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Expected credit loss measurement
 12 Months Ended
Dec. 31, 2021
Entity [Table]  
Disclosure Of Financial Assets Explanatory
Additional information
Note 20
 
Expected credit loss measurement
Total
 
net
 
credit
 
loss
 
releases
 
were
 
USD
148
 
million
 
in
 
2021,
reflecting
 
net
 
credit
 
loss
 
releases
 
of
 
USD
123
 
million
 
related
 
to
stage 1 and 2
 
positions and USD
25
 
million net credit loss
 
releases
related to credit-impaired (stage 3) positions.
Stage 1
 
and
 
2
 
net
 
credit
 
loss
 
releases
 
of
 
USD
123
 
million
included
 
a
 
USD
68
 
million
 
partial
 
net
 
release
 
of
 
a
 
post-model
adjustment,
 
due
 
to
 
the
 
continued
 
positive
 
trend
 
in
macroeconomic
 
scenario
 
input
 
data
 
during
 
the
 
year,
 
a
 
USD
45
million
 
net
 
release
 
from
 
a
 
number
 
of
 
model
 
and
 
methodology
changes
 
and
a
 
residual
USD
 
10
 
million
 
net
 
release
from
remeasurements
 
within
 
the
 
loan
 
book,
 
derecognized
transactions, partially offset by expenses from new transactions
.
 
›
 
Refer to Note 20b
 
for more information regarding changes to
ECL model, scenarios,
 
scenario weights and the post-model
adjustment and to Note 20c for more information
 
regarding
the development of ECL allowances and
 
provisions
Stage 3 net releases of USD
25
 
million were recognized across
a number of defaulted
 
positions with a USD
24
 
million net release
in Personal & Corporate Banking.
b) Changes to ECL models, scenarios, scenario weights and key inputs
Credit loss (expense) / release
USD million
Global
 
Wealth
 
Management
Personal &
 
Corporate
 
Banking
Asset
Management
Investment
 
Bank
Group
 
Functions
Total
For the year ended 31.12.21
Stages 1 and 2
28
62
0
34
0
123
Stage 3
1
24
(1)
0
0
25
Total credit loss (expense) / release
29
86
(1)
34
0
148
For the year ended 31.12.20
Stages 1 and 2
(48)
(129)
0
(88)
0
(266)
Stage 3
(40)
(128)
(2)
(217)
(42)
(429)
Total credit loss (expense) / release
(88)
(257)
(2)
(305)
(42)
(694)
For the year ended 31.12.19
Stages 1 and 2
3
23
0
(4)
0
22
Stage 3
(23)
(44)
0
(26)
(7)
(100)
Total credit loss (expense) / release
(20)
(21)
0
(30)
(7)
(78)
Refer to
 
Note 1a
 
for information
 
about the
 
principles governing
expected credit loss
 
(ECL) models, scenarios,
 
scenario weights and
key inputs applied.
 
Governance
Comprehensive
 
cross-functional and
 
cross-divisional
 
governance
processes
 
are
 
in
 
place
 
and
 
are
 
used
 
to
 
discuss
 
and
 
approve
scenario
 
updates
 
and
 
weights,
 
to
 
assess
 
whether
 
significant
increases in credit risk resulted in stage transfers, to
 
review model
outputs
 
and
 
to
 
reach
 
conclusions
 
regarding
 
post-model
adjustments.
 
Model changes
During 2021, the model review
 
and enhancement process led to
adjustments of
 
the probability
 
of default
 
(PD), loss
 
given default
(LGD)
 
and
 
credit
 
conversion
 
factor
 
(CCF)
 
models,
 
resulting
 
in
 
a
USD
45
 
million decrease
 
in ECL
 
allowances. An
 
amount of
 
USD
25
 
million related
 
to the
Large corporate
 
clients
 
segment in
 
the
Investment
 
Bank. The
 
remainder
 
related
 
to
 
various segments
 
in
Personal & Corporate Banking and Global Wealth Management.
Scenario and key input updates
During
 
2021,
 
the
 
scenarios
 
and
 
related
 
macroeconomic
 
factors
were updated
 
from those
 
that were
 
applied at
 
the end
 
of 2020
by
 
taking
 
into
 
account
 
the
 
prevailing
 
economic
 
and
 
political
conditions
 
and
 
uncertainty.
 
As
 
the
 
economic
 
development
 
was
more
 
positive
 
than
 
anticipated
 
following
 
the
 
COVID-19-related
downturn,
 
the
 
forward-looking
 
scenarios
 
benefited
 
from
 
an
improved forecast starting level.
 
The projections of
 
the baseline scenario,
 
which are aligned
 
to
the
 
economic
 
and
 
market assumptions
 
used
 
for
 
UBS’s business
planning purposes, are broadly in line with external data, such as
from
 
Bloomberg
 
Consensus,
 
Oxford
 
Economics
 
and
 
the
International
 
Monetary
 
Fund
 
World
 
Economic
 
Outlook.
 
The
economic
 
performance
 
during
 
2021
 
in
 
relevant
 
markets,
especially in the
 
US and in
 
Switzerland, highlighted an
 
accelerated
improvement
 
after
 
the
 
COVID-19-related
 
shocks.
 
The
 
scenario
assumes continued growth in 2022 in
 
all key markets, albeit at a
slower rate than
 
seen in 2021,
 
and unemployment rates
 
are not
expected to fall noticeably below the current levels. Interest rates
are expected to
 
remain low in
 
line with the
 
central bank policies
pursued in the Eurozone and Switzerland, and any potential rises
in the US would be
 
limited in the foreseeable
 
future. House prices
are
 
expected
 
to
 
reflect
 
the
 
momentum
 
and
 
continue
 
to
 
rise,
especially in Switzerland and, to a lesser degree, in the US.
The
 
narrative
 
of
 
the
 
hypothetical
 
severe
 
downside
 
scenario,
which
 
is the
 
Group’s binding
 
stress
 
scenario, has
 
been adapted
and assumes that, while
 
the immediate risks
 
from COVID-19 have
decreased,
 
the
 
associated
 
disruptions
 
and
 
the
 
consequences
 
of
the
 
unprecedented
 
monetary
 
and
 
fiscal
 
stimulus
 
measures
 
will
remain
 
critical.
 
