31 March 2019 Pillar 3 report
UBS Group and significant regulated subsidiaries and sub-groups
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
Date: April 25, 2019
UBS Group AG
Commission File Number: 1-36764
UBS AG
Commission File Number: 1-15060
(Registrants' Name)
Bahnhofstrasse 45, Zurich, Switzerland and
Aeschenvorstadt 1, Basel, Switzerland
(Address of principal executive offices)
Indicate by check mark whether the registrants file or will file annual reports under cover of Form 20‑F or Form 40-F.
Form 20-F x Form 40-F o
This Form 6-K consists of the Basel III Pillar 3 UBS Group AG First Quarter 2019 Report, which appears immediately following this page.
31 March 2019 Pillar 3 report
UBS Group and significant regulated subsidiaries and sub-groups
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Table of contents |
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UBS Group AG consolidated |
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6 |
Section 1 |
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8 |
Section 2 |
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12 |
Section 3 |
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14 |
Section 4 |
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17 |
Section 5 |
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UBS AG consolidated |
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20 |
Section 1 |
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Significant regulated subsidiaries and sub-groups |
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22 |
Section 1 |
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22 |
Section 2 |
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26 |
Section 3 |
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32 |
Section 4 |
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33 |
Section 5 |
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Contacts
Switchboards
For all general inquiries
www.ubs.com/contact
Zurich +41-44-234 1111
London +44- 207-567 8000
New York +1-212-821 3000
Hong Kong +852-2971 8888 Singapore +65-6495 8000
Investor Relations
UBS’s Investor Relations team
supports institutional, professional and retail investors from
our offices in Zurich,
New York and Krakow.
UBS Group AG, Investor Relations
P.O. Box, CH-8098 Zurich, Switzerland
www.ubs.com/investors
Zurich +41-44-234 4100
New York +1-212-882 5734
Media Relations
UBS’s
Media Relations team supports
global media and journalists
from our offices in Zurich, London, New York and Hong Kong.
www.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 5857
mediarelations-ny@ubs.com
Hong Kong +852-2971 8200
sh-mediarelations-ap@ubs.com
Office of the Group Company Secretary
The Group Company Secretary receives inquiries on compensation and related issues addressed to members of the Board of Directors.
UBS Group AG, Office of the
Group Company Secretary
P.O. Box, CH-8098 Zurich, Switzerland
sh-company-secretary@ubs.com
+41-44-235 6652
Shareholder Services
UBS’s Shareholder Services team,
a unit of the Group Company Secretary Office, is responsible
for the registration of UBS Group AG registered shares.
UBS Group AG, Shareholder Services
P.O. Box, CH-8098 Zurich, Switzerland
sh-shareholder-services@ubs.com
+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:
https://www-us.computershare.com/
investor/Contact
Shareholder website:
www.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
Imprint
Publisher: UBS Group AG, Zurich,
Switzerland | www.ubs.com
Language: English
© UBS 2019. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.
Introduction and basis for preparation
Scope and location of Basel III Pillar 3 disclosures
The Basel III capital adequacy framework consists of three complementary pillars. Pillar 1 provides a framework for measuring minimum capital requirements for the credit, market, operational and non-counterparty-related risks faced by banks. Pillar 2 addresses the principles of the supervisory review process, emphasizing the need for a qualitative approach to supervising banks. Pillar 3 requires banks to publish a range of disclosures, mainly covering risk, capital, leverage, liquidity and remuneration.
This report provides Pillar 3 disclosures for UBS Group AG and UBS AG on a consolidated basis, as well as prudential key figures and regulatory information for our significant regulated subsidiaries and sub-groups. These Pillar 3 disclosures are supplemented by specific additional requirements of the Swiss Financial Market Supervisory Authority (FINMA) and voluntary disclosures on our part.
As UBS is considered a systemically relevant bank (SRB) under Swiss banking law, UBS Group AG and UBS AG are required to comply with regulations based on the Basel III framework as applicable to Swiss SRBs on a consolidated basis. Capital and other regulatory information as of 31 March 2019 for UBS Group AG consolidated is provided in the “Capital management” section of our first quarter 2019 report under “Quarterly reporting” at www.ubs.com/investors.
Capital and other regulatory information as of 31 March 2019 for UBS AG consolidated is provided in the UBS AG first quarter 2019 report, which will be available as of 30 April 2019 under “Quarterly reporting” at www.ubs.com/investors, and, additionally, in the “KM1: Key metrics“ table for UBS AG consolidated on page 20 in this report.
Following the combined UK business transfer and cross-border merger of UBS Limited into UBS Europe SE, which became legally effective on 1 March 2019, UBS Europe SE is subject to direct supervision by the European Central Bank and is considered a significant regulated subsidiary. Therefore we include the regulatory information of UBS Europe SE consolidated in this report for the first time, and no longer include UBS Limited standalone information.
In addition, we are also required to disclose certain regulatory information for UBS AG standalone, UBS Switzerland AG standalone and UBS Americas Holding LLC consolidated. This information is provided in the “Significant regulated subsidiaries and sub-groups” sections of this report.
Local regulators may also require publication of Pillar 3 information at a subsidiary or sub-group level. Where applicable, these local disclosures are provided under “Holding company and significant regulated subsidiaries and sub-groups” at www.ubs.com/investors.
Significant BCBS and FINMA capital adequacy, liquidity and funding, and related disclosure requirements for the first quarter of 2019
This Pillar 3 report has been prepared in accordance with FINMA Pillar 3 disclosure requirements (FINMA circular 2016 / 01 “Disclosure – banks”) issued on 16 July 2018, the underlying Basel Committee on Banking Supervision (BCBS) guidance “Revised Pillar 3 disclosure requirements” issued in January 2015, the “Frequently asked questions on the revised Pillar 3 disclosure requirements” issued in August 2016, the “Pillar 3 disclosure requirements – consolidated and enhanced framework” issued in March 2017 and the subsequent “Technical Amendment – Pillar 3 disclosure requirements – regulatory treatment of accounting provisions” issued in August 2018.
The legal entities UBS AG and UBS Switzerland AG are subject to standalone capital adequacy, liquidity and funding, and disclosure requirements defined by FINMA. This information is provided in the “Significant regulated subsidiaries and sub-groups” section of this report.
Changes to Pillar 1 requirements
As of 1 January 2019, we became subject to the revised capital adequacy ordinance (CAO) and the banking ordinance (BO), with no material effect on UBS as the changes were largely previously implemented by too big to fail-related decrees.
Changes to Pillar 3 disclosure requirements
The “KM2: Key metrics – TLAC requirements (at resolution group level)” table is published for the first time effective as of 31 March 2019, in line with BCBS and FINMA requirements. The table is only to be provided for UBS Group AG, the ultimate parent entity of the defined UBS resolution group, to which, in case of resolution, resolution tools (e.g., a bail-in) are expected to be applied.
2
Significant BCBS and FINMA consultation papers relating to Pillar 3
Leverage ratio treatment of client cleared derivatives
The BCBS consultation on the leverage ratio treatment of client cleared derivatives was closed in January 2019, seeking feedback as to whether or not the leverage ratio treatment of client cleared derivatives under the Basel III finalization of the capital framework issued in December 2017 should be amended to allow cash and non-cash initial margin received from a client to offset the potential future exposure or to align existing treatment with the standardized approach for measuring counterparty credit risk exposures. The final standards have not yet been announced.
Revisions to leverage ratio disclosure requirements
In response to particular concerns regarding “window-dressing” (i.e., engaging in temporary reductions in market activity to effect artificial reductions in leverage ratio requirements), BCBS issued a consultation paper in December 2018 on mandating the additional disclosure of leverage ratio exposure amounts of securities financing transactions, derivative replacement costs and central bank reserves, all to be calculated using daily averages over the reporting quarter. The consultation period ended in March 2019 and final standards are awaited.
Revised gone concern capital requirements in Switzerland
In April 2019, the Swiss Federal Department of Finance issued a revised Capital Adequacy Ordinance for consultation. Among other items, the proposal introduces gone concern capital requirements for Swiss-based legal entities of global systemically important banks. Under the proposal, UBS AG would be subject to a gone concern capital requirement on its third-party exposure on a standalone basis, as well as to an additional gone concern capital buffer requirement on its consolidated exposure. UBS Switzerland AG would continue to be required to maintain gone concern capital. These gone concern requirements would become effective on 1 January 2020 and the buffer would be phased in in full between 1 January 2021 and 1 January 2024.
The proposal also caps the maximum gone concern rebate relevant for UBS Group AG consolidated and UBS AG at 1.25% of total exposure, compared with a maximum rebate level of 2.0% under the current regime.
Finally, the eligibility of bail-in bonds with a remaining maturity between one and two years would increase, from 50% under the current regime to 100% effective 1 January 2020; however, their share in total gone concern capital would be capped at 20%.
