors derived from a range of academic and expert sources. Both methodologies
 
have been adapted internally and enhanced.
Climate
 
risk
 
heatmaps
 
enable
 
us
 
to
 
use
 
a
 
materiality-driven
approach
 
when
 
defining
 
our
 
climate
 
risk
 
management
 
strategy
by:
–
 
helping
 
us
 
to
 
identify
 
concentrations
 
of
 
exposure
 
with
 
high
climate
 
risk
 
vulnerability,
 
which,
 
in
 
turn,
 
enables
 
resource
prioritization for detailed
 
risk analysis and
 
management action;
 
–
 
supporting a
 
client-centric strategy
 
in order
 
to best
 
assist clients
that
 
may benefit
 
from UBS
 
products and
 
services to
 
support
their climate strategies; and
 
–
 
providing
 
information
 
to
 
senior
 
management
 
to
 
support
decision
 
making
 
and
 
the
 
provision
 
of
 
external
 
disclosure
 
to
stakeholders.
Our
climate
 
risk
heatmap
s
 
rate
 
cross
-
sectoral
 
credit
 
risk
exposure to
 
climate sensitivity,
 
from high
 
to low,
 
through a
 
risk
segmentation process. The
 
transition risk methodology,
 
reflected
in the
 
climate risk
 
heatmap on
 
the next
 
page, divides
 
economic
sectors
 
into
 
segments
 
with
 
similar
 
risk
 
characteristics
 
and
 
rates
those
 
segments
 
according
 
to
 
their
 
vulnerability
 
to
mitigative
climate
 
policies,
 
low-carbon
 
technology
 
risks
 
and
 
revenue
 
or
demand shifts under an
 
aggressive approach to meeting the
 
well-
below
-
2˚C
 
Paris
 
goal.
 
The
 
physica
l
 
risk
 
methodology
 
groups
corporate counterparties
 
based on
 
exposure to
 
key physical
 
risk
factors,
 
through
 
rating
 
sectoral,
 
geographic,
 
and
 
value
 
chain
vulnerabilities
 
in
 
a
 
climate
 
change
 
trajectory
 
in
 
which
 
no
additional
 
policy
 
action
 
is
 
taken.
 
Counterparties
 
are
 
assigned
 
a
climate
 
vulnerability
 
rating
 
based
 
on
 
the
 
primary
 
industry
 
code
(Global Industry
 
Classification Standard,
 
GICS) and
 
risk domicile
in UBS data systems.
›
 
For our physical risk heatmap, refer to “Taking action on a net-
zero future – our climate report” in the Sustainability
 
Report
2021, available from 11 March 2022 under “Annual
 
reporting” at
ubs.com/investors
 
 
 
UBS_AR_2021p173i0.gif
 
145
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
146
Scenario analysis and stress tests
 
exercises
We
 
have
 
been
 
using
 
scenario-based
 
approaches
 
since
 
2014
 
to
assess
 
our
 
exposure
 
and
 
the
 
potential
 
impacts
 
of
 
physical
 
and
transition
 
risks
 
stemming
 
from
 
climate
 
change.
 
Novel
 
in-house
scenario analyses
 
have been followed
 
by a series
 
of assessments
performed through industry collaborations in order to harmonize
approaches
 
in
 
addressing
 
methodological
 
and
 
data
 
gaps.
 
We
have
 
performed
 
both
 
top-down
 
balance
 
sheet
 
stress
 
testing
(across
 
the
 
firm)
 
and
 
targeted
 
bottom-up
 
analyses
 
of
 
specific
sector
 
exposures
 
covering
 
short
-
,
 
mid
-
 
and
 
long
-
term
 
time
horizons. Starting in 2021, UBS
 
participates in regulatory scenario
analysis and stress test exercises,
 
including the Bank of England’s
“2021 Climate Biennial Exploratory Scenario:
 
Financial risks from
climate change” and
 
the European
 
Central Bank’s climate
 
stress
test. In addition, in 2021
 
UBS participated in a top-down
 
climate
risk
 
assessment
 
performed
 
jointly
 
by
 
FINMA
 
and
 
the
 
Swiss
National Bank in Switzerland.
›
 
For more information about our climate risk approach
 
and
physical risk heatmap, refer to “Taking action on a net-zero
future – our climate report” in the Sustainability
 
Report 2021,
available from 11 March 2022 under “Annual reporting”
 
at
ubs.com/investors
 
 
 
 
147
Non-financial risk
Key developments
We have identified
 
seven non-financial risk
 
themes as key
 
to the
firm for 2022. These are:
–
 
digital transformation and cyber and operational resilience;
–
 
use of data;
–
 
new ways of working and change delivery;
–
 
investor protection and market interaction;
–
 
strategic growth initiatives and partnerships;
–
 
the evolving
 
nature of
 
anti-money-laundering (AML)
 
/ know-
your-client (KYC) programs and sanctions;
 
and
–
 
environmental, social and governance (ESG) risks.
We
 
are
 
continuing
 
our
 
efforts
 
regarding
 
innovation
 
and
digitalization
 
to
 
create
 
value
 
for
 
our
 
clients.
 
As
 
part
 
of
 
the
resulting
 
transformation, we
 
are
 
focusing
 
on
 
timely
 
changes
 
to
frameworks, including
 
consideration of
 
new or
 
revised controls,
working practices
 
and oversight,
 
with the
 
aim of
 
mitigating any
new risks introduced, including those related to data ethics.
Increases in
 
the sophistication
 
of cyberattacks
 
and frauds
 
are
noted
 
worldwide,
 
especially
 
with
 
ransomware
 
attacks.
 
To
 
date,
our security controls,
 
regular communications to help
 
employees
stay alert to cyber
 
threats while working remotely
 
and enhanced
monitoring
 
of
 
cyber
 
threats
 
have
 
resulted
 
in
 
no
 
cyber
 
security
incidents having a material effect on our operations during 2021.
UBS continues to
 
be vigilant, particularly
 
in view of
 
the potential
for
 
intensifying
 
cyber
 
threats,
 
both
 
in
 
terms
 
of
 
volume
 
and
sophistication, driven by current geopolitical events.
Operational resilience
 
continues to
 
be a
 
focus area
 
for us,
 
as
well
 
as
 
for
 
regulators
 
globally.
 
We
 
have
 
a
 
global
 
program
 
to
enhance
 
our
 
operational-resilience
 
capabilities,
 
including
addressing developing regulatory requirements.
 
The
 
existing
 
resilience
 
built
 
into
 
our
 
operations
 
and
 
the
effectiveness
 
of
 
our
 
business
 
continuity
 
management
 
and
operational
 
risk processes (including
 
those for
 
third-party service
providers) have
 
been critical
 
in handling
 
the ongoing
 
COVID-19
pandemic.
 
They
 
have
 
enabled
 
us
 
to
 
maintain
 
stable
 
operations
while
 
complying
 
with
 
governmental
 
measures
 
to
 
contain
COVID-19;
 
continuing
 
to
 
serve
 
our
 
clients
 
without
 
material
impact; and to support the safety and well-being of our staff.
Hybrid
 
working arrangements
 
can
 
lead to
 
increased conduct
risk, inherent risk
 
of fraudulent
 
activities, potential increases
 
in the
number
 
of
 
suspicious
 
transactions
 
and
 
increased
 
information
security
 
risks.
 
We have
 
implemented
 
additional
 
monitoring and
supervision
 
intended
 
to
 
mitigate
 
these
 
risks.
 
In
 
addition,
 
as
 
we
move
 
to
 
a
 
post-pandemic
 
new
 
normal,
 
changes
 
to
 
the
 
work
environment, including permanent hybrid and
 
the introduction of
agile
 
ways
 
of
 
working,
 
may
 
introduce
 
new
 
challenges
 
for
supervision and monitoring.
Achieving
 
fair
 
outcomes
 
for
 
our
 
clients,
 
upholding
 
market
integrity
 
and
 
cultivating
 
the
 
highest
 
standards
 
of
 
employee
conduct
 
are
 
of
 
critical
 
importance
 
to
 
the
 
firm.
 
We
 
maintain
 
a
conduct risk framework across our activities, which is
 
designed to
align
 
our
 
standards
 
and
 
conduct
 
with
 
these
 
objectives
 
and
maintain momentum on fostering a strong culture.
 
Competition
 
to
 
find
 
new
 
business
 
opportunities
 
across
 
the
financial
 
services
 
industry,
 
both
 
for
 
firms
 
and
 
customers,
 
is
increasing. Thus suitability risk, product
 
selection, cross-divisional
service
 
offerings,
 
quality
 
of
 
advice
 
and
 
price
 
transparency
 
also
remain areas of heightened focus for UBS and for the industry as
a
 
whole,
 
as
 
low
 
interest
 
rates,
 
market
 
volatility
 
and
 
major
legislative change
 
programs (such as
 
the Swiss
 
Financial Services
Act (FIDLEG)
 
in
 
Switzerland,
 
Regulation
 
Best Interest
 
(Reg
 
BI)
 
in
the
 
US
,
 
and
 
the
 
Markets
 
in
 
Fin
ancial
 
Instruments
 
Directive
 
II
(MiFID II) in the EU) all significantly affect the industry and require
adjustments
 
to
 
control
 
processes
 
on
 
a
 
geographically
 
aligned
basis. We
 
regularly monitor
 
our suitability,
 
product and
 
conflicts
of
 
interest
 
control
 
frameworks
 
to
 
assess
 
whether
 
they
 
are
reasonably designed
 
to facilitate
 
adherence to
 
applicable laws
 
and
regulatory expectations.
 
Cross-border risk
 
remains an
 
area of
 
regulatory attention
 
for
global
 
financial
 
institutions,
 
with
a
 
strong
 
focus
 
on
 
fiscal
transparency, as
 
well as
 
market access,
 
particularly third-country
market access into the European Economic Area. There is also an
ongoing
 
high
 
level
 
of
 
attention
 
regarding
 
the
 
risk
 
that
 
tax
authorities
 
may,
 
on
 
the
 
basis
 
of
 
new
 
interpretations
 
of
 
existing
law,
 
seek
 
to
 
impose
 
taxation
 
based
 
on
 
the
 
existence
 
of
 
a
permanent
 
establishment.
 
We
 
maintain
 
a
 
series
 
of
 
controls
designed to address these risks.
 
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
 
for
 
UBS.
 
Money
 
laundering
and
 
financial
 
fraud
techniques
 
are
 
becoming
 
increasingly
 
sophisticated,
 
and
geopolitical
 
volatility
 
makes
 
the
 
sanctions
 
landscape
 
more
challenging,
 
as
 
new
 
or
 
novel
 
sanctions
 
may
 
be
 
imposed
 
that
require
 
complex
implementation
 
in
 
a
 
short
 
timeframe,
 
as
evidenced
 
by
 
the
 
existing,
 
and
 
potential
 
escalation
 
of
 
new
sanctions arising from the
 
Russian invasion of Ukraine.
 
New risks
continue
 
to
 
emerge,
 
such
 
as
 
virtual
 
currencies
 
and
 
related
activities or investments.
In the US, the Office of the
 
Comptroller of the Currency issued
a Cease and Desist Order
 
against the firm in May
 
2018 relating to
our US branch KYC and AML programs. In response, we initiated
an
 
extensive
 
program
 
for
 
the
 
purpose
 
of
 
ensuring
 
sustainable
remediation of US-relevant
 
Bank Secrecy Act
 
/ AML issues across
all our US legal entities.
 
We introduced significant improvements
to the framework between 2019 and 2021 and
 
are continuing to
implement
 
these.
 
We
 
believe
 
they
 
will
 
yield
 
the
 
planned
enhancements to our AML controls.
 
We
 
continued
 
to
 
focus
 
on
 
strategic
 
enhancements
 
to
 
our
global AML /
 
KYC and sanctions
 
programs to address
 
evolving risk
profiles and regulatory expectations,
 
including the exploration of
new technologies and more sophisticated monitoring.
 
In
 
line
 
with
 
our
 
firm-wide
 
purpose,
 
ESG
 
topics
 
and
 
the
 
risks
related to them
 
are high on
 
our agenda, particularly
 
considering
the increasing regulatory focus on ESG disclosure, climate-related
stress testing and greenwashing, as well as the
 
potential for new
and diverse regulations being deployed across jurisdictions.
›
 
Refer to “Sustainability and climate
 
risk” in this section for more
information about risks related to sustainability
 
and climate risk
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
148
Operational risk framework
Operational risk is
 
an inherent part
 
of the firm’s
 
business. Losses
can
 
result
 
from
 
inadequate
 
or
 
failed
 
internal
 
processes,
 
people
and systems, or from
 
external causes. UBS follows
 
a Group-wide
operational risk framework
 
(an ORF) that
 
establishes requirements
for identifying,
 
managing, assessing
 
and mitigating
 
operational,
compliance
 
and
 
conduct
 
risks
 
to
 
achieve
 
an
 
agreed
 
balance
between risk and return. It is built on the following pillars:
–
 
classifying
 
inherent
 
risks
 
through
 
the
 
operational
 
risk
taxonomy, which
 
defines the
 
universe of
 
material operational
risks
 
that
 
can
 
arise
 
as
 
a
 
consequence
 
of
 
the
 
firm’s
 
business
activities and external factors;
–
 
assessing
 
the
 
design
 
and
 
operating
 
effectiveness
 
of
 
controls
through the control assessment process;
–
 
proactively
 
and
 
sustainably
 
remediating
 
identified
 
control
deficiencies;
–
 
defining
 
operational
 
risk
 
appetite
 
(including
 
a
 
financial
operational
 
risk
 
appetite
 
statement
 
at
 
Group,
 
UBS
 
AG
 
and
business
 
division
 
levels
 
for
 
operational
 
risk
 
events)
 
through
quantitative metrics
 
and thresholds
 
and qualitative
 
measures,
and assessing risk exposure against appetite; and
–
 
assessing
 
inherent
 
and
 
residual
 
risk
 
through
 
risk
 
assessment
processes,
 
and
 
determining
 
whether
 
additional
 
remediation
plans are required to address identified deficiencies.
 
Divisional
 
Presidents
 
are
 
accountable
 
for
 
the
 
effectiveness
 
of
operational risk management and for the
 
robustness of the front-
to-back control
 
environment within
 
their business
 
divisions, and
legal entity responsible executives are responsible
 
for operational
risk management within their
 
legal entities. Group
 
function heads
are accountable for supporting the divisional Presidents and legal
entity responsible executives of our legal entities in the
 
discharge
of
 
this
 
responsibility,
 
by
 
confirming
 
completeness
 
and
effectiveness
 
of
 
the
 
control
 
environment
 
and
 
operational
 
risk
management within their Group functions. Collectively, divisional
Presidents,
 
central
 
Group
 
function
 
heads
 
and
 
legal
 
entity
responsible
 
executives
 
are
 
in
 
charge
 
of
 
implementing
 
the
operational risk framework.
Compliance & Operational
 
Risk Control (C&ORC)
 
is responsible
for providing an independent and objective view of the adequacy
of operational
 
risk management across
 
the Group, and
 
ensuring
that operational,
 
compliance and
 
conduct risks
 
are understood,
owned and managed in accordance with
 
the firm’s risk appetite.
C&ORC-aligned
 
teams
 
sit
 
within
 
the
 
Group
 
Compliance,
Regulatory
 
&
 
Governance
 
(GCRG)
 
function,
 
reporting
 
to
 
the
Group
 
Chief
 
Compliance
 
and
 
Governance
 
Officer,
 
who
 
is
 
a
member
 
of
 
the
 
Group
 
Executive
 
Board.
 
The
 
ORF
 
forms
 
the
common
 
basis
 
for
 
managing
 
and
 
assessing
 
operational,
compliance
 
and
 
conduct
 
risk,
 
and
 
there
 
are
 
additional
 
C&ORC
activities
 
intended
 
to
 
ensure
 
UBS
 
is
 
able
 
to
 
demonstrate
compliance with applicable laws, rules and regulations.
In
 
2021,
 
UBS
 
continued
 
to
 
review
 
and
 
enhance
 
the
 
ORF
through
 
the
 
established
 
ORF
 
design
 
authority,
 
considering
feedback and input from both internal and
 
external stakeholders,
including
 
implementing
 
Group-wide
 
control
 
portfolio
 
analytics,
supporting consistency across the control portfolio.
 
All functions within UBS are required to
 
assess the design and
operating effectiveness of
 
their internal controls
 
periodically. The
output of
 
these assessments
 
forms the
 
basis for
 
the assessment
and testing of
 
internal controls
 
over financial reporting
 
as required
by the Sarbanes–Oxley Act, Section 404 (SOX 404).
 
Key control
 
deficiencies identified
 
during the
 
internal control
and risk assessment
 
processes must
 
be reported in
 
the operational
risk inventory,
 
and sustainable
 
remediation must
 
be defined
 
and
executed.
 
These
 
control
 
deficiencies
 
are
 
assigned
 
to
 
owners
 
at
senior
 
management
 
level
 
and
 
the
 
remediation
 
progress
 
is
reflected
 
in
 
the
 
respective
 
managers’
 
annual
 
performance
measurement
 
and
 
management
 
objectives.
 
To
 
assist
 
with
prioritizing the
 
most material control
 
deficiencies and measuring
aggregated risk exposure, irrespective of origin, a common rating
methodology is applied across
 
all three lines of
 
defense, as well as
by external audit.
 
 
 
149
Advanced measurement approach model
The
 
operational
 
risk
 
framework
 
outlined
 
above
 
underpins
 
the
calculation
 
of
 
regulatory
 
capital
 
for
 
operational
 
risk,
 
which
enables
 
us
 
to
 
quantify
 
operational
 
risk
 
and
 
define effective
 
risk
mitigating
 
management
 
incentives
 
as
 
part
 
of
 
the
 
related
operational
 
risk
 
capital
 
allocation
 
approach
 
to
 
the
 
business
divisions.
We
 
measure
 
Group
 
operational
 
risk
 
exposure
 
and
 
calculate
operational
 
risk
 
regulatory
 
capital
 
using
 
the
 
advanced
measurement
 
approach
 
(AMA)
 
in
 
accordance
 
with
 
FINMA
requirements.
An
 
entity-specific
 
AMA
 
model
 
has
 
been
 
applied
 
for
 
UBS
Switzerland
 
AG,
 
while
 
for
 
other
 
regulated
 
entities
 
the
 
basic
indicators or standardized approaches are adopted for regulatory
capital in agreement with local
 
regulators. Also, the methodology
of the Group AMA is leveraged for entity-specific Internal Capital
Adequacy Assessment Processes.
 
Currently, the model includes
 
16 AMA
 
units of
 
measure (UoM),
which are
 
aligned with
 
our operational
 
risk taxonomy
 
as closely
as possible. Frequency and severity distributions are calibrated for
each of the model’s UoM. The modeled distribution functions for
both frequency and severity are used to generate
 
the annual loss
distribution. The
 
resulting
 
99.9% quantile
 
of
 
the overall
 
annual
operational
 
risk
 
loss
 
distribution
 
across
 
all
 
UoM
 
determines
 
the
required regulatory capital.
 
Currently,
 
we do
 
not reflect
 
mitigation
through
 
insurance
 
or
 
any
 
other
 
risk
 
transfer
 
mechanism
 
in
 
our
AMA model.
AMA model calibration and review
A
 
key
 
assumption
 
when
 
calibrating
 
data-driven
 
frequency
 
and
severity
 
distributions
 
is
 
that
 
historical
 
losses
 
form
 
a
 
reasonable
proxy for
 
future events.
 
In line
 
with regulatory
 
expectations, the
AMA
 
methodology
 
utilizes
 
both
 
historical
 
internal
 
losses
 
and
external
 
losses
 
suffered
 
by
 
the
 
broader
 
industry
 
for
 
model
calibration.
Initial
 
model outputs
 
driven by
 
loss
 
history
 
are
 
reviewed and
adjusted to reflect
 
fast-changing external developments,
 
such as
new
 
regulations,
 
geopolitical
 
change,
 
volatile
 
market
 
and
economic
 
conditions,
and
int
ernal
 
factors
(e.g.
,
 
changes
 
in
business
 
strategy
 
and
 
control
 
framework
 
enhancements).
 
The
resulting baseline data-driven frequency and severity distributions
are
 
reviewed
 
by
 
subject
 
matter
 
experts
 
and
 
where
 
necessary
adjusted based
 
on a
 
review of
 
qualitative information
 
about the
business
 
environment
 
and
 
internal
 
control
 
factors,
 
as
 
well
 
as
expert judgment, with the aim of forecasting losses.
Our model is reviewed regularly to maintain risk sensitivity
 
and
recalibrated
 
at least
 
annually.
 
Any changes
 
to regulatory
 
capital
as
 
a
 
result
 
of
 
a
 
recalibration
 
or
 
methodology
 
changes
 
are
presented
 
to
 
FINMA
 
for
 
approval
 
prior
 
to
 
use
 
for
 
disclosure
purposes.
AMA model governance
The
 
Group
 
and
 
entity-specific
 
AMA
 
models
 
are
 
subject
 
to
 
an
independent validation performed by Model Risk Management &
Control
 
in
 
line
 
with
 
the
 
Group’s
 
model
 
risk
 
management
framework.
Expected transition of capital regime under Basel III capital
regulations
The
 
AMA
 
is
 
expected
 
to
 
be
 
replaced
 
by
 
the
 
standardized
measurement
 
approach
 
for
 
regulatory
 
capital
 
determination
purposes in
 
line with
 
the relevant
 
Basel Committee
 
for Banking
Supervision Basel III
 
capital regulations.
 
UBS is interacting
 
closely
with the relevant Swiss authorities to discuss the
 
implementation
details and related implementation timeline.
›
 
Refer to “Capital planning and activities”
 
in the “Capital,
liquidity and funding, and balance sheet”
 
section of this report
for more information about the development
 
of risk-weighted
assets
›
 
Refer to “Risk measurement” in this section
 
for more
information about our approach to model confirmation
procedures
›
 
Refer to the “Risk factors” section of
 
this report for more
information
 
 
 
151
Capital management
Capital management objectives, planning and activities
Capital management objectives
Audited |
 
An adequate level of
 
total loss-absorbing capacity (TLAC)
meeting both internal assessment and regulatory requirements
 
is
a prerequisite for conducting our business activities.
p
 
We
 
are
 
therefore
 
committed
 
to
 
maintaining
 
a
 
strong
 
TLAC
position
 
and
 
sound
 
TLAC
 
ratios
 
at
 
all
 
times,
 
in
 
order
 
to
 
meet
regulatory capital requirements and
 
our target capital ratios,
 
and
to support the growth of our businesses.
As
 
of
 
31 December
 
2021,
 
our
 
common
 
equity
 
tier 1
 
(CET1)
capital ratio was
 
15.0% and our
 
CET1 leverage ratio
 
4.24%, each
above our capital guidance,
 
and also above the
 
requirements for
Swiss systemically relevant banks (SRBs) and the Basel Committee
on Banking Supervision (the BCBS) requirements. We believe that
our capital strength
 
is a source
 
of confidence for
 
our stakeholders,
contributes
 
to
 
our
 
sound
 
credit
 
ratings
 
and
 
is
 
one
 
of
 
the
foundations of our success.
 
The BCBS
 
announced
 
the finalization
 
of the
 
Basel III framework
in December 2017, and published the final
 
rules on the minimum
capital requirements
 
for market
 
risk from
 
the Fundamental
 
Review
of
 
the Trading
 
Book
 
(the FRTB)
 
in
 
January 2019.
 
In response
 
to
COVID-19,
 
the Group
 
of Central
 
Bank Governors
 
and Heads
 
of
Supervision, which
 
acts as
 
the BCBS’s
 
oversight body,
 
endorsed
the deferral of the implementation date by one year,
 
to 1 January
2023.
 
The
 
accompanying
 
transitional
 
arrangements
 
for
 
the
output floor were also
 
extended by one year,
 
to 1 January 2028.
We expect the
 
Swiss regulations to
 
come into force
 
in 2024 and
we continue
 
to make
 
progress on
 
our infrastructure
 
design and
operational governance
 
ahead of
 
the upcoming adoption
 
of these
rules. We
 
currently estimate
 
that the
 
revised Basel III
 
framework
may lead
 
to a further
 
net increase in
 
risk-weighted assets (RWA)
of
 
around
 
USD 20
 
billion
 
in
 
2024,
 
before
 
taking
 
into
 
account
mitigating
 
acti
ons.
The
e
stimate
 
includes
credit
 
risk
 
and
operational
 
risk
RWA
from
 
the
 
finalization
 
of
the
Basel
 
III
framework, as well as
 
market risk and credit
 
valuation adjustment
(CVA) RWA
 
from the
 
FRTB, based
 
on our
 
current understanding
of
 
the
 
relevant
 
standards.
 
It
 
may
 
change
 
as
 
a
 
result
 
of
 
new
 
or
changed
 
regulatory
 
interpretations,
 
particularly
 
those
 
regarding
the
 
treatment
 
of
 
historical
 
operational
 
losses
,
 
as
 
well
 
as
 
the
appropriate
 
conservatism
 
in
 
model
 
calibration
,
the
implementation of
 
Basel III standards
 
into national
 
law, changes
in business growth, market conditions and other factors.
 
›
 
Refer to the “Our strategy” and “Targets, aspirations and capital
guidance” sections of this report for more information
 
about our
capital and resource guidelines
 
›
 
Refer to “We may be unable to maintain our
 
capital strength” in
the “Risk factors” section of this report for more
 
information
about capital ratio-related risks
 
Capital
 
planning and activities
Audited
 
|
 
We
 
manage
 
our
 
balance
 
sheet,
 
RWA,
 
leverage
 
ratio
denominator (LRD) and TLAC ratio levels based on our regulatory
requirements
 
and
 
within
 
our
 
internal
 
limits
 
and
 
targets.
 
Our
strategic focus
 
is on
 
achieving an optimal
 
attribution and
 
use of
financial
 
resources
 
between
 
our
 
business
 
divisions
 
and
 
Group
Functions, as well
 
as between our legal
 
entities, while remaining
within
 
the
 
limits
 
defined
 
for
 
the
 
Group
 
and
 
allocated
 
to
 
the
business
 
divisions
 
by
 
the
 
Board
 
of
 
Directors
 
(the
 
BoD).
 
These
resource
 
allocations, in
 
turn, affect
 
business plans
 
and earnings
projections, which are reflected in our capital plans.
The
 
annual
 
strategic
 
planning
 
process
 
includes
 
a
 
capital
-
planning component that is
 
key in defining our
 
capital targets. It
is based on
 
an attribution of
 
Group RWA and
 
LRD internal limits
to the business divisions.
 
Limits and
 
targets are
 
established at
 
the Group
 
and business
division levels, and
 
are approved by
 
the BoD at
 
least annually. In
the target-setting process,
 
we take into
 
account the current
 
and
potential future TLAC
 
requirements, our aggregate
 
risk exposure
in
 
terms
 
of
 
capital-at-risk,
 
the
 
assessment
 
by
 
rating
 
agencies,
comparisons
 
with
 
peers
 
and
 
the
 
effect
 
of
 
expected
 
accounting
policy changes.
p
 
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
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Capital management
152
Swiss SRB total loss-absorbing capacity framework
The disclosures in this section are provided for UBS Group AG on
a consolidated
 
basis and
 
focus on
 
key developments
 
during the
reporting period and information
 
in accordance with the
 
Basel III
framework, as applicable to Swiss SRBs.
Additional
 
regulatory
 
disclosures
 
for
 
UBS
 
Group
 
AG
 
on
 
a
consolidated basis are provided in our 31 December 2021 Pillar 3
Report. The Pillar 3 Report
 
further includes information
 
relating to
our
 
significant
 
regulated
 
subsidiaries
 
and
 
sub-groups
 
(UBS AG
standalone,
 
UBS
 
Switzerland
 
AG
 
standalone,
 
UBS Europe
 
SE
consolidated and
 
UBS Americas
 
Holding LLC
 
consolidated) as
 
of
31 December 2021 and is available under “Pillar
 
3 disclosures” at
ubs.com/investors
.
Capital
 
and
 
other
 
regulatory
 
information
 
for
 
UBS AG
consolidated
 
in
 
accordance
 
with
 
the
 
Basel III
 
framework,
 
as
applicable to Swiss SRBs, is provided in the combined UBS Group
AG
 
and
 
UBS AG
 
Annual Report
 
2021,
 
available
 
under
 
“Annual
reporting” at
ubs.com/investors
.
Regulatory framework
The
 
Basel III
 
framework
 
came
 
into
 
effect
 
in
 
Switzerland
 
on
1 January 2013 and
 
is embedded
 
in the Swiss
 
Capital Adequacy
Ordinance
 
(the CAO).
 
The CAO
 
also includes
 
the too-big-to-fail
provisions applicable to
 
Swiss SRBs,
 
which have
 
been fully
 
phased-
in since 1 January 2020.
Under
 
the
 
Swiss
 
SRB
 
framework,
 
going
 
and
 
gone
 
concern
requirements
 
represent
 
the
 
Group’s
 
TLAC
 
requirement.
 
TLAC
encompasses
 
regulatory
 
capital,
 
such
 
as
 
CET1,
 
loss-absorbing
additional tier 1 (AT1) and
 
tier 2 capital instruments,
 
and liabilities
that
 
can
 
be
 
written
 
down
 
or
 
converted
 
into
 
equity
 
in
 
case
 
of
resolution or for the purpose of restructuring measures.
Capital and other instruments contributing to our total
 
loss-absorbing capacity
In addition to CET1
 
capital, the following instruments
 
contribute
to our loss-absorbing capacity:
–
 
loss-absorbing
 
AT1 capital
 
instruments
 
(high-
 
and low-trigger);
–
 
loss-absorbing
 
tier 2 capital
 
instruments
 
(high-
 
and low-trigger);
–
 
non-Basel III-compliant tier 2 capital instruments; and
–
 
TLAC-eligible senior unsecured debt instruments.
 
Under the Swiss
 
SRB rules,
 
going concern
 
capital includes
 
CET1
and
 
high-trigger
 
loss-absorbing
 
AT1
 
capital
 
instruments.
 
Our
existing
 
outstanding
 
low-trigger
 
loss-absorbing
 
AT1
 
capital
instruments
 
are
 
available
 
to
 
meet
 
the
 
going
 
concern
 
capital
requirements until
 
their first
 
call date.
 
As of
 
their first
 
call date,
these
 
instruments
 
are
 
eligible
 
to
 
meet
 
the
 
gone
 
concern
requirements.
Outstanding high-
 
and low-trigger loss-absorbing tier 2 capital
instruments, non-Basel III-compliant tier 2
 
capital instruments and
TLAC-eligible
 
senior
 
unsecured
 
debt
 
instruments
 
are
 
eligible
 
to
meet gone concern
 
requirements until one
 
year before maturity.
A maximum
 
of
 
25%
 
of the
 
gone
 
concern requirements
 
can be
met with instruments that have a remaining maturity of between
one and
 
two years (i.e., are
 
in the last year
 
of eligibility). However,
once at least
 
75% of the
 
gone concern requirement
 
has been met
with instruments that
 
have a remaining
 
maturity of greater
 
than
two
 
years,
 
all
 
instruments
 
that
 
have
 
a
 
remaining
 
maturity
 
of
between one and two years
 
remain eligible to be included in
 
the
total gone concern capital.
 
›
 
Refer to “Bondholder information,” available
 
at
ubs.com/investors
, for more information about the eligibility
 
of
capital and senior unsecured debt instruments
 
and key features
and terms and conditions of capital instruments
Total loss-absorbing capacity and leverage ratio requirements
Going concern capital requirements
Under the Swiss SRB requirements, total going concern minimum
requirements for all Swiss
 
SRBs are a capital ratio
 
requirement of
12.86%
 
of
 
RWA
 
and
 
a
 
leverage
 
ratio
 
requirement
 
of
 
4.5%.
 
In
addition
 
to
 
these
 
minimum
 
requirements,
 
an
 
add-on
 
reflecting
the
 
degree
 
of
 
systemic importance
 
is applied,
 
based
 
on market
share and LRD. The applicable market share add-on requirements
for
 
UBS
 
increased
 
0.36%
 
to
 
0.72%
 
of
 
RWA
 
and
 
0.125%
 
to
0.25% of LRD, reflecting an increase in
 
UBS’s market share in the
Swiss credit business to more than 17%. The applicable
 
LRD add-
on
 
requirements
 
remained
 
unchanged
 
at
 
0.72%
 
of
 
RWA
 
and
0.25% of LRD, as our Group LRD remained within the same add-
on bucket.
 
Effective
 
from
 
27 March
 
2020,
 
the
 
Swiss
 
Federal
 
Council
deactivated the countercyclical buffer requirement of 2% on risk-
weighted
 
positions
 
that
 
are
 
directly
 
or
 
indirectly
 
backed
 
by
residential
 
properties
 
in
 
Switzerland
 
to
 
support
 
the
 
lending
capacity of
 
banks. Even
 
though the
 
Swiss countercyclical
 
buffer
requirement
 
was
 
not
 
active
 
in
 
2021
,
 
we
continued
 
to
apply
additional countercyclical buffer requirements
 
introduced in other
BCBS
 
member jurisdictions,
 
which result
 
in an
 
additional
 
buffer
requirement of
 
0.02%. In
 
January 2022, the
 
Swiss Federal
 
Council
decided, at the
 
request of the
 
Swiss National Bank,
 
to reactivate
the
 
countercyclical
 
capital
 
buffer,
 
at
 
a
 
maximum level
 
of
 
2.5%.
The reactivated
 
countercyclical capital
 
buffer will
 
become effective
on
 
30 September
 
2022
 
and
 
is
 
expected
 
to
 
increase
 
our
 
CET1
capital requirement by approximately 30 basis points.
 
The
 
total
 
going
 
concern
 
capital
 
requirements
 
applicable
 
are
14.32%
 
of
 
RWA
 
(including
 
countercyclical
 
buffer
 
requirements)
and
 
5.00%
 
of
 
LRD.
 
Furthermore,
 
of
 
the
 
total
 
going
 
concern
capital requirement of 14.32% of RWA, at least
 
10.02% must be
met
 
with
 
CET1
 
capital,
 
while
 
a
 
maximum
 
of
 
4.3%
 
can
 
be
 
met
with
 
high-trigger
 
loss-absorbing
 
AT1
 
capital
 
instruments
(including
 
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 5.00%, at least
 
3.5% must be met with
 
CET1 capital, while a
maximum of
 
1.5% can
 
be met
 
with high-trigger
 
loss-absorbing
AT1 capital
 
instruments (including
 
our existing
 
outstanding low-
trigger AT1
 
capital instruments, which
 
qualify until their
 
first call
date as mentioned above).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
153
Gone concern loss-absorbing capacity requirements
As an internationally active Swiss SRB, UBS
 
is also subject to gone
concern loss-absorbing capacity requirements. The gone
 
concern
requirements also include add-ons for market share and LRD.
 
Under the Swiss
 
SRB framework, banks
 
are eligible for
 
a rebate
on
 
the
 
gone
 
concern
 
requirement
 
if
 
they
 
take
 
actions
 
that
facilitate
 
recovery
 
and
 
resolvability
 
beyond
 
the
 
minimum
requirements. The amount
 
of the rebate
 
for improved resolvability
is
 
assessed
 
annually
 
by
 
FINMA.
 
Based
 
on
 
actions
 
we
 
had
completed
 
by
 
December
 
2020
 
to
 
improve
 
resolvability,
 
FINMA
granted a rebate on
 
the gone concern
 
requirement of 55% of
 
the
aforementioned
 
maximum
 
rebate
 
in
 
the
 
third
 
quarter
 
of
 
2021,
which resulted
 
in a
 
reduction of
 
3.14 percentage points
 
for the
RWA-based
 
requirement
 
and
 
1.10 percentage
 
points
 
for
 
the
LRD-based requirement.
Our
 
gone
 
concern
 
requirements
 
are
 
further
 
reduced
 
when
higher
 
quality
 
capital
 
instruments
 
(
CET1
 
capital,
low
-
trigger
loss
-
absorbing
 
AT1
 
or
 
certain
 
low
-
trigger
 
tier
 
2
 
capital
instruments)
 
are used to meet gone concern
 
requirements. As of
31
 
December
 
202
1
,
UBS
used
low
-
trigger
 
tier
 
2
 
capital
instruments
 
to
 
fulfill
 
gone
 
concern
 
requirements,
 
resulting
 
in
 
a
reduction
o
f
0.4
3
 
percentage
 
points
 
for
 
the
 
RWA
-
based
requirement
 
and
 
0.
1
2
 
percentage
 
points
 
for
 
the
 
LRD
-
based
requirement.
Until 31 December 2021, the gone concern
 
requirement after
the
 
application
 
of
 
the
 
rebate
 
for
 
resolvability
 
measures
 
and
 
the
reduction
 
for
 
the
 
use
 
of
 
higher
 
quality
 
capital
 
instruments
 
was
floored
 
at
 
8.6%
 
and
 
3%
 
for
 
the
 
RWA
-
 
and
 
LRD
-
based
requirements
,
 
respectively.
 
From
 
1
 
January
 
2022
 
onward,
 
this
floor increased to 10% and 3.75%
 
for the RWA- and LRD-based
requirements,
 
respectively.
In
 
this
 
report
,
 
we
 
refer
 
to
 
the
 
RWA
-
based
 
gone
 
concern
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 2021.
 
Swiss SRB going and gone concern requirements and information
As of 31.12.21
RWA
LRD
USD million, except where indicated
in %
in %
Required going concern capital
Total going concern capital
 
14.32
1
 
43,281
 
5.00
1
 
53,443
Common equity tier 1 capital
 
10.02
 
30,286
 
3.50
2
 
37,410
of which: minimum capital
 
4.50
 
13,599
 
1.50
 
16,033
of which: buffer capital
 
5.50
 
16,621
 
2.00
 
21,377
of which: countercyclical buffer
 
0.02
 
66
Maximum additional tier 1 capital
 
4.30
 
12,995
 
1.50
 
16,033
of which: additional tier 1 capital
 
3.50
 
10,577
 
1.50
 
16,033
of which: additional tier 1 buffer capital
 
0.80
 
2,418
Eligible going concern capital
Total going concern capital
 
20.02
 
60,488
 
5.66
 
60,488
Common equity tier 1 capital
 
14.98
 
45,281
 
4.24
 
45,281
Total loss-absorbing additional tier 1 capital
3
 
5.03
 
15,207
 
1.42
 
15,207
of which: high-trigger loss-absorbing additional tier 1 capital
 
4.23
 
12,783
 
1.20
 
12,783
of which: low-trigger loss-absorbing additional tier 1 capital
 
0.80
 
2,425
 
0.23
 
2,425
Required gone concern capital
Total gone concern loss-absorbing capacity
4
 
10.74
 
32,444
 
3.78
 
40,388
of which: base requirement
5
 
12.86
 
38,864
 
4.50
 
48,099
of which: additional requirement for market share and LRD
 
1.44
 
4,352
 
0.50
 
5,344
of which: applicable reduction on requirements
 
(3.56)
 
(10,772)
 
(1.22)
 
(13,056)
of which: rebate granted (equivalent to 55% of maximum rebate)
 
(3.14)
 
(9,474)
 
(1.10)
 
(11,757)
of which: reduction for usage of low-trigger tier 2 capital instruments
 
(0.43)
 
(1,298)
 
(0.12)
 
(1,298)
Eligible gone concern capital
Total gone concern loss-absorbing capacity
 
14.65
 
44,264
 
4.14
 
44,264
Total tier 2 capital
 
1.04
 
3,144
 
0.29
 
3,144
of which: low-trigger loss-absorbing tier 2 capital
 
0.86
 
2,596
 
0.24
 
2,596
of which: non-Basel III-compliant tier 2 capital
 
0.18
 
547
 
0.05
 
547
TLAC-eligible senior unsecured debt
 
13.61
 
41,120
 
3.85
 
41,120
Total loss-absorbing capacity
Required total loss-absorbing capacity
 
25.06
 
75,725
 
8.78
 
93,831
Eligible total loss-absorbing capacity
 
34.66
 
104,752
 
9.80
 
104,752
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
 
302,209
Leverage ratio denominator
 
1,068,862
1 Includes applicable add-ons of 1.44% for
 
RWA and 0.50% for LRD.
 
2 Our minimum CET1 leverage ratio requirement of 3.5%
 
consists of a 1.5% base requirement, a 1.5%
 
base buffer capital requirement, a 0.25%
LRD add-on requirement and a 0.25% market
 
share add-on requirement based on our Swiss credit business.
 
3 Includes outstanding low-trigger loss-absorbing additional tier 1 (AT1)
 
capital instruments, which are
available under the Swiss SRB
 
framework to meet the going concern
 
requirements until their first call
 
date. As of their first call
 
date, these instruments are eligible to
 
meet the gone concern requirements.
 
4 A maximum
of 25% of the gone concern requirements can be met with instruments that have a remaining maturity of between one and two years. Once at least 75% of the minimum gone concern
 
requirement has been met with
instruments that have a remaining
 
maturity of greater than
 
two years, all instruments
 
that have a remaining
 
maturity of between one
 
and two years remain
 
eligible to be included in
 
the total gone concern
 
capital.
 
5 The gone concern requirement after the application of the rebate for resolvability measures and the reduction for the use of higher quality capital instruments is floored at 8.6% and 3% for the RWA-
 
and LRD-based
requirements, respectively. This means that the combined reduction may not exceed 5.7 percentage points for the RWA-based requirement of 14.3% and
 
2.0 percentage points for the LRD-based requirement of 5.0%.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Capital management
154
Total loss-absorbing capacity
Swiss SRB going and gone concern information
USD million, except where indicated
31.12.21
31.12.20
Eligible going concern capital
Total going concern capital
 
60,488
 
56,178
Total tier 1 capital
 
60,488
 
56,178
Common equity tier 1 capital
 
45,281
 
39,890
Total loss-absorbing additional tier 1 capital
 
15,207
 
16,288
of which: high-trigger loss-absorbing additional tier 1 capital
 
12,783
 
13,711
of which: low-trigger loss-absorbing additional tier 1 capital
 
2,425
 
2,577
Eligible gone concern capital
Total gone concern loss-absorbing capacity
 
44,264
 
45,545
Total tier 2 capital
 
3,144
 
7,744
of which: low-trigger loss-absorbing tier 2 capital
 
2,596
 
7,201
of which: non-Basel III-compliant tier 2 capital
 
547
 
543
TLAC-eligible senior unsecured debt
 
41,120
 
37,801
Total loss-absorbing capacity
Total loss-absorbing capacity
 
104,752
 
101,722
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
 
302,209
 
289,101
Leverage ratio denominator
 
1,068,862
 
1,037,150
1
Capital and loss-absorbing capacity ratios (%)
Going concern capital ratio
 
20.0
 
19.4
of which: common equity tier 1 capital ratio
 
15.0
 
13.8
Gone concern loss-absorbing capacity ratio
 
14.6
 
15.8
Total loss-absorbing capacity ratio
 
34.7
 
35.2
Leverage ratios (%)
1
Going concern leverage ratio
 
5.7
 
5.4
of which: common equity tier 1 leverage ratio
 
4.24
 
3.85
Gone concern leverage ratio
 
4.1
 
4.4
Total loss-absorbing capacity leverage ratio
 
9.8
 
9.8
1 The leverage ratio
 
denominator (LRD) and leverage ratios
 
for 31 December 2020 do
 
not reflect the effects of the
 
temporary exemption that applied
 
from 25 March 2020 until
 
1 January 2021 and was
 
granted by
FINMA in connection
 
with COVID-19.
 
Refer to the
 
“Regulatory and legal
 
developments” section
 
and to
 
“Application
 
of the temporary
 
COVID-19-related FINMA
 
exemption of central
 
bank sight deposits”
 
in the
“Capital, liquidity and funding, and balance sheet” sections of our Annual Report 2020 for more information.
 
Audited |
 
 
Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital
USD million
31.12.21
31.12.20
Total IFRS equity
61,002
59,765
Equity attributable to non-controlling interests
(340)
(319)
Defined benefit plans, net of tax
(270)
(41)
Deferred tax assets recognized for tax loss carry-forwards
(4,565)
(5,617)
Deferred tax assets on temporary differences, excess over threshold
(49)
(5)
Goodwill, net of tax
1
(5,838)
(6,319)
Intangible assets, net of tax
(180)
(296)
Compensation-related components (not recognized in net
 
profit)
(1,700)
(1,349)
Expected losses on advanced internal ratings-based portfolio less provisions
(482)
(330)
Unrealized (gains) / losses from cash flow hedges, net of tax
(628)
(2,321)
Own credit related to gains / losses on financial liabilities
 
measured at fair value that existed at the balance sheet date
315
382
Own credit related to gains / losses on derivative financial instruments
 
that existed at the balance sheet date
(50)
(45)
Unrealized gains related to debt instruments at fair value through
 
OCI, net of tax
(68)
(152)
Prudential valuation adjustments
(167)
(150)
Accruals for dividends to shareholders
(1,700)
(1,314)
Capital reserve for potential share repurchases
(2,000)
Other
1
0
Total common equity tier 1 capital
45,281
39,890
1 Includes goodwill
 
related to significant
 
investments in financial
 
institutions of USD
22
 
million as of 31
 
December 2021 (31
 
December 2020: USD
413
 
million) presented on
 
the balance sheet
 
line Investments in
associates.
p
 
 
 
155
Total loss-absorbing capacity and movement
 
Our total
 
loss-absorbing capacity increased
 
by USD 3.0 billion
 
to
USD 104.8 billion as of 31 December 2021.
 
Going concern capital and movement
Audited |
 
Our
 
CET1
 
capital mainly
 
consists of:
 
share
 
capital; share
premium,
 
which
 
primarily
 
consists
 
of
 
additional
 
paid-in
 
capital
related
 
to
 
shares
issued;
 
and
 
retained
 
earnings.
 
A
 
detailed
reconciliation of
 
IFRS
 
equity
 
to
 
CET1
 
capital
 
is
 
provided
 
in
 
the
“Reconciliation of IFRS equity to Swiss
 
SRB common equity tier 1
capital” table.
 
Our
 
CET1
 
capital
 
increased
 
by
 
USD
5.4
 
billion
 
to
 
USD
45.3
billion as
 
of 31 December
 
2021, mainly
 
as a
 
result of
 
operating
profit before
 
tax of
 
USD
9.5
 
billion, a
 
USD
0.5
 
billion increase
 
in
eligible deferred
 
tax assets
 
on temporary
 
differences, a
 
USD
0.4
billion decrease
 
in deduction
 
of goodwill
 
resulting from
 
the sale
of
 
our
 
remaining
 
minority
 
investment
 
in
 
Clearstream
 
Fund
Centre AG (previously Fondcenter
 
AG) and
 
an increase of
 
USD
0.2
billion related
 
to the
 
launch of
 
our new
 
operational partnership
entity
 
with
 
Sumitomo
 
Mitsui
 
Trust
 
Holdings,
 
Inc.
 
These
 
effects
were partly offset by dividend accruals of USD
1.7
 
billion, current
tax expenses
 
of USD
1.6
 
billion, share
 
repurchases under
 
our share
repurchase program of USD
0.6
 
billion, negative foreign currency
effects of
 
USD
0.6
 
billion, compensation- and
 
own share-related
capital components of USD
0.4
 
billion, and negative effects from
defined benefit plans of USD
0.2
 
billion.
Our
 
share
 
repurchases
 
in
 
2021
 
decreased
 
CET1
 
capital
 
by
USD
0.6
 
billion,
 
reflecting
 
shares
 
repurchased
 
under
 
our
 
share
repurchase programs
 
of USD
2.6
 
billion, partly
 
offset by
 
the use
of the
 
capital reserve
 
for potential share
 
repurchases of
 
USD
2.0
billion.
 
The
 
capital
 
reserve
 
for
 
potential
 
share
 
repurchases
 
was
fully utilized during 2021.
›
 
Refer to “UBS shares” in this section for more
 
information about
our share repurchase programs
 
Our loss-absorbing additional tier 1 (AT1) capital decreased by
USD
1.1
 
billion
 
to
 
USD
15.2
 
billion,
 
mainly
 
due
 
to
 
two
 
calls
 
of
USD
2.6
 
billion
 
of
 
AT1
 
capital
 
instruments
 
denominated
 
in
 
US
dollars
 
and
 
foreign
 
currency
 
translation
 
and
 
interest
 
rate
 
risk
hedge effects,
 
partly offset
 
by two issuances
 
of USD
2.25
 
billion
of AT1 capital instruments denominated in US dollars.
p
 
Gone concern loss-absorbing capacity and movement
Audited |
 
Our total gone
 
concern loss-absorbing capacity decreased
by USD 1.3
 
billion to
 
USD
44.3
 
billion as
 
of 31 December
 
2021 and
included
 
USD
41.1
 
billion
 
of
 
TLAC-eligible
 
senior
 
unsecured
debt.
p
 
The
 
decrease
 
was
 
mainly
 
due
 
to
 
four
 
TLAC-eligible
 
senior
unsecured debt instruments
 
denominated in US dollars,
 
euro and
Swiss francs
 
that ceased to
 
be eligible as
 
they had less
 
than one
year to maturity, the call of a low-trigger tier 2 capital instrument
denominated
 
in euro,
 
a
 
low-trigger loss-absorbing
 
tier 2
 
capital
instrument denominated
 
in US
 
dollars that
 
ceased to
 
be eligible
as it
 
had less
 
than one
 
year to
 
maturity, and
 
the call
 
of a
 
TLAC-
eligible senior
 
unsecured debt
 
instrument denominated
 
in euro,
as well as
 
interest rate risk
 
hedge, foreign
 
currency translation and
other effects. These
 
decreases were partly
 
offset by 16
 
issuances
of TLAC-eligible senior unsecured debt instruments
 
denominated
in euro,
 
US dollars,
 
Swiss francs,
 
pounds sterling
 
and Australian
dollars.
Loss-absorbing capacity and leverage ratios
Our CET1 capital ratio increased
 
1.2 percentage points to 15.0%,
reflecting a USD 5.4
 
billion increase in
 
CET1 capital
 
that was
 
partly
offset by a USD 13.1 billion increase in RWA.
 
Our CET1
 
leverage ratio
 
increased 0.39
 
percentage points
 
to
4.24% as of 31 December 2021, as the aforementioned increase
in CET1
 
capital was
 
partly offset
 
by a
 
USD 32 billion
 
increase in
LRD.
Our gone
 
concern loss-absorbing
 
capacity ratio
 
decreased from
15.8% to 14.6% and our gone concern leverage ratio decreased
from
 
4.4%
 
to
 
4.1%,
 
mainly
 
driven by
 
an
 
increase in
 
RWA and
LRD,
 
respectively,
 
and
the
 
aforementioned
decrease
 
in
 
gone
concern loss-absorbing capacity.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Capital management
156
Swiss SRB total loss-absorbing capacity movement
USD million
Going concern capital
Swiss SRB
Common equity tier 1 capital as of 31.12.20
39,890
Operating profit before tax
9,484
Current tax (expense) / benefit
(1,564)
Deferred tax assets on temporary differences
544
Goodwill and intangible assets
519
Accruals for proposed dividends to shareholders
(1,700)
Share repurchase program
(2,612)
Capital reserve for potential share repurchases
2,000
Foreign currency translation effects before tax
(570)
Compensation-
 
and own share-related capital components
(441)
Defined benefit plans
1
(234)
Other
(34)
Common equity tier 1 capital as of 31.12.21
45,281
Loss-absorbing additional tier 1 capital as of 31.12.20
16,288
Issuance of high-trigger loss-absorbing additional tier 1 capital
 
2,250
Call of high-trigger loss-absorbing additional tier 1 capital
(2,600)
Interest rate risk hedge, foreign currency translation and other effects
 
(731)
Loss-absorbing additional tier 1 capital as of 31.12.21
15,207
Total going concern capital as of 31.12.20
56,178
Total going concern capital as of 31.12.21
60,488
Gone concern loss-absorbing capacity
Tier 2 capital as of 31.12.20
7,744
Call of low-trigger loss-absorbing tier 2 capital
(2,415)
Debt no longer eligible as gone concern loss-absorbing capacity
 
due to residual tenor falling to below one year
(2,020)
Interest rate risk hedge, foreign currency translation and other effects
 
(166)
Tier 2 capital as of 31.12.21
3,144
TLAC-eligible senior unsecured debt as of 31.12.20
37,801
Issuance of TLAC-eligible senior unsecured debt
11,956
Call of TLAC-eligible senior unsecured debt
(2,027)
Debt no longer eligible as gone concern loss-absorbing capacity
 
due to residual tenor falling to below one year
(4,248)
Interest rate risk hedge, foreign currency translation and other effects
 
(2,362)
TLAC-eligible senior unsecured debt as of 31.12.21
41,120
Total gone concern loss-absorbing capacity as of 31.12.20
45,545
Total gone concern loss-absorbing capacity as of 31.12.21
44,264
Total loss-absorbing capacity
Total loss-absorbing capacity as of 31.12.20
101,722
Total loss-absorbing capacity as of 31.12.21
104,752
1 Includes a pension
 
plan curtailment of USD
 
80 million that reduced
 
the defined benefit obligation
 
and a USD 254
 
million payment of
 
the second installment to
 
employees’ retirement assets in
 
the Swiss pension
fund. As announced in 2018, a similar contribution will be made in the first quarter of 2022. Refer to “Note
 
29 Pension and other post-employment benefit plans” in the “Consolidated
 
financial statements” section
of the Annual Report 2019 for more information.
 
Additional information
Active management of sensitivity to foreign exchange
movements
Group
 
Treasury
 
is
 
mandated
 
to
 
minimize
 
adverse
 
effects
 
from
changes
 
in
 
foreign
 
currency
 
rates
 
on
 
our
 
CET1
 
capital
 
and / or
CET1 capital
 
ratio. A
 
significant portion
 
of our
 
CET1 capital
 
and
RWA
 
is denominated
 
in Swiss
 
francs, euro,
 
pounds sterling
 
and
other currencies.
 
In order
 
to hedge
 
the CET1
 
capital ratio,
 
CET1
capital
 
needs
 
to
 
have
 
foreign
 
currency
 
exposure,
 
leading
 
to
foreign currency rates sensitivity of CET1 capital.
 
As
 
a
 
consequence,
 
it
 
is
 
not
 
possible
 
to
 
simultaneously
 
fully
hedge CET1 capital and the CET1 capital ratio. As the proportion
of
 
RWA
 
denominated
 
in
 
currencies
 
other
 
than
 
the
 
US
 
dollar
outweighs
CET1
capita
l
 
in
such
currencies,
 
a
 
significant
appreciation of the
 
US dollar
 
against such currencies
 
could benefit
our capital ratios, while a significant depreciation of the US dollar
against these currencies could adversely affect our capital ratios.
The Group Asset and Liability Committee (the Group ALCO), a
committee of
 
the Group
 
Executive Board,
 
has mandated
 
Group
Treasury to
 
adjust the
 
currency mix of
 
CET1 capital,
 
within limits
set
 
by
 
the
 
BoD,
 
to
 
balance
 
the
 
effect
 
of
 
foreign
 
exchange
movements on CET1 capital and the CET1 capital ratio. Limits are
in
 
place
 
for
 
the
 
sensitivity
 
of
 
both
 
CET1
 
capital
 
and
 
the
 
CET1
capital
 
ratio
 
to
 
an
 
appreciation
 
or
 
depreciation
 
of
 
10%
 
in
 
the
value of the US dollar against other currencies.
Sensitivity to currency movements
 
Risk-weighted assets
We
 
estimate
 
that
 
a 10%
 
depreciation
 
of
 
the
 
US dollar
 
against
other
 
currencies
 
would
 
have
 
increased
 
our
 
RWA
 
by
 
USD 13
billion
 
and
 
our
 
CET1
 
capital
 
by
USD
 
1.
4
 
billion
 
as
 
of
31
 
December
 
202
1
 
(31
 
December
2020
:
USD
 
1
3
 
billion
 
and
USD 1.3
 
billion,
 
respectively
 
)
 
and
 
decreased
 
our
 
CET1
 
capital
ratio 15
 
basis points
 
(31 December
 
2020:
 
15 basis points)
 
.
Conversely,
 
we
 
estimate
 
that
 
a
 
10%
 
appreciation
 
of
 
the
 
US
dollar against other currencies
 
would have decreased our RWA
 
by
USD
 
1
1
 
billion
 
and
 
our
 
CET1
 
capital
 
by
USD
 
1.
3
 
billion
(31
 
December
20
20
:
USD
 
1
2
 
billion
 
and
USD
 
1.
2
 
billion,
respectively)
 
and increased our
 
CET1 capital ratio
 
14 basis points
(31 December 2020: 15 basis points).
 
 
 
157
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 63 billion
as
 
of
 
31 December
 
2021
 
(31 December
 
2020:
 
USD 65
 
billion)
and
decreased
 
our
 
Swiss
 
SRB
 
going
 
concern
 
leverage
 
ratio
15 basis points (31 December 2020:
 
16
 
basis points). Conversely,
we
 
estimate
 
that
 
a
 
10%
 
appreciation
 
of
 
the
 
US
 
dollar
 
against
other currencies would have decreased our LRD by
 
USD 57 billion
(31 December 20
 
20:
 
USD 58
 
billion) and increased our Swiss
 
SRB
going concern leverage
 
ratio 16 basis points
 
(31 December 20
 
20:
16
 
basis points)
 
.
The
 
aforementioned
 
sensitivities
 
do
 
not
 
consider
 
foreign
currency translation effects related to defined benefit plans other
than those related to the currency translation of the net equity of
foreign operations.
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 4.0 billion
 
as of
 
31 December
2021,
 
with
 
no
 
change
 
to
 
prior
 
year-end.
 
This
 
estimate
 
is
 
not
related
 
to
 
and
 
does
 
not
 
take
 
into
 
account
 
any
 
provisions
recognized
 
for
 
any
 
of
 
these
 
matters
 
and
 
does
 
not
 
constitute
 
a
subjective
 
assessment
 
of
 
our
 
actual
 
exposure
 
in
 
any
 
of
 
these
matters.
›
 
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 and
 
subsidiaries thereof. UBS Group
AG and
 
UBS AG
 
have
 
contributed a
 
significant portion
 
of
 
their
respective
 
capital
to,
and
 
provide
d
 
substantial
 
liquidity
 
to
,
 
subsidiaries. Many of these subsidiaries are subject to regulations
requiring compliance
 
with minimum
 
capital, liquidity
 
and similar
requirements. Regulatory capital
 
components and capital
 
ratios of
our
 
significant
 
regulated
 
subsidiaries
 
determined
 
under
 
the
regulatory
 
framework of
 
each subsidiary’s
 
home jurisdiction
 
are
provided
 
in
 
the
 
“Financial
 
and
 
regulatory
 
key
 
figures
 
for
 
our
significant regulated subsidiaries and
 
sub-groups” section of this
report. Supervisory authorities
 
generally have discretion
 
to impose
higher
 
requirements
,
 
or
 
to
 
otherwise
 
limit
the
 
activities
 
of
subsidiaries.
 
Supervisory
 
authorities
 
also
 
may
 
require
 
entities
 
to
measure capital and
 
leverage ratios on a
 
stressed basis,
 
and may
limit the
 
ability of
 
the entity
 
to engage
 
in new
 
activities or
 
take
capital actions based on the results of those tests.
 
›
 
Refer to the 31 December 2021 Pillar 3
 
Report,
 
available under
“Pillar 3 disclosures” at
ubs.com/investors
,
 
for more capital and
other regulatory information about our significant
 
regulated
subsidiaries and sub-groups
Joint liability of UBS AG and UBS Switzerland AG
In
 
June
 
2015,
 
upon
 
the
 
transfer
 
of
 
the
 
Personal
 
&
 
Corporate
Banking and
 
Global Wealth
 
Management businesses
 
booked in
Switzerland from
 
UBS AG
 
to UBS
 
Switzerland AG,
 
UBS AG
 
and
UBS
 
Switzerland
 
AG
 
assumed
 
joint
 
liability
 
for
 
obligations
transferred
 
to
 
UBS
 
Switzerland
 
AG
 
and
 
existing
 
at
 
UBS
 
AG,
respectively.
 
Under certain circumstances,
 
the Swiss Banking
 
Act
and FINMA’s
 
Banking Insolvency
 
Ordinance
 
authorize FINMA
 
to
modify,
 
extinguish
 
or
 
convert
 
to
 
common
 
equity
 
liabilities
 
of
 
a
bank in connection with a resolution or insolvency of such bank.
The
joint
 
liability
 
amounts
have
 
declined
 
as
 
obligations
matured, terminated or were
 
novated following the transfer
 
date.
As
 
of
 
31 December
 
2021,
 
the
 
liability
 
of
 
UBS
 
Switzerland
 
AG
amounted to CHF 5.2 billion (the equivalent of USD 5.7 billion),
 
a
decrease
 
of
 
CHF
 
3.7
 
billion
 
(USD
 
4.4
 
billion)
 
compared
 
with
31 December 2020.
 
The respective
 
liability of
 
UBS AG
 
has been
substantially extinguished.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Capital management
158
Risk-weighted assets
RWA development in 2021
During
 
2021, RWA
 
increased
 
by USD 13.1
 
billion
 
to USD 302.2
billion, primarily
 
driven by
 
increases
 
of USD 12.0
 
billion in
 
credit
and counterparty
 
credit risk
 
RWA,
 
USD 1.0 billion
 
in operational
risk
 
RWA
 
and
 
USD 0.9
 
billion
 
in
 
non-counterparty-related
 
risk.
These increases were partly
 
offset by a
 
decrease of USD 0.8
 
billion
in market risk RWA.
›
 
Refer to the 31 December 2021 Pillar 3
 
Report,
 
available under
“Pillar 3 disclosures” at
ubs.com/investors
, for more information
about RWA movements and definitions of RWA movement key
drivers
 
Movement in risk-weighted assets by key driver
USD billion
RWA as of
31.12.20
Currency
effects
Methodology
and policy
changes
Model
updates /
changes
Regulatory
add-ons
Asset size and
Other
1
RWA as of
31.12.21
Credit and counterparty credit risk
2
178.1
(4.1)
2.0
5.3
3.1
5.8
190.1
Non-counterparty-related risk
3
23.4
(0.3)
1.2
24.3
Market risk
11.8
(0.1)
3.1
4
(3.7)
11.1
Operational risk
75.8
1.0
76.7
Total
289.1
(4.4)
2.0
6.1
6.2
3.2
302.2
1 Includes
 
the Pillar
 
3 categories
 
“Asset
 
size,”
 
“Credit quality
 
of counterparties,”
 
“Acquisitions
 
and disposals”
 
and “Other.”
 
Refer to
 
the 31
 
December 2021
 
Pillar 3
 
Report under
 
“Pillar 3
 
disclosures”
 
at
ubs.com/investors for more
 
information.
 
2 Includes settlement
 
risk, credit valuation
 
adjustments, equity
 
exposures in the
 
banking book and
 
securitization exposures in
 
the banking book.
 
3 Non-counterparty-
related risk includes deferred tax assets recognized for temporary
 
differences, property, equipment, software
 
and other items.
 
4 As of 31 December 2021, the regulatory add-on related to
 
time decay was USD 3.5
billion.
 
Credit and counterparty credit risk
Credit
 
and counterparty
 
credit risk
 
RWA
 
increased
 
by USD 12.0
billion to USD 190.1
 
billion as
 
of 31 December
 
2021. This increase
was partly driven
 
by asset size and
 
other movements of
 
USD 5.8
billion,
 
due to an increase
 
in asset size
 
of USD 8.8 billion, mainly
due to loan growth
 
in Global Wealth
 
Management, partly offset
by asset
 
quality movements
 
of USD 3.1
 
billion, mainly
 
reflecting
improvements in counterparty
 
ratings and
 
loss given
 
default (LGD)
in
 
Global
 
Wealth
 
Management
 
and
 
Personal
 
&
 
Corporate
Banking.
 
Also,
 
2021 included
 
increases
 
from
 
model
 
updates of
USD 5.3
 
billion,
 
regulatory
 
add-ons
 
of
 
USD 3.1
 
billion,
 
and
methodology
 
and
 
policy
 
changes
 
of
 
USD 2.0
 
billion.
 
These
increases were partly offset by decreases from currency effects of
USD 4.1 billion.
 
Movement in credit and counterparty credit risk RWA by key driver
1
USD billion
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
 
Functions
Group
Total credit and counterparty credit risk RWA as of 31.12.20
46.7
62.8
2.9
58.5
7.2
178.1
Asset size
5.5
1.1
0.3
1.8
0.1
8.8
Asset quality
(1.3)
(1.1)
0.0
(0.4)
(0.3)
(3.1)
Model updates
4.3
1.2
0.0
(0.2)
0.0
5.3
Methodology and policy changes
1.7
0.3
0.0
0.0
0.0
2.0
Regulatory add-ons
0.2
0.7
0.0
2.3
(0.1)
3.1
Acquisitions and disposals
0.0
0.0
0.0
0.0
0.0
0.0
Foreign exchange movements
(0.6)
(1.6)
0.0
(1.4)
(0.5)
(4.1)
Other
0.4
(0.4)
0.0
0.0
0.0
0.1
Total movement
10.2
0.2
0.3
2.1
(0.8)
12.0
Total credit and counterparty credit risk RWA as of 31.12.21
56.9
63.0
3.2
60.5
6.4
190.1
1 Refer to the 31 December 2021 Pillar 3 Report under “Pillar 3 disclosures” at ubs.com/investors for the definitions of credit and
 
counterparty credit risk RWA movement categories.
 
 
 
 
159
Model updates
The
 
increase
 
in
 
credit
 
and
 
counterparty
 
credit
 
risk
 
RWA
 
from
model
 
updates
 
of
 
USD 5.3
 
billion
 
was
 
primarily
 
driven
 
by
 
the
phase-in impacts for structured margin
 
loans and similar products
in
 
Global
 
Wealth
 
Management
 
of
 
USD 2.1
 
billion
 
and
 
by
 
new
probability
 
of
 
default
 
(PD)
 
and
 
LGD
 
models
 
for
 
the
 
mortgage
portfolio
 
in
 
the
 
US
 
of
 
USD
 
2.0
 
billion.
 
In
 
addition,
 
we
 
have
updated
 
the
 
LGD
 
model
 
for
 
mortgages
 
in
 
Switzerland,
 
which
resulted
 
in
 
an
 
RWA
 
increase
 
of
 
USD 0.9
 
billion
 
and
 
was
 
partly
offset
 
by
 
an
 
RWA
 
reduction
 
of
 
USD 0.3
 
billion
 
related
 
to
 
the
introduction
 
of
 
new
 
models
 
for
 
the
 
leasing
 
of
 
aircraft
 
and
industrial goods.
 
›
 
Refer to “Credit risk models” in the “Risk management
 
and
control” section of this report for more information about
 
model
updates
Methodology changes
The
 
increase
 
in
 
credit
 
and
 
counterparty
 
credit
 
risk
 
RWA
 
from
methodology changes
 
of USD 2.0 billion
 
was primarily driven
 
by
a
 
change
 
related
 
to
 
credit
 
valuation
 
adjustment
 
(CVA)
 
risk
 
for
derivative
 
exposures
 
with
 
Lombard
 
clients
that
 
resulted
 
in
 
an
increase of
 
USD 1.1 billion
 
in
 
RWA.
 
Additionally,
 
the
 
approach
used
 
for
 
the
 
covered
 
bonds
 
within
 
the
 
high-quality
 
liquid
 
asset
(HQLA) portfolio
 
has been
 
changed from
 
the advanced
 
internal
ratings-based (A-IRB) approach
 
to the standardized
 
approach, as
requested
 
by
 
FINMA,
 
resulting
 
in
 
an
 
RWA
 
increase
 
of
 
USD 1.0
billion.
Regulatory add-ons
The
 
increase
 
in
 
credit
 
and
 
counterparty
 
credit
 
risk
 
RWA
 
from
regulatory add-ons of USD
 
3.1 billion was
 
primarily driven by
 
add-
ons
 
for
 
prime
 
brokerage
 
clients
 
of
 
USD 2.4
 
billion,
 
credit
 
card
exposures
 
in
 
Switzerland
 
of
 
USD 0.5
 
billion,
 
as
 
well
 
as
 
clients
leasing aircraft and industrial goods of USD 0.4 billion.
›
 
Refer to the “Risk management and control”
 
section of this
report and the 31 December 2021
 
Pillar 3 Report,
 
available under
“Pillar 3 disclosures” at
ubs.com/investors
, for more information
about credit and counterparty credit risk developments
 
We
 
expect
 
that
 
further
 
methodology
 
changes
 
and
 
model
updates,
 
as
 
well
 
as
 
regulatory
 
add-ons,
 
will
 
increase
 
credit
 
and
counterparty credit
 
risk RWA
 
by around
 
USD 10 billion
 
in 2022.
The extent and timing of RWA changes
 
may vary as methodology
changes and model
 
updates are completed
 
and receive regulatory
approval. In addition, changes in
 
the composition of the relevant
portfolios and other market factors will affect RWA.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Capital management
160
Non-counterparty-related risk
 
Non-counterparty credit risk RWA increased by USD 0.9 billion to
USD 24.3
 
billion as of 31 December 202
 
1, primarily driven by an
increase in deferred tax assets on temporary differences.
Market risk
Market risk RWA decreased by USD 0.8
 
billion to USD 11.1 billion
as
 
of
 
31
 
December
 
202
1
,
primarily
 
driven
 
by
 
a
 
decrease
 
of
USD 3.7 billion from
 
portfolio and market movements
 
,
 
mostly in
the
 
Investment Bank’s
 
Global Markets
 
business.
 
This was
 
partly
offset by an increase
 
from regulatory add-ons of
 
USD 3.1 billion,
primarily related to time decay. The integration of time
 
decay into
the
 
regulatory
 
VaR
 
model
 
is
 
subject
 
to
 
further
 
discussions
between FINMA and UBS.
 
›
 
Refer to the “Risk management and control”
 
section of this
report and the 31 December 2021 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
 
1.0 billion
 
to
 
USD 76.7
billion as of
 
31 December 2021,
 
driven by
 
the annual
 
recalibration
of
 
the
 
AMA
 
model
 
used
 
for
 
the
 
calculation
 
of
 
operational
 
risk
capital. Allocations to
 
the business divisions
 
changed in the
 
fourth
quarter of 2021,
 
as certain historical
 
losses dropped from
 
the time
window that is relevant for the internal allocation approach.
We are
 
assessing the effect
 
of the
 
verdict in
 
the French
 
cross-
border
 
matter
 
and
 
the
 
corresponding
 
changes
 
in
 
provisions
 
for
litigation, regulatory and similar matters on operational risk RWA
in
 
consultation
 
with
 
FINMA.
 
We
 
expect
 
to
 
reflect
 
additional
operational risk RWA in the first quarter of
 
2022, with a potential
single
-
digit
 
billion
 
US
 
dollar
 
operational
 
risk
 
RWA
 
impact
following completion of this assessment.
›
 
Refer to “Advanced measurement approach model”
 
in the “Risk
management and control” section of this report for
 
more
information about the AMA model
 
Risk-weighted assets by business division and Group Functions
USD billion
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Group
 
Functions
Total
RWA
31.12.21
Credit and counterparty credit risk
1
56.9
63.0
3.2
60.5
6.4
190.1
Non-counterparty-related risk
2
6.2
2.0
0.6
3.5
12.0
24.3
Market risk
1.6
0.0
8.1
1.5
11.1
Operational risk
35.2
8.1
3.0
20.2
10.3
76.7
Total
99.8
73.2
6.9
92.2
30.1
302.2
31.12.20
Credit and counterparty credit risk
1
46.7
62.8
2.9
58.5
7.2
178.1
Non-counterparty-related risk
2
6.2
2.1
0.7
3.6
10.7
23.4
Market risk
1.4
0.0
9.0
1.4
11.8
Operational risk
32.8
7.2
3.3
23.2
9.3
75.8
Total
87.2
72.1
6.9
94.3
28.7
289.1
31.12.21 vs 31.12.20
 
Credit and counterparty credit risk
1
10.2
0.2
0.3
2.1
(0.8)
12.0
Non-counterparty-related risk
2
0.0
(0.1)
(0.1)
(0.2)
1.2
0.9
Market risk
0.1
0.0
(0.9)
0.1
(0.8)
Operational risk
2.4
0.9
(0.3)
(3.0)
1.0
1.0
Total
12.7
1.1
(0.1)
(2.0)
1.5
13.1
1 Includes settlement risk, credit
 
valuation adjustments, equity exposures in the banking
 
book and securitization exposures in
 
the banking book.
 
2 Non-counterparty-related risk includes deferred
 
tax assets recognized
for temporary differences (31 December 2021: USD 11.4
 
billion; 31 December 2020: USD 10.0 billion), as well
 
as property, equipment, software and
 
other items (31 December 2021: USD 12.9 billion; 31
 
December
2020: USD 13.4 billion).
 
 
 
 
 
 
 
 
 
 
161
Leverage ratio denominator
LRD increased by USD 32 billion
 
to USD 1,069 billion as of 31 December
 
2021, driven by asset size and
 
other movements of USD 54
billion,
 
partly offset by a decrease due to currency effects of USD 23 billion.
 
Movement in leverage ratio denominator by key driver
USD billion
LRD as of
 
31.12.20
1
Currency
 
effects
Asset size and
 
other
LRD as of
 
31.12.21
On-balance sheet exposures (excluding derivative exposures
 
and SFTs)
2
806.6
(17.0)
57.8
847.4
Derivative exposures
96.6
(2.7)
(3.0)
90.9
Securities financing transactions
115.3
(2.3)
(3.9)
109.2
Off-balance sheet items
 
31.3
(0.7)
2.2
32.8
Deduction items
(12.8)
0.1
1.2
(11.5)
Total
1,037.1
(22.6)
54.3
1,068.9
1 The respective period shown ending on 31 December 2020 does not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection
with COVID-19. Refer
 
to the “Regulatory and
 
legal developments” section and
 
to “Application
 
of the temporary COVID
 
-19-related FINMA exemption of
 
central bank sight deposits”
 
in the “Capital, liquidity
 
and
funding, and balance
 
sheet” section of
 
our Annual Report
 
2020, available under
 
“Annual reporting”
 
at ubs.com/investors,
 
for more information.
 
2 The exposures
 
exclude derivative financial
 
instruments, cash
collateral receivables on
 
derivative instruments,
 
receivables from SFTs,
 
and margin loans,
 
as well as prime
 
brokerage receivables
 
and financial assets
 
at fair value
 
not held for trading,
 
both related to SFTs.
 
These
exposures are presented separately under Derivative exposures and Securities financing transactions in
 
this table.
 
The LRD movements described below exclude currency effects.
 
On-balance
 
sheet
 
exposures
 
(excluding
 
derivative
 
exposures
and SFTs)
 
increased by
 
USD 58 billion,
 
mainly driven
 
by an
 
increase
in central
 
bank balances
 
partly offset
 
by disposal
 
of high-quality
liquid asset (HQLA) securities in Group
 
Treasury, as well as higher
lending
 
balances,
 
mainly
 
in
 
Global
 
Wealth
 
Management,
 
and
trading assets in the Investment Bank.
Derivative
 
exposures
de
creased
 
by
USD
 
3
 
billion,
 
reflecting
 
market-driven movements and lower client volumes mainly in the
Investment Bank.
SFTs
 
decreased
 
by
 
USD 4
 
billion,
 
mainly
 
due
 
to
 
lower
 
prime
brokerage receivables and
 
margin loan repayments
 
as a result of
client activities in the Investment Bank.
 
›
 
Refer to “Balance sheet and off-balance sheet”
 
in this section for
more information about balance sheet movements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Capital management
162
Leverage ratio denominator by business division and Group Functions
USD billion
Global Wealth
Management
 
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
 
Functions
Total
 
31.12.21
Total IFRS assets
395.2
225.4
25.6
346.4
124.5
1,117.2
Difference in scope of consolidation
1
0.0
0.0
(21.5)
(0.1)
0.0
(21.6)
Less: derivative exposures and SFTs
2
(25.9)
(11.8)
(0.1)
(159.2)
(51.2)
(248.2)
On-balance sheet exposures
369.3
213.6
4.1
187.1
73.3
847.4
Derivative exposures
5.8
1.4
0.0
79.0
4.7
90.9
Securities financing transactions
22.6
10.9
0.0
45.7
29.9
109.2
Off-balance sheet items
 
7.2
17.5
0.0
7.6
0.5
32.8
Items deducted from Swiss SRB tier 1 capital
(5.3)
(0.2)
(1.2)
(0.3)
(4.4)
(11.5)
Total
399.6
243.2
2.9
319.2
104.0
1,068.9
31.12.20
3
Total IFRS assets
367.7
231.7
28.6
369.7
128.1
1,125.8
Difference in scope of consolidation
1
(0.1)
(21.1)
0.0
0.1
(21.2)
Less: derivative exposures and SFTs
2
(34.0)
(16.7)
(0.7)
(191.6)
(54.9)
(298.0)
On-balance sheet exposures
333.6
215.0
6.7
178.0
73.3
806.6
Derivative exposures
6.6
2.0
0.0
82.7
5.3
96.6
Securities financing transactions
30.1
15.1
0.7
46.5
22.9
115.3
Off-balance sheet items
 
6.1
16.3
0.0
8.5
0.4
31.3
Items deducted from Swiss SRB tier 1 capital
(5.2)
(0.1)
(1.6)
(0.3)
(5.5)
(12.8)
Total
371.2
248.3
5.8
315.5
96.2
1,037.1
31.12.21 vs 31.12.20
Total IFRS assets
27.5
(6.3)
(2.9)
(23.3)
(3.6)
(8.6)
Difference in scope of consolidation
1
0.1
0.0
(0.4)
(0.1)
(0.1)
(0.5)
Less: derivative exposures and SFTs
2
8.1
4.9
0.7
32.5
3.7
49.8
On-balance sheet exposures
35.7
(1.4)
(2.7)
9.1
0.0
40.8
Derivative exposures
(0.8)
(0.6)
0.0
(3.7)
(0.6)
(5.7)
Securities financing transactions
(7.5)
(4.2)
(0.7)
(0.8)
7.0
(6.2)
Off-balance sheet items
 
1.1
1.2
(0.9)
0.1
1.5
Items deducted from Swiss SRB tier 1 capital
(0.1)
0.0
0.4
0.0
1.1
1.3
Total
28.4
(5.1)
(2.9)
3.7
7.7
31.7
1 Represents the
 
difference between the
 
IFRS and the
 
regulatory scope of
 
consolidation, which is
 
the applicable scope
 
for the LRD
 
calculation.
 
2 The exposures
 
consist of derivative
 
financial instruments,
 
cash
collateral receivables on derivative instruments, receivables from SFTs,
 
and margin loans, as well as prime brokerage receivables and financial assets at fair value not held for trading,
 
both related to SFTs, all of which
are in accordance with the regulatory scope of consolidation. These exposures
 
are presented separately under Derivative exposures and Securities financing
 
transactions in this table.
 
3 The respective period shown
ending on 31 December 2020 does
 
not reflect the effects of the temporary
 
exemption that applied from 25 March
 
2020 until 1 January 2021
 
and was granted by FINMA
 
in connection with COVID-19. Refer
 
to the
“Regulatory and legal
 
developments” section and
 
to “Application
 
of the temporary
 
COVID-19-related FINMA
 
exemption of central
 
bank sight deposits”
 
in the “Capital,
 
liquidity and funding,
 
and balance sheet”
section of our Annual Report 2020, available under “Annual
 
reporting” at ubs.com/investors, for more information.
 
 
163
UBS AG consolidated total loss-absorbing capacity and leverage
ratio information
Going and gone concern requirements and information
UBS
 
is
 
considered
 
an
 
SRB
 
under
 
Swiss
 
banking
 
law
 
and,
 
on
 
a
consolidated basis, both UBS Group AG
 
and UBS AG are required
to
 
comply
 
with
 
regulations
 
based on
 
the Basel III
 
framework as
applicable for Swiss SRBs.
 
The
 
Swiss
 
SRB
 
framework
 
and
 
requirements
 
applicable
 
to
UBS AG
 
consolidated
 
are
 
consistent
 
with
 
those
 
applicable
 
to
UBS Group
 
AG
 
consolidated
 
and
 
are
 
described
 
in
 
the
 
“Capital,
liquidity and funding, and balance sheet” section of this report.
 
›
 
Refer to “Regulatory framework” in
 
this section for more
information about total loss-absorbing
 
capacity, leverage ratio
requirements and gone concern rebate
UBS AG is subject to
 
going and gone concern requirements
 
on
a standalone
 
basis. Capital
 
and other
 
regulatory information
 
for
UBS
 
AG
 
standalone
 
is
 
provided
 
under
 
“Holding
 
company
 
and
significant
 
regulated
 
subsidiaries
 
and
 
sub-groups”
 
at
ubs.com/investors
 
and
 
in the
 
31 December 2021
 
Pillar 3
 
Report
available under “Pillar 3 disclosures” at
ubs.com/investors
.
The table on the next page provides the RWA- and LRD-based
requirements
 
and
 
information
 
as
 
of
 
31 December
 
2021
 
for
UBS AG consolidated.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Capital management
164
Swiss SRB going and gone concern requirements and information
As of 31.12.21
RWA
LRD
USD million, except where indicated
in %
in %
Required going concern capital
Total going concern capital
 
14.32
1
 
42,824
 
5.00
1
 
53,384
Common equity tier 1 capital
 
10.02
 
29,966
 
3.50
2
 
37,369
of which: minimum capital
 
4.50
 
13,455
 
1.50
 
16,015
of which: buffer capital
 
5.50
 
16,445
 
2.00
 
21,354
of which: countercyclical buffer
 
0.02
 
66
Maximum additional tier 1 capital
 
4.30
 
12,857
 
1.50
 
16,015
of which: additional tier 1 capital
 
3.50
 
10,465
 
1.50
 
16,015
of which: additional tier 1 buffer capital
 
0.80
 
2,392
Eligible going concern capital
Total going concern capital
 
18.54
 
55,434
 
5.19
 
55,434
Common equity tier 1 capital
 
13.91
 
41,594
 
3.90
 
41,594
Total loss-absorbing additional tier 1 capital
3
 
4.63
 
13,840
 
1.30
 
13,840
of which: high-trigger loss-absorbing additional tier 1 capital
 
3.82
 
11,414
 
1.07
 
11,414
of which: low-trigger loss-absorbing additional tier 1 capital
 
0.81
 
2,426
 
0.23
 
2,426
Required gone concern capital
4
Total gone concern loss-absorbing capacity
5
 
10.74
 
32,100
 
3.78
 
40,343
of which: base requirement
 
12.86
 
38,452
 
4.50
 
48,046
of which: additional requirement for market share and LRD
 
1.44
 
4,306
 
0.50
 
5,338
of which: applicable reduction on requirements
 
(3.56)
 
(10,658)
 
(1.22)
 
(13,041)
of which: rebate granted (equivalent to 55% of maximum rebate)
 
(3.14)
 
(9,374)
 
(1.10)
 
(11,744)
of which: reduction for usage of low-trigger tier 2 capital instruments
 
(0.43)
 
(1,284)
 
(0.12)
 
(1,297)
Eligible gone concern capital
Total gone concern loss-absorbing capacity
 
14.80
 
44,264
 
4.15
 
44,264
Total tier 2 capital
 
1.05
 
3,144
 
0.29
 
3,144
of which: low-trigger loss-absorbing tier 2 capital
 
0.87
 
2,596
 
0.24
 
2,596
of which: non-Basel III-compliant tier 2 capital
 
0.18
 
547
 
0.05
 
547
TLAC-eligible senior unsecured debt
 
13.75
 
41,120
 
3.85
 
41,120
Total loss-absorbing capacity
Required total loss-absorbing capacity
 
25.06
 
74,923
 
8.78
 
93,727
Eligible total loss-absorbing capacity
 
33.34
 
99,698
 
9.34
 
99,698
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
 
299,005
Leverage ratio denominator
 
1,067,679
1 Includes applicable
 
add-ons of 1.44%
 
for RWA
 
and 0.50% for
 
LRD.
 
2 Our minimum
 
CET1 leverage ratio
 
requirement of 3.5%
 
consists of a
 
1.5% base requirement,
 
a 1.5% base
 
buffer capital requirement,
a 0.25% LRD add-on requirement and a 0.25% market
 
share add-on requirement based on our Swiss credit
 
business.
 
3 The relevant capital instruments were
 
issued after the new Swiss SRB framework
 
had been
implemented and qualify
 
as going concern
 
capital at the
 
UBS AG
 
consolidated level, as
 
agreed with FINMA.
 
4 A maximum of
 
25% of the
 
gone concern requirements
 
can be met
 
with instruments that
 
have a
remaining maturity of between one
 
and two years. Once at least
 
75% of the minimum gone
 
concern requirement has been met
 
with instruments that have a
 
remaining maturity of greater than
 
two years, all instruments
that have a remaining maturity
 
of between one and two
 
years remain eligible to be
 
included in the total gone
 
concern capital.
 
5 The gone concern
 
requirement after the application of
 
the rebate for resolvability
measures and the
 
reduction for the
 
use of higher
 
quality capital instruments
 
is floored at
 
8.6% and 3%
 
for the RWA-
 
and LRD-based requirements,
 
respectively. This
 
means that the
 
combined reduction
 
may not
exceed 5.7 percentage points for the RWA-based requirement of 14.3% and 2.0 percentage points for the LRD-based requirement
 
of 5.0%.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
165
Swiss SRB going and gone concern information
USD million, except where indicated
31.12.21
31.12.20
Eligible going concern capital
Total going concern capital
 
55,434
 
52,610
Total tier 1 capital
 
55,434
 
52,610
Common equity tier 1 capital
 
41,594
 
38,181
Total loss-absorbing additional tier 1 capital
 
13,840
 
14,430
of which: high-trigger loss-absorbing additional tier 1 capital
 
11,414
 
11,854
of which: low-trigger loss-absorbing additional tier 1 capital
1
 
2,426
 
2,575
Eligible gone concern capital
Total gone concern loss-absorbing capacity
 
44,264
 
45,545
Total tier 2 capital
 
3,144
 
7,744
of which: low-trigger loss-absorbing tier 2 capital
 
2,596
 
7,201
of which: non-Basel III-compliant tier 2 capital
 
547
 
543
TLAC-eligible senior unsecured debt
 
41,120
 
37,801
Total loss-absorbing capacity
Total loss-absorbing capacity
 
99,698
 
98,155
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
 
299,005
 
286,743
Leverage ratio denominator
 
1,067,679
 
1,036,771
2
Capital and loss-absorbing capacity ratios (%)
Going concern capital ratio
 
18.5
 
18.3
of which: common equity tier 1 capital ratio
 
13.9
 
13.3
Gone concern loss-absorbing capacity ratio
 
14.8
 
15.9
Total loss-absorbing capacity ratio
 
33.3
 
34.2
Leverage ratios (%)
2
Going concern leverage ratio
 
5.2
 
5.1
of which: common equity tier 1 leverage ratio
 
3.90
 
3.68
Gone concern leverage ratio
 
4.1
 
4.4
Total loss-absorbing capacity leverage ratio
 
9.3
 
9.5
1 The relevant capital instruments were issued after the new Swiss SRB framework had been
 
implemented and qualify as going concern capital of UBS AG, as agreed with FINMA.
 
2 The leverage ratio denominator
(LRD) and leverage ratios for 31 December
 
2020 do not reflect the effects of the
 
temporary exemption that applied from 25
 
March 2020 until 1 January 2021
 
and was granted by FINMA in connection
 
with COVID-
19. Refer to “UBS AG consolidated total loss-absorbing capacity and leverage ratio information” in the “Capital, liquidity and funding, and balance sheet” section of
 
the combined UBS Group AG and UBS AG Annual
Report 2020, available under “Annual reporting” at
 
ubs.com/investors, for more information.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Capital management
166
UBS Group AG vs UBS AG consolidated loss-absorbing
capacity and leverage ratio information
 
The going
 
concern capital of
 
UBS AG consolidated
 
was USD 5.1
billion
 
lower
 
than
 
the
 
going
 
concern
 
capital
 
of
 
UBS
 
Group
 
AG
consolidated
 
as
 
of
 
31 December
 
2021,
 
reflecting
 
lower
 
CET1
capital of USD 3.7 billion and
 
lower going concern loss-absorbing
additional tier 1 (AT1) capital of USD 1.4 billion.
The
 
aforementioned
 
difference in
 
CET1
 
capital was
 
primarily
due to a
 
lower UBS AG
 
consolidated IFRS equity
 
of USD 2.6
 
billion
and
 
higher
 
UBS
 
AG
 
accruals
 
for
 
dividends,
 
as
 
well
 
as
 
a
 
higher
capital
 
deduction
 
at
 
the
 
UBS
 
AG
 
consolidated
 
level
 
related
 
to
deferred tax assets
 
on temporary
 
differences. The aforementioned
factors
 
were
 
partly
 
offset
 
by
 
compensation-related
 
regulatory
capital accruals at the UBS Group AG level.
The
 
going
 
concern
 
loss-absorbing
 
AT1
 
capital
 
of
 
UBS
 
AG
consolidated was
 
USD 1.4 billion
 
lower than
 
that of
 
UBS Group
AG
 
consolidated
 
as
 
of
 
31
 
December
 
202
1
,
mainly
reflecting
deferred contingent capital plan
 
awards granted at Group
 
level to
eligible employees for
 
the performance years
 
2016 to
 
2020, partly
offset by
 
two loss-absorbing
 
AT1 capital
 
instruments on-lent
 
by
UBS Group AG to UBS AG.
Differences
 
in
 
capital
 
between
 
UBS
 
Group
 
AG
 
consolidated
and
 
UBS
 
AG
 
consolidated
 
related
 
to
 
employee
 
compensation
plans will reverse to the extent underlying services are performed
by employees of,
 
and are consequently
 
charged to, UBS
 
AG and
its
 
subsidiaries.
 
Such
 
reversal
 
generally
 
occurs
 
over
 
the
 
service
period of the employee compensation plans.
The
 
leverage
 
ratio
 
framework
 
for
 
UBS
 
AG
 
consolidated
 
is
consistent
 
with
 
that
 
of
 
UBS
 
Group
 
AG
 
consolidated.
 
As
 
of
31 December 2021, the going concern
 
leverage ratio of UBS AG
consolidated was
 
0.5 percentage points
 
lower than
 
that of
 
UBS
Group AG
 
consolidated, mainly
 
because the
 
going concern
 
capital
of UBS AG consolidated was USD 5.1 billion lower.
 
 
 
Audited |
 
Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital (UBS Group AG vs UBS AG consolidated)
As of 31.12.21
USD million
UBS Group AG
(consolidated)
UBS AG
(consolidated)
Difference
Total IFRS equity
61,002
58,442
2,559
Equity attributable to non-controlling interests
(340)
(340)
Defined benefit plans, net of tax
(270)
(270)
Deferred tax assets recognized for tax loss carry-forwards
(4,565)
(4,565)
Deferred tax assets on temporary differences, excess over threshold
(49)
(350)
302
Goodwill, net of tax
(5,838)
(5,838)
Intangible assets, net of tax
(180)
(180)
Compensation-related components (not recognized in net
 
profit)
(1,700)
(1,700)
Expected losses on advanced internal ratings-based portfolio less provisions
(482)
(482)
Unrealized (gains) / losses from cash flow hedges, net of tax
(628)
(628)
Own credit related to gains / losses on financial liabilities
 
measured at fair value that existed at the balance sheet date
315
315
Own credit related to gains / losses on derivative financial instruments
 
that existed at the balance sheet date
(50)
(50)
Unrealized gains related to debt instruments at fair value through
 
OCI, net of tax
(68)
(68)
Prudential valuation adjustments
(167)
(167)
Accruals for dividends to shareholders
(1,700)
(4,200)
2,500
Other
1
(24)
25
Total common equity tier 1 capital
45,281
41,594
3,687
p
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
167
Swiss SRB going and gone concern information (UBS Group AG vs UBS AG consolidated)
As of 31.12.21
USD million, except where indicated
UBS Group AG
(consolidated)
UBS AG
(consolidated)
Difference
Eligible going concern capital
Total going concern capital
 
60,488
 
55,434
 
5,054
Total tier 1 capital
 
60,488
 
55,434
 
5,054
Common equity tier 1 capital
 
45,281
 
41,594
 
3,687
Total loss-absorbing additional tier 1 capital
 
15,207
 
13,840
 
1,368
of which: high-trigger loss-absorbing additional tier 1 capital
 
12,783
 
11,414
 
1,369
of which: low-trigger loss-absorbing additional tier 1 capital
 
2,425
 
2,426
 
(1)
Eligible gone concern capital
Total gone concern loss-absorbing capacity
 
44,264
 
44,264
 
0
Total tier 2 capital
 
3,144
 
3,144
 
0
of which: low-trigger loss-absorbing tier 2 capital
 
2,596
 
2,596
 
0
of which: non-Basel III-compliant tier 2 capital
 
547
 
547
 
0
TLAC-eligible senior unsecured debt
 
41,120
 
41,120
 
0
Total loss-absorbing capacity
Total loss-absorbing capacity
 
104,752
 
99,698
 
5,054
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
 
302,209
 
299,005
 
3,204
Leverage ratio denominator
 
1,068,862
 
1,067,679
 
1,183
Capital and loss-absorbing capacity ratios (%)
Going concern capital ratio
 
20.0
 
18.5
 
1.5
of which: common equity tier 1 capital ratio
 
15.0
 
13.9
 
1.1
Gone concern loss-absorbing capacity ratio
 
14.6
 
14.8
 
(0.2)
Total loss-absorbing capacity ratio
 
34.7
 
33.3
 
1.3
Leverage ratios (%)
Going concern leverage ratio
 
5.7
 
5.2
 
0.5
of which: common equity tier 1 leverage ratio
 
4.24
 
3.90
 
0.34
Gone concern leverage ratio
 
4.1
 
4.1
 
0.0
Total loss-absorbing capacity leverage ratio
 
9.8
 
9.3
 
0.5
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Capital management
168
Equity attribution and return on attributed equity
Under
 
our
 
equity
 
attribution
 
framework,
 
tangible
 
equity
 
is
attributed
 
based on
 
a weighting
 
of 50%
 
each for
 
average
 
risk-
weighted assets
 
(RWA)
 
and average
 
leverage ratio
 
denominator
(LRD),
 
which
 
both
 
include
 
resource
 
allocations
 
from
 
Group
Functions to
 
the business
 
divisions (the
 
BDs). Average
 
RWA
 
and
LRD
 
are
 
converted
 
to
 
common
 
equity
 
tier 1
 
(CET1)
 
capital
equivalents using
 
capital ratios
 
of 12.5%
 
and 3.75%,
 
respectively.
If the
 
attributed tangible
 
equity calculated
 
under the
 
weighted-
driver approach
 
is less
 
than the
 
CET1
 
capital equivalent
 
of
 
risk-
based capital (RBC)
 
for any
 
BD, the
 
CET1 capital
 
equivalent of RBC
is used as a floor for that BD.
In addition to tangible equity, we allocate equity to the BDs to
support goodwill and intangible assets.
Furthermore, we
 
allocate to
 
the BDs
 
attributed equity
 
related
to
 
certain
 
CET1
 
deduction
 
items, such
 
as
 
compensation-related
components
 
and
 
expected
 
losses
 
on
 
the
 
advanced
 
internal
ratings-based portfolio less provisions.
We attribute
 
all remaining
 
Basel III capital
 
deduction items
 
to
Group Functions.
 
These items
 
include deferred
 
tax assets
 
(DTAs)
recognized
 
for
 
tax
 
loss
 
carry
-
forwards
,
 
DTAs
 
on
 
temporary
differences
 
in
 
excess
 
of
 
the
 
threshold,
 
accruals
 
for
 
shareholder
returns,
 
and unrealized gains from cash flow hedges.
 
›
 
Refer to “Balance sheet and off-balance sheet”
 
in this section for
more information about movements in equity
 
attributable to
shareholders
 
Average attributed equity
For the year ended
USD billion
31.12.21
31.12.20
31.12.19
Global Wealth Management
18.8
17.1
16.6
Personal & Corporate Banking
9.2
8.9
8.4
Asset Management
2.0
2.0
1.8
Investment Bank
13.0
12.6
12.3
Group Functions
16.3
17.4
15.1
of which: deferred tax assets
1
5.9
6.7
7.1
of which: related to retained RWA and LRD
2,3
3.2
3.4
2.8
of which: accruals for shareholder returns and others
4
7.2
7.2
5.1
Average equity attributed to business divisions and Group Functions
59.3
57.8
54.2
1 Includes average attributed equity related to
 
the Basel III capital deduction items for deferred tax assets (deferred
 
tax assets recognized for tax loss carry-forwards and
 
deferred tax assets on temporary differences,
excess over threshold), as
 
well as retained
 
RWA and LRD related
 
to deferred tax assets.
 
2 Excludes average
 
attributed equity related
 
to retained RWA
 
and LRD related to
 
deferred tax assets.
 
3 The temporary
exemption that
 
applied from
 
25 March
 
2020 until
 
1 January
 
2021 and
 
was granted
 
by FINMA
 
in connection
 
with COVID-19
 
was not
 
applied when
 
calculating average
 
attributed equity
 
for 2020.
 
Refer to
 
the
“Regulatory and legal developments” section
 
of our Annual Report 2020
 
for more information.
 
4 Includes attributed equity related
 
to dividend accruals,
 
unrealized gains from cash flow
 
hedges, and a
 
balancing
item for capital held in excess of the 12.5% / 3.75% capital and leverage ratio calibration thresholds for equity attribution.
 
 
Return on attributed equity
1
For the year ended
In %
31.12.21
31.12.20
31.12.19
Global Wealth Management
25.4
23.6
20.5
Personal & Corporate Banking
18.9
14.2
17.1
Asset Management
51.8
74.2
29.7
Investment Bank
20.3
19.7
6.4
1 Return on attributed equity for Group Functions is not shown, as it is not meaningful.
 
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
 
risks. This
 
section provides
information
about
 
regulatory
 
requirements
 
and
 
the
 
firm’s
governance
 
structure,
 
liquidity
 
and
 
funding
 
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.
Strategy, objectives and governance
Audited |
 
Our management of
 
balance sheet, liquidity
 
and funding
positions
 
has
 
the
 
overall
 
objective
 
of
 
optimizing
 
our
 
franchise’s
value across a
 
broad range of
 
market conditions while
 
considering
current and
 
future regulatory
 
constraints. We
 
employ a
 
number
of measures to
 
monitor these positions
 
under normal and
 
stressed
conditions.
 
In
 
particular,
 
we
 
use
 
stress
 
scenarios
 
to
 
apply
behavioral
 
adjustments
 
to
 
our
 
balance
 
sheet
 
and
 
calibrate
 
the
results
 
from
 
internal
 
stress
 
models
 
while
 
in
 
compliance
 
with
external measures, primarily the liquidity coverage ratio (the LCR)
and
 
the
 
net
 
stable
 
funding
 
ratio
 
(the
 
NSFR).
 
Our
 
liquidity
 
and
funding strategy is proposed by Group Treasury
 
and approved by
the
 
Group
 
Asset
 
and
 
Liability
 
Committee
 
(the
 
Group
 
ALCO),
which is a
 
committee of the
 
Group Executive Board (the
 
GEB) that
is overseen by the
 
Risk Committee of the
 
Board of Directors
 
(the
BoD).
p
 
Group Treasury monitors
 
and oversees the
 
implementation and
execution of our liquidity and funding strategy and is responsible
for adherence to policies, limits, triggers and targets.
 
This enables
close control of both
 
our cash and collateral,
 
including our high-
quality liquid assets, and centralizes
 
the Group’s general access
 
to
wholesale cash
 
markets in
 
Group Treasury.
 
In addition,
 
should a
crisis require contingency funding measures
 
to be invoked, Group
Treasury is
 
responsible for
 
coordinating liquidity
 
generation with
representatives
 
of
 
the
 
relevant
 
business
 
areas.
 
Group
 
Treasury
reports
 
on
 
the
 
Group’s
 
overall
 
liquidity
 
and
 
funding
 
position,
including funding status and
 
concentration risks, at
 
least monthly,
to the Group ALCO and the Risk Committee of the BoD.
Audited
 
|
 
Liquidity
 
and funding
 
limits
 
,
 
triggers
 
and targets
 
are
set
 
at
 
Group
 
and,
 
where
 
appropriate,
 
at
 
legal
 
entity
 
and
business
 
division
 
levels,
 
and
 
are
 
reviewed
 
and
 
reconfirmed
 
at
least
 
once
 
a
 
year
 
by
 
the
 
BoD,
 
the
 
Group
 
ALCO,
 
the
 
Group
Chief Financial
 
Officer,
 
the Group
 
Chief Risk
 
Officer,
 
the Group
Treasurer
 
and the
 
business
 
divisions,
 
taking
 
into
 
consideration
current
 
and projected
 
business
 
strategy
 
and risk
 
tolerance.
 
The
principles
 
underlying
 
our
 
limit
 
,
 
trigger
 
and
 
target
 
framework
are designed
 
to maximize
 
and sustain
 
the value of
 
our business
franchise
 
and maintain
 
an appropriate
 
balance
 
in the asset
 
and
liability
 
structure.
 
Structural
 
limits
 
,
 
triggers
 
and
 
targets
 
focus
on
 
the
 
structure
 
and
 
composition
 
of
 
the
 
balance
 
sheet,
 
with
supplementary
 
limits
 
,
 
triggers
 
and
 
targets
 
designed
 
to
 
drive
the
 
utilization,
 
diversification
 
and
 
allocation
 
of
 
funding
resources.
 
To complement
 
and support
 
this framework,
 
Group
Treasury
 
monitors
 
the
 
markets
 
for
 
early
 
warning
 
indicators
regarding
 
the
 
current
 
liquidity
 
situation.
 
These
 
indicators
 
are
used
 
at
 
the
 
Group
 
level
 
to
 
assess
 
both
 
the
 
overall
 
global
 
and
regional
 
liquidity
 
status
 
for
 
potential
 
threats.
 
Treasury
 
Risk
Control
 
provides
 
independent
 
oversight
 
over
 
liquidity
 
and
funding
 
risks.
p
 
›
 
Refer to the “Corporate governance”
 
and “Risk management
and control” sections
 
of this report for more information
Liquidity management
Audited |
 
Our liquidity risk
 
management aims to
 
ensure that the firm
has
 
sufficient
 
liquidity
 
or
 
access
 
to
 
funding
 
sources
 
to
 
meet
 
its
liabilities
 
when
 
due,
 
to
 
meet
 
prudential
 
requirements
 
and
 
to
survive
 
a
 
severe
 
three-month
 
idiosyncratic
 
and
 
market-wide
liquidity stress
 
event,
 
allowing for
 
discrete
 
management actions
instructed by
 
the Group
 
Treasurer
 
in addition
 
to monetizing
 
the
firm’s liquidity reserves.
 
Our liquid assets
 
are managed using limits,
 
triggers and targets
to
 
maintain
 
an
 
appropriate
 
level
 
of
 
diversification
 
(issuer,
 
tenor
and
 
other
 
risk
 
characteristics)
 
in
 
response
 
to
 
any
 
expected
 
or
un
expected
 
volatility
 
in
 
funding
 
availability
 
or
 
requirements
caused
 
by
 
adverse
 
market,
 
operational
 
or
 
other
 
firm-specific
events. The liquid asset
 
portfolio size is managed
 
dynamically,
 
so
as to operate at all
 
times within the risk appetite of
 
the BoD and
relevant Group and subsidiary liquidity requirements.
p
 
Stress testing
Audited |
 
We perform stress
 
testing to determine the
 
optimal asset
and liability structure that enables
 
us to maintain an
 
appropriately
balanced liquidity
 
and funding
 
position under
 
various scenarios.
Liquidity crisis scenario
 
analysis and contingency
 
funding planning
support the liquidity management process
 
and aim to ensure that
immediate
 
corrective
 
measures
 
to
 
absorb
 
potential
 
sudden
liquidity shortfalls can be put into effect.
p
 
We
 
model
 
our
 
liquidity
 
exposures
 
under
 
two
 
main
 
potential
scenarios:
 
a
 
structural
 
market-wide
 
scenario
 
and
 
a
 
combined
market
 
and
 
idiosyncratic
 
scenario.
 
We
 
continuously
 
refine
 
the
assumptions
 
used
 
to
 
maintain
 
a
 
robust,
 
actionable
 
and
 
tested
contingency plan.
›
 
Refer to “Risk measurement” in the “Risk management
 
and
control” section of this report for more information about
 
stress
testing
 
 
Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management
170
Structural market-wide scenario
As a
 
liquidity crisis
 
could have
 
a myriad
 
of causes,
 
the structural
market-wide scenario encompasses potential stress effects across
all markets,
 
currencies
 
and products,
 
but it
 
is typically
 
not firm-
specific. In addition
 
to the loss
 
of the ability
 
to replace maturing
wholesale
 
funding,
 
it
 
assumes
 
a
 
gradual
 
decline
 
of
 
otherwise
stable
 
client
 
deposits
 
and
 
liquidity
 
outflows
 
corresponding
 
to
 
a
one
-
notch
 
downgrade
 
in
 
our
 
long
-
term
 
credit
rating
,
 
and
 
a
corresponding downgrade in our short-term rating.
We use
 
a cash
 
capital metric
 
that incorporates
 
the structural
market-wide
 
scenario
 
and
 
measures
 
the
 
amount
 
of
 
long-term
funding available
 
to fund
 
franchise and
 
illiquid assets.
 
Franchise
assets consist
 
of lending exposure
 
to clients or
 
assets to support
franchise
 
client
 
activities.
 
The
 
illiquid
 
assets
 
cannot
 
easily
 
and
readily be sold or exchanged for
 
cash without a substantial loss in
value
 
within
 
the
 
scenario
 
horizon.
 
Long-term
 
funding
 
used
 
as
cash capital
 
to support
 
franchise and
 
illiquid assets
 
is composed
of unsecured funding
 
with a remaining
 
time to maturity
 
of at least
one year, deposits that have a behavioral maturity of
 
at least one
year and shareholders’ equity.
Combined market and idiosyncratic scenario
The
 
combined
 
scenario
 
represents
 
an
 
extreme
 
stress
 
event
 
that
combines
 
a
 
firm-specific
 
crisis
 
with
 
market
 
disruption.
 
This
scenario
 
assumes:
 
(i)
 
substantial
 
outflows
 
o
f
 
otherwise
 
stable
client
 
deposits, mainly
 
due on
 
demand; (ii) inability
 
to renew
 
or
replace
 
maturing
 
unsecured
 
wholesale
funding;
 
(iii)
 
unusually
large drawdowns on
 
loan commitments; (iv) reduced
 
capacity to
g
enerate
 
liquidity
 
from
 
trading
assets;
 
(v)
 
liquidity
 
outflows
corresponding
 
to
 
a
 
three-notch
 
downgrade
 
in
 
our
 
long-term
credit rating,
 
and a
 
corresponding downgrade
 
in our
 
short-term
rating; (vi) triggering contractual obligations to unwind derivative
positions
 
or
 
to
 
deliver
 
additional
collateral;
 
(vii)
 
additional
collateral requirements due
 
to adverse movements in the
 
market
values of
 
derivatives;
 
and (viii) elevated
 
liquidity requirements
 
in
supp
ort
 
of
 
continuous
 
payment
 
and
 
settlement
 
activity
.
The
combined scenario is run
 
daily to project potential
 
cash outflows
under
 
it
 
and
 
is
 
assessed
 
as
 
part
 
of
 
ongoing
 
risk
 
management
activities.
Contingency Funding Plan
Audited |
 
Our Group Contingency Funding
 
Plan is an integral
 
part of
our
 
global
 
crisis management
 
framework,
 
which
 
covers
 
various
types of crisis events. This
 
Contingency Funding Plan contains an
assessment of contingent
 
funding sources and
 
liquidity generative
actions
 
in
 
a
 
stressed
 
environment,
 
early
 
warning indicators
 
and
metrics, and contingency procedures.
 
Our funding diversification
and global scope
 
help to protect
 
our liquidity position
 
in the event
of
 
a
 
crisis.
 
We
 
regularly
 
assess and
 
test all
 
material
 
known and
expected cash flows,
 
as well as
 
the level and
 
availability of high-
quality collateral that could be used
 
to raise additional funding if
required. Our contingent funding
 
sources include our
 
high-quality
liquid
 
asset
 
(HQLA)
 
portfolios,
 
available
 
and
 
unutilized
 
liquidity
facilities at several
 
major central banks,
 
contingent reductions of
liquid
 
trading
 
portfolio
 
assets
,
 
and
 
other
 
available
business
management actions.
p
 
Funding management
Audited
 
|
 
Group
 
Treasury
 
regularly
 
monitors
 
our
 
funding
 
status,
including concentration risks, aiming
 
to ensure that
 
we maintain
a
 
well-balanced
 
and
 
diversified
 
liability
 
structure.
 
Our
 
funding
management team looks
 
to create
 
the optimal asset
 
and liability
structure
 
to
 
finance
 
our
 
businesses
 
reliably
 
and
 
cost-efficiently.
Our
 
funding
 
activities
 
are
 
planned
 
by
 
analyzing
 
the
 
overall
liquidity
 
and
 
funding
 
profile
 
of
 
our
 
balance
 
sheet,
 
taking
 
into
account the
 
amount of
 
stable funding
 
that would
 
be needed
 
to
support
 
ongoing
 
business
 
activities
 
through
 
periods
 
of
 
difficult
market conditions.
p
 
The funding
 
strategy of
 
UBS Group
 
AG is
 
set annually
 
in the
Funding Plan
 
and is
 
reviewed on
 
a quarterly
 
basis. The
 
Funding
Plan is developed by
 
Group Treasury and approved
 
by the Group
ALCO. Group Treasury proposes, sets and oversees limits, triggers
an
d
 
targets
 
for
 
funding
 
generation
,
 
including
 
concentration
limits,
 
weighted
 
average
 
maturity
 
limits
 
and
 
volume.
 
Funding
diversification is monitored continuously, with a focus on product
type, single-counterparty exposure (as a percentage
 
of the total),
mat
urity
 
profile,
and
the
 
overall
 
contribution
 
of
 
a
 
particular
funding source to the liability mix.
›
 
Refer to “Balance sheet and off-balance sheet”
 
in this section for
more information about the development of
 
our short-term and
long-term debt during 2021
 
Global
 
Wealth
 
Management
 
and
 
Personal
 
&
 
Corporate
Banking
 
provide
 
significant,
 
cost-efficient
 
and
 
stable
 
sources
 
of
funding. These include core deposits
 
and debt issued through the
Swiss central
 
mortgage institutions,
 
which
 
use a
 
portion of
 
our
portfolio of Swiss
 
residential mortgages as
 
collateral to generate
long-term funding. In
 
addition, we have
 
several short-, medium-
and
 
long-term
 
funding
 
programs
 
under
 
which
 
we
 
issue
 
senior
unsecured debt and structured notes, as well as
 
short-term debt.
These programs enable institutional and
 
private investors who are
active
 
in
 
the
 
markets
 
of
 
Europe,
 
the
 
US
 
and
 
Asia
 
Pacific
 
to
customize
 
their
 
investments
 
in
 
UBS’s
 
debt.
 
Collectively,
 
these
broad product
 
offerings and
 
funding sources,
 
together with
 
the
global
 
scope
 
of
 
our
 
business
 
activities,
 
support
 
our
 
funding
stability.
Internal funding and funds transfer pricing
We use
 
an integrated liquidity and funding framework to govern
the
 
liquidity
 
management
 
of
 
all
 
our
 
branches
 
and
 
subsidiaries,
and our major sources of liquidity are
 
channeled through entities
that
 
are
 
fully
 
consolidated.
 
Group
Treasury
 
meets
 
internal
demands
 
for
 
funding
 
by
 
channeling
 
funds
 
from
 
entities
generating surplus
 
cash to
 
those in
 
need of
 
financing, except
 
in
circumstances where transfer restrictions exist.
Funding
 
costs
 
and
 
benefits
 
are
 
allocated
 
to
 
our
 
business
divisions according to our liquidity and funding risk management
framework.
 
Our internal
 
funds transfer
 
pricing
 
system, which
 
is
governed
 
by
 
Group
 
Treasury,
 
is
 
designed
 
to
 
provide
 
the
 
proper
liability
 
structure to
 
support the
 
assets and
 
planned activities
 
of
each business division.
 
 
 
 
 
 
 
 
 
171
Credit ratings
Credit
 
ratings
 
can
 
affect
 
the
 
cost
 
and
 
availability
 
of
 
funding,
especially funding from
 
wholesale unsecured sources.
 
Our credit
ratings
 
can
 
also
 
influence
 
the
 
performance
 
of
 
some
 
of
 
our
businesses and
 
the levels
 
of client
 
and counterparty
 
confidence.
Rating
 
agencies
 
take
 
into
 
account
 
a
 
range
 
of
 
factors
 
when
assessing
 
creditworthiness
 
and
 
setting
 
credit
 
ratings.
 
These
include the
 
company’s strategy, its business
 
position and
 
franchise
value,
 
stability
 
and
 
quality
 
of
 
earnings,
 
capital
 
adequacy,
 
risk
profile and management, liquidity
 
management, diversification of
funding sources, asset
 
quality, and
 
corporate governance. Credit
ratings reflect the opinions of
 
the rating agencies and
 
can change
at any time.
In
 
evaluating
 
our
 
liquidity
 
and
 
funding
 
requirements,
 
we
consider the potential
 
effect of a
 
reduction in 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
 
2021,
 
in
 
the
 
event
 
of
 
a
 
one-notch
 
reduction
 
in
 
our
long-term credit ratings, we would have been
 
required to provide
USD 0.0 billion
 
in cash or
 
other collateral. In
 
the event of a
 
two-
notch
 
reduction
 
it
 
would
 
have
 
been
 
USD
 
0.5
 
billion
 
and
 
for
 
a
three-notch
 
downgrade
 
USD
 
0.7
 
billion.
 
In
 
all
 
scenarios
 
these
collateral
 
requirements
 
predominantly
 
relate
 
to
 
OTC
 
derivative
positions.
There was
 
one main
 
rating action
 
with regard
 
to UBS
 
Group
AG’s and
 
UBS AG’s
 
solicited credit
 
ratings in
 
2021. On
 
2 March
2021, Fitch
 
Ratings revised
 
the outlooks for
 
the issuer ratings
 
of
UBS Group AG, UBS AG and the rated subsidiaries from negative
back to stable, reversing
 
the outlook change on 31 March
 
2020,
which
 
was part
 
of a
 
series of
 
rating actions
 
over several
 
weeks
across
 
the
 
sector
 
to
 
reflect
 
the
 
disruption
 
caused
 
by
 
the
 
COVID-19 pandemic.
›
 
Refer to “Liquidity and funding management
 
are critical to UBS’s
ongoing performance” in the “Risk factors”
 
section of this report
for more information
Liquidity coverage ratio
The LCR
 
measures the
 
short-term resilience
 
of a
 
bank’s liquidity
profile
 
by
 
comparing
 
whether
 
sufficient
 
HQLA
 
are
 
available
 
to
survive
 
expected
 
net
 
cash
 
outflows
 
from
 
a
 
significant
 
liquidity
stress scenario, as defined by the relevant regulator.
For
 
UBS,
 
HQLA
 
are
 
low-risk
 
unencumbered assets
 
under
 
the
control
 
of
 
Group
 
Treasury
 
that
 
are
 
easily
 
and
 
immediately
convertible into cash at little or no loss
 
of value, in order to meet
liquidity
 
needs.
 
Our
 
HQLA
 
predominantly
 
consist
 
of
 
assets
 
that
qualify as
 
Level 1 in
 
the LCR
 
framework, including
 
cash, central
bank reserves
 
and government
 
bonds. Group
 
HQLA are
 
held by
UBS AG
 
and its
 
subsidiaries, and
 
may include
 
amounts that
 
are
available
 
to
 
meet
 
funding
 
and
 
collateral
 
needs
 
in
 
certain
jurisdictions, but are not readily available for use by the Group as
a
 
whole.
 
These
 
limitations
 
are
 
typically
 
the
 
result
 
of
 
local
regulatory requirements,
 
including local
 
LCR and
 
large exposure
requirements.
 
Funds
 
that
 
are
 
effectively
 
restricted
 
are
 
excluded
from the calculation
 
of Group HQLA
 
to the extent
 
they exceed the
outflow
 
assumptions
 
for
 
the
 
subsidiary
 
that
 
holds
 
the
 
relevant
HQLA. On this basis, USD 44 billion of assets were excluded from
our
 
daily
 
average
 
Group
 
HQLA
 
for
 
the
 
fourth
 
quarter
 
of
 
2021.
Amounts held in
 
excess of local
 
liquidity requirements that
 
are not
subject
 
to
 
other
 
restrictions
 
are
 
generally
 
available
 
for
 
transfer
within the Group.
Basel
 
Committee
 
on
 
Banking
 
Supervision
 
(BCBS)
 
standards
require an
 
LCR of
 
at least
 
100%. In
 
a period
 
of financial
 
stress,
the
 
Swiss
 
Financial
 
Market
 
Supervisory
 
Authority
 
(FINMA)
 
may
allow banks
 
to use
 
their HQLA
 
and let
 
their LCR
 
temporarily fall
below
 
the
 
minimum
 
threshold.
 
We
 
monitor
 
the
 
LCR
 
in
 
all
significant
 
currencies
 
in
 
order
 
to
 
manage
 
any
 
currency
mismatches between
 
HQLA and the
 
net expected
 
cash outflows
in times of stress.
Our
 
daily
 
average
 
LCR
 
for
 
the
 
fourth
 
quarter
 
of
 
2021
 
was
155%,
 
compared
 
with
 
152%
 
in
 
the
 
fourth
 
quarter
 
of
 
2020,
remaining
 
above
 
the
 
prudential
 
requirement
 
communicated
 
by
FINMA.
The
 
average
 
LCR
 
increase
 
was
 
driven
 
by
 
a
 
USD 14
 
billion
increase
 
in
 
average
 
HQLA
 
to
 
USD 228
 
billion,
 
driven
 
by
 
higher
average cash balances,
 
which was partly
 
offset by an
 
increase in
average net
 
cash outflows
 
of USD 6
 
billion to
 
USD 147 billion,
 
due
to higher
 
outflows from
 
customer deposit
 
balances and
 
secured
financing transactions.
›
 
Refer to the 31 December 2021 Pillar 3
 
Report,
 
available under
“Pillar 3 disclosures” at
ubs.com/investors
,
 
for more information
about the LCR
›
 
Refer to the “Significant regulated subsidiary
 
and sub-group
information”
 
section of this report
 
for more information about
the LCR of UBS AG and UBS Switzerland
 
AG
 
 
Liquidity coverage ratio
USD billion, except where indicated
Average 4Q21
1
Average 4Q20
1
High-quality liquid assets
 
228
 
214
Net cash outflows
 
147
 
141
Liquidity coverage ratio (%)
2
 
155
 
152
1 Calculated based on an average
 
of 66 data points in the
 
fourth quarter of 2021 and
 
63 data points in the fourth
 
quarter of 2020.
 
2 Calculated after the application of
 
haircuts and inflow and outflow rates,
 
as
well as, where applicable, caps on Level 2 assets and cash inflows.
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management
172
Net stable funding ratio
 
The net stable funding ratio
 
(NSFR) framework is intended to
 
limit
overreliance
 
on
 
short-term
 
wholesale
 
funding,
 
to
 
encourage
 
a
better assessment
 
of funding
 
risk across
 
all on-
 
and off-balance
sheet items
 
and to
 
promote funding
 
stability.
 
The NSFR has
 
two
components:
 
available
 
stable
 
funding
 
(ASF)
 
and
 
required
 
stable
funding (RSF). ASF is the portion of
 
capital and liabilities expected
to be
 
available over
 
the period
 
of one
 
year.
 
RSF is
 
a measure
 
of
the stable funding requirement of an asset based on its maturity,
encumbrance
 
and
 
other
 
characteristics, as
 
well as
 
the
 
potential
for
 
contingent
 
calls on
 
funding
 
liquidity
 
from
 
off-balance
 
sheet
exposures. The BCBS NSFR regulatory
 
framework requires a ratio
of at least 100%.
 
The NSFR
 
regulation was
 
finalized in
 
the fourth
 
quarter of
 
2020
with the
 
release of the
 
revised FINMA Circular
 
2015/2 “Liquidity
risks – banks” and became effective on 1 July 2021.
As of 31 December 2021, our NSFR was unchanged at 119%.
This
 
reflected
 
USD 15
 
billion
 
higher
 
available
 
stable
 
funding,
mainly driven
 
by an
 
increase in
 
debt issued
 
designated at fair
 
value
and
 
an
 
increase
 
in
 
required
 
stable
 
funding
 
of
 
USD 15
 
billion,
mainly reflecting higher loans and advances to customers.
 
 
Net stable funding ratio
USD billion, except where indicated
31.12.21
31.12.20
1
Available stable funding
 
578
 
563
Required stable funding
 
488
 
473
Net stable funding ratio (%)
 
119
 
119
1 “Net stable funding ratio” is based on estimated pro forma reporting.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
173
Balance sheet and off-balance sheet
Balance sheet
The
 
balances
 
disclosed
 
in
 
this
section
 
represent
 
year
-
end
positions,
 
unless
 
indicated
 
otherwise.
 
Intra-period
 
balances
fluctuate in
 
the ordinary
 
course of business
 
and may differ
 
from
year-end positions.
Balance sheet assets
As of 31 December
 
2021, balance sheet
 
assets totaled USD 1,117
billion, a
 
decrease of
 
USD 9 billion
 
compared with
 
31 December
20
20
,
which
included
 
a
 
decrease
 
from
 
currency
 
effects
 
of
approximately
 
USD 21
 
billion.
Derivatives
 
and
 
cash
 
collateral
 
receivables
 
on
 
derivative
instruments
 
decr
eased
 
by
 
USD
 
44
 
billion.
This
 
decrease
 
predominantly reflected decreases in foreign exchange contracts,
mainly in our Derivatives &
 
Solutions and Financing businesses in
the
 
Investment
 
Bank,
 
driven
 
by
 
net
 
roll-offs,
 
partly
 
offset
 
by
market-driven
 
movements.
 
In
 
addition,
 
interest
 
rate
 
contracts
decreased,
 
mainly
 
in
 
our
 
Derivatives
 
&
 
Solutions
 
and
 
Financing
businesses
 
and
 
in
 
Non-core
 
and
 
Legacy
 
Portfolio,
 
reflecting
market-driven movements as long-term
 
interest rates increased in
the year.
Other
 
financial
 
assets
 
measured
 
at
 
amortized
 
cost
 
and
 
fair
value decreased by USD 21 billion, largely due to shifts
 
within the
high-quality liquid asset (HQLA)
 
portfolio from securities into cash
within Group Treasury. Brokerage receivables decreased by USD 3
billion, mainly
 
in our
 
Financing business
 
in the
 
Investment Bank,
with growth in
 
lending more than
 
offset by an
 
associated increase
in netting effects.
These decreases were partly offset by
 
a USD 35 billion increase
in Cash
 
and balances
 
at central
 
banks, predominantly
 
in Group
Treasury
.
The
 
cash
 
inflow
 
was
generated
 
mainly
 
from
 
lower
funding
 
consumption
 
by
 
th
e
 
Investment
 
Bank,
the
aforementioned shifts
 
within the
 
HQLA portfolio
 
from securities
into
 
cash,
and
 
net
 
new
 
issuances
 
of
 
long
-
term
 
debt
 
issued
measured at
 
amortized cost.
 
These inflows
 
were partly
 
offset by
outflows from higher margin requirements and an increase in net
receivables
 
from
 
securities
 
financing
 
transactions,
 
as
 
well
 
as
currency effects.
Lending assets
 
increased by
 
USD 18 billion,
 
of which
 
USD 21
billion
 
was
 
in
 
Global
 
Wealth
 
Management
 
and
 
predominantly
reflect
ed
 
increases
 
in
 
Lombard
 
loans
 
and
 
mortgage
 
loans
,
 
primarily
 
in
 
the
 
Americas,
 
partly
 
offset
 
by
 
currency
 
effects.
 
In
Personal & Corporate
 
Banking, lending
 
assets decreased by
 
USD 1
billion as increases in mortgage
 
loans and corporate lending were
more
 
than
 
offset
 
by
 
currency
 
effects.
 
Trading
 
portfolio
 
assets
increased by USD 5 billion,
 
mainly in our Financing
 
business in the
Investment Bank, reflecting higher inventory held
 
to hedge client
positions.
›
 
Refer to the “Consolidated financial statements”
 
section of this
report for more information
 
 
Assets
As of
 
% change from
USD billion
31.12.21
31.12.20
31.12.20
Cash and balances at central banks
 
192.8
 
158.2
 
22
Lending
1
 
413.2
 
395.0
 
5
Securities financing transactions at amortized cost
 
75.0
 
74.2
 
1
Trading portfolio
2
 
130.8
 
125.4
 
4
Derivatives and cash collateral receivables on derivative instruments
 
148.7
 
192.4
 
(23)
Brokerage receivables
 
21.8
 
24.7
 
(11)
Other financial assets measured at amortized cost and fair
 
value
3
 
73.8
 
95.1
 
(22)
Non-financial assets and financial assets for unit-linked investment contracts
 
61.0
 
60.9
 
0
Total assets
 
1,117.2
 
1,125.8
 
(1)
1 Consists of loans and advances to banks
 
and customers.
 
2 Consists of financial assets at fair value
 
held for trading.
 
3 Consists of financial assets at fair value
 
not held for trading, financial assets measured
 
at
fair value through other comprehensive income and other financial assets measured at amortized cost, but excludes financial assets for unit-linked
 
investment contracts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
174
Asset encumbrance
The
 
table
 
below
 
provides
 
a
 
breakdown
 
of
 
on-
 
and
 
off-balance
sheet assets
 
between encumbered
 
assets, unencumbered
 
assets
and assets that cannot be pledged as collateral.
Assets are presented
 
as
Encumbered
 
if they have
 
been pledged
as
 
collateral
 
against
 
an
 
existing
 
liability
 
or
 
are
 
otherwise
 
not
available
 
for
 
securing
 
additional
 
funding.
 
Included
 
within
 
the
latter category are assets protected under
 
client asset segregation
rules, financial assets
 
for unit-linked investment
 
contracts, assets
held in certain jurisdictions to comply with explicit minimum local
asset maintenance requirements.
›
 
Refer to “Note 23 Restricted and transferred
 
financial assets” in
the “Consolidated financial statements”
 
section of this report for
more information
Assets that
 
cannot be
 
pledged as
 
collateral
 
represents assets
that are
 
not encumbered
 
but by
 
their nature
 
are not
 
considered
available to secure funding or meet collateral needs.
All other
 
assets are
 
presented as
Unencumbered
. Assets
 
that
are
 
considered
 
to
 
be
 
readily
 
available
 
to
 
secure
 
funding
 
on
 
a
Group and / or legal entity level are shown separately and consist
of
 
cash
 
and securities
 
readily realizable
 
in the
 
normal course
 
of
business. These
 
include our
 
HQLA and
 
unencumbered positions
in our trading
 
portfolio. Unencumbered assets
 
that are considered
to be
 
available to
 
secure funding
 
on a
 
legal entity
 
level may
 
be
subject
 
to
 
restrictions
 
that
 
limit
 
the
 
total
 
amount
 
of
 
assets
available to
 
the Group
 
as a
 
whole. Other
 
unencumbered assets,
which are not considered to
 
be readily available to secure
 
funding
on a
 
Group and
 
/ or
 
legal entity
 
level, primarily
 
consist of
 
loans
and advances to banks.
 
 
Asset encumbrance as of 31 December 2021
USD billion
Encumbered
Unencumbered
Assets that
cannot be
pledged as
collateral
Total Group
Assets
pledged
as collateral
Assets
otherwise
restricted and
not available
to secure
funding
Cash and
securities
available to
secure funding
on a Group and /
or legal entity
level
Other
realizable
assets
Balance sheet
Cash and balances at central banks
 
192.8
 
192.8
Loans and advances to banks
 
3.4
 
12.1
 
15.5
Receivables from securities financing transactions
 
75.0
 
75.0
Cash collateral receivables on derivative instruments
 
4.7
 
25.8
 
30.5
Loans and advances to customers
 
18.2
 
1.2
 
375.5
 
2.9
 
397.8
Other financial assets measured at amortized cost
 
2.2
 
0.1
 
16.6
 
1.4
 
5.9
 
26.2
Total financial assets measured at amortized cost
 
20.4
 
9.5
 
209.4
 
388.9
 
109.6
 
737.8
Financial assets at fair value held for trading
 
63.7
1
 
0.4
 
62.2
 
4.5
 
130.8
Derivative financial instruments
 
118.1
 
118.1
Brokerage receivables
 
21.8
 
21.8
Financial assets at fair value not held for trading
 
1.0
1
 
22.8
 
22.7
 
7.8
 
5.9
 
60.1
Total financial assets measured at fair value through profit or loss
 
64.7
 
23.2
 
84.8
 
12.3
 
145.9
 
330.9
Financial assets measured at fair value through other comprehensive income
 
0.0
 
0.9
 
7.9
 
8.8
Non-financial assets
 
0.0
 
5.3
 
14.1
 
20.3
 
39.7
Total balance sheet assets as of 31 December 2021
 
85.1
 
33.5
 
307.5
 
415.4
 
275.7
 
1,117.2
Total balance sheet assets as of 31 December 2020
 
89.5
 
32.3
 
284.0
 
395.6
 
324.3
 
1,125.8
Off-balance sheet
Fair value of securities accepted as collateral as of 31 December 2021
 
367.4
 
16.3
 
106.5
 
7.6
 
497.8
Fair value of securities accepted as collateral as of 31 December 2020
 
367.3
 
12.4
 
113.4
 
7.7
 
500.7
Total balance sheet assets and off-balance sheet securities accepted as collateral as of
31 December 2021
 
452.5
 
49.8
 
414.0
 
423.0
 
275.7
 
1,615.0
of which: high-quality liquid assets
 
232.8
Total balance sheet assets and off-balance sheet securities accepted as collateral as of
31 December 2020
 
456.8
 
44.7
 
397.3
 
403.3
 
324.3
 
1,626.5
of which: high-quality liquid assets
 
214.1
1 Includes assets pledged as collateral that may be sold
 
or repledged by counterparties. The respective amounts are disclosed in “Note 23 Restricted financial assets”
 
in the “Consolidated financial statements” section
of this report.
 
Assets available to secure funding on a Group and / or legal entity level by currency
USD billion
31.12.21
31.12.20
Swiss franc
 
111.4
 
109.2
US dollar
 
174.7
 
163.3
Euro
 
46.6
 
48.1
Other
 
81.2
 
76.7
Total
 
414.0
 
397.3
 
 
 
175
Balance sheet liabilities
Total
 
liabilities as
 
of 31 December
 
2021 were
 
USD 1,056 billion,
a decrease of
 
USD 10 billion compared with
 
31 December 2020,
which included a decrease from currency effects of approximately
USD 20
 
billion.
Derivatives
 
and
 
cash
 
collateral
 
payables
 
on
 
derivative
instruments
 
decreased
 
by
 
USD
 
45
 
billion
,
 
in
 
line
 
with
 
the
movement on the
 
asset side. Trading portfolio liabilities
 
decreased
by
 
USD 2
 
billion,
 
predominantly
 
due
 
to
 
lower
 
levels
 
of
 
short
positions held to
 
hedge client positions.
 
Other financial liabilities
measured
 
at
 
amortized
 
cost
 
and fair
 
value
 
decreased
 
by
 
USD 2
billion
,
 
mainly
 
in
 
Group
 
Treasury
 
due
 
to
higher
 
netting
 
on
securities
 
financing
 
transactions
 
measured
 
at
 
fair
 
value.
 
Short-
term borrowings decreased by USD 2 billion, mainly due to lower
short-term
 
debt
 
issued
 
in
 
Global
 
Wealth
 
Management,
 
partly
offset
 
by
 
higher
 
amounts
 
due
 
to
 
banks
 
in
 
our
 
Derivatives
 
&
Solutions business in the Investment Bank.
These decreases were
 
partly offset by an
 
increase in customer
deposits of USD 17
 
billion. An increase of
 
USD 22 billion in
 
Global
Wealth Management, mainly
 
in the Americas,
 
was partly offset
 
by
a
 
decrease
 
of
 
USD 4
 
billion
 
in
 
Personal
 
&
 
Corporate
 
Banking
driven by currency effects.
 
As of 31 December 2021, our ratio of
customer
 
deposits
 
to
 
outstanding
 
loan
 
balances
 
was
 
136%
(31 December 2020: 138%).
Debt issued designated at fair value
 
and long-term debt issued
measured at
 
amortized cost
 
increased by
 
USD 16 billion,
 
mainly
driven
 
by
 
USD 13
 
billion
 
higher
 
debt
 
issued
 
designated
 
at
 
fair
value,
 
mainly
 
reflecting
 
net
 
new
 
issuances
 
of
 
equity-linked
 
and
rates-linked
 
debt
 
instruments,
 
as
 
well
 
as
 
market-driven
movements
 
in
 
our
 
Derivatives
 
&
 
Solutions
 
business
 
in
 
the
Investment Bank. In addition, long-term debt issued measured at
amortized
 
cost
 
increased
 
by
 
USD 3
 
billion,
 
driven
 
by
 
net
 
new
issuance
s
,
 
partly
 
offset
 
by
f
oreign
 
exchange
 
and
 
hedge
accounting
 
effects.
 
During
 
2021,
 
net
 
new
 
issuances
 
of
 
TLAC-
eligible
 
benchmark
 
instruments
 
and
senior
 
unsecured
 
debt
 
USD
 
12
 
billion
w
ere
 
partly
 
offset
by
 
USD
 
4
 
billion
 
of
net
redemptions
 
of
covered
 
bon
d
s
 
and
 
subordinated
 
debt
instruments.
 
During
 
2022,
 
USD 1.4
 
billion
 
equivalent
 
of
 
TLAC-eligible
benchmark
 
instruments
 
and
 
USD 2.0
 
billion
 
of
 
loss-absorbing
tier 2
 
capital
 
instruments
 
will
 
mature.
 
In
 
February
 
2022,
 
loss-
absorbing
 
additional
 
tier 1
 
capital
 
instruments
 
equivalent
 
to
USD 1.1
 
billion
 
were
 
called
 
and
 
USD 2.8
 
billion
 
equivalent
 
of
TLAC-eligible
 
benchmark
 
instruments
 
matured.
 
UBS
 
is
 
already
compliant
 
with
 
its
2022
 
going
 
and
 
gone
 
concern
 
capital
requirements and
 
expects to
 
act rationally
 
and strategically
 
with
respect to the refinancing of
 
any callable capital instruments and
any potential incremental issuances.
›
 
Refer to the document titled “UBS Group AG consolidated
capital instruments and TLAC-eligible senior
 
unsecured debt,”
available under “Bondholder information”
 
at
 
ubs.com/investors
,
 
for more information
 
Brokerage
 
payables increased
 
by USD 5
 
billion, mainly
 
in the
Financing business of our Investment Bank, due
 
to an increase in
client
 
credit
 
and
 
short
 
positions,
 
partly
 
offset
 
by
 
higher
 
netting
effects from increased lending.
 
Non-financial liabilities
 
and financial
 
liabilities related
 
to unit-
linked
 
investment
 
contracts
 
increased
 
by
 
USD 2
 
billion,
 
mainly
reflecting
 
a
 
reclassification
 
of
 
assets
 
in
 
Global
 
Wealth
Management as disposal groups
 
held for sale in connection
 
with
the upcoming sales
 
of our domestic
 
wealth management
 
business
in Spain
 
and UBS
 
Swiss Financial
 
Advisers AG.
 
The increase
 
also
included
 
market
-
driven
 
increases
 
from
 
unit
-
linked
 
investment
contracts in Asset Management.
›
 
Refer to the “Consolidated financial statements”
 
section of this
report for more information
Equity
Equity
attributable
 
to
 
shareholders
 
increased
 
b
y
 
USD
 
1,217
million to USD 60,662 million as of 31 December 2021.
 
This increase was
 
mainly driven by
 
total comprehensive income
attributable
 
to
 
shareholders
 
of
 
positive
 
USD
 
5,106
 
million,
 
reflecting
 
net
 
profit
 
of
 
USD 7,457
 
million
 
and
 
negative
 
other
comprehensive
 
income
 
(OCI)
 
of
 
USD 2,351
 
million.
 
OCI
 
mainly
included
 
negative
 
cash
 
flow
 
hedge
 
OCI
 
of
 
USD 1,675
 
million,
negative OCI
 
related to
 
foreign currency
 
translation of
 
USD 535
million and negative OCI related
 
to debt instruments measured at
fair
 
value
 
through
 
OCI
 
of
 
USD
 
157
 
million
.
 
In
 
addition,
amortization
 
of
 
deferred
 
share-based
 
compensation
 
awards
increased share
 
premium by
 
USD 643 million
 
and the
 
launch of
our
 
new
 
operational
 
partnership
 
entity
 
with
 
Sumitomo
 
Mitsui
Trust
 
Holdings,
 
Inc.
 
resulted
 
in
 
an
 
equity
 
increase
 
of
 
USD 155
million.
These increases were partly offset by net
 
treasury share activity
that decreased equity by USD 3,326
 
million. This was mainly due
to share repurchases
 
with an
 
acquisition cost
 
of USD 2,500
 
million
under
 
our
 
2021
 
share
 
repurchase
 
program
,
repurchases
of
 
USD 112 million under
 
our 2018–2021 program
 
and purchases of
USD 545
 
million
 
from
 
the
 
market
 
to
 
hedge
 
our
 
share
 
delivery
obligations
 
related
 
to
 
employee
 
share-based
 
compensation
awards. In
 
addition, distributions to
 
shareholders reduced equity
by USD 1,301 million, reflecting a dividend payment of USD 0.37
per share.
In
 
the
 
second
 
quarter
 
of
 
2021,
 
we
 
canceled
 
156,632,400
shares
 
purchased
 
under
 
our
 
2018–2021
 
share
 
repurchase
program,
 
as
 
approved
 
by
 
shareholders
 
at
 
the
 
2021
 
Annual
General
 
Meeting.
 
The
 
cancellation
 
of
 
shares
 
resulted
 
in
reclassifications within
 
equity but
 
had no
 
net effect
 
on our
 
total
equity attributable to shareholders.
›
 
Refer to the “Group performance” and “Consolidated
 
financial
statements”
 
sections of this report for more information about
OCI
›
 
Refer to “UBS shares” in this section for more
 
information about
our share repurchase programs
›
 
Refer to “Note 30 Changes in organization
 
and acquisitions and
disposals of subsidiaries and businesses”
 
in the “Consolidated
financial statements” section of this
 
report for more information
about our partnership with Sumitomo
 
Mitsui Trust Holdings, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UBS_AR_2021p204i0.gif
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
176
Liabilities and equity
As of
 
% change from
USD billion
31.12.21
31.12.20
31.12.20
Short-term borrowings
1
 
56.2
 
57.7
 
(3)
Securities financing transactions at amortized cost
 
5.5
 
6.3
 
(12)
Customer deposits
 
542.0
 
524.6
 
3
Debt issued designated at fair value and long-term debt issued measured
 
at amortized cost
2
 
169.9
 
153.8
 
10
Trading portfolio
3
 
31.7
 
33.6
 
(6)
Derivatives and cash collateral payables on derivative instruments
 
153.1
 
198.4
 
(23)
Brokerage payables
 
44.0
 
38.7
 
14
Other financial liabilities measured at amortized cost and fair
 
value
4
 
17.6
 
19.1
 
(8)
Non-financial liabilities and financial liabilities related
 
to unit-linked investment contracts
 
36.1
 
33.7
 
7
Total liabilities
 
1,056.2
 
1,066.0
 
(1)
Share capital
 
0.3
 
0.3
 
(5)
Share premium
 
15.9
 
16.8
 
(5)
Treasury shares
 
(4.7)
 
(4.1)
 
15
Retained earnings
 
43.9
 
38.8
 
13
Other comprehensive income
5
 
5.2
 
7.6
 
(32)
Total equity attributable to shareholders
 
60.7
 
59.4
 
2
Equity attributable to non-controlling interests
 
0.3
 
0.3
 
6
Total equity
 
61.0
 
59.8
 
2
Total liabilities and equity
 
1,117.2
 
1,125.8
 
(1)
1 Consists of
 
short-term debt issued
 
measured at amortized
 
cost and amounts
 
due to 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 Consists of financial
liabilities at fair value held for trading.
 
4 Consists of other financial liabilities measured at amortized cost
 
and other financial liabilities designated at fair value,
 
but excludes financial liabilities related to unit-linked
investment contracts.
 
5 Excludes other comprehensive income related to defined benefit plans and own credit, which is recorded directly in Retained earnings.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
177
Liabilities by product and currency
USD billion
As a percentage of total liabilities
All currencies
All currencies
USD
CHF
EUR
Other
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
Short-term borrowings
56.2
57.7
5.3
5.4
3.1
3.0
0.4
0.6
0.6
1.0
1.3
0.9
of which: amounts due to banks
13.1
11.0
1.2
1.0
0.3
0.3
0.4
0.5
0.1
0.1
0.4
0.1
of which: short-term debt issued
1
43.1
46.7
4.1
4.4
2.7
2.7
0.0
0.0
0.5
0.9
0.8
0.8
Securities financing transactions at
amortized cost
5.5
6.3
0.5
0.6
0.5
0.5
0.0
0.0
0.0
0.0
0.0
0.1
Customer deposits
542.0
524.6
51.3
49.2
23.9
19.7
18.0
20.1
5.2
5.2
4.3
4.2
of which: demand deposits
246.4
236.4
23.3
22.2
8.7
7.4
6.7
7.2
4.4
4.3
3.5
3.4
of which: retail savings / deposits
247.2
220.9
23.4
20.7
11.9
8.3
11.0
11.8
0.5
0.5
0.0
0.0
of which: time deposits
48.4
67.3
4.6
6.3
3.2
4.0
0.3
1.1
0.3
0.4
0.8
0.8
Debt issued designated at fair value
and long-term debt issued
 
measured at amortized cost
2
169.9
153.8
16.1
14.4
9.5
7.6
1.7
1.6
3.3
3.7
1.5
1.5
Trading portfolio
3
31.7
33.6
3.0
3.2
1.3
1.3
0.1
0.1
0.6
0.5
1.0
1.2
Derivatives and cash collateral
payables on derivative instruments
153.1
198.4
14.5
18.6
12.0
15.2
0.2
0.2
1.4
2.0
0.9
1.1
Brokerage payables
44.0
38.7
4.2
3.6
3.1
2.7
0.0
0.0
0.3
0.2
0.8
0.7
Other financial liabilities measured at
amortized cost and fair value
4
17.6
19.1
1.7
1.8
0.9
1.1
0.1
0.2
0.4
0.2
0.3
0.3
Non-financial liabilities and financial
liabilities related to unit-linked
investment contracts
36.1
33.7
3.4
3.2
0.6
0.6
0.2
0.2
0.3
0.2
2.3
2.2
Total liabilities
1,056.2
1,066.0
100.0
100.0
54.7
51.6
20.8
23.0
12.1
13.1
12.4
12.3
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 Consists of financial liabilities at fair value held for trading.
 
4 Consists of other financial liabilities measured at amortized cost and other financial liabilities designated at fair value, but
excludes financial liabilities related to unit-linked investment contracts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
178
Maturity analysis of assets and liabilities
The
 
table
 
below
 
provides
 
an
 
analysis
 
of
 
carrying
 
amounts
 
of
balance
 
sheet assets
 
and
 
liabilities,
 
as
 
well as
 
off-balance
 
sheet
exposures
 
by
 
residual
 
contractual
 
maturity
 
as
 
of
 
the
 
reporting
date.
 
The
 
residual
 
contractual
 
maturity
 
of
 
assets
 
includes
 
the
effect
 
of
 
callable
 
features.
 
The
 
residual
 
contractual
 
maturity
 
of
liabilities and off-balance sheet exposures is based on the earliest
date on which
 
we could be
 
required to
 
pay.
 
The presentation of
liabilities at
 
the carrying
 
amount in
 
this table
 
differs from
 
“Note
24 Maturity
 
analysis of
 
financial liabilities”
 
in the
 
“Consolidated
financial statements” section of
 
this report, where
 
such liabilities
are
 
presented
 
on
 
an
 
undiscounted
 
basis,
 
as
 
required
 
by
International Financial Reporting Standards (IFRS).
Derivative
 
financial
 
instruments
 
and
f
inancial
assets
 
and
liabilities
 
at
 
fair
 
value
 
held
 
for
 
trading
 
are
 
assigned
 
to
 
the
Due
within
 
1
 
month
 
column
,
 
although
 
one
 
should
 
note
 
that
 
the
respective
 
contractual
 
maturities
 
may
 
extend
 
over
 
significantly
longer periods.
Assets
 
held
 
to
 
hedge
 
unit-linked
 
investment
 
contracts
(presented within
Financial assets
 
at fair
 
value not
 
held for
 
trading
)
are assigned to the
Due within 1 month
 
column, consistent with
the
 
maturity
 
assigned
 
to
 
the
 
related
 
amounts
 
due
 
under
 
unit-
linked
 
investment
 
contracts
 
(presented
 
within
Other
 
financial
liabilities designated at fair value
).
 
Other
 
financial
 
assets
 
and
 
liabilities
 
with
 
no
 
contractual
maturity, such as equity securities,
 
are included in the
Perpetual /
Not applicable
 
time bucket. Undated
 
or perpetual instruments
 
are
classified
 
based
 
on
 
the
 
contractual
 
notice
 
period
 
that
 
the
counterparty of the instrument is
 
entitled to give. Where there
 
is
no contractual notice
 
period, undated or perpetual
 
contracts are
included in the
Perpetual / Not applicable
 
time bucket.
Non-financial assets and liabilities
 
with no contractual maturity
are
 
generally
 
included
 
in
 
the
Perpetual
 
/
 
Not
 
applicable
 
time
bucket.
Loan
 
commitments
 
are
 
classified
 
on
 
the
 
basis
 
of
 
the
 
earliest
date they can be drawn down.
 
Maturity analysis of assets and liabilities
USD billion
Due
within
1 month
Due
between
1 and 3
months
Due
between
3 and 6
months
Due
between
6 and 9
months
Due
between
9 and 12
months
Due
between
1 and 2
years
Due
between
2 and 5
years
Due over
5 years
Perpetual /
Not
applicable
Total
Assets
Total financial assets measured at amortized cost
 
453.7
 
45.9
 
19.1
 
12.4
 
11.7
 
53.7
 
64.1
 
77.3
 
737.8
Loans and advances to customers
 
157.2
 
28.7
 
16.3
 
10.4
 
10.5
 
49.6
 
54.9
 
70.1
 
 
397.8
Total financial assets measured at fair value through profit or
loss
 
300.5
 
5.8
 
3.6
 
2.6
 
1.9
 
5.2
 
7.1
 
2.5
 
1.8
 
330.9
Financial assets at fair value not held for trading
29.7
 
5.8
 
3.6
 
2.6
 
1.9
 
5.2
 
7.1
 
2.5
 
1.8
 
60.1
Financial assets measured at fair value through other
comprehensive income
 
0.1
 
0.4
 
0.5
 
0.2
 
0.1
 
0.1
 
0.4
 
7.1
 
8.8
Total non-financial assets
 
7.7
 
0.5
 
0.1
 
0.0
 
0.0
 
0.2
 
1.4
 
0.3
 
29.4
 
39.7
Total assets as of 31 December 2021
 
761.9
 
52.6
 
23.3
 
15.1
 
13.6
 
59.2
 
73.0
 
87.2
 
31.2
 
1,117.2
Total assets as of 31 December 2020
 
748.1
 
64.2
 
32.7
 
18.6
 
17.8
 
53.0
 
79.9
 
79.6
 
31.8
 
1,125.8
Liabilities
Total financial liabilities measured at amortized cost
 
581.6
 
20.1
 
21.3
 
15.0
 
12.1
 
17.0
 
35.6
 
24.4
 
13.5
 
740.6
Customer deposits
 
530.1
 
5.2
 
2.0
 
0.6
 
0.7
 
1.6
 
1.5
 
0.3
 
542.0
Debt issued measured at amortized cost
 
3.7
 
12.1
 
16.5
 
13.7
 
9.6
 
14.9
 
32.5
 
22.7
 
13.5
 
139.2
Total financial liabilities measured at fair value through
profit or loss
 
237.7
 
12.0
 
5.2
 
6.1
 
3.3
 
18.8
 
5.6
 
12.2
 
300.9
Debt issued designated at fair value
 
12.5
 
11.6
 
5.1
 
5.8
 
3.2
 
18.6
 
5.4
 
11.5
 
73.8
Total non-financial liabilities
 
9.3
 
3.0
 
0.0
 
0.0
 
0.0
 
0.0
 
0.0
 
0.0
 
2.4
 
14.7
Total liabilities as of 31 December 2021
 
828.6
 
35.1
 
26.5
 
21.1
 
15.5
 
35.8
 
41.2
 
36.6
 
15.9
 
1,056.2
Total liabilities as of 31 December 2020
 
865.1
 
37.3
 
24.1
 
17.1
 
14.4
 
27.2
 
33.2
 
30.5
 
17.1
 
1,066.0
Guarantees, loan commitments and forward
 
starting transactions
1
Guarantees, loan commitments and forward starting
transactions as of 31 December 2021
 
60.9
 
0.5
 
0.4
 
0.2
 
0.0
 
0.0
 
0.0
 
0.0
 
0.0
 
62.1
Guarantees, loan commitments and forward starting
transactions as of 31 December 2020
 
61.3
 
0.5
 
0.3
 
0.1
 
0.0
 
0.0
 
0.0
 
0.0
 
0.0
 
62.2
1 The notional amounts associated with derivative loan
 
commitments, as well as forward starting repurchase
 
and reverse repurchase agreements, measured at fair
 
value through profit or loss are presented together
with notional amounts related to derivative instruments and have been
 
excluded from the table above. Refer to “Note 10 Derivative
 
instruments” in the “Consolidated financial statements” section
 
of this report for
information about the notional amounts of these instruments.
 
 
 
 
 
 
 
 
 
 
 
179
Off-balance sheet
In
 
the
 
normal
 
course
 
of
 
business,
 
we
 
enter
 
into
 
transactions
where, pursuant to IFRS, the maximum contractual exposure may
not be recognized in whole
 
or in part on
 
our balance sheet. These
transactions
 
include
 
derivative
 
instruments,
 
guarantees,
 
loan
commitments and similar arrangements.
When we
 
incur an
 
obligation or
 
become entitled
 
to an
 
asset
through these arrangements, we
 
recognize them on the
 
balance
sheet.
 
It
 
should
 
be
 
noted
 
that
 
in
 
certain
 
instances
 
the
 
amount
recognized on the balance
 
sheet does not represent the
 
full gain
or loss potential inherent in such arrangements.
›
 
Refer to “Note 1a Material accounting
 
policies” items 1, 2a and
2c, and “Note 29 Interests in subsidiaries and
 
other entities” in
the “Consolidated financial statements”
 
section of this report for
more information
 
The
 
following
 
paragraphs
 
provide
 
more
 
information
 
about
certain
 
off-balance
 
sheet
 
arrangements.
 
Additional
 
off-balance
sheet information is
 
primarily provided in
 
Notes 9, 10, 18,
 
20, 21i,
23 and 29
 
in the “Consolidated
 
financial statements” section
 
of
this report, and
 
in the 31 December
 
2021 Pillar 3
 
Report, available
under “Pillar 3 disclosures” at
 
ubs.com/investors.
Guarantees,
 
loan commitments and similar arrangements
In
 
the
 
normal
 
course
 
of
 
business,
 
we
 
issue
 
various
 
forms
 
of
guarantees,
 
commitments
 
to
 
extend
 
credit,
 
standby
 
and
 
other
letters
 
of
 
credit
 
to
 
support
 
our
 
clients,
 
forward
 
starting
transactions,
 
note
 
issuance
 
facilities
 
and
 
revolving
 
underwriting
facilities. With the exception of
 
related premiums, generally these
guarantees and
 
similar obligations
 
are kept
 
as off-balance
 
sheet
items,
 
unless
 
a
 
provision
 
to
 
cover
 
probable
 
losses
 
or
 
expected
credit losses is required.
Guarantees
 
represent
 
irrevocable
 
assurances
 
that,
 
subject
 
to
the satisfying of certain conditions, we will make payments if our
clients
 
fail
 
to
 
fulfill
 
their
 
obligations
 
to
 
third
 
parties.
 
As
 
of
31 December 2021, the
 
net exposure (i.e.,
 
gross values less
 
sub-
participations)
 
from
 
guarantees
 
and
 
similar
 
instruments
 
was
USD 19 billion, compared with USD 15 billion as of 31 December
2020. The increase of
 
USD 4 billion reflected higher
 
guarantees in
Group Treasury and an increase in guarantees issued
 
to corporate
clients in Personal & Corporate Banking. Fee income from issuing
guarantees was not significant to
 
total revenues in 2021 or 2020.
We also enter
 
into commitments to
 
extend credit in
 
the form
of credit lines available
 
to secure the liquidity
 
needs of clients. The
majority of loan commitments range in maturity from one month
to one year. Committed unconditionally revocable credit lines are
generally open-ended.
During
 
2021, loan
 
commitments decreased
 
by USD 2
 
billion,
mainly
 
in
 
Personal
 
&
Corporate
 
Banking
,
 
predominantly
 
in
Personal Banking Switzerland.
Committed
 
unconditionally
 
revocable
 
credit
 
lines
 
remained
broadly
 
stable.
 
Forward
 
starting
 
reverse
 
repurchase
 
agreements
de
creased
 
by
 
USD
 
2
 
billion
 
and
 
f
orward
 
starting
 
repurchase
agreements
 
increased
 
by
 
USD 1
 
billion,
 
both
 
predominantly
 
in
Group Treasury.
 
 
Off-balance sheet
As of
% change from
USD billion
31.12.21
31.12.20
31.12.20
Guarantees
1
 
18.9
 
15.0
 
26
Loan commitments
1,2
 
39.5
 
41.4
 
(5)
Committed unconditionally revocable credit lines
 
40.8
 
40.1
 
2
Forward starting reverse repurchase agreements
2
 
1.4
 
3.2
 
(56)
Forward starting repurchase agreements
2
 
1.0
 
0.4
 
178
1 Guarantees and Loan
 
commitments are shown
 
net of sub-participations.
 
2 The exposures
 
related to loan commitments,
 
forward starting repurchase
 
and reverse repurchase agreements
 
measured at fair value
through profit or loss are not included in this table but are reflected as notional amounts in “Note 10 Derivative instruments” in the “Consolidated
 
financial statements” section of this report.
 
 
If
 
customers
 
fail
 
to
 
meet
 
their
 
obligations,
 
our
 
maximum
exposure
 
to
 
credit
 
risk
 
is
 
the
 
contractual
 
amount
 
of
 
these
instruments. The
 
risk is
 
similar to
 
the
 
risk involved
 
in extending
loan
 
facilities
 
and
 
is
 
subject
 
to
 
the
 
same
 
risk
 
management
 
and
control framework.
 
In 2021,
 
we recognized net
 
credit loss
 
releases
of USD 46
 
million related to
 
loan commitments,
 
guarantees and
other
 
credit
 
facilities
 
in
the
scope
 
of
 
expected
 
credit
 
loss
measurement
,
 
compared
 
with
 
net
 
credit
 
loss
 
expenses
 
of
USD 138
 
million
 
in
 
2020.
 
Provisions
 
recognized
 
for
 
guarantees,
loan
 
commitments
 
and
 
other
 
credit
 
facilities
 
in
 
the
 
scope
 
of
expected
 
credit
 
loss
 
measurement
 
were
 
USD 196
 
million
 
as
 
of
31
 
December
 
202
1
,
 
compared
 
wi
th
 
USD
 
257
million
 
as
 
of
31 December 2020.
›
 
Refer to “Note 9 Financial
 
assets at
 
amortized
 
cost and
 
other
positions
 
in scope
 
of expected
 
credit loss
 
measurement”
 
and
“Note 20 Expected
 
credit loss
 
measurement”
 
in the “Consolidated
financial
 
statements”
 
section of this report for more information
about provisions for expected credit losses
 
 
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
180
For certain obligations we
 
enter into partial sub-participations
to mitigate various risks from guarantees and loan commitments.
A sub-participation
 
is an
 
agreement by
 
another
 
party
 
to
 
take a
share of the loss in the event that the obligation is not fulfilled by
the
 
obligor
 
and,
 
where
 
applicable,
 
to
 
fund
 
a
 
part
 
of
 
the
 
credit
facility.
 
We
 
retain
 
the
 
contractual
 
relationship
 
with
 
the
 
obligor,
and the sub-participant has only an indirect relationship. We only
enter into sub-participation
 
agreements with banks
 
to which we
ascribe a credit rating equal to or better than that of the obligor.
W
e
also
provide
 
representa
tions,
 
warranties
 
and
indemnifications to third parties in the normal
 
course of business.
Support provided to non-consolidated investment funds
In 2021, the Group did not
 
provide material support, financial or
otherwise, to unconsolidated
 
investment funds
 
when the Group
was
 
not
 
contractually
 
obligated
 
to
 
do
 
so,
 
nor
 
does
 
it
 
have
 
an
intention to do so.
Clearing house and exchange memberships
We
 
are
 
a
 
member
 
of
 
numerous
 
securities
 
and
 
derivative
exchanges and clearing houses. In
 
connection with some of these
memberships, we may be required to pay a share of the financial
obligations
 
of
 
another
 
member
 
who
 
defaults,
 
or
 
we
 
may
 
be
otherwise exposed
 
to additional
 
financial obligations.
 
While the
membership rules
 
vary,
 
obligations generally
 
would arise
 
only if
the exchange or
 
clearing house had
 
exhausted its resources.
 
We
consider the probability of a material loss due to such obligations
to be remote.
Deposit insurance
Swiss banking law
 
and the deposit
 
insurance system require Swiss
banks and securities dealers to jointly
 
guarantee an amount of
 
up
to CHF 6
 
billion for
 
privileged client
 
deposits in
 
the event
 
that a
Swiss
 
bank
 
or
 
securities
 
dealer
 
becomes
 
insolvent.
As
 
of
31 December
 
2021,
 
FINMA
 
estimates
 
our
 
share
 
in
 
the
 
deposit
insurance
 
system
 
to
 
be
 
CHF
 
0.9
 
billion.
 
This
 
represents
 
a
contingent payment obligation and exposes us
 
to additional risk.
As
 
of
 
31 December
 
2021,
 
we
 
considered
 
the
 
probability
 
of
 
a
material loss from our obligations to be remote.
UBS
 
is
 
also
 
subject
to
,
 
or
 
is
 
a
 
member
 
of,
 
other
 
deposit
protection
 
schemes
 
in
 
other
 
countries.
 
However,
 
no
 
contingent
payment
 
obligation
 
existed
 
as
 
of
 
31 December
 
2021
 
from
 
any
other material scheme.
Material cash requirements
The Group’s material cash requirements as of 31 December 2021
are
 
represented
 
by
 
the
 
residual
 
contractual
 
maturities
 
for
 
non-
derivative and non-trading financial
 
liabilities included in the
 
table
presented in “Note 24
 
Maturity analysis of financial
 
liabilities” in
the
 
“Consolidated
 
financial
 
statements”
 
section
 
of
 
this
 
report.
Included
 
in
 
the
 
table
 
are
 
debt
 
issued
 
designated
 
at
 
fair
 
value
(USD 82 billion)
 
and long-term
 
debt issued
 
measured at
 
amortized
cost
 
(USD 106
 
billion).
 
The
 
amounts
 
represent
 
estimated
 
future
interest and principal payments on an undiscounted basis.
In the
 
normal course
 
of business,
 
we also
 
issue or
 
enter into
various forms of guarantees, loan commitments and other
 
similar
arrangements that may result in an outflow of cash in the future.
The maturity profile of
 
these obligations, which
 
are presented off-
balance
 
sheet,
 
are
 
included
 
in
 
“Note 24
 
Maturity
 
analysis
 
of
financial
 
liabilities”
 
in
 
the
 
“Consolidated
 
financial
 
statements”
section of this report.
›
 
Refer to “Guarantees, loan commitments
 
and similar
arrangements” in this section for more information
 
 
 
 
 
 
 
 
 
 
 
 
181
Cash flows
As a
 
global financial
 
institution, our cash
 
flows are
 
complex and
often may bear
 
little relation
 
to our net
 
earnings and net
 
assets.
Consequently,
 
we believe
 
that a
 
traditional cash
 
flow analysis
 
is
less
 
meaningful
 
when evaluating
 
our liquidity
 
position than
 
the
liquidity,
 
funding
 
and
 
capital
 
management
 
frameworks
 
and
measures described elsewhere in this section.
 
Cash and cash equivalents
As
 
of 31
 
December
 
2021,
 
cash
 
and
 
cash
 
equivalents
 
totaled
USD 207.9 billion, an increase of USD 34.3 billion compared with
31 December
 
2020,
 
driven
 
by
 
net
 
cash
 
inflows
 
from
 
operating
and
 
financing
 
activities.
 
These
 
effects
 
were
 
partly
 
offset
 
by
 
net
cash outflows
 
from
 
investing activities,
 
as well
 
as the
 
effects
 
of
exchange rate
 
differences
 
on cash
 
and cash
 
equivalents, mainly
reflecting
 
the
 
appreciation
 
of
 
the
 
US
 
dollar
 
against
 
the
 
Swiss
franc, Japanese yen and euro in 2021.
 
Operating activities
Net cash
 
inflows from
 
operating activities
 
were USD 31.4
 
billion
in
 
20
2
1
,
 
compared
 
with
 
USD
 
37
.0
 
billion
 
in
 
2020
.
The
 
n
et
operating
 
cash
 
flow,
 
before
 
changes
 
in
 
operating
 
assets
 
and
liabilities
 
and
 
income
 
taxes
 
paid,
 
was
 
an
 
inflow
 
of
 
USD 13.5
billion. Changes
 
in operating
 
assets and liabilities
 
resulted in
 
net
cash inflows
 
of USD 18.0
 
billion, mainly driven
 
by net inflows
 
of
USD
 
29.8
 
billion
related
 
to
 
customer
 
deposit
s
 
and
 
USD
 
1
9
.
6
 
billion from financial assets and liabilities at fair value
 
not held for
trading and other
 
financial assets
 
and liabilities, as
 
well as
 
USD 8.1
billion
 
from
 
brokerage
 
receivables
 
and
 
payables.
 
These
 
inflows
were
 
partly
 
offset
 
by
 
a
 
net
 
outflow
 
from
 
lending
 
balances
 
to
customers of
 
USD 27.5
 
billion and
 
a net
 
outflow from
 
financial
assets and
 
liabilities at
 
fair value
 
held for
 
trading and
 
derivative
financial instruments of USD 10.5 billion.
Investing activities
Investing activities
 
resulted in
 
a net
 
cash outflow
 
of USD 2.1
 
billion
in 2021, compared with USD 6.8 billion in
 
2020, primarily related
to a
 
cash outflow
 
of USD 1.8
 
billion from
 
purchase of
 
property,
equipment and software.
Financing activities
Financing
 
activities
 
resulted in
 
a net cash
 
inflow of
 
USD 10.3
 
billion
in 2021, compared with
 
USD 12.4 billion in
 
2020, mainly due to
net issuance
 
proceeds of USD
 
18.4
 
billion from debt
 
designated
 
at
fair
 
value
 
and
 
long-term debt
 
measured
 
at
 
amortized cost.
 
This
inflow was
 
partly offset
 
by the net repayment
 
of USD 3.1
 
billion of
short
-
term
 
debt
,
 
net
 
cash
 
used
 
to
 
acquire
 
treasury
 
shares
 
of
USD 3.3
 
billion
 
and
 
a
 
dividend
 
distribution
 
to
 
shareholders
 
of
USD 1.3
 
billion.
 
›
 
Refer to “Primary financial statements and
 
share information” in
the “Consolidated financial statements”
 
section of this report for
more information about cash flows
 
Statement of cash flows (condensed)
For the year ended
USD billion
31.12.21
31.12.20
Net cash flow from / (used in) operating activities
31
37
Net cash flow from / (used in) investing activities
(2)
(7)
Net cash flow from / (used in) financing activities
10
12
Effects of exchange rate differences on cash and cash equivalents
 
(5)
11
Net increase / (decrease) in cash and cash equivalents
 
34
54
Cash and cash equivalents at the end of the year
 
208
174
 
Risk, capital, liquidity and funding, and balance sheet | Currency management
182
Currency management
Strategy, objectives and governance
Group
 
Treasury
 
focuses
 
on
 
three
 
main
 
areas
 
of
 
currency
 
risk
management:
 
(i)
 
currency-matched
 
funding
 
and
 
investment
 
of
non-US
 
dollar
 
assets
 
and
 
liabilities;
 
(ii) sell-down
 
of
 
foreign
currency
 
IFRS
 
profits
 
and
 
losses;
 
and
 
(iii) selective
 
hedging
 
of
anticipated non-US
 
dollar profits
 
and losses to
 
further mitigate
 
the
effect
 
of
 
structural
 
imbalances
 
in
 
the
 
balance
 
sheet.
 
Group
Treasury
 
also
 
manages
 
structural
 
currency
 
composition
 
at
 
the
consolidated Group level.
Currency-matched funding and investment of non-US dollar
assets and liabilities
For monetary
 
balance sheet
 
items and
 
other investments,
 
as far
as is
 
practical and
 
efficient, we
 
follow the
 
principle of
 
matching
the currencies
 
of our
 
assets and
 
liabilities for
 
funding purposes.
This
 
avoids
 
profits
 
and
 
losses
 
arising
 
from
 
the
 
translation
 
of
non-US dollar assets and liabilities.
Net investment
 
hedge accounting
 
is applied
 
to non-US
 
dollar
core
 
investments
 
to
 
balance
 
the
 
effect
 
of
 
foreign
 
exchange
movements on both CET1 capital and the CET1 capital ratio.
›
 
Refer to “Note 1a Material accounting
 
policies” and “Note 26
Hedge accounting” in the “Consolidated
 
financial statements”
section of this report for more information
›
 
Refer to “Capital management” in
 
this section for more
information about our active management
 
of sensitivity to
currency movements and the effect thereof on our key
 
ratios
 
Sell-down of non-US dollar reported profits and losses
Income statement
 
items of
 
foreign subsidiaries
 
and branches
 
of
UBS AG
 
with a
 
functional currency
 
other than
 
the US
 
dollar are
translated
 
into US
 
dollars at
 
average
 
exchange rates.
 
To
 
reduce
earnings
 
volatility
 
on
 
the
 
translation
 
of
 
previously
 
recognized
earnings
 
in
 
foreign
 
currencies,
 
Group
 
Treasury
 
centralizes
 
the
profits and losses (under IFRS) arising in UBS AG and its branches
and
 
sells
 
or
 
buys the
 
profit
 
or loss
 
for
 
US
 
dollars
 
on a
 
monthly
basis. Our foreign subsidiaries follow
 
a similar monthly sell-down
process into their own functional currencies. Retained earnings in
foreign subsidiaries with a
 
functional currency other than
 
the US
dollar are integrated and managed
 
as part of our net investment
hedge accounting program.
Hedging of anticipated non-US dollar profits and losses
The
 
Group
 
ALCO
 
may
 
at
 
any
 
time
 
instruct
 
Group
 
Treasury
 
to
execute hedges to protect anticipated future profits and losses in
foreign
 
currencies
 
against
 
possible
 
adverse
 
trends
 
of
 
foreign
exchange
 
rates.
 
Although
 
intended
 
to
 
hedge
 
future
 
earnings,
these transactions
 
are accounted
 
for as
 
open currency
 
positions
and
 
subject
 
to
 
internal
 
market
 
risk
 
limits
 
for
 
value-at-risk
 
and
stress loss limits.
Dividend distribution
 
UBS
 
Group
 
AG
 
declares
 
dividends
 
in
 
US
 
dollars.
 
Shareholders
holding
 
shares
 
through
 
SIX
 
(ISIN: CH0244767585)
 
will
 
receive
dividends
 
in
 
Swiss
 
francs,
 
based
 
on
 
a
 
published
 
exchange
 
rate
calculated up
 
to five
 
decimal places,
 
on the
 
day prior
 
to the
 
ex-
dividend
 
date.
 
Shareholders
 
holding
 
shares
 
through
 
DTC
(ISIN: CH0244767585; CUSIP: H42097107) will be paid
 
dividends
in US dollars.
›
 
Refer to the “Standalone financial statements”
 
section of this
report for more information about the proposed dividend
distribution of UBS Group AG
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
183
UBS
 
shares
UBS Group AG shares
Audited
 
|
 
As
 
of
31
 
December
 
20
2
1
,
 
IFRS
 
equity
 
attributable
 
to
shareholders
 
amounted
 
to
 
USD
60,662
 
million,
 
represented
 
by
3,702,422,995
 
shares
 
issued.
Shares
 
issued
 
decreased
 
by
157
 
million
 
in 2021,
 
as the
156,632,400
 
shares acquired
 
under the
2018–2021 share
 
repurchase program
 
were canceled
 
by means of
a
 
capital
 
reduction,
 
as
 
approved
 
by
 
shareholders
 
at
 
the
 
2021
Annual General
 
Meeting (AGM).
Each share has
 
a nominal value
 
of CHF
0.10
, carries one
 
vote
if entered into the
 
share register as having
 
the right to vote,
 
and
also
 
entitles
 
the
 
holder
 
to
 
a
 
proportionate
 
share
 
of
 
distributed
dividends.
 
All
 
shares
 
are
 
fully
 
paid
 
up.
 
As
 
the
 
Articles
 
of
Association of UBS Group AG indicate, there are no other classes
of shares and no preferential rights for shareholders.
p
 
›
 
Refer to the “Corporate governance”
 
section of this report for
more information about UBS shares
 
 
UBS Group share information
As of or for the year ended
% change from
31.12.21
31.12.20
31.12.20
Shares issued
3,702,422,995
3,859,055,395
(4)
Treasury shares
1
302,815,328
307,477,002
(2)
of which: related to share repurchase program 2018–2021
148,975,800
(100)
of which: related to share repurchase program 2021
2
152,596,273
Shares outstanding
3,399,607,667
3,551,578,393
(4)
Basic earnings per share (USD)
3
2.14
1.83
17
Basic earnings per share (CHF)
4
1.96
1.71
15
Diluted earnings per share (USD)
3
2.06
1.77
16
Diluted earnings per share (CHF)
4
1.88
1.65
14
Equity attributable to shareholders (USD million)
60,662
59,445
2
Less: goodwill and intangible assets (USD million)
6,378
6,480
(2)
Tangible equity attributable to shareholders (USD million)
54,283
52,965
2
Ordinary cash dividends per share (USD)
5,6
0.50
0.37
35
Total book value per share (USD)
17.84
16.74
7
Tangible book value per share (USD)
15.97
14.91
7
Share price (USD)
7
18.01
14.08
28
Market capitalization (USD million)
61,230
50,013
22
1 Based on a settlement date view.
 
2 Our active share repurchase program of up to
 
CHF 4 billion was started in February
 
2021. The program was
 
initially planned to run over a three-year period,
 
but we currently
expect to
 
complete it
 
in the
 
first half
 
of 2022.
 
We therefore
 
refer to
 
this program
 
as “share
 
repurchase program
 
2021” throughout
 
this report.
 
3 Refer
 
to “Share
 
information and
 
earnings per
 
share” in
 
the
“Consolidated financial statements” section of this report for more
 
information.
 
4 Basic and diluted earnings per share in Swiss
 
francs are calculated based on a translation of
 
net profit / (loss) under our US dollar
presentation currency.
 
5 Dividends and / or distributions out of the capital contribution
 
reserve are normally approved and paid in the
 
year subsequent to the reporting period.
 
6 Refer to “Statement of proposed
appropriation of total profit and dividend distribution out of total profit and capital contribution reserve” in the “Standalone financial statements” section of this report for more information.
 
7 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk, capital, liquidity and funding, and balance sheet | UBS shares
184
Holding of UBS Group AG shares
 
Group
 
Treasury
 
holds
 
UBS Group AG
 
shares
 
to
 
hedge
 
future
share
 
delivery
 
obligations
 
related
 
to
 
employee
 
share-based
compensation awards, and also
 
holds shares purchased under
 
the
share repurchase
 
program. As
 
of 31 December
 
2021, we
 
held a
total
 
of
302
,
815
,
328
 
treasury
 
shares
 
(31
 
December
 
20
20
:
307,477,002),
 
or
 
8.2%
 
(31 December
 
2020:
 
8.0%)
 
of
 
shares
issued.
Our 2018–2021 share repurchase program was
 
completed on
2 February
 
2021
 
with the
 
purchase of
 
an
 
additional
 
7.7
 
million
shares
 
in
 
2021
 
for
 
a
 
total
 
acquisition
 
cost
 
of
 
CHF 100
 
million
(USD 112
 
million).
 
The
 
156.6
 
million
 
shares
 
repurchased
 
under
this program
 
were canceled
 
by means
 
of a
 
capital reduction,
 
as
approved by shareholders at the 2021 AGM.
On
 
8 February
 
2021,
 
we
 
commenced
 
a
 
new
 
2021
 
share
repurchase program of up
 
to CHF 4 billion.
 
Shares acquired under
this program totaled 152.6
 
million as of 31 December 2021 for a
total
 
acquisition
 
cost
 
of
 
CHF 2,294
 
million
 
(USD 2,500
 
million)
and are intended to be canceled by means of a capital reduction,
pending approval by shareholders at the 2022 AGM.
Looking
 
ahead,
 
we
 
intend
 
to
 
commence
 
a
 
new
 
2022
 
share
repurchase
 
program
 
of
 
up
 
to
 
USD 6
 
billion
 
over
 
two
 
years
 
and
expect to execute
 
up to USD 5 billion
 
of repurchases under both
the existing
 
2021 repurchase
 
program and
 
the new
 
2022 program
by the end of 2022.
 
Treasury
 
shares
 
held
 
to
 
hedge
 
our
 
share
 
delivery
 
obligations
related
 
to
 
employee
 
share-based
 
compensation
 
awards
 
totaled
1
48
.
8
 
milli
on
 
shares
 
as
 
of
31
 
December
 
202
1
 
(31
 
December
20
20
:
157.1
 
million).
 
Share
 
delivery
 
obligations
 
related
 
to
employee share-based
 
compensation awards totaled
 
175 million
shares as of 31 December 2021
 
(31 December 2020: 172 million)
and
 
are
 
calculated
 
on
 
the
 
basis of
 
undistributed
 
notional
 
share
awards,
 
taking into
 
account applicable
 
performance conditions.
Treasury
 
shares
 
held
 
are
 
delivered
 
to
 
employees
 
at
 
exercise
 
or
vesting. As
 
of 31 December
 
2021, up
 
to 122
 
million UBS Group
AG
 
shares
 
(31 December
 
2020:
 
122
 
million)
 
could
 
have
 
been
issued
 
out
 
of
 
conditional
 
capital
 
to
 
satisfy
 
share
 
delivery
obligations
 
of
 
any
 
future
 
employee
 
share
 
option
 
programs
 
or
similar awards.
 
The
 
Investment
 
Bank
 
also
 
holds
 
a
 
limited
 
number
 
of
UBS Group AG shares, primarily in its capacity as a market-maker
with regard to UBS Group AG shares and related derivatives, and
to hedge certain issued structured debt instruments.
 
The table below
 
outlines the market
 
purchases of UBS Group
AG shares by Group
 
Treasury. It does not
 
include the activities of
the Investment Bank.
Treasury
 
share purchases
Share repurchase programs
1
Other treasury shares purchased
2
Month of purchase
3
Number of shares
Average price in CHF
Remaining volume of
2018–2021 share
repurchase program in
CHF million at month-end
Remaining volume of
2021 share repurchase
program in CHF million
at month-end
Number of shares
Average price in USD
January 2021
5,250,000
13.06
31
February 2021
22,861,600
13.89
0
3,714
March 2021
39,377,000
14.64
3,137
April 2021
7,400,415
14.56
3,030
May 2021
15,858,110
13.97
2,808
5,585,000
16.11
June 2021
2,808
14,415,000
16.31
July 2021
7,730,000
14.71
2,694
August 2021
17,140,000
15.36
2,431
September 2021
11,241,248
15.36
2,259
October 2021
4,500,000
16.58
2,184
November 2021
28,800,000
16.54
1,708
December 2021
94,500
16.23
1,706
4
12,770,000
17.73
1 In March 2018, UBS initiated a share repurchase
 
program of up to CHF 2 billion over
 
a three-year period and this program was
 
completed on 2 February 2021. UBS
 
has an active share repurchase program to buy
back up to CHF 4 billion of its own shares over the
 
three-year period started in February 2021. The share repurchase information in this table is disclosed in Swiss francs as the share buybacks were transacted in Swiss
francs on a separate trading line on the SIX Swiss Exchange.
 
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 906,951 UBS Group AG shares during the year and held 14,073,132
 
UBS Group AG shares as of 31 December 2021.
 
3 Based on the transaction date of
the respective treasury share
 
purchases.
 
4 The remaining
 
volume of the 2021
 
share repurchase program
 
as of 31 December
 
2021 was USD 1,871
 
million. This was
 
calculated based on
 
the remaining volume
 
of
CHF 1,706 million as of 31 December 2021 and the respective closing exchange rate as of this date.
 
Trading volumes
For the year ended
1,000 shares
31.12.21
31.12.20
31.12.19
SIX Swiss Exchange total
 
2,514,259
5,095,908
4,161,555
SIX Swiss Exchange daily average
9,899
20,222
16,713
New York Stock Exchange total
137,366
260,681
203,967
New York Stock Exchange daily average
545
1,030
809
Source: Reuters
 
 
 
 
 
 
 
 
 
185
Listing of UBS Group AG shares
UBS Group AG shares are
 
listed on the SIX
 
Swiss Exchange (SIX).
They are also
 
listed on the New
 
York
 
Stock Exchange (the
 
NYSE)
as
 
global
 
registered
 
shares.
 
As
 
such,
 
they
 
can
 
be
 
traded
 
and
transferred
 
across
 
applicable
 
borders
,
 
without
 
the
 
need
 
for
conversion,
 
with
 
identical
 
shares
 
traded
 
on
 
different
 
stock
exchanges in different currencies.
During 2021,
 
the average daily
 
trading volume of
 
UBS Group
AG shares was 9.9 million shares
 
on SIX and 0.5 million shares
 
on
the
 
NYSE.
 
SIX
 
is
 
expected
 
to
 
remain
 
the
 
main
 
venue
 
for
determining the
 
movement in
 
our share
 
price, because
 
of the
 
high
volume traded on this exchange.
During
 
the
 
hours
 
in
 
which
 
both
 
SIX
 
and
 
the
 
NYSE
 
are
simultaneously open for trading
 
(generally 3:30 p.m. to
 
5:30 p.m.
Central
 
European
 
Time),
 
price
 
differences
 
between
 
these
exchanges
 
are
 
likely
 
to
 
be
 
arbitraged
 
away
 
by
 
professional
market-makers.
 
Accordingly,
 
the
 
share
 
price
 
will
 
typically
 
be
similar
 
between
 
the
 
two
 
exchanges
 
when
 
considering
 
the
prevailing
 
US
 
dollar
 
/
 
Swiss
 
franc
 
exchange
 
rate.
 
When
 
SIX
 
is
closed for trading, globally traded volumes will typically be lower.
However, the
 
specialist firm
 
making a
 
market in
 
UBS Group AG
shares on the NYSE is required to facilitate sufficient liquidity and
maintain an orderly
 
market in UBS Group
 
AG shares throughout
normal NYSE trading hours.
 
 
Ticker symbols UBS Group AG
Trading exchange
SIX / NYSE
Bloomberg
Reuters
SIX Swiss Exchange
UBSG
UBSG SW
UBSG.S
New York Stock Exchange
UBS
UBS UN
UBS.N
Security identification codes
ISIN
CH0244767585
Valoren
24 476 758
CUSIP
CINS H42097 10 7
 
 
 
 
 
 
 
 
Corporate
governance and
compensation
Management report
 
4
 
 
 
 
 
 
 
 
 
 
 
 
 
Audited information according to the Swiss law and applicable regulatory
requirements and guidance
Disclosures provided
 
are in
 
line with
 
the requirements
 
of Art.
 
663c para.
 
1 and
 
3 of
 
the Swiss Code
 
of Obligations
 
(supplementary
disclosures
 
for
 
companies
 
whose
 
shares
 
are
 
listed
 
on
 
a
 
stock
 
exchange:
 
shareholdings)
 
and
 
the
 
Ordinance
 
against
 
Excessive
Compensation in Listed Stock Corporations (tables containing such information are marked as “Audited” throughout this section), as
well as other applicable regulations and guidance.
 
 
 
188
 
 
 
189
Corporate governance
 
 
 
 
Corporate governance and compensation | Corporate governance
190
Corporate governance
UBS Group AG is subject to, and complies with, all relevant Swiss
legal
 
and
 
regulatory
requirements
 
regarding
 
corporate
governance,
 
including
 
the
 
SIX
 
Swiss
 
Exchange’s
 
Directive
 
on
Information
 
relating
 
to
 
Corporate
 
Governance
 
(the
 
SIX
 
Swiss
Exchange
 
Corporate
 
Governance
 
Directive)
 
and
 
the
 
standards
established
 
in
 
the
 
Swiss
 
Code
 
of
 
Best
 
Practice
 
for
 
Corporate
Governance, including the appendix on executive compensation.
As a foreign
 
company with shares
 
listed on the
 
New York Stock
Exchange
 
(the
 
NYSE),
 
UBS
 
Group
 
AG
 
also
 
complies
 
with
 
all
relevant
 
corporate
 
governance
 
standards
 
applicable
 
to
 
foreign
private issuers.
The Organization
 
Regulations of
 
UBS Group
 
AG, adopted
 
by
the Board of Directors (the BoD) based on Art. 716b of
 
the Swiss
Code
 
of
 
Obligations
 
and
 
articles
 
25
 
and
 
27
 
of
 
the
 
Articles
 
of
Association of
 
UBS Group
 
AG, constitute
 
our primary
 
corporate
governance guidelines.
 
To
 
the
 
extent
 
practicable,
 
the
 
governance
 
structures
 
of
 
UBS
Group
 
AG
 
and
 
UBS
 
AG
 
are
 
aligned.
 
UBS
 
AG
 
complies
 
with
 
all
relevant
 
Swiss
 
legal
 
and
 
regulatory
 
corporate
 
governance
requirements. As a
 
foreign private issuer
 
with debt securities
 
listed
on
 
the
 
NYSE,
 
UBS
 
AG
 
also
 
complies
 
with
 
the
 
relevant
 
NYSE
corporate
 
governance
 
standards.
 
The
 
discussion
 
in
 
this
 
section
refers
 
to
 
both
 
UBS
 
Group
 
AG
 
and
 
UBS
 
AG,
 
unless
 
specifically
noted
 
otherwise
 
or
 
unless
 
the information
 
discussed is
 
relevant
only
 
to
 
listed
 
companies
 
and
 
therefore
 
only
 
applicable
 
to
UBS Group
 
AG.
 
This
 
approach
 
is
 
in
 
line
 
with
 
US
 
Securities
 
and
Exchange Commission (SEC) regulations and NYSE standards.
 
›
 
Refer to the Articles of Association of
 
UBS Group AG and of
UBS AG, and to the Organization Regulations
 
of UBS Group AG,
available at
ubs.com/governance
and
ubs.com/ubs-ag-
governance,
 
for more information
›
 
The SIX Swiss Exchange Corporate Governance
 
Directive is
available at
 
ser-ag.com/dam/downloads/regulation/listing/
directives/DCG-en.pdf,
 
the Swiss Code of Best Practice for
Corporate Governance at
economiesuisse.ch/en/publications/
swiss-code-best-practice-corporate-governance
 
and the NYSE
rules at
nyse.wolterskluwer.cloud/listed-company-manual
Differences from corporate governance standards relevant
to US-listed companies
The
 
NYSE
 
standards
 
on
 
corporate
 
governance
 
require
 
foreign
private
 
issuers
 
to
 
disclose
 
any
 
significant
 
ways
 
in
 
which
 
their
corporate governance practices differ from those that have to
 
be
followed by
 
domestic companies. Such
 
differences are
 
discussed
below.
Responsibility of the Audit Committee regarding independent
auditors
Our
 
Audit
 
Committee
 
is
 
responsible
 
for
 
the
 
compensation,
retention
 
and oversight
 
of independent
 
auditors. It
 
assesses the
performance and
 
qualifications of
 
external auditors
 
and submits
proposals
 
for
 
appointment,
 
reappointment
 
or
 
removal
 
of
independent auditors to the BoD. As required by the Swiss Code
of
 
Obligations,
 
the
 
BoD
 
submits its
 
proposals
 
for a
 
shareholder
vote
 
at
 
the
 
Annual
 
General
 
Meeting
 
(the
 
AGM).
 
Under
 
NYSE
standards
 
audit
 
committees
 
are
 
responsible
 
for
 
appointing
independent auditors.
Discussion of risk assessment and risk management policies by
the Risk Committee
As
 
per
 
the
 
Organization
 
Regulations
 
of
 
UBS
 
Group
 
AG
 
and
UBS AG, the Risk Committee, instead of
 
the Audit Committee, as
per NYSE standards, oversees our risk
 
principles and risk capacity
on
 
behalf
 
of
 
the
 
BoD.
 
The
 
Risk
 
Committee
 
is
 
responsible
 
for
monitoring our adherence to those risk principles and monitoring
whether business divisions and
 
control units maintain appropriate
systems of risk management and control.
Supervision of the internal audit function
Although under NYSE standards only audit
 
committees supervise
internal audit functions, the Chairman of the BoD
 
(the Chairman)
and the Audit Committee share the supervisory responsibility and
authority with respect to the internal audit function.
Responsibility of the Compensation Committee for performance
evaluations of senior management of UBS Group AG
In
 
line
 
with Swiss
 
law,
 
our Compensation
 
Committee, together
with the BoD, proposes for shareholder approval at the AGM the
maximum aggregate
 
amount of
 
compensation for
 
the BoD,
 
the
maximum
 
aggregate
 
amount
 
of
 
fixed
 
compensation
 
for
 
the
Group Executive
 
Board (the
 
GEB) and
 
the aggregate
 
amount of
variable
 
compensation
 
for
 
the
 
GEB.
 
The
 
members
 
of
 
the
Compensation Committee are
 
elected by the AGM.
 
Under NYSE
standards it
 
is the
 
responsibility of
 
compensation committees
 
to
evaluate
 
senior
 
management’s
 
performance
 
and
 
to
 
determine
and
 
approve,
 
as
 
a
 
committee
 
or
 
together
 
with
 
the
 
other
independent directors, the compensation thereof.
Proxy statement reports of the Audit Committee and the
Compensation Committee
NYSE
 
standards
 
require
 
the
 
aforementioned
 
committees
 
to
submit
 
their
 
reports
 
directly
 
to
 
shareholders.
 
However,
 
under
Swiss
 
law
 
all
 
reports
 
to
 
shareholders,
 
including
 
those
 
from
 
the
aforementioned committees, are
 
provided to and
 
approved by
 
the
BoD, which has ultimate responsibility to the shareholders.
Shareholder votes on equity compensation plans
NYSE standards require shareholder
 
approval for the establishing
of
 
and
 
material
 
revisions
 
to
 
all
 
equity
 
compensation
 
plans.
However,
 
as
 
per
 
Swiss
 
law,
 
the
 
BoD
 
approves
 
compensation
plans.
 
Shareholder
 
approval
 
is
 
only
 
mandatory
 
if
 
equity-based
compensation plans require an increase
 
in capital. No shareholder
approval is required
 
if shares for such
 
plans are purchased
 
in the
market.
›
 
Refer to “Board of Directors” in this section for more
information about the BoD’s committees
›
 
Refer to “Share capital structure” in this section
 
for more
information about UBS Group AG’s capital
 
 
 
 
 
 
 
 
 
191
Group structure and shareholders
Operational Group structure
As of 31 December 2021, the operational structure of the Group
is
 
composed
 
of
 
the
 
Global
 
Wealth
 
Management,
 
Personal
 
&
Corporate
 
Banking,
 
Asset
 
Management
 
and
 
Investment
 
Bank
business divisions, as well as Group Functions.
 
›
 
Refer to the “Our businesses” section on
 
page 21 of this report
for more information about our business
 
divisions and Group
Functions
›
 
Refer to “Financial and operating performance”
 
on page 75 and
to “Note
2 Segment reporting
” in the “Consolidated financial
statements”
 
section on page 306 of this report
 
for more
information
›
 
Refer to the “Our evolution” section
 
on page 14 of this report
for more information
Listed and non-listed companies belonging to the Group
The Group
 
includes a
 
number of
 
consolidated entities,
 
of which
only UBS Group AG shares are listed.
UBS
 
Group
 
AG’s
 
registered
 
office
 
is
 
at
 
Bahnhofstrasse
 
45,
CH-8001 Zurich, Switzerland. UBS Group AG shares are listed on
the SIX Swiss
 
Exchange (ISIN: CH0244767585)
 
and on the
 
NYSE
(CUSIP: H42097107).
›
 
Refer to “
UBS shares
” in the “
Capital, liquidity and funding, and
balance sheet
” section on page 183 of this report for
information about UBS Group AG’s market capitalization and
shares held by Group entities
›
 
Refer to “Note 29 Interests in subsidiaries and
 
other entities” in
the “
Consolidated financial statements
” section on page 391 of
this report for more information about the significant
subsidiaries of the Group
Significant shareholders
General rules
Under the
 
Swiss
 
Federal
 
Act on
 
Financial
 
Market
 
Infrastructures
 
and
Market Conduct in
 
Securities and Derivatives Trading
 
of 19 June
2015 (the FMIA), anyone directly
 
or indirectly, or acting in concert
with third
 
parties,
 
holding
 
shares in
 
a company
 
listed
 
in Switzerland
or
 
holding derivative rights
 
related to
 
shares in
 
such a
 
company
must notify the company and
 
the SIX Swiss
 
Exchange (SIX) if the
holding
 
reaches,
 
falls
 
below
 
or
 
exceeds
 
one
 
of
 
the
 
following
percentage thresholds:
 
3, 5, 10, 15, 20, 25, 33
1
⁄
3
, 50 or 66
2
⁄
3
% of
voting
 
rights, regardless
 
of
 
whether
 
or
 
not
 
such
 
rights
 
may
 
be
exercised. Nominee companies that cannot autonomously decide
how
 
voting
 
rights
 
are
 
exercised
 
are
 
not
 
required
 
to
 
notify
 
the
company and
 
SIX if
 
they reach,
 
exceed or
 
fall below
 
the above-
mentioned thresholds.
Pursuant
 
to
 
the
 
Swiss
 
Code
 
of
 
Obligations,
 
we
 
disclose
 
in
“Note
 
2
3
 
Significant
 
shareholders”
 
to
 
the
 
UBS
 
Group
 
AG
standalone
 
financial
 
statements
 
the
 
identity
 
of
 
any
 
shareholder
with a holding of more than 5% of the total share capital of UBS
Group AG.
Shareholders subject to FMIA disclosure notifications
According
 
to the
 
mandatory
 
FMIA disclosure
 
notifications
 
filed with
UBS Group
 
AG and
 
SIX, as
 
of 31 December 2021,
 
the following
entities
 
held
 
more
 
than
 
3%
 
of
 
the
 
total
 
share
 
capital
 
of
UBS Group AG:
 
Massachusetts
 
Financial
 
Services
 
Company,
Boston, which
 
disclosed a
 
holding of
 
3.01%
 
on
 
22 June
 
2021;
Artisan Partners
 
Limited Partnership,
 
Milwaukee, which
 
disclosed
 
a
holding
 
of
 
3.15%
 
on
 
18 November 2020;
 
BlackRock Inc.,
 
New
York,
 
which disclosed a holding of
 
4.70% on 26 May
 
2020; and
Norges Bank,
 
Oslo, which
 
disclosed a holding
 
of 3.01% on 24
 
July
2019.
 
As
 
registration
 
in
 
the
 
UBS
 
share
 
register
 
is
 
optional,
shareholders crossing
 
the aforementioned
 
thresholds requiring
 
SIX
notification under
 
the FMIA do not necessarily appear
 
in the table
below.
On 24 January
 
2022, Dodge
 
& Cox International
 
Stock Fund,
San
 
Francisco,
 
disclosed
 
a
 
holding
 
of
 
3.02%
 
of
 
the
 
total
 
share
capital
 
of
 
UBS
 
Group
 
AG
.
No
 
n
ew
 
disclosures
 
of
 
significant
shareholdings have been made since that date.
 
In accordance with the
 
FMIA, the aforementioned holdings
 
are
calculated in relation
 
to the total
 
share capital of
 
UBS Group AG
reflected in the
 
Articles of
 
Association at
 
the time
 
of the
 
respective
disclosure notification.
 
Information
 
on
 
disclosures
 
under
 
the
 
FMIA
 
is
 
available
 
at
 
ser-ag.com/en/resources/notifications-market-
participants/significant-shareholders.html.
 
Shareholders registered in the UBS share register with 3% or
more of the share capital of UBS Group AG
As
 
a
 
supplement
 
to
 
the
 
mandatory
 
disclosure
 
requirements
according
 
to
 
the
 
SIX
 
Swiss
 
Exchange
 
Corporate
 
Governance
Directive, we disclose in the
 
table below the
 
shareholders (acting
in
 
their
 
own
 
name
 
or
 
in
 
their
 
capacity
 
as
 
nominees
 
for
 
other
investors
 
or
 
beneficial
 
owners)
 
that
 
were
 
registered
 
in
 
the
 
UBS
share register with
 
3% or more
 
of the total
 
share capital of
 
UBS
Group AG as of 31 December 2021.
 
›
 
Refer to “Shareholders’ participation rights”
 
on page 197 of this
section for more information about voting
 
rights, restrictions
and representation
Cross-shareholdings
UBS
 
Group
 
AG
 
has
 
no
 
cross-shareholdings
 
where
 
reciprocal
ownership would
 
be in
 
excess of
 
5% of
 
capital or
 
voting rights
with any other company.
Audited |
 
Shareholders registered in the UBS share register with 3% or more of the total share capital
1
% of share capital
31.12.21
31.12.20
31.12.19
Chase Nominees Ltd., London
2
 
8.89
 
10.39
 
10.94
DTC (Cede & Co.), New York
2,3
 
5.78
 
4.99
 
7.57
Nortrust Nominees Ltd., London
2
 
4.80
 
5.15
 
4.90
1 As registration in the UBS share
 
register is optional, shareholders crossing the
 
threshold percentages requiring SIX notification
 
under the FMIA do not necessarily appear
 
in this table.
 
2 Nominee companies and
securities clearing organizations
 
cannot autonomously
 
decide how voting
 
rights are
 
exercised and
 
are therefore
 
not obligated
 
to notify
 
UBS and
 
SIX if
 
they reach, exceed
 
or fall
 
below the
 
threshold percentages
requiring disclosure notification under
 
the FMIA. Consequently,
 
they do not appear
 
in the “Shareholders subject
 
to FMIA disclosure notifications”
 
section above.
 
3 DTC (Cede & Co.),
 
New York, “The
 
Depository
Trust Company,”
 
is a US securities clearing organization.
p
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate governance and compensation | Corporate governance
192
Share capital structure
Ordinary share capital
At
 
year-end
 
2021,
 
UBS
 
Group
 
AG
 
had
 
3,702,422,995
 
issued
shares with a
 
nominal value
 
of CHF 0.10
 
each, equating
 
to a
 
share
capital of CHF 370,242,299.50.
 
Under
 
Swiss
 
company
 
law,
 
shareholders
 
must
 
approve,
 
in
 
a
general meeting of shareholders, any increase or reduction in the
ordinary share capital or the creation of conditional or authorized
share capital.
 
In 2021, our
 
shareholders were asked
 
to approve a
 
reduction
of
 
share
 
capital
 
by
 
way
 
of
 
canceling
 
156,632,400
 
registered
shares
 
repurchased
 
under
 
the
 
2018–2021
 
share
 
buyback
program.
 
In
 
2021,
 
our
 
shareholders
 
were
 
not
 
asked
 
to
 
approve
 
the
creation of conditional or authorized share capital.
No
 
shares
 
were
 
issued
 
out
 
of
 
existing
 
conditional
 
capital,
 
as
there
 
were
 
no
 
employee
 
options
 
and
 
stock
 
appreciation
 
rights
outstanding.
 
 
Distribution of UBS shares
 
As of 31 December 2021
Shareholders registered
Shares registered
Number of shares registered
Number
%
Number
% of shares issued
1–100
 
21,973
 
11.4
 
1,210,904
 
0.0
101–1,000
 
98,460
 
51.1
 
46,829,775
 
1.3
1,001–10,000
 
65,295
 
33.9
 
192,251,772
 
5.2
10,001–100,000
 
6,421
 
3.3
 
152,692,476
 
4.1
100,001–1,000,000
 
523
 
0.3
 
152,003,230
 
4.1
1,000,001–5,000,000
 
94
 
0.0
 
202,245,394
 
5.5
5,000,001–37,024,229 (1%)
 
26
 
0.0
 
291,114,743
 
7.9
1–2%
 
3
 
0.0
 
142,657,900
 
3.9
2–3%
 
0
 
0.0
 
0
 
0.0
3–4%
 
0
 
0.0
 
0
 
0.0
4–5%
 
1
 
0.0
 
177,762,902
 
4.8
Over 5%
 
2
1
 
0.0
 
543,460,208
 
14.7
Total registered
 
192,798
 
100.0
 
1,902,229,304
2
 
51.4
Unregistered
3
 
1,800,193,691
 
48.6
Total
 
192,798
 
100.0
 
3,702,422,995
 
100.0
1 On 31 December 2021, Chase Nominees Ltd., London, entered as a nominee, was registered with 8,89% of all UBS shares issued. However, according to the provisions of UBS Group AG,
 
voting rights of nominees
are limited to a maximum of 5% of all UBS shares issued. The US securities clearing organization DTC (Cede & Co.), New York, was registered with 5.78% of all UBS shares issued and is not subject to this 5% voting
limit as a securities clearing organization.
 
2 Of the total shares registered, 295,987,073 shares did not carry voting rights.
 
3 Shares not entered in the UBS share register as of 31 December 2021.
 
 
 
 
 
 
 
 
193
Conditional share capital
At
 
year-end
 
2021,
 
the
 
following
 
conditional
 
share
 
capital
 
was
available to UBS Group AG’s BoD:
 
–
 
A
 
maximum
 
of
 
CHF 38,000,000
 
represented
 
by
 
up
 
to
380,000,000 fully paid registered shares
 
with a nominal value
of
 
CHF 0.10
 
each,
 
to
 
be
 
issued
 
through
 
the
 
voluntary
 
or
mandatory
 
exercise
 
of
 
conversion
 
rights
 
and
 
/
 
or
 
warrants
granted
 
in
 
connection
 
with
 
the
 
issuance
 
of
 
bonds
 
or
 
similar
financial
 
instruments
 
on
 
national
 
or
 
international
 
capital
markets.
 
This
 
conditional
 
capital
 
allowance
 
was
 
approved
 
at
the
 
Extraordinary
 
G
eneral
 
Meeting
 
(
the
EGM)
 
held
 
on
26 November
 
2014,
 
having
 
originally
 
been
 
approved
 
at
 
the
AGM of UBS AG on 14 April 2010.
 
The BoD has not made use
of such allowance.
–
 
A maximum
 
of CHF 12,170,583
 
represented by
 
121,705,830
fully paid
 
registered shares
 
with a
 
nominal value
 
of CHF 0.10
each,
 
to
 
be
 
issued
 
upon
 
exercise
 
of
 
employee
 
options
 
and
stock appreciation rights issued to employees and members of
the
 
management
 
and
 
of
 
the
 
BoD
 
of
 
UBS
 
Group
 
AG
 
and
 
its
subsidiaries. This
 
conditional capital
 
allowance was
 
approved
by the shareholders at the same EGM in 2014.
 
›
 
Refer to article 4a of the Articles of Association
 
of UBS Group AG
for more information about the terms and
 
conditions of the
issue of shares out of existing conditional capital.
 
The Articles of
Association are available at
 
ubs.com/governance
›
 
Refer to the “Our evolution” section on
 
page 14 of this report
for more information
 
 
 
Conditional capital of UBS Group AG
As of 31 December 2021
Maximum number of shares to
be issued
Year approved by Extraor-
dinary General Meeting
% of shares issued
Employee equity participation plans
 
121,705,830
2014
 
3.29
Conversion rights / warrants granted in connection with bonds
 
380,000,000
2014
 
10.26
Total
 
501,705,830
 
13.55
 
 
Authorized share capital
UBS
 
Group
 
AG
 
had
 
no
 
authorized
 
capital
 
available
 
to
 
issue
 
on
31 December
2021
.
Changes in capital
In
 
accordance
 
with
 
International
 
Financial
 
Reporting
 
Standards
(IFRS),
 
Group
 
equity
 
attributable
 
to
 
shareholders
 
was
 
USD 60.7
billion
 
as
 
of
 
31 December
 
2021
 
(2020:
 
USD 59.4
 
billion;
 
2019:
USD 54.5 billion). The equity of UBS Group AG shareholders
 
was
represented
 
by 3,702,422,995
 
issued shares
 
as of
 
31 December
2021
 
(31 December 2020:
 
3,859,055,395 shares;
 
31 December
2019: 3,859,055,395 shares).
 
›
 
Refer to “Statement of changes in
 
equity” in the “
Consolidated
financial statements
” section on page 286 of this report for more
information about changes in shareholders’
 
equity over the last
three years
Ownership
Ownership of UBS
 
Group AG shares
 
is widely spread.
 