Concerns
 
regarding
 
the
 
sustainability
 
of
 
public
debt, following the
 
marked deterioration of
 
fiscal positions, lead
to
 
a
 
loss
 
of
 
confidence
 
and
 
market
 
turbulence,
 
while
protectionism results
 
in a
 
fall in
 
global trade.
 
Governments and
central banks have limited
 
scope to support the economies.
 
As a
consequence,
 
the
 
Eurozone
 
and
 
China
 
suffer
 
a
 
hard
 
landing,
under
 
this
 
scenario
 
which
 
severely
 
affects
 
the
 
Swiss
 
export-
oriented
 
economy,
 
and
 
the
 
US
 
economy
 
contracts
 
as
 
global
demand
 
is
 
significantly
 
affected.
 
Given
 
the
 
severity
 
of
 
the
macroeconomic
 
impact,
 
unemployment
 
rates
 
rise
 
to
 
historical
highs and real estate sectors contract sharply.
With effect
 
from the
 
second quarter,
 
the hypothetical
 
upside
and mild downside scenarios, which
 
were viewed as less
 
plausible
as
 
of
 
31
 
December
 
2020 and
 
had
 
a
 
probability
 
weight
 
of
 
zero
attached,
 
were
 
redesigned
 
and
 
reintroduced
 
in
 
the
 
ECL
calculation.
 
These
 
two
 
scenarios
 
have
 
become
 
more
 
relevant
following
 
this
 
update,
 
as
 
they
 
better
 
reflect
 
a
 
more
 
positive
outlook
 
with
 
regard
 
to
 
COVID-19
 
and
 
market
 
expectations
regarding a potential change in
 
central bank policies, respectively.
 
The
 
upside
 
scenario
 
is
 
based
 
on
 
positive
 
developments
following
 
COVID-19 and
 
strong economic
 
activity
 
supported by
pent-up demand in certain
 
sectors, as well
 
as the expectation
 
that
interest rates
 
will remain
 
relatively low
 
in the
 
near future.
 
Asset
prices rise significantly, but
 
a view that currently
 
observed higher
inflation rates are temporary and spare economic
 
capacity would
mean that
 
consumer prices
 
remain moderate
 
in the
 
first year
 
of
the scenario.
The
 
mild
 
downside
 
scenario
 
focuses
 
on
 
the
 
implications
 
of
rising concerns regarding inflationary trends
 
following a recovery
from
 
COVID-19.
 
Higher-than-expected
 
inflation
 
data
 
triggers
 
a
steepening of
 
yield curves
 
across the
 
globe and
 
leads to
 
market
volatility.
 
Higher
 
interest
 
rates
 
lead
 
to
 
a
 
sell-off
 
in
 
assets
 
and
 
a
period
 
of
 
deleveraging
 
under
 
this
 
scenario
.
 
With
 
inflation
remaining high, central
 
banks start hiking
 
their policy rates
 
after
a few
 
quarters, leading
 
to further
 
increases in
 
interest rates
 
and
impacting corporate
 
and private
 
debt sustainability.
 
A recessionary
period is the consequence.
The table
 
on the
 
following page
 
details the
 
key assumptions
for the four scenarios applied as of 31 December 2021.
Scenario weights and post-model adjustments
With the weighting of
 
four scenarios above 0%
 
and considering
the generally
 
more positive
 
outlook regarding
 
an abating
 
effect
on
 
the
 
world
 
economy
 
from
 
the
 
COVID-19
 
pandemic,
 
the
distribution of
 
weights shifted
 
during 2021.
 
As of
 
31 December
2021, 5 percentage points of the weight of the baseline scenario
and 10 percentage
 
points of
 
the severe
 
downside scenario were
redistributed to the upside
 
scenario (5%) and the mild downside
scenario (10%), as shown in the table below.
Although the scenarios and
 
weight allocation were
 
established
in
 
line
 
with
 
the
 
general
 
market
 
sentiment
 
that
 
COVID-19
 
has
passed its peak
 
and a gradual return
 
to normal is the
 
most likely
path,
 
significant
 
uncertainties
 
still
 
remain.
 
Models,
 
which
 
are
based
 
on
 
supportable
 
statistical
 
information
 
from
 
past
experiences
 
regarding
 
interdependencies
 
of
 
macroeconomic
factors
 
and
 
their
 
implications
 
for
 
credit
 
risk
 
portfolios,
 
cannot
comprehensively reflect extraordinary events, such as a pandemic
or a fundamental change in the world political order. Especially
 
in
these
 
uncertain
 
times,
 
it
 
is
 
in
 
the
 
realm
 
of
 
possibilities
 
that
 
the
generally accepted view that the effects of COVID-19 are abating
may prove to be disappointed by
 
the emergence of new variants
of
 
the
 
virus,
 
which
 
may
 
be
 
more
 
harmful
 
and
 
may
 
undermine
current
 
vaccination
 
efforts.
 
Political
 
events
 
involving
 
tensions
between
 
major
 
global
 
forces
 
may
 
introduce
 
unforeseen
challenges, such
 
as disruptions
 
in the
 
global supply
 
chain and
 
a
distortion of energy markets. Such events could affect economies
severely and change
 
the baseline assumptions
 
significantly. Rather
than
 
creating multiple
 
additional
 
scenarios
 
to
 
gauge these
 
risks
and applying model
 
parameters that lack
 
supportable information
and
 
cannot
 
be
 
robustly
 
validated,
 
management
 
continued
 
to
apply
 
significant
 
post
-
model
 
adjustments.
These
 
adjustments
were
 
benchmarked
 
against
 
coverage
 
ratio
 
levels
 
as
 
of
 
30 June
2021
,
 
when
 
a
 
partial
n
et
 
release
 
of
 
USD
 
91
 
million
 
was
recognized, corresponding to one third of
 
the accumulated effect
of
 
scenario
 
improvements,
 
following
 
comprehensive
 
expert
assessment and judgment, and
 
were also deemed appropriate
 
for
year-end 2021 reporting. The post-model adjustments relating to
COVID-19 amounted to
 
USD
224
 
million as
 
of 31 December
 
2021
(2020: USD
117
 
million in addition to
 
overlays of USD
16
 
million
for
 
other
 
aspects,
 
where
 
model
 
results
 
were
 
deemed
 
to
 
be
uncertain).
 