Based on our initial assessment, we would expect that when fully phased in on 1 January 2024, UBS would be required to maintain a gone concern leverage ratio of around 100 basis points higher than otherwise needed to meet the Group requirements.
® Refer to the “Capital management” section of our Annual Report 2018 for information on the current capital requirements
Format, frequency and comparability of Pillar 3 disclosures
FINMA has specified the reporting frequency for each disclosure. We generally provide quantitative comparative information for all disclosures as of 31 December 2018. For more information on disclosure frequency, refer to our 31 December 2018 Pillar 3 report – UBS Group and significant regulated subsidiaries and sub-groups under “Pillar 3 disclosures” at www.ubs.com/investors.
3
UBS Group AG consolidated
Section 1 Key metrics
Key metrics of the first quarter of 2019
The KM1 and KM2 tables below are based on Basel Committee on Banking Supervision (BCBS) Basel III phase-in rules. The KM2 table includes a reference to the total loss-absorbing capacity (TLAC) term sheet, published by the Financial Stability Board (FSB). This term sheet is available on the FSB website, at http://www.fsb.org/2015/11/total-loss-absorbing-capacity-tlac-principles-and-term-sheet.
During the first quarter of 2019, our common equity tier 1 (CET1) capital increased by USD 0.5 billion to USD 34.7 billion, primarily as a result of higher operating profit before tax, partly offset by accruals for capital returns to shareholders. Tier 1 capital increased by USD 3.2 billion due to the issuance of a USD 2.5 billion high-trigger additional tier 1 capital instrument and the aforementioned CET1 capital increase.
The TLAC available as of 31 March 2019 includes CET1 capital, additional tier 1 and tier 2 capital instruments eligible under the TLAC framework, and non-regulatory capital elements of TLAC. Under the Swiss systemically relevant bank (SRB) framework including transitional arrangements, TLAC excludes 45% of the gross unrealized gains on debt instruments measured at fair value through other comprehensive income, which is measured for regulatory capital at the lower of cost or market value. This amount was negligible as of 31 March 2019 but included as available TLAC in the KM2 table.
A senior unsecured debt instrument denominated in Swiss francs, the equivalent of USD 0.4 billion, was issued during the quarter, and qualifies as non-regulatory capital elements of TLAC.
Risk-weighted assets (RWA) increased by USD 3.8 billion to USD 267.6 billion, mainly due to increases of USD 5.4 billion in credit risk RWA, USD 2.8 billion in operational risk RWA and USD 2.5 billion in counterparty credit risk RWA, partly offset by a decrease of USD 7.0 billion in market risk RWA. Leverage ratio exposure increased by USD 6 billion to USD 911 billion, mainly driven by on-balance sheet exposures (excluding derivative exposures and securities financing transactions).
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KM1: Key metrics |
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USD million, except where indicated |
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31.3.19 |
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31.12.18 |
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30.9.18 |
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30.6.18 |
31.3.18 |
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Available capital (amounts)1 |
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1 |
Common equity tier 1 (CET1) |
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34,658 |
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34,119 |
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34,816 |
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34,116 |
34,774 |
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1a |
Fully loaded ECL accounting model |
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34,613 |
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34,071 |
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34,816 |
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34,116 |
34,774 |
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2 |
Tier 1 |
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49,436 |
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46,279 |
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45,972 |
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45,353 |
46,180 |
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2a |
Fully loaded ECL accounting model Tier 1 |
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49,391 |
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46,231 |
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45,972 |
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45,353 |
46,180 |
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3 |
Total capital |
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56,148 |
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52,981 |
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52,637 |
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52,450 |
54,972 |
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3a |
Fully loaded ECL accounting model total capital |
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56,103 |
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52,933 |
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52,637 |
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52,450 |
54,972 |
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Risk-weighted assets (amounts) |
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4 |
Total risk-weighted assets (RWA) |
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267,556 |
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263,747 |
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257,041 |
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254,603 |
266,169 |
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4a |
Total risk-weighted assets (pre-floor) |
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267,556 |
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263,747 |
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257,041 |
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254,603 |
266,169 |
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Risk-based capital ratios as a percentage of RWA1 |
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5 |
Common equity tier 1 ratio (%) |
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12.95 |
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12.94 |
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13.55 |
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13.40 |
13.06 |
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5a |
Fully loaded ECL accounting model Common Equity Tier 1 (%) |
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12.94 |
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12.92 |
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13.55 |
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13.40 |
13.06 |
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6 |
Tier 1 ratio (%) |
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18.48 |
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17.55 |
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17.89 |
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17.81 |
17.35 |
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6a |
Fully loaded ECL accounting model Tier 1 ratio (%) |
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18.46 |
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17.53 |
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17.89 |
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17.81 |
17.35 |
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7 |
Total capital ratio (%) |
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20.99 |
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20.09 |
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20.48 |
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20.60 |
20.65 |
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7a |
Fully loaded ECL accounting model total capital ratio (%) |
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20.97 |
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20.07 |
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20.48 |
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20.60 |
20.65 |
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Additional CET1 buffer requirements as a percentage of RWA |
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8 |
Capital conservation buffer requirement (2.5% from 2019) (%) |
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2.50 |
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1.88 |
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1.88 |
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1.88 |
1.88 |
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9 |
Countercyclical buffer requirement (%) |
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0.10 |
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0.08 |
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0.05 |
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0.06 |
0.03 |
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9a |
Additional countercyclical buffer for Swiss mortgage loans (%) |
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0.21 |
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0.21 |
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0.21 |
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0.20 |
0.19 |
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10 |
Bank G-SIB and/or D-SIB additional requirements (%) |
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1.00 |
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0.75 |
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0.75 |
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0.75 |
0.75 |
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11 |
Total of bank CET1 specific buffer requirements (%) |
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3.60 |
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2.71 |
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2.68 |
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2.68 |
2.65 |
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12 |
CET1 available after meeting the bank’s minimum capital requirements (%)1 |
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8.45 |
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8.44 |
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9.05 |
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8.90 |
8.56 |
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Basel III leverage ratio |
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|
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|
|
|
|
|
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13 |
Total Basel III leverage ratio exposure measure |
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910,993 |
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904,598 |
|
915,066 |
|
910,383 |
925,651 |
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14 |
Basel III leverage ratio (%)1 |
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5.43 |
|
5.12 |
|
5.02 |
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4.98 |
4.99 |
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14a |
Fully loaded ECL accounting model Basel III leverage ratio (%)1 |
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5.42 |
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5.11 |
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5.02 |
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4.98 |
4.99 |
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Liquidity coverage ratio |
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15 |
Total HQLA |
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186,038 |
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173,389 |
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176,594 |
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183,202 |
192,864 |
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16 |
Total net cash outflow |
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121,521 |
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127,352 |
|
130,750 |
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127,324 |
141,910 |
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17 |
LCR ratio (%) |
|
153 |
|
136 |
|
135 |
|
144 |
136 |
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1 Based on BCBS Basel III phase-in rules. |
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6
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KM2: Key metrics – TLAC requirements (at resolution group level)1 |
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USD million, except where indicated |
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31.3.19 |
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31.12.18 |
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30.9.18 |
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30.6.18 |
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31.3.18 |
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1 |
Total loss-absorbing capacity (TLAC) available |
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87,477 |
|
83,740 |
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81,711 |
|
82,211 |
|
83,079 |
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1a |
Fully loaded ECL accounting model TLAC available |
|
87,433 |
|
83,692 |
|
81,711 |
|
82,211 |
|
83,079 |
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2 |
Total RWA at the level of the resolution group |
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267,556 |
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263,747 |
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257,041 |
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254,603 |
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266,169 |
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3 |
TLAC as a percentage of RWA (%) |
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32.69 |
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31.75 |
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31.79 |
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32.29 |
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31.21 |
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3a |
Fully loaded ECL accounting model TLAC as a percentage of fully loaded ECL accounting model RWA (%) |
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32.68 |
|
31.73 |
|
31.79 |
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32.29 |
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31.21 |
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4 |
Leverage ratio exposure measure at the level of the resolution group |
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910,993 |
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904,598 |
|
915,066 |
|
910,383 |
|
925,651 |
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5 |
TLAC as a percentage of leverage ratio exposure measure (%) |
|
9.60 |
|
9.26 |
|
8.93 |
|
9.03 |
|
8.98 |
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5a |
Fully loaded ECL accounting model TLAC as a percentage of fully loaded ECL accounting model Leverage exposure measure (%) |
|
9.60 |
|
9.25 |
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8.93 |
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9.03 |
|
8.98 |
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6a |
Does the subordination exemption in the antepenultimate paragraph of Section 11 of the FSB TLAC Term Sheet apply? |
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No |
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6b |
Does the subordination exemption in the penultimate paragraph of Section 11 of the FSB TLAC Term Sheet apply? |
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No |
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6c |
If the capped subordination exemption applies, the amount of funding issued that ranks pari passu with excluded liabilities and that is recognized as external TLAC, divided by funding issued that ranks pari passu with excluded liabilities and that would be recognized as external TLAC if no cap was applied (%) |
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N/A – Refer to our response to 6b. |
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1 Resolution group level is defined as the UBS Group AG consolidated level. |
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7
UBS Group AG consolidated
Our approach to measuring risk exposure and risk-weighted assets
Depending on the intended purpose, the measurement of risk exposure that we apply may differ. Exposures may be measured for financial accounting purposes under International Financial Reporting Standards (IFRS), for deriving our regulatory capital requirement or for internal risk management and control purposes. Our Pillar 3 disclosures are generally based on measures of risk exposure used to derive the regulatory capital required under Pillar 1. Our RWA are calculated according to the BCBS Basel III framework, as implemented by the Swiss Capital Adequacy Ordinance issued by the Swiss Federal Council and by the associated circulars issued by the Swiss Financial Market Supervisory Authority (FINMA).