The tables
in this
 
section provide information
 
about the distribution
 
of UBS
Group AG shareholders by
 
category and
 
geographic location. This
information
 
relates
 
only
 
to
 
shareholders
 
registered
 
in
 
the
 
UBS
share register and cannot
 
be assumed to
 
be representative of UBS
Group
 
AG’s
 
entire
 
investor
 
base
 
or
 
the
 
actual
 
beneficial
ownership. Only
 
shareholders
 
registered
 
in the
 
share register
 
as
“shareholders with
 
voting rights”
 
are entitled
 
to exercise
 
voting
rights.
›
 
Refer to “Shareholders’ participation rights” in
 
this section for
more information
 
As
 
of
 
31
 
December
 
202
1
,
1,606,242,
231
 
UBS
 
Group
 
AG
shares
 
were
 
registered
 
in
 
the
 
share
 
register
 
and
 
carried
 
voting
rights, 295,987,073
 
shares were
 
registered in
 
the share
 
register
without
 
voting
 
rights,
 
and
1,800,193,691
 
shares
 
were
 
not
registered in the
 
UBS share register.
 
All shares were
 
fully paid up
and
 
eligible
 
for
 
dividends.
 
There
 
are
 
no
 
preferential
 
rights
 
for
shareholders, and no other classes of
 
shares have been issued by
UBS Group AG.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate governance and compensation | Corporate governance
194
Shareholders, legal entities and nominees: type and geographical distribution
Shareholders registered
As of 31 December 2021
Number
%
Individual shareholders
 
188,892
 
98.0
Legal entities
 
3,724
 
1.9
Nominees, fiduciaries
 
182
 
0.1
Total registered shares
Unregistered shares
Total
 
192,798
 
100.0
Individual shareholders
Legal entities
Nominees
Total
Number
%
Number
%
Number
%
Number
%
Americas
 
1,752
 
0.9
 
102
 
0.1
 
81
 
0.0
 
1,935
 
1.0
of which: USA
 
1,244
 
0.6
 
54
 
0.0
 
78
 
0.0
 
1,376
 
0.7
Asia Pacific
 
5,024
 
2.6
 
98
 
0.1
 
24
 
0.0
 
5,146
 
2.7
Europe, Middle East and Africa
 
11,988
 
6.2
 
218
 
0.1
 
45
 
0.0
 
12,251
 
6.4
of which: Germany
 
3,715
 
1.9
 
25
 
0.0
 
3
 
0.0
 
3,743
 
1.9
of which: UK
 
4,580
 
2.4
 
9
 
0.0
 
7
 
0.0
 
4,596
 
2.4
of which: rest of Europe
 
3,419
 
1.8
 
180
 
0.1
 
34
 
0.0
 
3,633
 
1.9
of which: Middle East and Africa
 
274
 
0.1
 
4
 
0.0
 
1
 
0.0
 
279
 
0.1
Switzerland
 
170,128
 
88.2
 
3,306
 
1.7
 
32
 
0.0
 
173,466
 
90.0
Total registered shares
Unregistered shares
Total
 
188,892
 
98.0
 
3,724
 
1.9
 
182
 
0.1
 
192,798
 
100.0
 
At
 
year-end 2021,
 
UBS
 
owned 302,81
 
5,328
 
UBS
 
Group
 
AG
registered shares,
 
which corresponded
 
to 8.18%
 
of the
 
total share
capital of UBS Group AG.
 
At the same time, UBS had
 
acquisition
positions relating to 327,114,543 voting rights of UBS Group AG
and
 
disposal
 
positions
relating
 
to
184,989,1
49
 
such
 
rights,
corresponding to 8.84%
 
and 5.00% of the
 
total voting rights of
UBS
 
Group
 
AG,
 
respectively.
 
Of
 
the
 
disposal
 
positions,
174,354,474
 
related
 
to
 
voting
 
rights
 
on
 
shares
 
deliverable
 
in
respect of employee awards.
 
The calculation methodology for
 
the
acquisition
 
and
 
disposal positions
 
is based
 
on
 
the
 
Ordinance of
the
 
Swiss
 
Financial
 
Market
 
Supervisory
 
Authority
 
on
 
Financial
Market
 
Infrastructures
 
and
 
Market
 
Conduct
 
in
 
Securities
 
and
Derivatives
 
Trading,
 
which
 
states
 
that
 
all
 
future
 
potential
 
share
delivery obligations,
 
irrespective of
 
the contingent
 
nature of
 
the
delivery, must be considered.
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. The
 
Equity Ownership
 
Plan (the
 
EOP) is
 
a mandatory
deferral
 
plan
 
for
 
all
 
employees
 
with
 
regulatory-driven
 
deferral
requirements
 
or
total
 
compensation
 
greater
 
than
 
USD
 
/
CHF 300,000,
 
excluding
 
selected
 
senior
 
leaders.
 
EOP
 
recipients
receive a portion of their deferred performance award in notional
shares (and / or
 
notional funds for Asset
 
Management). Selected
senior leaders receive
 
the equity-based Long-Term
 
Incentive Plan
(the
 
LTIP)
 
instead
 
of
 
the
 
EOP.
 
Both
 
the
 
EOP
 
and
 
LTIP
 
include
provisions
 
that
 
allow
 
the
 
firm
 
to
 
reduce
 
or
 
fully
 
forfeit
 
the
unvested deferred
 
portion of
 
an award
 
if an
 
employee commits
certain harmful
 
acts, and
 
in most
 
cases trigger
 
forfeiture
 
where
employment has been
 
terminated. To
 
reinforce our
 
emphasis on
sustainable performance and risk management, and our focus
 
on
achieving
 
growth
 
ambitions,
 
EOP
 
and
 
LTIP
 
awards
 
granted
 
to
certain
 
employees
 
will
 
only
 
vest
 
if
 
predetermined
 
performance
conditions are met.
On
 
31 December
 
2021,
 
UBS
 
employees
 
held
 
at
 
least
 
7%
 
of
UBS shares outstanding (including approximately 5% in unvested
notional shares from our
 
compensation programs). These figures
are
 
based
 
on
 
known
 
shareholding
 
information
 
from
 
employee
participation
 
plans,
 
personal
 
holdings
 
with
 
UBS
 
and
 
selected
individual retirement plans.
 
At the end
 
of 2021, at
 
least 30% of
all employees held UBS shares through the firm’s employee share
participation plans.
›
 
Refer to the “Compensation”
 
section on page 228 of this report
for more information
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.
 
Shares and participation certificates
UBS Group
 
AG has a
 
single class of
 
shares, which are
 
registered
shares in the form of uncertificated securities (in the
 
sense of the
Swiss Code
 
of Obligations)
 
and intermediary-held
 
securities (in
 
the
sense of the Swiss Federal
 
Act on Intermediated Securities). Each
registered share has a nominal value of CHF 0.10 and carries one
vote,
 
subject
 
to
 
the
 
restrictions
 
set
 
out
 
under
 
“Transferability,
voting rights and nominee registration” below.
We have no participation certificates outstanding.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
195
Shares registered
Number
%
 
407,015,326
 
11.0
 
532,743,019
 
14.4
 
962,470,959
 
26.0
 
1,902,229,304
 
51.4
 
1,800,193,691
 
48.6
 
3,702,422,995
 
100.0
Individual shareholders
Legal entities
Nominees
Total
Number of shares
%
Number of shares
%
Number of shares
%
Number of shares
%
 
2,353,309
 
0.1
 
38,231,738
 
1.0
 
314,298,798
 
8.5
 
354,883,845
 
9.6
 
895,352
 
0.0
 
32,243,999
 
0.9
 
314,079,349
 
8.5
 
347,218,700
 
9.4
 
20,738,978
 
0.6
 
12,399,087
 
0.3
 
8,213,841
 
0.2
 
41,351,906
 
1.1
 
44,135,588
 
1.2
 
70,477,887
 
1.9
 
623,075,242
 
16.8
 
737,688,717
 
19.9
 
12,300,749
 
0.3
 
1,303,330
 
0.0
 
10,696,165
 
0.3
 
24,300,244
 
0.7
 
19,457,985
 
0.5
 
288,377
 
0.0
 
578,307,924
 
15.6
 
598,054,286
 
16.2
 
11,187,562
 
0.3
 
30,050,555
 
0.8
 
33,946,355
 
0.9
 
75,184,472
 
2.0
 
1,189,292
 
0.0
 
38,835,625
 
1.0
 
124,798
 
0.0
 
40,149,715
 
1.1
 
339,787,451
 
9.2
 
411,634,307
 
11.1
 
16,883,078
 
0.5
 
768,304,836
 
20.8
 
407,015,326
 
11.0
 
532,743,019
 
14.4
 
962,470,959
 
26.0
 
1,902,229,304
 
51.4
 
0
 
0
 
0
 
1,800,193,691
 
48.6
 
407,015,326
 
11.0
 
532,743,019
 
14.4
 
962,470,959
 
26.0
 
3,702,422,995
 
100.0
 
Our shares are
 
listed on the
 
NYSE as global
 
registered shares.
As
 
such,
 
they
 
can
 
be
 
traded
 
and
 
transferred
 
across
 
applicable
borders,
 
without
 
the
 
need
 
for
 
conversion,
 
with
 
identical
 
shares
traded on different stock exchanges in different currencies.
›
 
Refer to “
UBS shares
” in the “
Capital, liquidity and funding, and
balance sheet
” section on page 183 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 2022 AGM,
 
the BoD intends
 
to propose to shareholders
for
 
approval
 
a
 
dividend
 
of
 
USD 0.50
 
per
 
share
 
for
 
the
 
2021
financial year. Shareholders whose
 
shares are held
 
through SIX SIS
AG
 
will
 
receive
 
dividends
 
in
 
Swiss
 
francs,
 
based
 
on
 
a
 
public
exchange
 
rate
 
on
 
the
 
day
 
prior
 
to
 
the
 
ex-dividend
 
date.
Shareholders
 
holding
 
shares
 
through
 
The
 
Depository
 
Trust
Company in New York and Computershare will be paid dividends
in US dollars.
 
In compliance with Swiss tax law, 50% of the dividend will be
paid out of retained earnings and the balance will
 
be paid out of
the
 
capital
 
contribution
 
reserve.
 
Dividends
 
paid
 
out
 
of
 
capital
contribution reserves are
 
not subject
 
to Swiss
 
withholding tax.
 
The
portion
 
of
 
the
 
dividend
 
paid
 
out
 
of
 
retained
 
earnings
 
will
 
be
subject to
 
a 35%
 
Swiss withholding
 
tax. For
 
US federal
 
income
tax
 
purposes,
 
we
 
expect
 
that
 
the
 
dividend
 
will
 
be
 
paid
 
out
 
of
current or accumulated earnings and profits.
Provided
 
that
 
the
 
proposed
 
dividend
 
distribution
 
out
 
of
retained earnings and
 
out of the capital
 
contribution reserve will
be
 
approved
 
at
 
the
 
AGM
 
on
 
6 April
 
2022,
 
the
 
payment
 
of
USD 0.50 per share
 
will be made
 
on 14 April 2022
 
to holders of
shares on the
 
record date 13 April
 
2022. The shares
 
will be traded
ex-dividend as of 12 April
 
2022 and, accordingly, the
 
last day on
which the
 
shares may
 
be traded
 
with entitlement
 
to receive
 
the
dividend will be 11 April 2022.
 
In
 
February 2021,
 
the
 
BoD
 
launched
 
a
 
new
 
three-year
 
share
buyback program.
 
At the
 
2021 AGM,
 
the shareholders
 
authorized
the
 
BoD
 
to
 
buy
 
back
 
shares
 
for
 
cancellation
 
purposes
 
in
 
an
aggregate value of up
 
to CHF 4 billion until
 
the 2024 AGM. Any
shares
 
bought
 
back
 
under
 
the
program
 
are
 
intended
 
to
 
be
canceled
 
by
 
way
 
of
 
capital
 
reduction,
 
which
 
will
 
be
 
subject
 
to
shareholder approval at
 
one or several
 
subsequent AGMs, and
 
the
acquisition and holding of
 
such shares are not
 
subject to the 10%
threshold for UBS Group AG’s own shares within the meaning of
Art. 659 para. 1 of the Swiss Code of Obligations. Since the start
of
 
this
 
2021
 
share
 
repurchase
 
program
 
in
 
February
 
2021
 
until
18 February
 
2022,
 
we
 
have
 
bought
 
back
 
CHF
 
2.78
 
billion
 
of
shares.
 
These shares
 
are expected
 
to be
 
canceled by means
 
of a
capital reduction, to be proposed for shareholder approval at
 
the
2022 AGM.
 
Looking
 
ahead,
 
we
 
intend
 
to
 
commence
 
a
 
new
 
2022
 
share
buyback
 
program
 
of
 
up
 
to
 
USD 6
 
billion over two
 
years
 
and
expect to execute up to USD 5 billion of share repurchases under
both the existing
 
2021 and the
 
new 2022 share
 
buyback program
by the end of 2022.
›
 
Refer to “
UBS shares
” in the “
Capital, liquidity and funding, and
balance sheet
” section on page 183 of this report for
 
more
information about the share repurchase programs
 
 
 
Corporate governance and compensation | Corporate governance
196
Transferability, voting rights and nominee registration
We
 
do
 
not
 
apply
 
any
 
restrictions
 
or
 
limitations
 
on
 
the
transferability of
 
shares. Voting
 
rights may
 
be exercised
 
without
any restrictions
 
by shareholders entered
 
into the share
 
register if
they
 
expressly
 
render
 
a
 
declaration
 
of
 
beneficial
 
ownership
according to the provisions of the Articles of Association.
We
 
have
 
special
 
provisions
 
for
 
the
 
registration
 
of
 
nominees.
Nominees are entered
 
in the share
 
register with voting
 
rights up
to a total of
 
5% of all issued
 
UBS Group AG shares if
 
they agree
to disclose, upon our request, beneficial owners holding 0.3% or
more of all issued UBS Group AG shares.
 
An exception to the 5%
voting
 
limit
 
rule is
 
in
 
place
 
for
 
securities
 
clearing organizations,
such as The Depository Trust Company in New York.
 
›
 
Refer to “Shareholders’ participation rights” in
 
this section for
more information
Convertible bonds and options
As
 
of
 
31
 
December
2021
,
there
 
were
 
no
 
contingent
 
capital
securities or convertible bonds outstanding
 
requiring the issuance
of new shares.
›
 
Refer to the “
Capital, liquidity and funding, and balance
 
sheet
”
section on page 150 of this report for more information
 
about
our outstanding capital instruments
 
As of 31 December
 
2021, there
 
were no employee
 
options and
stock
 
appreciation
 
rights
 
outstanding.
Option
-
based
compensation
 
plans
 
are
 
sourced
 
by
 
issuing
 
new
 
shares
 
out
 
of
conditional
 
capital.
 
As
 
of
 
31
 
December
 
2021
,
 
121,705,830
unissued UBS Group
 
AG shares in
 
conditional share capital
 
were
available for the issuance of new shares for this purpose.
 
 
›
 
Refer to “Conditional share capital” in this section
 
for more
information
 
›
 
Refer to “Note 28
 
Employee benefits: variable compensation
” in
the “
Consolidated financial statements
” section on page 387 of
this report for more information about outstanding
 
options and
stock appreciation rights
 
 
 
197
Shareholders’ participation rights
We
 
are
 
committed
 
to
 
shareholder
 
participation
 
in
 
decision-
making
 
processes.
 
Our
 
online
 
voting
 
platform
 
offers
 
registered
shareholders
 
a
 
convenient
 
log-in
 
and
 
online
 
voting
 
process.
Registered
 
shareholders
 
are
 
sent
 
personal
 
invitations
 
to
 
the
general
 
meetings.
 
Together
 
with
 
the
 
invitation
 
materials,
 
they
receive a personal one-time password and a QR
 
code to easily log
in to the
 
online voting platform,
 
where they can enter
 
their voting
instructions or order an admission card for the general meeting.
 
Shareholders
 
who
 
choose
 
not
 
to
 
receive
 
the
 
comprehensive
invitation materials
 
are informed
 
of upcoming
 
general meetings
by a
 
short letter containing
 
a personal one-time
 
password, a QR
code for online voting and a
 
reference to
ubs.com/agm
,
 
where all
information for the upcoming meeting is available.
General meetings
 
offer shareholders
 
the opportunity
 
to raise
questions
 
for
 
the
 
BoD,
 
GEB
 
and
 
internal
 
and
 
external
 
auditors.
Also,
 
prior
 
to
 
our
virtual
 
general
 
meetings,
 
we
 
offer
 
all
shareholders the opportunity to contact us with questions, which
are answered in writing or during the general meeting.
Voting rights, restrictions and representation
We
 
place
 
no
 
restrictions
 
on
 
share
 
ownership
 
and
 
voting rights.
However,
 
pursuant to general
 
principles formulated
 
by the BoD,
nominee companies, which normally represent a large number of
individual
 
shareholders
 
and
 
may
 
hold
 
an
 
unlimited
 
number
 
of
shares,
 
have
 
voting
 
rights
 
limited
 
to
 
a
 
maximum
 
of
 
5%
 
of
 
all
issued UBS
 
Group AG
 
shares. This
 
is to
 
avoid large
 
shareholders
being entered
 
in UBS’s
 
share register
 
via nominee
 
companies so
as
 
to
 
exercise
 
influence
 
without
 
directly
 
registering
 
their
 
shares
with
 
UBS.
 
Securities
 
clearing
 
organizations,
 
such
 
as
 
The
Depository Trust
 
Company in
 
New York,
 
are
 
not subject
 
to this
5% voting limit.
Shareholders
 
can
 
exercise
 
voting
 
rights
 
conferred
 
by
 
shares
only if they are registered in our share register
 
with voting rights.
To
 
register,
 
shareholders
 
must
 
confirm
 
that
 
they
 
have
 
acquired
UBS
 
Group
 
AG
 
shares
 
in
 
their
 
own
 
name
 
and
 
for
 
their
 
own
account. Nominee companies
 
are required to
 
sign an agreement
confirming
 
their
 
willingness
 
to
 
disclose,
 
upon
 
our
 
request,
individual beneficial owners holding more than
 
0.3% of all issued
UBS Group AG shares.
All
 
shareholders
 
registered
 
with
 
voting
 
rights
 
are
 
entitled
 
to
participate in
 
general meetings.
 
If they
 
do not
 
wish to
 
attend in
person, they
 
may issue
 
instructions to
 
support, reject
 
or abstain
for each individual item
 
on the meeting agenda,
 
either by giving
instructions
 
to an
 
independent proxy
 
in
 
accordance
 
with article
14
 
of
 
the
 
Articles
 
of
 
Association
 
(the
 
AoA)
 
or
 
by
 
appointing
another
 
registered
 
shareholder
 
of
 
their
 
choice
 
to
 
vote
 
on
 
their
behalf.
 
Alternatively,
 
registered
 
shareholders
 
may
 
issue
 
their
voting
 
instructions
 
to
 
the
 
independent
 
proxy
 
electronically
through our online
 
voting platform.
 
Nominee companies
 
normally
submit the
 
proxy material
 
to the
 
beneficial owners
 
and forward
the collected votes to the independent proxy.
In 2021,
 
physical attendance
 
at the
 
AGM was
 
not possible, due
to COVID-19-related restrictions in Switzerland, and voting rights
could only
 
be exercised
 
through the
 
independent proxy.
 
Due to
the ongoing
 
pandemic, the
 
BoD has
 
decided to
 
also hold
 
the 2022
AGM without the physical participation of shareholders.
›
 
Refer to article 14 of the Articles of Association
 
of UBS Group
AG, available at
ubs.com/governance
, for more information
about the issuing of instructions to independent
 
voting right
representatives
 
Statutory quorums
Motions are decided at a
 
general meeting by
 
an absolute majority
of
 
the
 
votes
 
cast,
 
excluding
 
blank
 
and
 
invalid
 
ballots.
 
For
 
the
approval of certain
 
specific issues, the Swiss Code
 
of Obligations
requires
 
a
 
positive
 
vote from
 
a two-thirds
 
majority of
 
the
 
votes
represented at
 
the given general
 
meeting, and from
 
an absolute
majority of the nominal value of
 
shares represented thereat. Such
issues
 
include
 
creating
 
shares
 
with
 
privileged
 
voting
 
rights,
introducing restrictions on the transferability of registered shares,
conditional
 
and
 
authorized
 
capital
 
increases
 
and
 
restricting
 
or
excluding shareholders’ preemptive rights.
 
The AoA
 
also require
 
a two-thirds
 
majority of
 
votes represented
for
 
approval
 
of
 
any
 
change
 
to
 
their
 
provisions
 
regarding
 
the
number of BoD members, any decision to remove one-quarter or
more of the BoD members and
 
any modification to the provision
establishing this qualified quorum.
Votes
 
and elections
 
are
 
generally
 
conducted electronically
 
to
ascertain
 
the
 
exact
 
number
 
of
 
votes
 
cast.
 
Voting
 
by
 
a
 
show
 
of
hands
 
is possible
 
if
 
a
 
clear majority
 
is predictable.
 
Shareholders
representing
 
at
 
least
 
3%
 
of
 
the
 
votes
 
represented
 
may
 
request
that a
 
vote or election
 
be carried out
 
electronically or
 
by written
ballot. To
 
allow shareholders
 
to clearly express
 
their views on
 
all
individual topics, each agenda
 
item is separately put
 
to a vote and
BoD members are elected on a person-by-person basis.
 
 
Corporate governance and compensation | Corporate governance
198
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
 
2022,
 
the
 
AGM
 
will
 
take
place on 6 April.
Extraordinary
 
General
 
Meetings
 
(EGMs)
 
may
 
be
 
convened
whenever
 
the
 
BoD
 
or
 
the
 
auditors
 
consider
 
it
 
necessary.
Shareholders individually
 
or jointly
 
representing at
 
least 10%
 
of
the
 
share
 
capital
 
may
 
at
 
any
 
time,
 
including
 
during
 
an
 
AGM,
require, by way of
 
a written statement, that
 
an EGM be convened
to address a specific issue they put forward.
A
 
personal
 
invitation,
 
including
 
a
 
detailed
 
agenda,
 
is
 
made
available to every registered shareholder
 
at least 20 days
 
ahead of
each
 
scheduled
 
general
 
meeting.
 
The
 
items
 
on
 
the
 
agenda
 
are
also published in the Swiss Official Gazette of Commerce, as well
as at
ubs.com/agm.
Placing of items on the agenda
Pursuant
 
to
 
our
 
AoA,
 
shareholders
 
individually
 
or
 
jointly
representing shares with an
 
aggregate minimum nominal
 
value of
CHF 62,500 may submit
 
proposals for matters
 
to be
 
placed on
 
the
agenda
 
for
 
consideration
 
at
 
the
 
next
 
general
 
meeting
 
of
shareholders.
At
 
the
 
beginning
 
of
 
January,
 
the
 
invitation
 
to
 
submit
 
such
proposals is published in the Swiss Official
 
Gazette of Commerce
and
 
at
ubs.com/agm.
 
Requests
 
for
 
items
 
to
 
be
 
placed
 
on
 
the
agenda
 
must
 
include
 
the
 
actual
 
motions
 
to
 
be
 
put
 
forward,
together
 
with
 
a
 
short
 
explanation.
 
Such
 
requests
 
must
 
be
submitted
 
to
 
the
 
BoD
 
50
 
days
 
prior
 
to
 
the
 
general
 
meeting
 
of
shareholders,
 
including
 
a
 
statement
 
from
 
the
 
depository
 
bank
confirming
 
the
 
number
 
of
 
shares
 
held
 
by
 
the
 
requesting
shareholder(s)
 
and that
 
these shares
 
are blocked
 
from
 
sale until
the
 
end
 
of
 
the
 
general
 
meeting
 
of
 
shareholders.
 
The
 
BoD
formulates
 
opinions
 
on
 
the
 
proposals,
 
which
 
are
 
published
together with the motions.
Registrations in the share register
The
 
share
 
register
 
of
 
UBS
 
Group
 
AG,
 
where
 
around
 
190,000
shareholders
 
are
 
directly
 
registered,
 
is
 
an
 
internal,
 
non-public
register
 
subject
 
to
 
statutory
 
confidentiality,
 
secrecy,
 
privacy
 
and
data protection regulations protecting registered shareholders. In
general, third
 
parties and shareholders
 
have no inspection
 
rights
with
 
regard to
 
data related
 
to other
 
shareholders.
 
Disclosure of
such data is
 
permitted only in
 
specific and limited
 
instances. In line
with the
 
Swiss Federal
 
Act on
 
Data Protection,
 
the disclosure
 
of
personal
 
data
 
as
 
defined
 
thereunder
 
is
 
only
 
allowed
 
with
 
the
consent of the registered shareholder and in cases where there is
an overriding private or public interest or if
 
explicitly provided for
by
 
Swiss
 
law.
 
The
 
Swiss
 
Federal
 
Act
 
on
 
Financial
 
Market
Infrastructures and
 
Market Conduct in
 
Securities and
 
Derivatives
Trading
 
contains specific
 
reporting
 
duties, such
 
as
 
in relation
 
to
significant shareholders (refer
 
to “Significant shareholders”
 
in this
section for more information). Disclosure may also be required or
requested
 
by
 
a
 
court
 
of
 
a
 
competent
 
jurisdiction,
 
by
 
any
regulatory body that
 
regulates the conduct
 
of UBS Group
 
AG or
by other statutory provisions.
The general
 
rules for
 
entry into
 
our Swiss
 
share register
 
with
voting rights are described in article 5
 
of our AoA. The same rules
apply to our US transfer agent
 
that operates the US share register
for
 
all
 
UBS Group
 
AG shares
 
in a
 
custodian account
 
in
 
the US,
where some 230,000 US shareholders are indirectly registered via
nominee
 
companies.
 
In order
 
to
 
determine
 
the voting
 
rights of
each shareholder, our share register generally closes two business
days
 
prior
 
to
 
a
 
general
 
meeting.
 
Our
 
independent
 
proxy
 
agent
processes
 
voting
 
instructions
 
from
 
shareholders
 
as
 
long
 
as
technically possible, generally also until two business days before
a
 
general
 
meeting.
 
Such
 
technical
 
closure
 
of
 
our
 
share
 
register
facilitates the
 
determination of
 
the actual
 
voting rights
 
of every
shareholder
 
that
 
issued
 
a
 
voting
 
instruction.
 
Irrespective
 
of
 
this
technical closure,
 
shares that
 
are registered
 
in our
 
share register
are
 
never
 
immobilized
 
and
 
are
 
freely
 
tradable
 
at
 
any
 
time,
irrespective of any issued voting instructions.
›
 
Refer to article 5 of the Articles of Association
 
of UBS Group AG,
available at
ubs.com/governance
, for more information about
the general rules for entry into our Swiss
 
share register
 
 
 
199
Board of Directors
 
The
 
BoD
 
of
 
UBS
 
Group
 
AG,
 
led
 
by
 
the
 
Chairman,
 
consists
 
of
between 6 and 12 members, as per our AoA.
 
The
 
BoD
 
decides
 
on
 
the
 
strategy
 
of
 
the
 
Group,
 
upon
recommendation by the Group
 
Chief Executive Officer (the
 
Group
CEO), and is responsible for the overall direction, supervision and
control of
 
the Group
 
and its
 
management. It
 
is also
 
responsible
for
 
supervising
 
compliance
 
with
 
applicable
 
laws,
 
rules
 
and
regulations. The BoD exercises oversight over UBS Group AG and
its subsidiaries,
 
and is
 
responsible for
 
establishing a
 
clear Group
governance
 
framework
 
to
 
provide
 
effective
 
steering
 
and
supervision of the Group,
 
taking into account the
 
material risks to
which UBS
 
Group AG
 
and its
 
subsidiaries are
 
exposed. The
 
BoD
has ultimate
 
responsibility for
 
the success
 
of the
 
Group and
 
for
delivering
 
sustainable
 
shareholder
 
value
 
within
 
a
 
framework
 
of
prudent and effective controls.
 
It approves all financial
 
statements
and appoints and removes all GEB members.
 
The
 
BoD
 
of
 
UBS AG,
 
led
 
by
 
the
 
Chairman,
 
decides
 
on
 
the
strategy of UBS AG upon recommendation by the President of its
Executive
 
Board
 
and
 
exercises
 
the
 
ultimate
 
supervision
 
of
management. Its ultimate
 
responsibility for the
 
success of
 
UBS AG
is exercised subject to the parameters set by the Group.
Members of the Board of Directors
At
 
the
 
AGM
 
on
 
8 April
 
2021,
 
Jeremy
 
Anderson,
 
William
 
C.
Dudley,
 
Reto Francioni, Fred Hu,
 
Mark Hughes, Nathalie Rachou,
Julie G. Richardson, Dieter Wemmer and Jeanette Wong were re-
elected as members of the BoD. Beatrice
 
Weder di Mauro did not
stand for
 
re-election; the
 
biography of
 
Ms. Weder
 
di Mauro can
be found on
 
page 190 of
 
the UBS Group
 
AG Annual Report
 
2020,
available under “Annual reporting” at
ubs.com/investors
. Claudia
Böckstiegel
 
and
 
Patrick
 
Firmenich
 
were
 
elected
 
for
 
their
 
first
terms.
 
At
 
that
 
same
 
AGM,
 
Axel
 
A.
 
Weber
 
was
 
re-elected
Chairman,
 
and
 
Julie
G.
Richardson,
 
Reto
 
Francioni,
 
Dieter
Wemmer
 
and
 
Jeanette
 
Wong
 
were
 
elected
 
as
 
members
 
of
 
the
Compensation Committee. ADB Altorfer Duss
 
& Beilstein AG was
elected as independent
 
proxy
 
agent. Following his
 
re-election, the
BoD
 
appointed
 
Jeremy
 
Anderson
 
as
 
Vice
 
Chairman
 
and
 
Senior
Independent Director of UBS Group AG.
On
 
20 November
 
2021,
 
the
 
BoD
 
announced
 
that
 
Colm
Kelleher
 
would
 
be
 
nominated
 
for
 
election
 
to
 
the
 
BoD
 
of
 
UBS
Group AG and UBS AG to succeed Axel A.
 
Weber as Chairman at
the forthcoming AGMs.
 
Mr. Kelleher was
 
the President of
 
Morgan
Stanley
 
&
 
Company,
 
and
 
responsible
 
for
 
Institutional
 
Securities
and
 
Wealth
 
Management
 
from
 
2016
 
to
 
2019.
 
In
 
his
 
30-year
career with Morgan Stanley,
 
he held various senior
 
management
positions,
 
including
 
Chief
 
Financial
 
Officer
 
during
 
the
 
financial
crisis
 
in
 
2008.
 
In
 
addition,
 
the
 
BoD
 
announced
 
that
 
Lukas
Gähwiler
 
would
 
be
 
nominated
 
for
 
election
 
to
 
the
 
BoD
 
of
 
UBS
Group
 
AG
 
and
 
UBS
 
AG
 
as
 
Vice
 
Chairman
 
at
 
the
 
forthcoming
AGMs.
 
Having joined
 
UBS in
 
2010 as
 
a member
 
of the
 
GEB of
UBS
 
AG
 
and
 
President
 
UBS
 
Switzerland,
 
Mr.
 
Gähwiler
 
stepped
down
 
from
 
those
 
roles
 
in 2016
 
and
 
has been
 
Chairman
 
of
 
the
board of directors of UBS
 
Switzerland AG since 2017.
 
He will step
down from the board of directors of
 
UBS Switzerland AG as of 5
April 2022.
Article
 
31
 
of
 
our
 
AoA
 
limits
 
the
 
number
 
of
 
mandates
 
that
members
 
of
 
the
 
BoD
 
may
 
hold
 
outside
 
UBS
 
Group
 
to
 
four
mandates
 
in
 
listed
 
companies
 
and
 
five
 
additional
 
mandates
 
in
non-listed companies. Mandates in companies that are
 
controlled
by
 
us
 
or
 
that
 
control
 
us
 
are
 
not
 
subject
 
to
 
this
 
limitation.
 
In
addition,
 
members
 
of
 
the
 
BoD
 
may
 
hold
 
no
 
more
 
than
 
10
mandates
 
at
 
UBS’s
 
request
 
and
 
10
 
mandates
 
in
 
associations,
charitable
 
organizations,
 
foundations,
 
trusts,
 
and
 
employee
welfare foundations. As
 
of 31 December 2021,
 
no member of
 
the
BoD reached the thresholds described in article 31 of our AoA.
 
The following biographies provide
 
information about the BoD
members
 
who
 
were in
 
office in
 
2021 and
 
the Group
 
Company
Secretary.
 
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 or has carried out
over
 
the past
 
three years
 
operational management
 
tasks within
the Group; therefore, all members
 
of the Board are non-executive
members.
All members of UBS
 
Group AG’s BoD are
 
also members of UBS
AG’s
 
BoD,
 
and
 
committee
 
membership
 
is
 
the
 
same
 
for
 
both
entities. The Senior Independent Director
 
function relates only to
UBS Group AG.
 
In 2021, UBS AG’s BoD had three permanent committees: the
Audit
 
Committee,
 
the
 
Compensation
 
Committee
 
and
 
the
 
Risk
Committee.
 
In
 
addition
 
to
 
those
 
permanent
 
committees,
 
UBS
Group
 
AG
 
also
 
had
 
the
 
Corporate
 
Culture
 
and
 
Responsibility
Committee and the Governance and Nominating Committee.
 
UBS_AR_2021p228i0.jpg
Corporate governance and compensation | Corporate governance
200
 
 
Axel A. Weber
 
Chairman of the Board of Directors and non-executive member
 
of
the Board since 2012
–
 
Chairperson of the Corporate Culture and Responsibility Committee
since 2013
–
 
Chairperson of the Governance and Nominating
 
Committee
 
since 2012
 
Nationality:
 
German |
Year of birth:
 
1957
 
Axel
 
A.
 
Weber
 
was
 
elected
 
Chairman
 
of
 
UBS
 
in
 
2012.
 
He
 
gained
international recognition
 
as the
 
President of
 
the Deutsche
 
Bundesbank.
During
 
his
 
six-year
 
tenure
 
there,
 
he
 
also
 
served
 
as
 
a
 
member
 
of
 
the
Governing Council of the
 
European Central Bank, a member
 
of the Board
of Directors of
 
the Bank for International Settlements,
 
German governor
of the
 
International Monetary
 
Fund and
 
a member
 
of the
 
G7 and
 
G20
Ministers
 
and
 
Governors.
 
As
 
an
 
expert
 
in
 
international
 
and
 
monetary
economics, Mr. Weber strove to
 
strengthen the Bundesbank’s
 
importance
in the
 
group of the
 
17 European central
 
banks and led
 
the Bundesbank
through the events of the
 
global real estate and
 
financial crisis. Before the
Deutsche Bundesbank, he
 
had a career as
 
a renowned expert in
 
monetary
and
 
currency
 
theories
 
through
 
his
 
academic
 
posts
 
at
 
several
 
German
universities.
 
Professional experience
2011 – 2012
Visiting professor, University of Chicago Booth School of
Business, USA (on leave, University of Cologne, Germany)
2011
Member of the Steering Committee, the European
Systemic Risk Board
2010 – 2011
Member of the Steering Committee, the Financial
 
Stability Board
2004 – 2011
President, Deutsche Bundesbank
2002 – 2004
Member, German Council of Economic Experts
2001 – 2004
Professor of International Economics and Director of the
Centre for Financial Research, University of Cologne
1998 – 2001
 
Professor for Applied Monetary Economics and Director
 
of the Center for Financial Studies, Goethe University
Frankfurt am Main
1994 – 1998
 
Professor of Economic Theory, University of Bonn
Education
–
 
Master’s degree, economics, University of Constance
–
 
Doctorate (Dr. rer.
 
pol.) and habilitation, economics,
 
University of Siegen, Germany
 
Other activities and functions
–
 
Vice Chairman of the Swiss Bankers Association
–
 
Member of the Board of Trustees of Avenir Suisse
–
 
Member of the Board of the Swiss Finance Council
–
 
Chairman of the Board of the Institute of International
 
Finance
–
 
Member of the European Financial Services Round Table
–
 
Member of the European Banking Group
–
 
Member of the International Advisory Councils
 
of the China Banking
and Insurance Regulatory Commission and the
 
China Securities
Regulatory Commission
–
 
Member of the International Advisory Panel,
 
Monetary Authority
 
of Singapore
–
 
Member of the Group of Thirty, Washington, DC
–
 
Member of the Advisory Board of the Department of
 
Economics,
University of Zurich
–
 
European Chairman of the Trilateral Commission
 
Key competencies
–
 
Finance, audit, accounting
–
 
Risk management, compliance and legal
–
 
Regulatory authority, central bank
–
 
ESG (environmental, social and governance)
 
Leadership experience
–
 
CEO, Chairman
 
 
UBS_AR_2021p229i1.jpgUBS_AR_2021p229i0.jpg
 
201
 
 
Jeremy Anderson
 
Vice Chairman and Senior Independent Director
 
since 2020 and
 
non-executive member of the Board since 2018
–
 
Member of the Governance and Nominating
 
Committee since 2019
–
 
Chairperson of the Audit Committee since 2018
 
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
Chairman of Global Financial Services,
 
KPMG International
2008
–
2011
Head of Clients and Markets KPMG Europe,
 
KPMG International
2006 – 2011
Head of Financial Services KPMG Europe,
 
KPMG International
2004 – 2006
Head of Financial Services KPMG UK,
 
KPMG International
2002 – 2004
Member of the Group Management Board and
 
Head of UK operations, Atos Origin SA
1985 – 2002
KPMG consulting UK, KPMG
1980 – 1985
Software developer, Triad
 
Computing Systems
 
Education
–
 
Bachelor’s degree, economics, University College London
 
Listed company boards
–
 
Member of the Board of Prudential plc
 
Other activities and functions
–
 
Trustee of the UK’s Productivity Leadership Group
–
 
Trustee of Kingham Hill Trust
–
 
Trustee of St. Helen’s Bishopsgate
 
Key competencies
–
 
Banking (wealth management, asset management,
 
personal and corporate banking) and insurance
–
 
Finance, audit, accounting
–
 
Risk management, compliance and legal
–
 
Technology,
 
cybersecurity
 
Leadership experience
–
 
Executive board leadership
 
 
Claudia Böckstiegel
 
Non-executive member of the Board since 2021
 
 
Nationality:
 
Swiss and German |
Year of birth:
 
1964
 
Claudia
 
Böckstiegel
 
has
 
been
 
General
 
Counsel
 
and
 
a
 
member
 
of
 
the
Enlarged
 
Executive
 
Committee
 
of
 
Roche
 
Holding
 
AG
 
since
 
2020.
 
She
started
 
her
 
professional
 
career
 
as
 
an
 
attorney
 
in
 
private
 
practice
 
in
Germany,
 
then joined the Swiss
 
pharmaceutical company in Germany in
2001 and subsequently held various global management positions in the
legal sector in Switzerland. Ms. Böckstiegel brings
 
a wealth of know-how
in
 
a
 
highly
 
regulated
 
sector.
 
Her
 
responsibilities
 
at
 
Roche
 
Holding
 
AG
include
 
a
 
broad
 
range
 
of
 
additional
 
topics,
 
such
 
as
 
safety,
 
health
 
&
environment,
 
patents,
 
audit
 
and
 
risk
 
advisory,
 
compliance
 
and
sustainability.
 
Professional experience
2020 – date
General Counsel and member of the Enlarged Executive
Committee, Roche Holding AG
2016 – 2020
Head of Legal Diagnostics, F. Hoffmann-La Roche Ltd.,
Basel, Switzerland, Roche Group
2010 – 2016
Head Legal Business, Roche Diagnostics International
 
Ltd,
Rotkreuz, Switzerland, Roche Group
2005 – 2010
Head Legal Business, Roche Diagnostics GmbH,
Mannheim, Germany, Roche Group
2001 – 2005
Legal Counsel, Roche Diagnostics GmbH,
 
Mannheim, Germany, Roche Group
1995 – 2001
Attorney (Partner), Philipp & Littig, Mannheim, Germany
1992 – 1995
Attorney (Associate), Dr. Hermann Büttner,
 
Karlsruhe, Germany
 
Education
–
 
Master’s degree, law, Universities of Mannheim and Heidelberg
–
 
Master of Laws (LL.M.), Georgetown University, Washington, DC
 
Key competencies
–
 
Risk management, compliance and legal
–
 
Finance, audit, accounting
–
 
ESG (environmental, social and governance)
–
 
Regulatory authority, central bank
 
Leadership experience
–
 
Executive board leadership
 
Other activities and functions
None
 
UBS_AR_2021p230i1.jpgUBS_AR_2021p230i0.jpg
Corporate governance and compensation | Corporate governance
202
 
 
William C. Dudley
 
Non-executive member of the Board since 2019
–
 
Member of the Governance and Nominating
 
Committee since 2020
–
 
Member of the Corporate Culture and Responsibility Committee
 
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
2009 – 2018
President and CEO, Federal Reserve Bank of New York,
USA
2007 – 2009
Executive Vice President and Head Markets Group,
 
Federal Reserve Bank of New York, USA
2006
Senior advisor (part-time), Goldman Sachs Group, USA
2002 – 2005
Partner and Director US Economic Research Group,
Goldman Sachs Group, USA
1996 – 2002
Managing Director and Director US Economic Research
Group, Goldman Sachs Group, USA
1983 – 1996
Economist at Goldman Sachs Group, Morgan Guaranty
Trust Company,
 
and Board of Governors of the Federal
Reserve System
 
Education
–
 
Bachelor of Arts, New College of Florida
–
 
Doctorate, economics, University of California, Berkeley
 
Non-listed company boards
–
 
Member of the Board of Treliant LLC
 
Other activities and functions
–
 
Senior Advisor to the Griswold Center for Economic
 
Policy Studies,
Princeton University
–
 
Member of the Group of Thirty
–
 
Member of the Council on Foreign Relations
–
 
Chair of the Bretton Woods Committee Board of Directors
–
 
Member of the Board of the Council for Economic
 
Education
 
Key competencies
–
 
Investment banking, capital markets
–
 
Risk management, compliance and legal
–
 
Regulatory authority, central bank
–
 
ESG (environmental, social and governance)
 
Leadership experience
–
 
CEO, Chairman
 
 
Patrick Firmenich
 
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
 
has
 
been
 
Chairman
 
of
 
the
 
Board
 
of
 
Firmenich
International
 
SA,
 
the
 
world’s
 
largest
 
privately
 
owned
 
fragrances
 
and
flavorings company, since 2016,
 
after leading the
 
company as CEO
 
during
a
 
12-year
 
tenure.
 
He
 
demonstrated
 
his
 
entrepreneurial
 
leadership
 
by
significantly
 
advancing
 
the
 
Firmenich
 
group’s
 
global
 
position
 
through
organic and in-organic growth and successfully continuously
 
transformed
the organization to respond to client needs and the market
 
environment.
He developed
 
an ambitious
 
sustainability strategy
 
for the
 
group to
 
lead
the
 
industry
 
in
 
health,
 
safety
 
and
 
environmental
 
performance.
 
Before
joining
 
Firmenich,
 
he
 
held
 
several
 
positions
 
in
 
the
 
legal
 
and
 
banking
sectors, including working
 
as an international
 
investment banking
 
analyst.
 
Professional experience
2014 – 2016
Vice Chairman of the Board, Firmenich International
 
SA
2002 – 2014
CEO, Firmenich SA, Geneva
2001 – 2002
Corporate Vice President, Special Operations,
 
Firmenich SA, Geneva
1997 – 2001
Vice President Fine Fragrance worldwide and Président
Directeur Général, Firmenich & Cie, Paris and
 
Firmenich Inc, New York
1993
–
1997
Vice President Fine Fragrance North America,
 
Firmenich Inc, New York
1990 – 1993
Account Manager, Firmenich & Cie, Paris
1988 – 1989
Analyst, International Investment Banking,
 
Credit Suisse
First Boston
1988
Production administrator, Firmenich SA de CV, Mexico
1984 – 1986
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
 
Non-listed company boards
–
 
Member of the Board of Jacobs Holding AG
 
Other activities and functions
–
 
Member of the Board of INSEAD and INSEAD World Foundation
–
 
Member of the Advisory Council of the Swiss Board Institute
 
Key competencies
–
 
Risk management, compliance and legal
–
 
Finance, audit, accounting
–
 
ESG (environmental, social and governance)
–
 
Banking (wealth management, asset management, personal
 
and
corporate banking) and insurance
 
Leadership experience
–
 
CEO, Chairman
 
 
UBS_AR_2021p231i1.jpgUBS_AR_2021p231i0.jpg
 
203
 
 
Reto Francioni
 
Non-executive member of the Board since 2013
–
 
Member of the Compensation Committee since 2019
–
 
Member of the Risk Committee since 2015
 
Nationality:
 
Swiss |
Year of birth:
 
1955
 
Reto Francioni, as the former CEO of Deutsche Börse, can draw on many
years of
 
experience in
 
the financial
 
world. Prior
 
to his
 
role at
 
Deutsche
Börse, he
 
was Chairman
 
of the
 
Supervisory Board
 
and President
 
of the
SWX Group, Zurich,
 
placing him at
 
the heart of
 
digitalization within the
financial sector. In both positions, he
 
drove a fundamental transformation
to
 
reshape
 
the firms
 
as
 
world
 
leaders
 
in
 
technology.
 
Mr.
 
Francioni
 
has
been
 
a
 
professor
 
of applied
 
capital markets
 
theory at
 
the University
 
of
Basel since 2006
 
and is the
 
author of several
 
highly respected books
 
on
capital markets issues. He
 
has also served as
 
an independent director on
the boards of various major corporations.
 
Professional experience
2005 – 2015
CEO, Deutsche Börse AG
2002 – 2005
Chairman of the Supervisory Board and President,
 
SWX Group, Zurich
2000 – 2002
Co-CEO and Spokesman for the Board of Directors,
Consors AG, Nuremberg
1999 – 2000
Deputy CEO, Deutsche Börse AG, Frankfurt am Main
1993 – 2000
Member of the Executive Board, Deutsche Börse AG,
Frankfurt am Main
1992 – 1993
Director, Corporate Finance, Hoffmann-La Roche, Basel
1989 – 1992
Deputy Director and deputy CEO, Association Tripartite
Bourses, Zurich
1985 – 1988
Equity sales and legal, Credit Suisse, New York and Zurich
1981 – 1984
Union Bank of Switzerland
 
Education
–
 
Master’s degree and doctorate, law, University of Zurich
 
Listed company boards
–
 
Member of the Board of Coca-Cola HBC AG (Senior Independent
Non-Executive Director, chair of the nomination committee)
 
Non-listed company boards
–
 
Chairman of the Board of Swiss International
 
Air Lines AG
–
 
Vice Chairman of the Board of MTIP AG
 
Other activities and functions
–
 
Member of the Board of economiesuisse
 
Key competencies
–
 
Investment banking, capital markets
–
 
Risk management, compliance and legal
–
 
Human resources management, including compensation
–
 
Technology,
 
cybersecurity
 
Leadership experience
–
 
CEO, Chairman
 
 
Fred Hu
 
Non-executive member of the Board since 2018
–
 
Member of the Governance and Nominating
 
Committee since 2020
–
 
Member of the Risk Committee since 2020
 
Nationality:
 
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, building the
firm’s
 
Asia
 
Pacific
 
franchise.
 
Mr.
 
Hu
 
has
 
a
 
profound
 
understanding
 
of
Chin
a’s
 
economy
 
and
 
rapidly
 
developing
 
financial
 
system,
and
vast
amount of experience advising and investing in leading firms in the tech,
consumer and health
 
care sectors in
 
China and globally.
 
He has worked
at the IMF and advised the Chinese government
 
on economic policy.
 
 
Professional experience
2010
–
date
Founder, Chairman & CEO,
 
Primavera Capital Group, China
2008 – 2010
Partner and Chairman of Greater China, Goldman Sachs
2004 – 2008
Partner and Co-Head, Investment Banking, China,
Goldman Sachs
2003 – 2004
Managing Director and Co-Head, Investment Banking,
China, Goldman Sachs
1997 – 2003
Executive Director, then Managing Director and Chief
Economist and Strategist, Greater China, Goldman Sachs
1996 – date
Co-Director, the National Center for Economic Research
1996 – date
Adjunct Professor, Economics,
 
Tsinghua University
 
Education
–
 
Master’s degree, engineering science, Tsinghua University
–
 
Master’s degree and doctorate, economics, Harvard University
 
Listed company boards
–
 
Non-executive Chairman of the Board of Yum China Holdings
 
(chair of the nomination and governance committee)
–
 
Member of the Board of ICBC
 
Non-listed company boards
–
 
Chairman of Primavera Capital Ltd
–
 
Member of the Board of Ant Group
–
 
Member of the Board of Minsheng Financial Leasing Co.
 
Other activities and functions
–
 
Trustee of the China Medical Board
–
 
Governor of the Chinese International
 
School in Hong Kong SAR
–
 
Co-Chairman of the Nature Conservancy Asia Pacific Council
–
 
Member of the Board of Trustees,
 
the Institute for Advanced Study
–
 
Director and member of the Executive Committee of China
 
Venture
Capital and Private Equity Association Ltd.
 
Key competencies
–
 
Investment banking, capital markets
–
 
Risk management, compliance and legal
–
 
Technology,
 
cybersecurity
–
 
Regulatory authority, central bank
 
Leadership experience
–
 
CEO, Chairman
UBS_AR_2021p232i1.jpgUBS_AR_2021p232i0.jpg
Corporate governance and compensation | Corporate governance
204
 
 
Mark Hughes
 
Non-executive member of the Board since 2020
–
 
Chairperson of the Risk Committee since 2020
–
 
Member of the Corporate Culture and Responsibility Committee
 
since 2020
 
Nationality:
 
Canadian, British and American (US) |
Year of birth:
 
1958
 
Mark
 
Hughes
 
is a
 
veteran in
 
the financial
 
services sector,
 
having spent
more
 
than
 
35
 
years
 
working
 
for
 
the
 
Royal
 
Bank
 
of
 
Canada
 
(RBC)
 
in
Canada, in the US and
 
the UK. In his final
 
role as Group Chief Risk Officer
of RBC,
 
he was
 
responsible for
 
the strategic management
 
of risk
 
on an
enterprise-wide basis
 
and oversaw all
 
risk functions. During
 
his career, Mr.
Hughes has also held
 
senior management positions
 
in the front office
 
and
key operational roles. Currently, he is a
 
visiting lecturer at Leeds
 
University
and is chair of the Global Risk Institute, bringing
 
an enormous amount of
experience as a risk specialist to the Board of Directors of UBS.
 
Professional experience
2014 – 2018
Group Chief Risk Officer and member Group Executive
Committee, Royal Bank of Canada
2013
Deputy Chief Risk Officer, Royal Bank of Canada
2008 – 2013
Chief Operating Officer, RBC Capital Markets, Royal Bank
of Canada
2001 – 2008
Head of Global Credit, Royal Bank of Canada
1999 – 2001
Head of Debt Products, Royal Bank of Canada
1998 – 1999
Senior Vice President and General Manager USA,
 
Royal Bank of Canada
1997 – 1998
Senior Vice President Financial Services, Royal Bank
of Canada
1982 – 1996
Various positions, Royal Bank of Canada
 
Education
–
 
Bachelor of Laws (LL.B.), University of Leeds
–
 
MBA, finance, University of Manchester
 
Other activities and functions
–
 
Chair of the Board of Directors of the Global Risk Institute
–
 
Visiting lecturer at the University of Leeds
–
 
Senior advisor to McKinsey & Company
 
Key competencies
–
 
Banking (wealth management, asset management,
 
personal and corporate banking) and insurance
–
 
Investment banking, capital markets
–
 
Risk management, compliance and legal
–
 
Technology,
 
cybersecurity
 
Leadership experience
–
 
Executive board leadership
 
 
Nathalie Rachou
 
Non-executive member of the Board since 2020
–
 
Member of the Risk Committee since 2020
 
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
2015
–
2020
Senior Advisor, Clartan Associés
 
(formerly Rouvier Associés), France
1999
–
2014
Founding partner and CEO,
 
Topiary Finance Ltd., UK
1996
–
1999
Head of Global Foreign Exchange and Currency Options,
Crédit Agricole Indosuez (formerly Banque Indosuez), UK
1991 – 1996
Corporate Secretary and Secretary to the
 
Board of Directors, Crédit
 
Agricole Indosuez, France
1986 – 1991
COO, Carr Futures, France (owned by Banque Indosuez),
Crédit Agricole Indosuez, France
1983 – 1986
Head of Asset
 
and Liability
 
Management
 
& Market
 
Risks,
Crédit Agricole
 
Indosuez,
 
France
1978 – 1982
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)
 
Other activities and functions
–
 
Member of the Board of the African Financial Institutions
 
Investment
Platform
 
Key competencies
–
 
Banking (wealth management, asset management,
 
personal and corporate banking) and insurance
–
 
Investment banking, capital markets
–
 
Risk management, compliance and legal
–
 
Finance, audit, accounting
 
 
UBS_AR_2021p233i1.jpgUBS_AR_2021p233i0.jpg
 
205
 
 
Julie G. Richardson
 
Non-executive member of the Board since 2017
–
 
Chairperson of the Compensation Committee since 2019
–
 
Member of the Governance and Nominating
 
Committee since 2019
–
 
Member of the Risk Committee since 2017
 
Nationality:
 
American (US) |
Year of birth:
 
1963
 
Julie G.
 
Richardson spent more
 
than 25 years
 
on Wall
 
Street as
 
a senior
investment banker with
 
a focus on
 
telecom, media and
 
technology. She
began her career at Merrill
 
Lynch, before moving to JPMorgan,
 
where she
headed
 
the
 
telecommunications,
 
media
 
and
 
technology
 
investment
banking group. Later, she moved into private equity,
 
as head of the New
York
 
office
 
of
 
Providence
 
Equity
 
Partners.
 
Throughout
 
her
 
career,
Ms. Richardson has spent significant time with both
 
incumbent and new
technology
 
companies,
 
including
 
being
 
a
 
board
 
member
 
of
 
a
 
digital
knowledge management company and a leading cloud monitoring
 
firm.
 
Professional experience
2012 – 2014
Senior advisor, Providence Equity Partners, New York
2003
–
2012
Partner and Head of the New York office,
 
Providence Equity Partners, New York
1998
–
2003
Vice Chairman of the Investment Banking division
 
of
JPMorgan Chase & Co. and Head of its Global
Telecommunications, Media and Technology
 
group
1986 – 1998
Various position at Merrill Lynch, final position:
 
Managing Director Media and Communications
Investment Banking
 
Education
–
 
Bachelor’s degree, business administration, University of
 
Wisconsin–Madison
 
Listed company boards
–
 
Member of the Board of Yext (chair of the audit committee)
–
 
Member of the Board of Datadog (chair of the audit committee)
 
Key competencies
–
 
Investment banking, capital markets
–
 
Risk management, compliance and legal
–
 
Human resources management, including compensation
–
 
Technology,
 
cybersecurity
 
 
Dieter Wemmer
 
Non-executive member of the Board since 2016
–
 
Member of the Governance and Nominating
 
Committee since 2020
–
 
Member of the Audit Committee since 2019
–
 
Member of the Compensation Committee since 2018
 
Nationality:
 
Swiss
 
and German
 
|
Year of
 
birth:
 
1957
 
Dieter Wemmer
 
began his
 
esteemed
 
career in the
 
insurance
 
sector with
 
the
Zurich Group
 
in 1986, retiring
 
in 2017 as CFO of Allianz.
 
As a long-serving
CFO of
 
two large
 
multi-national
 
companies
 
in the
 
financial
 
services
 
sector, he
brings
 
deep experience
 
across a broad
 
range of highly
 
relevant
 
topics to
 
the
table. Mr.
 
Wemmer brings
 
to
 
the
 
BoD
 
knowledge covering accounting,
finance
 
and audit,
 
including
 
capital markets,
 
investments,
 
risk management,
as well
 
as asset
 
management.
 
His know-how
 
includes
 
hands-on
 
experience
 
in
M&A and
 
management
 
of large
 
organizations
 
with
 
a dedication
 
to strategy.
 
Professional experience
2013 –
 
2017
CFO, Allianz SE
2012
–
2013
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
2007 –
 
2011
CFO, Zurich Insurance Group
2010 –
 
2011
Regional Chairman of Europe, Zurich Insurance Group
2004 –
 
2007
CEO of the Europe General Insurance business
 
and member of Zurich’s Group Executive Committee,
Zurich Insurance Group
2003 –
 
2004
COO of Europe General Insurance, Zurich Insurance Group
1999 –
 
2003
Head of Mergers and Acquisitions, Zurich Insurance Group
1997 –
 
1999
Head of Financial Controlling, Zurich Insurance Group
 
Education
–
 
Master’s degree and doctorate, mathematics, University
 
of Cologne
 
Listed company boards
–
 
Member of the Board of Ørsted A/S
 
(chair of the audit and risk committee)
 
Non-listed company boards
–
 
Chairman of Marco Capital Holdings Limited,
 
Malta and subsidiaries
 
Other activities and functions
–
 
Member of the Berlin Center of Corporate Governance
 
Key competencies
–
 
Banking (wealth management, asset management,
 
personal and corporate banking)
 
and insurance
–
 
Investment banking, capital markets
–
 
Finance, audit, accounting
–
 
Risk management, compliance and legal
 
Leadership experience
–
 
Executive board leadership
 
 
UBS_AR_2021p234i1.jpgUBS_AR_2021p234i0.jpg
 
Corporate governance and compensation | Corporate governance
206
 
 
Jeanette Wong
 
Non-executive member of the Board since 2019
–
 
Member Compensation Committee since 2020
–
 
Member of the Corporate Culture and Responsibility Committee
 
since 2020
–
 
Member of the Audit Committee since 2019
 
Nationality:
 
Singaporean |
Year of birth:
 
1960
 
Jeanette
 
Wong
 
has
 
spent more
 
than 30
 
years working
 
in
 
the financial
sector in Singapore. She retired from DBS Group in 2019, where she was
Group Executive responsible for the institutional banking business,
 
a post
which
 
encompassed
 
corporate
 
banking,
 
global
 
transaction
 
services,
strategic advisory and
 
mergers and acquisitions.
 
Prior to that, she
 
held the
position of
 
CFO at
 
DBS
 
Bank. During
 
a
 
16-year career
 
with JPMorgan,
Ms. Wong helped build
 
up its Asia
 
and emerging markets
 
business. She
brings extensive
 
experience from
 
serving as
 
a member
 
of the
 
board of
directors of two highly valued listed companies.
 
Professional experience
2008 – 2019
Group Executive institutional banking business,
 
DBS Bank, Singapore
2003 – 2008
CFO, DBS Bank
2003
Chief Administration Officer, DBS Bank, Singapore
1997 – 2002
Country Manager Singapore, JPMorgan Chase, Singapore
1986 – 1997
Various roles in Global Markets and Emerging Markets
Sales and Trading business, Asia,
 
JPMorgan Chase,
Singapore
1984 – 1986
Manager, Private Banking,
 
Citibank, Singapore
1982 – 1984
Manager, Corporate Banking, Paribas, Singapore
 
Education
–
 
Bachelor’s degree, business administration, the National University
 
of Singapore
–
 
MBA, University of Chicago
 
Listed company boards
–
 
Member of the Board of Prudential plc
–
 
Member of the Board of Singapore Airlines Limited
 
Non-listed company boards
–
 
Member of the Board Risk Committee of GIC Pte Ltd
–
 
Member of the Board of Jurong Town Corporation
–
 
Member of the Board of PSA International
 
Other activities and functions
–
 
Chairman of the CareShield Life Council
–
 
Member of the Securities Industry Council
–
 
Member of the Board of Trustees of the National University
 
of Singapore
 
Key competencies
–
 
Banking (wealth management, asset management,
 
personal and corporate banking) and insurance
–
 
Investment banking, capital markets
–
 
Finance, audit, accounting
–
 
ESG (environmental, social and governance)
 
Leadership experience
–
 
Executive board leadership
 
 
Markus Baumann
 
Group Company Secretary since 2017
 
Nationality:
 
Swiss |
Year of birth:
1963
 
Markus Baumann
 
joined UBS
 
in 1979
 
as a
 
banking apprentice
and has now been with the firm
 
for more than 40 years. Earlier
in his
 
career,
 
he worked
 
in Japan
 
for four
 
years, as
 
Corporate
Planning Officer
 
and assistant
 
to the
 
CEO. He
 
then worked
 
as
COO
 
EMEA for
 
UBS
 
Asset Management
 
and
 
has
 
since
 
held a
broad range of leadership roles across the Group
 
in Switzerland,
the US and Japan, including
 
COO of Group Internal Audit from
2006 to 2015.
 
Professional experience
2017 – date
Group Company Secretary of UBS Group AG
 
and Company Secretary of UBS AG
2015 – 2016
Chief of Staff to the Chairman of the Board of
Directors, UBS
 
2006 – 2015
COO, Group Internal Audit, UBS
 
2005 – 2006
Head Global Reporting & Controlling,
 
Global Asset Management, UBS
 
2002 – 2004
Head Management Support CEO EMEA,
 
Global Asset Management, UBS
 
1998 – 2002
COO EMEA, Global Asset Management, UBS
 
1979 – 1997
Various positions, Union Bank of Switzerland
 
Education
–
 
Swiss Federal Diploma as a Business Analyst
–
 
MBA, INSEAD Fontainebleau
 
207
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.
 
Due
 
to
 
the
 
continued COVID-19
 
pandemic,
 
all
meetings were organized as video calls, with the
 
exception of the
meeting
 
held
 
in
 
October
 
2021.
 
Additional
 
video
 
calls
 
were
organized
 
during
 
the
 
reporting
 
period
 
to
 
facilitate
 
social
engagement and
 
interaction between
 
the members
 
of the
 
BoD.
During 2021, a total of 24 BoD meetings were held, 12 of
 
which
were attended by
 
GEB members.
 
Average participation in
 
the BoD
meetings was 99%. In addition to the BoD meetings attended by
GEB members, the Group CEO attended
 
some of the meetings of
the BoD without GEB participation. The meetings had an
 
average
duration of
 
130 minutes
 
and covered
 
both UBS
 
Group AG
 
and
UBS AG. Additionally, 10 ad hoc calls were held, 6 of which were
attended by
 
GEB members.
 
The BoD
 
held a
 
number of
 
strategy
workshops throughout
 
the year,
 
during which
 
the results
 
of the
new CEO’s in-depth strategy review were
 
covered. These strategy
workshops
 
included
 
deep
 
dives
 
on
 
each
 
business
 
division
 
and
geographical
 
region,
 
and
 
topics
 
such
 
as
 
the
 
definition
 
of
 
the
p
urpose,
 
vision
 
and
 
strategic
 
imperatives
,
 
as
 
well
 
as
 
the
digitalization
 
of
 
the
 
business,
 
sustainable
 
finance,
 
cultural
 
and
behavioral
aspects
,
including
 
agile
 
approaches
 
to
ways
 
of
working.
 
The
 
strategy
 
discussions
 
were
 
completed
 
in
 
October
2021,
 
when the
 
overarching strategy
 
and implementation
 
plans
were agreed upon.
 
At
 
the
 
BoD
 
meetings,
 
each
 
committee
 
Chairperson
 
provides
the
 
BoD
 
with
 
an
 
update
 
on
 
current
 
activities
 
of
 
his
 
or
 
her
committee and important committee issues.
 
In 2021, four UBS AG BoD meetings were held with members
of
 
the
 
Executive
 
Board
 
in
 
attendance.
 
Standalone
 
meetings are
held regularly
 
to discuss
 
and agree
 
on finance,
 
risk, compliance,
operational risk,
 
regulatory and
 
other topics
 
related to
 
UBS AG.
We
 
also
 
continued
 
with
 
the
 
coordination
 
and
 
exchange
 
of
information
 
between
 
UBS
 
Group
 
AG
 
and
 
its
 
significant
 
group
entities. Joint meetings
 
between the BoD
 
of UBS Group
 
AG and
the boards of directors of the significant group entities, as well
 
as
between the
 
respective chairs
 
of the
 
risk and
 
audit committees,
have been held. As in prior years, an
 
annual workshop, attended
by
 
independent
 
members
 
of
 
the
 
boards
 
of
 
the
 
Group
 
and
significant group entities, was held.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate governance and compensation | Corporate governance
208
Performance assessment
Every third year, an external
 
assessment of
 
the effectiveness of
 
the
BoD is
 
conducted. In
 
2022, this
 
review
 
concluded that
 
the UBS
BoD and committees
 
operate effectively, in line
 
with best
 
practice,
and set a high standard in
 
comparison with leading international
peers. The review
 
also confirmed that
 
the BoD agenda
 
covers all
important
 
and
 
relevant
 
topics
 
and
 
that
 
these
 
are
 
addressed
professionally and
 
in great
 
depth. It
 
further found
 
that the
 
BoD
members are
 
independent, highly committed
 
and of the
 
highest
integrity, and that the Chairman provides effective
 
leadership and
direction. The
 
review emphasized
 
that the
 
cooperation between
the
 
BoD
 
and
 
the
 
GEB
 
is
 
based
 
on
 
mutual
 
trust,
 
respect
 
and
constructive dialogue.
 
The mix
 
of expertise
 
in the
 
BoD is
 
broad-
based and the quality of BoD members is high. The BoD and GEB
have
 
responded
 
well
 
to
 
the
 
economic
 
environment,
 
including
successfully managing the firm through
 
the COVID-19 pandemic
and
other
 
significant
 
challenges,
 
while
 
maintaining
 
an
appropriate
 
focus
 
on
 
control
 
and
 
regulatory
 
issues.
 
The
 
review
highlights the successful CEO
 
transition and onboarding and
 
the
well-planned
 
and
 
professionally
 
executed
 
Chairman
 
succession
process. No significant weaknesses were
 
identified in the review,
areas
 
to
 
be
 
further
 
focused
 
on
 
included
 
the
 
maintaining
 
of
 
a
balanced
 
agenda
 
that
 
provides
 
sufficient
 
room
 
for
 
business
performance, strategic review and growth initiatives.
 
BoD committees
The
 
committees listed
 
on the
 
following pages
 
assist the
 
BoD in
the
 
performance
 
of
 
its
 
responsibilities.
 
These
 
committees
 
and
their
 
charters
 
are
 
described
 
in
 
our
 
Organization
 
Regulations,
available at
ubs.com/governance.
 
The committees meet
 
as often
as their business requires, but
 
no less than four
 
times a year in
 
the
case
 
of
 
the
 
Audit
 
Committee,
 
the
 
Risk
 
Committee
 
and
 
the
Compensation Committee,
 
and no less
 
than two times
 
a year in
the case of
 
the Corporate Culture
 
and Responsibility Committee
and
 
the
 
Governance
 
and
 
Nominating
 
Committee.
 
Topics
 
of
common
 
interest
 
or
 
affecting
 
more
 
than
 
one
 
committee
 
are
discussed at joint committee meetings.
 
During
 
2021,
 
a
 
total of
 
nine joint
 
committee meetings
 
were
held
 
for
 
UBS
 
Group
 
AG
 
(seven
 
joint
 
committee
 
meetings
 
were
held simultaneously
 
for UBS
 
AG). The
 
Risk Committee
 
held two
meetings
 
with
 
the
 
Compensation
 
Committee,
two
 
with
 
the
Corporate
 
Culture
 
and
 
Responsibility
 
Committee,
 
and
 
five
 
with
the Audit Committee.
 
 
 
Board of Directors
Members in 2021
Meeting attendance
without GEB
3
Meeting attendance
with GEB
4
Key responsibilities include:
Axel A. Weber, Chairman
12/12
100%
12/12
100%
The Board has ultimate responsibility for the success of
 
the Group and
for delivering sustainable shareholder value within
 
a framework of
prudent and effective controls. It decides on the Group’s
 
strategy and
the necessary financial and human resources upon recommendation
 
of
the Group CEO and sets the Group’s values and standards to
 
ensure
that its obligations to shareholders and other stakeholders
 
are met.
›
 
Refer to the Organization Regulations of UBS Group
 
AG,
available at
ubs.com/governance
, for more information
Jeremy Anderson
12/12
100%
12/12
100%
Claudia Böckstiegel
1
10/10
100%
8/8
100%
William C. Dudley
12/12
100%
12/12
100%
Patrick Firmenich
1
10/10
100%
8/8
100%
Reto Francioni
12/12
100%
12/12
100%
Fred Hu
11/12
92%
11/12
92%
Mark Hughes
12/12
100%
12/12
100%
Nathalie Rachou
12/12
100%
12/12
100%
Julie G. Richardson
12/12
100%
12/12
100%
Beatrice Weder di Mauro
2
2/2
100%
4/4
100%
Dieter Wemmer
12/12
100%
12/12
100%
Jeanette Wong
12/12
100%
12/12
100%
1
 
Claudia Böckstiegel and Patrick Firmenich were elected to the Board at the 2021 AGM; indicated are their attended and total meetings after their election.
 
2
 
Beatrice Weder di Mauro did not stand for re-election at
the 2021 AGM; indicated are her attended and total meetings up to the 2021 AGM.
 
3
 
Additionally, four ad hoc calls took place in 2021.
 
4
 
Additionally, six ad hoc calls took place in 2021.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
209
Audit Committee
Throughout
 
2021,
 
the
 
Audit
 
Committee
 
consisted
 
of
 
four
 
BoD
members, all
 
of whom
 
were determined
 
by the
 
BoD to
 
be fully
independent. As a group, members
 
of the Audit Committee
 
must
have
 
the
 
necessary
 
qualifications
 
and
 
skills
 
to
 
perform
 
all
 
their
duties and together
 
must possess financial
 
literacy and experience
in banking and risk management.
The Audit
 
Committee itself
 
does not
 
perform audits;
 
instead,
it oversees the
 
work of the external
 
auditors, Ernst & Young
 
Ltd,
who
 
in
 
turn
 
are
 
responsible
 
for
 
auditing
 
the
 
annual
 
financial
statements of UBS Group AG
 
and UBS AG and for reviewing
 
the
quarterly financial statements.
In particular, the
 
Audit Committee monitors
 
the integrity of
 
the
financial
 
statements
 
of
 
UBS
 
Group
 
AG
 
and
 
UBS
 
AG
 
and
 
any
announcements
 
related
 
to
 
financial
 
performance,
 
and
 
reviews
significant
 
financial
 
reporting
 
judgments
 
contained
 
in
 
them,
before recommending their approval
 
to the BoD or
 
proposing any
adjustments the Audit Committee considers appropriate.
The
 
Audit
 
Committee
 
oversees
 
the
 
relationship
 
with,
 
and
assesses the qualifications, expertise,
 
effectiveness, independence
and
 
performance
 
of,
 
the
 
external
 
auditors
 
and
 
the
 
lead
 
audit
partner,
 
and
 
supports
 
the
 
BoD
 
in
 
reaching
 
decisions
 
on
 
the
appointment, reappointment or dismissal of the external auditors
and the rotation of the lead
 
audit partner. The BoD then submits
proposals for shareholder approval at the AGM.
During
 
2021,
 
the
 
Audit
 
Committee
 
held
 
13
 
committee
meetings, with
 
a participation
 
rate of
 
100%. The
 
meetings had
an average
 
duration of
 
approximately 145
 
minutes and
 
covered
both UBS Group AG
 
and UBS AG. Additional attendees
 
included
the Chairman
 
of the
 
BoD, the
 
Group CEO,
 
the Group
 
CFO, the
Group Controller and
 
Chief Accounting Officer,
 
the Head Group
Internal
 
Audit (GIA)
 
and the
 
external
 
auditors.
 
The
 
Chairperson
and
 
the
 
committee
 
continued
 
to
 
maintain
 
regular
 
contact
 
with
core supervisory authorities.
 
All
 
Audit
 
Committee
 
members
 
have
 
accounting
 
or
 
related
financial management expertise
 
and, in compliance with
 
the rules
established pursuant to the 2002 US Sarbanes–Oxley Act, at
 
least
one member
 
qualifies as
 
a financial
 
expert. The
 
NYSE standards
on corporate governance and Rule 10A-3 under the
 
US Securities
Exchange Act set
 
more stringent independence requirements
 
for
members of audit committees than for the other members of the
BoD. Throughout 2021, all
 
members of the Audit
 
Committee, in
addition
 
to
 
satisfying
 
our
 
independence
 
criteria,
 
satisfied
 
these
requirements,
 
in
 
that
 
they
 
did
 
not
 
receive,
 
directly
 
or
 
indirectly,
any consulting, advisory or compensatory
 
fees from any member
of the
 
Group other
 
than in
 
their capacity as
 
a BoD
 
member, did
not hold, directly or
 
indirectly, UBS Group AG shares
 
in excess of
5%
 
of
 
the
 
outstanding
 
capital,
 
and
 
did
 
not
 
serve
 
on
 
the
 
audit
committees of more than two other public companies.
 
 
 
Audit Committee
Members in 2021
Meeting attendance
3
 
Key responsibilities include:
Jeremy Anderson (Chairperson)
13/13
100%
The function of the Audit Committee is to support
 
the Board in fulfilling its oversight duty relating
to financial reporting and internal controls over financial
 
reporting, the effectiveness of the
external and internal audit functions,
 
and the effectiveness of whistleblowing procedures.
Management is responsible for the preparation, presentation
 
and integrity of the financial
statements, while the external auditors
 
are responsible for auditing financial statements. The
 
Audit
Committee’s responsibility is one of oversight
 
and review.
›
 
Refer to the Organization Regulations of UBS Group
 
AG,
 
available at
ubs.com/governance,
 
for more information
Patrick Firmenich
1
9/9
100%
 
Beatrice Weder di Mauro
2
4/4
100%
Dieter Wemmer
13/13
100%
Jeanette Wong
13/13
100%
1
 
Patrick Firmenich was elected to this committee at the 2021 AGM; indicated
 
are his attended and total meetings after his election.
 
2
 
Beatrice Weder di Mauro did not stand for re-election
 
at the 2021 AGM; indicated
are her attended and total meetings up to the 2021 AGM.
 
3
Additionally, the Audit Committee held one ad hoc call.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate governance and compensation | Corporate governance
210
Compensation Committee
The
 
Compensation
 
Committee
 
consisted
 
of
 
four
 
independent
BoD members throughout 2021, as indicated
 
in the table below.
In addition to the key responsibilities indicated in the
 
same table,
the
 
Compensation
 
Committee
 
reviews
 
the
 
compensation
disclosures included in this report.
During
 
2021,
 
the
Co
mpensation
 
Committee
 
held
 
nine
meetings,
 
with
 
a
n
 
average
 
participation
 
rate
 
of
 
97%.
 
The
meetings had
 
an average
 
duration of
 
approximately 90
 
minutes
and covered both UBS Group AG and UBS
 
AG. All meetings were
held
 
in the
 
presence of
 
the
 
Chairman
 
and the
 
Group CEO
 
and
most
 
were
 
attended
 
by
 
external
 
advisors.
In
2021
,
 
the
Chairperson met regularly with core supervisory authorities.
 
›
 
Refer to “Compensation for the Board of Directors”
 
in the
“Compensation” section on page 258 of
 
this report for more
information about the Compensation
 
Committee’s decision-
making procedures
Corporate Culture and Responsibility Committee
In
 
2021,
 
the
 
Corporate
 
Culture
 
and
 
Responsibility
 
Committee
consisted
 
of
 
the
 
Chairperson
 
and
 
four
 
independent
 
BoD
members.
 
The Group
 
CEO, the
 
Group
 
Chief Regulatory
 
Officer,
the President Asset
 
Management and GEB lead
 
for Sustainability
and
 
Impact,
 
and
 
the
 
Chief Sustainability
 
Officer
 
are
 
permanent
guests
 
of
 
the
 
Corporate
 
Culture
 
and
 
Responsibility
 
Committee.
During 2021, six meetings were held, with a
 
participation rate of
100
%.
 
The
 
average
 
duration
 
of
 
each
 
of
 
the
 
meetings
 
was
approximately 80 minutes.
 
Compensation Committee
Members in 2021
Meeting attendance
1
 
Key responsibilities include:
Julie G. Richardson (Chairperson)
9/9
100%
The Compensation Committee is responsible for:
(i)
supporting the Board in its duties to set guidelines
 
on compensation and benefits;
(ii)
 
approving the total compensation for the Chairman
 
and the non-independent Board members;
(iii) proposing, upon proposal of the Chairman, financial
 
and non-financial performance targets
and objectives for the Group CEO for approval by the
 
Board and reviewing,
upon the proposal
of the Group CEO, the performance f
ramework for the other GEB members;
(iv) proposing, upon proposal of the Chairman, the Group CEO’s
 
performance assessment for
approval by the Board, as well as informing the Board of the performance
 
assessments of
all GEB members, including the Group CEO
;
(v)
proposing, upon proposal
of the Chairman, the total compensation
 
for the Group CEO for
approval by the Board; and
(vi)
 
proposing, upon proposal of the Group CEO, the individual total
 
compensation for the other
GEB members for approval by the Board.
›
 
Refer to the Organization Regulations of UBS Group
 
AG,
 
available at
ubs.com/governance,
 
for more information
Reto Francioni
8/9
89%
Dieter Wemmer
9/9
100%
Jeanette Wong
9/9
100%
1
Additionally, the Compensation Committee held four ad hoc calls.
 
Corporate Culture and Responsibility Committee
Members in 2021
Meeting attendance
 
Key responsibilities include:
Axel A. Weber (Chairperson)
 
6/6
100%
The Corporate Culture and Responsibility Committee
 
supports the Board in its duties to safeguard
and advance the Group’s reputation for responsible and sustainable
 
conduct. Its function is
forward-looking in that it monitors and reviews societal
 
trends and transformational developments
and assesses their potential relevance for the Group.
In undertaking this assessment, it reviews stakeholder
 
concerns and expectations pertaining
 
to the
societal performance of UBS and to the development
 
of its corporate culture. The Corporate
Culture and Responsibility Committee’s function
 
also encompasses the monitoring of the
 
current
state and implementation of the programs and initiatives
 
within the Group pertaining to corporate
culture and corporate responsibility,
 
including sustainability.
›
 
Refer to the Organization Regulations of UBS Group
 
AG,
 
available at
ubs.com/governance
, for more information
William C. Dudley
6/6
100%
Patrick Firmenich
1
4/4
100%
Mark Hughes
6/6
100%
Beatrice Weder di Mauro
2
2/2
100%
Jeanette Wong
6/6
100%
1
 
Following the 2021 AGM, Patrick Firmenich became a member of this committee; indicated are his attended and total meetings after his election.
 
2
 
Beatrice Weder di Mauro did not stand for re-election at the 2021
AGM; indicated are her attended and total meetings up to the 2021 AGM.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
211
Governance and Nominating Committee
In 2021,
 
the Governance
 
and Nominating
 
Committee consisted
of the Chairperson and five independent members. During 2021,
nine meetings were held,
 
with a participation rate of 100%.
 
The
average duration
 
of each of
 
the meetings was
 
approximately 75
minutes. The Group CEO attended meetings as appropriate.
Risk Committee
In
 
2021,
 
the
 
Risk
 
Committee
 
consisted
 
of
 
six
 
independent
members.
 
During 2021,
 
the Risk
 
Committee held
 
11 committee
meetings,
 
with
 
a
 
participation
 
rate
 
of
 
100%.
 
The
 
average
duration of each
 
of the meetings
 
was approximately 205
 
minutes,
covering both UBS Group
 
AG and UBS AG.
 
The Group CEO,
 
the
Group CFO, the Group Chief Risk Officer,
 
Group COO and later
 
the
 
Group
 
Chief
Digital
 
and
 
Information
 
Officer,
 
the
 
Group
Treasurer,
 
the Group Chief Compliance
 
and Governance Officer,
the
 
Group
 
General
 
Counsel,
 
and
 
the
 
Head
 
GIA
 
attended
 
the
meetings.
 
In
 
2021,
 
the
 
Chairperson
 
or
 
the
 
full
 
committee
 
met
with core supervisory authorities.
Ad hoc committees
 
The Special
 
Committee and
 
the Strategy
 
Committee are
 
two ad
hoc
 
committees,
 
which
 
have
 
a
 
standing
 
composition
 
and
 
hold
meetings as and when required.
 
Leading
 
up
 
the
 
2021
 
AGM,
 
the
 
Special
 
Committee
 
was
composed
 
of
 
four BoD
 
members.
 
Jeremy
 
Anderson
 
chaired the
Special
 
Committee,
 
with
 
Nathalie
 
Rachou,
 
Julie
 
G.
 
Richardson,
and
 
Axel
 
A.
 
Weber
 
as
 
its
 
members;
 
after
 
the
 
AGM,
 
Claudia
Böckstiegel joined
 
the Special
 
Committee. Its
 
primary purpose
 
is
to
 
oversee
 
activities
 
related
 
to
 
key
 
litigation
 
and
 
investigation
matters, review
 
management’s respective
 
proposals and
 
send to
the BoD
 
recommendations for
 
decisions. In
 
2021, the
 
key focus
was
 
the
 
French
 
cross-border
 
matter.
 
The
 
Group
 
CEO
 
and
 
the
Group General
 
Counsel are
 
permanent guests.
 
During 2021,
 
six
meetings were held, covering both UBS Group AG and UBS AG.
 
The Strategy
 
Committee is
 
composed of
 
four BoD
 
members.
Its primary purpose is to
 
support management and the BoD with
regard to the assessment of strategic considerations and to assist
with
 
the
 
planning of
 
the annual
 
strategy meetings
 
for
 
the BoD
and
 
the
 
GEB.
 
The
 
committee
 
sends
 
recommendations
 
for
decisions
 
to
 
the
 
BoD.
 
Axel
 
A.
 
Weber
 
chaired
 
the
 
Strategy
Committee, with William C. Dudley, Fred Hu and Dieter
 
Wemmer
as
 
its
 
members.
 
During
 
2021,
 
one
 
meeting
 
was
 
held,
 
covering
both
 
UBS
 
Group
 
AG and
 
UBS AG.
 
The
 
Group
 
CEO,
 
the
 
Group
CFO and the
 
Head Corporate Development
 
& Performance were
present.
 
 
Governance and Nominating Committee
Members in 2021
Meeting attendance
1
 
Key responsibilities include:
Axel A. Weber (Chairperson)
9/9
100%
The function of the Governance and
 
Nominating Committee is to support the Board in fulfilling
 
its
duty to establish best practices in corporate governance
 
across the Group, including conducting a
Board assessment, establishing and maintaining
 
a process for appointing new Board and GEB
members, as well as for the annual performance
 
assessment of the Board.
›
 
Refer to the Organization Regulations of UBS Group
 
AG,
 
available at
ubs.com/governance
, for more information
Jeremy Anderson
9/9
100%
William C. Dudley
9/9
100%
Fred Hu
9/9
100%
Julie G. Richardson
9/9
100%
Dieter Wemmer
9/9
100%
1
Additionally, the Governance and Nominating Committee held five ad hoc calls.
 
Risk Committee
Members in 2021
Meeting attendance
1
 
Key responsibilities include:
Mark Hughes (Chairperson)
11/11
100%
The function of the Risk Committee is to oversee
 
and support the Board in fulfilling its duty to set
and supervise an appropriate risk management
 
and control framework in the areas of:
 
(i)
financial and non
-
financial risks
; and
(ii)
 
balance sheet, treasury and capital management, including
 
funding,
 
liquidity and
equity attribution.
›
 
Refer to the Organization Regulations of UBS Group
 
AG,
 
available at
ubs.com/governance
, for more information
William C. Dudley
11/11
100%
Reto Francioni
11/11
100%
Fred Hu
11/11
100%
Nathalie Rachou
11/11
100%
Julie G. Richardson
11/11
100%
1
Additionally, the Risk Committee held four ad hoc calls.
 
 
Corporate governance and compensation | Corporate governance
212
Roles and responsibilities of the Chairman of the Board of
Directors
At
 
the
 
2022
 
AGM,
 
Axel
 
A.
 
Weber
 
will
 
step
 
down
 
and
 
Colm
Kelleher will
 
stand for
 
election as
 
the full-time
 
Chairman of
 
the
BoD. The
 
Chairman coordinates
 
tasks within
 
the BoD,
 
calls BoD
meetings
 
and
 
sets
 
their
 
agendas.
 
He
 
presides
 
over
 
all
 
general
meetings
 
of
 
shareholders
 
and
 
works
 
with
 
the
 
committee
Chairpersons
 
to
 
coordinate
 
the
 
work
 
of
 
all
 
BoD
 
committees.
Together
 
with
 
the
 
Group
 
CEO,
 
the
 
Chairman
 
undertakes
responsibility for UBS’s reputation, and is responsible for
 
effective
communication
 
with
 
shareholders
 
and
 
other
 
stakeholders,
including
 
government
 
officials,
 
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 on page 44 and
 
the fold-out pages of this
report for information about our Pillars, Principles
 
and Behaviors
 
In
 
2021,
 
the
 
Chairman
 
met
 
regularly
 
with
 
core
 
supervisory
authorities
 
in
 
all
 
major
 
locations
 
where
 
UBS
 
is
 
active.
 
Meetings
with important
 
supervisory authorities
 
were scheduled
 
on an
 
ad
hoc or needs-driven basis.
Roles and responsibilities of the Vice Chairmen and the
Senior Independent Director
 
 
The
 
BoD
 
appoints
 
one
 
or
 
more
 
Vice
 
Chairmen
 
and
 
a
 
Senior
Independent
 
Director.
 
If
 
the
 
BoD
 
appoints
 
more
 
than
 
one
 
Vice
Chairman, at
 
least one
 
of them
 
must be
 
independent. Both
 
the
Vice Chairman and
 
the Senior Independent
 
Director support
 
the
Chairman with
 
regard
 
to his
 
responsibilities and
 
authorities and
provide him
 
with advice.
 
In conjunction
 
with the
 
Chairman and
the Governance and Nominating Committee, they facilitate good
Group-wide corporate governance,
 
as well as
 
balanced leadership
and
 
control
 
within
 
the
 
Group,
 
the
 
Board
 
and
 
the
 
committees.
Jeremy
 
Anderson
 
has
 
been
 
the
 
Vice
 
Chairman
 
and
 
Senior
Independent
 
Director
 
since
 
2020
 
and
 
it
 
is
 
planned
 
that
 
he
 
will
remain
 
Senior
 
Independent
 
Director
 
following
 
the
 
2022
 
AGM.
Lukas Gähwiler will be appointed as Vice Chairman following the
2022
 
AGM. The
 
Vice
 
Chairman is
 
required
 
to
 
lead and
 
has
 
led
meetings of the BoD
 
in the temporary absence of
 
the Chairman.
Together
 
with the Governance and Nominating Committee, he is
tasked with the ongoing
 
monitoring and the annual
 
evaluation of
the Chairman. He also represents UBS on behalf of the Chairman
in
 
meetings
 
with
 
internal
 
or
 
external
 
stakeholders.
 
The
 
Senior
Independent Director
 
enables and
 
supports communication
 
and
the flow
 
of information
 
among the
 
independent BoD
 
members.
At
 
least
 
twice
 
a
 
year,
 
he
 
organizes
 
and
 
leads
 
a
 
meeting
 
of
 
the
independent
 
BoD
 
members
 
without
 
the
 
participation
 
of
 
the
Chairman.
 
In 2021,
 
two independent
 
BoD meetings
 
were held,
covering
 
both
 
UBS
 
Group
 
AG
 
and
 
UBS
 
AG,
 
with
 
an
 
average
participation
 
rate
 
of
 
81%
 
and
 
an
 
average
 
duration
 
of
approximately 85 minutes.
 
The Senior Independent
 
Director also
relays
 
to
 
the
 
Chairman
 
any
 
issues
 
or
 
concerns
 
raised
 
by
 
the
independent
 
BoD
 
members
 
and
 
acts
 
as
 
a
 
point
 
of
 
contact
 
for
shareholders
 
and
 
stakeholders
 
seeking
 
discussions
 
with
 
an
independent BoD member.
 
Important business connections of independent members
of the Board of Directors
As a global financial services
 
provider and a major Swiss
 
bank, we
enter
 
into
 
business
 
relationships
 
with
 
many
 
large
 
companies,
including some in which our BoD members have management or
independent
 
board
 
responsibilities.
 
The
 
Governance
 
and
Nominating Committee determines in each instance whether the
nature of the Group’s business relationship with such a company
might
 
compromise
 
our
 
BoD
 
members’
 
capacity
 
to
 
express
independent judgment.
Our
 
Organization
 
Regulations
 
require
 
three-quarters
 
of
 
the
UBS Group AG
 
BoD members and one-third
 
of those at UBS
 
AG
to be independent. For this purpose,
 
independence is determined
in
 
accordan
ce
 
with
 
FINMA
 
Circular
2017/1
 
“Corporate
governance – banks” and the NYSE rules.
 
In
 
2021,
 
our
 
BoD
 
met
 
the
 
standards
 
of
 
the
 
Organization
Regulations
 
for the
 
percentage of
 
directors who
 
are
 
considered
independent
 
under
 
the
 
criteria
 
described
 
above.
 
Since
 
our
Chairman has a
 
full-time contract with UBS
 
Group AG, he is
 
not
considered independent. No other BoD member has a
 
significant
business
 
connection
 
to
 
UBS
 
or
 
any
 
of
 
its
 
subsidiaries.
 
No
 
BoD
member
 
currently
 
carries
 
out,
 
or
 
has
 
carried
 
out
 
over
 
the
 
past
three years, operational management tasks within the Group.
 
All
 
relationships
 
and
 
transactions
 
with
 
UBS
 
Group
 
AG’s
independent BoD members are conducted in
 
the ordinary course
of business and are
 
on the same terms as
 
those prevailing at the
time for comparable
 
transactions with non-affiliated
 
persons. All
relationships
 
and
 
transactions
 
with
 
BoD
 
members’
 
associated
companies are conducted at arm’s length.
›
 
Refer to “Note 31 Related parties” in the “
Consolidated financial
statements
” section on page 397 of this report
 
for more
information
Checks and balances: Board of Directors and Group
Executive Board
We operate
 
under a strict
 
dual board
 
structure, as
 
mandated by
Swiss banking law. The separation of responsibilities between the
BoD
 
and
 
the
 
GEB
 
is
 
clearly
 
defined
 
in
 
the
 
Organization
Regulations. The BoD decides on the strategy
 
of the Group,
 
upon
recommendations
 
by
 
the
 
Group
 
CEO,
 
and
 
exercises
 
ultimate
supervision over
 
management; whereas
 
the GEB, headed
 
by the
Group
 
CEO,
 
has
 
executive
 
management
 
responsibility.
 
The
functions
 
of
 
Chairman
 
and
 
Group
 
CEO
 
are
 
assigned
 
to
 
two
different people, leading to a separation
 
of power. This
 
structure
establishes
 
checks
 
and
 
balances
 
and
 
preserves
 
the
 
institutional
independence of the BoD from the executive
 
management of the
Group, for which responsibility
 
is delegated to
 
the GEB, under
 
the
leadership
 
of
 
the
 
Group
 
CEO.
 
No
 
member
 
of
 
one
 
board
 
may
simultaneously be a member of the other.
Supervision and control
 
of the GEB remain
 
with the BoD. The
authorities and responsibilities of the two bodies are governed
 
by
the AoA and the Organization Regulations.
 
 
UBS_AR_2021p241i0.gif
 
213
Skills, expertise and training of the Board of Directors
The BoD is
 
composed of members
 
with a broad spectrum
 
of skills,
educational backgrounds, experience and expertise from
 
a range
of sectors that reflect the nature
 
and scope of the firm’s
 
business.
With a view to recruiting needs, the Governance
 
and Nominating
Committee uses a
 
competencies and experience
 
matrix to identify
any
 
gaps
 
in
 
the
 
competencies
 
considered
 
most
 
relevant
 
to
 
the
BoD, taking
 
into consideration the
 
firm’s business
 
exposure, risk
profile, strategy and geographic reach.
We
 
asked
 
our
 
BoD
 
membe
rs
 
to
select
 
their
 
four
 
key
competencies from the following eight categories and to indicate
whether
 
they
 
have
 
ever
 
been
 
a
 
CEO
 
or
 
chairperson
 
of
 
a
 
listed
company or a member
 
of the executive board
 
of such a company:
Key competencies
–
 
banking
 
(wealth
 
management,
 
asset
 
management,
 
personal
and corporate banking) and insurance
–
 
investment banking, capital markets
 
–
 
finance, audit, accounting
 
–
 
risk management, compliance and legal
 
–
 
human resources management, including compensation
–
 
technology, cybersecurity
–
 
regulatory authority, central bank
 
–
 
environmental,
 
social and governance (ESG)
Leadership experience
–
 
experience as CEO or chairperson
–
 
executive board leadership experience
 
(e.g., as CFO, chief
 
risk
officer or COO of a listed company)
 
The
 
Governance
 
and
 
Nominating
 
Committee
 
reviews
 
these
categories and ratings annually
 
to confirm that the
 
BoD continues
to
 
possess
 
the
 
most
 
relevant
 
experience
 
and
 
competencies
 
to
perform its duties.
With
 
regard
 
to
 
the
 
BoD
 
composition
 
after
 
the
 
2021
 
AGM,
members
 
thereof
 
identified
 
all
 
of
 
the
 
target
 
competencies
 
as
being
 
their
 
key
 
competencies.
 
Particularly
 
strong
 
levels
 
of
experience and expertise existed in these areas:
–
 
financial services
 
–
 
risk management, compliance and legal
 
–
 
finance, audit, accounting
 
Furthermore, 10 of
 
the 12 BoD
 
members have held
 
or currently
hold chairperson,
 
CEO or
 
other executive
 
board-level leadership
positions.
Moreover,
 
education
 
remained
 
an
 
important
 
priority
 
for
 
our
BoD members. In addition to
 
a comprehensive induction program
for new BoD
 
members, continuous
 
training and
 
topical deep
 
dives
are part of the BoD agenda.
 
›
 
Refer to “Risk governance” in the
 
“
Risk management and
control
” section on page 103 of this report for information
 
about
our risk governance framework
 
 
 
 
 
UBS_AR_2021p242i0.gif
Corporate governance and compensation | Corporate governance
214
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 2021, the
 
Chairman and the
 
members of the
 
BoD and the
GEB
 
launched
 
several
 
strategic
 
initiatives
 
with
 
the
 
close
involvement of the
 
BoD and with
 
the aim of
 
further strengthening
UBS. The succession plans
 
for the GEB and
 
the management layer
below it are managed under the
 
lead of the Group CEO. The
 
BoD
reviews and approves the succession plans of the GEB.
For
 
the
 
BoD,
 
the
 
Chairman
 
leads
 
a
 
systematic
 
succession
planning process as illustrated in the chart below.
Our strategy and
 
the business environment
 
constitute the main
drivers in our succession planning process for
 
new BoD members,
as they define the key competencies required on the BoD. Taking
the diversity and the tenure of the existing BoD into account, the
Governance
 
and
 
Nominating
 
Committee
 
defines
 
the
 
recruiting
profile
 
for
 
the
 
search.
 
Both
 
external
 
and
 
internal
 
sources
contribute to
 
identifying suitable
 
candidates. The
 
Chairman and
the
 
members
 
of
 
the
 
Governance
 
and
 
Nominating
 
Committee
meet with potential
 
candidates and, with
 
the support of
 
the full
BoD, nominations
 
are submitted
 
to the
 
AGM for
 
approval. New
BoD members follow
 
an in-depth onboarding
 
process designed to
enable them to integrate efficiently and become effective in their
new
 
role.
Due
 
to
 
this
 
succession
 
planning
 
process,
 
the
composition
 
of
 
the
 
BoD
 
is
 
in
 
line
 
with
 
the
 
demanding
requirements of a leading global financial services firm.
 
The succession
 
of both
 
the CEO
 
and Chairman,
 
as well
 
as of
GEB
 
members,
 
was smoothly
 
planned
 
and is
 
being
 
carried out,
demonstrating
 
the
 
strength
 
and
 
success
 
of
 
the
 
succession
planning at UBS.
 
 
 
 
 
 
 
215
Information and control instruments with regard to the
Group Executive Board
The BoD is
 
kept informed of
 
the GEB’s activities in
 
various ways,
including
 
regular
 
meetings
 
between
 
the
 
Chairman,
 
the
 
Group
CEO and GEB members.
 
The Group CEO and
 
other GEB members
also
 
participate
 
in
 
BoD
 
meetings
 
to
 
update
 
its
 
members
 
on
 
all
significant
 
issues.
 
The
 
BoD
 
also
 
receives
 
regular
 
comprehensive
reports, covering
 
financial, capital,
 
funding, liquidity,
 
regulatory,
compliance
 
and
 
legal
 
developments,
 
as
 
well
 
as
 
performance
against
 
plan
 
and
 
forecasts
 
for
 
the
 
remainder
 
of
 
the
 
year.
 
For
important developments, BoD
 
members are
 
also updated by
 
the
GEB in between meetings. In addition, the Chairman receives the
meeting material and minutes of the GEB meetings.
BoD members
 
may request
 
from other
 
BoD or
 
GEB members
any
 
information about
 
matters concerning
 
the Group
 
that they
require
 
in
 
order
 
to
 
fulfill
 
their
 
duties.
 
When
 
these
 
requests
 
are
raised outside BoD meetings, such requests must
 
go through the
Group Company Secretary and be addressed to the Chairman.
 
The
 
BoD
 
is
 
supported
 
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 on page 108 of this report for information
 
about
reporting to the BoD
 
Corporate governance and compensation | Corporate governance
216
Group Executive Board
The BoD delegates the
 
management of the business
 
to the Group
Executive Board (the GEB).
 
Responsibilities, authorities and organizational principles
of the Group Executive Board
As of
 
31 December 2021,
 
the GEB,
 
under the
 
leadership of
 
the
Group
 
CEO,
 
consisted
 
of
12
 
members.
 
It
 
has
 
executive
management responsibility
 
for the
 
steering of
 
the Group and
 
its
business
 
and
 
assumes
 
overall
 
responsibility
 
for
 
developing
 
the
strategies of
 
the Group,
 
business divisions
 
and Group
 
Functions
and implements the BoD approved strategies. The GEB is also the
risk
 
council
 
of
 
the
 
Group,
 
with
 
overall
 
responsibility
 
for
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 2021,
 
the GEB
 
held a
 
total of
 
66 meetings
 
for UBS
 
Group
AG.
 
At UBS
 
AG, management
 
of the
 
business is
 
also delegated,
 
and
its
 
Executive
 
Board,
 
under
 
the
 
leadership
 
of
 
its
 
President,
 
has
executive management responsibility for
 
UBS AG and
 
its business.
In
 
2021,
 
all
 
members
 
of
 
the
 
GEB
 
were
 
members
 
of
 
UBS
 
AG’s
Executive Board,
 
with the exception
 
of Sabine Keller-Busse,
 
who
served as President
 
UBS Switzerland AG.
 
The Executive Board
 
held
66
 
combined
 
meetings
 
with
 
the
 
GEB
 
and
four
 
st
andalone
meetings for UBS AG in 2021.
›
 
Refer to the Organization Regulations
 
of UBS Group AG,
available at
ubs.com/governance
, for more information about
the authorities of the Group Executive Board
Changes to the Group Executive Board
Effective 1 February
 
2021, Axel
 
P.
 
Lehmann ended
 
his tenure
 
at
UBS and Sabine Keller-Busse
 
succeeded to the posts of President
Personal & Corporate Banking
 
and President UBS
 
Switzerland. In
addition
 
to
 
his
 
responsibility
 
as
 
Co-President
 
Global
 
Wealth
Management,
 
Iqbal
 
Khan
 
assumed
 
the
 
role
 
of
 
President
 
UBS
EMEA from
 
Sabine Keller-Busse
 
as of
 
1 February 2021.
 
Effective
1
 
April
 
2021,
 
Robert
 
Karofsky
 
was
 
appointed
 
sole
 
President
Investment Bank, following Piero
 
Novelli’s decision to step
 
down
as Co-President
 
Investment Bank as
 
of 31 March
 
2021. Effective
1 May 2021,
 
Mike Dargan
 
was appointed Group
 
Chief Digital
 
and
Information Officer
 
(CDIO) and
 
member of
 
the GEB.
 
The Group
CDIO
 
organization
 
succeeded
 
the
 
function
 
of
 
the
 
Group
 
Chief
Operating Officer. Effective 1 November 2021, and after 13 years
of
 
service,
 
Markus
 
U.
 
Diethelm
 
stepped
 
down
 
from
 
his
 
role
 
as
Group General Counsel and
 
member of the GEB;
 
he remains with
UBS
 
into
 
2022
 
as
 
a
 
senior
 
advisor
 
for
 
selected
 
legacy
 
litigation
matters. Barbara Levi assumed
 
the role of Group General
 
Counsel
and
 
member
 
of
 
the
 
GEB.
 
Ms.
 
Levi
 
joined
 
UBS
 
from
 
Rio
 
Tinto
Group,
 
where she served as Chief Legal Officer & External Affairs
and before that as Group
 
General Counsel and a member of
 
the
Executive Committee.
 
On 1 December
 
2021, UBS
 
announced that
 
Kirt Gardner
 
will
step
 
down
 
from
 
his
 
role
 
as
 
Group
 
CFO
 
in
 
May
 
2022.
 
Sarah
Youngwood
 
will join
 
UBS and
 
the
 
GEB in
 
March
 
2022 and
 
will
take over as Group CFO in May 2022.
 
Ms. Youngwood has been
CFO of JPMorgan Chase’s consumer
 
and community banking line
of
business
 
since
 
2016.
 
She
 
also
 
led
 
Finance
 
for
its
Global
Technology unit.
 
The
 
biographies
 
on
 
the
 
following
 
pages
 
provide
 
information
about the
 
GEB members in
 
office as
 
of 31 December
 
2021. The
biographies of Piero
 
Novelli and Markus
 
U. Diethelm can
 
be found
on page 208 and 203 of
 
the UBS Group AG Annual
 
Report 2020,
available
 
under
 
“Annual
 
reporting”
 
at
ubs.com/investors
.
 
In
addition
 
to
 
information
 
on
 
mandates,
 
the
 
biographies
 
include
memberships and other activities or functions, as required
 
by the
SIX Swiss Exchange Corporate Governance Directive.
In line with Swiss law, article 36 of UBS Group AG’s Articles of
Association
 
limits
 
the
 
number
 
of
 
mandates
 
that
 
GEB
 
members
may hold outside UBS Group to
 
one mandate in a listed company
and five additional mandates
 
in non-listed companies. Mandates
in companies
 
that are
 
controlled by UBS
 
or that
 
control UBS
 
are
not subject to this
 
limitation. In addition, GEB
 
members may not
hold
 
more
 
than
 
10
 
mandates
 
at
 
a
 
time
 
at
 
the
 
request
 
of
 
the
company
 
and
eight
 
mandates
in
 
associations,
 
charitable
organizations,
 
foundations,
 
trusts
 
and
 
employee
 
welfare
foundations.
 
On
 
31
 
December
 
2021,
 
no
 
member
 
of
 
the
 
GEB
reached the aforementioned thresholds.
Responsibilities and authorities of the Asset and Liability
Committees
The Asset and Liability
 
Committees (the ALCOs)
 
of UBS Group
 
AG
and
 
UBS AG
 
are
 
sub-committees of
 
the
 
GEB and
 
the Executive
Board
 
that are
 
responsible
 
for managing
 
assets and
 
liabilities in
line with the strategy,
 
risk appetite, regulatory commitments and
the interests
 
of shareholders
 
and other
 
stakeholders. The
 
ALCO
of
 
UBS
 
Group
 
AG
 
proposes
 
the
 
framework
 
for
 
capital
management,
 
capital
 
allocation,
 
funding
 
and
 
liquidity
 
risk,
 
and
proposes limits and
 
targets for the
 
Group to the
 
BoD for approval.
It
 
oversees
 
the
 
balance
 
sheet
 
management
 
of
 
the
 
Group,
 
its
business
 
divisions and
 
Group
 
Functions. In
 
2021,
 
the
 
ALCOs of
UBS Group AG and UBS AG held 11 meetings.
Management contracts
We
 
have
 
not
 
entered
 
into
 
management
 
contracts
 
with
 
any
companies or natural persons that do not belong to the Group.
 
 
UBS_AR_2021p245i1.jpgUBS_AR_2021p245i0.jpg
 
217
 
 
Ralph Hamers
 
Group Chief Executive Officer, member of the GEB since 2020
 
 
Nationality:
 
Dutch |
Year of birth:
 
1966
 
Ralph Hamers
 
has been
 
Group CEO
 
of UBS
 
Group AG
 
and President
 
of
the Executive Board of
 
UBS AG since
 
November 2020. Before
 
joining UBS,
he served
 
as CEO
 
and Chairman
 
of the
 
Executive Board
 
of ING
 
Group.
During his time
 
as CEO of
 
ING, he steered
 
the bank to
 
profitability after
the financial crisis
 
and supported the
 
firm’s digital transformation.
 
He also
played
 
a
 
leading
 
role
 
in
 
driving
 
sustainability
 
efforts
 
in
 
the
 
financial
industry, and firmly continues to do so.
 
Professional experience
2020 – date
Group CEO of UBS Group AG and President of the
Executive Board of UBS AG
2013 – 2020
CEO and Chairman of the Executive Board, ING
Supervisory Board member of NN Group (2014 – 2015);
Management Board Banking and Management Board NN
Group (2013 – 2014)
2011 – 2013
CEO of ING Belgium and Luxembourg, ING
 
2010 – 2011
Head of Network Management for Retail Banking Direct &
International, ING
2007 – 2010
Global Head of the Commercial Banking network, ING
2005 – 2007
CEO of ING Bank Netherlands, ING
2002 – 2005
General Manager of the ING Bank branch network,
 
ING
1999 – 2002
General Manager of ING Romania, ING
 
Education
–
 
Master’s degree, business econometrics and operations research,
Tilburg University
 
Other activities and functions
–
 
Member of the Board of the Swiss-American Chamber of
 
Commerce
–
 
Member of the Institut International d’Etudes
 
Bancaires
–
 
Member of the IMD Foundation Board
–
 
Member of the McKinsey Advisory Council
–
 
Member of the World Economic Forum International
 
Business Council
–
 
Governor of the World Economic Forum (Financial
 
Services)
 
 
Christian Bluhm
 
Group Chief Risk Officer, member of the GEB since 2016
 
 
Nationality:
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
Group Chief Risk Officer of UBS Group AG and Chief Risk
Officer of UBS AG
2012 – 2015
Spokesman of the Executive Board,
 
FMS Wertmanagement
2010 – 2015
Chief Risk & Financial Officer, FMS Wertmanagement
2004 – 2009
Managing Director, Credit Risk Management (Switzerland
and Private Banking worldwide), Credit Suisse
2008 – 2009
Head Credit Risk Management Analytics & Instruments,
Credit Suisse
2004 – 2008
Head of Credit Portfolio Management, Credit Suisse
2001 – 2004
Head Structured Finance Analytics, Group Credit Portfolio
Management, Hypovereinsbank
1999 – 2000
Credit Risk Management, Deutsche Bank
 
Education
–
 
Master’s degree, mathematics and informatics, and doctorate,
mathematics, University of Erlangen-Nuremberg
 
Other activities and functions
–
 
Member of the Board of UBS Switzerland AG
–
 
Member of the Foundation Board of the UBS Pension
 
Fund
–
 
Member of the Foundation Board – International
 
Financial
 
Risk Institute
 
 
UBS_AR_2021p246i1.jpgUBS_AR_2021p246i0.jpg
Corporate governance and compensation | Corporate governance
218
 
 
Mike Dargan
 
Group Chief Digital and Information Officer,
 
member of the GEB since 2021
 
Nationality:
 
British |
Year of birth:
 
1977
 
Mike Dargan was appointed Group Chief Digital and Information Officer
(CDIO) in May 2021. The Group CDIO organization consists
 
of the Group
Technology
 
teams and
 
Group
 
Corporate Services.
 
In October
 
2021, he
took up
 
the additional
 
role of
 
UBS GEB
 
sponsor to co-lead
 
the AI,
 
Data
and Analytics
 
center of
 
expertise, along
 
with Robert
 
Karofsky.
 
From his
former
 
roles
 
at
 
Standard
 
Chartered
 
Bank,
 
Mr.
 
Dargan
 
brings
 
proven
experience in technology strategy and operations.
 
Professional experience
May 2021 – date
Group CDIO, UBS Group AG and UBS AG
Oct. 2021 – date
President of the Executive Board,
 
UBS Business Solutions AG
2016 – 2021
Head Group Technology,
 
UBS
2015 – 2016
CIO for Corporate and
 
Institutional Banking, Standard Chartered Bank
2014 – 2015
Global Group Technology and Operations Head for
Global Markets, Wealth Management, Private Banking
and Securities Services, Group Technology and
Operations Engineering, Standard Chartered Bank
2013 – 2014
CIO for Financial Markets, Standard Chartered Bank
2009 – 2013
Global Head of Strategy and Corporate M&A, Global
Markets, Standard Chartered Bank
2005 – 2009
Head Corporate Strategy & M&A, EMEA and Pacific
Rim, Merrill Lynch
1999 – 2005
Head of Corporate and Institutional Banking Practice,
Asia Pacific, Oliver Wyman
 
Education
–
 
Master’s degree, politics, philosophy and economics,
 
St. John’s College, Oxford University
 
Non-listed company boards
–
 
Member of the Board of Directors of Done Next Holdings
 
AG
 
Other activities and functions
–
 
Member of the Board of UBS Business Solutions AG
–
 
Member of the Board of Trustees of the Inter-Community
 
School Zurich
 
 
Kirt Gardner
 
Group Chief Financial Officer, member of the GEB since 2016
 
 
Nationality:
 
American (US) |
Year of birth:
 
1959
 
Kirt Gardner became Group CFO in 2016. Earlier in his
 
career, he worked
for the
 
management and
 
technology consulting
 
firms BearingPoint
 
and
Barents Group in
 
the US, Asia, Latin America
 
and Europe. Before
 
joining
UBS
 
as
 
CFO
 
Wealth
 
Management
 
in
 
2013,
 
Mr.
 
Gardner
 
held
 
various
leadership
 
positions
 
at
 
Citigroup,
 
including
 
CFO
 
and
 
Head
 
of
 
Strategy
within Global
 
Transaction
 
Services, Head
 
of Strategy,
 
Planning and
 
Risk
Strategy for the Corporate and Institutional Division, and Head
 
of Global
Strategy and Cost Management for the Consumer Bank.
 
Professional experience
2016 – date
Group CFO of UBS Group AG and CFO of UBS AG
2013 – 2015
CFO Wealth Management, UBS
2010 – 2013
CFO and Head of Strategy Global Transaction Services,
Citigroup
2006 – 2010
Head of Strategy, Planning and Risk Strategy for the
Corporate and Institutional Division, Citigroup
2004
–
2006
Head of Global Strategy and Cost Management for
 
the
Consumer Bank, Citigroup
2000 – 2004
Global Head of Financial Services Strategy, BearingPoint
1994
–
2000
Managing Director and Head of Financial Services
Consulting, Barents Group
 
Education
–
 
Master’s degree, international studies, University of
 
Pennsylvania
–
 
MBA, finance, the Wharton School
 
Other activities and functions
–
 
Member of the Board of UBS Business Solutions AG
 
 
 
UBS_AR_2021p247i1.jpgUBS_AR_2021p247i0.jpg
 
219
 
 
Suni Harford
 
President Asset Management, member of the GEB since 2019
 
 
Nationality:
 
American (US) |
Year of birth:
 
1962
 
Suni Harford was appointed President Asset Management in 2019 and is
the Chair of
 
UBS Optimus Foundation.
 
Ms. Harford has been
 
the UBS GEB
lead for
 
Sustainability and Impact
 
since May
 
2021. She
 
started her
 
Wall
Street
 
career
 
at
 
Merrill
 
Lynch
 
&
 
Co.,
 
in
 
investment
 
banking
,
 
before
embarking on
 
a
 
24-year career
 
at Citigroup
 
Inc.,
 
the last
 
nine years
 
of
which
 
she
 
was
 
the
 
Regional
 
Head
 
of
 
Markets
 
for
 
North
 
America.
Ms. Harford then joined UBS, bringing with her a
 
broad experience from
across
 
the
 
industry,
 
including
 
in
 
research,
 
client
 
coverage
 
and
 
risk
management, and
 
successfully led
 
UBS Asset
 
Management’s integrated
investments capabilities, driving performance for its clients.
 
Professional experience
2019 – date
President Asset Management, UBS Group AG
 
and UBS AG
2017 – 2019
Head of Investments, Asset Management, UBS
2008 – 2017
Regional Head of Markets for North Americas,
 
Citigroup Inc.
2004 – 2008
Global Head of Fixed Income Research, Citigroup Inc.
 
Education
–
 
Bachelor’s degree, physics and mathematics, Denison University, Ohio
–
 
MBA, Tuck School of Business, Dartmouth College
 
Other activities and functions
–
 
Chairman of the Board of Directors of UBS Asset Management
 
AG
–
 
Chair of the Board of UBS Optimus Foundation
–
 
Member of the Leadership Council of the Bob Woodruff Foundation
 
 
Robert Karofsky
 
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.
 
He
 
became sole
 
President
 
in April
 
2021.
 
Before
 
joining UBS,
 
he
acquired
 
know-how
 
in
 
investment
 
banking
 
as
 
an
 
analyst
 
and
 
trader,
working
 
for
 
various
 
financial
 
institutions
 
such
 
as
 
Morgan
 
Stanley,
Deutsche Bank,
 
and AllianceBernstein. He
 
then became
 
Global Head
 
of
Equities at UBS, responsible for driving UBS’s growth strategy for
 
equities
globally. In
 
October 2021, Mr.
 
Karofsky was appointed to
 
the additional
role of
 
UBS GEB sponsor
 
to co-lead the
 
AI, Data and
 
Analytics center of
expertise, along with Mike Dargan.
 
Professional experience
Apr. 2021 – date
President Investment Bank, UBS Group AG and UBS AG
2018 – Mar. 2021
Co-President Investment Bank, UBS
2015 – 2021
President UBS Securities LLC, UBS
2014 – 2018
Global Head Equities, UBS
2011 – 2014
Global Head of Equity Trading, AllianceBernstein
2008 – 2010
Co-Head of Global Equities, Deutsche Bank
2005 – 2008
Head of North American Equities, Deutsche Bank
1994 – 2005
Head of North American Trading, Morgan Stanley
 
Education
–
 
Bachelor’s degree, economics, Hobart and William
 
Smith Colleges
–
 
MBA, finance and statistics, University of Chicago’s
 
Booth School
 
of Business
 
Other activities and functions
–
 
Member of the Board of UBS Americas Holding LLC
–
 
Member of the Board of UBS Optimus Foundation
–
 
Trustee of the UBS Americas Inc. Political Action Committee
 
 
UBS_AR_2021p248i1.jpgUBS_AR_2021p248i0.jpg
Corporate governance and compensation | Corporate governance
220
 
 
Sabine Keller-Busse
 
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,
 
Group
 
COO,
 
she
overs
aw
 
global
 
functions
 
such
 
as
 
technology,
 
oper
ations,
 
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
Feb. 2021 – date
President Personal & Corporate Banking and
 
President UBS Switzerland, UBS Group AG
Feb. 2021 – date
President of the Executive Board, UBS Switzerland AG
2018 – 2021
Group COO of UBS and President of the Executive
Board, UBS Business Solutions AG
2019 – 2021
President UBS Europe, Middle East and Africa, UBS
2016 – 2021
Member of the Executive Board of UBS AG
 
2014 – 2017
Group Head Human Resources, UBS
2010
–
2014
COO UBS Switzerland, UBS
2008 – 2010
Head Private Clients Region Zurich, Credit Suisse
1995 – 2008
Partner (2002), McKinsey & Company
 
Education
–
 
Master’s degree and doctorate, economics, University of
 
St. Gallen
 
Listed company boards
–
 
Member of the Board of Zurich Insurance Group
 
Other activities and functions
–
 
Member of the Foundation Council of the UBS International
 
Center
 
of Economics in Society
–
 
Member of the Board and Board Committee of Zurich Chamber
 
of Commerce
–
 
Member of the Board of the University Hospital Zurich
 
Foundation
 
 
Iqbal Khan
 
Co-President Global Wealth Management and
 
President UBS EMEA, member of the GEB since 2019
 
Nationality:
 
Swiss |
Year of birth:
 
1976
 
Iqbal Khan has been Co-President Global Wealth
 
Management, which he
leads
 
with
 
Tom
 
Naratil,
 
since
 
2019.
 
He
 
was
 
appointed
 
President
 
UBS
EMEA in
 
February 2021.
 
Mr.
 
Khan joined
 
Ernst &
 
Young
 
(EY) in
 
2001,
holding
 
many
 
leadership
 
positions
 
and
 
becoming
 
the
 
youngest
 
ever
partner of the firm’s Swiss arm; when leaving EY,
 
he was lead auditor of
UBS.
 
In
 
2013,
 
he
 
moved
 
to
 
Credit
 
Suisse,
 
holding
 
senior
 
leadership
positions as
 
CFO Private
 
Banking & Wealth
 
Management and
 
later CEO
International Wealth Management.
 
Professional experience
2019 – date
Co-President Global Wealth Management,
 
UBS Group AG and UBS AG
Feb. 2021 – date
President UBS Europe, Middle East and Africa,
 
UBS Group AG and UBS AG
2015 – 2019
CEO International Wealth Management, Credit Suisse
2013 – 2015
CFO Private Banking & Wealth Management,
 
Credit Suisse
2011 – 2013
Managing Partner Assurance and Advisory Services –
Financial Services, Ernst & Young
2009 – 2011
Industry Lead Partner Banking and Capital Markets,
Switzerland and EMEA Private Banking, Ernst
 
& Young
2001 – 2009
Various positions in Ernst & Young
 
Education
–
 
Swiss Certified Public Accountant
–
 
Advanced Master of International Business Law degree
 
(LLM),
University of Zurich
 
Other activities and functions
–
 
Member of the Supervisory Board of UBS Europe SE
–
 
Member of the Board of UBS Optimus Foundation
–
 
Member of the Board of Room to Read Switzerland
 
 
UBS_AR_2021p249i0.jpgUBS_AR_2021p249i1.jpg
 
221
 
 
 
Edmund Koh
 
President UBS Asia Pacific, member of the GEB since
 
2019
 
 
Nationality:
 
Singaporean |
Year of birth:
 
1960
 
Edmund
 
Koh
 
has
 
been
 
President
 
UBS
 
Asia
 
Pacific
 
since
 
2019.
 
He
 
is
 
a
financial sector
 
veteran, with
 
more than 30
 
years in
 
senior roles
 
in financial
services,
 
including
 
as
 
Head
 
Wealth
 
Management
 
Asia
 
Pacific,
 
Country
Head Singapore and Head Wealth Management South
 
East Asia and Asia
Pacific Hub for UBS. Before working for DBS
 
Bank in Singapore, Mr.
 
Koh
was CEO for Prudential Assurance and
 
Alverdine Pte Ltd, both companies
based in
 
Singapore. He
 
joined UBS
 
from Taiwan
 
-based Ta
 
Chong Bank,
where he served as President and Director.
 
Professional experience
2019 – date
President UBS Asia Pacific at UBS Group AG and UBS AG
2016 – 2018
Head Wealth Management Asia Pacific, UBS
2012 – 2018
Country Head Singapore, UBS
2012 – 2015
Head Wealth Management South East Asia and
 
Asia Pacific Hub, UBS
2008 – 2012
President and Director, Ta
 
Chong Bank, Taiwan
2001 – 2008
Managing Director and Regional Head, Consumer Banking
Group, DBS Bank, Singapore
 
Education
–
 
Bachelor’s degree, psychology, University of Toronto
 
Non-listed company boards
–
 
Member of the Board of Trustees of the Wealth Management
Institute, Singapore
–
 
Member of the Board of Next50 Limited, Singapore
–
 
Member of the Board of Medico Suites (S) Pte Ltd
 
Other activities and functions
–
 
Member of a sub-committee of the Singapore Ministry
 
of Finance’s Committee on the Future Economy
–
 
Member of the Financial Centre Advisory Panel of the
 
Monetary
Authority
 
of Singapore
–
 
Council member of the Asian Bureau of Finance and
 
Economic Research
–
 
Council member of the KidSTART program of the Early Childhood
Development Agency, Singapore (until 31 January 2022)
–
 
Trustee of the Cultural Matching Fund, Singapore
–
 
Member of University of Toronto’s International Leadership
 
Council for Asia
 
 
Barbara Levi
 
Group General Counsel, member of the GEB since 2021
 
 
Nationality:
 
Italian |
Year of birth:
 
1971
 
Barbara Levi
 
has been
 
Group General
 
Counsel since
 
November 2021. A
qualified attorney-at-law, she has
 
been admitted to
 
the Supreme Court
 
of
the United States, the New York State bar and the
 
bar of Milan, Italy, and
has worked in
 
several law firms
 
in New York
 
and Milan. Ms.
 
Levi began
her corporate career
 
with Novartis Group
 
in 2004 and
 
worked there for
16 years,
 
holding a
 
number of
 
senior legal
 
roles
 
across
 
Europe.
 
Before
joining UBS,
 
she served
 
as Chief
 
Legal Officer
 
&
 
External Affairs
 
at
 
Rio
Tinto Group and, before that, as General Counsel. In both roles, she was
a member of that company’s executive committee.
 
Professional experience
Nov. 2021 – date
Group General Counsel for UBS Group AG and UBS AG
2021
Chief Legal Officer & External Affairs, Rio Tinto Group
2020 – 2021
Group General Counsel, Rio Tinto Group
2019
Group Legal Head, M&A and Strategic Transactions,
Novartis
2016
–
2019
Global General Counsel, Sandoz International GmbH,
Novartis
2014 – 2016
Global Legal Head, Product Strategy &
Commercialization, Novartis
2013 – 2014
Global Legal Head, TechOps, Primary Care and
Established Medicines, Novartis
2009 – 2013
Head of Legal & Compliance, Region Asia-Pacific,
Middle East, and African Countries, Region Group
Emerging Markets, Novartis
 
Education
–
 
Master’s degree, law, University of Milan
–
 
LL.M., banking, corporate and finance law, Fordham University
 
School of Law, New York
 
Other activities and functions
–
 
Member of the Employers’ Board of the Global Institute
 
for
 
Women’s Leadership, King’s College London
–
 
Member of the Board of Directors of the European General
 
Counsel Association
 
 
UBS_AR_2021p250i1.jpgUBS_AR_2021p250i0.jpg
Corporate governance and compensation | Corporate governance
222
 
 
 
Tom
 
Naratil
 
Co-President Global Wealth Management and
 
President UBS Americas, member of the GEB since
 
2011
 
(UBS Group AG: 2014, UBS AG: 2011)
 
Nationality:
 
American (US) |
Year of birth:
 
1961
 
Tom
 
Naratil
 
has
 
been
 
Co-President
 
Global
 
Wealth
 
Management
 
since
2018, which
 
he leads
 
with Iqbal
 
Khan. He also
 
is CEO
 
of UBS
 
Americas
Holding LLC. He started his career in finance
 
in 1983, when he joined the
brokerage
 
firm
 
Paine
 
Webber
 
Jackson
 
&
 
Curtis,
 
and
 
is
 
an
 
experienced
veteran in the banking sector. UBS acquired Paine Webber in 2000; since
then, Mr.
 
Naratil has
 
held various
 
senior management
 
positions at
 
UBS
Group,
 
including
 
CFO
 
and
 
COO.
 
He
 
served
 
as
 
President
 
Wealth
Management Americas from 2016 and was
 
also appointed President UBS
Americas at UBS Group AG and UBS AG in 2016.
 
Professional experience
2018 – date
Co-President Global Wealth Management,
 
UBS Group AG and UBS AG
2016 – date
President UBS Americas,
 
UBS Group AG and UBS AG
2016 – date
CEO of UBS Americas Holding LLC
2016 – 2018
President Wealth Management Americas, UBS
2015 – 2016
President of the Executive Board,
 
UBS Business Solutions AG
2014 – 2015
Group COO, UBS
2011 – 2015
Group CFO, UBS
2009 – 2011
CFO and Chief Risk Officer,
 
Wealth Management Americas, UBS
1983 – 2009
Various positions
 
at PaineWebber and UBS
 
Education
–
 
Bachelor’s degree, history, Yale University
–
 
MBA, economics, New York University
 
Other activities and functions
–
 
Member of the Board of UBS Americas Holding LLC
–
 
Member of the Board of the American Swiss Foundation
 
 
Markus Ronner
 
Group Chief Compliance and Governance Officer,
 
member of the GEB since 2018
 
Nationality:
 
Swiss |
Year of birth:
 
1965
 
Markus
 
Ronner
 
has
 
been
 
Group
 
Chief
 
Compliance
 
and
 
Governance
Officer since 2018.
 
He has been
 
with UBS for
 
40 years and
 
held various
positions across the firm,
 
including manager of the Group-wide
 
too-big-
to-fail program, COO Wealth Management & Swiss Bank, Head Products
and
 
Services
 
of
 
Wealth
 
Management
 
&
 
Swiss
 
Bank,
 
COO
 
Asset
Management, and Head Group Internal Audit. In his current
 
position, he
is
 
responsible
 
at
 
the
 
Group
 
level
 
for
 
compliance
 
and
 
operational
 
risk
control, governmental and regulatory
 
affairs, as well as investigations
 
and
governance matters.
 
Professional experience
2018 – date
Group Chief Compliance and Governance Officer,
 
UBS Group AG and UBS AG
2012 – 2018
Head Group Regulatory and Governance, UBS
2011
–
2013
Manager Group-wide too-big-to-fail program, UBS
2010 – 2011
COO Wealth Management & Swiss Bank, UBS
2009 – 2010
Head Products and Services of Wealth Management &
Swiss Bank, UBS
2007 – 2009
COO Asset Management, UBS
2001 – 2007
Head Group Internal Audit, UBS
 
 
Education
–
 
Swiss Banking Diploma
 
Other activities and functions
None
 
 
 
223
Change of control and defense measures
 
Our
 
Articles
 
of
 
Association
 
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,
 
an
 
investor
 
who
 
has
 
acquired
(whether
 
directly,
 
indirectly
 
or
 
in
 
concert
 
with
 
third
 
parties)
more
 
than
 
33
1
⁄
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 full-time
 
contract with the
 
Chairman of the
 
BoD nor
any
 
employment
 
contracts
 
with
 
GEB
 
members
 
or
 
employees
holding
 
key
 
functions
 
within
 
the
 
company
 
contain
 
change
 
of
control clauses.
All employment contracts
 
with GEB members
 
stipulate a
 
notice
period of six months. During the notice
 
period, GEB members are
entitled
 
to
 
their
 
salaries
 
and
 
the
 
continuation
 
of
 
existing
employment benefits and
 
may be eligible
 
to be
 
considered for a
discretionary
 
performance
 
award
 
based
 
on
 
their
 
contribution
during their tenure.
In
 
case
 
of
 
a
 
change
 
of
 
control,
 
we
 
may,
 
at
 
our
 
discretion,
accelerate
 
the
 
vesting
 
of
 
and
 
/
 
or
 
relax
 
applicable
 
forfeiture
provisions of employees’ awards.
 
›
 
Refer to the “Compensation” section
 
of this report on page 228
for more information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate governance and compensation | Corporate governance
224
Auditors
Audit
 
is
 
an
 
integral
 
part
 
of
 
corporate
 
governance.
 
While
safeguarding
 
their
 
independence,
 
the
 
external
 
auditors
 
closely
coordinate their work with Group Internal Audit (GIA). The Audit
Committee and, ultimately, the BoD
 
supervise the effectiveness
 
of
audit work.
›
 
Refer to “Board of Directors” in this section for more
information about the Audit Committee
External independent auditors
The AGM
 
in 2021
 
re-elected Ernst &
 
Young
 
Ltd (EY)
 
as auditors
for the Group
 
for a one-year term
 
of office. EY
 
assumes virtually
all auditing functions
 
according to laws,
 
regulatory requests
 
and
the AoA. Bob Jacob is the EY
 
lead partner in charge of the overall
coordination of the
 
UBS Group financial
 
and regulatory audits
 
and
the
 
co-signing
 
partner
 
of
 
the
 
financial
 
audit.
 
In
 
2020,
 
Maurice
McCormick
 
became
 
the
 
lead
 
audit
 
partner
 
for
 
the
 
financial
statement
 
audit
 
and
 
has
 
an
 
incumbency
 
limit
 
of
 
five
 
years.
 
In
2021,
 
Hannes
 
Smit
 
became
 
the
 
Lead
 
Auditor
 
to
 
the
 
Swiss
Financial
 
Market
 
Supervisory
 
Authority
 
(FINMA)
 
with
 
an
incumbency limit
 
of seven years.
 
Daniel Martin has
 
been the co-
signing
 
partner
 
for
 
the
 
FINMA
 
audit
 
since
 
2019,
 
with
 
an
incumbency limit of seven years.
 
During 2021, the Audit Committee held 13 meetings with the
external auditors.
Review of UBS Group AG and UBS AG audit engagement
 
EU rules require UBS
 
Europe SE to rotate
 
its external auditor
 
in the
financial year 2024. In connection with this required change, and
in
 
consideration
 
of
 
governance
 
best
 
practices,
 
the
 
Board
 
of
Directors considered whether it would propose
 
to shareholders a
rotation of the Group auditor concurrent with the change at UBS
Europe
 
SE.
 
Under
 
the
 
direction
 
of
 
the
 
Audit
 
Committee,
 
UBS
conducted
 
a
 
formal
 
review
 
of
 
the
 
Group
 
audit
 
engagement
including
 
soliciting
 
proposals
 
from
 
potential
 
auditors.
 
Based
 
on
the results of this assessment, the Board of Directors has decided
to retain Ernst & Young as the Group’s
 
external auditor.
Audit effectiveness assessment
The
 
Audit
 
Committee
 
assesses
 
the
 
performance,
 
effectiveness
and
 
independence
 
of
 
the external
 
auditors
 
on
 
an
 
annual
 
basis.
The
 
assessment
 
is
 
generally
 
based
 
on
 
interviews
 
with
 
senior
management and
 
survey feedback
 
from stakeholders
 
across the
Group.
 
Assessment
 
criteria
 
include
 
quality
 
of
 
service
 
delivery,
quality and competence of the
 
audit team, value added as
 
part of
the
 
audit,
 
insightfulness,
 
and
 
the
 
overall
 
relationship
 
with
 
EY.
Based on
 
its own
 
analysis and
 
the assessment
 
results,
 
including
feedback
 
received
 
as
 
part
 
of
 
the
 
review
 
of
 
the
 
Group
 
audit
engagement
 
described
 
above,
 
the
 
Audit
 
Committee
 
concluded
that EY’s audit has been effective.
 
 
Fees paid to external independent auditors
UBS Group
 
AG and
 
its subsidiaries
 
(including UBS
 
AG) paid
 
the following
 
fees (including
 
expenses) to
 
their external
 
independent
auditors.
For the year ended
USD million
31.12.21
31.12.20
Audit
Global audit fees
 
53
 
53
Additional services classified as audit (services required
 
by law or statute, including work of a non-recurring nature mandated by
 
regulators)
 
8
 
10
Total audit
1
 
61
 
64
Non-audit
Audit-related fees
 
9
 
8
of which: assurance and attestation services
 
4
 
3
of which: control and performance reports
 
5
 
5
of which: consultation concerning financial accounting and
 
reporting standards
 
0
 
0
Tax fees
 
1
 
1
All other fees
 
0
 
0
Total non-audit
1
 
10
 
9
1 Total audit and non-audit fees amounted to USD 72 million for UBS Group AG consolidated as of 31
 
December 2021 (31 December 2020: USD 73 million), of which USD 43 million related to UBS AG consolidated
(31 December 2020: USD 46 million).
 
 
 
225
Special auditors for potential capital increases
At the AGM on
 
8 April 2021, BDO AG
 
was reappointed as special
auditors for
 
a three-year
 
term of
 
office. Special
 
auditors provide
audit
 
opinions
 
in
 
connection
 
with
 
potential
 
capital
 
increases
independently from other auditors.
Services performed and fees
The Audit Committee oversees all
 
services provided to UBS by
the external auditors. For services requiring the approval
 
from the
Audit
 
Committee,
 
a
 
preapproval
 
may
 
be
 
granted
 
either
 
for
 
a
specific
 
mandate
 
or
 
in
 
the
 
form
 
of
 
a
 
blanket
 
preapproval
authorizing a limited and well-defined type and
 
scope of services.
 
The
 
fees (including
 
expenses) paid
 
to
 
EY are
 
set forth
 
in
 
the
table
 
on
 
the
 
previous
 
page.
 
In
 
addition,
 
EY
 
received
 
USD 34.1
million in 2021 (USD 32.7 million in 2020) for services performed
on
 
behalf
 
of
 
our
 
investment
 
funds,
 
many
 
of
 
which
 
have
independent fund boards or trustees.
Audit work includes all services necessary to perform the audit
for the
 
Group in
 
accordance with
 
applicable laws
 
and generally
accepted auditing
 
standards, as
 
well as
 
other assurance
 
services
that
 
conventionally
 
only
 
the
 
auditor
 
can
 
provide.
 
These
 
include
statutory
 
and
 
regulatory
 
audits,
 
attestation
 
services
 
and
 
the
review
 
of
 
documents
 
to
 
be
 
filed
 
with
 
regulatory
 
bodies.
 
The
additional
 
services
 
classified
 
as
 
audit
 
in
 
2021
 
included
 
several
engagements
 
for
 
which
 
EY
 
was
 
mandated
 
at
 
the
 
request
 
of
FINMA.
Audit-related work
 
consists of
 
assurance and
 
related services
traditionally
 
performed
 
by
 
auditors,
 
such
 
as
 
attestation
 
services
related
 
to
 
financial
 
reporting,
 
internal
 
control
 
reviews
 
and
performance standard reviews,
 
as well as consultation
 
concerning
financial accounting and reporting standards.
Tax
 
work
 
involves
 
services
 
performed
 
by professional
 
staff
 
in
EY’s tax division and
 
includes tax compliance and
 
tax consultation
with respect to our own affairs.
“Other”
 
services
 
are
 
permitted
 
services,
 
which
 
include
technical IT security control reviews and assessments.
Group Internal Audit
GIA
 
performs
 
the
 
internal
 
auditing
 
role
 
for
 
the
 
Group.
 
It
 
is
 
an
independent
 
function
 
that
 
provides
 
expertise
 
and
 
insights
 
to
confirm
 
controls
 
are
 
functioning
 
correctly
 
and
 
highlight
 
where
UBS needs to better
 
manage current and emerging risks.
 
In 2021,
it operated with
 
an average headcount
 
of 586 full-time
 
equivalent
employees.
 
GIA
 
supports
 
the
 
BoD
 
in
 
discharging
 
its
 
governance
responsibilities
 
by
 
taking
 
a
 
dynamic
 
approach
 
to
 
audit,
 
issue
assurance
 
and
 
risk
 
assessment,
 
calling
 
attention
 
to
 
key
 
risks
 
in
order to drive action
 
to prevent unexpected loss
 
or damage to the
firm’s reputation. To
 
support the achievement
 
of UBS’s objectives,
GIA independently, objectively and systematically assesses the:
(i)
 
soundness of the Group’s risk and control culture;
 
(ii)
 
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.
 
The
 
Charter
also
 
applies
 
to
 
UBS
 
AG’s
 
internal
 
audit
 
function.
 
GIA
 
has
unrestricted
 
access
 
to
 
all
 
accounts,
 
books,
 
records,
 
systems,
property
 
and
 
personnel,
 
and
 
must
 
be
 
provided
 
with
 
all
information
 
and
 
data
 
that
 
it
 
needs
 
to
 
fulfill
 
its
 
auditing
responsibilities. GIA also conducts special audits at the request of
the Audit Committee, or other BoD members, committees or the
Group CEO in consultation with the Audit Committee.
 
GIA enhances
 
the efficiency of
 
its work
 
through coordination
and close cooperation with the external auditors.
 
 
 
 
 
 
 
 
Corporate governance and compensation | Corporate governance
226
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 2022
26 April 2022
Second quarter 2022
26 July 2022
Third quarter 2022
25 October 2022
The annual general meetings of the shareholders of UBS
Group AG will take place on the following dates:
2022
6 April 2022
2023
5 April 2023
 
›
 
Refer to the corporate calendar at
ubs.com/investors
 
for future
financial report publication and other key
 
dates, including UBS
AG’s financial report publication dates
 
We meet
 
with institutional
 
investors worldwide
 
throughout the
year and regularly
 
hold results presentations,
 
attend and present
at
 
investor
 
conferences,
 
and,
 
from
 
time
 
to
 
time,
 
host
 
investor
days. When
 
appropriate, investor
 
meetings are
 
hosted by
 
senior
management
 
and
 
are
 
attended
 
by
 
members
 
of
 
our
 
Investor
Relations team. We use
 
various technologies, such as
 
webcasting,
audio
 
links
 
and
 
cross-location
 
videoconferencing,
 
to
 
widen
 
our
audience and maintain contact with shareholders globally.
We
 
make
 
our
 
publications
 
available
 
to
 
all
 
shareholders
simultaneously to provide them with equal access to our financial
information.
All our financial
 
publications are
 
available at
ubs.com/investors
.
Shareholders
 
may
 
opt
 
to
 
receive
 
a
 
printed
 
copy
 
of
 
our
 
annual
report. Additionally, they
 
may also
 
access our
 
digital annual
 
review
at
ubs.com/annualreview
, which reflects
 
on specific initiatives
 
and
achievements
 
of
 
the
 
Group
 
and
 
provides
 
an
 
overview
 
of
 
the
Group’s
 
activities
 
during
 
the
 
year,
 
as
 
well
 
as
 
key
 
financial
information.
›
 
Refer to
ubs.com/investors
 
for a complete set of published
reporting documents and a selection of senior
 
management
industry conference presentations
›
 
Refer to the “Information sources” section
 
on page 585 of this
report for more information
›
 
Refer to “Corporate information” and
 
“Contacts” on page 6 of
this report for more information
Financial disclosure principles
 
We
 
fully
 
support
 
transparency,
 
and
 
consistent
 
and
 
informative
disclosure. We
 
aim to communicate
 
our strategy and results
 
in a
manner that enables
 
stakeholders to gain
 
a good understanding
of how our Group operates, what our growth prospects are, and
the
 
risks that
 
our
 
businesses and
 
our strategy
 
entail. We
 
assess
feedback
 
from
 
analysts
 
and
 
investors
 
on
 
a
 
regular
 
basis
 
and,
where
 
appropriate,
 
reflect
 
this
 
in
 
our
 
disclosures.
 
To
 
continue
achieving
 
these
 
goals,
 
we
 
apply
 
the
 
following
 
principles
 
in
 
our
financial reporting and disclosure:
–
 
transparency
 
that
 
enhances
 
the
 
understanding
 
of
 
economic
drivers and builds trust and credibility;
–
 
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 on page 292 of this
report for more information about the basis of accounting
 
We
 
are
 
committed
 
to
 
maintaining
 
the
 
transparency
 
of
 
our
reported results
 
and to
 
allowing analysts
 
and investors
 
to make
meaningful
 
comparisons
 
with
 
prior
 
periods.
 
If
 
there
 
is
 
a
 
major
reorganization
 
of
 
our
 
business
 
divisions
 
or
 
if
 
changes
 
to
accounting standards or interpretations lead to a material
 
change
in
 
the
 
Group’s
 
reported
 
results,
 
our
 
results
 
are
 
restated
 
for
previous periods as
 
required by applicable
 
accounting standards.
These
 
restatements
 
show
 
how
 
our
 
results
 
would
 
have
 
been
reported on
 
the new
 
basis and
 
provide clear
 
explanations of
 
all
relevant changes.
US disclosure requirements
As
 
a
 
foreign
 
private
 
issuer,
 
we
 
must
 
file
 
reports
 
and
 
other
information,
 
including
 
certain
 
financial
 
reports,
 
with
 
the
 
US
Securities
 
and Exchange
 
Commission
 
(the
 
SEC)
 
under
 
the US
 
federal
securities laws.
 
We file an annual report on Form 20-F
 
and furnish
our quarterly
 
financial
 
reports
 
and other
 
material
 
information
 
under
cover
 
of
 
Form
 
6-K
 
to
 
the
 
SEC.
 
These
 
reports
 
are
 
available
 
at
ubs.com/investors
 
and on the SEC’s
 
website,
sec.gov.
 
An evaluation
 
of the effectiveness
 
of our disclosure
 
controls
 
and
procedures (as defined
 
in Rule
 
13a–15e) under the
 
US Securities
Exchange Act of 1934
 
has been carried
 
out, under the supervision
of management,
 
including
 
the Group
 
CEO, the
 
Group CFO
 
and the
Group
 
Controller
 
and
 
Chief
 
Accounting
 
Officer.
 
Based
 
on
 
that
evaluation,
 
the Group
 
CEO and the
 
Group CFO
 
concluded
 
that our
disclosure
 
controls
 
and
 
procedures
 
were
 
effective
 
as
 
of
31 December
 
2021. No
 
significant
 
changes
 
have been
 
made to
 
our
internal controls or to
 
other factors that could
 
significantly affect
these controls
 
subsequent
 
to the date
 
of their evaluation.
›
 
Refer to the “Consolidated financial statements”
 
section on page
274 of this report for more information
 
 
 
 
Compensation
 
 
 
 
 
 
UBS_AR_2021p256i0.jpg
 
228
Compensation
Julie G. Richardson
Chairperson of the
Compensation Committee
of the Board of Directors
 
Dear Shareholders,
The Board of Directors (the BoD) and I wish to thank you for your
support
 
once
 
again
 
at
 
last
 
year’s
 
Annual
 
General
 
Meeting
 
(the
AGM) and for sharing your
 
views on our compensation practices
over
 
the
 
past
 
year.
 
As
 
the
 
Chairperson
 
of
 
the
 
Compensation
Committee, I am
 
pleased to present our
 
Compensation Report for
2021.
The arrival of our new CEO in late 2020 and the launch of our
purpose
 
in early
 
2021 resulted
 
in
 
a
 
review of
 
our
 
Total
 
Reward
Principles and
 
compensation framework
 
to ensure
 
that they
 
are
fully
 
aligned
 
with
 
our
 
purpose
 
and
 
strategic
 
imperatives.
Throughout
 
2021,
 
the
 
BoD
 
Compensation
 
Committee
 
also
continued to oversee that reward reflects
 
performance,
 
that risk-
taking is appropriate and
 
that employee interests are
 
aligned with
those
 
of
 
our
 
stakeholders.
 
Following
 
these
 
reviews,
 
we
 
applied
selected enhancements to
 
our principles while
 
keeping our overall
compensation
 
framework broadly
 
unchanged, as
 
we concluded
that
 
it
 
still
 
remains
 
well
 
suited
 
to
 
support
 
us
 
in
 
achieving
 
our
ambitions
 
for
 
the
 
Group
 
and
 
that
 
it
 
provides
 
strong
 
alignment
with shareholders’
 
interests. Nevertheless,
 
we have
 
updated our
G
roup
-
wide
 
performance
 
management
 
approach
,
 
including
evolving our Group Executive Board (GEB) performance review to
reflect our
 
strategic refresh,
 
digital initiatives
 
and elevated
 
focus
on
 
sustainability.
 
The
 
restructured
 
approach
 
fosters
 
an
 
even
greater
 
focus
 
on
 
GEB
 
priorities
 
and
 
the
 
success
 
of
 
the
 
overall
Group
 
by
 
assessing
 
all
 
GEB
 
members
 
against
 
Group
 
financial
targets.
Strategy execution
We made significant progress in delivering on our strategic vision
and
 
putting
 
clients
 
at
 
the
 
center
 
of
 
all
 
we
 
do.
 
The
 
benefits
 
of
delivering our ecosystem to clients in a seamless way as One UBS
are visible in our financial performance for 2021.
Our clients
 
continued to
 
put their
 
trust in
 
us, as
 
was evident
from
 
the
ongoing
 
momentum
 
in
 
flows
 
and
 
volume
 
growth
throughout the
 
year. Together
 
with favorable
 
market conditions
and
 
investor sentiment,
 
this
 
led to
 
growth
 
across
 
the
 
firm. Our
business momentum, our focus
 
on fueling growth and
 
disciplined
execution led to strong financial results.
Sustainability is core to our purpose and ecosystem; to help us
maximize our
 
impact and
 
direct capital
 
to where
 
it is
 
needed most,
we
 
are
 
focusing
 
on
 
three
 
key
 
areas
 
to
 
drive
 
the
 
sustainability
transit
ion:
P
lanet
,
 
People
 
and
P
artnerships.
 
As
 
a
 
result,
 
our
sustainability focus
 
and impact
 
investing assets
 
grew 78%
 
in 2021
and amounted
 
to USD 251
 
billion. Furthermore,
 
UBS was
 
again
named as
 
a member
 
of the
 
Dow Jones
 
Sustainability Index
 
and
we
 
are
 
proud
 
to
 
be
 
recognized
 
once
 
again
 
for
 
our
 
industry
leadership in the Environmental dimension.
›
 
Refer to “Financial and operating performance”
 
in our Annual
Report 2021 for further details about our
 
Group and business
division performance
 
 
Alignment to purpose
–
 
Our purpose articulates
 
why we do
 
what we do,
 
and why it
 
matters. Our
 
culture impacts how
 
we do things,
 
and it is
 
firmly
grounded in our three keys to success: our Pillars, Principles
 
and Behaviors. We refreshed our three keys to
 
success in 2021 to
reflect our purpose, client promise and strategic imperatives, and to help ensure that our culture advances our strategic goals.
–
 
For the past decade, those keys have defined how we work together and what
 
we stand for, as a firm and as individuals. They
continue
 
to
 
drive
 
daily
 
business
 
decisions
 
and
 
are
 
integrated
 
into
 
our
 
people
 
management
 
processes,
 
including
 
hiring,
performance management, compensation, promotion, talent development, training, and succession planning.
–
 
Following the
 
launch of
 
the purpose,
 
we reviewed
 
our
Total Reward
 
Principles, performance
 
management approach,
and compensation framework
 
to ensure they are fully aligned with our purpose
 
and strategic imperatives. While we made
modest adjustments, no fundamental changes were made to our compensation framework for 2021 as a result of our review.
–
 
Fair and effective people management processes
 
are key for our long-term success. Our
global performance management
approach
 
underwent a
 
comprehensive review
 
in 2021
 
as part
 
of our
 
broader strategic
 
refresh. Consequently,
 
we made changes
to
 
our
 
year-end review,
 
objective-setting
 
and
 
employee
 
feedback
 
processes
 
that
 
aim
 
to
 
support
 
our
 
strategic
 
priorities,
 
to
reinforce our
 
high performance
 
culture and
 
to be
 
simpler and
 
more transparent.
 
Additionally, our
 
GEB performance
 
review
process
 
includes
 
more
 
tangible measurement
 
on
 
quantitative outcomes
 
and
 
a
 
greater
 
focus on
 
strategy,
 
digitalization
 
and
sustainability matters.
Find out more:
ubs.com/global/en/our-firm/our-purpose
UBS_AR_2021p257i1.jpgUBS_AR_2021p257i0.jpg
 
229
Financial performance
In
 
2021,
 
the
 
ongoing
 
momentum
 
in
 
flows
 
and
 
volume
 
growth
together with favorable
 
market conditions and
 
investor sentiment
led to growth across the firm. Our
 
financial results outperformed
our
 
financial
 
targets
 
and
 
we
 
saw
 
the
 
highest
 
profit
 
before
 
tax
since
 
2006. This
 
growth
 
outpaces our
 
performance award
 
pool
development.
 
We
 
also
 
maintained
 
our
 
high
 
level
 
of
 
return
 
on
CET1 capital.
 
 
Commitment to return capital to shareholders
We
 
remain
 
committed
 
to
 
returning
 
excess
 
capital
 
to
 
our
shareholders. We
 
repurchased USD 2.6
 
billion of
 
shares in
 
2021
and we intend to
 
repurchase up to USD 5 billion
 
during 2022. For
2021,
 
the
 
BoD
 
intends
 
to
 
propose
 
a
 
dividend
 
of
 
USD 0.50
 
per
share for approval at
 
the Annual General
 
Meeting of shareholders
in 2022.
 
 
2021 performance award pool
The performance
 
award pool
 
continues to
 
reflect our
 
strict pay-
for
-
performance
 
philosophy
,
 
our
 
disciplined
 
approach
 
in
managing
 
compensation
 
over
 
business
 
cycles
 
and
 
alignment
 
to
shareholder interests.
The
 
2021
 
performance
 
award
 
pool
 
was
 
USD 3.7
 
billion,
 
an
increase
 
of
 
10%
 
compared
 
with
 
2020.
 
It
 
factors
 
in
 
the
 
strong
financial
 
performance,
 
as
 
well
 
as
 
the
 
financial
 
and
 
reputational
impact resulting from
 
the loss related
 
to the default
 
of a US-based
client
 
of
 
our
 
prime
 
brokerage
 
business.
 
The
 
seriousness
 
of
 
this
event
 
led
 
to
 
a
 
significant
 
downward
 
revision
 
of
 
the
 
Group
performance
 
award
 
pool.
 
As
 
a
 
reminder
 
regarding
 
the
 
French
cross-border
 
matter,
 
in
 
2019
 
we
 
reflected
 
this
 
matter
 
in
 
our
compensation decisions, including
 
linking a
 
meaningful portion
 
of
GEB compensation
 
(as well
 
as the
 
Chairman’s compensation)
 
to
the final outcome of this matter which is still not resolved.
 
Furthermore,
 
our
 
performance
 
award
 
pool
 
decision
 
also
reflected
 
our
 
achievements
 
relative
 
to
 
non-financial
 
objectives,
such as our good progress toward delivering on our sustainability
strategy,
 
as well
 
as the
 
positive total
 
shareholder return
 
(TSR) of
UBS
 
shares. It
 
also
 
reflected
 
other
 
factors,
 
such as
 
the growing
competition to attract
 
and retain a
 
talented and diverse
 
workforce
that continues to deliver on our purpose and strategy.
 
For
 
2021,
 
the
 
GEB
 
performance
 
award
 
pool
 
was
 
CHF 79.8
million, a reduction
 
of 1% on
 
a per capita
 
basis and a
 
reduction
of 6%
 
overall. This
 
decrease in
 
an otherwise
 
exceptionally good
financial year contrasts with
 
the Group pool increase
 
of 10%. The
decision for
 
the GEB
 
pool considers
 
the excellent
 
financial result
offset by
 
a proportionally
 
larger downward
 
adjustment than
 
the
Group pool
 
to reflect
 
the accountability
 
of the
 
GEB for
 
the loss
resulting
 
from
 
the
 
default
 
of
 
a
 
US-based
 
client
 
of
 
our
 
prime
brokerage business.
›
 
Refer to the “2021 key compensation
 
themes” section of this
report for more information about the compensation
 
impact
resulting from the significant loss event, the
 
French cross-border
matter, environmental, social and governance (ESG)
achievements,
 
and other key compensation themes
›
 
Refer to the “Group compensation” section
 
of this report for
more information
2022
 
Annual General Meeting
At the
 
2022 AGM
 
on 6 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 2022 AGM to the 2023 AGM;
–
 
the
 
maximum
 
aggregate
 
amount
 
of
 
fixed
 
compensation
 
for
the GEB for 2023;
–
 
the aggregate
 
amount of
 
variable compensation
 
for the
 
GEB
for 2021; 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
230
2021 key compensation themes
The feedback
 
we seek
 
from our
 
shareholders on
 
compensation-
related
 
topics
 
is
 
very
 
important
 
to
 
us,
 
as
 
we
 
are
 
committed
 
to
maintaining a strong link between the interests of our employees
and
 
those
 
of
 
our
 
shareholders.
 
We
 
continued
 
engaging
 
with
shareholders
 
during 2021 and
 
received overall
 
positive feedback
about our compensation framework.
 
The text
 
below summarizes
 
key compensation
 
themes for
 
2021
and provides answers to
 
the questions we most
 
frequently receive
from shareholders.
Summary of 2021 key compensation themes / responses to frequently asked questions
How was the loss resulting from the default of a US-based
client of our prime brokerage business reflected in the
compensation process?
Despite
 
our
 
excellent
 
financial
 
performance
 
in
 
2021,
 
our
reputation
 
and
 
financial
 
results
 
were
 
negatively
 
impacted
 
by
 
a
significant
 
USD 861 million
 
pre-tax
 
loss
 
that
 
we incurred
 
in
 
the
first half of 2021
 
related to the default
 
of a US-based client
 
of our
prime brokerage business.
We
 
conducted
 
a
 
thorough
 
review
 
of
 
the
 
event
 
and
 
its
 
root
causes, and took decisive
 
actions reflecting the significance of
 
the
event
 
and
 
its
 
impact
 
on
 
our
 
shareholders
 
and
 
reputation.
 
The
outcomes
 
of the
 
review
 
and the
 
actions taken
 
by management
were reviewed by
 
the Joint Risk and Compensation
 
Committees,
as well as other internal governance bodies, as appropriate.
The
 
2021
 
Group
 
performance
 
award
 
pool
 
was
 
reduced
significantly
 
as
 
a
 
consequence
 
of
 
this
 
event.
 
Our
 
funding
approach for the performance award
 
pool resulted in a
 
direct and
substantial reduction, which
 
was supplemented by
 
an additional
and
 
significant
 
negative
 
adjustment
 
to
 
the
 
pool.
 
Overall,
compensation was reduced by an amount equivalent to over half
of
 
the
 
post-tax
 
loss.
 
This
 
reduction
 
had
 
a
 
direct
 
impact
 
on
compensation for
 
business and
 
control
 
functions, as
 
well as
 
for
the Group Executive Board (the GEB).
The GEB performance
 
award pool had
 
a proportionally larger
downward
 
adjustment
 
than
 
the
 
Group
 
pool
,
 
to
 
reflect
 
the
 
accountability
 
of
 
the
 
GEB
 
for
 
the
 
event.
 
The
 
GEB
 
per-capita
performance pool
 
decreased in
 
an otherwise
 
exceptionally good
financial year.
On an individual level, we conducted a detailed accountability
review
 
of
 
employees
 
involved
 
in
 
the event.
 
The
 
fact-finding for
the review was supported by
 
external legal counsel, as
 
well as our
internal investigation
 
functions. The
 
accountability review covered
30
 
employees,
 
including
 
relevant
 
individuals
 
in
 
the
 
GEB.
 
The
outcomes
 
of
 
the
 
review
 
impacted
 
performance
 
reviews
 
and
compensation decisions substantially, where
 
appropriate.
 
How
 
do
 
the
 
refreshed
 
financial
 
targets
 
announced
 
in
February 2022 impact compensation?
The
 
compensation
 
decisions
 
for
 
2021
 
reflect
 
the
 
achievements
relative
 
to
 
the 2021
 
objectives
 
that
 
were
 
set
 
in early
 
2021 and
consider the previous externally communicated
 
targets. Similarly,
we
 
have
 
set
 
objectives
 
for
 
2022
 
that
 
consider
 
the
 
refreshed
targets as communicated in February 2022.
In addition, for our
 
Long-Term Incentive Plan (LTIP)
 
awards for
2021
 
performance,
 
we
 
have
 
reviewed
 
the
 
three-year
 
average
return on common equity
 
tier 1 (RoCET1)
 
performance metric to
reflect our strategic return ambitions, our revised
 
financial targets
and cost of capital.
Specifically,
 
for
 
our
 
awards
 
granted
 
in
 
early
 
2022
 
for
 
2021
performance,
 
the
 
required
 
performance
 
threshold
 
for
 
the
minimum payout
 
has been
 
raised to
 
8%, from
 
6% in
 
prior-year
awards,
 
to reflect our new financial targets. The required RoCET1
performance
 
for
 
a
 
maximum
 
payout
 
is
 
set
 
at
 
18%,
 
which
represents the
 
upper end of
 
our target
 
range. The
 
raised threshold
also
 
increases
 
the
 
mid-point
 
of
 
the
 
payout
 
thresholds
 
to
 
better
reflect
 
our
 
cost
 
of
 
capital.
 
The
 
linear
 
payout
 
design
 
between
threshold and maximum level supports our
 
growth ambitions and
our
 
focus
 
on
 
delivering
 
sustainable
 
performance
 
without
encouraging excessive risk-taking.
 
 
UBS_AR_2021p259i0.gif
 
231
How does UBS support diversity and pay fairness?
Ensuring
 
fair
 
treatment
 
and
 
strengthening
 
our
 
commitment
 
to
diversity,
 
equity and
 
inclusion (DE&I)
 
are
 
vital to
 
our sustainable
business
 
success.
 
We
 
find diverse
 
teams
 
better
 
understand
 
and
relate
 
to
 
the
 
needs
 
of
 
our
 
equally
 
diverse
 
clients.
 
Through
 
the
diversity
 
of
 
our
 
employees’
 
backgrounds
 
and
 
experiences,
 
we
drive innovation and better decision making.
 
Gender
 
diversity
 
is
 
a
 
key
 
priority
 
for
 
the
 
firm.
 
We
 
are
particularly focused on
 
increasing the representation
 
of women at
senior management levels. We take a multi-pronged approach in
this respect, analyzing
 
and adapting various
 
factors that support
the hiring, development and retention of women at all levels.
 
Increasing the
 
ethnic minority
 
diversity of
 
our workforce,
 
and
a
 
related
 
commitment
 
to
 
support
 
underrepresented
 
talent
 
and
communities, is also a top
 
priority across all business
 
divisions and
regions. We focus on four areas:
 
accountability and transparency;
investing in our talent; improving our culture;
 
and leveraging our
business strengths in underrepresented communities.
Compensating
 
employees
 
fairly
 
and
 
consistently
 
is
 
key
 
to
ensuring equal
 
opportunities. We
 
pay for
 
performance, and
 
we
take
 
pay
 
equity
 
seriously.
 
A
 
strong
 
commitment
 
to
 
both
 
is
embedded
 
in
 
our
 
compensation
 
policies,
 
and
 
we
regularly
conduct both internal reviews and
 
independent external audits as
quality
 
checks.
 
Additionally,
 
these
 
reviews
 
also
 
allow
 
us
 
to
maintain
 
our
 
certification
 
status
 
from
the
 
EQUAL
-
SALARY
Foundation for our equal
 
pay practices in Switzerland,
 
the US, the
UK, Hong Kong SAR and Singapore.
 
 
How is litigation considered in the compensation process?
Litigation
 
and
 
regulatory
 
matters,
 
and
 
their
 
resolution
 
and
remediation,
 
are
 
taken
 
into
 
consideration
 
throughout
 
the
compensation
 
decision-making
 
process.
 
The
 
Compensation
Committee
 
distinguishes
 
between
 
current
 
matters,
 
where
 
the
underlying
 
issues
 
are
 
within
 
the
 
responsibility
 
of
 
management,
and
 
legacy
 
matters,
 
where
 
management
 
is
 
accountable
 
for
resolving them but not responsible for the underlying issue.
Current
 
matters
 
have
 
a
 
direct
 
impact
 
on
 
the
 
performance
award
 
pool,
 
individual
 
performance
 
assessments
 
and
 
resulting
compensation decisions, as
 
well as
 
the payout
 
of deferred
 
awards.
For
 
legacy
 
matters,
 
the
 
Compensation
 
Committee
 
seeks
 
to
incentivize
 
management
 
to
 
resolve
 
these
 
matters
 
in
 
the
 
best
interest
 
of shareholders
 
and we
 
hold
 
management accountable
for
 
the
 
effective
 
and
 
efficient
 
resolution
 
of
 
these
 
matters.
Therefore,
 
the
 
performance
 
and
 
compensation
 
assessment
reflects
 
management’s
 
responsibility
 
for
 
achieving
 
a
 
resolution
without
 
creating
 
an
 
incentive
 
to
 
settle
 
inappropriately
 
or
 
take
excessive risks
 
on such
 
matters. In
 
addition, the
 
use of
 
RoCET1,
which
 
includes
 
both
 
current
 
and
 
legacy
 
matters,
 
in
 
our
performance assessment for GEB performance,
 
as well as the LTIP
design,
 
supports
 
the
 
focus
 
on
 
ensuring
 
the
 
cost
 
of
 
litigation
matters
 
has
 
in
 
our
 
compensation
 
plans
 
a
 
direct
 
impact
 
on
 
the
compensation
 
awarded
 
to
 
and
 
realized
 
by
 
our
 
most
 
senior
leaders, including the GEB.
What progress has been made on resolving the French
cross-border matter and how is this reflected in GEB
compensation?
 
In December 2021, UBS filed an appeal with the French Supreme
Court regarding
 
the decision
 
of the
 
Court of
 
Appeal relating
 
to
the French cross-border matter. This matter remains ongoing and
was
 
considered
 
in
 
the
 
decision-making
 
process
 
for
 
our
 
2021
performance award pool.
The
 
use
 
of
 
the
 
RoCET1
 
metric
 
aims
 
to
 
ensure
 
the
 
cost
 
of
litigation
 
matters, including
 
the French
 
cross-border matter,
 
has
an ongoing and direct impact on the compensation awarded and
realized
 
by
 
our
 
most
 
senior
 
leaders,
 
including
 
the
 
GEB.
Additionally,
 
when
 
determining
 
the
 
2019
 
performance
 
award
pool,
 
the
 
impact
 
of
 
the
 
French
cross
-
border
matter
 
was
considered in our decision making.
Furthermore,
 
as
 
outlined
 
in
 
our 2019
 
Compensation Report,
up to CHF 7.9 million,
 
or 30%, of the 2019
 
LTIP awards at grant
for GEB members active in
 
March 2017, as well as the
 
Chairman
of the
 
BoD’s unvested
 
share award,
 
continues to
 
be at
 
risk and
directly
 
linked
 
to
 
the final
 
resolution of
 
the French
 
cross-border
matter.
 
In
 
addition,
 
a
 
malus
 
clause
 
allows
 
the
 
Compensation
Committee to assess any
 
new information that becomes
 
available
in the future and
 
to retrospectively reduce the
 
2019 LTIP award by
up
 
to
 
the
 
full
 
amount
 
if
 
such
 
new
 
information
 
would
 
have
impacted
 
our
 
compensation
 
decision
 
in
 
2
019.
 
This
 
matter
continues to
 
be ongoing
 
and, once
 
resolved, the
 
final outcome
will be reflected in the final amounts delivered to relevant current
and former employees.
 
Impact of litigation matters on the LTIP
 
 
 
Advisory vote
 
Corporate governance and compensation | Compensation
232
How is ESG considered in the compensation process?
ESG objectives are considered in
 
the compensation determination
process
 
in
 
objective
 
setting,
 
performance
 
award
 
pool
 
funding,
performance evaluation and compensation decisions.
ESG-related objectives have been
 
embedded in our Pillars and
Principles since they
 
were established in
 
2011. In
 
2021, we revised
the Group CEO
 
and GEB scorecards
 
and further enhanced
 
the link
between
 
ESG
 
and
 
compensation
 
by
 
introducing
 
explicit
sustainability objectives
 
under “Strategic
 
& Growth” in
 
the non-
financial goal
 
category. These
 
sustainability objectives
 
are linked
to
 
our
 
priorities,
 
and
 
their
 
progress
 
is
 
measured
 
via
 
robust
quantitative
 
metrics
 
and
 
qualitative
criteria
.
 
Sustainability
objectives
 
are
 
individually
 
assessed
 
for
 
each
 
GEB
 
member,
 
and
consequently directly
 
impact their
 
performance assessments
 
and
compensation decisions.
In addition, in the performance award pool funding across the
Group,
 
ESG is
 
also reflected
 
through an
 
assessment of
 
progress
made toward
 
targets linked
 
to our focus
 
areas of Planet,
 
People
(including
 
progress
 
made
 
toward
 
our
 
diversity
 
ambitions)
 
and
Partnerships, alongside other key dimensions.
Therefore
 
ESG
 
is
 
taken
 
into
 
consideration
 
when
 
the
Compensation
 
Committee
 
assesses
 
not
 
only
 
what
 
results
 
were
achieved but also how they were achieved.
For
 
2021,
 
we
 
established
 
robust
 
and
 
concrete
 
targets,
 
and
made
 
good
 
progress
 
toward
 
achieving
 
them.
 
We
 
continue
 
to
increase our focus on this topic.
›
 
Refer to “Environmental, Social and Governance
 
considerations”
in the “Compensation philosophy and
 
governance” section of
this report for more information
How does
 
UBS promote
 
and support
 
the health
 
and well-
being of employees?
 
Supporting employee health
 
and well-being remained a
 
priority in
2021.
 
We
 
are
 
committed
 
to
 
helping
 
employees
 
thrive
 
in
 
their
current
 
roles
 
and
 
deliver
 
sustainable
 
performance
 
over
 
time.
Regular
 
“pulse”
 
surveys
 
gauged
 
employees’
 
views
 
on
 
remote
work,
 
stress,
 
communication
 
and
 
other
 
aspects.
 
Resources
 
to
support
 
holistic
 
well-being
 
featured
 
a
 
bespoke
 
eLearning
curriculum,
 
physical
 
and
 
mental
 
health
 
initiatives,
 
volunteering
opportunities,
 
increased
 
certain
 
local
 
benefits
 
offerings,
 
and
financial education events.
›
 
Refer to the Sustainability Report 2021,
 
available from 11 March
2022 under “Annual reporting” at
ubs.com/investors
, for more
information
 
How
 
does
 
UBS
 
respond
 
to the
 
increasing
 
competition
 
for
talent?
We
 
continue
 
to
 
see
 
increasing
 
competition
 
for
 
talent.
 
These
pressures
 
come
 
from
 
our
 
direct
 
competit
ors
 
but
 
also
 
other
organizations including technology, consulting
 
and new entrants
or disruptors, such
 
as fintech firms. As
 
a recognized employer of
choice,
 
we
 
continue
 
to
 
broaden
 
and
 
deepen
 
our
 
talent
 
pools
through ongoing
 
talent development
 
and continued
 
investment
in our employees. We take careful consideration to
 
reflect pay for
performance
 
and
 
competitive
 
pay
 
in
 
our
 
decision
 
making.
Furthermore, as our compensation
 
approach includes substantial
deferral, we
 
balance incentivizing
 
performance with retention
 
in
order to promote a sustainable workforce.
 
 
 
 
 
 
 
 
 
 
 
 
233
Say-on-pay
 
Say-on-pay votes at the AGM
In line with the Swiss Ordinance
 
against Excessive Compensation
in
 
Listed
 
Stock
 
Corporations,
 
we
 
seek
 
binding
 
shareholder
approval
 
for
 
the
 
aggregate
 
compensation
 
awarded
 
to
 
the
 
GEB
and the
 
BoD. Prospective
 
approval of
 
the fixed compensation
 
of
the BoD and GEB provides the firm and its governing bodies with
the
 
certainty
needed
to
 
operate
effectively.
R
etrospective
approval
 
of
 
the
 
GEB’s
 
variable
 
compensation
 
aligns
 
their
compensation with performance and contribution.
These binding votes
 
on compensation and
 
the advisory vote
 
on
our compensation report reflect our commitment to shareholders
having their say on pay.
›
 
Refer to “Provisions of the Articles of Association
 
related to
compensation” in the “Supplemental
 
information” section of
this report for more information
Audited |
 
Approved fixed compensation
At the 2020 AGM, shareholders approved a maximum aggregate
fixed
 
compensation
 
amount
 
of
 
CHF 33.0
 
million
 
for
 
GEB
members
 
for
 
the
 
2021
 
performance
 
year.
 
This
 
budget
 
reflects
base
 
salaries,
 
role-based
 
allowances
 
in
 
response
 
to
 
EU
 
Capital
Requirements Directive
 
IV,
 
and estimated standard
 
contributions
to retirement benefit plans, as well as other benefits.
 
Our expenses related to
 
fixed compensation for
 
our continuing
GEB members
 
were within
 
the budget;
 
however, the
 
amount of
fixed compensation
 
related to
 
the hiring
 
of Barbara
 
Levi as
 
new
Group
 
General
 
Counsel
 
resulted
 
in
 
exceeding
 
this
 
budget.
Therefore,
 
as authorized
 
by article
 
46 para.
 
5
 
of our
 
Articles of
Association, an
 
amount of
 
CHF 2.2 million
 
was used
 
to pay
 
the
portion of
 
her fixed
 
compensation (including
 
replacement awards)
that exceeded the approved amount.
p
 
›
 
Refer to “2021
 
total compensation for the GEB members”
 
in the
“Compensation for GEB members” section
 
of this report
 
 
Say on pay – compensation-related votes at the 2021
 
AGM
2021 AGM say-on-pay voting schemes
2021 AGM actual shareholder votes
Vote “for”
Binding vote on GEB variable compensation
Shareholders approved CHF 85,000,000 for the 2020 financial
 
year
1,2,3
84.8%
Binding vote on GEB fixed compensation
Shareholders approved CHF 33,000,000 for the 2022
 
financial year
1,2,3
91.8%
Binding vote on BoD compensation
Shareholders approved CHF 13,000,000 for the period
 
from the 2021 AGM
 
to the 2022
 
AGM
1,2,4
91.1%
Advisory
 
vote on the Compensation Report
Shareholders approved the UBS Group AG Compensation Report
 
2020 in an advisory vote
85.7%
1
 
Local currencies are converted into Swiss francs at
 
the exchange rates stated in “Note 33
 
Currency translation rates” in the “Consolidated
 
financial statements” section of our Annual Report
 
2021.
 
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 our Annual Report 2021, twelve GEB
 
members were
in office on 31 December 2021 and thirteen GEB members on 31 December 2020.
 
4
 
Twelve BoD members were in office on 31 December 2021.
 
 
 
 
 
 
 
 
 
 
 
Advisory vote
 
Corporate governance and compensation | Compensation
234
Compensation-related proposals for 2022
At the
 
2022
 
AGM, we
 
will ask
 
our shareholders
 
to vote
 
on the
variable
 
compensation
 
for
 
the
 
GEB
 
for
 
2021,
 
the
 
fixed
compensation for the
 
GEB for
 
2023 and the
 
compensation for the
BoD from the 2022 AGM to the 2023 AGM.
In
 
addition, we will also
 
ask shareholders for
 
an advisory vote
on our Compensation Report, which describes our compensation
policy,
 
including framework and governance.
The
 
table
below
outlines
 
our
 
compensation
 
proposals,
including
 
supporting
 
rationales,
 
that
 
we
 
plan
 
to
 
submit
 
to
 
the
2022
 
AGM
 
for
 
binding
 
votes
 
(in
 
line
 
with
 
the
 
Swiss
 
Ordinance
against Excessive Compensation in Listed Stock Corporations and
our Articles of Association (AoA)).
 
Compensation-related proposals for binding votes at the 2022
 
AGM
 
Item
Proposal
Rationale
GEB variable
compensation
The Board of Directors proposes an
aggregate amount of variable
compensation of CHF 79,750,000
for the members of the GEB for the
2021 financial year.
The proposed amount reflects a reduction of 1% on a per capita
 
basis and a reduction of 6%
overall compared with the previous year.
 
This decrease in an otherwise exceptionally good
 
financial
year contrasts with the Group pool increase of 10%.
 
The decision for the GEB pool considers the
excellent financial result offset by a proportionally larger downward
 
adjustment than the Group
pool to reflect the accountability of the GEB for the loss
 
resulting from the default of a US-based
client of our prime brokerage business.
GEB fixed
compensation
The Board of Directors proposes a
maximum aggregate amount of
fixed compensation of
CHF 33,000,000 for the members
of the GEB for the 2023 financial
year.
The proposed amount is unchanged from the previous year, reflecting consistency in planning
 
over
time and unchanged base salaries for the
 
Group CEO and other GEB members. In addition to
 
the
base salaries, it also includes role-based allowances
 
in response to EU Capital Requirements
Directive IV, estimated standard contributions to retirement benefit plans, and other benefits. The
proposed amount provides flexibility in light of potential
 
changes of GEB composition or roles,
competitive considerations
 
where potential additional role-based allowances may
 
be required, and
other factors (e.g., changes in FX rates or
 
benefits).
BoD
compensation
The Board of Directors proposes a
maximum aggregate amount of
compensation of CHF 13,000,000
for the members of the Board of
Directors for the period from the
2022 AGM to the 2023 AGM.
The proposed amount is unchanged compared with the
 
previous period and includes the total
compensation of the nominated Chairman and
 
Vice Chairman. For the new Chairman
 
we expect
his total compensation would be approximately
 
CHF 0.4 million lower compared with the current
Chairman (a reduction of approximately 8%). The fees for
 
BoD members other than the nominated
Chairman and Vice Chairman are unchanged.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UBS_AR_2021p263i0.gif
 
235
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. In 2021,
following
 
the
 
launch
 
of
 
our
 
purpose,
 
we
 
reviewed
 
our
 
Total
Reward Principles and
 
compensation framework to
 
confirm they
are
 
fully
 
aligned
 
with
 
our
 
purpose
 
and
 
support
 
our
 
strategic
imperatives.
This
 
ensures
 
that
 
the
 
interests
 
of
 
our
 
employees
 
are
 
aligned
with those of our clients and other stakeholders.
Therefore,
 
our
 
compensation
 
approach
 
supports
 
our
 
capital
strength
 
and
 
risk
 
management,
 
and
 
provides
 
for
 
simplification
and
 
efficiency.
 
It
 
encourages
 
employees
 
to
 
focus
 
on
 
client
 
centricity,
 
connectivity
 
and
 
sustainable
 
impact
 
in
 
everything
 
we
do. Moreover,
 
we reward
 
behaviors that
 
help build
 
and protect
the
 
firm’s
 
reputation,
 
specifically
 
accountability
 
with
 
integrity,
collaboration and
 
innovation. Compensation
 
for each
 
employee
is
 
based
 
on
 
individual,
 
team,
 
business
 
division
 
and
 
Group
performance,
 
within
 
the
 
context
 
of
 
the
 
markets
 
in
 
which
 
we
operate.
Total Reward Principles
Our Total
 
Reward Principles
 
apply to
 
all employees
 
globally,
 
but vary
 
in certain
 
locations according
 
to local
 
legal requirements
 
and
regulations and practices. The table below provides a summary of our Total
 
Reward Principles.
 
Support our purpose and strategy
Our compensation approach supports the firm’s
 
purpose and strategy, fosters engagement among
employees and aligns their long-term interests
 
with those of clients and stakeholders.
Attract, retain and connect a diverse, talented
workforce
We embrace a culture of diversity, equity, and inclusiveness. Pay at UBS is fair, reflects equal
treatment and is competitive. In this way, our investment in a connected workforce
 
supports the
sustainability of the organization.
Apply a pay-for-performance approach to
support development and our ways of
 
working
The setting of clear objectives and a thorough
 
evaluation of what was achieved and how
 
it was
achieved, combined with effective communication,
 
promote clarity, accountability and establish a
strong link between pay and performance. This
 
approach emphasizes our Behaviors, which are
accountability with integrity, collaboration and innovation.
Reinforce sustainable growth and support long-
term value creation
Compensation is appropriately balanced between
 
fixed and variable elements and delivered over
 
an
appropriate period to support our growth ambitions
 
and sustainable performance.
Support risk awareness and appropriate risk-
taking
Our compensation structure encourages employees
 
to have a focus on risk management and behave
consistently with the firm’s risk framework
 
and appetite, thereby anticipating and managing
 
risks
effectively to protect our capital and reputation.
Our Total Reward approach
At
 
UBS,
 
we
 
apply
 
a
 
holistic
 
Total
 
Reward
 
approach,
 
generally
consist
ing
 
of
 
fixed
 
compensation
 
(base
 
salary
 
and
 
role
-
b
a
sed
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 award
 
s
 
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
Advisory vote
 
Corporate governance and compensation | Compensation
236
Compensation governance
Board of Directors and Compensation Committee
The BoD is ultimately
 
responsible for approving the compensation
strategy
 
and
 
principles
 
proposed
 
by
 
the
 
Compensation
Committee,
 
which
 
determines
 
compensation-related
 
matters
 
in
line with the principles set forth in the AoA.
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
 
compensation.
 
The
Compensation
 
Committee
 
consist
s
 
of
 
independent
 
BoD
members, who are elected annually by shareholders at 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 2021, to
additionally support
 
the connection
 
between the
 
Compensation
Committee
 
and
 
the
 
Risk
 
Committee,
 
the
 
Compensation
Committee
 
Chair
person
 
was
 
also
 
a
 
member
 
of
 
the
 
Risk
Committee.
A
nnual
ly,
 
and
 
on
 
behalf
 
of
 
the
 
BoD,
 
the
 
Compensation
Committee:
–
 
reviews our Total Reward Principles;
–
 
approves
 
key
 
features
 
of
 
the
 
compensation
 
framework
 
and
plans
 
for
 
the
 
non-independent
 
Board
 
members
 
and
 
GEB
members;
–
 
reviews performance award
 
funding throughout the
 
year and
proposes, upon
 
proposal of
 
the Group
 
CEO, the
 
final annual
Group performance award pool for BoD approval;
–
 
upon
 
proposal
 
of
 
the
 
Group
 
CEO,
 
reviews
 
the
 
performance
framework of the other GEB members;
–
 
upon proposal
 
of the
 
Group CEO,
 
proposes the
 
performance
assessments
 
and
 
the
 
individual
 
total
 
compensation
 
for
 
the
other GEB members for approval by the BoD;
–
 
upon proposal
 
of the
 
Chairman, proposes
 
financial and
 
non-
financial
 
performance
 
targets
 
and
 
objectives
 
for
 
the
 
Group
CEO
 
and
 
the
 
Group
 
CEO’s
 
performance
 
assessment
 
for
approval by the Board;
–
 
approves
 
the
 
total
 
compensation
 
for
 
the
 
Chairman
 
and
 
the
non-independent Board members;
–
 
proposes,
 
upon
 
proposal
 
of
 
the
 
Chairman,
 
the
 
total
compensation for the Group CEO for approval by the Board;
–
 
proposes to the BoD the
 
maximum aggregate amounts of
 
BoD
compensation and GEB fixed
 
compensation and the
 
aggregate
amount of variable compensation for
 
the GEB for approval by
the general meeting of the shareholders;
–
 
upon proposal of
 
the Chairman, proposes
 
the remuneration /
fee framework
 
for independent
 
Board members
 
for approval
by the Board;
 
–
 
upon proposal of the Chairman and Group CEO, approves the
remuneration / fee
 
frameworks for external supervisory
 
board
members
 
of
 
Significant
 
Group
 
Entities
 
and
 
be
 
informed
 
of
remuneration / fee
 
frameworks for external
 
supervisory board
members of Significant Regional Entities; and
–
 
proposes
 
to
 
the
 
BoD
 
for
 
approval
 
the
 
annual
 
compensation
report and
 
approves other
 
material public
 
disclosures on
 
UBS
compensation matters.
 
The Compensation Committee
 
is required to meet
 
at least four
times each
 
year. All meetings
 
in 2021
 
were held in
 
the presence
of the Chairman and the Group CEO and most were attended by
external
 
advisors.
 
Individuals,
 
including
 
the
 
Chairman
 
and
 
the
Group CEO, are not permitted to attend a meeting or participate
in a discussion on their own performance and compensation.
After
 
the
 
meetings,
 
the
 
Chairperson
 
of
 
the
 
Compensation
Committee reports
 
to the
 
BoD on
 
the Compensation
 
Committee’s
activities and discussions
 
and, if necessary,
 
submits proposals for
approval
 
by
 
the
 
full
 
BoD.
 
Compensation
 
Committee
 
meeting
minutes are also sent to all members of the BoD.
On
 
31 December
 
2021,
 
the
 
members
 
of
 
the
 
Compensation
Committee
 
were
Julie
 
G.
 
Richardson
 
(Chair
person
),
 
Reto
Francioni, Dieter Wemmer and Jeanette Wong.
›
 
Refer to “Board of Directors” in the “Corporate
 
governance”
section of our Annual Report 2021 for
 
more information
External advisors
The
 
Compensation
 
Committee
 
may
 
retain
 
external
 
advisors
 
to
support it
 
in fulfilling
 
its duties. In
 
2021, HCM
 
International Ltd.
(HCM)
 
provided
 
independent
 
advice
 
on
 
compensation
 
matters.
HCM
 
holds
 
no
 
other
 
mandates
 
with
 
UBS.
 
Additionally,
 
Willis
Towers Watson provided the Compensation
 
Committee with
 
data
on
 
market
 
trends
 
and
 
pay
 
levels.
 
Various
 
subsidiaries
 
of
 
Willis
Towers
 
Watson provide
 
similar information to
 
Human Resources
in relation to compensation for employees. Willis Towers
 
Watson
holds no other compensation-related mandates with UBS.
The Risk Committee’s role in compensation
The Risk Committee, a committee of the BoD, works closely with
the Compensation
 
Committee to
 
ensure that
 
our compensation
framework
 
appropriately
 
reflects
 
risk
awareness
 
and
 
management,
 
and
 
ensures
 
appropriate
 
risk-taking.
 
It
 
supervises
and sets appropriate risk management
 
and risk control principles
and
 
is
regular
ly
 
brief
ed
 
on
 
how
 
risk
 
is
 
factored
 
into
 
the
compensation process. It also monitors the involvement of Group
Risk
 
Con
trol
 
and
 
Compliance
 
and
 
Operational
 
Risk
 
in
compensation
 
and
 
reviews
 
risk-related
 
aspects
 
of
 
the
compensation process.
›
 
Refer to
ubs.com/governance
 
for more information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
237
 
Compensation Committee 2021 / 2022 key activities and timeline
May
June
July
Sept
Oct
Nov¹
Dec¹
Jan
Feb
Strategy, policy and governance
Total Reward Principles
l
Sustainability / ESG in the compensation process
l
l
l
Compensation disclosure and stakeholder communication matters
l
l
l
l
l
AGM reward-related items
l
l
Compensation Committee governance
l
Annual compensation review
Accruals and full-year forecast of the performance award pool
 
funding
l
l
l
l
l
l
Performance targets and performance assessment of the Group CEO
 
and GEB members
l
l
l
Group CEO and GEB members’ salaries and individual performance
 
awards
l
l
l
Update on market practice, trends and peer group matters
l
l
l
Pay for performance, including governance on certain higher-paid employees, and
non-standard compensation arrangements
l
l
l
l
l
l
l
Board of Directors remuneration
l
l
Compensation framework
Compensation framework and deferred compensation matters
l
l
l
l
l
Risk and regulatory
Risk management in the compensation approach and
 
joint meeting with
 
BoD Risk Committee
l
l
l
l
l
Regulatory activities impacting employees and engagement
 
with regulators
l
l
l
l
l
l
l
l
 
1
The Compensation Committee held two meetings in November 2021 and three meetings in December 2021.
 
Compensation governance
 
The table below provides an overview of compensation governance by specific role.
 
 
Recipients
Compensation recommendations proposed by
Approved by
Chairman of the BoD
Chairperson of the Compensation Committee
Compensation Committee
1
Independent BoD members
 
(remuneration / fee framework)
Compensation Committee and Chairman of
 
the BoD
BoD
1
Group CEO
Compensation Committee and Chairman of
 
the BoD
BoD
1
Other GEB members
Compensation Committee and Group CEO
BoD
1
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 aggregate remuneration for the BoD, are subject to shareholder approval.
 
 
 
Advisory vote
 
Corporate governance and compensation | Compensation
238
Environmental, Social and Governance considerations
ESG in the compensation determination process
ESG objectives are considered in the compensation determination
process
 
in
 
objective
 
setting,
 
performance
 
award
 
pool
 
funding,
performance
 
evaluation
 
and compensation
 
decisions.
ESG-related objectives have been
 
embedded in our Pillars and
Principles since they
 
were established in
 
2011. In
 
2021, we revised
the Group CEO
 
and GEB scorecards
 
and further enhanced
 
the link
between
 
ESG
 
and
 
compensation
 
by
 
introducing
 
explicit
sustainability objectives
 
under “Strategic
 
& Growth” in
 
the non-
financial goal
 
category. These
 
sustainability objectives
 
are linked
to
 
our
priorities
,
 
and
 
their
 
progress
 
is
 
measured
 
via
 
robust
quantitative
 
metrics
 
and
 
qualitative
 
criteria.
 
The
 
table
 
below
provides
 
an
 
overview
 
of
 
our
 
metrics
 
and
 
progress
 
achieved
 
in
2021. Sustainability
 
objectives are
 
individually assessed
 
for each
GEB member, and consequently
 
directly impact their
 
performance
assessments and compensation decisions.
In addition, in the performance award pool funding across the
Group,
 
ESG is
 
also reflected
 
through an
 
assessment of
 
progress
made against
 
targets linked
 
to our focus
 
areas of Planet,
 
People
(including
 
progress
 
made
 
against
 
our
 
diversity
 
ambitions)
 
and
Partnerships,
 
alongside
 
other
 
key
 
dimensions.
 
Therefore
 
ESG
 
is
taken
 
into
 
consideration
 
when
 
the
 
Compensation
 
Committee
assesses not
 
only what
 
results were
 
achieved but
 
also how
 
they
were achieved.
For
 
2021,
 
we
 
established
 
robust
 
and
 
concrete
 
targets,
 
and
made
 
good
 
progress
 
toward
 
achieving
 
them.
 
We
 
continue
 
to
increase our focus on this topic.
›
 
Refer to “GEB performance assessments“
 
in the “Compensation
for GEB members” section of this report for more
 
information
about the GEB performance measurement
 
process
›
 
Refer to “Our focus on sustainability and climate,”
 
“Employees”
and “Society” in the “How we create value
 
for our stakeholders”
section of our Annual Report 2021 for
 
more information
›
 
Refer to
ubs.com/gri
 
for more information about ESG-related
topics
Fair pay and pay for performance
 
Compensating employees
 
fairly and consistently
 
is key to ensuring
equal opportunities. We
 
pay
 
for
 
performance, and
 
we
 
take
 
pay
equity seriously.
 
A strong commitment
 
to both is
 
embedded in
 
our
compensation policies,
 
and we conduct both internal reviews and
independent external
 
audits as quality checks. If we uncover gaps
that
 
c
annot
 
be
 
explained
 
by
 
business
 
factors
or
 
appropriate
personal
 
factors
–
 
such
 
as
 
experience,
 
role,
 
responsibility,
performance
 
or location
 
– we
 
explore the
 
root causes
 
of those
 
gaps
and address them.
Additionally, our regular monitoring and review processes also
allow
 
us
 
to
 
maintain
 
our
 
certification status
 
with
 
the
 
EQUAL-
SALARY Foundation
 
for our equal
 
pay practices
 
in Switzerland,
 
the
US,
 
the
 
UK,
 
Hong
 
Kong
 
SAR
 
and
 
Singapore.
 
The
 
firm
 
also
successfully
 
completed
 
an equal
 
pay analysis
 
in Switzerland
 
in 2020,
as required
 
by the
 
Swiss Federal
 
Act on
 
Gender
 
Equality. The
 
results
of the
 
analysis confirmed that
 
we are
 
fully compliant with
 
Swiss
equal pay standards.
 
These holistic
 
certifications
 
are a testament
 
to
our
 
well
-
established
 
equal
 
opportunity
 
environment
 
and
 
the
strength of our human resources
 
practices,
 
including performance
and reward.
 
In 2021,
 
we continued
 
to monitor
 
pay fairness and
addressed any unexplained gaps to ensure that all
 
employees are
paid fairly.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UBS_AR_2021p267i0.jpgUBS_AR_2021p267i2.jpgUBS_AR_2021p267i1.jpg
 
239
Our targets and progress
Our priorities
Our targets
Our progress in 2021
Planet,
 
people,
partnerships
USD 400 billion invested assets in sustainable
 
investments
by 2025.
Increased invested assets in sustainable investments
 
to
USD 251 billion (compared with USD 141 billion in
 
2020).
Planet
Set decarbonization targets for 2030 for financing
 
of the
fossil fuels, power generation and real estate sectors
 
(from
2020 levels):
–
 
reduce absolute financed emissions associated with
 
UBS
loans to fossil fuel companies by 71%;
–
 
reduce emissions intensity associated with UBS
 
loans to
power generation companies by 49%;
–
 
reduce emissions intensity of UBS’s commercial real
estate lending portfolio by 44%; and
–
 
reduce emissions intensity of UBS’s residential real estate
lending portfolio by 42%.
 
Estimated baselines and development of net-zero-aligned
pathways for the fossil fuel, power generation
 
and real
estate (commercial and residential) sectors.
Align USD 235 billion of invested assets to
 
net zero by
2030 (Asset Management).
Established Asset Management baseline covering
 
the
weighted average carbon intensity of the respective
benchmark for each strategy and fund included
 
in our
target.
Achieve net-zero emissions across discretionary client
portfolios by 2050.
Expanded discretionary offering with climate transition-
focused solutions and built more detailed carbon
 
footprint
data into our research and reporting toolkits.
Achieve net-zero energy emissions resulting from our own
operations (scope 1 and 2) by 2025; cut
 
energy
consumption by 15% by 2025 (compared with 2020).
Reduced net greenhouse gas footprint for scope 1
 
and 2
emissions by 75% and energy consumption
 
by 5%
(compared with 2020); continued implementation
 
of the
replacement of fossil fuel heating systems and investing
 
in
credible carbon removal projects; maintained 100%
renewable electricity coverage.
Offset historical emissions back to the year 2000
 
by
sourcing carbon offsets (by end 2021) and by offsetting
credit delivery and full retirement in registry (by end 2025).
Completed the sourcing process for a portfolio of
transparent carbon offsets from the voluntary carbon
market across a range of project types and geographies.
Engage with key vendors on targeting net
 
zero by 2035.
Commenced working on understanding
 
and quantifying
the scope 3 emissions in our supply chain.
People
30% global female representation at Director level and
above by 2025.
Increased to 26.7% (2020: 26.0%) female representation
at Director level and above.
26% US ethnic minority representation at Director level
and above by 2025.
Increased to 20.1% (2020: 19.5%) ethnic minority
representation at Director level and above in the US.
 
26% UK ethnic minority representation at Director level
and above by 2025.
Increased to 21.3% (2020: 20.7%) ethnic minority
representation at Director level and above in the UK.
Raise USD 1 billion in donations to our client philanthropy
foundations and funds and reach 25 million beneficiaries
by 2025 (cumulative for years 2021-2025).
Achieved UBS Optimus Foundation donations
 
volume of
USD 161 million (including UBS matching contributions)
and reached 4.6 million beneficiaries.
Support one million beneficiaries through our community
impact activities by 2025 (cumulative for years
 
2020-
2024).
Reached 1.199 million beneficiaries through strategic
community impact activities cumulatively during
 
2020 and
2021, surpassing our 2025 target in two
 
years.
Partnerships
Establish UBS as a leading facilitator of discussion,
 
debate
and idea generation.
Launched the UBS Sustainability and Impact
 
Institute, with
the objective of delivering original, best-in-class
sustainability and impact thought leadership.
Drive standards, research and development, and product
development through partnerships across the financial
ecosystem.
Continued implementation of the Principles
 
for
Responsible Banking by expanding the scope of
 
our
impact analyses and improving upon our existing
methodologies in partnership with the UN
 
Environment
Program and peers.
›
 
Refer to the Sustainability Report 2021,
 
available from 11 March 2022 under “Annual reporting“
 
at
ubs.com/investor
s, for more
information
 
 
Advisory vote
 
Corporate governance and compensation | Compensation
240
Our commitment to diversity, equity and inclusion
Ensuring
 
fair
 
treatment
 
and
 
strengthening
 
our
 
commitment
 
to
DE&I are vital to our sustainable
 
business success. We find diverse
teams better
 
understand and
 
relate
 
to the
 
needs of
 
our equally
diverse
 
clients.
 
Through
 
the
 
diversity
 
of
 
our
 
employees’
backgrounds
 
and
 
experiences,
 
we
 
drive
 
innovation
 
and
 
better
decision
 
making.
 
Our
 
aim,
 
therefore,
 
is
 
to
 
shape
 
a
 
diverse
 
and
inclusive
 
organization
 
that
 
is
 
innovative,
 
provides
 
outstanding
service
 
to
 
our
 
clients and
 
offers
 
equitable
 
opportunities
 
so that
every employee can thrive.
UBS is a
 
strong supporter of
 
the UN Standards
 
of Conduct for
Business
 
anti-discrimination
 
guidelines.
 
Additionally,
 
we
 
are
signatories to the UN-backed Women’s Empowerment Principles,
the UK’s
 
Women in
 
Finance Charter
 
and Race
 
at Work
 
Charter,
and
 
the Corporate
 
Call to
 
Action in
 
the US.
 
Philosophically, we
take a
 
broad approach
 
to DE&I,
 
focusing on
 
a range
 
of aspects,
including
 
inclusive
 
leadership,
 
age,
 
gender,
 
race
 
and
 
ethnicity,
LGBTQ+,
 
disability,
 
and
 
veterans.
 
Building
 
inclusive
 
leadership
skills, increasing
 
gender and
 
ethnic diversity,
 
and equitable
 
policies
and practices were our leading priorities in 2021.
Gender diversity is
 
a key priority
 
for the firm.
 
We are particularly
focused
 
on
 
increasing
 
the
 
representation
 
of
 
women
 
at
 
senior
management
 
levels.
 
We
 
take
 
a
 
multi-pronged
 
approach
 
in
 
this
respect, analyzing
 
and adapting
 
various factors
 
that support
 
the
hiring,
 
development
 
and
 
retention
 
of
 
women
 
at
 
all
 
levels.
 
For
example,
 
our
 
interviews
 
for
 
open
 
roles
 
are
 
expected
 
to
 
include
qualified diverse candidates, and
 
our interview questions seek
 
to
gauge inclusive leadership competencies for executive roles.
 
To ensure we are making progress, we
 
hold ourselves and our
leaders accountable. For
 
example, in
 
early 2020 we
 
publicly stated
our aspiration to have
 
30% of all
 
Director and above roles
 
held by
women by 2025. At
 
the end of 2021,
 
that figure stood at
 
26.7%,
up from 26.0% in
 
2020. As of 31 December
 
2021, 25% of GEB
members were
 
female and
 
we expect
 
to increase this
 
ratio to
 
33%
in early
 
2022 after
 
the designated
 
Group Chief
 
Financial Officer
joins the firm. In addition, 27%
 
of senior managers who reported
directly
 
to
 
the
 
Group
 
Executive
 
Board
 
(the
 
GEB)
 
in
 
2021
 
were
female. These aspirations
 
are considered in
 
the determination of
the
 
annual
 
performance
 
award
 
pool
 
and
 
are
 
included
 
in
 
the
explicit
 
sustainability objectives
 
under
 
“Strategic &
 
Growth” for
the GEB, as outlined in the table on the previous page.
 
Increasing the
 
ethnic minority diversity
 
of our
 
workforce, and
a
 
related
 
commitment
 
to
 
support
 
underrepresented
 
talent
 
and
communities, is also a top
 
priority across all business
 
divisions and
regions. We focus on four areas:
 
accountability and transparency;
investing in our talent; improving our culture;
 
and leveraging our
business strengths in underrepresented communities.
 
We take a country-by-country approach, in close collaboration
with relevant
 
business and
 
jurisdictional entities.
 
This is
 
because
legislation,
 
legal
 
requirements
 
and
 
progress
 
toward
 
racial
 
and
ethnic equality vary significantly across the
 
locations in which we
do business. In
 
the short term,
 
the largest
 
share of our
 
efforts is
focused on
 
Switzerland, the
 
US and
 
the UK.
 
In Switzerland,
 
we
began
 
collecting
 
ethnicity
 
data
 
on
 
a
 
voluntary
 
basis
 
in
 
2021,
aimed
 
at
 
understanding
 
the
 
current
 
representation
 
within
 
our
local
 
workforce.
 
Our
 
2025
 
aspiration
 
is
 
to
 
achieve
 
a
 
26%
representation of ethnic
 
minorities at Director
 
level and above
 
in
the UK and
 
the US. As
 
of the end
 
of 2021, our
 
representation was
20.1% in the US and 21.3% in the UK.
Our
 
employee
 
networks
 
are
 
strong
 
partners
 
in
 
our
 
ethnic
diversity
 
strategy.
 
Throughout
 
2021,
 
our
 
ethnicity-focused
MOSAIC networks
 
globally facilitated
 
numerous events
 
for staff
in every region to increase awareness and personal accountability
along with specialized
 
educational sessions
 
for network members.
In addition, a
 
community of more
 
than 480 Diversity
 
and Inclusion
Ambassadors acts
 
as a resource
 
for employee
 
advice and
 
coaching
on
 
conversations
 
about
 
various
 
diversity
 
and
 
inclusion-related
topics.
We are
 
committed to
 
ensuring a
 
workplace where
 
employees
are fairly
 
treated, with
 
equitable employment
 
and advancement
opportunities for all. We do not tolerate
 
harassment of any kind,
including sexual harassment, and we take
 
measures to prevent all
forms of
 
harassment, bullying,
 
victimization and
 
retaliation. Our
policies, procedures, employee
 
and line manager
 
education, and
awareness materials
 
all encourage
 
employees to
 
raise concerns,
which
 
they
 
may
 
do
 
openly
 
or
 
anonymously.
 
An
 
internal
 
anti-
harassment
 
officer
 
appointed
 
by
 
the
 
Group
 
Head
 
Human
Resources
 
provides
 
an
 
independent
 
view
 
of
 
the
 
firm’s
 
various
processes
 
and
 
procedures
 
to
 
prevent
 
harassment
 
and
 
sexual
misconduct.
›
 
Refer to
ubs.com/diversity
 
for additional information about our
priorities, commitments and progress, and the Sustainability
Report 2021, available from 11 March 2022 under “Annual
reporting” at
ubs.com/investors
, for our management practices
and detailed employee data, including
 
gender-
 
and region-
specific data
›
 
Refer to ”Employees”
 
in the ”How we create value for our
stakeholders”
 
section of our Annual Report 2021
 
for more
information.
 
 
 
 
241
Performance award pool funding
Our compensation philosophy focuses on balancing performance
with
 
appropriate
 
risk-taking,
 
retaining
 
talented
 
employees
 
and
shareholder returns. Our overall
 
performance award pool funding
percentage reduces as financial
 
performance increases. In
 
years of
strong
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.
Our performance award
 
pool funding
 
framework is based
 
on
Group and
 
business division
 
performance, including
 
achievements
against defined performance
 
measures. In
 
assessing performance,
we
 
also
 
consider
 
industry
 
peers,
 
market
 
competitiveness
 
of
 
our
results and pay position,
 
as well as progress against
 
our strategic
objectives,
 
including
returns,
 
risk
-
weighted
 
assets
 
and
 
cost
efficiency.
 
The Risk and Compliance functions
 
support our holistic
reflection
 
and
 
consideration
 
of
 
the
 
financial
 
and
 
non-financial
impact (including reputation) of risk matters. We further consider
the firm’s risk profile and culture, the extent to
 
which operational
risks and audit
 
issues have been
 
identified and resolved,
 
and the
success of risk reduction initiatives including significant events.
 
The
 
funding
 
for
 
Group
 
Functions
 
is
 
linked
 
to
 
overall
 
Group
performance
 
and
 
reflects
 
headcount,
 
workforce
 
location
 
and
demographics.
 
For
 
each
 
functional
 
area
 
quantitative
 
and
qualitative assessments evaluate service quality, risk management
and
 
financial
 
achievements.
O
ur
 
decision
s
 
also
 
balance
consideration
 
of
 
financial
 
performance
 
with
 
a
 
range
 
of
 
factors,
including
 
DE&I
 
and
 
other
 
ESG
 
metrics,
 
the
 
impact
 
of
 
litigation,
regulatory
 
costs,
 
the
 
effect
 
of
 
changes
 
in
 
financial
 
accounting
standards, capital returns, and relative total shareholder return.
Before making its final
 
proposal to the
 
BoD, the Compensation
Committee considers
 
the CEO’s
 
proposals and
 
can apply
 
a positive
or
 
negative
 
adjustment
 
to
 
the
 
performance
 
award
 
pool.
 
For
example,
 
despite
 
our
 
excellent
 
financial
 
results
 
in
 
2021,
 
our
reputation and financial
 
results were negatively
 
impacted by a
 
loss
related to the default
 
of a US-based client of
 
our prime brokerage
business.
 
As a consequence, the 2021 Group
 
performance award
pool
 
was
 
reduced
 
significantly.
 
Our
 
funding
 
approach
 
for
 
the
performance
 
award
 
pool
 
resulted
 
in
 
a
 
direct
 
and
 
substantial
reduction,
 
which
 
was
 
supplemented
 
by
 
a
 
significant
 
negative
adjustment to the pool.
Taking into consideration
 
the above
 
proposals and
 
factors, over
the past
 
nine years
 
the Compensation
 
Committee has
 
approved
adjustments
 
to
 
the
 
performance
 
award
 
pool,
 
resulting
 
in
downward adjustments in all but one year.
 
›
 
Refer to “2021
 
Group performance outcomes” in the “Group
compensation” section of this report
›
 
Refer to the “Group performance” section
 
of our Annual Report
2021 for more information about our results
 
 
 
UBS_AR_2021p270i0.gif
Advisory vote
 
Corporate governance and compensation | Compensation
242
Performance award pool funding process – illustrative overview
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UBS_AR_2021p271i0.gif
 
243
Compensation for GEB members
GEB compensation framework
In
 
2021,
 
we
 
made
 
no
 
changes
 
to
 
our
 
GEB
 
compensation
framework.
 