 
 
ECL scenario
Assigned weights in %
31.12.21
31.12.20
Upside
5.0
0.0
Baseline
55.0
60.0
Mild downside
10.0
0.0
Severe downside
30.0
40.0
Scenario assumptions
One year
 
Three years cumulative
 
31.12.21
Upside
Baseline
Mild
downside
Severe
downside
Upside
Baseline
Mild
downside
Severe
downside
Real GDP growth (% change)
United States
9.1
4.4
(0.1)
(5.9)
17.8
10.1
1.8
(3.8)
Eurozone
9.4
3.9
(0.1)
(8.7)
17.3
7.5
0.9
(10.3)
Switzerland
5.5
2.4
(0.9)
(6.6)
13.1
5.8
(0.1)
(5.7)
Consumer price index (% change)
United States
3.1
2.2
5.7
(1.2)
9.5
6.3
13.0
0.4
Eurozone
2.3
1.4
4.2
(1.3)
8.0
4.8
10.4
(1.7)
Switzerland
1.8
0.3
3.5
(1.8)
6.1
1.7
9.0
(1.6)
Unemployment rate (end-of-period level, %)
United States
3.0
3.9
6.1
10.9
3.0
3.5
7.2
10.8
Eurozone
6.2
7.4
8.7
12.9
6.0
7.2
9.1
15.1
Switzerland
2.3
2.5
3.4
5.2
1.6
2.3
4.2
5.9
Fixed income: 10-year government bonds (change in yields, basis points)
USD
50.0
16.5
259.2
(50.0)
170.0
41.2
329.2
(15.0)
EUR
40.0
11.1
283.8
(35.0)
140.0
34.9
349.3
(25.0)
CHF
50.0
12.1
245.5
(70.0)
150.0
34.4
307.3
(35.0)
Equity indices (% change)
S&P 500
12.0
14.1
(27.0)
(50.2)
35.5
24.7
(21.8)
(40.1)
EuroStoxx 50
16.0
12.3
(23.4)
(57.6)
41.6
20.7
(19.9)
(50.4)
SPI
14.0
12.1
(22.9)
(53.6)
37.9
19.1
(19.6)
(44.2)
Swiss real estate (% change)
Single-Family Homes
 
5.1
4.4
(4.3)
(17.0)
15.5
7.4
(8.8)
(30.0)
Other real estate (% change)
United States (S&P / Case-Shiller)
10.0
3.5
(2.3)
(9.5)
21.7
7.1
(8.7)
(26.3)
Eurozone (House Price Index)
8.4
5.1
(4.0)
(5.4)
17.8
9.6
(7.6)
(10.8)
Scenario assumptions
One year
 
Three years cumulative
 
31.12.20
Baseline
Severe downside
Baseline
Severe downside
Real GDP growth (% change)
United States
2.7
(5.9)
9.1
(3.8)
Eurozone
2.5
(8.7)
9.9
(10.3)
Switzerland
3.3
(6.6)
9.0
(5.7)
Consumer price index (% change)
United States
1.7
(1.2)
5.5
0.4
Eurozone
1.4
(1.3)
3.9
(1.7)
Switzerland
0.3
(1.8)
0.9
(1.6)
Unemployment rate (end-of-period level, %)
United States
5.5
12.1
4.5
9.9
Eurozone
9.5
14.1
8.0
16.4
Switzerland
3.8
6.1
3.2
6.8
Fixed income: 10-year government bonds (change in yields, basis points)
USD
22.0
(50.0)
46.0
(15.0)
EUR
4.0
(35.0)
21.0
(25.0)
CHF
13.0
(70.0)
31.0
(35.0)
Equity indices (% change)
S&P 500
(2.9)
(50.2)
(1.7)
(40.1)
EuroStoxx 50
3.8
(57.6)
13.5
(50.4)
SPI
(0.8)
(53.6)
5.8
(44.2)
Swiss real estate (% change)
Single-Family Homes
 
3.4
(17.0)
7.1
(30.0)
Other real estate (% change)
United States (S&P / Case-Shiller)
2.5
(15.3)
9.2
(28.7)
Eurozone (House Price Index)
1.1
(22.9)
7.2
(35.4)
c) Development of ECL allowances and provisions
The ECL
 
allowances and
 
provisions recognized
 
in the
 
period are
impacted by a variety of factors, such as:
–
 
origination of new instruments during the period;
 
–
 
effect of passage of time as the ECLs on an instrument for the
remaining
 
lifetime
 
decrease
 
(all
 
other
 
factors
 
remaining
 
the
same);
–
 
discount
 
unwind
 
within ECLs
 
as
 
it
 
is
 
measured
 
on
 
a
 
present
value basis;
–
 
derecognition of instruments in the period;
–
 
change in individual asset quality of instruments;
–
 
effect
 
of
 
updating
 
forward-looking
 
scenarios
 
and
 
the
respective weights;
movements from a
 
maximum 12-month
 
ECL to the
 
recognition
of
 
lifetime ECLs
 
(and
 
vice versa)
 
following transfers
 
between
stages 1 and 2;
 
