F-4/A

F-4/A 1 d501320df4a.htm F-4/A F-4/A

As filed with the Securities and Exchange Commission on May 16, 2023

Registration No. 333-271453

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1

FORM F-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

UBS Group AG

(Exact Name of Registrant as Specified in its Charter)


Switzerland	6021	Not Applicable
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(IRS Employer Identification Number)

Bahnhofstrasse 45, 8001

Zurich, Switzerland

Telephone: +41 44 234 11 11

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

David Kelly

600 Washington Boulevard

Stamford, CT 06901

Telephone: (203) 719 3000

(Name, address, including zip code, and telephone number, including area code, of agent of service)

With copies to:

David Kelly

UBS Group AG

600 Washington Boulevard

Stamford, CT 06901

Telephone: +1-203-719-3000

Marc O. Williams
John B. Meade

Evan Rosen

Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017
Telephone: +1-212-450-4000

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effectiveness of this registration statement and upon completion of the merger described in the enclosed prospectus.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the U.S. Securities Act, check the following box and list the U.S. Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the U.S. Securities Act, check the following box and list the U.S. Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

U.S. Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐

U.S. Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the U.S. Securities Act of 1933.

Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards^† provided pursuant to Section 7(a)(2)(B) of the U.S. Securities Act. ☐

†	The term ‘new or revised financial accounting standard’ refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the U.S. Securities Act, or until this registration statement shall become effective on such date as the U.S. Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL.

PRELIMINARY — SUBJECT TO COMPLETION — DATED MAY 16, 2023

PROSPECTUS OF UBS GROUP AG

LOGO

MERGER BETWEEN UBS GROUP AG AND CREDIT SUISSE GROUP AG

On March 19, 2023, UBS Group AG (which we refer to as “UBS Group AG”, “we” or “us”) and Credit Suisse Group AG (which we refer to as “Credit Suisse”) entered into a Merger Agreement (which, as amended on April 6, 2023 and as it may be amended from time to time, we refer to as the “merger agreement”) that provides for the acquisition of Credit Suisse by UBS Group AG. On the terms and subject to the conditions set forth in the merger agreement and in accordance with applicable provisions of the Swiss Federal Act on Mergers, Demergers, Conversion and Transfer of Assets and Liabilities and that certain Ordinance on Additional Liquidity Assistance Loans and the Granting of Federal Default Guarantees for Liquidity Assistance Loans from the Swiss National Bank to Systemically Important Banks dated March 16, 2023 and amended by the Swiss Federal Council on March 19, 2023 (which we refer to as the “Special Ordinance”), Credit Suisse will merge with and into UBS Group AG with UBS Group AG being the absorbing company which will continue to operate and Credit Suisse being the absorbed company which will cease to exist (the “transaction”). Upon completion of the transaction (which we refer to as “completion”), each registered ordinary Credit Suisse share with a nominal value of CHF 0.04 (which we refer to as a “Credit Suisse Ordinary Share” and collectively, the “Credit Suisse Ordinary Shares”) and each Credit Suisse American Depositary Share representing a beneficial interest in one Credit Suisse Ordinary Share (which we refer to as a “Credit Suisse ADS” and, collectively, the “Credit Suisse ADSs”) issued and outstanding immediately prior to completion will entitle its holder to receive, subject to the payment of certain fees to the depositary of the Credit Suisse ADSs in the case of Credit Suisse ADSs, the merger consideration (which we refer to as the “merger consideration”) consisting of 1/22.48 registered ordinary shares of UBS Group AG, each of which has a nominal value of USD 0.10 (each of which we refer to as a “UBS Group AG Share” and, collectively, the “UBS Group AG Shares”).

The merger consideration is fixed and will not be adjusted to reflect changes in the price of UBS Group AG Shares, Credit Suisse Ordinary Shares or Credit Suisse ADSs prior to completion. UBS Group AG Shares are currently traded on the New York Stock Exchange (which we refer to as the “NYSE”) under the ticker symbol “UBS” and on the SIX Swiss Exchange (which we refer to as the “SIX”) under the ticker symbol “UBSG.” Credit Suisse ADSs are currently traded on the NYSE under the ticker symbol “CS” and Credit Suisse Ordinary Shares are currently traded on the SIX under the ticker symbol “CSGN.” The UBS Group AG Shares that Credit Suisse shareholders will receive in connection with the transaction are treasury shares and are approved for listing on the NYSE and on the SIX. Based on the number of UBS Group AG Shares, Credit Suisse Ordinary Shares and Credit Suisse ADSs outstanding on May 12, 2023 and the closing price of UBS Group AG Shares on the NYSE on May 15, 2023, upon completion, we expect that former Credit Suisse shareholders would receive 178,031,943 UBS Group AG Shares in the aggregate, with an implied aggregate value of $3,450,259,055, and would own approximately 5.1% of the outstanding UBS Group AG Shares and persons who were holders of UBS Group AG Shares immediately prior to completion would own approximately 94.9% of the outstanding UBS Group AG Shares.

Pursuant to the Special Ordinance, the transaction will be implemented without the need for the approval of the shareholders of UBS Group AG or Credit Suisse. Accordingly, there will be no meeting of UBS Group AG shareholders and no meeting of Credit Suisse shareholders for purposes of voting on the approval of the merger agreement or the transaction. No shareholder action is required to effect the transaction and no shareholder action is sought for the transaction. We are not asking you for a proxy and you are requested not to send us a proxy.

This prospectus includes important business and financial information about UBS Group AG and Credit Suisse from reports UBS Group AG and Credit Suisse, including the information set forth in the UBS Group AG SEC Filings and the Credit Suisse SEC Filings. For details on how we use these reports to provide information, please see the section of this prospectus entitled “Where You Can Find Additional Information” beginning on page 97. We urge you to review this prospectus, carefully, in particular the “Risk Factors” section beginning on page 21 for a discussion of risks relevant to the transaction.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger agreement, the transaction or any of the other transactions described in this prospectus or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

This prospectus is dated [ ], 2023.

TABLE OF CONTENTS


	Page
ABOUT THIS PROSPECTUS		1
FREQUENTLY USED TERMS		3
QUESTIONS AND ANSWERS		6
PROSPECTUS SUMMARY		12
Information about the Companies		12
Risk Factors		13
The Transaction and the Merger Agreement		13
Merger Consideration		14
Treatment of Credit Suisse Equity Awards		14
Background and Reasons for the Transaction		15
Post-Transaction Governance and Management		15
Listing of UBS Group AG Shares		15
Delisting and Deregistration of Credit Suisse ADSs and Credit Suisse Ordinary Shares		16
Material Swiss Tax Consequences		16
Material U.S. Federal Income Tax Consequences		16
Accounting Treatment of the Transaction		17
Approvals Required for the Transaction		18
Conditions to the Transaction		19
Dissenters’ Rights		19
No Solicitation		19
Termination of the Merger Agreement		20
Termination Fee		20
Comparison of Rights of UBS Group AG Shareholders and Credit Suisse Shareholders		20
RISK FACTORS		21
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		34
COMPARATIVE PER SHARE MARKET PRICE		37
THE MERGER		38
Transaction Structure		38
Merger Consideration		38
Background and Reasons for the Transaction		39
Recent Developments		42
Listing of UBS Group AG Shares		43
Delisting and Deregistration of Credit Suisse ADSs and Credit Suisse Ordinary Shares		43
Accounting Treatment of the Transaction		44
Approvals Required for the Transaction		44
Dissenters’ Rights		45
Restrictions on Resales of UBS Group AG Shares Received in the Transaction		45
Material Swiss Tax Consequences		45
Material U.S. Federal Income Tax Consequences		51
THE MERGER AGREEMENT		55
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION		66
INFORMATION ABOUT THE COMPANIES		88
BENEFICIAL OWNERSHIP OF SECURITIES		89
COMPARISON OF RIGHTS OF UBS GROUP AG SHAREHOLDERS AND CREDIT SUISSE SHAREHOLDERS		92
LEGAL MATTERS		96
EXPERTS		96
WHERE YOU CAN FIND ADDITIONAL INFORMATION		97


	Page
ANNEX A: UBS GROUP AG’S ANNUAL REPORT ON FORM 20-F FOR THE FISCAL YEAR ENDED DECEMBER 31, 2022 FILED WITH THE SEC ON MARCH 6, 2023		A-1
ANNEX B: UBS GROUP AG’S REPORTS OF FOREIGN PRIVATE ISSUER ON FORM 6-K		B-1
ANNEX C: CREDIT SUISSE’S ANNUAL REPORT ON FORM 20-F FOR THE FISCAL YEAR ENDED DECEMBER 31, 2022 FILED WITH THE SEC ON MARCH 14, 2023		C-1
ANNEX D: CREDIT SUISSE’S REPORTS OF FOREIGN PRIVATE ISSUER ON FORM 6-K		D-1

ABOUT THIS PROSPECTUS

This prospectus, which forms part of a registration statement on Form F-4 (File No.333-271453) filed with the SEC by UBS Group AG, constitutes a prospectus of UBS Group AG under Section 5 of the U.S. Securities Act of 1933, as amended (which we refer to as the “U.S. Securities Act”) with respect to the UBS Group AG Shares to be received by the Credit Suisse shareholders in the transaction. The registration statement, including the attached exhibits, contains additional relevant information about UBS Group AG and the UBS Group AG Shares. The rules and regulations of the SEC allow UBS Group AG to omit certain information included in the registration statement from this prospectus.

We are not incorporating by reference any filings made by UBS Group AG or Credit Suisse with the SEC into this prospectus. Rather, in order to provide investors with information about UBS Group AG and Credit Suisse, we are including in this prospectus a number of reports prepared by UBS Group AG and Credit Suisse that have been filed with the SEC. For details on how we use these reports to provide information, see the section of this prospectus entitled “Where You Can Find Additional Information” beginning on page 97.

Information concerning UBS Group AG contained in this prospectus has been provided by UBS Group AG, and information concerning Credit Suisse contained in this prospectus has been provided by Credit Suisse.

No one has been authorized to provide you with information that is different from that contained in this prospectus. This prospectus is dated [ ], 2023. The information contained in this prospectus is accurate only as of that date. The distribution of UBS Group AG Shares pursuant to the merger agreement will not create any implication to the contrary.

Unless otherwise specified, currency amounts referenced in this prospectus are in U.S. dollars.

UBS Group AG has not taken any action that would permit the offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the securities described herein and the distribution of this prospectus outside the United States.

Presentation of Financial Information

The UBS Group AG SEC Filings included in this prospectus contain the audited consolidated balance sheets of UBS Group AG and its subsidiaries and UBS AG and its subsidiaries as of December 31, 2022 and 2021 and the related consolidated income statements, statements of comprehensive income, statements of changes in equity and statements of cash flows for each of the three years in the period ended December 31, 2022, and the unaudited consolidated balance sheets of UBS Group AG and its subsidiaries as of the quarters ended March 31, 2023 and December 31, 2022, and the related consolidated income statements and statements of comprehensive income for the quarters ended March 31, 2023, December 31, 2022 and March 31, 2022, and the related statements of changes in equity and statements of cash flows for the quarters ended March 31, 2023 and 2022, in each case, prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) (which financial statements are referred to in this prospectus as the “UBS consolidated financial statements”).

The Credit Suisse SEC Filings included in this prospectus contain the audited consolidated balance sheets of Credit Suisse and its subsidiaries and Credit Suisse AG and its subsidiaries as of December 31, 2022 and 2021 and the related consolidated statements of operations, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2022, prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) (which financial statements are referred to in this prospectus as the “Credit Suisse consolidated financial statements”), and unaudited financial information of Credit Suisse and

its subsidiaries as of and for the three months ended March 31, 2023, including comparative financial information as of and for the three months ended December 31, 2022 and March 31, 2022, and unaudited financial information of Credit Suisse AG and its subsidiaries as of and for the three months ended March 31, 2023, including comparative financial information as of December 31, 2022 and as of and for the three months ended March 31, 2022 (the “Credit Suisse 1Q23 unaudited financial information”). Credit Suisse’s independent registered public accounting firm has not completed a review of the Credit Suisse 1Q23 unaudited financial information. Any subsequent completion of a review may result in changes to that information.

Unless indicated otherwise, financial data with respect to UBS Group AG presented in this prospectus has been taken from the UBS consolidated financial statements and financial data with respect to Credit Suisse presented in this prospectus has been taken from the Credit Suisse consolidated financial statements and the Credit Suisse 1Q23 unaudited financial information.

This prospectus also contains the unaudited pro forma condensed combined financial information of UBS Group AG as of and for the year ended December 31, 2022 after giving effect to the transaction, referred to in this prospectus as “pro forma financial information.” See the section of this prospectus entitled “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 66. The financial information set forth in this prospectus has been rounded for ease of presentation. Accordingly, in certain cases, the sum of the numbers in a column in a table may not conform to the total figure given for that column.

For additional information on the presentation of financial information in this prospectus, see the UBS consolidated financial statements and the Credit Suisse consolidated financial statements, in each case, included in this prospectus.

FREQUENTLY USED TERMS

Certain terms that are defined in and frequently used throughout this prospectus may be helpful for you to have in mind at the outset. Unless otherwise specified or if the context so requires, the following terms have the meanings set forth below for purposes of this prospectus:

•

“Code” refers to the U.S. Internal Revenue Code of 1986, as amended.

•

“Combined Group” refers to UBS Group AG and its subsidiaries, including Credit Suisse and its subsidiaries, following completion.

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“completion” refers to the completion of the transaction.

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“completion date” refers to the date on which completion occurs.

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“Credit Suisse” refers to Credit Suisse Group AG, a corporation limited by shares (Aktiengesellschaft) according to Art. 620 et seqq. of the Swiss Code of Obligations, incorporated and domiciled in Switzerland and registered in the Commercial Register of the Canton of Zurich under the no. CHE-105.884.494.

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“Credit Suisse Annual Report” refers to the Credit Suisse and Credit Suisse AG Annual Report on Form 20-F for the fiscal year ended December 31, 2022 filed with the SEC on March 14, 2023 and included in Annex C of this prospectus.

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“Credit Suisse ADSs” refers to the American depositary shares of Credit Suisse, each of which represents a beneficial interest in one Credit Suisse Share.

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“Credit Suisse board of directors” refers to the board of directors of Credit Suisse.

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“Credit Suisse Cash Awards” refers to all cash-based retention or incentive awards outstanding under any Credit Suisse Cash Plan.

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“Credit Suisse Cash Plans” refers to any employee incentive plan operated by Credit Suisse or any individual retention or incentive agreement with an employee under which, in each case, Credit Suisse Cash Awards have been granted.

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“Credit Suisse Depositary” refers to The Bank of New York Mellon, a New York banking corporation.

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“Credit Suisse Depositary Agreement” refers to that certain Amended and Restated Deposit Agreement, dated as November 22, 2016, by and between Credit Suisse, The Bank of New York Mellon and all the owners and holders of Credit Suisse ADSs thereof, as amended.

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“Credit Suisse Equity Awards” refers to any equity awards denominated in Credit Suisse Ordinary Shares outstanding under any Credit Suisse Incentive Plan.

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“Credit Suisse Group” refers to Credit Suisse and its subsidiaries.

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“Credit Suisse Incentive Plans” refers to the Credit Suisse Group AG Master Share Plan, any employee incentive plan operated by Credit Suisse and any individual retention or incentive agreement with an employee.

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“Credit Suisse Ordinary Shares” refers to the registered ordinary shares of Credit Suisse, nominal value of CHF 0.04 per share.

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“Credit Suisse SEC Filings” refers to (1) the Credit Suisse Annual Report included in Annex C of this prospectus, and (2) (a) Credit Suisse’s Report of Foreign Private Issuer on Form 6-K filed with the SEC on April 4, 2023 and (b) Credit Suisse’s Report of Foreign Private Issuer on Form 6-K (Accession No. 0001370368-23-000042) filed with the SEC on April 24, 2023, in each case, included in Annex D of this prospectus.

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“Credit Suisse Shares” refers, collectively, to Credit Suisse Ordinary Shares and Credit Suisse ADSs.

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“Credit Suisse shareholders” refers, collectively, to registered holders of Credit Suisse Ordinary Shares and registered holders of Credit Suisse ADSs.

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“end date” refers to December 31, 2023.

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“EU” refers to the European Union.

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“Exchange Agent” refers to UBS AG.

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“exchange ratio” refers to 1/22.48.

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“FINMA” refers to the Swiss Financial Market Supervisory Authority FINMA.

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“FINMA Bail-In Measures Condition” means the condition to completion set forth in the merger agreement that, after the signing of the merger agreement, FINMA has not, with respect to either UBS Group AG or Credit Suisse, ordered any bail-in measures including converting debt capital into equity capital or the reduction (“write-down”) of claims according to art. 48-50 of the Ordinance of the Swiss Financial Market Supervisory Authority on the Insolvency of Banks and Securities Firms.

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“FTC” refers to the United States Federal Trade Commission.

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“HSR Act” refers to the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

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“IFRS” means the International Financial Reporting Standards as issued by the International Accounting Standards Board.

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“IRS” refers to the U.S. Internal Revenue Service.

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“IT” refers to information technology.

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“Merger Act” refers to the Swiss Federal Act on Mergers, Demergers, Conversion and Transfer of Assets and Liabilities.

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“merger agreement” refers to the Merger Agreement, dated as of March 19, 2023, by and between UBS Group AG and Credit Suisse, as amended on April 6, 2023 and as it may be amended from time to time. The merger agreement is attached as exhibit 2.1 to the registration statement of which this prospectus constitutes a part.

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“NYSE” refers to the New York Stock Exchange.

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“SIX” refers to the SIX Swiss Exchange.

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“SEC” refers to the U.S. Securities and Exchange Commission.

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“Special Ordinance” refers to that certain Ordinance on Additional Liquidity Assistance Loans and the Granting of Federal Default Guarantees for Liquidity Assistance Loans from the Swiss National Bank to Systemically Important Banks dated March 16, 2023 and amended by the Swiss Federal Council on March 19, 2023.

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“trading day” refers to any day when the SIX and the NYSE are scheduled to be open for trading for their respective regular trading sessions.

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“transaction” refers to the merger of Credit Suisse with and into UBS Group AG, with UBS Group AG being the absorbing company which will continue to operate and Credit Suisse being the absorbed company which will cease to exist.

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“Treasury Regulations” refers to the U.S. Treasury regulations promulgated under the Code.

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“UBS Group” refers to UBS Group AG and its consolidated subsidiaries.

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“UBS Group AG Annual Report” refers to UBS Group AG’s Annual Report on Form 20-F for the fiscal year ended December 31, 2022 filed with the SEC on March 6, 2023 and included in Annex A of this prospectus.

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“UBS Group AG board of directors” refers to the board of directors of UBS Group AG.

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“UBS Group AG” refers to UBS Group AG, a corporation limited by shares (Aktiengesellschaft) according to Art. 620 et seqq. of the Swiss Code of Obligations, incorporated and domiciled in Switzerland and registered in the Commercial Register of the Canton of Zurich under the no. CHE-395.345.924.

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“UBS Group AG Shares” refers to the registered ordinary shares of UBS Group AG, nominal value of USD 0.10per share.

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“UBS Group AG shareholders” refers to the holders of UBS Group AG Shares.

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“UBS Group AG SEC Filings” refers to (1) the UBS Group AG Annual Report included in Annex A of this prospectus, and (2) (a) UBS Group AG’s Report of Foreign Private Issuer on Form 6-K filed with the SEC on March 29, 2023, (b) UBS Group AG’s Report on Foreign Private Issuer on Form 6-K filed with the SEC on April 24, 2023, (c) UBS Group AG’s Report of Foreign Private Issuer on Form 6-K (Accession No. 0001610520-23-000078) filed with the SEC on April 25, 2023 and (d) UBS Group AG’s Report on Foreign Private Issuer on Form 6-K filed with the SEC on May 9, 2023, in each case, included in Annex B of this prospectus.

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“U.S. Exchange Act” refers to the U.S. Securities Exchange Act of 1934, as amended.

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“U.S. GAAP” refers to U.S. generally accepted accounting principles.

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“U.S. Holder” refers to a beneficial owner of Credit Suisse Ordinary Shares and Credit Suisse ADSs that is for U.S. federal income tax purposes (1) an individual citizen or resident of the United States, (2) a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, organized in or under the laws of the United States or any state thereof or the District of Columbia, (3) a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) such trust has a valid election in effect to be treated as a U.S. person for U.S. federal income tax purposes or (4) an estate, the income of which is subject to U.S. federal income tax, regardless of its source.

•

“U.S. Securities Act” refers to the U.S. Securities Act of 1933, as amended.

All brands, unless otherwise noted, referred to herein are trademarks owned or licensed by UBS Group or Credit Suisse Group, as applicable.

QUESTIONS AND ANSWERS

The following are brief answers to certain questions that you, as a Credit Suisse shareholder, may have regarding the transaction. You are urged to carefully read this prospectus and the other documents referred to in this prospectus in their entirety because this section may not provide all the information that is important to you regarding these matters. Please refer to the section of this prospectus entitled “Prospectus Summary” beginning on page 12 for a summary of important information regarding the merger agreement and the transaction. Additional important information is contained in the UBS Group AG SEC Filings and the Credit Suisse SEC Filings. For further information about UBS Group AG and Credit Suisse, see the section of this prospectus entitled “Where You Can Find Additional Information” beginning on page 97.

Q:	What is the purpose of this prospectus?

This prospectus relates to the UBS Group AG Shares to be received by Credit Suisse shareholders in the contemplated acquisition of Credit Suisse by UBS Group AG. On March 19, 2023, UBS Group AG and Credit Suisse entered into the merger agreement which provides for the acquisition of Credit Suisse by UBS Group AG. Pursuant to the merger agreement and in accordance with applicable provisions of the Merger Act and the Special Ordinance, Credit Suisse will merge with and into UBS Group AG with UBS Group AG being the absorbing company to continue to operate following completion and Credit Suisse being the absorbed company which will cease to exist upon completion. The merger agreement, which governs the terms and conditions of the transaction, is described in this prospectus and is incorporated by reference into this prospectus.

This prospectus is only to provide you information regarding the transaction. Your vote is not required or sought in connection with the transaction. You are not being asked for a proxy, and you are requested not to send a proxy.

Q:	Are shareholder approvals required for the transaction?

Pursuant to the Special Ordinance, the transaction will be implemented without the need for the approval of UBS Group AG shareholders or Credit Suisse shareholders. Therefore, there will be no Credit Suisse shareholders meeting or UBS Group AG shareholders meeting for purposes of voting on the approval of the merger agreement or the transaction and your vote is not required in connection with the transaction. You are not being asked for a proxy, and you are requested not to send a proxy.

Q:	What will Credit Suisse shareholders receive for their Credit Suisse Shares upon completion?

Upon completion, each Credit Suisse Share issued and outstanding immediately prior to the completion will entitle its holder to receive, subject to the payment of certain fees to the Credit Suisse Depositary in the case of Credit Suisse ADSs, the merger consideration consisting of 1/22.48 UBS Group AG Shares, as described in the section of this prospectus entitled “The Merger — Merger Consideration” beginning on page 38.

Each Credit Suisse shareholder will receive cash in lieu of any fractional UBS Group AG Shares that such stockholder would otherwise receive in the transaction. For details, please see the section in this prospectus entitled “The Merger Agreement — No Fractional UBS Group AG Shares” beginning on page 56.

Note that if you hold Credit Suisse ADSs, the Credit Suisse Depositary may charge you certain fees in connection with the transaction. Specifically, there is a fee of $[ ] per Credit Suisse ADS (or portion thereof) in connection with the cancellation of the Credit Suisse ADSs and the replacement of such Credit Suisse ADSs with UBS Group AG Shares. Please refer to the Credit Suisse Depositary Agreement for additional information.

Q:	When will Credit Suisse shareholders receive their merger consideration?

A:	Credit Suisse shareholders that hold their Credit Suisse Shares in book-entry or other non-certificated form will receive their merger consideration on or shortly after the completion date.

Holders of certificated Credit Suisse Ordinary Shares must surrender the physical certificates representing such Credit Suisse Ordinary Shares to the Exchange Agent together with supporting information reasonably requested by UBS Group AG after the closing date in order to receive the merger consideration in the form of UBS Group AG Shares.

Holders of certificated Credit Suisse ADSs must surrender the physical certificates representing such Credit Suisse ADSs to the Credit Suisse Depositary within ninety (90) days after the closing date in order to receive the merger consideration in the form of UBS Group AG Shares. After such date, the UBS Group AG Shares to which such Credit Suisse ADSs are exchangeable shall be sold by the Credit Suisse Depositary and the cash proceeds of such unclaimed merger consideration will be paid to such former holder of Credit Suisse ADSs following the surrender of its certificate(s). Any former holder of Credit Suisse ADSs who has not surrendered its certificated Credit Suisse ADSs shall only claim payment of the merger consideration from the Credit Suisse Depositary following the closing date, without any interest thereon.

Q:	Is the exchange ratio subject to adjustment based on changes in the prices of UBS Group AG Shares, Credit Suisse Ordinary Shares or Credit Suisse ADSs?

For each Credit Suisse Share, Credit Suisse shareholders will receive, subject to the payment of certain fees to the Credit Suisse Depositary in the case of Credit Suisse ADSs, 1/22.48 UBS Group AG Shares. The exchange ratio is fixed and will not be adjusted to reflect changes in the price of UBS Group AG Shares, Credit Suisse Ordinary Shares or Credit Suisse ADSs prior to completion. The market value of UBS Group AG Shares and the market value of Credit Suisse Ordinary Shares and Credit Suisse ADSs at completion may vary significantly from their respective values on the date that the merger agreement was executed or the date of this prospectus. Stock price changes may result from a variety of factors, including changes in UBS Group AG’s or Credit Suisse’s respective businesses, operations or prospects, regulatory considerations, and general business, market, industry or economic conditions. The exchange ratio will not be adjusted to reflect any such changes.

Based on the closing price of UBS Group AG Shares of $18.20 on the NYSE on March 17, 2023, the last full trading day before the public announcement of the merger agreement, the implied value of the merger consideration to Credit Suisse shareholders was approximately $0.81 per Credit Suisse Share. On May 15, 2023, the latest practicable trading day before the date of this prospectus, the closing price of UBS Group AG Shares was $19.38 on the NYSE, and accordingly, the implied value of the merger consideration to Credit Suisse shareholders was approximately $0.86 per Credit Suisse Share. Based on the number of UBS Group AG Shares, Credit Suisse Ordinary Shares and Credit Suisse ADSs outstanding on May 12, 2023 and the closing price of UBS Group AG Shares on the NYSE on May 15, 2023, upon completion, we expect that former Credit Suisse shareholders would receive 178,031,943 UBS Group AG Shares in the aggregate with an implied aggregate value of $3,450,259,055.

Q:	What equity stake will Credit Suisse shareholders hold in UBS Group AG immediately following the transaction?

Based on the number of UBS Group AG Shares and Credit Suisse Shares issued and outstanding on May 12, 2023, immediately after completion, former Credit Suisse shareholders are expected to own UBS Group AG Shares representing approximately 5.1% of the outstanding UBS Group AG Shares, and UBS Group AG shareholders immediately prior to completion are expected to own approximately 94.9% of the outstanding UBS Group AG Shares. The relative ownership interests of UBS Group AG shareholders and former Credit Suisse shareholders in UBS Group AG immediately following completion will depend on the number of UBS Group AG Shares and Credit Suisse Shares issued and outstanding immediately prior to completion.

Q:	Will the UBS Group AG Shares to be delivered to Credit Suisse shareholders be publicly traded on an exchange?

A:	Yes. The UBS Group AG Shares that Credit Suisse shareholders will receive in connection with the transaction are treasury shares and are approved for listing on the NYSE and on the SIX.

UBS Group AG Shares to be received by Credit Suisse shareholders in connection with the transaction will be freely transferable, except for UBS Group AG Shares received by any Credit Suisse shareholder deemed to be an “affiliate” of UBS Group AG for purposes of U.S. federal securities law. For more information, see the section entitled “The Merger — Restrictions on Resales of UBS Group AG Shares Received in the Transaction” beginning on page 45.

Q:	Will Credit Suisse Ordinary Shares and Credit Suisse ADSs continue to be publicly traded following completion?

Credit Suisse Ordinary Shares are currently authorized for trading on the SIX under the ticker symbol “CSGN” and Credit Suisse ADSs are currently authorized for trading on the NYSE under the ticker symbol “CS”. Unless otherwise mandated by the NYSE or the SIX, respectively, at the opening of the first trading day following the entry of the transaction in the Swiss Federal Commercial Registry Office, the Credit Suisse ADSs currently listed on the NYSE will cease to be listed on the NYSE and will thereafter be deregistered under the U.S. Exchange Act, and the Credit Suisse Ordinary Shares currently listed on the SIX will cease to be listed on the SIX.

Q:	May I transfer or sell my Credit Suisse Ordinary Shares or Credit Suisse ADSs prior to completion?

Yes, but only holders of Credit Suisse Ordinary Shares and Credit Suisse ADSs as of completion will become entitled to receive the merger consideration. If you transfer or otherwise sell your Credit Suisse Ordinary Shares or Credit Suisse ADSs prior to completion, you will not become entitled to receive the merger consideration by virtue of the transaction.

Q:	Will Credit Suisse shareholders receive any consideration if the transaction is not completed?

A:	If the transaction is not completed for any reason, Credit Suisse shareholders will not receive the merger consideration.

Q:	Are there any risks that I should be aware of with respect to the transaction?

You should read and carefully consider the risk factors set forth in the section of this prospectus entitled “Risk Factors” beginning on page 21. You also should read and carefully consider the risk factors with respect to UBS Group AG and Credit Suisse that are contained in the UBS Group AG SEC Filings and the Credit Suisse SEC Filings.

Q.	What material interests do Credit Suisse directors and executive officers have in the transaction?

A:	The executive board members and directors of Credit Suisse have material interests in the merger that may be different from, or in addition to, the interests of Credit Suisse shareholders generally.

After completion, the Credit Suisse Equity Awards outstanding under the Credit Suisse Group AG Master Share Plan, any employee incentive plan operated by Credit Suisse or under any individual retention or incentive agreement with an employee (each of which we refer to as a “Credit Suisse Incentive Plan” and collectively the “Credit Suisse Incentive Plans”), including such awards held by executive board members of Credit Suisse, will be converted into a share award covering, or a right to receive consideration by reference to, UBS Group AG Shares, and will continue to remain outstanding in accordance with their current terms, including the current vesting schedule and existing performance conditions (subject to

amendments approved by UBS Group AG as are reasonably necessary to reflect the impact of the transaction). For a description of the treatment of the Credit Suisse Equity Awards and the Credit Suisse Incentive Plans, see the section of this prospectus entitled “The Merger Agreement — Treatment of Credit Suisse Equity Awards” beginning on page 56. Except as otherwise provided, all Credit Suisse awards, including cash awards, will continue to be governed by the same terms and conditions as were applicable to the applicable award immediately prior to the completion date.

Pursuant to the terms of those awards, including those held by executive board members, upon an involuntary termination (including an involuntary termination in connection with or following completion), the awards will continue to be settled or delivered on the existing schedule, subject to the terms and conditions of the award.

All members of the executive board have employment contracts with Credit Suisse that are valid until terminated. The standard notice period for termination of employment by either Credit Suisse or the respective executive board member is six months. Certain executive board members are subject to a non-compete period of up to 12 months and may be compensated for this period by mutual agreement. In the event of termination, there are no contractual provisions that allow for the payment of severance awards to executive board members beyond the regular compensation awarded during the notice period. There are no “single-trigger” severance payments in connection with the merger.

Certain executive board members and directors of Credit Suisse have had employment or directorship relationships with UBS Group AG in the past. These former employment or directorship relationships with UBS Group AG concern the following individuals: (i) Axel P. Lehmann (Chairman): Mr. Lehmann was a director at UBS (2009 – 2015), as well as an executive officer (2016 – 2021), (ii) Mr. Bianchi (Audit Committee Chair) was a managing director at UBS (2000 – 2009); (iii) Mr. Körner (CEO) was an executive officer at UBS (2009 – 2020); and (iv) Mr. Diethelm was an executive officer at UBS (2008 – 2022). Further details of the former roles of these individuals at UBS is disclosed in the 2022 Credit Suisse Annual Report.

Q:	Will Credit Suisse shareholders be entitled to dissenters’ rights of appraisal?

No. There are no traditional dissenters’ rights under Swiss law. However, for business combinations effected in the form of a statutory merger and subject to Swiss law, such as the transaction, the Merger Act provides that, if the equity rights have not been adequately preserved or compensation payments in the transaction are not adequate, a shareholder may request the competent court to determine a reasonable amount of compensation payable to all shareholders. Any such determination will not impact the implementation of the merger or the receipt of the UBS Group AG Shares as merger consideration.

Q:	When is the transaction expected to be completed?

UBS Group AG expects to complete the transaction in the second quarter of 2023, assuming the conditions to closing (described in the section of this prospectus entitled “The Merger Agreement — Conditions to Completion” beginning on page 57) are satisfied or waived (to the extent waivable) by UBS Group AG. However, UBS Group AG cannot predict the actual date on which the transaction will be completed, or if the transaction will be completed at all, because completion is subject to conditions and factors outside UBS Group AG’s control. For a summary of the conditions that must be satisfied (or, to the extent waivable, waived) prior to completion, see the section of this prospectus entitled “The Merger Agreement — Conditions to Completion” beginning on page 57.

Q:	What are the material Swiss tax consequences of the transaction?

A:	The exchange of Credit Suisse Shares for UBS Group AG Shares will not be subject to Swiss Withholding Tax (as defined in the section entitled “The Merger — Material Swiss Tax Consequences”). A holder of

Credit Suisse Shares who is not a resident of Switzerland for Swiss tax purposes, and who, during the applicable tax year, has not engaged in a trade or business carried on through a permanent establishment in Switzerland for tax purposes, will not be subject to any Swiss federal, cantonal or communal income tax as a result of the transaction. For a holder of Credit Suisse Ordinary Shares who is an individual resident in Switzerland for tax purposes and who holds Credit Suisse Ordinary Shares as a private investment, the exchange of Credit Suisse Ordinary Shares for UBS Group AG Shares should be tax neutral for the purposes of Swiss federal, cantonal and communal income tax, since the sum of the UBS Group AG share capital and capital contribution reserves after the transaction does not exceed the sum of the share capital and capital contribution reserves of Credit Suisse and UBS Group AG prior to the transaction on a cumulative basis. The consideration for Credit Suisse Ordinary Shares that do not entitle the holder to receive one full UBS Group AG Share (“Fractional Shares”) should constitute a tax-free capital gain (or non tax-deductible loss) for Swiss resident individual shareholders holding Credit Suisse Ordinary Shares as private investments. For a holder who holds Credit Suisse Ordinary Shares as part of a trade or business carried on in Switzerland, the exchange of Credit Suisse Ordinary Shares for UBS Group AG Shares is tax neutral for the purposes of Swiss federal, cantonal and communal income tax, provided that the relevant book value (and thus, tax book value) of the shares is maintained. Otherwise, a taxable gain or tax deductible loss for the purposes of Swiss federal, cantonal and communal income tax may arise. Cash payments for Fractional Shares in excess of the relevant tax book value of such Fractional Shares are included as taxable income in the relevant taxation period for purposes of Swiss federal, cantonal and communal individual or corporate income tax. Cash payments for Fractional Shares below the relevant tax book value of such Fractional Shares result in a tax deductible loss in the relevant taxation period for purposes of Swiss federal, cantonal and communal individual or corporate income tax. This taxation treatment also applies to Swiss resident private individuals who, for Swiss income tax purposes, qualify as “professional securities dealers” because of, among other things, frequent dealing, or leveraging their investments, in securities. Corporate taxpayers may benefit from taxation relief on capital gains realized upon the disposal of Credit Suisse Ordinary Shares (Beteiligungsabzug), provided such Credit Suisse Ordinary Shares were held for at least one year and the shareholder disposes of at least 10% of the share capital or 10% of the profit and reserves, respectively. Subsequent sales can be less than 10% of the nominal share capital in order to qualify for the participation relief, provided the fair market value of the Credit Suisse Ordinary Shares held as of the previous financial year end prior to this sale amounts to at least 1 million Swiss francs. See “The Merger — Material Swiss Tax Consequences” beginning on page 45 for more information.

Q:	What are the material U.S. federal income tax consequences of the transaction?

The U.S. federal income tax consequences of the transaction to U.S. Holders depend on whether the transaction qualifies as a Reorganization (as defined in the section entitled “The Merger — Material U.S. Federal Income Tax Consequences”). To qualify as a Reorganization, the transaction must satisfy certain requirements, some of which are based on factual determinations and actions or events after the transaction, including events that are not within the control of UBS Group AG or Credit Suisse. Due to significant factual uncertainties, no representation is made as to the U.S. federal income tax treatment of the transaction. Completion is not conditioned on the transaction qualifying as a Reorganization or on the receipt of an opinion of counsel to that effect and neither UBS Group AG nor Credit Suisse has sought or received an opinion of counsel on the qualification of the transaction as a Reorganization. In addition, UBS Group AG and Credit Suisse have not sought and will not seek any ruling from the IRS regarding any matters relating to the transaction, and as a result, there can be no assurance that the IRS will not assert, or that a court would not sustain, a position that the transaction does not qualify as a Reorganization.

consequences differing from, and materially less favorable than, the consequences discussed in the preceding sentence may apply even if the transaction qualifies as a Reorganization, unless certain reporting requirements and other conditions are met. For additional discussion of these considerations, see the section entitled “The Merger — Material U.S. Federal Income Tax Consequences — Tax Consequences if the Transaction Qualifies as a Reorganization.”

The tax consequences of the transaction are complex and will depend on each U.S. Holder’s particular situation. In addition, U.S. Holders may be subject to state, local or non-U.S. tax laws that are not discussed in this prospectus. For a more detailed discussion of the material U.S. federal income tax consequences of the transaction, see the section entitled “The Merger — Material U.S. Federal Income Tax Consequences” beginning on page 51. U.S. Holders should consult their own tax advisors for a full understanding of the tax consequences to them of the transaction.

Q:	What should I do now?

A:	This prospectus is only to provide you information regarding the transaction. Your vote is not required or sought in connection with the transaction. You are not being asked for a proxy, and you are requested not to send a proxy.

You should read this prospectus carefully and in its entirety, including the information set forth in the UBS Group AG SEC Filings and the Credit Suisse SEC Filings that are included in this prospectus.

Q:	How can I find more information about UBS Group AG or Credit Suisse?

A:	You can find more information about UBS Group AG or Credit Suisse from various sources described in the section of this prospectus entitled “Where You Can Find Additional Information” beginning on page 97.

Q:	Whom do I call if I have questions about the transaction?

A:	If you have questions about the transaction, you may contact either UBS Group AG or Credit Suisse at the following addresses and telephone numbers, as applicable:

UBS Group AG

Investor Relations

Bahnhofstrasse 45, 8001

Zurich, Switzerland

Tel: +41 44 234 41 00

Credit Suisse Group AG

Paradeplatz 8, 8001

Zurich, Switzerland

Tel: +41 44 333 11 11

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus and may not contain all of the information that might be important to you. UBS Group AG urges you to read carefully the remainder of this prospectus, including the UBS Group AG SEC Filings and the Credit Suisse SEC Filings. For further information about UBS Group AG and Credit Suisse, see the section of this prospectus entitled “Where You Can Find Additional Information” beginning on page 97. Each item in this summary includes a page reference to direct you to a more complete description of the topics presented in this summary.

Information about the Companies

UBS Group AG

Bahnhofstrasse 45, 8001

Zurich, Switzerland

Tel: +41 44 234 11 11

UBS Group is a leading and truly global wealth manager with focused asset management and investment banking capabilities, and the leading universal bank in Switzerland. UBS Group enables people, institutions and corporations to achieve their goals by providing financial advice and solutions. UBS Group has a capital-light, cash-generative and well-diversified business model, a strong culture, a balance sheet for all seasons, and a respected brand with over 160 years of history.

The operational structure of UBS Group is comprised of the Group Functions and four business divisions: Global Wealth Management, Personal & Corporate Banking, Asset Management and the Investment Bank. UBS Group sees joint efforts as key to its growth, both within and between business divisions. UBS Group employs approximately 72,500 employees (full-time equivalents) across 48 countries.

UBS Group AG is incorporated and domiciled in Switzerland as a corporation limited by shares (Aktiengesellschaft) and operates under Art. 620 et seqq. of the Swiss Code of Obligations. UBS Group AG Shares are currently traded on the NYSE under the ticker symbol “UBS” and on the SIX under the ticker symbol “UBSG.” UBS Group AG’s principal executive offices are located at Bahnhofstrasse 45, 8001 Zurich, Switzerland, and its telephone number is +41 44 234 11 11.

Additional information about UBS Group AG can be found on its website at https://www.ubs.com. The information contained in, or that can be accessed through, UBS Group AG’s website is not intended to be incorporated into this prospectus. For additional information about UBS Group AG, see the section of this prospectus entitled “Where You Can Find Additional Information” beginning on page 97.

Credit Suisse Group AG

Paradeplatz 8, 8001

Zurich, Switzerland

Tel: +41 44 333 11 11

Credit Suisse Group is one of the world’s leading financial services providers. Its strategy is built on its leading Wealth Management and Swiss Bank franchises, with strong Asset Management as well as Markets capabilities. Credit Suisse Group seeks to follow a balanced approach to wealth management, aiming to capitalize on both the large pool of wealth within mature markets as well as the significant growth in wealth in Asia Pacific and other emerging markets, while also serving key developed markets with an emphasis on Switzerland. The bank employs more than 45,000 people (full-time equivalents) on a consolidated basis.

Credit Suisse is incorporated and domiciled in Switzerland as a corporation limited by shares (Aktiengesellschaft) and operates under Art. 620 et seqq. of the Swiss Code of Obligations. American depositary shares of Credit Suisse (each representing a beneficial interest in one Credit Suisse Share) are currently traded on the NYSE under the ticker symbol “CS” and Credit Suisse Ordinary Shares are currently traded on the SIX under the ticker symbol “CSGN”. Credit Suisse’s principal executive offices are located at Paradeplatz 8, 8001 Zurich, Switzerland and its telephone number is +41 44 333 11 11.

Additional information about Credit Suisse can be found on its website at https://www.credit-suisse.com. The information contained in, or that can be accessed through, Credit Suisse’s website is not intended to be incorporated into this prospectus. For additional information about Credit Suisse, see the section of this prospectus entitled “Where You Can Find Additional Information” beginning on page 97.

Risk Factors

You should carefully consider the risks that are described in the section of this prospectus entitled “Risk Factors” beginning on page 21.

The Transaction and the Merger Agreement

The merger agreement provides that, upon the terms and subject to the conditions set forth therein, upon completion, Credit Suisse will merge with and into UBS Group AG, with UBS Group AG being the absorbing company which will continue to operate following completion and Credit Suisse being the absorbed company which will cease to exist upon completion. By operation of law, Credit Suisse’s assets, liabilities and contracts, as well as all of Credit Suisse’s rights and obligations under such contracts, will be transferred to UBS Group AG in their entirety. The following diagram illustrates the organizational structures of UBS Group AG and Credit Suisse prior to and immediately following the consummation of the transaction and as of the date of this prospectus.

Prior to the Transaction


*UBS Group AG*		*Credit Suisse¹*

LOGO

Immediately Following the Consummation of the Transaction²

LOGO

¹	Credit Suisse AG directly owns 97.59% and Credit Suisse Group AG directly owns 2.41% of total voting of Credit Suisse International.

²	Following the transaction, Credit Suisse AG will continue to directly own 97.59%, and UBS Group AG will directly own 2.41%, of total voting of Credit Suisse International.

The terms and conditions of the transaction are contained in the merger agreement, which is described in this prospectus and is incorporated by reference into this prospectus. You are encouraged to read the merger agreement carefully, as it is the legal document that governs the transaction. All descriptions in this prospectus of the terms and conditions of the transaction are qualified by reference to the merger agreement. For additional information about the merger agreement, see the section of this prospectus entitled “The Merger Agreement” beginning on page 55.

Merger Consideration

Upon the terms and subject to the conditions set forth in the merger agreement, each Credit Suisse Share issued and outstanding immediately prior to completion will entitle its holder to receive, subject to the payment of certain fees to the Credit Suisse Depositary in the case of Credit Suisse ADSs, the merger consideration consisting of 1/22.48 UBS Group AG Shares, as described in the section of this prospectus entitled “The Merger — Merger Consideration” beginning on page 38.

Each Credit Suisse shareholder will receive cash in lieu of any fractional UBS Group AG Shares that such stockholder would otherwise receive in the transaction. For details, please see the section in this prospectus entitled “The Merger Agreement — No Fractional UBS Group AG Shares” beginning on page 56.

Treatment of Credit Suisse Equity Awards

After completion, all equity awards denominated in Credit Suisse Ordinary Shares (which we refer to as the “Credit Suisse Equity Awards”) outstanding under the Credit Suisse Group AG Master Share Plan, any employee incentive plan operated by Credit Suisse or under any individual retention or incentive agreement with an employee (each of which we refer to as a “Credit Suisse Incentive Plan” and collectively the “Credit Suisse Incentive Plans”) will (A) be converted into a share award covering, or a right to receive consideration by reference to, UBS Group AG Shares or (B) in relation to awards in the form of options or share appreciation rights, be converted into awards that pertain and apply to UBS Group AG Shares, and, in each case, to the extent legally permissible, will continue to remain outstanding in accordance with their current terms, including the current vesting schedule and existing performance conditions (subject to amendments approved by UBS Group AG as are reasonably necessary to reflect the impact of the transaction). We expect that Credit Suisse Equity Awards will be converted into a share award covering, or a right to receive consideration by reference to, UBS Group AG Shares using the same exchange ratio as the merger consideration. Any taxes, social security contributions or pension scheme contributions in connection with the settlement of the Credit Suisse Equity Awards, as applicable, will be deducted before the settlement with UBS Group AG Shares or cash.

relevant governing documents such that (A) such Credit Suisse Equity Awards are prorated to reflect the unexpired portion of any vesting period, (B) any performance conditions applicable to such Credit Suisse Equity Awards are tested based on actual performance through the consummation of the transaction to the fullest extent practicable (and any determination made in respect of the satisfaction of such performance conditions is approved by UBS Group AG) and (C) no restrictions applicable to a Credit Suisse Equity Award lapse, and that any Credit Suisse Equity Awards exercised or vested will be settled by reference to and in the form of merger consideration so that the Credit Suisse Equity Award holders will receive, for each Credit Suisse Share, the merger consideration otherwise receivable by Credit Suisse shareholders.

For a description of the treatment of the Credit Suisse Equity Awards and the Credit Suisse Incentive Plans (each as defined below), see the section of this prospectus entitled “The Merger Agreement — Treatment of Credit Suisse Equity Awards” beginning on page 56.

Background and Reasons for the Transaction

On March 19, 2023, UBS Group AG and Credit Suisse executed the merger agreement shortly after the boards of directors of UBS Group AG and Credit Suisse each approved the merger agreement. The merger agreement was entered into under exceptional circumstances of volatile financial markets and the continued outflows and deteriorating overall financial position of Credit Suisse, in order to avert a failure of Credit Suisse and thus damage to the Swiss financial center and to global financial stability. To address matters relating to Credit Suisse (including the transaction between Credit Suisse and UBS Group AG), the Swiss Federal Counsel passed the Special Ordinance. For a description of factors considered by the UBS Group AG board of directors in reaching its decision and background on the transaction (including additional detail relating to the Special Ordinance), see the section of this prospectus entitled “The Merger—Background and Reasons for the Transaction” beginning on page 39.

Post-Transaction Governance and Management

The UBS Group AG board of directors and the UBS Group AG executive board will hold overall responsibility for the Combined Group. The Combined Group will operate with five business divisions, seven functions and four regions, in addition to Credit Suisse AG. Each will be represented by a UBS Group AG executive board member, all of whom will report to UBS Group AG CEO Sergio P. Ermotti. Ulrich Körner, as Credit Suisse AG CEO, will become a member of the UBS Group AG executive board upon completion. Beatriz Martin Jimenez has been appointed Head Non-Core and Legacy and President EMEA Region and a member of the UBS Group AG executive board. Todd Tuckner became a member of the UBS Group AG executive board on May 9, 2023 and will take on the role of UBS Group AG Chief Financial Officer upon completion. Michelle Bereaux has been appointed Group Integration Officer and a member of the UBS Group AG executive board. Damian Vogel has been appointed as the Group Risk Control Head of Integration to lead risk control related integration activities and define the best possible set-up for UBS Group AG’s combined group risk control function.

For additional information regarding the post-transaction governance and management of the Combined Group, please see the UBS Group AG SEC Filings, including (i) UBS Group AG’s Report on Foreign Private Issuer on Form 6-K filed with the SEC on April 24, 2023 and (ii) UBS Group AG’s Report on Foreign Private Issuer on Form 6-K filed with the SEC on May 9, 2023, in each case, included in Annex B of this prospectus.

Listing of UBS Group AG Shares

The UBS Group AG Shares that Credit Suisse shareholders will receive in connection with the transaction are treasury shares and are approved for listing on the NYSE and on the SIX.

Delisting and Deregistration of Credit Suisse ADSs and Credit Suisse Ordinary Shares

Unless otherwise mandated by the NYSE or the SIX, respectively, at the opening of the first trading day following the entry of the transaction in the Swiss Federal Commercial Registry Office, the Credit Suisse ADSs currently listed on the NYSE will cease to be listed on the NYSE and will thereafter be deregistered under the U.S. Exchange Act, and the Credit Suisse Ordinary Shares currently listed on the SIX will cease to be listed on the SIX. See the section of this prospectus entitled “The Merger — Delisting and Deregistration of Credit Suisse ADSs and Credit Suisse Ordinary Shares” beginning on page 43.

Material Swiss Tax Consequences

The exchange of Credit Suisse Shares for UBS Group AG Shares will not be subject to Swiss Withholding Tax (as defined in the section entitled “The Merger — Material Swiss Tax Consequences”).

A holder of Credit Suisse Shares who is not a resident of Switzerland for Swiss tax purposes, and who, during the applicable tax year, has not engaged in a trade or business carried on through a permanent establishment in Switzerland for tax purposes, will not be subject to any Swiss federal, cantonal or communal income tax as a result of the transaction.

For a holder who is an individual resident in Switzerland for tax purposes and who holds Credit Suisse Ordinary Shares as a private investment, the exchange of Credit Suisse Ordinary Shares for UBS Group AG Shares should be tax neutral for the purposes of Swiss federal, cantonal and communal income tax, since the sum of the UBS Group AG share capital and capital contribution reserves after the transaction does not exceed the sum of the share capital and capital contribution reserves of Credit Suisse and UBS Group AG prior to the transaction on a cumulative basis. The consideration for Fractional Shares should constitute a tax-free capital gain (or non tax-deductible loss) for Swiss resident individual shareholders holding Credit Suisse Ordinary Shares as private investments.

For a holder who holds Credit Suisse Ordinary Shares as part of a trade or business carried on in Switzerland, the exchange of Credit Suisse Ordinary Shares for UBS Group AG Shares is tax neutral for the purposes of Swiss federal, cantonal and communal income tax, provided that the relevant book value (and thus, tax book value) of the shares is maintained. Otherwise, a taxable gain or tax deductible loss for the purposes of Swiss federal, cantonal and communal income tax may arise. Cash payments for Fractional Shares in excess of the relevant tax book value of such Fractional Shares are included as taxable income in the relevant taxation period for purposes of Swiss federal, cantonal and communal individual or corporate income tax. Cash payments for Fractional Shares below the relevant tax book value of such Fractional Shares result in a tax deductible loss in the relevant taxation period for purposes of Swiss federal, cantonal and communal individual or corporate income tax. This taxation treatment also applies to Swiss resident private individuals who, for Swiss income tax purposes, qualify as “professional securities dealers” because of, among other things, frequent dealing, or leveraging their investments, in securities. Corporate taxpayers may benefit from taxation relief on capital gains realized upon the disposal of Credit Suisse Ordinary Shares (Beteiligungsabzug), provided such Credit Suisse Ordinary Shares were held for at least one year and the shareholder disposes of at least 10% of the share capital or 10% of the profit and reserves, respectively. Subsequent sales can be less than 10% of the nominal share capital in order to qualify for the participation relief, provided the fair market value of the Credit Suisse Ordinary Shares held as of the previous financial year end prior to this sale amounts to at least 1 million Swiss francs. See “The Merger — Material Swiss Tax Consequences” beginning on page 45 for more information.

Material U.S. Federal Income Tax Consequences

Income Tax Consequences”). To qualify as a Reorganization, the transaction must satisfy certain requirements, some of which are based on factual determinations and actions or events after the transaction, including events that are not within the control of UBS Group AG or Credit Suisse. Due to significant factual uncertainties, no representation is made as to the U.S. federal income tax treatment of the transaction. Completion is not conditioned on the transaction qualifying as a Reorganization or on the receipt of an opinion of counsel to that effect and neither UBS Group AG nor Credit Suisse has sought or received an opinion of counsel on the qualification of the transaction as a Reorganization. In addition, UBS Group AG and Credit Suisse have not sought and will not seek any ruling from the IRS regarding any matters relating to the transaction, and as a result, there can be no assurance that the IRS will not assert, or that a court would not sustain, a position that the transaction does not qualify as a Reorganization.

If the transaction qualifies as a Reorganization, upon exchanging Credit Suisse Shares for UBS Group AG Shares, a U.S. Holder generally will not recognize gain or loss, except with respect to any cash received in lieu of a fractional UBS Group AG Share. If a U.S. Holder holds 5% or more by vote or by value (within the meaning of Treasury Regulations Section 1.367(a)-3(b)(1)(i)) of UBS Group AG immediately following the transaction, depending on events after the transaction, it is possible that U.S. federal income tax consequences differing from, and materially less favorable than, the consequences discussed in the preceding sentence may apply even if the transaction qualifies as a Reorganization, unless certain reporting requirements and other conditions are met. For additional discussion of these considerations, see the section entitled “The Merger — Material U.S. Federal Income Tax Consequences — Tax Consequences if the Transaction Qualifies as a Reorganization.”

Accounting Treatment of the Transaction

The transaction will be accounted for as a business combination using the acquisition method of accounting in accordance with IFRS 3, Business Combinations, which requires that one of the two companies in the transaction be designated as the acquirer for accounting purposes based on the evidence available. UBS Group AG will be treated as the accounting acquirer, and accordingly, will record assets acquired, including identifiable intangible assets, and liabilities assumed from Credit Suisse at their respective fair values (except for limited exceptions where IFRS 3 requires a different measurement basis) at the completion date. Due to the circumstances of the transaction, the purchase price will be lower than the net assets recognized, resulting in negative goodwill that is recorded in the income statement at the completion date. For a more detailed discussion of the accounting treatment of the transaction, see the section of this prospectus entitled “The Merger — Accounting Treatment of the Transaction” beginning on page 44.

Approvals Required for the Transaction

Pursuant to the merger agreement, completion is subject to the satisfaction (or waiver by UBS Group AG) of certain conditions precedent relating to required approvals, including the following:

•

the approval of the transaction by FINMA and granting by FINMA of separate arrangements and these decisions and arrangements remaining in full force and effect and not having been amended, conditioned or revoked before completion;

•

the receipt of all approvals and non-objections required to be obtained or which would be prudent to obtain under applicable law, rules or regulation from the relevant competent financial regulatory and other governmental entities (each of which we refer to as a “Regulatory Approval”) and all such Regulatory Approvals being in full force and effect and not having been amended or revoked until completion;

•

no Regulatory Approval being subject to a Regulatory Approval Adverse Condition (as defined in the merger agreement and described in the section of this prospectus entitled “The Merger Agreement — Conditions to Completion”);

•

insofar as the transaction requires approvals pursuant to the relevant merger control, competition or foreign direct investment rules in any jurisdiction without which completion would be unlawful or otherwise prohibited or restricted (each of which we refer to as a “Governmental Approval”), any relevant waiting periods under those rules will have expired, been waived or terminated, or all competent merger control, foreign direct investment and other authorities and, if applicable, courts will have adopted a decision allowing completion; and

•

no Governmental Approval being subject to a Governmental Approval Adverse Condition (as defined in the merger agreement and described in the section of this prospectus entitled “The Merger Agreement — Conditions to Completion”).

The Regulatory Approvals (granted or yet to be obtained) include (i) approval of the Board of Governors of the Federal Reserve System (which occurred on April 14, 2023), (ii) filing with the Financial Industry Regulatory Authority (“FINRA”) of an application seeking approval of a change of control pursuant to FINRA Rule 1017 (for which an application was filed on April 3, 2023), (iii) approvals from 36 U.S. state or territorial securities agencies pursuant to the relevant state securities laws (which were submitted on or before April 17, 2023) and (iv) approvals of (w) FINMA (which in principle occurred on March 19, 2023), (x) the UK Prudential Regulation Authority (which occurred on March 22, 2023), (y) the UK Financial Conduct Authority (which occurred on March 22, 2023) and (z) the European Central Bank (in relation to which initial submissions were made on April 21, 2023). To the extent there are outstanding regulatory approvals, UBS Group AG and Credit Suisse are working with the authorities to obtain the relevant approvals as soon as possible.

The Governmental Approvals (granted or yet to be obtained) include the expiration or early termination of the waiting period relating to the transaction under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (which expired on April 24, 2023) and approvals or waivers under antitrust or competition laws from competent authorities in other jurisdictions in which UBS Group AG and Credit Suisse have operations, including Canada (where the transaction received merger control clearance on April 25, 2023), Brazil (where the transaction received merger control approval from the Conselho Administrativo de Defesa Econômica on April 25, 2023 and a separate, non-suspensory merger control approval is currently being sought from the Brazilian central bank, pursuant to a filing submitted on April 18, 2023), and Switzerland (where the suspension requirement has been waived) as well as the European Union (where the short form filing was submitted on April 26, 2023), India (where the filing was submitted on April 26, 2023), Japan (where the clearance decision was issued on May 10, 2023), Mexico (where the filing was submitted on April 19, 2023) and South Korea (where the transaction received merger control approval on May 16, 2023). In all jurisdictions in which there are outstanding governmental approvals, UBS Group AG and Credit Suisse are working with the authorities to obtain the relevant approvals as soon as possible.

UBS Group AG and Credit Suisse are working to obtain all Regulatory Approvals and Governmental Approvals not yet granted expeditiously but cannot be certain when or if these Regulatory Approvals and Governmental Approvals will be obtained, or that the granting of the Regulatory Approvals and Governmental Approvals will not involve the imposition of conditions. For more information, see the sections of this prospectus entitled “The Merger Agreement — Conditions to Completion” and “The Merger Agreement — Cooperation for the Purposes of Satisfaction of Conditions to Completion” each beginning on page 58.

Conditions to the Transaction

Completion is subject to the receipt of the Regulatory Approvals and Governmental Approvals described above, granting by FINMA of certain separate arrangements, certain specified regulatory support from FINMA and other regulators and other closing conditions. Any such conditions may, to the extent waivable, be waived by UBS Group AG.

For further information, see the section in this prospectus entitled “The Merger Agreement — Conditions to Completion” beginning on page 57.

Dissenters’ Rights

No traditional dissenters’ rights exist under Swiss law. However, for business combinations effected in the form of a statutory merger and subject to Swiss law, such as the transaction, the Merger Act provides that, if the equity rights have not been adequately preserved or compensation payments in the transaction are not adequate, a shareholder may request the competent court to determine a reasonable amount of compensation payable to all shareholders. Any such determination will not impact the implementation of the merger or the receipt of the UBS Group AG Shares as merger consideration.

No Solicitation

The merger agreement generally restricts Credit Suisse’s ability to directly or indirectly (i) solicit, initiate, encourage or facilitate any inquiries or proposals from, or discuss or negotiate, or continue discussions or negotiations with, any third party relating to any restricted transaction (as defined below) or take or continue any other action which may encourage or facilitate a restricted transaction, (ii) provide or continue the provision of any information to any third party that may be considering to propose a restricted transaction or grant or continue to grant access to any such third party to Credit Suisse’s businesses, properties, assets, books or records (other than contacts and exchanges made in the ordinary course of business on matters which are not related to a restricted transaction) or (iii) approve or enter into any binding or non-binding letter of intent, memorandum of understanding, agreement or other arrangement relating to a restricted transaction.

The merger agreement provides that upon receipt of a proposal from a third party for a restricted transaction or for negotiations with respect to a restricted transaction, Credit Suisse must promptly (but no later than 24 hours after receipt) notify UBS Group AG in writing of any such proposal, which must inform UBS Group AG of the fact and the details of such approach (including any price, terms and conditions indicated). Further, Credit Suisse has agreed to keep UBS Group AG fully informed, on a prompt basis, of any material development with respect thereto, within 24 hours after receipt thereof.

Termination of the Merger Agreement

For purposes of this prospectus, “FINMA Bail-In Measures Condition” means the condition to completion set forth in the merger agreement that, after the signing of the merger agreement, FINMA has not, with respect to either UBS Group AG or Credit Suisse, ordered any bail-in measures including converting debt capital into equity capital or the reduction (“write-down”) of claims according to art. 48-50 of the Ordinance of the Swiss Financial Market Supervisory Authority on the Insolvency of Banks and Securities Firms.

For further information, see the section of this prospectus entitled “The Merger Agreement — Termination of the Merger Agreement” beginning on page 64.

Termination Fee

In the event of a termination fee event (as defined below), Credit Suisse has agreed to pay UBS Group AG a termination fee of either (i) CHF 100,000,000, or (ii) if the termination occurs because a third party has prior to completion either announced or published an offer to Credit Suisse shareholders or to Credit Suisse to acquire more than 50% of Credit Suisse’s business, in the amount of 50% of the explicit or implied premium offered by such third party. Credit Suisse has agreed to pay any termination fee within 20 trading days of the date on which the termination fee becomes payable. However, the merger agreement provides that if Credit Suisse enters into an agreement with a third party with respect to a restricted transaction, which is subject to certain terms and conditions as set forth in the merger agreement and also described in the section entitled “The Merger Agreement — No Solicitation,” the termination fee will immediately become due and payable by Credit Suisse to UBS Group AG. Termination fee will be payable plus VAT, if applicable, and will not be reduced on account of any taxes unless required by applicable law.

For the purposes of this prospectus, a “termination fee event” means the event where (i) the merger agreement is terminated due to non-fulfillment or non-waiver of a closing condition, (ii) the merger agreement is terminated and/or the transaction is not completed due to a material breach by Credit Suisse of the merger agreement or (iii) the merger agreement is terminated and/or the transaction is not completed due to a restricted transaction. For further information, see the section of this prospectus entitled “The Merger Agreement — Termination Fee” beginning on page 65.

Comparison of Rights of UBS Group AG Shareholders and Credit Suisse Shareholders

While both UBS Group AG and Credit Suisse are companies organized under the laws of Switzerland and accordingly their shareholder rights are both governed by Swiss law, there are certain differences between the rights of Credit Suisse shareholders and the rights of UBS Group AG shareholders, due to differences between the articles of associations of the two companies. These differences mainly concern the shareholders meeting organization convocation, the voting process, such as right to submit agenda items, shareholding requirements for shareholders calling extraordinary shareholders meetings, and meeting quorum and majority requirements with respect to certain resolutions. For a discussion of these differences, see the section of this prospectus entitled “Comparison of Rights of UBS Group AG Shareholders and Credit Suisse Shareholders” beginning on page 92.

RISK FACTORS

You should consider carefully the following risk factors as well as the other information set forth in this prospectus in each of the UBS Group AG SEC Filings and the Credit Suisse SEC Filings. You should also read and consider the risk factors associated with each of the businesses of UBS Group AG and Credit Suisse because these risk factors may affect the operations and financial results of the Combined Group. These risk factors may be found under (i) Part I, Item 3D, “Risk Factors” in the UBS Group AG Annual Report, which is included in the UBS Group AG SEC Filings and (ii) Part I, Item 3D, “Risk Factors” in the Credit Suisse Annual Report and the risk factors disclosed in the other Credit Suisse SEC Filings, in each case including in this prospectus.

Because the market value of UBS Group AG Shares may fluctuate, Credit Suisse shareholders cannot be sure of the market value of the merger consideration that they will receive in the transaction.

Upon completion, subject to the payment of certain fees to the Credit Suisse Depositary in the case of Credit Suisse ADSs, Credit Suisse shareholders will be entitled to receive, for each Credit Suisse Share issued and outstanding immediately prior to completion that they own, merger consideration consisting of 1/22.48 UBS Group AG Shares. Because the exchange ratio is fixed, the value of the merger consideration to be received by Credit Suisse shareholders will depend on the market price of UBS Group AG Shares, which will fluctuate from time to time. The merger consideration will not be adjusted for changes in the market price of UBS Group AG Shares, Credit Suisse Ordinary Shares or Credit Suisse ADSs between the date of signing the merger agreement and the closing date.

The market value of the merger consideration and the market prices of UBS Group AG Shares, Credit Suisse Ordinary Shares and Credit Suisse ADSs at completion may vary significantly from their respective values on the date that the merger agreement was executed or at other dates, such as the date of this prospectus or the date on which a Credit Suisse shareholder actually receives the merger consideration. These changes may result from a variety of factors, including changes in UBS Group’s or Credit Suisse Group’s respective businesses, operations or prospects, regulatory considerations and general business, market, industry or economic conditions. The merger consideration will not be adjusted to reflect the comparative market value of UBS Group AG Shares, Credit Suisse Ordinary Shares and Credit Suisse ADSs. Therefore, the aggregate market value of the merger consideration that a Credit Suisse shareholder is entitled to receive at the time that the transaction is completed could vary significantly from the value of the merger consideration on the date that the merger agreement was executed or the date of this prospectus or the date on which a Credit Suisse shareholder actually receives the merger consideration.

See the section entitled “Comparative Per Share Market Price” beginning on page 37 of this prospectus for more information about the market value of UBS Group AG Shares, Credit Suisse Ordinary Shares and Credit Suisse ADSs on certain dates.

The market price for UBS Group AG Shares may be affected by different factors from those that historically have affected the market price of Credit Suisse Ordinary Shares and Credit Suisse ADSs.

Upon completion, Credit Suisse shareholders will receive UBS Group AG Shares and will become UBS Group AG shareholders. UBS Group AG’s businesses differ from those of Credit Suisse, and, accordingly, the results of operations of UBS Group AG, including the market price of UBS Group AG Shares, will be affected by some factors that are different from those currently affecting the results of operations of Credit Suisse. For a discussion of the businesses of UBS Group AG and Credit Suisse and of some important factors to consider in connection with those businesses, please refer to the UBS Group AG SEC Filings and the Credit Suisse SEC Filings.

There is no assurance when or if the transaction will be completed.

The completion of the transaction is subject to the satisfaction (or waiver by UBS Group AG) of a number of conditions as set forth in the merger agreement, including, among others, (i) the approval of the transaction by

FINMA and granting by FINMA of separate arrangements and these decisions and arrangements remaining in full force and effect and not having been amended, conditioned or revoked before completion, (ii) receipt of all Regulatory Approvals, all such Regulatory Approvals being in full force and effect and not having been amended or revoked until completion and no Regulatory Approval being subject to a Regulatory Approval Adverse Condition (as defined in the merger agreement and described in the section of this prospectus entitled “The Merger Agreement — Conditions to Completion” beginning on page 57), (iii) receipt of all Governmental Approvals and no Governmental Approval being subject to a Governmental Approval Adverse Condition (as defined in the merger agreement and described in the section of this prospectus entitled “The Merger Agreement — Conditions to Completion” beginning on page 57), (iv) receipt of certain specified regulatory support from FINMA and other regulators, (v) the Credit Suisse board of directors having, to the fullest extent permitted by law, (a) made all necessary adjustments to the Credit Suisse Equity Awards, the Credit Suisse Cash Awards, the Credit Suisse Incentive Plans, the Credit Suisse Cash Plans and all relevant governing documents, and (b) exercised any available discretion pursuant to the Credit Suisse Incentive Plans, Credit Suisse Cash Plans and relevant governing documents such that (A) no Credit Suisse Equity Awards or Credit Suisse Cash Awards vest, become exercisable or deliver payment to an employee earlier than their scheduling vesting, exercise or payment date by reason of the merger agreement or the transaction and (B) if, notwithstanding the foregoing, any Credit Suisse Equity Award or Credit Suisse Cash Award will vest, become exercisable or deliver payment to an employee in connection with the merger agreement or the transaction: (x) time pro-rating is applied to such Credit Suisse Equity Awards or Credit Suisse Cash Awards, to reflect the unexpired portion of any vesting period, (y) any performance conditions applicable to such Credit Suisse Equity Awards or Credit Suisse Cash Awards are tested based on actual performance through the consummation of the transaction to the fullest extent practicable (with any determination made in respect of the satisfaction of such performance conditions having been approved by UBS Group AG), and (z) no restrictions applicable to any such Credit Suisse Equity Award or Credit Suisse Cash Award lapse, (vi) no circumstances having arisen and no events having occurred, and no circumstances or events having been reported by Credit Suisse or otherwise come to the attention of UBS Group AG that, considered individually or in conjunction with other requirements, obligations, circumstances or events, would reasonably be capable of having a Material Adverse Effect (as defined in the merger agreement and described in the section of this prospectus entitled “The Merger Agreement — Conditions to Completion” beginning on page 57) on Credit Suisse, including its direct or indirect subsidiaries, (vii) after the signing of the merger agreement, FINMA having not, with respect to either UBS Group AG or Credit Suisse, ordered any bail-in measures including converting debt capital into equity capital or the reduction (“write-down”) of claims according to Articles 48-50 of the Ordinance of the Swiss Financial Market Supervisory Authority on the Insolvency of Banks and Securities Firms (the “FINMA Bail-in Measures Condition”), (viii) unrestricted access to unsecured Central Bank liquidity tools from announcement throughout the integration period, including access to liquidity tools in the U.S., (ix) if required by applicable law, the SEC having declared the Form F-4 (of which this prospectus forms a part) effective, and the SEC having not taken any action to suspend effectiveness, and (x) as at completion, the absence of any order or injunction having been issued by any governmental entity or a competent court that prohibits completion and is enforceable in Switzerland. There can be no assurance as to when these conditions will be satisfied (or waived by UBS Group AG), if at all, or that other events will not intervene to delay or result in the failure to complete the transaction.

For a more complete summary of the conditions that must be satisfied or, to the extent waivable, waived prior to completion, see the section of this prospectus entitled “The Merger Agreement—Conditions to Completion” beginning on page 57.

Except in specified circumstances, if the conditions precedent to the transaction are not complete by December 31, 2023, either UBS Group AG or Credit Suisse may choose not to proceed with the transaction.

Either UBS Group AG or Credit Suisse may terminate the merger agreement if the conditions precedent to the merger have not been completed by December 31, 2023 other than as a result of the action or omission attributed to the party seeking termination provided that UBS Group AG may not seek to terminate the merger agreement as a result of the failure of the FINMA Bail-In Measures Condition without prior consultation with

FINMA. For more information, see the section entitled “The Merger Agreement—Termination of the Merger Agreement” beginning on page 64.

The termination of the merger agreement could negatively impact Credit Suisse.

If the transaction is not completed for any reason, the ongoing businesses of Credit Suisse may be adversely affected and, without realizing any of the anticipated benefits of the transaction, Credit Suisse would be subject to a number of risks, including the following:

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Credit Suisse may experience negative reactions from the financial markets, including a further decline of its stock price (which may reflect a market assumption that the transaction will be completed);

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Credit Suisse may experience negative reactions from the investment community and its customers, which could lead to further significant outflows in deposits and net assets, which could jeopardize Credit Suisse’s solvency and possibly lead to the institution of resolution measures;

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Credit Suisse may be required to pay certain costs relating to the transaction, whether or not the transaction is completed; and

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matters relating to the transaction will have required substantial commitments of time and resources by Credit Suisse management, which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to Credit Suisse had the transaction not been contemplated.

If the merger agreement is terminated and the Credit Suisse board of directors seeks another merger, business combination or other transaction, Credit Suisse stockholders cannot be certain that Credit Suisse will find a party willing to offer equivalent or more attractive consideration than the merger consideration Credit Suisse stockholders would receive from UBS Group AG in the transaction. If the merger agreement is terminated under the circumstances specified in the merger agreement, Credit Suisse may be required to pay UBS Group AG a termination payment of CHF 100,000,000 or a payment of 50% of the explicit or implied premium offered by a third party, if a third party has prior to the completion of the transaction either announced or published an offer to the shareholders of Credit Suisse or to Credit Suisse to acquire, either directly or indirectly, more than 50% of the business of Credit Suisse.

If the Special Ordinance is not transposed into ordinary Swiss law, the extraordinary liquidity facilities and public liquidity backstop may not be available on the terms described in the Special Ordinance.

The Special Ordinance provided for extraordinary liquidity facilities in the form of ELA+ and PLB. If the Special Ordinance is not transposed into ordinary law, loans under the ELA+ and PLB may no longer be available once the Special Ordinance has lapsed six months after its entry into effect (i.e., on September 17, 2023 in accordance with its article 15(2)). It is a condition precedent to completion that there remains “unrestricted access to unsecured Central Bank liquidity tools from announcement throughout integration period; including access to liquidity tools in the United States of America.” Should these liquidity facilities become unavailable and not be replaced in a subsequent legal instrument prior to closing of the transaction, either UBS Group AG or Credit Suisse would have the right to terminate the merger agreement.

The emergency circumstances under which UBS Group AG conducted its due diligence of Credit Suisse may have affected UBS Group AG’s ability to fully evaluate Credit Suisse’s assets and liabilities prior to the execution of the merger agreement.

There is a risk that the short time frame and emergency circumstances of the due diligence UBS Group AG conducted of Credit Suisse limited UBS Group AG’s ability to thoroughly evaluate Credit Suisse and fully plan for its financial condition and associated liabilities. As described in more detail in the section entitled “The Merger—Background and Reasons for the Transaction” of this prospectus beginning on page 39, UBS Group

AG was approached by Swiss governmental authorities on May 15, 2023 as the Swiss governmental authorities were considering whether to initiate resolution of Credit Suisse. To calm markets and avoid the possibility of contagion in the financial system, the Swiss government had determined that a decision would need to be made before the opening of markets following the weekend. Therefore, UBS Group AG had until March 19, 2023 to conduct limited but intensive due diligence before deciding whether to enter into a merger agreement for the acquisition of Credit Suisse. Under the merger agreement, upon completion of the transaction, all liabilities of Credit Suisse will become liabilities of UBS Group AG. If the circumstances of the due diligence affected UBS Group AG’s ability to thoroughly consider Credit Suisse’s liabilities and weaknesses, it is possible that UBS Group AG will have agreed to a rescue that is considerably more difficult and risky than it had contemplated. This could affect the future performance of UBS Group AG, its share price, and its value as an enterprise.

The merger consideration was determined based on discussions with the Swiss government and agreed with Credit Suisse after negotiations under emergency circumstances, during which limited due diligence could be conducted. As the merger consideration was fixed at that time, risks developing subsequent, or risks that were not fully identified under the circumstances result in the value of Credit Suisse at the time of completion of the transaction being considerably higher or lower than at the time the merger consideration was agreed.

The merger consideration was determined based on discussions with the Swiss government and agreed with Credit Suisse after negotiations under emergency circumstances, during which limited due diligence could be conducted. Risks inherent in the Credit Suisse business, market capitalization, general and economic conditions, the significant turbulence in the capital and financial markets, the impact of the current inflationary environment, the impact of implementation and compliance with current and proposed laws, regulations and regulatory interpretations, and the availability of capital and personnel were considered. Special consideration was also given to the fact that the negotiations of the merger agreement were completed in a highly condensed timeframe and in a market environment of extreme uncertainty. Accordingly, in light of the circumstances under which the merger consideration was determined, and because there will be no adjustment to the exchange ratio for changes in the market price of either UBS Group AG Shares or Credit Suisse Shares between the signing of the merger agreement and the completion of the transaction, the value of the UBS Group AG Shares to be delivered to Credit Suisse shareholders in the transaction could be considerably higher or lower than they were at the time the merger consideration was negotiated. Changes in operations and prospects of Credit Suisse since that time, general market and economic conditions, and other factors both within and outside UBS Group AG’s and Credit Suisse’s control may significantly alter the relative value of the companies at the time the transaction is completed.

Information about Credit Suisse upon which the UBS Group AG board of directors premised its decision for UBS Group AG to enter into the merger agreement do not reflect changes in circumstances subsequent to the date of the merger agreement.

The evaluation of Credit Suisse’s financial situation, which provided part of the basis for the decision by the UBS Group AG board of directors for UBS Group AG to enter into the merger agreement, was based only on information available up to that date. Changes in operations and prospects of Credit Suisse since that time, general market and economic conditions, and other factors both within and outside UBS Group AG’s and Credit Suisse’s control may significantly alter the relative value of the companies by the time the merger is completed.

If outflows of customer deposits and net assets at Credit Suisse continue at the same pace reported in the first quarter of 2023 or significantly increase in pace, Credit Suisse could become insolvent.

Credit Suisse has reported that in the first quarter of 2023, it experienced significant withdrawals of cash deposits, non-renewal of maturing time deposits and net asset outflows. Customer deposits declined by CHF 67 billion and net asset outflows were CHF 61.2 billion. See the Credit Suisse SEC Filings for additional information. If, as has not in fact occurred, outflows were to continue at the same pace per quarter or the pace of such outflows were to increase, Credit Suisse could quickly reach the limit of all liquidity facilities currently available to it under law and become insolvent.

The announcement and pendency of the transaction could adversely affect each of UBS Group AG’s and Credit Suisse’s respective businesses, results of operations, financial condition and/or prospects.

The announcement and pendency of the transaction could cause disruptions in and create uncertainty surrounding UBS Group AG’s and Credit Suisse’s business, including affecting UBS Group AG’s and Credit Suisse’s relationships with existing and commercial relationships, which could have an adverse effect on UBS Group AG’s and Credit Suisse’s business, results of operations, financial condition and/or prospects, regardless of whether the transaction is completed. In addition, each of UBS Group AG and Credit Suisse has expended, and continues to expend, significant management resources in an effort to complete the transaction, which are being diverted from UBS Group AG’s and Credit Suisse’s day-to-day operations.

If the transaction is not completed, the price of UBS Group AG Shares and Credit Suisse Shares may fall if and to the extent that the current prices reflect a market assumption that the transaction will be completed. In addition, the failure to complete the transaction may result in negative publicity or a negative impression of UBS Group AG and Credit Suisse in the investment community and may affect UBS Group AG’s and Credit Suisse’s relationship with employees, clients and other partners in the business community.

The unaudited pro forma condensed combined financial information of UBS Group AG and Credit Suisse is presented for illustrative purposes only and may not be indicative of the results of operations or financial condition of the Combined Group following the transaction.

The unaudited pro forma condensed combined financial information included in this prospectus has been prepared using the consolidated historical financial statements of UBS Group AG and Credit Suisse, is presented for illustrative purposes only and should not be considered to be an indication of the results of operations or financial condition of the Combined Group following the transaction. In addition, the pro forma combined financial information included in this prospectus is based in part on certain assumptions regarding the transaction. These assumptions may not prove to be accurate, and other factors may affect the Combined Group’s results of operations or financial condition following the transaction. Accordingly, the historical and pro forma financial information included in this prospectus does not necessarily represent the Combined Group’s results of operations and financial condition had UBS Group AG and Credit Suisse operated as a combined entity during the periods presented, or of the Combined Group’s results of operations and financial condition following completion of the transaction. The Combined Group’s potential for future business success and operating profitability must be considered in light of the risks, uncertainties, expenses and difficulties typically encountered by recently combined companies.

In preparing the pro forma condensed combined financial information contained in this prospectus, UBS Group AG has given effect to, among other items, the completion of the transaction and the payment of the merger consideration. The unaudited pro forma financial information does not reflect all of the costs that are expected to be incurred by UBS Group AG and Credit Suisse in connection with the transaction. For more information, see the section entitled “Unaudited Pro forma Condensed Combined Financial Information,” including the notes thereto.

The executive board members and directors of Credit Suisse have material interests in the merger that may be different from, or in addition to, the interests of Credit Suisse shareholders generally.

The executive board members and directors of Credit Suisse have material interests in the merger that may be different from, or in addition to, the interests of Credit Suisse shareholders generally. These interests include, among others, the treatment of outstanding equity awards and potential severance benefits and other payments. These interests are described in more detail in the section entitled “Questions and Answers – What Material Interests Do Credit Suisse Directors and Executive Officers have in the Transaction?”.

Certain contractual counterparties may seek to modify contractual relationships with the Combined Group, which could have an adverse effect on the Combined Group’s business and operations.

As a result of the transaction, the Combined Group may experience impacts on relationships with contractual counterparties that may harm the Combined Group’s business and results of operations. Certain counterparties may seek to terminate or modify contractual obligations following the transaction whether or not contractual rights are triggered as a result of the transaction. There can be no guarantee that UBS Group AG’s or Credit Suisse’s contractual counterparties will remain with or continue to have a relationship with the Combined Group or do so on the same or similar contractual terms following the transaction. If any contractual counterparties seek to terminate or modify contractual obligations or discontinue the relationship with the Combined Group, then the Combined Group’s business and results of operations may be harmed.

Certain UBS Group AG and Credit Suisse agreement(s), exemption(s) and other arrangement(s) may contain provisions, including change of control or anti-assignment provisions, that may be triggered by the transaction and that, if acted upon or not waived, could cause the Combined Group to lose the benefit of such agreement(s), exemption(s) and arrangement(s) and incur liabilities or replacement costs, which could have an adverse effect on the Combined Group.

Each of UBS Group AG and Credit Suisse is party to, or may become party to after the date hereof, various agreements, exemptions and other arrangements with third parties (including regulators) that may contain provisions, including change of control or anti-assignment provisions, that may be triggered upon completion. In the event that there is such an agreement, exemption or arrangement requiring a consent or waiver in relation to the transaction or the merger agreement, for which such consent or waiver was not obtained, the Combined Group could lose the benefit of the underlying agreement, exemption or arrangement and incur liabilities or replacement costs, which could have an adverse effect on the operations of the Combined Group.

UBS Group AG may not realize all of the expected cost reductions of the transaction.

There is a risk that some or all of the expected cost reductions of the transaction may not be realized, or may not occur within the time periods anticipated by UBS Group AG. The realization of such cost reductions is subject to various assumptions and may be affected by a number of factors, many of which are beyond the control of UBS Group AG. If the Combined Group cannot integrate substantially similar businesses within the same operating entities, or if it fails to integrate all of the companies’ technologies, service platforms, and operations in a timely and efficient manner, costs could be higher than expected and customer relations and the Combined Group’s reputation may suffer.

Failure to realize all of the anticipated cost reductions of the transaction may impact the financial performance of the Combined Group, the price of the UBS Group AG Shares and the ability of UBS Group AG, following completion, to continue paying dividends on UBS Group AG Shares at levels per share consistent with the current dividend or at all. The proposal of dividends by UBS Group AG following completion will be at the discretion of UBS Group AG board of directors, which may determine at any time not to recommend payment to shareholders payment of a dividend, or lower the proposed dividend per share or not increase the proposed dividend level per share.

Combining our two companies may be more challenging, costly or time-consuming than we expect.

UBS Group AG and Credit Suisse have operated and, until the completion of the merger, will continue to operate, independently. Although UBS Group AG has successfully completed mergers in the past, it is possible that the integration of Credit Suisse into UBS Group AG could result in the loss of key employees, the disruption of the ongoing business of UBS Group AG or inconsistencies in the business cultures of the two companies, or standards, controls, procedures and policies that adversely affect our ability to maintain relationships with customers and employees or to achieve the anticipated benefits of the merger. In addition, as with any merger of

banking institutions, there also may be disruptions that cause us to lose customers or cause customers to take their deposits out of UBS Group. The process of harmonizing UBS Group and Credit Suisse’s differing risk management strategies and techniques may initially leave the Combined Group exposed to unidentified and unanticipated risks that may be different than those previously faced by the two companies as separate entities. Finally, the Combined Group’s competitors may also seek to take advantage of potential integration problems to gain customers.

The Combined Group may not realize all of the anticipated benefits of the transaction.

UBS Group AG and Credit Suisse believe that the transaction will provide benefits to the Combined Group as described elsewhere in this prospectus. However, there is a risk that some or all of the expected benefits of the transaction may fail to materialize or may not occur within the time periods anticipated by UBS Group AG. The realization of such benefits may be affected by a number of factors, including regulatory considerations and decisions, many of which are beyond the control of UBS Group AG and Credit Suisse. The challenge of coordinating previously independent businesses makes evaluating the business and future financial prospects of the Combined Group following the transaction difficult. UBS Group AG and Credit Suisse have operated and, until completion of the transaction, will continue to operate, independently. The success of the transaction, including anticipated benefits and cost savings, will depend, in part, on the ability to successfully integrate the operations of both companies in a manner that results in various benefits, including, among other things, an expanded market reach and operating efficiencies that do not materially disrupt existing customer relationships nor result in decreased revenues or dividends due to the full or partial loss of customers. The past financial performance of each of UBS Group AG and Credit Suisse may not be indicative of their future financial performance. The Combined Group will be required to devote significant management attention and resources to integrating its business practices and support functions. The diversion of management’s attention and any delays or difficulties encountered in connection with the transaction and the coordination of the two companies’ operations could have an adverse effect on the business, financial results, financial condition or the share price of the Combined Group following the transaction. The coordination process may also result in additional and unforeseen expenses.

The write-down of Credit Suisse’s additional tier 1 (AT1) bonds after it was granted emergency liquidity assistance under the Special Ordinance may result in significant litigation against Credit Suisse that UBS Group AG will inherit upon the completion of the transaction and may lead to a significant attenuation in the market for AT1 instruments more generally.

Based on the Special Ordinance, Credit Suisse was granted extraordinary liquidity assistance loans secured by a guarantee of the Swiss Confederation. FINMA determined that, following the implementation of the guarantee, a “viability event” had occurred under the terms of Credit Suisse’s AT1 bonds and instructed Credit Suisse to write the bonds down to zero. Complaints have been made to Credit Suisse alleging mis-selling and suitability violations by Credit Suisse in the offering of the AT1 bonds, and a number of bondholders have appealed against FINMA’s decision. There is a risk that the complaints could develop into litigation which may become a significant liability – including significant costs and reputational impact – that UBS Group AG would inherit at the completion of the merger. In addition, the market could re-evaluate the risks associated with AT1 instruments generally, including that the probability of a write-down risk of AT1 bonds may be higher than some investors now claim to have understood and that the difference between a write-down AT1 bond and a convertible AT1 bond, which would be converted into shares instead of written off, could be more material than certain investors now claim to have perceived in circumstances. As a result, the market for such instruments may be considerably attenuated and could make it more difficult for UBS Group AG to issue such instruments at favorable terms in the future.

UBS Group AG and Credit Suisse may have difficulty attracting, motivating and retaining executives and other employees in light of the transaction.

UBS Group AG’s success after the transaction will depend in part on its ability to retain key executives and other employees. Uncertainty about the effects of the transaction on UBS Group AG and Credit Suisse employees may have an adverse effect on each of UBS Group AG and Credit Suisse and consequently on the Combined Group. This uncertainty may impair the Combined Group’s ability to attract, retain and motivate personnel.

Credit Suisse’s officers and employees that hold Credit Suisse Shares and/or Credit Suisse Equity Awards may, if the transaction is completed, be entitled to the merger consideration in respect of such Credit Suisse Shares and/or Credit Suisse Equity Awards. See the section of this prospectus entitled “The Merger Agreement – Treatment of Credit Suisse Equity Awards” beginning on page 56.

On April 5, 2023, the Swiss Federal Council decided that the outstanding variable remuneration of the top three levels of management at Credit Suisse would either be cancelled (with respect to the executive board), or

reduced by 50% (with respect to members of management one level below the executive board) or by 25% (with respect to members of management two levels below the executive board) and that the variable remuneration due in 2023 would be cancelled or reduced on a pro rata basis until the transaction is completed. These remuneration measures affect over 1,000 Credit Suisse employees.

As a result of the value of the merger consideration likely being substantially less than the original notional value of deferred compensation held by certain employees of Credit Suisse, as well as the additional restrictions that the Swiss Federal Council or the Swiss Federal Department of Finance has placed (and may place in the future) on payment of certain incentive compensation to Credit Suisse employees, Credit Suisse may experience substantially higher attrition of employees than historical levels, particularly with regards to those employees for whom the variable compensation (as opposed to the fixed compensation) represents a high percentage in their total remuneration package.

Members of the executive board have employment contracts with Credit Suisse that include a notice period for termination of employment by either Credit Suisse or the respective executive board member. Certain executive board members are subject to a non-compete period of up to 12 months and may be compensated for this period by mutual agreement. In the event of termination, there are no contractual provisions that allow for the payment of severance awards to executive board members beyond the regular compensation awarded during the notice period. Pursuant to the terms of awards held by executive board members and certain other employees, upon an involuntary termination (including an involuntary termination in connection with or following completion), the awards will continue to be settled or delivered on the existing schedule, subject to the terms and conditions of the award.

Furthermore, if employees of UBS Group AG or Credit Suisse depart or are at risk of departing, including because of issues relating to the uncertainty and difficulty of integration, financial security or a desire not to become employees of the Combined Group, UBS Group AG may have to incur significant costs in retaining such individuals (while potentially being subject to the Swiss Federal Department of Finance restrictions described above) or in identifying, hiring and retaining replacements for departing employees and may lose significant expertise and talent. As a result, the Combined Group’s ability to realize the anticipated benefits of the transaction may be materially and adversely affected. No assurance can be given that the Combined Group will be able to attract or retain employees to the same extent that Credit Suisse or UBS Group AG have been able to attract or retain employees in the past.

UBS Group AG and Credit Suisse will incur substantial transaction fees and costs in connection with the transaction.

UBS Group AG and Credit Suisse have incurred and expect to incur additional material non-recurring expenses in connection with the transaction and completion of the transactions contemplated by the merger agreement, including costs relating to obtaining required approvals (including Regulatory Approvals and Government Approvals). UBS Group AG and Credit Suisse have incurred significant financial services, accounting, tax and legal fees in connection with the process of negotiating and evaluating the terms of the transaction. Additional significant unanticipated costs may be incurred in the course of integrating the businesses of UBS Group AG and Credit Suisse after completion. Such costs may be significant and could have an adverse effect on the Combined Group’s future results of operations, cash flows and financial condition.

The transaction may not be accretive, and may be dilutive, to UBS Group AG’s earnings per share, which may negatively affect the market price of UBS Group AG Shares and the implied value of the UBS Group AG Shares following the transaction.

In connection with completion, UBS Group AG expects to deliver to Credit Suisse shareholders approximately 178,031,943 UBS Group AG Shares and certain Credit Suisse Equity Awards are required to be converted into equity awards of UBS Group AG pursuant to the merger agreement. Trading of these UBS Group AG Shares could have the effect of depressing the market price of UBS Group AG Shares.

UBS Group AG currently expects that the transaction will result in a number of benefits, including that it will ultimately be accretive to UBS Group AG’s earnings per share. This projection is based on preliminary estimates that may materially change. Future events and conditions could reduce or delay the accretion that is currently projected or result in the transaction being dilutive to UBS Group AG’s earnings per share, including adverse changes in market conditions, additional transaction and integration related costs and other factors such as the failure to realize some or all of the cost reductions and other benefits anticipated in the transaction. Any dilution of, reduction in or delay of any accretion to, UBS Group AG’s earnings per share could cause the price of UBS Group AG Shares and the implied value of the UBS Group AG Shares to decline or grow at a reduced rate.

UBS Group AG is organized under the laws of Switzerland and a substantial portion of its assets are, and many of its directors and officers reside, outside of the United States. As a result, it may not be possible for shareholders to enforce civil liability provisions of the securities laws of the United States against UBS Group AG or UBS Group AG’s officers and members of the UBS Group AG board of directors.

UBS Group AG is organized under the laws of Switzerland. A substantial portion of UBS Group’s assets are located outside the United States, and many of UBS Group AG’s directors and officers and some of the experts named in this prospectus are residents of jurisdictions outside of the United States and the assets of such persons may be located outside of the United States. As a result, it may be difficult for investors to effect service within the United States upon UBS Group AG and its directors, officers and experts, or to enforce judgments obtained in U.S. courts against UBS Group AG or such persons either inside or outside of the United States, or to enforce in U.S. courts judgments obtained against UBS Group AG or such persons in courts in jurisdictions outside the United States, in any action predicated upon the civil liability provisions of the federal securities laws of the United States.

There is no certainty that civil liabilities predicated solely upon the federal securities laws of the United States can be enforced in Switzerland, whether by original action or by seeking to enforce a judgment of U.S. courts. In addition, punitive damages awards in actions brought in the United States or elsewhere may be unenforceable in Switzerland.

There may be less publicly available information concerning UBS Group AG than there is for issuers that are not foreign private issuers because, as a foreign private issuer, UBS Group AG is exempt from a number of rules under the U.S. Exchange Act and is permitted to file less information with the SEC than issuers that are not foreign private issuers and UBS Group AG, as a foreign private issuer, is permitted to follow home country practice in lieu of the listing requirements of the NYSE, subject to certain exceptions.

As a foreign private issuer under the U.S. Exchange Act, UBS Group AG is exempt from certain rules under the U.S. Exchange Act, and is not required to file periodic reports and financial statements with the SEC as frequently or as promptly as companies whose securities are registered under the U.S. Exchange Act but are not foreign private issuers, or to comply with Regulation FD, which restricts the selective disclosure of material non-public information. In addition, UBS Group AG is exempt from certain disclosure and procedural requirements applicable to proxy solicitations under Section 14 of the U.S. Exchange Act. The members of the UBS Group AG management board, officers and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the U.S. Exchange Act. Accordingly, there may be less publicly available information concerning UBS Group AG than there is for companies whose securities are registered under the U.S. Exchange Act but are not foreign private issuers, and such information may not be provided as promptly as it is provided by such companies. In addition, certain information may be provided by UBS Group AG in accordance with Swiss law, which may differ in substance or timing from such disclosure requirements under the U.S. Exchange Act. Subject to certain exceptions, the rules of the NYSE permit a foreign private issuer to follow its home country practice in lieu of the listing requirements of the NYSE, including, for example, certain board, committee and director independence requirements. Accordingly, you may not have the same protections afforded to shareholders of companies that are required to comply with all of the NYSE corporate governance requirements.

Resales of UBS Group AG Shares following the transaction may cause the market value of UBS Group AG Shares to decline.

UBS Group AG expects that it will deliver to Credit Suisse shareholders approximately 178,031,943 UBS Group AG Shares in connection with the transaction. Completion and the resale of these UBS Group AG Shares from time to time could have the effect of depressing the market value for UBS Group AG Shares. The increase in the number of UBS Group AG Shares may lead to sales of such UBS Group AG Shares or the perception that such sales may occur, either of which may adversely affect the market for, and the market value of, UBS Group AG Shares.

Additionally, the market price of UBS Group AG Shares may fluctuate significantly following completion, and Credit Suisse shareholders could lose value of their UBS Group AG Shares. The delivery of additional UBS Group AG Shares in the transaction could on its own have the effect of depressing the market price for UBS Group AG Shares. In addition, many Credit Suisse shareholders may decide not to hold the UBS Group AG Shares they receive as a result of the transaction. Other Credit Suisse shareholders may be required to sell the UBS Group AG Shares they receive as a result of the transaction. Any such sales of UBS Group AG Shares could have the effect of depressing the market price for UBS Group AG Shares.

The UBS Group AG Shares have different rights from the Credit Suisse Ordinary Shares.

While both UBS Group AG and Credit Suisse are companies organized under the laws of Switzerland and, accordingly, their shareholders’ rights are governed by Swiss law, certain of the rights associated with Credit Suisse Ordinary Shares are different from the rights associated with UBS Group AG Shares due to differences between the articles of associations of the two companies. These differences mainly concern the shareholders meeting organization convocation, the voting process, such as right to submit agenda items, shareholding requirements for shareholders calling extraordinary shareholders meetings, and quorum and majority requirements with respect to certain resolutions. See the section of this prospectus entitled “Comparison of Rights of UBS Group AG Shareholders and Credit Suisse Shareholders” beginning on page 92 for a discussion of the different rights associated with UBS Group AG Shares and Credit Suisse Ordinary Shares.

UBS Group AG shareholders and Credit Suisse shareholders will have a reduced ownership and voting interest in the Combined Group after the transaction.

Upon completion, UBS Group AG expects to deliver approximately 178,031,943 UBS Group AG Shares in the aggregate to Credit Suisse shareholders pursuant to the merger agreement. As a result, it is expected that, based on the number of UBS Group AG Shares and Credit Suisse Shares outstanding on May 12, 2023, immediately after completion, former Credit Suisse shareholders will own approximately 5.1% of the outstanding UBS Group AG Shares and UBS Group AG shareholders will own approximately 94.9% of the outstanding UBS Group AG Shares. In addition, UBS Group AG Shares may be issued from time to time following completion to holders of Credit Suisse Equity Awards on the terms set forth in the merger agreement. See the section of this prospectus entitled “The Merger Agreement — Treatment of Credit Suisse Equity Awards” beginning on page 56 for a more detailed explanation.

UBS Group AG and Credit Suisse may become the target of lawsuits in connection with the transaction and/or the regulatory and other actions taken in connection with the transaction, including the enactment of the Special Ordinance, which could result in substantial costs.

Although no lawsuits have been brought against UBS Group AG, Credit Suisse or their respective board of directors in connection with the transaction and/or the regulatory and other actions taken in connection with the transaction as of the date of this prospectus, including the enactment of the Special Ordinance, lawsuits are often brought against companies that have entered into merger agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting consummation of the transaction, then that injunction may delay or prevent the transaction from being completed.

The Combined Group will have significant ongoing litigation and investigation matters, which could have an adverse effect on the Combined Group’s business and operations.

The Combined Group will be a global financial services firm and subject to many different legal, tax and regulatory regimes, including extensive regulatory oversight, and will be exposed to significant liability risk. UBS Group and Credit Suisse Group are, and following completion the Combined Group will be, subject to a large number of claims, disputes, legal proceedings and government investigations, and we expect that the Combined Group’s ongoing business activities will continue to give rise to such matters in the future. These matters may have an adverse impact on the Combined Group’s business and results of operations or may cause disruptions to the Combined Group’s operations.

For a detailed discussion of the material ongoing litigation and investigation regarding Credit Suisse, see the Credit Suisse SEC Filings.

For a detailed discussion of the material ongoing litigation and investigation regarding UBS Group AG, see the UBS Group AG SEC Filings.

If the transaction qualifies as a reorganization within the meaning of Section 368(a) of the Code, U.S. Holders generally cannot recognize losses, and additional reporting requirements may be required for certain U.S. Holders. If the transaction does not qualify as a reorganization within the meaning of Section 368(a) of the Code, it generally will be taxable to U.S. Holders.

To qualify as a Reorganization (as defined in the section entitled “The Merger — Material U.S. Federal Income Tax Consequences”), the transaction must satisfy certain requirements, some of which are based on factual determinations and actions or events after the transaction, including events that are not within the control of UBS Group AG or Credit Suisse. Due to significant factual uncertainties, no representation is made as to

the U.S. federal income tax treatment of the transaction. Completion is not conditioned on the transaction qualifying as a Reorganization or on the receipt of an opinion of counsel to that effect and neither UBS Group AG nor Credit Suisse has sought or received an opinion of counsel on the qualification of the transaction as a Reorganization. In addition, UBS Group AG and Credit Suisse have not sought and will not seek any ruling from the IRS regarding any matters relating to the transaction, and as a result, there can be no assurance that the IRS will not assert, or that a court would not sustain, a position that the transaction does not qualify as a Reorganization.

If the transaction qualifies as a Reorganization, upon exchanging Credit Suisse Shares for UBS Group AG Shares, a U.S. Holder (as defined in the section entitled “The Merger — Material U.S. Federal Income Tax Consequences”) generally will not recognize gain or loss, except with respect to any cash received in lieu of a fractional UBS Group AG Share. If a U.S. Holder holds 5% or more by vote or by value (within the meaning of Treasury Regulations Section 1.367(a)-3(b)(1)(i)) of UBS Group AG immediately following the transaction, depending on events after the transaction, it is possible that U.S. federal income tax consequences differing from, and materially less favorable than, the consequences discussed in the preceding sentence may apply even if the transaction qualifies as a Reorganization, unless certain reporting requirements and other conditions are met. For additional discussion of these considerations, see the section entitled “The Merger — Material U.S. Federal Income Tax Consequences — Tax Consequences if the Transaction Qualifies as a Reorganization.”

UBS Group AG and Credit Suisse may incur substantial tax liabilities in connection with the transaction.

In the past, Credit Suisse has made significant impairments of the tax value of its participations in subsidiaries below their tax acquisition costs. As a result of the transaction, tax acquisition costs of participations held by Credit Suisse may be transferred to UBS Group AG. Additionally, UBS may further impair its participations in former Credit Suisse subsidiaries after the closing of the transaction. UBS Group AG may become subject to additional Swiss tax on future reversals of such impairments for Swiss tax purposes. Reversals of prior impairments may occur to the extent that the net asset value of the previously impaired subsidiary increases, e.g., as a result of an increase in retained earnings. Although it is difficult to quantify this additional tax exposure, as various potential mitigants (e.g. transfers of assets and liabilities, business activities, subsidiary investments, as well as other restructuring measures within the Combined Group in the course of the integration) exist, such additional tax exposure may be material.

Risks Related to UBS Group AG and Credit Suisse

UBS Group AG and Credit Suisse are, and following completion, UBS Group AG will continue to be subject to the risks described in (i) Part I, Item 3D, “Risk Factors” in the UBS Group AG Annual Report, which is included in the UBS Group AG SEC Filings and (ii) Part I, Item 3D, “Risk Factors” in the Credit Suisse

Annual Report and the risk factors disclosed in the other Credit Suisse SEC Filings, including Credit Suisse’s Report of Foreign Private Issuer on Form 6-K (Accession No. 0001370368-23-000042) filed with the SEC on April 24, 2023.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements as that term is defined in Section 27A of the U.S. Securities Act and Section 21E of the U.S. Exchange Act, as amended by the Private Securities Litigation Reform Act of 1995. Forward-looking statements can sometimes be identified by the use of forward-looking terms such as “believes,” “expects,” “may,” “will,” “shall,” “should,” “would,” “could,” “potential,” “seeks,” “aims,” “projects,” “predicts,” “is optimistic,” “intends,” “plans,” “estimates,” “targets,” “anticipates,” “continues” or other comparable terms or negatives of these terms, but not all forward-looking statements include such identifying words. Forward-looking statements are based upon current plans, estimates and expectations that are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. UBS Group AG can give no assurance that such plans, estimates or expectations will be achieved and therefore, actual results may differ materially from any plans, estimates or expectations in such forward-looking statements. Important factors that could cause actual results to differ materially from such plans, estimates or expectations include:

•

the transaction may not close;

•

UBS Group AG may be unable to promptly and effectively integrate Credit Suisse Group’s businesses or to achieve the cost reductions and other benefits contemplated by the transaction;

•

disruption from the transaction may make it more difficult to maintain business, contractual and operational relationships;

•

the announcement or the consummation of the transaction may have a negative effect on the market price of UBS Group AG Shares or on Credit Suisse’s or UBS Group AG’s operating results;

•

the degree to which UBS Group AG 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;

•

the degree to which UBS Group AG is successful in implementing changes to its businesses to meet changing market, regulatory and other conditions;

•

developments in the macroeconomic climate and in the markets in which UBS Group AG or Credit Suisse operates or to which they are exposed, including movements in securities prices or liquidity, credit spreads, currency exchange rates, the effects of economic conditions, including increasing inflationary pressures, market developments, increasing geopolitical tensions and changes to national trade policies on the financial position or creditworthiness of UBS Group AG’s and Credit Suisse’s clients and counterparties, as well as on client sentiment and levels of activity, including the COVID-19 (coronavirus) pandemic and the measures taken to manage it, as well as instability in the financial industry and the Russian invasion in Ukraine and related sanctions and trade disruptions, which have had and may also continue to have a significant adverse effect on global and regional economic activity, including disruptions to global supply chains and labor market displacements;

•

the ability of UBS Group AG or Credit Suisse to successfully recover from a disaster or other business continuity problem due to a hurricane, flood, earthquake, terrorist attack, war, conflict (e.g., the Russia-Ukraine war), pandemic, security breach, cyberattack, power loss, telecommunications failure or other natural or man-made event, including the ability to function remotely during long-term disruptions such as the COVID-19 (coronavirus) pandemic;

•

the impact of public health crises, such as pandemics (including the COVID-19 (coronavirus) pandemic) and epidemics and any related company or governmental policies and actions to protect the health and safety of individuals or governmental policies or actions to maintain the functioning of national or global economies and markets, including any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down or similar actions and policies;

•

changes in the availability of capital and funding, including any changes in UBS Group AG’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);

•

changes in central bank policies or the implementation of financial legislation and regulation in Switzerland, the United States, 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 Group’s or Credit Suisse Group’s business activities;

•

the 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 or Credit Suisse Group in response to legal and regulatory requirements, or other external developments;

•

the liability to which UBS Group AG may be exposed, or possible constraints or sanctions that regulatory authorities might impose on UBS Group, due to litigation, contractual claims and regulatory investigations affecting UBS Group or Credit Suisse Group, 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 UBS Group AG’s RWA, as well as the amount of capital available for return to shareholders;

•

the effects on UBS Group AG’s or Credit Suisse’s business, in particular cross-border banking, of sanctions, tax or regulatory developments and of possible changes in UBS Group AG’s or Credit Suisse’s policies and practices;

•

the ability to retain and attract the employees necessary to generate revenues and to manage, support and control UBS Group’s and Credit Suisse Group’s respective businesses, which may be affected by competitive factors as well as by uncertainty caused by the transaction;

•

the occurrence of operational failures, such as fraud, misconduct, unauthorized trading, financial crime, cyberattacks, data leakage and systems failures, the risk of which is increased with cyberattack threats from nation states;

•

the ability to maintain and improve UBS Group and Credit Suisse Group’s systems and controls for complying with sanctions in a timely manner and for the detection and prevention of money laundering to meet evolving regulatory requirements and expectations, in particular in current geopolitical turmoil;

•

the uncertainty arising from domestic stresses in certain major economies;

•

changes in UBS Group AG’s competitive position, including whether differences in regulatory capital and other requirements among the major financial centers adversely affect UBS Group’s ability to compete in certain lines of business;

•

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;

•

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;

•

the 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;

•

limitations on the effectiveness of UBS Group’s and Credit Suisse Group’s internal processes for risk management, risk control, measurement and modeling, and of financial models generally;

•

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 Group AG’s operations in other countries of their broad statutory powers in relation to protective measures, restructuring and liquidation proceedings;

•

the degree to which changes in regulation, capital or legal structure, financial results or other factors may affect UBS Group AG’s ability to maintain its stated capital return objective;

•

uncertainty over the scope of actions that may be required by UBS Group AG, 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 the possibility of conflict between different governmental standards and regulatory regimes;

•

the effect that these or other factors or unanticipated events may have on UBS Group AG’s reputation and the additional consequences that this may have on our business and performance;

•

the ability of UBS Group AG, as a foreign private issuer, to file less information with the SEC than issuers that are not foreign private issuers;

•

the possibility that holders of UBS Group AG Shares in the U.S. may not be able to enforce civil liabilities against UBS Group AG, UBS Group AG officers and members of the UBS Group AG board of directors;

•

the risks and uncertainties discussed in the “Risk Factors” and “Cautionary Statement Regarding Forward Looking Statements” sections in UBS Group AG’s reports filed with the SEC; and

•

the risks and uncertainties discussed in the “Risk Factors” and “Cautionary Statement Regarding Forward Looking Information” sections in Credit Suisse’s reports filed with the SEC.

These risks, as well as other risks associated with the transaction, are more fully discussed in this prospectus. While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. UBS Group AG cautions you not to place undue reliance on any forward-looking statements as they are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, UBS Group AG’s or Credit Suisse’s actual results of operations, financial condition and liquidity, and the development of new markets or market segments in which UBS Group AG and Credit Suisse operate, may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. Except as required by law, UBS Group AG assumes no obligation to update or revise the information contained herein, which speaks only as of the date hereof.

For additional information about factors that could cause UBS Group AG’s and Credit Suisse’s results to differ materially from those described in the forward-looking statements, please see the section of this prospectus entitled “Risk Factors” beginning on page 21 as well as in the reports that UBS Group AG and Credit Suisse have filed with the SEC described in the section of this prospectus entitled “Where You Can Find Additional Information” beginning on page 97.

References to UBS Group AG in this section mean (i) before completion, the UBS Group and (ii) following completion, the Combined Group.

All written or oral forward-looking statements concerning the transaction or other matters addressed in this prospectus and attributable to UBS Group AG or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

COMPARATIVE PER SHARE MARKET PRICE

UBS Group AG Shares are traded on the NYSE under the ticker symbol “UBS” and on the SIX under the ticker symbol “UBSG”. Credit Suisse ADSs are traded on the NYSE under the ticker symbol “CS” and Credit Suisse Ordinary Shares are traded on the SIX under the ticker symbol “CSGN”.

The following table sets forth the closing prices for UBS Group AG Shares on the NYSE and the SIX, the closing price for Credit Suisse ADSs on the NYSE and the closing price for Credit Suisse Ordinary Shares on the SIX, in each case, as of March 17, 2023, the last trading day of UBS Group AG Shares, Credit Suisse ADSs and Credit Suisse Ordinary Shares prior to UBS Group AG’s and Credit Suisse’s announcement of their entry into the merger agreement. The table also shows the implied value of the merger consideration for each Credit Suisse Share as of the same date, calculated by multiplying the closing price of UBS Group AG Shares on March 17, 2023 and the exchange ratio.

UBS Group AG
Shares listed on
the NYSE

UBS Group
AG Shares
listed on the
SIX

Credit Suisse
ADSs listed on
the NYSE

Credit Suisse
Ordinary
Shares listed
on the SIX

Implied Per
Share Value of
Merger
Consideration
(USD)

Implied Per
Share Value of
Merger
Consideration
(CHF)

March 17, 2023

$ 18.20

CHF 17.11

$ 2.01

CHF 1.86

$ 0.81

CHF 0.76

The market prices of UBS Group AG Shares, Credit Suisse ADSs and Credit Suisse Ordinary Shares have fluctuated since the date of the announcement of the merger agreement and will continue to fluctuate from the date of this prospectus to completion, and the market price of UBS Group AG Shares will continue to fluctuate after completion. No assurance can be given concerning the market prices of UBS Group AG Shares, Credit Suisse ADSs and Credit Suisse Ordinary Shares before completion or UBS Group AG Shares after completion. The exchange ratio is fixed in the merger agreement, but the market price of the UBS Group AG Shares (and therefore the value of the merger consideration) upon completion could be greater than, less than or the same as shown in the table above.

THE MERGER

This section of the prospectus describes the various aspects of the transaction and related matters. This section may not contain all of the information that is important to you. You should carefully read this entire prospectus, including the full text of the merger agreement, which is incorporated by reference into this prospectus, for a more complete understanding of the transaction. In addition, important business and financial information about each of UBS Group AG and Credit Suisse is included in this prospectus, including the UBS Group AG SEC Filings and the Credit Suisse SEC Filings. For further information, see the section of this prospectus entitled “Where You Can Find Additional Information” beginning on page 97.

This prospectus is being furnished to you as a Credit Suisse shareholder in connection with the acquisition of Credit Suisse by UBS Group AG pursuant to a merger by absorption of Credit Suisse into UBS Group AG and the delivery of UBS Group AG Shares to Credit Suisse shareholders in accordance with terms and conditions set forth in the merger agreement. According to the Special Ordinance, the transaction will be implemented without the need for approval of the shareholders of UBS Group AG or Credit Suisse. Therefore, no shareholder action is required to effect the transaction.

Transaction Structure

The merger agreement provides that, subject to the terms and conditions of the merger agreement, upon completion, Credit Suisse will merge with and into UBS Group AG with UBS Group AG being the absorbing company which will continue to operate following completion and Credit Suisse being the absorbed company which will cease to exist upon completion. By operation of law, Credit Suisse’s assets, liabilities and contracts, as well as all rights and obligations under such contracts, will be transferred to UBS Group AG in their entirety. The terms and conditions of the transaction are contained in the merger agreement, which is described in this prospectus and is incorporated by reference into this prospectus. You are encouraged to read the merger agreement carefully, as it is the legal document that governs the transaction. All descriptions in this prospectus of the terms and conditions of the transaction are qualified by reference to the merger agreement.

Merger Consideration

Upon completion, holders of Credit Suisse Shares issued and outstanding immediately prior to completion will receive, for each Credit Suisse Share, and, subject to the payment of certain fees to the Credit Suisse Depositary in the case of Credit Suisse ADSs, the merger consideration consisting of 1/22.48 UBS Group AG Shares.

Each Credit Suisse shareholder will receive cash in lieu of any fractional UBS Group AG Shares that such stockholder would otherwise receive in the transaction. For details, please see the section in this prospectus entitled “The Merger Agreement — No Fractional UBS Group AG Shares” beginning on page 56.

The UBS Group AG Shares that Credit Suisse shareholders will receive in connection with the transaction are treasury shares and are already approved for listing on the NYSE and the SIX. Based on the number of UBS Group AG Shares and Credit Suisse Shares outstanding on May 12, 2023, upon completion, we expect that former holders of Credit Suisse Shares would own approximately 5.1% of the outstanding UBS Group AG Shares and persons who were holders of UBS Group AG Shares immediately prior to completion would own approximately 94.9% of the outstanding UBS Group AG Shares.

Because the exchange ratio is fixed, the market value of the merger consideration to Credit Suisse shareholders will fluctuate with the market price of the UBS Group AG Shares. Based on the closing price of UBS Group AG Shares of $18.20 on the NYSE on March 17, 2023, the last full trading day before the public announcement of the merger agreement, the implied value of the merger consideration to Credit Suisse shareholders was approximately $0.81 per Credit Suisse Share. On May 15, 2023, the latest practicable trading day before the date of this prospectus, the closing price of UBS Group AG Shares on the NYSE was $19.38 per share and, accordingly, the implied value of the merger consideration to Credit Suisse shareholders was approximately $0.86 per Credit Suisse Share. The merger consideration will not be adjusted to reflect changes in the price of UBS Group AG Shares or Credit Suisse Shares prior to completion. Therefore, the aggregate market value of the merger consideration that a Credit Suisse shareholder is entitled to receive at the time that the transaction is completed could vary significantly from the value of the merger consideration on the date that the merger agreement was executed or the date of this prospectus or the date on which a Credit Suisse shareholder actually receives the merger consideration.

Background and Reasons for the Transaction

Credit Suisse experienced significant deposit and net asset outflows in the months leading up to the signing of the merger agreement. In early fourth quarter of 2022, Credit Suisse began experiencing deposit and net asset outflows at levels that substantially exceeded the rates incurred in the third quarter of 2022. Specifically, in the fourth quarter of 2022, customer deposits declined by CHF 138 billion and net asset outflows were CHF 110.5 billion. In the second half of March 2023, Credit Suisse experienced significant withdrawals of cash deposits as well as non-renewal of maturing time deposits. Specifically, in the first quarter of 2023, customer deposits declined by CHF 67 billion. Net asset outflows in the first quarter of 2023 were CHF 61.2 billion.

Between October 2022 and February 2023, developments at Credit Suisse, including the net loss reported by Credit Suisse for the third quarter of 2022, implementation of the strategy announced by Credit Suisse in October 2022 and its share price, were reviewed by the ad hoc Strategy Committee of the UBS Group AG board of directors (the “Strategy Committee”). In early December 2022, at the direction of the Strategy Committee, management undertook a preliminary assessment of what consequences a transaction with Credit Suisse would have, should UBS Group AG be approached to take an active role in rescuing Credit Suisse. A preliminary assessment was presented to the Strategy Committee on December 19, 2022. Subsequently, in a meeting of February 20, 2023, the Strategy Committee, and in a meeting on February 22, 2023, the UBS Group AG board of directors, each concluded that an acquisition of Credit Suisse was not desirable for UBS Group AG but that further analysis was necessary in order to prepare for a scenario where Credit Suisse was in serious financial difficulties. In reaching this view, the Strategy Committee and the UBS Group AG board of directors considered the uncertainty of establishing a reliable valuation of Credit Suisse, recent business performance and risks of Credit Suisse, further potential liabilities as well as the risk that regulatory approvals required to complete a transaction might not be obtained or could only be obtained over an extended time. The UBS Group AG board of directors requested management to monitor ongoing developments at Credit Suisse and to assess measures through which UBS Group AG’s concerns could be addressed in the event that the Swiss government made a formal request to UBS Group AG to consider acquiring Credit Suisse. This request reflected the view of the UBS Group AG board of directors that in the event of a further substantial deterioration in Credit Suisse’s position, there was a possibility that UBS Group AG would be requested to intervene.

From January to mid-March 2023, teams including UBS Group AG personnel, external legal advisers and Morgan Stanley (who were asked to assist with this theoretical analysis), carried out financial analyses and assessed potential legal structures and the possible measures to address UBS Group AG’s concerns in a scenario where the Swiss Government would actively support the acquisition of Credit Suisse by UBS Group AG. UBS Group AG also assessed the potential negative impact on UBS Group AG, should Credit Suisse go into resolution. Negative impacts considered included the potential damage to the reputation of Switzerland as a financial center and to the standing of Swiss banks, including UBS, with clients and counterparties should Credit Suisse be placed in resolution. As signs of stress in the financial system materialized, as evidenced by significant

deposit outflows at, and the subsequent failure of, Silicon Valley Bank and Signature Bank in the United States, UBS Group AG’s assessment extended to potential global systemic risk that could arise from a failure of Credit Suisse.

Between December 2022 and mid-January 2023, Credit Suisse representatives engaged in meetings with Government Representatives (consisting of a combination of ad hoc and regular touchpoint meetings) in which M&A and other contingency planning was a focus of discussion, which covered, among other options, a potential merger with UBS Group AG. In these meetings, Credit Suisse was represented by certain key representatives, including its Chairman, Chief Executive Officer, Chief Financial Officer and General Counsel.

On March 15, 2023, Credit Suisse experienced a major drop in its share price and a substantial wave of deposit and net asset outflows. After market close on that day, FINMA and the Swiss National Bank (“SNB”) publicly announced that the SNB would provide liquidity assistance to Credit Suisse if necessary.

On the afternoon of March 15, 2023, representatives of the Swiss Government, SNB and FINMA (“Government Representatives”) met with the Chairman of the UBS Group AG board of directors and other representatives of UBS Group AG. The Government Representatives outlined the heightened fragility of the financial system following the failure of Silicon Valley Bank in the United States and the need to avoid contagion by taking decisive action with respect to Credit Suisse in order to safeguard the domestic and international financial stability by the end of the weekend. Government Representatives indicated that of all possible options available to give the market necessary reassurance, the one deemed by Government Representatives to be most successful in reassuring markets and minimizing negative fallout was an orderly takeover of Credit Suisse by UBS Group AG on a going concern basis. UBS Group AG was therefore asked whether it was willing to consider merging with Credit Suisse in principle. The Government Representatives indicated that without such a rescue it was to be expected that Credit Suisse (a Global Systemically Important Bank) would need to be placed into resolution or into bankruptcy. The Government Representatives made clear that a resolution or bankruptcy of Credit Suisse would have a very severe impact on the financial markets and the banking system in Switzerland and around the world. To avoid this, it would be necessary to agree and announce an alternative transaction by the end of Sunday, March 19, 2023.

UBS Group AG indicated that, in principle, it was prepared to undertake such a transaction if it could be executed in a manner that was in the best interests of its shareholders and other stakeholders. Based on the work previously performed, UBS Group AG outlined the issues that would need to be addressed in any transaction, together with measures designed to achieve transaction certainty. The issues included the ability to conduct due diligence on Credit Suisse, support from the Government Representatives to help timely achieve the multiple regulatory approvals that would be required to consummate the transaction, transition provisions for additional capital surcharges and liquidity requirements that would arise under Swiss regulation as a result of the size of the transaction and other capital requirements applicable to Credit Suisse and UBS Group AG, adequate access to central bank liquidity for Credit Suisse and UBS Group AG, and the potential need for downside protection on the valuation of non-core and similar portfolios.

While Credit Suisse obtained liquidity by borrowing against collateral from the SNB under its emergency liquidity assistance facility on March 16, 2023, outflows continued and created a downward cycle of a rapidly worsening operating environment, significantly deteriorating the overall liquidity and cash position of Credit Suisse and seriously jeopardizing its financial stability and ultimately exposing it to the imminent risk of being placed into resolution. Credit Suisse subsequently disclosed that, in the second half of March 2023, it experienced significant withdrawals of cash deposits as well as non-renewal of maturing time deposits and that customer deposits declined by CHF 67 billion in the first quarter of 2023, with outflows most acute in the days immediately preceding and following the announcement of the merger.

In view of such outflows, the Swiss Federal Council adopted a Special Ordinance on March 16, 2023, providing for an additional liquidity-assistance loan by the SNB to Credit Suisse, secured by a special bankruptcy privilege (“ELA+”), as well as a liquidity-assistance loan with a guarantee to be entered into with the Swiss Confederation (“Public Liquidity Backstop” or “PLB”). Borrowing under ELA+ and PLB bear interest at the SNB policy rate plus 3% per annum. In addition, Credit Suisse is required to pay a guarantee fee of 0.25% per annum on the PLB facility. Credit Suisse’s borrowings under the emergency liquidity facilities was CHF 108 billion as of March 31, 2023 after repayments of CHF 60 billion during the first quarter, with further repayments of CHF 10 billion as of April 24, 2023.

On March 16, 2023, the Government Representatives confirmed to representatives of UBS Group AG their preference for UBS Group AG to proceed with the acquisition of Credit Suisse and that they continued to consider this to be the preferred solution among the options available. In this meeting and subsequent discussions, UBS Group AG was represented by one or more of Colm Kelleher, Chairman of the Board; Lukas Gaehwiler, Vice Chairman of the Board; Ralph Hamers, Group CEO, Barbara Levi, Group General Counsel; and Markus Ronner, Group Chief Compliance and Governance Officer. The Government Representatives acknowledged the measures identified by UBS Group AG as necessary to support a transaction and their intention to implement the necessary support, including the Loss Protection Agreement. UBS Group AG indicated to the Government Representatives that it was willing to consider this option in order to give clarity and stability to the market, but only on the basis of a better understanding of Credit Suisse and the risks inherent in such a transaction and with the necessary governmental engagement and support in Switzerland and other key jurisdictions. On March 16, 2023, Credit Suisse and UBS Group AG signed a confidentiality agreement and UBS Group AG and its advisors started to conduct limited but intensive, targeted due diligence to review inherent risks and implications for UBS Group AG of a merger with Credit Suisse. UBS Group AG understood that the other options being considered by the Swiss government at this time would have involved placing Credit Suisse in resolution or bankruptcy.

From March 15, 2023 until March 19, 2023, certain key representatives of Credit Suisse, including its Chairman, Chief Executive Officer, Chief Financial Officer and General Counsel, had a number of meetings with Government Representatives regarding Credit Suisse’s liquidity and outflow situation and potential solutions related thereto, including a potential merger with UBS. Specifically with respect to the status of negotiations and discussions with respect to the proposed merger, there were approximately five meetings between Credit Suisse and Government Representatives between March 18, 2023 and March 19, 2023 prior to the parties’ announcement of the transaction.

During March 18, 2023 and March 19, 2023, UBS Group AG and Credit Suisse exchanged merger agreement drafts and, as a result of negotiations with Credit Suisse, UBS Group AG increased the offered merger consideration payable to Credit Suisse shareholders from approximately CHF 1 billion to approximately CHF 3 billion. In parallel, each of UBS Group AG and Credit Suisse had separate discussions with the Government Representatives to ensure that a merger would be feasible from the perspective of meeting the concerns of each of UBS Group AG and Credit Suisse, as well as enabling Credit Suisse to remain a viable going concern from that weekend until the consummation of the merger. In this context, the Government Representatives determined the actions they considered appropriate to sufficiently stabilize Credit Suisse both in terms of liquidity and capital.

These actions were taken into consideration by UBS Group AG and Credit Suisse in their respective overall assessments of a possible transaction. Additionally, in order to ensure the viability of a possible transaction, UBS Group AG and the Government Representatives further entered into negotiations about a potential loss protection agreement with the Swiss Confederation in favor of UBS Group AG for losses on certain non-core assets. UBS Group AG, Credit Suisse and the Government Representatives also concluded that a transaction in a going concern, supported by stabilization measures, was preferable to a resolution proceeding, given the unpredictable impact of a resolution of Credit Suisse on the financial markets and systemic stability, including in Switzerland, and the potential destruction of value for all stakeholders involved.

On March 19, 2023, the Special Ordinance was revised to empower the Swiss Federal Government and FINMA to enter into a loss protection agreement (“Loss Protection Agreement”) with UBS Group AG to cover up to CHF 9 billion in losses upon realization of a portfolio of certain Credit Suisse assets, after UBS Group AG having borne the first CHF 5 billion of losses on those assets. The Swiss Federal Council also adopted additional emergency liquidity and capital support measures to stabilize Credit Suisse and support a transaction with UBS Group AG. These measures included: making available additional liquidity facilities from the SNB to Credit Suisse and UBS Group AG; and making inapplicable the requirement that UBS Group AG and Credit Suisse shareholders approve the acquisition. In addition, UBS Group AG and the Swiss Government will further review a profit and loss sharing agreement on an equal basis for the case if losses would exceed 14 billion CHF. The revised Special Ordinance also provides that FINMA may order Credit Suisse to write down additional core capital if the guarantee by the Swiss confederation of the PLB liquidity facilities from the SNB is made available. Accordingly, and in consideration of the applicable contractual terms of Credit Suisse’s AT1 Securities, FINMA issued a decree ordering Credit Suisse to write down the principal and interest of all Credit Suisse’s AT1 securities (i.e. to zero and to notify the holders of the affected securities).

On the afternoon of March 19, 2023, after having considered the circumstances described above and having determined that the merger was in the best interests of their shareholders and other stakeholders as compared to other available alternatives, the UBS Group AG board of directors approved the merger. In making its determination, the board considered the liquidity facilities made available to both banks, the additional loss buffer created by the FINMA-ordered write-down of Credit Suisse AT1 instruments, the Loss Protection Agreement authorized by the revised Special Ordinance and the expressions of support for the transaction from key regulators of both UBS Group AG and Credit Suisse. The UBS Group AG board of directors also considered that the combined Global Wealth Management and Asset Management businesses would have approximately USD 5 trillion in invested assets, significantly increasing their scale, that the addition of Credit Suisse’s Swiss banking business would reinforce UBS Group AG’s leading position in Switzerland, management’s estimates that UBS Group would remain above its CET1 capital ratio guidance at closing and that the transaction would be accretive to earnings per share by 2027. The UBS Group AG board of directors further considered the complexity and cost of integration and executing a wind-down of non-core assets and parts of Credit Suisse’s investment bank and the substantial amount of litigation, regulatory and similar matters and other potential contingent liabilities at Credit Suisse. In light of the prevailing exigent economic and political circumstances and Credit Suisse’s declining financial condition, the Credit Suisse board of directors determined that at the time the only option available to Credit Suisse involving definitive documentation that could be executed on the required timeline would be entering into the merger agreement with UBS Group AG.

After receiving confirmation from the Government Representatives that appropriate stabilization measures would be taken to enable Credit Suisse to remain a viable going concern as described above, the merger agreement was executed.

Recent Developments

Securitized Product Group

On November 15, 2022, Credit Suisse announced that it entered into definitive transaction agreements for the sale of a significant part of its Securitized Products Group (“SPG”) to entities and funds managed by affiliates of Apollo Global Management (collectively, “Apollo”). This transaction involves phased closings through the first half of 2023. On February 7, 2023, the parties completed the first closing of such transaction, and the majority of the assets and professionals associated with the transaction are now part of or managed by ATLAS SP Partners, a new standalone credit firm focused on asset-backed financing and capital markets solutions. Following this first closing, there were three subsequent closings in the first quarter of 2023 with further assets transferred. These closings, together with the recently completed sales of other portfolio assets to Apollo and other third parties and certain business reductions, resulted in a total reduction of the asset equivalent exposures of SPG and related financing businesses from USD 74 billion as of September 30, 2022 to approximately USD

26 billion as of March 31, 2023. In the first quarter of 2023, Credit Suisse recognized a pre-tax gain of USD 0.8 billion as a result of the Apollo transaction, partially offset by losses on the valuation of certain financing arrangements associated with the Apollo transaction. One additional closing related to the SPG sale is expected to be consummated in the second quarter of 2023.

In connection with the initial closing of this transaction, Credit Suisse and Apollo entered into various ancillary agreements related to the transaction, including an investment management agreement, certain financing arrangements and a transition services agreement.

For additional information, please refer to the Credit Suisse SEC Filings.

CS First Boston

On February 9, 2023, Credit Suisse announced that it entered into a definitive transaction agreement with M. Klein & Co LLC relating to Credit Suisse’s acquisition of The Klein Group, LLC (i.e., the investment banking business as well as the registered broker-dealer of M. Klein & Co LLC). Subsequently, Credit Suisse and M. Klein & Co LLC mutually agreed to terminate the acquisition of The Klein Group, LLC by Credit Suisse considering Credit Suisse’s recently announced merger with UBS Group AG.

For additional information, please refer to the Credit Suisse SEC Filings.

Other Material Events and Activities

In the first quarter of 2023 and as further described on page 39, Credit Suisse experienced significant withdrawals of cash deposits, non-renewal of maturing time deposits and net asset outflows across its Wealth Management, Swiss Bank and Asset Management divisions. The corresponding reduction in assets under management and deposits is expected to lead to reduced net interest income and recurring commissions and fees. In particular, this will likely lead to a substantial loss in Credit Suisse’s Wealth Management division in the second quarter of 2023.

In light of the merger announcement, the adverse revenue impact from Credit Suisse’s previously disclosed exit from non-core businesses and exposures, restructuring charges and funding costs, Credit Suisse would also expect its Investment Bank and the Credit Suisse Group to report a substantial loss before taxes in the second quarter of 2023 and in 2023. Credit Suisse’s actual results will depend on a number of factors, including the performance of the Investment Bank and Wealth Management divisions; deposit or net asset flows; the continued exit of non-core positions; goodwill, software and other impairments; litigation; regulatory actions; credit spreads and related funding costs; the usage and availability of the SNB liquidity facilities; the impact of continued voluntary and involuntary employee attrition; and the outcome of certain other items, including potential real estate sales. Credit Suisse is taking proactive measures to protect its client franchise, manage risks and facilitate operational stability.

Listing of UBS Group AG Shares

The UBS Group AG Shares that Credit Suisse shareholders will receive in connection with the transaction are treasury shares and are already approved for listing on the NYSE and on the SIX.

Delisting and Deregistration of Credit Suisse ADSs and Credit Suisse Ordinary Shares

currently listed on the NYSE will cease to be listed on the NYSE and will thereafter be deregistered under the U.S. Exchange Act, and the Credit Suisse Ordinary Shares currently listed on the SIX will cease to be listed on the SIX.

Accounting Treatment of the Transaction

Approvals Required for the Transaction

To complete the transaction, UBS Group AG and Credit Suisse need to obtain approvals or consents from, or make filings with, a number of regulatory and governmental authorities. Subject to the terms of the merger agreement, UBS Group AG and Credit Suisse have agreed to cooperate with each other and use (and to cause their respective subsidiaries to use) their reasonable best efforts to take or cause to be taken all actions and do or cause to be done all things reasonably necessary, proper or advisable on their part under the merger agreement and applicable laws to cause completion to occur as soon as practicable.

Pursuant to the merger agreement, completion is conditioned upon, among other things, the following (subject to waiver by UBS Group AG):

•

the receipt of all Regulatory Approvals and all such Regulatory Approvals being in full force and effect and not having been amended or revoked until completion;

•

insofar as the transaction requires Governmental Approvals, any relevant waiting periods under the applicable rules will have expired, been waived or terminated, or all competent merger control, foreign direct investment and other authorities and, if applicable, courts will have adopted a decision allowing closing of the transaction; and

•

The Regulatory Approvals (granted or yet to be obtained) include (i) approval of the Board of Governors of the Federal Reserve System (which occurred on April 14, 2023), (ii) filing with the Financial Industry Regulatory Authority (“FINRA”) of an application seeking approval of a change of control pursuant to FINRA Rule 1017 (for which an application was filed on April 3, 2023), (iii) approvals from 36 U.S. state or territorial securities agencies pursuant to the relevant state securities laws (which were submitted on or before April 17, 2023) and (iv) approvals of (w) FINMA (which in principal occurred on March 19, 2023), (x) the UK Prudential Regulation Authority (which occurred on March 22, 2023), (y) the UK Financial Conduct Authority (which occurred on

March 22, 2023) and (z) the European Central Bank (in relation to which initial submissions were made on April 21, 2023). To the extent there are outstanding regulatory approvals, UBS Group AG and Credit Suisse are working with the authorities to obtain the relevant approvals as soon as possible.

UBS Group AG and Credit Suisse are working to obtain all Regulatory Approvals and Governmental Approvals not yet granted expeditiously. There can be no assurance that the Regulatory Approvals and Governmental Approvals not yet granted will be obtained. In addition, there can be no assurance that such approvals will not impose conditions or requirements that, individually or in the aggregate, would or could reasonably be expected to be relevant with respect to the closing of the transaction or to have an adverse effect on the financial condition, results of operations, assets or business of UBS Group AG following completion.

Dissenters’ Rights

No traditional dissenters’ rights exist under Swiss law. For business combinations effected in the form of a statutory merger and subject to Swiss law, such as the transaction, the Merger Act provides that, if the equity rights have not been adequately preserved or compensation payments in the transaction are not adequate, a shareholder may request the competent court to determine a reasonable amount of compensation payable to all shareholders. Any such determination will not impact the implementation of the merger or the receipt of the UBS Group AG Shares as merger consideration.

Restrictions on Resales of UBS Group AG Shares Received in the Transaction

The UBS Group AG Shares received by Credit Suisse shareholders in the transaction will be registered under the U.S. Securities Act and will be freely transferable under the U.S. Securities Act, except for UBS Group AG Shares received by any shareholder who may be deemed to be an “affiliate” of UBS Group AG for purposes of Rule 144 under the U.S. Securities Act. Persons who may be deemed to be affiliates include individuals or entities that control, are controlled by, or are under the common control with UBS Group AG and may include the executive officers, directors and significant shareholders of UBS Group AG. This prospectus does not cover resale of UBS Group AG Shares received by any person upon completion, and no person is authorized to make use of this prospectus in connection with any such resale.

Material Swiss Tax Consequences

The following summary sets forth the material Swiss tax consequences of receiving, owning and disposing of UBS Group AG Shares.

This summary is based upon Swiss tax laws and the practices of the Swiss tax authorities in effect on the date of this prospectus. Such laws and administrative practice are subject to change at any time, possibly with

retroactive effect. The summary does not constitute tax advice and is intended only as a general guide. It is not exhaustive and shareholders should consult their own tax advisors about the Swiss tax consequences (and tax consequences under the laws of other relevant jurisdictions) of the acquisition, ownership and disposal of UBS Group AG Shares. This summary does not discuss all tax considerations that may be relevant to shareholders in light of their particular circumstances, nor does it address the consequences for shareholders subject to special treatment under Swiss tax laws, including but not limited to tax-exempt entities; banks, financial institutions or insurance companies; persons who acquired Credit Suisse Shares pursuant to an employment share plan or otherwise as compensation; or persons who own Credit Suisse Shares through partnerships or other pass-through entities.

Tax Considerations Linked to the Transaction

Swiss Withholding Tax

The exchange of Credit Suisse Shares for UBS Group AG Shares, as well as the receipt of consideration for Fractional Shares, will not be subject to Swiss Withholding Tax (as defined below in “Holding UBS Group AG Shares — Swiss Withholding Tax”).

Swiss Income Taxes

Non-Resident Shareholders

Resident Private Shareholders

Domestic Commercial Shareholders

Cash payments for Fractional Shares in excess of the relevant tax book value of such Fractional Shares are included as taxable income in the relevant taxation period for purposes of Swiss federal, cantonal and communal individual or corporate income tax. Cash payments for Fractional Shares below the relevant tax book value of such Fractional Shares result in a tax deductible loss in the relevant taxation period for purposes of Swiss federal,

cantonal and communal individual or corporate income tax (please refer to Section “Merger Agreement — No Fractional UBS Group AG Shares” for more information). This taxation treatment also applies to Swiss resident private individuals who, for Swiss income tax purposes, qualify as “professional securities dealers” because of, among other things, frequent dealing, or leveraging their investments, in securities.