The
 
chart
 
below
 
illustrat
es
 
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
2021 compensation framework for GEB members (illustrative example)
 
›
 
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
Pay-for-performance safeguards for GEB members
Performance
 
award caps
–
 
Cap on the total GEB performance award pool
 
(2.5% of profit before tax)
1
 
–
 
Caps on individual performance awards (for the
 
Group CEO capped at five times the fixed compensation
 
and at seven times for
 
the other
GEB members)
–
 
Cap of 20% of performance award in cash
Delivery and
 
deferral
–
 
80% of performance awards are at risk of forfeiture
–
 
Long-term deferral over five years (or longer
 
for certain regulated GEB members)
–
 
Alignment with shareholders (through the LTIP)
 
and bondholders (through the DCCP)
–
 
Final payout of equity-based LTIP
 
award (50% of performance award) subject to absolute
 
and relative performance
 
conditions (three-year
performance period)
Contract
 
terms
 
–
 
No severance terms
–
 
Six-month notice period
Other
safeguards
–
 
Share ownership requirements
–
 
No hedging allowed
1
 
The Compensation Committee may consider adjustments to profit for items that are not reflective of underlying performance.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advisory vote
 
Corporate governance and compensation | Compensation
244
GEB share ownership requirements
To
 
align
 
the
 
interests
 
of
 
GEB
 
members
 
with
 
those
 
of
 
our
shareholders
 
and
 
to
 
demonstrate
 
personal
 
commitment
 
to
 
the
firm, we require
 
the Group CEO
 
and the other
 
GEB members to
hold
 
a
 
substantial
 
number
 
of
 
UBS
 
shares.
 
GEB
 
members
 
must
reach their minimum shareholding requirements
 
within five years
from their appointment and
 
retain it throughout their
 
tenure. The
total number of
 
UBS shares held by
 
a GEB member
 
consists of any
vested
 
or
 
unvested
 
shares
 
and
 
any
 
privately
 
held
 
shares.
 
GEB
members
 
may
 
not
 
sell
 
any
 
UBS
 
shares
 
before
 
they
 
reach
 
the
minimum ownership thresholds mentioned
 
below. At
 
the end of
2021, all GEB members met their share ownership
 
requirements,
except
 
for
 
those
 
appointed
 
within
 
the
 
last
 
four
 
years,
 
who
 
still
have time to build up and meet the required share ownership.
As of 31 December 2021,
 
our GEB members held shares
 
with
an
 
aggregate
 
value
 
of
approximately
USD
 
191
 
million
,
 
demonstrating their
 
commitment to
 
our strategy
 
and alignment
with shareholders.
 
Share ownership requirements
Group CEO
min. 1,000,000 shares
Must be built up within five years from their appointment
 
and retained throughout
their tenure.
Other GEB members
min. 500,000 shares
 
GEB base salary and role-based allowance
Each GEB member receives a
 
fixed base salary, which is reviewed
annually by the
 
Compensation Committee. The
 
2021 annual base
salary
 
for
 
the
 
Group
 
CEO
 
role
 
was
 
CHF 2.5
 
million
 
and
 
has
remained unchanged
 
since 2011.
 
The other
 
GEB members
 
each
received
 
a
 
base
 
salary
 
of
 
CHF 1.5
 
million
 
(or
 
local
 
currency
equivalent), also unchanged since 2011.
Over the course of 2021, two GEB
 
members held a UK Senior
Management
 
Function (SMF)
 
role for
 
one of
 
our UK
 
entities.
 
In
addition to
 
base salary,
 
role-based allowances
 
were part
 
of their
fixed compensation.
At the AGM, shareholders are asked to approve the maximum
aggregate amount
 
of fixed
 
compensation for
 
GEB members
 
for
the following financial year.
 
›
 
Refer to the “Supplemental information”
 
section of this report
for more information about MRTs and SMFs
›
 
Refer to the “Say-on-pay” section of
 
this report for more
information about the AGM vote on fixed
 
compensation for the
GEB
Caps on the GEB performance award pool
The
 
size
 
of
 
the
 
GEB
 
performance
 
award
 
pool
 
may
 
not
 
exceed
2.5% of
 
the Group
 
profit before
 
tax. This
 
limits the
 
overall GEB
compensation based on the firm’s profitability.
For 2021, the
 
Group’s profit
 
before tax
 
was USD 9.5
 
billion and
the total GEB performance award
 
pool was CHF 79.8 million. The
GEB
 
performance
 
award
 
pool
 
as
 
a
 
percentage
 
of
 
Group
 
profit
before tax was 0.9%, well below the 2.5% cap.
In line
 
with the
 
individual compensation
 
caps on
 
the proportion
of fixed
 
pay to
 
variable pay
 
for all
 
GEB members
 
(introduced in
2013), the Group CEO’s granted
 
performance award is capped at
five times
 
his fixed
 
compensation. Granted
 
performance awards
of
 
other
 
GEB
 
members
 
are
 
capped
 
at
 
seven
 
times
 
their
 
fixed
compensation
 
(or
 
two
 
times
 
for
 
GEB
 
members
 
who
 
are
 
also
Material
 
Risk
 
Takers
 
(
MRTs
)
)
.
 
For
 
202
1
,
 
performance
 
awards
granted to GEB members
 
and the Group CEO
 
were, on average,
3.2
 
times
 
their
 
fixed
 
compensation
 
(excluding
 
one
-
time
replacement
 
awards,
 
benefits
 
and
 
contributions
 
to
 
retirement
plans).
›
 
Refer to “Performance award pool funding” in
 
the
“Compensation philosophy and governance”
 
section of this
report for more information
GEB employment contracts and severance terms
GEB
 
members’
 
employment contracts
 
do
 
not include
 
severance
terms
 
or
 
supplementary
 
pension
 
plan
 
contributions
 
and
 
are
subject to a
 
notice period of at
 
least six months.
 
A GEB member
leaving
UBS
 
before
 
the
 
end
 
of
 
a
 
performance
 
year
 
may
 
be
considered for a performance award.
 
Such awards are subject to
approval
 
by the
 
BoD, and
 
ultimately
 
by the
 
shareholders at
 
the
AGM.
Benchmarking for GEB members
When
 
recommending
 
performance
 
awards
 
for
 
the
 
Group
 
CEO
and
 
the
 
other
 
GEB
 
members,
 
the
 
Compensation
 
Committee
reviews the respective total compensation for
 
each role against a
financial industry peer group.
 
The peer group is
 
selected based on
comparability of their
 
size, business
 
mix, geographic presence
 
and
the
 
extent
 
to
 
which
 
they
 
compete
 
with
 
us
 
for
 
talent.
 
The
Compensation
 
Committee
 
considers
 
our
 
peers’
 
strategies,
practices and pay
 
levels, as well
 
as their regulatory
 
environment;
it
 
also
 
periodically
 
reviews
 
other
 
firms’
 
pay
 
levels
 
or
 
practices,
including
 
both
 
financial
 
and
 
non-financial
 
sector
 
peers
 
as
applicable. The
 
total compensation
 
for a
 
GEB member’s
 
specific
role
 
considers
 
the
 
compensation
 
paid
 
by
 
our
 
peers
 
for
 
a
comparable
 
role
 
and
 
performance
 
within
 
the
 
context
 
of
 
our
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
202
1
 
performance year.
 
Bank of America
Goldman Sachs
Barclays
HSBC
BlackRock
JPMorgan Chase
BNP Paribas
Julius Baer
Citigroup
Morgan Stanley
Credit Suisse
Standard Chartered
Deutsche Bank
State Street
 
UBS_AR_2021p273i0.gif
 
245
GEB performance assessments
For 2021, we
 
have further enhanced
 
the performance assessment
for GEB members to ensure it is fully aligned
 
with the firm’s new
purpose and strategic
 
objectives. We assess
 
GEB members against
a
 
set
 
of
 
Group
 
financial
 
targets,
 
non-financial
 
objectives
 
and
Behaviors. Under
 
the non-financial
 
objectives we
 
introduced the
new
 
categories of
 
Core
 
Job, which
 
covers job-specific,
 
risk and
people
 
objectives,
 
as
 
well
 
as
 
Strategic
 
&
 
Growth,
 
which
 
covers
strategy,
 
digital
 
and
 
ESG
 
objectives.
 
The
 
restructured
 
approach
fosters an even greater focus on GEB priorities and the success
 
of
the Group overall
 
among all GEB
 
members, and strengthens
 
the
understanding
 
and
 
importance
 
of
 
interdependence
 
within
 
and
across
 
the GEB.
 
At the
 
same time,
 
it creates
 
stronger individual
accountability, and further increases
 
the focus on core activities.
The
 
Compensation
 
Committee
 
exercises
 
its
 
judgment
 
with
respect to the performance achieved
 
relative to the prior
 
year, the
strategic
 
plan and
 
competitors, and
 
considers the
 
Group
 
CEO’s
proposals.
 
The Compensation Committee’s proposals are
 
subject
to approval by the BoD.
The Compensation Committee, and then the full BoD, follows
a
 
similar
 
process
 
for
 
the
 
Group
 
CEO,
 
except
 
that
 
the
 
proposal
comes from the Chairman of the BoD.
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advisory vote
 
Corporate governance and compensation | Compensation
246
Overview of performance assessment measures
We apply
 
a range
 
of quantitative measures
 
to assess GEB
 
member performance
 
against financial
 
and non-financial
 
objectives while
Behaviors are assessed qualitatively.
 
The table below provides a summary of the main metrics and measures used for 2021.
Financial measures
(60%)
–
 
Reported Group profit before tax
–
 
Reported Group cost / income ratio
–
 
Reported Return on CET1 capital
Non-
financial
measures
(30%)
Core Job
 
Job-specific
–
 
Business-specific criteria such as net new investable
 
asset targets and client engagement-level objectives
–
 
Operating income growth targets for specific client
 
segments and total cost goals
–
 
Post-stress CET1 objectives and Capital ratio guidance
–
 
Execution progress on key client and internal initiatives;
 
e.g., cross-divisional collaboration initiatives,
efficiency and cost saving initiates
Risk
–
 
Operating within risk appetite constraints
–
 
Progress to deliver on risk reduction initiatives
People
–
 
Employee listening / sentiment results and feedback
–
 
Progress to meet 2025 ambitions
 
for female representation and for ethnic minority
 
representation in the
US and UK at Director and above levels (as per
 
ESG disclosure)
–
 
People development, mobility, turnover and succession plan metrics
Strategic &
Growth
Strategy
–
 
Progress on group-wide transformation initiatives
–
 
Delivery on division / function-specific strategic
 
programs and initiatives
Digital
–
 
Progress on digital transformation initiatives
–
 
Delivery of digital offering and user experience for
 
clients
ESG
–
 
Refer to the ”Our targets and progress” table in the ”Environmental,
 
Social and Governance
considerations”
 
section of this report
Behaviors
(10%)
Accountability with integrity
Qualitative assessment
against expected
Behaviors:
–
 
Responsible for what they say and do
–
 
Takes ownership and makes things happen
–
 
Steps up and acts when something is
 
not right
Collaboration
–
 
Trusts others and helps them to be successful
–
 
Delivers One UBS, together with their colleagues
–
 
Fosters a diverse, inclusive and equitable work
 
environment
Innovation
–
 
Challenges perspectives and looks at every
 
opportunity to improve
–
 
Actively seeks and provides feedback
–
 
Learns from every success and failure
 
Performance assessment categories
The table
 
below presents
 
the three
 
performance categories
 
for the
 
assessment of
 
the performance
 
against non-financial
 
objectives
related
 
to
 
Core
 
Job,
 
Strategic
 
&
 
Growth
 
and
 
Behaviors.
 
The
 
achievement
 
score
 
represents
 
the
 
maximum
 
percentage,
 
and
 
the
Compensation Committee may apply downward adjustments.
Non-financial measures
Needs focus
Good contribution
Excellent contribution
Achievement score: up to 33%
Achievement score: up to 66%
Achievement score: up to 100%
Behaviors
Needs focus
Expected behavior
Exemplary behavior
Achievement score: up to 33%
Achievement score: up to 66%
Achievement score: up to 100%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
247
2021 performance for the Group CEO
The
 
performance
 
award
 
for
 
the
 
Group
 
CEO
 
is
 
based
 
on
 
the
achievement
 
of
 
financial performance
 
targets
 
and non-financial
objectives related
 
to his
 
Core Job,
 
Strategic &
 
Growth initiatives
and Behaviors, as described earlier in this section.
These
 
objectives
 
were
 
set
 
to
 
reflect
 
the
 
strategic
 
priorities
determined by the Chairman and the BoD.
›
 
Refer to “GEB compensation framework”
 
in this section of this
report for more information
Performance assessment for the Group CEO
The
 
BoD recognized
 
that Ralph
 
Hamers
 
successfully focused
 
on
building on UBS’s strong
 
business momentum, which resulted
 
in
very strong
 
financial results
 
for 2021.
 
He led
 
the Group
 
toward
stronger client centricity
 
and improved the delivery
 
of the bank’s
ecosystem
 
to
 
clients.
 
He
 
also
 
delivered
 
a
 
successful
 
strategic
refresh in 2021 and
 
re-positioned the bank’s
 
sustainability efforts.
Mr.
 
Hamers successfully
 
led the
 
development of
 
the purpose
statement,
 
established
 
the
 
client
 
promise,
 
and
 
strategic
imperatives,
 
including
 
development
 
of
 
concrete
 
transformation
initiatives to position the firm for
 
future growth. He was the most
important
 
ambassador
 
for
 
the
 
firm’s
 
refreshed
 
culture
 
and
behavior program.
Furthermore,
 
Ralph
 
Hamers
 
continuously
 
displayed
 
high
 
risk
awareness and
 
set a strong
 
and consistent
 
tone from
 
the top to
promote
 
an
 
effective
 
risk
 
culture.
 
He
 
also
 
demonstrated
 
strong
leadership
 
and
 
accountability
 
in
 
dealing
 
with
 
the
 
loss
 
event
resulting
 
from
 
the
 
default
 
of
 
a
 
US-based
 
client
 
of
 
our
 
prime
brokerage business.
Additionally,
 
the BoD
 
recognized that
 
Mr.
 
Hamers personally
championed the drive towards
 
becoming more digital
 
across the
organization, along with his continuous push for technology as a
differentiator for both clients and employees.
The BoD acknowledged that Mr. Hamers also championed key
changes across the organization to further promote agile ways of
working,
 
simplification
 
and
 
empowerment.
 
He
 
continued
 
to
increase
 
the
 
Group’s
 
focus
 
on
 
delivering
 
against
 
diversity
 
and
ethnicity ambitions.
Mr.
 
Hamers
 
demonstrated
 
strong
 
leadership
 
on
 
ESG
 
topics,
including
 
establishing
 
a
 
group-wide
 
sustainability
 
and
 
impact
organization.
 
He
 
drove
 
the
 
definition
 
of
 
a
 
net-zero
 
framework
and
 
focused
 
the
 
organization
 
on
 
delivering
 
against
 
select
 
UN
Sustainable Development goals, as well as establishing ambitions
and making progress on key focus areas,
 
including Planet, People
and Partnerships.
The
 
table
 
below
 
illustrates
 
the
 
assessment
 
criteria
 
used
 
to
evaluate the achievements of Mr. Hamers in 2021.
Financial performance
Weight
Performance measures
2021
targets
2021
 
results
Achieve-
ment
2
Weighted
assess-
ment
2021 commentary
20%
Reported Group Profit
before Tax
USD 6.9bn
USD 9.5bn
100%
2
20%
–
 
Profit before tax increased 16% to USD 9.5 billion,
reflecting strong business momentum with income
 
up
in all regions and good cost control. This result
significantly exceeds the 2021 performance
target and also represents the highest result
since 2006.
20%
Reported Cost / Income
Ratio
75%
1
73.6%
100%
2,3
20%
–
 
The cost / income ratio was 73.6%,
better than the
2021 performance target
, despite the increase in
litigation provisions of USD 740 million taken for
 
the
French cross-border matter.
20%
Reported Return on CET1
Capital
16%
1
17.5%
100%
2
20%
–
 
The return on CET1 capital (RoCET1) was
 
17.5%,
compared with 17.4% in 2020,
exceeding the 2021
performance target
.
1
 
The return on
 
CET1 capital and
 
cost / income
 
ratio performance targets
 
are set based
 
on the previously
 
communicated targets a
 
nd reflect a
 
stretch-target level relative
 
to the Group
 
return on CET1
capital target range of 12–15% and the cost / income ratio target range of 75–78%
 
in the spirit of setting ambitious goals to reach a 100% performance achievement.
 
2
 
Achievement score capped at
100%.
 
3
 
For the assessment of the cost / income ratio,
 
each 1% difference between actual and target affects the score by 10%.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advisory vote
 
Corporate governance and compensation | Compensation
248
Performance assessment for the Group CEO (continued)
 
 
Non-financial performance and Behaviors
Weight
Performance
measures
Achieve-
ment
Weighted
 
assess-
ment
2021 commentary
30%
Good
contribution
(66%)
20%
–
 
The evaluation of each non-financial objective
 
considers
quantitative metrics
 
that are
assessed against internal targets / plan:
Core Job
 
(Job specific,
Risk, People)
Core Job
–
 
Progressed on execution of
digital transformation
 
initiatives
–
 
Delivered improved
digital offering
 
and
user experience for clients
 
–
 
Operated within
risk appetite
 
constraints
–
 
Progressed on
risk reduction initiatives
 
and strengthened the
control framework
 
–
 
Improved
employee listening / sentiment results
 
across key categories
–
 
Increased the
ratio of female leaders
, stayed on track to meet the 2025 target
–
 
Stayed on track toward the 2025 ambition for ratios
 
of US and UK
employees from ethnic
minorities
 
–
 
Improved statistics on
employee mobility and turnover
 
Strategic &
Growth
 
(Strategy, Digital,
ESG)
Strategic & Growth
–
 
Developed and launched UBS’s
purpose
 
–
 
Delivered the refreshed
strategy
 
–
 
Launched new client promise and strategic imperatives
–
 
Refreshed the
Sustainability
 
strategy
–
 
Progressed on the execution of key
growth initiatives
 
–
 
Refreshed culture and behavior program
–
 
See
ESG
 
metrics and progress in separate table in this report
10%
Behaviors
(Accountability
with integrity,
Collaboration,
Innovation)
Expected
behavior
(66%)
7%
The assessment of the Behavior objectives is
qualitative
 
and has resulted in the following
summary assessment:
–
 
Mr. Hamers acted as a
role model
 
in accepting
ownership and accountability
. He further
strengthened
collaboration
 
across the Group and at the same time pushed
individual
accountability
 
and empowerment across the organization
–
 
He drove
innovation
 
in UBS and built the foundation for
 
a successful digitalization through
new ways of working
. He continuously promoted simplification, more radical
 
challenge
and innovative thinking and action
Total weighted assessment
(maximum 100%)
87%
 
 
In addition to the
 
overall 2021 performance
 
of the Group and
 
Mr.
Hamers’
 
achievements
 
outlined
 
in
 
the
 
performance
 
evaluation
table above,
 
the BoD
 
also considered
 
other factors,
 
such as
 
the
impact of
 
the significant
 
risk event
 
related
 
to a
 
loss from
 
a US-
based client of our prime brokerage business.
The
 
BoD
 
approved
 
the
 
proposal
 
by
 
the
 
Compensation
Committee to grant Mr. Hamers
 
a performance award of
 
CHF 8.5
million, resulting
 
in a
 
total compensation
 
for 2021
 
of CHF
 
11.0
million
 
(excluding
 
benefits
 
and
 
contributions
 
to
 
his
 
retirement
benefit plan).
Aligned
 
with
 
the
 
GEB
 
compensation
 
framework,
 
the
 
Group
CEO’s performance award
 
will be delivered
 
20% (CHF 1.7
 
million)
in
 
cash
 
and
 
the
 
remaining
 
80%
 
(CHF
 
6.8
 
million)
 
subject
 
to
deferral and forfeiture provisions,
 
as well as meeting
 
performance
conditions over the next five years.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
249
2021 total compensation for the GEB members
The aggregate performance award
 
pool for the
 
GEB for 2021
 
was
CHF 79.8
 
million
 
(USD 87.1
 
million);
 
on
 
a
 
per
 
capita
 
basis
 
this
reflects
 
a
 
decrease
 
of
 
1%
 
compared
 
with
 
2020.
 
This
 
contrasts
with
 
the
 
change
 
in
 
the
 
overall
 
performance
 
award
 
pool
 
of
 
the
firm,
 
which
 
increased
 
10%
 
compared
 
with
 
2020.
 
The
 
GEB
performance award
 
pool had
 
a proportionally
 
larger downward
adjustment than
 
the Group
 
pool, to
 
reflect the
 
accountability of
the GEB for the significant risk event in the first half of
 
2021. The
Group’s profit before tax was USD 9.5 billion, up 16% compared
with 2020.
 
The
 
Compensation
 
Committee
 
has
 
confirmed
 
that
performance conditions for all GEB members’ awards due to vest
in March 2022 have
 
been satisfied and the
 
awards will therefore
vest in full.
At
 
the
 
2022
 
AGM,
 
shareholders
 
will
 
vote
 
on
 
the
 
aggregate
2021 total variable compensation
 
for the GEB in
 
Swiss francs. The
tables
 
below provide
 
the awarded
 
compensation for
 
the Group
CEO and the GEB members
 
in Swiss francs and, for
 
reference, the
total
 
amounts
 
in
 
US
 
dollars
 
for
 
comparability
 
with
 
financial
performance.
 
The
 
individual
 
variable
 
performance
 
awards
 
for
each
 
GEB
 
member
 
will
 
only
 
be
 
confirmed
 
upon
 
shareholder
approval at the AGM
›
 
Refer to “Provisions of the Articles of Association
 
related to
compensation” in the “Supplemental
 
Information” section of
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
Benefits
2
Total fixed
compensa-
tion
Cash
3
Performance
award
under LTIP
4
Performance
award
under
DCCP
5
Total
variable
compensa-
tion
Total fixed
and vari-
able com-
pensation
6
Total fixed
compensa-
tion
Total
variable
compensa-
tion
Total fixed
and vari-
able com-
pensation
6
Highest Paid Executive (for 2021 Ralph
 
A.J.G Hamers and for 2020 Sergio P. Ermotti)
2021
2,500,000
246,415
251,856
2,998,271
1,700,000
4,250,000
2,550,000
8,500,000
11,498,271
3,275,763
9,286,681
12,562,444
2020
7
2,500,000
244,353
78,891
2,823,244
2,100,000
5,250,000
3,150,000
10,500,000
13,323,244
Group CEO Ralph A.J.G. Hamers (reflects compensation
 
since joining UBS per 1 September
 
2020)
2020
833,333
62,124
314,260
1,209,717
600,000
1,500,000
900,000
3,000,000
4,209,717
Aggregate of all GEB members
8,9,10,11,12
2021
24,853,521
2,064,009
1,179,512
28,097,041
15,950,000
39,875,000
23,925,000
79,750,000
107,847,041
30,697,441
87,130,916
117,828,357
2020
27,469,369
2,249,276
1,145,489
30,864,135
16,625,062
42,874,938
25,500,000
85,000,000
115,864,135
1 Swiss franc
 
amounts have been
 
translated into US
 
dollars for reference
 
at the 2021
 
performance award currency
 
exchange rate of
 
CHF / USD
 
1.092551.
 
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 2021 were awarded
 
at a value of 67.7% of maximum which reflects our best estimate of the fair
value of the award. The maximum number of
 
shares is determined by dividing the awarded amount by the estimated
 
fair value of the award at grant, divided
 
by CHF 19.194 or USD 20.700, the average closing price
of UBS shares over the last ten trading days leading up to and including the grant date.
 
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 2021 and 2020, which are estimated
 
at grant at CHF 4,997,243 and CHF 5,497,811,
 
respectively, of which CHF 763,059
and CHF 880,496, respectively, are
 
for the highest-paid GEB member.
 
The legally required employees’
 
social security contributions are included in the
 
amounts shown in the table above,
 
as appropriate.
 
7 Reflects
compensation for 12 months until
 
the end of his GEB
 
employment on 31 December 2020.
 
8 As stated in “Group
 
Executive Board” in the
 
“Corporate governance” section of our
 
Annual Report 2021, twelve
 
GEB
members were in office on
 
31 December 2021 and thirteen
 
GEB members on 31 December
 
2020.
 
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 For 2021, Barbara Levi received a
 
one-time
replacement award of
 
CHF 7,081,474. This
 
replacement award is
 
not included in the
 
above table; including
 
this, the 2021
 
total aggregate compensation
 
of all GEB members
 
is CHF 114,928,515.
 
For 2020,
 
Ralph
A.J.G. Hamers received a
 
one-time replacement award of CHF
 
163,399. This replacement award
 
is not included in the above
 
table; including this, the 2020
 
total aggregate compensation of all GEB
 
members is CHF
116,027,534.
 
12 Base salary may include role-based allowances in line with market practice
 
in response to regulatory requirements.
 
p
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advisory vote
 
Corporate governance and compensation | Compensation
250
Total realized compensation for the Group CEO
The realized
 
compensation reflects
 
the total
 
amount paid
 
out in
the
 
year.
 
It
 
includes
 
the
 
base
 
salary,
 
cash
 
performance
 
award
payments,
 
and
 
all
 
deferred
 
performance
 
awards
 
vested
 
in
 
the
year.
 
As such,
 
realized pay
 
is the
 
natural culmination
 
of awards
granted and approved by shareholders in previous years.
To
 
illustrate
 
the
 
effect
 
of
 
our
 
long-term
 
deferral
 
approach,
which
 
has
 
been
 
in
 
place
 
since
 
2012,
 
we
 
disclose
 
the
 
annual
realized
 
compensation
 
of
 
Mr.
 
Hamers,
 
including
 
a
 
comparison
with his total awarded compensation.
 
Total
 
realized compensation vs awarded compensation for Ralph A.J.G Hamers¹
 
CHF
Realized
Awarded
For the year
Base salary
Cash award
2
Deferred cash
award
2
Performance
award under
equity plans
2
Performance
award under
DCCP
2
Total realized
fixed and variable
 
compensation
Total awarded
fixed and variable
compensation
3,4
2021
 
2,500,000
 
600,000
 
0
 
0
 
0
 
3,100,000
 
11,000,000
2020
1
 
833,333
 
0
 
0
 
0
 
0
 
833,333
 
3,833,333
1 Includes compensation for 4 months as Ralph A.J.G. Hamers joined UBS on
 
1 September 2020.
 
2 Excludes dividend / interest payments.
 
3 Excludes contributions to retirement benefit plans and benefits. Includes
social security contributions paid by Ralph A.J.G. Hamers but excludes the portion related to
 
the legally required social security contributions paid by UBS.
 
4 Excludes the one-time replacement award.
 
 
 
251
Group compensation
Compensation elements for all employees
A
ll
 
elements
 
of
 
pay
 
are
 
considered
 
when
 
making
 
our
compensation decisions.
 
We
 
regularly
 
review our
 
principles and
compensation
 
framework
 
in
 
order
 
to
 
remain
 
competitive
 
and
aligned with stakeholders.
 
In 2021, we
 
made no material
 
changes
to
 
our
 
overall
 
framew
ork.
 
We
 
will
 
continue
 
to
 
review
 
our
approach to salaries
 
and performance
 
awards,
 
considering market
developments, our
 
performance and
 
our commitment
 
to deliver
sustainable returns to shareholders.
Base salary and role-based allowance
Employees’
 
fixed
 
compensation
 
(e.g.,
 
base
 
salary)
 
reflects
 
their
level of skill, role and experience, as well as local market practice.
Base salaries
 
are usually
 
paid monthly
 
or fortnightly,
 
in line
 
with
local
 
market
 
practice.
 
We
 
offer
 
competitive
 
base
 
salaries
 
that
reflect
 
location,
 
function
 
and
 
role.
 
Salary
 
increases
 
generally
consider
 
promotions,
 
skill
 
set,
 
performance
 
and
 
overall
responsibility.
In addition
 
to base salary,
 
and as
 
part of
 
fixed compensation,
some
 
employees
 
may
 
receive
 
a
 
role-based
 
allowance.
 
This
allowance is
 
a shift
 
in the
 
compensation mix
 
between fixed
 
and
variable compensation,
 
not an increase
 
in total
 
compensation. It
reflects
 
the
 
market
 
value
 
of
 
a
 
specific
 
role
 
and
 
is
 
fixed,
 
non-
forfeitable compensation. Unlike salary, a role-based allowance is
paid only
 
if the employee
 
is in a
 
specific role. Similar
 
to previous
years,
 
2021
 
role-based
 
allowances
 
consisted
 
of
 
a
 
cash
 
portion
and, where applicable, a blocked UBS share award.
Pensions and benefits
We
 
offer
 
certain
 
benefits
 
for
 
all
 
employees,
 
such
 
as
 
health
insurance and
 
retirement benefits.
 
These vary
 
depending on
 
the
employee’s
 
location
 
and
 
are
reviewed
 
periodically
 
for
competitiveness.
 
Pension
 
contributions
 
and
 
pension
 
plans
 
also
vary in
 
accordance with
 
local requirements
 
and market
 
practice.
However, pension plan rules in any one location are generally the
same for all employees, including management.
GEB members’
 
pension contributions
 
and benefits
 
are in
 
line
with local practices
 
for other employees.
 
There are no
 
enhanced
or supplementary pension contributions for the GEB.
Performance award
Most
 
of
 
our
 
employees
 
are
 
eligible
 
for
 
an
 
annual
 
performance
award
.
 
The
 
level
 
of
this
 
award,
 
where
 
applicable,
 
generally
depends
 
on
 
the
 
firm’s
 
overall
 
performance,
 
the
 
employee’s
business division, team
 
and individual performance,
 
and behavior,
reflecting
 
their
 
overall
 
contribution
 
to
 
the
 
firm’s
 
results.
 
These
awards
 
are
 
in
 
line
 
with
 
applicable
 
local
 
employment
 
conditions
and at the discretion of the firm.
In addition to the firm’s Pillars
 
and Principles, Behaviors related
to accountability
 
with integrity,
 
collaboration and
 
innovation are
part of the
 
performance management approach.
 
Therefore, when
assessing performance, we consider
 
not only what was
 
achieved
but also how it was achieved.
 
 
UBS_AR_2021p280i0.gif
Advisory vote
 
Corporate governance and compensation | Compensation
252
Our deferred compensation plans
To
 
reinforce
 
our
 
emphasis
 
on sustainable
 
performance and
 
risk
management,
 
and our focus on
 
achieving growth ambitions,
 
we
deliver
 
part
 
of
 
our
 
employees’
 
annual
 
variable
 
compensation
through
 
deferred
 
compensation
 
plans
.
We
 
believe
 
that
 
our
approach,
 
with
 
a
 
single
 
incentive
 
decision
 
and
 
a
 
mandatory
deferral
,
is
transparent
 
and
well
 
suited
 
to
 
implementing
 
our
compensation
 
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.,
 
an
additional
 
non-financial
 
conduct-related
 
performance
 
metric
under
 
the
 
LTIP,
 
more
 
stringent deferral
 
requirements,
 
additional
blocking
 
periods).
 
In
 
addition,
 
SMFs
 
and
 
MRTs
 
receive
 
50%
 
of
their cash portion
 
in the form
 
of immediately vested
 
shares, which
are blocked for 12 months after grant.
 
The deferred amount increases at higher marginal rates in line
with the
 
value of
 
the performance
 
award. The
 
effective deferral
rate therefore depends on the amount
 
of the performance award
and the amount of total compensation.
We believe our deferral regime has
 
one of the longest vesting
periods in the industry. The weighted average deferral period (for
non-regulated
 
employees)
 
is
 
4.4
 
years
 
for
 
GEB
 
members
 
and
ranges
 
from
 
3.5
 
to
 
4
 
years
 
for
 
employees
 
below
 
GEB
 
level
.
 
Additionally, from
 
time to
 
time, we
 
may utilize
 
alternative deferred
compensation
 
arrangements
 
to
 
remain
 
competitive
 
in
 
specific
business areas.
To
 
further
 
promote
 
sustainable
 
performance,
all
 
of
our
deferred compensation plans include employment
 
conditions and
malus conditions. These
 
enable the firm to
 
reduce or fully forfeit
unvested deferred awards
 
under certain circumstances, pursuant
to performance
 
and harmful
 
acts provisions.
 
In addition,
 
forfeiture
is triggered in cases
 
where employment has been
 
terminated for
cause.
Our share delivery obligations related to notional
 
share awards
are satisfied by delivering treasury shares, which are purchased in
the market, to employees at vesting.
›
 
Refer to “Note 28 Employee benefits: variable
 
compensation” in
the “Consolidated financial statements”
 
section of our Annual
Report 2021
 
for more information
›
 
Refer to the “Supplemental information”
 
section of this report
for more information about MRTs and SMFs
 
 
Variable compensation elements by employee category
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
253
Long-Term Incentive Plan
The
 
LTIP
 
is
 
a
 
mandatory
 
deferral
 
plan
 
for
 
senior
 
leaders
 
of
 
the
Group (i.e., GEB members and selected senior management). For
the
 
2021
 
performance
 
year,
 
we
 
granted
 
LTIP
 
awards
 
to
 
117
employees at a
 
fair value of
 
67.7% of maximum.
 
The value was
calculated by an independent third party using a well-established
valuation methodology.
 
The
 
performance
 
metrics of
 
the share-based
 
LTIP awards
 
are
average
 
return
 
on
 
CET1
 
capital
 
(RoCET1)
 
and
 
relative
 
total
shareholder
 
return
 
(rTSR)
 
over
 
a
 
three-year
 
performance
 
period
starting on 1 January in the year of grant. Performance outcomes
and
 
actual
 
payout
 
levels
 
will
 
be
 
disclosed
 
at
 
the
 
end
 
of
 
the
performance period.
The
 
three-year
 
average
 
RoCET1
 
performance
 
metric
 
reflects
our strategic return ambitions and
 
considers our revised financial
targets,
 
as well as our cost of capital as outlined below:
–
 
the required RoCET1
 
performance for a
 
maximum payout is
 
set
at 18%, which represents the upper end of our target range;
–
 
the required performance
 
threshold for the
 
minimum payout
has been raised to 8%
 
from 6% in prior-year
 
awards to reflect
our
 
new
 
financial
 
targets
 
communicated
 
in
 
February
 
2022,
increasing
 
the
 
mid-point
 
of
 
the
 
payout
 
thresholds
 
to
 
better
reflect our cost of capital; and
–
 
the
 
linear
 
payout
 
design
 
between
 
threshold
 
and
 
maximum
level
 
supports
 
our
 
growth
 
ambitions
 
and
 
our
 
focus
 
on
delivering
 
sustainable
 
performance
 
without
 
encour
ag
ing
 
excessive risk-taking.
 
 
The rTSR
 
performance metric
 
over the
 
three-year period
 
further
aligns the interests of employees with those of shareholders:
–
 
the metric
 
compares the total
 
shareholder return
 
(the TSR) of
UBS
 
with
 
the
 
TSR
 
of
 
an
 
index
 
consisting
 
of
 
listed
 
Global
Systemically
 
Important
 
Banks
 
(G-SIBs)
 
as
 
determined
 
by
 
the
Financial Stability Board (excluding UBS Group);
–
 
the
 
G-SIBs
 
are
 
independently
 
defined
 
and
 
reflect
 
companies
with
 
a
 
comparable
 
risk
 
profile
 
and
 
impact
 
on
 
the
 
global
economy;
–
 
the
 
index,
 
which
 
includes
 
publicly
 
traded
 
G-SIBs,
 
is
 
equal
weighted,
 
calculated
 
in
 
Swiss
 
francs
 
and
 
maintained
 
by
 
an
independent index
 
provider,
 
so as to
 
ensure independence
 
of
the TSR calculation; and
–
 
the payout interval of
 
±25 percentage points versus the
 
index
performance
 
demonstrates
 
our
 
ambition
 
of
 
delivering
attractive
 
relative
 
returns
 
to
 
shareholders.
 
The
 
linear
 
payout
and
 
the threshold
 
level
 
set below
 
index performance
 
further
support sustainability of results and prudent risk-taking.
 
Global Systemically Important Banks (G-SIBs) that are listed companies
1
Agricultural Bank of China
Goldman Sachs
Santander
Bank of America
Groupe Crédit Agricole
Société Générale
Bank of China
HSBC
Standard Chartered
Bank of New York Mellon
ING Bank
State Street
Barclays
ICBC
Sumitomo Mitsui FG
BNP Paribas
JPMorgan Chase
Toronto-Dominion
China Construction Bank
Mitsubishi UFJ FG
UniCredit
Citigroup
Mizuho FG
Wells Fargo
Credit Suisse
Morgan Stanley
Deutsche Bank
Royal Bank of Canada
1
 
As of November 2021. Excludes UBS Group.
 
Dividend
 
equivalents
 
(granted
 
where
 
applicable
 
regulation
permits)
 
are
 
subject
 
to
 
the
 
same
 
terms
 
as
 
the
 
underlying
 
LTIP
award.
LTIP award
 
s
 
reflect the
 
long-term focus
 
of our
 
compensation
framework. The final number of shares as determined at
 
the end
of
 
the
 
three-year
 
performance
 
period
 
will
 
vest
 
in
 
three
 
equal
installments in each of the three years following the performance
period for GEB members,
 
and cliff vest in
 
the first year following
the performance period
 
for selected senior
 
management (longer
deferral periods may apply for regulated employees).
LTIP payout illustration
–
 
The final number of notional
shares vesting will vary based on
the achievement versus the
performance metrics.
–
 
Linear payout between threshold
and maximum performance.
–
 
Vesting levels are a percentage of
the maximum opportunity of the
LTIP and cannot exceed 100%.
–
 
Full forfeiture for performance
below the predefined threshold
levels.
 
–
 
SMFs and UK MRTs are subject to
an additional non-financial metric
based on a conduct assessment
with a potential downward
adjustment of up to 100% of the
entire award.
Performance metric:
 
average RoCET1 (50% of award)
Below threshold (<8%)
Threshold (8%) up to
maximum (<18%)
Maximum and above (>18%)
Full forfeiture
(payout 0%)
Partial vest
(payout between 33% and <100%)
Full vest
(payout 100%)
Performance metric:
 
rTSR vs G-SIBs index (50% of award)
Below threshold (<–25 pps)
Threshold (–25 pps) up to
 
maximum (+25 pps)
Maximum and above (>+25 pps)
Full forfeiture
(payout 0%)
Partial vest
(payout between 33% and <100%)
Full vest
(payout 100%)
 
 
 
 
 
 
Advisory vote
 
Corporate governance and compensation | Compensation
254
Equity Ownership Plan
The EOP
 
is the
 
deferred
 
compensation plan
 
for employees
 
who
are
 
subject
 
to
 
deferral
 
requirements
 
but
 
do
 
not
 
receive
 
LTIP
awards. For the 2021 performance year,
 
we granted EOP awards
to 4,228 employees.
 
Delivering sustainable performance
 
is a key objective
 
for UBS,
and
 
we
 
therefore
 
link
 
EOP
 
award
 
vesting
 
with
 
minimum
performance thresholds over
 
a multi-year time
 
horizon. Our EOP
creates a direct link with
 
shareholder returns as a notional equity
award
 
and
 
have
 
no
 
upward
 
leverage.
 
This
 
approach
 
promotes
growth and sustainable performance.
 
EOP
 
awards
 
generally
 
vest
over
 
three
 
years.
For
 
certain
employee populations, EOP awards
 
can be adjusted downwards,
including
 
to
 
zero,
 
based
 
on
 
the
 
average
 
RoCET1
 
over
 
the
applicable
 
performance
 
period.
 
The
 
Compensation
 
Committee
sets the
 
minimum future
 
performance threshold and
 
may adjust
the
 
award
 
if
 
the
 
performance
 
metric
 
does
 
not
 
reflect
 
a
 
fair
measure of performance.
Asset Management employees receive some or all of
 
their EOP
in the
 
form of
 
notional funds
 
to align
 
their compensation
 
more
closely with industry standards.
 
This plan is generally
 
delivered in
cash and vests over five years.
›
 
Refer to “Vesting of outstanding awards granted in prior
 
years
subject to performance conditions” in
 
the “Supplemental
information” section of this report for more information
 
Deferred Contingent Capital Plan
The DCCP
 
is a
 
key component
 
of our
 
compensation framework
and supports alignment
 
of the interests
 
of our senior
 
employees
with those of our stakeholders.
All employees
 
subject to
 
deferral requirements
 
receive
 
DCCP
awards.
 
For the
 
2021 performance
 
year, we
 
granted DCCP
 
awards
to 4,303 employees.
DCCP
 
replicates
 
many
 
of
 
the
 
features
 
of
 
the
 
loss-absorbing
bonds that
 
we issue
 
to investors
 
and may
 
be paid
 
at
 
vesting in
cash
 
or,
 
at
 
the
 
discretion
 
of
 
the
 
firm,
 
a
 
perpetual,
 
marketable
additional tier 1 (AT1)
 
capital instrument. Employees can
 
elect to
have
 
their
 
DCCP
 
awards
 
denominated
 
in
 
Swiss
 
francs
 
or
 
US
dollars.
DCCP
 
awards
 
vest
 
in
 
full
 
after
 
five
 
years
 
(longer
 
deferral
periods may
 
apply for
 
regulated employees).
 
DCCP awards
 
bear
notional interest paid annually (except as
 
limited by regulation for
MRTs), subject
 
to review and
 
confirmation by the
 
Compensation
Committee.
 
The
 
notional
 
interest
 
rate
 
for
 
grants
 
in
 
2022
 
was
3.7%
 
for
 
awards
 
denominated
 
in
 
Swiss
 
francs
 
and
 
5.7%
 
for
awards denominated in US dollars. These interest rates are based
on
 
the
 
current
 
market
 
rates
 
for
 
similar
 
AT1
 
capital
 
instruments
issued by UBS Group.
Awards are
 
forfeited if
 
a viability
 
event occurs,
 
i.e., if
 
FINMA
notifies the firm that the
 
DCCP awards must be written down
 
to
mitigate the risk of an insolvency, bankruptcy or failure of UBS or
if the
 
firm receives a
 
commitment of extraordinary
 
support from
the public sector that
 
is necessary to
 
prevent such an
 
event. DCCP
awards
 
are
 
also
 
written down
 
for
 
GEB
 
members
 
if
 
the
 
Group’s
CET1 capital ratio falls below 10%
 
and for all other employees if
it falls below 7%.
In
 
addition,
 
GEB
 
members
 
forfeit
 
20%
 
of
 
DCCP
 
awards
 
for
each
 
loss-making
 
year
 
during
 
the
 
vesting
 
period.
 
This
 
means
100% of the
 
award is subject
 
to risk of
 
forfeiture. The forfeiture
features of DCCP create
 
a strong alignment with
 
our debt holders
and support the sustainability of the firm.
Over the last
 
five years, USD 1.7
 
billion of DCCP
 
awards have
been
 
issued,
 
contributing
 
to
 
the
 
Group’s
 
total
 
loss-absorbing
capacity
 
(TLAC).
Therefore
,
 
DCCP
 
awards
 
not
 
only
 
support
competitive
 
pay
 
but
 
also
 
provide
 
a
 
loss
 
absorption
 
buffer
 
that
protects the firm’s capital position.
 
The following table illustrates
the contribution of the DCCP
 
to our AT1 capital
 
and the effect on
our TLAC ratio.
›
 
Refer to the “Supplemental information”
 
section of this report
for more information about performance award and
 
personnel-
related expenses
›
 
Refer to the “Supplemental information”
 
section of this report
for more information about longer vesting
 
and clawback periods
for MRTs and SMFs
 
 
Contribution of the Deferred Contingent Capital Plan to our loss-absorbing capacity
1
USD million, except where indicated
31.12.21
31.12.20
Deferred Contingent Capital Plan (DCCP), eligible
 
as high-trigger loss-absorbing additional
 
tier 1 capital
1,730
1,875
DCCP contribution to the total loss-absorbing capacity
 
ratio (%)
0.6
0.6
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
255
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
 
support talent
 
acquisition, and
 
consistent with
industry
 
practice,
 
we
 
may
 
offer
 
replacement
 
awards
 
to
 
attract
senior
 
candidates
by
offse
t
t
ing
 
deferred
compensation
 
being
forfeited
 
at
 
their
 
previous
 
employer
 
as
 
a
 
result
 
of
 
joining
 
UBS.
When
making
 
such
 
awards
,
 
we
 
aim
 
to
 
match
 
the
 
pre
vious
employer’s
 
terms and
 
conditions for
 
the awards
 
to be
 
forfeited
upon joining
 
UBS. The total
 
2021 forfeitures
 
of USD 258 million
of
 
previously
 
awarded
 
deferred
 
compensation
 
offset
 
the
 
2021
total sign-on payments,
 
replacement payments and
 
guarantees of
USD 137 million.
Barbara
 
Levi
 
succeeded
 
Markus
 
Diethelm
 
as
 
Group
 
General
Counsel effective 1 November 2021.
 
Consistent with the
 
terms of
the original
 
awards and
 
included in
 
the above
 
figures, she
 
received
replacement
 
awards
 
for
 
compensation
 
forfeited at
 
her
 
previous
employer
 
as
 
a
 
result
 
of
 
joining
 
UBS.
 
Ms.
 
Levi’s
 
replacement
payment had a total value of CHF 7,081,474 and consisted of an
EOP share award representing 430,732 UBS shares (denominated
in Swiss francs), a deferred
 
cash award as well as replacement of
cash items. The deferred portion of the award will vest
 
in various
installments between 2022 and 2027. These replacement awards
are subject to UBS’s harmful acts provisions.
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
 
may
 
be
 
required
 
to
 
attract
individuals with certain
 
skills and
 
experience –
 
these awards
 
are
fixed
 
incentives
 
subject
 
to
 
our
 
standard
 
deferral
 
rules
 
and
limited to the first full year of employment;
–
 
award
 
grants
 
to
 
employees
 
hired
 
late
 
in
 
the
 
year
 
to
 
replace
performance
 
awards
 
that
 
they
 
would
 
have
 
earned
 
at
 
their
previous employers, but have foregone by joining UBS – these
awards are generally structured with the same level of deferral
as for employees at a similar level at UBS; and
–
 
in
 
exceptional
 
cases,
 
candidates
 
may
 
be
 
offered
 
a
 
sign-on
award to increase the chances of them accepting our offer.
 
These other variable compensation components are subject to
a
 
comprehensive
 
governance
 
process,
 
which
 
may
 
involve
 
the
Compensation Committee, depending on
 
the amount or type of
such payments.
Below-GEB
 
level
 
employees
 
who
 
are
 
made
 
redundant
 
may
receive severance
 
payments. Our
 
severance terms
 
comply with
 
the
applicable
 
local
 
laws
 
(legally
 
obligated
 
severance).
 
In
 
certain
locations, we
 
may provide
 
severance packages
 
that are
 
negotiated
with our local
 
social partners and
 
may go beyond
 
the applicable
minimum
 
legal
 
requirements
 
(standard
 
severance).
 
Such
payments are governed by location
 
-specific severance policies. In
addition, we
 
may make
 
severance payments
 
that exceed
 
legally
obligated or
 
standard severance
 
payments where
 
we believe
 
these
are
 
aligned
 
with
 
market
 
practice
 
and
 
appropriate
 
under
 
the
circumstances
 
(supplemental
 
severance).
 
GEB
 
members
 
do
 
not
receive severance payments.
 
Sign-on payments, replacement payments, guarantees and severance payments
Total 2021
of which: non-deferred
cash
of which: deferred
compensation
awards
Total 2020
Number of beneficiaries
USD million, except where indicated
2021
2020
Total sign-on payments
1
 
26
 
18
 
8
 
20
 
226
 
99
of which: Key Risk Takers
2
 
9
 
4
 
5
 
2
 
6
 
3
Total replacement payments
3
 
94
 
11
 
83
 
58
 
310
 
200
of which: Key Risk Takers
2
 
34
 
5
 
29
 
17
 
12
 
13
Total guarantees
3
 
17
 
11
 
6
 
16
 
40
 
32
of which: Key Risk Takers
2
 
2
 
1
 
1
 
5
 
1
 
2
Total severance payments
1,4
 
160
 
200
5
 
0
 
134
 
1,477
 
1,019
of which: Key Risk Takers
2
 
3
 
0
 
0
 
0
 
10
 
0
1 GEB members are not eligible for sign-on or severance payments.
 
2 Expenses for Key Risk Takers are full-year
 
amounts for individuals in office on 31 December 2021. Key Risk Takers
 
as defined by UBS, including
all employees with a total compensation
 
exceeding USD / CHF 2.5 million
 
(Highly Paid Employees).
 
3 Includes replacement payments for one
 
GEB member in 2021 and for
 
another GEB member in 2020.
 
No GEB
member received a guarantee
 
in 2021 or
 
2020.
 
4 Includes legally obligated
 
and standard severance
 
payments as well as
 
payments in lieu
 
of notice.
 
5 Represents expense recognized
 
in 2021 associated
 
with
payments made in 2021 as well as provisions for expected payments in 2022.
 
Forfeitures
1
Total 2021
Total 2020
USD million, except where indicated
Total forfeitures
 
258
 
145
of which: former GEB members
 
23
 
0
of which: Key Risk Takers
2
 
8
 
6
1 For notional share awards,
 
forfeitures are calculated as units forfeited
 
during the year,
 
valued at the share price on
 
31 December 2021 (USD 17.87)
 
for 2021. The 2020 data
 
is valued using the share
 
price on 31
December 2020 (USD 14.13). For LTIP
 
the forfeited units reflect the fair value awarded at grant.
 
For the notional funds awarded to
 
Asset Management employees under the EOP,
 
this represents the forfeiture credits
recognized in 2021 and 2020. For the DCCP, the fair value at grant of the forfeited awards during the year is reflected. Numbers presented may differ from the effect on the income statement in accordance with IFRS.
 
2 Key Risk Takers as defined by UBS,
 
including all employees with a total compensation exceeding USD / CHF 2.5 million (Highly Paid Employees) and excluding former GEB members who forfeited awards in 2021 or
2020.
 
 
Advisory vote
 
Corporate governance and compensation | Compensation
256
Benchmarking for employees other than GEB members
We
 
generally consider
 
market practice
 
in our
 
pay decisions
 
and
framework. Our
 
market review
 
reflects several
 
factors, including
the comparability of the
 
business division, location, scope
 
and the
diversity of our
 
businesses. For certain
 
businesses or roles, we
 
may
consider practices at other major international banks, other large
Swiss private
 
banks, private
 
equity firms,
 
hedge funds
 
and non-
financial
 
firms.
W
e
 
also
internally
benchmark
 
employee
compensation
 
for
 
comparable
 
roles
 
within
 
and
 
across
 
business
divisions and locations.
Employee share ownership
According
 
to
 
available
 
records
 
on
 
employee
 
shareholdings,
including
 
unvested
 
deferred
 
compensation,
 
as
 
of
 
31 December
2021, employees
 
held at
 
least USD 4.5
 
billion of
 
UBS shares
 
(of
which approximately USD 2.9
 
billion were
 
unvested), representing
approximately 7% of our total shares issued.
The Equity Plus Plan is our
 
employee share purchase program.
It
 
allows
 
employees
 
at
 
Executive
 
Director
 
level
 
and
 
below
 
to
voluntarily invest up
 
to 30% of
 
their base salary
 
and / or
 
regular
commission payments to purchase UBS shares.
 
In addition (where
offered),
 
eligible
 
employee
s
 
can
invest
 
up
 
to
 
35%
 
of
 
their
performance
 
award
 
under
 
the
 
program.
 
Participation
 
in
 
the
program
 
is
 
capped
 
at
 
USD
 
/
 
CHF 20,000
 
annually.
 
Eligible
employees may purchase
 
UBS shares at market
 
price and receive
one additional share
 
for every three
 
shares purchased through
 
the
program. Additional shares
 
vest after a maximum
 
of three years,
provided
 
the
 
employee
 
remains
 
employed
 
by
 
UBS
 
and
 
has
retained the purchased shares throughout the holding period.
›
 
Refer to “Note 28 Employee benefits: variable
 
compensation” in
the “Consolidated financial statements”
 
section of our Annual
Report 2021
 
for more
 
information
Compensation for US financial advisors in Global Wealth
Management
In
 
line
 
with
 
market
 
practice
 
for
 
US
 
wealth
 
management
businesses, the
 
compensation for
 
US financial advisors
 
in Global
Wealth Management
 
predominantly includes
 
production payout
and
 
deferred
 
compensation
 
awards.
 
Production
 
payout,
 
paid
monthly,
 
is
 
primarily
 
based
 
on
 
compensable
 
revenue.
 
Financial
advisors
 
may
 
also
 
qualify
 
for
 
deferred
 
compensation
 
awards,
which
 
generally
 
vest
 
over
 
a
 
six-year
 
period.
 
These
 
awards
 
are
based on
 
strategic performance
 
measures, including
 
production
and
 
length
 
of
 
service
 
with
 
UBS.
 
Production
 
payout
 
rates
 
and
deferred compensation awards may be reduced for, among other
things,
 
errors,
 
negligence
 
or
 
carelessness,
 
or
 
failure
 
to
 
comply
with the
 
firm’s rules, standards,
 
practices and /
 
or policies, and
 
/
or applicable laws and regulations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
257
2021 Group performance outcomes
Performance
 
awards granted
 
for the 2021
 
performance
 
year
 
The “Variable
 
compensation” table below
 
shows the amount
 
of
variable
 
compensation
 
awarded
 
to
 
employees
 
for
 
the
 
2021
performance year, together with the number of beneficiaries for
each type of
 
award granted. In
 
the case of
 
deferred awards,
 
the
final
 
amount
 
paid
 
to
 
an
 
employee
 
depends
 
on
 
performance
conditions and consideration
 
of relevant forfeiture provisions. The
deferred
 
share
 
award
 
amount
 
is
 
based
 
on
 
the
 
market
 
value
 
of
these awards on the date of grant.
 
Variable compensation
1
Expenses recognized
in the IFRS income
statement
Expenses deferred to
future periods
4
Accounting
adjustments
4
Total
Number of beneficiaries
USD million, except where indicated
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Non-deferred cash
 
2,383
 
2,167
 
0
 
0
 
0
 
0
 
2,383
 
2,167
 
57,783
 
58,843
Deferred compensation awards
 
405
 
341
 
797
 
756
 
65
 
51
 
1,267
 
1,148
 
4,202
 
3,937
of which: Equity Ownership Plan
 
183
 
137
 
393
 
306
 
46
5
 
35
5
 
623
 
478
 
3,807
 
3,566
of which: Deferred Contingent Capital Plan
 
140
 
112
 
299
 
280
 
0
 
0
 
438
 
392
 
4,170
 
3,910
of which: Long-Term Incentive Plan
 
54
 
42
 
50
 
50
 
18
5
 
16
5
 
122
 
109
 
117
 
115
of which: Asset Management EOP
 
29
 
49
 
56
 
120
 
0
 
0
 
84
 
169
 
374
 
335
Variable compensation – performance award pool
 
2,788
 
2,508
 
797
 
756
 
65
 
51
 
3,650
 
3,315
 
57,793
 
58,850
Variable compensation – other
2
 
191
 
126
 
215
 
181
 
(121)
6
 
(74)
6
 
285
 
233
Total variable compensation excluding financial advisor
variable compensation
 
2,979
 
2,634
 
1,012
 
938
 
(56)
 
(23)
 
3,935
 
3,548
Financial advisor (FA) variable compensation
3
 
4,175
 
3,378
 
1,097
 
822
 
0
 
0
 
5,272
 
4,200
 
6,218
 
6,305
Total variable compensation including FA variable
compensation
 
7,155
 
6,012
 
2,109
 
1,760
 
(56)
 
(23)
 
9,207
 
7,749
1 Expenses under “Variable compensation – other” and “Financial advisor variable
 
compensation” are not part of UBS’s performance award pool.
 
2 Consists of replacement payments, forfeiture credits,
 
severance
payments, retention plan payments and interest
 
expense related to the Deferred
 
Contingent Capital Plan.
 
3 Financial advisor compensation consists
 
of formulaic compensation based directly on
 
compensable revenues
generated by
 
financial advisors
 
and supplemental
 
compensation calculated
 
based on financial
 
advisor productivity,
 
firm tenure,
 
new assets and
 
other variables.
 
It also includes
 
expenses related
 
to compensation
commitments with financial advisors entered into at the time of recruitment
 
that are subject to vesting requirements.
 
4 Estimates as of 31 December 2021 and 2020. Actual amounts
 
to be expensed in future periods
may vary, e.g., due to forfeiture of awards.
 
5 Represents estimated post-vesting transfer restriction and permanent forfeiture discounts.
 
6 Included in expenses deferred to future periods is an amount of USD 121
million (2020: USD 74 million) in interest expense related to the Deferred Contingent Capital Plan. As the amount recognized as performance award represents the present value of the award
 
at the date it is granted
to the employee, this amount is excluded.
 
 
2021
 
performance award pool and expenses
The performance award pool, which includes performance-based
variable
 
awards
 
for
 
2021,
 
was
 
USD 3.7
 
billion,
 
reflecting
 
an
increase
 
of
 
10%
 
compared
 
with
 
2020.
 
Performance
 
award
expenses
 
for
 
2021
 
decreased
 
1%
 
to
 
USD 3.2
 
billion,
 
reflecting
increased
 
performance
 
award
 
expenses
 
accrued
 
in
 
the
performance
 
year,
 
offset
 
by
 
lower
 
expenses
 
related
 
to
 
prior
performance
 
years,
 
as
 
2020
 
included
 
additional
 
expenses
 
that
resulted from modifying
 
the terms
 
of certain
 
outstanding deferred
compensation
 
awards.
 
The
 
“Performance
 
award
 
pool
 
and
expenses”
 
table
 
below
 
compares
 
the
 
performance
 
award
 
pool
with performance award expenses.
 
Performance award pool and expenses
USD million, except where indicated
2021
2020
% change
Performance award pool
1
 
3,650
 
3,315
 
10
of which: expenses deferred to future periods and accounting
 
adjustments
2,3
 
862
 
807
 
7
Performance award expenses accrued in the performance year
 
2,788
 
2,508
 
11
Performance award expenses related to prior performance years
 
402
 
701
 
(43)
Total performance award expenses recognized for the year
4
 
3,190
 
3,209
 
(1)
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 Accounting
adjustments represent estimated
 
post-vesting transfer
 
restriction and permanent
 
forfeiture discounts.
 
4 Refer to
 
“Note 28 Employee benefits:
 
variable compensation” in
 
the “Consolidated financial
 
statements”
section of our Annual Report 2021 for more information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advisory vote
 
Corporate governance and compensation | Compensation
258
Compensation for the Board of Directors
Chairman of the BoD
Under the
 
leadership of
 
the Chairman,
 
Axel A.
 
Weber,
 
the BoD
determines,
 
among
 
other
 
things,
 
the
 
strategy
 
for
 
the
 
Group,
based on recommendations by
 
the Group CEO, exercises ultimate
supervision over management and appoints all GEB members.
The
 
Chairman
 
leads
 
all
 
general
 
meetings
 
and
 
BoD
 
meetings
and works
 
with the
 
committee chairpersons
 
to coordinate
 
their
work. Together with the Group CEO, the Chairman is responsible
for effective communication with shareholders and
 
stakeholders,
including
 
clients,
 
government
 
officials,
 
regulators
 
and
 
public
organizations. The
 
Chairman works
 
closely with
 
the Group
 
CEO
and
 
other
 
GEB
 
members,
 
providing
 
advice
 
and
 
support
 
when
appropriate
,
 
and
 
continues
 
to
 
strengthen
 
and
 
promote
 
our
culture
 
through
 
the
 
three
 
keys
 
to
 
success:
 
our
 
Pillars,
 
Principles
and Behaviors.
The Chairman’s total compensation
 
for the period from
 
AGM
to
 
AGM is
 
contractually
 
fixed without
 
any
 
variable
 
component.
For the current period from the
 
2021
 
AGM to the 2022 AGM,
 
his
total compensation
 
was CHF 4.9
 
million, excluding
 
benefits and
pension fund
 
contributions. The
 
Chairman’s total
 
compensation
for
 
the
 
current
 
period
 
consisted
 
of
 
a
 
cash
 
payment
 
of
 
CHF 3.5
million and
 
a share
 
component of
 
CHF 1.4 million
 
consisting of
72,939
 
UBS
 
shares
 
at
 
CHF
 
19.19
4
 
per
 
share.
 
The
 
share
component aligns the
 
Chairman’s pay with
 
the Group’s
 
long-term
performance.
 
Thus, Mr. Weber’s
 
total reward, including
 
benefits and pension
fund
 
contributions,
 
for
 
his
 
service
 
as
 
Chairman
 
for
 
the
 
current
period,
 
was CHF 5,224,913.
The Chairman’s employment
 
agreement does not
 
provide for
severance terms or
 
supplementary contributions to
 
pension plans.
The benefits
 
for the Chairman
 
are in line
 
with local practices
 
for
UBS
 
employees.
 
The
 
Chair
person
 
of
 
the
 
Compensation
Committee proposes and
 
the Compensation
 
Committee approves
the Chairman’s
 
compensation annually
 
for the
 
upcoming AGM-
to-AGM
 
period,
 
taking
 
into
 
consideration
 
fee
 
or
 
compensation
levels
 
for comparable
 
roles
 
based on
 
our core
 
financial industry
peers and other relevant leading Swiss companies included in the
Swiss Market Index.
›
 
Refer to “Board of Directors” in the “Corporate
 
governance”
section of our Annual Report 2021
 
for more information about
the responsibilities of the Chairman
 
Audited |
 
Compensation details and additional information for non-independent BoD members
CHF, except where indicated
USD
(for reference)
Name, function
1
For the period
AGM to AGM
Base salary
Annual share
award
2
Contributions
to retirement
plans and
 
benefits
3
Total
4
Total
4,5
Axel A. Weber, Chairman
2021/2022
 
3,500,000
 
1,400,000
 
324,913
 
5,224,913
 
5,708,482
2020/2021
 
3,500,000
 
1,400,000
 
343,283
 
5,243,283
1 Axel A.
 
Weber was the
 
only non-independent member
 
in office on
 
31 December 2021
 
and 31 December 2020.
 
2 These shares
 
are blocked for
 
four years.
 
3 Includes the
 
estimated portion related
 
to UBS’s
contribution to the statutory pension scheme and
 
estimated benefits valued at market
 
price, as applicable.
 
For the period from
 
the 2020 AGM to the 2021
 
AGM, the actual amount was CHF
 
336,050.
 
4 Excludes
the portion related to the legally required social security contributions paid by UBS, which for the period from the 2021 AGM to the 2022 AGM is estimated at CHF 336,428 and for the period from the 2020 AGM
 
to
the 2021 AGM at CHF 332,243. The legally required social security contributions paid by the non-independent BoD members are included in the amounts shown in this table, as appropriate.
 
5 Swiss franc amounts
have been translated into US dollars for reference at the 2021 performance award currency exchange rate
 
of CHF / USD 1.092551.
p
 
 
 
 
UBS_AR_2021p287i0.gif
 
259
Independent BoD members
As
 
outlined
 
in
 
the
 
table
 
below,
 
all
 
BoD
 
members,
 
except
 
the
Chairman,
 
are
 
deemed
 
independent
 
and
 
receive
 
fixed
 
fees
 
for
their services
 
on the
 
BoD and
 
its committees.
 
Independent BoD
members
 
do
 
not
 
receive
 
performance
 
awards,
 
severance
payments,
 
benefits or pension contributions.
In the current period, the roles of Senior Independent Director
and Vice
 
Chairman are
 
both held
 
by one
 
BoD member,
 
but the
additional fee is only paid once. Independent BoD members
 
must
use
 
a
 
minimum
 
of
 
50%
 
of
 
their
 
fees
 
to
 
purchase
 
UBS
 
shares,
which are blocked for four years, and they may elect to use up to
100% of
 
their fees to
 
purchase blocked UBS
 
shares. In all
 
cases,
the number of
 
shares is calculated
 
based on the
 
average closing
price of the 10 trading
 
days leading up to and
 
including the grant
date.
At
 
each
 
AGM,
 
shareholders
 
are
 
invited
 
to
 
approve
 
the
aggregate amount of BoD
 
remuneration, including compensation
for the
 
Chairman, which
 
applies until
 
the next
 
AGM. The
 
tables
below
 
and
 
on
 
the
 
following
 
page
 
provide
 
details
 
on
 
the
 
fee
structure for the independent BoD members.
The
 
fee structure
 
for independent
 
BoD
 
members is
 
reviewed
annually based on the Chairman’s proposal to the Compensation
Committee,
 
which
 
in
 
turn
 
submits
 
a
 
proposal
 
to
 
the
 
BoD
 
for
approval.
 
In
 
our
 
regular
 
review
 
of
 
the
 
BoD
 
fee
 
structure,
 
we
concluded
 
that
 
our
 
overall
 
approach
 
for
 
independent
 
BoD
member compensation remains
 
appropriate and thus
 
unchanged.
 
 
Remuneration framework for independent BoD members
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advisory vote
 
Corporate governance and compensation | Compensation
260
Audited |
 
Total
 
payments to BoD members
CHF, except where indicated
USD (for reference)
For the period AGM to AGM
Total
1
Total
1,2
Aggregate of all BoD members
2021/2022
 
12,124,913
 
13,247,082
2020/2021
 
11,843,283
1 Includes social security contributions paid by the BoD members but excludes the portion related to the legally required
 
social security contributions paid by UBS, which for the period from the 2021 AGM to the 2022
AGM is
 
estimated at grant
 
at CHF
 
739,615 and
 
for the
 
period from the
 
2020 AGM
 
to the 2021
 
AGM at
 
CHF 719,763.
 
2 Swiss franc
 
amounts have
 
been translated
 
into US dollars
 
for reference
 
at the
 
2021
performance award currency exchange rate of CHF / USD 1.092551
p
 
Audited |
 
Remuneration details and additional information for independent BoD members
CHF, except where indicated
Name, function
1
Audit Committee
Compensation
Committee
Corporate Culture and
Responsibility
Committee
Governance and
Nominating Committee
Risk Committee
For the period
AGM to AGM
Base fee
Committee
fee(s)
Additional
payments
2
Total
3
Share
percentage
4
Number of
shares
5,6
Jeremy Anderson,
Vice Chairman and Senior
Independent Director
C
M
2021/2022
 
300,000
 
400,000
 
150,000
 
850,000
 
50
 
22,142
C
M
2020/2021
 
300,000
 
400,000
 
150,000
 
850,000
 
50
 
30,774
Claudia Böckstiegel, member
2021/2022
 
300,000
 
0
 
300,000
 
50
 
7,814
2020/2021
-
-
-
-
William C. Dudley, member
M
M
M
2021/2022
 
300,000
 
350,000
 
650,000
 
50
 
16,932
M
M
M
2020/2021
 
300,000
 
350,000
 
650,000
 
50
 
23,533
Patrick Firmenich, member
M
M
2021/2022
 
300,000
 
250,000
 
550,000
 
100
 
27,275
2020/2021
-
-
-
-
Reto Francioni, member
M
M
2021/2022
 
300,000
 
300,000
 
600,000
 
50
 
15,629
M
M
2020/2021
 
300,000
 
300,000
 
600,000
 
50
 
21,723
Fred Hu, member
M
M
2021/2022
 
300,000
 
300,000
 
600,000
 
100
 
23,062
M
M
2020/2021
 
300,000
 
300,000
 
600,000
 
100
 
32,053
Mark Hughes, member
M
C
2021/2022
 
300,000
 
400,000
 
700,000
 
50
 
18,234
M
C
2020/2021
 
300,000
 
400,000
 
700,000
 
50
 
25,343
Nathalie Rachou, member
M
2021/2022
 
300,000
 
200,000
 
500,000
 
50
 
13,024
M
2020/2021
 
300,000
 
200,000
 
500,000
 
50
 
18,102
Julie G. Richardson, member
C
M
M
2021/2022
 
300,000
 
500,000
 
800,000
 
50
 
20,839
C
M
M
2020/2021
 
300,000
 
500,000
 
800,000
 
50
 
28,964
Beatrice Weder di Mauro,
former member
2021/2022
-
-
-
-
M
M
2020/2021
 
300,000
 
250,000
 
550,000
 
50
 
19,913
Dieter Wemmer, member
M
M
M
2021/2022
 
300,000
 
400,000
 
700,000
 
50
 
18,234
M
M
M
2020/2021
 
300,000
 
400,000
 
700,000
 
50
 
25,343
Jeanette Wong, member
M
M
M
2021/2022
 
300,000
 
350,000
 
650,000
 
100
 
24,988
M
M
M
2020/2021
 
300,000
 
350,000
 
650,000
 
100
 
34,730
Total 2021/2022
 
6,900,000
Total 2021/2022 in USD
(for reference)
7
 
7,538,600
Total 2020/2021
 
6,600,000
Legend: C = Chairperson of the respective Committee, M = Member of the respective Committee
1 Eleven independent BoD members were in office on 31 December 2021. At the 2021 AGM, Claudia Böckstiegel and Patrick Firmenich were newly elected and Beatrice Weder di Mauro did not stand for re-election.
Ten independent BoD members were in
 
office on 31 December 2020.
 
2 These payments are associated with the Vice
 
Chairman and the Senior Independent Director function.
 
3 Excludes UBS’s portion related to
the legally required social security contributions, which for the period from the 2021 AGM to the 2022 AGM is estimated at grant at CHF 403,187 and which for the period from the 2020 AGM to the 2021 AGM was
estimated at grant at CHF 387,520. The legally required social security contributions paid by the independent
 
BoD members are included in the amounts shown in this table, as appropriate.
 
4 Fees are paid 50% in
cash and 50% in blocked UBS shares. However, independent BoD members may elect to have 100% of their remuneration paid in blocked UBS shares.
 
5
 
For 2021, UBS shares were valued at CHF 19.194 (average
closing price of UBS shares over the
 
last 10 trading days leading
 
up to and including the grant
 
date). For 2020, UBS
 
shares, valued at
 
CHF 13.810 (average closing price of
 
UBS shares over the last 10
 
trading days
leading up to and including the grant date). These shares are blocked for four years.
 
6 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.
 
7 Swiss franc amounts have been translated
 
into US dollars for reference at the 2021
 
performance award currency exchange
rate of CHF / USD 1.092551.
p
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
261
Supplemental information
Fixed and variable compensation for GEB members
 
Fixed and variable compensation for GEB members
1,2,3
Total for 2021
Not deferred
Deferred
4
Total for 2020
CHF million, except where indicated
Amount
%
Amount
%
Amount
%
Amount
Total compensation
Amount
5
 
105
 
100
 
41
 
39
 
64
 
61
 
112
Number of beneficiaries
 
15
 
16
Fixed compensation
5,6
 
25
 
24
 
25
 
100
 
0
 
0
 
27
Cash-based
 
22
 
21
 
22
 
0
 
24
Equity-based
 
3
 
3
 
3
 
0
 
4
Variable compensation
 
80
 
76
 
16
 
20
 
64
 
80
 
85
Cash
7
 
16
 
15
 
16
 
0
 
17
Long-Term Incentive Plan (LTIP)
8
 
40
 
38
 
0
 
40
 
43
Deferred Contingent Capital Plan (DCCP)
8
 
24
 
23
 
0
 
24
 
26
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.
 
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. For
 
2021, Barbara Levi received a one-time replacement award
 
of CHF 7
million. This replacement award is not included in the above table;
 
including this, the 2021 total aggregate compensation of all GEB members
 
is CHF 112 million. For 2020, Ralph A.J.G.
 
Hamers received a one-time
replacement award of CHF
 
0.2 million. This replacement
 
award is not included
 
in the above table;
 
including this, the 2020
 
total aggregate compensation of
 
all GEB members is CHF
 
113 million.
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advisory vote
 
Corporate governance and compensation | Compensation
262
Regulated staff
Key Risk Takers
KRTs
 
are defined as those employees who, by the
 
nature of their
roles, have been
 
determined to materially set,
 
commit or control
significant
 
amounts
 
of
 
the
 
firm’s
 
resources
 
and
 
/
 
or
 
exert
significant influence
 
over its
 
risk profile. This
 
includes employees
that
 
work
 
in
 
front-office
 
roles,
 
logistics
 
and
 
control
 
functions.
Identifying KRTs globally is part of our risk
 
control framework and
an important element in ensuring we incentivize only
 
appropriate
risk-taking.
 
For
 
2021,
 
in
 
addition
 
to
 
GEB
 
members,
 
699
employees
 
were
 
classified
 
as
 
KRTs
 
throughout
 
UBS
 
Group
globally,
 
including
all
employees
 
with
 
a
 
total
 
compensation
exceeding
 
USD
 
/
 
CHF 2.5
 
million
 
(Highly
 
Paid
 
Employees),
 
who
may
 
not
 
have
 
been
 
identified
 
as
 
KRTs
 
during
 
the
 
performance
year.
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 pre-
determined
 
threshold
 
where
 
standard
 
deferral
 
rates
 
apply).
 
A
KRT’s
 
deferred
 
compensation award
 
will
 
only
 
vest
 
if
 
the
 
Group
performance
 
conditions
 
are
 
met.
 
Consistent
 
with
 
all
 
other
employees, the deferred
 
portion of a KRT’s
 
compensation is also
subject to forfeiture or
 
reduction if the KRT
 
commits harmful acts.
 
 
Fixed and variable compensation for Key Risk Takers
1
Total for 2021
Not deferred
Deferred
2
Total for 2020
USD million, except where indicated
Amount
%
Amount
%
Amount
%
Amount
Total compensation
Amount
 
1,561
 
100
 
895
 
57
 
666
 
43
 
1,400
Number of beneficiaries
 
699
 
647
Fixed compensation
3,4
 
477
 
31
 
477
 
100
 
0
 
0
 
417
Cash-based
 
474
 
30
 
474
 
417
Equity-based
 
3
 
0
 
3
 
1
Variable compensation
 
1,084
 
69
 
418
 
39
 
666
 
61
 
983
Cash
5
 
418
 
27
 
418
 
365
Long-Term Incentive Plan (LTIP) / Equity Ownership
Plan (EOP)
6
 
423
 
27
 
423
 
404
Deferred Contingent Capital Plan (DCCP)
6
 
243
 
16
 
243
 
213
1 Includes employees
 
with a total
 
compensation exceeding
 
USD / CHF
 
2.5 million (Highly
 
Paid Employees),
 
excluding GEB members
 
who were in
 
office during
 
the performance year,
 
except the new
 
GEB member
appointed during 2021, who is included for compensation received
 
in their role as a KRT
 
prior to being appointed to the GEB.
 
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.
 
3 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.
 
4 Includes base salary and role-based allowances.
 
5 Includes allocation of vested but blocked shares, in line with regulatory requirements
where applicable.
 
6 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
263
GEB and KRTs deferred compensation
The table
 
below shows
 
the current
 
economic value
 
of unvested
outstanding
 
deferred
 
variable
 
compensation
 
awards
 
subject
 
to
 
ex-post adjustments. For share-based plans, the economic value
is determined
 
based on
 
the closing
 
share price
 
on 31 December
202
1
.
 
For
 
notional
 
funds
,
 
it
 
is
 
determined
 
using
 
the
 
latest
available market price for the underlying funds at year-end 2021,
and
 
for
 
deferred
 
cash
 
plans
,
 
it
 
is
 
determined
 
based
 
on
 
the
outstanding amount of cash owed to award recipients.
 
 
GEB and KRTs
 
deferred compensation
1,2,3
USD million, except where indicated
Relating to awards
for 2021
4
Relating to
awards for prior
years
5
Total
of which: exposed to
ex-post explicit and /
 
or implicit adjustments
Total deferred
compensation
year-end 2020
Total amount of
deferred compensation
paid out in 2021
6
GEB
Deferred Contingent Capital Plan
 
26
 
72
 
98
 
100%
 
126
 
8
Equity Ownership Plan (including notional funds)
 
78
 
78
 
100%
 
102
 
19
Long-Term Incentive Plan
 
44
 
76
 
119
 
100%
 
85
KRTs
Deferred Contingent Capital Plan
 
244
 
940
 
1,183
 
100%
 
1,000
 
172
Equity Ownership Plan (including notional funds)
 
357
 
1,057
 
1,414
 
100%
 
1,059
 
344
Long-Term Incentive Plan
 
67
 
169
 
235
 
100%
 
109
Total GEB and KRTs
 
736
 
2,391
 
3,127
 
2,480
 
544
1 Based
 
on the
 
specific plan
 
vesting and
 
reflecting the
 
economic value
 
of the
 
outstanding awards,
 
which may
 
differ from
 
the expense
 
recognized in
 
the income
 
statement in
 
accordance with
 
IFRS. Year
 
-to-year
reconciliations would also need
 
to consider the imp
 
acts of additional items
 
including off-cycle awards,
 
FX movements, population
 
changes, and dividend
 
equivalent reinvestments.
 
2 Refer to “Note
 
28 Employee
benefits: variable compensation”
 
in the “Consolidated
 
financial statements” section
 
of the Annual
 
Report 2021 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 2021. LTIP
 
values reflect the fair value awarded at grant.
 
6
Valued at distribution price and FX rate for all awards distributed in 2021.
 
 
 
The table below shows the value of actual ex-post explicit and
implicit adjustments to outstanding
 
deferred compensation in the
2021
 
financial year for GEB members and KRTs.
Ex-post adjustments
 
occur after
 
an award
 
has been
 
granted.
Explicit
 
adjustments
 
occur
 
when
 
we
 
adjust
 
compensation
 
by
forfeiting deferred
 
awards. Implicit
 
adjustments are
 
unrelated to
any
 
action
 
taken
 
by
 
the
 
firm
 
and
 
occur
 
as
 
a
 
result
 
of
 
price
movements that affect the value of an award.
The
 
total
 
value
 
of
 
ex-post
 
explicit
 
adjustments
 
made
 
to
 
UBS
share
 
awards
 
in
 
2021,
 
based
 
on
 
the
 
approximately
 
8.1
 
million
shares forfeited during 2021, is a reduction of USD 142 million.
 
 
 
GEB and KRTs
 
ex-post explicit and implicit adjustments to deferred compensation
 
Ex-post explicit adjustments
to unvested awards
1
Ex-post implicit adjustments
to unvested awards
2
USD million
31.12.21
31.12.20
31.12.21
31.12.20
GEB
Deferred Contingent Capital Plan
 
0
 
0
 
0
 
0
Equity Ownership Plan (including notional funds, if applicable)
 
0
 
0
 
17
 
13
Long-Term Incentive Plan
 
0
 
0
 
21
 
5
KRTs
Deferred Contingent Capital Plan
 
(14)
 
(3)
 
0
 
0
Equity Ownership Plan (including notional funds)
 
 
(16)
 
(3)
 
250
 
98
Long-Term Incentive Plan
 
(1)
 
0
 
47
 
6
Total GEB and KRTs
 
(31)
 
(6)
 
335
 
122
1 For notional share awards,
 
ex-post explicit adjustments are calculated
 
as units forfeited during the
 
year, valued
 
at the share price on 31
 
December 2021 (USD 17.87) for
 
2021 (which may differ from
 
the expense
recognized in the income statement in accordance with IFRS). The 2020 data is valued using the
 
share price on 31 December 2020 (USD 14.13). For LTIP
 
the forfeited units reflect the fair value awarded at grant. For
the notional funds awarded to Asset Management employees under the EOP, this represents the forfeiture credits recognized in 2021 and 2020. For the DCCP,
 
the fair value at grant of the forfeited awards during the
year is reflected.
 
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. The amount
 
for notional
funds is calculated using the mark-to-market change during 2021 and 2020. For the GEB
 
member who was appointed to the GEB during 2021, awards have been fully reflected in the GEB entries.
 
 
Advisory vote
 
Corporate governance and compensation | Compensation
264
Material Risk Takers
For relevant
 
EU- or
 
UK-regulated entities,
 
we identify individuals
who are deemed
 
to be
 
Material Risks
 
Takers (MRTs) based on local
regulatory requirements, including the respective EU Commission
Delegated
 
Regulation,
 
the
 
fifth
 
iteration
 
of
 
the
 
EU
 
Capital
Requirements Directive (CRD V) and equivalent UK requirements,
as
 
applicable.
 
This
 
group
 
consists
 
of
 
senior
 
management,
 
risk
takers, selected
 
staff in
 
control or
 
support functions
 
and certain
highly-compensated
 
employees.
 
For
 
2021,
 
UBS
 
identified
 
683
MRTs
 
in relation to its relevant EU or UK entities.
Variable
 
compensation
 
awarded
 
to
 
MRTs
 
is
 
subject
 
to
additional
 
deferral
 
and
 
other
 
requirements.
 
These
 
include
 
a
maximum variable to fixed
 
compensation ratio of
 
200% based on
approval through relevant shareholder votes, a minimum deferral
rate of 40% or 60% (depending on
 
role / variable compensation
level) on performance awards and delivery of at least 50% of any
upfront
 
performance
 
award
 
in
 
UBS
 
shares
 
that
 
are
 
vested
 
but
blocked for 12 months after grant.
Deferred
 
awards
 
granted
 
to
 
MRTs
 
under
 
UBS’s
 
deferred
compensation plans for their performance
 
in 2021 are subject to
6- or 12-month blocking periods post vesting and do not pay out
dividends or interest during the deferral period.
For up to seven
 
years after grant,
 
performance awards granted
to MRTs are subject to
 
clawback provisions, which allow the
 
firm
to claim repayment
 
of both the
 
upfront and the
 
vested deferred
element
 
of
 
any
 
performance
 
award
 
if
 
an
 
individual
 
is
 
found
 
to
have contributed
 
substantially to
 
significant financial
 
losses for
 
the
Group
 
or
 
corporate
 
structure
 
in
 
scope,
 
a
 
material
 
downward
restatement of disclosed results,
 
or engaged in misconduct
 
and /
or failed
 
to take
 
expected actions
 
that contributed
 
to significant
reputational harm.
LTIP awards
 
granted to
 
UK MRTs
 
and SMFs
 
are subject
 
to an
additional non-financial conduct-related metric as required by UK
regulation.
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 who
 
have total
compensation
 
below
 
GBP 500,000
 
and
 
variable
 
incentive
accounting for less than 33% of total compensation, for whom
 
a
five-year deferral
 
period (instead of
 
a seven-year
 
period) applies.
Such awards are also subject to a 12-month blocking period post
vesting. The clawback policy for SMFs permits clawback for up to
10 years from
 
the date of
 
performance award grants
 
(applicable
if
 
an
 
individual
 
is
 
subject
 
to
 
an
 
investigation
 
at
 
the
 
end
 
of
 
the
initial seven-year clawback period).
 
All SMFs are
 
also MRTs and,
 
as
such,
 
subject to
 
the same
 
prohibitions on
 
dividend and
 
interest
payments.
Control functions and Group Internal Audit
Our control
 
functions must
 
be independent
 
in order
 
to monitor
risk
 
effectively.
 
Therefore
,
 
their
 
compensation
 
is
 
determined
separately from the revenue areas that they oversee, supervise or
monitor.
 
Their
 
performance
 
award
 
pool
 
is
 
based
 
not
 
on
 
the
performance of these businesses, but
 
on the performance of the
Group as
 
a whole.
 
We also
 
consider other
 
factors, such
 
as how
effectively the
 
function has
 
performed and
 
our market
 
position.
Decisions on individual compensation for the
 
senior managers of
the
 
control
 
functions
 
are
 
made
 
by
 
the
 
function
 
heads
 
and
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
265
2021 Group personnel expenses
The number of personnel
 
employed as of 31 December
 
2021 was
broadly stable, at 71,385 (full-time
 
equivalents), a net decrease
 
of
166 compared with 31 December 2020.
The table below shows our total personnel expenses for 2021,
including salaries, pension expenses, social security contributions,
variable
 
compensation
 
and
 
other
 
personnel
 
costs.
 
Variable
compensation includes cash
 
performance awards paid
 
in 2022
 
for
the
 
2021
 
performance
 
year,
 
amortization
 
of
 
unvested
 
deferred
awards
 
granted in previous years and the
 
cost of deferred awards
granted
 
to
 
employees
that
 
are
 
eligible
 
for
 
retirement
 
in
 
the
context of the compensation framework at the date of grant.
The performance award pool
 
reflects the value
 
of performance
awards granted relating to the 2021
 
performance year, including
awards that are paid
 
out immediately
 
and those that
 
are deferred.
To
 
determine our variable compensation expenses,
 
the following
adjustments are required in order to reconcile the performance
award
 
pool to
 
the expenses
 
recognized in
 
the Group’s
 
financial
statements prepared in accordance with IFRS:
–
 
reduction for
 
expenses deferred
 
to future
 
periods (amortization
of unvested awards
 
granted in 2022
 
for the 2021
 
performance
year) and accounting adjustments; and
–
 
addition
 
for
 
2021 amortization
 
of
 
unvested
 
deferred
 
awards
granted in prior years.
 
As a
 
large part
 
of compensation
 
consists of
 
deferred awards,
the
 
amortization
 
of
 
unvested
 
deferred
 
awards
 
granted
 
in
 
prior
years forms
 
a significant
 
part of
 
the IFRS
 
expenses in
 
both 2021
and 2022.
›
 
Refer to “Note 6 Personnel expenses” and
 
“Note 28 Employee
benefits: variable compensation” in the
 
“Consolidated financial
statements” section of our Annual Report
 
2021 for more
information
 
 
Personnel expenses
Expenses recognized in the IFRS income statement
USD million
Related to the
performance year 2021
Related to prior
performance years
 
Total expenses
recognized in
2021
Total expenses
recognized in
2020
Total expenses
recognized in
2019
Salaries
1
 
7,339
 
0
 
7,339
 
7,023
 
6,518
Non-deferred cash
 
2,383
 
(10)
 
2,373
 
2,141
 
1,868
Deferred compensation awards
 
405
 
412
 
817
 
1,068
 
887
of which: Equity Ownership Plan
 
183
 
180
 
363
 
463
 
422
of which: Deferred Contingent Capital Plan
 
140
 
158
 
297
 
463
 
375
of which: Long-Term Incentive Plan
 
54
 
19
 
73
 
54
 
39
of which: Asset Management EOP
 
29
 
56
 
84
 
88
 
51
Variable compensation – performance awards
2
 
2,788
 
402
 
3,190
 
3,209
 
2,755
Variable compensation – other
2,3
 
191
 
38
 
229
 
220
 
246
Total variable compensation excluding financial advisor variable compensation
 
2,979
 
440
 
3,419
 
3,429
 
3,001
Contractors
 
381
 
0
 
381
 
375
 
381
Social security
 
926
 
53
 
978
 
899
 
799
Pension and other post-employment benefit plans
4
 
833
 
0
 
833
 
845
 
787
Financial advisor variable compensation
2,5
 
4,175
 
685
 
4,860
 
4,091
 
4,043
Other personnel expenses
 
560
 
16
 
576
 
561
 
555
Total personnel expenses
 
17,193
 
1,194
 
18,387
 
17,224
 
16,084
1 Includes role-based allowances.
 
2 Refer to “Note 28 Employee benefits: variable compensation” in the “Consolidated financial statements”
 
section of our Annual Report 2021 for more information.
 
3 Consists
of replacement
 
payments, forfeiture
 
credits, severance
 
payments, retention
 
plan payments
 
and interest
 
expense related
 
to the
 
Deferred Contingent
 
Capital Plan.
 
4 Refer
 
to “Note
 
27 Pension
 
and other
 
post-
employment benefit plans”
 
in the “Consolidated
 
financial statements” section
 
of our Annual
 
Report 2021
 
for more information.
 
5 Consists of
 
formulaic compensation based
 
directly on compensable
 
revenues
generated by
 
financial advisors
 
and supplemental
 
compensation calculated
 
based on financial
 
advisor productivity,
 
firm tenure,
 
new assets and
 
other variables.
 
It also includes
 
expenses related
 
to compensation
commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advisory vote
 
Corporate governance and compensation | Compensation
266
 
Deferred compensation
Vesting of outstanding awards granted in prior years subject to performance conditions
The tables
 
below show
 
the extent
 
to which
 
the performance
 
conditions for
 
awards granted
 
in prior
 
years have
 
been met
 
and the
percentage of the installment that will vest in 2022.
 
Equity Ownership Plan (EOP) 2016
 
/ 2017,
 
EOP 2017
 
/ 2018,
 
EOP 2018
 
/ 2019 and EOP 2019 / 2020
Performance conditions
Performance achieved
1
% of installment vesting
Return on common equity tier 1 capital
(RoCET1) and divisional return on
attributed equity
The Group and divisional performance conditions
 
have been satisfied. For EOP
2016 / 2017, the third and final installment for
 
the Group Executive Board (the
GEB) members vests in full. For EOP 2017
 
/ 2018, the second installment for the
GEB members vests in full. For EOP 2018
 
/ 2019, the first installment for the GEB
members and the second installment for
 
all other employees covered under the
plan vest in full. For EOP 2019 / 2020, the
 
first installment for all other employees
covered under the plan vests in full.
100%
 
Deferred Contingent Capital Plan (DCCP) 2016
 
/ 2017
Performance conditions
Performance achieved
1
% of installment vesting
Common equity tier 1 (CET1) capital
ratio, viability event and, additionally for
GEB, Group profit before tax
The performance conditions have been satisfied.
 
DCCP 2016
 
/ 2017
 
vests in full.
100%
1
 
Performance may be adjusted for disclosed items generally not representative of underlying business performance.
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advisory vote
 
Corporate governance and compensation | Compensation
268
 
Audited |
 
Share ownership / entitlements of GEB members
1
Name, function
on
31 December
Number of
unvested
shares / at
risk
2
Number of
vested shares
Total number
of shares
Potentially
conferred
voting
rights in %
Ralph A.J.G. Hamers, Group Chief Executive Officer
2021
 
122,453
 
2,673
 
125,126
 
0.008
2020
 
14,841
 
0
 
14,841
 
0.001
Christian Bluhm, Group Chief Risk Officer
2021
 
654,579
 
226
 
654,805
 
0.041
2020
 
582,787
 
218
 
583,005
 
0.035
Mike Dargan, Group Chief Digital and Information Officer
2021
 
240,343
 
82,743
 
323,086
 
0.020
2020
-
-
-
-
Markus U. Diethelm, former Group General Counsel
2021
-
-
-
-
2020
 
706,845
 
617,858
 
1,324,703
 
0.079
Kirt Gardner, Group Chief Financial Officer
2021
 
780,640
 
236,421
 
1,017,061
 
0.063
2020
 
696,500
 
165,223
 
861,723
 
0.051
Suni Harford, President Asset Management
 
2021
 
636,122
 
22,199
 
658,321
 
0.041
2020
 
352,329
 
0
 
352,329
 
0.021
Robert Karofsky, President Investment Bank
2021
 
851,520
 
357,064
 
1,208,584
 
0.075
2020
 
627,748
 
357,621
 
985,369
 
0.059
Sabine Keller-Busse, President Personal & Corporate Banking and President UBS Switzerland
 
2021
 
798,457
 
421,491
 
1,219,948
 
0.076
2020
 
639,087
 
349,834
 
988,921
 
0.059
Iqbal Khan, Co-President Global Wealth Management and President
 
EMEA
2021
 
898,111
 
113,715
 
1,011,826
 
0.063
2020
 
742,546
 
68,253
 
810,799
 
0.048
Edmund Koh, President Asia Pacific
2021
 
501,322
 
493,977
 
995,299
 
0.062
2020
 
421,930
 
337,062
 
758,992
 
0.045
Axel P. Lehmann, former President Personal & Corporate Banking and President UBS Switzerland
2021
-
-
-
-
2020
 
690,537
 
331,677
 
1,022,214
 
0.061
Barbara Levi, Group General Counsel
2021
 
430,732
 
0
 
430,732
 
0.027
2020
-
-
-
-
Tom Naratil, Co-President Global Wealth Management and President UBS Americas
2021
 
1,374,044
 
950,682
 
2,324,726
 
0.145
2020
 
1,383,854
 
770,780
 
2,154,634
 
0.128
Piero Novelli, former Co-President Investment Bank
2021
-
-
-
-
2020
 
660,240
 
408,897
 
1,069,137
 
0.064
Markus Ronner, Group Chief Compliance and Governance Officer
2021
 
418,452
 
57,856
 
476,308
 
0.030
2020
 
302,584
 
130,097
 
432,681
 
0.026
Total
2021
 
7,706,776
 
2,739,047
 
10,445,823
 
0.650
2020
 
7,821,828
 
3,537,520
 
11,359,348
 
0.675
1 Includes all vested and unvested
 
shares of GEB members, including those held by
 
related parties. No options were held in 2021 and
 
2020 by any GEB member or
 
any of its related parties. Refer to “Note
 
28 Employee
benefits: variable compensation” in the “Consolidated
 
financial statements” section of our Annual
 
Report 2021 for more information.
 
2 Includes shares granted under variable
 
compensation plans with forfeiture
provisions. LTIP
 
values reflect the
 
fair value
 
awarded at grant.
 
The actual number
 
of shares vesting in
 
the future will be
 
calculated under the terms
 
of the plans.
 
Refer to the
 
“Group compensation” section
 
of this
report for more information about the plans.
p
 
 
Audited |
 
Total
 
of all vested and unvested shares of GEB members
1,2
Total
of which: vested
of which: vesting
2022
2023
2024
2025
2026
2027
Shares on 31 December 2021
 
10,445,823
 
2,739,047
 
1,463,440
 
1,688,568
 
2,112,516
 
1,488,544
 
877,856
 
75,852
2021
2022
2023
2024
2025
2026
Shares on 31 December 2020
 
11,359,348
 
3,537,520
 
1,424,063
 
1,854,660
 
2,070,158
 
1,656,600
 
774,416
 
41,931
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.
p
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
269
 
Audited |
 
Number of shares of BoD members
1
Name, function
on 31 December
Number of shares held
Voting rights in %
Axel A. Weber, Chairman
2021
 
1,148,369
 
0.071
2020
 
1,046,994
 
0.062
Jeremy Anderson, Vice Chairman and Senior Independent Director
2021
 
97,518
 
0.006
2020
 
66,744
 
0.004
Claudia Böckstiegel, member
2
2021
 
0
 
0.000
2020
-
-
William C. Dudley, member
2021
 
49,714
 
0.003
2020
 
26,181
 
0.002
Patrick Firmenich, member
2
2021
 
0
 
0.000
2020
-
-
Reto Francioni, member
2021
 
139,609
 
0.009
2020
 
154,086
 
0.009
Fred Hu, member
2021
 
74,481
 
0.005
2020
 
42,428
 
0.003
Mark Hughes, member
2021
 
30,263
 
0.002
2020
 
4,920
 
0.000
Nathalie Rachou, member
2021
 
18,102
 
0.001
2020
 
0
 
0.000
Julie G. Richardson, member
2021
 
117,365
 
0.007
2020
 
88,401
 
0.005
Beatrice Weder di Mauro, former member
2
2021
-
-
2020
 
198,578
 
0.012
Dieter Wemmer, member
2021
 
114,086
 
0.007
2020
 
88,743
 
0.005
Jeanette Wong, member
2021
 
68,452
 
0.004
2020
 
33,722
 
0.002
Total
2021
 
1,857,959
 
0.116
2020
 
1,750,797
 
0.104
1 Includes blocked and unblocked shares held by BoD members,
 
including those held by related parties. No options were granted in 2021 and 2020.
 
2 At the 2021 AGM, Claudia Böckstiegel and Patrick Firmenich
were newly elected and Beatrice Weder di Mauro did not stand for re-election.
p
 
 
Audited |
 
Total
 
of all blocked and unblocked shares of BoD members
1
Total
of which:
unblocked
of which: blocked until
2022
2023
2024
2025
Shares on 31 December 2021
 
1,857,959
 
701,594
 
178,603
 
305,947
 
329,875
 
341,940
2021
2022
2023
2024
Shares on 31 December 2020
 
1,750,797
 
658,642
 
205,961
 
197,395
 
332,743
 
356,056
1 Includes shares held by related parties.
 
p
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advisory vote
 
Corporate governance and compensation | Compensation
270
 
Audited |
Loans granted to GEB members
1
 
In line with article 38 of the Articles of Association of UBS Group
AG, GEB members may be granted loans. Such
 
loans are made in
the ordinary course of
 
business on substantially
 
the same terms
 
as
those
 
granted
 
to
 
other
 
employees,
 
including
 
interest
 
rates
and collateral,
 
and neither
 
involve more
 
than the
 
normal risk
 
of
collectability nor
 
contain any
 
other unfavorable
 
features
 
for the
firm.
 
The
 
total
 
amount
 
of
 
such
 
loans
 
must
 
not
 
exceed
 
CHF 20
million per GEB member.
 
 
CHF, except where indicated
2
USD
(for reference)
Name, function
on 31 December
Loans
3
Loans
3
Christian Bluhm, Group Chief Risk Officer (highest loan
 
in 2021)
2021
 
7,059,000
 
7,742,947
Markus U. Diethelm, Group General Counsel (highest loan in 2020)
2020
 
6,131,500
Aggregate of all GEB members
4
2021
 
29,635,590
 
32,506,982
2020
 
31,830,394
1 No loans have been
 
granted to related parties
 
of the GEB members
 
at conditions not customary
 
in the market.
 
2 Swiss franc and
 
US dollar amounts disclosed
 
represent local currency amounts
 
translated at the
relevant year-end closing exchange rate.
 
3 All loans granted are secured loans.
 
4 No unused uncommitted credit facilities in 2021 and 2020.
p
 
 
Audited |
Loans granted to BoD members
1
In line with article 33 of the Articles of Association of UBS Group
AG, loans to independent
 
BoD members are made
 
in the ordinary
course of
 
business at
 
general market
 
conditions. The
 
Chairman,
as
 
a
 
non-independent
 
member,
 
may
 
be
 
granted
 
loans
 
in
 
the
ordinary
 
course
 
of
 
business
 
on
 
substantially
 
the
 
same
 
terms
 
as
those
 
granted
 
to
 
employees,
 
including
 
interest
 
rates
 
and
collateral,
 
and
 
neither
 
involve
 
more
 
than
 
the
 
normal
 
risk
 
of
collectability nor
 
contain any
 
other unfavorable
 
features
 
for the
firm.
 
The
 
total
 
amount
 
of
 
such
 
loans
 
must
 
not
 
exceed
 
CHF 20
million per BoD member.
 
 
CHF, except where indicated
2
USD
(for reference)
on 31 December
Loans
3,4
Loans
3,4
Aggregate of all BoD members
2021
 
1,500,000
 
1,645,335
2020
 
2,100,000
1 No loans have been granted
 
to related parties of the
 
BoD members at conditions not customary
 
in the market.
 
2 Swiss franc
 
and US dollar amounts disclosed represent
 
local currency amounts translated
 
at the
relevant year-end closing exchange
 
rate.
 
3 All loans granted are secured loans.
 
4 CHF 1,500,00 for Reto Francioni
 
in 2021 and CHF 600,000 for Reto
 
Francioni and CHF 1,500,000 for
 
Beatrice Weder di Mauro
in 2020.
p
 
 
Audited |
 
Compensation paid to former BoD and GEB members
1
CHF, except where indicated
2
USD
(for reference)
For the year
Compensation
Benefits
Total
Total
Former BoD members
2021
 
0
2020
 
0
 
0
 
0
Aggregate of all former GEB members
3
2021
 
187,876
 
187,876
 
205,264
2020
 
0
 
206,048
 
206,048
Aggregate of all former BoD and GEB members
2021
 
187,876
 
187,876
 
205,264
2020
 
0
 
206,048
 
206,048
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 2021 and 2020 to two former GEB members.
 
 
 
 
271
 
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 Articles of Association (the AoA).
 
Say on pay
 
In line with article 43 of the AoA of UBS
Group AG, the General Meeting approves
proposals from the BoD in relation to:
a) the maximum aggregate amount of
compensation of the BoD for the period
until the next AGM;
b) the maximum aggregate amount of
fixed compensation of the GEB for the
following financial year; and
c) the aggregate amount of variable
compensation of the GEB for the
preceding financial year.
 
The BoD may submit for approval by the
General Meeting deviating or additional
proposals relating to the same or different
periods. If the General Meeting does not
approve a proposal from the BoD, the
BoD will determine, taking into account
all relevant factors, the respective
(maximum) aggregate amount or
(maximum) partial amounts and submit
the amount(s) so determined for approval
by the General Meeting. UBS Group AG
or companies controlled by it may pay or
grant compensation prior to approval by
the General Meeting, subject to
subsequent approval.
Principles of compensation
 
In line with articles 45 and 46 of the AoA
of UBS Group AG, compensation of the
members of the BoD includes base
remuneration and may include other
compensation elements and benefits.
Compensation of the members of the
BoD is intended to recognize the
responsibility and governance nature of
their role, to attract and retain qualified
individuals, and to ensure alignment with
shareholders’ interests.
 
 
Compensation of the members of the
GEB includes fixed and variable
compensation elements. Fixed
compensation includes the base salary
and may include other compensation
elements and benefits. Variable
compensation elements are governed by
financial and non-financial performance
measures that take into account the
performance of UBS Group AG and / or
parts thereof, targets in relation to the
market, other companies or comparable
benchmarks, short- and long-term
strategic objectives, and / or individual
targets. The BoD or, where delegated to
it, the Compensation Committee
determines the respective performance
measures, the overall and individual
performance targets, and their
achievement. The BoD or, where
delegated to it, the Compensation
Committee aims to ensure alignment with
sustainable performance and appropriate
risk-taking through adequate deferrals,
forfeiture conditions, caps on
compensation, harmful acts provisions
and similar means with regard to parts of
or all of the compensation. Parts of
variable compensation are subject to a
multi-year vesting period.
 
Additional amount for GEB members
appointed after the vote on the
aggregate amount of compensation by
the AGM
In line with article 46 of the AoA of UBS
Group AG, if the maximum aggregate
amount of compensation already
approved by the General Meeting is not
sufficient to also cover the compensation
of a person who becomes a member of or
is being promoted within the GEB after
the General Meeting has approved the
compensation, UBS Group AG, or
companies controlled by it, is authorized
to pay or grant each such GEB member a
supplementary amount during the
compensation period(s) already approved.
The aggregate pool for such
supplementary amounts per
compensation period cannot exceed 40%
of the average of total annual
compensation paid or granted to the GEB
during the previous three years.
›
 
Refer to
ubs.com/governance
for more
information
 
 
 
 
 
 
UBS_AR_2021p300i0.gif
Advisory vote
 
Corporate governance and compensation | Compensation
272
 
 
 
 
 
Financial
statements
 
5
 
 
 
 
 
 
 
 
 
 
 
274
Consolidated
financial statements
Table of contents
276
277
278
283
283
283
284
285
286
288
289
291
291
1
308
2
311
311
3
312
4
312
5
313
6
313
7
314
8
 
 
 
317
317
9
322
10
324
11
324
12
325
13
327
14
327
15
328
16
329
17
330
18
336
19
337
337
20
348
21
364
22
366
23
369
24
370
25
373
26
377
27
387
28
391
29
396
30
397
31
399
32
400
33
400
34
401
35
 
 
 
 
275
403
404
405
406
407
409
413
413
413
414
415
416
418
419
422
422
1
439
2
442
442
3
443
4
443
5
444
6
444
7
445
8
 
448
448
9
453
10
455
11
455
12
456
13
458
14
458
15
459
16
460
17
461
18
467
19
468
468
20
479
21
496
22
498
23
501
24
502
25
505
26
509
27
519
28
523
29
528
30
529
31
532
32
533
33
533
34
534
35
536
36
 
 
 
276
 
Management’s report on internal control over financial
reporting
Management’s responsibility for internal control over financial
reporting
The Board of Directors and management of UBS Group AG (UBS)
are responsible for
 
establishing and
 
maintaining adequate
 
internal
control
 
over
 
financial
 
reporting.
 
UBS’s
 
internal
 
control
 
over
financial
 
reporting
 
is
 
designed
 
to
 
provide
 
reasonable
 
assurance
regarding
 
the
 
preparation
 
and
 
fair
 
presentation
 
of
 
published
financial
 
statements
 
in
 
accordance
 
with
 
International
 
Financial
Reporting
 
Standards
 
(IFRS),
 
as
 
issued
 
by
 
the
 
International
Accounting Standards Board (IASB).
UBS’s
 
internal
 
control
 
over
 
financial
 
reporting
 
includes
 
those
policies and procedures that:
–
 
pertain
 
to
 
the
 
maintenance
 
of
 
records
 
that,
 
in
 
reasonable
detail, accurately and
 
fairly reflect
 
transactions and dispositions
of assets;
–
 
provide reasonable assurance that transactions
 
are recorded as
necessary
 
to
 
permit
 
preparation
 
and
 
fair
 
presentation
 
of
financial statements, and that receipts and
 
expenditures of the
company
 
are
 
being
 
made
 
only
 
in
 
accordance
 
with
authorizations of UBS management; and
–
 
provide
 
reasonable
 
assurance
 
regarding
 
prevention
 
or
 
timely
detection of unauthorized
 
acquisition, use or disposition
 
of the
company’s
 
assets
 
that
 
could
 
have
 
a
 
material
 
effect
 
on
 
the
financial statements.
 
Because
 
of
 
its
 
inherent
 
limitations,
 
internal
 
control
 
over
financial reporting may
 
not prevent
 
or detect misstatements.
 
Also,
projections of any
 
evaluation of effectiveness
 
to future periods
 
are
subject to the risk that controls may become inadequate because
of changes
 
in conditions,
 
or that the
 
degree of
 
compliance with
the policies or procedures may deteriorate.
Management’s assessment of internal control over financial
reporting as of 31 December
2021
 
UBS management has assessed
 
the effectiveness of UBS’s
 
internal
control over financial
 
reporting as of
 
31 December 2021
 
based on
the
 
criteria
 
set
 
forth
 
by
 
the
 
Committee
 
of
 
Sponsoring
Organizations
 
of
 
the
 
Treadway
 
Commission
 
(COSO)
 
in
 
Internal
Control – Integrated Framework
 
(2013 Framework). Based
 
on this
assessment, management believes that,
 
as of 31 December
 
2021,
UBS’s internal control over financial reporting was effective.
The
 
effectiveness
 
of
 
UBS’s
 
internal
 
control
 
over
 
financial
reporting as of
 
31 December 2021
 
has been
 
audited by
 
Ernst &
Young Ltd,
 
UBS’s independent
 
registered
 
public
 
accounting
 
firm, as
stated in their report appearing on page 277, which expresses an
unqualified opinion on the effectiveness of UBS’s
 
internal control
over financial
 
reporting
 
as of 31 December
 
2021.
 
 
UBS_AR_2021p305i0.gif
 
277
 
 
 
 
UBS_AR_2021p306i0.gif
 
278
UBS_AR_2021p307i0.gif
 
279
UBS_AR_2021p308i0.gif
 
280
UBS_AR_2021p309i0.gif
 
281
UBS_AR_2021p310i0.gif
 
282
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
283
 
UBS Group AG consolidated financial
statements
Primary financial statements and share information
Audited |
Income statement
For the year ended
USD million
Note
31.12.21
31.12.20
31.12.19
Interest income from financial instruments measured at
 
amortized cost and fair value through
other comprehensive income
 
3
 
8,533
8,810
10,684
Interest expense from financial instruments measured at
 
amortized cost
 
3
 
(3,259)
(4,247)
(7,194)
Net interest income from financial instruments measured
 
at fair value through profit or loss
 
3
 
1,431
1,299
1,011
Net interest income
 
3
 
6,705
5,862
4,501
Other net income from financial instruments measured
 
at fair value through profit or loss
 
3
 
5,850
6,960
6,842
Credit loss (expense) / release
 
20
 
148
(694)
(78)
Fee and commission income
 
4
 
24,372
20,961
19,110
Fee and commission expense
 
4
 
(1,985)
(1,775)
(1,696)
Net fee and commission income
 
4
 
22,387
19,186
17,413
Other income
 
5
 
452
1,076
212
Total operating income
35,542
32,390
28,889
Personnel expenses
 
6
 
18,387
17,224
16,084
General and administrative expenses
 
7
 
5,553
4,885
5,288
Depreciation, amortization and impairment of non-financial
 
assets
12, 13
2,118
2,126
1,940
Total operating expenses
26,058
24,235
23,312
Operating profit / (loss) before tax
9,484
8,155
5,577
Tax expense / (benefit)
 
 
8
 
1,998
1,583
1,267
Net profit / (loss)
7,486
6,572
4,310
Net profit / (loss) attributable to non-controlling interests
29
15
6
Net profit / (loss) attributable to shareholders
7,457
6,557
4,304
Earnings per share (USD)
Basic
2.14
1.83
1.17
Diluted
2.06
1.77
1.14
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
284
 
Statement of comprehensive income
For the year ended
USD million
Note
31.12.21
31.12.20
31.12.19
Comprehensive income attributable to shareholders
Net profit / (loss)
7,457
6,557
4,304
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
(1,076)
2,103
200
Effective portion of changes in fair value of hedging instruments
 
designated as net investment hedges, before tax
498
(936)
(134)
Foreign currency translation differences on foreign operations reclassified to the
 
income statement
(2)
(7)
52
Effective portion of changes in fair value of hedging instruments
 
designated as net investment hedges reclassified
 
to
the income statement
10
2
(14)
Income tax relating to foreign currency translations, including the effect of
 
net investment hedges
35
(67)
0
Subtotal foreign currency translation, net of tax
(535)
1,095
104
Financial assets measured at fair value through other comprehensive income
11
Net unrealized gains / (losses), before tax
(203)
223
189
Net realized gains / (losses) reclassified to the income statement
 
from equity
(9)
(40)
(31)
Income tax relating to net unrealized gains / (losses)
55
(48)
(41)
Subtotal financial assets measured at fair value through other comprehensive
 
income, net of tax
(157)
136
117
Cash flow hedges of interest rate risk
26
Effective portion of changes in fair value of derivative instruments designated
 
as cash flow hedges, before tax
(992)
2,012
1,571
Net (gains) / losses reclassified to the income statement from
 
equity
(1,073)
(770)
(175)
Income tax relating to cash flow hedges
390
(231)
(253)
Subtotal cash flow hedges, net of tax
(1,675)
1
1,011
1,143
Cost of hedging
26
Cost of hedging, before tax
(32)
(13)
Income tax relating to cost of hedging
 
6
0
Subtotal cost of hedging, net of tax
(26)
(13)
Total other comprehensive income that may be reclassified to the income statement, net
 
of tax
(2,393)
2,230
1,363
Other comprehensive income that will not be reclassified to the income
 
statement
Defined benefit plans
27
Gains / (losses) on defined benefit plans, before tax
2
(327)
(146)
Income tax relating to defined benefit plans
(7)
109
(41)
Subtotal defined benefit plans, net of tax
(5)
(218)
(186)
Own credit on financial liabilities designated at fair value
21
Gains / (losses) from own credit on financial liabilities designated
 
at fair value, before tax
46
(293)
(400)
Income tax relating to own credit on financial liabilities designated
 
at fair value
0
0
8
Subtotal own credit on financial liabilities designated at
 
fair value, net of tax
46
(293)
(392)
Total other comprehensive income that will not be reclassified to the income statement,
 
net of tax
42
(511)
(578)
Total other comprehensive income
(2,351)
1,719
785
Total comprehensive income attributable to shareholders
5,106
8,276
5,089
Comprehensive income attributable to non-controlling
 
interests
Net profit / (loss)
29
15
6
Total other comprehensive income that will not be reclassified to the income statement,
 
net of tax
(16)
21
(4)
Total comprehensive income attributable to non-controlling interests
13
36
2
Total comprehensive income
 
Net profit / (loss)
7,486
6,572
4,310
Other comprehensive income
 
(2,367)
1,740
781
of which: other comprehensive income that may be reclassified
 
to the income statement
(2,393)
2,230
1,363
of which: other comprehensive income that will not be reclassified
 
to the income statement
26
(490)
(582)
Total comprehensive income
 
5,119
8,312
5,091
1 Mainly reflects the reclassification of net gains on hedging instruments from OCI to the
 
income statement as the hedged forecast cash flows affected profit or loss and a decrease in net
 
unrealized gains on US dollar
hedging derivatives resulting from increases in the relevant long-term US dollar interest rates.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
285
 
 
Balance sheet
USD million
Note
31.12.21
31.12.20
Assets
Cash and balances at central banks
192,817
158,231
Loans and advances to banks
 
9
15,480
15,444
Receivables from securities financing transactions
9, 22
75,012
74,210
Cash collateral receivables on derivative instruments
9, 22
30,514
32,737
Loans and advances to customers
 
9
397,761
379,528
Other financial assets measured at amortized cost
9, 14a
26,209
27,194
Total financial assets measured at amortized cost
737,794
687,345
Financial assets at fair value held for trading
 
21
130,821
125,397
of which: assets pledged as collateral that may be sold or repledged
 
by counterparties
43,397
47,098
Derivative financial instruments
10, 21, 22
118,142
159,617
Brokerage receivables
 
21
21,839
24,659
Financial assets at fair value not held for trading
 
21
60,080
80,364
Total financial assets measured at fair value through profit or loss
330,882
390,037
Financial assets measured at fair value through other comprehensive income
11, 21
8,844
8,258
Investments in associates
29b
1,243
1,557
Property, equipment and software
 
12
12,888
13,109
Goodwill and intangible assets
 
13
6,378
6,480
Deferred tax assets
 
8
8,876
9,212
Other non-financial assets
14b
10,277
9,768
Total assets
1,117,182
1,125,765
Liabilities
Amounts due to banks
 
 
15
13,101
11,050
Payables from securities financing transactions
 
22
5,533
6,321
Cash collateral payables on derivative instruments
 
22
31,798
37,312
Customer deposits
 
15
542,007
524,605
Debt issued measured at amortized cost
 
17
139,155
139,232
Other financial liabilities measured at amortized cost
19a
9,001
9,729
Total financial liabilities measured at amortized cost
740,595
728,250
Financial liabilities at fair value held for trading
 
21
31,688
33,595
Derivative financial instruments
10, 21, 22
121,309
161,102
Brokerage payables designated at fair value
 
21
44,045
38,742
Debt issued designated at fair value
16, 21
73,799
61,243
Other financial liabilities designated at fair value
19b, 21
30,074
30,387
Total financial liabilities measured at fair value through profit or loss
300,916
325,069
Provisions
18a
3,518
2,828
Other non-financial liabilities
19c
11,151
9,854
Total liabilities
1,056,180
1,066,000
Equity
Share capital
322
338
Share premium
15,928
16,753
Treasury shares
(4,675)
(4,068)
Retained earnings
43,851
38,776
Other comprehensive income recognized directly in equity, net of tax
5,236
7,647
Equity attributable to shareholders
60,662
59,445
Equity attributable to non-controlling interests
340
319
Total equity
61,002
59,765
Total liabilities and equity
1,117,182
1,125,765
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
286
 
Statement of changes in equity
USD million
Share
capital
Share
 
premium
Treasury shares
Retained
earnings
Balance as of 31 December 2018
338
20,843
(2,631)
30,416
Effect of adoption of IFRIC 23
(11)
Balance as of 1 January 2019 after the adoption of IFRIC 23
338
20,843
(2,631)
30,405
Acquisition of treasury shares
(1,771)
2
Delivery of treasury shares under share-based compensation
 
plans
(886)
983
Other disposal of treasury shares
(2)
94
2
Premium on shares issued and warrants exercised
29
Share-based compensation expensed in the income statement
619
Tax (expense) / benefit
11
Dividends
(2,544)
3
Translation effects recognized directly in retained earnings
(9)
New consolidations / (deconsolidations) and other increases
 
/ (decreases)
(6)
Total comprehensive income for the year
3,726
of which: net profit / (loss)
4,304
of which: OCI, net of tax
(578)
Balance as of 31 December 2019
338
18,064
(3,326)
34,122
Acquisition of treasury shares
(1,584)
2
Delivery of treasury shares under share-based compensation
 
plans
(628)
719
Other disposal of treasury shares
(11)
123
2
Share-based compensation expensed in the income statement
691
Tax (expense) / benefit
18
Dividends
(1,304)
3
(1,304)
3
Translation effects recognized directly in retained earnings
(49)
Share of changes in retained earnings of associates and
 
joint ventures
(40)
New consolidations / (deconsolidations) and other increases
 
/ (decreases)
4
(76)
Total comprehensive income for the year
6,046
of which: net profit / (loss)
6,557
of which: OCI, net of tax
(511)
Balance as of 31 December 2020
338
16,753
(4,068)
38,776
Acquisition of treasury shares
(3,521)
2
Delivery of treasury shares under share-based compensation
 
plans
(675)
789
Other disposal of treasury shares
7
81
2
Cancellation of treasury shares related to the 2018–2021
 
share repurchase program
5
(16)
(236)
2,044
(1,792)
Share-based compensation expensed in the income statement
643
Tax (expense) / benefit
(88)
Dividends
(651)
3
(651)
3
Equity classified as obligation to purchase own shares
(7)
Translation effects recognized directly in retained earnings
18
Share of changes in retained earnings of associates and
 
joint ventures
1
New consolidations / (deconsolidations) and other increases
 
/ (decreases)
6
182
Total comprehensive income for the year
7,499
of which: net profit / (loss)
7,457
of which: OCI, net of tax
42
Balance as of 31 December 2021
322
15,928
(4,675)
43,851
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 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
0.37
 
(2020: USD
0.73
, 2019: CHF
0.70
) per dividend-bearing share.
 
From 2020 onward, Swiss
 
tax law effective 1 January
 
2020
requires that Switzerland-domiciled companies
 
with shares listed on
 
a stock exchange pay
 
no more than
50
% of dividends from
 
capital contribution reserves,
 
with the remainder required
 
to be paid from
 
retained
earnings.
 
4 Mainly relates
 
to the establishment
 
of a banking
 
partnership with Banco
 
do Brasil. In
 
2020, UBS issued
 
a
49.99
% stake in
 
UBS Brasil Serviços
 
in exchange for
 
exclusive access to
 
Banco do Brasil’s
corporate clients. Upon completion of the transaction in 2020, equity attributable to non-controlling
 
interests increased by USD
115
 
million, with no material effect on equity attributable to shareholders.
 
5 Reflects
the cancellation of
156,632,400
 
shares purchased under UBS’s 2018–2021 share repurchase
 
program as approved by shareholders at the 2021 Annual General
 
Meeting. For shares repurchased from 2020 onward,
Swiss tax law effective
 
1 January 2020 requires
 
Switzerland-domiciled companies with
 
shares listed on a
 
Swiss stock exchange to
 
reduce capital contribution reserves
 
by at least
50
% of the total
 
capital reduction
amount exceeding the
 
nominal value upon
 
cancellation of the
 
shares.
 
6 Includes the effects
 
related to the launch
 
of UBS’s
 
new operational partnership
 
entity with Sumitomo
 
Mitsui Trust
 
Holdings, Inc.
 
Refer to
Note 30 for more information.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
287
 
Other comprehensive
 
income recognized
 
directly in equity,
 
net of tax
1
of which:
 
foreign currency
 
translation
of which:
 
financial assets at
fair value through OCI
of which:
 
cash flow
 
hedges
of which:
cost of hedging
Total equity
attributable to
 
shareholders
Non-controlling
 
interests
Total equity
3,930
3,924
(103)
109
52,896
176
53,071
(11)
(11)
3,930
3,924
(103)
109
52,885
176
53,060
(1,771)
(1,771)
97
97
92
92
29
29
619
619
11
11
(2,544)
(8)
(2,552)
9
0
9
0
0
(6)
5
(1)
1,363
104
117
1,143
5,089
2
5,091
4,304
6
4,310
1,363
104
117
1,143
785
(4)
781
5,303
4,028
14
1,260
54,501
174
54,675
(1,584)
(1,584)
90
90
112
112
691
691
18
18
(2,607)
(6)
(2,613)
49
0
49
0
0
(40)
(40)
65
65
(12)
115
103
2,230
1,095
136
1,011
(13)
8,276
36
8,312
6,557
15
6,572
2,230
1,095
136
1,011
(13)
1,719
21
1,740
7,647
5,188
151
2,321
(13)
59,445
319
59,765
(3,521)
(3,521)
114
114
88
88
0
0
643
643
(88)
(88)
(1,301)
(4)
(1,305)
(7)
(7)
(18)
0
(18)
0
0
0
1
1
182
12
193
(2,393)
(535)
(157)
(1,675)
(26)
5,106
13
5,119
7,457
29
7,486
(2,393)
(535)
(157)
(1,675)
(26)
(2,351)
(16)
(2,367)
5,236
4,653
(7)
628
(39)
60,662
340
61,002
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
288
 
 
 
Share information and earnings per share
Ordinary share capital
As
 
of
 
31
 
December
 
2021,
 
UBS
 
Group
 
AG
 
had
3,702,422,995
issued shares
 
with a nominal value
 
of CHF
0.10
 
each, leading to
a share
 
capital of CHF
370,242,299.50
. Shares
 
issued decreased
by
157
 
million and
 
share capital
 
decreased by
 
USD
16
 
million in
2021, as the
156,632,400
 
shares acquired under the 2018–2021
share
 
repurchase
 
program
 
were canceled
 
by means
 
of a
 
capital
reduction,
 
as
 
approved
 
by
 
shareholders
 
at
 
the
 
2021
 
Annual
General Meeting.
Conditional share capital
As of 31 December 2021, the
 
following conditional share capital
was available to UBS Group AG’s Board of Directors (BoD):
 
–
 
A
 
maximum
 
of
 
CHF
38,000,000
 
represented
 
by
 
up
 
to
380,000,000
 
fully paid registered shares with a
 
nominal value
of
 
CHF
0.10
 
each,
 
to
 
be
 
issued
 
through
 
the
 
voluntary
 
or
mandatory
 
exercise
 
of
 
conversion
 
rights
 
and
 
/
 
or
 
warrants
granted
 
in
 
connection
 
with
 
the
 
issuance
 
of
 
bonds
 
or
 
similar
financial
 
instruments
 
on
 
national
 
or
 
international
 
capital
markets. This conditional
 
capital
 
allowance
 
was approved
 
at
the
Extraordinary
 
General
 
Meeting
 
(the
 
EGM)
 
held
 
on
26 November
 
2014,
 
having
 
originally
 
been
 
approved
 
at
 
the
Annual General Meeting (AGM) of UBS
 
AG on 14 April 2010.
The BoD has not made use of such allowance.
–
 
A maximum
 
of CHF
12,170,583
 
represented by
121,705,830
fully paid
 
registered shares
 
with a
 
nominal value
 
of CHF
0.10
each,
 
to
 
be
 
issued
 
upon
 
exercise
 
of
 
employee
 
options
 
and
stock appreciation rights issued to employees and members of
the
 
management
 
and
 
of
 
the
 
BoD
 
of
 
UBS Group
 
AG
 
and
 
its
subsidiaries. This
 
conditional capital
 
allowance was
 
approved
by the shareholders at the same EGM in 2014.
Authorized share capital
UBS
 
Group
 
AG
 
had
 
no
 
authorized
 
capital
 
available
 
to
 
issue
 
on
31 December
2021
.
Share repurchase programs
In March
 
2018, UBS
 
initiated a
 
share repurchase
 
program of
 
up
to CHF
2
 
billion over a
 
three-year period. Under
 
this program, UBS
repurchas
ed
8
 
million
 
sha
res
for
 
a
 
total
 
acquisition
 
cost
 
of
 
USD
112
 
million
 
in
 
2021
 
(2020:
31
 
million
 
shares
 
for
 
a
 
total
acquisition cost of USD
364
 
million).
The 2018–2021
 
program was completed
 
on 2 February 2021
and the
156,632,400
 
shares acquired
 
under the
 
2018–2021 share
repurchase
 
program
 
were
 
canceled
 
by
 
means
 
of
 
a
 
capital
reduction,
 
as
 
approved
 
by
 
shareholders
 
at
 
the
 
2021
 
Annual
General Meeting.
In
 
February
 
2021,
 
UBS
 
commenced
 
a
 
new
 
three-year
 
share
repurchase program
 
of up
 
to CHF
4
 
billion. Under
 
this program,
UBS repurchased
153
 
million shares in 2021
 
for a total acquisition
cost of USD
2,500
 
million (CHF
2,294
 
million)
.
 
As of or for the year ended
31.12.21
31.12.20
31.12.19
Shares outstanding
Shares issued
Balance at the beginning of the year
3,859,055,395
3,859,055,395
3,855,634,749
Shares issued
3,420,646
Shares canceled
(156,632,400)
1
Balance at the end of the year
3,702,422,995
3,859,055,395
3,859,055,395
Treasury shares
Balance at the beginning of the year
307,477,002
243,021,296
166,467,802
Acquisitions
214,270,175
128,372,257
146,876,692
Disposals
(62,299,449)
(63,916,551)
(70,323,198)
Cancellation of second trading line treasury shares
(156,632,400)
1
Balance at the end of the year
302,815,328
307,477,002
243,021,296
Shares outstanding
3,399,607,667
3,551,578,393
3,616,034,099
Basic and diluted earnings (USD million)
Net profit / (loss) attributable to shareholders for basic
 
EPS
7,457
6,557
4,304
Less: (profit) / loss on own equity derivative contracts
0
(1)
0
Net profit / (loss) attributable to shareholders for diluted
 
EPS
7,457
6,556
4,304
Weighted average shares outstanding
Weighted average shares outstanding for basic EPS
2
3,482,963,682
3,583,176,189
3,663,278,238
Effect of dilutive potential shares resulting from notional
 
employee shares, in-the-money options and warrants
outstanding
3
144,277,693
123,852,137
103,881,600
Weighted average shares outstanding for diluted EPS
3,627,241,375
3,707,028,326
3,767,159,838
Earnings per share (USD)
Basic
2.14
1.83
1.17
Diluted
 
2.06
1.77
1.14
Potentially dilutive instruments
4
Employee share-based compensation awards
5,886,945
2,536,789
Other equity derivative contracts
6,553,051
11,414,728
21,632,879
Total
12,439,996
13,951,517
21,632,879
1 Reflects the cancellation of shares purchased
 
under UBS’s 2018–2021 share
 
repurchase program as approved by shareholders
 
at the 2021 Annual General
 
Meeting.
 
2 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.
 
3 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.
 
4 Reflects potential shares that could dilute basic earnings per share in the future, but were
 
not dilutive for the periods
presented.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
289
 
Statement of cash flows
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Cash flow from / (used in) operating activities
Net profit / (loss)
7,486
6,572
4,310
Non-cash items included in net profit and other adjustments:
Depreciation, amortization and impairment of non-financial
 
assets
2,118
2,126
1,940
Credit loss expense / (release)
(148)
694
78
Share of net profits of associates and joint ventures and impairment
 
related to associates
(105)
(84)
(45)
Deferred tax expense / (benefit)
434
352
477
Net loss / (gain) from investing activities
(230)
(698)
220
Net loss / (gain) from financing activities
100
3,246
6,493
Other net adjustments
3,802
(8,076)
854
Net change in operating assets and liabilities:
Loans and advances to banks and amounts due to banks
2,148
3,586
(4,336)
Securities financing transactions
(2,316)
9,588
8,678
Cash collateral on derivative instruments
(3,312)
(3,487)
2,839
Loans and advances to customers
(27,460)
(33,656)
(3,128)
Customer deposits
29,825
51,805
23,217
Financial assets and liabilities at fair value held for trading and derivative financial
 
instruments
(10,516)
11,259
(18,829)
Brokerage receivables and payables
8,115
(5,199)
(2,347)
Financial assets at fair value not held for trading and other financial assets
 
and liabilities
19,609
320
33
Provisions and other non-financial assets and liabilities
3,010
(387)
55
Income taxes paid, net of refunds
(1,134)
(1,002)
(804)
Net cash flow from / (used in) operating activities
31,425
36,958
19,705
Cash flow from / (used in) investing activities
Purchase of subsidiaries, associates and intangible assets
(1)
(46)
(26)
Disposal of subsidiaries, associates and intangible assets
1
593
674
114
Purchase of property, equipment and software
(1,841)
(1,854)
(1,584)
Disposal of property, equipment and software
295
366
11
Purchase of financial assets measured at fair value through other
 
comprehensive income
(5,802)
(6,290)
(3,424)
Disposal and redemption of financial assets measured at
 
fair value through other comprehensive income
5,052
4,530
3,913
Net (purchase) / redemption of debt securities measured
 
at amortized cost
(415)
(4,166)
(562)
Net cash flow from / (used in) investing activities
(2,119)
(6,785)
(1,558)
Table
 
continues on the next page.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
290
 
Statement of cash flows (continued)
Table
 
continued from previous page.
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Cash flow from / (used in) financing activities
Net short-term debt issued / (repaid)
(3,093)
23,845
(17,149)
Net movements in treasury shares and own equity derivative
 
activity
(3,341)
(1,387)
(1,559)
Distributions paid on UBS shares
(1,301)
(2,607)
(2,544)
Issuance of debt designated at fair value and long-term debt measured
 
at amortized cost
98,272
80,255
65,047
Repayment of debt designated at fair value and long-term debt measured
 
at amortized cost
(79,909)
(87,098)
(68,883)
Net cash flows from other financing activities
(282)
(575)
(526)
Net cash flow from / (used in) financing activities
10,345
12,432
(25,614)
Total cash flow
Cash and cash equivalents at the beginning of the year
173,531
119,873
126,079
Net cash flow from / (used in) operating, investing and financing
 
activities
39,651
42,605
(7,467)
Effects of exchange rate differences on cash and cash equivalents
(5,307)
11,052
1,261
Cash and cash equivalents at the end of the year
2
207,875
173,531
119,873
of which: cash and balances at central banks
3
192,706
158,088
106,957
of which: loans and advances to banks
13,942
14,028
11,386
of which: money market paper
4
1,227
1,415
1,530
Additional information
Net cash flow from / (used in) operating activities includes:
Interest received in cash
11,163
11,915
15,315
Interest paid in cash
4,707
6,320
10,769
Dividends on equity investments, investment funds and associates
 
received in cash
5
2,531
1,901
3,145
1 Includes cash proceeds from the sale of UBS’s
 
investment in Clearstream Fund Centre AG (previously Fondcenter
 
AG). UBS’s majority stake
 
was sold in 2020 and the remaining minority investment
 
was sold in the
second quarter of 2021. Refer to Note 30 for more information. Also
 
includes dividends received from associates.
 
2 USD
3,408
 
million, USD
3,828
 
million and USD
3,192
 
million of cash and cash equivalents (mainly
reflected in Loans and advances to banks)
 
were restricted as of 31 December 2021, 31
 
December 2020 and 31 December 2019,
 
respectively. Refer to Note
 
23 for more information.
 
3 Includes only balances with
an original maturity
 
of three
 
months or
 
less.
 
4 Money market
 
paper is
 
included in the
 
balance sheet
 
under Financial assets
 
at fair value
 
held for
 
trading, Financial
 
assets measured
 
at fair value
 
through other
comprehensive income, Financial assets at fair
 
value not held for trading
 
and Other financial assets measured at amortized
 
cost.
 
5 Includes dividends received from associates reported
 
within Net cash flow from /
(used in) investing activities.
 
Changes in liabilities arising from financing activities
USD million
Debt issued
measured at
amortized cost
of which:
short-term
1
of which:
long-term
2
Debt issued
designated at fair
value
Over-the-
counter debt
instruments
3
Total
Balance as of 1 January 2020
110,497
21,837
88,660
66,809
2,022
179,327
Cash flows
22,428
23,845
(1,417)
(5,420)
(6)
17,002
Non-cash changes
6,308
984
5,324
(146)
44
6,207
of which: foreign currency translation
4,980
984
3,995
1,764
81
6,824
of which: fair value changes
(1,909)
(37)
(1,946)
of which: hedge accounting and other effects
1,328
1,328
1,328
Balance as of 31 December 2020
139,232
46,666
92,566
61,243
2,060
202,535
Cash flows
5,070
(3,093)
8,163
10,076
124
15,270
Non-cash changes
(5,148)
(475)
(4,673)
2,480
(56)
(2,724)
of which: foreign currency translation
(3,175)
(475)
(2,700)
(1,617)
(65)
(4,857)
of which: fair value changes
4,097
9
4,106
of which: hedge accounting and other effects
(1,972)
(1,972)
(1,972)
Balance as of 31 December 2021
139,155
43,098
96,057
73,799
2,128
215,082
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 Other financial liabilities designated at fair value.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
292
 
Note 1
 
Summary of material accounting policies
 
(continued)
a)
Material accounting policies
This Note describes the
 
material accounting policies
 
applied in the
preparation of the
 
consolidated financial
 
statements (the
 
Financial
Statements)
 
of
 
UBS
 
Group
 
AG
 
and
 
its
 
subsidiaries
 
(UBS
 
or
 
the
Group).
 
On
 
24 February
 
2022,
 
the
 
Financial
 
Statements
 
were
authorized for issue by the Board of Directors.
 
Basis of accounting
The Financial Statements have been prepared in accordance with
International Financial Reporting
 
Standards (IFRS), as
 
issued by the
International
 
Accounting
 
Standards
 
Board
 
(the
 
IASB),
 
and
 
are
presented in US dollars (USD).
Disclosures
 
marked
 
as
 
audited
 
in
 
the
 
“Risk,
 
capital,
 
liquidity
and funding,
 
and balance
 
sheet” section
 
of this
 
report form
 
an
integral part of the Financial
 
Statements. These disclosures relate
to requirements
 
under IFRS 7,
Financial Instruments:
 
Disclosures
,
and
 
IAS
 
1,
Presentation
 
of
 
Financial
 
Statements
,
 
and
 
are
 
not
repeated in this section.
 
The
 
accounting
 
policies
 
described
 
in
 
this
 
Note
 
have
 
been
applied consistently in all years presented unless otherwise stated
in Note 1b.
 
 
Critical accounting estimates and judgments
Preparation of these Financial
 
Statements under IFRS requires
 
management
to apply
 
judgment
 
and make
 
estimates
 
and assumptions
 
that affect
 
reported
amounts
 
of
 
assets,
 
liabilities,
 
income
 
and
 
expenses
 
and
 
disclosure
 
of
contingent
 
assets and
 
liabilities,
 
and may
 
involve
 
significant
 
uncertainty
 
at the
time they are made. Such
 
estimates and
 
assumptions
 
are based on the best
available
 
information.
 
UBS
 
regularly
 
reassesses
such
estimates
 
and
assumptions, which
 
encompass historical experience,
 
expectations of
 
the
future and other pertinent factors, to determine their continuing relevance
based on current conditions,
 
updating them
 
as necessary. Changes
 
in those
estimates and
 
assumptions may have
 
a
 
significant effect on
 
the Financial
Statements. Furthermore, actual results may differ significantly from UBS’s
estimates,
 
which could
 
result in
 
significant
 
losses to
 
the Group,
 
beyond what
was anticipated
 
or provided
 
for.
 
The
 
following areas
 
contain estimation
 
uncertainty or
 
require
 
critical
judgment
 
and
 
have
 
a
 
significant
 
effect
 
on
 
amounts
 
recognized
 
in
 
the
Financial Statements:
 
–
 
expected credit loss measurement (refer to item 2g in this Note and to
Note 20);
–
 
fair value measurement (refer to item 2f in this Note
 
and to Note 21);
–
 
income taxes (refer to item 6 in this Note and to Note
 
8);
–
 
provisions and contingent liabilities (refer to item 9
 
in this Note and to
Note 18);
–
 
post-employment benefit
 
plans (refer to item
 
5 in this Note
 
and to Note
27);
–
 
goodwill (refer to item 8 in this Note and to Note
 
13); and
–
 
consolidation of structured entities (refer to
 
item 1 in this Note
 
and to
Note 29).
 
1) Consolidation
The Financial Statements comprise the
 
financial statements of the
parent company
 
(UBS Group
 
AG) and
 
its subsidiaries,
 
presented
as
 
a
 
single
 
economic
 
entity
;
 
intercompany
 
transactions
 
and
balances have been
 
eliminated. UBS consolidates
 
all entities that
it
 
controls,
 
including
 
structured
 
entities
 
(SEs),
 
which
 
is
 
the
 
case
when
 
it
 
has:
 
(i)
 
power
 
over
 
the
 
relevant
 
activities
 
of
 
the
 
entity;
(ii) exposure to
 
an entity‘s
 
variable returns;
 
and (iii)
 
the ability
 
to
use its power to affect its own returns.
Consideration
 
is
 
given
 
to
 
all
 
facts
 
and
 
circumstances
 
to
determine whether the Group has
 
power over another entity,
 
i.e.,
the current ability
 
to direct the
 
relevant activities of
 
an entity when
decisions about those activities need to be made.
 
Subsidiaries,
 
including
 
SEs,
 
are
 
consolidated
 
from
 
the
 
date
when control
 
is gained
 
and deconsolidated
 
from the
 
date when
control ceases.
 
Control, or
 
the lack thereof,
 
is reassessed
 
if facts
and circumstances indicate that there is a change to one or more
elements required to establish that control is present.
Business combinations are accounted for using the acquisition
method. The amount of any non-controlling
 
interest is measured
at
 
the
 
non-controlling
 
interest’s
 
proportionate
 
share
 
of
 
the
acquiree’s identifiable net assets.
 
›
 
Refer to Note
29
for more information
 
Critical accounting estimates and judgments
Each
 
individual
 
entity
 
is
 
assessed
 
for
 
consolidation
 
in
 
line
 
with
 
the
aforementioned consolidation principles.
 
The assessment of control
 
can be
complex
 
and
 
requires
 
the
 
use
 
of
 
significant
 
judgment,
 
in
 
particular
 
in
determining whether
 
UBS has
 
power over
 
the entity.
 
As the
 
nature and
extent of UBS’s involvement is unique for each entity,
 
there is no uniform
consolidation outcome
 
by
 
entity.
 
Certain entities
 
within
 
a
 
class may
 
be
consolidated while
 
others may
 
not. When
 
carrying out
 
the consolidation
assessment, judgment
 
is exercised
 
considering all
 
the relevant
 
facts and
circumstances, including the
 
nature and activities
 
of the investee,
 
as well as
the substance of voting and similar rights.
 
›
 
Refer to Note
29
for more information
 
 
 
293
 
Note 1
 
Summary of material accounting policies
 
(continued)
2) Financial instruments
a. Recognition
UBS recognizes financial instruments when it
 
becomes a party to
contractual
 
provisions
 
of an
 
instrument. UBS
 
applies settlement
date
 
accounting
 
to
 
all
 
standard
 
purchases
 
and
 
sales
 
of
 
non-
derivative financial instruments.
 
In transactions
 
where UBS
 
acts as
 
a transferee,
 
to the
 
extent
the financial
 
asset transfer
 
does not qualify
 
for derecognition by
the transferor, UBS does not recognize the transferred
 
instrument
as its asset.
UBS also acts in a fiduciary capacity, which results in it holding
or
 
placing
 
assets
 
on
 
behalf
 
of
 
individuals,
 
trusts,
 
retirement
benefit plans and
 
other institutions. Unless
 
these items meet the
definition
 
of
 
an
 
asset
 
and
 
the
 
recognition
 
criteria
 
are
 
satisfied,
they are
 
not recognized
 
on UBS’s
 
balance sheet
 
and the
 
related
income is excluded from the Financial Statements.
 
Client
 
cash balances
 
associated with
 
derivatives
 
clearing and
execution
 
services
 
are
 
not
 
recognized
 
on
 
the
 
balance
 
sheet
 
if,
through
 
contractual
 
agreement,
 
regulation
 
or
 
practice,
 
UBS
neither obtains benefits from nor controls such cash balances.
b. Classification, measurement and presentation
Financial assets
 
All financial instruments
 
are on initial recognition
 
measured at fair
value
 
and
 
classified
 
as
 
measured
 
at
 
amortized
 
cost,
 
fair
 
value
through
 
other
 
comprehensive
 
income
 
(FVOCI)
 
or
 
fair
 
value
through
 
profit
 
or
 
loss
 
(FVTPL)
.
For
 
financial
 
instruments
subsequently measured at amortized cost or
 
FVOCI, the initial fair
value is adjusted for directly attributable transaction costs.
Where the
 
contractual terms
 
of a
 
debt instrument
 
result in
 
cash
flows that are
 
solely payments of
 
principal and interest
 
(SPPI) on
the
 
principal
 
amount
 
outstanding,
the
 
debt
 
instrument
 
is
classified
 
as
 
measured
 
at
 
amortized
 
cost
 
if
 
it
 
is
 
held
 
within
 
a
business model that has
 
an objective of holding
 
financial assets to
collect
 
contractual
 
cash flows,
 
or
 
at
 
FVOCI if
 
it
 
is held
 
within a
business
 
model
with
the
objective
being
 
achieved
 
by
 
both
collecting contractual cash flows and selling financial assets.
 
All
 
other
 
financial
 
assets
 
are
 
measured
 
at
 
FVTPL,
 
including
those
 
held
 
for
 
trading
 
or
 
those
 
managed
 
on
 
a
 
fair
 
value
 
basis,
except for derivatives
 
designated in a
 
hedge relationship, in
 
which
case hedge accounting requirements apply (refer
 
to item 2j in this
Note for more information).
 
Business model assessment and contractual cash flow
characteristics
 
UBS determines the
 
nature of a
 
business model by
 
considering the
way financial assets are managed to achieve a particular business
objective.
 
In
 
assessing
 
whether
 
contractual
 
cash
 
flows
 
are
 
SPPI,
 
the
Group
 
considers whether
 
the contractual
 
terms of
 
the
 
financial
asset contain a
 
term that could
 
change the timing
 
or amount of
contractual cash flows arising over the life of the instrument.
 
Financial liabilities
 
Financial liabilities measured at amortized cost
 
Debt
 
issued
 
measured
 
at
 
amortized
 
cost
 
includes
 
contingent
capital instruments containing
 
contractual provisions under
 
which
the principal amounts
 
would be written
 
down or converted
 
into
equity upon either
 
a specified common
 
equity tier 1 (CET1)
 
ratio
breach
 
or
 
a
 
determination
 
by
the
Swiss
 
Financial
 
Market
Supervisory Authority (FINMA) that a viability event has occurred.
Such contractual provisions are not
 
derivatives, as the underlying
is deemed to be a non-financial variable specific to a party to
 
the
contract.
 
If a debt
 
were to be written
 
down or converted into
 
equity in
a future
 
period, it
 
would be
 
partially or
 
fully derecognized,
 
with
the difference between
 
its carrying amount
 
and the fair
 
value of
any equity issued recognized in the income statement.
 
A gain or loss is recognized in
Other income
 
when debt issued
is subsequently repurchased
 
for market-making
 
or other activities.
A
 
subsequent
 
sale
 
of
 
own
 
bonds
 
in
 
the
 
market
 
is
 
treated
 
as
 
a
reissuance of debt.
Financial liabilities measured at fair value through profit or loss
 
UBS
 
designates
 
certain
 
issued
 
debt
 
instruments
 
as
 
financial
liabilities at fair value
 
through profit or loss, on
 
the basis that such
financial instruments
 
include embedded
 
derivatives and
 
/ or
 
are
managed on a fair
 
value basis (refer to
 
the table below for
 
more
information),
 
in
 
which
 
case
 
bifurcation
 
of
 
the
 
embedded
derivative
 
component
 
is
 
not
 
required.
 
Financial
 
instruments
including
 
embedded
 
derivatives
 
arise
 
predominantly
 
from
 
the
issuance of certain structured debt instruments.
 
Measurement and presentation
 
After initial recognition, UBS
 
classifies, measures and presents
 
its
financial
 
assets
 
and
 
liabilities
 
in
 
accordance
 
with
 
IFRS
 
9,
 
as
described in the table on the following pages.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
294
 
Note 1
 
Summary of material accounting policies (continued)
 
Classification, measurement and presentation
 
of financial assets
 
Financial assets classification
Significant items included
Measurement and presentation
Measured at
 
amortized cost
This classification includes:
–
 
cash and balances at central banks;
–
 
loans and advances to banks;
–
 
receivables from securities financing transactions;
–
 
cash collateral receivables on derivative instruments;
–
 
residential and commercial mortgages;
–
 
corporate loans;
–
 
secured loans, including Lombard loans, and
unsecured loans;
–
 
loans to financial advisors;
 
and
–
 
debt securities held as high-quality liquid
 
assets
(HQLA).
 
Measured at amortized cost using the effective interest
method less allowances for expected credit losses
 
(ECL)
(refer to items 2d and 2g in this Note for more information).
The following items are recognized in the income
statement:
–
 
interest income, which is accounted for in accordance
with item 2d
 
in this Note;
–
 
ECL and reversals;
 
and
–
 
foreign exchange (FX) translation gains and losses.
When a financial asset at amortized cost is derecognized,
the gain or loss is recognized in the income statement.
For amounts arising from settlement of certain derivatives,
refer to the next page.
 
Measured
at FVOCI
 
Debt instruments
measured at
FVOCI
This classification primarily includes debt securities
 
and
certain asset-backed securities held as HQLA.
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
295
 
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
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.
 
Measured at fair value,
 
with changes recognized in the
income statement.
Derivative assets (including derivatives that
 
are designated
and effective hedging instruments) are generally
presented as
Derivative financial instruments
, except those
exchange-traded (ETD) and over-the-counter
 
(OTC)-
cleared derivatives that are legally settled on a daily
 
basis
or in substance net settled on a daily basis,
 
which are
presented within
Cash collateral receivables on derivative
instruments.
Changes in fair value, initial transaction costs,
 
dividends
and gains and losses arising on disposal or redemption
 
are
recognized in
Other net income from financial
instruments measured at fair value through
 
profit or loss
,
except interest income on instruments other than
derivatives (refer to item 2d in this Note), interest on
derivatives designated as hedging instruments
 
in hedges
of interest rate risk and forward points on certain short-
and long-duration FX contracts acting as economic
hedges, which are reported in
Net interest income.
 
Changes in the fair value of derivatives that
 
are
designated and effective hedging instruments are
presented either in the income statement or
Other
comprehensive income
, depending on the type of hedge
relationship (refer to item 2j in this Note for more
information).
Mandatorily
measured at
FVTPL – Other
This classification includes financial assets
 
mandatorily
measured at FVTPL that are not held for trading, as
follows:
 
–
 
certain structured loans, certain commercial loans, and
receivables from securities financing transactions are
managed on a fair value basis;
 
–
 
loans managed on a fair value basis, including those
hedged with credit derivatives;
–
 
certain debt securities held as HQLA and
 
managed on a
fair value basis;
 
–
 
certain investment fund holdings and assets
 
held to
hedge delivery obligations related to cash-settled
employee compensation plans;
 
–
 
brokerage receivables, for which contractual cash flows
do not meet the SPPI criterion because the aggregate
balance is accounted for as a single unit of
 
account,
with interest being calculated on the individual
components;
–
 
auction rate securities, for which contractual cash
 
flows
do not meet the SPPI criterion because interest may
 
be
reset at rates that contain leverage;
–
 
equity
 
instruments;
 
and
–
 
assets held under unit-linked investment contracts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
296
 
Note 1
 
Summary of material accounting policies (continued)
 
Classification, measurement and presentation
 
of financial liabilities
 
Financial liabilities classification
Significant items included
Measurement and presentation
Measured at amortized cost
This classification includes:
–
 
demand and time deposits;
 
–
 
retail savings / deposits;
–
 
payables
 
from securities financing transactions;
 
–
 
non-structured fixed-rate bonds;
 
–
 
subordinated debt;
 
–
 
certificates of deposit and covered bonds; and
–
 
cash collateral payables on derivative instruments.
Measured at 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.
 
Measured at
fair value
through
profit or loss
Held for trading
Financial liabilities held for trading include:
–
 
all derivatives with a negative replacement value
(including certain loan commitments),
 
except those
that are designated and effective hedging
instruments; and
–
 
obligations to deliver financial instruments,
 
such as
debt and equity instruments, that UBS has
 
sold to
third parties but does not own (short positions).
Measurement and presentation of financial liabilities
classified at FVTPL follow the same principles
 
as for
financial assets classified at FVTPL, except that
 
the amount
of change in the fair value of a financial liability
designated at FVTPL that is attributable to changes
 
in
UBS’s own credit risk is presented in
Other comprehensive
income
 
directly within
Retained earnings
and is never
reclassified to the income statement.
Derivative liabilities (including derivatives that
 
are
designated and effective hedging instruments)
 
are
generally presented as
Derivative financial instruments
,
except those exchange-traded and OTC-cleared
derivatives that are legally settled on a daily basis
 
or in
substance net settled on a daily basis, which
 
are
presented within
Cash collateral payables on derivative
instruments.
Designated at
FVTPL
UBS designates
 
at FVTPL the following financial
liabilities:
–
 
issued hybrid debt instruments that primarily
 
include
equity-linked, credit-linked and rates-linked bonds
 
or
notes;
–
 
issued debt instruments managed on a fair
 
value
basis;
–
 
certain payables from securities financing transactions;
–
 
amounts due under unit-linked investment contracts
the cash flows of which are linked to financial
 
assets
measured at FVTPL and eliminate an accounting
mismatch;
 
and
–
 
brokerage payables, which arise in conjunction with
brokerage receivables and are measured at FVTPL to
achieve measurement consistency.
 
 
 
 
 
297
 
Note 1
 
Summary of material accounting policies (continued)
c. Loan commitments and financial guarantees
Loan
 
commitments
 
are
 
arrangements
 
to
 
provide
 
credit
 
under
defined terms and
 
conditions. Irrevocable loan
 
commitments are
classified
 
as:
 
(i)
 
derivative
 
loan
 
commitments
 
measured
 
at
 
fair
value through profit
 
or loss; (ii) loan
 
commitments designated at
fair
 
value
 
through
 
profit
 
or
 
loss;
 
or
 
(iii)
 
loan
 
commitments
 
not
measured at
 
fair value.
Financial guarantee
 
contracts are
 
contracts
that
 
require
 
UBS
 
to
 
make
 
specified
 
payments
 
to
 
reimburse
 
the
holder
 
for
 
an
 
incurred
 
loss
 
because
 
a
 
specified
 
debtor
 
fails
 
to
make
 
payments
 
when
 
due
 
in
 
accordance
 
with
 
the
 
terms
 
of
 
a
specified debt instrument.
d. Interest income and expense
Interest
 
income
 
and
 
expense
 
are
 
recognized
 
in
 
the
 
income
statement
based
 
on
the
 
effective
 
interest
method
.
 
When
calculating
 
the
 
effective
 
interest
 
rate
 
(the
 
EIR)
 
for
 
financial
instruments
 
(other
 
than
 
credit-impaired
 
financial
 
instruments),
UBS estimates future cash flows considering all contractual terms
of
 
the
 
instrument,
 
but
 
not
 
expected
 
credit
 
losses,
 
with
 
the
 
EIR
applied to the gross carrying amount of the financial asset
 
or the
amortized cost
 
of a
 
financial liability.
 
However,
 
when a
 
financial
asset
 
becomes
 
credit-impaired
 
after
 
initial
 
recognition,
 
interest
income is determined by
 
applying the EIR to
 
the amortized cost
 
of
the
 
instrument,
 
which
 
represents
 
the
 
gross
 
carrying
 
amount
adjusted for any credit loss allowance.
 
Upfront
 
fees,
 
including
 
fees
 
on
 
loan
 
commitments
 
not
measured at fair value where a loan is expected to be issued, and
direct
 
costs
 
are
 
included
 
within
 
the
 
initial
 
measurement
 
of
 
a
financial
 
instrument
 
measured
 
at
 
amortized
 
cost
 
or
 
FVOCI
 
and
recognized over the expected
 
life of the instrument
 
as part of its
EIR.
Fees related
 
to loan
 
commitments where
 
no loan
 
is expected
to be issued, as well as loan syndication fees where UBS does not
retain a portion of
 
the syndicated loan or where
 
UBS does retain
a
 
portion
 
of
 
the syndicated
 
loan at
 
the
 
same effective
 
yield
 
for
comparable risk as other participants, are included in
Net fee and
commission
 
income
and
 
either
 
recognized
 
over
 
the
 
life
 
of
 
the
commitment or when syndication occurs.
 
›
 
Refer to item 3 in this Note for more information
 
Interest
 
income
 
on
 
financial
 
assets,
 
excluding
 
derivatives,
 
is
included in interest income when positive and in interest expense
when negative.
 
Similarly, interest
 
expense on
 
financial liabilities,
excluding derivatives, is
 
included in interest
 
expense, except when
interest rates are
 
negative, in which case
 
it is included in
 
interest
income.
 
›
 
Refer to item 2b
 
in this Note and Note
3
 
for more information
e. Derecognition
 
Financial assets
UBS derecognizes
 
a transferred
 
financial asset,
 
or a
 
portion of
 
a
financial asset,
 
if the
 
purchaser has
 
received substantially
 
all the
risks and rewards of the asset or
 
a significant part of the risks
 
and
rewards
 
combined
 
with
 
a
 
practical
 
ability
 
to
 
sell
 
or
 
pledge
 
the
asset.
 
Where
 
financial
 
assets
 
have
 
been
 
pledged
 
as
 
collateral
 
or
 
in
similar
 
arrangements,
 
they
 
are
 
considered
 
to
 
have
 
been
transferred if the counterparty has received the contractual rights
to the cash flows of
 
the pledged assets, as may be
 
evidenced by,
for example,
 
the counterparty’s
 
right to
 
sell or
 
repledge the
 
assets.
In transfers where control over the financial asset is retained, UBS
continues
 
to recognize
 
the asset
 
to the
 
extent of
 
its
 
continuing
involvement, determined
 
by the extent
 
to which it
 
is exposed to
changes
 
in
 
the
 
value
 
of
 
the
 
transferred
 
asset
 
following
 
the
transfer.
 
Certain
 
OTC
 
derivative
 
contracts
 
and
 
most
 
exchange-traded
futures
 
and
 
option
 
contracts
 
cleared
 
through
 
central
 
clearing
counterparties and
 
exchanges are
 
considered to
 
be settled
 
on a
daily basis,
 
as the
 
payment or
 
receipt of
 
variation margin
 
on a
 
daily
basis
 
represents
 
legal
 
or
 
economic
 
settlement,
 
which
 
results
 
in
derecognition of the associated derivatives.
›
 
Refer to Note 22 and
 
Note
23
 
for more information
 
Financial liabilities
UBS derecognizes a financial liability when
 
it is extinguished, i.e.,
when
 
the
 
obligation
 
specified
 
in
 
the
 
contract
 
is
 
discharged,
canceled
 
or
 
expires.
 
When
 
an
 
existing
 
financial
 
liability
 
is
exchanged for a
 
new one from
 
the same lender
 
on substantially
different
 
terms,
 
or
 
the
 
terms
 
of
 
an
 
existing
 
liability
 
are
substantially modified, the original
 
liability is derecognized
 
and a
new
 
liability
 
recognized
 
with
 
any
 
difference
 
in
 
the
 
respective
carrying amounts recognized in the income statement.
 
f. Fair value of financial instruments
UBS accounts
 
for a
 
significant portion
 
of its
 
assets and
 
liabilities
at fair value. Fair value is the price on the measurement date that
would be
 
received for
 
the sale
 
of an
 
asset or
 
paid to
 
transfer a
liability in
 
an orderly
 
transaction between
 
market participants
 
in
the principal market,
 
or in the most
 
advantageous market in the
absence of a principal market.
 
›
 
Refer to Note 21 for more information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
298
 
Note 1
 
Summary of material accounting policies (continued)
Critical accounting estimates and judgments
The use
 
of valuation techniques, modeling
 
assumptions and estimates
 
of
unobservable market
 
inputs in
 
the fair
 
valuation of
 
financial instruments
requires
 
significant judgment and could affect the
 
amount of gain or loss
recorded
 
for
 
a
 
particular
 
position.
 
Valuation
 
techniques
 
that
 
rely
 
more
heavily on unobservable
 
inputs and sophisticated
 
models inherently require
a higher
 
level of judgment
 
and may
 
require adjustment to
 
reflect factors
that market
 
participants would
 
consider in
 
estimating fair
 
value, such
 
as
close-out costs, which are presented in Note 21d.
 
UBS‘s governance framework over
 
fair value measurement is described
in Note 21b,
 
and UBS provides
 
a sensitivity analysis
 
of the estimated
 
effects
arising from
 
changing significant unobservable
 
inputs in
 
Level 3 financial
instruments to reasonably possible alternative
 
assumptions in Note 21g.
 
›
 
Refer to Note 21 for more information
g. Allowances and provisions for expected credit losses
ECL
 
are
 
recognized
 
for
 
financial
 
assets
 
measured
 
at
 
amortized
cost,
 
financial
 
assets
 
measured
 
at
 
FVOCI,
 
fee
 
and
 
lease
receivables,
 
financial
 
guarantees
,
 
and
 
loan
 
commitments
 
not
measured at
 
fair value. ECL
 
are also
 
recognized on the
 
undrawn
portion
 
of
 
committed
 
unconditionally
 
revocable
 
credit
 
lines,
which include UBS’s credit
 
card limits and master
 
credit facilities,
as
 
UBS
 
is
 
exposed
 
to
 
credit
 
risk
 
because
 
the
 
borrower
 
has
 
the
ability
 
to
 
draw
 
down
 
funds
 
before
 
UBS
 
can
 
take
 
credit
 
risk
mitigation actions.
Recognition of expected credit losses
 
ECL are recognized on the following basis:
–
 
Stage 1 instruments: Maximum 12-month
 
ECL are recognized
from initial recognition,
 
reflecting the portion
 
of lifetime cash
shortfalls that would
 
result if a default
 
occurs in the 12
 
months
after
 
the
 
reporting
 
date,
 
weighted
 
by
 
the
 
risk
 
of
 
a
 
default
occurring.
 
–
 
Stage 2
 
instruments:
 
Lifetime
 
ECL
 
are
 
recognized
 
if
 
a
significant
 
increase
 
in
 
credit
 
risk
 
(
an
SICR)
 
is
 
observed
subsequent
 
to
 
the
 
instrument’s
 
initial
 
recognition,
 
reflecting
lifetime
 
cash
 
shortfalls
 
that
 
would
 
result
 
from
 
all
 
possible
default events over the expected life of a financial instrument,
weighted by
 
the risk
 
of a
 
default occurring.
 
When an
 
SICR is
no longer observed, the instrument will move back to stage 1.
–
 
Stage 3
 
instruments:
 
Lifetime
 
ECL
 
are
 
always
 
recognized
 
for
credit-impaired
 
financial
 
instruments,
 
as
 
determined
 
by
 
the
occurrence of one or more loss events, by estimating
 
expected
cash
 
flows
 
based
 
on
 
a
 
chosen
recovery
 
strategy.
 
Credit
-
impaired
 
exposures
 
may
 
include
 
positions
 
for
 
which
 
no
allowance has been recognized, for example because they are
expected to be fully recoverable through collateral held.
–
 
Changes
 
in
 
lifetime
 
ECL
 
since
 
initial
 
recognition
 
are
 
also
recognized for
 
assets that
 
are purchased
 
or originated
 
credit-
impaired (POCI). POCI financial instruments include those that
are purchased
 
at a
 
deep discount
 
or newly
 
originated with
 
a
defaulted counterparty; they
 
remain a separate
 
category until
derecognition.
 
All
 
or
 
part
 
of
 
a
 
financial
 
asset
 
is
 
written
 
off
 
if
 
it
 
is
 
deemed
uncollectible or forgiven.
 
Write-offs reduce the
 
principal amount
of a
 
claim and
 
are charged
 
against related
 
allowances for
 
credit
losses. Recoveries, in part or in full, of
 
amounts previously written
off are generally credited to
Credit loss (expense) / release
.
 
ECL
 
are
 
recognized
 
in
 
the
 
income
 
statement
 
in
Credit
 
loss
(expense) / release
. A corresponding ECL allowance is reported as
a decrease in the carrying amount of financial assets measured at
amortized cost on the balance sheet.
 
For financial assets that are
measured at
 
FVOCI, the
 
carrying amount
 
is not
 
reduced, but
 
an
accumulated
 
amount
 
is
 
recognized
 
in
Other
 
comprehensive
income
.
 
For
 
off-balance
 
sheet
 
financial
 
instruments
 
and
 
other
credit lines, provisions for ECL are presented in
Provisions.
Default and credit impairment
UBS
 
applies
 
a
 
single
 
definition
 
of
 
default
 
for
 
credit
 
risk
management
 
purposes,
 
regulatory
 
reporting
 
and
 
ECL,
 
with
 
a
counterparty
 
classified
 
as
 
defaulted
 
based
 
on
 
quantitative
 
and
qualitative criteria.
 
›
 
Refer to “Credit policies for distressed assets”
 
in the “Risk
management and control” section of this report for
 
more
information
Measurement of expected credit losses
IFRS
 
9
 
ECL
 
reflect
 
an
 
unbiased,
 
probability-weighted
 
estimate
based
 
on
 
loss
 
expectations
 
resulting
 
from
 
default
 
events.
 
The
method
 
used
 
to
 
calculate
 
ECL
 
applies
 
the
 
following
 
principal
factors: probability
 
of default
 
(PD), loss
 
given default
 
(LGD) and
exposure
 
at default
 
(EAD). Parameters
 
are
 
generally determined
on an
 
individual financial
 
asset level. Based
 
on the materiality
 
of
the
 
portfolio,
 
for
 
credit
 
card
 
exposures
 
and
 
personal
 
account
overdrafts
 
in
 
Switzerland,
 
a
 
portfolio
 
approach
 
is
 
applied
 
that
derives an average
 
PD and LGD
 
for the entire
 
portfolio. PDs and
LGDs used in the ECL calculation are point-in-time (PIT)-based for
key portfolios and consider both current conditions and expected
cyclical
 
changes.
 
For
 
material
 
portfolios,
 
PDs
 
and
 
LGDs
 
are
determined for
 
different scenarios,
 
whereas EAD
 
projections are
treated as scenario independent.
For the
 
purpose of
 
determining the
 
ECL-relevant parameters,
UBS leverages its
 
Pillar 1 internal
 
ratings-based (IRB) models
 
that
are also used in determining expected loss (EL) and risk-weighted
assets under
 
the Basel III
 
framework and
 
Pillar 2 stress
 
loss models.
Adjustments have been made to these models and IFRS 9-related
models
 
have
 
been
 
developed
 
that
 
consider
 
the
 
complexity,
structure and
 
risk profile
 
of relevant
 
portfolios and
 
take account
of the fact that PDs and LGDs used in the ECL calculation are PIT-
based,
 
as
 
opposed
 
to
 
the
 
corresponding
 
Basel III
 
through-the-
cycle (TTC) parameters.
 
All models that
 
are relevant for
 
measuring
expected credit
 
losses are
 
subject to
 
UBS’s model
 
validation and
oversight processes.
 
 
 
 
 
299
 
Note 1
 
Summary of material accounting policies (continued)
Probability of default:
PD represents the
 
probability of a
 
default
over
 
a
 
specified
 
time
 
period.
 
A
 
12-month
 
PD
 
represents
 
the
probability of
 
default determined
 
for the
 
next 12
 
months and
 
a
lifetime
 
PD
 
represents
 
the
 
probability
 
of
 
default
 
over
 
the
remaining lifetime of
 
the instrument.
 
PIT PDs
 
are derived from
 
TTC
PDs and scenario forecasts.
 
The modeling is region-,
 
industry- and
client
 
segment-specific
 
and
 
considers
 
both
 
macroeconomic
scenario dependencies and client-idiosyncratic information.
Exposure
 
at
 
default:
EAD
 
represents
 
an
 
estimate
 
of
 
the
exposure to credit risk
 
at the time of
 
a potential default
 
occurring,
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
 
judgement-based.
 
The
 
assessment
 
is
based on a
 
holistic review of
 
the prevailing economic
 
or political
conditions,
 
which
 
may
 
exhibit
 
different
 
levels
 
of
 
uncertainty.
 
It
 
takes
 
into
 
account
 
the
 
impact
 
of
 
changes
 
in
 
the
 
nature
 
and
severity
 
of
 
the underlying
 
scenario
 
narratives
 
and
 
the
 
projected
economic variables.
 
The
 
determined
 
weights
 
constitute
 
the
 
probabilities
 
that
 
the
respective
 
set
 
of
 
macroeconomic
 
conditions
 
will
 
occur
 
and
 
not
that
 
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:
 
–
 
GDP growth rates, given
 
their significant effect on
 
borrowers’
performance;
 
–
 
unemployment
 
rates, given
 
their significant
 
effect on
 
private
clients’ ability to meet contractual obligations;
 
–
 
house price indices, given their
 
significant effect on mortgage
collateral valuations;
 
–
 
interest rates,
 
given their
 
significant effect
 
on counterparties’
abilities to service debt;
 
–
 
consumer
 
price
 
indices,
 
given
 
their
 
overall
 
relevance
 
for
companies’
 
performance,
 
private
 
clients’
 
purchasing
 
power
and economic stability; and
–
 
equity indices,
 
given that
 
they are
 
an important
 
factor in
 
our
corporate rating tools.
 
Scenario generation, review process and governance
A
 
team
 
of
 
economists,
 
who
 
are
 
part
 
of
 
Group
 
Risk
 
Control,
develop
 
the
 
forward-looking
 
macroeconomic
 
assumptions
 
with
involvement from a broad range of experts.
The
 
scenarios, their
 
weight and
 
the key
 
macroeconomic and
other
 
factors
 
are
 
subject
 
to
 
a
 
critical
 
assessment
 
by
 
the
 
IFRS
 
9
Scenario Sounding Sessions and ECL Management Forum, which
include senior management from Group Risk and Group Finance.
Important aspects
 
for the
 
review include
 
whether there
 
may be
particular credit
 
risk concerns
 
that may
 
not be
 
capable of
 
being
addressed systematically and
 
require post-model adjustments
 
for
stage allocation and ECL allowance.
 
The
 
Group
 
Model
 
Governance
Committee
,
 
as
 
the
 
highest
authority under UBS’s
 
model governance framework, ratifies
 
the
decisions taken by the ECL Management Forum.
 
›
 
Refer to Note 20 for more information
ECL measurement period
 
The period for which lifetime ECL are determined is based on the
maximum
 
contractual period
 
that UBS
 
is exposed
 
to
 
credit
 
risk,
taking
 
into
 
account
 
contractual
 
extension,
 
termination
 
and
prepayment
 
options.
 
For
 
irrevocable
 
loan
 
commitments
 
and
financial guarantee contracts,
 
the measurement period
 
represents
the maximum contractual period for which
 
UBS has an obligation
to extend credit.
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
300
 
Note 1
 
Summary of material accounting policies (continued)
Additionally,
 
some
 
financial
 
instruments
 
include
 
both
 
an
 
on-
demand loan and
 
a revocable undrawn
 
commitment, where the
contractual
 
cancellation
 
right
 
does
 
not
 
limit
 
UBS’s
 
exposure
 
to
credit risk
 
to the
 
contractual notice
 
period, as
 
the client
 
has the
ability to
 
draw down
 
funds before
 
UBS can
 
take risk-mitigating
actions. In such cases UBS is required to estimate
 
the period over
which it is exposed to credit risk. This applies to UBS’s credit card
limits, which do not have a
 
defined contractual maturity date, are
callable
 
on
 
demand
 
and
 
where
 
the
 
drawn
 
and
 
undrawn
components are managed as one exposure.
 
The exposure arising
from UBS’s credit
 
card limits is not
 
significant and is managed
 
at
a portfolio level,
 
with credit actions
 
triggered when balances
 
are
past due.
 
An ECL
 
measurement period
 
of seven
 
years is
 
applied
for credit card
 
limits, capped at
 
12 months for
 
stage 1 balances,
as a proxy for the period that UBS is exposed to credit risk.
Customary
 
master
 
credit
 
agreements
 
in
 
the
 
Swiss
 
corporate
market
 
also
 
include
 
on-demand
 
loans
 
and
 
revocable
 
undrawn
commitments.
 
For
 
smaller
 
commercial
 
facilities,
 
a
 
risk-based
monitoring
 
(RbM)
 
approach
 
is
 
in
 
place
 
that
 
highlights
 
negative
trends
 
as
 
risk
 
events,
 
at
 
an
 
individual
 
facility
 
level,
 
based
 
on
 
a
combination
 
of
 
continuously
 
updated
 
risk
 
indicators.
 
The
 
risk
events trigger additional
 
credit reviews by
 
a risk officer,
 
enabling
informed credit
 
decisions to
 
be taken.
 
Larger corporate
 
facilities
are not subject
 
to RbM, but
 
are reviewed
 
at least
 
annually through
a
 
formal
 
credit
 
review.
 
UBS
 
has
 
assessed
 
these
 
credit
 
risk
management practices and
 
considers both
 
the RbM approach
 
and
formal credit
 
reviews as
 
substantive credit
 
reviews resulting
 
in a
re-origination
 
of
 
the
 
given
 
facility.
 
Following
 
this,
 
a
 
12-month
measurement
 
period
 
from
 
the
 
reporting
 
date
 
is
 
used
 
for
 
both
types of facilities as
 
an appropriate proxy of
 
the period over
 
which
UBS is exposed to credit risk, with 12 months also
 
used as a look-
back
 
period
 
for
 
assessing
SICR,
 
always
 
from
 
the
 
respective
reporting date.
Significant increase in credit risk
 
Financial
 
instruments
 
subject
 
to
 
ECL
 
are
 
monitored
 
on
 
an
ongoing
 
basis.
 
To
 
determine
 
whether
 
the
 
recognition
 
of
 
a
maximum
 
12-month
 
ECL
 
continues
 
to
 
be
 
appropriate,
 
an
assessment
 
is made
 
as
 
to
 
whether
 
an
 
SICR
 
has
 
occurred
 
since
initial
 
recognition
 
of
 
the
 
financial
 
instrument
 
,
 
applying
 
both
quantitative
 
and qualitative
 
factors.
 
Primarily,
 
UBS
 
assesses
 
changes
 
in
 
an
 
instrument’s
 
risk
 
of
default
 
on
 
a
 
quantitative
 
basis
 
by
 
comparing
 
the
 
annualized
forward-looking
 
and
 
scenario-weighted
 
lifetime
 
PD
 
of
 
an
instrument determined at two different dates:
 
–
 
at the reporting date; and
 
–
 
at inception of the instrument.
If, based on UBS’s
 
quantitative modeling, an increase exceeds
a
 
set
 
threshold,
 
an
 
SICR
 
is
 
deemed
 
to
 
have
 
occurred
 
and
 
the
instrument is transferred to stage 2 with lifetime ECL recognized
.
The threshold
 
applied varies
 
depending on
 
the original
 
credit
quality of the borrower,
 
with a higher SICR
 
threshold set for
 
those
instruments
 
with
 
a
 
low
 
PD
 
at
 
inception.
 
The
 
SICR
 
assessment
based on PD changes
 
is made at
 
an individual financial asset
 
level.
A high-level
 
overview of
 
the SICR
 
trigger, which
 
is a
 
multiple of
the
 
annualized
 
remaining
 
lifetime
 
PIT
 
PD
 
expressed
 
in
 
rating
downgrades,
 
is
 
provided
 
in
 
the
 
“SICR
 
thresholds”
 
table
 
below.
The actual SICR
 
thresholds applied are
 
defined on a
 
more granular
level by interpolating between the values shown in the table.
SICR thresholds
Internal rating at origination
 
of the instrument
Rating downgrades /
SICR trigger
0–3
3
4–8
2
9–13
1
›
 
Refer to the “
Risk management and control
” section of this
report for more details about UBS’s internal grading system
 
Irrespective
 
of
 
the
 
SICR
 
assessment
 
based
 
on
 
default
probabilities, credit
 
risk is
 
generally deemed
 
to have
 
significantly
increased for an instrument if the contractual payments are more
than
 
30
 
days
 
past
 
due.
 
For
 
certain
 
less
 
material
 
portfolios,
specifically
 
the
 
Swiss
 
credit
 
card
 
portfolio,
 
the
 
30-day
 
past
 
due
criterion
 
is
 
used
 
as
 
the
 
primary
 
indicator
 
of
 
an
 
SICR.
 
Where
instruments are transferred to stage 2 due
 
to the 30-day past
 
due
criterion,
 
a
 
minimum
 
period
 
of
 
six
 
months
 
is
 
applied
 
before
 
a
transfer
 
back
 
to
 
stage 1
 
can
 
be
 
triggered.
 
For
 
instruments
 
in
Personal &
 
Corporate Banking
 
and Global
 
Wealth Management
Region Switzerland
 
that are
 
between 90
 
and 180
 
days past
 
due
but
 
have
 
not
 
been
 
reclassified
 
to
 
stage 3,
 
a
 
one-year
 
period
 
is
applied before a transfer back to stage 1 can be triggered.
Additionally,
 
based
 
on
 
individual
 
counterparty-specific
indicators,
 
external
 
market
 
indicators
 
of
 
credit
 
risk
 
or
 
general
economic
 
conditions,
 
counterparties may
 
be moved
 
to a
 
watch
list, which is used as a
 
secondary qualitative indicator for an SICR.
Exception management is further applied,
 
allowing for individual
and collective adjustments
 
on exposures
 
sharing the same
 
credit
risk characteristics
 
to take
 
account of
 
specific situations
 
that are
not otherwise fully reflected.
 
In
 
general,
 
the
 
overall
 
SICR
 
determination
 
process
 
does
 
not
apply
 
to
 
Lombard
 
loans,
 
securities
 
financing
 
transactions
 
and
certain other asset-based
 
lending transactions, because
 
of the risk
management
 
practices
 
adopted,
 
including
 
daily
 
monitoring
processes with strict margining. If margin calls are not satisfied, a
position
 
is
 
closed
 
out
 
and
 
classified
 
as
 
a
 
stage 3
 
position.
 
In
exceptional
 
cases,
 
an
 
individual
 
adjustment
 
and
 
a
 
transfer
 
into
stage 2 may be made to take account of specific facts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
301
 
Note 1
 
Summary of material accounting policies (continued)
Credit risk
 
officers are
 
responsible for
 
the identification
 
of an
SICR,
 
which for accounting purposes is in some respects different
from
 
internal
 
credit
 
risk
 
management processes.
 
This difference
mainly
arises
because
 
ECL
 
accounting
 
requirements
 
are
instrument-specific,
 
such
 
that
 
a
 
borrower
 
can
 
have
 
multiple
exposures
 
allocated
 
to
 
different
 
stages,
 
and
 
maturing
 
loans
 
in
stage 2 will
 
migrate to
 
stage 1 upon
 
renewal irrespective
 
of the
actual
 
credit
 
risk
 
at
 
that
 
time.
 
Under
 
a
 
risk-based
 
approach,
 
a
holistic counterparty
 
credit assessment
 
and the
 
absolute level
 
of
risk at any given date
 
will determine what risk-mitigating actions
may be warranted.
›
 
Refer to the “
Risk management and control
” section of this
report for more information
 
Critical accounting estimates and judgments
The calculation of ECL requires management
 
to apply significant judgment
and make estimates and assumptions
 
that can result in significant
 
changes
to the timing and amount of ECL recognized.
 
Determination of a significant increase in
 
credit risk
 
IFRS 9 does
 
not include
 
a definition of
 
what constitutes an
 
SICR,
 
with UBS’s
assessment considering qualitative and quantitative criteria. An IFRS 9 ECL
Management Forum
 
has been
 
established to
 
review and challenge
 
the SICR
results.
Scenarios, scenario weights and macroeconomic
 
variables
 
ECL
 
reflect
 
an
 
unbiased
 
and
 
probability-weighted
 
amount,
 
which
 
UBS
determines
 
by
 
evaluating
 
a
 
range
 
of
 
possible
 
outcomes.
 
Management
selects
 
forward-looking
 
scenarios
 
that
 
include
 
relevant
 
macroeconomic
variables
 
and
 
management’s
 
assumptions
 
around
 
future
 
economic
conditions. IFRS
 
9 Scenario Sounding
 
Sessions,
 
in addition
 
to the IFRS
 
9 ECL
Management
 
Forum,
 
are
 
in
 
place
 
to
 
derive,
 
review
 
and
 
challenge
 
the
scenario selection and weights,
 
and to determine
 
whether any additional
post-model adjustments are required that may significantly
 
affect ECL.
 
ECL measurement period
Lifetime ECL are
 
generally determined
 
based upon the
 
contractual maturity
of the transaction,
 
which significantly
 
affects ECL. For credit
 
card limits and
Swiss callable
 
master credit
 
facilities, judgment
 
is required,
 
as UBS
 
must
determine the period over
 
which it is exposed
 
to credit risk.
 
A seven-year
period is
 
applied for
 
credit card
 
limits, capped
 
at 12
 
months for
 
stage 1
positions, and a 12-month period applied for
 
master credit facilities.
 
Modeling and post-model adjustments
A number
 
of complex
 
models have
 
been developed
 
or modified
 
to calculate
ECL,
 
with
 
additional
 
post-model
 
adjustments
 
required
 
which
 
may
significantly affect
 
ECL. The
 
models are governed
 
by UBS’s
 
model validation
controls and
 
approved by
 
the Group Model
 
Governance Committee (the
GMGC)
.
 
The
 
post
-
model
 
adjustments
are
 
approved
 
by
 
the
ECL
Management Forum and endorsed by the
 
GMGC.
A
sensitivity
 
analysis
covering
 
key
 
macroeconomic
 
variables
,
 
scenario
weights and SICR trigger points
 
on ECL measurement is provided
 
in Note
20f.
 
›
 
Refer to Note 20 for more information
h. Restructured and modified financial assets
When payment default is expected,
 
or where default has already
occurred,
 
UBS
 
may
 
grant
 
concessions
 
to
 
borrowers
 
in
 
financial
difficulties that
 
it would not
 
consider in
 
the normal course
 
of its
business, such as
 
preferential interest rates, extension
 
of maturity,
modifying
 
the
 
schedule
 
of
 
repayments,
 
debt
 
/
 
equity
 
swap,
subordination,
 
etc. When a concession or forbearance measure is
granted, each case
 
is considered individually
 
and the exposure
 
is
generally classified as
 
being in default.
 
Forbearance classification
will
 
remain
 
until
 
the
 
loan
 
is
 
collected
 
or
 
written
 
off,
 
non-
preferential
 
conditions
 
superseding
 
preferential
 
conditions
 
are
granted
 
or
 
until
 
the
 
counterparty
 
has
 
recovered
 
and
 
the
preferential conditions no longer exceed UBS’s risk tolerance.
Modifications result in an alteration of future contractual cash
flows and can occur within UBS’s normal risk tolerance or as part
of
 
a
 
credit
 
restructuring
 
where
 
a
 
counterparty
 
is
 
in
 
financial
difficulties. The
 
restructuring or
 
modification of
 
a financial
 
asset
could lead
 
to a
 
substantial change
 
in the
 
terms and
 
conditions,
resulting in the
 
original financial asset
 
being derecognized and
 
a
new
 
financial
 
asset
 
being
 
recognized.
 
Where
 
the
 
modification
does
 
not
 
result
 
in
 
a
 
derecognition,
 
any
 
difference
 
between
 
the
modified contractual cash
 
flows discounted at
 
the original
 
EIR and
the existing
 
gross carrying amount
 
of the
 
given financial asset
 
is
recognized in the
 
income statement as
 
a modification gain
 
or loss.
 
i. Offsetting
UBS
 
presents
 
financial
 
assets
 
and
 
liabilities on
 
its
 
balance
 
sheet
net if (i) it has a legally enforceable right to set
 
off the recognized
amounts
 
and
 
(ii)
 
it
 
intends
 
either
 
to
 
settle
 
on
 
a
 
net
 
basis
 
or
 
to
realize
 
the
 
asset
 
and
 
settle
 
the
 
liability
 
simultaneously.
 
Netted
positions include, for example, certain derivatives and repurchase
and reverse
 
repurchase transactions
 
with various
 
counterparties,
exchanges and clearing houses.
In assessing whether
 
UBS intends
 
to either settle
 
on a net
 
basis,
or
 
to
 
realize
 
the
 
asset
 
and
 
settle
 
the
 
liability
 
simultaneously,
emphasis is placed on the effectiveness of operational settlement
mechanics
 
in
 
eliminating
 
substantially
 
all
 
credit
 
and
 
liquidity
exposure
 
between
 
the
 
counterparties.
 
This
 
condition
 
precludes
offsetting on the balance
 
sheet for substantial amounts
 
of UBS’s
financial assets and liabilities, even
 
though they may be
 
subject to
enforceable netting arrangements.
 
Repurchase arrangements and
securities
 
financing
 
transactions
 
are
 
presented
 
net
 
only
 
to
 
the
extent
 
that
 
the
 
settlement
 
mechanism
 
eliminates,
 
or
 
results
 
in
insignificant,
 
credit
 
and
 
liquidity
 
risk,
 
and
 
processes
 
the
receivables and payables in a single settlement process or cycle.
›
 
Refer to Note
22
for more information
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
302
 
Note 1
 
Summary of material accounting policies
 
(continued)
j
. Hedge accounting
The Group
 
applies
 
hedge accounting
 
requirements
 
of IFRS
 
9, unless
stated otherwise
 
below, where the criteria for documentation
 
and
hedge
 
effectiveness are
 
met.
 
If
 
a
 
hedge
 
relationship no
 
longer
meets
 
the
 
criteria
 
for
 
hedge
 
accounting,
 
hedge
 
accounting
 
is
discontinued. Voluntary
 
discontinuation of
 
hedge
 
accounting is
permitted under
 
IAS 39 but
 
not under
 
IFRS 9.
Fair value hedges of interest rate risk related to debt instruments
and loan assets
The fair value change
 
of the hedged item
 
attributable
 
to a hedged
risk is
 
reflected as
 
an
 
adjustment to
 
the
 
carrying amount of
 
the
hedged item, and recognized
 
in the income statement along with
the change
 
in the fair
 
value
 
of the
 
hedging
 
instrument.
 
Fair value hedges of portfolio interest rate risk related to loans
designated under IAS 39
Prior to discontinuation in December 2021, the fair value change
of the
 
hedged item
 
attributable to
 
a hedged
 
risk is
 
reflected within
Other
 
financial
 
assets
 
measured
 
at
 
amortized
 
cost
or
Other
financial liabilities measured
 
at amortized cost
and recognized in
the income statement
 
along with the
 
change in the
 
fair value of
the hedging instrument.
 
Fair value hedges of FX risk related to debt instruments
The
 
fair
 
value
 
change
 
of
 
the
 
hedged
 
item
 
attributable
 
to
 
the
hedged risk
 
is reflected
 
in the measurement
 
of the
 
hedged item
and recognized
 
in the
 
income statement
 
along with
 
the change
in the fair value of
 
the hedging instrument. The foreign
 
currency
basis
 
spread
 
of
 
cross-currency
 
swaps
 
designated
 
as
 
hedging
derivatives is excluded from the designation and
 
accounted for as
a cost of hedging with
 
amounts deferred in
Other comprehensive
income
 
within
Equity
. These amounts are released
 
to the income
statement over the term of the hedged item.
Discontinuation of fair value hedges
Discontinuations
 
for
 
reasons
 
other
 
than
 
derecognition
 
of
 
the
 
hedged
item
 
result
 
in
 
an
 
adjustment to
 
the
 
carrying
 
amount,
 
which
 
is
amortized to the income statement over the remaining life of the
hedged
 
item using
 
the effective
 
interest
 
method.
 
If the
 
hedged
 
item
is derecognized,
 
the unamortized
 
fair value adjustment
 
or deferred
cost of
 
hedging amount is recognized immediately in the income
statement
 
as part
 
of any
 
derecognition
 
gain or
 
loss.
Cash flow hedges of forecast transactions
Fair value gains
 
or losses associated with
 
the effective portion
 
of
derivatives designated as cash
 
flow hedges for
 
cash flow repricing
risk are recognized initially in
Other comprehensive income
within
Equity
 
and
 
reclassified
 
to
 
the
 
income
 
statement
 
in
 
the
 
periods
when
 
the
 
hedged
 
forecast
 
cash
 
flows
 
affect
 
profit
 
or
 
loss,
including discontinued
 
hedges for which
 
forecast cash
 
flows are
expected
 
to
 
occur.
 
If
 
the
 
forecast
 
transactions
 
are
 
no
 
longer
expected to
 
occur,
 
the deferred
 
gains or
 
losses are
 
immediately
reclassified to the income statement.
Hedges of net investments in foreign operations
Gains or losses on the hedging
 
instrument
 
relating to the effective
portion of a hedge are recognized
 
directly in
Other comprehensive
income
 
within
Equity,
while
 
any
 
gains
 
or
 
losses
 
relating
 
to
 
the
ineffective
 
and / or undesignated
 
portion (for
 
example, the
 
interest
element
 
of
 
a
 
forward
 
contract)
 
are
 
recognized
 
in
 
the
 
income
statement.
 
Upon
 
disposal
 
or
 
partial
 
disposal
 
of
 
the
 
foreign
 
operation,
the cumulative
 
value
 
of any
 
such
 
gains
 
or losses
 
recognized
 
in
Equity
 
associated
 
with the
 
entity
 
is reclassified
 
to
Other income
.
Interest Rate Benchmark Reform
 
UBS
 
can
 
continue
 
hedge
 
accounting
 
during
 
the
 
period
 
of
uncertainty before existing interest rate benchmarks are replaced
with
 
alternative
 
risk-free
 
interest
 
rates.
 
During
 
this
 
period,
 
UBS
can
 
assume
 
that
 
the
 
current
 
benchmark
 
rates
 
will
 
continue
 
to
exist,
 
such
 
that
 
forecast
 
transactions
 
are
 
considered
 
highly
probable
 
and
 
hedge
 
relationships
 
remain,
 
with
 
little
 
or
 
no
consequential
 
impact
 
on
 
the
 
financial
 
statements.
 
Upon
replacement
 
of
 
existing
 
interest
 
rate
 
benchmarks
 
by
 
alternative
risk-free
 
interest
 
rates
 
expected
 
in
 
2021
 
and
 
beyond,
 
UBS
 
will
apply the requirements of
Amendments to IFRS 9, IAS 39, IFRS 7,
IFRS 4 and IFRS 16 (Interest Rate Benchmark Reform – Phase 2).
 
›
 
Refer to Note 1b for more information
3) Fee and commission income and expenses
UBS
 
earns
 
fee
 
income
 
from
 
the
 
diverse
 
range
 
of
 
services
 
it
provides to its
 
clients. Fee income can
 
be divided into two
 
broad
categories:
 
fees
 
earned
 
from
 
services
 
that
 
are
 
provided
 
over
 
a
certain
 
period
 
of
 
time,
 
such
 
as
 
management
 
of
 
clients’
 
assets,
custody
 
services
 
and
 
certain
 
advisory
 
services;
 
and
 
fees
 
earned
from
 
point-in-time
 
services,
 
such
 
as
 
underwriting
 
fees,
 
deal-
contingent
 
merger
 
and
 
acquisitions
 
fees,
 
and
 
brokerage
 
fees
(e.g.,
 
securities
 
and
 
derivative
s
 
execution
 
and
 
clearing).
 
UBS
recognizes
 
fees
 
earned
 
from
 
point-in-time
 
services
 
when
 
it
 
has
fully
 
provided
 
the
 
service
 
to
 
the
 
customer.
 
Where
 
the
 
contract
requires
 
services to be
 
provided over
 
time, income
 
is recognized
on a systematic basis over the life of the agreement.
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.
 
 
 
 
303
 
Note 1
 
Summary of material accounting policies
 
(continued)
Point-in-time
 
services
 
are
 
generally
 
for
 
a
 
fixed
 
price
 
or
dependent on
 
deal size,
 
e.g., a
 
fixed number
 
of basis
 
points of
trade
 
size,
 
where
 
the
 
amount
 
of
 
revenue
 
is
 
known
 
when
 
the
performance
 
obligation
 
is
 
met.
 
Fixed
 
over-time
 
fees
 
are
recognized on
 
a straight-line
 
basis over
 
the performance period.
Custodial
 
and
 
asset
 
management
 
fees
 
can
 
be
 
variable
 
through
reference to the size of the customer portfolio. However,
 
they are
generally
 
billed
 
on
 
a
 
monthly
 
or
 
quarterly
 
basis
 
once
 
the
customer’s portfolio
 
size is
 
known or
 
known with
 
near certainty
and
 
therefore
 
also
 
recognized
 
ratably
 
over
 
the
 
performance
period.
 
UBS
 
does
 
not
 
recognize
 
performance
 
fees
 
related
 
to
management
 
of
 
clients’
 
assets
 
or
 
fees
 
related
 
to
 
contingencies
beyond UBS’s control until such uncertainties are resolved.
 
UBS’s fees are generally
 
earned from short-term contracts.
 
As
a result, UBS’s contracts do
 
not include a financing
 
component or
result in the
 
recognition of
 
significant receivables or
 
prepayment
assets.
 
Furthermore,
 
due
 
to
 
the
 
short-term
 
nature
 
of
 
such
contracts, UBS has not capitalized any material costs to obtain or
fulfill
 
a
 
contract
 
or
 
generated any
 
significant
 
contract
 
assets
 
or
liabilities.
UBS presents expenses primarily in line with their nature in the
income
 
statement,
 
differentiating
 
between
 
expenses
 
that
 
are
directly
 
attributable
 
to
 
the
 
satisfaction
 
of
 
specific
 
performance
obligations associated with the
 
generation of revenues, which
 
are
generally
 
presented
 
within
Total
 
operating
 
income
 
as
Fee
 
and
commission
 
expense
,
 
and
 
those
 
that
 
are
 
related
 
to
 
personnel,
general and administrative expenses,
 
which are presented within
Total operating
 
expenses
. For
 
derivatives execution
 
and clearing
services (where UBS
 
acts as an
 
agent), UBS only
 
records its specific
fees in the
 
income statement, with
 
fees payable to
 
other parties
not recognized
 
as an
 
expense but
 
instead directly
 
offset against
the associated income collected from the given client.
›
 
Refer to Note 4 for more information, including
 
the
disaggregation of revenues
4) Share-based and other deferred compensation plans
UBS recognizes expenses for deferred compensation awards over
the
 
period
 
that
 
the
 
employee
 
is
 
required
 
to
 
provide
 
service
 
to
become
 
entitled
 
to
 
the
 
award.
 
Where
 
the
 
service
 
period
 
is
shortened,
 
for
 
example
 
in
 
the
 
case
 
of
 
employees
 
affected
 
by
restructuring programs or
 
mutually agreed termination
 
provisions,
recognition
 
of
 
such
 
expense
 
is
 
accelerated
 
to
 
the
 
termination
date. Where no
 
future service is
 
required, such
 
as for employees
who are eligible for
 
retirement or who have
 
met certain age and
length-of-service criteria, the services are presumed to have been
received
 
and
 
compensation
 
expense
 
is
 
recognized
 
over
 
the
performance year or, in the case of off-cycle awards, immediately
on the grant date.
Share-based compensation plans
Share-based compensation
 
expense is
 
measured by
 
reference to
the
 
fair
 
value
 
of
 
the
 
equity
 
instruments
 
on
 
the
 
date
 
of
 
grant,
taking
 
into
 
account
 
the
 
terms
 
and
 
conditions
 
inherent
 
in
 
the
award,
 
including,
 
where
 
relevant,
 
dividend
 
rights,
 
transfer
restrictions in effect
 
beyond the vesting date,
 
market conditions,
and non-vesting conditions.
 
For equity-settled
 
awards, fair
 
value is
 
not remeasured
 
unless
the
 
terms
 
of
 
the
 
award
 
are
 
modified
 
such
 
that
 
there
 
is
 
an
incremental increase in value. Expenses
 
are recognized, on a per-
tranche basis, over the service period based
 
on an estimate of the
number
 
of
 
instruments
 
expected
 
to
 
vest
 
and
 
are
 
adjusted
 
to
reflect the actual outcomes of service or performance conditions.
 
For
 
equity-settled
 
awards,
 
forfeiture
 
events
 
resulting
 
from
 
a
breach of
 
a non-vesting
 
condition (i.e.,
 
one that
 
does not
 
relate
to
 
a
 
service
 
or
 
performance
 
condition)
 
do
 
not
 
result
 
in
 
any
adjustment to the share-based compensation expense.
For cash-settled
 
share-based awards,
 
fair value
 
is remeasured
at each reporting
 
date, so that
 
the cumulative
 
expense recognized
equals the cash distributed.
 
Other deferred compensation plans
Compensation expense for other deferred
 
compensation plans is
recognized on a
 
per-tranche or straight-line
 
basis, depending on
the nature of
 
the plan. The
 
amount recognized is
 
measured based
on the
 
present
 
value of
 
the amount
 
expected to
 
be paid
 
under
the
 
plan and
 
is remeasured
 
at each
 
reporting
 
date,
 
so that
 
the
cumulative expense
 
recognized equals
 
the cash
 
or the
 
fair value
of respective financial instruments distributed.
›
 
Refer to Note
28
 
for more information
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
304
 
Note 1
 
Summary of material accounting policies (continued)
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 judgment
s
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
 
taxes
 
are
 
recognized
 
for
 
temporary
 
differences
between
 
the
 
carrying
 
amounts
 
and
 
tax
 
bases
 
of
 
assets
 
and
liabilities that will
 
result in taxable
 
or deductible amounts
 
in future
periods and are measured using the applicable tax rates and laws
that have been
 
enacted or substantively
 
enacted by the
 
end of the
reporting period and that
 
will be in effect when
 
such differences
are expected to reverse.
Deferred
 
tax
 
assets arise
 
from a
 
variety
 
of
 
sources, the
 
most
significant being:
 
(i) tax
 
losses that
 
can be
 
carried forward
 
to be
used against profits in future years; and (ii) temporary differences
that
 
will
 
result
 
in
 
deductions
 
against
 
profits
 
in
 
future
 
years.
Deferred tax assets
 
are recognized only to
 
the extent it
 
is probable
that sufficient taxable profits will be
 
available against which these
differences can be
 
used. When an
 
entity or tax
 
group has a
 
history
of
 
recent
 
losses,
 
deferred
 
tax
 
assets
 
are
 
only
 
recognized
 
to
 
the
extent there are
 
sufficient taxable temporary differences
 
or there
is convincing
 
other evidence
 
that sufficient
 
taxable profit
 
will be
available against which the unused tax losses can be utilized.
Deferred tax liabilities
 
are recognized for
 
temporary differences
between
 
the
 
carrying
 
amounts
 
of
 
assets
 
and
 
liabilities
 
in
 
the
balance sheet
 
that reflect
 
the expectation
 
that certain
 
items will
give rise to taxable income in future periods.
Deferred and current tax assets and
 
liabilities are offset when:
(i) they arise in the
 
same tax reporting group; (ii)
 
they relate to the
same tax authority; (iii)
 
the legal right to
 
offset exists; and (iv)
 
they
are intended to be settled net or realized simultaneously.
Current
 
and
 
deferred
 
taxes
 
are
 
recognized
 
as
 
income
 
tax
benefit
 
or
 
expense in
 
the income
 
statement,
 
except for
 
current
and deferred taxes recognized in relation to:
 
(i) the acquisition of
a subsidiary (for which such amounts would
 
affect the amount of
goodwill arising from the acquisition); (ii) gains
 
and losses on the
sale of
 
treasury shares
 
(for which
 
the tax
 
effects are
 
recognized
directly
 
in
Equity
);
 
(iii)
 
unrealized
 
gains
 
or
 
losses
 
on
 
financial
instruments that are classified at
 
FVOCI; (iv) changes in fair
 
value
of
 
derivative
 
instruments
 
designated
 
as
 
cash
 
flow
 
hedges;
 
(v)
remeasurements
 
of defined
 
benefit plans;
 
or (vi)
 
certain foreign
currency translations
 
of foreign
 
operations. Amounts
 
relating to
points
 
(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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
305
 
Note 1
 
Summary of material accounting policies (continued)
Critical accounting estimates and judgments
Tax
 
laws
 
are
 
complex,
 
and
 
judgment
 
and
 
interpretations
 
about
 
the
application of such
 
laws are required
 
when accounting for
 
income taxes.
UBS
 
considers
 
the
 
performance
 
of
 
its
 
businesses
 
and
 
the
 
accuracy
 
of
historical forecasts and other factors when evaluating the recoverability of
its
 
deferred
 
tax
 
assets,
 
including
 
the
 
remaining
 
tax
 
loss
 
carry-forward
period, and its
 
assessment of expected
 
future taxable profits
 
in the forecast
period
 
used
 
for
 
recognizing
 
deferred
 
tax
 
assets.
 
Estimating
 
future
profitability
 
and
 
business
 
plan
 
forecasts
 
is
 
inherently
 
subjective
 
and
 
is
particularly sensitive to future economic,
 
market and other conditions.
 
Forecasts are reviewed
 
annually, but adjustments
 
may be made
 
at other
times, if required. If recent losses have been incurred, convincing evidence
is required to prove there is sufficient future profitability given the
 
value of
UBS’s deferred tax
 
assets may
 
be affected, with
 
effects primarily
 
recognized
through the income statement.
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 8 for more information
 
7) Property, equipment and software
Property,
 
equipment
 
and
 
software
 
is
measured
 
at
 
cost
 
less
accumulated
 
dep
reciation
 
and
 
impairment
 
losses
.
 
Software
development
 
costs
 
are
 
capitalized
 
only
 
when
 
the
 
costs
 
can
 
be
measured reliably and it is
 
probable that future economic
 
benefits
will
 
arise.
 
Depreciation
 
of
 
property,
 
equipment
 
and
 
software
begins
 
when
 
they
 
are
 
available
 
for
 
use
 
and
 
is
 
calculated
 
on
 
a
straight line basis over an asset’s estimated useful life.
 
Property,
 
equipment
 
and
 
software
 
are
 
generally
 
tested
 
for
impairment
 
at
 
the
 
appropriate
cash
-
generating
 
unit
 
level,
alongside goodwill and intangible assets as described in item 8 in
this Note.
 
An impairment
 
charge is
 
recognized for
 
such assets
 
if
the
 
recoverable
 
amount
 
is
 
below
 
its
 
carrying
 
amount
.
The
recoverable amounts of such assets, other than property that has
a market price,
 
are generally determined
 
using a replacement
 
cost
approach
 
that
 
reflects
 
the
 
amount
 
that
 
would
 
be
 
currently
required by a market participant to replace the service capacity
 
of
the
 
asset.
 
If
 
such
 
assets
 
are
 
no
 
longer
 
used,
 
they
 
are
 
tested
individually for impairment.
›
 
Refer to Note
12
for more information
8) Goodwill
Goodwill represents the
 
excess of
 
the consideration over the
 
fair
value
 
of
 
identifiable
 
assets,
 
liabilities
 
and
 
contingent
 
liabilities
acquired
 
that
 
arises
 
in
 
a
 
business combination.
 
Goodwill is
 
not
amortized,
 
but
 
is
 
assessed
 
for
 
impairment
 
at
 
the
 
end
 
of
 
each
reporting period,
 
or when indicators
 
of impairment
 
exist.
 
UBS tests
goodwill for impairment annually,
 
irrespective of whether there is
any indication
 
of impairment.
 
An impairment charge
 
is recognized in the income
 
statement if
the carrying
 
amount exceeds
 
the recoverable
 
amount.
 
 
Critical accounting estimates and judgments
UBS‘s methodology for
 
goodwill impairment testing is
 
based on a
 
model
that
 
is
 
most
 
sensitive
 
to
 
the
 
following
 
key
 
assumptions:
 
(i)
 
forecasts
 
of
earnings available to shareholders in years one to three; (ii) changes in the
discount rates; and (iii) changes in the long-term
 
growth rate.
 
Earnings available
 
to shareholders
 
are estimated
 
on the basis
 
of forecast
results,
 
which
 
are
 
part
 
of
 
the
 
business
 
plan
 
approved
 
by
 
the
 
Board
 
of
Directors.
 
The
 
discount
 
rates
 
and
 
growth
 
rates
 
are
 
determined
 
using
external information, and
 
also considering inputs
 
from both
 
internal and
external analysts and the view of management.
 
The
 
key assumptions
 
used
 
to determine
 
the recoverable
 
amounts of
each cash-generating unit are tested for sensitivity by applying reasonably
possible changes to those assumptions.
 
›
 
Refer to Notes
2
and
 
13
 
for more information
 
9) Provisions and contingent liabilities
Provisions
 
are
 
liabilities
 
of
 
uncertain
 
timing
 
or
 
amount,
 
and
 
are
generally
recognized
in
 
accordance
 
with
 
IAS
 
37,
Provisions,
Contingent Liabilities and Contingent Assets
, when: (i) UBS has a
present obligation as a
 
result of a
 
past event; (ii) it
 
is probable that
an outflow
 
of resources will
 
be required
 
to settle
 
the obligation;
and (iii) a reliable estimate
 
of the amount of the
 
obligation can be
made.
 
The majority of UBS’s provisions
 
relate to litigation, regulatory
and
 
similar
 
matters,
 
restructuring,
 
and
 
employee
 
benefits.
Restructuring
 
provisions
 
are
 
generally
 
recognized
 
as
 
a
consequence of
 
management agreeing
 
to materially
 
change the
scope
 
of
 
the
 
business
 
or
 
the
 
manner
 
in
 
which
 
it
 
is
 
conducted,
including
 
changes
 
in
 
management
 
structures.
 
Provisions
 
for
employee
 
benefits
 
relate
 
mainly
 
to
 
service
 
anniversaries
 
and
sabbatical
 
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.
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.
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
306
 
Note 1
 
Summary of material accounting policies
 
(continued)
 
Critical accounting estimates and judgments
Recognition of provisions
 
often involves significant judgment
 
in assessing
the
 
existence
 
of
 
an
 
obligation
 
that
 
results
 
from
past
 
events
 
and
 
in
estimating the
 
probability, timing and
 
amount of
 
any outflows
 
of resources.
This
 
is particularly
 
the case
 
for litigation,
 
regulatory and
 
similar matters,
which, due to their nature,
 
are subject to many uncertainties,
 
making their
outcome
 
difficult to predict.
 
The amount of any provision
 
recognized is sensitive to the
 
assumptions
used
 
and
 
there
 
could
 
be
 
a
 
wide
 
range
 
of
 
possible
 
outcomes
 
for
 
any
particular matter.
Management regularly reviews
 
all the available
 
information regarding
such
 
matters,
 
including
 
legal
 
advice,
 
to
 
assess
 
whether
 
the
 
recognition
criteria for provisions have been satisfied and to determine the timing and
amount of any potential outflows
.
›
 
Refer to Note
18
 
for more information
10) Foreign currency translation
Transactions
 
denominated
 
in
 
a
 
foreign
 
currency
 
are
 
translated
into
 
the
 
functional
 
currency
 
of
 
the
 
reporting
 
entity
 
at
 
the
 
spot
exchange rate
 
on the
 
date of
 
the transaction.
 