–
 
movements
 
from
 
stages 1
 
and
 
2
 
to
 
stage 3
 
(credit-impaired
status) when
 
default has
 
become certain
 
and PD
 
increases to
100% (or vice versa);
–
 
changes in models or updates to model parameters;
–
 
write-off; and
–
 
foreign
 
exchange
 
translations
 
for
 
assets
 
denominated
 
in
foreign currencies and other movements.
The following table explains the changes in
 
the ECL allowances and provisions for on-
 
and off-balance sheet financial instruments and
credit lines in
 
scope of ECL requirements
 
between the beginning and the
 
end of the period due
 
to the factors listed on
 
the previous
page.
Development of ECL allowances and
 
provisions
USD million
Total
Stage 1
Stage 2
Stage 3
Balance as of 31 December 2020
(1,468)
(306)
(333)
(829)
Net movement from new and derecognized transactions
1
(59)
(72)
13
0
of which: Private clients with mortgages
(7)
(10)
3
0
of which: Real estate financing
(7)
(11)
4
0
of which: Large corporate clients
(13)
(21)
7
0
of which: SME clients
(8)
(8)
0
0
of which: Other
(24)
(23)
(2)
0
 
of which: Financial intermediaries and hedge funds
(21)
(18)
(4)
0
 
of which: Loans to financial advisors
0
(1)
1
0
Remeasurements with stage transfers
2
(40)
8
0
(49)
of which: Private clients with mortgages
(9)
4
(13)
0
of which: Real estate financing
(3)
1
(4)
0
of which: Large corporate clients
2
(2)
12
(8)
of which: SME clients
(27)
5
4
(36)
of which: Other
(3)
0
2
(4)
 
of which: Financial intermediaries and hedge funds
2
(1)
3
0
 
of which: Loans to financial advisors
0
1
(1)
0
Remeasurements without stage transfers
3
203
55
74
74
of which: Private clients with mortgages
33
8
26
(1)
of which: Real estate financing
30
13
13
3
of which: Large corporate clients
44
5
21
17
of which: SME clients
53
(1)
1
53
of which: Other
44
29
14
2
 
of which: Financial intermediaries and hedge funds
27
15
12
0
 
of which: Loans to financial advisors
6
8
1
(3)
Model changes
4
45
29
16
0
Movements with profit or loss impact
5
148
19
104
25
Movements without profit or loss impact (write-off, FX and other)
6
154
5
9
141
Balance as of 31 December 2021
(1,165)
(282)
(220)
(662)
1 Represents the
 
increase and decrease
 
in allowances
 
and provisions resulting
 
from financial instruments
 
(including guarantees
 
and facilities) that
 
were newly originated,
 
purchased or renewed
 
and from the
 
final
derecognition of loans or facilities on
 
their maturity date or earlier.
 
2 Represents the remeasurement between 12-month and lifetime
 
ECL due to stage transfers.
 
3 Represents the change in allowances and provisions
related to
 
changes in
 
model inputs
 
or assumptions,
 
including changes
 
in forward
 
-looking macroeconomic
 
conditions,
 
changes in
 
the exposure
 
profile,
 
PD and
 
LGD changes,
 
and unwinding
 
of the
 
time value.
 
4 Represents the change in the allowances and provisions related to changes in models and methodologies.
 
5 Includes ECL movements from new and derecognized transactions, remeasurement changes, model and
methodology changes.
 
6 Represents the
 
decrease in
 
allowances and
 
provisions resulting
 
from write-offs
 
of the ECL
 
allowance against
 
the gross carrying
 
amount when all
 
or part of
 
a financial asset
 
is deemed
uncollectible or forgiven and movements in foreign exchange rates.
In
 
2021,
 
ECL
 
allowances
 
and
 
provisions
 
decreased
 
by
 
USD
148
million from net credit loss releases impacting profit or loss:
–
 
a
 
USD
59
 
million
 
net
 
increase
 
from
 
new
 
and
 
derecognized
transactions
 
that
 
resulted
 
from
 
a
 
USD
72
 
million
 
stage 1
increase
 
primarily
 
in
 
the
 
corporate
 
lending
 
and
 
real
 
estate
lending portfolio,
 
offset by
 
a USD
13
 
million net release
 
from
stage 2
 
positions,
 
driven
 
by
 
positions
 
that
 
were
 
terminated
before their contractual maturity;
 
–
 
a USD
163
 
million net decrease from book quality movements
that
 
resulted
 
from
 
a
 
USD
 
203
 
million
 
net
 
decrease
 
from
remeasurements
 
without
 
stage transfers,
 
with
 
approximately
half of
 
that related to
 
corporate lending –
 
another significant
portion related to
 
real estate-related lending,
 
primarily due to
the partial release of a
 
post-model adjustment, partially offset
by USD
40
 
million from transactions moving
 
from stages 1 and
2
 
into
 
stages 2
 
and
 
3,
 
respectively,
 
primarily
 
related
 
to
 
SME
clients;
 
and
–
 
a USD
45
 
million net decrease that resulted from a number
 
of
model changes.
 
An amount of
 
USD
25
 
million related to
 
the
Large corporate
 
clients
 
segment in
 
the Investment
 
Bank. The
remainder related to various
 
segments in Personal &
 
Corporate
Banking and Global Wealth Management.
 
In
 
addition
 
to
 
the
 
movements
 
impacting
 
profit
 
or
 
loss,
allowances decreased by USD
154
 
million as a result
 
of USD
137
million
 
of
 
write-offs and
 
USD
18
 
million
 
from
 
foreign
 
exchange
and other movements, both of which
 
did not impact the income
statement.
Development of ECL allowances and
 
provisions
USD million
Total
Stage 1
Stage 2
Stage 3
Balance as of 31 December 2019
(1,029)
(181)
(160)
(688)
Net movement from new and derecognized transactions
1
(28)
(90)
17
46
of which: Private clients with mortgages
(2)
(3)
2
0
of which: Real estate financing
(3)
(5)
2
0
of which: Large corporate clients
(32)
(29)
(4)
0
of which: SME clients
(16)
(14)
(3)
0
of which: Other
26
(39)
20
46
 
of which: Securities financing transactions REIT
32
(1)
15
17
 
of which: Loans to financial advisors
9
(1)
9
0
 
of which: Lombard loans
23
(6)
0
29
 
of which Financial intermediaries
 
(20)
(15)
(5)
0
Remeasurements with stage transfers
2
(427)
45
(134)
(338)
of which: Private clients with mortgages
(19)
(2)
(17)
0
of which: Real estate financing
(6)
3
(9)
0
of which: Large corporate clients
(224)
34
(83)
(175)
of which: SME clients
(43)
(1)
(11)
(31)
of which: Other
(134)
11
(14)
(131)
 
of which: Securities financing transactions REIT
(36)
0
(18)
(19)
 
of which: Loans to financial advisors
(12)
7
(7)
(11)
 
of which: Lombard loans
(36)
0
0
(36)
 