For information on the measurement of risk exposures and RWA, refer to pages 9–12 of the 31 December 2018 Pillar 3 report – UBS Group and significant regulated subsidiaries and sub-groups under “Pillar 3 disclosures” at www.ubs.com/investors.
RWA development in the first quarter of 2019
The “OV1: Overview of RWA” table on the next page provides an overview of RWA and the related minimum capital requirements by risk type.
During the first quarter of 2019, RWA increased by USD 3.8 billion to USD 267.6 billion, mainly due to increases of USD 5.4 billion in credit risk RWA, USD 2.8 billion in operational risk RWA and USD 2.5 billion in counterparty credit risk RWA, partly offset by a decrease of USD 7.0 billion in market risk RWA.
Credit risk RWA from exposures under standardized approach increased by USD 3.0 billion, mainly driven by a USD 3.5 billion increase from the adoption of IFRS 16, Leases.
Operational risk RWA increased by USD 2.8 billion to USD 80.3 billion as of 31 March 2019, as model inputs in the advanced measurement approach (AMA) model were updated during the quarter to reflect developments related to litigation on the cross-border matter.
The flow tables on the subsequent pages provide further detail on the movements in credit risk RWA from exposures under the advanced internal ratings-based approach as well as in counterparty credit risk and market risk RWA in the first quarter of 2019. More information on capital management and RWA, including detail on movements in RWA during the first quarter of 2019, is provided on pages 52–53 of our first quarter 2019 report under “Quarterly reporting” at www.ubs.com/investors.
8
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OV1: Overview of RWA |
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USD million |
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RWA |
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Minimum capital requirements1 |
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|
|
|
31.3.19 |
31.12.18 |
|
31.3.19 |
|
|
1 |
Credit risk (excluding counterparty credit risk) |
|
118,419 |
112,991 |
|
9,474 |
|
2 |
of which: standardized approach (SA)2 |
|
28,971 |
25,972 |
|
2,318 |
|
3 |
of which: foundation internal ratings-based (F-IRB) approach |
|
|
|
|
|
|
4 |
of which: supervisory slotting approach |
|
|
|
|
|
|
5 |
of which: advanced internal ratings-based (A-IRB) approach |
|
89,448 |
87,019 |
|
7,156 |
|
6 |
Counterparty credit risk3 |
|
36,793 |
34,282 |
|
2,943 |
|
7 |
of which: SA for counterparty credit risk (SA-CCR)4 |
|
5,183 |
5,415 |
|
415 |
|
8 |
of which: internal model method (IMM) |
|
19,371 |
17,624 |
|
1,550 |
|
8a |
of which: value-at-risk (VaR) |
|
5,889 |
5,036 |
|
471 |
|
9 |
of which: other CCR |
|
6,351 |
6,207 |
|
508 |
|
10 |
Credit valuation adjustment (CVA) |
|
2,631 |
2,816 |
|
210 |
|
11 |
Equity positions under the simple risk weight approach5 |
|
3,960 |
3,658 |
|
317 |
|
12 |
Equity investments in funds – look-through approach6 |
|
|
|
|
|
|
13 |
Equity investments in funds – mandate-based approach6 |
|
|
|
|
|
|
14 |
Equity investments in funds – fall-back approach6 |
|
|
|
|
|
|
15 |
Settlement risk |
|
384 |
375 |
|
31 |
|
16 |
Securitization exposures in banking book |
|
703 |
709 |
|
56 |
|
17 |
of which securitization internal ratings-based approach (SEC-IRBA) |
|
|
|
|
|
|
18 |
of which securitization external ratings-based approach (SEC-ERBA) including internal assessment approach (IAA) |
|
696 |
701 |
|
56 |
|
19 |
of which securitization standardized approach (SEC-SA) |
|
7 |
8 |
|
1 |
|
20 |
Market Risk |
|
12,985 |
19,992 |
|
1,039 |
|
21 |
of which: standardized approach (SA) |
|
643 |
452 |
|
51 |
|
22 |
of which: internal model approaches (IMM) |
|
12,343 |
19,541 |
|
987 |
|
23 |
Capital charge for switch between trading book and banking book |
|
|
|
|
|
|
24 |
Operational risk |
|
80,345 |
77,558 |
|
6,428 |
|
25 |
Amounts below thresholds for deduction (250% risk weight)7 |
|
11,335 |
11,365 |
|
907 |
|
26 |
Floor adjustment8 |
|
0 |
0 |
|
0 |
|
27 |
Total |
|
267,556 |
263,747 |
|
21,404 |
|
1 Calculated based on 8% of RWA. 2 Includes non-counterparty-related risk not subject to the threshold deduction treatment (31 March 2019: RWA USD 12,779 million; 31 December 2018: RWA USD 9,514 million). Non-counterparty-related risk (31 March 2019: RWA USD 8,747 million; 31 December 2018: RWA USD 8,782 million), which is subject to the threshold treatment, is reported in line 25 “Amounts below thresholds for deduction (250% risk weight).” 3 Excludes settlement risk, which is separately reported in line 15 “Settlement risk.” Includes RWA with central counterparties. New regulation for the calculation of RWA for exposure to central counterparties will be implemented by 1 January 2020. The split between the subcomponents of counterparty credit risk refers to the calculation of the exposure measure. 4 Calculated in accordance with the current exposure method (CEM), until SA-CCR is implemented by 1 January 2020. 5 Includes investments in funds. Items subject to threshold deduction treatments that do not exceed their respective threshold are risk weighted at 250% (31 March 2019: RWA USD 2,588 million; 31 December 2018: RWA USD 2,583 million) and are separately included in line 25 “Amounts below thresholds for deduction (250% risk weight).” 6 New regulation for the calculation of RWA for investments in funds will be implemented by 1 January 2020. 7 Includes items subject to threshold deduction treatments that do not exceed their respective threshold and risk weighted at 250%. Items subject to threshold deduction treatments are significant investments in common shares of non-consolidated financial institutions (banks, insurance and other financial entities) and deferred tax assets arising from temporary differences, both of which are measured against their respective threshold. 8 No floor effect, as 80% of our Basel I RWA including the RWA equivalent of the Basel I capital deductions do not exceed our Basel III RWA including the RWA equivalent of the Basel III capital deductions. For the status of the finalization of the Basel III capital framework, refer to the “Regulatory and legal developments” section of our Annual Report 2018, available under “Annual reporting” at www.ubs.com/investors, which outlines how the proposed floor calculation would differ in significant aspects from the current approach. |
||||||
9
UBS Group AG consolidated
The “CR8: RWA flow statements of credit risk exposures under IRB” and “CCR7: RWA flow statements of CCR exposures under internal model method (IMM) and value-at-risk (VaR)” tables below provide a breakdown of the credit risk and counterparty credit risk (CCR) RWA movements in the first quarter of 2019 across BCBS-defined movement categories. These categories are described on page 45 of our 31 December 2018 Pillar 3 report – UBS Group and significant regulated subsidiaries and sub-groups, which is available under “Pillar 3 disclosures” at www.ubs.com/investors.
Credit risk RWA development in the first quarter of 2019
Credit risk RWA under the advanced
internal ratings-based
(A-IRB) approach increased by USD 2.4 billion to USD 89.4
billion as of 31 March 2019.