At the
 
balance sheet
date, all monetary
 
assets, including those
 
at FVOCI, and
 
monetary
liabilities denominated in foreign currency
 
are translated into the
functional currency
 
using the
 
closing exchange
 
rate. Translation
differences
 
are
 
reported
 
in
Other
 
net
 
income
 
from
 
financial
instruments measured at fair value through profit or loss
.
Non-monetary items measured at historical cost are translated
at the exchange rate on the date of the transaction.
 
Upon consolidation, assets and liabilities of
 
foreign operations
are translated into US
 
dollars, UBS’s presentation currency, at the
closing exchange rate
 
on the balance sheet date, and income
 
and
expense items and other comprehensive income are translated at
the
 
average
 
rate
 
for
 
the
 
period.
 
The
 
resulting
 
foreign
 
currency
translation differences are recognized in
Equity
 
and reclassified to
the
 
income
 
statement when
 
UBS
 
disposes of,
 
partially or
 
in
 
its
entirety,
 
the
 
foreign
 
operation and
 
UBS
 
no
 
longer
 
controls
 
the
foreign operation.
Share
 
capital
 
issued,
 
share premium
 
and treasury
 
shares held
 
are
translated
 
at the historic
 
average rate,
 
with
 
the difference
 
between
the historic
 
average rate
 
and the
 
spot rate
 
realized
 
upon repayment
of
 
share capital
 
or
 
disposal of
 
treasury shares
 
reported as
Share
premium.
 
Cumulative
 
amounts
 
recognized
 
in
Other comprehensive
income
 
in
 
respect
 
of
 
cash
 
flow
 
hedg
es
 
and
 
financial
 
assets
measured at FVOCI are translated at the closing exchange rate as
of the
 
balance sheet
 
dates, with
 
any translation effects
 
adjusted
through
Retained earnings
.
›
 
Refer to Note 33 for more information
11) Equity, treasury shares and contracts on UBS Group AG
shares
UBS Group AG shares held (treasury shares)
UBS
 
Group
 
AG
 
shares
 
held
 
by
 
the
 
Group,
 
including
 
those
purchased
 
as
 
part of
 
market-making activities,
 
are
 
presented
 
in
Equity
 
as
Treasury
 
shares
 
at
 
their
 
acquisition
 
cost
 
and
 
are
deducted
 
from
Equity
 
until
 
they
 
are
 
canceled
 
or
 
reissued.
 
The
difference
 
between
 
the
 
proceeds
 
from
 
sales
 
of
 
treasury
 
shares
and their weighted average cost (net of tax, if any)
 
is reported as
Share premium
.
Net cash settlement contracts
Contracts involving
 
UBS Group
 
AG shares
 
that require
 
net cash
settlement, or provide the counterparty or UBS with a settlement
option that includes a choice of settling net in cash, are classified
as derivatives held for trading.
 
 
 
 
 
 
 
 
307
 
Note 1
 
Summary of material accounting policies (continued)
b)
Changes in accounting policies, comparability and other adjustments
 
Amendments to IAS 1,
Presentation of Financial Statements
, and
IFRS Practice Statement 2,
Making Materiality Judgements
 
Effective from 1 January
 
2021, UBS early
 
adopted amendments to
IAS 1,
Presentation
 
of
 
Financial
 
Statements
,
 
and
 
IFRS
 
Practice
Statement 2,
Making
 
Materiality
 
Judgements
, issued
 
by
 
IASB in
February 2021.
 
The disclosure
 
of material
 
accounting policies
 
in
Note 1a has been refined through adopting these amendments.
Amendments to IAS 39, IFRS 9 and IFRS 7 (
Interest Rate
Benchmark Reform – Phase 2
)
 
On
 
1 January
 
2021,
 
UBS
 
adopted
Interest
 
Rate
 
Benchmark
Reform – Phase
 
2 (Amendments to
 
IFRS 9, IAS 39, IFRS 7,
 
IFRS 4
and IFRS 16)
, addressing a number of issues in financial reporting
areas that arise
 
when interbank
 
offered rates (IBORs)
 
are reformed
or replaced.
 
The amendments
 
provide a
 
practical expedient
 
that
permits
 
certain
 
changes
 
in
 
the
 
contractual
 
cash
 
flows
 
of
 
debt
instruments
 
attributable
 
to
 
the
 
replacement
 
of
 
IBORs
 
with
alternative
 
reference
 
rates
 
(ARRs)
 
to
 
be
 
accounted
 
for
prospectively by
 
updating a
 
given instrument’s
 
effective interest
rate
 
(EIR),
 
provided
 
(i)
 
the
 
change
 
is
 
necessary
 
as
 
a
 
direct
consequence
 
of
 
IBOR
 
reform
 
and
 
(ii)
 
the
 
new
 
basis
 
for
determining the contractual cash
 
flows is economically equivalent
to the
 
previous basis.
 
UBS has
 
adopted the
 
amendments, which
had no material effect on the Group’s financial statements.
T
he
 
amendments
also
provide
 
various
 
hedge
 
accounting
reliefs, with the following adopted by UBS:
–
 
D
esignate
an
ARR
 
as
 
a
 
non
-
contractually
 
specified
 
risk
component, even if it is
 
not separately identifiable at the
 
date
when it
 
was designated, provided
 
UBS can reasonably
 
expect
that it will meet
 
the requirements within 24
 
months of the first
designation and the risk component is reliably
 
measurable. As
of
 
31 December
 
2021,
 
the
 
principal
 
ARRs
 
that
 
UBS
 
has
designated as
 
the hedged risk
 
in fair
 
value hedges
 
of interest
rate risk related to debt instruments, mortgages and
 
cash flow
hedges
 
of
 
forecast
 
transactions
 
were
 
the
 
Secured
 
Overnight
Financing
 
Rate
 
(SOFR),
 
the
 
Swiss
 
Average
 
Rate
 
Overnight
(SARON) and the Sterling Overnight Index Average (SONIA).
–
 
Amend
 
hedge
 
documentation
 
for
 
the
 
fair
 
value
 
hedges
 
of
interest
 
rate
 
risk
 
related
 
to
 
debt
 
instruments
 
for
 
which
 
the
hedged risk changed due
 
to IBOR reform,
 
which allowed UBS
to
 
continue
 
the
 
hedge
 
relationship
 
in
 
accordance
 
with
 
the
requirements of the phase 2 amendment.
–
 
The
 
cash
 
flow
 
hedges
 
of
 
IBOR forecast
 
transactions
 
in
 
Swiss
francs
 
and
 
pounds
 
sterling
 
were
 
discontinued
 
and
 
replaced
with
 
new
 
ARR
 
designations in
 
December
 
2021. The
 
amount
accumulated in
 
the cash
 
flow hedge
 
reserve is
 
deemed to
 
be
based on the ARR on which the hedged future cash
 
flows will
be based.
 
Amounts will
 
be released
 
to the
 
income statement
when the forecast ARR
 
cash flows affect
 
the income statement
or are no longer expected to occur.
 
›
 
Refer to Note 26 for more information
 
The
 
amendments
 
also
 
introduced
 
additional
 
disclosure
requirements
 
regarding
 
the
 
Group’s
 
management
 
of
 
the
transition
 
to
 
alternative
 
benchmark
 
rates,
 
its
 
progress
 
as
 
at
 
the
reporting date
 
and the
 
risks to
 
which it
 
is exposed
 
arising from
financial instruments because of the transition.
›
 
Refer to Note 25 for more information
 
c)
International Financial Reporting Standards and Interpretations to be adopted in 2022 and later and other changes
IFRS 17,
 
Insurance Contracts
In May 2017, the IASB issued
 
IFRS 17,
Insurance Contracts
, which
sets out
 
the accounting
 
requirements
 
for contractual
 
rights and
obligations
 
that
 
arise
 
from
 
insurance
 
contracts
 
issued
 
and
reinsurance
 
contracts
 
held.
 
IFRS 17
 
is
 
effective
 
from
 
1 January
2023.
 
UBS
 
is
 
assessing
 
the
 
standard,
 
but
 
does
 
not
 
expect
 
it
 
to
have a material effect on the Group’s financial statements.
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
308
 
Note 2a
 
Segment reporting
UBS’s
 
businesses
 
are
 
organized
 
globally
 
into
 
four
 
business
divisions:
 
Global
 
Wealth
 
Management,
 
Personal
 
&
 
Corporate
Banking,
 
Asset Management
 
and the
 
Investment Bank.
 
All four
business divisions
 
are supported
 
by Group
 
Functions and
 
qualify
as
 
reportable
 
segments
 
for
 
the
 
purpose
 
of
 
segment
 
reporting.
Together with Group Functions, the four business divisions reflect
the management structure of the Group.
 
–
 
Global
 
Wealth
 
Management
 
provides
 
financial
 
services,
advice and solutions to private clients, in particular in the ultra
high
 
net
 
worth
 
and
 
high
 
net
 
worth
 
segments.
 
Its
 
offering
ranges from
 
investment management
 
to estate
 
planning and
corporate
 
finance
 
advice,
 
in
 
addition
 
to
 
specific
 
wealth
management
 
products
 
and
 
services.
 
The
 
business
 
division
 
is
managed globally across the regions.
 
–
 
Personal & Corporate Banking
 
serves its private, corporate,
and
 
institutional
 
client
s
’
 
needs
,
 
from
basic
 
banking
 
to
retirement, financing,
 
investments and
 
strategic transactions,
in
 
Switzerland
,
 
through
 
its
 
branch
 
network
 
and
 
digital
channels.
–
 
Asset
 
Management
 
is
 
a
 
large-scale
 
and
 
diversified
 
global
asset
 
manager.
 
It
 
offers
 
investment
 
capabilities
 
and
 
styles
across all major traditional
 
and alternative asset classes,
 
as well
as
 
advisory
 
support
 
to
 
institutions,
 
wholesale
 
intermediaries
and wealth management clients globally.
 
–
 
The
Investment
 
Bank
 
provides
 
a
 
range
 
of
 
services
 
to
institutional,
 
corporate
 
and
 
wealth
 
management
 
clients
globally,
 
to
 
help
 
them
 
raise
 
capital,
 
grow
 
their
 
businesses,
invest and manage risks. Its offering includes advisory services,
facilitating clients raising debt
 
and equity from the
 
public and
private
 
markets
 
and
 
capital
 
markets,
 
cash
 
and
 
derivatives
trading across equities and fixed income,
 
and financing.
 
–
 
Group
 
Functions
 
is
 
made
 
up
 
of
 
the
 
following
 
major
 
areas:
Group
 
Se
rvices
 
(
which
 
consists
 
of
Technology,
 
Corporate
Services,
 
Human
 
Resources
,
 
Finance,
 
Legal,
 
Risk
 
Control,
Compliance,
 
Regulatory
 
&
 
Governance,
 
Communications
 
&
Branding and Group
 
Sustainability and Impact),
 
Group Treasury
and Non-core and Legacy Portfolio.
 
 
Financial
 
information
 
about
 
the
 
four
 
business
 
divisions
 
and
Group Functions is presented
 
separately in internal management
reports
 
to
 
the
 
Group
 
Executive
 
Board
 
(the
 
GEB),
 
which
 
is
considered
 
the
 
“chief
 
operating
 
decision
 
maker”
 
pursuant
 
to
IFRS 8,
Operating Segments
.
UBS’s internal accounting policies,
 
which include management
accounting policies
 
and service
 
level agreements,
 
determine the
revenues
 
and
 
expenses
 
directly
 
attributable
 
to
 
each
 
reportable
segment.
 
Transactions
 
between
 
the
 
reportable
 
segments
 
are
carried
 
out
 
at
 
internally
 
agreed
 
rates
 
and
 
are
 
reflected
 
in
 
the
operating
 
results
 
of
 
the
 
reportable
 
segments.
 
Revenue-sharing
agreements
 
are
 
used
 
to
 
allocate
 
external
 
client
 
revenues
 
to
reportable
 
segments
 
where
 
several
 
reportable
 
segments
 
are
involved in the value
 
creation chain. Total intersegment
 
revenues
for the Group are immaterial, as the majority
 
of the revenues are
allocated
 
across
 
the
 
segments
 
by
 
means
 
of
 
revenue-sharing
agreements.
 
Interest
 
income
 
earned
 
from
 
managing
 
UBS’s
consolidated equity is allocated to the reportable
 
segments based
on
 
average
 
attributed
 
equity
 
and
 
currency
 
composition.
 
Assets
and liabilities of the reportable segments are funded
 
through and
invested
 
with
 
Group
 
Functions,
 
and
 
the
 
net
 
interest
 
margin
 
is
reflected in the results of each reportable segment.
Segment
 
assets
 
are
 
based
 
on
 
a
 
third-party
 
view
 
and
 
do
 
not
include intercompany
 
balances. This
 
view is
 
in line
 
with internal
reporting to the
 
GEB. If one
 
operating segment is
 
involved in an
external transaction together with another operating segment or
Group Functions,
 
additional criteria
 
are considered
 
to determine
the segment that
 
will report
 
the associated
 
assets. This
 
will include
a
 
consideration
 
of
 
which
 
segment’s
 
business
 
needs
 
are
 
being
addressed by the transaction and which segment is providing the
funding
 
and
 
/
 
or
 
resources.
 
Allocation
 
of
 
liabilities
 
follows
 
the
same principles.
Non-current
 
assets disclosed
 
for segment
 
reporting
 
purposes
represent assets that are expected
 
to be recovered more than
 
12
months after the reporting
 
date, excluding financial instruments,
deferred tax assets and post-employment benefits.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
309
 
Note 2a
 
Segment reporting (continued)
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
 
Management
Investment
Bank
Group
Functions
UBS
For the year ended 31 December 2021
Net interest income
4,244
2,120
(15)
481
(127)
6,705
Non-interest income
15,175
2,143
2,632
8,972
(233)
28,689
Income
19,419
4,263
2,617
9,454
(359)
35,393
Credit loss (expense) / release
29
86
(1)
34
0
148
Total operating income
19,449
4,349
2,616
9,488
(360)
35,542
Total operating expenses
14,665
2,618
1,586
6,858
330
26,058
Operating profit / (loss) before tax
4,783
1,731
1,030
2,630
(689)
9,484
Tax expense / (benefit)
1,998
Net profit / (loss)
7,486
Additional information
Total assets
395,235
225,370
25,639
346,431
124,507
1,117,182
Additions to non-current assets
56
16
1
30
1,989
2,091
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
 
Management
Investment
Bank
Group
Functions
UBS
For the year ended 31 December 2020
Net interest income
4,027
2,049
(17)
284
(481)
5,862
Non-interest income
1
13,107
1,858
2,993
9,235
30
27,222
Income
17,134
3,908
2,975
9,519
(452)
33,084
Credit loss (expense) / release
(88)
(257)
(2)
(305)
(42)
(694)
Total operating income
17,045
3,651
2,974
9,214
(494)
32,390
Total operating expenses
13,026
2,392
1,519
6,732
567
24,235
Operating profit / (loss) before tax
4,019
1,259
1,455
2,482
(1,060)
8,155
Tax expense / (benefit)
1,583
Net profit / (loss)
6,572
Additional information
Total assets
367,714
231,657
28,589
369,683
128,122
1,125,765
Additions to non-current assets
5
12
385
150
2,294
2,847
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
 
Management
Investment
Bank
Group
Functions
UBS
For the year ended 31 December 2019
Net interest income
3,947
1,992
(25)
(669)
(744)
4,501
Non-interest income
12,426
1,744
1,962
7,968
367
24,467
Income
16,373
3,736
1,938
7,299
(378)
28,967
Credit loss (expense) / release
(20)
(21)
0
(30)
(7)
(78)
Total operating income
16,353
3,715
1,938
7,269
(385)
28,889
Total operating expenses
12,955
2,274
1,406
6,485
192
23,312
Operating profit / (loss) before tax
3,397
1,441
532
784
(577)
5,577
Tax expense / (benefit)
1,267
Net profit / (loss)
4,310
Additional information
Total assets
309,766
209,405
34,565
315,855
102,603
972,194
Additions to non-current assets
68
10
0
1
5,217
5,297
1 Includes a USD
631
 
million net gain on the sale of a majority stake
 
in Fondcenter AG (now Clearstream Fund Centre
 
AG), of which USD
571
 
million was recognized in Asset Management and USD
60
 
million was
recognized in Global Wealth Management.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
310
 
Note 2b
 
Segment reporting by geographic location
The
 
operating
 
regions
 
shown
 
in
 
the
 
table
 
below
 
correspond to
the regional management
 
structure of the
 
Group. The allocation
of
 
operating
 
income
 
to
 
these regions
 
reflects,
 
and
 
is consistent
with,
 
the
 
basis
 
on
 
which
 
the
 
business
 
is
 
managed
 
and
 
its
performance is
 
evaluated. These
 
allocations involve
 
assumptions
and judgments that
 
management considers to
 
be reasonable, and
may
 
be
 
refined
 
to
 
reflect
 
changes in
 
estimates
 
or
 
management
structure. The
 
main principles of
 
the allocation
 
methodology are
that
 
client
 
revenues
 
are
 
attributed
 
to
 
the
 
domicile
 
of
 
the
 
given
client
 
and
 
trading
 
and
 
portfolio
 
management
 
revenues
 
are
attributed to the country where the
 
risk is managed. This revenue
attribution
 
is
 
consistent
 
with
 
the
 
mandate
 
of
 
the
 
regional
Presidents.
 
Certain
 
revenues, such
 
as
 
those
 
related
 
to Non-core
and Legacy Portfolio in
 
Group Functions, are managed
 
at a Group
level. These revenues are included in the
Global
 
line.
The geographic analysis
 
of non-current assets
 
is based on
 
the
location of the entity in which the given assets are recorded.
 
For the year ended 31 December 2021
Total operating income
Total non-current assets
USD billion
Share %
USD billion
Share %
 
Americas
14.5
41
9.0
44
of which: USA
13.5
38
8.5
41
Asia Pacific
6.5
18
1.5
7
Europe, Middle East and Africa (excluding Switzerland)
7.0
20
2.9
14
Switzerland
7.9
22
7.1
35
Global
(0.3)
(1)
0.0
0
Total
35.5
100
20.5
100
For the year ended 31 December 2020
Total operating income
Total non-current assets
USD billion
Share %
USD billion
Share %
 
Americas
13.0
40
9.0
42
of which: USA
11.7
36
8.4
40
Asia Pacific
6.0
18
1.5
7
Europe, Middle East and Africa (excluding Switzerland)
6.5
20
3.0
14
Switzerland
6.9
21
7.6
36
Global
0.1
0
0.0
0
Total
32.4
100
21.1
100
For the year ended 31 December 2019
Total operating income
Total non-current assets
USD billion
Share %
USD billion
Share %
 
Americas
12.0
42
8.9
44
of which: USA
10.9
38
8.5
42
Asia Pacific
4.7
16
1.4
7
Europe, Middle East and Africa (excluding Switzerland)
5.8
20
3.0
15
Switzerland
6.7
23
7.1
35
Global
(0.3)
(1)
0.0
0
Total
28.9
100
20.3
100
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
311
Income statement notes
Note 3
 
Net interest
 
income and other
 
net income
 
from financial
 
instruments
 
measured at
 
fair value
 
through profit
 
or loss
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Net interest income from financial instruments measured
 
at fair value through profit or loss
 
1,431
1,299
1,011
Other net income from financial instruments measured
 
at fair value through profit or loss
5,850
6,960
6,842
of which: net gains / (losses) from financial liabilities designated
 
at fair value
1
(6,582)
1,509
(8,748)
Total net income from financial instruments measured at fair value through profit or loss
7,281
8,259
7,853
Net interest income
Interest income from loans and deposits
2
6,488
6,690
8,008
Interest income from securities financing transactions
3
513
862
2,005
Interest income from other financial instruments measured
 
at amortized cost
284
335
364
Interest income from debt instruments measured at fair
 
value through other comprehensive income
115
101
120
Interest income from derivative instruments designated as cash
 
flow hedges
 
1,133
822
188
Total interest income from financial instruments measured at amortized cost and fair
 
value through other comprehensive income
8,533
8,810
10,684
Interest expense on loans and deposits
4
523
1,031
2,634
Interest expense on securities financing transactions
5
1,102
870
1,152
Interest expense on debt issued
1,533
2,237
3,285
Interest expense on lease liabilities
102
110
122
Total interest expense from financial instruments measured at amortized cost
3,259
4,247
7,194
Total net interest income from financial instruments measured at amortized cost and fair
 
value through other comprehensive income
5,274
4,563
3,490
Total net interest income from financial instruments measured at fair value through profit or loss
1,431
1,299
1,011
Total net interest income
6,705
5,862
4,501
1 Excludes fair value changes of hedges related to financial liabilities designated at fair value and foreign currency translation effects arising from translating foreign currency transactions into the respective functional
currency, both of which are reported within Other net income from financial instruments measured at fair value through profit or loss.
 
2021 included net losses of USD
2,068
 
million (net losses of USD
72
 
million and
USD
1,830
 
million in 2020 and 2019,
 
respectively), driven by financial liabilities
 
related to unit-linked investment
 
contracts, which are
 
designated at fair value
 
through profit or loss.
 
This was offset
 
by net gains of
USD
2,068
 
million (net gains
 
of USD
72
 
million and USD
1,830
 
million in 2020
 
and 2019, respectively),
 
related to financial
 
assets for unit-linked
 
investment contracts that
 
are mandatorily measured
 
at fair value
through profit or loss not
 
held for trading.
 
2 Consists of interest income
 
from cash and balances at
 
central banks, loans and advances to banks and
 
customers, and cash collateral receivables on derivative instruments,
as well as negative interest on amounts due to banks, customer deposits, and cash collateral payables on derivative
 
instruments.
 
3 Includes interest income on receivables from securities financing transactions and
negative interest, including
 
fees, on
 
payables from
 
securities financing
 
transactions.
 
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, loans
 
and advances to banks,
 
and cash collateral receivables
 
on derivative instruments.
 
5 Includes interest expense on
 
payables from
securities financing transactions and negative interest, including fees, on receivables from securities
 
financing transactions.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
312
 
Note 4
 
Net fee and commission income
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Fee and commission income
Underwriting fees
1,463
1,085
741
M&A and corporate finance fees
1,102
736
774
Brokerage fees
4,382
4,132
3,248
Investment fund fees
5,790
5,289
4,858
Portfolio management and related services
9,762
8,009
7,656
Other
1,874
1,710
1,832
Total fee and commission income
1
24,372
20,961
19,110
of which: recurring
15,410
13,009
12,544
of which: transaction-based
8,692
7,491
6,402
of which: performance-based
269
461
163
Fee and commission expense
Brokerage fees paid
259
274
310
Distribution fees paid
611
589
590
Other
1,115
912
797
Total fee and commission expense
1,985
1,775
1,696
Net fee and commission income
22,387
19,186
17,413
of which: net brokerage fees
4,123
3,858
2,938
1 For the
 
year ended 31
 
December 2021, reflects
 
third-party fee and
 
commission income of
 
USD
14,545
 
million for Global
 
Wealth Management, USD
1,644
 
million for Personal
 
& Corporate Banking,
 
USD
3,337
million for Asset
 
Management, USD
4,814
 
million for
 
the Investment Bank
 
and USD
33
 
million for Group
 
Functions (for the
 
year ended
 
31 December 2020:
 
USD
12,475
 
million for Global
 
Wealth Management,
USD
1,426
 
million for Personal & Corporate Banking, USD
3,129
 
million for Asset Management, USD
3,882
 
million for the Investment Bank and USD
49
 
million for Group Functions; for the year ended 31 December
2019: USD
11,694
 
million for Global Wealth Management,
 
USD
1,307
 
million for Personal &
 
Corporate Banking, USD
2,659
 
million for Asset Management,
 
USD
3,355
 
million for the Investment Bank and
 
USD
94
million for Group Functions).
 
 
 
Note 5
 
Other income
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Associates, joint ventures and subsidiaries
Net gains / (losses) from acquisitions and disposals of
 
subsidiaries
1
(11)
635
2
(36)
Net gains / (losses) from disposals of investments in associates
41
0
4
Share of net profits of associates and joint ventures
105
84
46
Impairments related to associates
 
0
0
(1)
Total
135
719
13
Net gains / (losses) from disposals of financial assets measured
 
at fair value through other comprehensive income
9
40
31
Income from properties
3
23
26
27
Net gains / (losses) from properties held for sale
100
4
76
5
(19)
Other
185
6
216
7
160
Total other income
452
1,076
212
1 Includes foreign exchange gains
 
/ (losses) reclassified
 
from other comprehensive income
 
related to the disposal
 
or closure of foreign
 
operations.
 
2 Includes a USD
631
 
million net gain on
 
the sale of a
 
majority
stake in Fondcenter AG
 
(now Clearstream Fund Centre AG).
 
3 Includes rent received from third parties.
 
4 Mainly relates to the sale of a
 
property in Basel.
 
5 Includes net gains of USD
140
 
million arising from
sale-and-leaseback transactions, primarily
 
related to a property in
 
Geneva, partly offset by
 
remeasurement losses relating to properties
 
that were reclassified as held
 
for sale.
 
6 Includes a gain of
 
USD
100
 
million
from the sale of
 
UBS's domestic wealth management
 
business in Austria. Refer
 
to Note 30 for
 
more information.
 
7 Includes a
 
USD
215
 
million gain on the
 
sale of intellectual property
 
rights associated with the
Bloomberg Commodity Index family.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
313
 
Note 6
 
Personnel expenses
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Salaries
1
7,339
7,023
6,518
Variable compensation – performance awards
2
3,190
3,209
3
2,755
Variable compensation – other
2
229
220
246
Financial advisor compensation
2,4
4,860
4,091
4,043
Contractors
381
375
381
Social security
978
899
3
799
Post-employment benefit plans
5
833
6
845
787
of which: defined benefit plans
470
502
461
of which: defined contribution plans
363
343
326
Other personnel expenses
576
561
3
555
Total personnel expenses
18,387
17,224
16,084
1 Includes role-based allowances.
 
2 Refer to Note 28 for more information.
 
3 During 2020, UBS modified the conditions for continued vesting of certain
 
outstanding deferred compensation awards for qualifying
employees, resulting in an
 
expense of approximately USD
280
 
million, of which USD
240
 
million is disclosed within Variable
 
compensation – performance awards,
 
USD
20
 
million within Social security and
 
USD
20
million within
 
Other personnel
 
expenses.
 
4 Financial
 
advisor compensation
 
consists of
 
grid-based
 
compensation based
 
directly on
 
compensable
 
revenues generated
 
by financial
 
advisors and
 
supplemental
compensation calculated on the basis
 
of financial advisor productivity,
 
firm tenure, assets and
 
other variables. It
 
also includes expenses related
 
to compensation commitments with financial
 
advisors entered into at
the time of
 
recruitment that are
 
subject to vesting
 
requirements.
 
5 Refer to
 
Note 27 for
 
more information.
 
6 Includes curtailment gains
 
of USD
80
 
million, which represent
 
a reduction in
 
the defined benefit
obligation related to the Swiss pension plan resulting from a decrease in headcount following restructuring activities.
 
 
 
Note 7
 
General and administrative expenses
1
 
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Outsourcing costs
893
951
1,072
IT expenses
1,055
949
860
Consulting, legal and audit fees
540
646
850
Real estate and logistics costs
634
671
662
Market data services
417
413
414
Marketing and communication
242
217
270
Travel and entertainment
72
84
298
Litigation, regulatory and similar matters
2
911
197
165
Other
788
757
696
of which: UK and German bank levies
3
58
55
41
Total general and administrative expenses
5,553
4,885
5,288
1 In 2021, UBS changed
 
the presentation of the line
 
items within general and administrative expenses. Prior-period
 
information reflects the new presentation
 
structure, with no effect on Total general
 
and administrative
expenses.
 
2 Reflects the net increase in provisions for litigation, regulatory and similar matters recognized in the income statement. Refer to Note 18 for more information. Also, includes recoveries from third parties
of USD
1
 
million in 2021 (USD
3
 
million and USD
11
 
million in 2020 and 2019, respectively).
 
3 UK bank levy expenses of USD
22
 
million (USD
38
 
million for 2020 and USD
30
 
million for 2019) included a credit of
USD
16
 
million (USD
27
 
million for 2020 and USD
31
 
million for 2019) related to prior years.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
314
 
Note 8
 
Income taxes
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Tax expense / (benefit)
Swiss
Current
680
482
365
Deferred
34
116
265
Total Swiss
714
598
630
Non-Swiss
Current
884
749
426
Deferred
400
236
211
Total non-Swiss
1,284
985
637
Total income tax expense / (benefit) recognized in the income statement
1,998
1,583
1,267
 
 
Income tax recognized in the income statement
Income
 
tax
 
expenses
 
of
 
USD
1,998
 
million
 
were
 
recognized
 
for
the Group
 
in 2021, representing
 
an effective
 
tax rate of
21.1
%.
These included
 
Swiss tax
 
expenses of
 
USD
714
 
million and
 
non-
Swiss tax expenses of USD
1,284
 
million.
The
 
Swiss
 
tax
 
expenses
 
included
 
current
 
tax
 
expenses
 
of
USD
680
 
million related to taxable profits of UBS Switzerland AG
and other Swiss entities.
 
They also included deferred tax
 
expenses
of
 
USD
 
34
 
million,
 
which
 
reflect
movements
 
in
 
temporary
differences.
The non-Swiss
 
tax expenses
 
included current
 
tax expenses
 
of
USD
884
 
million
 
related
 
to
 
taxable
 
profits
 
earned
 
by
 
non-Swiss
subsidiaries
 
and
 
branches
,
 
and
net
deferred
 
t
ax
 
expenses
 
of
USD
400
 
million.
 
Expenses
 
of
 
USD
734
 
million,
 
which
 
primarily
related to
 
the amortization
 
of deferred
 
tax assets
 
(DTAs) previously
recognized in relation to
 
tax losses carried
 
forward and deductible
temporary differences of UBS Americas Inc.,
 
were partly offset by
a benefit of USD
334
 
million in respect of
 
the remeasurement of
DTAs.
 
This
 
benefit
 
included
 
upward
revaluations
 
of
 
DTAs
 
of
USD
152
 
million for certain
 
entities, primarily in
 
connection with
our business planning process. It also included
 
USD
113
 
million in
respect of additional DTA recognition that primarily related to the
contribution of real estate assets by UBS AG to
 
UBS Americas Inc.
and UBS Financial Services
 
Inc., which allowed the
 
full recognition
of DTAs in respect of the associated historic
 
real estate costs that
were
 
previously
 
capitalized
 
for
 
US
 
tax
 
purposes
 
under
 
elections
that
 
were
 
made
 
in
 
the
 
fourth
 
quarter
 
of
 
2018.
 
In
 
addition,
 
it
included USD
69
 
million in respect of an increase in the expected
value of future tax
 
deductions for deferred
 
compensation awards,
due to an increase in the Group’s share price during the year.
The pre-tax expense that was recognized in the year in respect
of the increase in litigation provisions for
 
the French cross-border
matter did not result in any tax benefit.
 
 
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Operating profit / (loss) before tax
9,484
8,155
5,577
of which: Swiss
3,334
3,403
2,571
of which: non-Swiss
6,150
4,752
3,006
Income taxes at Swiss tax rate of
18.5
% for 2021,
19.5
% for 2020 and
20.5
% for 2019
1,755
1,590
1,143
Increase / (decrease) resulting from:
Non-Swiss tax rates differing from Swiss tax rate
234
110
82
Tax effects of losses not recognized
124
144
131
Previously unrecognized tax losses now utilized
(179)
(212)
(265)
Non-taxable and lower-taxed income
(278)
(394)
(351)
Non-deductible expenses and additional taxable income
510
385
732
Adjustments related to prior years – current tax
(40)
(67)
(5)
Adjustments related to prior years – deferred tax
(10)
12
(6)
Change in deferred tax recognition
(342)
(381)
(294)
Adjustments to deferred tax balances arising from changes
 
in tax rates
(5)
234
(9)
Other items
231
161
107
Income tax expense / (benefit)
1,998
1,583
1,267
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
315
 
Note 8
 
Income taxes (continued)
The components of operating profit before tax, and the differences between income tax expense reflected in the financial statements
and the amounts calculated at the Swiss tax rate, are provided in the table on the previous page and explained below.
 
Component
Description
Non-Swiss tax rates
differing from Swiss tax
rate
To the extent that Group profits or losses arise outside Switzerland, the applicable local tax
 
rate may differ from the Swiss tax
rate. This item reflects, for such profits, an adjustment
 
from the tax expense that would arise at the
 
Swiss tax rate to the tax
expense that would arise at the applicable local
 
tax rate. Similarly, it reflects, for such losses, an adjustment from the tax
benefit that would arise at the Swiss tax rate
 
to the tax benefit that would arise at the
 
applicable local tax rate.
Tax effects of losses not
recognized
This item relates to tax losses of entities arising in the
 
year that are not recognized as DTAs and where no tax benefit arises in
relation to those losses. Therefore, the tax benefit calculated
 
by applying the local tax rate to those losses
 
as described above
is reversed.
Previously unrecognized
tax losses now utilized
This item relates to taxable profits of the year that are offset by tax losses
 
of previous years for which no DTAs were previously
recorded. Consequently, no current tax or deferred tax expense arises in relation to those taxable
 
profits and the tax expense
calculated by applying the local tax rate on
 
those profits is reversed.
Non-taxable and lower-
taxed income
This item relates to tax deductions for the year in
 
respect of permanent differences. These include deductions in
 
respect of
profits that are either not taxable or are taxable at a lower rate
 
of tax than the local tax rate. They also
 
include deductions
made for tax purposes, which are not reflected in the
 
accounts.
Non-deductible expenses
and additional taxable
income
This item relates to additional taxable income for
 
the year in respect of permanent differences. These include
 
income that is
recognized for tax purposes by an entity but is not
 
included in its profit that is reported in the financial
 
statements, as well as
expenses for the year that are non-deductible (e.g.,
 
client entertainment costs are not deductible
 
in certain locations).
Adjustments related to
prior years – current tax
This item relates to adjustments to current tax expense for
 
prior years (e.g., if the tax payable for a year is
 
agreed with the tax
authorities in an amount that differs from the amount previously
 
reflected in the financial statements).
Adjustments related to
prior years – deferred tax
This item relates to adjustments to deferred tax positions
 
recognized in prior years (e.g., if a tax loss
 
for a year is fully
recognized and the amount of the tax loss agreed with
 
the tax authorities is expected to differ from the
 
amount previously
recognized as DTAs in the accounts).
Change in deferred tax
recognition
This item relates to changes in DTAs, including changes in DTAs previously recognized resulting from reassessments of
expected future taxable profits. It also includes changes
 
in temporary differences in the year, for which deferred tax is not
recognized.
Adjustments to deferred
tax balances arising from
changes in tax rates
This item relates to remeasurements of DTAs and liabilities recognized due to changes
 
in tax rates. These have the effect of
changing the future tax saving that is expected from tax
 
losses or deductible tax differences and therefore the amount
 
of
DTAs recognized or, alternatively,
 
changing the tax cost of additional taxable income
 
from taxable temporary differences and
therefore the deferred tax liability.
Other items
Other items include other differences between profits or losses
 
at the local tax rate and the actual local tax
 
expense or
benefit, including movements in provisions for uncertain
 
positions in relation to the current year and other items.
 
 
Income tax recognized directly in equity
A net tax
 
benefit of USD
479
 
million was recognized
 
in
Other comprehensive income
 
(2020: net expense
 
of USD
237
 
million) and a
net tax expense of USD
88
 
million was recognized in
Share premium
(2020: benefit of USD
18
 
million).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
316
 
Note 8
 
Income taxes (continued)
Deferred tax assets and liabilities
The Group has gross
 
DTAs, valuation
 
allowances and recognized
DTAs related to tax loss carry-forwards and deductible temporary
differences,
 
and also
 
deferred tax
 
liabilities in
 
respect of
 
taxable
temporary differences, as
 
shown in the
 
table below. The valuation
allowances reflect DTAs
 
that were not recognized
 
because, as of
the last
 
remeasurement period,
 
management did not
 
consider it
probable
 
that
 
there
 
would
 
be
 
sufficient
 
future
 
taxable
 
profits
available
 
to
 
utilize
 
the
 
related
 
tax
 
loss
 
carry
-
forwards
 
and
deductible temporary differences.
The
 
recognition of
 
DTAs is
 
supported by
 
forecasts of
 
taxable
profits
 
for
 
the
 
entities
 
concerned.
 
In
 
addition,
 
tax
 
planning
opportunities are
 
available that
 
would result
 
in additional
 
future
taxable income and these would be utilized, if necessary.
Deferred tax liabilities are recognized in respect of investments
in
 
subsidiaries,
 
branches
 
and
 
associates,
 
and
 
interests
 
in
 
joint
arrangements,
 
except
 
to
 
the extent
 
that the
 
Group can
 
control
the
 
timing
 
of
 
the
 
reversal
 
of
 
the
 
associated
 
taxable
 
temporary
difference
 
and
 
it
 
is
 
probable
 
that
 
such
 
will
 
not
 
reverse
 
in
 
the
foreseeable
 
future.
 
However,
 
as
 
of
 
31
 
December
 
202
1
,
 
this
exception was not
 
considered to apply
 
to any taxable
 
temporary
differences.
 
 
USD million
31.12.21
31.12.20
Deferred tax assets
1
Gross
Valuation
allowance
Recognized
Gross
Valuation
allowance
Recognized
Tax loss carry-forwards
13,636
(9,193)
4,443
14,108
(8,715)
5,393
Temporary differences
5,133
(700)
4,433
4,384
(565)
3,819
of which: related to real estate costs capitalized for US
 
tax
purposes
2,272
0
2,272
2,268
0
2,268
of which: related to compensation and benefits
1,222
(209)
1,013
1,128
(173)
955
of which: other
1,639
(491)
1,148
989
(392)
564
Total deferred tax assets
18,769
(9,893)
8,876
2
18,492
(9,280)
9,212
2
of which: related to the US
8,521
8,780
of which: related to other locations
355
431
Deferred tax liabilities
Cash flow hedges
118
425
Other
183
139
Total deferred tax liabilities
300
564
1 After offset of DTLs, as applicable.
 
2 As of 31 December 2021, the Group recognized DTAs
 
of USD
77
 
million (31 December 2020: USD
138
 
million) in respect of entities that incurred losses in either
 
the current
or preceding year.
 
 
In general, US federal tax losses
 
incurred prior to 31 December
2017 can be
 
carried forward for
 
20 years. However,
 
US federal tax
losses incurred after 31 December 2017 and UK tax losses can be
carried forward indefinitely, although
 
the utilization of
 
such losses
is limited to 80% of the entity’s
 
future year taxable profits for the
US and generally to 25% thereof for
 
the UK. The amounts of US
tax
 
loss
 
carry-forwards
 
that are
 
included
 
in the
 
table below
 
are
based
 
on their
 
amount for
 
federal tax
 
purposes
 
rather than
 
for
state and local tax purposes.
 
 
Unrecognized tax loss carry-forwards
USD million
31.12.21
31.12.20
Within 1 year
141
146
From 2 to 5 years
1,026
638
From 6 to 10 years
13,283
13,257
From 11 to 20 years
2,093
3,858
No expiry
18,147
17,227
Total
34,690
35,127
of which: related to the US
1
14,870
16,256
of which: related to the UK
14,909
13,848
of which: related to other locations
4,911
5,023
1 Related to UBS AG's US branch.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
317
Balance sheet notes
Note 9
 
Financial assets at amortized cost and other positions in scope of expected credit loss measurement
The
 
tables
 
on
 
the
 
following
 
pages
 
provide
 
information
 
about
financial
 
instruments and
 
certain credit
 
lines that
 
are
 
subject to
expected
 
credit
 
loss
 
(ECL)
 
requirements.
 
UBS’s
 
ECL
 
disclosure
segments or “ECL segments” are aggregated portfolios based on
shared
 
risk
 
characteristics
 
and
 
on
 
the
 
same
 
or
 
similar
 
rating
methods
 
applied.
 
The
 
key
 
segments
 
are
 
presented
 
in
 
the
 
table
below.
›
 
Refer to Note 20 for more information about
 
expected credit
loss measuremen
t
 
Segment
Segment description
Description of credit risk sensitivity
Business division / Group Functions
Private clients with
mortgages
Lending to private clients secured by
owner-occupied real estate and
personal account overdrafts of those
clients
Sensitive to the interest rate environment,
unemployment
 
levels, real estate collateral
values and other regional aspects
 
–
 
Personal & Corporate Banking
–
 
Global Wealth Management
Real estate financing
Rental or income-producing real estate
financing to private and corporate
clients secured by real estate
Sensitive to unemployment
 
levels, the
interest rate environment, real estate
collateral values and other regional
aspects
 
–
 
Personal & Corporate Banking
–
 
Global Wealth Management
–
 
Investment Bank
Large corporate clients
Lending to large corporate and multi-
national clients
Sensitive to GDP developments,
unemployment levels,
 
seasonality,
business cycles and collateral values
(diverse collateral,
 
including real estate
and other collateral types)
–
 
Personal & Corporate Banking
–
 
Investment Bank
SME clients
Lending to small and medium-sized
corporate clients
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
Lombard
Loans secured by pledges of marketable
securities, guarantees and other forms
of collateral
Sensitive to equity and debt markets
 
(e.g.,
changes in collateral values)
–
 
Global Wealth Management
Credit cards
Credit card solutions in Switzerland and
the US
Sensitive to unemployment levels
–
 
Personal & Corporate Banking
–
 
Global Wealth Management
Commodity trade
finance
Working capital financing of commodity
traders, generally extended on a self-
liquidating transactional basis
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
–
 
Personal & Corporate Banking
Financial intermediaries
and hedge funds
Lending to financial institutions and
pension funds, including exposures to
broker-dealers and clearing houses
Sensitive to GDP development, the
interest rate environment, price and
volatility risks in financial markets, and
regulatory and political risk
–
 
Personal & Corporate Banking
–
 
Investment Bank
›
 
Refer to Note 20f for more details regarding sensitivity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
318
 
Note 9
 
Financial assets at amortized cost and other positions in scope of expected credit loss measurement (continued)
The
 
tables below
 
and on
 
the following
 
pages provide
 
ECL exposure
 
and ECL
 
allowance and
 
provision
 
information about
 
financial
instruments and certain non-financial instruments that are subject to ECL.
 
USD million
31.12.21
Carrying amount
1
ECL allowances
Financial instruments measured at amortized cost
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Cash and balances at central banks
192,817
192,817
0
0
0
0
0
0
Loans and advances to banks
15,480
15,453
26
1
(8)
(7)
(1)
0
Receivables from securities financing transactions
75,012
75,012
0
0
(2)
(2)
0
0
Cash collateral receivables on derivative instruments
30,514
30,514
0
0
0
0
0
0
Loans and advances to customers
397,761
380,564
15,620
1,577
(850)
(126)
(152)
(572)
of which: Private clients with mortgages
152,479
143,505
8,262
711
(132)
(28)
(71)
(33)
of which: Real estate financing
43,945
40,463
3,472
9
(60)
(19)
(40)
0
of which: Large corporate clients
13,990
12,643
1,037
310
(170)
(22)
(16)
(133)
of which: SME clients
14,004
12,076
1,492
436
(259)
(19)
(15)
(225)
of which: Lombard
149,283
149,255
0
27
(33)
(6)
0
(28)
of which: Credit cards
1,716
1,345
342
29
(36)
(10)
(9)
(17)
of which: Commodity trade finance
3,813
3,799
7
7
(114)
(6)
0
(108)
Other financial assets measured at amortized cost
26,209
25,718
302
189
(109)
(27)
(7)
(76)
of which: Loans to financial advisors
2,453
2,184
106
163
(86)
(19)
(3)
(63)
Total financial assets measured at amortized cost
737,794
720,079
15,948
1,767
(969)
(161)
(160)
(647)
Financial assets measured at fair value through other comprehensive income
8,844
8,844
0
0
0
0
0
0
Total on-balance sheet financial assets in scope of ECL requirements
746,638
728,923
15,948
1,767
(969)
(161)
(160)
(647)
Total exposure
ECL provisions
Off-balance sheet (in scope of ECL)
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Guarantees
20,972
19,695
1,127
150
(41)
(18)
(8)
(15)
of which: Large corporate clients
3,464
2,567
793
104
(6)
(3)
(3)
0
of which: SME clients
1,353
1,143
164
46
(8)
(1)
(1)
(7)
of which: Financial intermediaries and hedge funds
 
9,575
9,491
84
0
(17)
(13)
(4)
0
of which: Lombard
2,454
2,454
0
0
(1)
0
0
(1)
of which: Commodity trade finance
3,137
3,137
0
0
(1)
(1)
0
0
Irrevocable loan commitments
39,478
37,097
2,335
46
(114)
(72)
(42)
0
of which: Large corporate clients
23,922
21,811
2,102
9
(100)
(66)
(34)
0
Forward starting reverse repurchase and securities borrowing agreements
1,444
1,444
0
0
0
0
0
0
Committed unconditionally revocable credit lines
40,778
38,207
2,508
63
(38)
(28)
(10)
0
of which: Real estate financing
7,328
7,046
281
0
(5)
(4)
(1)
0
of which: Large corporate clients
5,358
4,599
736
23
(7)
(4)
(3)
0
of which: SME clients
5,160
4,736
389
35
(15)
(11)
(3)
0
of which: Lombard
8,670
8,670
0
0
0
0
0
0
of which: Credit cards
9,466
9,000
462
4
(6)
(5)
(2)
0
of which: Commodity trade finance
117
117
0
0
0
0
0
0
Irrevocable committed prolongation of existing loans
5,611
5,527
36
48
(3)
(3)
0
0
Total off-balance sheet financial instruments and credit lines
108,284
101,971
6,006
307
(196)
(121)
(60)
(15)
Total allowances and provisions
(1,165)
(282)
(220)
(662)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective
 
ECL allowances.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
319
 
Note 9
 
Financial assets at amortized cost and other positions in scope of expected credit loss measurement (continued)
USD million
31.12.20
Carrying amount
1
ECL allowances
Financial instruments measured at amortized cost
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Cash and balances at central banks
158,231
158,231
0
0
0
0
0
0
Loans and advances to banks
15,444
15,260
184
0
(16)
(9)
(5)
(1)
Receivables from securities financing transactions
74,210
74,210
0
0
(2)
(2)
0
0
Cash collateral receivables on derivative instruments
32,737
32,737
0
0
0
0
0
0
Loans and advances to customers
379,528
356,948
20,341
2,240
(1,060)
(142)
(215)
(703)
of which: Private clients with mortgages
148,175
138,769
8,448
959
(166)
(35)
(93)
(39)
of which: Real estate financing
43,429
37,568
5,838
23
(63)
(15)
(44)
(4)
of which: Large corporate clients
15,161
12,658
2,029
474
(279)
(27)
(40)
(212)
of which: SME clients
14,872
11,990
2,254
628
(310)
(19)
(23)
(268)
of which: Lombard
133,850
133,795
0
55
(36)
(5)
0
(31)
of which: Credit cards
1,558
1,198
330
30
(38)
(11)
(11)
(16)
of which: Commodity trade finance
3,269
3,214
43
12
(106)
(5)
0
(101)
Other financial assets measured at amortized cost
27,194
26,377
348
469
(133)
(34)
(9)
(90)
of which: Loans to financial advisors
2,569
1,982
137
450
(108)
(27)
(5)
(76)
Total financial assets measured at amortized cost
687,345
663,763
20,873
2,709
(1,211)
(187)
(229)
(795)
Financial assets measured at fair value through other comprehensive income
8,258
8,258
0
0
0
0
0
0
Total on-balance sheet financial assets in scope of ECL requirements
695,603
672,021
20,873
2,709
(1,211)
(187)
(229)
(795)
Total exposure
ECL provisions
Off-balance sheet (in scope of ECL)
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Guarantees
17,081
14,687
2,225
170
(63)
(14)
(15)
(34)
of which: Large corporate clients
3,710
2,048
1,549
113
(20)
(4)
(5)
(12)
of which: SME clients
1,310
936
326
48
(13)
(1)
(1)
(11)
of which: Financial intermediaries and hedge funds
 
7,637
7,413
224
0
(17)
(7)
(9)
0
of which: Lombard
641
633
0
8
(2)
0
0
(2)
of which: Commodity trade finance
1,441
1,416
25
0
(2)
(1)
0
0
Irrevocable loan commitments
41,372
36,894
4,374
104
(142)
(74)
(68)
0
of which: Large corporate clients
24,209
20,195
3,950
64
(121)
(63)
(58)
0
Forward starting reverse repurchase and securities borrowing agreements
3,247
3,247
0
0
0
0
0
0
Committed unconditionally revocable credit lines
40,134
35,233
4,792
108
(50)
(29)
(21)
0
of which: Real estate financing
6,328
5,811
517
0
(12)
(5)
(7)
0
of which: Large corporate clients
4,909
2,783
2,099
27
(9)
(2)
(7)
0
of which: SME clients
5,827
4,596
1,169
63
(16)
(12)
(4)
0
of which: Lombard
9,671
9,671
0
0
0
(1)
0
0
of which: Credit cards
8,661
8,220
430
11
(8)
(6)
(2)
0
of which: Commodity trade finance
242
242
0
0
0
0
0
0
Irrevocable committed prolongation of existing loans
3,282
3,277
5
0
(2)
(2)
0
0
Total off-balance sheet financial instruments and credit lines
105,116
93,337
11,396
382
(257)
(119)
(104)
(34)
Total allowances and provisions
(1,468)
(306)
(333)
(829)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the
 
respective ECL allowances.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
320
 
Note 9
 
Financial assets at amortized cost and other positions in scope of expected credit loss measurement (continued)
Coverage
 
ratios are
 
calculated
 
for
 
the
 
core loan
 
portfolio
 
by
taking ECL
 
allowances and
 
provisions divided
 
by the
 
gross carrying
amount of
 
the exposures.
 
Core loan
 
exposure is
 
defined as
 
the
sum of
Loans and
 
advances to
 
customers
 
and
Loans to
 
financial
advisors
.
 
These ratios are influenced by the following key factors:
 
–
 
Lombard loans
 
are generally
 
secured with
 
marketable securities
in
 
portfolios
 
that
 
are,
 
as
 
a
 
rule,
 
highly
 
diversified,
 
with
 
strict
lending policies
 
that are
 
intended to
 
ensure that
 
credit risk
 
is
minimal under most circumstances;
 
–
 
mortgage loans to private clients and
 
real estate financing are
controlled by
 
conservative eligibility
 
criteria, including
 
low loan-
to-value ratios and strong debt service capabilities;
–
 
the amount of unsecured retail lending (including credit cards)
is insignificant;
 
–
 
lending in Switzerland includes
 
government-backed COVID-19
loans;
–
 
contractual maturities in the loan portfolio, which
 
are a factor
in the
 
calculation of
 
ECLs, are
 
generally short,
 
with Lombard
lending
 
typically having
 
average contractual
 
maturities
 
of
 
12
months or
 
less, real
 
estate lending
 
generally between
 
2 years
and 3 years in Switzerland with longer
 
dated maturities in the
US and
 
corporate lending
 
between 1
 
to 2
 
years with
 
related
loan commitments up to 4 years; and
 
–
 
write-offs of
 
ECL allowances
 
against the
 
gross loan
 
balances
when all
 
or part of a financial asset is deemed uncollectible or
forgiven, reduces the coverage ratios
.
 
 
Coverage ratios for core loan portfolio
31.12.21
Gross carrying amount (USD million)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Private clients with mortgages
152,610
143,533
8,333
744
9
2
85
446
Real estate financing
44,004
40,483
3,512
10
14
5
114
231
Large corporate clients
14,161
12,665
1,053
443
120
18
148
2,997
SME clients
14,263
12,095
1,507
661
182
16
103
3,402
Lombard
149,316
149,261
0
55
2
0
0
5,026
Credit cards
1,752
1,355
351
46
204
72
255
3,735
Commodity trade finance
3,927
3,805
7
115
290
15
3
9,388
Other loans and advances to customers
18,578
17,493
1,010
75
25
9
15
3,730
Loans to financial advisors
2,539
2,203
109
226
338
88
303
2,791
Total
1
401,150
382,893
15,882
2,374
23
4
98
2,673
Gross exposure (USD million)
ECL coverage (bps)
Off-balance sheet
 
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Private clients with mortgages
9,123
8,798
276
49
3
3
9
15
Real estate financing
8,766
8,481
285
0
9
7
88
0
Large corporate clients
32,748
28,981
3,630
136
34
25
110
1
SME clients
8,077
7,276
688
114
38
19
151
585
Lombard
14,438
14,438
0
0
1
0
0
0
Credit cards
9,466
9,000
462
4
7
5
34
0
Commodity trade finance
3,262
3,262
0
0
4
4
0
0
Financial intermediaries and hedge funds
12,153
11,784
369
0
15
12
120
0
Other off-balance sheet commitments
8,806
8,507
296
4
15
6
30
0
Total
2
106,840
100,527
6,006
307
18
12
100
486
1 Includes Loans and
 
advances to customers
 
of USD
398,611
 
million and Loans
 
to financial advisors
 
of USD
2,539
 
million which are
 
presented on the
 
balance sheet line Other
 
assets measured at
 
amortized cost.
 
2 Excludes Forward starting reverse repurchase and securities borrowing agreements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
321
 
Note 9
 
Financial assets at amortized cost and other positions in scope of expected credit loss measurement (continued)
Coverage ratios for core loan portfolio
31.12.20
Gross carrying amount (USD million)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Private clients with mortgages
148,341
138,803
8,540
998
11
2
108
390
Real estate financing
43,492
37,583
5,883
27
15
4
75
1,414
Large corporate clients
15,440
12,684
2,069
686
181
21
192
3,089
SME clients
15,183
12,010
2,277
896
204
16
101
2,991
Lombard
133,886
133,800
0
86
3
0
0
3,592
Credit cards
1,596
1,209
342
46
240
91
333
3,488
Commodity trade finance
3,375
3,219
43
113
315
16
2
8,939
Other loans and advances to customers
19,274
17,781
1,402
91
31
14
25
3,563
Loans to financial advisors
2,677
2,009
142
526
404
135
351
1,446
Total
1
383,266
359,099
20,697
3,470
30
5
106
2,247
Gross exposure (USD million)
ECL coverage (bps)
Off-balance sheet
 
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Private clients with mortgages
6,285
6,083
198
3
7
6
16
197
Real estate financing
7,056
6,576
481
0
21
9
185
0
Large corporate clients
32,828
25,026
7,598
205
46
27
92
565
SME clients
9,121
7,239
1,734
148
40
19
63
779
Lombard
14,178
14,170
0
8
2
1
0
1,941
Credit cards
8,661
8,220
430
11
9
8
44
0
Commodity trade finance
1,683
1,658
25
0
10
8
15
8,279
Financial intermediaries and hedge funds
7,690
7,242
448
0
26
13
248
166
Other off-balance sheet commitments
14,366
13,876
482
8
13
7
11
12,414
Total
2
101,869
90,090
11,396
382
25
13
91
894
1 Includes Loans and
 
advances to customers
 
of USD
380,589
 
million and Loans
 
to financial advisors
 
of USD
2,677
 
million which are presented
 
on the balance
 
sheet line Other assets
 
measured at amortized
 
cost.
 
2 Excludes Forward starting reverse repurchase and securities borrowing agreements.
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
322
 
Note 10
 
Derivative instruments
Overview
Over-the-counter
 
(OTC)
 
derivative
 
contracts
 
are
 
usually
 
traded
under
 
a
 
standardized
 
International
 
Swaps
 
and
 
Derivatives
Association
 
(ISDA)
 
master
 
agreement
 
between
 
UBS
 
and
 
its
counterparties. Terms
 
are negotiated directly with counterparties
and the contracts have industry-standard settlement mechanisms
prescribed
 
by
 
ISDA.
 
Other
 
OTC
 
derivatives
 
are
 
cleared
 
through
clearing houses, in particular interest rate swaps
 
with LCH, where
a
 
settled-to-market method
 
has
 
been
 
generally adopted
 
,
 
under
which cash collateral exchanged
 
on a daily basis
 
is considered to
legally
 
settle
 
the
 
market
 
value
 
of
 
the
 
derivatives.
 
Regulators
 
in
various
 
jurisdictions
 
have
 
begun
 
a
 
phased
 
introduction
 
of
 
rules
requiring
 
the
 
payment
 
and
 
collection
 
of
 
initial
 
and
 
variation
margins on
 
certain OTC
 
derivative contracts,
 
which may
 
have a
bearing
 
on
 
price
 
and
 
other
 
relevant
 
terms.
 
Due
 
to
 
challenges
brought
 
on
 
by
 
COVID
-
19
,
 
the
 
International
 
Organization
 
of
Securities
 
Commissions
 
(IOSCO)
 
has
 
extended
 
the
 
deadline
 
for
completion of the final phase-in of margin requirements for non-
centrally cleared derivatives,
 
to 1 September 2022.
Other
 
derivative
 
contracts
 
are
 
standardized
 
in
 
terms
 
of
 
their
amounts
 
and
 
settlement
 
dates,
 
and
 
are
 
bought
 
and
 
sold
 
on
regulated
 
exchanges.
 
These
 
are
 
commonly
 
referred
 
to
 
as
exchange-traded derivatives (ETD) contracts.
 
Exchanges offer the
benefits of pricing transparency,
 
standardized daily settlement of
changes in value and, consequently,
 
reduced credit risk.
Most of the Group’s derivative transactions relate to sales and
market-making activity. Sales activities
 
include the structuring
 
and
marketing of derivative products to customers to
 
enable them to
take, transfer, modify or
 
reduce current or expected
 
risks. Market-
making aims to
 
directly support the
 
facilitation and execution
 
of
client activity,
 
and involves
 
quoting bid
 
and offer
 
prices to
 
other
market participants with
 
the aim
 
of generating revenues
 
based on
spread
 
and
 
volume.
 
The
Group
 
also
 
uses
 
various
 
derivative
instruments for hedging purposes.
›
 
Refer to Notes 16 and 21 for more information
 
about derivative
instruments
›
 
Refer to Note 26 for more information about
 
derivatives
designated in hedge accounting relationships
Risks of derivative instruments
The derivative financial assets shown on the
 
balance sheet can be
an
 
important
 
component
 
of
 
the
 
Group’s
 
credit
 
exposure;
however, the
 
positive replacement
 
values related
 
to a
 
respective
counterparty
 
are
 
rarely
 
an
 
adequate
 
reflection
 
of
 
the
 
Group’s
credit exposure in
 
its derivatives business
 
with that counterparty.
This is generally the case because, on the one hand, replacement
values can
 
increase over
 
time (potential
 
future exposure),
 
while,
on the
 
other hand,
 
exposure may
 
be mitigated
 
by entering
 
into
master netting agreements and bilateral collateral
 
arrangements.
Both
 
the
 
exposure
 
measures
 
used
 
internally
 
by
 
the
 
Group
 
to
control
 
credit
 
risk
 
and
 
the
 
capital
 
requirements
 
imposed
 
by
regulators reflect these additional factors.
›
 
Refer to Note 22 for more information about
 
derivative financial
assets and liabilities after consideration
 
of netting potential
allowed under enforceable netting arrangements
›
 
Refer to the “Risk management and control”
 
section of this
report for more information about the risks arising
 
from
derivative instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
323
 
Note 10
 
Derivative instruments (continued)
Derivative instruments
 
31.12.21
31.12.20
USD billion
Derivative
financial
assets
Notional
amounts
related to
derivative
financial
assets
2,3
Derivative
financial
liabilities
Notional
amounts
related to
derivative
financial
liabilities
2,3
Other
notional
amounts
2,4
Derivative
financial
assets
Notional
amounts
related to
derivative
financial
assets
2,3
Derivative
financial
liabilities
Notional
amounts
related to
derivative
financial
liabilities
2,3
Other
notional
amounts
2,4
Interest rate contracts
33.2
991.2
28.7
943.1
8,675.1
50.9
928.0
43.9
880.4
11,291.5
of which: forward contracts (OTC)
1
0.1
29.4
0.2
28.6
443.6
0.0
19.8
0.4
21.9
2,602.5
of which: swaps (OTC)
26.4
394.3
19.2
344.1
7,549.4
40.8
407.0
30.9
364.8
8,105.2
of which: options (OTC)
6.6
545.2
9.2
553.6
10.1
447.5
12.5
460.5
of which: futures (ETD)
525.0
480.6
of which: options (ETD)
0.0
22.4
0.0
16.8
157.1
0.0
53.6
0.0
33.1
103.3
Credit derivative contracts
1.4
44.7
1.8
46.3
2.4
57.6
2.9
64.8
of which: credit default swaps (OTC)
1.3
39.4
1.6
44.1
2.2
53.6
2.6
62.3
of which: total return swaps (OTC)
0.1
1.3
0.2
1.7
0.1
1.9
0.3
2.5
Foreign exchange contracts
53.3
3,030.8
54.1
2,938.8
1.2
68.7
2,951.1
70.5
2,820.4
1.4
of which: forward contracts (OTC)
23.8
1,008.9
23.8
1,043.2
27.3
779.1
29.0
853.3
of which: swaps (OTC)
24.3
1,606.3
24.9
1,480.3
34.3
1,727.3
34.4
1,567.3
of which: options (OTC)
5.2
412.6
5.3
408.6
7.1
440.9
7.1
394.7
Equity contracts
28.2
456.9
34.9
603.9
80.1
34.8
449.6
41.2
581.3
91.3
of which: swaps (OTC)
4.7
105.7
9.3
154.8
6.4
89.4
9.8
108.4
of which: options (OTC)
4.6
61.4
6.5
102.3
7.0
87.1
10.9
146.2
of which: futures (ETD)
71.2
67.9
of which: options (ETD)
10.2
289.6
9.8
346.3
8.8
10.7
273.1
11.3
326.8
23.5
of which: client-cleared transactions (ETD)
8.6
9.4
10.7
9.1
Commodity contracts
1.6
57.8
1.6
56.4
14.7
2.2
57.8
2.0
49.7
10.1
of which: swaps (OTC)
0.5
19.9
0.8
25.4
0.5
17.7
0.8
18.0
of which: options (OTC)
0.4
14.0
0.2
10.4
1.0
23.5
0.7
17.8
of which: futures (ETD)
13.9
9.3
of which: forward contracts (ETD)
 
0.0
18.1
 
0.0
15.2
 
0.0
8.0
 
0.0
6.3
of which: client-cleared transactions (ETD)
0.6
0.4
0.5
0.3
Loan commitments
 
measured at FVTPL (OTC)
 
0.0
0.8
0.0
8.2
0.0
10.2
Unsettled purchases of non-derivative
financial instruments
5
0.1
13.3
0.2
10.6
0.3
18.3
0.2
10.0
Unsettled sales of non-derivative financial
instruments
5
0.2
18.2
0.1
9.4
0.2
17.2
0.3
12.9
Total derivative instruments,
 
based on IFRS netting
6
118.1
4,613.8
121.3
4,616.6
8,771.1
159.6
4,479.5
161.1
4,429.7
11,394.4
1 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.
 
2 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.
 
3 Notional
amounts of client-cleared ETD and OTC
 
transactions through central clearing counterparties
 
are not disclosed, as they have significantly different
 
risk profile.
 
4 Other notional amounts relate to derivatives that
 
are
cleared through either a central counterparty or an exchange. The fair value
 
of these derivatives is presented on the balance sheet net of the corresponding cash margin under Cash collateral
 
receivables on derivative
instruments and Cash collateral
 
payables on derivative
 
instruments and was not
 
material for all periods presented.
 
5 Changes in the fair
 
value of purchased and sold
 
non-derivative financial instruments between
trade date and settlement date
 
are recognized as derivative financial instruments.
 
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.
 
On a notional amount basis,
 
approximately
40
% of OTC interest
rate contracts held as of
 
31 December 2021 (31 December 2020:
50
%) mature
 
within one
 
year,
36
% (31
 
December 2020:
30
%)
within one to
 
five years and
25
% (31 December
 
2020:
20
%) after
five years.
 
Notional
 
amounts
 
of
 
interest
 
rate
 
contracts
 
cleared
 
through
either
 
a
 
central
 
counterparty
 
or
 
an
 
exchange
 
that
 
are
 
legally
settled
 
on
 
a
 
daily
 
basis
 
are
 
presented
 
under
Other
 
notional
amounts
 
in
 
the
 
table
 
above
 
and
 
are
 
categorized
 
into
 
maturity
buckets
 
on
 
the
 
basis
 
of
contractual
 
maturities
 
of
 
the
 
cleared
underlying
 
derivative
 
contracts. Other
 
notional
 
amounts
 
related
to interest rate contracts decreased
 
by USD
2.6
 
trillion compared
with
 
31 December
 
2020,
 
mainly
 
reflecting
 
trade
 
compressions,
which
 
included
 
activity
 
as
 
part
 
of
 
the
 
ongoing
 
transition
 
to
alternative reference rates, and maturities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
324
 
Note 11
 
Financial assets measured at fair value through other comprehensive income
USD million
31.12.21
31.12.20
Financial assets measured at fair value through other comprehensive income
1
Debt instruments
Governments and government agencies
8,522
8,155
of which: USA
7,507
7,727
Banks
322
103
Total financial assets measured at fair value through other comprehensive income
8,844
8,258
Unrealized gains / (losses) recognized in Other comprehensive
 
income
Unrealized gains, before tax
67
204
Unrealized (losses), before tax
(80)
(4)
Net unrealized gains / (losses), before tax
(13)
200
Net unrealized gains / (losses), after tax
(7)
151
1 Refer to Note 21c for more information about product type and fair value hierarchy categorization. Refer also to Note 9 and
 
Note 20 for more information about expected credit loss measurement.
 
 
 
 
Note 12
 
Property, equipment and software
 
At historical cost less accumulated depreciation
USD million
Owned
properties and
equipment
1
Leased
properties and
equipment
2
Software
Projects in
progress
2021
2020
Historical cost
Balance at the beginning of the year
13,185
4,249
7,768
1,036
26,238
24,431
Additions
273
213
228
1,376
2,090
2,312
Disposals / write-offs
3
(430)
(223)
(98)
0
(751)
(990)
Reclassifications
4
323
0
808
(1,149)
(18)
(590)
Foreign currency translation
(303)
(66)
(64)
(12)
(445)
1,074
Balance at the end of the year
13,048
4,174
8,642
1,250
27,113
26,238
Accumulated depreciation
Balance at the beginning of the year
8,060
1,082
3,987
0
13,129
11,628
Depreciation
635
498
945
0
2,078
1,997
Impairment
5
9
1
0
0
10
72
Disposals / write-offs
3
(424)
(215)
(98)
0
(737)
(855)
Reclassifications
4
(12)
0
0
0
(12)
(328)
Foreign currency translation
(196)
(20)
(28)
0
(243)
616
Balance at the end of the year
8,072
1,346
4,807
0
14,225
13,129
Net book value
 
Net book value at the beginning of the year
5,126
3,167
3,780
1,036
13,109
12,804
Net book value at the end of the year
4,976
2,828
3,835
1,250
6
12,888
13,109
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
 
2021 was USD
657
 
million (2020: USD
679
 
million). Interest expense on lease
 
liabilities is included
within Interest expense from
 
financial instruments measured at
 
amortized cost and Lease
 
liabilities are included within
 
Other financial liabilities measured
 
at amortized cost. Refer
 
to Notes 3 and
 
19a, respectively.
There were no material gains
 
or losses arising from sale-and-leaseback
 
transactions in 2021 (2020: USD
140
 
million).
 
3 Includes write-offs of fully
 
depreciated assets.
 
4 The total reclassification
 
amount for the
respective periods represents net reclassifications
 
to Properties and other
 
non-current assets held for
 
sale.
 
5 Impairment charges recorded in
 
2021 generally relate to
 
assets that are no longer
 
used, for which the
recoverable amount based on a value in use approach was determined to be zero.
 
6 Consists of USD
1,087
 
million related to software and USD
163
 
million related to Owned properties and equipment.
 
 
 
 
325
 
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 it is reported in
 
Note 2a,
as a separate cash-generating unit (a
 
CGU), as that is the level at
which the
 
performance of investment
 
(and the related
 
goodwill)
is reviewed and
 
assessed by management.
 
Given that a
 
significant
amount of goodwill in Global Wealth Management relates to the
PaineWebber
 
acquisition
 
in
 
2000,
 
which
 
mainly
 
affected
 
the
Americas portion of
 
the business,
 
this goodwill remains
 
separately
monitored
 
by
 
the
 
Americas,
 
despite
 
the
 
formation
 
of
 
Global
Wealth
 
Management
 
in
 
2018.
 
Therefore,
 
goodwill
 
for
 
Global
Wealth Management
 
is separately
 
considered for
 
impairment at
the
 
level
 
of
 
two
 
CGUs:
 
Americas;
 
and
 
Switzerland
 
and
International (consisting of EMEA, Asia Pacific and Global).
The
 
impairment
 
test
 
is
 
performed
 
for
 
each
 
CGU
 
to
 
which
goodwill is
 
allocated by
 
comparing the
 
recoverable amount,
 
based
on
 
its
 
value
 
in
 
use,
 
with
 
the
 
carrying
 
amount
 
of
 
the
 
respective
CGU. An impairment charge is recognized if the carrying amount
exceeds the recoverable amount.
As
 
of
 
31 December
 
2021,
 
total
 
goodwill
 
recognized
 
on
 
the
balance sheet
 
was USD
6.1
 
billion, of which
 
USD
3.7
 
billion was
carried
 
by
 
the
 
Global
 
Wealth
 
Management
 
Americas
 
CGU,
USD
1.2
 
billion
 
was
 
carried
 
by the
 
Global
 
Wealth
 
Management
Switzerland
 
and
 
International
 
CGU
,
 
and
 
USD
 
1.2
 
billion
 
was
carried by
 
Asset Management.
 
Based on
 
the impairment
 
testing
methodology described below,
 
UBS concluded that
 
the goodwill
balances
 
as
 
of
 
31 December
 
2021 allocated
 
to
 
these
 
CGUs are
not impaired.
Methodology for goodwill impairment testing
The recoverable amounts are determined using
 
a discounted cash
flow model, which has
 
been adapted to use inputs
 
that consider
features of the banking
 
business and its regulatory
 
environment.
The recoverable
 
amount of
 
a CGU
 
is the
 
sum of
 
the discounted
earnings attributable to shareholders from the first three forecast
years and the terminal value, adjusted
 
for the effect of the capital
assumed to
 
be needed
 
over the next
 
three years
 
and to
 
support
growth beyond
 
that period. The
 
terminal value,
 
which covers all
periods
 
beyond
 
the third
 
year,
 
is calculated
 
on the
 
basis
 
of
 
the
forecast of third
 
-year profit, the
 
discount rate and
 
the long-term
growth rate, as well as the implied perpetual capital growth.
The carrying amount for each CGU is determined by reference
to
 
the
 
Group’s
 
equity
 
attribution
 
framework.
 
Within
 
this
framework,
 
which
 
is
 
described
 
in
 
the
 
“Capital,
 
liquidity
 
and
funding, and balance sheet” section of this
 
report, UBS attributes
equity to the businesses on the basis of their risk-weighted assets
and
 
leverage
 
ratio
 
denominator
 
(both
 
metrics
 
include
 
resource
allocations from Group
 
Functions to the business
 
divisions), their
goodwill and
 
their intangible
 
assets, as
 
well as
 
attributed equity
related
 
to
 
certain
 
CET1
 
deduction
 
items.
 
The
 
framework
 
is
primarily used for
 
the purpose of
 
measuring the performance
 
of
the
 
businesses
 
and
 
includes
 
certain
 
management
 
assumptions.
Attributed equity is
 
equal to the
 
capital a CGU
 
requires to conduct
its
 
business
 
and
 
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.
›
 
Refer to the “Capital, liquidity and funding,
 
and balance sheet”
section of this report for more information about
 
the equity
attribution framework
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.
 
T
hey
also
take
 
int
o
 
account
regional differences in risk-free rates at
 
the level of the individual
CGUs.
 
In
 
line
 
with
 
discount
 
rates,
 
long-term
 
growth
 
rates
 
are
determined
 
at
 
the regional
 
level
 
based
 
on
 
nominal
 
or
 
real GDP
growth rate forecasts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
326
 
Note 13
 
Goodwill and intangible assets (continued)
Key assumptions
 
used to determine
 
the recoverable
 
amounts
of eac
 
h
 
CGU are
 
tested
 
for sensitivity
 
by applying
 
a reasonably
possible
 
change
 
to
 
those
 
assumptions.
 
Forecast
 
earnings
available
 
to
 
shareholders
 
were
 
changed
 
by
20
%,
 
the
 
discount
rates were changed by
1.5
 
percentage points, and the long-term
growth rates were changed by
0.75
 
percentage points. Under all
scenarios,
 
reasonably
 
possible
 
changes
 
in
 
key
 
assumptions
 
did
not
 
result
 
in
 
an
 
impairment
 
of
 
goodwill
 
or
 
intangible
 
assets
reported
 
by
 
Global
 
Wealth
 
Management
 
Americas,
 
Global
Wealth
 
Management
 
Switzerland
 
and
 
International,
 
and
 
Asset
Management.
If
 
the
 
estimated
 
earnings
 
and
 
other
 
assumptions
 
in
 
future
periods deviate
 
from the
 
current outlook,
 
the value
 
of goodwill
attributable
 
to
 
Global
 
Wealth
 
Management
 
Americas,
 
Global
Wealth
 
Management
 
Switzerland
 
and
 
International,
 
and
 
Asset
Management may
 
become impaired
 
in the
 
future, giving
 
rise to
losses in the income
 
statement. Recognition of any
 
impairment of
goodwill
 
would
 
reduce IFRS
 
equity and
 
net profit.
 
It
 
would
 
not
affect cash flows
 
and, as goodwill
 
is required to
 
be deducted from
capital under
 
the Basel III capital
 
framework, no effect
 
would be
expected on the Group’s capital ratios.
 
Discount and growth rates
Discount rates
Growth rates
In %
31.12.21
31.12.20
31.12.21
31.12.20
Global Wealth Management Americas
9.5
9.5
4.0
5.1
Global Wealth Management Switzerland and International
8.5
8.5
3.1
3.7
Asset Management
8.5
8.5
2.9
3.5
 
USD million
Goodwill
Intangible
assets
1
2021
2020
Historical cost
Balance at the beginning of the year
6,182
1,683
7,865
7,820
Additions
1
1
147
Disposals
(3)
(3)
(158)
Write-offs
(41)
(41)
(35)
Foreign currency translation
(53)
(30)
(83)
91
Balance at the end of the year
6,126
1,612
7,739
7,865
Accumulated amortization and impairment
Balance at the beginning of the year
1,385
1,385
1,351
Amortization
31
31
55
Impairment / (reversal of impairment)
2
(1)
(1)
2
Disposals
0
0
Write-offs
(41)
(41)
(35)
Foreign currency translation
(13)
(13)
11
Balance at the end of the year
1,360
1,360
1,385
Net book value at the end of the year
6,126
252
6,378
6,480
of which: Global Wealth Management Americas
3,720
41
3,760
3,770
of which: Global Wealth Management Switzerland and International
1,204
72
1,276
1,320
of which: Asset Management
1,202
1,202
1,226
of which: Investment Bank
139
139
161
of which: Group Functions
0
4
1 Intangible
 
assets mainly
 
include customer
 
relationships, contractual
 
rights and
 
the fully
 
amortized branch
 
network intangible
 
asset recognized
 
in connection
 
with the
 
acquisition of
 
PaineWebber Group,
 
Inc.
 
2 Impairment charges recorded in
 
2020 relate to
 
assets for which the
 
recoverable amount was
 
determined considering their
 
value in use
 
(recoverable amount of
 
the impaired intangible
 
assets: USD
5
 
million for
2020).
 
The table below presents estimated aggregated amortization expenses for intangible assets.
 
USD million
Intangible assets
Estimated aggregated amortization expenses for:
2022
29
2023
27
2024
23
2025
23
2026
23
Thereafter
126
Not amortized due to indefinite useful life
2
Total
252
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
327
 
Note 14
 
Other assets
 
 
a) Other financial assets measured at amortized cost
USD million
31.12.21
31.12.20
Debt securities
18,858
18,801
of which: government bills / bonds
 
9,833
9,789
Loans to financial advisors
2,453
2,569
Fee-
 
and commission-related receivables
1,972
2,014
Finance lease receivables
1,356
1,447
Settlement and clearing accounts
 
455
614
Accrued interest income
520
591
Other
594
1,158
Total other financial assets measured at amortized cost
26,209
27,194
 
 
b) Other non-financial assets
USD million
31.12.21
31.12.20
Precious metals and other physical commodities
 
5,258
6,264
Deposits and collateral provided in connection with litigation,
 
regulatory and similar matters
1
1,526
1,418
Prepaid expenses
1,108
1,081
VAT and other tax receivables
638
433
Properties and other non-current assets held for sale
32
246
Assets of disposal groups held for sale
2
1,093
Other
 
621
326
Total other non-financial assets
10,277
9,768
1 Refer to Note 18 for more information.
 
2 Refer to Note 30 for more information.
 
 
 
Note 15
 
Amounts due to banks and customer deposits
USD million
31.12.21
31.12.20
Amounts due to banks
 
 
13,101
 
11,050
Customer deposits
542,007
524,605
of which: demand deposits
246,417
236,447
of which: retail savings / deposits
247,224
220,898
of which: time deposits
1
48,365
67,260
Total amounts due to banks and customer deposits
555,108
535,655
1 Includes customer deposits in UBS AG Jersey Branch placed by UBS Switzerland AG on behalf
 
of its clients.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
328
 
Note 16
 
Debt issued designated at fair value
USD million
31.12.21
31.12.20
Issued debt instruments
Equity-linked
1
47,059
41,069
Rates-linked
16,369
11,038
Credit-linked
1,723
1,933
Fixed-rate
2,868
3,604
Commodity-linked
2,911
1,497
Other
2,868
2,101
of which: debt that contributes to total loss-absorbing capacity
2,136
1,190
Total debt issued designated at fair value
73,799
61,243
of which: issued by UBS AG with original maturity greater than one
 
year
2
57,967
46,427
of which: life-to-date own credit (gain) / loss
347
418
1 Includes investment fund unit-linked instruments issued.
 
2 Based on original contractual maturity without considering any early redemption features. As of 31 December
 
2021,
100
% of the balance was unsecured
(31 December 2020:
100
%).
 
As of 31 December
 
2021 and 31
 
December 2020, the contractual
redemption amount at maturity
 
of debt issued designated at
 
fair
value through profit or
 
loss was not materially different
 
from the
carrying amount.
The table below shows the
 
residual contractual maturity of the
carrying
 
amount
 
of
 
debt
 
issued
 
designated
 
at
 
fair
 
value,
 
split
between
 
fixed-rate
 
and
 
floating-rate
 
instruments
 
based
 
on
 
the
contractual
 
terms,
 
and
 
does
 
not
 
consider
 
any
 
early
 
redemption
features. Interest rate ranges for future interest
 
payments related
to debt issued designated at fair value have
 
not been included in
the table below,
 
as the majority
 
of the debt
 
instruments issued are
structured
 
products
 
and
 
therefore
 
the
 
future
 
interest
 
payments
are
 
highly
 
dependent
 
upon
 
the
 
embedded
 
derivative
 
and
prevailing market conditions
 
at the point
 
in time that
 
each interest
payment is made.
›
 
Refer to Note 24 for maturity information
 
on an undiscounted
cash flow basis
 
 
Contractual maturity of carrying amount
USD million
2022
2023
2024
2025
2026
2027–2031
Thereafter
Total
31.12.21
Total
31.12.20
UBS Group AG
1
Non-subordinated debt
Fixed-rate
0
0
0
0
0
0
2,340
2,340
1,375
UBS AG
2
Non-subordinated debt
Fixed-rate
4,296
1,658
716
495
226
273
1,732
9,397
9,409
Floating-rate
19,338
15,621
5,067
5,816
3,840
8,364
3,238
61,284
49,528
Subtotal
23,635
17,279
5,783
6,311
4,066
8,637
4,971
70,682
58,937
Other subsidiaries
3
Non-subordinated debt
Fixed-rate
6
0
0
0
0
423
0
429
539
Floating-rate
150
47
145
0
0
0
7
349
392
Subtotal
156
47
145
0
0
423
7
778
931
Total
 
23,791
17,325
5,929
6,311
4,066
9,060
7,317
73,799
61,243
1 Consists of instruments issued by the legal entity UBS Group AG.
 
2 Consists of instruments issued by the legal entity UBS AG.
 
3 Consists of instruments issued by subsidiaries of UBS AG.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
329
 
Note 17
 
Debt issued measured at amortized cost
USD million
31.12.21
31.12.20
Certificates of deposit and commercial paper
40,640
41,151
Other short-term debt
2,458
5,515
Short-term debt
1
43,098
46,666
Senior unsecured debt that contributes to total loss-absorbing
 
capacity (TLAC)
38,984
36,611
Senior unsecured debt other than TLAC
27,590
21,340
of which: issued by UBS AG with original maturity greater than one
 
year
2
23,307
18,464
Covered bonds
1,389
2,796
Subordinated debt
18,640
22,157
of which: high-trigger loss-absorbing additional tier 1 capital
 
instruments
11,052
11,837
of which: low-trigger loss-absorbing additional tier 1 capital
 
instruments
2,425
2,577
of which: low-trigger loss-absorbing tier 2 capital instruments
2,596
7,201
of which: non-Basel III-compliant tier 2 capital instruments
547
543
Debt issued through the Swiss central mortgage institutions
9,454
9,660
Other long-term debt
0
3
Long-term debt
3
96,057
92,566
Total debt issued measured at amortized cost
4
139,155
139,232
1 Debt with an original contractual maturity of
 
less than one year.
 
2 Based on original contractual maturity without considering
 
any early redemption features. As
 
of 31 December 2021,
100
% of the balance was
unsecured (31 December 2020:
100
%).
 
3 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.
 
4 Net of bifurcated embedded derivatives, the fair value of which was
 
not material for the periods presented.
 
The Group uses interest
 
rate and foreign exchange
 
derivatives to
manage
 
the
 
risks
 
inherent
 
in
 
certain
 
debt
 
instruments
 
held
 
at
amortized
 
cost.
 
In
some
cases,
 
the
 
Group
 
applies
 
hedge
accounting for interest rate risk as discussed in item 2j in Note 1a
and Note
 
26. As a
 
result of applying
 
hedge accounting, the
 
life-
to-date adjustment to the carrying amount of debt issued was
 
an
increase
 
of
 
USD
478
 
million
 
as
 
of
 
31
 
December
 
2021
 
and
 
an
increase of USD
2,401
 
million as of 31
 
December 2020, reflecting
changes in fair value due to interest rate movements.
Subordinated debt consists of unsecured debt obligations that
are
 
contractually
 
subordinated
 
in
 
right
 
of
 
payment
 
to
 
all
 
other
present and future
 
non-subordinated obligations of
 
the respective
issuing
 
entity.
All
 
of
 
the
 
subordinated
 
debt
 
instruments
outstanding as of 31 December 2021 pay a fixed rate of interest.
The table below shows the
 
residual contractual maturity of
 
the
carrying
 
amount
 
of
 
debt
 
issued,
 
split
 
between
 
fixed-rate
 
and
floating-rate
 
based
 
on
 
the
 
contractual
 
terms,
 
and
 
does
 
not
consider any early redemption
 
features. The effects from interest
rate
 
swaps,
 
which
 
are
 
used
 
to
 
hedge
 
various
 
fixed-rate
 
debt
issuances
 
by
 
changing
 
the
 
repricing
 
characteristics
 
into
 
those
similar to
 
floating-rate debt, are
 
also not considered
 
in the
 
table
below.
›
 
Refer to Note 24 for maturity information
 
on an undiscounted
cash flow basis
 
Contractual maturity of carrying amount
USD million
2022
2023
2024
2025
2026
2027–2031
Thereafter
Total
31.12.21
Total
31.12.20
UBS Group AG
1
Non-subordinated debt
Fixed-rate
3,769
4,027
5,145
5,052
6,748
12,534
3,294
40,569
33,578
Floating-rate
492
2,183
0
0
0
0
0
2,676
5,890
Subordinated debt
Fixed-rate
0
0
0
0
0
0
13,477
13,477
14,413
Subtotal
4,261
6,211
5,145
5,052
6,748
12,534
16,771
56,722
53,881
UBS AG
2
Non-subordinated debt
Fixed-rate
38,647
5,578
1,964
349
3,439
1,381
1,213
52,571
52,618
Floating-rate
9,807
2,093
1,922
907
508
0
0
15,238
15,299
Subordinated debt
Fixed-rate
2,020
0
2,596
337
210
0
0
5,163
7,744
Subtotal
50,474
7,671
6,482
1,594
4,158
1,381
1,213
72,972
75,661
Other subsidiaries
3
Non-subordinated debt
Fixed-rate
907
1,007
1,072
1,173
1,045
3,674
582
9,460
9,690
Subtotal
907
1,007
1,072
1,173
1,045
3,674
582
9,460
9,690
Total
 
55,642
14,889
12,698
7,818
11,951
17,590
18,566
139,155
139,232
1 Consists of debt issued by the legal entity UBS Group AG.
 
2 Consists of debt issued by the legal entity UBS AG.
 
3 Consists of debt issued by subsidiaries of UBS AG.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
330
 
Note 18
 
Provisions and contingent liabilities
a) Provisions
The table below presents an overview of total provisions.
 
USD million
31.12.21
31.12.20
Provisions other than provisions for expected credit losses
3,322
2,571
Provisions for expected credit losses
196
257
Total provisions
3,518
2,828
 
The following table presents additional information for provisions other than provisions for expected credit losses.
 
USD million
Litigation,
regulatory and
similar matters
1
Restructuring
Other
3
Total 2021
Balance at the beginning of the year
2,135
72
363
2,571
Increase in provisions recognized in the income statement
986
297
78
1,361
Release of provisions recognized in the income statement
(74)
(30)
(32)
(136)
Provisions used in conformity with designated purpose
(189)
(165)
(80)
(434)
Capitalized reinstatement costs
0
0
32
32
Foreign currency translation / unwind of discount
(59)
(3)
(10)
(72)
Balance at the end of the year
 
2,798
172
2
352
3,322
1 Consists of provisions for losses
 
resulting from legal, liability and compliance
 
risks.
 
2 Primarily consists of personnel-related restructuring provisions of USD
125
 
million as of 31 December 2021 (31 December 2020:
USD
18
 
million) and provisions
 
for onerous contracts
 
of USD
47
 
million as of
 
31 December 2021 (31 December 2020: USD
49
 
million).
 
3 Mainly includes provisions
 
related to real
 
estate, employee benefits
 
and
operational risks.
 
 
Restructuring
 
provisions
 
primarily
 
relate
 
to
 
personnel
-
related
provisions and onerous contracts. Personnel-related restructuring
provisions
 
are
 
used
 
within
 
a
 
short
 
period
 
of
 
time
 
but
 
potential
changes in amount may be
 
triggered when natural staff
 
attrition
reduces the
 
number of
 
people affected
 
by a
 
restructuring event
and therefore the estimated
 
costs. Onerous contracts
 
for property
are
 
recognized
 
when
 
UBS
 
is
 
committed
 
to
 
pay
 
for
 
non-lease
components,
 
such
 
as
 
utilities,
 
service
 
charges,
 
taxes
 
and
maintenance, when
 
a property
 
is vacated
 
or not
 
fully recovered
from sub-tenants.
 
Information
 
about
 
provisions
 
and
 
contingent
 
liabilities
 
in
respect of
 
litigation, regulatory
 
and similar
 
matters, as
 
a class, is
included in Note
 
18b. There are
 
no material contingent liabilities
associated with the other classes of provisions.
b) Litigation, regulatory and similar matters
The
 
Group
 
operates in
 
a legal
 
and regulatory
 
environment
 
that
exposes
 
it
 
to
 
significant
 
litigation
 
and
 
similar
 
risks
 
arising
 
from
disputes and regulatory
 
proceedings. As a
 
result, UBS (which
 
for
purposes of this Note
 
may refer to UBS
 
Group AG and/or one or
more
 
of
 
its
 
subsidiaries,
 
as
 
applicable)
 
is
 
involved
 
in
 
various
disputes
 
and
 
legal
 
proceedings,
 
including
 
litigation,
 
arbitration,
and regulatory and criminal investigations.
Such
 
matters
 
are
 
subject
 
to
 
many
 
uncertainties,
 
and
 
the
outcome and the
 
timing of
 
resolution are often
 
difficult to
 
predict,
particularly in the earlier
 
stages of a case.
 
There are also situations
where
 
the
 
Group
 
may
 
enter
 
into
 
a
 
settlement
 
agreement.
 
This
may occur in order
 
to avoid the expense,
 
management distraction
or reputational implications of continuing to
 
contest liability, even
for
 
those
 
matters
 
for
 
which
 
the
 
Group
 
believes
 
it
 
should
 
be
exonerated. The
 
uncertainties inherent
 
in all
 
such matters
 
affect
the amount and
 
timing of any
 
potential outflows for
 
both matters
with respect to which provisions have been established and other
contingent
 
liabilities.
 
The
 
Group
 
makes
 
provisions
 
for
 
such
matters brought against
 
it when, in
 
the opinion of
 
management
after seeking legal advice,
 
it is more
 
likely than not that
 
the Group
has a
 
present legal
 
or constructive
 
obligation as
 
a result
 
of past
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.
 
 
 
 
 
 
 
 
 
 
 
 
331
 
Note 18
 
Provisions and contingent liabilities (continued)
Specific litigation,
 
regulatory and
 
other matters
 
are described
below, including
 
all such
 
matters that management
 
considers to
be
 
material
 
and
 
others
 
that
 
management
 
believes
 
to
 
be
 
of
significance
 
due
 
to
 
potential
 
financial,
 
reputational
 
and
 
other
effects. The amount of
 
damages claimed, the size
 
of a transaction
or other information is provided where
 
available and appropriate
in order to assist
 
users in considering the magnitude
 
of potential
exposures.
In
 
the
 
case of
 
certain
 
matters below,
 
we state
 
that we
 
have
established a
 
provision, and
 
for the
 
other matters,
 
we make
 
no
such
 
statement.
 
When
 
we
 
make
 
this
 
statement
 
and
 
we
 
expect
disclosure of the amount of a provision to
 
prejudice seriously our
position with other
 
parties in the
 
matter because it
 
would reveal
what
 
UBS
 
believes
 
to
 
be
 
the
 
probable
 
and
 
reliably
 
estimable
outflow, we
 
do not
 
disclose that
 
amount. In
 
some cases
 
we are
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, in
 
which case
 
the matter
 
is treated
 
as a
contingent liability
 
under the
 
applicable accounting
 
standard; or
(b) we have
 
established a provision
 
but expect disclosure
 
of that
fact to
 
prejudice seriously
 
our position
 
with other
 
parties in
 
the
matter
 
because
 
it
 
would
 
reveal
 
the
 
fact
 
that
 
UBS
 
believes
 
an
outflow of resources to be probable and reliably estimable.
With respect
 
to certain
 
litigation, regulatory
 
and similar
 
matters
for which we have established provisions, we
 
are able to estimate
the expected timing
 
of outflows. However,
 
the aggregate amount
of the expected outflows for those matters for which we are able
to estimate
 
expected timing
 
is immaterial
 
relative to
 
our current
and expected levels of liquidity over the relevant time periods.
The
 
aggregate
 
amount
 
provisioned
 
for
 
litigation,
 
regulatory
and similar matters as a class
 
is disclosed in the “Provisions” table
in Note
 
18a above.
 
It is
 
not practicable
 
to provide
 
an aggregate
estimate
 
of
 
liability
 
for
 
our
 
litigation,
 
regulatory
 
and
 
similar
matters as a class of contingent liabilities. Doing so would
 
require
UBS
 
to
 
provide
 
speculative
 
legal
 
assessments
 
as
 
to
 
claims
 
and
proceedings
 
that
 
involve
 
unique
 
fact
 
patterns
 
or
 
novel
 
legal
theories, that have not yet been initiated or are at early
 
stages of
adjudication,
 
or
 
as
 
to
 
which
 
alleged
 
damages
 
have
 
not
 
been
quantified
 
by
 
the
 
claimants.
 
Although
 
UBS
 
therefore
 
cannot
provide a numerical estimate of the
 
future losses that could arise
from litigation,
 
regulatory and
 
similar matters,
 
UBS believes
 
that
the aggregate
 
amount of
 
possible future
 
losses from
 
this class
 
that
are
 
more than
 
remote
 
substantially exceeds
 
the level
 
of
 
current
provisions.
 
Litigation,
 
regulatory
 
and
 
similar
 
matters
 
may
 
also
 
result
 
in
non-monetary
 
penalties
 
and
 
consequences.
 
A guilty
 
plea
 
to,
 
or
conviction of, a crime could have material consequences for UBS.
Resolution of
 
regulatory proceedings
 
may require
 
UBS to
 
obtain
waivers
 
of
 
regulatory
 
disqualifications
 
to
 
maintain
 
certain
operations, may entitle regulatory authorities to limit, suspend or
terminate licenses and regulatory authorizations, and may permit
financial
 
market
 
utilities
 
to
 
limit,
 
suspend
 
or
 
terminate
 
UBS’s
participation in such
 
utilities. Failure to
 
obtain such
 
waivers, or
 
any
limitation, suspension or
 
termination of licenses,
 
authorizations or
participations, could have material consequences for UBS.
The risk of
 
loss associated with
 
litigation, regulatory and
 
similar
matters
 
is
 
a
 
component
 
of
 
operational
 
risk
 
for
 
purposes
 
of
determining
 
capital
 
requirements.
 
Information
 
concerning
 
our
capital requirements
 
and the
 
calculation of
 
operational risk
 
for this
purpose
 
is
 
included
 
in
 
the
 
“Capital,
 
liquidity
 
and
 
funding,
 
and
balance sheet” section of this report.
 
Provisions for litigation, regulatory and similar matters
 
by business division and in Group Functions
1
USD million
Global
Wealth
 
Manage-
ment
Personal &
Corporate
Banking
 
Asset
 
Manage-
ment
Investment
 
Bank
Group
Functions
Total 2021
Balance at the beginning of the year
861
115
0
227
932
2,135
Increase in provisions recognized in the income statement
754
84
9
107
32
986
Release of provisions recognized in the income statement
(60)
(11)
0
(4)
0
(74)
Provisions used in conformity with designated purpose
(175)
(1)
(1)
(10)
(2)
(189)
Foreign currency translation / unwind of discount
(42)
(6)
0
(11)
0
(59)
Balance at the end of the year
1,338
181
8
310
962
2,798
1 Provisions, if any,
 
for the matters described
 
in items 3 and
 
4 of this Note are
 
recorded in Global Wealth
 
Management, and provisions,
 
if any, for
 
the matters described in
 
item 2 are recorded in
 
Group Functions.
Provisions, if any, for the matters described in items 1 and 6 of this Note are allocated between Global Wealth Management and
 
Personal & Corporate Banking, and provisions, if any, for the matters described in item
5 are allocated between the Investment Bank and Group Functions.
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
332
 
Note 18
 
Provisions and contingent liabilities (continued)
1. Inquiries regarding cross-border wealth management
businesses
 
Tax
 
and
 
regulatory
 
authorities
 
in
 
a
 
number
 
of
 
countries
 
have
made
 
inquiries,
 
served
 
requests
 
for
 
information
 
or
 
examined
employees located
 
in their
 
respective jurisdictions
 
relating to
 
the
cross-border
 
wealth management
 
services provided
 
by UBS
 
and
other financial institutions.
 
It is possible
 
that the implementation
of
 
automatic
 
tax
 
information
 
exchange
 
and
 
other
 
measures
relating to
 
cross-border provision
 
of financial
 
services could
 
give
rise to further inquiries in
 
the future. UBS has
 
received disclosure
orders from the Swiss Federal
 
Tax Administration (FTA) to transfer
information
 
based
 
on
 
requests
 
for
 
international
 
administrative
assistance in tax matters. The
 
requests concern a number of UBS
account numbers pertaining to
 
current and former clients and
 
are
based
 
on
 
data
 
from
 
2006
 
and
 
2008.
 
UBS
 
has
 
taken
 
steps
 
to
inform
 
affected
 
clients
 
about
 
the
 
administrative
 
assistance
proceedings
 
and
 
their
 
procedural
 
rights,
 
including
 
the
 
right
 
to
appeal. The requests
 
are based on
 
data received from the
 
German
authorities, who seized certain
 
data related to UBS clients
 
booked
in
 
Switzerland
 
during
 
their
 
investigations
 
and
 
have
 
apparently
shared
 
this
 
data
 
with
 
other
 
European
 
countries.
 
UBS
 
expects
additional countries to file similar requests.
Since
 
2013,
 
UBS
 
(France)
 
S.A.,
 
UBS
 
AG
 
and
 
certain
 
former
employees
 
have
 
been
 
under
 
investigation
 
in
 
France
 
for
 
alleged
complicity
 
in
 
unlawful
 
solicitation
 
of
 
clients
 
on
 
French
 
territory,
regarding
 
the laundering
 
of proceeds
 
of tax
 
fraud, and
 
banking
and financial solicitation
 
by unauthorized persons.
 
In connection
with this
 
investigation, the investigating
 
judges ordered
 
UBS AG
to provide
 
bail (“
caution
”) of
 
EUR
1.1
 
billion and
 
UBS (France)
 
S.A.
to post
 
bail of
 
EUR
40
 
million, which
 
was reduced
 
on appeal
 
to
EUR
10
 
million.
On
 
20 February
 
2019,
 
the
 
court
 
of
 
first
 
instance
 
returned
 
a
verdict finding UBS AG guilty of unlawful
 
solicitation of clients on
French territory and aggravated laundering of
 
the proceeds of tax
fraud,
 
and
 
UBS
 
(France)
 
S.A.
 
guilty
 
of
 
aiding
 
and
 
abetting
unlawful solicitation and of laundering the proceeds of tax fraud.
The court
 
imposed fines aggregating
 
EUR
3.7
 
billion on
 
UBS AG
and
 
UBS
 
(France)
 
S.A.
 
and
 
awarded
 
EUR
800
 
million
 
of
 
civil
damages to the French
 
state. A trial
 
in the French Court
 
of Appeal
took place in
 
March 2021.
 
On 13 December
 
2021, the
 
Court of
Appeal
 
found
 
UBS
 
AG
 
guilty
 
of
 
unlawful
 
solicitation
 
and
aggravated
 
laundering
 
of
 
the
 
proceeds
 
of
 
tax
 
fraud.
 
The
 
court
ordered
 
a
 
fine
 
of
 
EUR
3.75
 
million,
 
the
 
confiscation
 
of
EUR
1
 
billion, and
 
awarded civil
 
damages to
 
the French
 
state of
EUR
800
 
million. The
 
court also
 
found UBS
 
(France) SA
 
guilty of
the aiding and abetting of
 
unlawful solicitation and ordered it
 
to
pay a fine of EUR
1.875
 
million. UBS AG has filed an appeal with
the
 
French
 
Supreme
 
Court
 
to
 
preserve
 
its
 
rights.
 
The
 
appeal
enables UBS AG
 
to thoroughly assess the
 
verdict of the
 
Court of
Appeal
 
and
 
to
 
determine
 
next
 
steps
 
in
 
the
 
best
 
interest
 
of
 
its
stakeholders. The fine
 
and confiscation imposed
 
by the Court
 
of
Appeal are
 
suspended during the
 
appeal. The civil
 
damages award
has been
 
paid to
 
the French
 
state (EUR
99
 
million of
 
which was
deducted from the bail), subject to the result of UBS’s appeal.
Our balance
 
sheet at
 
31 December 2021
 
reflected provisions
with
 
respect
 
to
 
this
 
matter
 
in
 
an
 
amount
 
of
 
EUR
1.1
 
billion
(USD
1.252
 
billion
 
at
 
31
 
December
 
2021).
 
The
 
wide
 
range
 
of
possible
 
outcomes
 
in
 
this
 
case
 
contributes
 
to
 
a
 
high
 
degree
 
of
estimation uncertainty and
 
the provision reflects
 
our best estimate
of
 
possible
 
financial
 
implications,
 
although
 
actual
 
penalties and
civil
 
damages
 
could
 
exceed
 
(or
 
may
 
be
 
less
 
than)
 
the
 
provision
amount.
In 2016,
 
UBS was
 
notified by
 
the Belgian
 
investigating judge
that it
 
was under
 
formal investigation
 
(“
inculpé
”) regarding
 
the
allegations of
 
laundering of
 
proceeds of
 
tax fraud,
 
banking and
financial
 
solicitation
 
by
 
unauthorized
 
persons,
 
and
 
serious
 
tax
fraud.
 
In
 
November
 
2021,
 
the
 
Council
 
Chamber
 
approved
 
a
settlement with the Brussels
 
Prosecution Office for EUR
49
 
million
without
 
recognition
 
of
 
guilt
 
with
 
regard
 
to
 
the
 
allegations
 
of
banking
 
and
 
financial
 
solicitation
 
by
 
unauthorized
 
persons
 
and
serious tax fraud. The allegation of laundering of proceeds of tax
fraud was dismissed.
Our balance
 
sheet at
 
31 December
 
2021 reflected
 
provisions
with respect to matters described
 
in this item 1 in
 
an amount that
UBS believes
 
to be
 
appropriate under
 
the applicable
 
accounting
standard.
 
As
 
in
 
the
 
case
 
of
 
other
 
matters
 
for
 
which
 
we
 
have
established provisions, the
 
future outflow of resources
 
in respect
of
 
such
 
matters
 
cannot
 
be
 
determined
 
with
 
certainty
 
based
 
on
currently
 
available
 
information
 
and
 
accordingly
 
may
 
ultimately
prove
 
to
 
be
 
substantially
 
greater
 
(or
 
may
 
be
 
less)
 
than
 
the
provision that we have recognized.
2. Claims related to sales of residential mortgage-backed
securities and mortgages
From 2002 through
 
2007, prior to the
 
crisis in the US
 
residential
loan market, UBS was
 
a substantial issuer and
 
underwriter of US
residential
 
mortgage-backed
 
securities
 
(RMBS)
 
and
 
was
 
a
purchaser and seller of US residential mortgages.
 
In November 2018,
 
the DOJ
 
filed a
 
civil complaint
 
in the
 
District
Court for
 
the Eastern
 
District of
 
New York.
 
The complaint
 
seeks
unspecified
 
civil
 
monetary
 
penalties
 
under
 
the
 
Financial
Institutions
 
Reform,
 
Recovery
 
and
 
Enforcement
 
Act
 
of
 
1989
related
 
to
 
UBS’s
 
issuance,
 
underwriting
 
and
 
sale
 
of
 
40
 
RMBS
transactions
 
in
 
2006
 
and
 
2007.
 
UBS
 
moved
 
to
 
dismiss
 
the
 
civil
complaint
 
on
 
6 February
 
2019.
 
On
 
10 December
 
2019,
 
the
district court denied UBS’s motion to dismiss.
 
Our balance sheet at
 
31 December 2021 reflected a
 
provision
with respect to matters described
 
in this item 2 in
 
an amount that
UBS believes
 
to be
 
appropriate under
 
the applicable
 
accounting
standard.
 
As
 
in
 
the
 
case
 
of
 
other
 
matters
 
for
 
which
 
we
 
have
established provisions, the
 
future outflow of resources
 
in respect
of
 
this
 
matter
 
cannot
 
be
 
determined
 
with
 
certainty
 
based
 
on
currently
 
available
 
information
 
and
 
accordingly
 
may
 
ultimately
prove
 
to
 
be
 
substantially
 
greater
 
(or
 
may
 
be
 
less)
 
than
 
the
provision that we have recognized.
 
 
 
 
333
 
Note 18
 
Provisions and contingent liabilities (continued)
3. Madoff
In
 
relation
 
to
 
the
 
Bernard
 
L.
 
Madoff
 
Investment
 
Securities
 
LLC
(BMIS) investment
 
fraud, UBS
 
AG, UBS
 
(Luxembourg) S.A.
 
(now
UBS
 
Europe
 
SE,
 
Luxembourg
 
branch)
 
and
 
certain
 
other
 
UBS
subsidiaries
 
have
 
been
 
subject
 
to
 
inquiries
 
by
 
a
 
number
 
of
regulators,
 
including
 
the
 
Swiss
 
Financial
 
Market
 
Supervisory
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
2.1
 
billion,
 
which
includes
 
amounts
 
that
 
the
 
funds
 
may
 
be
 
held
 
liable
 
to
 
pay
 
the
trustee for the liquidation of BMIS (BMIS Trustee).
A
 
large
 
number
 
of
 
alleged
 
beneficiaries
 
have
 
filed
 
claims
against UBS
 
entities (and
 
non-UBS entities)
 
for purported
 
losses
relating
 
to
 
the
 
Madoff
 
fraud.
 
The
 
majority
 
of
 
these
 
cases
 
have
been filed in
 
Luxembourg, where decisions
 
that the claims
 
in eight
test
 
cases
 
were
 
inadmissible
 
have
 
been
 
affirmed
 
by
 
the
Luxembourg
 
Court
 
of
 
Appeal,
 
and
 
the
 
Luxembourg
 
Supreme
Court has dismissed a further appeal in one of the test cases.
 
In the
 
US, the
 
BMIS Trustee
 
filed claims
 
against UBS
 
entities,
among others, in relation to the two Luxembourg funds and
 
one
of
 
the
 
offshore
 
funds.
 
The
 
total
 
amount
 
claimed
 
against
 
all
defendants
 
in
 
these
 
actions
 
was
 
not
 
less
 
than
 
USD
2
 
billion.
 
In
2014, the US Supreme
 
Court rejected the BMIS
 
Trustee’s motion
for leave to appeal decisions dismissing
 
all claims except those for
the
 
recovery
 
of
 
approximately
 
USD
125
 
million
 
of
 
payments
alleged to
 
be fraudulent
 
conveyances and
 
preference payments.
In 2016, the bankruptcy court dismissed
 
these claims against the
UBS entities. In February 2019, the Court of Appeals reversed the
dismissal
 
of
 
the
 
BMIS
 
Trustee’s
 
remaining
 
claims,
 
and
 
the
 
US
Supreme Court subsequently denied a
 
petition seeking review of
the Court
 
of Appeals’
 
decision. The
 
case has
 
been remanded
 
to
the Bankruptcy Court for further proceedings.
4. Puerto Rico
Declines since 2013 in the market prices of Puerto Rico municipal
bonds and of
 
closed-end funds
 
(funds) that
 
are sole-managed and
co-managed
 
by
 
UBS
 
Trust
 
Company
 
of
 
Puerto
 
Rico
 
and
distributed by UBS
 
Financial Services Incorporated of
 
Puerto Rico
(UBS PR)
 
led to
 
multiple regulatory
 
inquiries, which
 
in 2014
 
and
2015, led to settlements
 
with the Office
 
of the Commissioner of
Financial Institutions
 
for the
 
Commonwealth of
 
Puerto Rico,
 
the
US Securities
 
and Exchange
 
Commission (SEC)
 
and the
 
Financial
Industry Regulatory Authority.
 
Since then,
 
UBS clients
 
in Puerto
 
Rico who
 
own the
 
funds or
Puerto Rico municipal bonds and/or
 
who used their UBS account
assets
 
as
 
collateral
 
for
 
UBS
 
non-purpose
 
loans
 
filed
 
customer
complaints and arbitration demands seeking aggregate
 
damages
of USD
3.4
 
billion, of
 
which USD
3.1
 
billion have
 
been resolved
through
 
settlements,
 
arbitration
 
or
 
withdrawal
 
of
 
claims.
Allegations include
 
fraud, misrepresentation
 
and unsuitability
 
of
the funds and of the loans.
A
 
shareholder
 
derivative
 
action
 
was
 
filed
 
in
 
2014
 
against
various UBS
 
entities and
 
current and
 
certain former
 
directors of
the funds, alleging hundreds
 
of millions of US
 
dollars in losses in
the funds. In
 
2021, the
 
parties reached an
 
agreement to settle
 
this
matter for USD
15
 
million, subject to court approval.
 
In 2011,
 
a purported
 
derivative action
 
was filed
 
on behalf
 
of
the Employee Retirement
 
System of
 
the Commonwealth of
 
Puerto
Rico
 
(System)
 
against
 
over
 
40
 
defendants,
 
including
 
UBS
 
PR,
which
 
was
 
named
 
in
 
connection
 
with
 
its
 
underwriting
 
and
consulting
 
services.
 
Plaintiffs
 
alleged
 
that
 
defendants
 
violated
their
 
purported
 
fiduciary
 
duties
 
and
 
contractual
 
obligations
 
in
connection
 
with the
 
issuance and
 
underwriting
 
of USD
3
 
billion
of
 
bonds
 
by
 
the
 
System
 
in
 
2008
 
and
 
sought
 
damages
 
of
 
over
USD
800
 
million. In 2016, the court granted the System’s request
to
 
join
 
the
 
action
 
as
 
a
 
plaintiff.
 
In
 
2017,
 
the
 
court
 
denied
defendants’ motion to
 
dismiss the complaint.
 
In 2020, the
 
court
denied plaintiffs’ motion for summary judgment.
Beginning in 2015, certain
 
agencies and public corporations
 
of
the
 
Commonwealth
 
of
 
Puerto
 
Rico
 
(Commonwealth)
 
defaulted
on certain
 
interest payments
 
on Puerto
 
Rico bonds.
 
In 2016,
 
US
federal
 
legislation
 
created
 
an
 
oversight
 
board
 
with
 
power
 
to
oversee
 
Puerto
 
Rico’s
 
finances
 
and
 
to
 
restructure
 
its
 
debt.
 
The
oversight
 
board
 
has
 
imposed
 
a
 
stay
 
on
 
the
 
exercise
 
of
 
certain
creditors’
 
rights.
 
In
 
2017,
 
the oversight
 
board placed
 
certain of
the
 
bonds
 
into
 
a
 
bankruptcy-like
 
proceeding
 
under
 
the
supervision of a Federal District Judge.
 
In
 
May
 
2019,
 
the
 
oversight
 
board
 
filed
 
complaints in
 
Puerto
Rico federal
 
district court
 
bringing claims
 
against financial,
 
legal
and
 
accounting
 
firms
 
that
 
had
 
participated
 
in
 
Puerto
 
Rico
municipal
 
bond
 
offerings,
 
including
 
UBS,
 
seeking
 
a
 
return
 
of
underwriting
 
and
 
swap
 
fees
 
paid
 
in
 
connection
 
with
 
those
offerings. UBS
 
estimates that
 
it received
 
approximately USD
125
million in fees in the relevant offerings.
In August
 
2019, and
 
February and
 
November 2020,
 
four US
insurance companies that insured issues of Puerto Rico municipal
bonds
 
sued
 
UBS
 
and
 
several
 
other
 
underwriters
 
of
 
Puerto
 
Rico
municipal bonds
 
in three
 
separate cases.
 
The actions
 
collectively
seek
 
recovery
 
of
 
an
 
aggregate
 
of
 
USD
955
 
million
 
in
 
damages
from
 
the
 
defendants.
 
The
 
plaintiffs
 
in
 
these
 
cases
 
claim
 
that
defendants failed to
 
reasonably investigate financial
 
statements in
the
 
offering
 
materials
 
for
 
the
 
insured
 
Puerto
 
Rico
 
bonds
 
issued
between 2002 and 2007, which plaintiffs argue they relied
 
upon
in agreeing to insure the
 
bonds notwithstanding that they had
 
no
contractual
 
relationship
 
with
 
the
 
underwriters.
 
Defendants’
motions
 
to
 
dismiss
 
were
 
granted
 
in
 
two
 
of
 
the
 
cases;
 
those
decisions are
 
being appealed
 
by the
 
plaintiffs. In
 
the third
 
case,
defendants’
 
motion
 
to
 
dismiss
 
was
 
denied,
 
but
 
on
 
appeal
 
that
ruling was reversed and the motion to dismiss was granted.
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
334
 
Note 18
 
Provisions and contingent liabilities (continued)
Our balance
 
sheet at
 
31 December 2021
 
reflected
 
provisions
with respect
 
to matters described
 
in this
 
item 4 in
 
amounts that
UBS believes
 
to be
 
appropriate under
 
the applicable
 
accounting
standard.
 
As
 
in
 
the
 
case
 
of
 
other
 
matters
 
for
 
which
 
we
 
have
established provisions, the future
 
outflow of resources
 
in respect
of
 
such
 
matters
 
cannot
 
be
 
determined
 
with
 
certainty
 
based
 
on
currently
 
available
 
information
 
and
 
accordingly
 
may
 
ultimately
prove
 
to
 
be
 
substantially
 
greater
 
(or
 
may
 
be
 
less)
 
than
 
the
provisions that we have recognized.
5. Foreign exchange, LIBOR and benchmark rates, and other
trading practices
Foreign exchange-related regulatory matters:
 
Beginning in 2013,
numerous
 
authorities
 
commenced
 
investigations
 
concerning
possible manipulation of foreign
 
exchange markets and precious
metals prices. As a
 
result of these investigations,
 
UBS entered into
resolutions
 
with
 
Swiss,
 
US
 
and
 
United
 
Kingdom
 
regulators
 
and
the
 
European
 
Commission.
 
UBS
 
was
 
granted
 
conditional
immunity by the
 
Antitrust Division of
 
the DOJ and
 
by authorities
in other jurisdictions
 
in connection with
 
potential competition law
violations
 
relating
 
to
 
foreign
 
exchange
 
and
 
precious
 
metals
businesses.
Foreign exchange-related
 
civil litigation:
 
Putative class
 
actions
have
 
been
 
filed
 
since
 
2013
 
in
 
US
 
federal
 
courts
 
and
 
in
 
other
jurisdictions against
 
UBS and
 
other banks
 
on behalf
 
of putative
classes of persons
 
who engaged in
 
foreign currency transactions
with
 
any
 
of
 
the
 
defendant
 
banks.
 
UBS
 
has
 
resolved
 
US
 
federal
court class
 
actions relating
 
to foreign
 
currency transactions
 
with
the
 
defendant
 
banks
 
and
 
persons
 
who
 
transacted
 
in
 
foreign
exchange futures
 
contracts and options
 
on such futures
 
under a
settlement agreement that provides for UBS
 
to pay an aggregate
of
 
USD
141
 
million
 
and
 
provide
 
cooperation
 
to
 
the
 
settlement
classes.
 
Certain
 
class
 
members
 
have
 
excluded
 
themselves
 
from
that settlement and have
 
filed individual actions in
 
US and English
courts against UBS and other banks, alleging violations of US
 
and
European competition laws and unjust enrichment.
In
 
2015,
 
a
 
putative
 
class
 
action
 
was
 
filed
 
in
 
federal
 
court
against UBS and numerous other banks on behalf of persons and
businesses in the
 
US who
 
directly purchased foreign
 
currency from
the defendants
 
and alleged co-conspirators
 
for their
 
own end
 
use.
In March
 
2017, the
 
court granted
 
UBS’s (and
 
the other
 
banks’)
motions to dismiss the complaint. The plaintiffs filed an amended
complaint in August
 
2017. In March
 
2018, the court
 
denied the
defendants’ motions to dismiss the amended complaint.
LIBOR
 
and
 
other
 
benchmark-related
 
regulatory
 
matters:
 
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.
LIBOR and
 
other benchmark-related
 
civil litigation:
 
A number
of
 
putative
 
class
 
actions
 
and
 
other
 
actions
 
are
 
pending
 
in
 
the
federal courts
 
in New
 
York against
 
UBS and
 
numerous other
 
banks
on
 
behalf
 
of
 
parties
 
who
 
transacted
 
in
 
certain
 
interest
 
rate
benchmark-based derivatives. Also
 
pending in the
 
US and in
 
other
jurisdictions are a number of
 
other actions asserting losses
 
related
to various products whose
 
interest rates were linked to
 
LIBOR and
other benchmarks, including
 
adjustable rate mortgages,
 
preferred
and debt securities, bonds
 
pledged as collateral, loans,
 
depository
accounts,
 
investments
 
and
 
other
 
interest-bearing
 
instruments.
The
 
complaints
 
allege
 
manipulation,
 
through
 
various
 
means, of
certain
 
benchmark
 
interest rates,
 
including USD
 
LIBOR, Euroyen
TIBOR, Yen
 
LIBOR, EURIBOR, CHF LIBOR,
 
GBP LIBOR, SGD
 
SIBOR
and
 
SOR
 
and
 
Australian
 
BBSW,
 
and
 
seek
 
unspecified
compensatory and other damages under varying legal theories.
USD LIBOR class and individual actions
 
in the US:
In 2013 and
2015,
 
the
 
district
 
court
 
in
 
the
 
USD LIBOR
 
actions
 
dismissed,
 
in
whole
 
or
 
in
 
part,
 
certain
 
plaintiffs’
 
antitrust
 
claims,
 
federal
racketeering
 
claims, CEA
 
claims, and
 
state common
 
law claims,
and
 
again
 
dismissed
 
the
 
antitrust
 
claims
 
in
 
2016
 
following
 
an
appeal. In
 
December 2021,
 
the Second
 
Circuit affirmed
 
the district
court’s dismissal in part and
 
reversed in part and
 
remanded to the
district court for further proceedings. The Second
 
Circuit, among
other things,
 
held that
 
there was
 
personal jurisdiction
 
over UBS
and other
 
foreign defendants
 
based on
 
allegations that
 
at least
one alleged
 
co-conspirator undertook an
 
overt act in
 
the United
States. Separately, in
 
2018, the Second
 
Circuit reversed in
 
part the
district
 
court’s
 
2015
 
decision
 
dismissing
 
certain
 
individual
plaintiffs’ claims and certain of
 
these actions are now
 
proceeding.
In
 
2018,
 
the
 
district
 
court
 
denied
 
plaintiffs’
 
motions
 
for
 
class
certification
 
in the
 
USD class actions
 
for
 
claims pending
 
against
UBS, and plaintiffs sought permission to appeal that ruling to the
Second
 
Circuit.
 
In
 
July
 
2018,
 
the
 
Second
 
Circuit
 
denied
 
the
petition to
 
appeal of
 
the class
 
of USD lenders
 
and in
 
November
2018 denied
 
the petition
 
of the
 
USD exchange class.
 
In January
2019, a putative class action
 
was filed in the District
 
Court for the
Southern District
 
of New
 
York against
 
UBS and
 
numerous other
banks
 
on
 
behalf
 
of
 
US
 
residents
 
who,
 
since
 
1 February
 
2014,
directly
 
transacted
 
with
 
a
 
defendant
 
bank
 
in
 
USD LIBOR
instruments.
 
The
 
complaint
 
asserts
 
antitrust
 
claims.
 
The
defendants moved to
 
dismiss the complaint
 
in August 2019.
 
On
26 March 2020 the
 
court granted defendants’ motion to
 
dismiss
the complaint in
 
its entirety. Plaintiffs
 
have appealed the
 
dismissal.
In
 
August
 
2020,
 
an
 
individual
 
action
 
was
 
filed
 
in
 
the
 
Northern
District
 
of
 
California
 
against
 
UBS
 
and
 
numerous
 
other
 
banks
alleging that the
 
defendants conspired to
 
fix the interest
 
rate used
as
 
the
 
basis
 
for
 
loans
 
to
 
consumers
 
by
 
jointly
 
setting
 
the
USD LIBOR
 
rate
 
and
 
monopolized
 
the
 
market
 
for
 
LIBOR-based
consumer
 
loans
 
and
 
credit
 
cards. Defendants
 
moved
 
to
 
dismiss
the complaint in September 2021.
 
 
 
 
 
335
 
Note 18
 
Provisions and contingent liabilities (continued)
Other benchmark class actions in the US:
 
Yen
 
LIBOR / Euroyen TIBOR –
In 2014, 2015 and 2017, the court
in
 
one
 
of
 
the
 
Yen
 
LIBOR
 
/
 
Euroyen
 
TIBOR
 
lawsuits
 
dismissed
certain
 
of
 
the
 
plaintiffs’
 
claims,
 
including
 
the
 
plaintiffs’
 
federal
antitrust
 
and
 
racketeering
 
claims.
 
In
 
August
 
2020,
 
the
 
court
granted defendants’
 
motion for
 
judgment on
 
the pleadings
 
and
dismissed the lone remaining claim in the action as impermissibly
extraterritorial.
 
Plaintiffs
 
have
 
appealed.
 
In
 
2017,
 
the
 
court
dismissed
 
the
 
other
 
Yen
 
LIBOR
 
/
 
Euroyen
 
TIBOR
 
action
 
in
 
its
entirety
 
on
 
standing
 
grounds.
 
In
 
April
 
2020,
 
the
 
appeals
 
court
reversed the dismissal and in August 2020 plaintiffs
 
in that action
filed
 
an
 
amended
 
complaint
 
focused
 
on
 
Yen
 
LIBOR.
 
The
 
court
granted in part and denied in part defendants’ motion to dismiss
the amended complaint in
 
September 2021 and plaintiffs and
 
the
remaining defendants have moved for reconsideration.
 
CHF LIBOR
 
– In
 
2017, the
 
court dismissed the
 
CHF LIBOR action
on standing grounds and failure
 
to state a claim. Plaintiffs
 
filed an
amended complaint, and the court granted a renewed motion to
dismiss
 
in
 
September
 
2019.
 
Plaintiffs
 
appealed.
 
In
 
September
2021,
 
the
 
Second
 
Circuit
 
granted
 
the
 
parties’
 
joint
 
motion
 
to
vacate the dismissal and
 
remand the case for
 
further proceedings.
 
EURIBOR
 
– In 2017,
 
the court in
 
the EURIBOR lawsuit
 
dismissed
the case as
 
to UBS and
 
certain other foreign defendants
 
for lack
of personal jurisdiction. Plaintiffs have appealed.
 
SIBOR / SOR
 
– In October
 
2018, the court
 
in the SIBOR
 
/ SOR
action
 
dismissed
 
all
 
but
 
one
 
of
 
plaintiffs’
 
claims
 
against
 
UBS.
Plaintiffs
 
filed
 
an
 
amended
 
complaint,
 
and
 
the
 
court
 
granted
 
a
renewed
 
motion
 
to
 
dismiss
 
in
 
July
 
2019.
 
Plaintiffs
 
appealed.
 
In
March 2021,
 
the Second
 
Circuit reversed
 
the dismissal.
 
Plaintiffs
filed an amended
 
complaint in October
 
2021, which defendants
have moved to dismiss.
 
BBSW
 
–
 
In
 
November
 
2018,
 
the
 
court
 
dismissed
 
the
 
BBSW
lawsuit as to UBS and certain other
 
foreign defendants for lack of
personal jurisdiction. Plaintiffs
 
filed an
 
amended complaint
 
in April
2019,
 
which
 
UBS
 
and
 
other
 
defendants
 
moved
 
to
 
dismiss.
 
In
February
 
2020,
 
the
 
court
 
granted
 
in
 
part
 
and
 
denied
 
in
 
part
defendants’
 
motions
 
to
 
dismiss
 
the
 
amended
 
complaint.
 
In
August 2020,
 
UBS and
 
other BBSW
 
defendants joined
 
a motion
for
 
judgment
 
on
 
the pleadings,
 
which
 
the
 
court denied
 
in May
2021.
 
GBP
 
LIBOR
 
–
 
The
 
court
 
dismissed
 
the
 
GBP
 
LIBOR
 
action
 
in
August 2019. Plaintiffs have appealed.
 
Government bonds:
 
Putative class actions
 
have been filed since
2015 in US federal courts against UBS and other banks on behalf
of persons who
 
participated in markets for US
 
Treasury securities
since 2007. A consolidated complaint was filed
 
in 2017 in the US
District Court for the
 
Southern District of New
 
York alleging that
the banks colluded with
 
respect to, and manipulated
 
prices of, US
Treasury securities
 
sold at auction
 
and in the
 
secondary
 
market and
asserting
 
claims
 
under the
 
antitrust
 
laws and
 
for unjust
 
enrichment.
Defendants’ motions
 
to
 
dismiss the
 
consolidated complaint was
granted
 
in
 
March
 
2021.
 
Plaintiffs filed
 
an
 
amended
 
complaint,
which
 
defendants moved
 
to
 
dismiss in
 
June
 
2021.
 
Similar
 
class
actions have
 
been filed
 
concerning European government bonds
and other government
 
bonds.
In
 
May
 
2021,
 
the
 
European
 
Commission
 
issued
 
a
 
decision
finding that
 
UBS
 
and
 
six other
 
banks breached
 
European Union
antitrust
 
rules
 
in
 
2007–2011
 
relating
 
to
 
European
 
government
bonds. The European
 
Commission
 
fined UBS EUR
172
 
million. UBS
is appealing
 
the amount
 
of the fine.
With
 
respect
 
to
 
additional
 
matters
 
and
 
jurisdictions
 
not
encompassed
 
by
 
the
 
settlements
 
and
 
orders
 
referred
 
to
 
above,
our balance
 
sheet at
 
31 December 2021
 
reflected a
 
provision in
an
 
amount
 
that
 
UBS
 
believes
 
to
 
be
 
appropriate
 
under
 
the
applicable accounting
 
standard. As
 
in the
 
case of
 
other matters
for which
 
we have
 
established provisions,
 
the future
 
outflow of
resources in
 
respect of
 
such matters
 
cannot be
 
determined with
certainty based on
 
currently available information
 
and accordingly
may ultimately
 
prove to
 
be substantially
 
greater (or
 
may be
 
less)
than the provision that we have recognized.
6. Swiss retrocessions
The Federal Supreme Court of Switzerland
 
ruled in 2012, in
 
a test
case
 
against
 
UBS,
 
that
 
distribution
 
fees
 
paid
 
to
 
a
 
firm
 
for
distributing
 
third-party
 
and
 
intra-group
 
investment
 
funds
 
and
structured products must be
 
disclosed and surrendered to clients
who have
 
entered into
 
a discretionary
 
mandate agreement
 
with
the firm, absent
 
a valid
 
waiver.
 
FINMA issued
 
a supervisory
 
note
to all Swiss
 
banks in response to
 
the Supreme Court decision.
 
UBS
has met
 
the FINMA
 
requirements and
 
has notified all
 
potentially
affected clients.
The
 
Supreme
 
Court
 
decision
 
has
 
resulted,
 
and
 
continues
 
to
result,
 
in
 
a
 
number
 
of
 
client
 
requests
 
for
 
UBS
 
to
 
disclose
 
and
potentially
 
surrender
 
retrocessions.
 
Client
 
requests
 
are
 
assessed
on a case-by-case basis. Considerations taken into account when
assessing these cases
 
include, among other
 
things, the existence
of
 
a
 
discretionary
 
mandate
 
and
 
whether
 
or
 
not
 
the
 
client
documentation
 
contained
 
a
 
valid
 
waiver
 
with
 
respect
 
to
distribution fees.
Our balance sheet at
 
31 December 2021 reflected a
 
provision
with respect to matters described
 
in this item 6 in
 
an amount that
UBS believes
 
to be
 
appropriate under
 
the applicable
 
accounting
standard.
 
The
 
ultimate
 
exposure
 
will
 
depend
 
on
 
client
 
requests
and the resolution thereof, factors that
 
are difficult to predict and
assess. Hence, as in the
 
case of other matters for
 
which we have
established provisions, the
 
future outflow of resources
 
in respect
of
 
such
 
matters
 
cannot
 
be
 
determined
 
with
 
certainty
 
based
 
on
currently
 
available
 
information
 
and
 
accordingly
 
may
 
ultimately
prove
 
to
 
be
 
substantially
 
greater
 
(or
 
may
 
be
 
less)
 
than
 
the
provision that we have recognized.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
336
 
Note 19
 
Other liabilities
 
a) Other financial liabilities measured at amortized cost
USD million
31.12.21
31.12.20
Other accrued expenses
1,876
1,696
Accrued interest expenses
1,094
1,355
Settlement and clearing accounts
1,304
1,199
Lease liabilities
3,558
3,927
Other
1,167
1,553
Total other financial liabilities measured at amortized cost
9,001
9,729
 
b) Other financial liabilities designated at fair value
USD million
31.12.21
31.12.20
Financial liabilities related to unit-linked investment contracts
21,466
20,975
Securities financing transactions
6,377
7,317
Over-the-counter debt instruments
2,128
2,060
Other
103
35
Total other financial liabilities designated at fair value
30,074
30,387
of which: life-to-date own credit (gain) / loss
(32)
(36)
 
c) Other non-financial liabilities
 
USD million
31.12.21
31.12.20
Compensation-related liabilities
7,257
7,468
of which: Deferred Contingent Capital Plan
1,628
1,858
of which: financial advisor compensation plans
1,512
1,500
of which: other compensation plans
2,846
2,740
of which: net defined benefit liability
633
722
of which: other compensation-related liabilities
1
638
648
Deferred tax liabilities
300
564
Current tax liabilities
1,398
1,009
VAT and other tax payables
590
523
Deferred income
240
228
Liabilities of disposal groups held for sale
2
1,298
Other
68
61
Total other non-financial liabilities
 
11,151
9,854
1 Includes liabilities for payroll taxes and untaken vacation.
 
2 Refer to Note 30 for more information.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
337
Additional information
Note 20
 
Expected credit loss measurement
 
 
a) Expected credit losses in the period
Total
 
net
 
credit
 
loss
 
releases
 
were
 
USD
148
 
million
 
in
 
2021,
reflecting
 
net
 
credit
 
loss
 
releases
 
of
 
USD
123
 
million
 
related
 
to
stage 1 and 2
 
positions and USD
25
 
million net credit loss
 
releases
related to credit-impaired (stage 3) positions.
Stage 1
 
and
 
2
 
net
 
credit
 
loss
 
releases
 
of
 
USD
123
 
million
included
 
a
 
USD
68
 
million
 
partial
 
net
 
release
 
of
 
a
 
post-model
adjustment,
 
due
 
to
 
the
 
continued
 
positive
 
trend
 
in
macroeconomic
 
scenario
 
input
 
data
 
during
 
the
 
year,
 
a
 
USD
45
million
 
net
 
release
 
from
 
a
 
number
 
of
 
model
 
and
 
methodology
changes
 
and
a
 
residual
USD
 
10
 
million
 
net
 
release
from
remeasurements
 
within
 
the
 
loan
 
book,
 
derecognized
transactions, partially offset by expenses from new transactions
.
 
›
 
Refer to Note 20b
 
for more information regarding changes to
ECL model, scenarios,
 
scenario weights and the post-model
adjustment and to Note 20c for more information
 
regarding
the development of ECL allowances and
 
provisions
 
Stage 3 net releases of USD
25
 
million were recognized across
a number of defaulted
 
positions with a USD
24
 
million net release
in Personal & Corporate Banking.
 
 
 
 
Credit loss (expense) / release
USD million
Global
 
Wealth
 
Management
Personal &
 
Corporate
 
Banking
Asset
Management
Investment
 
Bank
Group
 
Functions
Total
For the year ended 31.12.21
Stages 1 and 2
28
62
0
34
0
123
Stage 3
1
24
(1)
0
0
25
Total credit loss (expense) / release
29
86
(1)
34
0
148
For the year ended 31.12.20
Stages 1 and 2
(48)
(129)
0
(88)
0
(266)
Stage 3
(40)
(128)
(2)
(217)
(42)
(429)
Total credit loss (expense) / release
(88)
(257)
(2)
(305)
(42)
(694)
For the year ended 31.12.19
Stages 1 and 2
3
23
0
(4)
0
22
Stage 3
(23)
(44)
0
(26)
(7)
(100)
Total credit loss (expense) / release
(20)
(21)
0
(30)
(7)
(78)
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
338
 
Note 20
 
Expected credit loss measurement (continued)
 
b) Changes to ECL models, scenarios, scenario weights and key inputs
Refer to
 
Note 1a
 
for information
 
about the
 
principles governing
expected credit loss
 
(ECL) models, scenarios,
 
scenario weights and
key inputs applied.
 
Governance
Comprehensive
 
cross-functional and
 
cross-divisional
 
governance
processes
 
are
 
in
 
place
 
and
 
are
 
used
 
to
 
discuss
 
and
 
approve
scenario
 
updates
 
and
 
weights,
 
to
 
assess
 
whether
 
significant
increases in credit risk resulted in stage transfers, to
 
review model
outputs
 
and
 
to
 
reach
 
conclusions
 
regarding
 
post-model
adjustments.
 
Model changes
During 2021, the model review
 
and enhancement process led to
adjustments of
 
the probability
 
of default
 
(PD), loss
 
given default
(LGD)
 
and
 
credit
 
conversion
 
factor
 
(CCF)
 
models,
 
resulting
 
in
 
a
USD
45
 
million decrease
 
in ECL
 
allowances. An
 
amount of
 
USD
25
 
million related
 
to the
Large corporate
 
clients
 
segment in
 
the
Investment
 
Bank. The
 
remainder
 
related
 
to
 
various segments
 
in
Personal & Corporate Banking and Global Wealth Management.
Scenario and key input updates
During
 
2021,
 
the
 
scenarios
 
and
 
related
 
macroeconomic
 
factors
were updated
 
from those
 
that were
 
applied at
 
the end
 
of 2020
by
 
taking
 
into
 
account
 
the
 
prevailing
 
economic
 
and
 
political
conditions
 
and
 
uncertainty.
 
As
 
the
 
economic
 
development
 
was
more
 
positive
 
than
 
anticipated
 
following
 
the
 
COVID-19-related
downturn,
 
the
 
forward-looking
 
scenarios
 
benefited
 
from
 
an
improved forecast starting level.
 
The projections of
 
the baseline scenario,
 
which are aligned
 
to
the
 
economic
 
and
 
market assumptions
 
used
 
for
 
UBS’s business
planning purposes, are broadly in line with external data, such as
from
 
Bloomberg
 
Consensus,
 
Oxford
 
Economics
 
and
 
the
International
 
Monetary
 
Fund
 
World
 
Economic
 
Outlook.
 
The
economic
 
performance
 
during
 
2021
 
in
 
relevant
 
markets,
especially in the
 
US and in
 
Switzerland, highlighted an
 
accelerated
improvement
 
after
 
the
 
COVID-19-related
 
shocks.
 
The
 
scenario
assumes continued growth in 2022 in
 
all key markets, albeit at a
slower rate than
 
seen in 2021,
 
and unemployment rates
 
are not
expected to fall noticeably below the current levels. Interest rates
are expected to
 
remain low in
 
line with the
 
central bank policies
pursued in the Eurozone and Switzerland, and any potential rises
in the US would be
 
limited in the foreseeable
 
future. House prices
are
 
expected
 
to
 
reflect
 
the
 
momentum
 
and
 
continue
 
to
 
rise,
especially in Switzerland and, to a lesser degree, in the US.
 
The
 
narrative
 
of
 
the
 
hypothetical
 
severe
 
downside
 
scenario,
which
 
is the
 
Group’s binding
 
stress
 
scenario, has
 
been adapted
and assumes that, while
 
the immediate risks
 
from COVID-19 have
decreased,
 
the
 
associated
 
disruptions
 
and
 
the
 
consequences
 
of
the
 
unprecedented
 
monetary
 
and
 
fiscal
 
stimulus
 
measures
 
will
remain
 
critical.
 
Concerns
 
regarding
 
the
 
sustainability
 
of
 
public
debt, following the
 
marked deterioration of
 
fiscal positions, lead
to
 
a
 
loss
 
of
 
confidence
 
and
 
market
 
turbulence,
 
while
protectionism results
 
in a
 
fall in
 
global trade.
 
Governments and
central banks have limited
 
scope to support the economies.
 
As a
consequence,
 
the
 
Eurozone
 
and
 
China
 
suffer
 
a
 
hard
 
landing,
under
 
this
 
scenario
 
which
 
severely
 
affects
 
the
 
Swiss
 
export-
oriented
 
economy,
 
and
 
the
 
US
 
economy
 
contracts
 
as
 
global
demand
 
is
 
significantly
 
affected.
 
Given
 
the
 
severity
 
of
 
the
macroeconomic
 
impact,
 
unemployment
 
rates
 
rise
 
to
 
historical
highs and real estate sectors contract sharply.
With effect
 
from the
 
second quarter,
 
the hypothetical
 
upside
and mild downside scenarios, which
 
were viewed as less
 
plausible
as
 
of
 
31
 
December
 
2020 and
 
had
 
a
 
probability
 
weight
 
of
 
zero
attached,
 
were
 
redesigned
 
and
 
reintroduced
 
in
 
the
 
ECL
calculation.
 
These
 
two
 
scenarios
 
have
 
become
 
more
 
relevant
following
 
this
 
update,
 
as
 
they
 
better
 
reflect
 
a
 
more
 
positive
outlook
 
with
 
regard
 
to
 
COVID-19
 
and
 
market
 
expectations
regarding a potential change in
 
central bank policies, respectively.
 
The
 
upside
 
scenario
 
is
 
based
 
on
 
positive
 
developments
following
 
COVID-19 and
 
strong economic
 
activity
 
supported by
pent-up demand in certain
 
sectors, as well
 
as the expectation
 
that
interest rates
 
will remain
 
relatively low
 
in the
 
near future.
 
Asset
prices rise significantly, but
 
a view that currently
 
observed higher
inflation rates are temporary and spare economic
 
capacity would
mean that
 
consumer prices
 
remain moderate
 
in the
 
first year
 
of
the scenario.
The
 
mild
 
downside
 
scenario
 
focuses
 
on
 
the
 
implications
 
of
rising concerns regarding inflationary trends
 
following a recovery
from
 
COVID-19.
 
Higher-than-expected
 
inflation
 
data
 
triggers
 
a
steepening of
 
yield curves
 
across the
 
globe and
 
leads to
 
market
volatility.
 
Higher
 
interest
 
rates
 
lead
 
to
 
a
 
sell-off
 
in
 
assets
 
and
 
a
period
 
of
 
deleveraging
 
under
 
this
 
scenario
.
 
With
 
inflation
remaining high, central
 
banks start hiking
 
their policy rates
 
after
a few
 
quarters, leading
 
to further
 
increases in
 
interest rates
 
and
impacting corporate
 
and private
 
debt sustainability.
 
A recessionary
period is the consequence.
The table
 
on the
 
following page
 
details the
 
key assumptions
for the four scenarios applied as of 31 December 2021.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
339
 
Note 20
 
Expected credit loss measurement (continued)
Scenario weights and post-model adjustments
With the weighting of
 
four scenarios above 0%
 
and considering
the generally
 
more positive
 
outlook regarding
 
an abating
 
effect
on
 
the
 
world
 
economy
 
from
 
the
 
COVID-19
 
pandemic,
 
the
distribution of
 
weights shifted
 
during 2021.
 
As of
 
31 December
2021, 5 percentage points of the weight of the baseline scenario
and 10 percentage
 
points of
 
the severe
 
downside scenario were
redistributed to the upside
 
scenario (5%) and the mild downside
scenario (10%), as shown in the table below.
Although the scenarios and
 
weight allocation were
 
established
in
 
line
 
with
 
the
 
general
 
market
 
sentiment
 
that
 
COVID-19
 
has
passed its peak
 
and a gradual return
 
to normal is the
 
most likely
path,
 
significant
 
uncertainties
 
still
 
remain.
 
Models,
 
which
 
are
based
 
on
 
supportable
 
statistical
 
information
 
from
 
past
experiences
 
regarding
 
interdependencies
 
of
 
macroeconomic
factors
 
and
 
their
 
implications
 
for
 
credit
 
risk
 
portfolios,
 
cannot
comprehensively reflect extraordinary events, such as a pandemic
or a fundamental change in the world political order. Especially
 
in
these
 
uncertain
 
times,
 
it
 
is
 
in
 
the
 
realm
 
of
 
possibilities
 
that
 
the
generally accepted view that the effects of COVID-19 are abating
may prove to be disappointed by
 
the emergence of new variants
of
 
the
 
virus,
 
which
 
may
 
be
 
more
 
harmful
 
and
 
may
 
undermine
current
 
vaccination
 
efforts.
 
Political
 
events
 
involving
 
tensions
between
 
major
 
global
 
forces
 
may
 
introduce
 
unforeseen
challenges, such
 
as disruptions
 
in the
 
global supply
 
chain and
 
a
distortion of energy markets. Such events could affect economies
severely and change
 
the baseline assumptions
 
significantly. Rather
than
 
creating multiple
 
additional
 
scenarios
 
to
 
gauge these
 
risks
and applying model
 
parameters that lack
 
supportable information
and
 
cannot
 
be
 
robustly
 
validated,
 
management
 
continued
 
to
apply
 
significant
 
post
-
model
 
adjustments.
These
 
adjustments
were
 
benchmarked
 
against
 
coverage
 
ratio
 
levels
 
as
 
of
 
30 June
2021
,
 
when
 
a
 
partial
n
et
 
release
 
of
 
USD
 
91
 
million
 
was
recognized, corresponding to one third of
 
the accumulated effect
of
 
scenario
 
improvements,
 
following
 
comprehensive
 
expert
assessment and judgment, and
 
were also deemed appropriate
 
for
year-end 2021 reporting. The post-model adjustments relating to
COVID-19 amounted to
 
USD
224
 
million as
 
of 31 December
 
2021
(2020: USD
117
 
million in addition to
 
overlays of USD
16
 
million
for
 
other
 
aspects,
 
where
 
model
 
results
 
were
 
deemed
 
to
 
be
uncertain).
 
 
 
ECL scenario
Assigned weights in %
31.12.21
31.12.20
Upside
5.0
0.0
Baseline
55.0
60.0
Mild downside
10.0
0.0
Severe downside
30.0
40.0
 
Scenario assumptions
One year
 
Three years cumulative
 
31.12.21
Upside
Baseline
Mild
downside
Severe
downside
Upside
Baseline
Mild
downside
Severe
downside
Real GDP growth (% change)
United States
9.1
4.4
(0.1)
(5.9)
17.8
10.1
1.8
(3.8)
Eurozone
9.4
3.9
(0.1)
(8.7)
17.3
7.5
0.9
(10.3)
Switzerland
5.5
2.4
(0.9)
(6.6)
13.1
5.8
(0.1)
(5.7)
Consumer price index (% change)
United States
3.1
2.2
5.7
(1.2)
9.5
6.3
13.0
0.4
Eurozone
2.3
1.4
4.2
(1.3)
8.0
4.8
10.4
(1.7)
Switzerland
1.8
0.3
3.5
(1.8)
6.1
1.7
9.0
(1.6)
Unemployment rate (end-of-period level, %)
United States
3.0
3.9
6.1
10.9
3.0
3.5
7.2
10.8
Eurozone
6.2
7.4
8.7
12.9
6.0
7.2
9.1
15.1
Switzerland
2.3
2.5
3.4
5.2
1.6
2.3
4.2
5.9
Fixed income: 10-year government bonds (change in yields, basis points)
USD
50.0
16.5
259.2
(50.0)
170.0
41.2
329.2
(15.0)
EUR
40.0
11.1
283.8
(35.0)
140.0
34.9
349.3
(25.0)
CHF
50.0
12.1
245.5
(70.0)
150.0
34.4
307.3
(35.0)
Equity indices (% change)
S&P 500
12.0
14.1
(27.0)
(50.2)
35.5
24.7
(21.8)
(40.1)
EuroStoxx 50
16.0
12.3
(23.4)
(57.6)
41.6
20.7
(19.9)
(50.4)
SPI
14.0
12.1
(22.9)
(53.6)
37.9
19.1
(19.6)
(44.2)
Swiss real estate (% change)
Single-Family Homes
 
5.1
4.4
(4.3)
(17.0)
15.5
7.4
(8.8)
(30.0)
Other real estate (% change)
United States (S&P / Case-Shiller)
10.0
3.5
(2.3)
(9.5)
21.7
7.1
(8.7)
(26.3)
Eurozone (House Price Index)
8.4
5.1
(4.0)
(5.4)
17.8
9.6
(7.6)
(10.8)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
340
 
Note 20
 
Expected credit loss measurement (continued)
Scenario assumptions
One year
 
Three years cumulative
 
31.12.20
Baseline
Severe downside
Baseline
Severe downside
Real GDP growth (% change)
United States
2.7
(5.9)
9.1
(3.8)
Eurozone
2.5
(8.7)
9.9
(10.3)
Switzerland
3.3
(6.6)
9.0
(5.7)
Consumer price index (% change)
United States
1.7
(1.2)
5.5
0.4
Eurozone
1.4
(1.3)
3.9
(1.7)
Switzerland
0.3
(1.8)
0.9
(1.6)
Unemployment rate (end-of-period level, %)
United States
5.5
12.1
4.5
9.9
Eurozone
9.5
14.1
8.0
16.4
Switzerland
3.8
6.1
3.2
6.8
Fixed income: 10-year government bonds (change in yields, basis points)
USD
22.0
(50.0)
46.0
(15.0)
EUR
4.0
(35.0)
21.0
(25.0)
CHF
13.0
(70.0)
31.0
(35.0)
Equity indices (% change)
S&P 500
(2.9)
(50.2)
(1.7)
(40.1)
EuroStoxx 50
3.8
(57.6)
13.5
(50.4)
SPI
(0.8)
(53.6)
5.8
(44.2)
Swiss real estate (% change)
Single-Family Homes
 
3.4
(17.0)
7.1
(30.0)
Other real estate (% change)
United States (S&P / Case-Shiller)
2.5
(15.3)
9.2
(28.7)
Eurozone (House Price Index)
1.1
(22.9)
7.2
(35.4)
 
c) Development of ECL allowances and provisions
The ECL
 
allowances and
 
provisions recognized
 
in the
 
period are
impacted by a variety of factors, such as:
–
 
origination of new instruments during the period;
 
–
 
effect of passage of time as the ECLs on an instrument for the
remaining
 
lifetime
 
decrease
 
(all
 
other
 
factors
 
remaining
 
the
same);
–
 
discount
 
unwind
 
within ECLs
 
as
 
it
 
is
 
measured
 
on
 
a
 
present
value basis;
–
 
derecognition of instruments in the period;
–
 
change in individual asset quality of instruments;
–
 
effect
 
of
 
updating
 
forward-looking
 
scenarios
 
and
 
the
respective weights;
–
 
movements from a
 
maximum 12-month
 
ECL to the
 
recognition
of
 
lifetime ECLs
 
(and
 
vice versa)
 
following transfers
 
between
stages 1 and 2;
 
–
 
movements
 
from
 
stages 1
 
and
 
2
 
to
 
stage 3
 
(credit-impaired
status) when
 
default has
 
become certain
 
and PD
 
increases to
100% (or vice versa);
–
 
changes in models or updates to model parameters;
–
 
write-off; and
–
 
foreign
 
exchange
 
translations
 
for
 
assets
 
denominated
 
in
foreign currencies and other movements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
341
 
Note 20
 
Expected credit loss measurement (continued)
 
The following table explains the changes in
 
the ECL allowances and provisions for on-
 
and off-balance sheet financial instruments and
credit lines in
 
scope of ECL requirements
 
between the beginning and the
 
end of the period due
 
to the factors listed on
 
the previous
page.
 
Development of ECL allowances and
 
provisions
USD million
Total
Stage 1
Stage 2
Stage 3
Balance as of 31 December 2020
(1,468)
(306)
(333)
(829)
Net movement from new and derecognized transactions
1
(59)
(72)
13
0
of which: Private clients with mortgages
(7)
(10)
3
0
of which: Real estate financing
(7)
(11)
4
0
of which: Large corporate clients
(13)
(21)
7
0
of which: SME clients
(8)
(8)
0
0
of which: Other
(24)
(23)
(2)
0
 
of which: Financial intermediaries and hedge funds
(21)
(18)
(4)
0
 
of which: Loans to financial advisors
0
(1)
1
0
Remeasurements with stage transfers
2
(40)
8
0
(49)
of which: Private clients with mortgages
(9)
4
(13)
0
of which: Real estate financing
(3)
1
(4)
0
of which: Large corporate clients
2
(2)
12
(8)
of which: SME clients
(27)
5
4
(36)
of which: Other
(3)
0
2
(4)
 
of which: Financial intermediaries and hedge funds
2
(1)
3
0
 
of which: Loans to financial advisors
0
1
(1)
0
Remeasurements without stage transfers
3
203
55
74
74
of which: Private clients with mortgages
33
8
26
(1)
of which: Real estate financing
30
13
13
3
of which: Large corporate clients
44
5
21
17
of which: SME clients
53
(1)
1
53
of which: Other
44
29
14
2
 
of which: Financial intermediaries and hedge funds
27
15
12
0
 
of which: Loans to financial advisors
6
8
1
(3)
Model changes
4
45
29
16
0
Movements with profit or loss impact
5
148
19
104
25
Movements without profit or loss impact (write-off, FX and other)
6
154
5
9
141
Balance as of 31 December 2021
(1,165)
(282)
(220)
(662)
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, 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.
 
 
In
 
2021,
 
ECL
 
allowances
 
and
 
provisions
 
decreased
 
by
 
USD
148
million from net credit loss releases impacting profit or loss:
–
 
a
 
USD
59
 
million
 
net
 
increase
 
from
 
new
 
and
 
derecognized
transactions
 
that
 
resulted
 
from
 
a
 
USD
72
 
million
 
stage 1
increase
 
primarily
 
in
 
the
 
corporate
 
lending
 
and
 
real
 
estate
lending portfolio,
 
offset by
 
a USD
13
 
million net release
 
from
stage 2
 
positions,
 
driven
 
by
 
positions
 
that
 
were
 
terminated
before their contractual maturity;
 
–
 
a USD
163
 
million net decrease from book quality movements
that
 
resulted
 
from
 
a
 
USD
 
203
 
million
 
net
 
decrease
 
from
remeasurements
 
without
 
stage transfers,
 
with
 
approximately
half of
 
that related to
 
corporate lending –
 
another significant
portion related to
 
real estate-related lending,
 
primarily due to
the partial release of a
 
post-model adjustment, partially offset
by USD
40
 
million from transactions moving
 
from stages 1 and
2
 
into
 
stages 2
 
and
 
3,
 
respectively,
 
primarily
 
related
 
to
 
SME
clients;
 
and
–
 
a USD
45
 
million net decrease that resulted from a number
 
of
model changes.
 
An amount of
 
USD
25
 
million related to
 
the
Large corporate
 
clients
 
segment in
 
the Investment
 
Bank. The
remainder related to various
 
segments in Personal &
 
Corporate
Banking and Global Wealth Management.
 
In
 
addition
 
to
 
the
 
movements
 
impacting
 
profit
 
or
 
loss,
allowances decreased by USD
154
 
million as a result
 
of USD
137
million
 
of
 
write-offs and
 
USD
18
 
million
 
from
 
foreign
 
exchange
and other movements, both of which
 
did not impact the income
statement.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
342
 
Note 20
 
Expected credit loss measurement (continued)
 
 
Development of ECL allowances and
 
provisions
USD million
Total
Stage 1
Stage 2
Stage 3
Balance as of 31 December 2019
(1,029)
(181)
(160)
(688)
Net movement from new and derecognized transactions
1
(28)
(90)
17
46
of which: Private clients with mortgages
(2)
(3)
2
0
of which: Real estate financing
(3)
(5)
2
0
of which: Large corporate clients
(32)
(29)
(4)
0
of which: SME clients
(16)
(14)
(3)
0
of which: Other
26
(39)
20
46
 
of which: Securities financing transactions REIT
32
(1)
15
17
 
of which: Loans to financial advisors
9
(1)
9
0
 
of which: Lombard loans
23
(6)
0
29
 
of which Financial intermediaries
 
(20)
(15)
(5)
0
Remeasurements with stage transfers
2
(427)
45
(134)
(338)
of which: Private clients with mortgages
(19)
(2)
(17)
0
of which: Real estate financing
(6)
3
(9)
0
of which: Large corporate clients
(224)
34
(83)
(175)
of which: SME clients
(43)
(1)
(11)
(31)
of which: Other
(134)
11
(14)
(131)
 
of which: Securities financing transactions REIT
(36)
0
(18)
(19)
 
of which: Loans to financial advisors
(12)
7
(7)
(11)
 
of which: Lombard loans
(36)
0
0
(36)
 
of which Commodity trade finance
(59)
0
0
(59)
Remeasurements without stage transfers
3
(271)
(88)
(47)
(136)
of which: Private clients with mortgages
(34)
(19)
(8)
(7)
of which: Real estate financing
(14)
(4)
(11)
1
of which: Large corporate clients
(149)
(53)
(17)
(79)
of which: SME clients
(13)
0
(7)
(6)
of which: Other
(60)
(11)
(4)
(44)
 
of which: Loans to financial advisors
(18)
(12)
(3)
(3)
 
of which: Lombard loans
(3)
6
0
(9)
 
of which: Credit cards
(12)
0
0
(12)
Model changes
4
32
21
11
0
Movements with profit or loss impact
5
(694)
(112)
(154)
(429)
Movements without profit or loss impact (write-off, FX and other)
6
254
(14)
(19)
287
Balance as of 31 December 2020
(1,468)
(306)
(333)
(829)
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, 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.
 
As explained in Note
 
1a, the assessment of
 
a significant increase
in
 
credit
 
risk
 
(
SICR
)
 
considers
 
a
 
number
 
of
 
qualitative
 
and
quantitative
 
factors
 
to
 
determine
 
whether
 
a
 
stage
 
transfer
between
 
stage 1
 
and
 
stage 2
 
is
 
required,
 
although
 
the
 
primary
assessment considers changes in PD based
 
on rating analyses and
economic
 
outlook.
 
Additionally,
 
UBS
 
takes
 
into
 
consideration
counterparties that
 
have moved
 
to a
 
credit watch
 
list and
 
those
with payments that are at least 30 days past due.
 
ECL stage 2 (“significant deterioration
 
in credit risk”) allowances / provisions as of 31 December
 
2021 – classification by trigger
USD million
Stage 2
of which:
PD layer
of which:
watch list
of which:
≥30 days
 
past due
On-and off-balance sheet
 
(220)
(158)
(22)
(39)
of which: Private clients with mortgages
(71)
(54)
0
(17)
of which: Real estate financing
(43)
(38)
0
(4)
of which: Large corporate clients
(55)
(40)
(15)
0
of which: SME clients
(30)
(19)
(7)
(4)
of which: Financial intermediaries and hedge funds
(6)
(6)
0
0
of which: Loans to financial advisors
(3)
0
0
(3)
of which: Credit cards
(11)
0
0
(11)
of which: Other
(1)
(1)
0
0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
343
 
Note 20
 
Expected credit loss measurement (continued)
 
d) Maximum exposure to credit risk
The
 
tables
 
below
 
provide
 
the
 
Group’s
 
maximum
 
exposure
 
to
credit
 
risk for
 
financial instruments
 
subject to
 
ECL requirements
and
 
the
 
respective
 
collateral
 
and
 
other
 
credit
 
enhancements
mitigating credit risk for these classes of financial instruments.
 
The
 
maximum
 
exposure
 
to
 
credit
 
risk
 
includes
 
the
 
carrying
amounts of financial
 
instruments recognized on
 
the balance sheet
subject
 
to
 
credit
 
risk
 
and
 
the
 
notional
 
amounts
 
for
 
off-balance
sheet arrangements.
 
Where information
 
is available,
 
collateral is
presented at fair value.
 
For other collateral, such as
 
real estate, a
reasonable alternative
 
value is
 
used. Credit
 
enhancements, such
as credit derivative contracts
 
and guarantees, are included
 
at their
notional amounts. Both are capped at the maximum
 
exposure to
credit risk for which
 
they serve as
 
security. The “Risk management
and control” section of this
 
report describes management’s view
of credit risk and
 
the related exposures,
 
which can differ
 
in certain
respects from the requirements of IFRS.
 
Maximum exposure to credit risk
 
31.12.21
Collateral
1,2
Credit enhancements
1
Exposure to
credit risk
after collateral
and credit
enhancements
USD billion
Maximum
exposure to
credit risk
Cash
collateral
received
Collateralized
by securities
Secured by
real estate
Other
collateral
3
Netting
Credit
derivative
contracts
Guarantees
 
Financial assets measured at
 
amortized cost on the balance sheet
Cash and balances at central banks
192.8
 
 
 
 
 
 
192.8
Loans and advances to banks
4
15.5
0.1
 
0.1
15.3
Receivables from securities financing transactions
75.0
0.0
68.0
6.9
 
 
 
0.0
Cash collateral receivables on derivative instruments
5,6
30.5
 
18.4
 
 
12.1
Loans and advances to customers
7
397.8
37.5
128.7
191.3
20.2
 
4.0
16.2
Other financial assets measured at amortized cost
26.2
0.2
0.1
 
0.0
1.3
 
 
24.6
Total financial assets measured at amortized cost
737.8
37.7
196.9
191.3
28.4
18.4
0.0
4.0
261.0
Financial assets measured at fair value
 
through other comprehensive income – debt
8.8
 
 
 
 
 
 
 
8.8
Total maximum exposure to credit risk
 
reflected on the balance sheet in scope of ECL
746.6
37.7
196.9
191.3
28.4
18.4
0.0
4.0
269.8
Guarantees
8
20.9
1.3
6.5
0.2
2.5
 
2.3
8.1
Loan commitments
8
39.4
0.5
4.0
2.4
7.3
 
0.3
1.7
23.1
Forward starting transactions, reverse repurchase
and securities borrowing agreements
1.4
 
1.4
 
 
 
 
 
0.0
Committed unconditionally revocable credit lines
40.7
0.3
9.0
6.2
3.9
 
 
0.5
20.9
Total maximum exposure to credit risk not
 
reflected on the balance sheet, in scope of ECL
102.5
2.2
20.9
8.7
13.7
0.0
0.3
4.5
52.1
31.12.20
Collateral
1,2
Credit enhancements
1
Exposure to
credit risk
after collateral
and credit
enhancements
USD billion
Maximum
exposure to
credit risk
Cash
collateral
received
Collateralized
by securities
Secured by
real estate
Other
collateral
3
Netting
Credit
derivative
contracts
Guarantees
 
Financial assets measured at
 
amortized cost on the balance sheet
Cash and balances at central banks
158.2
 
 
 
 
 
 
158.2
Loans and advances to banks
4
15.4
0.1
 
15.3
Receivables from securities financing transactions
74.2
0.0
67.1
 
7.0
 
 
 
0.0
Cash collateral receivables on derivative instruments
5,6
32.7
 
21.1
 
 
11.6
Loans and advances to customers
7
379.5
25.8
118.2
194.6
21.7
 
4.4
14.8
Other financial assets measured at amortized cost
27.2
0.1
0.2
1.3
 
 
 
25.5
Total financial assets measured at amortized cost
687.3
26.0
185.7
194.6
30.1
21.1
0.0
4.4
225.5
Financial assets measured at fair value
 
through other comprehensive income – debt
8.3
 
 
 
 
 
 
 
8.3
Total maximum exposure to credit risk
 
reflected on the balance sheet in scope of ECL
695.6
26.0
185.7
194.6
30.1
21.1
0.0
4.4
233.7
Guarantees
8
17.0
0.7
5.0
0.2
1.7
 
2.5
7.0
Loan commitments
8
41.2
0.0
4.2
2.1
6.8
 
0.4
2.4
25.3
Forward starting transactions, reverse repurchase
and securities borrowing agreements
3.2
 
3.2
 
 
 
 
 
0.0
Committed unconditionally revocable credit lines
40.1
0.1
10.3
6.2
2.7
 
 
0.0
20.7
Total maximum exposure to credit risk not
 
reflected on the balance sheet, in scope of ECL
101.6
0.8
22.7
8.5
11.2
0.0
0.4
4.9
53.0
1 Of which: USD
1,443
 
million for 31 December 2021 (31 December 2020: USD
1,983
 
million) relates to total credit-impaired financial assets measured at amortized cost and USD
130
 
million for 31 December 2021
(31 December 2020: USD
154
 
million) to total off-balance sheet
 
financial instruments and credit
 
lines for credit-impaired positions.
 
2 Collateral arrangements generally
 
incorporate a range of
 
collateral, including
cash, securities, real estate and other collateral. UBS applies
 
a risk-based approach that generally prioritizes collateral according to its
 
liquidity profile.
 
3 Includes but is not limited to life
 
insurance contracts, inventory,
mortgage loans, gold and other commodities.
 
4 Loans and advances to banks include amounts held with third-party banks on behalf of clients.
 
The credit risk associated with these balances may be borne by those
clients.
 
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 In 2021,
the collateral allocation was updated
 
to reflect additional cash collateral
 
and custody accounts that are also
 
available as security for certain
 
on-balance sheet lending. This resulted
 
in an increase in loans secured
 
by
cash, with an offsetting reduction in loans secured by real estate and loans secured by securities.
 
8 The amount shown in the “Guarantees” column includes sub-participations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
344
 
Note 20
 
Expected credit loss measurement (continued)
 
e) Financial assets subject to credit risk by rating category
The
 
table
 
below
 
shows
 
the
 
credit
 
quality
 
and
 
the
 
maximum
exposure to credit risk based on the Group’s internal credit rating
system and year-end
 
stage classification. Under IFRS 9, the credit
risk rating reflects the Group’s assessment
 
of
 
the
 
probability
 
of
default of
 
individual
 
counterparties,
 
prior
 
to
 
substitutions.
 
The
amounts presented are gross of impairment allowances.
›
 
Refer to the “Risk management and control”
 
section of this
report for more details
 
regarding the Group’s internal grading
system
 
 
Financial assets subject to credit risk by rating
 
category
USD million
31.12.21
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total gross
carrying
amount
ECL
allowances
Net carrying
amount
(maximum
exposure to
credit risk)
Financial assets measured at amortized cost
Cash and balances at central banks
191,015
1,802
0
0
0
0
192,817
0
192,817
of which: stage 1
191,015
1,802
0
0
0
0
192,817
0
192,817
Loans and advances to banks
407
12,623
1,171
795
490
1
15,488
(8)
15,480
of which: stage 1
407
12,623
1,146
795
488
0
15,460
(7)
15,453
of which: stage 2
0
0
24
0
2
0
27
(1)
26
of which: stage 3
0
0
0
0
0
1
1
0
1
Receivables from securities financing transactions
 
34,386
11,267
10,483
17,440
1,439
0
75,014
(2)
75,012
of which: stage 1
34,386
11,267
10,483
17,440
1,439
0
75,014
(2)
75,012
Cash collateral receivables on derivative instruments
7,466
13,476
5,878
3,647
47
0
30,514
0
30,514
of which: stage 1
7,466
13,476
5,878
3,647
47
0
30,514
0
30,514
Loans and advances to customers
5,295
232,233
67,620
69,892
21,423
2,148
398,611
(850)
397,761
of which: stage 1
5,295
231,153
65,084
62,796
16,362
0
380,690
(126)
380,564
of which: stage 2
0
1,080
2,536
7,096
5,061
0
15,773
(152)
15,620
of which: stage 3
0
0
0
0
0
2,148
2,148
(572)
1,577
Other financial assets measured at amortized cost
12,564
6,702
321
6,072
394
264
26,318
(109)
26,209
of which: stage 1
12,564
6,693
307
5,863
317
0
25,745
(27)
25,718
of which: stage 2
0
10
13
209
77
0
309
(7)
302
of which: stage 3
0
0
0
0
0
264
264
(76)
189
Total financial assets measured at amortized cost
251,133
278,103
85,472
97,846
23,793
2,414
738,762
(969)
737,794
On-balance sheet financial instruments
Financial assets measured at FVOCI – debt instruments
3,996
4,771
0
77
0
0
8,844
0
8,844
Total on-balance sheet financial instruments
255,130
282,874
85,472
97,923
23,793
2,414
747,606
(969)
746,638
Off-balance sheet positions subject to expected
 
credit loss by rating category
USD million
31.12.21
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total off -
balance sheet
exposure
(maximum
exposure to
credit risk)
ECL provisions
Off-balance sheet financial instruments
Guarantees
 
4,457
7,064
4,535
3,757
1,009
150
20,972
(41)
of which: stage 1
4,457
7,037
4,375
3,075
752
0
19,695
(18)
of which: stage 2
0
27
160
682
258
0
1,127
(8)
of which: stage 3
0
0
0
0
0
150
150
(15)
Irrevocable loan commitments
2,797
14,183
7,651
8,298
6,502
46
39,478
(114)
of which: stage 1
2,797
13,917
7,416
7,127
5,840
0
37,097
(72)
of which: stage 2
0
266
235
1,171
663
0
2,335
(42)
of which: stage 3
0
0
0
0
0
46
46
0
Forward starting reverse repurchase and securities borrowing agreements
0
0
55
1,389
0
0
1,444
0
Total off-balance sheet financial instruments
7,254
21,247
12,241
13,444
7,512
196
61,894
(155)
Credit lines
Committed unconditionally revocable credit lines
2,636
15,594
8,627
9,752
4,107
63
40,778
(38)
of which: stage 1
2,636
15,250
8,304
8,346
3,671
0
38,207
(28)
of which: stage 2
0
344
323
1,406
436
0
2,508
(10)
of which: stage 3
0
0
0
0
0
63
63
0
Irrevocable committed prolongation of existing loans
17
2,438
1,422
1,084
602
48
5,611
(3)
of which: stage 1
17
2,438
1,422
1,082
568
0
5,527
(3)
of which: stage 2
0
0
0
1
34
0
36
0
of which: stage 3
0
0
0
0
0
48
48
0
Total credit lines
2,653
18,032
10,049
10,836
4,709
111
46,390
(41)
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
345
 
Note 20
 
Expected credit loss measurement (continued)
Financial assets subject to credit risk by rating
 
category
USD million
31.12.20
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total gross
carrying
amount
ECL
allowances
Net carrying
amount
(maximum
exposure to
credit risk)
Financial assets measured at amortized cost
Cash and balances at central banks
156,250
1,981
0
0
0
0
158,231
0
158,231
of which: stage 1
156,250
1,981
0
0
0
0
158,231
0
158,231
Loans and advances to banks
543
12,129
1,344
1,182
260
1
15,460
(16)
15,444
of which: stage 1
543
12,074
1,277
1,145
231
0
15,269
(9)
15,260
of which: stage 2
0
55
67
37
29
0
189
(5)
184
of which: stage 3
0
0
0
0
0
1
1
(1)
0
Receivables from securities financing transactions
 
22,998
16,009
15,367
17,995
1,842
0
74,212
(2)
74,210
of which: stage 1
22,998
16,009
15,367
17,995
1,842
0
74,212
(2)
74,210
Cash collateral receivables on derivative instruments
8,196
13,477
7,733
3,243
88
0
32,737
0
32,737
of which: stage 1
8,196
13,477
7,733
3,243
88
0
32,737
0
32,737
Loans and advances to customers
5,813
214,307
67,270
69,217
21,038
2,943
380,589
(1,060)
379,528
of which: stage 1
5,813
212,970
63,000
59,447
15,860
0
357,090
(142)
356,948
of which: stage 2
0
1,338
4,269
9,770
5,178
0
20,556
(215)
20,341
of which: stage 3
0
0
0
0
0
2,943
2,943
(703)
2,240
Other financial assets measured at amortized cost
15,404
4,018
280
6,585
481
560
27,327
(133)
27,194
of which: stage 1
15,404
4,015
269
6,334
389
0
26,410
(34)
26,377
of which: stage 2
0
3
11
251
91
0
357
(9)
348
of which: stage 3
0
0
0
0
0
560
560
(90)
469
Total financial assets measured at amortized cost
209,204
261,922
91,993
98,223
23,709
3,505
688,556
(1,211)
687,345
On-balance sheet financial instruments
Financial assets measured at FVOCI – debt instruments
3,212
5,014
0
32
0
0
8,258
0
8,258
Total on-balance sheet financial instruments
212,417
266,936
91,993
98,255
23,709
3,505
696,815
(1,211)
695,603
Off-balance sheet positions subject to expected
 
credit loss by rating category
USD million
31.12.20
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total off -
balance sheet
exposure
(maximum
exposure to
credit risk)
ECL provisions
Off-balance sheet financial instruments
Guarantees
 
3,482
4,623
3,522
4,293
991
170
17,081
(63)
of which: stage 1
3,482
4,219
2,688
3,558
739
0
14,687
(14)
of which: stage 2
0
404
834
736
252
0
2,225
(15)
of which: stage 3
0
0
0
0
0
170
170
(34)
Irrevocable loan commitments
3,018
14,516
8,583
9,302
5,850
104
41,372
(142)
of which: stage 1
3,018
13,589
6,873
8,739
4,676
0
36,894
(74)
of which: stage 2
0
927
1,711
563
1,174
0
4,374
(68)
of which: stage 3
0
0
0
0
0
104
104
0
Forward starting reverse repurchase and securities borrowing agreements
82
150
0
3,015
0
0
3,247
0
Total off-balance sheet financial instruments
6,583
19,289
12,105
16,610
6,840
273
61,700
(205)
Credit lines
Committed unconditionally revocable credit lines
574
13,505
5,958
8,488
11,501
108
40,134
(50)
of which: stage 1
574
12,940
4,517
6,609
10,593
0
35,233
(29)
of which: stage 2
0
565
1,441
1,879
908
0
4,792
(21)
of which: stage 3
0
0
0
0
0
108
108
0
Irrevocable committed prolongation of existing loans
14
1,349
931
632
357
0
3,282
(2)
of which: stage 1
14
1,349
930
630
355
0
3,277
(2)
of which: stage 2
0
1
1
2
1
0
5
0
of which: stage 3
0
0
0
0
0
0
0
0
Total credit lines
588
14,854
6,889
9,119
11,858
109
43,416
(52)
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
346
 
Note 20
 
Expected credit loss measurement (continued)
 
f) Sensitivity information
As
 
outlined
 
in
 
Note
 
1a,
 
ECL
 
estimates
 
involve
 
significant
uncertainties at the time they are made.
ECL model
The models applied
 
to determine
 
point-in-time
 
PD and LGD rely
on
 
market
 
and
 
statistical
 
data,
 
which
 
has
 
been
 
found
 
to
correlate
 
well
 
with
 
historically
 
observed
 
defaults
 
in
 
sufficiently
homogeneous
 
segments.
 
The
 
risk
 
sensitivities
 
for
 
each
 
of
 
the
ECL reporting
 
segments to such
 
factors are
 
summarized in
 
Note
9.
Forward-looking scenarios
Depending on the scenario selection
 
and related macro-economic
assumptions for the
 
risk factors, the
 
components of the
 
relevant
weighted
 
average
 
ECL
 
change.
 
This
 
is
 
particularly
 
relevant
 
for
interest rates,
 
which can
 
move in
 
both directions
 
under a
 
given
growth assumption
 
(for example,
 
low growth
 
with high
 
interest
rates
 
in a
 
stagflation
 
scenario,
 
versus
 
low growth
 
and falling
 
interest
rates
 
in
 
a
 
recession).
 
Management generally
 
looks
 
for
 
scenario
narratives
 
that reflect
 
the key risk
 
drivers of
 
a given credit
 
portfolio.
As forecasting models are complex, due to the combination
 
of
multiple
 
factors,
 
simple
 
what-if
 
analyses
 
involving
 
a
 
change
 
of
individual
 
parameters
 
do
 
not
 
necessarily
 
provide
 
realistic
information
 
on
 
the
 
exposure
 
of
 
segments
 
to
 
changes
 
in
 
the
macroeconomy. Portfolio
 
-specific analyses based on their key risk
factors would also not be meaningful, as potential compensatory
effects
 
in
 
other
 
segments
 
would
 
be
 
ignored.
 
The
 
table
 
below
indicate
s
 
some
 
sensitivities
 
to
 
ECL
s
 
if
 
a
 
key
 
macroeconomic
variable for the forecasting period is amended
 
across all scenarios
with all other factors remaining unchanged.
 
Potential effect on stage 1 and stage 2
 
positions from changing key parameters as of
 
31 December 2021
 
USD million
Baseline
Upside
Mild downside
Severe downside
Weighted average
 
Change in key parameters
Fixed income: Government bonds (absolute change)
–0.50%
(1)
0
(29)
(9)
(4)
+0.50%
1
1
39
11
5
+1.00%
4
2
88
23
14
Unemployment rate (absolute change)
–1.00%
(2)
(2)
(30)
(48)
(13)
–0.50%
(1)
(1)
(17)
(27)
(7)
+0.50%
1
1
21
31
8
+1.00%
3
2
47
68
18
Real GDP growth (relative change)
–2.00%
4
2
8
17
10
–1.00%
2
1
4
8
5
+1.00%
(1)
0
(10)
(8)
(4)
+2.00%
(2)
0
(14)
(16)
(7)
House Price Index (relative change)
–5.00%
6
4
50
73
24
–2.50%
3
2
24
34
12
+2.50%
(2)
(1)
(26)
(31)
(11)
+5.00%
(4)
(3)
(46)
(31)
(13)
Equity (S&P500, EuroStoxx, SMI) (relative change)
–10.00%
2
2
5
6
5
–5.00%
1
0
2
3
2
+5.00%
(1)
0
(2)
(3)
(2)
+10.00%
(2)
0
(4)
(6)
(3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
347
 
Note 20
 
Expected credit loss measurement (continued)
Sensitivities can be more meaningfully
 
assessed in the context
of
 
coherent
 
scenarios
 
with
 
consistently
 
developed
macroeconomic factors.
 
The table on
 
the previous page
 
outlines
favorable and
 
unfavorable effects,
 
based on
 
reasonably possible
alternative changes
 
to the
 
economic conditions
 
for stage 1
 
and
stage 2
 
positions.
 
The
 
ECL
 
impact
 
is
 
calculated
 
for
 
material
portfolios and disclosed for each scenario.
 
The
 
forecasting
 
horizon
 
is
 
limited
 
to
 
three
 
years,
 
with
 
a
model-based
 
mean
 
reversion
 
of
 
PD
 
and
 
LGD
 
assumed
thereafter.
 
Changes
 
to
 
these
 
timelines
 
may
 
have
 
an
 
effect
 
on
ECLs:
 
depending
 
on
 
the
 
cycle,
 
a
 
longer
 
or
 
shorter
 
forecasting
horizon will lead to different
 
annualized lifetime
 
PD and average
LGD estimations.
 
This is currently
 
not deemed to be material
 
for
UBS,
 
as
 
a
 
large
 
proportion
 
of
 
loans,
 
including
 
mortgages
 
in
Switzerland,
 
have
maturities
 
that
are
 
within
 
the
 
forecasting
horizon.
Scenario weights
ECL
 
is
 
sensitive
 
to
 
changing
 
scenario
 
weights,
 
in
 
particular
 
if
narratives and
 
parameters are
 
selected that
 
are not
 
close to
 
the
baseline scenario, highlighting the non-linearity of credit losses.
As shown
 
in
 
the
 
table
 
on the
 
bottom
 
of
 
this
 
page,
 
the
 
ECL
for
 
stage 1
 
and
 
stage
 
2
 
positions
 
would
 
have
 
been
 
USD
387
million
 
(31
 
December
 
2020:
USD
 
442
 
million)
 
instead
 
o
f
USD
503
 
million
 
(31 December
 
2020:
 
USD
639
 
million)
 
if
 
ECL
had
 
been
 
determined
 
solely
 
on
 
the
 
baseline
 
scenario.
 
The
weighted
 
average
 
ECL
 
therefore
 
amounts
 
to
130
%
(31 December 2020:
145
%) of the baseline value. The effects of
weighting
 
each
 
of
 
the
 
four
 
scenarios
 
100%
 
are
 
shown
 
in
 
the
table below.
Stage allocation and SICR
The
 
determination
 
of
 
what
 
constitutes
 
a
n
 
SICR
 
is
 
based
 
on
management
 
judgment, as
 
explained in
 
Note 1a. Changing
 
the
SICR trigger
 
will have
 
a direct
 
effect on
 
ECLs, as
 
more or
 
fewer
positions would be subject to lifetime ECLs under any scenario.
 
The
 
relevance
 
of
 
the
 
SICR
 
trigger
 
on
 
overall
 
ECL
 
is
demonstrated
 
in
 
the
 
table
 
below
 
with
 
the
 
indication
 
that
 
the
ECL allowances
 
and provisions
 
for stage 1 and
 
stage 2 positions
would have been USD
1,060
 
million if all non-impaired
 
positions
across
 
the
 
portfolio
 
had
 
been
 
measured
 
for
 
lifetime
 
ECLs
irrespective
 
of their actual SICR status. This
 
amount compares to
actual
 
stage 1
 
and
 
2
 
allowances
 
and
 
provisions
 
of
 
USD
503
million as
 
of 31 December
 
2021.
 
Potential
 
effect on
 
stage 1
 
and stage
 
2 positions
 
from changing
 
scenario
 
weights
 
or moving
 
to an ECL
 
lifetime
 
calculation
 
as of 31
 
December
 
2021
 
Actual ECL
allowances and
provisions,
including staging
(as per Note 9)
 
Pro forma ECL allowances and provisions, including staging
 
and assuming application of 100% scenario weighting
 
Pro forma ECL
allowances and
provisions,
assuming all
positions being
subject to lifetime
ECL
 
Scenarios
Weighted average
100% Baseline
100% Upside
100% Mild
downside
100% Severe
downside
Weighted average
USD million, except where indicated
Segmentation
Private clients with mortgages
(95)
(53)
(52)
(119)
(207)
(277)
Real estate financing
(62)
(50)
(48)
(101)
(97)
(118)
Large corporate clients
(150)
(116)
(107)
(148)
(244)
(257)
SME clients
(65)
(56)
(55)
(71)
(91)
(117)
Other segments
(130)
(112)
(108)
(135)
(166)
(291)
Total
(503)
(387)
(370)
(574)
(806)
(1,060)
 
Maturity profile
The maturity profile is an important driver for changes
 
in ECL due
to transfers
 
to stage 2
 
and from
 
stage 2 to
 
stage 1. The
 
current
maturity profile of most lending books is relatively
 
short; hence a
movement
 
to
 
stage 2
 
may
 
have
 
a
 
moderate
 
effect
 
on
 
ECLs.
 
A
significant portion
 
of our
 
lending to
 
SMEs is
 
documented under
multi-purpose
 
credit agreements,
 
which allow
 
for various
 
forms
of
 
utilization
 
but
 
are
 
unconditionally
 
cancelable
 
by
 
UBS
 
at
 
any
time. For drawings under such agreements with a
 
fixed maturity,
the respective term is applied for ECL calculations,
 
or a maximum
of 12 months in stage 1. For unused credit lines and all
 
drawings
that have no fixed
 
maturity (e.g., current accounts),
 
UBS generally
applies a
 
12-month maturity
 
from the
 
reporting date,
 
given the
credit review policies, which require either
 
continuous monitoring
of key indicators
 
and behavioral patterns
 
for smaller positions
 
or
an annual
 
formal review
 
for any
 
other limit.
 
The ECLs
 
for these
products
 
are
 
sensitive
 
to
 
shortening
 
or
 
extending
 
the
 
maturity
assumption.
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
348
 
Note 21
 
Fair value measurement
a) Valuation principles
All
 
financial
 
and non-financial
 
assets
 
and liabilities
 
measured
 
or
disclosed at fair value are categorized into one of three
 
fair value
hierarchy levels
 
in accordance
 
with IFRS.
 
The fair
 
value hierarchy
is based on the
 
transparency of inputs to
 
the valuation of an
 
asset
or liability as
 
of the measurement
 
date. In certain
 
cases, the inputs
used to
 
measure fair
 
value may fall
 
within different
 
levels of
 
the
fair
 
value
 
hierarchy.
 
For
 
disclosure
 
purposes,
 
the
 
level
 
in
 
the
hierarchy within which an
 
instrument is classified in its entirety
 
is
based on the lowest level input
 
that is significant to the position’s
fair value measurement:
–
 
Level 1
 
–
 
quoted
 
prices
 
(unadjusted)
 
in
 
active
 
markets
 
for
identical assets and liabilities;
–
 
Level 2 –
 
valuation techniques
 
for which
 
all significant
 
inputs
are, or are based on, observable market data; or
–
 
Level 3 – valuation techniques
 
for which significant inputs are
not based on observable market data.
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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
349
 
Note 21
 
Fair value measurement (continued)
 
c) Fair value hierarchy
The table below provides
 
the fair value hierarchy
 
classification of
financial and
 
non-financial assets
 
and liabilities
 
measured at
 
fair
value.
 
The
 
narrative
 
that
 
follows describes
 
valuation
 
techniques
used
 
in
 
measuring
 
their
 
fair
 
value
 
of
 
different
 
product
 
types
(including significant valuation
 
inputs and assumptions
 
used), and
the
 
factors
 
considered
 
in
 
determining
 
their
 
classification
 
within
the fair value hierarchy.
 
Determination of fair values from quoted market
 
prices or valuation techniques
1
31.12.21
31.12.20
USD million
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value on a recurring basis
Financial assets at fair value held for trading
113,697
14,825
2,299
130,821
107,507
15,553
2,337
125,397
of which:
Equity instruments
97,958
1,090
149
99,197
90,307
1,101
171
91,579
Government bills / bonds
7,135
1,351
10
8,496
9,028
2,207
10
11,245
Investment fund units
7,843
1,364
21
9,229
7,374
1,794
23
9,192
Corporate and municipal bonds
708
7,604
556
8,868
789
8,356
817
9,961
Loans
0
3,099
1,443
4,542
0
1,860
1,134
2,995
Asset-backed securities
53
317
120
489
8
236
181
425
Derivative financial instruments
522
116,479
1,140
118,142
795
157,068
1,754
159,617
of which:
Foreign exchange contracts
255
53,043
7
53,305
319
68,424
5
68,749
Interest rate contracts
0
32,747
494
33,241
0
50,353
537
50,890
Equity / index contracts
0
27,861
384
28,245
0
33,990
853
34,842
Credit derivative contracts
0
1,179
236
1,414
0
2,008
350
2,358
Commodity contracts
0
1,590
16
1,606
0
2,211
6
2,217
Brokerage receivables
0
21,839
0
21,839
0
24,659
0
24,659
Financial assets at fair value not held for trading
2
27,278
28,622
4,180
60,080
40,986
35,435
3,942
80,364
of which:
Financial assets for unit-linked investment contracts
21,110
187
6
21,303
20,628
101
2
20,731
Corporate and municipal bonds
123
13,937
306
14,366
290
16,957
372
17,619
Government bills / bonds
5,624
3,236
0
8,860
19,704
3,593
0
23,297
Loans
0
4,982
892
5,874
0
7,699
862
8,561
Securities financing transactions
0
5,704
100
5,804
0
6,629
122
6,751
Auction rate securities
0
0
1,585
1,585
0
0
1,527
1,527
Investment fund units
338
574
117
1,028
278
447
105
831
Equity instruments
83
2
681
765
86
0
544
631
Other
0
0
495
495
0
10
408
418
Financial assets measured at fair value through other comprehensive income on
 
a recurring basis
Financial assets measured at fair value through other comprehensive
 
income
2
2,704
6,140
0
8,844
1,144
7,114
0
8,258
of which:
Asset-backed securities
0
4,849
0
4,849
0
6,624
0
6,624
Government bills / bonds
2,658
27
0
2,686
1,103
47
0
1,150
Corporate and municipal bonds
45
1,265
0
1,310
40
444
0
485
Non-financial assets measured at fair value on a recurring basis
Precious metals and other physical commodities
5,258
0
0
5,258
6,264
0
0
6,264
Non-financial assets measured at fair value on a non-recurring basis
Other non-financial assets
3
0
0
26
26
0
1
245
246
Total assets measured at fair value
149,459
187,905
7,645
345,010
156,696
239,831
8,278
404,805
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
350
 
Note 21
 
Fair value measurement (continued)
Determination of fair values from quoted market
 
prices or valuation techniques (continued)
1
31.12.21
31.12.20
USD million
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial liabilities measured at fair value on a recurring basis
Financial liabilities at fair value held for trading
25,413
6,170
105
31,688
26,888
6,652
55
33,595
of which:
Equity instruments
18,328
513
83
18,924
22,519
425
40
22,985
Corporate and municipal bonds
30
4,219
17
4,266
31
4,048
9
4,089
Government bills / bonds
5,883
826
0
6,709
3,642
1,036
0
4,678
Investment fund units
1,172
555
6
1,733
696
1,127
5
1,828
Derivative financial instruments
509
118,558
2,242
121,309
746
156,884
3,471
161,102
of which:
Foreign exchange contracts
258
53,800
21
54,078
316
70,149
61
70,527
Interest rate contracts
0
28,398
278
28,675
0
43,389
527
43,916
Equity / index contracts
0
33,438
1,511
34,949
0
38,870
2,306
41,176
Credit derivative contracts
0
1,412
341
1,753
0
2,403
528
2,931
Commodity contracts
0
1,503
63
1,566
0
2,003
24
2,027
Financial liabilities designated at fair value on a recurring basis
Brokerage payables designated at fair value
0
44,045
0
44,045
0
38,742
0
38,742
Debt issued designated at fair value
2
0
59,606
14,194
73,799
0
50,273
10,970
61,243
Other financial liabilities designated at fair value
2
0
29,258
816
30,074
0
29,671
716
30,387
of which:
Financial liabilities related to unit-linked investment contracts
0
21,466
0
21,466
0
20,975
0
20,975
Securities financing transactions
0
6,375
2
6,377
0
7,317
0
7,317
Over-the-counter debt instruments
0
1,334
794
2,128
0
1,363
697
2,060
Total liabilities measured at fair value
25,922
257,637
17,357
300,916
27,635
282,222
15,212
325,069
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 As of 31 December 2021, USD
17
 
billion (31 December 2020: USD
21
 
billion) of Financial assets at fair value not
 
held for trading, USD
8
 
billion (31 December 2020: USD
8
 
billion) of Financial assets measured at
fair value through other
 
comprehensive income, USD
36
 
billion (31 December 2020:
 
USD
16
 
billion) of Debt issued
 
designated at fair value
 
and USD
1
 
billion (31 December 2020:
 
USD
1
 
billion) of Other financial
liabilities designated at fair value are expected to be recovered or settled after 12 months.
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
351
 
Note 21
 
Fair value measurement (continued)
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.
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 21f
for
 
more
 
information.
 
The
 
discount
 
curves
 
used
 
by
 
the
 
Group
incorporate
 
the
 
funding
 
and
 
credit
 
characteristics
 
of
 
the
instruments
 
to which they
 
are applied.
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.
 
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.
Corporate and
municipal bonds
Valuation
–
 
Generally
 
valued
 
using
 
prices
 
obtained
 
directly
 
from
 
the
 
market
 
for
 
the
 
security,
 
or
 
similar
 
securities,
adjusted for seniority, maturity and liquidity.
–
 
When prices
 
are not
 
available, instruments are
 
valued using
 
discounted cash
 
flow valuation
 
techniques
incorporating the credit spread of the
 
issuer or similar issuers.
–
 
For convertible bonds
 
without directly
 
comparable prices,
 
issuances may
 
be priced using
 
a convertible
 
bond
model.
Fair value hierarchy
–
 
Generally classified as Level 1 or Level 2, depending
 
on the depth of trading activity behind price
 
sources.
–
 
Level 3 instruments have no suitable pricing information
 
available.
Traded loans and
loans measured at
fair value
Valuation
–
 
Valued directly
 
using market prices
 
that reflect recent
 
transactions or quoted
 
dealer prices, where
 
available.
–
 
Where no
 
market price
 
data is
 
available, loans
 
are valued
 
by relative
 
value benchmarking
 
using pricing
derived from debt instruments in comparable entities or different products in the same entity, or by using
a credit default
 
swap valuation technique,
 
which requires inputs
 
for credit spreads,
 
credit recovery rates
and interest
 
rates. Recently
 
originated commercial real
 
estate loans
 
are measured
 
using a
 
securitization
approach based on rating agency guidelines.
Fair value hierarchy
–
 
Instruments with suitably deep and liquid pricing
 
information are classified as Level 2.
–
 
Positions requiring the use of
 
valuation techniques, or for
 
which the price sources have
 
insufficient trading
depth, are classified as Level 3.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
352
 
Note 21
 
Fair value measurement (continued)
Product
Valuation and classification in the fair value hierarchy
Investment fund
units
Valuation
–
 
Predominantly exchange-traded, with
 
readily available quoted prices in liquid markets.
–
 
Where market prices are not available, fair
 
value may be measured using net asset
 
values (NAVs).
Fair value hierarchy
–
 
Listed units
 
are classified
 
as
 
Level 1, provided
 
there is
 
sufficient trading
 
activity to
 
justify active-market
classification, while other positions are classified
 
as Level 2.
–
 
Positions for which NAVs are not available
 
are classified as Level 3.
Asset-backed
securities (ABS)
Valuation
–
 
For liquid securities, the valuation
 
process will use trade
 
and price data, updated for movements
 
in market
levels between the time of trading and the
 
time of valuation. Less liquid instruments are measured using
discounted expected
 
cash flows
 
incorporating price
 
data for instruments
 
or indices with
 
similar risk profiles.
Fair value hierarchy
–
 
Residential
 
mortgage
-
backed
 
securities
,
c
ommercial
 
mortgage
-
backed
 
securities
 
and
 
other
 
ABS
 
are
generally classified as Level 2. However,
 
if significant inputs are unobservable,
 
or if market or fundamental
data is not available, they are classified as Level
 
3.
Auction rate
securities (ARS)
Valuation
–
 
ARS
 
are
 
valued
 
utilizing
 
a
 
discounted
 
cash
 
flow
 
methodology.
 
The
 
model
 
captures
 
interest
 
rate
 
risk
emanating from the note coupon, credit risk attributable to the
 
underlying closed-end fund investments,
liquidity risk as a function of the level of trading volume in these positions, and extension risk, as ARS
 
are
perpetual instruments that require an assumption
 
regarding their maturity or issuer redemption
 
date.
 
Fair value hierarchy
–
 
Granular and liquid pricing information is generally not available for
 
ARS. As a result, these securities are
classified as Level 3.
Equity instruments
Valuation
–
 
Listed equity instruments are generally valued
 
using prices obtained directly from the market.
–
 
Unlisted equity holdings,
 
including private equity
 
positions, are initially
 
marked at their
 
transaction price
and are
 
revalued when
 
reliable evidence of
 
price movement
 
becomes available
 
or when
 
the position
 
is
deemed to be impaired.
 
Fair value hierarchy
–
 
The majority
 
of equity
 
securities are actively
 
traded on
 
public stock
 
exchanges where quoted
 
prices are
readily and regularly available, resulting in Level
 
1 classification.
Financial assets for
unit-linked
investment
contracts
Valuation
–
 
The majority of assets are listed on exchanges
 
and fair values are determined using quoted
 
prices.
Fair value hierarchy
–
 
Most assets are classified as Level 1 if actively traded,
 
or Level 2 if trading is not active.
–
 
Instruments for which prices are not readily available
 
are classified as Level 3.
Securities financing
transactions
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.
Brokerage
receivables and
payables
Valuation
–
 
Fair value is determined based on the value of
 
the underlying balances.
Fair value hierarchy
–
 
Due to their on-demand nature, these receivables
 
and payables are deemed as Level 2.
Amounts due under
unit-linked
investment
contracts
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.
 
 
 
 
 
 
 
 
 
 
 
 
353
 
Note 21
 
Fair value measurement (continued)
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
2
1
d
,
the
 
fair
 
value
 
of
 
uncollateralized
 
and
 
partially
collateralized
 
derivatives
 
is
 
then
 
adjusted
 
by
 
credit
 
valuation
adjustments
 
(
CVA
s)
,
debit
 
valuation
 
adjustments
 
(
DVA
s)
 
and
funding valuation adjustments (FVAs), as
 
applicable, to reflect an
estimation
 
of
 
the
 
effect
 
of
 
counterparty
 
credit
 
risk,
 
UBS’s
 
own
credit risk, and funding costs and benefits.
›
 
Refer to Note 10 for more information about
 
derivative
instruments
 
Derivative product
Valuation and classification in the fair value hierarchy
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.
Credit derivative
contracts
Valuation
–
 
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.
Fair value hierarchy
–
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
354
 
Note 21
 
Fair value measurement (continued)
Derivative product
Valuation and classification in the fair value hierarchy
Foreign exchange
contracts
Valuation
–
 
Open spot foreign exchange (FX)
 
contracts are valued using the FX spot rate
 
observed in the market.
–
 
Forward FX contracts are valued using the FX spot rate adjusted for forward pricing points observed from
standard market-based sources.
–
 
Over-the-counter (OTC) FX
 
option contracts are
 
valued using
 
market-standard option valuation
 
models.
The models used for shorter-dated options (i.e., maturities of
 
five years or less) tend
 
to be different than
those used for
 
longer-dated
 
options because
 
the models needed
 
for longer-dated
 
OTC FX contracts
 
require
additional consideration of interest rate and FX
 
rate interdependency.
–
 
The valuation for
 
multi-dimensional FX
 
options uses a
 
multi-local volatility model,
 
which is calibrated
 
to the
observed FX volatilities for all relevant FX pairs.
Fair value hierarchy
–
 
The
 
markets
 
for
 
FX
 
spot
 
and
 
FX
 
forward
 
pricing
 
points
 
are
 
both
 
actively
 
traded
 
and
 
observable
 
and
therefore such FX contracts are generally classified
 
as Level 2.
 
–
 
A significant proportion of
 
OTC FX option contracts are
 
classified as Level 2 as
 
inputs are derived mostly
from standard market contracts traded in
 
active and observable markets.
–
 
OTC FX
 
option contracts
 
classified as
 
Level 3 include
 
multi-dimensional FX
 
options and
 
long-dated FX
 
exotic
option contracts where there is no active market
 
from which to derive volatility or correlation
 
inputs.
Equity / index
contracts
Valuation
–
 
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.
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.
Commodity
contracts
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
355
 
Note 21
 
Fair value measurement (continued)
d) Valuation adjustments and other items
The output of a
 
valuation technique is
 
always an estimate of
 
a fair
value
 
that
 
cannot
 
be
 
measured
 
with
 
complete
 
certainty.
 
As
 
a
result, valuations are adjusted, where appropriate and when such
factors would be considered by market participants
 
in estimating
fair value, to
 
reflect close-out costs,
 
credit exposure, model-driven
valuation
 
uncertainty,
 
funding
 
costs
 
and
 
benefits,
 
trading
restrictions and other factors.
 
The table below summarizes the
 
valuation adjustment reserves
recognized on the balance sheet. Details about each category are
provided further below.
 
Valuation adjustment reserves on the balance sheet
As of
Life-to-date gain / (loss), USD million
31.12.21
31.12.20
31.12.19
Deferred day-1 profit or loss reserves
418
269
146
Own credit adjustments on financial liabilities designated at fair value
(315)
(381)
(88)
CVAs, FVAs,
 
DVAs and other valuation adjustments
(1,004)
(959)
(706)
 
 
Deferred day-1 profit or loss reserves
For
 
new
 
transactions
 
where
 
the
 
valuation
 
technique
 
used
 
to
measure fair
 
value requires
 
significant inputs
 
that are
 
not based
on
 
observable
 
market
 
data,
 
the
 
financial
 
instrument
 
is
 
initially
recognized
 
at
 
the
 
transaction
 
price.
 
The
 
transaction
 
price
 
may
differ
 
from
 
the fair
 
value obtained
 
using a
 
valuation technique,
where any such difference is deferred and not initially recognized
in the income statement.
 
Deferred
 
day-1
 
profit
 
or
 
loss
 
is generally
 
released
 
into
Other
net
 
income
 
from
 
financial
 
instruments
 
measured
 
at
 
fair
 
value
through profit or loss
 
when pricing of equivalent products or the
underlying
 
parameters
 
become
s
 
observable
 
or
 
when
 
the
transaction is closed out.
The
 
table
 
below
 
summarizes
 
the
 
changes
 
in
 
deferred
 
day-1
profit or loss reserves during the respective period.
 
Deferred day-1 profit or loss reserves
USD million
2021
2020
2019
Reserve balance at the beginning of the year
269
146
255
Profit / (loss) deferred on new transactions
459
362
171
(Profit) / loss recognized in the income statement
(308)
(238)
(278)
Foreign currency translation
(2)
0
(2)
Reserve balance at the end of the year
418
269
146
 
 
Own credit
 
Own
 
credit
 
risk
 
is
 
reflected
 
in
 
the
 
valuation
 
of
 
UBS’s
 
fair
 
value
option liabilities where
 
this component is considered relevant
 
for
valuation
 
purposes
 
by
 
UBS’s
 
counterparties
 
and
 
other
 
market
participants.
Changes in
 
the fair
 
value of
 
financial liabilities
 
designated at
fair
 
value
 
through
 
profit
 
or
 
loss
 
related
 
to
 
own
 
credit
 
are
recognized
 
in
Other
 
comprehensive
 
income
 
directly
 
within
Retained
 
earnings,
with
 
no
 
reclassification
 
to
 
the
 
income
statement in future periods.
 
This presentation does not
 
create or
increase an accounting mismatch in the
 
income statement, as the
Group does not hedge changes in own credit.
Own
 
credit
 
is
 
estimated
 
using
 
own
 
credit
 
adjustment
 
(OCA)
curves,
 
which
 
incorporate
 
observable
 
market
 
data,
 
including
market-observed
 
secondary
 
prices
 
for
 
UBS’s
 
debt,
 
UBS’s
 
credit
default swap spreads
 
and debt curves
 
of peers. In
 
the table below,
the
 
change
 
in
 
unrealized
 
own credit
 
consists of
 
changes
 
in
 
fair
value that are attributable
 
to the change in
 
UBS’s credit spreads,
as well
 
as the
 
effect of
 
changes in
 
fair values
 
attributable to
 
factors
other than credit spreads, such as redemptions, effects from time
decay
 
and changes
 
in
 
interest and
 
other
 
market rates.
 
Realized
own credit is recognized
 
when an instrument with
 
an associated
unrealized OCA
 
is repurchased
 
prior to
 
the contractual
 
maturity
date.
 
Life-to-date
 
amounts
 
reflect
 
the
 
cumulative
 
unrealized
change since initial recognition.
›
 
Refer to Note 16 for more information about
 
debt issued
designated at fair value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
356
 
Note 21
 
Fair value measurement (continued)
Own credit adjustments on financial liabilities
 
designated at fair value
Included in Other comprehensive income
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Recognized during the period:
Realized gain / (loss)
 
(14)
2
8
Unrealized gain / (loss)
 
60
(295)
(408)
Total gain / (loss), before tax
46
(293)
(400)
As of
 
USD million
31.12.21
31.12.20
31.12.19
Recognized on the balance sheet as of the end of the period:
Unrealized life-to-date gain / (loss)
 
(315)
(381)
(88)
 
 
Credit valuation adjustments
In order to measure
 
the fair value of
 
OTC derivative instruments,
including
 
funded
 
derivative
 
instruments
 
that
 
are
 
classified
 
as
Financial assets at
 
fair value
 
not held for
 
trading,
 
CVAs are needed
to
 
reflect
 
the
 
credit
 
risk
 
of
 
the
 
counterparty
 
inherent
 
in
 
these
instruments. This
 
amount represents
 
the estimated
 
fair value
 
of
protection required
 
to hedge the counterparty credit
 
risk of such
instruments.
 
A
 
CVA
 
is
 
determined
 
for
 
each
 
counterparty,
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 items
In the first half of 2021,
 
UBS incurred a loss of
 
USD
861
 
million as
a
 
result
 
of
 
closing
 
out
 
a
 
significant
 
portfolio
 
of
 
swaps
 
with
 
a
US-based
 
client
 
of
 
its
 
prime
 
brokerage
 
business
 
and
 
the
unwinding of
 
related hedges,
 
following the
 
client’s default.
 
This
loss
 
is
 
presented
 
within
Other
 
net
 
income
 
from
 
financial
instruments measured at fair value through profit or loss
.
 
Valuation adjustments on financial instruments
As of
Life-to-date gain / (loss), USD million
31.12.21
31.12.20
Credit valuation adjustments
1
(44)
(66)
Funding valuation adjustments
(49)
(73)
Debit valuation adjustments
2
0
Other valuation adjustments
(913)
(820)
of which: liquidity
(341)
(340)
of which: model uncertainty
(571)
(479)
1 Amounts do not include reserves against defaulted counterparties.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
357
Note 21
 
Fair value measurement (continued)
 
e) Transfers between Level 1 and Level 2
Assets and liabilities transferred
 
from Level 2 to
 
Level 1 during 2021 were
 
not material. Assets and
 
liabilities transferred from Level 1
to Level 2 during 2021 were also not material.
 
 
f) Level 3 instruments: valuation techniques and inputs
 
The
 
table
 
below
 
presents
 
material
 
Level 3
 
assets
 
and
 
liabilities,
together
 
with
 
the
 
valuation
 
techniques
 
used
 
to
 
measure
 
fair
value,
 
the
 
inputs
 
used
 
in
 
a
 
given
 
valuation
 
technique
 
that
 
are
considered significant as
 
of 31 December
 
2021 and
 
unobservable,
and a range of values for those unobservable inputs.
 
The
 
range
 
of
 
values represents
 
the
 
highest-
 
and lowest-level
inputs
 
used in
 
the valuation
 
techniques. Therefore,
 
the range
 
does
not reflect the level of
 
uncertainty regarding a particular input or
an assessment
 
of the
 
reasonableness of
 
the Group’s
 
estimates and
assumptions, but rather the different underlying
 
characteristics of
the relevant
 
assets and
 
liabilities held
 
by the
 
Group. The
 
ranges
will
 
therefore
 
vary
 
from
 
period
 
to
 
period
 
and
 
parameter
 
to
parameter
 
based
 
on
 
characteristics
 
of
 
the
 
instruments
 
held
 
at
each balance
 
sheet date.
 
Furthermore, the
 
ranges of
 
unobservable
inputs may differ across other financial institutions, reflecting the
diversity of the products in each firm’s inventory.
 