Corporate taxpayers may benefit from taxation relief on capital gains realized upon the disposal of Credit Suisse Ordinary Shares (Beteiligungsabzug), provided such Credit Suisse Ordinary Shares were held for at least one year and the shareholder disposes of at least 10% of the share capital or 10% of the profit and reserves, respectively. Subsequent sales can be less than 10% of the nominal share capital in order to qualify for the participation relief, provided the fair market value of the Credit Suisse Ordinary Shares held as of the previous financial year end prior to this sale amounts to at least 1 million Swiss francs.

Swiss Securities Tax

The exchange of Credit Suisse Shares for UBS Group AG Shares should not be subject to issuance stamp duty and securities transfer tax. The sale of UBS Group AG Shares on behalf of the holders of the Share Fraction Rights, and specifically with respect to the delivery of 1 UBS Group AG Share against additional cash consideration to Credit Suisse Shareholders who hold less than 22.48 Credit Suisse Shares, respectively, may be subject to securities transfer tax at a current rate of up to 0.15% if a bank or other securities dealer in Switzerland or Liechtenstein, as defined in the Swiss Federal Stamp Tax Act, is a party or an intermediary to the transaction and no exemption applies (please refer to Section “Merger Agreement — No Fractional UBS Group AG Shares” for more information).

Holding UBS Group AG Shares

Swiss Withholding Tax

Non-taxable and Taxable Distributions

Under present Swiss tax law, dividends and similar cash or in-kind distributions made by UBS Group AG to a holder of UBS Group AG Shares (including liquidation proceeds and bonus shares) are subject to Swiss federal withholding tax (the “Withholding Tax”), currently at a rate of 35% (applicable to the gross amount of taxable distribution). UBS Group AG is obliged to deduct the Withholding Tax from the gross amount of any taxable distribution and to pay the tax to the Swiss Federal Tax Administration within 30 days of the due date of such distribution, unless a notification procedure applies (notification procedure does not apply to portfolio holdings). The repayment of the par value of the UBS Group AG Shares and any repayment of qualifying additional paid-in capital (capital contribution reserves, Reserven aus Kapitaleinlagen), within the limitations accepted by the legislation in force when such dividend becomes due and the respective administrative practice, are not subject to Withholding Tax.

In that respect it should, however, be noted that Swiss listed companies such as UBS Group AG are required to fund dividends out of taxable reserves in an amount at least equivalent to capital contribution reserves to the extent such taxable reserves are available for a distribution, meaning that dividends distributed will be subject to Withholding Tax on at least half of their total amount (to the extent UBS Group AG disposes of taxable reserves in such amount).

Capital gains realized on the sale of UBS Group AG Shares are not subject to Withholding Tax (other than in case of a sale to (i) for cancellation, (ii) if the total of repurchased shares exceeds 10% of UBS Group AG share capital or (iii) if the repurchased UBS Group AG Shares are not resold within the applicable time period after the repurchase, if and to the extent the redemption price less the nominal value of the redeemed UBS Group AG Shares is not booked against confirmed capital contribution reserves (“Taxable Repurchase”)).

Refund of Withholding Tax on Taxable Distributions

Swiss Resident Recipients: Swiss resident individuals who hold their UBS Group AG Shares as private assets (“Resident Private Shareholders”) and who, among other things, are also the beneficial owners of the UBS Group AG Shares and the dividends or the other distributions made or paid by UBS Group AG on the UBS Group AG Shares are in principle eligible for a full refund or credit against income tax of the Withholding Tax if they duly report the underlying income in their income tax return. In addition, (i) corporate and individual shareholders who are resident in Switzerland for tax purposes who hold their UBS Group AG Shares as business assets, (ii) corporate and individual shareholders who are not resident in Switzerland, and who, in each case, hold their UBS Group AG Shares as part of a trade or business carried on in Switzerland through a permanent establishment with fixed place of business situated in Switzerland for tax purposes and (iii) Swiss resident private individuals who, for income tax purposes, are classified as “professional securities dealers” for reasons of, inter alia, frequent dealing, or leveraged investments, in shares and other securities (collectively, “Domestic Commercial Shareholders”) and who, among other things, are also the beneficial owners of the UBS Group AG Shares and the dividends or the other distributions made or paid by UBS Group AG on the UBS Group AG Shares are in principle eligible for a full refund or credit against income tax of the Withholding Tax if they, inter alia, duly report the underlying income in their income statements or income tax return, as the case may be.

Non-Resident Shareholders: Shareholders who are not resident in Switzerland for tax purposes, and who, during the respective taxation year, have not engaged in a trade or business carried on through a permanent establishment with fixed place of business situated in Switzerland for tax purposes, and who are not subject to corporate or individual income taxation in Switzerland for any other reason (collectively, “Non-Resident Shareholders”) may be entitled to a total or partial refund of the Withholding Tax if the country in which such recipient resides for tax purposes maintains a bilateral treaty for the avoidance of double taxation with Switzerland and further conditions of such treaty are met. Non-Resident Shareholders should be aware that the procedures for claiming treaty benefits (and the time required for obtaining a refund) may differ from country to country. Non-Resident Shareholders should consult their own legal, financial or tax advisors regarding receipt, ownership, purchases, sale or other dispositions of UBS Group AG Shares and the procedures for claiming a refund of the Withholding Tax.

Residents of the United States: A holder of UBS Group AG Shares who is a resident of the United States for purposes of the U.S.-Swiss Double Taxation Treaty without a trade or business carried on through a permanent establishment in Switzerland to whom the shares are attributable and who, in each case, is also the beneficial owner of the shares and the dividend or other distribution and who meets the conditions of the U.S.-Swiss Double Taxation Treaty, may, (i) if the holder is a qualified U.S. pension fund, apply for a full refund of the Withholding Tax, (ii) if the holder is a corporation owning at least 10% of UBS Group AG voting rights, apply for a refund of the Withholding Tax withheld in excess of the 5% reduced treaty rate, and (iii) in all other cases, apply for a refund of the Withholding Tax withheld in excess of the 15% treaty rate. The claim for a refund must be filed on Swiss Tax Form 82 (82C for corporations, 82I for individuals, 82E for other entities and 82R for regulated investment companies), which forms, together with the form providing instructions, may be obtained from the Swiss embassy or any Swiss consulate general in the United States, the Swiss Federal Tax Administration at the address below or may be downloaded from the Swiss Federal Tax Administration’s website. Four copies of the form must be duly completed and then signed before a notary public of the U.S. and three of them must then be sent to the Swiss Federal Tax Administration, Eigerstrasse 65, CH-3003 Bern, Switzerland. The form must be accompanied by suitable evidence demonstrating the deduction of the Swiss withholding tax, such as certificates of deduction, bank vouchers or credit slips. The form must be filed no later than December 31 of the third year following the calendar year in which the dividend subject to the withholding tax became payable.

Swiss Income Tax

Non-Resident Shareholders

A holder of UBS Group AG Shares who is not a resident of Switzerland for Swiss tax purposes, and who, during the applicable tax year, has not engaged in a trade or business carried on through a permanent establishment in Switzerland for tax purposes, is not subject to any Swiss federal, cantonal or communal income tax as a result of the receipt of dividends or other distributions on UBS Group AG Shares or in respect of any capital gains realized on the sale of UBS Group AG Shares. Refer to “— Swiss Withholding Tax” above for a summary of the Withholding Tax treatment of dividends and other distributions and capital gains on UBS Group AG Shares. Refer to “— International automatic exchange of information in tax matters” and “— Swiss facilitation of the implementation of the U.S. Foreign Account Tax Compliance Act” below for a summary on the exchange of information in respect of holding UBS Group AG Shares in an account or deposit with a financial institution or paying agent in Switzerland.

Resident Private Shareholders

Resident Private Shareholders who receive dividends and similar distributions (including stock dividends and liquidation proceeds in excess of nominal share capital and capital contribution reserves, as well as Taxable Repurchases) from UBS Group AG must include these distributions in his or her personal tax return and will be subject to federal, cantonal and communal income tax on any net taxable income for the relevant tax period. However, dividends and similar distributions out of capital contribution reserves and repayments of the nominal share capital will not be subject to federal, cantonal and communal income tax. A capital gain or loss realized by Resident Private Shareholders (except in respect of Taxable Repurchases which qualify as dividend for tax purposes) is classified as a tax-exempt private capital gain and a capital loss as a non-tax deductible private capital loss for purposes of Swiss federal, cantonal and communal income tax.

See “— Domestic Commercial Shareholders” below for a summary of the taxation treatment of Swiss resident individuals who, for income tax purposes, qualify as “professional securities dealers.”

Domestic Commercial Shareholders

Domestic Commercial Shareholders who receive dividends and similar cash or in-kind distributions (including liquidation proceeds as well as bonus shares) are required to recognize such payments in their income statements for the relevant tax period and are subject to Swiss federal, cantonal and communal individual or corporate income tax, as the case may be, on any net taxable earnings (including dividends) for such period. Domestic Commercial Shareholders who are corporate taxpayers may qualify for participation relief on dividend distributions (Beteiligungsabzug), provided such UBS Group AG Shares represent at the time of the distribution at least 10% of the share capital or 10% of the profit and reserves, respectively, or a fair market value of at least 1 million Swiss francs. For cantonal and communal income tax purposes, the regulations on participation relief are broadly similar, depending on the canton of residency.

Domestic Commercial Shareholders are required to recognize a gain or loss realized upon the disposal of UBS Group AG Shares in their income statement for the respective taxation period and are subject to Swiss federal, cantonal and communal individual or corporate income tax, as the case may be, on any net taxable earnings (including the gain or loss realized on the sale or other disposition of UBS Group AG Shares) for such taxation period. Domestic Commercial Shareholders who are corporate taxpayers may benefit from taxation relief on capital gains realized upon the disposal of UBS Group AG Shares (Beteiligungsabzug), provided such UBS Group AG Shares were held for at least one year and the shareholder disposes of at least 10% of the share capital or 10% of the profit and reserves, respectively. Subsequent sales can be less than 10% of the nominal share capital in order to qualify for the participation relief, provided the fair market value of the UBS Group AG Shares held as of the previous financial year end prior to this sale amounts to at least 1 million Swiss francs. For cantonal and communal income tax purposes, the regulations on participation relief are broadly similar, depending on the canton of residency.

Swiss Securities Tax

The sale of UBS Group AG Shares and the subsequent transfer of any UBS Group AG Shares may be subject to Swiss securities transfer tax (Umsatzabgabe) at a current rate of up to 0.15% if a bank or other securities dealer in Switzerland or Liechtenstein, as defined in the Swiss Federal Stamp Tax Act (Stempelabgabengesetz), is a party or an intermediary to the transaction and no exemption applies.

Swiss Wealth Tax and Capital Tax

Non-Resident Shareholders

Non-Resident Shareholders are not subject to any cantonal and communal wealth or annual capital tax because of the mere holding of the UBS Group AG Shares.

Resident Private Shareholders

Resident Private Shareholders are required to report the market value of their UBS Group AG Shares at the end of each tax period as part of their private wealth and which is subject to cantonal and communal wealth tax.

Domestic Commercial Shareholders

Domestic Commercial Shareholders are required to report their UBS Group AG Shares as part of their business wealth or taxable capital, as defined, and which is subject to cantonal and communal wealth or annual capital tax.

International Automatic Exchange of Information in Tax Matters

On November 19, 2014, Switzerland signed the Multilateral Competent Authority Agreement. The Multilateral Competent Authority Agreement is intended to ensure the uniform implementation of Automatic Exchange of Information (the “AEOI”). The Swiss Federal Act on the International Automatic Exchange of Information in Tax Matters (the “AEOI Act”) entered into force on January 1, 2017. The AEOI Act is the legal basis for the implementation of the AEOI standard in Switzerland.

The AEOI is being introduced in Switzerland through bilateral agreements or multilateral agreements. The agreements have been, and will be, concluded on the basis of guaranteed reciprocity, compliance with the principle of specialty (i.e., the information exchanged may only be used to assess and levy taxes (and for criminal tax proceedings)) and adequate data protection.

Based on such multilateral and bilateral agreements and the implementing laws of Switzerland, Switzerland collects and has collected data in respect of financial assets, which may include UBS Group AG Shares, held in, and income derived thereon and credited to, accounts or deposits with a paying agent in Switzerland for the benefit of individuals resident in an EU member state or in a treaty state since 2017, and has exchanged such data since 2018. Switzerland has signed and is expected to sign AEOI agreements with other countries. A list of such agreements of Switzerland in effect or signed and becoming effective can be found on the website of the State Secretariat for International Finance.

Swiss Facilitation of the Implementation of the U.S. Foreign Account Tax Compliance Act

Switzerland has concluded an intergovernmental agreement with the United States to facilitate the implementation of FATCA. The agreement ensures that the accounts held by U.S. persons with Swiss financial institutions are disclosed to the U.S. tax authorities either with the consent of the account holder or by means of group requests within the scope of administrative assistance. Information will not be transferred automatically in

the absence of consent, and instead will be exchanged only within the scope of administrative assistance on the basis of the double taxation agreement between the United States and Switzerland. On September 20, 2019, the protocol of amendment to the double taxation treaty between Switzerland and the United States entered into force, allowing U.S. competent authority in accordance with the information reported in aggregated form to request all the information on U.S. accounts without a declaration of consent and on nonconsenting nonparticipating financial institutions.

Material U.S. Federal Income Tax Consequences

This section describes the material U.S. federal income tax consequences to U.S. Holders of exchanging their Credit Suisse Shares for UBS Group AG Shares in the transaction. The following discussion is based upon the Code, the Treasury Regulations and judicial and administrative authorities, rulings and decisions, all as in effect as of the date of this prospectus. These authorities may change, possibly with retroactive effect, and any such change could affect the accuracy of the statements and conclusions set forth in this discussion. This discussion does not address any tax consequences arising under the unearned income Medicare contribution tax or the alternative minimum tax, nor does it address any tax consequences arising under the laws of any state, local or non-U.S. jurisdiction, or under any U.S. federal laws other than those pertaining to income tax.

The following discussion applies only to U.S. Holders who hold Credit Suisse Shares as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). Further, this discussion does not purport to consider all aspects of U.S. federal income taxation that might be relevant to U.S. Holders in light of their particular circumstances and does not apply to U.S. Holders subject to special treatment under the U.S. federal income tax laws (such as, for example, dealers or brokers in securities, commodities or foreign currencies, traders in securities that elect to apply a mark-to-market method of accounting, banks and certain other financial institutions, insurance companies, mutual funds, tax-exempt organizations, holders subject to the alternative minimum tax provisions of the Code, partnerships, S corporations or other pass-through entities or investors therein, regulated investment companies, real estate investment trusts, former citizens or residents of the United States, U.S. expatriates, holders whose functional currency is not the U.S. dollar, holders who hold Credit Suisse Shares as part of a hedge, straddle, constructive sale or conversion transaction or other integrated investment, retirement plans, individual retirement accounts, or other tax-deferred accounts, holders who acquired their Credit Suisse Shares pursuant to the exercise of employee stock options, through a tax qualified retirement plan or otherwise as compensation, or holders who actually or constructively own 5% or more of the Credit Suisse Shares or, following the transaction, 5% or more of the UBS Group AG Shares).

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Credit Suisse Shares, the tax treatment of a partner in such partnership generally will depend on the status of the partner and the activities of the partnership. Any entity treated as a partnership for U.S. federal income tax purposes that holds Credit Suisse Shares, and any partners in such partnership, should consult their own tax advisors regarding the tax consequences of the transaction to their specific circumstances.

Determining the actual tax consequences of the transaction to you may be complex and will depend on your specific situation and on factors that are not within the control of UBS Group AG or Credit Suisse. You should consult your own tax advisors as to the specific tax consequences of the transaction in your particular circumstances, including the applicability and effect of any state, local, non-U.S. and other tax laws and of changes, if any, in those laws.

The U.S. federal income tax consequences of the transaction to U.S. Holders will depend in part on whether Credit Suisse or UBS Group AG is or has been classified as a passive foreign investment company for U.S. federal income tax purposes (a “PFIC”). Except as discussed below under “ — Passive Foreign Investment Company Considerations,” this discussion assumes that neither Credit Suisse nor UBS Group AG is or has been classified as a PFIC for U.S. federal income tax purposes.

In addition, the U.S. federal income tax consequences of the transaction to U.S. Holders will depend on whether the transaction qualifies as a reorganization within the meaning of Section 368(a) of the Code (a “Reorganization”). To qualify as a Reorganization, the transaction must satisfy certain requirements, some of which are based on factual determinations and actions or events after the transaction, including events that are not within the control of UBS Group AG or Credit Suisse. One such requirement is the “continuity of business enterprise” (or “COBE”) requirement. In order to meet the COBE requirement, UBS Group AG must, directly or indirectly, either continue a significant line of Credit Suisse’s historic business or use a significant portion of Credit Suisse’s historic business assets in a business, in each case, within the meaning of the applicable Treasury Regulations. Whether this requirement will be met will depend on which of Credit Suisse’s business assets and lines of business UBS Group AG continues to use and operate and which it either sells or discontinues. UBS Group AG is still in the process of evaluating Credit Suisse’s operations and conducting integration and cost reduction planning, which may be affected by regulatory considerations and decisions, many of which are beyond the control of UBS Group AG and Credit Suisse. Given the uncertainty around which of Credit Suisse’s business assets and lines of business UBS Group AG will continue to use and operate, U.S. tax counsel is unable to render an opinion as to whether the transaction will qualify as a Reorganization. Accordingly, no representation is made as to the U.S. federal income tax treatment of the transaction. Completion of the transaction is not conditioned on the transaction qualifying as a Reorganization or on the receipt of an opinion of counsel to that effect, and neither UBS Group AG nor Credit Suisse has sought or received an opinion of counsel on the qualification of the transaction as a Reorganization. In addition, UBS Group AG and Credit Suisse have not sought and will not seek any ruling from the IRS regarding any matters relating to the transaction, and as a result, there can be no assurance that the IRS will not assert, or that a court would not sustain, a position that the transaction does not qualify as a Reorganization.

Tax Consequences if the Transaction Qualifies as a Reorganization

If the transaction qualifies as a Reorganization, a U.S. Holder generally will not recognize gain or loss on the receipt of UBS Group AG Shares in exchange for Credit Suisse Shares, except with respect to any cash received in lieu of a fractional UBS Group AG Share (as discussed below). The aggregate tax basis in the UBS Group AG Shares that a U.S. Holder receives in the transaction (including any fractional shares deemed received as described below) will equal the U.S. Holder’s aggregate adjusted tax basis in the Credit Suisse Shares surrendered in the transaction. A U.S. Holder’s holding period for the UBS Group AG Shares received in the transaction (including any fractional share deemed received as described below) will include the U.S. Holder’s holding period of the Credit Suisse Shares surrendered in the transaction. If a U.S. Holder acquired different blocks of Credit Suisse Shares at different times or at different prices, the UBS Group AG Shares received will be allocated pro rata to each block of Credit Suisse Shares, and the tax basis and holding period of each block of UBS Group AG Shares received will be determined on a block-for-block basis depending on the tax basis and holding period of the block of Credit Suisse Shares exchanged for such block of UBS Group AG Shares. A U.S. Holder may be required to report certain information to the IRS on the U.S. Holder’s U.S. federal income tax return for the tax year in which the transaction occurs and to maintain certain records related to the transaction.

If a U.S. Holder holds 5% or more by vote or by value (within the meaning of Treasury Regulations Section 1.367(a)-3(b)(1)(i)) of the UBS Group AG Shares immediately following the transaction, depending on events after the transaction, it is possible that U.S. federal income tax consequences differing from, and materially less favorable than, the consequences discussed in the previous paragraph may apply even if the transaction qualifies as a Reorganization, unless the U.S. Holder enters into a five-year gain recognition agreement in the form provided in Treasury Regulations Section 1.367(a)-8(c) and certain other conditions are met. Such a U.S. Holder should consult its own tax advisors regarding relevant tax consequences and reporting requirements.

Treatment of Fractional Shares

If a U.S. Holder receives cash in lieu of a fractional UBS Group AG Share, the U.S. Holder will be treated as having received such fractional UBS Group AG Share pursuant to the transaction and then as having sold such fractional UBS Group AG Share for cash. As a result, the U.S. Holder generally will recognize gain or loss equal to the difference between the amount of cash received and the tax basis allocated to the fractional UBS Group AG Share as set forth above. Such gain or loss generally will be capital gain or loss and will be long-term capital gain or loss if, as of the completion date, the U.S. Holder’s holding period for such fractional UBS Group AG Share (including the holding period of Credit Suisse Shares exchanged therefor) exceeds one year. Long-term capital gains of individuals generally are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations.

Tax Consequences if the Transaction is a Taxable Transaction

If the transaction does not qualify as a Reorganization, the exchange of Credit Suisse Shares for UBS Group AG Shares will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. Holder will recognize capital gain or loss for U.S. federal income tax purposes on the exchange of Credit Suisse Shares for UBS Group AG Shares in an amount equal to the difference, if any, between (i) the sum of the fair market value of the UBS Group AG Shares received in the exchange on the date of the exchange and the amount of cash received in lieu of a fractional UBS Group AG Share and (ii) the U.S. Holder’s adjusted tax basis in the Credit Suisse Shares surrendered in the exchange. If a U.S. Holder acquired different blocks of Credit Suisse Shares at different times or at different prices, gain or loss will be determined separately for each such block. Such gain or loss generally will be capital gain or loss and will be long-term capital gain or loss if, as of the completion date, the U.S. Holder’s holding period for its Credit Suisse Shares exceeds one year. Long-term capital gains of individuals generally are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations.

Receipt of Foreign Currency

If a U.S. Holder receives cash in lieu of a fractional UBS Group AG Share and the payment is made in Swiss francs, the amount realized will be the U.S. dollar value of the payment received, translated at the spot rate of exchange on the date of the exchange. On the settlement date, the U.S. Holder will recognize U.S.-source foreign currency gain or loss (taxable as ordinary income or loss) equal to the difference (if any) between the U.S. dollar value of the amount received based on the exchange rates in effect on the date of the exchange and the settlement date. However, if the Credit Suisse Shares are traded on an established securities market and are exchanged by a cash basis U.S. Holder (or an accrual basis U.S. Holder that so elects), the amount realized will be based on the exchange rate in effect on the settlement date, and no exchange gain or loss will be recognized at that time. U.S. Holders should consult their own tax advisors regarding the treatment of foreign currency gain or loss, if any, on any Swiss francs received that are converted into U.S. dollars on a date subsequent to receipt.

Passive Foreign Investment Company Considerations

The U.S. federal income tax consequences of the transaction to U.S. Holders will depend in part on whether Credit Suisse or UBS Group AG is or has been classified as a PFIC.

In general, a non-U.S. corporation will be a PFIC with respect to a U.S. Holder if, for any taxable year in which the U.S. Holder held the non-U.S. corporation’s shares, either (i) at least 75% of the gross income of the non-U.S. corporation for the taxable year is passive income or (ii) at least 50% of the value, determined on the basis of a quarterly average, of the non-U.S. corporation’s assets is attributable to assets that produce or are held for the production of passive income (including cash). For purposes of determining whether a non-U.S. corporation is a PFIC, such non-U.S. corporation will be treated as holding its proportionate share of the assets and receiving directly its proportionate share of the income of any other corporation in which it owns, directly or indirectly, at least 25% (by value) of the stock.

If Credit Suisse were a PFIC during any taxable year in which a U.S. Holder holds or held Credit Suisse Shares, and if UBS Group AG were not a PFIC in the taxable year that includes the transaction, then the U.S. Holder may be required to recognize gain, if any, but not loss, on the exchange of Credit Suisse Shares for UBS Group AG Shares pursuant to the transaction, whether or not the transaction qualifies as a Reorganization. If gain were required to be recognized, then, in general, the amount of U.S. federal income tax on such gain would be increased by an interest charge to compensate for tax deferral, and the amount of income tax, before the imposition of the interest charge, would be calculated as if such gain were earned ratably over the period the U.S. Holder held its Credit Suisse Shares, and would be subject to U.S. federal income tax at the highest rate applicable to ordinary income for the relevant taxable years, regardless of the tax rate otherwise applicable to the U.S. Holder, subject to certain exceptions. If, however, Credit Suisse were a PFIC during any taxable year in which a U.S. Holder holds or held Credit Suisse Shares, and UBS Group AG were a PFIC for its taxable year that includes the day following the consummation of the transaction, then the consequences described in this paragraph should not apply (except with respect to cash received in lieu of a fractional UBS Group AG Share).

Different rules generally would apply to any U.S. Holder that has made a “qualified electing fund” election or “mark-to-market” election, if available, with respect to its Credit Suisse Shares.

According to Credit Suisse’s Form 20-F for its 2022 taxable year, which was filed with the SEC on March 14, 2023, based on its audited consolidated financial statements, Credit Suisse believes that it was not treated as a PFIC for its 2021 or 2022 taxable years and, based on its audited consolidated financial statements and its current expectations regarding the value and nature of its assets and the sources and nature of its income, it does not anticipate becoming a PFIC for the 2023 taxable year. However, this conclusion is a factual determination made annually and thus may be subject to change. As a result, there can be no assurances that Credit Suisse has not been and will not be a PFIC for any taxable year, including the year in which the transaction occurs.

UBS Group AG believes that UBS Group AG Shares should not currently be treated as stock of a PFIC, and does not expect to become a PFIC in the foreseeable future. However, this conclusion is a factual determination made annually and thus may be subject to change.

U.S. Holders should consult their own tax advisors with respect to the respective statuses of Credit Suisse and UBS Group AG under the PFIC rules and the potential application of the PFIC rules to the exchange of Credit Suisse Shares for UBS Group AG Shares pursuant to the transaction in light of each such U.S. Holder’s particular situation.

Information Reporting and Backup Withholding

A non-corporate U.S. Holder may be subject, under certain circumstances, to information reporting and backup withholding (currently at a rate of 24%) on cash received in lieu of a fractional UBS Group AG Share. A U.S. Holder generally will not be subject to backup withholding, however, if the U.S. Holder (1) furnishes a correct taxpayer identification number, certifies that the U.S. Holder is not subject to backup withholding and otherwise complies with all the applicable requirements of the backup withholding rules; or (2) provides proof that the U.S. Holder is otherwise exempt from backup withholding. Any amounts withheld under the backup withholding rules are not an additional tax and will generally be allowed as a refund or credit against the U.S. Holder’s U.S. federal income tax liability, provided the U.S. Holder timely furnishes the required information to the IRS.

This discussion of the material U.S. federal income tax consequences of the transaction to U.S. Holders is not intended to be, and should not be construed as, tax advice. U.S. Holders should consult their own tax advisors with respect to the application of U.S. federal income tax laws to their particular situations as well as any tax consequences arising under the U.S. federal estate or gift tax rules, or under the laws of any state, local, non-U.S. or other taxing jurisdiction or under any applicable tax treaty.

THE MERGER AGREEMENT

The summary of the material provisions of the merger agreement below and elsewhere in this prospectus is qualified in its entirety by reference to the merger agreement, which is incorporated by reference into this prospectus. This summary does not purport to be complete and may not provide all of the information about the merger agreement. You are urged to read the merger agreement carefully and in its entirety because it is the legal document that governs the transaction.

The merger agreement and the summary of its terms in this prospectus have been included to provide information about the terms and conditions of the merger agreement. The terms and information in the merger agreement are not intended to provide any other public disclosure of factual information about UBS Group AG, Credit Suisse or any of their respective subsidiaries or affiliates. The covenants and agreements contained in the merger agreement are only for the purposes of the merger agreement and are qualified and subject to certain limitations and exceptions agreed to by UBS Group AG and Credit Suisse in connection with negotiating the terms of the merger agreement. Investors are not third-party beneficiaries under the merger agreement.

For the foregoing reasons, the covenants and agreements and any descriptions of those provisions should not be read alone or relied upon as characterizations of the actual state of facts or condition of UBS Group AG, Credit Suisse or any of their respective subsidiaries or affiliates. Instead, such provisions or descriptions should be read only in conjunction with the other information provided elsewhere in this prospectus or included as exhibits to the registration statement of which this prospectus constitutes a part.

Structure of the Transaction

The merger agreement provides that, subject to the terms and conditions of the merger agreement, upon completion, pursuant to the Merger Act and in accordance with the Special Ordinance, Credit Suisse will merge with and into UBS Group AG with UBS Group AG being the absorbing company which will continue to operate following completion and Credit Suisse being the absorbed company which will cease to exist upon completion. By operation of law, Credit Suisse’s assets, liabilities and contracts, as well as all rights and obligations under such contracts, will be transferred to UBS Group AG in their entirety. Upon completion, UBS Group AG, as the surviving entity of the Merger, will retain its name and registered address, and the composition of the board of directors as well as the group executive management of UBS Group AG will remain unchanged.

Pursuant to the merger agreement, completion will occur on the date in which entries into the Commercial Register in respect to both UBS Group AG and Credit Suisse have been made, subject to the satisfaction (or waiver (to the extent waivable) by UBS Group AG) of the conditions to completion.

Merger Consideration

Upon completion, subject to the payment of certain fees to the Credit Suisse Depositary in the case of Credit Suisse ADSs, Credit Suisse shareholders will receive, for each Credit Suisse Share issued and outstanding immediately prior to completion, the merger consideration consisting of 1/22.48 UBS Group AG Shares, meaning that a Credit Suisse shareholder would receive 1 UBS Group AG Share for every 22.48 Credit Suisse Shares.

The merger consideration will be adjusted to reflect the economic effect of any share split, share combination, subdivision, reclassification, stock dividend, exchange of shares or other similar transactions involving UBS Group AG Shares or Credit Suisse Shares that (i) is approved after the date of the merger agreement but prior to completion and (ii) is entered into the commercial register, or has a record or effective date that occurs during such period. The UBS Group AG Shares delivered to Credit Suisse shareholders in the transaction will receive any future dividends paid by UBS Group AG on the same basis as the UBS Group AG Shares currently outstanding (other than with respect to dividends with an ex-dividend date that is prior to completion).

Share Register

UBS Group AG will register in its share register any holder of Credit Suisse Ordinary Shares subject to the UBS Group AoA (as defined below). Applications for registration of holders of Credit Suisse Ordinary Shares that are pending at completion will be treated in accordance with the UBS Group AoA.

Implementation of the Exchange

UBS Group AG will appoint an exchange agent, which may be a subsidiary of UBS Group AG (the “Exchange Agent”) to implement the exchange of Credit Suisse Ordinary Shares for the merger consideration. UBS Group AG will use reasonable best efforts to ensure that the merger consideration is credited to the Exchange Agent as promptly as practicable following the completion. Credit Suisse will provide to the Exchange Agent all information reasonably necessary for it to perform its function as specified in the merger agreement and as specified in any agreement with the Exchange Agent. With respect to the Credit Suisse ADSs, in accordance with the terms of the Credit Suisse Depositary Agreement, the Credit Suisse Depositary will provide the exchange services necessary to implement the exchange of Credit Suisse ADSs for UBS Group AG Shares.

No Fractional UBS Group AG Shares

Credit Suisse shareholders will not receive any fractional UBS Group AG Shares in the transaction. Each Credit Suisse shareholder who, based on its shareholding at completion and on the merger consideration, does not receive an integral number of UBS Group AG Shares will receive rights corresponding to the resulting fraction of 1/22.48 of a UBS Group AG Share or a multiple thereof (each a “Share Fraction Right”). The Exchange Agent and Credit Suisse Depositary, as applicable, will (i) sell all UBS Group AG Shares covering Share Fraction Rights on the SIX or the NYSE, as applicable, (ii) calculate the implied value of a Share Fraction Right based on the cash received from such sale and (iii) organize the transfer of such amount of cash proceeds to the subject Credit Suisse shareholders as soon as practically feasible following the closing date. Alternatively, the Exchange Agent may decide to transfer UBS Group AG Shares covering Share Fraction Rights to custodians holding shares of multiple Credit Suisse shareholders so that such custodians may handle Share Fraction Rights held by their customers.

Certain Credit Suisse shareholders holding 22 Credit Suisse Shares or less who want to continue to be shareholders after closing will by default receive a cash only consideration, but may request to receive one UBS Group AG Share upon payment of a Swiss franc amount equivalent to the difference between their Share Fraction Rights and one UBS Group AG Share, determined based on the volume-weighted average price of one UBS Group AG Share at SIX on the trading day preceding the closing date, and providing (i) proof of their holding, (ii) a confirmation that they do not hold Credit Suisse Shares elsewhere and (iii) evidence that this number of Credit Suisse Shares was already held on March 19, 2023. Holders of Credit Suisse Ordinary Shares who are residents of the United States and holders of Credit Suisse ADSs are each not entitled to make such request.

Treatment of Credit Suisse Equity Awards

After completion, all Credit Suisse Equity Awards outstanding under any Credit Suisse Incentive Plan will (A) be converted into a share award covering, or a right to receive consideration by reference to, UBS Group AG Shares or (B) in relation to awards in the form of options or share appreciation rights, be converted into awards that pertain and apply to UBS Group AG Shares, and, in each case, to the extent legally permissible, will continue to remain outstanding in accordance with their current terms, including the current vesting schedule and existing performance conditions (subject to amendments approved by UBS Group AG as are reasonably necessary to reflect the impact of the transaction). We expect that Credit Suisse Equity Awards will be converted into a share award covering, or a right to receive consideration by reference to, UBS Group AG Shares using the same exchange ratio as the merger consideration. Any taxes, social security contributions or pension scheme contributions in connection with the settlement of the Credit Suisse Equity Awards, as applicable, will be deducted before the settlement with UBS Group AG Shares or cash.

To the fullest extent permitted by applicable law, the Credit Suisse board of directors will make all necessary adjustments to the Credit Suisse Equity Awards, the Credit Suisse Incentive Plans and/or all of the relevant governing documents to accomplish the foregoing and will exercise any and all discretion pursuant to the Credit Suisse Incentive Plans and relevant governing documents that no such Credit Suisse Equity Awards vest or become exercisable earlier than their scheduled vesting or exercise date by reason of the transaction and no restrictions on Credit Suisse Equity Awards will lapse. To the extent that, notwithstanding the foregoing, the Credit Suisse Equity Awards vest or become exercisable in connection with the transaction, the Credit Suisse board of directors will exercise any and all available discretion pursuant to the Credit Suisse Incentive Plans and relevant governing documents such that (A) such Credit Suisse Equity Awards are prorated to reflect the unexpired portion of any vesting period, (B) any performance conditions applicable to such Credit Suisse Equity Awards are tested based on actual performance through the consummation of the transaction to the fullest extent practicable (and any determination made in respect of the satisfaction of such performance conditions is approved by UBS Group AG) and (C) no restrictions applicable to a Credit Suisse Equity Award lapse, and that any Credit Suisse Equity Awards exercised or vested will be settled by reference to and in the form of merger consideration so that the Credit Suisse Equity Award holders will receive, for each Credit Suisse Ordinary Share, the merger consideration otherwise receivable by Credit Suisse shareholders.

Cessation of Trading in Credit Suisse ADSs

Unless otherwise mandated by the NYSE, at the opening of the first trading day following the entry of the transaction in the Swiss Federal Commercial Registry Office, trading in the Credit Suisse ADSs on the NYSE will cease.

Shareholder’s Meeting

Pursuant to the Special Ordinance, no shareholders’ approval is required in connection with the conclusion of the merger agreement and completion.

Conditions to Completion

Completion is subject to the receipt of the Regulatory Approvals and Governmental Approvals described in the section entitled “The Merger — Approvals Required for the Transaction”, granting by FINMA of certain separate arrangements, certain specified regulatory support from FINMA and other regulators and the following closing conditions:

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the Credit Suisse board of directors having, to the fullest extent permitted by law, (a) made all necessary adjustments to the Credit Suisse Equity Awards, the Credit Suisse Cash Awards, the Credit Suisse Incentive Plans, the Credit Suisse Cash Plans and all relevant governing documents, and (b) exercised any available discretion pursuant to the Credit Suisse Incentive Plans, Credit Suisse Cash Plans and relevant governing documents such that:

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no Credit Suisse Equity Awards or Credit Suisse Cash Awards vest, become exercisable or deliver payment to an employee earlier than their scheduling vesting, exercise or payment date by reason of the merger agreement or the transaction; and

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if, notwithstanding the foregoing, any Credit Suisse Equity Award or Credit Suisse Cash Award will vest, become exercisable or deliver payment to an employee in connection with the merger agreement or the transaction: (i) time pro-rating is applied to such Credit Suisse Equity Awards or Credit Suisse Cash Awards, to reflect the unexpired portion of any vesting period; (ii) any performance conditions applicable to such Credit Suisse Equity Awards or Credit Suisse Cash Awards are tested based on actual performance through the consummation of the transaction to the fullest extent practicable (with any determination made in respect of the satisfaction of such performance conditions having been approved by UBS Group AG); and (iii) no restrictions applicable to any such Credit Suisse Equity Award or Credit Suisse Cash Award lapse;

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no circumstances having arisen and no events having occurred, and no circumstances or events having been reported by Credit Suisse or otherwise come to the attention of UBS Group AG that, considered individually or in conjunction with other requirements, obligations, circumstances or events, would reasonably be capable of having a Material Adverse Effect on Credit Suisse, including its direct or indirect subsidiaries;

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the FINMA Bail-in Measures Condition;

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nonrestricted access to unsecured Central Bank liquidity tools from announcement throughout the integration period, including access to liquidity tools in the U.S.;

•

if required by applicable law, the SEC having declared the Form F-4 (of which this prospectus forms a part) effective, and the SEC having not taken any action to suspend effectiveness; and

•

as at completion, the absence of any order or injunction having been issued by any governmental entity or a competent court that prohibits completion and is enforceable in Switzerland.

For purposes of the merger agreement, a “Material Adverse Effect” means any change, event or development that individually or taken together with all such other changes, events or developments, has or would reasonably be expected to have a material adverse effect on the business, asset, cash position, liabilities, financial condition, results of operation, capitalization, the capacity or authority to execute the merger agreement and effect the transaction, or the ability to obtain any governmental approval required in connection with completion.

Any such conditions may, to the extent waivable, be waived by UBS Group AG.

Cooperation for the Purposes of Satisfaction of Conditions to Completion

UBS Group AG and Credit Suisse have agreed to use all reasonable efforts to ensure that the closing conditions are fulfilled as soon as reasonably practicable after the date of the merger agreement. For the purposes of satisfying the closing conditions, Credit Suisse undertakes to (and will procure that each member of the Credit Suisse Group, and any other person who may be reasonably required to assist, will):

•

use all reasonable endeavors to cooperate with UBS Group AG and promptly provide such assistance and access to all information and personnel as may reasonably be requested or required by UBS Group AG, or on behalf of UBS Group AG in connection with (i) ensuring that the closing conditions are fulfilled, and (ii) making any other submissions, notifications or filings that are reasonably required to be submitted, or it is prudent to submit, to a relevant governmental entity, including for the purposes of responding to requests for further information by a government entity;

•

to the extent permitted by applicable law, rules or regulations, keep UBS Group AG reasonably informed of any material communication such person has (whether written or oral) with any governmental entity in connection with the transaction; and

•

notify UBS Group AG immediately (but in any event within one trading day) upon becoming aware that circumstances have arisen that are reasonably likely to result in any of the closing conditions not being satisfied prior to the end date together with such details of the relevant circumstances as are in Credit Suisse’s possession at the relevant time.

Conduct of Business Pending the Transaction

General

From the date of the merger agreement until completion, Credit Suisse is required to conduct its and the Credit Suisse Group’s business in the ordinary course and use its reasonable best efforts to (i) preserve intact its commercial integrity and present business organization and protect its assets and goodwill, (ii) keep available the services of its officers, employees and consultants, and (iii) maintain good relationships with its customers, clients, suppliers, regulators and others having significant business relationships with Credit Suisse.

Without limiting the generality of the foregoing, except as expressly contemplated by the merger agreement, unless with UBS Group AG’s prior written consent (which consent may not be unreasonably withheld) or for the implementation of decisions taken or ratified by the Credit Suisse board of directors prior to the date of the merger agreement, Credit Suisse shall not, nor shall it cause or allow to do or to be done, any of the following:

•

amend its articles of association (other than amendments of its articles of association reflecting the issuance of Credit Suisse Shares in 2022 under the Credit Suisse Incentive Plans), organizational regulations or any other constitutional or organizational document (whether by merger, consolidation or otherwise);

•

issue, sell or otherwise deliver, or authorize the issuance, sale or other delivery of, any Credit Suisse securities or securities of any of its subsidiaries, or create, allot, issue, or grant any Credit Suisse Equity Awards other than the issuance of Credit Suisse Shares pursuant to Credit Suisse Equity Awards outstanding on the date of the merger agreement under the Credit Suisse Incentive Plans with no such Credit Suisse Equity Awards to have any terms or conditions that would result in the accelerated vesting, settlement or exercise in connection with the transaction;

•

amend any term of any Credit Suisse security or securities of any of its subsidiaries (whether by merger, consolidation or otherwise);

•

(i) acquire any material assets or property other than (a) in the ordinary course of business or (b) as required by contracts or agreements in effect on the date of the merger agreement; or (ii)(a) sell, lease, license, dispose of or otherwise transfer any material assets or property, other than in the ordinary course of business or as required by existing contracts or agreements in effect on the date of the merger agreement or (b) sell, assign, license or otherwise transfer any material intellectual property owned by or licensed to Credit Suisse except pursuant to contracts or agreements in effect on the date of the merger agreement;

•

undertake any corporate, commercial or operational reorganization of any member of the Credit Suisse Group, or the discontinuation of any part of its business;

•

incorporate any new subsidiary or create any other new member of the Credit Suisse Group or enter into any new partnership, joint venture or similar arrangement (other than special purpose vehicles in the ordinary course of business in accordance with existing business plans);

•

undertake any material alteration, amendment or variation of the accounting policies of any member of the Credit Suisse Group unless such alteration, amendment or variation is required by law or relevant accounting requirements;

•

undertake any capital expenditure which, in addition to amounts disclosed to UBS Group AG, is in excess of CHF 10,000,000;

•

incur, guarantee or otherwise become liable for any indebtedness for borrowed money other than in the ordinary course of business or by using any central bank liquidity facility;

•

create or incur any encumbrance on any material assets or property other than in the ordinary course of business;

•

enter into any agreement or arrangement that limits or otherwise restricts in any material respect Credit Suisse or any of its subsidiaries (or that could, after completion, limit or otherwise restrict in any material respect UBS Group AG, Credit Suisse or any of their respective subsidiaries or any successor thereto) from engaging or competing in any line of business, in any location or with any person;

•

enter into or terminate any contract or arrangement of any member of the Credit Suisse Group (i) having a value or involving or likely to involve expenditure in excess of CHF 3,000,000 per annum; or (ii) which cannot be performed within its terms within 12 months after the date on which it is entered into or undertaken or cannot be terminated on less than 12 months’ notice; or (iii) which may result in any material change in the nature or scope of the operations of the Credit Suisse Group; or the

modification of an existing contract or arrangement of any member of the Credit Suisse Group which would itself fall, or cause the contract or arrangement concerned to fall, within any of (i) to (iii) above;

•

reduce the level of financial or other resources allocated to regulatory remediation or other compliance programs or commitments or fail to carry out or deviate from such programs or commitments;

•

enter into or grant any customer or other counterparty a new credit facility or credit line in an amount exceeding CHF 100,000,000 for investment grade and CHF 50,000,000 for non-investment grade (or increase any such credit facility or credit line above these amounts);

•

amend any of the Credit Suisse Incentive Plans except as may be required in order to comply with applicable provisions in the merger agreement;

•

(i) settle, or propose to settle, any action, suit, investigation, proceeding or claim that is above CHF 1,000,000 taken as a whole or that relates to the transaction or (ii) intentionally waive, release or assign any material right or claim;

•

institute (i) any amendment or termination of any employee benefit plan, except as required by law, or adoption of any new employee benefit plan or any material individual employment, severance, change in control or consulting agreement (other than in the ordinary course of business), or material amendment to the terms and conditions of employment (including remuneration, pension entitlements and other benefits) of the employees of the Credit Suisse Group (other than in the ordinary course of business to reflect inflationary increases); or (ii) enter into any new labor or collective bargaining agreement or material amendment or termination of any such existing agreement, except as required by law or by the terms thereof;

•

fail to maintain in full force or comply with any policies of insurance entered into for the benefit of Credit Suisse and/or its subsidiaries;

•

submit any applications for any new authorizations, licenses, permissions, exemptions or similar to any governmental entity;

•

do or fail to do anything which would be reasonably likely to result in the termination, revocation, suspension, modification or non-renewal of any material license or consent held by any member of the Credit Suisse Group and issued or granted by a governmental entity; or

•

resolve, commit or agree to do any of the foregoing.

Interaction with regulators

From the date of the merger agreement, and without prejudice to the above, to the extent Credit Suisse:

•

(i) enters into, or takes part in, any material correspondence, meeting (whether physical or virtual) to which Credit Suisse has received prior notice, or other interaction with any governmental entity in relation to either (w) the transaction, (x) a compliance matter, including cyber attack, hack, outage or system’s failure, (y) any remediation plan, regulatory change program or other regulatory commitment entered into with any governmental entity or (z) any litigation or investigation involving, or pending before, a governmental entity (each of (w), (x), (y) and (z) being a “Regulatory Interaction Matter”); or

•

(ii) seeks to deviate from any Regulatory Interaction Mater in a material fashion;

then, in each case, Credit Suisse is required, to the extent practicable and permissible under any applicable laws, rules or regulations: (i) notify UBS Group AG as far as possible in advance of such Regulatory Interaction Matter, (ii) involve UBS Group AG in its preparation of any such Regulatory Interaction Matter (including consulting with UBS Group AG in advance and taking into account UBS Group AG’s comments) and (iii) permit UBS Group AG’s active participation in such correspondence, meetings with a governmental entity in relation to such Regulatory Interaction Matter.

Information and Assistance

To the extent permissible under applicable law, from the date of the merger agreement and until completion, Credit Suisse:

•

will procure that UBS Group AG and its representatives are provided with such information and assistance as they may reasonably request (i) to plan (but not implement) all aspects of the integration of the Credit Suisse Group with the UBS Group following completion, (ii) to develop appropriate arrangements for the retention of Credit Suisse Group employees following completion, (iii) to plan for any repayment, replacement and/or amendment of the Credit Suisse Group financing facilities at or following completion, including assistance arranging discussions between UBS Group AG and the relevant financing providers and bond or security trustees, and (iv) to evaluate the status and performance of Credit Suisse Group’s IT infrastructure environment and shall as reasonably practicable and in accordance with Credit Suisse’s escalation procedures inform UBS Group AG of any material cyberattack, hack, outage or system malfunction; and

•

in order to provide UBS Group AG with sufficient visibility on the financial performance of the Credit Suisse Group with a view to preserving their value, will keep UBS Group AG reasonably informed of the overall financial performance of the Credit Suisse Group prior to completion by (i) providing UBS Group AG with aggregated summary financial information in relation to the Credit Suisse Group within five trading days of the end of each calendar month, and (ii) meeting with representatives of UBS Group AG regularly to discuss such financial information and other matters’ relation to the performance of the Credit Suisse Group;

•

in order to provide UBS Group AG with sufficient visibility on the progress on its various remediation programs, Credit Suisse Group will keep UBS Group AG informed of the progress of such programs including (i) providing UBS Group AG with a weekly update on weekly actions or items undertaken, and (ii) meeting with representatives of UBS Group AG regularly and at least weekly to discuss such remediation programs and other compliance matters requested by UBS Group AG.

Integration

The merger agreement provides that, following the execution of the merger agreement, an integration committee (which we refer to as the “integration committee”) will be formed to plan and oversee the implementation of the integration of Credit Suisse’s business into UBS Group AG. Matters related to the integration of businesses of UBS Group AG and Credit Suisse will be communicated and discussed first at such integration committee. Unless otherwise agreed by UBS Group AG and Credit Suisse, the integration committee will consist of up to nine members, up to five to be designated by UBS Group AG and up to four to be designated by Credit Suisse. The integration committee will be chaired by a member designated by UBS Group AG. UBS Group AG and Credit Suisse have agreed to establish the authorities and procedures of the integration committee in good faith and cooperation promptly after entering into the merger agreement.

No Solicitation

For purposes of the merger agreement, a “restricted transaction” means any transaction involving a sale, transfer or other disposal, or the creation of an obligation for a sale, transfer or other disposal of Credit Suisse Shares or of any of Credit Suisse’s material assets or businesses, whether directly or indirectly or any other transaction which may compete with, or impair, hinder or delay completion or impair the success or which may substantially change the businesses, assets, liabilities, financial position, revenues or prospects of the Credit Suisse Group or impair the value of Credit Suisse Shares.

If Credit Suisse receives a proposal from a third party relating to a merger between such third party and Credit Suisse or to a tender offer for all Credit Suisse Shares prior to completion, Credit Suisse is permitted to provide information with respect to Credit Suisse under a customary confidentiality and standstill agreement, which will not contain any terms that impair Credit Suisse’s ability to comply with its obligations under the merger agreement, and to participate in discussions or negotiations with the third party regarding such proposal if (i) Credit Suisse has discharged its notification obligation in respect of such proposal, (ii) the Credit Suisse board of directors has properly determined that the transaction proposed is more favorable to the Credit Suisse shareholders and not less favorable to the financial stability of the Swiss financial market, taking into account all the terms and conditions of the proposal, including the termination fee, transaction certainty and execution risks of the alternative proposal, conditions to the consummation and regulatory, financing and other aspects of the proposal and (iii) Credit Suisse has notified UBS Group AG in writing of its intention with the third party, specifying the reasons therefor, and has given UBS Group AG five trading days following such notification to submit to Credit Suisse a binding proposal for an alternative merger agreement, so that the merger agreement is at least as favorable to the Credit Suisse shareholders and the financial stability of the Swiss financial market as the alternative transaction. The merger agreement provides further that only if Credit Suisse does not receive during such five trading day period an updated offer from UBS Group AG, Credit Suisse may enter into an agreement with the third party and retrieve its public support to the transaction, in which case the termination fee (as described below in this section) will immediately become due and payable by Credit Suisse to UBS Group AG.

Further Assurances

Subject to, and without limiting the generality of, each other term and condition set forth in the merger agreement, UBS Group AG and Credit Suisse have agreed to cooperate with each other and use (and will cause their respective subsidiaries to use) their respective reasonable best efforts to take or cause to be taken all actions, including but not limited to, in connection with any financial industry supervisory and regulatory reporting or filing duties, communication and dealing with rating agencies, as well as any report or filings to be performed according to securities laws, and do or cause to be done all things, reasonably necessary, proper or advisable on its part under the merger agreement and applicable laws to cause completion and the completion of the other transactions contemplated by the merger agreement to occur as soon as practicable, including executing and delivering all such other agreements, certificates, instruments and documents as either UBS Group AG or Credit Suisse reasonably may request in order to carry out the intent and accomplish the purposes of the merger agreement.

Credit Suisse will further grant access to UBS Group AG, subject to applicable confidentiality provisions set forth in the merger agreement, in case of a transfer of nonpublic information, to all information reasonably required by UBS Group AG to prepare the integration of Credit Suisse Group’s business.

Directors and Officers Insurance

The merger agreement provides that UBS Group AG will, or will cause Credit Suisse to obtain prior to completion, effective as of completion, “tail” insurance policies with a claims period of six years following completion with at least the same coverage and amounts as the current policies of directors’ and officers’ liability insurance maintained by Credit Suisse, or an extension of the existing insurance policies, in each case with respect to claims arising out of or relating to events that occurred before or at completion (including in connection with the negotiation and the conclusion of the merger agreement and the implementation of the transaction). The annual premium will be negotiated with best efforts to achieve a reasonable solution at arm’s length, it being understood, however, that Credit Suisse will notify any and all events currently known as circumstances that may potentially give rise to claims under its current directors’ and officers’ liability insurance policy before its expiry, in order to procure that the premium can be reduced as much as possible.

Certain Other Covenants and Agreements

The merger agreement contains certain other covenants and agreements, including the following covenants and agreements, among others, all of which are subject to certain exceptions and qualifications as described in the merger agreement:

•

Credit Suisse will (i) conduct its and the Credit Suisse Group’s business in the ordinary course and use its reasonable best efforts to (x) preserve intact its commercial integrity and present business organization and protect its assets and goodwill, (y) keep available the services of its officers, employees and consultants and (z) maintain good relationships with its customers, clients, suppliers, regulators and others having significant business relationships with Credit Suisse, (ii) not take certain specified actions without UBS Group AG’s prior written consent (which may not be unreasonably withheld), (iii) provide certain information and assistance to UBS Group AG in connection with integration and to provide UBS Group AG with sufficient visibility on the financial performance of the Credit Suisse Group and on the progress of its various remediation programs and (iv) use commercially reasonable efforts to retain key personnel as designed by UBS Group AG until completion (with the understanding that any retention plan or retention-related mechanism for Credit Suisse Group’s employees will be subject to UBS Group AG’s prior written consent);

•

Subject to applicable laws, UBS Group AG has the right to require the appointment of key personnel to Credit Suisse Group’s legal entities for the purpose of integration planning and ensuring compliance with the requirements of the provisions set forth in the merger agreement;

•

To the extent Credit Suisse (i) enters into, or takes part in, any material correspondence, meeting (whether physical or virtual) to which Credit Suisse has received prior notice or other written interaction with any governmental entity in relation to either (A) the merger, (B) a compliance matter, including cyber attack, hack, outage or systems failure, (C) any remediation plan, regulatory change program or other regulatory commitment with a governmental entity or (D) any litigation or investigation involving, or pending before, a governmental entity, or (ii) seeks any material deviation from any of the foregoing, then in each such case, Credit Suisse will, to the extent practicable and permissible under applicable laws, rules or regulations: (x) notify UBS Group AG as far as possible in advance of such interactions; (y) involve UBS Group AG in its preparation of any such interactions (including consulting with UBS Group AG in advance and taking into about UBS Group AG’s comments); and (z) permit UBS Group AG’s active participation in such correspondence or meetings with a government entity related to such matters;

•

The parties will form an integration committee to plan and oversee the implementation of the integration of Credit Suisse Group’s business into UBS Group AG;

•

UBS Group AG and Credit Suisse have agreed that the content of the negotiations of the merger agreement and matters related thereto, including any documents and information exchanged in this regard, will be treated as confidential by UBS Group AG and Credit Suisse, subject to any legal or regulatory obligations to provide information to any governmental entity;

•

Each of UBS Group AG and Credit Suisse will bear its own costs and costs that are jointly incurred will be evenly divided between UBS Group AG and Credit Suisse;

•

Subject to any constraints imposed by the fiduciary duties of the members of the board of directors of UBS Group AG and Credit Suisse, as the case may be, both UBS Group AG and Credit Suisse will publicly and actively support the transaction and will refrain from any acts, filings or statements that could adversely affect the success of the transaction;

•

Each of the UBS Group AG board of directors and the Credit Suisse board of directors will apply best efforts in performing their duties under the merger agreement;

•

Except as required by applicable legal requirements or by the requirements of any stock exchange on which its securities are listed, Credit Suisse Group will not make any press release or public announcement or any other communication with the news media in respect of the merger agreement or the transaction without the prior written consent of UBS Group AG;

•

If any person other than UBS Group AG and Credit Suisse (such persons including but not limited to shareholders of either UBS Group AG or Credit Suisse) raises claims against either UBS Group AG or Credit Suisse, including but not limited to a member of the board of directors or the management of either UBS Group AG or Credit Suisse in connection with the transaction, UBS Group AG and Credit Suisse undertake to fully support and closely cooperate with each other in order to defend their position. Credit Suisse will not settle any such claim without the consent of UBS Group AG;

•

UBS Group AG and Credit Suisse will cooperate with each other and use (and will cause their respective subsidiaries to use) reasonable best efforts to take or cause to be taken all actions, including but not limited to, mitigating any tax implications in connection with pre-closing tax structuring, structuring of the merger transaction as well as integration actions including preparation and filing of tax rulings, tax filings and notifications, executing and delivering all other agreements, certificates, instruments and documents as either UBS Group AG or Credit Suisse may reasonably request in order to carry out the intent and accomplish the purposes of the merger agreement;

•

UBS Group AG and Credit Suisse will each file the application for the entry in the Commercial Register of Zürich timely;

•

The employees and employee representatives of UBS Group AG and Credit Suisse will be informed and consulted by either UBS Group AG or Credit Suisse, as applicable, in accordance with applicable legal requirements in any jurisdiction and any collective bargaining agreement, national standard employment agreement or the equivalent; and

•

UBS Group AG and Credit Suisse will cooperate in good faith and provide prompt and reasonable assistance to the other to enable UBS Group AG and Credit Suisse and their subsidiaries to undertake any required information and consultation exercise with their respective employees or representatives that may be required in relation to or by reason of the transaction, and will share such information as may reasonably be required in order to discharge any information and consultation obligation.

Termination of the Merger Agreement

The merger agreement may be terminated by either UBS Group AG (by decision of the UBS Group AG board of directors) or Credit Suisse (by decision of the Credit Suisse board of directors), only if the closing conditions have not been satisfied (or waived (to the extent waivable) by UBS Group AG) by December 31, 2023, other than as a result of the action or omission attributed to the party seeking termination. UBS Group AG may not seek to terminate the merger agreement as a result of the failure of the FINMA Bail-in Measures Condition without prior consultation with FINMA. UBS Group AG and Credit Suisse have agreed that any non-obtainment of any Regulatory Approval due to the Regulatory Approval Adverse Condition or any Governmental Approval Adverse Condition will not constitute a breach by UBS Group AG of the merger agreement or qualify as an action or omission of UBS Group AG in the event of the termination of the merger agreement.

Termination Fee

In the event of a termination fee event (as defined below), Credit Suisse has agreed to pay UBS Group AG a termination fee of either (i) CHF 100,000,000, or (ii) if the termination occurs because a third party has prior to completion either announced or published an offer to Credit Suisse shareholders or to Credit Suisse to acquire more than 50% of Credit Suisse’s business, in the amount of 50% of the explicit or implied premium offered by such third party. Credit Suisse has agreed to pay any termination fee within 20 trading days of the date on which the termination fee becomes payable. However, the merger agreement provides that if Credit Suisse enters into an agreement with a third party with respect to a restricted transaction, which is subject to certain terms and conditions as set forth in the merger agreement and also described in the section above entitled “— No Solicitation,” the termination fee will immediately become due and payable by Credit Suisse to UBS Group AG. Termination fee will be payable plus VAT, if applicable, and will not be reduced on account of any taxes unless required by applicable law.

Governing Law and Jurisdiction

The transaction and the merger agreement, and any claims arising out of or in connection therewith, will be governed by and construed in accordance with the substantive laws of Switzerland without giving effect to the provisions of any conflict of laws rules that might lead to the application of the laws of any other jurisdiction.

Any dispute arising out of or in connection with the transaction or the merger agreement must be submitted to the exclusive jurisdiction of the courts of the City of Zurich, Switzerland, venue being Zurich 1. Any claims by shareholders based on the Merger Act or any other law which arise out of or are made in connection with the transaction or the merger agreement, must be submitted to the exclusive jurisdiction of the courts of the City of Zurich, Switzerland, venue being Zurich 1.

Amendments; Waivers

Any modifications to, or waivers of any provisions of, the merger agreement (including any amendment to an essential term of the merger agreement) must be made in writing and will be subject to approval by the UBS Group AG board of directors and the Credit Suisse board of directors.

No waiver of any of the provisions of the merger agreement is to be deemed or constitute a waiver of any other provision and no waiver will constitute a continuing waiver. No waiver will be binding unless executed in writing by the party making the waiver and delivered to the other party pursuant to the merger agreement.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

All amounts in this section are in US dollars (USD) unless otherwise specified. The abbreviation “bn” is used to represent “billion”. The abbreviation “CHF” is used to represent “Swiss francs”. Numbers presented throughout this section may not add up precisely to the totals provided in the tables and text due to rounding.

The following unaudited pro forma condensed combined financial information is intended to illustrate the effect of the transaction (as defined below) and comprises the following:

•

the unaudited pro forma condensed combined income statement for UBS Group AG for the year ended 31 December 2022, prepared as if the transaction occurred on 1 January 2022; and

•

the unaudited pro forma condensed combined balance sheet as of 31 December 2022 for UBS Group AG, prepared as if the transaction had occurred at that date.

On March 19, 2023, UBS Group AG (“UBS”) and Credit Suisse Group AG (“Credit Suisse”) entered into a merger agreement that provides for the acquisition of Credit Suisse by UBS. On the terms and subject to the conditions set forth in the merger agreement and in accordance with applicable provisions of the Swiss law, including the emergency ordinance issued by the Swiss Federal Council on March 19, 2023, Credit Suisse will merge with and into UBS with UBS being the absorbing company which will continue to operate and Credit Suisse being the absorbed company which will cease to exist (the “transaction”). Upon completion of the transaction, each registered ordinary Credit Suisse share with a nominal value of CHF 0.04 issued and outstanding immediately prior to completion (including Credit Suisse Shares represented by Credit Suisse ADSs, subject to the payment of certain fees to the Credit Suisse Depositary) will be converted into the right to receive the merger consideration consisting of 1/22.48 registered ordinary shares of UBS, each of which has a nominal value of USD 0.10.

The transaction will be accounted for by UBS, as the legal and accounting acquirer, using the acquisition method pursuant to IFRS 3 “Business Combinations.” Under the acquisition method, the acquirer records all the identifiable assets acquired and liabilities assumed, including contingent liabilities, at their respective fair values on the completion date, with limited exceptions. Adjustments to any provisional amounts are allowed during the subsequent 12 months following the acquisition date. Any excess of the net fair value of the assets and liabilities over the consideration transferred will be recorded at the completion date as a gain in the income statement. The purchase price accounting is dependent upon performance of detailed valuations and other analyses that have yet to progress to a stage where there is sufficient information for a definitive measurement. UBS intends to complete the valuations and other assessments upon completion of the transaction and will finalize the purchase price allocation within the required 12-month period. The various assets and liabilities of Credit Suisse have been measured based on preliminary estimates and the assumptions underlying the respective adjustments are described in the accompanying notes. Differences between these preliminary estimates and the final accounting will occur, and these differences could have a material impact on the accompanying unaudited pro forma financial information and the future combined results of operations or combined financial condition of UBS.

The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and reflects preliminary estimates and assumptions made by UBS’s management that it considers reasonable. Such estimates and assumptions are subject to change as additional information becomes known upon consummation of the acquisition. The unaudited pro forma condensed combined financial information does not purport to represent what UBS’s actual results of operations or financial condition would have been had the transaction occurred on the dates indicated, nor is it necessarily indicative of future results of operations or financial condition. The unaudited pro forma condensed combined financial information also does not consider any potential impacts of current market conditions on revenues, assets or liabilities. Nor does it reflect expense efficiencies, asset dispositions or business reorganizations that are or may be contemplated, or any cost or revenue synergies, including any potential restructuring actions, associated with combining UBS and Credit Suisse. Regulatory impacts related to the unaudited pro forma condensed combined financial information are subject to regulator review and approval.

On 19 March 2023 the Swiss Confederation authorized a loss protection agreement (the “Loss Protection Agreement”) in favor of UBS Group AG for CHF 9bn if losses incurred by UBS Group AG on certain assets held by Credit Suisse entities exceeded CHF 5bn. This is outlined in the Amendment to the Ordinance on Additional Liquidity Assistance Loans and the Granting of Federal Default Guarantees for Liquidity Assistance Loans from the Swiss National Bank to Systemically Important Banks published on 19 March 2023. The details will be set out in the Loss Protection Agreement between the Swiss Confederation and UBS and, as these details are not yet agreed, no effect has been given to the Loss Protection Agreement in this pro forma condensed combined financial information. Valuation of the Loss Protection Agreement is dependent on the definitive terms of the Loss Protection Agreement and on completion of detailed valuations for the assets in scope of the Loss Protection Agreement. To the extent losses on the assets in scope of the Loss Protection Agreement are not realized, there would be no cost to the Swiss government. UBS and the Swiss Government will further review a profit and loss sharing agreement for the case if losses exceed CHF 14bn.

The following Credit Suisse events in the first quarter of 2023 are reflected in the pro forma condensed combined financial information as they are considered to be significant and outside of the normal course of operations:

•

In the first quarter of 2023, Credit Suisse has written down CHF 15bn of Additional Tier 1 (AT1) capital notes as ordered by the Swiss Financial Market Supervisory Authority (FINMA) in connection with the provision of extraordinary statutory support to Credit Suisse. This write down has been reflected on the basis of the decree issued by FINMA on 19 March 2023 to Credit Suisse Group AG. The estimated effects of this event have been included in the pro forma condensed combined balance sheet and income statement.

•

The pro forma condensed combined balance sheet includes estimated effects of certain compensation-relevant developments in 2023 to the date of this filing, including the estimated impact of triggering the write down mechanism for contingent capital awards issued by Credit Suisse and the estimated effect of the specific mandated compensation cancellations communicated by the Swiss Government to Credit Suisse.

Subsequent to 31 December 2022, Credit Suisse has also experienced significant withdrawals of cash deposits, non-renewal of maturing time deposits and net asset outflows, as referenced in the Credit Suisse First Quarter 2023 earnings release. As a result of these and other developments, there were significant changes in Credit Suisse’s assets and liabilities, as well as to its revenue generating businesses. Credit Suisse has also executed elements of a restructuring plan. These changes are not reflected in the pro forma financial data included herein because the transaction was assumed to occur as of 31 December 2022.

The unaudited pro forma condensed combined financial information should be read in conjunction with the information contained in this prospectus and the consolidated financial statements of UBS and Credit Suisse and the accompanying notes included elsewhere.

Unaudited Pro Forma Condensed Combined Balance Sheet as of 31 December 2022


	Historical		Pro Forma									Pro Forma
USD millions	UBS Group (IFRS)		Historical adjusted Credit Suisse Group US GAAP (reclassified and translated to USD)¹		Reference to explanatory notes		Transaction accounting adjustments²			Reference to explanatory notes		Condensed combined balance sheet (IFRS)
Assets
Cash and balances at central banks		169,445		73,873		2a)		4,750			3j)		248,068
Loans and advances to banks		14,792		477		2b)							15,656
				387		2h)
Receivables from securities financing transactions measured at amortized cost		67,814		19,480		2c)							87,294
Cash collateral receivables on derivative instruments		35,032		8,356		2j)		14,606			3a)		57,490
								(503	)		3t)
Loans and advances to customers		387,220		277,455		2h)		(5,922	)		3d)		659,778
								1,350			3j)
								(325	)		3v)
Other financial assets measured at amortized cost		53,264		996		2f)		2,600			3j)		70,738
				13,878		2j)
Total financial assets measured at amortized cost		727,568		394,901				16,556					1,139,025

Financial assets at fair value held for trading		107,866		3,222		2d)		(500	)		3b)		176,660
				58,813		2e)		(3,222	)		3c)
				17,432		2j)		(3,000	)		3e)
								(3,950	)		3j)
Derivative financial instruments		150,108		12,010		2e)		74,620			3a)		233,171
								(3,567	)		3t)
Brokerage receivables		17,576		14,950				(10,000	)		3b)		22,526
Financial assets at fair value not held for trading		59,796		214		2a)		(1,000	)		3f)		106,282
				15		2b)		(8,950	)		3j)
				44,134		2c)
				4,111		2g)


	Historical		Pro Forma									Pro Forma
USD millions	UBS Group (IFRS)		Historical adjusted Credit Suisse Group US GAAP (reclassified and translated to USD)¹		Reference to explanatory notes		Transaction accounting adjustments²			Reference to explanatory notes		Condensed combined balance sheet (IFRS)
				7,961		2h)
Total financial assets measured at fair value through profit or loss		335,347		162,862				40,431					538,640

Financial assets measured at fair value through other comprehensive income		2,239		862		2f)							3,101

Investments in associates		1,101		1,752		2g)							2,853
Property, equipment and software		12,288		4,974		2j)		1,000			3k)		16,261
								(2,000	)		3l)
Goodwill and intangible assets		6,267		3,636		2i)		(3,141	)		3m)		8,703
								2,000			3n)
								(60	)		3n)
Deferred tax assets		9,389		330		2j)		(118	)		3q)		9,601
Other non-financial assets		10,166		107		2g)		(3,849	)		3o)		11,881
				5,457		2j)
Total assets		1,104,364		574,881				50,819					1,730,064

Liabilities
Amounts due to banks		11,596		12,350		2k)							23,946
Payables from securities financing transactions measured at amortized cost		4,202		6,749		2m)							10,951
Cash collateral payables on derivative instruments		36,436		2,203		2r)		9,501			3a)		47,636
								(503	)		3t)
Customer deposits		525,051		237,964		2l)							763,015
Debt issued measured at amortized cost		114,621		6,092		2p)		(216	)		3h)		238,790
				11,710		2l)
				106,583		2q)


	Historical		Pro Forma								Pro Forma
USD millions	UBS Group (IFRS)		Historical adjusted Credit Suisse Group US GAAP (reclassified and translated to USD)¹		Reference to explanatory notes		Transaction accounting adjustments²			Reference to explanatory notes	Condensed combined balance sheet (IFRS)
Other financial liabilities measured at amortized cost		9,575		11,339		2r)		182		3r)		21,097
Total financial liabilities measured at amortized cost		701,481		394,990				8,964				1,105,435

Financial liabilities at fair value held for trading		29,515		3,222		2n)		(500	)	3b)		39,177
				10,162		2o)		(3,222	)	3c)
Derivative financial instruments		154,906		9,678		2o)		79,725		3a)		240,908
				167		2r)		(3,567	)	3t)
Brokerage payables designated at fair value		45,085		12,379				(10,000	)	3b)		47,464
Debt issued designated at fair value		73,638		7,339		2p)		5,329		3h)		133,894
				63,531		2q)		(15,943	)	3i)
Other financial liabilities designated at fair value		30,237		530		2k)		(4,950	)	3j)		43,675
				2,666		2l)
				15,192		2m)
Total financial liabilities measured at fair value through profit or loss		333,381		124,865				46,873				505,119

Provisions		3,243		1,679		2r)		221		3v)		12,243
								3,100		3g)
								4,000		3p)
Other non-financial liabilities		9,040		4,303		2r)		(637	)	3q)		12,267
								(439	)	3s)

Total liabilities		1,047,146		525,837				62,082				1,635,064

Equity
Equity attributable to shareholders		56,876		48,826				(11,263	)	3u), 4		94,439


	Historical		Pro Forma							Pro Forma
USD millions	UBS Group (IFRS)		Historical adjusted Credit Suisse Group US GAAP (reclassified and translated to USD)¹		Reference to explanatory notes	Transaction accounting adjustments²			Reference to explanatory notes	Condensed combined balance sheet (IFRS)
Equity attributable to non-controlling interests		342		219							561

Total equity		57,218		49,044			(11,263	)			94,999

Total liabilities and equity		1,104,364		574,881			50,819				1,730,064

Reflects the U.S. GAAP balance sheet for Credit Suisse Group as of 31 December 2022, translated to US dollars at a rate of 1.08 (CHF/USD) and reflecting presentation reclassification adjustments applied to conform with UBS’s consolidated financial statement presentation. Refer to Note 2 in the explanatory notes for further information.

2	Refer to Note 3 in the explanatory notes for further information.

See accompanying notes.

Unaudited Pro Forma Condensed Combined Income Statement

for the year ended 31 December 2022


	Historical		Pro forma									Pro Forma
USD millions	UBS Group (IFRS)		Historical adjusted Credit Suisse Group US GAAP (reclassified and translated to USD)¹			Reference to explanatory notes		Transaction accounting adjustments²			Reference to explanatory notes	Condensed Combined Income Statement (IFRS)
Net interest income		6,621		4,891			2s)		1,076		3w)		14,496
									2,271		3x)
									(14	)	3y)
									(349	)	3z)
Other net income from financial instruments measured at fair value through profit or loss		7,517		(473	)				157		3w)		7,797
				715			2s)		(242	)	3aa)
									124		3z)
Net fee and commission income		18,966		9,293					1,033		3x)		28,128
				(1,062	)		2v)		(102	)	3z)
Other income		1,459		1,236					34,777		3bb)		37,473

Total revenues		34,563		14,600					38,731				87,894

Credit loss expense / (release)		29		17					546		3gg)		592

Personnel expenses		17,680		7,990			2t)		289		3cc)		27,067
				(196	)		2u)		886		3dd)
				419			2x)
General and administrative expenses		5,189		6,578			2u)		130		3ee)		13,259
				1,261			2t)
				101			2x)
Depreciation, amortization and impairment of non-financial assets		2,061		1,787			2u)		300		3ff)		3,655
				24			2w)		(558	)	3ff)
				40			2x)		25		3ff)
									(24	)	3ff)

Operating expenses		24,930		18,003					1,048				43,981

Operating profit / (loss) before tax		9,604		(3,420	)				37,137				43,321
Tax expense / (benefit)		1,942		4,249					—				6,191

Net profit / (loss)		7,661		(7,669	)				37,137				37,129

Net profit / (loss) attributable to non-controlling interests		32		(14	)				—				18

Net profit / (loss) attributable to shareholders		7,630		(7,655	)				37,137				37,112


Earnings per share (USD)
Basic		2.34		(2.68	)						6		10.82
Diluted		2.25		(2.68	)						6		10.41

Reflects the U.S. GAAP income statement for Credit Suisse Group for the year ended 31 December 2022, translated to US dollars at a rate of 1.05 (CHF/USD) and reflecting presentation reclassification adjustments applied to conform with UBS’s consolidated financial statement presentation. Refer to Note 2 in the explanatory notes for further information.

2	Refer to Note 3 in the explanatory notes for further information.

See accompanying notes.

Notes to unaudited pro forma condensed combined financial information

As of and for the year ended 31 December 2022 (in USDbn except where otherwise indicated)

Basis of preparation

The unaudited pro forma condensed combined financial information gives effect to the acquisition of a 100% ownership interest in Credit Suisse by UBS under the acquisition method of accounting. The unaudited pro forma condensed combined balance sheet gives effect to the transaction as if it had closed on 31 December 2022. The unaudited pro forma condensed combined income statement for the year ended 31 December 2022 gives effect to the transaction as if it had closed on 1 January 2022.

Explanatory notes on pro forma condensed combined financial information

Note 1: Basis of preparation

The unaudited pro forma condensed combined financial information was prepared by UBS based on the audited consolidated financial statements of both UBS and Credit Suisse as of and for the year ended 31 December 2022, and other limited information available. The unaudited pro forma condensed combined financial information should therefore be read in conjunction with the following consolidated financial statements, including the notes thereto:

•

the audited consolidated financial statements of UBS Group AG as of and for the year ended 31 December 2022, which have been prepared in accordance with IFRS and included in the UBS Group AG Annual Report which is attached as Annex A to this prospectus; and

•

the audited consolidated financial statements of Credit Suisse Group AG as of and for the year ended 31 December 2022, which have been prepared in accordance with U.S. GAAP and included in the Credit Suisse Annual Report which is attached as Annex C to this prospectus.

The Credit Suisse historical consolidated financial statements were prepared in accordance with U.S. GAAP and presented in Swiss francs (CHF). For purposes of the unaudited pro forma condensed combined financial information, those financial statements have been adjusted to conform to the recognition, measurement and presentation requirements of IFRS, presented in US dollars (USD), which is the presentation currency of UBS. Balance sheet information available for Credit Suisse in CHF has been translated to USD using a spot rate of 1.08 (CHF/USD) as of 31 December 2022 and income statement information available for Credit Suisse in CHF has been translated to USD using an average rate of 1.05 (CHF/USD) for the year ended 31 December 2022.

Note 2: Presentation reclassification adjustments

Presentation reclassification adjustments have been applied to the Credit Suisse balance sheet and income statement information as of and for the year ended 31 December 2022 in order to conform with UBS’s consolidated financial statement presentation. Such reclassifications have been made based on currently available information and, accordingly, further required adjustments may be identified as additional information becomes available. These adjustments may be material. The notes below refer to the historical Credit Suisse balance sheet and income statement line items and indicate how these have been reclassified to the respective UBS balance sheet and income statement line items presented herein. Amounts are presented in USD and have been translated from CHF as indicated under Note 1 above.

“Cash and due from banks” of 74.1bn was reclassified to “Cash and balances at central banks” (73.9bn) and to “Financial assets at fair value not held for trading” (0.2bn).

“Interest-bearing deposits with banks” of 0.5bn was reclassified to “Loans and advances to banks” (0.5bn) and “Financial assets at fair value not held for trading” (0.02bn).

“Central bank funds sold, securities purchased under resale agreements and securities borrowing transactions” of 63.6bn was reclassified to “Receivables from securities financing transactions measured at amortized cost” (19.5bn) and to “Financial assets at fair value not held for trading” (44.1bn).

“Securities received as collateral, at fair value” of 3.2bn was reclassified to “Financial assets at fair value held for trading”.

“Trading assets, at fair value” of 70.8bn were split between derivative assets (reclassified to “Derivative financial instruments” (12.0bn)) and non-derivative assets (reclassified to “Financial assets at fair value held for trading” (58.8bn)).

“Investment securities” of 1.9bn was split, with the portion classified as held to maturity under U.S. GAAP reclassified to “Other financial assets measured at amortized cost” (1.0bn) and the portion classified as available for sale under U.S. GAAP reclassified to “Financial assets measured at fair value through other comprehensive income” (0.9bn).

“Other investments” of 6.0bn was split between equity method investments (reclassified to “Investments in associates” (1.8bn)), equity securities (3.5bn) and life finance instruments (0.6bn) (total of 4.1bn reclassified to “Financial assets at fair value not held for trading”) and real estate held-for-investment (reclassified to “Other non-financial assets” (0.1bn)).

“Net loans” of 285.8bn was split between those measured at amortized cost (reclassified to “Loans and advances to customers” (277.5bn) and “Loans and advances to banks” (0.4bn)) and those measured at fair value (reclassified to “Financial assets at fair value not held for trading” (8.0bn)).

“Goodwill” of 3.1bn and “Other intangible assets” of 0.5bn (totalling 3.6bn) were reclassified to “Goodwill and intangible assets”.

“Other assets” of 50.4bn has been split, with 8.4bn reclassified to “Cash collateral receivables on derivative instruments”, 13.9bn reclassified to “Other financial assets measured at amortized cost”, 5.0bn reclassified to “Property, equipment and software”, 17.4bn reclassified to “Financial assets at fair value held for trading”, 0.3bn reclassified to “Deferred tax assets” and 5.5bn reclassified to “Other non-financial assets”.

“Due to banks” of 12.9bn was split, with 0.5bn measured at fair value reclassified to “Other financial liabilities designated at fair value” and the remaining balance reclassified to “Amounts due to banks” (12.4bn).

“Customer deposits” of 252.3bn was split, with 2.7bn measured at fair value reclassified to “Other financial liabilities designated at fair value”, 11.7bn relating to certificates of deposit reclassified to “Debt issued measured at amortized cost” and the remaining balance remaining in “Customer deposits” (238.0bn).

“Central bank funds purchased, securities sold under repurchase agreements and securities lending transactions” of 21.9bn was reclassified to “Payables from securities financing transactions measured at amortized cost” (6.7bn) and to “Other financial liabilities designated at fair value” (15.2bn).

“Obligation to return securities received as collateral, at fair value” of 3.2bn was reclassified to “Financial liabilities at fair value held for trading”.

“Trading liabilities, at fair value” of 19.8bn were split between derivative liabilities (reclassified to “Derivative financial instruments” (9.7bn)) and non-derivative liabilities (reclassified to “Financial liabilities at fair value held for trading” (10.2bn)).

“Short-term borrowings” of 13.4bn has been split between the portion recognized at amortized cost (reclassified to “Debt issued measured at amortized cost” (6.1bn)) and at fair value (reclassified to “Debt issued designated at fair value” (7.3bn)).

“Long-term debt” of 170.1bn has been split between the portion recognized at amortized cost (reclassified to “Debt issued measured at amortized cost” (106.6bn)) and at fair value (reclassified to “Debt issued designated at fair value” (63.5bn)).

“Other liabilities” of 19.7bn has been split, with 2.2bn reclassified to “Cash collateral payables on derivative instruments”, 0.2bn reclassified to “Derivative financial instruments” (liabilities), 11.3bn reclassified to “Other financial liabilities measured at amortized cost”, 1.7bn reclassified to “Provisions” and 4.3bn reclassified to “Other non-financial liabilities”.

Income statement

“Net interest income” of 5.6bn has been split, with 0.7bn relating to net dividend income reclassified to “Other net income from financial instruments measured at fair value through profit or loss” and the remainder remaining within “Net interest income” (4.9bn).

“Compensation and benefits” of 9.3bn has been split, with 8.0bn reclassified to “Personnel expenses” and 1.3bn of outsourcing expenses reclassified to “General and administrative expenses”.

“General and administrative expenses” of 8.2bn has been split, with 1.8bn reclassified to “Depreciation, amortization and impairment of non-financial assets”, a credit of 0.2bn reclassified to “Personnel expenses”, and the balance of 6.6bn remaining in “General and administrative expenses”.

“Commission expenses” of 1.1bn were reclassified to “Net fee and commission income” in line with IFRS presentation requirements.

“Goodwill impairment” of 0.02bn was reclassified to “Depreciation, amortization and impairment of non-financial assets”.

“Restructuring expenses” of 0.6bn were split between those relating to personnel (reclassified to “Personnel expenses” (0.4bn)), those relating to depreciation and impairment of non-financial assets (reclassified to “Depreciation, amortization and impairment of non-financial assets” (0.04bn)) and those relating to other costs (reclassified to “General and administration expenses” (0.1bn)).

Note 3: Transaction accounting adjustments

Transaction accounting adjustments include certain pro forma preliminary adjustments to conform Credit Suisse’s balance sheet and income statement to UBS’s IFRS accounting policies and adjustments made to reflect the fair value of identifiable assets acquired and liabilities assumed in accordance with IFRS. They also include certain identified combination adjustments, the elimination of Credit Suisse equity balances and reflection of the estimated purchase consideration and estimated negative goodwill.

These adjustments have been estimated based on information available at the time of preparing the pro forma condensed combined balance sheet and income statement.

Pro forma transaction adjustments made to reflect the fair value measurement of identifiable assets acquired and liabilities assumed are preliminary and based upon available information and certain assumptions that UBS believes are reasonable under the circumstances, which are described in this note. A final determination of the fair value of assets acquired and liabilities assumed will be based on the actual assets and liabilities of Credit Suisse that exist as of the closing date of the transaction, with further adjustments possible in the subsequent 12 months as allowed under IFRS 3 requirements. As a consequence, the final fair value adjustments may differ materially from the amounts presented here.

In preparing the unaudited pro forma condensed combined financial information, UBS has assumed that all acquired hedging instruments and hedged items are redesignated within effective hedge accounting relationships upon completion of the merger.

All adjustments have been considered on a pre- and post-tax basis and where an estimated impact on income taxes has been identified this is reflected in Note 3q). This assessment includes assumptions and represents UBS’s best estimate as to the likely tax impacts. The assessment could change as further information becomes

available, including how the entities and businesses in each location will be reorganized, receipt of revised profit forecasts for those entities, and discussions with the relevant tax authorities. No deferred tax assets have been recognized in connection with the pre-tax adjustments as it is assumed that the pre-tax adjustments will either not be recognized for tax purposes, or they will generally relate to entities with tax losses carried forward that are not recognized as deferred tax assets.

The following notes reference the pro forma condensed combined balance sheet and income statement as of and for the year ended 31 December 2022 which is included earlier in this section.

Balance sheet

Reflects an adjustment to reverse certain netting impacts allowable under U.S. GAAP but not under IFRS. Under U.S. GAAP, derivative financial instruments may be presented on a net basis where an enforceable master netting agreement is in place. IFRS offsetting rules are more restrictive, requiring, in addition to having an enforceable right to offset upon the counterparty’s default, the right to offset if the reporting entity itself defaults and the right to offset in the normal course of business. UBS has reviewed Credit Suisse’s offsetting under U.S. GAAP and the estimated impact of this accounting difference as of 31 December 2022 results in an increase in Credit Suisse’s derivative assets and liabilities and associated cash collateral of approximately 89bn. The table below summarizes the impacts of this adjustment on the relevant line items. This adjustment is estimated to have no regulatory capital impact given the Basel capital netting rules are not tied to the underlying accounting treatment.


USD millions
Cash collateral receivables on derivative instruments			14,606
Derivative financial instruments			74,620

Total assets			89,225

Cash collateral payables on derivative instruments			9,501
Derivative financial instruments			79,725

Total liabilities			89,225

Reflects an adjustment to include estimated impacts of moving from trade date to settlement date accounting. Credit Suisse recognizes security purchases and sales on a trade date basis for their house business, while UBS uses a settlement date basis. The estimated impact of this accounting difference as of 31 December 2022 results in a reduction in Financial assets at fair value held for trading and Financial liabilities at fair value held for trading of 0.5bn and a reduction in Brokerage receivables and Brokerage payables designated at fair value of 10bn (with the latter stemming from matching long / short positions executed by Credit Suisse non-broker dealer branches, and therefore reported as receivables and payables on a gross basis in its financial statements). UBS reviewed other possible scenarios that could trigger trade date / settlement date differences (e.g., client clearing activities and derivatives booked on a settlement date accounting basis), and no material differences were identified.


USD millions
Financial assets at fair value held for trading	(500	)
Brokerage receivables	(10,000	)

Total assets	(10,500	)

Financial liabilities at fair value held for trading	(500	)
Brokerage payables designated at fair value	(10,000	)

Total liabilities	(10,500	)

Reflects an adjustment to derecognize certain positions that were recognized under U.S. GAAP. Under U.S. GAAP, lenders of securities are required to gross up their balance sheet if they receive securities as collateral (showing a respective asset and liability for the securities received that need to be redelivered). Securities received as collateral (reflected under “Financial assets at fair value held for trading”) and the associated obligation to return securities received as collateral (reflected under “Financial liabilities at fair value held for trading”) of 3.2bn recognized by Credit Suisse under U.S. GAAP have been derecognized under IFRS.

A preliminary fair value adjustment (discount) of 5.9bn has been applied to accrual accounted exposures recognized under Loans and advances to customers. This adjustment reflects UBS’s best estimate of the delta between carrying value and fair value for certain accrual accounted portfolios and positions upon closing of the transaction. The estimate has been prepared with reference to fair value information provided for these positions in the audited Credit Suisse 2022 financial statements, developments in interest rates and with consideration of the markets for potential strategic exit of certain portfolios or positions. Around half of the 5.9bn discount stems from fixed rate products, in particular Swiss mortgages, which are expected to accrue back to par if the product is held to its maturity. Detailed valuations have not been obtained and, accordingly, the fair value adjustment reflects preliminary estimates made by UBS and is subject to change once detailed analyses are performed and as additional information becomes available. These changes may be material. Refer also to Note 3x)i. for the corresponding impact on the pro forma condensed combined income statement for 2022.

A preliminary fair value adjustment (discount) of 3.0bn has been applied to Financial assets at fair value held for trading to reflect UBS’s best estimate of the fair value of individual positions and valuation adjustments for a range of uncertainties including liquidity and model risks given the illiquid nature of some positions and structural complexities and consideration of the markets for potential strategic exit of certain positions. Detailed valuations have not been performed and, accordingly, the fair value adjustment reflects preliminary estimates made by UBS and is subject to change once further analyses are performed and as additional information becomes available. These changes may be material.

A preliminary fair value adjustment (discount) of 1.0bn has been applied to Financial assets at fair value not held for trading to reflect UBS’s best estimate of the fair value of certain unobservable or more complex portfolios in markets for potential strategic exit. Detailed valuations have not been performed and, accordingly, the fair value adjustment reflects preliminary estimates made by UBS and is subject to change once further analyses are performed and as additional information becomes available. These changes may be material.

A preliminary fair value adjustment of 3.1bn has been made to increase Provisions to reflect UBS’s best estimate of the fair value of accrual-accounted unfunded loan commitments, primarily in the relationship lending portfolio, which are required to be fair valued under IFRS 3 acquisition rules. For the portion retained, the initial mark is expected to accrete back into fee and commission income over the life of the loan commitment. Detailed valuations have not been performed and, accordingly, the fair value adjustment reflects preliminary estimates made by UBS and is subject to change once further analyses are performed and as additional information becomes available. These changes may be material. Refer also to Note 3x)ii. for the corresponding impact on the pro forma condensed combined income statement for 2022.

A preliminary fair value adjustment (discount) of 0.2bn has been applied to Debt issued measured at amortized cost and a preliminary fair value adjustment (premium) of 5.3bn has been applied to Debt issued designated at fair value to reflect UBS’s best estimate of the delta between carrying value and fair value for issued debt acquired from Credit Suisse upon closing of the transaction. The delta represents the impact of fair valuing Credit Suisse issued debt using UBS funding spreads and includes (i) the reversal of the life-to-date own credit gain recognized by Credit Suisse on fair value debt as of

31 December 2022 (5.1bn premium relating to debt issued designated at fair value), (ii) a fair value adjustment to incorporate the estimated impact of UBS’s own credit spread on amortized cost and fair value debt (estimate of 1.0bn premium for amortized cost and 0.2bn premium for fair value), (iii) a fair value adjustment to incorporate the estimated impact of interest rate movements into amortized cost securities not held under fair value hedge accounting programs (1.2bn discount). The fair value adjustments have been calculated using UBS funding spreads as of 31 March 2023 to give an estimate of the impacts at the merger closure date, given the significant movement in funding spreads across the first quarter of 2023. Detailed valuations have not been performed and, accordingly, the fair value adjustments reflect preliminary estimates made by UBS and are subject to change once further analyses are performed and as additional information becomes available. These changes may be material. Refer to Note 3q)ii. for the corresponding impact on deferred tax liabilities. Refer also to Note 3y) for the corresponding impact of these adjustments on the pro forma condensed combined income statement for 2022. Adjustments (i) and (ii) related to UBS funding spreads are not expected to have an impact on regulatory capital given that they relate in substance to own credit impacts which are reversed from common equity tier 1 capital for fair valued liabilities. The treatment is subject to regulator review and approval.

Debt issued designated at fair value has been reduced by 15.9bn to reflect the impact from writing off additional tier 1 (AT1) capital instruments on the basis of the decree issued by the Swiss Financial Market Supervisory Authority (FINMA) on 19 March 2023 to Credit Suisse Group AG. The write down reflects the book value of the impacted AT1 instruments, gross of the impact of Credit Suisse’s life-to-date own credit gain (which was already reversed in Note 3h) above). For the pro forma condensed combined balance sheet this has been reflected as if the write down would have occurred on 31 December 2022. Refer also to Note 3w) for the corresponding impact on the pro forma condensed combined income statement for 2022.

In the first quarter of 2023, Credit Suisse sold a significant part of the Securitized Products Group (Apollo transaction) to entities and funds managed by affiliates of Apollo Global Management. The table below summarizes the adjustments which have been reflected in the pro forma condensed combined balance sheet in connection with the sold portfolio, including the derecognition of financial assets and liabilities and the recognition of new financing provided, following the accounting treatment applied by Credit Suisse. A detailed review of the transaction and associated accounting has not been performed. Accordingly, the adjustments are subject to change once further analyses are performed and these changes may be material. Refer also to Note 3z) for the corresponding impact on the pro forma condensed combined income statement for 2022.


USD millions
Cash and balances at central banks	4,750
Loans and advances to customers	1,350
Other financial assets measured at amortized cost	2,600
Financial assets at fair value held for trading	(3,950	)
Financial assets at fair value not held for trading	(8,950	)

Total assets	(4,200	)

Other financial liabilities designated at fair value	(4,950	)

Total liabilities	(4,950	)

Net impact on fair value of assets acquired	750

An adjustment of 1.0bn has been reflected in connection with estimated fair value markups on real estate properties held by Credit Suisse at cost, based on a preliminary valuation analysis performed for the most significant properties, referencing limited information provided by Credit Suisse. Detailed valuations have not been obtained and, accordingly, the fair value adjustment reflects a preliminary

estimate made by UBS and it is subject to change once a detailed analysis is performed and as additional information becomes available. These changes may be material. Refer to Note 3q)v. for the corresponding impact on deferred tax liabilities. Refer also to Note 3ff)iii. for the corresponding impact on the pro forma condensed combined income statement for 2022.

An estimated markdown of 2.0bn has been reflected for capitalized software on the basis of an initial scenario analysis, including high-level information about the components of capitalized software received from Credit Suisse by business division and how other market participants would fair value the software acquired. Detailed valuations have not been obtained and, accordingly, the fair value adjustments reflect preliminary estimates made by UBS’s management and are subject to change once detailed analyses are performed and as additional information becomes available. These changes may be material. Refer also to Note 3ff)i. for the corresponding impact on the pro forma condensed combined income statement for 2022.

In accordance with the requirements of IFRS 3 that only allow recognition of the acquired identifiable assets, existing goodwill of 3.1bn in the financial statements of Credit Suisse is eliminated. Refer also to Note 3ff)iv. for the corresponding impact on the pro forma condensed combined income statement for 2022.

The pro forma condensed combined balance sheet includes two adjustments relating to intangible assets:

Recognition of 2.0bn estimated fair value of identifiable intangible assets acquired, stemming primarily from customer relationships and core deposits. Detailed valuations have not been obtained, with initial assumptions leveraging public information and limited confidential information to provide indicative values. The fair value adjustments are subject to change once detailed analyses are performed and as additional information becomes available. These changes may be material.

ii.

Write down of 0.06bn of existing intangible assets based on preliminary assessments, with the assets comprising this balance at the end of their useful economic life and therefore valued at zero. Mortgage servicing rights measured at fair value of 0.4bn are retained.

Refer to Note 3q)iv. for the corresponding impact on deferred tax liabilities. Refer also to Note 3ff)ii. for the aggregate impact on the pro forma condensed combined income statement for 2022.

Credit Suisse sponsors several defined benefit pension plans for its employees and has recognized a pension asset of 4.5bn in Other non-financial assets, as of 31 December 2022 under U.S. GAAP, of which 3.8bn relates to the Swiss plan. Under IFRS, if the fair value of the assets is higher than the present value of the defined benefit obligation, the recognition of the resulting net asset is limited to the present value of economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan (asset ceiling). UBS analyzed available information on the Credit Suisse pension plans and has derecognized pension assets of 3.8bn, in accordance with IAS 19 limits. This adjustment is expected to have no regulatory capital impact given pension assets are already deducted from common equity tier 1 capital. Refer to Note 3q)iii. for the corresponding impact on deferred tax liabilities.

IFRS 3 requires UBS to recognize all contingent liabilities included in the scope of the acquisition at fair value upon closing, even if it is not probable that they will result in an outflow of resources, i.e., UBS is required to recognize provisions for all possible obligations, significantly increasing the recognition threshold beyond the standard thresholds under U.S. GAAP and IFRS. To reflect this, additional pro forma provisions of 4.0bn have been recognized based on UBS’s initial assessment of the possible outflows from litigation, regulatory and similar matters. Detailed assessments have not been performed and the fair value adjustments are subject to change once detailed analyses are performed and as additional information becomes available. These adjustments may be material.

Pro forma adjustments have been reflected in Deferred tax assets and deferred tax liabilities, in Other non-financial liabilities, as outlined in the table below.


USD millions			Note
Derecognition of DTAs	(118	)		i.

Total assets	(118	)

Derecognition of net DTL associated with own credit OCI	(500	)		ii.
Derecognition of net DTL associated with pension asset	(737	)		iii.
Recognition of DTL associated with new intangibles	400			iv.
Recognition of DTL associated with real estate valuation increase	200			v.

Total liabilities	(637	)

A pro forma adjustment has been made to derecognize deferred tax assets of 0.1bn to reflect UBS’s estimate of deferred tax asset utilization in the relevant legal entities.

ii.

A pro forma adjustment has been made to reverse net deferred tax liabilities of 0.5bn relating to other comprehensive income (OCI) for own credit on the basis that Credit Suisse equity balances, including OCI, are reversed as part of the business combination accounting under IFRS 3 (see Note 3h).

iii.

A pro forma adjustment has been made to reduce net deferred tax liabilities by 0.7bn in connection with the reversal of pension assets (see Note 3o).

iv.

A pro forma adjustment has been made to increase deferred tax liabilities by 0.4bn to reflect the estimated taxable temporary difference arising on recognition of new intangible assets (see Note 3n)i).

A pro forma adjustment has been made to increase deferred tax liabilities by 0.2bn to reflect the estimated taxable temporary difference potentially arising on higher real estate valuations (see Note 3k).

An adjustment has been reflected to include an accrual for estimated acquisition-related costs of 0.2bn, based on the estimate of costs to be incurred up to closing of the transaction for both UBS and Credit Suisse, consisting primarily of advisory, legal and consulting fees. An increase to liabilities for estimated costs for Credit Suisse (0.1bn) is part of the calculation of negative goodwill, whereas the estimated costs for UBS (0.1bn) are excluded from this calculation but are reflected as an increase to liabilities in the pro forma condensed combined balance sheet. Refer to Note 3ee) for the associated impact on the pro forma condensed combined income statement for 2022.

An adjustment has been made (estimated reduction of 0.4bn to Other non-financial liabilities) to reflect the estimated effect on the balance sheet of a write down of contingent capital awards issued by Credit Suisse and specific mandated Credit Suisse compensation cancellations as communicated by the Swiss government to Credit Suisse in the second quarter of 2023.

UBS has reviewed exposures and transactions with Credit Suisse as of and for the year ended 31 December 2022 and applied estimated intercompany elimination adjustments, as outlined in the table below, assuming reciprocal measurements and classification in the accounts of Credit Suisse. Estimated intercompany amounts in the income statement are not considered to be material and have not been adjusted. Further consolidation adjustments may be required as more information becomes

available and as analyses are completed and, accordingly, carrying values are subject to change. These adjustments may be material.


USD millions
Cash collateral receivables on derivative instruments	(503	)
Derivative financial instruments	(3,567	)

Total assets	(4,070	)

Cash collateral payables on derivative instruments	(503	)
Derivative financial instruments	(3,567	)

Total liabilities	(4,070	)

Credit Suisse’s historical shareholders’ equity, which includes common shares, additional paid-in capital, retained earnings, treasury shares and accumulated other comprehensive income / (loss), is eliminated on combination. The movements impacting the pro forma combined equity are outlined in the table below.


	Historical			Historical			Proforma																Pro Forma
Equity	UBS Group (IFRS)			Credit Suisse Group (US GAAP)			Estimated purchase consideration		Delta of purchase consideration to weighted average cost of treasury shares			Negative goodwill		Elimination of Credit Suisse historical equity			Estimate of UBS transaction costs up to closing of the transaction			Recognition of ECL under IFRS 9			Condensed combined balance sheet (IFRS)
Share capital		304			173										(173	)								304
Share premium		13,546			41,778			156		349					(41,778	)								14,051
Treasury shares		(6,874	)		(463	)		3,305		(349	)				463									(3,918	)
Retained earnings		50,004			25,568								34,777		(25,568	)		(130	)		(546	)		84,105
Other comprehensive income recognized directly in equity, net of tax		(103	)		(18,230	)									18,230									(103	)

Equity attributable to shareholders		56,876			48,826			3,461		—			34,777		(48,826	)		(130	)		(546	)		94,439

Equity attributable to non-controlling interests		342			219																			561

Total equity		57,218			49,044			3,461		—			34,777		(48,826	)		(130	)		(546	)		94,999

Following the recognition of identifiable assets as part of the purchase price allocation under IFRS 3 and their measurement at fair value, including financial assets and off-balance sheet arrangements, it is required under IFRS 9 to additionally recognize expected credit losses for positions measured at amortized cost which are not impaired. Impaired instruments are recognized as purchased credit impaired instruments at fair value, with no additional expected credit losses initially recorded. For the pro forma condensed combined balance sheet, an allowance of 0.3bn has been recorded against the carrying value of non-impaired Loans and advances to customers. This amount is 0.2bn less than the historic allowance as of 31 December 2022 under the U.S. GAAP CECL approach which was subject to a lifetime calculation. In addition, provisions for credit losses of 0.2bn have been recognized in “Provisions” to reflect the recognition of IFRS 9 expected credit loss provisions for qualifying off-balance sheet commitments that are not impaired. This amount is 0.05bn higher than the historic provision as of 31 December 2022 under US GAAP and includes expected credit losses for committed unconditionally revocable credit lines for which no CECL was required under U.S. GAAP. Refer to Note 3gg) for the associated impact on the pro forma condensed combined income statement of 2022.

Loan allowances and provisions for credit losses (USDm)


	Credit Suisse Group
	31.12.2022									Acquisition date
	U.S. GAAP			Delta U.S. GAAP to IFRS			IFRS			Impact of reset through purchase price allocation (PPA)		ECL in PPA balance sheet		Initial recognition of ECL allowances and provisions post-PPA			UBS Group 31 December 2022 (IFRS)			Combined UBS Group post- acquisition date (IFRS)
Loans and advances to customers
Allowances for credit losses		(1,475	)		235			(1,240	)		1,240		—		(325	)		(783	)		(1,108	)
of which on non-impaired exposures		(560	)		235			(325	)		325		—		(325	)		(308	)		(633	)
of which on impaired exposures		(915	)		—			(915	)		915		—		—			(475	)		(475	)

Off-balance sheet arrangements not at fair value
Provisions for credit losses		(235	)		(151	)		(386	)		386		—		(221	)		(201	)		(422	)
of which on non-impaired exposures		(172	)		(151	)		(323	)		323		—		(221	)		(175	)		(396	)
of which on impaired exposures		(63	)		—			(63	)		63		—		—			(26	)		(26	)

Income statement

Net interest income includes a preliminary transaction adjustment to reverse out interest expense of 1.1bn and Other net income from financial instruments measured at fair value through profit or loss includes a reversal of net fair value losses of 0.2bn to reflect the impact from writing off the additional tier 1 (AT1) capital instruments (see Note 3i). This write down has been reflected on the basis of the decree issued by the Swiss Financial Market Supervisory Authority (FINMA) on 19 March 2023 to Credit Suisse Group AG. For the pro forma condensed combined income statement this has been reflected as if the write down would have occurred on 1 January 2022. The adjustment is reflected net of hedge effects as UBS has assumed that related hedging instruments would have been terminated in parallel with the write off of the AT1 capital instruments.

The pro forma condensed combined income statement includes two adjustments to reflect accretion of the fair value adjustment on certain loan portfolios (see Note 3d) and unfunded loan commitments (see Note 3g):

An estimated fair value discount related to on-balance sheet loan portfolios where there is an expected intent to hold the portfolio to maturity has been accreted over a period of 2-4 years using the sum-of-the-years digits method. The pro forma condensed combined income statement includes a credit of 2.3bn to Net interest income reflecting estimated associated accretion. The calculation includes significant assumptions including the intended business model of acquired assets (hold to maturity versus held for trading or imminent sale) and the estimated average maturity of those assets which are expected to be held to maturity. This calculation is intended to approximate an effective yield calculation based on preliminary estimates and assumptions which are subject to change once detailed analyses are performed and as additional information becomes available. These changes may be material.


USD billions	Year 1		Year 2		Year 3		Year 4
Estimated accretion of fair value discount for on-balance sheet loan portfolios		2.3		1.6		0.8		0.3

ii.

The accretion of an estimated fair value discount on unfunded loan commitments (recognized within Provisions) has been accreted over 3 years on a straight-line basis, resulting in a 1.0bn pro forma credit in 2022 to Net fee and commission income. The calculation is based on preliminary estimates and assumptions, in particular that the whole portfolio would be held to maturity, which are subject to change once detailed analyses are performed and as additional information becomes available. These changes may be material.

The pro forma condensed combined income statement includes an adjustment to reflect 0.01bn (debit) of estimated interest income from net amortization in the first year following acquisition of the

adjustment made to report acquired debt issued at fair value, including the estimated impact of UBS’s own credit spread and interest rate movements where not already incorporated in CS’s carrying values (refer to Note 3h)). The accretion is calculated using the sum-of-the-years digits method, with reference to the average estimated maturity profile of acquired debt issued. This calculation is intended to approximate an effective yield calculation based on preliminary estimates and assumptions which are subject to change once detailed analyses are performed and as additional information becomes available. These changes may be material.

In the first quarter of 2023, Credit Suisse sold a significant part of the Securitized Products Group (SPG) (Apollo transaction) to entities and funds managed by affiliates of Apollo Global Management. Net interest income of 0.3bn, Net fee and commission income of 0.1bn and a trading loss in Other net income from financial instruments measured at fair value through profit or loss of 0.1bn recognized in 2022 by Credit Suisse in connection with the sold portfolio have been adjusted out of the pro forma condensed combined income statement to reflect the transaction as if it had been completed on or prior to 1 January 2022. As the net gain on sale of this portfolio of approximately 0.8bn was recognized by Credit Suisse in the first quarter of 2023 (i.e., after 31 December 2022 but before closing of the transaction), it is not directly reflected in the pro forma income statement. However, the gain is included in the calculation of the negative goodwill as it represents an increase in net assets acquired from Credit Suisse (see Note 3j).

aa)

Under IFRS, Day 1 gains and losses on financial instruments, after taking account of any valuation adjustments, are recognized in the income statement only when their fair value is evidenced by an observable market source. A similar restriction does not exist under U.S. GAAP. On this basis, a debit adjustment of 0.2bn has been recognized in the pro forma condensed combined income statement for 2022.

bb)

The negative goodwill balance arising from the transaction is estimated to be 34.8bn and has been determined based on the estimated fair values (note that there are certain limited exemptions from fair value measurement as permitted under IFRS 2 and IAS 19) for the identifiable assets acquired and liabilities assumed, and consideration transferred. Refer to Note 4 for further information. This adjustment is non-recurring in nature.

cc)

Personnel expenses include a pro forma adjustment of 0.3bn to reflect incremental expense as IFRS and U.S. GAAP have different requirements for the expected return on plan assets, recognition of changes to past service costs and recognition of actuarial gains/losses in connection with post-employment benefit plans.

dd)

A pro forma adjustment of 0.9bn (increase to personnel expenses) has been made to reflect UBS’s estimate of other compensation-related effects, primarily related to the application of UBS compensation approaches and deferral framework. The increase to pro forma expenses in 2022 would be offset by lower deferred compensation amortization expenses in future years.

ee)

General and administrative expenses include an adjustment for estimated acquisition-related costs of 0.1bn, based on an estimate of costs to be incurred up to closing of the transaction for UBS, consisting primarily of advisory and legal fees. This adjustment is non-recurring in nature.

ff)

Depreciation, amortization and impairment of non-financial assets includes the following adjustments:

An estimated reduction in amortization expense of 0.6bn has been recognized in the pro forma condensed combined income statement to reflect the impact on amortization expense in 2022 if the fair value discount on software was applied on 1 January 2022. See Note 3l).

ii.

Incremental amortization of 0.3bn has been reflected in the pro forma condensed combined income statement to reflect the estimated impact on operating expenses if new intangible assets were recognized as of 1 January 2022. See Note 3n)i.

iii.

Incremental amortization of 0.03bn has been reflected in the pro forma condensed combined income statement to reflect the estimated impact on operating expenses related to the fair value adjustment of real estate acquired as of 1 January 2022. See Note 3k).

iv.

Goodwill impairment of 0.02bn recognized in 2022 has been reversed in the pro forma condensed combined income statement to reflect the impact of writing off Credit Suisse goodwill as referenced in Note 3m).

gg)

Net credit loss expense of 0.5bn, including 0.3bn for on- and 0.2bn for off-balance sheet positions, are reflected in the pro forma income statement for the year ended 2022. Refer to Note 3v).

Note 4: Estimated preliminary purchase price allocation

The unaudited pro forma condensed combined financial information assumes that UBS will acquire 100% of the outstanding Credit Suisse shares upon closing of the transaction, that the number of outstanding Credit Suisse shares exchanged will be approximately 3.9bn shares and that each Credit Suisse share will be exchanged for 1/22.48 UBS shares. In addition, the estimated fair value of outstanding share-based compensation awards for Credit Suisse employees that is attributable to pre-combination service is 0.2bn, for a total purchase price of approximately 3.5bn (based on the UBS Group AG share price on 5 May 2023). The final valuation of the consideration to be transferred by UBS upon the completion of the transaction will be determined based on the closing price of UBS shares on the closing date of the transaction. The purchase consideration is reflected as a reduction to treasury shares of UBS Group at their weighted average cost, with the difference between the fair value of UBS shares on the closing date and the weighted average cost of treasury shares in the UBS Group balance sheet on closing date taken as an adjustment to share premium.

The negative goodwill amount arising from the transaction is estimated to be 34.8bn and has been determined based on the estimated fair values for the identifiable assets acquired and liabilities assumed, and consideration transferred.

Preliminary pro forma purchase price allocation (indicative only, subject to change)


	USD millions
Pro forma estimated purchase price		3,461


Credit Suisse Net Assets at Fair Value
Assets
Loans and advances to customers		272,883
Other financial assets measured at amortized cost		138,899
Financial assets at fair value held for trading and derivatives		151,858
Other financial assets measured at fair value		52,298
Other non-financial assets		10,088

Total assets		626,025


Liabilities
Customer deposits		237,964
Debt issued		184,425
Other financial liabilities measured at amortized cost		41,691
Financial liabilities at fair value held for trading and derivatives		95,665
Other financial liabilities designated at fair value		15,817
Other non-financial liabilities		12,006

Total liabilities		587,568

Non-controlling interests		219

Fair value of net assets acquired		38,238


Pro forma negative goodwill resulting from the merger		(34,777	)

Pro forma transaction adjustments made to reflect the fair value measurement of identifiable assets acquired and liabilities assumed are preliminary and based upon available information and certain assumptions that UBS believes are reasonable under the circumstances, which are described above. A final determination of the fair value of assets acquired and liabilities assumed will be based on the actual assets and liabilities of Credit Suisse that exist as of the closing date of the transaction and, therefore, cannot be finalized prior to the completion of the transaction and may differ materially from the amounts presented here. In addition, IFRS 3 allows for a further 12 months to finalize provisional amounts after closing.

The following table summarizes the determination of the purchase price consideration with a sensitivity analysis assuming a 10% increase and a 10% decrease in the price of UBS’s ordinary share price from the 5 May 2023 baseline with its impact on the pro forma negative goodwill.


in millions, except per share data and exchange rate	5 May 2023		10% increase in UBS Group share price		10% decrease in UBS Group share price
CS ordinary shares outstanding, 31 March 2023		3,947		3,947		3,947
Exchange ratio		0.04		0.04		0.04

UBS ordinary shares		176		176		176
UBS ordinary share price, 5 May 2023 (in CHF)		17.40		19.14		15.66

Pro forma purchase price consideration (in CHFm), before consideration of replacement awards		3,055		3,360		2,749
CHF/USD, 31 December 2022		1.08		1.08		1.08


Pro forma purchase price consideration (in USDm), before consideration of replacement awards		3,305		3,636		2,975

Estimated impact of replacement awards		156		171		140


Pro forma purchase price consideration (in USDm), after consideration of replacement awards		3,461		3,807		3,115
Preliminary pro forma negative goodwill resulting from the merger (USDm)		34,777		34,431		35,123

Note 5: U.S. GAAP to IFRS differences

Other than for the items noted in section 3, UBS has reviewed Credit Suisse’s U.S. GAAP policies and related reporting and has concluded that other identified policy differences did not result in a material impact compared with reporting prepared under UBS’s IFRS accounting policies. As part of this review UBS has considered the following:

Consolidation: IFRS and US GAAP consolidation principles are for the most part in line with consolidation required when an entity has power over relevant activities and exposure to variable returns. No material differences are expected.

Classification of financial instruments: A detailed assessment of the business model and solely payments of principal and interest criteria under IFRS 9 is required to substantiate the classification and measurement of financial instruments under IFRS. However, the majority of financial instruments recognized by Credit Suisse are not expected to have changes to their classification under IFRS.

Hedge accounting: IFRS requires that all hedge relationships are redesignated following an acquisition. In preparing the pro forma condensed combined financial information, Credit Suisse’s hedge designations have been retained on the assumption that they would continue to qualify for hedge accounting under IFRS, subject to redocumentation.

Lease accounting: Lease liability measurement throughout the life of the lease is similar under both IFRS and U.S. GAAP. No material differences are expected.

Accordingly, no adjustments have been reflected in the pro forma financial information for the items above.

Note 6: Earnings per share

Pro forma earnings (loss) per share (referred to as “EPS”) for the pro forma condensed combined income statement have been recalculated to show the impacts of the transaction after giving effect to the UBS shares to be transferred to Credit Suisse shareholders, using the exchange ratio defined and assuming that the UBS shares to be transferred to Credit Suisse shareholders in connection with the transaction were outstanding at the beginning of the period presented.

For the purposes of the unaudited pro forma diluted EPS calculation, there is assumed to be no effect from anti-dilutive potential ordinary shares.


	For the year ended 31 December 2022
	UBS Group Historic		Unaudited pro forma combined company
Net income attributable to shareholders, USDm		7,630		37,112
Weighted average number of ordinary shares (basic), million		3,261		3,429

Basic earnings per share, USD		2.34		10.82


Weighted average number of ordinary shares (diluted), million		3,397		3,565

Diluted earnings per share, USD		2.25		10.41

INFORMATION ABOUT THE COMPANIES

UBS Group AG

Bahnhofstrasse 45, 8001

Zurich, Switzerland

Tel: +41 44 234 11 11

UBS Group is a leading and truly global wealth manager with focused asset management and investment banking capabilities, and the leading universal bank in Switzerland. UBS Group enables people, institutions and corporations to achieve their goals by providing financial advice and solutions. UBS Group has a capital-light, cash-generative and well-diversified business model, a strong culture, a balance sheet for all seasons and a respected brand with over 160 years of history.

The operational structure of UBS Group is comprised of the Group Functions and four business divisions: Global Wealth Management, Personal & Corporate Banking, Asset Management and the Investment Bank. UBS Group AG sees joint efforts as key to its growth, both within and between business divisions. UBS Group employs approximately 72,500 employees (full-time equivalents) across 48 countries.

Credit Suisse Group AG

Paradeplatz 8, 8001

Zurich, Switzerland

Tel: +41 44 333 11 11

Credit Suisse is incorporated and domiciled in Switzerland as a corporation limited by shares (Aktiengesellschaft) and operates under Art. 620 et seqq. of the Swiss Code of Obligations. American depositary shares of Credit Suisse (each representing a beneficial interest in one Credit Suisse Ordinary Share) are currently traded on the NYSE under the ticker symbol “CS” and Credit Suisse Ordinary Shares are currently traded on the SIX under the ticker symbol “CSGN.” Credit Suisse’s principal executive offices are located at Paradeplatz 8, 8001 Zurich, Switzerland and its telephone number is +41 44 333 11 11.

BENEFICIAL OWNERSHIP OF SECURITIES

Major Shareholders of UBS Group AG

Under the Swiss Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading of June 19, 2015 (the “FMIA”), anyone directly, indirectly or acting in concert with third parties holding shares in a company listed in Switzerland or holding derivative rights related to shares in such a company directly, indirectly or in concert with third parties must notify the company and the SIX if the holding reaches, falls below or exceeds one of the following percentage thresholds: 3, 5, 10, 15, 20, 25, 331/3, 50 or 66 2/3% of voting rights, regardless of whether or not such rights may be exercised. Nominee companies that cannot autonomously decide how voting rights are exercised are not required to notify the company and SIX if they reach, exceed or fall below the aforementioned thresholds.

The following table sets forth information as of May 16, 2023 with respect to the ownership of more than 3% of UBS Group AG Shares according to the mandatory FMIA disclosure notifications filed with UBS Group AG and the SIX. Percentage computations are based on 3,462,087,722 UBS Group AG Shares outstanding as of May 4, 2023.


Name of Beneficial Owner	UBS Group AG Shares Beneficially Owned		Percent of UBS Group AG Shares Beneficially Owned
BlackRock Inc., New York		177,901,324		5.14	%
Artisan Partners Limited Partnership, Milwaukee		106,896,637		3.09	%
Dodge & Cox International Stock Fund, San Francisco		111,816,261		3.23	%
Norges Bank, Oslo		115,997,262		3.35	%

According to the share register of UBS Group AG, the shareholders (acting in their own name or in their capacity as nominees for other investors or beneficial owners) listed in the table below were registered with 3% or more of the total share capital of UBS Group AG.


	UBS Group AG Shares Beneficially Owned as of May 16, 2023		Percent of UBS Group AG Shares Beneficially Owned
Name of Beneficial Owner			as of May 16, 2023			as of December 31, 2022		as of December 31, 2022		as of December 31, 2022
Chase Nominees Ltd., London		304,174,313		8.79	%		8.60		8.89		10.39
DTC (Cede & Co.), New York*		254,100,761		7.34	%		7.12		5.78		4.99
Nortrust Nominees Ltd., London		139,076,291		4.02	%		4.33		4.80		5.15

*	DTC (Cede & Co.), New York, “The Depository Trust Company” is a U.S. clearing organization.

As of March 27, 2023, to UBS Group AG Group’s knowledge, approximately 9.8% of the outstanding UBS Group AG Shares registered on our share register are beneficially owned by UBS Group AG shareholders that reside in the United States.

To the extent known to UBS Group AG, it is neither directly nor indirectly owned or controlled by one or more corporations, by any government or by any other natural or legal person(s) severally or jointly.

UBS Group AG does not know of any arrangements, the operation of which might at a subsequent date result in a change in control of UBS Group AG.

Security Ownership of Certain Beneficial Owners and Management of Credit Suisse

Credit Suisse Executive Board shareholdings

The shareholdings of the Credit Suisse Executive Board members as well as the value of the outstanding share-based compensation awards (comprising awards that vested between January 1, 2023 and May 16, 2023 that have not been delivered and unvested awards) held by Executive Board members as of May 16, 2023, are disclosed in the table below. These figures are based on shareholding and awards information available to Credit Suisse as of May 16, 2023, including such members’ Credit Suisse shares held, as applicable, in internal Credit Suisse accounts and through external brokers.

On April 5, 2023, the Swiss Federal Council announced that certain outstanding deferred variable remuneration awards held by senior executives of Credit Suisse would be partially or fully cancelled. The final decision to order and implement these cancellations has not yet been issued by the competent Swiss Federal Ministry of Finance. Any cancellations or adjustments ultimately required by such decision are not reflected in the amounts below.

Executive Board holdings and values of deferred share-based awards by individual


Name	Number of Owned Shares¹		Number of Unvested Shares³		Number of Owned Shares & Unvested Shares³		Values of Unvested Shares at Grant Date²		Value of Unvested Shares at May 16, 2023³
Ulrich Körner		340,055		1,407		341,462		10,796.64		1,069.46
Markus Diethelm		—		—		—		—		—
Francesco De Ferrari		104,114		85,093		189,207		654,895.89		64,679.19
Christine Graeff		—		33,631		33,631		258,818.55		25,562.92
Joanne Hannaford		127,171		355,988		483,159		2,947,770.75		270,586.48
André Helfenstein		208,718		61,623		270,341		621,262.45		46,839.64
Dixit Joshi		35,816		294,553		330,369		1,209,005.01		223,889.74
Edwin Chee Ann Low		283,051		595,255		878,306		5,476,907.31		452,453.33
Francesca McDonagh		—		—		—		—		—
Nitaben Patel		24,273		206,523		230,796		866,746.51		156,978.13
David Wildermuth		162,427		171,507		333,934		1,339,690.03		130,362.47

Total		1,285,625		1,805,580		3,091,205		13,385,893.14		1,372,421.36

1	Includes shares that were initially granted as deferred compensation and have been delivered.

2	Determined based on the number of unvested awards multiplied by the share price at grant.

3	Includes deferred shares that vested between January 1, 2023, and May 16, 2023, that have not yet been delivered.

Credit Suisse Board of Directors shareholdings

The shareholdings of the Credit Suisse Board of Directors members as of May 16, 2023 are disclosed in the following table. As of May 16, 2023, there were no members of the Credit Suisse Board of Directors with outstanding options. These figures are based on shareholding and awards information available to Credit Suisse as of May 16, 2023, including such members’ Credit Suisse shares held, as applicable, in internal Credit Suisse accounts and through external brokers.


Name	Total Shares as of May 16, 2023¹
Axel Lehmann		981,848
Mirko Bianchi		335,133
Clare Brady		248,372
Christian Gellerstad		751,784
Keyu Jin		187,161
Iris Bohnet		355,912
Amanda Norton		183,934

Total		3,044,144

1	Includes Credit Suisse shares that are subject to a blocking period of up to four years.

COMPARISON OF RIGHTS OF UBS GROUP AG SHAREHOLDERS AND CREDIT SUISSE SHAREHOLDERS

The rights of UBS Group AG shareholders are governed by Swiss law and UBS Group AG’s Articles of Association dated as of April 5, 2023 (which we refer to as the “UBS Group AoA”). The rights of holders of Credit Suisse Ordinary Shares are governed by Swiss law and the Articles of Association of Credit Suisse dated as of April 4, 2023 (which we refer to as the “CS AoA”). Upon completion, each Credit Suisse Share issued and outstanding immediately prior to completion will entitle its holder to receive, subject to the payment of certain fees to the Credit Suisse Depositary in the case of Credit Suisse ADSs, the merger consideration consisting of 1/22.48 UBS Group AG Shares. As a result, following completion, the rights of holders of Credit Suisse Ordinary Shares will be governed by Swiss law and the UBS Group AoA.

While both UBS Group AG and Credit Suisse are companies organized under the laws of Switzerland, and accordingly, the shareholder rights of both companies are governed by Swiss law, there are certain differences between the rights of holders of Credit Suisse Ordinary Shares and the rights of UBS Group AG shareholders due to differences between the UBS Group AoA and the CS AoA. Set forth below are the material differences between the rights of UBS Group AG shareholders (and rights that Credit Suisse shareholders will have as UBS Group AG shareholders under the UBS Group AoA once they receive UBS Group AG Shares in the transaction), on the one hand, and the current rights of holders of Credit Suisse Ordinary Shares under the CS AoA, on the other hand.

The following comparison of shareholder rights is necessarily a summary and is not intended to be complete or to identify all differences that may, under given situations, be material to current holders of Credit Suisse Ordinary Shares, nor to be a complete summary of the relevant positions under of the UBS Group AoA and the CS AoA. The identification of specific differences is not intended to indicate that other equally or more significant differences do not exist. Also, as this comparison deals with the differences between the shareholder rights under the UBS Group AoA and the CS AoA, it does not purport to provide any description of the provisions of Swiss law on which the UBS Group AoA and the CS AoA are based. It should be noted, however, some differences between the UBS Group AoA and the CS AoA result from the fact that the UBS Group AoA take into account and incorporate the possibilities offered by the new provisions of Swiss corporate law which entered into force on January 1, 2023. While this is also the case for the CS AoA, not all proposed revisions were approved at the Shareholder’s meeting of April 4, 2023 due to non-fulfillment of the quorum requirements and as such, certain provisions in the CS AoA remain unchanged versus the former version of December 7, 2022. The below summary is qualified in its entirety by reference to Swiss law, the UBS Group AoA, and the CS AoA. For this section, please note that under Swiss law, holders of Credit Suisse ADSs are not considered shareholders. Therefore, the comparison of rights in this section is only with respect to the rights of holders of Credit Suisse Ordinary Shares.


UBS Group AG		Credit Suisse

Shareholder Registration

Holders of UBS Group AG Shares will be entered into UBS Group AG’s share register as UBS Group AG shareholders with voting rights, if they expressly declare that they acquired such UBS Group AG Shares in their own name and for their own account. No right of registration of nominee holders is available. If a holder of UBS Group AG Shares is not prepared to provide a declaration in writing to disclose that such UBS Group AG Shares were acquired in his, her or its own name, the UBS Group AG board of directors may refuse to allow such UBS Group AG Shares to be entered with voting rights.		Holders of Credit Suisse Ordinary Shares will be entered into Credit Suisse’s share register as Credit Suisse shareholders with voting rights, if they expressly state that they acquired such Credit Suisse Ordinary Shares in their own name and for their own account. Any Credit Suisse shareholder not expressly stating in his or her application for registration that the shares concerned have been acquired for his or her own account (which we refer to as a “nominee holder”) may be entered for a maximum of 2% of Credit Suisse’s total outstanding share capital with voting rights in the Credit Suisse share register. In excess of such 2% limit, Credit Suisse Ordinary


UBS Group AG		Credit Suisse

		Shares held by a nominee holder will only be granted voting rights if such nominee holder declares in writing that the nominee is prepared to disclose the name, address and shareholding of any person for whose account such nominee holder is holding 0.5% or more of the outstanding share capital of Credit Suisse.

Conditional Share Capital

UBS Group AG’s share capital may be increased by an amount not exceeding CHF 12,170,583 through the issuance of a maximum of 121,705,830 fully paid UBS Group AG Shares upon exercise of employee options issued to employees and members of the management and of the UBS Group AG board of directors and its subsidiaries in accordance with the plan rules issued by the UBS Group AG board of directors and its compensation committee. The existing shareholders’ preemptive (subscription) rights are excluded. UBS Group AG’s share capital may be increased by an amount not exceeding CHF 38,000,000 through the issuance of a maximum of 380,000,000 fully paid UBS Group AG Shares each through the voluntary or mandatory exercise of conversion rights and/or warrants granted in connection with the issuance of bonds or similar financial instruments by UBS Group AG or companies in the UBS Group on national or international capital markets. The existing shareholders’ preemptive (subscription) rights are excluded.		Credit Suisse does not have any conditional share capital in place.

Authorized Share Capital

UBS does not have any authorized share capital in place.		Credit Suisse does not have any authorized share capital in place.

Right to Submit Agenda Items for Shareholders Meetings

UBS Group AG shareholders holding UBS Group AG Shares representing an aggregate nominal value of CHF 62,500 may request that items be placed on the agenda for consideration by the shareholders meeting of UBS Group AG or that motions relating to agenda items be included in the notice to convene the general meeting, if such proposals are submitted in writing within the deadline published by UBS Group AG and specify the requests for agenda items and motion(s) to be put forward. The deadline for submitting agenda items is not specified in the UBS Group AoA and is therefore determined by the board of directors. For the 2023 shareholders meeting, the actual deadline was 38		Credit Suisse shareholders holding Credit Suisse Shares representing at least 0.025 percent of the share capital or votes may require that a particular item appear on the agenda of the shareholders meeting of Credit Suisse or that a proposal relating to an agenda item be included in the notice convening the shareholders meeting, by submitting a corresponding request in writing, together with the relevant proposals, and at the same time depositing Credit Suisse Shares representing at least 0.025 percent of the share capital or votes for safekeeping. Such Credit Suisse Shares are to remain in safekeeping until the day after the relevant shareholders meeting. The request to include a particular item on the


UBS Group AG		Credit Suisse

business days and 53 calendar days prior to the meeting date.		agenda, together with the relevant proposals, or the request to include a proposal relating to an agenda item, must be submitted to the Credit Suisse board of directors not later than 45 days before the date of the relevant shareholders meeting.

Calling of Extraordinary Shareholders Meetings

A shareholders’ meeting can be convened upon written request from one or more shareholders representing one twentieth of the share capital.		One or more shareholders whose combined holdings represent at least 5% of the share capital or votes can request that a shareholders’ meeting be called.

Hybrid / Virtual General Meetings

The UBS Group AG board of directors may grant shareholders who are not present at the venue of the shareholder meeting the ability to exercise their rights by electronic means. Alternatively and in exceptional circumstances, the board of directors may provide that the shareholders meeting shall be held by electronic means without a venue.		The board of directors can determine that the shareholders’ meeting be held simultaneously at different venues, provided that the contributions of the participants are transmitted directly in video and audio to all venues and/or that shareholders, who are not present at a venue of the shareholders’ meeting may exercise their rights by electronic means. Alternatively, the board of directors may also provide that the shareholders’ meeting will be held by electronic means without a venue.

Shareholders Meetings Quorum

No specific quorum requirement applies to UBS Group AG shareholders meetings.		Based on the CS AoA, Credit Suisse shareholders meetings must have a quorum of at least half of Credit Suisse’s share capital being represented for the passing of the following resolutions: (i) conversion of registered shares into bearer shares, (ii) amendment to the section of the CS AoA related to nominee holders and to the 2% restriction on voting rights for shares held by nominee holders, (iii) amendment to the section of the CS AoA relating to the exercise and restriction on voting rights, and (iv) dissolution of Credit Suisse.

Voting Procedures

The presiding chair of the UBS Group AG shareholders meeting shall decide whether voting on resolutions and elections will be conducted electronically, by a show of hands or by a written ballot. UBS Group AG shareholders holding UBS Group AG Shares that represent at least 3% of the votes represented at the shareholders meeting may always request that a vote or election take place electronically or by a written ballot. In the case of a written ballot, the presiding chair of the UBS Group AG shareholders meeting may rule that only the ballots of those UBS Group AG shareholders who choose to abstain or to cast an “against” vote will be collected, and that all other UBS Group AG Shares		The chairperson of the Credit Suisse shareholders meeting may allow elections and ballots to be conducted by a show of hands, by written ballot or by electronic means. In case of a tie, the chair of the relevant shareholders meeting has a casting vote with respect to elections and resolutions.


UBS Group AG		Credit Suisse

represented at the meeting at the time of the vote shall be deemed to be counted in favor to expedite the counting of the votes. The presiding chair of the shareholders meeting may also order that a resolution or election be repeated if, in their view, the results of the vote are in doubt. In this case, the preceding resolution or election shall be deemed to have not occurred. At any UBS Group AG shareholders meetings, the chair of such meeting has no casting vote.

Required Shareholder Votes

For UBS Group AG, while resolutions and elections at shareholders meetings are generally decided by a majority of the votes represented, the following resolutions require a qualified majority (in addition to the qualified majority requirements imposed by Swiss law): • Two-thirds of the votes represented to (i) remove one fourth or more of the members of the UBS Group AG board of directors, (ii) amend the provision of the UBS Group AoA relating to the number of members of the UBS Group AG board of directors, and (iii) amend or delete the provision in the UBS Group AoA relating to qualified majority.		For Credit Suisse, while resolutions and elections at shareholders meetings are generally passed with the approval of the majority of the votes represented at the meeting, the following resolutions require qualified majorities (in addition to the qualified majority requirements imposed by Swiss law): • Three-quarters of the votes cast for (i) conversion of registered shares into bearer shares and (ii) amendment to the section of the CS AoA relating to nominee holders and to the 2% restriction on voting rights for Credit Suisse Ordinary Shares held by nominee holders; and • Seven-eighths of the votes cast for: amendment to the section of the CS AoA relating to the exercise and restriction on voting rights.

LEGAL MATTERS

Bär & Karrer AG, counsel to UBS Group AG, has opined upon the validity of the UBS Group AG Shares being registered in connection with the transaction.

EXPERTS

UBS Group AG

The consolidated financial statements of UBS Group AG and UBS AG appearing in the UBS Group AG Annual Report, and the effectiveness of UBS Group AG and UBS AG’s internal control over financial reporting as of December 31, 2022 have been audited by Ernst & Young Ltd., independent registered public accounting firm, as set forth in their reports thereon and included therein and herein. Such consolidated financial statements and UBS Group AG and UBS AG management’s assessments of the effectiveness of internal control over financial reporting as of December 31, 2022 are included herein in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

Credit Suisse

The financial statements as of December 31, 2022 and 2021 and for each of the three years in the period ended December 31, 2022 and management’s assessment of the effectiveness of internal control over financial reporting (which is included in management’s report on internal control over financial reporting) of both Credit Suisse and its subsidiaries and Credit Suisse AG and its subsidiaries included in this prospectus have been so included in reliance on the reports (which contain adverse opinions on the effectiveness of Credit Suisse Group AG’s and Credit Suisse AG’s internal control over financial reporting) of PricewaterhouseCoopers AG, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

UBS Group AG

For additional information about UBS Group AG, see the below reference table that indicates where you, may locate additional information in the UBS Group AG SEC Filings on the topics listed.


For a description of the history and development of the company, including:		Please refer to the following sections (and pages) of the UBS Group AG Annual Report:

• The legal and commercial name of the company, information about the company’s incorporation, and information about the registered office and agent of the company;		Corporate information and Contacts (pg. 6). The registrants’ agent is David Kelly, 600 Washington Boulevard, Stamford, CT 06901.

• Important events in the development of the company’s business;		Our evolution (pg. 14); Our strategy (pgs. 15-17); Our businesses (pgs. 18-28); Note 29 to each set of Financial Statements (Changes in organization and acquisitions and disposals of subsidiaries and businesses) (pgs. 354 and 475)

• The company’s principal capital investments and divestures since the beginning of the last three fiscal years;		Our businesses (pgs. 18-28), as applicable, Note 11 to each set of Financial Statements (Property, equipment and software) (pgs. 291 and 410) and Note 29 to each set of Financial Statements (Changes in organization and acquisitions and disposals of subsidiaries and businesses) (354 and 475).

• Any public takeover offers since the last fiscal year; and		Nothing to disclose.

• Availability of the company’s SEC filings.		Information sources (pg. 515).

For a description of the business, including:		Please refer to the following sections (and pages) of the UBS Group AG Annual Report:

• The company’s operations and principal activities, principal markets, and marketing channels;		Our strategy, business model and environment (pgs. 15-66), Note 2a to each set of Financial Statements (Segment reporting) (pgs. 277-278 and 396-397) and Note 2b to each set of Financial Statements (Segment reporting by geographic location) (pgs. 279 and 398). See also Supplement (pg. 11).

• Seasonality of the company’s business;		Seasonal characteristics (pg. 72).

• Sources and availability of raw materials;		Not applicable.

• Dependence on patients, licenses, contracts or manufacturing processes;		None.

• The basis for statements regarding competitive position; and		Information as to the basis for these statements normally accompanies the statements, except where marked in the report as a statement based upon publicly available information or internal estimates, as applicable. Our businesses (pgs. 18-28), as applicable.


• Material government regulation.		Regulation and supervision (pgs. 50-53) and Regulatory and legal developments (pgs. 53-55). Supplement (pg. 12)

For a description of the company’s organizational structure:		Please refer to the following sections (and pages) of the UBS Group AG Annual Report: Our evolution (pg. 14) and Note 28 to each set of Financial Statements (Interests in subsidiaries and other entities) (pgs. 350-354 and 471-475).


For a description of the company’s material property, plants and equipment:		Please refer to the following sections (and pages) of the UBS Group AG Annual Report: Property, plant and equipment (pgs. 495 and 503), Note 1a, 7) to each set of Financial Statements (Summary of material accounting policies: Property, equipment and software) (pgs. 274 and 393), Note 11 to each set of Financial Statements (Property, equipment and software) (pgs. 291 and 410).

For a description of the company’s related party transactions:		Please refer to the following sections (and pages) of the UBS Group AG Annual Report: Loans granted to GEB members (pg. 238), Loans granted to BoD members (pg. 239) and Note 30 to each set of Financial Statements (Related parties) (pgs. 355-356 and 476-477).

For a description of the company’s material legal or arbitration proceedings:		Please refer to the following sections (and pages) of the UBS Group AG SEC Filings: Information on material legal and regulatory proceedings is in Note 17 to each set of Financial Statements (Provisions and contingent liabilities) (pgs. 295-301 and 414-421, as supplemented by Note 13 of the interim financial statements contained in UBS Group AG’s Report on Form 6-K dated April 25, 2023).

Description of exchange controls that may affect the import or export of capital and remittance of dividends to nonresident holders:		Other than in relation to economic sanctions, there are no restrictions under the Articles of Association of UBS Group AG, nor under Swiss law, as presently in force, that limit the right of non-resident or foreign owners to hold UBS Group AG’s securities freely. There are currently no Swiss foreign exchange controls or other Swiss laws restricting the import or export of capital by UBS Group AG or its subsidiaries, nor restrictions affecting the remittance of dividends, interest or other payments to non-resident holders of UBS Group AG securities. The Swiss federal government may impose sanctions on particular countries, regimes, organizations or persons which may create restrictions on exchange of


		control. A current list, in German, French and Italian, of such sanctions can be found at www.seco-admin.ch. UBS Group AG may also be subject to sanctions regulations from other jurisdictions where it operates imposing further restrictions.