of which Commodity trade finance
(59)
0
0
(59)
Remeasurements without stage transfers
3
(271)
(88)
(47)
(136)
of which: Private clients with mortgages
(34)
(19)
(8)
(7)
of which: Real estate financing
(14)
(4)
(11)
1
of which: Large corporate clients
(149)
(53)
(17)
(79)
of which: SME clients
(13)
0
(7)
(6)
of which: Other
(60)
(11)
(4)
(44)
 
of which: Loans to financial advisors
(18)
(12)
(3)
(3)
 
of which: Lombard loans
(3)
6
0
(9)
 
of which: Credit cards
(12)
0
0
(12)
Model changes
4
32
21
11
0
Movements with profit or loss impact
5
(694)
(112)
(154)
(429)
Movements without profit or loss impact (write-off, FX and other)
6
254
(14)
(19)
287
Balance as of 31 December 2020
(1,468)
(306)
(333)
(829)
1 Represents the
 
increase and decrease
 
in allowances
 
and provisions resulting
 
from financial instruments
 
(including guarantees
 
and facilities) that
 
were newly originated,
 
purchased or renewed
 
and from the
 
final
derecognition of loans or facilities on
 
their maturity date or earlier.
 
2 Represents the remeasurement between 12-month and lifetime
 
ECL due to stage transfers.
 
3 Represents the change in allowances and provisions
related to
 
changes in
 
model inputs
 
or assumptions,
 
including changes
 
in forward
 
-looking macroeconomic
 
conditions,
 
changes in
 
the exposure
 
profile,
 
PD and
 
LGD changes,
 
and unwinding
 
of the
 
time value.
 
4 Represents the change in the allowances and provisions related to changes in models and methodologies.
 
5 Includes ECL movements from new and derecognized transactions, remeasurement changes, model and
methodology changes.
 
6 Represents the
 
decrease in
 
allowances and
 
provisions resulting
 
from write-offs
 
of the ECL
 
allowance against
 
the gross carrying
 
amount when all
 
or part of
 
a financial
 
asset is
 
deemed
uncollectible or forgiven and movements in foreign exchange rates.
As explained in Note
 
1a, the assessment of
 
a significant increase
in
 
credit
 
risk
 
(
SICR
)
 
considers
 
a
 
number
 
of
 
qualitative
 
and
quantitative
 
factors
 
to
 
determine
 
whether
 
a
 
stage
 
transfer
between
 
stage 1
 
and
 
stage 2
 
is
 
required,
 
although
 
the
 
primary
assessment considers changes in PD based
 
on rating analyses and
economic
 
outlook.
 
Additionally,
 
UBS
 
takes
 
into
 
consideration
counterparties that
 
have moved
 
to a
 
credit watch
 
list and
 
those
with payments that are at least 30 days past due.
ECL stage 2 (“significant deterioration
 
in credit risk”) allowances / provisions as of 31 December
 
2021 – classification by trigger
USD million
Stage 2
of which:
PD layer
of which:
watch list
of which:
≥30 days
 
past due
On-and off-balance sheet
 
(220)
(158)
(22)
(39)
of which: Private clients with mortgages
(71)
(54)
0
(17)
of which: Real estate financing
(43)
(38)
0
(4)
of which: Large corporate clients
(55)
(40)
(15)
0
of which: SME clients
(30)
(19)
(7)
(4)
of which: Financial intermediaries and hedge funds
(6)
(6)
0
0
of which: Loans to financial advisors
(3)
0
0
(3)
of which: Credit cards
(11)
0
0
(11)
of which: Other
(1)
(1)
0
0
d) Maximum exposure to credit risk
The
 
tables
 
below
 
provide
 
the
 
Group’s
 
maximum
 
exposure
 
to
credit
 
risk for
 
financial instruments
 
subject to
 
ECL requirements
and
 
the
 
respective
 
collateral
 
and
 
other
 
credit
 
enhancements
mitigating credit risk for these classes of financial instruments.
 
The
 
maximum
 
exposure
 
to
 
credit
 
risk
 
includes
 
the
 
carrying
amounts of financial
 
instruments recognized on
 
the balance sheet
subject
 
to
 
credit
 
risk
 
and
 
the
 
notional
 
amounts
 
for
 
off-balance
sheet arrangements.
 
Where information
 
is available,
 
collateral is
presented at fair value.
 
For other collateral, such as
 
real estate, a
reasonable alternative
 
value is
 
used. Credit
 
enhancements, such
as credit derivative contracts
 
and guarantees, are included
 
at their
notional amounts. Both are capped at the maximum
 
exposure to
credit risk for which
 
they serve as
 
security. The “Risk management
and control” section of this
 
report describes management’s view
of credit risk and
 
the related exposures,
 
which can differ
 
in certain
respects from the requirements of IFRS.
Maximum exposure to credit risk
 
31.12.21
Collateral
1,2
Credit enhancements
1
Exposure to
credit risk
after collateral
and credit
enhancements
USD billion
Maximum
exposure to
credit risk
Cash
collateral
received
Collateralized
by securities
Secured by
real estate
Other
collateral
3
Netting
Credit
derivative
contracts
Guarantees
 
Financial assets measured at
 
amortized cost on the balance sheet
Cash and balances at central banks
192.8
 
 
 
 
 
 
192.8
Loans and advances to banks
4
15.5
0.1
 
0.1
15.3
Receivables from securities financing transactions
75.0
0.0
68.0
6.9
 
 
 
0.0
Cash collateral receivables on derivative instruments
5,6
30.5
 
18.4
 
 
12.1
Loans and advances to customers
7
397.8
37.5
128.7
191.3
20.2
 
4.0
16.2
Other financial assets measured at amortized cost
26.2
0.2
0.1
 
0.0
1.3
 
 
24.6
Total financial assets measured at amortized cost
737.8
37.7
196.9
191.3
28.4
18.4
0.0
4.0
261.0
Financial assets measured at fair value
 
through other comprehensive income – debt
8.8
 
 
 
 
 
 
 
8.8
Total maximum exposure to credit risk
 
reflected on the balance sheet in scope of ECL
746.6
37.7
196.9
191.3
28.4
18.4
0.0
4.0
269.8
Guarantees
8
20.9
1.3
6.5
0.2
2.5
 