Valuation techniques and inputs used in the fair value measurement
 
of Level 3 assets and liabilities
Fair value
Significant
unobservable
input(s)
1
Range of inputs
Assets
Liabilities
Valuation
technique(s)
31.12.21
31.12.20
USD billion
31.12.21
31.12.20
31.12.21
31.12.20
low
high
weighted
average
2
low
high
weighted
average
2
unit
1
Financial assets and liabilities at fair value held for trading and Financial assets at fair
 
value not held for trading
Corporate and municipal
bonds
0.9
1.2
0.0
0.0
Relative value to
market comparable
Bond price equivalent
16
143
98
1
143
100
points
Discounted expected
cash flows
Discount margin
434
434
268
268
basis
points
Traded loans, loans
measured at fair value,
loan commitments and
guarantees
2.8
2.4
0.0
0.0
Relative value to
market comparable
Loan price equivalent
0
101
99
0
101
99
points
Discounted expected
cash flows
Credit spread
175
800
436
190
800
398
basis
points
Market comparable
and securitization
model
Credit spread
28
1,544
241
40
1,858
333
basis
points
Auction rate securities
1.6
1.5
Discounted expected
cash flows
Credit spread
115
197
153
100
188
140
basis
points
Investment fund units
3
0.1
0.1
0.0
0.0
Relative value to
market comparable
Net asset value
Equity instruments
3
0.8
0.7
0.1
0.0
Relative value to
market comparable
Price
Debt issued designated at
fair value
4
14.2
11.0
Other financial liabilities
designated at fair value
0.8
0.7
Discounted expected
cash flows
Funding spread
24
175
42
175
basis
points
Derivative financial instruments
Interest rate contracts
0.5
0.5
0.3
0.5
Option model
Volatility of interest
rates
65
81
29
69
basis
points
Credit derivative contracts
0.2
0.3
0.3
0.5
Discounted expected
cash flows
Credit spreads
 
1
583
1
489
basis
points
Bond price equivalent
2
136
0
100
points
Equity / index contracts
0.4
0.9
1.5
2.3
Option model
Equity dividend yields
0
11
0
13
%
Volatility of equity
stocks, equity and
other indices
4
98
4
100
%
Equity-to-FX
correlation
(29)
76
(34)
65
%
Equity-to-equity
correlation
(25)
100
(16)
100
%
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,
 
rates-linked and credit-
linked notes, all of which have embedded derivative parameters that are considered to be unobservable.
 
The equivalent derivative instrument parameters are presented in the respective derivative financial instruments
lines in this table.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
358
 
Note 21
 
Fair value measurement (continued)
Significant unobservable inputs in Level 3 positions
This section discusses the significant unobservable inputs
 
used in the valuation of Level
 
3 instruments and assesses the potential
 
effect
that a change in each
 
unobservable input in isolation
 
may have on a
 
fair value measurement. Relationships
 
between observable and
unobservable inputs have not been included
 
in the summary below.
 
Input
Description
Bond price equivalent
–
 
Where market
 
prices are
 
not available
 
for a
 
bond, fair
 
value is
 
measured by comparison
 
with observable
 
pricing data
 
from
similar instruments. Factors considered when
 
selecting comparable instruments include credit
 
quality, maturity and industry of
the issuer. Fair value may be measured either by a direct price comparison or by conversion of
 
an instrument price into a yield
(either as an outright yield or as a spread to
 
the relevant benchmark rate).
 
–
 
For corporate and municipal bonds,
 
the range represents the range
 
of prices from reference issuances
 
used in determining fair
value. Bonds priced at 0 are distressed to the point that no recovery
 
is expected, while prices significantly in excess of 100 or
par
 
relate
 
to
 
inflation-linked
 
or
 
structured
 
issuances
 
that
 
pay
 
a
 
coupon
 
in
 
excess
 
of
 
the
 
market
 
benchmark
 
as
 
of
 
the
measurement date.
–
 
For credit derivatives, the bond price range
 
represents the range of prices used for
 
reference instruments, which are typically
converted to an equivalent yield or credit
 
spread as part of the valuation process.
Loan price equivalent
–
 
Where market prices are not available
 
for a traded loan, fair value is measured
 
by comparison with observable
 
pricing data for
similar instruments.
 
Factors considered
 
when selecting
 
comparable instruments include
 
industry segment, collateral
 
quality,
maturity and issuer-specific covenants. Fair value may be measured either by a direct price comparison
 
or by conversion of an
instrument price
 
into a yield.
 
The range represents
 
the range
 
of prices
 
derived from
 
reference issuances
 
of a similar
 
credit quality
used to
 
measure fair
 
value for
 
loans classified
 
as Level 3.
 
Loans priced
 
at 0
 
are distressed
 
to the
 
point that
 
no recovery
 
is
expected, while a current price of 100 represents
 
a loan that is expected to be repaid in full.
Credit spread
–
 
Valuation models for many credit derivatives
 
require an input for the credit
 
spread, which is a reflection of the
 
credit quality of
the associated referenced
 
underlying. The credit
 
spread of a
 
particular security is
 
quoted in relation
 
to the yield
 
on a benchmark
security or reference rate, typically either US Treasury or ARR,
 
and is generally expressed in terms of basis points. An increase
 
/
(decrease) in credit
 
spread will increase
 
/ (decrease) the
 
value of credit
 
protection offered by
 
credit default swaps
 
and other
credit derivative
 
products. The
 
income statement
 
effect from
 
such changes
 
depends on
 
the nature
 
and direction
 
of the
 
positions
held. Credit spreads may
 
be negative where the asset
 
is more creditworthy than the
 
benchmark against which the spread
 
is
calculated. A
 
wider credit spread
 
represents decreasing creditworthiness. The
 
range represents a
 
diverse set
 
of underlyings,
with the lower
 
end of the
 
range representing
 
credits of the
 
highest quality
 
and the upper
 
end of the
 
range representing
 
greater
levels of credit risk.
Discount margin
–
 
The discount margin (DM) spread represents the
 
discount rates applied to present value
 
cash flows of an asset
 
to reflect the
market return required for uncertainty in the
 
estimated cash flows. DM spreads are
 
a rate or rates applied on top of a floating
index (e.g., Secured Overnight Financing
 
Rate (SOFR)) to discount expected
 
cash flows. Generally, a decrease
 
/ (increase) in the
DM in isolation would result in a higher / (lower)
 
fair value.
–
 
The high end
 
of the
 
range relates
 
to securities
 
that are priced
 
low within
 
the market
 
relative to the
 
expected cash
 
flow schedule.
This indicates
 
that the
 
market is
 
pricing an
 
increased risk
 
of credit
 
loss into
 
the security
 
that is
 
greater than
 
what is
 
being
captured by the
 
expected cash
 
flow generation process.
 
The low e
 
nds of
 
the ranges are
 
typical of funding
 
rates on
 
better-
quality instruments.
Funding spread
–
 
Structured financing transactions are valued using synthetic funding curves that best represent the assets that are pledged as
collateral for the transactions. They are not representative
 
of where UBS can fund itself on an unsecured basis, but
 
provide an
estimate of where UBS can source and deploy secured funding with counterparties for a given type of collateral. The funding
spreads are expressed in terms of basis points,
 
and if funding spreads widen, this increases the
 
effect of discounting.
 
–
 
A small proportion of structured
 
debt instruments and non-structured
 
fixed-rate bonds within financial
 
liabilities designated at
fair value had an exposure to funding spreads that
 
was longer in duration than the actively traded
 
market.
Volatility
–
 
Volatility measures the variability of future prices
 
for a particular instrument and is generally
 
expressed as a percentage, where
a higher number reflects a more volatile instrument, for which future price movements are
 
more likely to occur. Volatility is a
key input
 
into option
 
models, where it
 
is used
 
to derive
 
a probability-based
 
distribution of
 
future prices
 
for the
 
underlying
instrument. The effect
 
of volatility on
 
individual positions within
 
the portfolio is
 
driven primarily by
 
whether the option
 
contract
is a
 
long or
 
short position.
 
In most
 
cases, the
 
fair value
 
of an
 
option increases
 
as a
 
result of
 
an increase
 
in volatility
 
and is
reduced by
 
a decrease
 
in volatility.
 
Generally,
 
volatility used
 
in the
 
measurement of fair
 
value is
 
derived from
 
active-market
option prices
 
(referred to
 
as implied
 
volatility). A
 
key feature
 
of implied
 
volatility is
 
the volatility
 
“smile” or
 
“skew,” which
represents the effect of pricing options of
 
different option strikes at different implied volatility
 
levels.
–
 
Volatilities of low interest rates tend to be much higher than volatilities of high interest rates. In addition, different currencies
may have significantly different implied volatilities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
359
 
Note 21
 
Fair value measurement (continued)
Input
Description
Correlation
–
 
Correlation measures the interrelationship between the movements of two variables. It is expressed as a percentage between
 
–100% and
 
+100%, where
 
+100% represents
 
perfectly correlated
 
variables (meaning
 
a movement
 
of one
 
variable is
 
associated
with a
 
movement of the
 
other variable in
 
the same direction)
 
and –100% implies
 
that the variables
 
are inversely correlated
(meaning a movement
 
of one variable
 
is associated with
 
a movement of
 
the other variable
 
in the opposite
 
direction). The
 
effect
of correlation on the measurement of fair value depends on the specific terms of the instruments being valued, reflecting the
range of different payoff features within
 
such instruments.
–
 
Equity-to-FX correlation is important for equity options based on
 
a currency other than the
 
currency of the underlying stock.
Equity-to-equity correlation is particularly important for complex options that incorporate, in some
 
manner, different equities
in the projected payoff.
Equity dividend yields
–
 
The derivation of
 
a forward price
 
for an individual
 
stock or index
 
is important for
 
measuring fair value
 
for forward or
 
swap
contracts and for measuring fair value using option pricing models. The relationship between the current stock price and
 
the
forward price is based on a combination of expected future dividend levels and
 
payment timings, and, to a lesser extent, the
relevant funding rates applicable
 
to the stock in question.
 
Dividend yields are generally expressed
 
as an annualized percentage
of the share price,
 
with the lowest limit
 
of 0% representing
 
a stock that is
 
not expected to pay
 
any dividend. The
 
dividend yield
and timing represent the
 
most significant parameter in determining
 
fair value for instruments
 
that are sensitive to
 
an equity
forward price.
g) Level 3 instruments: sensitivity to changes in unobservable input assumptions
The table
 
below summarizes
 
those financial
 
assets and
 
liabilities
classified
 
as
 
Level 3
 
for
 
which
 
a
 
change
 
in
 
one
 
or
 
more
 
of
 
the
unobservable inputs
 
to reflect
 
reasonably possible
 
favorable and
unfavorable
 
alternative
 
assumptions
 
would
 
change
 
fair
 
value
significantly,
 
and
 
the estimated
 
effect
 
thereof.
 
The
 
table
 
below
does
 
not
 
represent
 
the
 
estimated
 
effect
 
of
 
stress
 
scenarios.
Interdependencies between Level 1, 2 and 3
 
parameters have not
been
 
incorporated
 
in
 
the
 
table.
 
Furthermore,
 
direct
 
inter-
relationships between the
 
Level 3 parameters discussed
 
below are
not a significant element of the valuation uncertainty.
Sensitivity
 
data
 
is
 
estimated
 
using
 
a
 
number
 
of
 
techniques,
including
 
the
 
estimation
 
of
 
price
 
dispersion
 
among
 
different
market
 
participants,
 
variation
 
in
 
modeling
 
approaches
 
and
reasonably possible
 
changes to assumptions
 
used within
 
the fair
value measurement process. The sensitivity ranges are not always
symmetrical
 
around
 
the
 
fair
 
values,
 
as
 
the
 
inputs
 
used
 
in
valuations are not always precisely in
 
the middle of the favorable
and unfavorable range.
Sensitivity data
 
is determined
 
at a
 
product or
 
parameter level
and
 
then
 
aggregated
 
assuming
 
no
 
diversification
 
benefit.
Diversification
 
would
 
incorporate
 
estimated
 
correlations
 
across
different sensitivity results and, as such, would result in an overall
sensitivity
 
that
 
would
 
be
 
less
 
than
 
the
 
sum
 
of
 
the
 
individual
component
 
sensitivities.
 
However,
 
the
 
Group
 
believes
 
that
 
the
diversification benefit is not significant to this analysis.
 
 
 
Sensitivity of fair value measurements to changes
 
in unobservable input assumptions
1
31.12.21
31.12.20
USD million
Favorable
 
changes
Unfavorable
 
changes
Favorable
 
changes
Unfavorable
 
changes
Traded loans, loans designated at fair value, loan commitments and guarantees
19
(13)
29
(28)
Securities financing transactions
41
(53)
40
(52)
Auction rate securities
66
2
(66)
2
105
(105)
Asset-backed securities
20
(20)
41
(41)
Equity instruments
173
(146)
129
(96)
Interest rate derivative contracts, net
29
(19)
11
(16)
Credit derivative contracts, net
5
(8)
10
(14)
Foreign exchange derivative contracts, net
19
(11)
20
(15)
Equity / index derivative contracts, net
368
(335)
318
(294)
Other
50
(73)
91
(107)
Total
790
(744)
794
(768)
1 Sensitivity of issued and
 
over-the-counter debt instruments
 
is reported with the equivalent
 
derivative or securities financing
 
instrument.
 
2 Includes refinements applied in estimating
 
valuation uncertainty across
various parameters and a change in assumptions regarding the underlying statistical distribution.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
360
 
Note 21
 
Fair value measurement (continued)
h) Level 3 instruments: movements during the period
The
 
table below
 
presents
 
additional
 
information about
 
material
movements in Level 3 assets and
 
liabilities measured at fair
 
value
on a recurring basis, excluding any related hedging activity.
Assets
 
and
 
liabilities
 
transferred
 
into
 
or
 
out
 
of
 
Level 3
 
are
presented as
 
if those
 
assets or
 
liabilities had
 
been transferred
 
at
the beginning of the year.
 
Movements of Level 3 instruments
Total gains / losses
included in
comprehensive income
USD billion
Balance
 
as of
31 December
2019
Net gains /
losses
included in
income
1
of which:
related to
Level 3
instruments
held at the
end of the
reporting
period
Purchases
Sales
Issuances
Settlements
Transfers
 
into
 
Level 3
Transfers
 
out of
 
Level 3
Foreign
currency
translation
Balance
 
as of
 
31 December
2020
Financial assets at fair value held for
trading
1.8
(0.1)
(0.1)
0.8
(1.4)
1.0
0.0
0.3
0.0
0.0
2.3
of which:
Investment fund units
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Corporate and municipal bonds
0.5
0.0
0.0
0.7
(0.5)
0.0
0.0
0.1
0.0
0.0
0.8
Loans
0.8
0.0
(0.1)
0.0
(0.7)
1.0
0.0
0.1
0.0
0.0
1.1
Other
0.4
0.0
0.0
0.1
(0.3)
0.0
0.0
0.2
0.0
0.0
0.4
Derivative financial instruments –
assets
1.3
0.3
0.4
0.0
0.0
0.7
(0.5)
0.1
(0.2)
0.1
1.8
of which:
Interest rate contracts
0.3
0.2
0.2
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.5
Equity / index contracts
0.6
0.1
0.1
0.0
0.0
0.6
(0.3)
0.0
(0.1)
0.0
0.9
Credit derivative contracts
0.4
0.0
0.0
0.0
0.0
0.1
(0.2)
0.1
0.0
0.0
0.3
Other
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Financial assets at fair value not held
for trading
4.0
0.0
0.1
0.8
(0.9)
0.0
0.0
0.1
0.0
0.0
3.9
of which:
Loans
1.2
0.0
0.0
0.3
(0.7)
0.0
0.0
0.0
0.0
0.0
0.9
Auction rate securities
1.5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.5
Equity instruments
0.5
0.0
0.0
0.1
(0.1)
0.0
0.0
0.0
0.0
0.0
0.5
Other
0.7
0.0
0.0
0.4
(0.2)
0.0
0.0
0.0
0.0
0.0
1.0
Derivative financial instruments –
liabilities
2.0
1.3
1.2
0.0
0.0
1.2
(0.9)
0.4
(0.6)
0.1
3.5
of which:
Interest rate contracts
0.1
0.3
0.3
0.0
0.0
0.3
(0.2)
0.2
(0.2)
0.0
0.5
Equity / index contracts
1.3
1.0
0.8
0.0
0.0
0.8
(0.6)
0.1
(0.2)
0.0
2.3
Credit derivative contracts
0.5
0.0
0.0
0.0
0.0
0.1
(0.1)
0.1
(0.2)
0.0
0.5
Other
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
Debt issued designated at fair value
9.9
0.2
0.0
0.0
0.0
7.6
(5.7)
0.5
(1.7)
0.2
11.0
Other financial liabilities designated
at fair value
0.8
0.1
0.1
0.0
0.0
0.3
(0.5)
0.0
0.0
0.0
0.7
1 Net gains / losses
 
included in comprehensive income
 
are composed of Net interest
 
income, Other net
 
income from financial instruments
 
measured at fair value
 
through profit or loss
 
and Other income.
 
2 Total
Level 3 assets as of 31 December 2021 were USD
7.6
 
billion (31 December 2020: USD
8.3
 
billion). Total Level 3 liabilities as of 31 December 2021 were USD
17.4
 
billion (31 December 2020: USD
15.2
 
billion).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
361
 
Note 21
 
Fair value measurement (continued)
 
 
 
 
 
 
Total gains / losses
included in
comprehensive income
Balance
 
as of
31 December
2020
2
Net gains /
losses
included in
income
1
of which:
related to
Level 3
instruments
held at the
end of the
reporting
period
Purchases
Sales
Issuances
Settlements
Transfers
 
into
 
Level 3
Transfers
 
out of
 
Level 3
Foreign
 
currency
 
translation
Balance
 
as of
 
31 December
2021
2
2.3
0.0
(0.1)
0.3
(1.6)
1.2
0.0
0.3
(0.3)
0.0
2.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.8
0.0
0.0
0.2
(0.4)
0.0
0.0
0.0
(0.1)
0.0
0.6
1.1
0.0
0.0
0.0
(0.8)
1.2
0.0
0.0
(0.2)
0.0
1.4
0.4
0.0
0.0
0.1
(0.4)
0.0
0.0
0.3
0.0
0.0
0.3
1.8
(0.2)
(0.1)
0.0
0.0
0.5
(0.7)
0.1
(0.3)
0.0
1.1
0.5
0.1
0.1
0.0
0.0
0.1
(0.2)
0.0
(0.1)
0.0
0.5
0.9
(0.1)
(0.1)
0.0
0.0
0.3
(0.4)
0.0
(0.2)
0.0
0.4
0.3
(0.1)
(0.1)
0.0
0.0
0.0
(0.1)
0.0
0.0
0.0
0.2
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
3.9
0.1
0.1
1.0
(0.6)
0.0
0.0
0.1
(0.3)
0.0
4.2
0.9
0.0
0.0
0.6
(0.3)
0.0
0.0
0.0
(0.3)
0.0
0.9
1.5
0.1
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.6
0.5
0.1
0.1
0.1
(0.1)
0.0
0.0
0.0
0.0
0.0
0.7
1.0
0.0
(0.1)
0.3
(0.2)
0.0
0.0
0.0
0.0
0.0
1.0
3.5
0.2
0.0
0.0
0.0
0.9
(1.8)
0.0
(0.5)
0.0
2.2
0.5
(0.1)
(0.1)
0.0
0.0
0.0
(0.1)
0.0
0.0
0.0
0.3
2.3
0.3
0.1
0.0
0.0
0.8
(1.5)
0.0
(0.4)
0.0
1.5
0.5
(0.1)
(0.1)
0.0
0.0
0.0
0.0
0.0
(0.1)
0.0
0.3
0.1
0.1
0.0
0.0
0.0
0.0
(0.1)
0.0
0.0
0.0
0.1
11.0
0.7
0.6
0.0
0.0
8.0
(4.2)
0.2
(1.2)
(0.2)
14.2
0.7
0.0
0.0
0.0
0.0
0.4
(0.2)
0.0
0.0
0.0
0.8
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
362
 
Note 21
 
Fair value measurement (continued)
 
i) Maximum exposure to credit risk for financial instruments measured at fair value
The
 
tables
 
below
 
provide
 
the
 
Group’s
 
maximum
 
exposure
 
to
credit risk for financial instruments
 
measured at fair value and
 
the
respective
 
collateral
 
and
 
other
 
credit
 
enhancements
 
mitigating
credit risk for these classes of financial instruments.
 
The
 
maximum
 
exposure
 
to
 
credit
 
risk
 
includes
 
the
 
carrying
amounts of financial
 
instruments recognized on
 
the balance sheet
subject
 
to
 
credit
 
risk
 
and
 
the
 
notional
 
amounts
 
for
 
off-balance
sheet arrangements.
 
Where information
 
is available,
 
collateral is
presented at fair value.
 
For other collateral, such as
 
real estate, a
reasonable alternative
 
value is
 
used. Credit
 
enhancements, such
as credit derivative contracts
 
and guarantees, are included
 
at their
notional amounts. Both are capped at the maximum
 
exposure to
credit risk for which
 
they serve as
 
security. The “Risk management
and control” section of this
 
report describes management’s view
of credit risk and
 
the related exposures,
 
which can differ
 
in certain
respects from the requirements of IFRS.
 
 
Maximum exposure to credit risk
 
31.12.21
Maximum
exposure to
credit risk
Collateral
Credit enhancements
Exposure to
credit risk
after collateral
and credit
enhancements
USD billion
Cash
collateral
received
Collateral-
ized by
securities
Secured by
real estate
Other
 
collateral
Netting
Credit
derivative
contracts
Guarantees
 
Financial assets measured at
 
fair value on the balance sheet
1
Financial assets at fair value
 
held for trading – debt instruments
2,3
22.4
 
22.4
Derivative financial instruments
4,5
118.1
4.2
103.2
10.7
Brokerage receivables
21.8
21.6
0.2
Financial assets at fair value not
 
held for trading – debt instruments
6
37.0
11.2
25.7
Total financial assets measured at fair value
199.4
0.0
37.1
0.0
0.0
103.2
0.0
0.0
59.1
Guarantees
7
0.2
 
 
 
 
0.2
0.0
31.12.20
Maximum
exposure to
credit risk
Collateral
Credit enhancements
Exposure to
credit risk
after collateral
and credit
enhancements
USD billion
Cash
collateral
received
Collateral-
ized by
securities
Secured by
real estate
Other
 
collateral
Netting
Credit
derivative
contracts
Guarantees
 
Financial assets measured at
 
fair value on the balance sheet
1
Financial assets at fair value
 
held for trading – debt instruments
2,3
24.6
24.6
Derivative financial instruments
4,5
159.6
6.0
138.4
15.2
Brokerage receivables
24.7
24.4
0.3
Financial assets at fair value not
 
held for trading – debt instruments
6
58.2
13.2
 
45.0
Total financial assets measured at fair value
267.1
0.0
43.6
0.0
0.0
138.4
0.0
0.0
85.1
Guarantees
7
0.5
0.1
0.3
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 These positions are generally managed under the market
 
risk framework. For
the purpose of this disclosure, collateral
 
and credit enhancements were not considered.
 
3 Does not include investment fund units.
 
4 Includes USD
0
 
million (31 December 2020: USD
0
 
million) fair values of loan
commitments and forward starting reverse repurchase agreements classified as derivatives.
 
The full contractual committed amount of forward starting reverse repurchase agreements (generally highly collateralized) of
USD
27.8
 
billion (31 December 2020:
 
USD
21.9
 
billion) and derivative
 
loan commitments (generally
 
unsecured) of USD
8.2
 
billion, of which
 
USD
0.8
 
billion has been sub-participated
 
(31 December 2020: USD
9.4
billion, of which USD
0.8
 
billion had been sub-participated), is
 
presented in Note 10 under notional
 
amounts.
 
5 The amount shown in
 
the “Netting” column represents the netting
 
potential not recognized on the
balance sheet. Refer to
 
Note 22 for more information.
 
6 Financial assets at fair
 
value not held for
 
trading collateralized by
 
securities consisted of structured
 
loans and reverse repurchase
 
and securities borrowing
agreements.
 
7 The amount shown in the “Guarantees” column largely relates to sub-participations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
363
 
Note 21
 
Fair value measurement (continued)
 
j) 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
31.12.21
31.12.20
Carrying
amount
Fair value
Carrying
amount
Fair value
USD billion
Total
Carrying
amount
approximates
fair value
1
Level 1
Level 2
Level 3
Total
Total
Carrying
amount
approximates
fair value
1
Level 1
Level 2
Level 3
Total
Assets
2
Cash and balances at central banks
192.8
192.7
0.1
0.0
0.0
192.8
158.2
158.1
0.1
0.0
0.0
158.2
Loans and advances to banks
15.5
14.8
0.0
0.7
0.0
15.5
15.4
14.7
0.0
0.6
0.1
15.4
Receivables from securities financing
transactions
75.0
71.6
0.0
1.3
2.1
75.0
74.2
64.9
0.0
7.6
1.7
74.2
Cash collateral receivables on derivative
instruments
30.5
30.5
0.0
0.0
0.0
30.5
32.7
32.7
0.0
0.0
0.0
32.7
Loans and advances to customers
397.8
163.1
0.0
43.8
190.1
396.9
379.5
172.0
0.0
34.2
174.6
380.8
Other financial assets measured at amortized
cost
26.2
4.1
9.3
10.7
2.4
26.5
27.2
5.3
9.4
10.9
2.3
28.0
Liabilities
2
Amounts due to banks
13.1
9.1
0.0
4.0
0.0
13.1
11.0
8.5
0.0
2.6
0.0
11.0
Payables from securities financing
transactions
5.5
4.1
0.0
1.5
0.0
5.5
6.3
6.0
0.0
0.3
0.0
6.3
Cash collateral payables on derivative
instruments
31.8
31.8
0.0
0.0
0.0
31.8
37.3
37.3
0.0
0.0
0.0
37.3
Customer deposits
542.0
535.4
0.0
6.6
0.0
542.0
524.6
519.4
0.0
5.3
0.0
524.7
Debt issued measured at amortized cost
139.2
15.8
0.0
125.3
0.0
141.1
139.2
16.4
0.0
125.5
0.0
141.9
Other financial liabilities measured at
amortized cost
3
5.4
5.4
0.0
0.0
0.0
5.4
5.8
5.7
0.0
0.0
0.1
5.8
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 As of 31 December 2021,
 
USD
0
 
billion (31 December 2020: USD
0
 
billion) of Cash and balances
 
at central banks,
USD
0
 
billion (31 December 2020: USD
0
 
billion) of Loans and advances to banks, USD
1
 
billion (31 December 2020: USD
1
 
billion) of Receivables from securities financing transactions, USD
175
 
billion (31 December
2020: USD
163
 
billion) of Loans and advances to customers, USD
19
 
billion (31 December 2020: USD
20
 
billion) of Other financial assets measured at amortized cost, USD
1
 
billion (31 December 2020: USD
0
 
billion)
of Amounts due to
 
banks, USD
3
 
billion (31 December 2020:
 
USD
2
 
billion) of Customer
 
deposits, USD
84
 
billion (31 December 2020:
 
USD
82
 
billion) of Debt issued
 
measured at amortized
 
cost and USD
3
 
billion
(31 December 2020: USD
3
 
billion) of Other financial liabilities measured at amortized cost were expected to be recovered or settled after 12 months.
 
3 Excludes lease liabilities.
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
364
 
Note 22
 
Offsetting financial assets and financial liabilities
UBS
 
enters
 
into
 
netting
 
agreements
 
with
 
counterparties
 
to
manage the credit risks
 
associated primarily with repurchase
 
and
reverse repurchase transactions,
 
securities borrowing
 
and lending,
over-the-counter
 
derivatives,
 
and
 
exchange-traded
 
derivatives.
These
 
netting
 
agreements
 
and
 
similar
 
arrangements
 
generally
enable
 
the
 
counterparties
 
to
 
set
 
off
 
liabilities
 
against
 
available
assets received
 
in the ordinary
 
course of business
 
and / or
 
in the
event
 
that
 
the
 
counterparties
 
to
 
the
 
transaction
 
are
 
unable
 
to
fulfill their contractual obligations.
 
The tables on this page and the next page
 
provide a summary
of
 
financial
 
assets
 
and
 
financial
 
liabilities
 
subject
 
to
 
offsetting,
enforceable master netting
 
arrangements and
 
similar agreements,
as well as
 
financial collateral received
 
or pledged to
 
mitigate credit
exposures for these financial instruments.
 
The
 
Group
 
engages
 
in
 
a
 
variety
 
of
 
counterparty
 
credit
 
risk
mitigation
 
strategies
 
in
 
addition
 
to
 
netting
 
and
 
collateral
arrangements. Therefore the net amounts presented in the
 
tables
on this page and the next page do not purport to
 
represent their
actual credit risk exposure.
 
 
Financial assets subject to offsetting, enforceable
 
master netting arrangements and similar agreements
Assets subject to netting arrangements
 
Netting recognized on the balance sheet
Netting potential not recognized on
the balance sheet
3
Assets not
subject to netting
arrangements
4
Total assets
As of 31.12.21, USD billion
Gross assets
before netting
Netting with
 
gross liabilities
2
Net assets
recognized
on the
balance
 
sheet
Financial
liabilities
Collateral
received
Assets after
consideration
of
netting
potential
Assets
recognized
on the
balance
 
sheet
Total assets
after
consideration
of netting
 
potential
Total assets
recognized
 
on the
 
balance
sheet
Receivables from securities
 
financing transactions
67.7
(13.8)
53.9
(2.9)
(51.0)
0.0
21.1
21.1
75.0
Derivative financial instruments
 
116.0
(3.6)
112.4
(88.9)
(18.5)
5.0
5.7
10.7
118.1
Cash collateral receivables on
 
derivative instruments
1
29.4
0.0
29.4
(15.2)
(3.3)
11.0
1.1
12.1
30.5
Financial assets at fair value
 
not held for trading
93.1
(87.6)
5.5
(1.1)
(4.4)
0.0
54.6
54.6
60.1
of which: reverse
 
repurchase agreements
93.1
(87.6)
5.5
(1.1)
(4.4)
0.0
0.3
0.3
5.8
Total assets
306.2
(105.0)
201.2
(108.1)
(77.2)
15.9
82.6
98.5
283.7
As of 31.12.20, USD billion
Receivables from securities
 
financing transactions
70.3
(13.4)
57.0
(1.7)
(55.3)
0.0
17.3
17.3
74.2
Derivative financial instruments
 
156.9
(5.0)
151.9
(117.2)
(27.2)
7.5
7.7
15.2
159.6
Cash collateral receivables on
 
derivative instruments
1
31.9
0.0
31.9
(19.6)
(1.5)
10.8
0.8
11.6
32.7
Financial assets at fair value
 
not held for trading
85.6
(79.1)
6.5
(0.8)
(5.8)
0.0
73.9
73.9
80.4
of which: reverse
 
repurchase agreements
85.6
(79.1)
6.5
(0.8)
(5.8)
0.0
0.2
0.2
6.7
Total assets
344.8
(97.5)
247.3
(139.3)
(89.8)
18.3
99.7
117.9
346.9
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 on the following page. Netting in this column for reverse repurchase agreements presented within the lines
“Receivables from securities financing
 
transactions” and “Financial assets
 
at fair value not held
 
for trading” taken together
 
corresponds to the amounts presented
 
for repurchase agreements in the
 
“Payables from
securities financing transactions” and “Other financial
 
liabilities designated at fair value” lines in the
 
liabilities table presented on the following
 
page.
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
365
 
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 sheet
3
Liabilities not
subject
 
to netting
 
arrangements
4
Total liabilities
As of 31.12.21, USD billion
Gross
liabilities
before
netting
Netting with
 
gross assets
2
Net
 
liabilities
recognized
on the
balance
sheet
Financial
assets
Collateral
pledged
Liabilities
after
consideration of
 
netting
potential
Liabilities
recognized
on the
balance
 
sheet
Total
 
liabilities
 
after
consideration
of netting
potential
Total
 
liabilities
recognized
on the
balance
 
sheet
Payables from securities
 
financing transactions
16.9
(12.8)
4.1
(1.8)
(2.3)
0.0
1.4
1.4
5.5
Derivative financial instruments
 
118.4
(3.6)
114.9
(88.9)
(18.1)
7.9
6.4
14.3
121.3
Cash collateral payables on
 
derivative instruments
1
30.4
0.0
30.4
(13.1)
(3.3)
14.0
1.4
15.4
31.8
Other financial liabilities
 
designated at fair value
94.8
(88.6)
6.2
(2.2)
(3.8)
0.2
23.9
24.1
30.1
of which: repurchase agreements
94.6
(88.6)
6.0
(2.2)
(3.8)
0.0
0.4
0.4
6.4
Total liabilities
260.6
(105.0)
155.6
(106.0)
(27.5)
22.1
33.1
55.2
188.7
As of 31.12.20, USD billion
Payables from securities
 
financing transactions
18.2
(13.3)
4.9
(1.6)
(3.3)
0.0
1.4
1.4
6.3
Derivative financial instruments
 
157.1
(5.0)
152.1
(117.2)
(23.9)
10.9
9.0
19.9
161.1
Cash collateral payables on
 
derivative instruments
1
35.6
0.0
35.6
(19.6)
(2.1)
13.9
1.7
15.7
37.3
Other financial liabilities
 
designated at fair value
87.0
(79.2)
7.8
(0.8)
(6.3)
0.7
22.6
23.3
30.4
of which: repurchase agreements
86.2
(79.2)
7.0
(0.8)
(6.3)
0.0
0.3
0.3
7.3
Total liabilities
297.8
(97.5)
200.3
(139.2)
(35.5)
25.6
34.8
60.4
235.1
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 on the
 
previous page.
 
Netting in this
 
column for repurchase
 
agreements presented
 
within the lines
 
“Payables from
 
securities
financing transactions” and “Other financial liabilities designated at fair value”
 
taken together corresponds to the amounts presented
 
for reverse repurchase agreements in the “Receivables from securities
 
financing
transactions” and “Financial assets
 
at fair value not
 
held for trading” lines
 
in the assets table presented
 
on the previous page.
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
366
 
Note 23
 
Restricted and transferred financial assets
This Note provides
 
information about
 
restricted financial assets
 
(Note 23a), transfers
 
of financial
 
assets (Note 23b
 
and 23c) and
 
financial
assets that are received as collateral with the right to resell or repledge these assets (Note 23d).
a) Restricted financial assets
Restricted
 
financial assets
 
consist of
 
assets
 
pledged as
 
collateral
against an existing liability or contingent liability and other assets
that are
 
otherwise explicitly
 
restricted
 
such that
 
they cannot
 
be
used to secure funding.
 
Financial
 
assets
 
are
 
mainly
 
pledged
 
as
 
collateral
 
in
 
securities
lending
 
transactions,
 
in
 
repurchase
 
transactions,
 
against
 
loans
from
 
Swiss
 
mortgage
 
institutions
 
and
 
in
 
connection
 
with
 
the
issuance
 
of
 
covered
 
bonds.
 
The
 
Group
 
generally
 
enters
 
into
repurchase
 
and securities
 
lending
 
arrangements
 
under
 
standard
market
 
agreements.
 
For
 
securities lending,
 
the cash
 
received as
collateral may be more or less than the fair value of the securities
loaned,
 
depending
 
on
 
the
 
nature
 
of
 
the
 
transaction.
 
For
repurchase agreements, the fair value of the collateral sold under
an
 
agreement
 
to
 
repurchase
 
is
 
generally
 
in
 
excess
 
of
 
the
 
cash
borrowed. Pledged mortgage loans serve as collateral for existing
liabilities
 
against
 
Swiss
 
central
 
mortgage
 
institutions
 
and
 
for
existing
 
covered
 
bond
 
issuances
 
of
 
USD
10,843
 
million
 
as
 
of
 
31 December 2021 (31 December 2020: USD
12,456
 
million).
Other restricted financial assets include assets protected under
client asset
 
segregation rules,
 
assets held
 
by the
 
Group’s insurance
entities to back related liabilities to the policy holders, assets held
in certain jurisdictions to
 
comply with explicit
 
minimum local asset
maintenance requirements. The carrying
 
amount of the liabilities
associated with these other
 
restricted financial assets is
 
generally
equal to the carrying amount of the assets, with the exception of
assets held to comply with local asset maintenance requirements,
for which the associated liabilities are greater.
 
 
Restricted financial assets
 
USD million
31.12.21
31.12.20
Restricted
financial assets
of which: assets
pledged as
collateral that
may be sold or
repledged by
counterparties
of which:
mortgage loans
1
Restricted
financial assets
of which: assets
pledged as
collateral that
may be sold or
repledged by
counterparties
of which:
mortgage loans
1
Financial assets pledged as collateral
Financial assets at fair value held for trading
63,725
43,397
64,367
47,098
Loans and advances to customers
18,160
16,330
20,361
18,191
Financial assets at fair value not held for trading
961
961
2,140
2,140
Debt securities classified as Other financial assets measured
 
at amortized
cost
2,234
1,870
2,506
2,506
Financial assets measured at fair value through other comprehensive
income
0
0
149
149
Total financial assets pledged as collateral
2
85,079
89,523
Other restricted financial assets
Loans and advances to banks
3,408
3,730
Financial assets at fair value held for trading
392
741
Cash collateral receivables on derivative instruments
4,747
3,765
Loans and advances to customers
1,237
756
Financial assets at fair value not held for trading
22,765
23,243
Financial assets measured at fair value through other comprehensive
income
894
0
Other
97
110
Total other restricted financial assets
 
33,540
32,345
Total financial assets pledged and other restricted financial assets
118,619
121,868
1 All related
 
to mortgage loans
 
that serve as
 
collateral for existing
 
liabilities toward Swiss
 
central mortgage
 
institutions and for
 
existing covered bond
 
issuances. Of
 
these pledged mortgage
 
loans, approximately
USD
2.7
 
billion as
 
of 31
 
December 2021
 
(31 December
 
2020: approximately
 
USD
2.7
 
billion) could
 
be withdrawn
 
or used
 
for future
 
liabilities or
 
covered bond
 
issuances without
 
breaching existing
 
collateral
requirements.
 
2 Does not
 
include assets placed
 
with central banks
 
related to undrawn
 
credit lines and
 
for payment, clearing
 
and settlement purposes
 
(31 December 2021:
 
USD
4.4
 
billion; 31 December
 
2020:
USD
1.3
 
billion).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
367
 
Note 23
 
Restricted and transferred financial assets (continued)
In addition
 
to restrictions
 
on financial
 
assets,
 
UBS Group
 
AG
and
 
its
 
subsidiaries
 
are,
 
in
 
certain
 
cases,
 
subject
 
to
 
regulatory
requirements
 
that
 
affect
 
the
 
transfer
 
of
 
dividends
 
and
 
capital
within
 
the Group,
 
as
 
well as
 
intercompany lending.
 
Supervisory
authorities
 
also
 
may
 
require
 
entities
 
to
 
measure
 
capital
 
and
leverage
 
ratios on
 
a
 
stressed basis,
 
such
 
as
 
the
 
Federal
 
Reserve
Board
’s
 
Comprehensive
 
Capital
 
Analysis
 
and
 
Review
 
process,
which
 
may
 
limit
the
 
relevant
 
subsidiaries’
 
ability
 
to
 
make
distributions of capital based on the results of those tests.
Supervisory
 
authorities
 
generally
 
have
 
discretion
 
to
 
impose
higher
 
requirements
 
or
 
to
 
otherwise
 
limit
 
the
 
activities
 
of
subsidiaries.
 
Non-regulated
 
subsidiaries
 
are
 
generally
 
not
 
subject
 
to
 
such
requirements
 
and transfer
 
restrictions. However,
 
restrictions
 
can
also be the result
 
of different legal, regulatory,
 
contractual, entity-
or country-specific arrangements and / or requirements.
›
 
Refer to the “Financial and regulatory key figures
 
for our
significant regulated subsidiaries and sub-groups” section
 
of this
report for financial information about significant
 
regulated
subsidiaries of the Group
b) Transferred financial assets that are not derecognized in their entirety
The table below presents
 
information for financial
 
assets that have been
 
transferred but are
 
subject to continued recognition
 
in full,
as well as recognized liabilities associated with those transferred assets.
 
Transferred financial assets subject to continued recognition in full
 
USD million
31.12.21
31.12.20
Carrying amount
of transferred
assets
Carrying amount of
 
associated liabilities
 
recognized
 
on balance sheet
Carrying amount
of transferred
assets
Carrying amount of
 
associated liabilities
 
recognized
 
on balance sheet
Financial assets at fair value held for trading that may be sold or repledged
 
by counterparties
43,397
17,687
47,098
18,874
relating to securities lending and repurchase agreements in
 
exchange for cash received
17,970
17,687
19,177
18,874
relating to securities lending agreements in exchange for securities
 
received
24,146
27,595
relating to other financial asset transfers
1,281
326
Financial assets at fair value not held for trading that may be sold or repledged
 
by
counterparties
961
898
2,140
1,378
Debt securities classified as Other financial assets measured
 
at amortized cost that may be
sold or repledged by counterparties
1,870
1,725
2,506
1,963
Financial assets measured at fair value through other comprehensive
 
income that may be sold
or repledged by counterparties
0
0
149
148
Total financial assets transferred
46,227
20,311
51,893
22,363
 
 
Transactions
 
in
 
which
 
financial
 
assets
 
are
 
transferred,
 
but
continue to be recognized
 
in their entirety on
 
UBS’s balance sheet
include securities lending
 
and repurchase agreements
 
,
 
as well as
other financial asset
 
transfers. Repurchase
 
and securities lending
arrangements are,
 
for the
 
most part,
 
conducted under
 
standard
market
 
agreements
 
and
 
are
 
undertaken
 
with
 
counterparties
subject to UBS’s normal credit risk control processes.
 
›
 
Refer to Note 1a item 2e for more information
 
about repurchase
and securities lending agreements
 
As
 
of
31
 
December
 
2021
,
approximately
41
%
 
of
 
the
transferred
 
financial
 
assets
 
were
 
assets
held
 
for
 
trading
transferred
 
in
 
exchange
 
for
 
cash,
 
in
 
which
 
case
 
the
 
associated
recognized
 
liability
 
represents
 
the
 
amount
 
to
 
be
 
repaid
 
to
counterparties. For securities
 
lending and repurchase
 
agreements,
a
 
haircut
 
of
 
between
0
%
 
and
15
%
 
is
 
generally
 
applied
 
to
 
the
transferred assets,
 
which results
 
in associated
 
liabilities having
 
a
carrying
 
amount
 
below
 
the
 
carrying
 
amount
 
of
 
the
 
transferred
assets. The counterparties to the
 
associated liabilities presented in
the table above have full recourse to UBS.
In securities
 
lending arrangements
 
entered into in
 
exchange for
the receipt
 
of other
 
securities as
 
collateral, neither
 
the securities
received
 
nor
 
the
 
obligation
 
to
 
return
 
them
 
are
 
recognized
 
on
UBS’s balance
 
sheet, as
 
the risks
 
and rewards
 
of ownership
 
are
not
 
transferred
 
to
 
UBS.
 
In
 
cases
 
where
 
such
 
financial
 
assets
received
 
are
 
subsequently
 
sold
 
or
 
repledged
 
in
 
another
transaction,
 
this
 
is
 
not
 
considered
 
to
 
be
 
a
 
transfer
 
of
 
financial
assets.
Other
 
financial
 
asset
 
transfers
 
primarily
 
include
 
securities
transferred to
 
collateralize derivative
 
transactions, for
 
which the
carrying
 
amount
 
of
 
associated
 
liabilities
 
is
 
not
 
provided
 
in
 
the
table above,
 
because those
 
replacement values are
 
managed on
a
 
portfolio
 
basis
 
across
 
counterparties
 
and
 
product
 
types,
 
and
therefore
 
there
 
is
 
no
 
direct
 
relationship
 
between
 
the
 
specific
collateral pledged and the associated liability.
Transferred
 
financial
 
assets
 
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 2021 and as of 31 December 2020.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
368
 
Note 23
 
Restricted and transferred financial assets (continued)
 
c) Transferred financial assets that are derecognized in their entirety with continuing involvement
Continuing
 
involvement
 
in a
 
transferred
 
and fully
 
derecognized
financial
 
asset
 
may
 
result
 
from
 
contractual
 
provisions
 
in
 
the
particular transfer agreement or from
 
a separate agreement, with
the counterparty or a third party, entered into in connection with
the transfer.
 
 
The
 
fair
 
value
 
and
 
carrying
 
amount
 
of
 
UBS’s
 
continuing
involvement from
 
transferred positions as
 
of
 
31 December 2021
and
 
31 December
 
2020
 
was
 
not
 
material.
 
Life-to-date
 
losses
reported
 
in
 
prior
 
periods
 
primarily
 
relate
 
to
 
legacy
 
positions
 
in
securitization
 
vehicles
 
which
 
have been
 
fully marked
 
down, with
 
no
remaining exposure
 
to loss
.
d) Off-balance sheet assets received
The table below presents assets received from third parties that can
 
be sold or repledged and that are not recognized on the
 
balance
sheet, but that are held as collateral, including amounts that have been sold or repledged.
 
Off-balance sheet assets received
USD million
31.12.21
31.12.20
Fair value of assets received that can be sold or repledged
497,828
500,689
received as collateral under reverse repurchase, securities borrowing
 
and lending arrangements, derivative and other transactions
1
483,426
487,904
received in unsecured borrowings
14,402
12,785
Thereof sold or repledged
2
367,440
367,258
in connection with financing activities
319,176
315,603
to satisfy commitments under short sale transactions
31,688
33,595
in connection with derivative and other transactions
1
16,575
18,059
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 2021:
 
USD
12.7
 
billion; 31 December 2020:
 
USD
18.9
 
billion) placed with central banks
 
related to undrawn credit
 
lines and for payment, clearing
 
and
settlement purposes for which there are no associated liabilities or contingent liabilities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
369
 
Note 24
 
Maturity analysis of financial liabilities
The
 
residual
 
contractual
 
maturities
 
for
 
non-derivative
 
and
 
non-
trading financial liabilities
 
as of 31 December 2021
 
are based on
the earliest date on which UBS could be contractually required to
pay.
 
The
 
total
 
amounts
 
that
 
contractually
 
mature
 
in
 
each
 
time
band are also shown for 31 December 2020.
 
Derivative positions
and
 
trading
 
liabilities,
 
predominantly
 
made
 
up
 
of
 
short
 
sale
transactions, are assigned to the
Due within 1 month
 
column
,
 
as
this
 
provides
 
a
 
conservative
 
reflection
 
of
 
the
 
nature
 
of
 
these
trading activities. The
 
residual contractual
 
maturities may extend
over significantly longer periods.
 
Maturity analysis of financial liabilities
31.12.21
USD billion
Due within
 
1 month
Due between
 
1 and 3 months
Due between
 
3 and 12 months
Due between
 
1 and 5 years
Due after
 
5 years
Total
Financial liabilities recognized on balance sheet
1
Amounts due to banks
 
6.7
2.4
3.5
0.6
 
13.1
Payables from securities financing transactions
3.8
0.3
1.6
0.0
 
5.7
Cash collateral payables on derivative instruments
31.8
 
 
 
 
31.8
Customer deposits
530.1
5.2
3.3
3.2
0.4
542.3
Debt issued measured at amortized cost
2
4.0
12.7
41.1
53.5
37.6
148.9
Other financial liabilities measured at amortized cost
4.5
0.1
0.5
1.8
1.6
8.4
 
of which: lease liabilities
0.1
0.1
0.5
1.8
1.6
4.0
Total financial liabilities measured at amortized cost
580.9
20.8
49.9
59.2
39.5
750.2
Financial liabilities at fair value held for trading
3,4
31.7
 
 
 
 
31.7
Derivative financial instruments
3,5
121.3
 
 
 
 
121.3
Brokerage payables designated at fair value
44.0
 
 
 
 
44.0
Debt issued designated at fair value
6
13.8
11.5
13.5
24.5
18.5
81.9
Other financial liabilities designated at fair value
28.1
0.4
0.5
0.4
1.1
30.5
Total financial liabilities measured at fair value through profit or loss
239.0
11.9
14.0
24.9
19.6
309.4
Total
819.8
32.7
63.9
84.1
59.1
1,059.6
Guarantees, commitments and forward starting transactions
Loan commitments
7
38.3
0.5
0.7
0.0
 
39.5
Guarantees
21.2
 
0.0
 
 
21.2
Forward starting transactions, reverse repurchase
and securities borrowing agreements
7
1.4
 
 
 
 
1.4
Total
60.9
0.5
0.7
0.0
0.0
62.1
 
 
31.12.20
USD billion
Due within
 
1 month
Due between
 
1 and 3 months
Due between
 
3 and 12 months
Due between
 
1 and 5 years
Due after
 
5 years
Total
Financial liabilities recognized on balance sheet
1
Amounts due to banks
6.1
2.4
2.1
0.5
0.0
11.1
Payables from securities financing transactions
5.6
0.4
0.3
0.0
0.0
6.3
Cash collateral payables on derivative instruments
37.3
 
 
 
 
37.3
Customer deposits
512.8
6.6
3.5
1.8
0.2
524.9
Debt issued measured at amortized cost
2
9.0
8.3
41.9
53.7
35.6
148.5
Other financial liabilities measured at amortized cost
4.5
0.1
0.5
2.0
1.8
8.9
 
of which: lease liabilities
0.1
0.1
0.5
2.0
1.8
4.5
Total financial liabilities measured at amortized cost
575.3
17.9
48.2
58.0
37.7
737.1
Financial liabilities at fair value held for trading
3,4
33.6
 
 
 
 
33.6
Derivative financial instruments
3,5
161.1
 
 
 
 
161.1
Brokerage payables designated at fair value
38.7
 
 
 
 
38.7
Debt issued designated at fair value
6
21.9
16.8
7.1
9.2
9.5
64.5
Other financial liabilities designated at fair value
27.9
0.6
0.6
0.7
1.1
30.9
Total financial liabilities measured at fair value through profit or loss
283.2
17.4
7.7
9.9
10.6
328.8
Total
858.5
35.3
56.0
67.9
48.3
1,065.9
Guarantees, commitments and forward starting transactions
Loan commitments
7
40.5
0.5
0.4
0.0
 
41.4
Guarantees
17.5
 
 
 
 
17.5
Forward starting transactions, reverse repurchase
and securities borrowing agreements
7
3.2
 
 
 
 
3.2
Total
61.3
0.5
0.4
0.0
0.0
62.2
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 Due after 5 years 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
30.8
 
billion due within 1 month (31 December 2020:
USD
32.6
 
billion), USD
0.9
 
billion due between 1 month and 1 year (31 December 2020: USD
1.0
 
billion) and USD
0
 
billion due between 1 and 5 years (31 December 2020: USD
0
 
billion).
 
5 Includes USD
34
 
million
(31 December 2020: USD
32
 
million) related to fair values of
 
derivative loan commitments and forward
 
starting reverse repurchase agreements classified as
 
derivatives, presented within “Due
 
within 1 month." The
full contractual committed amount of USD
36.0
 
billion (31 December 2020: USD
31.3
 
billion) is presented in Note 10 under notional
 
amounts.
 
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).
 
Consolidated financial statements | UBS Group AG consolidated financial statements
370
 
Note 25
 
Interest rate benchmark reform
Background
A market-wide reform of major interest rate benchmarks is being
undertaken
 
globally,
 
with
 
the
 
Financial
 
Conduct
 
Authority
 
(the
FCA) announcing in
 
March 2021
 
that the publication
 
of London
Interbank Offered Rates (LIBORs) would cease after 31 December
2021 for
 
all non-US
 
dollar LIBORs,
 
as well
 
as for
 
one-week and
two-month USD
 
LIBOR. Publication
 
of the
 
remaining USD
 
LIBOR
tenors will cease immediately after 30 June 2023.
The majority of UBS’s IBOR exposure was linked
 
to CHF LIBOR
and USD LIBOR. The
 
alternative reference rate (the
 
ARR) for CHF
LIBOR is the Swiss Average Rate Overnight (SARON). The ARR for
USD
 
LIBOR
 
is
 
the
 
Secured
 
Overnight
 
Financing
 
Rate
 
(SOFR);
 
in
addition, there are recommended ARRs for GBP LIBOR, JPY LIBOR
and EUR LIBOR.
 
The
 
Euro
 
Interbank Offered
 
Rate (EURIBOR)
 
was reformed
 
in
2019,
 
with the
 
reform consisting
 
of a
 
change in
 
the underlying
calculation
 
method.
 
Consequently,
 
contracts
 
linked
 
to
 
EURIBOR
are not considered throughout the rest of this Note.
On 25 January 2021, the IBOR Fallbacks
 
Supplement and IBOR
Fallbacks
 
Protocol,
 
which
 
amend
 
the
 
International
 
Swaps
 
and
Derivatives Association (ISDA)
 
standard definitions
 
for interest rate
derivatives to incorporate
 
fallbacks for derivatives
 
linked to certain
IBORs,
 
came
 
into
 
effect.
 
From
 
that
 
date,
 
all
 
newly
 
cleared
 
and
non-cleared derivatives
 
between adhering
 
parties that
 
reference
ISDA
 
standard
 
definitions
 
now
 
include
 
these
 
fallbacks.
 
UBS
adhered to the protocol in November 2020.
UBS’s
 
focus
 
throughout
 
2021
 
was
 
on
 
transitioning
 
existing
contracts via bi-lateral
 
and multi-lateral agreements,
 
by leveraging
industry
 
solutions
 
(e.
g.,
 
the
 
use
 
of
 
fallback
 
provisions)
 
and
 
through
 
third-party
 
actions
 
(those
 
by
 
clearing
 
houses,
 
agents,
etc.). UBS
 
has established
 
a framework
 
to address
 
the transition
of
 
contracts
 
that
 
do
 
not
 
contain
 
adequate
 
fallback
 
provisions.
Furthermore,
 
in
 
line
 
with
 
regulatory
 
guidance
,
 
UBS
 
has
implemented
 
a
 
framework
 
to
 
limit
 
new
 
contracts
 
referencing
IBORs.
 
Governance over the transition to alternative benchmark rates
UBS
 
established
 
a
 
global
 
cross-divisional,
 
cross-functional
governance structure
 
and change
 
program
 
to address
 
the scale
and complexity of
 
the transition.
 
This global program
 
is sponsored
by
 
the
 
Group
 
CFO
 
and
 
led
 
by
 
senior
 
representatives
 
from
 
the
business divisions
 
and UBS’s
 
control and
 
support functions.
 
The
program
 
includes
 
governance
 
and
 
execution
 
structures
 
within
each business division,
 
together with cross-divisional
 
teams from
each
 
control
 
and
 
support
 
function.
 
During
 
2021,
 
progress
 
was
overseen
 
centrally
 
via
 
a
 
monthly
 
operating
 
committee
 
and
 
a
monthly steering
 
committee, as well
 
as quarterly
 
updates to
 
the
joint Audit and Risk
 
Committees. A dedicated Group-wide
 
forum,
with an increased US
 
regional focus, will oversee
 
progress of the
remaining USD LIBOR transition.
Risks
A
 
core
 
part
 
of
 
UBS’s
 
change
 
program
 
is
 
the
 
identification,
management
 
and
 
monitoring
 
of
 
the
 
risks
 
associated
 
with
 
IBOR
reform and transition. These
 
risks include,
 
but are not limited
 
to,
the following:
–
 
economic risks to UBS and its
 
clients, through the repricing of
existing
 
contracts,
 
reduced
 
transparency
 
and
 
/
 
or
 
liquidity
 
of
pricing information, market uncertainty or disruption;
–
 
accounting
 
risks, where
 
the transition
 
affects the
 
accounting
treatment,
 
including
 
hedge
 
accounting
 
and
 
consequential
income statement volatility;
–
 
valuation risks arising from the variation between benchmarks
that will cease
 
and ARRs, affecting
 
the risk profile
 
of financial
instruments;
–
 
operational risks
 
arising from
 
changes to
 
UBS’s front-to-back
processes
 
and
 
systems
 
to
 
accommodate
 
the
 
transition,
 
e.g.,
data sourcing and processing and bulk migration of contracts;
and
–
 
legal
 
and
 
conduct
 
risks
 
relating
 
to
 
UBS’s
 
engagement
 
with
clients
 
and
 
market
 
counterparties
 
around
 
new
 
benchmark
products
 
and
 
amendments
 
required
 
for
 
existing
 
contracts
referencing benchmarks that will cease.
 
Overall, the effort required to transition is affected by multiple
factors, including
 
whether negotiations need
 
to
 
take place
 
with
multiple stakeholders
 
(as is the case for
 
syndicated loans
 
or certain
listed
 
securities),
 
market
 
readiness
–
 
such
 
as
 
liquidity
 
in
 
ARR
-
equivalent products – and a
 
client’s technical readiness to handle
ARR
 
market conventions.
 
UBS remains
 
confident that
 
it
 
has
 
the
transparency, oversight and operational preparedness to progress
with the
 
IBOR transition
 
consistent
 
with market
 
timelines,
 
given the
significant progress made as
 
of 31 December 2021.
 
UBS did
 
not
have
 
and does
 
not expect
 
changes
 
to its
 
risk
 
management
 
approach
and strategy
 
as a result
 
of interest
 
rate benchmark
 
reform.
 
 
 
 
371
 
Note 25
 
Interest rate benchmark reform (continued)
Transition progress
 
Non-derivative instruments
UBS’s significant non-derivative exposures subject to IBOR reform
primarily
 
related
 
to
 
brokerage
 
receivable
 
and
 
payable
 
balances,
corporate and
 
private loans,
 
and mortgages,
 
linked to
 
CHF and
USD
 
LIBORs.
 
During
 
2020,
 
UBS
 
transitioned
 
most
 
of
 
its
 
CHF
LIBOR-linked deposits to SARON.
 
In that same year, UBS launched
SARON-based mortgages and corporate loans based on all major
ARRs in the
 
Swiss market, as
 
well as SOFR-based
 
mortgages in the
US market.
 
Throughout
 
2021,
 
UBS
 
transitioned
 
substantially
 
all
 
of
 
its
private
 
and
 
corporate
 
loans
 
linked
 
to
 
non-USD
 
IBORs,
 
with
 
the
remaining
 
CHF
 
LIBOR-linked
 
contracts
 
planned
 
to
 
transition
 
on
their first roll date in 2022.
 
In addition, as
 
of 31 December 2021
 
UBS had completed
 
the
transition
 
of
 
IBOR
-
linked
 
non
-
derivative
 
financial
 
assets
 
and
liabilities
 
related
 
to
 
brokerage
 
accounts,
 
except
 
for
 
balances
originated in the US, which transitioned
 
to SOFR in January 2022.
In
 
March
 
2021,
 
following
 
the FCA
 
announcement
 
regarding
the
 
cessation
 
timelines
 
for
 
IBORs,
 
UBS
 
initiated
 
a
 
centralized
communication
 
initiative
 
for
 
private
 
mortgages
 
linked
 
to
 
CHF
LIBOR, with the objective
 
of transitioning these exposures,
 
either
through the activation of existing fallbacks
 
or the amendment of
contractual terms where such
 
fallbacks do not exist.
 
During 2021,
mortgages
 
that
 
were
 
linked
 
to
 
CHF
 
LIBOR
were
 
reduced
to
 
USD
 
21
 
billion
 
as
 
of 31 December
 
2021,
 
with these
 
remaining
mortgages automatically
 
transitioning to
 
SARON from
 
their next
coupon roll date.
 
The
 
transition
 
of
US
 
sec
urities
-
based
 
lending
to
 
SOFR
,
 
amounting
 
to
 
USD
37
 
billion
 
as of
 
31 December
 
2021,
 
was for
the
 
most
 
part
 
completed
 
in
 
January
 
2022,
 
with
 
US
 
mortgages
linked to USD LIBOR planned
 
to transition to SOFR
 
in 2022–2023.
As of
 
31 December 2021, UBS
 
had approximately
 
USD
3
 
billion
equivalent of
 
Japanese yen-
 
and US
 
dollar-denominated publicly
issued
 
benchmark
 
bonds
 
that, per
 
current
 
contractual
 
terms,
 
if
not called on their
 
respective call dates,
 
would reset based
 
directly
on
 
JPY
 
LIBOR
 
and
 
USD
 
LIBOR.
 
These
 
bonds
 
have
 
robust
 
IBOR
fallback language and
 
the confirmation
 
of interest rate
 
calculation
mechanics will
 
be communicated
 
as market
 
standards formalize
and in
 
advance of
 
any rate
 
resets. In
 
addition, several
 
US dollar-
and
 
Swiss
 
franc-denominated
 
benchmark
 
bonds
 
publicly
 
issued
by UBS
 
reference rates
 
indirectly derived
 
from IBORs,
 
if they
 
are
not
 
called
 
on
 
their
 
respective
 
call
 
dates.
 
UBS
 
aims
 
to
 
transition
those bonds in advance of their reset dates, with
 
the transition of
Swiss franc-denominated benchmark
 
bonds completed in
 
January
2022. These debt instruments
 
have not been
 
included in the
 
table
on the following page, given their current fixed-rate coupon.
 
As of
 
31 December 2021, UBS
 
had approximately
 
USD
5
 
billion
of irrevocable commitments that may
 
be drawn down in different
currencies with IBOR-linked interest
 
rates and that
 
expire after the
relevant benchmark cessation
 
dates; approximately USD
3
 
billion
of
 
these
 
contracts
 
had
 
transitioned
 
for
 
all
 
IBORs,
 
except
 
USD
LIBOR
,
 
and
USD
 
2
 
billion
 
of
 
these
commitments
 
retained
a
non
-
USD
 
IBOR
 
interest
 
rate
 
as
of
 
31
 
December
 
2021
with
transition
 
dependent
 
upon
 
the
 
actions
 
of
 
other
 
parties.
 
To
 
the
extent non-USD IBOR-linked
 
amounts are requested
 
under these
contracts,
 
UBS will
 
seek to
 
renegotiate
 
current
 
terms or
 
rely on
legislative solutions.
Derivative instruments
 
UBS holds derivatives
 
for trading and
 
hedging purposes, including
those designated in hedge accounting relationships. A significant
number
 
of
 
interest
 
rate
 
and cross
 
-currency
 
swaps have
 
floating
legs that
 
reference various
 
benchmarks that
 
are subject
 
to IBOR
reform.
The majority of derivatives
 
are transacted with clearing
 
houses,
in
 
particular
 
LCH,
 
with
 
the
 
transition
 
of
 
these
 
non-USD
 
IBOR-
linked derivatives substantially completed
 
in December 2021.
 
UBS
had
 
also
 
completed
 
the
 
transition
 
of
 
all
 
non-USD
 
IBOR-linked
exchange
-
traded
 
derivatives
 
(ETDs)
 
through
 
participation
 
in
activities
 
organized
 
by
 
respective
 
exchanges
 
by
 
31
 
December
2021.
 
For
 
derivatives
 
not
 
transacted
 
with
 
clearing
 
houses
 
or
exchanges,
 
UBS
 
and
 
a
 
significant
 
proportion
 
of
 
UBS’s
counterparties have adhered to the ISDA IBOR Fallbacks Protocol,
which builds in
 
agreed fallbacks. The
 
majority of these
 
contracts
had
 
transitioned as
 
of 31 December
 
2021,
 
with a
 
small number
of
 
contracts
 
transitioned
 
in
 
January
 
2022,
 
to
 
ensure
 
an
 
orderly
transition
 
when
 
converting
 
high
 
volumes
 
of
 
transactions
 
at
 
the
time of cessation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
372
 
Note 25
 
Interest rate benchmark reform (continued)
Financial instruments yet to transition to alternative benchmarks
The
 
amounts
 
included
 
in
 
the
 
table
 
below
 
relate
 
to
 
financial
instrument
 
contracts across
 
UBS’s business
 
divisions
 
where
 
UBS
has material
 
exposures subject
 
to IBOR
 
reform that
 
have not
 
yet
transitioned to ARRs, and that:
–
 
contractually
 
reference
 
an
 
interest
 
rate
 
benchmark
 
that
 
will
transition to an alternative benchmark; and
–
 
have
 
a
 
contractual
 
maturity
 
date
 
(including
 
open-ended
contracts) after the agreed cessation dates.
 
Contracts
where
 
penalty
 
terms
 
reference
 
IBORs,
 
or
 
where
exposure to
 
an IBOR
 
is not
 
the primary
 
purpose of
 
the contract,
have not been included,
 
as these contracts do
 
not have a material
impact on the transition process.
 
In line with information provided
 
to management and external
parties
 
monitoring
 
UBS’s
 
transition
 
progress,
 
the
 
table
 
below
includes the
 
following financial
 
metrics for
 
instruments external
to the Group that are subject to interest rate benchmark reform:
–
 
gross
 
carrying
 
value
 
/
 
exposure
 
for
 
non-derivative
 
financial
instruments;
 
and
 
–
 
total trade count for derivative financial instruments.
The
 
exposure
s
 
included
 
in
 
the
 
table
 
below
 
represent
 
the
maximum
 
IBOR
 
exposure,
 
without
 
regard
 
for
 
early
 
termination
rights,
 
with
 
the
 
actual
 
exposure
 
being
 
dependent
 
upon
 
client
preferences and investment decisions.
 
As of
 
31 December 2021, UBS
 
had
 
made significant progress
in transitioning LIBOR
 
exposures to ARRs.
 
The remaining non-USD
LIBOR-linked
 
exposures
 
included
 
in
 
the
 
table
 
below
 
primarily
relate to derivatives that successfully transitioned in January 2022
and
 
CHF
 
LIBOR
 
mortgages
 
that
 
will
 
automatically
 
transition
 
to
SARON on their first roll date in 2022.
 
 
31.12.21
LIBOR benchmark rates
Measure
CHF
USD
GBP
EUR
1
JPY
Carrying value of non-derivative financial instruments
Total non-derivative financial assets
 
USD million
21,616
2
65,234
3
45
4
1
0
Total non-derivative financial liabilities
 
USD million
27
4
1,985
4
3
4
5
0
Trade count of derivative financial instruments
Total derivative financial instruments
Trade count
829
6
40,500
7
183
6
3,744
6
184
6
Off-balance sheet exposures
Total irrevocable loan commitments
USD million
0
11,863
8
0
0
0
1 Relates primarily to EUR LIBOR positions.
 
2 Relates primarily to CHF LIBOR mortgages, which will automatically transition to SARON on their first roll date in 2022.
 
3 Includes USD LIBOR securities-based lending
and brokerage accounts, amounting to USD
37
 
billion, and USD
5
 
billion respectively, which for the most part transitioned to SOFR in January 2022, as well as USD
1
 
billion of loans related to revolving multi-currency
credit lines, where IBOR transition efforts are complete, except for USD LIBOR. The remainder primarily relates to US mortgages and corporate lending.
 
4 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.
 
5 Relates to contracts that transitioned
 
in January 2022.
 
6 Includes predominantly bilateral derivatives,
 
which
transitioned in January 2022, and an insignificant amount of cleared derivatives, where the respective clearing houses’ organized transition happened in January 2022.
 
7 Includes approximately
5,000
 
cross-currency
derivatives, of which approximately
500
 
have both a non-USD LIBOR leg and a USD LIBOR
 
leg, where the non-USD leg transitioned in January 2022 before the
 
next fixing date. The remainder represents cross-currency
swaps with an ARR leg
 
and a USD IBOR leg.
 
8 Includes loan commitments that can
 
be drawn in different currencies
 
at the client‘s discretion, of
 
which approximately USD
3
 
billion have only USD LIBOR
 
exposure
remaining and approximately USD
2
 
billion retain a non-USD
 
LIBOR interest rate as
 
of 31 December 2021, with
 
transition dependent upon the
 
actions of other parties.
 
The remainder represents loan
 
commitments
that can be drawn in US dollars only and will transition in 2022–2023.
 
 
 
 
 
373
 
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 spot foreign exchange rate.
 
The notional
 
of the
 
designated hedging
 
instruments matches
the notional
 
of the
 
hedged items,
 
except when
 
the interest
 
rate
swaps are
 
re-designated in
 
cash flow
 
hedges, in
 
which case
 
the
hedge
 
ratio
 
designated
 
is
 
determined
 
based
 
on
 
the
 
swap
sensitivity.
Hedged items and hedge designation
 
Fair value hedges of interest rate risk related to debt instruments
and loan assets
Fair value hedges of interest
 
rate risk related to debt
 
instruments
and loan assets involve
 
swapping fixed cash flows
 
associated with
the debt issued,
 
debt securities held
 
and, from 2021
 
onward, loan
assets
 
(principally
 
long-term
 
fixed-rate
 
mortgage
 
loans
 
in
 
Swiss
francs formerly designated within “Fair
 
value hedges of portfolio
interest
 
rate
 
risk
 
related
 
to
 
loans
 
designated
 
under
 
IAS 39”)
 
to
floating cash flows by
 
entering into interest rate swaps
 
that either
receive
 
fixed and
 
pay
 
floating cash
 
flows
 
or
 
that
 
pay
 
fixed
 
and
receive floating cash flows.
 
Designations
 
have
 
been
 
made
 
in
 
US
 
dollars,
 
euros,
 
Swiss
francs, Australian dollars, Japanese
 
yen and Singapore dollars.
 
For
new hedging
 
instruments and
 
hedged risk
 
designations entered
into in 2021 in these
 
currencies (with the exception of euro),
 
the
benchmark rate was the relevant alternative reference rate (ARR).
Following the
 
interbank offered
 
rate (IBOR)
 
transition for
 
swaps
with
 
LCH
 
(formerly
 
the
 
London
 
Clearing
 
House)
 
in
 
December
2021,
 
the
 
benchmark
 
hedge
 
rate
 
for
 
Swiss
 
franc
 
and
 
Japanese
yen designations was changed
 
from an IBOR rate
 
to the relevant
ARR with
 
the hedge
 
relationship continuing
 
in accordance
 
with
Interest
 
Rate
 
Benchmark
 
Reform
 
–
 
Phase
 
2
 
(Amendments
 
to
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
.
Fair
 
value
 
hedges
 
of
 
portfolio
 
interest
 
rate
 
risk
 
related
 
to
 
loans
designated under IAS 39
Prior to December 2021, the Group
 
hedged an open portfolio of
long-term fixed-rate mortgage loans in
 
Swiss francs using interest
rate swaps that
 
paid a fixed
 
rate of interest
 
and received a
 
floating
rate
 
of
 
interest.
 
Both
 
the
 
hedged
 
portfolio
 
and
 
the
 
hedging
instruments were adjusted
 
on a monthly basis
 
to reflect changes
in
 
size
 
and
 
the
 
maturity
 
profile
 
of
 
the
 
hedged
 
portfolio.
 
Each
month the
 
hedge relationship
 
was discontinued
 
and a
 
new one
designated.
 
Changes in
 
the portfolio
 
were
 
driven by
 
new loans
being originated or loans being repaid.
Cash flow hedges of forecast transactions
The
 
Group
 
hedges forecas
 
t
 
cash flows
 
on
 
non-trading financial
assets
 
and
 
liabilities
 
that
 
bear
 
interest
 
at
 
variable
 
rates
 
or
 
are
expected
 
to
 
be
 
refinanced
 
or
 
reinvested
 
in
 
the
 
future,
 
due
 
to
movements
 
in
 
future
 
market
 
rates. The
 
amounts
 
and
 
timing of
future cash flows, representing
 
both principal and interest flows,
are projected on the basis of
 
contractual terms and other
 
relevant
factors,
 
including
 
estimates
 
of
 
prepayments
 
and
 
defaults.
 
The
aggregate
 
principal
 
balances
 
and
 
interest
 
cash
 
flows
 
across
 
all
portfolios over time form the
 
basis for identifying the non-trading
interest rate risk of the Group, which is hedged with interest rate
swaps,
 
the
 
maximum
 
maturity
 
of
 
which
 
is
 
10
 
years.
 
Cash
 
flow
forecasts
 
and risk
 
exposures
 
are
 
monitored
 
and adjusted
 
on an
ongoing basis, and
 
consequently additional hedging instruments
are traded and designated, or are terminated resulting
 
in a hedge
discontinuance.
 
Hedge
 
designations
 
have
 
been
 
made
 
in
 
the
following
 
currencies:
 
US
 
dollars,
 
euros,
 
Swiss
 
francs,
 
pounds
sterling
 
and
 
Hong
 
Kong
 
dollars.
 
The
 
cash
 
flow
 
hedges
 
in
 
US
dollars, Swiss
 
francs and
 
pounds sterling
 
were discontinued
 
and
replaced with new ARR designations in December 2021.
›
 
Refer to Note
1b
 
for more information
Fair value hedges of foreign exchange risk related to issued debt
instruments
Debt
 
instruments
 
denominated
 
in
 
currencies
 
other than
 
the US
dollar
 
are
 
designated
 
in
 
fair
 
value
 
hedges
 
of
 
spot
 
foreign
exchange
 
risk,
 
in
 
addition
 
to
 
and
 
separate
 
from
 
the
 
fair
 
value
hedges
 
of
 
interest
 
rate
 
risk.
 
Cross-currency
 
swaps
 
economically
convert debt denominated in currencies
 
other than the US dollar
to
 
US
 
dollars.
 
This
 
hedge
 
accounting
 
program
 
started
 
on
1 January
 
2020,
 
with
 
the
 
adoption
 
of
 
the
 
hedge
 
accounting
requirements of IFRS 9,
Financial Instruments,
 
by UBS.
›
 
Refer to Note
1b
 
for more information
Hedges of net investments in foreign operations
The Group applies
 
hedge accounting for
 
certain net investments
in
 
foreign
 
operations,
 
which
 
include
 
subsidiaries,
 
branches
 
and
associates. Upon
 
maturity of
 
hedging instruments,
 
typically two
months,
 
the
 
hedge
 
relationship
 
is
 
terminated
 
and
 
new
designations
 
are
 
made
 
to
 
reflect
 
any
 
changes
 
in
 
the
 
net
investments in foreign operations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
374
 
Note 26
 
Hedge accounting (continued)
 
 
Economic relationship between hedged item and hedging
instrument
For
 
hedges
 
designated
 
under
 
IFRS
 
9,
 
the economic
 
relationship
between
 
the
 
hedged
 
item
 
and
 
the
 
hedging
 
instrument
 
is
determined based on
 
a qualitative analysis
 
of their critical
 
terms.
In cases where hedge designation takes place after origination of
the
 
hedging
 
instrument,
 
a
 
quantitative
 
analysis
 
of
 
the
 
possible
behavior of
 
the hedging
 
derivative and
 
the hedged
 
item during
their respective terms is also performed.
Prior to
 
December 2021, for
 
the fair
 
value hedge of
 
portfolio
interest rate risk related to loans designated under IAS 39, hedge
effectiveness was assessed by
 
comparing changes in the
 
fair value
of
 
the hedged
 
portfolio of
 
loans
 
attributable
 
to
 
changes
 
in
 
the
designated benchmark
 
interest rate
 
with the
 
changes in
 
the fair
value of the interest rate swaps.
Sources of hedge ineffectiveness
 
In
 
hedges
 
of
 
interest
 
rate
 
risk,
 
hedge
 
ineffectiveness
 
can
 
arise
from
 
mismatches
 
of
 
critical
 
terms
 
and
 
/
 
or
 
the
 
use
 
of
 
different
curves
 
to
 
discount
 
the
 
hedged
 
item
 
and
 
instrument,
 
or
 
from
entering
 
into
 
a
 
hedge
 
relationship
 
after
 
the
 
trade
 
date
 
of
 
the
hedging derivative
.
 
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.
 
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.
 
 
All hedges: designated hedging instruments
 
and hedge ineffectiveness
As of or for the year ended
31.12.21
Carrying amount
USD million
Notional
amount
Derivative
financial
assets
Derivative
financial
liabilities
Changes in
 
fair value of
hedging
instruments
1
Changes in
fair value of
hedged
items
1
Hedge
ineffectiveness
recognized in the
income statement
Interest rate risk
Fair value hedges
89,525
0
7
(1,604)
1,602
(2)
Cash flow hedges
79,573
12
1
(1,185)
990
(196)
Foreign exchange risk
Fair value hedges
2
27,875
87
261
(2,139)
2,181
42
Hedges of net investments in foreign operations
13,939
23
105
497
(497)
0
As of or for the year ended
31.12.20
Carrying amount
USD million
Notional
amount
Derivative
financial
assets
Derivative
financial
liabilities
Changes in
 
fair value of
hedging
instruments
1
Changes in
fair value of
hedged
items
1
Hedge
ineffectiveness
recognized in the
income statement
Interest rate risk
Fair value hedges
80,759
12
1,231
(1,247)
(16)
Cash flow hedges
72,732
18
2,213
(2,012)
201
Foreign exchange risk
Fair value hedges
2
21,555
449
7
(1,735)
1,715
(20)
Hedges of net investments in foreign operations
13,775
3
194
(937)
936
(2)
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
375
 
Note 26
 
Hedge accounting (continued)
Fair value hedges: designated hedged items
 
USD million
31.12.21
31.12.20
Interest rate
risk
FX risk
Interest rate
risk
FX risk
Debt issued measured at amortized cost
Carrying amount of designated debt issued
74,700
27,875
70,429
21,555
 
of which: accumulated amount of fair value hedge adjustment
478
2,401
Other financial assets measured at amortized cost – debt securities
Carrying amount of designated debt securities
2,677
3,242
 
of which: accumulated amount of fair value hedge adjustment
(7)
(38)
Loans and advances to customers
1
Carrying amount of designated loans
13,835
10,374
of which: accumulated amount of fair value hedge adjustment
2
(109)
100
of which: accumulated amount of fair value hedge adjustment subject
 
to amortization attributable to the portion of the
portfolio that ceased to be part of hedge accounting
2
3
111
1 Prior to 31 December 2021, these amounts were designated in fair value hedges of portfolio interest rate risk under IAS 39.
 
2 As of 31 December 2021, the amount was presented within Loans and advances to
customers, whereas prior to 1 January 2021 amounts were presented within either Other financial assets
 
measured at amortized cost or Other financial liabilities measured at amortized cost.
 
Fair value hedges: profile of the timing of the
 
nominal amount of the hedging instrument
 
31.12.21
USD billion
Due within
1 month
Due between
1 and 3 months
Due between
3 and 12 months
Due between
1 and 5 years
Due after
5 years
Total
Interest rate swaps
0
8
10
49
22
90
Cross-currency swaps
 
1
1
6
13
6
28
31.12.20
USD billion
Due within
1 month
Due between
1 and 3 months
Due between
3 and 12 months
Due between
1 and 5 years
Due after
5 years
Total
Interest rate swaps
1
0
4
9
46
12
70
Cross-currency swaps
 
0
0
4
16
2
22
1 In accordance with IFRS 7 requirements, the fair value hedges of portfolio interest rate risk
 
related to loans and advances to customers designated under IAS 39 are not included.
 
Cash flow hedge reserve on a pre-tax basis
 
USD million
31.12.21
31.12.20
Amounts related to hedge relationships for which hedge
 
accounting continues to be applied
26
2,560
Amounts related to hedge relationships for which hedge
 
accounting is no longer applied
743
296
Total other comprehensive income recognized directly in equity related to cash flow hedges, on a pre-tax basis
769
2,856
 
Foreign currency translation reserve on a pre-tax basis
USD million
31.12.21
31.12.20
Amounts related to hedge relationships for which hedge
 
accounting continues to be applied
(45)
(559)
Amounts related to hedge relationships for which hedge
 
accounting is no longer applied
262
268
Total other comprehensive income recognized directly in equity related to hedging instruments
 
designated as net investment hedges, on a pre-tax
basis
217
(291)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
376
 
Note 26
 
Hedge accounting (continued)
Interest rate benchmark reform
The Group continues to apply the relief provided
 
by
Interest Rate
Benchmark
 
Reform
 
(amendments
 
to
 
IFRS 9,
 
IAS 39 and
 
IFRS 7),
published by the IASB in September 2019.
 
The
 
interest
 
rate
 
benchmarks
 
subject
 
to
 
interest
 
rate
benchmark
 
reforms
 
to
 
which
 
the
 
Group’s
 
hedge
 
relationships
were
 
exposed
 
were
 
USD
 
LIBOR,
 
CHF
 
LIBOR,
 
GBP
 
LIBOR,
 
AUD
LIBOR, JPY
 
LIBOR, HKD
 
LIBOR, SGD
 
LIBOR and
 
EONIA. Interest rate
swaps
 
designated
 
in
 
hedge
 
relationships
 
referencing
 
GBP,
 
CHF
and JPY LIBOR transitioned to ARRs
 
in December 2021 when LCH
transitioned
 
its
 
contracts.
 
For
 
other
 
currencies,
 
IBOR
 
quotations
remain available, but all
 
new designations will reference
 
ARR. As
such,
 
ARR
 
designations
 
in
 
these
 
currencies
 
will
 
replace
 
IBOR
designations as IBOR contracts mature.
 
The Group’s hedge
 
relationships are also
 
exposed to the Euro
Inter-bank Offered Rate (EURIBOR), which
 
is expected to continue
to exist as a benchmark rate for the foreseeable future. Thus, the
Group
 
does
 
not
 
consider
 
its
 
hedges
 
involving
 
the
 
EURIBOR
benchmark
 
interest
 
rate
 
to
 
be
 
directly
 
affected
 
by
 
interest
 
rate
benchmark reform.
 
Apart from
 
EURIBOR hedges,
 
UBS applied
 
the relief
 
to all
 
its
fair value
 
hedges of
 
interest rate
 
risk and to
 
those cash
 
flow hedge
relationships
 
where
 
the
 
hedged
 
risk
 
is
 
LIBOR
 
or
 
EONIA.
 
The
following
 
table
 
provides
 
details
 
on
 
the
 
notional
 
amount
 
and
carrying
 
amount
 
of
 
the
 
hedging
 
instruments
 
in
 
those
 
hedge
relationships maturing after 31 December 2021, or 30 June 2023
for
 
USD
 
LIBOR
 
hedges,
 
which
 
are
 
the
 
cessation
 
dates
 
of
 
the
applicable interest rate benchmarks.
Hedges
 
of
 
net
 
investments
 
in
 
foreign
 
operations
 
are
 
not
affected by the amendments.
›
 
Refer to Note
1a item 2j
for more information about the relief
provided by the amendments to IFRS 9, IAS
 
39 and IFRS 7 related
to interest rate benchmark reform
›
 
Refer to Note 25 Interest rate benchmark reform
 
for more
information about the transition progress
 
 
Hedging instruments referencing LIBOR
31.12.21
31.12.20
Carrying amount
Carrying amount
USD million
Notional
amount
Derivative
financial
assets
Derivative
financial
liabilities
Notional
amount
Derivative
financial
assets
Derivative
financial
liabilities
Interest rate risk
Fair value hedges
23,367
0
0
37,146
1
(12)
Cash flow hedges
10,803
0
0
11,179
0
0
 
 
 
 
 
377
 
Note 27
 
Post-employment benefit plans
a) Defined benefit plans
UBS
 
has
 
established
 
defined
 
benefit
 
plans
 
for
 
its
 
employees
 
in
various
 
jurisdiction
s
 
in
 
accordance
 
with
 
local
 
regulations
 
and
practices.
 
The major plans are located in Switzerland, the UK, the
US
 
and Germany.
 
The
 
level of
 
benefits
 
depends on
 
the specific
plan rules.
Swiss pension plan
The
Swiss
 
pension
 
plan
 
covers
employees
 
of
 
UBS
 
AG
 
in
Switzerland
 
and employees
 
of companies
 
in Switzerland
 
having
close
 
economic
 
or
 
financial
 
ties with
 
UBS
 
AG, and
 
exceeds
 
the
minimum
 
benefit
 
requirements
 
under
 
Swiss
 
pension
 
law.
 
The
Swiss plan offers retirement, disability and survivor benefits
 
and is
governed by a
 
Pension Foundation
 
Board. The
 
responsibilities of
this board are defined by Swiss pension law and the plan rules.
Savings
 
contributions
 
to
 
the
 
Swiss
 
plan
 
are
 
paid
 
by
 
both
employer and employee. Depending on the age of the
 
employee,
UBS pays
 
a savings
 
contribution that
 
ranges between
6.5
% and
27.5
% of contributory base salary
 
and between
2.8
% and
9
% of
contributory
 
variable
 
compensation.
 
UBS
 
also
 
pays
 
risk
contributions that
 
are used
 
to fund
 
disability and
 
survivor benefits.
Employees can
 
choose the
 
level of savings
 
contributions paid
 
by
them, which vary between
2.5
% and
13.5
% of contributory base
salary
 
and
 
between
0
%
 
and
9
%
 
of
 
contributory
 
variable
compensation,
 
depending
 
on
 
age
 
and
 
choice
 
of
 
savings
contribution category.
 
The plan offers to
 
members at the
 
normal retirement age
 
of
65
a choice between
 
a lifetime pension
 
and a partial
 
or full lump
 
sum
payment.
 
Participants
 
can
 
choose
 
to
draw
 
early
 
retirement
benefits
 
starting
 
from
 
the
 
age
 
of
58
,
 
but
 
can
 
also
 
continue
employment and remain active members
 
of the plan until the
 
age
of
70
.
 
Employees
 
have
 
the
 
opportunity
 
to
 
make
 
additional
purchases of benefits to fund early retirement benefits.
The pension
 
amount payable
 
to a
 
participant is
 
calculated by
applying
 
a
 
conversion
 
rate
 
to
 
the
 
accumulated
 
balance
 
of
 
the
participant’s
 
retirement
 
savings
 
account
 
at
 
the
 
retirement
 
date.
The balance is based on credited vested benefits transferred from
previous employers, purchases of benefits, and the
 
employee and
employer contributions that have
 
been made to the
 
participant’s
retirement
 
savings account,
 
as well
 
as the
 
interest accrued.
 
The
annual interest rate
 
credited to participants
 
is determined by
 
the
Pension Foundation Board at the end of each year.
Although
 
the
 
Swiss
 
plan
 
is
 
based
 
on
 
a
 
defined
 
contribution
promise under Swiss pension law, it is accounted for as a defined
benefit
 
plan
 
under
 
IFRS,
 
primarily
 
because
 
of
 
the
 
obligation
 
to
accrue
 
interest
 
on
 
the
 
participants’
 
retirement
 
savings
 
accounts
and the payment of lifetime pension benefits.
 
An actuarial valuation in accordance with Swiss pension law is
performed
 
regularly.
 
Should
 
an
 
underfunded
 
situation
 
on
 
this
basis occur, the Pension Foundation Board is required to
 
take the
necessary measures
 
to ensure
 
that full
 
funding can
 
be expected
to be
 
restored within
 
a maximum
 
period of
10
 
years. If
 
a Swiss
plan
 
were
 
to
 
become
 
significantly
 
underfunded
 
on
 
a
 
Swiss
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 2021, the
 
Swiss plan had
 
a technical
funding
 
ratio in
 
accordance with
 
Swiss pension
 
law of
134.8
%
(31 December 2020:
132.6
%).
The investment strategy of the Swiss plan complies with Swiss
pension
 
law,
 
including
 
the
 
rules
 
and
 
regulations
 
relating
 
to
diversification of plan assets,
 
and is derived
 
from the risk budget
defined by the Pension
 
Foundation Board on
 
the basis of
 
regularly
performed asset and
 
liability management analyses.
 
The Pension
Foundation
 
Board strives
 
for
 
a medium
 
-
 
and long
 
-term balance
between assets and liabilities.
 
As
 
of
 
31 December
 
2021,
 
the
 
Swiss
 
plan
 
was
 
in
 
a
 
surplus
situation on
 
an IFRS
 
measurement basis,
 
as the
 
fair value
 
of the
plan’s
 
assets
 
exceeded
 
the
 
defined
 
benefit
 
obligation
 
(DBO)
 
by
USD
6,577
 
million
 
(31 December 2020:
 
a
 
surplus
 
of
 
USD
4,862
million).
 
However,
 
a
 
surplus
 
is
 
only
 
recognized
 
on
 
the
 
balance
sheet to
 
the extent that
 
it does not
 
exceed the
 
estimated future
economic
 
benefit,
 
which
 
equals
 
the
 
difference
 
between
 
the
present
 
value
 
of
 
the
 
estimated
 
future
 
net
 
service
 
cost
 
and
 
the
present value of the estimated
 
future employer contributions. As
of
 
both
 
31 December
 
2021
 
and
 
31 December
 
2020,
 
the
estimated
 
future
 
economic
 
benefit
 
was
 
zero
 
and
 
hence
 
no
 
net
defined benefit asset was recognized on the balance sheet.
 
Changes to the Swiss pension plan in 2019
The
 
Pension
 
Foundation
 
Board
 
and
 
UBS
 
agreed
 
to
 
implement
measures that
 
took effect
 
from the
 
start of 2019
 
to support the
long-term
 
financial
 
stability
 
of
 
the
 
Swiss
 
pension
 
fund.
 
The
measures, among
 
other things, lowered
 
the conversion rate
 
and
increased
 
the
 
normal
 
retirement
 
age
 
from
 
64
 
to
 
65.
 
Pensions
already in payment on 1 January 2019 were not affected.
To mitigate the
 
effects for active
 
participants, UBS committed
to
 
pay
 
an
 
extraordinary
 
contribution
 
of
 
up
 
to
 
CHF
720
 
million
(USD
790
 
million at
 
the
 
closing exchange
 
rate
 
on 31 December
2021)
 
in
 
three
 
installments
 
in
 
2020,
 
2021
 
and
 
2022.
 
Two
installments of USD
235
 
million and USD
254
 
million paid in
 
2020
and 2021 reduced OCI with no effect on the income statement.
The third installment, CHF
193
 
million (USD
212
 
million at the
closing exchange rate on 31 December 2021), will
 
be paid in the
first
 
quarter
 
of
 
2022.
 
The
 
regular
 
employer
 
contributions
 
to
 
be
made to the Swiss plan
 
in 2022 are estimated at
 
USD
491
 
million.
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
378
 
Note 27
 
Post-employment benefit plans (continued)
UK pension plan
 
The UK
 
plan is
 
a career
 
-average revalued
 
earnings scheme,
 
and
benefits increase
 
automatically based
 
on UK
 
price inflation.
 
The
normal retirement
 
age for
 
participants in
 
the UK plan
 
is
60
. The
plan provides guaranteed lifetime
 
pension benefits to participants
upon retirement.
 
The UK
 
plan has
 
been closed
 
to new
 
entrants
for more than
 
20 years
 
and, since 2013,
 
participants are no
 
longer
accruing benefits for current or
 
future service. Instead, employees
participate in the UK defined contribution plan.
The governance
 
responsibility for the
 
UK plan lies
 
jointly with
the Pension
 
Trustee Board
 
and UBS.
 
The employer
 
contributions
to
 
the
 
pension
 
fund
 
reflect
 
agreed-upon
 
deficit
 
funding
contributions,
 
which
 
are
 
determined
 
on
 
the
 
basis
 
of
 
the
 
most
recent
 
actuarial
 
valuation
 
using
 
assumptions
 
agreed
 
by
 
the
Pension Trustee
 
Board and
 
UBS. In
 
the event
 
of underfunding,
 
UBS
and the
 
Pension Trustee
 
Board must
 
agree on
 
a deficit
 
recovery
plan
 
within
 
statutory
 
deadlines.
 
In
 
2021,
 
UBS
 
made
 
no
 
deficit
funding contributions to the
 
UK plan. In 2020,
 
UBS made deficit
funding contributions of USD
46
 
million.
The
 
plan
 
assets
 
are
 
invested
 
in
 
a
 
diversified
 
portfolio
 
of
financial assets, which
 
include a longevity
 
swap with an external
insurance
 
company.
 
This
 
swap
 
enables
 
the
 
UK
 
pension
 
plan
 
to
hedge
 
the
 
risk
 
between
 
expected
 
and
 
actual
 
longevity,
 
which
should mitigate volatility in the net defined
 
benefit asset / liability.
As of 31
 
December 2021, the
 
longevity swap had
 
a negative value
of USD
3
 
million (31 December 2020: zero).
In 2019,
 
UBS and
 
the Pension
 
Trustee Board
 
entered into
 
an
arrangement whereby a collateral
 
pool was established
 
to provide
security for the
 
pension fund. The
 
value of the
 
collateral pool as
of 31 December 2021 was USD
337
 
million (31 December 2020:
USD
347
 
million)
 
and
 
includes
 
corporate
 
bonds,
 
government-
related
 
debt
 
instruments
 
and
 
other
 
financial
 
assets
.
 
The
arrangement provides the
 
Pension Trustee Board
 
dedicated access
to a pool of assets in the event of UBS’s insolvency
 
or not paying
a required deficit funding contribution.
The
 
employer
 
contributions
 
to
 
be
 
made
 
to
 
the
 
UK
 
defined
benefit
 
plan
 
in 2022
 
are
 
estimated at
 
USD
5
 
million, subject
 
to
regular funding reviews during the year.
US pension plans
There are two distinct major defined benefit plans in the US,
 
with
a
 
normal retirement
 
age
 
of
65
. Both
 
plans
 
were
 
closed to
 
new
entrants
 
more
 
than
 
20
 
years
 
ago.
 
Since
 
they
 
closed,
 
new
employees have participated in a defined contribution plan.
One of the
 
defined benefit plans
 
is a contribution-based
 
plan
in
 
which
 
each
 
participant
 
accrues
 
a
 
percentage
 
of
 
salary
 
in
 
a
retirement
 
savings
 
account.
 
The
 
retirement
 
savings
 
account
 
is
credited annually
 
with interest
 
based
 
on a
 
rate that
 
is linked
 
to
the
 
average
 
yield
 
on
 
one-year
 
US
 
government
 
bonds.
 
For
 
the
other defined
 
benefit plan,
 
retirement benefits
 
accrue based
 
on
the
 
career-average earnings
 
of
 
each
 
individual
 
plan
 
participant.
Former employees with vested benefits have the option to take a
lump sum payment or a lifetime annuity.
As
 
required
 
under
 
applicable
 
pension
 
laws,
 
both
 
plans
 
have
fiduciaries
 
who,
 
together
 
with
 
UBS,
 
are
 
responsible
 
for
 
the
governance of the plans.
The
 
plan
 
assets
 
of
 
both
 
plans
 
are
 
invested
 
in
 
diversified
portfolio
s
 
of
 
financial
 
assets.
 
Ea
ch
 
plan’s
 
fiduciaries
 
are
responsible for the
 
investment decisions with respect
 
to the plan
assets.
 
The
 
employer
 
contributions
 
to
 
be
 
made
 
to
 
the
 
US
 
defined
benefit plans in 2022 are estimated at USD
10
 
million.
German pension plans
There are two
 
defined benefit plans in
 
Germany,
 
which are both
unfunded. The normal retirement age is
65
 
and benefits are paid
directly
 
by
 
UBS. In
 
the
 
larger
 
of
 
the
 
two plans
 
each
 
participant
accrues
 
a
 
percentage
 
of
 
salary in
 
a
 
retirement
 
savings
 
account.
The accumulated account
 
balance of the
 
participant is credited
 
on
an annual basis
 
with guaranteed
 
interest at a
 
rate of
5
%. The
 
plan
has been closed
 
to new entrants
 
and all participants
 
younger than
the
 
age
 
of
 
55
 
no
 
longer
 
accrue
 
benefits.
 
In
 
the
 
other
 
plan,
amounts
 
are
 
accrued
 
annually
 
based
 
on
 
employee
 
elections
related to variable
 
compensation. For this plan,
 
the accumulated
account balance is credited on an annual basis
 
with a guaranteed
interest rate of
6
% for amounts accrued before 2010, of
4
% for
amounts accrued
 
from 2010
 
to 2017
 
and of
0.9
% for
 
amounts
accrued
 
after
 
2017.
 
Both
 
plans
 
are
 
subject
 
to
 
German
 
pension
law, whereby the responsibility to
 
pay pension benefits
 
when they
are
 
due
 
resides
 
entirely
 
with
 
UBS.
 
A
 
portion
 
of
 
the
 
pension
payments is directly increased in line with price inflation.
 
In June
 
2021, UBS
 
implemented a
 
new funded
 
pension plan
with interest
 
credited to
 
participants equal
 
to actual
 
investment
returns
 
with
 
a
 
guaranteed
 
minimum
 
of
0
%.
 
The
 
plan
 
was
implemented
 
retrospectively for
 
new
 
hires
 
since
 
June 2018
 
and
for all eligible active participants
 
younger than 55 from July
 
2021.
Each
 
participant
 
accrues
 
a
 
percentage
 
of
 
salary
 
in
 
a
 
retirement
savings account.
The employer contributions
 
to be made
 
to the German
 
defined
benefit plans in 2022 are estimated at USD
12
 
million.
Financial information by plan
The
 
tables
 
on
 
the
 
following
 
pages
 
provide
 
an
 
analysis
 
of
 
the
movement
 
in the
 
net asset
 
/ liability
 
recognized
 
on the
 
balance
sheet for defined benefit plans, as well as an analysis of amounts
recognized in net profit and in
Other comprehensive incom
e.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
379
 
Note 27
 
Post-employment benefit plans (continued)
Defined benefit plans
USD million
Swiss pension plan
UK pension plan
US and German
pension plans
Total
2021
2020
2021
2020
2021
2020
2021
2020
Defined benefit obligation at the beginning of the year
27,728
24,496
4,162
3,654
1,905
1,820
33,795
29,970
Current service cost
494
447
0
0
6
6
500
453
Interest expense
58
72
58
73
30
45
147
190
Plan participant contributions
266
259
0
0
0
0
266
259
Remeasurements
837
1,279
71
449
(62)
105
846
1,832
of which: actuarial (gains) / losses due to changes in demographic
 
assumptions
51
(164)
14
(14)
4
(34)
69
(212)
of which: actuarial (gains) / losses due to changes in financial
 
assumptions
(678)
983
(3)
505
(78)
134
(759)
1,621
of which: experience (gains) / losses
1
1,464
460
59
(42)
12
5
1,535
423
Past service cost related to plan amendments
0
0
0
3
4
0
4
3
Curtailments
(80)
0
0
0
0
0
(80)
0
Benefit payments
(1,097)
(1,153)
(148)
(148)
(112)
(108)
(1,357)
(1,409)
Other movements
0
(4)
0
0
1
0
1
(4)
Foreign currency translation
(809)
2,333
(38)
132
(33)
37
(880)
2,501
Defined benefit obligation at the end of the year
27,398
27,728
4,105
4,162
1,740
1,905
33,242
33,795
of which: amounts owed to active members
14,333
13,765
150
159
222
245
14,705
14,169
of which: amounts owed to deferred members
0
0
1,593
1,879
669
743
2,262
2,622
of which: amounts owed to retirees
13,065
13,963
2,362
2,124
849
917
16,276
17,004
of which: funded plans
27,398
27,728
4,105
4,162
1,222
1,319
32,724
33,209
of which: unfunded plans
0
0
0
0
518
586
518
586
Fair value of plan assets at the beginning of the year
32,590
28,219
4,149
3,658
1,360
1,299
38,100
33,176
Return on plan assets excluding interest income
2,322
1,818
277
388
40
118
2,639
2,324
Interest income
74
84
58
73
26
38
159
196
Employer contributions
 
763
729
0
46
16
17
779
792
Plan participant contributions
266
259
0
0
0
0
266
259
Benefit payments
(1,097)
(1,153)
(148)
(148)
(112)
(108)
(1,357)
(1,409)
Administration expenses, taxes and premiums paid
(13)
(13)
0
0
(4)
(4)
(17)
(17)
Other movements
0
0
0
0
1
0
1
0
Foreign currency translation
(930)
2,647
(39)
132
0
0
(969)
2,779
Fair value of plan assets at the end of the year
33,975
32,590
4,297
4,149
1,329
1,360
39,601
38,100
Surplus / (deficit)
6,577
4,862
192
(13)
(411)
(545)
6,358
4,304
Asset ceiling effect at the beginning of the year
4,862
3,724
0
0
0
0
4,862
3,724
Interest expense on asset ceiling effect
15
12
0
0
0
0
15
12
Asset ceiling effect excluding interest expense and foreign currency
 
translation on
asset ceiling effect
1,821
814
0
0
0
0
1,821
814
Foreign currency translation
(121)
313
0
0
0
0
(121)
313
Asset ceiling effect at the end of the year
6,577
4,862
0
0
0
0
6,577
4,862
Net defined benefit asset / (liability) of major plans
0
0
192
(13)
(411)
(545)
(219)
(558)
Net defined benefit asset / (liability) of remaining plans
(112)
(123)
Total net defined benefit asset / (liability)
(331)
(680)
of which: Net defined benefit asset
302
42
of which: Net defined benefit liability
2
(633)
(722)
1 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.
 
2 Refer to Note 19c.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
380
 
Note 27
 
Post-employment benefit plans (continued)
Income statement – expenses related to defined benefit plans
1
USD million
Swiss pension plan
UK pension plan
US and German
pension plans
Total
For the year ended
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
Current service cost
494
447
0
0
6
6
500
453
Interest expense related to defined benefit obligation
58
72
58
73
30
45
147
190
Interest income related to plan assets
(74)
(84)
(58)
(73)
(26)
(38)
(159)
(196)
Interest expense on asset ceiling effect
15
12
0
0
0
0
15
12
Administration expenses, taxes and premiums paid
13
13
0
0
4
4
17
17
Past service cost related to plan amendments
0
0
0
3
4
0
4
3
Curtailments
(80)
0
0
0
0
0
(80)
0
Net periodic expenses recognized in net profit for major plans
426
459
0
3
18
18
444
479
Net periodic expenses recognized in net profit for remaining plans
2
25
23
Total net periodic expenses recognized in net profit
470
502
1 Refer to Note 6.
 
2 Includes differences between actual and estimated performance award accruals.
Other comprehensive income – gains / (losses) on defined benefit plans
 
USD million
Swiss pension plan
UK pension plan
US and German
pension plans
Total
For the year ended
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
Remeasurement of defined benefit obligation
(837)
(1,279)
(71)
(449)
62
(105)
(846)
(1,832)
of which: change in discount rate assumption
870
(777)
319
(504)
77
(141)
1,267
(1,421)
of which: change in rate of salary increase assumption
(3)
(230)
0
0
0
0
(3)
(230)
of which: change in rate of pension increase assumption
0
0
(316)
(1)
(1)
1
(318)
0
of which: change in rate of interest credit on retirement savings
 
assumption
(193)
26
0
0
(1)
24
(194)
50
of which: change in life expectancy
0
261
9
22
(3)
50
5
333
of which: change in other actuarial assumptions
(47)
(99)
(23)
(8)
2
(34)
(68)
(142)
of which: experience gains / (losses)
1
(1,464)
(460)
(59)
42
(12)
(5)
(1,535)
(423)
Return on plan assets excluding interest income
2,322
1,818
277
388
40
118
2,639
2,324
Asset ceiling effect excluding interest expense and foreign currency
 
translation
(1,821)
(814)
0
0
0
0
(1,821)
(814)
Total gains / (losses) recognized in other comprehensive income for major plans
(336)
(276)
207
(61)
103
14
(27)
(323)
Total gains / (losses) recognized in other comprehensive income for remaining plans
30
(4)
Total gains / (losses) recognized in other comprehensive income
2
2
(327)
1 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.
 
2 Refer to the “Statement of comprehensive income.”
 
 
The table below provides information about the duration of the DBO and the timing for expected benefit payments.
 
Swiss pension plan
UK pension plan
US and German pension
plans
1
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
Duration of the defined benefit obligation (in years)
15.1
15.7
18.8
19.0
9.5
10.2
Maturity analysis of benefits expected to be paid
USD million
Benefits expected to be paid within 12 months
1,312
1,293
110
114
123
122
Benefits expected to be paid between 1 and 3 years
2,636
2,630
248
232
237
235
Benefits expected to be paid between 3 and 6 years
3,824
3,839
418
406
338
346
Benefits expected to be paid between 6 and 11 years
6,220
6,166
743
744
495
532
Benefits expected to be paid between 11 and 16 years
5,572
5,646
751
758
392
413
Benefits expected to be paid in more than 16 years
18,092
18,884
3,028
3,206
519
541
1 The duration of the defined benefit obligation represents a weighted average across US and
 
German plans.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
381
 
Note 27
 
Post-employment benefit plans (continued)
Actuarial assumptions
The actuarial assumptions
 
used for the
 
defined benefit plans
 
are
based on the economic conditions prevailing in the jurisdiction in
which they are offered. Changes
 
in the defined benefit obligation
are most
 
sensitive to
 
changes in
 
the discount
 
rate. The
 
discount
rate is based on the yield of high-quality corporate bonds quoted
in
 
an
 
active
 
market
 
in
 
the
 
currency
 
of
 
the
 
respective
 
plan.
 
A
decrease in
 
the discount
 
curve increases
 
the DBO.
 
UBS regularly
reviews the actuarial assumptions used
 
in calculating the DBO to
determine their continuing relevance.
›
 
Refer to Note 1a item 5 for a description
 
of the accounting policy
for defined benefit plans
 
 
The tables below show the significant actuarial assumptions used in calculating the DBO at the end of the year
.
 
Significant actuarial assumptions
Swiss pension plan
UK pension plan
US and German pension
plans
1
In %
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
Discount rate
0.34
0.10
1.82
1.42
2.10
1.62
Rate of salary increase
2.01
2.00
0.00
0.00
2.35
2.25
Rate of pension increase
0.00
0.00
3.32
2.89
1.80
1.70
Rate of interest credit on retirement savings
 
1.04
0.60
0.00
0.00
1.18
1.12
1 Represents weighted average assumptions across US and German plans.
 
Mortality tables and life expectancies for
 
major plans
Life expectancy at age 65 for a male member currently
aged 65
aged 45
Country
Mortality table
31.12.21
31.12.20
31.12.21
31.12.20
Switzerland
BVG 2020 G with CMI 2019 projections
21.7
21.7
23.3
23.2
UK
S3PA with CMI 2020 projections
1
23.4
23.4
24.5
24.6
USA
Pri-2012 with MP-2021 projection scale
2
21.9
21.8
23.3
23.2
Germany
Dr. K. Heubeck 2018 G
20.5
20.8
23.2
23.6
Life expectancy at age 65 for a female member currently
aged 65
aged 45
Country
Mortality table
31.12.21
31.12.20
31.12.21
31.12.20
Switzerland
BVG 2020 G with CMI 2019 projections
23.4
23.4
25.0
24.9
UK
S3PA with CMI 2020 projections
1
24.9
24.9
26.3
26.3
USA
Pri-2012 with MP-2021 projection scale
2
23.3
23.2
24.7
24.5
Germany
Dr. K. Heubeck 2018 G
23.9
24.3
26.1
26.5
1 In 2020, S3PA with CMI 2019 projections was used.
 
2 In 2020, Pri-2012 with MP-2020 projection scale was used.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
382
 
Note 27
 
Post-employment benefit plans (continued)
Sensitivity analysis of significant actuarial assumptions
The table below presents a sensitivity analysis for each significant
actuarial
 
assumption,
 
showing
 
how
 
the
 
DBO
 
would
 
have
 
been
affected
 
by
 
changes
 
in
 
the
 
relevant
 
actuarial
 
assumption
 
that
were reasonably
 
possible at
 
the balance
 
sheet date.
 
Unforeseen
circumstances may arise, which could
 
result in variations that are
outside
 
the
 
range
 
of
 
alternatives
 
deemed
 
reasonably
 
possible.
Caution should be used
 
in extrapolating the sensitivities
 
below on
the DBO, as the sensitivities may not be linear.
 
Sensitivity analysis of significant actuarial
 
assumptions
1
Increase / (decrease) in defined benefit obligation
Swiss pension plan
UK pension plan
US and German pension plans
USD million
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
Discount rate
Increase by 50 basis points
(1,695)
(1,793)
(361)
(370)
(78)
(91)
Decrease by 50 basis points
1,933
2,048
411
423
84
99
Rate of salary increase
Increase by 50 basis points
109
117
–
2
–
2
0
1
Decrease by 50 basis points
(104)
(111)
–
2
–
2
0
(1)
Rate of pension increase
Increase by 50 basis points
1,333
1,413
334
358
6
8
Decrease by 50 basis points
–
3
–
3
(306)
(316)
(6)
(7)
Rate of interest credit on retirement savings
Increase by 50 basis points
224
236
–
4
–
4
8
9
Decrease by 50 basis points
(224)
5
(188)
–
4
–
4
(7)
(8)
Life expectancy
Increase in longevity by one additional year
915
1,061
184
182
56
60
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 plan is closed for future
service, a change in assumption is not
 
applicable.
 
3 As the assumed rate of pension increase
 
was
0
% as of 31 December 2021 and as
 
of 31 December 2020, a downward change
 
in assumption is not applicable.
 
4 As the UK plan does not provide interest
 
credits on retirement savings, a change in
 
assumption is not applicable.
 
5 As of 31 December 2021,
19
% of retirement savings were subject to a legal minimum
 
rate of
1.00
%.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
383
 
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
 
Swiss,
 
UK, US
 
and German
 
pension
 
plans
.
 
Composition and fair value of plan assets
Swiss pension plan
31.12.21
31.12.20
Fair value
Plan asset
allocation %
Fair value
Plan asset
allocation %
USD million
Quoted
in an active
market
Other
Total
Quoted
in an active
market
Other
Total
Cash and cash equivalents
187
0
187
1
219
0
219
1
Real estate / property
Domestic
0
3,530
3,530
10
0
3,582
3,582
11
Foreign
0
580
580
2
0
331
331
1
Investment funds
Equity
 
Domestic
843
0
843
2
826
0
826
3
Foreign
6,213
2,652
8,865
26
6,284
1,958
8,242
25
Bonds
1
Domestic, AAA to BBB–
4,446
0
4,446
13
3,721
0
3,721
11
Foreign, AAA to BBB–
5,093
0
5,093
15
6,146
0
6,146
19
Foreign, below BBB–
1,314
0
1,314
4
1,303
0
1,303
4
Other
4,211
3,558
7,769
23
3,363
3,722
7,085
22
Other investments
668
682
1,349
4
663
473
1,136
3
Total fair value of plan assets
22,973
11,002
33,975
100
22,525
10,065
32,590
100
31.12.21
31.12.20
Total fair value of plan assets
33,975
32,590
of which:
2
Bank accounts at UBS
 
194
231
UBS debt instruments
28
34
UBS shares
25
24
Securities lent to UBS
3
1,079
1,416
Property occupied by UBS
93
96
Derivative financial instruments, counterparty UBS
3
128
149
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
 
fund. The other
positions disclosed in the table encompass both direct investments in UBS instruments and indirect investments, i.e., those made through funds that the pension fund invests in.
 
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
 
2021 and 31
 
December 2020. Net
 
of collateral, derivative
 
financial instruments
amounted to USD
43
 
million as of 31 December 2021 (31 December 2020: negative USD
17
 
million).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
384
 
Note 27
 
Post-employment benefit plans (continued)
Composition and fair value of plan assets
 
(continued)
UK pension plan
31.12.21
31.12.20
Fair value
Plan asset
allocation %
Fair value
Plan asset
allocation %
USD million
Quoted
in an active
market
Other
Total
Quoted
in an active
market
Other
Total
Cash and cash equivalents
147
0
147
3
195
0
195
5
Bonds
1
Domestic, AAA to BBB–
2,605
0
2,605
61
2,150
0
2,150
52
Foreign, AAA to BBB–
372
0
372
9
53
0
53
1
Foreign, below BBB–
4
0
4
0
0
0
0
0
Investment funds
Equity
 
Domestic
44
4
47
1
34
3
37
1
Foreign
921
0
921
21
1,077
0
1,077
26
Bonds
1
Domestic, AAA to BBB–
532
147
679
16
919
131
1,050
25
Domestic, below BBB–
12
0
12
0
47
0
47
1
Foreign, AAA to BBB–
179
0
179
4
149
0
149
4
Foreign, below BBB–
115
0
115
3
110
0
110
3
Real estate
Domestic
110
12
122
3
98
16
114
3
Foreign
6
34
40
1
0
37
37
1
Other
(313)
0
(313)
(7)
(86)
0
(86)
(2)
Insurance contracts
0
8
8
0
0
8
8
0
Derivatives
57
(3)
54
1
(3)
0
(3)
0
Asset-backed securities
0
11
11
0
0
6
6
0
Other investments
2
(717)
10
(707)
(16)
(803)
9
(794)
(19)
Total fair value of plan assets
4,074
223
4,297
100
3,940
209
4,149
100
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 Mainly relates to repurchase arrangements on UK treasury bonds.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
385
Note 27
 
Post-employment benefit plans (continued)
US and German pension plans
31.12.21
31.12.20
Fair value
Plan asset
allocation %
Fair value
Plan asset
allocation %
USD million
Quoted
in an active
market
Other
Total
Quoted
in an active
market
Other
Total
Cash and cash equivalents
11
0
11
1
38
0
38
3
Equity
Domestic
79
0
79
6
0
0
0
0
Foreign
31
0
31
2
0
0
0
0
Bonds
1
Domestic, AAA to BBB–
486
0
486
37
490
0
490
36
Domestic, below BBB–
17
0
17
1
7
0
7
0
Foreign, AAA to BBB–
97
0
97
7
99
0
99
7
Foreign, below BBB–
6
0
6
0
1
0
1
0
Investment funds
Equity
 
Domestic
3
0
3
0
210
0
210
15
Foreign
56
0
56
4
169
0
169
12
Bonds
1
Domestic, AAA to BBB–
269
0
269
20
195
0
195
14
Domestic, below BBB–
147
0
147
11
34
0
34
2
Foreign, AAA to BBB–
11
0
11
1
19
0
19
1
Foreign, below BBB–
2
0
2
0
3
0
3
0
Real estate
Domestic
0
9
9
1
0
14
14
1
Other
99
0
99
7
79
0
79
6
Insurance contracts
0
1
1
0
0
1
1
0
Other investments
5
0
5
0
0
0
0
0
Total fair value of plan assets
1,319
10
1,329
100
1,345
15
1,360
100
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
386
 
Note 27
 
Post-employment benefit plans (continued)
b) Defined contribution plans
UBS sponsors
 
a number
 
of defined
 
contribution plans,
 
with the
most significant
 
plans in
 
the US
 
and the
 
UK. UBS’s
 
obligation is
limited
 
to its
 
contributions made
 
in accordance
 
with each
 
plan,
which
 
may
 
include
 
direct
 
contributions
and
matching
contributions.
 
Employer
 
contributions
 
to
 
defined
 
contribution
plans are recognized as an expense.
 
Expenses related to defined contribution
 
plans
For the year ended
USD million
31.12.21
31.12.20
31.12.19
US plan
198
190
173
UK plan
101
88
82
Remaining plans
64
65
71
Total
1
363
343
326
1 Refer to Note 6.
c) Related-party disclosure
UBS is
 
the principal
 
provider of
 
banking services
 
for the
 
pension
fund of
 
UBS in
 
Switzerland. In
 
this capacity,
 
UBS is
 
engaged to
execute
 
most
 
of
 
the
 
pension
 
fund’s
 
banking
 
activities.
 
These
activities
 
can
 
include,
 
but
 
are
 
not
 
limited
 
to,
 
trading,
 
securities
lending and borrowing
 
and derivative transactions.
 
The non-Swiss
UBS pension funds
 
do not
 
have a similar
 
banking relationship with
UBS.
Also, UBS leases
 
certain properties that
 
are owned by
 
the Swiss
pension
 
fund
.
 
As
 
of
 
31
 
December
 
202
1
,
 
the
 
minimum
commitment
 
toward
 
the
 
Swiss
 
pension
 
fund
 
under
 
the
 
related
leases
 
was
 
approximately
USD
 
9
 
million
 
(31
 
December
 
20
20
:
USD
11
 
million).
›
 
Refer to the “Composition and fair value
 
of plan assets” table in
Note 27a for more information about fair value
 
of investments
in UBS instruments held by the Swiss
 
pension fund
 
The following
 
amounts have
 
been received
 
or paid
 
by UBS
 
from
and to the post-employment benefit
 
plans located in Switzerland,
the UK, the US
 
and Germany in
 
respect of these banking
 
activities
and arrangements.
 
Related-party disclosure
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Received by UBS
Fees
39
34
34
Paid by UBS
Rent
4
5
4
Dividends, capital repayments and interest
5
10
11
 
The transaction volumes in UBS shares and UBS debt instruments and the balances of UBS shares held were:
 
Transaction volumes – UBS shares and UBS debt instruments
For the year ended
31.12.21
31.12.20
Financial instruments bought by pension funds
UBS shares (in thousands of shares)
907
1,758
UBS debt instruments (par values, USD million)
37
28
Financial instruments sold by pension funds or matured
UBS shares (in thousands of shares)
1,688
2,605
UBS debt instruments (par values, USD million)
40
6
UBS shares held by post-employment benefit
 
plans
31.12.21
31.12.20
Number of shares (in thousands of shares)
14,073
14,854
Fair value (USD million)
252
210
 
 
 
387
 
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 5 for a description of the accounting
 
policy
related to share-based and other deferred compensation
 
plans
Mandatory deferred compensation plans
The Long-Term Incentive Plan
The
 
Long-Term
 
Incentive
 
Plan
 
(LTIP)
 
is
 
a
 
mandatory
 
deferred
share-based
 
compensation plan
 
for senior
 
leaders of
 
the Group
(i.e., GEB members and selected senior management).
The number of notional
 
shares delivered at
 
vesting depends on
two
 
equally
 
weighted
 
performance
 
metrics
 
over
 
a
 
three
-
year
performance
 
period:
 
reported
 
return
 
on
 
common
 
equity
 
tier
 
1
capital and relative
 
total shareholder return,
 
which measures the
performance
 
of
 
UBS
 
against
 
an
 
index
 
of
 
Global
 
Systemically
Important Banks as determined by the Financial Stability Board.
 
The final number of shares will vest in three equal installments
in each
 
of the
 
three years
 
following the
 
performance period
 
for
GEB
 
members,
 
and
 
cliff
 
vest
 
in
 
the
 
first
 
year
 
following
 
the
performance period for selected senior management.
The Equity
 
Ownership
 
Plan
The
 
Equity
 
Ownership
 
Plan
 
(EOP)
 
is
 
a
 
deferred
 
share-based
compensation
 
plan
 
for
 
employees
 
who
 
are
 
subject
 
to
 
deferral
requirements but
 
do not
 
receive LTIP
 
awards. Vesting
 
under the
EOP
 
generally
 
occurs
 
in
 
equal
 
installments
 
two
 
and
 
three
 
years
after
 
grant,
 
subject
 
to
 
continued
 
employment
 
and,
 
in
 
certain
cases, achievement of defined performance conditions.
 
Asset Management employees receive some or all of
 
their EOP
 
in
 
the
 
form
 
of
 
cash-settled
 
notional
 
investment
 
funds.
 
The
amount
 
delivered
 
depends
 
on
 
the
 
value
 
of
 
the
 
underlying
investment funds at the time of vesting.
 
 
The Deferred
 
Contingent
 
Capital
 
Plan
The
 
Deferred
 
Contingent
 
Capital
 
Plan
 
(DCCP)
 
is
 
a
 
deferred
compensation plan for all
 
employees who are
 
subject to deferral
requirements.
 
Such employees
 
are awarded
 
notional
 
additional
 
tier
1 (AT1) capital
 
instruments,
 
which, at
 
the discretion
 
of UBS, can
 
be
settled as a cash
 
payment or a perpetual, marketable AT1
 
capital
instrument. DCCP
 
awards
 
generally
 
vest
 
in
 
full
 
after
 
five
 
years,
unless the
 
award is
 
written down
 
following the
 
occurrence of
 
a
viability
 
event (as
 
defined under
 
the terms
 
of an AT1 instrument)
 
or
if the
 
Group’s CET1 capital
 
ratio falls below
 
a defined
 
threshold.
Additional performance
 
conditions
 
apply
 
to GEB members.
Interest payments
 
on DCCP awards
 
are paid at the
 
discretion of
UBS.
 
Where interest
 
payments
 
are not
 
permitted,
 
such
 
as for
 
certain
regulated employees,
 
the DCCP
 
award reflects
 
the fair value
 
of the
granted non-interest-bearing
 
award.
Financial advisor variable compensation
In
line
 
with
 
market
 
practice
 
for
 
US
 
wealth
 
management
businesses, the compensation for US financial advisors in Global
Wealth Management
 
predominantly includes
 
production payout
and
 
deferred
 
compensation
 
awards.
 
Production
 
payout
 
is
primarily based
 
on compensable revenue.
 
Financial advisors may
also qualify
 
for deferred
 
compensation awards,
 
which generally
vest over
 
a six-year
 
period. These
 
awards are
 
based on
 
strategic
performance
 
measures,
 
including
 
production
 
and
 
length
 
of
service
 
with
 
UBS.
 
Production
 
payout
 
rates
 
and
 
deferred
compensation awards
 
may be
 
reduced for,
 
among other
 
things,
errors,
 
negligence or
 
carelessness, or
 
failure to
 
comply with
 
the
firm’s
 
rules,
 
standards,
 
practices
 
and
 
/
 
or
 
policies,
 
and
 
/
 
or
applicable laws and regulations.
 
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
175
 
million shares as of
 
31 December
2021
 
(31 December
 
2020:
172
 
million
 
shares).
 
Share
 
delivery
obligations are
 
calculated on
 
the basis
 
of undistributed
 
notional
share
 
awards,
 
taking
 
applicable
 
performance
 
conditions
 
into
account.
As of 31 December 2021,
 
UBS held
149
 
million treasury shares
(31 December
 
2020:
157
 
million)
 
that
 
were
 
available
 
to
 
satisfy
share delivery obligations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
388
 
Note 28
 
Employee benefits: variable compensation (continued)
 
b) Effect on the income statement
Effect
 
on the
 
income
 
statement
 
for the
 
financial
 
year and
 
future
periods
The table
 
below
 
provides
 
information
 
about
 
compensation
 
expenses
related to
 
total variable compensation, including financial advisor
variable compensation,
 
that were
 
recognized in the
 
financial year
ended 31 December
 
2021, as well as expenses
 
that were deferred
and will be
 
recognized
 
in the income
 
statement
 
for 2022 and
 
later.
The majority
 
of expenses
 
deferred
 
to 2022
 
and later
 
that are
 
related
to the
 
2021
 
performance
 
year
 
pertain
 
to awards
 
granted
 
in February
2022.
 
The total
 
unamortized compensation
 
expense for unvested
share
-
based
 
awards
 
granted
 
up
 
to
 
31
 
December
 
2021
 
will
 
be
recognized
 
in future periods
 
over a weighted
 
average
 
period of
2.5
years.
 
 
 
Variable compensation including financial advisor variable
 
compensation
Expenses recognized in 2021
Expenses deferred to 2022 and later
1
USD million
Related to the
2021
performance
year
Related to prior
performance
years
Total
Related to the
2021
performance
year
Related to prior
performance
years
Total
Non-deferred cash
2,383
(10)
2,373
0
0
0
Deferred compensation awards
405
412
817
797
624
1,421
of which: Equity Ownership Plan
183
180
363
393
184
577
of which: Deferred Contingent Capital Plan
140
158
297
299
329
628
of which: Long-Term Incentive Plan
54
19
73
50
33
83
of which: Asset Management EOP
29
56
84
56
78
133
Variable compensation – performance awards
2,788
402
3,190
797
624
1,421
Variable compensation – other
2
191
38
229
215
182
397
Total variable compensation excluding financial advisor variable compensation
2,979
440
3,419
1,012
806
1,818
Financial advisor variable compensation
4,134
248
4,382
434
641
1,075
of which: non-deferred cash
3,858
(6)
3,853
0
0
0
of which: deferred share-based awards
106
51
157
123
146
269
of which: deferred cash-based awards
170
202
372
311
495
806
Compensation commitments with recruited financial advisors
3
41
438
479
662
1,682
2,344
Total FA variable compensation
4,175
685
4,860
1,097
2,323
3,419
Total variable compensation including FA variable compensation
7,155
1,125
8,280
4
2,109
3,129
5,238
1 Estimate as
 
of 31 December
 
2021. Actual
 
amounts to be
 
expensed in future
 
periods may vary,
 
e.g., due
 
to forfeiture of
 
awards.
 
2 Consists of
 
replacement payments,
 
forfeiture credits,
 
severance payments,
retention plan payments and interest
 
expense related to the Deferred Contingent
 
Capital Plan.
 
3 Reflects expenses related to
 
compensation commitments with financial advisors entered into
 
at the time of recruitment
that are subject to
 
vesting requirements. Amounts
 
reflected as deferred expenses
 
represent the maximum
 
deferred exposure as of
 
the balance sheet date.
 
Amounts in the “Related
 
to the 2021 performance
 
year”
columns represent commitments entered into
 
in 2021.
 
4 Includes USD
651
 
million in expenses related to share-based
 
compensation (performance awards: USD
435
 
million; other variable compensation:
 
USD
59
million; financial advisor
 
compensation: USD
157
 
million). A further
 
USD
85
 
million in expenses
 
related to share-based
 
compensation was recognized
 
within other expense
 
categories included in
 
Note 6 (salaries:
USD
5
 
million related to role-based allowances; social security: USD
64
 
million; other personnel expenses: USD
16
 
million related to the Equity Plus Plan). Total personnel expense related to share-based equity-settled
compensation excluding social security was USD
641
 
million.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
389
 
Note 28
 
Employee benefits: variable compensation (continued)
Variable compensation including financial advisor variable
 
compensation (continued)
Expenses recognized in 2020
Expenses deferred to 2021 and later
1
USD million
Related to the
2020
performance
year
Related to prior
performance
years
Total
Related to the
2020
performance
year
Related to prior
performance
years
Total
Non-deferred cash
2,167
(26)
2,141
0
0
0
Deferred compensation awards
341
727
1,068
756
288
1,044
of which: Equity Ownership Plan
137
327
463
306
69
376
of which: Deferred Contingent Capital Plan
112
351
463
280
196
476
of which: Long-Term Incentive Plan
42
11
54
50
10
61
of which: Asset Management EOP
49
39
88
120
12
132
Variable compensation – performance awards
2,508
701
3,209
756
288
1,044
Variable compensation – other
2
126
94
220
181
192
374
Total variable compensation excluding financial advisor variable compensation
2,634
795
3,429
938
480
1,418
Financial advisor variable compensation
3,356
233
3,589
350
602
952
of which: non-deferred cash
3,154
0
3,154
0
0
0
of which: deferred share-based awards
69
50
119
79
135
214
of which: deferred cash-based awards
133
183
316
271
467
738
Compensation commitments with recruited financial advisors
3
22
480
502
473
1,682
2,155
Total FA variable compensation
3,378
713
4,091
822
2,284
3,106
Total variable compensation including FA variable compensation
6,012
1,508
7,520
4
1,760
2,764
4,524
1 Estimate as of 31
 
December 2020. Actual amounts to be
 
expensed in future periods may vary, e.g., due to forfeiture of
 
awards.
 
2 Consists of replacement payments, forfeiture credits, severance payments, retention
plan payments and interest expense related
 
to the Deferred Contingent Capital Plan.
 
3 Reflects expenses related to compensation
 
commitments with financial advisors
 
entered into at the time of
 
recruitment that
are subject to vesting requirements. Amounts reflected as deferred expenses represent the maximum deferred exposure as of the balance sheet date. Amounts in the “Related to the 2020 performance year” columns
represent commitments entered into
 
in 2020.
 
4 Includes USD
686
 
million in expenses related
 
to share-based compensation
 
(performance awards: USD
517
 
million; other variable compensation:
 
USD
50
 
million;
financial advisor compensation:
 
USD
119
 
million). A further
 
USD
100
 
million in expenses
 
related to share-based
 
compensation was recognized
 
within other expense
 
categories included in
 
Note 6 (salaries:
 
USD
4
million related to
 
role-based allowances;
 
social security:
 
USD
54
 
million; other
 
personnel expenses:
 
USD
42
 
million related
 
to the Equity
 
Plus Plan).
 
Total personnel
 
expense related
 
to share-based
 
equity-settled
compensation excluding social security was USD
691
 
million.
 
Variable compensation including financial advisor variable
 
compensation (continued)
Expenses recognized in 2019
Expenses deferred to 2020 and later
1
USD million
Related to the
2019
performance
year
Related to prior
performance
years
Total
Related to the
2019
performance
year
Related to prior
performance
years
Total
Non-deferred cash
1,894
(26)
1,868
0
0
0
Deferred compensation awards
299
588
887
429
608
1,036
of which: Equity Ownership Plan
122
300
422
205
219
424
of which: Deferred Contingent Capital Plan
113
262
375
173
365
538
of which: Long-Term Incentive Plan
39
0
39
25
0
25
of which: Asset Management EOP
25
26
51
26
23
49
Variable compensation – performance awards
2,193
562
2,755
429
608
1,036
Variable compensation – other
2
159
88
246
117
232
349
Total variable compensation excluding financial advisor variable compensation
2,352
650
3,001
545
840
1,385
Financial advisor variable compensation
3,233
268
3,501
197
710
907
of which: non-deferred cash
3,064
0
3,064
0
0
0
of which: deferred share-based awards
57
48
106
54
130
183
of which: deferred cash-based awards
112
219
331
144
580
724
Compensation commitments with recruited financial advisors
3
32
510
542
350
1,617
1,967
Total FA variable compensation
3,265
778
4,043
548
2,327
2,874
Total variable compensation including FA variable compensation
5,617
1,428
7,045
4
1,093
3,166
4,259
1 Estimate as of 31 December 2019. Actual amounts expensed may vary, e.g.,
 
due to forfeiture of awards.
 
2 Consists of replacement payments, forfeiture credits, severance payments,
 
retention plan payments and
interest expense related to the Deferred Contingent Capital Plan.
 
3 Reflects expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting
requirements. Amounts reflected as deferred expenses represent
 
the maximum deferred exposure as of
 
the balance sheet date. Amounts in the
 
“Related to the 2019 performance year”
 
columns represent commitments
entered into in
 
2019.
 
4 Includes USD
610
 
million in expenses related
 
to share-based compensation (performance
 
awards: USD
461
 
million; other variable compensation: USD
43
 
million; financial advisor compensation:
USD
106
 
million). A
 
further USD
61
 
million in
 
expenses related
 
to share-based
 
compensation was
 
recognized within
 
other expense
 
categories included
 
in Note
 
6 (salaries:
 
USD
10
 
million related
 
to role-based
allowances; social security:
 
USD
25
 
million; other personnel
 
expenses: USD
27
 
million related to
 
the Equity Plus
 
Plan). Total personnel
 
expense related to
 
share-based equity-settled compensation
 
excluding social
security was USD
619
 
million.
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
390
 
Note 28
 
Employee benefits: variable compensation (continued)
 
c) Outstanding share-based compensation awards
Share and performance share awards
Movements in outstanding share-based awards during 2021 and 2020 are provided in the table below.
 
Movements in outstanding share-based compensation
 
awards
Number of shares
2021
Weighted average
grant date fair value
(USD)
Number of shares
2020
Weighted average
grant date fair value
(USD)
Outstanding, at the beginning of the year
174,900,395
12
156,064,763
14
Awarded during the year
68,721,549
15
72,250,157
11
Distributed during the year
(52,137,287)
13
(46,899,362)
15
Forfeited during the year
(10,906,096)
13
(6,515,164)
13
Outstanding, at the end of the year
180,578,561
13
174,900,395
12
of which: shares vested for accounting purposes
107,828,979
118,260,527
 
 
The total carrying amount of the liability related to cash-settled share-based awards as of 31 December 2021 and 31 December 2020
was USD
37
 
million and USD
36
 
million, respectively.
d) Valuation
UBS share awards
UBS
 
measures
 
compensation
 
expense
 
based
 
on
 
the
 
average
market price
 
of UBS
 
shares on
 
the grant
 
date as
 
quoted on
 
the
SIX
 
Swiss
 
Exchange,
 
taking
 
into
 
consideration
 
post-vesting
 
sale
and
 
hedge
 
restrictions,
 
non-vesting
 
conditions
 
and
 
market
conditions, where
 
applicable. The
 
fair value
 
of the
 
share awards
subject to
 
post-vesting sale
 
and hedge
 
restrictions is
 
discounted
on the basis of
 
the duration of the
 
post-vesting restriction and is
referenced to
 
the cost
 
of purchasing
 
an at-the-money
 
European
put option for the term of the transfer restriction. The grant date
fair
 
value
 
of
 
notional
 
shares
 
without dividend
 
entitlements also
includes
 
a
 
deduction
 
for
 
the
 
present
 
value
 
of
 
future
 
expected
dividends to be paid between the grant date and distribution.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
391
 
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
 
2021. Unless
 
otherwise stated,
 
the
subsidiaries
 
listed
 
below
 
have
 
share
 
capital
 
consisting
 
solely
 
of
ordinary shares held entirely by the Group, and the proportion of
ownership interest
 
held is
 
equal to
 
the voting
 
rights held
 
by the
Group.
 
The country where the respective registered office is located is
also the
 
principal place
 
of business.
 
UBS AG
 
operates through
 
a
global branch network and
 
a significant proportion of
 
its business
activity is conducted outside Switzerland, including in
 
the UK, the
US, Singapore, Hong Kong SAR and other countries.
 
UBS Europe
SE has
 
branches and
 
offices in
 
a number
 
of EU
 
Member States,
including Germany, Italy,
 
Luxembourg and Spain.
 
Share capital is
provided in the currency of the legally registered office.
 
 
 
Individually significant subsidiaries
 
of UBS Group AG as of 31 December 2021
Company
Registered office
Share capital in million
Equity interest accumulated in %
UBS AG
Zurich and Basel, Switzerland
CHF
385.8
100.0
UBS Business Solutions AG
1
Zurich, Switzerland
CHF
1.0
100.0
1 UBS Business Solutions AG holds subsidiaries in China, India, Israel and Poland.
Individually significant subsidiaries
 
of UBS AG as of 31 December 2021
1
Company
Registered office
Primary business
Share capital in million
Equity interest accumulated in %
UBS Americas Holding LLC
Wilmington, Delaware, USA
Group Functions
USD
4,150.0
2
100.0
UBS Americas Inc.
Wilmington, Delaware, USA
Group Functions
USD
0.0
100.0
UBS Asset Management AG
Zurich, Switzerland
Asset Management
CHF
43.2
100.0
UBS Bank USA
Salt Lake City, Utah, USA
Global Wealth Management
USD
0.0
100.0
UBS Europe SE
Frankfurt, Germany
Global Wealth Management
EUR
446.0
100.0
UBS Financial Services Inc.
Wilmington, Delaware, USA
Global Wealth Management
USD
0.0
100.0
UBS Securities LLC
Wilmington, Delaware, USA
Investment Bank
USD
1,283.1
3
100.0
UBS Switzerland AG
Zurich, Switzerland
Personal & Corporate Banking
CHF
10.0
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
4,150,000,000
.
 
3 Consists of common share capital of USD
100,000
 
and non-voting preferred share capital of USD
1,283,000,000
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
392
 
Note 29
 
Interests in subsidiaries and other entities (continued)
Other subsidiaries
The table below lists other direct and indirect subsidiaries of UBS
 
AG that are not individually significant but contribute to
 
the Group’s
total assets and aggregated profit before tax thresholds and are thus disclosed in accordance with requirements
 
set by the SEC.
 
 
Other subsidiaries of UBS AG as of 31
 
December 2021
Company
Registered office
Primary business
Share capital in million
Equity interest
 
accumulated in %
UBS Asset Management (Americas) Inc.
Wilmington, Delaware, USA
Asset Management
USD
0.0
100.0
UBS Asset Management (Hong Kong) Limited
Hong Kong SAR, China
 
Asset Management
HKD
254.0
100.0
UBS Asset Management Life Ltd
London, United Kingdom
Asset Management
GBP
15.0
100.0
UBS Asset Management Switzerland AG
Zurich, Switzerland
Asset Management
CHF
0.5
100.0
UBS Business Solutions US LLC
Wilmington, Delaware, USA
Group Functions
USD
0.0
100.0
UBS Credit Corp.
Wilmington, Delaware, USA
Global Wealth Management
USD
0.0
100.0
UBS (France) S.A.
Paris, France
Global Wealth Management
EUR
133.0
100.0
UBS Fund Management (Luxembourg) S.A.
Luxembourg, Luxembourg
Asset Management
EUR
13.0
100.0
UBS Fund Management (Switzerland) AG
Basel, Switzerland
Asset Management
CHF
1.0
100.0
UBS (Monaco) S.A.
Monte Carlo, Monaco
Global Wealth Management
EUR
49.2
100.0
UBS O‘Connor LLC
Wilmington, Delaware, USA
Asset Management
USD
1.0
100.0
UBS Realty Investors LLC
Boston, Massachusetts, USA
Asset Management
USD
9.0
100.0
UBS Securities Australia Ltd
Sydney, Australia
Investment Bank
AUD
0.3
1
100.0
UBS Securities Hong Kong Limited
Hong Kong SAR, China
 
Investment Bank
HKD
4,154.2
100.0
UBS Securities Japan Co., Ltd.
Tokyo, Japan
Investment Bank
JPY
34,708.7
100.0
UBS SuMi TRUST Wealth Management Co., Ltd.
Tokyo, Japan
Global Wealth Management
JPY
5,165.0
51.0
1 Includes a nominal amount relating to redeemable preference shares.
 
 
Consolidated structured entities
Consolidated structured
 
entities (SEs)
 
include certain
 
investment
funds, securitization
 
vehicles and client
 
investment vehicles.
 
UBS
has no individually significant subsidiaries that are SEs.
In
 
2021
 
and
 
2020,
 
the
 
Group
 
did
 
not
 
enter
 
into
 
any
contractual
 
obligation
 
that
 
could
 
require
 
the
 
Group
 
to
 
provide
financial support
 
to consolidated SEs.
 
In addition,
 
the Group did
not provide support,
 
financial or otherwise,
 
to a consolidated
 
SE
when
 
the
 
Group
 
was
 
not
 
contractually
 
obligated
 
to
 
do
 
so,
 
nor
does
 
the
 
Grou
p
have
an
y
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
393
 
Note 29
 
Interests in subsidiaries and other entities (continued)
 
b) Interests in associates and joint ventures
As of 31 December 2021 and 2020, no associate or joint venture
was
 
individually
 
material
 
to
 
the
 
Group.
 
Also,
 
there
 
were
 
no
significant restrictions on the ability of
 
associates or joint ventures
to
 
transfer
 
funds
 
to
 
UBS
 
Group
 
AG
 
or
 
its
 
subsidiaries
 
as
 
cash
dividends
 
or
 
to
 
repay
 
loans
 
or
 
advances
 
made.
 
There
 
were
 
no
quoted market
 
prices for
 
any associates
 
or joint
 
ventures of
 
the
Group.
 
 
Investments in associates and joint ventures
USD million
2021
2020
Carrying amount at the beginning of the year
1,557
1,051
Additions
1
388
Reclassifications
1
(386)
0
Share of comprehensive income
150
83
of which: share of net profit
2
105
84
of which: share of other comprehensive income
3
45
(1)
Share of changes in retained earnings
1
(40)
Dividends received
(39)
(33)
Foreign currency translation
(39)
108
Carrying amount at the end of the year
1,243
1,557
of which: associates
1,200
1,513
of which: SIX Group AG, Zurich
4
1,043
965
of which: Clearstream Fund Centre AG, Zurich
1
399
of which: other associates
157
150
of which: joint ventures
43
44
1 In the second quarter
 
of 2021, UBS reclassified
 
its minority investment (
48.8
%) in Clearstream Fund
 
Centre AG (previously Fondcenter
 
AG) of USD
386
 
million to Properties and other
 
non-current assets held for
sale and sold the investment in the same quarter. Refer to Note 30 for more information.
 
2 For 2021, consists of USD
79
 
million from associates and USD
26
 
million from joint ventures. For 2020, consists of USD
64
million from associates
 
and USD
19
 
million from joint
 
ventures.
 
3 For 2021,
 
consists of USD
44
 
million from associates
 
and USD
1
 
million from joint
 
ventures. For
 
2020, consists of
 
negative USD
1
 
million from
associates.
 
4 In 2021, UBS AG’s equity interest amounted to
17.31
%. UBS AG is represented on the Board of Directors.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
394
 
Note 29
 
Interests in subsidiaries and other entities (continued)
 
c) Unconsolidated structured entities
UBS
 
is
 
considered
 
to
 
sponsor
 
another
 
entity
 
if,
 
in
 
addition
 
to
ongoing
 
involvement
 
with
the
 
entity,
 
it
 
had
 
a
 
key
 
role
 
in
establishing
 
that
 
entity
 
or
 
in
 
bringing
 
together
 
relevant
counterparties
 
for a
 
transaction facilitated
 
by the
 
entity.
 
During
2021
,
the
Group
 
sponsored
 
the
 
creation
 
of
 
various
 
SEs
 
and
interacted
 
with
 
a
 
number
 
of
 
non-sponsored
 
SEs,
 
including
securitization
 
vehicles,
 
client
 
vehicles
 
and
 
certain
 
investment
funds,
 
that
 
UBS
 
did
 
not
 
consolidate
 
as
 
of
 
31 December
 
2021
because it did not control them.
 
Interests in unconsolidated structured entities
The table below
 
presents the
 
Group’s interests
 
in and maximum
exposure
 
to
 
loss
 
from
 
unconsolidated
 
SEs,
 
as
 
well
 
as
 
the
 
total
assets held
 
by the
 
SEs in
 
which UBS
 
had an
 
interest as
 
of year-
end,
 
except for
 
investment funds sponsored
 
by third
 
parties, for
which the
 
carrying amount
 
of UBS’s
 
interest as
 
of year-end
 
has
been disclosed.
 
Sponsored
 
unconsolidated
 
structured
 
entities
 
in
 
which
 
UBS
 
did
not have an interest at year-end
During 2021 and
 
2020, the Group did
 
not earn material
 
income
from sponsored unconsolidated SEs in
 
which UBS did not have
 
an
interest at year-end.
During 2021 and 2020,
 
UBS and third parties did
 
not transfer
any
 
assets
 
into
 
sponsored
 
securitization
 
vehicles
 
created
 
in
 
the
year. UBS and
 
third parties transferred
 
assets, alongside deposits
and debt issuances (which
 
are assets from the
 
perspective of the
vehicle),
 
of
 
USD
1
 
billion
 
and
 
USD
2
 
billion,
 
respectively,
 
into
sponsored client vehicles
 
created in
 
2021 (2020: USD
0
 
billion and
USD
9
 
billion,
 
respectively).
 
For
 
sponsored
 
investment
 
funds,
transfers
 
arose
 
during
 
the
 
period
 
as
 
investors
 
invested
 
and
redeemed
 
positions,
 
thereby
 
changing
 
the
 
overall
 
size
 
of
 
the
funds, which, when combined with
 
market movements, resulted
in a total
 
closing net asset value
 
of USD
46
 
billion (31 December
2020: USD
37
 
billion).
 
 
Interests in unconsolidated structured entities
31.12.21
USD million, except where indicated
Securitization
vehicles
Client
vehicles
Investment
funds
Total
Maximum
exposure to loss
1
Financial assets at fair value held for trading
246
162
6,743
7,151
7,151
Derivative financial instruments
5
45
155
205
205
Loans and advances to customers
125
125
125
Financial assets at fair value not held for trading
35
222
257
257
Financial assets measured at fair value through other comprehensive
 
income
324
4,525
4,849
4,849
Other financial assets measured at amortized cost
0
2
0
1
250
Total assets
610
3
4,732
7,247
12,588
Derivative financial instruments
2
11
281
294
Total liabilities
2
11
281
294
Assets held by the unconsolidated structured entities in which UBS had
 
an interest
(USD billion)
30
4
81
5
158
6
31.12.20
USD million, except where indicated
Securitization
vehicles
Client
vehicles
Investment
funds
Total
Maximum
exposure to loss
1
Financial assets at fair value held for trading
375
131
7,595
8,101
8,101
Derivative financial instruments
6
49
158
213
211
Loans and advances to customers
179
179
179
Financial assets at fair value not held for trading
35
1
2
172
208
208
Financial assets measured at fair value through other comprehensive
 
income
6,624
6,624
6,624
Other financial assets measured at amortized cost
0
2
0
250
Total assets
416
3
6,805
8,104
15,326
Derivative financial instruments
3
11
376
390
0
Total liabilities
3
11
376
390
Assets held by the unconsolidated structured entities in which UBS had
 
an interest
(USD billion)
39
4
136
5
124
6
1 For the purpose of this disclosure, maximum exposure to loss amounts do not consider the risk-reducing effects of collateral or other credit enhancements.
 
2 Represents the carrying amount of loan commitments.
The maximum exposure to loss for these instruments is equal
 
to the notional amount.
 
3 As of 31 December 2021, USD
0.1
 
billion of the USD
0.6
 
billion (31 December 2020: USD
0.2
 
billion of the USD
0.4
 
billion)
was held in Group Functions – Non-core and Legacy Portfolio.
 
4 Represents the principal
 
amount outstanding.
 
5 Represents the market value of total assets.
 
6 Represents the net asset value of the investment
funds sponsored by
 
UBS and the
 
carrying amount
 
of UBS’s
 
interests in the
 
investment funds not
 
sponsored by UBS.
 
In 2021,
 
UBS updated the
 
presentation of this
 
table to remove
 
its interests in
 
unconsolidated
structured investment funds and
 
the corresponding total asset
 
information, where UBS’s
 
interest is driven
 
solely from UBS’s
 
role as the
 
fund’s investment
 
manager and the fees
 
it receives. This
 
information is now
separately disclosed in the accompanying text on the following page. Prior-period
 
information has been aligned with this new presentation.
 
 
 
 
395
 
Note 29
 
Interests in subsidiaries and other entities (continued)
The Group retains or purchases interests in
 
unconsolidated SEs
in the form of
 
direct investments, financing, guarantees,
 
letters of
credit, derivatives,
 
as well as through management
 
contracts. The
Group’s
 
maximum
 
exposure
 
to
 
loss
 
is
 
generally
 
equal
 
to
 
the
carrying amount
 
of the
 
Group’s interest
 
in the
 
SE, with
 
this subject
to change over time with market movements. Guarantees,
 
letters
of
 
credit
 
and
 
credit
 
derivatives
 
are
 
an
 
exception,
 
with
 
the
contract’s notional
 
amount, adjusted
 
for losses already
 
incurred,
representing the maximum loss that the Group is exposed to.
The
 
maximum exposure
 
to loss
 
disclosed in
 
the table
 
on the
previous
 
page
 
does
 
not
 
reflect
 
the
 
Group’s
 
risk
 
management
activities, including effects from
 
financial instruments that may
 
be
used to economically
 
hedge risks inherent
 
in the unconsolidated
SE
 
or
 
risk
-
reducing
 
effects
 
of
 
collateral
 
or
 
other
 
credit
enhancements.
In 2021 and
 
2020, the
 
Group did
 
not provide support,
 
financial
or
 
otherwise,
 
to
 
an
 
unconsolidated
 
SE
 
when
 
not
 
contractually
obligated to do so, nor
 
does the Group have any
 
intention to do
so in the future.
In
 
2021
 
and
 
2020,
 
income
 
and
 
expenses
 
from
 
interests
 
in
unconsolidated
 
SEs
 
primarily
 
resulted
 
from
 
mark-to-market
movements
 
recognized
 
in
Other
 
net
 
income
 
from
 
financial
instruments
 
measured at fair
 
value through profit
 
of loss
, which
have generally been
 
hedged with other financial
 
instruments, as
well
 
as
 
fee
 
and
 
commission
 
income
 
received
 
from
 
UBS-
sponsored
 
funds.
Interests in securitization vehicles
As of 31 December
 
2021 and
 
31 December 2020, the
 
Group held
interests,
 
both
 
retained
 
and
 
acquired,
 
in
 
various
 
securitization
vehicles that relate
 
to financing, underwriting, secondary
 
market
and derivative trading activities.
The numbers
 
outlined in
 
the table
 
on the previous
 
page may
differ
 
from
 
the
 
securitization
 
positions
 
presented
 
in
 
the
31
 
December
2021
Pillar
 
3
R
eport
,
 
available
 
under
 
“Pillar
 
3
disclosures”
 
at
ubs.com/investors
,
 
for
 
the
 
following
 
reasons:
(i) exclusion
 
of synthetic
 
securitizations
 
transacted
 
with entities
that
 
are
 
not
 
SEs
 
and
 
transactions
 
in
 
which
 
the
 
Group
 
did
 
not
have an interest because it did not absorb any risk
 
;
 
(ii) a different
measurement
 
basis
 
in certain
 
cases
 
(e.g.,
 
IFRS
 
carrying
 
amount
within
 
the previous
 
table
 
compared
 
with net
 
exposure
 
amount
at default for
 
Pillar 3 disclosures)
 
;
 
and (iii) different
 
classification
of vehicles
 
viewed as
 
sponsored by
 
the Group versus
 
sponsored
by third parties.
›
 
Refer to the 31 December 2021 Pillar 3
 
Report,
 
available under
“Pillar 3 disclosures” at
ubs.com/investors
,
 
for more information
Interests in client vehicles
Client
 
vehicles are
 
established predominantly
 
for
 
clients to
 
gain
exposure
 
to specific
 
assets or
 
risk exposures.
 
Such vehicles
 
may
enter
 
into
 
derivative
 
agreements,
 
with
 
UBS
 
or
 
a
 
third
 
party,
 
to
align
 
the
 
cash
 
flows
 
of
 
the
 
entity
 
with
 
the
 
investor’s
 
intended
investment objective,
 
or to introduce other
 
desired risk exposures.
 
As of
 
31 December 2021 and
 
31 December 2020,
 
the Group
retained
 
interests
 
in
 
client
 
vehicles
 
sponsored
 
by
 
UBS
 
and
 
third
parties that
 
relate to
 
financing, secondary
 
market and
 
derivative
trading activities, and to hedge structured product offerings.
Interests in investment funds
Investment funds have
 
a collective investment
 
objective, and are
either passively
 
managed, so
 
that any
 
decision making
 
does not
have a
 
substantive effect
 
on variability,
 
or are
 
actively managed
and investors
 
or their
 
governing bodies
 
do not
 
have substantive
voting or similar rights.
The
 
Group holds
 
interests in
 
a
 
number
 
of
 
investment
 
funds,
primarily
 
resulting
 
from
 
seed
 
investments
 
or
 
in
 
order
 
to
 
hedge
structured product offerings. In addition to the interests disclosed
in the table on the previous page, the Group manages
 
the assets
of
 
various
 
pooled
 
investment
 
funds
 
and
 
receives
 
fees
 
based,
 
in
whole
 
or
 
part, on
 
the net
 
asset
 
value
 
of
 
the
 
fund and
 
/
 
or
 
the
performance of the fund. The specific fee structure is determined
based on various
 
market factors and considers
 
the fund’s nature
and
 
the
 
jurisdiction
 
of
 
incorporation,
 
as
 
well
 
as
 
fee
 
schedules
negotiated with clients. These
 
fee contracts represent an interest
in
 
the
 
fund,
 
as
 
they
 
align
 
the Group’s
 
exposure
 
with
 
investors,
providing
 
a
 
variable
 
return
 
based
 
on
 
the
 
performance
 
of
 
the
entity. Depending on the structure of
 
the fund, these fees may
 
be
collected
 
directly
 
from
 
the
 
fund
’s
 
assets
 
and
 
/
 
or
 
from
 
the
investors. Any
 
amounts due are
 
collected on
 
a regular
 
basis and
are
 
generally
 
backed
 
by
 
the
 
fund’s
 
assets.
 
Therefore
 
interest
 
in
such
 
funds
 
is
 
not
 
represented
 
by
 
the
 
on-balance
 
sheet
 
fee
receivable but rather by the
 
future exposure to variable fees. The
total
 
assets
 
of
 
such
 
funds
 
were
 
USD
370
 
billion
 
and
 
USD
359
billion
as
 
of
 
31
 
December
2021
 
and
 
31
 
December
2020,
 
respectively,
 
and
 
have
 
been
 
excluded
 
from
 
the
 
table
 
on
 
the
previous page. The Group
 
did not have any
 
material exposure to
loss
 
from
 
these
 
interests
 
as
 
of
 
31 December
 
2021
 
or
 
as
 
of
31 December 2020.
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
396
 
Note 30
 
Changes in organization and acquisitions and disposals of subsidiaries and businesses
 
Strategic partnership with Sumitomo Mitsui Trust Holdings
In
 
2019,
 
UBS
 
entered
 
into
 
a
 
strategic
 
wealth
 
management
partnership
 
in
 
Japan
 
with
 
Sumitomo
 
Mitsui Trust
 
Holdings, Inc.
(SuMi
 
Trust
 
Holdings).
 
In
 
January
 
2020,
 
the
 
first
 
phase
 
was
launched, with
 
operations commencing in
 
the joint
 
venture that
was established
 
to promote
 
the respective
 
services. At
 
the time,
UBS and
 
SuMi Trust
 
Holdings also
 
started offering
 
each other’s
products and services to their respective clients.
In
 
the
 
third
 
quarter
 
of
 
2021,
 
the
 
second
 
phase
 
of
 
the
partnership was completed, with the
 
launch of a new operational
partnership
 
entity,
 
UBS
 
SuMi
 
TRUST
 
Wealth
 
Management
 
Co.,
Ltd., which is
51
%-owned and controlled by
 
UBS, requiring UBS
to consolidate
 
this entity.
 
The new
 
entity offers
 
global securities
and wealth management
 
capabilities, together with the
 
custody,
real
 
estate,
 
inheritance
 
and
 
wealth
 
transfer
 
expertise
 
of
 
a
Japanese
 
trust
 
banking
 
group.
 
Upon
 
completion
 
of
 
this
transaction in
 
the third
 
quarter of
 
2021, shareholders’
 
equity of
the Group increased by USD
155
 
million, with no effect on profit
or loss.
Disposals of subsidiaries and businesses
Sale of remaining investment in Clearstream Fund Centre AG
In
 
the
 
second quarter
 
of
 
2021, UBS
 
sold its
 
remaining
 
minority
investment in Clearstream Fund Centre
 
AG to Deutsche Börse
 
AG
for
 
CHF
390
 
million.
 
The
 
transaction
 
followed
 
the
 
sale
 
of
 
a
majority
 
investment
 
and
 
successful
 
transfer
 
of
 
control
 
of
Fondcenter
 
AG
 
to
 
Deutsche
 
Börse
 
AG
 
in
 
2020,
 
when
 
UBS
recognized
 
a
 
post-tax gain
 
on sale
 
of
 
USD
631
 
million
 
in
Other
income
. The sale of
 
the remaining
48.8
% investment resulted
 
in
a post-tax gain of USD
37
 
million in 2021, which was recognized
in
Other income
, with no
 
associated net tax
 
expense. Long-term
commercial
 
cooperation
 
arrangements
 
remain
 
in
 
place
 
for
 
the
provision
 
of
 
services
 
by
 
Clearstream
 
to
 
UBS,
 
including
 
jointly
servicing banks and insurance companies.
Sale of wealth management business in Austria
In
 
the
 
third
 
quarter
 
of
 
2021,
 
UBS
 
completed
 
the
 
sale
 
of
 
its
domestic wealth management
 
business in Austria
 
to LGT. The sale
resulted
 
in
 
a
 
pre-tax
 
gain
 
of
 
USD
100
 
million,
 
which
 
was
recognized
 
in
Other
 
income
,
 
and
 
an
 
associated
 
tax
 
expense
 
of
USD
25
 
million.
Sale of wealth management business in Spain in 2022
In
 
October 2021,
 
UBS signed
 
an agreement
 
to sell
 
its
 
domestic
wealth
 
management
 
business
 
in
 
Spain
 
to
 
Singular
 
Bank.
 
The
agreement
 
includes
 
the
 
transition
 
of
 
employees,
 
client
relationships,
 
products
 
and services
 
of
 
the
 
wealth management
business of UBS in Spain. The
 
transaction is subject to customary
closing conditions and is expected to close in the third quarter of
2022.
As
 
of
 
31 December
 
2021,
 
the
 
assets
 
and
 
liabilities
 
of
 
the
business
 
were
 
presented
 
in
 
Global
 
Wealth
 
Management
 
as
 
a
disposal group held for sale within
Other non-financial assets
 
and
Other non-financial
 
liabilities
 
and amounted
 
to USD
647
 
million
and
 
USD
 
823
 
million,
 
respectively.
 
Upon
 
the
 
closing
 
of
 
the
transaction, UBS expects
 
to record a
 
pre-tax gain of
 
approximately
USD
0.2
 
billion.
Sale of UBS Swiss Financial Advisers AG in 2022
In
 
December
 
2021,
 
UBS
 
signed
 
an
 
agreement
 
to
 
sell
 
its
 
wholly
owned
 
subsidiary
 
UBS
 
Swiss
 
Financial
 
Advisers
 
AG
 
(SFA)
 
to
Vontobel.
 
SFA
 
is
 
an
 
SEC-registered
 
investment
 
advisor
 
and
FINMA-licensed
 
securities
 
firm
 
that
 
offers
 
US
 
clients
 
tailored
investment
 
solutions
 
in
 
a
 
Switzerland-based
 
environment.
 
The
transaction
 
is
 
subject
 
to
 
customary
 
closing
 
conditions
 
and
regulatory approvals and is
 
expected to close in the
 
third quarter
of 2022.
As
 
of
 
31 December
 
2021,
 
the
 
assets
 
and
 
liabilities
 
that
 
are
subject
 
to
 
the
 
transaction
were
 
presented
 
in
 
Global
 
Wealth
Management as a disposal group held for sale within
Other non-
financial assets
 
and
Other non-financial
 
liabilities
 
and amounted
to USD
446
 
million and
 
USD
475
 
million, respectively.
 
Upon the
closing of the
 
transaction, UBS does not
 
expect a material
 
effect
on profit or loss or shareholders’ equity of the Group.
Acquisitions of subsidiaries and businesses in 2022
Acquisition of Wealthfront in 2022
In
 
January
 
2022,
 
UBS
 
entered
 
into
 
an
 
agreement
 
to
 
acquire
Wealthfront,
 
an
 
industry-leading
 
digital
 
wealth
 
management
provider,
 
for
 
a
 
cash
 
consideration
 
of
 
USD
1.4
 
billion.
 
The
acquisition is aligned with UBS’s growth strategy
 
in the Americas,
will broaden
 
our reach
 
among affluent
 
investors and
 
will add
 
a
new
 
digital-first
 
offering
 
increasing
 
our
 
distribution
 
capabilities.
The
 
transaction
 
is
 
subject
 
to
 
customary
 
closing
 
conditions,
including
 
regulatory
 
approvals,
 
and
 
is
 
expected
 
to
 
close
 
in
 
the
second
 
half
 
of
 
2022.
 
Upon
 
the
 
closing
 
of
 
the
 
transaction,
Wealthfront
 
will become
 
a wholly
 
owned subsidiary
 
of UBS
 
and
UBS expects to
 
recognize additional goodwill
 
and other intangible
assets of approximately USD
1.2
 
billion.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
397
 
Note
 
31
 
Related parties
 
UBS
 
defines
 
related
 
parties
 
as
 
associates
 
(entities
that
 
are
significantly influenced
 
by UBS),
 
joint ventures
 
(entities in
 
which
UBS shares control with another party), post-employment benefit
plans
 
for
 
UBS
 
employees,
 
key
 
management
 
personnel,
 
close
family members
 
of key management
 
personnel and entities
 
that
are,
 
directly
 
or
 
indirectly,
 
controlled
 
or
 
jointly
 
controlled
 
by
 
key
management
 
personnel
 
or
 
their
 
close
 
family
 
members.
 
Key
management
 
personnel
 
is
 
defined
 
as
 
members
 
of
 
the Board
 
of
Directors (BoD) and Group Executive Board (GEB).
 
a) Remuneration of key management personnel
The
 
Chairman of
 
the
 
BoD
 
has a
 
specific
 
management
 
employment
 
contract and
 
receives
 
pension
 
benefits upon
 
retirement.
 
Total
remuneration of the Chairman of the BoD and all GEB members is included in the table below.
 
 
Remuneration of key management
 
personnel
USD million, except where indicated
31.12.21
31.12.20
31.12.19
Base salaries and other cash payments
1
31
33
32
Incentive awards – cash
2
17
18
14
Annual incentive award under DCCP
26
27
21
Employer’s contributions to retirement benefit plans
3
3
3
Benefits in kind, fringe benefits (at market value)
1
1
1
Share-based compensation
3
45
47
37
Total
124
129
108
Total (CHF million)
4
113
121
107
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 27 for
 
more information. For
 
GEB members, share-based
 
compensation for 2021, 2020
 
and 2019 was
 
entirely
composed of LTIP awards.For
 
the Chairman of the BoD the share-based compensation for 2021, 2020 and 2019 was
 
entirely composed of UBS shares.
 
4 Swiss franc amounts disclosed represent the respective US
dollar amounts translated at the applicable performance award currency exchange rates (2021: USD /
 
CHF
0.92
; 2020: USD / CHF
0.94
; 2019: USD / CHF
0.99
).
 
 
The independent members
 
of the BoD
 
do not have
 
employment
or service contracts
 
with UBS, and
 
thus are not
 
entitled to benefits
upon termination of their
 
service on the BoD.
 
Payments to these
individuals for their
 
services as
 
external board
 
members amounted
to
 
USD
7.5
 
million
 
(CHF
6.9
 
million)
 
in
 
2021,
 
USD
7.0
 
million
(CHF
6.6
 
million) in 2020 and USD
7.3
 
million (CHF
7.3
 
million) in
2019.
 
b) Equity holdings of key management personnel
Equity holdings of key management personnel
1
31.12.21
31.12.20
Number of shares held by members of the BoD, GEB and parties closely
 
linked to them
2
4,597,006
5,288,317
1 No options were held in 2021 and 2020 by non-independent members
 
of the BoD and any GEB member or any of its related
 
parties.
 
2 Excludes shares granted under variable
 
compensation plans with forfeiture
provisions.
 
 
Of
 
the
 
share
 
totals
 
above,
 
no
 
shares
 
were
 
held
 
by
 
close
 
family
members of
 
key management
 
personnel on
 
31 December 2021
and 31 December 2020. No shares were
 
held by entities that are
directly
 
or
 
indirectly
 
controlled
 
or
 
jointly
 
controlled
 
by
 
key
management
 
personnel
 
or
 
their
 
close
 
family
 
members
 
on
31 December 2021 and
 
31 December 2020. As
 
of 31 December
2021, no member of the BoD or
 
GEB was the beneficial owner of
more than 1% of UBS Group AG’s shares.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
398
 
Note 31
 
Related parties (continued)
 
c) Loans, advances and mortgages to key management personnel
The non-independent members
 
of the BoD
 
and GEB members
 
are
granted
 
loans,
 
fixed
 
advances
 
and
 
mortgages
 
in
 
the
 
ordinary
course of business
 
on substantially the same
 
terms and conditions
that are available to other employees, including
 
interest rates and
collateral,
 
and
 
neither
 
involve
 
more
 
than
 
the
 
normal
 
risk
 
of
collectability nor
 
contain any
 
other unfavorable
 
features
 
for the
firm.
 
Independent
 
BoD
 
members
 
are
 
granted
 
loans
 
and
mortgages in
 
the ordinary
 
course of
 
business at
 
general market
conditions.
Movements in the
 
loan, advances and
 
mortgage balances are
as follows
.
 
 
Loans, advances and mortgages to key management
 
personnel
1
USD million, except where indicated
2021
2020
Balance at the beginning of the year
38
33
Additions
11
14
Reductions
(15)
(8)
Balance at the end of the year
2
34
38
Balance at the end of the year (CHF million)
2, 3
31
34
1 All loans are secured loans.
 
2 There were no unused uncommitted credit facilities as of 31
 
December 2021 and 31 December 2020.
 
3 Swiss franc amounts disclosed represent the respective US dollar
 
amounts
translated at the relevant year-end closing exchange rate.
 
d) Other related-party transactions with entities controlled by key management personnel
In
 
2021
 
and
 
2020,
 
UBS
 
did
 
not
 
enter
 
into
 
transactions
 
with
entities
 
that
 
are
 
directly
 
or
 
indirectly
 
controlled
 
or
 
jointly
controlled
 
by
 
UBS’s
 
key
 
management
 
personnel
 
or
 
their
 
close
family
 
members
 
and
 
as
 
of
 
31 December
 
2021,
 
31 December
20
20
 
and
 
31
 
December
 
201
9
,
 
there
 
were
 
no
 
outstanding
balances related
 
to such
 
transactions. Furthermore,
 
in 2021
 
and
2020, entities
 
controlled by
 
key management
 
personnel did
 
not
sell any
 
goods or
 
provide any
 
services to
 
UBS, and
 
therefore did
not receive any
 
fees from UBS.
 
UBS also did
 
not provide services
to such entities in 2021 and 2020, and
 
therefore also received no
fees.
 
e) Transactions with associates and joint ventures
Loans to and outstanding receivables from associates
 
and joint ventures
USD million
2021
2020
Carrying amount at the beginning of the year
630
982
Additions
133
527
Reductions
(497)
(1,001)
Foreign currency translation
(14)
123
Carrying amount at the end of the year
 
251
630
of which: unsecured loans and receivables
243
621
Other transactions with associates and
 
joint ventures
As of or for the year ended
USD million
31.12.21
31.12.20
Payments to associates and joint ventures for goods and services
 
received
157
139
Fees received for services provided to associates and joint ventures
104
128
Liabilities to associates and joint ventures
127
91
Commitments and contingent liabilities to associates
 
and joint ventures
7
9
›
 
Refer to Note 29 for an overview of investments
 
in associates and joint ventures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
399
 
Note 32
 
Invested assets and net new money
 
The following disclosures provide a bre
 
akdown of UBS’s invested
assets and a
 
presentation of their
 
development, including net
 
new
money,
 
as
 
required
 
by
 
the
 
Swiss
 
Financial
 
Market
 
Supervisory
Authority.
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
 
total
 
invested
 
assets,
 
as
 
both
 
business
divisions are independently providing a
 
service to their respective
clients, and both add value and generate revenue.
Net new money
Net new
 
money in
 
a reporting
 
period is
 
the amount
 
of invested
assets
 
entrusted
 
to
 
UBS
 
by
 
new
 
and
 
existing
 
clients,
 
less
 
those
withdrawn
 
by
 
existing
 
clients
 
and
 
clients
 
who
 
terminated
relationships
 
with UBS.
Net new
 
money is
 
calculated using
 
the direct
 
method, under
which
 
inflows
 
and
 
outflows
 
to
 
/
from
 
invested
 
assets
 
are
determined at the client level,
 
based on transactions. Interest and
dividend income from invested
 
assets are not counted as net new
money inflows. Market and currency movements,
 
as well as
 
fees,
commissions
 
and interest on loans
 
charged,
 
are excluded from
 
net
new
 
money,
 
as
 
are
 
effects
 
resulting
 
from
 
any
 
acquisition
 
or
divestment
 
of
 
a
 
UBS
 
subsidiary
 
or
 
business.
 
Reclassifications
between invested assets
 
and custody-only assets as
 
a
 
result of
 
a
change in service level
 
delivered are generally treated as net
 
new
money flows.
 
However, where the change in
 
service level directly
results
 
from an
 
externally
 
imposed
 
regulation
 
or a
 
strategic
 
decision
by UBS
 
to exit
 
a market
 
or specific
 
service
 
offering,
 
the one-time
 
net
effect is
 
reported as
Other effects
.
The
 
Investment
 
Bank
 
does
 
not track
 
invested
 
assets
 
and
 
net
new
 
money.
 
However,
 
when
 
a
 
client
 
is
 
transferred
 
from
 
the
Investment Bank
 
to another
 
business division,
 
this may
 
produce
net new
 
money even though
 
the client assets
 
were already with
UBS.
 
Invested
 
assets and net new money
As of or for the year ended
USD billion
31.12.21
31.12.20
Fund assets managed by UBS
419
397
Discretionary assets
1,705
1,459
Other invested assets
2,472
2,331
Total invested assets
1
4,596
4,187
of which: double counts
356
311
Net new money
1
159
127
1 Includes double counts.
 
Development of invested assets
USD billion
2021
2020
Total invested assets at the beginning of the year
1
4,187
3,607
Net new money
159
127
Market movements
2
339
359
Foreign currency translation
(65)
96
Other effects
(24)
(1)
of which: acquisitions / (divestments)
(5)
0
Total invested assets at the end of the year
1
4,596
4,187
1 Includes double counts.
 
2 Includes interest and dividend income.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
400
 
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.
 
Closing exchange rate
Average rate
1
As of
For the year ended
31.12.21
31.12.20
31.12.21
31.12.20
31.12.19
1 CHF
1.10
1.13
1.09
1.07
1.01
1 EUR
1.14
1.22
1.18
1.15
1.12
1 GBP
1.35
1.37
1.37
1.29
1.28
100 JPY
0.87
0.97
0.91
0.94
0.92
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 12
month-end rates, weighted
 
according to the income
 
and expense volumes of all
 
operations of the Group
 
with the same functional currency
 
for each month. Weighted
 
average rates for individual
 
business divisions
may deviate from the weighted average rates for the Group.
 
 
Note 34
 
Events after the reporting period
 
Russia’s invasion of Ukraine
Russia’s
 
invasion of
 
Ukraine on
 
24 February
 
2022
 
has triggered
disruptions
 
and
 
uncertainties
 
in
 
the
 
markets
 
and
 
the
 
global
economy,
 
as well as coordinated implementation
 
of sanctions by
Switzerland, the
 
United States,
 
the European
 
Union, the
 
United
Kingdom and
 
others against
 
Russia and,
 
certain Russian
 
entities
and
 
nationals.
 
These
 
events,
 
together
 
with
 
potential
 
counter-
sanctions
 
and
 
other
 
measures
 
taken
 
by
 
Russia,
 
impact
 
UBS’s
businesses.
UBS’s
 
country
 
risk
 
exposure
 
to
 
Russia
 
was
 
approximately
USD
0.6
 
billion
 
across
 
its
 
business
 
divisions
 
as
 
of
 
31 December
2021.
 
This
 
exposure
 
has
 
been
 
reduced
 
since
 
year-end 2021.
 
In
addition,
 
UBS
 
is
 
currently
 
monitoring
 
settlement
 
risk
 
on
 
certain
open transactions with Russian bank- or non-bank
 
counterparties
or
 
Russian
 
underlyings,
 
as
 
market
 
closures,
 
the
 
imposition
 
of
exchange
 
controls,
 
sanctions
 
or
 
other
 
measures
 
may
 
limit
 
our
ability
 
to
 
settle
 
existing
 
transactions
 
or
 
to
 
realize
 
on
 
collateral,
which
 
may
 
result
 
in
 
unexpected
 
increases
 
in
 
exposures.
 
UBS’s
balance sheet as of
 
31 December 2021 also
 
included net assets
 
of
USD
51
 
million held in UBS’s
 
Russian subsidiary, OOO
 
UBS Bank.
As of 3 March 2022, UBS also
 
had approximately USD
0.2
 
billion
of exposure arising
 
from reliance on
 
Russian assets as
 
collateral on
Lombard
 
lending and
 
other secured
 
financing in
 
Global
 
Wealth
Management.
 
As of 3 March
 
2022,
 
UBS identified a small
 
number of Global
Wealth
 
Management
 
clients
 
subject
 
to
 
the
 
recently
 
introduced
sanctions with total loans outstanding of under USD
10
 
million.
UBS continues to closely
 
monitor related effects on
 
its financial
statements,
 
including
 
estimated
 
direct
 
and
 
indirect
 
impacts
 
on
expected credit
 
loss calculations
 
and on
 
fair value
 
measurement
of assets, liabilities and off-balance
 
sheet exposures. The situation
continues
 
to
 
evolve
 
and
 
broader
 
implications
 
for
 
other
counterparties
 
of
 
UBS,
 
including
 
financial
 
institutions,
 
are
 
not
possible to
 
assess at
 
this time;
 
however, there
 
were no
 
material
adverse effects on
 
UBS’s financial statements
 
as of 4 March
 
2022.
›
 
Refer to “Top and emerging risks” and “Country risk” in the
“Risk management and control” section and
 
to “Performance in
the financial services industry is affected by
 
market conditions
and the macroeconomic climate” in the “Risk
 
factors” section of
this report for more information
 
 
 
 
 
401
 
Note 35
 
Main differences between IFRS and Swiss GAAP
 
The
 
consolidated
 
financial
 
statements
 
of
 
UBS
 
Group
 
AG
 
are
prepared
 
in
 
accordance
 
with
 
International
 
Financial
 
Reporting
Standards (IFRS). The
 
Swiss Financial
 
Market Supervisory Authority
(FINMA) requires financial groups presenting financial statements
under
 
IFRS
 
to
 
provide
 
a
 
narrative
 
explanation
 
of
 
the
 
main
differences
 
between
 
IFRS
 
and
 
Swiss
g
enerally
 
accepted
accounting principles (GAAP) (the FINMA Accounting
 
Ordinance,
FINMA
 
Circular
 
2020/1 “Accounting
 
– banks”
 
and the
 
Banking
Ordinance
 
(the
 
BO)).
 
Included
 
in
 
this
 
Note
 
are
 
the
 
significant
differences
 
in
 
the
 
recognition
 
and
 
measurement
 
between
 
IFRS
and
 
the
 
provisions
 
of
 
the
BO
 
and
 
the
 
guidelines
 
of
 
FINMA
governing
 
true
 
and
 
fair
 
view
 
financial
 
statement
 
reporting
pursuant to Art. 25 to Art. 42 of the BO.
1. Consolidation
Under IFRS,
 
all entities
 
that are
 
controlled
 
by the
 
holding entity
are consolidated. Under
 
Swiss GAAP,
 
controlled entities deemed
immaterial to the
 
Group or held
 
only temporarily are exempt
 
from
consolidation,
 
but
 
instead
 
are
 
recorded
 
as
 
participations
accounted
 
for
 
under
 
the
 
equity
 
method
 
of
 
accounting
 
or
 
as
financial
 
investments
 
measured
 
at
 
the
 
lower
 
of
 
cost
 
or
 
market
value.
2. Classification and measurement of financial assets
Under IFRS, debt instruments
 
are measured at amortized
 
cost, fair
value through
 
other comprehensive income
 
(FVOCI) or fair
 
value
through
 
profit
 
or
 
loss
 
(FVTPL),
 
depending
 
on
 
the
 
nature
 
of
 
the
business
 
model
 
within
 
which
 
the
 
asset
 
is
 
held
 
and
 
the
characteristics of
 
the contractual
 
cash flows
 
of the
 
asset.
 
Equity
instruments
 
are
 
accounted
 
for
 
at
 
FVTPL
 
by
 
UBS.
 
Under
 
Swiss
GAAP, trading assets and derivatives
 
are measured at
 
FVTPL in
 
line
with IFRS.
 
However,
 
non-trading debt
 
instruments are
 
generally
measured at amortized
 
cost, even when
 
the assets are
 
managed
on
 
a
 
fair value
 
basis.
 
In
 
addition,
 
the measurement
 
of
 
financial
assets in the
 
form of
 
securities depends on
 
the nature of
 
the asset:
debt instruments not
 
held to maturity,
 
i.e., instruments available
for
 
sale,
and
equity
 
instruments
 
with
 
no
 
permanent
 
holding
intent, are classified as
Financial investments
 
and measured at the
lower
 
of
 
(amortized)
 
cost
 
or
 
market
 
value.
 
Market
 
value
adjustments up to the original cost amount and
 
realized gains or
losses upon disposal
 
of the investment
 
are recorded in the
 
income
statement
 
as
Other
 
income
 
from
 
ordinary
 
activities.
Equity
instruments
 
with
 
a
 
permanent
 
holding
 
intent
 
are
 
classified
 
as
participations in
Non-consolidated investments in
 
subsidiaries and
other
 
participations
 
and
 
are
 
measured
 
at
 
cost
 
less
 
impairment.
Impairment
 
losses
 
are
 
recorded
 
in
 
the
 
income
 
statement
 
as
Impairment
 
of investments
 
in non-consolidated
 
subsidiaries and
other participations.
 
Reversals of
 
impairments up
 
to the
 
original
cost
 
amount
 
and
 
realized
 
gains
 
or
 
losses
 
upon
 
disposal
 
of
 
the
investment are
 
recorded as
Extraordinary income
 
/
Extraordinary
expenses
.
3. Fair value option applied to financial liabilities
Under IFRS,
 
UBS applies the
 
fair value option
 
to certain financial
liabilities not held for trading.
 
Instruments for which the fair
 
value
option
 
is
 
applied
 
are
 
accounted
 
for
 
at
 
FVTPL.
 
The
 
amount
 
of
change
 
in
 
the
 
fair
 
value
 
attributable
 
to
 
changes
 
in
 
UBS’s
 
own
credit is presented in
Other comprehensive income
 
directly within
Retained
 
earnings
.
 
The
 
fair
 
value
 
option
 
is
 
applied
 
primarily
 
to
issued
 
structured
 
debt
 
instruments,
 
certain
 
non-structured
 
debt
instruments,
 
certain payables
 
under repurchase
 
agreements and
cash
 
collateral
 
on
 
securities
 
lending
 
agreements,
 
amounts
 
due
under unit-linked investment contracts, and brokerage payables.
Under Swiss GAAP, the fair
 
value option can only be
 
applied to
structured debt instruments
 
consisting of
 
a debt
 
host contract
 
and
one
 
or
 
more
 
embedded
 
derivatives
 
that
 
do
 
not
 
relate
 
to
 
own
equity. Furthermore, unrealized changes
 
in fair value attributable
to
 
changes
 
in
 
UBS’s
 
own
 
credit
 
are
 
not
 
recognized,
 
whereas
realized own credit is recognized in
 
Net trading income
.
4. Allowances and provisions for credit losses
Swiss GAAP permit use of IFRS for
 
accounting for allowances and
provisions for credit losses based on an expected credit loss (ECL)
model. UBS has
 
chosen to apply
 
the IFRS 9
 
ECL approach to
 
the
substantial
 
majority
 
of
 
exposures
 
in
 
scope
 
of
 
Swiss
 
GAAP
 
ECL
requirements,
 
including all exposures in scope of ECL under both
Swiss GAAP and IFRS.
In
 
addition,
 
for
 
a
 
small
 
population
 
of
 
exposures
 
within
 
the
scope of Swiss GAAP ECL requirements, which are not subject to
ECL
 
under
IFRS
 
due
 
to
 
classification
 
and
 
measurements
differences,
 
UBS applies
 
an alternative
 
approach.
 
Where Pillar 1
internal ratings-based (IRB)
 
models are applied
 
to measure credit
risk,
 
ECL
 
for
 
such
 
exposures
 
is
 
determined
 
by
 
the
 
regulatory
expected loss
 
(EL), with
 
an add-on
 
for scaling
 
up to
 
the residual
maturity of exposures
 
maturing beyond the next
 
12 months. For
detailed
 
information
 
on
 
regulatory
 
EL,
 
refer
 
to
 
the
“
Risk
management
 
and control”
 
section
 
of
 
this report.
 
For exposures
where the Pillar 1 standardized approach (SA) is used
 
to measure
credit
 
risk,
 
ECL
 
is
 
determined
 
using
 
a
 
portfolio
 
approach
 
that
derives
 
a
 
conservative probability
 
of
 
default
 
(PD)
 
and loss
 
given
default (LGD) for the entire portfolio.
 
5. Hedge accounting
Under IFRS, when cash flow hedge accounting is applied, the fair
value
 
gain
 
or
 
loss
 
on
 
the
 
effective
 
portion
 
of
a
 
derivative
designated as
 
a cash
 
flow hedge
 
is recognized
 
initially in
 
equity
and reclassified to the income statement when certain conditions
are
 
met.
 
When
 
fair
 
value
 
hedge
 
accounting
 
is
 
applied,
 
the
 
fair
value change of the
 
hedged item attributable to
 
the hedged risk
is
 
reflected
 
in
 
the
 
measurement
 
of
 
the
 
hedged
 
item
 
and
 
is
recognized in the income statement along with
 
the change in the
fair
 
value
 
of
 
the
 
hedging
 
derivative.
 
Under
 
Swiss
 
GAAP,
 
the
effective
 
portion
 
of
 
the
 
fair
 
value
 
change
 
of
a
derivative
instrument designated
 
as a
 
cash flow
 
or as
 
a fair
 
value hedge
 
is
deferred on the balance
 
sheet as
Other assets
 
or
Other liabilities
.
The carrying amount of the hedged
 
item designated in fair value
hedges is
 
not adjusted
 
for fair
 
value changes
 
attributable to
 
the
hedged risk.
 
 
 
Consolidated financial statements | UBS Group AG consolidated financial statements
402
 
Note 35
 
Main differences between IFRS and Swiss GAAP (continued)
6. Goodwill and intangible assets
Under
 
IFRS,
 
goodwill acquired
 
in
 
a
 
business combination
 
is
 
not
amortized
 
but tested
 
annually for
 
impairment.
 
Intangible
 
assets
with
 
an
 
indefinite
 
useful
 
life
 
are
 
also
 
not
 
amortized
 
but
 
tested
annually
 
for
 
impairment.
 
Under
 
Swiss
 
GAAP,
 
goodwill
 
and
intangible assets with
 
indefinite useful lives
 
are amortized over
 
a
period not exceeding five years, unless a longer useful life, which
may not exceed
10
 
years, can
 
be justified. In
 
addition, these assets
are tested annually for impairment.
7. Post-employment benefit plans
Swiss GAAP permit the use of IFRS or Swiss accounting
 
standards
for post-employment benefit
 
plans, with the
 
election made on
 
a
plan-by-plan basis.
UBS
 
has
 
elected
 
to
 
apply
 
IFRS
 
(IAS
 
19)
 
for
 
the
 
non-Swiss
defined
 
benefit
 
plans
 
in
 
the
 
UBS
 
AG
 
standalone
 
financial
statements and
 
Swiss GAAP
 
(FER 16)
 
for the
 
Swiss pension
 
plan
in the UBS
 
AG and the UBS
 
Switzerland AG standalone
 
financial
statements. The
 
requirements of
 
Swiss GAAP
 
are better
 
aligned
with the specific nature
 
of Swiss pension plans, which
 
are hybrid
in
 
that
 
they
 
combine
 
elements
 
of
 
defined
 
contribution
 
and
defined
 
benefit
 
plans,
 
but
 
are
 
treated
 
as
 
defined
 
benefit
 
plans
under IFRS. Key
 
differences between Swiss
 
GAAP and IFRS
 
include
the treatment
 
of dynamic
 
elements, such
 
as future
 
salary increases
and future
 
interest credits
 
on retirement
 
savings, which
 
are not
considered under
 
the static
 
method used
 
in accordance
 
with Swiss
GAAP.
 
Also,
 
the
 
discount
 
rate
 
used
 
to
 
determine
 
the
 
defined
benefit obligation in accordance with
 
IFRS is based on the yield
 
of
high-quality
 
corporate
 
bonds
 
of
 
the
 
market
 
in
 
the
 
respective
pension plan country. The
 
discount rate used in
 
accordance with
Swiss GAAP (i.e., the technical interest rate) is determined by
 
the
Pension Foundation
 
Board based
 
on the
 
expected returns of
 
the
Board’s investment strategy.
For defined benefit plans,
 
IFRS require the full
 
defined benefit
obligation net
 
of the
 
plan assets
 
to be
 
recorded on
 
the balance
sheet
 
subject
 
to
 
the
 
asset
 
ceiling
 
rules,
 
with
 
changes
 
resulting
from remeasurements recognized
 
directly in equity.
 
However, for
non-Swiss
 
defined
 
benefit
 
plans
 
for
 
which
 
IFRS
 
accounting
 
is
elected,
 
changes
 
due
 
to
 
remeasurements
 
are
 
recognized
 
in
 
the
income statement of UBS AG standalone under Swiss GAAP.
Swiss
 
GAAP
 
require
 
employer
 
contributions
 
to
 
the
 
pension
fund
 
to
 
be
 
recognized
 
as
 
personnel
 
expenses
 
in
 
the
 
income
statement.
 
Swiss
 
GAAP
 
also
 
require
 
an
 
assessment
 
of
 
whether,
based
 
on
 
the
 
pension
 
fund’s
 
financial
 
statements
 
prepared
 
in
accordance
 
with
 
Swiss
 
accounting
 
standards
(FER
 
26),
 
an
economic benefit
 
to, or
 
obligation of,
 
the employer
 
arises from
the
 
pension
 
fund that
 
is recognized
 
in the
 
balance sheet
 
when
conditions are
 
met. Conditions
 
for recording
 
a pension
 
asset or
liability would
 
be met
 
if, for
 
example, an
 
employer contribution
reserve is available
 
or the employer
 
is required to
 
contribute to the
reduction of a pension deficit (on an FER 26 basis).
8. Leasing
Under IFRS, a single lease accounting model applies that
 
requires
UBS to
 
record a
 
right-of-use (RoU)
 
asset and
 
a corresponding
 
lease
liability
 
on
 
the
 
balance
 
sheet
 
when
 
UBS
 
is
 
a
 
lessee
 
in
 
a
 
lease
arrangement. The RoU asset and the lease liability are recognized
when UBS
 
acquires control
 
of the
 
physical use
 
of the
 
asset. The
lease liability is measured based on the present value of the lease
payments over the lease term, discounted using UBS’s unsecured
borrowing rate. The RoU asset is recorded at an amount equal to
the lease liability
 
but is adjusted
 
for rent prepayments,
 
initial direct
costs,
 
any
 
costs
 
to
 
refurbish
 
the
 
leased
 
asset
 
and
 
/
 
or
 
lease
incentives received. The RoU asset is depreciated over the shorter
of the lease term or the useful life of the underlying asset.
Under Swiss GAAP,
 
leases that
 
transfer substantially
 
all the risks
and
 
rewards,
 
but
 
not
 
necessarily
 
legal
 
title
 
in
 
the
 
underlying
assets,
 
are
 
classified
 
as
 
finance
 
leases.
 
All
 
other
 
leases
 
are
classified
 
as
 
operating
 
leases.
 
Whereas
 
finance
 
leases
 
are
recognized on the balance
 
sheet and measured in line
 
with IFRS,
operating
 
leases are
 
not recognized
 
on
 
the balance
 
sheet, with
payments recognized as
General and administrative
 
expenses
 
on
a straight-line
 
basis over
 
the lease term,
 
which commences with
control
 
of
 
the
 
physical
 
use
 
of
 
the
 
asset.
 
Lease
 
incentives
 
are
treated
 
as
 
a
 
reduction
 
of
 
rental
 
expense
 
and
 
recognized
 
on
 
a
consistent basis over the lease term.
 
9. Netting of derivative assets and liabilities
Under IFRS, derivative assets, derivative liabilities and related cash
collateral
 
not
 
settled
 
to
 
market
 
are
 
reported
 
on
 
a
 
gross
 
basis
unless
 
the
 
restrictive
 
IFRS
 
netting
 
requirements
 
are
 
met:
 
(i)
existence
 
of
 
master
 
netting
 
agreements
 
and
 
related
 
collateral
arrangements
 
that are
 
unconditional and
 
legally enforceable,
 
in
both
 
the
 
normal
 
course
 
of
 
business
 
and
 
the
 
event
 
of
 
default,
bankruptcy
 
or
 
insolvency of
 
UBS and
 
its
 
counterparties;
 
and
 
(ii)
UBS’s intention
 
to either
 
settle on
 
a net
 
basis or
 
to realize the
 
asset
and
 
settle
 
the
 
liability
 
simultaneously.
 
Under
 
Swiss
 
GAAP,
derivative
 
assets,
 
derivative
 
liabilities
 
and
 
related
 
cash
 
collateral
not
 
settled
 
to
 
market
 
are
 
generally
 
reported
 
on
 
a
 
net
 
basis,
provided the master netting
 
and the related collateral
 
agreements
are
 
legally
 
enforceable
 
in
 
the
 
event
 
of
 
default,
 
bankruptcy
 
or
insolvency of UBS’s counterparties.
10. Negative interest
Under IFRS,
 
negative interest
 
income arising
 
on a
 
financial asset
does not
 
meet the
 
definition of
 
interest
 
income and,
 
therefore,
negative
 
interest
 
on
 
financial
 
assets
 
and
 
negative
 
interest
 
on
financial
 
liabilities
 
are
 
presented
 
within
 
interest
 
expense
 
and
interest income, respectively. Under
 
Swiss GAAP, negative interest
on
 
financial
 
assets
 
is
 
presented
 
within
 
interest
 
income
 
and
negative interest on financial liabilities
 
is presented within interest
expense.
11. Extraordinary income and expense
Certain
 
non-recurring
 
and
 
non-operating
 
income
 
and
 
expense
items,
 
such
 
as
 
realized
 
gains
 
or
 
losses
 
from
 
the
 
disposal
 
of
participations,
 
fixed
 
and
 
intangible
 
assets,
 
a
nd
 
reversals
 
of
impairments
 
of
 
participations
 
and
 
fixed
 
assets,
 
are
 
classified
 
as
extraordinary
 
items
 
under
 
Swiss
 
GAAP.
 
This
 
distinction
 
is
 
not
available under IFRS
.
p
 
 
 
403
UBS AG consolidated financial information
This
 
section
 
contains
 
a
 
comparison
 
of
 
selected
 
financial
 
and
capital
 
information
 
between
 
UBS
 
Group
 
AG
 
consolidated
 
and
UBS AG consolidated. Information for UBS AG consolidated does
not differ materially from UBS Group AG on a consolidated basis.
 
Comparison between UBS Group AG consolidated and
UBS AG consolidated
The
 
accounting
 
policies
 
applied
 
under
 
International
 
Financial
Reporting Standards
 
(IFRS) to
 
both UBS
 
Group AG
 
and UBS
 
AG
consolidated
 
financial
 
statements
 
are
 
identical.
 
However,
 
there
are certain scope and presentation differences as noted below:
–
 
Assets,
 
liabilities,
 
operating
 
income,
 
operating
 
expenses
 
and
tax
 
expenses
 
/
 
(benefits)
 
relating
 
to
 
UBS
 
Group
 
AG
 
and
 
its
directly held subsidiaries, including UBS
 
Business Solutions AG,
are
 
reflected in
 
the consolidated
 
financial statements
 
of UBS
Group
 
AG
 
but
 
not
 
of
 
UBS
 
AG.
 
UBS
 
AG’s
 
assets,
 
liabilities,
operating
 
income
 
and
 
operating
 
expenses
 
related
 
to
transactions
 
with
 
UBS
 
Group
 
AG
 
and
 
its
 
directly
 
held
subsidiaries,
 
including
 
UBS
 
Business
 
Solutions
 
AG
 
and
 
other
shared
 
services
 
subsidiaries, are
 
not
 
subject to
 
elimination
 
in
the
 
UBS
 
AG
 
consolidated
 
financial
 
statements,
 
but
 
are
eliminated
in
 
the
 
UBS
 
Group
 
AG
 
consolidated
 
financial
statements.
 
–
 
Differences in net profit between UBS Group AG consolidated
and
 
UBS
 
AG
 
consolidated
 
mainly
 
arise
 
as
 
UBS
 
Business
Solutions
 
AG
 
and
 
other
 
shared
 
services
 
subsidiaries
 
of
 
UBS
Group
 
AG
 
charge
 
other
 
legal
 
entities
 
within
 
the
 
UBS
 
AG
consolidation scope for
 
services provided, including
 
a markup
on
 
costs
 
incurred.
 
In
 
addition,
 
and
 
to
 
a
 
lesser
 
extent,
differences
 
arise
 
as
 
a
 
result
 
of
 
certain
 
compensation-related
matters, including pensions.
–
 
The equity of UBS Group AG consolidated was USD 2.6 billion
higher
than
 
the
 
equity
 
of
 
UBS
 
AG
 
consolidated
 
as
 
of
 
31
 
December
 
202
1
.
 
This
 
difference
 
was
 
mainly
 
driven
 
by
higher dividends paid by UBS AG to UBS Group AG compared
with
 
the dividend
 
distributions of
 
UBS
 
Group AG,
 
as
 
well as
higher
 
retained
 
earnings
 
in
 
the
 
UBS Group
 
AG
 
consolidated
financial
 
statements,
 
largely
 
related
 
to
 
the
 
aforementioned
markup charged by
 
shared services subsidiaries
 
of UBS Group
AG
 
to
 
other
 
legal
 
entities
 
in
 
the
 
UBS
 
AG
 
scope
 
of
consolidation.
 
In
 
addition,
 
UBS
 
Group
 
is
 
the
 
grantor
 
of
 
the
majority
 
of
 
the
 
compensation
 
plans
 
of
 
the
 
Group
 
and
recognizes share
 
premium for
 
equity-settled awards
 
granted.
These effects were partly offset
 
by treasury shares acquired as
part of
 
our share
 
repurchase programs
 
and those
 
held to
 
hedge
share delivery obligations
 
associated with
 
Group compensation
plans, as
 
well as
 
additional share
 
premium recognized
 
at the
UBS
 
AG
 
consolidated
 
level
 
related
 
to
 
the
 
establishment
 
of
UBS Group AG
 
and
 
UBS
 
Business
 
Solutions
 
AG,
 
a
 
wholly
owned subsidiary of UBS Group AG.
–
 
The going concern capital of UBS Group AG consolidated was
USD
 
5
.
1
 
billion
 
higher
 
than
 
the
 
going
 
concern
 
capital
 
of
UBS AG
 
consolidated
 
as
 
of
 
31 December
 
2021,
 
reflecting
higher common equity
 
tier 1 (CET1)
 
capital of USD 3.7 billion
and higher going
 
concern loss-absorbing
 
additional tier 1
 
(AT1)
capital of USD 1.4 billion
 
–
 
The CET1 capital of UBS Group AG consolidated
 
was USD 3.7
billion
 
higher
 
than
 
that
 
of
 
UBS
 
AG
 
consolidated
 
as
 
of
31 December 2021. The higher
 
CET1 capital of UBS Group
 
AG
consolidated
 
was
 
primarily
 
due
 
to
 
a
 
higher
 
UBS
 
Group
 
AG
consolidated
 
IFRS
 
equity
 
of
 
USD 2.6 billion,
 
as
 
described
above, and lower UBS Group AG accruals for future dividends
to
 
shareholders,
 
as
 
well as
 
a
 
higher
 
capital deduction
 
at
 
the
UBS
 
AG
 
consolidated
 
level
 
related
 
to
 
deferred
 
tax
 
assets
 
on
temporary differences. The
 
aforementioned factors were
 
partly
offset
 
by
 
compensation-related
 
regulatory
 
capital
 
accruals
 
at
the UBS Group AG level.
–
 
The
 
going
 
concern
 
loss-absorbing
 
AT1
 
capital
 
of
 
UBS
 
Group
AG consolidated was
 
USD 1.4 billion
 
higher than that
 
of UBS
AG
 
consolidated
 
as
 
of
 
31
 
December 2021,
 
mainly reflecting
deferred contingent capital plan awards granted at
 
the Group
level to eligible
 
employees for the
 
performance years 2016 to
2020,
 
partly
 
offset
 
by
 
two
 
loss-absorbing
 
AT1
 
capital
instruments on-lent by UBS Group AG to UBS AG.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
404
 
UBS AG consolidated key figures
As of or for the year ended
USD million, except where indicated
31.12.21
31.12.20
31.12.19
1
Results
Operating income
 
35,976
 
32,780
 
29,307
Operating expenses
 
27,012
 
25,081
 
24,138
Operating profit / (loss) before tax
 
8,964
 
7,699
 
5,169
Net profit / (loss) attributable to shareholders
 
7,032
 
6,196
 
3,965
Profitability and growth
2
Return on equity (%)
 
12.3
 
10.9
 
7.4
Return on tangible equity (%)
 
13.9
 
12.4
 
8.5
Return on common equity tier 1 capital (%)
 
17.6
 
16.6
 
11.3
Return on risk-weighted assets, gross (%)
 
12.3
 
11.9
 
11.2
Return on leverage ratio denominator, gross (%)
3
 
3.4
 
3.4
 
3.2
Cost / income ratio (%)
 
75.4
 
74.9
 
82.1
Net profit growth (%)
 
13.5
 
56.3
 
(3.4)
Resources
Total assets
 
1,116,145
 
1,125,327
 
971,927
Equity attributable to shareholders
 
58,102
 
57,754
 
53,722
Common equity tier 1 capital
4
 
41,594
 
38,181
 
35,233
Risk-weighted assets
4
 
299,005
 
286,743
 
257,831
Common equity tier 1 capital ratio (%)
4
 
13.9
 
13.3
 
13.7
Going concern capital ratio (%)
4
 
18.5
 
18.3
 
18.3
Total loss-absorbing capacity ratio (%)
4
 
33.3
 
34.2
 
33.9
Leverage ratio denominator
3,4
 
1,067,679
 
1,036,771
 
911,228
Common equity tier 1 leverage ratio (%)
3,4
 
3.90
 
3.68
 
3.87
Going concern leverage ratio (%)
3,4
 
5.2
 
5.1
 
5.2
Total loss-absorbing capacity leverage ratio (%)
4
 
9.3
 
9.5
 
9.6
Other
Invested assets (USD billion)
5
 
4,596
 
4,187
 
3,607
Personnel (full-time equivalents)
 
47,067
 
47,546
 
47,005
1 Refer to the “Accounting and financial reporting” and “Consolidated financial
 
statements” sections of this report for information about the restatement of comparative information, where
 
applicable.
 
2 Refer to
the “Targets, aspirations and capital guidance”
 
section of this report for more information about our performance measurement.
 
3 Leverage ratio denominators and leverage ratios for year 2020 do not reflect the
effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of our
Annual Report 2020 for more information.
 
4 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.
 
5 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
405
 
Comparison between UBS Group AG consolidated and UBS AG consolidated
As of or for the year ended 31.12.21
As of or for the year ended 31.12.20
USD million, except where indicated
UBS Group AG
consolidated
UBS AG
consolidated
Difference
(absolute)
UBS Group AG
consolidated
UBS AG
consolidated
Difference
(absolute)
Income statement
Operating income
35,542
35,976
(434)
32,390
32,780
(390)
Operating expenses
26,058
27,012
(955)
24,235
25,081
(846)
Operating profit / (loss) before tax
 
9,484
8,964
520
8,155
7,699
456
of which: Global Wealth Management
4,783
4,706
77
4,019
3,965
54
of which: Personal & Corporate Banking
1,731
1,726
4
1,259
1,261
(2)
of which: Asset Management
1,030
1,023
7
1,455
1,454
1
of which: Investment Bank
2,630
2,592
38
2,482
2,441
41
of which: Group Functions
(689)
(1,083)
394
(1,060)
(1,423)
362
Net profit / (loss)
 
7,486
7,061
425
6,572
6,211
361
of which: net profit / (loss) attributable to shareholders
7,457
7,032
425
6,557
6,196
361
of which: net profit / (loss) attributable to non-controlling interests
29
29
0
15
15
0
Statement of comprehensive income
Other comprehensive income
(2,367)
(2,235)
(131)
1,740
1,759
(19)
of which: attributable to shareholders
(2,351)
(2,220)
(131)
1,719
1,738
(19)
of which: attributable to non-controlling interests
(16)
(16)
0
21
21
0
Total comprehensive income
5,119
4,826
293
8,312
7,970
342
of which: attributable to shareholders
5,106
4,813
293
8,276
7,934
342
of which: attributable to non-controlling interests
13
13
0
36
36
0
Balance sheet
Total assets
1,117,182
1,116,145
1,037
1,125,765
1,125,327
438
Total liabilities
1,056,180
1,057,702
(1,522)
1,066,000
1,067,254
(1,254)
Total equity
 
61,002
58,442
2,559
59,765
58,073
1,691
of which: equity attributable to shareholders
60,662
58,102
2,559
59,445
57,754
1,691
of which: equity attributable to non-controlling interests
340
340
0
319
319
0
Capital information
Common equity tier 1 capital
45,281
41,594
3,687
 
39,890
 
38,181
1,709
Going concern capital
60,488
55,434
5,054
 
56,178
 
52,610
 
3,567
Risk-weighted assets
302,209
299,005
3,204
 
289,101
 
286,743
 
2,358
Common equity tier 1 capital ratio (%)
15.0
13.9
1.1
 
13.8
 
13.3
0.5
Going concern capital ratio (%)
20.0
18.5
1.5
 
19.4
 
18.3
1.1
Total loss-absorbing capacity ratio (%)
34.7
33.3
1.3
 
35.2
 
34.2
1.0
Leverage ratio denominator
1,068,862
1,067,679
1,183
 
1,037,150
 
1,036,771
379
Common equity tier 1 leverage ratio (%)
4.24
3.90
0.34
 
3.85
 
3.68
0.16
Going concern leverage ratio (%)
5.7
5.2
0.5
 
5.4
 
5.1
0.3
Total loss-absorbing capacity leverage ratio (%)
9.8
9.3
0.5
 
9.8
 
9.5
0.3
 
 
Consolidated financial statements | UBS AG consolidated financial statements
406
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
 
AG
 
are
responsible
 
for
 
establishing
 
and
 
maintaining
 
adequate
 
internal
control
 
over
 
financial
 
reporting.
 
UBS
 
AG’s
 
internal control
 
over
financial
 
reporting
 
is
 
designed
 
to
 
provide
 
reasonable
 
assurance
regarding
 
the
 
preparation
 
and
 
fair
 
presentation
 
of
 
published
financial
 
statements
 
in
 
accordance
 
with
 
International
 
Financial
Reporting
 
Standards
 
(IFRS)
 
as
 
issued
 
by
 
the
 
International
Accounting Standards Board (IASB).
UBS
 
AG’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 AG management; and
–
 
provide
 
reasonable
 
assurance
 
regarding
 
prevention
 
or
 
timely
detection of unauthorized
 
acquisition, use or disposition
 
of the
company’s
 
assets
 
that
 
could
 
have
 
a
 
material
 
effect
 
on
 
the
financial statements.
 
Because
 
of
 
its
 
inherent
 
limitations,
 
internal
 
control
 
over
financial reporting may
 
not prevent
 
or detect misstatements.
 
Also,
projections of any
 
evaluation of effectiveness
 
to future periods
 
are
subject to the risk that controls may become inadequate because
of changes
 
in conditions,
 
or that the
 
degree of
 
compliance with
the policies or procedures may deteriorate.
Management’s assessment of internal control over financial
reporting as of 31 December
2021
 
UBS AG management has assessed the effectiveness of UBS AG’s
internal control over financial reporting
 
as of 31 December 2021
based on
 
the criteria
 
set forth
 
by the
 
Committee of
 
Sponsoring
Organizations
 
of
 
the
 
Treadway
 
Commission
 
(COSO)
 
in
 
Internal
Control – Integrated Framework
 
(2013 Framework). Based
 
on this
assessment, management believes
 
that, as of
 
31 December 2021,
UBS AG’s internal control over financial reporting was effective.
The
 
effectiveness
 
of
 
UBS
 
AG’s internal
 
control
 
over
 
financial
reporting as
 
of 31
 
December 2021
 
has been
 
audited by
 
Ernst &
Young
 
Ltd,
 
UBS AG’s
 
independent
 
registered public
 
accounting
firm,
 
as
 
stated
 
in
 
their
 
report
 
appearing
 
on
 
page
 
407
 
which
expresses an unqualified
 
opinion on the
 
effectiveness of UBS
 
AG’s
internal control over financial reporting as of 31 December 2021.
 