For information regarding taxes to which U.S. shareholders may be subject:		Please refer to the following sections (and pages) of the UBS Group AG Annual Report: Supplement (pgs. 17-19)

For management’s discussion and analysis of results of operations and financial condition, including:		Please refer to the following sections (and pages) of the UBS Group AG SEC Filings:

• Operating results;		Our key figures (pg. 8), UBS AG consolidated key figures (pg. 362), Targets, aspirations and capital guidance (pg. 17), Our businesses (pg. 18-28), Group performance (pg. 68-73), financial and operating performance by business division and Group Functions (pgs. 74-81), Income statement (pgs. 251 and 371), Note 2a to each set of Financial Statements (Segment reporting) (pgs. 277-278 and 396-397), and Selected financial data (pgs. 494-495 and 502-503). Risk factors (pgs. 56-66), Capital management (pgs. 135-149), Currency Management (pgs. 159-160) and Note 25 to each set of Financial Statements (Hedge Accounting) (pgs. 337-340 and 456-459). Our environment (pgs. 28-32), Regulation and supervision (pgs. 50-53), Regulatory and legal developments (pgs. 53-55), Accounting and financial reporting (pg. 67), Note 1b to each set of Financial Statements (Changes in accounting policies, comparability and other adjustments) (pgs. 276 and 395). For a discussion on operating results for the quarter ended March 31, 2023, please see Section 2 of UBS Group AG’s Report on Form 6-K dated April 25, 2023.

• Liquidity and capital resources;		Risk factors (pgs. 56-66), Group performance (pgs. 68-73), financial and operating performance by business division and Group Functions (pgs. 74-81), Seasonal characteristics (pg. 72), Interest rate risk in the banking book (pgs. 115-118), Capital, liquidity and funding, and balance sheet (pgs. 134-162), Asset


		encumbrance (pg. 154), Note 22 to each set of Financial Statements (Restricted and transferred financial assets) (pgs. 330-332 and 449- 451) and Note 28(b) to each set of Financial Statements (Interests in associates and joint ventures) (pgs. 352 and 473). Liquidity and capital management is undertaken at UBS as an integrated asset and liability management function. While we believe our ‘working capital’ is sufficient for the company’s present requirements, it is our opinion that, as a bank, our liquidity coverage ratio (LCR) is the more relevant measure. For more information see, Liquidity coverage ratio (pg. 152). Capital, liquidity and funding, and balance sheet (pgs. 134-162), Currency Management (pgs. 159-160), Note 10 to each set of Financial Statements (Derivative instruments) (pgs. 289-291 and 408-410), Note 15 to each set of Financial Statements (Debt issued designated at fair value) (pgs. 294 and 413), Note 16 to each set of Financial Statements (Debt issued measured at amortized cost) (pgs. 295 and 414), Note 18 to each set of Financial Statements (Other liabilities) (pgs. 302 and 421), and Note 25 to each set of Financial Statements (Hedge Accounting) (pgs. 337-340 and 456-459). Material cash requirements (pg. 158), Liquidity and funding management (pgs. 150-152), Note 23 to each set of Financial Statements (Maturity analysis of assets and liabilities) (pgs. 332-334 and 451-453), and Note 11 to each set of Financial Statements (Property, equipment and software) (pgs. 291 and 410). For a discussion on liquidity and capital resources as of and for the quarter ended March 31, 2023, please see Section 3 of UBS Group AG’s Report on Form 6-K dated April 25, 2023.

• Trend information; and		Our businesses (pgs. 18-28), Our environment (pgs. 28-32), Regulatory and legal developments (pgs. 53-55), Risk factors (pgs. 56-66), Financial and operating performance (pgs. 67-81) and Top and emerging risks (pgs. 86-87).

• Critical accounting estimates.		Not applicable.

For quantitative and qualitative disclosures of market risk:		Please refer to the following sections (and pages) of the UBS Group AG Annual Report: Market risk (pgs. 111-119).

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For financial statements:		Please refer to the following sections (and pages) of the UBS Group AG Annual Report: Financial statements (pgs. 242-502), Significant regulated subsidiary and sub-group information (pgs. 521-522) and Additional regulatory information (pgs. 523-539), as supplemented by the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” in this prospectus and Section 4 of UBS Group AG’s Report on Form 6-K dated April 25, 2023.

For information regarding trading markets of the company’s ordinary shares:		Please refer to the following sections (and pages) of the UBS Group AG Annual Report: Listing of UBS Group AG shares (pg. 162).

Credit Suisse

For additional information about Credit Suisse, see the below reference table that indicates where you may locate additional information in the Credit Suisse Filings on the topics listed.


For a description of the history and development of the company, including:		Please refer to the following sections (and pages) of the Credit Suisse Annual Report (unless otherwise noted):

• The legal and commercial name of the company, information about the company’s incorporation, and information about the registered office and agent of the company;		IV — Corporate Governance — Overview — Corporate Governance framework — Company details (pg. 174).

• Important events in the development of the company’s business;		I — Information on the Company — Strategy (pgs. 10-13); I — Information on the Company — Divisions (pgs. 14-20); Note 3 to VI — Consolidated financial statements — Credit Suisse Group (Business developments, significant shareholders and subsequent events) (pgs. 276-277); Note 3 to VIII — Consolidated financial statements — Credit Suisse (Bank) (Business developments, significant shareholders and subsequent events) (pg. 441); Note 4 to VI — Consolidated financial statements — Credit Suisse Group (Segment information) (pgs. 278-279), Note 4 to VIII — Consolidated financial statements — Credit Suisse (Bank) (Segment information) (pg. 441); as supplemented by Other Information (pgs. 6-8) of the Q1 Earnings Release contained in Credit Suisse’s Report on Form 6-K dated April 24, 2023, and the section entitled “Recent Developments” in this prospectus.

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• The company’s principal capital investments and divestures since the beginning of the last three fiscal years;		I — Information on the Company — Strategy (pgs. 10-13); I — Information on the Company — Divisions (pgs. 14-20); Note 3 to VI — Consolidated financial statements — Credit Suisse Group (Business developments, significant shareholders and subsequent events) (pgs. 276-277), Note 3 to VIII — Consolidated financial statements — Credit Suisse (Bank) (Business developments, significant shareholders and subsequent events) (pg. 441); as supplemented by Other Information (pgs. 6-8) of the Q1 Earnings Release contained in Credit Suisse’s Report on Form 6-K dated April 24, 2023.

• Any public takeover offers since the last fiscal year; and		Other Information (pg. 6) of the Q1 Earnings Release contained in Credit Suisse’s Report on Form 6-K dated April 24, 2023, and the section entitled “Background and Reasons for the Transaction” in this prospectus.

• Availability of the company’s SEC filings.		Item 10.H — Documents on display (pg. 11) of Credit Suisse’s Form 20-F for the year ended 2022; as supplemented by Results Overview and segment information for Wealth Management, Swiss Bank, Investment Bank, Corporate Center and Capital Release Unit and Additional Financial Metrics (pgs. 10-33) of the Q1 Earnings Release contained in Credit Suisse’s Report on Form 6-K dated April 24, 2023.

For a description of the business, including:		Please refer to the following sections (and pages) of the Credit Suisse Annual Report:

• The company’s operations and principal activities, principal markets, and marketing channels;		I — Information on the Company — Divisions (pgs. 14-20); Note 4 to VI — Consolidated financial statements — Credit Suisse Group (Segment information) (pgs. 278-279), Note 4 to VIII — Consolidated financial statements — Credit Suisse (Bank) (Segment information) (pg. 441).

• Seasonality of the company’s business;		I — Information on the Company — Divisions (pgs. 14-20); Note 4 to VI — Consolidated financial statements — Credit Suisse (Segment information) (pgs. 278-279), Note 4 to VIII — Consolidated financial statements — Credit Suisse (Bank) (Segment information) (pg. 441).

• Sources and availability of raw materials;		Not applicable.

• Dependence on patents, licenses, contracts or manufacturing processes;		None.

• The basis for statements regarding competitive position; and		The “Sources” section located inside Credit Suisse’s Form 20-F cover (pg. 20-F/6).

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• Material government regulation.		I — Information on the Company — Regulation and supervision (pgs. 21-39); as supplemented by Other Information (pgs. 6-8) of the Q1 Earnings Release contained in Credit Suisse’s Report on Form 6-K dated April 24, 2023, and the sections entitled “Background and Reasons for the Transaction” and “Risk Factors” in this prospectus.

For a description of the company’s organizational structure:		Please refer to the following sections (and pages) of the Credit Suisse Annual Report: I — Information on the Company — Strategy (pgs. 10-13); II — Operating and financial review — Credit Suisse — Group and Bank differences (pg. 73); and Note 41 to VI — Consolidated financial statements — Credit Suisse Group (Significant subsidiaries and equity method investments) (pgs. 400-402), Note 40 to VIII — Consolidated financial statements — Credit Suisse (Bank) (Significant subsidiaries and equity method investments) (pgs. 503-504).

For a description of the company’s material property, plants and equipment:		Please refer to the following sections (and pages) of the Credit Suisse Annual Report: X — Additional information — Other information — Property and Equipment (pg. 569).

For a description of the company’s material legal or arbitration proceedings:		Please refer to the following sections (and pages) of the Credit Suisse Annual Report: Note 40 to VI — Consolidated financial statements — Credit Suisse Group (Litigation) (pgs. 389-399), Note 39 to VIII — Consolidated financial statements — Credit Suisse (Bank) (Litigation) (pg. 502); as supplemented by Additional Financial Metrics (pg. 33) of the Q1 Earnings Release contained in Credit Suisse’s Report on Form 6-K dated April 24, 2023.

Description of exchange controls that may affect the import or export of capital and remittance of dividends to nonresident holders:		Please refer to the following sections (and pages) of the Credit Suisse Annual Report: X — Additional information — Other information — Exchange Controls (pg. 564).

For information regarding taxes to which U.S. shareholders may be subject:		Please refer to the following sections (and pages) of the Credit Suisse Annual Report: X — Additional information — Other information — Taxation (pgs. 564-568); as supplemented by as supplemented by the section entitled “Material U.S. Federal Income Tax Consequences” in this prospectus.

For management’s discussion and analysis of results of operations and financial condition, including:		Please refer to the following sections (and pages) of the Credit Suisse Annual Report (unless otherwise specified):

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• Operating results;		II — Operating and financial review (pgs. 57-104); I — Information on the Company — Regulation and supervision (pgs. 21-39); III — Treasury, Risk, Balance sheet and Off-balance sheet — Liquidity and funding management — Funding management — Structural interest rate management (pg. 113); III — Treasury, Risk, Balance sheet and Off-balance sheet — Capital management — Foreign exchange exposure (pg. 130); as supplemented by Results Overview and segment information for Wealth Management, Swiss Bank, Investment Bank, Corporate Center and Capital Release Unit and Additional Financial Metrics (pgs. 10-33) of the Q1 Earnings Release contained in Credit Suisse’s Report on Form 6-K dated April 24, 2023.

• Liquidity and capital resources;		III — Treasury, Risk, Balance sheet and Off-balance sheet — Liquidity and funding management (pgs. 106-114); III — Treasury, Risk, Balance sheet and Off-balance sheet — Capital management (pgs. 115 to 131); III — Treasury, Risk, Balance sheet and Off-balance sheet — Balance sheet and off-balance sheet — Contractual obligations and other commercial commitments (pg. 168); Consolidated statements of cash flows in VI — Consolidated financial statements — Credit Suisse Group (pgs. 264-265) and Consolidated statements of cash flows in VIII — Consolidated financial statements — Credit Suisse (Bank) (pgs. 438-439); Note 26 to VI — Consolidated financial statements — Credit Suisse Group (Long-term debt) (pgs. 309-310) and Note 25 to VIII — Consolidated financial statements — Credit Suisse (Bank) (Long-term debt) (pg. 460); Note 38 to VI — Consolidated financial statements — Credit Suisse Group (Capital adequacy) (pgs. 386-387) and Note 37 to VIII — Consolidated financial statements — Credit Suisse (Bank) (Capital adequacy) (pgs. 501-502); as supplemented by Additional Financial Metrics (pg. 33) of the Q1 Earnings Release contained in Credit Suisse’s Report on Form 6-K dated April 24, 2023.

• Trend information; and		Item 5.D of Credit Suisse’s Form 20-F for the year ended 2022 (pg. 20-F/8).

• Critical accounting estimates.		II — Operating and financial review — Critical accounting estimates (pgs. 97-104).

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For quantitative and qualitative disclosures of market risk:		Please refer to the following sections (and pages) of the Credit Suisse Annual Report: I — Information on the company — Risk factors (pgs. 40-56); III — Treasury, Risk, Balance sheet and Off-balance sheet — Risk management (pgs. 132-165); Note 33 to VI — Consolidated financial statements — Credit Suisse Group (Derivatives and hedging activities) (pgs. 338-344); Note 32 to Consolidated financial statements — Credit Suisse AG (Derivatives and hedging activities) (pgs. 478-481); as supplemented by Risk Factors (pg. 9) and Appendix (pg. 39) of the Q1 Earnings Release contained in Credit Suisse’s Report on Form 6-K dated April 24, 2023.

For financial statements:		Please refer to the following sections (and pages) of the Credit Suisse Annual Report: Financial statements (pgs. 255-408 and 429-506), as supplemented by the Q1 Earnings Release contained in Credit Suisse’s Report on Form 6-K dated April 24, 2023, and the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” in this prospectus.

For information regarding trading markets of the company’s ordinary shares:		Please refer to the following sections (and pages) of the Credit Suisse Annual Report: X — Additional information — Other information — Listing details (pg. 569).

UBS Group AG incorporates the merger agreement by reference to Exhibit 2.1 to the registration statement (of which this prospectus forms a part).

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ANNEX A: UBS GROUP AG’S ANNUAL REPORT ON FORM 20-F FOR THE FISCAL YEAR ENDED

DECEMBER 31, 2022 FILED WITH THE SEC ON MARCH 6, 2023

A-1

Annex A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

UBS Group AG

Commission file number: 1-36764

UBS AG

Commission file number: 1-15060

(Exact Name of Registrants as Specified in Their Respective Charters)

Switzerland

(Jurisdiction of Incorporation or Organization)


UBS Group AG		UBS AG
Bahnhofstrasse 45, CH-8001 Zurich, Switzerland		Bahnhofstrasse 45, CH-8001 Zurich, Switzerland and
(Address of Principal Executive Office)		Aeschenvorstadt 1, CH-4051 Basel, Switzerland
		(Address of Principal Executive Offices)

David Kelly

600 Washington Boulevard

Stamford, CT 06901

Telephone: (203) 719 3000

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Please see page 3.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

Please see page 3.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

Please see page 3.


Annual Report 2022		1

Indicate the number of outstanding shares of each of each issuer’s classes of capital or common stock as of 31 December 2022:


UBS Group AG		UBS AG
Ordinary shares, par value CHF 0.10 per share:		Ordinary shares, par value CHF 0.10 per share:
3,524,635,722 ordinary shares		3,858,408,466 ordinary shares
(including 416,909,010 treasury shares)		(none of which are treasury shares)

Indicate by check mark if the registrants are well-known seasoned issuers, as defined in Rule 405 of the Securities Act.


UBS Group AG				UBS AG
Yes ☐ No ☒				Yes ☐ No ☒

If this report is an annual or transition report, indicate by check mark if the registrants are not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☐ No ☒

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports) and (2) have been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or an emerging growth company. See definition of “accelerated filer and large accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):

UBS Group AG


Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐

				Emerging growth company	☐

UBS AG


Large accelerated filer	☐	Accelerated filer	☐	Non-accelerated filer	☒

				Emerging growth company	☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.


UBS Group AG		UBS AG
Yes ☒ No ☐		Yes ☒ No ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.


UBS Group AG		UBS AG
Yes ☐ No ☒		Yes ☐ No ☒

Indicate by check mark which basis of accounting the registrants have used to prepare the financial statements included in this filing.


U.S. GAAP ☐	International Financial Reporting Standards as issued		Other ☐
	by the International Accounting Standards Board	☒


Annual Report 2022		2

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrants have elected to follow.

Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act)

Yes ☐ No ☒

Securities registered or to be registered pursuant to Section 12(b) of the Act:

UBS Group AG

Title of each class

Trading

symbol(s)

Name of each exchange

on which registered

Ordinary Shares (par value of CHF 0.10 each)

UBS

New York Stock Exchange

UBS AG


Title of each class	Trading symbol(s)	Name of each exchange on which registered
ETRACS Alerian Midstream Energy Index ETN due June 21, 2050	AMNA	NYSE Arca
ETRACS Alerian Midstream Energy High Dividend Index ETN due July 19, 2050	AMND	NYSE Arca
ETRACS Alerian Midstream Energy Total Return Index ETN due October 20, 2050	AMTR	NYSE Arca
ETRACS Alerian MLP Index ETN Series B due July 18, 2042	AMUB	NYSE Arca
ETRACS Quarterly Pay 1.5x Leveraged MVIS BDC Index ETN due June 10, 2050	BDCX	NYSE Arca
E-TRACS MVIS Business Development Companies Index ETN due April 26, 2041	BDCZ	NYSE Arca
ETRACS Monthly Pay 1.5x Leveraged Closed-End Fund Index ETN due June 10, 2050	CEFD	NYSE Arca
E-TRACS Bloomberg Commodity Index Total Return Series B due October 31, 2039	DJCB	NYSE Arca
ETRACS 2x Leveraged MSCI USA ESG Focus TR ETN due September 15, 2061	ESUS	NYSE Arca
UBS AG FI Enhanced Large Cap Growth ETN due June 19, 2024	FBGX	NYSE Arca
ETRACS 2x Leveraged IFED Invest with the Fed TR Index ETN due September 15, 2061	FEDL	NYSE Arca
UBS AG FI Enhanced Europe 50 ETN due February 12, 2026	FIEE	NYSE Arca
UBS AG FI Enhanced Global High Yield ETN due March 3, 2026	FIHD	NYSE Arca
ETRACS Monthly Pay 2xLeveraged US High Dividend Low Volatility ETN Series B due October 21, 2049	HDLB	NYSE Arca
ETRACS IFED Invest with the Fed TR Index ETN due September 15, 2061	IFED	NYSE Arca
ETRACS 2x Leveraged US Value Factor TR ETN due February 9, 2051	IWDL	NYSE Arca
ETRACS 2x Leveraged US Growth Factor TR ETN due February 9, 2051	IWFL	NYSE Arca
ETRACS 2x Leveraged US Size Factor TR ETN due February 9, 2051	IWML	NYSE Arca
E-TRACS Alerian MLP Infrastructure Index Series B due April 2, 2040	MLPB	NYSE Arca
ETRACS Quarterly Pay 1.5x Leveraged Alerian MLP Index ETN due June 10, 2050	MLPR	NYSE Arca
ETRACS 2x Leveraged MSCI US Momentum Factor TR ETN due February 9, 2051	MTUL	NYSE Arca
ETRACS Monthly Pay 1.5x Leveraged Mortgage REIT ETN due June 10, 2050	MVRL	NYSE Arca
ETRACS Monthly Pay 2xLeveraged Preferred Stock ETN due September 25, 2048	PFFL	NYSE Arca
ETRACS Linked to the NYSE® Pickens Core Midstream Index due August 20, 2048	PYPE	NYSE Arca
ETRACS 2x Leveraged MSCI US Quality Factor TR ETN due February 9, 2051	QULL	NYSE Arca
ETRACS 2x Leveraged US Dividend Factor TR ETN due February 9, 2051	SCDL	NYSE Arca
ETRACS Monthly Pay 2xLeveraged US Small Cap High Dividend ETN Series B due November 10, 2048	SMHB	NYSE Arca
E-TRACS CMCI Total Return ETN Series B due April 5, 2038	UCIB	NYSE Arca
ETRACS 2x Leveraged MSCI US Minimum Volatility Factor TR ETN due February 9, 2051	USML	NYSE Arca

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None


Annual Report 2022		3

Cautionary Statement: Refer to the Cautionary Statement Regarding Forward-Looking Statements section in the Annual Report 2022 (page 516).

Cross-reference table

Set forth below are the respective items of SEC Form 20-F, and the locations in this document where the corresponding information can be found.

•

Annual Report refers to the Annual Report 2022 of UBS Group AG and UBS AG annexed hereto, which forms an integral part hereof.

•

Supplement refers to certain supplemental information contained in this forepart of the Form 20-F, starting on page 11 following the cross-reference table.

•

Financial Statements refers to the consolidated financial statements of either UBS Group AG or UBS AG, or both, depending upon the context, contained in the Annual Report.

In the cross-reference table below, page numbers refer to either the Annual Report or the Supplement, as noted.

Please see page 9 of the Annual Report for definitions of terms used in this Form 20-F relating to UBS.


Form 20-F item		Response or location in this filing
Item 1. Identity of Directors, Senior Management and Advisors.		Not applicable.

Item 2. Offer Statistics and Expected Timetable.		Not applicable.

Item 3. Key Information

B – Capitalization and Indebtedness.		Not applicable.

C – Reasons for the Offer and Use of Proceeds.		Not applicable.

D – Risk Factors.		Annual Report, Risk factors (56-66).

Item 4. Information on the Company.

A – History and Development of the Company		1-3: Annual Report, Corporate information and Contacts (6). The registrants’ agent is David Kelly, 600 Washington Boulevard, Stamford, CT 06901. 4: Annual Report, Our evolution (14); Our strategy (15-17); Our businesses (18-28); Note 29 to each set of Financial Statements (Changes in organization and acquisitions and disposals of subsidiaries and businesses) (354 and 475) 5-6: Annual Report, Our businesses (18-28), as applicable, Note 11 to each set of Financial Statements (Property, equipment and software) (291 and 410) and Note 29 to each set of Financial Statements (Changes in organization and acquisitions and disposals of subsidiaries and businesses) (354 and 475).
		7: Nothing to disclose.
		8: Annual Report, Information sources (515).

B – Business Overview.		1, 2 and 5: Annual Report, Our strategy, business model and environment (15-66), Note 2a to each set of Financial Statements (Segment reporting) (277-278 and 396-397) and Note 2b to each set of Financial Statements (Segment reporting by geographic location) (279 and 398). See also Supplement (11).
		3: Annual Report, Seasonal characteristics (72).
		4: Not applicable.
		6: None.
		7: Information as to the basis for these statements normally accompanies the statements, except where marked in the report as a statement based upon publicly available information or internal estimates, as applicable. Annual Report, Our businesses (18-28), as applicable.
		8: Annual Report, Regulation and supervision (50-53) and Regulatory and legal developments (53-55).
		Supplement (12).

C – Organizational Structure.		Annual Report, Our evolution (14) and Note 28 to each set of Financial Statements (Interests in subsidiaries and other entities) (350-354 and 471-475).


Annual Report 2022		4


D – Property, Plant and Equipment.		Annual Report, Property, plant and equipment (495 and 503), Note 1a, 7) to each set of Financial Statements (Summary of material accounting policies: Property, equipment and software) (274 and 393), Note 11 to each set of Financial Statements (Property, equipment and software) (291 and 410).

Information required by SEC Regulation S-K Part 1400		Annual Report, Information required under SEC regulation S-K: Subpart 1400 (496-501 and 504-509), Loss history statistics (110), and Note 9 to each set of Financial Statements (Financial assets at amortized cost and other positions in scope of expected credit loss measurement) (285-289 and 404-408).

Item 4A. Unresolved Staff Comments.		None.

Item 5. Operating and Financial Review and Prospects.

A – Operating Results.		1: Annual Report, Our key figures (8), UBS AG consolidated key figures (362), Targets, aspirations and capital guidance (17), Our businesses (18-28), Group performance (68- 73), financial and operating performance by business division and Group Functions (74- 81), Income statement (251 and 371), Note 2a to each set of Financial Statements (Segment reporting) (277-278 and 396-397), and Selected financial data (494-495 and 502-503).
		2: Not applicable
		3: Annual Report, Risk factors (56-66), Capital management (135-149), Currency Management (159-160) and Note 25 to each set of Financial Statements (Hedge Accounting) (337-340 and 456-459).
		4: Annual Report, Our environment (28-32), Regulation and supervision (50-53), Regulatory and legal developments (53-55), Accounting and financial reporting (67), Note 1b to each set of Financial Statements (Changes in accounting policies, comparability and other adjustments) (276 and 395).

		A discussion on the results for the year 2021 compared with 2020 can be found on UBS annual report 2021 filed with the SEC in Form 20-F on March 7, 2022, under Financial and operating performance and under Financial statements of UBS Group AG and UBS AG.

B – Liquidity and Capital Resources.		1: Annual Report, Risk factors (56-66), Group performance (68-73), financial and operating performance by business division and Group Functions (74-81), Seasonal characteristics (72), Interest rate risk in the banking book (115-118), Capital, liquidity and funding, and balance sheet (134-162), Asset encumbrance (154), Note 22 to each set of Financial Statements (Restricted and transferred financial assets) (330-332 and 449- 451) and Note 28(b) to each set of Financial Statements (Interests in associates and joint ventures) (352 and 473).
		Liquidity and capital management is undertaken at UBS as an integrated asset and liability management function. While we believe our ‘working capital’ is sufficient for the company’s present requirements, it is our opinion that, as a bank, our liquidity coverage ratio (LCR) is the more relevant measure. For more information see, Annual Report, Liquidity coverage ratio (152).
		2: Annual Report, Capital, liquidity and funding, and balance sheet (134-162), Currency Management (159-160), Note 10 to each set of Financial Statements (Derivative instruments) (289-291 and 408-410), Note 15 to each set of Financial Statements (Debt issued designated at fair value) (294 and 413), Note 16 to each set of Financial Statements (Debt issued measured at amortized cost) (295 and 414), Note 18 to each set of Financial Statements (Other liabilities) (302 and 421), and Note 25 to each set of Financial Statements (Hedge Accounting) (337-340 and 456-459).
		3: Annual Report, Material cash requirements (158), Liquidity and funding management (150-152), Note 23 to each set of Financial Statements (Maturity analysis of assets and liabilities) (332-334 and 451-453), and Note 11 to each set of Financial Statements (Property, equipment and software) (291 and 410).

C—Research and Development, Patents and Licenses, etc.		Not applicable.

D—Trend Information.		Annual Report, Our businesses (18-28), Our environment (28-32), Regulatory and legal developments (53-55), Risk factors (56-66), Financial and operating performance (67- 81) and Top and emerging risks (86-87).

E—Critical Accounting Estimates		Not applicable.


Annual Report 2022		5


Item 6. Directors, Senior Management and Employees.

A – Directors and Senior Management.		1, 2 and 3: Annual Report, Board of Directors (173-188) and Group Executive Board (189-195). 4, 5: None.

B – Compensation.		1: Annual Report, Compensation (201-241), Note 1a, 4) to each set of Financial Statements (Share-based and other deferred compensation plans) (272 and 391), Note 27 to each set of Financial Statements (Employee benefits: variable compensation) (347-350 and 467-471) and Note 30 to each set of Financial Statements (Related parties) (355-356 and 476-477).
		2: Annual Report, Compensation (201-241), Note 26 to each set of Financial Statements (Post-employment benefit plans) (340-347 and 459-467).

C – Board practices.		1: Annual Report, Board of Directors (173-188). The term of office for members of the Board of Directors and its Chairman expires after completion of the next Annual General Meeting. The next UBS Group AG Annual General Meeting is scheduled on 5 April 2023, and the next UBS AG Annual General Meeting is scheduled on 4 April 2023.
		2: Annual Report, Compensation (201-241), Clauses on change of control (196), and Note 30 to each set of Financial Statements (Related parties) (355-356 and 476-477).
		3: Annual Report, Audit Committee (182) and Compensation Committee (183). Refer to the Supplement (15) for information on UBS AG’s Board of Directors’ executive sessions.

D—Employees.		Annual Report, Employees (39-41), and Selected financial data (494-495 and 502-503).

		In addition to seeking out employee feedback, we maintain an open dialogue with our formal employee representation groups. The UBS Employee Forum (our European Works Council) and the UBS Europe SE Works Council represent 16 countries and consider topics related to our performance and operations. Local works councils such as the Employee Representation Committee in Switzerland discuss topics such as benefits, workplace conditions and redundancies. Collectively, these groups represent approximately 47% of our global workforce.

		Where applicable, our operations are subject to collective bargaining agreements (CBAs). In all those locations, the employment terms and conditions for any employees not covered by CBAs are aligned with those agreements. Benefits are aligned with local markets, and due to the competitive labor environments in which we operate, often go beyond legal requirements or market practice.

		During 2022, the Global Research and Analytics function was re-aligned, resulting in a shift of personnel from Group Functions to the Investment Bank. Comparative figures have been restated accordingly for both UBS Group AG and UBS AG on the tables below.

		UBS group AG (consolidated) personnel by business division and Group Functions:


Full-time equivalents	31.12.22		As of 31.12.21		31.12.20

Personnel (full-time equivalents)		72,597		71,385		71,551
Global Wealth Management		24,351		24,093		24,200
Personal & Corporate Banking		5,725		5,791		6,021
Asset Management		2,848		2,693		2,642
Investment Bank		9,177		8,667		8,575
Group Functions		30,497		30,142		30,113


		UBS AG (consolidated) personnel by business division and Group Functions:


Full-time equivalents	31.12.22		As of 31.12.21		31.12.20

Personnel (full-time equivalents)		47,628		47,067		47,546
Global Wealth Management		23,292		22,986		23,039
Personal & Corporate Banking		4,923		4,993		5,131
Asset Management		2,450		2,375		2,351
Investment Bank		6,929		6,644		6,518
Group Functions		10,035		10,069		10,507


Annual Report 2022		6


E—Share Ownership.		1 and 2: Annual Report, Compensation (201-241), Note 27 to each set of Financial Statements (Employee benefits: variable compensation) (347-350 and 467-471) and Note 30b to each set of Financial Statements (Equity holdings of key management personnel) (355 and 476).

F—Disclosure of a registrant’s action to recover erroneously awarded compensation.		Not applicable.

Item 7. Major Shareholders and Related Party Transactions.

A—Major Shareholders.		Annual Report, Group structure and shareholders (166-167), Share capital structure (167-171) and Voting rights, restrictions and representation (171).

		The number of shares of UBS Group AG held by the respective shareholders listed on page 167 of the Annual Report registered in the UBS share register with 3% or more of total share capital as of 31 December 2022 is as follows:


Shareholder	Number of shares held
Chase Nominees Ltd., London		302,947,749
DTC (Cede & Co.), New York		251,014,771
Nortrust Nominees Ltd., London		152,567,310


		According to the mandatory FMIA disclosure notifications filed with UBS Group AG and SIX, the following entities disclosed holding of more than 3% of the total share capital of UBS Group AG, with the following number of shares:


Shareholder	Number of shares held
Norges Bank, Oslo on 25 July 2019		115,997,262
Artisan Partners Limited Partnership, Milwaukee on 18 November 2020		121,591,630
Massachusetts Financial Services Company, on 25 June 2021		116,145,996
Dodge & Cox International Stock Fund, on 28 January 2022		111,816,261
BlackRock Inc., New York, on 29 June 2022		184,188,641


		The number of shares of UBS AG held by UBS Group AG as of 31 December 2022 was 3,858,408,466 shares.

B—Related Party Transactions.		Annual Report, Loans granted to GEB members (238), Loans granted to BoD members (239) and Note 30 to each set of Financial Statements (Related parties) (355-356 and 476-477).

C—Interests of Experts and Counsel.		Not applicable.

Item 8. Financial Information.
A—Consolidated Statements and Other Financial Information.		1, 2, 3, 4, 6: Please see Item 18 of this Form 20-F.
		5: Not applicable.
		7: Information on material legal and regulatory proceedings is in Note 17 to each set of Financial Statements (Provisions and contingent liabilities) (295-301 and 414-421). For developments during the year, please see also the note Provisions and contingent liabilities in the Consolidated Financial Statements section in our respective quarterly reports for the First, Second and Third Quarters 2022, filed on Forms 6-K dated April 26, 2022 (UBS Group AG) and April 29, 2022 (UBS AG), July 26, 2022 (UBS Group AG) and July 29, 2022 (UBS AG) and October 25, 2022 (UBS Group AG) and October 28, 2022 (UBS AG), respectively; as well as the Provisions and contingent liabilities section in the Fourth Quarter 2022 Report, filed on Form 6-K dated January 31, 2023. The disclosures in each such Quarterly Report speak only as of their respective dates.
		8: Annual Report, Letter to Shareholders (2-5), Investors (37-38), Dividend distribution (160), Distributions to shareholders (170).

B—Significant Changes.		None.


Annual Report 2022		7


Item 9. The Offer and Listing.

A – Offer and Listing Details.		1, 2, 3, 5, 6, 7: Not applicable.
		4: Annual Report, Listing of UBS Group AG shares (162).

B—Plan of Distribution.		Not applicable.

C—Markets.		Cover page (3).
		Annual Report, Listing of UBS Group AG shares (162)

D—Selling Shareholders.		Not applicable.

E—Dilution.		Not applicable.

F—Expenses of the Issue.		Not applicable.

Item 10. Additional Information.

A—Share Capital.		Not applicable.
B—Memorandum and Articles of Association.		1: Supplement (16).
		2: Annual Report, Compensation governance (208-209), Compensation for the Board of Directors (229-231). Supplement (15).
		3: Annual Report, Share capital structure (167-171), Shareholders’ participation rights (171-172), Elections and terms of office (181). Supplement (13-16).
		4: Supplement (14).
		5: Annual Report, Shareholders’ participation rights (171-172). Supplement (14).
		6: Annual Report, Transferability, voting rights and nominee registration (171), Shareholders’ participation rights (171-172). Supplement (13).
		7: Annual Report, Change of control and defense measures (196).
		8: Annual Report, Significant Shareholders (166-167).
		9: Supplement (13-16) and Annual Report, Differences from corporate governance standards relevant to US-listed companies (165-166), Compensation governance (208-209), Compensation for the Board of Directors (229-231), Share capital structure (167-171), Shareholders’ participation rights (171-172), Elections and terms of office (207), Transferability, voting rights and nominee registration (171), Change of control and defense measures (196), Significant Shareholders (166-167)
		10: Supplement (13-16).

C—Material Contracts.		The Terms & Conditions of the several series of capital instruments issued to date, and to be issued pursuant to Deferred Capital Contingent Plans, are exhibits 4.1 through 4.19 to this Form 20-F. These notes are described under Swiss SRB total loss-absorbing capacity framework on page 136-138 of the Annual Report and Our deferred compensation plans on page 222-223 of the Annual Report.

		The Asset Transfer Agreement by which certain assets and liabilities of UBS AG were transferred to UBS Switzerland AG is filed as Exhibit 4.20, and is described under Joint liability of UBS Switzerland AG on page 482 of the Annual Report.

D—Exchange Controls.		Other than in relation to economic sanctions, there are no restrictions under the Articles of Association of UBS Group AG or UBS AG, nor under Swiss law, as presently in force, that limit the right of non-resident or foreign owners to hold UBS’s securities freely. There are currently no Swiss foreign exchange controls or other Swiss laws restricting the import or export of capital by UBS or its subsidiaries, nor restrictions affecting the remittance of dividends, interest or other payments to non-resident holders of UBS securities. The Swiss federal government may impose sanctions on particular countries, regimes, organizations or persons which may create restrictions on exchange of control. A current list, in German, French and Italian, of such sanctions can be found at www.seco-admin.ch. UBS may also be subject to sanctions regulations from other jurisdictions where it operates imposing further restrictions.

E—Taxation.		Supplement (17-19).

F—Dividends and Paying Agents.		Not applicable.

G—Statement by Experts.		Not applicable.

H—Documents on Display.		UBS files periodic reports and other information with the Securities and Exchange Commission. You may read and copy any document that we file with the SEC on the SEC’s website, www.sec.gov. Much of this information may also be found on the UBS website at www.ubs.com/investors.

I—Subsidiary Information.		Not applicable.

J—Annual Report to Security Holders		Not applicable


Annual Report 2022		8


Item 11. Quantitative and Qualitative Disclosures About Market Risk.

(a) Quantitative Information About Market Risk.		Annual Report, Market risk (111-119).

(b) Qualitative Information About Market Risk.		Annual Report, Market risk (111-119).

(c) Interim Periods.		Not applicable.

Item 12. Description of Securities Other than Equity Securities.

A – Debt Securities		Not applicable.

B – Warrants and Rights		Not applicable.

C – Other Securities		Not applicable.

D – American Depositary Shares		Not applicable.

Item 13. Defaults, Dividend Arrearages and Delinquencies.		There has been no material default in respect of any indebtedness of UBS or any of its significant subsidiaries or any arrearages of dividends or any other material delinquency not cured within 30 days relating to any preferred stock of UBS Group AG or any of its significant subsidiaries.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.		None.

Item 15. Controls and Procedures.

(a) Disclosure Controls and Procedures		Annual Report, US disclosure requirements (199), and Exhibit 12 to this Form 20-F.

(b) Management’s Annual Report on Internal Control over Financial Reporting		Annual Report, Management’s report on internal control over financial reporting (244 and 364).

(c) Attestation Report of the Registered Public Accounting Firm		Annual Report, Report of Independent Registered Public Accounting Firm (245 and 365).

(d) Changes in Internal Control over Financial Reporting		None.

Item 16A. Audit Committee Financial Expert.		Annual Report, Audit Committee (182) and Differences from corporate governance standards relevant to US-listed companies (165-166).

		All Audit Committee members have accounting or related financial management expertise and, in compliance with the rules established pursuant to the US Sarbanes- Oxley Act of 2002, at least one member, the Chairperson Jeremy Anderson, qualifies as a financial expert.

Item 16B. Code of Ethics.		Annual Report, Our Code of Conduct and Ethics (43) UBS’s Code of Conduct and Ethics (“the Code”) is published on our website under https://www.ubs.com/code.The UBS Code of Business Conduct does not include a waiver option, and no waiver from any provision of the Code was granted to any employee in 2022.
Item 16C. Principal Accountant Fees and Services.		Annual Report, Auditors (196-198).
Item 16C. Principal Accountant Fees and Services.		None of the non-audit services so disclosed were approved by the Audit Committee pursuant to paragraph (c) (7)(i)(C) of Rule 2-01 of Regulation S-X.

Item 16D. Exemptions from the Listing Standards for Audit Committees.		Not applicable.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.		Annual Report, Holding of UBS Group AG shares (161).

Item 16F. Changes in Registrant’s Certifying Accountant.		Not applicable.


Annual Report 2022		9


Item 16G. Corporate Governance.		Annual Report, Differences from corporate governance standards relevant to US-listed companies (165-166), Governance and Nominating Committee (183-184).

Item 16H. Mine Safety Disclosure.		Not applicable.

Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections		Not applicable.

Item 17. Financial Statements.		Not applicable.

Item 18. Financial Statements.		Annual Report, Financial statements (242-502), Significant regulated subsidiary and sub-group information (521-522) and Additional regulatory information (523-539).

Item 19. Exhibits		Supplement (20-21).


Annual Report 2022		10

Supplemental information

Item 4.

Information on the Company

B – Business Overview

Item 4.B.2. Geographic breakdown of total revenues¹ of UBS Group AG consolidated

The operating regions shown in the table below correspond to the regional management structure of the Group. The allocation of revenues to these regions reflects, and is consistent with, the basis on which the business is managed and its performance is evaluated. These allocations involve assumptions and judgments that management considers to be reasonable, and may be refined to reflect changes in estimates or management structure.

The main principles of the allocation methodology are that client revenues are attributed to the domicile of the client, and trading and portfolio management revenues are attributed to the country where the risk is managed. This revenue attribution is consistent with the mandate of the regional Presidents. Certain revenues, such as those related to Non-core and Legacy Portfolio within Group Functions, are managed at a Group level. These revenues are included in the Global column. Financial information for UBS AG consolidated does not differ materially from that for UBS Group AG consolidated.

USD billion



Business Division	FY		Americas		Asia Pacific		EMEA		Switzerland		Global			Total
Global Wealth Management		2022		10.6		2.6		3.9		1.9		0.0			19.0
		2021		10.7		2.9		3.9		1.9		0.0			19.4
		2020		9.1		2.7		3.6		1.7		0.0			17.1
Personal & Corporate Banking		2022		0.0		0.0		0.0		4.3		0.0			4.3
		2021		0.0		0.0		0.0		4.3		0.0			4.3
		2020		0.0		0.0		0.0		3.9		0.0			3.9
Asset Management		2022		0.5		0.4		0.4		0.7		0.8			3.0
		2021		0.6		0.5		0.5		0.8		0.0			2.6
		2020		0.7		0.5		0.5		0.7		0.6			3.0
Investment Bank		2022		2.7		2.7		2.6		0.7		0.0			8.7
		2021		3.2		3.0		2.5		0.8		(0.0	)		9.5
		2020		3.5		2.8		2.5		0.8		0.0			9.5
Group Functions		2022		0.0		0.0		0.0		0.0		(0.4	)		(0.4	)
		2021		0.0		0.0		0.0		0.0		(0.4	)		(0.4	)
		2020		0.0		0.0		0.0		0.0		(0.5	)		(0.5	)
Group		2022		13.8		5.6		7.0		7.7		0.5			34.6
		2021		14.5		6.5		7.0		7.8		(0.3	)		35.4
		2020		13.2		6.1		6.5		7.1		0.1			33.1

During 2022, UBS changed the presentation of its Income statement. Total operating income was renamed Total revenues and excludes Credit loss expense / (release). This table, including prior-period information, has been updated to reflect the new presentation structure, with the disclosure of Total revenues instead of Total operating income. Refer to Note 1b to the UBS Group AG consolidated financial statements for more information.


Annual Report 2022		11

Disclosure Pursuant To Section 219 of the Iran Threat Reduction And Syrian Human Rights Act

Section 219 of the US Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”) added Section 13(r) to the US Securities Exchange Act of 1934, as amended (the “Exchange Act”) requiring each SEC reporting issuer to disclose in its annual and, if applicable, quarterly reports whether it or any of its affiliates have knowingly engaged in certain activities, transactions or dealings relating to Iran or with the Government of Iran or certain designated natural persons or entities involved in terrorism or the proliferation of weapons of mass destruction during the period covered by the report. The required disclosure may include reporting of activities not prohibited by US or other law, even if conducted outside the US by non-US affiliates in compliance with local law. Pursuant to Section 13(r) of the Exchange Act, we note the following for the period covered by this annual report:

UBS has a Group Sanctions Policy that prohibits transactions involving sanctioned countries, including Iran, and sanctioned individuals and entities. However, UBS maintains one account involving the Iranian government under the auspices of the United Nations in Geneva after agreeing with the Swiss government that it would do so only under certain conditions. These conditions include that payments involving the account must: (1) be made within Switzerland; (2) be consistent with paying rent, salaries, telephone and other expenses necessary for its operations in Geneva; and (3) not involve any Specially Designated Nationals (SDNs) blocked or otherwise restricted under US or Swiss law. In 2022, the gross revenues for this UN-related account were approximately USD 19,064.61. We do not allocate expenses to specific client accounts in a way that enables us to calculate net profits with respect to any individual account. UBS AG intends to continue maintaining this account pursuant to the conditions it has established with the Swiss Government and consistent with its Group Sanctions Policy.

As previously reported, UBS had certain outstanding legacy trade finance arrangements issued on behalf of Swiss client exporters in favor of their Iranian counterparties. In February 2012 UBS ceased accepting payments on these outstanding export trade finance arrangements and worked with the Swiss government who insured these contracts (Swiss Export Risk Insurance “SERV”). On December 21, 2012, UBS and the SERV entered into certain Transfer and Assignment Agreements under which SERV purchased all of UBS’s remaining receivables under or in connection with Iran-related export finance transactions. Hence, the SERV is the sole beneficiary of said receivables. There was no financial activity involving Iran in connection with these trade finance arrangements in 2022, and no gross revenue or net profit.

In connection with these trade finance arrangements, UBS has maintained one existing account relationship with an Iranian bank. This account was established prior to the US designation of this bank and maintained due to the existing trade finance arrangements. In 2007, following the designation of the bank pursuant to sanctions issued by the US, UN and Switzerland, the account was blocked under Swiss law and remained subject to blocking requirements until January 2016. Client assets as of 31 December 2022 were CHF 3,097.40. There have been no transactions involving this account. Accordingly, there is no gross revenue to report for 2022.


Annual Report 2022		12

Item 10.

Additional Information.

B—Memorandum and Articles of Association.

Please see the Articles of Association of UBS Group AG and of UBS AG (Exhibits 1.1 and 1.2, respectively, to this Form 20-F) and the Organization Regulations of UBS Group AG and UBS AG (Exhibit 1.3 and 1.4, respectively, to this Form 20-F).

Set forth below is a summary of the material provisions of the Articles of Association of UBS Group AG (which we call the “Articles” throughout this document), Organization Regulations of UBS Group AG (which we call the “Organization Regulations” throughout this document) and relevant Swiss laws, in particular the Swiss Code of Obligations, relating to our shares. This description does not purport to be complete and is qualified in its entirety by references to Swiss law, including Swiss company law, and to the Articles and Organization Regulations.

The Articles of Association and Organization Regulations of UBS AG are substantially similar to the Articles and Organization Regulations of UBS Group AG, so the following description applies equally to UBS AG, except where indicated that it refers to only one of the companies.

The principal legislation under which UBS Group AG and UBS AG operate, and under which the ordinary shares of UBS Group AG are issued, is the Swiss Code of Obligations.

The shares are registered shares with a par value of CHF 0.10 per share. The shares are fully paid up, and there is no liability of shareholders to further capital calls by the company. The shares rank pari passu in all respects with each other, including voting rights, entitlement to dividends, liquidation proceeds in case of the liquidation of the company, subscription or preemptive rights in the event of a share issue (Bezugsrechte) and preemptive rights in the event of the issuance of equity-linked securities (Vorwegzeichnungsrechte).

Each share carries one vote at our shareholders’ meetings. Voting rights may be exercised only after a shareholder has been recorded in our share register as a shareholder with voting rights. Registration with voting rights is subject to certain restrictions. See “Share Register and Transfer of Shares” below.

The Articles provide that we may elect not to print and deliver certificates in respect of registered shares. Shareholders may, however, following registration in the share register, request at any time that we issue a written statement in respect of their shares; however, the shareholder has no entitlement to the printing and delivery of share certificates.

Shares and Shareholders

Share Register and Transfer of Shares

UBS Group AG’s share register is kept by UBS Shareholder Services, P.O. Box, CH-8098 Zurich, Switzerland. Shareholder Services is responsible for the registration of the global shares. It is split into two parts – a Swiss register, which is maintained by UBS Group, acting as Swiss share registrar, and a US register, which is maintained by Computershare Trust Company NA, c/o Computershare Investor Services, P.O. Box 505000, Louisville, KY 40233-5000, United States (US), as US transfer agent.

Swiss law and the Articles of Association of UBS Group AG and UBS AG require UBS to keep a share register in which the names, addresses and nationality (for legal persons, the registered office) of the owners (and beneficial owners) of registered shares are recorded. The main function of the share register is to record shareholders entitled to vote and participate in general meetings, or to assert or exercise other rights related to voting rights.

The transfer of shares which exist in the form of intermediary-held securities is effected by entries in securities accounts in accordance with applicable law. The transfer of uncertificated securities is effected by way of a written declaration of assignment and requires notice to the issuer.

In order to register shares in the share register, a purchaser must file a share registration form with the share register. Failing such registration, the purchaser may not vote at or participate in shareholders’ meetings, but will be entitled to dividends, preemptive and priority subscription rights, and liquidation proceeds.

Swiss law distinguishes between registration with and without voting rights. Shareholders must be registered in the share register as shareholders with voting rights in order to vote and participate in general meetings or to assert or exercise other rights related to voting rights. A purchaser of shares will be recorded in our share register with voting rights upon disclosure of its name and nationality (and for legal persons, the registered office). However, we may decline a registration with voting rights if the shareholder does not declare that it has acquired the shares in its own name and for its own account. If the shareholder refuses to make such declaration, it will be registered as a shareholder without voting rights.


Annual Report 2022		13

General Meeting

A shareholders’ meeting is convened by the Board of Directors (BoD) upon notification of the shareholders at least 20 days prior to such meeting. An invitation will be sent to all registered shareholders. The Articles do not require a minimum number of shareholders to be present in order to hold a shareholders’ meeting.

Unless otherwise provided by law or the Articles (as indicated in this section), resolutions require the approval of a majority of the votes represented, excluding blank and invalid ballots, at a shareholders’ meeting. Under Swiss corporate law, a resolution passed by at least two-thirds of votes represented and a majority of the nominal value of the shares represented is required in order to approve:

•

A change in our stated purpose in the Articles;

•

The consolidation of shares, unless the consent of all the shareholders concerned is required;

•

The restriction or cancellation of the preemptive right;

•

The conversion of participation certificates into shares;

•

The introduction of shares with preferential voting rights;

•

Any restriction on the transferability of registered shares;

•

Any change in the currency of the share capital;

•

The introduction of a casting vote for the person chairing the shareholders’ meeting;

•

A provision of the articles of association on holding the shareholders’ meeting abroad;

•

The delisting of the equity securities of the corporation;

•

Authorizing contingent capital, a capital band or the creation of reserve capital in accordance with Swiss banking law;

•

A capital increase from equity capital, in return for contributions in kind or by offset with a claim, and the granting of special privileges;

•

A change of domicile of the corporation;

•

The introduction of an arbitration clause in the articles of association;

•

Dispensing with the designation of an independent voting representative for conducting a virtual general meeting in the case of corporations whose shares are not listed on a stock exchange (e.g., UBS AG); or

•

Dissolution of the corporation.

Under the Articles, a resolution passed at a shareholders’ meeting with a supermajority of at least two-thirds of the votes represented at such meeting is required to:

•

Change the limits on BoD size in the Articles;

•

Remove one-fourth or more of the members of the BoD; or

•

Delete or modify these supermajority requirements.

At shareholders’ meetings, a shareholder can be represented by a legal representative or under a written power of attorney by another shareholder eligible to vote or, under a written or electronic power of attorney, by the independent proxy. Votes are taken electronically, by written ballot or by a show of hands. Shareholders representing at least 3% of the votes represented may always request that a vote or election take place electronically or by a written ballot.

Net Profits and Dividends

Swiss law requires that at least 5% of the annual net profits of a corporation must be retained as statutory retained earnings until these equal, together with the statutory capital reserve, 50% of the corporation’s paid-up share capital. Holding companies, such as UBS Group AG, must increase the statutory retained earnings until these equal, together with the statutory capital reserve, 20% of the corporation’s paid-up share capital.

Under Swiss law, dividends may be paid out only if the corporation has sufficient distributable profits from previous business years or if the reserves of the corporation are sufficient to allow distribution of a dividend. In either event, dividends may be paid out only after approval by the shareholders’ meeting. The BoD may propose to the shareholders that a dividend be paid out. The auditors must confirm that the dividend proposal of the BoD conforms with statutory law.

Dividends are usually due and payable after the shareholders’ resolution relating to the allocation of profits has been passed. Under Swiss law, the statute of limitations in respect of dividend payments is five years.

Preemptive Rights

Under Swiss law, any share issue, whether for cash or non-cash consideration or for no consideration, is subject to the prior approval of the shareholders’ meeting. Shareholders of a Swiss corporation have certain preemptive rights to subscribe for new issues of shares in proportion to the nominal amount of shares held. The Articles or a resolution adopted at a shareholders’ meeting with a supermajority of at least two-thirds of the votes represented and a majority of the nominal value of the shares represented at the meeting may, however, limit or suspend preemptive rights in certain limited circumstances.


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Notices

Notices to shareholders are made by publication in the Swiss Official Gazette of Commerce. The BoD may designate further means of communication for publishing notices to shareholders.

Mandatory Tender Offer

Under the applicable provisions of the Swiss Financial Market Infrastructure Act, anyone who directly or indirectly or acting in concert with third parties acquires more than 33 1/3% of the voting rights of a Swiss-listed company will have to submit a takeover bid to all remaining shareholders. A waiver from the mandatory bid rule may be granted by our supervisory authority. If no waiver is granted, the mandatory takeover bid must be made pursuant to the procedural rules set forth in the Swiss Financial Market Infrastructure Act and implementing ordinances.

Board of Directors

Borrowing Power

Neither Swiss law nor the Articles restrict in any way our power to borrow and raise funds, provided that any such borrowing is entered into on arms’ length terms.

Swiss law requires that the Articles determine the amount of loans that UBS Group AG, as a listed company, may grant to members of its BoD. The Articles restrict UBS Group AG’s ability to grant loans to BoD members as follows: First, loans to the independent members of the BoD shall be made in accordance with the customary business and market conditions. Second, loans to the non-independent members of the BoD shall be made in the ordinary course of business on substantially the same terms as those granted to UBS employees. Third, the total amount of such loans shall not exceed CHF 20 million per member.

Conflicts of Interests

Swiss law requires directors and members of senior management to inform the BoD immediately and comprehensively of any conflicts of interest affecting them. The BoD then has to take the measures required to safeguard the interests of the corporation. Directors and officers are personally liable to the corporation for any breach of these provisions. In addition, Swiss law contains a provision under which payments made to a shareholder or a director or any person associated therewith, other than at arm’s length, must be repaid to us if the shareholder or director was acting in bad faith.

In addition, our Organization Regulations provide that the member of the BoD or senior management with a conflict of interest shall participate in discussions and a double vote (meaning a vote with and a vote without the conflicted individual) shall take place. A binding decision on the matter requires the same outcome in both votes. This is subject to exceptional circumstances in which the best interests of UBS dictate that the member of the BoD or senior management with a conflict of interest shall not participate in the discussions and decision-making involving the interest at stake.

Retirement of Board members

There is no age-limit requirement for retirement of the members of the BoD. The term of office for each Board member is one year, and no Board member may serve for more than 10 consecutive terms of office. In exceptional circumstances the Board can extend this limit.

Executive sessions

UBS AG’s Organization Regulations require one-third of the members of the Board of Directors of UBS AG to be independent. While neither Swiss law applicable to UBS AG nor the Organization Regulations require regularly scheduled meetings of UBS AG’s independent directors, the Organization Regulations of UBS Group AG require independent members of the Board of Directors of UBS Group AG to meet, without the participation of the Chairman, at least twice a year. All members of UBS Group AG’s Board of Directors are also members of UBS AG’s Board of Directors and all meetings of UBS Group AG’s Board of Directors are held as combined meetings with the UBS AG’s Board of Directors. As a result, the practice currently in place at UBS AG is that the independent members regularly meet in sessions of independent members only. In addition to these joint meetings, standalone meetings of UBS AG’s Board of Directors are held regularly to discuss and agree on finance, risk, compliance, operational risk, regulatory and other topics related to UBS AG.


Annual Report 2022		15

The Company

Repurchase of Shares

Swiss law limits a corporation’s ability to hold or repurchase its own shares. We and our Swiss subsidiaries may only repurchase shares if we have sufficient freely disposable equity capital available at its acquisition value to pay the purchase price and if the aggregate nominal value of the shares does not exceed 10% of our nominal share capital. Repurchases for cancellation purposes approved by the shareholders’ meeting are exempted from the 10% threshold. Furthermore, such own shares must be disclosed as negative items in our shareholders’ equity. Such shares held by us or our Swiss subsidiaries do not carry any rights to vote at shareholders’ meetings.

Sinking fund provisions

There are no provisions in the Swiss law or in the Articles requiring the company to put resources aside for the exclusive purpose of redeeming bonds or repurchasing shares.

Registration and Business Purpose

UBS Group AG was incorporated and registered as a corporation limited by shares (Aktiengesellschaft) under the laws of Switzerland. UBS Group AG was entered into the commercial register of Canton Zurich on 10 June 2014 under the registration number CHE-395.345.924 and has its registered domicile in Zurich, Switzerland. The business purpose of UBS Group AG, as set forth in article 2 of its Articles, is the acquisition, holding, management and sale of direct and indirect participations in enterprises of any kind, in particular in the area of banking, financial, advisory, trading and service activities in Switzerland and abroad. UBS Group may establish enterprises of any kind in Switzerland and abroad, hold equity interests in these companies, and conduct their management. UBS Group is authorized to acquire, mortgage and sell real estate and building rights in Switzerland and abroad. UBS Group may provide loans, guarantees and other types of financing and security for group companies and borrow and invest capital on the money and capital markets.

UBS AG was incorporated and registered as a corporation limited by shares (Aktiengesellschaft) under the laws of Switzerland. It is entered into the commercial registers of Canton Zurich and Canton Basel-City under the registration number CHE-101.329.561 and has registered domiciles in Zurich and Basel, Switzerland. The business purpose of UBS AG, as set forth in article 2 of its Articles of Association, is the operation of a bank, with a scope of operations extending to all types of banking, financial, advisory, trading and service activities in Switzerland and abroad. UBS AG is a wholly owned subsidiary of UBS Group AG.

Duration and Liquidation

UBS Group AG and UBS AG have unlimited duration.

Under Swiss law, we may be dissolved at any time by a shareholders’ resolution which must be passed by a supermajority of at least two-thirds of the votes represented and a majority of the nominal value of the shares represented at the meeting. Dissolution by law or court order is possible, for example, if we become bankrupt.

Under Swiss law, any surplus arising out of a liquidation (after the settlement of all claims of all creditors) is distributed to shareholders in proportion to the paid-up nominal value of shares held.

Other

Ernst & Young Ltd, Aeschengraben 9, CH-4051 Basel, Switzerland, PCAOB number 1460, have been appointed as statutory auditors and as auditors of the consolidated accounts of both UBS Group AG and UBS AG. The auditors are subject to election by the shareholders at the ordinary general meeting on an annual basis.


Annual Report 2022		16

E—Taxation.

This section outlines the material Swiss tax and US federal income tax consequences of the ownership of UBS Group AG’s ordinary shares (defined as “UBS ordinary shares “ in this section) by a US holder (as defined below) who holds UBS ordinary shares as capital assets. This discussion addresses only US federal income taxation and Swiss income and capital taxation and does not discuss all of the tax consequences that may be relevant to holders in light of their individual circumstances, including other foreign tax consequences, state or local tax consequences, estate and gift tax consequences, and tax consequences arising under the Medicare contribution tax on net investment income or the alternative minimum tax. It is designed to explain the major interactions between Swiss and US taxation for US persons who hold UBS ordinary shares.

The discussion does not address the tax consequences to persons who hold UBS ordinary shares in particular circumstances, such as tax-exempt entities, banks, financial institutions, life insurance companies, broker-dealers, traders in securities that elect to use a mark-to-market method of accounting for securities holdings, holders that actually or constructively own 10% or more of the total combined voting power of the voting stock of UBS Group AG or of the total value of stock of UBS Group AG, holders that hold UBS ordinary shares as part of a straddle or a hedging or conversion transaction, holders that purchase or sell UBS ordinary shares as part of a wash sale for tax purposes or holders whose functional currency for US tax purposes is not the US dollar. This discussion also does not apply to holders who acquired their UBS ordinary shares through a tax-qualified retirement plan, nor generally to unvested UBS ordinary shares held under deferred compensation arrangements.

If a partnership (or other entity treated as a partnership) holds UBS ordinary shares, the US federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the UBS ordinary shares should consult its tax advisor with regard to the US federal income tax treatment of an investment in the ordinary shares.

The discussion is based on the tax laws of Switzerland and the United States, including the US Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations under the Internal Revenue Code, published rulings and court decisions, as in effect on the date of this document, as well as the Convention between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income, which we call the “Treaty,” all of which may be subject to change or change in interpretation, possibly with retroactive effect.

For purposes of this discussion, a “US holder” is any beneficial owner of UBS ordinary shares that is for US federal income tax purposes:

•

A citizen or resident of the United States;

•

A domestic corporation or other entity taxable as a corporation;

•

An estate, the income of which is subject to US federal income tax without regard to its source; or

•

A trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more US persons have the authority to control all substantial decisions of the trust.

Holders of UBS ordinary shares are urged to consult their tax advisors regarding the US federal, state and local and the Swiss and other tax consequences of owning and disposing of these shares in their particular circumstances.

(a) Ownership of UBS Ordinary Shares - Swiss Taxation

Dividends and Distributions

Dividends paid by UBS Group AG to a holder of UBS ordinary shares (including dividends on liquidation proceeds and stock dividends) are in principle subject to a Swiss federal withholding tax at a rate of 35%.

Under the Capital Contribution Principle, the repayment of capital contributions, including share premiums made by the shareholders after December 31, 1996 is in principle no longer subject to Swiss withholding tax if certain requirements regarding the booking of these capital contributions are met.

Swiss companies listed on a Swiss stock exchange such as UBS Group AG can repay reserves from capital contributions to their shareholders without deduction of Swiss withholding tax only if they distribute at least the same amount of taxable dividends. For this reason UBS Group AG pays half of the dividend from capital contribution reserves and half of the dividend from taxable dividends which is subject to 35% Swiss withholding tax.


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A US holder resident in the US that qualifies for Treaty benefits may apply for a refund of the withholding tax withheld in excess of the 15% Treaty rate (or for a full refund in case of qualifying retirement arrangements). The claim for refund must be filed with the Swiss Federal Tax Administration, Eigerstrasse 65, CH-3003 Berne, Switzerland no later than December 31 of the third year following the end of the calendar year in which the income subject to withholding was due. The form used for obtaining a refund is one of the Swiss Tax Forms 82 (82 C for US companies; 82 E for other US entities; 82 I for individuals; 82 R for regulated investment companies), which may be obtained from the Swiss Federal Tax Administration at the address above or downloaded from the web page of the Swiss Federal tax Administration. The form must be filled out in triplicate with each copy duly completed and signed before a notary public in the United States. The form must be accompanied by evidence of the deduction of withholding tax withheld at the source.

A US holder resident outside the US may be eligible for a withholding tax reclaim. If the US holder is resident in Switzerland, a full reclaim based on the Swiss withholding tax Act is possible provided all necessary conditions are met. A US holder resident neither in the US nor in Switzerland may be eligible for a partial reclaim provided that a Treaty between Switzerland and the country of residence is applicable and that all necessary conditions are met.

Transfers of UBS Ordinary Shares

The purchase or sale of UBS ordinary shares, whether by Swiss resident or non-resident holders (including US holders), may be subject to a Swiss securities transfer stamp duty of up to 0.15% calculated on the purchase price or sale proceeds if it occurs through or with a bank or other securities dealer as defined in the Swiss Federal Stamp Tax Act in Switzerland or the Principality of Liechtenstein. In addition to the stamp duty, the sale of UBS ordinary shares by or through a member of a recognized stock exchange may be subject to a stock exchange levy.

Capital gains realized by a US holder upon the sale of UBS ordinary shares are not subject to Swiss income or gains taxes, unless such US holder holds such shares as business assets of a Swiss business operation qualifying as a permanent establishment. In the latter case, gains are taxed at ordinary Swiss individual or corporate income tax rates, as the case may be, and losses are deductible for purposes of Swiss income taxes. Furthermore, a US holder who is an individual resident in Switzerland and holds such shares as business assets (as he qualifies as a professional trader of securities as per Swiss tax law) may be liable to Swiss income taxes on gains.

(b) Ownership of UBS Ordinary Shares - US Federal Income Taxation

The tax treatment of the UBS ordinary shares will depend in part on whether or not UBS Group AG is classified as a passive foreign investment company, or PFIC, for US federal income tax purposes. Except as discussed below under “—Passive Foreign Investment Company (PFIC) Rules”, this discussion assumes that UBS Group AG is not classified as a PFIC for United States federal income tax purposes.

Dividends and Distributions

A US holder will include in gross income and treat as a dividend the gross amount of any distribution paid, before reduction for Swiss withholding taxes, by UBS Group AG out of its current or accumulated earnings and profits (as determined for US federal income tax purposes), other than certain pro-rata distributions of UBS ordinary shares, when the distribution is actually or constructively received by the US holder. Distributions in excess of current and accumulated earnings and profits (as determined for US federal income tax purposes) will be treated as a return of capital to the extent of the US holder’s basis in its UBS ordinary shares and thereafter as capital gain. However, UBS Group AG does not expect to calculate earnings and profits in accordance with US federal income tax principles. Accordingly, a US holder should expect to generally treat distributions we make on UBS ordinary shares as dividends.

Dividends paid to a noncorporate US holder that constitute qualified dividend income will be taxable to the holder at preferential rates, provided that the holder has a holding period in the shares of more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and meets other holding period requirements. Dividends paid by UBS Group AG with respect to the ordinary shares will generally be qualified as dividend income provided that, in the year that the US holder receives the dividend, the UBS ordinary shares are readily tradable on an established securities market in the United States. The UBS ordinary shares are listed on the New York Stock Exchange, and UBS Group AG therefore expects that dividends will be qualified dividend income.

For US federal income tax purposes, a dividend will include a distribution characterized under Swiss law as a repayment of capital contributions if the distribution is made out of current or accumulated earnings and profits, as described above.


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Dividends will generally be income from sources outside the United States for foreign tax credit limitation purposes, and will generally be “passive” income for purposes of computing the foreign tax credit allowable to the holder. However, if (a) we are 50% or more owned, by vote or value, by US persons and (b) at least 10% of our earnings and profits are attributable to sources within the US, then for foreign tax credit purposes, a portion of our dividends would be treated as derived from sources within the US. With respect to any dividend paid for any taxable year, the US source ratio of our dividends for foreign tax credit purposes would be equal to the portion of our earnings and profits from sources within the United States for such taxable year, divided by the total amount of our earnings and profits for such taxable year. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to preferential rates. The dividend will not be eligible for the dividends-received deduction generally allowed to US corporations in respect of dividends received from other US corporations.

In the case of dividends that are paid in Swiss francs, the amount of the dividend distribution included in income of a US holder will be the US dollar value of the Swiss franc payments made, determined at the spot Swiss franc/US dollar rate on the date such dividend distribution is includible in the income of the US holder, regardless of whether the payment is in fact converted into US dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is included in income to the date such dividend payment is converted into US dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. Such gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.

Subject to US foreign tax credit limitations, the nonrefundable Swiss tax withheld and paid over to Switzerland will be creditable or deductible against the US holder’s US federal income tax liability. To the extent a reduction or refund of the tax withheld is available to a US holder under the laws of Switzerland or under the Treaty, the amount of tax withheld that is refundable will not be eligible for credit against the US holder’s US federal income tax liability, whether or not the refund is actually obtained. See “(a) Ownership of UBS Ordinary Shares – Swiss Taxation” above, for the procedures for obtaining a tax refund.

Transfers of UBS Ordinary Shares

A US holder that sells or otherwise disposes of UBS ordinary shares generally will recognize capital gain or loss for US federal income tax purposes equal to the difference between the US dollar value of the amount realized and its tax basis, determined in US dollars, in such UBS ordinary shares. Capital gain of a non-corporate US holder is generally taxed at preferential rates if the UBS ordinary shares were held for more than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes. A US holder will not be allowed a foreign tax credit in respect of any stamp duty or stock exchange levy that is imposed upon a transfer of UBS ordinary shares.

Passive Foreign Investment Company (PFIC) Rules

UBS Group AG believes that UBS ordinary shares should not currently be treated as stock of a PFIC for US federal income tax purposes, and does not expect to become a PFIC in the foreseeable future. However, this conclusion is a factual determination made annually and thus may be subject to change. It is therefore possible that UBS Group AG could become a PFIC in a future taxable year. In general, UBS Group AG will be a PFIC with respect to a US holder if, for any taxable year in which the US holder held UBS ordinary shares, either (i) at least 75% of the gross income of UBS Group AG for the taxable year is passive income or (ii) at least 50% of the value, determined on the basis of a quarterly average, of UBS’s assets is attributable to assets that produce or are held for the production of passive income (including cash). If UBS Group AG were to be treated as a PFIC, gain realized on the sale or other disposition of UBS ordinary shares would in general not be treated as capital gain. Instead, unless a US holder elects to be taxed annually on a mark-to-market basis with respect to its UBS ordinary shares, such gain and certain “excess distributions” would be treated as having been realized ratably over the holder’s holding period for the shares and generally would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. With certain exceptions, a holder’s UBS ordinary shares will be treated as stock in a PFIC if UBS Group AG was a PFIC at any time during the holder’s holding period in the UBS ordinary shares. In addition, dividends received from UBS Group AG would not be eligible for the preferential tax rate applicable to qualified dividend income if UBS Group AG were to be treated as a PFIC either in the taxable year of the distribution or the preceding taxable year, but would instead be taxable at rates applicable to ordinary income.


Annual Report 2022		19

Item 19.

Exhibits.


Exhibit number		Description

1.1		Articles of Association of UBS Group AG dated 6 April 2022.

1.2		Articles of Association of UBS AG dated 26 April 2018. (Incorporated by reference to Exhibit 1.2 to UBS’s Annual Report on Form 20-F for the fiscal year ended December 31, 2019)

1.3		Organization Regulations of UBS Group AG dated 14 February 2022. (Incorporated by reference to Exhibit 1.3 to UBS’s Annual Report on Form 20-F for the fiscal year ended December 31, 2021)

1.4		Organization Regulations of UBS AG dated 14 February 2022. (Incorporated by reference to Exhibit 1.4 to UBS’s Annual Report on Form 20-F for the fiscal year ended December 31, 2021)

2(b)		Instruments defining the rights of the holders of long-term debt issued by UBS Group AG and its subsidiaries. We agree to furnish to the SEC upon request, copies of the instruments, including indentures, defining the rights of the holders of our long-term debt and of our subsidiaries’ long-term debt.

2(d)		Description of securities registered under Section 12 or the Securities Exchange Act of 1934

4.1		Terms and Conditions of Tier 2 Subordinated Notes of UBS AG due 2024, issued 15 May 2014. (Incorporated by reference to Exhibit 4.3 to UBS AG’s Annual Report on Form 20-F for the fiscal year ended December 31, 2014)

4.2		Terms and Conditions of USD 1.25 billion 7% Tier 1 Subordinated Notes issued by UBS Group AG on 19 February 2015. (Incorporated by reference to Exhibit 4.4 to UBS AG’s Annual Report on Form 20-F for the fiscal year ended December 31, 2014)

4.3		Terms and Conditions of EUR 1 billion 5.75% Tier 1 Subordinated Notes issued by UBS Group AG on 19 February 2015. (Incorporated by reference to Exhibit 4.6 to UBS AG’s Annual Report on Form 20-F for the fiscal year ended December 31, 2014)

4.4		Terms and Conditions of USD 1.575 billion Tier 1 Subordinated Notes issued by UBS Group AG on 7 August 2015. (Incorporated by reference to Exhibit 4.8 to UBS’s Annual Report on Form 20-F for the fiscal year ended December 31, 2015)

4.5		Terms and Conditions of SGD 700 million 5.875% Tier 1 Subordinated Notes issued on 28 November 2018 by UBS Group AG (originally issued by UBS Group Funding (Switzerland) AG and guaranteed by UBS Group AG, migrated to UBS Group AG as issuer on 11 October 2019). (Incorporated by reference to Exhibit 4.17 to UBS’s Annual Report on Form 20-F for the fiscal year ended December 31, 2018)

4.6		Terms and Conditions of USD 2.5 billion 7.00% Tier 1 Subordinated Notes issued on 31 January 2019 by UBS Group AG (originally issued by UBS Group Funding (Switzerland) AG and guaranteed by UBS Group AG, migrated to UBS Group AG as issuer on 11 October 2019). (Incorporated by reference to Exhibit 4.18 to UBS’s Annual Report on Form 20-F for the fiscal year ended December 31, 2018)

4.7		Terms and Conditions of additional Tier 1 capital instruments issued pursuant to the Deferred Contingent Capital Plan 2018/19. (Incorporated by reference to Exhibit 4.19 to UBS’s Annual Report on Form 20-F for the fiscal year ended December 31, 2018)

4.8		Terms and Conditions of AUD 700 million 4.375% Tier 1 Subordinated Notes issued on 27 August 2019 by UBS Group AG. (Incorporated by reference to Exhibit 4.17 to UBS’s Annual Report on Form 20-F for the fiscal year ended December 31, 2019)

4.9		Terms and Conditions of SGD 750 million 4.85% Tier 1 Subordinated Notes issued on 04 September 2019 by UBS Group AG. (Incorporated by reference to Exhibit 4.18 to UBS’s Annual Report on Form 20-F for the fiscal year ended December 31, 2019)

4.10		Terms and Conditions of CHF 275 million 3.00% Tier 1 Subordinated Notes issued on 13 November 2019 by UBS Group AG. (Incorporated by reference to Exhibit 4.19 to UBS’s Annual Report on Form 20-F for the fiscal year ended December 31, 2019)

4.11		Terms and Conditions of additional Tier 1 capital instruments issued pursuant to the Deferred Contingent Capital Plan 2019/20. (Incorporated by reference to Exhibit 4.19 to UBS’s Annual Report on Form 20-F for the fiscal year ended December 31, 2020)


Annual Report 2022		20


4.12		Terms and Conditions of USD 750 million 5.125% Tier 1 Subordinated Notes issued on 29 July 2020 by UBS Group AG. (Incorporated by reference to Exhibit 4.20 to UBS’s Annual Report on Form 20-F for the fiscal year ended December 31, 2020)

4.13		Terms and Conditions of USD 1.5 billion 4.375% Tier 1 Subordinated Notes issued on 10 February 2021 by UBS Group AG. (Incorporated by reference to Exhibit 4.21 to UBS’s Annual Report on Form 20-F for the fiscal year ended December 31, 2020)

4.14		Terms and Conditions of additional Tier 1 capital instruments issued pursuant to the Deferred Contingent Capital Plan 2020/21. (Incorporated by reference to Exhibit 4.22 to UBS’s Annual Report on Form 20-F for the fiscal year ended December 31, 2020)

4.15		Terms and Conditions of USD 750 million 3.875% Tier 1 Subordinated Notes issued on 02 June 2021 by UBS Group AG. (Incorporated by reference to Exhibit 4.18 to UBS’s Annual Report on Form 20-F for the fiscal year ended December 31, 2021)

4.16		Terms and Conditions of USD 1.5 billion 4.875% Tier 1 Subordinated Notes issued on 12 January 2022 by UBS Group AG. (Incorporated by reference to Exhibit 4.19 to UBS’s Annual Report on Form 20-F for the fiscal year ended December 31, 2021)

4.17		Terms and Conditions of CHF 265 million 3.375% Tier 1 Subordinated Notes issued on 16 February 2022 by UBS Group AG. (Incorporated by reference to Exhibit 4.20 to UBS’s Annual Report on Form 20-F for the fiscal year ended December 31, 2021)

4.18		Terms and Conditions of additional Tier 1 capital instruments issued pursuant to the Deferred Contingent Capital Plan 2021/22. (Incorporated by reference to Exhibit 4.21 to UBS’s Annual Report on Form 20-F for the fiscal year ended December 31, 2021)

4.19		Terms and Conditions of additional Tier 1 capital instruments issued pursuant to the Deferred Contingent Capital Plan 2022/23.

4.20		Asset Transfer Agreement between UBS AG and UBS Switzerland AG dated 12 June 2015. (Incorporated by reference to Form 6-K of UBS AG filed on June 17, 2015)

8		Significant Subsidiaries of UBS Group AG.

		Please see Note 28 to each set of Financial Statements (Interests in subsidiaries and other entities), on pages 350- 354 and 471-475 of the Annual Report.

12		The certifications required by Rule 13(a)-14(a) (17 CFR 240.13a-14(a)).

13		The certifications required by Rule 13(a)-14(b) (17 CFR 240.13a-14(b)) and Section 1350 of Chapter 63 of Title 18 of the U.S. Code (18 U.S.C. 1350).

15.1		Consent of Ernst & Young Ltd. with respect to UBS Group AG.

15.2		Consent of Ernst & Young Ltd. with respect to UBS AG.

101		Interactive Data Files (sections of the Annual Report formatted in inline XBRL (Extensible Business Reporting Language)). Furnished electronically herewith.


Annual Report 2022		21

SIGNATURES

The registrants hereby certify that they meet all of the requirements for filing on Form 20-F and that they have duly caused the undersigned to sign this annual report on their behalf.


UBS Group AG

/s/ Ralph Hamers
Name:		Ralph Hamers
Title:		Group Chief Executive Officer

/s/ Sarah Youngwood
Name:		Sarah Youngwood
Title:		Group Chief Financial Officer

/s/ Christopher Castello
Name:		Christopher Castello
Title:		Group Controller and Chief Accounting Officer

UBS AG

/s/ Ralph Hamers
Name:		Ralph Hamers
Title:		President of the Executive Board

/s/ Sarah Youngwood
Name:		Sarah Youngwood
Title:		Chief Financial Officer

/s/ Christopher Castello
Name:		Christopher Castello
Title:		Controller and Chief Accounting Officer

Date: March 6, 2023


Annual Report 2022		22

Annual Report 2022

UBS Group AG and UBS AG

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Our external reporting approach

The scope and content of our external reports are determined by Swiss legal and regulatory requirements, accounting standards, relevant stock and debt listing rules, including regulations promulgated by the Swiss Financial Market Supervisory Authority (FINMA), the SIX Swiss Exchange, the US Securities and Exchange Commission (the SEC) and other regulatory requirements, as well as by our financial reporting policies.

At the center of our external reporting approach is the annual report of UBS Group AG, which consists of disclosures for UBS Group AG and its consolidated subsidiaries. We also provide a combined annual report for UBS Group AG and UBS AG consolidated, which additionally includes the consolidated financial statements of UBS AG, as well as supplemental disclosures required under SEC regulations, and is the basis for our SEC Form 20-F filing.

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Annual Reports

The 2022 Annual Reports (the UBS Group AG Annual Report 2022 and the combined UBS Group AG and UBS AG Annual Report 2022) include the consolidated financial statements of UBS Group AG and UBS AG, respectively, and provide comprehensive information about our firm, including our strategy, businesses, financial and operating performance, and other key information. The reports are presented in US dollars. The UBS Group AG Annual Report 2022 is partly translated into German, with the German translation available as of 10 March 2023 under “Annual reporting” at ubs.com/investors.

The consolidated financial statements of UBS Group AG and UBS AG have been prepared in accordance with International Financial Reporting Standards (IFRS). The sections within “Risk, capital, liquidity and funding, and balance sheet“ include certain audited financial information, which forms part of the consolidated financial statements. The Annual Reports also include the statutory financial statements of UBS Group AG, which are the basis for our appropriation of profit and the proposed distribution of dividends, subject to shareholder approval at the Annual General Meeting.

Sustainability Report

The Sustainability Report, which will be available from 6 March 2023, provides disclosures on environmental, social and governance topics for UBS Group. Selected information on environmental, social and governance is also included in our Annual Report.

Standalone reports of significant regulated entities

We publish separate standalone reports for UBS AG and UBS Switzerland AG. Selected financial and regulatory key figures for these entities, as well as for UBS Europe SE and UBS Americas Holding LLC, are also included in our annual reports. The UBS Europe SE 2022 financial statements and complementary disclosures will be published on our website in the first half of 2023.

Pillar 3 Report

The Pillar 3 Report provides detailed quantitative and qualitative information about risk, capital, leverage and liquidity and funding for UBS Group and prudential key figures and regulatory information for UBS AG standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated and UBS Americas Holding LLC consolidated.

Diversity, Equity and Inclusion Report

The first global Diversity, Equity and Inclusion (DE&I) Report, which will be available in the second quarter of 2023, details our DE&I priority areas of focus, our strategic goals and our approach to achieving them at UBS.

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Contents


2		Letter to shareholders
7		Highlights of the 2022 financial year
8		Our key figures
10		Our Board of Directors
12		Our Group Executive Board
14		Our evolution


1		Our strategy, business model and environment

15		Our strategy
17		Targets, aspirations and capital guidance
18		Our businesses
28		Our environment
33		How we create value for our stakeholders
50		Regulation and supervision
53		Regulatory and legal developments
56		Risk factors


2		Financial and operating performance

67		Accounting and financial reporting
68		Group performance
74		Global Wealth Management
76		Personal & Corporate Banking
78		Asset Management
80		Investment Bank
81		Group Functions


3		Risk, capital, liquidity and funding, and balance sheet

83		Risk management and control
134		Capital, liquidity and funding, and balance sheet


4		Corporate governance and compensation

164		Corporate governance
200		Compensation


5		Financial statements

251		UBS Group AG consolidated financial statements
371		UBS AG consolidated financial statements


6		Significant regulated subsidiary and sub-group information

491		Financial and regulatory key figures for our significant regulated subsidiaries and sub-groups


7		Additional regulatory information

494		UBS Group AG consolidated supplemental disclosures required under SEC regulations
502		UBS AG consolidated supplemental disclosures required under SEC regulations


A		Appendix

510		Alternative performance measures
513		Abbreviations frequently used in our financial reports
515		Information sources
516		Cautionary statement

Dear shareholders,

In 2022, the world was impacted by Russia’s invasion of Ukraine, which led to a humanitarian crisis and wide-ranging sanctions. The war contributed to higher commodity prices, adding to inflation, which reached multi-decade highs in most major economies. This prompted central banks to tighten monetary policy at a pace not seen since the 1980s.

As a consequence, equity and bond markets fell in tandem. Global equities delivered a total negative return of 18.4%, and global GDP growth decelerated to 3.1% from 6.4% in 2021.

Our 2022 financial performance

Our globally diversified business, with strong positions across Switzerland, Asia Pacific, EMEA and the US, allowed us to deliver value for both our clients and you, our shareholders, in this challenging environment. Our outstanding client franchises are underpinned by a balance sheet for all seasons, a strong risk culture and an intense focus on costs. This enabled us to deliver good results in 2022 and achieve our Group financial targets for the full year, with a net profit of USD 7.6bn, a return on CET1 capital of 17.0% and a cost / income ratio of 72.1%. We also maintained a strong capital position, ending the year with a CET1 capital ratio of 14.2% and a CET1 leverage ratio of 4.42%, both significantly above our guidance.

Throughout 2022, our clients turned to us for stability and advice. We helped them reposition their portfolios and take advantage of longer-term opportunities. This resulted in USD 60bn of net new fee-generating assets in 2022. Net new money from our asset management clients reached USD 25bn for the year. And we saw continued interest in our separately managed account (SMA) offering in the US and in alternatives, contributing to our strong momentum.

Leveraging our position as Switzerland’s leading universal bank

In our home market of Switzerland, we benefited from the stability of the economy and strengthened our position as the country’s #1 universal bank. In 2022, we expanded our offering, with a focus on real estate, sustainability and pension solutions. Additionally, for our corporate clients, we launched a one-stop marketplace for partner products and services. All this helped us deliver above-market growth. And we plan to continue to do so. We will further invest in our strategic technology initiatives and support our clients’ transition to mobile banking, where we have seen a 10 percentage point increase in active mobile clients. At the same time, we remain disciplined on expenses.

After the initial launch of UBS key4 in Switzerland, we continued to expand our digital product range. Increasingly, clients want to invest and manage their money more independently, preferably using their smartphones. With UBS key4 smart investing, clients can now do everything themselves – from opening an account to buying and selling selected funds –easily, intuitively and all online. Our focus on enhancing user experience has resulted in excellent client feedback and interest in engaging with our digital product range.

Building on our scale in the Americas

Regionally, more than half of our invested assets in wealth management come from clients in the US, which is the largest wealth pool globally. In 2022, we remained focused on delivering our entire firm to our core wealth, global family and institutional wealth clients by leveraging our investment banking and asset management capabilities as well as our thought leadership.

We will add to our scale and efficiencies by continuing to develop tailored solutions for global family and institutional wealth clients, expanding our banking capabilities with the long-term goal of becoming our clients’ primary bank, recruiting highly productive advisors, and increasing the efficiency and effectiveness of our advisors, processes and controls.

Advisor recruitment is an important component of our organic growth strategy in the US. We have over 20% of Barron’s Top 100 Private Wealth Management teams and we continued to recruit high-quality advisors in 2022 to support our industry-leading advisor productivity. By improving our use of digitalization, data and analytics, we are enhancing our financial advisors’ ability to spend more time with clients, and offering a more personalized, relevant, on-time and seamless client experience. While we continue to simplify processes and invest in infrastructure and controls, we are also taking strategic and tactical actions on costs to strengthen profitability.


Annual Report 2022 \| Letter to shareholders		2

Capturing growth opportunities in Asia Pacific

Asia Pacific is the fastest-growing wealth market, and our long-term commitment to this region is a cornerstone of our strategy. UBS is by far the largest wealth manager in the region, and we are #1 in equity capital markets for non-domestic banks. In 2022, we delivered the best mergers and acquisitions year on record and were recently named both the Best Investment Bank in Asia and Australia by FinanceAsia and the Best Equity House in Asia and Australia by IFR. This gives us confidence in our ability to grow further. Our diversified business streams and multi-shoring capabilities enable us to mitigate short-term geopolitical and macroeconomic headwinds and focus on longer-term opportunities.

The easing of COVID-19 restrictions in China has led to a more positive outlook for 2023, and we are well positioned to support clients both onshore and offshore in China and the rest of Asia Pacific when client activity levels increase. Our launch of WE.UBS in October 2022 marked the first digital-led wealth management platform by a global wealth manager in China. Here, our goal is to be the provider of choice for digital-first wealth advisory for our targeted clients. And in Southeast Asia, we are expanding our global family and institutional wealth business to better serve family offices, entrepreneurs and Asian technology firms.

Driving focused growth in EMEA

In EMEA, we made further progress on improving profitability and driving focused growth. In 2022, we completed the sale of our domestic wealth management business in Spain, following the sale of our domestic Austrian business in 2021. We are continuing to pursue growth opportunities across Europe and the Middle East, especially by providing holistic coverage for entrepreneurs. In the Investment Bank, our Global Markets business had its best year on record, and we outperformed the fee pool in Global Banking.

Making technology a differentiator

We made further progress in leveraging technology as a differentiator, through simplification, automation and user-experience improvements. We removed around 39,000 legacy technology components and decommissioned over 600 applications in an effort to modernize our technology estate and enhance our cybersecurity position. As part of our approximately USD 1.1bn cumulative gross cost savings aspiration, we expect our technology strategy to help us achieve USD 200m in gross cost savings for 2023, which we intend to reinvest.

We are also supporting the development of new financial market infrastructure and are exploring new ideas to create better solutions for our clients. For example, digital assets and distributed ledger technology have the potential to radically transform our industry, and we expect the market for digital assets to continue to grow and evolve. In 2022, we launched and issued the world’s first digital bond that is publicly traded and settled on both blockchain-based and traditional exchanges. Investors can buy this bond regardless of whether they have blockchain infrastructure, removing a hurdle in the adoption of the new and disruptive technology that can make issuing bonds faster and more efficient.

Investing in talent and new ways of working

In 2022, we focused on hiring talent with the right capabilities and agile mindsets. And our adoption of flexible ways of working has made us an even more attractive employer. As of year-end, around 18,500 employees across the firm are working in agile teams, which is helping us deliver faster, better and in a more connected way.

We are also making progress toward our aspiration of increasing female and ethnic minority representation. Five of the twelve members of our Group Executive Board, and four of the twelve members of our Board of Directors, are female. Women held 28% of Director and above roles globally as of the end of 2022, while ethnic minority employees held 20% of Director and above roles in the US and 23% in the UK.

We are committed to ongoing education of our workforce. We invested USD 78m in training in 2022, and our permanent employees completed an average of two training days each. We are also investing in the next generation. We welcomed more than 1,900 graduates, trainees, apprentices and interns to our firm through our junior talent programs worldwide. We also run multi-year apprenticeship programs in Switzerland, Australia and the UK, along with summer internship programs in numerous locations globally. In 2022, for the 14th consecutive year, we were recognized among the top 50 of the World’s Most Attractive Employers by employer-branding expert Universum.


Annual Report 2022 \| Letter to shareholders		3

LOGO

Colm Kelleher

Chairman of the Board of Directors

LOGO

Ralph Hamers

Group Chief Executive Officer

A leader in sustainability

The transition to net zero will be one of the most consequential trends in the coming years. Technological advances and the need for new infrastructure and new products in carbon markets and agriculture are just some examples of the opportunities ahead. Blended finance vehicles that leverage philanthropic capital bring public–private partnerships to the fore. We have made good progress on the execution of our sustainability strategy, as outlined in our Sustainability Report 2022.

Our progress is also reflected in feedback from our stakeholders. At our 2022 Annual General Meeting (AGM), our shareholders supported our climate roadmap, including our net-zero targets. And we have made progress toward those targets across many areas of the firm, from our lending business to supply chains to our own operations. At the upcoming 2023 AGM, we will ask you to express your view on our 2022 non-financial reporting in an advisory vote. This is set out in our Sustainability Report 2022, which describes our sustainability strategy, ambitions, governance and achievements.

A number of key sustainability ratings have reconfirmed our leading position. We were again included in the Dow Jones Sustainability Index and the CDP Climate A list. We maintained our MSCI ESG rating of AA, and saw an improvement in ESG risk rating by Sustainalytics, which now considers our firm as “low risk.”

Our commitment to society and communities

UBS is committed to giving back to the communities where we live and work through long-standing partnerships and community-based engagement of our employees. We focus on education and skill development, which is where our resources can have the most impact. In 2022, 34% of our global workforce engaged in volunteering, and 45% of the 177,000 volunteer hours were skills-based.

In 2022, our UBS Optimus Foundation network raised USD 274m in donations, including UBS matching contributions, and committed USD 150m in grants. Donations and grants committed increased by 70% and 39%, respectively.

As of year-end 2022, the Ukraine Relief Fund had disbursed over half of the more than USD 50m committed by clients, employees, UBS and our strategic partner XTX Markets for relief and recovery efforts. The fund is supporting more than 25 organizations and their local partners in Ukraine and the neighboring countries of Poland, Moldova and Romania.


Annual Report 2022 \| Letter to shareholders		4

Our commitment to capital returns, today and in the future

We remain committed to delivering attractive capital returns and creating long-term sustainable value for our shareholders. For the 2022 financial year, the Board of Directors is proposing a dividend to UBS Group AG shareholders of USD 0.55 per share, an increase of 10% year over year. Having also repurchased USD 5.6bn of shares in 2022, we are returning USD 7.3bn of capital to our shareholders for the financial year.

Looking ahead, we will remain focused on the disciplined execution of our strategy to create value for our shareholders. We entered 2023 from a position of strength. We remain committed to a progressive dividend and expect to buy back more than USD 5bn of shares in 2023.

Thank you for your ongoing support. We look forward to your feedback and to welcoming you in person to this year’s AGM, which will take place on 5 April in Basel, Switzerland.

Yours sincerely,



Colm Kelleher		Ralph Hamers
Chairman of the Board of Directors		Group Chief Executive Officer


Annual Report 2022 \| Letter to shareholders		5

Corporate information

UBS Group AG is incorporated and domiciled in Switzerland and operates under Art. 620ff. of the Swiss Code of Obligations as an Aktiengesellschaft, a corporation limited by shares. Its registered office is at Bahnhofstrasse 45, CH-8001 Zurich, Switzerland, telephone +41-44-234 11 11, and its corporate identification number is CHE-395.345.924. UBS Group AG was incorporated on 10 June 2014 and was established in 2014 as the holding company of the UBS Group. UBS Group AG shares are listed on the SIX Swiss Exchange and on the New York Stock Exchange (ISIN: CH0244767585; CUSIP: H42097107). UBS Group AG owns 100% of the outstanding shares in UBS AG.

UBS AG is incorporated and domiciled in Switzerland and operates under Art. 620ff. of the Swiss Code of Obligations as an Aktiengesellschaft, a corporation limited by shares. The addresses and telephone numbers of the two registered offices of UBS AG are: Bahnhofstrasse 45, CH-8001 Zurich, Switzerland, telephone +41-44-234 11 11; and Aeschenvorstadt 1, CH-4051 Basel, Switzerland, telephone +41-61-288 50 50. The corporate identification number is CHE-101.329.561. UBS AG is a bank. The company was formed on 29 June 1998, when Union Bank of Switzerland (founded in 1862) and Swiss Bank Corporation (founded in 1872) merged to form UBS AG.


Contacts

Switchboards	Media Relations	Shareholder Services
For all general inquiries ubs.com/contact Zurich +41-44-234 1111 London +44-207-567 8000 New York +1-212-821 3000 Hong Kong SAR +852-2971 8888 Singapore +65-6495 8000 Investor Relations UBS’s Investor Relations team manages relationships with institutional investors, research analysts and credit rating agencies. ubs.com/investors Zurich +41-44-234 4100 New York +1-212-882 5734	UBS’s Media Relations team manages relationships with global media and journalists. ubs.com/media Zurich +41-44-234 8500 mediarelations@ubs.com London +44-20-7567 4714 ubs-media-relations@ubs.com New York +1-212-882 5858 mediarelations@ubs.com Hong Kong SAR +852-2971 8200 sh-mediarelations-ap@ubs.com Office of the Group Company Secretary The Group Company Secretary handles inquiries directed to the Chairman or to other members of the Board of Directors. UBS Group AG, Office of the Group Company Secretary P.O. Box, CH-8098 Zurich, Switzerland sh-company-secretary@ubs.com Zurich +41-44-235 6652	UBS’s Shareholder Services team, a unit of the Group Company Secretary’s office, manages relationships with shareholders and the registration of UBS Group AG registered shares. UBS Group AG, Shareholder Services P.O. Box, CH-8098 Zurich, Switzerland sh-shareholder-services@ubs.com Zurich +41-44-235 6652 US Transfer Agent For global registered share-related inquiries in the US. Computershare Trust Company NA P.O. Box 505000 Louisville, KY 40233-5000, USA Shareholder online inquiries: www-us.computershare.com/investor/contact Shareholder website: computershare.com/investor Calls from the US +1-866-305-9566 Calls from outside the US +1-781-575-2623 TDD for hearing impaired +1-800-231-5469 TDD for foreign shareholders +1-201-680-6610


Corporate calendar UBS Group AG		Imprint

Publication of the Sustainability Report 2022:	Monday, 6 March 2023	Publisher: UBS Group AG, Zurich, Switzerland \| ubs.com

Annual General Meeting 2023:	Wednesday, 5 April 2023	Language: English

Publication of the first quarter 2023 report:	Tuesday, 25 April 2023	© UBS 2023. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.
Publication of the second quarter 2023 report:	Tuesday, 25 July 2023

Publication of the third quarter 2023 report:	Tuesday, 24 October 2023

Corporate calendar UBS AG

Publication of the first quarter 2023 report:	Thursday, 27 April 2023

Publication of the second quarter 2023 report:	Thursday, 27 July 2023

Additional publication dates of quarterly and annual reports will be made available as part of the corporate calendar of UBS AG at ubs.com/investors.

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Annual Report 2022		7

Our key figures


	As of or for the year ended
USD m, except where indicated	31.12.22		31.12.21			31.12.20
Group results
Total revenues		34,563		35,393			33,084
Credit loss expense / (release)		29		(148	)		694
Operating expenses		24,930		26,058			24,235
Operating profit / (loss) before tax		9,604		9,484			8,155
Net profit / (loss) attributable to shareholders		7,630		7,457			6,557
Diluted earnings per share (USD)¹		2.25		2.06			1.77
Profitability and growth²
Return on equity (%)		13.3		12.6			11.3
Return on tangible equity (%)		14.9		14.1			12.8
Return on common equity tier 1 capital (%)		17.0		17.5			17.4
Return on leverage ratio denominator, gross (%)³		3.3		3.4			3.4
Cost / income ratio (%)		72.1		73.6			73.3
Effective tax rate (%)		20.2		21.1			19.4
Net profit growth (%)		2.3		13.7			52.3
Resources²
Total assets		1,104,364		1,117,182			1,125,765
Equity attributable to shareholders		56,876		60,662			59,445
Common equity tier 1 capital⁴		45,457		45,281			39,890
Risk-weighted assets⁴		319,585		302,209			289,101
Common equity tier 1 capital ratio (%)⁴		14.2		15.0			13.8
Going concern capital ratio (%)⁴		18.2		20.0			19.4
Total loss-absorbing capacity ratio (%)⁴		33.0		34.7			35.2
Leverage ratio denominator^3,4		1,028,461		1,068,862			1,037,150
Common equity tier 1 leverage ratio (%)^3,4		4.42		4.24			3.85
Liquidity coverage ratio (%)⁵		163.7		155.5			152.1
Net stable funding ratio (%)⁶		119.8		118.5			119.2
Other
Invested assets (USD bn)⁷		3,957		4,596			4,187
Personnel (full-time equivalents)		72,597		71,385			71,551
Market capitalization⁸		57,848		61,230			50,013
Total book value per share (USD)⁸		18.30		17.84			16.74
Tangible book value per share (USD)⁸		16.28		15.97			14.91

1	Refer to “Share information and earnings per share” in the “Consolidated financial statements” section of this report for more information.

2	Refer to the “Targets, aspirations and capital guidance” section of this report for more information about our performance targets.

Leverage ratio denominators and leverage ratios for year 2020 do not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of our Annual Report 2020 for more information.

4	Based on the Swiss systemically relevant bank framework as of 1 January 2020. Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information.

The disclosed ratios represent averages for the fourth quarter of each year presented, which are calculated based on an average of 63 data points in the fourth quarter of 2022, 66 data points in the fourth quarter of 2021 and 63 data points in the fourth quarter of 2020. Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information.

6	The final Swiss net stable funding ratio (NSFR) regulation became effective on 1 July 2021. Prior to this date, the NSFR was based on estimated pro forma reporting. Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information.

7	Consists of invested assets for Global Wealth Management, Asset Management and Personal & Corporate Banking. Refer to “Note 31 Invested assets and net new money” in the “Consolidated financial statements” section of this report for more information.

8	Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information.

Alternative performance measures

An alternative performance measure (an APM) is a financial measure of historical or future financial performance, financial position or cash flows other than a financial measure defined or specified in the applicable recognized accounting standards or in other applicable regulations. We report a number of APMs in the discussion of the financial and operating performance of the Group, our business divisions and our Group Functions. We use APMs to provide a more complete picture of our operating performance and to reflect management’s view of the fundamental drivers of our business results. A definition of each APM, the method used to calculate it and the information content are presented under “Alternative performance measures” in the appendix to this report. Our APMs may qualify as non-GAAP measures as defined by US Securities and Exchange Commission (SEC) regulations.


Annual Report 2022		8


Terms used in this report, unless the context requires otherwise

“UBS,” “UBS Group,” “UBS Group AG consolidated,” “Group,” “the Group,” “we,” “us” and “our”		UBS Group AG and its consolidated subsidiaries

“UBS AG consolidated”		UBS AG and its consolidated subsidiaries

“UBS Group AG” and “UBS Group AG standalone”		UBS Group AG on a standalone basis

“UBS AG” and “UBS AG standalone”		UBS AG on a standalone basis

“UBS Switzerland AG” and “UBS Switzerland AG standalone”		UBS Switzerland AG on a standalone basis

“UBS Europe SE consolidated”		UBS Europe SE and its consolidated subsidiaries

“UBS Americas Holding LLC” and “UBS Americas Holding LLC consolidated”		UBS Americas Holding LLC and its consolidated subsidiaries

“1m”		One million, i.e., 1,000,000

“1bn”		One billion, i.e., 1,000,000,000

“1trn”		One trillion, i.e., 1,000,000,000,000

In this report, unless the context requires otherwise, references to any gender shall apply to all genders.


Annual Report 2022		9

Our Board of Directors


1 Colm Kelleher
Chairman of the Board of Directors / Chairperson of the Corporate Culture and Responsibility Committee / Chairperson of the Governance and Nominating Committee
2 Mark Hughes
Chairperson of the Risk Committee / member of the Corporate Culture and Responsibility Committee
3 Jeanette Wong
Member of the Audit Committee / member of the Compensation Committee
4 Jeremy Anderson
Senior Independent Director / Chairperson of the Audit Committee / member of the Governance and Nominating Committee
5 Fred Hu
Member of the Governance and Nominating Committee
6 Lukas Gähwiler
Vice Chairman of the Board of Directors
7 Claudia Böckstiegel
Member of the Corporate Culture and Responsibility Committee
8 Patrick Firmenich
Member of the Audit Committee / member of the Corporate Culture and Responsibility Committee
9 Nathalie Rachou
Member of the Governance and Nominating Committee / member of the Risk Committee
10 Julie G. Richardson
Chairperson of the Compensation Committee / member of the Risk Committee
11 William C. Dudley
Member of the Corporate Culture and Responsibility Committee / member of the Risk Committee
12 Dieter Wemmer
Member of the Audit Committee / member of the Compensation Committee

LOGO

The Board of Directors (the BoD) of UBS Group AG, under the leadership of the Chairman, consists of between 6 and 12 members as per our Articles of Association. The BoD decides on the strategy of the Group upon recommendation by the Group Chief Executive Officer (the Group CEO) and is responsible for the overall direction, supervision and control of the Group and its management, as well as for supervising compliance with applicable laws, rules and regulations. The BoD exercises oversight over UBS Group AG and its subsidiaries and is responsible for establishing a clear Group governance framework to provide effective steering and supervision of the Group, taking into account the material risks to which UBS Group AG and its subsidiaries are exposed. The BoD has ultimate responsibility for the success of the Group and for delivering sustainable shareholder value within a framework of prudent and effective controls, approves all financial statements for issue, and appoints and removes all Group Executive Board (GEB) members.

Our Group Executive Board

LOGO

UBS Group AG operates under a strict dual-board structure, as mandated by Swiss banking law, and therefore the BoD delegates the management of the business to the GEB. Under the leadership of the Group CEO, the GEB was composed of 12 members as of 31 December 2022 and has executive management responsibility for the steering of the Group and its business. It develops the strategies of the Group, the business divisions and Group Functions, and implements the BoD-approved strategies.

•

Refer to “Board of Directors” and “Group Executive Board” in the “Corporate governance” section of this report or to ubs.com/bod and ubs.com/geb for the full biographies of our BoD and GEB members


		1 Ralph Hamers
		Group Chief Executive Officer
		2 Sabine Keller-Busse
		President Personal & Corporate Banking and
		President UBS Switzerland
		3 Naureen Hassan
		President UBS Americas
		4 Edmund Koh
		President UBS Asia Pacific
		5 Barbara Levi
		Group General Counsel
		6 Markus Ronner
		Group Chief Compliance and Governance Officer
		7 Robert Karofsky
		President Investment Bank
		8 Sarah Youngwood
		Group Chief Financial Officer
		9 Suni Harford
		President Asset Management
		10 Mike Dargan
		Group Chief Digital and Information Officer
		11 Iqbal Khan
		President Global Wealth Management and
		President UBS Europe, Middle East and Africa
		12 Christian Bluhm
		Group Chief Risk Officer

Our evolution

Since our origins in the mid-19th century, many financial institutions have become part of the history of our firm and helped shape our development. 1998 was a major turning point: two of the three largest Swiss banks, Union Bank of Switzerland and Swiss Bank Corporation (SBC), merged to form UBS. Both banks were well established and successful in their own right. Union Bank of Switzerland had grown organically to become the largest Swiss bank. In contrast, SBC had grown mainly through strategic partnerships and acquisitions, including S.G. Warburg in 1995.

In 2000, we acquired PaineWebber, a US brokerage and asset management firm with roots going back to 1879, establishing us as a significant player in the US. For nearly 60 years, we have been building our strong presence in the Asia Pacific region, where we are by far the largest wealth manager,¹ with asset management and investment banking capabilities.

After incurring significant losses in the 2008 financial crisis, we sought to return to our roots, emphasizing a client-centric model that requires less risk-taking and capital. In 2011, we started a strategic transformation of our business model to focus on our traditional businesses: wealth management globally, and personal and corporate banking in Switzerland.

Today, we are a leading and truly global wealth manager,² a leading Swiss personal and corporate bank, a global, large-scale and diversified asset manager, and a focused investment bank.

In 2014, we began adapting our legal entity structure in response to too-big-to-fail requirements and other regulatory initiatives. First, we established UBS Group AG as the ultimate parent holding company for the Group. In 2015, we transferred personal and corporate banking and Swiss-booked wealth management businesses from UBS AG to the newly established UBS Switzerland AG. That same year, we set up UBS Business Solutions AG as the Group’s service company. In 2016, UBS Americas Holding LLC became the intermediate holding company for our US subsidiaries and our wealth management subsidiaries across Europe were merged into UBS Europe SE, our Germany-headquartered European subsidiary. In 2019, we merged UBS Limited, our UK-headquartered subsidiary, into UBS Europe SE.

The chart below gives an overview of our principal legal entities and our legal entity structure.

•

Refer to ubs.com/history for more information

•

Refer to the “Risk factors” and “Regulatory and legal developments” sections of this report for more information

The legal structure of the UBS Group

LOGO

¹	Private banking assets under management excluding China onshore in 2021, according to Asian Private Banker.

²	Statements of market position for Global Wealth Management are based on UBS’s internal estimates and publicly available information about competitors’ invested assets.


Annual Report 2022		14

Our strategy, business model and environment

Management report

Our strategy

UBS – who we are

UBS is a leading and truly global wealth manager with focused asset management and investment banking capabilities, and the leading universal bank in Switzerland. We enable people, institutions and corporations to achieve their goals by providing financial advice and solutions. We have a capital-light, cash-generative and well-diversified business model, a strong culture, a balance sheet for all seasons, and a respected brand with over 160 years of history.

At UBS, we are driven by a common purpose: Reimagining the power of investing. Connecting people for a better world. This focus provides direction on the way forward and helps us build on our strengths.

We are focused on driving long-term growth while maintaining risk and cost discipline

Our objective is to generate value for our shareholders and clients by driving long-term growth. To accomplish this, we are building on our scale, content and solutions, while remaining disciplined on risk and costs. This will give us the capacity to invest strategically and will enable us to deliver against our financial targets and commercial aspirations, which are outlined in the “Targets, aspirations and capital guidance” section of this report.

Moreover, we are aiming to maximize our and our clients’ impact to create long-term sustainable value. We also have a responsibility toward our communities and employees. We have outlined selected environmental, social and governance (ESG) aspirations, which should support our financial and commercial targets.

Our business model helps us to achieve our growth ambitions

In early 2022, we set out our strategy, which we have been executing on since. Our growth plans aim to increase the value of our network of clients, connections and contributors, in which UBS’s scale, global reach and capabilities play a central role.

Our invested assets of USD 4.0trn are regionally diversified across the globe, making us a highly attractive partner to many sophisticated and specialized contributors. This enables us to give our clients access to a broader, more relevant and customizable range of solutions, which, together with our thought leadership and capabilities, position us well to become their partner of choice. Our plans are a reflection of the outlook on long-term demographic and social trends affecting wealth distribution, product demand and client experience. As we see clients’ needs changing, we also expect continued growth in alternatives and ESG products.

Clients are at the center of everything we do

Helping clients to achieve their financial goals is the essence of what we do. We aim to differentiate our service by delivering a client experience that is personalized, relevant, on-time and seamless. This is our promise to clients.

With evolving client needs, we are adapting by making our wealth coverage more needs-based, digital and effective. In wealth management, our focus remains on our core wealth, global family and institutional wealth clients, while expanding our coverage of entrepreneurs, women and the next generation of wealthy individuals. We are launching and scaling digitally customizable services, enhancing personally advised wealth with digital support, and expanding our custom offerings for global family and institutional wealth to cater for the different needs of our clients.

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Refer to “Clients” in the “How we create value for our stakeholders” section of this report for more information

We have a global, diversified business model

Regionally, more than half of our wealth management clients’ invested assets are in the US, which is the largest wealth pool globally. Here, we are focused on improving scale and profitability by deepening our relationships with core clients and by building out Global Wealth Management’s digital-led capabilities and banking platform.

In Asia Pacific, which is the fastest-growing wealth market, we are by far the largest wealth manager¹ and are building on that scale to drive growth. We are further developing our onshore business in China and working to offer our capabilities in a more cohesive way to our clients in Southeast Asia.


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In EMEA, we are focused on improving profitability and driving focused growth, by streamlining our domestic footprint and providing holistic coverage for entrepreneurs.

Finally, in Switzerland, we have a highly integrated business and aim to expand our lead as the #1 universal bank. We are driving the digital transformation, improving the client experience, and focusing on capturing selected growth opportunities.

Our growth plans are underpinned by our asset management and investment banking capabilities

Our asset management business provides clients with a broad offering and exclusive access to premium customized services, while our investment banking capabilities support our growth plans across the client franchise with unique insights, execution and risk management. Close collaboration between our businesses also adds value for clients, including in private markets, alternatives and ESG products, and we are actively looking for additional such opportunities.

Sustainability drives our ambitions and informs our purpose

We partner with our clients to help them mobilize their capital toward a more sustainable world. At UBS, we want to meet clients’ demands for a credible sustainable offering. We want to be the financial provider of choice for clients that wish to mobilize capital toward the achievement of the United Nations Sustainable Development Goals and the orderly transition to a low-carbon economy. In Switzerland, as the leading universal bank, we are helping finance the country’s transition to net zero.

We are investing in our technology

The trusted and personal relationship with our clients across our businesses is evolving. Today, our clients expect us to provide our services more seamlessly across the firm in a personalized, relevant and timely fashion, with increasing demand for services that are digital first, anytime and anywhere. This presents an opportunity for us to fully embrace technology and make it a differentiator for our firm. To support our ambitions, we have established our technology strategy based on five key pillars: (i) Agile@UBS, a unified approach to working in an agile way across the firm to become faster and more adaptable; (ii) engineering excellence, as, in order to succeed in making technology a differentiator for our firm, we must attract and retain the best engineers, which is only possible by creating and fostering an engineering and digital culture of excellence; (iii) quarterly business reviews and digital roadmaps that help us to manage our technology investment portfolio in a more strategic and flexible way; (iv) automation, which increases efficiency and effectiveness; and (v) modern technology, which accelerates digitalization and efficiency.

We are becoming simpler and more efficient

In order to continuously increase efficiency and our capacity to invest, we are working to become simpler, by further streamlining and standardizing our functions, processes, entities and general ways of doing business, including our Agile@UBS approach, to ultimately improve the client experience.

¹	Private banking assets under management excluding China onshore in 2021, according to Asian Private Banker.

Our focus on technology

The world is faster, more digital and more data-driven than ever before, with clients increasingly demanding services that are digital first, anytime, anywhere, and underpinned by first-class technology. Through our technology strategy and five key pillars (Agile@UBS; engineering excellence; quarterly business reviews and digital roadmaps; automation; and modern technology), we aim to make technology a differentiator for our clients and employees, helping to deliver on our client promise. We are championing the adoption of a single, consistent, agile setup across the firm, driving transformational and sustainable approaches to our real estate and technology, building an engineering culture to be proud of, and fostering firm-wide operational resilience.

In 2022, our unified agile approach helped us drive greater business value, enhance the client experience and be more responsive and adaptable, with faster delivery of client digital solutions. Overall, approximately 18,500 employees transitioned to working in new Agile@UBS ways, and we continued our efforts to create and foster an engineering culture of excellence, in order to attract and retain the best engineers. Currently, approximately two-thirds of our global technology team within the Chief Digital and Information Office (CDIO) are engineers that are instrumental to responding to our clients’ digital needs, while the remaining part of the technology team manages critical operational functions at UBS.

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Refer to “Clients” in the “How we create value for our stakeholders” section of this report for more information about client digital solutions

•

Refer to “Employees” in the “How we create value for our stakeholders” section of this report for more information about agile ways of working


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We are using the quarterly business reviews and digital roadmaps to help us manage our technology investment portfolio in a more strategic and flexible way. During 2022, we aligned 70% of our technology investments to agile teams that deliver incremental and continuous value to our clients. In addition, we also moved from multiple to one single UBS DevCloud toolchain and we are increasingly adopting an industry-standard set of metrics (DORA) to measure the efficiency of our software development process.

We believe the bank of the future will leverage a lean, modern technology estate and Cloud-based applications to provide clients with flexible, best-in-class service. As such, in 2022, we removed approximately 39,000 legacy technology components and decommissioned more than 600 applications, as a step to modernize our technology estate and enhance our cybersecurity position. We also announced the landmark expansion of our partnership with Microsoft, to accelerate our Cloud footprint over the next five years. As of 31 December 2022, 65% of our applications were on the public Cloud (i.e., servers not on UBS’s premises) or on our private Cloud (i.e., servers on UBS’s premises).

Targets, aspirations and capital guidance

We aim to create sustainable value through the cycle, which is reflected by our financial targets. In addition, we have outlined selected commercial aspirations, which support these targets.

Our capital guidance remains unchanged. We intend to operate with a common equity tier 1 (CET1) capital ratio of around 13% and a CET1 leverage ratio of greater than 3.7%. The Investment Bank is expected to represent up to one-third of Group risk-weighted assets and leverage ratio denominator.

Performance against targets, aspirations and capital guidance is taken into account when determining variable compensation.

The table below shows our targets, guidance and aspirations, based on reported results. Our aspirations on environmental, social and governance (ESG) are set forth in “Our focus on sustainability and climate” in the “How we create value for our stakeholders” section of this report.

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Refer to “Society” and “Our focus on sustainability and climate” in the “How we create value for our stakeholders” section and to the “Corporate governance” section of this report for more information about ESG

•

Refer to the “Compensation” section of this report for more information about variable compensation

•

Refer to “Alternative performance measures” in the appendix to this report for definitions of and further information about our performance measures

LOGO


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Our businesses

Delivering one ecosystem

We operate through four business divisions: Global Wealth Management, Personal & Corporate Banking, Asset Management and the Investment Bank. Our global reach and the breadth of our expertise are the major assets setting us apart from our competitors.

We see joint efforts as key to our growth, both within and between business divisions. We combine our strengths to provide our clients with better, innovative solutions and differentiated offerings, for example, our Global Family & Institutional Wealth (GFIW) offering with integrated global coverage. Initiatives such as the Group Franchise Awards encourage employees to look for ways to connect across teams and offer the whole firm to our clients.

How we deliver the whole firm to our clients – examples


Global Family & Institutional Wealth		GFIW is a cross-divisional offering that leverages capabilities from the Investment Bank and client coverage from Global Wealth Management to address the execution, investment, risk management, financing and banking needs of family offices and their corporate entities, as well as entrepreneurs. Drawing on UBS’s client ecosystem, we aim to connect clients with like-minded peers and recognized experts to exchange ideas and bring opportunities to life for a return and impact. Client coverage is managed via regional cross-functional teams (GFIW market pods).

Wealth management platforms		In our major booking centers outside the Americas, we use the Wealth Management Platform, which is shared between Global Wealth Management and Personal & Corporate Banking in Switzerland. In the Americas, we continue to build out our Wealth Management Americas digital capabilities. All our platforms can be navigated intuitively and support strong advisory capabilities across channels, helping our clients to benefit from a broader universe of products and services, simplified onboarding, and a better banking experience.

Separately managed accounts (SMAs)		We offer Global Wealth Management clients access to selected separately managed account strategies in the Americas with no additional management fees, including an extensive range of strategies managed by Asset Management. This enables our advisors to focus on delivering the best ideas, solutions and capabilities to our clients, regardless of where they originate.

Shifts and referrals		To best serve our clients according to their needs, and to foster growth, we operate a holistic collaboration framework within our universal bank delivery model in Switzerland. We initiate client shifts from Personal Banking to Global Wealth Management as their needs become more complex. Examples of referrals include corporate and institutional clients being introduced to Asset Management for mandate solutions or to the Investment Bank for capital market transactions, thus providing access to our global expertise, and entrepreneurs being introduced to Global Wealth Management, ensuring holistic coverage of their corporate and private needs.

Global Lending Unit		The Global Lending Unit delivers lending capabilities to clients of both the Investment Bank and Global Wealth Management. The unit provides product expertise to clients through collaboration with Investment Bank bankers and Global Wealth Management advisors. It is organized with a regional focus by grouping existing regional resources and competencies to best serve respective markets and clients.

Unified Global Markets		We continue to develop the cross-divisional strategic partnership between Global Wealth Management and the Investment Bank, focused on providing differentiated content that helps our clients identify the best trading opportunities, uncover new evidence, and generate fresh insights to meet their investment needs. Through our integrated approach, we provide structured, scalable investment products, asset and liability management solutions, financing alternatives and other value-added bespoke solutions that deliver a quality client experience and outcome by catering to specific coverage needs.


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Global Wealth Management

As a leading and truly global wealth manager,¹ we help our clients pursue what matters most to them. More than 20,000 employees around the world help to manage our clients’ finances from locations in the Americas, Europe, the Middle East and Asia. Clients look to us to provide them with the tailored advice, expertise and solutions that they need, to protect and grow their wealth, today, tomorrow and for generations to come. The size and diversification of our global franchise, our bespoke cross-divisional solutions, and our premium brand and reputation set us apart.

We have strong positions in the largest and the fastest-growing regions – respectively, the US and Asia Pacific – and clearly defined regional priorities: scaling our franchise in the US; capturing growth in Asia Pacific; increasing profitability in EMEA; and increasing market share in Switzerland, our home market. Our focus remains on our core client base of ultra high and high net worth individuals through trusted relationships with our advisors, while expanding our coverage of entrepreneurs, women and the next generation of wealthy individuals. We are also strengthening our capabilities to serve our clients with the most sophisticated needs through our Global Family & Institutional Wealth (GFIW) offering.

As our clients’ needs are changing, we are adapting our capabilities and coverage. We are therefore launching and scaling digitally customizable services, enhancing our personally advised wealth management offering with digital support and expanding our custom offerings for global family and institutional wealth to cater for the different needs of our clients.

Organizational changes

On 3 October 2022, Iqbal Khan became sole President Global Wealth Management. Since joining UBS in 2019, Mr. Khan had served as Co-President Global Wealth Management with Tom Naratil, who stepped down after nearly four decades with UBS.

In April 2022, to better cater to our clients with institutional-like needs that require a more bespoke offering, we created GFIW, a cross-divisional offering that leverages capabilities from the Investment Bank and client coverage from Global Wealth Management.

In August 2022, UBS and Wealthfront mutually agreed to terminate the merger agreement first announced in January 2022, under which Wealthfront was to be acquired by UBS Americas Inc. The two organizations will continue to explore ways to work together, and, as part of that process, UBS purchased a USD 69.7m note convertible into Wealthfront shares.

In the second half of 2022, we completed the sales of our wholly owned subsidiary UBS Swiss Financial Advisers AG, our domestic wealth management business in Spain and our US alternative investments administration business.

How we do business

Our distinctive approach to wealth management is designed to help our clients pursue what matters most to them by offering advice, expertise and solutions and delivering on our client promise to be personalized, relevant, on-time and seamless.

Our Chief Investment Office (the CIO) produces the UBS House View, identifying investment opportunities designed to protect and increase our clients’ wealth over the longer term, directing the investment advice for and management of more than USD 1trn in fee-generating assets globally. Close integration between idea generation and product development enables us to deliver to clients CIO-aligned investment solutions, such as the investment modules in UBS Manage Advanced [My Way]. In Asia Pacific and Switzerland, the Direct Investment Insights function on our online banking platform enables clients to trade directly based on CIO insights via their smartphones and other digital devices.

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Refer to “Clients” in the “How we create value for our stakeholders” section and to “Our focus on technology” in the “Our strategy” section of this report for more information about innovation and digitalization

Regional Chief Investment Officers leverage direct client feedback and insights from Client Analytics to deepen our understanding of clients’ needs. Our product specialists deliver investment solutions, including our flagship investment mandates, as well as innovative long-term themes and sustainable investment offerings.

In addition to our investment products, we offer extensive mortgage, securities-based and structured lending expertise. We provide clients with advice on wealth planning, sustainability and impact investing, and corporate and banking services, while specialist teams also advise on art and collecting, family strategy and governance, philanthropy, next generation, and wealth transition.

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Refer to our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for more information about sustainability matters


Annual Report 2022 \| Our strategy, business model and environment \| Our businesses		19

LOGO

Our private markets business gives clients access to investments in private equity funds, hedge funds and real estate. Furthermore, we have increased our offering of institutional-grade products, such as our Co-Investment STRIPE (strategic investments in private equity) opportunities, a feeder structure to enable clients to invest in closed-ended institutional private market funds. We have made it easier for private clients to access investment products and services suited to their individual preferences, e.g., by expanding access to our Advice SI and separately managed accounts (SMA) solutions in the US, and new targeted sustainability focus and impact offerings. Our Global Wealth Management clients have invested more than USD 20bn in discretionary mandates aligned to our sustainable investing strategic asset allocation. Additionally, we continue to broaden our offering across asset classes and themes, collaborating with external partners, such as Robeco Asset Management, Ambienta, Rockefeller Asset Management, Rethink Impact and Bridge Investment Group, to provide clients with access to differentiated sustainable- and impact-investing opportunities.

We are investing in our operating platforms and tools to better serve our clients’ needs, improve their experience and enhance overall advisor productivity. As of 31 December 2022, more than 80% of invested assets outside the Americas were booked on our Wealth Management Platform. In the US, we are enhancing the Wealth Management Americas workstation for advisors, by delivering new functionalities, as well as driving simplification and improving our banking capabilities.

•

Our digital transformation aims to make us faster and more responsive and our services more convenient for our clients. Our clients benefit from a more seamless service across platforms and devices, and our advisors and the teams that support them are aspiring to deliver best-in-class content and solutions with increasing speed, relevance and personalization. We are developing new service models through which we seek to serve our clients according to their individual needs and preferences, based on scalable digital platforms, and underpinned by our client promise: providing service that is personalized, relevant, on-time and seamless.

For clients with complex financial needs, our GFIW offering addresses the execution, investment, risk management, financing and banking needs of family offices and their corporate entities, as well as entrepreneurs. In our core personally advised service model, we focus on expanding our coverage of entrepreneurs, women and next-generation clients, alternative investments as a differentiated source of returns, and increasing digital convenience for all our clients. We are making continuous improvements to our digital platforms, and have rolled out innovative new solutions, such as Circle One (in 2022), a global ecosystem that connects clients to experts, thought leaders and actionable investment ideas, and UBS My Way (in 2021), a next-generation portfolio management solution that enables clients to tailor their investments to their individual preferences. We have introduced the UBS My Way solution in Germany, Italy and Japan, and plan to also offer it in other markets. We have launched WE.UBS, the first digital-only offering launched by a global wealth manager in China, and we are planning the launch of further regional solutions.


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We closely collaborate across business divisions to deliver UBS’s best capabilities to our clients. Joint efforts with the Investment Bank, Asset Management and selected external partners enable us to offer clients broad access to financing, global capital markets and bespoke portfolio solutions. For example, we launched an SMA initiative in 2020 with Asset Management in the US and continued to expand our SMA offering throughout 2022. The initiative generated USD 21bn in net new money inflows in 2022, bringing total invested assets from this initiative to USD 125bn.

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Refer to “Delivering one ecosystem” in this section for examples of the joint efforts of the business divisions

Our operations and our competitors

We operate a global business tailored to both regional and local clients, combining scale with an ability to provide local offerings to best serve our clients’ needs. We are regularly recognized as a leading wealth manager by independent industry awards on a global, regional and country level.

The US is our largest market, accounting for around half of our invested assets, and we are recognized as the industry-leading firm in terms of overall client satisfaction.² In Asia Pacific, we are by far the largest wealth manager³ and have received numerous independent industry awards for several years in a row,⁴ recognizing our long-term commitment to the region. In our home market of Switzerland, we are the leading wealth manager⁵ and continue to extend our leading market position with above-market growth and investments into digitalizing our core business. In Western Europe, we have a strong footprint, which we further optimized with the sales of our domestic businesses in Spain (in 2022) and Austria (in 2021), and have been recognized as the best bank for wealth management several years in a row.⁶ 1n Latin America, we continue to expand our strategic partnership with Banco do Brasil, helping us remain the best bank for wealth management in the region.⁷ We were able to deliver a strong performance in Central & Eastern Europe, Greece and Israel despite substantial geopolitical challenges in parts of the region, supported by our GFIW offering. In the Middle East and Africa, we are building out our offering with further investment in local offices, such as Dubai and Qatar, emphasizing our commitment to the region and building on our local strength.⁸

Our competitors fall into two categories: competitors with a strong position in the Americas but more limited global footprints, such as Morgan Stanley and JPMorgan Chase; and competitors with similar international footprints but with a smaller presence than UBS in the US, such as Credit Suisse and Julius Baer. We have strong positions in the largest and the fastest-growing regions (respectively, the US and Asia Pacific). The size and diversification of our global franchise, bespoke cross-divisional solutions, and premium brand and reputation set us apart and would be difficult for our competitors to replicate.

LOGO

¹	Statements of market position for Global Wealth Management are based on UBS’s internal estimates and publicly available information about competitors’ invested assets.

²	Highest in client satisfaction with full-service brokerage firms in the J.D. Power 2022 survey.

³	Private banking assets under management excluding China onshore in 2021, according to Asian Private Banker.

⁴	Awards won in two or more consecutive years include the Private Banker International Global Wealth Awards, PWM / The Banker Private Banking Awards, Euromoney Private Banking Awards, Asiamoney Asia Private Banking Awards, WealthBriefingAsia Awards and Asian Private Banker Awards.

⁵	Recognized as “Best Private Bank Switzerland” by Euromoney Private Banking Awards in 2022.

⁶	Recognized as “Western Europe’s Best Bank for Wealth Management” by Euromoney Awards for Excellence in 2020, 2021 and 2022.

⁷	Recognized as “Latin America’s Best Bank for Wealth Management” by Euromoney Awards for Excellence in 2022.

⁸	Recognized as “Middle East’s Best Bank for Wealth Management” by Euromoney Awards for Excellence in 2020, 2021 and 2022.


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Personal & Corporate Banking

As the #1 Swiss universal bank, we provide a comprehensive range of financial products and services to private, corporate and institutional clients. Personal & Corporate Banking is the core of our universal bank in Switzerland. As a market leader across all our business areas, we strive to grow at a rate faster than the Swiss market. We aim to be digital at the core by enabling our clients to satisfy most of their banking needs via our apps, while offering a user experience that is personalized, relevant, on-time and seamless.

How we do business

Our personal banking clients have access to a comprehensive, life-cycle-based offering. This includes a broad range of basic banking products, from payments to deposits, cards and convenient online and mobile banking, as well as lending (predominantly mortgages), investments and retirement planning services. In 2022, we were once again named the “Best Bank in Switzerland” by Euromoney. Our offering is complemented by our UBS KeyClub reward program, which provides clients in Switzerland with exclusive and attractive offers, some of which are offered in collaboration with our external partners. We also work closely with Global Wealth Management to provide our clients with access to leading wealth management services.

Our corporate and institutional clients benefit from our financing and investment solutions, in particular access to equity and debt capital markets, syndicated and structured credit, private placements, leasing, and traditional financing. We offer transaction banking solutions for payment and cash management services, trade and export finance, and global custody solutions for institutional clients.

We work closely with the Investment Bank to offer capital market and foreign exchange products, hedging strategies, and trading capabilities, as well as corporate finance advice. In cooperation with Asset Management, we also provide fund and portfolio management solutions.

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Refer to “Delivering one ecosystem” in this section for examples of the joint efforts of the business divisions

While continuing to focus on the needs of our clients, we need to better connect business and technology and develop new solutions in an agile way through fully empowered teams. The agile transformation is essential for every part of our organization. In 2022, we accelerated Agile@UBS, a unified approach to agile ways of working, which now includes approximately 5,000 colleagues based in Switzerland.

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Refer to “Clients” and “Employees” in the “How we create value for our stakeholders” section and to “Our focus on technology” in the “Our strategy” section of this report for more information about innovation and digitalization

In 2022, we continued to support our clients in the transition to a low-carbon economy. For example, we introduced two new products: UBS Mortgage Energy for our private clients and UBS Loan Energy for income-producing real estate, both providing preferential conditions for energy-efficient buildings. Furthermore, we entered into two partnerships with Swiss start-ups to remove greenhouse gas emissions from the atmosphere.

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Refer to our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for more information about sustainability-related topics

We collaborate with other companies to better satisfy our clients’ diverse needs. For example, in 2022, we further expanded our strategic partnership with Baloise. We both increased our stakes in the digital homeowner platform Houzy, which offers prospective and existing homeowners advice about financing, insurance and other property planning and management matters, and Brixel, which provides our clients real estate sales advice and services.

Our operations and our competitors

We operate primarily in our Swiss home market. With our Personal Banking and Corporate & Institutional Clients business units, we are organized into 10 regions, covering distinct Swiss economic areas. We operate a multi-channel approach, and we are constantly developing our digital and remote channels.

In Personal Banking, our main competitors are Raiffeisen, the cantonal banks, Credit Suisse, PostFinance, and other regional and local Swiss banks; we also face competition from international neobanks and other national digital market participants. Areas of competition are basic banking services, mortgages, and foreign exchange, as well as investment mandates and funds.

In Corporate & Institutional Clients, the cantonal banks, Credit Suisse and globally active foreign banks are our main competitors. We compete in basic banking services, cash management, trade and export finance, asset servicing, investment advice for institutional clients, corporate finance and lending, and cash and securities transactions for banks. We also support the international business activities of our Swiss corporate clients through local hubs in New York, Frankfurt, Singapore and the Hong Kong SAR. No other Swiss bank offers its corporate clients local banking capabilities abroad.


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LOGO

Asset Management

Asset Management is a global, large-scale and diversified asset manager, with USD 1.1trn in invested assets. We offer investment capabilities and styles across all major traditional and alternative asset classes, as well as advisory support to institutions, wholesale intermediaries and our Global Wealth Management clients.

Our strategy is focused on capitalizing on the areas where we have a leading position and differentiated capabilities – including sustainability, alternatives, indexed customization, and key markets in Asia Pacific – in order to drive further profitable growth.

Organizational changes

In April 2022, we completed the sale of our 49% shareholding in our Japanese real estate joint venture, Mitsubishi Corp.-UBS Realty Inc., to KKR & Co.

How we do business

We offer clients a wide range of investment products and services in different asset classes, in the form of segregated, pooled or advisory mandates, as well as registered investment funds in various jurisdictions. Our traditional and alternative capabilities include equities, fixed income, hedge funds (single- and multi-manager), real estate and private markets, and indexed and alternative beta strategies, including exchange-traded funds (ETFs), as well as sustainable- and impact-investing products and solutions.

Our Investment Solutions business draws on the breadth of our capabilities to offer: asset allocation and currency investment strategies across the risk–return spectrum; customized multi-asset solutions; and advisory and fiduciary services.

Sustainable and impact investing remains a key area, as clients increasingly seek solutions that combine their investment goals with sustainability objectives. We are continuing the expansion of our capabilities through: product and service innovation; dedicated research; integrating environmental, social and governance risk factors into our investment processes by leveraging our proprietary analytics; and active corporate engagement.

During 2022, our Real Estate & Private Markets business launched a number of new innovative strategies, including UK Life Sciences and Cold Storage, and again achieved strong results in the latest GRESB Assessments,¹ with 100% of our submitted strategies (representing 96% of Real Estate & Private Markets’ direct pooled real estate and infrastructure strategies) achieving four- or five-star ratings.

We also continue to develop our award-winning2 indexed businesses globally, including ETFs in Europe, Switzerland and Asia. To meet increasing client demand, we have focused on sustainable investing across our product range and provide customized solutions. Aligned with our purpose and strength in building partnerships, in 2022, we launched the UBS Global Equity Climate Transition Fund, in partnership with Aon, and the UBS Life Global Equity Sustainable Transition Fund, in collaboration with the Essex Pension Fund and Hymans Robertson. These funds provide investors with the ability to mitigate climate-related investment risks while also aiming to make a positive social impact aligned with specific United Nations Sustainable Development Goals.


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Stewardship is a fundamental element of our sustainability strategy, and we are firmly committed to engaging with companies to support them on their transition journey. During 2022, we extended our Climate Engagement Program to include more industry sectors and built out our research to further extend the program to include natural capital. We also launched our new Social Engagement Program, with a focus on human and labor rights, diversity, equity and inclusion, and health, to enable us to provide clients with products that meet their criteria in these areas as well.

As a founding member of the Net Zero Asset Managers³ initiative, we are working on the foundational pillars required to deliver on our net-zero interim target, committing to align 20% of total assets under management to achieve a 50% carbon emissions reduction by 2030. In parallel, we are continuing to work with our clients, standard setters and industry bodies to help develop the new methodologies, tools and data needed by investors to mitigate risks and capture opportunities.

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Refer to our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for more information about sustainability matters

To support our growth, we are focused on disciplined execution of our operational excellence initiatives. This includes further automation, simplification, process optimization and offshoring or nearshoring of selected activities, complemented by continued enhancements to our platform and development of our analytics and data capabilities.

We have also continued our joint efforts with the other business divisions, enabling our teams to draw on the best ideas, solutions and capabilities from across the firm in order to deliver high-quality investment performance and experiences for our clients. For example, we launched a separately managed accounts (SMA) initiative in 2020 with Global Wealth Management in the US. We continued to expand our SMA offering throughout 2022, including the launch of new index SMA portfolios offering personalized tax management, and also a sustainable investing overlay enabling clients to select from six major themes, including climate change, pollution and governance. The initiative generated USD 21bn in net new money inflows in 2022, bringing total invested assets from this initiative to USD 125bn.

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Refer to “Delivering one ecosystem” in this section for examples of the joint efforts of the business divisions

Our operations and our competitors

Our business division is organized into five areas: Client Coverage; Investments; Real Estate & Private Markets; Products; and the COO area. We cover the main asset management markets globally, and have a local presence in 23 locations across four regions: the Americas; Asia Pacific; EMEA; and Switzerland. We have nine main hubs: Chicago; the Hong Kong SAR; London; New York; Shanghai; Singapore; Sydney; Tokyo; and Zurich.

Geographically, we are building on our extensive and long-standing presence in the Asia Pacific region, including China, where we continue to invest in our products and presence, both on- and off-shore.

In the rapidly evolving and attractive wholesale segment, we aim to further expand our market share through a combination of measures: a continued increase in the share of clients’ business; expansion of our strategic partnerships with distributors; the building-out of our client service and product shelf offerings; and the launch of new white-labeling and portfolio implementation capabilities.

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Our main competitors are global firms with wide-ranging capabilities and distribution channels, such as AllianceBernstein, Allianz Asset Management, Amundi, BlackRock, Credit Suisse Asset Management, DWS, Franklin Templeton, Invesco, JPMorgan Asset Management, Morgan Stanley Investment Management, Schroders, SSGA Funds Management and T. Rowe Price, as well as firms with a specific market or asset-class focus.


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LOGO

¹	GRESB is an independent organization providing validated ESG performance data and peer benchmarks.

Passive Manager of the Year 2022, Insurance Asset Management Awards; ETF Provider of the Year, European Pensions Awards; UBS MSCI UK IMI SRI ETF, Winner: Ethical / Sustainable – Passive, AJ Bell FIT Awards; ETP Award 2022, Best Provider of Sustainable ETFs; and ranked fifth largest ETF provider in Europe as of December 2022 (source: ETFBook.com).

³	netzeroassetmanagers.org

Investment Bank

The Investment Bank provides services to institutional, corporate and wealth management clients, helping them raise capital, invest and manage risks, while targeting attractive and sustainable risk-adjusted returns for shareholders. Our traditional strengths are in equities, foreign exchange, research, advisory services and capital markets, complemented by a focused rates and credit platform. We use our data-driven research and technology capabilities to help clients adapt to evolving market structures and changes in regulatory, technological, economic and competitive landscapes.

Aiming to deliver market-leading solutions by using our intellectual capital and electronic platforms, we work closely with Global Wealth Management, Personal & Corporate Banking and Asset Management to bring the best of UBS’s capabilities to our clients. We do so with a disciplined approach to balance sheet deployment and costs.

Our priority is providing high-quality execution and seamless client service, through an integrated, solutions-led approach, with disciplined growth in the capital-light advisory and execution businesses, while accelerating our digital transformation. In Global Banking, we position ourselves as trusted advisors via our client coverage and ability to provide access to the wider suite of UBS’s capabilities.

Organizational changes

In January 2022, Global Research and the Strategic Insights teams, formerly part of Evidence Lab Innovations, were integrated into the Investment Bank, as Investment Bank Research. With this new setup, we intend to better align our research coverage with the needs of our clients, while continuing to provide research and analytical services across the firm.

In April 2022, we created Global Family & Institutional Wealth (GFIW), a cross-divisional offering that leverages capabilities from the Investment Bank and client coverage from Global Wealth Management to address the execution, investment, risk management, financing and banking needs of family offices and their corporate entities, as well as entrepreneurs.

How we do business

Our business division consists of two areas: Global Banking and Global Markets, which are supported by Investment Bank Research. Our global coverage model utilizes our international industry expertise and product capabilities to meet clients’ emerging needs.

Our Global Banking business advises clients on strategic business opportunities, such as mergers, acquisitions and related strategic matters, and helps them raise capital, both on public and private markets, to fund their activities.


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Our Global Markets business enables clients to buy, sell and finance securities on capital markets worldwide, and to manage their risks and liquidity. We distribute, trade, finance and clear cash equities and equity-linked products, as well as structuring, originating and distributing new equity and equity-linked issues. From origination and distribution to managing risk and providing liquidity in foreign exchange, rates, credit and precious metals, we help clients to realize their financial goals. We provide flexible, innovative and bespoke access to solutions, from market and insight tools to trading strategies and execution.

