UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
Date: July 23, 2021
Commission File Number: 1-15060
(Registrant’s Name)
Bahnhofstrasse 45, Zurich, Switzerland
Aeschenvorstadt 1, Basel, Switzerland
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of
Form 20-F or Form 40-F.
Form 20-F
☒
☐
This Form 6-K consists of the Second Quarter 2021 Report of UBS AG, which appears immediately
following this page.
UBS AG
Second
quarter
2021
report
Corporate calendar UBS AG
Publication of the
third
quarter 2021 report:
Friday, 2
9
October
2021
Publication dates of quarterly and annual reports and results are made available as
part of the corporate calendar of UBS AG at ubs.com/investors
Contacts
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ubs.com/investors
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Imprint
Publisher: UBS AG, Zurich, Switzerland | ubs.com/media
Language: English
© UBS 2021. The key symbol and UBS are among the registered and unregistered
trademarks of UBS. All rights reserved.
3
1.
Risk and capital
management
8
9
2.
Consolidated
financial statements
17
3.
UBS AG standalone
financial information
71
information (unaudited)
Appendix
74
77
79
80
Second quarter 2021 report
2
UBS AG consolidated key figures
UBS AG consolidated key figures
As of or for the quarter ended
As of or year-to-date
USD million, except where indicated
30.6.21
31.3.21
31.12.20
30.6.20
30.6.21
30.6.20
Results
Operating income
Operating expenses
Operating profit / (loss) before tax
Net profit / (loss) attributable to shareholders
Profitability and growth
Return on equity (%)
Return on tangible equity (%)
Return on common equity tier 1 capital (%)
Return on risk-weighted assets, gross (%)
Return on leverage ratio denominator, gross (%)
1
Cost / income ratio (%)
Net profit growth (%)
Resources
Total assets
Equity attributable to shareholders
Common equity tier 1 capital
2
Risk-weighted assets
2
Common equity tier 1 capital ratio (%)
2
Going concern capital ratio (%)
2
Total loss-absorbing capacity ratio (%)
2
Leverage ratio denominator
1,2
Common equity tier 1 leverage ratio (%)
1,2
Going concern leverage ratio (%)
1,2
Total loss-absorbing capacity leverage ratio (%)
2
Other
Invested assets (USD billion)
3
Personnel (full-time equivalents)
1 Leverage ratio denominators and leverage ratios for the respective periods 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. 2 Based on the Swiss systemically relevant bank framework as
of 1 January 2020. Refer to the “Capital management” section of this report for more information. 3 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 our Annual Report 2020 for more information.
Alternative performance measures
An alternative performance measure (an APM) is a financial measure of historical or future financial performance, financial position
or cash flows other than a financial measure defined or specified in the applicable recognized accounting standards or in other
applicable regulations. We report a number of APMs in our external reports (annual, quarterly and other reports). 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.
3
Introduction
Overview
UBS Group AG is the holding company for the UBS Group and the
parent company of UBS AG. UBS Group AG holds 100% of the
issued shares in UBS AG. Financial information for UBS AG
consolidated does not differ materially from that for UBS Group AG
consolidated.
This report includes risk and capital management information
for UBS AG consolidated and the interim consolidated financial
statements, as well as UBS AG standalone financial information
for the quarter ended 30 June 2021. Regulatory information for
UBS
AG standalone
is
provided in the 3
0
June 2021 Pillar
3
report, available
under “Pillar 3 disclosures” at
ubs.com/investors.
›
Refer to the UBS Group second quarter 2021 report, available
under “Quarterly reporting” at
ubs.com/investors
, for more
information
Comparison between UBS Group AG consolidated and UBS
AG consolidated
The table on the following page contains a comparison of
selected financial and capital information between UBS Group
AG consolidated and UBS AG consolidated.
The accounting policies applied under International Financial
Reporting Standards (IFRS) to both the UBS Group AG and the
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
operating profit before tax 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 in those 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 consolidated financial statements of UBS AG, but are
eliminated in the consolidated financial statements of UBS
Group AG. 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.
–
The equity of UBS Group AG consolidated was USD 3.4
billion higher than the equity of UBS AG consolidated as of
30 June 2021. 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 consolidated financial statements of
UBS Group AG, 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 AG 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 and canceled 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 3.8 billion higher than the going concern capital of
UBS AG consolidated as of 30 June 2021, reflecting higher
common equity tier 1 (CET1) capital of USD 2.4 billion and
going concern loss-absorbing additional tier 1 (AT1) capital of
USD 1.4 billion.
–
The CET1 capital of UBS Group AG consol idated was USD 2.4
billion higher than that of UBS AG consolidated as of 30 June
2021. The higher CET1 capital of UBS Group AG consolidated
was primarily due to higher UBS Group AG consolidated IFRS
equity of USD 3.4 billion, as described above, and lower UBS
Group AG accruals for future capital returns to shareholders,
partly offset by compensation-related regulatory capital
accruals and a capital reserve for potential share repurchases
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 30 June 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.
›
Refer to “Holding company and significant regulated
subsidiaries and sub-groups” under “Complementary financial
information” at
ubs.com/investors
for an illustration of the
consolidation scope differences between UBS AG and UBS Group
AG
›
Refer to the “Capital management” section of this report for
more information about differences in the loss-absorbing
capacity between UBS Group AG consolidated and UBS AG
consolidated
Introduction
4
Comparison between UBS Group AG consolidated and UBS AG consolidated
As of or for the quarter ended 30.6.21
USD million, except where indicated
UBS Group AG
consolidated
UBS AG
consolidated
Difference
(absolute)
Income statement
Operating income
Operating expenses
Operating profit / (loss) before tax
of which: Global Wealth Management
of which: Personal & Corporate Banking
of which: Asset Management
of which: Investment Bank
of which: Group Functions
Net profit / (loss)
of which: net profit / (loss) attributable to shareholders
of which: net profit / (loss) attributable to non-controlling interests
Statement of comprehensive income
Other comprehensive income
591
592
(1)
of which: attributable to shareholders
576
578
(1)
of which: attributable to non-controlling interests
14
14
0
Total comprehensive income
2,602
2,510
92
of which: attributable to shareholders
2,582
2,491
92
of which: attributable to non-controlling interests
20
20
0
Balance sheet
Total assets
1,086,519
1,085,861
658
Total liabilities
1,027,469
1,030,216
(2,746)
Total equity
59,050
55,645
3,405
of which: equity attributable to shareholders
58,765
55,361
3,405
of which: equity attributable to non-controlling interests
284
284
0
Capital information
Common equity tier 1 capital
42,583
40,190
2,393
Going concern capital
59,188
55,398
3,790
Risk-weighted assets
293,277
290,470
2,807
Common equity tier 1 capital ratio (%)
14.5
13.8
0.7
Going concern capital ratio (%)
20.2
19.1
1.1
Total loss-absorbing capacity ratio (%)
35.6
34.6
1.0
Leverage ratio denominator
1
1,039,939
1,039,375
564
Common equity tier 1 leverage ratio (%)
1
4.09
3.87
0.23
Going concern leverage ratio (%)
1
5.7
5.3
0.4
Total loss-absorbing capacity leverage ratio (%)
10.0
9.7
0.4
1 Leverage ratio denominators 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 of our Annual Report 2020 for more information.
5
As of or for the quarter ended 31.3.21
As of or for the quarter ended 31.12.20
UBS Group AG
consolidated
UBS AG
consolidated
Difference
(absolute)
UBS Group AG
consolidated
UBS AG
consolidated
Difference
(absolute)
(2,166)
(2,032)
(135)
29
(2,154)
(2,019)
(135)
29
(12)
(12)
0
0
(339)
(319)
(21)
102
(330)
(309)
(21)
102
(9)
(9)
0
0
1,107,712
1,109,234
(1,522)
1,125,765
1,125,327
438
1,049,379
1,051,481
(2,102)
1,066,000
1,067,254
(1,254)
58,333
57,753
580
59,765
58,073
1,691
58,026
57,446
580
59,445
57,754
1,691
307
307
0
319
319
0
Risk and capital
management
Management report
Risk management and control
8
Risk management and control
UBS AG consolidated risk profile
The risk profile of UBS AG consolidated does not differ
materially from that of UBS Group AG consolidated and the risk
information provided in the UBS Group second quarter 2021
report is equally applicable to UBS AG consolidated.
The credit risk profile of UBS AG consolidated differs from
that of UBS Group AG consolidated primarily in relation to
receivables of UBS AG and UBS Switzerland AG from UBS Group
AG.
The
total banking products exposure of UBS
AG
consolidated as of 30 June 2021 was USD 1.2 billion, or 0.2%,
higher than the exposure of UBS Group, compared with USD 3.3
billion, or 0.5%, as of 31 March 2021.
›
Refer to the “Risk management and control” section of the
UBS Group second quarter 2021 report for more information
9
Capital management
Going and gone concern requirements and information
UBS is considered a systemically relevant bank (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 our Annual
Report 2020.
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 30 June 2021 Pillar 3 report, which
will be available as of 20
August 2021
under “Pillar
3
disclosures” at
ubs.com/investors
.
The table on the next page provides the risk-weighted assets
(RWA)
-
and
leverage ratio denominator (LRD)
-
based
requirements and information as of 30 June 2021 for UBS AG
consolidated.
Capital management
10
Swiss SRB going and gone concern requirements and information
As of 30.6.21
RWA
LRD
USD million, except where indicated
in %
in %
Required going concern capital
Total going concern capital
1
1
Common equity tier 1 capital
2
of which: minimum capital
of which: buffer capital
of which: countercyclical buffer
Maximum additional tier 1 capital
of which: additional tier 1 capital
of which: additional tier 1 buffer capital
Eligible going concern capital
Total going concern capital
Common equity tier 1 capital
Total loss-absorbing additional tier 1 capital
of which: high-trigger loss-absorbing additional tier 1 capital
of which: low-trigger loss-absorbing additional tier 1 capital
3
Required gone concern capital
4
Total gone concern loss-absorbing capacity
5
of which: base requirement
of which: additional requirement for market share and LRD
of which: applicable reduction on requirements
of which: rebate granted (equivalent to 47.5% of maximum rebate)
6
of which: reduction for usage of low-trigger tier 2 capital instruments
Eligible gone concern capital
Total gone concern loss-absorbing capacity
Total tier 2 capital
of which: low-trigger loss-absorbing tier 2 capital
of which: non-Basel III-compliant tier 2 capital
TLAC-eligible senior unsecured debt
Total loss-absorbing capacity
Required total loss-absorbing capacity
Eligible total loss-absorbing capacity
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
Leverage ratio denominator
1 Includes applicable add-ons of 1.08% for RWA and 0.375% for LRD. 2 Our minimum CET1 leverage ratio requirement of 3.375% consists of a 1.5% base requirement, a 1.5% base buffer capital requirement, a
0.25% LRD add-on requirement and a 0.125% 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 5.34 percentage points for the RWA-based requirement of 13.94% and 1.875 percentage points for the LRD-based requirement of 4.875%. 6 Based on the actions we completed up to December
2020 to improve resolvability, FINMA granted an increase of rebate on the gone concern requirement from 47.5% to 55.0% of the maximum rebate, effective from 1 July 2021.
11
Swiss SRB going and gone concern information
USD million, except where indicated
30.6.21
31.3.21
31.12.20
Eligible going concern capital
Total going concern capital
Total tier 1 capital
Common equity tier 1 capital
Total loss-absorbing additional tier 1 capital
of which: high-trigger loss-absorbing additional tier 1 capital
of which: low-trigger loss-absorbing additional tier 1 capital
1
Eligible gone concern capital
Total gone concern loss-absorbing capacity
Total tier 2 capital
of which: low-trigger loss-absorbing tier 2 capital
of which: non-Basel III-compliant tier 2 capital
TLAC-eligible senior unsecured debt
Total loss-absorbing capacity
Total loss-absorbing capacity
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
Leverage ratio denominator
2
Capital and loss-absorbing capacity ratios (%)
Going concern capital ratio
of which: common equity tier 1 capital ratio
Gone concern loss-absorbing capacity ratio
Total loss-absorbing capacity ratio
Leverage ratios (%)
2
Going concern leverage ratio
of which: common equity tier 1 leverage ratio
Gone concern leverage ratio
Total loss-absorbing capacity leverage ratio
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.
Capital management
12
UBS Group AG vs UBS AG consolidated loss-absorbing capacity and leverage ratio information
Swiss SRB going and gone concern information
As of 30.6.21
USD million, except where indicated
UBS Group AG
(consolidated)
UBS AG
(consolidated)
Difference
Eligible going concern capital
Total going concern capital
Total tier 1 capital
Common equity tier 1 capital
Total loss-absorbing additional tier 1 capital
of which: high-trigger loss-absorbing additional tier 1 capital
of which: low-trigger loss-absorbing additional tier 1 capital
Eligible gone concern capital
Total gone concern loss-absorbing capacity
Total tier 2 capital
of which: low-trigger loss-absorbing tier 2 capital
of which: non-Basel III-compliant tier 2 capital
TLAC-eligible senior unsecured debt
Total loss-absorbing capacity
Total loss-absorbing capacity
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
Leverage ratio denominator
Capital and loss-absorbing capacity ratios (%)
Going concern capital ratio
of which: common equity tier 1 capital ratio
Gone concern loss-absorbing capacity ratio
Total loss-absorbing capacity ratio
Leverage ratios (%)
Going concern leverage ratio
of which: common equity tier 1 leverage ratio
Gone concern leverage ratio
Total loss-absorbing capacity leverage ratio
13
Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital (UBS Group AG vs UBS AG consolidated)
As of 30.6.21
USD million
UBS Group AG
(consolidated)
UBS AG
(consolidated)
Difference
Total IFRS equity
Equity attributable to non-controlling interests
Defined benefit plans, net of tax
Deferred tax assets recognized for tax loss carry-forwards
Deferred tax assets on temporary differences, excess over threshold
Goodwill, net of tax
Intangible assets, net of tax
Compensation-related components (not recognized in net profit)
Expected losses on advanced internal ratings-based portfolio less provisions
Unrealized (gains) / losses from cash flow hedges, net of tax
Own credit related to gains / losses on financial liabilities measured at fair value that existed at the balance sheet date
Own credit related to gains / losses on derivative financial instruments that existed at the balance sheet date
Unrealized gains related to debt instruments at fair value through OCI, net of tax
Prudential valuation adjustments
Capital reserve for potential share repurchases
Other
1
Total common equity tier 1 capital
1 Includes accruals for dividends to shareholders for the current year and other items.
UBS Group AG vs UBS AG consolidated loss-absorbing capacity
and leverage ratio information
The going
concern capital of UBS
AG consolidated was
USD
3.
8
billion lower than the going concern capital
of
UBS
Group AG consolidated as of
30
June
2021
, reflecting
lower common equity tier 1 (CET1) capital of USD 2.4 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 higher UBS Group AG consolidated IFRS equity of
USD 3.4 billion and lower UBS Group AG accruals for future
capital returns to shareholders, partly offset by compensation-
related regulatory capital accruals and a capital reserve for
potential share repurchases 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 30 June 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.
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
30
June 2021
,
the going concern leverage ratio of UBS
AG
consolidat
ed was 0.
4
percentage points lower than that of
UBS Group AG consolidated, mainly because the going concern
capital of UBS AG consolidated was USD 3.8 billion lower.