2.3
8.1
Loan commitments
8
39.4
0.5
4.0
2.4
7.3
 
0.3
1.7
23.1
Forward starting transactions, reverse repurchase
and securities borrowing agreements
1.4
 
1.4
 
 
 
 
 
0.0
Committed unconditionally revocable credit lines
40.7
0.3
9.0
6.2
3.9
 
 
0.5
20.9
Total maximum exposure to credit risk not
 
reflected on the balance sheet, in scope of ECL
102.5
2.2
20.9
8.7
13.7
0.0
0.3
4.5
52.1
31.12.20
Collateral
1,2
Credit enhancements
1
Exposure to
credit risk
after collateral
and credit
enhancements
USD billion
Maximum
exposure to
credit risk
Cash
collateral
received
Collateralized
by securities
Secured by
real estate
Other
collateral
3
Netting
Credit
derivative
contracts
Guarantees
 
Financial assets measured at
 
amortized cost on the balance sheet
Cash and balances at central banks
158.2
 
 
 
 
 
 
158.2
Loans and advances to banks
4
15.4
0.1
 
15.3
Receivables from securities financing transactions
74.2
0.0
67.1
 
7.0
 
 
 
0.0
Cash collateral receivables on derivative instruments
5,6
32.7
 
21.1
 
 
11.6
Loans and advances to customers
7
379.5
25.8
118.2
194.6
21.7
 
4.4
14.8
Other financial assets measured at amortized cost
27.2
0.1
0.2
1.3
 
 
 
25.5
Total financial assets measured at amortized cost
687.3
26.0
185.7
194.6
30.1
21.1
0.0
4.4
225.5
Financial assets measured at fair value
 
through other comprehensive income – debt
8.3
 
 
 
 
 
 
 
8.3
Total maximum exposure to credit risk
 
reflected on the balance sheet in scope of ECL
695.6
26.0
185.7
194.6
30.1
21.1
0.0
4.4
233.7
Guarantees
8
17.0
0.7
5.0
0.2
1.7
 
2.5
7.0
Loan commitments
8
41.2
0.0
4.2
2.1
6.8
 
0.4
2.4
25.3
Forward starting transactions, reverse repurchase
and securities borrowing agreements
3.2
 
3.2
 
 
 
 
 
0.0
Committed unconditionally revocable credit lines
40.1
0.1
10.3
6.2
2.7
 
 
0.0
20.7
Total maximum exposure to credit risk not
 
reflected on the balance sheet, in scope of ECL
101.6
0.8
22.7
8.5
11.2
0.0
0.4
4.9
53.0
1 Of which: USD
1,443
 
million for 31 December 2021 (31 December 2020: USD
1,983
 
million) relates to total credit-impaired financial assets measured at amortized cost and USD
130
 
million for 31 December 2021
(31 December 2020: USD
154
 
million) to total off-balance sheet
 
financial instruments and credit
 
lines for credit-impaired positions.
 
2 Collateral arrangements generally
 
incorporate a range of
 
collateral, including
cash, securities, real estate and other collateral. UBS applies
 
a risk-based approach that generally prioritizes collateral according to its
 
liquidity profile.
 
3 Includes but is not limited to life
 
insurance contracts, inventory,
mortgage loans, gold and other commodities.
 
4 Loans and advances to banks include amounts held with third-party banks on behalf of clients.
 
The credit risk associated with these balances may be borne by those
clients.
 
5 Included within Cash collateral receivables
 
on derivative instruments are margin balances due
 
from exchanges or clearing houses.
 
Some of these margin balances reflect amounts
 
transferred on behalf of
clients who retain the associated credit risk.
 
6 The amount shown in the “Netting” column represents the netting potential not recognized on the balance sheet. Refer to Note 22 for more information.
 
7 In 2021,
the collateral allocation was updated
 
to reflect additional cash collateral
 
and custody accounts that are also
 
available as security for certain
 
on-balance sheet lending. This resulted
 
in an increase in loans secured
 
by
cash, with an offsetting reduction in loans secured by real estate and loans secured by securities.
 
8 The amount shown in the “Guarantees” column includes sub-participations.
e) Financial assets subject to credit risk by rating category
The
 
table
 
below
 
shows
 
the
 
credit
 
quality
 
and
 
the
 
maximum
exposure to credit risk based on the Group’s internal credit rating
system and year-end
 
stage classification. Under IFRS 9, the credit
risk rating reflects the Group’s assessment
 
of
 
the
 
probability
 
of
default of
 
individual
 
counterparties,
 
prior
 
to
 
substitutions.
 
The
amounts presented are gross of impairment allowances.
›
 
Refer to the “Risk management and control”
 
section of this
report for more details
 
regarding the Group’s internal grading
system
Financial assets subject to credit risk by rating
 
category
USD million
31.12.21
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total gross
carrying
amount
ECL
allowances
Net carrying
amount
(maximum
exposure to
credit risk)
Financial assets measured at amortized cost
Cash and balances at central banks
191,015
1,802
0
0
0
0
192,817
0
192,817
of which: stage 1
191,015
1,802
0
0
0
0
192,817
0
192,817
Loans and advances to banks
407
12,623
1,171
795
490
1
15,488
(8)
15,480
of which: stage 1
407
12,623
1,146
795
488
0
15,460
(7)
15,453
of which: stage 2
0
0
24
0
2
0
27
(1)
26
of which: stage 3
0
0
0
0
0
1
1
0
1
Receivables from securities financing transactions
 