As presented in the “CR8: RWA flow statements of credit risk exposures under IRB” table below, RWA increased by USD 3.2 billion disclosed in “asset size,” primarily due to increases in traded loans and exposures in real estate financing within the Investment Bank’s Corporate Client Solutions business. The increase of USD 0.4 billion from model updates relates to the continued phasing-in of RWA increases related to probability of default (PD) and loss given default (LGD) changes from the implementation of revised models for Swiss residential mortgages.
|
CR8: RWA flow statements of credit risk exposures under IRB |
||
|
USD million |
RWA |
|
|
1 |
RWA as of 31.12.18 |
87,019 |
|
2 |
Asset size |
3,212 |
|
3 |
Asset quality |
(70) |
|
4 |
Model updates |
430 |
|
5 |
Methodology and policy |
(102) |
|
5a |
of which: regulatory add-ons |
0 |
|
6 |
Acquisitions and disposals |
0 |
|
7 |
Foreign exchange movements |
(667) |
|
8 |
Other |
(374) |
|
9 |
RWA as of 31.3.19 |
89,448 |
Counterparty credit risk RWA development in the first quarter of 2019
CCR RWA under the internal model method (IMM) and value-at-risk (VaR) increased by USD 2.6 billion during the first quarter of 2019. Derivative exposures within the Investment Bank’s Foreign Exchange, Rates and Credit business and securities financing transactions in Corporate Center were the main drivers of the increase in asset size as presented in the table below. The increase from methodology and policy updates was predominantly driven by a regulatory add-on of USD 0.6 billion for certain portfolios awaiting the development of a formalized rating tool.
|
CCR7: RWA flow statements of CCR exposures under internal model method (IMM) and value-at-risk (VaR) |
||||||
|
|
Derivatives |
|
SFTs |
|
Total |
|
|
USD million |
Subject to IMM |
|
Subject to VaR |
|
|
|
|
1 |
RWA as of 31.12.18 |
17,624 |
|
5,036 |
|
22,660 |
|
2 |
Asset size |
1,147 |
|
900 |
|
2,047 |
|
3 |
Credit quality of counterparties |
15 |
|
(189) |
|
(174) |
|
4 |
Model updates |
0 |
|
0 |
|
0 |
|
5 |
Methodology and policy |
621 |
|
150 |
|
771 |
|
5a |
of which: regulatory add-ons |
450 |
|
150 |
|
600 |
|
6 |
Acquisitions and disposals |
0 |
|
0 |
|
0 |
|
7 |
Foreign exchange movements |
(36) |
|
(8) |
|
(44) |
|
8 |
Other |
0 |
|
0 |
|
0 |
|
9 |
RWA as of 31.3.19 |
19,371 |
|
5,889 |
|
25,260 |
10
Market risk RWA development in the first quarter of 2019
The four main components that contribute to market risk RWA are Value-at-risk (VaR), stressed value-at-risk (SVaR), incremental risk charge (IRC) and comprehensive risk measure (CRM). VaR and SVaR components include the RWA charge for risks-not-in-VaR.
The “MR2: RWA flow statements of market risk exposures under an internal models approach” table below provides a breakdown of the market risk RWA movement in the first quarter of 2019 across these components, according to BCBS-defined movement categories. These categories are described on page 81 of our 31 December 2018 Pillar 3 report – UBS Group and significant regulated subsidiaries and sub-groups, which is available under “Pillar 3 disclosures” at www.ubs.com/investors.
Market risk RWA decreased by USD 7.2 billion in the first quarter of 2019, driven by asset size and other movements resulting from lower average regulatory, stressed VaR and incremental risk charge (IRC) levels observed in the Investment Bank. This decrease was driven by the Equities business due to a reduction in market volatility as well as a decrease in client activity along with an overall reduction in credit exposure in the FRC business.
The VaR multiplier remained unchanged, at 3.0, compared with the fourth quarter of 2018.
|
MR2: RWA flow statements of market risk exposures under an internal models approach1 |
|||||||
|
USD million |
VaR |
Stressed VaR |
IRC |
CRM |
Other |
Total RWA |
|
|
1 |
RWA as of 31.12.18 |
5,085 |
12,149 |
2,299 |
7 |
|
19,541 |
|
1a |
Regulatory adjustment |
(2,167) |
(8,470) |
(1,059) |
(7) |
|
(11,702) |
|
1b |
RWA at previous quarter-end (end of day) |
2,918 |
3,680 |
1,240 |
0 |
|
7,838 |
|
2 |
Movement in risk levels |
(1,771) |
(831) |
(26) |
0 |
|
(2,628) |
|
3 |
Model updates / changes |
(12) |
41 |
0 |
0 |
|
29 |
|
4 |
Methodology and policy |
0 |
0 |
0 |
0 |
|
0 |
|
5 |
Acquisitions and disposals |
0 |
0 |
0 |
0 |
|
0 |
|
6 |
Foreign exchange movements |
0 |
0 |
0 |
0 |
|
0 |
|
7 |
Other |
(205) |
(495) |
0 |
0 |
|
(700) |
|
8a |
RWA at the end of the reporting period (end of day) |
929 |
2,395 |
1,214 |
0 |
|
4,539 |
|
8b |
Regulatory adjustment |
2,298 |
5,506 |
0 |
0 |
|
7,804 |
|
8c |
RWA as of 31.3.19 |
3,227 |
7,901 |
1,214 |
0 |
|
12,343 |
|
1 Components that describe movements in RWA are presented in italic. |
|||||||
11
UBS Group AG consolidated
Section 3 Going and gone concern requirements and eligible capital
The table below provides details on the Swiss SRB going and gone concern requirements as required by FINMA. More information on capital management is provided on pages 46–55 of our first quarter 2019 report, available under “Quarterly reporting” at www.ubs.com/investors.
|
Swiss SRB going and gone concern requirements and information1 |
||||||||||
|
As of 31.3.19 |
|
Swiss SRB, including transitional arrangements |
|
Swiss SRB as of 1.1.20 |
||||||
|
USD million, except where indicated |
|
RWA |
LRD |
|
RWA |
LRD |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Required loss-absorbing capacity |
|
in % |
|
in % |
|
|
in % |
|
in % |
|
|
Common equity tier 1 capital |
|
9.99 |
26,730 |
3.20 |
29,152 |
|
10.31 |
27,586 |
3.50 |
31,885 |
|
of which: minimum capital |
|
4.90 |
13,110 |
1.70 |
15,487 |
|
4.50 |
12,040 |
1.50 |
13,665 |
|
of which: buffer capital |
|
4.78 |
12,789 |
1.50 |
13,665 |
|
5.50 |
14,716 |
2.00 |
18,220 |
|
of which: countercyclical buffer2 |
|
0.31 |
831 |
|
|
|
0.31 |
831 |
|
|
|
Maximum additional tier 1 capital |
|
3.90 |
10,435 |
1.30 |
11,843 |
|
4.30 |
11,505 |
1.50 |
13,665 |
|
of which: high-trigger loss-absorbing additional tier 1 minimum capital |
|
3.10 |
8,294 |
1.30 |
11,843 |
|
3.50 |
9,364 |
1.50 |
13,665 |
|
of which: high-trigger loss-absorbing additional tier 1 buffer capital |
|
0.80 |
2,140 |
|
|
|
0.80 |
2,140 |
|
|
|
Total going concern capital |
|
13.89 |
37,165 |
4.50 |
40,995 |
|
14.613 |
39,091 |
5.003 |
45,550 |
|
Base gone concern loss-absorbing capacity, including applicable add-ons and rebate/reduction |
|
9.744 |
26,071 |
3.364 |
30,609 |
|
10.745 |
28,742 |
3.835 |
34,865 |
|
Total gone concern loss-absorbing capacity |
|
9.74 |
26,071 |
3.36 |
30,609 |
|
10.74 |
28,742 |
3.83 |
34,865 |
|
Total loss-absorbing capacity |
|
23.63 |
63,236 |
7.86 |
71,604 |
|
25.35 |
67,834 |
8.83 |
80,415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Eligible loss-absorbing capacity |
|
|
|
|
|
|
|
|
|
|
|
Common equity tier 1 capital |
|
12.95 |
34,658 |
3.80 |
34,658 |
|
12.95 |
34,658 |
3.80 |
34,658 |
|
High-trigger loss-absorbing additional tier 1 capital6,7 |
|
7.77 |
20,790 |
2.28 |
20,790 |
|
5.52 |
14,778 |
1.62 |
14,778 |
|
of which: high-trigger loss-absorbing additional tier 1 capital |
|
4.63 |
12,397 |
1.36 |
12,397 |
|
4.63 |
12,397 |
1.36 |
12,397 |
|
of which: low-trigger loss-absorbing additional tier 1 capital |
|
0.89 |
2,381 |
0.26 |
2,381 |
|
0.89 |
2,381 |
0.26 |
2,381 |
|
of which: low-trigger loss-absorbing tier 2 capital |
|
2.25 |
6,012 |
0.66 |
6,012 |
|
|
|
|
|
|
Total going concern capital |
|
20.72 |
55,448 |
6.09 |
55,448 |
|
18.48 |
49,436 |
5.43 |
49,436 |
|
Gone concern loss-absorbing capacity |
|
11.97 |
32,020 |
3.51 |
32,020 |
|
14.21 |
38,032 |
4.17 |