›
Refer to the “Capital management” section of the UBS Group
second quarter 2021 report, available under “Quarterly
reporting” at
ubs.com/investors,
for information about the
developments of loss-absorbing capacity, RWA and LRD for
UBS Group AG consolidated
›
Refer to the “Introduction” section of this report for more
information about the differences in equity between UBS AG
consolidated and UBS Group AG consolidated
Consolidated
financial
statements
Unaudited
Table of contents
UBS AG interim consolidated financial
statements (unaudited)
17
18
20
22
24
26
1
effects
28
2
29
3
29
4
30
5
30
6
30
7
30
8
31
9
38
10
47
11
48
12
50
13
50
14
51
15
54
16
60
17
61
18
17
UBS AG interim consolidated
financial statements (unaudited)
Income statement
For the quarter ended
Year-to-date
USD million
Note
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Interest income from financial instruments measured at amortized cost and fair value through
other comprehensive income
Interest expense from financial instruments measured at amortized cost
(860 )
(859 )
(1,112 )
(1,719 )
(2,519 )
Net interest income from financial instruments measured at fair value through profit or loss
Net interest income
Other net income from financial instruments measured at fair value through profit or loss
Credit loss (expense) / release
(272 )
(540 )
Fee and commission income
Fee and commission expense
(484 )
(478 )
(419 )
(962 )
(875 )
Net fee and commission income
Other income
Total operating income
Personnel expenses
General and administrative expenses
Depreciation and impairment of property, equipment and software
Amortization and impairment of goodwill and intangible assets
Total operating expenses
Operating profit / (loss) before tax
Tax expense / (benefit)
Net profit / (loss)
Net profit / (loss) attributable to non-controlling interests
Net profit / (loss) attributable to shareholders
UBS AG interim consolidated financial statements (unaudited)
18
Statement of comprehensive income
For the quarter ended
Year-to-date
USD million
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Comprehensive income attributable to shareholders
Net profit / (loss)
Other comprehensive income that may be reclassified to the income statement
Foreign currency translation
Foreign currency translation movements related to net assets of foreign operations, before tax
(1,407 )
(960 )
Effective portion of changes in fair value of hedging instruments designated as net investment hedges, before tax
(203 )
(196 )
(61 )
Foreign currency translation differences on foreign operations reclassified to the income statement
(9 )
(8 )
Effective portion of changes in fair value of hedging instruments designated as net investment hedges reclassified to the income
statement
(7 )
Income tax relating to foreign currency translations, including the impact of net investment hedges
(4 )
(2 )
(2 )
Subtotal foreign currency translation, net of tax
(691 )
(452 )
Financial assets measured at fair value through other comprehensive income
Net unrealized gains / (losses), before tax
(131 )
(110 )
Realized gains reclassified to the income statement from equity
(3 )
(8 )
(15 )
(11 )
(24 )
Realized losses reclassified to the income statement from equity
Income tax relating to net unrealized gains / (losses)
(4 )
(3 )
(54 )
Subtotal financial assets measured at fair value through other comprehensive income, net of tax
(102 )
(88 )
Cash flow hedges of interest rate risk
Effective portion of changes in fair value of derivative instruments designated as cash flow hedges, before tax
(1,172 )
(630 )
Net (gains) / losses reclassified to the income statement from equity
(268 )
(254 )
(171 )
(522 )
(274 )
Income tax relating to cash flow hedges
(51 )
(25 )
(370 )
Subtotal cash flow hedges, net of tax
(1,160 )
(937 )
Cost of hedging
Change in fair value of cost of hedging, before tax
(24 )
(13 )
(18 )
(37 )
(12 )
Amortization of initial cost of hedging to the income statement
Income tax relating to cost of hedging
Subtotal cost of hedging, net of tax
(16 )
(6 )
(13 )
(23 )
(4 )
Total other comprehensive income that may be reclassified to the income statement, net of tax
(1,958 )
(1,500 )
Other comprehensive income that will not be reclassified to the income statement
Defined benefit plans
Gains / (losses) on defined benefit plans, before tax
(35 )
(417 )
(35 )
(314 )
Income tax relating to defined benefit plans
(81 )
Subtotal defined benefit plans, net of tax
(32 )
(498 )
(31 )
(270 )
Own credit on financial liabilities designated at fair value
1
Gains / (losses) from own credit on financial liabilities designated at fair value, before tax
(29 )
(1,095 )
Income tax relating to own credit on financial liabilities designated at fair value
Subtotal own credit on financial liabilities designated at fair value, net of tax
(29 )
(872 )
Total other comprehensive income that will not be reclassified to the income statement, net of tax
(61 )
(1,370 )
(208 )
Total other comprehensive income
(2,019 )
(1,037 )
(1,442 )
Total comprehensive income attributable to shareholders
(309 )
19
Statement of comprehensive income (continued)
For the quarter ended
Year-to-date
USD million
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Comprehensive income attributable to non-controlling interests
Net profit / (loss)
Other comprehensive income that will not be reclassified to the income statement
Foreign currency translation movements, before tax
(12 )
(4 )
Income tax relating to foreign currency translation movements
Subtotal foreign currency translation, net of tax
(12 )
(4 )
Total other comprehensive income that will not be reclassified to the income statement, net of tax
(12
(4
Total comprehensive income attributable to non-controlling interests
(9 )
Total comprehensive income
Net profit / (loss)
Other comprehensive income
(2,032 )
(1,035 )
(1,440 )
of which: other comprehensive income that may be reclassified to the income statement
(1,958 )
(1,500 )
of which: other comprehensive income that will not be reclassified to the income statement
(73 )
(1,369 )
(212 )
Total comprehensive income
(319 )
1 Refer to Note 10 for more information.
UBS AG interim consolidated financial statements (unaudited)
20
Balance sheet
USD million
Note
30.6.21
31.3.21
31.12.20
Assets
Cash and balances at central banks
Loans and advances to banks
Receivables from securities financing transactions
Cash collateral receivables on derivative instruments
Loans and advances to customers
Other financial assets measured at amortized cost
Total financial assets measured at amortized cost
Financial assets at fair value held for trading
of which: assets pledged as collateral that may be sold or repledged by counterparties
Derivative financial instruments
10, 11
Brokerage receivables
Financial assets at fair value not held for trading
Total financial assets measured at fair value through profit or loss
Financial assets measured at fair value through other comprehensive income
Investments in associates
Property, equipment and software
Goodwill and intangible assets
Deferred tax assets
Other non-financial assets
Total assets
21
Balance sheet (continued)
USD million
Note
30.6.21
31.3.21
31.12.20
Liabilities
Amounts due to banks
Payables from securities financing transactions
Cash collateral payables on derivative instruments
Customer deposits
Funding from UBS Group AG
Debt issued measured at amortized cost
Other financial liabilities measured at amortized cost
Total financial liabilities measured at amortized cost
Financial liabilities at fair value held for trading
Derivative financial instruments
10, 11
Brokerage payables designated at fair value
Debt issued designated at fair value
10, 13
Other financial liabilities designated at fair value
10, 12
Total financial liabilities measured at fair value through profit or loss
Provisions
Other non-financial liabilities
Total liabilities
Equity
Share capital
Share premium
Retained earnings
Other comprehensive income recognized directly in equity, net of tax
Equity attributable to shareholders
Equity attributable to non-controlling interests
Total equity
Total liabilities and equity
UBS AG interim consolidated financial statements (unaudited)
22
Statement of changes in equity
USD million
Share
capital
Share
premium
Retained
earnings
Balance as of 1 January 2020
Tax (expense) / benefit
(2 )
Dividends
(2,550 )
Translation effects recognized directly in retained earnings
(11 )
Share of changes in retained earnings of associates and joint ventures
(40 )
New consolidations / (deconsolidations) and other increases / (decreases)
Total comprehensive income for the period
of which: net profit / (loss)
of which: OCI that may be reclassified to the income statement, net of tax
of which: OCI that will not be reclassified to the income statement, net of tax – defined benefit plans
(270 )
of which: OCI that will not be reclassified to the income statement, net of tax – own credit
of which: OCI that will not be reclassified to the income statement, net of tax – foreign currency translation
Balance as of 30 June 2020
Balance as of 1 January 2021
Tax (expense) / benefit
Dividends
(4,539 )
Translation effects recognized directly in retained earnings
Share of changes in retained earnings of associates and joint ventures
New consolidations / (deconsolidations) and other increases / (decreases)
(39 )
Total comprehensive income for the period
of which: net profit / (loss)
of which: OCI that may be reclassified to the income statement, net of tax
of which: OCI that will not be reclassified to the income statement, net of tax – defined benefit plans
(31 )
of which: OCI that will not be reclassified to the income statement, net of tax – own credit
of which: OCI that will not be reclassified to the income statement, net of tax – foreign currency translation
Balance as of 30 June 2021
1 Excludes other comprehensive income related to defined benefit plans and own credit that is recorded directly in Retained earnings.
23
Other comprehensive
income recognized
directly in equity,
net of tax
1
of which:
foreign currency
translation
of which:
financial assets
measured 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
(2 )
(2 )
(2,550 )
(4 )
(2,554 )
(40 )
(40 )
(4 )
(4 )
(270 )
(270 )
(4 )
(4 )
(4 )
(13 )
(4,539 )
(4 )
(4,542 )
(19 )
(19 )
(39 )
(42 )
(81 )
(1,500 )
(452 )
(88 )
(937 )
(23 )
(1,500 )
(452 )
(88 )
(937 )
(23 )
(1,500 )
(1,500 )
(31 )
(31 )
(36 )
UBS AG interim consolidated financial statements (unaudited)
24
Statement of cash flows
Year-to-date
USD million
30.6.21
30.6.20
Cash flow from / (used in) operating activities
Net profit / (loss)
Non-cash items included in net profit and other adjustments:
Depreciation and impairment of property, equipment and software
Amortization and impairment of goodwill and intangible assets
Credit loss expense / (release)
(108 )
Share of net profits of associates / joint ventures and impairment of associates
(74 )
(29 )
Deferred tax expense / (benefit)
Net loss / (gain) from investing activities
(239 )
Net loss / (gain) from financing activities
(7,047 )
Other net adjustments
(595 )
Net change in operating assets and liabilities:
Loans and advances to banks / amounts due to banks
Securities financing transactions
(10,249 )
Cash collateral on derivative instruments
(2,183 )
(2,046 )
Loans and advances to customers
(19,714 )
(14,143 )
Customer deposits
Financial assets and liabilities at fair value held for trading and derivative financial instruments
(1,278 )
Brokerage receivables and payables
Financial assets at fair value not held for trading, other financial assets and liabilities
(7,484 )
Provisions, other non-financial assets and liabilities
(1,323 )
Income taxes paid, net of refunds
(363 )
(364 )
Net cash flow from / (used in) operating activities
(1,413 )
Cash flow from / (used in) investing activities
Purchase of subsidiaries, associates and intangible assets
(1 )
(1 )
Disposal of subsidiaries, associates and intangible assets
1
Purchase of property, equipment and software
(757 )
(725 )
Disposal of property, equipment and software
Purchase of financial assets measured at fair value through other comprehensive income
(1,950 )
(4,132 )
Disposal and redemption of financial assets measured at fair value through other comprehensive income
Net (purchase) / redemption of debt securities measured at amortized cost
(4,817 )
Net cash flow from / (used in) investing activities
(7,713 )
25
Statement of cash flows (continued)
Year-to-date
USD million
30.6.21
30.6.20
Cash flow from / (used in) financing activities
Net short-term debt issued / (repaid)
(3,877 )
Distributions paid on UBS shares
(4,539 )
(2,550 )
Repayment of lease liabilities
(274 )
(262 )
Issuance of debt designated at fair value and long-term debt measured at amortized cost
2
Repayment of debt designated at fair value and long-term debt measured at amortized cost
2
(45,244 )
(46,137 )
Net changes in non-controlling interests
(4 )
(4 )
Net cash flow from / (used in) financing activities
Total cash flow
Cash and cash equivalents at the beginning of the period
Net cash flow from / (used in) operating, investing and financing activities
Effects of exchange rate differences on cash and cash equivalents
(5,389 )
Cash and cash equivalents at the end of the period
3
of which: cash and balances at central banks
4
of which: loans and advances to banks
of which: money market paper
Additional information
Net cash flow from / (used in) operating activities includes:
Interest received in cash
Interest paid in cash
Dividends on equity investments, investment funds and associates received in cash
1 Includes cash proceeds from the sale of UBS’s minority investment in Clearstream Fund Centre for the period ended 30 June 2021, and dividends received from associates in both periods. 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
Refer to “Note 23 Restricted and transferred financial assets” in the “Consolidated financial statements” section of the Annual Report 2020 for more information. 4 Includes only balances with an original
maturity of three months or less.
Notes to the UBS AG interim consolidated financial statements (unaudited)
26
Notes to the UBS AG interim
consolidated financial statements (unaudited)
Note 1 Basis of accounting and other financial reporting effects
Basis of preparation
The consolidated financial statements (the financial statements)
of UBS AG and its subsidiaries (together, UBS AG) are 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). These interim
financial statements are prepared in accordance with IAS 34,
Interim Financial Reporting
.
In preparing these interim financial statements, the same
accounting policies and methods of computation have been
applied as in the UBS AG consolidated annual financial
statements for the period ended 31 December 2020, except for
the changes described in this Note. These interim financial
statements are unaudited and should be read in conjunction
with UBS AG’s audited consolidated financial statements
included in the Annual Report 20
20
.
In
the opinion of
management, all necessary adjustments were made for a fair
presentation of UBS AG’s financial position, results of operations
and cash flows.
Amendments to IFRS 9, IAS 39 and IFRS 7
(Interest Rate
Benchmark Reform – Phase 2)
On 1 January 2021, UBS AG 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
(
IBOR
s)
are
reformed or replaced.
The amendments provide a practical expedient which permits
certain changes in the contractual cash flows of debt
instruments attributable to the repl
acement of IBOR
s
with
alternative
reference
rates
(ARRs)
to be accounted for
prospectively by updating the 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 adopted the amendments, which provide a practical
expedient with no material effect on the its financial statements.
27
Note 1 Basis of accounting and other financial reporting effects (continued)
Furthermore, the amendments provide various hedge
accounting reliefs, with the following expected to benefit UBS
AG.
–
Risk components
The amendments permit UBS AG to designate an alternative
benchmark rate as a non-contractually specified risk
component, even if it is not separately identifiable at the date
when it is 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 30 June 2021, the alternative benchmark
rates that UBS AG has designated as the hedged risk in fair
value hedges of interest rate risk related to debt instruments
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). The designated notionals were USD
billion, USD
–
Hedge designation
Following amendments to the hedge documentation
to
reflect the change in designation relating to IBOR reform,
UBS
AG
will continue its hedge relationships provided the
other hedge accounting criteria and requirements of the
phase 2 amendment are met. As of 30 June 2021, no such
changes have been made.
–
Amounts accumulated in the cash flow hedge reserve
Upon changing the hedge designation as set out above, the
accumulated amounts in the cash flow hedge reserve are
assumed to be based on the alternative benchmark rate. For
discontinued hedging relationships, when the interest rate
benchmark on which the hedged future cash flows were
based is changed as required by IBOR reform, the amount
accumulated in the cash flow hedge reserve is also assumed
to be based on the alternative benchmark rate for the
purpose of assessing whether the hedged future cash flows
are still expected
to occur. As of
3
0
June
2021, no such
changes have been made.
–
Retrospective effectiveness assessment as applied to hedges
designated under IAS 39
U
pon the end of the
p
hase
1
relief
for effectiveness
assessment UBS AG may elect to reset to zero the cumulative
fair value changes of the hedged item and hedging
instrument for the purpose of assessing the retrospective
effectiveness of a hedging relationship. As of 30 June 2021,
no such election has been made.
›
Refer to “Note 25 Hedge accounting” in the “Consolidated
financial statements” section of the Annual Report 2020 for
details about phase 1 accounting reliefs
The amendments also introduced additional disclosure
requirements regarding UBS AG’s management of the transition
to alternative benchmark rates, its progress at the reporting date
and the risks to which it is exposed arising from financial
instruments because of the transition.
›
Refer to Note 15 for more information
Notes to the UBS AG interim consolidated financial statements (unaudited)
28
Note 2 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 they reflect the management
structure of UBS AG.