34,386
11,267
10,483
17,440
1,439
0
75,014
(2)
75,012
of which: stage 1
34,386
11,267
10,483
17,440
1,439
0
75,014
(2)
75,012
Cash collateral receivables on derivative instruments
7,466
13,476
5,878
3,647
47
0
30,514
0
30,514
of which: stage 1
7,466
13,476
5,878
3,647
47
0
30,514
0
30,514
Loans and advances to customers
5,295
232,233
67,620
69,892
21,423
2,148
398,611
(850)
397,761
of which: stage 1
5,295
231,153
65,084
62,796
16,362
0
380,690
(126)
380,564
of which: stage 2
0
1,080
2,536
7,096
5,061
0
15,773
(152)
15,620
of which: stage 3
0
0
0
0
0
2,148
2,148
(572)
1,577
Other financial assets measured at amortized cost
12,564
6,702
321
6,072
394
264
26,318
(109)
26,209
of which: stage 1
12,564
6,693
307
5,863
317
0
25,745
(27)
25,718
of which: stage 2
0
10
13
209
77
0
309
(7)
302
of which: stage 3
0
0
0
0
0
264
264
(76)
189
Total financial assets measured at amortized cost
251,133
278,103
85,472
97,846
23,793
2,414
738,762
(969)
737,794
On-balance sheet financial instruments
Financial assets measured at FVOCI – debt instruments
3,996
4,771
0
77
0
0
8,844
0
8,844
Total on-balance sheet financial instruments
255,130
282,874
85,472
97,923
23,793
2,414
747,606
(969)
746,638
Off-balance sheet positions subject to expected
 
credit loss by rating category
USD million
31.12.21
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total off -
balance sheet
exposure
(maximum
exposure to
credit risk)
ECL provisions
Off-balance sheet financial instruments
Guarantees
 
4,457
7,064
4,535
3,757
1,009
150
20,972
(41)
of which: stage 1
4,457
7,037
4,375
3,075
752
0
19,695
(18)
of which: stage 2
0
27
160
682
258
0
1,127
(8)
of which: stage 3
0
0
0
0
0
150
150
(15)
Irrevocable loan commitments
2,797
14,183
7,651
8,298
6,502
46
39,478
(114)
of which: stage 1
2,797
13,917
7,416
7,127
5,840
0
37,097
(72)
of which: stage 2
0
266
235
1,171
663
0
2,335
(42)
of which: stage 3
0
0
0
0
0
46
46
0
Forward starting reverse repurchase and securities borrowing agreements
0
0
55
1,389
0
0
1,444
0
Total off-balance sheet financial instruments
7,254
21,247
12,241
13,444
7,512
196
61,894
(155)
Credit lines
Committed unconditionally revocable credit lines
2,636
15,594
8,627
9,752
4,107
63
40,778
(38)
of which: stage 1
2,636
15,250
8,304
8,346
3,671
0
38,207
(28)
of which: stage 2
0
344
323
1,406
436
0
2,508
(10)
of which: stage 3
0
0
0
0
0
63
63
0
Irrevocable committed prolongation of existing loans
17
2,438
1,422
1,084
602
48
5,611
(3)
of which: stage 1
17
2,438
1,422
1,082
568
0
5,527
(3)
of which: stage 2
0
0
0
1
34
0
36
0
of which: stage 3
0
0
0
0
0
48
48
0
Total credit lines
2,653
18,032
10,049
10,836
4,709
111
46,390
(41)
1 Refer to the “Internal UBS rating scale and mapping of external ratings” table in the “Risk management and
 
control” section of this report for more information on rating categories.
Financial assets subject to credit risk by rating
 
category
USD million
31.12.20
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total gross
carrying
amount
ECL
allowances
Net carrying
amount
(maximum
exposure to
credit risk)
Financial assets measured at amortized cost
Cash and balances at central banks
156,250
1,981
0
0
0
0
158,231
0
158,231
of which: stage 1
156,250
1,981
0
0
0
0
158,231
0
158,231
Loans and advances to banks
543
12,129
1,344
1,182
260
1
15,460
(16)
15,444
of which: stage 1
543
12,074
1,277
1,145
231
0
15,269
(9)
15,260
of which: stage 2
0
55
67
37
29
0
189
(5)
184
of which: stage 3
0
0
0
0
0
1
1
(1)
0
Receivables from securities financing transactions
 
22,998
16,009
15,367
17,995
1,842
0
74,212
(2)
74,210
of which: stage 1
22,998
16,009
15,367
17,995
1,842
0
74,212
(2)
74,210
Cash collateral receivables on derivative instruments
8,196
13,477
7,733
3,243
88
0
32,737
0
32,737
of which: stage 1
8,196
13,477
7,733
3,243
88
0
32,737
0
32,737
Loans and advances to customers
5,813
214,307
67,270
69,217
21,038
2,943
380,589
(1,060)
379,528
of which: stage 1
5,813
212,970
63,000
59,447
15,860
0
357,090
(142)
356,948
of which: stage 2
0
1,338
4,269
9,770
5,178
0
20,556
(215)
20,341
of which: stage 3
0
0
0
0
0
2,943
2,943
(703)
2,240
Other financial assets measured at amortized cost
15,404
4,018
280
6,585
481
560
27,327
(133)
27,194
of which: stage 1
15,404
4,015
269
6,334
389
0
26,410
(34)
26,377
of which: stage 2
0
3
11
251
91
0
357
(9)
348
of which: stage 3
0
0
0
0
0
560
560
(90)
469
Total financial assets measured at amortized cost
209,204
261,922
91,993
98,223
23,709
3,505
688,556
(1,211)
687,345
On-balance sheet financial instruments
Financial assets measured at FVOCI – debt instruments
3,212
5,014
0
32
0
0
8,258
0
8,258
Total on-balance sheet financial instruments
212,417
266,936
91,993
98,255
23,709
3,505
696,815
(1,211)
695,603
Off-balance sheet positions subject to expected
 
credit loss by rating category
USD million
31.12.20
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total off -
balance sheet
exposure
(maximum
exposure to
credit risk)
ECL provisions
Off-balance sheet financial instruments
Guarantees
 