38,032 |
|
of which: TLAC-eligible senior unsecured debt |
|
11.42 |
30,548 |
3.35 |
30,548 |
|
11.42 |
30,548 |
3.35 |
30,548 |
|
Total gone concern loss-absorbing capacity |
|
11.97 |
32,020 |
3.51 |
32,020 |
|
14.21 |
38,032 |
4.17 |
38,032 |
|
Total loss-absorbing capacity |
|
32.69 |
87,468 |
9.60 |
87,468 |
|
32.69 |
87,468 |
9.60 |
87,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-weighted assets / leverage ratio denominator |
|
|
|
|
|
|
|
|
|
|
|
Risk-weighted assets |
|
|
267,556 |
|
|
|
|
267,556 |
|
|
|
Leverage ratio denominator |
|
|
|
|
910,993 |
|
|
|
|
910,993 |
|
1 This table includes a rebate equal to 40% of the maximum rebate on the gone concern requirements, which was granted by FINMA and will be phased in until 1 January 2020 plus an additional reduction of 1.27% for the RWA requirement and 0.37% for the LRD requirement, respectively under Swiss SRB as of 1.1.20 rules, for the usage of low-trigger tier 2 capital instruments to fulfill gone concern requirements. 2 Going concern capital ratio requirements include countercyclical buffer requirements of 0.31%. 3 Includes applicable add-ons of 1.44% for RWA and 0.5% for leverage ratio denominator (LRD). 4 Includes applicable add-ons of 1.08% for RWA and 0.38% for LRD and applicable rebate of 1.86% for RWA and 0.64% for LRD. 5 Includes applicable add-ons of 1.44% for RWA and 0.5% for LRD and applicable rebate/reduction of 3.56% for RWA and 1.17% for LRD. 6 Includes outstanding low-trigger loss-absorbing additional tier 1 (AT1) capital instruments, which are available under the transitional rules of the Swiss SRB framework to meet the going concern requirements until their first call date, even if the first call date is after 31 December 2019. As of their first call date, these instruments are eligible to meet the gone concern requirements. 7 Includes outstanding low-trigger loss-absorbing tier 2 capital instruments, which are available under the transitional rules of the Swiss SRB framework to meet the going concern requirements until the earlier of (i) their maturity or first call date or (ii) 31 December 2019, and to meet gone concern requirements thereafter. Outstanding low-trigger loss-absorbing tier 2 capital instruments are subject to amortization starting five years prior to their maturity, with the amortized portion qualifying as gone concern loss-absorbing capacity. Instruments available to meet gone concern requirements are eligible until one year before maturity, with a haircut of 50% applied in the last year of eligibility. |
||||||||||
12
Explanation of the difference between the IFRS and regulatory scope of consolidation
The scope of consolidation for the purpose of calculating Group regulatory capital is generally the same as the consolidation scope under International Financial Reporting Standards (IFRS) and includes subsidiaries that are directly or indirectly controlled by UBS Group AG and active in banking and finance. However, subsidiaries consolidated under IFRS whose business is outside the banking and finance sector are excluded from the regulatory scope of consolidation.
The key difference between the IFRS and regulatory capital scope of consolidation as of 31 March 2019 relates to investments in insurance, real estate and commercial companies, as well as investment vehicles that are consolidated under IFRS, but not for regulatory capital purposes, where they are subject to risk-weighting.
The table below provides a list of the most significant entities that were included in the IFRS scope of consolidation, but not in the regulatory capital scope of consolidation. As of 31 March 2019, entities consolidated under either the IFRS or the regulatory scope of consolidation did not report any significant capital deficiencies.
In the banking book, certain equity investments are consolidated neither under IFRS nor under the regulatory scope. As of 31 March 2019, these investments mainly consisted of infrastructure holdings and joint operations (e.g., settlement and clearing institutions, and stock and financial futures exchanges) and included our participation in the SIX Group. These investments were risk-weighted based on applicable threshold rules.
More information on the legal structure of the UBS Group and on the IFRS scope of consolidation is provided on pages 12–13 and 328–329, respectively, of our Annual Report 2018, available under “Annual reporting” at www.ubs.com/investors.
|
Main legal entities consolidated under IFRS but not included in the regulatory scope of consolidation |
||||||
|
|
|
31.3.19 |
|
|
||
|
USD million |
|
Total assets1 |
Total equity1 |
|
|
Purpose |
|
UBS Asset Management Life Ltd |
|
24,602 |
42 |
|
|
Life Insurance |
|
A&Q Alpha Select Hedge Fund Limited |
|
304 |
3032 |
|
|
Investment vehicle for multiple investors |
|
A&Q Alternative Solution Limited |
|
249 |
2432 |
|
|
Investment vehicle for multiple investors |
|
A&Q Alternative Solution Master Limited |
|
247 |
2472 |
|
|
Investment vehicle for multiple investors |
|
UBS Life Insurance Company USA |
|
164 |
43 |
|
|
Life insurance |
|
1 Total assets and total equity on a standalone basis. 2 Represents the net asset value of issued fund units. These fund units are subject to liability treatment in the consolidated financial statements in accordance with IFRS. |
||||||
13
UBS Group AG consolidated
Section 4 Leverage ratio
The Basel Committee on Banking Supervision (BCBS) leverage ratio is calculated by dividing the period-end tier 1 capital by the period-end leverage ratio denominator (LRD). The LRD consists of IFRS on-balance sheet assets and off-balance sheet items. Derivative exposures are adjusted for a number of items, including replacement value and eligible cash variation margin netting, the current exposure method add-on and net notional amounts for written credit derivatives. The LRD also includes an additional charge for counterparty credit risk related to securities financing transactions.
The “Reconciliation of IFRS total assets to BCBS Basel III total on-balance sheet exposures excluding derivatives and securities financing transactions” table below shows the difference between total IFRS assets per IFRS consolidation scope and the BCBS total on-balance sheet exposures, which are the starting point for calculating the BCBS LRD, as shown in the “LR2: BCBS Basel III leverage ratio common disclosure” table on the next page. The difference is due to the application of the regulatory scope of consolidation for the purpose of the BCBS calculation. In addition, carrying values for derivative financial instruments and securities financing transactions are deducted from IFRS total assets. They are measured differently under BCBS leverage ratio rules and are therefore added back in separate exposure line items in the “LR2: BCBS Basel III leverage ratio common disclosure” table on the next page.
As of 31 March 2019, our BCBS Basel III leverage ratio was 5.4% and the BCBS Basel III LRD was USD 911 billion.
Difference between the Swiss SRB and BCBS leverage ratio
The LRD is the same under Swiss SRB and BCBS rules. However, there is a difference in the capital numerator between the two frameworks. Under BCBS rules, only common equity tier 1 and additional tier 1 capital are included in the numerator. Under Swiss SRB we are required to meet going as well as gone concern leverage ratio requirements. Therefore, depending on the requirement, the numerator includes tier 1 capital instruments, tier 2 capital instruments and / or total loss-absorbing capacity (TLAC)-eligible senior unsecured debt.