›
Refer to “Note 2 Segment reporting” in the “Consolidated
financial statements” section of the Annual Report 2020 for
more information about UBS AG’s reporting segments
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
UBS AG
For the six months ended 30 June 2021
Net interest income
(7 )
(103 )
Non-interest income
Income
Credit loss (expense) / release
(1 )
Total operating income
Total operating expenses
Operating profit / (loss) before tax
(448 )
Tax expense / (benefit)
Net profit / (loss)
As of 30 June 2021
Total assets
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
UBS AG
For the six months ended 30 June 2020
Net interest income
(9 )
(387 )
Non-interest income
(20 )
Income
(407 )
Credit loss (expense) / release
(117 )
(187 )
(200 )
(35 )
(540 )
Total operating income
(443 )
Total operating expenses
Operating profit / (loss) before tax
(921 )
Tax expense / (benefit)
Net profit / (loss)
As of 31 December 2020
Total assets
29
Note 3 Net interest income
For the quarter ended
Year-to-date
USD million
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Net interest income from financial instruments measured at amortized cost and fair value through other comprehensive income
Interest income from loans and deposits
1
Interest income from securities financing transactions
2
Interest income from other financial instruments measured at amortized cost
Interest income from debt instruments measured at fair value through other comprehensive income
Interest income from derivative instruments designated as cash flow hedges
Total interest income from financial instruments measured at amortized cost and fair value through other comprehensive
income
Interest expense on loans and deposits
3
Interest expense on securities financing transactions
4
Interest expense on debt issued
Interest expense on lease liabilities
Total interest expense from financial instruments measured at amortized cost
Total net interest income from financial instruments measured at amortized cost and fair value through other comprehensive
income
Net interest income from financial instruments measured at fair value through profit or loss
Net interest income from financial instruments at fair value held for trading
Net interest income from brokerage balances
Net interest income from securities financing transactions at fair value not held for trading
5
Interest income from other financial instruments at fair value not held for trading
Interest expense on other financial instruments designated at fair value
(138 )
(155 )
(244 )
(294 )
(555 )
Total net interest income from financial instruments measured at fair value through profit or loss
Total net interest income
1 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. 2 Includes interest income on receivables from securities financing transactions and negative interest, including fees, on
payables from securities financing transactions. 3 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. 4 Includes interest expense on payables from securities
financing transactions and negative interest, including fees, on receivables from securities financing transactions. 5 Includes interest expense on securities financing transactions designated at fair value.
Note 4 Net fee and commission income
For the quarter ended
Year-to-date
USD million
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Fee and commission income
Underwriting fees
of which: equity underwriting fees
of which: debt underwriting fees
M&A and corporate finance fees
Brokerage fees
Investment fund fees
Portfolio management and related services
Other
Total fee and commission income
1
of which: recurring
of which: transaction-based
of which: performance-based
Fee and commission expense
Brokerage fees paid
Distribution fees paid
Other
Total fee and commission expense
Net fee and commission income
of which: net brokerage fees
1 Reflects third-party fee and commission income for the second quarter of 2021 of USD
million), USD
USD
Group Functions (first quarter of 2021: USD
Notes to the UBS AG interim consolidated financial statements (unaudited)
30
Note 5 Other income
UBS AG recognized USD
second quarter of 2021, compared with USD
second quarter of 2020. This includes gains of USD
from properties held for sale, largely driven by the sale of a
property in Basel, and other income of USD
a legacy bankruptcy claim
.
In addition,
the investment
in
Clearstream Fund Centre was sold to Deutsche Börse AG during
the quarter, resulting in a USD
Note 6 Personnel expenses
For the quarter ended
Year-to-date
USD million
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Salaries and variable compensation
Financial advisor compensation
1
Contractors
Social security
Post-employment benefit plans
2
Other personnel expenses
Total personnel expenses
1 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. 2 Includes curtailment gains of USD
restructuring activities.
Note 7 General and administrative expenses
For the quarter ended
Year-to-date
USD million
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Outsourcing costs
IT expenses
Consulting, legal and audit fees
Real estate and logistics costs
Market data services
Marketing & communication
Travel and entertainment
Litigation, regulatory & similar matters
1
Other
2
of which: shared services costs charged by UBS Group AG or its subsidiaries
of which: UK and German bank levies
(11 )
Total general and administrative expenses
1 Reflects the net increase in / (release of) provisions for litigation, regulatory and similar matters recognized in the income statement. Refer to Note 16 for more information. 2 Includes charitable donations.
Note 8 Income taxes
Income tax expenses of USD
second quarter of 2021, representing an effective tax rate of
%, compared with USD
of 2020 and an effective tax rate of
%.
Current tax expenses were USD
USD
Switzerland AG and other entities.
Deferred tax expenses were USD
a net deferred tax benefit of USD
to the amortization of deferred tax assets previously recognized
in relation to tax losses carried forward and deductible
temporary differences of UBS Americas Inc.
31
Note 9 Expected credit loss measurement
a) Credit loss expense / release
Total net credit loss releases were USD
quarter of 2021, reflecting an USD
credit losses related to stage 1 and 2 positions and USD
of net credit loss expenses related to credit-impaired (stage 3)
positions.
The USD
partial release of a post-model adjustment of USD
(representing one-third of the USD
model output effects from the third quarter of 2020 to the
second quarter of 2021), due to the continued positive trend in
macroeconomic scenario input data.
Stage 3 net credit loss expenses were USD
USD
million net expenses in Personal & Corporate Banking, across
various corporate lending positions.
Credit loss (expense) / release
USD million
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
Total
For the quarter ended 30.6.21
Stages 1 and 2
(1 )
Stage 3
(5 )
(3 )
(8 )
Total credit loss (expense) / release
(1 )
Notes to the UBS AG interim consolidated financial statements (unaudited)
32
Note 9 Expected credit loss measurement (continued)
b) Changes to ECL models, scenarios, scenario weights and key inputs
Scenarios
The expected credit loss (ECL) scenarios, along with the related
macroeconomic factors, were updated and reviewed in light of
the economic and political conditions prevailing for the second
quarter of 2021 through a series of governance meetings, with
input and feedback from UBS risk and finance experts across the
business divisions and regions. Effective from the second quarter
of 2021, management has included an upside scenario and a
mild downside scenario in the ECL calculation similar to the
approach applied before the COVID-19 pandemic, as uncertainty
regarding future economic developments and the related effects
on models further d
ecline
and post
-
model adjustment levels
decrease.
The upside scenario assumes
that
positive developments
regarding COVID-19 enable economic activity to rebound more
quickly than expected, supported by significant improvements in
business and consumer activity. Structural changes from the
lockdown period and accelerated technology uptake increase
productivity and help to keep growth buoyant beyond the initial
rebound in activity. Underlying macroeconomic conditions
improve, and asset values increase substantially.
The mild downside scenario assumes a shift in sentiment
caused by higher-than-expected inflation and the Federal
Reserve
’s
intention to begin tapering its quantitative easing
program. Long
-
term interest
rates
rise sharply
and
equities
decline as market volatility ensues. Economic activity slows
across the globe causing a mild recession.
The baseline and severe downside scenarios included slightly
more optimistic assumptions compared with those applied in the
first quarter of 2021, reflecting improvements in economic
activity, greater optimism regarding the availability and effective
distribution of COVID-19 vaccines, and continued government
support. The baseline scenario assumptions on a calendar-year
basis are included in the table below.
Scenario weights and post-model adjustments
Management applied the following scenario weightings effective
from the second quarter of 2021: upside at
%, baseline at
%, mild downside at
% and severe downside at
%. This
compared with a baseline scenario weighting of
% and a
severe downside scenario weighting of
% applied in the first
quarter of 2021. The incorporation of the two new scenarios
and the applied weightings did not have a material effect on
allowances and provisions.
In addition, more than one year after the exceptional
circumstances of the COVID-19 pandemic began, management
has released one-third (USD
post-model adjustment for scenario-driven model output effects
into profit or loss in the second quarter of 2021, following a
portfolio level review, which supported partial overlay releases,
particularly in real estate and large corporate segments. This
decision was made following a continued positive trend in
macroeconomic scenario input data (from the third quarter of
2020 to the second quarter of 2021), as well as positive
vaccination developments and gradual lifting of lockdowns in
many economies. Two-thirds of the post-model adjustment for
scenario
-
driven model output effects
(
USD
m
illion
)
w
as
retained, given the heightened level of uncertainty that remains
with regard to the ultimate effects of the crisis. This recognizes
that new challenges are frequently arising in the context of the
pandemic, for example, the spread of new variants of COVID-19,
inflationary pressure from supply chain disruption and surging
demand, and the risk of potential tail effects as government and
central bank support winds down.
Baseline
Key parameters
2020
2021
2022
Real GDP growth (annual percentage change)
United States
(3.6 )
Eurozone
(7.4 )
Switzerland
(4.5 )
Unemployment rate (%, annual average)
United States
Eurozone
Switzerland
Real estate (annual percentage change, Q4)
United States
Eurozone
(0.3 )
Switzerland
Economic scenarios and weights applied
ECL scenario
Assigned weights in %
30.6.21
31.3.21
31.3.20
Upside
Baseline
Mild downside
Severe downside
33
Note 9 Expected credit loss measurement (continued)
c) ECL-relevant balance sheet and off-balance sheet positions including ECL allowances and provisions
The tables
below and
on the following pages provide
information about financial instruments and certain non-
financial instruments that are subject to ECL requirements. For
amortized-cost instruments, the carrying amount represents the
maximum exposure to credit risk, taking into account the
allowance for credit losses. Financial assets measured at fair
value through other comprehensive income (FVOCI) are also
subject to ECL; however, unlike amortized-cost instruments, the
allowance for credit losses for FVOCI instruments does not
reduce the carrying amount of these financial assets. Instead,
the carrying amount of financial assets measured at FVOCI
represents the maximum exposure to credit risk.
In addition to on-balance sheet financial assets, certain off-
balance sheet and other credit lines are also subject to ECL. The
maximum exposure to credit risk for off-balance sheet financial
instruments is calculated based on the maximum contractual
amounts.
USD million
30.6.21
Carrying amount¹ / Total exposure
ECL allowances / provisions
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
Loans and advances to banks
(8 )
(6 )
(1 )
(1 )
Receivables from securities financing transactions
(3 )
(3 )
Cash collateral receivables on derivative instruments
Loans and advances to customers
(950 )
(124 )
(156 )
(670 )
of which: Private clients with mortgages
(139 )
(26 )
(76 )
(37 )
of which: Real estate financing
(49 )
(17 )
(32 )
of which: Large corporate clients
(246 )
(20 )
(19 )
(207 )
of which: SME clients
(291 )
(20 )
(19 )
(253 )
of which: Lombard
(35 )
(6 )
(29 )
of which: Credit cards
(34 )
(9 )
(9 )
(16 )
of which: Commodity trade finance
(103 )
(5 )
(98 )
Other financial assets measured at amortized cost
(124 )
(30 )
(9 )
(86 )
of which: Loans to financial advisors
(103 )
(23 )
(6 )
(74 )
Total financial assets measured at amortized cost
(1,085 )
(163 )
(166 )
(757 )
Financial assets measured at fair value through other comprehensive income
Total on-balance sheet financial assets in scope of ECL requirements
(1,085 )
(163 )
(166 )
(757 )
Off-balance sheet (in scope of ECL)
Guarantees
(52 )
(15 )
(9 )
(27 )
of which: Large corporate clients
(13 )
(3 )
(3 )
(7 )
of which: SME clients
(13 )
(1 )
(1 )
(12 )
of which: Financial intermediaries and hedge funds
(16 )
(10 )
(5 )
of which: Lombard
(1 )
(1 )
of which: Commodity trade finance
(2 )
(1 )
(1 )
Irrevocable loan commitments
(118 )
(69 )
(49 )
of which: Large corporate clients
(103 )
(61 )
(42 )
Forward starting reverse repurchase and securities borrowing agreements
Committed unconditionally revocable credit lines
(36 )
(28 )
(8 )
of which: Real estate financing
(5 )
(4 )
(1 )
of which: Large corporate clients
(7 )
(4 )
(3 )
of which: SME clients
(14 )
(12 )
(2 )
of which: Lombard
of which: Credit cards
(6 )
(5 )
(2 )
of which: Commodity trade finance
Irrevocable committed prolongation of existing loans
(3 )
(2 )
(1 )
Total off-balance sheet financial instruments and other credit lines
(209 )
(114 )
(67 )
(27 )
Total allowances and provisions
(1,294 )
(277 )
(233 )
(784 )
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances.
Notes to the UBS AG interim consolidated financial statements (unaudited)
34
Note 9 Expected credit loss measurement (continued)
USD million
31.3.21
Carrying amount¹ / Total exposure
ECL allowances / provisions
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
Loans and advances to banks
(12 )
(8 )
(3 )
(1 )
Receivables from securities financing transactions
(3 )
(3 )
Cash collateral receivables on derivative instruments
Loans and advances to customers
(993 )
(138 )
(184 )
(671 )
of which: Private clients with mortgages
(158 )
(37 )
(86 )
(35 )
of which: Real estate financing
(56 )
(15 )
(41 )
of which: Large corporate clients
(271 )
(28 )
(28 )
(216 )
of which: SME clients
(283 )
(19 )
(19 )
(246 )
of which: Lombard
(34 )
(5 )
(30 )
of which: Credit cards
(33 )
(9 )
(8 )
(16 )
of which: Commodity trade finance
(101 )
(5 )
(96 )
Other financial assets measured at amortized cost
(125 )
(32 )
(7 )
(86 )
of which: Loans to financial advisors
(104 )
(26 )
(4 )
(75 )
Total financial assets measured at amortized cost
(1,133 )
(180 )
(195 )
(758 )
Financial assets measured at fair value through other comprehensive income
Total on-balance sheet financial assets in scope of ECL requirements
(1,133 )
(180 )
(195 )
(758 )
Off-balance sheet (in scope of ECL)
Guarantees
(59 )
(15 )
(15 )
(29 )
of which: Large corporate clients
(17 )
(3 )
(5 )
(9 )
of which: SME clients
(12 )
(1 )
(11 )
of which: Financial intermediaries and hedge funds
(18 )
(9 )
(9 )
of which: Lombard
(2 )
(1 )
of which: Commodity trade finance
(4 )
(1 )
(3 )
Irrevocable loan commitments
(138 )
(75 )
(63 )
of which: Large corporate clients
(121 )
(68 )
(54 )
Forward starting reverse repurchase and securities borrowing agreements
Committed unconditionally revocable credit lines
(45 )
(27 )
(18 )
of which: Real estate financing
(11 )
(5 )
(6 )
of which: Large corporate clients
(9 )
(3 )
(6 )
of which: SME clients
(14 )
(11 )
(3 )
of which: Lombard
(1 )
(1 )
of which: Credit cards
(6 )
(5 )
(1 )
of which: Commodity trade finance
Irrevocable committed prolongation of existing loans
(3 )
(3 )
Total off-balance sheet financial instruments and other credit lines
(245 )
(121 )
(95 )
(29 )
Total allowances and provisions
(1,378 )
(301 )
(290 )
(787 )
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances.