Our Investment Bank Research business continues to publish research based on primary data to concentrate on data-driven outcomes and offers clients differentiated content about major financial markets and securities around the globe, with analysts based in 22 countries and with coverage of more than 3,000 stocks in 49 different countries. The Strategic Insights team provides timely and relevant information and insights to help clients quickly make decisions regarding their most important questions.

We seek to develop new products and solutions consistent with our capital-efficient business model, typically related to new technologies or changing market standards.

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The Investment Bank is focused on meeting clients’ needs, including those with respect to environmental, social and governance (ESG) considerations and sustainable finance, helping to reshape business models and investment opportunities and to develop sustainable finance products and solutions.

In Global Markets, we develop products and solutions designed to meet clients’ specific and increasingly detailed ESG objectives, such as thematic portfolio and investment solutions. We have also developed products related to carbon, such as emissions futures, and we joined Carbonplace as a founding member. Carbonplace is a platform that seeks to build infrastructure to scale voluntary carbon markets, with the aim of enabling firms such as UBS to offer clients the ability to buy, sell, hold and retire voluntary carbon credits.

Following the formation of the Global ESG Advisory team within Global Banking in 2021, in 2022, we provided strategic advisory and capital-raising services by specifically recognizing the structural shift in investor preferences toward ESG investment opportunities. To do so, we built our capabilities to assess a firm’s sustainability profile and to link such profiles to ESG investor demand. During 2022, we facilitated USD 48bn of green, social, sustainability and sustainability-linked (GSSS) bonds financing through 77 bond deals for our clients, including corporate clients, financial firms and sovereign issuers. UBS has a market-leading share of the Swiss franc GSSS bond market (Bloomberg, 2022), supporting domestic issuers and bringing international names to the Swiss market.

Our independent ESG research team collaborates with UBS sector analysts and UBS Evidence Lab primary research experts. The ESG research team works to identify touchpoints between markets, society and the environment, and to respond to ESG issues as they move onto investors’ agenda. By December 2022, the ESG team had published more than 90 ESG Sector Radar reports, which assessed the impact of ESG factors at the sector level (up from about 30 in 2021).

In 2022, we launched our ESG Company Radar research reports (more than 30 published by December 2022), which assess the impact of ESG factors at company level, and we have seen a very positive client response to those reports. Other types of ESG content include thematic and cross-sectoral collaborations, ESG Keys (which covers sustainable investing topics), and an increasing number of regional perspectives from our expanded ESG team, which works out of our offices in London, New York, the Hong Kong SAR, Tokyo and Sydney.

As part of our efforts to enhance governance and oversight, the Sustainable Investment Review Group was launched in June 2022 with the responsibility for reviewing ESG products within Global Markets. The Investment Bank Sustainable Finance Guidelines were established in 2022 to set out minimum criteria for ESG products, which are to be applied to new products. In addition, as part of the Group’s net-zero commitments, the Investment Bank has developed emission targets for 2030 for its lending business.

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Refer to the “Environment” section of our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for more information about the Investment Bank’s targets for its lending business

Our digital strategy harnesses technology to provide access to a wide range of sources of global liquidity and differentiated content. The Investment Bank strives to be the digital investment bank of the future, with innovation-led businesses driving efficiencies and solutions. We aim to develop new products and solutions consistent with our capital-efficient business model, which are most often related to new technologies or changing market standards.

In 2021, we announced the creation of a single Digital Platforms business area within the Investment Bank, utilizing digital competencies to benefit all products and maximizing the return on our technology spend in close partnership with our Chief Digital and Information Office. Digital Platforms combines product expertise with deep technical know-how, aiming to reduce the number of systems and increase automation, maximizing client impact, revenue and digital adoption. Digital Platforms was an early adopter of Agile@UBS, an evolution of the historically close collaboration with our Chief Digital and Information Office, creating long-lived teams that learn and continuously improve, which in turn attracts the best talent.


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Our ambition is to have a simplified and modern technology landscape that is secure and stable, where we re-use more of everything and where the platforms work together to drive progress toward our overall strategic imperatives.

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Joint efforts between the Investment Bank and the other business divisions (for example, our work with Global Wealth Management on our new GFIW offering) and, externally, strategic partnerships (for example, UBS BB jointly with Banco do Brasil, focused on Latin America) continue to be key strategic priorities. Partnership with Global Wealth Management and Asset Management enables us to provide clients with broad access to financing, global capital markets and portfolio solutions. We expect these initiatives to continue to lead to growth by delivering global products to each region, leveraging our global connectivity across borders and sharing and strengthening our best client relationships.

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Refer to “Delivering one ecosystem” in this section for examples of the joint efforts of the business divisions

Our operations and our competitors

Our two business areas, Global Banking and Global Markets, are organized globally by product. Our business is regionally diversified, with a presence in more than 30 countries. We cover the main investment banking markets globally, and have major financial hubs across four regions: the Americas; Asia Pacific; EMEA; and Switzerland.

Our global reach gives attractive options for growth. In the Americas, the largest investment banking fee pool globally, we continue to focus on increasing market share in our core Global Banking and Global Markets businesses. In Asia Pacific, opportunities arise mainly from expected market internationalization and growth in China, where we plan to grow by strengthening our presence, both onshore and offshore. In EMEA, we plan to leverage our strong base and brand recognition even further.

Competing firms operate in many of our markets, but our strategy differentiates us, with our focus on leadership in the areas where we have chosen to compete and a business model that leverages talent and technology rather than balance sheet. Our main competitors are the major global investment banks (e.g., Morgan Stanley, Credit Suisse and Goldman Sachs) and corporate investment banks (e.g., Bank of America, Barclays, Citigroup, BNP Paribas, Deutsche Bank and JPMorgan Chase). We also compete with boutique investment banks and fintech firms in certain regions and products.

LOGO


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Group Functions

Group Functions provides services to the Group, focusing on effectiveness, risk mitigation and efficiency. Group Functions also includes the Non-core and Legacy Portfolio unit.

How we are organized

Group Functions

Group Functions is made up of the following major areas: Group Services (which consists of Chief Digital and Information Office, Communications & Branding, Compliance, Finance, Group Sustainability and Impact, Human Resources, Group Legal, Regulatory & Governance, and Risk Control), Group Treasury and Non-core and Legacy Portfolio.

In recent years, we have aligned support functions and business divisions. The vast majority of such functions are fully aligned or shared among the business divisions, where they have full management responsibility. By keeping the activities of the businesses and support functions close, we improve efficiency and create a working environment built on accountability and collaboration.

Certain activities are retained centrally, where not directly related to the businesses, such as: Non-core and Legacy Portfolio; a small residual set of activities in Group Treasury; and certain other costs that are mainly related to deferred tax assets and costs relating to our legal entity transformation program.

Group Treasury

Group Treasury manages balance sheet structural risk (e.g., interest rate, structural foreign exchange and collateral risks) as well as the risks associated with our liquidity, capital and funding portfolios. Group Treasury serves all four business divisions, and its risk management is integrated into the Group risk governance framework.

Non-core and Legacy Portfolio

Non-core and Legacy Portfolio consists of residual trades from businesses exited by the Investment Bank, mainly in 2012. Positions are typically left to run to contractual maturity, although trades are terminated early where such action is economically prudent, and the portfolio continues to be actively hedged. The portfolio also includes positions relating to legal matters arising from businesses transferred to it at the time of its formation.

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Refer to “Note 17 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report for more information about litigation, regulatory and similar matters

Our environment

Market climate

Global economic developments in 2022¹

2022 was a challenging year for the global economy and most markets. After rebounding in 2021 from the COVID-19 pandemic, economic momentum slowed in 2022. The Russia–Ukraine war contributed to higher commodity prices, adding to rising inflation, which reached multi-decade highs in most major economies. This led to the fastest pace of monetary tightening by many leading central banks since the 1980s.

Against this backdrop, global GDP growth decelerated to 3.3% in 2022, from 6.5% in 2021, with headwinds continuing to mount in 2023. US GDP growth slowed to 2.1% in 2022, from 5.9% in 2021, as the Federal Reserve raised interest rates. Reduced energy supplies from Russia and tighter monetary policy from the European Central Bank added to headwinds for the Eurozone economy, where growth was down to 3.5% in 2022, from 5.3% in 2021. Weakness in the Eurozone contributed to a slowdown in Switzerland. Swiss GDP growth was down to 2.0% in 2022, from 4.2% in 2021. UK GDP grew by 4.0% in 2022, down from 7.6% in 2021, with momentum undermined by higher inflation, interest rate increases by the Bank of England (the BoE) and weaker global demand.

China’s economy grew by 3.0% in 2022, down from 8.4% in 2021, reflecting an economic drag from the government’s zero-COVID policy, along with a downturn in the nation’s real estate sector. Other leading Asian economies slowed less markedly, with GDP growth in India of 7.0% in 2022, down from 8.7% in 2021. South Korea’s GDP grew by 2.6% in 2022, down from 4.1% in 2021.


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Inflation remained elevated in 2022. Exceptionally strong demand for goods emerged as economies reopened, overwhelming supply, and creating inflation. Just as this pressure faded, the Russia–Ukraine war led to a rise in energy and food prices, further boosting inflation. High inflation affected many major economies, averaging 8.5% globally in 2022. US inflation reached a high in June 2022 of 9.1% year on year, having risen at the fastest pace since 1982. However, inflation remained relatively muted in China, at 3%, and Japan, at 1.1%, with neither country experiencing an exceptional post-pandemic surge in demand. Inflation in Switzerland was also more muted, at 2% for 2022, due to a less-pronounced profit margin expansion than elsewhere.

Equity and bond markets fell in tandem in 2022, impacted by the combination of high inflation, monetary tightening and slowing growth. In 2022, the MSCI USA index fell by 19.8% and the MSCI Eurozone, the MSCI Switzerland and the MSCI China indices fell by 12.5%, by 17.1% and by 20.7% respectively (in local currency terms). However, more defensive markets outperformed, such as the MSCI UK index, which increased by 7.1%. Globally, value stocks proved more resilient, with the MSCI World Value index down 6.5%, compared with a 29.2% decrease in the MSCI World Growth index.

Bond markets also experienced negative returns, amid headwinds from higher inflation and central bank tightening. The Bloomberg Global Aggregate Bond index decreased by 16.2% in 2022. The yield on 10-year US Treasuries ended the year at 3.9%, up from 1.5% at the end of 2021. The yield on the 10-year Swiss government bonds increased from –0.2% at the start of 2022 to 1.6% by year-end, and the yield on 10-year German Bunds increased to 2.6%, up from –0.2% at the end of 2021.

Economic and market outlook for 2023

We expect 2023 to be a year of inflections, as investors try to identify turning points for inflation, interest rates, economic growth and financial markets against a complex geopolitical backdrop.

We expect inflation to be lower at the end of 2023 than it was at the end of 2022, as tighter monetary policy slows demand and squeezes profit margins. In addition, a repeat of the 2022 commodity price surge is, in our view, unlikely. Although future economic data will be key, and recent data suggests the decline in inflation has been slower than forecast in some economies, we expect the Federal Reserve, the European Central Bank, the Swiss National Bank, and the BoE to conduct the final interest rate increases of this cycle in 2023.

We expect the impact of higher interest rates to weigh on economic growth and earnings. Economic growth should hit bottom later in the year, if, as we expect, financial conditions start to ease. For 2023 as a whole, we expect the US economy to grow by 0.8%, with the Eurozone expanding 0.8% and Switzerland 0.4%. We forecast a contraction of 0.4% in UK GDP, with inflation still high, given the prospect of tighter fiscal and monetary policy. The relaxation of China’s COVID-19 restrictions means a rebound of the Chinese economy is likely over the course of 2023. We expect China’s GDP to expand 4.9% in 2023.

Geopolitical events look likely to remain a concern for investors. The Russia–Ukraine war poses energy and security threats to Europe and fosters the risk of a broader war. US–China tensions are unlikely to recede, given Beijing’s focus on self-sufficiency, the Biden administration’s moves to restrict trade on security grounds, and the potential for further discord over Taiwan. In addition, we are cognizant of an elevated risk of political tensions within and across countries, as well as their impact on society and financial markets.

¹	Comparative figures as of 28 February 2023.

Industry trends

Although our industry has been heavily affected by various regulatory developments over the past decade, technological transformation and changing client expectations are further emerging as key drivers of change today, increasingly affecting the competitive landscape, as well as our products, service models and operations. In parallel, our industry continues to be materially driven by changes in financial markets and macroeconomic and geopolitical conditions.

Digitalization

While the technological maturity of the financial services sector increased greatly throughout the COVID-19 pandemic, digitalization in our industry is still developing at a rapid pace. The world is faster, more digital and more data-driven than ever before, with clients increasingly demanding even more seamless, personalized digital products and services tailored to their needs. Following the COVID-19 pandemic, regional and demographic differences in the acceptance and use of digital technologies are narrowing, thus continuing a high rate of digital adoption across all client segments. As a result, we see a gradual shift from digitalizing and automating existing processes to digital-as-default solutions, while still allowing for human interaction, a component that continues to be an important competitive advantage.


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Digital communication, with clients and employees alike, has established new remote ways of working, enabling financial services providers to attract an even wider array of talent than before. The digitalization of the financial services sector has led to a structural shift in the workforce: more and better engineers are required to keep banks at the forefront of technology, thus putting them into direct competition with technology companies beyond the borders of the financial sector.

Continuous investment in technology is driving automation and simplification of labor-intensive processes, improving banks’ operational efficiency and freeing up resources to focus on client needs. Decision-making is becoming increasingly data-driven, with advanced analytics and artificial intelligence (AI) enabling banks to address client needs in an even more targeted manner. In a consistently connected, open, and location-independent financial services ecosystem, the focus lies on adopting open-source technology, including cloud-native and modular architecture, to drive innovation and open exchange.

An open-finance environment combined with a shift in business models from in-person to digital channels bears the risk of increased digital vulnerability. Clients and other stakeholders are demanding ethical and responsible data gathering, storage and usage, making the protection of the firm’s data a continued priority and focus. We also place great importance on managing the risk of cyberattacks.

Decentralized finance applications, including digital cash solutions, are gradually being adopted by the banking industry. Nascent technologies, such as distributed ledger technology, are expected to mature over the coming years and may reshape our industry. They provide opportunities to overcome friction within the existing financial system, increase banking efficiency, broaden access to underserved communities and make previously unviable products or services available to the financial services sector. They also further enable early-stage concepts, such as Web 3.0 and the metaverse, which could lead to an enhanced digital user experience.

Sustainability

The evolution of corporate business models, the growth in investors factoring the transition to a low-carbon economy and other sustainability themes into investment risk-and-return expectations, the ongoing shifts in societal values, and greater regulation are all increasing client demand for sustainable investing strategies.

In 2022, due to the challenging environment for investments, global open-ended fund and exchange-traded fund (ETF) total net assets decreased by 19%.¹ Despite this downturn, the industry overall saw continued inflows into sustainable investing products, while funds and ETFs that were not specifically categorized as sustainable faced outflows throughout most of 2022.¹

Our view is that the long-term growth trajectory for sustainable funds and ETFs plays to UBS’s strengths, as we have been at the forefront of sustainable finance for over two decades, making us well placed to build on our offering and continue to develop the innovative products and solutions our institutional and private clients need.

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Refer to our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for more information about sustainability matters

Client expectations

As technology progresses, clients more rapidly redefine the way they live, work and interact with others. This is reshaping clients’ expectations toward financial services firms, as their reference points are increasingly influenced by experiences with companies outside our sector, where technology-supported and data-driven solutions are progressively enabling a more personalized, relevant, on-time and seamless client experience. These services often focus on convenience, flexibility and personalization, and drive toward holistically addressing clients’ needs and facilitating community building. Therefore, our franchise needs to evolve, as clients measure us against new standards. While the global pandemic further sharpened our industry’s focus on digital-led solutions, recent geopolitical, macroeconomic and societal shifts have highlighted values such as security, stability and a credible plan toward a sustainable future. Additionally, many clients not only expect net-zero commitments from their financial services provider of choice, but they are also increasingly demanding investment, financing and advisory products and services that fit their own sustainability preferences and ambitions.

Consolidation

Many regions and businesses in the financial services sector are still highly fragmented. We expect further consolidation, with the key drivers being ongoing margin pressure, a push for cost efficiencies and increasing scale advantages resulting from fixed technology costs and regulatory requirements. Many players in financial services continue to seek increasing exposure and access to regions with attractive growth profiles, such as Asia and other emerging markets, through local acquisitions or partnerships, as well as acquiring new capabilities addressing changes in market dynamics and overall client demands. The increased focus on core capabilities and geographical footprint, as well as the ongoing simplification of business models to reduce operational and compliance risks, is likely to drive further disposals of non-core businesses and assets. While banks already face increasing challenges from digitalization needs and intensified competition, tightening macroeconomic conditions across major economies may create further pressure if a recessionary environment cannot be avoided.


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New competitors

Our competitive environment is evolving. In addition to traditional competitors in the asset-gathering businesses, new entrants are targeting selected parts of the value chain. However, we have not yet seen a fundamental unbundling of the value chain and client relationships, which might ultimately result in the further disintermediation of banks by new competitors. Over the long term, we believe large platform companies entering the financial services sector could pose a larger competitive threat, given their strong client franchises and access to client data, if they decide to broaden the scope of their services. While fintech firms have gained greater momentum during the COVID-19 pandemic, recent macroeconomic developments have slowed down the trend, as funding appetite and valuations have trended downward. Although we expect our industry to recover in the near term, we do not expect a material disruption of our asset-gathering businesses. The trend for forging partnerships between new entrants and incumbent banks is continuing, as technology and innovation help banks overcome new challenges.

Regulation

In 2022, regulators further progressed in their policy developments with a focus on regulations around digital innovation and sustainable finance along with finalizing and implementing the remaining Basel III requirements.

Regulators increased their focus on AI, data and, particularly, digital assets, as a result of market turbulence. In the area of digital assets, the attention by regulators was on stablecoins, crypto assets and the prudential treatment of banks’ exposures to digital assets, with recent efforts by supranational standard setters aiming to coordinate relevant national regulations. Central banks also continued to work on central bank digital currencies, which aim to provide new digital payment instruments that would be a direct liability of the central bank.

Sustainable finance and climate-related risks continued to be a key focus of policymakers in 2022, where we noted significant activity, particularly in the areas of disclosures regarding the impact of climate-related risks and corporate sustainability actions, classification or taxonomies of sustainability-related efforts and activities, and risk management of climate-related financial risks. The multitude of developments at the jurisdictional level has the potential to create a fragmented policy landscape. These developments add to the rapidly evolving societal expectations toward financial institutions.

The national implementation of the remaining Basel III elements continues to be another important focus area. The authorities in Switzerland and the UK launched consultations on their approaches in 2022 and Switzerland changed the expected date on which the final Basel III guidelines are to enter into force, from 1 July 2024 to 1 January 2025. The EU authorities continued with the parliamentary debates. We expect the US authorities also to start their consultation process in the first half of 2023. Although the timing of the implementation seems broadly aligned across Switzerland, the EU and the UK at this stage, we still see a significant risk of divergence regarding the content of the provisions.

In addition, regulatory authorities continued to refine existing regulations, including the finalization of the Swiss too-big-to-fail framework and revision of the EU anti-money laundering framework, as well as efforts to enhance operational resilience. Following Brexit, the UK started a holistic review of its regulatory framework for financial services, while both the EU and the UK are updating their wholesale markets and investor protection rules. Furthermore, the focus of regulatory authorities is also increasingly moving toward corporate responsibility, diversity and inclusion. Finally, digitalization and shifts in the macroeconomic and interest rate environment increased the focus on operational resilience and financial stability risks, including the assessment of existing policy gaps relating to the non-bank financial intermediation sector.

Many of these developments are taking place in an environment characterized by significant political uncertainties, including increasing geopolitical tensions and the Russia–Ukraine war which resulted in the adoption of unprecedented sanctions packages introduced by various jurisdictions against Russia and Belarus. This led to significant implementation efforts that were closely coordinated between authorities to ensure consistency in interpretation and implementation. Political uncertainties and geopolitical tensions are posing additional challenges to the provision of cross-border financial services.

We believe the continued adaptations made to our business model and our proactive management of regulatory change put us in a strong position to absorb upcoming changes to the regulatory environment.

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Refer to the “Regulatory and legal developments” and “Capital, liquidity and funding, and balance sheet” sections of this report for more information

Wealth creation²

2022 began with the global high net worth individual population and financial wealth both at record highs, with surging financial markets and recovering economies enabling the global high net worth individual population and financial wealth to increase 7.8% and 8.0%, respectively, in 2021.

Since then, falling equity and bond markets, slowing economic growth, and US dollar strength, mean that global wealth growth in 2022 was likely substantially lower, or negative, although we continue to see the longer-term outlook for wealth creation and financial asset appreciation as positive.


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As of the end of 2021, 46% of global financial wealth was concentrated in North America, followed by Asia (26%) and Europe (21%).³

By segment, approximately one-third of global high net worth individual wealth is held by individuals with wealth in excess of USD 30m, 23% by individuals with wealth ranging from USD 5m to USD 30m and the remaining 43% is within the wealth segment between USD 1m and USD 5m.

Wealth is being created at a faster rate for certain key client groups, including female clients and entrepreneurs. We also see significant wealth transition to the next generation over the coming decade.

Wealth transfer

Demographic and socioeconomic developments continue to generate shifts in wealth. Over the next few decades, more than USD 30trn of wealth will be passed between generations. The majority will move from the silent generation and older baby boomers to younger baby boomers and Gen X (jointly encompassing individuals currently between the ages of 42 and 65).²

As a group, these “next gens” are likely to have a longer investment horizon, a greater appetite for risk, often combined with a desire to use wealth to create a positive societal impact alongside investment returns. Meanwhile, as shown in the Wealth-X report “World Ultra Wealth Report 2022,” the proportion of ultra-wealthy⁴ women is gradually rising, reflecting changing cultural attitudes and growth in female entrepreneurship, as well as wealth transfers between generations.

We are responding to the evolving wealth landscape with a framework that addresses all aspects of our clients’ financial lives, called UBS Wealth Way. It begins with discovery questions and a conversation with clients about what is most important to them. We help clients organize their financial life along three key strategies: Liquidity to help provide cash flow for short-term expenses; Longevity for long-term needs; and Legacy for needs that go beyond their own and help improve the lives of others, a key part of wealth transfer planning.

Investing in an inflationary world

As a result of the major macroeconomic shocks in 2022, investors are facing a very different landscape to the one seen over the past decade, with significant market volatility, higher interest rates and inflation levels not seen for a generation. This environment has created opportunities in the bond market, and investors are once again being rewarded for taking risks in fixed income. Investors also continue to diversify into illiquid alternatives (including private equity, property, hedge funds and infrastructure) that can deliver compelling longer-term risk-adjusted returns, while also looking for low-cost, efficient passive strategies across liquid markets. The breadth of our investment expertise and capabilities enables us to find the right solutions for clients across asset classes and regions.

Morningstar Direct, as of or for the year ended 31 December 2022. Encompasses worldwide open-ended funds and exchange-traded funds, excluding money market funds. Sustainable funds are identified on the basis of Morningstar’s Sustainable-Investment framework. ^© Morningstar 2023. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and / or its content providers; (2) may not be copied, adapted or distributed; (3) is not warranted to be accurate, complete or timely; and (4) does not constitute advice of any kind, whether investment, tax, legal or otherwise. User is solely responsible for ensuring that it complies with all laws, regulations and restrictions applicable to it. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information, except where such damages or losses cannot be limited or excluded by law in your jurisdiction. Past performance is no guarantee of future results.

All the figures are from the Capgemini World Wealth Report 2022 unless otherwise stated and refer to the 2021 financial year. The Capgemini World Wealth Report 2022 segments wealth as follows: those with wealth of greater than USD 30m are classified as ultra high net worth individuals; USD 1m to USD 30m for high net worth individuals.

³	Based on BCG Global Wealth Report 2022, which refers to the 2021 financial year. Wealth concentration is based on financial assets by regions and excludes real assets and liabilities.

⁴	World Ultra Wealth Report 2022, Altrata. The report defines those with wealth of greater than USD 30m as ultra high net worth individuals (also referred to as the “ultra wealthy”).


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How we create value for our stakeholders


Stakeholder group	Stakeholder needs: what our stakeholders expect from us	Value proposition: how we create value for our stakeholders	Key topics discussed: what was important to our stakeholders in 2022	Stakeholder engagement: how we engage with our stakeholders
Clients	Advice on a broad range of products and services from trusted advisors, addressing increasingly complex needs A mix of personal interaction with our advisors in combination with digital and remote services (convenient, seamless digital banking) High-quality solutions and the highest standards in terms of asset safety, data and information security, confidentiality, and privacy A combination of global reach and local capabilities targeting positive investment outcomes Competitively priced products and services, risk management, and the provision of liquidity	Delivering tailored advice and customized solutions, using our intellectual capital and digital platforms Developing new products, solutions and strategic partnerships in response to clients’ evolving needs Providing access to global capital markets and bespoke financing solutions Meeting increasing sustainable investment and private markets demand from clients Implementing cross-divisional offering with fully aligned front-to-back setup	Investing in times of uncertainty: high inflation, market volatility, rising interest rates, slowing economic growth and increasing geopolitical tensions Holistic goal-based financial planning Sustainable finance and investing opportunities Data privacy and security Products and services, including those around digital banking	Personalized meetings A blend of virtual and in-person client events and conferences, including information about key developments and opportunities Client satisfaction surveys Increasing levels of digital interaction with clients Monitor client feedback and complaint handling

Investors	Disciplined execution of our strategy leading to attractive capital returns through dividends and share repurchases Comprehensive and clear disclosures on quantitative and qualitative data necessary to make informed investment decisions Recognizing and proactively addressing strategic opportunities and challenges	Executing our strategy with discipline and agility as the external environment evolves, while aiming to deliver cost- and capital-efficient growth Providing relevant, transparent, timely and reliable public disclosures	Strategic plans and targets, and execution against them Structural growth in and return potential of our businesses Cost efficiency and ability to generate positive operating leverage Ability to protect or grow profits in a higher-inflation and rising-interest-rate environment Incorporation of environmental, social and governance (ESG) factors into the business model, compensation and risk management	Financial reports, investor and analyst conference calls, and webcasts, as well as media updates about our performance or other disclosures General meetings of shareholders Investor and analyst meetings Digital interactions with investors as a result of COVID-19 pandemic restrictions and hybrid-working patterns in the industry, with limited impact on pre-pandemic meeting schedules and participation, given reliable virtual solutions; the 2022 Annual General Meeting was held virtually

Employees	A world-class employer with the expertise and breadth of opportunity to empower successful careers A collaborative, engaging, inclusive and supportive workplace culture An environment that provides a sense of belonging and opportunities to positively impact colleagues, clients, shareholders and society Engaging work and career growth opportunities, including future-capabilities development, and rewards for performance and impact	Hiring talented, diverse employees and investing in development, now and for the future Fair, effective people management and compensation policies and practices Further strengthening our workplace culture to live up to our purpose, and providing a framework for employees to develop their careers Hybrid- and flexible-working arrangements, along with holistic support to empower employees and foster resilience Comprehensive data analytics that enable leaders to make better and faster decisions to meet business needs	Living up to our purpose and culture, enabled by our three keys to success Fair and equitable pay practices Focusing on impact and outcome in our performance management processes Hybrid-, flexible- and home-working arrangements Building a diverse, equitable and inclusive workplace Fostering internal mobility and providing long-term career prospects Accelerating new ways of working, particularly through Agile@UBS	Regular CEO and senior leadership communications and events, along with divisional, regional and functional sessions with employees Group-wide targeted surveys and other employee engagement activities Group Franchise Awards and the Kudos peer-to-peer recognition program Health and well-being events and offerings, employee networks and volunteering opportunities, and hybrid- and flexible-working arrangements

Society	Facilitation of economic development that is sustainable for the planet and humankind Maximization of our positive effects and minimization of any negative effects on society and the environment Proactive management of the environmental and societal impacts of our businesses	Promoting significant and lasting improvements to the well-being of communities in which we operate Taking an active role in the transition of our economy toward environmentally and socially sustainable solutions Advising clients to align their business models with ESG parameters and the United Nations Sustainable Development Goals	Sustainable finance Our climate strategy Our client and corporate philanthropy efforts Furthering the economic and social inclusion of those we support	Grant making and volunteering through strategic community partners Participation in forums and round tables, as well as industry-, sector-and topic-specific debates Dialogues with regulators and governments; interaction with NGOs Launch of our Ukraine and Pakistan Relief Funds Support for COVID-19-related aid projects across our communities


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Clients

Our clients are the heart of our business. We are committed to building and sustaining long-term relationships based on mutual respect, trust and integrity. Understanding our clients’ needs and expectations enables us to best serve their interests and to create value for them, underpinned by our client promise that we aim to differentiate our service by delivering a client experience that is personalized, relevant, on-time and seamless.

Our clients and what matters most to them

There is no typical UBS client, but each of our clients expects outstanding advice and service, a range of choices, and an excellent client experience.

Global Wealth Management focuses on serving the unique and sophisticated needs of wealthy families and individuals. We give them access to outstanding advice, global service and investment opportunities, delivered by experts they can trust and based on the expertise and insights of our Chief Investment Office (the CIO). Using a holistic, goals-based approach to financial planning, we deliver a personalized wealth management experience, working closely with clients to help them realize their ambitions, and we make our wealth coverage more client-centric, digital and effective. Our client-facing advisors and the global teams supporting them focus on developing long-term client relationships, which often span generations. Clients look to us for expertise in helping them to grow, protect and transfer their wealth, as well as helping them make some of the most important decisions in their lives. From significant liquidity events to professional milestones and personal turning points, we aim to give clients the confidence to move forward and achieve their goals. Through extensive research into clients’ preferences and goals, and broader analysis of investor sentiment globally, we constantly evolve our offerings to meet the shifting priorities of today’s wealthy clients. This includes investing in digital capabilities and developing products to help clients fund their lifestyles and manage their cash flow, as well as offering guidance on how they can create a lasting and positive impact for their communities and the causes they care about most. We are the leading global wealth manager for clients interested in sustainable investing,¹ with a commitment to developing solutions that enable them to align their financial goals with their personal values.

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Refer to “Global Wealth Management” in the “Our businesses” section of this report for more information about sustainable investment offerings

Personal & Corporate Banking serves a total of approximately 2.6 million retail clients² and more than 100,000 corporate clients,³ companies ranging from start-ups to multi-nationals, including specialized entities, such as pension funds and insurers, real estate companies, commodity traders and banks. Our clients include more than 30% of Swiss households, more than 90% of the 250 largest Swiss corporations and more than 50% of midsize to large pension funds in Switzerland. They look for financial advice based on their needs at each stage of their individual or corporate journey. We aim to deliver outstanding advice to all via a multi-channel approach. Clients have access to digital banking, a wide network of branches and remote advice. These channels are designed to deliver a quality and convenient client experience with 24/7 availability, security and value for money, resulting in high levels of client satisfaction. Clients are also offered a broad range of products and services in all relevant areas: basic banking, investing, financing (including mortgages), retirement planning, cash management, trade and export finance, global custody, and company succession, among others.

In Asset Management, we manage relationships with institutional clients (including sovereign institutions, central banks, pension funds and insurers), wholesale intermediaries and Global Wealth Management and its clients. By building long-term, personalized relationships with our clients and partners, underpinned by disciplined execution, we aim to achieve a deep understanding of their needs and to earn their trust. We combine our global scale with the independent thinking of our distinct investment teams to utilize innovative ideas, drawing on the breadth and depth of our investment capabilities, across traditional and alternative, active and indexed, to deliver the solutions that clients need.

The Investment Bank provides corporate, institutional and wealth management clients with expert advice, financial solutions, deal execution and access to the world’s capital markets. Our business model is specifically built around our clients and their needs. Corporate clients can access advisory services, debt and equity capital market solutions, and bespoke financing through our Global Banking business. Our Global Markets business focuses on helping institutional clients engage with local markets around the world, offering equities and equity-linked products, and foreign exchange, rates and credit products and services. Our differentiated content offering is underpinned by Investment Bank Research. The differentiated nature of our research provides access to insight-ready data sets for thousands of companies, and aims to give clients an informational edge. In 2022, our experts produced more than 40,000 research reports, attracting seven million reads.


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We know the security and confidentiality of our clients’ data is of utmost importance to them, as it is for UBS. That is why we put the highest priority on having comprehensive measures in place that are seeking to ensure client data confidentiality and integrity are maintained. We continually assess and improve our control environment to mitigate emerging cyber threats and meet expanding legal and regulatory expectations. Investments in our digital platforms preserve and improve our security standards, with a focus on giving clients secure access to their data via our digital channels and protecting that data from unauthorized access. Although the level of sophistication and the impact and volume of cyberattacks continue to grow worldwide, we are ever vigilant, maintaining a strong and agile cybersecurity and information security program to mitigate and manage cyber risk by providing robust, consistent, secure and resilient business processes.

Enhancing the client experience through innovation and digitalization

We streamline and simplify interactions with clients through front-to-back digitalization and innovation.

In Global Wealth Management, we develop and deploy digital tools that help deepen and enhance the relationships we have built with our clients, a factor that differentiates UBS. Clients expect the convenience and speed that technology offers but, at the same time, they feel that a personal experience with advisors is more important than ever. Our advisors use digital tools to spend more time with clients and better evaluate the full scope of their financial lives. Our clients appreciate digital tools that improve their experience. They also want multiple ways in which to interact conveniently with their advisors. Clients increasingly embrace the use of digital and mobile tools. We continue to introduce new and better tools to meet and exceed clients’ expectations. For example, our UBS Manage Advanced [My Way] solution offers clients in selected markets access to more than 60 professionally managed investment modules. Clients can personalize beyond what they can normally do in a discretionary solution while continuing to reap the benefits of continuous portfolio monitoring and risk management. The app is interactive; clients can work with their advisors to design their own portfolio based on individual preferences and priorities, easily including elements such as sustainable investing modules or themes. We intend to further extend access and upgrade client convenience and experience with UBS Manage Advanced [My Way]. In 2022, UBS Circle One was launched in Asia Pacific. This digital platform aims to bring to clients the best of UBS’s global ecosystem for investing, connecting them with experts, thought leaders and actionable ideas delivered by the CIO in an engaging and convenient way. As a trusted brand offering premium content, we see opportunities to deliver our expertise to a broader set of clients, combining digital experience with human advice. Progress continues on our multi-year strategy to serve clients via two platforms: the Wealth Management Americas Platform in the US and the Wealth Management Platform outside the US.

In Personal & Corporate Banking, we further strengthened our leadership position as the leading digital bank in Switzerland by continuing to develop simple, smart, secure and sustainable solutions for our clients. In 2022, an average of 74% of Personal Banking clients used Digital Banking, and an average of 56% logged in via Mobile Banking. This demonstrates that our clients are engaging more frequently with us through our online and mobile capabilities. Our continued growth in digital enrollment and engagement led us to take the next evolutionary step, the introduction of a dedicated digital assortment line: UBS key4. Within six months of its launch in May 2022, we introduced a comprehensive digital product shelf. UBS key4 banking offers new Personal Banking clients 24/7 mobile account opening via secure, biometric self-identification and instant credit card availability, with attractive exchange rates. With UBS key4 smart investing, UBS key4 gold, UBS key4 pension 3a and UBS key4 FX, our Swiss clients benefit from new seamless digital-only investing, pension and payment solutions. We have also delivered products and personalized care for our corporate clients, whose digital adoption has accelerated further in recent years, with an average of 80% of such clients using Digital Banking in 2022. With UBS key4 business, small and medium-sized enterprises that are in the process of being formed can open their accounts more quickly and entirely paperlessly, and access comprehensive solutions beyond banking via our UBS key4 business marketplace. Complementing our dedicated digital offering, we also continued to further build out our hybrid touchpoints with clients, such as Remote Sales & Advice for private clients and our Corporate Hybrid Bank. In addition, to give clients access to market-leading solutions beyond banking, we have expanded our network of partnerships, such as our targeted long-term collaboration with Baloise, investing in homeowner platforms, such as Houzy and Brixel. Furthermore, we entered into a strategic partnership with ETH Zurich, a Swiss Federal Institute of Technology, to promote innovation and entrepreneurship in Switzerland. We have also continuously developed our sustainability offerings, such as UBS Mortgage Energy, which helps clients with the transition to more sustainable heating, and UBS Loan Energy, thanks to which clients benefit from attractive interest rates and comprehensive advice for their low-energy investment properties.

In Asset Management, we are accelerating our investment in digitalization. We have extended our digital client relationship management pilot tools, technologies and data capabilities to enhance the experience of, and service for, our clients, to foster innovation and to support alpha generation. For example, we are developing a scalable platform to enable more efficient development and management of theme-based investment products to meet growing client demand. To simplify and enhance our client service, we are introducing improvements in client and data analytics.


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The Investment Bank strives to be the digital investment bank of the future, with innovation-led businesses driving efficiencies and solutions. In 2021, we announced the creation of a Digital Platforms business area within the Investment Bank, to work on transformation through innovation, experimentation and external partnerships. In Global Markets, our Technology-Enhanced Sales (TES) teams work in close partnership with our Data Intelligence, Chief Digital and Information Office and Client Coverage teams to embed our data and technology capabilities across all client teams and enhance our client service. TES enables clients to choose where and how we deliver content and uses data modeling to personalize the content they receive. UBS Neo, our award-winning multi-channel platform and enterprise ecosystem for digital clients, lets our professional and institutional clients access a comprehensive suite of products and services covering the full investment life cycle. Investment Bank DigiOps, our Operations team working in collaboration with the Chief Digital and Information Office on digital innovation projects, is enhancing the client experience through a digital platform that continues to make progress on simplifying Operations’ technology infrastructure, increasing front-to-back efficiency and enhancing our decision-making and relevance to clients. By utilizing distributed ledger technology, Global Markets is transforming the business models of products where the Investment Bank has been strong historically. One example is UBS key4 gold, our global physical gold transaction network of retail investors, gold merchants, institutional investors and vault providers that enables clients to buy and sell at interbank prices, which saw growth in 2022. A tokenized representation of underlying physical gold provides fractional ownership with low-friction transactional capability. Our vision is to accelerate the tokenization of financial products traded by UBS clients. In November 2022, we launched and issued the world’s first digital bond that is publicly traded and settled on both blockchain-based and traditional exchanges. Global Banking has also prioritized the client experience. Global Banking Strategic Development Lab uses data science, predictive analytics and quantitative models to develop solutions for our businesses. UBS-GUARD applies data science and predictive analytics to Global Banking business users, predicting the risk of companies becoming the targets of activists, identifying deal opportunities and helping navigate client pitches.

Engaging with our clients

Our clients’ needs and their preferred communication channels continually evolve. Our objective is to engage with clients in the ways most convenient for them. We use a variety of channels to engage with clients, including regular client relationship and service meetings, as well as various corporate roadshows and dedicated events. In the post-COVID “new normal,” we observe an increase in client interaction across all channels, and have changed to a mix of hybrid and in-person events.

Global Wealth Management interacted with clients via various settings in 2022, from personalized private briefings with subject matter experts to segment-specific virtual and in-person events and large-scale initiatives. We utilize marketing campaigns, events, advertising, publications and digital-only solutions to help drive greater awareness of UBS among prospective clients and reinforce trust-based relationships between advisors and clients.

Personal & Corporate Banking holds regular client events (leveraging a number of formats such as webcasts and in-person, virtual or hybrid events), covering a wide range of topics. In 2022, we increasingly engaged with clients via online channels, such as social media, online displays and search engines, and further decreased our use of traditional channels.

In Asset Management, we have a consistent program of client events and engagement activities throughout the year. These include our flagship conferences, such as the annual UBS Reserve Management Seminar, and we held our second annual Alternatives Conference in 2022. Alongside this, our teams continued the high level of interaction with clients globally in 2022, facilitated by new digital tools, and our publication of macro insights and thought leadership to provide timely insights into rapidly evolving markets. We also hosted a broad range of hybrid events, including our investment series, to help our clients better understand market challenges and opportunities, and we continued to engage with clients through our social media and online channels.

The Investment Bank hosted more than 175 investor conferences and educational seminars globally in 2022, covering a broad range of macro, sector, regional and regulatory topics. Almost all of those conferences were held virtually. More than 40,000 clients took part in such events in 2022, providing insight and access to our own opinion leaders, policy makers and leading industry experts. We leverage our intellectual capital and relationships and use our execution capabilities, differentiated research content, bespoke solutions, client franchise model and global platform to expand coverage across a broad set of clients. UBS Neo Question Bank is the largest global database of market-related questions asked by professional investors, while UBS Live Desk, built within the UBS Neo platform, provides clients with a stream of fast-paced commentary from UBS traders. Our clients’ needs and their preferred communication channels have continued to evolve. Our objective is to engage with clients in the manner most convenient for them. Following the pandemic, we have observed an increase in client interaction through all channels, both digital and in-person.


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How we measure client satisfaction

We use multiple techniques to regularly assess our achievements and the satisfaction of our clients.

Global Wealth Management is increasingly using technology and analytics capabilities to collect and respond to client feedback. Our digital client feedback tool lets clients submit, via mobile and the web, input about overall satisfaction with advisors and UBS, and share key topics they wish to discuss with their advisors. Advisors and their teams have seamless, real-time access to client feedback, enabling them to be highly responsive. The tool is available in the US and Asia Pacific, as well as most EMEA countries. In 2022, our client satisfaction level and net promoter score (NPS) remained high.

Personal & Corporate Banking has conducted annual surveys of clients in Switzerland since 2008, consistently covering all private and corporate client segments annually since 2015. Clients provide feedback on their satisfaction with regard to various topics (e.g., UBS overall, branches, client advisors, products and services) and indicate further product or advisory needs. Survey responses are distributed to client advisors, who follow up with each respondent individually. In 2022, our client satisfaction levels and NPS remained high, with client satisfaction regarding mobile banking at an all-time high.

The Quality Feedback system in Global Wealth Management and Personal & Corporate Banking provides a comprehensive and systematic platform to receive and process client feedback and suggestions. We receive feedback in various forms and through different client touchpoints. Client feedback, including complaints and suggestions, is vitally important, as it shows direct and unfiltered client needs, supports the development and introduction of new products and services, and, therefore, fosters the optimization of our offering in a client-focused manner. By addressing client feedback, we aim to strengthen client relationships, improve client satisfaction and make tangible improvements to our services. By sharing their views, clients contribute to quality improvements at all levels. We aim to respond to each individual who provides feedback. In 2022, key topics and enhancements centered mostly around services rendered by our hotlines and in our branches, cards, and Digital Banking features.

In Asset Management, we have an integrated process to record and manage client feedback through our client relationship management tool. We also conduct regular surveys, covering our wholesale and institutional clients globally, inviting them to assess their satisfaction with our client service, products and solutions, as well as other factors relevant to their investments. The results are analyzed to identify focus areas for improvement, and our client relationship managers follow up with respondents to address specific feedback where required.

The Investment Bank closely monitors client satisfaction via individual product coverage points. Direct client feedback is actively captured and tracked in our systems. Internal regional forums serve as a platform for senior management to discuss client relationships, possibilities for improvement, potential opportunities and specific client issues. Other processes are in place to enable consolidated findings to be shared within UBS as appropriate. The Investment Bank also closely monitors external surveys, which provide feedback across a range of investment banking services. We continue to make progress in simplifying our technology infrastructure, focusing on increasing front-to-back efficiency and enhancing our decision-making and relevance to clients. In the second quarter of 2022, we extended our Annual Global Markets Client Survey to a broader population looking to measure client satisfaction, and the ease and frequency of doing business. We also looked to understand the key drivers of each measure, both to refine individual coverage but also as an additional input into our investment and development plans. The most significant drivers of client satisfaction remain relationship management coverage and connectivity, liquidity and competitive pricing. We thoroughly evaluate the feedback we receive, including complaints from clients, and take measures to address key themes identified.

¹	Euromoney Private Banking and Wealth Management Survey 2022: No. 1 in ESG / Sustainable Investing.

²	“Clients” refers to the number of unique business relationships operated by Personal Banking.

³	“Clients” refers to the number of unique business relationships or legal entities operated by Corporate & Institutional Clients.

Investors

We aim to create sustainable, long-term value for our investors by executing our strategy with discipline, maintaining risk and cost discipline, and delivering attractive shareholder returns.

Investor base

Our investor base is well diversified. A substantial proportion of our institutional shareholders are based in the US, the UK and Switzerland.

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Refer to the “Corporate governance” section of this report for more information about disclosed shareholdings


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Alignment of interests

We aim to align the interests of our employees with those of our equity and debt investors, and this approach is reflected in our compensation philosophy and practices.

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Refer to “Our compensation philosophy” in the “Compensation” section of this report for more information

We are focused on driving long-term growth while maintaining risk and cost discipline

Our objective is to generate value for our shareholders and clients by driving long-term growth. To accomplish this, we are building on our scale, content and solutions, while remaining disciplined on risk and costs. This will give us the capacity to invest strategically, and will enable us to deliver against our financial and commercial targets.

Moreover, we are aiming to maximize our and our clients’ impact to create long-term sustainable value. We also have a responsibility toward our communities and employees. We have outlined selected environmental, social and governance aspirations, which should support our financial and commercial targets.

Our primary measurement of performance for the Group is return on common equity tier 1 (CET1), as regulatory capital is our binding constraint and drives our ability to return capital to shareholders.

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Refer to the “Targets, aspirations and capital guidance” section of this report for more information

Active capital management to enable growth and deliver attractive shareholder returns

Our first priority is ensuring that we can maintain a strong balance sheet. This includes our strong capitalization, in line with our capital guidance of maintaining a CET1 capital ratio of around 13% and a CET1 leverage ratio of greater than 3.7%.

As a second priority, we consider opportunities for investment in growth.

Our third priority is returning capital to shareholders in the form of a progressive dividend and share buybacks. For 2022, the Board of Directors is proposing a dividend to UBS Group AG shareholders of USD 0.55 per share. We also bought back USD 5.6bn of our shares. Looking ahead, we intend to buy back more than USD 5bn of shares in 2023.

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Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information

Communications

Our Investor Relations (IR) function is the primary point of contact between UBS and our shareholders. Our senior management and IR regularly interact with institutional investors, financial analysts and other market participants, such as credit rating agencies. Clear, transparent and relevant disclosures, and regular direct interactions with existing and prospective shareholders, form the basis for our communications. The IR team relays the views of and feedback on UBS from institutional investors and other market participants to our senior management.

IR and our Corporate Responsibility function work together and interact with any investors interested in sustainability topics relevant to UBS and wider society.

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Refer to the first part of the “Corporate governance” section of this report and “Information policy” in that same section for more information

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Refer to our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for more information


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Employees

At UBS, all business is personal. We are dedicated to being a world-class employer for talented individuals across all our markets, and a place where people can unlock their full potential. We want to have real impact. As such, we invest in measures to strengthen our unique culture and to provide a framework for employee growth and well-being as part of our overarching people-management approach.

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Deliver on our purpose and culture

Everything we do as a firm starts with our purpose. It is why we do what we do, and, in this respect, our culture is decisive in achieving our ambitions, and is grounded in our three keys to success: our Pillars, Principles and Behaviors. We therefore engage with our employees and seek to build an even more diverse and inclusive organization. Likewise, embracing flexibility and agile ways of working and our intentional focus on simplification and efficiency support a transformation that will generate significant benefits for our clients and for our employees.

In our global employee experience survey conducted in spring 2022, 92% of respondents indicated that they were familiar with our purpose. In 2022, we therefore sought to ensure that we are living up to our purpose by bringing it to life and driving it deeply into our daily business and people-management processes. Our Leadership Summit has been pivotal in that respect. Senior leaders engaged with and were aligned to our purpose and strategy, thereby making those concepts more tangible within their teams and accelerating our transformation. They also participated in training to discover their own purpose and to connect it to the firm’s performance opportunities. We will have an ongoing focus on the topic.

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Refer to “A firm driven by purpose” at the beginning of this report for more information about our purpose and culture

Build a diverse, equitable and inclusive workplace

We live a culture of belonging, where everyone can thrive. In practical terms, we seek to hire individuals with diverse skills, perspectives and experiences, to provide visibility and opportunities, and to create an inclusive culture where employees feel recognized and valued.

As a member of The Valuable 500, a global business collective, we are committed to taking action on disability inclusion. We have improved the physical accessibility of many of our locations in 2022, increased digital accessibility for clients and employees, and provided support for our disability-focused employee networks to increase their visibility and impact.


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In 2020, we outlined our intention to increase our female and ethnic minority representation, especially in leadership positions, and we are making progress toward these aspirations. For example, we aim to have 30% of Director and above roles globally held by women by 2025. At the end of 2022, that figure was 27.8%, up from 26.7% in 2021. Similarly, our 2025 aspiration is to have 26% of Director and above roles in the US and the UK held by ethnic minority employees. This figure was 20.4% in the US and 23.0% in the UK as of the end of 2022.

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Refer to our Diversity, Equity and Inclusion Report 2022, which will be available in the second quarter of 2023 at ubs.com/diversity, for more details

Pay our people fairly and equitably

Fair and consistent pay practices are designed to ensure employees are appropriately rewarded for their contribution. We pay for performance, and we take pay equity seriously. We’ve embedded clear commitments in our global compensation policies and practices, and we regularly conduct internal reviews and external audits as quality checks. Since 2020, we have been certified under the EQUAL-SALARY Foundation standards for our human resources practices in Switzerland, the US, the UK, the Hong Kong SAR and Singapore, covering more than two-thirds of our global employee population. Our global human resources policies and standards, including reward, performance management and promotion, from hiring through retirement, are reviewed annually to further improve our approach and processes. Our processes are global, and we apply the same standards across all our locations.

Listen to and appreciate employees

Key to bringing our purpose to life is listening to employees and acting on the things that matter to them. As part of our employee listening strategy, we conduct regular Group-wide, focused and employee life cycle surveys. Those surveys measure indicators such as strategic alignment, employee experience and well-being, collaboration, innovation, career development and line manager effectiveness. We implement improvement measures on firm-wide, divisional and regional levels and use survey results to create future culture-building initiatives.

Employee recognition continued to be a priority in 2022, as appreciation brings teams together and increases employees’ motivation and engagement. In particular, our Group Franchise Awards program rewards employees for promoting innovation and cross-divisional collaboration. A linked idea-sharing platform helps employees collaborate on solutions for various operational, client service and sustainability challenges. Furthermore, our peer-to-peer appreciation program, called Kudos, encourages employees to recognize colleagues’ exemplary behavior, with more than 424,000 recognitions awarded in 2022 alone.

Attract employees with the right capabilities and support their development

Connecting people with ideas and opportunities starts with our employees. In 2022, we continued to focus on hiring diverse individuals with strong potential, along with the right capabilities and agile mindset. These qualities enable us to deliver innovative and personalized products to clients faster, and in a more connected way. We hired a total of 12,693 external candidates in 2022, including more than 1,900 graduates and trainees, apprentices and interns through our junior talent programs worldwide. We actively support multi-year apprenticeship programs in Switzerland and the UK, along with summer internship programs in numerous locations. In 2022, for the 14th consecutive year, UBS was recognized among the top 50 of the World’s Most Attractive Employers by employer-branding expert Universum.

Personnel by region


	As of						% change from
Full-time equivalents	31.12.22		31.12.21		31.12.20		31.12.21
Americas		21,819		21,317		21,394		2
of which: USA		*21,032*		20,537		20,528		2
Asia Pacific		16,489		15,618		15,353		6
Europe, Middle East and Africa (excluding Switzerland)		14,342		14,091		13,899		2
of which: UK		*6,234*		6,051		6,069		3
of which: rest of Europe (excluding Switzerland)		*7,823*		7,826		7,652		0
of which: Middle East and Africa		*285*		215		178		33
Switzerland		19,947		20,359		20,904		(2	)

Total		72,597		71,385		71,551		2

Drive career growth

We want our employees to be able to build long and successful careers. It starts with our senior leaders and line managers, all of whom are expected to invest in their employees’ development and to inspire excellence. We take a systematic approach to talent management, conducting annual talent reviews that look at our succession planning needs along with individual employees’ contributions, abilities and future potential. Supporting this is our innovative Career Navigator platform. It offers a wide range of self-service tools and resources, including mentorship and networking opportunities, career path and training guidance, access to short-term rotations and internal mobility resources. To date, more than 7,000 people have shared their skills, enabling colleagues or internal recruiters to approach them directly for their subject matter expertise.


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Our in-house UBS University plays a central role in both skill- and culture-building. Our broad offering includes business, leadership and line manager education along with training on digitalization, data literacy, agile working, diversity, inclusion and personal well-being, among other topics. Launched in June 2022, our new learning experience platform offers AI-powered training recommendations based on employees’ unique needs and interests. We invested USD 78m in training in 2022, and our permanent employees completed more than 1,327,000 learning activities, including mandatory training, for an average of two training days per employee.

Work smarter

Driven by our strategic imperatives and evolving client needs, we continued to embrace new ways of working together in 2022. In particular, we accelerated our transition to agile ways of working, with approximately 18,500 employees across the firm working in agile teams as of year-end. In this setup, pods of specialists with end-to-end responsibility are empowered to achieve better results, and more quickly, than in traditional project structures. A number of tailored measures supported the transition, including the development of one consistent agile model and specialized training delivered through the Agile Academy within our UBS University.

Comprehensive workforce data dashboards help us analyze all aspects of the employee life cycle, including recruitment, internal mobility and attrition. These tools enable us to identify trends and make workforce decisions based on relevant HR data.

Focus on impact and outcome

Our performance management approach (MyImpact), which considers both contribution and behavior, supports a high-performance culture while simplifying our performance management and feedback processes. It features aspirational objectives with outcomes aligned to strategic priorities, continuous feedback and transparent year-end decisions that support pay-for-performance principles. Line managers play a key role in the quality of our approach. In 2022, we introduced an integrated feedback app called Feedback 365, which allows employees to easily give and receive meaningful feedback throughout the year.

Foster a supportive workplace community

We are committed to meeting employees’ needs and supporting their overall well-being. Hybrid-working arrangements enable many employees to work at home several days a week, with agreed in-office days to support collaboration. Additionally, starting with Global Wealth Management in the US, a new virtual worker framework launched in March 2022 will enable eligible US employees to work entirely remotely. These measures, along with options such as flexible hours, part-time working, job sharing and partial retirement, will help us attract and retain top talent while making us a stronger, more dynamic company.

Having seen the positive impact, we further expanded our employee health and well-being offering in 2022. This included a suite of programs, benefits and workplace resources, along with a bespoke eLearning curriculum, that aimed to help our employees manage their health, foster well-being, strengthen their resilience and support the sustainability of the organization. We also sponsored virtual fitness challenges and mental health initiatives in all regions.

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Refer to our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for more information about our workforce, our people management approach and relevant data

Society

The world’s social and environmental problems are too big and complex to tackle alone. Lasting change can only be achieved when philanthropists and public and private organizations work collectively to maximize positive impact for people and the planet.

Our clients can maximize the positive effect of their giving through our diverse social impact offering: UBS Philanthropy Services, the grant-making UBS Optimus Foundation network, UBS Global Visionaries and UBS Community Impact.

Reimagining client philanthropy

With more than 100 social impact and philanthropy staff around the globe, we help clients to maximize their impact locally, nationally and globally. We have partnered for more than two decades with clients and their families by using an investment-based approach and connecting them to an international network of expertise and support.

To best serve our clients, we base our approach on three pillars: Advice, Insights and Execution. Advice – consulting with clients who are considering setting up their first charitable fund and guiding them on tax-efficient giving, thus maximizing the value of charitable giving. Insights – connecting our clients to a global network of experts, both within and outside UBS (e.g., through insight trips, publications and events with fellow philanthropists, thought leaders and social entrepreneurs, such as UBS Global Visionaries). Execution – providing clients with flexible options for managing their philanthropic giving, including structures such as donor-advised funds (DAFs), outcomes financing, emergency relief funds and our UBS Collectives, and supporting curated programs via the UBS Optimus Foundation network.


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Donor-advised funds

A DAF offers clients an easy, flexible and efficient alternative to setting up their own foundation and can be managed in line with their usual investment approach. Their charitable donations can be invested within the parameters they select, such as capital, growth or income, so they can grow their fund to give grants at a later date. UBS offers these services in Switzerland, Singapore and the UK, with USD 249m in donations in 2022.

UBS Optimus Foundation

UBS Optimus Foundation is a network of foundations globally that connects clients with inspiring programs designed to make a measurable, long-term difference. It has a 20-year track record and is recognized globally as a philanthropic thought leader and is focused on incubating impact ventures, scaling impact through partnerships and achieving impact transparency. The network is a pioneer in the social finance space, through which we leverage solutions to mobilize private capital in new and more efficient ways. It conducts extensive due diligence and only recommends programs considered to have the capacity to achieve long-term, measurable impact. UBS also makes matching contributions to the network, to help our clients’ donations go even further.

Collective impact

The UBS Collectives also utilize an evidence-based approach and bring together philanthropists to pool their funds, share their expertise and achieve a longer-term impact. The Collectives are a three-year learning journey during which philanthropists follow a curriculum, network with peers and engage in programs with the goals of preventing family separation, mitigating climate change and funding programs linked to measurable results. In 2022, USD 4.8m in funding was raised for this long-term, systems-level change approach.

Emergency relief

In response to urgent relief efforts, in 2022 UBS raised more than USD 25m for the Ukraine Relief Fund, with matched funding from UBS and XTX Markets bringing the total to more than USD 50m. Over half the funds have been disbursed to 14 partners providing relief, recovery and resilience services. In 2022, we also launched our Pakistan Relief Fund with our partners Americares and The Citizens Foundation, which raised USD 1.2m, including UBS matching contributions, to provide both response and recovery efforts.

UBS Global Visionaries

Through our UBS Global Visionaries program, we aim to create opportunities for clients and prospective clients to connect with leading social entrepreneurs, and help entrepreneurs focusing on social and environmental issues increase their impact by expanding their network, building capacity and raising awareness of their work. Since the program started in 2016, we have onboarded and helped 68 entrepreneurs to accelerate their impact.

A third-party evaluation1 conducted in 2022 found that 88% of those entrepreneurs said the program had had a positive influence on expanding their networks, with 68% creating partnerships from it, 64% agreed that we had increased awareness of critical global issues and their solutions, 51% agreed that the program had helped them build skills valuable to delivering their mission, and 48% felt that the program had influenced their fundraising efforts. We have also started to evaluate how we can maximize the role of the program in terms of the impact of Global Visionaries on the United Nations Sustainable Development Goals. In 2022, 27% noted this benefit.¹

UBS Community Impact

At UBS, we seek to have an impact in local communities. We have a strategic focus on education and the development of skills, as we believe these topics are where our resources can make the most impact. We believe our long-term investment in these subjects is central to furthering the economic and social inclusion of those we support through our activities.

With our Community Impact program, we focus on helping young people and adults to learn and develop skills. We deliver on our commitment through strategic financial support and employee volunteering that will address social issues to help further their economic and social inclusion. Through our Community Impact program, in 2022, we:

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supported 370,916 young people and adults in learning and developing skills – our aim is to support 1.5 million young people and adults by 2025;

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engaged 34% of our global workforce in volunteering.

Direct cash contributions from the firm, including support through our Community Impact program, UBS’s affiliated foundations in Switzerland and the UBS Foundation of Economics in Society at the University of Zurich, and contributions to the UBS Optimus Foundation network, amounted to a total of USD 76m in 2022.

UBS’s overall charitable contributions are measured using the industry-leading Business for Societal Impact (B4SI) framework. This includes cash, employee time and in-kind support.

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Refer to the “Social” section of our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for more information

¹	Evaluation led by Wasafiri Consulting in October 2022, based on survey results from 71% (44) of our 62 UBS Global Visionaries and alumni at the time.


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Our focus on sustainability and climate

Our commitment to sustainability starts with our purpose. We know finance has a powerful influence on the world and we recognize that investments can help create a better world for everyone: a fairer society, a more prosperous economy and a healthier environment. That is why we partner with our clients to help them mobilize their capital toward a more sustainable world and why we have put sustainability at the heart of our purpose. We are guided by the goal of being the financial provider of choice for clients that want to mobilize capital toward the achievement of the United Nations Sustainable Development Goals (the SDGs) and the orderly transition to a low-carbon economy.

Our Code of Conduct and Ethics

In our Code of Conduct and Ethics (the Code), the Board of Directors (the BoD) and the Group Executive Board (the GEB) set out the principles and practices that define our ethical standards and the way we do business, which apply to all aspects of our business. All employees must affirm annually that they have read and will adhere to the Code and other key policies, supporting a culture where ethical and responsible behavior is part of our everyday operations. In our Code, we make a commitment to acting with the long term in mind and creating value for clients, employees and shareholders. We aspire to do our part in creating a fairer, more prosperous society, championing a healthier environment and addressing inequalities at their root. This ethos underpins our purpose and is in line with our external commitments, such as our pledge to help making progress toward the SDGs. Following a substantial review in 2021, we made only limited changes to the Code in 2022, mainly pertaining to clarifications, simplifications and alignment of language.

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Refer to the Code of Conduct and Ethics of UBS, available at ubs.com/code, for more information

Our sustainability and impact governance

Sustainability activities, including climate, are overseen at the highest level of UBS, by the BoD and the GEB, and are grounded in our Code.

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Refer to our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for more information about our sustainability and impact governance

Board of Directors and Group Executive Board

The BoD is responsible for setting UBS’s values and standards for the purpose of ensuring that the Group’s obligations to stakeholders are met. Both the Chairman of the BoD and the Group CEO play key roles in safeguarding our reputation and ensuring we communicate effectively with all of our stakeholders. The BoD’s Corporate Culture and Responsibility Committee (the CCRC) is the UBS body primarily responsible for corporate culture, responsibility and sustainability. The CCRC oversees our sustainability and impact strategy and key activities across environmental and social topics, including climate, nature and human rights. Annually, it considers and approves our firm’s sustainability and impact objectives. During its six meetings throughout the course of the year, the CCRC also reviews the GEB’s activities in executing our climate strategy, including our net-zero targets, and, jointly with the BoD’s Risk Committee, evaluates the progress of our climate risk program. All BoD committees have environmental, social and governance (ESG)-related responsibilities.

The Group CEO has delegated to the GEB Lead for Sustainability and Impact, Suni Harford, the responsibility to lead reviews of the firm’s sustainability and impact strategy and related objectives, in agreement with fellow GEB members, and to propose strategy and objectives to the CCRC. The GEB Lead for Sustainability and Impact also co-chairs the firm’s cross-divisional and cross-functional Sustainability and Climate Task Force, which oversees the implementation of the firm’s sustainability activities and its climate action plan, including its net-zero program. We manage these annual plans and goals through our ISO 14001-certified environmental management system, with management accountabilities across our firm. Senior representatives from across our firm, including from the business divisions, Risk, Compliance and Finance, attend the task force’s regular meetings.

The GEB also resolves overarching matters relating to sustainability and climate risks, including risk management framework, policies, and disclosure.

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Refer to “Board of Directors” in the “Corporate governance” section of this report for more information about the CCRC

Group Sustainability and Impact

The Group Sustainability and Impact (GSI) organization supports the GEB Lead for Sustainability and Impact with carrying out her responsibilities. GSI consists of the Chief Sustainability and Social Impact offices, headed by the Chief Sustainability Officer (the CSO) and the Head Social Impact, respectively. The CSO is responsible for driving the implementation of the Group-wide sustainability and impact strategy, including reporting on our progress toward net zero (and the execution thereof by the business divisions and Group Functions). The Head Social Impact is responsible for driving and implementing our social impact strategy, including Community Impact, Philanthropy Services and UBS Global Visionaries. Progress toward the firm’s sustainability and impact strategy and associated targets is reviewed at least once a year by the GEB and the CCRC.

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Refer to our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for more information about our sustainability and impact governance


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Our sustainability and impact strategy

To help us maximize our impact, we focus on three key areas to drive the sustainability transition: planet, people and partnerships.

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Planet: Climate is a clear focus for us as we shift toward a lower-carbon future. We have committed to achieving net-zero greenhouse gas (GHG) emissions from across our business by 2050.

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People: We believe in a diverse, equitable and inclusive society. We are taking action to get there, within our own workplace and beyond.

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Partnerships: By working in partnership with other thought leaders and standard setters, our goal is to drive change at a global scale.

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Refer to our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for more information about how UBS is advancing sustainability in the financial sector and beyond

Our approach to climate and nature

Our climate strategy covers two main areas: managing climate-related financial risks and acting for a low-carbon future. Underpinning these two areas are four strategic pillars.

LOGO

We understand the deep interrelationships that exist between climate and nature. Our climate strategy, including our ambition to achieve net zero, also forms part of our approach toward managing nature-related risks and opportunities.

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Refer to our Climate and Nature Report 2022, available at ubs.com/gri, for a full description of UBS’s approach to climate and nature

Our approach to sustainable finance

As a global financial institution, we have a role in helping clients direct capital toward the SDGs. Our clients turn to us for advice on how they can help finance the transition to a low-carbon economy, support sustainable finance, align their investments with their personal values and better risk manage their portfolios and businesses. They want to take advantage of these opportunities, while also managing the risks associated with this transformational challenge.

During a year of global geopolitical and economic upheaval, sustainability and sustainable finance remained strategically important topics for UBS and many of our clients, with a focus on two key areas:

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the implementation of strategic sustainability commitments, for example reaching net-zero GHG emissions across all our activities by 2050, and

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the ongoing evolution of regulatory guidance designed to prevent greenwashing.


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At UBS, we want to partner with all our clients by providing innovative and effective products and solutions that can support them in their sustainability transition and deliver on their commitments, where that is their preference. In particular, we want to support innovation and technological progress.

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Refer to our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for more information about our sustainability and impact strategy and activities

Defining sustainable finance

It is important to set out how we define sustainable finance, as at present there is no global, uniformly accepted definition. At UBS, sustainable finance means any financial product or service (including both investing and financing solutions) that aims to explicitly align with and / or contribute to sustainability-related objectives, while targeting market-rate financial returns.

Sustainability outcomes can occur across a range of topics including goals defined using a reference framework, such as the SDGs in the United Nations 2030 Agenda for Sustainable Development. As an example, a sustainable investment (SI) product could invest in companies whose transition plans are aligned with the goal of limiting global warming to 1.5°C compared with the pre-industrial age or invest with the goal of encouraging companies to adopt such plans.

Our definition is also reflected in our Group’s SI framework, which specifically defines “sustainability focus” and “impact investing” products. Both categories reflect a defined and explicit sustainability intention of the underlying investment strategy. This intentionality differentiates them from more “traditional“ investment products, or those that consider ESG aspects but do not actively and explicitly pursue any specific sustainability objective, such as ESG integration- or exclusions-only approaches.

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Identifying opportunities

UBS has a global and diversified business model. Each client has specific and differentiated sustainable financing, investing and / or advisory needs. Leveraging the deep expertise of our experienced teams, we work hard to service those needs in the best way possible. While their needs are diverse, our interactions with our clients follow an established rationale that starts by building an understanding of the relevance of sustainability for their business and / or investment portfolio.


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LOGO

Sustainable investment

In 2022, we made progress on a number of important investment product initiatives relevant to a broad spectrum of clients across our business areas. For example:

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we made it easier for private clients to access SI products and services, suited to their individual preferences, e.g., through expanded access to our Advice SI and separately managed account (SMA) solutions, and new targeted sustainable and impact offerings. In line with EU regulations for clients in scope thereof, UBS systematically captures clients’ preferences when it comes to SI;

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we expanded the range of sustainable and impact funds in public and private markets and exchange-traded funds available to private, institutional and corporate clients; and

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we continued to provide customized, tailored, and structured investment solutions for private and institutional investors.

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Refer to our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for more information about our sustainable investing and financing offering, including financing solutions, advisory, and research and insights

Sustainable financing

We develop financing solutions to help our clients transition to a more sustainable future. These solutions can be on-balance sheet (e.g., green or sustainable loans and mortgages) or off-balance sheet (such as access to debt and equity capital markets), and also include transaction structuring. Highlights in 2022 included: our Investment Bank facilitating USD 48bn of green, social, sustainability and sustainability-linked (GSSS) bonds financing through 77 bond deals for our clients, with a market-leading share of the Swiss franc GSSS bond market; our Personal & Corporate Banking business launching both UBS Mortgage Energy and UBS Loan Energy, the former to encourage private clients to replace their fossil fuel heating, either with a more sustainable alternative or by installing a photovoltaic system, and the latter being specially designed for energy-efficient investment properties. Clients benefit from attractive interest rates and comprehensive advice for their low-energy properties. In December of 2022, UBS adopted guidelines providing an internal global standard for all our products in the categories of sustainable lending, sustainable bonds and GHG emissions trading. During the course of 2023, UBS expects to (re-)assess all its products against these guidelines.

Sustainable investments


	For the year ended						% change from
USD bn, except where indicated	31.12.22		31.12.21		31.12.20		31.12.21
Sustainable investments¹
Sustainability focus²		246.9		222.7		127.7		10.9
Impact investing³		20.7		28.5		13.1		(27.4	)
Total sustainable investments^4,5		267.6		251.2		140.8		6.5
*SI proportion of total invested assets (%)*		*6.8*		5.5		3.4

UBS total invested assets		3,957.2		4,596.2		4,187.2		(13.9	)

¹	We focus our sustainable investment reporting on those investment strategies exhibiting an explicit sustainability intention.

Strategies that have explicit sustainable intentions or objectives that drive the strategy. Underlying investments may contribute to positive sustainability outcomes through products / services / use of proceeds. Examples include Global Wealth Management’s discretionary Manage SI mandate solutions and Asset Management’s strategies such as its Global Sustainable Equities product.

Strategies that have explicit intentions of generating measurable, verifiable and positive sustainability outcomes. Impact generated is attributable to investor action and / or contributions. Examples include Global Wealth Management’s Oncology Impact funds and Asset Management’s UBS Engage for Impact or UBS Climate Action funds.

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In 2022, UBS converted funds to the sustainability focus and impact investing categories, in line with corresponding changes to the funds’ underlying investment policies. The main impact was on sustainability focus and impact investing strategies in Asset Management of USD 33bn. Further, we aligned the Global Wealth Management and Personal & Corporate Banking reporting of UBS funds and mandates products to the Asset Management categorization with an impact on sustainable investments of USD 20bn.

⁵	In 2022, methodology changes related to the application of the Group SI framework resulted in a decrease in invested assets of USD 10bn across total sustainable investments.


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In line with global market developments, at UBS, we continue to grow SI assets under management (AuM) as a share of total AuM, reaching 6.8% by the end of 2022, compared with 5.5% at the end of 2021. As of 31 December 2022, UBS’s SI assets (sustainability focus and impact investing) were USD 268bn, compared with USD 251bn at year-end 2021. Impact investing assets decreased to USD 21bn from USD 29bn, reflecting negative market performance and foreign currency effects, as well as methodology changes.

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Managing sustainability and climate risks

At UBS, sustainability and climate risk is defined as the risk that UBS negatively impacts, or is impacted by, climate change, natural capital, human rights, and other environmental, social, governance matters. Sustainability and climate risk may manifest as credit, market, liquidity and / or non-financial risks for UBS, resulting in potential adverse financial, liability and / or reputational impacts. These risks extend to the value of investments and may also affect the value of collateral (e.g., real estate). Climate risks can arise from either changing climate conditions (physical risks) or from efforts to mitigate climate change (transition risks). Physical and transition risks from a changing climate contribute to a structural change across economies and, consequently, can affect banks and the financial sector through financial and non-financial impacts.

Our Sustainability and Climate Risk (SCR) unit (part of Group Risk Control) manages material exposure to sustainability and climate risks. It also advances our firm-wide SCR initiative to build in-house capacity for the management of sustainability and climate-related risks.

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Refer to “Sustainability and climate risk” in the “Risk management and control” section of this report

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Refer to Appendix 2 to our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for a full description of our sustainability and climate risk policy framework

Our sustainability goals and progress

We work with a long-term focus on providing appropriate returns to our stakeholders in a responsible manner. We are committed to providing transparent targets and reporting on the progress made against them. Our aspirational goals, as set out below, can therefore only partly be compared with what we set out in previous years.


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Our aspirational goals and progress


Our priorities	Our aspirational goals	Our progress in 2022
Planet, people, partnerships	USD 400bn invested assets in sustainable investments by 2025.	Increased invested assets in sustainable investments to USD 268bn (compared with USD 251bn in 2021).

Planet	Decarbonization targets for 2030 for financing of the real estate, fossil fuels, power generation and cement sectors (from 2020 levels):	Calculated progress against pathways for the real estate (commercial and residential), fossil fuel and power generation sectors:¹
Planet	• reduce emissions intensity of UBS’s residential real estate lending portfolio by 42%; • reduce emissions intensity of UBS’s commercial real estate lending portfolio by 44%; • reduce absolute financed emissions associated with UBS loans to fossil fuel companies by 71%; • reduce emissions intensity associated with UBS loans to power generation companies by 49%; and • reduce emissions intensity associated with UBS loans to cement companies by 15%.	• reduced emissions intensity of UBS’s residential real estate lending portfolio by 8% (end of 2021 vs 2020 baseline); • reduced emissions intensity of UBS’s commercial real estate lending portfolio by 7% (end of 2021 vs 2020 baseline); • reduced absolute financed emissions associated with UBS loans to fossil fuel companies by 42% (end of 2021 vs 2020 baseline); and • reduced emissions intensity associated with UBS loans to power generation companies by 12% (end of 2021 vs 2020 baseline). Introduction of an additional decarbonization target for the cement sector, as well as an estimation of the overall financed emissions.

	Align 20% of AuM to be managed in line with net zero (Asset Management).² Achieve net-zero emissions across discretionary client portfolios by 2050 (Asset Management).³	Initiated analysis of revisions to fund documentation and investment management agreements to align with Asset Management’s net-zero-aligned frameworks.

	Achieve net-zero energy emissions resulting from our own operations (scopes 1 and 2) by 2025; cut energy consumption by 15% by 2025 (compared with 2020).	Reduced net GHG footprint for scope 1 and 2 emissions by 13% and energy consumption by 8% (compared with 2021); continued implementation of the replacement of fossil fuel heating systems and investing in credible carbon removal projects; achieved 99% renewable electricity coverage despite challenging market conditions.

	Offset historical emissions back to the year 2000 by sourcing carbon offsets (by year-end 2021) and by offsetting credit delivery and full retirement in registry (by year-end 2025).	Continued to follow up on credit delivery and retirement of sourced portfolio.

	Engage with key vendors on aiming for net zero by 2035.	Identified “GHG key vendors” (vendors that collectively account for >50% of our estimated vendor GHG emissions) and invited the vendors that accounted for 67% of our annual vendor spend (including all GHG key vendors) to disclose their environmental performance through CDP’s Supply Chain Program, with 66% of the invited vendors completing their disclosures in the CDP platform.
People	30% global female representation at Director level and above by 2025.	Increased to 27.8% (2021: 26.7%) female representation at Director level and above.
	26% of US roles at Director level and above held by employees from ethnic minorities by 2025.	Increased to 20.4% (2021: 20.1%) ethnic minority representation at Director level and above in the US.
	26% of UK roles at Director level and above held by employees from ethnic minorities by 2025.	Increased to 23.0% (2021: 21.3%) ethnic minority representation at Director level and above in the UK.
	Raise USD 1bn in donations to our client philanthropy foundations and funds and reach 25 million beneficiaries by 2025 (cumulative for 2021–2025).	Achieved a UBS Optimus Foundation network donation volume of USD 274m in 2022, totaling USD 436m since 2021 (both figures include UBS matching contributions).
		Reached 5.9 million beneficiaries.

	Support 1.5 million young people and adults to learn and develop skills through our community impact activities (2022–2025).	Reached 370,916 beneficiaries through strategic community impact activities.⁴

Partnerships	Establish UBS as a leading facilitator of discussion, debate and idea generation.	Co-organized, with the Institute of International Finance, the first Wolfsberg Forum for Sustainable Finance. Joined a consortium that is pioneering methods of assessing and maximizing the GHG reduction potential of energy storage. Co-founded Carbonplace, a technology platform for the voluntary carbon market that has the goal of creating a streamlined and transparent market for our clients.

	Drive standards, research and development, and product development.	Co-led the Taskforce on Nature-related Financial Disclosures’ financial-sector-specific working group. Collaboration with two Swiss companies that are pioneering innovative carbon removal technologies. Joined the Partnership for Carbon Accounting Financials (PCAF).
¹ Refer to the “Environment” section of our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for further information. The inherent one-year time lag between the as-of date of our lending exposure and the as-of date of emissions can be explained by two factors: corporates disclose their emissions in annual reporting only a few months after the end of a financial year; and specialized third-party data providers take up to nine months to collect disclosed data and make it available to data users. Consequently, the baselines for our net-zero ambitions are based on year-end 2020 lending exposure and 2019 emissions data. Our 2021 emissions actuals are based on year-end 2021 lending exposure and 2020 emissions data. ² The 20% alignment goal amounted to USD 235bn at the time of Asset Management’s commitment in 2021. By 2030, the weighted average carbon intensity of funds is to be 50% below the carbon intensity of the respective 2019 benchmark. ³ The near- and medium-term plans for the achievement of this goal include our Asset Management business division only. ⁴ Our Community Impact program has a strategic focus on education and the development of skills.


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Our climate-related metrics and targets

We have developed methodologies that we use to set our climate-related targets and identify climate-related risks and which underly the metrics that are disclosed in this report. Standard-setting organizations and regulators continue to provide new or revised guidance and standards, as well as new or enhanced regulatory requirements for climate disclosures. Our disclosed metrics are based upon data available to us, including estimates and approximations where actual or specific data is not available. We intend to update our disclosures to comply with new guidance and regulatory requirements as they become applicable to UBS. Such updates may result in revisions to our disclosed metrics, our methodologies and related disclosures, which may be substantial, as well as changes to the metrics we disclose.

Our climate targets and ambitions are high-level goals that have been set based on the methodologies, data and assumptions that we currently use. Changes to these methodologies, data and assumptions may affect our progress toward intermediate targets and ambitions and the achievability of net zero and other climate goals. Our 2050 net-zero targets, and related ambitions for scope 3 emissions, have a critical dependency on overall progress across all sectors and countries toward net-zero carbon emissions that requires substantial governmental action across many jurisdictions. In the absence of such progress, our goals with respect to scope 3 emissions will not be achievable.

•

Refer to our Climate and Nature Report 2022, available at ubs.com/gri, for a full description of our net-zero targets, including baselines and pathways

Climate-related metrics 2022

For the year ended

% change from

31.12.22

31.12.21

31.12.20

31.12.21

Risk management

Carbon-related assets (USD bn)^1,2

33.8

36.5

37.1

(7.4

)

of which: UBS AG

8.9

10.1

11.0

(11.9

)

of which: UBS Switzerland AG

24.6

26.0

25.4

(5.4

)

Proportion of total customer lending exposure, gross (%)

7.5

8.0

8.6

Total exposure to climate-sensitive sectors, transition risk (USD bn)^2,3,4

24.9

27.3

27.1

(8.8

)

of which: UBS AG

5.4

6.7

7.5

(19.4

)

of which: UBS Switzerland AG

19.3

20.4

19.2

(5.4

)

Proportion of total customer lending exposure, gross (%)

5.5

5.9

6.2

Total exposure to climate-sensitive sectors, physical risk (USD bn)^2,3,4

30.0

31.9

35.0

(6.0

)

of which: UBS AG

11.6

13.3

18.3

(12.8

)

of which: UBS Switzerland AG

17.7

18.2

16.2

(2.7

)

Proportion of total customer lending exposure, gross (%)

6.7

7.0

8.0

Opportunities

Number of green, sustainability, and sustainability-linked bond deals⁵

(29.6

)

Total deal value of green, sustainability, and sustainability-linked bond deals (USD bn)⁵

42.4

63.3

19.3

UBS-apportioned deal value of above (USD bn)

8.8

13.2

5.7

Stewardship – Voting

Number of climate-related resolutions voted upon⁶

160

79.8

Proportion of supported climate-related resolutions (%)

71.2

78.6

88.0

Own operations (reporting period: July to June)

Net GHG footprint (1,000 metric tons CO₂e)⁷

(15.4

)

Change from baseline 2004 (%)

(93.0

)

(92.0

)

(79.0

)

Share of renewable electricity (%)

100

As defined by the Task Force on Climate-related Financial Disclosures (the TCFD), in its expanded definition published in 2021, UBS defines carbon-related assets through industry-identifying attributes of the firm’s banking book. UBS further includes the four non-financial sectors addressed by the TCFD, including, but not limited to, fossil fuel extraction, carbon-based power generation, transportation (air, sea, rail, and auto manufacture), metals production and mining, manufacturing industries, real estate development, chemicals, petrochemicals, and pharmaceuticals, building and construction materials and activities, forestry, agriculture, fishing, food and beverage production, as well as including trading companies that may trade any of the above (e.g., oil trading or agricultural commodity trading companies). This metric is agnostic of risk rating, and therefore may include exposures of companies that may be already transitioning or adapting their business models to climate risks, unlike UBS climate-sensitive sectors methodology, which takes a risk-based approach to defining material exposure to climate impacts.

Methodologies for assessing climate-related risks are emerging and may change over time. As the methodologies, tools and data availability improve, we will further develop our risk identification and measurement approaches, including further and updated geospatial analysis of properties securing financing with UBS (real estate) and better understanding how private lending (e.g., Lombard) activities may result in direct financial impacts for UBS. Lombard lending rating is assigned based on the average riskiness of loans.

Consists of total loans and advances to customers and guarantees, as well as irrevocable loan commitments (within the scope of expected credit loss), and is based on consolidated and standalone IFRS numbers. Metrics are calculated and restated based on 2022 methodology, across three years of reporting, 2020–2022.

⁴

⁵

Such as, but not limited to, Investment Bank Global Banking bonds issued under the voluntary ICMA Green Bond Principles, Sustainability Bond Principles, and Sustainability-Linked Bond Principles. The principles include a recommendation that the issuer appoints an external review provider to undertake an independent external review (e.g., second-party opinion). This is consistent with market practice.

This excludes proposals related to Japanese companies that included changes to the companies’ articles of association. The 2022 and 2021 numbers include shareholder and management proposals, the 2020 number shareholder proposals only. This reflects the increasingly common market practice of climate-related proposals being presented by management.

⁷

Net greenhouse gas (GHG) footprint equals gross GHG emissions minus GHG reductions from renewable electricity and CO₂e offsets (gross GHG emissions include: direct GHG emissions by UBS; indirect GHG emissions associated with the generation of imported / purchased electricity (grid average emission factor), heat or steam; and other indirect GHG emissions associated with business travel, paper consumption and waste disposal). A breakdown of our GHG emissions (scopes 1, 2 and 3) is provided in Appendix 3 to our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors.


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Reporting to our stakeholders on our sustainability strategy and activities

Further information about our sustainability efforts and commitments is provided in our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors. The content of our Sustainability Report 2022 has been prepared in accordance with Global Reporting Initiative (GRI) standards and with the German rules implementing the EU Directive on disclosure of non-financial and diversity information (2014/95/EU). We also disclose data on climate-related financial risks, pertaining to the Swiss Financial Market Supervisory Authority’s (FINMA’s) disclosure requirements as set out in appendix 5 to FINMA Circular 2016/1 “Disclosure – banks.” Our reporting on sustainability has been reviewed on a limited assurance basis by Ernst & Young Ltd against the GRI standards.

•

Refer to our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for an overview of non-financial disclosures in accordance with the German rules implementing EU Directive 2014/95 and for information about UBS AG and UBS Europe SE disclosures pursuant to Art. 8 of the EU Taxonomy Regulation

Regulation and supervision

As a financial services provider based in Switzerland, UBS is subject to consolidated supervision by the Swiss Financial Market Supervisory Authority (FINMA). Our entities are also regulated and supervised by authorities in each country where they conduct business. Through UBS AG and UBS Switzerland AG, both licensed as banks in Switzerland, UBS may engage in a full range of financial services activities in Switzerland and abroad, including personal banking, commercial banking, investment banking and asset management.

As a global systemically important bank (a G-SIB), as designated by the Financial Stability Board, and a systemically relevant bank (an SRB) in Switzerland, we are subject to stricter regulatory requirements and supervision than most other Swiss banks.

•

Refer to the “Our evolution” section of this report for more information

•

Refer to the “Regulatory and legal developments” and “Risk factors” sections of this report for more information

Regulation and supervision in Switzerland

Supervision

UBS Group AG and its subsidiaries are subject to consolidated supervision by FINMA under the Swiss Banking Act and related ordinances, which impose standards for matters such as minimum capital, liquidity, risk concentration and internal organization standards. FINMA meets its statutory supervisory responsibilities through licensing, regulation, supervision, and enforcement. It is responsible for prudential supervision and mandates audit firms to perform regulatory audits and other supervisory tasks on its behalf.

Capital adequacy and liquidity regulation

As an internationally active Swiss systemically important bank (SIB), we are subject to capital and total loss-absorbing capacity (TLAC) requirements that are based on both risk-weighted assets and the leverage ratio denominator, and are among the most stringent in the world. We are also subject to Swiss SIB liquidity requirements and to minimum long-term funding requirements.

•

Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information about the Swiss SRB framework and the Swiss too-big-to-fail (TBTF) requirements

•

Refer to “Liquidity coverage ratio” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information about liquidity coverage ratio requirements

Regulation and supervision outside Switzerland

Regulation and supervision in the US

In the US, UBS is subject to regulation and supervision by the Board of Governors of the Federal Reserve System (the Federal Reserve Board) under a number of laws. UBS Group AG and UBS AG are both subject to the Bank Holding Company Act, pursuant to which the Federal Reserve Board has supervisory authority over the US operations of both UBS Group AG and UBS AG.

In addition to being a financial holding company under the Bank Holding Company Act, UBS AG has US branches, which are authorized and supervised by the Office of the Comptroller of the Currency (the OCC). UBS AG is registered as a swap dealer with the Commodity Futures Trading Commission (the CFTC) and as a securities-based swap dealer with the Securities and Exchange Commission (the SEC).


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UBS Americas Holding LLC, the intermediate holding company for our operations in the US outside of the UBS AG branch network, as required under the Dodd–Frank Act, is subject to requirements established by the Federal Reserve Board related to risk-based capital, liquidity, the Comprehensive Capital Analysis and Review (CCAR) stress testing and capital planning process, and resolution planning and governance.

UBS Bank USA, a Federal Deposit Insurance Corporation (FDIC)-insured depository institution subsidiary, is licensed and regulated by state regulators in Utah and is also supervised by the FDIC.

UBS Financial Services Inc., UBS Securities LLC and several other US subsidiaries of UBS are subject to regulation by a number of different government agencies and self-regulatory organizations, including the SEC, the Financial Industry Regulatory Authority, the CFTC, the Municipal Securities Rulemaking Board and national securities exchanges, depending on the nature of their business. Certain of our activities in the US are subject to regulation by the Consumer Financial Protection Bureau.

Regulation and supervision in the UK

Our regulated UK operations are mainly subject to the authority of the Prudential Regulation Authority (the PRA), which is part of the Bank of England, and the Financial Conduct Authority (the FCA). We are also subject to the rules of the London Stock Exchange and other securities and commodities exchanges of which UBS AG is a member.

UBS AG has a UK-registered branch in London, which serves as a global booking center for our Investment Bank. Our regulated subsidiaries in the UK that provide asset management services are authorized and regulated mainly by the FCA, with one entity, UBS Asset Management Life Ltd, being also subject to the authority of the PRA.

Regulation and supervision in Germany / the EU

UBS Europe SE, headquartered in Germany, is subject to the direct supervision of the European Central Bank, as well as to continued conduct, consumer protection and anti-money-laundering-related supervision by the German Federal Financial Supervisory Authority (the BaFin) and supervisory support by the German Bundesbank. The entity is subject to EU and German laws and regulations. UBS Europe SE maintains branches in Denmark, France, Italy, Luxembourg, the Netherlands, Poland, Spain, Sweden and Switzerland, and is subject to conduct supervision by authorities in all those countries.

Regulation and supervision in Asia Pacific

We operate in 13 locations in Asia Pacific and are subject to regulation and supervision by local financial regulators. Our regional hubs are in Singapore and the Hong Kong SAR.

In Singapore, we conduct our operations primarily through UBS AG Singapore Branch and UBS Securities Pte. Ltd., which are supervised by the Monetary Authority of Singapore and the Singapore Exchange.

UBS AG Hong Kong Branch is primarily supervised by the Hong Kong Monetary Authority. UBS Securities Hong Kong Limited, UBS Securities Asia Limited and UBS Asset Management (Hong Kong) Limited are primarily supervised by the Hong Kong Securities and Futures Commission. In addition, UBS Securities Hong Kong Limited is supervised by the Hong Kong Stock Exchange and the Hong Kong Futures Exchange.

In mainland China, UBS has multiple licenses to operate its core business lines and the various UBS entities are subject to regulation by a number of different government agencies. The People’s Bank of China oversees the macro capital markets policies and ensures coordinated supervisory approaches by the China Banking and Insurance Commission, the China Securities and Regulatory Commission, and the exchanges.

Financial crime prevention

Combating money laundering and terrorist financing has been a major focus of many governments in recent years. Laws and regulations, including the Swiss Banking Act and the US Bank Secrecy Act, require effective policies, procedures and controls to detect, prevent and report money laundering and terrorist financing, and the verification of client identities. Failure to introduce and maintain adequate programs to prevent money laundering and terrorist financing can result in significant legal and reputational risk and fines.

We are also subject to laws and regulations prohibiting corrupt or illegal payments to government officials and other persons, including the US Foreign Corrupt Practices Act and the UK Bribery Act. We maintain policies, procedures and internal controls intended to comply with those regulations.

•

Refer to “Non-financial risk” in the “Risk management and control” section of this report for more information

Data protection

We are subject to regulations concerning the use and protection of customer, employee, and other personal and confidential information. This includes provisions under Swiss law, the EU General Data Protection Regulation (the GDPR) and laws of other jurisdictions.

•

Refer to the “Risk factors” section of this report for more information about regulatory change


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Recovery and resolution

Swiss TBTF legislation requires each Swiss SRB to establish an emergency plan to maintain systemic functions in case of impending insolvency. In response to these Swiss requirements, and similar ones in other jurisdictions, UBS has developed recovery plans and resolution strategies, as well as plans for restructuring or winding down businesses if the firm could not be stabilized otherwise.

In 2013, FINMA stated its preference for a single point of entry (an SPE) strategy for globally active SRBs, such as UBS, with a bail-in at the group holding-company level. UBS has made structural, financial and operational changes to facilitate an SPE strategy and is confident that a resolution of the bank is operationally executable and legally enforceable.

FINMA evaluates the recovery and resolution plans of Swiss SRBs on a regular basis. In its most recent assessment published in March 2022, FINMA re-confirmed that our Swiss emergency plan is effective and that our recovery plan was approved. Furthermore, FINMA acknowledged the continued progress we made toward achieving global resolvability.

UBS’s crisis management framework

Our crisis management framework assigns responsibility and actions depending on the nature of the stress incident and the scale of the response needed.

•

For incident, risk and crisis management, the Group Crisis Task Force works with incident management teams that provide monitoring and early-warning indicators at the local / regional level, without needing to activate protocols at the Group level. If a local response is insufficient, global task forces and crisis management teams provide decision-making guidance and coordination, including crisis management plans, protocols and playbooks, and contingency funding plans.

•

The Group Executive Board (the GEB) and the Board of Directors (the BoD) would evaluate and decide upon the need to activate the Global Recovery Plan (the GRP) if a stress event reached a severity requiring such activation, based on the GRP’s risk indicators.

•

FINMA has the authority to determine whether the point of non-viability (PONV) as defined by Swiss law has been reached and, as part of the resolution strategy, has the power to order the bail-in of creditors to recapitalize and stabilize the Group, limit payments of dividends and interest, alter our legal structure, take actions to reduce business risk, and order a restructuring of the bank.

LOGO


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Global Recovery Plan

The GRP provides a tool to restore financial strength if UBS comes under severe capital and liquidity stress. Quantitative and qualitative triggers are monitored daily and are subject to predefined governance and escalation processes. Recovery options are linked to owners and checklists, with the objectives of preserving capital, raising capital or liquidity, or disposing of or winding down businesses.

Global Resolution Strategy

FINMA is required to produce a global resolution plan for UBS. The plan includes setting out measures that FINMA can take to resolve UBS in an orderly manner if the Group enters into resolution. The SPE bail-in strategy would involve writing down the Group’s remaining equity and additional tier 1 and tier 2 instruments, as well as bail-in of total TLAC-eligible senior unsecured bonds at the UBS Group AG level. An internal recapitalization of undercapitalized subsidiaries would be made simultaneously with losses transmitted to UBS AG and, ultimately, UBS Group AG. Post-resolution restructuring measures could include disposal and winding down of businesses and assets.

Local recovery and resolution plans

The Swiss emergency plan demonstrates how UBS’s systemically important functions and critical operations in Switzerland can continue if the UBS Group cannot be restructured. This is achieved mainly by holding UBS Switzerland AG as a separate legal entity and maintaining sufficient capital and liquidity to ensure its continued operation. FINMA considers the plan to be effective.

The US resolution plan sets out the steps that could be taken to resolve the UBS Americas Holding LLC group if it suffered material financial distress and the UBS Group was unable or unwilling to provide financial support. As required by US regulations, our US plan contemplates that UBS Americas Holding LLC will commence US bankruptcy proceedings. Prior to this, the plan envisages UBS Americas Holding LLC down-streaming financial resources to subsidiaries to facilitate orderly wind-down or disposal of businesses.

UBS Europe SE develops a local recovery plan annually based on European Central Bank (ECB) requirements, and resolution planning information and capabilities based on Single Resolution Board requirements. On the basis of such information the Internal Resolution Team (IRT), composed of members of the Single Resolution Board, produces a resolution plan for UBS Europe SE.

Other local recovery and resolution plans exist for various Group entities and jurisdictions.

Regulatory and legal developments

Developments regarding prudential matters

In March 2022, the Swiss Financial Market Supervisory Authority (FINMA) presented its annual assessment of the recovery and resolution plans of systemically important financial institutions in Switzerland as part of the too-big-to-fail framework. In its report, FINMA acknowledged the further progress that UBS has made with regard to its global resolvability by significantly reducing the remaining obstacles to the implementation of its resolution strategy and making further improvements to its recovery plans. FINMA considered UBS’s global recovery plan and Swiss emergency plan to be effective, while identifying certain areas for further improvement, which UBS is in the process of addressing.

In parallel, the Swiss Federal Council announced the key parameters for a public liquidity backstop in conjunction with the revision of the Swiss Liquidity Ordinance. The liquidity backstop would enable the Swiss government and the Swiss National Bank to support the liquidity of a Swiss systemically important bank (SIB) in the process of resolution. The introduction of the backstop is intended to increase the confidence of market participants in the ability of SIBs to become successfully recapitalized and remain solvent in a crisis situation. The Swiss Federal Department of Finance (the FDF) is expected to issue a public consultation by mid-2023.

In July 2022, the revision of the Swiss Liquidity Ordinance became effective, which increases the regulatory minimum liquidity requirements for SIBs from 1 January 2024. The specific increase for UBS remains uncertain pending supervisory guidance from FINMA, which is expected to be communicated to the firm in the autumn of 2023. Related new and revised regulatory reporting requirements became effective from the fourth quarter of 2022 onward.


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In November 2022, the Swiss Federal Council adopted the amendments to the Banking Act and the Banking Ordinance, which entered into force as of 1 January 2023. The amendments enact insolvency provisions for banks into statutory law and strengthen the deposit insurance framework. They also replace the current resolvability discount on the gone concern capital requirements for SIBs, including UBS, with a reduced base gone concern capital requirement. In addition, FINMA has the authority to impose a surcharge of up to 25% of the base gone concern capital requirement should obstacles to a SIB’s resolvability be identified in future resolvability assessments. We currently expect that our total gone concern requirements will remain substantially unchanged in the first quarter of 2023 because of these changes.

In December 2022, the Swiss State Secretariat for International Finance changed the expected date on which the final Basel III guidelines are to enter into force, from 1 July 2024 to 1 January 2025. As a result, the Swiss implementation timeline would be aligned to the currently expected implementation timeline in the EU. We currently estimate that the revised Basel III framework would lead to a further net increase in risk-weighted assets (RWA) of around USD 12bn, before taking into account mitigating actions and not reflecting the impact of the output floor, which is phased in over time. Our estimate includes the finalization of the Basel III framework, as well as the Fundamental Review of the Trading Book, based on our current understanding of the relevant standards. It may change as a result of new or updated regulatory interpretations, appropriate conservatism in model calibration, the implementation of Basel III standards into national law, changes in business growth, market conditions and other factors. The final degree of alignment between the Swiss implementation and those in other jurisdictions, particularly those regarding the treatment of historical operational losses, remains uncertain at this stage.

In the US, the Securities and Exchange Commission (the SEC) has proposed a number of significant new and revised regulations, including, among others, proposals that would significantly change order execution rules in US public equity markets and new disclosure requirements relating to climate, cybersecurity and share repurchases, as well as changes relating to investment companies and investment advisors. On 15 February 2023, the SEC approved rule changes to shorten the settlement cycle for US markets to trade date +1, with the compliance date set as 28 May 2024.

US banking regulators are expected to adopt rules that would substantially change how banks’ service to low-income and underserved communities is evaluated under the Community Reinvestment Act, which, if adopted as currently proposed, would change measurement of this obligation for UBS Bank USA. The regulators further propose regulations to implement the remaining Basel III capital requirements, including the Fundamental Review of the Trading Book requirements. These requirements, when final, will affect UBS Americas Holding LLC.

The above proposals from the SEC and the US banking regulators represent a significant regulatory agenda, which, if completed in the near future, would likely require significant resources to implement.

Corporate taxation in Switzerland and the US

In December 2021, the Organisation for Economic Co-operation and Development (the OECD) issued Global Anti-Base Erosion Rules under the Pillar 2 framework. To address this, the Swiss Federal Council launched the consultation of the ordinance on the national implementation of a global minimum corporate tax rate in August 2022. The Federal Council has proposed a minimum tax rate of 15% for Swiss firms with global earnings above EUR 750m from January 2024. The OECD model rules will be transformed into Swiss national law following a constitutional amendment, which is subject to a mandatory referendum, expected by June 2023. We do not expect the proposed implementation of global minimum taxation in Switzerland to materially impact our effective tax rate.

As part of the Inflation Reduction Act (the IRA) passed by the US Congress in August 2022, a new corporate alternative minimum tax (CAMT) was introduced, with an effective date of 1 January 2023. CAMT is calculated as 15% of an entity’s consolidated financial statement profits, without taking into account pre-2019 tax loss carry-forwards. As a result, the Group is expected to incur significant US current tax expenses, although these will be offset by the recognition of equivalent benefits in respect of deferred tax assets. There is no change to the Group’s effective tax rate. CAMT will temporarily defer the accretion of profits to the Group’s common equity tier 1 (CET1) capital, but the amount of such deferral is expected to be recaptured in the future through the use of CAMT credits. The 2022 impact on the accretion of CET1 capital would have been around USD 250m.

Sanctions related to the Russia–Ukraine war

During 2022, the Swiss Federal Council adopted the EU sanctions against Russia. Recently issued measures provide, among other things, a legal basis for the introduction of price caps for Russian crude oil and petroleum, and include a ban on the provision of certain services to the Russian government and Russian companies. UBS’s sanctions programs are designed to comply with sanctions across multiple jurisdictions, including those imposed by the United Nations, Switzerland, the EU, the UK and the US.

Developments regarding environmental, social and governance matters

In 2022, environmental, social and governance (ESG) matters continued to evolve rapidly across different jurisdictions.

In June 2022, two new self-regulation minimum requirements were issued by the Swiss Bankers Association. One requirement sets standards for the consideration of sustainability criteria in the investment advisory process and the other regulates the mortgage advisory process. In parallel, the Swiss Federal Council launched the Swiss Climate Scores, which consist of six indicators that provide transparency regarding climate-related information, such as carbon emissions and the implied temperature increase of a portfolio.


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In September 2022, the Swiss Parliament adopted a new federal law on climate protection, including provisions related to emission-reduction pathways and interim targets. The law provides the legal basis for measures to support the transition to net zero in different economic sectors, including the financial sector. Subject to a referendum that will take place in June 2023, the new law is expected to enter into force in 2024.

The Swiss Federal Council adopted a revised ordinance on climate-related disclosures in November 2022, which will be mandatory for large companies domiciled in Switzerland as of 1 January 2024. The ordinance makes reference to the recommendations of the Task Force on Climate-related Financial Disclosures (the TCFD) and sets disclosure requirements related to the plans for the transition to net zero and regarding climate-related impacts on a company’s business activities. In parallel, FINMA has issued guidance on disclosures of climate-related financial risks and announced another review of climate-related disclosures in the course of 2023.

In December 2022, the Swiss Federal Council published a report on sustainability in the financial sector, in which it defined 15 measures planned to be implemented in the years 2023 to 2025. The measures aim to, among other things, ensure that more and better sustainability data is available from all sectors of the economy, in order to increase overall transparency. The Swiss government also adopted a position on greenwashing, stating that financial products or services should only be advertised as being sustainable if they are aligned with or contribute to at least one of the goals of the wider sustainability frameworks, such as the United Nations Sustainable Development Goals.

In January 2023, FINMA provided further guidance on the developments regarding the management of climate risks. FINMA reiterated its expectation that supervised institutions, including UBS, will establish adequate frameworks for managing climate-related financial risks that are adapted to the respective risk profile of the institution. In this context, FINMA expects the supervised financial institutions to proactively engage with the recommendations and guidance provided by international bodies, such as the BCBS and its Principles for the Effective Management and Supervision of Climate-Related Financial Risks issued in June 2023, as well as relevant best practices in the market, and to further develop their tools and processes where necessary.

In April 2022, the SEC proposed rules on climate-related disclosures. The proposed rules would require qualitative disclosures on climate risk management processes inclusive of governance, risk identification and scenario analyses, and quantitative disclosures on greenhouse gas emissions and financial statement impacts.

The European Commission (the EC) proposed draft legislation on corporate sustainability due diligence in February 2022, requiring companies to identify and, where necessary, prevent, end or mitigate adverse impacts of their activities on human rights and the environment. The EC also published a consultation aiming to gain a better understanding of the functioning of ESG ratings provided by specialized rating agencies.

In November 2022, the EU finalized the Corporate Sustainability Reporting Directive, which amends the reporting requirements of the 2014 Non-Financial Reporting Directive for all large companies and all companies listed on regulated markets in the EU. It requires the first companies, including UBS, to provide detailed information about sustainability matters in their annual financial reports from the 2024 fiscal year onward, including the impact of their business activities on sustainability matters and the influence of sustainability factors (e.g., climate change or human rights issues) on their business model, outlook and operations. The Swiss Federal Council decided to review the impact of the EU rules on Switzerland with a consultation planned for July 2024 at the latest.

On a global level, the International Sustainability Standards Board (the ISSB) launched a consultation in March 2022 on two of its proposed standards: one defining general sustainability-related disclosure requirements and the other specifying climate-related disclosure requirements. Based on the results of this consultation, the ISSB decided to adopt disclosure standards on greenhouse gas emissions, to introduce scenarios for reporting on climate resilience and to identify climate-related risks and opportunities. The ISSB is expected to finalize its standards by June 2023.

We expect to implement the standards and requirements that are applicable to us by their respective due dates.

FINMA revision of Circular 2008/21 “Operational risks and resilience – banks”

In December 2022, FINMA issued a revised “Operational risks and resilience – banks” circular that incorporates the BCBS’s new Principles on Operational Resilience into the FINMA framework, including information and communication technology risk, cyber risk, critical data risk, business continuity management, cross-border business service risk, and the continuation of critical services during resolution and recovery. A two-year transition period has been granted for the implementation of the requirements on ensuring operational resilience, with the first elements on critical functions and disruption tolerance required to be in place by 1 January 2024 and the remaining elements in phases until 1 January 2026.

Swiss Federal Council approval of the revised Anti-Money Laundering Act

In August 2022, the Swiss Federal Council revised the Swiss Anti-Money Laundering Act and amended the Anti-Money Laundering Ordinance, which became effective on 1 January 2023. Among other things, the revised provisions will affect reporting requirements, as well as requirements to periodically review all clients and client data.


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Risk factors

Certain risks, including those described below, may affect our ability to execute our strategy or our business activities, financial condition, results of operations and prospects. We are inherently exposed to multiple risks, many of which may become apparent only with the benefit of hindsight. As a result, risks that we do not consider to be material, or of which we are not currently aware, could also adversely affect us. Within each category, the risks that we consider to be most material are presented first.

Market, credit and macroeconomic risks

Performance in the financial services industry is affected by market conditions and the macroeconomic climate

Our businesses are materially affected by market and macroeconomic conditions. A market downturn and weak macroeconomic conditions can be precipitated by a number of factors, including geopolitical events, such as international armed conflicts, war, or acts of terrorism, the imposition of sanctions, global trade or global supply chain disruptions, including energy shortages and food insecurity, changes in monetary or fiscal policy, changes in trade policies or international trade disputes, significant inflationary or deflationary price changes, disruptions in one or more concentrated economic sectors, natural disasters, pandemics or local and regional civil unrest. Such developments can have unpredictable and destabilizing effects.

Adverse changes in interest rates, credit spreads, securities prices, market volatility and liquidity, foreign exchange rates, commodity prices, and other market fluctuations, as well as changes in investor sentiment, can affect our earnings and ultimately our financial and capital positions. As financial markets are global and highly interconnected, local and regional events can have widespread effects well beyond the countries in which they occur. Any of these developments may adversely affect our business or financial results.

As a result of significant volatility in the market, our businesses may experience a decrease in client activity levels and market volumes, which would adversely affect our ability to generate transaction fees, commissions and margins, particularly in Global Wealth Management and the Investment Bank. A market downturn would likely reduce the volume and valuation of assets that we manage on behalf of clients, which would reduce recurring fee income that is charged based on invested assets, primarily in Global Wealth Management and Asset Management, and performance-based fees in Asset Management. Such a downturn could also cause a decline in the value of assets that we own and account for as investments or trading positions. In addition, reduced market liquidity or volatility may limit trading opportunities and may therefore reduce transaction-based income and may also impede our ability to manage risks.

Geopolitical events: For example, the Russia–Ukraine war has led to one of the largest humanitarian crises in decades, with millions of people displaced, a mass exodus of businesses from Russia, and heightened volatility across global markets. In addition, as a result of the war, several jurisdictions, including the US, the EU, the UK, Switzerland and others, have imposed extensive sanctions on Russia and Belarus and certain Russian and Belarusian entities and nationals, as well as the Russian Central Bank. Among others, the financial sanctions include barring certain Russian banks from using the Society for Worldwide Interbank Financial Telecommunication (SWIFT) messaging system, asset freezes for sanctioned individuals and corporations, limits on financial transactions with sanctioned entities and individuals, and limitation of deposits in the EU and Switzerland from Russian persons not entitled to residency in the European Economic Area (the EEA) or Switzerland. The scale of the conflict and the speed and extent of sanctions may produce many of the effects described in the paragraph above, including in ways that cannot now be anticipated.

If individual countries impose restrictions on cross-border payments or trade, or other exchange or capital controls, or change their currency (for example, if one or more countries should leave the Eurozone, as a result of the imposition of sanctions on individuals, entities or countries, or escalation of trade restrictions and other actions between the US, or other countries, and China), we could suffer adverse effects on our business, losses from enforced default by counterparties, be unable to access our own assets or be unable to effectively manage our risks.

We could be materially affected if a crisis develops, regionally or globally, as a result of disruptions in markets due to macroeconomic or political developments, trade restrictions, or the failure of a major market participant. Over time, our strategic plans have become more heavily dependent on our ability to generate growth and revenue in emerging markets, including China, causing us to be more exposed to the risks associated with such markets.

Global Wealth Management derives revenues from all the principal regions, but has a greater concentration in Asia than many peers and a substantial presence in the US, unlike many European peers. The Investment Bank’s business is more heavily weighted to Europe and Asia than our peers, while its derivatives business is more heavily weighted to structured products for wealth management clients, in particular with European and Asian underlyings. Our performance may therefore be more affected by political, economic and market developments in these regions and businesses than some other financial service providers.

Annual Report 2022 | Our strategy, business model and environment | Risk factors

COVID-19 pandemic: The COVID-19 pandemic, the governmental measures taken to manage it, and related effects, such as labor market displacements, supply chain disruptions, and inflationary pressures, have adversely affected, and may still adversely affect, global and regional economic conditions, resulting in contraction in the global economy, substantial volatility in the financial markets, crises in markets for goods and services, as well as significant disruptions in certain regional real estate markets, increased unemployment, increased credit and counterparty risk, and operational challenges. While in most jurisdictions the pandemic-related governmental measures were reversed, resurgence of the pandemic, ineffectiveness of vaccines and continuance or imposition of new pandemic control measures may result in additional adverse effects on the global economy negatively affecting UBS’s results of operations and financial condition. Should inflationary pressures or other adverse global market conditions persist, or should the pandemic lead to additional economic or market disruptions, we may experience reduced levels of client activity and demand for our products and services, increased utilization of lending commitments, significantly increased client defaults, continued and increasing credit and valuation losses in our loan portfolios, loan commitments and other assets, and impairments of other financial assets. A fall in equity markets and a consequent decline in invested assets would also reduce recurring fee income in our Global Wealth Management and Asset Management businesses, as UBS experienced in the second quarter of 2022. These factors and other consequences of the COVID-19 pandemic may negatively affect our financial condition, including possible constraints on capital and liquidity, as well as a higher cost of capital, and possible downgrades to our credit ratings.

The extent to which the pandemic, the ongoing Russia–Ukraine war, and current inflationary pressures and related adverse economic conditions affect our businesses, results of operations and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, including the effects of the current conditions on our clients, counterparties, employees and third-party service providers.

Our credit risk exposure to clients, trading counterparties and other financial institutions would increase under adverse or other economic conditions

Credit risk is an integral part of many of our activities, including lending, underwriting and derivatives activities. Adverse economic or market conditions, or the imposition of sanctions or other restrictions on clients, counterparties or financial institutions, may lead to impairments and defaults on these credit exposures. Losses may be exacerbated by declines in the value of collateral securing loans and other exposures. In our prime brokerage, securities finance and Lombard lending businesses, we extend substantial amounts of credit against securities collateral, the value or liquidity of which may decline rapidly. Market closures and the imposition of exchange controls, sanctions or other measures may limit our ability to settle existing transactions or to realize on collateral, which may result in unexpected increases in exposures. Our Swiss mortgage and corporate lending portfolios are a large part of our overall lending. We are therefore exposed to the risk of adverse economic developments in Switzerland, including property valuations in the housing market, the strength of the Swiss franc and its effect on Swiss exports, return to negative interest rates applied by the Swiss National Bank, economic conditions within the Eurozone or the EU, and the evolution of agreements between Switzerland and the EU or EEA, which represent Switzerland’s largest export market. We have exposures related to real estate in various countries, including a substantial Swiss mortgage portfolio. Although we believe this portfolio is prudently managed, we could nevertheless be exposed to losses if a substantial deterioration in the Swiss real estate market were to occur.

As we experienced in 2020, under the IFRS 9 expected credit loss (ECL) regime, credit loss expenses may increase rapidly at the onset of an economic downturn as a result of higher levels of credit impairments (stage 3), as well as higher ECL from stages 1 and 2. Substantial increases in ECL could exceed expected loss for regulatory capital purposes and adversely affect our common equity tier 1 (CET1) capital and regulatory capital ratios.

Interest rate trends and changes could negatively affect our financial results

UBS’s businesses are sensitive to changes in interest rate trends. A prolonged period of low or negative interest rates, particularly in Switzerland and the Eurozone, adversely affected the net interest income generated by UBS’s Personal & Corporate Banking and Global Wealth Management businesses prior to 2022. Actions that UBS took to mitigate adverse effects on income, such as the introduction of selective deposit fees or minimum lending rates, contributed to outflows of customer deposits (a key source of funding for UBS), net new money outflows and a declining market share in its Swiss lending business.

During 2022, interest rates increased sharply in the US and most other markets, including a shift from negative to positive central bank policy rates in the Eurozone and Switzerland, as central banks responded to higher inflation. Higher interest rates generally benefit UBS’s net interest income. However, as returns on alternatives to deposits increase with rising interest rates, such as returns on money market funds, UBS has experienced outflows from customer deposits and shifts of deposits from lower-interest account types to accounts bearing higher interest rates, such as savings and certificates of deposit, particularly in the US, where rates have rapidly increased. Customer deposit outflows may require UBS to obtain alternative funding, which would likely be more costly than customer deposits.

Our shareholders’ equity and capital are also affected by changes in interest rates.

Annual Report 2022 | Our strategy, business model and environment | Risk factors

Currency fluctuation may have an adverse effect on our profits, balance sheet and regulatory capital

We are subject to currency fluctuation risks. Although our change from the Swiss franc to the US dollar as our Group presentation currency in 2018 reduces our exposure to currency fluctuation risks with respect to the Swiss franc, a substantial portion of our assets and liabilities are denominated in currencies other than the US dollar. Additionally, in order to hedge our CET1 capital ratio, our CET1 capital must have foreign currency exposure, which leads to currency sensitivity. As a consequence, it is not possible to simultaneously fully hedge both the amount of capital and the capital ratio. Accordingly, changes in foreign exchange rates may adversely affect our profits, balance sheet, and capital, leverage and liquidity coverage ratios.

Regulatory and legal risks

Material legal and regulatory risks arise in the conduct of our business

As a global financial services firm operating in more than 50 countries, we are subject to many different legal, tax and regulatory regimes, including extensive regulatory oversight, and are exposed to significant liability risk. We are subject to a large number of claims, disputes, legal proceedings and government investigations, and we expect that our ongoing business activities will continue to give rise to such matters in the future. The extent of our financial exposure to these and other matters is material and could substantially exceed the level of provisions that we have established. We are not able to predict the financial and non-financial consequences these matters may have when resolved.

We may be subject to adverse preliminary determinations or court decisions that may negatively affect public perception and our reputation, result in prudential actions from regulators, and cause us to record additional provisions for such matters even when we believe we have substantial defenses and expect to ultimately achieve a more favorable outcome. This risk is illustrated by the award of aggregate penalties and damages of EUR 4.5bn by the court of first instance in France. This award was reduced to an aggregate of EUR 1.8bn by the Court of Appeal, and UBS has further appealed this judgment.

Resolution of regulatory proceedings may require us to obtain waivers of regulatory disqualifications to maintain certain operations, may entitle regulatory authorities to limit, suspend or terminate licenses and regulatory authorizations, and may permit financial market utilities to limit, suspend or terminate our participation in them. Failure to obtain such waivers, or any limitation, suspension or termination of licenses, authorizations or participations, could have material adverse consequences for us.

Our settlements with governmental authorities in connection with foreign exchange, London Interbank Offered Rates (LIBOR) and other benchmark interest rates starkly illustrate the significantly increased level of financial and reputational risk now associated with regulatory matters in major jurisdictions. In connection with investigations related to LIBOR and other benchmark rates and to foreign exchange and precious metals, very large fines and disgorgement amounts were assessed against us, and we were required to enter guilty pleas despite our full cooperation with the authorities in the investigations, and despite our receipt of conditional leniency or conditional immunity from anti-trust authorities in a number of jurisdictions, including the US and Switzerland.

For a number of years, we have been, and we continue to be, subject to a very high level of regulatory scrutiny and to certain regulatory measures that constrain our strategic flexibility. We believe we have remediated the deficiencies that led to significant losses in the past and made substantial changes in our controls and conduct risk frameworks to address the issues highlighted by the LIBOR-related, foreign exchange and precious metals regulatory resolutions. We have also undertaken extensive efforts to implement new regulatory requirements and meet heightened expectations.

We continue to be in active dialogue with regulators concerning the actions we are taking to improve our operational risk management, risk control, anti-money laundering, data management and other frameworks, and otherwise seek to meet supervisory expectations, but there can be no assurance that our efforts will have the desired effects. As a result of this history, our level of risk with respect to regulatory enforcement may be greater than that of some of our peers.

Substantial changes in regulation may adversely affect our businesses and our ability to execute our strategic plans

Since the financial crisis of 2008, we have been subject to significant regulatory requirements, including recovery and resolution planning, changes in capital and prudential standards, changes in taxation regimes as a result of changes in governmental administrations, new and revised market standards and fiduciary duties, as well as new and developing environmental, social and governance standards and requirements. Notwithstanding attempts by regulators to align their efforts, the measures adopted or proposed for banking regulation differ significantly across the major jurisdictions, making it increasingly difficult to manage a global institution. In addition, Swiss regulatory changes with regard to such matters as capital and liquidity have often proceeded more quickly than those in other major jurisdictions, and Switzerland’s requirements for major international banks are among the strictest of the major financial centers. This could put Swiss banks, such as UBS, at a disadvantage when competing with peer financial institutions subject to more lenient regulation or with unregulated non-bank competitors.

Our implementation of additional regulatory requirements and changes in supervisory standards, as well as our compliance with existing laws and regulations, continue to receive heightened scrutiny from supervisors. If we do not meet supervisory expectations in relation to these or other matters, or if additional supervisory or regulatory issues arise, we would likely be subject to further regulatory scrutiny, as well as measures that may further constrain our strategic flexibility.

Annual Report 2022 | Our strategy, business model and environment | Risk factors

Resolvability and resolution and recovery planning: We have moved significant operations into subsidiaries to improve resolvability and meet other regulatory requirements, and this has resulted in substantial implementation costs, increased our capital and funding costs and reduced operational flexibility. For example, we have transferred all of our US subsidiaries under a US intermediate holding company to meet US regulatory requirements, and have transferred substantially all the operations of Personal & Corporate Banking and Global Wealth Management booked in Switzerland to UBS Switzerland AG to improve resolvability.

These changes create operational, capital, liquidity, funding and tax inefficiencies. Our operations in subsidiaries are subject to local capital, liquidity, stable funding, capital planning and stress testing requirements. These requirements have resulted in increased capital and liquidity requirements in affected subsidiaries, which limit our operational flexibility and negatively affect our ability to benefit from synergies between business units and to distribute earnings to the Group.

Under the Swiss too-big-to-fail (TBTF) framework, we are required to put in place viable emergency plans to preserve the operation of systemically important functions in the event of a failure. Moreover, under this framework and similar regulations in the US, the UK, the EU and other jurisdictions in which we operate, we are required to prepare credible recovery and resolution plans detailing the measures that would be taken to recover in a significant adverse event or in the event of winding down the Group or the operations in a host country through resolution or insolvency proceedings. If a recovery or resolution plan that we produce is determined by the relevant authority to be inadequate or not credible, relevant regulation may permit the authority to place limitations on the scope or size of our business in that jurisdiction, or oblige us to hold higher amounts of capital or liquidity or to change our legal structure or business in order to remove the relevant impediments to resolution.

Capital and prudential standards: As an internationally active Swiss systemically relevant bank (an SRB), we are subject to capital and total loss-absorbing capacity (TLAC) requirements that are among the most stringent in the world. Moreover, many of our subsidiaries must comply with minimum capital, liquidity and similar requirements and, as a result, UBS Group AG and UBS AG have contributed a significant portion of their capital and provide substantial liquidity to these subsidiaries. These funds are available to meet funding and collateral needs in the relevant entities, but are generally not readily available for use by the Group as a whole.

We expect our risk-weighted assets (RWA) to further increase as the effective date for additional capital standards promulgated by the Basel Committee on Banking Supervision (the BCBS) draws nearer.

Increases in capital and liquidity standards could significantly curtail our ability to pursue strategic opportunities or to return capital to shareholders.

Market regulation and fiduciary standards: Our wealth and asset management businesses operate in an environment of increasing regulatory scrutiny and changing standards with respect to fiduciary and other standards of care and the focus on mitigating or eliminating conflicts of interest between a manager or advisor and the client, which require effective implementation across the global systems and processes of investment managers and other industry participants. For example, we have made material changes to our business processes, policies and the terms on which we interact with these clients in order to comply with SEC Regulation Best Interest, which is intended to enhance and clarify the duties of brokers and investment advisers to retail customers, the Volcker Rule, which limits our ability to engage in proprietary trading, as well as changes in European and Swiss market conduct regulation. Future changes in the regulation of our duties to customers may require us to make further changes to our businesses, which would result in additional expense and may adversely affect our business. We may also become subject to other similar regulations substantively limiting the types of activities in which we may engage or the way we conduct our operations.

In many instances, we provide services on a cross-border basis, and we are therefore sensitive to barriers restricting market access for third-country firms. In particular, efforts in the EU to harmonize the regime for third-country firms to access the European market may have the effect of creating new barriers that adversely affect our ability to conduct business in these jurisdictions from Switzerland. In addition, a number of jurisdictions are increasingly regulating cross-border activities based on determinations of equivalence of home country regulation, substituted compliance or similar principles of comity. A negative determination with respect to Swiss equivalence could limit our access to the market in those jurisdictions and may negatively influence our ability to act as a global firm. For example, the EU declined to extend its equivalence determination for Swiss exchanges, which lapsed as of 30 June 2019.

UBS experienced cross-border outflows over a number of years as a result of heightened focus by fiscal authorities on cross-border investment and fiscal amnesty programs, in anticipation of the implementation in Switzerland of the global automatic exchange of tax information, and as a result of the measures UBS has implemented in response to these changes. Further changes in local tax laws or regulations and their enforcement, additional cross-border tax information exchange regimes, national tax amnesty or enforcement programs or similar actions may affect our clients’ ability or willingness to do business with us and could result in additional cross-border outflows.

Annual Report 2022 | Our strategy, business model and environment | Risk factors

If we experience financial difficulties, FINMA has the power to open restructuring or liquidation proceedings or impose protective measures in relation to UBS Group AG, UBS AG or UBS Switzerland AG, and such proceedings or measures may have a material adverse effect on our shareholders and creditors

Under the Swiss Banking Act, FINMA is able to exercise broad statutory powers with respect to Swiss banks and Swiss parent companies of financial groups, such as UBS Group AG, UBS AG and UBS Switzerland AG, if there is justified concern that the entity is over-indebted, has serious liquidity problems or, after the expiration of any relevant deadline, no longer fulfills capital adequacy requirements. Such powers include ordering protective measures, instituting restructuring proceedings (and exercising any Swiss resolution powers in connection therewith), and instituting liquidation proceedings, all of which may have a material adverse effect on shareholders and creditors or may prevent UBS Group AG, UBS AG or UBS Switzerland AG from paying dividends or making payments on debt obligations.

UBS would have limited ability to challenge any such protective measures, and creditors and shareholders would also have limited ability under Swiss law or in Swiss courts to reject them, seek their suspension, or challenge their imposition, including measures that require or result in the deferment of payments.

If restructuring proceedings are opened with respect to UBS Group AG, UBS AG or UBS Switzerland AG, the resolution powers that FINMA may exercise include the power to: (i) transfer all or some of the assets, debt and other liabilities, and contracts of the entity subject to proceedings to another entity; (ii) stay for a maximum of two business days (a) the termination of, or the exercise of rights to terminate, netting rights, (b) rights to enforce or dispose of certain types of collateral or (c) rights to transfer claims, liabilities or certain collateral, under contracts to which the entity subject to proceedings is a party; and / or (iii) partially or fully write down the equity capital and regulatory capital instruments and, if such regulatory capital is fully written down, write down or convert into equity the other debt instruments of the entity subject to proceedings. Shareholders and creditors would have no right to reject, or to seek the suspension of, any restructuring plan pursuant to which such resolution powers are exercised. They would have only limited rights to challenge any decision to exercise resolution powers or to have that decision reviewed by a judicial or administrative process or otherwise.

Upon full or partial write-down of the equity and regulatory capital instruments of the entity subject to restructuring proceedings, the relevant shareholders and creditors would receive no payment in respect of the equity and debt that is written down, the write-down would be permanent, and the investors would likely not, at such time or at any time thereafter, receive any shares or other participation rights, or be entitled to any write-up or any other compensation in the event of a potential subsequent recovery of the debtor. If FINMA orders the conversion of debt of the entity subject to restructuring proceedings into equity, the securities received by the investors may be worth significantly less than the original debt and may have a significantly different risk profile. In addition, creditors receiving equity would be effectively subordinated to all creditors of the restructured entity in the event of a subsequent winding up, liquidation or dissolution of the restructured entity, which would increase the risk that investors would lose all or some of their investment.

FINMA has significant discretion in the exercise of its powers in connection with restructuring proceedings. Furthermore, certain categories of debt obligations, such as certain types of deposits, are subject to preferential treatment. As a result, holders of obligations of an entity subject to a Swiss restructuring proceeding may have their obligations written down or converted into equity even though obligations ranking on par with such obligations are not written down or converted.

Developments in sustainability, climate, environmental and social standards and regulations may affect our business and impact our ability to fully realize our goals

We have set ambitious goals for environmental, social and governance (ESG) matters. These goals include our ambitions for environmental sustainability in our operations, including carbon emissions, in the business we do with clients and in products that we offer. They also include goals or ambitions for diversity in our workforce and supply chain, and support for the United Nations Sustainable Development Goals. There is substantial uncertainty as to the scope of actions that may be required of us, governments and others to achieve the goals we have set, and many of our goals and objectives are only achievable with a combination of government and private action. National and international standards and expectations, industry and scientific practices, and regulatory taxonomies and disclosure obligations addressing these matters are relatively immature and are rapidly evolving. In many cases, goals and standards are defined at a high level and can be subject to different interpretations. In addition, there are significant limitations in the data available to measure our climate and other goals. Although we have defined and disclosed our goals based on the standards existing at the time of disclosure, there can be no assurance (i) that the various ESG regulatory and disclosure regimes under which we operate will not come into conflict with one another, (ii) that the current standards will not be interpreted differently than our understanding or change in a manner that substantially increases the cost or effort for us to achieve such goals or (iii) that additional data or methods, whether voluntary or required by regulation, may substantially change our calculation of our goals and aspirations. It is possible that such goals may prove to be considerably more difficult or even impossible to achieve. The evolving standards may also require us to substantially change the stated goals and ambitions. If we are not able to achieve the goals we have set, or can only do so at significant expense to our business, we may fail to meet regulatory expectations, incur damage to our reputation or be exposed to an increased risk of litigation or other adverse action.

Annual Report 2022 | Our strategy, business model and environment | Risk factors

While ESG regulatory regimes and international standards are being developed, including to require consideration of ESG risks in investment decisions, some jurisdictions, notably in the US, have developed rules restricting the consideration of ESG factors in investment and business decisions. Under these anti-ESG rules, companies that are perceived as boycotting or discriminating against certain industries may be restricted from doing business with certain governmental entities. Our businesses may be adversely affected if UBS is considered as discriminating against companies based on ESG considerations, or if further anti-ESG rules are developed or broadened.

Our financial results may be negatively affected by changes to assumptions and valuations, as well as changes to accounting standards

We prepare our consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). The application of these accounting standards requires the use of judgment based on estimates and assumptions that may involve significant uncertainty at the time they are made. This is the case, for example, with respect to the measurement of fair value of financial instruments, the recognition of deferred tax assets (DTAs), the assessment of the impairment of goodwill, expected credit losses and estimation of provisions for litigation, regulatory and similar matters. Such judgments, including the underlying estimates and assumptions, which encompass historical experience, expectations of the future and other factors, are regularly evaluated to determine their continuing relevance based on current conditions. Using different assumptions could cause the reported results to differ. Changes in assumptions, or failure to make the changes necessary to reflect evolving market conditions, may have a significant effect on the financial statements in the periods when changes occur. Estimates of provisions may be subject to a wide range of potential outcomes and significant uncertainty. For example, the broad range of potential outcomes in our legal proceedings in France and in the US relating to residential mortgage-backed securities increase the uncertainty associated with assessing the appropriate provision. If the estimates and assumptions in future periods deviate from the current outlook, our financial results may also be negatively affected.

Changes to IFRS or interpretations thereof may cause future reported results and financial position to differ from current expectations, or historical results to differ from those previously reported due to the adoption of accounting standards on a retrospective basis. Such changes may also affect our regulatory capital and ratios. For example, the introduction of the ECL regime under IFRS 9 in 2018 fundamentally changed how credit risk arising from loans, loan commitments, guarantees and certain revocable facilities is accounted for. Under the ECL regime, credit loss expenses may increase rapidly at the onset of an economic downturn as a result of higher levels of credit impairments (stage 3), as well as higher ECL from stages 1 and 2, only gradually diminishing once the economic outlook improves. As we observed in 2020, this effect may be more pronounced in a deteriorating economic environment. Substantial increases in ECL could exceed expected loss for regulatory capital purposes and adversely affect our CET1 capital and regulatory capital ratios.

We may be unable to maintain our capital strength

Capital strength enables us to grow our businesses and absorb increases in regulatory and capital requirements. It reassures our clients and stakeholders, allows us to maintain our capital return policy and contributes to our credit ratings. Our capital and leverage ratios are driven primarily by RWA, the leverage ratio denominator and eligible capital, all of which may fluctuate based on a number of factors, some of which are outside of our control. Our ability to maintain our capital ratios is subject to numerous risks, including the financial results of our businesses, the effect of changes to capital standards, methodologies and interpretations that may adversely affect the calculation of our capital ratios, the imposition of risk add-ons or capital buffers, and the application of additional capital, liquidity and similar requirements to subsidiaries. The results of our businesses may be adversely affected by events arising from other risk factors described herein. In some cases, such as litigation and regulatory risk and operational risk events, losses may be sudden and large. These risks could reduce the amount of capital available for return to shareholders and hinder our ability to achieve our capital returns target of a progressive cash dividend coupled with a share repurchase program.

Our eligible capital may be reduced by losses recognized within net profit or other comprehensive income. Eligible capital may also be reduced for other reasons, including acquisitions that change the level of goodwill, changes in temporary differences related to DTAs included in capital, adverse currency movements affecting the value of equity, prudential adjustments that may be required due to the valuation uncertainty associated with certain types of positions, changes in regulatory interpretations on the inclusion or exclusion of items contributing to our shareholders equity in regulatory capital, and changes in the value of certain pension fund assets and liabilities or in the interest rate and other assumptions used to calculate the changes in our net defined benefit obligation recognized in other comprehensive income.

RWA are driven by our business activities, by changes in the risk profile of our exposures, by changes in our foreign currency exposures and foreign exchange rates, and by regulation. For instance, substantial market volatility, a widening of credit spreads, adverse currency movements, increased counterparty risk, deterioration in the economic environment or increased operational risk could result in an increase in RWA. Changes in the calculation of RWA, the imposition of additional supplemental RWA charges or multipliers applied to certain exposures and other methodology changes, as well as the finalization of the Basel III framework and Fundamental Review of the Trading Book promulgated by the BCBS, which are expected to increase our RWA.

The leverage ratio is a balance sheet-driven measure and therefore limits balance sheet-intensive activities, such as lending, more than activities that are less balance sheet intensive, and it may constrain our business even if we satisfy other risk-based capital requirements. Our leverage ratio denominator is driven by, among other things, the level of client activity, including deposits and loans, foreign exchange rates, interest rates and other market factors. Many of these factors are wholly or partly outside of our control.

Annual Report 2022 | Our strategy, business model and environment | Risk factors

The effect of taxes on our financial results is significantly influenced by tax law changes and reassessments of our deferred tax assets

Our effective tax rate is highly sensitive to our performance, our expectation of future profitability and any potential increases or decreases in statutory tax rates, such as any potential increase in the US federal corporate tax rate. Furthermore, based on prior years’ tax losses, we have recognized DTAs reflecting the probable recoverable level based on future taxable profit as informed by our business plans. If our performance is expected to produce diminished taxable profit in future years, particularly in the US, we may be required to write down all or a portion of the currently recognized DTAs through the income statement in excess of anticipated amortization. This would have the effect of increasing our effective tax rate in the year in which any write-downs are taken. Conversely, if we expect the performance of entities in which we have unrecognized tax losses to improve, particularly in the US or the UK, we could potentially recognize additional DTAs. The effect of doing so would be to reduce our effective tax rate in years in which additional DTAs are recognized and to increase our effective tax rate in future years. Our effective tax rate is also sensitive to any future reductions in statutory tax rates, particularly in the US, which would cause the expected future tax benefit from items such as tax loss carry-forwards in the affected locations to diminish in value. This, in turn, would cause a write-down of the associated DTAs. Conversely, an increase in US corporate tax rates would result in an increase in the Group’s DTAs.

We generally revalue our DTAs in the fourth quarter of the financial year based on a reassessment of future profitability taking into account our updated business plans. We consider the performance of our businesses and the accuracy of historical forecasts, tax rates and other factors in evaluating the recoverability of our DTAs, including the remaining tax loss carry-forward period and our assessment of expected future taxable profits over the life of DTAs. Estimating future profitability is inherently subjective and is particularly sensitive to future economic, market and other conditions, which are difficult to predict.

Our results in past years have demonstrated that changes in the recognition of DTAs can have a very significant effect on our reported results. Any future change in the manner in which UBS remeasures DTAs could affect UBS’s effective tax rate, particularly in the year in which the change is made.

Our full-year effective tax rate could change if aggregate tax expenses in respect of profits from branches and subsidiaries without loss coverage differ from what is expected, or if branches and subsidiaries generate tax losses that we cannot benefit from through the income statement. In particular, losses at entities or branches that cannot offset for tax purposes taxable profits in other Group entities, and which do not result in additional DTA recognition, may increase our effective tax rate. In addition, tax laws or the tax authorities in countries where we have undertaken legal structure changes may cause entities to be subject to taxation as permanent establishments or may prevent the transfer of tax losses incurred in one legal entity to newly organized or reorganized subsidiaries or affiliates or may impose limitations on the utilization of tax losses that relate to businesses formerly conducted by the transferor. Were this to occur in situations where there were also limited planning opportunities to utilize the tax losses in the originating entity, the DTAs associated with such tax losses may be required to be written down through the income statement.

Changes in tax law may materially affect our effective tax rate, and, in some cases, may substantially affect the profitability of certain activities. In addition, statutory and regulatory changes, as well as changes to the way in which courts and tax authorities interpret tax laws, including assertions that we are required to pay taxes in a jurisdiction as a result of activities connected to that jurisdiction constituting a permanent establishment or similar theory, and changes in our assessment of uncertain tax positions, could cause the amount of taxes we ultimately pay to materially differ from the amount accrued.

Strategy, management and operational risks

Operational risks affect our business

Our businesses depend on our ability to process a large number of transactions, many of which are complex, across multiple and diverse markets in different currencies, to comply with requirements of many different legal and regulatory regimes to which we are subject and to prevent, or promptly detect and stop, unauthorized, fictitious or fraudulent transactions. We also rely on access to, and on the functioning of, systems maintained by third parties, including clearing systems, exchanges, information processors and central counterparties. Any failure of our or third-party systems could have an adverse effect on us. These risks may be greater as we deploy newer technologies, such as blockchain, or processes, platforms or products that rely on these technologies. Our operational risk management and control systems and processes are designed to help ensure that the risks associated with our activities – including those arising from process error, failed execution, misconduct, unauthorized trading, fraud, system failures, financial crime, cyberattacks, breaches of information security, inadequate or ineffective access controls and failure of security and physical protection – are appropriately controlled. If our internal controls fail or prove ineffective in identifying and remedying these risks, we could suffer operational failures that might result in material losses, such as the substantial loss we incurred from the unauthorized trading incident announced in September 2011.

As a significant proportion of our staff have been and will continue working from outside the office, we have faced, and will continue to face, new challenges and operational risks, including maintenance of supervisory and surveillance controls, as well as increased fraud and data security risks. While we have taken measures to manage these risks, such measures have never been tested on the scale or duration that we are currently experiencing, and there is risk that these measures will prove not to have been effective in the current unprecedented operating environment.

Annual Report 2022 | Our strategy, business model and environment | Risk factors

We use automation as part of our efforts to improve efficiency, reduce the risk of error and improve our client experience. We intend to expand the use of robotic processing, machine learning and artificial intelligence to further these goals. Use of these tools presents their own risks, including the need for effective design and testing; the quality of the data used for development and operation of machine learning and artificial intelligence tools may adversely affect their functioning and result in errors and other operational risks.

For financial institutions, cybersecurity risks have increased due to the widespread use of digital technologies, cloud computing and mobile devices to conduct financial business and transactions. In addition, cyberattacks by hackers, terrorists, criminal organizations, nation states and extremists have also increased in frequency and sophistication. Current geopolitical tensions have also led to increased risk of cyberattack from foreign state actors. In particular, the Russia–Ukraine war and the imposition of significant sanctions on Russia by Switzerland, the US, the EU, the UK and others has resulted and may continue to result in an increase in the risk of cyberattacks.