UBS_AR_2021p435i0.gif
 
407
 
 
 
 
 
UBS_AR_2021p436i0.gif
 
408
 
UBS_AR_2021p437i0.gif
 
409
UBS_AR_2021p438i0.gif
 
410
UBS_AR_2021p439i0.gif
 
411
UBS_AR_2021p440i0.gif
 
412
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
413
UBS AG consolidated financial statements
Primary financial statements and share information
Audited |
Income statement
For the year ended
USD million
Note
31.12.21
31.12.20
31.12.19
Interest income from financial instruments measured at
 
amortized cost and fair value through
other comprehensive income
3
8,534
8,816
10,703
Interest expense from financial instruments measured at
 
amortized cost
3
(3,366)
(4,333)
(7,303)
Net interest income from financial instruments measured
 
at fair value through profit or loss
3
1,437
1,305
1,015
Net interest income
3
6,605
5,788
4,415
Other net income from financial instruments measured
 
at fair value through profit or loss
3
5,844
6,930
6,833
Credit loss (expense) / release
20
148
(695)
(78)
Fee and commission income
4
24,422
20,982
19,156
Fee and commission expense
4
(1,985)
(1,775)
(1,696)
Net fee and commission income
4
22,438
19,207
17,460
Other income
5
941
1,549
677
Total operating income
35,976
32,780
29,307
Personnel expenses
6
15,661
14,686
13,801
General and administrative expenses
7
9,476
8,486
8,586
Depreciation, amortization and impairment of non-financial
 
assets
12,13
1,875
1,909
1,751
Total operating expenses
27,012
25,081
24,138
Operating profit / (loss) before tax
8,964
7,699
5,169
Tax expense / (benefit)
 
8
1,903
1,488
1,198
Net profit / (loss)
7,061
6,211
3,971
Net profit / (loss) attributable to non-controlling interests
29
15
6
Net profit / (loss) attributable to shareholders
7,032
6,196
3,965
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
414
 
Statement of comprehensive income
For the year ended
USD million
Note
31.12.21
31.12.20
31.12.19
Comprehensive income attributable to shareholders
Net profit / (loss)
7,032
6,196
3,965
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
(1,046)
2,040
199
Effective portion of changes in fair value of hedging instruments
 
designated as net investment hedges, before tax
492
(938)
(144)
Foreign currency translation differences on foreign operations reclassified to the
 
income statement
(1)
(7)
52
Effective portion of changes in fair value of hedging instruments
 
designated as net investment hedges reclassified
 
to
the income statement
10
2
(14)
Income tax relating to foreign currency translations, including the effect of
 
net investment hedges
35
(67)
(1)
Subtotal foreign currency translation, net of tax
(510)
1,030
92
Financial assets measured at fair value through other comprehensive income
11
Net unrealized gains / (losses), before tax
(203)
223
189
Net realized gains / (losses) reclassified to the income statement
 
from equity
(9)
(40)
(31)
Income tax relating to net unrealized gains / (losses)
55
(48)
(41)
Subtotal financial assets measured at fair value through other comprehensive
 
income, net of tax
(157)
136
117
Cash flow hedges of interest rate risk
26
Effective portion of changes in fair value of derivative instruments designated
 
as cash flow hedges, before tax
(992)
2,012
1,571
Net (gains) / losses reclassified to the income statement from
 
equity
(1,073)
(770)
(175)
Income tax relating to cash flow hedges
390
(231)
(253)
Subtotal cash flow hedges, net of tax
(1,675)
1
1,011
1,143
Cost of hedging
26
Cost of hedging, before tax
(32)
(13)
Income tax relating to cost of hedging
 
6
0
Subtotal cost of hedging, net of tax
(26)
(13)
Total other comprehensive income that may be reclassified to the income statement, net
 
of tax
(2,368)
2,165
1,351
Other comprehensive income that will not be reclassified to the income
 
statement
Defined benefit plans
27
Gains / (losses) on defined benefit plans, before tax
133
(222)
(129)
Income tax relating to defined benefit plans
(31)
88
(41)
Subtotal defined benefit plans, net of tax
102
(134)
(170)
Own credit on financial liabilities designated at fair value
21
Gains / (losses) from own credit on financial liabilities designated
 
at fair value, before tax
46
(293)
(400)
Income tax relating to own credit on financial liabilities designated
 
at fair value
0
0
8
Subtotal own credit on financial liabilities designated at
 
fair value, net of tax
46
(293)
(392)
Total other comprehensive income that will not be reclassified to the income statement,
 
net of tax
148
(427)
(562)
Total other comprehensive income
(2,220)
1,738
789
Total comprehensive income attributable to shareholders
4,813
7,934
4,754
Comprehensive income attributable to non-controlling
 
interests
Net profit / (loss)
29
15
6
Total other comprehensive income that will not be reclassified to the income statement,
 
net of tax
(16)
21
(4)
Total comprehensive income attributable to non-controlling interests
13
36
2
Total comprehensive income
 
Net profit / (loss)
7,061
6,211
3,971
Other comprehensive income
 
(2,235)
1,759
785
of which: other comprehensive income that may be reclassified
 
to the income statement
(2,368)
2,165
1,351
of which: other comprehensive income that will not be reclassified
 
to the income statement
132
(406)
(566)
Total comprehensive income
 
4,826
7,970
4,756
1 Mainly reflects the reclassification of net gains on hedging instruments from OCI to the income statement as the hedged forecast cash flows affected
 
profit or loss and a decrease in net unrealized gains on US dollar
hedging derivatives resulting from increases in the relevant long-term US dollar interest rates.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
415
 
 
Balance sheet
USD million
Note
31.12.21
31.12.20
Assets
Cash and balances at central banks
192,817
158,231
Loans and advances to banks
 
9
15,360
15,344
Receivables from securities financing transactions
9, 22
75,012
74,210
Cash collateral receivables on derivative instruments
9, 22
30,514
32,737
Loans and advances to customers
 
9
398,693
380,977
Other financial assets measured at amortized cost
9, 14a
26,236
27,219
Total financial assets measured at amortized cost
738,632
688,717
Financial assets at fair value held for trading
 
21
131,033
125,492
of which: assets pledged as collateral that may be sold or repledged
 
by counterparties
43,397
47,098
Derivative financial instruments
10, 21, 22
118,145
159,618
Brokerage receivables
 
21
21,839
24,659
Financial assets at fair value not held for trading
 
21
59,642
80,038
Total financial assets measured at fair value through profit or loss
330,659
389,808
Financial assets measured at fair value through other comprehensive income
11, 21
8,844
8,258
Investments in associates
29b
1,243
1,557
Property, equipment and software
 
12
11,712
11,958
Goodwill and intangible assets
 
13
6,378
6,480
Deferred tax assets
 
8
8,839
9,174
Other non-financial assets
14b
9,836
9,374
Total assets
1,116,145
1,125,327
Liabilities
Amounts due to banks
 
15a
13,101
11,050
Payables from securities financing transactions
 
22
5,533
6,321
Cash collateral payables on derivative instruments
 
22
31,801
37,313
Customer deposits
15a
544,834
527,929
Funding from UBS Group AG
15b
57,295
53,979
Debt issued measured at amortized cost
 
17
82,432
85,351
Other financial liabilities measured at amortized cost
19a
9,765
10,421
Total financial liabilities measured at amortized cost
744,762
732,364
Financial liabilities at fair value held for trading
 
21
31,688
33,595
Derivative financial instruments
10, 21, 22
121,309
161,102
Brokerage payables designated at fair value
 
21
44,045
38,742
Debt issued designated at fair value
16, 21
71,460
59,868
Other financial liabilities designated at fair value
19b, 21
32,414
31,773
Total financial liabilities measured at fair value through profit or loss
300,916
325,080
Provisions
18a
3,452
2,791
Other non-financial liabilities
19c
8,572
7,018
Total liabilities
1,057,702
1,067,254
Equity
Share capital
338
338
Share premium
24,653
24,580
Retained earnings
27,912
25,251
Other comprehensive income recognized directly in equity, net of tax
5,200
7,585
Equity attributable to shareholders
58,102
57,754
Equity attributable to non-controlling interests
340
319
Total equity
58,442
58,073
Total liabilities and equity
1,116,145
1,125,327
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
416
 
Statement of changes in equity
USD million
Share
capital
Share
 
premium
Retained
earnings
Balance as of 31 December 2018
338
24,655
23,285
Effect of adoption of IFRIC 23
(11)
Balance as of 1 January 2019 after the adoption of IFRIC 23
338
24,655
23,274
Premium on shares issued and warrants exercised
0
Tax (expense) / benefit
11
Dividends
(3,250)
Translation effects recognized directly in retained earnings
(9)
New consolidations / (deconsolidations) and other increases
 
/ (decreases)
(7)
Total comprehensive income for the year
3,403
of which: net profit / (loss)
3,965
of which: OCI, net of tax
(562)
Balance as of 31 December 2019
338
24,659
23,419
Premium on shares issued and warrants exercised
(4)
2
Tax (expense) / benefit
1
Dividends
(3,848)
Translation effects recognized directly in retained earnings
(49)
Share of changes in retained earnings of associates and
 
joint ventures
(40)
New consolidations / (deconsolidations) and other increases
 
/ (decreases)
3
(76)
Total comprehensive income for the year
5,769
of which: net profit / (loss)
6,196
of which: OCI, net of tax
(427)
Balance as of 31 December 2020
338
24,580
25,251
Premium on shares issued and warrants exercised
(7)
2
Tax (expense) / benefit
(102)
Dividends
(4,539)
Translation effects recognized directly in retained earnings
18
Share of changes in retained earnings of associates and
 
joint ventures
1
New consolidations / (deconsolidations) and other increases
 
/ (decreases)
4
182
Total comprehensive income for the year
7,180
of which: net profit / (loss)
7,032
of which: OCI, net of tax
148
Balance as of 31 December 2021
338
24,653
27,912
1 Excludes other comprehensive income related to defined benefit plans and own credit, which is recorded directly in Retained earnings.
 
2 Includes decreases related to recharges by UBS Group AG for share-based
compensation awards granted to employees of UBS AG or its subsidiaries.
 
3 Mainly relates to the establishment of a banking partnership with Banco do Brasil. In 2020, UBS AG issued a
49.99
% stake in UBS Brasil
Serviços in exchange
 
for exclusive access
 
to Banco do
 
Brasil’s corporate
 
clients. Upon
 
completion of the
 
transaction in 2020,
 
equity attributable to
 
non-controlling interests increased
 
by USD
115
 
million, with no
material effect on equity attributable to shareholders.
 
4 Includes the effects related to the launch of UBS AG’s new operational partnership entity with Sumitomo Mitsui Trust Holdings, Inc. Refer to Note 30 for more
information.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
417
 
Other comprehensive
 
income recognized
 
directly in equity,
 
net of tax
1
of which:
 
foreign currency
 
translation
of which:
 
financial assets
at fair value through
OCI
of which:
 
cash flow
 
hedges
of which:
cost of hedging
Total equity
 
attributable to
 
shareholders
Non-controlling
 
interests
Total equity
3,946
3,940
(103)
109
52,224
176
52,400
(11)
(11)
3,946
3,940
(103)
109
52,213
176
52,389
0
0
11
11
(3,250)
(8)
(3,258)
9
0
9
0
0
(7)
5
(3)
1,351
92
117
1,143
4,754
2
4,756
3,965
6
3,971
1,351
92
117
1,143
789
(4)
785
5,306
4,032
14
1,260
53,722
174
53,896
(4)
(4)
1
1
(3,848)
(6)
(3,854)
49
0
49
0
0
(40)
(40)
65
65
(12)
115
103
2,165
1,030
136
1,011
(13)
7,934
36
7,970
6,196
15
6,211
2,165
1,030
136
1,011
(13)
1,738
21
1,759
7,585
5,126
151
2,321
(13)
57,754
319
58,073
(7)
(7)
(102)
(102)
(4,539)
(4)
(4,542)
(18)
0
(18)
0
0
0
1
1
182
12
193
(2,368)
(510)
(157)
(1,675)
(26)
4,813
13
4,826
7,032
29
7,061
(2,368)
(510)
(157)
(1,675)
(26)
(2,220)
(16)
(2,235)
5,200
4,617
(7)
628
(39)
58,102
340
58,442
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
418
 
Share information and earnings per share
Ordinary share capital
As
 
of
 
31 December
 
2021,
 
UBS
 
AG
 
had
3,858,408,466
 
issued
shares
 
(31 December
 
2020:
3,858,408,466
 
shares)
 
with
 
a
nominal
 
value
 
of
 
CHF
0.10
 
each,
 
leading
 
to
 
a
 
share
 
capital
 
of
CHF
385,840,846.60
.
 
The
 
shares
 
were
 
entirely
 
held
 
by
UBS Group AG.
Conditional share capital
As of 31 December 2021, the following
 
conditional share capital
was available to UBS AG’s Board of Directors (BoD):
 
–
 
A
 
maximum
 
of
 
CHF
 
38,000,000
 
represented
 
by
 
up
 
to
380,000,000
 
fully paid registered shares with a
 
nominal value
of
 
CHF
0.10
 
each,
 
to
 
be
 
issued
 
through
 
the
 
voluntary
 
or
mandatory
 
exercise
 
of
 
conversion
 
rights
 
and
 
/
 
or
 
warrants
granted
 
in
 
connection
 
with
 
the
 
issuance
 
of
 
bonds
 
or
 
similar
financial
 
instruments
 
on
 
national
 
or
 
international
 
capital
markets. This conditional
 
capital
 
allowance
 
was approved
 
at
the Annual General Meeting of UBS
 
AG on 14 April 2010. The
BoD has not made use of such allowance.
Authorized share capital
UBS
 
AG
 
had
 
no
 
authorized
 
capital
 
available
 
to
 
issue
 
on
31 December 2021.
Earnings per share
In
 
2015,
 
UBS
 
AG
 
shares
 
were
 
delisted
 
from
 
the
 
SIX
 
Swiss
Exchange and the New York Stock Exchange. As of 31 December
2021, 100% of UBS AG’s issued shares
 
were held by UBS Group
AG and therefore were not publicly traded. Accordingly, earnings
per share information is not provided for UBS AG.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
419
 
Statement of cash flows
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Cash flow from / (used in) operating activities
Net profit / (loss)
7,061
6,211
3,971
Non-cash items included in net profit and other adjustments:
Depreciation, amortization and impairment of non-financial
 
assets
1,875
1,909
1,751
Credit loss expense / (release)
(148)
695
78
Share of net profits of associates and joint ventures and impairment
 
related to associates
(105)
(84)
(45)
Deferred tax expense / (benefit)
432
355
460
Net loss / (gain) from investing activities
(230)
(698)
220
Net loss / (gain) from financing activities
100
3,246
6,506
Other net adjustments
3,790
(8,061)
862
Net change in operating assets and liabilities:
Loans and advances to banks and amounts due to banks
2,148
3,586
(4,336)
Securities financing transactions
(2,316)
9,588
8,678
Cash collateral on derivative instruments
(3,311)
(3,486)
2,842
Loans and advances to customers
(26,943)
(33,897)
(3,205)
Customer deposits
29,349
52,831
23,399
Financial assets and liabilities at fair value held for trading and derivative financial
 
instruments
(10,635)
11,326
(18,873)
Brokerage receivables and payables
8,115
(5,199)
(2,347)
Financial assets at fair value not held for trading and other financial assets
 
and liabilities
19,793
392
126
Provisions and other non-financial assets and liabilities
2,617
(1,213)
(537)
Income taxes paid, net of refunds
(1,026)
(919)
(741)
Net cash flow from / (used in) operating activities
30,563
36,581
18,805
Cash flow from / (used in) investing activities
Purchase of subsidiaries, associates and intangible assets
(1)
(46)
(26)
Disposal of subsidiaries, associates and intangible assets
1
593
674
114
Purchase of property, equipment and software
(1,581)
(1,573)
(1,401)
Disposal of property, equipment and software
295
364
11
Purchase of financial assets measured at fair value through other
 
comprehensive income
(5,802)
(6,290)
(3,424)
Disposal and redemption of financial assets measured at
 
fair value through other comprehensive income
5,052
4,530
3,913
Net (purchase) / redemption of debt securities measured
 
at amortized cost
(415)
(4,166)
(562)
Net cash flow from / (used in) investing activities
(1,860)
(6,506)
(1,374)
Table
 
continues on the next page.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
420
 
Statement of cash flows (continued)
Table
 
continued from previous page.
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Cash flow from / (used in) financing activities
Net short-term debt issued / (repaid)
(3,093)
23,845
(17,149)
Distributions paid on UBS AG shares
(4,539)
(3,848)
(3,250)
Issuance of debt designated at fair value and long-term debt measured
 
at amortized cost
2
98,619
80,153
65,047
Repayment of debt designated at fair value and long-term debt measured
 
at amortized cost
2
(79,799)
(87,099)
(68,883)
Net cash flows from other financing activities
(261)
(553)
(504)
Net cash flow from / (used in) financing activities
10,927
12,498
(24,738)
Total cash flow
Cash and cash equivalents at the beginning of the year
173,430
119,804
125,853
Net cash flow from / (used in) operating, investing and financing
 
activities
39,630
42,573
(7,307)
Effects of exchange rate differences on cash and cash equivalents
(5,306)
11,053
1,258
Cash and cash equivalents at the end of the year
3
207,755
173,430
119,804
of which: cash and balances at central banks
4
192,706
158,088
106,957
of which: loans and advances to banks
13,822
13,928
11,317
of which: money market paper
5
1,227
1,415
1,530
Additional information
Net cash flow from / (used in) operating activities includes:
Interest received in cash
11,170
11,929
15,344
Interest paid in cash
4,802
6,414
10,800
Dividends on equity investments, investment funds and associates
 
received in cash
6
2,531
1,901
3,145
1 Includes cash proceeds from the sale of UBS AG’s investment in Clearstream Fund Centre AG (previously Fondcenter
 
AG). UBS AG’s majority stake was
 
sold in 2020 and the remaining minority investment was sold
in the second quarter of 2021. Refer to
 
Note 30 for more information. Also includes dividends received
 
from associates.
 
2 Includes funding from UBS Group AG measured at
 
amortized cost (recognized in Funding
from UBS Group AG in the balance sheet)
 
and measured at fair value (recognized in Other financial
 
liabilities designated at fair value in the balance
 
sheet).
 
3 USD
3,408
 
million, USD
3,828
 
million and USD
3,192
million of cash and cash equivalents
 
(mainly reflected in Loans and advances
 
to banks) were restricted as of
 
31 December 2021, 31 December 2020
 
and 31 December 2019, respectively.
 
Refer to Note 23 for more
information.
 
4 Includes only balances with an original maturity of three months or less.
 
5 Money market paper is included in the balance sheet under Financial assets at fair value held for trading,
 
Financial assets
measured at fair value through other comprehensive
 
income, Financial assets at fair value
 
not held for trading and Other financial
 
assets measured at amortized cost.
 
6 Includes dividends received from associates
reported within Net cash flow from / (used in) investing activities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
421
Changes in liabilities arising from financing activities
USD million
Debt issued
measured at
amortized cost
of which:
short-term
1
of which:
long-term
2
Debt issued
designated at fair
value
Over-the-
counter (OTC)
debt
instruments
3
Funding from
UBS Group
AG
4
Total
Balance as of 1 January 2020
62,835
21,837
40,998
66,592
2,022
48,083
179,531
Cash flows
18,722
23,845
(5,123)
(6,423)
(6)
4,606
16,899
Non-cash changes
3,794
984
2,810
(301)
44
2,666
6,203
of which: foreign currency translation
3,589
984
2,605
1,760
82
1,395
6,825
of which: fair value changes
(2,061)
(38)
152
(1,946)
of which: hedge accounting and other effects
205
205
1,119
1,324
Balance as of 31 December 2020
85,351
46,666
38,685
59,868
2,060
55,354
202,633
Cash flows
(550)
(3,093)
2,543
9,075
126
7,076
15,727
Non-cash changes
(2,369)
(475)
(1,894)
2,516
(58)
(2,795)
(2,705)
of which: foreign currency translation
(1,841)
(475)
(1,366)
(1,611)
(65)
(1,340)
(4,857)
of which: fair value changes
4,127
7
(30)
4,104
of which: hedge accounting and other effects
(528)
(528)
(1,425)
(1,953)
Balance as of 31 December 2021
82,432
43,098
39,334
71,460
2,128
59,635
215,655
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
 
Other financial liabilities
 
designated at fair
 
value.
 
4 Includes funding
 
from UBS Group
 
AG measured at
 
amortized cost (refer
 
to Note 15b)
 
and
measured at fair value (refer to Note 19b).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
423
 
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
 
AG
 
and
 
its
 
subsidiaries
 
(UBS
AG
).
On
24 February 2022,
 
the Financial
 
Statements were
 
authorized for
issue by the Board of Directors.
 
Basis of accounting
The Financial Statements have been prepared in accordance with
International Financial Reporting
 
Standards (IFRS), as
 
issued by the
International
 
Accounting
 
Standards
 
Board
 
(the
 
IASB),
 
and
 
are
presented in US dollars (USD).
Disclosures
 
marked
 
as
 
audited
 
in
 
the
 
“Risk,
 
capital,
 
liquidity
and funding,
 
and balance
 
sheet” section
 
of this
 
report form
 
an
integral part of the Financial
 
Statements. These disclosures relate
to requirements
 
under IFRS 7,
Financial Instruments:
 
Disclosures
,
and
 
IAS
 
1,
Presentation
 
of
 
Financial
 
Statements
,
 
and
 
are
 
not
repeated in this section.
 
The
 
accounting
 
policies
 
described
 
in
 
this
 
Note
 
have
 
been
applied consistently in all years presented unless otherwise stated
in Note 1b.
 
 
Critical accounting estimates and judgments
Preparation of these Financial
 
Statements under IFRS requires
 
management
to apply
 
judgment
 
and make
 
estimates
 
and assumptions
 
that affect
 
reported
amounts
 
of
 
assets,
 
liabilities,
 
income
 
and
 
expenses
 
and
 
disclosure
 
of
contingent
 
assets and
 
liabilities,
 
and may
 
involve
 
significant
 
uncertainty
 
at the
time they are made. Such
 
estimates and
 
assumptions
 
are based on the best
available
 
information.
 
UBS
AG
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
 
AG’s
estimates, which could result in significant
 
losses to UBS AG, beyond what
was anticipated
 
or provided
 
for.
 
The
 
following
 
areas
 
contain
 
estimation
 
uncertainty
 
or
 
require
 
critical
judgment
 
and
 
have
 
a
 
significant
 
effect
 
on
 
amounts
 
recognized
 
in
 
the
Financial Statements:
 
–
 
expected credit loss measurement (refer to item 2g in this Note and to
Note 20);
–
 
fair value measurement (refer to item 2f in this Note
 
and to Note 21);
–
 
income taxes (refer to item 6 in this Note and to Note
 
8);
–
 
provisions and contingent liabilities (refer to item 9
 
in this Note and to
Note 18);
–
 
post-employment benefit
 
plans (refer to item
 
5 in this Note
 
and to Note
27);
–
 
goodwill (refer to item 8 in this Note and to Note
 
13); and
–
 
consolidation of structured entities (refer to
 
item 1 in this Note
 
and to
Note 29).
 
1) Consolidation
The
 
Financial
 
Statements
 
comprise
 
the
 
financial
 
statements
 
of
UBS AG
 
and its
 
subsidiaries, presented
 
as a
 
single economic
 
entity;
intercompany
 
transactions
 
and
 
balances
 
have
 
been
 
eliminated.
UBS
 
AG
 
consolidates
 
all
 
entities
 
that
 
it
 
controls,
 
including
structured entities
 
(SEs), which is
 
the case when
 
it has: (i)
 
power
over the relevant activities of
 
the entity;
 
(ii) exposure to an
 
entity‘s
variable returns;
 
and (iii)
 
the ability
 
to use
 
its power
 
to affect
 
its
own returns.
Consideration
 
is
 
given
 
to
 
all
 
facts
 
and
 
circumstances
 
to
determine whether
 
UBS AG
 
has power
 
over another
 
entity,
 
i.e.,
the current ability
 
to direct the
 
relevant activities of
 
an entity when
decisions about those activities need to be made.
 
Subsidiaries,
 
including
 
SEs,
 
are
 
consolidated
 
from
 
the
 
date
when control
 
is gained
 
and deconsolidated
 
from the
 
date when
control ceases.
 
Control, or
 
the lack thereof,
 
is reassessed
 
if facts
and circumstances indicate that there is a change to one or more
elements required to establish that control is present.
Business combinations are accounted for using the acquisition
method. The amount of any non-controlling
 
interest is measured
at
 
the
 
non-controlling
 
interest’s
 
proportionate
 
share
 
of
 
the
acquiree’s identifiable net assets.
 
›
 
Refer to Note
29
for more information
 
Critical accounting estimates and judgments
Each
 
individual
 
entity
 
is
 
assessed
 
for
 
consolidation
 
in
 
line
 
with
 
the
aforementioned consolidation principles.
 
The assessment of control
 
can be
complex
 
and
 
requires
 
the
 
use
 
of
 
significant
 
judgment,
 
in
 
particular
 
in
determining whether
 
UBS AG has
 
power over the
 
entity. As the nature and
extent
 
of
 
UBS
 
AG’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
 
 
Consolidated financial statements | UBS AG consolidated financial statements
424
 
Note 1
 
Summary of material accounting policies (continued)
2)
Financial instruments
a. Recognition
UBS AG recognizes financial
 
instruments when it
 
becomes a party
to
 
contractual
 
provisions
 
of
an
 
instrument.
 
UBS
 
AG
 
applies
settlement date accounting to all standard purchases and
 
sales of
non-derivative financial instruments.
 
In
 
transactions
 
where
 
UBS
 
AG
 
acts
 
as
 
a
 
transferee,
 
to
 
the
extent
the
 
financial
 
asset
 
transfer
 
does
 
not
 
qualify
 
for
derecognition by
 
the transferor,
 
UBS AG
 
does not
 
recognize the
transferred instrument as its asset.
UBS
 
AG
 
also
 
acts
 
in
 
a
 
fiduciary
 
capacity,
 
which
 
results
 
in
 
it
holding
 
or
 
placing
 
assets
 
on
 
behalf
 
of
 
individuals,
 
trusts,
retirement benefit plans and
 
other institutions. Unless these
 
items
meet
 
the
 
definition
 
of
 
an
 
asset
 
and
 
the
 
recognition
 
criteria
 
are
satisfied, they are not recognized on UBS AG’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 AG
neither obtains benefits from nor controls such cash balances.
b. Classification, measurement and presentation
Financial assets
All financial instruments
 
are on initial recognition
 
measured at fair
value
 
and
 
classified
 
as
 
measured
 
at
 
amortized
 
cost,
 
fair
 
value
through
 
other
 
comprehensive
 
income
 
(FVOCI)
 
or
 
fair
 
value
through
 
profit
 
or
 
loss
 
(FVTPL)
.
For
 
financial
 
instruments
subsequently measured at amortized cost or
 
FVOCI, the initial fair
value is adjusted for directly attributable transaction costs.
Where the
 
contractual terms
 
of a
 
debt instrument
 
result in
 
cash
flows that are
 
solely payments of
 
principal and interest
 
(SPPI) on
the
 
principal
 
amount
 
outstanding,
the
 
debt
 
instrument
 
is
classified
 
as
 
measured
 
at
 
amortized
 
cost
 
if
 
it
 
is
 
held
 
within
 
a
business model that has
 
an objective of
 
holding financial assets to
collect
 
contractual
 
cash flows,
 
or
 
at
 
FVOCI if
 
it
 
is held
 
within a
business
 
model
with
the
objective
being
 
achieved
 
by
 
both
collecting contractual cash flows and selling financial assets.
 
All
 
other
 
financial
 
assets
 
are
 
measured
 
at
 
FVTPL,
 
including
those
 
held
 
for
 
trading
 
or
 
those
 
managed
 
on
 
a
 
fair
 
value
 
basis,
except for derivatives
 
designated in a
 
hedge relationship, in
 
which
case hedge accounting requirements apply (refer
 
to item 2j in this
Note for more information).
 
Business model assessment and contractual cash flow
characteristics
 
UBS AG determines
 
the nature
 
of a business
 
model by
 
considering
the
 
way
 
financial
 
assets
 
are
 
managed
 
to
 
achieve
 
a
 
particular
business objective.
In assessing whether
 
contractual cash flows
 
are SPPI, UBS
 
AG
considers
 
whether
 
the
 
contractual
 
terms
 
of
 
the
 
financial
 
asset
contain
 
a
 
term
 
that
 
could
 
change
 
the
 
timing
 
or
 
amount
 
of
contractual cash flows arising over the life of the instrument.
Financial liabilities
 
Financial liabilities measured at amortized cost
Financial liabilities
 
measured at
 
amortized cost
 
include
Debt issued
measured
 
at
 
amortized
 
cost
 
and
Funding
 
from UBS
 
Group AG
,
which
 
constitute
 
obligations
 
of
 
UBS
 
AG arising
 
from
 
funding it
has received from
 
UBS Group AG,
 
which are not
 
within the UBS
AG scope of consolidation.
 
The latter includes contingent capital
instruments
issued
 
to
 
UBS
 
Group
 
AG
 
cont
ain
ing
 
contractual
provisions
 
under which
 
the principal
 
amounts would
 
be written
down or
 
converted into
 
equity upon
 
either a
 
specified common
equity tier 1 (CET1)
 
ratio breach or
 
a determination by
 
the Swiss
Financial
 
Market
 
Supervisory
 
Authority
 
(FINMA)
 
that
 
a
 
viability
event
 
has
 
occurred.
Such
 
contractual
 
provisions
 
are
 
not
derivatives,
 
as
 
the
 
underlying
 
is
 
deemed
 
to
 
be
 
a
 
non-financial
variable specific to a party to the contract.
 
If a debt
 
were to be written
 
down or converted into
 
equity in
a future
 
period, it
 
would be
 
partially or
 
fully derecognized,
 
with
the difference between
 
its carrying amount
 
and the fair
 
value of
any equity issued recognized in the income statement.
A gain or loss is recognized in
Other income
 
when debt issued
is subsequently repurchased
 
for market-making
 
or other activities.
A
 
subsequent
 
sale
 
of
 
own
 
bonds
 
in
 
the
 
market
 
is
 
treated
 
as
 
a
reissuance of debt.
Financial liabilities measured at fair value through profit or loss
 
UBS
 
AG
 
designates
 
certain
 
issued
 
debt
 
instruments
 
as
 
financial
liabilities at fair value
 
through profit or loss, on
 
the basis that such
financial instruments
 
include embedded
 
derivatives and
 
/ or
 
are
managed on a fair
 
value basis (refer to
 
the table below for
 
more
information),
 
in
 
which
 
case
 
bifurcation
 
of
 
the
 
embedded
derivative
 
component
 
is
 
not
 
required.
 
Financial
 
instruments
including
 
embedded
 
derivatives
 
arise
 
predominantly
 
from
 
the
issuance of certain structured debt instruments.
 
Measurement and presentation
 
After initial recognition, UBS AG
 
classifies, measures and presents
its
 
financial
 
assets
 
and
 
liabilities
 
in
 
accordance
 
with
 
IFRS
 
9,
 
as
described in the table on the following pages.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
425
 
Note 1
 
Summary of material accounting policies (continued)
 
Classification, measurement and presentation
 
of financial assets
 
Financial assets classification
Significant items included
Measurement and presentation
Measured at
 
amortized cost
This classification includes:
–
 
cash and balances at central banks;
–
 
loans and advances to banks;
–
 
receivables from securities financing transactions;
–
 
cash collateral receivables on derivative instruments;
–
 
residential and commercial mortgages;
–
 
corporate loans;
–
 
secured loans, including Lombard loans, and
unsecured loans;
–
 
loans to financial advisors;
 
and
–
 
debt securities held as high-quality liquid
 
assets
(HQLA).
 
Measured at amortized cost using the effective interest
method less allowances for expected credit losses
 
(ECL)
(refer to items 2d and 2g in this Note for more information).
The following items are recognized in the income
statement:
–
 
interest income, which is accounted for in accordance
with item 2d
 
in this Note;
–
 
ECL and reversals;
 
and
–
 
foreign exchange (FX) translation gains and losses.
When a financial asset at amortized cost is derecognized,
the gain or loss is recognized in the income statement.
For amounts arising from settlement of certain derivatives,
refer to the next page.
 
Measured
at FVOCI
 
Debt instruments
measured at
FVOCI
This classification primarily includes debt securities
 
and
certain asset-backed securities held as HQLA.
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
426
 
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
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.
 
Measured at fair value,
 
with changes recognized in the
income statement.
Derivative assets (including derivatives that
 
are designated
and effective hedging instruments) are generally
presented as
Derivative financial instruments
, except those
exchange-traded (ETD) and over-the-counter
 
(OTC)-
cleared derivatives that are legally settled on a daily
 
basis
or in substance net settled on a daily basis,
 
which are
presented within
Cash collateral receivables on derivative
instruments.
Changes in fair value, initial transaction costs,
 
dividends
and gains and losses arising on disposal or redemption
 
are
recognized in
Other net income from financial
instruments measured at fair value through
 
profit or loss
,
except interest income on instruments other than
derivatives (refer to item 2d in this Note), interest on
derivatives designated as hedging instruments
 
in hedges
of interest rate risk and forward points on certain short-
and long-duration FX contracts acting as economic
hedges, which are reported in
Net interest income.
 
Changes in the fair value of derivatives that
 
are
designated and effective hedging instruments are
presented either in the income statement or
Other
comprehensive income
, depending on the type of hedge
relationship (refer to item 2j in this Note for more
information).
Mandatorily
measured at
FVTPL – Other
This classification includes financial assets
 
mandatorily
measured at FVTPL that are not held for trading, as
follows:
 
–
 
certain structured loans, certain commercial loans, and
receivables from securities financing transactions are
managed on a fair value basis;
 
–
 
loans managed on a fair value basis, including those
hedged with credit derivatives;
–
 
certain debt securities held as HQLA and
 
managed on a
fair value basis;
 
–
 
certain investment fund holdings and assets
 
held to
hedge delivery obligations related to cash-settled
employee compensation plans;
 
–
 
brokerage receivables, for which contractual cash flows
do not meet the SPPI criterion because the aggregate
balance is accounted for as a single unit of
 
account,
with interest being calculated on the individual
components;
–
 
auction rate securities, for which contractual cash
 
flows
do not meet the SPPI criterion because interest may
 
be
reset at rates that contain leverage;
–
 
equity instruments;
 
and
–
 
assets held under unit-linked investment contracts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
427
 
Note 1
 
Summary of material accounting policies
 
(continued)
 
Classification, measurement and presentation
 
of financial liabilities
 
Financial liabilities classification
Significant items included
Measurement and presentation
Measured at amortized cost
This classification includes:
–
 
demand and time deposits;
 
–
 
retail savings / deposits;
–
 
payables
 
from securities financing transactions;
 
–
 
non-structured fixed-rate bonds;
 
–
 
subordinated debt;
 
–
 
certificates of deposit and covered bonds;
 
–
 
obligations against funding from UBS Group AG;
 
and
–
 
cash collateral payables on derivative instruments.
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.
 
Measured at
fair value
through
profit or loss
Held for trading
Financial liabilities held for trading include:
–
 
all derivatives with a negative replacement value
(including certain loan commitments),
 
except those
that are designated and effective hedging
instruments; and
–
 
obligations to deliver financial instruments,
 
such as
debt and equity instruments, that UBS AG has sold
 
to
third parties but does not own (short positions).
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
AG’s own credit risk is presented in
Other comprehensive
income
 
directly within
Retained earnings
and is never
reclassified to the income statement.
Derivative liabilities (including derivatives that
 
are
designated and effective hedging instruments)
 
are
generally presented as
Derivative financial instruments
,
except those exchange-traded and OTC-cleared
derivatives that are legally settled on a daily basis
 
or in
substance net settled on a daily basis, which
 
are
presented within
Cash collateral payables on derivative
instruments.
Designated at
FVTPL
UBS AG designates
 
at FVTPL the following financial
liabilities:
–
 
issued hybrid debt instruments that primarily include
equity-linked, credit-linked and rates-linked bonds
 
or
notes;
–
 
issued debt instruments managed on a fair
 
value
basis;
–
 
certain payables from securities financing transactions;
–
 
amounts due under unit-linked investment contracts
the cash flows of which are linked to financial
 
assets
measured at FVTPL and eliminate an accounting
mismatch;
 
and
–
 
brokerage payables, which arise in conjunction with
brokerage receivables and are measured at FVTPL to
achieve measurement consistency.
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
428
 
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 AG
 
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
 
AG
 
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 AG does
not retain a portion
 
of the syndicated loan
 
or where UBS AG
 
does
retain a portion of the syndicated loan at the same effective yield
for comparable risk
 
as other participants, are
 
included in
Net fee
and commission income
and either recognized over the
 
life of the
commitment or when syndication occurs.
 
›
 
Refer to item 3 in this Note for more information
 
Interest
 
income
 
on
 
financial
 
assets,
 
excluding
 
derivatives,
 
is
included in interest income when positive and in interest expense
when negative.
 
Similarly, interest
 
expense on
 
financial liabilities,
excluding derivatives, is
 
included in interest
 
expense,
 
except when
interest rates are
 
negative, in which case
 
it is included in
 
interest
income.
 
›
 
Refer to item 2b
 
in this Note and Note
3
 
for more information
e.
Derecognition
 
Financial assets
UBS AG derecognizes a transferred financial asset, or
 
a portion of
a financial asset, if the purchaser has received substantially all the
risks and rewards of the asset or
 
a significant part of the risks
 
and
rewards
 
combined
 
with
 
a
 
practical
 
ability
 
to
 
sell
 
or
 
pledge
 
the
asset.
 
Where
 
financial
 
assets
 
have
 
been
 
pledged
 
as
 
collateral
 
or
 
in
similar
 
arrangements,
 
they
 
are
 
considered
 
to
 
have
 
been
transferred if the counterparty has received the contractual rights
to the cash flows of
 
the pledged assets, as may be
 
evidenced by,
for example,
 
the counterparty’s
 
right to
 
sell or
 
repledge the
 
assets.
In transfers where control over the financial asset is retained, UBS
AG continues to
 
recognize the
 
asset to
 
the extent of
 
its continuing
involvement, determined
 
by the extent
 
to which it
 
is exposed to
changes
 
in
 
the
 
value
 
of
 
the
 
transferred
 
asset
 
following
 
the
transfer.
 
Certain
 
OTC
 
derivative
 
contracts
 
and
 
most
 
exchange-traded
futures
 
and
 
option
 
contracts
 
cleared
 
through
 
central
 
clearing
counterparties
 
and exchanges
 
are considered
 
to be
 
settled on
 
a
daily basis,
 
as the
 
payment or
 
receipt of
 
variation margin
 
on a
 
daily
basis
 
represents
 
legal
 
or
 
economic
 
settlement,
 
which
 
results
 
in
derecognition of the associated derivatives.
›
 
Refer to Note 22 and Note 23 for more information
 
Financial liabilities
UBS AG derecognizes
 
a financial liability
 
when it is extinguished,
i.e., when
 
the obligation
 
specified in
 
the contract
 
is discharged,
canceled
 
or
 
expires.
 
When
 
an
 
existing
 
financial
 
liability
 
is
exchanged for a
 
new one from
 
the same lender
 
on substantially
different
 
terms,
 
or
 
the
 
terms
 
of
 
an
 
existing
 
liability
 
are
substantially modified, the original
 
liability is derecognized
 
and a
new
 
liability
 
recognized
 
with
 
any
 
difference
 
in
 
the
 
respective
carrying amounts recognized in the income statement.
 
f. Fair value of financial instruments
UBS
 
AG
 
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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
429
 
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
AG
‘
s
 
governance
 
framework
 
over
 
fair
 
value
 
measurement
 
is
described in
 
Note 21b,
 
and UBS
 
AG provides
 
a sensitivity
 
analysis of
 
the
estimated effects arising from changing significant unobservable inputs in
Level 3 financial instruments
 
to reasonably possible
 
alternative assumptions
in Note 21g.
 
›
 
Refer to Note 21 for more information
g. Allowances and provisions for expected credit losses
ECL
 
are
 
recognized
 
for
 
financial
 
assets
 
measured
 
at
 
amortized
cost,
 
financial
 
assets
 
measured
 
at
 
FVOCI,
 
fee
 
and
 
lease
receivables,
 
financial
 
guarantees
,
 
and
 
loan
 
commitments
 
not
measured at
 
fair value. ECL
 
are also
 
recognized on the
 
undrawn
portion
 
of
 
committed
 
unconditionally
 
revocable
 
credit
 
lines,
which
 
include
 
UBS
 
AG
’s
 
credit
 
card
 
limits
 
and
 
master
 
credit
facilities, as UBS
 
AG is
 
exposed to credit
 
risk because
 
the borrower
has the ability to
 
draw down funds
 
before UBS AG can
 
take credit
risk mitigation actions.
Recognition of expected credit losses
 
ECL are recognized on the following basis:
–
 
Stage 1 instruments: Maximum 12-month
 
ECL are recognized
from initial recognition,
 
reflecting the portion
 
of lifetime cash
shortfalls that would
 
result if a default
 
occurs in the 12
 
months
after
 
the
 
reporting
 
date,
 
weighted
 
by
 
the
 
risk
 
of
 
a
 
default
occurring.
 
–
 
Stage 2
 
instruments:
 
Lifetime
 
ECL
 
are
 
recognized
 
if
 
a
significant
 
increase
 
in
 
credit
 
risk
 
(
an
SICR)
 
is
 
observed
subsequent
 
to
 
the
 
instrument’s
 
initial
 
recognition,
 
reflecting
lifetime
 
cash
 
shortfalls
 
that
 
would
 
result
 
from
 
all
 
possible
default events over the expected life of a financial instrument,
weighted by
 
the risk
 
of a
 
default occurring.
 
When an
 
SICR is
no longer observed, the instrument will move back to stage 1.
–
 
Stage 3
 
instruments:
 
Lifetime
 
ECL
 
are
 
always
 
recognized
 
for
credit-impaired
 
financial
 
instruments,
 
as
 
determined
 
by
 
the
occurrence of one or more loss events, by estimating
 
expected
cash
 
flows
 
based
 
on
 
a
 
chosen
recovery
 
strategy.
 
Credit
-
impaired
 
exposures
 
may
 
include
 
positions
 
for
 
which
 
no
allowance has been recognized, for example because they are
expected to be fully recoverable through collateral held.
–
 
Changes
 
in
 
lifetime
 
ECL
 
since
 
initial
 
recognition
 
are
 
also
recognized for
 
assets that
 
are purchased
 
or originated
 
credit-
impaired (POCI). POCI financial instruments include those that
are purchased
 
at a
 
deep discount
 
or newly
 
originated with
 
a
defaulted counterparty; they
 
remain a separate
 
category until
derecognition.
 
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
 
AG
 
applies
 
a
 
single
 
definition
 
of
 
default
 
for
 
credit
 
risk
management
 
purposes,
 
regulatory
 
reporting
 
and
 
ECL,
 
with
 
a
counterparty
 
classified
 
as
 
defaulted
 
based
 
on
 
quantitative
 
and
qualitative criteria.
 
›
 
Refer to “Credit policies for distressed assets’’ in the ‘’Risk
management and control” section of this report for
 
more
information
Measurement of expected credit losses
IFRS
 
9
 
ECL
 
reflect
 
an
 
unbiased,
 
probability-weighted
 
estimate
based
 
on
 
loss
 
expectations
 
resulting
 
from
 
default
 
events.
 
The
method
 
used
 
to
 
calculate
 
ECL
 
applies
 
the
 
following
 
principal
factors: probability
 
of default
 
(PD), loss
 
given default
 
(LGD) and
exposure
 
at default
 
(EAD). Parameters
 
are
 
generally determined
on an
 
individual financial
 
asset level. Based
 
on the materiality
 
of
the
 
portfolio,
 
for
 
credit
 
card
 
exposures
 
and
 
personal
 
account
overdrafts
 
in
 
Switzerland,
 
a
 
portfolio
 
approach
 
is
 
applied
 
that
derives an average
 
PD and LGD
 
for the entire
 
portfolio. PDs and
LGDs used in the ECL calculation are point-in-time (PIT)-based for
key portfolios and consider both current conditions and expected
cyclical
 
changes.
 
For
 
material
 
portfolios,
 
PDs
 
and
 
LGDs
 
are
determined for
 
different scenarios,
 
whereas EAD
 
projections are
treated as scenario independent.
For the
 
purpose of
 
determining the
 
ECL-relevant parameters,
UBS AG
 
leverages its
 
Pillar 1 internal
 
ratings-based (IRB)
 
models
that
 
are
 
also
 
used
 
in
 
determining
 
expected
 
loss
 
(EL)
 
and
 
risk-
weighted assets
 
under the
 
Basel III framework
 
and Pillar 2
 
stress
loss models.
 
Adjustments have
 
been made
 
to these
 
models and
IFRS
 
9-related
 
models
 
have
 
been
 
developed
 
that
 
consider
 
the
complexity,
 
structure
 
and
 
risk
 
profile
 
of
 
relevant
 
portfolios
 
and
take
 
account
 
of
 
the
 
fact
 
that
 
PDs
 
and
 
LGDs
 
used
 
in
 
the
 
ECL
calculation
 
are
 
PIT-based,
 
as
 
opposed
 
to
 
the
 
corresponding
Basel III through-the-cycle
 
(TTC) parameters.
 
All models
 
that are
relevant for
 
measuring expected
 
credit losses
 
are subject
 
to UBS
AG’s model validation and oversight processes.
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
430
 
Note 1
 
Summary of material accounting policies (continued)
Probability of default:
PD represents the
 
probability of a
 
default
over
 
a
 
specified
 
time
 
period.
 
A
 
12-month
 
PD
 
represents
 
the
probability of
 
default determined
 
for the
 
next 12
 
months and
 
a
lifetime
 
PD
 
represents
 
the
 
probability
 
of
 
default
 
over
 
the
remaining lifetime of
 
the instrument.
 
PIT PDs
 
are derived from
 
TTC
PDs and scenario forecasts.
 
The modeling is region-,
 
industry- and
client
 
segment-specific
 
and
 
considers
 
both
 
macroeconomic
scenario dependencies and client-idiosyncratic information.
Exposure
 
at
 
default:
EAD
 
represents
 
an
 
estimate
 
of
 
the
exposure to credit risk
 
at the time of
 
a potential default
 
occurring,
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
 
AG
 
uses
 
different
economic
 
scenarios
 
in
 
the
 
ECL
 
calculation
.
 
Each
 
scenario
 
is
represented
 
by
 
a
 
specific
 
scenario
 
narrative,
 
which
 
is
 
relevant
considering the exposure of key portfolios to economic risks, and
for
 
which
 
a
 
set
 
of
 
consistent
 
macroeconomic
 
variables
 
is
determined. The estimation
 
of the appropriate weights
 
for these
scenarios
 
is
 
predominantly
 
judgement-based.
 
The
 
assessment
 
is
based on a
 
holistic review of
 
the prevailing economic
 
or political
conditions,
 
which
 
may
 
exhibit
 
different
 
levels
 
of
 
uncertainty.
 
It
 
takes
 
into
 
account
 
the
 
impact
 
of
 
changes
 
in
 
the
 
nature
 
and
severity
 
of
 
the underlying
 
scenario
 
narratives
 
and
 
the
 
projected
economic variables.
 
The
 
determined
 
weights
 
constitute
 
the
 
probabilities
 
that
 
the
respective
 
set
 
of
 
macroeconomic
 
conditions
 
will
 
occur
 
and
 
not
that
 
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
 
a
nd
 
LGD
 
determination
 
purposes,
 
UBS
 
AG
 
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 AG’s key ECL-relevant portfolios.
For
 
UBS
 
AG,
 
the
 
following
 
forward-looking
 
macroeconomic
variables represent the most relevant factors for ECL calculation:
 
–
 
GDP growth rates, given
 
their significant effect on
 
borrowers’
performance;
 
–
 
unemployment
 
rates, given
 
their significant
 
effect on
 
private
clients’ ability to meet contractual obligations;
 
–
 
house price indices, given their
 
significant effect on mortgage
collateral valuations;
 
–
 
interest rates,
 
given their
 
significant effect
 
on counterparties’
abilities to service debt;
 
–
 
consumer
 
price
 
indices,
 
given
 
their
 
overall
 
relevance
 
for
companies’
 
performance,
 
private
 
clients’
 
purchasing
 
power
and economic stability; and
–
 
equity indices,
 
given that
 
they are
 
an important
 
factor in
 
our
corporate rating tools.
 
Scenario generation, review process and governance
A
 
team
 
of
 
economists,
 
who
 
are
 
part
 
of
 
Group
 
Risk
 
Control,
develop
 
the
 
forward-looking
 
macroeconomic
 
assumptions
 
with
involvement from a broad range of experts.
The
 
scenarios, their
 
weight and
 
the key
 
macroeconomic and
other
 
factors
 
are
 
subject
 
to
 
a
 
critical
 
assessment
 
by
 
the
 
IFRS
 
9
Scenario Sounding Sessions and ECL Management Forum, which
include senior management from Group Risk and Group Finance.
Important aspects
 
for the
 
review include
 
whether there
 
may be
particular credit
 
risk concerns
 
that may
 
not be
 
capable of
 
being
addressed systematically and
 
require post-model adjustments
 
for
stage allocation and ECL allowance.
 
The
 
Group
 
Model
 
Governance
Committee
,
 
as
 
the
 
highest
authority under UBS
 
AG’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
 
AG
 
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
 
AG
 
has
 
an
obligation to extend credit.
 
 
 
 
 
 
 
 
 
 
 
431
 
Note 1
 
Summary of material accounting policies (continued)
Additionally,
 
some
 
financial
 
instruments
 
include
 
both
 
an
 
on-
demand loan and
 
a revocable undrawn
 
commitment, where the
contractual cancellation right
 
does not limit
 
UBS AG’s exposure
 
to
credit risk
 
to the
 
contractual notice
 
period, as
 
the client
 
has the
abi
lity
 
to
 
draw
 
down
 
funds
 
before
 
UBS
 
AG
 
can
 
take
 
risk
-
mitigating actions.
 
In such
 
cases UBS
 
AG is required
 
to estimate
the period
 
over which
 
it is
 
exposed to
 
credit risk.
 
This applies to
UBS
 
AG
’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
 
AG’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
AG 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
 
AG
 
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 AG is
 
exposed to credit
 
risk, with 12
 
months also used
 
as a
look-back
 
period for
 
assessing SICR,
 
always from
 
the respective
reporting date.
Significant increase in credit risk
 
Financial
 
instruments
 
subject
 
to
 
ECL
 
are
 
monitored
 
on
 
an
ongoing
 
basis.
 
To
 
determine
 
whether
 
the
 
recognition
 
of
 
a
maximum
 
12-month
 
ECL
 
continues
 
to
 
be
 
appropriate,
 
an
assessment
 
is made
 
as
 
to
 
whether
 
an
 
SICR
 
has
 
occurred
 
since
initial
 
recognition
 
of
 
the
 
financial
 
instrument
 
,
 
applying
 
both
quantitative
 
and qualitative
 
factors.
 
Primarily, UBS
 
AG 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
 
AG’s
 
quantitative
 
modeling,
 
an
 
increase
exceeds a set threshold, an SICR is deemed to have occurred and
the
 
instrument
 
is
 
transferred
 
to
 
stage 2
 
with
 
lifetime
 
ECL
recognized.
The threshold
 
applied varies
 
depending on
 
the original
 
credit
quality of the borrower,
 
with a higher SICR
 
threshold set for
 
those
instruments
 
with
 
a
 
low
 
PD
 
at
 
inception.
 
The
 
SICR
 
assessment
based on PD changes
 
is made at
 
an individual financial asset
 
level.
A high-level
 
overview of
 
the SICR
 
trigger, which
 
is a
 
multiple of
the
 
annualized
 
remaining
 
lifetime
 
PIT
 
PD
 
expressed
 
in
 
rating
downgrades,
 
is
 
provided
 
in
 
the
 
“SICR
 
thresholds”
 
table
 
below.
The actual SICR
 
thresholds applied are
 
defined on a
 
more granular
level by interpolating between the values shown in the table.
SICR thresholds
Internal rating at origination
 
of the instrument
Rating downgrades /
SICR trigger
0–3
3
4–8
2
9–13
1
›
 
Refer to the “
Risk management and control
” section of this
report for more details about UBS AG’s internal grading system
 
Irrespective
 
of
 
the
 
SICR
 
assessment
 
based
 
on
 
default
probabilities, credit
 
risk is
 
generally deemed
 
to have
 
significantly
increased for an instrument if the contractual payments are more
than
 
30
 
days
 
past
 
due.
 
For
 
certain
 
less
 
material
 
portfolios,
specifically
 
the
 
Swiss
 
credit
 
card
 
portfolio,
 
the
 
30-day
 
past
 
due
criterion
 
is
 
used
 
as
 
the
 
primary
 
indicator
 
of
 
an
 
SICR.
 
Where
instruments are transferred to stage 2 due
 
to the 30-day past
 
due
criterion,
 
a
 
minimum
 
period
 
of
 
six
 
months
 
is
 
applied
 
before
 
a
transfer
 
back
 
to
 
stage 1
 
can
 
be
 
triggered.
 
For
 
instruments
 
in
Personal &
 
Corporate Banking
 
and Global
 
Wealth Management
Region Switzerland
 
that are
 
between 90
 
and 180
 
days past
 
due
but
 
have
 
not
 
been
 
reclassified
 
to
 
stage 3,
 
a
 
one-year
 
period
 
is
applied before a transfer back to stage 1 can be triggered.
Additionally,
 
based
 
on
 
individual
 
counterparty-specific
indicators,
 
external
 
market
 
indicators
 
of
 
credit
 
risk
 
or
 
general
economic
 
conditions,
 
counterparties may
 
be moved
 
to a
 
watch
list, which is used as a
 
secondary qualitative indicator for an SICR.
Exception management is further applied,
 
allowing for individual
and collective adjustments
 
on exposures
 
sharing the same
 
credit
risk characteristics
 
to take
 
account of
 
specific situations
 
that are
not otherwise fully reflected.
 
In
 
general,
 
the
 
overall
 
SICR
 
determination
 
process
 
does
 
not
apply
 
to
 
Lombard
 
loans,
 
securities
 
financing
 
transactions
 
and
certain other asset-based
 
lending transactions, because
 
of the risk
management
 
practices
 
adopted,
 
including
 
daily
 
monitoring
processes with strict margining. If margin calls are not satisfied, a
position
 
is
 
closed
 
out
 
and
 
classified
 
as
 
a
 
stage 3
 
position.
 
In
exceptional
 
cases,
 
an
 
individual
 
adjustment
 
and
 
a
 
transfer
 
into
stage 2 may be made to take account of specific facts.
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
432
 
Note 1
 
Summary of material accounting policies
 
(continued)
Credit risk
 
officers are
 
responsible for
 
the identification
 
of an
SICR,
 
which for accounting purposes is in some respects different
from
 
internal
 
credit
 
risk
 
management processes.
 
This difference
mainly
arises
because
 
ECL
 
accounting
 
requirements
 
are
instrument-specific,
 
such
 
that
 
a
 
borrower
 
can
 
have
 
multiple
exposures
 
allocated
 
to
 
different
 
stages,
 
and
 
maturing
 
loans
 
in
stage 2 will
 
migrate to
 
stage 1 upon
 
renewal irrespective
 
of the
actual
 
credit
 
risk
 
at
 
that
 
time.
 
Under
 
a
 
risk-based
 
approach,
 
a
holistic counterparty
 
credit assessment
 
and the
 
absolute level
 
of
risk at any given date
 
will determine what risk-mitigating actions
may be warranted.
›
 
Refer to the “
Risk management and control
” section of this
report for more information
 
Critical accounting estimates and judgments
The calculation of ECL requires management
 
to apply significant judgment
and make estimates and assumptions
 
that can result in significant
 
changes
to the timing and amount of ECL recognized.
 
Determination of a significant increase in
 
credit risk
 
IFRS 9 does not include a definition of what constitutes an SICR, with UBS
AG’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 AG
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
 
AG must
determine the period over
 
which it is exposed
 
to credit risk.
 
A seven-year
period is
 
applied for
 
credit card
 
limits, capped
 
at 12
 
months for
 
stage 1
positions, and a 12-month period applied for
 
master credit facilities.
 
Modeling and post-model adjustments
A number
 
of complex
 
models have
 
been developed
 
or modified
 
to calculate
ECL,
 
with
 
additional
 
post-model
 
adjustments
 
required
 
which
 
may
significantly
 
affect
 
ECL.
 
The
 
models
 
are
 
governed
 
by
 
UBS
 
AG’s
 
model
validation
 
controls
 
and
 
approved
 
by
 
the
 
Group
 
Model
 
Governance
Committee (the GMGC).
 
The post-model adjustments
 
are approved by the
ECL Management Forum and endorsed by the
 
GMGC.
A
sensitivity
 
analysis
covering
 
key
 
macroeconomic
 
variables
,
 
scenario
weights and SICR trigger points
 
on ECL measurement is provided
 
in Note
20f.
 
›
 
Refer to Note 20 for more information
h.
Restructured and modified financial assets
When payment default is expected,
 
or where default has already
occurred, UBS AG
 
may grant
 
concessions to
 
borrowers in financial
difficulties that
 
it would not
 
consider in
 
the normal course
 
of its
business, such as
 
preferential interest rates, extension
 
of maturity,
modifying
 
the
 
schedule
 
of
 
repayments,
 
debt
 
/
 
equity
 
swap,
subordination,
 
etc. When a concession or forbearance measure is
granted, each case
 
is considered individually
 
and the exposure
 
is
generally classified as
 
being in default.
 
Forbearance classification
will
 
remain
 
until
 
the
 
loan
 
is
 
collected
 
or
 
written
 
off,
 
non-
preferential
 
conditions
 
superseding
 
preferential
 
conditions
 
are
granted
 
or
 
until
 
the
 
counterparty
 
has
 
recovered
 
and
 
the
preferential conditions no longer exceed UBS AG’s risk tolerance.
Modifications result in an alteration of future contractual cash
flows and can occur
 
within UBS AG’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 AG
 
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
 
AG 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
AG’s
 
financial
 
assets
 
and
 
liabilities,
 
even
 
though
 
they
 
may
 
be
subject
 
to
 
enforceable
 
netting
 
arrangements.
R
epurchase
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
 
 
 
 
 
433
 
Note 1
 
Summary of material accounting policies (continued)
j.
Hedge accounting
UBS AG applies
 
hedge accounting requirements of IFRS 9, unless
stated otherwise
 
below, where the criteria for documentation
 
and
hedge
 
effectiveness are
 
met.
 
If
 
a
 
hedge
 
relationship no
 
longer
meets
 
the
 
criteria
 
for
 
hedge
 
accounting,
 
hedge
 
accounting
 
is
discontinued. Voluntary
 
discontinuation of
 
hedge
 
accounting is
permitted under
 
IAS 39 but
 
not under
 
IFRS 9.
Fair value hedges of interest rate risk related to debt instruments
and loan assets
The fair value change
 
of the hedged item
 
attributable
 
to a hedged
risk is
 
reflected as
 
an
 
adjustment to
 
the
 
carrying amount of
 
the
hedged item, and recognized
 
in the income statement along with
the change
 
in the fair
 
value
 
of the
 
hedging
 
instrument.
 
Fair value hedges of portfolio interest rate risk related to loans
designated under IAS 39
Prior to discontinuation in December 2021, the fair value change
of the
 
hedged item
 
attributable to
 
a hedged
 
risk is
 
reflected within
Other
 
financial
 
assets
 
measured
 
at
 
amortized
 
cost
or
Other
financial liabilities measured
 
at amortized cost
and recognized in
the income statement
 
along with the
 
change in the
 
fair value of
the hedging instrument.
 
Fair value hedges of FX risk related to debt instruments
The
 
fair
 
value
 
change
 
of
 
the
 
hedged
 
item
 
attributable
 
to
 
the
hedged risk
 
is reflected
 
in the measurement
 
of the
 
hedged item
and recognized
 
in the
 
income statement
 
along with
 
the change
in the fair value of
 
the hedging instrument. The foreign
 
currency
basis
 
spread
 
of
 
cross-currency
 
swaps
 
designated
 
as
 
hedging
derivatives is excluded from the designation and
 
accounted for as
a cost of hedging with
 
amounts deferred in
Other comprehensive
income
 
within
Equity
. These amounts are released
 
to the income
statement over the term of the hedged item.
Discontinuation of fair value hedges
Discontinuations
 
for
 
reasons
 
other
 
than
 
derecognition
 
of
 
the
 
hedged
item
 
result
 
in
 
an
 
adjustment to
 
the
 
carrying
 
amount,
 
which
 
is
amortized to the income statement over the remaining life of the
hedged
 
item using
 
the effective
 
interest
 
method.
 
If the
 
hedged
 
item
is derecognized,
 
the unamortized
 
fair value adjustment
 
or deferred
cost of
 
hedging amount is recognized immediately in the income
statement
 
as part
 
of any
 
derecognition
 
gain or
 
loss.
Cash flow hedges of forecast transactions
Fair value gains
 
or losses associated with
 
the effective portion
 
of
derivatives designated as cash
 
flow hedges for
 
cash flow repricing
risk are recognized initially in
Other comprehensive income
within
Equity
 
and
 
reclassified
 
to
 
the
 
income
 
statement
 
in
 
the
 
periods
when
 
the
 
hedged
 
forecast
 
cash
 
flows
 
affect
 
profit
 
or
 
loss,
including discontinued
 
hedges for which
 
forecast cash
 
flows are
expected
 
to
 
occur.
 
If
 
the
 
forecast
 
transactions
 
are
 
no
 
longer
expected to
 
occur,
 
the deferred
 
gains or
 
losses are
 
immediately
reclassified to the income statement.
Hedges of net investments in foreign operations
Gains or losses on the hedging
 
instrument
 
relating to the effective
portion of a hedge are recognized
 
directly in
Other comprehensive
income
 
within
Equity,
while
 
any
 
gains
 
or
 
losses
 
relating
 
to
 
the
ineffective
 
and / or undesignated
 
portion (for
 
example, the
 
interest
element
 
of
 
a
 
forward
 
contract)
 
are
 
recognized
 
in
 
the
 
income
statement.
 
Upon
 
disposal
 
or
 
partial
 
disposal
 
of the
 
foreign
 
operation,
the cumulative
 
value
 
of any
 
such
 
gains
 
or losses
 
recognized
 
in
Equity
 
associated
 
with the
 
entity
 
is reclassified
 
to
Other income
.
Interest Rate Benchmark Reform
 
UBS
 
AG
 
can
 
continue
 
hedge
 
accounting
 
during
 
the
 
period
 
of
uncertainty before existing interest rate benchmarks are replaced
with alternative
 
risk-free interest rates.
 
During this
 
period, UBS
 
AG
can
 
assume
 
that
 
the
 
current
 
benchmark
 
rates
 
will
 
continue
 
to
exist,
 
such
 
that
 
forecast
 
transactions
 
are
 
considered
 
highly
probable
 
an
d
 
hedge
 
relationships
 
remain,
 
with
 
little
 
or
 
no
consequential
 
impact
 
on
 
the
 
financial
 
statements.
 
Upon
replacement
 
of
 
existing
 
interest
 
rate
 
benchmarks
 
by
 
alternative
risk-free interest rates expected in 2021 and beyond, UBS
 
AG will
apply the requirements of
Amendments to IFRS 9, IAS 39, IFRS 7,
IFRS 4 and IFRS 16 (Interest Rate Benchmark Reform – Phase 2).
 
›
 
Refer to Note 1b for more information
3) Fee and commission income and expenses
UBS
 
AG
 
earns fee
 
income
 
from
 
the
 
diverse
 
range
 
of
 
services it
provides to its
 
clients. Fee income can
 
be divided into two
 
broad
categories:
 
fees
 
earned
 
from
 
services
 
that
 
are
 
provided
 
over
 
a
certain
 
period
 
of
 
time,
 
such
 
as
 
management
 
of
 
clients’
 
assets,
custody
 
services
 
and
 
certain
 
advisory
 
services;
 
and
 
fees
 
earned
from
 
point-in-time
 
services,
 
such
 
as
 
underwriting
 
fees,
 
deal-
contingent
 
merger
 
and
 
acquisitions
 
fees,
 
and
 
brokerage
 
fees
(e.g., securities
 
and derivatives
 
execution and
 
clearing). UBS
 
AG
recognizes
 
fees
 
earned
 
from
 
point-in-time-services
 
when
 
it
 
has
fully
 
provided
 
the
 
service
 
to
 
the
 
customer.
 
Where
 
the
 
contract
requires
 
services to be
 
provided over
 
time, income
 
is recognized
on a systematic basis over the life of the agreement.
Consideration
 
received
 
is
 
allocated
 
to
 
the
 
separately
identifiable performance
 
obligations in
 
a contract.
 
Owing to
 
the
nature
 
of
 
UBS
 
AG’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
 
AG
 
is
 
not
 
required
 
to
 
apply
 
significant
judgment
 
in
 
allocating
 
the
 
consideration
 
received
 
across
 
the
various performance obligations.
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
434
 
Note 1
 
Summary of material accounting policies (continued)
Point-in-time
 
services
 
are
 
generally
 
for
 
a
 
fixed
 
price
 
or
dependent on
 
deal size,
 
e.g., a
 
fixed number
 
of basis
 
points of
trade
 
size,
 
where
 
the
 
amount
 
of
 
revenue
 
is
 
known
 
when
 
the
performance
 
obligation
 
is
 
met.
 
Fixed
 
over-time
 
fees
 
are
recognized on
 
a straight-line
 
basis over
 
the performance period.
Custodial
 
and
 
asset
 
management
 
fees
 
can
 
be
 
variable
 
through
reference to the size of the customer portfolio. However,
 
they are
generally
 
billed
 
on
 
a
 
monthly
 
or
 
quarterly
 
basis
 
once
 
the
customer’s portfolio
 
size is
 
known or
 
known with
 
near certainty
and
 
therefore
 
also
 
recognized
 
ratably
 
over
 
the
 
performance
period. UBS
 
AG does
 
not recognize
 
performance fees
 
related to
management
 
of
 
clients’
 
assets
 
or
 
fees
 
related
 
to
 
contingencies
beyond UBS AG’s control until such uncertainties are resolved.
 
UBS AG’s fees are generally earned from short-term contracts.
As
 
a
 
result,
 
UBS
 
AG
’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 AG has not
 
capitalized any material
 
costs
to obtain or fulfill a contract
 
or generated any significant contract
assets or liabilities.
UBS AG presents expenses primarily in line with their nature
 
in
the income statement, differentiating between expenses that are
directly
 
attributable
 
to
 
the
 
satisfaction
 
of
 
specific
 
performance
obligations associated with the
 
generation of revenues, which
 
are
generally
 
presented
 
within
Total
 
operating
 
income
 
as
Fee
 
and
commission
 
expense
,
 
and
 
those
 
that
 
are
 
related
 
to
 
personnel,
general and administrative expenses,
 
which are presented within
Total operating
 
expenses
. For
 
derivatives execution
 
and clearing
services (where UBS AG
 
acts as an agent),
 
UBS AG only records
 
its
specific fees in the income
 
statement, with fees payable to other
parties
 
not recognized
 
as an
 
expense but
 
instead directly
 
offset
against the associated income collected from the given client.
›
 
Refer to Note 4 for more information, including
 
the
disaggregation of revenues
4)
Share-based and other deferred compensation plans
UBS AG
 
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
UBS Group
 
AG is the
 
grantor of and
 
maintains the obligation
 
to
settle
 
share-based
 
compensation
 
plans
 
that
 
are
 
awarded
 
to
employees of
 
UBS AG.
 
As a
 
consequence, UBS
 
AG classifies
 
the
awards
 
of
 
UBS
 
Group
 
AG
 
shares
 
as
 
equity-settled
 
share-based
payment transactions. UBS
 
AG recognizes the
 
fair value
 
of awards
granted
 
to
 
its
 
employees
 
by
 
reference
 
to
 
the
 
fair
 
value
 
of
 
UBS
Group AG’s
 
equity instruments on the date of grant, taking into
account
 
the
 
terms
 
and
 
conditions
 
inherent
 
in
 
the
 
award,
including, where
 
relevant, dividend rights,
 
transfer restrictions in
effect
 
beyond
 
the
 
vesting
 
date,
 
market
 
conditions,
 
and
 
non-
vesting conditions.
 
For equity-settled
 
awards, fair
 
value is
 
not remeasured
 
unless
the
 
terms
 
of
 
the
 
award
 
are
 
modified
 
such
 
that
 
there
 
is
 
an
incremental increase in value. Expenses
 
are recognized, on a per-
tranche basis, over the service period based
 
on an estimate of the
number
 
of
 
instruments
 
expected
 
to
 
vest
 
and
 
are
 
adjusted
 
to
reflect the actual outcomes of service or performance conditions.
 
For
 
equity-settled
 
awards,
 
forfeiture
 
events
 
resulting
 
from
 
a
breach of
 
a non-vesting
 
condition (i.e.,
 
one that
 
does not
 
relate
to
 
a
 
service
 
or
 
performance
 
condition)
 
do
 
not
 
result
 
in
 
any
adjustment to the share-based compensation expense.
For cash-settled
 
share-based awards,
 
fair value
 
is remeasured
at each reporting
 
date, so that
 
the cumulative
 
expense recognized
equals the cash distributed.
 
Other deferred compensation plans
Compensation expense for other deferred
 
compensation plans is
recognized on a
 
per-tranche or straight-line
 
basis, depending on
the nature of
 
the plan. The
 
amount recognized is
 
measured based
on the
 
present
 
value of
 
the amount
 
expected to
 
be paid
 
under
the
 
plan and
 
is remeasured
 
at each
 
reporting
 
date,
 
so that
 
the
cumulative expense
 
recognized equals
 
the cash
 
or the
 
fair value
of respective financial instruments distributed.
›
 
Refer to Note
28
 
for more information
 
 
 
 
 
 
 
 
 
 
 
 
 
435
 
Note 1
 
Summary of material accounting policies (continued)
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 AG‘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 AG
 
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 AG is
 
subject to
 
the income
 
tax laws of
 
Switzerland and
 
those
of
 
the
 
non-Swiss
 
jurisdictions
 
in
 
which
 
UBS
 
AG
 
has
 
business
operations.
UBS
 
AG’s provision
 
for income
 
taxes is
 
composed of
 
current
and deferred
 
taxes. Current
 
income taxes
 
represent taxes
 
to be
paid or refunded for the current period or previous periods.
 
Deferred
 
taxes
 
are
 
recognized
 
for
 
temporary
 
differences
between
 
the
 
carrying
 
amounts
 
and
 
tax
 
bases
 
of
 
assets
 
and
liabilities that will
 
result in taxable
 
or deductible amounts
 
in future
periods and are measured using the applicable tax rates and laws
that have been
 
enacted or substantively
 
enacted by the
 
end of the
reporting period and that
 
will be in effect when
 
such differences
are expected to reverse.
Deferred
 
tax
 
assets arise
 
from a
 
variety
 
of
 
sources,
 
the most
significant being:
 
(i) tax
 
losses that
 
can be
 
carried forward
 
to be
used against profits in future years; and (ii) temporary differences
that
 
will
 
result
 
in
 
deductions
 
against
 
profits
 
in
 
future
 
years.
Deferred tax assets
 
are recognized only to
 
the extent it
 
is probable
that sufficient taxable profits will be
 
available against which these
differences can be
 
used. When an
 
entity or tax
 
group has a
 
history
of
 
recent
 
losses,
 
deferred
 
tax
 
assets
 
are
 
only
 
recognized
 
to
 
the
extent there are
 
sufficient taxable temporary differences
 
or there
is convincing
 
other evidence
 
that sufficient
 
taxable profit
 
will be
available against which the unused tax losses can be utilized.
Deferred tax liabilities
 
are recognized for temporary
 
differences
between
 
the
 
carrying
 
amounts
 
of
 
assets
 
and
 
liabilities
 
in
 
the
balance sheet
 
that reflect
 
the expectation
 
that certain
 
items will
give rise to taxable income in future periods.
Deferred and current tax assets and
 
liabilities are offset
 
when:
(i) they arise in the
 
same tax reporting group; (ii)
 
they relate to the
same tax authority; (iii)
 
the legal right to
 
offset exists; and (iv)
 
they
are intended to be settled net or realized simultaneously.
Current
 
and
 
deferred
 
taxes
 
are
 
recognized
 
as
 
income
 
tax
benefit
 
or
 
expense in
 
the income
 
statement,
 
except for
 
current
and deferred taxes recognized in relation to:
 
(i) the acquisition of
a subsidiary (for which such amounts would
 
affect the amount of
goodwill arising from the acquisition); (ii) gains
 
and losses on the
sale of
 
treasury shares
 
(for which
 
the tax
 
effects are
 
recognized
directly
 
in
Equity
);
 
(iii)
 
unrealized
 
gains
 
or
 
losses
 
on
 
financial
instruments that are classified at
 
FVOCI; (iv) changes in fair
 
value
of
 
derivative
 
instruments
 
designated
 
as
 
cash
 
flow
 
hedges;
 
(v)
remeasurements
 
of defined
 
benefit plans;
 
or (vi)
 
certain foreign
currency translations
 
of foreign
 
operations. Amounts
 
relating to
points
 
(iii)
 
through
 
(vi)
 
above
 
are
 
recognized
 
in
Other
comprehensive income
 
within
Equity
.
UBS AG 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
436
 
Note 1
 
Summary of material accounting policies (continued)
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 AG
 
considers the performance
 
of its
 
businesses and the
 
accuracy of
historical forecasts and other factors when evaluating the recoverability of
its
 
deferred
 
tax
 
assets,
 
including
 
the
 
remaining
 
tax
 
loss
 
carry-forward
period, and its
 
assessment of expected
 
future taxable profits
 
in the forecast
period
 
used
 
for
 
recognizing
 
deferred
 
tax
 
assets.
 
Estimating
 
future
profitability
 
and
 
business
 
plan
 
forecasts
 
is
 
inherently
 
subjective
 
and
 
is
particularly sensitive to future economic,
 
market and other conditions.
 
Forecasts are reviewed
 
annually, but adjustments
 
may be made
 
at other
times, if required. If recent losses have been incurred, convincing evidence
is required to prove there is sufficient future profitability given the
 
value of
UBS
AG
’s
 
deferred
 
tax
 
assets
 
may
 
b
e
 
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
8
 
for more information
 
7) Property, equipment and software
Property,
 
equipment
 
and
 
software
 
is
measured
 
at
 
cost
 
less
accumulated
 
dep
reciation
 
and
 
impairment
 
losses
.
 
Software
development
 
costs
 
are
 
capitalized
 
only
 
when
 
the
 
costs
 
can
 
be
measured reliably and it is
 
probable that future economic
 
benefits
will
 
arise.
 
Depreciation
 
of
 
property,
 
equipment
 
and
 
software
begins
 
when
 
they
 
are
 
available
 
for
 
use
 
and
 
is
 
calculated
 
on
 
a
straight line basis over an asset’s estimated useful life.
 
Property,
 
equipment
 
and
 
software
 
are
 
generally
 
tested
 
for
impairment
 
at
 
the
 
appropriate
cash
-
generating
 
unit
 
level,
alongside goodwill and intangible assets as described in item 8 in
this Note.
 
An impairment
 
charge is
 
recognized for
 
such assets
 
if
the
 
recoverable
 
amount
 
is
 
below
 
its
 
carrying
 
amount
.
The
recoverable amounts of such assets, other than property that has
a market price,
 
are generally determined
 
using a replacement
 
cost
approach
 
that
 
reflects
 
the
 
amount
 
that
 
would
 
be
 
currently
required by a market participant to replace the service capacity
 
of
the
 
asset.
 
If
 
such
 
assets
 
are
 
no
 
longer
 
used,
 
they
 
are
 
tested
individually for impairment.
›
 
Refer to Note
12
for more information
8) Goodwill
Goodwill represents the
 
excess of
 
the consideration over the
 
fair
value
 
of
 
identifiable
 
assets,
 
liabilities
 
and
 
contingent
 
liabilities
acquired
 
that
 
arises
 
in
 
a
 
business combination.
 
Goodwill is
 
not
amortized,
 
but
 
is
 
assessed
 
for
 
impairment
 
at
 
the
 
end
 
of
 
each
reporting period,
 
or when indicators of impairment exist.
 
UBS AG
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.
 
 
Critical accounting estimates and judgments
UBS
 
AG‘s
 
methodology
 
for
 
goodwill
 
impairment
 
testing
 
is
 
based
 
on
 
a
model that is most sensitive to the following key assumptions: (i) forecasts
of earnings available to shareholders
 
in years one to
 
three; (ii) changes in
the discount rates; and (iii) changes in the
 
long-term growth rate.
 
Earnings available
 
to shareholders
 
are estimated
 
on the basis
 
of forecast
results,
 
which
 
are
 
part
 
of
 
the
 
business
 
plan
 
approved
 
by
 
the
 
Board
 
of
Directors.
 
The
 
discount
 
rates
 
and
 
growth
 
rates
 
are
 
determined
 
using
external information, and
 
also considering inputs
 
from both
 
internal and
external analysts and the view of management.
 
The
 
key assumptions
 
used
 
to determine
 
the recoverable
 
amounts of
each cash-generating unit are tested for sensitivity by applying reasonably
possible changes to those assumptions.
 
›
 
Refer to Notes
2
and
 
13
 
for more information
 
9) Provisions and contingent liabilities
Provisions
 
are
 
liabilities
 
of
 
uncertain
 
timing
 
or
 
amount,
 
and
 
are
generally
recognized
in
 
accordance
 
with
 
IAS
 
37,
Provisions,
Contingent
 
Liabilities
 
and
 
Contingent
 
Assets
,
 
when:
 
(i)
 
UBS
 
AG
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
 
AG
’s
 
provisio
ns
 
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 AG presents
 
expected credit loss
 
allowances within
Provisions
 
if they relate to a loan commitment, financial
 
guarantee contract
or a revolving revocable credit line.
IAS 37 provisions are
 
measured considering the
 
best estimate
of the
 
consideration required
 
to settle
 
the present
 
obligation at
the balance sheet date.
 
When conditions required
 
to recognize
 
a provision
 
are not met,
a
 
contingent
 
liability
 
is
 
disclosed,
 
unless
 
the
 
likelihood
 
of
 
an
outflow
 
of
 
resources
 
is
 
remote.
 
Contingent
 
liabilities
 
are
 
also
disclosed for
 
possible obligations that
 
arise from past
 
events the
existence
 
of
 
which
 
will
 
be
 
confirmed
 
only
 
by
 
uncertain
 
future
events not wholly within the control of UBS AG.
 
 
 
 
 
 
 
 
 
 
 
 
 
437
 
Note 1
 
Summary of material accounting policies (continued)
 
Critical accounting estimates and judgments
Recognition of provisions
 
often involves significant judgment
 
in assessing
the
 
existence
 
of
 
an
 
obligation
 
that
 
results
 
from
past
 
events
 
and
 
in
estimating the
 
probability, timing and
 
amount of
 
any outflows
 
of resources.
This
 
is particularly
 
the case
 
for litigation,
 
regulatory and
 
similar matters,
which, due to their nature,
 
are subject to many uncertainties,
 
making their
outcome difficult to predict.
 
The amount of any provision
 
recognized is sensitive to the
 
assumptions
used
 
and
 
there
 
could
 
be
 
a
 
wide
 
range
 
of
 
possible
 
outcomes
 
for
 
any
particular matter.
Management regularly reviews
 
all the available
 
information regarding
such
 
matters,
 
including
 
legal
 
advice,
 
to
 
assess
 
whether
 
the
 
recognition
criteria for provisions have been satisfied and to determine the timing and
amount of any potential outflows.
›
 
Refer to Note
18
 
for more information
10) Foreign currency translation
Transactions
 
denominated
 
in
 
a
 
foreign
 
currency
 
are
 
translated
into
 
the
 
functional
 
currency
 
of
 
the
 
reporting
 
entity
 
at
 
the
 
spot
exchange rate
 
on the
 
date of
 
the transaction.
 
At the
 
balance sheet
date, all monetary
 
assets, including those
 
at FVOCI, and
 
monetary
liabilities denominated in foreign currency
 
are translated into the
functional currency
 
using the
 
closing exchange
 
rate. Translation
differences
 
are
 
reported
 
in
Other
 
net
 
income
 
from
 
financial
instruments measured at fair value through profit or loss
.
Non-monetary items measured at historical cost are translated
at the exchange rate on the date of the transaction.
 
Upon consolidation, assets and liabilities of
 
foreign operations
are translated into US
 
dollars,
 
UBS AG’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 AG disposes of, partially
 
or in its
entirety, the foreign
 
operation and UBS AG no longer controls
 
the
foreign operation.
Share
 
capital
 
issued,
 
share premium
 
and treasury
 
shares held
 
are
translated
 
at the historic
 
average rate,
 
with the
 
difference
 
between
the historic
 
average rate
 
and the
 
spot rate
 
realized
 
upon repayment
of
 
share capital
 
or
 
disposal of
 
treasury shares
 
reported as
Share
premium.
 
Cumulative
 
amounts
 
recognized
 
in
Other comprehensive
income
 
in
 
respect
 
of
 
cash
 
flow
 
hedges
 
and
 
financial
 
assets
measured at FVOCI are translated at the closing exchange rate as
of the
 
balance sheet
 
dates, with
 
any translation effects
 
adjusted
through
Retained earnings
.
›
 
Refer to Note 33 for more information
11) Net cash settlement contracts
Contracts involving
 
UBS Group
 
AG shares
 
that require
 
net cash
settlement,
 
or
 
provide
 
the
 
counterparty
 
or
 
UBS
 
AG
 
with
 
a
settlement option
 
that includes
 
a choice
 
of settling
 
net in
 
cash,
are classified as derivatives held for trading.
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
438
 
Note 1
 
Summary of material accounting policies (continued)
b)
Changes in accounting policies, comparability and other adjustments
 
Amendments to IAS 1,
Presentation of Financial Statements
, and
IFRS Practice Statement 2,
Making Materiality Judgements
 
Effective
 
from
 
1 January
 
2021,
 
UBS
 
AG
 
early
 
adopted
amendments to IAS 1,
Presentation of Financial
 
Statements
, and
IFRS Practice Statement 2,
Making Materiality Judgements
, issued
by IASB
 
in February
 
2021. The
 
disclosure of
 
material accounting
policies
 
in
 
Note
 
1a
 
has
 
been
 
refined
 
through
 
adopting
 
these
amendments.
Amendments to IAS 39, IFRS 9 and IFRS 7 (
Interest Rate
Benchmark Reform – Phase 2
)
 
On
 
1 January
 
2021,
 
UBS
 
adopted
Interest
 
Rate
 
Benchmark
Reform – Phase
 
2 (Amendments to
 
IFRS 9, IAS 39, IFRS 7,
 
IFRS 4
and IFRS 16)
, addressing a number of issues in financial reporting
areas that arise
 
when interbank
 
offered rates (IBORs)
 
are reformed
or replaced.
 
The amendments
 
provide a
 
practical expedient
 
that
permits
 
certain
 
changes
 
in
 
the
 
contractual
 
cash
 
flows
 
of
 
debt
instruments
 
attributable
 
to
 
the
 
replacement
 
of
 
IBORs
 
with
alternative
 
reference
 
rates
 
(ARRs)
 
to
 
be
 
accounted
 
for
prospectively by
 
updating a
 
given instrument’s
 
effective interest
rate
 
(EIR),
 
provided
 
(i)
 
the
 
change
 
is
 
necessary
 
as
 
a
 
direct
consequence
 
of
 
IBOR
 
reform
 
and
 
(ii)
 
the
 
new
 
basis
 
for
determining the contractual cash
 
flows is economically equivalent
to
 
the
 
previous
 
basis.
 
UBS
 
AG
 
has
 
adopted
 
the
 
amendments,
which had no material effect on UBS AG’s financial statements.
T
he
 
amendments
also
provide
 
various
 
hedge
 
accounting
reliefs, with the following adopted by UBS AG:
–
 
D
esignate
an
ARR
 
as
 
a
 
non
-
contractually
 
specified
 
risk
component, even if it is
 
not separately identifiable at the
 
date
when
 
it
 
was
 
designated,
 
provided
 
UBS
 
AG
 
can
 
reasonably
expect that it will meet the requirements
 
within 24 months of
the
 
first
 
designation
 
and
 
the
 
risk
 
component
 
is
 
reliably
measurable. As of 31 December 2021, the principal ARRs that
UBS AG has designated as the
 
hedged risk in fair value hedges
of interest rate
 
risk related to
 
debt instruments, mortgages
 
and
cash
 
flow
 
hedges
 
of
 
forecast
 
transactions
 
were
 
the
 
Secured
Overnight
 
Financing
 
Rate
 
(SOFR),
the
Swiss
 
Average
 
Rate
Overnight (SARON) and
 
the Sterling
 
Overnight Index Average
(SONIA).
–
 
Amend
 
hedge
 
documentation
 
for
 
the
 
fair
 
value
 
hedges
 
of
interest
 
rate
 
risk
 
related
 
to
 
debt
 
instruments
 
for
 
which
 
the
hedged risk changed due
 
to IBOR reform,
 
which allowed UBS
AG to continue the hedge relationship in accordance with the
requirements of the phase 2 amendment.
–
 
The
 
cash
 
flow
 
hedges
 
of
 
IBOR forecast
 
transactions
 
in
 
Swiss
francs
 
and
 
pounds
 
sterling
 
were
 
discontinued
 
and
 
replaced
with
 
new
 
ARR
 
designations in
 
December
 
2021. The
 
amount
accumulated in
 
the cash
 
flow hedge
 
reserve is
 
deemed to
 
be
based on the ARR on which the hedged future cash
 
flows will
be based.
 
Amounts will
 
be released
 
to the
 
income statement
when the forecast ARR
 
cash flows affect
 
the income statement
or are no longer expected to occur.
 
›
 
Refer to Note 26 for more information
 
The
 
amendments
 
also
 
introduced
 
additional
 
disclosure
requirements regarding
 
UBS AG’s management
 
of the
 
transition
to
 
alternative
 
benchmark
 
rates,
 
its
 
progress
 
as
 
at
 
the
 
reporting
date
 
and
 
the
 
risks
 
to
 
which
 
it
 
is
 
exposed
 
arising
 
from
 
financial
instruments because of the transition.
›
 
Refer to Note 25 for more information
 
c)
International Financial Reporting Standards and Interpretations to be adopted in 2022 and later and other changes
IFRS 17,
 
Insurance Contracts
In May 2017, the IASB issued
 
IFRS 17,
Insurance Contracts
, which
sets out
 
the accounting
 
requirements
 
for contractual
 
rights and
obligations
 
that
 
arise
 
from
 
insurance
 
contracts
 
issued
 
and
reinsurance
 
contracts
 
held.
 
IFRS 17
 
is
 
effective
 
from
 
1 January
2023. UBS AG is assessing the standard, but
 
does not expect it to
have a material effect on UBS AG’s financial statements.
 
 
 
 
439
 
Note 2a
 
Segment reporting
UBS
 
AG’s
 
businesses
 
are
 
organized
 
globally
 
into
 
four
 
business
divisions:
 
Global
 
Wealth
 
Management,
 
Personal
 
&
 
Corporate
Banking,
 
Asset Management
 
and the
 
Investment Bank.
 
All four
business divisions
 
are supported
 
by Group
 
Functions and
 
qualify
as
 
reportable
 
segments
 
for
 
the
 
purpose
 
of
 
segment
 
reporting.
Together with Group Functions, the four business divisions reflect
the management structure of UBS AG.
 
–
 
Global
 
Wealth
 
Management
 
pr
ovides
 
financial
 
services,
advice and solutions to private clients, in particular in the ultra
high
 
net
 
worth
 
and
 
high
 
net
 
worth
 
segments.
 
Its
 
offering
ranges from
 
investment management
 
to estate
 
planning and
corporate
 
finance
 
advice,
 
in
 
addition
 
to
 
specific
 
wealth
management
 
products
 
and
 
services.
 
The
 
business
 
division
 
is
managed globally across the regions.
 
–
 
Personal & Corporate Banking
 
serves its private, corporate,
and
 
institutional
 
client
s
’
 
needs
,
 
from
basic
 
banking
 
to
retirement, financing,
 
investments and
 
strategic transactions,
in
 
Switzerland
,
 
through
 
its
 
branch
 
network
 
and
 
digital
channels.
–
 
Asset
 
Management
 
is
 
a
 
large-scale
 
and
 
diversified
 
global
asset
 
manager.
 
It
 
offers
 
investment
 
capabilities
 
and
 
styles
across all major traditional
 
and alternative asset classes,
 
as well
as
 
advisory
 
support
 
to
 
institutions,
 
wholesale
 
intermediaries
and wealth management clients globally.
 
–
 
The
Investment
 
Bank
 
provides
 
a
 
range
 
of
 
services
 
to
institutional,
 
corporate
 
and
 
wealth
 
management
 
clients
globally,
 
to
 
help
 
them
 
raise
 
capital,
 
grow
 
their
 
businesses,
invest and manage risks. Its offering includes advisory services,
facilitating clients raising debt
 
and equity from the
 
public and
private
 
markets
 
and
 
capital
 
markets,
 
cash
 
and
 
derivatives
trading across equities and fixed income,
 
and financing.
 
–
 
Group
 
Functions
 
is
 
made
 
up
 
of
 
the
 
following
 
major
 
areas:
Group
 
Services
 
(
which
 
consists
 
of
Technology,
 
Corporate
Services,
 
Human
 
Resources
,
 
Finance,
 
Legal,
 
Ris
k
 
Control,
Compliance,
 
Regulatory
 
&
 
Governance,
 
Communications
 
&
Branding and Group
 
Sustainability and Impact),
 
Group Treasury
and Non-core and Legacy Portfolio.
 
Financial
 
information
 
about
 
the
 
four
 
business
 
divisions
 
and
Group Functions is presented
 
separately in internal
 
management
reports
 
to
 
the
 
Executive
 
Board,
 
which
 
is
 
considered
 
the
 
“chief
operating
 
decision
 
maker”
 
pursuant
 
to
 
IFRS 8,
Operating
Segments
.
UBS
 
AG’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 UBS
 
AG 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
 
AG’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
 
management. If
 
one operating
 
segment is
 
involved
in
 
an
 
external
 
transaction
 
together
 
with
 
another
 
operating
segment or Group Functions, additional criteria are considered to
determine the segment that will report the associated
 
assets. This
will
 
include
 
a
 
consideration of
 
which
 
segment’s
 
business needs
are
 
being
 
addressed
 
by
 
the
 
transaction
 
and
 
which
 
segment
 
is
providing the
 
funding and
 
/ or
 
resources. Allocation
 
of liabilities
follows the same principles.
Non-current
 
assets disclosed
 
for segment
 
reporting
 
purposes
represent assets that are expected
 
to be recovered more than
 
12
months after the reporting date,
 
excluding financial instruments,
deferred tax assets and post-employment benefits.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
440
 
Note 2a
 
Segment reporting (continued)
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
 
Management
Investment
Bank
Group
 
Functions
UBS AG
For the year ended 31 December 2021
Net interest income
4,244
2,120
(15)
481
(226)
6,605
Non-interest income
15,175
2,144
2,632
8,978
294
29,222
Income
19,419
4,264
2,617
9,459
68
35,828
Credit loss (expense) / release
29
86
(1)
34
0
148
Total operating income
19,449
4,350
2,616
9,493
68
35,976
Total operating expenses
14,743
2,623
1,593
6,902
1,151
27,012
Operating profit / (loss) before tax
4,706
1,726
1,023
2,592
(1,083)
8,964
Tax expense / (benefit)
1,903
Net profit / (loss)
7,061
Additional information
Total assets
395,235
225,425
25,202
346,641
123,641
1,116,145
Additions to non-current assets
56
16
1
30
1,689
1,791
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
 
Management
Investment
Bank
Group
Functions
UBS AG
For the year ended 31 December 2020
Net interest income
4,027
2,049
(17)
284
(555)
5,788
Non-interest income
1
13,107
1,859
2,993
9,224
504
27,686
Income
17,134
3,908
2,975
9,508
(52)
33,474
Credit loss (expense) / release
(88)
(257)
(2)
(305)
(42)
(695)
Total operating income
17,046
3,651
2,974
9,203
(94)
32,780
Total operating expenses
13,080
2,390
1,520
6,762
1,329
25,081
Operating profit / (loss) before tax
3,965
1,261
1,454
2,441
(1,423)
7,699
Tax expense / (benefit)
1,488
Net profit / (loss)
6,211
Additional information
Total assets
367,714
231,710
28,266
369,778
127,858
1,125,327
Additions to non-current assets
5
12
385
150
1,971
2,524
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
 
Management
Investment
Bank
Group
Functions
UBS AG
For the year ended 31 December 2019
Net interest income
3,947
1,993
(25)
(669)
(831)
4,415
Non-interest income
12,426
1,745
1,962
7,967
869
24,970
Income
16,373
3,737
1,938
7,298
38
29,385
Credit loss (expense) / release
(20)
(21)
0
(30)
(7)
(78)
Total operating income
16,353
3,717
1,938
7,268
31
29,307
Total operating expenses
13,018
2,274
1,407
6,515
925
24,138
Operating profit / (loss) before tax
3,335
1,443
531
753
(893)
5,169
Tax expense / (benefit)
1,198
Net profit / (loss)
3,971
Additional information
Total assets
309,766
209,512
34,565
316,058
102,028
971,927
Additions to non-current assets
68
10
0
1
4,935
5,014
1 Includes a USD
631
 
million net gain on the sale of a majority stake in Fondcenter AG
 
(now Clearstream Fund Centre AG), of which USD
571
 
million was recognized in Asset Management and USD
60
 
million was
recognized in Global Wealth Management.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
441
 
Note 2b
 
Segment reporting by geographic location
The
 
operating
 
regions
 
shown
 
in
 
the
 
table
 
below
 
correspond to
the regional management structure of UBS AG. The
 
allocation of
operating income to these regions
 
reflects, and is consistent with,
the basis on which
 
the business is managed and
 
its performance
is
 
evaluated.
 
These
 
allocations
 
involve
 
assumptions
 
and
judgments
 
that
 
management
 
considers
 
to
 
be
 
reasonable,
 
and
may
 
be
 
refined
 
to
 
reflect
 
changes in
 
estimates
 
or
 
management
structure. The
 
main principles of
 
the allocation
 
methodology are
that
 
client
 
revenues
 
are
 
attributed
 
to
 
the
 
domicile
 
of
 
the
 
given
client
 
and
 
trading
 
and
 
portfolio
 
management
 
revenues
 
are
attributed to the country where the
 
risk is managed. This revenue
attribution
 
is
 
consistent
 
with
 
the
 
mandate
 
of
 
the
 
regional
Presidents.
 
Certain
 
revenues, such
 
as
 
those
 
related
 
to Non-core
and Legacy Portfolio in
 
Group Functions, are managed
 
at a Group
level. These revenues are included in the
Global
 
line.
The geographic analysis
 
of non-current assets
 
is based on
 
the
location of the entity in which the given assets are recorded.
 
For the year ended 31 December 2021
Total operating income
Total non-current assets
USD billion
Share %
USD billion
Share %
 
Americas
14.5
40
9.0
47
of which: USA
13.5
38
8.5
44
Asia Pacific
6.5
18
1.4
7
Europe, Middle East and Africa (excluding Switzerland)
7.0
19
2.6
13
Switzerland
7.9
22
6.3
33
Global
0.1
0
0.0
0
Total
36.0
100
19.3
100
For the year ended 31 December 2020
Total operating income
Total non-current assets
USD billion
Share %
USD billion
Share %
 
Americas
13.0
40
9.0
45
of which: USA
11.7
36
8.4
42
Asia Pacific
6.0
18
1.4
7
Europe, Middle East and Africa (excluding Switzerland)
6.5
20
2.7
14
Switzerland
6.9
21
6.9
34
Global
0.5
2
0.0
0
Total
32.8
100
20.0
100
For the year ended 31 December 2019
Total operating income
Total non-current assets
USD billion
Share %
USD billion
Share %
 
Americas
12.0
41
8.9
46
of which: USA
10.9
37
8.5
44
Asia Pacific
4.7
16
1.3
7
Europe, Middle East and Africa (excluding Switzerland)
5.8
20
2.6
13
Switzerland
6.7
23
6.5
34
Global
0.1
0
0.0
0
Total
29.3
100
19.3
100
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
442
Income statement notes
Note 3
 
Net interest
 
income and other
 
net income
 
from financial
 
instruments
 
measured at
 
fair value
 
through profit
 
or loss
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Net interest income from financial instruments measured
 
at fair value through profit or loss
 
1,437
1,305
1,015
Other net income from financial instruments measured
 
at fair value through profit or loss
5,844
6,930
6,833
of which: net gains / (losses) from financial liabilities designated
 
at fair value
1
(6,457)
1,625
(8,748)
Total net income from financial instruments measured at fair value through profit or loss
7,281
8,235
7,848
Net interest income
Interest income from loans and deposits
2
6,489
6,696
8,026
Interest income from securities financing transactions
3
513
862
2,005
Interest income from other financial instruments measured
 
at amortized cost
284
335
364
Interest income from debt instruments measured at fair
 
value through other comprehensive income
115
101
120
Interest income from derivative instruments designated as cash
 
flow hedges
 
1,133
822
188
Total interest income from financial instruments measured at amortized cost and fair
 
value through other comprehensive income
8,534
8,816
10,703
Interest expense on loans and deposits
4
1,655
2,440
4,541
Interest expense on securities financing transactions
5
1,102
870
1,152
Interest expense on debt issued
512
918
1,491
Interest expense on lease liabilities
98
105
118
Total interest expense from financial instruments measured at amortized cost
3,366
4,333
7,303
Total net interest income from financial instruments measured at amortized cost and fair
 
value through other comprehensive income
5,168
4,483
3,400
Total net interest income from financial instruments measured at fair value through profit or loss
1,437
1,305
1,015
Total net interest income
6,605
5,788
4,415
1 Excludes fair value changes
 
of hedges related to financial liabilities
 
designated at fair value and foreign
 
currency translation effects arising from translating foreign
 
currency transactions into the respective functional
currency, both of which
 
are reported within Other net
 
income from financial instruments measured
 
at fair value through profit
 
or loss. 2021 included net
 
losses of USD
2,068
 
million (net losses of USD
72
 
million
and USD
1,830
 
million in 2020 and 2019, respectively), driven by financial liabilities related to unit-linked investment contracts, which are designated at fair value through profit or loss. This
 
was offset by net gains
of USD
2,068
 
million (net gains of USD
72
 
million and USD
1,830
 
million in 2020 and 2019, respectively), related to financial assets for unit-linked investment contracts
 
that are mandatorily measured at fair value
through profit or
 
loss not
 
held for
 
trading.
 
2 Consists
 
of interest income
 
from cash
 
and balances at
 
central banks,
 
loans and
 
advances to
 
banks and
 
customers, and
 
cash collateral
 
receivables on
 
derivative
instruments, as well as negative
 
interest on amounts due to banks,
 
customer deposits, and cash collateral
 
payables on derivative instruments.
 
3 Includes interest income on receivables
 
from securities financing
transactions and negative interest, including fees,
 
on payables from securities financing transactions.
 
4 Consists of interest expense on amounts
 
due to banks, cash collateral
 
payables on derivative instruments,
customer deposits, and funding from UBS Group AG,
 
as well as negative interest on cash and balances at central banks, loans and advances
 
to banks, and cash collateral receivables on
 
derivative instruments.
 
5
Includes interest expense on payables from securities financing transactions and negative interest, including fees,
 
on receivables from securities financing transactions.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
443
 
Note 4
 
Net fee and commission income
 
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Fee and commission income
Underwriting fees
1,512
1,104
784
M&A and corporate finance fees
1,102
736
774
Brokerage fees
4,383
4,132
3,248
Investment fund fees
5,790
5,289
4,859
Portfolio management and related services
9,762
8,009
7,656
Other
1,874
1,712
1,836
Total fee and commission income
1
24,422
20,982
19,156
of which: recurring
15,410
13,010
12,545
of which: transaction-based
8,743
7,512
6,449
of which: performance-based
269
461
163
Fee and commission expense
Brokerage fees paid
259
274
310
Distribution fees paid
611
589
590
Other
1,115
911
796
Total fee and commission expense
1,985
1,775
1,696
Net fee and commission income
22,438
19,207
17,460
of which: net brokerage fees
4,124
3,858
2,938
1 For the
 
year ended 31
 
December 2021, reflects
 
third-party fee and
 
commission income of
 
USD
14,545
 
million for Global
 
Wealth Management, USD
1,645
 
million for Personal
 
& Corporate Banking,
 
USD
3,337
million for Asset Management, USD
4,863
 
million for the Investment Bank and USD
33
 
million for Group Functions (for the year ended 31
 
December 2020: USD
12,475
 
million for Global Wealth Management, USD
1,427
 
million for Personal & Corporate Banking, USD
3,129
 
million for Asset Management, USD
3,901
 
million for the Investment Bank and USD
50
 
million for Group Functions; for the year ended 31 December 2019:
USD
11,694
 
million for Global Wealth Management, USD
1,307
 
million for Personal & Corporate Banking,
 
USD
2,659
 
million for Asset Management, USD
3,397
 
million for the Investment Bank and USD
98
 
million
for Group Functions).
 
 
 
Note 5
 
Other income
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Associates, joint ventures and subsidiaries
Net gains / (losses) from acquisitions and disposals of
 
subsidiaries
1
(11)
635
2
(36)
Net gains / (losses) from disposals of investments in associates
41
0
4
Share of net profits of associates and joint ventures
105
84
46
Impairments related to associates
 
0
0
(1)
Total
134
719
13
Net gains / (losses) from disposals of financial assets measured
 
at fair value through other comprehensive income
9
40
31
Income from properties
3
22
25
27
Net gains / (losses) from properties held for sale
100
4
76
5
(19)
Income from shared services provided to UBS Group AG or its subsidiaries
451
422
464
Other
224
6
267
7
161
Total other income
941
1,549
677
1 Includes foreign exchange gains
 
/ (losses) reclassified
 
from other comprehensive income
 
related to the disposal
 
or closure of foreign
 
operations.
 
2 Includes a USD
631
 
million net gain on
 
the sale of a
 
majority
stake in Fondcenter AG
 
(now Clearstream Fund Centre AG).
 
3 Includes rent received from third parties.
 
4 Mainly relates to the sale of a
 
property in Basel.
 
5 Includes net gains of USD
140
 
million arising from
sale-and-leaseback transactions, primarily
 
related to a property in
 
Geneva, partly offset by
 
remeasurement losses relating to properties
 
that were reclassified as held
 
for sale.
 
6 Includes a gain of
 
USD
100
 
million
from the sale of UBS AG's domestic wealth management business in Austria. Refer to Note 30 for more
 
information.
 
7 Includes a USD
215
 
million gain on the sale of intellectual property rights associated with the
Bloomberg Commodity Index family.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
444
 
Note 6
 
Personnel expenses
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Salaries
1
5,723
5,535
5,183
Variable compensation – performance awards
2
2,916
2,953
3
2,545
Variable compensation – other
2
196
201
225
Financial advisor compensation
2,4
4,860
4,091
4,043
Contractors
142
138
147
Social security
762
704
3
627
Post-employment benefit plans
5
582
6
597
569
of which: defined benefit plans
280
306
 
291
of which: defined contribution plans
303
291
278
Other personnel expenses
479
466
3
461
Total personnel expenses
15,661
14,686
13,801
1 Includes role-based allowances.
 
2 Refer to Note 28 for
 
more information.
 
3 During 2020, UBS AG modified the
 
conditions for continued vesting of certain outstanding deferred
 
compensation awards for qualifying
employees, resulting in an
 
expense of approximately USD
270
 
million, of which USD
240
 
million is disclosed within Variable
 
compensation – performance awards,
 
USD
20
 
million within Social security and
 
USD
10
million within
 
Other personnel
 
expenses.
 
4 Financial
 
advisor compensation
 
consists of
 
grid-based
 
compensation based
 
directly on
 
compensable revenues
 
generated by
 
financial advisors
 
and supplemental
compensation calculated on the basis
 
of financial advisor productivity,
 
firm tenure, assets and
 
other variables. It
 
also includes expenses related
 
to compensation commitments with financial
 
advisors entered into at
the time of
 
recruitment that are
 
subject to vesting
 
requirements.
 
5 Refer to
 
Note 27 for
 
more information.
 
6 Includes curtailment
 
gains of USD
49
 
million, which represent
 
a reduction in
 
the defined benefit
obligation related to the Swiss pension plan resulting from a decrease in headcount following restructuring activities.
 
 
 
 
Note 7
 
General and administrative expenses
1
 
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Outsourcing costs
426
466
551
IT expenses
490
449
448
Consulting, legal and audit fees
465
566
753
Real estate and logistics costs
530
563
559
Market data services
367
361
364
Marketing and communication
171
162
191
Travel and entertainment
66
77
272
Litigation, regulatory and similar matters
2
910
197
165
Other
6,051
5,646
5,283
of which: shared services costs charged by UBS Group AG or its subsidiaries
5,321
4,939
4,621
of which: UK and German bank levies
3
58
55
41
Total general and administrative expenses
9,476
8,486
8,586
1 In
 
2021, UBS
 
AG changed
 
the presentation
 
of the
 
line items
 
within general
 
and administrative
 
expenses. Prior-period
 
information reflects
 
the new
 
presentation structure,
 
with no
 
effect on
 
Total general
 
and
administrative expenses.
 
2 Reflects the net increase in
 
provisions for litigation, regulatory and
 
similar matters recognized in the
 
income statement. Refer to Note 18
 
for more information. Also,
 
includes recoveries
from third parties of USD
1
 
million in 2021 (USD
3
 
million and USD
11
 
million in 2020 and 2019, respectively).
 
3 UK bank levy expenses of USD
22
 
million (USD
38
 
million for 2020 and USD
30
 
million for 2019)
included a credit of USD
16
 
million (USD
27
 
million for 2020 and USD
31
 
million for 2019) related to prior years.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
445
 
Note 8 Income taxes
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Tax expense / (benefit)
Swiss
Current
614
417
336
Deferred
26
107
246
Total Swiss
640
524
582
Non-Swiss
 
Current
857
715
402
Deferred
406
248
214
Total non-Swiss
1,263
963
616
Total income tax expense / (benefit) recognized in the income statement
1,903
1,488
1,198
 
 
Income tax recognized in the income statement
Income
 
tax
 
expenses
 
of
 
USD
1,903
 
million
 
were
 
recognized
 
for
UBS
 
AG
 
in
 
2021,
 
representing
 
an
 
effective
 
tax
 
rate
 
of
21.2
%.
These included
 
Swiss tax
 
expenses of
 
USD
640
 
million and
 
non-
Swiss tax expenses of USD
1,263
 
million.
The
 
Swiss
 
tax
 
expenses
 
included
 
current
 
tax
 
expenses
 
of
USD
614
 
million related to taxable profits of UBS Switzerland AG
and other Swiss entities.
 
They also included deferred tax
 
expenses
of
 
USD
 
26
 
million,
 
which
 
reflect
movements
 
in
 
temporary
differences.
The non-Swiss
 
tax expenses
 
included current
 
tax expenses
 
of
USD
857
 
million
 
related
 
to
 
taxable
 
profits
 
earned
 
by
 
non-Swiss
subsidiaries
 
and
 
branches
,
 
and
net
deferred
 
t
ax
 
expenses
 
of
USD
406
 
million.
 
Expenses
 
of
 
USD
740
 
million,
 
which
 
primarily
related to
 
the amortization
 
of deferred
 
tax assets
 
(DTAs) previously
recognized in relation to
 
tax losses carried
 
forward and deductible
temporary differences of UBS Americas Inc.,
 
were partly offset by
a benefit of USD
334
 
million in respect of
 
the remeasurement of
DTAs.
 
This
 
benefit
 
included
 
upward
revaluation
s
 
of
 
DTAs
 
of
USD
152
 
million for certain
 
entities, primarily in
 
connection with
our business planning process. It also included
 
USD
113
 
million in
respect of additional DTA recognition that primarily related to the
contribution of real estate assets by UBS AG to UBS
 
Americas Inc.
and UBS Financial Services
 
Inc., which allowed the
 
full recognition
of DTAs in respect of the associated historic
 
real estate costs that
were
 
previously
 
capitalized
 
for
 
US
 
tax
 
purposes
 
under
 
elections
that
 
were
 
made
 
in
 
the
 
fourth
 
quarter
 
of
 
2018.
 
In
 
addition,
 
it
included USD
69
 
million in respect of an increase in the expected
value of future tax
 
deductions for deferred
 
compensation awards,
due to an increase in the Group’s share price during the year.
The pre-tax expense that was recognized in the year in respect
of the increase in litigation provisions for the
 
French cross-border
matter did not result in any tax benefit.
 
 
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Operating profit / (loss) before tax
 
8,964
 
7,699
 
5,169
of which: Swiss
2,983
3,042
2,297
of which: non-Swiss
5,981
4,657
2,872
Income taxes at Swiss tax rate of
18.5
% for 2021,
19.5
% for 2020 and
20.5
% for 2019
1,658
1,501
1,060
Increase / (decrease) resulting from:
Non-Swiss tax rates differing from Swiss tax rate
217
96
72
Tax effects of losses not recognized
124
144
131
Previously unrecognized tax losses now utilized
(179)
(212)
(265)
Non-taxable and lower-taxed income
(252)
(381)
(305)
Non-deductible expenses and additional taxable income
487
373
713
Adjustments related to prior years – current tax
(38)
(66)
1
Adjustments related to prior years – deferred tax
(3)
18
(6)
Change in deferred tax recognition
(341)
(383)
(293)
Adjustments to deferred tax balances arising from changes
 
in tax rates
(1)
235
(9)
Other items
230
163
99
Income tax expense / (benefit)
 
1,903
1,488
1,198
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
446
 
Note 8
 
Income taxes (continued)
The components of operating profit before tax, and the differences between income tax expense reflected in the financial statements
and the amounts calculated at the Swiss tax rate, are provided in the table on the previous page and explained below.
 
Component
Description
Non-Swiss tax rates
differing from Swiss tax
rate
To the extent that UBS AG 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
 
benefit of USD
455
 
million was recognized
 
in
Other comprehensive income
 
(2020: net expense
 
of USD
258
 
million) and a
net tax expense of USD
102
 
million was recognized in
Share premium
(2020: net benefit of USD
1
 
million).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
447
 
Note 8
 
Income taxes (continued)
Deferred tax assets and liabilities
UBS
 
AG
 
has
 
gross
 
DTAs,
 
valuation
 
allowances
 
and
 
recognized
DTAs related to tax loss carry-forwards and deductible temporary
differences,
 
and also
 
deferred tax
 
liabilities in
 
respect of
 
taxable
temporary differences, as
 
shown in the
 
table below. The valuation
allowances reflect DTAs
 
that were not recognized
 
because, as of
the last
 
remeasurement period,
 
management did not
 
consider it
probable
 
that
 
there
 
would
 
be
 
sufficient
 
future
 
taxable
 
profits
available
 
to
 
utilize
 
the
 
related
 
tax
 
loss
 
carry
-
forwards
 
and
deductible temporary differences.
The
 
recognition of
 
DTAs is
 
supported by
 
forecasts of
 
taxable
profits
 
for
 
the
 
entities
 
concerned.
 
In
 
addition,
 
tax
 
planning
opportunities are
 
available that
 
would result
 
in additional
 
future
taxable income and these would be utilized, if necessary.
Deferred tax liabilities are recognized in respect of investments
in
 
subsidiaries,
 
branches
 
and
 
associates,
 
and
 
interests
 
in
 
joint
arrangements, except to
 
the extent that UBS
 
AG 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
 
202
1
,
 
this
exception was not
 
considered to apply
 
to any taxable
 
temporary
differences.
 
 
USD million
31.12.21
31.12.20
Deferred tax assets
1
Gross
Valuation
allowance
Recognized
Gross
Valuation
allowance
Recognized
Tax loss carry-forwards
13,636
(9,193)
4,443
14,108
(8,715)
5,393
Temporary differences
5,092
(696)
4,396
4,343
(561)
3,782
of which: related to real estate costs capitalized for US
 
tax
purposes
2,272
0
2,272
2,268
0
2,268
of which: related to compensation and benefits
1,200
(209)
991
1,112
(173)
939
of which: other
1,620
(487)
1,133
963
(388)
574
Total deferred tax assets
18,728
(9,889)
8,839
2
18,450
(9,276)
9,174
2
of which: related to the US
8,521
8,780
of which: related to other locations
318
394
Deferred tax liabilities
Cash flow hedges
118
425
Other
179
133
Total deferred tax liabilities
297
558
1 After offset of DTLs, as applicable.
 
2 As of 31 December 2021, UBS AG recognized DTAs
 
of USD
77
 
million (31 December 2020: USD
138
 
million) in respect of entities that incurred losses in either the current or
preceding year.
 
 
In general, US federal tax losses
 
incurred prior to 31 December
2017 can be
 
carried forward for
 
20 years. However,
 
US federal tax
losses incurred after 31 December 2017 and UK tax losses can be
carried forward indefinitely, although
 
the utilization of
 
such losses
is limited to 80% of the entity’s
 
future year taxable profits for the
US and generally to 25% thereof for
 
the UK. The amounts of US
tax
 
loss
 
carry-forwards
 
that are
 
included
 
in the
 
table below
 
are
based
 
on their
 
amount for
 
federal tax
 
purposes
 
rather than
 
for
state and local tax purposes.
 
 
Unrecognized tax loss carry-forwards
USD million
31.12.21
31.12.20
Within 1 year
141
146
From 2 to 5 years
1,026
638
From 6 to 10 years
13,283
13,257
From 11 to 20 years
2,093
3,858
No expiry
18,147
17,227
Total
34,690
35,127
of which: related to the US
1
14,870
16,256
of which: related to the UK
14,909
13,848
of which: related to other locations
4,911
5,023
1 Related to UBS AG's US branch.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
448
Balance sheet notes
Note 9
 
Financial assets at amortized cost and other positions in scope of expected credit loss measurement
The
 
tables
 
on
 
the
 
following
 
pages
 
provide
 
information
 
about
financial
 
instruments and
 
certain credit
 
lines that
 
are
 
subject to
expected credit loss (ECL) requirements
 
.
 
UBS AG’s ECL disclosure
segments or “ECL segments” are aggregated portfolios based on
shared
 
risk
 
characteristics
 
and
 
on
 
the
 
same
 
or
 
similar
 
rating
methods
 
applied.
 
The
 
key
 
segments
 
are
 
presented
 
in
 
the
 
table
below.
›
 
Refer to Note 20 for more information about
 
expected credit
loss measurement
 
Segment
Segment description
Description of credit risk sensitivity
Business division / Group Functions
Private clients with
mortgages
Lending to private clients secured by
owner-occupied real estate and
personal account overdrafts of those
clients
Sensitive to the interest rate environment,
unemployment levels, real estate collateral
values
 
and other regional aspects
 
–
 
Personal & Corporate Banking
–
 
Global Wealth Management
Real estate financing
Rental or income-producing real estate
financing to private and corporate
clients secured by real estate
Sensitive to unemployment levels, the
interest rate environment,
 
real estate
collateral values
 
and other regional
aspects
–
 
Personal & Corporate Banking
–
 
Global Wealth Management
–
 
Investment Bank
Large corporate clients
Lending to large corporate and multi-
national clients
Sensitive to GDP developments,
unemployment levels,
 
seasonality,
business cycles and collateral values
(diverse collateral,
 
including real estate
and other collateral types)
–
 
Personal & Corporate Banking
–
 
Investment Bank
SME clients
Lending to small and medium-sized
corporate clients
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
Lombard
Loans secured by pledges of marketable
securities, guarantees and other forms
of collateral
Sensitive to equity and debt markets
 
(e.g.,
changes in collateral values)
–
 
Global Wealth Management
Credit cards
Credit card solutions in Switzerland and
the US
Sensitive to unemployment levels
–
 
Personal & Corporate Banking
–
 
Global Wealth Management
Commodity trade
finance
Working capital financing of commodity
traders, generally extended on a self-
liquidating transactional basis
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
–
 
Personal & Corporate Banking
Financial intermediaries
and hedge funds
Lending to financial institutions and
pension funds, including exposures to
broker-dealers and clearing houses
Sensitive to GDP development, the
interest rate environment, price and
volatility risks in financial markets, and
regulatory and political risk
–
 
Personal & Corporate Banking
–
 
Investment Bank
›
 
Refer to Note 20f for more details regarding sensitivity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
449
 
Note 9
 
Financial assets at amortized cost and other positions in scope of expected credit loss measurement (continued)
The
 
tables below
 
and on
 
the following
 
pages provide
 
ECL exposure
 
and ECL
 
allowance and
 
provision
 
information about
 
financial
instruments and certain non-financial instruments that are subject to ECL.
 
USD million
31.12.21
Carrying amount
1
ECL allowances
Financial instruments measured at amortized
 
cost
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Cash and balances at central banks
192,817
192,817
0
0
0
0
0
0
Loans and advances to banks
15,360
15,333
26
1
(8)
(7)
(1)
0
Receivables from securities financing transactions
75,012
75,012
0
0
(2)
(2)
0
0
Cash collateral receivables on derivative instruments
30,514
30,514
0
0
0
0
0
0
Loans and advances to customers
398,693
381,496
15,620
1,577
(850)
(126)
(152)
(572)
of which: Private clients with mortgages
152,479
143,505
8,262
711
(132)
(28)
(71)
(33)
of which: Real estate financing
43,945
40,463
3,472
9
(60)
(19)
(40)
0
of which: Large corporate clients
13,990
12,643
1,037
310
(170)
(22)
(16)
(133)
of which: SME clients
14,004
12,076
1,492
436
(259)
(19)
(15)
(225)
of which: Lombard
149,283
149,255
0
27
(33)
(6)
0
(28)
of which: Credit cards
1,716
1,345
342
29
(36)
(10)
(9)
(17)
of which: Commodity trade finance
3,813
3,799
7
7
(114)
(6)
0
(108)
Other financial assets measured at amortized cost
26,236
25,746
302
189
(109)
(27)
(7)
(76)
of which: Loans to financial advisors
2,453
2,184
106
163
(86)
(19)
(3)
(63)
Total financial assets measured at amortized cost
738,632
720,917
15,948
1,767
(969)
(161)
(160)
(647)
Financial assets measured at fair value through other comprehensive income
8,844
8,844
0
0
0
0
0
0
Total on-balance sheet financial assets in scope of ECL requirements
747,477
729,762
15,948
1,767
(969)
(161)
(160)
(647)
Total exposure
ECL provisions
Off-balance sheet (in scope of ECL)
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Guarantees
20,972
19,695
1,127
150
(41)
(18)
(8)
(15)
of which: Large corporate clients
3,464
2,567
793
104
(6)
(3)
(3)
0
of which: SME clients
1,353
1,143
164
46
(8)
(1)
(1)
(7)
of which: Financial intermediaries and hedge funds
 
9,575
9,491
84
0
(17)
(13)
(4)
0
of which: Lombard
2,454
2,454
0
0
(1)
0
0
(1)
of which: Commodity trade finance
3,137
3,137
0
0
(1)
(1)
0
0
Irrevocable loan commitments
39,478
37,097
2,335
46
(114)
(72)
(42)
0
of which: Large corporate clients
23,922
21,811
2,102
9
(100)
(66)
(34)
0
Forward starting reverse repurchase and securities borrowing agreements
1,444
1,444
0
0
0
0
0
0
Committed unconditionally revocable credit lines
42,373
39,802
2,508
63
(38)
(28)
(10)
0
of which: Real estate financing
7,328
7,046
281
0
(5)
(4)
(1)
0
of which: Large corporate clients
5,358
4,599
736
23
(7)
(4)
(3)
0
of which: SME clients
5,160
4,736
389
35
(15)
(11)
(3)
0
of which: Lombard
8,670
8,670
0
0
0
0
0
0
of which: Credit cards
9,466
9,000
462
4
(6)
(5)
(2)
0
of which: Commodity trade finance
117
117
0
0
0
0
0
0
Irrevocable committed prolongation of existing loans
5,611
5,527
36
48
(3)
(3)
0
0
Total off-balance sheet financial instruments and credit lines
109,878
103,565
6,006
307
(196)
(121)
(60)
(15)
Total allowances and provisions
(1,165)
(282)
(220)
(662)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective
 
ECL allowances.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
450
 
Note 9
 
Financial assets at amortized cost and other positions in scope of expected credit loss measurement (continued)
USD million
31.12.20
Carrying amount
1
ECL allowances
Financial instruments measured at amortized
 
cost
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Cash and balances at central banks
158,231
158,231
0
0
0
0
0
0
Loans and advances to banks
15,344
15,160
184
0
(16)
(9)
(5)
(1)
Receivables from securities financing transactions
74,210
74,210
0
0
(2)
(2)
0
0
Cash collateral receivables on derivative instruments
32,737
32,737
0
0
0
0
0
0
Loans and advances to customers
380,977
358,396
20,341
2,240
(1,060)
(142)
(215)
(703)
of which: Private clients with mortgages
148,175
138,769
8,448
959
(166)
(35)
(93)
(39)
of which: Real estate financing
43,429
37,568
5,838
23
(63)
(15)
(44)
(4)
of which: Large corporate clients
15,161
12,658
2,029
474
(279)
(27)
(40)
(212)
of which: SME clients
14,872
11,990
2,254
628
(310)
(19)
(23)
(268)
of which: Lombard
133,850
133,795
0
55
(36)
(5)
0
(31)
of which: Credit cards
1,558
1,198
330
30
(38)
(11)
(11)
(16)
of which: Commodity trade finance
3,269
3,214
43
12
(106)
(5)
0
(101)
Other financial assets measured at amortized cost
27,219
26,401
348
469
(133)
(34)
(9)
(90)
of which: Loans to financial advisors
2,569
1,982
137
450
(108)
(27)
(5)
(76)
Total financial assets measured at amortized cost
688,717
665,135
20,873
2,709
(1,211)
(187)
(229)
(795)
Financial assets measured at fair value through other comprehensive income
8,258
8,258
0
0
0
0
0
0
Total on-balance sheet financial assets in scope of ECL requirements
696,976
673,394
20,873
2,709
(1,211)
(187)
(229)
(795)
Total exposure
ECL provisions
Off-balance sheet (in scope of ECL)
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Guarantees
17,081
14,687
2,225
170
(63)
(14)
(15)
(34)
of which: Large corporate clients
3,710
2,048
1,549
113
(20)
(4)
(5)
(12)
of which: SME clients
1,310
936
326
48
(13)
(1)
(1)
(11)
of which: Financial intermediaries and hedge funds
 
7,637
7,413
224
0
(17)
(7)
(9)
0
of which: Lombard
641
633
0
8
(2)
0
0
(2)
of which: Commodity trade finance
1,441
1,416
25
0
(2)
(1)
0
0
Irrevocable loan commitments
41,372
36,894
4,374
104
(142)
(74)
(68)
0
of which: Large corporate clients
24,209
20,195
3,950
64
(121)
(63)
(58)
0
Forward starting reverse repurchase and securities borrowing agreements
3,247
3,247
0
0
0
0
0
0
Committed unconditionally revocable credit lines
42,077
37,176
4,792
108
(50)
(29)
(21)
0
of which: Real estate financing
6,328
5,811
517
0
(12)
(5)
(7)
0
of which: Large corporate clients
4,909
2,783
2,099
27
(9)
(2)
(7)
0
of which: SME clients
5,827
4,596
1,169
63
(16)
(12)
(4)
0
of which: Lombard
9,671
9,671
0
0
0
(1)
0
0
of which: Credit cards
8,661
8,220
430
11
(8)
(6)
(2)
0
of which: Commodity trade finance
242
242
0
0
0
0
0
0
Irrevocable committed prolongation of existing loans
3,282
3,277
5
0
(2)
(2)
0
0
Total off-balance sheet financial instruments and credit lines
107,059
95,281
11,396
382
(257)
(119)
(104)
(34)
Total allowances and provisions
(1,468)
(306)
(333)
(829)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the
 
respective ECL allowances.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
451
 
Note 9
 
Financial assets at amortized cost and other positions in scope of expected credit loss measurement (continued)
Coverage
 
ratios are
 
calculated
 
for
 
the
 
core loan
 
portfolio
 
by
taking ECL
 
allowances and
 
provisions divided
 
by the
 
gross carrying
amount of
 
the exposures.
 
Core loan
 
exposure is
 
defined as
 
the
sum of
Loans and
 
advances to
 
customers
 
and
Loans to
 
financial
advisors
.
 
These ratios are influenced by the following key factors:
 
–
 
Lombard loans
 
are generally
 
secured with
 
marketable securities
in
 
portfolios
 
that
 
are,
 
as
 
a
 
rule,
 
highly
 
diversified,
 
with
 
strict
lending policies
 
that are
 
intended to
 
ensure that
 
credit risk
 
is
minimal under most circumstances;
 
–
 
mortgage loans to private clients and
 
real estate financing are
controlled by
 
conservative eligibility
 
criteria, including
 
low loan-
to-value ratios and strong debt service capabilities;
 
–
 
the amount of unsecured retail lending (including credit cards)
is insignificant;
 
–
 
lending in Switzerland includes government backed
 
COVID-19
loans;
–
 
contractual maturities in the loan portfolio, which
 
are a factor
in the
 
calculation of
 
ECLs, are
 
generally short,
 
with Lombard
lending
 
typically having
 
average contractual
 
maturities
 
of
 
12
months or
 
less, real
 
estate lending
 
generally between
 
2 years
and 3 years in Switzerland with longer
 
dated maturities in the
US and
 
corporate lending
 
between 1
 
to 2
 
years with
 
related
loan commitments up to 4 years;
 
and
 
–
 
write-offs of
 
ECL allowances
 
against the
 
gross loan
 
balances
when all or part of a financial asset is deemed
 
uncollectible or
forgiven, reduces the coverage ratios
.
 
 
Coverage ratios for core loan portfolio
31.12.21
Gross carrying amount (USD million)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Private clients with mortgages
152,610
143,533
8,333
744
9
2
85
446
Real estate financing
44,004
40,483
3,512
10
14
5
114
231
Large corporate clients
14,161
12,665
1,053
443
120
18
148
2,997
SME clients
14,263
12,095
1,507
661
182
16
103
3,402
Lombard
149,316
149,261
0
55
2
0
0
5,026
Credit cards
1,752
1,355
351
46
204
72
255
3,735
Commodity trade finance
3,927
3,805
7
115
290
15
3
9,388
Other loans and advances to customers
19,510
18,425
1,010
75
23
9
15
3,730
Loans to financial advisors
2,539
2,203
109
226
338
88
303
2,791
Total
1
402,081
383,825
15,882
2,374
23
4
98
2,673
Gross exposure (USD million)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Private clients with mortgages
9,123
8,798
276
49
3
3
9
15
Real estate financing
8,766
8,481
285
0
9
7
88
0
Large corporate clients
32,748
28,981
3,630
136
34
25
110
1
SME clients
8,077
7,276
688
114
38
19
151
585
Lombard
14,438
14,438
0
0
1
0
0
0
Credit cards
9,466
9,000
462
4
7
5
34
0
Commodity trade finance
3,262
3,262
0
0
4
4
0
0
Financial intermediaries and hedge funds
13,747
13,379
369
0
13
10
120
0
 
Other off-balance sheet commitments
8,806
8,507
296
4
15
6
30
0
Total
2
108,434
102,121
6,006
307
18
12
100
486
1 Includes Loans and
 
advances to customers
 
of USD
399,543
 
million and Loans
 
to financial advisors
 
of USD
2,539
 
million which are presented
 
on the balance
 
sheet line Other assets
 
measured at amortized
 
cost.
 
2 Excludes Forward starting reverse repurchase and securities borrowing agreements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
452
 
Note 9
 
Financial assets at amortized cost and other positions in scope of expected credit loss measurement (continued)
Coverage ratios for core loan portfolio
31.12.20
Gross carrying amount (USD million)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Private clients with mortgages
148,341
138,803
8,540
998
11
2
108
390
Real estate financing
43,492
37,583
5,883
27
15
4
75
1,414
Large corporate clients
15,440
12,684
2,069
686
181
21
192
3,089
SME clients
15,183
12,010
2,277
896
204
16
101
2,991
Lombard
133,886
133,800
0
86
3
0
0
3,592
Credit cards
1,596
1,209
342
46
240
91
333
3,488
Commodity trade finance
3,375
3,219
43
113
315
16
2
8,939
Other loans and advances to customers
20,722
19,229
1,402
91
29
13
25
3,563
Loans to financial advisors
2,677
2,009
142
526
404
135
351
1,446
Total
1
384,714
360,547
20,697
3,470
30
5
106
2,247
Gross exposure (USD million)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Private clients with mortgages
6,285
6,083
198
3
7
6
16
197
Real estate financing
7,056
6,576
481
0
21
9
185
0
Large corporate clients
32,828
25,026
7,598
205
46
27
92
565
SME clients
9,121
7,239
1,734
148
40
19
63
779
Lombard
14,178
14,170
0
8
2
1
0
1,941
Credit cards
8,661
8,220
430
11
9
8
44
0
Commodity trade finance
1,683
1,658
25
0
10
8
15
8,279
Financial intermediaries and hedge funds
7,690
7,270
448
0
26
13
248
166
 
Other off-balance sheet commitments
16,309
15,792
482
8
12
6
11
12,414
Total
2
103,812
92,034
11,396
382
25
13
91
894
1 Includes Loans and
 
advances to customers
 
of USD
382,036
 
million and Loans
 
to financial advisors
 
of USD
2,677
 
million which are presented
 
on the balance
 
sheet line Other assets
 
measured at amortized
 
cost.
 
2 Excludes Forward starting reverse repurchase and securities borrowing agreements.
 
 
 
 
 
453
 
Note 10
 
Derivative instruments
Overview
Over-the-counter
 
(OTC)
 
derivative
 
contracts
 
are
 
usually
 
traded
under
 
a
 
standardized
 
International
 
Swaps
 
and
 
Derivatives
Association
 
(ISDA)
 
master
 
agreement
 
between
 
UBS
 
AG
 
and
 
its
counterparties. Terms
 
are negotiated directly with counterparties
and the contracts have industry-standard settlement mechanisms
prescribed
 
by
 
ISDA.
 
Other
 
OTC
 
derivatives
 
are
 
cleared
 
through
clearing houses, in particular interest rate swaps
 
with LCH, where
a
 
settled-to-market method
 
has
 
been
 
generally adopted,
 
under
which cash collateral exchanged
 
on a daily basis
 
is considered to
legally
 
settle
 
the
 
market
 
value
 
of
 
the
 
derivatives.
 
Regulators
 
in
various
 
jurisdictions
 
have
 
begun
 
a
 
phased
 
introduction
 
of
 
rules
requiring
 
the
 
payment
 
and
 
collection
 
of
 
initial
 
and
 
variation
margins on
 
certain OTC
 
derivative contracts,
 
which may
 
have a
bearing
 
on
 
price
 
and
 
other
 
relevant
 
terms.
 
Due
 
to
 
challenges
brought
 
on
 
by
 
COVID
-
19
,
 
the
 
International
 
Organization
 
of
Securities
 
Commissions
 
(IOSCO)
 
has
 
extended
 
the
 
deadline
 
for
completion of the final phase-in of margin requirements for non-
centrally cleared derivatives,
 
to 1 September 2022.
Other
 
derivative
 
contracts
 
are
 
standardized
 
in
 
terms
 
of
 
their
amounts
 
and
 
settlement
 
dates,
 
and
 
are
 
bought
 
and
 
sold
 
on
regulated
 
exchanges.
 
These
 
are
 
commonly
 
referred
 
to
 
as
exchange-traded derivatives (ETD) contracts.
 
Exchanges offer the
benefits of pricing transparency,
 
standardized daily settlement of
changes in value and, consequently,
 
reduced credit risk.
Most
 
of
 
UBS
 
AG’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.
 
UBS
 
AG
 
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
Risks of derivative instruments
The derivative financial assets shown on the
 
balance sheet can be
an important component of UBS AG ’s credit exposure; however,
the
 
positive
 
replacement
 
values
 
related
 
to
 
a
 
respective
counterparty are rarely an adequate reflection of UBS AG’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 UBS AG
 
to control credit
risk
 
and
 
the
 
capital
 
requirements
 
imposed
 
by
 
regulators
 
reflect
these additional factors.
›
 
Refer to Note 22 for more information about
 
derivative financial
assets and liabilities after consideration
 
of netting potential
allowed under enforceable netting arrangements
›
 
Refer to the “Risk management and control”
 
section of this
report for more information about the risks arising
 
from
derivative instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
454
 
Note 10
 
Derivative instruments (continued)
Derivative instruments
 
31.12.21
31.12.20
USD billion
Derivative
financial
assets
Notional
amounts
related to
derivative
financial
assets
2,3
Derivative
financial
liabilities
Notional
amounts
related to
derivative
financial
liabilities
2,3
Other
notional
amounts
2,4
Derivative
financial
assets
Notional
amounts
related to
derivative
financial
assets
2,3
Derivative
financial
liabilities
Notional
amounts
related to
derivative
financial
liabilities
2,3
Other
notional
amounts
2,4
Interest rate contracts
33.2
991.2
28.7
943.1
8,675.1
50.9
928.0
43.9
880.4
11,291.5
of which: forward contracts (OTC)
1
0.1
29.4
0.2
28.6
443.6
0.0
19.8
0.4
21.9
2,602.5
of which: swaps (OTC)
26.4
394.3
19.2
344.1
7,549.4
40.8
407.0
30.9
364.8
8,105.2
of which: options (OTC)
6.6
545.2
9.2
553.6
10.1
447.5
12.5
460.5
of which: futures (ETD)
525.0
480.6
of which: options (ETD)
0.0
22.4
0.0
16.8
157.1
0.0
53.6
0.0
33.1
103.3
Credit derivative contracts
1.4
44.7
1.8
46.3
2.4
57.6
2.9
64.8
of which: credit default swaps (OTC)
1.3
39.4
1.6
44.1
2.2
53.6
2.6
62.3
of which: total return swaps (OTC)
0.1
1.3
0.2
1.7
0.1
1.9
0.3
2.5
Foreign exchange contracts
53.3
3,031.0
54.1
2,938.8
1.2
68.7
2,951.2
70.5
2,820.4
1.4
of which: forward contracts (OTC)
23.8
1,009.1
23.8
1,043.2
27.3
779.2
29.0
853.3
of which: swaps (OTC)
24.3
1,606.4
24.9
1,480.3
34.3
1,727.3
34.4
1,567.3
of which: options (OTC)
5.2
412.6
5.3
408.6
7.1
440.9
7.1
394.7
Equity contracts
28.2
456.9
34.9
603.9
80.1
34.8
449.6
41.2
581.3
91.3
of which: swaps (OTC)
4.7
105.7
9.3
154.8
6.4
89.4
9.8
108.4
of which: options (OTC)
4.6
61.4
6.5
102.3
7.0
87.1
10.9
146.2
of which: futures (ETD)
71.2
67.9
of which: options (ETD)
10.2
289.6
9.8
346.3
8.8
10.7
273.1
11.3
326.8
23.5
of which: client-cleared transactions (ETD)
8.6
9.4
10.7
9.1
Commodity contracts
1.6
57.8
1.6
56.4
14.7
2.2
57.8
2.0
49.7
10.1
of which: swaps (OTC)
0.5
19.9
0.8
25.4
0.5
17.7
0.8
18.0
of which: options (OTC)
0.4
14.0
0.2
10.4
1.0
23.5
0.7
17.8
of which: futures (ETD)
13.9
9.3
of which: forward contracts (ETD)
0.0
18.1
0.0
15.2
0.0
8.0
0.0
6.3
of which: client-cleared transactions (ETD)
0.6
0.4
0.5
0.3
Loan commitments
 
measured at FVTPL (OTC)
 
0.0
0.8
0.0
8.2
0.0
10.2
Unsettled purchases of non-derivative
financial instruments
5
0.1
13.3
0.2
10.6
0.3
18.3
0.2
10.0
Unsettled sales of non-derivative financial
instruments
5
0.2
18.2
0.1
9.4
0.2
17.2
0.3
12.9
Total derivative instruments,
 
based on IFRS netting
6
118.1
4,614.0
121.3
4,616.6
8,771.1
159.6
4,479.6
161.1
4,429.7
11,394.4
1 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.
 
2 In cases where
derivative financial instruments
 
are presented on
 
a net basis
 
on the bal
 
ance sheet, the
 
respective notional amounts
 
of the netted
 
derivative financial
 
instruments are
 
still presented on
 
a gross basis.
 
3 Notional
amounts of client-cleared ETD and OTC
 
transactions through central clearing
 
counterparties are not disclosed, as they
 
have significantly different risk profile.
 
4 Other notional amounts relate to derivatives
 
that are
cleared through either a central counterparty or an exchange. The
 
fair value of these derivatives is presented on the balance
 
sheet net of the corresponding cash margin under Cash collateral receivables on
 
derivative
instruments and Cash collateral
 
payables on derivative
 
instruments and was not
 
material for all periods
 
presented.
 
5 Changes in the
 
fair value of purchased
 
and sold non-derivative financial
 
instruments between
trade date and
 
settlement date are
 
recognized as derivative
 
financial instruments.
 
6 Derivative financial
 
assets and liabilities
 
are presented net
 
on the balance
 
sheet if UBS
 
AG 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.
 
On a notional amount basis,
 
approximately
40
% of OTC interest
rate contracts held as of 31 December 2021 (31 December
 
2020:
50
%) mature
 
within one
 
year,
36
% (31
 
December 2020:
30
%)
within one to
 
five years and
25
% (31 December
 
2020:
20
%) after
five years.
 
Notional
 
amounts
 
of
 
interest
 
rate
 
contracts
 
cleared
 
through
either
 
a
 
central
 
counterparty
 
or
 
an
 
exchange
 
that
 
are
 
legally
settled
 
on
 
a
 
daily
 
basis
 
are
 
presented
 
under
Other
 
notional
amounts
 
in
 
the
 
table
above
 
and
 
are
 
categorized
 
into
 
maturity
buckets
 
on
 
the
 
basis
 
of
 
contractual
 
maturities
 
of
 
the
 
cleared
underlying
 
derivative
 
contracts. Other
 
notional
 
amounts
 
related
to interest rate contracts
 
decreased by USD
2.6
 
trillion compared
with
 
31 December
 
2020,
 
mainly
 
reflecting
 
trade
 
compressions,
which
 
included
 
activity
 
as
 
part
 
of
 
the
 
ongoing
 
transition
 
to
alternative reference rates, and maturities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
455
 
 
Note 11
 
Financial assets measured at fair value through other comprehensive income
USD million
31.12.21
31.12.20
Financial assets measured at fair value through other comprehensive income
1
Debt instruments
Governments and government agencies
8,522
8,155
of which: USA
7,507
7,727
Banks
322
103
Total financial assets measured at fair value through other comprehensive income
8,844
8,258
Unrealized gains / (losses) recognized in Other comprehensive
 
income
Unrealized gains, before tax
67
204
Unrealized (losses), before tax
(80)
(4)
Net unrealized gains / (losses), before tax
(13)
200
Net unrealized gains / (losses), after tax
(7)
151
1 Refer to Note 21c for more information about product type and fair value hierarchy categorization. Refer
 
also to Note 9 and Note 20 for more information about expected credit loss measurement.
 
 
 
 
 
Note 12
 
Property, equipment and software
At historical cost less accumulated depreciation
USD million
Owned
properties and
equipment
1
Leased
properties and
equipment
2
Software
Projects in
progress
2021
2020
Historical cost
Balance at the beginning of the year
11,676
4,091
7,111
907
23,785
22,329
Additions
162
1
174
233
1,220
1,789
1,989
Disposals / write-offs
3
(345)
(212)
(75)
0
(632)
(867)
Reclassifications
4
267
0
703
(988)
(18)
(590)
Foreign currency translation
(266)
(59)
(48)
(9)
(381)
924
Balance at the end of the year
11,494
3,994
7,924
1,130
24,542
23,785
Accumulated depreciation
Balance at the beginning of the year
7,188
1,019
3,621
0
11,827
10,503
Depreciation
507
474
854
0
1,835
1,779
Impairment
5
8
1
0
0
9
72
Disposals / write-offs
3
(341)
(204)
(75)
0
(619)
(735)
Reclassifications
4
(12)
0
0
0
(12)
(328)
Foreign currency translation
(172)
(18)
(19)
0
(210)
535
Balance at the end of the year
7,178
1,272
4,380
0
12,830
11,827
Net book value
 
Net book value at the beginning of the year
4,488
3,072
3,490
907
11,958
11,826
Net book value at the end of the year
4,316
2,722
3,544
1,130
6
11,712
11,958
1 Includes leasehold improvements and IT hardware.
 
2 Represents right-of-use assets recognized by UBS AG as lessee. UBS AG predominantly enters into lease contracts, or contracts that include lease components,
in relation to real estate, including offices, retail branches and sales offices. The
 
total cash outflow for leases during 2021 was USD
632
 
million (2020: USD
652
 
million). Interest expense on lease liabilities is included
within Interest expense from
 
financial instruments measured at
 
amortized cost and Lease
 
liabilities are included within
 
Other financial liabilities
 
measured at amortized cost.
 
Refer to Notes 3
 
and 19a, respectively.
There were no material gains
 
or losses arising from sale-and-leaseback
 
transactions in 2021 (2020: USD
140
 
million).
 
3 Includes write-offs of fully
 
depreciated assets.
 
4 The total reclassification amount
 
for the
respective periods represents net reclassifications
 
to Properties and other
 
non-current assets held for
 
sale.
 
5 Impairment charges recorded in
 
2021 generally relate to
 
assets that are no longer
 
used, for which the
recoverable amount based on a value in use approach was determined to be zero.
 
6 Consists of USD
1,009
 
million related to software and USD
121
 
million related to Owned properties and equipment.
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
456
 
Note 13
 
Goodwill and intangible assets
Introduction
UBS AG performs an impairment test on
 
its goodwill assets on an
annual basis or when indicators of impairment exist.
 
UBS AG considers Asset Management,
 
as it is reported in Note
2a, as a separate cash-generating
 
unit (a
 
CGU), as that is
 
the level
at
 
which
 
the
 
performance
 
of
 
investment
 
(and
 
the
 
related
goodwill) is reviewed and assessed by management. Given that a
significant
 
amount
 
of
 
goodwill
 
in
 
Global
 
Wealth
 
Management
relates
 
to
 
the
 
PaineWebber
 
acquisition
 
in
 
2000,
 
which
 
mainly
affected
 
the
 
Americas
 
portion
 
of
 
the
 
business,
 
this
 
goodwill
remains
 
separately
 
monitored
 
by
 
the
 
Americas
,
 
despite
 
the
formation
 
of
 
Global
 
Wealth
 
Management
 
in
 
2018.
 
Therefore,
goodwill for Global Wealth Management is
 
separately considered
for
 
impairment
 
at
 
the
 
level
 
of
 
two
 
CGUs:
 
Americas;
 
and
Switzerland
 
and
 
International
 
(consisting
 
of
 
EMEA,
 
Asia
 
Pacific
and Global).
The
 
impairment
 
test
 
is
 
performed
 
for
 
each
 
CGU
 
to
 
which
goodwill is
 
allocated by
 
comparing the
 
recoverable amount,
 
based
on
 
its
 
value
 
in
 
use,
 
with
 
the
 
carrying
 
amount
 
of
 
the
 
respective
CGU. An impairment charge is recognized if the carrying amount
exceeds the recoverable amount.
As
 
of
 
31 December
 
2021,
 
total
 
goodwill
 
recognized
 
on
 
the
balance sheet
 
was USD
6.1
 
billion, of which
 
USD
3.7
 
billion was
carried
 
by
 
the
 
Global
 
Wealth
 
Management
 
Americas
 
CGU,
USD
1.2
 
billion
 
was
 
carried
 
by the
 
Global
 
Wealth
 
Management
Switzerland
 
and
 
International
 
CGU
,
 
and
 
USD
 
1.2
 
billion
 
was
carried by
 
Asset Management.
 
Based on
 
the impairment
 
testing
methodology
 
described
 
below,
 
UBS
 
AG
 
concluded
 
that
 
the
goodwill
 
balances
 
as
 
of
 
31 December
 
2021
 
allocated
 
to
 
these
CGUs are not impaired.
Methodology for goodwill impairment testing
The recoverable amounts are determined using
 
a discounted cash
flow model, which has
 
been adapted to use inputs
 
that consider
features of the banking
 
business and its regulatory
 
environment.
The recoverable
 
amount of
 
a CGU
 
is the
 
sum of
 
the discounted
earnings attributable to shareholders from the first three forecast
years and the terminal value, adjusted
 
for the effect of the capital
assumed to
 
be needed
 
over the next
 
three years
 
and to
 
support
growth beyond
 
that period. The
 
terminal value,
 
which covers all
periods
 
beyond
 
the third
 
year,
 
is calculated
 
on the
 
basis
 
of
 
the
forecast of third
 
-year profit, the
 
discount rate and
 
the long-term
growth rate, as well as the implied perpetual capital growth.
The carrying amount for each CGU is determined by reference
to
 
UBS’s
 
equity
 
attribution
 
framework.
 
Within
 
this
 
framework,
which
 
is
 
described
 
in
 
the
 
“Capital,
 
liquidity
 
and
 
funding,
 
and
balance sheet” section of this report, UBS attributes equity to the
businesses on the basis of their risk-weighted assets and leverage
ratio denominator (both metrics include
 
resource allocations from
Group
 
Functions
 
to
 
the
 
business
 
divisions),
 
their
 
goodwill
 
and
their
 
intangible
 
assets,
 
as
 
well
 
as
 
attributed
 
equity
 
related
 
to
certain CET1 deduction
 
items. The framework
 
is primarily used
 
for
the purpose of measuring the performance of the
 
businesses and
includes
 
certain
 
management
 
assumptions.
 
Attributed
 
equity
 
is
equal to the capital a CGU requires to conduct its business and 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.
›
 
Refer to the “Capital, liquidity and funding,
 
and balance sheet”
section of this report for more information about
 
the equity
attribution framework
Assumptions
Valuation
 
parameters
 
used
 
within
 
UBS
 
AG’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.
 
T
hey
also
take
 
into
 
account
regional differences in risk-free rates at
 
the level of the individual
CGUs.
 
In
 
line
 
with
 
discount
 
rates,
 
long-term
 
growth
 
rates
 
are
determined
 
at
 
the regional
 
level
 
based
 
on
 
nominal
 
or
 
real GDP
growth rate forecasts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
457
 
Note 13
 
Goodwill and intangible assets (continued)
Key assumptions
 
used to determine
 
the recoverable
 
amounts
of eac
 
h
 
CGU are
 
tested
 
for sensitivity
 
by applying
 
a reasonably
possible
 
change
 
to
 
those
 
assumptions.
 
Forecast
 
earnings
available
 
to
 
shareholders
 
were
 
changed
 
by
20
%,
 
the
 
discount
rates were changed by
1.5
 
percentage points, and the long-term
growth rates were changed by
0.75
 
percentage points. Under all
scenarios,
 
reasonably
 
possible
 
changes
 
in
 
key
 
assumptions
 
did
not
 
result
 
in
 
an
 
impairment
 
of
 
goodwill
 
or
 
intangible
 
assets
reported
 
by
 
Global
 
Wealth
 
Management
 
Americas,
 
Global
Wealth
 
Management
 
Switzerland
 
and
 
International,
 
and
 
Asset
Management.
If
 
the
 
estimated
 
earnings
 
and
 
other
 
assumptions
 
in
 
future
periods deviate
 
from the
 
current outlook,
 
the value
 
of goodwill
attributable
 
to
 
Global
 
Wealth
 
Management
 
Americas,
 
Global
Wealth
 
Management
 
Switzerland
 
and
 
International,
 
and
 
Asset
Management may
 
become impaired
 
in the
 
future, giving
 
rise to
losses in the income
 
statement. Recognition of any
 
impairment of
goodwill
 
would
 
reduce IFRS
 
equity and
 
net profit.
 
It
 
would
 
not
affect cash flows
 
and, as goodwill
 
is required to
 
be deducted from
capital under
 
the Basel III capital
 
framework, no effect
 
would be
expected on UBS AG’s capital ratios.
 
Discount and growth rates
Discount rates
Growth rates
In %
31.12.21
31.12.20
31.12.21
31.12.20
Global Wealth Management Americas
9.5
9.5
4.0
5.1
Global Wealth Management Switzerland and International
8.5
8.5
3.1
3.7
Asset Management
8.5
8.5
2.9
3.5
 
USD million
Goodwill
Intangible
assets
1
2021
2020
Historical cost
Balance at the beginning of the year
6,182
1,683
7,865
7,820
Additions
1
1
147
Disposals
(3)
(3)
(158)
Write-offs
(41)
(41)
(35)
Foreign currency translation
(53)
(30)
(83)
91
Balance at the end of the year
6,126
1,612
7,739
7,865
Accumulated amortization and impairment
Balance at the beginning of the year
1,385
1,385
1,351
Amortization
31
31
55
Impairment / (reversal of impairment)
2
(1)
(1)
2
Disposals
0
0
Write-offs
(41)
(41)
(35)
Foreign currency translation
(13)
(13)
11
Balance at the end of the year
1,360
1,360
1,385
Net book value at the end of the year
6,126
252
6,378
6,480
of which: Global Wealth Management Americas
3,720
41
3,760
3,770
of which: Global Wealth Management Switzerland and International
1,204
72
1,276
1,320
of which: Asset Management
1,202
1,202
1,226
of which: Investment Bank
139
139
161
of which: Group Functions
0
4
1 Intangible assets mainly include customer relationships, contractual rights and the fully amortized branch
 
network intangible asset recognized in connection with the acquisition of PaineWebber
 
Group, Inc.
 
2 Impairment charges recorded in 2020 relate to assets for which the recoverable amount was determined considering their value
 
in use (recoverable amount of the impaired intangible assets: USD
5
 
million for
2020).
 
The table below presents estimated aggregated amortization expenses for intangible assets.
 
USD million
Intangible assets
Estimated aggregated amortization expenses for:
2022
29
2023
27
2024
23
2025
23
2026
23
Thereafter
126
Not amortized due to indefinite useful life
2
Total
252
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
458
 
Note 14
 
Other assets
 
a) Other financial assets measured at amortized cost
USD million
31.12.21
31.12.20
Debt securities
18,858
18,801
of which: government bills / bonds
 
9,833
9,789
Loans to financial advisors
2,453
2,569
Fee-
 
and commission-related receivables
1,966
2,014
Finance lease receivables
1,356
1,447
Settlement and clearing accounts
 
455
614
Accrued interest income
521
592
Other
627
1,182
Total other financial assets measured at amortized cost
26,236
27,219
b) Other non-financial assets
USD million
31.12.21
31.12.20
Precious metals and other physical commodities
 
5,258
6,264
Deposits and collateral provided in connection with litigation,
 
regulatory and similar matters
1
1,526
1,418
Prepaid expenses
717
731
VAT and other tax receivables
591
392
Properties and other non-current assets held for sale
32
246
Assets of disposal groups held for sale
2
1,093
Other
 
618
323
Total other non-financial assets
9,836
9,374
1 Refer to Note 18 for more information.
 
2 Refer to Note 30 for more information.
 
 
 
Note 15
 
Amounts due to banks, customer deposits, and funding from UBS Group AG
 
a) Amounts due to banks and customer deposits
USD million
31.12.21
31.12.20
Amounts due to banks
 
13,101
11,050
Customer deposits
544,834
527,929
of which: demand deposits
247,299
237,604
of which: retail savings / deposits
247,224
220,898
of which: time deposits
1
50,312
69,427
Total amounts due to banks and customer deposits
557,935
538,979
1 Includes customer deposits in UBS AG Jersey Branch placed by UBS Switzerland AG on behalf of its clients.
 
 
b) Funding from UBS Group AG
USD million
31.12.21
31.12.20
Senior unsecured debt that contributes to total loss-absorbing
 
capacity (TLAC)
38,984
36,611
Senior unsecured debt other than TLAC
4,471
2,939
High-trigger loss-absorbing additional tier 1 capital instruments
11,414
11,854
Low-trigger loss-absorbing additional tier 1 capital instruments
2,426
2,575
Total
1
57,295
53,979
1 UBS AG has also recognized funding from UBS Group AG that is designated at fair value.
 
Refer to Note 19b for more information.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
459
 
Note 16
 
Debt issued designated at fair value
USD million
31.12.21
31.12.20
Issued debt instruments
Equity-linked
1
47,059
41,069
Rates-linked
16,369
11,038
Credit-linked
1,723
1,933
Fixed-rate
2,868
3,604
Commodity-linked
2,911
1,497
Other
529
726
Total debt issued designated at fair value
71,460
59,868
of which: issued by UBS AG with original maturity greater than one
 
year
2
57,967
46,427
of which: life-to-date own credit (gain) / loss
144
233
1 Includes investment fund unit-linked instruments issued.
 
2 Based on original contractual maturity without considering any early redemption features. As of 31 December
 
2021,
100
% of the balance was unsecured
(31 December 2020:
100
%).
 
As of 31 December
 
2021 and 31
 
December 2020, the contractual
redemption amount at maturity
 
of debt issued designated at
 
fair
value through profit or
 
loss was not materially different
 
from the
carrying amount.
The table below shows the
 
residual contractual maturity of the
carrying
 
amount
 
of
 
debt
 
issued
 
designated
 
at
 
fair
 
value,
 
split
between
 
fixed-rate
 
and
 
floating-rate
 
instruments
 
based
 
on
 
the
contractual
 
terms,
 
and
 
does
 
not
 
consider
 
any
 
early
 
redemption
features. Interest rate ranges for future interest
 
payments related
to debt issued designated at fair value have
 
not been included in
the table below,
 
as the majority
 
of the debt
 
instruments issued are
structured
 
products
 
and
 
therefore
 
the
 
future
 
interest
 
payments
are
 
highly
 
dependent
 
upon
 
the
 
embedded
 
derivative
 
and
prevailing market conditions
 
at the point
 
in time that
 
each interest
payment is made.
›
 
Refer to Note 24 for maturity information
 
on an undiscounted
cash flow basis
 
 
Contractual maturity of carrying amount
USD million
2022
2023
2024
2025
2026
2027–2031
Thereafter
Total
31.12.21
Total
31.12.20
UBS AG
1
Non-subordinated debt
Fixed-rate
4,296
1,658
716
495
226
273
1,732
9,397
9,409
Floating-rate
19,338
15,621
5,067
5,816
3,840
8,364
3,238
61,284
49,528
Subtotal
23,635
17,279
5,783
6,311
4,066
8,637
4,971
70,682
58,937
Other subsidiaries
2
Non-subordinated debt
Fixed-rate
6
0
0
0
0
423
0
429
539
Floating-rate
150
47
145
0
0
0
7
349
392
Subtotal
156
47
145
0
0
423
7
778
931
Total
 
23,791
17,325
5,929
6,311
4,066
9,060
4,977
71,460
59,868
1 Consists of instruments issued by the legal entity UBS AG.
 
2 Consists of instruments issued by subsidiaries of UBS AG.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
460
 
Note 17
 
Debt issued measured at amortized cost
USD million
31.12.21
31.12.20
Certificates of deposit and commercial paper
40,640
41,151
Other short-term debt
2,458
5,515
Short-term debt
1
43,098
46,666
Senior unsecured debt
23,328
18,483
of which: issued by UBS AG with original maturity greater than one
 
year
2
23,307
18,464
Covered bonds
1,389
2,796
Subordinated debt
5,163
7,744
of which: low-trigger loss-absorbing tier 2 capital instruments
2,596
7,201
of which: non-Basel III-compliant tier 2 capital instruments
547
543
Debt issued through the Swiss central mortgage institutions
9,454
9,660
Other long-term debt
0
3
Long-term debt
3
39,334
38,685
Total debt issued measured at amortized cost
4
82,432
85,351
1 Debt with an original contractual maturity of
 
less than one year.
 
2 Based on original contractual maturity without considering
 
any early redemption features. As
 
of 31 December 2021,
100
% of the balance was
unsecured (31 December 2020:
100
%).
 
3 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.
 
4 Net of bifurcated embedded derivatives, the fair value of which was
 
not material for the periods presented.
 
 
UBS
 
AG
 
uses
 
interest
 
rate
 
and
 
foreign
 
exchange
 
derivatives
 
to
manage
 
the
 
risks
 
inherent
 
in
 
certain
 
debt
 
instruments
 
held
 
at
amortized cost. In some cases, UBS AG applies hedge accounting
for interest
 
rate risk as
 
discussed in
 
item 2j in
 
Note 1a and
 
Note
26.
 
As
 
a
 
result
 
of
 
applying
 
hedge
 
accounting,
 
the
 
life-to-date
adjustment to the
 
carrying amount of
 
debt issued was
 
an increase
of USD
261
 
million as
 
of 31
 
December 2021
 
and an
 
increase of
USD
761
 
million as
 
of 31
 
December 2020,
 
reflecting changes
 
in
fair value due to interest rate movements.
Subordinated debt consists of unsecured debt obligations that
are
 
contractually
 
subordinated
 
in
 
right
 
of
 
payment
 
to
 
all
 
other
present and future
 
non-subordinated obligations of
 
the respective
issuing
 
entity.
All
 
of
 
the
 
subo
rdinated
 
debt
 
instruments
outstanding as of 31 December 2021 pay a fixed rate of interest.
The table below shows the
 
residual contractual maturity of
 
the
carrying
 
amount
 
of
 
debt
 
issued,
 
split
 
between
 
fixed-rate
 
and
floating-rate
 
based
 
on
 
the
 
contractual
 
terms,
 
and
 
does
 
not
consider any early redemption
 
features. The effects from interest
rate
 
swaps,
 
which
 
are
 
used
 
to
 
hedge
 
various
 
fixed-rate
 
debt
issuances
 
by
 
changing
 
the
 
repricing
 
characteristics
 
into
 
those
similar to
 
floating-rate debt, are
 
also not considered
 
in the
 
table
below.
›
 
Refer to Note 24 for maturity information
 
on an undiscounted
cash flow basis
 
 
Contractual maturity of carrying amount
USD million
2022
2023
2024
2025
2026
2027–2031
Thereafter
Total
31.12.21
Total
31.12.20
UBS AG
1
Non-subordinated debt
Fixed-rate
38,647
5,578
1,964
349
3,439
1,381
1,213
52,571
52,618
Floating-rate
9,807
2,093
1,922
907
508
0
0
15,238
15,299
Subordinated debt
Fixed-rate
2,020
0
2,596
337
210
0
0
5,163
7,744
Subtotal
50,474
7,671
6,482
1,594
4,158
1,381
1,213
72,972
75,661
Other subsidiaries
2
Non-subordinated debt
Fixed-rate
907
1,007
1,072
1,173
1,045
3,674
582
9,460
9,690
Subtotal
907
1,007
1,072
1,173
1,045
3,674
582
9,460
9,690
Total
 
51,381
8,679
7,554
2,766
5,203
5,055
1,795
82,432
85,351
1 Consists of debt issued by the legal entity UBS AG.
 
2 Consists of debt issued by subsidiaries of UBS AG.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
461
 
Note 18
 
Provisions and contingent liabilities
a) Provisions
The table below presents an overview of total provisions.
 
USD million
31.12.21
31.12.20
Provisions other than provisions for expected credit losses
3,256
2,534
Provisions for expected credit losses
196
257
Total provisions
3,452
2,791
 
The following table presents additional information for provisions other than provisions for expected credit losses.
 
USD million
Litigation,
regulatory and
similar matters
1
Restructuring
Other
3
Total 2021
Balance at the beginning of the year
2,135
67
332
2,534
Increase in provisions recognized in the income statement
986
228
73
1,286
Release of provisions recognized in the income statement
(74)
(25)
(29)
(128)
Provisions used in conformity with designated purpose
(189)
(130)
(76)
(396)
Capitalized reinstatement costs
0
0
30
30
Foreign currency translation / unwind of discount
(59)
(3)
(9)
(70)
Balance at the end of the year
 
2,798
137
2
321
3,256
1 Consists of provisions for losses resulting from legal, liability and compliance risks.
 
2 Primarily consists of personnel-related restructuring provisions of USD
90
 
million as of 31 December 2021 (31 December 2020:
USD
13
 
million) and provisions
 
for onerous contracts
 
of USD
47
 
million as of
 
31 December 2021 (31 December 2020: USD
49
 
million).
 
3 Mainly includes provisions
 
related to real
 
estate, employee benefits
 
and
operational risks.
 
 
Restructuring
 
provisions
 
primarily
 
relate
 
to
 
personnel
-
related
provisions and onerous contracts. Personnel-related restructuring
provisions
 
are
 
used
 
within
 
a
 
short
 
period
 
of
 
time
 
but
 
potential
changes in amount may be
 
triggered when natural staff
 
attrition
reduces the
 
number of
 
people affected
 
by a
 
restructuring event
and therefore the estimated
 
costs. Onerous contracts
 
for property
are recognized
 
when UBS AG
 
is committed to
 
pay for non-lease
components,
 
such
 
as
 
utilities,
 
service
 
charges,
 
taxes
 
and
maintenance, when
 
a property
 
is vacated
 
or not
 
fully recovered
from sub-tenants.
 
Information
 
about
 
provisions
 
and
 
contingent
 
liabilities
 
in
respect of
 
litigation, regulatory
 
and similar
 
matters, as
 
a class, is
included in Note
 
18b. There are
 
no material contingent liabilities
associated with the other classes of provisions.
b) Litigation, regulatory and similar matters
UBS 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
 
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
 
UBS
 
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 UBS 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. UBS 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
 
UBS
 
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 UBS, but are nevertheless expected to be,
 
based
on UBS’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.
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
462
 
Note 18
 
Provisions and contingent liabilities (continued)
Specific litigation,
 
regulatory and
 
other matters
 
are described
below, including
 
all such
 
matters that management
 
considers to
be
 
material
 
and
 
others
 
that
 
management
 
believes
 
to
 
be
 
of
significance
 
due
 
to
 
potential
 
financial,
 
reputational
 
and
 
other
effects. The amount of
 
damages claimed, the size
 
of a transaction
or other information is provided where
 
available and appropriate
in order to assist
 
users in considering the magnitude
 
of potential
exposures.
In
 
the
 
case of
 
certain
 
matters below,
 
we state
 
that we
 
have
established a
 
provision, and
 
for the
 
other matters,
 
we make
 
no
such
 
statement.
 
When
 
we
 
make
 
this
 
statement
 
and
 
we
 
expect
disclosure of the amount of a provision to
 
prejudice seriously our
position with other
 
parties in the
 
matter because it
 
would reveal
what
 
UBS
 
believes
 
to
 
be
 
the
 
probable
 
and
 
reliably
 
estimable
outflow, we
 
do not
 
disclose that
 
amount. In
 
some cases
 
we are
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, in
 
which case
 
the matter
 
is treated
 
as a
contingent liability
 
under the
 
applicable accounting
 
standard; or
(b) we have
 
established a provision
 
but expect disclosure
 
of that
fact to
 
prejudice seriously
 
our position
 
with other
 
parties in
 
the
matter
 
because
 
it
 
would
 
reveal
 
the
 
fact
 
that
 
UBS
 
believes
 
an
outflow of resources to be probable and reliably estimable.
With respect
 
to certain
 
litigation, regulatory
 
and similar
 
matters
for which we have established provisions, we
 
are able to estimate
the expected timing
 
of outflows. However,
 
the aggregate amount
of the expected outflows for those matters for which we are able
to estimate
 
expected timing
 
is immaterial
 
relative to
 
our current
and expected levels of liquidity over the relevant time periods.
The
 
aggregate
 
amount
 
provisioned
 
for
 
litigation,
 
regulatory
and similar matters as a class
 
is disclosed in the “Provisions” table
in Note
 
18a above.
 
It is
 
not practicable
 
to provide
 
an aggregate
estimate
 
of
 
liability
 
for
 
our
 
litigation,
 
regulatory
 
and
 
similar
matters as a class of contingent liabilities. Doing so would
 
require
UBS
 
to
 
provide
 
speculative
 
legal
 
assessments
 
as
 
to
 
claims
 
and
proceedings
 
that
 
involve
 
unique
 
fact
 
patterns
 
or
 
novel
 
legal
theories, that have not yet been initiated or are at early
 
stages of
adjudication,
 
or
 
as
 
to
 
which
 
alleged
 
damages
 
have
 
not
 
been
quantified
 
by
 
the
 
claimants.
 
Although
 
UBS
 
therefore
 
cannot
provide a numerical estimate of the
 
future losses that could arise
from litigation,
 
regulatory and
 
similar matters,
 
UBS believes
 
that
the aggregate
 
amount of
 
possible future
 
losses from
 
this class
 
that
are
 
more than
 
remote
 
substantially exceeds
 
the level
 
of
 
current
provisions.
 
Litigation,
 
regulatory
 
and
 
similar
 
matters
 
may
 
also
 
result
 
in
non-monetary
 
penalties
 
and
 
consequences.
 
A guilty
 
plea
 
to,
 
or
conviction of, a crime could have material consequences for UBS.
Resolution of
 
regulatory proceedings
 
may require
 
UBS to
 
obtain
waivers
 
of
 
regulatory
 
disqualifications
 
to
 
maintain
 
certain
operations, may entitle regulatory authorities to limit, suspend or
terminate licenses and regulatory authorizations, and may permit
financial
 
market
 
utilities
 
to
 
limit,
 
suspend
 
or
 
terminate
 
UBS’s
participation in such
 
utilities. Failure to
 
obtain such
 
waivers, or
 
any
limitation, suspension or
 
termination of licenses,
 
authorizations or
participations, could have material consequences for UBS.
The risk of
 
loss associated with
 
litigation, regulatory and
 
similar
matters
 
is
 
a
 
component
 
of
 
operational
 
risk
 
for
 
purposes
 
of
determining
 
capital
 
requirements.
 
Information
 
concerning
 
our
capital requirements
 
and the
 
calculation of
 
operational risk
 
for this
purpose
 
is
 
included
 
in
 
the
 
“Capital,
 
liquidity
 
and
 
funding,
 
and
balance sheet” section of this report.
 
Provisions for litigation, regulatory and similar matters
 
by business division and in Group Functions
1
USD million
Global
Wealth
 
Manage-
ment
Personal &
Corporate
Banking
 
Asset
 
Manage-
ment
Investment
 
Bank
Group
Functions
Total 2021
Balance at the beginning of the year
861
115
0
227
932
2,135
Increase in provisions recognized in the income statement
754
84
9
107
32
986
Release of provisions recognized in the income statement
(60)
(11)
0
(4)
0
(74)
Provisions used in conformity with designated purpose
(175)
(1)
(1)
(10)
(2)
(189)
Foreign currency translation / unwind of discount
(42)
(6)
0
(11)
0
(59)
Balance at the end of the year
1,338
181
8
310
962
2,798
1 Provisions, if any,
 
for the matters described
 
in items 3 and
 
4 of this Note are
 
recorded in Global Wealth
 
Management, and provisions,
 
if any, for
 
the matters described in
 
item 2 are recorded in
 
Group Functions.
Provisions, if any, for the matters described in items 1 and 6 of this Note are allocated between Global Wealth Management and Personal & Corporate Banking, and provisions, if any, for the matters described in item
5 are allocated between the Investment Bank and Group Functions.
 
 
 
 
463
 
Note 18
 
Provisions and contingent liabilities (continued)
1. Inquiries regarding cross-border wealth management
businesses
 
Tax
 
and
 
regulatory
 
authorities
 
in
 
a
 
number
 
of
 
countries
 
have
made
 
inquiries,
 
served
 
requests
 
for
 
information
 
or
 
examined
employees located
 
in their
 
respective jurisdictions
 
relating to
 
the
cross-border
 
wealth management
 
services provided
 
by UBS
 
and
other financial institutions.
 
It is possible
 
that the implementation
of
 
automatic
 
tax
 
information
 
exchange
 
and
 
other
 
measures
relating to
 
cross-border provision
 
of financial
 
services could
 
give
rise to further inquiries in
 
the future. UBS has
 
received disclosure
orders from the Swiss Federal
 
Tax Administration (FTA) to transfer
information
 
based
 
on
 
requests
 
for
 
international
 
administrative
assistance in tax matters. The
 
requests concern a number of UBS
account numbers pertaining to
 
current and former clients and
 
are
based
 
on
 
data
 
from
 
2006
 
and
 
2008.
 
UBS
 
has
 
taken
 
steps
 
to
inform
 
affected
 
clients
 
about
 
the
 
administrative
 
assistance
proceedings
 
and
 
their
 
procedural
 
rights,
 
including
 
the
 
right
 
to
appeal. The requests
 
are based on
 
data received from the
 
German
authorities, who seized certain
 
data related to UBS clients
 
booked
in
 
Switzerland
 
during
 
their
 
investigations
 
and
 
have
 
apparently
shared
 
this
 
data
 
with
 
other
 
European
 
countries.
 
UBS
 
expects
additional countries to file similar requests.
Since
 
2013,
 
UBS
 
(France)
 
S.A.,
 
UBS
 
AG
 
and
 
certain
 
former
employees
 
have
 
been
 
under
 
investigation
 
in
 
France
 
for
 
alleged
complicity
 
in
 
unlawful
 
solicitation
 
of
 
clients
 
on
 
French
 
territory,
regarding
 
the laundering
 
of proceeds
 
of tax
 
fraud, and
 
banking
and financial solicitation
 
by unauthorized persons.
 
In connection
with this
 
investigation, the investigating
 
judges ordered
 
UBS AG
to provide
 
bail (“
caution
”) of
 
EUR
1.1
 
billion and
 
UBS (France)
 
S.A.
to post
 
bail of
 
EUR
40
 
million, which
 
was reduced
 
on appeal
 
to
EUR
10
 
million.
On
 
20 February
 
2019,
 
the
 
court
 
of
 
first
 
instance
 
returned
 
a
verdict finding UBS AG guilty of unlawful
 
solicitation of clients on
French territory and aggravated laundering of
 
the proceeds of tax
fraud,
 
and
 
UBS
 
(France)
 
S.A.
 
guilty
 
of
 
aiding
 
and
 
abetting
unlawful solicitation and of laundering the proceeds of tax fraud.
The court
 
imposed fines aggregating
 
EUR
3.7
 
billion on
 
UBS AG
and
 
UBS
 
(France)
 
S.A.
 
and
 
awarded
 
EUR
800
 
million
 
of
 
civil
damages to the French
 
state. A trial
 
in the French Court
 
of Appeal
took place in
 
March 2021.
 
On 13 December
 
2021, the
 
Court of
Appeal
 
found
 
UBS
 
AG
 
guilty
 
of
 
unlawful
 
solicitation
 
and
aggravated
 
laundering
 
of
 
the
 
proceeds
 
of
 
tax
 
fraud.
 
The
 
court
ordered
 
a
 
fine
 
of
 
EUR
3.75
 
million,
 
the
 
confiscation
 
of
EUR
1
 
billion, and
 
awarded civil
 
damages to
 
the French
 
state of
EUR
800
 
million. The
 
court also
 
found UBS
 
(France) SA
 
guilty of
the aiding and abetting of
 
unlawful solicitation and ordered it
 
to
pay a fine of EUR
1.875
 
million. UBS AG has filed an appeal with
the
 
French
 
Supreme
 
Court
 
to
 
preserve
 
its
 
rights.
 
The
 
appeal
enables UBS AG
 
to thoroughly assess the
 
verdict of the
 
Court of
Appeal
 
and
 
to
 
determine
 
next
 
steps
 
in
 
the
 
best
 
interest
 
of
 
its
stakeholders. The fine
 
and confiscation imposed
 
by the Court
 
of
Appeal are
 
suspended during the
 
appeal. The civil
 
damages award
has been
 
paid to
 
the French
 
state (EUR
99
 
million of
 
which was
deducted from the bail), subject to the result of UBS’s appeal.
Our balance
 
sheet at
 
31 December 2021
 
reflected provisions
with
 
respect
 
to
 
this
 
matter
 
in
 
an
 
amount
 
of
 
EUR
1.1
 
billion
(USD
1.252
 
billion
 
at
 
31
 
December
 
2021).
 
The
 
wide
 
range
 
of
possible
 
outcomes
 
in
 
this
 
case
 
contributes
 
to
 
a
 
high
 
degree
 
of
estimation uncertainty and
 
the provision reflects
 
our best estimate
of
 
possible
 
financial
 
implications,
 
although
 
actual
 
penalties and
civil
 
damages
 
could
 
exceed
 
(or
 
may
 
be
 
less
 
than)
 
the
 
provision
amount.
In 2016,
 
UBS was
 
notified by
 
the Belgian
 
investigating judge
that it
 
was under
 
formal investigation
 
(“
inculpé
”) regarding
 
the
allegations of
 
laundering of
 
proceeds of
 
tax fraud,
 
banking and
financial
 
solicitation
 
by
 
unauthorized
 
persons,
 
and
 
serious
 
tax
fraud.
 
In
 
November
 
2021,
 
the
 
Council
 
Chamber
 
approved
 
a
settlement with the Brussels
 
Prosecution Office for EUR
49
 
million
without
 
recognition
 
of
 
guilt
 
with
 
regard
 
to
 
the
 
allegations
 
of
banking
 
and
 
financial
 
solicitation
 
by
 
unauthorized
 
persons
 
and
serious tax fraud. The allegation of laundering of proceeds of tax
fraud was dismissed.
Our balance
 
sheet at
 
31 December
 
2021 reflected
 
provisions
with respect to matters described
 
in this item 1 in
 
an amount that
UBS believes
 
to be
 
appropriate under
 
the applicable
 
accounting
standard.
 
As
 
in
 
the
 
case
 
of
 
other
 
matters
 
for
 
which
 
we
 
have
established provisions, the
 
future outflow of resources
 
in respect
of
 
such
 
matters
 
cannot
 
be
 
determined
 
with
 
certainty
 
based
 
on
currently
 
available
 
information
 
and
 
accordingly
 
may
 
ultimately
prove
 
to
 
be
 
substantially
 
greater
 
(or
 
may
 
be
 
less)
 
than
 
the
provision that we have recognized.
2. Claims related to sales of residential mortgage-backed
securities and mortgages
From 2002 through
 
2007, prior to the
 
crisis in the US
 
residential
loan market, UBS was
 
a substantial issuer and
 
underwriter of US
residential
 
mortgage-backed
 
securities
 
(RMBS)
 
and
 
was
 
a
purchaser and seller of US residential mortgages.
 
In November 2018,
 
the DOJ
 
filed a
 
civil complaint
 
in the
 
District
Court for
 
the Eastern
 
District of
 
New York.
 
The complaint
 
seeks
unspecified
 
civil
 
monetary
 
penalties
 
under
 
the
 
Financial
Institutions
 
Reform,
 
Recovery
 
and
 
Enforcement
 
Act
 
of
 
1989
related
 
to
 
UBS’s
 
issuance,
 
underwriting
 
and
 
sale
 
of
 
40
 
RMBS
transactions
 
in
 
2006
 
and
 
2007.
 
UBS
 
moved
 
to
 
dismiss
 
the
 
civil
complaint
 
on
 
6 February
 
2019.
 
On
 
10 December
 
2019,
 
the
district court denied UBS’s motion to dismiss.
 
Our balance sheet at
 
31 December 2021 reflected a
 
provision
with respect to matters described
 
in this item 2 in
 
an amount that
UBS believes
 
to be
 
appropriate under
 
the applicable
 
accounting
standard.
 
As
 
in
 
the
 
case
 
of
 
other
 
matters
 
for
 
which
 
we
 
have
established provisions, the
 
future outflow of resources
 
in respect
of
 
this
 
matter
 
cannot
 
be
 
determined
 
with
 
certainty
 
based
 
on
currently
 
available
 
information
 
and
 
accordingly
 
may
 
ultimately
prove
 
to
 
be
 
substantially
 
greater
 
(or
 
may
 
be
 
less)
 
than
 
the
provision that we have recognized.
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
464
 
Note 18
 
Provisions and contingent liabilities (continued)
3. Madoff
In
 
relation
 
to
 
the
 
Bernard
 
L.
 
Madoff
 
Investment
 
Securities
 
LLC
(BMIS) investment
 
fraud, UBS
 
AG, UBS
 
(Luxembourg) S.A.
 
(now
UBS
 
Europe
 
SE,
 
Luxembourg
 
branch)
 
and
 
certain
 
other
 
UBS
subsidiaries
 
have
 
been
 
subject
 
to
 
inquiries
 
by
 
a
 
number
 
of
regulators,
 
including
 
the
 
Swiss
 
Financial
 
Market
 
Supervisory
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
2.1
 
billion,
 
which
includes
 
amounts
 
that
 
the
 
funds
 
may
 
be
 
held
 
liable
 
to
 
pay
 
the
trustee for the liquidation of BMIS (BMIS Trustee).
A
 
large
 
number
 
of
 
alleged
 
beneficiaries
 
have
 
filed
 
claims
against UBS
 
entities (and
 
non-UBS entities)
 
for purported
 
losses
relating
 
to
 
the
 
Madoff
 
fraud.
 
The
 
majority
 
of
 
these
 
cases
 
have
been filed in
 
Luxembourg, where decisions
 
that the claims
 
in eight
test
 
cases
 
were
 
inadmissible
 
have
 
been
 
affirmed
 
by
 
the
Luxembourg
 
Court
 
of
 
Appeal,
 
and
 
the
 
Luxembourg
 
Supreme
Court has dismissed a further appeal in one of the test cases.
 
In the
 
US, the
 
BMIS Trustee
 
filed claims
 
against UBS
 
entities,
among others, in relation to the two Luxembourg funds and
 
one
of
 
the
 
offshore
 
funds.
 
The
 
total
 
amount
 
claimed
 
against
 
all
defendants
 
in
 
these
 
actions
 
was
 
not
 
less
 
than
 
USD
2
 
billion.
 
In
2014, the US Supreme
 
Court rejected the BMIS
 
Trustee’s motion
for leave to appeal decisions dismissing
 
all claims except those for
the
 
recovery
 
of
 
approximately
 
USD
125
 
million
 
of
 
payments
alleged to
 
be fraudulent
 
conveyances and
 
preference payments.
In 2016, the bankruptcy court dismissed
 
these claims against the
UBS entities. In February 2019, the Court of Appeals reversed the
dismissal
 
of
 
the
 
BMIS
 
Trustee’s
 
remaining
 
claims,
 
and
 
the
 
US
Supreme Court subsequently denied a
 
petition seeking review of
the Court
 
of Appeals’
 
decision. The
 
case has
 
been remanded
 
to
the Bankruptcy Court for further proceedings.
4. Puerto Rico
Declines since 2013 in the market prices of Puerto Rico municipal
bonds and of
 
closed-end funds
 
(funds) that
 
are sole-managed and
co-managed
 
by
 
UBS
 
Trust
 
Company
 
of
 
Puerto
 
Rico
 
and
distributed by UBS
 
Financial Services Incorporated of
 
Puerto Rico
(UBS PR)
 
led to
 
multiple regulatory
 
inquiries, which
 
in 2014
 
and
2015, led to settlements
 
with the Office
 
of the Commissioner of
Financial Institutions
 
for the
 
Commonwealth of
 
Puerto Rico,
 
the
US Securities
 
and Exchange
 
Commission (SEC)
 
and the
 
Financial
Industry Regulatory Authority.
 
Since then,
 
UBS clients
 
in Puerto
 
Rico who
 
own the
 
funds or
Puerto Rico municipal bonds and/or
 
who used their UBS account
assets
 
as
 
collateral
 
for
 
UBS
 
non-purpose
 
loans
 
filed
 
customer
complaints and arbitration demands seeking aggregate
 
damages
of USD
3.4
 
billion, of
 
which USD
3.1
 
billion have
 
been resolved
through
 
settlements,
 
arbitration
 
or
 
withdrawal
 
of
 
claims
.
 
Allegations include
 
fraud, misrepresentation
 
and unsuitability
 
of
the funds and of the loans.
A
 
shareholder
 
derivative
 
action
 
was
 
filed
 
in
 
2014
 
against
various UBS
 
entities and
 
current and
 
certain former
 
directors of
the funds, alleging hundreds
 
of millions of US
 
dollars in losses in
the funds. In
 
2021, the
 
parties reached an
 
agreement to settle
 
this
matter for USD
15
 
million, subject to court approval.
 
In 2011,
 
a purported
 
derivative action
 
was filed
 
on behalf
 
of
the Employee Retirement
 
System of
 
the Commonwealth of
 
Puerto
Rico
 
(System)
 
against
 
over
 
40
 
defendants,
 
including
 
UBS
 
PR,
which
 
was
 
named
 
in
 
connection
 
with
 
its
 
underwriting
 
and
consulting
 
services.
 
Plaintiffs
 
alleged
 
that
 
defendants
 
violated
their
 
purported
 
fiduciary
 
duties
 
and
 
contractual
 
obligations
 
in
connection
 
with the
 
issuance and
 
underwriting
 
of USD
3
 
billion
of
 
bonds
 
by
 
the
 
System
 
in
 
2008
 
and
 
sought
 
damages
 
of
 
over
USD
800
 
million. In 2016, the court granted the System’s request
to
 
join
 
the
 
action
 
as
 
a
 
plaintiff.
 
In
 
2017,
 
the
 
court
 
denied
defendants’ motion to
 
dismiss the complaint.
 
In 2020, the
 
court
denied plaintiffs’ motion for summary judgment.
Beginning in 2015, certain
 
agencies and public corporations
 
of
the
 
Commonwealth
 
of
 
Puerto
 
Rico
 
(Commonwealth)
 
defaulted
on certain
 
interest payments
 
on Puerto
 
Rico bonds.
 
In 2016,
 
US
federal
 
legislation
 
created
 
an
 
oversight
 
board
 
with
 
power
 
to
oversee
 
Puerto
 
Rico’s
 
finances
 
and
 
to
 
restructure
 
its
 
debt.
 
The
oversight
 
board
 
has
 
imposed
 
a
 
stay
 
on
 
the
 
exercise
 
of
 
certain
creditors’
 
rights.
 
In
 
2017,
 
the oversight
 
board placed
 
certain of
the
 
bonds
 
into
 
a
 
bankruptcy-like
 
proceeding
 
under
 
the
supervision of a Federal District Judge.
 
In
 
May
 
2019,
 
the
 
oversight
 
board
 
filed
 
complaints in
 
Puerto
Rico federal
 
district court
 
bringing claims
 
against financial,
 
legal
and
 
accounting
 
firms
 
that
 
had
 
participated
 
in
 
Puerto
 
Rico
municipal
 
bond
 
offerings,
 
including
 
UBS,
 
seeking
 
a
 
return
 
of
underwriting
 
and
 
swap
 
fees
 
paid
 
in
 
connection
 
with
 
those
offerings. UBS
 
estimates that
 
it received
 
approximately USD
125
million in fees in the relevant offerings.
In August
 
2019, and
 
February and
 
November 2020,
 
four US
insurance companies that insured issues of Puerto Rico municipal
bonds
 
sued
 
UBS
 
and
 
several
 
other
 
underwriters
 
of
 
Puerto
 
Rico
municipal bonds
 
in three
 
separate cases.
 
The actions
 
collectively
seek
 
recovery
 
of
 
an
 
aggregate
 
of
 
USD
955
 
million
 
in
 
damages
from
 
the
 
defendants.
 
The
 
plaintiffs
 
in
 
these
 
cases
 
claim
 
that
defendants failed to
 
reasonably investigate financial
 
statements in
the
 
offering
 
materials
 
for
 
the
 
insured
 
Puerto
 
Rico
 
bonds
 
issued
between 2002 and 2007, which plaintiffs argue they relied
 
upon
in agreeing to insure the
 
bonds notwithstanding that they had
 
no
contractual
 
relationship
 
with
 
the
 
underwriters.
 
Defendants’
motions
 
to
 
dismiss
 
were
 
granted
 
in
 
two
 
of
 
the
 
cases;
 
those
decisions are
 
being appealed
 
by the
 
plaintiffs. In
 
the third
 
case,
defendants’
 
motion
 
to
 
dismiss
 
was
 
denied,
 
but
 
on
 
appeal
 
that
ruling was reversed and the motion to dismiss was granted.
 
 
 
 
465
 
Note 18
 
Provisions and contingent liabilities (continued)
Our balance
 
sheet at
 
31 December 2021
 
reflected
 
provisions
with respect
 
to matters described
 
in this
 
item 4 in
 
amounts that
UBS believes
 
to be
 
appropriate under
 
the applicable
 
accounting
standard.
 
As
 
in
 
the
 
case
 
of
 
other
 
matters
 
for
 
which
 
we
 
have
established provisions, the future
 
outflow of resources
 
in respect
of
 
such
 
matters
 
cannot
 
be
 
determined
 
with
 
certainty
 
based
 
on
currently
 
available
 
information
 
and
 
accordingly
 
may
 
ultimately
prove
 
to
 
be
 
substantially
 
greater
 
(or
 
may
 
be
 
less)
 
than
 
the
provisions that we have recognized.
5. Foreign exchange, LIBOR and benchmark rates, and other
trading practices
Foreign exchange-related regulatory matters:
 
Beginning in 2013,
numerous
 
authorities
 
commenced
 
investigations
 
concerning
possible manipulation of foreign
 
exchange markets and precious
metals prices. As a
 
result of these investigations,
 
UBS entered into
resolutions
 
with
 
Swiss,
 
US
 
and
 
United
 
Kingdom
 
regulators
 
and
the
 
European
 
Commission.
 
UBS
 
was
 
granted
 
conditional
immunity by the
 
Antitrust Division of
 
the DOJ and
 
by authorities
in other jurisdictions
 
in connection with
 
potential competition law
violations
 
relating
 
to
 
foreign
 
exchange
 
and
 
precious
 
metals
businesses.
Foreign exchange-related
 
civil litigation:
 
Putative class
 
actions
have
 
been
 
filed
 
since
 
2013
 
in
 
US
 
federal
 
courts
 
and
 
in
 
other
jurisdictions against
 
UBS and
 
other banks
 
on behalf
 
of putative
classes of persons
 
who engaged in
 
foreign currency transactions
with
 
any
 
of
 
the
 
defendant
 
banks.
 
UBS
 
has
 
resolved
 
US
 
federal
court class
 
actions relating
 
to foreign
 
currency transactions
 
with
the
 
defendant
 
banks
 
and
 
persons
 
who
 
transacted
 
in
 
foreign
exchange futures
 
contracts and options
 
on such futures
 
under a
settlement agreement that provides for UBS
 
to pay an aggregate
of
 
USD
141
 
million
 
and
 
provide
 
cooperation
 
to
 
the
 
settlement
classes.
 
Certain
 
class
 
members
 
have
 
excluded
 
themselves
 
from
that settlement and have
 
filed individual actions in
 
US and English
courts against UBS and other banks, alleging violations of US
 
and
European competition laws and unjust enrichment.
In
 
2015,
 
a
 
putative
 
class
 
action
 
was
 
filed
 
in
 
federal
 
court
against UBS and numerous other banks on behalf of persons and
businesses in the
 
US who
 
directly purchased foreign
 
currency from
the defendants
 
and alleged co-conspirators
 
for their
 
own end
 
use.
In March
 
2017, the
 
court granted
 
UBS’s (and
 
the other
 
banks’)
motions to dismiss the complaint. The plaintiffs filed an amended
complaint in August
 
2017. In March
 
2018, the court
 
denied the
defendants’ motions to dismiss the amended complaint.
LIBOR
 
and
 
other
 
benchmark
-
related
 
regulatory
matters:
 
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.
LIBOR and
 
other benchmark-related
 
civil litigation:
 
A number
of
 
putative
 
class
 
actions
 
and
 
other
 
actions
 
are
 
pending
 
in
 
the
federal courts
 
in New
 
York against
 
UBS and
 
numerous other
 
banks
on
 
behalf
 
of
 
parties
 
who
 
transacted
 
in
 
certain
 
interest
 
rate
benchmark-based derivatives. Also
 
pending in the
 
US and in
 
other
jurisdictions are a number of
 
other actions asserting losses
 
related
to various products whose
 
interest rates were linked to
 
LIBOR and
other benchmarks, including
 
adjustable rate mortgages,
 
preferred
and debt securities, bonds
 
pledged as collateral, loans,
 
depository
accounts,
 
investments
 
and
 
other
 
interest-bearing
 
instruments.
The
 
complaints
 
allege
 
manipulation,
 
through
 
various
 
means, of
certain
 
benchmark
 
interest rates,
 
including USD
 
LIBOR, Euroyen
TIBOR, Yen
 
LIBOR, EURIBOR, CHF LIBOR,
 
GBP LIBOR, SGD
 
SIBOR
and
 
SOR
 
and
 
Australian
 
BBSW,
 
and
 
seek
 
unspecified
compensatory and other damages under varying legal theories.
USD LIBOR class and individual actions
 
in the US:
In 2013 and
2015,
 
the
 
district
 
court
 
in
 
the
 
USD LIBOR
 
actions
 
dismissed,
 
in
whole
 
or
 
in
 
part,
 
certain
 
plaintiffs’
 
antitrust
 
claims,
 
federal
racketeering
 
claims, CEA
 
claims, and
 
state common
 
law claims,
and
 
again
 
dismissed
 
the
 
antitrust
 
claims
 
in
 
2016
 
following
 
an
appeal. In
 
December 2021,
 
the Second
 
Circuit affirmed
 
the district
court’s dismissal in part and
 
reversed in part and
 
remanded to the
district court for further proceedings. The Second
 
Circuit, among
other things,
 
held that
 
there was
 
personal jurisdiction
 
over UBS
and other
 
foreign defendants
 
based on
 
allegations that
 
at least
one alleged
 
co-conspirator undertook an
 
overt act in
 
the United
States. Separately, in
 
2018, the Second
 
Circuit reversed in
 
part the
district
 
court’s
 
2015
 
decision
 
dismissing
 
certain
 
individual
plaintiffs’ claims and certain of
 
these actions are now
 
proceeding.
In
 
2018,
 
the
 
district
 
court
 
denied
 
plaintiffs’
 
motions
 
for
 
class
certification
 
in the
 
USD class actions
 
for
 
claims pending
 
against
UBS, and plaintiffs sought permission to appeal that ruling to the
Second
 
Circuit.
 
In
 
July
 
2018,
 
the
 
Second
 
Circuit
 
denied
 
the
petition to
 
appeal of
 
the class
 
of USD lenders
 
and in
 
November
2018 denied
 
the petition
 
of the
 
USD exchange class.
 
In January
2019, a putative class action
 
was filed in the District
 
Court for the
Southern District
 
of New
 
York against
 
UBS and
 
numerous other
banks
 
on
 
behalf
 
of
 
US
 
residents
 
who,
 
since
 
1 February
 
2014,
directly
 
transacted
 
with
 
a
 
defendant
 
bank
 
in
 
USD LIBOR
instruments.
 
The
 
complaint
 
asserts
 
antitrust
 
claims.
 
The
defendants moved to
 
dismiss the complaint
 
in August 2019.
 
On
26 March 2020 the
 
court granted defendants’ motion to
 
dismiss
the complaint in
 
its entirety. Plaintiffs
 
have appealed the
 
dismissal.
In
 
August
 
2020,
 
an
 
individual
 
action
 
was
 
filed
 
in
 
the
 
Northern
District
 
of
 
California
 
against
 
UBS
 
and
 
numerous
 
other
 
banks
alleging that the
 
defendants conspired to
 
fix the interest
 
rate used
as
 
the
 
basis
 
for
 
loans
 
to
 
consumers
 
by
 
jointly
 
setting
 
the
USD LIBOR
 
rate
 
and
 
monopolized
 
the
 
market
 
for
 
LIBOR-based
consumer
 
loans
 
and
 
credit
 
cards. Defendants
 
moved
 
to
 
dismiss
the complaint in September 2021.
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
466
 
Note 18
 
Provisions and contingent liabilities (continued)
Other benchmark class actions in the US:
 
Yen
 
LIBOR / Euroyen TIBOR –
In 2014, 2015 and 2017, the court
in
 
one
 
of
 
the
 
Yen
 
LIBOR
 
/
 
Euroyen
 
TIBOR
 
lawsuits
 
dismissed
certain
 
of
 
the
 
plaintiffs’
 
claims,
 
including
 
the
 
plaintiffs’
 
federal
antitrust
 
and
 
racketeering
 
claims.
 
In
 
August
 
2020,
 
the
 
court
granted defendants’
 
motion for
 
judgment on
 
the pleadings
 
and
dismissed the lone remaining claim in the action as impermissibly
extraterritorial.
 
Plaintiffs
 
have
 
appealed.
 
In
 
2017,
 
the
 
court
dismissed
 
the
 
other
 
Yen
 
LIBOR
 
/
 
Euroyen
 
TIBOR
 
action
 
in
 
its
entirety
 
on
 
standing
 
grounds.
 
In
 
April
 
2020,
 
the
 
appeals
 
court
reversed the dismissal and in August 2020 plaintiffs
 
in that action
filed
 
an
 
amended
 
complaint
 
focused
 
on
 
Yen
 
LIBOR.
 
The
 
court
granted in part and denied in part defendants’ motion to dismiss
the amended complaint in
 
September 2021 and plaintiffs and
 
the
remaining defendants have moved for reconsideration.
 
CHF LIBOR
 
– In
 
2017, the
 
court dismissed the
 
CHF LIBOR action
on standing grounds and failure
 
to state a claim. Plaintiffs
 
filed an
amended complaint, and the court granted a renewed motion to
dismiss
 
in
 
September
 
2019.
 
Plaintiffs
 
appealed.
 
In
 
September
2021,
 
the
 
Second
 
Circuit
 
granted
 
the
 
parties’
 
joint
 
motion
 
to
vacate the dismissal and
 
remand the case for
 
further proceedings.
 
EURIBOR
 
– In 2017,
 
the court in
 
the EURIBOR lawsuit
 
dismissed
the case as
 
to UBS and
 
certain other foreign defendants
 
for lack
of personal jurisdiction. Plaintiffs have appealed.
 
SIBOR / SOR
 
– In October
 
2018, the court
 
in the SIBOR
 
/ SOR
action
 
dismissed
 
all
 
but
 
one
 
of
 
plaintiffs’
 
claims
 
against
 
UBS.
Plaintiffs
 
filed
 
an
 
amended
 
complaint,
 
and
 
the
 
court
 
granted
 
a
renewed
 
motion
 
to
 
dismiss
 
in
 
July
 
2019.
 
Plaintiffs
 
appealed.
 
In
March 2021,
 
the Second
 
Circuit reversed
 
the dismissal.
 
Plaintiffs
filed an amended
 
complaint in October
 
2021, which defendants
have moved to dismiss.
 
BBSW
 
–
 
In
 
November
 
2018,
 
the
 
court
 
dismissed
 
the
 
BBSW
lawsuit as to UBS and certain other
 
foreign defendants for lack of
personal jurisdiction. Plaintiffs
 
filed an
 
amended complaint in
 
April
2019,
 
which
 
UBS
 
and
 
other
 
defendants
 
moved
 
to
 
dismiss.
 
In
February
 
2020,
 
the
 
court
 
granted
 
in
 
part
 
and
 
denied
 
in
 
part
defendants’
 
motions
 
to
 
dismiss
 
the
 
amended
 
complaint.
 
In
August 2020,
 
UBS and
 
other BBSW
 
defendants joined
 
a motion
for
 
judgment
 
on
 
the pleadings,
 
which
 
the
 
court denied
 
in May
2021.
 
GBP
 
LIBOR
 
–
 
The
 
court
 
dismissed
 
the
 
GBP
 
LIBOR
 
action
 
in
August 2019. Plaintiffs have appealed.
 
Government bonds:
 
Putative class actions
 
have been filed since
2015 in US federal courts against UBS and other banks on behalf
of persons who
 
participated in markets for US
 
Treasury securities
since 2007. A consolidated complaint was filed
 
in 2017 in the US
District Court for the
 
Southern District of New
 
York alleging that
the banks colluded with
 
respect to, and manipulated
 
prices of, US
Treasury securities
 
sold at auction
 
and in the
 
secondary
 
market and
asserting
 
claims
 
under the
 
antitrust
 
laws and
 
for unjust
 
enrichment
.
Defendants’ motions
 
to
 
dismiss the
 
consolidated complaint was
granted
 
in
 
March
 
2021.
 
Plaintiffs filed
 
an
 
amended
 
complaint,
which
 
defendants moved
 
to
 
dismiss in
 
June
 
2021.
 
Similar
 
class
actions have
 
been filed
 
concerning European government bonds
and other government
 
bonds.
In
 
May
 
2021,
 
the
 
European
 
Commission
 
issued
 
a
 
decision
finding that
 
UBS
 
and
 
six other
 
banks breached
 
European Union
antitrust
 
rules
 
in
 
2007–2011
 
relating
 
to
 
European
 
government
bonds. The European
 
Commission
 
fined UBS EUR
172
 
million. UBS
is appealing
 
the amount
 
of the fine.
With
 
respect
 
to
 
additional
 
matters
 
and
 
jurisdictions
 
not
encompassed
 
by
 
the
 
settlements
 
and
 
orders
 
referred
 
to
 
above,
our balance
 
sheet at
 
31 December 2021
 
reflected a
 
provision in
an
 
amount
 
that
 
UBS
 
believes
 
to
 
be
 
appropriate
 
under
 
the
applicable accounting
 
standard. As
 
in the
 
case of
 
other matters
for which
 
we have
 
established provisions,
 
the future
 
outflow of
resources in
 
respect of
 
such matters
 
cannot be
 
determined with
certainty based on
 
currently available information
 
and accordingly
may ultimately
 
prove to
 
be substantially
 
greater (or
 
may be
 
less)
than the provision that we have recognized.
6. Swiss retrocessions
The Federal Supreme Court of Switzerland
 
ruled in 2012, in
 
a test
case
 
against
 
UBS,
 
that
 
distribution
 
fees
 
paid
 
to
 
a
 
firm
 
for
distributing
 
third-party
 
and
 
intra-group
 
investment
 
funds
 
and
structured products must be
 
disclosed and surrendered to clients
who have
 
entered into
 
a discretionary
 
mandate agreement
 
with
the firm, absent
 
a valid
 
waiver.
 
FINMA issued
 
a supervisory
 
note
to all Swiss
 
banks in response to
 
the Supreme Court decision.
 
UBS
has met
 
the FINMA
 
requirements and
 
has notified all
 
potentially
affected clients.
The
 
Supreme
 
Court
 
decision
 
has
 
resulted,
 
and
 
continues
 
to
result,
 
in
 
a
 
number
 
of
 
client
 
requests
 
for
 
UBS
 
to
 
disclose
 
and
potentially
 
surrender
 
retrocessions.
 
Client
 
requests
 
are
 
assessed
on a case-by-case basis. Considerations taken into account when
assessing these cases
 
include, among other
 
things, the existence
of
 
a
 
discretionary
 
mandate
 
and
 
whether
 
or
 
not
 
the
 
client
documentation
 
contained
 
a
 
valid
 
waiver
 
with
 
respect
 
to
distribution fees.
Our balance sheet at
 
31 December 2021 reflected a
 
provision
with respect to matters described
 
in this item 6 in
 
an amount that
UBS believes
 
to be
 
appropriate under
 
the applicable
 
accounting
standard.
 
The
 
ultimate
 
exposure
 
will
 
depend
 
on
 
client
 
requests
and the resolution thereof, factors that
 
are difficult to predict and
assess. Hence, as in the
 
case of other matters for
 
which we have
established provisions, the
 
future outflow of resources
 
in respect
of
 
such
 
matters
 
cannot
 
be
 
determined
 
with
 
certainty
 
based
 
on
currently
 
available
 
information
 
and
 
accordingly
 
may
 
ultimately
prove
 
to
 
be
 
substantially
 
greater
 
(or
 
may
 
be
 
less)
 
than
 
the
provision that we have recognized.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
467
 
Note 19
 
Other liabilities
 
a) Other financial liabilities measured at amortized cost
USD million
31.12.21
31.12.20
Other accrued expenses
1,642
1,508
Accrued interest expenses
1,134
1,382
Settlement and clearing accounts
1,282
1,181
Lease liabilities
3,438
3,821
Other
2,269
2,530
Total other financial liabilities measured at amortized cost
9,765
10,421
 
 
b) Other financial liabilities designated at fair value
USD million
31.12.21
31.12.20
Financial liabilities related to unit-linked investment contracts
21,466
20,975
Securities financing transactions
6,377
7,317
Over-the-counter debt instruments
2,128
2,060
Funding from UBS Group AG
 
2,340
1,375
Other
103
46
Total other financial liabilities designated at fair value
32,414
31,773
of which: life-to-date own credit (gain) / loss
172
148
 
 
c) Other non-financial liabilities
 
USD million
31.12.21
31.12.20
Compensation-related liabilities
4,795
4,776
of which: financial advisor compensation plans
1,512
1,497
of which: other compensation plans
2,140
2,034
of which: net defined benefit liability
617
711
of which: other compensation-related liabilities
1
526
534
Deferred tax liabilities
297
558
Current tax liabilities
1,365
943
VAT and other tax payables
524
470
Deferred income
225
212
Liabilities of disposal groups held for sale
2
1,298
Other
68
61
Total other non-financial liabilities
 
8,572
7,018
1 Includes liabilities for payroll taxes and untaken vacation.
 