35
Note 9 Expected credit loss measurement (continued)
USD million
31.12.20
Carrying amount¹ / Total exposure
ECL allowances / provisions
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
Loans and advances to banks
(16 )
(9 )
(5 )
(1 )
Receivables from securities financing transactions
(2 )
(2 )
Cash collateral receivables on derivative instruments
Loans and advances to customers
(1,060 )
(142 )
(215 )
(703 )
of which: Private clients with mortgages
(166 )
(35 )
(93 )
(39 )
of which: Real estate financing
(63 )
(15 )
(44 )
(4 )
of which: Large corporate clients
(279 )
(27 )
(40 )
(212 )
of which: SME clients
(310 )
(19 )
(23 )
(268 )
of which: Lombard
(36 )
(5 )
(31 )
of which: Credit cards
(38 )
(11 )
(11 )
(16 )
of which: Commodity trade finance
(106 )
(5 )
(101 )
Other financial assets measured at amortized cost
(133 )
(34 )
(9 )
(90 )
of which: Loans to financial advisors
(108 )
(27 )
(5 )
(76 )
Total financial assets measured at amortized cost
(1,211 )
(187 )
(229 )
(795 )
Financial assets measured at fair value through other comprehensive income
Total on-balance sheet financial assets in scope of ECL requirements
(1,211 )
(187 )
(229 )
(795 )
Off-balance sheet (in scope of ECL)
Guarantees
(63 )
(14 )
(15 )
(34 )
of which: Large corporate clients
(20 )
(4 )
(5 )
(12 )
of which: SME clients
(13 )
(1 )
(1 )
(11 )
of which: Financial intermediaries and hedge funds
(17 )
(7 )
(9 )
of which: Lombard
(2 )
(2 )
of which: Commodity trade finance
(2 )
(1 )
Irrevocable loan commitments
(142 )
(74 )
(68 )
of which: Large corporate clients
(121 )
(63 )
(58 )
Forward starting reverse repurchase and securities borrowing agreements
Committed unconditionally revocable credit lines
(50 )
(29 )
(21 )
of which: Real estate financing
(12 )
(5 )
(7 )
of which: Large corporate clients
(9 )
(2 )
(7 )
of which: SME clients
(16 )
(12 )
(4 )
of which: Lombard
(1 )
of which: Credit cards
(8 )
(6 )
(2 )
of which: Commodity trade finance
Irrevocable committed prolongation of existing loans
(2 )
(2 )
Total off-balance sheet financial instruments and other credit lines
(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.
Notes to the UBS AG interim consolidated financial statements (unaudited)
36
Note 9 Expected credit loss measurement (continued)
The table below provides information about the ECL gross
exposure and the ECL coverage ratio for our core loan portfolios
(i.e.,
Loans and advances to customers
and
advisors
) and relevant off-balance sheet exposures.
Cash and
balances at central banks
,
Loans and advances to banks
,
Receivables from securities financing transactions
,
Cash collateral
receivables on derivative instruments
and
Financial assets
measured at fair value through other comprehensive income
not included in the table below, due to their lower sensitivity to
ECL.
ECL coverage ratios are calculated by taking ECL allowances
and provisions divided by the gross carrying amount
of the
exposures
.
Coverage ratios for core loan portfolio
30.6.21
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
Real estate financing
Large corporate clients
SME clients
Lombard
Credit cards
Commodity trade finance
Other loans and advances to customers
Loans to financial advisors
Total
1
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
Real estate financing
Large corporate clients
SME clients
Lombard
Credit cards
Commodity trade finance
Financial intermediaries and hedge funds
Other off-balance sheet commitments
Total
2
1 Includes Loans and advances to customers of USD
2 Excludes Forward starting reverse repurchase and securities borrowing agreements.
37
Note 9 Expected credit loss measurement (continued)
Coverage ratios for core loan portfolio
31.3.21
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
Real estate financing
Large corporate clients
SME clients
Lombard
Credit cards
Commodity trade finance
Other loans and advances to customers
Loans to financial advisors
Total
1
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
Real estate financing
Large corporate clients
SME clients
Lombard
Credit cards
Commodity trade finance
Financial intermediaries and hedge funds
Other off-balance sheet commitments
Total
2
1 Includes Loans and advances to customers of USD
2 Excludes Forward starting reverse repurchase and securities borrowing agreements.
Notes to the UBS AG interim consolidated financial statements (unaudited)
38
Note 9 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
Real estate financing
Large corporate clients
SME clients
Lombard
Credit cards
Commodity trade finance
Other loans and advances to customers
Loans to financial advisors
Total
1
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
Real estate financing
Large corporate clients
SME clients
Lombard
Credit cards
Commodity trade finance
Financial intermediaries and hedge funds
Other off-balance sheet commitments
Total
2
1 Includes Loans and advances to customers of USD
2 Excludes Forward starting reverse repurchase and securities borrowing agreements.
Note 10 Fair value measurement
This Note provides fair value measurement information for both
financial and non-financial instruments and should be read in
conjunction with “Note 21 Fair value measurement” in the
“Consolidated financial statements” section of the Annual
Report 2020, which provides more information about valuation
principles, valuation governance, fair value hierarchy
classification, valuation adjustments, valuation techniques and
inputs, sensitivity of fair value measurements, and methods
applied to calculate fair values
for financial instruments not
measured at fair value.
›
Refer to the “Balance sheet and off-balance sheet” section of
this report for more information about quarter-on-quarter
balance sheet movements
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 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 the 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
–
identical assets and liabilities;
–
Level 2
–
are, or are based on, observable market data; or
–
Level 3
–
not based on observable market data.
39
Note 10 Fair value measurement (continued)
a) Fair value hierarchy
The fair value hierarchy classification of financial and non-financial assets and liabilities measured at fair value is summarized in the
table below.
Determination of fair values from quoted market prices or valuation techniques
1
30.6.21
31.3.21
31.12.20
USD million
Level 1
Level 2
Level 3
Total
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
of which:
Equity instruments
Government bills / bonds
Investment fund units
Corporate and municipal bonds
Loans
Asset-backed securities
Derivative financial instruments
of which:
Foreign exchange contracts
Interest rate contracts
Equity / index contracts
Credit derivative contracts
Commodity contracts
Brokerage receivables
Financial assets at fair value not held for trading
of which:
Financial assets for unit-linked investment
contracts
Corporate and municipal bonds
Government bills / bonds
Loans
Securities financing transactions
Auction rate securities
Investment fund units
Equity instruments
Other
Financial assets measured at fair value through other comprehensive income on a recurring basis
Financial assets measured at fair value through
other comprehensive income
of which:
Asset-backed securities
Government bills / bonds
Corporate and municipal bonds
Non-financial assets measured at fair value on a recurring basis
Precious metals and other physical commodities
Non-financial assets measured at fair value on a non-recurring basis
Other non-financial assets
2
Total assets measured at fair value
Notes to the UBS AG interim consolidated financial statements (unaudited)
40
Note 10 Fair value measurement (continued)
Determination of fair values from quoted market prices or valuation techniques (continued)
1
30.6.21
31.3.21
31.12.20
USD million
Level 1
Level 2
Level 3
Total
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
of which:
Equity instruments
Corporate and municipal bonds
Government bills / bonds
Investment fund units
Derivative financial instruments
of which:
Foreign exchange contracts
Interest rate contracts
Equity / index contracts
Credit derivative contracts
Commodity contracts
Financial liabilities designated at fair value on a recurring basis
Brokerage payables designated at fair value
Debt issued designated at fair value
Other financial liabilities designated at fair value
of which:
Financial liabilities related to unit-linked
investment contracts
Securities financing transactions
Over-the-counter debt instruments
Total liabilities measured at fair value
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 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.
b) Valuation adjustments and other items
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
30.6.21
31.3.21
31.12.20
Deferred day-1 profit or loss reserves
Own credit adjustments on financial liabilities designated at fair value
(278 )
(400 )
(381 )
CVAs, FVAs, DVAs and other valuation adjustments
(956 )
(977 )
(959 )
Deferred day-1 profit or loss reserves
The table below summarizes the changes in deferred day-1
profit or loss reserves during the relevant period.
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 observable or when the
transaction is closed out.
Deferred day-1 profit or loss reserves
For the quarter ended
Year-to-date
USD million
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Reserve balance at the beginning of the period
Profit / (loss) deferred on new transactions
(Profit) / loss recognized in the income statement
(79 )
(63 )
(72 )
(142 )
(141 )
Foreign currency translation
(1 )
(1 )
(1 )
Reserve balance at the end of the period
41
Note 10 Fair value measurement (continued)
Own credit
The valuation of financial liabilities designated at fair value
requires consideration of the own credit component of fair
value. 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. However, own credit risk is not
reflected in the valuation of UBS’s liabilities that are fully
collateralized or for other obligations for which it is established
market practice to not include an own credit component.
A description of UBS’s methodology to estimate own credit
and the related accounting principles is included in “Note 21 Fair
value measurement” in the “Consolidated financial statements”
section of the Annual Report 2020.
In the second quarter of 2021, other comprehensive income
related to own credit on financial liabilities designated at fair
value was positive USD
of UBS’s credit spreads.
Own credit adjustments on financial liabilities designated at fair value
Included in Other comprehensive income
For the quarter ended
Year-to-date
USD million
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
Recognized during the period:
Realized gain / (loss)
(5 )
(6 )
(11 )
Unrealized gain / (loss)
(23 )
(1,103 )
Total gain / (loss), before tax
(29 )
(1,095 )
As of
USD million
30.6.21
31.3.21
30.6.20
Recognized on the balance sheet as of the end of the period:
Unrealized life-to-date gain / (loss)
(278 )
(400 )
(31 )
Credit, funding, debit and other valuation adjustments
A
description of UBS’s methodology
for
estimat
ing
credit
valuation adjustment
s
(CVA
s
), funding valuation adjustments
(FVAs), debit valuation adjustments (DVAs) and other valuation
adjustments is included in “Note 21 Fair value measurement” in
the “Consolidated financial statements” section of the Annual
Report 2020.
In the second quarter of 2021, other valuation adjustments
for liquidity decreased, primarily due to lower observed levels of
risk across portfolios during the quarter.
Valuation adjustments on financial instruments
As of
Life-to-date gain / (loss), USD million
30.6.21
31.3.21
31.12.20
Credit valuation adjustments
1
(51 )
(53 )
(66 )
Funding valuation adjustments
(58 )
(58 )
(73 )
Debit valuation adjustments
Other valuation adjustments
(848 )
(867 )
(820 )
of which: liquidity
(327 )
(356 )
(340 )
of which: model uncertainty
(521 )
(511 )
(479 )
1 Amounts do not include reserves against defaulted counterparties.
c) Transfers between Level 1 and Level 2
During the first six months of 2021, assets and liabilities transferred from Level 2 to Level 1, or from Level 1 to Level 2, that were
held for the entire reporting period, were not material.
Notes to the UBS AG interim consolidated financial statements (unaudited)
42
Note 10 Fair value measurement (continued)
d) 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 30 June 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.
The significant unobservable inputs disclosed in the table
below are consistent with those included in “Note 21 Fair value
measurement” in the “Consolidated financial statements”
section of the Annual Report 2020. A description of the
potential effect that a change in each unobservable input in
isolation may have on a fair value measurement, including
information to facilitate an understanding of factors that give
rise to the input ranges shown, is also provided in “Note 21 Fair
value measurement” in the “Consolidated financial statements”
section of the Annual Report 2020.
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)
30.6.21
31.12.20
USD billion
30.6.21
31.12.20
30.6.21
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
Relative value to
market comparable
Bond price equivalent
points
Discounted expected
cash flows
Discount margin
basis
points
Traded loans, loans
measured at fair value,
loan commitments and
guarantees
Relative value to
market comparable
Loan price equivalent
points
Discounted expected
cash flows
Credit spread
basis
points
Market comparable
and securitization
model
Credit spread
basis
points
Auction rate securities
Discounted expected
cash flows
Credit spread
basis
points
Investment fund units
3
Relative value to
market comparable
Net asset value
Equity instruments
3
Relative value to
market comparable
Price
Debt issued designated at
fair value
4
Other financial liabilities
designated at fair value
Discounted expected
cash flows
Funding spread
basis
points
Derivative financial instruments
Interest rate contracts
Option model
Volatility of interest rates
basis
points
Credit derivative contracts
Discounted expected
cash flows
Credit spreads
basis
points
Bond price equivalent
points
Equity / index contracts
Option model
Equity dividend yields
%
Volatility of equity stocks,
equity and other indices
%
Equity-to-FX correlation
(30 )
(34 )
%
Equity-to-equity
correlation
(25 )
(16 )
%
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 non-derivative financial instruments and were calculated by weighting inputs based on the fair values of the respective instruments. Weighted averages are not provided for inputs related to derivative contracts, as
this would not be meaningful. 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 is composed primarily of
UBS structured notes, which include variable maturity notes with various equity and foreign exchange underlying risks, rates -linked and credit-linked notes, all of which have embedded derivative parameters that are
considered to be unobservable. The equivalent derivative instrument parameters are presented in the respective derivative financial instruments lines in this table.
43
Note 10 Fair value measurement (continued)
e) 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 alternative
assumptions would change fair value significantly, and the
estimated effect thereof. The table presents the favorable and
unfavorable effects for each class of financial assets and
liabilities for which the potential change in fair value is
considered significant. The sensitivity of fair value measurements
for debt issued designated at fair value and over-the-counter
debt instruments designated at fair value is reported together
with the equivalent derivative or securities financing instrument.
The sensitivity data shown below presents an estimation of
valuation uncertainty based on reasonably possible alternative
values for Level 3 inputs at the balance sheet date and does not
represent the estimated effect of stress scenarios. Typically, these
financial assets and liabilities are sensitive to a combination of
inputs from Levels 1–3. Although well-defined interdepend-
encies may exist between Levels 1–2 and Level 3 parameters
(e.g., between interest rates, which are generally Level 1 or
Level 2, and prepayments, which are generally Level 3), these
have not been incorporated in the table. Furthermore, direct
interrelationships between the Level 3 parameters are not a
significant element of the valuation uncertainty.
Sensitivity of fair value measurements to changes in unobservable input assumptions
30.6.21
31.3.21
31.12.20
USD million
Favorable
changes
Unfavorable
changes
Favorable
changes
Unfavorable
changes
Favorable
changes
Unfavorable
changes
Traded loans, loans designated at fair value, loan commitments and guarantees
(13 )
(21 )
(28 )
Securities financing transactions
(68 )
(51 )
(52 )
Auction rate securities
(114 )
(88 )
(105 )
Asset-backed securities
(34 )
(40 )
(41 )
Equity instruments
(120 )
(99 )
(96 )
Interest rate derivative contracts, net
(14 )
(23 )
(16 )
Credit derivative contracts, net
(10 )
(10 )
(14 )
Foreign exchange derivative contracts, net
(9 )
(11 )
(15 )
Equity / index derivative contracts, net
(324 )
(344 )
(294 )
Other
(77 )
(92 )
(107 )
Total
(782 )
(779 )
(768 )
f) Level 3 instruments: movements during the period
Significant changes in Level 3 instruments
The table on the following pages presents additional information
about material Level 3 assets and liabilities measured at fair
value on a recurring basis. Level 3 assets and liabilities may be
hedged with instruments classified as Level 1 or Level 2 in the
fair value hierarchy and, as a result, realized and unrealized gains
and losses included in the table may not include the effect of
related hedging activity. Furthermore, the realized and
unrealized gains and losses presented in the table are not limited
solely to those arising from Level 3 inputs, as valuations are
generally derived from both observable and unobservable
parameters.
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.