Financial services firms have increasingly been subject to breaches of security and to cyber- and other forms of attack, some of which are sophisticated and targeted attacks intended to gain access to confidential information or systems, disrupt service or steal or destroy data. These attacks may occur on our own systems or on the systems that are operated by external service providers, may be attempted through the introduction of “ransomware,” viruses or malware, phishing and other forms of social engineering, distributed denial of service attacks and other means. These attempts may occur directly, or using equipment or security passwords of our employees, third-party service providers or other users. In addition to external attacks, we have experienced loss of client data from failure by employees and others to follow internal policies and procedures and from misappropriation of our data by employees and others. We may not be able to anticipate, detect or recognize threats to our systems or data and our preventative measures may not be effective to prevent an attack or a security breach. In the event of a security breach, notwithstanding our preventative measures, we may not immediately detect a particular breach or attack. Once a particular attack is detected, time may be required to investigate and assess the nature and extent of the attack, and to restore and test systems and data. If a successful attack occurs at a service provider, as we have recently experienced, we may be dependent on the service provider’s ability to detect the attack, investigate and assess the attack and successfully restore the relevant systems and data. A successful breach or circumvention of security of our or a service provider’s systems or data could have significant negative consequences for us, including disruption of our operations, misappropriation of confidential information concerning us or our clients, damage to our systems, financial losses for us or our clients, violations of data privacy and similar laws, litigation exposure and damage to our reputation. We may be subject to enforcement actions as regulatory focus on cybersecurity increases and regulators have announced new rules, guidance and initiatives on ransomware and other cybersecurity-related issues.

We are subject to complex and frequently changing laws and regulations governing the protection of client and personal data, such as the EU General Data Protection Regulation. Ensuring that we comply with applicable laws and regulations when we collect, use and transfer personal information requires substantial resources and may affect the ways in which we conduct our business. In the event that we fail to comply with applicable laws, we may be exposed to regulatory fines and penalties and other sanctions. We may also incur such penalties if our vendors or other service providers or clients or counterparties fail to comply with these laws or to maintain appropriate controls over protected data. In addition, any loss or exposure of client or other data may adversely damage our reputation and adversely affect our business.

A major focus of US and other countries’ governmental policies relating to financial institutions in recent years has been on fighting money laundering and terrorist financing. We are required to maintain effective policies, procedures and controls to detect, prevent and report money laundering and terrorist financing, and to verify the identity of our clients under the laws of many of the countries in which we operate. We are also subject to laws and regulations related to corrupt and illegal payments to government officials by others, such as the US Foreign Corrupt Practices Act and the UK Bribery Act. We have implemented policies, procedures and internal controls that are designed to comply with such laws and regulations. Notwithstanding this, US regulators have found deficiencies in the design and operation of anti-money laundering programs in our US operations. We have undertaken a significant program to address these regulatory findings with the objective of fully meeting regulatory expectations for our programs. Failure to maintain and implement adequate programs to combat money laundering, terrorist financing or corruption, or any failure of our programs in these areas, could have serious consequences both from legal enforcement action and from damage to our reputation. Frequent changes in sanctions imposed and increasingly complex sanctions imposed on countries, entities and individuals, as exemplified by the breadth and scope of the sanctions imposed in relation to the war in Ukraine, increase our cost of monitoring and complying with sanctions requirements and increase the risk that we will not identify in a timely manner client activity that is subject to a sanction.

As a result of new and changed regulatory requirements and the changes we have made in our legal structure, the volume, frequency and complexity of our regulatory and other reporting has remained elevated. Regulators have also significantly increased expectations regarding our internal reporting and data aggregation, as well as management reporting. We have incurred, and continue to incur, significant costs to implement infrastructure to meet these requirements. Failure to meet external reporting requirements accurately and in a timely manner or failure to meet regulatory expectations of internal reporting, data aggregation and management reporting could result in enforcement action or other adverse consequences for us.

Annual Report 2022 | Our strategy, business model and environment | Risk factors

In addition, despite the contingency plans that we have in place, our ability to conduct business may be adversely affected by a disruption in the infrastructure that supports our businesses and the communities in which we operate. This may include a disruption due to natural disasters, pandemics, civil unrest, war or terrorism and involve electrical, communications, transportation or other services that we use or that are used by third parties with whom we conduct business.

We may not be successful in the ongoing execution of our strategic plans

We have transformed UBS to focus on our Global Wealth Management business and our universal bank in Switzerland, complemented by Asset Management and a significantly smaller and more capital-efficient Investment Bank; we have substantially reduced the risk-weighted assets and leverage ratio denominator usage in Group Functions; and made significant cost reductions. Our ongoing strategic initiatives focus on growing our business in the Americas and in Asia Pacific, particularly China, and investing in technology to differentiate our service to clients, and implementing an agile mode of work. These measures will require significant change in our organization and we may not succeed in executing our strategy or achieving our performance targets, or may be delayed in doing so. Macroeconomic conditions, geopolitical uncertainty, changes to regulatory requirements and the continuing costs of meeting these requirements have prompted us to adapt our targets and ambitions in the past and we may need to do so again in the future.

To achieve our strategic plans, we expect to continue to make significant expenditures on technology and infrastructure to improve client experience, improve and further enable digital offerings and increase efficiency. We also may seek to implement our strategy through acquisitions or strategic partnerships to expand or improve our product offerings or target additional client segments. Our investments in new technology and our acquisitions and strategic partnerships may not be successfully completed, fully achieve our objectives or improve our ability to attract and retain clients. In addition, we face competition in providing digitally enabled offerings from both existing competitors and new financial service providers in various portions of the value chain. For example, technological advances and the growth of e-commerce have made it possible for e-commerce firms and other companies to offer products and services that were traditionally offered only by banks. These advances have also allowed financial institutions and other companies to provide digitally based financial solutions, including electronic securities trading, payments processing and online automated algorithmic-based investment advice at a low cost to their clients. We may have to lower our prices, or risk losing clients as a result. Our ability to develop and implement competitive digitally enabled offerings and processes will be an important factor in our ability to compete.

As part of our strategy, we seek to improve our operating efficiency, in part by controlling our costs. We may not be able to identify feasible cost reduction opportunities that are consistent with our business goals and cost reductions may be realized later or may be smaller than we anticipate. Higher temporary and permanent regulatory costs and higher business demand than anticipated have partly offset cost reductions and delayed the achievement of our past cost reduction targets, and we could continue to be challenged in the execution of our ongoing efforts to improve operating efficiency.

Changes in our workforce as a result of outsourcing, nearshoring, offshoring, insourcing or staff reductions, or changes that arise from the introduction of work from home or other flexible ways of working or agile work methodologies may introduce new operational risks that, if not effectively addressed, could affect our ability to achieve cost and other benefits from such changes, or could result in operational losses.

As we implement effectiveness and efficiency programs, we may also experience unintended consequences, such as the unintended loss or degradation of capabilities that we need in order to maintain our competitive position, achieve our targeted returns or meet existing or new regulatory requirements and expectations.

We depend on our risk management and control processes to avoid or limit potential losses in our businesses

Controlled risk-taking is a major part of the business of a financial services firm. Some losses from risk-taking activities are inevitable, but to be successful over time, we must balance the risks we take against the returns generated. Therefore, we must diligently identify, assess, manage and control our risks, not only in normal market conditions but also as they might develop under more extreme, stressed conditions, when concentrations of exposures can lead to severe losses.

We have not always been able to prevent serious losses arising from risk management failures and extreme or sudden market events. We recorded substantial losses on fixed-income trading positions in the 2008 financial crisis, in the unauthorized trading incident in 2011 and, more recently, positions resulting from the default of a US prime brokerage client. We revise and strengthen our risk management and control frameworks to seek to address identified shortcomings. Nonetheless, we could suffer further losses in the future if, for example:

•

we do not fully identify the risks in our portfolio, in particular risk concentrations and correlated risks;

•

our assessment of the risks identified, or our response to negative trends, proves to be untimely, inadequate, insufficient or incorrect;

•

our risk models prove insufficient to predict the scale of financial risks the bank faces;

•

markets move in ways that we do not expect – in terms of their speed, direction, severity or correlation – and our ability to manage risks in the resulting environment is, therefore, affected;

•

third parties to whom we have credit exposure or whose securities we hold are severely affected by events and we suffer defaults and impairments beyond the level implied by our risk assessment; or

•

collateral or other security provided by our counterparties and clients proves inadequate to cover their obligations at the time of default.

Annual Report 2022 | Our strategy, business model and environment | Risk factors

We also hold legacy risk positions, primarily in Group Functions, that, in many cases, are illiquid and may again deteriorate in value.

We also manage risk on behalf of our clients. The performance of assets we hold for our clients may be adversely affected by the same aforementioned factors. If clients suffer losses or the performance of their assets held with us is not in line with relevant benchmarks against which clients assess investment performance, we may suffer reduced fee income and a decline in assets under management, or withdrawal of mandates.

Investment positions, such as equity investments made as part of strategic initiatives and seed investments made at the inception of funds that we manage, may also be affected by market risk factors. These investments are often not liquid and generally are intended or required to be held beyond a normal trading horizon. Deteriorations in the fair value of these positions would have a negative effect on our earnings.

We may not be successful in implementing changes in our wealth management businesses to meet changing market, regulatory and other conditions

We are exposed to possible outflows of client assets in our asset-gathering businesses and to changes affecting the profitability of Global Wealth Management, in particular. Initiatives that we may implement to overcome the effects of changes in the business environment on our profitability, balance sheet and capital positions may not succeed in counteracting those effects and may cause net new money outflows and reductions in client deposits, as happened with our balance sheet and capital optimization program in 2015. There is no assurance that we will be successful in our efforts to offset the adverse effect of these or similar trends and developments.

We may be unable to identify or capture revenue or competitive opportunities, or retain and attract qualified employees

The financial services industry is characterized by intense competition, continuous innovation, restrictive, detailed, and sometimes fragmented regulation and ongoing consolidation. We face competition at the level of local markets and individual business lines, and from global financial institutions that are comparable to us in their size and breadth, as well as competition from new technology-based market entrants, which may not be subject to the same level of regulation. Barriers to entry in individual markets and pricing levels are being eroded by new technology. We expect these trends to continue and competition to increase. Our competitive strength and market position could be eroded if we are unable to identify market trends and developments, do not respond to such trends and developments by devising and implementing adequate business strategies, do not adequately develop or update our technology, including our digital channels and tools, or are unable to attract or retain the qualified people needed.

The amount and structure of our employee compensation is affected not only by our business results, but also by competitive factors and regulatory considerations.

In response to the demands of various stakeholders, including regulatory authorities and shareholders, and in order to better align the interests of our staff with other stakeholders, we have increased average deferral periods for stock awards, expanded forfeiture provisions and, to a more limited extent, introduced clawback provisions for certain awards linked to business performance. We have also introduced individual caps on the proportion of fixed to variable pay for the Group Executive Board (GEB) members, as well as certain other employees.

Constraints on the amount or structure of employee compensation, higher levels of deferral, performance conditions and other circumstances triggering the forfeiture of unvested awards may adversely affect our ability to retain and attract key employees, particularly where we compete with companies that are not subject to these constraints. The loss of key staff and the inability to attract qualified replacements could seriously compromise our ability to execute our strategy and to successfully improve our operating and control environment, and could affect our business performance. Swiss law requires that shareholders approve the compensation of the Board of Directors (the BoD) and the GEB each year. If our shareholders fail to approve the compensation for the GEB or the BoD, this could have an adverse effect on our ability to retain experienced directors and our senior management.

Our reputation is critical to our success

Our reputation is critical to the success of our strategic plans, business and prospects. Reputational damage is difficult to reverse, and improvements tend to be slow and difficult to measure. In the past, our reputation has been adversely affected by our losses during the financial crisis, investigations into our cross-border private banking services, criminal resolutions of LIBOR-related and foreign exchange matters, as well as other matters. We believe that reputational damage as a result of these events was an important factor in our loss of clients and client assets across our asset-gathering businesses. New events that cause reputational damage could have a material adverse effect on our results of operation and financial condition, as well as our ability to achieve our strategic goals and financial targets.

Annual Report 2022 | Our strategy, business model and environment | Risk factors

As UBS Group AG is a holding company, its operating results, financial condition and ability to pay dividends and other distributions and / or to pay its obligations in the future depend on funding, dividends and other distributions received directly or indirectly from its subsidiaries, which may be subject to restrictions

UBS Group AG’s ability to pay dividends and other distributions and to pay its obligations in the future will depend on the level of funding, dividends and other distributions, if any, received from UBS AG and other subsidiaries. The ability of such subsidiaries to make loans or distributions, directly or indirectly, to UBS Group AG may be restricted as a result of several factors, including restrictions in financing agreements and the requirements of applicable law and regulatory, fiscal or other restrictions. In particular, UBS Group AG’s direct and indirect subsidiaries, including UBS AG, UBS Switzerland AG, UBS Americas Holding LLC and UBS Europe SE, are subject to laws and regulations that restrict dividend payments, authorize regulatory bodies to block or reduce the flow of funds from those subsidiaries to UBS Group AG, or could affect their ability to repay any loans made to, or other investments in, such subsidiary by UBS Group AG or another member of the Group. For example, in the early stages of the COVID-19 pandemic, the European Central Bank ordered all banks under its supervision to cease dividend distributions and the Federal Reserve Board has limited capital distributions by bank holding companies and intermediate holding companies. Restrictions and regulatory actions of this kind could impede access to funds that UBS Group AG may need to meet its obligations or to pay dividends to shareholders. In addition, UBS Group AG’s right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to all prior claims of the subsidiary’s creditors.

Our capital instruments may contractually prevent UBS Group AG from proposing the distribution of dividends to shareholders, other than in the form of shares, and from engaging in repurchases of shares, if we do not pay interest on these instruments.

Furthermore, UBS Group AG may guarantee some of the payment obligations of certain of the Group’s subsidiaries from time to time. These guarantees may require UBS Group AG to provide substantial funds or assets to subsidiaries or their creditors or counterparties at a time when UBS Group AG is in need of liquidity to fund its own obligations.

The credit ratings of UBS Group AG or its subsidiaries used for funding purposes could be lower than the ratings of the Group’s operating subsidiaries, which may adversely affect the market value of the securities and other obligations of UBS Group AG or those subsidiaries on a standalone basis.

Liquidity and funding risk

Liquidity and funding management are critical to UBS’s ongoing performance

The viability of our business depends on the availability of funding sources, and our success depends on our ability to obtain funding at times, in amounts, for tenors and at rates that enable us to efficiently support our asset base in all market conditions. Our funding sources have generally been stable, but could change in the future because of, among other things, general market disruptions or widening credit spreads, which could also influence the cost of funding. A substantial part of our liquidity and funding requirements are met using short-term unsecured funding sources, including retail and wholesale deposits and the regular issuance of money market securities. A change in the availability of short-term funding could occur quickly.

The addition of loss-absorbing debt as a component of capital requirements, the regulatory requirements to maintain minimum TLAC at UBS’s holding company and at subsidiaries, as well as the power of resolution authorities to bail in TLAC instruments and other debt obligations, and uncertainty as to how such powers will be exercised, caused and may still cause further increase of our cost of funding, and could potentially increase the total amount of funding required, in the absence of other changes in our business.

Reductions in our credit ratings may adversely affect the market value of the securities and other obligations and increase our funding costs, in particular with regard to funding from wholesale unsecured sources, and could affect the availability of certain kinds of funding. In addition, as experienced in connection with Moody’s downgrade of UBS AG’s long-term debt rating in June 2012, rating downgrades can require us to post additional collateral or make additional cash payments under trading agreements. Our credit ratings, together with our capital strength and reputation, also contribute to maintaining client and counterparty confidence, and it is possible that rating changes could influence the performance of some of our businesses.

The requirement to maintain a liquidity coverage ratio of high-quality liquid assets to estimated stressed short-term net cash outflows, and other similar liquidity and funding requirements, oblige us to maintain high levels of overall liquidity, limit our ability to optimize interest income and expense, make certain lines of business less attractive and reduce our overall ability to generate profits. In particular, UBS AG is subjected to increased liquidity coverage requirements under the direction of FINMA. The liquidity coverage ratio and net stable funding ratio requirements are intended to ensure that we are not overly reliant on short-term funding and that we have sufficient long-term funding for illiquid assets. The relevant calculations make assumptions about the relative likelihood and amount of outflows of funding and available sources of additional funding in market-wide and firm-specific stress situations. In an actual stress situation, however, our funding outflows could exceed the assumed amounts.

Annual Report 2022 | Our strategy, business model and environment | Risk factors

Financial and operating performance

Management report

Accounting and financial reporting

Critical accounting estimates and judgments

In preparing our financial statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (the IASB), we apply judgment and make estimates and assumptions that may involve significant uncertainty at the time they are made. We regularly reassess those estimates and assumptions, which encompass historical experience, expectations of the future and other pertinent factors, to determine their continuing relevance based on current conditions, and update them as necessary. Changes in estimates and assumptions may have significant effects on the financial statements. Furthermore, actual results may differ significantly from our estimates, which could result in significant losses to the Group, beyond what we expected or provided for.

Key areas involving a high degree of judgment and areas where estimates and assumptions are significant to the consolidated financial statements include:

•

expected credit loss measurement;

•

fair value measurement;

•

income taxes;

•

provisions and contingent liabilities;

•

post-employment benefit plans;

•

goodwill; and

•

consolidation of structured entities.

•

Refer to “Note 1a Material accounting policies” in the “Consolidated financial statements” section of this report for more information

•

Refer to the “Risk factors” section of this report for more information

Annual Report 2022 | Financial and operating performance | Accounting and financial reporting

Group performance

Income statement


	For the year ended							% change from
USD m	31.12.22		31.12.21			31.12.20		31.12.21
Net interest income		6,621		6,705			5,862		(1	)
Other net income from financial instruments measured at fair value through profit or loss		7,517		5,850			6,960		28
Net fee and commission income		18,966		22,387			19,186		(15	)
Other income		1,459		452			1,076		223

Total revenues		34,563		35,393			33,084		(2	)

Credit loss expense / (release)		29		(148	)		694

Personnel expenses		17,680		18,387			17,224		(4	)
General and administrative expenses		5,189		5,553			4,885		(7	)
Depreciation, amortization and impairment of non-financial assets		2,061		2,118			2,126		(3	)

Operating expenses		24,930		26,058			24,235		(4	)

Operating profit / (loss) before tax		9,604		9,484			8,155		1
Tax expense / (benefit)		1,942		1,998			1,583		(3	)

Net profit / (loss)		7,661		7,486			6,572		2

Net profit / (loss) attributable to non-controlling interests		32		29			15		11

Net profit / (loss) attributable to shareholders		7,630		7,457			6,557		2

Comprehensive income
Total comprehensive income		3,167		5,119			8,312		(38	)

Total comprehensive income attributable to non-controlling interests		18		13			36		39

Total comprehensive income attributable to shareholders		3,149		5,106			8,276		(38	)

2022 compared with 2021

Results

In 2022, net profit attributable to shareholders increased by USD 173m, or 2%, to USD 7,630m, which included a net tax expense of USD 1,942m.

Operating profit before tax increased by USD 120m, or 1%, to USD 9,604m, reflecting lower operating expenses, partly offset by lower total revenues. Operating expenses decreased by USD 1,128m, or 4%, to USD 24,930m, which included positive foreign currency effects. This decrease was mainly driven by USD 707m lower personnel expenses and USD 364m lower general and administrative expenses. Net credit loss expenses were USD 29m, compared with net credit loss releases of USD 148m in the prior year. Total revenues decreased by USD 830m, or 2%, to USD 34,563m, which included negative foreign currency effects. Net fee and commission income decreased by USD 3,421m, partly offset by a USD 1,582m increase in total combined net interest income and other net income from financial instruments measured at fair value through profit or loss, as well as USD 1,007m higher other income.

Total revenues

Net interest income and other net income from financial instruments measured at fair value through profit or loss

Total combined net interest income and other net income from financial instruments measured at fair value through profit or loss increased by USD 1,582m to USD 14,137m.

Global Wealth Management increased by USD 1,014m to USD 6,355m, predominantly due to higher net interest income, mainly driven by an increase in deposit revenues, as rising interest rates led to higher deposit margins. This increase was partly offset by the effects of shifts to lower-margin products and higher interest rates paid to clients. In addition, loan revenues decreased, driven by lower loan margins.

The Investment Bank increased by USD 702m to USD 5,769m, mainly reflecting USD 803m higher net income in Financing, largely due to a loss of USD 861m incurred in the first half of 2021 on the default of a US-based client of our prime brokerage business. In addition, Derivatives & Solutions increased by USD 320m, driven by Rates and Foreign Exchange, which benefited from elevated volatility due to inflationary concerns and the actions of central banks, partly offset by decreases in Equity Derivatives and Credit revenues due to lower levels of client activity. The increases in Financing and Derivatives & Solutions were partly offset by a USD 409m decrease in Global Banking, mainly due to lower revenues in Leveraged Capital Markets.

Annual Report 2022 | Financial and operating performance | Group performance

Personal & Corporate Banking increased by USD 128m, predominantly driven by an increase in net interest income, mainly reflecting higher deposit revenues, as a result of rising interest rates. This increase was partly offset by a lower benefit from the Swiss National Bank deposit exemption and a decrease in deposit fees.

Group Functions recognized negative income of USD 649m, compared with negative income of USD 397m, mainly driven by higher funding costs related to deferred tax assets (DTAs) and capitalized software in Group Services and negative net effects of accounting asymmetries, including hedge accounting ineffectiveness, within Group Treasury. These changes were partly offset by higher valuation gains on auction rate and other securities in Non-core and Legacy Portfolio.

•

Refer to “Note 3 Net interest income and other net income from financial instruments measured at fair value through profit or loss” in the “Consolidated financial statements” section of this report for more information

Net interest income and other net income from financial instruments measured at fair value through profit or loss


	For the year ended									% change from
USD m	31.12.22			31.12.21			31.12.20			31.12.21
Net interest income from financial instruments measured at amortized cost and fair value through other comprehensive income		5,218			5,274			4,563			(1	)
Net interest income from financial instruments measured at fair value through profit or loss and other		1,403			1,431			1,299			(2	)
Other net income from financial instruments measured at fair value through profit or loss		7,517			5,850			6,960			28

Total		14,137			12,555			12,822			13

Global Wealth Management		6,355			5,341			5,039			19
of which: net interest income		*5,273*			4,244			4,027			24
of which: transaction-based income from foreign exchange and other intermediary activity¹		*1,082*			1,097			1,012			(1	)
Personal & Corporate Banking		2,685			2,557			2,459			5
of which: net interest income		*2,191*			2,120			2,049			3
of which: transaction-based income from foreign exchange and other intermediary activity¹		*494*			437			409			13
Asset Management		(23	)		(13	)		(16	)		75
Investment Bank²		5,769			5,067			5,643			14
Global Banking		*187*			596			585			(69	)
Global Markets		*5,582*			4,471			5,057			25
Group Functions		(649	)		(397	)		(302	)		64

Mainly includes spread-related income in connection with client-driven transactions, foreign currency translation effects and income and expenses from precious metals, which are included in the income statement line Other net income from financial instruments measured at fair value through profit or loss. The amounts reported on this line are one component of Transaction-based income in the management discussion and analysis of Global Wealth Management and Personal & Corporate Banking in the “Global Wealth Management” and “Personal & Corporate Banking” sections of this report, respectively.

Investment Bank information is provided at the business line level rather than by financial statement reporting line in order to reflect the underlying business activities, which is consistent with the structure of the management discussion and analysis in the “Investment Bank” section of this report.

Net fee and commission income

Net fee and commission income decreased by USD 3,421m to USD 18,966m.

Underwriting fees decreased by USD 884m to USD 579m, mainly driven by lower equity underwriting revenues from public offerings in the Investment Bank, reflecting lower levels of client activity.

Net brokerage fees decreased by USD 841m to USD 3,282m, driven by Global Wealth Management, reflecting lower levels of client activity, and by the Investment Bank, mainly in relation to Cash Equities, partly offset by higher net income from foreign exchange products.

Investment fund fees decreased by USD 848m, driven by Asset Management and Global Wealth Management, mainly reflecting negative market performance. In addition, performance-based fee income in Asset Management decreased, mainly in Hedge Fund Businesses and Equities. Fees for portfolio management and related services decreased by USD 703m, predominantly driven by Global Wealth Management, also reflecting negative market performance, partly offset by incremental revenues from net new fee-generating assets.

M&A and corporate finance fees decreased by USD 298m to USD 804m, primarily reflecting lower revenues from merger and acquisition transactions in our Global Banking business in the Investment Bank, due to a decrease in the number of transactions that closed in 2022.

•

Refer to “Note 4 Net fee and commission income” in the “Consolidated financial statements” section of this report for more information

Other income

Other income increased by USD 1,007m to USD 1,459m, mainly driven by higher gains from disposals of associates and subsidiaries, largely reflecting a gain of USD 848m in Asset Management on the sale of our shareholding in our Japanese real estate joint venture, Mitsubishi Corp.-UBS Realty Inc. In addition, there were gains in Global Wealth Management of USD 133m on the sale of our domestic wealth management business in Spain, USD 86m on the sale of UBS Swiss Financial Advisers AG and USD 41m on the sale of our US alternative investments administration business. These gains compared with a gain of USD 100m in 2021 in Global Wealth Management from the sale of our domestic wealth management business in Austria. In addition, we recognized USD 98m of gains related to the repurchase of UBS’s own debt instruments, compared with losses of USD 60m in the prior year. These gains were partly offset by USD 76m lower net gains from properties held for sale.

•

Refer to “Note 5 Other income” in the “Consolidated financial statements” section of this report for more information

•

Refer to “Note 29 Changes in organization and acquisitions and disposals of subsidiaries and businesses” in the “Consolidated financial statements” section of this report for more information about the gains from disposals of associates and subsidiaries

Annual Report 2022 | Financial and operating performance | Group performance

Credit loss expense / release

Total net credit loss expenses were USD 29m, compared with net credit loss releases of USD 148m in the prior year, reflecting net expenses of USD 29m related to stage 1 and 2 positions.

•

Refer to “Note 9 Financial assets at amortized cost and other positions in scope of expected credit loss measurement” and “Note 19 Expected credit loss measurement” in the “Consolidated financial statements” section of this report for more information about credit loss expenses / releases

•

Refer to the “Risk factors” section of this report for more information

Credit loss expense / (release)


USD m	Global Wealth Management			Personal & Corporate Banking			Asset Management		Investment Bank			Group Functions		Total
For the year ended 31.12.22
Stages 1 and 2		(5	)		27			0		6			1		29
Stage 3		5			12			0		(18	)		2		0

Total credit loss expense / (release)		0			39			0		(12	)		3		29

For the year ended 31.12.21
Stages 1 and 2		(28	)		(62	)		0		(34	)		0		(123	)
Stage 3		(1	)		(24	)		1		0			0		(25	)

Total credit loss expense / (release)		(29	)		(86	)		1		(34	)		0		(148	)

For the year ended 31.12.20
Stages 1 and 2		48			129			0		88			0		266
Stage 3		40			128			2		217			42		429

Total credit loss expense / (release)		88			257			2		305			42		694

Operating expenses

Personnel expenses

Personnel expenses decreased by USD 707m to USD 17,680m, mainly driven by USD 352m lower variable compensation related to financial advisors, following a decrease in compensable revenues. Furthermore, salary costs decreased by USD 294m, as an underlying increase from higher salaries and an increase in the number of employees were more than offset by foreign currency translation effects. Other personnel expenses were USD 87m lower, primarily reflecting a decrease in the number of contractors.

•

Refer to the “Compensation” section of this report for more information

•

Refer to “Note 6 Personnel expenses,” “Note 26 Post-employment benefit plans” and “Note 27 Employee benefits: variable compensation” in the “Consolidated financial statements” section of this report for more information

General and administrative expenses

General and administrative expenses decreased by USD 364m to USD 5,189m, mainly reflecting USD 563m lower net expenses for litigation, regulatory and similar matters, as 2021 included expenses of USD 740m related to litigation provisions for the French cross-border matter. This was partly offset by higher expenses for travel and entertainment, technology, and consulting fees.

We believe that the industry continues to operate in an environment in which expenses associated with litigation, regulatory and similar matters will remain elevated for the foreseeable future, and we continue to be exposed to a number of significant claims and regulatory matters. The outcome of many of these matters, the timing of a resolution, and the potential effects of resolutions on our future business, financial results or financial condition are extremely difficult to predict.

•

Refer to “Note 7 General and administrative expenses” and “Note 17 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report for more information

Annual Report 2022 | Financial and operating performance | Group performance

Operating expenses

For the year ended

% change from

USD m

31.12.22

31.12.21

31.12.20

31.12.21

Personnel expenses

17,680

18,387

17,224

)

of which: salaries

7,045

7,339

7,023

)

of which: variable compensation

7,954

8,280

7,520

)

of which: performance awards

3,205

3,190

3,209

of which: financial advisors¹

4,508

4,860

4,091

)

of which: other

241

229

220

of which: other personnel expenses²

2,681

2,768

2,680

)

General and administrative expenses

5,189

5,553

4,885

)

of which: net expenses for litigation, regulatory and similar matters

348

911

197

(62

)

of which: other general and administrative expenses

4,841

4,642

4,688

Depreciation, amortization and impairment of non-financial assets

2,061

2,118

2,126

)

Total operating expenses

24,930

26,058

24,235

)

1	Consists of cash and deferred compensation awards and is based on compensable revenues and firm tenure using a formulaic approach. It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements.

2	Consists of expenses related to contractors, social security, post-employment benefit plans, and other personnel expenses. Refer to “Note 6 Personnel expenses” in the “Consolidated financial statements” section of this report for more information.

During 2020, UBS modified the conditions for continued vesting of certain outstanding deferred compensation awards for qualifying employees, resulting in an expense of approximately USD 280m, of which USD 240m is disclosed within Variable compensation and USD 40m within Other personnel expenses in this table.

Tax

Income tax expenses of USD 1,942m were recognized for the Group in 2022, representing an effective tax rate of 20.2%, compared with USD 1,998m for 2021, which represented an effective tax rate of 21.1%. The income tax expenses for 2022 included Swiss tax expenses of USD 715m and non-Swiss tax expenses of USD 1,227m.

The Swiss tax expenses included current tax expenses of USD 730m related to taxable profits of UBS Switzerland AG and other Swiss entities. They also included a deferred tax benefit of USD 15m.

The non-Swiss tax expenses included current tax expenses of USD 718m related to taxable profits earned by non-Swiss subsidiaries and branches and net deferred tax expenses of USD 509m. Expenses of USD 678m, which primarily related to the amortization of DTAs previously recognized in relation to tax losses carried forward and deductible temporary differences of UBS Americas Inc., were partly offset by a benefit of USD 169m in respect of net upward revaluations of DTAs for certain entities, primarily in connection with our business planning process.

The effective tax rate for the year of 20.2% is lower than our projected rate for the year of 24%, primarily as a result of the aforementioned deferred tax benefit of USD 169m in respect of net upward revaluations of DTAs and because no tax expenses were recognized in respect of pre-tax gains from dispositions of UBS subsidiaries in 2022.

Excluding any potential effects from the remeasurement of DTAs in connection with the business planning process and any material jurisdictional statutory tax rate changes that could be enacted, we expect a tax rate for 2023 of around 23%.

•

Refer to “Note 8 Income taxes” in the “Consolidated financial statements” section of this report for more information

•

Refer to the “Risk factors” section of this report for more information

Total comprehensive income attributable to shareholders

In 2022, total comprehensive income attributable to shareholders was USD 3,149m, reflecting net profit of USD 7,630m and negative other comprehensive income (OCI), net of tax, of USD 4,481m.

OCI related to cash flow hedges was negative USD 4,793m, mainly reflecting net unrealized losses on US dollar hedging derivatives resulting from significant increases in the relevant US dollar long-term interest rates.

Foreign currency translation OCI was negative USD 525m, mainly due to the weakening of the Swiss franc (1%) and the euro (6%) against the US dollar.

Defined benefit plan OCI, net of tax, was negative USD 10m. Total net pre-tax OCI related to the Swiss pension plan was negative USD 285m. This was predominantly driven by an extraordinary employer contribution of USD 209m that increased the gross plan assets and resulted in an offsetting OCI loss as no net pension asset could be recognized on the balance sheet as of 31 December 2022 due to the asset ceiling. As announced in 2018, UBS agreed to mitigate the effects from changes to the Swiss pension plan implemented in 2019 and contributed CHF 646m (USD 698m) in three installments in 2020, 2021 and 2022. The extraordinary contribution of USD 209m in the first quarter of 2022 reflected the third and final installment paid.

Total pre-tax OCI related to our non-Swiss pension plans was positive USD 212m, mostly driven by the UK pension plan, which recorded positive net pre-tax OCI of USD 162m. The positive OCI in the UK plan reflected gains of USD 1,474m from the remeasurement of the defined benefit obligation (DBO), partly offset by a negative return on plan assets of USD 1,312m. The DBO remeasurement effect was mainly driven by a gain of USD 1,451m due to an increase in the applicable discount rate.

Annual Report 2022 | Financial and operating performance | Group performance

OCI related to own credit on financial liabilities designated at fair value was positive USD 796m, primarily due to a widening of our own credit spreads.

•

Refer to “Statement of comprehensive income” in the “Consolidated financial statements” section of this report for more information

•

Refer to “Note 1b Changes in accounting policies, comparability and other adjustments” in the “Consolidated financial statements” section of this report for more information about the reclassification of a portfolio of assets from Financial assets measured at fair value through OCI to Other financial assets measured at amortized cost in 2022

•

Refer to “Note 20 Fair value measurement” in the “Consolidated financial statements” section of this report for more information about own credit on financial liabilities designated at fair value

•

Refer to “Note 25 Hedge accounting” in the “Consolidated financial statements” section of this report for more information about cash flow hedges of forecast transactions

•

Refer to “Note 26 Post-employment benefit plans” in the “Consolidated financial statements” section of this report for more information about OCI related to defined benefit plans

Sensitivity to interest rate movements

As of 31 December 2022, we estimate that a parallel shift in yield curves by +100 basis points could lead to a combined increase in annual net interest income of approximately USD 1.5bn in Global Wealth Management and Personal & Corporate Banking in the first year after such a shift. Of this increase, approximately USD 0.8bn, USD 0.4bn and USD 0.2bn would result from changes in Swiss franc, US dollar and euro interest rates, respectively. A parallel shift in yield curves by -100 basis points could lead to a combined decrease in annual net interest income of approximately USD 1.5bn in Global Wealth Management and Personal & Corporate Banking in the first year after such a shift, showing similar currency contributions as for the aforementioned increase in rates.

These estimates are based on a hypothetical scenario of an immediate change in interest rates, equal across all currencies and relative to implied forward rates as of 31 December 2022 applied to our banking book. These estimates further assume no change to balance sheet size and structure, constant foreign exchange rates, and no specific management action. The benefit of the negative rates exemption threshold provided by the Swiss National Bank is not in scope of this net interest income sensitivity disclosure. As average implied forward rates were above 100 basis points across all tenors as of 31 December 2022, the impact would have been negligible. These estimates do not represent a forecast of our net interest income and actual changes in net interest income could differ significantly from the amounts referred to above.

Seasonal characteristics

Our revenues may show seasonal patterns, notably in the Investment Bank and transaction-based revenues for Global Wealth Management, and typically reflect the highest client activity levels in the first quarter, with lower levels throughout the rest of the year, especially during the summer months and the end-of-year holiday season.

Key figures

Below we provide an overview of selected key figures of the Group. For further information about key figures related to capital management, refer to the “Capital, liquidity and funding, and balance sheet” section of this report.

Cost / income ratio

The cost / income ratio was 72.1%, compared with 73.6%, mainly reflecting a decrease in operating expenses, partly offset by a decrease in total revenues.

Return on common equity tier 1 capital

The annualized return on our common equity tier 1 (CET1) capital was 17.0%, compared with 17.5%, reflecting a USD 2.2bn increase in average CET1 capital, with a partly offsetting effect driven by a USD 173m increase in net profit attributable to shareholders.

CET1 capital

CET1 capital increased by USD 0.2bn to USD 45.5bn as of 31 December 2022, mainly as a result of operating profit before tax of USD 9.6bn with associated current tax expenses of USD 1.4bn, partly offset by share repurchases of USD 5.6bn under our share repurchase programs, dividend accruals of USD 1.7bn, negative foreign currency effects of USD 0.5bn and compensation- and own share-related capital components of USD 0.3bn.

Risk-weighted assets

Risk-weighted assets (RWA) increased by USD 17.4bn to USD 319.6bn, primarily driven by increases of USD 10.4bn in credit and counterparty credit risk RWA, USD 4.7bn in operational risk RWA, and USD 2.4bn in market risk RWA.

CET1 capital ratio

Our CET1 capital ratio decreased to 14.2% from 15.0%, mainly reflecting a USD 17.4bn increase in RWA.

Annual Report 2022 | Financial and operating performance | Group performance

Leverage ratio denominator

The leverage ratio denominator (the LRD) decreased by USD 40.4bn to USD 1,028.5bn, driven by currency effects of USD 24.5bn and a USD 15.9bn decrease due to asset size and other movements.

CET1 leverage ratio

Our CET1 leverage ratio increased to 4.42% from 4.24%, predominantly due to the aforementioned decrease in the LRD.

Going concern leverage ratio

Our going concern leverage ratio was unchanged at 5.7%, as the aforementioned decrease in the LRD was offset by a USD 2.2bn decrease in the going concern capital.

Personnel

The number of personnel employed as of 31 December 2022 increased by 1,212 to 72,597 (full-time equivalents) compared with 31 December 2021.

Equity, CET1 capital and returns


	As of or for the year ended
USD m, except where indicated	31.12.22		31.12.21		31.12.20
Net profit
Net profit attributable to shareholders		7,630		7,457		6,557

Equity
Equity attributable to shareholders		56,876		60,662		59,445
Less: goodwill and intangible assets		6,267		6,378		6,480
Tangible equity attributable to shareholders		50,609		54,283		52,965
Less: other CET1 deductions		5,152		9,003		13,075
CET1 capital		45,457		45,281		39,890

Return on equity
Return on equity (%)		13.3		12.6		11.3
Return on tangible equity (%)		14.9		14.1		12.8
Return on CET1 capital (%)		17.0		17.5		17.4

Annual Report 2022 | Financial and operating performance | Group performance

Global Wealth Management

Global Wealth Management¹


	As of or for the year ended					% change from
USD m, except where indicated	31.12.22		31.12.21			31.12.21
Results
Net interest income		5,273		4,244			24
Recurring net fee income²		10,282		11,170			(8	)
Transaction-based income²		3,137		3,836			(18	)
Other income		275		168			63

Total revenues		18,967		19,419			(2	)

Credit loss expense / (release)		0		(29	)

Operating expenses		13,989		14,665			(5	)

Business division operating profit / (loss) before tax		4,977		4,783			4

Performance measures and other information
Pre-tax profit growth (year-on-year, %)²		4.1		19.0
Cost / income ratio (%)²		73.8		75.5
Average attributed equity (USD bn)³		20.0		18.8			6
Return on attributed equity (%)^2,3		24.9		25.4
Financial advisor compensation⁴		4,508		4,860			(7	)
Net new fee-generating assets (USD bn)²		60.1		106.9
Fee-generating assets (USD bn)²		1,271		1,482			(14	)
Fee-generating asset margin (bps)²		79.5		82.6
Net new money (USD bn)²		40.5		111.1
Invested assets (USD bn)²		2,815		3,303			(15	)
Loans, gross (USD bn)⁵		225.0		234.1			(4	)
Customer deposits (USD bn)⁵		348.2		369.8			(6	)
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)^2,6		0.3		0.2
Advisors (full-time equivalents)		9,215		9,329			(1	)

1	Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.

Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method. Since the second quarter of 2022, assets related to our Global Financial Intermediaries business have been excluded from fee-generating assets, given that fee-generating investment management products, such as mandates, are not central to this business. Furthermore, client commitments into closed-ended private-market investment funds are included as fee-generating assets once recurring fees are charged, rather than when commitments are funded. These changes have been applied prospectively.

3	Refer to “Capital management” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information.

Relates to licensed professionals with the ability to provide investment advice to clients in the Americas. Consists of cash and deferred compensation awards and is based on compensable revenues and firm tenure using a formulaic approach. It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements. Recruitment loans to financial advisors were USD 1,751m as of 31 December 2022.

5	Loans and Customer deposits in this table include customer brokerage receivables and payables, respectively, which are presented in a separate reporting line on the balance sheet.

6	Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures. Excludes loans to financial advisors.

2022 compared with 2021

Results

Profit before tax increased by USD 194m, or 4%, to USD 4,977m, mainly driven by lower operating expenses, as 2021 included expenses of USD 657m related to litigation provisions for the French cross-border matter, partly offset by lower total revenues.

Total revenues

Total revenues decreased by USD 452m, or 2%, to USD 18,967m, due to decreases across recurring net fee and transaction-based income, partly offset by increases in net interest and other income.

Net interest income increased by USD 1,029m, or 24%, to USD 5,273m, mainly due to an increase in deposit revenues, as rising interest rates led to higher deposit margins. This increase was partly offset by the effects of shifts to lower-margin products and higher interest rates paid to clients. Loan revenues decreased, driven by lower loan margins.

Recurring net fee income decreased by USD 888m, or 8%, to USD 10,282m, primarily driven by negative market performance and foreign currency effects, partly offset by incremental revenues from net new fee-generating assets.

Transaction-based income decreased by USD 699m, or 18%, to USD 3,137m, mainly reflecting lower levels of client activity in Asia Pacific, Americas and EMEA.

Annual Report 2022 | Financial and operating performance | Global Wealth Management

Other income increased by USD 107m to USD 275m, including a USD 133m gain from the sale of our domestic wealth management business in Spain, an USD 86m gain from the sale of UBS Swiss Financial Advisers AG and a USD 41m gain from the sale of our US alternative investments administration business in 2022. 2021 included a gain of USD 100m related to the sale of our domestic wealth management business in Austria. Additionally, 2022 included lower gains on our equity ownership of SIX Group and lower gains from sales of securities positions.

Credit loss expense / release

Net credit loss expenses were zero, as net expenses related to credit-impaired (stage 3) positions were entirely offset by net releases from stage 1 and 2 positions, compared with net releases of USD 29m.

Operating expenses

Operating expenses decreased by USD 676m, or 5%, to USD 13,989m, primarily due to 2021 including the aforementioned expenses of USD 657m related to litigation provisions for the French cross-border matter. Operating expenses in 2022 included lower personnel expenses, primarily as a result of lower financial advisor variable compensation following a decrease in compensable revenues, and benefited from positive foreign currency effects. These effects were partly offset by higher technology expenses and higher expenses for professional fees, travel and entertainment, outsourcing, and marketing in 2022.

Pre-tax profit growth

Pre-tax profit growth in 2022 was 4.1%, compared with 19.0% in 2021. Our target range is 10–15% over the cycle. Cost / income ratio The cost / income ratio decreased to 73.8% from 75.5%, reflecting positive operating leverage.

Fee-generating assets

Fee-generating assets decreased by USD 211bn, or 14%, to USD 1,271bn, mainly driven by net negative market performance and foreign currency effects. Net new fee-generating asset inflows were USD 60.1bn, with inflows in all regions, and resulted in an annualized net new fee-generating asset growth rate of 4.1%.

Loans

Loans decreased by USD 9.1bn, or 4%, to USD 225.0bn, primarily driven by negative foreign exchange effects and net new loan outflows of USD 2.5bn.

•

Refer to the “Risk management and control” section of this report for more information

Customer deposits

Customer deposits decreased by USD 21.6bn to USD 348.2bn, mainly driven by US dollar deposit shifts into other products, as well as negative foreign currency effects.

Regional breakdown of performance measures

As of or for the year ended 31.12.22
USD bn, except where indicated

Americas¹

Switzerland

EMEA²

Asia Pacific

Global Wealth
Management³

Total revenues (USD m)

10,634

1,859

3,913

2,556

18,967

Operating profit / (loss) before tax (USD m)

1,748

817

1,490

943

4,977

Cost / income ratio (%)⁴

83.7

55.2

61.9

63.2

73.8

Loans, gross

101.2

⁵

45.1

43.4

34.5

225.0

Net new loans

9.0

2.5

(1.4

)

(13.2

)

(2.5

)

Fee-generating assets⁴

779

119

259

114

1,271

Net new fee-generating assets4

17.2

9.1

20.3

13.7

60.1

Net new fee-generating asset growth rate (%)⁴

1.9

7.0

6.1

11.8

4.1

Invested assets⁴

1,581

253

541

437

2,815

Net new money⁴

7.0

12.3

21.9

(0.6

)

40.5

Advisors (full-time equivalents)

6,245

676

1,372

847

9,215

1	Including the following business units: United States and Canada; and Latin America.

2	Including the following business units: Europe; Central & Eastern Europe, Greece and Israel; and Middle East and Africa.

Including minor functions, which are not included in the four regions individually presented in this table, with USD 5m of total revenues, USD 21m of operating loss before tax, USD 0.7bn of loans, USD 0.6bn of net new loan inflows, USD 0.8bn of fee-generating assets, USD 0.1bn of net new fee-generating asset outflows, USD 3bn of invested assets, USD 0.1bn of net new money outflows and 74 advisors in 2022.

4	Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.

5	Loans include customer brokerage receivables, which are presented in a separate reporting line on the balance sheet.

Regional comments: 2022 compared with 2021

Americas

Profit before tax decreased by USD 253m to USD 1,748m, mainly driven by higher operating expenses, including an increase in net expenses for litigation, regulatory and similar matters. Total revenues decreased by USD 22m to USD 10,634m, mainly driven by lower recurring net fee and transaction-based income, partly offset by higher net interest income. The cost / income ratio increased to 83.7% from 81.4%. Loans increased 10% to USD 101.2bn, reflecting USD 9.0bn of net new loan inflows. Net new fee-generating assets were USD 17.2bn.

Annual Report 2022 | Financial and operating performance | Global Wealth Management

Switzerland

Profit before tax increased by USD 67m to USD 817m, mostly driven by lower operating expenses, as 2021 included expenses of USD 85m related to litigation provisions for the French cross-border matter. Total revenues decreased by USD 41m to USD 1,859m, mainly driven by lower recurring net fee income, partly offset by higher net interest and transaction-based income. The cost / income ratio decreased to 55.2% from 60.8%. Loans increased 4% to USD 45.1bn, driven by net new loan inflows of USD 2.5bn, partly offset by negative foreign currency effects. Net new fee-generating assets were USD 9.1bn.

EMEA

Profit before tax increased by USD 678m to USD 1,490m, primarily driven by lower operating expenses, as 2021 included expenses of USD 572m related to litigation provisions for the French cross-border matter. Total revenues decreased by USD 35m to USD 3,913m, due to lower recurring net fee and transaction-based income, partly offset by an increase in net interest income, as well as an increase in other income, which was driven by the aforementioned gains from sales. The cost / income ratio decreased to 61.9% from 79.6%. Loans decreased 12% to USD 43.4bn, mainly reflecting negative foreign currency effects and net new loan outflows of USD 1.4bn. Net new fee-generating assets were USD 20.3bn.

Asia Pacific

Profit before tax decreased by USD 294m to USD 943m. Total revenues decreased by USD 343m to USD 2,556m, mostly driven by lower transaction-based and recurring net fee income, partly offset by an increase in net interest income. The cost / income ratio increased to 63.2% from 57.4%. Loans decreased 29% to USD 34.5bn, driven by net new loan outflows of USD 13.2bn, as clients reduced their debts in light of market uncertainty, as well as negative foreign currency effects. Net new fee-generating assets were USD 13.7bn.

Personal & Corporate Banking

Personal & Corporate Banking – in Swiss francs¹


	As of or for the year ended					% change from
CHF m, except where indicated	31.12.22		31.12.21			31.12.21
Results
Net interest income		2,087		1,941			8
Recurring net fee income²		812		774			5
Transaction-based income²		1,154		1,079			7
Other income		46		110			(58	)

Total revenues		4,099		3,904			5

Credit loss expense / (release)		36		(79	)

Operating expenses		2,337		2,397			(2	)

Business division operating profit / (loss) before tax		1,726		1,587			9

Performance measures and other information
Pre-tax profit growth (year-on-year, %)²		8.8		35.1
Cost / income ratio (%)²		57.0		61.4
Average attributed equity (CHF bn)³		8.8		8.4			6
Return on attributed equity (%)^2,3		19.5		19.0
Net interest margin (bps)²		147		140
Fee and trading income for Corporate & Institutional Clients²		810		791			2
Investment products for Personal Banking (CHF bn)²		21.6		23.5			(8	)
Net new investment products for Personal Banking (CHF bn)²		1.99		2.66
Active Digital Banking clients in Personal Banking (%)^2,4		74.3		70.3
Active Mobile Banking clients in Personal Banking (%)²		56.5		46.7
Active Digital Banking clients in Corporate & Institutional Clients (%)²		80.0		79.3
Loans, gross (CHF bn)		142.9		139.3			3
Customer deposits (CHF bn)		167.2		162.1			3
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)^2,5		0.8		0.9

1	Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.

2	Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.

3	Refer to “Capital management” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information.

4	In 2022, 86.0% of clients of Personal Banking were “activated users” of Digital Banking (i.e., clients who had logged into Digital Banking at least once in the course of their relationship with UBS).

5	Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures.

Annual Report 2022 | Financial and operating performance | Global Wealth Management

2022 compared with 2021

Results

Profit before tax increased by CHF 139m, or 9%, to CHF 1,726m, reflecting higher total revenues and lower operating expenses, partly offset by net credit loss expenses, compared with net credit loss releases in 2021.

Total revenues

Total revenues increased by CHF 195m, or 5%, to CHF 4,099m, reflecting increases across all income lines except other income.

Net interest income increased by CHF 146m to CHF 2,087m, mainly driven by higher deposit revenues, as a result of rising interest rates. This increase was partly offset by a lower benefit from the Swiss National Bank deposit exemption and lower deposit fees.

Recurring net fee income increased by CHF 38m to CHF 812m, primarily driven by higher revenues from account fees.

Transaction-based income increased by CHF 75m to CHF 1,154m, largely driven by higher revenues from credit card and foreign exchange transactions, reflecting a continued increase in spending on travel and leisure by clients following the easing of COVID-19-related restrictions in certain countries compared with 2021.

Other income decreased by CHF 64m to CHF 46m, mostly due to lower gains on our equity ownership of SIX Group. The prior year also included a gain of CHF 26m from the sale of several small properties in that year.

Credit loss expense / release

Net credit loss expenses were CHF 36m, compared with net releases of CHF 79m. Stage 1 and 2 net credit loss expenses were CHF 25m. Prior-year stage 1 and 2 net credit loss releases were CHF 57m, largely resulting from a partial release of a post-model adjustment during the year, as well as model updates. Stage 3 net credit loss expenses were CHF 11m, compared with net releases of CHF 23m in 2021.

Operating expenses

Operating expenses decreased by CHF 60m, or 2%, to CHF 2,337m, mostly due to 2021 including expenses of CHF 76m (USD 83m) related to litigation provisions for the French cross-border matter.

Cost / income ratio

The cost / income ratio was 57.0%, compared with 61.4% in 2021, reflecting both higher total revenues and lower operating expenses.

Personal & Corporate Banking – in US dollars¹


	As of or for the year ended					% change from
USD m, except where indicated	31.12.22		31.12.21			31.12.21
Results
Net interest income		2,191		2,120			3
Recurring net fee income²		852		846			1
Transaction-based income²		1,212		1,178			3
Other income		48		119			(60	)

Total revenues		4,302		4,263			1

Credit loss expense / (release)		39		(86	)

Operating expenses		2,452		2,618			(6	)

Business division operating profit / (loss) before tax		1,812		1,731			5

Performance measures and other information
Pre-tax profit growth (year-on-year, %)²		4.7		37.5
Cost / income ratio (%)²		57.0		61.4
Average attributed equity (USD bn)³		9.3		9.2			1
Return on attributed equity (%)^2,3		19.5		18.9
Net interest margin (bps)²		146		142
Fee and trading income for Corporate & Institutional Clients²		851		864			(1	)
Investment products for Personal Banking (USD bn)²		23.4		25.8			(9	)
Net new investment products for Personal Banking (USD bn)²		2.11		2.90
Active Digital Banking clients in Personal Banking (%)^2,4		74.3		70.3
Active Mobile Banking clients in Personal Banking (%)²		56.5		46.7
Active Digital Banking clients in Corporate & Institutional Clients (%)²		80.0		79.3
Loans, gross (USD bn)		154.6		152.8			1
Customer deposits (USD bn)		180.8		177.8			2
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)^2,5		0.8		0.9

1	Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.

2	Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.

3	Refer to “Capital management” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information.

4	In 2022, 86.0% of clients of Personal Banking were “activated users” of Digital Banking (i.e., clients who had logged into Digital Banking at least once in the course of their relationship with UBS).

5	Refer to the “Risk management and control” section of this report for more information about (credit-) impaired exposures.

Annual Report 2022 | Financial and operating performance | Personal & Corporate Banking

Asset Management

Asset Management¹


	As of or for the year ended						% change from
USD m, except where indicated	31.12.22			31.12.21			31.12.21
Results
Net management fees²		2,050			2,320			(12	)
Performance fees		64			260			(75	)
Net gain from disposal of a joint venture / an associate		848			37

Total revenues		2,961			2,617			13

Credit loss expense / (release)		0			1

Operating expenses		1,564			1,586			(1	)

Business division operating profit / (loss) before tax		1,397			1,030			36

Performance measures and other information
Pre-tax profit growth (year-on-year, %)³		35.7			(29.2	)
Cost / income ratio (%)³		52.8			60.6
Average attributed equity (USD bn)⁴		1.7			2.0			(13	)
Return on attributed equity (%)^3,4		81.2			51.8
Gross margin on invested assets (bps)³		28			23

Information by business line / asset class
Net new money (USD bn)³
Equities		(12.8	)		10.3
Fixed Income		36.5			22.7
of which: money market		*26.3*			(3.1	)
Multi-asset & Solutions		(1.3	)		6.8
Hedge Fund Businesses		2.3			5.7
Real Estate & Private Markets		0.2			(0.6	)

Total net new money⁵		24.8			44.9

of which: net new money excluding money market		*(1.6*	)		48.0

Invested assets (USD bn)³
Equities		456			580			(21	)
Fixed Income		296			285			4
of which: money market		*119*			92			29
Multi-asset & Solutions		155			193			(19	)
Hedge Fund Businesses		55			55			1
Real Estate & Private Markets		102			98			4

Total invested assets		1,064			1,211			(12	)

of which: passive strategies		*443*			540			(18	)

Information by region
Invested assets (USD bn)³
Americas		298			287			4
Asia Pacific		150			190			(21	)
Europe, Middle East and Africa (excluding Switzerland)		263			334			(21	)
Switzerland		354			399			(11	)

Total invested assets		1,064			1,211			(12	)


Information by channel
Invested assets (USD bn)³
Third-party institutional		606			707			(14	)
Third-party wholesale		116			145			(20	)
UBS’s wealth management businesses		342			359			(5	)

Total invested assets		1,064			1,211			(12	)

1	Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.

Net management fees include transaction fees, fund administration revenues (including net interest and trading income from lending activities and foreign exchange hedging as part of the fund services offering), distribution fees, incremental fund-related expenses, gains or losses from seed money and co-investments, funding costs, the negative pass-through impact of third-party performance fees, and other items that are not Asset Management’s performance fees.

3	Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.

4	Refer to “Capital management” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information.

5	A net new money inflow of USD 4.1bn was recognized in the fourth quarter of 2022 for the provision of hedge fund services to Global Wealth Management Americas.

Annual Report 2022 | Financial and operating performance | Asset Management

2022 compared with 2021

Results

Profit before tax increased by USD 367m, or 36%, to USD 1,397m. This increase reflected a gain of USD 848m from the sale of our shareholding in the Mitsubishi Corp.-UBS Realty Inc. joint venture in the second quarter of 2022. Profit before tax in 2021 included a post-tax gain of USD 37m related to the sale of our minority interest in Clearstream Fund Centre AG. Excluding these gains, profit before tax decreased by USD 443m, or 45%, to USD 550m, reflecting lower net management and performance fees.

•

Total revenues

Total revenues increased by USD 344m, or 13%, to USD 2,961m. Excluding the aforementioned gains from sales, total revenues decreased by USD 466m, or 18%.

Net management fees decreased by USD 270m, or 12%, to USD 2,050m, on a lower average invested asset base, reflecting negative market performance and foreign currency effects.

Performance fees decreased by USD 196m to USD 64m, mainly in Hedge Fund Businesses and Equities.

Operating expenses

Operating expenses decreased by USD 22m, or 1%, to USD 1,564m, mainly reflecting positive foreign currency effects, lower personnel expenses and lower net expenses for litigation, regulatory and similar matters, as well as lower consulting expenses. These decreases were almost entirely offset by higher expenses for technology, market data services, travel, regulatory, and risk management.

Cost / income ratio

The cost / income ratio was 52.8%, compared with 60.6% in 2021. Excluding the aforementioned gains from sales, the cost / income ratio was 74.0%, compared with 61.5% in 2021.

Invested assets

Invested assets decreased to USD 1,064bn from USD 1,211bn, reflecting negative market performance of USD 137bn and negative foreign currency effects of USD 32bn, partly offset by net new money inflows of USD 25bn. Excluding money market flows, net new money was negative USD 2bn.

Investment performance

As of year-end 2022, Morningstar assigned a four- or five-star rating to 62% of our retail and institutional funds assets under management (AuM) (both actively managed and passive), on an AuM-weighted basis. Furthermore, 47% of our actively managed open-ended retail and institutional funds AuM are ranked, on an AuM-weighted basis over a three-year investment period, above their respective peer median.

Investment performance as of 31 December 2022


In %	Total traditional investments		Equities		Fixed Income		Multi-asset
% of UBS Asset Management fund assets rated as 4- or 5-star^1,2		62		71		55		41
% of UBS Asset Management fund assets above peer median over a 3-year investment period^1,3		47		46		52		44

Morningstar® Essentials Quantitative Star Rating & Rankings; © Morningstar 2023, extract date 12 January 2023. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and / or its content providers; (2) may not be copied or distributed; (3) is not warranted to be accurate, complete or timely; and (4) does not constitute advice of any kind, whether investment, tax, legal or otherwise. User is solely responsible for ensuring that it complies with all laws, regulations and restrictions applicable to it. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information, except where such damages or losses cannot be limited or excluded by law in your jurisdiction. Past performance is no guarantee of future results. For more detailed information about the Morningstar Rating, including its methodology, please go to: https://s21.q4cdn.com/198919461/files/doc_downloads/othe_disclosure_materials/MorningstarRatingforFunds.pdf.

Percentage of AuM to which Morningstar has assigned a four- or five-star rating. AuM reflect the AuM of Asset Management’s retail and institutional funds (both actively managed and passive) across all domiciles for which Asset Management owns the investment performance, i.e., Asset Management is either the sole portfolio manager or co-portfolio manager. Universe is approximately 31% of all active and passive traditional assets of Asset Management (Equities, Fixed Income excluding money market, and Multi-asset) as of 31 December 2022.

Percentage of AuM above peer median over a three-year investment period. AuM reflect the AuM of Asset Management’s actively managed open-ended retail and institutional funds across all domiciles for which Asset Management owns the investment performance, i.e., Asset Management is either the sole portfolio manager or co-portfolio manager. Universe is approximately 29% of all active traditional assets of Asset Management (Equities, Fixed Income excluding money market, and Multi-asset) as of 31 December 2022.

Annual Report 2022 | Financial and operating performance | Asset Management

Investment Bank

Investment Bank¹


	As of or for the year ended						% change from
USD m, except where indicated	31.12.22			31.12.21			31.12.21
Results
Advisory		733			988			(26	)
Capital Markets		854			2,170			(61	)

Global Banking		1,587			3,158			(50	)

Execution Services		1,643			1,894			(13	)
Derivatives & Solutions		3,665			3,422			7
Financing		1,822			979			86

Global Markets		7,129			6,296			13

of which: Equities		*4,970*			4,581			8
of which: Foreign Exchange, Rates and Credit		*2,160*			1,715			26

Total revenues		8,717			9,454			(8	)

Credit loss expense / (release)		(12	)		(34	)		(65	)

Operating expenses		6,832			6,858			0

Business division operating profit / (loss) before tax		1,897			2,630			(28	)

Performance measures and other information
Pre-tax profit growth (year-on-year, %)²		(27.9	)		5.9
Cost / income ratio (%)²		78.4			72.5
Average attributed equity (USD bn)³		13.0			13.0			0
Return on attributed equity (%)^2,3		14.6			20.3
Average VaR (1-day, 95% confidence, 5 years of historical data)		10			11			(5	)

1	Comparative figures in this table may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.

2	Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.

3	Refer to “Capital management” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information.

2022 compared with 2021

Results

Profit before tax decreased by USD 733m, or 28%, to USD 1,897m, driven by lower total revenues and lower net credit loss releases, partly offset by lower operating expenses.

Total revenues

Total revenues decreased by USD 737m, or 8%, to USD 8,717m, reflecting lower revenues in Global Banking, partly offset by higher revenues in Global Markets.

Global Banking

Global Banking revenues decreased by USD 1,571m, or 50%, to USD 1,587m, driven by Capital Markets and Advisory revenues, compared with a 43% decrease in the overall global fee pool.

Advisory revenues decreased by USD 255m, or 26%, to USD 733m, mostly due to lower merger and acquisition (M&A) transaction revenues, which decreased by USD 217m, or 25%, compared with a 21% decrease in the global M&A fee pool.

Capital Markets revenues decreased by USD 1,316m, or 61%, to USD 854m, primarily due to lower Equity Capital Markets (ECM) revenues, which decreased by USD 738m, or 71%, compared with a 67% decrease in the global ECM fee pool. Leveraged Capital Markets (LCM) fee revenues decreased by USD 297m, or 58%, compared with a 54% decrease in the global LCM fee pool.

Global Markets

Global Markets revenues increased by USD 833m, or 13%, to USD 7,129m, driven by higher revenues in our Financing and Derivatives & Solutions businesses, partly offset by lower revenues in Execution Services.

Execution Services revenues decreased by USD 251m, or 13%, to USD 1,643m, mainly driven by lower Cash Equities revenues.

Derivatives & Solutions revenues increased by USD 243m, or 7%, to USD 3,665m, mostly driven by an increase in Foreign Exchange and Rates, which benefited from elevated volatility due to inflationary concerns and the actions of central banks, partly offset by a decrease in Equity Derivatives revenues due to lower levels of client activity.

Financing revenues increased by USD 843m, or 86%, to USD 1,822m, predominantly due to 2021 including an USD 861m loss on the default of a US-based client of our prime brokerage business.

Annual Report 2022 | Financial and operating performance | Investment Bank

Global Markets Equities revenues increased by USD 389m, or 8%, to USD 4,970m, mainly driven by Equity Financing, due to the aforementioned loss in our prime brokerage business in 2021, partly offset by lower revenues in Cash Equities and Equity Derivatives.

Global Markets Foreign Exchange, Rates and Credit revenues increased by USD 445m, or 26%, to USD 2,160m, mostly driven by an increase in Foreign Exchange and Rates products, which benefited from elevated volatility due to inflationary concerns and the actions of central banks.

Credit loss expense / release

Net credit loss releases were USD 12m, primarily related to credit-impaired (stage 3) positions, compared with net releases of USD 34m in 2021.

Operating expenses

Operating expenses decreased by USD 26m, to USD 6,832m, with positive foreign currency effects being almost entirely offset by increases across a number of expense lines.

Cost / income ratio

The cost / income ratio increased to 78.4% from 72.5%, as total revenues decreased by 8% and operating expenses were in line with 2021.

Group Functions

Group Functions1


	As of or for the year ended						% change from
USD m	31.12.22			31.12.21			31.12.21
Results
Total revenues		(385	)		(359	)		7

Credit loss expense / (release)		3			0			801

Operating expenses		92			330			(72	)

Operating profit / (loss) before tax		(480	)		(689	)		(30	)

of which: Group Treasury		*(404*	)		(446	)		(9	)
of which: Non-core and Legacy Portfolio		*131*			(79	)
of which: Group Services		*(206*	)		(165	)		25

1	Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the reporting period.

2022 compared with 2021

Results

Group Functions recorded a loss before tax of USD 480m, compared with a loss of USD 689m.

Group Treasury

The Group Treasury result was negative USD 404m, compared with negative USD 446m.

The net effects of accounting asymmetries, including hedge accounting ineffectiveness, were negative USD 375m, compared with negative USD 341m. Accounting asymmetries are generally expected to mean revert to zero over time, though the length of time needed for full reversion can vary significantly, depending on market conditions.

Income related to centralized Group Treasury risk management was negative USD 2m, compared with negative USD 63m.

Non-core and Legacy Portfolio

The Non-core and Legacy Portfolio result was positive USD 131m, compared with negative USD 79m. This was mainly due to income of USD 114m related to a legacy litigation settlement and a legacy bankruptcy claim, and valuation gains of USD 81m on our USD 1.3bn portfolio of auction rate securities (ARS). Our remaining exposures to ARS were all rated investment grade as of 31 December 2022.

Group Services

The Group Services result was negative USD 206m, compared with negative USD 165m, mainly driven by higher funding costs related to deferred tax assets, partly offset by lower expenses relating to our legal entity transformation program.

Annual Report 2022 | Financial and operating performance | Investment Bank

Risk, capital, liquidity and funding, and balance sheet

Management report

Audited information according to IFRS 7 and IAS 1

Risk and capital disclosures provided in line with the requirements of International Financial Reporting Standard 7 (IFRS 7), Financial Instruments: Disclosures, and International Accounting Standard 1 (IAS 1), Presentation of Financial Statements, form part of the financial statements included in the “Consolidated financial statements” section of this report and are audited by the independent registered public accounting firm Ernst & Young Ltd, Basel. This information is marked as “Audited” within this section of the report. The risk profile of UBS AG consolidated does not differ materially from that of UBS Group AG consolidated. Audited information provided in the “Risk management and control” and “Capital, liquidity and funding, and balance sheet” sections applies to both UBS Group AG consolidated and UBS AG consolidated.

Signposts

The Audited | signpost that is displayed at the beginning of a section, table or chart indicates that those items have been audited. A triangle symbol – p – indicates the end of the audited section, table or chart.

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet

Risk management and control

Table of contents


84		Overview of risks arising from our business activities
85		Risk categories
86		Top and emerging risks
87		Risk governance
89		Risk appetite framework
92		Internal risk reporting
92		Model risk management
93		Risk measurement
96		Credit risk
111		Market risk
119		Country risk
122		Sustainability and climate risk
130		Non-financial risk

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control

Risk management and control

Overview of risks arising from our business activities

Key risks by business division and Group Functions


Business divisions and Group Functions		Key financial risks arising from business activities
Global Wealth Management		Credit risk from lending against securities collateral, including derivative trading activity, and lending against residential and commercial real estate collateral, as well as corporate and other lending.

		Market risk from municipal securities and taxable fixed-income securities. Interest rate risk in the banking book related to Global Wealth Management is transferred to and managed by Group Treasury.

Personal & Corporate Banking		Credit risk from retail business, mortgages, secured and unsecured corporate lending, commodity trade finance, lending to banks and other regulated clients, as well as a small amount of derivatives trading activity.

		Minimal contribution to market risk. Interest rate risk in the banking book related to Personal & Corporate Banking is transferred to and managed by Group Treasury.

Asset Management		Credit risk and market risk on client assets invested in Asset Management funds can impact management and performance fees and cause heightened fund outflows, liquidity risk and losses on our seed capital and co-investments.

		Small amounts of credit and market risk for on-balance sheet items.

Investment Bank		Credit risk from lending (take-and-hold, as well as temporary loan underwriting activities), derivatives trading and securities financing.

		Market risk from primary underwriting activities and secondary trading.

Group Functions		Credit and market risk arising from management of the Group’s balance sheet, capital, profit or loss and liquidity portfolios.

		Structural risk arising from asset and liability management and liquidity and funding risk (managed by Group Treasury).

Non-financial risks, which include operational, financial crime, compliance, conduct, model and reputational risks, are an inevitable consequence of being in business and can arise as a result of our past and current business activities across all business divisions and Group Functions.

•

Refer to “Risk categories” in this section for more information about other financial and non-financial risks relevant to UBS

Key risk developments

Although 2022 was a challenging year for the global economy and most markets, our lending portfolio performed well, with low credit loss expenses and a USD 0.2bn reduction in credit-impaired exposure to USD 2.5bn. Overall, we saw a USD 6bn decrease in banking product exposure driven by lower balances at central banks and lower loans and advances to Global Wealth Management customers. Traded product exposures saw a decrease of USD 3bn across our business divisions.

Market risk remained stable and at low levels, as a result of our continued focus on managing tail risks.

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control

Risk categories

We categorize the risk exposures of our business divisions and Group Functions as outlined in the table below. Our risk appetite framework is designed to capture all risk categories.

•

Refer to “Risk appetite framework” in this section for more information


	Risk managed by	Independent oversight by
Financial risks

Audited \| Credit risk: the risk of loss resulting from the failure of a client or counterparty to meet its contractual obligations toward UBS. This includes settlement risk, loan underwriting risk and step-in risk.	Business divisions	Risk Control
*Settlement risk:* the risk of loss resulting from transactions that involve exchange of value (e.g., security versus cash) where we must deliver without first being able to determine with certainty that we will receive the consideration. *Loan underwriting risk:* the risk of loss arising during the holding period of financing transactions that are intended for further distribution. *Step-in risk:* the risk that UBS may decide to provide financial support to an unconsolidated entity that is facing stress in the absence of, or in excess of, any contractual obligations to provide such support. p

Audited \| Market risk (traded and non-traded): the risk of loss resulting from adverse movements in market variables. Market variables include observable variables, such as interest rates, foreign exchange rates, equity prices, credit spreads and commodity (including precious metal) prices, as well as variables that may be unobservable or only indirectly observable, such as volatilities and correlations. Market risk includes issuer risk and investment risk.	Business divisions and Group Treasury	Risk Control

*Issuer risk:* the risk of loss from changes in fair value resulting from credit-related events affecting an issuer to which we are exposed through tradable securities or derivatives referencing the issuer. *Investment risk:* issuer risk associated with positions held as financial investments. p

Country risk: the risk of loss resulting from country-specific events. Includes transfer risk, which involves a country’s authorities preventing or restricting the payment of an obligation, as well as systemic risk events arising from country-specific political or macroeconomic developments.	Business divisions	Risk Control

Sustainability and climate risk: the risk that UBS negatively impacts, or is impacted by, climate change, natural capital, human rights, and other environmental, social, governance (ESG) matters. Climate risks can arise from either changing climate conditions (physical risks) or from efforts to mitigate climate change (transition risks). Sustainability and climate risk may manifest as credit, market, liquidity, and / or non-financial risks for UBS, resulting in potential adverse financial, liability and / or reputation impacts. These risks extend to the value of investments and may also affect the value of collateral (e.g., real estate).	Business divisions	Risk Control

Treasury risk: the risks associated with asset and liability management and our liquidity and funding positions, as well as structural exposures including pension risks.	Group Treasury	Risk Control

Audited \| *Liquidity risk:* the risk that the firm will not be able to efficiently meet both expected and unexpected current and forecast cash flows and collateral needs without affecting either daily operations or the financial condition of the firm. p Audited \| *Funding risk:* the risk that the firm will be unable, on an ongoing basis, to borrow funds in the market on an unsecured (or even secured) basis at an acceptable price to fund actual or proposed commitments, i.e., the risk that UBS’s funding capacity is not sufficient to support the firm’s current business and desired strategy. p *Interest rate risk in the banking book:* the risk to the bank’s capital and earnings arising from the adverse effects of interest rate movements on the bank’s banking book positions. The risk is transferred from the originating business units GWM and P&C to Group Treasury to risk manage this centrally and benefit from Group-wide netting while leaving the business units with margin management. *Structural foreign exchange risk:* the risk of decreases in our capital due to changes in foreign exchange rates with an adverse translation effect on capital held in currencies other than the US dollar.

*Pension risk:* the risk of a negative impact on our capital as a result of deteriorating funded status from decreases in the fair value of assets held in defined benefit pension funds and / or changes in the value of defined benefit pension obligations due to changes in actuarial assumptions (e.g., discount rate, life expectancy, rate of pension increase) and / or changes to plan designs.	Group Treasury and Human Resources	Risk Control and Finance

Business risk: the potential negative impact on earnings from lower-than-expected business volumes and / or margins, to the extent they are not offset by a decrease in expenses. For example, changes in the competitive landscape, client behavior or market conditions can potentially have a negative impact.	Business divisions	Risk Control and Finance

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control


	Risk managed by	Independent oversight by
Non-financial risks

Compliance risk: the risk of failure to comply with laws, rules and regulations, and internal policies and procedures.	Business divisions	Group Compliance, Regulatory & Governance (GCRG)

*Employment risk:* the risk of not adhering to the applicable employment law, regulatory requirements and human resources practices, as well as our own internal standards.		Human Resources

*Conduct risk:* the risk that the conduct of the firm or its individuals unfairly impacts clients or counterparties, undermines the integrity of the financial system or impairs effective competition to the detriment of consumers.		GCRG

Financial crime risk: the risk of failure to prevent financial crime (including money laundering, terrorist financing, sanctions violations, fraud, bribery and corruption).	Business divisions and Financial Crime Prevention (FCP)	GCRG

Operational risk: the risk resulting from inadequate or failed internal processes, people or systems, or from external causes (deliberate, accidental or natural).	Business divisions	GCRG

*Cybersecurity and information security risk:* the risk of a malicious internal or external act, or a failure of IT hardware or software, or human error, leading to a material impact on confidentiality, integrity or availability of UBS’s data or information systems.	Business divisions and the Chief Digital and Information Office (the CDIO)	GCRG

*Model risk:* the risk of adverse consequences (e.g., financial loss, due to legal matters, operational loss, biased business decisions, or reputational damage) resulting from decisions based on incorrect / inadequate or misused model outputs and reports.	Model owner	Risk Control

Legal risk: the financial or reputational implications resulting from the risk of: (i) being held liable for a breach of applicable laws, rules or regulations; (ii) being held liable for a breach of contractual or other legal obligations; (iii) an inability or failure to enforce or protect contractual rights or non-contractual rights sufficiently to protect UBS’s interests, including the risk of being party to a claim in respect of any of the above (and the risk of loss of attorney–client privilege in the context of any such claim); (iv) a failure to adequately develop, supervise and resource legal teams or adequately supervise external legal counsel advising on business legal risk and other matters; and (v) a failure to adequately manage any potential, threatened and commenced litigation and legal proceedings, including civil, criminal, arbitration and regulatory proceedings, and / or litigation risk or any dispute or investigation that may lead to litigation or threat of any litigation.	Business divisions	Legal

Reputational risk: the risk of loss of and damage to reputation, loss of clients and investor confidence within the financial system.	All businesses and functions	All control functions

Top and emerging risks

The top and emerging risks disclosed below reflect those that we currently think have the potential to materialize within one year and which could significantly affect the Group. Investors should also carefully review all information set out in the “Risk factors” section of this report, where we discuss these and other material risks that we consider could have an effect on our ability to execute our strategy and may affect our business activities, financial condition, results of operations and business prospects.

•

We remain watchful of a range of geopolitical developments across the world, including the Russia–Ukraine war, US– China and US–Iran tensions, and political changes in a number of countries. Geopolitical tensions will continue to create uncertainty, while the Russia–Ukraine war complicates the energy price outlook.

•

Inflation appears to be moderating in the US and Europe, but there continue to be concerns regarding a potential resurgence and regarding the timing and extent of central bank policy responses (i.e., interest rate hikes and the tapering of quantitative easing).

•

We are exposed to a number of macroeconomic issues, as well as general market conditions. As noted in “Market, credit and macroeconomic risks” in the “Risk factors” section of this report, these external pressures may have a significant adverse effect on our business activities and related financial results, primarily through reduced margins and revenues, asset impairments and other valuation adjustments. Accordingly, these macroeconomic factors are considered in the development of stress-testing scenarios for our ongoing risk management activities.

•

We are exposed to substantial changes in the regulation of our businesses that could have a material adverse effect on our business, as discussed in the “Regulatory and legal developments” section of this report and in “Regulatory and legal risks” in the “Risk factors” section of this report.

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control

•

As a global financial services firm, we are subject to many different legal, tax and regulatory regimes and extensive regulatory oversight. We are exposed to significant liability risk, and we are subject to various claims, disputes, legal proceedings and government investigations, as noted in “Regulatory and legal risks” in the “Risk factors” section of this report. Information about litigation, regulatory and similar matters we consider significant is disclosed in “Note 17 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report.

•

The geopolitical situation increases the likelihood of external state-driven cyber activity, and attacks are becoming increasingly sophisticated, which may result in business disruption or the corruption or loss of data. Additionally, as a result of the dynamic and material nature of recent geopolitical, environmental and health threats and the operational complexity of all our businesses, we are continually exposed to operational resilience scenarios such as process error, failed execution, system failures and fraud.

•

Conduct risks are inherent in our businesses. Achieving fair outcomes for our clients, upholding market integrity and cultivating the highest standards of employee conduct are of critical importance to us. Management of conduct risks is an integral part of our risk management framework.

•

Financial crime (including money laundering, terrorist financing, sanctions violations, fraud, bribery and corruption) presents significant risk. Heightened regulatory expectations and attention require investment in people and systems, while emerging technologies and changing geopolitical risks further increase the complexity of identifying and preventing financial crime. Refer to “Non-financial risk” in this section and “Strategy, management and operational risks” in the “Risk factors” section of this report for more information.

•

ESG / sustainability and climate risks are in the focus of regulators and other stakeholders, in particular climate risks, nature-related risk and concerns about greenwashing, where UBS may be subject to reputational risk if not fully aligned with sustainability-related criteria. New standards and rules are developing in several jurisdictions, with the risk of divergent rules increasing and leading to an increased risk that UBS may not comply with all relevant regulations. Refer to “Sustainability and climate risk” and “Non-financial risk” in this section.

•

New risks continue to emerge. For example, client demand for distributed ledger technology, blockchain-based assets and virtual currencies creates new risks, to which we currently have limited exposure and for which relevant control frameworks are being implemented.

Risk governance

Our risk governance framework operates along three lines of defense.

Our first line of defense, business management, owns its risks and is accountable for maintaining effective processes and systems to manage them in compliance with applicable laws, rules and regulations, as well as internal standards, including identifying control weaknesses and inadequate processes.

Our second line of defense, control functions, is separate from the business and reports directly to the Group CEO. Control functions provide independent oversight, challenge financial and non-financial risks arising from the firm’s business activities, and establish independent frameworks for risk assessment, measurement, aggregation, control and reporting, protecting against non-compliance with applicable laws, rules and regulations.

Our third line of defense, Group Internal Audit (GIA), reports to the Chairman and to the Audit Committee. This function assesses the design and operating effectiveness and sustainability of processes to define risk appetite, governance, risk management, internal controls, remediation activities and processes to comply with legal and regulatory requirements and internal governance standards.

The key roles and responsibilities for risk management and control are shown in the chart below and described further below.

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control

LOGO

Audited | The Board of Directors (the BoD) approves the risk management and control framework of the Group, including the Group and business division overall risk appetite. The BoD is supported by its Risk Committee, which monitors and oversees the Group’s risk profile and the implementation of the risk framework approved by the BoD, and approves the Group’s risk appetite methodology. The Corporate Culture and Responsibility Committee (the CCRC) helps the BoD meet its duty to safeguard and advance UBS’s reputation for responsible and sustainable conduct, reviewing stakeholder concerns and expectations pertaining to UBS’s societal contribution and corporate culture. The Audit Committee assists the BoD with its oversight duty relating to financial reporting and internal controls over financial reporting, and the effectiveness of whistleblowing procedures and the external and internal audit functions.

The Group Executive Board (the GEB) has overall responsibility for establishing and implementing a risk management and control framework in the Group, managing the risk profile of the Group as a whole.

The Group Chief Executive Officer has responsibility and accountability for the management and performance of the Group, has risk authority over transactions, positions and exposures, and allocates business divisions and Group Functions risk limits approved by the BoD.

The business division Presidents and Group functional heads are responsible for the operation and management of their business divisions / Group Functions, including controlling the dedicated financial resources and risk appetite of the business divisions.

The regional Presidents ensure cross-divisional collaboration in their regions and are mandated to inform the GEB about any regional activities and issues that may give rise to actual or potentially material regulatory or reputational concerns.

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control

The Group Chief Risk Officer (the Group CRO) is responsible for developing the Group’s risk management and control framework (including risk principles and risk appetite) for credit, market, country, treasury, model and sustainability and climate risks. This includes risk measurement and aggregation, portfolio controls and risk reporting. The Group CRO sets risk limits and approves credit and market risk transactions and exposures. Risk Control is also the central function for model risk management and control for all models used in UBS. A framework of policies and authorities support the risk control process.

The Group Chief Compliance and Governance Officer is responsible for developing the Group’s non-financial risk framework, which sets the general requirements for identification, management, assessment and mitigation of non-financial risk, and for ensuring that all non-financial risks are identified, owned and managed according to the non-financial risk appetite objectives, supported by an effective control framework.

The Group Chief Financial Officer is responsible for transparency in assessing the financial performance of the Group and the business divisions, and for managing the Group’s financial accounting, controlling, forecasting, planning and reporting. Additional responsibilities include managing UBS’s tax affairs, as well as treasury and capital management, including liquidity and funding risk and UBS’s regulatory ratios, Finance Artificial Intelligence & Data Analytics strategy and Group M&A.

The Group General Counsel manages the Group’s legal affairs (including litigation involving UBS), ensuring effective and timely assessment of legal matters impacting the Group or its businesses, and managing and reporting all litigation matters.

The Head Human Resources is responsible for independent oversight and challenge of employment-related risks.

Group Internal Audit (GIA) independently assesses the effectiveness of processes to define strategy and risk appetite and overall adherence to the approved strategy. It also assesses the effectiveness of governance processes and risk management, including compliance with legal and regulatory requirements and internal governance documents. The Head GIA reports to the Chairman of the BoD. GIA also has a functional reporting line to the BoD Audit Committee.

Some of these roles and responsibilities are replicated for significant legal entities of the Group. Designated legal entity risk officers oversee and control financial and non-financial risks for significant legal entities of UBS as part of the legal entity control framework, which complements the Group’s risk management and control framework. p

Risk appetite framework

We have a defined Group-level risk appetite, covering all financial and non-financial risk types, via a complementary set of qualitative and quantitative risk appetite statements. This is reviewed and recalibrated annually and presented to the BoD for approval.

Our risk appetite is defined at the aggregate Group level and reflects the types of risk that we are willing to accept or wish to avoid. It is set via complementary qualitative and quantitative risk appetite statements defined at a firm-wide level and is embedded throughout our business divisions and legal entities by Group, business division and legal entity policies, limits and authorities. Our risk appetite is reviewed and recalibrated annually, with the aim of ensuring that risk-taking at every level of the organization is in line with our strategic priorities, our capital and liquidity plans, our Pillars, Principles and Behaviors, and minimum regulatory requirements. The “Risk appetite framework” chart below shows the key elements of the framework, which is described in detail in this section.

Qualitative risk appetite statements aim to ensure we maintain the desired risk culture. Quantitative risk appetite objectives are designed to enhance UBS’s resilience against the effects of potential severe adverse economic or geopolitical events. These risk appetite objectives cover UBS’s minimum capital and leverage ratios, solvency, earnings, liquidity and funding, and are subject to periodic review, including the yearly business planning process. These objectives are complemented by non-financial risk appetite objectives, which are set for each of our non-financial risk categories. A standardized quantitative firm-wide non-financial risk appetite has been established at the Group and business division levels. Non-financial risk events exceeding predetermined risk tolerances, expressed as percentages of UBS’s total revenue, must be escalated as per the firm-wide escalation framework to the respective business division President or higher, as appropriate.

The quantitative risk appetite objectives are supported by a comprehensive suite of risk limits set at a portfolio level to monitor specific portfolios and to control potential risk concentrations.

The status of risk appetite objectives is evaluated each month and reported to the BoD and the GEB. As our risk appetite may change over time, portfolio limits and associated approval authorities are subject to periodic reviews and changes, particularly in the context of our annual business planning process.

Our risk appetite framework is governed by a single overarching policy and conforms to the Financial Stability Board’s Principles for an Effective Risk Appetite Framework.

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control

LOGO

Risk principles and risk culture

Maintaining a strong risk culture is a prerequisite for success in today’s highly complex operating environment and a source of sustainable competitive advantage.

Our risk appetite framework combines all the important elements of our risk culture, expressed in our Pillars, Principles and Behaviors, our risk management and control principles, our Code of Conduct and Ethics, and our Total Reward Principles. Together these aim to align our decisions with the Group’s strategy, principles and risk appetite. They help create a solid foundation for promoting risk awareness, leading to appropriate risk-taking and the establishing of robust risk management and control processes. These principles are supported by a range of initiatives covering employees at all levels, for example the UBS House View on Leadership, which is a set of explicit expectations that establishes consistent leadership standards across UBS, and our Principles of Good Supervision, which establish clear expectations of managers and employees regarding supervisory responsibilities, specifically: to take responsibility; to know and organize their business; to know their employees and what they do; to create a good risk culture; and to respond to and resolve issues.

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Refer to “Employees” in the “How we create value for our stakeholders” section of this report for more information about our Pillars, Principles and Behaviors

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Refer to the Code of Conduct and Ethics of UBS at ubs.com/code for more information

Risk management and control principles


Protection of financial strength		Protecting UBS’s financial strength by controlling our risk exposure and avoiding potential risk concentrations at individual exposure levels, at specific portfolio levels and at an aggregate firm-wide level across all risk types.

Protection of reputation		Protecting our reputation through a sound risk culture characterized by a holistic and integrated view of risk, performance and reward, and through full compliance with our standards and principles, particularly our Code of Conduct and Ethics.

Business management accountability		Maintaining management accountability, whereby business management owns all risks assumed throughout the Group and is responsible for the continuous and active management of all risk exposures to provide for balanced risk and return.

Independent controls		Independent control functions that monitor the effectiveness of the businesses’ risk management and oversee risk-taking activities.

Risk disclosure		Disclosure of risks to senior management, the BoD, investors, regulators, credit rating agencies and other stakeholders with an appropriate level of comprehensiveness and transparency.

Whistleblowing policies and procedures exist to encourage an environment where staff are comfortable raising concerns. There are multiple channels via which individuals may, either openly or anonymously, escalate suspected breaches of laws, regulations, rules and other legal requirements, our Code of Conduct and Ethics, policies or relevant professional standards. We are committed to ensuring there is appropriate training and communication to staff and legal entity representatives, including information about new regulatory requirements.

Mandatory training programs cover various compliance-related and risk-related topics, including operational risk and anti-money laundering. Additional specialized training is provided depending on employees’ specific roles and responsibilities; e.g., credit risk and market risk training for those working in trading areas. Our non-financial risk framework aims to identify and manage financial, regulatory and reputational risks, as well as risks to clients and markets.

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control

Quantitative risk appetite objectives

Our quantitative risk appetite objectives aim to ensure that our aggregate risk exposure remains within desired risk capacity, based on capital and business plans. The specific definition of risk capacity for each objective is aimed at ensuring we have sufficient capital, earnings, funding and liquidity to protect our businesses and exceed minimum regulatory requirements under a severe stress event. The risk appetite objectives are evaluated during the annual business planning process and approved by the BoD. The comparison of risk exposure with risk capacity is a key consideration in decisions on potential adjustments to the business strategy, risk profile, and the level of capital returns to shareholders.

In the annual business planning process, UBS’s business strategy is reviewed, the risk profile that our operations and activities result in is assessed, and that risk profile stressed. We use both scenario-based stress tests and statistical risk measurement techniques to assess the effects of severe stress events at a firm-wide level. These complementary frameworks capture exposures to material risks across our business divisions and Group Functions.

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Refer to “Risk measurement” in this section for more information about our stress testing and statistical stress frameworks

LOGO

Our risk capacity is underpinned by performance targets and capital guidance as per our business plan. When determining our risk capacity in case of a severe stress event, we estimate projected earnings under stress, factoring in lower expected income and expenses. We also consider capital impacts under stress from deferred tax assets, pension plan assets and liabilities, and accruals for capital returns to shareholders.

Risk appetite objectives define the aggregate risk exposure acceptable at the firm-wide level, given our risk capacity. The maximum acceptable risk exposure is supported by a full set of risk limits, which are cascaded to businesses and portfolios. These limits aim to ensure that our risks remain in line with risk appetite.

Risk appetite statements at the business division level are derived from the firm-wide risk appetite. They may also include division-specific strategic goals related to that division’s activities and risks. Risk appetite statements are also set for certain legal entities, which must be consistent with the firm-wide risk appetite framework and approved in accordance with Group and legal entity regulations. Differences may exist that reflect the specific nature, size, complexity and regulations applicable to the relevant legal entity.

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control

Internal risk reporting

Comprehensive and transparent reporting of risks is central to our risk governance framework’s control and oversight responsibilities and required by our risk management and control principles. Accordingly, risks are reported at a frequency and level of detail commensurate with the extent and variability of the risk and the needs of the various governance bodies, regulators and risk authority holders.

The Group Risk Report provides a detailed qualitative and quantitative monthly overview of developments in financial and non-financial risks at the firm-wide level, including the status of our risk appetite objectives and the results of firm-wide stress testing. The Group Risk Report is distributed internally to the BoD and the GEB, and senior members of Risk Control, GIA, Finance and Legal. Risk reports are also produced for significant Group entities (entities subject to enhanced standards of corporate governance) and significant branches.

Granular divisional risk reports are provided to the respective business division CROs and business division Presidents. This monthly reporting is supplemented with daily or weekly reports, at various levels of granularity, covering market and credit risks for the business divisions to enable risk officers and senior management to monitor and control the Group’s risk profile.

Our internal risk reporting covers financial and non-financial risks and is supported by risk data and measurement systems that are also used for external disclosure and regulatory reporting. Dedicated units within Risk Control assume responsibility for measurement, analysis and reporting of risk and for overseeing the quality and integrity of risk-related data. Our risk data and measurement systems are subject to periodic review by GIA, following a risk-based audit approach.

Model risk management

Introduction

We rely on models to inform risk management and control decisions, to measure risks or exposures, value instruments or positions, conduct stress testing, assess adequacy of capital, and manage clients’ assets and our own assets. Models may also be used to measure and monitor compliance with rules and regulations, for surveillance activities, or to meet financial or regulatory reporting requirements.

Model risk is defined as the risk of adverse consequences (e.g., financial losses or reputational damage) resulting from incorrect or misused models.

Model governance framework

Our model governance framework establishes requirements for identifying, measuring, monitoring, reporting, controlling and mitigating model risk. All the models that we use are subject to governance and controls throughout their life cycles, with rigor, depth and frequency determined by the model’s materiality and complexity. This is designed to ensure that risks arising from model use are identified, understood, managed, monitored, controlled and reported on both a model-specific and an aggregated level. Before they can be granted approval for use from the model sponsor, all our models are independently validated.

Once validated and approved for use, a model is subject to ongoing model monitoring and annual model confirmation, ensuring that the model is only used if it continues to be found fit for purpose. All models are subject to periodic model re-validation.

Our model risk governance framework follows our overarching risk governance framework, with the three lines of defense (LoD) assigned as follows.

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First LoD: model sponsors, model owners, model developers, and model users

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Second LoD: Chief Model Risk Officer, Model Risk Management & Control

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Third LoD: Group Internal Audit

An important difference as compared with how LoD are usually defined in financial and non-financial risk is that some models are owned by traditionally second LoD functions, such as Risk Control, Finance or Compliance.

Model risk appetite framework and statement

The model risk appetite framework sets out the model risk appetite statement, defines the relevant metrics and lays out how appropriate adherence is assessed.

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control

Model oversight

Model oversight committees and forums ensure that model risk is overseen at different levels of the organization, appropriate model risk management and control actions are taken and, where necessary, escalated to the next level.

The Group Model Governance Committee is our most senior oversight and escalation body for all models in scope of our model governance framework. It is co-chaired by the Group CRO and the Group CFO and is responsible for: (i) reviewing and approving changes to the framework; (ii) approving the model risk appetite statement; (iii) overseeing adherence to the UBS model risk governance framework; and (iv) monitoring model risk at a firm-wide level.

Risk measurement

Audited | We apply a variety of methodologies and measurements to quantify the risks of our portfolios and potential risk concentrations. Risks that are not fully reflected within standard measures are subject to additional controls, which may include preapproval of specific transactions and the application of specific restrictions. Models to quantify risk are generally developed by dedicated units within control functions and are subject to independent validation. p

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Refer to “Credit risk,” “Market risk” and “Non-financial risk” in this section for more information about model confirmation procedures

Stress testing

We perform stress testing to estimate losses that could result from extreme yet plausible macroeconomic and geopolitical stress events to identify, better understand and manage our potential vulnerabilities and risk concentrations. Stress testing has a key role in our limits framework at the firm-wide, business division, legal entity and portfolio levels. Stress test results are regularly reported to the BoD and the GEB. As described in “Risk appetite framework,” stress testing, along with statistical loss measures, has a central role in our risk appetite and business planning processes.

Our stress testing framework has three pillars: (i) combined stress tests; (ii) an extensive set of portfolio- and risk-type-specific stress tests; and (iii) reverse stress testing.

Our combined stress testing (CST) framework is scenario-based and aims to quantify overall firm-wide losses that could result from various potential global systemic events. The framework captures all material risks, as covered in “Risk categories.” Scenarios are forward-looking and encompass macroeconomic and geopolitical stress events calibrated to different levels of severity. We implement each scenario through the expected evolution of market indicators and economic variables under that scenario and then estimate the overall loss and capital implications were the scenario to occur. At least once a year, the Risk Committee approves the most relevant scenario, known as the binding scenario, for use as the main scenario for regular CST reporting and for monitoring risk exposure against our minimum capital, earnings and leverage ratio objectives in our risk appetite framework.

We provide detailed stress loss analyses to the Swiss Financial Market Supervisory Authority (FINMA) and regulators of our legal entities in accordance with their requirements.

Our Enterprise-wide Stress Forum (the ESF) aims to ensure the consistency and adequacy of the assumptions and scenarios used for firm-wide stress measures. As part of its responsibilities, the ESF, with input from the Think Tank, a panel of senior representatives from the business divisions, Risk Control and Economic Research, seeks to ensure that the set of stress scenarios adequately reflects current and potential developments in the macroeconomic and geopolitical environment, current and planned business activities, and actual or potential risk concentrations and vulnerabilities in our portfolios.

Each scenario captures a wide range of macroeconomic variables, including GDP, equity prices, interest rates, foreign exchange rates, commodity prices, property prices and unemployment. We use assumed changes in these macroeconomic and market variables in each scenario to stress the key risk drivers of our portfolios. We also capture the business risk resulting from lower fee, interest and trading income net of lower expenses. These effects are measured for all businesses and material risk types to calculate the aggregate estimated effect of the scenario on profit or loss, other comprehensive income, risk-weighted assets, the leverage ratio denominator and, ultimately, capital and leverage ratios. The assumed changes in macroeconomic variables are updated periodically to account for changes in the current and possible future market environment.

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control

In 2022, the binding scenario for CST was the internal global crisis scenario. In this scenario, weaker fiscal conditions resulting from the COVID-19 pandemic, combined with concerns around inflation, geopolitical tensions and accelerating policy actions toward a carbon-neutral economy, lead to sovereign defaults in several emerging markets. This then spills over into a Eurozone crisis, a hard landing in China and a global downturn. The macroeconomic impact is severe, as is the immediate market impact. Volatility in the bond markets spreads to other asset classes. Greece, Portugal and Cyprus lose market access and require substantial debt restructurings, while Greece leaves the Eurozone. Weak consumer and business confidence and a fall in global markets lead to a global recession. The fiscal response in many countries is limited due to the lack of fiscal headroom, while central banks resume expansionary monetary policy. China is hit severely by the slowdown in global demand and volatility in financial markets, which further weakens emerging market economies. The scenario was updated over the course of 2022 to incorporate evolving economic conditions, including rising interest rates across the globe.

As part of the CST framework, we routinely monitored three additional stress scenarios throughout 2022:

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The global depression scenario explores a resurgence of COVID-19 occurring in the midst of a global market downturn. A combination of political, solvency and liquidity concerns cause several large emerging markets to default, which triggers a broader sovereign crisis. Several European economies default, and some leave the Eurozone. A negative feedback loop between collapsing demand in developed and emerging markets, declining asset values and commodity prices, and disruption in the banking system leads to a deep and prolonged recession across the globe.

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The severe Russia–Ukraine conflict scenario was created in early 2022 in response to developments in Ukraine and explores a sharp and persistent rise in inflation due to an escalation of geopolitical tensions, leading to a significant rise in long-term interest rates and a period of market turbulence. Economic activity slows across the globe as both business and household sentiment collapse, while credit conditions deteriorate. Despite weakness in activity, inflation remains stubbornly high, forcing central banks to begin raising their policy rates and thereby prolonging the weakness in economic activity and asset prices.

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The US monetary crisis scenario explores a loss of confidence in the US, which leads to a sell-off of US dollar- denominated assets, sparking an abrupt and substantial depreciation of the US dollar. The US economy is hit hard, financial markets enter a period of high volatility and other industrialized countries replicate the cyclical pattern of the US. Regional inflation trends diverge as the US experiences significant inflationary pressures while other developed markets experience deflation.

We have updated the binding stress scenario in our CST framework for 2023. The new stagflationary geopolitical crisis scenario assumes that a geopolitical event leads to economic regionalization and fears of prolonged stagflation. Central banks signal a firm commitment to price stability and continue to tighten monetary policy, triggering a broad rise in interest rates and impacting economic activity and asset values. The global crisis scenario will continue to be maintained and run for monitoring purposes.

Portfolio-specific stress tests are measures tailored to the risks of specific portfolios. Our portfolio stress loss measures are derived from data on past events, but also include forward-looking elements (e.g., we derive the expected market movements in our liquidity-adjusted stress metric using a combination of historical market behavior, based on an analysis of historical events, and forward-looking analysis, including consideration of defined scenarios not modeled on any historical events). Results of portfolio-specific stress tests may be subject to limits to explicitly control risk-taking or may be monitored without limits to identify vulnerabilities.

Reverse stress testing starts from a defined stress outcome (e.g., a specified loss amount, reputational damage, a liquidity shortfall or a breach of regulatory capital ratios) and works backward to identify economic or financial scenarios that could result in such an outcome. As such, reverse stress testing is intended to complement scenario-based stress tests by assuming “what if” outcomes that could extend beyond the range normally considered, and thereby potentially challenge assumptions regarding severity and plausibility.

We also routinely analyze the effect of increases or decreases in interest rates and changes in the structure of yield curves.

Within Group Treasury, we also perform stress testing to determine the optimal asset and liability structure, enabling us to maintain an appropriately balanced liquidity and funding position under various scenarios. These scenarios differ from those outlined above, because they focus on specific situations that could generate liquidity and funding stress, as opposed to the scenarios used in the CST framework, which focus on the effect on profit or loss and capital.

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Refer to “Credit risk” and “Market risk” in this section for more information about stress loss measures

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Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information about stress testing

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Refer to “Note 19 Expected credit loss measurement” in the “Consolidated financial statements” section of this report for more information about scenarios used for expected credit loss measurement

Statistical measures

We complement the scenario-based CST measures with our statistical stress measures to calculate and aggregate risks using statistical techniques to derive stress events at chosen confidence levels.

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control

This framework is used to derive a loss distribution, considering effects on both income and expenses, based on the simulation of historically observed financial and economic risk factors in combination with the firm’s actual earnings and relevant risk exposures. From that, we determine earnings-at-risk (EaR), measuring the potential shortfall in earnings (i.e., the deviation from forecast earnings) at a 95% confidence level and evaluated over a one-year horizon. EaR is used for the assessment of the earnings objectives in our risk appetite framework.

We extend the EaR measure, incorporating the effects of gains and losses recognized through other comprehensive income, to derive a distribution of potential effects of stress events on common equity tier 1 capital. From this distribution, we derive our capital-at-risk (CaR) buffer measure at a 95% confidence level to assess our capital and leverage ratio risk appetite objectives, and derive our CaR solvency measure at a 99.9% confidence level to assess our solvency risk appetite objective.

We use the CaR solvency measure as a basis for deriving the contributions of the business divisions to risk-based capital (RBC), which is a component of our equity attribution framework. RBC measures the potential capital impairment from an extreme stress event at a 99.9% confidence level.

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Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information about the equity attribution framework

Portfolio and position limits

UBS maintains a comprehensive set of risk limits across its major risk portfolios. These portfolio limits are set based on our risk appetite and periodically reviewed and adjusted as part of the business planning process.

Firm-wide stress and statistical metrics are complemented by more granular portfolio and position limits, triggers and targets. Combining these measures provides a comprehensive framework for control of the key risks of our business divisions, as well as significant legal entities.

We apply limits to a variety of exposures at portfolio level, using statistical and stress-based measures, such as value-at-risk, liquidity-adjusted stress, loan underwriting limits, economic value sensitivity and portfolio default simulations for loan books. These are complemented with a set of controls for net interest income sensitivity, mark-to-market losses on available-for-sale portfolios, and the effect of foreign exchange movements on capital and capital ratios.

Portfolio measures are supplemented with counterparty- and position-level controls. Risk measures for position controls are based on market risk sensitivities and counterparty-level credit risk exposures. Market risk sensitivities include sensitivities to changes in general market risk factors (e.g., equity indices, foreign exchange rates and interest rates) and sensitivities to issuer-specific factors (e.g., changes in an issuer’s credit spread or default risk). We monitor numerous market and treasury risk controls on a daily basis. Counterparty measures capture the current and potential future exposure to an individual counterparty, considering collateral and legally enforceable netting agreements.

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Refer to “Credit risk” in this section for more information about counterparty limits

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Refer to “Risk appetite framework” in this section for more information about the risk appetite framework

Risk concentrations

Audited | Risk concentrations may exist where one or several positions within or across different risk categories could result in significant losses relative to UBS’s financial strength. Identifying such risk concentrations and assessing their potential impact is a critical component of our risk management and control process.

For financial risks, we consider a number of elements, such as shared characteristics of positions, the size of the portfolio and the sensitivity of positions to changes in the underlying risk factors. Also important in our assessment is the liquidity of the markets where the positions are traded, as well as the availability and effectiveness of hedges or other potential risk-mitigating factors. This includes an assessment of, for example, the provider of the hedge and market liquidity where the hedge might be traded. Particular attention is given to identification of wrong-way risk and risk on risk. Wrong-way risk is defined as a positive correlation between the size of the exposure and the likelihood of a loss. Risk on risk is when a position and its risk mitigation can be impacted by the same event.

For non-financial risks, risk concentrations may result from, for example, a single operational risk issue that is large on its own (i.e., it has the potential to produce a single high-impact loss or a number of losses that together are high impact) or related risk issues that may link together to create a high impact.

Risk concentrations are subject to increased oversight by Group Risk Control and Group Compliance, Regulatory & Governance, and assessed to determine whether they should be reduced or mitigated, depending on the available means to do so. It is possible that material losses could occur on financial or non-financial risks, particularly if the correlations that emerge in a stressed environment differ markedly from those envisaged by risk models. p

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Refer to “Credit risk” and “Market risk” in this section for more information about the composition of our portfolios

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Refer to the “Risk factors” section of this report for more information

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control

Credit risk

Audited | Main sources of credit risk

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Global Wealth Management credit risk arises from lending against securities collateral, including derivative trading activity, and lending against residential and commercial real estate collateral, as well as corporate and other lending.

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A substantial portion of lending exposure arises from Personal & Corporate Banking, which offers mortgage loans, secured mainly by owner-occupied properties and income-producing real estate, as well as corporate loans, and therefore depends on the performance of the Swiss economy and real estate market.

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The Investment Bank’s credit exposure arises mainly from lending, derivatives trading and securities financing. Derivatives trading and securities financing are mainly investment grade. Loan underwriting activity can be lower rated and give rise to temporary concentrated exposure.

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Credit risk within Non-core and Legacy portfolio relates to derivative transactions and securitized positions. p

Credit loss expense / release

Total net credit loss expenses were USD 29m in 2022, compared with net credit loss releases of USD 148m in the prior year, reflecting net expenses of USD 29m related to stage 1 and 2 positions.

Stage 1 and 2 expected credit loss expenses of USD 29m relate to lending to corporate clients not secured by mortgages (USD 21m), mainly driven by scenario effects related to downward revision of GDP and higher interest rate assumptions, and lending secured by mortgages (USD 16m), mainly driven by scenario effects related to higher interest rate assumptions, especially in the newly introduced stagflationary geopolitical crisis scenario, and adverse house price assumptions, partly offset by releases from other lending (USD 9m).

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Refer to “Note 1 Summary of material accounting policies,” “Note 9 Financial assets at amortized cost and other positions in scope of expected credit loss measurement” and “Note 19 Expected credit loss measurement” in the “Consolidated financial statements” section of this report for more information about IFRS 9 and expected credit losses

Credit loss expense / (release)


USD m	Global Wealth Management			Personal & Corporate Banking			Asset Management		Investment Bank			Group Functions		Total
For the year ended 31.12.22
Stages 1 and 2		(5	)		27			0		6			1		29
Stage 3		5			12			0		(18	)		2		0

Total credit loss expense / (release)		0			39			0		(12	)		3		29


For the year ended 31.12.21
Stages 1 and 2		(28	)		(62	)		0		(34	)		0		(123	)
Stage 3		(1	)		(24	)		1		0			0		(25	)

Total credit loss expense / (release)		(29	)		(86	)		1		(34	)		0		(148	)


For the year ended 31.12.20
Stages 1 and 2		48			129			0		88			0		266
Stage 3		40			128			2		217			42		429

Total credit loss expense / (release)		88			257			2		305			42		694

Audited | Overview of measurement, monitoring and management techniques

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Credit risk from transactions with individual counterparties is based on our estimates of probability of default (PD), exposure at default (EAD) and loss given default (LGD). Limits are established for individual counterparties and groups of related counterparties covering banking and traded products, and for settlement amounts. Risk authorities are approved by the Board of Directors and are delegated to the Group CEO, the Group CRO and divisional CROs, based on risk exposure amounts, internal credit rating and potential for losses.

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Limits apply not only to the current outstanding amount but also to contingent commitments and the potential future exposure of traded products.

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The Investment Bank monitoring, measurement and limit framework distinguishes between exposures intended to be held to maturity (take-and-hold exposures) and those intended for distribution or risk transfer (temporary exposures).

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We use models to derive portfolio credit risk measures of expected loss, statistical loss and stress loss at Group-wide and business division levels, and to establish portfolio limits.

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control

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Credit risk concentrations can arise if clients are engaged in similar activities, located in the same geographical region or have comparable economic characteristics, e.g., if their ability to meet contractual obligations would be similarly affected by changes in economic, political or other conditions. To avoid credit risk concentrations, we establish limits / operational controls that constrain risk concentrations at portfolio, sub-portfolio or counterparty levels for sector exposure, country risk and specific product exposures. p

Credit risk profile of the Group

The exposures detailed in this section are based on management’s view of credit risk, which differs in certain respects from the expected credit loss (ECL) measurement requirements of International Financial Reporting Standards (IFRS). Internally, we put credit risk exposures into two broad categories: banking products and traded products. Banking products include drawn loans, guarantees and loan commitments, amounts due from banks, balances at central banks, and other financial assets at amortized cost. Traded products include over-the-counter (OTC) derivatives, exchange-traded derivatives (ETDs) and securities financing transactions (SFTs), consisting of securities borrowing and lending, and repurchase and reverse repurchase agreements.

Banking and traded products exposure in our business divisions and Group Functions

31.12.22

USD m

Global Wealth
Management

Personal &
Corporate
Banking

Asset
Management

Investment
Bank

Group
Functions

Total

Banking products^1,2

Gross exposure

334,621

236,508

1,454

76,585

37,986

687,152

of which: loans and advances to customers (on-balance sheet)

219,385

154,643

)

12,754

1,221

388,003

of which: guarantees and loan commitments (off-balance sheet)

13,147

28,610

12,920

7,486

62,163

Traded products^2,3

Gross exposure

8,328

320

34,370

43,018

of which: over-the-counter derivatives

6,416

304

11,218

17,938

of which: securities financing transactions

17,055

of which: exchange-traded derivatives

1,912

6,097

8,024

Other credit lines, gross⁴

12,084

23,092

6,105

109

41,390

Total credit-impaired exposure, gross (stage 3)¹

757

1,380

312

2,455

Total allowances and provisions for expected credit losses (stages 1 to 3)

215

701

168

1,091

of which: stage 1

138

259

of which: stage 2

156

267

of which: stage 3

406

564


	31.12.21
USD m	Global Wealth Management		Personal & Corporate Banking		Asset Management		Investment Bank		Group Functions		Total
Banking products^1,2
Gross exposure		337,266		229,334		1,520		59,352		65,514		692,985
of which: loans and advances to customers (on-balance sheet)		228,598		152,847		0		13,720		3,445		398,611
of which: guarantees and loan commitments (off-balance sheet)		10,772		29,737		0		14,994		4,947		60,450
Traded products^2,3
Gross exposure		9,582		783		0		35,950				46,314
of which: over-the-counter derivatives		7,186		766		0		9,767				17,719
of which: securities financing transactions		0		0		0		18,566				18,566
of which: exchange-traded derivatives		2,396		17		0		7,617				10,030

Other credit lines, gross⁴		12,947		24,174		0		3,629		28		40,778

Total credit-impaired exposure, gross (stage 3)¹		729		1,617		0		264		0		2,610
Total allowances and provisions for expected credit losses (stages 1 to 3)		264		709		0		188		4		1,165
of which: stage 1		89		126		0		64		4		282
of which: stage 2		41		146		0		34		0		220
of which: stage 3		135		438		0		90		0		662

ECL gross exposure including other financial assets at amortized cost, but excluding cash, receivables from securities financing transactions, cash collateral receivables on derivative instruments, financial assets at FVOCI, irrevocable committed prolongation of existing loans and unconditionally revocable committed credit lines and forward starting reverse repurchase and securities borrowing agreements.

2	Internal management view of credit risk, which differs in certain respects from IFRS.

3	As counterparty risk for traded products is managed at counterparty level, no further split between exposures in the Investment Bank and Group Functions is provided.

4	Unconditionally revocable committed credit lines.

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control

Banking products

•

Refer to “Note 1 Summary of material accounting policies” in the “Consolidated financial statements” section of this report for more information about our accounting policy for allowances and provisions for ECL

•

Refer to “Note 13a Other financial assets measured at amortized cost” in the “Consolidated financial statements” section of this report for more details

Global Wealth Management

Gross banking products exposure within Global Wealth Management decreased slightly to USD 335bn from USD 337bn.

Our Global Wealth Management loan portfolio is mainly secured by securities (Lombard loans) and by residential real estate. Most of our USD 154bn of Lombard loans, including traded products collateralized by securities, were of high quality, with 89% rated as investment grade based on our internal ratings and an average loan-to-value (LTV) of 49%. Moreover, Lombard loans are typically uncommitted, short term in nature and can be canceled immediately if the collateral quality deteriorates and margin calls are not met. In 2022, the Lombard book, including traded products, decreased by approximately 11%, while keeping a stable risk profile with regard to collateral concentrations with no material losses. The decrease was primarily driven by clients in Asia Pacific deleveraging on the back of ongoing market volatility. The share of non-standard Lombard loans, for example those with less liquid or concentrated collateral, slightly increased to 5% of the total Lombard book from 4%.

The mortgage book increased by approximately 8%, driven by higher volumes of mortgage loans in the US residential real estate portfolios (average LTV 48%) and by further expansion of the commercial real estate business to USD 5bn.

Other financings represent approximately 6% of the total banking products exposures and are consolidated in a corporate and other portfolio that increased by approximately 68% in 2022, mainly driven by private equity subscription facilities in the US, which are mostly investment grade rated.

Collateralization of Loans and advances to customers¹

UBS

of which:
Global Wealth Management

of which: Personal &
Corporate Banking

of which:
Investment Bank

USD m, except where indicated

31.12.22

31.12.21

31.12.22

31.12.21

31.12.22

31.12.21

31.12.22

31.12.21

Secured by collateral

367,159

377,857

216,993

225,591

138,851

138,344

10,724

11,200

Residential real estate

172,700

168,696

62,200

58,655

110,500

110,041

Commercial / industrial real estate

25,271

22,682

4,955

3,338

19,795

18,878

520

466

Cash

33,550

37,504

30,514

34,175

3,036

3,114

215

Securities

115,941

128,665

107,253

115,901

2,228

2,214

5,869

7,829

Other collateral

19,698

20,310

12,071

13,523

3,293

4,098

4,334

2,690

Subject to guarantees

2,957

3,954

144

616

2,758

3,338

Uncollateralized and not subject to guarantees

17,887

16,801

2,247

2,391

13,034

11,166

1,976

2,519

Total loans and advances to customers, gross

388,003

398,611

219,385

228,598

154,643

152,847

12,754

13,720

Allowances

(783

)

(850

)

(138

)

(168

)

(559

)

(574

)

(83

)

(108

)

Total loans and advances to customers, net of allowances

387,220

397,761

219,247

228,431

154,084

152,273

12,672

13,612

Collateralized loans and advances to customers in % of total loans and advances to customers, gross (%)

94.6

94.8

98.9

98.7

89.8

90.5

84.1

81.6

1	Collateral arrangements generally incorporate a range of collateral, including cash, securities, real estate and other collateral. UBS applies a risk-based approach that generally prioritizes collateral according to its liquidity profile.

Personal & Corporate Banking

Gross banking products exposure within Personal & Corporate Banking increased to USD 237bn, compared with USD 229bn in 2021. Net banking products exposure (excluding exposure reallocated from Group Treasury) was largely unchanged at USD 186bn (CHF 172bn), of which approximately 66% was classified as investment grade, broadly unchanged from 2021. Around 48% of the exposure is categorized in the lowest LGD bucket, i.e., 0–25%, compared with 50% in 2021. Personal & Corporate Banking’s gross loan portfolio was USD 155bn (CHF 143bn) compared with USD 153bn (CHF 139bn) in 2021. This portfolio is predominantly denominated in Swiss francs and the increase in Swiss franc terms was largely offset by the effect of the US dollar appreciating. As of 31 December 2022, 90% of this portfolio was secured by collateral, mainly residential and commercial property. Of the total unsecured amount, 86% related to cash flow-based lending to corporate counterparties and 3% related to lending to public authorities. Based on our internal ratings, 53% of the unsecured loan portfolio was rated as investment grade, compared with 50% in 2021.

Our Swiss corporate banking products take-and-hold portfolio, which was USD 36bn (CHF 33bn) and unchanged compared with 2021, consists of loans, guarantees and loan commitments to multi-national and domestic counterparties. The small and medium-sized entity (SME) portfolio, in particular, is well diversified across industries. However, such companies are reliant on the domestic economy and the economies to which they export, in particular the EU and the US.

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control

Our commodity trade finance portfolio focuses on energy and base-metal trading companies, where the related commodity price risk is hedged to a large extent by the commodity trader. The majority of limits in this business are uncommitted, transactional and short-term in nature. Our portfolio size was USD 7bn (CHF 7bn) as of 31 December 2022, compared with USD 8bn (CHF 7bn) in 2021, with a considerable part of the exposure correlating with commodity prices.

Our exposure to banks consists primarily of contingent claims and was USD 5bn (CHF 5bn), compared with USD 6bn (CHF 5bn) in 2021.

Despite the Russia–Ukraine war, higher energy prices and supply chain bottlenecks, as well as the onset of monetary policy tightening, credit losses were at a low level in 2022. The delinquency ratio was 0.2% for the corporate portfolio, compared with 0.3% at the end of 2021.

•

Refer to “Credit risk models” in this section for more information about loss given default, rating grades and rating agency mappings

Swiss mortgage loan portfolio

Our Swiss mortgage loan portfolio secured by residential and commercial real estate in Switzerland continues to be our largest loan portfolio. These mortgage loans, totaling USD 170bn (CHF 157bn), mainly originate from Personal & Corporate Banking, but also from Global Wealth Management Region Switzerland. Of these mortgage loans, USD 154bn (CHF 142bn) related to residential properties that the borrower was either occupying or renting out, with full recourse to the borrower. Of this USD 154bn (CHF 142bn), USD 111bn (CHF 103bn) is related to properties occupied by the borrower, with an average LTV ratio of 51%, compared with 52% as of 31 December 2021. The average LTV for newly originated loans for this portfolio was 63%, compared with 64% in 2021. The remaining USD 43bn (CHF 39bn) of the Swiss residential mortgage loan portfolio related to properties rented out by the borrower and the average LTV of that portfolio was 51%, compared with 52% as of 31 December 2021. The average LTV for newly originated Swiss residential mortgage loans for properties rented out by the borrower was 54%, compared with 55% in 2021.

As illustrated in the “Swiss mortgages: distribution of net exposure at default (EAD) across exposure segments and loan-to-value (LTV) buckets” table below, 99.9% of the aggregate amount of Swiss residential mortgage loans would continue to be covered by the real estate collateral even if the value assigned to that collateral were to decrease 20%, and more than 99% would remain covered by the real estate collateral even if the value assigned to that collateral were to decrease 30%.

Personal & Corporate Banking: distribution of banking products exposure across internal UBS ratings and loss given default (LGD) buckets¹

USD m, except where indicated

31.12.22

31.12.21

LGD buckets

Weighted
average
LGD (%)

Exposure

Weighted
average
LGD (%)

Internal UBS rating²

Exposure

0–25%

26–50%

51–75%

76–100%

Investment grade

123,358

67,254

44,236

9,162

2,706

121,520

Sub-investment grade

62,219

22,924

25,168

11,790

2,336

63,141

of which: 6–9

56,774

21,053

22,976

10,592

2,153

57,955

of which: 10–13

5,445

1,871

2,193

1,199

182

5,185

Defaulted / Credit-impaired

1,380

1,151

205

1,617

Total exposure before deduction of allowances and provisions

186,957

90,202

70,555

21,158

5,042

186,278

Less: allowances and provisions

(664

)

(674

)

Net banking products exposure¹

186,293

185,604

1	Excluding balances at central banks and Group Treasury reallocations.

2	The ratings of the major credit rating agencies, and their mapping to our internal rating scale, are shown in the “Internal UBS rating scale and mapping of external ratings” table in this section.

Personal & Corporate Banking: loans uncollateralized and not subject to guarantees by industry sector


	31.12.22				31.12.21
	USD m		%		USD m		%
Construction		172		1.3		166		1.5
Financial institutions		3,878		29.8		2,786		25.0
Hotels and restaurants		135		1.0		119		1.1
Manufacturing		1,715		13.2		1,555		13.9
Private households		1,473		11.3		1,488		13.3
Public authorities		416		3.2		419		3.8
Real estate and rentals		547		4.2		574		5.1
Retail and wholesale		2,230		17.1		1,971		17.7
Services		2,242		17.2		1,908		17.1
Other		226		1.7		180		1.6

Exposure, gross		13,034		100.0		11,166		100.0

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control

Swiss mortgages: distribution of net exposure at default (EAD) across exposure segments and loan-to-value (LTV) buckets¹


USD bn, except where indicated		31.12.22																31.12.21
		LTV buckets														Total		Total
Exposure segment		≤30%		31–50%		51–60%		61–70%		71–80%		81–100%		>100%		Total		Total
Residential mortgages	Net EAD		91.5		38.4		9.6		3.9		1.0		0.1		0.0		144.5		143.9
	as a % of row total		63		27		7		3		1		0		0		100
Income-producing real estate	Net EAD		15.6		6.1		1.3		0.5		0.1		0.0		0.0		23.7		22.2
	as a % of row total		66		26		6		2		1		0		0		100
Corporates	Net EAD		7.2		2.7		0.7		0.4		0.2		0.1		0.0		11.2		10.9
	as a % of row total		64		24		6		3		1		1		0		100
Other segments	Net EAD		0.6		0.2		0.0		0.0		0.0		0.0		0.0		0.9		0.9
	as a % of row total		67		22		5		3		2		1		0		100
Mortgage-covered exposure	Net EAD		114.8		47.4		11.6		4.9		1.2		0.3		0.1		180.3		177.9
	as a % of total		64		26		6		3		1		0		0		100
Mortgage-covered exposure 31.12.21	Net EAD		111.2		47.0		12.2		5.5		1.5		0.3		0.1		177.9
	as a % of total		63		26		7		3		1		0		0

The amount of each mortgage loan is allocated across the LTV buckets to indicate the portion at risk at the various value levels shown; for example, a loan of 75 with an LTV ratio of 75% (i.e., a collateral value of 100) would result in allocations of 30 in the less-than-30% LTV bucket, 20 in the 31–50% bucket, 10 in the 51–60% bucket, 10 in the 61–70% bucket and 5 in the 71–80% bucket.

Investment Bank

The Investment Bank’s lending activities are largely associated with corporate and non-bank financial institutions. The business is broadly diversified across industry sectors, but concentrated in North America.

The gross banking products exposure increased to USD 77bn as of 31 December 2022, compared with USD 59bn as of 31 December 2021, mostly driven by balances at central banks allocated to the business division. Excluding balances at central banks and Group Treasury reallocations, gross banking products exposure decreased to USD 32bn from USD 35bn in 2021, mostly driven by a decrease in irrevocable loan commitments. Based on our internal ratings, 50% of this gross banking products exposure was classified as investment grade. The vast majority of the gross banking products exposure had an estimated LGD below 50%.

Total mandated temporary loan underwriting exposure ended 2022 at USD 2.6bn, compared with USD 6.6bn at the end of the prior year. USD 2.3bn of commitments had not yet been distributed as originally planned as of 31 December 2022. Loan underwriting exposures are classified as held for trading, with fair values reflecting market conditions at the end of 2022.

•

Refer to “Credit risk models” in this section for more information about LGD, rating grades and rating agency mappings

Investment Bank: distribution of banking products exposure across internal UBS ratings and loss given default (LGD) buckets¹

USD m, except where indicated

31.12.22

31.12.21

LGD buckets

Weighted
average
LGD (%)

Exposure

Weighted
average
LGD (%)

Internal UBS rating²

Exposure

0–25%

26–50%

51–75%

76–100%

Investment grade

15,878

4,182

7,867

2,127

1,702

18,302

Sub-investment grade

15,522

4,872

6,324

4,128

198

16,250

of which: 6–9

9,174

2,746

2,380

3,879

169

10,467

of which: 10–13

6,348

2,127

3,944

249

5,783

Defaulted / Credit-impaired

312

273

264

Banking products exposure¹

31,712

9,327

14,218

6,264

1,904

34,815

1	Excluding balances at central banks and Group Treasury reallocations.

2	The ratings of the major credit rating agencies, and their mapping to our internal rating scale, are shown in the “Internal UBS rating scale and mapping of external ratings” table in this section.

Investment Bank: banking products exposure by geographical region¹


	31.12.22				31.12.21
	USD m		%		USD m		%
Asia Pacific		4,766		15.0		5,154		14.8
Latin America		1,209		3.8		1,327		3.8
Middle East and Africa		183		0.6		212		0.6
North America		15,409		48.6		16,282		46.8
Switzerland		461		1.5		453		1.3
Rest of Europe		9,684		30.5		11,387		32.7

Exposure¹		31,712		100.0		34,815		100.0

1	Excluding balances at central banks and Group Treasury reallocations.

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control

100

Investment Bank: banking products exposure by industry sector¹


	31.12.22				31.12.21
	USD m		%		USD m		%
Banks		4,409		13.9		4,908		14.1
Chemicals		583		1.8		645		1.9
Electricity, gas, water supply		363		1.1		359		1.0
Financial institutions, excluding banks		14,587		46.0		13,353		38.4
Manufacturing		1,361		4.3		1,692		4.9
Mining		878		2.8		1,024		2.9
Public authorities		259		0.8		619		1.8
Real estate and construction		1,685		5.3		1,581		4.5
Retail and wholesale		1,654		5.2		2,793		8.0
Technology and communications		2,324		7.3		3,736		10.7
Transport and storage		499		1.6		414		1.2
Other		3,110		9.8		3,691		10.6

Exposure¹		31,712		100.0		34,815		100.0

1	Excluding balances at central banks and Group Treasury reallocations.

Group Functions

Gross banking products exposure within Group Functions, which arises primarily in connection with treasury activities, decreased by USD 28bn to USD 38bn from balances at central banks. The decrease was mainly due to shifts within the high-quality liquid asset portfolio from cash into securities, a reduction in short-term debt, decreases in customer deposits, and outflows related to the share repurchase programs.

•

Refer to “Balance sheet assets” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information

•

Refer to the “Group Functions” section of this report for more information

Traded products

Audited | Counterparty credit risk (CCR) arising from traded products, which include OTC derivatives, ETD exposures and SFTs, originating in the Investment Bank, Non-core and Legacy Portfolio, and Group Treasury, is generally managed on a close-out basis. This takes into account possible effects of market movements on the exposure and any associated collateral over the time it would take to close out our positions. In the Investment Bank, limits are applied to the potential future exposure per counterparty, with the size of the limit dependent on the counterparty’s creditworthiness (as determined by Risk Control). Limit frameworks are also used to control overall exposure to specific classes or categories of collateral on a portfolio level. Such portfolio limits are monitored and reported to senior management.

Trading in OTC derivatives is conducted through central counterparties where practicable. Where central counterparties are not used, we have clearly defined policies and processes for trading on a bilateral basis. Trading is typically conducted under bilateral International Swaps and Derivatives Association or similar master netting agreements, which generally allow for close-out and netting of transactions in case of default, subject to applicable law. For most major market participant counterparties, we use two-way collateral agreements under which either party can be required to provide collateral in the form of cash or marketable securities when the exposure exceeds specified levels. This collateral typically consists of well-rated government debt or other collateral permitted by applicable regulations. For certain counterparties, an initial margin is taken to cover some or all of the calculated close-out exposure. This is in addition to the variation margin taken to settle changes in market value of transactions. Regulations on margining uncleared OTC derivatives continue to evolve. These generally expand the scope of bilateral derivatives activity subject to margining. They will also result in greater amounts of initial margin received from, and posted to, certain bilateral trading counterparties than had been required in the past. These changes should result in lower close-out risk over time. p

In the tables below, OTC derivatives exposures are generally presented as net positive replacement values after the application of legally enforceable netting agreements and the deduction of cash and marketable securities held as collateral. SFT exposures are reported taking into account collateral received, and ETD exposures take into account collateral margin calls.

•

Refer to “Note 10 Derivative instruments” in the “Consolidated financial statements” section of this report for more information about OTC derivatives settled through central counterparties

•

Refer to “Note 21 Offsetting financial assets and financial liabilities” in the “Consolidated financial statements” section of this report for more information about the effect of netting and collateral arrangements on derivative exposures

Investment Bank, Non-core and Legacy Portfolio and Group Treasury: traded products exposure

USD m

OTC derivatives

SFTs

ETDs

Total

31.12.22

31.12.21

Total exposure, before deduction of credit valuation adjustments and hedges

11,218

17,055

6,097

34,370

35,950

Less: credit valuation adjustments and allowances

(34

)

(35

)

(34

)

Less: credit protection bought (credit default swaps, notional)

(109

)

(109

)

(119

)

Net exposure after credit valuation adjustments, allowances and hedges

11,075

17,055

6,097

34,226

35,797

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control

101

Investment Bank, Non-core and Legacy Portfolio and Group Treasury: distribution of net OTC derivatives and SFT exposure across internal UBS ratings and loss given default (LGD) buckets


USD m, except where indicated	31.12.22												31.12.21
	Exposure		LGD buckets								Weighted average LGD (%)		Exposure		Weighted average LGD (%)
Internal UBS rating¹	Exposure		0–25%		26–50%		51–75%		76–100%		Weighted average LGD (%)		Exposure		Weighted average LGD (%)
Net OTC derivatives exposure
Investment grade		10,757		310		8,791		444		1,212		48		9,297		47
Sub-investment grade		318		13		114		14		177		72		317		59
of which: 6–9		*285*		9		89		13		*174*		76		249		62
of which: 10–12		28		0		25		0		2		41		46		64
of which: 13 and defaulted		5		3		0		2		0		23		22		14

Total net OTC derivatives exposure, after credit valuation adjustments and hedges		11,075		322		8,905		458		1,389		49		9,615		48

Net SFT exposure
Investment grade		16,682		279		14,414		999		990		40		17,937		40
Sub-investment grade		373		0		151		45		177		71		629		69

Total net SFT exposure		17,055		279		14,565		1,044		1,166		41		18,566		41

1	The ratings of the major credit rating agencies, and their mapping to our internal rating scale, are shown in the “Internal UBS rating scale and mapping of external ratings” table in this section.

Investment Bank, Non-core and Legacy Portfolio and Group Treasury: net OTC derivatives and SFT exposure by geographical region


	Net OTC derivatives exposure								Net SFT exposure
	31.12.22				31.12.21				31.12.22				31.12.21
	USD m		%		USD m		%		USD m		%		USD m		%
Asia Pacific		1,249		11.3		1,586		16.5		4,906		28.8		5,380		29.0
Latin America		117		1.1		111		1.2		34		0.2		20		0.1
Middle East and Africa		615		5.6		112		1.2		483		2.8		360		1.9
North America		2,200		19.9		1,830		19.0		3,177		18.6		4,473		24.1
Switzerland		1,055		9.5		688		7.2		466		2.7		559		3.0
Rest of Europe		5,839		52.7		5,288		55.0		7,988		46.8		7,774		41.9

Exposure		11,075		100.0		9,615		100.0		17,055		100.0		18,566		100.0

Investment Bank, Non-core and Legacy Portfolio and Group Treasury: net OTC derivatives and SFT exposure by industry sector


	Net OTC derivatives exposure								Net SFT exposure
	31.12.22				31.12.21				31.12.22				31.12.21
	USD m		%		USD m		%		USD m		%		USD m		%
Banks		1,288		11.6		986		10.3		869		5.1		1,654		8.9
Chemicals		71		0.6		14		0.1		0		0.0		0		0.0
Electricity, gas, water supply		118		1.1		103		1.1		0		0.0		0		0.0
Financial institutions, excluding banks		8,614		77.8		7,174		74.6		14,865		87.2		15,866		85.5
Manufacturing		97		0.9		50		0.5		0		0.0		0		0.0
Mining		20		0.2		51		0.5		0		0.0		0		0.0
Public authorities		655		5.9		810		8.4		1,320		7.7		926		5.0
Retail and wholesale		29		0.3		22		0.2		0		0.0		0		0.0
Transport, storage and communication		115		1.0		255		2.6		0		0.0		0		0.0
Other		69		0.6		150		1.6		0		0.0		120		0.6

Exposure		11,075		100.0		9,615		100.0		17,055		100.0		18,566		100.0

Credit risk mitigation

Audited | We actively manage credit risk in our portfolios by taking collateral against exposures and by utilizing credit hedging. p

Lending secured by real estate

Audited | We use a scoring model as part of a standardized front-to-back process for credit decisions on originating or modifying Swiss mortgage loans. The model’s two key factors are the LTV ratio and an affordability calculation. p

The calculation of affordability takes into account interest payments, minimum amortization requirements and potential property maintenance costs in relation to gross income or rental income for rental properties. Interest payments are estimated using a predefined framework, which considers the potential for significant interest rate increases over the lifetime of the loan. The interest rate is set at 5% per annum in the context of the current environment.

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For residential properties occupied by the borrower, the maximum LTV for the standard approval process is 80% and 60% for holiday homes and luxury real estate. For other properties, the maximum LTV allowed within the standard approval process ranges from 30% to 80%, depending on the type and age of the property, and the amount of renovation work needed.

Audited | The value we assign to each property is based on the lowest value determined from model-derived valuations, the purchase price, an asset value for income-producing real estate (IPRE), and, in some cases, an additional external valuation. p

Two separate models provided by a market-leading external vendor are used to derive property valuations for owner-occupied residential properties (ORPs) and IPRE. We estimate the current value of an ORP using a regression model (a hedonic model) based on statistical comparison against current transaction data. We derive the value of a property from the characteristics of the real estate itself, as well as those of its location. In addition to the initial valuation, values for ORPs are updated quarterly over the lifetime of the loan using region-specific real estate price indices. The price indices are sourced from an external vendor and subject to internal validation and benchmarking. We use these valuations quarterly to compute indexed LTV for all ORPs. A portfolio-specific monitoring system considers these along with other risk measures (e.g., rating and behavioral information) to identify higher-risk loans and triggers an assessment and reappraisal by client advisors and credit officers as needed.

For IPRE, the capitalization rate model is used to determine the property valuation by discounting estimated sustainable future income using a capitalization rate based on various attributes. These attributes consider regional and specific property characteristics, such as market and location data (e.g., vacancy rates), benchmarks (e.g., for running costs), and certain other standardized input parameters (e.g., property condition). Updated information regarding rental income from IPRE is requested from the client at least once every three years. Our portfolio-specific monitoring system alerts us to changes in rental income and other risk measures (e.g., LTV, rating, behavioral information), and triggers an assessment and reappraisal by client advisors and credit officers as needed.

To take market developments into account for these models, the external vendor regularly updates the parameters and / or refines the architecture for each model. Model changes and parameter updates are subject to the same validation procedures as our internally developed models.

Audited | We similarly apply underwriting guidelines for our Global Wealth Management Region Americas mortgage loan portfolio, taking into account loan affordability and collateral sufficiency. LTV standards are defined for the various mortgage types, such as residential mortgages or investment properties, based on associated risk factors, such as property type, loan size, and purpose. The maximum LTV allowed within the standard approval process ranges from 45% to 80%. In addition to LTV, other credit risk metrics, such as debt-to-income ratios, credit scores and required client reserves, are also part of our underwriting guidelines.

A risk limit framework is applied to the Global Wealth Management Region Americas mortgage loan portfolio. Limits are set to govern exposures within LTV categories, geographic concentrations, portfolio growth and high-risk mortgage segments, such as interest-only loans. These limits are monitored by a specialized credit risk monitoring team and reported to senior management. Supplementing this limit framework is a real estate lending policy and procedures framework, set up to govern real estate lending activities. Quality assurance and quality control programs monitor compliance with mortgage underwriting and documentation requirements.

For our mortgage loan portfolio in the Global Wealth Management regions of EMEA and Asia Pacific, we apply global underwriting guidelines with regional variations to allow for regulatory and market differentials. As in other regions, the underwriting guidelines take into account affordability and collateral sufficiency. Affordability is assessed at a stressed interest rate using, for residential real estate, the borrowers’ sustainable income and declared liabilities, and for commercial real estate the quality and sustainability of rental income. For interest-only loans, a declared and evidenced repayment strategy must be in place. The applicable LTV for each mortgage is based on the quality and liquidity of the property and assessed against valuations from bank-appointed third-party valuers. Maximum LTV varies from 30% to 70%, depending on the type and location of the property, as well as other factors. Collateral sufficiency is often further supported by personal guarantees from related third parties. The overall portfolio is centrally assessed against a number of stress scenarios to ensure that exposures remain within predefined stress limits. p

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Refer to “Swiss mortgage loan portfolio” in this section for more information about LTV in our Swiss mortgage portfolio

Lombard lending

Audited | Lombard loans are secured by pledges of marketable securities, guarantees and other forms of collateral. Eligible financial securities are primarily liquid and actively traded transferable securities (such as bonds and equities), and other transferable securities, such as approved structured products for which regular prices are available and the issuer of the security provides a market. To a lesser degree, less liquid collateral is also used.

We derive lending values by applying discounts (haircuts) to the pledged collateral’s market value. Haircuts for marketable securities are calculated to cover a possible change in value over a given close-out period and confidence level. Less liquid or more volatile collateral will typically have larger haircuts.

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We assess concentration and correlation risks across collateral posted at a counterparty level, and at a divisional level across counterparties. We also perform targeted Group-wide reviews of concentration. Concentration of collateral in single securities, issuers or issuer groups, industry sectors, countries, regions or currencies may result in higher risk and reduced liquidity. In such cases, the lending value of the collateral, margin call and close-out levels are adjusted accordingly. p

Exposures and collateral values are monitored daily, with the aim of ensuring that the credit exposure is always within the established risk tolerance. A shortfall occurs when the lending value drops below the exposure; if it exceeds a defined trigger level, a margin call is initiated, requiring the client to provide additional collateral, reduce the exposure or take other action to bring exposure in line with the agreed lending value of the collateral. If a shortfall is not corrected within the required period, a close-out is initiated, through which collateral is liquidated, open derivative positions are closed and guarantees are called.