|
Reconciliation of IFRS total assets to BCBS Basel III total on-balance sheet exposures excluding derivatives and securities financing transactions |
||
|
USD million |
31.3.19 |
31.12.18 |
|
On-balance sheet exposures |
|
|
|
IFRS total assets |
956,580 |
958,351 |
|
Adjustment for investments in banking, financial, insurance or commercial entities that are consolidated for accounting purposes but outside the scope of regulatory consolidation |
(25,074) |
(22,277) |
|
Adjustment for investments in banking, financial, insurance or commercial entities that are outside the scope of consolidation for accounting purposes but consolidated for regulatory purposes |
0 |
0 |
|
Adjustment for fiduciary assets recognized on the balance sheet pursuant to the operative accounting framework but excluded from the leverage ratio exposure measure |
0 |
0 |
|
Less carrying value of derivative financial instruments in IFRS total assets1 |
(136,335) |
(149,821) |
|
Less carrying value of securities financing transactions in IFRS total assets2 |
(124,070) |
(123,154) |
|
Adjustments to accounting values |
0 |
0 |
|
On-balance sheet items excluding derivatives and securities financing transactions, but including collateral |
671,101 |
663,099 |
|
Asset amounts deducted in determining BCBS Basel III tier 1 capital |
(13,588) |
(13,831) |
|
Total on-balance sheet exposures (excluding derivatives and securities financing transactions) |
657,514 |
649,268 |
|
1 Consists of derivative financial instruments and cash collateral receivables on derivative instruments in accordance with the regulatory scope of consolidation. 2 Consists of receivables from securities financing transactions, margin loans, prime brokerage receivables and financial assets at fair value not held for trading related to securities financing transactions in accordance with the regulatory scope of consolidation. |
||
14
|
LR2: BCBS Basel III leverage ratio common disclosure |
|
|
|
|
USD million, except where indicated |
31.3.19 |
31.12.18 |
|
|
|
|
|
|
|
|
On-balance sheet exposures |
|
|
|
1 |
On-balance sheet items excluding derivatives and SFTs, but including collateral |
671,101 |
663,099 |
|
2 |
(Asset amounts deducted in determining Basel III tier 1 capital) |
(13,588) |
(13,831) |
|
3 |
Total on-balance sheet exposures (excluding derivatives and SFTs) |
657,514 |
649,268 |
|
|
|
|
|
|
|
Derivative exposures |
|
|
|
4 |
Replacement cost associated with all derivatives transactions (i.e., net of eligible cash variation margin) |
40,032 |
43,007 |
|
5 |
Add-on amounts for PFE associated with all derivatives transactions |
86,524 |
85,503 |
|
6 |
Gross-up for derivatives collateral provided where deducted from the balance sheet assets pursuant to the operative accounting framework |
0 |
0 |
|
7 |
(Deductions of receivables assets for cash variation margin provided in derivatives transactions) |
(13,012) |
(13,717) |
|
8 |
(Exempted CCP leg of client-cleared trade exposures) |
(20,126) |
(21,556) |
|
9 |
Adjusted effective notional amount of all written credit derivatives1 |
74,842 |
76,901 |
|
10 |
(Adjusted effective notional offsets and add-on deductions for written credit derivatives)2 |
(73,213) |
(74,771) |
|
11 |
Total derivative exposures |
95,046 |
95,366 |
|
|
|
|
|
|
|
Securities financing transaction exposures |
|
|
|
12 |
Gross SFT assets (with no recognition of netting), after adjusting for sale accounting transactions |
213,202 |
213,710 |
|
13 |
(Netted amounts of cash payables and cash receivables of gross SFT assets) |
(89,132) |
(90,555) |
|
14 |
CCR exposure for SFT assets |
8,075 |
7,774 |
|
15 |
Agent transaction exposures |
0 |
0 |
|
16 |
Total securities financing transaction exposures |
132,145 |
130,928 |
|
|
|
|
|
|
|
Other off-balance sheet exposures |
|
|
|
17 |
Off-balance sheet exposure at gross notional amount |
78,673 |
88,075 |
|
18 |
(Adjustments for conversion to credit equivalent amounts) |
(52,385) |
(59,039) |
|
19 |
Total off-balance sheet items |
26,287 |
29,035 |
|
|
Total exposures (leverage ratio denominator) |
910,993 |
904,598 |
|
|
|
|
|
|
|
Capital and total exposures (leverage ratio denominator) |
|
|
|
20 |
Tier 1 capital |
49,436 |
46,279 |
|
21 |
Total exposures (leverage ratio denominator) |
910,993 |
904,598 |
|
|
Leverage ratio |
|
|
|
22 |
Basel III leverage ratio (%) |
5.4 |
5.1 |
|
1 Includes protection sold, including agency transactions. 2 Protection sold can be offset with protection bought on the same underlying reference entity, provided that the conditions according to the Basel III leverage ratio framework and disclosure requirements are met. |
|||
15
UBS Group AG consolidated
LRD increased by USD 6 billion during the first quarter of 2019, mainly driven by an increase in on-balance sheet exposures (excluding derivatives exposures and securities financing transactions (SFTs)) due to a USD 3.5 billion increase from the adoption of IFRS 16, Leases, and USD 8 billion of asset size and other increases, partly offset by a decrease of USD 4 billion due to currency effects.
|
LR1: BCBS Basel III leverage ratio summary comparison |
|
|
|
|
USD million |
31.3.19 |
31.12.18 |
|
|
1 |
Total consolidated assets as per published financial statements |
956,580 |
958,351 |
|
2 |
Adjustment for investments in banking, financial, insurance or commercial entities that are consolidated for accounting purposes but outside the scope of regulatory consolidation1 |
(38,661) |
(36,108) |
|
3 |
Adjustment for fiduciary assets recognized on the balance sheet pursuant to the operative accounting framework but excluded from the leverage ratio exposure measure |
0 |
0 |
|
4 |
Adjustments for derivative financial instruments |
(41,289) |
(54,454) |
|
5 |
Adjustment for securities financing transactions (i.e., repos and similar secured lending) |
8,075 |
7,774 |
|
6 |
Adjustment for off-balance sheet items (i.e., conversion to credit equivalent amounts of off-balance sheet exposures) |
26,287 |
29,035 |
|
7 |
Other adjustments |
0 |
0 |
|
8 |
Leverage ratio exposure (leverage ratio denominator) |
910,993 |
904,598 |
|
1 This item includes assets that are deducted from tier 1 capital. |
|||
|
BCBS Basel III leverage ratio |
|
|
|
|
|
|
USD million, except where indicated |
|
|
|
|
|
|
|
31.3.19 |
31.12.18 |
30.9.18 |
30.6.18 |
31.3.18 |
|
Total tier 1 capital |
49,436 |
46,279 |
45,972 |
45,353 |
46,180 |
|
BCBS total exposures (leverage ratio denominator) |
910,993 |
904,598 |
915,066 |
910,383 |
925,651 |
|
BCBS Basel III leverage ratio (%) |
5.4 |
5.1 |
5.0 |
5.0 |
5.0 |
16
Section 5 Liquidity coverage ratio
LIQ1 – Liquidity risk management
We monitor the LCR in all significant currencies in order to manage any currency mismatch between HQLA and the net expected cash outflows in times of stress.
|
LIQ1 – Liquidity risk management |
|||||||
|
Pillar 3 disclosure requirement |
|
Quarterly Rerport |
|
Disclosure |
|
First quarter 2019 report |
|
|
|
|
|
|
|
|
|
|
|
Concentration of funding sources |
|
Treasury management |
|
– |
Funding by product and currency |
|
45 |
High-quality liquid assets
High-quality liquid assets (HQLA) must be easily and immediately convertible into cash at little or no loss of value, especially during a period of stress. HQLA are assets that are of low risk and are unencumbered. Other characteristics of HQLA are ease and certainty of valuation, low correlation with risky assets, listing on a developed and recognized exchange, an active and sizeable market, and low volatility. Based on these characteristics, HQLA are categorized as Level 1 (primarily central bank reserves and government bonds) or Level 2 (primarily US and European agency bonds as well as non-financial corporate covered bonds). Level 2 assets are subject to regulatory haircuts and caps.
|
High-quality liquid assets |
|
|
|
|
||||
|
|
|
Average 1Q191 |
|
Average 4Q181 |
||||
|
USD billion |
|
Level 1 weighted liquidity value2 |
Level 2 weighted liquidity value2 |
Total weighted liquidity value2 |
|
Level 1 weighted liquidity value2 |
Level 2 weighted liquidity value2 |
Total weighted liquidity value2 |
|
Cash balances3 |
|
115 |
0 |
115 |
|
96 |
0 |
96 |
|
Securities (on- and off-balance sheet) |
|
58 |
13 |
71 |
|
65 |
12 |
78 |
|
Total high-quality liquid assets4 |
|
173 |
13 |
186 |
|
161 |
12 |
173 |
|
1 Calculated based on an average of 63 data points in the first quarter of 2019 and 64 data points in the fourth quarter of 2018. 2 Calculated after the application of haircuts. 3 Includes cash and balances with central banks and other eligible balances as prescribed by FINMA. 4 Calculated in accordance with FINMA requirements. |
||||||||
17
UBS Group AG consolidated
Liquidity coverage ratio
In the first quarter of 2019, the UBS Group liquidity coverage ratio (LCR) increased by 17 percentage points to 153%, remaining above the 110% Group LCR minimum communicated by the Swiss Financial Market Supervisory Authority (FINMA). The LCR increase was primarily driven by additional HQLA relating to higher average cash balances, reflecting higher deposit volumes and reduced funding consumption by the business divisions, as well as lower net cash outflows, mainly from secured financing transactions, driven by additional inflows from excess cash investments and lower outflows from client activity.