Notes to the UBS AG interim consolidated financial statements (unaudited)
44
Note 10 Fair value measurement (continued)
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
30 June
2020
Financial assets at fair value held for
trading
(0.1 )
(1.0 )
of which:
Investment fund units
Corporate and municipal bonds
(0.2 )
Loans
(0.6 )
Other
(0.2 )
Derivative financial instruments –
assets
(0.5 )
(0.1 )
of which:
Interest rate contracts
(0.2 )
Equity / index contracts
(0.2 )
(0.1 )
Credit derivative contracts
(0.2 )
Other
Financial assets at fair value not held
for trading
(0.1 )
(0.1 )
(0.6 )
of which:
Loans
(0.5 )
Auction rate securities
(0.1 )
(0.1 )
Equity instruments
Other
(0.1 )
Derivative financial instruments –
liabilities
(0.8 )
(0.3 )
of which:
Interest rate contracts
(0.3 )
Equity / index contracts
(0.4 )
(0.2 )
Credit derivative contracts
(0.1 )
(0.1 )
Other
Debt issued designated at fair value
(3.5 )
(1.0 )
Other financial liabilities designated
at fair value
(0.3 )
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 30 June 2021 were USD
45
Note 10 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
30 June
2021
2
(0.8 )
(0.2 )
(0.1 )
(0.1 )
(0.5 )
(0.2 )
(0.1 )
(0.1 )
(0.2 )
(0.2 )
(0.1 )
(0.4 )
(0.1 )
(0.1 )
(0.1 )
(0.1 )
(0.4 )
(0.1 )
(0.1 )
(0.1 )
(0.3 )
(0.1 )
(0.1 )
(1.2 )
(0.2 )
(0.1 )
(0.1 )
(1.1 )
(0.2 )
(0.2 )
(0.2 )
(0.1 )
(2.9 )
(0.8 )
(0.2 )
(0.2 )
Notes to the UBS AG interim consolidated financial statements (unaudited)
46
Note 10 Fair value measurement (continued)
g) Financial instruments not measured at fair value
The table below reflects the estimated fair values of financial instruments not measured at fair value.
Financial instruments not measured at fair value
30.6.21
31.3.21
31.12.20
USD billion
Carrying
amount
Fair value
Carrying
amount
Fair value
Carrying
amount
Fair value
Assets
Cash and balances at central banks
Loans and advances to banks
Receivables from securities financing transactions
Cash collateral receivables on derivative instruments
Loans and advances to customers
Other financial assets measured at amortized cost
Liabilities
Amounts due to banks
Payables from securities financing transactions
Cash collateral payables on derivative instruments
Customer deposits
Funding from UBS Group AG
Debt issued measured at amortized cost
Other financial liabilities measured at amortized cost
1
The fair values included in the table above have been calculated
for disclosure purposes only. The valuation techniques and
assumptions relate only to UBS’s financial instruments not
otherwise measured at fair value. Other institutions may use
different methods and assumptions for their fair value
estimation, and therefore such fair value disclosures cannot
necessarily be compared from one financial institution to
another.
47
Note 11 Derivative instruments
a) Derivative instruments
As of 30.6.21, USD billion
Derivative
financial
assets
Notional values
related to derivative
financial assets
1
Derivative
financial
liabilities
Notional values
related to derivative
financial liabilities
1
Other
notional
values
2
Derivative financial instruments
Interest rate contracts
Credit derivative contracts
Foreign exchange contracts
Equity / index contracts
Commodity contracts
Loan commitments measured at FVTPL
Unsettled purchases of non-derivative financial instruments
3
Unsettled sales of non-derivative financial instruments
3
Total derivative financial instruments, based on IFRS netting
4
Further netting potential not recognized on the balance sheet
5
(107.5 )
(106.8 )
of which: netting of recognized financial liabilities / assets
(86.8 )
(86.8 )
of which: netting with collateral received / pledged
(20.6 )
(20.0 )
Total derivative financial instruments, after consideration of further
netting potential
As of 31.3.21, USD billion
Derivative financial instruments
Interest rate contracts
Credit derivative contracts
Foreign exchange contracts
Equity / index contracts
Commodity contracts
Loan commitments measured at FVTPL
Unsettled purchases of non-derivative financial instruments
3
Unsettled sales of non-derivative financial instruments
3
Total derivative financial instruments, based on IFRS netting
4
Further netting potential not recognized on the balance sheet
5
(130.1 )
(127.5 )
of which: netting of recognized financial liabilities / assets
(105.1 )
(105.1 )
of which: netting with collateral received / pledged
(25.0 )
(22.5 )
Total derivative financial instruments, after consideration of further
netting potential
As of 31.12.20, USD billion
Derivative financial instruments
Interest rate contracts
Credit derivative contracts
Foreign exchange contracts
Equity / index contracts
Commodity contracts
Loan commitments measured at FVTPL
Unsettled purchases of non-derivative financial instruments
3
Unsettled sales of non-derivative financial instruments
3
Total derivative financial instruments, based on IFRS netting
4
Further netting potential not recognized on the balance sheet
5
(144.4 )
(141.2 )
of which: netting of recognized financial liabilities / assets
(117.2 )
(117.2 )
of which: netting with collateral received / pledged
(27.2 )
(23.9 )
Total derivative financial instruments, after consideration of further
netting potential
1 In cases where derivative financial instruments are presented on a net basis on the balance sheet, the respective notional values of the netted derivative financial instruments are still presented on a gross basis.
Notional amounts of exchange-traded agency transactions and OTC -cleared transactions entered into on behalf of clients are not disclosed, as they have a significantly different risk profile. 2 Other notional values
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. 3 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. 4 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 UBS AG or its counterparties, and
intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. 5 Reflects the netting potential in accordance with enforceable master netting and similar arrangements where
not all criteria for a net presentation on the balance sheet have been met. Refer to “Note 22 Offsetting financial assets and financial liabilities” in the “Consolidated financial statements” section of the Annual
Report 2020 for more information.
Notes to the UBS AG interim consolidated financial statements (unaudited)
48
Note 11 Derivative instruments (continued)
b) Cash collateral on derivative instruments
USD billion
Receivables
30.6.21
Payables
30.6.21
Receivables
31.3.21
Payables
31.3.21
Receivables
31.12.20
Payables
31.12.20
Cash collateral on derivative instruments, based on IFRS netting
1
Further netting potential not recognized on the balance sheet
2
(18.3 )
(16.9 )
(21.1 )
(20.7 )
(21.1 )
(21.6 )
of which: netting of recognized financial liabilities / assets
(15.9 )
(14.4 )
(18.2 )
(18.3 )
(19.6 )
(19.6 )
of which: netting with collateral received / pledged
(2.4 )
(2.5 )
(2.9 )
(2.3 )
(1.5 )
(2.1 )
Cash collateral on derivative instruments, after consideration of further netting potential
1 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 UBS AG or its counterparties, and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. 2 Reflects the netting potential
in accordance with enforceable master netting and similar arrangements where not all criteria for a net presentation on the balance sheet have been met. Refer to “Note 22 Offsetting financial assets and financial
liabilities” in the “Consolidated financial statements” section of the Annual Report 2020 for more information.
Note 12 Other assets and liabilities
a) Other financial assets measured at amortized cost
USD million
30.6.21
31.3.21
31.12.20
Debt securities
of which: government bills / bonds
Loans to financial advisors
Fee- and commission-related receivables
Finance lease receivables
Settlement and clearing accounts
Accrued interest income
Other
Total other financial assets measured at amortized cost
b) Other non-financial assets
USD million
30.6.21
31.3.21
31.12.20
Precious metals and other physical commodities
Bail deposit
1
Prepaid expenses
VAT and other tax receivables
Properties and other non-current assets held for sale
Other
Total other non-financial assets
1 Refer to item 1 in Note 16b for more information.
49
Note 12 Other assets and liabilities (continued)
c) Other financial liabilities measured at amortized cost
USD million
30.6.21
31.3.21
31.12.20
Other accrued expenses
Accrued interest expenses
Settlement and clearing accounts
Lease liabilities
Other
Total other financial liabilities measured at amortized cost
d) Other financial liabilities designated at fair value
USD million
30.6.21
31.3.21
31.12.20
Financial liabilities related to unit-linked investment contracts
Securities financing transactions
Over-the-counter debt instruments
Funding from UBS Group AG
Other
Total other financial liabilities designated at fair value
of which: life-to-date own credit (gain) / loss
e) Other non-financial liabilities
USD million
30.6.21
31.3.21
31.12.20
Compensation-related liabilities
of which: financial advisor compensation plans
of which: other compensation plans
of which: net defined benefit liability
of which: other compensation-related liabilities
1
Deferred tax liabilities
Current tax liabilities
VAT and other tax payables
Deferred income
Other
Total other non-financial liabilities
1 Includes liabilities for payroll taxes and untaken vacation.
Notes to the UBS AG interim consolidated financial statements (unaudited)
50
Note 13 Debt issued designated at fair value
USD million
30.6.21
31.3.21
31.12.20
Issued debt instruments
Equity-linked
1
Rates-linked
Credit-linked
Fixed-rate
Commodity-linked
Other
Total debt issued designated at fair value
of which: issued by UBS AG with original maturity greater than one year
2
of which: life-to-date own credit (gain) / loss
1 Includes investment fund unit-linked instruments issued. 2 Issued by the legal entity UBS AG. Based on original contractual maturity without considering any early redemption features. As of 30 June 2021, more
than
% of the balance was unsecured (31 March 2021:
%; 31 December 2020:
%).
Note 14 Debt issued measured at amortized cost
USD million
30.6.21
31.3.21
31.12.20
Certificates of deposit
Commercial paper
Other short-term debt
Short-term debt
1
Senior unsecured debt
of which: issued by UBS AG with original maturity greater than one year
2
Covered bonds
Subordinated debt
of which: low-trigger loss-absorbing tier 2 capital instruments
of which: non-Basel III-compliant tier 2 capital instruments
Debt issued through the Swiss central mortgage institutions
Other long-term debt
Long-term debt
3
Total debt issued measured at amortized cost
4
1 Debt with an original contractual maturity of less than one year. 2 Issued by the legal entity UBS AG. Based on original contractual maturity without considering any early redemption features. As of
30 June 2021,
% of the balance was unsecured (31 March 2021:
%; 31 December 2020:
%). 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.
51
Note 15 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) will cease for all non-
US dollar LIBORs, as well as for one-week and two-month USD
LIBOR, after 31 December 2021. Publication of the remaining
USD LIBOR tenors will cease immediately after 30 June 2023.
The majority of UBS
AG
’s
Interbank Offered Rate
(
IBOR
)
exposure is
to
CHF LIBOR
and
USD LIBOR.
The
alternative
reference rate (ARR) for CHF LIBOR is the Swiss Average Rate
Overnight (SARON).
Th
e
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.
For certain products in the US, UBS AG is considering the use of
credit-sensitive rates as an alternative to SOFR.
As of 30 June 2021, transition uncertainty with respect to
significant interest rate benchmarks remains, with the exception
of
the
Euro Interbank Offered Rate
(
Euribor
).
The reform of
Euribor is now complete and consisted of a change in the
underlying calculation method.
The transition to ARRs includes a number of active steps that
will also benefit from the support of associated regulatory
activities. There may be some contracts, known as “tough legacy
contracts,” that cannot be practically transitioned or amended
from IBORs to ARRs
.
The FCA
continues to consult
market
participants about requiring the ICE Benchmark Administration
to continue publishing certain LIBOR settings (i.e., one-, three-
and six-month settings for the GBP, JPY and USD LIBORs) on a
“synthetic” basis, which are not representative of the underlying
financial markets,
for
a certain duration
after
3
1
December
2021. However, these synthetic LIBORs will not be available for
use in new contracts, given that they are non-representative,
and
are
instead
intended to help reduce disruption
where
resolution has not been agreed
for certain tough legacy
contracts. Furthermore, in February 2021, the EU Benchmarks
Regulation was amended to enable the European Commission
to designate a statutory replacement rate for tough legacy LIBOR
contracts that are governed by the laws of EU Member States
and remain outstanding after LIBOR cessation. On 6 April 2021,
New York State LIBOR legislation was enacted with the intention
of minimizing legal uncertainty and adverse economic effects
associated with USD LIBOR transition for tough legacy contracts
governed
by
New York law. For USD
LIBOR contracts not
governed by New York
law, a
bill
has been introduced in
Congress with similar objectives.
In October 2020, the International Swaps and Derivatives
Association (ISDA) released the IBOR Fallbacks Supplement and
IBOR Fallbacks Protocol, amending ISDA standard definitions for
interest-rate derivatives to incorporate fallbacks for derivatives
linked to certain IBORs. The changes came into effect on
25 January 2021 and, 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 is focused on transitioning existing contracts via bi-
lateral and multi
-
lateral agreements,
leveraging industry
solutions (e.g., the use of fallback provisions) and through third-
party actions (clearing houses, agents, etc.). Furthermore, in line
with regulatory guidance UBS AG has implemented a framework
to limit entry into new contracts referencing IBORs.
Governance over the transition to alternative benchmark rates
UBS AG has 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.
Progress is overseen centrally via a monthly operating committee
and a monthly steering committee, as well as quarterly updates
to the joint Audit and Risk committees.
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,
as well as the revision of operational controls related to the
reform; 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.
Notes to the UBS AG interim consolidated financial statements (unaudited)
52
Note 15 Interest rate benchmark reform (continued)
In some cases, contracts may contain provisions intended to
provide a fallback interest rate in the event of a brief unavailability
of the relevant IBOR. These provisions may not be effective or may
produce arbitrary results in the event of a permanent cessation of
the relevant IBOR. While efforts to transition outstanding
transactions from IBORs to ARRs have made substantial progress,
including through industry-wide protocols, such as the ISDA IBOR
Fallbacks Supplement and IBOR Fallbacks Protocol, there are still
substantial volumes of transactions that require modification to
effectively transition to ARRs.
UBS AG remains confident that it has the transparency,
oversight and operational preparedness to progress with the
IBOR transition consistent with market timelines. UBS AG does
not expect changes to its risk management approach and
strategy as a result of interest rate benchmark reform.
Progress made during 2020 and the first half of 2021
Approaches to transition vary by product type. During 2020,
UBS AG transitioned most of its CHF LIBOR-linked deposits to
SARON and 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. By the end of the
second quarter of 2021, UBS AG had successfully transitioned its
GBP LIBOR- and EUR LIBOR-based private and commercial real
estate
mortgages
in
the UK and Monaco to
the
Sterling
Overnight Index Average
(
SONIA
)
and Euribor
,
respectively.
UBS AG has detailed plans in place to deliver the required
changes for all other IBOR exposures, predominantly during
2021.
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 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 addition, contracts
that have been changed to incorporate ARR-based interest rates
before the relevant cessation date have been excluded from the
table below, because UBS AG expects no further transition work
to implement the reform.
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 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 t
he
maximum IBOR exposure, with the actual IBOR exposure being
dependent upon client preferences and investment decisions.
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.
As significant IBOR exposures transition to ARRs during 2021,
the values and trade count disclosed are expected to decrease.
30.6.21
LIBOR benchmark rates
1
Measure
CHF
USD
GBP
EUR
2
JPY
XCCY
Carrying value of non-derivative financial instruments
Total non-derivative financial assets
USD million
3
Total non-derivative financial liabilities
USD million
Trade count of derivative financial instruments
Total derivative financial instruments
Trade count
4
Off-balance sheet exposures
Total irrevocable loan commitments
USD million
5
31.3.21
LIBOR benchmark rates
1
Measure
CHF
USD
GBP
EUR
2
JPY
XCCY
Carrying value of non-derivative financial instruments
Total non-derivative financial assets
USD million
3
Total non-derivative financial liabilities
USD million
Trade count of derivative financial instruments
Total derivative financial instruments
Trade count
4
Off-balance sheet exposures
Total irrevocable loan commitments
USD million
5
1 Contracts have been disclosed without regard to early termination rights. Instead, it is assumed that such contracts will transition away from IBORs without such rights being exercised. 2 Includes primarily EUR
LIBOR positions. 3 Includes loans related to revolving multi-currency credit lines. 4 Includes cross-currency swaps where either leg or both legs are indexed to an IBOR. 5 Includes loan commitments that can be
drawn in different currencies at the client‘s discretion.
53
Note 15 Interest rate benchmark reform (continued)
Non-derivative instruments
UBS
AG
’s significant non
-
derivative IBOR exposures primaril
y
relate to brokerage receivable and payable balances, corporate
and
private
loans
,
and mortgages
,
linked to CHF and USD
LIBORs.