We conduct stress testing of collateralized exposures to simulate market events that reduce collateral value, increase exposure of traded products, or do both. For certain classes of counterparties, limits on such calculated stress exposures are applied and controlled at a counterparty level. Also, portfolio limits are applied across certain businesses or collateral types.

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Refer to “Stress loss” in this section for more information about our stress testing

Credit hedging

Audited | We use single-name credit default swaps (CDSs), credit-index CDSs, bespoke protection and other instruments to actively manage credit risk in the Investment Bank and Non-core and Legacy Portfolio. The aim is to reduce concentrations of risk from specific counterparties, sectors or portfolios and, for CCR, the profit or loss effect arising from changes in credit valuation adjustments (CVAs).

We have strict guidelines with regard to taking credit hedges into account for credit risk mitigation purposes. For example, when monitoring exposures against counterparty limits, we do not usually apply certain credit risk mitigants, such as proxy hedges (credit protection on a correlated but different name) or credit-index CDSs, to reduce counterparty exposures. Buying credit protection also creates credit exposure with regard to the protection provider. We monitor and limit exposures to credit protection providers, and also monitor the effectiveness of credit hedges as part of our overall credit exposures to the relevant counterparties. Trading with such counterparties is typically collateralized. For credit protection purchased to hedge the lending portfolio, this includes monitoring mismatches between the maturity of credit protection purchased and the maturity of the associated loan. Such mismatches result in basis risk and may reduce the effectiveness of the credit protection. Mismatches are routinely reported to credit officers and mitigating actions are taken when necessary. p

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Refer to “Note 10 Derivative instruments” in the “Consolidated financial statements” section of this report for more information

Mitigation of settlement risk

To mitigate settlement risk, we reduce actual settlement volumes by using multi-lateral and bi-lateral agreements with counterparties, including payment netting.

Foreign exchange transactions are our most significant source of settlement risk. We are a member of Continuous Linked Settlement (CLS), an industry utility that provides a multi-lateral framework to settle transactions on a delivery-versus-payment basis, thus reducing foreign-exchange-related settlement risk relative to the volume of business. However, mitigation of settlement risk through CLS and other means does not fully eliminate credit risk in foreign exchange transactions resulting from changes in exchange rates prior to settlement, which is managed as part of our overall credit risk management of OTC derivatives.

Credit risk models

Basel III – A-IRB credit risk models

Audited | We have developed tools and models to estimate future credit losses that may be implicit in our current portfolio. Exposures to individual counterparties are measured using three generally accepted parameters: PD, EAD and LGD. For a given credit facility, the product of these three parameters results in the expected loss (the EL). These parameters are the basis for the majority of our internal measures of credit risk, and key inputs for regulatory capital calculation under the advanced internal ratings-based (A-IRB) approach of the Basel III framework. We also use models to derive the portfolio credit risk measures of EL, statistical loss and stress loss. p

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Refer to the 31 December 2022 Pillar 3 Report, available under “Pillar 3 disclosures” at ubs.com/investors, for more information about the regulatory capital calculation under the advanced internal ratings-based approach

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Key features of our main credit risk models

Portfolio in scope

Asset class

Model
approach

Number of
main models

Main drivers

Number of
years of loss
data¹

Probability of
default

Sovereigns and central banks

Central governments and central banks

Scorecard

Political, institutional and economic indicators

>10

Owner-occupied mortgages
in Switzerland and the US

Retail: residential
mortgages

Scorecard

Behavioral data, affordability relative to
income, property type, loan-to-value.
Separate models for mortgages in
Switzerland and the US

Income-producing real estate
mortgages

Retail: residential
mortgages, Corporates:
specialized lending

Scorecard

Loan-to-value, debt service coverage,
financial data (for large corporates only),
behavioral data. Weights of risk drivers
differ between corporate and private clients

Lombard lending

Retail: other retail,
Corporates: other
lending

Merton type

Separate models for structured margin
lending and standard Lombard. Key risk
drivers for both models: loan-to-value,
historical asset returns, behavioral data

13–16

Small and medium-sized
enterprises

Corporates: other
lending

Scorecard

Financial data including balance sheet ratios
and profit and loss, behavioral data.
Weights of risk drivers differ depending on
the corporate client sub-segment

Credit cards in Switzerland

Retail: qualifying
revolving retail and
other retail, Corporates:
other lending

Scorecard

Client type and characteristics (revolver,
transactor, new client, dormant client), and
behavioral data

Banks

Banks and securities
dealers

Scorecard

Financial data including balance sheet ratios
and profit and loss. Separate models for
banks – developed markets, banks –
emerging markets, broker-dealers and
investment banks, and private banks

Commodity traders

Corporates: specialized
lending

Scorecard

Financial data including balance sheet ratios
and profit and loss, as well as non-financial
criteria

Aircraft financing

Corporates: other
lending

Scorecard

Loan-to-value, AuM, strength of legal
framework of source of wealth, and
behavioral factors

Large corporates

Corporates: other
lending

Scorecard /

market data

Financial data including balance sheet ratios
and profit and loss, and market data.
Separate rating tools for corporates with
publicly traded and highly liquid stocks
(market intelligence tool), private
corporates, and leveraged corporates

Other portfolios

Corporates: other
lending, Public-sector
entities and multi-lateral
development banks

Scorecard /
pooled rating
approach /
rating
template

Financial data and/or historical portfolio
performance for pooled ratings. Separate
models for hedge funds, managed funds,
private equity funds, insurance companies,
commercial real estate loans, debt REITs,
mortgage originators, public-sector entities
and multi-lateral development banks /
supranationals

Loss given default

Owner-occupied mortgages
in Switzerland and the US

Retail: residential
mortgages

Statistical
model

Loan-to-value, time since last valuation.
Separate models for mortgages in
Switzerland and the US

11–14

Income-producing real estate
mortgages

Retail: residential
mortgages, Corporates:
specialized lending

Statistical
model

Loan-to-value, time since last valuation,
property type, location indicator

Lombard lending

Retail: other retail,
Corporates: other
lending

Statistical
model,
simulation

Separate models for structured margin
lending and standard Lombard. Key risk
drivers for both models: historical observed
loss rates, liquidity

13–14

Small and medium-sized
enterprises

Corporates: other
lending

Statistical
model

Separate models for mortgage and
non-mortgage LGDs. Mortgage models:
loan-to-value, time since last valuation,
property type, location indicator. Non-
mortgage models: historical observed loss
rates

11–17

Credit cards in Switzerland

Retail: qualifying
revolving retail and
other retail, Corporates:
other lending

Statistical
model

Collateral, accrued interests, client
characteristics.

Investment Bank – all
counterparties

Across the asset classes

Statistical
model

Counterparty and facility specific, including
industry segment, collateral, seniority, legal
environment and bankruptcy procedures.
Specific model for sovereign LGDs based
on econometric modeling of past default
events using GDP per capita, government
debt, and other quantitative and qualitative
factors such as the share of multi-lateral
debt service, the size of the banking sector
and institutional quality

>10

Exposure at default

Banking products

Across the asset classes

Statistical
model

Separate models based on exposure type
(committed credit lines, revocable credit
lines, contingent products)

>10

Traded products

Across the asset classes

Statistical
model

Product-specific market drivers, e.g.,
interest rates. Separate models for OTC
derivatives, ETDs and SFTs that generate
the simulation of risk factors used for the
credit exposure measure

n/a

1	For sovereign and Investment Bank PD models, the length of internal portfolio history is shown in “Number of years of loss data.”

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Audited |

Internal UBS rating scale and mapping of external ratings

Internal UBS rating

1-year PD range in %

Description

Moody’s Investors
Service mapping

S&P mapping

Fitch mapping

0 and 1

0.00–0.02

Investment grade

Aaa

AAA

0.02–0.05

Aa1 to Aa3

AA+ to AA–

0.05–0.12

A1 to A3

A+ to A–

0.12–0.25

Baa1 to Baa2

BBB+ to BBB

0.25–0.50

Baa3

BBB–

0.50–0.80

Sub-investment grade

Ba1

BB+

0.80–1.30

Ba2

1.30–2.10

Ba3

BB–

2.10–3.50

B+

3.50–6.00

6.00–10.00

B–

10.00–17.00

Caa1 to
Caa2

CCC+ to CCC

>17

Caa3 to C

CCC- to C

Counterparty is in default

Default

Defaulted

Probability of default

PD estimates the likelihood of a counterparty defaulting on its contractual obligations over the next 12 months, and is assessed using rating tools tailored to the various categories of counterparties. The “Key features of our main credit risk models” table above gives an overview of the approaches used for our main asset classes and presents the main drivers of the PD. The rating tools for these asset classes are also calibrated to our internal credit rating scale (masterscale), designed to ensure a consistent assessment of default probabilities across counterparties.

The ratings of major credit rating agencies, and their mapping to our masterscale and internal PD bands, are shown in the “Internal UBS rating scale and mapping of external ratings” table above. For Moody’s and S&P, the mapping is based on the long-term average of one-year default rates available from these rating agencies, with Fitch ratings being mapped to the equivalent S&P ratings. For each external rating category, the average default rate is compared with our internal PD bands to derive a periodically reviewed mapping to our internal rating scale.

Exposure at default

EAD is the amount we expect to be owed by a counterparty at the time of possible default. We derive EAD from current exposure to the counterparty and possible future exposure development.

The EAD of an on-balance sheet loan is its notional amount, while for off-balance sheet commitments that are not drawn, credit conversion factors (CCFs) are used in order to obtain an expected on-balance sheet amount.

For traded products, we derive EAD by modeling the range of possible exposure outcomes at various points in time using scenario and statistical techniques. We assess the net amount that may be owed to us or that we may owe to others, taking into account the effect of market movements over the potential time it would take to close out positions.

We assess exposures where there is a material correlation between the factors driving the credit quality of the counterparty and those driving the potential future value of our traded products exposure (wrong-way risk), and we have established specific controls to mitigate such risks.

Loss given default

LGD is the magnitude of the likely loss if there is a default. Our LGD estimates, which consider downturn conditions, include loss of principal, interest and other amounts less recovered amounts. We determine LGD based on the likely recovery rate of claims against defaulted counterparties, which depends on the type of counterparty and any credit mitigation due to collateral or guarantees. Our estimates are supported by internal loss data and external information, where available. If we hold collateral, such as marketable securities or a mortgage on a property, LTV ratios are typically a key parameter in determining LGD. For risk-weighted asset (RWA) calculation, floors are applied to LGD in line with regulation.

Expected loss

We use the concept of expected loss to quantify future credit losses that may be implicit in our current portfolio. The expected loss for a given credit facility is a product of the three components described above, i.e., PD, EAD and LGD. We aggregate the expected loss for individual counterparties to derive expected portfolio credit losses.

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IFRS 9 – ECL credit risk models

Expected credit loss

Expected credit loss (ECL) is defined as the difference between contractual cash flows and those UBS expects to receive, discounted at the effective interest rate (EIR). For loan commitments and other credit facilities in scope of ECL requirements, expected cash shortfalls are determined by considering expected future drawdowns. Rather than focusing on an average through-the-cycle (TTC) expected annual loss, the purpose of ECL is to estimate the amount of losses inherent in a portfolio based on current conditions and future outlook (a point-in-time (PIT) measure), whereby such a forecast has to include all information available without undue cost and effort, and address multiple scenarios where there is perceived non-linearity between changes in economic conditions and their effect on credit losses. From a credit risk modeling perspective, ECL parameters are generally derivations of the factors assessed for regulatory Basel III EL.

Comparison of Basel III EL and IFRS 9 ECL credit risk models

The IFRS 9 ECL concept has a number of key differences from our Basel III credit risk models, both in the loss estimation process and the result thereof. Most notably, regulatory Basel III EL parameters are TTC / downturn estimates, which might include a margin of conservatism, while IFRS 9 ECL parameters are typically PIT, reflecting current economic conditions and future outlook. The table below summarizes the main differences. Stage 1 and 2 ECL expenses in 2022 were USD 29m and respective allowances and provisions as of 31 December 2022 were USD 526m. This included ECL allowances and provisions of USD 485m related to positions under the Basel III advanced internal ratings-based (A-IRB) approach. Basel III EL for non-defaulted positions increased by USD 37m to USD 956m.

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The table below shows the main differences between the two expected loss measures.


	Basel III EL (advanced internal ratings-based approach)	IFRS 9 ECL
Scope	The Basel III A-IRB approach applies to most credit risk exposures. It includes transactions measured at amortized cost, at fair value through profit or loss and at fair value through OCI, including loan commitments and financial guarantees.	The IFRS 9 ECL calculation mainly applies to financial assets measured at amortized cost and debt instruments measured at fair value through OCI, as well as loan commitments and financial guarantees not at fair value through profit or loss.
12-month versus lifetime expected loss	The Basel III A-IRB approach takes into account expected losses resulting from expected default events occurring within the next 12 months.	In the absence of a significant increase in credit risk (SICR), a maximum 12-month ECL is recognized to reflect lifetime cash shortfalls that will result if a default event occurs in the 12 months after the reporting date (or a shorter period if the expected lifetime is less). Once an SICR event has occurred, a lifetime ECL is recognized considering expected default events over the life of the transaction.
Exposure at default (EAD)	EAD is the amount we expect a counterparty to owe us at the time of a possible default. For banking products, EAD equals book value as of the reporting date; for traded products, the vast majority of EAD is modeled. EAD is expected to remain constant over a 12-month period. For loan commitments, a credit conversion factor is applied to model expected future drawdowns over the 12-month period, irrespective of the actual maturity of a particular transaction. The credit conversion factor includes downturn adjustments.	EAD is generally calculated on the basis of the cash flows that are expected to be outstanding at the individual points in time during the life of the transaction, discounted to the reporting date using the effective interest rate. For loan commitments, a credit conversion factor is applied to model expected future drawdowns over the life of the transaction without including downturn assumptions. In both cases, the time period is capped at 12 months, unless an SICR has occurred.
Probability of default (PD)	PD estimates are determined on a through-the-cycle (TTC) basis. They represent historical average PDs, taking into account observed losses over a prolonged historical period, and therefore are less sensitive to movements in the underlying economy.	PD estimates will be determined on a point-in-time (PIT) basis, based on current conditions and incorporating forecasts for future economic conditions at the reporting date.
Loss given default (LGD)	LGD includes prudential adjustments, such as downturn LGD assumptions and floors. Similar to PD, LGD is determined on a TTC basis.	LGD should reflect the losses that are reasonably expected and prudential adjustments should therefore not be applied. Similar to PD, LGD is determined on the basis of a PIT approach.
Use of scenarios	n / a	Multiple forward-looking scenarios have to be taken into account to determine a probability-weighted ECL.

Further key aspects of credit risk models

Stress loss

We complement our statistical modeling approach with scenario-based stress loss measures. Stress tests are run regularly to monitor potential effects of extreme, but nevertheless plausible, events on our portfolios, under which key credit risk parameters are assumed to deteriorate substantially. Where we consider it appropriate, we apply limits on this basis. Stress scenarios and methodologies are tailored to portfolios’ natures, ranging from regionally focused to global systemic events, and varying in time horizon.

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Refer to “Stress testing” in this section for more information about our stress testing framework

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Credit risk model confirmation

Our approach to model confirmation involves both quantitative methods, such as monitoring compositional changes in portfolios and results of backtesting, and qualitative assessments, such as feedback from users on model output as a practical indicator of a model’s performance and reliability.

Material changes in portfolio composition may invalidate the conceptual soundness of a model. We therefore perform regular analyses of the evolution of portfolios to identify such changes in the structure and credit quality of portfolios. This includes analyses of changes in key attributes, changes in portfolio concentration measures and changes in RWA.

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Refer to “Model risk management” in this section for more information

Backtesting

We monitor the performance of models by backtesting and benchmarking them, with model outcomes compared with actual results, based on our internal experience and externally observed results. To assess the predictive power of credit exposure models for traded products, such as OTC derivatives and ETD products, we statistically compare predicted future exposure distributions at different forecast horizons with realized values.

For PD, we derive a predicted distribution of the number of defaults. The observed number of defaults is compared with the upper tail of the predicted distribution. If the observed number of defaults is higher than a given upper tail quantile, we conclude there is evidence that the model may underpredict the number of defaults. Based on historical long-run average default rates and, if required, additional margin of conservatism, we also derive PD calibration targets and a lower boundary. As a general rule, if the portfolio average PD lies below the derived lower boundary, the rating tool is recalibrated.

For LGD, backtesting statistically tests whether the mean difference between the observed and predicted LGD is zero. If the test fails, there is evidence that our predicted LGD is too low. In such cases, and where these differences are outside expectations, models are recalibrated.

Main credit risk models backtesting by regulatory asset class


			Actual rates in %
	Length of time series used for the calibration (in years)		Average of last 5 years1		Min. of last 5 years2	Max. of last 5 years2		Estimated average rates at the start of 2022 in %
Probability of default³
Central governments and central banks		>104		0.00	0.00		0.00		0.43
Banks and securities dealers		>10		0.03	0.00		0.13		0.65
Public-sector entities, multi-lateral development banks		>10		0.05	0.00		0.21		0.23
Corporates: specialized lending		>10		0.30	0.11		0.60		1.26
Corporates: other lending⁵		>10		0.28	0.20		0.34		0.44
Retail: residential mortgages		>20		0.20	0.14		0.25		0.49
Retail: qualifying revolving retail exposure⁵		>10		0.71	0.63		0.79		0.83
Retail: other retail⁵		>10		0.09	0.05		0.19		0.20

Loss given default
Central governments and central banks		>10							47.72
Banks and securities dealers		>10							53.38
Public-sector entities, multi-lateral development banks		>10							27.40
Corporates: specialized lending		>10		2.16	0.00		9.51		22.80
Corporates: other lending⁵		>10		15.92	5.09		24.68		38.24
Retail: residential mortgages		>20		0.45	0.00		0.72		22.75
Retail: qualifying revolving retail exposure⁵		>10		24.88	20.27		27.42		47.87
Retail: other retail⁵		>10		8.20	4.80		13.54		24.37

Credit conversion factors
Corporates		>10		21.65	6.93		38.08		38.10

1	Average of all observations over the last five years.

2	Minimum / maximum annual average of observations in any single year from the last five years. Yearly averages are only calculated where five or more observations occurred during that year.

3	Average PD estimation is based on all rated clients in the portfolio.

4	Sovereign PD model is calibrated to UBS masterscale, length of time series shows span of internal history for this portfolio.

5	During 2021, a new PD and LGD model for credit cards went live. Obligors subject to this model contribute to Corporates: other lending, Retail: qualifying revolving retail exposure, and Retail: other retail.

CCFs, used for the calculation of EAD for undrawn facilities with corporate counterparties, are dependent on several credit facility contractual dimensions. We compare the predicted amount drawn with observed historical use of such facilities by defaulted counterparties. If any statistically significant deviation is observed, the relevant CCFs are redefined.

The “Main credit risk models backtesting by regulatory asset class” table above compares the current model calibration for PD, LGD and CCFs with historical observed values over the last five years.

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Changes to models and model parameters during the period

As part of our continuous efforts to enhance models to reflect market developments and newly available data, we updated several models in 2022.

In Personal & Corporate Banking and Global Wealth Management, we updated the PD model for owner-occupied residential properties in Switzerland and the LGD model for mortgages in Switzerland. In Global Wealth Management, we also recalibrated the PD model for aircraft financing and implemented some model updates for the standard Lombard model.

In the Investment Bank, a new PD model for private equity counterparties was introduced, and a redeveloped PD model for hedge funds went live. Additionally, we have implemented a new model for structured margin lending.

For CCR models, we recalibrated the market parameters in the SFT model, enhancing and automating the process, which is run on a daily basis. The transition from LIBOR required a number of model changes for CCR models, for traded products to be able to consume the new alternative reference rate curves.

Where required, changes to models and model parameters were approved by FINMA before being made.

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Refer to “Risk-weighted assets” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information about the effect of the changes to models and model parameters on credit risk RWA

Future credit risk-related regulatory capital developments

In December 2017, the Basel Committee on Banking Supervision (the BCBS) announced the finalization of the Basel III framework. In December 2022, the Swiss State Secretariat for International Finance changed the expected date on which the final Basel III guidelines are to enter into force, from 1 July 2024 to 1 January 2025. The updated framework makes a number of revisions to the internal ratings-based (IRB) approaches, namely: (i) removing the option of using the A-IRB approach for certain asset classes (including large and medium-sized corporate clients, and banks and other financial institutions); (ii) placing floors on certain model inputs under the IRB approach, e.g., PD and LGD; and (iii) introducing various requirements to reduce RWA variability (e.g., for LGD).

The published framework has a number of requirements that are subject to national discretion. Also, revisions to the credit valuation adjustment (CVA) framework were published, including the removal of the advanced CVA approach. UBS has a close dialogue with FINMA to discuss in detail the implementation objectives and prepare for a smooth transition of the capital regime for credit risk.

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Refer to “Capital management objectives, planning and activities” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information about the development of RWA

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Refer to “Risk measurement” in this section for more information about our approach to model confirmation procedures

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Refer to the “Regulatory and legal developments” and “Risk factors” sections of this report for more information

Credit policies for distressed assets

Non-performing

Audited | In line with the regulatory definition, we report a claim as non-performing when: (i) it is more than 90 days past due; (ii) it is subject to restructuring proceedings, where preferential conditions concerning interest rates, subordination, tenor, etc. have been granted in order to avoid default of the counterparty (forbearance); (iii) the counterparty is subject to bankruptcy / enforced liquidation proceedings in any form, even if there is sufficient collateral to cover the due payment; or (iv) there is other evidence that payment obligations will not be fully met without recourse to collateral.

Default and credit-impaired

UBS uses a single definition of default for classifying assets and determining the PD of its obligors for risk modeling purposes. The definition of default is based on quantitative and qualitative criteria. A counterparty is classified as defaulted when material payments of interest, principal or fees are overdue for more than 90 days, or more than 180 days for certain exposures in relation to loans to private and commercial clients in Personal & Corporate Banking and to private clients of Global Wealth Management Region Switzerland. UBS does not consider the general 90-day presumption for default recognition appropriate for those portfolios, given the cure rates, which show that strict application of the 90-day criterion would not accurately reflect the inherent credit risk. Counterparties are also classified as defaulted when: bankruptcy, insolvency proceedings or enforced liquidation have commenced; obligations have been restructured on preferential terms (forbearance); or there is other evidence that payment obligations will not be fully met without recourse to collateral. The latter may be the case even if, to date, all contractual payments have been made when due. If one claim against a counterparty is defaulted on, generally all claims against the counterparty are treated as defaulted.

An instrument is classified as credit-impaired if the counterparty is classified as defaulted and / or the instrument is identified as purchased or originated credit-impaired (POCI). An instrument is POCI if it has been purchased at a deep discount to its carrying amount following a risk event of the issuer or originated with a defaulted counterparty. Once a financial asset is classified as defaulted / credit-impaired (except POCI), it is reported as a stage 3 instrument and remains as such unless all past due amounts have been rectified, additional payments have been made on time, the position is not classified as credit-restructured, and there is general evidence of credit recovery. A three-month probation period is applied before a transfer back to stages 1 or 2 can be triggered. However, most instruments remain in stage 3 for a longer period. As of 31 December 2022, we had no instruments classified as POCI on our books. p

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Forbearance (credit restructuring)

Audited | If payment default is imminent or default has already occurred, we may grant concessions to borrowers in financial difficulties that we would otherwise not consider in the normal course of business, such as offering preferential interest rates, extending maturity, modifying the schedule of repayments, debt / equity swap, subordination, etc. When a forbearance measure takes place, each case is considered individually and the exposure is generally classified as defaulted. Forbearance classification remains until the loan is repaid or written off, non-preferential conditions are granted that supersede the preferential conditions, or the counterparty has recovered and the preferential conditions no longer exceed our risk tolerance.

Contractual adjustments when there is no evidence of imminent payment default, or where changes to terms and conditions are within our usual risk tolerance, are not considered to be forborne. p

Loss history statistics

An instrument is classified as credit-impaired if the counterparty has defaulted. This also includes credit-impaired exposures for which no loss has occurred or for which no allowance has been recognized (e.g., we expect to fully recover the exposures via collateral held).

Coverage ratios are calculated for the core loan portfolio by taking ECL allowances and provisions divided by the gross carrying amount of the exposures. Core loan exposure is defined as the sum of Loans and advances to customers and Loans to financial advisors.

The total combined on- and off-balance sheet coverage ratio was at 21 basis points as of 31 December 2022, 1 basis point lower than on 31 December 2021. The combined stage 1 and 2 ratio of 10 basis points was unchanged compared with 31 December 2021; the stage 3 ratio was 22%, 2 percentage points lower than as of 31 December 2021.

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The majority of the credit-impaired exposure relates to loans and advances in our Swiss domestic business. Refer to “Note 9 Financial assets at amortized cost and other positions in scope of expected credit loss measurement” and “Note 19 Expected credit loss measurement” in the “Consolidated financial statements” section of this report for more information about ECL measurement and the calculation of the coverage ratio

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Refer to “Note 13a Other financial assets measured at amortized cost” in the “Consolidated financial statements” section of this report for more details

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Loss history statistics


USD m, except where indicated	31.12.22		31.12.21			31.12.20		31.12.19		31.12.18
Banking products, core exposure on- and off-balance sheet, gross¹		491,556		499,839			479,176		408,331		410,117
of which: loans and advances to banks and customers (gross)		*402,801*		414,099			396,049		340,003		338,000
Credit-impaired exposure, gross (stage 3)		2,455		2,610			3,778		3,113		3,154
of which: credit-impaired loans and advances to banks and customers (stage 3)		*2,012*		2,150			2,945		2,309		2,300
Non-performing loans and advances to banks and customers		2,333		2,387			3,176		2,466		2,419
ECL allowances and provisions for credit losses²		1,091		1,165			1,468		1,029		1,054
of which: core loan exposure (all stages)		*1,043*		1,132			1,426		987		1,003
of which: loans and advances to banks and customers (all stages)		*789*		857			1,076		770		780
of which: loans and advances to banks and customers (stage 3)		*474*		572			703		559		549
Write-offs (stage 3)		95		137			356		142		210
of which: write-offs for loans and advances to banks and customers		74		118			348		122		192
Credit loss expense / (release)³		29		(148	)		694		78		118

Ratios
Credit-impaired loans and advances to banks and customers as a percentage of loans and advances to banks and customers (gross)		0.5		0.5			0.7		0.7		0.7
Non-performing loans and advances to banks and customers as a percentage of loans and advances to banks and customers (gross)		0.6		0.6			0.8		0.7		0.7
ECL allowances for loans and advances to banks and customers as a percentage of loans and advances to banks and customers (gross)		0.2		0.2			0.3		0.2		0.2
Write-offs as a percentage of average loans and advances to banks and customers (gross) outstanding during the period		0.0		0.0			0.1		0.0		0.1

1	Core loan exposure is defined as the sum of Loans and advances to customers and Loans to financial advisors.

2	Includes provisions for ECL of guarantees and loan commitments and allowances for securities financing transactions.

3	Includes credit loss expense / (release) for other financial assets at amortized cost, guarantees, loan commitments, and securities financing transactions.

Market risk

Audited | Main sources of market risk

Market risks arise from both trading and non-trading business activities.

•

Trading market risks are mainly connected with primary debt and equity underwriting and securities and derivatives trading for market-making and client facilitation in our Investment Bank, as well as the remaining positions in Non-core and Legacy Portfolio in Group Functions and our municipal securities trading business in Global Wealth Management.

•

Non-trading market risks arise predominantly in the form of interest rate and foreign exchange risks connected with personal banking and lending in our wealth management business, our Swiss personal and corporate banking business, the Investment Bank’s lending business, and treasury activities.

•

Group Treasury assumes market risks in the process of managing interest rate risk, structural foreign exchange risk and the Group’s liquidity and funding profile, including high-quality liquid assets (HQLA).

•

Equity and debt investments can also give rise to market risks, as can some aspects of employee benefits, such as defined benefit pension schemes. p

Audited | Overview of measurement, monitoring and management techniques

•

Market risk limits are set for the Group, the business divisions, Group Treasury and Non-core and Legacy Portfolio at granular levels in the various business lines, reflecting the nature and magnitude of the market risks.

•

Management value-at-risk (VaR) measures exposures under the market risk framework, including trading market risks and some non-trading market risks. Non-trading market risks not included in VaR are also covered in the risks controlled by Market & Treasury Risk Control, as set out below.

•

Our primary portfolio measures of market risk are liquidity-adjusted stress (LAS) loss and VaR. Both are common to all business divisions and subject to limits that are approved by the Board of Directors (the BoD).

•

These measures are complemented by concentration and granular limits for general and specific market risk factors. Our trading businesses are subject to multiple market risk limits, which take into account the extent of market liquidity and volatility, available operational capacity, valuation uncertainty, and, for our single-name exposures, issuer credit quality.

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Trading market risks are managed on an integrated basis at portfolio level. As risk factor sensitivities change due to new transactions, transaction expiries or changes in market levels, risk factors are dynamically rehedged to remain within limits. We do not generally seek to distinguish in the trading portfolio between specific positions and associated hedges.

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•

Issuer risk is controlled by limits applied at business division level based on jump-to-zero measures, which estimate maximum default exposure (the default event loss assuming zero recovery).

•

Non-trading foreign exchange risks are managed under market risk limits, with the exception of Group Treasury management of consolidated capital activity.

Our Market & Treasury Risk Control function applies a holistic risk framework, setting the appetite for treasury-related risk-taking activities across the Group. Key elements of the framework include an overarching economic value sensitivity limit, set by the BoD, and the sensitivity of net interest income to changes in interest rates targets, set by the Group CEO. Limits are also set by the BoD to balance the effect of foreign exchange movements on our CET1 capital and CET1 capital ratio. Non-trading interest rate and foreign exchange risks are included in Group-wide statistical and stress testing metrics, which flow into our risk appetite framework.

Equity and debt investments are subject to a range of risk controls, including preapproval of new investments by business management and Risk Control and regular monitoring and reporting. They are also included in Group-wide statistical and stress testing metrics. p

•

Refer to “Currency management” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information about Group Treasury’s management of foreign exchange risks

•

Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information about the sensitivity of our CET1 capital and CET1 capital ratio to currency movements

Market risk stress loss

The measurement and management of market risks include an extensive set of stress tests and scenario analyses, continuously evaluated to ensure that losses resulting from an extreme yet plausible event do not exceed our risk appetite.

Liquidity-adjusted stress

LAS is our primary stress loss measure for Group-wide market risk. The LAS framework captures the economic losses that could arise under specified stress scenarios. This is partially done by replacing the standard 1-day and 10-day holding period assumptions used for management and regulatory VaR with liquidity-adjusted holding periods, as explained below. Shocks are applied to positions based on expected market movements in the liquidity-adjusted holding periods resulting from the specified scenario.

The holding periods used for LAS are calibrated to reflect the time needed to reduce or hedge the risk of positions in each major risk factor in a stressed environment, assuming maximum utilization of the relevant position limits. We apply minimum holding periods, regardless of observed liquidity levels, as identification of and reaction to a crisis may not always be immediate.

The expected market movements are derived using historical market behavior (based on analysis of historical events) and forward-looking analysis including consideration of defined scenarios that have not occurred in the past.

LAS-based limits apply at several levels: Group, business division, Group Treasury, and Non-core and Legacy Portfolio; business area; and sub-portfolio. LAS is also the core market risk component of our combined stress test framework and therefore integral to our overall risk appetite framework.

•

Refer to “Risk appetite framework” in this section for more information

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Refer to “Stress testing” in this section for more information about our stress testing framework

Value-at-risk

VaR definition

Audited | VaR is a statistical measure of market risk, representing the potential market risk losses over a set time horizon (holding period) at an established level of confidence. VaR assumes no change in the Group’s trading positions over the set time horizon.

We calculate VaR daily. The profit or loss distribution VaR is derived from our internally developed VaR model, which simulates returns over the holding period for those risk factors our trading positions are sensitive to, and subsequently quantifies the profit / loss effect of these risk factor returns on trading positions. Risk factor returns associated with general interest rate, foreign exchange and commodities risk factor classes are based on a pure historical simulation approach, using a five-year look-back window. Risk factor returns for selected issuer-based risk factors (e.g., equity prices and credit spreads) are split into systematic and residual issuer-specific components using a factor model approach. Systematic returns are based on historical simulation, and residual returns on a Monte Carlo simulation. VaR model profit or loss distribution is derived from the sum of systematic and residual returns in such a way that we consistently capture systematic and residual risk. Correlations among risk factors are implicitly captured via a historical simulation approach. When modeling risk factor returns, we consider the stationarity properties of the historical time series of risk factor changes. Depending on the stationarity properties of the risk factors within a given factor class, we model the factor returns using absolute returns or logarithmic returns. Risk factor return distributions are updated fortnightly.

Our VaR model does not have full revaluation capability, but we source full revaluation grids and sensitivities from front-office systems, enabling us to capture material non-linear profit-or-loss effects.

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We use a single VaR model for both internal management purposes and determining market risk risk-weighted assets (RWA), although we consider different confidence levels and time horizons. For internal management purposes, we establish risk limits and measure exposures using VaR at a 95% confidence level with a 1-day holding period, aligned to the way we consider the risks associated with our trading activities. The regulatory measure of market risk used to underpin the market risk capital requirement under Basel III requires a measure equivalent to a 99% confidence level using a 10-day holding period. To calculate a 10-day holding period VaR, we use 10-day risk factor returns, with all observations equally weighted.

Additionally, the portfolio populations for management and regulatory VaR are slightly different. The one for regulatory VaR meets regulatory requirements for inclusion in regulatory VaR. Management VaR includes a broader range of positions. For example, regulatory VaR excludes credit spread risks from the securitization portfolio, which are treated instead under the securitization approach for regulatory purposes.

We also use stressed VaR (SVaR) for the calculation of market risk RWA. SVaR uses broadly the same methodology as regulatory VaR and is calculated using the same population, holding period (10-day) and confidence level (99%). Unlike regulatory VaR, the historical data set for SVaR is not limited to five years, instead covering the period from 1 January 2007 to the present. In deriving SVaR, we seek the largest 10-day holding period VaR for the current Group portfolio across all one-year look-back windows from 1 January 2007 to the present. SVaR is computed weekly. p

•

Management VaR for the period

We continued to maintain management VaR at low levels, with average VaR at USD 11m, unchanged compared with 2021.

Audited |

Management value-at-risk (1-day, 95% confidence, 5 years of historical data) of our business divisions and Group Functions by general market risk type¹


	For the year ended 31.12.22
USD m								Equity			Interest rates			Credit spreads			Foreign exchange			Commodities
		Min.							2			8			4			2			2
			Max.						17			18			9			11			7
				Average					6			10			5			3			3
						31.12.22			6			10			4			3			3

Total management VaR, Group		6	18	11		9			*Average (per business division and risk type)*

Global Wealth Management		1	2	1		1			0			1			1			0			0
Personal & Corporate Banking		0	0	0		0			0			0			0			0			0
Asset Management		0	0	0		0			0			0			0			0			0
Investment Bank		6	17	10		8			6			9			5			3			3
Group Functions		3	5	4		5			1			4			3			1			0
Diversification effect^2,3				(5	)	(5	)		(1	)		(3	)		(4	)		(1	)		0

	For the year ended 31.12.21
USD m								Equity			Interest rates			Credit spreads			Foreign exchange			Commodities
		Min.							1			7			5			1			2
			Max.						35			13			11			9			5
				Average					7			9			7			3			3
						31.12.21			8			11			7			6			3

Total management VaR, Group		4	36	11		12			Average (per business division and risk type)

Global Wealth Management		1	3	1		2			0			1			2			0			0
Personal & Corporate Banking		0	0	0		0			0			0			0			0			0
Asset Management		0	0	0		0			0			0			0			0			0
Investment Bank		3	36	11		11			7			9			7			3			3
Group Functions		4	8	5		4			0			4			4			1			0
Diversification effect^2,3				(6	)	(5	)		0			(5	)		(5	)		(1	)		0

Statistics at individual levels may not be summed to deduce the corresponding aggregate figures. The minima and maxima for each level may well occur on different days, and likewise, the VaR for each business line or risk type, being driven by the extreme loss tail of the corresponding distribution of simulated profits and losses for that business line or risk type, may well be driven by different days in the historical time series, rendering invalid the simple summation of figures to arrive at the aggregate total.

2	Difference between the sum of the standalone VaR for the business divisions and Group Functions and the VaR for the Group as a whole.

3	As the minima and maxima for different business divisions and Group Functions occur on different days, it is not meaningful to calculate a portfolio diversification effect.

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VaR limitations

Audited | Actual realized market risk losses may differ from those implied by VaR for a variety of reasons.

•

VaR is calibrated to a specified level of confidence and may not indicate potential losses beyond this confidence level.

•

The 1-day time horizon used for VaR for internal management purposes (10-day for regulatory VaR) may not fully capture market risk of positions that cannot be closed out or hedged within the specified period.

•

In some cases, VaR calculations approximate the effect of changes in risk factors on the values of positions and portfolios. This may happen due to the number of risk factors included in the VaR model needing to be limited.

•

Effects of extreme market movements are subject to estimation errors, which may result from non-linear risk sensitivities, and the potential for actual volatility and correlation levels to differ from assumptions implicit in VaR calculations.

•

Using a five-year window means sudden increases in market volatility will tend not to increase VaR as quickly as the use of shorter historical observation periods, but such increases will affect VaR for a longer period of time. Similarly, after periods of increased volatility, as markets stabilize, VaR predictions will remain more conservative for a period of time influenced by the length of the historical observation period.

SVaR is subject to the limitations noted for VaR above, but the use of one-year data sets avoids the smoothing effect of the five-year data set used for VaR and the absence of the five-year window gives a longer history of potential loss events. Therefore, although the significant period of stress during the 2007–2009 financial crisis is no longer contained in the historical five-year period used for management and regulatory VaR, SVaR continues to use that data. This approach aims to reduce the procyclicality of the regulatory capital requirements for market risks.

We recognize that no single measure can encompass all risks associated with a position or portfolio. We use a set of metrics with both overlapping and complementary characteristics to create a holistic framework that aims to ensure material completeness of risk identification and measurement. As a statistical aggregate risk measure, VaR supplements our liquidity-adjusted stress and comprehensive stress testing frameworks.

We also have a framework to identify and quantify potential risks not fully captured by our VaR model and refer to such risks as risks not in VaR. The framework underpins these potential risks with regulatory capital, calculated as a multiple of regulatory VaR and stressed VaR. p

Backtesting of VaR

VaR backtesting is a performance measurement process in which a 1-day VaR prediction is compared with the realized 1-day profit or loss (P&L). We compute backtesting VaR using a 99% confidence level and 1-day holding period for the regulatory VaR population. Since 99% VaR at UBS is defined as a risk measure that operates on the lower tail of the P&L distribution, 99% backtesting VaR is a negative number. Backtesting revenues exclude non-trading revenues, such as valuation reserves, fees and commissions, and revenues from intraday trading, so as to provide for a like-for-like comparison. A backtesting exception occurs when backtesting revenues are lower than the previous day’s backtesting VaR.

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Statistically, given the 99% confidence level, two or three backtesting exceptions a year can be expected. More than four exceptions could indicate that the VaR model is not performing appropriately, as could too few exceptions over a long period. However, as noted for VaR limitations above, a sudden increase (or decrease) in market volatility relative to the five-year window could lead to a higher (or lower) number of exceptions. Therefore, Group-level backtesting exceptions are investigated, as are exceptional positive backtesting revenues, with the results reported to senior business management, the Group CRO and the Group Chief Market & Treasury Risk Officer. Internal and external auditors and relevant regulators are also informed about backtesting exceptions.

In the “Group: development of regulatory backtesting revenues and actual trading revenues against backtesting VaR” chart above, the asymmetry between the negative and positive tails is due to the long gamma risk profile historically run in the Investment Bank. The actual trading revenues include backtesting and intraday revenues.

The number of negative backtesting exceptions within a 250-business-day window decreased to one from four by the end of 2022. The Swiss Financial Market Supervisory Authority (FINMA) VaR multiplier derived from backtesting exceptions for market risk RWA was unchanged compared with the prior year, at 3.0.

VaR model confirmation

As well as for regulatory-purposes backtesting described above, we conduct extended backtesting for internal model confirmation purposes. This includes observing model performance across the entire P&L distribution (not just the tails), and at multiple levels within the business division hierarchies.

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Refer to “Risk measurement” in this section for more information about our approach to model confirmation procedures

VaR model developments in 2022

Audited | In the fourth quarter of 2022, we made an upgrade to our credit spread factor model, in which we significantly increased the coverage of single-name-issuer bond spread curves. The resulting RWA decrease was offset by an RWA increase arising from the introduction of a FINMA-agreed temporary measure. p

Future market risk-related regulatory capital developments In January 2019, the Basel Committee on Banking Supervision (the BCBS) published the final standards on the minimum capital requirements for market risk (the Fundamental Review of the Trading Book). In December 2022, the Swiss State Secretariat for International Finance changed the expected date on which the final Basel III guidelines are to enter into force, from 1 July 2024 to 1 January 2025. As a result, the Swiss implementation timeline would be aligned to the currently expected implementation timeline in the EU.

Key elements of the revised market risk framework include: (i) changes to the internal model-based approach, including changes to the model approval and performance measurement process; (ii) changes to the standardized approach with the aim of it being a credible fallback method for an internal model-based approach; and (iii) a revised boundary between trading book and banking book. UBS maintains a close dialogue with FINMA to discuss the implementation objectives in more detail and to provide a smooth transition of the capital regime for market risk.

In September 2021, FINMA mandated that UBS hold an RWA add-on for the omission of time decay in regulatory VaR and SVaR. The add-on reflects the outcome of discussions with FINMA regarding our regulatory VaR model, which started in late 2019. The integration of time decay into the regulatory VaR model, which would replace the add-on, is subject to further discussions between FINMA and UBS. The integration of time decay into regulatory VaR is expected to become effective in 2023. The FINMA-agreed temporary measure related to the credit spread factor model and the add-on related to time decay are expected to be removed with the integration of time decay into regulatory VaR.

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Refer to “Risk-weighted assets” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information about the development of RWA including the regulatory add-on

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Refer to “Risk measurement” in this section for more information about our approach to model confirmation procedures

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Refer to the “Regulatory and legal developments” and “Risk factors” sections of this report for more information

Interest rate risk in the banking book

Sources of interest rate risk in the banking book

Audited | Interest rate risk in the banking book (IRRBB) arises from balance sheet positions such as Loans and advances to banks, Loans and advances to customers, Financial assets at fair value not held for trading, Financial assets measured at amortized cost, Customer deposits, Debt issued measured at amortized cost, and derivatives, including those subject to hedge accounting. Fair value changes to these positions may affect other comprehensive income (OCI) or the income statement, depending on their accounting treatment.

Our largest banking book interest rate exposures arise from customer deposits and lending products in Global Wealth Management and Personal & Corporate Banking, as well as from debt issuance, liquidity buffers and interest rate hedges in Group Treasury. The inherent interest rate risks stemming from Global Wealth Management and Personal & Corporate Banking are generally transferred to Group Treasury, to manage them centrally together with our modeled interest rate duration assigned to equity, goodwill and real estate. This makes the netting of interest rate risks across different sources possible, while leaving the originating businesses with commercial margin and volume management. The residual interest rate risk is mainly hedged with interest rate swaps, to the vast majority of which we apply hedge accounting. Short-term exposures and most of our HQLA classified as Financial assets at fair value not held for trading are hedged with derivatives accounted for on a mark-to-market basis. Long-term fixed-rate debt issued and HQLA hedged with external interest rate swaps are designated in fair value hedge accounting relationships.

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Risk management and governance

IRRBB is measured using several metrics, the most relevant of which are the following.

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Economic value of equity (EVE) sensitivity to yield curve moves is calculated as changes in the present value of future cash flows irrespective of accounting treatment. They are also the key risk factors for statistical and stress-based measures, e.g., value-at-risk and stress scenarios, as well as the regulatory interest rate scenarios. These are measured and reported daily. The regulatory IRRBB EVE exposure is the most adverse regulatory interest rate scenario that is netted across currencies. It excludes the sensitivity from additional tier 1 (AT1) capital instruments (as per specific FINMA requirements) and the modeled interest rate duration assigned to equity, goodwill and real estate. UBS also applies granular internal interest rate shock scenarios to its banking book positions to monitor its specific risk profile.

•

Net interest income (NII) sensitivities to yield curve moves are calculated as changes of baseline NII over a set time horizon, which we internally compute by assuming interest rates in all currencies develop according to their market-implied forward rates and assuming constant business volumes and no specific management actions. The sensitivities are measured and reported monthly. Our Pillar 3 disclosure (as per specific FINMA requirements) excludes the contribution from cash held at central banks.

We actively manage IRRBB, with the aim of reducing the volatility of NII subject to limits and triggers for EVE and NII exposure at consolidated and significant legal entity levels.

The Group Asset and Liability Committee (ALCO) and, where relevant, ALCOs at a legal entity level perform independent oversight over the management of IRRBB, which is also subject to Group Internal Audit and model governance.

•

Refer to “Group Internal Audit” in the “Corporate governance” section of this report and to “Risk measurement” in this section for more information

Key modeling assumptions

The cash flows from customer deposits and lending products used in calculation of EVE sensitivity exclude commercial margins and other spread components, are aggregated by daily time buckets and are discounted using risk-free rates. Our external issuances are discounted using UBS’s senior debt curve, and capital instruments are modeled to the first call date. NII sensitivity, which includes commercial margins, is calculated over a one-year time horizon, assuming constant balance sheet structure and volumes, and considers embedded interest rate options.

The average repricing maturity of non-maturing deposits and loans is determined via target replication portfolios designed to protect product margins. Optimal replicating portfolios are determined at granular currency- and product-specific levels by simulating and applying a real-world market rate model to historically calibrated client rate and volume models.

We use an econometric prepayment model to forecast prepayment rates on US mortgage loans in UBS Bank USA and agency mortgage-backed securities (MBSs) held in various liquidity portfolios of UBS Americas Holding LLC consolidated. These prepayment rates are used to forecast both mortgage loan and MBS balances under various macroeconomic scenarios. The prepayment model is used for a variety of purposes, including risk management and regulatory stress testing. Swiss mortgages and fixed-term deposits generally do not carry similar optionality, due to prepayment and early redemption penalties. p

Effect of interest rate changes on shareholders’ equity and CET1 capital

The “Accounting and capital effect of changes in interest rates” table below shows the effects on shareholders’ equity and CET1 capital of gains and losses from changes in interest rates in the main banking book positions. We use derivatives to hedge interest rate risks in the banking book and these reflect changes in interest rates as an immediate fair value gain or loss, recognized either in the income statement or through OCI. Where hedged items are accrual accounted, we aim to minimize accounting asymmetries by applying hedge accounting to reflect the economic hedge relationship.

In a rising rate scenario, we would have an initial decrease in shareholders’ equity as a result of fair value losses on our derivatives recognized in OCI. This would be compensated over time by increased NII for higher interest rates. The effect on CET1 capital would be much lower as gains and losses on interest rate swaps designated as cash flow hedges are not recognized for regulatory capital purposes.

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Accounting and capital effect of changes in interest rates¹

Recognition

Shareholders’ equity

CET1 capital

Timing

Income statement / OCI

Gains

Losses

Gains

Losses

Loans and deposits at amortized cost^2,3

Gradual

Income statement

●

Other financial assets and liabilities measured at amortized cost²

Gradual

Income statement

●

Debt issued measured at amortized cost^2,3

Gradual

Income statement

●

Receivables and payables from securities financing transactions²

Gradual

Income statement

●

Financial assets at fair value not held for trading

Immediate

Income statement

●

Financial assets at fair value through other comprehensive income

Immediate

OCI

●

Derivatives designated as cash flow hedges

Immediate

OCI4

●

Derivatives designated as fair value hedges⁵

Immediate

Income statement

●

Derivatives transacted as economic hedges

Immediate

Income statement

●

1	Refer to the “Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital” table in the “Capital, liquidity and funding, and balance sheet” section of this report for more information about the differences between shareholders’ equity and CET1 capital.

2	For fixed-rate financial instruments, changes in interest rates affect the income statement when these instruments roll over and reprice.

3	For hedge accounted items, a fair value adjustment is applied in line with the treatment of the hedging derivatives.

4	Excluding hedge ineffectiveness that is recognized in the income statement in accordance with IFRS.

The fair value of the derivatives is offset by the fair value adjustment of the hedged items. Under the fair value hedge program applied to cross-currency swaps and foreign currency debt, the foreign currency basis spread is excluded from the hedge designation and accounted for through OCI, which is included in CET1.

Economic value of equity sensitivity

Audited | The EVE sensitivity in the banking book to a +1-basis-point parallel shift in yield curves was negative USD 25.0m as of 31 December 2022, compared with negative USD 29.9m as of 31 December 2021, the change predominantly driven by rising market rates. This excludes the sensitivity of USD 3.4m from additional tier 1 (AT1) capital instruments (as per specific FINMA requirements) in contrast to general Basel Committee on Banking Supervision (BCBS) guidance.

The majority of our interest rate risk in the banking book is a reflection of the net asset duration that we run to offset our modeled sensitivity of net USD 19.6m (31 December 2021: USD 22.1m) assigned to our equity, goodwill and real estate, with the aim of generating a stable NII contribution. Of this, USD 14.0m and USD 4.8m are attributable to the US dollar and the Swiss franc portfolios, respectively (31 December 2021: USD 15.6m and USD 5.5m, respectively).

In addition to the sensitivity mentioned above, we calculate the six interest rate shock scenarios prescribed by FINMA. The “Parallel up” scenario, assuming all positions were fair valued, was the most severe and would have resulted in a change in EVE of negative USD 4.6bn, or 7.9%, of our tier 1 capital (31 December 2021: negative USD 6.0bn, or 10.0%), which is well below the 15% threshold as per the BCBS supervisory outlier test for high levels of interest rate risk in the banking book.

The immediate effect on our tier 1 capital in the “Parallel up” scenario as of 31 December 2022 would have been only a decrease of USD 0.4bn, or 0.6% (31 December 2021: USD 1.1bn, or 1.8%), reflecting the fact that the vast majority of our banking book is accrual accounted or subject to hedge accounting. The “Parallel up” scenario would subsequently have a positive effect on NII, assuming a constant balance sheet.

UBS also applies granular internal interest rate shock scenarios to its banking book positions to monitor the banking book’s specific risk profile.

Net interest income sensitivity

The main NII sensitivity in the banking book resides in Global Wealth Management and Personal & Corporate Banking. Our investment of equity portfolio has a long duration and Group Treasury actively manages the residual IRRBB. This sensitivity is assessed using a number of scenarios assuming parallel and non-parallel shifts in yield curves, with various degrees of severity, and we have set and monitor thresholds for the NII sensitivity to immediate parallel shocks of –200 and +200 basis points under the assumption of constant balance sheet volume and structure. p

•

Refer to the “Group performance” section of this report for more information about sensitivity to interest rate movements

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Audited |

Interest rate risk – banking book

31.12.22

USD m

Effect on EVE¹ – FINMA

Effect on EVE¹ –BCBS

Scenarios

CHF

EUR

GBP

USD

Other

Total

Additional tier 1 (AT1) capital
instruments

Total

+1 bp

(4.0

)

(0.7

)

0.1

(20.4

)

(0.1

)

(25.0

)

3.4

(21.6

)

Parallel up²

(574.6

)

(117.0

)

33.2

(3,944.3

)

(26.3

)

(4,629.1

)

649.7

(3,979.4

)

Parallel down²

642.3

148.1

(45.4

)

4,074.9

21.9

4,841.7

(699.8

)

4,141.9

Steepener³

(257.0

)

(92.8

)

(28.2

)

(1,027.4

)

(3.3

)

(1,408.7

)

(46.8

)

(1,455.5

)

Flattener⁴

145.4

74.1

32.6

94.4

(2.5

)

344.0

189.9

533.9

Short-term up⁵

(83.0

)

34.3

42.2

(1,519.0

)

(13.8

)

(1,539.2

)

438.6

(1,100.6

)

Short-term down⁶

86.9

(33.1

)

(42.5

)

1,658.5

13.4

1,683.1

(455.5

)

1,227.6


	31.12.21
USD m	Effect on EVE¹ – FINMA																		Effect on EVE¹ – BCBS
Scenarios	CHF			EUR			GBP			USD			Other			Total			Additional tier 1 (AT1) capital instruments			Total
+1 bp		(5.1	)		(1.1	)		0.1			(23.5	)		(0.4	)		(29.9	)		4.5			(25.4	)
Parallel up²		(724.1	)		(196.6	)		33.3			(5,068.3	)		(85.8	)		(6,041.4	)		853.4			(5,188.0	)
Parallel down²		806.3			231.9			(32.8	)		4,124.2			19.9			5,149.5			(928.4	)		4,221.1
Steepener³		(254.3	)		(69.0	)		(31.1	)		(821.4	)		(3.7	)		(1,179.6	)		(9.6	)		(1,189.2	)
Flattener⁴		117.1			37.4			35.3			(362.3	)		(34.5	)		(207.0	)		197.1			(10.0	)
Short-term up⁵		(158.7	)		(24.1	)		45.4			(2,165.9	)		(59.6	)		(2,362.9	)		531.5			(1,831.4	)
Short-term down⁶		162.5			27.4			(43.7	)		2,315.6			3.8			2,465.6			(553.3	)		1,912.3

1	Economic value of equity.

2	Rates across all tenors move by ±150 bps for Swiss franc, ±200 bps for euro and US dollar, and ±250 bps for pound sterling.

3	Short-term rates decrease and long-term rates increase.

4	Short-term rates increase and long-term rates decrease.

5	Short-term rates increase more than long-term rates.

6	Short-term rates decrease more than long-term rates.

Other market risk exposures

Own credit

We are exposed to changes in UBS’s own credit reflected in the valuation of financial liabilities designated at fair value when UBS’s own credit risk would be considered by market participants, except for fully collateralized liabilities or other obligations for which it is established market practice to not include an own-credit component.

•

Refer to “Note 20 Fair value measurement” in the “Consolidated financial statements” section of this report for more information about own credit

Structural foreign exchange risk

Upon consolidation, assets and liabilities held in foreign operations are translated into US dollars at the closing foreign exchange rate on the balance sheet date. Value changes (in US dollars) of non-US dollar assets or liabilities due to foreign exchange movements are recognized in OCI and therefore affect shareholders’ equity and CET1 capital.

Group Treasury uses strategies to manage this foreign currency exposure, including matched funding of assets and liabilities and net investment hedging.

•

Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information about our exposure to and management of structural foreign exchange risk

•

Refer to “Note 10 Derivative instruments” in the “Consolidated financial statements” section of this report for more information about our hedges of net investments in foreign operations

Equity investments and investment fund units

Audited | We make direct investments in a variety of entities and buy equity holdings in both listed and unlisted companies, with the aim of supporting our business activities and delivering strategic value to UBS. This includes investments in exchange and clearing house memberships, as well as minority investments in early-stage fintechs and technology companies via UBS Next. We may also make investments in funds that we manage in order to fund or seed them at inception or to demonstrate that our interests align with those of investors. We also buy, and are sometimes required by agreement to buy, securities and units from funds that we have sold to clients.

The fair value of equity investments tends to be influenced by factors specific to the individual investments. Equity investments are generally intended to be held for the medium or long term and may be subject to lock-up agreements. For these reasons, we generally do not control these exposures by using market risk measures applied to trading activities. However, such equity investments are subject to a different range of controls, including preapproval of new investments by business management and Risk Control, portfolio and concentration limits, and regular monitoring and reporting to senior management. They are also included in our Group-wide statistical and stress testing metrics, which flow into our risk appetite framework.

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As of 31 December 2022, we held equity investments and investment fund units totaling USD 3.0bn, of which USD 1.9bn was classified as Financial assets at fair value not held for trading and USD 1.1bn as Investments in associates. p

•

Refer to “Note 20 Fair value measurement” and “Note 28 Interests in subsidiaries and other entities” in the “Consolidated financial statements” section of this report for more information

•

Refer to “Note 1 Summary of material accounting policies” in the “Consolidated financial statements” section of this report for more information about the classification of financial instruments

Debt investments

Audited | Debt investments classified as Financial assets measured at fair value through other comprehensive income as of 31 December 2022 were measured at fair value with changes in fair value recorded through Equity, and can broadly be categorized as money market instruments and debt securities primarily held for statutory, regulatory or liquidity reasons. The risk control framework applied to debt instruments classified as Financial assets measured at fair value through other comprehensive income depends on the nature of the instruments and the purpose for which we hold them. Our exposures may be included in market risk limits or be subject to specific monitoring and interest rate sensitivity analysis. They are also included in our Group-wide statistical and stress testing metrics, which flow into our risk appetite framework.

Debt instruments classified as Financial assets measured at fair value through other comprehensive income had a fair value of USD 2.2bn as of 31 December 2022, compared with USD 8.8bn as of 31 December 2021. Effective from 1 April 2022, UBS has reclassified a portfolio of financial assets from Financial assets measured at fair value through other comprehensive income with a fair value of USD 6.9bn to Other financial assets measured at amortized cost, in line with the principles in IFRS 9, Financial Instruments, which require a reclassification when an entity changes its business model for managing financial assets. p

•

Refer to “Note 20 Fair value measurement” in the “Consolidated financial statements” section of this report for more information

•

Refer to “Economic value of equity sensitivity” in this section for more information

•

Pension risk

We provide a number of pension plans for past and current employees, some classified as defined benefit pension plans under IFRS that can have a material effect on our IFRS equity and CET1 capital.

Pension risk is the risk that defined benefit plans’ funded status might decrease, negatively affecting our capital. This can result from falls in the value of a plan’s assets or in the investment returns, increases in defined benefit obligations, or combinations of the above.

Important risk factors affecting the fair value of pension plans’ assets include equity market returns, interest rates, bond yields, and real estate prices. Important risk factors affecting the present value of expected future benefit payments include high-grade bond yields, interest rates, inflation rates, and life expectancy.

Pension risk is included in our Group-wide statistical and stress testing metrics, which flow into our risk appetite framework. The potential effects are thus captured in the post-stress capital ratio calculations.

•

Refer to “Note 1 Summary of material accounting policies” and “Note 26 Post-employment benefit plans” in the “Consolidated financial statements” section of this report for more information about defined benefit plans

UBS own share exposure

Group Treasury holds UBS Group AG shares to hedge future share delivery obligations related to employee share-based compensation awards, and also holds shares purchased under the share repurchase program. In addition, the Investment Bank holds a limited number of UBS Group AG shares, primarily in its capacity as a market-maker with regard to UBS Group AG shares and related derivatives, and to hedge certain issued structured debt instruments.

•

Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information

Country risk

Country risk framework

Country risk includes all country-specific events occurring in a sovereign jurisdiction that may lead to impairment of UBS’s exposures. It may take the form of: (i) sovereign risk, which is the ability and willingness of a government to honor its financial commitments; (ii) transfer risk, which arises if a counterparty or issuer cannot acquire foreign currencies following a moratorium by a central bank on foreign exchange transfers; or (iii) “other” country risk. “Other” country risk may manifest itself through, on the one hand, increased and multiple counterparty and issuer default risk (systemic risk) and, on the other hand, events that may affect a country’s standing, such as adverse shocks affecting political stability or institutional and / or legal frameworks. We have a well-established risk control framework to assess the risk profiles of all countries where we have exposure.

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We assign a country rating to each country, which reflects our view of the country’s creditworthiness and of the probability of a country risk event occurring. Country ratings are mapped to statistically derived default probabilities, described under “Probability of default” in this section. We use this internal analysis to set the credit ratings of governments and central banks, estimate the probability of a transfer event occurring, and establish rules on how aspects of country risk should be incorporated in counterparty ratings of non-sovereign entities domiciled in the respective country.

Country ratings are also used to define our risk appetite and risk exposure to foreign countries. A country risk limit (i.e., maximum aggregate exposure) applies to exposures to counterparties or issuers of securities and financial investments in the given foreign country. We may limit the extension of credit, transactions in traded products or positions in securities based on a country risk ceiling even if our exposure to a counterparty is otherwise acceptable.

For internal measurement and control of country risk, we also consider the financial effect of market disruptions arising prior to, during and after a country crisis. These may take the form of a severe deterioration in a country’s debt, equity or other asset markets, or a sharp depreciation of its currency. We use stress testing to assess potential financial effects of severe country or sovereign crises. This involves the developing of plausible stress scenarios for combined stress testing and the identification of countries that may potentially be subject to a crisis event, determining potential losses and making assumptions about recovery rates depending on the types of credit transactions involved and their economic importance to the affected countries.

Our exposures to market risks are subject to regular stress tests covering major global scenarios, which are also used for combined stress testing, where we apply market shock factors to equity indices, interest rates and currency rates in all relevant countries and consider the potential liquidity of the instruments.

Country risk exposure

Country risk exposure measure

The presentation of country risk follows our internal risk view, where the basis for measuring exposures depends on the product category in which we classified the exposures. In addition to the classification of exposures into banking products and traded products, covered in “Credit risk profile of the Group” in this section, in the trading inventory we classify issuer risk on securities such as bonds and equities, as well as risk relating to underlying reference assets for derivative positions.

As we manage the trading inventory on a net basis, we net the value of long positions against short positions with the same underlying issuer. Net exposures are, however, floored at zero per issuer in the figures presented in the following tables. As a result, we do not recognize potentially offsetting benefits of certain hedges and short positions across issuers. We do not recognize any expected recovery values when reporting country exposures as exposure before hedges, except for risk-reducing effects of master netting agreements and collateral held in either cash or portfolios of diversified marketable securities, which we deduct from the positive exposure values. Within banking products and traded products, risk-reducing effects of credit protection are taken into account on a notional basis when determining the net of hedge exposures.

Country risk exposure allocation

In general, exposures are shown against the country of domicile of the contractual counterparty or the issuer of the security. For some counterparties whose economic substance in terms of assets or source of revenues is primarily located in a different country, the exposure is allocated to the risk domicile of those assets or revenues.

We apply a specific approach for banking products exposures to branches of banks that are located in a country other than the legal entity’s domicile. In such cases, exposures are recorded in full against the country of domicile of the counterparty and additionally in full against the country where the branch is located.

In the case of derivatives, we show counterparty risk associated with positive replacement value (PRV) against the counterparty’s country of domicile (presented within traded products). In addition, risk associated with an instantaneous fall in value of underlying reference assets to zero (assuming no recovery) is shown against the country of domicile of the issuer of the reference asset (presented within trading inventory). This approach allows us to capture both counterparty and, where applicable, issuer elements of risk arising from derivatives and applies comprehensively for all derivatives, including single-name credit default swaps (CDSs) and other credit derivatives.

CDSs are primarily bought and sold in relation to our trading businesses, and, to a much lesser degree, used to hedge credit valuation adjustments (CVAs). Holding CDSs for credit default protection does not necessarily protect the buyer of protection against losses, as contracts only pay out under certain scenarios. The effectiveness of our CDS protection as a hedge of default risk is influenced by several factors, including the contractual terms under which a given CDS was written. Generally, only the occurrence of credit events as defined by the CDS contract’s terms (which may include, among other events, failure to pay, restructuring or bankruptcy) results in payments under the purchased credit protection contracts. For CDS contracts on sovereign obligations, repudiation can also be deemed as a default event. The determination as to whether a credit event has occurred is made by the relevant International Swaps and Derivatives Association (ISDA) determination committees (composed of various ISDA member firms) based on the terms of the CDS and the facts and circumstances surrounding the event.

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Top 20 country risk exposures

The table below shows our 20 largest country exposures by product type, excluding our home country, as of 31 December 2022 compared with 31 December 2021.

Compared with the prior year, our net exposure to the UK decreased by USD 14.5bn, driven by central bank exposures due to treasury activities. Net exposure to Germany increased by USD 4.1bn, driven by central bank exposures due to treasury activities. Net exposures to Singapore increased by USD 1.9bn, driven by trading inventory due to treasury activities. Net exposure to China decreased by USD 1.7bn, predominantly driven by trading inventory across issuer risk and margin loans, as well as traded and banking products. Net exposure to France increased by USD 1.7bn, driven by trading inventory due to treasury activities. Net exposure to the US increased by USD 1.6bn, driven by mortgages, as well as trading inventory due to treasury activities with partial offsets related to securities financing transactions.

Based on the sovereign rating categories, as of 31 December 2022, 86% of our emerging market country exposure was rated investment grade, compared with 84% as of 31 December 2021.

Russia

Our direct country risk exposure to Russia contributed USD 98m to our total emerging market exposure of USD 18.6bn as of 31 December 2022, compared with a contribution of USD 634m as of 31 December 2021. This includes trade finance exposures in Personal & Corporate Banking, Nostro and cash accounts balances, and issuer risk on trading inventory within the Investment Bank.

We had no material direct country risk exposures to Belarus or to Ukraine as of 31 December 2022 and no material reliance on Russian, Belarusian or Ukrainian collateral.

Top 20 country risk net exposures by product type


USD m	Total				Banking products (loans, guarantees, loan commitments)				Traded products (counterparty risk from derivatives and securities financing) after master netting agreements and net of collateral				Trading inventory (securities and potential benefits / remaining exposure from derivatives)
	Net of hedges¹				Net of hedges¹				Net of hedges				Net long per issuer
	31.12.22		31.12.21		31.12.22		31.12.21		31.12.22		31.12.21		31.12.22		31.12.21
United States		117,994		116,388		81,875		79,647		6,620		8,371		29,499		28,371
United Kingdom		20,360		34,837		10,887		24,788		7,982		7,465		1,490		2,585
Japan		15,894		14,764		13,251		10,572		2,232		3,508		410		684
Germany		14,651		10,564		8,255		3,397		1,495		1,232		4,901		5,934
Singapore		10,863		8,993		3,038		3,110		2,493		2,557		5,332		3,326
France		7,996		6,301		2,056		1,356		1,335		1,711		4,605		3,235
Australia		4,893		6,397		1,365		2,674		1,833		1,786		1,696		1,937
Canada		4,722		3,933		274		1,199		620		1,044		3,827		1,689
China		3,625		5,344		1,347		1,823		295		830		1,983		2,691
South Korea		3,265		2,479		388		462		411		418		2,466		1,599
Luxembourg		3,230		3,453		2,717		2,438		87		58		427		958
Netherlands		2,866		3,020		1,074		1,183		669		830		1,123		1,007
Hong Kong SAR		2,278		3,388		938		1,914		455		367		885		1,107
Norway		1,676		1,215		80		25		396		206		1,200		983
United Arab Emirates		1,393		769		446		555		707		117		240		97
Thailand		1,383		1,469		344		208		23		26		1,017		1,235
Sweden		1,293		1,617		158		647		332		194		803		776
Austria		1,192		1,220		285		265		116		97		792		858
Monaco		1,017		1,022		1,001		984		16		28		0		10
India		975		1,119		847		991		88		87		40		41

Total top 20²		221,565		228,291		130,626		138,238		28,203		30,930		62,736		59,124

1	Before deduction of IFRS 9 ECL allowances and provisions.

2	Excluding Switzerland, supranationals and global funds.

Emerging markets¹ net exposure² by internal UBS country rating category


USD m	31.12.22		31.12.21
Investment grade		16,029		17,608
Sub-investment grade		2,594		3,261

Total		18,623		20,869

1	We classify countries as emerging markets based on per capita GDP, historical real GDP growth, alignment with international institutions (such as BIS, World Bank, IMF, MSCI) and other factors.

2	Net of credit hedges (for banking products and for traded products); net long per issuer (for trading inventory). Before deduction of IFRS 9 ECL allowances and provisions.

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Sustainability and climate risk

At UBS, sustainability and climate risk is defined as the risk that UBS negatively impacts or is impacted by climate change, natural capital, human rights or other environmental, social and governance (ESG) matters.

Sustainability and climate risk may manifest as credit, market, liquidity and / or non-financial risk for UBS, resulting in potential adverse financial, liability and / or reputational impacts. These risks extend to the value of investments and may also affect the value of collateral (e.g., real estate). The management of sustainability and climate risk is key, amid a global drive to meet the United Nations Sustainable Development Goals (the SDGs) and the transition to net zero, as defined by the Paris Agreement. In addition, regulators across jurisdictions increasingly seek to understand the potential financial impacts of climate change.

Our sustainability and climate risk policy framework governs client and supplier relationships, applies Group-wide to all activities, and is integrated in management practices and control principles. The sustainability and climate risk framework is embedded in our standard risk, compliance and operations processes and applied as described below.

LOGO

The aforementioned processes include client onboarding, transaction due diligence, product development and investment decision processes, own operations, supply chain management, and portfolio reviews. This framework is geared toward identifying clients, transactions or suppliers potentially in breach of our standards or otherwise subject to significant controversies related to sustainability, human rights or climate change.

•

Refer to “Sustainability and climate risk policy framework” in Supplement 2 to our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for more information

Managing climate risk

Climate risk can arise either from changing climate conditions (physical risks) or from efforts to mitigate climate change (transition risks). The physical and transition risks from a changing climate contribute to a structural change across economies and consequently can affect banks and the financial sector as a whole through financial and non-financial impacts.

Our sustainability and climate risk (SCR) unit (part of Group Risk Control) manages material exposure to sustainability and climate risks. It also advances our firm-wide SCR initiative to build in-house capacity for the management of sustainability and climate-related risks.

Our SCR initiative follows a multi-year roadmap. It is designed to integrate sustainability and climate risk considerations into our various traditional financial and non-financial risk management frameworks, and related policies and processes. This is necessary to meet expectations regarding the management of sustainability and climate risks and to deliver on climate stress-test exercises. Our roadmap is configured to address current and emerging regulations and builds capacity through expertise and collaboration, for example, structured engagement with internal and external stakeholders (e.g., our Group Compliance, Regulatory & Governance (GCRG) function, for non-financial risks) and pertinent experts.

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In 2022, the SCR initiative monitored emerging sustainability and climate risk regulation, engaged with select regulators for deep dives, and further advanced efforts toward the goal of full integration of sustainability and climate risk into our traditional risk management frameworks and stress-testing capacity. Further developments included establishing sustainable product guidelines, building new capacity to centrally structure, acquiring and deploying ESG data across the firm, and further refining governance and methodologies driving ESG reporting and disclosure.

•

Refer to “Our management of climate risks” in our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for more information

UBS’s lending to climate-sensitive sectors

UBS approaches climate risk identification by integrating climate risk drivers, expert-based views on their transmission channels, and climate risk methodologies (e.g., risk scores and heatmaps). This enables a materiality-driven approach to climate risk management.

•

Refer to “Climate related materiality assessment” in our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for more information

The current inventory of UBS’s exposure to climate-sensitive activities (transition and physical risk) at the sector level is summarized in the table below. Exposures may appear either under one or more of the risk types, as the methodologies are distinct in their approach and application and should not be added up as one total exposure figure. Climate risk analysis is a novel area of research, and, as the methodologies, tools, and data availability improve, we will further develop our risk identification and measurement approaches.

Risk exposures by sector^1,2

Exposure

Transition risk

Physical risk

Sector

2020–2022
trend

2022
(USD bn)

2022
climate-
sensitive
exposure³

2022 risk-rating
category³

2020–2022
trend in risk
profile⁴

In scope of
net-zero
target (%)⁵

2022
climate-
sensitive
exposure³

2022 risk-rating
category³

2020–2022
trend in risk
profile⁴

Agriculture

Agriculture, fishing and forestry

0.3

0.0

Moderately low

0.3

Moderate

Food and beverage

3.2

1.4

Moderate

2.3

Moderate

Financial services

Financial services

46.9

0.0

Low

7.1

Moderately low

Industrials

Cement or concrete manufacture

0.5

Moderately high

0.5

Moderate

Chemicals manufacture

1.0

Moderately high

1.0

Moderate

Electronics manufacture

1.8

0.0

Moderately low

0.1

Moderately low

Goods and apparel manufacture

2.1

1.0

Moderate

0.9

Moderately low

Machinery manufacturing

2.9

2.6

Moderate

0.1

Moderately low

Pharmaceuticals manufacture

1.9

Moderately high

0.2

Moderately low

Plastics and petrochemicals manufacture

0.9

Moderate

0.8

Moderate

Metals and mining

Conglomerates (incl. trading)

2.4

Moderate

0.4

Moderately low

Mining and quarrying

0.4

0.0

Moderately low

0.4

Moderately high

Production

0.4

Moderate

0.1

Moderate

Fossil fuels

Downstream refining, distribution

0.3

Moderate

0.3

Moderate

Integrated

0.4

Moderately high

100

0.4

Moderate

Midstream transport, storage

0.0

Moderate

0.0

Moderate

Trading

5.2

Moderate

5.2

Moderately high

Upstream extraction

0.1

Moderately high

0.1

Moderate

Real estate

Real estate development and management

5.6

1.8

Moderately low

0.8

Moderately low

Residential²

158.9

0.0

Low

0.0

Low

Commercial²

47.1

1.4

Moderately low

1.7

Low

Services and technology

Services and technology

19.6

0.0

Low

3.0

Moderately low

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Risk exposures by sector^1,2 (continued)

Exposure

Transition risk

Physical risk

Sector

2020–2022
trend

2022
(USD bn)

2022
climate-
sensitive
exposure³

2022 risk-rating
category³

2020–2022
trend in risk
profile⁴

In scope of
net-zero
target (%)⁵

2022
climate-
sensitive
exposure³

2022 risk-rating
category³

2020–2022
trend in risk
profile⁴

Transportation

Air transport

1.8

Moderate

1.1

Moderate

Automotive

0.4

0.1

Moderately low

0.0

Moderately low

Parts and equipment supply

0.5

Moderate

0.1

Moderately low

Rail freight

0.7

0.0

Low

0.2

Moderately low

Road freight

0.5

Moderate

0.2

Moderately low

Transit

0.2

0.0

Moderately low

0.1

Moderately low

Water transport

0.4

0.0

Moderately low

0.4

Moderate

Utilities

Other

0.2

0.1

Moderately low

0.1

Moderate

Secondary energy production

2.0

0.5

Moderately low

2.0

Moderate

Secondary energy trading

0.0

Moderately low

0.0

Moderate

Private lending

Lombard^2,6

137.3

0.0

Low

0.0

Moderately low

Private lending, credit cards, other²

4.1

0.0

Not Classified

0.0

Not Classified

Total

450.0

24.9

Moderately low

30.0

Moderately low

of which: sensitive exposure (%)

5.5

6.7

Consists of total loans and advances to customers and guarantees, as well as irrevocable loan commitments (within the scope of expected credit loss), and is based on consolidated and standalone IFRS numbers, in USD bn. Metrics and trends are calculated and restated based on 2022 methodology, across three years of reporting, 2020–2022.

Methodologies for assessing climate-related risks are emerging and may change over time. As the methodologies, tools and data availability improve, we will further develop our risk identification and measurement approaches, including further and updated geospatial analysis of properties securing financing with UBS (real estate) and better understanding how private lending (e.g., Lombard) activities may result in direct financial impacts for UBS. For physical climate risks, UBS has identified select properties in its real estate portfolio that are vulnerable to acute climate hazards. However, real estate rating is assigned based on the riskiness of loan counterparties or qualitative estimates leveraging internal studies.

Climate-related risks are scored between 0 and 1, based upon sustainability and climate risk transmission channels, as outlined in Appendix 3 to our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors. Risk ratings represent a range of scores across five risk-rating categories: low, moderately low, moderate, moderately high, and high. The climate-sensitive exposure metrics are determined based upon the top three out of five rated categories: high to moderate. Legend on risk codes: not classified means the respective category of risk rating is not classified and its range of risk profiles scores 0%; low means the category of risk rating is low and its range of risk profiles scores ≤19%; moderately low means the category of risk rating is moderately low and its range of risk profiles scores >19% and ≤39%; moderate means the category of risk rating is moderate and its range of risk profiles scores >39% and ≤59%; moderately high means the category of risk rating is moderately high and its range of risk profiles scores >59% and ≤79%; high means the category of risk rating is high and its range of risk profiles scores >79% and ≤100%.

4	A material change in risk profile (discrete risk score, weighted average per sub-sector) is considered a >5% shift up, or down.

5	Calculated as a % of total exposure to the sub-sector, overall net-zero targets cover 45.6% of UBS lending, as defined in footnote 1.

6	Lombard lending rating is assigned based on the average riskiness of loans.

Transition risk heatmap

Transition risk covers the adjustment to an environmentally sustainable economy, including changes in public policies, disruptive technological developments and shifts in consumer and investor preferences. Our transition risk heatmap methodology is based on a risk-segmentation process, dividing and rating economic sectors and industry sub-segments that share similar risk vulnerability characteristics.

These are then scored and rated according to their vulnerability to (i) climate policy, (ii) low-carbon technology risks and (iii) revenue or demand shifts under an immediate and ambitious approach, to meeting the well-below-2°C Paris goal. We are able to use these risk ratings to support identification of potential climate-sensitive concentrations. The ratings in the heatmap are bands of scores (from 0 to 1), and reflect the levels of risk that would likely occur under an ambitious transition (in a short-term time horizon).

Our current transition risk heatmap shows that our exposure to activities rated as having high, moderately high or moderate vulnerability to climate transition risks is relatively low (as a percentage, in 2022 compared with 2021). Most year-on-year fluctuations (2021 to 2022) were in the energy sector, specifically in the oil and gas midstream and downstream segments, and were caused by increasing energy prices, as the Russia–Ukraine war tightened the global energy supply. Despite these fluctuations, we have continued to reduce our exposure to climate-sensitive sectors.

•

Refer to “Managing sustainability and climate risks” in our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for more information

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Climate risk heatmap (transition risk)1.2
In USD bn
5.08
Moderately high
Industrials
Fossil fuels Utilities
Real estate Agriculture
3.43
1.12
0.51
0.02
0.01
Industrials
Fossil fuels
1.90
Pharmaceuticals
1.02 Chemicals
0.51 Cement or concrete manufacture
0.54 Wholesale/trade: crude oil and natural gas
0.40 Integrated oil and gas
0.11 Conventional oil (on-/offshore)
0.08 Gas processing (ind. LNG)
Utilities
0.51 Electricity from high-carbon fuels (regulated)
Real estate
0.02 Commercial real estate
Agriculture
0.01 Livestock-beef extensive grazing
0.02
High
Fossil fuels
0.02 Shale gas
0.00 Refining and marketing
12.82
Not classified
80.1
Moder
450.173,4
Total exposure
1 Consists of total loans and advances to customers and guarantees, as well as irrevocable loan commitments (within the scope of expected credit loss), and are
2 Climate-related risks are scored between 0 and 1, based upon sustainability and climate risk transmission channels, as outlined in the Appendix 3 to our Sustai low, moderately low, moderate, moderately high, and high. Climate-sensitive exposure metric is determined based upon the top 3 out of 5 rated categories: h the sensitive sector.
3 Total exposure calculation is subject to rounding to two decimal places, hence potential deviation from actual.
4 Methodologies for assessing climate-related risks are emerging and may change over time. As the methodologies, tools, and data availability improve, we will estate) and better understanding how private lending (e.g., Lombard) activities may result in direct financial impacts to UBS. Not classified represents portion o riskiness of loans.

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19.77
Moderate
Fossil fuels Industrials
Real estate Transportation Metals and
Agriculture
Utilities
mining
4.91
4.55
3.15
2.86
2.80
1.40
0.10
19
ately low
Fossil fuels
Industrials
Real estate
Transportation
332.28
Low
Metals and mining
Agriculture
Utilities
4.70 Wholesale/trade: refined petroleum products
0.21 Downstream oil and gas distribution
0.00 Transportation and storage (gas)
2.62 Machinery and related parts manufacturing
1.00 Consumer durables manufacturing
0.93 Plastics and petrochemicals manufacture
1.76 Construction of buildings and related activities
1.39 Commercial real estate
1.70 Airlines – cargo
0.49 Land-based shipping (trucks)
0.48 Transportation parts and equipment supply
0.10 Autos, high-carbon (few EVs, many SUVs)
0.06 Airlines – commercial
0.02 Sea-based shipping, high-carbon
2.44 Conglomerates (incl. trading)
0.26 Production of other mined metals and raw materials
0.09 Production of steel/iron
1.40 Food and beverage production
0.08 Wastewater treatment
0.02 Electricity from moderate-carbon fuels (regulated)
based on consolidated and standalone IFRS numbers. nability Report 2022, available under “Annual reporting” at ubs.com/investors. Risk ratings represent a range of scores across, 5 risk rating categories: igh to moderate. Sectors, such as fossil fuels, are further segmented to categories reflecting a range of risk vulnerabilities from high to moderate, within further develop our risk identification and measurement approaches, including updated geospatial analysis of properties securing financing with UBS (real UBSbusiness activities where methodologies and data are not yet able to provide a rating. Lombard lending rating is assigned ba-sed on the average

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Physical risk heatmap

Physical risk arises from the impact of weather events and long-term or widespread environmental changes. The physical risk heatmap methodology groups corporate counterparties based on exposure to key physical risk factors, by rating sectoral (sectoral average risk distribution), geographic (vulnerability and adaptive capacity) and value chain (sectoral average risk distribution) vulnerabilities in a climate-change trajectory in which no additional policy action is taken, and scored for the potential for financial loss in the short-term time horizon. Ratings from low to high are based on a weighted-average score (from 0 to 1), given by double-weighting sector and geography and single-weighting value chain.

•

Refer to “Managing sustainability and climate risks” in our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors

We will continue to enhance our methodology in 2023, with relevant subject matter experts (e.g., country risk experts) and enhanced vendor data sources (e.g., systematic integration of geospatial tools and data). Our current physical risk heatmap shows that we have relatively low exposure to activities rated as having high, moderately high or moderate vulnerability to physical climate risks. Key concentrations of exposure include high volumes of real estate lending in Switzerland. Most of our lending is to the financial sector, which by its nature has a lower physical climate risk. Key exceptions are lending to property insurance companies or lending in higher-risk regions, such as South Asia.

The chart below shows the location-specific risk distribution compared with the spread of physical risk across sectoral risk ratings versus country (risk domicile, see above) risk ratings. The size of the circle indicates the relative lending exposure.

Scenario analysis and stress test exercises

We use scenario-based approaches to assess our exposure to physical and transition risks stemming from climate change. We have introduced a series of assessments performed through industry collaborations in order to harmonize approaches for addressing methodological and data gaps. We have performed top-down balance sheet stress testing (across the Group), as well as targeted, bottom-up analysis of specific sector exposures covering short-, medium-, and long-term time horizons.

UBS first participated in regulatory scenario analysis and stress test exercises in 2021,namely the Bank of England (BoE) 2021 Climate Biennial Exploratory Scenario (CBES): Financial risks from climate change; and the Climate Risk Stress Test (CST) of the European Central Bank (the ECB). In addition, in 2021 UBS participated in climate risk assessment conducted in Switzerland jointly by FINMA and the Swiss National Bank. Throughout 2022, we engaged with a range of regulatory surveys and other requests for information from supervisors around the globe.

•

Refer to “Managing sustainability and climate risks” in our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors

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LOGO

Climate risk heatmap (physical risk)1,2
in USD bn
226.59
Low
1.42
High
8.71
Not classified
4.15
Moderately high
Physical risk by sector
24.44
Moderate
Marker size indicates re
450.173,4
Total exposure
184.85
Moderately low
Country score
High 1.0
0.6
La
0.5
50
0.4
0.3
0.2
0.1
0
Low
Average
Lower ri
1 Consists of total loans and advances to customers and guarantees, as well as irrevocable loan commitments (within the scope of expected credit loss), and are
2 Climate-related risks are scored between 0 and 1, based upon sustainability and climate risk transmission channels, as outlined in the Appendix
3 to our Sustain low, moderately low, moderate, moderately high, and high. Climate sensitive exposure metric is determined based upon the top 3 out of 5 rated categories: high the sensitive sector.
3 Total exposure calculation is subject to rounding to two decimal places, hence potential deviation from actual.
4 Methodologies for assessing climate-related risks are emerging and may change over time. As the methodologies, tools, and data availability improve, we will f estate) and better understanding how private lending (eg, Lombard) activities may result in direct financial impacts to UBS. Not classified represents portion of riskiness of loans
5 Residential real estate is not given a sector score, therefore not included in this chart, however is rated “low” based on periodic geospatial analysis 1
6 UBS has identified select properties in its portfolio that are vulnerable to acute climate hazards, however portfolio-level risks are inherently low, given the integra

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LOGO

and geographic (country) scores
ative exposure magnitude
mbard4
Real estate
(development,
commercial)5,6
Financial
services
Transportation
Industrials
Services and
technology
0.1
0.2
0.3
0.4
country and sector score
sk
0.5
Sector score
Metals and
mining
Fossil fuels
Utilities
Agriculture
0.6
0.7
0.8
0.9
1.0
High
Higher risk
based on consolidated and standalone FRS numbers. ability Report 2022, available under “Annual reporting” at ubs.com/investors. Risk ratings represent a range of scores across, 5 risk rating categories: in to moderate. Sectors, such as fossil fuels, are further segmented to categories reflecting a range of risk vulnerabilities from high to moderate, within further develop our risk identification and measurement approaches, including updated geospatial analysis of properties securing financing with UBS (real UBS business activities where methodologies and data are not yet able to provide a rating. Lombard lending rating is assigned based on the average tion of such information in UBS’s loan underwriting processes.

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Non-financial risk

Non-financial risk is the risk of undue monetary loss and / or non-monetary adverse consequences resulting from inadequate or failed internal processes, people and / or systems, failure to comply with laws and regulations and internal policies and procedures, or external events (deliberate, accidental or natural) that have an impact, monetary or non-monetary, on UBS, its clients or its markets.

Key developments

We have identified eight non-financial risk themes as being currently key to us. These are:

•

digital transformation and change delivery;

•

data life cycle;

•

operational resilience and cyber threat;

•

investor protection and market interaction;

•

strategic growth initiatives and partnerships;

•

the evolving nature of AML / KYC and sanctions;

•

virtual assets; and

•

environmental, social and governance (ESG) risks.

We are continuing our efforts regarding innovation and digitalization to create value for our clients. As part of the resulting transformation, we focus on timely and properly controlled changes to frameworks, including consideration of new or revised controls, working practices and oversight, with the aim of mitigating any new risks introduced.

The increasing interest in data-driven advisory processes, and use of artificial intelligence and machine learning, is opening up new questions related to data ethics, data privacy and records management. In addition, given the interconnectivity between systems and data flows, it is important that data is properly managed and is complete, timely and correct. We are actively enhancing the required frameworks, which are designed to ensure proper controls are in place to meet regulatory and customer expectations.

Given rising geopolitical tensions, coupled with ongoing environmental and health threats, we believe that it is essential that UBS remains operationally resilient. We have developed a global operational resilience framework and are implementing it across all business divisions and jurisdictions. The framework will mature over time and is designed to drive enhancements in operational resilience. In addition, in regions with local COVID-19 restrictions, our response continues to rely upon our business continuity management and operational risk processes, with no material impact on our services.

The inherent risk of cyberattacks continues to be elevated, as the geopolitical situation increases the likelihood of external state-driven cyber activity, and attacks are becoming increasingly sophisticated, which may result in business disruption or the corruption or loss of data. It is therefore key that our cyber-defense capabilities continue to be strengthened and evolve in line with developments in the threat landscape. Our IT security controls, staff training and communications, and cyber-threat monitoring provided adequate cyber defenses to prevent our operations being materially impacted by cybersecurity incidents in 2022. We continue to enhance our cyber capabilities to stay abreast of evolving threats. Cyberattacks may also occur on the systems that are operated by external service providers. If a successful attack occurs at a service provider, as we have recently experienced, we may be dependent on the service provider’s ability to detect, investigate and assess the attack, and successfully restore the relevant systems and data.

As we continue to move to a post-pandemic “new normal,” changes to the work environment (including permanent hybrid working and the introduction of agile ways of working) have introduced new challenges for supervision and monitoring. Hybrid working can lead to increased conduct risk, inherent risk of fraudulent activities, potential increases in the number of suspicious transactions, and increased information security risks. We have implemented additional monitoring and supervision to mitigate these risks.

Competition to find new investment opportunities across the financial services sector, both for firms and for customers, is increasing. Thus, suitability risk, product selection, cross-divisional service offerings, quality of advice and price transparency also remain areas of heightened focus for UBS and for the industry as a whole.

With regard to consumer protection, sustainable investing, market volatility and major legislative change programs, such as the Swiss Financial Services Act (FIDLEG) in Switzerland, Regulation Best Interest (Reg BI) in the US and the Markets in Financial Instruments Directive II (MiFID II) in the EU, all significantly affect the industry and require adjustments to control processes on a geographically aligned basis.

Achieving fair outcomes for our clients, upholding market integrity and cultivating the highest standards of employee conduct are of critical importance to us. We maintain a conduct risk framework across our activities, which is designed to align our standards and conduct with these objectives and to retain momentum on fostering a strong culture.

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Cross-border risk remains an area of regulatory attention for global financial institutions, with a strong focus on fiscal transparency, as well as market access, particularly third-country market access into the European Economic Area. There is also an ongoing high level of attention regarding the risk that tax authorities may, on the basis of new interpretations of existing law, seek to impose taxation based on the existence of a permanent establishment. We maintain a series of controls designed to address these risks. Remote communication and the use of digital solutions also require that these evolving client channels remain compliant.

In September 2022, the Securities and Exchange Commission (the SEC) and the Commodity Futures Trading Commission (the CFTC) issued settlement orders with UBS AG relating to communications recordkeeping requirements in our US broker-dealers and our registered swap dealer. In response, we have initiated a program to remediate the identified shortcomings.

Financial crime, including money laundering, terrorist financing, sanctions violations, fraud, bribery and corruption, continues to present a major risk, as technological innovation and geopolitical developments increase the complexity of doing business and heightened regulatory attention continues. An effective financial crime prevention program therefore remains essential for UBS. Money laundering and financial fraud techniques are becoming increasingly sophisticated, and geopolitical volatility makes the sanctions landscape more complex, as new or novel sanctions may be imposed that require complex implementation in a short time frame, such as the extensive and continuously evolving sanctions arising from the Russia–Ukraine war. As a regulated financial institution, UBS is subject to the requirements of, and to supervision by, the Swiss Financial Market Supervisory Authority (FINMA), the US Federal Reserve Board, the US Office of the Comptroller of the Currency (the OCC), the US Federal Deposit Insurance Corporation, the US SEC, the UK Prudential Regulation Authority, the UK Financial Conduct Authority, the German Federal Financial Supervisory Authority (BaFIN) and the European Central Bank (the ECB), as applicable. As such, we maintain policies and procedures that are reasonably designed to comply with the sanctions, anti-bribery and anti-corruption regimes in the jurisdictions in which we operate, including the Swiss, EU, US and UK regimes.

In the US, the OCC issued a Cease and Desist Order against UBS in May 2018 relating to our US branch anti-money-laundering (AML) and know-your-client (KYC) programs. In response, we initiated an extensive program for the purpose of ensuring sustainable remediation of US-relevant Bank Secrecy Act / AML issues across all our US legal entities. We introduced significant improvements to the framework between 2019 and 2022. We are continuing to implement these enhancements, as well as evolving them to respond to any new and emerging risks.

We continue to focus on strategic enhancements to our global AML / KYC and sanctions programs, including the exploration of new technologies and sophisticated monitoring and analytical capabilities, as well as the application of risk appetite statements for markets.

In line with our firm-wide purpose, ESG topics and the risks related to them are high on our agenda, particularly considering the increasing regulatory focus on ESG disclosure, climate-related stress testing, net-zero commitments, greenwashing risk and the strategic commercial pushing of sustainability topics, as well as the potential for new and diverse regulations being deployed across jurisdictions. Strong regulatory development tracking and impact assessment are key, as is integrating ESG factors into the financial and non-financial risk control frameworks as required.

•

Refer to “Sustainability and climate risk” in this section for more information about risks related to sustainability and climate risk

Non-financial risk framework

Non-financial risk is an inherent part of our business. Losses can result from people and systems, inadequate or failed internal processes, or external causes. We follow a Group-wide non-financial risk framework that establishes requirements for identifying, managing, assessing and mitigating operational, compliance and conduct risks to achieve an agreed balance between risk and return. It is built on the following pillars:

•

classifying inherent risks through 18 non-financial risk taxonomies, which define the universe of material non-financial risks that can arise as a consequence of our business activities and external factors;

•

assessing the design and operating effectiveness of controls through our control assessment process;

•

defining the non-financial risk appetite (including a financial risk appetite statement at the Group, UBS AG and business division levels for non-financial risk events) through quantitative metrics and thresholds and qualitative measures, and assessing risk exposure against appetite;

•

assessing inherent and residual risk through risk assessment processes and determining whether additional remediation plans are required to address identified deficiencies; and

•

proactively and sustainably remediating identified control deficiencies.

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Divisional Presidents are accountable for the effectiveness of non-financial risk management and for the robustness of the front-to-back control environment within their business divisions, and legal-entity-responsible executives are in charge of non-financial risk management within their legal entities. Group function heads are accountable for supporting the divisional Presidents and legal-entity-responsible executives of our legal entities in the discharge of this responsibility, by confirming completeness and effectiveness of the control environment and non-financial risk management within their Group functions. Collectively, divisional Presidents, central Group function heads and legal-entity-responsible executives are in charge of implementing the non-financial risk framework.

Compliance & Operational Risk Control (C&ORC) is responsible for providing an independent and objective view of the adequacy of non-financial risk management across the Group, and ensuring that compliance risk, financial crime risk and operational risk are understood, owned and managed in accordance with our risk appetite. C&ORC business- or function-aligned teams sit within the Group Compliance, Regulatory & Governance (GCRG) function, reporting to the Group Chief Compliance and Governance Officer, who is a member of the Group Executive Board. The non-financial risk framework forms the common basis for managing and assessing compliance risk, financial crime risk and operational risk, and there are additional C&ORC activities intended to ensure we are able to demonstrate compliance with applicable laws, rules and regulations.

In 2022, we continued to review and enhance the non-financial risk framework, including delivery of the Group Functions Risk Control Self-Assessment for the first time and the rolling-out of the simplified risk taxonomy, which also facilitated the development of the firm-wide non-financial risk appetite statement and assessments across all 18 taxonomies. All functions within UBS are required to assess the design and operating effectiveness of their internal controls periodically. The output of these reviews supports the assessment and testing scope of internal controls over financial reporting as required by the Sarbanes–Oxley Act, Section 404 (SOX 404).

Key control deficiencies identified during the internal control and risk assessment processes must be reported in the non-financial risk inventory, and sustainable remediation must be defined and executed. These control deficiencies are assigned to owners at senior management level and the remediation progress is reflected in the respective managers’ annual performance measurement and objectives. To assist with prioritizing the most material control deficiencies and measuring aggregated risk exposure, irrespective of origin, a common rating methodology is applied across all three lines of defense, as well as by external audit.

Advanced measurement approach model

The non-financial risk framework outlined above underpins the calculation of regulatory capital for operational risk, which enables us to quantify operational risk and define effective risk-mitigating management incentives as part of the related operational risk capital allocation approach to the business divisions.

We measure Group operational risk exposure and calculate operational risk regulatory capital using the advanced measurement approach (AMA) in accordance with FINMA and international requirements.

An entity-specific AMA model has been applied for UBS Switzerland AG, while for other regulated entities the basic indicators or standardized approaches are adopted for regulatory capital in agreement with local regulators. Also, the methodology of the Group AMA is leveraged for entity-specific Internal Capital Adequacy Assessment Processes.

Currently, the model includes 16 AMA units of measure (UoM), which are aligned with our non-financial risk taxonomy as closely as possible. Full transition to the non-financial risk taxonomy is not yet implemented, but is planned by the end of December 2023 with expected FINMA approval for the Group’s AMA model. Frequency and severity distributions are calibrated for each of the model’s UoM. The modeled distribution functions for both frequency and severity are used to generate the annual loss distribution. The resulting 99.9% quantile of the overall annual operational risk loss distribution across all UoM determines the required regulatory capital. Currently, we do not reflect mitigation through insurance or any other risk transfer mechanism in our AMA model.

AMA model calibration and review

A key assumption when calibrating data-driven frequency and severity distributions is that historical losses form a reasonable proxy for future events. In line with regulatory expectations, the AMA methodology utilizes both historical internal losses and external losses suffered by the broader industry for model calibration purposes.

Initial model outputs driven by the loss history are reviewed and adjusted to reflect fast-changing external developments, such as new regulations, geopolitical change, volatile market and economic conditions, and internal factors (e.g., changes in business strategy and control framework enhancements). The resulting baseline data-driven frequency and severity distributions are reviewed by subject matter experts and where necessary adjusted based on a review of qualitative information about the business environment and internal control factors, as well as expert judgment, with the aim of forecasting losses.

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Our model is reviewed regularly to maintain risk sensitivity and recalibrated at least annually. Any changes to regulatory capital as a result of a recalibration or methodology changes are presented to FINMA for approval prior to use for disclosure purposes.

AMA model governance

The Group- and entity-specific AMA models are subject to an independent validation performed by Model Risk Management & Control in line with the Group’s model risk management framework.

Expected transition of capital regime under Basel III capital regulations

The AMA is expected to be replaced by the standardized measurement approach for regulatory capital determination purposes in line with the relevant Basel Committee for Banking Supervision Basel III capital regulations. UBS is interacting closely with the relevant Swiss authorities to discuss the implementation details and related implementation timeline.

•

Refer to “Capital planning and activities” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information about the development of risk-weighted assets

•

Refer to “Risk measurement” in this section for more information about our approach to model confirmation procedures

•

Refer to the “Risk factors” section of this report for more information

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Capital, liquidity and funding, and balance sheet

Table of contents


135		Capital management

135		Capital management objectives, planning and activities

136		Swiss SRB total loss-absorbing capacity framework

139		Total loss-absorbing capacity

143		Risk-weighted assets

144		Leverage ratio denominator

146		UBS AG consolidated total loss-absorbing capacity and leverage ratio information

149		Equity attribution and return on attributed equity

150		Liquidity and funding management

150		Strategy, objectives and governance

150		Liquidity and funding stress testing

151		Funding management

152		Liquidity coverage ratio

152		Net stable funding ratio

153		Balance sheet and off-balance sheet

153		Balance sheet

157		Off-balance sheet

159		Cash flows

159		Currency management

160		UBS shares

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Capital management

Capital management objectives, planning and activities

Capital management objectives

Audited | An adequate level of common equity tier 1 (CET1) capital and total loss-absorbing capacity (TLAC) meeting both internal assessment and regulatory requirements is a prerequisite for conducting our business activities. p

We are therefore committed to maintaining a strong CET1 capital and TLAC position at all times, in order to meet regulatory capital requirements and our target capital ratios, and to support the growth of our businesses.

As of 31 December 2022, our CET1 capital ratio was 14.2% and our CET1 leverage ratio 4.42%, each above our capital guidance and also above the requirements for Swiss systemically relevant banks (SRBs) and the Basel Committee on Banking Supervision (the BCBS) requirements. We believe that our capital strength, consistent with our capital guidance, is a source of confidence for our stakeholders, contributes to our sound credit ratings and is one of the foundations of our success.

The BCBS announced the finalization of the Basel III framework in December 2017, and published the final rules on the minimum capital requirements for market risk from the Fundamental Review of the Trading Book (the FRTB) in January 2019. In response to COVID-19, the Group of Central Bank Governors and Heads of Supervision, which acts as the BCBS’s oversight body, endorsed the deferral of the implementation date by one year, to 1 January 2023. The accompanying transitional arrangements for the output floor were also extended by one year, to 1 January 2028. We expect the Swiss regulations to come into force in 2025 and we continue to make progress on our infrastructure design and operational governance ahead of the upcoming adoption of these rules. We currently estimate that the revised Basel III framework would lead to a further net increase in risk-weighted assets (RWA) of around USD 12bn, before taking into account mitigating actions and not reflecting the impact of the output floor, which is phased in over time. Our estimate includes the finalization of the Basel III framework, as well as the FRTB, based on our current understanding of the relevant standards. It may change as a result of new or updated regulatory interpretations, appropriate conservatism in model calibration, the implementation of Basel III standards into national law, changes in business growth, market conditions and other factors. The final degree of alignment between the Swiss implementation and those in other jurisdictions, particularly those regarding the treatment of historical operational losses, remains uncertain at this stage.

•

Refer to the “Our strategy” and “Targets, aspirations and capital guidance” sections of this report for more information about our capital and resource guidelines

•

Refer to “We may be unable to maintain our capital strength” in the “Risk factors” section of this report for more information about capital ratio-related risks

Capital planning and activities

Audited | We manage our balance sheet, RWA, leverage ratio denominator (LRD) and TLAC ratio levels based on our regulatory requirements, within our internal limits and targets, and our externally provided guidance. Our strategic focus is on achieving an optimal attribution and use of financial resources between our business divisions and Group Functions, as well as between our legal entities, while remaining within the limits defined for the Group and allocated to the business divisions by the Board of Directors (the BoD). These resource allocations, in turn, affect business plans and earnings projections, which are reflected in our capital plans.

The annual strategic planning process includes a capital-planning component that is key in defining our capital targets. It is based on an attribution of Group RWA and LRD internal limits to the business divisions.

Limits and targets are established at the Group and business division levels, and are approved by the BoD at least annually. In the target-setting process, we take into account the current and potential future TLAC requirements, our aggregate risk exposure in terms of capital-at-risk, the assessment by rating agencies, comparisons with peers and the effect of expected accounting policy changes. p

Monitoring is based on these internal limits and targets and provides indications if any changes are required. Any breach of limits in place triggers a series of required remediating actions.

Group Treasury plans for and monitors consolidated TLAC information on an ongoing basis, reflecting business and legal entity requirements, as well as regulatory developments in capital regulations. In addition, capital planning and monitoring are performed at the legal entity level for our significant subsidiaries and sub-groups that are subject to prudential supervision and must meet capital and other supervisory requirements.

•

Refer to “Capital and capital ratios of our significant regulated subsidiaries” in this section for more information

•

Refer to “Statistical measures” in the “Risk management and control” section of this report for more information about capital-at-risk

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Swiss SRB total loss-absorbing capacity framework

The disclosures in this section are provided for UBS Group AG on a consolidated basis and focus on key developments during the reporting period and information in accordance with the Basel III framework, as applicable to Swiss SRBs.

Additional regulatory disclosures for UBS Group AG on a consolidated basis are provided in our 31 December 2022 Pillar 3 Report. The Pillar 3 Report further includes information relating to our significant regulated subsidiaries and subgroups (UBS AG standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated and UBS Americas Holding LLC consolidated) as of 31 December 2022 and is available under “Pillar 3 disclosures” at ubs.com/investors.

Capital and other regulatory information for UBS AG consolidated in accordance with the Basel III framework, as applicable to Swiss SRBs, is provided in the combined UBS Group AG and UBS AG Annual Report 2022, available under “Annual reporting” at ubs.com/investors.

Regulatory framework

The Basel III framework came into effect in Switzerland on 1 January 2013 and is embedded in the Swiss Capital Adequacy Ordinance (the CAO). The CAO also includes the too-big-to-fail provisions applicable to Swiss SRBs, which have been fully phased-in since 1 January 2020.

Under the Swiss SRB framework, going and gone concern requirements represent the Group’s TLAC requirement. TLAC encompasses regulatory capital, such as CET1, loss-absorbing additional tier 1 (AT1) and tier 2 capital instruments, and liabilities that can be written down or converted into equity in case of resolution or for the purpose of restructuring measures.

Capital and other instruments contributing to our total loss-absorbing capacity

In addition to CET1 capital, the following instruments contribute to our loss-absorbing capacity:

•

loss-absorbing AT1 capital instruments (high- and low-trigger);

•

loss-absorbing tier 2 capital instruments (high- and low-trigger);

•

non-Basel III-compliant tier 2 capital instruments; and

•

TLAC-eligible senior unsecured debt instruments.

Under the Swiss SRB rules, going concern capital includes CET1 and high-trigger loss-absorbing AT1 capital instruments. Our existing outstanding low-trigger loss-absorbing AT1 capital instruments are available to meet the going concern capital requirements until their first call date. As of their first call date, these instruments are eligible to meet the gone concern requirements.

Outstanding high- and low-trigger loss-absorbing tier 2 capital instruments, non-Basel III-compliant tier 2 capital instruments and TLAC-eligible senior unsecured debt instruments are eligible to meet gone concern requirements until one year before maturity. A maximum of 25% of the gone concern requirements can be met with instruments that have a remaining maturity of between one and two years (i.e., are in the last year of eligibility). However, once at least 75% of the gone concern requirement has been met with instruments that have a remaining maturity of greater than two years, all instruments that have a remaining maturity of between one and two years remain eligible to be included in the total gone concern capital.

•

Refer to “Bondholder information,” available at ubs.com/investors, for more information about the eligibility of capital and senior unsecured debt instruments and key features and terms and conditions of capital instruments

Total loss-absorbing capacity and leverage ratio requirements

Going concern capital requirements

Under the Swiss SRB requirements, total going concern minimum requirements for all Swiss SRBs are a capital ratio requirement of 12.86% of RWA and a leverage ratio requirement of 4.5%. In addition to these minimum requirements, an add-on reflecting the degree of systemic importance is applied, based on market share and LRD. The applicable market share add-on requirements for UBS were unchanged at 0.72% of RWA and 0.25% of LRD. The applicable LRD add-on requirements remained unchanged at 0.72% of RWA and 0.25% of LRD, as our Group LRD remained within the same add-on bucket.

On 30 September 2022, the Swiss countercyclical capital buffer was reactivated, at a maximum level of 2.5% on risk-weighted positions that are directly or indirectly backed by residential properties in Switzerland. This increased our minimum CET1 capital requirement by 27 basis points as of 31 December 2022. We also continued to apply countercyclical buffer requirements introduced in other BCBS member jurisdictions, which resulted in an additional buffer requirement of 7 basis points as of 31 December 2022. Overall, countercyclical capital buffers contributed 34 basis points to our minimum CET1 capital requirement as of 31 December 2022.

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The total going concern capital requirements applicable are 14.64% of RWA (including countercyclical buffer requirements) and 5.00% of LRD. Furthermore, of the total going concern capital requirement of 14.64% of RWA, at least 10.34% must be met with CET1 capital, while a maximum of 4.3% can be met with high-trigger loss-absorbing AT1 capital instruments (including our existing outstanding low-trigger AT1 capital instruments, which qualify until their first call date as mentioned above).

Similarly, of the total going concern leverage ratio requirement of 5.00%, at least 3.5% must be met with CET1 capital, while a maximum of 1.5% can be met with high-trigger loss-absorbing AT1 capital instruments (including our existing outstanding low-trigger AT1 capital instruments, which qualify until their first call date as mentioned above).

Gone concern loss-absorbing capacity requirements

As an internationally active Swiss SRB, UBS is also subject to gone concern loss-absorbing capacity requirements. The gone concern requirements also include add-ons for market share and LRD.

Under the Swiss SRB framework, banks are eligible for a rebate on the gone concern requirement if they take actions that facilitate recovery and resolvability beyond the minimum requirements. The amount of the rebate for improved resolvability is assessed annually by the Swiss Financial Market Supervisory Authority (FINMA). Based on actions we had completed by December 2021 to improve resolvability, FINMA granted a rebate on the gone concern requirement of 65% of the aforementioned maximum rebate in the third quarter of 2022, with an effective maximum rebate of 3.56 percentage points for the RWA-based requirement and 1.25 percentage points for the LRD-based requirement as of 31 December 2022.

Our gone concern requirements are further reduced when higher quality capital instruments (CET1 capital, low-trigger loss-absorbing AT1 or certain low-trigger tier 2 capital instruments) are used to meet gone concern requirements. As of 31 December 2022, UBS used low-trigger tier 2 capital to fulfill gone concern requirements, resulting in a reduction of 0.38 percentage points for the RWA-based requirement.

From 1 January 2022 onward, the gone concern requirement after the application of the rebate for resolvability measures and the reduction for the use of higher quality capital instruments has been floored at 10.0% and 3.75% for the RWA- and LRD-based requirements, respectively.

In November 2022, the Swiss Federal Council adopted amendments to the Banking Act and the Banking Ordinance and both entered into force as of 1 January 2023. The amendments replace the resolvability discount on the gone concern capital requirements for systemically important banks (SIBs), including UBS, with a reduced base gone concern capital requirement. In addition, FINMA has the authority to impose a surcharge of up to 25% of the base gone concern capital requirement based on obstacles to a SIB’s resolvability identified in future resolvability assessments. We currently expect that our total gone concern requirements will remain substantially unchanged in 2023 as a result of these changes.

In this report, we refer to the RWA-based gone concern requirements as gone concern loss-absorbing capacity requirements and the RWA-based gone concern ratio is referred to as the gone concern loss-absorbing capacity ratio.

The table below provides the RWA- and LRD-based requirements and information as of 31 December 2022.

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Swiss SRB going and gone concern requirements and information

As of 31.12.22

RWA

LRD

USD m, except where indicated

in %

Required going concern capital

Total going concern capital

14.64

46,802

5.00

51,423

Common equity tier 1 capital

10.34

33,060

3.50

35,996

of which: minimum capital

4.50

14,381

1.50

15,427

of which: buffer capital

5.50

17,577

2.00

20,569

of which: countercyclical buffer

0.34

1,102

Maximum additional tier 1 capital

4.30

13,742

1.50

15,427

of which: additional tier 1 capital

3.50

11,185

1.50

15,427

of which: additional tier 1 buffer capital

0.80

2,557

Eligible going concern capital

Total going concern capital

18.25

58,321

5.67

58,321

Common equity tier 1 capital

14.22

45,457

4.42

45,457

Total loss-absorbing additional tier 1 capital³

4.03

12,864

1.25

12,864

of which: high-trigger loss-absorbing additional tier 1 capital

3.65

11,675

1.14

11,675

of which: low-trigger loss-absorbing additional tier 1 capital

0.37

1,189

0.12

1,189

Required gone concern capital

Total gone concern loss-absorbing capacity⁴

10.36

33,105

3.75

38,567

of which: base requirement⁵

12.86

41,099

4.50

46,281

of which: additional requirement for market share and LRD

1.44

4,602

0.50

5,142

of which: applicable reduction on requirements

(3.94

)

(12,596

)

(1.25

)

(12,856

)

of which: rebate granted⁶

(3.56

)

(11,385

)

(1.25

)

(12,856

)

of which: reduction for usage of low-trigger tier 2 capital instruments

(0.38

)

(1,211

)

0.00

Eligible gone concern capital

Total gone concern loss-absorbing capacity

14.70

46,991

4.57

46,991

Total tier 2 capital

0.93

2,958

0.29

2,958

of which: low-trigger loss-absorbing tier 2 capital

0.76

2,422

0.24

2,422

of which: non-Basel III-compliant tier 2 capital

0.17

536

0.05

536

TLAC-eligible senior unsecured debt

13.78

44,033

4.28

44,033

Total loss-absorbing capacity

Required total loss-absorbing capacity

25.00

79,907

8.75

89,990

Eligible total loss-absorbing capacity

32.95

105,312

10.24

105,312

Risk-weighted assets / leverage ratio denominator

Risk-weighted assets

319,585

Leverage ratio denominator

1,028,461

1	Includes applicable add-ons of 1.44% for RWA and 0.50% for LRD.

2	Our minimum CET1 leverage ratio requirement of 3.5% consists of a 1.5% base requirement, a 1.5% base buffer capital requirement, a 0.25% LRD add-on requirement and a 0.25% market share add-on requirement based on our Swiss credit business.

Includes outstanding low-trigger loss-absorbing additional tier 1 capital instruments, which are available under the Swiss systemically relevant bank framework to meet the going concern requirements until their first call date. As of their first call date, these instruments are eligible to meet the gone concern requirements.

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.

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 10% and 3.75% for the RWA- and LRD-based requirements, respectively. This means that the combined reduction may not exceed 4.3 percentage points for the RWA-based requirement of 14.3% and 1.25 percentage points for the LRD-based requirement of 5.0%.

Based on the actions we completed up to December 2021 to improve resolvability, FINMA granted an increase in the rebate on the gone concern requirement from 55.0% to 65.0% of the maximum rebate, effective 1 July 2022, with an effective maximum rebate of 1.25 percentage points for the LRD-based requirements and – given the risk density of 35% underlying the regulatory requirements – an effective maximum rebate of 3.56 percentage points for the RWA-based requirements.

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Total loss-absorbing capacity


Swiss SRB going and gone concern information

USD m, except where indicated	31.12.22	31.12.21

Eligible going concern capital
Total going concern capital	58,321	60,488
Total tier 1 capital	58,321	60,488
Common equity tier 1 capital	45,457	45,281
Total loss-absorbing additional tier 1 capital	12,864	15,207
of which: high-trigger loss-absorbing additional tier 1 capital	*11,675*	12,783
of which: low-trigger loss-absorbing additional tier 1 capital	*1,189*	2,425

Eligible gone concern capital
Total gone concern loss-absorbing capacity	46,991	44,264
Total tier 2 capital	2,958	3,144
of which: low-trigger loss-absorbing tier 2 capital	*2,422*	2,596
of which: non-Basel III-compliant tier 2 capital	*536*	547
TLAC-eligible senior unsecured debt	44,033	41,120

Total loss-absorbing capacity
Total loss-absorbing capacity	105,312	104,752

Risk-weighted assets / leverage ratio denominator
Risk-weighted assets	319,585	302,209
Leverage ratio denominator	1,028,461	1,068,862

Capital and loss-absorbing capacity ratios (%)
Going concern capital ratio	18.2	20.0
of which: common equity tier 1 capital ratio	*14.2*	15.0
Gone concern loss-absorbing capacity ratio	14.7	14.6
Total loss-absorbing capacity ratio	33.0	34.7

Leverage ratios (%)
Going concern leverage ratio	5.7	5.7
of which: common equity tier 1 leverage ratio	*4.42*	4.24
Gone concern leverage ratio	4.6	4.1
Total loss-absorbing capacity leverage ratio	10.2	9.8

Audited |

Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital


USD m	31.12.22		31.12.21
Total IFRS equity	57,218		61,002
Equity attributable to non-controlling interests	(342	)	(340	)
Defined benefit plans, net of tax	(311	)	(270	)
Deferred tax assets recognized for tax loss carry-forwards	(4,077	)	(4,565	)
Deferred tax assets on temporary differences, excess over threshold	(64	)	(49	)
Goodwill, net of tax¹	(5,754	)	(5,838	)
Intangible assets, net of tax	(150	)	(180	)
Compensation-related components (not recognized in net profit)	(2,287	)	(1,700	)
Expected losses on advanced internal ratings-based portfolio less provisions	(471	)	(482	)
Unrealized (gains) / losses from cash flow hedges, net of tax	4,234		(628	)
Own credit related to (gains) / losses on financial liabilities measured at fair value that existed at the balance sheet date, net of tax	(523	)	315
Own credit related to (gains) / losses on derivative financial instruments that existed at the balance sheet date	(105	)	(50	)
Unrealized gains related to financial assets at fair value through OCI, net of tax	0		(68	)
Prudential valuation adjustments	(201	)	(167	)
Accruals for dividends to shareholders	(1,683	)	(1,700	)
Other	(29	)	1

Total common equity tier 1 capital	45,457		45,281

1	Includes goodwill related to significant investments in financial institutions of USD 20m as of 31 December 2022 (31 December 2021: USD 22m) presented on the balance sheet line Investments in associates.

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Total loss-absorbing capacity and movement

Our total loss-absorbing capacity increased by USD 0.6bn to USD 105.3bn as of 31 December 2022.

Going concern capital and movement

Audited | Our CET1 capital mainly consists of: share capital; share premium, which primarily consists of additional paid-in capital related to shares issued; and retained earnings. A detailed reconciliation of International Financial Reporting Standards (IFRS) equity to CET1 capital is provided in the “Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital” table.

Our CET1 capital increased by USD 0.2bn to USD 45.5bn as of 31 December 2022, mainly as a result of operating profit before tax of USD 9.6bn with associated current tax expenses of USD 1.4bn, partly offset by share repurchases of USD 5.6bn under our share repurchase programs, dividend accruals of USD 1.7bn, negative foreign currency effects of USD 0.5bn and compensation- and own share-related capital components of USD 0.3bn.

•

Refer to “UBS shares” in this section for more information about our share repurchase programs

Our loss-absorbing AT1 capital decreased by USD 2.3bn to USD 12.9bn, mainly driven by our announcement on 5 December 2022 that we intended to redeem an AT1 capital instrument on 31 January 2023, the first call date (ISIN CH0400441280, with a nominal amount of USD 2.0bn, issued on 31 January 2018; this instrument ceased to be eligible as AT1 capital when the call was announced in December 2022), a call of a USD 1.1bn equivalent AT1 capital instrument denominated in euro, and interest rate risk hedge, foreign currency translation and other effects. This was partly offset by two issuances of AT1 capital instruments denominated in US dollars and Swiss francs amounting to USD 1.8bn equivalent. p

Gone concern loss-absorbing capacity and movement

Audited | Our total gone concern loss-absorbing capacity increased by USD 2.7bn to USD 47.0bn as of 31 December 2022 and included USD 44.0bn of TLAC-eligible senior unsecured debt. p

The increase was mainly due to 21 issuances of TLAC-eligible senior unsecured debt instruments denominated in US dollars, euro, yen and Australian dollars amounting to USD 15.2bn, partly offset by four calls of TLAC-eligible senior unsecured debt instruments denominated in US dollars amounting to USD 6.3bn, as well as interest rate risk hedge, foreign currency translation and other effects.

Loss-absorbing capacity and leverage ratios

Our CET1 capital ratio decreased to 14.2% from 15.0%, mainly reflecting a USD 17.4bn increase in RWA.

Our CET1 leverage ratio increased to 4.42% from 4.24%, predominantly due to a USD 40.4bn decrease in the LRD.

Our gone concern loss-absorbing capacity ratio increased to 14.7% from 14.6%, due to an increase in gone concern loss-absorbing capacity of USD 2.7bn, partly offset by the aforementioned increase in RWA.

Our gone concern leverage ratio increased to 4.6% from 4.1%, driven by the aforementioned increase in gone concern loss-absorbing capacity and the aforementioned decrease in the LRD.

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Swiss SRB total loss-absorbing capacity movement
USD m

Going concern capital	Swiss SRB
Common equity tier 1 capital as of 31.12.21		45,281
Operating profit before tax		9,604
Current tax (expense) / benefit		(1,448	)
Share repurchase programs		(5,602	)
Accruals for proposed dividends to shareholders		(1,683	)
Foreign currency translation effects, before tax		(529	)
Compensation- and own share-related capital components		(258	)
Other		93
Common equity tier 1 capital as of 31.12.22		45,457
Loss-absorbing additional tier 1 capital as of 31.12.21		15,207
Issuance of high-trigger loss-absorbing additional tier 1 capital		1,789
Call of high-trigger loss-absorbing additional tier 1 capital¹		(2,000	)
Call of low-trigger loss-absorbing additional tier 1 capital		(1,121	)
Interest rate risk hedge, foreign currency translation and other effects		(1,011	)
Loss-absorbing additional tier 1 capital as of 31.12.22		12,864
Total going concern capital as of 31.12.21		60,488
Total going concern capital as of 31.12.22		58,321

Gone concern loss-absorbing capacity
Tier 2 capital as of 31.12.21		3,144
Interest rate risk hedge, foreign currency translation and other effects		(185	)
Tier 2 capital as of 31.12.22		2,958
TLAC-eligible senior unsecured debt as of 31.12.21		41,120
Issuance of TLAC-eligible senior unsecured debt		15,237
Call of TLAC-eligible senior unsecured debt		(6,250	)
Interest rate risk hedge, foreign currency translation and other effects		(6,075	)
TLAC-eligible senior unsecured debt as of 31.12.22		44,033
Total gone concern loss-absorbing capacity as of 31.12.21		44,264
Total gone concern loss-absorbing capacity as of 31.12.22		46,991

Total loss-absorbing capacity
Total loss-absorbing capacity as of 31.12.21		104,752
Total loss-absorbing capacity as of 31.12.22		105,312

1	On 5 December 2022, we announced our intention to redeem an AT1 capital instrument on 31 January 2023, the first call date (ISIN CH0400441280). This instrument ceased to be eligible as AT1 capital when the call was announced.

Additional information

Active management of sensitivity to foreign exchange movements

Group Treasury is mandated to minimize adverse effects from changes in foreign currency rates on our CET1 capital and / or CET1 capital ratio. A significant portion of our CET1 capital and RWA is denominated in Swiss francs, euro, pounds sterling and other currencies. In order to hedge the CET1 capital ratio, CET1 capital needs to have foreign currency exposure, leading to foreign currency rates sensitivity of CET1 capital.

Consequently, it is not possible to simultaneously fully hedge CET1 capital and the CET1 capital ratio. As the proportion of RWA denominated in currencies other than the US dollar outweighs CET1 capital in such currencies, a significant appreciation of the US dollar against such currencies could benefit our capital ratios, while a significant depreciation of the US dollar against these currencies could adversely affect our capital ratios.

The Group Asset and Liability Committee, a committee of the Group Executive Board, has mandated Group Treasury to adjust the currency mix of CET1 capital, within limits set by the BoD, to balance the effect of foreign exchange movements on CET1 capital and the CET1 capital ratio. Limits are in place for the sensitivity of both CET1 capital and the CET1 capital ratio to an appreciation or depreciation of 10% in the value of the US dollar against other currencies.

Sensitivity to currency movements

Risk-weighted assets

We estimate that a 10% depreciation of the US dollar against other currencies would have increased our RWA by USD 13bn and our CET1 capital by USD 1.4bn as of 31 December 2022 (31 December 2021: USD 13bn and USD 1.4bn, respectively) and decreased our CET1 capital ratio 13 basis points (31 December 2021: 15 basis points).

Conversely, we estimate that a 10% appreciation of the US dollar against other currencies would have decreased our RWA by USD 12bn and our CET1 capital by USD 1.3bn as of 31 December 2022 (31 December 2021: USD 11bn and USD 1.3bn, respectively) and increased our CET1 capital ratio 13 basis points (31 December 2021: 14 basis points).

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Leverage ratio denominator

Our leverage ratio is also sensitive to foreign exchange movements as a result of the currency mix of our capital and LRD. When adjusting the currency mix in capital, potential effects on the going concern leverage ratio are taken into account and the sensitivity of the going concern leverage ratio to an appreciation or depreciation of 10% in the value of the US dollar against other currencies is actively monitored.

We estimate that a 10% depreciation of the US dollar against other currencies would have increased our LRD by USD 63bn as of 31 December 2022 (31 December 2021: USD 63bn) and decreased our Swiss SRB going concern leverage ratio 17 basis points (31 December 2021: 15 basis points). Conversely, we estimate that a 10% appreciation of the US dollar against other currencies would have decreased our LRD by USD 57bn (31 December 2021: USD 57bn) and increased our Swiss SRB going concern leverage ratio 17 basis points (31 December 2021: 16 basis points). The aforementioned sensitivities do not consider foreign currency translation effects related to defined benefit plans other than those related to the currency translation of the net equity of foreign operations.

Estimated effect on capital from litigation, regulatory and similar matters subject to provisions and contingent liabilities

We have estimated the loss in capital that we could incur as a result of the risks associated with the matters described in “Note 17 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report. We have employed for this purpose the advanced measurement approach (AMA) methodology that we use when determining the capital requirements associated with operational risks, based on a 99.9% confidence level over a 12-month horizon. The methodology takes into consideration UBS and industry experience for the AMA operational risk categories to which those matters correspond, as well as the external environment affecting risks of these types, in isolation from other areas. On this basis, we estimate the maximum loss in capital that we could incur over a 12-month period as a result of our risks associated with these operational risk categories at USD 4.4bn as of 31 December 2022, unchanged compared with the prior year-end. This estimate is not related to and does not take into account any provisions recognized for any of these matters and does not constitute a subjective assessment of our actual exposure in any of these matters.

•

Refer to “Non-financial risk” in the “Risk management and control” section of this report for more information

•

Refer to “Note 17 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report for more information

Capital and capital ratios of our significant regulated subsidiaries

UBS Group AG is a holding company conducting substantially all operations through UBS AG and subsidiaries thereof. UBS Group AG and UBS AG have contributed a significant portion of their respective capital to, and provided substantial liquidity to, subsidiaries. Many of these subsidiaries are subject to regulations requiring compliance with minimum capital, liquidity and similar requirements. Regulatory capital components and capital ratios of our significant regulated subsidiaries determined under the regulatory framework of each subsidiary’s home jurisdiction are provided in the “Financial and regulatory key figures for our significant regulated subsidiaries and sub-groups” section of this report. Supervisory authorities generally have discretion to impose higher requirements, or to otherwise limit the activities of subsidiaries. Supervisory authorities also may require entities to measure capital and leverage ratios on a stressed basis, and may limit the ability of the entity to engage in new activities or take capital actions based on the results of those tests.

•

Refer to the 31 December 2022 Pillar 3 Report, available under “Pillar 3 disclosures” at ubs.com/investors, for more capital and other regulatory information about our significant regulated subsidiaries and sub-groups

Joint liability of UBS AG and UBS Switzerland AG

In June 2015, upon the transfer of the Personal & Corporate Banking and Global Wealth Management businesses booked in Switzerland from UBS AG to UBS Switzerland AG, UBS AG and UBS Switzerland AG assumed joint liability for obligations transferred to UBS Switzerland AG and existing at UBS AG, respectively. Under certain circumstances, the Swiss Banking Act and FINMA’s Banking Insolvency Ordinance authorize FINMA to modify, extinguish or convert to common equity liabilities of a bank in connection with a resolution or insolvency of such bank.

The joint liability amounts have declined as obligations matured, terminated or were novated following the transfer date. As of 31 December 2022, the liability of UBS Switzerland AG amounted to CHF 4.0bn (USD 4.3bn), a decrease of CHF 1.2bn (USD 1.4bn) compared with 31 December 2021. The respective liability of UBS AG has been substantially extinguished.

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Risk-weighted assets

RWA development in 2022

During 2022, RWA increased by USD 17.4bn to USD 319.6bn, primarily driven by increases of USD 10.4bn in credit and counterparty credit risk RWA, USD 4.7bn in operational risk RWA, and USD 2.4bn in market risk RWA.

•

Refer to the 31 December 2022 Pillar 3 Report, available under “Pillar 3 disclosures” at ubs.com/investors, for more information about RWA movements and definitions of RWA movement key drivers

Movement in risk-weighted assets by key driver

USD bn

RWA as of
31.12.21

Currency
effects

Methodology
and policy
changes

Model
updates /
changes

Regulatory
add-ons

Asset size
and other¹

RWA as of
31.12.22

Credit and counterparty credit risk²

190.1

(3.6

)

0.1

6.7

0.3

6.9

200.5

Non-counterparty-related risk³

24.3

(0.2

)

0.1

24.2

Market risk

11.1

1.2

(2.4

)

2.3

1.3

13.5

Operational risk

76.7

4.6

81.4

Total

302.2

(3.8

)

1.2

9.0

2.6

8.3

319.6

1	Includes the Pillar 3 categories “Asset size,” “Credit quality of counterparties,” “Acquisitions and disposals” and “Other.” For more information, refer to the 31 December 2022 Pillar 3 report, available under “Pillar 3 disclosures” at ubs.com/investors.

2	Includes settlement risk, credit valuation adjustments, equity exposures in the banking book, investments in funds and securitization exposures in the banking book.

3	Non-counterparty-related risk includes deferred tax assets recognized for temporary differences, property, equipment, software and other items.

Credit and counterparty credit risk

Credit and counterparty credit risk RWA increased by USD 10.4bn to USD 200.5bn as of 31 December 2022. This increase was mainly driven by model updates of USD 6.7bn and asset size increases of USD 6.4bn, partly offset by currency effects of USD 3.6bn. Model updates resulted in an increase of USD 6.7bn, mainly relating to structured margin loans and similar products in Global Wealth Management, prime brokerage clients, private equity and hedge fund financing trades and structured margin loans in the Investment Bank, and mortgage loans in Personal & Corporate Banking.

Asset size increased by USD 6.4bn, mainly due to higher RWA from loans and loan commitments in Global Wealth Management and, to a lesser extent, in Personal & Corporate Banking, partly offset by lower RWA from loans and loan commitments in the Investment Bank.

Movement in credit and counterparty credit risk RWA by key driver¹


USD bn	Global Wealth Management			Personal & Corporate Banking			Asset Management			Investment Bank			Group Functions			Group
Total credit and counterparty credit risk RWA as of 31.12.21		56.9			63.0			3.2			60.5			6.4			190.1
Asset size		8.2			2.9			(0.1	)		(4.9	)		0.3			6.4
Asset quality		0.3			(1.5	)		0.0			0.0			0.4			(0.7	)
Model updates		2.1			1.3			0.0			3.3			0.0			6.7
Methodology and policy changes		0.1			0.0			0.0			0.0			0.0			0.1
Regulatory add-ons		0.0			0.0			0.0			0.3			0.0			0.3
Acquisitions and disposals		1.2			0.0			0.0			0.0			0.0			1.2
Foreign exchange movements		(0.5	)		(0.9	)		(0.1	)		(1.5	)		(0.6	)		(3.6	)
Other		0.0			0.0			0.0			0.0			0.0			0.0
Total movement		11.5			1.9			(0.2	)		(2.8	)		0.1			10.4

Total credit and counterparty credit risk RWA as of 31.12.22		68.4			64.9			3.0			57.7			6.5			200.5

1	Refer to the 31 December 2022 Pillar 3 Report, available under “Pillar 3 disclosures” at ubs.com/investors, for the definitions of credit and counterparty credit risk RWA movement categories.

•

Refer to the “Risk management and control” section of this report and the 31 December 2022 Pillar 3 Report, available under “Pillar 3 disclosures” at ubs.com/investors, for more information about credit and counterparty credit risk developments

Market risk

Market risk RWA increased by USD 2.4bn to USD 13.5bn as of 31 December 2022, driven by an increase of USD 2.3bn in regulatory add-ons, reflecting updates from the monthly risks-not-in-VaR assessment and an increase of USD 1.3bn in asset size and other movements related to higher average regulatory and stressed value-at-risk levels in the Investment Bank’s Global Markets business on the back of heightened market volatility in the first half of 2022. These increases were partly offset by decreases of USD 2.4bn from changes to the value-at-risk (VaR) model, and such decreases were partly offset by USD 1.2bn arising from the introduction of a FINMA-agreed temporary measure to offset a VaR-model-change-related RWA decrease that went live in the fourth quarter of 2022. We are in discussions with FINMA regarding material updates to the VaR model in 2023, which would replace the aforementioned temporary measure and the currently applied add-on related to time decay.

•

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Operational risk

Operational risk RWA increased by USD 4.7bn to USD 81.4bn as of 31 December 2022. Following a review with FINMA regarding the French cross-border matter, we reflected additional operational risk RWA of USD 4.1bn in the first half of 2022. In the fourth quarter of 2022, we reflected an increase of USD 0.5bn driven by the annual recalibration of the advanced measurement approach (AMA) model used for the calculation of operational risk capital.

•

Refer to “Advanced measurement approach model” in the “Risk management and control” section of this report for more information about the AMA model

Outlook

We expect that regulatory-driven updates to models will result in an RWA increase of around USD 4bn in 2023. The extent and timing of RWA changes may vary as model updates are completed and receive regulatory approval, along with changes in the composition of the relevant portfolios. In addition, business growth and changes in market factors are expected to increase RWA at the beginning of 2023, following a period of lower levels of client activity and market volatility toward the end of the fourth quarter of 2022.

•

Refer to the “Regulatory and legal developments” section of this report for more information

Risk-weighted assets by business division and Group Functions


USD bn	Global Wealth Management			Personal & Corporate Banking			Asset Manage- ment			Investment Bank			Group Functions			Total RWA
	31.12.22
Credit and counterparty credit risk¹		68.4			64.9			3.0			57.7			6.5			200.5
Non-counterparty-related risk²		5.9			1.9			0.6			3.7			12.1			24.2
Market risk		1.6			0.0						10.1			1.8			13.5
Operational risk		37.6			9.1			3.2			21.3			10.1			81.4

Total		113.5			75.9			6.7			92.8			30.6			319.6


	31.12.21
Credit and counterparty credit risk¹		56.9			63.0			3.2			60.5			6.4			190.1
Non-counterparty-related risk²		6.2			2.0			0.6			3.5			12.0			24.3
Market risk		1.6			0.0						8.1			1.5			11.1
Operational risk		35.2			8.1			3.0			20.2			10.3			76.7

Total		99.8			73.2			6.9			92.2			30.1			302.2


	31.12.22 vs 31.12.21
Credit and counterparty credit risk¹		11.5			1.9			(0.2	)		(2.8	)		0.1			10.4
Non-counterparty-related risk²		(0.3	)		(0.1	)		0.0			0.2			0.2			0.0
Market risk		0.0			0.0						2.1			0.3			2.4
Operational risk		2.5			1.1			0.1			1.1			(0.2	)		4.6

Total		13.6			2.8			(0.1	)		0.6			0.4			17.4

1	Includes settlement risk, credit valuation adjustments, equity exposures in the banking book, investments in funds and securitization exposures in the banking book.

2	Non-counterparty-related risk includes deferred tax assets recognized for temporary differences (31 December 2022: USD 11.4bn; 31 December 2021: USD 11.4bn), as well as property, equipment, software and other items (31 December 2022: USD 12.9bn; 31 December 2021: USD 12.9bn).

Leverage ratio denominator

The LRD decreased by USD 40.4bn to USD 1,028.5bn as of 31 December 2022, driven by currency effects of USD 24.5bn and a USD 15.9bn decrease due to asset size and other movements.

Movement in leverage ratio denominator by key driver


USD bn	LRD as of 31.12.21			Currency effects			Asset size and other			LRD as of 31.12.22
On-balance sheet exposures (excluding derivatives and securities financing transactions)¹		847.4			(17.3	)		(14.1	)		816.0
Derivatives		90.9			(3.5	)		2.9			90.3
Securities financing transactions		109.2			(3.1	)		(7.4	)		98.6
Off-balance sheet items		32.8			(0.5	)		2.2			34.4
Deduction items		(11.5	)		0.1			0.6			(10.8	)

Total		1,068.9			(24.5	)		(15.9	)		1,028.5

The exposures exclude derivative financial instruments, cash collateral receivables on derivative instruments, receivables from securities financing transactions, and margin loans, as well as prime brokerage receivables and financial assets at fair value not held for trading, both related to securities financing transactions. These exposures are presented separately under Derivatives and Securities financing transactions in this table.

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The LRD movements described below exclude currency effects.

On-balance sheet exposures (excluding derivatives and securities financing transactions) decreased by USD 14.1bn, mainly driven by lower trading portfolio assets in the Investment Bank, lower central bank balances, and a decrease in lending assets, mainly in Global Wealth Management, partly offset by purchases of high-quality liquid asset securities.

Derivatives increased by USD 2.9bn, primarily reflecting market-driven movements, partly offset by lower client volumes, in the Investment Bank.

Securities financing transactions decreased by USD 7.4bn, mainly due to lower client activity levels and lower brokerage receivables in the Investment Bank, as well as trade roll-offs in Group Treasury.

Off-balance sheet items increased by USD 2.2bn, mainly driven by higher unutilized credit lines in Global Wealth Management, and an increase in forward starting reverse repurchase agreements in Group Treasury.