2 Refer to Note 30 for more information.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
468
Additional information
Note 20
 
Expected credit loss measurement
 
 
a) Expected credit losses in the period
Total
 
net
 
credit
 
loss
 
releases
 
were
 
USD
148
 
million
 
in
 
2021,
reflecting
 
net
 
credit
 
loss
 
releases
 
of
 
USD
123
 
million
 
related
 
to
stage 1 and 2
 
positions and USD
25
 
million net credit loss
 
releases
related to credit-impaired (stage 3) positions.
Stage 1
 
and
 
2
 
net
 
credit
 
loss
 
releases
 
of
 
USD
123
 
million
included
 
a
 
USD
68
 
million
 
partial
 
net
 
release
 
of
 
a
 
post-model
adjustment,
 
due
 
to
 
the
 
continued
 
positive
 
trend
 
in
macroeconomic
 
scenario
 
input
 
data
 
during
 
the
 
year,
 
a
 
USD
45
million
 
net
 
release
 
from
 
a
 
number
 
of
 
model
 
and
 
methodology
changes
 
and
a
residual
USD
 
10
 
million
 
net
 
release
from
remeasurements
 
within
 
the
 
loan
 
book,
 
derecognized
transactions, partially offset by expenses from new transactions
.
 
›
 
Refer to Note 20b
 
for more information regarding changes to
ECL model, scenarios,
 
scenario weights and the post-model
adjustment and to Note 20c for more information
 
regarding the
development of ECL allowances and
 
provisions
 
Stage 3 net releases of USD
25
 
million were recognized across
a number of defaulted
 
positions with a USD
24
 
million net release
in Personal & Corporate Banking.
 
 
 
 
Credit loss (expense) / release
USD million
Global
 
Wealth
 
Management
Personal &
 
Corporate
 
Banking
Asset
Management
Investment
 
Bank
Group
 
Functions
Total
For the year ended 31.12.21
Stages 1 and 2
28
62
0
34
0
123
Stage 3
1
24
(1)
0
0
25
Total credit loss (expense) / release
29
86
(1)
34
0
148
For the year ended 31.12.20
Stages 1 and 2
(48)
(129)
0
(88)
0
(266)
Stage 3
(40)
(128)
(2)
(217)
(42)
(429)
Total credit loss (expense) / release
(88)
(257)
(2)
(305)
(42)
(695)
For the year ended 31.12.19
Stages 1 and 2
3
23
0
(4)
0
22
Stage 3
(23)
(44)
0
(26)
(7)
(100)
Total credit loss (expense) / release
(20)
(21)
0
(30)
(7)
(78)
 
 
 
 
 
469
 
Note 20
 
Expected credit loss measurement (continued)
 
b) Changes to ECL models, scenarios, scenario weights and key inputs
Refer to
 
Note 1a
 
for information
 
about the
 
principles governing
expected credit loss
 
(ECL) models, scenarios,
 
scenario weights and
key inputs applied.
 
Governance
Comprehensive
 
cross-functional and
 
cross-divisional
 
governance
processes
 
are
 
in
 
place
 
and
 
are
 
used
 
to
 
discuss
 
and
 
approve
scenario
 
updates
 
and
 
weights,
 
to
 
assess
 
whether
 
significant
increases in credit risk resulted in stage transfers, to
 
review model
outputs
 
and
 
to
 
reach
 
conclusions
 
regarding
 
post-model
adjustments.
 
Model changes
During 2021, the model review
 
and enhancement process led to
adjustments of
 
the probability
 
of default
 
(PD), loss
 
given default
(LGD)
 
and
 
credit
 
conversion
 
factor
 
(CCF)
 
models,
 
resulting
 
in
 
a
USD
45
 
million decrease
 
in ECL
 
allowances. An
 
amount of
 
USD
25
 
million related
 
to the
Large corporate
 
clients
 
segment in
 
the
Investment
 
Bank. The
 
remainder
 
related
 
to
 
various segments
 
in
Personal & Corporate Banking and Global Wealth Management.
Scenario and key input updates
During
 
2021,
 
the
 
scenarios
 
and
 
related
 
macroeconomic
 
factors
were updated
 
from those
 
that were
 
applied at
 
the end
 
of 2020
by
 
taking
 
into
 
account
 
the
 
prevailing
 
economic
 
and
 
political
conditions
 
and
 
uncertainty.
 
As
 
the
 
economic
 
development
 
was
more
 
positive
 
than
 
anticipated
 
following
 
the
 
COVID-19-related
downturn,
 
the
 
forward
-
looking
 
scenarios
 
benefited
 
from
 
an
improved forecast starting level.
 
The projections of
 
the baseline scenario,
 
which are aligned
 
to
the
 
economic
 
and
 
market
 
assumptions
 
used
 
for
 
UBS
 
AG
’s
business planning purposes,
 
are broadly in
 
line with external
 
data,
such as
 
from Bloomberg
 
Consensus, Oxford
 
Economics and
 
the
International
 
Monetary
 
Fund
 
World
 
Economic
 
Outlook.
 
The
economic
 
performance
 
during
 
2021
 
in
 
relevant
 
markets,
especially in the
 
US and in
 
Switzerland, highlighted an
 
accelerated
improvement
 
after
 
the
 
COVID-19-related
 
shocks.
 
The
 
scenario
assumes continued growth in 2022 in
 
all key markets, albeit at a
slower rate than
 
seen in 2021,
 
and unemployment rates
 
are not
expected to fall noticeably below the current levels. Interest rates
are expected to
 
remain low in
 
line with the
 
central bank policies
pursued in the Eurozone and Switzerland, and any potential rises
in the US would be
 
limited in the foreseeable
 
future. House prices
are
 
expected
 
to
 
reflect
 
the
 
momentum
 
and
 
continue
 
to
 
rise,
especially in Switzerland and, to a lesser degree, in the US.
 
The
 
narrative
 
of
 
the
 
hypothetical
 
severe
 
downside
 
scenario,
which
 
is the
 
Group’s binding
 
stress
 
scenario, has
 
been adapted
and assumes that, while
 
the immediate risks
 
from COVID-19 have
decreased,
 
the
 
associated
 
disruptions
 
and
 
the
 
consequences
 
of
the
 
unprecedented
 
monetary
 
and
 
fiscal
 
stimulus
 
measures
 
will
remain
 
critical.
 
Concerns
 
regarding
 
the
 
sustainability
 
of
 
public
debt, following the
 
marked deterioration of
 
fiscal positions, lead
to
 
a
 
loss
 
of
 
confidence
 
and
 
market
 
turbulence,
 
while
protectionism results
 
in a
 
fall in
 
global trade.
 
Governments and
central banks have limited
 
scope to support the economies.
 
As a
consequence,
 
the
 
Eurozone
 
and
 
China
 
suffer
 
a
 
hard
 
landing,
under
 
this
 
scenario
 
which
 
severely
 
affects
 
the
 
Swiss
 
export-
oriented
 
economy,
 
and
 
the
 
US
 
economy
 
contracts
 
as
 
global
demand
 
is
 
significantly
 
affected.
 
Given
 
the
 
severity
 
of
 
the
macroeconomic
 
impact,
 
unemployment
 
rates
 
rise
 
to
 
historical
highs and real estate sectors contract sharply.
With effect
 
from the
 
second quarter,
 
the hypothetical
 
upside
and mild downside scenarios, which
 
were viewed as less
 
plausible
as
 
of
 
31
 
December
 
2020 and
 
had
 
a
 
probability
 
weight
 
of
 
zero
attached,
 
were
 
redesigned
 
and
 
reintroduced
 
in
 
the
 
ECL
calculation.
 
These
 
two
 
scenarios
 
have
 
become
 
more
 
relevant
following
 
this
 
update,
 
as
 
they
 
better
 
reflect
 
a
 
more
 
positive
outlook
 
with
 
regard
 
to
 
COVID-19
 
and
 
market
 
expectations
regarding a potential change in
 
central bank policies, respectively.
 
The
 
upside
 
scenario
 
is
 
based
 
on
 
positive
 
developments
following
 
COVID-19 and
 
strong economic
 
activity
 
supported by
pent-up demand in certain
 
sectors, as well
 
as the expectation
 
that
interest rates
 
will remain
 
relatively low
 
in the
 
near future.
 
Asset
prices rise significantly, but
 
a view that currently
 
observed higher
inflation rates are temporary and spare economic
 
capacity would
mean that
 
consumer prices
 
remain moderate
 
in the
 
first year
 
of
the scenario.
The
 
mild
 
downside
 
scenario
 
focuses
 
on
 
the
 
implications
 
of
rising concerns regarding inflationary trends
 
following a recovery
from
 
COVID-19.
 
Higher-than-expected
 
inflation
 
data
 
triggers
 
a
steepening of
 
yield curves
 
across the
 
globe and
 
leads to
 
market
volatility.
 
Higher
 
interest
 
rates
 
lead
 
to
 
a
 
sell-off
 
in
 
assets
 
and
 
a
period
 
of
 
deleveraging
 
under
 
this
 
scenario.
 
With
 
inflation
remaining high, central
 
banks start hiking
 
their policy rates
 
after
a few
 
quarters, leading
 
to further
 
increases in
 
interest rates
 
and
impacting corporate
 
and private
 
debt sustainability.
 
A recessionary
period is the consequence.
The table
 
on the
 
following page
 
details the
 
key assumptions
for the four scenarios applied as of 31 December 2021.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
470
 
Note 20
 
Expected credit loss measurement (continued)
Scenario weights and post-model adjustments
With the weighting of
 
four scenarios above 0%
 
and considering
the generally
 
more positive
 
outlook regarding
 
an abating
 
effect
on
 
the
 
world
 
economy
 
from
 
the
 
COVID-19
 
pandemic,
 
the
distribution of
 
weights shifted
 
during 2021.
 
As of
 
31 December
2021, 5 percentage points of the weight of the baseline scenario
and 10 percentage
 
points of
 
the severe
 
downside scenario were
redistributed to the upside
 
scenario (5%) and the mild downside
scenario (10%), as shown in the table below.
Although the scenarios and
 
weight allocation were
 
established
in
 
line
 
with
 
the
 
general
 
market
 
sentiment
 
that
 
COVID-19
 
has
passed its peak
 
and a gradual return
 
to normal is the
 
most likely
path,
 
significant
 
uncertainties
 
still
 
remain.
 
Models,
 
which
 
are
based
 
on
 
supportable
 
statistical
 
information
 
from
 
past
experiences
 
regarding
 
interdependencies
 
of
 
macroeconomic
factors
 
and
 
their
 
implications
 
for
 
credit
 
risk
 
portfolios,
 
cannot
comprehensively reflect extraordinary events, such as a pandemic
or a fundamental change in the world political order. Especially
 
in
these
 
uncertain
 
times,
 
it
 
is
 
in
 
the
 
realm
 
of
 
possibilities
 
that
 
the
generally accepted view that the effects of COVID-19 are abating
may prove to be disappointed by
 
the emergence of new variants
of
 
the
 
virus,
 
which
 
may
 
be
 
more
 
harmful
 
and
 
may
 
undermine
current
 
vaccination
 
efforts.
 
Political
 
events
 
involving
 
tensions
between
 
major
 
global
 
forces
 
may
 
introduce
 
unforeseen
challenges, such
 
as disruptions
 
in the
 
global supply
 
chain and
 
a
distortion of energy markets. Such events could affect economies
severely and change
 
the baseline assumptions
 
significantly. Rather
than
 
creating multiple
 
additional
 
scenarios
 
to
 
gauge these
 
risks
and applying model
 
parameters that lack
 
supportable information
and
 
cannot
 
be
 
robustly
 
validated,
 
management
 
continued
 
to
apply
 
significant
 
post
-
model
 
adjustments.
These
 
adjustments
 
were
 
benchmarked
 
against
 
coverage
 
ratio
 
levels
 
as
 
of
 
30 June
2021
,
 
when
 
a
 
partial
net
 
release
 
of
 
USD
 
91
 
million
 
was
recognized, corresponding to one third of
 
the accumulated effect
of
 
scenario
 
improvements,
 
following
 
comprehensive
 
expert
assessment and judgment, and
 
were also deemed appropriate
 
for
year-end 2021 reporting. The post-model adjustments relating to
COVID-19 amounted to
 
USD
224
 
million as of
 
31 December 2021
(2020: USD
117
 
million in addition to
 
overlays of USD
16
 
million
for
 
other
 
aspects,
 
where
 
model
 
results
 
were
 
deemed
 
to
 
be
uncertain).
 
 
 
ECL scenario
Assigned weights in %
31.12.21
31.12.20
Upside
5.0
0.0
Baseline
55.0
60.0
Mild downside
10.0
0.0
Severe downside
30.0
40.0
 
Scenario assumptions
One year
 
Three years cumulative
 
31.12.21
Upside
Baseline
Mild
downside
Severe
downside
Upside
Baseline
Mild
downside
Severe
downside
Real GDP growth (% change)
United States
9.1
4.4
(0.1)
(5.9)
17.8
10.1
1.8
(3.8)
Eurozone
9.4
3.9
(0.1)
(8.7)
17.3
7.5
0.9
(10.3)
Switzerland
5.5
2.4
(0.9)
(6.6)
13.1
5.8
(0.1)
(5.7)
Consumer price index (% change)
United States
3.1
2.2
5.7
(1.2)
9.5
6.3
13.0
0.4
Eurozone
2.3
1.4
4.2
(1.3)
8.0
4.8
10.4
(1.7)
Switzerland
1.8
0.3
3.5
(1.8)
6.1
1.7
9.0
(1.6)
Unemployment rate (end-of-period level, %)
United States
3.0
3.9
6.1
10.9
3.0
3.5
7.2
10.8
Eurozone
6.2
7.4
8.7
12.9
6.0
7.2
9.1
15.1
Switzerland
2.3
2.5
3.4
5.2
1.6
2.3
4.2
5.9
Fixed income: 10-year government bonds (change in yields, basis points)
USD
50.0
16.5
259.2
(50.0)
170.0
41.2
329.2
(15.0)
EUR
40.0
11.1
283.8
(35.0)
140.0
34.9
349.3
(25.0)
CHF
50.0
12.1
245.5
(70.0)
150.0
34.4
307.3
(35.0)
Equity indices (% change)
S&P 500
12.0
14.1
(27.0)
(50.2)
35.5
24.7
(21.8)
(40.1)
EuroStoxx 50
16.0
12.3
(23.4)
(57.6)
41.6
20.7
(19.9)
(50.4)
SPI
14.0
12.1
(22.9)
(53.6)
37.9
19.1
(19.6)
(44.2)
Swiss real estate (% change)
Single-Family Homes
 
5.1
4.4
(4.3)
(17.0)
15.5
7.4
(8.8)
(30.0)
Other real estate (% change)
United States (S&P / Case-Shiller)
10.0
3.5
(2.3)
(9.5)
21.7
7.1
(8.7)
(26.3)
Eurozone (House Price Index)
8.4
5.1
(4.0)
(5.4)
17.8
9.6
(7.6)
(10.8)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
471
 
Note 20
 
Expected credit loss measurement (continued)
Scenario assumptions
One year
 
Three years cumulative
 
31.12.20
Baseline
Severe downside
Baseline
Severe downside
Real GDP growth (% change)
United States
2.7
(5.9)
9.1
(3.8)
Eurozone
2.5
(8.7)
9.9
(10.3)
Switzerland
3.3
(6.6)
9.0
(5.7)
Consumer price index (% change)
United States
1.7
(1.2)
5.5
0.4
Eurozone
1.4
(1.3)
3.9
(1.7)
Switzerland
0.3
(1.8)
0.9
(1.6)
Unemployment rate (end-of-period level, %)
United States
5.5
12.1
4.5
9.9
Eurozone
9.5
14.1
8.0
16.4
Switzerland
3.8
6.1
3.2
6.8
Fixed income: 10-year government bonds (change in yields, basis points)
USD
22.0
(50.0)
46.0
(15.0)
EUR
4.0
(35.0)
21.0
(25.0)
CHF
13.0
(70.0)
31.0
(35.0)
Equity indices (% change)
S&P 500
(2.9)
(50.2)
(1.7)
(40.1)
EuroStoxx 50
3.8
(57.6)
13.5
(50.4)
SPI
(0.8)
(53.6)
5.8
(44.2)
Swiss real estate (% change)
Single-Family Homes
 
3.4
(17.0)
7.1
(30.0)
Other real estate (% change)
United States (S&P / Case-Shiller)
2.5
(15.3)
9.2
(28.7)
Eurozone (House Price Index)
1.1
(22.9)
7.2
(35.4)
 
c) Development of ECL allowances and provisions
The ECL
 
allowances and
 
provisions recognized
 
in the
 
period are
impacted by a variety of factors, such as:
–
 
origination of new instruments during the period;
 
–
 
effect of passage of time as the ECLs on an instrument for the
remaining
 
lifetime
 
decrease
 
(all
 
other
 
factors
 
remaining
 
the
same);
–
 
discount
 
unwind
 
within ECLs
 
as
 
it
 
is
 
measured
 
on
 
a
 
present
value basis;
–
 
derecognition of instruments in the period;
–
 
change in individual asset quality of instruments;
–
 
effect
 
of
 
updating
 
forward-looking
 
scenarios
 
and
 
the
respective weights;
–
 
movements from a
 
maximum 12-month
 
ECL to the
 
recognition
of
 
lifetime ECLs
 
(and
 
vice versa)
 
following transfers
 
between
stages 1 and 2;
 
–
 
movements
 
from
 
stages 1
 
and
 
2
 
to
 
stage 3
 
(credit-impaired
status) when
 
default has
 
become certain
 
and PD
 
increases to
100% (or vice versa);
–
 
changes in models or updates to model parameters;
–
 
write-off; and
–
 
foreign
 
exchange
 
translations
 
for
 
assets
 
denominated
 
in
foreign currencies and other movements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
472
 
Note 20
 
Expected credit loss measurement (continued)
 
The following table explains the changes in
 
the ECL allowances and provisions for on-
 
and off-balance sheet financial instruments and
credit lines in
 
scope of ECL requirements
 
between the beginning and the
 
end of the period due
 
to the factors listed on
 
the previous
page.
 
Development of ECL allowances and
 
provisions
USD million
Total
Stage 1
Stage 2
Stage 3
Balance as of 31 December 2020
(1,468)
(306)
(333)
(829)
Net movement from new and derecognized transactions
1
(59)
(72)
13
0
of which: Private clients with mortgages
(7)
(10)
3
0
of which: Real estate financing
(7)
(11)
4
0
of which: Large corporate clients
(13)
(21)
7
0
of which: SME clients
(8)
(8)
0
0
of which: Other
(24)
(23)
(2)
0
 
of which: Financial intermediaries and hedge funds
(21)
(18)
(4)
0
 
of which: Loans to financial advisors
0
(1)
1
0
Remeasurements with stage transfers
2
(40)
8
0
(49)
of which: Private clients with mortgages
(9)
4
(13)
0
of which: Real estate financing
(3)
1
(4)
0
of which: Large corporate clients
2
(2)
12
(8)
of which: SME clients
(27)
5
4
(36)
of which: Other
(3)
0
2
(4)
 
of which: Financial intermediaries and hedge funds
2
(1)
3
0
 
of which: Loans to financial advisors
0
1
(1)
0
Remeasurements without stage transfers
3
203
55
74
74
of which: Private clients with mortgages
33
8
26
(1)
of which: Real estate financing
30
13
13
3
of which: Large corporate clients
44
5
21
17
of which: SME clients
53
(1)
1
53
of which: Other
44
29
14
2
 
of which: Financial intermediaries and hedge funds
27
15
12
0
 
of which: Loans to financial advisors
6
8
1
(3)
Model changes
4
45
29
16
0
Movements with profit or loss impact
5
148
19
104
25
Movements without profit or loss impact (write-off, FX and other)
6
154
5
9
141
Balance as of 31 December 2021
(1,165)
(282)
(220)
(662)
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, 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.
 
 
In
 
2021,
 
ECL
 
allowances
 
and
 
provisions
 
decreased
 
by
 
USD
148
million from net credit loss releases impacting profit or loss:
–
 
a
 
USD
59
 
million
 
net
 
increase
 
from
 
new
 
and
 
derecognized
transactions
 
that
 
resulted
 
from
 
a
 
USD
72
 
million
 
stage 1
increase
 
primarily
 
in
 
the
 
corporate
 
lending
 
and
 
real
 
estate
lending portfolio,
 
offset by
 
a USD
13
 
million net release
 
from
stage 2
 
positions,
 
driven
 
by
 
positions
 
that
 
were
 
terminated
before their contractual maturity;
 
–
 
a USD
163
 
million net decrease from book quality movements
that
 
resulted
 
from
 
a
 
USD
203
 
million
 
net
 
decrease
 
from
remeasurements
 
without
 
stage transfers,
 
with
 
approximately
half of
 
that related to
 
corporate lending –
 
another significant
portion related to
 
real estate related
 
lending, primarily due
 
to
the partial release of a
 
post-model adjustment, partially offset
by USD
40
 
million from transactions moving
 
from stages 1 and
2
 
into
 
stages 2
 
and
 
3,
 
respectively,
 
primarily
 
related
 
to
 
SME
clients;
 
and
–
 
a USD
45
 
million net decrease that resulted from a number
 
of
model changes.
 
An amount
 
of USD
25
 
million related
 
to the
Large corporate
 
clients
 
segment in
 
the Investment
 
Bank. The
remainder related to various
 
segments in Personal &
 
Corporate
Banking and Global Wealth Management.
 
In
 
addition
 
to
 
the
 
movements
 
im
pacting
 
profit
 
or
 
loss,
allowances decreased by USD
154
 
million as a result
 
of USD
137
million
 
of write
 
offs and
 
USD
18
 
million from
 
foreign exchange
and other movements, both of which
 
did not impact the income
statement.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
473
 
Note 20
 
Expected credit loss measurement (continued)
 
 
Development of ECL allowances and
 
provisions
USD million
Total
Stage 1
Stage 2
Stage 3
Balance as of 31 December 2019
(1,029)
(181)
(160)
(688)
Net movement from new and derecognized transactions
1
(28)
(90)
17
46
of which: Private clients with mortgages
(2)
(3)
2
0
of which: Real estate financing
(3)
(5)
2
0
of which: Large corporate clients
(32)
(29)
(4)
0
of which: SME clients
(16)
(14)
(3)
0
of which: Other
26
(39)
20
46
 
of which: Securities financing transactions REIT
32
(1)
15
17
 
of which: Loans to financial advisors
9
(1)
9
0
 
of which: Lombard loans
23
(6)
0
29
 
of which Financial intermediaries
 
(20)
(15)
(5)
0
Remeasurements with stage transfers
2
(427)
45
(134)
(338)
of which: Private clients with mortgages
(19)
(2)
(17)
0
of which: Real estate financing
(6)
3
(9)
0
of which: Large corporate clients
(224)
34
(83)
(175)
of which: SME clients
(43)
(1)
(11)
(31)
of which: Other
(134)
11
(14)
(131)
 
of which: Securities financing transactions REIT
(36)
0
(18)
(19)
 
of which: Loans to financial advisors
(12)
7
(7)
(11)
 
of which: Lombard loans
(36)
0
0
(36)
 
of which Commodity trade finance
(59)
0
0
(59)
Remeasurements without stage transfers
3
(271)
(88)
(47)
(136)
of which: Private clients with mortgages
(34)
(19)
(8)
(7)
of which: Real estate financing
(14)
(4)
(11)
1
of which: Large corporate clients
(149)
(53)
(17)
(79)
of which: SME clients
(13)
0
(7)
(6)
of which: Other
(60)
(11)
(4)
(44)
 
of which: Loans to financial advisors
(18)
(12)
(3)
(3)
 
of which: Lombard loans
(3)
6
0
(9)
 
of which: Credit cards
(12)
0
0
(12)
Model changes
4
32
21
11
0
Movements with profit or loss impact
5
(694)
(112)
(154)
(429)
Movements without profit or loss impact (write-off, FX and other)
6
254
(14)
(19)
287
Balance as of 31 December 2020
(1,468)
(306)
(333)
(829)
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, 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.
 
As explained in Note
 
1a, the assessment of
 
a significant increase
in
 
credit
 
risk
 
(
SICR
)
 
considers
 
a
 
number
 
of
 
qualitative
 
and
quantitative
 
factors
 
to
 
determine
 
whether
 
a
 
stage
 
transfer
between
 
stage 1
 
and
 
stage 2
 
is
 
required,
 
although
 
the
 
primary
assessment considers changes in PD based
 
on rating analyses and
economic outlook. Additionally, UBS
 
AG takes into consideration
counterparties that
 
have moved
 
to a
 
credit watch
 
list and
 
those
with payments that are at least 30 days past due.
 
ECL stage 2 ("significant deterioration
 
in credit risk”) allowances / provisions as of 31 December
 
2021 – classification by trigger
USD million
Stage 2
of which:
PD layer
of which:
watch list
of which:
≥30 days
 
past due
On-and off-balance sheet
 
(220)
(158)
(22)
(39)
of which: Private clients with mortgages
(71)
(54)
0
(17)
of which: Real estate financing
(43)
(38)
0
(4)
of which: Large corporate clients
(55)
(40)
(15)
0
of which: SME clients
(30)
(19)
(7)
(4)
of which: Financial intermediaries and hedge funds
(6)
(6)
0
0
of which: Loans to financial advisors
(3)
0
0
(3)
of which: Credit cards
(11)
0
0
(11)
of which: Other
(1)
(1)
0
0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
474
 
Note 20
 
Expected credit loss measurement (continued)
 
d) Maximum exposure to credit risk
The tables below provide
 
UBS AG’s maximum exposure
 
to credit
risk for financial instruments subject to ECL requirements and the
respective
 
collateral
 
and
 
other
 
credit
 
enhancements
 
mitigating
credit risk for these classes of financial instruments.
 
The
 
maximum
 
exposure
 
to
 
credit
 
risk
 
includes
 
the
 
carrying
amounts of financial
 
instruments recognized on
 
the balance sheet
subject
 
to
 
credit
 
risk
 
and
 
the
 
notional
 
amounts
 
for
 
off-balance
sheet arrangements.
 
Where information
 
is available,
 
collateral is
presented at fair value.
 
For other collateral, such as
 
real estate, a
reasonable alternative
 
value is
 
used. Credit
 
enhancements, such
as credit derivative contracts
 
and guarantees, are included
 
at their
notional amounts. Both are capped at the maximum
 
exposure to
credit risk for which
 
they serve as
 
security. The “Risk management
and control” section of this
 
report describes management’s view
of credit risk and
 
the related exposures,
 
which can differ
 
in certain
respects from the requirements of IFRS
.
 
Maximum exposure to credit risk
 
31.12.21
Collateral
1,2
Credit enhancements
1
Exposure to
credit risk
after collateral
and credit
enhancements
USD billion
Maximum
exposure to
credit risk
Cash
collateral
received
Collateralized
by securities
Secured by
real estate
Other
collateral
3
Netting
Credit
derivative
contracts
Guarantees
 
Financial assets measured at
 
amortized cost on the balance sheet
Cash and balances at central banks
192.8
 
 
 
 
 
 
192.8
Loans and advances to banks
4
15.4
0.1
 
0.1
15.1
Receivables from securities financing transactions
75.0
0.0
68.0
6.9
 
 
 
0.0
Cash collateral receivables on derivative instruments
5,6
30.5
 
18.4
 
 
12.1
Loans and advances to customers
7
398.7
38.2
128.7
191.3
20.2
 
 
4.0
16.4
Other financial assets measured at amortized cost
26.2
0.2
0.1
0.0
1.3
 
 
24.7
Total financial assets measured at amortized cost
738.6
38.4
196.9
191.3
28.4
18.4
0.0
4.0
261.1
Financial assets measured at fair value
 
through other comprehensive income – debt
8.8
 
 
 
 
 
 
 
8.8
Total maximum exposure to credit risk
 
reflected on the balance sheet in scope of ECL
747.5
38.4
196.9
191.3
28.4
18.4
0.0
4.0
270.0
Guarantees
8
20.9
1.3
6.5
0.2
2.5
 
2.3
8.1
Loan commitments
8
39.4
0.5
4.0
2.4
7.3
 
0.3
1.7
23.1
Forward starting transactions, reverse repurchase
and securities borrowing agreements
1.4
 
1.4
 
 
 
 
 
0.0
Committed unconditionally revocable credit lines
42.3
0.3
9.0
6.2
3.9
 
 
0.5
22.5
Total maximum exposure to credit risk not
 
reflected on the balance sheet, in scope of ECL
104.1
2.2
20.9
8.7
13.7
0.0
0.3
4.5
53.7
31.12.20
Collateral
1,2
Credit enhancements
1
Exposure to
credit risk
after collateral
and credit
enhancements
USD billion
Maximum
exposure to
credit risk
Cash
collateral
received
Collateralized
by securities
Secured by
real estate
Other
collateral
3
Netting
Credit
derivative
contracts
Guarantees
 
Financial assets measured at
 
amortized cost on the balance sheet
Cash and balances at central banks
158.2
 
 
 
 
 
 
158.2
Loans and advances to banks
4
15.3
0.1
 
15.2
Receivables from securities financing transactions
74.2
0.0
67.1
 
7.0
 
 
 
0.0
Cash collateral receivables on derivative instruments
5,6
32.7
 
21.1
 
 
11.6
Loans and advances to customers
7
381.0
27.0
118.2
194.6
21.7
 
0.0
4.4
15.1
Other financial assets measured at amortized cost
27.2
0.1
0.2
0.0
1.3
 
 
 
25.5
Total financial assets measured at amortized cost
688.7
27.2
185.7
194.6
30.1
21.1
0.0
4.4
225.6
Financial assets measured at fair value
 
through other comprehensive income – debt
8.3
 
 
 
 
 
 
 
8.3
Total maximum exposure to credit risk
 
reflected on the balance sheet in scope of ECL
697.0
27.2
185.7
194.6
30.1
21.1
0.0
4.4
233.9
Guarantees
8
17.0
0.7
5.0
0.2
1.7
 
2.5
7.0
Loan commitments
8
41.2
0.0
4.2
2.1
6.8
 
0.4
2.4
25.3
Forward starting transactions, reverse repurchase
and securities borrowing agreements
3.2
 
3.2
 
 
 
 
 
0.0
Committed unconditionally revocable credit lines
42.0
0.1
10.3
6.2
2.7
 
 
0.0
22.7
Total maximum exposure to credit risk not
 
reflected on the balance sheet, in scope of ECL
103.5
0.8
22.7
8.5
11.2
0.0
0.4
4.9
54.9
1 Of which: USD
1,443
 
million for 31 December 2021 (31 December 2020: USD
1,983
 
million) relates to total credit-impaired financial assets measured at amortized cost and USD
130
 
million for 31 December 2021
(31 December 2020: USD
154
 
million) to total off-balance sheet
 
financial instruments and credit lines
 
for credit-impaired positions.
 
2 Collateral arrangements generally
 
incorporate a range of
 
collateral, including
cash, securities, real
 
estate and other collateral.
 
UBS AG applies
 
a risk-based approach
 
that generally prioritizes
 
collateral according to
 
its liquidity profile.
 
3 Includes but is not
 
limited to life insurance
 
contracts,
inventory, mortgage loans, gold and other commodities.
 
4 Loans and advances to banks include amounts held with third-party banks on behalf of clients. The credit risk associated with these balances may be borne
by those clients.
 
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 In 2021, the collateral allocation
 
was updated to reflect
 
additional cash collateral and
 
custody accounts that are also
 
available
 
as security for certain
 
on-balance sheet lending. This
 
resulted in an
increase in loans secured by cash, with an offsetting reduction in loans secured by real estate and loans secured by securities.
 
8 The amount shown in the “Guarantees” column includes sub-participations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
475
 
Note 20
 
Expected credit loss measurement (continued)
 
e) Financial assets subject to credit risk by rating category
The
 
table
 
below
 
shows
 
the
 
credit
 
quality
 
and
 
the
 
maximum
exposure to credit risk based on the Group’s internal credit rating
system and year-end
 
stage classification. Under IFRS 9, the credit
risk rating reflects the Group’s assessment of the probability of
default
 
of
 
individual
 
counterparties,
 
prior
 
to
 
substitutions.
 
The
amounts presented are gross of impairment allowances.
›
 
Refer to the “Risk management and control”
 
section of this
report for more details
 
regarding the Group’s internal grading
system
 
 
Financial assets subject to credit risk by rating
 
category
USD million
31.12.21
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total gross
carrying
amount
ECL
allowances
Net carrying
amount
(maximum
exposure to
credit risk)
Financial assets measured at amortized cost
Cash and balances at central banks
191,015
1,802
0
0
0
0
192,817
0
192,817
of which: stage 1
191,015
1,802
0
0
0
0
192,817
0
192,817
Loans and advances to banks
407
12,552
1,123
795
490
1
15,368
(8)
15,360
of which: stage 1
407
12,552
1,098
795
488
0
15,340
(7)
15,333
of which: stage 2
0
0
24
0
2
0
27
(1)
26
of which: stage 3
0
0
0
0
0
1
1
0
1
Receivables from securities financing transactions
 
34,386
11,267
10,483
17,440
1,439
0
75,014
(2)
75,012
of which: stage 1
34,386
11,267
10,483
17,440
1,439
0
75,014
(2)
75,012
Cash collateral receivables on derivative instruments
7,466
13,476
5,878
3,647
47
0
30,514
0
30,514
of which: stage 1
7,466
13,476
5,878
3,647
47
0
30,514
0
30,514
Loans and advances to customers
5,295
232,663
67,620
70,394
21,423
2,148
399,543
(850)
398,693
of which: stage 1
5,295
231,583
65,083
63,298
16,362
0
381,622
(126)
381,496
of which: stage 2
0
1,080
2,536
7,096
5,061
0
15,773
(152)
15,620
of which: stage 3
0
0
0
0
0
2,148
2,148
(572)
1,577
Other financial assets measured at amortized cost
12,564
6,705
321
6,097
394
264
26,346
(109)
26,236
of which: stage 1
12,564
6,696
307
5,887
317
0
25,772
(27)
25,746
of which: stage 2
0
10
13
209
77
0
309
(7)
302
of which: stage 3
0
0
0
0
0
264
264
(76)
189
Total financial assets measured at amortized cost
251,133
278,465
85,424
98,372
23,793
2,414
739,601
(969)
738,632
On-balance sheet financial instruments
Financial assets measured at FVOCI – debt instruments
3,996
4,771
0
77
0
0
8,844
0
8,844
Total on-balance sheet financial instruments
255,130
283,236
85,424
98,449
23,793
2,414
748,445
(969)
747,477
Off-balance sheet positions subject to expected
 
credit loss by rating category
USD million
31.12.21
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total off -
balance sheet
exposure
(maximum
exposure to
credit risk)
ECL provisions
Off-balance sheet financial instruments
Guarantees
 
4,457
7,064
4,535
3,757
1,009
150
20,972
(41)
of which: stage 1
4,457
7,037
4,375
3,075
752
0
19,695
(18)
of which: stage 2
0
27
160
682
258
0
1,127
(8)
of which: stage 3
0
0
0
0
0
150
150
(15)
Irrevocable loan commitments
2,797
14,183
7,651
8,298
6,502
46
39,478
(114)
of which: stage 1
2,797
13,917
7,416
7,127
5,840
0
37,097
(72)
of which: stage 2
0
266
235
1,171
663
0
2,335
(42)
of which: stage 3
0
0
0
0
0
46
46
0
Forward starting reverse repurchase and securities borrowing agreements
0
0
55
1,389
0
0
1,444
0
Total off balance sheet financial instruments
7,254
21,247
12,241
13,444
7,512
196
61,894
(155)
Credit lines
Committed unconditionally revocable credit lines
2,636
16,811
8,627
10,130
4,107
63
42,373
(38)
of which: stage 1
2,636
16,467
8,304
8,724
3,671
0
39,802
(28)
of which: stage 2
0
344
323
1,406
436
0
2,508
(10)
of which: stage 3
0
0
0
0
0
63
63
0
Irrevocable committed prolongation of existing loans
17
2,438
1,422
1,084
602
48
5,611
(3)
of which: stage 1
17
2,438
1,422
1,082
568
0
5,527
(3)
of which: stage 2
0
0
0
1
34
0
36
0
of which: stage 3
0
0
0
0
0
48
48
0
Total credit lines
2,653
19,249
10,049
11,214
4,709
111
47,984
(41)
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
476
 
Note 20
 
Expected credit loss measurement (continued)
Financial assets subject to credit risk by rating
 
category
USD million
31.12.20
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total gross
carrying
amount
ECL
allowances
Net carrying
amount
(maximum
exposure to
credit risk)
Financial assets measured at amortized cost
Cash and balances at central banks
156,250
1,981
0
0
0
0
158,231
0
158,231
of which: stage 1
156,250
1,981
0
0
0
0
158,231
0
158,231
Loans and advances to banks
543
12,029
1,344
1,182
260
1
15,360
(16)
15,344
of which: stage 1
543
11,974
1,277
1,145
231
0
15,170
(9)
15,160
of which: stage 2
0
55
67
37
29
0
189
(5)
184
of which: stage 3
0
0
0
0
0
1
1
(1)
0
Receivables from securities financing transactions
 
22,998
16,009
15,367
17,995
1,842
0
74,212
(2)
74,210
of which: stage 1
22,998
16,009
15,367
17,995
1,842
0
74,212
(2)
74,210
Cash collateral receivables on derivative instruments
8,196
13,477
7,733
3,243
88
0
32,737
0
32,737
of which: stage 1
8,196
13,477
7,733
3,243
88
0
32,737
0
32,737
Loans and advances to customers
5,813
215,755
67,270
69,217
21,038
2,943
382,036
(1,060)
380,977
of which: stage 1
5,813
214,418
63,000
59,447
15,860
0
358,538
(142)
358,396
of which: stage 2
0
1,338
4,269
9,770
5,178
0
20,556
(215)
20,341
of which: stage 3
0
0
0
0
0
2,943
2,943
(703)
2,240
Other financial assets measured at amortized cost
15,404
4,043
280
6,585
481
560
27,352
(133)
27,219
of which: stage 1
15,404
4,040
269
6,334
389
0
26,435
(34)
26,401
of which: stage 2
0
3
11
251
91
0
357
(9)
348
of which: stage 3
0
0
0
0
0
560
560
(90)
469
Total financial assets measured at amortized cost
209,204
263,295
91,993
98,223
23,709
3,505
689,929
(1,211)
688,717
On-balance sheet financial instruments
Financial assets measured at FVOCI – debt instruments
3,212
5,014
0
32
0
0
8,258
0
8,258
Total on-balance sheet financial instruments
212,417
268,309
91,993
98,255
23,709
3,505
698,187
(1,211)
696,976
Off-balance sheet positions subject to expected
 
credit loss by rating category
USD million
31.12.20
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total off -
balance sheet
exposure
(maximum
exposure to
credit risk)
ECL provisions
Off-balance sheet financial instruments
Guarantees
 
3,482
4,623
3,522
4,293
991
170
17,081
(63)
of which: stage 1
3,482
4,219
2,688
3,558
739
0
14,687
(14)
of which: stage 2
0
404
834
736
252
0
2,225
(15)
of which: stage 3
0
0
0
0
0
170
170
(34)
Irrevocable loan commitments
3,018
14,516
8,583
9,302
5,850
104
41,372
(142)
of which: stage 1
3,018
13,589
6,873
8,739
4,676
0
36,894
(74)
of which: stage 2
0
927
1,711
563
1,174
0
4,374
(68)
of which: stage 3
0
0
0
0
0
104
104
0
Forward starting reverse repurchase and securities borrowing agreements
82
150
0
3,015
0
0
3,247
0
Total off balance sheet financial instruments
6,583
19,289
12,105
16,610
6,840
273
61,700
(205)
Credit lines
Committed unconditionally revocable credit lines
574
15,448
5,958
8,488
11,501
108
42,077
(50)
of which: stage 1
574
14,883
4,517
6,609
10,593
0
37,176
(29)
of which: stage 2
0
565
1,441
1,879
908
0
4,792
(21)
of which: stage 3
0
0
0
0
0
108
108
0
Irrevocable committed prolongation of existing loans
14
1,349
931
632
357
0
3,282
(2)
of which: stage 1
14
1,349
930
630
355
0
3,277
(2)
of which: stage 2
0
1
1
2
1
0
5
0
of which: stage 3
0
0
0
0
0
0
0
0
Total credit lines
588
16,797
6,889
9,119
11,858
109
45,359
(52)
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
477
 
Note 20
 
Expected credit loss measurement (continued)
 
f) Sensitivity information
As
 
outlined
 
in
 
Note
 
1a,
 
ECL
 
estimates
 
involve
 
significant
uncertainties at the time they are made.
ECL model
The models applied
 
to determine
 
point-in-time
 
PD and LGD rely
on
 
market
 
and
 
statistical
 
data,
 
which
 
has
 
been
 
found
 
to
correlate
 
well
 
with
 
historically
 
observed
 
defaults
 
in
 
sufficiently
homogeneous
 
segments.
 
The
 
risk
 
sensitivities
 
for
 
each
 
of
 
the
ECL reporting
 
segments to such
 
factors are
 
summarized in
 
Note
9.
Forward-looking scenarios
Depending on the scenario selection
 
and related macro-economic
assumptions for the
 
risk factors, the
 
components of the
 
relevant
weighted
 
average
 
ECL
 
change.
 
This
 
is
 
particularly
 
relevant
 
for
interest rates,
 
which can
 
move in
 
both directions
 
under a
 
given
growth assumption
 
(for example,
 
low growth
 
with high
 
interest
rates
 
in a
 
stagflation
 
scenario,
 
versus
 
low growth
 
and falling
 
interest
rates
 
in
 
a
 
recession).
 
Management generally
 
looks
 
for
 
scenario
narratives
 
that reflect
 
the key risk
 
drivers of
 
a given credit
 
portfolio.
As forecasting models are complex, due to the combination
 
of
multiple
 
factors,
 
simple
 
what-if
 
analyses
 
involving
 
a
 
change
 
of
individual
 
parameters
 
do
 
not
 
necessarily
 
provide
 
realistic
information
 
on
 
the
 
exposure
 
of
 
segments
 
to
 
changes
 
in
 
the
macroeconomy. Portfolio
 
-specific analyses based on their key risk
factors would also not be meaningful, as potential compensatory
effects
 
in
 
other
 
segments
 
would
 
be
 
ignored.
 
The
 
table
 
below
indicate
s
 
some
 
sensitivities
 
to
 
ECL
s
 
if
 
a
 
key
 
macroeconomic
variable for the forecasting period is amended
 
across all scenarios
with all other factors remaining unchanged
.
 
Potential effect on stage 1 and stage 2
 
positions from changing key parameters as of
 
31 December 2021
 
USD million
Baseline
Upside
Mild downside
Severe downside
Weighted average
 
Change in key parameters
Fixed income: Government bonds (absolute change)
–0.50%
(1)
0
(29)
(9)
(4)
+0.50%
1
1
39
11
5
+1.00%
4
2
88
23
14
Unemployment rate (absolute change)
–1.00%
(2)
(2)
(30)
(48)
(13)
–0.50%
(1)
(1)
(17)
(27)
(7)
+0.50%
1
1
21
31
8
+1.00%
3
2
47
68
18
Real GDP growth (relative change)
–2.00%
4
2
8
17
10
–1.00%
2
1
4
8
5
+1.00%
(1)
0
(10)
(8)
(4)
+2.00%
(2)
0
(14)
(16)
(7)
House Price Index (relative change)
–5.00%
6
4
50
73
24
–2.50%
3
2
24
34
12
+2.50%
(2)
(1)
(26)
(31)
(11)
+5.00%
(4)
(3)
(46)
(31)
(13)
Equity (S&P500, EuroStoxx, SMI) (relative change)
–10.00%
2
2
5
6
5
–5.00%
1
0
2
3
2
+5.00%
(1)
0
(2)
(3)
(2)
+10.00%
(2)
0
(4)
(6)
(3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
478
 
Note 20
 
Expected credit loss measurement (continued)
Sensitivities can be more meaningfully
 
assessed in the context
of
 
coherent
 
scenarios
 
with
 
consistently
 
developed
macroeconomic factors.
 
The table on
 
the previous page
 
outlines
favorable and
 
unfavorable effects,
 
based on
 
reasonably possible
alternative changes
 
to the
 
economic conditions
 
for stage 1
 
and
stage 2
 
positions.
 
The
 
ECL
 
impact
 
is
 
calculated
 
for
 
material
portfolios and disclosed for each scenario.
 
The
 
forecasting
 
horizon
 
is
 
limited
 
to
 
three
 
years,
 
with
 
a
model-based
 
mean
 
reversion
 
of
 
PD
 
and
 
LGD
 
assumed
thereafter.
 
Changes
 
to
 
these
 
timelines
 
may
 
have
 
an
 
effect
 
on
ECLs:
 
depending
 
on
 
the
 
cycle,
 
a
 
longer
 
or
 
shorter
 
forecasting
horizon will lead to different
 
annualized lifetime
 
PD and average
LGD estimations.
 
This is currently
 
not deemed to be material
 
for
UBS AG,
 
as a large
 
proportion
 
of loans,
 
including
 
mortgages
 
in
Switzerland,
 
have
maturities
 
that
are
 
within
 
the
 
forecasting
horizon.
Scenario weights
ECL
 
is
 
sensitive
 
to
 
changing
 
scenario
 
weights,
 
in
 
particular
 
if
narratives and
 
parameters are
 
selected that
 
are not
 
close to
 
the
baseline scenario, highlighting the non-linearity of credit losses.
As shown in the table on the bottom of this page, the ECL for
stage 1 and
 
stage 2 positions
 
would have been
 
USD
387
 
million
(31 December 2020: USD
442
 
million) instead of USD
503
 
million
(31
 
December
 
2020:
USD
 
639
 
million)
 
if
 
ECL
 
had
 
been
determined solely on
 
the baseline scenario.
 
The weighted average
ECL therefore amounts
 
to
130
% (31 December 2020:
145
%) of
the
 
baseline
 
value.
 
The
 
effects
 
of
 
weighting
 
each
 
of
 
the
 
four
scenarios 100% are shown in the table below.
Stage allocation and SICR
The
 
determination
 
of
 
what
 
constitutes
 
a
n
 
SICR
 
is
 
based
 
on
management judgment,
 
as explained
 
in Note
 
1a. Changing
 
the
SICR trigger
 
will have
 
a direct
 
effect on
 
ECLs, as
 
more or
 
fewer
positions would be subject to lifetime ECLs under any scenario.
 
The
 
relevance
 
of
 
the
 
SICR
 
trigger
 
on
 
overall
 
ECL
 
is
demonstrated in the table below with the indication that the ECL
allowances and provisions
 
for stage 1
 
and stage 2
 
positions would
have been USD
1,060
 
million if all
 
non-impaired positions across
the portfolio had been
 
measured for lifetime ECLs
 
irrespective of
their actual SICR
 
status. This amount
 
compares to actual
 
stage 1
and
 
2
 
allowances
 
and
 
provisions
 
of
 
USD
503
 
million
 
as
 
of
31 December 2021.
 
Potential
 
effect on
 
stage 1
 
and stage
 
2 positions
 
from changing
 
scenario
 
weights
 
or moving
 
to an ECL
 
lifetime
 
calculation
 
as of 31
 
December
 
2021
 
Actual ECL
allowances and
provisions,
including staging
(as per Note 9)
 
Pro forma ECL allowances and provisions, including staging
 
and assuming application of 100% scenario weighting
 
Pro forma ECL
allowances and
provisions,
assuming all
positions being
subject to lifetime
ECL
 
Scenarios
Weighted average
100% Baseline
100% Upside
100% Mild
downside
100% Severe
downside
Weighted average
USD million, except where indicated
Segmentation
Private clients with mortgages
(95)
(53)
(52)
(119)
(207)
(277)
Real estate financing
(62)
(50)
(48)
(101)
(97)
(118)
Large corporate clients
(150)
(116)
(107)
(148)
(244)
(257)
SME clients
(65)
(56)
(55)
(71)
(91)
(117)
Other segments
(130)
(112)
(108)
(135)
(166)
(291)
Total
(503)
(387)
(370)
(574)
(806)
(1,060)
Maturity profile
The maturity profile is an important driver for changes
 
in ECL due
to transfers
 
to stage 2
 
and from
 
stage 2 to
 
stage 1. The
 
current
maturity profile of most lending books is relatively
 
short; hence a
movement
 
to
 
stage 2
 
may
 
have
 
a
 
moderate
 
effect
 
on
 
ECLs.
 
A
significant portion
 
of our
 
lending to
 
SMEs is
 
documented under
multi-purpose
 
credit agreements,
 
which allow
 
for various
 
forms
of utilization but are unconditionally
 
cancelable by UBS AG
 
at any
time. For drawings
 
under such agreements
 
with a fixed
 
maturity
the respective term is applied for ECL calculations,
 
or a maximum
of 12 months in stage 1. For unused credit lines and all
 
drawings
that
 
have
 
no
 
fixed
 
maturity
 
(e.g.,
 
current
 
accounts),
 
UBS
 
AG
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.
 
 
 
 
 
479
 
Note 21
 
Fair value measurement
a) Valuation principles
All
 
financial
 
and non-financial
 
assets
 
and liabilities
 
measured
 
or
disclosed at fair value are categorized into one of three
 
fair value
hierarchy levels
 
in accordance
 
with IFRS.
 
The fair
 
value hierarchy
is based on the
 
transparency of inputs to
 
the valuation of an
 
asset
or liability as
 
of the measurement
 
date. In certain
 
cases, the inputs
used to
 
measure fair
 
value may fall
 
within different
 
levels of
 
the
fair
 
value
 
hierarchy.
 
For
 
disclosure
 
purposes,
 
the
 
level
 
in
 
the
hierarchy within which an
 
instrument is classified in its entirety
 
is
based on the lowest level input
 
that is significant to the position’s
fair value measurement:
–
 
Level 1
 
–
 
quoted
 
prices
 
(unadjusted)
 
in
 
active
 
markets
 
for
identical assets and liabilities;
–
 
Level 2 –
 
valuation techniques
 
for which
 
all significant
 
inputs
are, or are based on, observable market data; or
–
 
Level 3 – valuation techniques
 
for which significant inputs are
not based on observable market data.
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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
480
 
Note 21
 
Fair value measurement (continued)
 
c) Fair value hierarchy
The table below provides
 
the fair value hierarchy
 
classification of
financial and
 
non-financial assets
 
and liabilities
 
measured at
 
fair
value.
 
The
 
narrative
 
that
 
follows describes
 
valuation
 
techniques
used
 
in
 
measuring
 
their
 
fair
 
value
 
of
 
different
 
product
 
types
(including significant valuation
 
inputs and assumptions
 
used), and
the
 
factors
 
considered
 
in
 
determining
 
their
 
classification
 
within
the fair value hierarchy.
 
Determination of fair values from quoted market
 
prices or valuation techniques
1
31.12.21
31.12.20
USD million
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value on a recurring basis
Financial assets at fair value held for trading
113,722
15,012
2,299
131,033
107,526
15,630
2,337
125,492
of which:
Equity instruments
97,983
1,090
149
99,222
90,327
1,101
171
91,599
Government bills / bonds
7,135
1,351
10
8,496
9,028
2,207
10
11,245
Investment fund units
7,843
1,364
21
9,229
7,374
1,794
23
9,192
Corporate and municipal bonds
708
7,791
556
9,055
789
8,432
817
10,038
Loans
0
3,099
1,443
4,542
0
1,860
1,134
2,995
Asset-backed securities
53
317
120
489
8
236
181
425
Derivative financial instruments
522
116,482
1,140
118,145
795
157,069
1,754
159,618
of which:
Foreign exchange contracts
255
53,046
7
53,307
319
68,425
5
68,750
Interest rate contracts
0
32,747
494
33,241
0
50,353
537
50,890
Equity / index contracts
0
27,861
384
28,245
0
33,990
853
34,842
Credit derivative contracts
0
1,179
236
1,414
0
2,008
350
2,358
Commodity contracts
0
1,590
16
1,606
0
2,211
6
2,217
Brokerage receivables
0
21,839
0
21,839
0
24,659
0
24,659
Financial assets at fair value not held for trading
2
27,278
28,185
4,180
59,642
40,986
35,110
3,942
80,038
of which:
Financial assets for unit-linked investment contracts
21,110
187
6
21,303
20,628
101
2
20,731
Corporate and municipal bonds
123
13,937
306
14,366
290
16,957
372
17,619
Government bills / bonds
5,624
3,236
0
8,860
19,704
3,593
0
23,297
Loans
0
4,982
892
5,874
0
7,699
862
8,561
Securities financing transactions
0
5,704
100
5,804
0
6,629
122
6,751
Auction rate securities
0
0
1,585
1,585
0
0
1,527
1,527
Investment fund units
338
137
117
591
278
121
105
505
Equity instruments
83
2
681
765
86
0
544
631
Other
0
0
495
495
0
10
408
418
Financial assets measured at fair value through other comprehensive income on
 
a recurring basis
Financial assets measured at fair value through other comprehensive
 
income
2
2,704
6,140
0
8,844
1,144
7,114
0
8,258
of which:
Asset-backed securities
0
4,849
0
4,849
0
6,624
0
6,624
Government bills / bonds
2,658
27
0
2,686
1,103
47
0
1,150
Corporate and municipal bonds
45
1,265
0
1,310
40
444
0
485
Non-financial assets measured at fair value on a recurring basis
Precious metals and other physical commodities
5,258
0
0
5,258
6,264
0
0
6,264
Non-financial assets measured at fair value on a non-recurring basis
Other non-financial assets
3
0
0
26
26
0
1
245
246
Total assets measured at fair value
149,484
187,658
7,645
344,787
156,716
239,583
8,278
404,576
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
481
 
Note 21
 
Fair value measurement (continued)
Determination of fair values from quoted market
 
prices or valuation techniques (continued)
1
31.12.21
31.12.20
USD million
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial liabilities measured at fair value on a recurring basis
Financial liabilities at fair value held for trading
25,413
6,170
105
31,688
26,889
6,652
55
33,595
of which:
Equity instruments
18,328
513
83
18,924
22,519
425
40
22,985
Corporate and municipal bonds
30
4,219
17
4,266
31
4,048
9
4,089
Government bills / bonds
5,883
826
0
6,709
3,642
1,036
0
4,678
Investment fund units
1,172
555
6
1,733
696
1,127
5
1,828
Derivative financial instruments
509
118,558
2,242
121,309
746
156,884
3,471
161,102
of which:
Foreign exchange contracts
258
53,800
21
54,078
316
70,149
61
70,527
Interest rate contracts
0
28,398
278
28,675
0
43,389
527
43,916
Equity / index contracts
0
33,438
1,511
34,949
0
38,870
2,306
41,176
Credit derivative contracts
0
1,412
341
1,753
0
2,403
528
2,931
Commodity contracts
0
1,503
63
1,566
0
2,003
24
2,027
Financial liabilities designated at fair value on a recurring basis
Brokerage payables designated at fair value
0
44,045
0
44,045
0
38,742
0
38,742
Debt issued designated at fair value
2
0
59,606
11,854
71,460
0
50,273
9,595
59,868
Other financial liabilities designated at fair value
2
0
29,258
3,156
32,414
0
29,682
2,091
31,773
of which:
Financial liabilities related to unit-linked investment contracts
0
21,466
0
21,466
0
20,975
0
20,975
Securities financing transactions
0
6,375
2
6,377
0
7,317
0
7,317
Over-the-counter debt instruments
0
1,334
794
2,128
0
1,363
697
2,060
Total liabilities measured at fair value
25,922
257,637
17,357
300,916
27,635
282,233
15,212
325,080
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 As of 31 December 2021, USD
16
 
billion (31 December 2020: USD
20
 
billion) of Financial assets at fair value not
 
held for trading, USD
8
 
billion (31 December 2020: USD
8
 
billion) of Financial assets measured at
fair value through other
 
comprehensive income, USD
33
 
billion (31 December 2020:
 
USD
15
 
billion) of Debt issued
 
designated at fair value
 
and USD
3
 
billion (31 December 2020:
 
USD
3
 
billion) of Other financial
liabilities designated at fair value are expected to be recovered or settled after 12 months.
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
482
 
Note 21
 
Fair value measurement (continued)
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.
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 21f
for more
 
information.
 
The discount
 
curves
 
used by
 
UBS 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.
 
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.
Corporate and
municipal bonds
Valuation
–
 
Generally
 
valued
 
using
 
prices
 
obtained
 
directly
 
from
 
the
 
market
 
for
 
the
 
security,
 
or
 
similar
 
securities,
adjusted for seniority, maturity and liquidity.
–
 
When prices
 
are not
 
available, instruments are
 
valued using
 
discounted cash
 
flow valuation
 
techniques
incorporating the credit spread of the
 
issuer or similar issuers.
–
 
For convertible bonds
 
without directly
 
comparable prices,
 
issuances may
 
be priced using
 
a convertible
 
bond
model.
Fair value hierarchy
–
 
Generally classified as Level 1 or Level 2, depending
 
on the depth of trading activity behind price
 
sources.
–
 
Level 3 instruments have no suitable pricing information
 
available.
Traded loans and
loans measured at
fair value
Valuation
–
 
Valued directly
 
using market prices
 
that reflect recent
 
transactions or quoted
 
dealer prices, where
 
available.
–
 
Where no
 
market price
 
data is
 
available, loans
 
are valued
 
by relative
 
value benchmarking
 
using pricing
derived from debt instruments in comparable entities or different products in the same entity, or by using
a credit default
 
swap valuation technique,
 
which requires inputs
 
for credit spreads,
 
credit recovery rates
and interest
 
rates. Recently
 
originated commercial real
 
estate loans
 
are measured
 
using a
 
securitization
approach based on rating agency guidelines.
Fair value hierarchy
–
 
Instruments with suitably deep and liquid pricing
 
information are classified as Level 2.
–
 
Positions requiring the use of
 
valuation techniques, or for
 
which the price sources have
 
insufficient trading
depth, are classified as Level 3.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
483
 
Note 21
 
Fair value measurement (continued)
Product
Valuation and classification in the fair value hierarchy
Investment fund
units
Valuation
–
 
Predominantly exchange-traded, with
 
readily available quoted prices in liquid markets.
–
 
Where market prices are not available, fair
 
value may be measured using net asset values
 
(NAVs).
Fair value hierarchy
–
 
Listed units
 
are classified
 
as
 
Level 1, provided
 
there is
 
sufficient trading
 
activity to
 
justify active-market
classification, while other positions are classified
 
as Level 2.
–
 
Positions for which NAVs are not available
 
are classified as Level 3.
Asset-backed
securities (ABS)
Valuation
–
 
For liquid securities, the valuation
 
process will use trade
 
and price data, updated for movements
 
in market
levels between the time of trading and the
 
time of valuation. Less liquid instruments are measured using
discounted expected
 
cash flows
 
incorporating price
 
data for instruments
 
or indices with
 
similar risk profiles.
Fair value hierarchy
–
 
Residential
 
mortgage
-
backed
 
securities
,
commercial
mortgage
-
backed
 
securities
 
and
 
other
 
ABS
 
are
generally classified as Level 2. However,
 
if significant inputs are unobservable,
 
or if market or fundamental
data is not available, they are classified as Level
 
3.
Auction rate
securities (ARS)
Valuation
–
 
ARS
 
are
 
valued
 
utilizing
 
a
 
discounted
 
cash
 
flow
 
methodology.
 
The
 
model
 
captures
 
interest
 
rate
 
risk
emanating from the note coupon, credit risk attributable to the
 
underlying closed-end fund investments,
liquidity risk as a function of the level of trading volume in these positions, and extension risk, as ARS are
perpetual instruments that require an assumption
 
regarding their maturity or issuer redemption
 
date.
Fair value hierarchy
–
 
Granular and liquid pricing information is generally not available for
 
ARS. As a result, these securities are
classified as Level 3.
Equity instruments
Valuation
–
 
Listed equity instruments are generally valued
 
using prices obtained directly from the market.
–
 
Unlisted equity holdings,
 
including private equity
 
positions, are initially
 
marked at their
 
transaction price
and are
 
revalued when
 
reliable evidence of
 
price movement
 
becomes available
 
or when
 
the position
 
is
deemed to be impaired.
 
Fair value hierarchy
–
 
The majority
 
of equity
 
securities are actively
 
traded on
 
public stock
 
exchanges where quoted
 
prices are
readily and regularly available, resulting in Level
 
1 classification.
Financial assets for
unit-linked
investment
contracts
Valuation
–
 
The majority of assets are listed on exchanges
 
and fair values are determined using quoted
 
prices.
Fair value hierarchy
–
 
Most assets are classified as Level 1 if actively traded,
 
or Level 2 if trading is not active.
–
 
Instruments for which prices are not readily available
 
are classified as Level 3.
Securities financing
transactions
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.
Brokerage
receivables and
payables
Valuation
–
 
Fair value is determined based on the value of
 
the underlying balances.
Fair value hierarchy
–
 
Due to their on-demand nature, these receivables
 
and payables are deemed as Level 2.
Amounts due under
unit-linked
investment
contracts
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.
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
484
 
Note 21
 
Fair value measurement (continued)
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
2
1
d
,
the
 
fair
 
value
 
of
 
uncollateralized
 
and
 
partially
collateralized
 
derivatives
 
is
 
then
 
adjusted
 
by
 
credit
 
valuation
adjustments
 
(
CVA
s)
,
debit
 
valuation
 
adjustments
 
(
DVA
s)
 
and
funding valuation adjustments (FVAs), as
 
applicable, to reflect an
estimation
 
of
 
the
 
effect
 
of
 
counterparty
 
credit
 
risk,
 
UBS’s
 
own
credit risk, and funding costs and benefits.
›
 
Refer to Note 10 for more information about
 
derivative
instruments
 
 
 
 
Derivative product
Valuation and classification in the fair value hierarchy
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.
Credit derivative
contracts
Valuation
–
 
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.
Fair value hierarchy
–
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
485
 
Note 21
 
Fair value measurement (continued)
Derivative product
Valuation and classification in the fair value hierarchy
Foreign exchange
contracts
Valuation
–
 
Open spot foreign exchange (FX)
 
contracts are valued using the FX spot rate
 
observed in the market.
–
 
Forward FX contracts are valued using the FX spot rate adjusted for forward pricing points observed from
standard market-based sources.
–
 
Over-the-counter (OTC)
 
FX option
 
contracts are
 
valued using
 
market-standard option valuation
 
models.
The models used for shorter-dated options (i.e., maturities of
 
five years or less) tend
 
to be different than
those used for
 
longer-dated
 
options because
 
the models needed
 
for longer-dated
 
OTC FX contracts
 
require
additional consideration of interest rate and FX
 
rate interdependency.
–
 
The valuation for
 
multi-dimensional FX
 
options uses a
 
multi-local volatility model,
 
which is calibrated
 
to the
observed FX volatilities for all relevant FX pairs.
Fair value hierarchy
–
 
The
 
markets
 
for
 
FX
 
spot
 
and
 
FX
 
forward
 
pricing
 
points
 
are
 
both
 
actively
 
traded
 
and
 
observable
 
and
therefore such FX contracts are generally classified
 
as Level 2.
 
–
 
A significant proportion of
 
OTC FX option contracts are
 
classified as Level 2 as
 
inputs are derived mostly
from standard market contracts traded in
 
active and observable markets.
–
 
OTC FX
 
option contracts
 
classified as
 
Level 3 include
 
multi-dimensional FX
 
options and
 
long-dated FX
 
exotic
option contracts where there is no active market
 
from which to derive volatility or correlation
 
inputs.
Equity / index
contracts
Valuation
–
 
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.
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.
Commodity
contracts
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
486
 
Note 21
 
Fair value measurement (continued)
d) Valuation adjustments and other items
The output of a valuation technique is always an estimate of a
fair value that cannot be
 
measured with complete certainty. As a
result, valuations are adjusted, where appropriate and when such
factors would be considered by market participants in estimating
fair value, to reflect
 
close-out costs, credit exposure,
 
model-driven
valuation
 
uncertainty,
 
funding
 
costs
 
and
 
benefits,
 
trading
restrictions and other factors.
 
The table below summarizes the
 
valuation adjustment reserves
recognized on the balance sheet. Details about each category are
provided further below.
 
 
Valuation adjustment reserves on the balance sheet
As of
Life-to-date gain / (loss), USD million
31.12.21
31.12.20
31.12.19
Deferred day-1 profit or loss reserves
418
269
146
Own credit adjustments on financial liabilities designated at fair value
(315)
(381)
(88)
CVAs, FVAs,
 
DVAs and other valuation adjustments
(1,004)
(959)
(706)
 
Deferred day-1 profit or loss reserves
For
 
new
 
transactions
 
where
 
the
 
valuation
 
technique
 
used
 
to
measure fair
 
value requires
 
significant inputs
 
that are
 
not based
on
 
observable
 
market
 
data,
 
the
 
financial
 
instrument
 
is
 
initially
recognized
 
at
 
the
 
transaction
 
price.
 
The
 
transaction
 
price
 
may
differ
 
from
 
the fair
 
value obtained
 
using a
 
valuation technique,
where any such difference is deferred and not initially recognized
in the income statement.
 
Deferred
 
day-1
 
profit
 
or
 
loss
 
is generally
 
released
 
into
Other
net
 
income
 
from
 
financial
 
instruments
 
measured
 
at
 
fair
 
value
through profit or loss
 
when pricing of equivalent products or the
underlying
 
parameters
 
become
s
 
observable
 
or
 
when
 
the
transaction is closed out.
The
 
table
 
below
 
summarizes
 
the
 
changes
 
in
 
deferred
 
day-1
profit or loss reserves during the respective period.
 
 
 
Deferred day-1 profit or loss reserves
USD million
2021
2020
2019
Reserve balance at the beginning of the year
269
146
255
Profit / (loss) deferred on new transactions
459
362
171
(Profit) / loss recognized in the income statement
(308)
(238)
(278)
Foreign currency translation
(2)
0
(2)
Reserve balance at the end of the year
418
269
146
 
Own credit
 
Own
 
credit
 
risk
 
is
 
reflected
 
in
 
the
 
valuation
 
of
 
UBS’s
 
fair
 
value
option liabilities where
 
this component is considered relevant
 
for
valuation
 
purposes
 
by
 
UBS’s
 
counterparties
 
and
 
other
 
market
participants.
Changes in
 
the fair
 
value of
 
financial liabilities
 
designated at
fair
 
value
 
through
 
profit
 
or
 
loss
 
related
 
to
 
own
 
credit
 
are
recognized
 
in
Other
 
comprehensive
 
income
 
directly
 
within
Retained
 
earnings,
with
 
no
 
reclassification
 
to
 
the
 
income
statement in future periods.
 
This presentation does not
 
create or
increase an
 
accounting mismatch
 
in the income
 
statement, as
 
UBS
does not hedge changes in own credit
.
Own
 
credit
 
is
 
estimated
 
using
 
own
 
credit
 
adjustment
 
(OCA)
curves,
 
which
 
incorporate
 
observable
 
market
 
data,
 
including
market-observed
 
secondary
 
prices
 
for
 
UBS’s
 
debt,
 
UBS’s
 
credit
default swap spreads
 
and debt curves
 
of peers. In
 
the table below,
the
 
change
 
in
 
unrealized
 
own credit
 
consists of
 
changes
 
in
 
fair
value that are attributable
 
to the change in
 
UBS’s credit spreads,
as well
 
as the
 
effect of
 
changes in
 
fair values
 
attributable to
 
factors
other than credit spreads, such as redemptions, effects from time
decay
 
and changes
 
in
 
interest and
 
other market
 
rates.
 
Realized
own credit is recognized
 
when an instrument with
 
an associated
unrealized OCA
 
is repurchased
 
prior to
 
the contractual
 
maturity
date.
 
Life-to-date
 
amounts
 
reflect
 
the
 
cumulative
 
unrealized
change since initial recognition.
›
 
Refer to Note 16 for more information about
 
debt issued
designated at fair value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
487
 
Note 21
 
Fair value measurement (continued)
Own credit adjustments on financial liabilities
 
designated at fair value
Included in Other comprehensive income
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Recognized during the period:
Realized gain / (loss)
 
(14)
2
8
Unrealized gain / (loss)
 
60
(295)
(408)
Total gain / (loss), before tax
46
(293)
(400)
As of
 
USD million
31.12.21
31.12.20
31.12.19
Recognized on the balance sheet as of the end of the period:
Unrealized life-to-date gain / (loss)
 
(315)
(381)
(88)
 
Credit valuation adjustments
In order to measure
 
the fair value of
 
OTC derivative instruments,
including
 
funded
 
derivative
 
instruments
 
that
 
are
 
classified
 
as
Financial assets at
 
fair value
 
not held for
 
trading,
 
CVAs are needed
to
 
reflect
 
the
 
credit
 
risk
 
of
 
the
 
counterparty
 
inherent
 
in
 
these
instruments. This
 
amount represents
 
the estimated
 
fair value
 
of
protection required
 
to hedge the counterparty credit
 
risk of such
instruments.
 
A
 
CVA
 
is
 
determined
 
for
 
each
 
counterparty,
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 UBS 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,
 
UBS
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 items
In the first
 
half of
 
2021, UBS
 
AG incurred
 
a loss
 
of USD
861
 
million
as a
 
result of
 
closing out
 
a significant
 
portfolio of
 
swaps with
 
a
US-based
 
client
 
of
 
its
 
prime
 
brokerage
 
business
 
and
 
the
unwinding of
 
related hedges,
 
following the
 
client’s default.
 
This
loss
 
is
 
presented
 
within
Other
 
net
 
income
 
from
 
financial
instruments measured at fair value through profit or loss
.
 
 
Valuation adjustments on financial instruments
As of
Life-to-date gain / (loss), USD million
31.12.21
31.12.20
Credit valuation adjustments
1
(44)
(66)
Funding valuation adjustments
(49)
(73)
Debit valuation adjustments
2
0
Other valuation adjustments
(913)
(820)
of which: liquidity
(341)
(340)
of which: model uncertainty
(571)
(479)
1 Amounts do not include reserves against defaulted counterparties.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
488
 
Note 21
 
Fair value measurement (continued)
e) Transfers between Level 1 and Level 2
Assets and liabilities transferred
 
from Level 2 to
 
Level 1 during 2021
 
were not material. Assets and
 
liabilities transferred from Level 1
to Level 2 during 2021 were also not material.
 
 
f) Level 3 instruments: valuation techniques and inputs
 
The
 
table
 
below
 
presents
 
material
 
Level 3
 
assets
 
and
 
liabilities,
together
 
with
 
the
 
valuation
 
techniques
 
used
 
to
 
measure
 
fair
value,
 
the
 
inputs
 
used
 
in
 
a
 
given
 
valuation
 
technique
 
that
 
are
considered significant as
 
of 31 December
 
2021 and
 
unobservable,
and a range of values for those unobservable inputs.
 
The
 
range
 
of
 
values
 
represents
 
the
 
highest-
 
and lowest-level
inputs
 
used in
 
the valuation
 
techniques. Therefore,
 
the range
 
does
not reflect the level of
 
uncertainty regarding a particular input or
an
 
assessment
 
of
 
the
 
reasonableness
 
of
 
UBS’s
 
estimates
 
and
assumptions, but rather the different underlying
 
characteristics of
the
 
relevant
 
assets
 
and
 
liabilities
 
held
 
by
 
UBS.
 
The
 
ranges
 
will
therefore vary from period to period and parameter to parameter
based on characteristics
 
of the instruments
 
held at each
 
balance
sheet date. Furthermore,
 
the ranges of unobservable
 
inputs may
differ across other financial institutions,
 
reflecting the diversity of
the products in each firm’s inventory.
 
Valuation techniques and inputs used in the fair value measurement
 
of Level 3 assets and liabilities
Fair value
Significant
unobservable
input(s)
1
Range of inputs
Assets
Liabilities
Valuation
technique(s)
31.12.21
31.12.20
USD billion
31.12.21
31.12.20
31.12.21
31.12.20
low
high
weighted
average
2
low
high
weighted
average
2
unit
1
Financial assets and liabilities at fair value held for trading and Financial assets at fair
 
value not held for trading
Corporate and municipal
bonds
0.9
1.2
0.0
0.0
Relative value to
market comparable
Bond price equivalent
16
143
98
1
143
100
points
Discounted expected
cash flows
Discount margin
434
434
268
268
basis
points
Traded loans, loans
measured at fair value,
loan commitments and
guarantees
2.8
2.4
0.0
0.0
Relative value to
market comparable
Loan price equivalent
0
101
99
0
101
99
points
Discounted expected
cash flows
Credit spread
175
800
436
190
800
398
basis
points
Market comparable
and securitization
model
Credit spread
28
1,544
241
40
1,858
333
basis
points
Auction rate securities
1.6
1.5
Discounted expected
cash flows
Credit spread
115
197
153
100
188
140
basis
points
Investment fund units
3
0.1
0.1
0.0
0.0
Relative value to
market comparable
Net asset value
Equity instruments
3
0.8
0.7
0.1
0.0
Relative value to
market comparable
Price
Debt issued designated at
fair value
4
11.9
9.6
Other financial liabilities
designated at fair value
3.2
2.1
Discounted expected
cash flows
Funding spread
24
175
42
175
basis
points
Derivative financial instruments
Interest rate contracts
0.5
0.5
0.3
0.5
Option model
Volatility of interest
rates
65
81
29
69
basis
points
Credit derivative contracts
0.2
0.3
0.3
0.5
Discounted expected
cash flows
Credit spreads
 
1
583
1
489
basis
points
Bond price equivalent
2
136
0
100
points
Equity / index contracts
0.4
0.9
1.5
2.3
Option model
Equity dividend yields
0
11
0
13
%
Volatility of equity
stocks, equity and
other indices
4
98
4
100
%
Equity-to-FX
correlation
(29)
76
(34)
65
%
Equity-to-equity
correlation
(25)
100
(16)
100
%
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,
 
rates-linked and credit-
linked notes, all of which have embedded derivative parameters that are considered to be unobservable.
 
The equivalent derivative instrument parameters are presented in the respective derivative financial instruments
lines in this table.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
489
 
Note 21
 
Fair value measurement (continued)
Significant unobservable inputs in Level 3 positions
This section discusses the significant unobservable inputs
 
used in the valuation of Level 3
 
instruments and assesses the potential effect
that a change in each
 
unobservable input in isolation
 
may have on a
 
fair value measurement. Relationships
 
between observable and
unobservable inputs have not been included in the summary below.
 
Input
Description
Bond price equivalent
–
 
Where market
 
prices are
 
not available
 
for a
 
bond, fair
 
value is
 
measured by comparison
 
with observable
 
pricing data
 
from
similar instruments. Factors considered when
 
selecting comparable instruments include credit
 
quality, maturity and industry of
the issuer. Fair value may be measured either by a direct price comparison or by conversion of
 
an instrument price into a yield
(either as an outright yield or as a spread to
 
the relevant benchmark rate).
 
–
 
For corporate and municipal bonds,
 
the range represents the range
 
of prices from reference issuances
 
used in determining fair
value. Bonds priced at 0 are distressed to the point that no
 
recovery is expected, while prices significantly in excess of 100 or
par
 
relate
 
to
 
inflation-linked
 
or
 
structured
 
issuances
 
that
 
pay
 
a
 
coupon
 
in
 
excess
 
of
 
the
 
market
 
benchmark
 
as
 
of
 
the
measurement date.
–
 
For credit derivatives, the bond price range
 
represents the range of prices used for
 
reference instruments, which are typically
converted to an equivalent yield or credit
 
spread as part of the valuation process.
Loan price equivalent
–
 
Where market prices are not available
 
for a traded loan, fair value is measured
 
by comparison with observable
 
pricing data for
similar instruments.
 
Factors considered
 
when selecting
 
comparable instruments include
 
industry segment, collateral
 
quality,
maturity and issuer-specific covenants. Fair value may be measured either by a direct price comparison
 
or by conversion of an
instrument price
 
into a yield.
 
The range represents
 
the range
 
of prices
 
derived from
 
reference issuances
 
of a similar
 
credit quality
used to
 
measure fair
 
value for
 
loans classified
 
as Level 3.
 
Loans priced
 
at 0
 
are distressed
 
to the
 
point that
 
no recovery
 
is
expected, while a current price of 100 represents
 
a loan that is expected to be repaid in full.
Credit spread
–
 
Valuation models for many credit derivatives
 
require an input for the credit
 
spread, which is a reflection of the
 
credit quality of
the associated referenced
 
underlying. The credit
 
spread of a
 
particular security is
 
quoted in relation
 
to the yield
 
on a benchmark
security or reference rate, typically either US Treasury or ARR,
 
and is generally expressed in terms of basis points. An increase
 
/
(decrease) in credit
 
spread will increase
 
/ (decrease) the
 
value of credit
 
protection offered by
 
credit default swaps
 
and other
credit derivative
 
products. The
 
income statement
 
effect from
 
such changes
 
depends on
 
the nature
 
and direction
 
of the
 
positions
held. Credit spreads may
 
be negative where the asset
 
is more creditworthy than the
 
benchmark against which the spread
 
is
calculated. A
 
wider credit spread
 
represents decreasing creditworthiness. The
 
range represents a
 
diverse set
 
of underlyings,
with the lower
 
end of the
 
range representing
 
credits of the
 
highest quality
 
and the upper
 
end of the
 
range representing
 
greater
levels of credit risk.
Discount margin
–
 
The discount margin (DM) spread represents the
 
discount rates applied to present value
 
cash flows of an asset
 
to reflect the
market return required for uncertainty in the
 
estimated cash flows. DM spreads are
 
a rate or rates applied on top of a floating
index (e.g., Secured Overnight Financing
 
Rate (SOFR)) to discount expected
 
cash flows. Generally, a decrease
 
/ (increase) in the
DM in isolation would result in a higher / (lower)
 
fair value.
–
 
The high end
 
of the
 
range relates
 
to securities
 
that are priced
 
low within
 
the market
 
relative to the
 
expected cash
 
flow schedule.
This indicates
 
that the
 
market is
 
pricing an
 
increased risk
 
of credit
 
loss into
 
the security
 
that is
 
greater than
 
what is
 
being
captured by the
 
expected cash
 
flow generation process.
 
The low e
 
nds of
 
the ranges are
 
typical of funding
 
rates on
 
better-
quality instruments.
Funding spread
–
 
Structured financing transactions are valued using synthetic funding curves that best represent the assets that are pledged as
collateral for the transactions. They are not representative
 
of where UBS can fund itself on an unsecured basis, but
 
provide an
estimate of where UBS can source and deploy secured funding with counterparties for a given type of collateral. The funding
spreads are expressed in terms of basis points,
 
and if funding spreads widen, this increases the
 
effect of discounting.
 
–
 
A small proportion of structured
 
debt instruments and non-structured
 
fixed-rate bonds within financial
 
liabilities designated at
fair value had an exposure to funding spreads that
 
was longer in duration than the actively traded
 
market.
Volatility
–
 
Volatility measures the variability of future prices
 
for a particular instrument and is generally
 
expressed as a percentage, where
a higher number reflects a more volatile instrument, for which future price movements are
 
more likely to occur. Volatility is a
key input
 
into option
 
models, where it
 
is used
 
to derive
 
a probability-based
 
distribution of
 
future prices
 
for the
 
underlying
instrument. The effect
 
of volatility on
 
individual positions within
 
the portfolio is
 
driven primarily by
 
whether the option
 
contract
is a
 
long or
 
short position.
 
In most
 
cases, the
 
fair value
 
of an
 
option increases
 
as a
 
result of
 
an increase
 
in volatility
 
and is
reduced by
 
a decrease
 
in volatility.
 
Generally,
 
volatility used
 
in the
 
measurement of fair
 
value is
 
derived from
 
active-market
option prices
 
(referred to
 
as implied
 
volatility). A
 
key feature
 
of implied
 
volatility is
 
the volatility
 
“smile” or
 
“skew,” which
represents the effect of pricing options of
 
different option strikes at different implied volatility
 
levels.
–
 
Volatilities of low interest rates tend to be much higher than volatilities of high interest rates. In addition, different currencies
may have significantly different implied volatilities.
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
490
 
Note 21
 
Fair value measurement (continued)
Input
Description
Correlation
–
 
Correlation measures the interrelationship between the movements of two variables. It is expressed as a percentage between
 
–100% and
 
+100%, where
 
+100% represents
 
perfectly correlated
 
variables (meaning
 
a movement
 
of one
 
variable is
 
associated
with a
 
movement of the
 
other variable in
 
the same direction)
 
and –100% implies
 
that the variables
 
are inversely correlated
(meaning a movement
 
of one variable
 
is associated with
 
a movement of
 
the other variable
 
in the opposite
 
direction). The
 
effect
of correlation on the measurement of fair value depends on the specific terms of the instruments being valued, reflecting the
range of different payoff features within
 
such instruments.
–
 
Equity-to-FX correlation is important for equity options based on
 
a currency other than the
 
currency of the underlying stock.
Equity-to-equity correlation is particularly important for complex options that incorporate, in some
 
manner, different equities
in the projected payoff.
Equity dividend yields
–
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
491
 
Note 21
 
Fair value measurement (continued)
g) Level 3 instruments: sensitivity to changes in unobservable input assumptions
The table
 
below summarizes
 
those financial
 
assets and
 
liabilities
classified
 
as
 
Level 3
 
for
 
which
 
a
 
change
 
in
 
one
 
or
 
more
 
of
 
the
unobservable inputs
 
to reflect
 
reasonably possible
 
favorable and
unfavorable
 
alternative
 
assumptions
 
would
 
change
 
fair
 
value
significantly,
 
and
 
the estimated
 
effect
 
thereof.
 
The
 
table
 
below
does
 
not
 
represent
 
the
 
estimated
 
effect
 
of
 
stress
 
scenarios.
Interdependencies between Level 1, 2 and 3
 
parameters have not
been
 
incorporated
 
in
 
the
 
table.
 
Furthermore,
 
direct
 
inter-
relationships between the
 
Level 3 parameters discussed
 
below are
not a significant element of the valuation uncertainty.
Sensitivity
 
data
 
is
 
estimated
 
using
 
a
 
number
 
of
 
techniques,
including
 
the
 
estimation
 
of
 
price
 
dispersion
 
among
 
different
market
 
participants,
 
variation
 
in
 
modeling
 
approaches
 
and
reasonably possible
 
changes to assumptions
 
used within the
 
fair
value measurement process. The sensitivity ranges are not always
symmetrical
 
around
 
the
 
fair
 
values,
 
as
 
the
 
inputs
 
used
 
in
valuations are not always precisely in
 
the middle of the favorable
and unfavorable range.
Sensitivity data
 
is determined
 
at a
 
product or
 
parameter level
and
 
then
 
aggregated
 
assuming
 
no
 
diversification
 
benefit.
Diversification
 
would
 
incorporate
 
estimated
 
correlations
 
across
different sensitivity results and, as such, would result in an overall
sensitivity
 
that
 
would
 
be
 
less
 
than
 
the
 
sum
 
of
 
the
 
individual
component
 
sensitivities.
 
However,
 
UBS
 
believes
 
that
 
the
diversification benefit is not significant to this analysis.
 
 
 
Sensitivity of fair value measurements to changes
 
in unobservable input assumptions
1
31.12.21
31.12.20
USD million
Favorable
 
changes
Unfavorable
 
changes
Favorable
 
changes
Unfavorable
 
changes
Traded loans, loans designated at fair value, loan commitments and guarantees
19
(13)
29
(28)
Securities financing transactions
41
(53)
40
(52)
Auction rate securities
66
2
(66)
2
105
(105)
Asset-backed securities
20
(20)
41
(41)
Equity instruments
173
(146)
129
(96)
Interest rate derivative contracts, net
29
(19)
11
(16)
Credit derivative contracts, net
5
(8)
10
(14)
Foreign exchange derivative contracts, net
19
(11)
20
(15)
Equity / index derivative contracts, net
368
(335)
318
(294)
Other
50
(73)
91
(107)
Total
790
(744)
794
(768)
1 Sensitivity of issued and
 
over-the-counter debt instruments
 
is reported with the equivalent
 
derivative or securities financing
 
instrument.
 
2 Includes refinements applied in estimating
 
valuation uncertainty across
various parameters and a change in assumptions regarding the underlying statistical distribution.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
492
 
Note 21
 
Fair value measurement (continued)
h) Level 3 instruments: movements during the period
The
 
table below
 
presents
 
additional
 
information about
 
material
movements in Level 3 assets and
 
liabilities measured at fair
 
value
on a recurring basis, excluding any related hedging activity.
Assets
 
and
 
liabilities
 
transferred
 
into
 
or
 
out
 
of
 
Level 3
 
are
presented as
 
if those
 
assets or
 
liabilities had
 
been transferred
 
at
the beginning of the year.
 
Movements of Level 3 instruments
Total gains / losses
included in
comprehensive income
USD billion
Balance
 
as of
31 December
2019
Net gains /
losses
included in
income
1
of which:
related to
Level 3
instruments
held at the
end of the
reporting
period
Purchases
Sales
Issuances
Settlements
Transfers
 
into
 
Level 3
Transfers
 
out of
 
Level 3
Foreign
currency
translation
Balance
 
as of
 
31 December
2020
Financial assets at fair value held for
trading
1.8
(0.1)
(0.1)
0.8
(1.4)
1.0
0.0
0.3
0.0
0.0
2.3
of which:
Investment fund units
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Corporate and municipal bonds
0.5
0.0
0.0
0.7
(0.5)
0.0
0.0
0.1
0.0
0.0
0.8
Loans
0.8
0.0
(0.1)
0.0
(0.7)
1.0
0.0
0.1
0.0
0.0
1.1
Other
0.4
0.0
0.0
0.1
(0.3)
0.0
0.0
0.2
0.0
0.0
0.4
Derivative financial instruments –
assets
1.3
0.3
0.4
0.0
0.0
0.7
(0.5)
0.1
(0.2)
0.1
1.8
of which:
Interest rate contracts
0.3
0.2
0.2
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.5
Equity / index contracts
0.6
0.1
0.1
0.0
0.0
0.6
(0.3)
0.0
(0.1)
0.0
0.9
Credit derivative contracts
0.4
0.0
0.0
0.0
0.0
0.1
(0.2)
0.1
0.0
0.0
0.3
Other
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Financial assets at fair value not held
for trading
4.0
0.0
0.1
0.8
(0.9)
0.0
0.0
0.1
0.0
0.0
3.9
of which:
Loans
1.2
0.0
0.0
0.3
(0.7)
0.0
0.0
0.0
0.0
0.0
0.9
Auction rate securities
1.5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.5
Equity instruments
0.5
0.0
0.0
0.1
(0.1)
0.0
0.0
0.0
0.0
0.0
0.5
Other
0.7
0.0
0.0
0.4
(0.2)
0.0
0.0
0.0
0.0
0.0
1.0
Derivative financial instruments –
liabilities
2.0
1.3
1.2
0.0
0.0
1.2
(0.9)
0.4
(0.6)
0.1
3.5
of which:
Interest rate contracts
0.1
0.3
0.3
0.0
0.0
0.3
(0.2)
0.2
(0.2)
0.0
0.5
Equity / index contracts
1.3
1.0
0.8
0.0
0.0
0.8
(0.6)
0.1
(0.2)
0.0
2.3
Credit derivative contracts
0.5
0.0
0.0
0.0
0.0
0.1
(0.1)
0.1
(0.2)
0.0
0.5
Other
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
Debt issued designated at fair value
9.6
0.0
(0.2)
0.0
0.0
6.6
(5.6)
0.5
(1.7)
0.2
9.6
Other financial liabilities designated
at fair value
1.0
0.2
0.2
0.0
0.0
1.4
(0.6)
0.0
0.0
0.0
2.1
1 Net gains / losses
 
included in comprehensive income
 
are composed of Net interest
 
income, Other net
 
income from financial instruments
 
measured at fair value
 
through profit or loss
 
and Other income.
 
2 Total
Level 3 assets as of 31 December 2021 were USD
7.6
 
billion (31 December 2020: USD
8.3
 
billion). Total Level 3 liabilities as of 31 December 2021 were USD
17.4
 
billion (31 December 2020: USD
15.2
 
billion).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
493
 
Note 21
 
Fair value measurement (continued)
 
 
 
 
 
 
Total gains / losses
included in
comprehensive income
Balance
 
as of
31 December
2020
2
Net gains /
losses
included in
income
1
of which:
related to
Level 3
instruments
held at the
end of the
reporting
period
Purchases
Sales
Issuances
Settlements
Transfers
 
into
 
Level 3
Transfers
 
out of
 
Level 3
Foreign
 
currency
 
translation
Balance
 
as of
 
31 December
2021
2
2.3
0.0
(0.1)
0.3
(1.6)
1.2
0.0
0.3
(0.3)
0.0
2.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.8
0.0
0.0
0.2
(0.4)
0.0
0.0
0.0
(0.1)
0.0
0.6
1.1
0.0
0.0
0.0
(0.8)
1.2
0.0
0.0
(0.2)
0.0
1.4
0.4
0.0
0.0
0.1
(0.4)
0.0
0.0
0.3
0.0
0.0
0.3
1.8
(0.2)
(0.1)
0.0
0.0
0.5
(0.7)
0.1
(0.3)
0.0
1.1
0.5
0.1
0.1
0.0
0.0
0.1
(0.2)
0.0
(0.1)
0.0
0.5
0.9
(0.1)
(0.1)
0.0
0.0
0.3
(0.4)
0.0
(0.2)
0.0
0.4
0.3
(0.1)
(0.1)
0.0
0.0
0.0
(0.1)
0.0
0.0
0.0
0.2
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
3.9
0.1
0.1
1.0
(0.6)
0.0
0.0
0.1
(0.3)
0.0
4.2
0.9
0.0
0.0
0.6
(0.3)
0.0
0.0
0.0
(0.3)
0.0
0.9
1.5
0.1
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.6
0.5
0.1
0.1
0.1
(0.1)
0.0
0.0
0.0
0.0
0.0
0.7
1.0
0.0
(0.1)
0.3
(0.2)
0.0
0.0
0.0
0.0
0.0
1.0
3.5
0.2
0.0
0.0
0.0
0.9
(1.8)
0.0
(0.5)
0.0
2.2
0.5
(0.1)
(0.1)
0.0
0.0
0.0
(0.1)
0.0
0.0
0.0
0.3
2.3
0.3
0.1
0.0
0.0
0.8
(1.5)
0.0
(0.4)
0.0
1.5
0.5
(0.1)
(0.1)
0.0
0.0
0.0
0.0
0.0
(0.1)
0.0
0.3
0.1
0.1
0.0
0.0
0.0
0.0
(0.1)
0.0
0.0
0.0
0.1
9.6
0.7
0.6
0.0
0.0
7.1
(4.2)
0.1
(1.2)
(0.2)
11.9
2.1
0.0
0.0
0.0
0.0
1.3
(0.2)
0.0
0.0
0.0
3.2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
494
 
Note 21
 
Fair value measurement (continued)
 
i) Maximum exposure to credit risk for financial instruments measured at fair value
The tables below provide
 
UBS AG’s maximum exposure
 
to credit
risk
 
for
 
financial
 
instruments
 
measured
 
at
 
fair
 
value
 
and
 
the
respective
 
collateral
 
and
 
other
 
credit
 
enhancements
 
mitigating
credit risk for these classes of financial instruments.
 
The
 
maximum
 
exposure
 
to
 
credit
 
risk
 
includes
 
the
 
carrying
amounts of financial
 
instruments recognized on
 
the balance sheet
subject
 
to
 
credit
 
risk
 
and
 
the
 
notional
 
amounts
 
for
 
off-balance
sheet arrangements.
 
Where information
 
is available,
 
collateral is
presented at fair value.
 
For other collateral, such as
 
real estate, a
reasonable alternative
 
value is
 
used. Credit
 
enhancements, such
as credit derivative contracts
 
and guarantees, are included
 
at their
notional amounts. Both are capped at the maximum
 
exposure to
credit risk for which
 
they serve as
 
security. The “Risk management
and control” section of this
 
report describes management’s view
of credit risk and
 
the related exposures,
 
which can differ
 
in certain
respects from the requirements of IFRS.
 
 
Maximum exposure to credit risk
 
31.12.21
Maximum
exposure to
credit risk
Collateral
Credit enhancements
Exposure to
credit risk
after collateral
and credit
enhancements
USD billion
Cash
collateral
received
Collateral-
ized by
securities
Secured by
real estate
Other
 
collateral
Netting
Credit
derivative
contracts
Guarantees
 
Financial assets measured at
 
fair value on the balance sheet
1
Financial assets at fair value
 
held for trading – debt instruments
2,3
22.6
 
22.6
Derivative financial instruments
4,5
118.1
4.2
103.2
 
10.7
Brokerage receivables
21.8
0.0
21.6
 
 
 
 
0.2
Financial assets at fair value not
 
held for trading – debt instruments
6
37.0
0.0
11.2
 
 
 
25.7
Total financial assets measured at fair value
199.5
0.0
37.1
0.0
0.0
103.2
0.0
0.0
59.2
Guarantees
7
0.2
 
 
 
0.0
 
0.2
0.0
31.12.20
Maximum
exposure to
credit risk
Collateral
Credit enhancements
Exposure to
credit risk
after collateral
and credit
enhancements
USD billion
Cash
collateral
received
Collateral-
ized by
securities
Secured by
real estate
Other
 
collateral
Netting
Credit
derivative
contracts
Guarantees
 
Financial assets measured at
 
fair value on the balance sheet
1
Financial assets at fair value
 
held for trading – debt instruments
2,3
24.7
 
 
24.7
Derivative financial instruments
4,5
159.6
6.0
138.4
 
 
15.2
Brokerage receivables
24.7
24.4
 
 
 
 
0.3
Financial assets at fair value not
 
held for trading – debt instruments
6
58.2
0.0
13.2
 
 
 
 
45.0
Total financial assets measured at fair value
267.2
0.0
43.6
0.0
0.0
138.4
0.0
0.0
85.2
Guarantees
7
0.5
 
 
 
0.1
 
0.3
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 These positions are generally managed under the market risk framework. For
the purpose of this disclosure, collateral and credit enhancements were
 
not considered.
 
3 Does not include investment fund units.
 
4 Includes USD
0
 
million (31 December 2020: USD
0
 
million) fair values of loan
commitments and forward starting reverse repurchase
 
agreements classified as derivatives. The
 
full contractual committed amount of forward
 
starting reverse repurchase agreements (generally highly
 
collateralized)
of USD
27.8
 
billion (31 December 2020: USD
21.9
 
billion) and derivative loan commitments (generally unsecured) of USD
8.2
 
billion, of which USD
0.8
 
billion has been sub-participated (31 December 2020: USD
9.4
billion, of which USD
0.8
 
billion had been sub-participated), is presented in Note 10
 
under notional amounts.
 
5 The amount shown in the “Netting” column represents
 
the netting potential not recognized on the
balance sheet. Refer to Note 22
 
for more information.
 
6 Financial assets at fair value
 
not held for trading collateralized
 
by securities consisted of structured loans
 
and reverse repurchase and securities borrowing
agreements.
 
7 The amount shown in the “Guarantees” column largely relates to sub-participations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
495
 
Note 21
 
Fair value measurement (continued)
 
j) 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
31.12.21
31.12.20
Carrying
amount
Fair value
Carrying
amount
Fair value
USD billion
Total
Carrying
amount
approximates
fair value
1
Level 1
Level 2
Level 3
Total
Total
Carrying
amount
approximates
fair value
1
Level 1
Level 2
Level 3
Total
Assets
2
Cash and balances at central banks
192.8
192.7
0.1
0.0
0.0
192.8
158.2
158.1
0.1
0.0
0.0
158.2
Loans and advances to banks
15.4
14.6
0.0
0.7
0.0
15.3
15.3
14.6
0.0
0.6
0.1
15.3
Receivables from securities financing
transactions
75.0
71.6
0.0
1.3
2.1
75.0
74.2
64.9
0.0
7.6
1.7
74.2
Cash collateral receivables on derivative
instruments
30.5
30.5
0.0
0.0
0.0
30.5
32.7
32.7
0.0
0.0
0.0
32.7
Loans and advances to customers
398.7
163.7
0.0
43.8
190.4
397.9
381.0
173.1
0.0
34.2
174.9
382.3
Other financial assets measured at amortized
cost
26.2
4.1
9.3
10.7
2.4
26.5
27.2
5.4
9.4
10.9
2.3
28.0
Liabilities
2
Amounts due to banks
13.1
9.1
0.0
4.0
0.0
13.1
11.0
8.5
0.0
2.6
0.0
11.1
Payables from securities financing
transactions
5.5
4.1
0.0
1.5
0.0
5.5
6.3
6.0
0.0
0.2
0.0
6.3
Cash collateral payables on derivative
instruments
31.8
31.8
0.0
0.0
0.0
31.8
37.3
37.3
0.0
0.0
0.0
37.3
Customer deposits
544.8
537.6
0.0
7.3
0.0
544.8
527.9
521.8
0.0
6.2
0.0
528.0
Funding from UBS Group AG
57.3
2.8
0.0
56.0
0.0
58.8
54.0
0.0
0.0
55.6
0.0
55.6
Debt issued measured at amortized cost
82.4
13.0
0.0
69.8
0.0
82.8
85.4
16.4
0.0
70.0
0.0
86.3
Other financial liabilities measured at
amortized cost
3
6.3
6.3
0.0
0.0
0.0
6.3
6.6
6.6
0.0
0.0
0.1
6.7
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 As of 31 December 2021,
 
USD
0
 
billion (31 December 2020: USD
0
 
billion) of Cash and balances
 
at central banks,
USD
0
 
billion (31 December 2020: USD
0
 
billion) of Loans and advances to banks, USD
1
 
billion (31 December 2020: USD
1
 
billion) of Receivables from securities financing transactions, USD
175
 
billion (31 December
2020: USD
163
 
billion) of Loans and advances to customers, USD
19
 
billion (31 December 2020: USD
20
 
billion) of Other financial assets measured at amortized cost, USD
1
 
billion (31 December 2020: USD
0
 
billion)
of Amounts due to banks,
 
USD
4
 
billion (31 December 2020:
 
USD
3
 
billion) of Customer deposits,
 
USD
53
 
billion (31 December 2020: USD
49
 
billion) of Funding from
 
UBS Group AG,
 
USD
31
 
billion (31 December
2020: USD
31
 
billion) of Debt issued measured at amortized cost and USD
3
 
billion (31 December 2020: USD
3
 
billion) of Other financial liabilities measured at amortized cost were expected to be recovered or settled
after 12 months.
 
3 Excludes lease liabilities.
 
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
496
 
Note 22
 
Offsetting financial assets and financial liabilities
UBS
 
AG
 
enters
 
into
 
netting
 
agreements
 
with
 
counterparties
 
to
manage the credit risks
 
associated primarily with repurchase
 
and
reverse repurchase transactions,
 
securities borrowing
 
and lending,
over-the-counter
 
derivatives
 
and
 
exchange-traded
 
derivatives.
These
 
netting
 
agreements
 
and
 
similar
 
arrangements
 
generally
enable
 
the
 
counterparties
 
to
 
set
 
off
 
liabilities
 
against
 
available
assets received
 
in the ordinary
 
course of business
 
and / or
 
in the
event
 
that
 
the
 
counterparties
 
to
 
the
 
transaction
 
are
 
unable
 
to
fulfill their contractual obligations.
 
The tables on this page and the next page
 
provide a summary
of
 
financial
 
assets
 
and
 
financial
 
liabilities
 
subject
 
to
 
offsetting,
enforceable master netting
 
arrangements and
 
similar agreements,
as well as
 
financial collateral received
 
or pledged to
 
mitigate credit
exposures for these financial instruments.
 
UBS
 
AG
 
engages
 
in
 
a
 
variety
 
of
 
counterparty
 
credit
 
risk
mitigation
 
strategies
 
in
 
addition
 
to
 
netting
 
and
 
collateral
arrangements. Therefore, the
 
net amounts presented
 
in the tables
on this page and the next page do not purport to
 
represent their
actual credit risk exposure.
 
 
Financial assets subject to offsetting, enforceable
 
master netting arrangements and similar
 
agreements
Assets subject to netting arrangements
 
Netting recognized on the balance sheet
Netting potential not recognized on
the balance sheet
3
Assets not
subject to netting
arrangements
4
Total assets
As of 31.12.21, USD billion
Gross assets
before netting
Netting with
 
gross liabilities
2
Net assets
recognized
on the
balance
 
sheet
Financial
liabilities
Collateral
received
Assets after
consideration
of
netting
potential
Assets
recognized
on the
balance
 
sheet
Total assets
after
consideration
of netting
 
potential
Total assets
recognized
 
on the
 
balance
sheet
Receivables from securities
 
financing transactions
67.7
(13.8)
53.9
(2.9)
(51.0)
0.0
21.1
21.1
75.0
Derivative financial instruments
 
116.0
(3.6)
112.4
(88.9)
(18.5)
5.0
5.8
10.7
118.1
Cash collateral receivables on
 
derivative instruments
1
29.4
0.0
29.4
(15.2)
(3.3)
11.0
1.1
12.1
30.5
Financial assets at fair value
 
not held for trading
93.1
(87.6)
5.5
(1.1)
(4.4)
0.0
54.1
54.1
59.6
of which: reverse
 
repurchase agreements
93.1
(87.6)
5.5
(1.1)
(4.4)
0.0
0.3
0.3
5.8
Total assets
306.2
(105.0)
201.2
(108.1)
(77.2)
15.9
82.1
98.1
283.3
As of 31.12.20, USD billion
Receivables from securities
 
financing transactions
70.3
(13.4)
57.0
(1.7)
(55.3)
0.0
17.3
17.3
74.2
Derivative financial instruments
 
156.9
(5.0)
151.9
(117.2)
(27.2)
7.5
7.7
15.2
159.6
Cash collateral receivables on
 
derivative instruments
1
31.9
0.0
31.9
(19.6)
(1.5)
10.8
0.8
11.6
32.7
Financial assets at fair value
 
not held for trading
85.6
(79.1)
6.5
(0.8)
(5.8)
0.0
73.5
73.5
80.0
of which: reverse
 
repurchase agreements
85.6
(79.1)
6.5
(0.8)
(5.8)
0.0
0.2
0.2
6.7
Total assets
344.8
(97.5)
247.3
(139.3)
(89.8)
18.3
99.3
117.6
346.6
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 on the following page. Netting in this column for reverse repurchase agreements presented within the lines
“Receivables from securities financing
 
transactions” and “Financial assets
 
at fair value not held
 
for trading” taken together
 
corresponds to the amounts presented
 
for repurchase agreements in the
 
“Payables from
securities financing transactions” and “Other financial
 
liabilities designated at fair value” lines in the
 
liabilities table presented on the following
 
page.
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
497
 
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 sheet
3
Liabilities not
subject
 
to netting
 
arrangements
4
Total liabilities
As of 31.12.21, USD billion
Gross
liabilities
before
netting
Netting with
 
gross assets
2
Net
 
liabilities
recognized
on the
balance
sheet
Financial
assets
Collateral
pledged
Liabilities
after
consideration of
 
netting
potential
Liabilities
recognized
on the
balance
 
sheet
Total
 
liabilities
 
after
consideration
of netting
potential
Total
 
liabilities
recognized
on the
balance
 
sheet
Payables from securities
 
financing transactions
16.9
(12.8)
4.1
(1.8)
(2.3)
0.0
1.4
1.4
5.5
Derivative financial instruments
 
118.4
(3.6)
114.9
(88.9)
(18.1)
7.9
6.4
14.3
121.3
Cash collateral payables on
 
derivative instruments
1
30.4
0.0
30.4
(13.1)
(3.3)
14.0
1.4
15.4
31.8
Other financial liabilities
 
designated at fair value
94.8
(88.6)
6.2
(2.2)
(3.8)
0.2
26.3
26.5
32.4
of which: repurchase agreements
94.6
(88.6)
6.0
(2.2)
(3.8)
0.0
0.4
0.4
6.4
Total liabilities
260.6
(105.0)
155.6
(106.0)
(27.5)
22.1
35.5
57.6
191.1
As of 31.12.20, USD billion
Payables from securities
 
financing transactions
18.2
(13.3)
4.9
(1.6)
(3.3)
0.0
1.4
1.4
6.3
Derivative financial instruments
 
157.1
(5.0)
152.1
(117.2)
(23.9)
10.9
9.0
19.9
161.1
Cash collateral payables on
 
derivative instruments
1
35.6
0.0
35.6
(19.6)
(2.1)
13.9
1.7
15.7
37.3
Other financial liabilities
 
designated at fair value
87.0
(79.2)
7.8
(0.8)
(6.3)
0.7
24.0
24.7
31.8
of which: repurchase agreements
86.2
(79.2)
7.0
(0.8)
(6.3)
0.0
0.3
0.3
7.3
Total liabilities
297.8
(97.5)
200.3
(139.2)
(35.5)
25.6
36.2
61.7
236.5
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 on the
 
previous page.
 
Netting in this
 
column for repurchase
 
agreements presented
 
within the lines
 
“Payables from
 
securities
financing transactions” and “Other financial liabilities designated at fair value”
 
taken together corresponds to the amounts presented
 
for reverse repurchase agreements in the “Receivables from securities
 
financing
transactions” and “Financial assets
 
at fair value not
 
held for trading” lines
 
in the assets table presented
 
on the previous page.
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
498
 
Note 23
 
Restricted and transferred financial assets
This Note provides
 
information about
 
restricted financial assets
 
(Note 23a), transfers
 
of financial
 
assets (Note 23b
 
and 23c) and
 
financial
assets that are received as collateral with the right to resell or repledge these assets (Note 23d).
a) Restricted financial assets
Restricted
 
financial assets
 
consist of
 
assets
 
pledged as
 
collateral
against an existing liability or contingent liability and other assets
that are
 
otherwise explicitly
 
restricted
 
such that
 
they cannot
 
be
used to secure funding.
 
Financial
 
assets
 
are
 
mainly
 
pledged
 
as
 
collateral
 
in
 
securities
lending
 
transactions,
 
in
 
repurchase
 
transactions,
 
against
 
loans
from
 
Swiss
 
mortgage
 
institutions
 
and
 
in
 
connection
 
with
 
the
issuance
 
of
 
covered
 
bonds.
 
UBS
 
AG
 
generally
 
enters
 
into
repurchase
 
and securities
 
lending
 
arrangements
 
under
 
standard
market
 
agreements.
 
For
 
securities lending,
 
the cash
 
received
 
as
collateral may be more or less than the fair value of the securities
loaned,
 
depending
 
on
 
the
 
nature
 
of
 
the
 
transaction.
 
For
repurchase agreements, the fair value of the collateral sold under
an
 
agreement
 
to
 
repurchase
 
is
 
generally
 
in
 
excess
 
of
 
the
 
cash
borrowed. Pledged mortgage loans serve as collateral for existing
liabilities
 
against
 
Swiss
 
central
 
mortgage
 
institutions
 
and
 
for
existing
 
covered
 
bond
 
issuances
 
of
 
USD
10,843
 
million
 
as
 
of
31 December 2021 (31 December 2020: USD
12,456
 
million).
Other restricted financial assets include assets protected under
client asset segregation
 
rules, assets held
 
by UBS AG’s
 
insurance
entities to back related liabilities to the policy holders, assets held
in certain jurisdictions to
 
comply with explicit
 
minimum local asset
maintenance requirements. The carrying
 
amount of the liabilities
associated with these other
 
restricted financial assets is
 
generally
equal to the carrying amount of the assets, with the exception of
assets held to comply with local asset maintenance requirements,
for which the associated liabilities are greater.
 
 
Restricted financial assets
 
USD million
31.12.21
31.12.20
Restricted
financial assets
of which: assets
pledged as
collateral that
may be sold or
repledged by
counterparties
of which:
mortgage loans
1
Restricted
financial assets
of which: assets
pledged as
collateral that
may be sold or
repledged by
counterparties
of which:
mortgage loans
1
Financial assets pledged as collateral
Financial assets at fair value held for trading
63,834
43,397
64,418
47,098
Loans and advances to customers
18,160
16,330
20,361
18,191
Financial assets at fair value not held for trading
961
961
2,140
2,140
Debt securities classified as Other financial assets measured
 
at amortized
cost
2,234
1,870
2,506
2,506
Financial assets measured at fair value through other comprehensive
income
0
0
149
149
Total financial assets pledged as collateral
2
85,188
89,574
Other restricted financial assets
Loans and advances to banks
3,408
3,730
Financial assets at fair value held for trading
392
741
Cash collateral receivables on derivative instruments
4,747
3,765
Loans and advances to customers
1,237
756
Financial assets at fair value not held for trading
22,328
22,917
Financial assets measured at fair value through other comprehensive
income
894
0
Other
97
110
Total other restricted financial assets
 
33,104
32,019
Total financial assets pledged and other restricted financial assets
118,292
121,593
1 All related
 
to mortgage loans
 
that serve as
 
collateral for existing
 
liabilities toward
 
Swiss central
 
mortgage institutions
 
and for existing
 
covered bond issuances.
 
Of these pledged
 
mortgage loans,
 
approximately
USD
2.7
 
billion as
 
of 31
 
December 2021
 
(31 December
 
2020: approximately
 
USD
2.7
 
billion) could
 
be withdrawn
 
or used
 
for future
 
liabilities or
 
covered bond
 
issuances without
 
breaching existing
 
collateral
requirements.
 
2 Does not
 
include assets placed
 
with central banks
 
related to undrawn
 
credit lines
 
and for payment,
 
clearing and settlement
 
purposes (31 December
 
2021: USD
4.4
 
billion; 31 December
 
2020:
USD
1.3
 
billion).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
499
 
Note 23
 
Restricted and transferred financial assets (continued)
In addition
 
to restrictions
 
on financial
 
assets, UBS
 
AG and
 
its
subsidiaries
 
are,
 
in
 
certain
 
cases,
 
subject
 
to
 
regulatory
requirements
 
that
 
affect
 
the
 
transfer
 
of
 
dividends
 
and
 
capital
within
 
UBS
 
AG,
 
as
 
well
 
as
 
intercompany
 
lending.
 
Supervisory
authorities
 
also
 
may
 
require
 
entities
 
to
 
measure
 
capital
 
and
leverage
 
ratios on
 
a
 
stressed basis,
 
such
 
as
 
the
 
Federal
 
Reserve
Board’s
 
Comprehensive
 
Capital
 
Analysis
 
and
 
Review
 
process,
which
 
may
 
limit
the
 
relevant
 
subsidiaries’
 
ability
 
to
 
make
distributions of capital based on the results of those tests.
Supervisory
 
authorities
 
generally
 
have
 
discretion
 
to
 
impose
higher
 
requirements
 
or
 
to
 
otherwise
 
limit
 
the
 
activities
 
of
subsidiaries.
 
Non-regulated
 
subsidiaries
 
are
 
generally
 
not
 
subject
 
to
 
such
requirements
 
and transfer
 
restrictions. However,
 
restrictions
 
can
also be the result
 
of different legal, regulatory,
 
contractual, entity-
or country-specific arrangements and / or requirements.
›
 
Refer to the “Financial and regulatory key figures
 
for our
significant regulated subsidiaries and sub-groups” section
 
of this
report for financial information about significant
 
regulated
subsidiaries of UBS AG
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 million
31.12.21
31.12.20
Carrying amount
of transferred
assets
Carrying amount of
 
associated liabilities
 
recognized
 
on balance sheet
Carrying amount
of transferred
assets
Carrying amount of
 
associated liabilities
 
recognized
 
on balance sheet
Financial assets at fair value held for trading that may be sold or repledged
 
by counterparties
43,397
17,687
47,098
18,874
relating to securities lending and repurchase agreements in
 
exchange for cash received
17,970
17,687
19,177
18,874
relating to securities lending agreements in exchange for securities
 
received
24,146
27,595
relating to other financial asset transfers
1,281
326
Financial assets at fair value not held for trading that may be sold or repledged
 
by
counterparties
961
898
2,140
1,378
Debt securities classified as Other financial assets measured
 
at amortized cost that may be
sold or repledged by counterparties
1,870
1,725
2,506
1,963
Financial assets measured at fair value through other comprehensive
 
income that may be sold
or repledged by counterparties
0
0
149
148
Total financial assets transferred
46,227
20,311
51,893
22,363
 
 
Transactions
 
in
 
which
 
financial
 
assets
 
are
 
transferred,
 
but
continue to
 
be recognized
 
in their entirety
 
on UBS AG’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
 
AG’s
 
normal
 
credit
 
risk
 
control
processes.
 
›
 
Refer to Note 1a item 2e for more information
 
about repurchase
and securities lending agreements
 
As
 
of
31
 
December
 
2021
,
approximately
41
%
 
of
 
the
transferred
 
financial
 
assets
 
were
 
assets
 
held
 
for
 
trading
transferred
 
in
 
exchange
 
for
 
cash,
 
in
 
which
 
case
 
the
 
associated
recognized
 
liability
 
represents
 
the
 
amount
 
to
 
be
 
repaid
 
to
counterparties. For securities
 
lending and repurchase
 
agreements,
a
 
haircut
 
of
 
between
0
%
 
and
15
%
 
is
 
generally
 
applied
 
to
 
the
transferred assets,
 
which results
 
in associated
 
liabilities having
 
a
carrying
 
amount
 
below
 
the
 
carrying
 
amount
 
of
 
the
 
transferred
assets. The counterparties to the
 
associated liabilities presented in
the table above have full recourse to UBS AG.
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
AG’s balance sheet, as
 
the risks and rewards
 
of ownership are not
transferred
 
to
 
UBS
 
AG.
 
In
 
cases
 
where
 
such
 
financial
 
assets
received
 
are
 
subsequently
 
sold
 
or
 
repledged
 
in
 
another
transaction,
 
this
 
is
 
not
 
considered
 
to
 
be
 
a
 
transfer
 
of
 
financial
assets.
Other
 
financial
 
asset
 
transfers
 
primarily
 
include
 
securities
transferred to
 
collateralize derivative
 
transactions, for
 
which the
carrying
 
amount
 
of
 
associated
 
liabilities
 
is
 
not
 
provided
 
in
 
the
table above,
 
because those
 
replacement values are
 
managed on
a
 
portfolio
 
basis
 
across
 
counterparties
 
and
 
product
 
types,
 
and
therefore
 
there
 
is
 
no
 
direct
 
relationship
 
between
 
the
 
specific
collateral pledged and the associated liability.
Transferred
 
financial
 
assets
 
that
 
are
 
not
 
subject
 
to
derecognition in
 
full but
 
remain on
 
the balance
 
sheet to
 
the extent
of
 
UBS
 
AG’s
 
continuing
 
involvement
 
were
 
not
 
material
 
as
 
of
31 December 2021 and as of 31 December 2020.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
500
 
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
 
AG’s
 
continuing
involvement from transferred positions
 
as of
 
31 December
 
2021
and
 
31
 
December
 
2020
 
was
 
not
 
material.
 
Life-to-date
 
losses
reported
 
in
 
prior
 
periods
 
primarily
 
relate
 
to
 
legacy
 
positions
 
in
securitization
 
vehicles
 
which
 
have been
 
fully marked
 
down, with
 
no
remaining exposure
 
to loss.
d) Off-balance sheet assets received
The table below presents assets received from third parties that can
 
be sold or repledged and that are not recognized on the
 
balance
sheet, but that are held as collateral, including amounts that have been sold or repledged.
 
Off-balance sheet assets received
USD million
31.12.21
31.12.20
Fair value of assets received that can be sold or repledged
497,828
500,689
received as collateral under reverse repurchase, securities borrowing
 
and lending arrangements, derivative and other transactions
1
483,426
487,904
received in unsecured borrowings
14,402
12,785
Thereof sold or repledged
2
367,440
367,258
in connection with financing activities
319,176
315,603
to satisfy commitments under short sale transactions
31,688
33,595
in connection with derivative and other transactions
1
16,575
18,059
1 Includes securities
 
received as initial
 
margin from its
 
clients that UBS
 
AG 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 2021: USD
12.7
 
billion; 31 December 2020:
 
USD
18.9
 
billion) placed with
 
central banks related
 
to undrawn credit
 
lines and for payment,
clearing and settlement purposes for which there are no associated liabilities or contingent liabilities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
501
 
 
Note 24
 
Maturity analysis of financial liabilities
The
 
residual
 
contractual
 
maturities
 
for
 
non-derivative
 
and
 
non-
trading financial liabilities as
 
of 31 December 2021
 
are based on
the earliest date
 
on which UBS
 
AG could be
 
contractually required
to pay.
 
The total amounts that contractually mature in
 
each time
band are also shown for 31 December 2020.
 
Derivative positions
and
 
trading
 
liabilities,
 
predominantly
 
made
 
up
 
of
 
short
 
sale
transactions, are assigned to the
Due within 1 month
 
column
,
 
as
this
 
provides
 
a
 
conservative
 
reflection
 
of
 
the
 
nature
 
of
 
these
trading activities. The
 
residual contractual
 
maturities may extend
over significantly longer periods.
 
Maturity analysis of financial liabilities
31.12.21
USD billion
Due within
 
1 month
Due between
 
1 and 3 months
Due between
 
3 and 12 months
Due between
 
1 and 5 years
Due after
 
5 years
Total
Financial liabilities recognized on balance sheet
1
Amounts due to banks
 
6.7
2.4
3.5
0.6
0.0
13.1
Payables from securities financing transactions
3.8
0.3
1.6
0.0
 
5.7
Cash collateral payables on derivative instruments
31.8
 
 
 
 
31.8
Customer deposits
531.0
6.6
3.3
3.9
0.4
545.1
Funding from UBS Group AG
2
0.2
3.3
2.3
28.8
30.6
65.3
Debt issued measured at amortized cost
2
3.8
9.4
38.8
25.1
7.6
84.7
Other financial liabilities measured at amortized cost
5.3
0.1
0.4
1.8
1.5
9.1
of which: lease liabilities
0.1
0.1
0.4
1.8
1.5
3.9
Total financial liabilities measured at amortized cost
582.6
22.1
49.9
60.2
40.1
754.8
Financial liabilities at fair value held for trading
3,4
31.7
 
 
 
 
31.7
Derivative financial instruments
3,5
121.3
 
 
 
 
121.3
Brokerage payables designated at fair value
44.0
 
 
 
 
44.0
Debt issued designated at fair value
6
13.8
11.5
13.5
24.5
12.5
75.9
Other financial liabilities designated at fair value
28.1
0.4
0.5
0.4
7.1
36.5
Total financial liabilities measured at fair value through profit or loss
239.0
11.9
14.0
24.9
19.6
309.4
Total
 
821.6
34.0
63.9
85.0
59.6
1,064.2
Guarantees, commitments and forward starting transactions
Loan commitments
7
38.3
0.5
0.7
0.0
 
39.5
Guarantees
21.2
 
0.0
 
 
21.2
Forward starting transactions, reverse repurchase
and securities borrowing agreements
7
1.4
 
 
 
 
1.4
Total
 
60.9
0.5
0.7
0.0
0.0
62.1
 
 
 
31.12.20
USD billion
Due within
 
1 month
Due between
 
1 and 3 months
Due between
 
3 and 12 months
Due between
 
1 and 5 years
Due after
 
5 years
Total
Financial liabilities recognized on balance sheet
1
Amounts due to banks
 
6.1
2.4
2.1
0.5
0.0
11.1
Payables from securities financing transactions
5.6
0.4
0.3
0.0
0.0
6.3
Cash collateral payables on derivative instruments
37.3
 
 
 
 
37.3
Customer deposits
514.0
7.8
3.5
2.8
0.2
528.2
Funding from UBS Group AG
2
0.1
0.3
6.2
29.1
24.8
60.5
Debt issued measured at amortized cost
2
8.8
7.8
38.2
24.5
8.9
88.2
Other financial liabilities measured at amortized cost
5.3
0.1
0.5
2.0
1.8
9.6
of which: lease liabilities
0.1
0.1
0.5
2.0
1.8
4.4
Total financial liabilities measured at amortized cost
577.2
18.9
50.7
58.8
35.8
741.3
Financial liabilities at fair value held for trading
3,4
33.6
 
 
 
 
33.6
Derivative financial instruments
3,5
161.1
 
 
 
 
161.1
Brokerage payables designated at fair value
38.7
 
 
 
 
38.7
Debt issued designated at fair value
6
21.9
16.8
7.1
9.2
6.0
61.0
Other financial liabilities designated at fair value
27.9
0.6
0.6
0.7
4.6
34.3
Total financial liabilities measured at fair value through profit or loss
283.2
17.4
7.7
9.8
10.6
328.8
Total
 
860.3
36.3
58.4
68.6
46.4
1,070.0
Guarantees, commitments and forward starting transactions
Loan commitments
7
40.5
0.5
0.4
0.0
 
41.4
Guarantees
17.5
 
 
 
 
17.5
Forward starting transactions, reverse repurchase
and securities borrowing agreements
7
3.2
 
 
 
 
3.2
Total
 
61.3
0.5
0.4
0.0
0.0
62.2
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 Due after 5 years 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
30.8
 
billion due within 1 month (31 December 2020:
USD
32.6
 
billion), USD
0.9
 
billion due between 1 month and 1 year (31 December 2020: USD
1.0
 
billion) and USD
0
 
billion due between 1 and 5 years (31 December 2020: USD
0
 
billion).
 
5 Includes USD
34
 
million
(31 December 2020: USD
32
 
million) related to fair values of derivative
 
loan commitments and forward starting
 
reverse repurchase agreements classified as derivatives,
 
presented within “Due within 1 month." The
full contractual committed amount of USD
36.0
 
billion (31 December 2020: USD
31.3
 
billion) is presented in Note 10 under notional amounts.
 
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).
 
Consolidated financial statements | UBS AG consolidated financial statements
502
 
Note 25
 
Interest rate benchmark reform
Background
A market-wide reform of major interest rate benchmarks is being
undertaken
 
globally,
 
with
 
the
 
Financial
 
Conduct
 
Authority
 
(the
FCA) announcing in
 
March 2021
 
that the publication
 
of London
Interbank Offered Rates (LIBORs) would cease after 31 December
2021 for
 
all non-US
 
dollar LIBORs,
 
as well
 
as for
 
one-week and
two-month USD
 
LIBOR. Publication
 
of the
 
remaining USD
 
LIBOR
tenors will cease immediately after 30 June 2023.
The
 
majority
 
of
 
UBS
 
AG’s
 
IBOR
 
exposure
 
was
 
linked
 
to
 
CHF
LIBOR and USD LIBOR.
 
The alternative reference rate
 
(the ARR) for
CHF LIBOR is
 
the Swiss Average
 
Rate Overnight (SARON).
 
The ARR
for USD LIBOR is the Secured Overnight Financing Rate (SOFR); in
addition, there are recommended ARRs for GBP LIBOR, JPY LIBOR
and EUR LIBOR.
 
The
 
Euro
 
Interbank Offered
 
Rate (EURIBOR)
 
was reformed
 
in
2019,
 
with the
 
reform consisting
 
of a
 
change in
 
the underlying
calculation
 
method.
 
Consequently,
 
contracts
 
linked
 
to
 
EURIBOR
are not considered throughout the rest of this Note.
On 25 January 2021, the IBOR Fallbacks
 
Supplement and IBOR
Fallbacks
 
Protocol,
 
which
 
amend
 
the
 
International
 
Swaps
 
and
Derivatives Association (ISDA)
 
standard definitions
 
for interest rate
derivatives to incorporate
 
fallbacks for derivatives
 
linked to certain
IBORs,
 
came
 
into
 
effect.
 
From
 
that
 
date,
 
all
 
newly
 
cleared
 
and
non-cleared derivatives
 
between adhering
 
parties that
 
reference
ISDA
 
standard
 
definitions
 
now
 
include
 
these
 
fallbacks.
 
UBS AG
adhered to the protocol in November 2020.
UBS AG’s focus throughout
 
2021 was on transitioning
 
existing
contracts via bi-lateral
 
and multi-lateral agreements,
 
by leveraging
industry
 
solutions
 
(e.
g.,
 
the
 
use
 
of
 
fallback
 
provisions)
 
and
 
through
 
third-party
 
actions
 
(those
 
by
 
clearing
 
houses,
 
agents,
etc
.
).
 
UBS
 
AG
 
h
as
 
established
 
a
 
framework
 
to
 
address
 
the
transition
 
of
 
contracts
 
that
 
do
 
not
 
contain
 
adequate
 
fallback
provisions. Furthermore, in line
 
with regulatory guidance, UBS
 
AG
has implemented a framework to limit new contracts referencing
IBORs.
 
Governance over the transition to alternative benchmark rates
UBS
 
AG
 
established
 
a
 
global
 
cross
-
divisional,
 
cross
-
functional
governance structure
 
and change
 
program
 
to address
 
the scale
and complexity of
 
the transition.
 
This global program
 
is sponsored
by
 
the
 
Group
 
CFO
 
and
 
led
 
by
 
senior
 
representatives
 
from
 
the
business
 
divisions and
 
UBS
 
AG’s control
 
and
 
support functions.
The program includes
 
governance and
 
execution structures within
each business division,
 
together with cross-divisional
 
teams from
each
 
control
 
and
 
support
 
function.
 
During
 
2021,
 
progress
 
was
overseen
 
centrally
 
via
 
a
 
monthly
 
operating
 
committee
 
and
 
a
monthly steering
 
committee, as well
 
as quarterly
 
updates to
 
the
joint Audit and Risk
 
Committees. A dedicated Group-wide
 
forum,
with an increased US
 
regional focus, will oversee
 
progress of the
remaining USD LIBOR transition.
Risks
A
 
core
 
part
 
of
 
UBS
 
AG’s
 
change
 
program
 
is
 
the
 
identification,
management
 
and
 
monitoring
 
of
 
the
 
risks
 
associated
 
with
 
IBOR
reform and transition. These
 
risks include,
 
but are not limited
 
to,
the following:
–
 
economic risks to UBS AG
 
and its clients, through
 
the repricing
of existing contracts, reduced transparency and
 
/ or liquidity of
pricing information, market uncertainty or disruption;
–
 
accounting
 
risks, where
 
the transition
 
affects the
 
accounting
treatment,
 
including
 
hedge
 
accounting
 
and
 
consequential
income statement volatility;
–
 
valuation risks arising from the variation between benchmarks
that will cease
 
and ARRs, affecting
 
the risk profile of
 
financial
instruments;
–
 
operational
 
risks
 
arising
 
from
 
changes
 
to
 
UBS
 
AG’s
 
front-to-
back
 
processes
 
and
 
systems
 
to
 
accommodate
 
the
 
transition,
e.g.
,
 
data
 
sourcing
 
and
 
processing
 
and
 
bulk
 
migration
 
of
contracts; and
–
 
legal and conduct risks relating to UBS AG’s engagement with
clients
 
and
 
market
 
counterparties
 
around
 
new
 
benchmark
products
 
and
 
amendments
 
required
 
for
 
existing
 
contracts
referencing benchmarks that will cease.
 
Overall, the effort required to transition is affected by multiple
factors, including
 
whether negotiations need
 
to
 
take place
 
with
multiple stakeholders
 
(as is the case for
 
syndicated loans
 
or certain
listed
 
securities),
 
market
 
readiness
–
 
such
 
as
 
liquidity
 
in
 
ARR
-
equivalent products – and a
 
client’s technical readiness to handle
ARR market
 
conventions.
 
UBS AG remains
 
confident
 
that it
 
has the
transparency, oversight and operational preparedness to progress
with the
 
IBOR transition
 
consistent
 
with market
 
timelines,
 
given the
significant
 
progress
 
made as
 
of 31
 
December
 
2021.
 
UBS AG
 
did not
have
 
and does
 
not expect
 
changes
 
to its
 
risk
 
management
 
approach
and strategy
 
as a result
 
of interest
 
rate benchmark
 
reform.
 
 
 
 
503
 
Note 25
 
Interest rate benchmark reform (continued)
Transition progress
 
Non-derivative instruments
UBS
 
AG’s
 
significant
 
non-derivative
 
exposures
 
subject
 
to
 
IBOR
reform
primarily
 
relate
d
 
to
 
brokerage
 
receivable
 
and
 
payable
balances, corporate
 
and private
 
loans, and
 
mortgages, linked
 
to
CHF and USD LIBORs. During 2020, UBS AG transitioned most of
its CHF
 
LIBOR-linked deposits
 
to SARON. In
 
that same
 
year,
 
UBS
AG launched
 
SARON-based mortgages
 
and corporate
 
loans based
on
 
all
 
major
 
ARRs
 
in
 
the
 
Swiss
 
market,
 
as
 
well
 
as
 
SOFR-based
mortgages in the US market.
 
Throughout 2021,
 
UBS AG
 
transitioned substantially all
 
of its
private
 
and
 
corporate
 
loans
 
linked
 
to
 
non-USD
 
IBORs,
 
with
 
the
remaining
 
CHF
 
LIBOR-linked
 
contracts
 
planned
 
to
 
transition
 
on
their first roll date in 2022.
 
In addition, as
 
of 31 December 2021
 
UBS AG had
 
completed
the
 
transition of
 
IBOR-linked
 
non-derivative
 
financial
 
assets
 
and
liabilities
 
related
 
to
 
brokerage
 
accounts,
 
except
 
for
 
balances
originated in the US, which transitioned
 
to SOFR in January 2022.
In
 
March
 
2021,
 
following
 
the FCA
 
announcement
 
regarding
the cessation
 
timelines for IBORs,
 
UBS AG
 
initiated a
 
centralized
communication
 
initiative
 
for
 
private
 
mortgages
 
linked
 
to
 
CHF
LIBOR, with the objective
 
of transitioning these exposures,
 
either
through the activation of existing fallbacks
 
or the amendment of
contractual terms where such
 
fallbacks do not exist.
 
During 2021,
mortgages
 
that
 
were
 
linked
 
to
 
CHF
 
LIBOR
were
 
reduced
to
 
USD
 
21
 
billion
 
as
 
of 31 December
 
2021,
 
with these
 
remaining
mortgages automatically
 
transitioning to
 
SARON from
 
their next
coupon roll date.
 
The
 
transition
 
of
US
 
securities
-
based
 
lending
to
 
SOFR
,
 
amounting
 
to
 
USD
37
 
billion
 
as of
 
31 December
 
2021,
 
was for
the
 
most
 
part
 
completed
 
in
 
January
 
2022,
 
with
 
US
 
mortgages
linked to USD LIBOR planned
 
to transition to SOFR
 
in 2022–2023.
As of
 
31 December 2021,
 
UBS AG
 
had approximately
 
USD
3
billion
 
equivalent
 
of
 
Japanese
 
yen-
 
and
 
US
 
dollar-denominated
funding from UBS Group AG that,
 
per current contractual terms,
if
 
not
 
called
 
on
 
their
 
respective
 
call
 
dates,
 
would
 
reset
 
based
directly on
 
JPY LIBOR
 
and USD
 
LIBOR. These
 
bonds have
 
robust
IBOR
 
fallback
 
language
 
and
 
the
 
confirmation
 
of
 
interest
 
rate
calculation mechanics will be communicated as market standards
formalize and
 
in advance
 
of any
 
rate resets.
 
In addition,
 
several
US
 
dollar
-
 
and
Swiss
 
franc
-
denominated
contracts
 
providing
funding
 
from
 
UBS
 
Group
 
AG
 
reference
 
rates
 
indirectly
 
derived
from IBORs,
 
if they
 
are not
 
called on
 
their respective
 
call dates.
UBS AG aims
 
to transition these
 
contracts in advance
 
of their reset
dates,
 
with
 
the
 
transition
 
of
 
Swiss
 
franc-denominated
 
funding
completed
 
in
 
January
 
2022.
 
These
 
debt
 
instruments
 
have
 
not
been
 
included
 
in
 
the
 
table
 
on
 
the
 
following
 
page,
 
given
 
their
current fixed-rate coupon.
As of
 
31 December 2021,
 
UBS AG
 
had approximately
 
USD
5
billion of
 
irrevocable commitments
 
that may
 
be drawn
 
down in
different currencies with IBOR-linked
 
interest rates and
 
that expire
after
 
the
 
relevant
 
benchmark
 
cessation
 
dates
;
 
approximately
USD
3
 
billion
 
of
 
these
 
contracts
 
had
 
transitioned
 
for
 
all
 
IBORs,
except
USD
 
LIBOR
,
 
and
 
USD
 
2
 
billion
 
of
 
these
commitments
retained a
 
non-USD IBOR
 
interest rate
 
as of
 
31 December 2021
with transition
 
dependent upon
 
the actions
 
of other
 
parties. To
the
 
extent
 
non-USD
 
IBOR-linked
 
amounts
 
are
 
requested
 
under
these contracts, UBS AG will seek to renegotiate current terms or
rely on legislative solutions.
Derivative instruments
 
UBS
 
AG
 
holds
 
derivatives
 
for
 
trading
 
and
 
hedging
 
purposes,
including those
 
designated in
 
hedge accounting
 
relationships. A
significant number of interest rate and cross-currency swaps
 
have
floating legs
 
that reference
 
various benchmarks
 
that are
 
subject
to IBOR reform.
The majority of derivatives
 
are transacted with clearing
 
houses,
in
 
particular
 
LCH,
 
with
 
the
 
transition
 
of
 
these
 
non-USD
 
IBOR-
linked derivatives substantially completed
 
in December 2021.
 
UBS
AG had also completed the transition of all non-USD IBOR-linked
exchange
-
traded
 
derivatives
 
(ETDs)
 
through
 
participation
 
in
activities
organized
 
by
 
respective
 
exchanges
 
by
 
31
 
December
2021.
 
For
 
derivatives
 
not
 
transacted
 
with
 
clearing
 
houses
 
or
exchanges,
 
UBS
 
AG
 
and
 
a
 
significant
 
proportion
 
of
 
UBS
 
AG’s
counterparties have adhered to the ISDA IBOR Fallbacks Protocol,
which builds in
 
agreed fallbacks. The
 
majority of these
 
contracts
had
 
transitioned as
 
of 31 December
 
2021,
 
with a
 
small number
of
 
contracts
 
transitioned
 
in
 
January
 
2022,
 
to
 
ensure
 
an
 
orderly
transition
 
when
 
converting
 
high
 
volumes
 
of
 
transactions
 
at
 
the
time of cessation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
504
 
Note 25
 
Interest rate benchmark reform (continued)
Financial instruments yet to transition to alternative benchmarks
The
 
amounts
 
included
 
in
 
the
 
table
 
below
 
relate
 
to
 
financial
instrument
 
contracts
 
across
 
UBS
 
AG’s
 
business
 
divisions
 
where
UBS AG has material exposures subject
 
to IBOR reform that have
not yet transitioned to ARRs, and that:
–
 
contractually
 
reference
 
an
 
interest
 
rate
 
benchmark
 
that
 
will
transition to an alternative benchmark; and
–
 
have
 
a
 
contractual
 
maturity
 
date
 
(including
 
open-ended
contracts) after the agreed cessation dates.
 
Contracts
where
 
penalty
 
terms
 
reference
 
IBOR
s,
 
or
 
where
exposure to
 
an IBOR
 
is not
 
the primary
 
purpose of
 
the contract,
have not been included,
 
as these contracts do
 
not have a material
impact on the transition process.
 
In line with information provided
 
to management and external
parties monitoring UBS AG’s
 
transition progress, the table below
includes the
 
following financial
 
metrics for
 
instruments external
to UBS AG that are subject to interest rate benchmark reform:
–
 
gross
 
carrying
 
value
 
/
 
exposure
 
for
 
non-derivative
 
financial
instruments;
 
and
 
–
 
total trade count for derivative financial instruments.
The
 
exposure
s
 
included
 
in
 
the
 
table
 
below
 
represent
 
the
maximum
 
IBOR
 
exposure,
 
without
 
regard
 
for
 
early
 
termination
rights,
 
with
 
the
 
actual
 
exposure
 
being
 
dependent
 
upon
 
client
preferences and investment decisions.
 
As
 
of
 
31
 
December
 
2021,
 
UBS
AG
ha
d
 
made
 
significant
progress in transitioning LIBOR exposures to ARRs. The remaining
non-USD
 
LIBOR-linked
 
exposures
 
included
 
in
 
the
 
table
 
below
primarily
 
relate
 
t
o
 
derivatives
that
 
successfully
 
transitioned
 
in
January 2022
 
and CHF
 
LIBOR mortgages
 
that will
 
automatically
transition to SARON on their first roll date in 2022.
 
 
31.12.21
LIBOR benchmark rates
Measure
CHF
USD
GBP
EUR
1
JPY
Carrying value of non-derivative financial instruments
Total non-derivative financial assets
 
USD million
21,616
2
65,234
3
45
4
1
0
Total non-derivative financial liabilities
 
USD million
27
4
1,985
4
3
4
5
0
Trade count of derivative financial instruments
Total derivative financial instruments
Trade count
829
6
40,500
7
183
6
3,744
6
184
6
Off-balance sheet exposures
Total irrevocable loan commitments
USD million
0
11,863
8
0
0
0
1 Relates primarily to EUR LIBOR positions.
 
2 Relates primarily to CHF LIBOR mortgages, which will automatically transition to SARON on their first roll date in 2022.
 
3 Includes USD LIBOR securities-based lending
and brokerage accounts, amounting to USD
37
 
billion, and USD
5
 
billion respectively, which for the most part transitioned to SOFR in January 2022, as well as USD
1
 
billion of loans related to revolving multi-currency
credit lines, where IBOR transition efforts are complete, except for USD LIBOR. The remainder primarily relates to US mortgages and corporate lending.
 
4 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.
 
5 Relates to contracts that transitioned
 
in January 2022.
 
6 Includes predominantly bilateral derivatives,
 
which
transitioned in January 2022, and an insignificant amount of cleared derivatives, where the respective clearing houses’ organized transition happened in January 2022.
 
7 Includes approximately
5,000
 
cross-currency
derivatives, of which approximately
500
 
have both a non-USD LIBOR leg and a USD LIBOR
 
leg, where the non-USD leg transitioned in January 2022 before the
 
next fixing date. The remainder represents cross-currency
swaps with an ARR leg
 
and a USD IBOR leg.
 
8 Includes loan commitments that can
 
be drawn in different currencies
 
at the client‘s discretion, of
 
which approximately USD
3
 
billion have only USD LIBOR
 
exposure
remaining and approximately USD
2
 
billion retain a non-USD
 
LIBOR interest rate as
 
of 31 December 2021, with
 
transition dependent upon the
 
actions of other parties.
 
The remainder represents loan
 
commitments
that can be drawn in US dollars only and will transition in 2022–2023.
 
 
 
 
 
505
 
Note 26 Hedge accounting
Derivatives designated in hedge accounting relationships
UBS AG 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 UBS AG
Hedging instruments and hedged risk
Interest
 
rate
 
swaps
 
are
 
designated
 
in
 
fair
 
value
 
hedges
 
or
 
cash
flow
 
hedges
 
of
 
interest
 
rate
 
risk
 
arising
 
solely
 
from
 
changes
 
in
benchmark interest rates.
 
Fair value
 
changes arising from
 
such risk
are usually the largest
 
component of the overall
 
change in the
 
fair
value of the hedged position in transaction currency.
 
Cross-currency
 
swaps are
 
designated
 
as
 
fair
 
value
 
hedges
 
of
foreign
 
exchange
 
risk.
 
Foreign
 
exchange
 
forwards
 
and
 
foreign
exchange
 
swaps
 
are
 
mainly
 
designated
 
as
 
hedges
 
of
 
structural
foreign
 
exchange
 
risk
 
related
 
to
 
net
 
investments
 
in
 
foreign
operations.
 
In
 
both
 
cases
 
the
 
hedged
 
risk
 
arises
 
solely
 
from
changes in spot foreign exchange rate.
 
The notional
 
of the
 
designated hedging
 
instruments matches
the notional
 
of the
 
hedged items,
 
except when
 
the interest
 
rate
swaps are
 
re-designated in
 
cash flow
 
hedges, in
 
which case
 
the
hedge
 
ratio
 
designated
 
is
 
determined
 
based
 
on
 
the
 
swap
sensitivity.
Hedged items and hedge designation
 
Fair value hedges of interest rate risk related to debt instruments
and loan assets
Fair value hedges of interest
 
rate risk related to debt
 
instruments
and loan assets involve
 
swapping fixed cash flows
 
associated with
the debt issued,
 
debt securities held
 
and, from 2021
 
onward, loan
assets
 
(principally
 
long-term
 
fixed-rate
 
mortgage
 
loans
 
in
 
Swiss
francs formerly designated within “Fair
 
value hedges of portfolio
interest
 
rate
 
risk
 
related
 
to
 
loans
 
designated
 
under
 
IAS
 
39”) to
floating cash flows by
 
entering into interest rate swaps
 
that either
receive
 
fixed and
 
pay
 
floating cash
 
flows
 
or
 
that
 
pay
 
fixed
 
and
receive floating cash flows.
 
Designations
 
have
 
been
 
made
 
in
 
US
 
dollars,
 
euros,
 
Swiss
francs, Australian dollars, Japanese
 
yen and Singapore dollars.
 
For
new hedging
 
instruments and
 
hedged risk
 
designations entered
into in 2021 in these
 
currencies (with the exception of euro),
 
the
benchmark rate was the
 
relevant
 
alternative reference rate (ARR).
Following the
 
interbank offered
 
rate (IBOR)
 
transition for
 
swaps
with
 
LCH
 
(formerly
 
the
 
London
 
Clearing
 
House)
 
in
 
December
2021,
 
the
 
benchmark
 
hedge
 
rate
 
for
 
Swiss
 
franc
 
and
 
Japanese
yen designations was changed
 
from an IBOR rate
 
to the relevant
ARR with
 
the hedge
 
relationship continuing
 
in accordance
 
with
Interest Rate Benchmark Reform
 
– Phase 2 (Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
.
Fair
 
value
 
hedges
 
of
 
portfolio
 
interest
 
rate
 
risk
 
related
 
to
 
loans
designated under IAS 39
Prior
 
to
 
December
 
2021,
 
UBS AG
 
hedged an
 
open
 
portfolio of
long-term fixed-rate mortgage loans in
 
Swiss francs using interest
rate swaps that
 
paid a fixed
 
rate of interest
 
and received a
 
floating
rate
 
of
 
interest.
 
Both
 
the
 
hedged
 
portfolio
 
and
 
the
 
hedging
instruments were adjusted
 
on a monthly basis
 
to reflect changes
in
 
size
 
and
 
the
 
maturity
 
profile
 
of
 
the
 
hedged
 
portfolio.
 
Each
month the
 
hedge relationship
 
was discontinued
 
and a
 
new one
designated.
 
Changes in
 
the portfolio
 
were
 
driven by
 
new loans
being originated or loans being repaid.
Cash flow hedges of forecast transactions
UBS
 
AG
 
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 UBS
 
AG, which
 
is hedged
 
with interest
 
rate
swaps,
 
the
 
maximum
 
maturity
 
of
 
which
 
is
 
10 years.
 
Cash
 
flow
forecasts
 
and
 
risk exposures
 
are
 
monitored
 
and adjusted
 
on an
ongoing basis, and
 
consequently additional hedging instruments
are traded and designated, or are terminated resulting
 
in a hedge
discontinuance.
 
Hedge
 
designations
 
have
 
been
 
made
 
in
 
the
following
 
currencies
:
US
 
dollars
,
 
euros,
 
Swiss
 
francs,
 
pounds
sterling
 
and
 
Hong
 
Kong
 
dollars.
 
The
 
cash
 
flow
 
hedges
 
in
 
US
dollars, Swiss
 
francs and
 
pounds sterling
 
were discontinued
 
and
replaced with new ARR designations in December 2021.
Fair value hedges of foreign exchange risk related to issued debt
instruments
Debt
 
instruments
 
denominated
 
in
 
currencies
 
other than
 
the US
dollar
are
 
designated
 
in
 
fair
 
value
 
hedges
 
of
 
spot
 
foreign
exchange
 
risk,
 
in
 
addition
 
to
 
and
 
separate
 
from
 
the
 
fair
 
value
hedges
 
of
 
interest
 
rate
 
risk.
 
Cross
 
currency
 
swaps economically
convert debt denominated in currencies
 
other than the US dollar
to
 
US
 
dollars
.
 
This
 
hedge
 
accounting
 
program
 
started
 
on
1 January
 
2020,
 
with
 
the
 
adoption
 
of
 
the
 
hedge
 
accounting
requirements of IFRS 9,
Financial Instruments,
 
by UBS AG.
›
 
Refer to Note
1b
 
for more information
Hedges of net investments in foreign operations
UBS AG applies
 
hedge accounting for
 
certain net investments
 
in
foreign
 
operations
,
 
which
 
include
 
subsidiaries,
 
branches
 
and
associates. Upon
 
maturity of
 
hedging instruments,
 
typically two
months,
 
the
 
hedge
 
relationship
 
is
 
terminated
 
and
 
new
designations
 
are
 
made
 
to
 
reflect
 
any
 
changes
 
in
 
the
 
net
investments in foreign operations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
506
 
Note 26 Hedge accounting (continued)
 
Economic relationship between hedged item and hedging
instrument
For
 
hedges
 
designated
 
under
 
IFRS
 
9,
 
the economic
 
relationship
between
 
the
 
hedged
 
item
 
and
 
the
 
hedging
 
instrument
 
is
determined based on
 
a qualitative analysis
 
of their critical
 
terms.
In cases where hedge designation takes place after origination of
the
 
hedging
 
instrument,
 
a
 
quantitative
 
analysis
 
of
 
the
 
possible
behavior of
 
the hedging
 
derivative and
 
the hedged
 
item during
their respective terms is also performed.
Prior to
 
December 2021, for
 
the fair
 
value hedge of
 
portfolio
interest rate risk related to loans designated under IAS 39, hedge
effectiveness was assessed by
 
comparing changes in the
 
fair value
of
 
the hedged
 
portfolio of
 
loans
 
attributable
 
to
 
changes
 
in
 
the
designated benchmark
 
interest rate
 
with the
 
changes in
 
the fair
value of the interest rate swaps.
Sources of hedge ineffectiveness
 
In
 
hedges
 
of
 
interest
 
rate
 
risk,
 
hedge
 
ineffectiveness
 
can
 
arise
from
 
mismatches
 
of
 
critical
 
terms
 
and
 
/
 
or
 
the
 
use
 
of
 
different
curves
 
to
 
discount
 
the
 
hedged
 
item
 
and
 
instrument,
 
or
 
from
entering
 
into
 
a
 
hedge
 
relationship
 
after
 
the
 
trade
 
date
 
of
 
the
hedging derivative
.
 
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.
 
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
.
 
 
 
All hedges: designated hedging instruments
 
and hedge ineffectiveness
As of or for the year ended
31.12.21
USD million
Notional
amount
Carrying amount
Changes in
 
fair value of
hedging
instruments
1
Changes in
fair value of
hedged
items
1
Hedge
ineffectiveness
recognized in the
income statement
Derivative
financial
assets
Derivative
financial
liabilities
Interest rate risk
Fair value hedges
89,525
0
7
(1,604)
1,602
(2)
Cash flow hedges
79,573
12
1
(1,185)
990
(196)
Foreign exchange risk
Fair value hedges
2
27,875
87
261
(2,139)
2,181
42
Hedges of net investments in foreign operations
13,761
23
103
492
(491)
0
As of or for the year ended
31.12.20
USD million
Notional
amount
Carrying amount
Changes in
 
fair value of
hedging
instruments
1
Changes in
fair value of
hedged
items
1
Hedge
ineffectiveness
recognized in the
income statement
Derivative
financial
assets
Derivative
financial
liabilities
Interest rate risk
Fair value hedges
80,759
12
1,231
(1,247)
(16)
Cash flow hedges
72,732
18
2,213
(2,012)
201
Foreign exchange risk
Fair value hedges
2
21,555
449
7
(1,735)
1,715
(20)
Hedges of net investments in foreign operations
13,634
3
193
(939)
938
(2)
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
507
 
Note 26 Hedge accounting (continued)
Fair value hedges: designated hedged items
 
USD million
31.12.21
31.12.20
Interest rate
risk
FX risk
Interest rate
risk
FX risk
Debt issued measured at amortized cost
Carrying amount of designated debt issued
21,653
11,392
24,247
10,889
 
of which: accumulated amount of fair value hedge adjustment
261
761
Funding from UBS Group AG
Carrying amount of designated debt instruments
53,047
16,483
46,182
10,666
 
of which: accumulated amount of fair value hedge adjustment
218
1,640
Other financial assets measured at amortized cost – debt securities
Carrying amount of designated debt securities
2,677
3,242
 
of which: accumulated amount of fair value hedge adjustment
(7)
(38)
Loans and advances to customers
1
Carrying amount of designated loans
13,835
10,374
of which: accumulated amount of fair value hedge adjustment
2
(109)
100
of which: accumulated amount of fair value hedge adjustment subject
 
to amortization attributable to the
portion of the portfolio that ceased to be part of hedge
 
accounting
2
3
111
1 Prior to 31 December 2021, these amounts were designated in fair value
 
hedges of portfolio interest rate risk under IAS 39.
 
2 As of 31 December 2021, the amount was presented within Loans
 
and advances to
customers, whereas prior to 1 January 2021 amounts were presented within either Other financial assets
 
measured at amortized cost or Other financial liabilities measured at amortized cost.
 
Fair value hedges: profile of the timing of the
 
nominal amount of the hedging instrument
31.12.21
USD billion
Due within
1 month
Due between
1 and 3 months
Due between
3 and 12 months
Due between
1 and 5 years
Due after
5 years
Total
Interest rate swaps
0
8
10
49
22
90
Cross-currency swaps
1
1
6
13
6
28
31.12.20
USD billion
Due within
1 month
Due between
1 and 3 months
Due between
3 and 12 months
Due between
1 and 5 years
Due after
5 years
Total
Interest rate swaps
1
0
4
9
46
12
70
Cross-currency swaps
0
0
4
16
2
22
1 In accordance with IFRS 7 requirements, the fair value hedges of portfolio interest rate risk
 
related to loans and advances to customers designated under IAS 39 are not included.
 
 
Cash flow hedge reserve on a pre-tax basis
 
USD million
31.12.21
31.12.20
Amounts related to hedge relationships for which hedge
 
accounting continues to be applied
26
2,560
Amounts related to hedge relationships for which hedge
 
accounting is no longer applied
743
296
Total other comprehensive income recognized directly in equity related to cash flow hedges, on a pre-tax basis
769
2,856
 
Foreign currency translation reserve on a pre-tax basis
USD million
31.12.21
31.12.20
Amounts related to hedge relationships for which hedge
 
accounting continues to be applied
 
(61)
(569)
Amounts related to hedge relationships for which hedge
 
accounting is no longer applied
 
262
268
Total other comprehensive income recognized directly in equity related to hedging instruments
 
designated as net investment hedges, on a pre-tax
basis
201
(302)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
508
 
Note 26 Hedge accounting (continued)
Interest rate benchmark reform
UBS
 
AG
 
continues
 
to
 
apply
 
the
 
relief
 
provided
 
by
Interest
 
Rate
Benchmark
 
Reform
 
(amendments
 
to
 
IFRS 9,
 
IAS 39 and
 
IFRS 7),
published by the IASB in September 2019.
 
The
 
interest
 
rate
 
benchmarks
 
subject
 
to
 
interest
 
rate
benchmark
 
reforms
 
to
 
which
 
the
 
Group’s
 
hedge
 
relationships
were
 
exposed
 
were
 
USD
 
LIBOR,
 
CHF
 
LIBOR,
 
GBP
 
LIBOR,
 
AUD
LIBOR, JPY
 
LIBOR, HKD
 
LIBOR, SGD
 
LIBOR and
 
EONIA. Interest rate
swaps
 
designated
 
in
 
hedge
 
relationships
 
referencing
 
GBP,
 
CHF
and JPY LIBOR transitioned to ARRs
 
in December 2021 when LCH
transitioned
 
its
 
contracts.
 
For
 
other
 
currencies,
 
IBOR
 
quotations
remain available, but all
 
new designations will reference
 
ARR. As
such,
 
ARR
 
designations
 
in
 
these
 
currencies
 
will
 
replace
 
IBOR
designations as IBOR contracts mature.
 
UBS
 
AG’s
 
hedge
 
relationships
 
are
 
also
 
exposed
 
to
 
the
 
Euro
Inter-bank Offered Rate (EURIBOR), which
 
is expected to continue
to exist as a benchmark rate for the foreseeable future. Thus, the
Group
 
does
 
not
 
consider
 
its
 
hedges
 
involving
 
the
 
EURIBOR
benchmark
 
interest
 
rate
 
to
 
be
 
directly
 
affected
 
by
 
interest
 
rate
benchmark reform.
Apart from
 
EURIBOR hedges,
 
UBS AG applied
 
the relief
 
to all
its fair
 
value hedges
 
of interest
 
rate risk
 
and to
 
those cash
 
flow
hedge relationships where the
 
hedged risk is
 
LIBOR or EONIA.
 
The
following
 
table
 
provides
 
details
 
on
 
the
 
notional
 
amount
 
and
carrying
 
amount
 
of
 
the
 
hedging
 
instruments
 
in
 
those
 
hedge
relationships maturing after 31 December 2021, or 30 June 2023
for
 
USD
 
LIBOR
 
hedges,
 
which
 
are
 
the
 
cessation
 
dates
 
of
 
the
applicable interest rate benchmarks.
 
Hedges
 
of
 
net
 
investments
 
in
 
foreign
 
operations
 
are
 
not
affected by the amendments.
›
 
Refer to Note
1a item 2j
for more information about the relief
provided by the amendments to IFRS 9, IAS
 
39 and IFRS 7 related
to interest rate benchmark reform
›
 
Refer to Note 25 Interest rate benchmark reform
 
for more
information about the transition progress
 
 
Hedging instruments referencing LIBOR
31.12.21
31.12.20
Carrying amount
Carrying amount
USD million
Notional
amount
Derivative
financial
assets
Derivative
financial
liabilities
Notional
amount
Derivative
financial
assets
Derivative
financial
liabilities
Interest rate risk
Fair value hedges
23,367
0
0
37,146
1
(12)
Cash flow hedges
10,803
0
0
11,179
0
0
 
 
 
509
 
Note 27
 
Post-employment benefit plans
a) Defined benefit plans
UBS AG has established defined
 
benefit plans for its employees in
various
 
jurisdictions
 
in
 
accordance
 
with
 
local
 
r
egulations
 
and
practices.
 
The major plans are located in Switzerland, the UK, the
US
 
and Germany.
 
The
 
level of
 
benefits
 
depends on
 
the specific
plan rules.
Swiss pension plan
The
Swiss
 
pension
 
plan
 
covers
employees
 
of
 
UBS
 
AG
 
in
Switzerland
 
and employees
 
of companies
 
in Switzerland
 
having
close
 
economic
 
or
 
financial
 
ties with
 
UBS
 
AG, and
 
exceeds
 
the
minimum benefit requirements under Swiss pension law.
 
In 2017,
 
a significant
 
number of
 
employees were
 
transferred
from UBS
 
AG to
 
UBS Business
 
Solutions AG,
 
which is
 
a directly
held
 
subsidiary
 
of
 
UBS
 
Group
 
AG.
 
There
 
continues
 
to
 
be
 
one
pooled
 
pension
 
plan
 
in
 
Switzerland
 
covering
 
the
 
employees
 
of
UBS AG and those transferred to
 
UBS Business Solutions AG. UBS
AG
 
and
 
UBS
 
Business
 
Solutions
 
AG
 
both
 
are
 
legal
 
sponsors
 
of
UBS’s Swiss pension
 
plan. Since
 
the date of
 
the employee transfer,
UBS
 
AG
 
and
 
UBS
 
Business
 
Solutions
 
AG
 
apply
 
proportionate
defined benefit accounting, i.e., the net pension cost and the net
pension
 
asset
 
/
 
liability
 
of
 
the
 
Swiss
 
pension
 
plan
 
are
 
allocated
proportionally between
 
UBS AG
 
and UBS
 
Business Solutions
 
AG
based
 
on
 
the
 
aggregated
 
net pension
 
cost and
 
defined
 
benefit
obligations related to their employees.
 
The Swiss
 
plan offers
 
retirement, disability
 
and survivor
 
benefits
and
 
is
 
governed
 
by
 
a
 
Pension
 
Foundation
 
Board.
 
The
responsibilities of this board
 
are defined by Swiss
 
pension law and
the plan rules.
Savings
 
contributions
 
to
 
the
 
Swiss
 
plan
 
are
 
paid
 
by
 
both
employer and employee. Depending on the age of the
 
employee,
UBS AG
 
pays a
 
savings contribution
 
that ranges
 
between
6.5
%
and
27.5
% of
 
contributory base
 
salary and
 
between
2.8
% and
9
% of contributory variable compensation. UBS AG also pays
 
risk
contributions that
 
are used to
 
fund disability
 
and survivor
 
benefits.
Employees can
 
choose the
 
level of savings
 
contributions paid
 
by
them, which vary between
2.5
% and
13.5
% of contributory base
salary
 
and
 
between
0
%
 
and
9
%
 
of
 
contributory
 
variable
compensation,
 
depending
 
on
 
age
 
and
 
choice
 
of
 
savings
contribution category.
 
The plan offers to
 
members at the
 
normal retirement age
 
of
65
a choice between
 
a lifetime pension
 
and a partial
 
or full lump
 
sum
payment.
 
Participants
 
can
 
choose
 
to
draw
 
early
 
retirement
benefits
 
starting
 
from
 
the
 
age
 
of
58
,
 
but
 
can
 
also
 
continue
employment and remain active members
 
of the plan until the
 
age
of
70
.
 
Employees
 
have
 
the
 
opportunity
 
to
 
make
 
additional
purchases of benefits to fund early retirement benefits.
The pension
 
amount payable
 
to a
 
participant is
 
calculated by
applying
 
a
 
conversion
 
rate
 
to
 
the
 
accumulated
 
balance
 
of
 
the
participant’s
 
retirement
 
savings
 
account
 
at
 
the
 
retirement
 
date.
The balance is based on credited vested benefits transferred from
previous employers, purchases of benefits, and the
 
employee and
employer contributions that have
 
been made to the
 
participant’s
retirement
 
savings account,
 
as well
 
as the
 
interest accrued.
 
The
annual interest rate
 
credited to participants
 
is determined by
 
the
Pension Foundation Board at the end of each year
.
Although
 
the
 
Swiss
 
plan
 
is
 
based
 
on
 
a
 
defined
 
contribution
promise under Swiss pension law, it is accounted for as a defined
benefit
 
plan
 
under
 
IFRS,
 
primarily
 
because
 
of
 
the
 
obligation
 
to
accrue
 
interest
 
on
 
the
 
participants’
 
retirement
 
savings
 
accounts
and the payment of lifetime pension benefits.
 
An actuarial valuation in accordance with Swiss pension law is
performed
 
regularly.
 
Should
 
an
 
underfunded
 
situation
 
on
 
this
basis occur, the Pension Foundation Board is required to
 
take the
necessary measures
 
to ensure
 
that full
 
funding can
 
be expected
to be
 
restored within
 
a maximum
 
period of
10
 
years. If
 
a Swiss
plan
 
were
 
to
 
become
 
significantly
 
underfunded
 
on
 
a
 
Swiss
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 2021, the
 
Swiss plan had
 
a technical
funding
 
ratio in
 
accordance with
 
Swiss pension
 
law of
134.8
%
(31 December 2020:
132.6
%).
The investment strategy of the Swiss plan complies with Swiss
pension
 
law,
 
including
 
the
 
rules
 
and
 
regulations
 
relating
 
to
diversification of plan assets,
 
and is derived
 
from the risk budget
defined by the Pension
 
Foundation Board on
 
the basis of
 
regularly
performed asset and
 
liability management analyses.
 
The Pension
Foundation
 
Board strives
 
for
 
a medium
 
-
 
and long
 
-term balance
between assets and liabilities.
 
As
 
of
 
31 December
 
2021,
 
the
 
Swiss
 
plan
 
was
 
in
 
a
 
surplus
situation on
 
an IFRS
 
measurement basis,
 
as the
 
fair value
 
of the
plan’s
 
assets
 
exceeded
 
the
 
defined
 
benefit
 
obligation
 
(DBO)
 
by
USD
3,716
 
million
 
(31 December 2020:
 
a
 
surplus
 
of
 
USD
2,739
million).
 
However,
 
a
 
surplus
 
is
 
only
 
recognized
 
on
 
the
 
balance
sheet to
 
the extent that
 
it does not
 
exceed the
 
estimated future
economic
 
benefit,
 
which
 
equals
 
the
 
difference
 
between
 
the
present
 
value
 
of
 
the
 
estimated
 
future
 
net
 
service
 
cost
 
and
 
the
present value of the estimated
 
future employer contributions. As
of
 
both
 
31 December
 
2021
 
and
 
31 December
 
2020,
 
the
estimated
 
future
 
economic
 
benefit
 
was
 
zero
 
and
 
hence
 
no
 
net
defined benefit asset was recognized on the balance sheet.
 
Changes to the Swiss pension plan in 2019
The Pension Foundation Board and UBS AG agreed to implement
measures that
 
took effect
 
from the
 
start of 2019
 
to support the
long-term
 
financial
 
stability
 
of
 
the
 
Swiss
 
pension
 
fund.
 
The
measures, among
 
other things, lowered
 
the conversion rate
 
and
increased
 
the
 
normal
 
retirement
 
age
 
from
 
64
 
to
 
65.
 
Pensions
already in payment on 1 January 2019 were not affected.
To
 
mitigate
 
the
 
effects
 
for
 
active
 
participants
,
 
UBS
 
AG
 
committed to pay an
 
extraordinary contribution of up
 
to CHF
450
million
 
(USD
 
494
 
million
at
the
 
closing
 
exchange
 
rate
on
31 December
 
2021)
 
in
 
three
 
installments
 
in
 
2020,
 
2021
 
and
2022. Two
 
installments of
 
USD
143
 
million and
 
USD
152
 
million
paid in 2020 and
 
2021 reduced OCI with
 
no effect on the
 
income
statement.
The third installment, CHF
116
 
million (USD
127
 
million at the
closing exchange rate on 31 December 2021), will
 
be paid in the
first
 
quarter
 
of
 
2022.
 
The
 
regular
 
employer
 
contributions
 
to
 
be
made to the Swiss plan
 
in 2022 are estimated at
 
USD
277
 
million.
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
510
 
Note 27
 
Post-employment benefit plans (continued)
UK pension plan
 
The UK
 
plan is
 
a career
 
-average revalued
 
earnings scheme,
 
and
benefits increase
 
automatically based
 
on UK
 
price inflation.
 
The
normal retirement
 
age for
 
participants in
 
the UK plan
 
is
60
. The
plan provides guaranteed lifetime
 
pension benefits to participants
upon retirement.
 
The UK
 
plan has
 
been closed
 
to new
 
entrants
for more than
 
20 years
 
and, since 2013,
 
participants are no
 
longer
accruing benefits for current or
 
future service. Instead, employees
participate in the UK defined contribution plan.
The governance
 
responsibility for the
 
UK plan lies
 
jointly with
the
 
Pension
 
Trustee
 
Board
 
and
 
UBS
 
AG
.
 
The
 
employer
contributions
 
to
 
the
 
pension
 
fund
 
reflect
 
agreed-upon
 
deficit
funding contributions, which
 
are determined on
 
the basis of
 
the
most recent actuarial
 
valuation using assumptions
 
agreed by the
Pension Trustee Board and
 
UBS AG. In the
 
event of underfunding,
UBS AG
 
and the
 
Pension Trustee
 
Board must
 
agree on
 
a deficit
recovery plan within
 
statutory deadlines. In 2021,
 
UBS AG made
no deficit funding contributions to the UK plan. In 2020, UBS AG
made deficit funding contributions of USD
46
 
million.
The
 
plan
 
assets
 
are
 
invested
 
in
 
a
 
diversified
 
portfolio
 
of
financial assets, which
 
include a longevity
 
swap with an external
insurance
 
company.
 
This
 
swap
 
enables
 
the
 
UK
 
pension
 
plan
 
to
hedge
 
the
 
risk
 
between
 
expected
 
and
 
actual
 
longevity,
 
which
should mitigate volatility in the net defined
 
benefit asset / liability.
As of 31
 
December 2021, the
 
longevity swap had
 
a negative value
of USD
3
 
million (31 December 2020: zero).
In 2019,
 
UBS AG and
 
the Pension Trustee
 
Board entered
 
into
an
 
arrangement
 
whereby
 
a
 
collateral
 
pool
 
was
 
established
 
to
provide security for
 
the pension fund.
 
The value of
 
the collateral
pool as of
 
31 December 2021 was
 
USD
337
 
million (31 December
20
20
:
 
USD
347
 
million
)
 
and
 
includes
 
corporate
 
bonds
,
government-related debt
 
instruments and
 
other financial
 
assets.
The
 
arrangement
 
provides
 
the Pension
 
Trustee
 
Board
 
dedicated
access to a pool
 
of assets in the event
 
of UBS AG’s insolvency
 
or
not paying a required deficit funding contribution.
The
 
employer
 
contributions
 
to
 
be
 
made
 
to
 
the
 
UK
 
defined
benefit plan
 
in 2022
 
are estimated
 
at USD
5
 
million, subject
 
to
regular funding reviews during the year.
US pension plans
There are two distinct major defined benefit plans in the
 
US, with
a
 
normal retirement
 
age
 
of
65
. Both
 
plans
 
were
 
closed to
 
new
entrants
 
more
 
than
 
20
 
years
 
ago.
 
Since
 
they
 
closed,
 
new
employees have participated in a defined contribution plan.
One of the
 
defined benefit plans
 
is a contribution-based
 
plan
in
 
which
 
each
 
participant
 
accrues
 
a
 
percentage
 
of
 
salary
 
in
 
a
retirement
 
savings
 
account.
 
The
 
retirement
 
savings
 
account
 
is
credited annually
 
with interest
 
based
 
on a
 
rate that
 
is linked
 
to
the
 
average
 
yield
 
on
 
one-year
 
US
 
government
 
bonds.
 
For
 
the
other defined
 
benefit plan,
 
retirement benefits
 
accrue based
 
on
the
 
career-average earnings
 
of
 
each
 
individual
 
plan
 
participant.
Former employees with vested benefits have the option to take a
lump sum payment or a lifetime annuity.
As
 
required
 
under
 
applicable
 
pension
 
laws,
 
both
 
plans
 
have
fiduciaries
 
who,
 
together
 
with
 
UBS
 
AG,
 
are
 
responsible
 
for
 
the
governance of the plans.
The
 
plan
 
assets
 
of
 
both
 
plans
 
are
 
invested
 
in
 
diversified
portfolio
s
 
of
 
finan
cial
 
assets.
 
Each
 
plan’s
 
fiduciaries
 
are
responsible for the
 
investment decisions with respect
 
to the plan
assets.
 
The
 
employer
 
contributions
 
to
 
be
 
made
 
to
 
the
 
US
 
defined
benefit plans in 2022 are estimated at USD
10
 
million.
German pension plans
There are two
 
defined benefit plans in
 
Germany,
 
which are both
unfunded. The normal retirement age is
65
 
and benefits are paid
directly by UBS AG. In
 
the larger of
 
the two plans each
 
participant
accrues
 
a
 
percentage
 
of
 
salary in
 
a
 
retirement
 
savings
 
account.
The accumulated account
 
balance of the
 
participant is credited
 
on
an annual basis
 
with guaranteed
 
interest at a
 
rate of
5
%. The
 
plan
has been closed
 
to new entrants
 
and all participants
 
younger than
the
 
age
 
of
 
55
 
no
 
longer
 
accrue
 
benefits.
 
In
 
the
 
other
 
plan,
amounts
 
are
 
accrued
 
annually
 
based
 
on
 
employee
 
elections
related to variable
 
compensation. For this plan,
 
the accumulated
account balance is credited on an annual basis
 
with a guaranteed
interest rate of
6
% for amounts accrued before 2010, of
4
% for
amounts accrued
 
from 2010
 
to 2017
 
and of
0.9
% for
 
amounts
accrued
 
after
 
2017.
 
Both
 
plans
 
are
 
subject
 
to
 
German
 
pension
law, whereby the responsibility to
 
pay pension benefits
 
when they
are
 
due resides
 
entirely with
 
UBS AG.
 
A portion
 
of the
 
pension
payments is directly increased in line with price inflation.
 
In
 
June
 
2021,
 
UBS
 
AG
 
implemented
 
a
 
new
 
funded
 
pension
plan
 
with
 
interest
 
credited
 
to
 
participants
 
equal
 
to
 
actual
investment returns with a guaranteed minimum of
0
%. The plan
was implemented
 
retrospectively for
 
new hires
 
since June
 
2018
and for
 
all eligible
 
active participants
 
younger than
 
55 from
 
July
2021.
 
Each
 
participant
 
accrues
 
a
 
percentage
 
of
 
salary
 
in
 
a
retirement savings account.
The employer contributions
 
to be made
 
to the German
 
defined
benefit plans in 2022 are estimated at USD
12
 
million.
Financial information by plan
The
 
tables
 
on
 
the
 
following
 
pages
 
provide
 
an
 
analysis
 
of
 
the
movement
 
in the
 
net asset
 
/ liability
 
recognized
 
on the
 
balance
sheet for defined benefit plans, as well as an analysis of amounts
recognized in net profit and in
Other comprehensive incom
e.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
511
 
Note 27
 
Post-employment benefit plans (continued)
Defined benefit plans
USD million
Swiss pension plan
UK pension plan
US and German
pension plans
Total
2021
2020
2021
2020
2021
2020
2021
2020
Defined benefit obligation at the beginning of the year
15,619
13,809
4,162
3,654
1,905
1,820
21,686
19,283
Current service cost
285
262
0
0
6
6
291
268
Interest expense
33
40
58
73
30
45
122
159
Plan participant contributions
161
159
0
0
0
0
161
159
Remeasurements
490
677
71
449
(62)
105
498
1,231
of which: actuarial (gains) / losses due to changes in demographic
 
assumptions
26
(53)
14
(14)
4
(34)
45
(101)
of which: actuarial (gains) / losses due to changes in financial
 
assumptions
(385)
565
(3)
505
(78)
134
(466)
1,204
of which: experience (gains) / losses
1,2
848
165
59
(42)
12
5
919
127
Past service cost related to plan amendments
0
0
0
3
4
0
4
3
Curtailments
(49)
0
0
0
0
0
(49)
0
Benefit payments
(602)
(641)
(148)
(148)
(112)
(108)
(862)
(898)
Other movements
0
(4)
0
0
1
0
1
(4)
Foreign currency translation
(456)
1,317
(38)
132
(33)
37
(527)
1,486
Defined benefit obligation at the end of the year
15,480
15,619
4,105
4,162
1,740
1,905
21,324
21,686
of which: amounts owed to active members
8,604
8,290
150
159
222
245
8,976
8,694
of which: amounts owed to deferred members
0
0
1,593
1,879
669
743
2,262
2,622
of which: amounts owed to retirees
6,876
7,329
2,362
2,124
849
917
10,086
10,370
of which: funded plans
15,480
15,619
4,105
4,162
1,222
1,319
20,806
21,100
of which: unfunded plans
0
0
0
0
518
586
518
586
Fair value of plan assets at the beginning of the year
18,358
15,908
4,149
3,658
1,360
1,299
23,867
20,864
Return on plan assets excluding interest income
2
1,319
962
277
388
40
118
1,637
1,469
Interest income
42
48
58
73
26
38
127
159
Employer contributions
 
450
436
0
46
16
17
466
499
Plan participant contributions
161
159
0
0
0
0
161
159
Benefit payments
(602)
(641)
(148)
(148)
(112)
(108)
(862)
(898)
Administration expenses, taxes and premiums paid
(8)
(8)
0
0
(4)
(4)
(11)
(11)
Other movements
0
0
0
0
1
0
1
0
Foreign currency translation
(524)
1,495
(39)
132
0
0
(563)
1,626
Fair value of plan assets at the end of the year
19,196
18,358
4,297
4,149
1,329
1,360
24,821
23,867
Surplus / (deficit)
3,716
2,739
192
(13)
(411)
(545)
3,497
2,181
Asset ceiling effect at the beginning of the year
2,739
2,099
0
0
0
0
2,739
2,099
Interest expense on asset ceiling effect
8
7
0
0
0
0
8
7
Asset ceiling effect excluding interest expense and foreign currency
 
translation on
asset ceiling effect
1,037
457
0
0
0
0
1,037
457
Foreign currency translation
(68)
176
0
0
0
0
(68)
176
Asset ceiling effect at the end of the year
3,716
2,739
0
0
0
0
3,716
2,739
Net defined benefit asset / (liability) of major plans
0
0
192
(13)
(411)
(545)
(219)
(558)
Net defined benefit asset / (liability) of remaining plans
(96)
(112)
Total net defined benefit asset / (liability)
(315)
(670)
of which: Net defined benefit asset
302
42
of which: Net defined benefit liability
3
(617)
(711)
1 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.
 
2 Includes the effect from employees being transferred between UBS AG and UBS Business Solutions during the period.
 
3 Refer to Note 19c.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
512
 
Note 27
 
Post-employment benefit plans (continued)
Income statement – expenses related to defined benefit plans
1
USD million
Swiss pension plan
UK pension plan
US and German
pension plans
Total
For the year ended
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
Current service cost
285
262
0
0
6
6
291
268
Interest expense related to defined benefit obligation
33
40
58
73
30
45
122
159
Interest income related to plan assets
(42)
(48)
(58)
(73)
(26)
(38)
(127)
(159)
Interest expense on asset ceiling effect
8
7
0
0
0
0
8
7
Administration expenses, taxes and premiums paid
8
8
0
0
4
4
11
11
Past service cost related to plan amendments
0
0
0
3
4
0
4
3
Curtailments
(49)
0
0
0
0
0
(49)
0
Net periodic expenses recognized in net profit for major plans
243
269
0
3
18
18
261
289
Net periodic expenses recognized in net profit for remaining plans
2
19
17
Total net periodic expenses recognized in net profit
280
306
1 Refer to Note 6.
 
2 Includes differences between actual and estimated performance award accruals.
Other comprehensive income – gains / (losses) on defined benefit plans
 
USD million
Swiss pension plan
UK pension plan
US and German
pension plans
Total
For the year ended
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
Remeasurement of defined benefit obligation
(490)
(677)
(71)
(449)
62
(105)
(498)
(1,231)
of which: change in discount rate assumption
494
(447)
319
(504)
77
(141)
890
(1,092)
of which: change in rate of salary increase assumption
(2)
(132)
0
0
0
0
(2)
(132)
of which: change in rate of pension increase assumption
0
0
(316)
(1)
(1)
1
(317)
0
of which: change in rate of interest credit on retirement savings
 
assumption
(110)
15
0
0
(1)
24
(110)
39
of which: change in life expectancy
0
84
9
22
(3)
50
5
156
of which: change in other actuarial assumptions
(24)
(33)
(23)
(8)
2
(34)
(45)
(75)
of which: experience gains / (losses)
1,2
(848)
(165)
(59)
42
(12)
(5)
(919)
(127)
Return on plan assets excluding interest income
1,319
962
277
388
40
118
1,637
1,469
Asset ceiling effect excluding interest expense and foreign currency
 
translation
(1,037)
(457)
0
0
0
0
(1,037)
(457)
Total gains / (losses) recognized in other comprehensive income for major plans
(207)
(172)
207
(61)
103
14
102
(219)
Total gains / (losses) recognized in other comprehensive income for remaining plans
31
(3)
Total gains / (losses) recognized in other comprehensive income
3
133
(222)
1 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.
 
2 Includes the effect from employees being transferred between UBS AG and UBS Business Solutions during the period.
 
3 Refer to the “Statement of comprehensive income.”
 
 
The table below provides information about the duration of the DBO and the timing for expected benefit payments.
 
Swiss pension plan
UK pension plan
US and German pension
plans
1
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
Duration of the defined benefit obligation (in years)
15.5
16.2
18.8
19.0
9.5
10.2
Maturity analysis of benefits expected to be paid
USD million
Benefits expected to be paid within 12 months
719
710
110
114
123
122
Benefits expected to be paid between 1 and 3 years
1,440
1,442
248
232
237
235
Benefits expected to be paid between 3 and 6 years
2,097
2,100
418
406
338
346
Benefits expected to be paid between 6 and 11 years
3,467
3,408
743
744
495
532
Benefits expected to be paid between 11 and 16 years
3,156
3,184
751
758
392
413
Benefits expected to be paid in more than 16 years
10,733
11,186
3,028
3,206
519
541
1 The duration of the defined benefit obligation represents a weighted average across US and
 
German plans.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
513
 
Note 27
 
Post-employment benefit plans (continued)
Actuarial assumptions
The actuarial assumptions
 
used for the
 
defined benefit plans
 
are
based on the economic conditions prevailing in the jurisdiction in
which they are offered. Changes
 
in the defined benefit obligation
are most
 
sensitive to
 
changes in
 
the discount
 
rate. The
 
discount
rate is based on the yield of high-quality corporate bonds quoted
in
 
an
 
active
 
market
 
in
 
the
 
currency
 
of
 
the
 
respective
 
plan.
 
A
decrease
 
in
 
the
 
discount
 
curve
 
increases
 
the
 
DBO.
 
UBS
 
AG
 
regularly reviews the
 
actuarial assumptions used
 
in calculating the
DBO to determine their continuing relevance.
›
 
Refer to Note 1a item 5 for a description
 
of the accounting policy
for defined benefit plans
 
 
The tables below show the significant actuarial assumptions used in calculating the DBO at the end of the year.
 
Significant actuarial assumptions
Swiss pension plan
UK pension plan
US and German pension
plans
1
In %
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
Discount rate
0.34
0.10
1.82
1.42
2.10
1.62
Rate of salary increase
2.01
2.00
0.00
0.00
2.35
2.25
Rate of pension increase
0.00
0.00
3.32
2.89
1.80
1.70
Rate of interest credit on retirement savings
 
1.04
0.60
0.00
0.00
1.18
1.12
1 Represents weighted average assumptions across US and German plans.
 
 
Mortality tables and life expectancies for
 
major plans
Life expectancy at age 65 for a male member currently
aged 65
aged 45
Country
Mortality table
31.12.21
31.12.20
31.12.21
31.12.20
Switzerland
BVG 2020 G with CMI 2019 projections
21.7
21.7
23.3
23.2
UK
S3PA with CMI 2020 projections
1
23.4
23.4
24.5
24.6
USA
Pri-2012 with MP-2021 projection scale
2
21.9
21.8
23.3
23.2
Germany
Dr. K. Heubeck 2018 G
20.5
20.8
23.2
23.6
Life expectancy at age 65 for a female member currently
aged 65
aged 45
Country
Mortality table
31.12.21
31.12.20
31.12.21
31.12.20
Switzerland
BVG 2020 G with CMI 2019 projections
23.4
23.4
25.0
24.9
UK
S3PA with CMI 2020 projections
1
24.9
24.9
26.3
26.3
USA
Pri-2012 with MP-2021 projection scale
2
23.3
23.2
24.7
24.5
Germany
Dr. K. Heubeck 2018 G
23.9
24.3
26.1
26.5
1 In 2020, S3PA with CMI 2019 projections was used.
 
2 In 2020, Pri-2012 with MP-2020 projection scale was used.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
514
 
Note 27
 
Post-employment benefit plans (continued)
Sensitivity analysis of significant actuarial assumptions
The table below presents a sensitivity analysis for each significant
actuarial
 
assumption,
 
showing
 
how
 
the
 
DBO
 
would
 
have
 
been
affected
 
by
 
changes
 
in
 
the
 
relevant
 
actuarial
 
assumption
 
that
were reasonably
 
possible at
 
the balance
 
sheet date.
 
Unforeseen
circumstances may arise, which could
 
result in variations that are
outside
 
the
 
range
 
of
 
alternatives
 
deemed
 
reasonably
 
possible.
Caution should be used
 
in extrapolating the sensitivities
 
below on
the DBO, as the sensitivities may not be linear.
 
Sensitivity analysis of significant actuarial
 
assumptions
1
Increase / (decrease) in defined benefit obligation
Swiss pension plan
UK pension plan
US and German pension plans
USD million
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
Discount rate
Increase by 50 basis points
(975)
(1,030)
(361)
(370)
(78)
(91)
Decrease by 50 basis points
1,116
1,181
411
423
84
99
Rate of salary increase
Increase by 50 basis points
69
74
–
2
–
2
0
1
Decrease by 50 basis points
(66)
(71)
–
2
–
2
0
(1)
Rate of pension increase
Increase by 50 basis points
749
793
334
358
6
8
Decrease by 50 basis points
–
3
–
3
(306)
(316)
(6)
(7)
Rate of interest credit on retirement savings
Increase by 50 basis points
134
142
–
4
–
4
8
9
Decrease by 50 basis points
(134)
5
(113)
–
4
–
4
(7)
(8)
Life expectancy
Increase in longevity by one additional year
475
566
184
182
56
60
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 plan is closed for future
service, a change in assumption is not
 
applicable.
 
3 As the assumed rate of pension increase
 
was
0
% as of 31 December 2021 and as
 
of 31 December 2020, a downward change
 
in assumption is not applicable.
 
4 As the UK plan does not provide interest
 
credits on retirement savings, a change in
 
assumption is not applicable.
 
5 As of 31 December 2021,
17
% of retirement savings were subject to a legal minimum
 
rate of
1.00
%.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
515
 
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
 
Swiss,
 
UK, US
 
and German
 
pension
 
plans.
 
Composition and fair value of plan assets
Swiss pension plan
31.12.21
31.12.20
Fair value
Plan asset
allocation %
Fair value
Plan asset
allocation %
USD million
Quoted
in an active
market
Other
Total
Quoted
in an active
market
Other
Total
Cash and cash equivalents
106
0
106
1
123
0
123
1
Real estate / property
Domestic
0
1,994
1,994
10
0
2,018
2,018
11
Foreign
0
328
328
2
0
186
186
1
Investment funds
Equity
 
Domestic
476
0
476
2
465
0
465
3
Foreign
3,510
1,498
5,009
26
3,540
1,103
4,642
25
Bonds
1
Domestic, AAA to BBB–
2,512
0
2,512
13
2,096
0
2,096
11
Foreign, AAA to BBB–
2,877
0
2,877
15
3,462
0
3,462
19
Foreign, below BBB–
742
0
742
4
734
0
734
4
Other
2,379
2,010
4,389
23
1,894
2,097
3,991
22
Other investments
377
385
762
4
373
266
640
3
Total fair value of plan assets
12,980
6,216
19,196
100
12,688
5,670
18,358
100
31.12.21
31.12.20
Total fair value of plan assets
19,196
18,358
of which:
2
Bank accounts at UBS AG
109
130
UBS AG debt instruments
16
19
UBS Group AG shares
14
13
Securities lent to UBS AG
3
608
796
Property occupied by UBS AG
52
54
Derivative financial instruments, counterparty UBS AG
3
72
84
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 AG encompass accounts in the name of the Swiss pension fund.
 
The other
positions disclosed
 
in the
 
table encompass
 
both direct
 
investments in
 
UBS AG
 
instruments and
 
UBS Group
 
AG shares
 
and indirect
 
investments, i.e.,
 
those made
 
through funds
 
that the
 
pension fund
 
invests in.
 
3 Securities lent to UBS AG and derivative
 
financial instruments are presented gross of any
 
collateral. Securities lent to UBS AG
 
were fully covered by collateral as
 
of 31 December 2021 and 31 December 2020.
 
Net
of collateral, derivative financial instruments amounted to USD
24
 
million as of 31 December 2021 (31 December 2020: negative USD
9
 
million).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
516
Note 27
 
Post-employment benefit plans (continued)
Composition and fair value of plan assets (continued)
UK pension plan
31.12.21
31.12.20
Fair value
Plan asset
allocation %
Fair value
Plan asset
allocation %
USD million
Quoted
in an active
market
Other
Total
Quoted
in an active
market
Other
Total
Cash and cash equivalents
147
0
147
3
195
0
195
5
Bonds
1
Domestic, AAA to BBB–
2,605
0
2,605
61
2,150
0
2,150
52
Foreign, AAA to BBB–
372
0
372
9
53
0
53
1
Foreign, below BBB–
4
0
4
0
0
0
0
 
0
Investment funds
Equity
 
Domestic
44
4
47
1
34
3
37
1
Foreign
921
0
921
21
1,077
0
1,077
26
Bonds
1
Domestic, AAA to BBB–
532
147
679
16
919
131
1,050
25
Domestic, below BBB–
12
0
12
0
47
0
47
1
Foreign, AAA to BBB–
179
0
179
4
149
0
149
4
Foreign, below BBB–
115
0
115
3
110
0
110
3
Real estate
Domestic
110
12
122
3
98
16
114
3
Foreign
6
34
40
1
0
37
37
1
Other
(313)
0
(313)
(7)
(86)
0
(86)
(2)
Insurance contracts
0
8
8
0
0
8
8
0
Derivatives
57
(3)
54
1
(3)
0
(3)
0
Asset-backed securities
0
11
11
0
0
6
6
0
Other investments
2
(717)
10
(707)
(16)
(803)
9
(794)
(19)
Total fair value of plan assets
4,074
223
4,297
100
3,940
209
4,149
100
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 Mainly relates to repurchase arrangements on UK treasury bonds.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
517
Note 27
 
Post-employment benefit plans (continued)
Composition and fair value of plan assets (continued)
US and German pension plans
31.12.21
31.12.20
Fair value
Plan asset
allocation %
Fair value
Plan asset
allocation %
USD million
Quoted
in an active
market
Other
Total
Quoted
in an active
market
Other
Total
Cash and cash equivalents
11
0
11
1
38
0
38
3
Equity
Domestic
79
0
79
6
0
0
0
0
Foreign
31
0
31
2
0
0
0
0
Bonds
1
Domestic, AAA to BBB–
486
0
486
37
490
0
490
36
Domestic, below BBB–
17
0
17
1
7
0
7
0
Foreign, AAA to BBB–
97
0
97
7
99
0
99
7
Foreign, below BBB–
6
0
6
0
1
0
1
0
Investment funds
Equity
 
Domestic
3
0
3
0
210
0
210
15
Foreign
56
0
56
4
169
0
169
12
Bonds
1
Domestic, AAA to BBB–
269
0
269
20
195
0
195
14
Domestic, below BBB–
147
0
147
11
34
0
34
2
Foreign, AAA to BBB–
11
0
11
1
19
0
19
1
Foreign, below BBB–
2
0
2
0
3
0
3
0
Real estate
Domestic
0
9
9
1
0
14
14
1
Other
99
0
99
7
79
0
79
6
Insurance contracts
0
1
1
0
0
1
1
0
Other investments
 
5
 
0
 
5
 
0
 
0
 
0
 
0
 
0
Total fair value of plan assets
1,319
10
1,329
100
1,345
15
1,360
100
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
518
 
Note 27
 
Post-employment benefit plans (continued)
b) Defined contribution plans
UBS AG
 
sponsors a
 
number of
 
defined contribution
 
plans, with
the
 
most
 
significant
 
plans
 
in
 
the
 
US
 
and
 
the
 
UK.
 
UBS
 
AG’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.
 
Expenses related to defined contribution
 
plans
For the year ended
USD million
31.12.21
31.12.20
31.12.19
US plan
198
190
173
UK plan
41
36
34
Remaining plans
64
65
71
Total
1
303
291
278
1 Refer to Note 6.
c) Related-party disclosure
UBS
 
AG
 
is
 
the
 
principal
 
provider
 
of
 
banking
 
services
 
for
 
the
pension fund of UBS AG in
 
Switzerland. In this capacity,
 
UBS AG
is
 
engaged
 
to
 
execute
 
most
 
of
 
the
 
pension
 
fund’s
 
banking
activities.
 
These
 
activities
 
can
 
include,
 
but
 
are
 
not
 
limited
 
to,
trading,
 
securities
 
lending
 
and
 
borrowing
 
and
 
derivative
transactions. The non-Swiss UBS AG pension funds
 
do not have a
similar banking relationship with UBS AG.
Also, UBS AG
 
leases certain properties
 
that are owned
 
by the
Swiss
 
pension
 
fund.
 
As
 
of
 
31 December
 
2021,
 
the
 
minimum
commitment
 
toward
 
the
 
Swiss
 
pension
 
fund
 
under
 
the
 
related
leases
 
was
 
approximately
USD
 
5
 
million
 
(31
 
December
 
20
20
:
USD
6
 
million).
›
 
Refer to the “Composition and fair value
 
of plan assets” table in
Note 27a for more information about fair value
 
of investments
in UBS AG and UBS Group AG instruments
 
held by the Swiss
pension fund
 
The following amounts have been received or paid by UBS AG
from
 
and
 
to
 
the
 
post-employment
 
benefit
 
plans
 
located
 
in
Switzerland,
 
the
 
UK,
 
the
 
US
 
and
 
Germany
 
in
 
respect
 
of
 
these
banking activities and arrangements.
 
Related-party disclosure
For the year ended
USD million
31.12.21
31.12.20
31.12.19
Received by UBS AG
Fees
22
19
19
Paid by UBS AG
Rent
2
3
2
Dividends, capital repayments and interest
5
10
10
 
The transaction volumes in UBS Group AG shares
 
and UBS AG debt instruments and the
 
balances of UBS Group AG shares held were:
 
Transaction volumes – UBS Group AG shares and UBS AG debt instruments
For the year ended
31.12.21
31.12.20
Financial instruments bought by pension funds
UBS Group AG shares (in thousands of shares)
847
1,677
UBS AG debt instruments (par values, USD million)
22
16
Financial instruments sold by pension funds or matured
UBS Group AG shares (in thousands of shares)
1,505
2,556
UBS AG debt instruments (par values, USD million)
22
4
UBS Group AG shares held by post-employment
 
benefit plans
31.12.21
31.12.20
Number of shares (in thousands of shares)
13,456
14,112
Fair value (USD million)
241
199
 
 
 
519
 
Note 28
 
Employee benefits: variable compensation
 
 
a) Plans offered
UBS
 
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.
For
 
the
 
majority
 
of
 
variable
 
compensation
 
awards
 
granted
under such
 
plans to
 
employees of
 
UBS AG,
 
the grantor
 
entity is
UBS
 
Group
 
AG.
 
Expenses
 
associated
 
with
 
these
 
awards
 
are
charged
 
by UBS
 
Group AG
 
to UBS
 
AG. For
 
the purpose
 
of
 
this
Note, references to shares refer to UBS Group AG shares.
›
 
Refer to Note 1a
 
item 5 for a description of the accounting
 
policy
related to share-based and other deferred compensation
 
plans
Mandatory
 
deferred
 
compensation
 
plans
The Long-Term Incentive Plan
The
 
Long-Term
 
Incentive
 
Plan
 
(LTIP)
 
is
 
a
 
mandatory
 
deferred
share-based
 
compensation plan
 
for senior
 
leaders of
 
the Group
(i.e., GEB members and selected senior management).
The number of notional
 
shares delivered at
 
vesting depends on
two
 
equally
 
weighted
 
performan
ce
 
metrics
 
over
 
a
 
three
-
year
performance
 
period:
 
reported
 
return
 
on
 
common
 
equity
 
tier
 
1
capital and relative
 
total shareholder return,
 
which measures the
performance
 
of
 
UBS
 
against
 
an
 
index
 
of
 
Global
 
Systemically
Important Banks as determined by the Financial Stability Board.
 
The final number of shares will vest in three
 
equal installments in
each of the three years
 
following the performance period for
 
GEB
members, and cliff
 
vest in the
 
first year
 
following the performance
period for selected senior management.
The Equity
 
Ownership
 
Plan
The
 
Equity
 
Ownership
 
Plan
 
(EOP)
 
is
 
a
 
deferred
 
share-based
compensation
 
plan
 
for
 
employees
 
who
 
are
 
subject
 
to
 
deferral
requirements but
 
do not
 
receive LTIP
 
awards. Vesting
 
under the
EOP
 
generally
 
occurs
 
in
 
equal
 
installments
 
two
 
and
 
three
 
years
after
 
grant,
 
subject
 
to
 
continued
 
employment
 
and,
 
in
 
certain
cases, achievement of defined performance conditions.
 
Asset Management employees receive some or all of
 
their EOP
 
in
 
the
 
form
 
of
 
cash-settled
 
notional
 
investment
 
funds.
 
The
amount
 
delivered
 
depends
 
on
 
the
 
value
 
of
 
the
 
underlying
investment funds at the time of vesting.
 
 
The Deferred
 
Contingent
 
Capital
 
Plan
The
 
Deferred
 
Contingent
 
Capital
 
Plan
 
(DCCP)
 
is
 
a
 
deferred
compensation plan for all
 
employees who are
 
subject to deferral
requirements.
 
Such employees
 
are awarded
 
notional additional
 
tier
1 (AT1) capital
 
instruments,
 
which, at
 
the discretion
 
of UBS, can
 
be
settled as a cash
 
payment or a perpetual, marketable AT1
 
capital
instrument. DCCP
 
awards
 
generally
 
vest
 
in
 
full
 
after
 
five
 
years,
unless the
 
award is
 
written down
 
following the
 
occurrence of
 
a
viability
 
event (as
 
defined under
 
the terms
 
of an AT1 instrument)
 
or
if the
 
Group’s CET1 capital
 
ratio falls below
 
a defined
 
threshold.
Additional performance
 
conditions
 
apply to GEB
 
members.
Interest payments
 
on DCCP awards
 
are paid at the
 
discretion of
UBS.
 
Where interest
 
payments
 
are not
 
permitted,
 
such
 
as for
 
certain
regulated employees,
 
the DCCP
 
award reflects
 
the fair value
 
of the
granted non-interest-bearing
 
award.
Financial advisor variable compensation
In
line
 
with
 
market
 
prac
tice
 
for
 
US
 
wealth
 
management
businesses, the compensation for US financial advisors in Global
Wealth Management
 
predominantly includes
 
production payout
and
 
deferred
 
compensation
 
awards.
 
Production
 
payout
 
is
primarily based
 
on compensable revenue.
 
Financial advisors
 
may
also qualify
 
for deferred
 
compensation awards,
 
which generally
vest over
 
a six-year
 
period. These
 
awards are
 
based on
 
strategic
performance
 
measures,
 
including
 
production
 
and
 
length
 
of
service
 
with
 
UBS.
 
Production
 
payout
 
rates
 
and
 
deferred
compensation awards
 
may be
 
reduced for,
 
among other
 
things,
errors,
 
negligence or
 
carelessness, or
 
failure to
 
comply with
 
the
firm’s
 
rules,
 
standards,
 
practices
 
and
 
/
 
or
 
policies,
 
and
 
/
 
or
applicable laws and regulations.
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
520
 
Note 28
 
Employee benefits: variable compensation (continued)
 
b) Effect on the income statement
Effect
 
on the
 
income
 
statement
 
for the
 
financial
 
year and
 
future
periods
The table
 
below
 
provides
 
information
 
about
 
compensation
 
expenses
related to
 
total variable compensation, including financial advisor
variable compensation,
 
that were
 
recognized in the
 
financial year
ended 31 December
 
2021, as well as expenses
 
that were deferred
and will be
 
recognized
 
in the income
 
statement
 
for 2022 and
 
later.
The majority
 
of expenses
 
deferred
 
to 2022
 
and later
 
that are
 
related
to the
 
2021
 
performance
 
year
 
pertain
 
to awards
 
granted
 
in February
2022.
 
The total
 
unamortized compensation
 
expense for unvested
share
-
based
 
awards
 
granted
 
up
 
to
 
31
 
December
 
2021
will
 
be
recognized
 
in future periods
 
over a weighted
 
average
 
period of
2.5
years.
 
 
 
Variable compensation including financial advisor variable
 
compensation
Expenses recognized in 2021
Expenses deferred to 2022 and later
1
USD million
Related to the
2021
performance
year
Related to prior
performance
years
Total
Related to the
2021
performance
year
Related to prior
performance
years
Total
Non-deferred cash
2,136
(8)
2,128
0
0
0
Deferred compensation awards
389
399
788
767
606
1,373
of which: Equity Ownership Plan
175
174
350
374
180
553
of which: Deferred Contingent Capital Plan
134
151
285
290
318
608
of which: Long-Term Incentive Plan
51
17
69
48
32
79
of which: Asset Management EOP
29
55
84
56
77
133
Variable compensation – performance awards
2,525
391
2,916
767
606
1,373
Variable compensation – other
2
163
33
196
210
178
388
Total variable compensation excluding financial advisor variable compensation
2,688
424
3,112
978
784
1,762
Financial advisor variable compensation
4,134
248
4,382
434
641
1,075
of which: non-deferred cash
3,858
(6)
3,853
0
0
0
of which: deferred share-based awards
106
51
157
123
146
269
of which: deferred cash-based awards
170
202
372
311
495
806
Compensation commitments with recruited financial advisors
3
41
438
479
662
1,682
2,344
Total FA variable compensation
4,175
685
4,860
1,097
2,323
3,419
Total variable compensation including FA variable compensation
6,863
1,109
7,973
4
2,074
3,107
5,181
1 Estimate as
 
of 31 December
 
2021. Actual
 
amounts to be
 
expensed in future
 
periods may vary,
 
e.g., due
 
to forfeiture of
 
awards.
 
2 Consists of
 
replacement payments,
 
forfeiture credits,
 
severance payments,
retention plan payments and interest
 
expense related to the Deferred Contingent
 
Capital Plan.
 
3 Reflects expenses related to
 
compensation commitments with financial advisors entered into
 
at the time of recruitment
that are subject to
 
vesting requirements. Amounts
 
reflected as deferred expenses
 
represent the maximum
 
deferred exposure as of
 
the balance sheet date.
 
Amounts in the “Related
 
to the 2021 performance
 
year”
columns represent commitments entered into
 
in 2021.
 
4 Includes USD
631
 
million in expenses related to share-based
 
compensation (performance awards: USD
419
 
million; other variable compensation:
 
USD
56
million; financial advisor compensation: USD
157
 
million). A further USD
77
 
million in expenses related to share-based compensation was recognized within other expense categories included in Note 6 (salaries: USD
5
 
million related to role-based allowances; social security: USD
59
 
million; other personnel expenses: USD
13
 
million related to the Equity Plus Plan).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
521
 
Note 28
 
Employee benefits: variable compensation (continued)
Variable compensation including financial advisor variable
 
compensation (continued)
Expenses recognized in 2020
Expenses deferred to 2021 and later
1
USD million
Related to the
2020
performance
year
Related to prior
performance
years
Total
Related to the
2020
performance
year
Related to prior
performance
years
Total
Non-deferred cash
1,948
(29)
1,920
0
0
0
Deferred compensation awards
329
704
1,034
734
277
1,011
of which: Equity Ownership Plan
131
315
446
298
67
365
of which: Deferred Contingent Capital Plan
108
339
448
271
189
459
of which: Long-Term Incentive Plan
41
11
52
46
9
55
of which: Asset Management EOP
49
39
88
120
12
132
Variable compensation – performance awards
2,278
675
2,953
734
277
1,011
Variable compensation – other
2
109
92
201
176
189
364
Total variable compensation excluding financial advisor variable compensation
2,387
768
3,155
909
465
1,375
Financial advisor variable compensation
3,356
233
3,589
350
602
952
of which: non-deferred cash
3,154
0
3,154
0
0
0
of which: deferred share-based awards
69
50
119
79
135
214
of which: deferred cash-based awards
133
183
316
271
467
738
Compensation commitments with recruited financial advisors
3
22
480
502
473
1,682
2,155
Total FA variable compensation
3,378
713
4,091
822
2,284
3,106
Total variable compensation including FA variable compensation
5,765
1,481
7,246
4
1,732
2,749
4,481
1 Estimate as of 31
 
December 2020. Actual amounts to be
 
expensed in future periods may vary, e.g., due to forfeiture of
 
awards.
 
2 Consists of replacement payments, forfeiture credits, severance payments, retention
plan payments and interest expense related
 
to the Deferred Contingent Capital Plan.
 
3 Reflects expenses related to compensation
 
commitments with financial advisors entered
 
into at the time of recruitment
 
that
are subject to vesting requirements. Amounts reflected as deferred expenses represent the maximum deferred exposure as of the balance sheet date.
 
Amounts in the “Related to the 2020 performance year” columns
represent commitments entered into
 
in 2020.
 
4 Includes USD
666
 
million in expenses related
 
to share-based compensation
 
(performance awards: USD
498
 
million; other variable compensation:
 
USD
49
 
million;
financial advisor compensation: USD
119
 
million). A further USD
88
 
million in expenses related to share-based compensation was recognized within
 
other expense categories included in Note 6 (salaries: USD
4
 
million
related to role-based allowances; social security: USD
51
 
million; other personnel expenses: USD
34
 
million related to the Equity Plus Plan).
 
Variable compensation including financial advisor variable
 
compensation (continued)
Expenses recognized in 2019
Expenses deferred to 2020 and later
1
USD million
Related to the
2019
performance
year
Related to prior
performance
years
Total
Related to the
2019
performance
year
Related to prior
performance
years
Total
Non-deferred cash
1,706
(24)
1,682
0
0
0
Deferred compensation awards
287
576
863
413
592
1,005
of which: Equity Ownership Plan
115
294
410
198
213
412
of which: Deferred Contingent Capital Plan
109
256
365
166
356
521
of which: Long-Term Incentive Plan
38
0
38
23
0
23
of which: Asset Management EOP
25
26
51
26
23
49
Variable compensation – performance awards
1,993
553
2,545
413
592
1,005
Variable compensation – other
2
140
85
225
115
228
343
Total variable compensation excluding financial advisor variable compensation
2,133
638
2,770
528
820
1,348
Financial advisor variable compensation
3,233
268
3,501
197
710
907
of which: non-deferred cash
3,064
0
3,064
0
0
0
of which: deferred share-based awards
57
48
106
54
130
183
of which: deferred cash-based awards
112
219
331
144
580
724
Compensation commitments with recruited financial advisors
3
32
510
542
350
1,617
1,967
Total FA variable compensation
3,265
778
4,043
548
2,327
2,874
Total variable compensation including FA variable compensation
5,398
1,416
6,814
4
1,076
3,146
4,222
1 Estimate as of 31 December 2019. Actual amounts expensed may vary, e.g.,
 
due to forfeiture of awards.
 