In March 2021, following the FCA announcement regarding
the cessation timelines for IBORs, UBS AG started 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 the
second quarter of 2021, mortgages that were linked to CHF
LIBOR have been reduced by approximately USD
the remaining USD
as of 31 March 2021
have
successfully
transitioned
.
US
mortgages linked to USD LIBOR are planned to transition to
SOFR from 2022–2023. US securities-based lending increased by
approximately USD
agreements
expected
to switch to
an
alternative benchmark
from the fourth quarter of 2021.
UBS AG is also proactively discussing transition mechanisms
with many of its brokerage and corporate clients in order to
transition
their exposures
throughout 2021 from CHF LIBOR,
EUR LIBOR and GBP LIBOR. During the second quarter of 2021,
the
gross
carrying amount of
IBOR
-
indexed
non
-
derivative
financial assets and liabilities related to brokerage accounts,
predominantly linked to GBP and USD LIBOR, was reduced by
approximately USD
transitions.
For certain non-derivative financial assets and financial
liabilities, in particular bonds issued by third parties, UBS AG is
dependent on the participation and engagement of others in
effecting the transition from IBORs. UBS
AG
is actively
monitoring such exposures and is in discussions with clients.
As presented in the table on the previous page, UBS AG had
approximately USD
irrevocable commitments as of 30 June 2021 that can be drawn
down in different currencies with IBOR-based interest rates,
primarily USD LIBOR
and Euribor,
and
that
expire after the
relevant
benchmark
cessation dates
. Related drawn
-
down
amounts under these commitments
were
USD
billion
(31 March 2021, USD
In
addition,
UBS
AG
ha
d
approximately
USD
billion
(31 March 2021, USD
lines outstanding that allow clients to draw down a number of
IBOR-linked products. UBS AG is in discussions with impacted
clients, with plans in place to have all contracts amended by the
relevant cessation dates.
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 will
cease.
The majority of derivatives are transacted with clearing
houses
where UBS
AG
is dependent upon i
ndustry
-
wide
compression activities to reduce exposure and clearing house
actions to convert any remaining derivatives nearer the cessation
dates. London Clearing House (LCH), which is the clearing house
for a significant number of UBS
AG
’s IRS derivatives
, has
confirmed that a standardized transition will be undertaken in
December 2021 to transition IBOR-based derivatives to
respective ARRs. UBS AG expects derivative volumes to fluctuate
in line with business activity until such clearing house actions are
taken.
For derivatives not transacted with clearing houses, as
previously noted, UBS AG adhered to the ISDA IBOR Fallback
Protocol in November 2020, although its preferred approach, in
line with regulatory expectations, is to actively switch to ARRs
before the relevant cessation dates or to bilaterally compress
where feasible. UBS AG has begun a series of outreach activities
to understand counterparties’ intentions regarding whether they
seek to adhere to the protocol or will actively switch.
In order to minimize the operational risk of converting high
volumes of transactions at the time of cessation, UBS AG is
making
progress
with
its
preparations to convert derivative
instruments in bulk to ARR equivalents.
Notes to the UBS AG interim consolidated financial statements (unaudited)
54
Note 16 Provisions and contingent liabilities
a) Provisions
The table below presents an overview of total provisions.
USD million
30.6.21
31.3.21
31.12.20
Provisions other than provisions for expected credit losses
Provisions for expected credit losses
Total provisions
The following table presents additional information for provisions other than provisions for expected credit losses.
USD million
Litigation,
regulatory and
similar matters
1
Restructuring
2
Other
3
Total
Balance as of 31 December 2020
Balance as of 31 March 2021
Increase in provisions recognized in the income statement
Release of provisions recognized in the income statement
(24 )
(5 )
(4 )
(33 )
Provisions used in conformity with designated purpose
(27 )
(20 )
(31 )
(78 )
Capitalized reinstatement costs
(1 )
(1 )
Reclassifications
(1 )
Foreign currency translation / unwind of discount
(1 )
Balance as of 30 June 2021
1 Comprises provisions for losses resulting from legal, liability and compliance risks. 2 Includes personnel-related restructuring provisions of USD
31 December 2020: USD
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 time period but potential
changes in amount may be triggered when natural staff attrition
reduces the number of people affected by a restructuring event
and therefore the estimated costs.
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 16b. 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.
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.
55
Note 16 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.
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 16a above.
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 management” section of
the UBS Group second quarter 2021 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
Balance as of 31 December 2020
Balance as of 31 March 2021
Increase in provisions recognized in the income statement
Release of provisions recognized in the income statement
(11 )
(11 )
(2 )
(24 )
Provisions used in conformity with designated purpose
(27 )
(27 )
Foreign currency translation / unwind of discount
Balance as of 30 June 2021
1 Provisions, if any, for matters described in this Note are recorded in Global Wealth Management (item 3 and item 4) and Group Functions (item 2). Provisions, if any, for the matters described in items 1 and 6 of
this Note are allocated between Global Wealth Management and Personal & Corporate Banking, and provisions, if any, for the matters described in this Note in item 5 are allocated between the Investment Bank
and Group Functions.
Notes to the UBS AG interim consolidated financial statements (unaudited)
56
Note 16 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
S.A. to post bail of EUR
appeal to EUR
A trial in the court of first instance took place from 8 October
2018 until 15 November 2018. On 20 February 2019, the court
announced a verdict finding UBS AG guilty of unlawful
solicitation of clients
on French territory and aggravated
laundering of the proceeds of tax fraud, and UBS (France) S.A.
guilty of aiding and abetting unlawful solicitation and laundering
the proceeds of tax fraud. The court imposed fines aggregating
EUR
EUR
appealed the decision. Under French law, the judgment is
suspended while the appeal is pending. The trial in the Court of
Appeal took place between 8-24 March 2021. At the conclusion
of the trial, the prosecutor asserted that the maximum penalty
was EUR
of at least EUR
of EUR
currently set for 27 September 2021. A subsequent appeal to
the Cour de Cassation, France’s highest court, is possible with
respect to questions of law.
UBS believes that based on both the law and the facts the
judgment of the court of first instance should be reversed. UBS
believes it followed its obligations under Swiss and French law as
well as the European Savings Tax Directive. Even assuming
liability, which it contests, UBS believes the penalties and
damage amounts awarded greatly exceed the amounts that
could be supported by the law and the facts. In particular, UBS
believes the court incorrectly based the penalty on the total
regularized assets rather than on any unpaid taxes on those
assets for which a fraud has been characterized and further
incorrectly awarded damages based on costs that were not
proven by the civil party. Notwithstanding that UBS believes it
should be acquitted, our balance sheet at 30 June 2021
reflected provisions with respect to this matter in an amount of
EUR
range of possible outcomes in this case contributes to a high
degree of estimation uncertainty. The provision reflected on our
balance sheet at 30 June 2021 reflects our best estimate of
possible financial implications, although it is reasonably possible
that actual penalties and civil damages could exceed the
provision amount.
In 2016, UBS was notified by the Belgian investigating judge
that it is under formal investigation (“
inculpé
”) regarding the
laundering of proceeds of tax fraud, of banking and financial
solicitation by unauthorized persons, and of serious tax fraud.
Our balance sheet at 30 June 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.
57
Note 16 Provisions and contingent liabilities (continued)
2. Claims related to sales of residential mortgage-backed
securities and mortgages
From 2002 through 2007, prior to the crisis in the US residential
loan market, UBS was a substantial issuer and underwriter of US
residential mortgage-backed securities (RMBS) and was a
purchaser and seller of US residential mortgages.
In November 2018, the DOJ filed a civil complaint in the
District Court for the Eastern District of New York. The complaint
seeks unspecified civil monetary penalties under the Financial
Institutions Reform, Recovery and Enforcement Act of 1989
related to UBS’s issuance, underwriting and sale of 40 RMBS
transactions in 2006 and 2007. UBS moved to dismiss the civil
complaint on 6 February 2019. On 10 December 2019, the
district court denied UBS’s motion to dismiss.
Our balance sheet at 30 June 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.
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
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
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
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. Allegations include fraud,
misrepresentation and unsuitability of the funds and of the loans
seeking aggregate damages of USD
USD
arbitration or withdrawal of claims.
A shareholder derivative action was filed in 2014 against
various UBS entities and current and certain former directors of
the funds, alleging hundreds of millions of US dollars in losses in
the funds. In 2015, defendants’ motion to dismiss was denied.
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
of bonds by the System in 2008 and sought damages of over
USD
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.
Notes to the UBS AG interim consolidated financial statements (unaudited)
58
Note 16 Provisions and contingent liabilities (continued)
Beginning in 2015, certain agencies and public corporations
of the Commonwealth of Puerto
Rico (Commonwealth)
defaulted on certain interest payments on Puerto Rico bonds. In
2016, US federal legislation created an oversight board with
power to oversee Puerto Rico’s finances and to restructure its
debt. The oversight board has imposed a stay on the exercise of
certain creditors’ rights. In 2017, the oversight board placed
certain of the bonds into a bankruptcy-like proceeding under the
supervision of a Federal District Judge.
In May 2019, the oversight board filed complaints in Puerto
Rico federal district court bringing claims against financial, legal
and accounting firms that had participated in Puerto Rico
municipal bond offerings, including UBS, seeking a return of
underwriting and swap fees paid in connection with those
offerings. UBS estimates that it received approximately USD
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
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. In June 2021
the court in the first of the three cases denied defendants’
motion to dismiss; defendants are seeking leave to appeal that
decision. In July 2021, the court in another of these cases
granted defendants’ motion to dismiss. A motion to dismiss is
pending in the remaining case.
Our balance sheet at 30 June 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:
numerous authorities commenced investigations concerning
possible manipulation of foreign exchange markets and precious
metals prices. As a result of these investigations, UBS entered
into resolutions with the UK Financial Conduct Authority (FCA),
the US Commodity Futures Trading Commission (CFTC), FINMA,
the Board of Governors of the Federal Reserve System (Federal
Reserve Board) and the Connecticut Department of Banking, the
DOJ’s Criminal Division and the European Commission. UBS has
ongoing obligations under the Cease and Desist Order of the
Federal Reserve Board and the Office of the Comptroller of the
Currency (as successor to the Connecticut Department of
Banking), and to cooperate with relevant authorities and to
undertake certain
remediation measures. UBS has also been
granted conditional immunity by the Antitrust Division of the
DOJ and by authorities in other jurisdictions in connection with
potential competition law violations relating to foreign exchange
and precious metals businesses. Investigations relating to foreign
exchange matters by certain authorities remain ongoing
notwithstanding these resolutions.
Foreign exchange-related civil litigation:
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
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, including the SEC, the CFTC,
the DOJ, the FCA, the UK Serious Fraud Office, the Monetary
Authority of Singapore, the Hong Kong Monetary Authority,
FINMA, various state attorneys general in the US and competition
authorities in various jurisdictions, have conducted investigations
regarding potential improper attempts by UBS, among others, to
manipulate LIBOR and other benchmark rates at certain times.
UBS reached settlements or otherwise concluded investigations
relating to benchmark interest rates with the investigating
authorities. UBS has ongoing obligations to cooperate with the
authorities with whom we have reached resolutions and to
undertake certain remediation measures with respect to
benchmark interest rate submissions. UBS has been granted
conditional leniency or conditional immunity from authorities in
certain jurisdictions, including the Antitrust Division of the DOJ
and the Swiss Competition Commission (WEKO), in connection
with potential antitrust or competition law violations related to
certain rates. However, UBS has not reached a final settlement
with WEKO, as the Secretariat of WEKO has asserted that UBS
does not qualify for full immunity.
59
Note 16 Provisions and contingent liabilities (continued)
LIBOR and other benchmark-related civil litigation:
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.
Although the Second Circuit vacated the district court’s
judgment dismissing antitrust claims, the district court again
dismissed antitrust claims against UBS in 2016. Certain plaintiffs
have appealed that decision to the Second Circuit. Separately, in
2018, the Second Circuit reversed in part the district court’s
2015 decision dismissing certain individual plaintiffs’ claims and
certain of these actions are now proceeding. UBS entered into
an agreement in 2016 with representatives of a class of
bondholders to settle their USD LIBOR class action. The
agreement has received final court approval. In 2018, the district
court denied plaintiffs’ motions for class certification in the
USD class actions for claims pending against UBS, and plaintiffs
sought permission to appeal that ruling to the Second Circuit. In
July 2018, the Second Circuit denied the petition to appeal of
the class of USD lenders and in November 2018 denied the
petition of the USD exchange class. In December 2019, UBS
entered into an agreement with representatives of the class of
USD lenders to settle their USD LIBOR class action. The
agreement has received final court approval. In January 2019, a
putative class action was filed in the District Court for the
Southern District of New York against UBS and numerous other
banks on behalf of US residents who, since 1 February 2014,
directly transacted with a defendant bank in USD LIBOR
instruments. The complaint asserts antitrust claims. The
defendants moved to dismiss the complaint in August 2019. On
26 March 2020 the court granted defendants’ motion to dismiss
the complaint in its entirety. Plaintiffs have appealed the
dismissal. In August 2020, an individual action was filed in the
Northern District of California against UBS and numerous other
banks alleging that the defendants conspired to fix the interest
rate used as the basis for loans to consumers by jointly setting
the USD LIBOR rate and monopolized the market for LIBOR-
based consumer loans and credit cards.
Other benchmark class actions in the US:
In 2014, 2015 and
2017, the court in one of the Euroyen TIBOR lawsuits dismissed
certain of the plaintiffs’ claims, including plaintiffs’ federal
antitrust and racketeering claims. In August 2020, the court
granted defendants’ motion for judgment on the pleadings and
dismissed the lone remaining claim in the action as impermissibly
extraterritorial. Plaintiffs have appealed. In 2017, the court
dismissed the other Yen LIBOR / Euroyen TIBOR action in its
entirety on standing grounds. In April 2020, the appeals court
reversed the dismissal and in August 2020 plaintiffs in that
action filed an amended complaint. Defendants moved to
dismiss the amended complaint in October 2020. In 2017, the
court dismissed the CHF LIBOR action on standing grounds and
failure to state a claim. Plaintiffs filed an amended complaint
following the dismissal, and the court granted a renewed
motion to dismiss in September 2019. Plaintiffs have appealed.
Also in 2017, the court in the EURIBOR lawsuit dismissed the
case as to UBS and certain other foreign defendants for lack of
personal jurisdiction. Plaintiffs have appealed. In October 2018,
the court in the SIBOR / SOR action dismissed all but one of
plaintiffs’ claims against UBS. Plaintiffs filed an amended
complaint following the dismissal, and the court granted a
renewed motion to dismiss in July 2019. Plaintiffs appealed. In
March 2021, the Second Circuit reversed
the dismissal. In
November 2018, the court in the BBSW lawsuit dismissed the
case as to UBS and certain other foreign defendants for lack of
personal jurisdiction. Following that dismissal, plaintiffs filed an
amended complaint in April 2019, which UBS and other
defendants named in the amended complaint moved to dismiss.
In February 2020, the court in the BBSW action granted in part
and denied in part defendants’ motions to dismiss the amended
complaint. In August 2020, UBS and other BBSW defendants
joined
a motion for judgment on the pleadings. The court
dismissed the GBP LIBOR action in August 2019. Plaintiffs have
appealed.
Government bonds:
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 on 31 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
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 30 June 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.
Notes to the UBS AG interim consolidated financial statements (unaudited)
60
Note 16 Provisions and contingent liabilities (continued)
6. Swiss retrocessions
The Federal Supreme Court of Switzerland ruled in 2012, in a
test case against UBS, that distribution fees paid to a firm for
distributing third-party and intra-group investment funds and
structured products must be disclosed and surrendered to clients
who have entered into a discretionary mandate agreement with
the firm, absent a valid waiver. FINMA issued a supervisory note
to all Swiss banks in response to the Supreme Court decision.
UBS has met the FINMA requirements and has notified all
potentially affected clients.