•

Refer to “Balance sheet and off-balance sheet” in this section for more information about balance sheet movements

Leverage ratio denominator by business division and Group Functions


USD bn	Global Wealth Management			Personal & Corporate Banking			Asset Management			Investment Bank			Group Functions			Total
	31.12.22
Total IFRS assets		388.5			235.2			17.3			391.3			71.9			1,104.4
Difference in scope of consolidation¹		0.0			0.0			(13.2	)		(0.1	)		0.0			(13.3	)
Less: derivatives and securities financing transactions²		(23.7	)		(11.9	)		(0.1	)		(201.7	)		(37.7	)		(275.0	)
On-balance sheet exposures		364.8			223.4			4.0			189.5			34.2			816.0
Derivatives		5.4			1.5			0.0			80.0			3.3			90.3
Securities financing transactions		20.5			10.8			0.1			40.4			26.8			98.6
Off-balance sheet items		8.8			16.6						6.9			2.1			34.4
Items deducted from Swiss SRB tier 1 capital		(5.2	)		(0.2	)		(1.2	)		(0.4	)		(3.9	)		(10.8	)

Total		394.4			252.1			2.9			316.6			62.6			1,028.5


	31.12.21
Total IFRS assets		395.2			225.4			25.6			346.4			124.5			1,117.2
Difference in scope of consolidation¹		0.0			0.0			(21.5	)		(0.1	)		0.0			(21.6	)
Less: derivatives and securities financing transactions²		(25.9	)		(11.8	)		(0.1	)		(159.2	)		(51.2	)		(248.2	)
On-balance sheet exposures		369.3			213.6			4.1			187.1			73.3			847.4
Derivatives		5.8			1.4			0.0			79.0			4.7			90.9
Securities financing transactions		22.6			10.9			0.0			45.7			29.9			109.2
Off-balance sheet items		7.2			17.5			0.0			7.6			0.5			32.8
Items deducted from Swiss SRB tier 1 capital		(5.3	)		(0.2	)		(1.2	)		(0.3	)		(4.4	)		(11.5	)

Total		399.6			243.2			2.9			319.2			104.0			1,068.9


	31.12.22 vs 31.12.21
Total IFRS assets		(6.7	)		9.9			(8.3	)		44.9			(52.6	)		(12.8	)
Difference in scope of consolidation¹		0.0			0.0			8.3			0.0			0.0			8.3
Less: derivatives and securities financing transactions²		2.2			(0.1	)		0.0			(42.5	)		13.5			(26.9	)
On-balance sheet exposures		(4.5	)		9.8			(0.1	)		2.4			(39.1	)		(31.4	)
Derivatives		(0.4	)		0.1			0.0			1.0			(1.3	)		(0.7	)
Securities financing transactions		(2.1	)		(0.1	)		0.0			(5.3	)		(3.1	)		(10.6	)
Off-balance sheet items		1.6			(0.9	)		0.0			(0.7	)		1.5			1.6
Items deducted from Swiss SRB tier 1 capital		0.1			0.0			0.0			(0.1	)		0.6			0.6

Total		(5.2	)		8.8			0.0			(2.6	)		(41.4	)		(40.4	)

1	Represents the difference between the IFRS and the regulatory scope of consolidation, which is the applicable scope for the LRD calculation.

The exposures consist of derivative financial instruments, cash collateral receivables on derivative instruments, receivables from securities financing transactions, and margin loans, as well as prime brokerage receivables and financial assets at fair value not held for trading, both related to securities financing transactions, all of which are in accordance with the regulatory scope of consolidation. These exposures are presented separately under Derivatives and Securities financing transactions in this table.

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UBS AG consolidated total loss-absorbing capacity and leverage ratio information

Going and gone concern requirements and information

UBS is considered an SRB under Swiss banking law and, on a consolidated basis, both UBS Group AG and UBS AG are required to comply with regulations based on the Basel III framework as applicable for Swiss SRBs.

The Swiss SRB framework and requirements applicable to UBS AG consolidated are consistent with those applicable to UBS Group AG consolidated and are described in the “Capital, liquidity and funding, and balance sheet” section of this report.

•

Refer to “Regulatory framework” in this section for more information about total loss-absorbing capacity, leverage ratio requirements and gone concern rebate

UBS AG is subject to going and gone concern requirements on a standalone basis. Capital and other regulatory information for UBS AG standalone is provided under “Holding company and significant regulated subsidiaries and subgroups” at ubs.com/investors and in the 31 December 2022 Pillar 3 Report available under “Pillar 3 disclosures” at ubs.com/investors.

The table below provides the RWA- and LRD-based requirements and information as of 31 December 2022 for UBS AG consolidated.

Swiss SRB going and gone concern requirements and information

As of 31.12.22

RWA

LRD

USD m, except where indicated

in %

Required going concern capital

Total going concern capital

14.64

46,545

5.00

51,478

Common equity tier 1 capital

10.34

32,878

3.50

36,035

of which: minimum capital

4.50

14,302

1.50

15,443

of which: buffer capital

5.50

17,480

2.00

20,591

of which: countercyclical buffer

0.34

1,096

Maximum additional tier 1 capital

4.30

13,666

1.50

15,443

of which: additional tier 1 capital

3.50

11,124

1.50

15,443

of which: additional tier 1 buffer capital

0.80

2,543

Eligible going concern capital

Total going concern capital

17.23

54,770

5.32

54,770

Common equity tier 1 capital

13.51

42,929

4.17

42,929

Total loss-absorbing additional tier 1 capital

3.73

11,841

1.15

11,841

of which: high-trigger loss-absorbing additional tier 1 capital

3.35

10,654

1.03

10,654

of which: low-trigger loss-absorbing additional tier 1 capital³

0.37

1,187

0.12

1,187

Required gone concern capital

Total gone concern loss-absorbing capacity⁴

10.36

32,922

3.75

38,609

of which: base requirement⁵

12.86

40,872

4.50

46,330

of which: additional requirement for market share and LRD

1.44

4,577

0.50

5,148

of which: applicable reduction on requirements

(3.94

)

(12,527

)

(1.25

)

(12,870

)

of which: rebate granted⁶

(3.56

)

(11,322

)

(1.25

)

(12,870

)

of which: reduction for usage of low-trigger tier 2 capital instruments

(0.38

)

(1,204

)

0.00

Eligible gone concern capital

Total gone concern loss-absorbing capacity

14.79

46,991

4.56

46,991

Total tier 2 capital

0.93

2,958

0.29

2,958

of which: low-trigger loss-absorbing tier 2 capital

0.76

2,422

0.24

2,422

of which: non-Basel III-compliant tier 2 capital

0.17

536

0.05

536

TLAC-eligible senior unsecured debt

13.85

44,033

4.28

44,033

Total loss-absorbing capacity

Required total loss-absorbing capacity

25.00

79,467

8.75

90,087

Eligible total loss-absorbing capacity

32.02

101,761

9.88

101,761

Risk-weighted assets / leverage ratio denominator

Risk-weighted assets

317,823

Leverage ratio denominator

1,029,561

1	Includes applicable add-ons of 1.44% for RWA and 0.50% for leverage ratio denominator LRD.

2	Our minimum CET1 leverage ratio requirement of 3.5% consists of a 1.5% base requirement, a 1.5% base buffer capital requirement, a 0.25% LRD add-on requirement and a 0.25% market share add-on requirement based on our Swiss credit business.

3	Existing outstanding low-trigger AT1 capital instruments qualify as going concern capital at the UBS AG consolidated level, as agreed with FINMA, until their first call date. As of their first call date, these instruments are eligible to meet the gone concern requirements.

Based on the actions we completed up to December 2021 to improve resolvability, FINMA granted an increase in the rebate on the gone concern requirement from 55.0% to 65.0% of the maximum rebate, effective from 1 July 2022, with an effective maximum rebate of 1.25 percentage points for the LRD-based requirements and – given the risk density of 35% underlying the regulatory requirements – an effective maximum rebate of 3.56 percentage points for the RWA-based requirements.

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Swiss SRB going and gone concern information

USD m, except where indicated	31.12.22		31.12.21
Eligible going concern capital
Total going concern capital		54,770		55,434
Total tier 1 capital		54,770		55,434
Common equity tier 1 capital		42,929		41,594
Total loss-absorbing additional tier 1 capital		11,841		13,840
of which: high-trigger loss-absorbing additional tier 1 capital		*10,654*		11,414
of which: low-trigger loss-absorbing additional tier 1 capital		*1,187*		2,426

Eligible gone concern capital
Total gone concern loss-absorbing capacity		46,991		44,264
Total tier 2 capital		2,958		3,144
of which: low-trigger loss-absorbing tier 2 capital		*2,422*		2,596
of which: non-Basel III-compliant tier 2 capital		*536*		547
TLAC-eligible senior unsecured debt		44,033		41,120

Total loss-absorbing capacity
Total loss-absorbing capacity		101,761		99,698

Risk-weighted assets / leverage ratio denominator
Risk-weighted assets		317,823		299,005
Leverage ratio denominator		1,029,561		1,067,679

Capital and loss-absorbing capacity ratios (%)
Going concern capital ratio		17.2		18.5
of which: common equity tier 1 capital ratio		*13.5*		13.9
Gone concern loss-absorbing capacity ratio		14.8		14.8
Total loss-absorbing capacity ratio		32.0		33.3

Leverage ratios (%)
Going concern leverage ratio		5.3		5.2
of which: common equity tier 1 leverage ratio		*4.17*		3.90
Gone concern leverage ratio		4.6		4.1
Total loss-absorbing capacity leverage ratio		9.9		9.3

UBS Group AG consolidated vs UBS AG consolidated loss-absorbing capacity and leverage ratio information

The going concern capital of UBS AG consolidated was USD 3.6bn lower than the going concern capital of UBS Group AG consolidated as of 31 December 2022, reflecting lower CET1 capital of USD 2.5bn and lower going concern loss-absorbing additional tier 1 (AT1) capital of USD 1.0bn.

The aforementioned difference in CET1 capital was primarily due to higher UBS AG consolidated accruals for dividends and USD 0.3bn lower UBS AG consolidated International Financial Reporting Standards equity, as well as a higher capital deduction at the UBS AG consolidated level related to deferred tax assets on temporary differences. The aforementioned factors were partly offset by compensation-related regulatory capital accruals at the UBS Group AG consolidated level.

The going concern loss-absorbing AT1 capital of UBS AG consolidated was USD 1.0bn lower than that of UBS Group AG consolidated as of 31 December 2022, mainly reflecting deferred contingent capital plan awards granted at Group level to eligible employees for the performance years 2017 to 2021, partly offset by four loss-absorbing AT1 capital instruments on lent by UBS Group AG to UBS AG.

Differences in capital between UBS Group AG consolidated and UBS AG consolidated related to employee compensation plans will reverse to the extent underlying services are performed by employees of, and are consequently charged to, UBS AG and its subsidiaries. Such reversal generally occurs over the service period of the employee compensation plans.

The leverage ratio framework for UBS AG consolidated is consistent with that of UBS Group AG consolidated. As of 31 December 2022, the going concern leverage ratio of UBS AG consolidated 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 3.6bn lower.

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Audited |

Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital (UBS Group AG vs UBS AG
consolidated)

As of 31.12.22

USD m

UBS Group AG
(consolidated)

UBS AG
(consolidated)

Difference

Total IFRS equity

57,218

56,940

278

Equity attributable to non-controlling interests

(342

)

(342

)

Defined benefit plans, net of tax

(311

)

(311

)

Deferred tax assets recognized for tax loss carry-forwards

(4,077

)

(4,077

)

Deferred tax assets on temporary differences, excess over threshold

(64

)

(262

)

198

Goodwill, net of tax

(5,754

)

(5,754

)

Intangible assets, net of tax

(150

)

(150

)

Compensation-related components (not recognized in net profit)

(2,287

)

(2,287

)

Expected losses on advanced internal ratings-based portfolio less provisions

(471

)

(471

)

Unrealized (gains) / losses from cash flow hedges, net of tax

4,234

Own credit related to (gains) / losses on financial liabilities measured at fair value that existed at the balance sheet date, net of tax

(523

)

(523

)

Own credit related to (gains) / losses on derivative financial instruments that existed at the balance sheet date

(105

)

(105

)

Unrealized gains related to financial assets at fair value through OCI, net of tax

Prudential valuation adjustments

(201

)

(201

)

Accruals for dividends to shareholders

(1,683

)

(6,000

)

4,317

Other

(29

)

(51

)

Total common equity tier 1 capital

45,457

42,929

2,528

Swiss SRB going and gone concern information (UBS Group AG vs UBS AG consolidated)

As of 31.12.22

USD m, except where indicated

UBS Group AG
(consolidated)

UBS AG
(consolidated)

Difference

Eligible going concern capital

Total going concern capital

58,321

54,770

3,551

Total tier 1 capital

58,321

54,770

3,551

Common equity tier 1 capital

45,457

42,929

2,528

Total loss-absorbing additional tier 1 capital

12,864

11,841

1,023

of which: high-trigger loss-absorbing additional tier 1 capital

11,675

10,654

1,021

of which: low-trigger loss-absorbing additional tier 1 capital

1,189

1,187

Eligible gone concern capital

Total gone concern loss-absorbing capacity

46,991

Total tier 2 capital

2,958

of which: low-trigger loss-absorbing tier 2 capital

2,422

of which: non-Basel III-compliant tier 2 capital

536

TLAC-eligible senior unsecured debt

44,033

Total loss-absorbing capacity

105,312

101,761

3,551

Risk-weighted assets / leverage ratio denominator

Risk-weighted assets

319,585

317,823

1,762

Leverage ratio denominator

1,028,461

1,029,561

(1,100

)

Capital and loss-absorbing capacity ratios (%)

Going concern capital ratio

18.2

17.2

1.0

of which: common equity tier 1 capital ratio

14.2

13.5

0.7

Gone concern loss-absorbing capacity ratio

14.7

14.8

(0.1

)

Total loss-absorbing capacity ratio

33.0

32.0

0.9

Leverage ratios (%)

Going concern leverage ratio

5.7

5.3

0.4

of which: common equity tier 1 leverage ratio

4.42

4.17

0.25

Gone concern leverage ratio

4.6

0.0

Total loss-absorbing capacity leverage ratio

10.2

9.9

0.4

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Equity attribution and return on attributed equity

Under our equity attribution framework, tangible equity is attributed based on a weighting of 50% each for average risk-weighted assets (RWA) and average leverage ratio denominator (LRD), which both include resource allocations from Group Functions to the business divisions (the BDs). Average RWA and LRD are converted to common equity tier 1 (CET1) capital equivalents using capital ratios of 12.5% and 3.75%, respectively. If the attributed tangible equity calculated under the weighted-driver approach is less than the CET1 capital equivalent of risk-based capital (RBC) for any BD, the CET1 capital equivalent of RBC is used as a floor for that BD.

In addition to tangible equity, we allocate equity to the BDs to support goodwill and intangible assets.

Furthermore, we allocate to the BDs attributed equity related to certain CET1 deduction items, such as compensation-related components and expected losses on the advanced internal ratings-based portfolio less provisions.

We attribute all remaining Basel III capital deduction items to Group Functions. These items include deferred tax assets (DTAs) recognized for tax loss carry-forwards, DTAs on temporary differences in excess of the threshold, accruals for shareholder returns, and unrealized gains / losses from cash flow hedges.

•

Refer to “Balance sheet and off-balance sheet” in this section for more information about movements in equity attributable to shareholders

Average attributed equity

For the year ended

USD bn

31.12.22

31.12.21

31.12.20

Global Wealth Management

20.0

18.8

17.1

Personal & Corporate Banking

9.3

9.2

8.9

Asset Management

1.7

2.0

Investment Bank

13.0

13.0

12.6

Group Functions

13.5

16.3

17.4

of which: deferred tax assets¹

5.2

5.9

6.7

of which: related to retained RWA and LRD²

3.0

3.2

3.4

of which: accruals for shareholder returns and others³

5.4

7.2

Average equity attributed to business divisions and Group Functions

57.6

59.3

57.8

Includes average attributed equity related to the Basel III capital deduction items for deferred tax assets (deferred tax assets recognized for tax loss carry-forwards and deferred tax assets on temporary differences, excess over threshold), as well as retained risk-weighted assets (RWA) and leverage ratio denominator (LRD) related to deferred tax assets.

2	Excludes average attributed equity related to retained RWA and LRD related to deferred tax assets.

3	Includes attributed equity related to dividend accruals, unrealized gains / losses from cash flow hedges, and a balancing item for capital held in excess of the 12.5%-capital and 3.75%-leverage-ratio calibration thresholds for equity attribution.


Return on attributed equity^{1, 2}

	For the year ended
in %	31.12.22		31.12.21		31.12.20
Global Wealth Management		24.9		25.4		23.6
Personal & Corporate Banking		19.5		18.9		14.2
Asset Management		81.2		51.8		74.2
Investment Bank		14.6		20.3		19.7

1	Return on attributed equity for Group Functions is not shown, as it is not meaningful.

2	Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Capital management

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Liquidity and funding management

We manage the structural risks of our balance sheet, including interest rate risk, structural foreign exchange risk and collateral risk, as well as liquidity and funding risk. This section provides information about liquidity and funding regulatory requirements, governance, management (including sources of liquidity and funding), contingency planning, and stress testing. The balances disclosed in this section represent year-end positions, unless indicated otherwise. Intra-period balances fluctuate in the ordinary course of business and may differ from year-end positions.

Strategy, objectives and governance

Audited | Our management of liquidity and funding has the overall objective of protecting our business franchises and prudently managing our internal and regulatory liquidity and funding requirements. We measure liquidity and funding risk using internal and regulatory models and metrics. We define and implement internal stress testing across different time horizons, scenarios and currencies to ensure we have sufficient liquidity and funding, while remaining compliant with regulatory requirements, primarily expressed through the liquidity coverage ratio (the LCR) and the net stable funding ratio (the NSFR). Our liquidity and funding strategy is proposed by Group Treasury and approved by the Group Asset and Liability Committee (the Group ALCO), which is a committee of the Group Executive Board (the GEB) that is overseen by the Risk Committee of the Board of Directors (the BoD).

Liquidity and funding limits and other indicators (including early-warning indicators) are set at Group and, where appropriate, at legal entity and business division levels, and are reviewed and reconfirmed at least once a year by the BoD, the GEB, the Group ALCO, the Group Chief Financial Officer, the Group Chief Risk Officer and the Group Treasurer, taking into consideration the Group’s business strategy and risk appetite. Treasury Risk Control provides independent oversight over liquidity and funding risk. p

•

Refer to the “Corporate governance” and “Risk management and control” sections of this report for more information

Group Treasury monitors and oversees the implementation and execution of our liquidity and funding strategy and manages liquidity and funding risk within the limits and other relevant indicators, thereby adhering to the internal risk appetite and regulatory requirements. This includes close control of both our cash and collateral, including our high-quality liquid assets (HQLA), and centralizes the Group’s access to wholesale cash markets in Group Treasury. To complement our business-as-usual management, Group Treasury maintains a Contingency Funding Plan and contributes to plans for recovery and resolution to define procedures throughout the crisis continuum. Group Treasury reports on the Group’s liquidity and funding status and position, including concentration risk, at least monthly, to the Group ALCO and the Risk Committee of the BoD.

In July 2022, the revision of the Swiss Liquidity Ordinance became effective. Further supervisory guidance from FINMA is expected to be communicated in the autumn of 2023.

Liquidity and funding stress testing

Audited | Our liquidity and funding risk management aims to ensure that the firm has sufficient liquidity and funding to survive a severe idiosyncratic and market-wide liquidity and funding stress event without government support, allowing for discrete management actions.

Group Treasury maintains a diversified, high-quality pool of unencumbered liquid assets under Treasury control. The liquid asset portfolio is managed dynamically, so as to operate at all times within the internal risk appetite and other relevant Group and subsidiary liquidity and funding requirements. p

Our liquidity and funding stress testing covers two main stress scenarios: a combined (market and idiosyncratic) scenario and a structural market-wide scenario. We continuously refine stress-testing assumptions.

•

Refer to “Risk measurement” in the “Risk management and control” section of this report for more information about stress testing

Combined (market and idiosyncratic) scenario

In this scenario, UBS faces the consequences of both a severely deteriorated macroeconomic and financial market environment and a UBS-specific event, resulting in an acute loss of liquidity over a relatively short period of time. This scenario represents severe yet plausible events encompassing both market-wide and idiosyncratic elements, in which, however, franchise client relationships are materially maintained.

The objective of this stress test is to ensure that UBS keeps a cumulative liquidity surplus on each day in the three-month stress horizon. The liquidity gap is assessed by modeling the stressed liquidity value of the liquidity buffer and stressed liquidity inflows and outflows under the scenario.

Structural market-wide scenario

In this scenario, UBS is subject to a significant deterioration of macroeconomic and financial market conditions globally, resulting in a requirement for long-term funding to survive the liquidity drain and support the franchise of the business. Macroeconomic shocks result in deteriorated financial market conditions over the scenario horizon of one year. UBS is assumed to be affected equally relative to other global financial institutions.

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management

150

The objective of this stress test is to ensure that UBS maintains a positive cumulative behavioral liquidity gap across the 3-month, 6-month, 9-month and 12-month tenors. The liquidity gap is assessed by modeling the stressed liquidity value of the liquidity buffer, and stressed liquidity inflows and outflows under the scenario. In addition, the liquidity stress-testing metric above 12 months aims to ensure that UBS has sufficient long-term (contractual and behavioral) funding supply to support its long-term funding consumption.

Funding management

Audited | Group Treasury monitors our funding position, including concentration risk, aiming to ensure that we maintain a well-balanced and diversified liability structure. Our funding management team looks to create the optimal liability structure to finance our businesses in a reliable and cost-efficient manner. Our funding activities are planned by analyzing the overall liquidity and funding requirements, taking into account the amount of stable funding that would be needed to support ongoing business activities through periods of difficult market conditions. p

The funding strategy of UBS Group AG is set annually in the Funding Plan and is reviewed on an ongoing basis. The Funding Plan is developed by Group Treasury and approved by the Group ALCO.

•

Refer to “Balance sheet and off-balance sheet” in this section for more information about the development of our short- and long-term debt during 2022

Global Wealth Management and Personal & Corporate Banking provide significant, cost-efficient and stable sources of funding. These include deposits and debt issued through the Swiss central mortgage institutions, which use a portion of our portfolio of Swiss residential mortgages as collateral to generate long-term funding. In addition, we have several short-, medium- and long-term funding programs under which we issue senior unsecured debt and structured notes, as well as short-term debt. These programs enable UBS to source funding from institutional and private investors who are active in Europe, the US and Asia Pacific. Collectively, these broad product offerings and funding sources, together with the global scope of our business activities, support our funding stability.

Internal funding and funds transfer pricing

We use our global liquidity and funding framework to govern the liquidity management of all our branches and subsidiaries. Group Treasury meets internal demands for funding by channeling funds from entities generating surplus cash to those in need of financing, except in circumstances where transfer restrictions exist.

Funding costs and benefits are allocated to our business divisions according to our liquidity and funding risk management framework. Our internal funds transfer pricing system is designed to ensure we have the right mix of assets and liabilities in currencies and tenors.

Credit ratings

Credit ratings can affect the cost and availability of funding, especially from wholesale unsecured sources. Our credit ratings can also influence the performance of some of our businesses and the levels of client and counterparty confidence. Rating agencies take into account a range of factors when assessing creditworthiness and setting credit ratings. These include the company’s strategy, its business position and franchise value, stability and quality of earnings, capital adequacy, risk profile and management, liquidity management, diversification of funding sources, asset quality, and corporate governance. Credit ratings reflect the opinions of the rating agencies and can change at any time.

In evaluating our liquidity and funding requirements, we consider the potential effect of a reduction in our long-term credit ratings and a corresponding reduction in short-term ratings. If our credit ratings were to be downgraded, rating trigger clauses could result in an immediate cash settlement or the need to deliver additional collateral to counterparties from contractual obligations related to over-the-counter (OTC) derivative positions and other obligations. Based on our credit ratings as of 31 December 2022, in the event of a one-notch reduction in our long-term credit ratings, we would have been required to provide USD 0.1bn in cash or other collateral. In the event of a two-notch reduction, it would have been USD 0.3bn and for a three-notch downgrade USD 1.0bn. In the two- and three-notch scenarios the collateral requirements predominantly relate to OTC derivative positions.

There were no rating actions with regard to UBS Group AG’s or UBS AG’s solicited credit ratings in 2022.

•

Refer to “Liquidity and funding management are critical to UBS’s ongoing performance” in the “Risk factors” section of this report for more information

Contingency Funding Plan

Audited | We maintain our Contingency Funding Plan as a preparation and action plan, aiming to ensure we hold sufficient liquidity to meet our payment obligations and raise funding during periods of liquidity stress. The plan specifies the processes, tools and responsibilities that we have available to effectively manage liquidity and funding through these periods. Our funding diversification and global scope help to protect our liquidity position in the event of a crisis. Our contingent funding sources include our HQLA portfolios, available and unutilized liquidity facilities at several major central banks, contingent reductions of trading portfolio assets, and other actions available to the management. p

Annual Report 2022 | Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management

151

Liquidity coverage ratio

The LCR measures the short-term resilience of a bank’s liquidity profile by assessing whether sufficient HQLA are available to meet expected net cash outflows from a significant liquidity stress scenario, as defined by the relevant regulator.

For UBS, HQLA are low-risk unencumbered assets under the control of Group Treasury that are easily and immediately convertible into cash at little or no loss of value, in order to meet liquidity needs. Our HQLA predominantly consist of assets that qualify as Level 1 in the LCR framework, including cash, central bank reserves and government bonds. Group HQLA are held by UBS AG and its subsidiaries and may include amounts that are available to meet funding and collateral needs in certain jurisdictions but are not readily available for use by the Group as a whole. These limitations are typically the result of local regulatory requirements, including local LCR and large exposure requirements. Funds that are effectively restricted are excluded from the calculation of Group HQLA to the extent they exceed the outflow assumptions for the subsidiary that holds the relevant HQLA. On this basis, USD 34bn of assets were excluded from our daily average Group HQLA for the fourth quarter of 2022. Amounts held in excess of local liquidity requirements that are not subject to other restrictions are generally available for transfer within the Group.

Basel Committee on Banking Supervision (BCBS) standards require an LCR of at least 100%. In a period of financial stress, the Swiss Financial Market Supervisory Authority (FINMA) may allow banks to use their HQLA and let their LCR temporarily fall below the minimum threshold. We monitor the LCR in all significant currencies in order to manage any currency mismatches between HQLA and the net expected cash outflows in times of stress.

Our daily average LCR for the fourth quarter of 2022 was 163.7%, compared with 155.5% in the fourth quarter of 2021, remaining above the prudential requirement communicated by FINMA.

Average HQLA increased by USD 10.7bn to USD 238.6bn, mainly driven by lower funding consumption from the business divisions, partly offset by a reduction of short-term debt. Average net cash outflows decreased slightly, by USD 0.8bn, to USD 146.0bn. Lower average outflows from customer deposits were almost entirely offset by lower average inflows from loans and securities financing transactions, as well as higher average net cash outflows from derivatives.

•

Refer to the 31 December 2022 Pillar 3 Report, available under “Pillar 3 disclosures” at ubs.com/investors, for more information about the LCR

•

Refer to the “Significant regulated subsidiary and sub-group information” section of this report for more information about the LCR of UBS AG and UBS Switzerland AG


Liquidity coverage ratio

USD bn, except where indicated	Average 4Q22¹		Average 4Q21¹
High-quality liquid assets (HQLA)		238.6		227.9
Total net cash outflows²		146.0		146.8

Liquidity coverage ratio (%)³		163.7		155.5

1	Calculated based on an average of 63 data points in the fourth quarter of 2022 and 66 data points in the fourth quarter of 2021.

2	Represents the net cash outflows expected over a stress period of 30 calendar days.

3	Calculated after the application of haircuts and inflow and outflow rates, as well as, where applicable, caps on Level 2 assets and cash inflows.

Net stable funding ratio

The NSFR framework is intended to limit overreliance on short-term wholesale funding, to encourage a better assessment of funding risk across all on- and off-balance sheet items and to promote funding stability. The NSFR has two components: available stable funding (ASF), as numerator, and required stable funding (RSF), as denominator. ASF is the portion of capital and liabilities expected to be available over the period of one year. RSF is a measure of the stable funding requirement of assets based on their maturity, encumbrance and other characteristics, as well as the potential for contingent calls on funding liquidity from off-balance sheet exposures. The BCBS NSFR regulatory framework requires a ratio of at least 100%.

As of 31 December 2022, the NSFR increased 1.3 percentage points to 119.8%, remaining above the prudential requirement communicated by FINMA. RSF decreased by USD 19.6bn to USD 468.5bn, mainly due to lower trading assets and receivables from securities financing transactions, partly offset by higher derivative balances. ASF decreased by USD 17.0bn to USD 561.4bn, mainly driven by lower debt securities issued and customer deposits.

•

Refer to the 31 December 2022 Pillar 3 Report, available under “Pillar 3 disclosures” at ubs.com/investors, for more information about the NSFR

•

Refer to the “Significant regulated subsidiary and sub-group information” section of this report for more information about the NSFR of UBS AG and UBS Switzerland AG


Net stable funding ratio

USD bn, except where indicated	31.12.22		31.12.21
Available stable funding (ASF)		561.4		578.4
Required stable funding (RSF)		468.5		488.1

Net stable funding ratio (%)		119.8		118.5

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Balance sheet and off-balance sheet

Balance sheet

The balances disclosed in this section represent year-end positions, unless indicated otherwise. Intra-period balances fluctuate in the ordinary course of business and may differ from year-end positions. Refer to the “Consolidated financial statements” section of this report for more information about the development of our financial position.

Balance sheet assets

As of 31 December 2022, balance sheet assets totaled USD 1,104.4bn, a decrease of USD 12.8bn compared with 31 December 2021, which included a decrease of approximately USD 22.7bn from currency effects.

Cash and balances at central banks decreased by USD 23.4bn, including currency effects of approximately USD 5.9bn. The net cash outflow was mainly due to shifts within the high-quality liquid asset (HQLA) portfolio from cash into securities, a reduction in short-term debt, decreases in customer deposits and outflows related to the share repurchase programs. These outflows were partly offset by inflows from roll-offs of securities financing transactions, decreases in trading assets, as well as lower lending.

Trading portfolio assets decreased by USD 22.9bn, mainly in our Financing and Derivatives & Solutions businesses in the Investment Bank, reflecting lower inventory held to hedge client positions and market-driven movements. Lending assets decreased by USD 11.2bn, mainly driven by currency effects of USD 6.4bn. The movement not related to currency effects was mainly in Global Wealth Management, reflecting decreases in Lombard loans in Asia Pacific, partly offset by higher mortgage loans in the Americas. Non-financial assets and financial assets for unit-linked investment contracts decreased by USD 8.7bn, predominantly in Asset Management, mainly due to market-driven decreases on investments related to unit-linked contracts, and in Global Wealth Management, due to the completion of the sale of our domestic wealth management business in Spain and the sale of UBS Swiss Financial Advisers AG in 2022. Securities financing transactions at amortized cost decreased by USD 7.2bn, mostly due to lower client activity levels in the Investment Bank as interest rates rose, as well as trade roll-offs in Group Treasury. Brokerage receivables decreased by USD 4.2bn in our Financing business, as increases in client lending were more than offset by netting effects against Brokerage payables.

These decreases were partly offset by a USD 36.4bn increase in Derivatives and cash collateral receivables on derivative instruments. The increases were mainly in our Derivatives & Solutions and Financing businesses, predominantly reflecting increases in foreign exchange contracts, where the contracts in place at the end of 2022 had higher fair values compared with the contracts in place at the end of 2021, as well as increases in interest rate contracts, mainly due to higher trading volumes and market-driven movements as interest rates increased during the year. These increases were partly offset by market-driven decreases in Non-core and Legacy Portfolio on long-dated interest rate contracts due to the aforementioned increases in interest rates.

Other financial assets measured at amortized cost and fair value increased by USD 28.4bn, largely reflecting shifts within the HQLA portfolio from cash into securities within Group Treasury due to the widening of spreads. Included within Other financial assets measured at amortized cost and fair value is a portfolio of financial assets reclassified effective from 1 April 2022 from Financial assets measured at fair value through other comprehensive income to Other financial assets measured at amortized cost, in line with the principles in IFRS 9, Financial Instruments.

•

Refer to “Note 1 Summary of material accounting policies” in the “Consolidated financial statements” section of this report for more information about the reclassification of a portfolio of financial assets


Assets

	As of				% change from
USD bn	31.12.22		31.12.21		31.12.21
Cash and balances at central banks		169.4		192.8		(12	)
Lending¹		402.0		413.2		(3	)
Securities financing transactions at amortized cost		67.8		75.0		(10	)
Trading portfolio²		107.9		130.8		(18	)
Derivatives and cash collateral receivables on derivative instruments		185.1		148.7		25
Brokerage receivables		17.6		21.8		(20	)
Other financial assets measured at amortized cost and fair value³		102.2		73.8		38
Non-financial assets and financial assets for unit-linked investment contracts		52.3		61.0		(14	)

Total assets		1,104.4		1,117.2		(1	)

1	Consists of loans and advances to customers and banks.

2	Consists of financial assets at fair value held for trading.

3	Consists of financial assets at fair value not held for trading, financial assets measured at fair value through other comprehensive income and other financial assets measured at amortized cost, but excludes financial assets for unit-linked investment contracts.

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Asset encumbrance

The table below provides a breakdown of on- and off-balance sheet assets between encumbered assets, unencumbered assets and assets that cannot be pledged as collateral.

Assets are presented as Encumbered if they have been pledged as collateral against an existing liability or are otherwise not available for securing additional funding. Included within the latter category are assets protected under client asset segregation rules, financial assets for unit-linked investment contracts, and assets held in certain jurisdictions to comply with explicit minimum local asset maintenance requirements.

•

Refer to “Note 22 Restricted and transferred financial assets” in the “Consolidated financial statements” section of this report for more information

Assets that cannot be pledged as collateral represents assets that are not encumbered but by their nature are not considered available to secure funding or meet collateral needs.

All other assets are presented as Unencumbered. Assets that are considered to be readily available to secure funding on a Group and / or legal entity level are shown separately and consist of cash and securities readily realizable in the normal course of business. These include our HQLA and unencumbered positions in our trading portfolio. Unencumbered assets that are considered to be available to secure funding on a legal entity level may be subject to restrictions that limit the total amount of assets available to the Group as a whole. Other unencumbered assets, which are not considered to be readily available to secure funding on a Group and / or legal entity level, primarily consist of loans and advances to banks and customers.

Asset encumbrance as of 31 December 2022

Encumbered

Unencumbered

USD bn

Assets
pledged
as collateral

Assets
otherwise
restricted and
not available
to secure
funding

Cash and
securities
available to
secure funding
on a Group
and / or legal
entity level

Other
realizable
assets

Assets that
cannot be
pledged as
collateral

Total
Group

Balance sheet

Cash and balances at central banks

0.0

169.4

Loans and advances to banks

3.7

11.1

14.8

Receivables from securities financing transactions

67.8

Cash collateral receivables on derivative instruments

5.2

29.9

35.0

Loans and advances to customers

15.2

1.1

370.2

0.7

387.2

Other financial assets measured at amortized cost

3.4

0.8

40.4

1.3

7.3

53.3

Total financial assets measured at amortized cost

18.6

10.8

209.8

382.6

105.7

727.6

Financial assets at fair value held for trading

57.4

0.2

48.5

1.8

107.9

Derivative financial instruments

0.0

150.1

Brokerage receivables

17.6

Financial assets at fair value not held for trading

1.5

14.5

30.1

6.0

7.7

59.8

Total financial assets measured at fair value through profit or loss

58.9

14.6

78.7

7.8

175.4

335.3

Financial assets measured at fair value through other comprehensive income

1.8

0.4

2.2

Non-financial assets

0.0

4.5

13.4

21.4

39.2

Total balance sheet assets as of 31 December 2022

77.5

27.3

293.4

403.7

302.5

1,104.4

Total balance sheet assets as of 31 December 2021

85.1

33.5

307.5

415.4

275.7

1,117.2

Off-balance sheet

Fair value of securities accepted as collateral as of 31 December 2022

331.8

5.6

93.8

2.8

434.0

Fair value of securities accepted as collateral as of 31 December 2021

367.4

16.3

106.5

7.6

497.8

Total balance sheet assets and off-balance sheet securities accepted as collateral as of 31 December 2022

409.3

33.0

387.1

406.5

302.5

1,538.4

of which: high-quality liquid assets

238.6

Total balance sheet assets and off-balance sheet securities accepted as collateral as of 31 December 2021

452.5

49.8

414.0

423.0

275.7

1,615.0

of which: high-quality liquid assets

232.8

1	Includes assets pledged as collateral that may be sold or repledged by counterparties. The respective amounts are disclosed in “Note 22 Restricted financial assets” in the “Consolidated financial statements” section of this report.


Assets available to secure funding on a Group and / or legal entity level by currency

USD bn	31.12.22		31.12.21
Swiss franc		120.0		111.4
US dollar		156.2		174.7
Euro		40.3		46.6
Other		70.6		81.2

Total		387.1		414.0

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Balance sheet liabilities

Total liabilities as of 31 December 2022 were USD 1,047.1bn, a decrease of USD 9.1bn compared with 31 December 2021, which included a decrease of approximately USD 20.4bn from currency effects.

Customer deposits decreased by USD 16.9bn, including an USD 8.3bn decrease from currency effects. The decrease not related to currency effects was USD 14.4bn in Global Wealth Management, mostly in the Americas, partly offset by a USD 5.8bn increase in Personal & Corporate Banking. In addition, increases in interest rates during the year resulted in significant shifts from demand deposits to time deposits. As of 31 December 2022, our ratio of customer deposits to outstanding loans and advances to customers was unchanged at 136%. Short-term borrowings decreased by USD 14.9bn, mainly due to maturities of commercial paper and certificates of deposit in Group Treasury.

Debt issued designated at fair value and long-term debt issued measured at amortized cost decreased by USD 11.3bn. Long-term debt issued measured at amortized cost decreased by USD 11.1bn, driven by hedge accounting and foreign currency effects, as well as net redemptions. Debt issued designated at fair value remained broadly unchanged, while net new issuances mainly of fixed-rate and equity-linked contracts were offset by market-driven movements on equity-linked contracts.

During 2022, the redemption of a covered bond of USD 1.4bn and net redemptions of subordinated debt instruments of USD 1.3bn were partly offset by USD 0.8bn of net new issuances of senior unsecured debt, including TLAC-eligible benchmark instruments. In December 2022, we announced our intention to call one loss-absorbing tier 1 capital instrument of USD 2.0bn, which was redeemed in January 2023. As of 31 December 2022, UBS is already compliant with its 2023 going and gone concern capital requirements and expects to act rationally and strategically with respect to the refinancing of any callable capital instruments and any potential incremental issuances.

•

Refer to “UBS Group AG consolidated capital instruments and TLAC-eligible senior unsecured debt,” available under “Bondholder information” at ubs.com/investors, for more information

Non-financial liabilities and financial liabilities related to unit-linked investment contracts decreased by USD 10.6bn, mainly reflecting market-driven decreases in unit-linked investment contracts in line with the asset side and in Global Wealth Management due to the completion of the sale of our domestic wealth management business in Spain and the sale of UBS Swiss Financial Advisers AG in 2022.

•

These decreases were partly offset by a USD 38.2bn increase in Derivatives and cash collateral payables on derivative instruments, in line with the movement on the asset side. Other financial liabilities measured at amortized cost and fair value increased by USD 9.0bn, mainly in Group Treasury, due to lower netting effects on securities financing transactions measured at fair value.

Equity

Equity attributable to shareholders decreased by USD 3,786m to USD 56,876m as of 31 December 2022.

This decrease was mainly driven by net treasury share activity that decreased equity by USD 5,999m. This was mainly due to share repurchases with an acquisition cost of USD 3,966m under our 2022 share repurchase program, repurchases of USD 1,637m under our 2021 program and purchases of USD 207m from the market to hedge our share delivery obligations related to employee share-based compensation awards. In addition, distributions to shareholders reduced equity by USD 1,668m, reflecting a dividend payment of USD 0.50 per share.

These decreases were partly offset by total comprehensive income attributable to shareholders of positive USD 3,149m, reflecting net profit of USD 7,630m and negative other comprehensive income (OCI) of USD 4,481m. OCI mainly included negative cash flow hedge OCI of USD 4,793m, negative OCI related to foreign currency translation of USD 525m and positive OCI related to own credit on financial liabilities designated at fair value of USD 796m. In addition, deferred share-based compensation awards of USD 716m were expensed in the income statement, increasing share premium.

In the second quarter of 2022, we canceled 177,787,273 shares purchased under our 2021 share repurchase program from its inception in 2021 until 18 February 2022, as approved by shareholders at the 2022 Annual General Meeting. The cancellation of shares resulted in reclassifications within equity but had no net effect on our total equity attributable to shareholders.

•

Refer to the “Group performance” and “Consolidated financial statements” sections of this report for more information about OCI

•

Refer to the “Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital” table in this section for more information about the effects of OCI on common equity tier 1 capital

•

Refer to “UBS shares” in this section for more information about our share repurchase programs

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Liabilities and equity
	As of						% change from
USD bn	31.12.22			31.12.21			31.12.21
Short-term borrowings¹		41.3			56.2			(27	)
Securities financing transactions at amortized cost		4.2			5.5			(24	)
Customer deposits		525.1			542.0			(3	)
Debt issued designated at fair value and long-term debt issued measured at amortized cost²		158.6			169.9			(7	)
Trading portfolio³		29.5			31.7			(7	)
Derivatives and cash collateral payables on derivative instruments		191.3			153.1			25
Brokerage payables		45.1			44.0			2
Other financial liabilities measured at amortized cost and fair value⁴		26.6			17.6			51
Non-financial liabilities and financial liabilities related to unit-linked investment contracts		25.5			36.1			(29	)

Total liabilities		1,047.1			1,056.2			(1	)

Share capital		0.3			0.3			(6	)
Share premium		13.5			15.9			(15	)
Treasury shares		(6.9	)		(4.7	)		47
Retained earnings		50.0			43.9			14
Other comprehensive income⁵		(0.1	)		5.2			(102	)

Total equity attributable to shareholders		56.9			60.7			(6	)

Equity attributable to non-controlling interests		0.3			0.3			1

Total equity		57.2			61.0			(6	)

Total liabilities and equity		1,104.4			1,117.2			(1	)

1	Consists of short-term debt issued measured at amortized cost and amounts due to banks.

The classification of debt issued measured at amortized cost into short-term and long-term is based on original contractual maturity and therefore long-term debt also includes debt with a remaining time to maturity of less than one year. This classification does not consider any early redemption features.

3	Consists of financial liabilities at fair value held for trading.

4	Consists of other financial liabilities measured at amortized cost and other financial liabilities designated at fair value, but excludes financial liabilities related to unit-linked investment contracts.

5	Excludes other comprehensive income related to defined benefit plans and own credit, which is recorded directly in Retained earnings.

LOGO

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156

Liabilities by product and currency

USD equivalent

All currencies

of which: USD

of which: CHF

of which: EUR

USD bn

31.12.22

31.12.21

31.12.22

31.12.21

31.12.22

31.12.21

31.12.22

31.12.21

Short-term borrowings

41.3

56.2

23.3

32.2

3.8

4.3

4.4

6.2

of which: amounts due to banks

11.6

13.1

4.2

3.4

3.7

4.2

1.1

0.8

of which: short-term debt issued¹

29.7

43.1

19.0

28.8

0.1

0.2

3.3

5.3

Securities financing transactions at amortized cost

4.2

5.5

3.6

5.2

0.0

0.0

0.2

0.2

Customer deposits

525.1

542.0

226.6

252.1

198.5

189.7

53.6

54.8

of which: demand deposits

180.8

246.4

47.1

92.3

71.4

70.9

37.3

46.3

of which: retail savings / deposits

149.3

133.3

24.6

11.7

119.0

116.0

5.6

5.5

of which: sweep deposits

69.2

113.9

69.2

113.9

0.0

0.0

0.0

0.0

of which: time deposits

125.7

48.4

85.7

34.2

8.1

2.8

10.6

3.0

Debt issued designated at fair value and long-term debt issued measured at amortized cost²

158.6

169.9

98.4

100.3

16.9

18.4

29.6

35.1

Trading portfolio³

29.5

31.7

12.1

13.7

0.8

0.9

8.1

6.3

Derivatives and cash collateral payables on derivative instruments

191.3

153.1

160.4

126.3

3.8

2.1

15.8

15.2

Brokerage payables

45.1

44.0

32.3

32.8

0.4

0.4

3.2

2.8

Other financial liabilities measured at amortized cost and fair value⁴

26.6

17.6

16.3

9.3

1.7

1.5

4.8

3.7

Non-financial liabilities and financial liabilities related to unit-linked investment contracts

25.5

36.1

4.7

6.0

1.5

2.4

2.9

3.4

Total liabilities

1,047.1

1,056.2

577.7

577.8

227.6

219.7

122.6

127.8

1	Short-term debt issued consists of certificates of deposit, commercial paper, acceptances and promissory notes, and other money market paper.

3	Consists of financial liabilities at fair value held for trading.

4	Consists of other financial liabilities measured at amortized cost and other financial liabilities designated at fair value, but excludes financial liabilities related to unit-linked investment contracts.

Off-balance sheet

In the normal course of business, we enter into transactions where, pursuant to IFRS, the maximum contractual exposure may not be recognized in whole or in part on our balance sheet. These transactions include derivative instruments, guarantees, loan commitments and similar arrangements.

When we incur an obligation or become entitled to an asset through these arrangements, we recognize them on the balance sheet. It should be noted that in certain instances the amount recognized on the balance sheet does not represent the full gain or loss potential inherent in such arrangements.

The following paragraphs provide more information about certain off-balance sheet arrangements. Additional off-balance sheet information is primarily provided in Notes 9, 10, 17, 19, 20h, 22 and 28 in the “Consolidated financial statements” section of this report, and in the 31 December 2022 Pillar 3 Report, available under “Pillar 3 disclosures” at ubs.com/investors.

Guarantees, loan commitments and similar arrangements

In the normal course of business, we issue various forms of guarantees, commitments to extend credit, standby and other letters of credit to support our clients, forward starting transactions, note issuance facilities, and revolving underwriting facilities. With the exception of related premiums, generally these guarantees and similar obligations are kept as off-balance sheet items, unless a provision to cover probable losses or expected credit losses is required.

Guarantees represent irrevocable assurances that, subject to the satisfying of certain conditions, we will make payments if our clients fail to fulfill their obligations to third parties. As of 31 December 2022, the net exposure (i.e., gross values less sub-participations) from guarantees and similar instruments was USD 20.6bn, compared with USD 18.9bn as of 31 December 2021. The increase of USD 1.7bn reflected higher guarantees issued to corporate clients in Group Treasury. Fee income from issuing guarantees compared with total net fee and commission income is insignificant for both 2022 and 2021.

We also enter into commitments to extend credit in the form of credit lines available to secure the liquidity needs of clients. The majority of loan commitments range in maturity from one month to two years. Committed unconditionally revocable credit lines are generally open-ended. During 2022, loan commitments and committed unconditionally revocable credit lines remained broadly stable. Forward starting reverse repurchase agreements increased by USD 2.4bn and forward starting repurchase agreements increased by USD 0.9bn, both predominantly in Group Treasury.

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Off-balance sheet

	As of				% change from
USD bn	31.12.22		31.12.21		31.12.21
Guarantees¹		20.6		18.9		9
Loan commitments^1,2		40.0		39.5		1
Committed unconditionally revocable credit lines		41.4		40.8		1
Forward starting reverse repurchase agreements²		3.8		1.4		163
Forward starting repurchase agreements²		1.9		1.0		80

1	Guarantees and Loan commitments are shown net of sub-participations.

The exposures related to loan commitments, forward starting repurchase and reverse repurchase agreements measured at fair value through profit or loss are not included in this table but are reflected as notional amounts in “Note 10 Derivative instruments” in the “Consolidated financial statements” section of this report.

If customers fail to meet their obligations, our maximum exposure to credit risk is generally the contractual amount of these instruments. The risk is similar to the risk involved in extending loan facilities and is subject to the same risk management and control framework. In 2022, we recognized net credit loss releases of USD 3m related to loan commitments, guarantees and other credit facilities in the scope of expected credit loss measurement, compared with net credit loss releases of USD 46m in 2021. Provisions recognized for guarantees, loan commitments and other credit facilities in the scope of expected credit loss measurement were USD 201m as of 31 December 2022, compared with USD 196m as of 31 December 2021.

•

For certain obligations, we enter into partial sub-participations to mitigate various risks from guarantees and loan commitments. A sub-participation is an agreement by another party to take a share of the loss in the event that the obligation is not fulfilled by the obligor and, where applicable, to fund a part of the credit facility. We retain the contractual relationship with the obligor, and the sub-participant has only an indirect relationship. Generally, we only enter into sub-participation agreements with banks to which we ascribe a credit rating equal to or better than that of the obligor.

We also provide representations, warranties and indemnifications to third parties in the normal course of business.

Support provided to non-consolidated investment funds

In 2022, the Group did not provide material support, financial or otherwise, to unconsolidated investment funds when the Group was not contractually obligated to do so, nor does it have an intention to do so.

Clearing house and exchange memberships

We are a member of numerous securities and derivative exchanges and clearing houses. In connection with some of these memberships, we may be required to pay a share of the financial obligations of another member who defaults, or we may be otherwise exposed to additional financial obligations. While the membership rules vary, obligations generally would arise only if the exchange or clearing house had exhausted its resources. We consider the probability of a material loss due to such obligations to be remote.

Deposit insurance

Swiss banking law and the deposit insurance system require Swiss banks and securities dealers to jointly guarantee an amount of up to CHF 6bn for privileged client deposits in the event that a Swiss bank or securities dealer becomes insolvent. As of 31 December 2022, FINMA estimates our share in the deposit insurance system to be CHF 0.9bn. This represents a contingent payment obligation and exposes us to additional risk. As of 31 December 2022, we considered the probability of a material loss from our obligations to be remote.

UBS is also subject to, or is a member of, other deposit protection schemes in other countries. However, no contingent payment obligation existed as of 31 December 2022 from any other material scheme.

Material cash requirements

The Group’s material cash requirements as of 31 December 2022 are represented by the residual contractual maturities for non-derivative and non-trading financial liabilities included in the table presented in “Note 23b Maturity analysis of financial liabilities on an undiscounted basis” in the “Consolidated financial statements” section of this report. Included in the table are debt issued designated at fair value (USD 83.4bn) and long-term debt issued measured at amortized cost (USD 103.7bn). The amounts represent estimated future interest and principal payments on an undiscounted basis.

In the normal course of business, we also issue or enter into various forms of guarantees, loan commitments and other similar arrangements that may result in an outflow of cash in the future. The maturity profile of these obligations, which are presented off-balance sheet, are included in “Note 23b Maturity analysis of financial liabilities on an undiscounted basis” in the “Consolidated financial statements” section of this report.

•

Refer to “Guarantees, loan commitments and similar arrangements” in this section for more information

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Cash flows

As a global financial institution, our cash flows are complex and often may bear little relation to our net earnings and net assets. Consequently, we believe that a traditional cash flow analysis is less meaningful when evaluating our liquidity position than the liquidity, funding and capital management frameworks and measures described elsewhere in this section.

•

Refer to the “Liquidity and funding management” section of this report for more information

Cash and cash equivalents

As of 31 December 2022, cash and cash equivalents totaled USD 195.3bn, a decrease of USD 12.6bn compared with 31 December 2021, driven by net cash outflows from investing and financing activities, as well as negative foreign exchange effects, largely reflecting appreciation of the US dollar against the yen, euro and Swiss franc in 2022. These effects were partly offset by net cash inflows from operating activities.

Operating activities

Net cash inflows from operating activities were USD 14.6bn in 2022, compared with USD 31.4bn in 2021. The net operating cash flow, before changes in operating assets and liabilities and income taxes paid, was an outflow of USD 2.0bn. Changes in operating assets and liabilities resulted in net cash inflows of USD 16.6bn, mainly driven by net inflows of USD 8.0bn from financial assets and liabilities at fair value held for trading and derivative financial instruments, USD 6.0bn from brokerage receivables and payables, USD 5.7bn from financial assets and liabilities at fair value not held for trading and other financial assets and liabilities, as well as USD 4.4bn from securities financing transactions at amortized cost. These inflows were partly offset by a net outflow from loans and advances to customers and customer deposits of USD 5.2bn and income tax paid of USD 1.6bn.

Investing activities

Investing activities resulted in a net cash outflow of USD 12.4bn in 2022, compared with USD 2.1bn in 2021, primarily related to a cash outflow of USD 12.0bn from net purchases of debt securities measured at amortized cost.

Financing activities

Financing activities resulted in a net cash outflow of USD 9.1bn in 2022, compared with an inflow of USD 10.3bn in 2021, mainly due to net repayment of short-term debt of USD 12.2bn, net cash used to repurchase treasury shares of USD 6.0bn and a dividend distribution to shareholders of USD 1.7bn. This outflow was partly offset by net issuance proceeds of USD 11.4bn from debt designated at fair value and long-term debt measured at amortized cost.

•

Refer to “Primary financial statements and share information” in the “Consolidated financial statements” section of this report for more information about cash flows


Statement of cash flows (condensed)
	For the year ended
USD bn	31.12.22			31.12.21
Net cash flow from / (used in) operating activities		14.6			31.4
Net cash flow from / (used in) investing activities		(12.4	)		(2.1	)
Net cash flow from / (used in) financing activities		(9.1	)		10.3
Effects of exchange rate differences on cash and cash equivalents		(5.7	)		(5.3	)

Net increase / (decrease) in cash and cash equivalents		(12.6	)		34.3

Cash and cash equivalents at the end of the year		195.3			207.9

Currency management

Strategy, objectives and governance

Group Treasury focuses on three main areas of currency risk management: (i) currency-matched funding and investment of non-US-dollar assets and liabilities; (ii) sell-down of foreign currency International Financial Reporting Standards profits and losses; and (iii) selective hedging of anticipated non-US-dollar profits and losses to further mitigate the effect of structural imbalances in the balance sheet. Group Treasury also manages structural currency composition at the consolidated Group level.

Currency-matched funding and investment of non-US-dollar assets and liabilities

For monetary balance sheet items and other investments, as far as is practical and efficient, we follow the principle of matching the currencies of our assets and liabilities for funding purposes. This avoids profits and losses arising from the translation of non-US-dollar assets and liabilities.

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Net investment hedge accounting is applied to non-US-dollar core investments to balance the effect of foreign exchange movements on both common equity tier 1 (CET1) capital and the CET1 capital ratio.

•

Refer to “Note 1a Material accounting policies” and “Note 25 Hedge accounting” in the “Consolidated financial statements” section of this report for more information

•

Refer to “Capital management” in this section for more information about our active management of sensitivity to currency movements and the effect thereof on our key ratios

Sell-down of non-US-dollar reported profits and losses

Income statement items of foreign subsidiaries and branches of UBS AG with a functional currency other than the US dollar are translated into US dollars at average exchange rates. To reduce earnings volatility on the translation of previously recognized earnings in foreign currencies, Group Treasury centralizes the profits and losses (under IFRS) arising in UBS AG and its branches and sells or buys the profit or loss for US dollars on a monthly basis. Our foreign subsidiaries follow a similar monthly sell-down process into their own functional currencies. Retained earnings in foreign subsidiaries with a functional currency other than the US dollar are integrated and managed as part of our net investment hedge accounting program.

Hedging of anticipated non-US-dollar profits and losses

The Group Asset and Liability Committee may at any time instruct Group Treasury to execute hedges to protect anticipated future profits and losses in foreign currencies against possible adverse trends of foreign exchange rates. Although intended to hedge future earnings, these transactions are accounted for as open currency positions and subject to internal market risk limits for value-at-risk and stress loss limits.

Dividend distribution

UBS Group AG declares dividends in US dollars. Shareholders holding shares through the SIX Swiss Exchange (ISIN: CH0244767585) will receive dividends in Swiss francs, based on a published exchange rate calculated up to five decimal places, on the day prior to the ex-dividend date. Shareholders holding shares through DTC (ISIN: CH0244767585; CUSIP: H42097107) will be paid dividends in US dollars.

•

Refer to the “Standalone financial statements” section of this report for more information about the proposed dividend distribution of UBS Group AG

UBS shares

UBS Group AG shares

Audited | As of 31 December 2022, IFRS equity attributable to shareholders amounted to USD 56,876m, represented by 3,524,635,722 shares issued. Shares issued decreased by 177,787,273 shares in 2022 as the shares acquired under the 2021 share repurchase program from its inception in 2021 until 18 February 2022 were canceled by means of a capital reduction, as approved by shareholders at the 2022 Annual General Meeting (the AGM).

Each share has a nominal value of CHF 0.10, carries one vote if entered into the share register as having the right to vote, and also entitles the holder to a proportionate share of distributed dividends. All shares are fully paid up. As the Articles of Association of UBS Group AG indicate, there are no other classes of shares and no preferential rights for shareholders. p

•

Refer to “Share information and earnings per share” in the “Consolidated financial statements” section of this report for more information about the planned conversion of our share capital nominal currency in 2023

•

Refer to the “Corporate governance” section of this report for more information about UBS shares

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UBS Group share information


	As of or for the year ended				% change from
	31.12.22		31.12.21		31.12.21
Shares issued		3,524,635,722		3,702,422,995		(5	)
Treasury shares¹		416,909,010		302,815,328		38
of which: related to share repurchase program 2021		*62,548,000*		152,596,273		(59	)
of which: related to share repurchase program 2022		*233,901,950*
Shares outstanding		3,107,726,712		3,399,607,667		(9	)
Basic earnings per share (USD)²		2.34		2.14		9
Basic earnings per share (CHF)³		2.23		1.96		14
Diluted earnings per share (USD)²		2.25		2.06		9
Diluted earnings per share (CHF)³		2.14		1.88		14
Equity attributable to shareholders (USD m)		56,876		60,662		(6	)
Less: goodwill and intangible assets (USD m)		6,267		6,378		(2	)
Tangible equity attributable to shareholders (USD m)		50,609		54,283		(7	)
Ordinary cash dividends per share (USD)^4,5		0.55		0.50		10
Total book value per share (USD)		18.30		17.84		3
Tangible book value per share (USD)		16.28		15.97		2
Share price (USD)⁶		18.61		18.01		3
Market capitalization (USD m)		57,848		61,230		(6	)

1	Based on a settlement date view.

2	Refer to “Share information and earnings per share” in the “Consolidated financial statements” section of this report for more information.

3	Basic and diluted earnings per share in Swiss francs are calculated based on a translation of net profit / (loss) under our US dollar presentation currency.

4	Dividends and / or distributions out of the capital contribution reserve are normally approved and paid in the year subsequent to the reporting period.

5	Refer to “Statement of proposed appropriation of total profit and dividend distribution out of total profit and capital contribution reserve” in the “Standalone financial statements” section of this report for more information.

6	Represents the share price as listed on the SIX Swiss Exchange, translated to US dollars using the closing exchange rate as of the respective date.

Holding of UBS Group AG shares

Our 2021 share repurchase program was concluded on 29 March 2022 with the purchase of an additional 87.7m shares in 2022 for an acquisition cost of USD 1,637m (CHF 1,516m). The 177.8m shares repurchased under this program from its inception until 18 February 2022 for a total acquisition cost of USD 3,022m (CHF 2,775m) were canceled by means of a capital reduction, as approved by shareholders at the 2022 AGM. We also intend to cancel the remaining shares purchased under the 2021 program, subject to shareholder approval at the 2023 AGM.

On 31 March 2022, we commenced a new, 2022 share repurchase program of up to USD 6bn. Shares acquired under this program totaled 233.9m as of 31 December 2022 for a total acquisition cost of USD 3,944m (CHF 3,808m) and are intended to be canceled by means of a capital reduction, pending approval by shareholders at a future AGM.

Looking ahead, we intend to commence a new, 2023 repurchase program of up to USD 6bn over two years and expect to execute more than USD 5bn of share repurchases under both the existing, 2022 repurchase program and the new program in 2023.

Treasury shares held to hedge our share delivery obligations related to employee share-based compensation awards totaled 119m shares as of 31 December 2022 (31 December 2021: 149m). Share delivery obligations related to employee share-based compensation awards totaled 178m shares as of 31 December 2022 (31 December 2021: 175m) and are calculated on the basis of undistributed notional share awards, taking applicable performance conditions into account. Treasury shares held are delivered to employees at exercise or vesting. As of 31 December 2022, up to 122m UBS Group AG shares (31 December 2021: 122m) could have been issued out of conditional capital to satisfy share delivery obligations of any future employee share option programs or similar awards.

The Investment Bank also holds a limited number of UBS Group AG shares, primarily in its capacity as a market-maker with regard to UBS Group AG shares and related derivatives, and to hedge certain issued structured debt instruments.

The table below outlines the market purchases of UBS Group AG shares by Group Treasury. It does not include the activities of the Investment Bank.

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Treasury share purchases


					Share repurchase programs¹								Other treasury shares purchased²
Month of purchase³	Number of shares		Average price in USD		Remaining volume of 2021 share repurchase program in CHF m at month-end			Remaining volume of 2021 share repurchase program in USD m at month-end⁴			Remaining volume of 2022 share repurchase program in USD m at month-end		Number of shares		Average price in USD
January 2022						1,706			1,843
February 2022		38,231,000		20.05		999			1,089
March 2022		51,928,000		17.68		190	⁵		205	⁵		5,952
April 2022		29,420,000		18.14								5,418
May 2022		31,670,000		17.65								4,859
June 2022		32,124,500		16.78								4,320
July 2022		32,152,000		15.83								3,811
August 2022		18,284,450		16.41								3,511
September 2022		14,114,500		15.23								3,296		12,510,000		16.52
October 2022		30,526,500		15.15								2,833
November 2022		23,769,000		17.70								2,413
December 2022		20,571,000		18.40								2,034

In February 2021, UBS initiated a share repurchase program of up to CHF 4bn and this program was concluded on 29 March 2022. UBS has an active share repurchase program to buy back up to USD 6bn of its own shares over the two-year period started in March 2022. The share buybacks were transacted in Swiss francs on a separate trading line on the SIX Swiss Exchange.

This table excludes purchases for the purpose of hedging derivatives linked to UBS Group AG shares and for market-making in UBS Group AG shares. The table also excludes UBS Group AG shares purchased by post-employment benefit funds for UBS employees, which are managed by a board of UBS management and employee representatives in accordance with Swiss law. UBS’s post-employment benefit funds purchased 1,243,164 UBS Group AG shares during the year and held 14,213,559 UBS Group AG shares as of 31 December 2022.

3	Based on the transaction date of the respective treasury share purchases.

4	The remaining volume of the 2021 share repurchase program in US dollars was calculated based on the remaining volume in Swiss francs and the respective month-end closing exchange rate.

5	The 2021 share repurchase program was concluded on 29 March 2022.

Trading volumes


	For the year ended
1,000 shares	31.12.22		31.12.21		31.12.20
SIX Swiss Exchange total		2,433,051		2,514,259		5,095,908
SIX Swiss Exchange daily average		9,579		9,899		20,222
New York Stock Exchange total		186,468		137,366		260,681
New York Stock Exchange daily average		743		545		1,030

Source: Reuters

Listing of UBS Group AG shares

UBS Group AG shares are listed on the SIX Swiss Exchange (SIX). They are also listed on the New York Stock Exchange (the NYSE) as global registered shares. As such, they can be traded and transferred across applicable borders, without the need for conversion, with identical shares traded on different stock exchanges in different currencies.

During 2022, the average daily trading volume of UBS Group AG shares was 9.6m shares on SIX and 0.7m shares on the NYSE. SIX is expected to remain the main venue for determining the movement in our share price, because of the high volume traded on this exchange.

During the hours in which both SIX and the NYSE are simultaneously open for trading, price differences between these exchanges are likely to be arbitraged away by professional market-makers. Accordingly, the share price will typically be similar between the two exchanges when considering the prevailing US dollar / Swiss franc exchange rate. When SIX is closed for trading, globally traded volumes will typically be lower. However, the specialist firm making a market in UBS Group AG shares on the NYSE is required to facilitate sufficient liquidity and maintain an orderly market in UBS Group AG shares throughout normal NYSE trading hours.

Ticker symbols UBS Group AG


Trading exchange	SIX / NYSE	Bloomberg	Reuters
SIX Swiss Exchange	UBSG	UBSG SW	UBSG.S
New York Stock Exchange	UBS	UBS UN	UBS.N

Security identification codes


ISIN		CH0244767585
Valoren		24 476 758
CUSIP		CINS H42097 10 7

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Corporate governance and compensation

Management report

Audited information according to the Swiss law and applicable regulatory requirements and guidance

Disclosures provided are in line with the requirements of the Swiss Code of Obligations (tables containing such information are marked as “Audited” throughout this section), as well as other applicable regulations and guidance.

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Corporate governance

Table of contents


165		Corporate governance
166		Group structure and shareholders
167		Share capital structure
171		Shareholders’ participation rights
173		Board of Directors
189		Group Executive Board
196		Change of control and defense measures
196		Auditors
198		Information policy

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Corporate governance

UBS Group AG is subject to, and complies with, all relevant Swiss legal and regulatory requirements regarding corporate governance, including the SIX Swiss Exchange’s Directive on Information relating to Corporate Governance (the SIX Swiss Exchange Corporate Governance Directive) and the standards established in the Swiss Code of Best Practice for Corporate Governance.

The revised Swiss Code of Obligations entered into force on 1 January 2023. The correspondingly amended Articles of Association of UBS Group AG (the AoA) will be submitted to the Annual General Meeting (the AGM) on 5 April 2023 for approval. The implementation of resulting amendments based on the revised Swiss Code of Obligations will be reflected in the Annual Report 2023.

As a foreign company with shares listed on the New York Stock Exchange (the NYSE), UBS Group AG also complies with all relevant corporate governance standards applicable to foreign private issuers.

The Organization Regulations of UBS Group AG, adopted by the Board of Directors (the BoD) based on Art. 716b of the Swiss Code of Obligations and Art. 25 and 27 of the AoA, constitute our primary corporate governance guidelines.

To the extent practicable, the governance structures of UBS Group AG and UBS AG are aligned. UBS AG complies with all relevant Swiss legal and regulatory corporate governance requirements. As a foreign private issuer with debt securities listed on the NYSE, UBS AG also complies with the relevant NYSE corporate governance standards. The discussion in this section refers to both UBS Group AG and UBS AG, unless specifically noted otherwise or unless the information discussed is relevant only to listed companies and therefore only applicable to UBS Group AG. This approach is in line with US Securities and Exchange Commission (SEC) regulations and NYSE standards.

•

Refer to the Articles of Association of UBS Group AG and of UBS AG, and to the Organization Regulations of UBS Group AG, available at ubs.com/governance and ubs.com/ubs-ag-governance, for more information

•

The SIX Swiss Exchange Corporate Governance Directive is available at ser-ag.com/content/dam/ serag/downloads/regulation/listing/directives/dcg-en.pdf, the Swiss Code of Best Practice for Corporate Governance at economiesuisse.ch/en/publications/swiss-code-best-practice-corporate-governance and the NYSE rules at nyseguide.srorules.com/listed-company-manual

Differences from corporate governance standards relevant to US-listed companies

The NYSE standards on corporate governance require foreign private issuers to disclose any significant ways in which their corporate governance practices differ from those that have to be followed by domestic companies. The key differences are discussed below.

Responsibility of the Audit Committee regarding independent auditors

Our Audit Committee is responsible for the compensation, retention and oversight of independent auditors. It assesses the performance and qualifications of external auditors and submits proposals for appointment, reappointment or removal of independent auditors to the BoD. As required by the Swiss Code of Obligations, the BoD submits its proposals for a shareholder vote at the AGM. Under NYSE standards audit committees are responsible for appointing independent auditors.

Discussion of risk assessment and risk management policies by the Risk Committee

As per the Organization Regulations of UBS Group AG and UBS AG, the Risk Committee, instead of the Audit Committee, as per NYSE standards, oversees our risk principles and risk capacity on behalf of the BoD. The Risk Committee is responsible for monitoring our adherence to those risk principles and monitoring whether business divisions and control units maintain appropriate systems of risk management and control.

Supervision of the internal audit function

Although under NYSE standards only audit committees supervise internal audit functions, the Chairman of the BoD (the Chairman) and the Audit Committee share the supervisory responsibility and authority with respect to the internal audit function.

Responsibility of the Compensation Committee for performance evaluations of senior management of UBS Group AG

In line with Swiss law, our Compensation Committee, together with the BoD, proposes for shareholder approval at the AGM the maximum aggregate amount of compensation for the BoD, the maximum aggregate amount of fixed compensation for the Group Executive Board (the GEB) and the aggregate amount of variable compensation for the GEB. The members of the Compensation Committee are elected by the AGM. Under NYSE standards it is the responsibility of compensation committees to evaluate senior management’s performance and to determine and approve, as a committee or together with the other independent directors, the compensation thereof.

Proxy statement reports of the Audit Committee and the Compensation Committee

NYSE standards require the aforementioned committees to submit their reports directly to shareholders. However, under Swiss law all reports to shareholders, including those from the aforementioned committees, are provided to and approved by the BoD, which has ultimate responsibility to the shareholders.

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Shareholder votes on equity compensation plans

NYSE standards require shareholder approval for the establishing of and material revisions to all equity compensation plans. However, as per Swiss law, the BoD approves compensation plans. Shareholder approval is only mandatory if equity-based compensation plans require an increase in capital. No shareholder approval is required if shares for such plans are purchased in the market.

•

Refer to “Board of Directors” in this section for more information about the BoD’s committees

•

Refer to “Share capital structure” in this section for more information about UBS Group AG’s capital

Group structure and shareholders

Operational Group structure

As of 31 December 2022, the operational structure of the Group is composed of the Global Wealth Management, Personal & Corporate Banking, Asset Management and Investment Bank business divisions, as well as Group Functions.

•

Refer to the “Our businesses” section of this report for more information about our business divisions and Group Functions

•

Refer to “Financial and operating performance” and to “Note 2a Segment reporting” in the “Consolidated financial statements” section of this report for more information

•

Refer to the “Our evolution” section of this report for more information

Listed and non-listed companies belonging to the Group

The Group includes a number of consolidated entities, of which only UBS Group AG shares are listed.

UBS Group AG’s registered office is at Bahnhofstrasse 45, CH-8001 Zurich, Switzerland. UBS Group AG shares are listed on the SIX Swiss Exchange (ISIN: CH0244767585) and on the NYSE (CUSIP: H42097107).

•

Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for information about UBS Group AG’s market capitalization and shares held by Group entities

•

Refer to “Note 28 Interests in subsidiaries and other entities” in the “Consolidated financial statements” section of this report for more information about the significant subsidiaries of the Group

Significant shareholders

General rules

Under the Swiss Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading of 19 June 2015 (the FMIA), anyone directly, indirectly or acting in concert with third parties holding shares in a company listed in Switzerland or holding derivative rights related to shares in such a company directly, indirectly or in concert with third parties must notify the company and the SIX Swiss Exchange (SIX) if the holding reaches, falls below or exceeds one of the following percentage thresholds: 3, 5, 10, 15, 20, 25, 33¹⁄₃ , 50 or 66²⁄₃ % of voting rights, regardless of whether or not such rights may be exercised. Nominee companies that cannot autonomously decide how voting rights are exercised are not required to notify the company and SIX if they reach, exceed or fall below the aforementioned thresholds.

Pursuant to the Swiss Code of Obligations, we disclose in “Note 24 Significant shareholders” to the UBS Group AG standalone financial statements the identity of any shareholder with a holding of more than 5% of the total share capital of UBS Group AG.

Shareholders subject to FMIA disclosure notifications

According to the mandatory FMIA disclosure notifications filed with UBS Group AG and SIX, as of 31 December 2022, the following entities held more than 3% of the total share capital of UBS Group AG: BlackRock Inc., New York, which disclosed a holding of 5.23% on 29 June 2022; Dodge & Cox International Stock Fund, San Francisco, which disclosed a holding of 3.02% on 28 January 2022; Massachusetts Financial Services Company, Boston, which disclosed a holding of 3.01% on 25 June 2021; Artisan Partners Limited Partnership, Milwaukee, which disclosed a holding of 3.15% on

18 November 2020; and Norges Bank, Oslo, which disclosed a holding of 3.01% on 25 July 2019.

As registration in the UBS share register is optional, the aforementioned shareholders that crossed the indicated percentage thresholds and were required to notify their holding to UBS and SIX do not necessarily appear in the table below, as such table only discloses registered shareholders.

In accordance with the FMIA, the aforementioned holdings are calculated in relation to the total share capital of UBS Group AG reflected in the AoA at the time of the respective disclosure notification.

Information on disclosures under the FMIA is available at ser-ag.com/en/resources/notifications-market-participants/significant-shareholders.html.

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Shareholders registered in the UBS share register with 3% or more of the share capital of UBS Group AG

As a supplement to the mandatory disclosure requirements according to the SIX Swiss Exchange Corporate Governance Directive, we disclose in the table below the shareholders (acting in their own name or in their capacity as nominees for other investors or beneficial owners) that were registered in the UBS share register with 3% or more of the total share capital › of UBS Group AG as of 31 December 2022.

•

Refer to “Shareholders’ participation rights” in this section for more information about voting rights, restrictions and representation

Audited |


Shareholders registered in the UBS share register with 3% or more of the total share capital¹

% of share capital	31.12.22		31.12.21		31.12.20
Chase Nominees Ltd., London²		8.60		8.89		10.39
DTC (Cede & Co.), New York^2,3		7.12		5.78		4.99
Nortrust Nominees Ltd., London²		4.33		4.80		5.15

As registration in the UBS share register is optional, shareholders crossing the threshold percentages requiring SIX notification under the FMIA do not necessarily appear in this table. 2 Nominee companies and securities clearing organizations cannot autonomously decide how voting rights are exercised and are therefore not obligated to notify UBS and SIX if they reach, exceed or fall below the threshold percentages requiring disclosure notification under the FMIA. Consequently, they do not appear in the “Shareholders subject to FMIA disclosure notifications” section above. 3 DTC (Cede & Co.), New York, “The Depository Trust Company,” is a US securities clearing organization.

Cross-shareholdings

UBS Group AG has no cross-shareholdings where reciprocal ownership would be in excess of 5% of capital or voting rights with any other company.

Share capital structure

Ordinary share capital

At year-end 2022, UBS Group AG had 3,524,635,722 issued shares with a nominal value of CHF 0.10 each, equating to a share capital of CHF 352,463,572.20.

Under Swiss company law, shareholders must approve, in a general meeting of shareholders, any increase or reduction in the ordinary share capital or the creation of conditional or authorized share capital.

In 2022, our shareholders were asked to approve a reduction of share capital by way of canceling 177,787,273 registered shares repurchased under the 2021 share buyback program.

In 2022, our shareholders were not asked to approve the creation of conditional or authorized share capital.

No shares were issued out of existing conditional capital, as there were no employee options and stock appreciation rights outstanding.

Following revisions to Swiss Corporate Law that are effective from 1 January 2023, the BoD will propose at the 2023 AGM that the shareholders approve the conversion of the share capital currency of UBS Group AG from the Swiss franc to the US dollar.

•

Refer to “Share information and earnings per share” in the “Consolidated financial statements” section of this report for information about the conversion of the share capital currency


Distribution of UBS shares

As of 31 December 2022	Shareholders registered					Shares registered
Number of shares registered	Number			%		Number			% of shares issued
1–100		21 641			11.6		1 189 373			0.0
101–1,000		95 818			51.4		45 447 811			1.3
1,001–10,000		62 369			33.4		182 418 473			5.2
10,001–100,000		6 086			3.3		144 786 290			4.1
100,001–1,000,000		512			0.3		149 728 515			4.2
1,000,001–5,000,000		83			0.0		178 206 417			5.1
5,000,001–35,246,357 (1%)		24			0.0		253 068 282			7.2
1–2%		3			0.0		134 680 829			3.8
2–3%		0			0.0		0			0.0
3–4%		0			0.0		0			0.0
4–5%		1			0.0		152 567 310			4.3
Over 5%		2	¹		0.0		553 962 520			15.7

Total shares registered		186 539			100.0		1 796 055 820	²		51.0
Shares not registered³							1 728 579 902			49.0

Total		186 539			100.0		3 524 635 722			100.0

On 31 December 2022, Chase Nominees Ltd., London, entered as a nominee, was registered with 8.60% of all UBS shares issued. However, according to the provisions of UBS Group AG, voting rights of nominees are limited to a maximum of 5% of all UBS shares issued. The US securities clearing organization DTC (Cede & Co.), New York, was registered with 7.12% of all UBS shares issued and is not subject to this 5% voting limit as a securities clearing organization.

2	Of the total shares registered, 264,874,790 shares did not carry voting rights.

3	Shares not entered in the UBS share register as of 31 December 2022.

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Conditional share capital

At year-end 2022, the following conditional share capital was available to UBS Group AG’s BoD.

•

A maximum of CHF 38,000,000 represented by up to 380,000,000 fully paid registered shares with a nominal value of CHF 0.10 each, to be issued through the voluntary or mandatory exercise of conversion rights and / or warrants granted in connection with the issuance of bonds or similar financial instruments on national or international capital markets. This conditional capital allowance was approved at the Extraordinary General Meeting (the EGM) held on 26 November 2014, having originally been approved at the AGM of UBS AG on 14 April 2010. The BoD has not made use of such allowance.

•

A maximum of CHF 12,170,583 represented by 121,705,830 fully paid registered shares with a nominal value of CHF 0.10 each, to be issued upon exercise of employee options and stock appreciation rights issued to employees and members of the management and of the BoD of UBS Group AG and its subsidiaries. This conditional capital allowance was approved by the shareholders at the same EGM in 2014.

•

Refer to article 4a of the AoA for more information about the terms and conditions of the issue of shares out of existing conditional capital. The AoA are available at ubs.com/governance

•

Refer to the “Our evolution” section of this report for more information

Conditional capital of UBS Group AG


As of 31 December 2022	Maximum number of shares to be issued		Year approved by Extraor- dinary General Meeting		% of shares issued
Employee equity participation plans		121,705,830		2014		3.45
Conversion rights / warrants granted in connection with bonds		380,000,000		2014		10.78

Total		501,705,830				14.23

Authorized share capital

UBS Group AG had no authorized capital available to issue on 31 December 2022.

Changes in capital

In accordance with International Financial Reporting Standards (IFRS), Group equity attributable to shareholders was USD 56.9bn as of 31 December 2022 (2021: USD 60.7bn; 2020: USD 59.4bn). The equity of UBS Group AG shareholders was represented by 3,524,635,722 issued shares as of 31 December 2022 (31 December 2021: 3,702,422,995 shares; 31 December 2020: 3,859,055,395 shares).

•

Refer to “Statement of changes in equity” in the “Consolidated financial statements” section of this report for more information about changes in shareholders’ equity over the last three years

Ownership

Ownership of UBS Group AG shares is widely spread. The tables in this section provide information about the distribution of UBS Group AG shareholders by category and geographic location. This information relates only to shareholders registered in the UBS share register and cannot be assumed to be representative of UBS Group AG’s entire investor base or the actual beneficial ownership. Only shareholders registered in the share register as “shareholders with voting rights” are entitled to exercise voting rights.

•

Refer to “Shareholders’ participation rights” in this section for more information

As of 31 December 2022, 1,531,181,030 UBS Group AG shares were registered in the share register and carried voting rights, 264,874,790 shares were registered in the share register without voting rights, and 1,728,579,902 shares were not registered in the UBS share register. All shares were fully paid up and eligible for dividends. There are no preferential rights for shareholders, and no other classes of shares have been issued by UBS Group AG.

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Shareholders, legal entities and nominees: type and geographical distribution
	Shareholders registered
As of 31 December 2022	Number		%
Individual shareholders		182 738		98.0
Legal entities		3 646		1.9
Nominees, fiduciaries		155		0.1

Total shares registered		186 539		100.0
Shares not registered

Total		186 539		100.0

Individual shareholders

Legal entities

Nominees

Total

Number

Americas

1 710

0.9

0.1

0.0

1 881

1.0

of which: USA

1 235

0.7

0.0

1 362

0.7

Asia Pacific

5 008

2.7

0.0

5 110

2.7

Europe, Middle East and Africa

12 068

6.5

243

0.1

0.0

12 351

6.6

of which: Germany

3 821

2.0

0.0

3 854

2.1

of which: UK

4 563

2.4

0.0

4 578

2.5

of which: rest of Europe

3 415

1.8

201

0.0

3 645

2.0

of which: Middle East and Africa

269

0.1

0.0

274

0.1

Switzerland

163 952

87.9

3 217

1.7

0.0

167 197

89.6

Total shares registered

Shares not registered

Total

182 738

98.0

3 646

1.9

155

0.1

186 539

100.0

At year-end 2022, UBS owned 416,909,010 UBS Group AG registered shares, which corresponded to 11.83% of the total share capital of UBS Group AG. At the same time, UBS had acquisition positions relating to 440,347,367 voting rights of UBS Group AG and disposal positions relating to 182,025,794 such rights, corresponding to 12.49% and 5.16% of the total voting rights of UBS Group AG, respectively. Of the disposal positions, 177,610,490 related to voting rights on shares deliverable in respect of employee awards. The calculation methodology for the acquisition and disposal positions is based on the Ordinance of the Swiss Financial Market Supervisory Authority on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading, which states that all future potential share delivery obligations, irrespective of the contingent nature of the delivery, must be considered.

Employee share ownership

Employee share ownership is encouraged and made possible in a variety of ways. Our Equity Plus Plan is a voluntary plan that provides eligible employees with the opportunity to purchase UBS Group AG shares at market value and receive, at no additional cost, one notional UBS Group AG share for every three shares purchased. Additional shares vest after a maximum of three years, provided the employee remains employed by UBS and has retained the purchased shares throughout the holding period. The Equity Ownership Plan (the EOP) is a mandatory deferral plan for all employees (except GEB members) with regulatory-driven deferral requirements or total compensation greater than USD / CHF 300,000. EOP recipients receive a portion of their deferred performance award in notional shares (or notional funds for employees in Investment Areas within Asset Management). GEB members receive the equity-based Long-Term Incentive Plan (the LTIP) instead of the EOP. Both the EOP and LTIP include employment conditions and malus conditions that allow the firm to reduce or fully forfeit unvested deferred awards under certain circumstances, pursuant to performance and harmful acts provisions. In addition, forfeiture is triggered in cases where employment has been terminated for cause. Underlining our emphasis on sustainable performance and risk management, and our focus on achieving growth ambitions, LTIP awards will only vest if predetermined performance conditions are met.

On 31 December 2022, UBS employees held at least 7.9% of UBS shares outstanding (including approximately 5.05% in unvested deferred notional shares from our compensation programs). These figures are based on known shareholding information from employee participation plans, personal holdings with UBS and selected individual retirement plans. At the end of 2022, at least 25.5% of all employees held UBS shares through the firm’s employee share participation plans.

•

Refer to the “Compensation” section of this report for more information

Trading restrictions in UBS shares

UBS employees with regular access to unpublished price-sensitive information about the firm are subject to specific restrictions in respect to UBS financial instruments, including, but not limited to, pre-clearance requirements and regular blackout periods. Such UBS employees are not permitted to trade UBS financial instruments in the period starting from the close of business in New York on the seventh business day of the final month of the financial quarter of UBS Group AG and ending on the day of the publication of the quarterly financial results.

Shares and participation certificates

UBS Group AG has a single class of shares, which are registered shares in the form of uncertificated securities (in the sense of the Swiss Code of Obligations) and intermediary-held securities (in the sense of the Swiss Federal Act on Intermediated Securities). Each registered share has a nominal value of CHF 0.10 and carries one vote, subject to the restrictions set out under “Transferability, voting rights and nominee registration” below.

We have no participation certificates outstanding.

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Shareholders, legal entities and nominees: type and geographical distribution (continued)
	Shares registered
As of 31 December 2022	Number		%
Individual shareholders		384 263 314		10.9
Legal entities		490 864 772		13.9
Nominees, fiduciaries		920 927 734		26.1

Total shares registered		1 796 055 820		51.0
Shares not registered		1 728 579 902		49.0

Total		3 524 635 722		100.0

Individual shareholders

Legal entities

Nominees

Total

Number of shares

Americas

2 427 163

0.1

29 166 035

0.8

342 441 815

9.7

374 035 013

10.6

of which: USA

935 175

0.0

21 746 373

0.6

342 247 810

9.7

364 929 358

10.4

Asia Pacific

19 829 362

0.6

12 908 549

0.4

7 244 419

0.2

39 982 330

1.1

Europe, Middle East and Africa

42 154 279

1.2

72 455 397

2.1

557 324 269

15.8

671 933 945

19.1

of which: Germany

11 365 680

0.3

1 841 712

0.1

11 597 965

0.4

24 805 357

0.7

of which: UK

19 125 762

0.5

280 984

0.0

517 282 579

14.7

536 689 325

15.2

of which: rest of Europe

10 608 646

0.3

31 497 076

0.9

28 310 742

0.8

70 416 464

2.0

of which: Middle East and Africa

1 054 191

0.0

38 835 625

1.1

132 983

0.0

40 022 799

1.1

Switzerland

319 852 510

9.1

376 334 791

10.7

13 917 231

0.4

710 104 532

20.1

Total shares registered

384 263 314

10.9

490 864 772

13.9

920 927 734

26.1

1 796 055 820

51.0

Shares not registered

1 728 579 902

49.0

Total

384 263 314

10.9

490 864 772

13.9

920 927 734

26.1

3 524 635 722

100.0

Our shares are listed on the NYSE as global registered shares. As such, they can be traded and transferred across applicable borders, without the need for conversion, with identical shares traded on different stock exchanges in different currencies.

•

Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information

Distributions to shareholders

The decision to pay a dividend and the amount of any dividend depend on a variety of factors, including our profits, cash flow generation and capital ratios.

At the 2023 AGM, the BoD is proposing to shareholders for approval a dividend of USD 0.55 per share for the 2022 financial year. Shareholders whose shares are held through SIX SIS AG will receive dividends in Swiss francs, based on a public exchange rate on the day prior to the ex-dividend date. Shareholders holding shares through The Depository Trust Company in New York and Computershare will be paid dividends in US dollars.

In compliance with Swiss tax law, 50% of the dividend will be paid out of retained earnings and the balance will be paid out of the capital contribution reserve. Dividends paid out of capital contribution reserves are not subject to Swiss withholding tax. The portion of the dividend paid out of retained earnings will be subject to a 35% Swiss withholding tax. For US federal income tax purposes, we expect that the dividend will be paid out of current or accumulated earnings and profits.

Provided that the proposed dividend distribution out of retained earnings and out of the capital contribution reserve will be approved at the AGM on 5 April 2023, the payment of USD 0.55 per share will be made on 14 April 2023 to holders of shares on the record date 13 April 2023. The shares will be traded ex-dividend as of 12 April 2023 and, accordingly, the last day on which the shares may be traded with entitlement to receive the dividend will be 11 April 2023.

In February 2022, the BoD announced a new two-year share buyback program. At the 2022 AGM, the shareholders authorized the BoD to buy back shares for cancellation purposes in an aggregate value of up to USD 6bn until the 2024 AGM. Any shares bought back under the program are intended to be canceled by way of capital reduction, which will be subject to shareholder approval at one or several subsequent AGMs, and the acquisition and holding of such shares are not subject to the 10% threshold for UBS Group AG’s own shares within the meaning of Art. 659 para. 1 of the Swiss Code of Obligations. The 2021 share repurchase program was concluded on 29 March 2022 with a total of 240,335,273 shares repurchased, at an overall purchase price of CHF 3.81bn. A total of 177,787,273 shares purchased up to 18 February 2022 were canceled in June 2022 upon approval at the 2022 AGM of UBS Group AG. The remaining 62,548,000 shares, repurchased between 21 February 2022 and 29 March 2022, are expected to be canceled by means of a capital reduction, to be proposed for shareholder approval at the 2023 AGM.

Looking ahead, we intend to commence a new, 2023 share repurchase program of up to USD 6bn over two years and expect to execute more than USD 5bn of share repurchases under both the existing, 2022 repurchase program and the new program in 2023.

•

Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information about the share repurchase programs

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Transferability, voting rights and nominee registration

We do not apply any restrictions or limitations on the transferability of shares. Voting rights may be exercised without any restrictions by shareholders entered into the share register if they expressly render a declaration of beneficial ownership according to the provisions of the AoA.

We have special provisions for the registration of nominees. Nominees are entered in the share register with voting rights up to a total of 5% of all issued UBS Group AG shares if they agree to disclose, upon our request, beneficial owners holding 0.3% or more of all issued UBS Group AG shares. An exception to the 5% voting limit rule is in place for securities clearing organizations, such as The Depository Trust Company in New York.

•

Refer to “Shareholders’ participation rights” in this section for more information

Convertible bonds and options

As of 31 December 2022, there were no contingent capital securities or convertible bonds outstanding requiring the issuance of new shares.

•

Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information about our outstanding capital instruments

As of 31 December 2022, there were no employee options and stock appreciation rights outstanding. Option-based compensation plans are sourced by issuing new shares out of conditional capital. As of 31 December 2022, 121,705,830 unissued UBS Group AG shares in conditional share capital were available for the issuance of new shares for this purpose.

•

Refer to “Conditional share capital” in this section for more information

•

Refer to “Note 27 Employee benefits: variable compensation” in the “Consolidated financial statements” section of this report for more information about outstanding options and stock appreciation rights

Shareholders’ participation rights

We are committed to shareholder participation in decision-making processes. Our online voting platform offers registered shareholders a convenient log-in and online voting process. Registered shareholders are sent personal invitations to the general meetings. Together with the invitation materials, they receive a personal one-time password and a QR code to easily log in to the online voting platform, where they can enter their voting instructions or order an admission card for the general meeting.

Shareholders who choose not to receive the comprehensive invitation materials are informed of upcoming general meetings by a short letter containing a personal one-time password, a QR code for online voting and a reference to ubs.com/agm, where all information for the upcoming meeting is available.

General meetings offer shareholders the opportunity to raise questions for the BoD, GEB and internal and external auditors. During the pandemic, when the general meetings 2020–2022 had to be held without the physical attendance of shareholders, we also offered all shareholders the opportunity to contact us with questions, which were answered in writing or during the general meeting.

Voting rights, restrictions and representation

We place no restrictions on share ownership and voting rights. However, pursuant to general principles formulated by the BoD, nominee companies, which normally represent a large number of individual shareholders and may hold an unlimited number of shares, have voting rights limited to a maximum of 5% of all issued UBS Group AG shares. This is to avoid large shareholders being entered in UBS’s share register via nominee companies so as to exercise influence without directly registering their shares with UBS. Securities clearing organizations, such as The Depository Trust Company in New York, are not subject to this 5% voting limit.

Shareholders can exercise voting rights conferred by shares only if they are registered in our share register with voting rights. To register, shareholders must confirm that they have acquired UBS Group AG shares in their own name and for their own account. Nominee companies are required to sign an agreement confirming their willingness to disclose, upon our request, individual beneficial owners holding more than 0.3% of all issued UBS Group AG shares.

All shareholders registered with voting rights are entitled to participate in general meetings. If they do not wish to attend in person, they may issue instructions to support, reject or abstain for each individual item on the meeting agenda, either by giving instructions to an independent proxy in accordance with article 14 of the AoA or by appointing another registered shareholder of their choice to vote on their behalf. Alternatively, registered shareholders may issue their voting instructions to the independent proxy electronically through our online voting platform. Nominee companies normally submit the proxy material to the beneficial owners and forward the collected votes to the independent proxy.

•

Refer to article 14 of the AoA, available at ubs.com/governance, for more information about the issuing of instructions to independent voting right representatives

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Statutory quorums

Motions are decided at a general meeting by an absolute majority of the votes cast, excluding blank and invalid ballots. For the approval of certain specific issues, the Swiss Code of Obligations requires a positive vote from a two-thirds majority of the votes represented at the given general meeting and from a majority of the nominal value of shares represented thereat. Such issues include creating shares with privileged voting rights, introducing restrictions on the transferability of registered shares, authorizing contingent capital or a capital band and restricting or excluding shareholders’ preemptive rights.

The AoA also require a two-thirds majority of votes represented for approval of any change to their provisions regarding the number of BoD members, any decision to remove one-quarter or more of the BoD members and any modification to the provision establishing this qualified quorum.

Votes and elections are generally conducted electronically to ascertain the exact number of votes cast. Voting by a show of hands is possible if a clear majority is predictable. Shareholders representing at least 3% of the votes represented may request that a vote or election be carried out electronically or by written ballot. To allow shareholders to clearly express their views on all individual topics, each agenda item is separately put to a vote and BoD members are elected on a person-by-person basis.

Convocation of general meetings of shareholders

The AGM must be held within six months of the close of the financial year (i.e., 31 December). In 2023, the AGM will take place on 5 April.

Extraordinary general meetings (EGMs) may be convened whenever the BoD or the auditors consider it necessary. Shareholders individually or jointly representing at least 10% of the share capital may at any time, including during an AGM, require, by way of a written statement, that an EGM be convened to address a specific issue they put forward.

A personal invitation, including a detailed agenda, is made available to every registered shareholder at least 20 days ahead of each scheduled general meeting. The items on the agenda are also published in the Swiss Official Gazette of Commerce, as well as at ubs.com/agm.

Placing of items on the agenda

Pursuant to our AoA, shareholders individually or jointly representing shares with an aggregate minimum nominal value of CHF 62,500 may submit proposals for matters to be placed on the agenda for consideration at the next general meeting of shareholders.

At the beginning of January, the invitation to submit such proposals is published in the Swiss Official Gazette of Commerce and at ubs.com/agm. Requests for items to be placed on the agenda must include the actual motions to be put forward, together with a short explanation. Such requests must be submitted to the BoD at least 50 days prior to the general meeting of shareholders, including a statement from the depository bank confirming the number of shares held by the requesting shareholder(s) and that these shares are blocked from sale until the end of the general meeting of shareholders. The BoD formulates opinions on the proposals, which are published together with the motions.

Registrations in the share register

The share register of UBS Group AG, where around 185,000 shareholders are directly registered, is an internal, non-public register subject to statutory confidentiality, secrecy, privacy and data protection regulations protecting registered shareholders. In general, third parties and shareholders have no inspection rights with regard to data related to other shareholders. Disclosure of such data is permitted only in specific and limited instances. In line with the Swiss Federal Act on Data Protection, the disclosure of personal data as defined thereunder is only allowed with the consent of the registered shareholder and in cases where there is an overriding private or public interest or if explicitly provided for by Swiss law. The Swiss Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading contains specific reporting duties, such as in relation to significant shareholders (refer to “Significant shareholders” in this section for more information). Disclosure may also be required or requested by a court of a competent jurisdiction, by any regulatory body that regulates the conduct of UBS Group AG or by other statutory provisions.

The general rules for entry into our Swiss share register with voting rights are described in article 5 of our AoA. The same rules apply to our US transfer agent that operates the US share register for all UBS Group AG shares in a custodian account in the US, where some 255,000 US shareholders are indirectly registered via nominee companies. In order to determine the voting rights of each shareholder, our share register generally closes two business days prior to a general meeting. Our independent proxy agent processes voting instructions from shareholders as long as technically possible, generally also until two business days before a general meeting. Such technical closure of our share register facilitates the determination of the actual voting rights of every shareholder that issued a voting instruction. Irrespective of this technical closure, shares that are registered in our share register are never immobilized and are freely tradable at any time, irrespective of any issued voting instructions.

•

Refer to article 5 of our AoA, available at ubs.com/governance, for more information about the general rules for entry into our Swiss share register

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Board of Directors

The BoD of UBS Group AG, led by the Chairman, consists of between 6 and 12 members, as per our AoA.

The BoD decides on the strategy of the Group, upon recommendation by the Group Chief Executive Officer (the Group CEO), and is responsible for the overall direction, supervision and control of the Group and its management. It is also responsible for supervising compliance with applicable laws, rules and regulations. The BoD exercises oversight over UBS Group AG and its subsidiaries, and is responsible for establishing a clear Group governance framework to provide effective steering and supervision of the Group, taking into account the material risks to which UBS Group AG and its subsidiaries are exposed. The BoD has ultimate responsibility for the success of the Group and for delivering sustainable shareholder value within a framework of prudent and effective controls. It approves all financial statements and appoints and removes all GEB members.

The BoD of UBS AG, led by the Chairman, decides on the strategy of UBS AG upon recommendation by the President of its Executive Board and exercises the ultimate supervision of management. Its ultimate responsibility for the success of UBS AG is exercised subject to the parameters set by the Group.

Members of the Board of Directors

At the AGM on 6 April 2022, Jeremy Anderson, Claudia Böckstiegel, William C. Dudley, Patrick Firmenich, Fred Hu, Mark Hughes, Nathalie Rachou, Julie G. Richardson, Dieter Wemmer and Jeanette Wong were re-elected as members of the BoD. The Chairman, Axel A. Weber, and Reto Francioni did not stand for re-election; the biographies of Mr. Weber and Mr. Francioni can be found on pages 194 and 197 of the UBS Group AG Annual Report 2021, available under “Annual reporting” at ubs.com/investors. Colm Kelleher and Lukas Gähwiler were elected for their first terms, as the new Chairman and a new Board member, respectively. At that same AGM, Julie G. Richardson, Dieter Wemmer and Jeanette Wong were re-elected as members of the Compensation Committee. ADB Altorfer Duss & Beilstein AG was re-elected as independent proxy agent. Following their election, the BoD appointed Lukas Gähwiler as Vice Chairman and Jeremy Anderson as Senior Independent Director of UBS Group AG.

Article 31 of our AoA limits the number of mandates that members of the BoD may hold outside UBS Group to four mandates in listed companies and five additional mandates in non-listed companies. Mandates in companies that are controlled by us or that control us are not subject to this limitation. In addition, members of the BoD may hold no more than 10 mandates at UBS’s request and 10 mandates in associations, charitable organizations, foundations, trusts, and employee welfare foundations. As of 31 December 2022, no member of the BoD reached the thresholds described in article 31 of our AoA.

The following biographies provide information about the BoD members who were in office after the 2022 AGM and the Group Company Secretary. In addition to information on mandates, the biographies include information on memberships or other activities or functions, as required by the SIX Swiss Exchange Corporate Governance Directive.

No member of the BoD currently carries out or has carried out over the past three years operational management tasks within the Group; therefore, all members of the Board are non-executive members.

All members of UBS Group AG’s BoD are also members of UBS AG’s BoD, and committee membership is the same for both entities. The Senior Independent Director function relates only to UBS Group AG.

In 2022, UBS AG’s BoD had three permanent committees: the Audit Committee, the Compensation Committee and the Risk Committee. In addition to these, UBS Group AG also had the Corporate Culture and Responsibility Committee and the Governance and Nominating Committee as permanent committees.

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LOGO

Colm Kelleher

Chairman of the Board of Directors and non-executive member of the Board since 2022

•

Chairperson of the Corporate Culture and Responsibility Committee since 2022

•

Chairperson of the Governance and Nominating Committee since 2022

Nationality: Irish | Year of birth: 1957

Colm Kelleher was elected Chairman of UBS in April 2022. He served as President of Morgan Stanley until retiring from that firm in 2019, overseeing both the Institutional Securities Business and Wealth Management. Before that, he was Co-President and then President of Morgan Stanley Institutional Securities. During the global financial crisis, he held the position of CFO and Co-Head Corporate Strategy from 2007 to 2009. Mr. Kelleher is a well-respected leader in the financial services sector. His 30-year career with Morgan Stanley attests to his solid leadership experience in banking and excellent relationships around the world. He has a deep understanding of the global banking landscape and broad banking experience across all the geographic regions and major business areas in which UBS operates.

Professional experience



2016 – 2019		President, Morgan Stanley, responsible for Institutional Securities and Wealth Management

2011 – 2016		CEO of Morgan Stanley International, Morgan Stanley

2013 – 2015		President, Institutional Securities, Morgan Stanley

2010 – 2012		Co-President, Institutional Securities, Morgan Stanley

2007 – 2009		CFO and Co-Head Corporate Strategy, Morgan Stanley

2006 – 2007		Head Global Capital Markets, Morgan Stanley

2004 – 2006		Co-Head Fixed Income, Europe, Morgan Stanley

1989 – 2004		Various roles, Morgan Stanley

Education

•

Master’s degree, modern history, University of Oxford

•

Fellow of the Institute of Chartered Accountants in England and Wales

Listed company boards

•

Member of the Board of Norfolk Southern Corporation (chair of the risk and finance committee)

Other activities and functions

•

Member of the Board of Directors of the Bretton Woods Committee

•

Member of the Board of the Swiss Finance Council

•

Member of the Board of Americans for Oxford

•

Member of the Oxford Chancellor’s Court of Benefactors

•

Member of the Advisory Council of the British Museum

•

Member of the International Advisory Council of the China Securities Regulatory Commission

•

Member of the European Financial Services Round Table

•

Member of the European Banking Group

•

Member of the International Monetary Conference

Key competencies

•

Banking (wealth management, asset management, personal and corporate banking) and insurance

•

Investment banking, capital markets

•

Finance, audit, accounting

•

Risk management, compliance and legal

Leadership experience

•

CEO, Chairman

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LOGO

Lukas Gähwiler

Vice Chairman and non-executive member of the Board since 2022

Nationality: Swiss | Year of birth: 1965

Lukas Gähwiler brings a wealth of industry experience and an in-depth understanding of UBS to the Board. He served as Chairman of the Board of UBS Switzerland AG for five years and was a member of the Group Executive Board of UBS and President UBS Switzerland from 2010 to 2016, responsible for the private clients, wealth management, corporate and institutional clients, investment banking, and asset management businesses in UBS’s home market. Before joining UBS, Mr. Gähwiler worked for Credit Suisse for over twenty years, his last role being Chief Credit Officer, Global Private and Corporate Banking. In addition to his leadership and industry experience across all parts of the banking business, his strong connections and network, particularly in Switzerland, are instrumental for the firm.

Professional experience



2017 – 2022		Chairman of the Board of Directors of UBS Switzerland AG

2010 – 2016		Member of the Group Executive Board, UBS and President UBS Switzerland

2003 – 2010		Chief Credit Officer, Global Private and Corporate Banking, Credit Suisse

2002 – 2003		Head Credit Risk Management, Corporate Clients Switzerland, Credit Suisse

1998 – 2001		Chief of Staff to CEO, Private and Corporate Clients, Credit Suisse

1990 – 1998		Various senior front office roles in Corporate Clients in Switzerland and North America, Credit Suisse

1981 – 1986		Client Advisor Retail and Wealth Management, St.Galler Kantonalbank

Education

•

Advanced Management Program, Harvard Business School

•

MBA program, International Bankers School, New York

•

Bachelor’s degree, business administration, University of Applied Sciences, St. Gallen

Non-listed company boards

•

Vice Chairman of the Board of Directors of Pilatus Aircraft Ltd

•

Member of the Board of Directors of Ringier AG

Other activities and functions

•

Vice Chairman of the Swiss Bankers Association

•

Chairman of the Employers Association of Banks in Switzerland

•

Member of the Board of Directors of the Swiss Employers Association

•

Member of the Board of economiesuisse

•

Chairman of the Foundation Board of the UBS Pension Fund

•

Member of the Board of the Swiss Finance Council

•

Member of the Board of Trustees of Avenir Suisse

Key competencies

•

Banking (wealth management, asset management, personal and corporate banking) and insurance

•

Finance, audit, accounting

•

Risk management, compliance and legal

•

Human resources management, including compensation

Leadership experience

•

CEO, Chairman

LOGO

Jeremy Anderson

Senior Independent Director since 2020 and non-executive member of the Board since 2018

•

Member of the Governance and Nominating Committee since 2019

•

Chairperson of the Audit Committee since 2018

Nationality: British | Year of birth: 1958

Jeremy Anderson is a financial services veteran, with more than 30 years’ experience working in the banking and insurance sector in an advisory capacity, covering a broad range of topics, including strategy, audit and risk management, technology-enabled transformation, mergers, and bank restructuring. Before retiring from KPMG in 2017, he was its Chairman of Global Financial Services. Mr. Anderson is also an IT expert, having started out as a software developer in the early 1980s, before working in IT consulting and developing a broad knowledge of systems integration and IT outsourcing services, as well as software development. He cemented his reputation as a tech specialist by becoming a founding sponsor of KPMG’s Global Fintech Network in 2014.

Professional experience



2010 – 2017		Chairman of Global Financial Services, KPMG International

2008 – 2011		Head of Clients and Markets KPMG Europe, KPMG International

2006 – 2011		Head of Financial Services KPMG Europe, KPMG International

2004 – 2006		Head of Financial Services KPMG UK, KPMG International

2002 – 2004		Member of the Group Management Board and Head of UK operations, Atos Origin SA

1985 – 2002		KPMG consulting UK, KPMG

1980 – 1985		Software developer, Triad Computing Systems

Education

•

Bachelor’s degree, economics, University College London

Listed company boards

•

Member of the Board of Prudential plc

Other activities and functions

•

Trustee of the UK’s Productivity Leadership Group

•

Trustee of The Kingham Hill Trust

•

Trustee of St. Helen’s Bishopsgate

Key competencies

•

Banking (wealth management, asset management, personal and corporate banking) and insurance

•

Finance, audit, accounting

•

Risk management, compliance and legal

•

Technology, cybersecurity

Leadership experience

•

Executive board leadership

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LOGO

Claudia Böckstiegel

Non-executive member of the Board since 2021

•

Member of the Corporate Culture and Responsibility Committee since 2022

Nationality: Swiss and German | Year of birth: 1964

Claudia Böckstiegel has been General Counsel and a member of the Enlarged Executive Committee of Roche Holding AG since 2020. She started her professional career as an attorney in private practice in Germany, then joined the Swiss pharmaceutical company Roche in Germany in 2001 and subsequently held various global management positions in the legal sector in Switzerland. Ms. Böckstiegel brings a wealth of know-how in a highly regulated sector. Her responsibilities at Roche Holding AG include a broad range of additional topics, such as safety, health and environment, patents, audit and risk advisory, compliance, and sustainability.

Professional experience



2020 – date		General Counsel and member of the Enlarged Executive Committee, Roche Holding AG

2016 – 2020		Head of Legal Diagnostics, F. Hoffmann-La Roche Ltd., Basel, Switzerland, Roche Group

2010 – 2016		Head Legal Business, Roche Diagnostics International Ltd, Rotkreuz, Switzerland, Roche Group

2005 – 2010		Head Legal Business, Roche Diagnostics GmbH, Mannheim, Germany, Roche Group

2001 – 2005		Legal Counsel, Roche Diagnostics GmbH, Mannheim, Germany, Roche Group

1995 – 2001		Attorney (Partner), Philipp & Littig, Mannheim, Germany

1992 – 1995		Attorney (Associate), Dr. Hermann Büttner, Karlsruhe, Germany

Education

•

Master’s degree, law, Universities of Mannheim and Heidelberg

•

Master of Laws (LL.M.), Georgetown University, Washington, DC

Other activities and functions

•

None

Key competencies

•

Finance, audit, accounting

•

Risk management, compliance and legal

•

Regulatory authority, central bank

•

ESG (environmental, social and governance)

Leadership experience

•

Executive board leadership

LOGO

William C. Dudley

Non-executive member of the Board since 2019

•

Member of the Corporate Culture and Responsibility Committee since 2019

•

Member of the Risk Committee since 2019

Nationality: American (US) | Year of birth: 1953

William C. Dudley served as the President and CEO of the Federal Reserve Bank of New York for nine years. He demonstrated exceptional leadership in monetary policy and as a top regulator, including during the years of the global financial crisis. During that period, his additional area of focus included cultural behavior and social and governance topics in the financial services industry. He also served as the Vice Chairman and a permanent member of the Federal Open Market Committee. Mr. Dudley brings a wealth of experience in banking and research thanks to his former management positions at Goldman Sachs Group and Morgan Guaranty Trust.

Professional experience



2009 – 2018		President and CEO, Federal Reserve Bank of New York

2007 – 2009		Executive Vice President and Head Markets Group, Federal Reserve Bank of New York

2006		Senior advisor (part-time), Goldman Sachs Group

2002 – 2005		Partner and Director US Economic Research Group, Goldman Sachs Group

1996 – 2002		Managing Director and Director US Economic Research Group, Goldman Sachs Group

1983 – 1996		Economist at Goldman Sachs Group, Morgan Guaranty Trust Company, and Board of Governors of the Federal Reserve System

Education

•

Bachelor of Arts, New College of Florida

•

Doctorate, economics, University of California, Berkeley

Non-listed company boards

•

Member of the Board of Treliant LLC

Other activities and functions

•

Senior Advisor to the Griswold Center for Economic Policy Studies, Princeton University

•

Member of the Group of Thirty

•

Member of the Council on Foreign Relations

•

Chairman of the Bretton Woods Committee Board of Directors

•

Member of the Board of the Council for Economic Education

•

Opinion writer and consultant to Bloomberg Economics, Bloomberg

Key competencies

•

Investment banking, capital markets

•

Risk management, compliance and legal

•

Regulatory authority, central bank

•

ESG (environmental, social and governance)

Leadership experience

•

CEO, Chairman

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LOGO

Patrick Firmenich

Non-executive member of the Board since 2021

•

Member of the Audit Committee since 2021

•

Member of the Corporate Culture and Responsibility Committee since 2021

Nationality: Swiss | Year of birth: 1962

Patrick Firmenich has been Chairman of the Board of Firmenich International SA, the world’s largest privately owned fragrances and flavorings company, since 2016, after leading the company as CEO during a 12-year tenure. He demonstrated his entrepreneurial leadership by significantly advancing the Firmenich group’s global position through organic and in-organic growth and succeeded in transforming the organization to continuously respond to client needs and the market environment. He developed an ambitious sustainability strategy for the group to lead the industry in health, safety and environmental performance. Before joining Firmenich, he held several positions in the legal and banking sectors, including working as an international investment banking analyst.

Professional experience



2014 – 2016		Vice Chairman of the Board, Firmenich International SA

2002 – 2014		CEO, Firmenich SA, Geneva

2001 – 2002		Corporate Vice President, Special Operations, Firmenich SA, Geneva

1997 – 2001		Vice President Fine Fragrance worldwide and Président Directeur Général, Firmenich & Cie, Paris, and Firmenich Inc, New York

1993 – 1997		Vice President Fine Fragrance North America, Firmenich Inc, New York

1990 – 1993		Account Manager, Firmenich & Cie, Paris

1988 – 1989		Analyst, International Investment Banking, Credit Suisse First Boston

1988		Production administrator, Firmenich SA de CV, Mexico

1984 – 1986		Attorney, Business Law, Patry, Junet, Simon & Le Fort, Geneva

Education

•

Master’s degree, law, University of Geneva, admitted to the bar in Geneva

•

MBA, INSEAD Fontainebleau

Non-listed company boards

•

Chairman of Firmenich International SA

•

Member of the Board of Jacobs Holding AG

Other activities and functions

•

Member of the Board of INSEAD and INSEAD World Foundation

•

Member of the Advisory Council of the Swiss Board Institute

Key competencies

•

Finance, audit, accounting

•

Risk management, compliance and legal

•

Human resources management, including compensation

•

ESG (environmental, social and governance)

Leadership experience

•

CEO, Chairman

LOGO

Fred Hu

Non-executive member of the Board since 2018

•

Member of the Governance and Nominating Committee since 2020

Nationality: Chinese | Year of birth: 1963

Fred Hu has been the Chairman and CEO of Primavera Capital Group, an Asia-based private investment firm focused on emerging technology and innovative industries, since founding it in 2010. Prior to that, he was a partner and Chairman for Greater China at Goldman Sachs. Mr. Hu has a profound understanding of China’s economy and rapidly developing financial system, and a vast amount of experience advising and investing in leading firms in the tech, consumer and health-care sectors in China and globally. He has worked at the IMF and advised the Chinese government on economic policy.

Professional experience



2010 – date		Founder, Chairman and CEO, Primavera Capital Group, China

2008 – 2010		Partner and Chairman of Greater China, Goldman Sachs

2004 – 2008		Partner and Co-Head, Investment Banking, China, Goldman Sachs

2003 – 2004		Managing Director and Co-Head, Investment Banking, China, Goldman Sachs

2000 – 2003		Managing Director and Chief Economist and Strategist, Greater China, Goldman Sachs

1996 – date		Co-Director, the National Center for Economic Research

1996 – date		Adjunct Professor, Economics, Tsinghua University

Education

•

Master’s degree, engineering science, Tsinghua University

•

Master’s degree and doctorate, economics, Harvard University

Listed company boards

•

Non-executive Chairman of the Board of Yum China Holdings (chair of the nomination and governance committee)

•

Member of the Board of ICBC

Non-listed company boards

•

Chairman of Primavera Capital Ltd

Other activities and functions

•

Trustee of the China Medical Board

•

Governor of the Chinese International School in Hong Kong SAR

•

Co-Chairman of the Nature Conservancy Asia Pacific Council

•

Member of the Board of Trustees, the Institute for Advanced Study

•

Director and member of the Executive Committee of China Venture Capital and Private Equity Association Ltd.

Key competencies

•

Investment banking, capital markets

•

Risk management, compliance and legal

•

Technology, cybersecurity

•

Regulatory authority, central bank

Leadership experience

•

CEO, Chairman

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LOGO

Mark Hughes

Non-executive member of the Board since 2020

•

Chairperson of the Risk Committee since 2020

•

Member of the Corporate Culture and Responsibility Committee since 2020

Nationality: Canadian, British and American (US) | Year of birth: 1958

Mark Hughes is a highly experienced professional in the financial services sector, having spent more than 35 years working for RBC (the Royal Bank of Canada) in Canada, the US and the UK. In his final role as Group Chief Risk Officer of RBC, he was responsible for the strategic management of risk on an enterprise-wide basis and oversaw all risk functions. During his career, Mr. Hughes has also held senior management positions in the front office and key operational roles. Currently, he is a visiting lecturer at Leeds University and is chair of the Global Risk Institute, bringing an enormous amount of experience as a risk specialist to the Board of Directors of UBS.

Professional experience



2014 – 2018		Group Chief Risk Officer and member Group Executive Committee, RBC

2013		Deputy Chief Risk Officer, RBC

2008 – 2013		COO, RBC Capital Markets, RBC

2001 – 2008		Head of Global Credit, RBC

1999 – 2001		Head of Debt Products, RBC

1998 – 1999		Senior Vice President and General Manager USA, RBC

1997 – 1998		Senior Vice President Financial Services, RBC

1982 – 1996		Various positions, RBC

Education

•

Bachelor of Laws (LL.B.), University of Leeds

•

MBA, finance, University of Manchester

Other activities and functions

•

Chair of the Board of Directors of the Global Risk Institute

•

Visiting lecturer at the University of Leeds

•

Senior advisor to McKinsey & Company

Key competencies

•

Banking (wealth management, asset management, personal and corporate banking) and insurance

•

Investment banking, capital markets

•

Risk management, compliance and legal

•

Technology, cybersecurity

Leadership experience

•

Executive board leadership

LOGO

Nathalie Rachou

Non-executive member of the Board since 2020

•

Member of the Governance and Nominating Committee since 2022

•

Member of the Risk Committee since 2020

Nationality: French | Year of birth: 1957

Nathalie Rachou is a seasoned expert in financial services, having held a number of banking positions, such as CEO of Prime Brokerage and head of a business line in Capital Markets at Crédit Agricole Indosuez in the UK and in France. In 1999, she founded a London-based asset management company that merged with a French asset manager and continued as a senior adviser until 2020. Alongside these roles, Ms. Rachou brings extensive experience from serving as a board member of Société Générale for 12 years and is currently on the boards of two other listed companies, including the pan-European bourse, Euronext N.V.

Professional experience



2015 – 2020		Senior Advisor, Clartan Associés (formerly Rouvier Associés), France

1999 – 2014		Founding partner and CEO, Topiary Finance Ltd., UK

1996 – 1999		Head of Global Foreign Exchange and Currency Options, Crédit Agricole Indosuez (formerly Banque Indosuez), UK

1991 – 1996		Corporate Secretary and Secretary to the Board of Directors, Crédit Agricole Indosuez, France

1986 – 1991		COO, Carr Futures, France (owned by Banque Indosuez), Crédit Agricole Indosuez, France

1983 – 1986		Head of Asset and Liability Management & Market Risks, Crédit Agricole Indosuez, France

1978 – 1982		Position in Forex Exchange Sales, Crédit Agricole Indosuez, France and UK

Education

•

Master’s degree, management, HEC Paris

•

MBA, INSEAD Fontainebleau

Listed company boards

•

Member of the Board of Euronext N.V. (chair of the remuneration committee)

•

Member of the Board of Veolia Environnement SA (chair of the audit committee)

Non-listed company boards

•

Member of the Board of the African Financial Institutions Investment Platform

Key competencies

•

Banking (wealth management, asset management, personal and corporate banking) and insurance

•

Investment banking, capital markets

•

Finance, audit, accounting

•

Risk management, compliance and legal

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178

LOGO

Julie G. Richardson

Non-executive member of the Board since 2017

•

Chairperson of the Compensation Committee since 2019

•

Member of the Risk Committee since 2017

Nationality: American (US) | Year of birth: 1963

Julie G. Richardson spent more than 25 years on Wall Street as a senior investment banker with a focus on telecom, media and technology. She began her career at Merrill Lynch, before moving to JPMorgan Chase, where she headed the telecommunications, media and technology investment banking group. Later, she moved into private equity, as head of the New York office of Providence Equity Partners. Throughout her career, Ms. Richardson has spent significant time with both incumbent and new technology companies, including being a board member of a digital knowledge management company and a leading cloud monitoring firm.

Professional experience



2012 – 2014		Senior advisor, Providence Equity Partners, New York

2003 – 2012		Partner and Head of the New York office, Providence Equity Partners, New York

1998 – 2003		Vice Chairman of the Investment Banking division of JPMorgan Chase & Co. and Head of its Global Telecommunications, Media and Technology group

1986 – 1998		Various positions at Merrill Lynch, final position: Managing Director Media and Communications Investment Banking

Education

•

Bachelor’s degree, business administration, University of Wisconsin–Madison

Listed company boards

•

Member of the Board of Yext (chair of the audit committee)

•

Member of the Board of Datadog (chair of the audit committee)

Non-listed company boards

•

Member of the Board of Fivetran

•

Member of the Board of Coalition, Inc.

Key competencies

•

Investment banking, capital markets

•

Risk management, compliance and legal

•

Human resources management, including compensation

•

Technology, cybersecurity

LOGO

Dieter Wemmer

Non-executive member of the Board since 2016

•

Member of the Audit Committee since 2019

•

Member of the Compensation Committee since 2018

Nationality: Swiss and German | Year of birth: 1957

Dieter Wemmer began his highly successful career in the insurance sector with the Zurich Group in 1986, retiring in 2017 as CFO of Allianz. As a long-serving CFO of two large multi-national companies in the financial services sector, he has deep experience across a broad range of highly relevant topics. Mr. Wemmer brings to the BoD knowledge covering accounting, finance and audit, including capital markets, investments and risk management, as well as asset management. His know-how includes hands-on experience in mergers and acquisitions, and management of large organizations with a focus on strategy.

Professional experience



2013 – 2017		CFO, Allianz SE

2012 – 2013		Member of the Board of Management, responsible for the insurance business in France, Benelux, Italy, Greece and Turkey and for the “Global Property & Casualty” Center of Competence, Allianz SE

2007 – 2011		CFO, Zurich Insurance Group

2010 – 2011		Regional Chairman of Europe, Zurich Insurance Group

2004 – 2007		CEO of the Europe General Insurance business and member of Zurich’s Group Executive Committee, Zurich Insurance Group

2003 – 2004		COO of Europe General Insurance, Zurich Insurance Group

1999 – 2003		Head of Mergers and Acquisitions, Zurich Insurance Group

1997 – 1999		Head of Financial Controlling, Zurich Insurance Group

Education

•

Master’s degree and doctorate, mathematics, University of Cologne

Listed company boards

•

Member of the Board of Ørsted A/S (chair of the audit and risk committee)

Non-listed company boards

•

Chairman of Marco Capital Holdings Limited, Malta and subsidiaries

Other activities and functions

•

Member of the Berlin Center of Corporate Governance

Key competencies

•

Banking (wealth management, asset management, personal and corporate banking) and insurance

•

Investment banking, capital markets

•

Finance, audit, accounting

•

Risk management, compliance and legal

Leadership experience

•

Executive board leadership

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LOGO

Jeanette Wong

Non-executive member of the Board since 2019

•

Member of the Compensation Committee since 2020

•

Member of the Audit Committee since 2019

Nationality: Singaporean | Year of birth: 1960

Jeanette Wong has spent more than 30 years working in the financial sector in Singapore. She retired from DBS Group in 2019, where she was Group Executive responsible for the institutional banking business, a post that encompassed corporate banking, global transaction services, strategic advisory, and mergers and acquisitions. Prior to that, she held the position of CFO at DBS Bank. During a 16-year career with JPMorgan Chase, Ms. Wong helped build up its Asia and emerging markets business. She brings extensive experience from serving as a member of the board of directors of two high-value listed companies.

Professional experience



2008 – 2019		Group Executive institutional banking business, DBS Bank, Singapore

2003 – 2008		CFO, DBS Bank, Singapore

2003		Chief Administration Officer, DBS Bank, Singapore

1997 – 2002		Country Manager Singapore, JPMorgan Chase, Singapore

1986 – 1997		Various roles in Global Markets and Emerging Markets Sales and Trading business, Asia, JPMorgan Chase, Singapore

1984 – 1986		Manager, Private Banking, Citibank, Singapore

1982 – 1984		Manager, Corporate Banking, Paribas, Singapore

Education

•

Bachelor’s degree, business administration, the National University of Singapore

•

MBA, University of Chicago

Listed company boards

•

Member of the Board of Prudential plc

•

Member of the Board of Singapore Airlines Limited

Non-listed company boards

•

Member of the Board Risk Committee of GIC Pte Ltd

•

Member of the Board of Jurong Town Corporation

•

Member of the Board of PSA International

Other activities and functions

•

Chairman of the CareShield Life Council

•

Member of the Securities Industry Council

•

Member of the Board of Trustees of the National University of Singapore

Key competencies

•

Banking (wealth management, asset management, personal and corporate banking) and insurance

•

Investment banking, capital markets

•

Finance, audit, accounting

•

ESG (environmental, social and governance)

Leadership experience

•

Executive board leadership

LOGO

Markus Baumann

Group Company Secretary since 2017

Nationality: Swiss | Year of birth: 1963

Markus Baumann joined UBS in 1979 as a banking apprentice and has now been with the firm for more than 40 years. Earlier in his career, he worked in Japan for four years, as Corporate Planning Officer and assistant to the CEO. He then worked as COO EMEA for UBS Asset Management and has since held a broad range of leadership roles across the Group in Switzerland, the US and Japan, including COO of Group Internal Audit from 2006 to 2015.

Professional experience



2017 – date		Group Company Secretary of UBS Group AG and Company Secretary of UBS AG

2015 – 2016		Chief of Staff to the Chairman of the Board of Directors, UBS

2006 – 2015		COO, Group Internal Audit, UBS

2005 – 2006		Head Global Reporting & Controlling, Global Asset Management, UBS

2002 – 2004		Head Management Support CEO EMEA, Global Asset Management, UBS

1998 – 2002		COO EMEA, Global Asset Management, UBS

1979 – 1997		Various positions, Union Bank of Switzerland

Education

•

Swiss Federal Diploma as a Business Analyst

•

MBA, INSEAD Fontainebleau

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Elections and terms of office

Shareholders annually elect each member of the BoD individually, as well as the Chairman and the members of the Compensation Committee, based on proposals from the BoD.

As set out in the Organization Regulations, BoD members are normally expected to serve for at least three years. BoD members are limited to serving for a maximum of 10 consecutive terms of office; in exceptional circumstances, the BoD may extend that limit.

•

Refer to “Skills, expertise and training of the Board of Directors” in this section for more information

Organizational principles and structure

Following each AGM, the BoD meets to appoint one or more Vice Chairmen, a Senior Independent Director, the BoD committee members (other than the Compensation Committee members, who are elected by the shareholders) and the respective committee Chairpersons. At the same meeting, the BoD appoints the Group Company Secretary, who, pursuant to the Organization Regulations, acts as secretary to the BoD and its committees.

Pursuant to the AoA and the Organization Regulations, the BoD meets as often as business requires, but it must meet at least six times a year. During the height of the COVID-19 pandemic, BoD meetings were mainly organized as video calls, with few exceptions. Based on the experiences during the pandemic, the BoD decided to adopt a split approach for 2022 and going forward. In 2022, half of the meetings were held in person. During 2022, a total of 31 BoD meetings were held, 15 of which were attended by GEB members. Average participation in the BoD meetings was 98%. In addition to the BoD meetings attended by GEB members, the Group CEO regularly attended some of the meetings of the BoD without the participation of other GEB members. The meetings had an average duration of 95 minutes and covered both UBS Group AG and UBS AG. Additionally, six ad hoc calls were held. The BoD held a two-day strategy workshop, which included deep dives on each business division and geographical region, and focused on the execution against the strategy defined in 2021. A separate one-day strategy deep dive was held with a specific focus on the Asia Pacific region.

At the BoD meetings, each committee Chairperson provides the BoD with an update on current activities of his or her committee and important committee issues.

In 2022, four UBS AG BoD meetings were held with members of the Executive Board in attendance. These standalone meetings are held regularly to discuss and agree on finance, risk, compliance, operational risk, regulatory and other topics related to UBS AG.

We also continued with the coordination and exchange of information between UBS Group AG and its significant group entities. Joint meetings between the BoD of UBS Group AG and the boards of directors of the significant group entities, as well as between the respective chairs of the risk and audit committees, have been held. As in prior years, an annual workshop, attended by independent members of the boards of the Group and significant group entities, was held.

Performance assessment

Every third year, an external assessment of the effectiveness of the BoD is conducted. In 2022, this review concluded that the UBS BoD and committees operate effectively, in line with best practice, and set a high standard in comparison with leading international peers. The review also confirmed that the BoD agenda covers all important and relevant topics and that these are addressed professionally and in great depth. It further found that the BoD members are independent, highly committed and of the highest integrity, and that the Chairman provides effective leadership and direction. The review emphasized that the cooperation between the BoD and the GEB is based on mutual trust, respect and constructive dialogue. The mix of expertise in the BoD is broad-based and the quality of BoD members is high. The BoD and GEB have responded well to the economic environment, including successfully managing the firm through the COVID-19 pandemic and other significant challenges, while maintaining an appropriate focus on control and regulatory issues. The review highlighted the successful CEO transition and onboarding, and the well-planned and professionally executed Chairman succession process. No significant weaknesses were identified in the review; maintaining a balanced agenda that provides sufficient room for each business performance, strategic review and growth initiatives was the main area recommended for further focus. In spring 2023, the performance assessment will be conducted in-house with a lengthy questionnaire.

BoD committees

The committees listed below assist the BoD in fulfilling the performance of its responsibilities. These committees and their charters are described in our Organization Regulations, available at ubs.com/governance. The committees meet as often as their business requires, but no less than four times a year in the case of the Audit Committee, the Risk Committee and the Compensation Committee, and no less than twice a year in the case of the Corporate Culture and Responsibility Committee (the CCRC) and the Governance and Nominating Committee. Topics of common interest or affecting more than one committee are discussed at joint committee meetings.

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During 2022, a total of eight joint committee meetings were held for UBS Group AG (five joint committee meetings were held simultaneously for UBS AG). The Audit Committee met four times with the Risk Committee and twice with the CCRC. The Risk Committee met once with the CCRC and once with the Compensation Committee.

Board of Directors


Members in 2022	Meeting attendance without GEB³				Meeting attendance with GEB
Axel A. Weber, Chairman¹		2/2	100	%		2/2	100	%
Colm Kelleher, Chairman²		14/14	100	%		13/13	100	%
Lukas Gähwiler²		14/14	100	%		13/13	100	%
Jeremy Anderson		16/16	100	%		15/15	100	%
Claudia Böckstiegel		16/16	100	%		15/15	100	%
William C. Dudley		16/16	100	%		15/15	100	%
Patrick Firmenich		16/16	100	%		15/15	100	%
Reto Francioni¹		2/2	100	%		2/2	100	%
Fred Hu		14/16	88	%		14/15	93	%
Mark Hughes		16/16	100	%		15/15	100	%
Nathalie Rachou		16/16	100	%		15/15	100	%
Julie G. Richardson		15/16	94	%		15/15	100	%
Dieter Wemmer		15/16	94	%		15/15	100	%
Jeanette Wong		16/16	100	%		15/15	100	%

Key responsibilities include:

The Board has ultimate responsibility for the success of the Group and for delivering sustainable shareholder value within a framework of prudent and effective controls. It decides on the Group’s strategy and the necessary financial and human resources upon recommendation of the Group CEO and sets the Group’s values and standards to ensure that its obligations to shareholders and other stakeholders are met.

•

Refer to the Organization Regulations of UBS Group AG, available at ubs.com/governance, for more information

¹	Axel A. Weber and Reto Francioni did not stand for re-election at the 2022 AGM; indicated are their attended and total meetings up to the 2022 AGM.

²	Colm Kelleher was elected as Chairman and Lukas Gähwiler to the Board at the 2022 AGM; indicated are their attended and total meetings after their election.

³	Additionally, six calls took place in 2022.

Audit Committee

Throughout 2022, the Audit Committee consisted of four independent BoD members. All Audit Committee members have accounting or related financial management expertise and, in compliance with the rules established pursuant to the 2002 US Sarbanes–Oxley Act, at least one member qualifies as a financial expert. The NYSE standards on corporate governance and Rule 10A-3 under the US Securities Exchange Act set more stringent independence requirements for members of audit committees than for the other members of the BoD. Throughout 2022, all members of the Audit Committee, in addition to satisfying our independence criteria, satisfied these requirements, in that they did not receive, directly or indirectly, any consulting, advisory or compensatory fees from any member of the Group other than in their capacity as a BoD member, did not hold, directly or indirectly, UBS Group AG shares in excess of 5% of the outstanding capital, and did not serve on the audit committees of more than two other public companies.

During 2022, the Audit Committee held 12 committee meetings, with a participation rate of 100%. The meetings had an average duration of approximately 135 minutes and covered both UBS Group AG and UBS AG. Additional attendees included the Group CFO, the Group Controller and Chief Accounting Officer, the Head Group Internal Audit (GIA), and the external auditors. The Chairman of the BoD, the Vice Chairman and the Group CEO attended most meetings. The Chairperson and the committee continued to maintain regular contact with core supervisory authorities.

Audit Committee


Members in 2022	Meeting attendance
Jeremy Anderson (Chairperson)		12/12	100	%
Patrick Firmenich		12/12	100	%
Dieter Wemmer		12/12	100	%
Jeanette Wong		12/12	100	%

Key responsibilities include:

The function of the Audit Committee is to support the Board in fulfilling its oversight duty relating to financial reporting and internal controls over financial reporting, the effectiveness of the external and internal audit functions, and the effectiveness of whistleblowing procedures.

Management is responsible for the preparation, presentation and integrity of the financial statements, while the external auditors are responsible for auditing financial statements. The Audit Committee’s responsibility is one of oversight and review.

•

Refer to the Organization Regulations of UBS Group AG, available at ubs.com/governance, for more information

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Compensation Committee

In 2022, the Compensation Committee consisted of four independent members before the AGM and three independent members after the AGM. In addition to the key responsibilities indicated in the same table, the Compensation Committee reviews the compensation disclosures included in this report.

During 2022, the Compensation Committee held eight meetings, with a participation rate of 100%. The meetings had an average duration of approximately 70 minutes and covered both UBS Group AG and UBS AG. All meetings were held in the presence of the Chairman and the Group CEO and most were attended by external advisors. In 2022, the Chairperson met regularly with core supervisory authorities.

•

Refer to “Compensation for the Board of Directors” in the “Compensation” section of this report for more information about the Compensation Committee’s decision-making procedures

Compensation Committee


Members in 2022	Meeting attendance²
Julie G. Richardson (Chairperson)		8/8	100	%
Reto Francioni¹		2/2	100	%
Dieter Wemmer		8/8	100	%
Jeanette Wong		8/8	100	%

Key responsibilities include:

The Compensation Committee is responsible for:

(i)	supporting the Board in its duties to set guidelines on compensation and benefits;

(ii)	approving the total compensation for the Chairman and the non-independent Board members;

(iii)

proposing, upon proposal of the Chairman, financial and non-financial performance targets and objectives for the Group CEO for approval by the Board and reviewing, upon the proposal of the Group CEO, the performance framework for the other GEB members;

(iv)	proposing, upon proposal of the Chairman, the Group CEO’s performance assessment for approval by the Board, as well as informing the Board of the performance assessments of all GEB members, including the Group CEO;

(v)	proposing, upon proposal of the Chairman, the total compensation for the Group CEO for approval by the Board; and

(vi)	proposing, upon proposal of the Group CEO, the individual total compensation for the other GEB members for approval by the Board.

•

Refer to the Organization Regulations of UBS Group AG, available at ubs.com/governance, for more information

¹	Reto Francioni did not stand for re-election at the 2022 AGM; indicated are his attended and total meetings up to the 2022 AGM

²	Additionally, the Compensation Committee held one ad hoc call.

Corporate Culture and Responsibility Committee

In 2022, the CCRC consisted of the Chairperson and four independent BoD members. The Group CEO, the Group Chief Risk Officer, the President Asset Management and GEB Lead for Sustainability and Impact, the Group General Counsel and the Chief Sustainability Officer are permanent guests of the CCRC. During 2022, six meetings were held, with a participation rate of 100%. The average duration of each of the meetings was approximately 85 minutes.

Corporate Culture and Responsibility Committee


Members in 2022	Meeting attendance
Axel A. Weber (Chairperson)¹		2/2	100	%
Colm Kelleher (Chairperson)²		4/4	100	%
Claudia Böckstiegel²		4/4	100	%
William C. Dudley		6/6	100	%
Patrick Firmenich		6/6	100	%
Mark Hughes		6/6	100	%
Jeanette Wong¹		2/2	100	%

Key responsibilities include:

The CCRC supports the Board in its duties to safeguard and advance the Group’s reputation for responsible and sustainable conduct. Its function is forward-looking in that it monitors and reviews societal trends and transformational developments and assesses their potential relevance for the Group.

In undertaking this assessment, it reviews stakeholder concerns and expectations pertaining to the societal performance of UBS and to the development of its corporate culture. The CCRC’s function also encompasses the monitoring of the current state and implementation of the programs and initiatives within the Group pertaining to corporate culture and corporate responsibility, including sustainability.

•

Refer to the Organization Regulations of UBS Group AG, available at ubs.com/governance, for more information

¹	Axel A. Weber did not stand for re-election and Jeannette Wong stepped down from this committee at the 2022 AGM; indicated are their attended and total meetings up to the 2022 AGM.

²	Colm Kelleher became Chairman and Claudia Böckstiegel member of this committee; indicated are their attended and total meetings after election.

Governance and Nominating Committee

In 2022, the Governance and Nominating Committee consisted of, in addition to the Chairperson, five independent members before the AGM and three independent members after the AGM. During 2022, six meetings were held, with a participation rate of 100%. The average duration of each of the meetings was approximately 60 minutes. The Group CEO attended meetings as appropriate.

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Governance and Nominating Committee


Members in 2022	Meeting attendance³
Axel A. Weber (Chairperson)¹		2/2	100	%
Colm Kelleher (Chairperson)²		4/4	100	%
Jeremy Anderson		6/6	100	%
William C. Dudley¹		2/2	100	%
Fred Hu		6/6	100	%
Nathalie Rachou²		4/4	100	%
Julie G. Richardson¹		2/2	100	%
Dieter Wemmer¹		2/2	100	%

Key responsibilities include:

The function of the Governance and Nominating Committee is to support the Board in fulfilling its duty to establish best practices in corporate governance across the Group, including conducting a Board assessment, establishing and maintaining a process for appointing new Board and GEB members, as well as for the annual performance assessment of the Board.

•

Refer to the Organization Regulations of UBS Group AG, available at ubs.com/governance, for more information

¹	Axel A. Weber did not stand for re-election; William Dudley, Julie G. Richardson and Dieter Wemmer stepped down from this committee at the 2022 AGM; indicated are their attended and total meetings up to the 2022 AGM.

²	Colm Kelleher became Chairman and Nathalie Rachou member of this committee; indicated are their attended and total meetings after election.

³	Additionally, the Governance and Nominating Committee held one ad hoc call.

Risk Committee

In 2022, the Risk Committee consisted of six independent members before the AGM and four independent members after the AGM. During 2022, the Risk Committee held 12 committee meetings, with a participation rate of 100%. The average duration of each of the meetings was approximately 145 minutes, covering both UBS Group AG and UBS AG. The Chairman of the BoD, the Vice Chairman, the Group CEO, the Group CFO, the Group Chief Risk Officer, the Group Chief Digital and Information Officer, the Group Treasurer, the Group Chief Compliance and Governance Officer, the Group General Counsel, the Head GIA, and the external auditors attended the meetings. In 2022, the Chairperson or the full committee met with core supervisory authorities.

Risk Committee


Members in 2022	Meeting attendance
Mark Hughes (Chairperson)		12/12	100	%
William C. Dudley		12/12	100	%
Reto Francioni¹		3/3	100	%
Fred Hu¹		3/3	100	%
Nathalie Rachou		12/12	100	%
Julie G. Richardson		12/12	100	%

Key responsibilities include:

The function of the Risk Committee is to oversee and support the Board in fulfilling its duty to set and supervise an appropriate risk management and control framework in the areas of:

(i)	financial and non-financial risks;

(ii)	balance sheet, treasury and capital management, including funding, liquidity and equity attribution.