|
Liquidity coverage ratio |
|
|
|
|
|
|
|
|
|
|
|
Average 1Q191 |
|
Average 4Q181 |
||
|
USD billion, except where indicated |
|
Unweighted value |
Weighted value2 |
|
Unweighted value |
Weighted value2 |
|
|
|
|||||||
|
High-quality liquid assets |
|
|
|
|
|
|
|
|
1 |
High-quality liquid assets |
|
188 |
186 |
|
176 |
173 |
|
|
|
|
|
|
|
|
|
|
Cash outflows |
|
|
|
|
|
|
|
|
2 |
Retail deposits and deposits from small business customers |
|
238 |
27 |
|
234 |
26 |
|
3 |
of which: stable deposits |
|
34 |
1 |
|
35 |
1 |
|
4 |
of which: less stable deposits |
|
204 |
26 |
|
199 |
25 |
|
5 |
Unsecured wholesale funding |
|
183 |
103 |
|
182 |
102 |
|
6 |
of which: operational deposits (all counterparties) |
|
42 |
10 |
|
42 |
10 |
|
7 |
of which: non-operational deposits (all counterparties) |
|
130 |
82 |
|
129 |
80 |
|
8 |
of which: unsecured debt |
|
11 |
11 |
|
12 |
12 |
|
9 |
Secured wholesale funding |
|
|
73 |
|
|
76 |
|
10 |
Additional requirements: |
|
72 |
24 |
|
76 |
24 |
|
11 |
of which: outflows related to derivatives and other transactions |
|
38 |
16 |
|
40 |
16 |
|
12 |
of which: outflows related to loss of funding on debt products3 |
|
0 |
0 |
|
1 |
1 |
|
13 |
of which: committed credit and liquidity facilities |
|
33 |
7 |
|
35 |
7 |
|
14 |
Other contractual funding obligations |
|
14 |
13 |
|
14 |
12 |
|
15 |
Other contingent funding obligations |
|
251 |
6 |
|
247 |
5 |
|
16 |
Total cash outflows |
|
|
246 |
|
|
246 |
|
|
|
|
|
|
|
|
|
|
Cash inflows |
|
|
|
|
|
|
|
|
17 |
Secured lending |
|
296 |
84 |
|
295 |
79 |
|
18 |
Inflows from fully performing exposures |
|
66 |
29 |
|
66 |
29 |
|
19 |
Other cash inflows |
|
11 |
11 |
|
10 |
10 |
|
20 |
Total cash inflows |
|
374 |
124 |
|
370 |
119 |
|
|
|
|
|
|
|
|
|
|
|
Average 1Q191 |
|
|
Average 4Q181 |
|||
|
USD billion, except where indicated |
|
|
Total adjusted value4 |
|
|
Total adjusted value4 |
|
|
|
|
|
|
|
|
|
|
|
Liquidity coverage ratio |
|
|
|
|
|
|
|
|
21 |
High-quality liquid assets |
|
|
186 |
|
|
173 |
|
22 |
Net cash outflows |
|
|
122 |
|
|
127 |
|
23 |
Liquidity coverage ratio (%) |
|
|
153 |
|
|
136 |
|
1 Calculated based on an average of 63 data points in the first quarter of 2019 and 64 data points in the fourth quarter of 2018. 2 Calculated after the application of inflow and outflow rates. 3 Includes outflows related to loss of funding on asset-backed securities, covered bonds, other structured financing instruments, asset-backed commercial papers, structured entities (conduits), securities investment vehicles and other such financing facilities. 4 Calculated after the application of haircuts and inflow and outflow rates as well as, where applicable, caps on Level 2 assets and cash inflows. |
|||||||
18
UBS AG consolidated
Section 1 Key metrics
Information on the Swiss SRB capital framework and on the Swiss SRB going and gone concern requirements is provided in the UBS Group AG and UBS AG Annual Report 2018 which is available under “Annual reporting” at www.ubs.com/investors. UBS AG consolidated capital and other regulatory information is provided in the UBS AG first quarter 2019 financial report, which will be available as of 30 April 2019 under “Quarterly reporting” at www.ubs.com/investors.
The table below is based on BCBS Basel III phase-in rules. During the first quarter of 2019, common equity tier 1 (CET1) increased by USD 0.3 billion to USD 34.9 billion, primarily as a result of operating profit before tax, partly offset by accruals for capital returns to shareholders. Risk-weighted assets (RWA) increased by USD 3.7 billion to USD 266.6 billion, driven by increases of USD 4.8 billion in credit and counterparty credit risk, USD 3.1 billion in non-counterparty risk and USD 2.8 billion in operational risk, partly offset by a decrease in market risk RWA of USD 7.0 billion. Leverage ratio exposure increased by USD 7 billion to USD 911 billion, mainly driven by on-balance sheet exposures (excluding derivative exposures and securities financing transactions).
|
KM1: Key metrics |
|
|
|
|
|
|
|
|||
|
USD million, except where indicated |
||||||||||
|
|
|
|
31.3.19 |
31.12.18 |
|
30.9.18 |
|
30.6.18 |
|
31.3.18 |
|
Available capital (amounts)1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
Common equity tier 1 (CET1) |
|
34,933 |
34,608 |
|
35,046 |
|
33,983 |
|
35,060 |
|
1a |
Fully loaded ECL accounting model |
|
34,897 |
34,572 |
|
35,046 |
|
33,983 |
|
35,060 |
|
2 |
Tier 1 |
|
47,748 |
44,791 |
|
44,576 |
|
43,562 |
|
44,763 |
|
2a |
Fully loaded ECL accounting model Tier 1 |
|
47,712 |
44,755 |
|
44,576 |
|
43,562 |
|
44,763 |
|
3 |
Total capital |
|
54,460 |
51,494 |
|
51,241 |
|
50,659 |
|
52,061 |
|
3a |
Fully loaded ECL accounting model total capital |
|
54,424 |
51,458 |
|
51,241 |
|
50,659 |
|
52,061 |
|
Risk-weighted assets (amounts) |
|
|
|
|
|
|
|
|
|
|
|
4 |
Total risk-weighted assets (RWA) |
|
266,581 |
262,840 |
|
256,206 |
|
253,872 |
|
266,202 |
|
4a |
Total risk-weighted assets (pre-floor) |
|
266,581 |
262,840 |
|
256,206 |
|
253,872 |
|
266,202 |
|
Risk-based capital ratios as a percentage of RWA1 |
|
|
|
|
|
|
|
|
|
|
|
5 |
Common equity tier 1 ratio (%) |
|
13.10 |
13.17 |
|
13.68 |
|
13.39 |
|
13.17 |
|
5a |
Fully loaded ECL accounting model Common Equity Tier 1 (%) |
|
13.09 |
13.15 |
|
13.68 |
|
13.39 |
|
13.17 |
|
6 |
Tier 1 ratio (%) |
|
17.91 |
17.04 |
|
17.40 |
|
17.16 |
|
16.82 |
|
6a |
Fully loaded ECL accounting model Tier 1 ratio (%) |
|
17.90 |
17.03 |
|
17.40 |
|
17.16 |
|
16.82 |
|
7 |
Total capital ratio (%) |
|
20.43 |
19.59 |
|
20.00 |
|
19.95 |
|
19.56 |
|
7a |
Fully loaded ECL accounting model total capital ratio (%) |
|
20.42 |
19.58 |
|
20.00 |
|
19.95 |
|
19.56 |
|
Additional CET1 buffer requirements as a percentage of RWA |
|
|
|
|
|
|
|
|
|
|
|
8 |
Capital conservation buffer requirement (2.5% from 2019) (%) |
|
2.50 |
1.88 |
|
1.88 |
|
1.88 |
|
1.88 |
|
9 |
Countercyclical buffer requirement (%) |
|
0.10 |
0.08 |
|
0.05 |
|
0.06 |
|
0.03 |
|
9a |
Additional countercyclical buffer for Swiss mortgage loans (%) |
|
0.21 |
0.21 |
|
0.21 |
|
0.20 |
|
0.19 |
|
10 |
Bank G-SIB and/or D-SIB additional requirements (%)2 |
|
|
|
|
|
|
|
|
|
|
11 |
Total of bank CET1 specific buffer requirements (%) |
|
2.60 |
1.95 |
|
1.93 |
|
1.93 |
|
1.90 |
|
12 |
CET1 available after meeting the bank’s minimum capital requirements (%)1 |
|
8.60 |
8.67 |
|
9.18 |
|
8.89 |
|
8.67 |
|
Basel III leverage ratio |
|
|
|
|
|
|
|
|
|
|
|
13 |
Total Basel III leverage ratio exposure measure |
|
911,410 |
904,458 |
|
915,977 |
|
911,451 |
|
926,917 |
|
14 |
Basel III leverage ratio (%)1 |
|
5.24 |
4.95 |
|
4.87 |
|
4.78 |
|
4.83 |
|
14a |
Fully loaded ECL accounting model Basel III leverage ratio (%)1 |
|
5.23 |
4.95 |
|
4.87 |
|
4.78 |
|
4.83 |
|
1 Based on BCBS Basel III phase-in rules. 2 Swiss SRB going concern requirements and information for UBS AG consolidated is provided in the “Capital management” section of UBS AG first quarter 2019 report available under “Quarterly reporting” at www.ubs.com/investors. |
||||||||||
20
Significant regulated subsidiaries and sub-groups
Section 1 Introduction
The sections below include capital and other regulatory information for UBS AG standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated and UBS Americas Holding LLC consolidated.
Capital information in this section is based on Pillar 1 capital requirements. Entities may be subject to significant additional Pillar 2 requirements, which represent additional amounts of capital considered necessary and agreed with regulators based on the risk profile of the entities.