The Supreme Court decision has resulted, and may continue
to result, in a number of client requests for UBS to disclose and
potentially surrender retrocessions. Client requests are assessed
on a case-by-case basis. Considerations taken into account when
assessing these cases include, among other things, the existence
of a discretionary mandate and whether or not the client
documentation contained a valid waiver with respect to
distribution fees.
Our balance sheet at 30 June 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.
Note 17 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 quarter ended
Year-to-date
30.6.21
31.3.21
31.12.20
30.6.20
30.6.21
31.3.21
30.6.20
30.6.21
30.6.20
1 CHF
1 EUR
1 GBP
100 JPY
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 quarter represent an average
of three 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.
61
Note 18 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 by USD
half of 2021 to USD
related to derivative financial instruments.
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 six months ended 30 June 2021
Operating income
Interest income from financial instruments measured at amortized cost and
fair value through other comprehensive income
(356 )
Interest expense from financial instruments measured at amortized cost
(1,441 )
(276 )
(517 )
(1,719 )
Net interest income from financial instruments measured at fair value through
profit or loss
(133 )
Net interest income
Other net income from financial instruments measured at fair value through
profit or loss
(109 )
Credit loss (expense) / release
(23 )
Fee and commission income
(387 )
Fee and commission expense
(412 )
(239 )
(690 )
(962 )
Net fee and commission income
(7 )
Other income
(3,333 )
Total operating income
(3,445 )
Operating expenses
Personnel expenses
General and administrative expenses
(1,373 )
Depreciation and impairment of property, equipment and software
(58 )
Amortization and impairment of goodwill and intangible assets
Total operating expenses
(1,429 )
Operating profit / (loss) before tax
(2,016 )
Tax expense / (benefit)
(13 )
Net profit / (loss)
(2,003 )
Net profit / (loss) attributable to non-controlling interests
Net profit / (loss) attributable to shareholders
(2,003 )
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.
Notes to the UBS AG interim consolidated financial statements (unaudited)
62
Note 18 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 six months ended 30 June 2021
Comprehensive income attributable to shareholders
Net profit / (loss)
(2,003 )
Other comprehensive income
Other comprehensive income that may be reclassified to the income statement
Foreign currency translation, net of tax
(38 )
(641 )
(287 )
(452 )
Financial assets measured at fair value through other comprehensive income, net of tax
(88 )
(88 )
Cash flow hedges, net of tax
(662 )
(159 )
(110 )
(5 )
(937 )
Cost of hedging, net of tax
(23 )
(23 )
Total other comprehensive income that may be reclassified to the income statement, net of tax
(723 )
(801 )
(485 )
(1,500 )
Other comprehensive income that will not be reclassified to the income statement
Defined benefit plans, net of tax
(123 )
(31 )
Own credit on financial liabilities designated at fair value, net of tax
Total other comprehensive income that will not be reclassified to the income statement, net of tax
(123 )
Total other comprehensive income
(592 )
(924 )
(435 )
(1,442 )
Total comprehensive income attributable to shareholders
(1,494 )
Total comprehensive income attributable to non-controlling interests
Total comprehensive income
(1,494 )
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.
63
Note 18 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 30 June 2021
Assets
Cash and balances at central banks
Loans and advances to banks
(48,788 )
Receivables from securities financing transactions
(35,584 )
Cash collateral receivables on derivative instruments
(13,980 )
Loans and advances to customers
(24,613 )
Other financial assets measured at amortized cost
(1,974 )
Total financial assets measured at amortized cost
(124,938 )
Financial assets at fair value held for trading
(2,983 )
of which: assets pledged as collateral that may be
sold or repledged by counterparties
(14,995 )
Derivative financial instruments
(37,532 )
Brokerage receivables
(3 )
Financial assets at fair value not held for trading
(17,724 )
Total financial assets measured at fair value through profit or loss
(58,242 )
Financial assets measured at fair value
through other comprehensive income
Investments in subsidiaries and associates
(52,384 )
Property, equipment and software
(312 )
Goodwill and intangible assets
Deferred tax assets
Other non-financial assets
(3 )
Total assets
(235,852 )
Liabilities
Amounts due to banks
(98,126 )
Payables from securities financing transactions
(35,645 )
Cash collateral payables on derivative instruments
(13,919 )
Customer deposits
Funding from UBS Group AG
Debt issued measured at amortized cost
(29 )
Other financial liabilities measured at amortized cost
(2,274 )
Total financial liabilities measured at amortized cost
(138,351 )
Financial liabilities at fair value held for trading
(2,806 )
Derivative financial instruments
(37,539 )
Brokerage payables designated at fair value
(5 )
Debt issued designated at fair value
(95 )
Other financial liabilities designated at fair value
(4,311 )
Total financial liabilities measured at fair value through profit or loss
(44,756 )
Provisions
(3 )
Other non-financial liabilities
(63 )
Total liabilities
(183,174 )
Equity attributable to shareholders
(52,678 )
Equity attributable to non-controlling interests
Total equity
(52,678 )
Total liabilities and equity
(235,852 )
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.
Notes to the UBS AG interim consolidated financial statements (unaudited)
64
Note 18 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
1
UBS AG
(consolidated)
For the six months ended 30 June 2021
Net cash flow from / (used in) operating activities
(3,264 )
(1,413 )
Cash flow from / (used in) investing activities
Purchase of subsidiaries, associates and intangible assets
(1 )
(1 )
Disposal of subsidiaries, associates and intangible assets
2
Purchase of property, equipment and software
(313 )
(134 )
(310 )
(757 )
Disposal of property, equipment and software
Purchase of financial assets measured at fair value through other comprehensive income
(11 )
(1,939 )
(1,950 )
Disposal and redemption of financial assets measured at fair value through other comprehensive income
Net (purchase) / redemption of debt securities measured at amortized cost
(449 )
Net cash flow from / (used in) investing activities
Cash flow from / (used in) financing activities
Net short-term debt issued / (repaid)
(3,863 )
(14 )
(3,877 )
Distributions paid on UBS shares
(4,539 )
(4,539 )
Repayment of lease liabilities
(143 )
(130 )
(274 )
Issuance of debt designated at fair value and long-term debt measured at amortized cost
3
Repayment of debt designated at fair value and long-term debt measured at amortized cost
3
(44,428 )
(570 )
(246 )
(45,244 )
Net changes in non-controlling interests
(4 )
(4 )
Net activity related to group internal capital transactions and dividends
(537 )
(1,687 )
Net cash flow from / (used in) financing activities
(833 )
(1,932 )
Total cash flow
Cash and cash equivalents at the beginning of the year
Net cash flow from / (used in) operating, investing and financing activities
(1,451 )
Effects of exchange rate differences on cash and cash equivalents
(945 )
(3,926 )
(518 )
(5,389 )
Cash and cash equivalents at the end of the period
4
of which: cash and balances at central banks
of which: loans and advances to banks
of which: money market paper
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 UBS’s minority investment in Clearstream Fund Centre and dividends received from associates. 3 Includes funding from UBS Group AG to UBS AG. 4 Comprises balances with an original maturity of three
months or less. USD
65
Note 18 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 six months ended 30 June 2020
Operating income
Interest income from financial instruments measured at amortized cost and
fair value through other comprehensive income
(481 )
Interest expense from financial instruments measured at amortized cost
(2,152 )
(258 )
(759 )
(2,519 )
Net interest income from financial instruments measured at fair value through
profit or loss
(149 )
Net interest income
Other net income from financial instruments measured at fair value through
profit or loss
Credit loss (expense) / release
(239 )
(218 )
(83 )
(540 )
Fee and commission income
(518 )
Fee and commission expense
(307 )
(454 )
(623 )
(875 )
Net fee and commission income
(8 )
Other income
(2,857 )
Total operating income
(2,517 )
Operating expenses
Personnel expenses
General and administrative expenses
(1,210 )
Depreciation and impairment of property, equipment and software
(57 )
Amortization and impairment of goodwill and intangible assets
Total operating expenses
(1,267 )
Operating profit / (loss) before tax
(1,250 )
Tax expense / (benefit)
Net profit / (loss)
(1,333 )
Net profit / (loss) attributable to non-controlling interests
Net profit / (loss) attributable to shareholders
(1,333 )
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.
Notes to the UBS AG interim consolidated financial statements (unaudited)
66
Note 18 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 six months ended 30 June 2020
Comprehensive income attributable to shareholders
Net profit / (loss)
(1,333 )
Other comprehensive income
Other comprehensive income that may be reclassified to the income statement
Foreign currency translation, net of tax
(111 )
(72 )
Financial assets measured at fair value through other comprehensive income, net of tax
Cash flow hedges, net of tax
(8 )
Cost of hedging, net of tax
(13 )
(4 )
Total other comprehensive income that may be reclassified to the income statement, net of tax
(80 )
Other comprehensive income that will not be reclassified to the income statement
Defined benefit plans, net of tax
(131 )
(97 )
(42 )
(270 )
Own credit on financial liabilities designated at fair value, net of tax
Total other comprehensive income that will not be reclassified to the income statement, net of tax
(69 )
(97 )
(42 )
(208 )
Total other comprehensive income
(80 )
Total comprehensive income attributable to shareholders
(1,413 )
Total comprehensive income attributable to non-controlling interests
Total comprehensive income
(1,413 )
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.
67
Note 18 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
Loans and advances to banks
(50,678 )
Receivables from securities financing transactions
(29,735 )
Cash collateral receivables on derivative instruments
(11,671 )
Loans and advances to customers
(20,767 )
Other financial assets measured at amortized cost
(2,644 )
Total financial assets measured at amortized cost
(115,495 )
Financial assets at fair value held for trading
(1,634 )
of which: assets pledged as collateral that
may be sold or repledged by counterparties
(13,617 )
Derivative financial instruments
(45,041 )
Brokerage receivables
(2 )
Financial assets at fair value not held for trading
(15,672 )
Total financial assets measured at fair value through profit or loss
(62,350 )
Financial assets measured at fair value
through other comprehensive income
Investments in subsidiaries and associates
(52,526 )
Property, equipment and software
(350 )
Goodwill and intangible assets
Deferred tax assets
(1 )
Other non-financial assets
(183 )
Total assets
(230,878 )
Liabilities
Amounts due to banks
(107,527 )
Payables from securities financing transactions
(29,899 )
Cash collateral payables on derivative instruments
(11,618 )
Customer deposits
Funding from UBS Group AG
Debt issued measured at amortized cost
Other financial liabilities measured at amortized cost
(3,175 )
Total financial liabilities measured at amortized cost
(128,470 )
Financial liabilities at fair value held for trading
(1,529 )
Derivative financial instruments
(45,043 )
Brokerage payables designated at fair value
(7 )
Debt issued designated at fair value
(54 )
Other financial liabilities designated at fair value
(2,927 )
Total financial liabilities measured at fair value through profit or loss
(49,559 )
Provisions
Other non-financial liabilities
(49 )
Total liabilities
(178,078 )
Equity attributable to shareholders
(52,800 )
Equity attributable to non-controlling interests
Total equity
(52,800 )
Total liabilities and equity
(230,878 )
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.
Notes to the UBS AG interim consolidated financial statements (unaudited)
68
Note 18 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
1
UBS AG
(consolidated)
For the six months ended 30 June 2020
Net cash flow from / (used in) operating activities
Cash flow from / (used in) investing activities
Purchase of subsidiaries, associates and intangible assets
(1 )
(1 )
Disposal of subsidiaries, associates and intangible assets
Purchase of property, equipment and software
(277 )
(139 )
(309 )
(725 )
Disposal of property, equipment and software
Purchase of financial assets measured at fair value through other comprehensive income
(77 )
(4,055 )
(4,132 )
Disposal and redemption of financial assets measured at fair value through other comprehensive income
Net (purchase) / redemption of debt securities measured at amortized cost
(3,126 )
(373 )
(1,318 )
(4,817 )
Net cash flow from / (used in) investing activities
(3,437 )
(513 )
(3,762 )
(7,713 )
Cash flow from / (used in) financing activities
Net short-term debt issued / (repaid)
(3 )
(1 )
Distributions paid on UBS shares
(2,550 )
(2,550 )
Repayment of lease liabilities
(133 )
(129 )
(262 )
Issuance of debt designated at fair value and long-term debt measured at amortized cost
2
Repayment of debt designated at fair value and long-term debt measured at amortized cost
2
(45,770 )
(306 )
(62 )
(46,137 )
Net changes in non-controlling interests
(4 )
(4 )
Net activity related to group internal capital transactions and dividends
(749 )
(763 )
Net cash flow from / (used in) financing activities
(723 )
(890 )
Total cash flow
Cash and cash equivalents at the beginning of the year
Net cash flow from / (used in) operating, investing and financing activities
Effects of exchange rate differences on cash and cash equivalents
(30 )
Cash and cash equivalents at the end of the period
3
of which: cash and balances at central banks
of which: loans and advances to banks
of which: money market paper
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 Incudes funding from UBS Group
AG to UBS AG. 3 Comprises balances with an original maturity of three months or less. USD
UBS AG
standalone
financial
information
Unaudited
Table of contents
information (unaudited)
71
72
73
UBS AG interim standalone financial information (unaudited)
Income statement
USD million
CHF million
Year-to-date
Year-to-date
30.6.21
30.6.20
30.6.21
30.6.20
Interest and discount income
1
Interest and dividend income from trading portfolio
Interest and dividend income from financial investments
Interest expense
2
Gross interest income
Credit loss (expense) / release
Net interest income
Fee and commission income from securities and investment business and other fee and commission income
Credit-related fees and commissions
Fee and commission expense
Net fee and commission income
Net trading income
Net income from disposal of financial investments
Dividend income from investments in subsidiaries and other participations
Income from real estate holdings
Sundry ordinary income
Sundry ordinary expenses
Other income from ordinary activities
Total operating income
Personnel expenses
General and administrative expenses
Subtotal operating expenses
Impairment of investments in subsidiaries and other participations
Depreciation, amortization and impairment of property, equipment, software, goodwill and intangible assets
Changes in provisions and other allowances and losses
Total operating expenses
Operating profit
Extraordinary income
Extraordinary expenses
Tax expense / (benefit)
Net profit / (loss) for the period
1 Interest and discount income includes negative interest income on financial assets of approximately USD 0.2 billion (CHF 0.2 billion) and approximately USD 0.2 billion (CHF 0.2 billion) for the periods ended
30 June 2021 and 30 June 2020, respectively. 2 Includes negative interest expense on financial liabilities of approximately USD 0.2 billion (CHF 0.2 billion) and approximately USD 0.1 billion (CHF 0.1 billion) for
the periods ended 30 June 2021 and 30 June 2020, respectively.
UBS AG interim standalone financial information (unaudited)
72
Balance sheet
USD million
CHF million
30.6.21
31.12.20
30.6.21
31.12.20
Assets
Cash and balances at central banks
Due from banks
Receivables from securities financing transactions
Due from customers
Funding provided to significant regulated subsidiaries eligible as total loss-absorbing capacity
1
Mortgage loans
Trading portfolio assets
Derivative financial instruments
Financial investments
Accrued income and prepaid expenses
Investments in subsidiaries and other participations
Property, equipment and software
Other assets
Total assets
of which: subordinated assets
of which: subject to mandatory conversion and / or debt waiver
Liabilities
Due to banks
Payables from securities financing transactions
Due to customers
Funding received from UBS Group AG eligible as total loss-absorbing capacity at UBS AG level measured at
amortized cost
1
Trading portfolio liabilities
Derivative financial instruments
Financial liabilities designated at fair value
of which: funding received from UBS Group AG eligible as total loss-absorbing capacity at UBS AG level
1
Bonds issued
of which: total loss-absorbing capacity eligible at UBS AG level
1
Accrued expenses and deferred income
Other liabilities
Provisions
Total liabilities
Equity
Share capital
General reserve
of which: statutory capital reserve
of which: capital contribution reserve
Voluntary earnings reserve
Net profit / (loss) for the period
Total equity
Total liabilities and equity
of which: subordinated liabilities
of which: subject to mandatory conversion and / or debt waiver
1 Represents the Swiss GAAP carrying amount of instruments qualifying as total loss-absorbing capital.
Basis of accounting and items impacting comparability
UBS AG standalone
financial statements are prepared in
accordance with Swiss GAAP (the FINMA Accounting Ordinance,
FINMA Circular 2020/1 “Accounting – banks” and the Banking
Ordinance).