2 Consists of replacement payments, forfeiture credits, severance payments,
 
retention plan payments and
interest expense related to the Deferred Contingent Capital Plan.
 
3 Reflects expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting
requirements. Amounts reflected as deferred expenses
 
represent the maximum deferred exposure
 
as of the balance sheet
 
date.
 
Amounts in the “Related to
 
the 2019 performance year”
 
columns represent commitments
entered into in
 
2019.
 
4 Includes USD
595
 
million in expenses related
 
to share-based compensation (performance
 
awards: USD
448
 
million; other variable compensation: USD
42
 
million; financial advisor compensation:
USD
106
 
million). A
 
further USD
54
 
million in
 
expenses related
 
to share-based
 
compensation was
 
recognized within
 
other expense
 
categories included
 
in Note
 
6 (salaries:
 
USD
10
 
million related
 
to role-based
allowances; social security: USD
23
 
million; other personnel expenses: USD
22
 
million related to the Equity Plus Plan).
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
522
 
Note 28
 
Employee benefits: variable compensation (continued)
 
c) Outstanding share-based compensation awards
Share and performance share awards
Movements in outstanding share-based awards under the EOP during 2021 and 2020 are provided in the table below.
The awards presented are granted by UBS AG, but are based on UBS Group AG shares.
 
Movements in outstanding share-based compensation
 
awards
 
Number of shares
2021
Weighted
 
average grant
 
date fair
 
value (USD)
Number of shares
2020
Weighted
 
average grant
 
date fair
 
value (USD)
Outstanding, at the beginning of the year
54,557
13
90,443
14
Awarded during the year
278,756
15
19,229
11
Distributed during the year
(24,176)
13
(55,114)
14
Forfeited during the year
(13,215)
15
0
0
Outstanding, at the end of the year
295,921
15
54,557
13
of which: shares vested for accounting purposes
116,775
53,216
 
 
The total carrying amount of the liability related to cash-settled share-based awards as of 31 December 2021 and 31 December 2020
was USD
3
 
million and USD
1
 
million, respectively.
d) Valuation
UBS share awards
UBS
 
measures
 
compensation
 
expense
 
based
 
on
 
the
 
average
market price
 
of UBS
 
shares on
 
the grant
 
date as
 
quoted on
 
the
SIX
 
Swiss
 
Exchange,
 
taking
 
into
 
consideration
 
post-vesting
 
sale
and
 
hedge
 
restrictions,
 
non-vesting
 
conditions
 
and
 
market
conditions, where
 
applicable. The
 
fair value
 
of the
 
share awards
subject to
 
post-vesting sale
 
and hedge
 
restrictions is
 
discounted
on the basis of
 
the duration of the
 
post-vesting restriction and is
referenced to
 
the cost
 
of purchasing
 
an at-the-money
 
European
put option for the term of the transfer restriction. The grant date
fair
 
value
 
of
 
notional
 
shares
 
without dividend
 
entitlements also
includes
 
a
 
deduction
 
for
 
the
 
present
 
value
 
of
 
future
 
expected
dividends to be paid between the grant date and distribution.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
523
 
Note 29
 
Interests in subsidiaries and other entities
 
a) Interests in subsidiaries
UBS AG
 
defines its
 
significant subsidiaries
 
as those
 
entities that,
either individually or in aggregate, contribute significantly to UBS
AG’s
 
financial
 
position
 
or
 
results
 
of
 
operations,
 
based
 
on
 
a
number
 
of
 
criteria,
 
including
 
the
 
subsidiaries’
 
equity
 
and
contribution to UBS AG’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 table below lists UBS AG’s individually significant subsidiaries
as of
 
31 December 2021.
 
Unless otherwise
 
stated, the
 
subsidiaries
listed below have share capital
 
consisting solely of ordinary
 
shares
held entirely by UBS
 
AG, and the
 
proportion of ownership
 
interest
held is equal to the voting rights held by UBS AG.
 
The country where the respective registered office is located is
also the
 
principal place
 
of business.
 
UBS AG
 
operates through
 
a
global branch network and
 
a significant proportion of
 
its business
activity is conducted outside Switzerland, including in
 
the UK, the
US, Singapore, Hong Kong SAR and other countries.
 
UBS Europe
SE has
 
branches and
 
offices in
 
a number
 
of EU
 
Member States,
including Germany, Italy,
 
Luxembourg and Spain.
 
Share capital is
provided in the currency of the legally registered office.
 
 
 
Individually significant subsidiaries
 
of UBS AG as of 31 December 2021
1
Company
Registered office
Primary business
Share capital in million
Equity interest accumulated in %
UBS Americas Holding LLC
Wilmington, Delaware, USA
Group Functions
USD
4,150.0
2
100.0
UBS Americas Inc.
Wilmington, Delaware, USA
Group Functions
USD
0.0
100.0
UBS Asset Management AG
Zurich, Switzerland
Asset Management
CHF
43.2
100.0
UBS Bank USA
Salt Lake City, Utah, USA
Global Wealth Management
USD
0.0
100.0
UBS Europe SE
Frankfurt, Germany
Global Wealth Management
EUR
446.0
100.0
UBS Financial Services Inc.
Wilmington, Delaware, USA
Global Wealth Management
USD
0.0
100.0
UBS Securities LLC
Wilmington, Delaware, USA
Investment Bank
USD
1,283.1
3
100.0
UBS Switzerland AG
Zurich, Switzerland
Personal & Corporate Banking
CHF
10.0
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
4,150,000,000
.
 
3 Consists of common share capital of USD
100,000
 
and non-voting preferred share capital of USD
1,283,000,000
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
524
 
Note 29
 
Interests in subsidiaries and other entities (continued)
Other subsidiaries
The table below lists
 
other direct and
 
indirect subsidiaries of
 
UBS AG that are
 
not individually significant but
 
contribute to UBS AG’s
total assets and aggregated profit before tax thresholds and are thus disclosed in accordance with requirements
 
set by the SEC.
 
 
Other subsidiaries of UBS AG as of 31
 
December 2021
Company
Registered office
Primary business
Share capital in million
Equity interest
 
accumulated in %
UBS Asset Management (Americas) Inc.
Wilmington, Delaware, USA
Asset Management
USD
0.0
100.0
UBS Asset Management (Hong Kong) Limited
Hong Kong SAR, China
 
Asset Management
HKD
254.0
100.0
UBS Asset Management Life Ltd
London, United Kingdom
Asset Management
GBP
15.0
100.0
UBS Asset Management Switzerland AG
Zurich, Switzerland
Asset Management
CHF
0.5
100.0
UBS Business Solutions US LLC
Wilmington, Delaware, USA
Group Functions
USD
0.0
100.0
UBS Credit Corp.
Wilmington, Delaware, USA
Global Wealth Management
USD
0.0
100.0
UBS (France) S.A.
Paris, France
Global Wealth Management
EUR
133.0
100.0
UBS Fund Management (Luxembourg) S.A.
Luxembourg, Luxembourg
Asset Management
EUR
13.0
100.0
UBS Fund Management (Switzerland) AG
Basel, Switzerland
Asset Management
CHF
1.0
100.0
UBS (Monaco) S.A.
Monte Carlo, Monaco
Global Wealth Management
EUR
49.2
100.0
UBS O‘Connor LLC
Wilmington, Delaware, USA
Asset Management
USD
1.0
100.0
UBS Realty Investors LLC
Boston, Massachusetts, USA
Asset Management
USD
9.0
100.0
UBS Securities Australia Ltd
Sydney, Australia
Investment Bank
AUD
0.3
1
100.0
UBS Securities Hong Kong Limited
Hong Kong SAR, China
 
Investment Bank
HKD
4,154.2
100.0
UBS Securities Japan Co., Ltd.
Tokyo, Japan
Investment Bank
JPY
34,708.7
100.0
UBS SuMi TRUST Wealth Management Co., Ltd.
Tokyo, Japan
Global Wealth Management
JPY
5,165.0
51.0
1 Includes a nominal amount relating to redeemable preference shares.
 
 
Consolidated structured entities
Consolidated structured
 
entities (SEs)
 
include certain
 
investment
funds, securitization
 
vehicles and client
 
investment vehicles.
 
UBS
AG has no individually significant subsidiaries that are SEs.
In 2021 and 2020, UBS AG
 
did not enter into any contractual
obligation that could require UBS AG to provide financial support
to consolidated SEs. In addition, UBS AG did
 
not provide support,
financial
 
or
 
otherwise,
 
to a
 
consolidated SE
 
when
 
UBS AG
 
was
not contractually obligated
 
to do so,
 
nor does UBS
 
AG have any
intention
 
to
 
do
 
so
 
in
 
the
 
future.
 
Furthermore,
 
UBS
 
AG
 
did
 
not
provide
 
support,
 
financial
 
or
 
otherwise,
 
to
 
a
 
previously
unconsolidated
 
SE
 
that
 
resulted
 
in
 
UBS
 
AG
 
controlling
 
the
 
SE
during the reporting period.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
525
 
Note 29
 
Interests in subsidiaries and other entities (continued)
 
b) Interests in associates and joint ventures
As of 31 December 2021 and 2020, no associate or joint venture
was
 
individually
 
material
 
to
UBS
 
AG
.
Also
,
 
there
 
were
 
no
significant restrictions on the ability of
 
associates or joint ventures
to transfer
 
funds to
 
UBS 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 UBS AG.
 
 
Investments in associates and joint ventures
USD million
2021
2020
Carrying amount at the beginning of the year
1,557
1,051
Additions
1
388
Reclassifications
1
(386)
0
Share of comprehensive income
150
83
of which: share of net profit
2
105
84
of which: share of other comprehensive income
3
45
(1)
Share of changes in retained earnings
1
(40)
Dividends received
(39)
(33)
Foreign currency translation
(39)
108
Carrying amount at the end of the year
1,243
1,557
of which: associates
1,200
1,513
of which: SIX Group AG, Zurich
4
1,043
965
of which: Clearstream Fund Centre AG, Zurich
1
399
of which: other associates
157
150
of which: joint ventures
43
44
1 In the second quarter
 
of 2021, UBS reclassified
 
its minority investment (
48.8
%) in Clearstream Fund
 
Centre AG (previously Fondcenter
 
AG) of USD
386
 
million to Properties and other
 
non-current assets held for
sale and sold the investment in the same quarter. Refer to Note 30 for more information.
 
2 For 2021, consists of USD
79
 
million from associates and USD
26
 
million from joint ventures. For 2020, consists of USD
64
million from associates
 
and USD
19
 
million from joint
 
ventures.
 
3 For 2021,
 
consists of USD
44
 
million from associates
 
and USD
1
 
million from joint
 
ventures. For
 
2020, consists of
 
negative USD
1
 
million from
associates.
 
4 In 2021, UBS AG’s equity interest amounted to
17.31
%. UBS AG is represented on the Board of Directors.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
526
 
Note 29
 
Interests in subsidiaries and other entities (continued)
 
c) Unconsolidated structured entities
UBS AG is considered
 
to sponsor another entity
 
if, in addition to
ongoing
 
involvement
 
with
the
 
entity,
 
it
 
had
 
a
 
key
 
role
 
in
establishing
 
that
 
entity
 
or
 
in
 
bringing
 
together
 
relevant
counterparties
 
for a
 
transaction facilitated
 
by the
 
entity.
 
During
2021
,
U
BS
 
AG
 
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 AG did not consolidate as of 31 December 2021
because it did not control
 
them.
 
Interests in unconsolidated structured entities
The
 
table
 
below
 
presents
 
UBS
 
AG’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
 
AG’s interest
 
as of
 
year-end
has been disclosed.
 
Sponsored
 
unconsolidated
 
structured
 
entities
 
in
 
which
 
UBS
 
did
not have an interest at year-end
During
 
2021
 
and
 
2020,
 
UBS
 
AG
 
did
 
not
 
earn
 
material
 
income
from sponsored
 
unconsolidated SEs
 
in which
 
UBS AG
 
did not
 
have
an interest at year-end.
During
 
2021
 
and
 
2020,
 
UBS
 
AG
 
and
 
third
 
parties
 
did
 
not
transfer any
 
assets into
 
sponsored securitization
 
vehicles created
in the year. UBS AG and
 
third parties transferred assets, alongside
deposits
 
and
 
debt
 
issuances
 
(which
 
are
 
assets
 
from
 
the
perspective
 
of
 
the
 
vehicle),
 
of
 
USD
1
 
billion
 
and
 
USD
2
 
billion,
respectively, into sponsored client vehicles created in 2021 (2020:
USD
0
 
billion
 
and
 
USD
9
 
billion,
 
respectively).
 
For
 
sponsored
investment
 
funds, transfers
 
arose during
 
the period
 
as investors
invested
 
and
 
redeemed
 
positions,
 
thereby
 
changing
 
the
 
overall
size
 
of
 
the
 
funds,
 
which,
 
when
 
combined
 
with
 
market
movements, resulted in
 
a total closing net
 
asset value of
 
USD
46
billion (31 December 2020: USD
37
 
billion).
 
 
Interests in unconsolidated structured entities
31.12.21
USD million, except where indicated
Securitization
vehicles
Client
vehicles
Investment
funds
Total
Maximum
exposure to loss
1
Financial assets at fair value held for trading
246
162
6,743
7,151
7,151
Derivative financial instruments
5
45
155
205
205
Loans and advances to customers
125
125
125
Financial assets at fair value not held for trading
35
100
135
135
Financial assets measured at fair value through other comprehensive
 
income
324
4,525
4,849
4,849
Other financial assets measured at amortized cost
0
2
0
1
250
Total assets
610
3
4,732
7,124
12,466
Derivative financial instruments
2
11
281
294
Total liabilities
2
11
281
294
Assets held by the unconsolidated structured entities in which UBS AG had
 
an
interest (USD billion)
30
4
81
5
103
6
31.12.20
USD million, except where indicated
Securitization
vehicles
Client
vehicles
Investment
funds
Total
Maximum
exposure to loss
1
Financial assets at fair value held for trading
375
131
7,595
8,101
8,101
Derivative financial instruments
6
49
158
213
211
Loans and advances to customers
179
179
179
Financial assets at fair value not held for trading
35
1
2
73
109
109
Financial assets measured at fair value through other comprehensive
 
income
6,624
6,624
6,624
Other financial assets measured at amortized cost
0
2
0
250
Total assets
416
3
6,805
8,005
15,227
Derivative financial instruments
3
11
376
390
0
Total liabilities
3
11
376
390
Assets held by the unconsolidated structured entities in which UBS AG had
 
an
interest (USD billion)
39
4
136
5
89
6
1 For the purpose of this disclosure, maximum exposure to loss amounts do not consider the risk-reducing effects of collateral or other credit enhancements.
 
2 Represents the carrying amount of loan commitments.
The maximum exposure to loss for these instruments is equal
 
to the notional amount.
 
3 As of 31 December 2021, USD
0.1
 
billion of the USD
0.6
 
billion (31 December 2020: USD
0.2
 
billion of the USD
0.4
 
billion)
was held in Group Functions – Non-core and Legacy Portfolio.
 
4 Represents the principal amount outstanding.
 
5 Represents the market value of total assets.
 
6 Represents the net asset value of the investment
funds sponsored by
 
UBS AG and
 
the carrying amount
 
of UBS AG’s
 
interests in the
 
investment funds
 
not sponsored by
 
UBS AG.
 
In 2021, UBS
 
AG updated
 
the presentation of
 
this table to
 
remove its interests
 
in
unconsolidated structured investment funds and the corresponding total asset information, where UBS AG’s
 
interest is driven solely from UBS AG’s role as the fund’s
 
investment manager and the fees it receives. This
information is now separately disclosed in the accompanying text on the following page. Prior-period
 
information has been aligned with this new presentation.
 
 
 
 
527
 
Note 29
 
Interests in subsidiaries and other entities (continued)
UBS AG retains or purchases interests in unconsolidated SEs in
the form
 
of direct
 
investments, financing,
 
guarantees, letters
 
of
credit,
 
derivatives,
 
as
 
well
 
as
 
through
 
management
 
contracts.
UBS AG’s
 
maximum
 
exposure
 
to
 
loss
 
is
 
generally
 
equal
 
to
 
the
carrying amount of UBS
 
AG’s interest in the SE,
 
with this subject
to change over time with market movements. Guarantees,
 
letters
of
 
credit
 
and
 
credit
 
derivatives
 
are
 
an
 
exception,
 
with
 
the
contract’s notional
 
amount, adjusted
 
for losses already
 
incurred,
representing the maximum loss that UBS AG is exposed to.
The
 
maximum exposure
 
to loss
 
disclosed in
 
the table
 
on the
previous
 
page
 
does
 
not
 
reflect
UBS
 
AG’s
 
risk
 
management
activities, including effects from
 
financial instruments that may
 
be
used to economically
 
hedge risks inherent
 
in the unconsolidated
SE
 
or
 
risk-reducing
 
effects
 
of
 
collateral
 
or
 
other
 
credit
enhancements.
In 2021 and
 
2020, UBS AG
 
did not provide
 
support, financial
or
 
otherwise,
 
to
 
an
 
unconsolidated
 
SE
 
when
 
not
 
contractually
obligated to do so, nor does UBS AG have any intention to do so
in the future.
In
 
2021
 
and
 
2020,
 
income
 
and
 
expenses
 
from
 
interests
 
in
unconsolidated
 
SEs
 
primarily
 
resulted
 
from
 
mark-to-market
movements
 
recognized
 
in
Other
 
net
 
income
 
from
 
financial
instruments
 
measured at fair
 
value through profit
 
of loss
, which
have generally been
 
hedged with other financial
 
instruments, as
well
 
as
 
fee
 
and
 
commission
 
income
 
received
 
from
 
UBS-
sponsored
 
funds.
Interests in securitization vehicles
As of
 
31 December 2021
 
and 31 December
 
2020, UBS AG
 
held
interests,
 
both
 
retained
 
and
 
acquired,
 
in
 
various
 
securitization
vehicles that relate
 
to financing, underwriting, secondary
 
market
and derivative trading activities.
The numbers
 
outlined in
 
the table
 
on the previous
 
page may
differ
 
from
 
the
 
securitization
 
positions
 
presented
 
in
 
the
31
 
December
2021
Pillar
 
3
R
eport
,
 
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 UBS
 
AG did not have
an
 
interest
 
because
 
it
 
did
 
not
 
absorb
 
any
 
risk;
 
(ii)
 
a
 
different
measurement
 
basis
 
in certain
 
cases
 
(e.g.,
 
IFRS
 
carrying
 
amount
within
 
the previous
 
table
 
compared
 
with net
 
exposure
 
amount
at default for
 
Pillar 3 disclosures)
 
;
 
and (iii) different
 
classification
of vehicles viewed
 
as sponsored by UBS
 
AG versus sponsored
 
by
third parties.
›
 
Refer to the 31 December 2021 Pillar 3
 
Report,
 
available under
“Pillar 3 disclosures” at
ubs.com/investors
,
 
for more information
Interests in client vehicles
Client
 
vehicles are
 
established predominantly
 
for
 
clients to
 
gain
exposure
 
to specific
 
assets or
 
risk exposures.
 
Such vehicles
 
may
enter
 
into
 
derivative
 
agreements,
 
with
 
UBS
 
or
 
a
 
third
 
party,
 
to
align
 
the
 
cash
 
flows
 
of
 
the
 
entity
 
with
 
the
 
investor’s
 
intended
investment objective,
 
or to introduce other
 
desired risk exposures.
 
As
 
of
 
31 December
 
2021
 
and
 
31 December
 
2020,
 
UBS
 
AG
retained
 
interests
 
in
 
client
 
vehicles
 
sponsored
 
by
 
UBS
 
and
 
third
parties that
 
relate to
 
financing, secondary
 
market and
 
derivative
trading activities, and to hedge structured product offerings.
Interests in investment funds
Investment funds have
 
a collective investment
 
objective, and are
either passively
 
managed, so
 
that any
 
decision making
 
does not
have a
 
substantive effect
 
on variability,
 
or are
 
actively managed
and investors
 
or their
 
governing bodies
 
do not
 
have substantive
voting or similar rights.
UBS
 
AG
 
holds
 
interests
 
in
 
a
 
number
 
of
 
investment
 
funds,
primarily
 
resulting
 
from
 
seed
 
investments
 
or
 
in
 
order
 
to
 
hedge
structured product offerings. In addition to the interests disclosed
in the table on the previous page, UBS AG manages the assets of
various pooled
 
investment funds
 
and receives
 
fees based,
 
in whole
or
 
part,
 
on
 
the
 
net
 
asset
 
value
 
of
 
the
 
fund
 
and
 
/
 
or
 
the
performance of the fund. The specific fee structure is determined
based on various
 
market factors and considers
 
the fund’s nature
and
 
the
 
jurisdiction
 
of
 
incorporation,
 
as
 
well
 
as
 
fee
 
schedules
negotiated with clients. These
 
fee contracts represent an interest
in
 
the
 
fund,
 
as
 
they
 
align
 
UBS
 
AG’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
425
 
billion
 
and
 
USD
395
billion
as
 
of
 
31
 
December
2021
 
and
 
31
 
De
cember
2020,
 
respectively,
 
and
 
have
 
been
 
excluded
 
from
 
the
 
table
 
on
 
the
previous page. UBS AG
 
did not have any
 
material exposure to loss
from
 
these
 
interests
 
as
 
of
 
31
 
December
2021
or
 
as
 
of
31 December 2020.
 
 
Consolidated financial statements | UBS AG consolidated financial statements
528
 
Note 30
 
Changes in organization and acquisitions and disposals of subsidiaries and businesses
 
Strategic partnership with Sumitomo Mitsui Trust Holdings
In
 
2019,
 
UBS
 
AG
 
entered
 
into
 
a
 
strategic
 
wealth
 
management
partnership
 
in
 
Japan
 
with
 
Sumitomo
 
Mitsui Trust
 
Holdings, Inc.
(SuMi
 
Trust
 
Holdings).
 
In
 
January
 
2020,
 
the
 
first
 
phase
 
was
launched, with
 
operations commencing in
 
the joint
 
venture that
was established
 
to promote
 
the respective
 
services. At
 
the time,
UBS
 
AG
 
and
 
SuMi
 
Trust
 
Holdings
 
also
 
started
 
offering
 
each
other’s products and services to their respective clients.
In
 
the
 
third
 
quarter
 
of
 
2021,
 
the
 
second
 
phase
 
of
 
the
partnership was completed, with the
 
launch of a new operational
partnership
 
entity,
 
UBS
 
SuMi
 
TRUST
 
Wealth
 
Management
 
Co.,
Ltd., which
 
is
51
%-owned and
 
controlled by
 
UBS AG,
 
requiring
UBS
 
AG
 
to
 
consolidate
 
this
 
entity.
 
The
 
new
 
entity
 
offers
 
global
securities and wealth management capabilities,
 
together with the
custody, real
 
estate, inheritance
 
and wealth
 
transfer expertise of
a
 
Japanese
 
trust
 
banking
 
group.
 
Upon
 
completion
 
of
 
this
transaction in
 
the third
 
quarter of
 
2021, shareholders’
 
equity of
UBS AG increased by USD
155
 
million, with no effect on profit or
loss.
Disposals of subsidiaries and businesses
Sale of remaining investment in Clearstream Fund Centre AG
In the second
 
quarter of 2021,
 
UBS AG sold
 
its remaining minority
investment in Clearstream Fund Centre
 
AG to Deutsche Börse
 
AG
for
 
CHF
390
 
million.
 
The
 
transaction
 
followed
 
the
 
sale
 
of
 
a
majority
 
investment
 
and
 
successful
 
transfer
 
of
 
control
 
of
Fondcenter
 
AG
 
to
 
Deutsche
 
Börse
 
AG
 
in
 
2020,
 
when
 
UBS
 
AG
recognized
 
a
 
post-tax gain
 
on sale
 
of
 
USD
631
 
million
 
in
Other
income
. The sale of
 
the remaining
48.8
% investment resulted
 
in
a post-tax gain of USD
37
 
million in 2021, which was recognized
in
Other income
, with no
 
associated net tax
 
expense. Long-term
commercial
 
cooperation
 
arrangements
 
remain
 
in
 
place
 
for
 
the
provision
 
of
 
services
 
by
 
Clearstream
 
to
 
UBS,
 
including
 
jointly
servicing banks and insurance companies.
Sale of wealth management business in Austria
In
 
the third
 
quarter
 
of 2021,
 
UBS AG
 
completed the
 
sale of
 
its
domestic wealth management
 
business in Austria
 
to LGT. The sale
resulted
 
in
 
a
 
pre-tax
 
gain
 
of
 
USD
100
 
million,
 
which
 
was
recognized
 
in
Other
 
income
,
 
and
 
an
 
associated
 
tax
 
expense
 
of
USD
25
 
million.
Sale of wealth management business in Spain in 2022
In October 2021,
 
UBS AG signed
 
an agreement to
 
sell its
 
domestic
wealth
 
management
 
business
 
in
 
Spain
 
to
 
Singular
 
Bank.
 
The
agreement
 
includes
 
the
 
transition
 
of
 
employees,
 
client
relationships,
 
products
 
and services
 
of
 
the
 
wealth management
business
 
of
 
UBS
 
AG
 
in
 
Spain.
 
The
 
transaction
 
is
 
subject
 
to
customary closing conditions and is expected to close in the third
quarter of 2022.
As
 
of
 
31 December
 
2021,
 
the
 
assets
 
and
 
liabilities
 
of
 
the
business
 
were
 
presented
 
in
 
Global
 
Wealth
 
Management
 
as
 
a
disposal group held for sale within
Other non-financial assets
 
and
Other non-financial
 
liabilities
 
and amounted
 
to USD
647
 
million
and
 
USD
 
823
 
million,
 
respectively.
 
Upon
 
the
 
closing
 
of
 
the
transaction,
 
UBS
AG
expects
 
to
 
record
 
a
 
pre
-
tax
 
gain
 
of
approximately USD
0.2
 
billion.
Sale of UBS Swiss Financial Advisers AG in 2022
In December 2021,
 
UBS AG signed
 
an agreement to sell
 
its wholly
owned
 
subsidiary
 
UBS
 
Swiss
 
Financial
 
Advisers
 
AG
 
(SFA)
 
to
Vontobel.
 
SFA
 
is
 
an
 
SEC-registered
 
investment
 
advisor
 
and
FINMA-licensed
 
securities
 
firm
 
that
 
offers
 
US
 
clients
 
tailored
investment
 
solutions
 
in
 
a
 
Switzerland-based
 
environment.
 
The
transaction
 
is
 
subject
 
to
 
customary
 
closing
 
conditions
 
and
regulatory approvals and is
 
expected to close in the
 
third quarter
of 2022.
As
 
of
 
31 December
 
2021,
 
the
 
assets
 
and
 
liabilities
 
that
 
are
subject
 
to
 
the
 
transaction
were
 
presented
 
in
 
Global
 
Wealth
Management as a disposal group held for sale within
Other non-
financial assets
 
and
Other non-financial
 
liabilities
 
and amounted
to USD
446
 
million and
 
USD
475
 
million, respectively.
 
Upon the
closing
 
of
 
the
 
transaction,
 
UBS
 
AG
 
does
 
not
 
expect
 
a
 
material
effect on profit or loss or shareholders’ equity.
Acquisitions of subsidiaries and businesses in 2022
Acquisition of Wealthfront in 2022
In January
 
2022, UBS
 
AG entered
 
into an
 
agreement to
 
acquire
Wealthfront,
 
an
 
industry-leading
 
digital
 
wealth
 
management
provider,
 
for
 
a
 
cash
 
consideration
 
of
 
USD
1.4
 
billion.
 
The
acquisition is aligned with UBS’s growth strategy
 
in the Americas,
will broaden
 
our reach
 
among affluent
 
investors and
 
will add
 
a
new
 
digital-first
 
offering
 
increasing
 
our
 
distribution
 
capabilities.
The
 
transaction
 
is
 
subject
 
to
 
customary
 
closing
 
conditions,
including
 
regulatory
 
approvals,
 
and
 
is
 
expected
 
to
 
close
 
in
 
the
second
 
half
 
of
 
2022.
 
Upon
 
the
 
closing
 
of
 
the
 
transaction,
Wealthfront
 
will become
 
a wholly
 
owned subsidiary
 
of UBS
 
AG
and UBS
 
AG expects
 
to recognize
 
additional goodwill
 
and other
intangible assets of approximately USD
1.2
 
billion.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
529
 
Note 31
 
Related parties
 
UBS
 
AG
 
defines
 
related
 
parties
 
as
 
associates
 
(entities
 
that
 
are
significantly influenced
 
by UBS),
 
joint ventures
 
(entities in
 
which
UBS shares control with another party), post-employment benefit
plans for
 
UBS AG
 
employees, key
 
management personnel,
 
close
family members
 
of key management
 
personnel and entities
 
that
are,
 
directly
 
or
 
indirectly,
 
controlled
 
or
 
jointly
 
controlled
 
by
 
key
management
 
personnel
 
or
 
their
 
close
 
family
 
members.
 
Key
management
 
personnel
 
is
 
defined
 
as
 
members
 
of
 
the Board
 
of
Directors (BoD) and Executive Board (EB).
 
a) Remuneration of key management personnel
The
 
Chairman of
 
the
 
BoD
 
has a
 
specific
 
management
 
employment
 
contract and
 
receives
 
pension
 
benefits upon
 
retirement.
 
Total
remuneration of the Chairman of the BoD and all EB members is included in the table below.
 
 
Remuneration of key management
 
personnel
USD million, except where indicated
31.12.21
31.12.20
31.12.19
Base salaries and other cash payments
1
30
31
30
Incentive awards – cash
2
17
17
13
Annual incentive award under DCCP
26
26
20
Employer’s contributions to retirement benefit plans
2
2
2
Benefits in kind, fringe benefits (at market value)
1
1
1
Share-based compensation
3
45
45
34
Total
122
122
101
Total (CHF million)
4
112
115
101
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
 
27 for more
 
information. For
 
EB members, share
 
-based compensation for
 
2021, 2020 and
 
2019 was
 
entirely
composed of LTIP
 
awards. For the
 
Chairman of the BoD, the
 
share-based compensation for 2021, 2020
 
and 2019 was entirely composed
 
of UBS shares.
 
4 Swiss franc amounts disclosed represent
 
the respective
US dollar amounts translated at the applicable performance award currency exchange rates (2021: USD
 
/ CHF
0.92
; 2020: USD / CHF
0.94
; 2019: USD / CHF
0.99
).
 
 
The independent members
 
of the BoD
 
do not have
 
employment
or
 
service
 
contracts
 
with
 
UBS
 
AG,
 
and
 
thus
 
are
 
not
 
entitled
 
to
benefits upon termination
 
of their service
 
on the BoD.
 
Payments
to these
 
individuals for their
 
services as external
 
board members
amounted to USD
7.5
 
million (CHF
6.9
 
million) in 2021, USD
7.0
million
 
(CHF
6.6
 
million)
 
in
 
2020
 
and
 
USD
7.3
 
million
 
(CHF
7.3
million) in 2019.
 
b) Equity holdings of key management personnel
Equity holdings of key management personnel
1
31.12.21
31.12.20
Number of shares held by members of the BoD, EB and parties closely linked to them
2
4,175,515
4,956,640
1 No options were held in 2021 and 2020 by non-independent members
 
of the BoD and any GEB member or any of its related
 
parties.
 
2 Excludes shares granted under variable
 
compensation plans with forfeiture
provisions.
 
 
Of
 
the
 
share
 
totals
 
above,
 
no
 
shares
 
were
 
held
 
by
 
close
 
family
members of
 
key management
 
personnel on
 
31 December 2021
and 31 December 2020. No shares were
 
held by entities that are
directly
 
or
 
indirectly
 
controlled
 
or
 
jointly
 
controlled
 
by
 
key
management
 
personnel
 
or
 
their
 
close
 
family
 
members
 
on
31 December 2021 and
 
31 December 2020. As
 
of 31 December
2021,
 
no member of
 
the BoD or EB
 
was the beneficial owner
 
of
more than 1% of UBS Group AG’s shares.
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
530
 
Note 31
 
Related parties (continued)
 
c) Loans, advances and mortgages to key management personnel
The non-independent members
 
of the BoD and
 
EB members are
granted
 
loans,
 
fixed
 
advances
 
and
 
mortgages
 
in
 
the
 
ordinary
course of business
 
on substantially the same
 
terms and conditions
that are available to other employees, including
 
interest rates and
collateral,
 
and
 
neither
 
involve
 
more
 
than
 
the
 
normal
 
risk
 
of
collectability nor
 
contain any
 
other unfavorable
 
features
 
for the
firm.
 
Independent
 
BoD
 
members
 
are
 
granted
 
loans
 
and
mortgages in
 
the ordinary
 
course of
 
business at
 
general market
conditions.
Movements in the
 
loan, advances and
 
mortgage balances are
as follows.
 
 
Loans, advances and mortgages to key management
 
personnel
1
USD million, except where indicated
2021
2020
Balance at the beginning of the year
31
23
Additions
11
13
Reductions
(15)
(5)
Balance at the end of the year
2
28
31
Balance at the end of the year (CHF million)
2, 3
25
28
1 All loans are secured loans.
 
2 There were no unused uncommitted credit facilities as of 31 December
 
2021 and 31 December 2020.
 
3 Swiss franc amounts disclosed represent the respective US dollar amounts
translated at the relevant year-end closing exchange rate.
 
d) Other related-party transactions with entities controlled by key management personnel
In 2021
 
and 2020,
 
UBS AG
 
did not
 
enter into
 
transactions with
entities
 
that
 
are
directly
 
or
 
indirectly
 
controlled
 
or
 
jointly
controlled by UBS AG’s key management personnel or their close
family
 
members
 
and
 
as
 
of
 
31
 
December
2021
,
 
31
 
December
20
20
 
and
 
31
 
December
 
201
9
,
 
th
ere
 
were
 
no
 
outstanding
balances related
 
to such
 
transactions. Furthermore,
 
in 2021
 
and
2020, entities
 
controlled by
 
key management
 
personnel did
 
not
sell any
 
goods or
 
provide any
 
services to UBS
 
AG, and
 
therefore
did
 
not
 
receive
 
any
 
fees
 
from
 
UBS
 
AG.
 
UBS
 
AG
 
also
 
did
 
not
provide services to such entities in 2021 and 2020, and therefore
also received no fees.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
531
 
Note 31
 
Related parties (continued)
 
e) Transactions with associates and joint ventures
Loans to and outstanding receivables from associates
 
and joint ventures
USD million
2021
2020
Carrying amount at the beginning of the year
630
982
Additions
133
527
Reductions
(497)
(1,001)
Foreign currency translation
(14)
123
Carrying amount at the end of the year
 
251
630
of which: unsecured loans and receivables
243
621
Other transactions with associates and
 
joint ventures
As of or for the year ended
USD million
31.12.21
31.12.20
Payments to associates and joint ventures for goods and services
 
received
157
139
Fees received for services provided to associates and joint ventures
104
128
Liabilities to associates and joint ventures
127
91
Commitments and contingent liabilities to associates
 
and joint ventures
7
9
›
 
Refer to Note 29 for an overview of investments
 
in associates and joint ventures
 
f) Receivables and payables from / to UBS Group AG and other subsidiaries of UBS Group AG
USD million
31.12.21
31.12.20
Receivables
Loans and advances to customers
1,049
1,470
Financial assets at fair value held for trading
187
76
Other financial assets measured at amortized cost
45
38
Payables
Customer deposits
2,828
3,324
Funding from UBS Group AG
57,295
53,979
Other financial liabilities measured at amortized cost
1,887
1,820
Other financial liabilities designated at fair value
1
2,340
1,375
1 Represents funding recognized from UBS Group AG that is designated at fair value. Refer to Note
 
19b for more information.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
532
 
Note 32
 
Invested assets and net new money
 
The
 
following
 
disclosures
 
provide
a
 
breakdown
 
of
 
UBS
 
AG
’s
 
invested assets
 
and a
 
presentation of their
 
development, including
net
 
new
 
money,
 
as
 
required
 
by
 
the
 
Swiss
 
Financial
 
Market
Supervisory Authority.
 
Invested assets
Invested assets
 
consist of
 
all client
 
assets managed
 
by or
 
deposited
with
 
UBS
 
AG
 
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
 
AG
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
 
AG total
 
invested
 
assets, as
 
both business
divisions are independently providing a
 
service to their respective
clients, and both add value and generate revenue.
Net new money
Net new
 
money in
 
a reporting
 
period is
 
the amount
 
of invested
assets entrusted to UBS AG
 
by new and existing
 
clients, less those
withdrawn
 
by
 
existing
 
clients
 
and
 
clients
 
who
 
terminated
relationships
 
with UBS AG.
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
 
AG
 
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
 
AG to
 
exit a
 
market
 
or specific
 
service
 
offering,
 
the one-time
net effect
 
is reported
 
as
Other effects
.
The
 
Investment
 
Bank
 
does
 
not track
 
invested
 
assets
 
and
 
net
new
 
money.
 
However,
 
when
 
a
 
client
 
is
 
transferred
 
from
 
the
Investment Bank
 
to another
 
business division,
 
this may
 
produce
net new
 
money even though
 
the client assets
 
were already with
UBS AG.
 
Invested assets and net new money
As of or for the year ended
USD billion
31.12.21
31.12.20
Fund assets managed by UBS
419
397
Discretionary assets
1,705
1,459
Other invested assets
2,472
2,331
Total invested assets
1
4,596
4,187
of which: double counts
356
311
Net new money
1
159
127
1 Includes double counts.
 
Development of invested assets
USD billion
2021
2020
Total invested assets at the beginning of the year
1
4,187
3,607
Net new money
159
127
Market movements
2
339
359
Foreign currency translation
(65)
96
Other effects
(24)
(1)
of which: acquisitions / (divestments)
(5)
0
Total invested assets at the end of the year
1
4,596
4,187
1 Includes double counts.
 
2 Includes interest and dividend income.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
533
 
Note 33
 
Currency translation rates
 
The following table shows the rates of
 
the main currencies used to translate
 
the financial information of UBS AG’s operations with
 
a
functional currency other than the US dollar into US dollars.
 
Closing exchange rate
Average rate
1
As of
For the year ended
31.12.21
31.12.20
31.12.21
31.12.20
31.12.19
1 CHF
1.10
1.13
1.09
1.07
1.01
1 EUR
1.14
1.22
1.18
1.15
1.12
1 GBP
1.35
1.37
1.37
1.29
1.28
100 JPY
0.87
0.97
0.91
0.94
0.92
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 12
month-end rates, weighted according to the income and expense volumes of all operations of UBS
 
AG with the same functional currency for each month. Weighted average rates for
 
individual business divisions may
deviate from the weighted average rates for UBS AG.
 
 
 
Note 34
 
Events after the reporting period
 
Russia’s invasion of Ukraine
Russia’s
 
invasion of
 
Ukraine on
 
24 February
 
2022
 
has triggered
disruptions
 
and
 
uncertainties
 
in
 
the
 
markets
 
and
 
the
 
global
economy,
 
as well as coordinated implementation
 
of sanctions by
Switzerland, the
 
United States,
 
the European
 
Union, the
 
United
Kingdom and
 
others against
 
Russia and,
 
certain Russian
 
entities
and
 
nationals.
 
These
 
events,
 
together
 
with
 
potential
 
counter-
sanctions and other
 
measures taken
 
by Russia, impact
 
UBS AG’s
businesses.
UBS
 
AG’s country
 
risk exposure
 
to Russia
 
was approximately
USD
0.6
 
billion
 
across
 
its
 
business
 
divisions
 
as
 
of
 
31 December
2021.
 
This
 
exposure
 
has
 
been
 
reduced
 
since
 
year-end 2021.
 
In
addition,
 
UBS
 
AG
 
is
 
currently
 
monitoring
 
settlement
 
risk
 
on
certain
 
open
 
transactions
 
with
 
Russian
 
bank
-
 
or
 
non
-
bank
counterparties
 
or
 
Russian
 
underlyings,
 
as
 
market
 
closures,
 
the
imposition of exchange
 
controls, sanctions or
 
other measures may
limit
 
our
 
ability
 
to
 
settle
 
existing
 
transactions
 
or
 
to
 
realize
 
on
collateral, which may result in unexpected increases in exposures.
UBS AG’s
 
balance sheet
 
as of
 
31 December 2021
 
also included
net assets of USD
51
 
million held in UBS AG’s Russian
 
subsidiary,
OOO
 
UBS
 
Bank.
 
As
 
of
 
3 March
 
2022,
 
UBS
 
AG
 
also
 
had
approximately USD
0.2
 
billion of
 
exposure arising from
 
reliance on
Russian assets as
 
collateral on Lombard
 
lending and other
 
secured
financing in Global Wealth Management.
 
As of 3 March
 
2022, UBS identified a small
 
number of Global
Wealth
 
Management
 
clients
 
subject
 
to
 
the
 
recently
 
introduced
sanctions with total loans outstanding of under USD
10
 
million.
UBS
 
AG
 
continues
 
to
 
closely
 
monitor
 
related
 
effects
 
on
 
its
financial
 
statements,
 
including
 
estimated
 
direct
 
and
 
indirect
impacts
 
on
 
expected
 
credit
 
loss
 
calculations
 
and
 
on
 
fair
 
value
measurement
 
of
 
assets,
 
liabilities
 
and
 
off-balance
 
sheet
exposures.
 
The
 
situation
 
continues
 
to
 
evolve
 
and
 
broader
implications
 
for
 
other
 
counterparties
 
of
 
UBS
 
AG,
 
including
financial
 
institutions,
 
are
 
not
 
possible
 
to
 
assess
 
at
 
this
 
time;
however,
 
there
 
were
 
no
 
material
 
adverse
 
effects
 
on
 
UBS
 
AG’s
financial statements as of 4 March 2022.
›
 
Refer to “Top and emerging risks” and “Country risk” in the
“Risk management and control” section and
 
to “Performance in
the financial services industry is affected by
 
market conditions
and the macroeconomic climate” in the “Risk
 
factors” section of
this report for more information
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
534
Note 35
 
Main differences between IFRS and Swiss GAAP
 
The consolidated financial statements of UBS AG are
 
prepared in
accordance
 
with
 
International
 
Financial
 
Reporting
 
Standards
(IFRS). The
 
Swiss Financial Market
 
Supervisory Authority
 
(FINMA)
requires
 
financial
 
groups
 
presenting
 
financial
 
statements
 
under
IFRS
 
to
 
provide
 
a
 
narrative
 
explanation
 
of
 
the
 
main
 
differences
between IFRS and Swiss generally accepted accounting principles
(
GAAP
)
 
(
the
 
FINMA
 
Accounting
 
Ordinance,
 
FINMA
 
Circular
2020/1
 
“Accounting –
 
banks” and
 
the
 
Banking
 
Ordinance
 
(the
BO)). Included
 
in this
 
Note are
 
the significant
 
differences
 
in the
recognition and measurement between
 
IFRS and the
 
provisions of
the BO and the guidelines of FINMA governing true and fair view
financial statement reporting pursuant
 
to Art. 25 to
 
Art. 42 of
 
the
BO.
1. Consolidation
Under IFRS,
 
all entities
 
that are
 
controlled
 
by the
 
holding entity
are consolidated. Under
 
Swiss GAAP,
 
controlled entities deemed
immaterial to the
 
Group or held
 
only temporarily are exempt
 
from
consolidation,
 
but
 
instead
 
are
 
recorded
 
as
 
participations
accounted
 
for
 
under
 
the
 
equity
 
method
 
of
 
accounting
 
or
 
as
financial
 
investments
 
measured
 
at
 
the
 
lower
 
of
 
cost
 
or
 
market
value.
2. Classification and measurement of financial assets
Under IFRS, debt instruments
 
are measured at amortized
 
cost, fair
value through
 
other comprehensive income
 
(FVOCI) or fair
 
value
through
 
profit
 
or
 
loss
 
(FVTPL),
 
depending
 
on
 
the
 
nature
 
of
 
the
business
 
model
 
within
 
which
 
the
 
asset
 
is
 
held
 
and
 
the
characteristics of
 
the contractual
 
cash flows
 
of the
 
asset.
 
Equity
instruments are accounted
 
for at FVTPL by
 
UBS AG. Under Swiss
GAAP, trading assets and derivatives
 
are measured at
 
FVTPL in
 
line
with IFRS.
 
However,
 
non-trading debt
 
instruments are
 
generally
measured at amortized
 
cost, even when
 
the assets are
 
managed
on
 
a
 
fair value
 
basis.
 
In
 
addition,
 
the measurement
 
of
 
financial
assets in the
 
form of
 
securities depends on
 
the nature of
 
the asset:
debt instruments not
 
held to maturity,
 
i.e., instruments available
for
 
sale,
 
and
 
equity
 
instruments
 
with
 
no
 
permanent
 
holding
intent, are classified as
Financial investments
 
and measured at the
lower
 
of
 
(amortized)
 
cost
 
or
 
market
 
value.
 
Market
 
value
adjustments up to the original cost amount and
 
realized gains or
losses upon disposal
 
of the investment
 
are recorded in the
 
income
statement
 
as
Other
 
income
 
from
 
ordinary
 
activities.
Equity
instruments
 
with
 
a
 
permanent
 
holding
 
intent
 
are
 
classified
 
as
participations in
Non-consolidated investments in
 
subsidiaries and
other
 
participations
 
and
 
are
 
measured
 
at
 
cost
 
less
 
impairment.
Impairment
 
losses
 
are
 
recorded
 
in
 
the
 
income
 
statement
 
as
Impairment
 
of investments
 
in non-consolidated
 
subsidiaries and
other participations.
 
Reversals of
 
impairments up
 
to the
 
original
cost
 
amount
 
and
 
realized
 
gains
 
or
 
losses
 
upon
 
disposal
 
of
 
the
investment are
 
recorded as
Extraordinary income
 
/
Extraordinary
expenses
.
3. Fair value option applied to financial liabilities
Under
 
IFRS,
 
UBS
 
AG
 
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 AG’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
 
u
nit
-
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 AG’s own
 
credit are not
 
recognized, whereas
realized own credit is recognized in
 
Net trading income
.
4. Allowances and provisions for credit losses
Swiss GAAP permit use of IFRS for
 
accounting for allowances and
provisions for credit losses based on an expected credit loss (ECL)
model. UBS AG
 
has chosen to
 
apply the IFRS
 
9 ECL approach
 
to
the substantial majority of exposures in scope of Swiss GAAP ECL
requirements,
 
including all exposures in scope of ECL under both
Swiss GAAP and IFRS.
In
 
addition,
 
for
 
a
 
small
 
population
 
of
 
exposures
 
within
 
the
scope of Swiss GAAP ECL requirements, which are not subject to
ECL
 
under
IFRS
 
due
 
to
 
classification
 
and
 
measurements
differences,
 
UBS
 
AG
 
applies
 
an
 
alternative
 
approach
.
 
Where
Pillar 1 internal ratings-based (IRB) models are
 
applied to measure
credit risk, ECL for
 
such exposures is
 
determined by the regulatory
expected loss
 
(EL), with
 
an add-on
 
for scaling
 
up to
 
the residual
maturity of exposures
 
maturing beyond the next
 
12 months. For
detailed
 
information
 
on
 
r
egulatory
 
EL,
 
refer
 
to
 
the
“
Risk
management
 
and control”
 
section
 
of
 
this report.
 
For exposures
where the Pillar 1 standardized approach (SA) is used
 
to measure
credit
 
risk,
 
ECL
 
is
 
determined
 
using
 
a
 
portfolio
 
approach
 
that
derives
 
a
 
conservative probability
 
of
 
default
 
(PD)
 
and loss
 
given
default (LGD) for the entire portfolio.
 
5. Hedge accounting
Under IFRS, when cash flow hedge accounting is applied, the fair
value
 
gain
 
or
 
loss
 
on
 
the
 
effective
 
portion
 
of
a
 
derivative
designated as
 
a cash
 
flow hedge
 
is recognized
 
initially in
 
equity
and reclassified to the income statement when certain conditions
are
 
met.
 
When
 
fair
 
value
 
hedge
 
accounting
 
is
 
applied,
 
the
 
fair
value change of the
 
hedged item attributable to
 
the hedged risk
is
 
reflected
 
in
 
the
 
measurement
 
of
 
the
 
hedged
 
item
 
and
 
is
recognized in the income statement along with
 
the change in the
fair
 
value
 
of
 
the
 
hedging
 
derivative.
 
Under
 
Swiss
 
GAAP,
 
the
effective
 
portion
 
of
 
the
 
fair
 
value
 
change
 
of
a
derivative
instrument designated
 
as a
 
cash flow
 
or as
 
a fair
 
value hedge
 
is
deferred on the balance
 
sheet as
Other assets
 
or
Other liabilities
.
The carrying amount of the hedged
 
item designated in fair value
hedges is
 
not adjusted
 
for fair
 
value changes
 
attributable to
 
the
hedged risk.
 
 
 
 
535
 
Note 35
 
Main differences between IFRS and Swiss GAAP (continued)
6. Goodwill and intangible assets
Under
 
IFRS,
 
goodwill acquired
 
in
 
a
 
business combination
 
is
 
not
amortized
 
but tested
 
annually for
 
impairment.
 
Intangible
 
assets
with
 
an
 
indefinite
 
useful
 
life
 
are
 
also
 
not
 
amortized
 
but
 
tested
annually
 
for
 
impairment.
 
Under
 
Swiss
 
GAAP,
 
goodwill
 
and
intangible assets with
 
indefinite useful lives
 
are amortized over
 
a
period not exceeding five years, unless a longer useful life, which
may not exceed
10
 
years, can
 
be justified. In
 
addition, these assets
are tested annually for impairment.
7. Post-employment benefit plans
Swiss GAAP permit the use of IFRS or Swiss
 
accounting standards
for post-employment benefit
 
plans, with the
 
election made on
 
a
plan-by-plan basis.
UBS AG
 
has elected
 
to apply
 
IFRS (IAS
 
19) for
 
the non-Swiss
defined
 
benefit
 
plans
 
in
 
the
 
UBS
 
AG
 
standalone
 
financial
statements and
 
Swiss GAAP
 
(FER 16)
 
for the
 
Swiss pension
 
plan
in the UBS
 
AG and the UBS
 
Switzerland AG standalone
 
financial
statements. The
 
requirements of
 
Swiss GAAP
 
are better
 
aligned
with the specific nature
 
of Swiss pension plans, which
 
are hybrid
in
 
that
 
they
 
combine
 
elements
 
of
 
defined
 
contribution
 
and
defined
 
benefit
 
plans,
 
but
 
are
 
treated
 
as
 
defined
 
benefit
 
plans
under IFRS. Key
 
differences between Swiss
 
GAAP and IFRS
 
include
the treatment
 
of dynamic
 
elements, such
 
as future
 
salary increases
and future
 
interest credits
 
on retirement
 
savings, which
 
are not
considered under
 
the static
 
method used
 
in accordance
 
with Swiss
GAAP.
 
Also,
 
the
 
discount
 
rate
 
used
 
to
 
determine
 
the
 
defined
benefit obligation in accordance with
 
IFRS is based on the
 
yield of
high-quality
 
corporate
 
bonds
 
of
 
the
 
market
 
in
 
the
 
respective
pension plan country. The
 
discount rate used in
 
accordance with
Swiss GAAP (i.e., the technical interest rate) is determined by
 
the
Pension Foundation
 
Board based
 
on the
 
expected returns of
 
the
Board’s investment strategy.
For defined benefit plans,
 
IFRS require the full
 
defined benefit
obligation net
 
of the
 
plan assets
 
to be
 
recorded on
 
the balance
sheet
 
subject
 
to
 
the
 
asset
 
ceiling
 
rules,
 
with
 
changes
 
resulting
from remeasurements recognized
 
directly in equity.
 
However, for
non-Swiss
 
defined
 
benefit
 
plans
 
for
 
which
 
IFRS
 
accounting
 
is
elected,
 
changes
 
due
 
to
 
remeasurements
 
are
 
recognized
 
in
 
the
income statement of UBS AG standalone under Swiss GAAP.
Swiss
 
GAAP
 
require
 
employer
 
contributions
 
to
 
the
 
pension
fund
 
to
 
be
 
recognized
 
as
 
personnel
 
expenses
 
in
 
the
 
income
statement.
 
Swiss
 
GAAP
 
also
 
require
 
an
 
assessment
 
of
 
whether,
based
 
on
 
the
 
pension
 
fund’s
 
financial
 
statements
 
prepared
 
in
accordance
 
with
 
Swiss
 
accounting
 
standards
 
(FER
 
26),
 
an
economic benefit
 
to, or
 
obligation of,
 
the employer
 
arises from
the
 
pension
 
fund that
 
is recognized
 
in the
 
balance sheet
 
when
conditions are
 
met. Conditions
 
for recording
 
a pension
 
asset or
liability would
 
be met
 
if, for
 
example, an
 
employer contribution
reserve is available
 
or the employer
 
is required to
 
contribute to the
reduction of a pension deficit (on an FER 26 basis).
8. Leasing
Under IFRS, a single lease accounting model applies
 
that requires
UBS AG to record a right-of-use (RoU) asset and a corresponding
lease liability on
 
the balance sheet
 
when UBS AG
 
is a lessee
 
in a
lease
 
arrangement.
 
The
 
RoU
 
asset
 
and
 
the
 
lease
 
liability
 
are
recognized when UBS
 
AG 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 AG’s unsecured borrowing rate.
 
The RoU asset is recorded at
an
 
amount
 
equal
 
to
 
the
 
lease
 
liability
 
but
 
is
 
adjusted
 
for
 
rent
prepayments, initial direct costs, any costs to refurbish the leased
asset
 
and
 
/
 
or
 
lease
 
incentives
 
received.
 
The
 
RoU
 
asset
 
is
depreciated over the shorter of the lease
 
term or the useful life of
the underlying asset.
Under Swiss GAAP,
 
leases that
 
transfer substantially
 
all the risks
and
 
rewards,
 
but
 
not
 
necessarily
 
legal
 
title
 
in
 
the
 
underlying
assets,
 
are
 
classified
 
as
 
finance
 
leases.
 
All
 
other
 
leases
 
are
classified
 
as
 
operating
 
leases.
 
Whereas
 
finance
 
leases
 
are
recognized on the balance
 
sheet and measured in line
 
with IFRS,
operating
 
leases are
 
not recognized
 
on
 
the balance
 
sheet, with
payments recognized as
General and administrative
 
expenses
 
on
a straight-line
 
basis over
 
the lease term,
 
which commences with
control
 
of
 
the
 
physical
 
use
 
of
 
the
 
asset.
 
Lease
 
incentives
 
are
treated
 
as
 
a
 
reduction
 
of
 
rental
 
expense
 
and
 
recognized
 
on
 
a
consistent basis over the lease term.
 
9. Netting of derivative assets and liabilities
Under IFRS, derivative assets, derivative liabilities and related cash
collateral
 
not
 
settled
 
to
 
market
 
are
 
reported
 
on
 
a
 
gross
 
basis
unless
 
the
 
restrictive
 
IFRS
 
netting
 
requirements
 
are
 
met:
 
(i)
existence
 
of
 
master
 
netting
 
agreements
 
and
 
related
 
collateral
arrangements
 
that are
 
unconditional and
 
legally enforceable,
 
in
both
 
the
 
normal
 
course
 
of
 
business
 
and
 
the
 
event
 
of
 
default,
bankruptcy or
 
insolvency of
 
UBS AG
 
and its
 
counterparties; and
(ii) UBS AG’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 AG’s counterparties.
10. Negative interest
Under IFRS,
 
negative interest
 
income arising
 
on a
 
financial asset
does not
 
meet the
 
definition of
 
interest
 
income and,
 
therefore,
negative
 
interest
 
on
 
financial
 
assets
 
and
 
negative
 
interest
 
on
financial
 
liabilities
 
are
 
presented
 
within
 
interest
 
expense
 
and
interest income, respectively. Under
 
Swiss GAAP, negative interest
on
 
financial
 
assets
 
is
 
presented
 
within
 
interest
 
income
 
and
negative interest on financial liabilities
 
is presented within interest
expense.
11. Extraordinary income and expense
Certain
 
non-recurring
 
and
 
non-operating
 
income
 
and
 
expense
items,
 
such
 
as
 
realized
 
gains
 
or
 
losses
 
from
 
the
 
disposal
 
of
participations,
 
fixed
 
and
 
intangible
 
assets,
 
a
nd
 
reversals
 
of
impairments
 
of
 
participations
 
and
 
fixed
 
assets,
 
are
 
classified
 
as
extraordinary
 
items
 
under
 
Swiss
 
GAAP.
 
This
 
distinction
 
is
 
not
available under IFRS
.
p
 
Consolidated financial statements | UBS AG consolidated financial statements
536
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
537
 
 
Note 36
 
Supplemental guarantor information required under SEC regulations
Joint liability of UBS Switzerland AG
In
 
2015,
 
the
 
Personal
 
&
 
Corporate
 
Banking
 
and
 
Wealth
Management businesses booked in Switzerland
 
were transferred
from UBS AG to UBS Switzerland AG through an asset transfer in
accordance
 
with the
 
Swiss Merger
 
Act. Under
 
the terms
 
of the
asset
 
transfer
 
agreement,
 
UBS
 
Switzerland
 
AG
 
assumed
 
joint
liability for contractual
 
obligations of UBS
 
AG existing
 
on the asset
transfer date,
 
including the
 
full and
 
unconditional guarantee
 
of
certain registered debt securities issued by UBS AG.
 
To reflect this
joint
 
liability,
 
UBS
 
Switzerland
 
AG
 
is
 
presented
 
in
 
a
 
separate
column as a subsidiary co-guarantor.
The
 
joint
 
liability
 
of
 
UBS
 
Switzerland
 
AG
 
for
 
contractual
obligations
 
of UBS
 
AG decreased
 
in 2021
 
by USD
4.4
 
billion to
USD
 
5.7
 
billion
 
as
 
of
 
31
 
December
 
2021,
mainly
 
driven
 
by
contractual
 
maturities
 
and,
 
to
 
a
 
lesser
 
extent,
 
early
extinguishments of UBS AG liabilities.
 
Supplemental guarantor consolidated
 
income statement
USD million
UBS AG
(standalone)
1
UBS
Switzerland AG
(standalone)
1
Other
 
subsidiaries
2
Elimination
entries
UBS AG
(consolidated)
For the year ended 31 December 2021
Operating income
Interest income from financial instruments measured at
 
amortized cost and
fair value through other comprehensive income
3,130
3,652
2,456
(703)
8,534
Interest expense from financial instruments measured at
 
amortized cost
(2,847)
(520)
(1,024)
1,025
(3,366)
Net interest income from financial instruments measured
 
at fair value through
profit or loss
1,229
254
228
(274)
1,437
Net interest income
1,512
3,386
1,660
48
6,605
Other net income from financial instruments measured
 
at fair value through
profit or loss
3,751
807
1,369
(83)
5,844
Credit loss (expense) / release
65
98
10
(24)
148
Fee and commission income
3,837
5,204
16,151
(770)
24,422
Fee and commission expense
(810)
(481)
(1,450)
755
(1,985)
Net fee and commission income
3,027
4,723
14,702
(14)
22,438
Other income
7,555
221
1,560
(8,396)
941
Total operating income
15,910
9,235
19,300
(8,469)
35,976
Operating expenses
Personnel expenses
3,401
2,098
10,161
1
15,661
General and administrative expenses
4,255
3,442
4,474
(2,696)
9,476
Depreciation, amortization and impairment of non-financial
 
assets
949
285
755
(114)
1,875
Total operating expenses
8,605
5,825
15,390
(2,809)
27,012
Operating profit / (loss) before tax
7,305
3,409
3,910
(5,660)
8,964
Tax expense / (benefit)
203
622
1,090
(11)
1,903
Net profit / (loss)
7,102
2,788
2,820
(5,649)
7,061
Net profit / (loss) attributable to non-controlling interests
0
0
29
0
29
Net profit / (loss) attributable to shareholders
7,102
2,788
2,792
(5,649)
7,032
1 Amounts presented for UBS
 
AG standalone and UBS
 
Switzerland AG standalone represent
 
IFRS standalone information. Refer
 
to the UBS AG
 
standalone and UBS Switzerland
 
AG standalone financial statements
under “Complementary financial
 
information” at
 
ubs.com/investors for
 
information prepared
 
in accordance
 
with Swiss GAAP.
 
2 The
 
”Other subsidiaries“ column
 
includes consolidated information
 
for the
 
UBS
Americas Holding LLC, UBS Europe SE and UBS Asset Management AG significant sub-groups,
 
as well as standalone information for other subsidiaries.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
538
 
Note 36
 
Supplemental guarantor information required under SEC regulations (continued)
Supplemental guarantor consolidated
 
statement of comprehensive income
USD million
UBS AG
(standalone)
1
UBS
Switzerland AG
(standalone)
1
Other
 
subsidiaries
2
Elimination
entries
UBS AG
(consolidated)
For the year ended 31 December 2021
Comprehensive income attributable to shareholders
Net profit / (loss)
7,102
2,788
2,792
(5,649)
7,032
Other comprehensive income
Other comprehensive income that may be reclassified to the income
statement
Foreign currency translation, net of tax
(1)
(419)
(607)
517
(510)
Financial assets measured at fair value through other comprehensive
income, net of tax
0
(157)
0
(157)
Cash flow hedges, net of tax
(1,129)
(279)
(250)
(17)
(1,675)
Cost of hedging, net of tax
(26)
(26)
Total other comprehensive income that may be reclassified to the
income statement, net of tax
(1,155)
(699)
(1,014)
500
(2,368)
Other comprehensive income that will not be reclassified to the
income statement
Defined benefit plans, net of tax
170
(135)
67
0
102
Own credit on financial liabilities designated at fair value, net of tax
46
46
Total other comprehensive income that will not be reclassified to the
income statement, net of tax
217
(135)
67
0
148
Total other comprehensive income
(939)
(834)
(947)
500
(2,220)
Total comprehensive income attributable to shareholders
6,163
1,954
1,845
(5,149)
4,813
Total comprehensive income attributable to non-controlling interests
13
13
Total comprehensive income
6,163
1,954
1,858
(5,149)
4,826
1 Amounts presented for UBS
 
AG standalone and UBS
 
Switzerland AG standalone represent
 
IFRS standalone information. Refer
 
to the UBS AG
 
standalone and UBS Switzerland
 
AG standalone financial statements
under “Complementary financial
 
information” at
 
ubs.com/investors for
 
information prepared
 
in accordance
 
with Swiss
 
GAAP.
 
2 The
 
”Other subsidiaries“ column
 
includes consolidated information
 
for the
 
UBS
Americas Holding LLC, UBS Europe SE and UBS Asset Management AG significant sub-groups,
 
as well as standalone information for other subsidiaries.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
539
 
Note 36
 
Supplemental guarantor information required under SEC regulations (continued)
Supplemental guarantor consolidated
 
balance sheet
USD million
UBS AG
(standalone)
1
UBS
Switzerland AG
(standalone)
1
Other
 
subsidiaries
2
Elimination
entries
UBS AG
(consolidated)
As of 31 December 2021
Assets
Cash and balances at central banks
53,839
91,031
47,946
192,817
Loans and advances to banks
39,681
7,066
19,858
(51,245)
15,360
Receivables from securities financing transactions
50,566
5,438
40,585
(21,577)
75,012
Cash collateral receivables on derivative instruments
29,939
779
10,314
(10,518)
30,514
Loans and advances to customers
101,458
230,170
93,252
(26,188)
398,693
Other financial assets measured at amortized cost
8,902
6,828
12,377
(1,870)
26,236
Total financial assets measured at amortized cost
284,385
341,312
224,332
(111,397)
738,632
Financial assets at fair value held for trading
116,370
79
16,740
(2,156)
131,033
of which: assets pledged as collateral that may be
sold or repledged by counterparties
47,891
0
6,073
(10,568)
43,397
Derivative financial instruments
113,426
4,199
35,567
(35,047)
118,145
Brokerage receivables
14,563
7,283
(7)
21,839
Financial assets at fair value not held for trading
37,532
5,413
33,940
(17,243)
59,642
Total financial assets measured at fair value through profit or loss
281,891
9,691
93,531
(54,454)
330,659
Financial assets measured at fair value
 
through other comprehensive income
1,007
7,837
8,844
Investments in subsidiaries and associates
54,204
37
40
(53,038)
1,243
Property, equipment and software
6,501
1,456
4,048
(293)
11,712
Goodwill and intangible assets
213
6,138
28
6,378
Deferred tax assets
936
7,903
8,839
Other non-financial assets
5,757
2,424
1,656
(1)
9,836
Total assets
634,894
354,921
345,484
(219,154)
1,116,145
Liabilities
Amounts due to banks
 
34,691
33,453
50,405
(105,448)
13,101
Payables from securities financing transactions
16,711
526
9,910
(21,615)
5,533
Cash collateral payables on derivative instruments
30,260
153
11,845
(10,458)
31,801
Customer deposits
101,093
286,488
142,967
14,287
544,834
Funding from UBS Group AG
 
57,295
57,295
Debt issued measured at amortized cost
73,045
9,460
(73)
82,432
Other financial liabilities measured at amortized cost
4,477
2,477
5,057
(2,245)
9,765
Total financial liabilities measured at amortized cost
317,572
332,556
220,184
(125,551)
744,762
Financial liabilities at fair value held for trading
25,711
372
7,652
(2,046)
31,688
Derivative financial instruments
116,588
4,053
35,731
(35,063)
121,309
Brokerage payables designated at fair value
30,497
13,548
(1)
44,045
Debt issued designated at fair value
70,660
785
14
71,460
Other financial liabilities designated at fair value
11,127
24,454
(3,167)
32,414
Total financial liabilities measured at fair value through profit or loss
254,584
4,425
82,171
(40,263)
300,916
Provisions
2,023
297
1,153
(21)
3,452
Other non-financial liabilities
1,799
1,278
5,528
(33)
8,572
Total liabilities
575,978
338,556
309,036
(165,868)
1,057,702
Equity attributable to shareholders
58,916
16,365
36,108
(53,287)
58,102
Equity attributable to non-controlling interests
340
340
Total equity
58,916
16,365
36,448
(53,287)
58,442
Total liabilities and equity
634,894
354,921
345,484
(219,154)
1,116,145
1 Amounts presented for UBS AG
 
standalone and UBS Switzerland AG
 
standalone represent IFRS standalone information.
 
Refer to the UBS AG
 
standalone and UBS Switzerland AG standalone
 
financial statements,
available under “Complementary financial information” at ubs.com/investors, for information prepared
 
in accordance with Swiss GAAP.
 
2 The ”Other subsidiaries“ column includes consolidated information for the
UBS Americas Holding LLC, UBS Europe SE and UBS Asset Management AG significant sub-groups,
 
as well as standalone information for other subsidiaries.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
540
 
Note 36
 
Supplemental guarantor information required under SEC regulations (continued)
Supplemental guarantor consolidated
 
statement of cash flows
USD million
UBS AG
1
UBS
Switzerland AG
1
Other
 
subsidiaries
1
UBS AG
(consolidated)
For the year ended 31 December 2021
Net cash flow from / (used in) operating activities
5,714
2,131
22,718
30,563
Cash flow from / (used in) investing activities
Purchase of subsidiaries, associates and intangible assets
0
(1)
0
(1)
Disposal of subsidiaries, associates and intangible assets
2
16
0
577
593
Purchase of property, equipment and software
(656)
(276)
(650)
(1,581)
Disposal of property, equipment and software
294
0
1
295
Purchase of financial assets measured at fair value through other
 
comprehensive income
(1,006)
0
(4,795)
(5,802)
Disposal and redemption of financial assets measured at
 
fair value through other comprehensive
income
189
0
4,863
5,052
Net (purchase) / redemption of debt securities measured
 
at amortized cost
(807)
772
(380)
(415)
Net cash flow from / (used in) investing activities
(1,970)
495
(385)
(1,860)
Cash flow from / (used in) financing activities
Net short-term debt issued / (repaid)
(3,073)
(21)
0
(3,093)
Distributions paid on UBS AG shares
(4,539)
0
0
(4,539)
Issuance of debt designated at fair value and long-term debt measured
 
at amortized cost
3
97,250
1,177
193
98,619
Repayment of debt designated at fair value and long-term debt measured
 
at amortized cost
3
(78,385)
(1,093)
(320)
(79,799)
Net cash flows from other financing activities
(280)
0
20
(261)
Net activity related to group internal capital transactions and dividends
5,240
(537)
(4,702)
0
Net cash flow from / (used in) financing activities
16,212
(475)
(4,811)
10,927
Total cash flow
Cash and cash equivalents at the beginning of the year
39,400
93,342
40,689
173,430
Net cash flow from / (used in) operating, investing and financing
 
activities
19,957
2,151
17,523
39,630
Effects of exchange rate differences on cash and cash equivalents
(1,462)
(2,693)
(1,151)
(5,306)
Cash and cash equivalents at the end of the year
4
57,895
92,799
57,061
207,755
of which: cash and balances at central banks
53,729
91,031
47,946
192,706
of which: loans and advances to banks
3,258
1,588
8,975
13,822
of which: money market paper
5
908
179
139
1,227
1 Cash flows generally represent a
 
third-party view from a UBS AG
 
consolidated perspective, except for
 
Net activity related to group internal
 
capital transactions and dividends.
 
2 Includes cash proceeds from the
sale of the minority stake in Clearstream Fund Centre AG and dividends received from associates.
 
3 Includes funding from UBS Group AG to UBS AG.
 
4 Balances with an original maturity of three months or less.
USD
3,408
 
million of cash and cash equivalents were
 
restricted.
 
5 Money market paper is included
 
in the balance sheet under Financial assets
 
at fair value held for trading,
 
Financial assets measured at fair value
through other comprehensive income, Financial assets at fair value not held for trading and Other
 
financial assets measured at amortized cost.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
541
 
Note 36
 
Supplemental guarantor information required under SEC regulations (continued)
Supplemental guarantor consolidated
 
income statement
USD million
UBS AG
(standalone)
1
UBS
Switzerland AG
(standalone)
1
Other
 
subsidiaries
2
Elimination
entries
UBS AG
(consolidated)
For the year ended 31 December 2020
Operating income
Interest income from financial instruments measured at
 
amortized cost and
fair value through other comprehensive income
3,386
3,636
2,612
(818)
8,816
Interest expense from financial instruments measured at
 
amortized cost
(3,694)
(513)
(1,261)
1,134
(4,333)
Net interest income from financial instruments measured
 
at fair value through
profit or loss
1,103
164
311
(273)
1,305
Net interest income
794
3,288
1,662
43
5,788
Other net income from financial instruments measured
 
at fair value through
profit or loss
4,857
911
1,044
118
6,930
Credit loss (expense) / release
(352)
(286)
(56)
0
(695)
Fee and commission income
3,731
4,585
13,651
(984)
20,982
Fee and commission expense
(644)
(829)
(1,263)
961
(1,775)
Net fee and commission income
3,087
3,756
12,388
(23)
19,207
Other income
4,671
233
2,585
(5,941)
1,549
Total operating income
13,057
7,902
17,623
(5,803)
32,780
Operating expenses
Personnel expenses
3,458
2,017
9,211
0
14,686
General and administrative expenses
3,507
3,313
4,147
(2,481)
8,486
Depreciation, amortization and impairment of non-financial
 
assets
1,013
261
750
(115)
1,909
Total operating expenses
7,978
5,591
14,108
(2,596)
25,081
Operating profit / (loss) before tax
5,079
2,311
3,515
(3,207)
7,699
Tax expense / (benefit)
238
444
912
(107)
1,488
Net profit / (loss)
4,840
1,868
2,603
(3,100)
6,211
Net profit / (loss) attributable to non-controlling interests
0
0
15
0
15
Net profit / (loss) attributable to shareholders
4,840
1,868
2,588
(3,100)
6,196
1 Amounts presented for UBS AG
 
standalone and UBS Switzerland AG
 
standalone represent IFRS standalone
 
information. Refer to the UBS
 
AG standalone and UBS Switzerland
 
AG standalone financial statements
under “Complementary financial
 
information” at ubs.com/investors
 
for information prepared
 
in accordance with
 
Swiss GAAP.
 
2 The
 
”Other subsidiaries“
 
column includes consolidated
 
information for
 
the UBS
Americas Holding LLC, UBS Europe SE and UBS Asset Management AG significant sub-groups,
 
as well as standalone information for other subsidiaries.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
542
 
Note 36
 
Supplemental guarantor information required under SEC regulations (continued)
Supplemental guarantor consolidated
 
statement of comprehensive income
USD million
UBS AG
(standalone)
1
UBS
Switzerland AG
(standalone)
1
Other
 
subsidiaries
2
Elimination
entries
UBS AG
(consolidated)
For the year ended 31 December 2020
Comprehensive income attributable to shareholders
Net profit / (loss)
4,840
1,868
2,588
(3,100)
6,196
Other comprehensive income
Other comprehensive income that may be reclassified to the income
statement
Foreign currency translation, net of tax
81
1,228
690
(969)
1,030
Financial assets measured at fair value through other comprehensive
income, net of tax
0
0
137
0
136
Cash flow hedges, net of tax
902
26
101
(18)
1,011
Cost of hedging, net of tax
(13)
(13)
Total other comprehensive income that may be reclassified to the
income statement, net of tax
971
1,254
928
(988)
2,165
Other comprehensive income that will not be reclassified to the
income statement
Defined benefit plans, net of tax
(67)
(107)
40
0
(134)
Own credit on financial liabilities designated at fair value, net of tax
(293)
(293)
Total other comprehensive income that will not be reclassified to the
income statement, net of tax
(360)
(107)
40
0
(427)
Total other comprehensive income
611
1,147
968
(988)
1,738
Total comprehensive income attributable to shareholders
5,451
3,015
3,556
(4,088)
7,934
Total comprehensive income attributable to non-controlling interests
36
36
Total comprehensive income
5,451
3,015
3,592
(4,088)
7,970
1 Amounts presented for UBS
 
AG standalone and UBS
 
Switzerland AG standalone represent
 
IFRS standalone information. Refer
 
to the UBS AG
 
standalone and UBS Switzerland
 
AG standalone financial statements
under “Complementary financial
 
information” at
 
ubs.com/investors for
 
information prepared
 
in accordance
 
with Swiss GAAP.
 
2 The
 
”Other subsidiaries“ column
 
includes consolidated information
 
for the
 
UBS
Americas Holding LLC, UBS Europe SE and UBS Asset Management AG significant sub-groups,
 
as well as standalone information for other subsidiaries.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
543
 
Note 36
 
Supplemental guarantor information required under SEC regulations (continued)
Supplemental guarantor consolidated
 
balance sheet
USD million
UBS AG
(standalone)
1
UBS
Switzerland AG
(standalone)
1
Other
 
subsidiaries
2
Elimination
entries
UBS AG
(consolidated)
As of 31 December 2020
Assets
Cash and balances at central banks
34,426
91,638
32,167
158,231
Loans and advances to banks
40,171
6,385
19,465
(50,678)
15,344
Receivables from securities financing transactions
56,568
4,026
43,350
(29,735)
74,210
Cash collateral receivables on derivative instruments
32,771
1,543
10,093
(11,671)
32,737
Loans and advances to customers
99,952
228,279
73,513
(20,767)
380,977
Other financial assets measured at amortized cost
8,411
8,084
13,368
(2,644)
27,219
Total financial assets measured at amortized cost
272,299
339,956
191,957
(115,495)
688,717
Financial assets at fair value held for trading
110,812
55
16,260
(1,634)
125,492
of which: assets pledged as collateral that
 
may be sold or repledged by counterparties
54,468
1
6,247
(13,617)
47,098
Derivative financial instruments
154,313
6,342
44,005
(45,041)
159,618
Brokerage receivables
16,898
7,763
(2)
24,659
Financial assets at fair value not held for trading
46,198
13,068
36,444
(15,672)
80,038
Total financial assets measured at fair value through profit or loss
328,221
19,464
104,473
(62,350)
389,808
Financial assets measured at fair value
 
through other comprehensive income
187
8,072
8,258
Investments in subsidiaries and associates
53,606
38
439
(52,526)
1,557
Property, equipment and software
6,999
1,335
3,975
(350)
11,958
Goodwill and intangible assets
217
6,234
28
6,480
Deferred tax assets
840
1
8,334
(1)
9,174
Other non-financial assets
6,641
2,063
854
(183)
9,374
Total assets
669,010
362,857
324,337
(230,878)
1,125,327
Liabilities
Amounts due to banks
 
41,414
34,096
43,066
(107,527)
11,050
Payables from securities financing transactions
17,247
566
18,407
(29,899)
6,321
Cash collateral payables on derivative instruments
35,875
561
12,495
(11,618)
37,313
Customer deposits
98,441
293,371
112,372
23,745
527,929
Funding from UBS Group AG
53,979
53,979
Debt issued measured at amortized cost
75,658
9,687
3
3
85,351
Other financial liabilities measured at amortized cost
5,285
2,567
5,745
(3,175)
10,421
Total financial liabilities measured at amortized cost
327,898
340,848
192,088
(128,470)
732,364
Financial liabilities at fair value held for trading
28,800
335
5,989
(1,529)
33,595
Derivative financial instruments
156,192
5,593
44,359
(45,043)
161,102
Brokerage payables designated at fair value
25,045
13,704
(7)
38,742
Debt issued designated at fair value
58,986
935
(54)
59,868
Other financial liabilities designated at fair value
11,255
23,445
(2,927)
31,773
Total financial liabilities measured at fair value through profit or loss
280,279
5,927
88,433
(49,559)
325,080
Provisions
1,293
301
1,197
2,791
Other non-financial liabilities
2,173
987
3,907
(49)
7,018
Total liabilities
611,643
348,063
285,625
(178,078)
1,067,254
Equity attributable to shareholders
57,367
14,794
38,393
(52,800)
57,754
Equity attributable to non-controlling interests
319
319
Total equity
57,367
14,794
38,712
(52,800)
58,073
Total liabilities and equity
669,010
362,857
324,337
(230,878)
1,125,327
1 Amounts presented for UBS AG
 
standalone and UBS Switzerland AG
 
standalone represent IFRS standalone information.
 
Refer to the UBS AG
 
standalone and UBS Switzerland AG standalone
 
financial statements,
available under “Complementary financial information” at ubs.com/investors, for information prepared
 
in accordance with Swiss GAAP.
 
2 The ”Other subsidiaries“ column includes consolidated information for the
UBS Americas Holding LLC, UBS Europe SE and UBS Asset Management AG significant sub-groups,
 
as well as standalone information for other subsidiaries.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
544
 
Note 36
 
Supplemental guarantor information required under SEC regulations (continued)
Supplemental guarantor consolidated
 
statement of cash flows
USD million
UBS AG
1
UBS
Switzerland AG
1
Other
 
subsidiaries
1
UBS AG
(consolidated)
For the year ended 31 December 2020
Net cash flow from / (used in) operating activities
(14,883)
24,661
26,804
36,581
Cash flow from / (used in) investing activities
Purchase of subsidiaries, associates and intangible assets
0
(3)
(43)
(46)
Disposal of subsidiaries, associates and intangible assets
2
14
0
660
674
Purchase of property, equipment and software
(714)
(162)
(697)
(1,573)
Disposal of property, equipment and software
361
0
3
364
Purchase of financial assets measured at fair value through other
 
comprehensive income
(77)
0
(6,213)
(6,290)
Disposal and redemption of financial assets measured at
 
fair value through other comprehensive
income
79
0
4,451
4,530
Net (purchase) / redemption of debt securities measured
 
at amortized cost
(3,021)
132
(1,277)
(4,166)
Net cash flow from / (used in) investing activities
(3,357)
(33)
(3,117)
(6,506)
Cash flow from / (used in) financing activities
Net short-term debt issued / (repaid)
23,828
17
0
23,845
Distributions paid on UBS AG shares
(3,848)
0
0
(3,848)
Issuance of debt designated at fair value and long-term debt measured
 
at amortized cost
3
78,867
1,057
229
80,153
Repayment of debt designated at fair value and long-term debt measured
 
at amortized cost
3
(86,204)
(776)
(118)
(87,099)
Net cash flows from other financing activities
(290)
0
(263)
(553)
Net activity related to group internal capital transactions and dividends
2,984
(1,307)
(1,677)
0
Net cash flow from / (used in) financing activities
15,336
(1,009)
(1,829)
12,498
Total cash flow
Cash and cash equivalents at the beginning of the year
39,598
62,551
17,655
119,804
Net cash flow from / (used in) operating, investing and financing
 
activities
(2,905)
23,619
21,859
42,573
Effects of exchange rate differences on cash and cash equivalents
2,706
7,171
1,175
11,053
Cash and cash equivalents at the end of the year
4
39,400
93,342
40,689
173,430
of which: cash and balances at central banks
34,283
91,638
32,167
158,088
of which: loans and advances to banks
4,085
1,695
8,148
13,928
of which: money market paper
5
1,032
9
374
1,415
1 Cash flows generally represent
 
a third-party view from a UBS
 
AG consolidated perspective,
 
except for Net activity related
 
to group internal capital transactions
 
and dividends.
 
2 Includes cash proceeds from
 
the
sale of the majority stake
 
in Fondcenter AG and
 
dividends received from associates.
 
3 Includes funding from UBS Group
 
AG to UBS AG.
 
4 Balances with an original maturity of
 
three months or less. USD
3,828
million of cash and cash equivalents were restricted.
 
5 Money market paper is included in the balance sheet under Financial assets at fair value held for trading, Financial assets measured at fair value through other
comprehensive income, Financial assets at fair value not held for trading and Other financial assets
 
measured at amortized cost.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
545
 
Note 36
 
Supplemental guarantor information required under SEC regulations (continued)
Supplemental guarantor consolidated
 
income statement
USD million
UBS AG
(standalone)
1
UBS
Switzerland AG
(standalone)
1
Other
 
subsidiaries
2
Elimination
entries
UBS AG
(consolidated)
For the year ended 31 December 2019
Operating income
Interest income from financial instruments measured at
 
amortized cost and
fair value through other comprehensive income
4,864
4,048
3,719
(1,928)
10,703
Interest expense from financial instruments measured at
 
amortized cost
(6,547)
(737)
(2,317)
2,298
(7,303)
Net interest income from financial instruments measured
 
at fair value through
profit or loss
1,177
(228)
394
(327)
1,015
Net interest income
(506)
3,083
1,796
42
4,415
Other net income from financial instruments measured
 
at fair value through
profit or loss
5,116
924
1,114
(322)
6,833
Credit loss (expense) / release
(51)
7
(33)
0
(78)
Fee and commission income
3,285
4,342
12,527
(997)
19,156
Fee and commission expense
(674)
(819)
(1,188)
986
(1,696)
Net fee and commission income
2,610
3
3,523
3
11,338
(11)
17,460
Other income
4,899
259
1,960
(6,442)
677
Total operating income
12,069
7,796
16,176
(6,733)
29,307
Operating expenses
Personnel expenses
3,251
1,936
8,614
0
13,801
General and administrative expenses
3,467
3,181
4,565
(2,627)
8,586
Depreciation, amortization and impairment of non-financial
 
assets
954
221
772
(196)
1,751
Total operating expenses
7,672
5,338
13,951
(2,823)
24,138
Operating profit / (loss) before tax
4,396
2,458
2,225
(3,911)
5,169
Tax expense / (benefit)
175
514
530
(21)
1,198
Net profit / (loss)
4,221
1,944
1,695
(3,890)
3,971
Net profit / (loss) attributable to non-controlling interests
0
0
6
0
6
Net profit / (loss) attributable to shareholders
4,221
1,944
1,689
(3,889)
3,965
1 Amounts presented for UBS
 
AG standalone and UBS
 
Switzerland AG standalone represent
 
IFRS standalone information. Refer
 
to the UBS AG
 
standalone and UBS Switzerland
 
AG standalone financial statements
under “Complementary financial
 
information” at
 
ubs.com/investors for
 
information prepared
 
in accordance
 
with Swiss GAAP.
 
2 The
 
”Other subsidiaries“ column
 
includes consolidated
 
information for
 
the UBS
Americas Holding LLC,
 
UBS Europe SE and UBS
 
Asset Management AG significant
 
sub-groups, as well
 
as standalone information for
 
other subsidiaries.
 
3 Includes the effects of
 
the transfer in 2019
 
of beneficial
ownership of a
 
portion of
 
Global Wealth
 
Management international
 
business booked
 
in Switzerland
 
from UBS Switzerland
 
AG to
 
UBS AG.
 
Refer to “Note
 
25 Changes
 
in organization
 
and other events
 
affecting
comparability” in the “UBS AG standalone financial statements” section of the UBS AG Standalone financial
 
statements and regulatory information for the year ended 31 December 2019.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial statements | UBS AG consolidated financial statements
546
 
Note 36
 
Supplemental guarantor information required under SEC regulations (continued)
Supplemental guarantor consolidated
 
statement of comprehensive income
USD million
UBS AG
(standalone)
1
UBS
Switzerland AG
(standalone)
1
Other
 
subsidiaries
2
Elimination
entries
UBS AG
(consolidated)
For the year ended 31 December 2019
Comprehensive income attributable to shareholders
Net profit / (loss)
4,221
1,944
1,689
(3,889)
3,965
Other comprehensive income
Other comprehensive income that may be reclassified to the income
statement
Foreign currency translation, net of tax
5
150
39
(102)
92
Financial assets measured at fair value through other
comprehensive income, net of tax
0
0
117
0
117
Cash flow hedges, net of tax
870
140
147
(15)
1,143
Total other comprehensive income that may be reclassified to the
income statement, net of tax
875
290
303
(117)
1,351
Other comprehensive income that will not be reclassified to the
income statement
Defined benefit plans, net of tax
(89)
(6)
(75)
0
(170)
Own credit on financial liabilities designated at fair value, net of tax
(392)
(392)
Total other comprehensive income that will not be reclassified to
the income statement, net of tax
(481)
(6)
(75)
0
(562)
Total other comprehensive income
394
284
228
(117)
789
Total comprehensive income attributable to shareholders
4,616
2,228
1,917
(4,007)
4,754
Total comprehensive income attributable to non-controlling interests
2
2
Total comprehensive income
4,616
2,228
1,919
(4,007)
4,756
1 Amounts presented for UBS AG
 
standalone and UBS Switzerland AG
 
standalone represent IFRS standalone information.
 
Refer to the UBS AG
 
standalone and UBS Switzerland AG
 
standalone financial statements
under “Complementary financial information” at ubs.com/investors for information prepared in accordance with Swiss GAAP.
 
2 The ”Other subsidiaries“ column includes consolidated information for the significant
sub-groups UBS Americas Holding LLC, UBS Europe SE and UBS Asset Management AG,
 
as well as standalone information for other subsidiaries.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
547
 
Note 36
 
Supplemental guarantor information required under SEC regulations (continued)
Supplemental guarantor consolidated
 
statement of cash flows
USD million
UBS AG
1
UBS
Switzerland AG
1
Other
 
subsidiaries
1
UBS AG
(consolidated)
For the year ended 31 December 2019
Net cash flow from / (used in) operating activities
17,531
8,882
(7,608)
18,805
Purchase of subsidiaries, associates and intangible assets
(6)
0
(20)
(26)
Disposal of subsidiaries, associates and intangible assets
2
100
0
14
114
Purchase of property, equipment and software
(628)
(173)
(600)
(1,401)
Disposal of property, equipment and software
10
0
1
11
Purchase of financial assets measured at fair value through other
 
comprehensive income
(10)
0
(3,414)
(3,424)
Disposal and redemption of financial assets measured at
 
fair value through other comprehensive
income
10
0
3,904
3,913
Net (purchase) / redemption of debt securities measured
 
at amortized cost
(1,045)
437
45
(562)
Net cash flow from / (used in) investing activities
(1,569)
264
(70)
(1,374)
Cash flow from / (used in) financing activities
Net short-term debt issued / (repaid)
(17,150)
0
0
(17,149)
Distributions paid on UBS AG shares
(3,250)
0
0
(3,250)
Issuance of debt designated at fair value and long-term debt measured
 
at amortized cost
3
64,285
621
142
65,047
Repayment of debt designated at fair value and long-term debt measured
 
at amortized cost
3
(67,113)
(752)
(1,017)
(68,883)
Net cash flows from other financing activities
(262)
0
(242)
(504)
Net activity related to group internal capital transactions and dividends
3,569
(2,055)
(1,514)
0
Net cash flow from / (used in) financing activities
(19,922)
(2,186)
(2,630)
(24,738)
Total cash flow
Cash and cash equivalents at the beginning of the year
42,895
54,757
28,201
125,853
Net cash flow from / (used in) operating, investing and financing
 
activities
(3,960)
6,961
(10,308)
(7,307)
Effects of exchange rate differences on cash and cash equivalents
664
833
(239)
1,258
Cash and cash equivalents at the end of the year
4
39,598
62,551
17,655
119,804
of which: cash and balances at central banks
36,275
60,926
9,756
106,957
of which: loans and advances to banks
2,697
1,127
7,493
11,317
of which: money market paper
5
626
498
406
1,530
1 Cash flows generally represent a
 
third-party view from a UBS AG
 
consolidated perspective, except for
 
Net activity related to group internal
 
capital transactions and dividends.
 
2 Includes dividends received from
associates.
 
3 Includes funding from UBS
 
Group AG to UBS AG.
 
4 Balances with an original maturity
 
of three months or less.
 
USD
3,192
 
million of cash and cash
 
equivalents were restricted.
 
5 Money market
paper is included in the balance sheet under Financial assets at
 
fair value held for trading, Financial assets measured at fair value through other comprehensive income, Financial assets at
 
fair value not held for trading
and Other financial assets measured at amortized cost.
p
 
 
 
 
 
Significant
regulated
subsidiary and
sub-group
information
 
6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
549
Financial and regulatory key figures for our significant regulated
subsidiaries and sub-groups
 
UBS AG
(standalone)
UBS Switzerland AG
(standalone)
UBS Europe SE
(consolidated)
UBS Americas Holding
LLC
(consolidated)
All values in million, except where indicated
USD
CHF
EUR
USD
Financial and regulatory requirements
Swiss GAAP
Swiss SRB rules
Swiss GAAP
Swiss SRB rules
IFRS
EU regulatory rules
US GAAP
US Basel III rules
As of or for the year ended
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
31.12.21
31.12.20
Financial information
1
Income statement
Total operating income
 
16,293
12,951
8,490
7,185
1,123
1,054
14,490
12,675
Total operating expenses
 
9,712
8,370
5,472
5,590
800
878
11,925
10,842
Operating profit / (loss) before tax
 
6,581
4,581
3,018
1,595
323
176
2,565
1,833
Net profit / (loss)
 
6,548
4,539
2,452
1,271
227
163
1,812
975
Balance sheet
Total assets
 
509,851
509,024
320,656
316,829
46,411
48,591
209,718
172,385
Total liabilities
 
 
455,446
456,628
305,919
304,194
42,664
43,896
182,633
144,103
Total equity
 
54,405
52,396
14,736
12,634
3,747
4,696
27,085
28,283
Capital
2
Common equity tier 1 capital
 
52,818
 
50,269
 
12,609
 
12,234
2,764
3,703
13,002
14,384
Additional tier 1 capital
 
13,840
 
14,430
 
5,387
 
5,176
290
290
4,049
3,047
Total going concern capital / Tier 1 capital
 
66,658
 
64,699
 
17,996
 
17,410
3,054
3,993
17,051
17,431
Tier 2 capital
 
3,129
 
7,719
125
736
Total capital
3,054
3,993
17,176
18,166
Total gone concern loss-absorbing capacity
 
44,250
 
45,520
 
10,853
 
10,824
2,414
3
1,784
3
7,000
4
5,600
4
Total loss-absorbing capacity
 
110,908
 
110,219
 
28,849
 
28,234
5,468
5,777
24,051
23,031
Risk-weighted assets and leverage ratio
 
denominator
2
Risk-weighted assets
 
317,913
 
305,575
 
106,399
 
107,253
12,328
13,175
72,979
63,929
Leverage ratio denominator
5
 
593,868
 
595,017
 
339,788
 
335,251
46,660
41,376
188,246
154,609
Supplementary leverage ratio denominator
6
212,167
150,019
Capital and leverage ratios (%)
2
Common equity tier 1 capital ratio
5
 
16.6
 
16.5
 
11.9
 
11.4
 
22.4
 
28.1
 
17.8
 
22.5
Going concern capital ratio / Tier 1 capital ratio
 
21.0
 
21.2
 
16.9
 
16.2
 
24.8
 
30.3
 
23.4
 
27.3
Total capital ratio
 
24.8
 
30.3
 
23.5
 
28.4
Total loss-absorbing capacity ratio
 
27.1
 
26.3
 
44.4
 
43.8
 
33.0
 
36.0
Tier 1 leverage ratio
 
6.5
 
9.7
 
9.1
 
11.3
Supplementary tier 1 leverage ratio
 
8.0
 
11.6
Going concern leverage ratio
5
 
11.2
10.9
 
5.3
 
5.2
Total loss-absorbing capacity leverage ratio
 
8.5
 
8.4
 
11.7
 
14.0
 
12.8
 
14.9
Gone concern capital coverage ratio
 
112.0
 
135.7
Liquidity coverage ratio
2,7
High-quality liquid assets (billion)
89
84
91
92
17
17
32
Net cash outflows (billion)
52
53
64
62
10
11
22
Liquidity coverage ratio (%)
8,9
173
159
143
148
170
151
147
Net stable funding ratio
2,10
Total available stable funding
257,992
225,239
15,358
Total required stable funding
289,195
158,072
8,963
Net stable funding ratio (%)
89
11
142
11
171
Other
Joint and several liability between UBS AG and UBS Switzerland AG
(billion)
12
5
9
1 The financial information
 
disclosed does not
 
represent financial statements
 
under the respective
 
GAAP / IFRS.
 
2 Refer to the
 
31 December 2021 Pillar 3
 
Report, available under
 
“Pillar 3 disclosures” at
ubs.com/investors, for
 
more information.
 
3 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.
 
4 Consists of eligible long-term debt
 
that meets the conditions
 
specified in 12 CFR 252.162 of the
 
final TLAC rules. TLAC is the
 
sum of tier 1 capital
 
and eligible long-term debt.
 
5 Leverage
ratio denominators and going concern leverage ratios for UBS AG standalone and UBS Switzerland AG standalone for 31 December 2020 do
 
not reflect the effects of the temporary exemption that applied from
25 March 2020 until 1 January 2021 and was
 
granted by FINMA in connection with COVID-19.
 
Refer to the “Introduction and basis for preparation”
 
section of the 31 December 2021 Pillar 3 Report.
 
6 US
regulatory authorities temporarily eased the requirements for the supplementary leverage ratio (the SLR), allowing for the exclusion of US Treasury
 
securities and deposits at the Federal Reserve Banks from the
SLR denominator through March 2021. This
 
exclusion resulted in an increase in the
 
SLR of 170 bps on 31 December 2020.
 
7 There was no local
 
disclosure requirement for UBS Americas Holding
 
LLC as of
31 December 2020.
 
8 In the fourth quarter
 
of 2021, the liquidity
 
coverage ratio (the LCR)
 
of UBS AG was
 
173%, remaining above the prudential
 
requirements communicated by FINMA.
 
9 In the fourth
quarter of 2021, the LCR of UBS Switzerland AG, which is a Swiss SRB, was 143%, remaining above the prudential
 
requirement communicated by FINMA in connection with the Swiss Emergency Plan.
 
10 For
UBS AG standalone and UBS Switzerland
 
AG standalone, the
 
local disclosure requirement for
 
the net stable funding
 
ratio (the NSFR) came
 
into force in July
 
2021. For UBS
 
Europe SE consolidated, the
 
local
disclosure requirement for the NSFR came into force in June 2021. For UBS Americas Holding LLC consolidated, the NSFR requirement
 
became effective as of 1 July 2021 and related disclosures will come into
effect in the second quarter of 2023.
 
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 this report for
 
more
information about the joint and several
 
liability. Under certain circumstances,
 
the Swiss Banking Act and FINMA’s
 
Banking Insolvency Ordinance authorize
 
FINMA to modify, extinguish
 
or convert to common
equity liabilities of a bank in connection with a resolution or insolvency of such bank.
 
 
 
Significant regulated subsidiary and sub-group information
550
UBS Group
 
AG is a
 
holding company and
 
conducts substantially
all of its
 
operations through UBS
 
AG and subsidiaries
 
thereof. UBS
Group AG and
 
UBS AG have contributed
 
a significant portion of
their
 
respective
 
capital
 
to,
 
and
 
provide
 
substantial
 
liquidity
 
to,
such
 
subsidiaries.
 
Many
 
of
 
these
 
subsidiaries
 
are
 
subject
 
to
regulations requiring
 
compliance with minimum
 
capital, liquidity
and similar requirements. The table
 
in this section summarizes
 
the
regulatory capital components and
 
capital ratios of our
 
significant
regulated
 
subsidiaries
 
and
 
sub
-
groups
 
determined
 
under
 
the
regulatory
 
framework of
 
each subsidiary’s
 
or sub-group’s
 
home
jurisdiction.
›
 
Refer to “Capital and capital ratios of
 
our significant regulated
subsidiaries” in the “Capital, liquidity and
 
funding, and balance
sheet” section of this report for more information
›
 
Refer to “Note 23 Restricted and transferred
 
financial assets” in
the “Consolidated financial statements”
 
section of this report for
more information.
 
 
 
Supervisory
 
authorities
 
generally
 
have
 
discretion
 
to
 
impose
higher
 
requirements
 
or
 
to
 
otherwise
 
limit
 
the
 
activities
 
of
subsidiaries.
 
Supervisory
 
authorities
 
also
 
may
 
require
 
entities
 
to
measure capital
 
and leverage
 
ratios on
 
a stressed
 
basis and
 
may
limit
 
the ability
 
of
 
an entity
 
to engage
 
in new
 
activities
 
or take
capital actions based on the results of those tests.
Effective 1 October 2021, UBS
 
Americas Holding LLC is
 
subject
to a
 
stress capital
 
buffer (an
 
SCB) of
 
7.1%, in
 
addition to
 
minimum
capital
 
requirements.
 
The
 
SCB
 
was
 
determined
 
by
 
the
 
Federal
Reserve
 
Board
 
following
 
the
 
completion
 
of
 
the
 
Comprehensive
Capital Analysis and Review
 
(based on Dodd–Frank Act
 
Stress Test
(DFAST)
 
results
 
and
 
planned
 
future
 
dividends).
 
The
 
SCB,
 
which
replaces the static capital
 
conservation buffer of 2.5%, is
 
subject
to change on an
 
annual basis or as otherwise
 
determined by the
Federal Reserve Board.
Standalone
 
regulatory
 
information
 
for
 
UBS
 
AG
 
and
 
UBS
Switzerland
 
AG,
 
as
 
well
 
as
 
consolidated
 
regulatory
 
information
for UBS Europe SE and
 
UBS Americas Holding LLC, is provided
 
in
the
 
31 December
 
2021
 
Pillar 3
 
Report,
 
available
 
under
 
“Pillar 3
disclosures” at
ubs.com/investors
.
Standalone financial statements
 
for UBS
 
Group AG,
 
as well
 
as
standalone
 
financial
 
statements
 
and
 
regulatory
 
information
 
for
UBS AG
 
and
 
UBS Switzerland AG,
 
are
 
available under
 
“Holding
company and significant
 
regulated
 
subsidiaries
 
and sub-groups”
 
at
ubs.com/investors.
 
 
 
 
 
 
 
Additional
regulatory
information
 
7
 
 
UBS Group AG consolidated supplemental disclosures required under SEC regulations
554
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 SEC regulations. In
 
September
2020,
 
the
 
SEC
 
issued
 
final
 
rules
 
updating
 
and
 
codifying
 
the
disclosure
 
requirements
 
for
 
banking
 
registrants
 
set
 
forth
 
in
Industry
 
Guide
3,
 
Statistical
 
Disclosure
 
by
 
Bank
 
Holding
Companies. Under the final rules, Industry
 
Guide 3 was rescinded
and replaced with a new
 
Subpart 1400 of Regulation S-K, which
has come into effect
 
for UBS Group AG’s 2021
 
reporting. Part D
of this section provides the information
 
required by Subpart 1400
of Regulation S-K
 
and where applicable, prior-period comparative
information has been revised to align
 
with the new requirements.
 
 
UBS Group AG’s
 
consolidated financial statements
 
have been
prepared
 
in
 
accordance
 
with
 
International
 
Financial
 
Reporting
Standards
 
(IFRS)
 
as
 
issued
 
by
 
the
 
International
 
Accounting
Standards Board (IASB) and are denominated in US dollars (USD),
which is also
 
the functional currency
 
of: UBS Group AG;
 
UBS AG’s
Head
 
Office;
 
UBS
 
AG
 
London
 
Branch;
 
and
 
UBS’s
 
US-based
operations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
555
B – Selected financial data
 
Key figures
As of or for the year ended
USD million, except where indicated
31.12.21
31.12.20
31.12.19
31.12.18
31.12.17
Group results
Operating income
 
35,542
 
32,390
 
28,889
 
30,213
 
29,622
Operating expenses
 
26,058
 
24,235
 
23,312
 
24,222
 
24,272
Operating profit / (loss) from continuing operations before tax
 
9,484
 
8,155
 
5,577
 
5,991
 
5,351
Net profit / (loss) attributable to shareholders
 
7,457
 
6,557
 
4,304
 
4,516
 
969
Diluted earnings per share (USD)
1
 
2.06
 
1.77
 
1.14
 
1.18
 
0.25
Profitability and growth
2
Return on equity (%)
 
12.6
 
11.3
 
7.9
 
8.6
 
1.8
Return on tangible equity (%)
 
14.1
 
12.8
 
9.0
 
9.8
 
2.0
Return on common equity tier 1 capital (%)
 
17.5
 
17.4
 
12.4
 
13.1
 
3.0
Return on risk-weighted assets, gross (%)
 
12.0
 
11.7
 
11.0
 
11.8
 
12.6
Return on leverage ratio denominator, gross (%)
3
 
3.4
 
3.4
 
3.2
 
3.3
 
3.3
Cost / income ratio (%)
 
73.6
 
73.3
 
80.5
 
79.9
 
81.6
Effective tax rate (%)
 
21.1
 
19.4
 
22.7
 
24.5
 
80.5
Net profit growth (%)
 
13.7
 
52.3
 
(4.7)
 
366.0
 
(71.1)
Resources
2
Total assets
 
1,117,182
 
1,125,765
 
972,194
 
958,500
 
939,279
Equity attributable to shareholders
 
60,662
 
59,445
 
54,501
 
52,896
 
52,495
Common equity tier 1 capital
4
 
45,281
 
39,890
 
35,535
 
34,073
 
33,516
Risk-weighted assets
4
 
302,209
 
289,101
 
259,208
 
263,747
 
243,636
Common equity tier 1 capital ratio (%)
4
 
15.0
 
13.8
 
13.7
 
12.9
 
13.8
Going concern capital ratio (%)
4
 
20.0
 
19.4
 
20.0
 
17.5
 
17.6
Total loss-absorbing capacity ratio (%)
4
 
34.7
 
35.2
 
34.6
 
31.7
 
33.0
Leverage ratio denominator
3,4
 
1,068,862
 
1,037,150
 
911,322
 
904,595
 
909,032
Common equity tier 1 leverage ratio (%)
3,4
 
4.24
 
3.85
 
3.90
 
3.77
 
3.69
Going concern leverage ratio (%)
3,4
 
5.7
 
5.4
 
5.7
 
5.1
 
4.7
Total loss-absorbing capacity leverage ratio (%)
4
 
9.8
 
9.8
 
9.8
 
9.3
 
8.8
Net stable funding ratio (%)
5
 
119.0
 
119.0
 
111.0
 
110.0
 
105.0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UBS Group AG consolidated supplemental disclosures required under SEC regulations
556
 
Key figures (continued)
As of or for the year ended
USD million, except where indicated
31.12.21
31.12.20
31.12.19
31.12.18
31.12.17
Other
Invested assets (USD billion)
6
 
4,596
 
4,187
 
3,607
 
3,101
 
3,262
Personnel (full-time equivalents)
 
71,385
 
71,551
 
68,601
 
66,888
 
61,253
Americas
 
21,317
 
21,394
 
21,036
 
21,309
 
20,770
of which: USA
 
20,537
 
20,528
 
20,232
 
20,495
 
19,944
Asia Pacific
 
15,618
 
15,353
 
13,956
 
12,119
 
8,959
Europe, Middle East and Africa (excluding Switzerland)
 
14,091
 
13,899
 
12,918
 
12,620
 
11,097
of which: UK
 
6,051
 
6,069
 
5,704
 
5,782
 
5,274
of which: rest of Europe (excluding Switzerland)
 
7,826
 
7,652
 
7,048
 
6,670
 
5,662
of which: Middle East and Africa
 
215
 
178
 
166
 
168
 
161
Switzerland
 
20,359
 
20,904
 
20,691
 
20,840
 
20,427
Market capitalization
7
 
61,230
 
50,013
 
45,661
 
45,907
 
68,477
Total book value per share (USD)
7
 
17.84
 
16.74
 
15.07
 
14.34
 
14.11
Tangible book value per share (USD)
7
 
15.97
 
14.91
 
13.28
 
12.54
 
12.34
Registered ordinary shares (number)
7
 
3,702,422,995
 
3,859,055,395
 
3,859,055,395
 
3,855,634,749
 
3,853,096,603
Treasury shares (number)
7
 
302,815,328
 
307,477,002
 
243,021,296
 
166,467,802
 
132,301,550
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,
 
aspirations and capital guidance” section
 
of
this report for more information about our
 
performance targets.
 
3 Leverage ratio denominators and
 
leverage ratios for year 2020
 
do not reflect the effects of the
 
temporary exemption that applied from
 
25 March
2020 until 1 January
 
2021 and was granted
 
by FINMA in connection with
 
COVID-19. Refer to the
 
“Regulatory and legal developments” section
 
of our Annual Report
 
2020 for more information.
 
4 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 the report for the
 
respective period for more information.
 
5 The final
Swiss net stable funding ratio
 
(NSFR) regulation became effective on
 
1 July 2021. Prior to
 
this date, the NSFR
 
was based on estimated
 
pro forma reporting. Refer to
 
the “Capital, liquidity and funding,
 
and balance
sheet” section of this report for more information.
 
6 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.
 
7 Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more
information.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
557
 
Income statement data
For the year ended
USD million, except where indicated
31.12.21
31.12.20
31.12.19
31.12.18
31.12.17
Net interest income
 
6,705
 
5,862
 
4,501
 
5,048
 
6,070
Other net income from financial instruments measured
 
at fair value through profit or loss
 
5,850
 
6,960
 
6,842
 
6,960
 
5,637
Credit loss (expense) / release
 
148
 
(694)
 
(78)
 
(118)
 
(131)
Fee and commission income
 
24,372
 
20,961
 
19,110
 
19,598
 
19,362
Fee and commission expense
 
(1,985)
 
(1,775)
 
(1,696)
 
(1,703)
 
(1,840)
Net fee and commission income
 
22,387
 
19,186
 
17,413
 
17,895
 
17,522
Other income
 
452
 
1,076
 
212
 
428
 
524
Total operating income
 
35,542
 
32,390
 
28,889
 
30,213
 
29,622
Total operating expenses
 
26,058
 
24,235
 
23,312
 
24,222
 
24,272
Operating profit / (loss) before tax
 
9,484
 
8,155
 
5,577
 
5,991
 
5,351
Tax expense / (benefit)
 
1,998
 
1,583
 
1,267
 
1,468
 
4,305
Net profit / (loss)
 
7,486
 
6,572
 
4,310
 
4,522
 
1,046
Net profit / (loss) attributable to non-controlling interests
 
29
 
15
 
6
 
7
 
77
Net profit / (loss) attributable to shareholders
 
7,457
 
6,557
 
4,304
 
4,516
 
969
Cost / income ratio (%)
 
73.6
 
73.3
 
80.5
 
79.9
 
81.6
Per share data
Basic earnings per share (USD)
1
 
2.14
 
1.83
 
1.17
 
1.21
 
0.26
Diluted earnings per share (USD)
1
 
2.06
 
1.77
 
1.14
 
1.18
 
0.25
Ordinary cash dividends declared per share (CHF)
2,3
 
0.34
 
0.69
 
0.70
 
0.65
Ordinary cash dividends declared per share (USD)
2,3
 
0.50
 
0.37
 
0.73
 
0.69
 
0.65
Rates of return (%)
Return on equity attributable to shareholders
 
12.6
 
11.3
 
7.9
 
8.6
 
1.8
1 Refer to “Share information and earnings per share” in the “Consolidated financial statements” section of this report for more information.
 
2 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
 
2021 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.
 
3 Refer to “Statement of proposed appropriation of total profit and dividend
distribution out of total profit and capital contribution reserve” in the “Standalone financial statements” section of this report for more information.
 
Cash dividends received from investments in subsidiaries
In 2021,
 
UBS Group
 
AG received
 
cash dividends
 
of USD 4,672
 
million (2020:
 
USD 3,853 million;
 
2019: USD 3,400
 
million) from
 
its
subsidiaries. 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UBS Group AG consolidated supplemental disclosures required under SEC regulations
558
 
Balance sheet data
USD million
31.12.21
31.12.20
31.12.19
31.12.18
31.12.17
Assets
Cash and balances at central banks
 
192,817
 
158,231
 
107,068
 
108,370
 
90,045
Loans and advances to banks
 
15,480
 
15,444
 
12,447
 
16,868
 
14,094
Receivables from securities financing transactions
 
75,012
 
74,210
 
84,245
 
95,349
 
91,951
Cash collateral receivables on derivative instruments
 
30,514
 
32,737
 
23,289
 
23,602
 
24,040
Loans and advances to customers
 
397,761
 
379,528
 
326,786
 
320,352
 
326,746
Other financial assets measured at amortized cost
 
26,209
 
27,194
 
22,980
 
22,563
 
37,815
Total financial assets measured at amortized cost
 
737,794
 
687,345
 
576,815
 
587,104
 
584,691
Financial assets at fair value held for trading
 
130,821
 
125,397
 
127,514
 
104,370
 
129,407
of which: assets pledged as collateral that may be sold or repledged
 
by counterparties
 
43,397
 
47,098
 
41,285
 
32,121
 
36,277
Derivative financial instruments
 
118,142
 
159,617
 
121,841
 
126,210
 
121,285
Brokerage receivables
 
21,839
 
24,659
 
18,007
 
16,840
Financial assets at fair value not held for trading
 
60,080
 
80,364
 
83,944
 
82,690
 
60,457
Total financial assets measured at fair value through profit or loss
 
330,882
 
390,037
 
351,307
 
330,110
 
311,148
Financial assets measured at fair value through other comprehensive income
 
8,844
 
8,258
 
6,345
 
6,667
 
8,889
Investments in associates
 
1,243
 
1,557
 
1,051
 
1,099
 
1,045
Property, equipment and software
 
12,888
 
13,109
 
12,804
 
9,348
 
9,057
Goodwill and intangible assets
 
6,378
 
6,480
 
6,469
 
6,647
 
6,563
Deferred tax assets
 
8,876
 
9,212
 
9,548
 
10,116
 
10,056
Other non-financial assets
 
10,277
 
9,768
 
7,856
 
7,410
 
7,830
Total assets
 
1,117,182
 
1,125,765
 
972,194
 
958,500
 
939,279
Liabilities
Amounts due to banks
 
 
13,101
 
11,050
 
6,570
 
10,962
 
7,728
Payables from securities financing transactions
 
5,533
 
6,321
 
7,778
 
10,296
 
17,485
Cash collateral payables on derivative instruments
 
31,798
 
37,312
 
31,415
 
28,906
 
31,029
Customer deposits
 
542,007
 
524,605
 
448,284
 
419,838
 
419,577
Debt issued measured at amortized cost
 
139,155
 
139,232
 
110,497
 
132,271
 
143,160
Other financial liabilities measured at amortized cost
 
9,001
 
9,729
 
9,712
 
6,885
 
37,276
Total financial liabilities measured at amortized cost
 
740,595
 
728,250
 
614,256
 
609,158
 
656,255
Financial liabilities at fair value held for trading
 
31,688
 
33,595
 
30,591
 
28,943
 
31,251
Derivative financial instruments
 
121,309
 
161,102
 
120,880
 
125,723
 
119,137
Brokerage payables designated at fair value
 
44,045
 
38,742
 
37,233
 
38,420
Debt issued designated at fair value
 
73,799
 
61,243
 
66,809
 
57,031
 
50,782
Other financial liabilities designated at fair value
 
30,074
 
30,387
 
35,940
 
33,594
 
16,643
Total financial liabilities measured at fair value through profit or loss
 
300,916
 
325,069
 
291,452
 
283,711
 
217,813
Provisions
 
3,518
 
2,828
 
2,974
 
3,494
 
3,214
Other non-financial liabilities
 
11,151
 
9,854
 
8,837
 
9,065
 
9,443
Total liabilities
 
1,056,180
 
1,066,000
 
917,519
 
905,429
 
886,725
Equity attributable to shareholders
 
60,662
 
59,445
 
54,501
 
52,896
 
52,495
Equity attributable to non-controlling interests
 
340
 
319
 
174
 
176
 
59
Total equity
 
61,002
 
59,765
 
54,675
 
53,071
 
52,554
Total liabilities and equity
 
1,117,182
 
1,125,765
 
972,194
 
958,500
 
939,279
 
 
 
559
C – Information about the company
Property, plant and equipment
As of 31 December 2021, UBS operated about
 
690 business and
banking locations worldwide, of which approximately
 
33% were
in Switzerland, 47% in the Americas,
 
10% in the rest of Europe,
Middle East and
 
Africa, and 10% in
 
Asia Pacific. Of the
 
business
and banking
 
locations in Switzerland,
 
30% 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UBS Group AG consolidated supplemental disclosures required under SEC regulations
560
D – Information required by Subpart 1400 of Regulation S-K
Selected statistical information
The
 
following
 
tables
 
set
 
forth
 
select
 
statistical
 
information
regarding
 
the
 
Group’s
 
banking
 
operations
 
extracted
 
from
 
its
financial
 
statements.
 
Unless
 
otherwise
 
indicated,
 
average
balances for
 
the years
 
ended 31 December
 
2021, 31 December
2020 and 31 December
 
2019 are calculated
 
from monthly data.
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 following table sets forth average interest-earning assets and
average interest
 
-bearing liabilities,
 
along with
 
the average
 
yield,
for 2021, 2020
 
and 2019. Refer
 
to “Note 3
 
Net interest
 
income
and other net income from financial instruments measured
 
at fair
value
 
through
 
profit
 
or
 
loss”
 
in
 
the
 
“Consolidated
 
financial
statements”
 
section
 
of
 
this
 
report
 
for
 
more
 
information
 
about
interest income and interest expense.
 
For the year ended
31.12.21
31.12.20
31.12.19
USD million, except where indicated
Average
 
balance
Interest
 
income
Average
 
yield (%)
Average
 
balance
Interest
 
income
Average
 
yield (%)
Average
 
balance
Interest
 
income
Average
 
yield (%)
Assets
Balances at central banks
Domestic
 
98,804
 
(105)
 
(0.1)
 
90,234
 
(112)
 
(0.1)
 
70,639
 
(208)
 
(0.3)
Foreign
 
71,529
 
(31)
 
0.0
 
51,611
 
7
 
0.0
 
34,017
 
194
 
0.6
Loans and advances to banks
Domestic
 
3,158
 
40
 
1.3
 
2,930
 
43
 
1.5
 
2,574
 
29
 
1.1
Foreign
 
13,074
 
12
 
0.1
 
12,089
 
31
 
0.3
 
12,071
 
15
 
0.1
Receivables from securities financing transactions
1
Domestic
 
9,435
 
(28)
 
(0.3)
 
4,746
 
8
 
0.2
 
7,550
 
(11)
 
(0.1)
Foreign
 
79,297
 
234
 
0.3
 
92,098
 
551
 
0.6
 
99,269
 
1,654
 
1.7
Loans and advances to customers
Domestic
 
228,070
 
3,211
 
1.4
 
210,971
 
3,014
 
1.4
 
189,438
 
3,280
 
1.7
Foreign
 
160,902
 
2,700
 
1.7
 
138,515
 
3,139
 
2.3
 
131,046
 
3,930
 
3.0
Financial assets at fair value
1,2
Domestic
 
10,006
 
11
 
0.1
 
12,455
 
40
 
0.3
 
9,311
 
72
 
0.8
Foreign
 
169,267
 
1,203
 
0.7
 
192,251
 
1,826
 
0.9
 
191,373
 
3,484
 
1.8
of which: taxable
 
169,254
 
1,203
 
0.7
 
192,243
 
1,826
 
0.9
 
191,373
 
3,484
 
1.8
of which: non-taxable
 
12
 
0
 
2.4
 
7
 
0
 
4.0
Other interest-earning assets
Domestic
 
7,477
 
121
 
1.6
 
8,064
 
136
 
1.7
 
7,258
 
151
 
2.1
Foreign
 
47,040
 
298
 
0.6
 
45,442
 
386
 
0.8
 
35,471
 
637
 
1.8
Total interest-earning assets
 
898,059
 
7,666
 
0.9
 
861,406
 
9,068
 
1.1
 
790,017
 
13,226
 
1.7
Net interest income on swaps
 
1,552
 
1,134
 
711
Interest income on off-balance sheet securities and other
 
472
 
386
 
429
Interest income and average interest-earning assets
 
898,059
 
9,689
3
 
1.1
 
861,406
 
10,588
3
 
1.2
 
790,017
 
14,366
3
 
1.8
Non-interest-earning assets
4
 
298,224
 
310,129
 
282,668
Total average assets
 
1,196,284
 
1,171,535
 
1,072,685
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.
 
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 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 3 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 assets for unit-linked
 
investment
contracts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
561
 
Average balances and interest rates (continued)
For the year ended
31.12.21
31.12.20
31.12.19
USD million, except where indicated
Average
balance
Interest
 
expense
Average
 
interest
 
rate (%)
Average
balance
Interest
 
expense
Average
 
interest
 
rate (%)
Average
 
balance
Interest
 
expense
Average
 
interest
 
rate (%)
Liabilities and equity
Amount due to banks
Domestic
 
10,369
 
(32)
 
(0.3)
 
8,097
 
(9)
 
(0.1)
 
6,012
 
(5)
 
(0.1)
Foreign
 
2,897
 
18
 
0.6
 
3,169
 
26
 
0.8
 
2,697
 
21
 
0.8
Payables from securities financing transactions
1
Domestic
 
4,786
 
1
 
0.0
 
3,888
 
6
 
0.2
 
3,238
 
18
 
0.6
Foreign
 
14,161
 
209
 
1.5
 
18,793
 
174
 
0.9
 
17,218
 
353
 
2.1
Customer deposits
Domestic
 
289,096
 
(290)
 
(0.1)
 
263,619
 
(173)
 
(0.1)
 
243,484
 
(41)
 
0.0
of which: demand deposits
 
160,019
 
(273)
 
(0.2)
 
137,599
 
(166)
 
(0.1)
 
123,833
 
(74)
 
(0.1)
of which: savings deposits
 
126,290
 
4
 
0.0
 
121,793
 
3
 
0.0
 
112,810
 
16
 
0.0
of which: time deposits
 
2,786
 
(20)
 
(0.7)
 
4,227
 
(9)
 
(0.2)
 
6,842
 
18
 
0.3
Foreign
 
232,165
 
107
 
0.0
 
214,785
 
552
 
0.3
 
185,097
 
1,784
 
1.0
of which: demand deposits
 
82,226
 
(31)
 
0.0
 
64,957
 
(6)
 
0.0
 
53,981
 
116
 
0.2
of which: savings deposits
 
99,847
 
81
 
0.1
 
71,341
 
194
 
0.3
 
48,629
 
186
 
0.4
of which: time deposits
 
50,092
 
58
 
0.1
 
78,488
 
363
 
0.5
 
82,488
 
1,482
 
1.8
Commercial paper
Domestic
 
292
 
0
 
0.0
 
130
 
0
 
(0.3)
 
105
 
0
 
0.0
Foreign
 
24,461
 
33
 
0.1
 
17,098
 
120
 
0.7
 
19,762
 
356
 
1.8
Other short-term debt issued measured at amortized cost
Domestic
 
13
 
0
 
(0.1)
 
10
 
0
 
0.0
 
8
 
0
 
0.0
Foreign
 
18,473
 
37
 
0.2
 
16,989
 
147
 
0.9
 
9,019
 
112
 
1.2
Long-term debt issued measured at amortized cost
Domestic
 
67,916
 
1,789
 
2.6
 
64,899
 
1,988
 
3.1
 
58,802
 
2,043
 
3.5
Foreign
 
27,820
 
491
 
1.8
 
27,100
 
581
 
2.1
 
34,903
 
824
 
2.4
Financial liabilities at fair value (excluding debt issued
designated at fair value)
1,2
Domestic
 
421
 
3
 
0.8
 
700
 
2
 
0.3
 
902
 
0
 
0.0
Foreign
 
137,268
 
13
 
0.0
 
145,398
 
324
 
0.2
 
143,216
 
1,834
 
1.3
Debt issued designated at fair value
Domestic
 
9,905
 
48
 
0.5
 
4,376
 
35
 
0.8
 
2,337
 
43
 
1.8
Foreign
 
60,388
 
429
 
0.7
 
56,442
 
801
 
1.4
 
63,182
 
1,450
 
2.3
Other interest-bearing liabilities
Domestic
 
2,884
 
(7)
 
(0.2)
 
3,333
 
(6)
 
(0.2)
 
2,384
 
15
 
0.6
Foreign
 
34,943
 
105
 
0.3
 
38,606
 
191
 
0.5
 
32,850
 
470
 
1.4
Total interest-bearing liabilities
 
938,259
 
2,954
 
0.3
 
887,433
 
4,759
 
0.5
 
825,216
 
9,277
 
1.1
Swap interest on hedged debt issued and other swaps
 
(765)
 
(608)
 
(63)
Interest expense on off-balance sheet securities and other
 
795
 
576
 
651
Interest expense and average interest-bearing liabilities
 
938,259
 
2,985
3
 
0.3
 
887,433
 
4,726
3
 
0.5
 
825,216
 
9,865
3
 
1.2
Non-interest-bearing liabilities
4
 
198,130
 
226,388
 
193,040
Total liabilities
 
1,136,389
 
1,113,820
 
1,018,256
Total equity
 
59,895
 
57,715
 
54,429
Total average liabilities and equity
 
1,196,284
 
1,171,535
 
1,072,685
Net interest income
 
6,705
 
5,862
 
4,501
Net yield on interest-earning assets
 
0.7
 
0.7
 
0.6
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.
 
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 3 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.
 
 
The
 
percentage
 
of
 
total
 
average
 
interest-earning
 
assets
attributable to foreign
 
activities was 60%
 
for 2021 (2020: 62%;
2019:
 
64%).
 
The
 
percentage
 
of
 
total
 
average
 
interest-bearing
liabilities
 
attributable
 
to
 
foreign
 
activities
 
was
 
56%
 
for
 
2021
(2020:
 
61%; 2019:
 
62%). 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UBS Group AG consolidated supplemental disclosures required under SEC regulations
562
 
Analysis of changes in interest income and expense
The following tables
 
provide information by
 
categories of
 
interest-
earning
 
assets
 
and
 
interest-bearing
 
liabilities
 
on
 
the
 
changes
 
in
interest
 
income
 
and
 
expense
 
due
 
to
 
changes
 
in
 
volume
 
and
interest
 
rates
 
for
 
the
 
year
 
ended
 
31 December
 
2021
 
compared
with the year ended
 
31 December 2020, and for
 
the year ended
31 December 2020 compared with the year ended
 
31 December
2019.
 
Volume
 
and
 
rate
 
variances
 
have
 
been
 
calculated
 
on
movements
 
in
 
average
 
balances
 
and
 
changes
 
in
 
interest
 
rates.
Changes
 
due to
 
a
 
combination of
 
volume
 
and rates
 
have been
allocated proportionally.
 
 
2021 compared with 2020
2020 compared with 2019
Increase / (decrease)
due to changes in
Increase / (decrease)
due to changes in
USD million
Average
 
volume
Average
interest rate
Net
change
Average
 
volume
Average
 
interest rate
Net
change
Interest income from interest-earning assets
Balances at central banks
Domestic
 
(9)
 
16
 
7
 
(59)
 
155
 
96
Foreign
 
0
 
(38)
 
(38)
 
106
 
(293)
 
(187)
Loans and advances to banks
Domestic
 
3
 
(6)
 
(3)
 
4
 
10
 
14
Foreign
 
3
 
(23)
 
(20)
 
0
 
16
 
16
Receivables from securities financing transactions
Domestic
 
9
 
(44)
 
(35)
 
3
 
16
 
19
Foreign
 
(77)
 
(240)
 
(317)
 
(122)
 
(981)
 
(1,103)
Loans and advances to customers
Domestic
 
239
 
(42)
 
197
 
366
 
(632)
 
(266)
Foreign
 
515
 
(954)
 
(439)
 
224
 
(1,015)
 
(791)
Financial assets at fair value
Domestic
 
(7)
 
(22)
 
(29)
 
25
 
(57)
 
(32)
Foreign
 
(207)
 
(416)
 
(623)
 
16
 
(1,674)
 
(1,658)
of which: taxable
 
(207)
 
(416)
 
(623)
 
16
 
(1,674)
 
(1,658)
of which: non-taxable
 
0
 
0
 
0
 
0
 
0
 
0
Other interest-earning assets
Domestic
 
(10)
 
(5)
 
(15)
 
17
 
(32)
 
(15)
Foreign
 
13
 
(101)
 
(88)
 
179
 
(430)
 
(251)
Interest income
Domestic
 
225
 
(103)
 
122
 
356
 
(540)
 
(184)
Foreign
 
247
 
(1,771)
 
(1,524)
 
403
 
(4,377)
 
(3,974)
Total interest income from interest-earning assets
 
472
 
(1,874)
 
(1,402)
 
759
 
(4,917)
 
(4,158)
Net interest income on swaps
 
418
 
423
Interest income on off-balance sheet securities and other
 
86
 
(43)
Total interest income
 
(899)
 
(3,778)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
563
 
Analysis of changes in interest income and expense (continued)
2021 compared with 2020
2020 compared with 2019
Increase / (decrease)
due to changes in
Increase / (decrease)
due to changes in
USD million
Average
 
volume
Average
interest rate
Net
change
Average
 
volume
Average
 
interest rate
Net
change
Interest expense on interest-bearing liabilities
Amount due to banks
Domestic
 
(2)
 
(21)
 
(23)
 
(2)
 
(2)
 
(4)
Foreign
 
(2)
 
(6)
 
(8)
 
4
 
1
 
5
Payables from securities financing transactions
Domestic
 
2
 
(7)
 
(5)
 
4
 
(16)
 
(12)
Foreign
 
(42)
 
76
 
34
 
33
 
(211)
 
(178)
Customer deposits
Domestic
 
(19)
 
(98)
 
(117)
 
(22)
 
(110)
 
(132)
of which: demand deposits
 
(22)
 
(86)
 
(108)
 
(14)
 
(78)
 
(92)
of which: savings deposits
 
0
 
1
 
1
 
0
 
(13)
 
(13)
of which: time deposits
 
3
 
(14)
 
(11)
 
(8)
 
(19)
 
(27)
Foreign
 
52
 
(497)
 
(445)
 
297
 
(1,530)
 
(1,233)
of which: demand deposits
 
(2)
 
(24)
 
(26)
 
24
 
(146)
 
(122)
of which: savings deposits
 
78
 
(192)
 
(114)
 
87
 
(79)
 
8
of which: time deposits
 
(24)
 
(281)
 
(305)
 
186
 
(1,306)
 
(1,120)
Commercial paper
Domestic
 
0
 
0
 
0
 
0
 
0
 
0
Foreign
 
52
 
(138)
 
(86)
 
(48)
 
(189)
 
(237)
Other short-term debt issued measured at amortized cost
Domestic
 
0
 
0
 
0
 
0
 
0
 
0
Foreign
 
13
 
(123)
 
(110)
 
133
 
(98)
 
35
Long-term debt issued measured at amortized cost
Domestic
 
94
 
(293)
 
(199)
 
3
 
(59)
 
(56)
Foreign
 
15
 
(105)
 
(90)
 
(187)
 
(56)
 
(243)
Financial liabilities at fair value (excluding debt issued designated
 
at fair value)
Domestic
 
(1)
 
2
 
1
 
0
 
2
 
2
Foreign
 
(16)
 
(295)
 
(311)
 
28
 
(1,538)
 
(1,510)
Debt issued designated at fair value
Domestic
 
44
 
(31)
 
13
 
37
 
(44)
 
(7)
Foreign
 
55
 
(427)
 
(372)
 
(155)
 
(494)
 
(649)
Other interest-bearing liabilities
Domestic
 
1
 
(2)
 
(1)
 
6
 
(27)
 
(21)
Foreign
 
(18)
 
(68)
 
(86)
 
81
 
(359)
 
(278)
Interest expense
Domestic
 
119
 
(450)
 
(331)
 
26
 
(257)
 
(231)
Foreign
 
109
 
(1,583)
 
(1,474)
 
186
 
(4,473)
 
(4,287)
Total interest expense on interest-bearing liabilities
 
228
 
(2,033)
 
(1,805)
 
212
 
(4,731)
 
(4,518)
Swap interest on hedged debt issued and other swaps
 
(157)
 
(545)
Interest expense on off-balance sheet securities and other
 
220
 
(75)
Total interest expense
 
(1,742)
 
(5,139)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UBS Group AG consolidated supplemental disclosures required under SEC regulations
564
 
Deposits
The following
 
table analyzes average
 
deposits and average
 
rates
on each deposit category
 
for the years
 
ended 31 December 2021,
2020
 
and
2019
.
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
 
77,011
 
million
 
as
 
of
 
31
 
December
2021
 
(31 December
 
2020:
 
USD 76,167
 
million;
 
31 December
 
2019:
USD 54,251 million).
 
31.12.21
31.12.20
31.12.19
USD million, except where indicated
Average
 
deposits
Average
 
rate (%)
Average
 
deposits
Average
 
rate (%)
Average
 
deposits
Average
 
rate (%)
Due to banks
Domestic
 
Demand deposits
 
927
 
(0.5)
 
1,037
 
(0.4)
 
925
 
(0.3)
Time deposits
 
3,026
 
0.0
 
1,775
 
0.4
 
44
 
0.9
Total domestic
 
 
3,953
 
(0.1)
 
2,812
 
0.1
 
969
 
(0.3)
Foreign
1
Interest-bearing deposits
 
9,313
 
(0.1)
 
8,454
 
0.1
 
7,740
 
0.1
Total due to banks
 
13,266
 
(0.1)
 
11,266
 
0.1
 
8,709
 
0.1
Customer deposits
Domestic
 
Demand deposits
 
101,338
 
(0.2)
 
90,070
 
(0.1)
 
83,835
 
(0.1)
Savings deposits
 
114,792
 
0.0
 
110,328
 
0.0
 
101,845
 
0.0
Time deposits
 
8,371
 
(0.4)
 
17,610
 
(0.1)
 
13,776
 
0.4
Total domestic
 
 
224,502
 
(0.1)
 
218,008
 
(0.1)
 
199,456
 
0.0
Foreign
1
Demand deposits
 
140,906
 
(0.1)
 
112,486
 
0.0
 
93,979
 
0.1
Savings deposits
 
111,345
 
0.1
 
82,806
 
0.2
 
59,593
 
0.3
Time deposits
 
44,507
 
0.1
 
65,104
 
0.5
 
75,554
 
1.9
Total foreign
 
 
296,758
 
0.0
 
260,397
 
0.2
 
229,126
 
0.8
Total customer deposits
 
521,260
 
0.0
 
478,404
 
0.1
 
428,582
 
0.4
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
 
2021, total
 
estimated uninsured deposits
 
were
USD 392
 
billion
 
(31 December
 
2020:
 
USD 380
 
billion;
31 December
 
2019:
 
USD 318
 
billion).
 
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, EdB,
 
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 597
 
million
 
per
client) 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 2021. Where a depositor
 
holds
multiple accounts,
 
which 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 million
 
Uninsured time deposits
1
Within 3 months
44,912
3 to 6 months
2,748
6 to 12 months
2,437
Over 12 months
85
Total uninsured time deposits as of 31 December 2021
50,182
1 Amounts are estimated based on the methodologies defined in each local jurisdiction. As of 31 December 2021, there were no
 
US time deposits subject to the FDIC scheme that were in excess of the FDIC insurance
limit.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
565
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 up to 5 years
5 to 10 years
Over 10 years
Total carrying
amount
USD million, except where indicated
Carrying
amount
Yield (%)
Carrying
amount
Yield (%)
Carrying
amount
Yield (%)
Carrying
amount
Yield (%)
Debt instruments measured at fair value through
other comprehensive income
Asset-backed securities
 
 
1,129
 
1.63
 
3,720
 
1.42
 
4,849
Government bills/bonds
 
27
 
1.67
 
416
 
2.40
 
1,998
 
1.20
 
244
 
1.64
 
2,686
Corporate and other
 
1,193
 
1.61
 
116
 
2.48
 
1,310
Subtotal as of 31 December 2021
 
1,220
 
533
 
3,127
 
3,964
 
8,844
Debt securities measured at amortized cost
 
Asset-backed securities
 
 
2,418
 
2.32
 
2,418
Government bills/bonds
 
1,693
 
1.20
 
5,924
 
1.85
 
2,216
 
2.00
 
9,833
Corporate and other
 
1,025
 
0.77
 
4,264
 
0.30
 
1,318
 
0.33
 
6,608
Subtotal as of 31 December 2021
 
2,718
 
10,189
 
3,534
 
2,418
 
18,858
Total as of 31 December 2021
 
3,939
 
10,721
 
6,661
 
6,382
 
27,702
 
 
 
Loan portfolio
The table below provides the maturity profile of UBS’s core loan portfolio as of 31 December 2021. 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 million
31.12.21
Within 1 year
 
1 - 5 years
5 - 15 years
Over 15 years
Total
 
of which: over 1 year
Fixed rate
Adjustable or
floating rate
Private clients with mortgages
 
30,119
 
66,165
 
34,226
 
21,969
 
152,479
 
78,826
 
43,533
Real estate financing
 
20,010
 
15,628
 
8,266
 
41
 
43,945
 
19,057
 
4,878
Large corporate clients
 
8,787
 
4,396
 
807
 
1
 
13,990
 
3,879
 
1,325
SME clients
 
6,772
 
4,205
 
3,027
 
0
 
14,004
 
3,817
 
3,414
Lombard
 
142,261
 
6,733
 
247
 
42
 
149,283
 
6,481
 
540
Credit cards
 
1,716
 
0
 
0
 
0
 
1,716
 
0
 
0
Commodity trade finance
 
3,809
 
0
 
4
 
0
 
3,813
 
4
 
0
Other loans and advances to customers
 
9,614
 
7,463
 
1,357
 
100
 
18,532
 
5,308
 
3,611
Loans to financial advisors
 
118
 
1,196
 
1,073
 
66
 
2,453
 
2,335
 
0
Total
 
223,205
 
105,785
 
49,005
 
22,218
 
400,214
 
119,708
 
57,301
 
 
 
Allowance for credit losses
For the years
 
ended 31 December
 
2021, 2020 and
 
2019, 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 2021 were
 
USD
137 million (31
 
December 2020: USD
 
356 million, 31
 
December
2019:
 
USD
 
142
 
million).
 
Refer
 
to
 
the
 
coverage
 
ratio
 
tables
 
in
“Note 9 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.
 
UBS AG consolidated supplemental disclosures required under SEC regulations
566
UBS AG consolidated supplemental
disclosures required under SEC regulations
A
–
 
Introduction
The
 
following
 
pages
 
contain
 
supplemental
 
UBS
 
AG
 
disclosures
that are required
 
under SEC regulations. In September 2020,
 
the
SEC
 
issued
 
final
 
rules
 
updating
 
and
 
codifying
 
the
 
disclosure
requirements
 
for banking
 
registrants
 
set forth
 
in Industry
 
Guide
3,
 
Statistical Disclosure
 
by Bank
 
Holding
 
Companies. Under
 
the
final
 
rules, Industry
 
Guide 3
 
was rescinded
 
and replaced
 
with a
new Subpart 1400 of Regulation S-K, which has come into effect
for UBS
 
AG’s 2021 reporting.
 
Part D of
 
this section provides
 
the
information
 
required
 
by
 
Subpart
 
1400
 
of
 
Regulation
 
S-K
 
and
where applicable, prior-period comparative information has been
revised to align with the new requirements.
UBS
 
AG’s
 
consolidated
 
financial
 
statements
 
have
 
been
prepared
 
in
 
accordance
 
with
 
International
 
Financial
 
Reporting
Standards
 
(IFRS)
 
as
 
issued
 
by
 
the
 
International
 
Accounting
Standards Board (IASB) and are denominated in US dollars (USD),
which is
 
also the
 
functional currency
 
of: UBS
 
AG’s Head
 
Office;
UBS AG London Branch; and UBS AG’s US-based operations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
567
B – Selected financial data
 
Key figures
As of or for the year ended
USD million, except where indicated
31.12.21
31.12.20
31.12.19
31.12.18
31.12.17
Results
Operating income
 
35,976
 
32,780
 
29,307
 
30,642
 
30,044
Operating expenses
 
27,012
 
25,081
 
24,138
 
25,184
 
24,969
Operating profit / (loss) from continuing operations before tax
 
8,964
 
7,699
 
5,169
 
5,458
 
5,076
Net profit / (loss) attributable to shareholders
 
7,032
 
6,196
 
3,965
 
4,107
 
758
Profitability and growth
1
Return on equity (%)
 
12.3
 
10.9
 
7.4
 
7.9
 
1.4
Return on tangible equity (%)
 
13.9
 
12.4
 
8.5
 
9.1
 
1.6
Return on common equity tier 1 capital (%)
 
17.6
 
16.6
 
11.3
 
11.9
 
2.3
Return on risk-weighted assets, gross (%)
 
12.3
 
11.9
 
11.2
 
12.0
 
12.8
Return on leverage ratio denominator, gross (%)
2
 
3.4
 
3.4
 
3.2
 
3.4
 
3.4
Cost / income ratio (%)
 
75.4
 
74.9
 
82.1
 
81.9
 
82.7
Net profit growth (%)
 
13.5
 
56.3
 
(3.4)
 
441.9
 
(77.4)
Resources
1
Total assets
 
1,116,145
 
1,125,327
 
971,927
 
958,066
 
940,020
Equity attributable to shareholders
 
58,102
 
57,754
 
53,722
 
52,224
 
51,987
Common equity tier 1 capital
3
 
41,594
 
38,181
 
35,233
 
34,562
 
34,100
Risk-weighted assets
3
 
299,005
 
286,743
 
257,831
 
262,840
 
242,725
Common equity tier 1 capital ratio (%)
3
 
13.9
 
13.3
 
13.7
 
13.1
 
14.0
Going concern capital ratio (%)
3
 
18.5
 
18.3
 
18.3
 
16.1
 
15.6
Total loss-absorbing capacity ratio (%)
3
 
33.3
 
34.2
 
33.9
 
31.3
 
31.4
Leverage ratio denominator
2,3
 
1,067,679
 
1,036,771
 
911,228
 
904,455
 
910,133
Common equity tier 1 leverage ratio (%)
2,3
 
3.90
 
3.68
 
3.87
 
3.82
 
3.75
Going concern leverage ratio (%)
2,3
 
5.2
 
5.1
 
5.2
 
4.7
 
4.2
Total loss-absorbing capacity leverage ratio (%)
3
 
9.3
 
9.5
 
9.6
 
9.1
 
8.4
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UBS AG consolidated supplemental disclosures required under SEC regulations
568
Key figures (continued)
As of or for the year ended
USD million, except where indicated
31.12.21
31.12.20
31.12.19
31.12.18
31.12.17
Other
Invested assets (USD billion)
4
 
4,596
 
4,187
 
3,607
 
3,101
 
3,262
Personnel (full-time equivalents)
 
47,067
 
47,546
 
47,005
 
47,643
 
46,009
Americas
 
21,317
 
21,394
 
21,036
 
21,309
 
20,770
of which: USA
 
20,537
 
20,528
 
20,232
 
20,495
 
19,944
Asia Pacific
 
7,993
 
8,049
 
7,958
 
7,987
 
6,891
Europe, Middle East and Africa (excluding Switzerland)
 
5,748
 
5,797
 
5,546
 
5,669
 
5,404
of which: UK
 
2,611
 
2,596
 
2,392
 
2,508
 
2,428
of which: rest of Europe (excluding Switzerland)
 
2,949
 
3,024
 
2,988
 
2,992
 
2,814
of which: Middle East and Africa
 
189
 
177
 
166
 
168
 
161
Switzerland
 
12,009
 
12,307
 
12,465
 
12,678
 
12,943
Registered ordinary shares (number)
 
3,858,408,466
 
3,858,408,466
 
3,858,408,466
 
3,858,408,466
 
3,858,408,466
Treasury shares (number)
 
0
 
0
 
0
 
0
 
0
1 Refer to the “Targets, aspirations
 
and capital guidance” section of this report for more information
 
about our performance measurement.
 
2 Leverage ratio denominators and leverage ratios
 
for year 2020 do not
reflect the effects of
 
the temporary exemption
 
that applied from 25
 
March 2020 until 1
 
January 2021 and
 
was granted by
 
FINMA in connection with
 
COVID-19. Refer to
 
the “Regulatory and legal
 
developments”
section of our Annual Report 2020 for more information.
 
3 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 the report for the respective period for more information.
 
4 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
569
 
Income statement data
For the year ended
USD million, except where indicated
31.12.21
31.12.20
31.12.19
31.12.18
31.12.17
Net interest income
 
6,605
 
5,788
 
4,415
 
4,971
 
6,021
Other net income from financial instruments measured
 
at fair value through profit or loss
 
5,844
 
6,930
 
6,833
 
6,953
 
5,640
Credit loss (expense) / release
 
148
 
(695)
 
(78)
 
(117)
 
(131)
Fee and commission income
 
24,422
 
20,982
 
19,156
 
19,632
 
19,390
Fee and commission expense
 
(1,985)
 
(1,775)
 
(1,696)
 
(1,703)
 
(1,840)
Net fee and commission income
 
22,438
 
19,207
 
17,460
 
17,930
 
17,550
Other income
 
941
 
1,549
 
677
 
905
 
965
Total operating income
 
35,976
 
32,780
 
29,307
 
30,642
 
30,044
Total operating expenses
 
27,012
 
25,081
 
24,138
 
25,184
 
24,969
Operating profit / (loss) before tax
 
8,964
 
7,699
 
5,169
 
5,458
 
5,076
Tax expense / (benefit)
 
1,903
 
1,488
 
1,198
 
1,345
 
4,242
Net profit / (loss)
 
7,061
 
6,211
 
3,971
 
4,113
 
834
Net profit / (loss) attributable to preferred noteholders
 
73
Net profit / (loss) attributable to non-controlling interests
 
29
 
15
 
6
 
7
 
4
Net profit / (loss) attributable to shareholders
 
7,032
 
6,196
 
3,965
 
4,107
 
758
Cost / income ratio (%)
 
75.4
 
74.9
 
82.1
 
81.9
 
82.7
Rates of return (%)
Return on equity attributable to shareholders
 
12.3
 
10.9
 
7.4
 
7.9
 
1.4
 
Dividends received from investments in subsidiaries and associates
In 2021,
 
UBS AG
 
received dividends
 
of USD 6,401
 
million (2020:
 
USD 3,214 million;
 
2019: USD 3,508
 
million) from
 
its subsidiaries
and associates. 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UBS AG consolidated supplemental disclosures required under SEC regulations
570
 
Balance sheet data
USD million
31.12.21
31.12.20
31.12.19
31.12.18
31.12.17
Assets
Cash and balances at central banks
 
192,817
 
158,231
 
107,068
 
108,370
 
90,045
Loans and advances to banks
 
15,360
 
15,344
 
12,379
 
16,642
 
14,047
Receivables from securities financing transactions
 
75,012
 
74,210
 
84,245
 
95,349
 
91,951
Cash collateral receivables on derivative instruments
 
30,514
 
32,737
 
23,289
 
23,603
 
24,040
Loans and advances to customers
 
398,693
 
380,977
 
327,992
 
321,482
 
328,952
Other financial assets measured at amortized cost
 
26,236
 
27,219
 
23,012
 
22,637
 
37,890
Total financial assets measured at amortized cost
 
738,632
 
688,717
 
577,985
 
588,084
 
586,925
Financial assets at fair value held for trading
 
131,033
 
125,492
 
127,695
 
104,513
 
129,509
of which: assets pledged as collateral that may be sold or repledged
 
by counterparties
 
43,397
 
47,098
 
41,285
 
32,121
 
36,277
Derivative financial instruments
 
118,145
 
159,618
 
121,843
 
126,212
 
121,286
Brokerage receivables
 
21,839
 
24,659
 
18,007
 
16,840
Financial assets at fair value not held for trading
 
59,642
 
80,038
 
83,636
 
82,387
 
60,070
Total financial assets measured at fair value through profit or loss
 
330,659
 
389,808
 
351,181
 
329,953
 
310,865
Financial assets measured at fair value through other comprehensive income
 
8,844
 
8,258
 
6,345
 
6,667
 
8,889
Investments in associates
 
1,243
 
1,557
 
1,051
 
1,099
 
1,045
Property, equipment and software
 
11,712
 
11,958
 
11,826
 
8,479
 
8,191
Goodwill and intangible assets
 
6,378
 
6,480
 
6,469
 
6,647
 
6,563
Deferred tax assets
 
8,839
 
9,174
 
9,524
 
10,077
 
9,993
Other non-financial assets
 
9,836
 
9,374
 
7,547
 
7,062
 
7,548
Total assets
 
1,116,145
 
1,125,327
 
971,927
 
958,066
 
940,020
Liabilities
Amounts due to banks
 
 
13,101
 
11,050
 
6,570
 
10,962
 
7,728
Payables from securities financing transactions
 
5,533
 
6,321
 
7,778
 
10,296
 
17,485
Cash collateral payables on derivative instruments
 
31,801
 
37,313
 
31,416
 
28,906
 
31,029
Customer deposits
 
544,834
 
527,929
 
450,591
 
421,986
 
423,058
Funding from UBS Group AG
 
57,295
 
53,979
 
47,866
 
41,202
 
35,648
Debt issued measured at amortized cost
 
82,432
 
85,351
 
62,835
 
91,245
 
107,458
Other financial liabilities measured at amortized cost
 
9,765
 
10,421
 
10,373
 
7,576
 
38,092
Total financial liabilities measured at amortized cost
 
744,762
 
732,364
 
617,429
 
612,174
 
660,498
Financial liabilities at fair value held for trading
 
31,688
 
33,595
 
30,591
 
28,949
 
31,251
Derivative financial instruments
 
121,309
 
161,102
 
120,880
 
125,723
 
119,138
Brokerage payables designated at fair value
 
44,045
 
38,742
 
37,233
 
38,420
Debt issued designated at fair value
 
71,460
 
59,868
 
66,592
 
57,031
 
50,782
Other financial liabilities designated at fair value
 
32,414
 
31,773
 
36,157
 
33,594
 
16,643
Total financial liabilities measured at fair value through profit or loss
 
300,916
 
325,080
 
291,452
 
283,717
 
217,814
Provisions
 
3,452
 
2,791
 
2,938
 
3,457
 
3,164
Other non-financial liabilities
 
8,572
 
7,018
 
6,211
 
6,318
 
6,499
Total liabilities
 
1,057,702
 
1,067,254
 
918,031
 
905,667
 
887,974
Equity attributable to shareholders
 
58,102
 
57,754
 
53,722
 
52,224
 
51,987
Equity attributable to non-controlling interests
 
340
 
319
 
174
 
176
 
59
Total equity
 
58,442
 
58,073
 
53,896
 
52,400
 
52,046
Total liabilities and equity
 
1,116,145
 
1,125,327
 
971,927
 
958,066
 
940,020
 
 
 
 
 
571
C – Information about the company
Property, plant and equipment
As of 31
 
December 2021, UBS AG
 
operated about 680
 
business
and banking
 
locations worldwide,
 
of which
 
approximately 33%
were
 
in
 
Switzerland,
 
48%
 
in
 
the
 
Americas,
 
10%
 
in
 
the
 
rest
 
of
Europe,
 
Middle East
 
and Africa,
 
and
 
9% in
 
Asia Pacific.
 
Of the
business and banking locations in Switzerland, 30% were owned
directly by UBS
 
AG, with the remainder,
 
along with most of
 
UBS
AG’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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UBS AG consolidated supplemental disclosures required under SEC regulations
572
D – Information required by Subpart 1400 of Regulation S-K
Selected statistical information
The
 
following
 
tables
 
set
 
forth
 
select
 
statistical
 
information
regarding
 
UBS
 
AG’s
 
banking
 
operations
 
extracted
 
from
 
its
financial
 
statements.
 
Unless
 
otherwise
 
indicated,
 
average
balances for
 
the years
 
ended 31 December
 
2021, 31 December
2020 and 31 December
 
2019 are calculated
 
from monthly data.
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 following table sets forth average interest-earning assets and
average interest
 
-bearing liabilities,
 
along with
 
the average
 
yield,
for 2021,
 
2020 and
 
2019. Refer
 
to “Note
 
3 Net interest income
and other net income from financial instruments measured
 
at fair
value
 
through
 
profit
 
or
 
loss”
 
in
 
the
 
“Consolidated
 
financial
statements”
 
section
 
of
 
this
 
report
 
for
 
more
 
information
 
about
interest income and interest expense.
 
For the year ended
31.12.21
31.12.20
31.12.19
USD million, except where indicated
Average
 
balance
Interest
 
income
Average
 
yield (%)
Average
 
balance
Interest
 
income
Average
 
yield (%)
Average
 
balance
Interest
 
income
Average
 
yield (%)
Assets
Balances at central banks
Domestic
 
98,804
 
(105)
 
(0.1)
 
90,234
 
(112)
 
(0.1)
 
70,639
 
(208)
 
(0.3)
Foreign
 
71,529
 
(31)
 
0.0
 
51,611
 
7
 
0.0
 
34,017
 
194
 
0.6
Loans and advances to banks
Domestic
 
3,158
 
40
 
1.3
 
2,930
 
43
 
1.5
 
2,574
 
29
 
1.1
Foreign
 
12,961
 
12
 
0.1
 
12,001
 
31
 
0.3
 
11,853
 
15
 
0.1
Receivables from securities financing transactions
1
Domestic
 
9,435
 
(28)
 
(0.3)
 
4,746
 
8
 
0.2
 
7,550
 
(11)
 
(0.1)
Foreign
 
79,297
 
234
 
0.3
 
92,098
 
551
 
0.6
 
99,269
 
1,654
 
1.7
Loans and advances to customers
Domestic
 
229,794
 
3,214
 
1.4
 
212,383
 
3,020
 
1.4
 
190,898
 
3,300
 
1.7
Foreign
 
160,869
 
2,698
 
1.7
 
138,485
 
3,136
 
2.3
 
131,020
 
3,926
 
3.0
Financial assets at fair value
1,2
Domestic
 
10,023
 
11
 
0.1
 
12,459
 
40
 
0.3
 
9,317
 
72
 
0.8
Foreign
 
169,368
 
1,203
 
0.7
 
192,381
 
1,826
 
0.9
 
191,500
 
3,484
 
1.8
of which: taxable
 
169,356
 
1,202
 
0.7
 
192,374
 
1,826
 
0.9
 
191,500
 
3,484
 
1.8
of which: non-taxable
 
12
 
0
 
2.4
 
7
 
0
 
4.0
Other interest-earning assets
Domestic
 
7,477
 
121
 
1.6
 
8,064
 
136
 
1.7
 
7,258
 
151
 
2.1
Foreign
 
47,042
 
298
 
0.6
 
45,443
 
386
 
0.8
 
35,471
 
637
 
1.8
Total interest-earning assets
 
899,757
 
7,666
 
0.9
 
862,835
 
9,071
 
1.1
 
791,366
 
13,242
 
1.7
Net interest income on swaps
 
1,558
 
1,140
 
716
Interest income on off-balance sheet securities and other
 
472
 
386
 
429
Interest income and average interest-earning assets
 
899,757
 
9,695
3
 
1.1
 
862,835
 
10,597
3
 
1.2
 
791,366
 
14,386
3
 
1.8
Non-interest-earning assets
4
 
296,300
 
308,528
 
280,815
Total average assets
 
1,196,057
 
1,171,363
 
1,072,181
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.
 
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 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 3 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 assets for unit-linked
 
investment
contracts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
573
 
Average balances and interest rates (continued)
For the year ended
31.12.21
31.12.20
31.12.19
USD million, except where indicated
Average
balance
Interest
expense
Average
 
interest
 
rate (%)
Average
balance
Interest
expense
Average
 
interest
 
rate (%)
Average
balance
Interest
expense
Average
 
interest
 
rate (%)
Liabilities and equity
Amount due to banks
Domestic
 
10,369
 
(32)
 
(0.3)
 
8,097
 
(9)
 
(0.1)
 
6,012
 
(5)
 
(0.1)
Foreign
 
2,897
 
18
 
0.6
 
3,169
 
26
 
0.8
 
2,697
 
21
 
0.8
Payables from securities financing transactions
1
Domestic
 
4,786
 
1
 
0.0
 
3,888
 
6
 
0.2
 
3,238
 
18
 
0.6
Foreign
 
14,161
 
209
 
1.5
 
18,793
 
174
 
0.9
 
17,218
 
353
 
2.1
Customer deposits
Domestic
 
293,028
 
(281)
 
(0.1)
 
266,614
 
(160)
 
(0.1)
 
246,066
 
133
 
0.1
of which: demand deposits
 
162,016
 
(273)
 
(0.2)
 
138,949
 
(164)
 
(0.1)
 
125,127
 
(66)
 
(0.1)
of which: savings deposits
 
126,290
 
4
 
0.0
 
121,793
 
3
 
0.0
 
112,810
 
16
 
0.0
of which: time deposits
 
4,721
 
(12)
 
(0.3)
 
5,873
 
1
 
0.0
 
8,130
 
18
 
0.2
Foreign
 
232,165
 
107
 
0.0
 
214,783
 
551
 
0.3
 
185,093
 
1,784
 
1.0
of which: demand deposits
 
82,226
 
(31)
 
0.0
 
64,955
 
(6)
 
0.0
 
53,976
 
116
 
0.2
of which: savings deposits
 
99,847
 
81
 
0.1
 
71,341
 
194
 
0.3
 
48,629
 
186
 
0.4
of which: time deposits
 
50,092
 
58
 
0.1
 
78,488
 
363
 
0.5
 
82,488
 
1,483
 
1.8
Funding from UBS Group AG
Domestic
 
56,008
 
1,699
 
3.0
 
51,005
 
1,740
 
3.4
 
45,487
 
1,896
 
4.2
Foreign
 
0
 
0
 
0.0
 
0
 
0
 
0.0
 
0
 
0
 
0.0
Commercial paper
Domestic
 
292
 
0
 
0.0
 
130
 
0
 
0.0
 
105
 
0
 
0.0
Foreign
 
24,461
 
33
 
0.1
 
17,098
 
120
 
0.7
 
19,762
 
356
 
1.8
Other short-term debt issued measured at amortized cost
Domestic
 
13
 
0
 
(0.1)
 
10
 
0
 
0.0
 
8
 
0
 
0.0
Foreign
 
18,473
 
37
 
0.2
 
16,989
 
147
 
0.9
 
9,019
 
112
 
1.2
Long-term debt issued measured at amortized cost
Domestic
 
12,352
 
192
 
1.6
 
14,054
 
323
 
2.3
 
13,483
 
336
 
2.5
Foreign
 
27,820
 
491
 
1.8
 
27,100
 
581
 
2.1
 
34,903
 
824
 
2.4
Financial liabilities at fair value (excluding debt issued
designated at fair value)
1,2
Domestic
 
421
 
3
 
0.8
 
701
 
2
 
0.3
 
903
 
0
 
0.0
Foreign
 
139,374
 
81
 
0.1
 
146,306
 
354
 
0.2
 
143,246
 
1,835
 
1.3
Debt issued designated at fair value
Domestic
 
7,806
 
(20)
 
(0.3)
 
3,469
 
6
 
0.2
 
2,307
 
42
 
1.8
Foreign
 
60,388
 
429
 
0.7
 
56,442
 
801
 
1.4
 
63,182
 
1,450
 
2.3
Other interest-bearing liabilities
Domestic
 
2,884
 
(7)
 
(0.2)
 
3,333
 
(6)
 
(0.2)
 
2,381
 
15
 
0.6
Foreign
 
34,833
 
101
 
0.3
 
38,516
 
187
 
0.5
 
32,768
 
465
 
1.4
Total interest-bearing liabilities
 
942,531
 
3,060
 
0.3
 
890,498
 
4,841
 
0.5
 
827,878
 
9,470
 
1.1
Swap interest on hedged debt instruments and other swaps
 
(765)
 
(608)
 
(149)
Interest expense on off-balance sheet securities and other
 
797
 
576
 
651
Interest expense and average interest-bearing liabilities
 
942,531
 
3,091
3
 
0.3
 
890,498
 
4,809
3
 
0.5
 
827,878
 
9,971
3
 
1.2
Non-interest-bearing liabilities
4
 
196,273
 
224,468
 
191,113
Total liabilities
 
1,138,804
 
1,114,966
 
1,018,991
Total equity
 
57,254
 
56,397
 
53,189
Total average liabilities and equity
 
1,196,057
 
1,171,363
 
1,072,181
Net interest income
 
6,604
 
5,788
 
4,415
Net yield on interest-earning assets
 
0.7
 
0.7
 
0.6
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.
 
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 3 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.
 
 
The
 
percentage
 
of
 
total
 
average
 
interest-earning
 
assets
attributable to foreign
 
activities was 60%
 
for 2021 (2020: 62%;
2019:
 
64%).
 
The
 
percentage
 
of
 
total
 
average
 
interest-bearing
liabilities
 
attributable
 
to
 
foreign
 
activities
 
was
 
56%
 
for
 
2021
(2020:
 
61%; 2019:
 
61%). 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UBS AG consolidated supplemental disclosures required under SEC regulations
574
 
Analysis of changes in interest income and expense
The following tables
 
provide information by
 
categories of
 
interest-
earning
 
assets
 
and
 
interest-bearing
 
liabilities
 
on
 
the
 
changes
 
in
interest
 
income
 
and
 
expense
 
due
 
to
 
changes
 
in
 
volume
 
and
interest
 
rates
 
for
 
the
 
year
 
ended
 
31 December
 
2021
 
compared
with the year ended
 
31 December 2020, and for
 
the year ended
31 December 2020 compared with the year ended
 
31 December
2019.
 
Volume
 
and
 
rate
 
variances
 
have
 
been
 
calculated
 
on
movements
 
in
 
average
 
balances
 
and
 
changes
 
in
 
interest
 
rates.
Changes
 
due to
 
a
 
combination of
 
volume
 
and rates
 
have been
allocated proportionally.
 
 
2021 compared with 2020
2020 compared with 2019
Increase / (decrease)
due to changes in
Increase / (decrease)
due to changes in
USD million
Average
 
volume
Average
interest rate
Net
change
Average
 
volume
Average
 
interest rate
Net
change
Interest income from interest-earning assets
Balances at central banks
Domestic
 
(9)
 
16
 
7
 
(59)
 
155
 
96
Foreign
 
0
 
(38)
 
(38)
 
106
 
(293)
 
(187)
Loans and advances to banks
Domestic
 
3
 
(6)
 
(3)
 
4
 
10
 
14
Foreign
 
3
 
(23)
 
(20)
 
0
 
16
 
16
Receivables from securities financing transactions
Domestic
 
9
 
(44)
 
(35)
 
3
 
16
 
19
Foreign
 
(77)
 
(240)
 
(317)
 
(122)
 
(981)
 
(1,103)
Loans and advances to customers
Domestic
 
244
 
(50)
 
194
 
365
 
(645)
 
(280)
Foreign
 
515
 
(954)
 
(439)
 
224
 
(1,014)
 
(790)
Financial assets at fair value
Domestic
 
(7)
 
(22)
 
(29)
 
25
 
(57)
 
(32)
Foreign
 
(207)
 
(416)
 
(623)
 
16
 
(1,674)
 
(1,658)
of which: taxable
 
(207)
 
(416)
 
(623)
 
16
 
(1,674)
 
(1,658)
of which: non-taxable
 
0
 
0
 
0
 
0
 
0
 
0
Other interest-earning assets
Domestic
 
(10)
 
(5)
 
(15)
 
17
 
(32)
 
(15)
Foreign
 
13
 
(101)
 
(88)
 
179
 
(430)
 
(251)
Interest income
Domestic
 
230
 
(111)
 
119
 
355
 
(553)
 
(198)
Foreign
 
247
 
(1,772)
 
(1,525)
 
403
 
(4,376)
 
(3,973)
Total interest income from interest-earning assets
 
477
 
(1,883)
 
(1,406)
 
758
 
(4,929)
 
(4,171)
Net interest income on swaps
 
418
 
424
Interest income on off-balance sheet securities and other
 
86
 
(43)
Total interest income
 
(902)
 
(3,789)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
575
 
Analysis of changes in interest income and expense (continued)
2021 compared with 2020
2020 compared with 2019
Increase / (decrease)
due to changes in
Increase / (decrease)
due to changes in
USD million
Average
 
volume
Average
interest rate
Net
change
Average
 
volume
Average
 
interest rate
Net
change
Interest expense on interest-bearing liabilities
Amount due to banks
Domestic
 
(2)
 
(21)
 
(23)
 
(2)
 
(3)
 
(5)
Foreign
 
(2)
 
(5)
 
(7)
 
4
 
1
 
5
Payables from securities financing transactions
Domestic
 
2
 
(7)
 
(5)
 
4
 
(16)
 
(12)
Foreign
 
(42)
 
76
 
34
 
33
 
(211)
 
(178)
Customer deposits
 
Domestic
 
(23)
 
(98)
 
(121)
 
(19)
 
(109)
 
(128)
of which: demand deposits
 
(23)
 
(86)
 
(109)
 
(14)
 
(84)
 
(98)
of which: savings deposits
 
0
 
1
 
1
 
0
 
(13)
 
(13)
of which: time deposits
 
0
 
(13)
 
(13)
 
(5)
 
(12)
 
(17)
Foreign
 
52
 
(497)
 
(445)
 
297
 
(1,530)
 
(1,233)
of which: demand deposits
 
0
 
(26)
 
(26)
 
22
 
(144)
 
(122)
of which: savings deposits
 
86
 
(200)
 
(114)
 
91
 
(83)
 
8
of which: time deposits
 
(142)
 
(163)
 
(305)
 
206
 
(1,326)
 
(1,120)
Funding from UBS Group AG
 
Domestic
 
170
 
(211)
 
(41)
 
(3)
 
(153)
 
(156)
Foreign
 
0
 
0
 
0
 
0
 
0
 
0
Commercial paper
Domestic
 
0
 
0
 
0
 
0
 
0
 
0
Foreign
 
52
 
(138)
 
(86)
 
(48)
 
(189)
 
(237)
Other short-term debt issued measured at amortized cost
Domestic
 
0
 
0
 
0
 
0
 
0
 
0
Foreign
 
13
 
(123)
 
(110)
 
133
 
(98)
 
35
Long-term debt issued measured at amortized cost
Domestic
 
(39)
 
(92)
 
(131)
 
14
 
(27)
 
(13)
Foreign
 
15
 
(105)
 
(90)
 
(187)
 
(56)
 
(243)
Financial liabilities at fair value (excluding debt issued designated
 
at fair value)
Domestic
 
(1)
 
2
 
1
 
0
 
2
 
2
Foreign
 
(14)
 
(259)
 
(273)
 
40
 
(1,521)
 
(1,481)
Debt issued designated at fair value
Domestic
 
9
 
(34)
 
(25)
 
21
 
(57)
 
(36)
Foreign
 
55
 
(426)
 
(371)
 
(155)
 
(494)
 
(649)
Other interest-bearing liabilities
Domestic
 
1
 
(2)
 
(1)
 
6
 
(27)
 
(21)
Foreign
 
(18)
 
(68)
 
(86)
 
80
 
(358)
 
(278)
Interest expense
Domestic
 
117
 
(463)
 
(346)
 
21
 
(390)
 
(369)
Foreign
 
111
 
(1,546)
 
(1,435)
 
197
 
(4,456)
 
(4,259)
Total interest expense on interest-bearing liabilities
 
228
 
(2,010)
 
(1,782)
 
218
 
(4,846)
 
(4,628)
Swap interest on hedged debt instruments and other swaps
 
(157)
 
(459)
Interest expense on off-balance sheet securities and other
 
221
 
(75)
Total interest expense
 
(1,718)
 
(5,162)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UBS AG consolidated supplemental disclosures required under SEC regulations
576
 
Deposits
The following
 
table analyzes average
 
deposits and average
 
rates
on each deposit category
 
for the years
 
ended 31 December 2021,
2020
 
and
2019
.
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
 
77
,
070
 
million
 
as
 
of
 
31
 
 
December
2021
 
(31 December
 
2020:
 
USD 76,200
 
million;
 
31 December
 
2019:
USD 54,262 million).
 
31.12.21
31.12.20
31.12.19
USD million, except where indicated
Average
 
deposits
Average
 
rate (%)
Average
 
deposits
Average
 
rate (%)
Average
 
deposits
Average
 
rate (%)
Due to banks
Domestic
 
Demand deposits
 
927
 
(0.5)
 
1,037
 
(0.4)
 
925
 
(0.3)
Time deposits
 
3,026
 
0.0
 
1,775
 
0.4
 
44
 
0.9
Total domestic
 
 
3,953
 
(0.1)
 
2,812
 
0.1
 
969
 
(0.3)
Foreign
1
Interest-bearing deposits
 
9,313
 
(0.1)
 
8,454
 
0.1
 
7,740
 
0.1
Total due to banks
 
13,266
 
(0.1)
 
11,266
 
0.1
 
8,709
 
0.1
Customer deposits
Domestic
 
Demand deposits
 
103,267
 
(0.2)
 
91,404
 
(0.1)
 
85,115
 
(0.1)
Savings deposits
 
114,792
 
0.0
 
110,328
 
0.0
 
101,845
 
0.0
Time deposits
 
10,306
 
(0.2)
 
19,256
 
0.0
 
15,064
 
0.3
Total domestic
 
 
228,366
 
(0.1)
 
220,988
 
0.0
 
202,024
 
0.0
Foreign
1
Demand deposits
 
140,975
 
(0.1)
 
112,499
 
0.0
 
93,988
 
0.1
Savings deposits
 
111,345
 
0.1
 
82,806
 
0.2
 
59,593
 
0.3
Time deposits
 
44,507
 
0.1
 
65,104
 
0.5
 
75,554
 
1.9
Total foreign
 
 
296,826
 
0.0
 
260,410
 
0.2
 
229,135
 
0.8
Total customer deposits
 
525,192
 
0.0
 
481,398
 
0.1
 
431,159
 
0.4
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
 
2021, total estimated
 
uninsured deposits were
USD 395
 
billion
 
(31 December
 
2020:
 
USD 383
 
billion;
31 December
 
2019:
 
USD 320
 
billion).
 
Uninsured
 
deposits
 
are
deposits that are in
 
excess of local deposit
 
insurance or protection
scheme
 
limits
 
in
 
the
 
key
 
locations
 
in
 
which
 
UBS
 
AG
 
operates,
calculated
 
based
 
on
 
the
 
respective
 
local
 
regulations,
 
as
 
well
 
as
deposits
 
in
 
uninsured
 
accounts.
 
The
 
main
 
deposit
 
insurance
schemes applicable
 
to UBS
 
AG 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, EdB,
 
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
 
597 million
 
per
client) 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 2021. Where a depositor
 
holds
multiple accounts,
 
which 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 million
 
Uninsured time deposits
1
Within 3 months
 
46,223
3 to 6 months
 
2,748
6 to 12 months
 
2,437
Over 12 months
 
720
Total uninsured time deposits as of 31 December 2021
 
52,128
1 Amounts are estimated based on the methodologies defined in each local jurisdiction. As of 31 December 2021, there were no US time deposits subject to the FDIC scheme that
 
were in excess of the FDIC insurance
limit.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
577
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 up to 5 years
5 to 10 years
Over 10 years
Total
carrying
amount
USD million, except where indicated
Carrying
amount
Yield (%)
Carrying
amount
Yield (%)
Carrying
amount
Yield (%)
Carrying
amount
Yield (%)
Debt instruments measured at fair value
through other comprehensive income
Asset-backed securities
 
 
1,129
 
1.63
 
3,720
 
1.42
 
4,849
Government bills/bonds
 
27
 
1.67
 
416
 
2.40
 
1,998
 
1.20
 
244
 
1.64
 
2,686
Corporate and other
 
1,193
 
1.61
 
116
 
2.48
 
1,310
Subtotal as of 31 December 2021
 
1,220
 
533
 
3,127
 
3,964
 
8,844
Debt securities measured at amortized cost
 
Asset-backed securities
 
 
2,418
 
2.32
 
2,418
Government bills/bonds
 
1,693
 
1.20
 
5,924
 
1.85
 
2,216
 
2.00
 
9,833
Corporate and other
 
1,025
 
0.77
 
4,264
 
0.30
 
1,318
 
0.33
 
6,608
Subtotal as of 31 December 2021
 
2,718
 
10,189
 
3,534
 
2,418
 
18,858
Total as of 31 December 2021
 
3,939
 
10,721
 
6,661
 
6,382
 
27,702
 
 
 
Loan portfolio
The table
 
below provides
 
the maturity profile
 
of UBS
 
AG’s core
 
loan portfolio
 
as of
 
31 December 2021. 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 million
31.12.21
Within 1 year
 
1 - 5 years
5 - 15 years
Over 15 years
Total
 
of which: over 1 year
Fixed rate
Adjustable or
floating rate
Private clients with mortgages
 
30,119
 
66,165
 
34,226
 
21,969
 
152,479
 
78,826
 
43,533
Real estate financing
 
20,010
 
15,628
 
8,266
 
41
 
43,945
 
19,057
 
4,878
Large corporate clients
 
8,787
 
4,396
 
807
 
1
 
13,990
 
3,879
 
1,325
SME clients
 
6,772
 
4,205
 
3,027
 
0
 
14,004
 
3,817
 
3,414
Lombard
 
142,261
 
6,733
 
247
 
42
 
149,283
 
6,481
 
540
Credit cards
 
1,716
 
0
 
0
 
0
 
1,716
 
0
 
0
Commodity trade finance
 
3,809
 
0
 
4
 
0
 
3,813
 
4
 
0
Other loans and advances to customers
 
10,293
 
7,679
 
1,393
 
100
 
19,464
 
5,411
 
3,760
Loans to financial advisors
 
118
 
1,196
 
1,073
 
66
 
2,453
 
2,335
 
0
Total
 
223,884
 
106,002
 
49,042
 
22,218
 
401,146
 
119,811
 
57,450
 
 
 
Allowance for credit losses
For the years
 
ended 31 December
 
2021, 2020 and
 
2019, 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
 
AG’s
core loan portfolio, both on
 
an overall basis and on an individual
loan category basis. Total
 
write-offs for 31 December 2021 were
USD
 
137
 
million
 
(31
 
December
 
2020:
 
USD
 
356
 
million,
 
31
December
 
2019:
 
USD
 
142
 
million).
 
Refer
 
to
 
the
 
coverage
 
ratio
tables
 
in
 
“Note
 
9
 
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.
 
UBS AG consolidated supplemental disclosures required under SEC regulations
578
 
 
579
Appendix
 
A
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Appendix
580
Alternative performance measures
 
Alternative performance measures
An alternative performance
 
measure (an
 
APM) is a
 
financial measure of
 
historical or future
 
financial performance, financial
 
position
or
 
cash
 
flows
 
other
 
than
 
a
 
financial
 
measure
 
defined
 
or
 
specified
 
in
 
the
 
applicable
 
recognized
 
accounting
 
standards
 
or
 
in
 
other
applicable regulations. We report
 
a number of APMs in the discussion of
 
the financial and operating performance of the Group,
 
our
business divisions and our Group Functions.
 
We use APMs to provide a
 
more complete picture of our
 
operating performance and to
reflect management’s view of the
 
fundamental drivers of our
 
business results. A definition of
 
each APM, the method
 
used to calculate
it and the information content are presented in alphabetical order in the table below.
 
Our APMs may qualify as non-GAAP measures
as defined by US Securities and Exchange Commission (SEC) regulations.
 
APM label
Calculation
Information content
Active Digital Banking clients in
Corporate & Institutional Clients (%)
– P&C
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).
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.
Active Digital Banking clients in
Personal Banking (%)
– P&C
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).
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.
Business volume for Personal
 
Banking (CHF and USD)
– P&C
Calculated as the sum of client assets and loans.
This measure provides information about the volume
of client assets and loans.
Client assets (USD and CHF)
– P&C
Calculated as the sum of invested assets
 
and other
assets held purely for transactional purposes or
 
custody
only. Net new money is not measured for Personal &
Corporate Banking.
This measure provides information about the volume
of client assets managed by or deposited with
 
UBS for
investment purposes, including other assets
 
held
purely for transactional purposes or custody only.
Cost / income ratio (%)
Calculated as operating expenses divided by
 
operating
income before credit loss expense or release
(annualized as applicable).
This measure provides information about the
efficiency of the business by comparing operating
expenses with gross income.
Fee-generating assets (USD)
– GWM
Calculated as the sum of discretionary and non-
discretionary wealth management portfolios (mandate
volume) and assets where generated revenues are
predominantly of a recurring nature, i.e., mainly
investment and mutual funds, including hedge
 
funds
and private markets, where we have a distribution
agreement.
This measure provides information about the volume
of invested assets that create a revenue stream,
whether as a result of the nature of the contractual
relationship with clients or through the fee structure
of the asset. An increase in the level of fee-generating
assets results in an increase in the associated revenue
stream.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
581
APM label
Calculation
 
Information content
Fee-generating asset margin (bps)
– GWM
Calculated as revenues from fee-generating assets (a
portion of which is included in recurring fee income
and a portion of which is included in transaction-
based income, annualized as applicable) divided
 
by
average fee-generating assets for the relevant
mandate fee billing period. For the US, fees have
been billed on daily balances since the fourth
 
quarter
of 2020 and average fee-generating assets
 
are
calculated as the average of the monthly
 
average
balances. Prior to the fourth quarter 2020, billing
 
was
based on prior quarter-end balances,
 
and the average
fee-generating
 
assets were thus the prior quarter-end
balance. For balances outside of the US, billing
 
is
based on prior month-end balances and average
 
fee-
generating assets are thus the average of the prior
month-end balances.
This measure provides information about the revenues
from fee-generating assets in relation to their average
volume during the relevant mandate fee billing
period.
Gross margin on invested assets (bps)
– AM
Calculated as operating income before credit loss
expense or release (annualized as applicable) divided
by average invested assets.
This measure provides information about the
operating income before credit loss expense or release
of the business in relation to invested assets.
Impaired loan portfolio as a percentage
of total loan portfolio, gross (%)
– GWM, P&C
Calculated as impaired loan portfolio divided by
 
total
gross loan portfolio.
This measure provides information about the
proportion of impaired loan portfolio in the total gross
loan portfolio.
Invested assets (USD and CHF)
– GWM, P&C, AM
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.
This measure provides information about the volume
of client assets managed by or deposited with
 
UBS for
investment purposes.
Loan penetration (%)
– GWM
Calculated as loans divided by invested
 
assets.
This measure provides information about loan volume
in relation to invested assets.
Mobile Banking log-in share in Personal
Banking (%)
– P&C
Calculated as the number of Mobile Banking
 
app
 
log-ins divided by total log-ins via E-Banking
 
and the
Mobile Banking app in Personal Banking. If
 
a digital
banking contract is linked to multiple business
relationships, the log-in is attributed to the business
relationship with the most banking products in use.
This measure provides information about the
proportion of Mobile Banking app log-ins in the total
number of log-ins via E-Banking and the Mobile
Banking app in Personal Banking.
Net interest margin (bps)
– P&C
Calculated as net interest income (annualized
 
as
applicable) divided by average loans.
This measure provides information about the
profitability of the business by calculating the
difference between the price charged for lending and
the cost of funding, relative to loan value.
Net margin on invested assets (bps)
– AM
Calculated as operating profit before tax (annualized
as applicable) divided by average invested
 
assets.
This measure provides information about the
operating profit before tax of the business in relation
to invested
 
assets.
Net new business volume for Personal
Banking (CHF and USD)
– P&C
Calculated as the sum of net inflows and outflows
 
of
client assets and loans during a specific period
(annualized as applicable).
This measure provides information about the business
volume as a result of net new business volume flows
during a specific period.
Net new business volume growth for
Personal Banking (%)
– P&C
Calculated as the sum of net inflows and outflows
 
of
client assets and loans during a specific period
(annualized as applicable) divided by total business
volume / client assets at the beginning of the
 
period.
This measure provides information about the growth
of business volume as a result of net new business
volume flows during a specific period.
Net new fee-generating assets (USD)
– GWM
Calculated as the sum of the net amount of
 
fee-
generating assets inflows and outflows, including
dividend and interest inflows into mandates and
outflows from mandate fees paid by clients, during
 
a
specific period.
This measure provides information about the
development of fee-generating assets during
 
a
specific period as a result of net flows and excludes
movements due to market performance and
 
foreign
exchange translation.
Net new money (USD)
– GWM, AM
 
Calculated as the sum of the net amount of inflows
and outflows of invested assets (as defined
 
in UBS
policy) recorded during a specific period.
This measure provides information about the
development of invested assets during a
 
specific
period as a result of net new money flows and
excludes movements due to market performance,
foreign exchange translation, dividends, interest and
fees.
Net profit growth (%)
Calculated as the change in net profit attributable
 
to
shareholders from continuing operations between
current and comparison periods divided by net profit
attributable to shareholders from continuing
operations of the comparison period.
This measure provides information about profit
growth in comparison with the prior period.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Appendix
582
APM label
Calculation
 
Information content
Pre-tax profit growth (%)
Calculated as the change in net profit before tax
attributable to shareholders from continuing
operations between current and comparison periods
divided by net profit before tax attributable to
shareholders from continuing operations of the
comparison period.
This measure provides information about pre-tax
profit growth in comparison with the prior period.
Recurring net fee income
(USD and CHF)
– GWM, P&C
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.
This measure provides information about the amount
of recurring net fee income.
Return on attributed equity (%)
Calculated as annualized business division
 
operating
profit before tax divided by average attributed equity.
This measure provides information about the
profitability of the business divisions in relation to
attributed equity.
Return on
 
common equity
 
tier 1
 
capital (%)
Calculated as annualized net profit attributable to
shareholders divided by average common equity
 
tier 1
capital.
This measure provides information about the
profitability of the business in relation to common
equity tier 1 capital.
Return on equity (%)
Calculated as annualized net profit attributable to
shareholders divided by average equity attributable
 
to
shareholders.
This measure provides information about the
profitability of the business in relation to equity.
Return on leverage ratio denominator,
gross (%)
Calculated as annualized operating income
 
before
credit loss expense or release divided by average
leverage ratio denominator.
This measure provides information about the revenues
of the business in relation to leverage ratio
denominator.
Return on risk-weighted
 
assets, gross (%)
Calculated as annualized operating income
 
before
credit loss expense or release divided by average risk-
weighted assets.
This measure provides information about the revenues
of the business in relation to risk-weighted assets.
Return on tangible equity (%)
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.
Secured loan portfolio as a percentage
of total loan portfolio, gross (%)
– P&C
Calculated as secured loan portfolio divided by
 
total
gross loan portfolio.
This measure provides information about the
proportion of the secured loan portfolio in the total
gross loan portfolio.
Tangible book value per share
(USD and CHF
1
)
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 and CHF
1
)
Calculated as equity attributable to shareholders
divided by the number of shares outstanding.
This measure provides information about net assets
on a per-share basis.
Transaction-based income
 
(USD and CHF)
– GWM, P&C
Calculated as the total of the non-recurring portion
 
of
net fee and commission income, mainly composed
 
of
brokerage and transaction-based investment fund
fees, and credit card fees, as well as fees for payment
and foreign exchange transactions, together with
other net income from financial instruments
measured at fair value through profit or loss.
This measure provides information about the amount
of the non-recurring portion of net fee and
commission income.
1
 
Total book value per share and tangible book value per share in Swiss francs are calculated based
 
on a translation of equity under our US dollar presentation currency.
 
 
 
583
 
Abbreviations frequently used in our financial reports
 
A
ABS
 
asset
-
backed securities
 
AG
M
 
Annual G
eneral
M
eeting
 
of
shareholders
A
-
IRB
 
advanced internal ratings
-
based
AIV
 
alternative investment
vehicle
ALCO
 
Asset and Liability
Committee
AMA
 
advanced measurement
approach
AML
 
anti
-
money laundering
 
AoA
 
Articles of Association
 
APM
 
alternative pe
rformance
measure
ARR
 
alternative reference rate
 
ARS
 
auction rate securities
 
ASF
 
available stable funding
 
AT1
 
additional tier 1
 
AuM
 
assets under management
 
 
B
BCBS
 
Basel Committee on
Banking Supervision
BIS
 
Bank for International
Settlements
BoD
 
Board of Directors
 
 
C
CAO
 
Capital Adequacy
Ordinance
CCAR
 
Comprehensive Capital
Analysis and Review
CCF
 
credit conversion factor
 
CCP
 
central counterparty
 
CCR
 
counterparty credit risk
 
CCRC
 
Corporate Culture and
Responsibility Committee
 
 
 
 
CDS
 
credit defa
ult swap
 
CEA
 
Commodity Exchange Act
 
CEO
 
Chief Executive Officer
 
CET1
 
common equity tier 1
 
CFO
 
Chief Financial Officer
 
CFTC
 
US Commodity Futures
Trading Commission
C
GU
 
c
ash
-
generating unit
 
CHF
 
Swiss franc
 
 
CIO
 
Chief Investment Office
 
CLS
 
C
ontinuous
Linked
Settlement
 
C&ORC
 
Compliance & Operational
Risk Control
CRD IV
 
EU Capital Requirements
Directive of 2013
CRM
 
credit risk mitigation (credit
risk) or comprehensive risk
measure (market risk)
CST
 
combined stress test
 
CUSIP
 
Committee on Unif
orm
Security Identification
Procedures
CVA
 
credit valuation adjustment
 
 
D
DBO
 
defined benefit obligation
 
DCCP
 
Deferred Contingent
Capital Plan
 
DM
 
discount margin
 
DOJ
 
US Department of Justice
 
DTA
 
deferred tax asset
 
DVA
 
debit valuation adjustment
 
 
E
EAD
 
exposure at default
 
EB
 
Executive Board
 
EC
 
European Commission
 
ECB
 
European Central Bank
 
ECL
 
expected credit loss
 
EGM
 
Extraordinary General
Meeting of shareholders
EIR
 
effective interest rate
 
EL
 
expected loss
 
EMEA
 
Europe, Middle East and
Africa
EOP
 
Equity Ownership Plan
 
EPS
 
earnings per share
 
ESG
 
environmental, social and
governance
ETD
 
exchange
-
traded derivative
s
 
ETF
 
exchange
-
traded fund
 
EU
 
European Union
 
EUR
 
euro
 
EURIBOR
 
Euro Interbank Offered Rate
 
ESR
 
e
nvironmental and social
risk
EVE
 
economic va
lue of equity
 
EY
 
Ernst & Young Ltd
 
 
F
FA
 
financial advisor
 
FCA
 
UK Financial Conduct
Authority
FCT
 
foreign currency translation
 
FINMA
 
Swiss Financial Market
Supervisory Authority
FMIA
 
Swiss Financial Market
Infrastructure Act
 
 
Appendix
584
 
Abbreviations frequently used in our financial reports (continued)
 
FSB
 
Financial Stability Board
 
F
TA
 
Swiss Federal Tax
Administration
FVA
 
funding valuation
adjustment
FVOCI
 
fair value through other
comprehensive income
FVTPL
 
fair value through profit or
loss
FX
 
foreign exchange
 
 
G
GAAP
 
generally accepted
accounting principles
GCRG
 
Group
Compliance,
Regulatory & Governance
GBP
 
pound sterling
 
GDP
 
gross domestic product
 
GEB
 
Group Executive Board
 
GHG
 
greenhouse gas
 
GIA
 
Group Internal Audit
 
GMD
 
Group Managing Director
 
GRI
 
Global Reporting Initiative
 
G
-
SIB
 
global systemically
important bank
 
H
Hong Kong
SAR
 
Hong Kong Special
 
 
Administrative Region of
the People’s Republic of
 
China
 
HQLA
 
high-quality liquid assets
 
I
IAS
 
International Accounting
Standards
IASB
 
International Accounting
Standards Board
IBOR
 
interbank offered rate
 
IFRIC
 
International Financial
Reporting Interpretations
Committee
IFRS
 
International Financial
Reporting Standards
IRB
 
internal ratings
-
based
 
IRRBB
 
interest rate risk in the
banking book
ISDA
 
International Swaps and
Derivatives Association
ISIN
 
International Se
curities
Identification Number
 
K
KRT
 
Key Risk Taker
 
 
L
LAS
 
liquidity
-
adjusted stress
 
LCR
 
liquidity coverage ratio
 
LGD
 
loss given default
 
LIBOR
 
London Interbank Offered
Rate
LLC
 
limited liability company
 
LoD
 
lines of defense
 
LRD
 
leverage ratio
denominator
 
LTIP
 
Long
-
Term Incentive Plan
 
LTV
 
loan
-
to
-
value
 
 
M
M&A
 
mergers and acquisitions
 
MiFID II
 
Markets in Financial
Instruments Directive II
MRT
 
Material Risk Taker
 
 
N
NAV
 
net asset value
 
NII
 
net interest income
 
NSFR
 
net stable funding ratio
 
NYSE
 
Ne
w York Stock Exchange
 
 
O
OCA
 
own credit adjustment
 
OCI
 
other comprehensive
income
ORF
 
operational risk framework
 
OTC
 
over
-
the
-
counter
 
 
P
PD
 
probability of default
 
PIT
 
point in time
 
P&L
 
profit or loss
 
POCI
 
purchased or originated
credit-impaired
PRA
 
UK Prudential Regulation
Authority
 
PRV
 
positive replacement value
 
 
R
RBA
 
role
-
based allowance
 
RBC
 
risk
-
based capital
 
RbM
 
risk
-
based monitoring
 
REIT
 
r
eal estate investment trust
 
RMBS
 
residential mortgage
-
backed securities
RniV
 
risks not
 
in VaR
 
RoCET1
 
return on CET1 capital
 
RoTE
 
return on tangible equity
 
RoU
 
right
-
of
-
use
 
rTSR
 
r
elative total shareholder
return
RWA
 
risk
-
weighted assets
 
 
 
 
 
 
 
585
 
Abbreviations frequently used in our financial reports (continued)
 
S
SA
 
standardized approach
 
SA
-
CCR
 
standardized approach for
counterparty credit risk
SAR
 
stock appreciation righ
t
 
or
Special Administrative
Region
SBC
 
Swiss Bank Corporation
 
SDG
 
Sustainable Development
Goal
SE
 
structured entity
 
SEC
 
US Securities and Exchange
Commission
SEEOP
 
Senior Executive Equity
Ownership Plan
 
SFT
 
securities financing
transaction
SI
 
sustainable investing
 
or
 
 
sustainable
investments
 
SIBOR
 
Singapore Interbank
Offered Rate
SICR
 
significant increase in credit
risk
SIX
 
SIX Swiss Exchange
 
SME
 
small and medium
-
sized
entities
SMF
 
Senior Management
Function
SNB
 
Swiss National Bank
 
SOR
 
Singapore Swap Offer Rate
 
SPPI
 
solely payments of principal
and interest
SRB
 
systemically relevant bank
 
SRM
 
specific risk measure
 
SVaR
 
stressed value
-
at
-
risk
 
 
T
TBTF
 
too big to fail
 
TCFD
 
Task
 
Force on Climate
-
related Financial Disclosures
TIBOR
 
Tokyo
 
Inte
rbank Offered
Rate
TLAC
 
total loss
-
absorbing capacity
 
 
U
UoM
 
units of measure
 
USD
 
US dollar
 
 
V
VaR
 
value
-
at
-
risk
 
VAT
 
value added tax
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
This is a
 
general list of
 
the abbreviations
 
frequently used
 
in our financial
 
reporting. Not all
 
of the listed
 
abbreviations may
 
appear in
this particular report.
 
Appendix
586
Information sources
Reporting publications
Annual publications
 
Annual Report (SAP No. 80531):
 
Published in English, this single-
volume
 
report
 
provides
 
descriptions of:
 
our
 
Group strategy
 
and
performance;
 
the
 
strategy
 
and
 
performance
 
of
 
the
 
business
divisions
 
and
 
Group
 
Functions;
 
risk,
 
capital
 
and
 
funding,
 
and
balance
 
sheet
 
management;
 
corporate
 
governance,
 
corporate
responsibility
 
and
 
our
 
compensation
 
framework,
 
including
information about
 
compensation for
 
the Board
 
of Directors
 
and
the Group
 
Executive Board
 
members; and
 
financial information,
including the financial statements.
 
Geschäftsbericht
 
(SAP
 
No.
 
80531):
 
This
 
publication
 
provides
 
a
translation
 
into
 
German
 
of
 
selected
 
sections
 
of
 
our
 
Annual
Report.
 
Annual
 
Review
 
(SAP
 
No.
 
80530):
 
This
 
booklet
 
contains
 
key
information about our strategy and
 
performance, with a focus
 
on
corporate responsibility at UBS.
 
It is published in
 
English, German,
French and Italian.
 
Compensation Report (SAP No. 82307):
 
This report discusses our
compensation
 
framework
 
and
 
provides
 
information
 
about
compensation for the Board of Directors and
 
the Group Executive
Board members. It is available in English and German.
 
Quarterly publications
 
The quarterly financial report provides
 
an update on our strategy
and
 
performance
 
for
 
the
 
respective
 
quarter.
 
It
 
is
 
available
 
in
English.
 
How to order publications
 
The annual and quarterly publications are available in .pdf format
at
ubs.com/investors
, under “Financial information,” and printed
copies
 
can
 
be
 
requested
 
from
 
UBS
 
free
 
of
 
charge.
 
For
 
annual
publications,
 
refer
 
to
 
the
 
“Investor
 
services”
 
section
 
at
ubs.com/investors.
Alternatively, they
 
can be ordered
 
by quoting
the SAP number and the language preference,
 
where applicable,
from UBS AG,
 
F4UK–AUL, P.O. Box, CH-8098 Zurich, Switzerland.
 
 
Other information
Website
 
The
 
“Investor
 
Relations”
 
website
 
at
ubs.com/investors
 
provides
the
 
following
 
information
 
about
 
UBS:
 
news
 
releases;
 
financial
information, including results-related filings
 
with the US
 
Securities
and
 
Exchange
 
Commission
 
(the
 
SEC);
 
information
 
for
shareholders, including UBS
 
share price charts,
 
as well as
 
data and
dividend
 
information,
 
and
 
for
 
bondholders;
 
the
 
UBS
 
corporate
calendar;
 
and
 
presentations
 
by
 
management
 
for
 
investors
 
and
financial analysts.
 
Information is
 
available online
 
in English,
 
with
some information also available in German.
 
Results presentations
 
Our
 
quarterly
 
results
 
presentations
 
are
 
webcast
 
live.
 
Playbacks
 
of
 
most
 
presentations
 
can
 
be
 
download
ed
 
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
We file periodic reports and submit other
 
information about UBS
to the
 
US Securities
 
and Exchange
 
Commission (the
 
SEC). Principal
among
 
these
 
filings
 
is
 
the
 
annual
 
report
 
on
 
Form
 
20-F,
 
filed
pursuant to the US Securities Exchange Act of 1934. The filing of
Form
 
20-F
 
is
 
structured
 
as
 
a
 
wrap-around
 
document.
 
Most
sections of the filing can
 
be satisfied by referring to the
 
combined
UBS Group
 
AG and
 
UBS AG
 
annual report.
 
However,
 
there is
 
a
small amount
 
of additional
 
information in
 
Form 20-F
 
that is
 
not
presented elsewhere and is particularly targeted at
 
readers in the
US. Readers are encouraged to refer
 
to this additional disclosure.
Any document that we file with the SEC is available on the SEC’s
website:
sec.gov
.
 
Refer
 
to
ubs.com/investors
 
for
 
more
information.
 
 
 
587
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cautionary Statement Regarding Forward-Looking Statements |
 
This report contains statements that constitute “forward-looking statements,” including
but not limited to management’s outlook for
 
UBS’s financial performance,
 
statements relating to the anticipated effect of
 
transactions and strategic initiatives
on UBS’s
 
business and future
 
development and goals
 
or intentions to
 
achieve climate, sustainability
 
and other social
 
objectives. While these
 
forward-looking
statements represent
 
UBS’s judgments,
 
expectations and
 
objectives concerning the
 
matters described,
 
a number
 
of risks,
 
uncertainties and
 
other important
factors could cause
 
actual developments
 
and results
 
to differ materially
 
from UBS’s expectations.
 
Russia’s invasion of
 
Ukraine has led
 
to heightened volatility
across global markets
 
and to
 
the coordinated
 
implementation of sanctions
 
on Russia, Russian
 
entities and nationals.
 
Russia’s invasion of
 
Ukraine
 
already has
caused significant population displacement, and as the conflict continues, the disruption will likely increase. The scale
 
of the conflict and the speed and extent
of sanctions, as well as the uncertainty as to how the situation will develop, may have significant adverse effects to the market and
 
macroeconomic conditions,
including in ways that cannot be anticipated. This creates significantly greater uncertainty about forward-looking statements. The COVID-19 pandemic and the
measures taken to manage it
 
have had and may
 
also continue to have
 
a significant adverse effect on
 
global and regional economic
 
activity, including disruptions
to global supply chains,
 
inflationary pressures, and labor
 
market displacements. Factors
 
that may affect our
 
performance and ability
 
to achieve our plans,
 
outlook
and other objectives also
 
include, but are not limited
 
to: (i) the degree to
 
which UBS is successful
 
in the ongoing execution
 
of its strategic plans,
 
including its cost
reduction and efficiency initiatives
 
and its ability to
 
manage its levels of
 
risk-weighted assets (RWA) and
 
leverage ratio denominator
 
(LRD), liquidity coverage
 
ratio
and other financial resources,
 
including changes in RWA assets
 
and liabilities arising from higher
 
market volatility; (ii) the degree
 
to which UBS is successful
 
in
implementing changes to its businesses
 
to meet changing market, regulatory
 
and other conditions; (iii) the continuing
 
low or negative interest rate environment
in Switzerland
 
and other
 
jurisdictions; (iv) developments
 
in the
 
macroeconomic climate and
 
in the
 
markets in
 
which UBS
 
operates or
 
to which
 
it is
 
exposed,
including movements in securities
 
prices or liquidity, credit spreads, and currency exchange
 
rates, and the effects of economic
 
conditions, market developments,
and increasing geopolitical tensions, and changes to national trade policies on the
 
financial position or creditworthiness of UBS’s clients and counterparties, as
well as on client sentiment and levels of activity; (v) changes in the availability
 
of capital and funding, including any changes in UBS’s credit spreads and ratings,
as well as availability and cost of funding to meet requirements for debt eligible for total loss-absorbing capacity (TLAC); (vi) changes in central bank policies or
the implementation
 
of financial legislation and regulation in Switzerland,
 
the US, the UK, the European Union and other financial
 
centers that have imposed, or
resulted in, or may do
 
so in the future, more
 
stringent or entity-specific
 
capital, TLAC, leverage
 
ratio, net stable
 
funding ratio, liquidity
 
and funding requirements,
heightened operational resilience requirements, incremental tax requirements, additional levies, limitations
 
on permitted activities, constraints on remuneration,
constraints on transfers of capital and liquidity and sharing of operational costs
 
across the Group or other measures, and the effect these will or would have on
UBS’s business activities;
 
(vii) UBS’s ability
 
to successfully implement resolvability
 
and related
 
regulatory requirements and
 
the potential need
 
to make further
changes to the
 
legal structure or
 
booking model of
 
UBS Group in
 
response to legal
 
and regulatory requirements,
 
or other external
 
developments; (viii) UBS’s
ability to maintain
 
and improve its
 
systems and controls
 
for complying with
 
sanctions and for
 
the detection and
 
prevention of money
 
laundering to meet
 
evolving
regulatory
 
requirements
 
and
 
expectations, in
 
particular
 
in
 
current
 
geopolitical
 
turmoil;
 
(ix)
 
the
 
uncertainty
 
arising
 
from
 
domestic stresses
 
in
 
certain
 
major
economies; (x)
 
changes in
 
UBS’s competitive position,
 
including whether differences
 
in regulatory
 
capital and
 
other requirements
 
among the
 
major financial
centers adversely affect UBS’s ability
 
to compete in certain lines
 
of business; (xi) changes in
 
the standards of conduct applicable
 
to our businesses that
 
may result
from new regulations or new enforcement of existing standards, including measures to impose
 
new and enhanced duties when interacting with customers
 
and
in the
 
execution and
 
handling of
 
customer transactions;
 
(xii) the
 
liability to
 
which UBS
 
may be
 
exposed, or
 
possible constraints
 
or sanctions
 
that regulatory
authorities might
 
impose on
 
UBS, due
 
to litigation,
 
contractual claims
 
and regulatory
 
investigations, including the
 
potential for
 
disqualification from
 
certain
businesses, potentially large fines or monetary penalties, or the loss of licenses or privileges
 
as a result of regulatory or other governmental sanctions, as well as
the effect that litigation, regulatory
 
and similar matters have
 
on the operational risk
 
component of our RWA, as
 
well as the amount
 
of capital available for
 
return
to shareholders; (xiii) the effects on UBS’s cross-border banking business of sanctions, tax or regulatory developments and of possible changes in UBS’s policies
and practices relating to this business;
 
(xiv) UBS’s ability to retain and
 
attract the employees necessary
 
to generate revenues and to manage,
 
support and control
its businesses,
 
which may
 
be affected
 
by competitive
 
factors; (xv) changes
 
in accounting
 
or tax
 
standards or
 
policies, and
 
determinations or
 
interpretations
affecting the recognition of gain or loss,
 
the valuation of goodwill, the
 
recognition of deferred tax assets and
 
other matters; (xvi) UBS’s ability
 
to implement new
technologies and business methods, including digital services and technologies, and ability to successfully compete with both
 
existing and new financial service
providers, some of which may not be
 
regulated to the same extent; (xvii) limitations on
 
the effectiveness of UBS’s internal processes for risk management, risk
control, measurement and modeling, and
 
of financial models generally; (xviii)
 
the occurrence of operational
 
failures, such as
 
fraud, misconduct, unauthorized
trading, financial crime,
 
cyberattacks, data leakage and
 
systems failures,
 
the risk
 
of which is
 
increased with cyberattack
 
threats from
 
nation states and
 
while
COVID-19 control measures
 
require large portions
 
of the staff of
 
both UBS and
 
its service providers
 
to work remotely;
 
(xix) restrictions on the
 
ability of UBS
 
Group
AG to make payments or distributions,
 
including due to restrictions on the
 
ability of its subsidiaries to make
 
loans or distributions, directly or indirectly, or, in the
case of financial difficulties, due to the exercise by FINMA or the regulators of UBS’s operations in other countries of their broad statutory powers in relation to
protective measures, restructuring
 
and liquidation proceedings;
 
(xx) the degree to
 
which changes in
 
regulation, capital or
 
legal structure, financial results
 
or other
factors may affect
 
UBS’s ability to
 
maintain its stated
 
capital return
 
objective; (xxi)
 
uncertainty over
 
the scope
 
of actions that
 
may be required
 
by UBS, governments
and
 
others
 
to
 
achieve
 
goals
 
relating
 
to
 
climate,
 
environmental and
 
social
 
matters, as
 
well
 
as
 
the
 
evolving
 
nature
 
of
 
underlying science
 
and
 
industry and
governmental standards; and (xxii) the effect that
 
these or other factors or unanticipated events may have
 
on our reputation and the additional
 
consequences
that this may have on
 
our business and performance.
 
The sequence in which the
 
factors above are presented is
 
not indicative of their
 
likelihood of occurrence or
the potential magnitude
 
of their consequences.
 
Our business and
 
financial performance could
 
be affected by
 
other factors identified
 
in our past
 
and future filings
and reports, including those filed with the SEC. More
 
detailed information about those factors is set forth in documents furnished by UBS and
 
filings made by
UBS with the
 
SEC, including
 
UBS’s Annual Report
 
on Form 20-F
 
for the year
 
ended 31 December
 
2021. UBS is
 
not under any
 
obligation to
 
(and expressly disclaims
any obligation to) update or alter its forward-looking
 
statements, whether as a result of new information,
 
future events, or otherwise.
Rounding |
 
Numbers presented throughout this report may not add up
 
precisely to the totals provided in the tables and text.
 
Percentages and percent changes
disclosed in text and tables are
 
calculated on the basis of unrounded
 
figures. Absolute changes between reporting periods disclosed
 
in the text, which can be
derived from numbers presented in related tables, are calculated on
 
a rounded basis.
Tables |
 
Within tables, blank fields generally indicate non-applicability or that presentation of any content would not be meaningful, or that information is not
available as of the relevant date or for the relevant period. Zero values generally indicate that the respective figure is zero on an actual or rounded basis.
 
Values
that are zero on a rounded basis can be either negative
 
or positive on an actual basis.
 
 
 
 
 
UBS_AR_2021p617i0.gif
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UBS Group AG
P.O.
 
Box
CH-8098 Zurich
 
ubs.com
 
 
 

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