Key metrics of the first quarter of 2019
The table below is based on BCBS Basel III phase-in rules. During the first quarter of 2019, common equity tier 1 (CET1) capital remained stable. RWA increased by USD 7.8 billion to USD 300.7 billion, mainly resulting from the gradual increase of risk weights for Swiss and foreign-domiciled subsidiaries according to FINMA decree. Leverage ratio exposure increased by USD 16 billion to USD 617 billion, mainly due to an increase in on-balance sheet exposures (excluding derivative exposures and securities financing transactions).
|
KM1: Key metrics |
|
|
|
|
|
|
|
|
|
|
|
USD million, except where indicated |
||||||||||
|
|
|
|
31.3.19 |
31.12.18 |
|
30.9.18 |
|
30.6.18 |
|
31.3.18 |
|
Available capital (amounts)1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
Common equity tier 1 (CET1) |
|
49,024 |
49,411 |
|
49,810 |
|
49,583 |
|
49,833 |
|
1a |
Fully loaded ECL accounting model |
|
49,021 |
49,411 |
|
49,810 |
|
49,583 |
|
49,833 |
|
2 |
Tier 1 |
|
61,839 |
59,595 |
|
59,341 |
|
59,161 |
|
59,537 |
|
2a |
Fully loaded ECL accounting model Tier 1 |
|
61,836 |
59,595 |
|
59,341 |
|
59,161 |
|
59,537 |
|
3 |
Total capital |
|
68,542 |
66,295 |
|
66,005 |
|
66,258 |
|
68,329 |
|
3a |
Fully loaded ECL accounting model total capital |
|
68,539 |
66,295 |
|
66,005 |
|
66,258 |
|
68,329 |
|
Risk-weighted assets (amounts) |
|
|
|
|
|
|
|
|
|
|
|
4 |
Total risk-weighted assets (RWA) |
|
300,734 |
292,888 |
|
288,045 |
|
286,457 |
|
302,296 |
|
4a |
Total risk-weighted assets (pre-floor) |
|
300,734 |
292,888 |
|
288,045 |
|
286,457 |
|
302,296 |
|
Risk-based capital ratios as a percentage of RWA1 |
|
|
|
|
|
|
|
|
|
|
|
5 |
Common equity tier 1 ratio (%) |
|
16.30 |
16.87 |
|
17.29 |
|
17.31 |
|
16.48 |
|
5a |
Fully loaded ECL accounting model Common Equity Tier 1 (%) |
|
16.30 |
16.87 |
|
17.29 |
|
17.31 |
|
16.48 |
|
6 |
Tier 1 ratio (%) |
|
20.56 |
20.35 |
|
20.60 |
|
20.65 |
|
19.69 |
|
6a |
Fully loaded ECL accounting model Tier 1 ratio (%) |
|
20.56 |
20.35 |
|
20.60 |
|
20.65 |
|
19.69 |
|
7 |
Total capital ratio (%) |
|
22.79 |
22.63 |
|
22.91 |
|
23.13 |
|
22.60 |
|
7a |
Fully loaded ECL accounting model total capital ratio (%) |
|
22.79 |
22.63 |
|
22.91 |
|
23.13 |
|
22.60 |
|
Additional CET1 buffer requirements as a percentage of RWA |
|
|
|
|
|
|
|
|
|
|
|
8 |
Capital conservation buffer requirement (2.5% from 2019) (%) |
|
2.50 |
1.88 |
|
1.88 |
|
1.88 |
|
1.88 |
|
9 |
Countercyclical buffer requirement (%) |
|
0.09 |
0.07 |
|
0.05 |
|
0.08 |
|
0.04 |
|
9a |
Additional countercyclical buffer for Swiss mortgage loans (%) |
|
0.00 |
0.00 |
|
0.00 |
|
0.00 |
|
0.00 |
|
10 |
Bank G-SIB and/or D-SIB additional requirements (%)2 |
|
|
|
|
|
|
|
|
|
|
11 |
Total of bank CET1 specific buffer requirements (%) |
|
2.59 |
1.95 |
|
1.92 |
|
1.96 |
|
1.91 |
|
12 |
CET1 available after meeting the bank’s minimum capital requirements (%)1 |
|
11.80 |
12.37 |
|
12.79 |
|
12.81 |
|
11.98 |
|
Basel III leverage ratio |
|
|
|
|
|
|
|
|
|
|
|
13 |
Total Basel III leverage ratio exposure measure |
|
617,329 |
601,013 |
|
619,741 |
|
620,074 |
|
620,353 |
|
14 |
Basel III leverage ratio (%)1 |
|
10.02 |
9.92 |
|
9.58 |
|
9.54 |
|
9.60 |
|
14a |
Fully loaded ECL accounting model Basel III leverage ratio (%)1 |
|
10.02 |
9.92 |
|
9.58 |
|
9.54 |
|
9.60 |
|
Liquidity coverage ratio |
|
|
|
|
|
|
|
|
|
|
|
15 |
Total HQLA |
|
86,690 |
76,456 |
|
81,214 |
|
83,473 |
|
89,631 |
|
16 |
Total net cash outflow |
|
51,434 |
55,032 |
|
59,450 |
|
60,786 |
|
70,367 |
|
17 |
LCR ratio (%) |
|
169 |
139 |
|
137 |
|
137 |
|
127 |
|
1 Based on BCBS Basel III phase-in rules. 2 Swiss SRB going concern requirements and information for UBS AG standalone is provided in the following pages in this section. |
||||||||||
22
Swiss SRB going concern requirements and information
Under Swiss systemically relevant bank (SRB) regulations, article 125 “Reliefs for financial groups and individual institutions” of the Capital Adequacy Ordinance stipulates that the Swiss Financial Market Supervisory Authority (FINMA) may grant, under certain conditions, capital relief to individual institutions to ensure that an individual institution’s compliance with the capital requirements does not lead to a de facto overcapitalization of the group of which it is a part.
FINMA granted relief concerning the regulatory capital requirements of UBS AG on a standalone basis by means of decrees issued on 20 December 2013 and 20 October 2017, the latter effective as of 1 July 2017 and partly replacing the former.
More information is provided in “Section 2 UBS AG standalone” of the 31 December 2018 Pillar 3 report – UBS Group and significant regulated subsidiaries and sub-groups under “Pillar 3 disclosures” at www.ubs.com/investors.
|
Swiss SRB going concern requirements and information |
||||||||||
|
As of 31.3.19 |
|
Swiss SRB, including transitional arrangements |
|
Swiss SRB after transition |
||||||
|
USD million, except where indicated |
|
RWA |
LRD |
|
RWA |
LRD |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Required going concern capital |
|
in %1 |
|
in %1 |
|
|
in % |
|
in % |
|
|
Common equity tier 1 capital |
|
10.09 |
30,336 |
3.50 |
21,607 |
|
10.09 |
38,598 |
3.50 |
21,607 |
|
of which: minimum capital |
|
4.50 |
13,533 |
1.50 |
9,260 |
|
4.50 |
17,219 |
1.50 |
9,260 |
|
of which: buffer capital |
|
5.50 |
16,540 |
2.00 |
12,347 |
|
5.50 |
21,045 |
2.00 |
12,347 |
|
of which: countercyclical buffer2 |
|
0.09 |
263 |
|
|
|
0.09 |
335 |
|
|
|
Maximum additional tier 1 capital |
|
4.30 |
12,932 |
1.50 |
9,260 |
|
4.30 |
16,453 |
1.50 |
9,260 |
|
of which: high-trigger loss-absorbing additional tier 1 minimum capital |
|
3.50 |
10,526 |
1.50 |
9,260 |
|
3.50 |
13,392 |
1.50 |
9,260 |
|
of which: high-trigger loss-absorbing additional tier 1 buffer capital |
|
0.80 |
2,406 |
|
|
|
0.80 |
3,061 |
|
|
|
Total going concern capital |
|
14.393 |
43,268 |
5.003 |
30,866 |
|
14.393 |
55,051 |
5.003 |
30,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Eligible going concern capital |
|
|
|
|
|
|
|
|
|
|
|
Common equity tier 1 capital |
|
16.30 |
49,024 |
7.94 |
49,024 |
|
12.81 |
49,024 |
7.94 |
49,024 |
|
High-trigger loss-absorbing additional tier 1 capital4 |
|
5.47 |
16,447 |
2.66 |
16,447 |
|
2.73 |
10,435 |
1.69 |
10,435 |
|
of which: high-trigger loss-absorbing additional tier 1 capital |
|
3.47 |
10,435 |
1.69 |
10,435 |
|
2.73 |
10,435 |
1.69 |
10,435 |
|
of which: low-trigger loss-absorbing tier 2 capital |
|
2.00 |
6,012 |
0.97 |
6,012 |
|
|
|
|
|
|
Total going concern capital |
|
21.77 |
65,472 |
10.61 |
65,472 |
|
15.54 |
59,460 |
9.63 |
59,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-weighted assets / leverage ratio denominator |
|
|
|
|
|
|
|
|
|
|
|
Risk-weighted assets |
|
|
300,734 |
|
|
|
|
382,634 |
|
|
|
Leverage ratio denominator |
|
|
|
|
617,329 |
|
|
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