The accounting policies are principally the same as the IFRS-
based accounting policies
for the consolidated financial
statements outlined in Note 1 to the consolidated financial
statements of UBS AG included in the UBS Group AG and
UBS AG Annual Report 2020. Major differences between the
Swiss GAAP requirements and International Financial Reporting
Standards are described in Note 35 to the consolidated financial
statements of UBS AG. Further information on the accounting
policies applied for the standalone financial statements of
UBS
AG is provided in Note 2
to
the UBS
AG standalone
financial statements as of 31 December 2020.
In preparing the interim financial information for UBS AG, the
same accounting policies and methods of computation have
been applied as in the annual standalone financial statements as
of 31 December 2020.
This interim financial information is unaudited and should be
read in conjunction with the audited 2020 standalone financial
statements of UBS AG, available under “Holding company and
significant regulated subsidiaries and sub-groups” under
complementary financial information at ubs.com/investors.
In the fourth quarter of 2020, UBS decided not to proceed
with the transfer of a portion of the Global Wealth Management
business booked in Switzerland from UBS Switzerland AG to
UBS AG. As a result of this decision, the beneficial ownership of
that business was re-transferred from UBS AG to
UBS Switzerland AG with effective date 31 December 2020.
UBS AG’s share of the profits for the first six months of 2020 of
USD 221 million (CHF 213 million) is reflected in
Fee and
commission income from securities and investment business and
other fee and commission income
.
Appendix
74
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 our external reports (annual, quarterly and other reports). We use APMs to
provide a more complete picture of our operating performance and to reflect management’s view of the fundamental drivers of our
business results. A definition of each APM, the method used to calculate it and the information content are presented in the table
below. Our APMs may qualify as non-GAAP measures as defined by US Securities and Exchange Commission (SEC) regulations.
APM label
Calculation
Information content
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.
Client assets (USD and CHF)
– GWM, P&C
Calculated as the sum of invested assets and other
assets held purely for transactional purposes or custody
only.
This measure provides information about the volume
of client assets managed by or deposited with UBS for
investment purposes, including other assets held
purely for transactional purposes or custody only.
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 (as well as credit card
fees for GWM).
This measure provides information about the amount
of recurring net fee income.
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,
as well as fees for payment and foreign exchange
transactions (and credit card fees for P&C), together
with other net income from financial instruments
measured at fair value through profit or loss.
This measure provides information about the amount
of the non-recurring portion of net fee and
commission income.
Cost / income ratio (%)
Calculated as operating expenses divided by operating
income before credit loss expense or release.
This measure provides information about the
efficiency of the business by comparing operating
expenses with gross income.
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.
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.
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.
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 the business volume as a result of net new business
volume flows during a specific period.
APM label
Calculation
Information content
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.
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.
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 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 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.
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.
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.
Loan penetration (%)
– GWM
Calculated as loans divided by invested assets.
This measure provides information about the loan
volume in relation to invested assets.
Net new money (USD)
– 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.
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.
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 secured loan portfolio in the total gross
loan portfolio.
Active Digital Banking clients in
Personal Banking (%)
– P&C
Calculated as the number of clients (within the
meaning of numbers of unique business relationships
operated by Personal Banking), excluding persons
under the age of 15, clients who do not have a
private account, clients domiciled outside Switzerland,
and clients who have defaulted on loans or credit
facilities, who have logged on at least once within the
past month divided by the total number of clients
(within the aforementioned meaning).
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.
Appendix
76
APM label
Calculation
Information content
Active Digital Banking clients in
Corporate & Institutional Clients (%)
– P&C
Calculated as the number of clients (within the
meaning of numbers of unique business relationships
or legal entities operated by Corporate & Institutional
Clients), excluding clients that do not have an
account, mono-product clients and clients that have
defaulted on loans or credit facilities, which have
logged on at least once within the past month divided
by the total number of clients (within the
aforementioned meaning).
This measure provides information about the
proportion of active Digital Banking clients in the total
number of UBS clients (within the aforementioned
meaning) which are serviced by Corporate &
Institutional Clients.
Mobile Banking log-in share in Personal
Banking (%)
– P&C
Calculated as the number of Mobile Banking app
log-ins divided by total log-ins via E-Banking and the
Mobile Banking app in Personal Banking.
This measure provides information about the
proportion of Mobile Banking app log-ins in the total
number of log-ins via E-Banking and the Mobile
Banking app in Personal Banking.
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.
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.
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.
This measure provides information about the revenues
from fee-generating assets in relation to their average
volume during the relevant mandate fee billing
period.
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.
Abbreviations frequently used in our financial reports
A
ABS
asset
-
bac
k
ed securities
AEI
automatic exchange of
information
AGM
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
APAC
Asia Pacific
APM
alternative performance
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
BEAT
base erosion and anti
-
abuse
tax
BIS
Bank for
International
Settlements
BoD
Board of Directors
BVG
Swiss occupational
pension plan
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
CCyB
countercyclical buffer
CDO
collateralized debt
obligation
CDS
credit default swap
CEA
Commodity Exchange Act
CEM
current exposure method
CEO
Chief Executive Officer
CET1
common equity tier 1
CFO
Chief Financial Officer
CFTC
US Commodity Futures
Trading Commission
CHF
Swiss franc
CIC
Corporate & Institutional
Clients
CIO
Chief Investment Office
CLS
C
ontinuous
Linked
Settlement
CMBS
commercial mortgage
-
backed security
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)
CRR
Capital Requirements
Regulation
CST
combined stress test
CVA
credit valuation adjustment
D
D
BO
defined benefit obligation
DCCP
Deferred Contingent
Capital Plan
DJSI
Dow Jones Sustainability
Indices
DM
discount margin
DOJ
US Department of Justice
D
-
SIB
domestic systemically
important bank
DTA
deferred tax asset
DVA
debit valuation adjustment
E
EAD
exposure at default
EB
Executive Board
EBA
European Banking Authority
EC
European Commission
ECB
European Central Bank
ECL
expected credit loss
EIR
effective interest rate
EL
expected loss
EMEA
Europe, Middle East and
Africa
EOP
Equity Ownership Plan
EPE
expected positive exposure
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
EVE
economic value 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
FSB
Financial Stability Board
FTA
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
GBP
pound sterling
GDP
gross domes
tic product
GEB
Group Executive Board
GIA
Group Internal Audit
GIIPS
Greece, Italy, Ireland,
Portugal and Spain
GMD
Group Managing Director
GRI
Global Reporting Initiative
GSE
government sponsored
entities
G
-
SIB
global systemically
important bank
H
HQLA
high-quality liquid assets
HR
human resources
Appendix
78
Abbreviations frequently used in our financial reports (continued)
I
IAA
internal assessment
approach
IAS
International Accounting
Standards
IASB
International Accounting
Standards Board
IBOR
Interbank Offered Rate
IFRIC
International
Financial
Reporting Interpretations
Committee
IFRS
International Financial
Reporting Standards
IHC
intermediate holding
company
IMA
internal models approach
IMM
internal model method
IRB
internal ratings
-
based
IRC
incremental risk charge
IRRBB
interest ra
te
risk
in the
banking book
ISDA
International Swaps and
Derivatives Association
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
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
NCL
Non
-
core and Legacy
Portfolio
NII
net interest income
NRV
negative replacement value
NSFR
net stable funding ratio
NYSE
New York Stock Exchange
O
OCA
own credit adjustment
OCI
other comprehensive
income
OTC
over
-
the
-
counter
P
PD
probability of default
PFE
potential future exposure
PIT
point in time
P&L
profit or loss
POCI
purchased or originated
credit-impaired
PRA
UK Prudential Regulation
Authority
PRV
positive replacement value
Q
QCCP
qualifying central
counterparty
QRRE
qualifying revolving retail
exposures
R
RBA
role
-
based allowances
RBC
risk
-
based capital
RbM
risk
-
based monitoring
RMBS
residential mortgage
-
backed securities
RniV
risks not in VaR
RoAE
return on attributed equity
RoCET1
return on CET1 capital
RoTE
return on tangible equity
RoU
right
-
of
-
use
RV
replacement value
RW
risk weight
RWA
risk
-
weighted assets
S
SA
standardized approach
SA
-
CCR
standardized approach for
counterparty credit risk
SAR
stock appreciation right 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
SICR
significant increase in credit
risk
SIX
SIX Swiss Exchange
SME
small and medium
-
sized
entity
SMF
Senior Management
Function
SNB
Swiss National Bank
SPPI
solely payments of principal
and interest
SRB
systemically relevant bank
SRM
specific risk measure
SVaR
stressed value
-
at
-
risk
T
TBTF
t
oo big to fail
TCJA
US Tax Cuts and Jobs Act
TLAC
total loss
-
absorbing capacity
TTC
through
-
the
-
cycle
U
UBS RESI
UBS Real Estate Securities
Inc.
UoM
units of measure
USD
US dollar
V
VaR
value
-
at
-
risk
VAT
value added tax
W
WEKO
Swiss
Competition
Commission
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.
Information sources
Reporting publications
Annual publications
Annual Report (SAP No. 80531):
volume report provides descriptions of: our Group strategy and
performance; the strategy and performance of the business
divisions and
Group Functions
; risk, treasury and capital
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):
German translation 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):
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
the following information about UBS: news releases; financial
information, including
results
-
related filings with the US
Securities and Exchange Commission; 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. Recordings
of most presentations can be downl
oad
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
Appendix
80
Cautionary Statement Regarding Forward-Looking Statements |
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. The outbreak of COVID-19 and the measures taken in
response to the pandemic have had and may continue to have a significant adverse effect on global economic activity, and an adverse effect on the credit
profile of some of our clients and other market participants, which has resulted in and may continue to increase credit loss expense and credit impairments. In
addition, we face heightened operational risks due to remote working arrangements, including risks to supervisory and surveillance controls, as well as
increased fraud and data security risks. The unprecedented scale of the measures taken to respond to the pandemic as well as the uncertainty surrounding
vaccine supply, distribution, and efficacy against mutated virus strains create significantly greater uncertainty about forward-looking statements. 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
(including as a result of the COVID-19 pandemic) in the macroeconomic climate and in the markets in which UBS operates or to which it is exposed, including
movements in securities prices or liquidity, credit spreads, and currency exchange rates, and the effects of economic conditions, market developments, and
geopolitical tensions, and changes to national trade policies on the financial position or creditworthiness of UBS’s clients and counterparties as well as on client
sentiment and levels of activity; (v) changes in the availability of capital and funding, including any changes in UBS’s credit spreads and ratings, as well as
availability and cost of funding to meet requirements for debt eligible for total loss-absorbing capacity (TLAC); (vi) changes in or the implementation of financial
legislation and regulation in Switzerland, the US, the UK, the European Union and other financial centers that have imposed, or resulted in, or may do so in the
future, more stringent or entity-specific capital, TLAC, leverage ratio, net stable funding ratio, liquidity and funding requirements, heightened operational
resilience requirements, incremental tax requirements, additional levies, limitations on permitted activities, constraints on remuneration, constraints on transfers
of capital and liquidity and sharing of operational costs across the Group or other measures, and the effect these will or would have on UBS’s business
activities; (vii) 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, proposals in Switzerland and other jurisdictions for
mandatory structural reform of banks or systemically important institutions or to other external developments; (viii) UBS’s ability to maintain and improve its
systems and controls for the detection and prevention of money laundering and compliance with sanctions to meet evolving regulatory requirements and
expectations, in particular in the US; (ix) the uncertainty arising from the UK’s exit from the EU; (x) changes in UBS’s competitive position, including whether
differences in regulatory capital and other requirements among the major financial centers will adversely affect UBS’s ability to compete in certain lines of
business; (xi) changes in the standards of conduct applicable to our businesses that may result from new regulations or new enforcement of existing standards,
including measures to impose new and enhanced duties when interacting with customers and in the execution and handling of customer transactions; (xii) the
liability to which UBS may be exposed, or possible constraints or sanctions that regulatory authorities might impose on UBS, due to litigation, contractual claims
and regulatory investigations, including the potential for disqualification from certain businesses, potentially large fines or monetary penalties, or the loss of
licenses or privileges as a result of regulatory or other governmental sanctions, as well as the effect that litigation, regulatory and similar matters have on the
operational risk component of our RWA as well as the amount of capital available for return to shareholders; (xiii) the effects on UBS’s cross-border banking
business of tax or regulatory developments and of possible changes in UBS’s policies and practices relating to this business; (xiv) UBS’s ability to retain and
attract the employees necessary to generate revenues and to manage, support and control its businesses, which may be affected by competitive factors;
(xv) changes in accounting or tax standards or policies, and determinations or interpretations affecting the recognition of gain or loss, the valuation of
goodwill, the recognition of deferred tax assets and other matters; (xvi) UBS’s ability to implement new technologies and business methods, including digital
services and technologies, and ability to successfully compete with both existing and new financial service providers, some of which may not be regulated to
the same extent; (xvii) limitations on the effectiveness of UBS’s internal processes for risk management, risk control, measurement and modeling, and of
financial models generally; (xviii) the occurrence of operational failures, such as fraud, misconduct, unauthorized trading, financial crime, cyberattacks and
systems failures, the risk of which is increased while COVID-19 control measures require large portions of the staff of both UBS and its service providers to
work remotely; (xix) restrictions on the ability of UBS Group AG to make payments or distributions, including due to restrictions on the ability of its subsidiaries
to make loans or distributions, directly or indirectly, or, in the case of financial difficulties, due to the exercise by FINMA or the regulators of UBS’s operations in
other countries of their broad statutory powers in relation to protective measures, restructuring and liquidation proceedings; (xx) the degree to which changes
in regulation, capital or legal structure, financial results or other factors may affect UBS’s ability to maintain its stated capital return objective; (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 2020 and UBS’s First Quarter 2021 Report on Form 6K. 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 |
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 |
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 AG
P.O. Box, CH-8098 Zurich
P.O. Box, CH-4002 Basel
ubs.com
This Form 6-K is hereby incorporated by reference into (1) each of the registration statements of UBS
AG on Form F-3 (Registration Number 333-253432), and of UBS Group AG on Form S-8
(Registration Numbers 333-200634; 333-200635; 333-200641; 333-200665; 333-215254; 333-
215255; 333-228653; 333-230312; and 333-249143), and into each prospectus outstanding under any
of the foregoing registration statements, (2) any outstanding offering circular or similar document
issued or authorized by UBS AG that incorporates by reference any Forms 6-K of UBS AG that are
incorporated into its registration statements filed with the SEC, and (3) the base prospectus of
Corporate Asset Backed Corporation (“CABCO”) dated June 23, 2004 (Registration Number 333-
111572), the Form 8-K of CABCO filed and dated June 23, 2004 (SEC File Number 001-13444), and
the Prospectus Supplements relating to the CABCO Series 2004-101 Trust dated May 10, 2004 and
May 17, 2004 (Registration Number 033-91744 and 033-91744-05).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
UBS AG
By: /s/ Ralph Hamers ________________
Name: Ralph Hamers
Title: President of the Executive Board
By: /s/ Kirt Gardner _____
Name: Kirt Gardner
Title: Chief Financial Officer
By: /s/ Christopher Castello _____
Name:
Christopher Castello
Title:
Controller and Chief Accounting Officer
Date: July 23, 2021