•

Refer to the Organization Regulations of UBS Group AG, available at ubs.com/governance, for more information

¹	Reto Francioni did not stand for re-election and Fred Hu stepped down from this committee at the 2022 AGM; indicated are their attended and total meetings up to the 2022 AGM.

Ad hoc committees

The Special Committee and the Strategy Committee are two ad hoc committees, which have a standing composition and hold meetings as and when required.

Leading up to the 2022 AGM, the Special Committee was chaired by Jeremy Anderson, with Claudia Böckstiegel, Nathalie Rachou, Julie G. Richardson and Axel A. Weber as its members; after the AGM, Colm Kelleher and Lukas Gähwiler joined the Special Committee and Axel A. Weber stepped down from the BoD. Its primary purpose is to oversee activities related to key litigation and investigation matters, review management’s respective proposals and provide to the BoD recommendations for decisions. In 2022, the main focus was the French cross-border matter. The Group CEO and the Group General Counsel are permanent guests of the Special Committee. During 2022, two meetings of the Special Committee were held, covering both UBS Group AG and UBS AG.

Leading up to the 2022 AGM, the Strategy Committee was chaired by Axel A. Weber, with William C. Dudley, Fred Hu and Dieter Wemmer as its members; after the AGM, Colm Kelleher replaced Axel A. Weber (who stepped down from the BoD) as the chair and Julie G. Richardson also joined the Strategy Committee. The primary purpose of this committee is to support management and the BoD with regard to the assessment of strategic considerations and to prepare decisions on behalf of the BoD. During 2022, four meetings of the Strategy Committee were held, covering both UBS Group AG and UBS AG. The Group CEO and other members of the GEB and management participated in these meetings as required.

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Roles and responsibilities of the Chairman of the Board of Directors

At the 2022 AGM, Axel A. Weber stepped down and Colm Kelleher was elected as the full-time Chairman of the BoD. The Chairman coordinates tasks within the BoD, calls BoD meetings and sets their agendas. He presides over all general meetings of shareholders, chairs the Governance and Nominating Committee, as well as the CCRC, and works with the committee Chairpersons to coordinate the work of all BoD committees. Together with the Group CEO, the Chairman undertakes responsibility for UBS’s reputation, and is responsible for effective communication with shareholders and other stakeholders, including government officials, regulators and public organizations. This is in addition to establishing and maintaining close working relationships with the Group CEO and other GEB members, and providing advice and support when appropriate.

•

Refer to “Employees” in the “How we create value for our stakeholders” section of this report for information about our Pillars, Principles and Behaviors

In 2022, the respective Chairman in office met regularly with core supervisory authorities of all major locations where UBS is active. Meetings with important supervisory authorities were scheduled on an ad hoc or needs-driven basis.

Roles and responsibilities of the Vice Chairmen and the Senior Independent Director

The BoD appoints one or more Vice Chairmen and a Senior Independent Director. If the BoD appoints more than one Vice Chairman, at least one of them must be independent. Both the Vice Chairman and the Senior Independent Director support the Chairman with regard to his responsibilities and authorities and provide him with advice. In conjunction with the Chairman and the Governance and Nominating Committee, they facilitate good Group-wide corporate governance, as well as balanced leadership and control within the Group, the Board and the committees.

Lukas Gähwiler was appointed as Vice Chairman following the 2022 AGM. Jeremy Anderson has been the Senior Independent Director since 2020. The Vice Chairman is required to lead meetings of the BoD in the temporary absence of the Chairman. Together with the Governance and Nominating Committee, either one of them is tasked with the ongoing monitoring and the annual evaluation of the Chairman. The Vice Chairman also represents UBS on behalf of the Chairman in meetings with internal or external stakeholders. In particular, he represents UBS across a broad range of associations and industry bodies in Switzerland.

The Senior Independent Director enables and supports communication and the flow of information among the independent BoD members. At least twice a year, he organizes and leads a meeting of the independent BoD members without the participation of the Chairman. In 2022 and in early 2023, two independent BoD meetings were held, covering both UBS Group AG and UBS AG, with an average participation rate of 85% and an average duration of approximately 105 minutes. The Senior Independent Director also relays to the Chairman any issues or concerns raised by the independent BoD members and acts as a point of contact for shareholders and stakeholders seeking discussions with an independent BoD member.

Important business connections of independent members of the Board of Directors

As a global financial services provider and a major Swiss bank, we enter into business relationships with many large companies, including some in which our BoD members have management or independent board responsibilities. The Governance and Nominating Committee determines in each instance whether the nature of the Group’s business relationship with such a company might compromise our BoD members’ capacity to express independent judgment.

Our Organization Regulations require three-quarters of the UBS Group AG BoD members and one-third of those at UBS AG to be independent. For this purpose, independence is determined in accordance with FINMA Circular 2017/1 “Corporate governance – banks” and the NYSE rules.

In 2022, our BoD met the standards of the Organization Regulations for the percentage of directors who are considered independent under the criteria described above. Axel Weber, who served as Chairman of the Board until the Annual General Meeting on 6 April 2022, had a full-time contract with UBS Group AG and was not considered independent. Our Vice Chairman, Lukas Gähwiler, previously had a full-time contract with UBS Switzerland AG and, therefore, is currently not considered independent according to the regulatory independence rules. No current BoD member has either an employment contract or a significant business connection to UBS or any of its subsidiaries. Except for the Vice Chairman, no BoD member currently carries out, or has carried out over the past three years, any operational management tasks within the Group.

All relationships and transactions with UBS Group AG’s independent BoD members are conducted in the ordinary course of business and are on the same terms as those prevailing at the time for comparable transactions with non-affiliated persons. All relationships and transactions with BoD members’ associated companies are conducted at arm’s length.

•

Refer to “Note 30 Related parties” in the “Consolidated financial statements” section on of this report for more information

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Checks and balances: Board of Directors and Group Executive Board

We operate under a strict dual board structure, as mandated by Swiss banking law. The separation of responsibilities between the BoD and the GEB is clearly defined in the Organization Regulations. The BoD decides on the strategy of the Group, upon recommendations by the Group CEO, and exercises ultimate supervision over management; whereas the GEB, headed by the Group CEO, has executive management responsibility. The functions of Chairman and Group CEO are assigned to two different people, leading to a separation of powers. This structure establishes checks and balances and preserves the institutional independence of the BoD from the executive management of the Group, for which responsibility is delegated to the GEB, under the leadership of the Group CEO. No member of one board may simultaneously be a member of the other.

Supervision and control of the GEB remain with the BoD. The authorities and responsibilities of the two bodies are governed by the AoA and the Organization Regulations.

Skills, expertise and training of the Board of Directors

At present, the BoD is well-diversified and composed of members with a broad spectrum of skills, educational backgrounds, experience, and expertise from a range of sectors that reflect the nature and scope of the firm’s business. The Governance and Nominating Committee maintains a competencies and experience matrix to identify gaps in the competencies considered most relevant to the BoD, taking into consideration the firm’s business exposure, risk profile, strategy and geographic reach.

In recent years, the composition of the BoD has been systematically rebuilt along the identified requirements. The appointment of a new Chairman and Vice Chairman in 2022 completed this process. As a result, no nominations are submitted for a vote at the AGM in 2023. Nevertheless, a list of potential candidates is prepared and updated regularly by UBS Group AG.

We asked our BoD members to select their four key competencies from the following eight categories and to indicate whether they have ever been a CEO or chairperson of a listed company or a member of the executive board of such a company:

Key competencies

•

banking (wealth management, asset management, personal and corporate banking) and insurance

•

investment banking, capital markets

•

finance, audit, accounting

•

risk management, compliance and legal

•

human resources management, including compensation

•

technology, cybersecurity

•

regulatory authority, central bank

•

environmental, social and governance (ESG)

Leadership experience

•

experience as a CEO or chairperson

•

executive board leadership experience (e.g., as CFO, chief risk officer or COO of a listed company)

The Governance and Nominating Committee reviews these categories and ratings annually to confirm that the BoD continues to possess the most relevant experience and competencies to perform its duties.

With regard to the composition of the BoD after the 2022 AGM, the members thereof identified all of the target competencies as being their key competencies. Particularly strong levels of experience and expertise existed in these areas:

•

financial services

•

risk management, compliance and legal

•

finance, audit, accounting

Furthermore, 10 of the 12 BoD members have held or currently hold chairperson, CEO or other executive board-level leadership positions.

Moreover, education remained an important priority for our BoD members. In addition to a comprehensive induction program for new BoD members, continuous training and topical deep dives are part of the BoD agenda.

•

Refer to “Risk governance” in the “Risk management and control” section of this report for information about our risk governance framework

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LOGO

Succession planning

Succession planning is one of the key responsibilities of both the BoD and the GEB. Across all divisions and regions, an inclusive talent development and succession planning process is in place that aims to foster the personal development and Group-wide mobility of our employees. Although the recruiting process for BoD and GEB members takes into account a broad spectrum of factors, such as skills, backgrounds, experience and expertise, our approach with regard to diversity considerations does not constitute a diversity policy within the meaning of the EU Directive on Non-Financial Reporting, and Swiss law does not require UBS to maintain such a policy.

In 2022, the GEB launched several strategic initiatives with the close involvement of the BoD and with the aim of further strengthening internal succession planning at UBS. This included the early identification of talents and their systematic development, including international and cross-divisional rotations. The succession plans for the GEB and the management layers below it are managed under the lead of the Group CEO and are reviewed and approved by the BoD.

For the BoD, the Chairman leads a systematic succession planning process as illustrated in the chart below.

Our strategy and the business environment constitute the main drivers in our succession planning process for new BoD members, as they define the key competencies required on the BoD. Taking the diversity and the tenure of the existing BoD into account, the Governance and Nominating Committee defines the recruiting profile for the search. Both external and internal sources contribute to identifying suitable candidates. The Chairman and the members of the Governance and Nominating Committee meet with potential candidates and, with the support of the full BoD, nominations are submitted to the AGM for approval. New BoD members follow an in-depth onboarding process designed to enable them to integrate efficiently and become effective in their new role. Due to this succession planning process, the composition of the BoD is in line with the demanding requirements of a leading global financial services firm.

The smooth and effective succession of both the CEO and Chairman, as well as that of new GEB members, demonstrates the strength and success of succession planning at UBS.

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LOGO

Information and control instruments with regard to the Group Executive Board

The BoD is kept informed of the GEB’s activities in various ways, including regular meetings between the Chairman, the Group CEO and GEB members. The Group CEO and other GEB members also participate in BoD meetings to update its members on all significant issues. The BoD receives regular comprehensive reports covering financial, capital, funding, liquidity, regulatory, compliance and legal developments, as well as performance against plan and forecasts for the remainder of the year. For important developments, BoD members are also updated by the GEB in between meetings. In addition, the Chairman receives the meeting material and minutes of the GEB meetings.

BoD members may request from other BoD or GEB members any information about matters concerning the Group that they require in order to fulfill their duties. When these requests are raised outside BoD meetings, such requests must go through the Group Company Secretary and be addressed to the Chairman.

The BoD is supported in discharging its governance responsibilities by GIA, which independently assesses whether risk management, control and governance processes are designed and operating sustainably and effectively.

The Head GIA reports directly to the Chairman. In addition, GIA has a functional reporting line to the Audit Committee in accordance with its responsibilities as set forth in our Organization Regulations. The Audit Committee assesses the independence and performance of GIA and the effectiveness of both the Head GIA and GIA as an organization, approves GIA’s annual audit plan and objectives and monitors GIA’s discharge of these objectives.

The committee is also in regular contact with the Head GIA. GIA issues quarterly reports that provide an overview of significant audit results and key issues, as well as themes and trends, based on results of individual audits, continuous risk assessment and issue assurance. The reports are provided to the Chairman, the members of the Audit and the Risk Committees, the GEB and other stakeholders. The Head GIA regularly updates the Chairman and the Audit Committee on GIA’s activities, processes, audit plan execution, resourcing requirements and other important developments. GIA issues an annual Activity Report, which is provided to the Chairman and the Audit Committee to support their assessment of GIA’s effectiveness.

•

Refer to “Group Internal Audit” in this section for more information

•

Refer to “Internal risk reporting” in the “Risk management and control” section of this report for information about reporting to the BoD

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Group Executive Board

The BoD delegates the management of the business to the Group Executive Board (the GEB).

Responsibilities, authorities and organizational principles of the Group Executive Board

As of 31 December 2022, the GEB, under the leadership of the Group CEO, consisted of 12 members. It has executive management responsibility for the steering of the Group and its business, develops the strategies of the Group, business divisions and Group Functions, and implements the BoD-approved strategies. The GEB is also the risk council of the Group, with overall responsibility for establishing and supervising the implementation of risk management and control principles, as well as for managing the risk profile of the Group, as determined by the BoD and the Risk Committee.

In 2022, the GEB held a total of 74 meetings for UBS Group AG.

At UBS AG, management of the business is also delegated, and its Executive Board, under the leadership of its President, has executive management responsibility for UBS AG and its business. All members of the GEB are members of UBS AG’s Executive Board, with the exception of Sabine Keller-Busse, who serves as President UBS Switzerland AG. The Executive Board held 74 combined meetings with the GEB and four standalone meetings for UBS AG in 2022.

•

Refer to the Organization Regulations of UBS Group AG, available at ubs.com/governance, for more information about the authorities of the Group Executive Board

Changes to the Group Executive Board

Effective 16 May 2022, Kirt Gardner stepped down and Sarah Youngwood succeeded him as Group CFO, having joined the GEB on 1 March 2022. Formerly, she was CFO of JPMorgan Chase’s Consumer & Community Banking line of business.

Effective 3 October 2022, Tom Naratil stepped down as Co-President Global Wealth Management and President UBS Americas and Naureen Hassan joined UBS as a GEB member with functions of President UBS Americas and CEO of UBS Americas Holding LLC. Ms. Hassan was most recently First Vice President and Chief Operating Officer of the Federal Reserve Bank of New York, where she was responsible for technology, operations, finance, risk and HR, and led the New York Fed’s agile transformation. Iqbal Khan became sole President Global Wealth Management on the same date.

On 8 November 2022, UBS announced that Christian Bluhm will step down from his role as Group Chief Risk Officer on

30 April 2023. Damian Vogel will join the GEB on 1 May 2023 and will take over as Group Chief Risk Officer. Mr. Vogel is currently Chief Risk Officer for UBS’s Global Wealth Management business division.

The biographies on the following pages provide information about the GEB members in office as of 31 December 2022. The biographies of Kirt Gardner and Tom Naratil can be found on pages 212 and 216 of the UBS Group AG Annual Report 2021, available under “Annual reporting” at ubs.com/investors. In addition to information on mandates, the biographies include memberships and other activities or functions, as required by the SIX Swiss Exchange Corporate Governance Directive.

In line with Swiss law, article 36 of our AoA limits the number of mandates that GEB members may hold outside UBS Group to one mandate in a listed company and five additional mandates in non-listed companies. Mandates in companies that are controlled by UBS or that control UBS are not subject to this limitation. In addition, GEB members may not hold more than 10 mandates at one time at the request of the company and more than eight mandates in associations, charitable organizations, foundations, trusts and employee welfare foundations. On 31 December 2022, no member of the GEB reached the aforementioned thresholds.

Responsibilities and authorities of the Asset and Liability Committees

The Asset and Liability Committees (the ALCOs) of UBS Group AG and UBS AG are sub-committees of the GEB and the Executive Board that are responsible for managing assets and liabilities in line with the strategy, risk appetite, regulatory commitments and the interests of shareholders and other stakeholders. The ALCO of UBS Group AG proposes the framework for capital management, capital allocation, and liquidity and funding risk, and proposes limits and indicators for the Group to the BoD for approval. It oversees the balance sheet management of the Group, its business divisions and Group Functions. In 2022, the ALCOs of UBS Group AG and UBS AG held 10 meetings.

Management contracts

We have not entered into management contracts with any companies or natural persons that do not belong to the Group.

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LOGO

Ralph Hamers

Group Chief Executive Officer, member of the GEB since 2020

Nationality: Dutch | Year of birth: 1966

Ralph Hamers has been Group CEO of UBS Group AG and President of the Executive Board of UBS AG since November 2020, after joining UBS as Group Executive Board member in September 2020. Mr. Hamers is committed to ensuring that our firm is positioned to evolve with our clients and the larger world. He has led work to transform our firm for the future, with our Group-wide strategy and newly defined purpose launched in April 2021. Prior to joining UBS, Mr. Hamers was CEO and Chairman of the Executive Board of ING Group, where he spent over 30 years of his career. During his time as CEO of ING, he steered the bank to profitability after the financial crisis and supported the firm’s digital transformation. Mr. Hamers has played a leading role in driving efforts in areas such as digital disruption and sustainability.

Professional experience



2020 – date		Group CEO, UBS Group AG, and President of the Executive Board, UBS AG

2013 – 2020		CEO and Chairman of the Executive Board, ING Supervisory Board member of NN Group (2014 – 2015); Chairman Management Board Banking (2013 – 2020) and Chairman Management Board Insurance (2013 – 2014)

2011 – 2013		CEO of ING Belgium and Luxembourg, ING

2010 – 2011		Head of Network Management for Retail Banking Direct & International, ING

2007 – 2010		Global Head of the Commercial Banking network, ING

2005 – 2007		CEO of ING Bank Netherlands, ING

2002 – 2005		General Manager of the ING Bank branch network, ING

Education

•

Master’s degree, business econometrics and operations research, Tilburg University, Netherlands

Other activities and functions

•

Member of the Board of the Swiss-American Chamber of Commerce

•

Member of the Institut International d’Etudes Bancaires

•

Member of the IMD Foundation Board

•

Member of the McKinsey Advisory Council

•

Member of the World Economic Forum International Business Council

•

Governor of the Financial Services / Banking Community of the World Economic Forum

•

Member of the International Advisory Panel, Monetary Authority of Singapore

•

Member of the Board of the Institute of International Finance

LOGO

Christian Bluhm

Group Chief Risk Officer, member of the GEB since 2016

Nationality: German | Year of birth: 1969

Christian Bluhm has been Group Chief Risk Officer since 2016. He held several positions in academia before starting his banking career in 1999 with Deutsche Bank in credit risk management, and subsequently working for Hypovereinsbank and Credit Suisse in the same area. Before joining UBS, he used his expertise and skills as Chief Risk & Financial Officer at FMS Wertmanagement. Mr. Bluhm is responsible for the development of the Group’s risk management and control framework for various risk categories and implementation of its independent control frameworks.

Professional experience



2016 – date		Group Chief Risk Officer, UBS Group AG, and Chief Risk Officer, UBS AG

2012 – 2015		Spokesman of the Executive Board, FMS Wertmanagement

2010 – 2015		Chief Risk & Financial Officer, FMS Wertmanagement

2004 – 2009		Managing Director, Credit Risk Management (Switzerland and Private Banking worldwide), Credit Suisse

2008 – 2009		Head Credit Risk Management Analytics & Instruments, Credit Suisse

2004 – 2008		Head of Credit Portfolio Management, Credit Suisse

2001 – 2004		Head Structured Finance Analytics, Group Credit Portfolio Management, Hypovereinsbank

Education

•

Master’s degree, mathematics and informatics, and doctorate, mathematics, University of Erlangen-Nuremberg, Germany

Non-listed company boards

•

Chairman of the Board of Christian Bluhm Photography AG

Other activities and functions

•

Member of the Board of UBS Switzerland AG

•

Member of the Foundation Board of the UBS Pension Fund

•

Member of the Foundation Board International Financial Risk Institute

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LOGO

Mike Dargan

Group Chief Digital and Information Officer,

member of the GEB since 2021

Nationality: British | Year of birth: 1977

Mike Dargan was appointed Group Chief Digital and Information Officer (CDIO) in May 2021 after leading our Group Technology function since joining UBS in 2016. In addition to his CDIO remit, where he oversees global functions such as technology and corporate services, he is also Group Executive Board sponsor for our firm’s digital assets strategy and a co-sponsor of both our AI, Data and Analytics center of expertise (along with Robert Karofsky) and our agile transformation. Prior to joining UBS, Mr. Dargan held various senior roles in technology, corporate strategy and investment banking at Standard Chartered Bank, Merrill Lynch and Oliver Wyman.

Professional experience



May 2021 – date		Group CDIO, UBS Group AG, and CDIO, UBS AG

Oct. 2021 – date		President of the Executive Board, UBS Business Solutions AG

2016 – 2021		Head Group Technology, UBS

2015 – 2016		CIO for Corporate and Institutional Banking, Standard Chartered Bank

2014 – 2015		Global Group Technology and Operations Head for Global Markets, Wealth Management, Private Banking and Securities Services, Group Technology and Operations Engineering, Standard Chartered Bank

2013 – 2014		CIO for Financial Markets, Standard Chartered Bank

2009 – 2013		Global Head of Strategy and Corporate M&A, Global Markets, Standard Chartered Bank

2005 – 2009		Head Corporate Strategy & M&A, EMEA and Pacific Rim, Merrill Lynch

Education

•

Master’s degree, politics, philosophy and economics, St. John’s College, University of Oxford

Non-listed company boards

•

Member of the Board of Directors of Done Next Holdings AG

Other activities and functions

•

Member of the Board of UBS Business Solutions AG

•

Member of the Board of UBS Optimus Foundation

•

Member of the Board of Trustees of the Inter-Community School Zurich

LOGO

Suni Harford

President Asset Management, member of the GEB since 2019

Nationality: American (US) | Year of birth: 1962

Suni Harford was appointed President Asset Management in 2019 and is the Chair of UBS Optimus Foundation. Ms. Harford has been the UBS GEB Lead for Sustainability and Impact since May 2021. She started her Wall Street career at Merrill Lynch & Co., in investment banking, before embarking on a 24-year career at Citigroup Inc., the last nine years of which she was the Regional Head of Markets for North America. Ms. Harford joined UBS in 2017, bringing with her a broad experience from across the industry, including in research, client coverage and risk management, and successfully led UBS Asset Management’s integrated investments capabilities, driving performance for its clients.

Professional experience



2019 – date		President Asset Management, UBS Group AG and UBS AG

2017 – 2019		Head of Investments, Asset Management, UBS

2008 – 2017		Regional Head of Markets for North Americas, Citigroup Inc.

2004 – 2008		Global Head of Fixed Income Research, Citigroup Inc.

Education

•

Bachelor’s degree, physics and mathematics, Denison University, Ohio

•

MBA, Tuck School of Business, Dartmouth College, New Hampshire

Other activities and functions

•

Chairman of the Board of Directors of UBS Asset Management AG

•

Chair of the Board of UBS Optimus Foundation

•

Member of the Leadership Council of the Bob Woodruff Foundation

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LOGO

Naureen Hassan

President UBS Americas, member of the GEB since October 2022

Nationality: American (US) | Year of birth: 1971

Naureen Hassan was appointed President UBS Americas and CEO of UBS Americas Holding LLC in October 2022. She joined UBS from the Federal Reserve Bank of New York, where she was COO and First Vice President. After starting her career at McKinsey & Company, Ms. Hassan held various business transformation, strategy, and client experience leadership roles at Charles Schwab Corporation. As Chief Digital Officer at Morgan Stanley Wealth Management, she led the digital strategy and executed digital transformation of the wealth management business to improve client experience and financial advisor effectiveness and efficiency.

Professional experience



Oct. 2022 – date		President UBS Americas, UBS Group AG and UBS AG CEO, UBS Americas Holding LLC

2021 – Sept. 2022		First Vice President and COO, Federal Reserve Bank of New York

2016 – 2020		Chief Digital Officer, Wealth Management, Morgan Stanley

2014 – 2016		Executive Vice President, Investor Services Segments & Platforms, Charles Schwab Corporation

2014		Senior Vice President, Business Process Transformation, Charles Schwab Corporation

2012 – 2014		Senior Vice President, Advisor Services Client Experience & Strategic Integration, Charles Schwab Corporation

2010 – 2012		COO and Board Director, Charles Schwab Corporation

2003 – 2010		Various senior positions at Charles Schwab Corporation

Education

•

Bachelor’s degree, economics, Princeton University

•

Master’s degree, business administration, Stanford University Graduate School of Business

Other activities and functions

•

Member of the Board of UBS Americas Holding LLC

•

Member of the Board of the Securities Industry and Financial Markets Association

LOGO

Robert Karofsky

President Investment Bank, member of the GEB since 2018

Nationality: American (US) | Year of birth: 1967

Robert Karofsky was appointed Co-President of the Investment Bank in 2018. He became sole President in April 2021. Before joining UBS, he acquired know-how in investment banking as an analyst and trader, working for various financial institutions such as Morgan Stanley, Deutsche Bank and AllianceBernstein. He then became Global Head of Equities at UBS, responsible for driving UBS’s growth strategy for equities globally. In October 2021, Mr. Karofsky was appointed to the additional role of UBS GEB sponsor to co-lead the AI, Data and Analytics center of expertise, along with Mike Dargan.

Professional experience



Apr. 2021 – date		President Investment Bank, UBS Group AG and UBS AG

2018 – Mar. 2021		Co-President Investment Bank, UBS

2015 – 2021		President UBS Securities LLC, UBS

2014 – 2018		Global Head Equities, UBS

2011 – 2014		Global Head of Equity Trading, AllianceBernstein

2008 – 2010		Co-Head of Global Equities, Deutsche Bank

2005 – 2008		Head of North American Equities, Deutsche Bank

Education

•

Bachelor’s degree, economics, Hobart and William Smith Colleges, New York

•

MBA, finance and statistics, University of Chicago’s Booth School of Business

Other activities and functions

•

Member of the Board of UBS Americas Holding LLC

•

Member of the Board of UBS Optimus Foundation

•

Trustee of the UBS Americas Inc. Political Action Committee

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LOGO

Sabine Keller-Busse

President Personal & Corporate Banking and

President UBS Switzerland, member of the GEB since 2016

Nationality: Swiss and German | Year of birth: 1965

Sabine Keller-Busse was appointed President Personal & Corporate Banking and President UBS Switzerland in 2021, heading the leading universal bank in Switzerland. In her previous role as Group COO, she oversaw global functions such as technology, operations, human resources and corporate services. She has been pivotal in driving business alignment, and digital and cultural transformation, while also facilitating business growth as President UBS Europe, Middle East and Africa. Ms. Keller-Busse also brings in-depth experience regarding financial market infrastructure, having served on the Board of SIX Group for nine years.

Professional experience



Feb. 2021 – date		President Personal & Corporate Banking and President UBS Switzerland, UBS Group AG

Feb. 2021 – date		President of the Executive Board, UBS Switzerland AG

2019 – 2021		President UBS Europe, Middle East and Africa, UBS

2018 – 2021		Group COO of UBS and President of the Executive Board, UBS Business Solutions AG

2016 – 2021		Member of the Executive Board of UBS AG

2014 – 2017		Group Head Human Resources, UBS

2010 – 2014		COO UBS Switzerland, UBS

Education

•

Master’s degree, economic sciences, University of St. Gallen

•

Ph.D., economic sciences (Dr. oec.), University of St. Gallen

Listed company boards

•

Member of the Board of Zurich Insurance Group

Other activities and functions

•

Member of the Foundation Council of the UBS International Center of Economics in Society

•

Member of the Board and Board Committee of Zurich Chamber of Commerce

•

Member of the Board of the University Hospital Zurich Foundation

•

Member of the Board of Trustees of the Swiss Entrepreneurs Foundation

LOGO

Iqbal Khan

President Global Wealth Management and

President UBS Europe, Middle East and Africa, member of the GEB since 2019

Nationality: Swiss | Year of birth: 1976

Iqbal Khan has been President Global Wealth Management since October 2022 and President UBS Europe, Middle East and Africa since February 2021. From 2019 until September 2022, he was Co-President Global Wealth Management. Mr. Khan joined Ernst & Young in 2001, holding many leadership positions and becoming the youngest-ever partner of the firm’s Swiss arm; when leaving Ernst & Young, he was lead auditor of UBS. In 2013, he moved to Credit Suisse, holding senior leadership positions as CFO Private Banking & Wealth Management and later CEO International Wealth Management.

Professional experience



Oct. 2022 – date		President Global Wealth Management, UBS Group AG and UBS AG

Feb. 2021 – date		President UBS Europe, Middle East and Africa, UBS Group AG and UBS AG

2019 – Sept. 2022		Co-President Global Wealth Management, UBS

2015 – 2019		CEO International Wealth Management, Credit Suisse

2013 – 2015		CFO Private Banking & Wealth Management, Credit Suisse

2011 – 2013		Managing Partner Assurance and Advisory Services – Financial Services, Ernst & Young

2009 – 2011		Industry Lead Partner Banking and Capital Markets, Switzerland and EMEA Private Banking, Ernst & Young

2001 – 2009		Various positions in Ernst & Young

Education

•

Swiss Certified Public Accountant

•

Advanced Master of International Business Law degree (LL.M.), University of Zurich

Other activities and functions

•

Member of the Supervisory Board of UBS Europe SE

•

Member of the Board of UBS Optimus Foundation

•

Member of the Board of Room to Read Switzerland

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LOGO

Edmund Koh

President UBS Asia Pacific, member of the GEB since 2019

Nationality: Singaporean | Year of birth: 1960

Edmund Koh has been President UBS Asia Pacific since 2019. He is a financial sector veteran, with more than 30 years in senior roles in financial services, including as Head Wealth Management Asia Pacific, Country Head Singapore and Head Wealth Management South-East Asia and Asia Pacific Hub for UBS. Before working for DBS Bank in Singapore, Mr. Koh was CEO for Prudential Assurance and Alverdine Pte Ltd, both companies based in Singapore. He joined UBS from Taiwan-based Ta Chong Bank, where he served as President and Director.

Professional experience



2019 – date		President UBS Asia Pacific, UBS Group AG and UBS AG

2016 – 2018		Head Wealth Management Asia Pacific, UBS

2012 – 2018		Country Head Singapore, UBS

2012 – 2015		Head Wealth Management South-East Asia and Asia Pacific Hub, UBS

2008 – 2012		President and Director, Ta Chong Bank, Taiwan

2001 – 2008		Managing Director and Regional Head, Consumer Banking Group, DBS Bank, Singapore

Education

•

Bachelor’s degree, psychology, University of Toronto

Non-listed company boards

•

Member of the Board of Trustees of the Wealth Management Institute, Singapore

•

Member of the Board of Next50 Limited, Singapore

•

Member of the Board of Medico Suites (S) Pte Ltd

•

Member of the Board of Curbside Pte Ltd

Other activities and functions

•

Member of a sub-committee of the Singapore Ministry of Finance’s Committee on the Future Economy

•

Member of the Financial Centre Advisory Panel of the Monetary Authority of Singapore

•

Council member of the Asian Bureau of Finance and Economic Research

•

Trustee of the Cultural Matching Fund, Singapore

•

Member of University of Toronto’s International Leadership Council for Asia

LOGO

Barbara Levi

Group General Counsel, member of the GEB since 2021

Nationality: Italian | Year of birth: 1971

Barbara Levi has been Group General Counsel since November 2021. A qualified attorney-at-law, she has been admitted to the Supreme Court of the United States, the New York State bar and the bar of Milan, Italy, and has worked in several law firms in New York and Milan. Ms. Levi began her corporate career with Novartis Group in 2004 and worked there for 16 years, holding a number of senior legal roles across Europe. Before joining UBS, she served as Chief Legal Officer & External Affairs at Rio Tinto Group and, before that, as General Counsel. In both roles, she was a member of that company’s executive committee.

Professional experience



Nov. 2021 – date		Group General Counsel, UBS Group AG, and General Counsel, UBS AG

2021		Chief Legal Officer & External Affairs, Rio Tinto Group

2020 – 2021		Group General Counsel, Rio Tinto Group

2019		Group Legal Head, M&A and Strategic Transactions, Novartis

2016 – 2019		Global General Counsel, Sandoz International GmbH, Novartis

2014 – 2016		Global Legal Head, Product Strategy & Commercialization, Novartis

2013 – 2014		Global Legal Head, TechOps, Primary Care and Established Medicines, Novartis

2009 – 2013		Head of Legal & Compliance, Region Asia-Pacific, Middle East, and African Countries, Region Group Emerging Markets, Novartis

Education

•

Law degree, University of Milan

•

Master of Laws (LL.M.), banking, corporate and finance law, Fordham University School of Law, New York

Other activities and functions

•

Member of the Employers’ Board of the Global Institute for Women’s Leadership, King’s College London

•

Member of the Board of Directors of the European General Counsel Association

•

Member of the Legal Committee of the Swiss-American Chamber of Commerce

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LOGO

Markus Ronner

Group Chief Compliance and Governance Officer,

member of the GEB since 2018

Nationality: Swiss | Year of birth: 1965

Markus Ronner has been Group Chief Compliance and Governance Officer since 2018. He has been with UBS for more than 40 years and held various positions across the firm, including manager of the Group-wide too-big-to-fail program, COO Wealth Management & Swiss Bank, Head Products and Services of Wealth Management & Swiss Bank, COO Asset Management, and Head Group Internal Audit. In his current position, he is responsible at the Group level for the control of all non-financial risks, governmental and regulatory affairs, as well as investigations and governance matters. Since 2022, he also serves as Chairman of UBS Switzerland AG, the leading Swiss universal bank.

Professional experience



2018 – date		Group Chief Compliance and Governance Officer, UBS Group AG, and Chief Compliance and Governance Officer UBS AG

2012 – 2018		Head Group Regulatory and Governance, UBS

2011 – 2013		Manager Group-wide too-big-to-fail program, UBS

2010 – 2011		COO Wealth Management & Swiss Bank, UBS

2009 – 2010		Head Products and Services of Wealth Management & Swiss Bank, UBS

2007 – 2009		COO Asset Management, UBS

2001 – 2007		Head Group Internal Audit, UBS

Education

•

Swiss Banking Diploma

Other activities and functions

•

Chairman of the Board of Directors of UBS Switzerland AG

LOGO

Sarah Youngwood

Group Chief Financial Officer, member of the GEB since March 2022

Nationality: American (US) and French | Year of birth: 1974

Sarah Youngwood became Group CFO in May 2022. Before joining UBS, Ms. Youngwood was CFO for JPMorgan Chase Consumer & Community Banking, CFO for Firmwide Technology and CFO for Diversity & Inclusion. She set up the data and reporting infrastructure for that company’s USD 30bn racial equity commitments. Previously, Ms. Youngwood was Head of Investor Relations and worked in the Financial Institutions Group within JPMorgan’s investment bank in Paris, London and New York. She brings in-depth finance expertise to the table and has a strong track record of adding long-term value, and leading agile and data-driven transformations.

Professional experience



May 2022 – date		Group CFO, UBS Group AG, and CFO, UBS AG

2020 – 2022		CFO, Consumer & Community Banking and Diversity & Inclusion, incl. Global Technology, JPMorgan Chase

2016 – 2020		CFO, Consumer & Community Banking, JPMorgan Chase

2012 – 2016		Head of Investor Relations, JPMorgan Chase

1997 – 2012		Investment Bank, Financial Institutions Group, JPMorgan Chase, Paris, London and New York, including Managing Director – Head of Mortgage Coverage activities

Education

•

Master’s degree, Business and Finance, ESCP Business School, Paris

Other activities and functions

•

Member of the Board of UBS Business Solutions AG

•

Advisory Board Member – Wall Street Women’s Alliance

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Change of control and defense measures

Our Articles of Association (the AoA) do not provide any measures for delaying, deferring or preventing a change of control.

Duty to make an offer

Pursuant to the Swiss Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading of 19 June 2015, an investor who has acquired (whether directly, indirectly or in concert with third parties) more than 33¹⁄₃% of all voting rights of a company listed in Switzerland, whether such rights are exercisable or not, is required to submit a takeover offer for all listed shares outstanding. We have not elected to change or opt out of this rule.

Clauses on change of control

Neither the terms regulating the Board members’ mandate nor any employment contracts with GEB members or employees holding key functions within the Group contain change of control clauses.

All employment contracts with GEB members stipulate a notice period of six months. During the notice period, GEB members are entitled to their salaries and the continuation of existing employment benefits and may be eligible to be considered for a discretionary performance award based on their contribution during their tenure.

In case of a change of control, we may, at our discretion, accelerate the vesting of and / or relax applicable forfeiture provisions of employees’ awards.

•

Refer to the “Compensation” section of this report for more information

Auditors

Audit is an integral part of corporate governance. While safeguarding their independence, the external auditors closely coordinate their work with Group Internal Audit (GIA). The Audit Committee and, ultimately, the BoD supervise the effectiveness of audit work.

•

Refer to “Board of Directors” in this section for more information about the Audit Committee

External independent auditors

The 2022 AGM re-elected Ernst & Young Ltd (EY) as auditors for the Group for the 2022 financial year. EY assumes virtually all auditing functions according to laws, regulatory requests and the AoA. Bob Jacob is the EY lead partner in charge of the overall coordination of the UBS Group financial and regulatory audits and the co-signing partner of the financial audit. In 2020, Maurice McCormick became the lead audit partner for the financial statement audit and has an incumbency limit of five years. In 2021, Hannes Smit became the Lead Auditor to the Swiss Financial Market Supervisory Authority (FINMA) with an incumbency limit of seven years. Daniel Martin has been the co-signing partner for the FINMA audit since 2019, with an incumbency limit of seven years.

During 2022, the Audit Committee held 12 meetings with the external auditors.

Review of UBS Group AG and UBS AG audit engagement

EU rules require UBS Europe SE to rotate its external auditors in the 2024 financial year. In connection with this required change, and in consideration of governance best practices, the BoD considered whether it would propose to shareholders a rotation of the Group auditor concurrent with the change at UBS Europe SE. Under the direction of the Audit Committee, UBS conducted a formal review of the Group audit engagement including soliciting proposals from potential auditors. In early 2022, based on the results of this assessment, the BoD decided to retain EY as the Group’s external auditors.

Audit effectiveness assessment

The Audit Committee assesses the performance, effectiveness and independence of the external auditors on an annual basis. The assessment is generally based on interviews with senior management and survey feedback from stakeholders across the Group. Assessment criteria include quality of service delivery, quality and competence of the audit team, value added as part of the audit, insightfulness, and the overall relationship with EY. Based on its own analysis and the assessment results, including feedback received as part of the review of the Group audit engagement described above, the Audit Committee concluded that EY’s audit has been effective.

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Fees paid to external independent auditors

UBS Group AG and its subsidiaries (including UBS AG) paid the following fees (including expenses) to their external independent auditors.


	For the year ended
USD m	31.12.22		31.12.21

Audit
Global audit fees		49		53
Additional services classified as audit (services required by law or statute, including work of a non-recurring nature mandated by regulators)		7		8

Total audit¹		56		61


Non-audit
Audit-related fees		11		9
of which: assurance and attestation services		6		4
of which: control and performance reports		5		5
of which: consultation concerning financial accounting and reporting standards		0		0
Tax fees		2		1
All other fees		1		0

Total non-audit¹		14		10

1	Total audit and non-audit fees amounted to USD 70m for UBS Group AG consolidated as of 31 December 2022 (31 December 2021: USD 72m), of which USD 46m related to UBS AG consolidated (31 December 2021: USD 43m).

Special auditors for potential capital increases

At the AGM on 8 April 2021, BDO AG was reappointed as special auditors for a three-year term of office. Special auditors provide audit opinions in connection with potential capital increases independently from other auditors.

Services performed and fees

The Audit Committee oversees all services provided to UBS by the external auditors. For services requiring the approval from the Audit Committee, a preapproval may be granted either for a specific mandate or in the form of a blanket preapproval authorizing a limited and well-defined type and scope of services. The fees (including expenses) paid to EY are set forth in the table above. In addition, EY received USD 35.2m in 2022 (USD 34.1m in 2021) for services performed on behalf of our investment funds, many of which have independent fund boards or trustees.

Audit work includes all services necessary to perform the audit for the Group in accordance with applicable laws and generally accepted auditing standards, as well as other assurance services that conventionally only the auditor can provide. These include statutory and regulatory audits, attestation services and the review of documents to be filed with regulatory bodies. The additional services classified as audit in 2022 included several engagements for which EY was mandated at the request of FINMA.

Audit-related work consists of assurance and related services traditionally performed by auditors, such as attestation services related to financial reporting, internal control reviews and performance standard reviews, as well as consultation concerning financial accounting and reporting standards.

Tax work involves services performed by professional staff in EY’s tax division and includes tax compliance and tax consultation with respect to our own affairs.

“Other” services are permitted services, which include technical IT security control reviews and assessments.

Group Internal Audit

GIA performs the internal auditing role for the Group. It is an independent function that provides expertise and insights to confirm controls are functioning correctly and highlight where UBS needs to better manage current and emerging risks. In 2022, it operated with an average headcount of 585 full-time equivalent employees.

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GIA supports the BoD in discharging its governance responsibilities by taking a dynamic approach to audit, issue assurance and risk assessment, drawing attention to key risks in order to drive action to prevent unexpected loss or damage to the firm’s reputation. To support the achievement of UBS’s objectives, GIA independently, objectively and systematically assesses the:

(i)	soundness of the Group’s risk and control culture;

(ii)	reliability and integrity of financial and operational information, including whether activities are properly, accurately and completely recorded, and the quality of underlying data and models; and

(iii)

design, operating effectiveness and sustainability of:

•

processes to define strategy and risk appetite, as well as the overall adherence to the approved strategy;

•

governance processes;

•

risk management, including whether risks are appropriately identified and managed;

•

internal controls, specifically whether they are commensurate with the risks taken;

•

remediation activities; and

•

processes to comply with legal and regulatory requirements, internal policies, and the Group’s constitutional documents and contracts.

Audit reports that include significant issues are provided to the Group CEO, relevant GEB members and other responsible management. The Chairman, the Audit Committee and the Risk Committee of the BoD are regularly informed of such issues.

In addition, GIA provides independent assurance on the effective and sustainable remediation of control deficiencies within its mandate, taking a prudent and conservative risk-based approach and assessing at the issue level whether the root cause and the potential exposure for the firm have been holistically and sustainably addressed. GIA also cooperates closely with risk control functions and internal and external legal advisors on investigations into major control issues.

To ensure GIA’s independence from management, the Head GIA reports to the Chairman of the BoD and to the Audit Committee, which assesses annually whether GIA has sufficient resources to perform its function, as well as its independence and performance. In the Audit Committee’s assessment, GIA is sufficiently resourced to fulfill its mandate and complete its auditing objectives. GIA’s role, position, responsibilities and accountability are set out in our Organization Regulations and the Charter for GIA, available at ubs.com/governance. The Charter also applies to UBS AG’s internal audit function. GIA has unrestricted access to all accounts, books, records, systems, property and personnel, and must be provided with all information and data that it needs to fulfill its auditing responsibilities. GIA also conducts special audits at the request of the Audit Committee, or other BoD members, committees or the Group CEO in consultation with the Audit Committee.

GIA enhances the efficiency of its work through coordination and close cooperation with the external auditors.

Information policy

We provide regular information to our shareholders and to the wider financial community.

Financial reports for UBS Group AG are expected to be published on the following dates:


First quarter 2023		25 April 2023
Second quarter 2023		25 July 2023
Third quarter 2023		24 October 2023

The annual general meetings of the shareholders of UBS Group AG will take place on the following dates:


2023		5 April 2023
2024		11 April 2024

•

Refer to the corporate calendar available at ubs.com/investors for the dates of the publication of financial reports and other key dates, including the dates of the publication of UBS AG’s financial reports

We meet with institutional investors worldwide throughout the year and regularly hold results presentations, attend and present at investor conferences, and, from time to time, host investor days. When appropriate, investor meetings are hosted by senior management and are attended by members of our Investor Relations team. We use various technologies, such as webcasting, audio links and cross-location videoconferencing, to widen our audience and maintain contact with shareholders globally.

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We make our publications available to all shareholders simultaneously to provide them with equal access to our financial information.

Our annual and quarterly publications are available in a fully digital and .pdf format at ubs.com/investors, under “Financial information.” Starting with our Annual Report 2022, we no longer provide printed copies of our Annual Report and our Compensation Report in any language.

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Refer to ubs.com/investors for a complete set of published reporting documents and a selection of senior management industry › conference presentations

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Refer to the “Information sources” section of this report for more information

•

Refer to “Corporate information” and “Contacts” of this report for more information

Financial disclosure principles

We fully support transparency, and consistent and informative disclosure. We aim to communicate our strategy and results in a manner that enables stakeholders to gain a good understanding of how our Group operates, what our growth prospects are, and the risks that our businesses and our strategy entail. We assess feedback from analysts and investors on a regular basis and, where appropriate, reflect this in our disclosures. To continue achieving these goals, we apply the following principles in our financial reporting and disclosure:

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transparency that enhances the understanding of economic drivers and builds trust and credibility;

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consistency within each reporting period and between reporting periods;

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simplicity that allows readers to gain a good understanding of the performance of our businesses;

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relevance, by focusing not only on what is required by regulation or statute but also on what is relevant to our stakeholders; and

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best practice that leads to improved standards.

We regard the continuous improvement of our disclosures as an ongoing commitment.

Financial reporting policies

We report our Group’s results for each financial quarter, including a breakdown of results by business division and disclosures or key developments relating to risk management and control, capital, liquidity and funding management. Each quarter, we publish quarterly financial reports for UBS Group AG, on the same day as the earnings releases.

The consolidated financial statements of UBS Group AG and UBS AG are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

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Refer to “Note 1 Summary of material accounting policies” in the “Consolidated financial statements” section of this report for more information about the basis of accounting

We are committed to maintaining the transparency of our reported results and to allowing analysts and investors to make meaningful comparisons with prior periods. If there is a major reorganization of our business divisions or if changes to accounting standards or interpretations lead to a material change in the Group’s reported results, our results are restated for previous periods as required by applicable accounting standards. These restatements show how our results would have been reported on the new basis and provide clear explanations of all relevant changes.

US disclosure requirements

As a foreign private issuer, we must file reports and other information, including certain financial reports, with the US Securities and Exchange Commission (the SEC) under the US federal securities laws.

An evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a–15e) under the US Securities Exchange Act of 1934 has been carried out, under the supervision of management, including the Group CEO, the Group CFO and the Group Controller and Chief Accounting Officer. Based on that evaluation, the Group CEO and the Group CFO concluded that our disclosure controls and procedures were effective as of 31 December 2022. No significant changes have been made to our internal controls or to other factors that could significantly affect these controls subsequent to the date of their evaluation.

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Refer to the “Consolidated financial statements” section of this report for more information

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Compensation

Table of contents


201		Compensation
204		2022 key compensation themes
206		Say-on-pay
207		Compensation philosophy and governance
214		Compensation for GEB members
222		Group compensation
229		Compensation for the Board of Directors
232		Supplemental information

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Compensation

Julie G. Richardson

Chairperson of the

Compensation Committee

of the Board of Directors

Dear Shareholders,

The Board of Directors (the BoD) and I wish to thank you for your support once again at last year’s Annual General Meeting (the AGM) and for sharing your views on our compensation practices over the past year.

Throughout 2022, the BoD Compensation Committee continued to oversee the compensation process, aiming to ensure that reward reflects performance, that risk-taking is appropriate and that employees’ interests are aligned with those of our stakeholders. As the Chairperson of the Compensation Committee, I am pleased to present our Compensation Report for 2022.

As part of our ongoing engagement with shareholders during 2022, we received positive feedback on our compensation framework. We believe it is well suited to support our ambitions for the Group and provides strong alignment with shareholders. Its robustness supports pay-for-performance through varying business cycles and incentivizes both annual and longer-term performance. In addition to other measures taken in light of the increasing competition for talent, our compensation framework further reinforces the attractiveness of UBS for key talent.

Supporting our clients and executing in a challenging environment

The macroeconomic and geopolitical environment has become increasingly complex. Our clients remain focused on key issues, such as potential persistently high inflation, elevated energy prices, the war in Ukraine and residual effects of the pandemic. The related impact has been far-reaching, affecting asset levels, market volatility, rates and investor sentiment across the globe. Our highly accretive, capital-light business model and disciplined risk management position us well to face the challenges of the current macroeconomic environment.

Sustainable finance is crucial when it comes to helping our clients achieve their diverse sustainability objectives. Leveraging the deep expertise of our experienced teams, we work hard to service our clients’ diverse sustainable financing, investing and/or advisory needs in the best way possible. In 2022, we expanded our sustainable investment offering with additional alternative and tailored-investment solutions and progressed a number of important investment product initiatives relevant to a broad spectrum of clients across our business areas.

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Refer to “Financial and operating performance” in our Annual Report 2022 for further details about our Group and business division performance

How does UBS respond to the increasing competition for talent?

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We continue to see heightened competition for talent. These pressures come from our competitors but also organizations in other industries, including technology, consulting and new entrants, such as fintech firms.

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We continue to be successful in hiring the talent we need to grow our businesses, who are increasingly interested in operating digitally, and they value diverse experiences, which requires flexibility and agility. That’s one reason why we support hybrid working arrangements where possible as these benefit current employees and improve client service while attracting a wider range of candidates and making us a stronger, more dynamic company.

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Agility drives simplification; we are committed to making it even easier for our clients to do business with us and for our employees to work at UBS. As of year-end 2022, approximately 18,500 employees across the firm were working in agile teams.

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In 2022, we further expanded our employee health and well-being offering. This included a suite of programs, benefits and workplace resources, along with a bespoke eLearning curriculum, that aimed to help our employees manage their health, foster well-being, strengthen their resilience and support the sustainability of the organization.

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Ultimately, we strongly reflect pay-for-performance in our compensation decision-making, and additionally consider carefully inflation levels and our competitive market position.

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Refer to ubs.com/global/en/our-firm/our-employees for more information about our workforce

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GEB hiring and succession planning

Succession planning is a pivotal activity for the BoD. We are convinced that a Group Executive Board (GEB) with diverse backgrounds and experiences is critical to our continued success. We have a successful track record of filling GEB roles with highly qualified, diverse candidates from within the Group and, in selected cases, from the outside. In order to attract external top talent, market practice dictates that we consider replacing the forfeited compensation from their prior employer. In selected situations and with careful consideration, we replace the lost compensation of senior hires. Awards for new GEB members are subject to independent review to support the like-for-like nature of the replacement and confirm that these awards do not represent sign-on payments (i.e., there are no “golden hellos”). In 2022, we made two external GEB hires and in this report we disclose their replacement awards.

Financial performance

We delivered good results in 2022, with USD 9.6bn profit before tax and 17.0% RoCET1 in a challenging environment, achieving our Group returns and efficiency targets on a reported and underlying basis. This result was supported by strong momentum with our clients, who turned to us for advice, resulting in USD 60bn of net new fee-generating assets. We also demonstrated continued cost discipline despite the backdrop of rising inflation, resulting in a cost-income ratio of 72.1%. We are well positioned to continue executing our growth strategy and delivering strong capital returns, while weathering the challenges of the current macroeconomic environment. We enter 2023 in a position of strength and with a CET1 capital ratio of 14.2%, enabling us to fund growth and deliver attractive and sustainable returns to shareholders.

Commitment to return capital to shareholders

We remain committed to returning excess capital to our shareholders. We repurchased USD 5.6bn of shares in 2022. Looking ahead, we intend to continue repurchasing shares and accruing for a progressive dividend. The BoD is proposing a dividend of USD 0.55 per share for 2022 (which represents an increase of 10% compared with the previous year) for approval at the AGM in 2023.

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2022 performance award pool and salaries

The performance award pool continues to reflect our strict pay-for-performance philosophy, our disciplined approach in managing compensation over business cycles and our alignment to shareholder interests. Reflecting our overall results while also considering our underlying results, the 2022 performance award pool was USD 3.3bn, a decrease of 10% compared with 2021.

In addition, the pool also reflects our achievements relative to non-financial objectives, such as our reconfirmed position among the leading firms when it comes to their approach to sustainability. It also takes into account risk considerations, as well as the competitive total shareholder return (TSR) of UBS shares versus our core peers. It also considers other factors, such as the continuing competition to attract and retain a talented and diverse workforce that delivers on our purpose and strategy.

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While the 2022 GEB pool percentage change appears more favorable than the overall Group pool, this year’s GEB comparison is impacted by the significant reduction made in 2021 to reflect the loss resulting from the default of a US client in our prime brokerage business. For 2022, we consider a GEB pool before the impact of the 2021 loss event to support competitive pay for competitive performance and not to carry forward the 2021 impact over multiple years. In addition, the 2022 GEB pool reflects changes in both foreign exchange rates and GEB composition. Adjusted for the direct impact of the 2021 loss event on specific GEB members, the 2022 GEB pool is down approximately 5% in Swiss franc terms or a decrease of 10% in US dollar terms, which is aligned with the Group pool development.

We take note of the increased impact of inflationary pressures on the broad-based employee population. At a Group level, we have carefully monitored and adjusted compensation levels where appropriate to address increased competition for talent in certain markets. For the GEB, we continue with the same salary level instituted in 2011 and propose no increase to our GEB fixed compensation budget and salary levels for 2024. Furthermore, we also propose no increase to the fee levels for the BoD and no change to the maximum aggregate amount for BoD from the 2023 AGM to the 2024 AGM.

Commitment to fair pay and diversity, equity and inclusion

Pay equity and equal opportunity are fundamental to achieving our purpose. We pay for performance, and we take pay equity seriously. Since 2020, we have been certified under the EQUAL-SALARY Foundation standards for our human resources practices in Switzerland, the US, the UK, the Hong Kong SAR and Singapore, covering more than two-thirds of our global employee population. Our processes are global and we apply the same standards across all our locations.

In 2022, we extended our internal fair pay analysis by assessing employees’ salaries against local living wages, using benchmarks defined by the Fair Wage Network. We are committed to fair pay and support all employees being paid at least a living wage.

In 2020, we outlined our intention to increase diversity, especially among management, and we have made steady progress toward achieving our aspirations. Women now account for more than 40% of our workforce, nearly 28% of our Director-level and above population, and 42% of our GEB members.

The 2023 Annual General Meeting

At the 2023 AGM on 5 April, we will seek your support on the following compensation-related items:

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the maximum aggregate amount of compensation for the BoD for the period from the 2023 AGM to the 2024 AGM;

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the maximum aggregate amount of fixed compensation for the GEB for 2024;

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the aggregate amount of variable compensation for the GEB for 2022; and

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shareholder endorsement in an advisory vote for this Compensation Report.

On behalf of the Compensation Committee and the BoD, I thank you again for your feedback and we respectfully ask for your continued support at the upcoming AGM.

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Julie G. Richardson

Chairperson of the Compensation Committee of the

Board of Directors

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2022 key compensation themes

The feedback we seek from our shareholders about compensation-related topics is very important to us, as we are committed to maintaining a strong link between the interests of our employees and those of our shareholders. We continued engaging with shareholders during 2022 and received overall positive feedback about our compensation framework.

The text below summarizes key compensation themes for 2022 and provides answers to the questions we most frequently receive from shareholders.

Summary of 2022 key compensation themes / responses to frequently asked questions

What progress has been made on resolving the French cross-border matter and how is this reflected in GEB compensation?

In December 2021, UBS filed an appeal with the French Supreme Court regarding the decision of the Court of Appeal relating to the French cross-border matter. This matter remains ongoing and was considered in the decision-making process for our 2021 performance award pool.

The use of the RoCET1 metric aims to ensure the cost of litigation matters, including the French cross-border matter, has an ongoing and direct impact on the compensation awarded and realized by our most senior leaders, including the GEB. Additionally, when determining the 2019 performance award pool, the impact of the French cross-border matter was considered in our decision making, following the verdict of the Court of First Instance in early 2019.

Furthermore, up to CHF 7.9m, or 30%, of the 2019 LTIP awards at grant for GEB members active in March 2017, as well as the former Chairman of the BoD’s unvested share award, remains undelivered and continues to be at risk and directly linked to the final resolution of the French cross-border matter. In addition, a malus clause allows the Compensation Committee to assess any new information that becomes available in the future and to retrospectively reduce any undelivered 2019 LTIP award by up to the full amount if such new information would have impacted our compensation decision in 2019. This matter continues to be ongoing and, once resolved, the final outcome will be reflected in the final amounts delivered to relevant current and former employees.

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How does UBS support diversity and pay fairness?

Compensating employees fairly and consistently is key to ensuring equal opportunities. A strong commitment to pay for performance and pay equity is embedded in our compensation policies.

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Refer to “Environmental, Social and Governance considerations” in the “Compensation philosophy and governance” section of this report for more information about pay fairness

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Refer to the “People and culture make the difference“ section of our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for more information about diversity, equity and inclusion (DE&I)

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How are environmental, social and governance considerations factored into the compensation process?

We maintain our well-established process that considers environmental, social and governance (ESG) objectives in the compensation determination process in objective setting, performance award pool funding, performance evaluation and compensation decisions.

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Refer to “Environmental, Social and Governance considerations” in the “Compensation philosophy and governance” section of this report for more information

How does UBS promote and support the health and well-being of employees?

Supporting employee health and well-being remained a priority, and we further expanded our offering in 2022. We are committed to helping employees thrive in their current roles and deliver sustainable performance over time. Regular “pulse” surveys gauged employees’ views on remote work, stress, communication and other aspects. Resources to support holistic well-being included a suite of programs, benefits and workplace resources, along with a bespoke eLearning curriculum, that aimed to help our employees manage their health, foster well-being, strengthen their resilience › and support the sustainability of the organization.

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What is the achievement level of the Long-Term Incentive Plan granted in 2020 for 2019 performance?

The deferred portion of the performance award granted in 2020 (for 2019 performance) to members of the Group Executive Board (the GEB) and selected senior management was in part delivered through the Long-Term Incentive Plan (the LTIP) award. The three-year performance period concluded at the end of 2022, with the 2019 LTIP achieving 98% of the maximum opportunity (of up to 100%). We believe alignment of our senior leadership with our shareholders is important for long-term success. Our LTIP is designed to support alignment of compensation with the execution of our strategy, financial performance and long-term growth.

Performance achievement for the 2019 LTIP awarded in 2020

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Say-on-pay

Say-on-pay votes at the AGM

In line with the revised Swiss Code of Obligations (which to a large extent integrates the Swiss Ordinance against Excessive Compensation in Listed Stock Corporations, which was enacted as an interim measure), we seek binding shareholder approval for the aggregate compensation awarded to the Group Executive Board (the GEB) and the Board of Directors (the BoD). Prospective approval of the fixed compensation of the BoD and GEB provides the firm and its governing bodies with the certainty needed to operate effectively. Retrospective approval of the GEB’s variable compensation aligns their compensation with performance and contribution.

The table below outlines our compensation proposals, including supporting rationales, that we plan to submit to the 2023 AGM for binding votes, in line with the revised Swiss Code of Obligations and our Articles of Association (the AoA).

These binding votes on compensation and the advisory vote on our compensation report reflect our commitment to shareholders having their say on pay.

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Refer to “Provisions of the Articles of Association related to compensation” in the “Supplemental information” section of this report for more information

Audited |

Approved fixed compensation

At the 2021 AGM, the shareholders approved a maximum aggregate fixed compensation amount of CHF 33.0m for GEB members for the 2022 performance year. This budget reflects base salaries, role-based allowances in response to EU Capital Requirements Directive V, and estimated standard contributions to retirement benefit plans, as well as other benefits.

Our expenses related to fixed compensation for our continuing GEB members were within the budget; however, the amount of fixed compensation, including replacement awards, related to the hiring of Sarah Youngwood as Group Chief Financial Officer and Naureen Hassan as President UBS Americas, required the use of the supplemental amount as authorized by article 46 para. 5 of our AoA. A total of CHF 0.1m (of which CHF 0.05m related to Sarah Youngwood and CHF 0.05m related to Naureen Hassan) was used to fund the authorized excess to the approved aggregate amount of fixed compensation. p

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Refer to “2022 total compensation for the GEB members” in the “Compensation for GEB members” section of this report

Compensation-related proposals for binding and advisory votes at the 2023 AGM


Item	Approved at the 2022 AGM	BoD proposals for the 2023 AGM	Rationale
GEB variable compensation	Shareholders approved CHF 79,750,000 for the 2021 financial year^1,2,3 (vote “for”: 86%)	The BoD proposes an aggregate amount of variable compensation of CHF 81,100,000 for the members of the GEB for the 2022 financial year.	The proposed pool reflects the solid performance of the GEB as demonstrated in the strength of our share price and the good performance of the Group in a challenging market environment. For 2022, we consider a GEB pool excluding the impact of the 2021 loss event to support competitive pay for competitive performance and not to carry forward the 2021 impact over multiple years. Adjusted for the direct impact of the 2021 loss event on specific GEB members, the 2022 GEB pool is down approximately 5% in Swiss franc terms or a decrease of 10% in US dollar terms, which is aligned with the Group pool development.

GEB fixed compensation	Shareholders approved CHF 33,000,000 for the 2023 financial year^1,2,3 (vote “for”: 93%)	The BoD proposes a maximum aggregate amount of fixed compensation of CHF 33,000,000 for the members of the GEB for the 2024 financial year.	The proposed amount is unchanged from the previous year, reflecting consistency in planning over time and unchanged base salaries for the Group CEO and other GEB members. Besides the base salaries, it also includes role-based allowances, estimated standard contributions to retirement benefit plans, as well as other benefits. The proposed amount provides flexibility in light of potential changes of GEB composition or roles, competitive considerations where potential additional role-based allowances may be required as well as other factors (e.g., changes in FX rates or benefits).

BoD compensation	Shareholders approved CHF 13,000,000 for the period from the 2022 AGM to the 2023 AGM^1,2,4 (vote “for”: 93%)	The BoD proposes a maximum aggregate amount of compensation of CHF 13,000,000 for the members of the BoD for the period from the 2023 AGM to the 2024 AGM.	The proposed amount is unchanged compared with the previous period and includes the total compensation of the Chairman and the newly defined Vice Chairman role. The compensation for the Chairman is approximately 8% lower compared with the previous Chairman. The fee for the new full-time Vice Chairman role was absorbed within the existing budget. All BoD fees remain unchanged for the period 2023 AGM to 2024 AGM.

Advisory vote on the Compensation Report	Shareholders approved the UBS Group AG Compensation Report 2021 in an advisory vote (vote “for”: 86%)	The BoD proposes that the UBS Group AG Compensation Report 2022 be ratified in an advisory vote.	Our Total Reward Principles and compensation framework are fully aligned with our purpose and support our strategic imperatives. This aims to ensure that the interests of our employees are aligned with those of our clients and other stakeholders.

¹	Local currencies are converted into Swiss francs at the 2022 performance award currency exchange rates.

²	Excludes the portion related to the legally required employer’s social security contributions.

³	As stated in “Group Executive Board” in the “Corporate governance” section of our Annual Report 2022, twelve GEB members were in office on 31 December 2022 and on 31 December 2021.

⁴	Twelve BoD members were in office on 31 December 2022 and on 31 December 2021.

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Compensation philosophy and governance

Our compensation philosophy

Total Reward Principles

Our Total Reward Principles provide a strong link to our strategic imperatives and encourage employees to live our strong and inclusive culture that is grounded in our three keys to success: our Pillars, Principles and Behaviors. These guiding principles underpin our approach to compensation and define our compensation framework. In 2022, we reviewed our Total Reward Principles and compensation framework to confirm they are fully aligned with our purpose and support our strategic imperatives. This aims to ensure that the interests of our employees are aligned with those of our clients and other stakeholders.

Therefore, our compensation approach supports our capital strength and risk management, and provides for simplification and efficiency. It encourages employees to focus on client centricity, connectivity and sustainable impact in everything we do. Moreover, we reward behaviors that help build and protect the firm’s reputation, specifically Accountability with integrity, Collaboration and Innovation. Compensation for each employee is based on individual, team, business division and Group performance, within the context of the markets in which we operate.

Total Reward Principles

Our Total Reward Principles apply to all employees globally, but vary in certain locations according to local legal requirements, regulations and practices. The table below provides a summary of our Total Reward Principles.


Support our purpose and strategy		Our compensation approach supports the firm’s purpose and strategy, fosters engagement among employees and aligns their long-term interests with those of clients and stakeholders.

Attract, retain and connect a diverse, talented workforce		We embrace a culture of diversity, equity and inclusiveness. Pay at UBS is fair, reflects equal treatment and is competitive. In this way, our investment in a connected workforce supports the sustainability of the organization.

Apply a pay-for-performance approach to promote development and our ways of working		The setting of clear objectives, as well as a thorough evaluation of what was achieved and how it was achieved, combined with effective communication, promotes clarity, accountability and establishes a strong link between pay and performance. This approach emphasizes our Behaviors, which are Accountability with integrity, Collaboration and Innovation.

Reinforce sustainable growth and support long-term value creation		Compensation is appropriately balanced between fixed and variable elements and delivered over an adequate period to support our growth ambitions and sustainable performance.

Support risk awareness and appropriate risk-taking		Our compensation structure encourages employees to have a focus on risk management and behave consistently with the firm’s risk framework and appetite, thereby anticipating and managing risks effectively to protect our capital and reputation.

Our Total Reward approach

At UBS, we apply a holistic Total Reward approach, generally consisting of fixed compensation (base salary and role-based allowances, if applicable), performance awards, pension contributions and benefits. Our Total Reward approach is structured to support sustainable results and growth ambitions.

For employees whose total compensation exceeds certain levels, performance awards are delivered in a combination of cash, deferred contingent capital awards and deferred share-based awards.

A substantial portion of performance awards is deferred and vests over a five-year period (or longer for certain regulated employees). This deferral approach supports alignment of employee and investor interests, our capital base and the creation of sustainable shareholder value.

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Refer to “Compensation elements for all employees” in the “Group compensation” section of this report for more information

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Compensation governance

Board of Directors and Compensation Committee

The BoD is ultimately responsible for approving the compensation strategy and principles proposed by the Compensation Committee, which determines compensation-related matters in line with the principles set forth in the AoA.

As determined in the AoA and the firm’s Organization Regulations, the Compensation Committee supports the BoD with its duties to set guidelines on compensation and benefits, to oversee implementation thereof, to approve certain compensation and to scrutinize executive performance. The Compensation Committee consists of independent BoD members, who are elected annually by shareholders at the AGM, and is responsible for governance and oversight of our compensation process and practices. This includes the alignment between pay and performance, and ensuring that the compensation framework supports appropriate risk awareness and management, as well as appropriate risk-taking. In 2022, to additionally support the connection between the Compensation Committee and the Risk Committee, the Compensation Committee Chairperson was also a member of the Risk Committee.

Annually, and on behalf of the BoD, the Compensation Committee:

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reviews our Total Reward Principles;

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approves key features of the compensation framework and plans for the non-independent Board members and GEB members;

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reviews performance award funding throughout the year and proposes, upon proposal of the Group CEO, the final annual Group performance award pool to the BoD for approval;

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upon proposal of the Group CEO, reviews the performance framework for the other GEB members;

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upon proposal of the Group CEO, proposes the performance assessments and the individual total compensation for the other GEB members for approval by the BoD;

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upon proposal of the Chairman, for the Group CEO, proposes the financial and non-financial performance targets and objectives, the performance assessment and the total compensation for approval by the Board;

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approves the total compensation for the Chairman and the non-independent Board members;

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upon proposal of the Chairman, proposes the remuneration / fee framework for independent Board members for approval by the Board;

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upon proposal of the Chairman and Group CEO, approves the remuneration / fee frameworks for external supervisory board members of Significant Group Entities and is informed of remuneration / fee frameworks for external supervisory board members of Significant Regional Entities;

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proposes to the BoD for approval the annual compensation report and approves other material public disclosures on UBS compensation matters; and

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proposes to the BoD, for approval by the AGM, the maximum aggregate amounts of BoD compensation and GEB fixed compensation and the aggregate amount of variable compensation for the GEB.

The Compensation Committee is required to meet at least four times each year. All meetings in 2022 were held in the presence of the Chairman and the Group CEO and most were attended by external advisors. Individuals, including the Chairman and the Group CEO, are not permitted to attend a meeting or participate in a discussion on their own performance and compensation.

After the meetings, the Chairperson of the Compensation Committee reports to the BoD on the Compensation Committee’s activities and discussions and, if necessary, submits proposals for approval by the full BoD. Compensation Committee meeting minutes are also sent to all members of the BoD.

On 31 December 2022, the members of the Compensation Committee were Julie G. Richardson (Chairperson), Dieter Wemmer and Jeanette Wong.

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Refer to “Board of Directors” in the “Corporate governance” section of our Annual Report 2022 for more information

External advisors

The Compensation Committee may retain external advisors to support it in fulfilling its duties. In 2022, HCM International Ltd. (HCM) provided independent advice on compensation matters. HCM holds no other mandates with UBS. Additionally, Willis Towers Watson provided the Compensation Committee with data on market trends and pay levels. Various subsidiaries of Willis Towers Watson provide similar information to UBS’s human resources department in relation to compensation for employees. Willis Towers Watson holds no other compensation-related mandates with UBS.

The Risk Committee’s role in compensation

The Risk Committee, a committee of the BoD, works closely with the Compensation Committee with the goal of ensuring that our compensation framework appropriately reflects risk awareness and management, and supports appropriate risk-taking. It supervises and sets appropriate risk management and risk control principles and is regularly briefed on how risk is factored into the compensation process. It also monitors the involvement of Group Risk Control and Compliance and Operational Risk in compensation and reviews risk-related aspects of the compensation process.

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Refer to ubs.com/governance for more information

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Compensation Committee 2022 / 2023 key activities and timeline

April

July

Sept

Oct

Nov

Dec¹

Jan

Feb

Strategy, policy and governance

Total Reward Principles

●

Sustainability / ESG in the compensation process

●

Compensation disclosure and stakeholder communication matters

●

AGM reward-related items

●

Compensation Committee governance

●

Annual compensation review

Accruals and full-year forecast of the performance award pool funding

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Performance targets and performance assessment of the Group CEO and GEB members

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Group CEO and GEB members’ salaries and individual performance awards

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Update on market practice, trends and peer group matters

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Pay for performance, including governance on certain higher-paid employees, and

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non-standard compensation arrangements

Board of Directors remuneration

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Compensation framework

Compensation framework and deferred compensation matters

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Risk and regulatory

Risk management in the compensation approach and joint meeting with

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BoD Risk Committee

Regulatory activities impacting employees and engagement with regulators

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1	The Compensation Committee held two meetings in December 2022.

Compensation governance

The table below provides an overview of compensation governance by specific role.


Recipients	Compensation recommendations proposed by	Approved by
Chairman of the BoD and Vice Chairman of the BoD	Compensation Committee	Compensation Committee¹

Other BoD members	Compensation Committee and Chairman of the BoD	BoD¹

Group CEO	Compensation Committee and Chairman of the BoD	BoD¹

Other GEB members	Compensation Committee and Group CEO	BoD¹

Key Risk Takers (KRTs) / senior employees	Respective GEB member and functional management team	Individual compensation for KRTs and senior employees: Group CEO

1	Aggregate variable compensation and maximum aggregate amount of fixed compensation for the GEB, as well as maximum aggregate remuneration for the BoD, are subject to shareholder approval.

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Environmental, Social and Governance considerations

Environmental, social and governance in the compensation determination process

Environmental, social and governance (ESG) objectives are considered in the compensation determination process in objective setting, performance award pool funding, performance evaluation and compensation decisions.

ESG-related objectives have been embedded in our Pillars and Principles since they were established in 2011. In 2021, we introduced explicit sustainability objectives in the non-financial goal category of the Group CEO and GEB scorecards. These sustainability objectives are linked to our priorities, and their progress is measured via robust quantitative metrics and qualitative criteria. The table below provides an overview of our metrics and progress achieved in 2022, including climate-related goals under the priority “Planet.” Sustainability objectives are individually assessed for each GEB member, and consequently directly impact their performance assessments and compensation decisions.

In addition, in the performance award pool funding across the Group, ESG is also reflected through an assessment of progress made against targets linked to our focus areas of Planet, People (including progress made against our diversity ambitions) and Partnerships, alongside other key dimensions. Therefore, ESG is taken into consideration when the Compensation Committee assesses not only what results were achieved but also how they were achieved.

For 2022, we established robust and concrete targets, and made good progress toward achieving them. We continue to increase our focus on this topic.

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Refer to “GEB performance assessments” in the “Compensation for GEB members” section of this report for more information about the GEB performance measurement process

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Refer to “Our focus on sustainability and climate,” “Employees” and “Society” in the “How we create value for our stakeholders” section of our Annual Report 2022 for more information

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Refer to ubs.com/gri for more information about ESG-related topics

Paying our people fairly and equitably

Pay equity and equal opportunity are fundamental to achieving our purpose. To connect for a better world, providing equal support to all our employees, with their diverse experiences, perspectives and backgrounds, is critical to our success. Factors such as gender, race, ethnicity, part-time status or a recent leave of absence should not impact opportunities.

Fair and consistent pay practices are designed to ensure that employees are appropriately rewarded for their contribution. We pay for performance, and we take pay equity seriously. We’ve embedded clear commitments in our global compensation policies and practices, and we regularly conduct internal reviews and external audits as quality checks. If we find any gaps not explained by business or by appropriate employee factors such as role, responsibility, experience, performance or location, we look at the root causes and address them.

Since 2020, we have been certified under the EQUAL-SALARY Foundation standards for our human resources practices in Switzerland, the US, the UK, the Hong Kong SAR and Singapore, covering more than two-thirds of our global employee population. Our global human resources policies and standards, including reward, performance management and promotion, from hiring through retirement, are reviewed annually to further improve our approach and processes. Our processes are global and we apply the same standards across all our locations.

The firm also successfully completed an equal pay analysis in Switzerland in 2020, as required by the Swiss Federal Act on Gender Equality. The results of the analysis confirmed that we are fully compliant with Swiss equal pay standards. These holistic certifications are a testament to our well-established equal opportunity environment and the strength of our human resources practices, including performance and reward.

In 2022, we extended our internal fair pay analysis by assessing employees’ salaries against local living wages, using benchmarks defined by the Fair Wage Network. Excluding our US Financial Advisor population and their related support population (as their compensation is primarily based on a formulaic approach), our analysis showed that employees’ salaries were at or above the respective benchmarks, and the few outliers have all been addressed. UBS is committed to fair pay and supports all employees being paid at least a living wage.

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Our aspirational goals and progress


Our priorities	Our aspirational goals	Our progress in 2022
Planet, people, partnerships	USD 400bn invested assets in sustainable investments by 2025.	Increased invested assets in sustainable investments to USD 268bn (compared with USD 251bn in 2021).

Planet	Decarbonization targets for 2030 for financing of the real estate, fossil fuels, power generation and cement sectors (from 2020 levels): • reduce emissions intensity of UBS’s residential real estate lending portfolio by 42%; • reduce emissions intensity of UBS’s commercial real estate lending portfolio by 44%; • reduce absolute financed emissions associated with UBS loans to fossil fuel companies by 71%; • reduce emissions intensity associated with UBS loans to power generation companies by 49%; and • reduce emissions intensity associated with UBS loans to cement companies by 15%.	Calculated progress against pathways for the real estate (commercial and residential), fossil fuel and power generation sectors:¹ • reduced emissions intensity of UBS’s residential real estate lending portfolio by 8% (end of 2021 vs 2020 baseline); • reduced emissions intensity of UBS’s commercial real estate lending portfolio by 7% (end of 2021 vs 2020 baseline); • reduced absolute financed emissions associated with UBS loans to fossil fuel companies by 42% (end of 2021 vs 2020 baseline); and • reduced emissions intensity associated with UBS loans to power generation companies by 12% (end of 2021 vs 2020 baseline). Introduction of an additional decarbonization target for the cement sector, as well as an estimation of the overall financed emissions.

	Align 20% of AuM to be managed in line with net zero (Asset Management).² Achieve net-zero emissions across discretionary client portfolios by 2050 (Asset Management).³	Initiated analysis of revisions to fund documentation and investment management agreements to align with Asset Management’s net-zero-aligned frameworks.

	Achieve net-zero energy emissions resulting from our own operations (scopes 1 and 2) by 2025; cut energy consumption by 15% by 2025 (compared with 2020).	Reduced net greenhouse gas (GHG) footprint for scope 1 and 2 emissions by 13% and energy consumption by 8% (compared with 2021); continued implementation of the replacement of fossil fuel heating systems and investing in credible carbon removal projects; achieved 99% renewable electricity coverage despite challenging market conditions.

	Offset historical emissions back to the year 2000 by sourcing carbon offsets (by year-end 2021) and by offsetting credit delivery and full retirement in registry (by year-end 2025).	Continued to follow up on credit delivery and retirement of sourced portfolio.

	Engage with key vendors on aiming for net zero by 2035.	Identified “GHG key vendors” (vendors that collectively account for >50% of our estimated vendor GHG emissions) and invited the vendors that accounted for 67% of our annual vendor spend (including all GHG key vendors) to disclose their environmental performance through CDP’s Supply Chain Program, with 66% of the invited vendors completing their disclosures in the CDP platform.

People	30% global female representation at Director level and above by 2025.	Increased to 27.8% (2021: 26.7%) female representation at Director level and above.
People	26% of US roles at Director level and above held by employees from ethnic minorities by 2025.	Increased to 20.4% (2021: 20.1%) ethnic minority representation at Director level and above in the US.

	26% of UK roles at Director level and above held by employees from ethnic minorities by 2025.	Increased to 23.0% (2021: 21.3%) ethnic minority representation at Director level and above in the UK.

	Raise USD 1bn in donations to our client philanthropy foundations and funds and reach 25 million beneficiaries by 2025 (cumulative for 2021–2025).	Achieved a UBS Optimus Foundation network donation volume of USD 274m in 2022, totaling USD 436m since 2021 (both figures include UBS matching contributions). Reached 5.9 million beneficiaries.

	Support 1.5 million young people and adults to learn and develop skills through our community impact activities (2022–2025).	Reached 370,916 beneficiaries through strategic community impact activities.⁴

Partnerships	Establish UBS as a leading facilitator of discussion, debate and idea generation.	Co-organized, with the Institute of International Finance, the first Wolfsberg Forum for Sustainable Finance.
		Joined a consortium that is pioneering methods of assessing and maximizing the GHG reduction potential of energy storage.
		Co-founded Carbonplace, a technology platform for the voluntary carbon market that has the goal of creating a streamlined and transparent market for our clients.

	Drive standards, research and development, and product development.	Co-led the Taskforce on Nature-related Financial Disclosures’ financial-sector-specific working group.

		Collaboration with two Swiss companies that are pioneering innovative carbon removal technologies.

		Joined the Partnership for Carbon Accounting Financials (PCAF).

Refer to the “Environment” section of our Sustainability Report 2022, available under “Annual reporting” at ubs.com/investors, for further information. The inherent one-year time lag between the as-of date of our lending exposure and the as-of date of emissions can be explained by two factors: corporates disclose their emissions in annual reporting only a few months after the end of a financial year; and specialized third-party data providers take up to nine months to collect disclosed data and make it available to data users. Consequently, the baselines for our net-zero ambitions are based on year-end 2020 lending exposure and 2019 emissions data. Our 2021 emissions actuals are based on year-end 2021 lending exposure and 2020 emissions data.

2	The 20% alignment goal amounted to USD 235bn at the time of Asset Management’s commitment in 2021. By 2030, the weighted average carbon intensity of funds is to be 50% below the carbon intensity of the respective 2019 benchmark.

3	The near- and medium-term plans for the achievement of this goal include our Asset Management business division only.

4	Our Community Impact program has a strategic focus on education and the development of skills.

Cautionary note: We have developed methodologies that we use to set our climate-related targets and identify climate-related risks and which underly the metrics that are disclosed in this report. Standard setting organizations and regulators continue to provide new or revised guidance and standards, as well as new or enhanced regulatory requirements for climate disclosures. Our disclosed metrics are based upon data available to us, including estimates and approximations where actual or specific data is not available. We intend to update our disclosures to comply with new guidance and regulatory requirements as they become applicable to UBS. Such updates may result in revisions to our disclosed metrics, our methodologies and related disclosures, which may be substantial, as well as changes to the metrics we disclose.

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Refer to our Sustainability Report 2022, available under “Annual reporting“ at ubs.com/investors, for more information

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Build a diverse, equitable and inclusive workplace

Our diversity, equity and inclusion (DE&I) strategy and initiatives focus on a wide range of characteristics including gender, gender identity, sexual orientation, ethnic diversity, disabilities, age, and veteran status, along the entire employee life cycle. Our businesses aim to hire individuals with strong potential along with diverse skills, backgrounds and perspectives. We invest in the development of all employees and give them the visibility and opportunities to realize their potential, and implement Group-wide divisional and regional initiatives that support their career growth. These efforts collectively support the progress towards achieving our DE&I aspirational goals. For example, our partnerships with the Investments and Wealth Institute (the IWI) and Kaplan Financial Education in the US provide scholarships for diverse Wealth Management professionals at UBS to pursue industry certifications in investment management, private wealth advisory, retirement management and financial planning. Our leaders and employee networks are essential in our work to build a sense of belonging and to advance our goals.

We have an ongoing focus on the importance of inclusive leadership skills, ensuring equity in our policies and practices, and increasing the representation of women and ethnic minority employees. We take a multi-faceted approach that considers recruitment, development and belonging perspectives. For example, we support flexible working arrangements that benefit current employees and help us attract a more diverse pool of applicants. We also assess executive candidates for inclusive leadership competencies.

In 2020, we outlined our intention to increase our female and ethnic minority representation, especially among management, and we have made steady progress toward achieving those aspirations. Women now account for 41% of our workforce and 27.8% of our Director-level and above population. At the same time, 42% of our GEB members are female. Due to variations in legal requirements and historical progress, we continue to take a country-specific approach to increasing our representation of ethnic minorities, and we have published aspirations for the US and the UK, specifically. In 2022, we increased the ethnic minority representation at Director level and above to 20.4% (in the US) and 23.0% (in the UK).

Progress against these aspirations is considered in the determination of the annual performance award pool and included in the sustainability objectives under “Strategic & Growth” for the GEB, as outlined in the table above.

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Performance award pool funding

Our compensation philosophy focuses on balancing performance with appropriate risk-taking, retaining talented employees and shareholder returns. Our overall performance award pool funding percentage decreases as financial performance increases. In years of strong financial performance, this prevents excessive compensation and results in an increased proportion of profit before performance awards being available for distribution to shareholders or growing the Group’s capital. In years where performance declines, the performance award pool will generally decrease; however, the funding percentage may increase.

Our performance award pool funding framework is based on Group and business division performance, including achievements against defined performance measures. In assessing performance, we also consider industry peers, market competitiveness of our results and pay position, as well as progress against our strategic objectives, including returns, risk-weighted assets and cost efficiency. The Risk and Compliance functions support our holistic reflection and consideration of the financial and non-financial impact (including reputation) of risk matters. We further consider the firm’s risk profile and culture, the extent to which operational risks and audit issues have been identified and resolved, and the success of risk reduction initiatives including significant events.

The funding for Group Functions is linked to overall Group performance and reflects headcount, workforce location and demographics. For each functional area, quantitative and qualitative assessments evaluate service quality, risk management and financial achievements.

Our decisions regarding the performance award pool also balance consideration of financial performance with a range of factors, including DE&I and other ESG metrics, the impact of litigation, regulatory costs, the effect of changes in financial accounting standards, capital returns and relative total shareholder return.

Before making its final proposal to the BoD, the Compensation Committee considers the CEO’s proposals and can apply a positive or negative adjustment to the performance award pool.

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Refer to “2022 Group performance outcomes” in the “Group compensation” section of this report

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Refer to the “Group performance” section of our Annual Report 2022 for more information about our results

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Compensation for GEB members

GEB compensation framework

In 2022, we made no changes to our GEB compensation framework. The chart below illustrates the compensation elements, pay mix and key features for GEB members. Of the annual performance award, 20% is paid in the form of cash and 80% is deferred over a period of five years,¹ with 50% of the annual performance awards granted under the Long-Term Incentive Plan (the LTIP) and 30% under the Deferred Contingent Capital Plan (the DCCP).

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Refer to “Our deferred compensation plans” in the “Group compensation” section of this report for more information

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Refer to the “Group Compensation” section of this report for more information

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Refer to “Regulated staff” in the “Supplemental information” section of this report for more information

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Pay-for-performance safeguards for GEB members


Performance award caps		• Cap on the total GEB performance award pool (2.5% of profit before tax)¹ • Caps on individual performance awards (for the Group CEO capped at five times the fixed compensation and at seven times for the other GEB members) • Cap of 20% of performance award in cash

Delivery and deferral		• 80% of performance awards are at risk of forfeiture • Long-term deferral over five years (or longer for certain regulated GEB members) • Alignment with shareholders (through the LTIP) and bondholders (through the DCCP) • Final payout of equity-based LTIP award (50% of performance award) subject to absolute and relative performance conditions (three-year performance period)

Contract terms		• No severance terms • Notice period between six and twelve months

Other safeguards		• Share ownership requirements • No hedging allowed

1	The Compensation Committee may consider adjustments to profit for items that are not reflective of underlying performance.

GEB share ownership requirements

To align the interests of GEB members with those of our shareholders and to demonstrate personal commitment to the firm, we require the Group CEO and the other GEB members to hold a substantial number of UBS shares. GEB members must reach their minimum shareholding requirements within five years from their appointment and retain it throughout their tenure. The total number of UBS shares held by a GEB member consists of any vested or unvested shares and any privately held shares. At the end of 2022, all GEB members met their share ownership requirements, except for those appointed within the last three years, who still have time to build up and meet the required share ownership.

As of 31 December 2022, our GEB members held shares with an aggregate value of approximately USD 154m, demonstrating their commitment to our strategy and alignment with shareholders.

Share ownership requirements


Group CEO	min. 1,000,000 shares	Must be built up within five years from their appointment and retained throughout their tenure
Other GEB members	min. 500,000 shares

GEB base salary and role-based allowance

Each GEB member receives a fixed base salary, which is reviewed annually by the Compensation Committee. The 2022 annual base salary for the Group CEO role was CHF 2.5m and has remained unchanged since 2011. The other GEB members each received a base salary of CHF 1.5m (or local currency equivalent), also unchanged since 2011.

Over the course of 2022, one GEB member held a UK Senior Management Function (SMF) role for one of our UK entities. In addition to base salary, a role-based allowance was part of the fixed compensation.

At the AGM, shareholders are asked to approve the maximum aggregate amount of fixed compensation for GEB members for the following financial year.

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Refer to the “Supplemental information” section of this report for more information about Material Risk Takers (MRTs) and SMFs

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Refer to the “Say-on-pay” section of this report for more information about the AGM vote on fixed compensation for the GEB

Caps on the GEB performance award pool

The size of the GEB performance award pool may not exceed 2.5% of the Group’s profit before tax. This limits the overall GEB compensation based on the firm’s profitability.

For 2022, the Group’s profit before tax was USD 9.6bn and the total GEB performance award pool was CHF 81.1m. The GEB performance award pool was 0.9% of Group profit before tax, well below the 2.5% cap.

In line with the individual compensation caps on the proportion of fixed pay to variable pay for all GEB members (introduced in 2013), the Group CEO’s granted performance award is capped at five times his fixed compensation. Granted performance awards of other GEB members are capped at seven times their fixed compensation (or two times for GEB members who are also MRTs). For 2022, performance awards granted to GEB members and the Group CEO were, on average, 3.5 times their fixed compensation (in Swiss franc terms, excluding one-time replacement awards, benefits and contributions to retirement plans).

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Refer to “Performance award pool funding” in the “Compensation philosophy and governance” section of this report for more information

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GEB employment contracts

GEB members’ employment contracts do not include severance terms or supplementary pension plan contributions and are subject to a notice period of between six and twelve months. A GEB member leaving UBS before the end of a performance year may be considered for a performance award. Such awards are subject to approval by the BoD, and ultimately by the shareholders at the AGM.

Benchmarking for GEB members

When recommending performance awards for the Group CEO and the other GEB members, the Compensation Committee reviews the respective total compensation for each role against a financial industry peer group. The peer group is selected based on comparability of their size, business mix, geographic presence and the extent to which they compete with us for talent. The Compensation Committee considers our peers’ strategies, practices and pay levels, as well as their regulatory environment; it also periodically reviews other firms’ pay levels or practices, including both financial and non-financial sector peers, as applicable. The total compensation for a GEB member’s specific role considers the compensation paid by our peers for a comparable role and performance within the context of our organizational profile. The Compensation Committee periodically reviews and approves the peer group composition.

The table below presents the composition of our peer group as approved by the Compensation Committee for the 2022 performance year.


Bank of America		Goldman Sachs
Barclays		HSBC
BlackRock		JPMorgan Chase
BNP Paribas		Julius Baer
Citigroup		Morgan Stanley
Credit Suisse		Standard Chartered
Deutsche Bank		State Street

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GEB performance assessments

We assess each GEB member’s performance against a set of Group financial targets, non-financial objectives and Behaviors. Under the non-financial objectives, we maintained the categories introduced in 2021: Core Job (which covers job-specific, risk and people objectives) and Strategic & Growth (which covers strategy, digital, and environmental, social and governance (ESG) objectives). This approach fosters an even greater focus on GEB priorities and the success of the Group overall among all GEB members, and strengthens the understanding and importance of interdependence within and across the GEB. At the same time, it creates stronger individual accountability, and further increases the focus on core activities.

The Compensation Committee exercises its judgment with respect to the performance achieved relative to the prior year, our strategic plan and our competitors, and considers the Group CEO’s proposals. The Compensation Committee’s proposals are subject to approval by the BoD.

The Compensation Committee, and then the full BoD, follows a similar process for the Group CEO, except that the proposal comes from the Chairman of the BoD.

Overview of the GEB compensation determination process

The compensation for the Group CEO and the other GEB members is governed by a rigorous process under Compensation Committee and BoD oversight. The chart below shows how compensation for all GEB members is determined.

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Overview of performance assessment measures

We apply a range of quantitative measures to assess GEB member performance against financial and non-financial objectives while Behaviors are assessed qualitatively. The table below provides a summary of the main metrics and measures used for 2022.


Financial measures (60%)			• Reported Group profit before tax • Reported Group cost / income ratio • Reported Return on CET1 capital
Non- financial measures (30%)	Strategic & Growth	Strategy	• Progress on Group-wide transformation initiatives • Delivery on division- / function-specific strategic programs and initiatives
		Digital	• Progress on digital transformation initiatives
		Digital	• Delivery of digital offering and user experience for clients
		ESG	• Refer to the ”Our aspirational goals and progress” table in the ”Environmental, Social and Governance considerations” section of this report
	Core Job	Job-specific	• Business-specific criteria, such as net new investable asset targets and client engagement-level objectives
			• Operating income growth targets for specific client segments and total cost goals
			• Post-stress CET1 objectives and capital ratio guidance • Execution progress regarding key client and internal initiatives; e.g., cross-divisional collaboration initiatives, efficiency and cost-saving initiatives
		Risk	• Operating within risk appetite constraints
			• Progress to delivering on risk reduction initiatives
		People	• Employee listening / sentiment results and feedback
			• Progress toward meeting 2025 ambitions for female representation and for ethnic minority representation in the US and the UK at Director and above levels (as per ESG disclosure)
			• People development, mobility, turnover and succession plan metrics
Behaviors (10%)	Accountability with integrity			• Responsible for what they say and do
Behaviors (10%)				• Takes ownership and makes things happen
				• Steps up and acts when something is not right
	Collaboration		Qualitative assessment against expected Behaviors:	• Trusts others and helps them to be successful • Delivers One UBS, together with their colleagues • Fosters a diverse, inclusive and equitable work environment
	Innovation			• Challenges perspectives and looks at every opportunity to improve
				• Actively seeks and provides feedback
				• Learns from every success and failure

Performance assessment categories

The table below presents the three performance categories for the assessment of the performance against non-financial objectives related to Core Job, Strategic & Growth and Behaviors. The achievement score represents the maximum percentage, and the Compensation Committee may apply downward adjustments.


	Non-financial measures
Needs focus	Good contribution	Excellent contribution
Achievement score: up to 33%	Achievement score: up to 66%	Achievement score: up to 100%

	Behaviors
Needs focus	Expected behavior	Exemplary behavior
Achievement score: up to 33%	Achievement score: up to 66%	Achievement score: up to 100%

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2022 performance for the Group CEO

The performance award for the Group CEO is based on the achievement of financial performance targets and non-financial objectives related to Core Job, Strategic & Growth and Behaviors, as described earlier in this section.

These objectives were set to reflect the strategic priorities determined by the Chairman and the BoD.

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Refer to “GEB compensation framework” in this section of this report for more information

Performance assessment for the Group CEO

The BoD recognized that Ralph Hamers successfully led UBS through a challenging year and delivered good financial results despite significant headwinds due to geopolitical and macroeconomic developments. In this environment, he focused the firm on maintaining client momentum and the disciplined execution of our strategy across regions to deliver the benefits of our geographic diversification. Furthermore, the resulting growth enabled us to achieve a performance in line with our 2022 targets. In addition, our strong capital position enabled us to return USD 7.3bn of capital to shareholders for the 2022 financial year.

Furthermore, Mr. Hamers effectively led the Group through the challenging and volatile risk environment and continued to promote an effective risk culture throughout the organization. He also kept the firm focused on risk reduction and operating within our risk appetite.

Additionally, the BoD acknowledged that Mr. Hamers continued to be a strong ambassador for the drive to make our organization more digital. He continued to increase the Group’s focus on technology as a differentiator for our clients and employees, achieving important progress on our technology initiatives and agile transformation that benefit clients and employees.

Mr. Hamers successfully continued to focus the Group on delivering on its diversity, equity and inclusion (DE&I) strategy and initiatives. Important progress was made in our diversity and ethnicity ambitions and it remains a key area of focus. He also successfullly managed Group Executive Board (GEB) transitions that rejuvenated the GEB and increased the female ratio on the GEB to 42%.

Mr. Hamers continued to demonstrate strong leadership and focus on delivering the Group’s sustainability strategy, including the commitment to net zero. He continued to focus the organization to deliver on the ambitions in the key ESG focus areas including a reduction of 11% in scope 1 and 2 emissions year on year, partnering with two pioneering companies on CO2 removal, supporting clients with USD 268bn invested assets in sustainability-focused and impact investments. As a result, UBS retained its position amongst the leaders in the field, as evidenced by the ratings from the most important independent sustainability rating agencies.

The table below illustrates the assessment criteria used to evaluate the achievements of Mr. Hamers in 2022.

Financial performance


Weight	Performance measures	2022 targets			2022 results			Achievement²			Weighted assessment			2022 commentary
20%	Reported Group PBT		USD 9.8bn			USD 9.6bn			97.6	%		19.5	%	• Profit before tax (PBT) increased to USD 9.6 bn, slightly below target but up from 2021 and the highest annual result since 2006, reflecting good profitability in a challenging market.
20%	Reported Group C/I ratio		70 to 73	%¹		72.1	%		100	%³		20.0	%	• The cost / income (C/I) ratio was 72.1%, in line with the 2022 performance target range and an improvement of 1.5 percentage points compared with 2021. This demonstrates good cost discipline in an inflationary environment.
20%	Reported RoCET1		15 to 18	%¹		17.0	%		100	%		20.0	%	• Delivered strong capital returns with a return on CET1 capital (RoCET1) of 17.0%, in line with the 2022 performance target range.

1	The return on CET1 capital and cost / income ratio performance targets reflect externally communicated target ranges. The determination of the achievement is based on specific target levels defined within the indicated target ranges.

2	Achievement score capped at 100%.

3	For the assessment of the cost / income ratio, each 1% difference between actual and target affects the score by 10%.

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Performance assessment for the Group CEO (continued)

Non-financial performance and Behaviors


Weight	Performance measures	Achievement	Weighted assessment	2022 commentary
30%		Good contribution (66%)	20%	• The evaluation of each non-financial objective considers quantitative metrics that are assessed against internal targets / plan.
	Core Job (Job specific, Risk, People)			Core Job • Good client momentum in a challenging market environment and maintained strong focus on managing our costs
				• Active capital management to protect our business, enable growth and deliver attractive returns including executing USD 5.6bn in share buybacks
				• Operated within risk appetite constraints
				• Improved employee listening / sentiment results across key categories
				• Successfully managed effective leadership transitions in GEB
				• Continued focus on people diversity, with the ratio of female leaders increased to 28%, on track to meet the 2025 target; stayed on track toward the 2025 ambition for ratios of UK (23%) and US (20%) employees from ethnic minorities

	Strategic & Growth (Strategy, Digital, ESG)			Strategic & Growth • Embedded our purpose into the organization and executed on the strategic imperatives, including executing across regions and delivering benefits of geographic diversification. • Focused the Group to deliver simplification initiatives, making it easier for our businesses to deliver for our clients. • Progressed our technology initiatives and agile transformation with new launches of key products such as Key4 in Switzerland, Circle One, and WE.UBS in China and approximately 18,500 employees operating in an agile work environment • See ESG metrics and progress in separate table in this report

10%	Behaviors (Accountability with integrity, Collaboration, Innovation)	Expected behavior (66%)	7%	The assessment of the Behavior objectives is qualitative and has resulted in the following summary assessment: • Mr. Hamers continued to be a role model in accountability and empowerment in the organization. He remained the most important ambassador of collaboration to deliver the whole firm to our clients. • Mr. Hamers exemplifies innovation in UBS. He continued the successful digitalization through new ways of working and continuously promoted innovative thinking and simplification.
	Total weighted assessment (maximum 100%)		86.5%

In addition to the overall 2022 Group performance and Mr. Hamers’s achievements outlined above, the BoD also considered other factors, such as the Group’s good profitability, UBS’s performance in context of the underlying results and the strong relative share price performance. For context, as outlined in our compensation report last year, Mr. Hamers’s 2021 performance award was additionally impacted by the significant risk event related to a loss from a US-based client of our prime brokerage business. The 2022 proposal considers a year-on-year change that reflects pay-for-performance and does not carry forward the 2021 impact over multiple years.

The BoD approved the proposal by the Compensation Committee to grant Mr. Hamers a performance award of CHF 9.7m, resulting in a total compensation for 2022 of CHF 12.2m (excluding benefits and contributions to his retirement benefit plan).

Aligned with the GEB compensation framework, the Group CEO’s performance award will be delivered 20% (CHF 1.94m) in cash and the remaining 80% (CHF 7.76m) subject to deferral and forfeiture provisions, as well as meeting performance conditions over the next five years.

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2022 total compensation for the GEB members

The 2022 GEB performance award pool is CHF 81.1m, which is an increase of 2% in Swiss franc terms and a decrease of 3% in US dollar terms. Adjusted for the direct impact of the 2021 loss event on specific GEB members, the 2022 GEB pool is down approximately 5% in Swiss franc terms or a decrease of 10% in US dollar terms, which is aligned with the Group pool development. This pool also considers the impact of changes in GEB composition and foreign exchange rates. This outcome reflects the solid performance of the GEB as demonstrated by the strength of our share price and the good performance of the Group in a challenging market environment, achieving our returns and efficiency targets on a reported basis, while also considering our underlying reported results.

At the 2023 AGM, shareholders will vote on the aggregate 2022 total variable compensation for the GEB in Swiss francs. The tables below provide the awarded compensation for the Group CEO and the GEB members in Swiss francs and, for reference, the total amounts in US dollars for comparability with financial performance. The individual variable performance awards for each GEB member will only be confirmed upon shareholder approval at the AGM.

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Refer to “Deferred compensation” in the “Supplemental information” section of this report for more information about the vesting of outstanding awards for GEB members

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Refer to “Provisions of the Articles of Association related to compensation” in the “Supplemental Information” section of this report for more information

Audited |


Total compensation for GEB members
CHF, except where indicated																			USD (for reference)¹
For the year	Base salary		Contribution to retirement benefit plans		Benefits²		Total fixed compensation		Cash³		Performance award under LTIP⁴		Performance award under DCCP⁵		Total variable compensation		Total fixed and variable compensation6		Total fixed compensation		Total variable compensation		Total fixed and variable compensation⁶
Group CEO Ralph Hamers (Highest Paid Executive excluding replacement awards)¹¹
2022		2,500,000		242,239		198,378		2,940,617		1,940,000		4,850,000		2,910,000		9,700,000		12,640,617		3,050,684		10,063,071		13,113,755
2021		2,500,000		246,415		251,856		2,998,271		1,700,000		4,250,000		2,550,000		8,500,000		11,498,271

Aggregate of all GEB members (excluding replacement awards)^{7,8,9,10,11,12}
2022		23,318,410		1,796,872		693,473		25,808,756		16,220,000		40,550,000		24,330,000		81,100,000		106,908,756		26,774,777		84,135,571		110,910,348
2021		24,853,521		2,064,009		1,179,512		28,097,041		15,950,000		39,875,000		23,925,000		79,750,000		107,847,041

1	Swiss franc amounts have been translated into US dollars for reference at the 2022 performance award currency exchange rate of CHF / USD 1.037430.

2	All benefits are valued at market price.

3	For GEB members who are also MRTs or SMFs, the cash portion includes blocked shares.

LTIP awards for performance year 2022 were awarded at a value of 71.45% of maximum which reflects our best estimate of the fair value of the award. The maximum number of shares is determined by dividing the awarded amount by the estimated fair value of the award at grant, divided by CHF 20.092 or USD 21.790, the average closing price of UBS shares over the last ten trading days leading up to and including the award date in February.

5	The amounts reflect the amount of the notional additional tier 1 (AT1) capital instrument excluding future notional interest.

Excludes the portion related to the legally required employer’s social security contributions for 2022 and 2021, which are estimated at grant at CHF 4,675,424 and CHF 4,997,243, respectively, of which CHF 841,402 and CHF 763,059, respectively, are for the highest-paid GEB member (excluding replacement awards). The legally required employees’ social security contributions are included in the amounts shown in the table above, as appropriate.

7	As stated in “Group Executive Board” in the “Corporate governance” section of our Annual Report 2022, twelve GEB members were in office on 31 December 2022 and 31 December 2021.

8	Includes compensation paid under employment contracts during notice periods for GEB members who stepped down during the respective years.

9	Includes compensation for newly appointed GEB members for their time in office as GEB members during the respective years.

10	Base salary may include role-based allowances in line with market practice in response to regulatory requirements.

The 2022 total compensation of Sarah Youngwood, Group CFO, including both the one-time replacement awards of her compensation forfeited upon joining UBS as well as her compensation for the 2022 performance year, amounts to a total of CHF 13,475,863 (which makes her the highest paid executive including replacement awards).

For 2022, the one-time replacement awards of CHF 7,206,683 for Sarah Youngwood and CHF 65,229 for Naureen Hassan are not included in the above table; including these, the 2022 total aggregate compensation of all GEB members is CHF 114,180,668. For 2021, the one-time replacement award of CHF 7,081,474 for Barbara Levi is not included in the above table; including this, the 2021 total aggregate compensation of all GEB members is CHF 114,928,515.

Total realized compensation for the Group CEO

The realized compensation for the Group CEO reflects the total amount paid out in the year. It includes the base salary, cash performance award payments, and all deferred performance awards vested in the year. As such, realized pay is the natural culmination of awards granted and approved by shareholders in previous years.

To illustrate the effect of our long-term deferral approach, which has been in place since 2012, we disclose the annual realized compensation of Mr. Hamers, including a comparison with his total awarded compensation.

Total realized compensation vs awarded compensation for Ralph A.J.G Hamers


CHF									Realized		Awarded
For the year	Base salary		Cash award²		Performance award under equity plans²		Performance award under DCCP²		Total realized fixed and variable compensation		Total awarded fixed and variable compensation^3,4
2022		2,500,000		1,700,000		0		0		4,200,000		12,200,000
2021		2,500,000		600,000		0		0		3,100,000		11,000,000
2020¹		833,333		0		0		0		833,333		3,833,333

1	Includes compensation for 4 months as Ralph A.J.G. Hamers joined UBS on 1 September 2020.

2	Excludes dividend / interest payments.

3	Excludes contributions to retirement benefit plans and benefits. Includes social security contributions paid by Ralph A.J.G. Hamers but excludes the portion related to the legally required social security contributions paid by UBS.

4	Excludes the one-time replacement award granted in 2020.

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Group compensation

Compensation elements for all employees

All elements of pay are considered when making our compensation decisions. We regularly review our principles and compensation framework in order to remain competitive and aligned with stakeholders. In 2022, we made no material changes to our overall framework. We will continue to review our approach to salaries and performance awards, considering market developments, our performance and our commitment to deliver sustainable returns to shareholders.

Base salary and role-based allowance

Employees’ fixed compensation (e.g., base salary) reflects their level of skill, role and experience, as well as local market practice. Base salaries are usually paid monthly or fortnightly, in line with local market practice. We offer competitive base salaries that reflect location, function and role. Salary increases generally consider promotions, skill set, performance and overall responsibility.

In addition to base salary, and as part of fixed compensation, some employees may receive a role-based allowance. This allowance is a shift in the compensation mix between fixed and variable compensation, not an increase in total compensation. It reflects the market value of a specific role and is fixed, non-forfeitable compensation. Unlike salary, a role-based allowance is paid only if the employee is in a specific role. Similar to previous years, 2022 role-based allowances consisted of a cash portion and, where applicable, a blocked UBS share award.

Pensions and benefits

We provide a range of benefit plans, such as retirement benefits and health insurance, aiming to provide financial protection in case of significant life events, and support our employees’ well-being and diverse needs. Retirement and other benefits are set in the context of local market practice and regularly reviewed for competitiveness.

Pension plan rules in any one location are generally the same for all employees, including GEB members and other management. There are no enhanced or supplementary pension contributions for the GEB.

Performance award

Most of our employees are eligible for an annual performance award. The level of this award, where applicable, generally depends on the firm’s overall performance, the employee’s business division, team and individual performance, and behavior, reflecting their overall contribution to the firm’s results. These awards are in line with applicable local employment conditions and at the discretion of the firm.

In addition to the firm’s Pillars and Principles, Behaviors related to Accountability with integrity, Collaboration and Innovation are part of the performance management approach. Therefore, when assessing performance, we consider not only what was achieved but also how it was achieved.

Our deferred compensation plans

Underlining our emphasis on sustainable performance and risk management, and our focus on achieving our growth ambitions, we deliver part of our employees’ annual variable compensation through deferred compensation plans. We believe that our approach, with a single incentive decision and a mandatory deferral, is transparent and well suited to implementing our compensation philosophy and delivering sustainable performance. This aligns the interests of our employees and shareholders and appropriately links compensation to longer-term sustainable performance.

Our mandatory deferral approach applies to all employees with regulatory-driven deferral requirements or total compensation greater than USD / CHF 300,000. Certain regulated employees, such as Senior Management Functions (SMFs) and Material Risk Takers (MRTs), are subject to additional requirements (e.g., more stringent deferral requirements and additional blocking periods). In addition, SMFs and MRTs receive 50% of their cash portion in the form of immediately vested shares, which are blocked for 12 months after grant.

The deferred amount increases at higher marginal rates in line with the value of the performance award. The effective deferral rate therefore depends on the amount of the performance award and the amount of total compensation.

We believe our deferral regime has one of the longest vesting periods in the industry. The weighted average deferral period for non-regulated employees is 4.4 years for GEB members and is 3.5 years for employees outside of the GEB. Additionally, from time to time, we may utilize alternative deferred compensation arrangements to remain competitive in specific business areas.

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To further promote sustainable performance, all of our deferred compensation plans include employment conditions and malus conditions. These enable the firm to reduce or fully forfeit unvested deferred awards under certain circumstances, pursuant to performance and harmful acts provisions. In addition, forfeiture is triggered in cases where employment has been terminated for cause.

Our share delivery obligations related to notional share awards are satisfied by delivering treasury shares, which are purchased in the market, to employees at vesting.

•

Refer to “Note 27 Employee benefits: variable compensation” in the “Consolidated financial statements” section of our Annual Report 2022 for more information

•

Refer to the “Supplemental information” section of this report for more information about MRTs and SMFs

Variable compensation elements by employee category


		Deferred compensation elements
Employee category	Cash	LTIP	EOP	DCCP

GEB members	✔	✔		✔
Employees subject to mandatory deferral framework	✔		✔¹	✔

1	Employees in investment areas within Asset Management typically receive notional funds (Fund Ownership Plan, Previously named AM EOP) in lieu of EPO to align their compensation more closely with fund performance, industry standards and regulatory requirements.

Long-Term Incentive Plan

The Long-Term Incentive Plan (the LTIP) granted for 2022 performance is a mandatory deferral plan for GEB members. For the 2022 performance year, we awarded LTIP to 14 GEB members in office during 2022, at a fair value of 71.45% of the maximum. The value was calculated by an independent third party using a well-established valuation methodology.

The performance metrics of the share-based LTIP awards are average return on CET1 capital (RoCET1) and relative total shareholder return (rTSR) over a three-year performance period starting on 1 January in the year of grant. Performance outcomes and actual payout levels will be disclosed at the end of the performance period.

The three-year average RoCET1 performance metric reflects our strategic return ambitions and considers our financial targets, as well as our cost of capital as outlined below:

•

the required RoCET1 performance for a maximum payout is set at 18%, which represents the upper end of our target range, without encouraging excessive risk-taking;

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the required performance threshold for the minimum payout is 8%, the mid-point of the payout thresholds appropriately reflects our cost of equity; and

•

the linear payout design between threshold and maximum level supports our growth ambitions and our focus on delivering sustainable performance without encouraging excessive risk-taking.

The rTSR performance metric over the three-year period further aligns the interests of employees with those of shareholders:

•

the metric compares the total shareholder return (the TSR) of UBS with the TSR of an index consisting of listed Global Systemically Important Banks (G-SIBs) as determined by the Financial Stability Board (excluding UBS Group);

•

the G-SIBs are independently defined and reflect companies with a comparable risk profile and impact on the global economy;

•

the index, which includes publicly traded G-SIBs, is equally weighted, calculated in Swiss francs and maintained by an independent index provider, so as to ensure independence of the TSR calculation; and

•

the payout interval of ±25 percentage points versus the index performance demonstrates our ambition of delivering attractive relative returns to shareholders. The linear payout and the threshold level set below index performance further support sustainability of results and appropriate risk-taking.

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Global Systemically Important Banks (G-SIBs) that are listed companies¹


Agricultural Bank of China	Goldman Sachs	Santander

Bank of America	Groupe Crédit Agricole	Société Générale

Bank of China	HSBC	Standard Chartered

Bank of New York Mellon	ING	State Street

Barclays	ICBC	Sumitomo Mitsui FG

BNP Paribas	JPMorgan Chase	Toronto-Dominion

China Construction Bank	Mitsubishi UFJ FG	UniCredit

Citigroup	Mizuho FG	Wells Fargo

Credit Suisse	Morgan Stanley

Deutsche Bank	Royal Bank of Canada

¹	As of November 2022. Excludes UBS Group.

Dividend equivalents (granted where applicable regulation permits) are subject to the same terms as the underlying LTIP award.

LTIP awards reflect the long-term focus of our compensation framework. The final number of shares as determined at the end of the three-year performance period will vest in three equal installments in each of the three years following the performance period for GEB members (i.e., years 3, 4 and 5 after grant), although longer deferral periods may apply for regulated employees).

LTIP payout illustration


– The final number of notional shares vesting will vary based on the achievement versus the performance metrics.	Performance metric: average RoCET1 (50% of award)

– Linear payout between threshold and maximum performance.	Below threshold (<8%)	Threshold (8%) up to maximum (<18%)	Maximum and above (≥18%)

– Achievement levels are a percentage of the maximum opportunity of the LTIP and cannot exceed 100%.	Full forfeiture (payout 0%)	Partial vest (payout between 33% and <100%)	Full vest (payout 100%)

– Full forfeiture for performance below the predefined threshold levels.

– UK Senior Management Function holders (SMFs) and UK Material Risk Takers (UK MRTs) are subject to an additional non-financial metric based on a conduct assessment with a potential downward adjustment of up to 100% of the entire award.	Performance metric: rTSR vs G-SIBs index (50% of award)
	Below threshold (<–25 ppts)	Threshold (–25 ppts) up to maximum (+25 ppts)	Maximum and above (≥+25 ppts)
	Full forfeiture (payout 0%)	Partial vest (payout between 33% and <100%)	Full vest (payout 100%)

Performance achievement of the 2019 LTIP granted in 2020

The 2019 LTIP was granted in 2020 (for 2019 performance) at a fair value of 62.25% of a maximum of 100%. The final performance achieved is 98% of a maximum of 100%. This achievement reflects the outcome of the two equally weighted performance metrics, RoCET1 and rTSR, both measured over the three-year performance period from 1 January 2020 to 31 December 2022. The achievement level of this 2019 LTIP award (granted in 2020) applies to 8 current GEB members and 102 other plan participants.

We achieved a three-year average RoCET1 performance of 17.3% against the performance range of 6% to 18%, and an rTSR outperformance of +50.9 percentage points versus the index of listed Global Systemically Important Banks (G-SIBs). No adjustments, pandemic-related or otherwise, were made in the assessment of the performance conditions. For context, at the time when the LTIP was introduced, our communicated ambition for RoCET1 was 12–15%. This ambition level has since been updated and was raised to 15–18%, as communicated in February 2022.

For GEB members, the first of the three equal installments of the 2019 LTIP vested on 1 March 2023 and the second and third installments will vest in March 2024 and 2025; while for selected senior management, the 2019 LTIP cliff vested on 1 March 2023 (later dates may apply for regulated employees). For context, and as outlined in our 2019 Compensation Report, up to CHF 7.3m, or 30%, of the 2019 LTIP awards at grant for GEB members active in March 2017 continues to be at risk and directly linked to the final resolution of the French cross-border matter. In addition, a malus clause allows the Compensation Committee to assess any new information that becomes available in the future in relation to the matter and for the affected GEB members, and to retrospectively reduce any undelivered 2019 LTIP award by up to the full amount if any new information would have impacted our compensation decision in 2019. This matter continues to be ongoing and, once resolved, the final outcome will be reflected in the final amounts delivered to relevant current and former employees.

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Performance achievement for the 2019 LTIP awarded in 2020

LOGO

Equity Ownership Plan / Fund Ownership Plan

The Equity Ownership Plan (the EOP) is the deferred compensation plan for employees outside of the GEB that are subject to deferral requirements. For the 2022 performance year, we granted EOP awards to 4,458 employees.

Delivering sustainable results is a key objective for UBS. Our EOP creates a direct link with shareholder returns as a notional equity award and has no upward leverage. This approach promotes growth and sustainable performance. EOP awards generally vest over three years.

In place of EOP, employees in investment areas within Asset Management receive some or all of their EOP in the form of notional funds (the Fund Ownership Plan (the FOP), previously named AM EOP) to align their compensation more closely with industry standards. This plan is generally delivered in cash and vests over three years.

•

Refer to “Vesting of outstanding awards granted in prior years subject to performance metrics and thresholds” in the “Supplemental information” section of this report for more information

Deferred Contingent Capital Plan

The Deferred Contingent Capital Plan (the DCCP) is a key component of our compensation framework and supports alignment of the interests of our senior employees with those of our stakeholders.

All employees subject to deferral requirements receive DCCP awards. For the 2022 performance year, we granted DCCP awards to 4,326 employees.

The DCCP is consistent with many of the features of the loss-absorbing bonds that we issue to investors and may be paid at vesting in cash or, at the discretion of the firm, as a perpetual, marketable additional tier 1 (AT1) capital instrument. Employees can elect to have their DCCP awards denominated in Swiss francs or US dollars.

DCCP awards vest in full after five years (longer deferral periods may apply for regulated employees). DCCP awards bear notional interest paid annually (except as limited by regulation for MRTs), subject to review and confirmation by the Compensation Committee. The notional interest rate for grants in 2023 was 4.85% for awards denominated in Swiss francs and 7.80% for awards denominated in US dollars. These interest rates are based on the current market rates for similar AT1 capital instruments issued by UBS Group.

Awards are forfeited if a viability event occurs (i.e., if FINMA notifies the firm that the DCCP awards must be written down to mitigate the risk of an insolvency, bankruptcy or failure of UBS) or if the firm receives a commitment of extraordinary support from the public sector that is necessary to prevent such an event. DCCP awards are also written down for GEB members if the Group’s CET1 capital ratio falls below 10% and for all other employees if it falls below 7%.

In addition, GEB members forfeit 20% of DCCP awards for each loss-making year during the vesting period. This means 100% of the award is subject to risk of forfeiture. The forfeiture features of DCCP create a strong alignment with our debt holders and support the sustainability of the firm.

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Over the last five years, USD 2.0bn of DCCP awards have been issued, contributing to the Group’s total loss-absorbing capacity (TLAC). Therefore, DCCP awards not only support competitive pay but also provide a loss absorption buffer that protects the firm’s capital position. The following table illustrates the contribution of the DCCP to our AT1 capital and the effect on our TLAC ratio.

•

Refer to the “Supplemental information” section of this report for more information about performance award and personnel related expenses

•

Refer to the “Supplemental information” section of this report for more information about longer vesting and clawback periods for MRTs and SMFs


Contribution of the Deferred Contingent Capital Plan to our loss-absorbing capacity¹

USD m, except where indicated	31.12.22	31.12.21

Deferred Contingent Capital Plan (DCCP), eligible as high-trigger loss-absorbing additional tier 1 capital	1,794	1,730

DCCP contribution to the total loss-absorbing capacity ratio (%)	0.6	0.6

1	Refer to “Bondholder information” at ubs.com/investors for more information about the capital instruments of UBS Group AG and UBS AG both on a consolidated and a standalone basis.

Other variable compensation components

To support hiring and retention, particularly at senior levels, we may offer other compensation components, such as:

•

retention payments to key employees to induce them to stay, particularly during critical periods for the firm, such as a sale or wind-down of a business;

•

on a limited basis, guarantees that may be required to attract individuals with certain skills and experience – these awards are fixed incentives subject to our standard deferral rules and limited to the first full year of employment;

•

awards granted to employees hired late in the year to replace performance awards that they would have earned at their previous employer, but have foregone by joining UBS – these awards are generally structured with the same level of deferral as for employees at a similar level at UBS; and

•

in exceptional cases, sign-on awards may be offered to candidates to increase the chances of them accepting our offer.

These other variable compensation components are subject to a comprehensive governance process, which may involve the Compensation Committee, depending on the amount or type of such payments.

Employees outside of the GEB that are made redundant may receive severance payments. Our severance terms comply with the applicable local laws (legally obligated severance). In certain locations, we may provide severance packages that are negotiated with our local social partners and may go beyond the applicable minimum legal requirements (standard severance). Such payments are governed by location-specific severance policies. In addition, we may make severance payments that exceed legally obligated or standard severance payments where we believe these are aligned with market practice and appropriate under the circumstances (supplemental severance). GEB members do not receive severance payments.

Replacement awards and forfeitures

In line with industry practice, our compensation framework and plans include provisions generally requiring reduction / forfeiture of a terminated employee’s unvested or deferred awards. In particular, these provisions apply if the terminated employee joins another financial services organization and / or violates restrictive covenants, such as solicitation of clients or employees.

Conversely, to attract external top talent, market practice dictates that we consider replacing their forfeited compensation from their prior employer. In select situations and based on careful consideration, we replace the lost compensation of senior hires. The replacement awards are subject to UBS’s harmful acts provisions. Their value is subject to independent review as part of the “Report of the statutory auditor on the compensation report” to support the like-for-like nature of the replacement and to confirm that these awards do not represent sign-on payments (i.e., there are no “golden hellos”).

Based on a thorough review of available documentation, we aim to mirror the type, conditions and timing of the forfeited compensation, based on actual facts and circumstances. Replacement awards can include cash payments and / or deferred awards, including EOP share awards and DCCP awards. Where payments are made in cash, there is typically a clawback period if the employee leaves UBS voluntarily within 12 months of the start of employment. The replacement awards do not exceed the commercial or fair value of the compensation actually forfeited by the individual and, in case of GEB members, are disclosed transparently. The total 2022 forfeitures of USD 188m of previously awarded deferred compensation offset the 2022 total sign-on payments, replacement payments and guarantees of USD 153m.

In March 2022, Sarah Youngwood joined the GEB and succeeded Kirt Gardner as Group CFO effective 16 May 2022. Before joining UBS, Ms. Youngwood was CFO for JPMorgan Chase Consumer & Community Banking, CFO for Firmwide Technology and CFO for Diversity & Inclusion. In October 2022, Naureen Hassan joined the GEB and succeeded Tom Naratil in his role as President UBS Americas. She joined UBS from the Federal Reserve Bank of New York, where she was COO and First Vice President.

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Consistent with the terms of the compensation forfeited at her previous employer, Sarah Youngwood received replacement awards with a total value of CHF 7,206,683, consisting of an EOP share award representing 291,584 UBS shares (denominated in Swiss francs), and replacement of cash items. The deferred portion of the award will vest in various installments between 2023 and 2026. Similarly, Naureen Hassan received replacement awards with a total value of CHF 65,229, consisting of a deferred cash award (vesting in 2023) and replacement of cash items. These replacement awards reflect the different compensation structures of the industries and organizations we recruit from.

Sign-on payments, replacement payments, guarantees and severance payments


	Total 2022		of which: non-deferred cash		of which: deferred compensation awards		Total 2021		Number of beneficiaries
USD m, except where indicated										2022	2021

Total sign-on payments¹		0		0		0		0		1	0

of which: Key Risk Takers²		0		0		0		0		0	0

Total replacement payments³		110		28		82		119		452	463

of which: Key Risk Takers²		32		10		22		43		19	13

Total guarantees⁴		43		22		21		17		49	40

of which: Key Risk Takers²		26		12		15		2		9	1

Total severance payments^1,5		233		233		0		160		1,745	1,477

of which: Key Risk Takers²		1		1		0		3		8	10

GEB members are not eligible for sign-on or severance payments. Sign-on awards exclude one-time payments for junior associate hires into the Investment Bank. Including these, the 2022 and 2021 total sign-on payments are USD 1m for each respective year. All one-time payments for junior associate hires are subject to a 12-month clawback condition. Prior period information has been adjusted to exclude awards granted to employees hired late in the year.

2	Expenses for Key Risk Takers are full-year amounts for individuals in office on 31 December 2022. Key Risk Takers as defined by UBS, including all employees with a total compensation exceeding USD / CHF 2.5m (Highly Paid Employees).

Includes replacement payments for two GEB members in 2022 and for one GEB member in 2021. Includes awards granted to employees hired late in the year to replace performance awards that they would have earned at their previous employers, but have foregone by joining UBS. Prior period information has been adjusted to include awards granted to employees hired late in the year.

4	No GEB member received a guarantee in 2022 or 2021.

5	Includes legally obligated and standard severance payments, as well as payments in lieu of notice.


Forfeitures¹
	Total 2022	Total 2021
USD m, except where indicated

Total forfeitures	188	258

of which: former GEB members	3	23

of which: Key Risk Takers²	12	8

For notional share awards, forfeitures are calculated as units forfeited during the year, valued at the share price on 31 December 2022 (USD 18.67) for 2022. The 2021 data is valued using the share price on 31 December 2021 (USD 17.87). For LTIP the forfeited units reflect the fair value awarded at grant. For the notional funds awarded to Asset Management employees under the EOP, this represents the forfeiture credits recognized in 2022 and 2021. For the DCCP, the fair value at grant of the forfeited awards during the year is reflected. Numbers presented may differ from the effect on the income statement in accordance with IFRS.

2	Key Risk Takers as defined by UBS, including all employees with a total compensation exceeding USD / CHF 2.5m (Highly Paid Employees) and excluding former GEB members who forfeited awards in 2022 or 2021.

Employee share ownership

According to available records on employee shareholdings, including unvested deferred compensation, as of 31 December 2022, employees held at least USD 4.6bn of UBS shares (of which approximately USD 2.9bn were unvested), representing approximately 7% of our total shares issued.

The Equity Plus Plan is our employee share purchase program. It allows employees at Executive Director level and below to voluntarily invest up to 30% of their base salary and / or regular commission payments to purchase UBS shares. In addition (where offered), eligible employees can invest up to 35% of their performance award under the program. Participation in the program is capped at USD / CHF 20,000 annually. Eligible employees may purchase UBS shares at market price and receive one additional share for every three shares purchased through the program. Additional shares vest after a maximum of three years, provided the employee remains employed by UBS and has retained the purchased shares throughout the holding period.

•

Refer to “Note 27 Employee benefits: variable compensation” in the “Consolidated financial statements” section of our Annual Report 2022 for more information

Compensation for US financial advisors in Global Wealth Management

In line with market practice for US wealth management businesses, the compensation for US financial advisors in Global Wealth Management consists of cash compensation and deferred compensation awards, determined using a formulaic approach based on production.

The monthly cash compensation is determined using an overall percentage rate for each financial advisor. It reflects a percentage of the compensable production that each financial advisor generates during that month. Compensable production is generally based on transaction revenue and investment advisory fees and may reflect further adjustments. The percentage rate generally varies based on the level of the production and firm tenure, supporting growth and alignment with the investment strategy and goals of our clients.

Financial advisors may also be granted annual deferred compensation. These amounts generally vest over a six-year period. The annual deferred compensation amount reflects their overall percentage rate and production, as previously outlined.

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Cash compensation and deferred compensation awards may be reduced for, among other things, errors, negligence or carelessness, or failure to comply with the firm’s rules, standards, practices and / or policies, and / or applicable laws and regulations.

Financial advisors may also participate in additional programs to support promoting and developing their business or supporting the transition of client relationships where appropriate.

2022 Group performance outcomes

Performance awards granted for the 2022 performance year

The “Variable compensation” table below shows the amount of variable compensation awarded to employees for the 2022 performance year, together with the number of beneficiaries for each type of award granted. In the case of deferred awards, the final amount paid to an employee depends on performance conditions and consideration of relevant forfeiture provisions. The deferred share award amount is based on the market value of these awards on the date of grant.


Variable compensation

	Expenses recognized in the IFRS income statement				Expenses deferred to future periods³				Accounting adjustments^3,4						Total				Number of beneficiaries⁶
USD m, except where indicated	2022		2021		2022		2021		2022			2021			2022		2021		2022		2021

Non-deferred cash		2,276		2,383		0		0		(18	)		0			2,259		2,383		59,570		57,783

Deferred compensation awards		364		405		605		797		58			65			1,026		1,267		4,349		4,202

of which: Equity Ownership Plan		*202*		183		*310*		393		55			46			*568*		623		*4,042*		3,807

of which: Deferred Contingent Capital Plan		*129*		140		*245*		299		0			0			*375*		438		*4,206*		4,170

of which: Long-Term Incentive Plan		11		54		30		50		3			18			43		122		14		117

of which: Fund Ownership Plan		21		29		20		56		0			0			41		84		*295*		374

Variable compensation – performance award pool		2,640		2,788		605		797		40			65			3,285		3,650		59,590		57,793

Variable compensation – financial advisors¹		3,799		4,175		1,290		1,097		0			0			5,089		5,272		6,245		6,218

Variable compensation – other²		169		191		237		215		(146	)⁵		(121	)⁵		260		285


Total variable compensation		6,608		7,155		2,131		2,109		(106	)		(56	)		8,634		9,207

Financial advisor compensation consists of cash and deferred compensation awards and is based on compensable revenues and firm tenure using a formulaic approach. It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements.

2	Consists of replacement payments, forfeiture credits, severance payments, retention plan payments and interest expense related to the Deferred Contingent Capital Plan.

3	Estimates as of 31 December 2022 and 2021. Actual amounts to be expensed in future periods may vary; e.g., due to forfeiture of awards.

4	Represents estimated post-vesting transfer restriction and permanent forfeiture discounts, as well as currency translation adjustments.

Included in expenses deferred to future periods is an amount of USD 146m (2021: USD 121m) in interest expense related to the Deferred Contingent Capital Plan. As the amount recognized as performance award represents the present value of the award at the date it is granted to the employee, this amount is excluded.

6	Excludes awards that are part of other variable compensation.

2022 performance award pool and expenses

The performance award pool, which includes performance-based variable awards for 2022, was USD 3.3bn, reflecting a decrease of 10% compared with 2021. Performance award expenses for 2022 remained at USD 3.2bn, reflecting decreased performance award expenses accrued in the performance year, offset by increased performance award expenses related to prior performance years. The “Performance award pool and expenses” table below compares the performance award pool with performance award expenses.


Performance award pool and expenses

USD m, except where indicated	2022		2021		% change
Performance award pool¹		3,285		3,650		(10	)
of which: expenses deferred to future periods and accounting adjustments^2,3		*645*		862		(25	)
Performance award expenses accrued in the performance year		2,640		2,788		(5	)
Performance award expenses related to prior performance years		566		402		41

Total performance award expenses recognized for the year⁴		3,205		3,190		0

1	Excluding employer-paid taxes and social security.

2	Estimate as of the end of the performance year. Actual amounts expensed in future periods may vary, e.g., due to forfeiture of awards.

3	Accounting adjustments represent estimated post-vesting transfer restriction and permanent forfeiture discounts, as well as currency translation adjustments.

4	Refer to “Note 27 Employee benefits: variable compensation” in the “Consolidated financial statements” section of our Annual Report 2022 for more information.

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Compensation for the Board of Directors

Chairman of the BoD

Colm Kelleher was elected Chairman of the BoD at the 2022 AGM on 6 April 2022. Under his leadership, the BoD determines, among other things, the strategy for the Group, based on recommendations by the Group CEO, exercises ultimate supervision over management and appoints all GEB members.

The Chairman leads all general meetings and BoD meetings and works with the committee Chairpersons to coordinate the work of all BoD committees. Together with the Group CEO, the Chairman is responsible for effective communication with shareholders and stakeholders, including clients, government officials, regulators and public organizations. The Chairman works closely with the Group CEO and other GEB members, providing advice and support when appropriate, and continues to strengthen and promote our culture through the three keys to success: our Pillars, Principles and Behaviors.

As an independent director, the Chairman’s total compensation for the period from AGM to AGM consists of a fixed fee without any variable component, which is delivered 50% in cash and 50% in shares (blocked for four years). For the current period, from the 2022 AGM to the 2023 AGM, his fixed fee was CHF 4.7m and consisted of a cash payment of CHF 2.35m and a share component of CHF 2.35m, consisting of 116,961 UBS shares at CHF 20.092 per share. The share component aligns the Chairman’s pay with the Group’s long-term performance. The Chairman does not receive performance awards, severance payments or pension contributions in addition to his fixed fee, but, given the full-time nature of his role, he is eligible for employee conditions on UBS products and services.

•

Refer to “Board of Directors” in the “Corporate governance” section of our Annual Report 2022 for more information about the responsibilities of the Chairman

Vice Chairman of the BoD

Lukas Gähwiler was elected as a member of the BoD at the 2022 AGM on 6 April 2022 and thereafter appointed as Vice Chairman. In this newly defined full-time role, he leads the BoD in the absence of the Chairman. Together with the Senior Independent Director, he also supports the Chairman in all aspects of corporate governance and oversight across the Group. In particular, he represents UBS across a broad range of associations and industry bodies in Switzerland.

The Vice Chairman’s total compensation for the period from AGM to AGM consists of a fixed fee without any variable component, which is delivered 50% in cash and 50% in shares (blocked for four years). For the current period, from the 2022 AGM to the 2023 AGM, his fixed fee was CHF 1.5m, excluding benefits and pension fund contributions. The fixed fee consisted of a cash payment of CHF 0.75m and a share component of CHF 0.75m, consisting of 37,328 UBS shares at CHF 20.092 per share. The fee for the new full-time Vice Chairman was absorbed within the existing budget and does not result in an increase of the proposed maximum aggregate amount for BoD compensation.

As a non-independent director, Mr. Gähwiler is entitled to pension fund contributions. Including these, his total reward for his service as Vice Chairman for the current period was CHF 1,879,010.

The Vice Chairman is not eligible for performance awards, severance terms or supplementary contributions to pension plans. The pension contributions and benefits for the Vice Chairman, in his capacity as non-independent director, are consistent with all UBS employees and aligned with local market practice.

•

Refer to “Board of Directors” in the “Corporate governance” section of our Annual Report 2022 for more information about the responsibilities of the Vice Chairman

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Other BoD members

BoD members, except the Chairman and Vice Chairman, receive fixed fees for their services on the BoD and its committees. BoD members do not receive performance awards, severance payments, benefits or pension contributions (the benefit eligibility of the Chairman and that of the Vice Chairman are described above).

BoD members must use a minimum of 50% of their fees to purchase UBS shares, which are blocked for four years, and they may elect to use up to 100% of their fees to purchase blocked UBS shares. As outlined above, the fixed fees of the Chairman and Vice Chairman are delivered 50% in cash and 50% in shares, which are blocked for four years. The number of shares is calculated based on the average closing price of the 10 trading days leading up to and including the grant date.

At each AGM, shareholders are invited to approve the aggregate amount of BoD remuneration, including the compensation for the Chairman and Vice Chairman, which applies until the next AGM. The chart and the tables below provide details on the fee structure for the BoD members.

LOGO

Approval governance for BoD compensation

The Chairperson of the Compensation Committee proposes and the Compensation Committee approves the compensation of the Chairman and that of the Vice Chairman annually for the upcoming AGM-to-AGM period, taking into consideration fee or compensation levels for comparable roles based on our core financial industry peers and other relevant leading Swiss companies included in the Swiss Market Index.

The fee structure for the other BoD members is reviewed annually based on the Chairman’s proposal to the Compensation Committee, which in turn submits a proposal to the BoD for approval. In our regular review of the BoD fee structure, we concluded that our overall approach for BoD member compensation remains appropriate and thus unchanged.

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Refer to “Compensation Governance” in the “Compensation philosophy and governance” section of this report for more information about the remuneration responsibilities of the BoD and Compensation Committee

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Audited |


Remuneration details and additional information for BoD members
Period 2022 AGM to 2023 AGM
CHF, except where indicated
Name, function¹	Audit Committee		Compensation Committee		Corporate Culture and Responsibility Committee		Governance and Nominating Committee		Risk Committee		Base fee		Committee fee(s)		Additional payments²		Benefits³		Total⁴		Share percentage⁵		Number of shares^6,7
Colm Kelleher, Chairman⁸						C		C				4,700,000						86,494		4,786,494		50		116,961
Lukas Gähwiler, Vice Chairman⁸												1,500,000						379,010		1,879,010		50		37,328
Jeremy Anderson, Senior Independent Director		C						M				300,000		400,000		150,000				850,000		50		21,152
Claudia Böckstiegel, member						M						300,000		50,000						350,000		50		8,709
William C. Dudley, member						M				M		300,000		250,000						550,000		50		13,687
Patrick Firmenich, member		M				M						300,000		250,000						550,000		100		26,130
Fred Hu, member								M				300,000		100,000						400,000		100		14,722
Mark Hughes, member						M				C		300,000		400,000						700,000		50		17,419
Nathalie Rachou, member								M		M		300,000		300,000						600,000		50		14,931
Julie G. Richardson, member				C						M		300,000		400,000						700,000		50		17,419
Dieter Wemmer, member		M		M								300,000		300,000						600,000		50		14,931
Jeanette Wong, member		M		M								300,000		300,000						600,000		100		22,127

Aggregate of all BoD members 2022/2023																				12,565,504

Aggregate of all BoD members 2022/2023 in USD (for reference)⁹																				13,035,831


Period 2021 AGM to 2022 AGM
CHF, except where indicated
Name, function¹	Audit Committee		Compensation Committee		Corporate Culture and Responsibility Committee		Governance and Nominating Committee		Risk Committee		Base fee		Committee fee(s)		Additional payments¹⁰		Benefits		Total⁴		Share percentage⁵		Number of shares^6,7
Axel A. Weber, Chairman¹¹						C		C				4,900,000						324,913		5,224,913		29		72,939
Jeremy Anderson, Vice Chairman and Senior Independent Director		C						M				300,000		400,000		150,000				850,000		50		22,142
Claudia Böckstiegel, member												300,000		0						300,000		50		7,814
William C. Dudley, member						M		M		M		300,000		350,000						650,000		50		16,932
Patrick Firmenich, member												300,000		250,000						550,000		100		27,275
Reto Francioni, member				M						M		300,000		300,000						600,000		50		15,629
Fred Hu, member								M		M		300,000		300,000						600,000		100		23,062
Mark Hughes, member						M				C		300,000		400,000						700,000		50		18,234
Nathalie Rachou, member										M		300,000		200,000						500,000		50		13,024
Julie G. Richardson, member				C				M		M		300,000		500,000						800,000		50		20,839
Dieter Wemmer, member		M		M				M				300,000		400,000						700,000		50		18,234
Jeanette Wong, member		M		M		M						300,000		350,000						650,000		100		24,988

Aggregate of all BoD members 2021/2022																				12,124,913

Legend: C = Chairperson of the respective Committee, M = Member of the respective Committee

1	Twelve BoD members were in office on 31 December 2022. At the 2022 AGM, Colm Kelleher and Lukas Gähwiler were newly elected and Reto Francioni and Axel A. Weber did not stand for re-election. Twelve BoD members were in office on 31 December 2021.