3,482
4,623
3,522
4,293
991
170
17,081
(63)
of which: stage 1
3,482
4,219
2,688
3,558
739
0
14,687
(14)
of which: stage 2
0
404
834
736
252
0
2,225
(15)
of which: stage 3
0
0
0
0
0
170
170
(34)
Irrevocable loan commitments
3,018
14,516
8,583
9,302
5,850
104
41,372
(142)
of which: stage 1
3,018
13,589
6,873
8,739
4,676
0
36,894
(74)
of which: stage 2
0
927
1,711
563
1,174
0
4,374
(68)
of which: stage 3
0
0
0
0
0
104
104
0
Forward starting reverse repurchase and securities borrowing agreements
82
150
0
3,015
0
0
3,247
0
Total off-balance sheet financial instruments
6,583
19,289
12,105
16,610
6,840
273
61,700
(205)
Credit lines
Committed unconditionally revocable credit lines
574
13,505
5,958
8,488
11,501
108
40,134
(50)
of which: stage 1
574
12,940
4,517
6,609
10,593
0
35,233
(29)
of which: stage 2
0
565
1,441
1,879
908
0
4,792
(21)
of which: stage 3
0
0
0
0
0
108
108
0
Irrevocable committed prolongation of existing loans
14
1,349
931
632
357
0
3,282
(2)
of which: stage 1
14
1,349
930
630
355
0
3,277
(2)
of which: stage 2
0
1
1
2
1
0
5
0
of which: stage 3
0
0
0
0
0
0
0
0
Total credit lines
588
14,854
6,889
9,119
11,858
109
43,416
(52)
1 Refer to the “Internal UBS rating scale and mapping of external ratings” table in the “Risk management and
 
control” section of this report for more information on rating categories.
f) Sensitivity information
As
 
outlined
 
in
 
Note
 
1a,
 
ECL
 
estimates
 
involve
 
significant
uncertainties at the time they are made.
ECL model
The models applied
 
to determine
 
point-in-time
 
PD and LGD rely
on
 
market
 
and
 
statistical
 
data,
 
which
 
has
 
been
 
found
 
to
correlate
 
well
 
with
 
historically
 
observed
 
defaults
 
in
 
sufficiently
homogeneous
 
segments.
 
The
 
risk
 
sensitivities
 
for
 
each
 
of
 
the
ECL reporting
 
segments to such
 
factors are
 
summarized in
 
Note
9.
Forward-looking scenarios
Depending on the scenario selection
 
and related macro-economic
assumptions for the
 
risk factors, the
 
components of the
 
relevant
weighted
 
average
 
ECL
 
change.
 
This
 
is
 
particularly
 
relevant
 
for
interest rates,
 
which can
 
move in
 
both directions
 
under a
 
given
growth assumption
 
(for example,
 
low growth
 
with high
 
interest
rates
 
in a
 
stagflation
 
scenario,
 
versus
 
low growth
 
and falling
 
interest
rates
 
in
 
a
 
recession).
 
Management generally
 
looks
 
for
 
scenario
narratives
 
that reflect
 
the key risk
 
drivers of
 
a given credit
 
portfolio.
As forecasting models are complex, due to the combination
 
of
multiple
 
factors,
 
simple
 
what-if
 
analyses
 
involving
 
a
 
change
 
of
individual
 
parameters
 
do
 
not
 
necessarily
 
provide
 
realistic
information
 
on
 
the
 
exposure
 
of
 
segments
 
to
 
changes
 
in
 
the
macroeconomy. Portfolio
 
-specific analyses based on their key risk
factors would also not be meaningful, as potential compensatory
effects
 
in
 
other
 
segments
 
would
 
be
 
ignored.
 
The
 
table
 
below
indicate
s
 
some
 
sensitivities
 
to
 
ECL
s
 
if
 
a
 
key
 
macroeconomic
variable for the forecasting period is amended
 
across all scenarios
with all other factors remaining unchanged.
Potential effect on stage 1 and stage 2
 
positions from changing key parameters as of
 
31 December 2021
USD million
Baseline
Upside
Mild downside
Severe downside
Weighted average
 
Change in key parameters
Fixed income: Government bonds (absolute change)
–0.50%
(1)
0
(29)
(9)
(4)
+0.50%
1
1
39
11
5
+1.00%
4
2
88
23
14
Unemployment rate (absolute change)
–1.00%
(2)
(2)
(30)
(48)
(13)
–0.50%
(1)
(1)
(17)
(27)
(7)
+0.50%
1
1
21
31
8
+1.00%
3
2
47
68
18
Real GDP growth (relative change)
–2.00%
4
2
8
17
10
–1.00%
2
1
4
8
5
+1.00%
(1)
0
(10)
(8)
(4)
+2.00%
(2)
0
(14)
(16)
(7)
House Price Index (relative change)
–5.00%
6
4
50
73
24
–2.50%
3
2
24
34
12
+2.50%
(2)
(1)
(26)
(31)
(11)
+5.00%
(4)
(3)
(46)
(31)
(13)
Equity (S&P500, EuroStoxx, SMI) (relative change)
–10.00%
2
2
5
6
5
–5.00%
1
0
2
3
2
+5.00%
(1)
0
(2)
(3)
(2)
+10.00%
(2)
0
(4)
(6)
(3)
Sensitivities can be more meaningfully
 
assessed in the context
of
 
coherent
 
scenarios
 
with
 
consistently
 
developed
macroeconomic factors.
 
The table on
 
the previous page
 
outlines
favorable and
 
unfavorable effects,
 
based on
 
reasonably possible
alternative changes
 
to the
 
economic conditions
 
for stage 1
 
and
stage 2
 
positions.
 
The
 
ECL
 
impact
 
is
 
calculated
 
for
 
material
portfolios and disclosed for each scenario.
 
The
 
forecasting
 
horizon
 
is
 
limited
 
to
 
three
 
years,
 
with
 
a
model-based
 
mean
 
reversion
 
of
 
PD
 
and
 
LGD
 
assumed
thereafter.
 
Changes
 
to
 
these
 
timelines
 
may
 
have
 
an
 
effect
 
on
ECLs:
 
depending
 
on
 
the
 
cycle,
 
a
 
longer
 
or
 
shorter
 
forecasting
horizon will lead to different
 
annualized lifetime
 
PD and average
LGD estimations.
 
This is currently
 
not deemed to be material
 
for
UBS,
 
as
 
a
 
large
 
proportion
 
of
 
loans,
 
including
 
mortgages
 
in
Switzerland,
 
have
maturities
 
that
are
 
within
 
the
 
forecasting
horizon.
Scenario weights
ECL
 
is
 
sensitive
 
to
 
changing
 
scenario
 
weights,
 
in
 
particular
 
if
narratives and
 
parameters are
 
selected that
 
are not
 
close to
 
the
baseline scenario, highlighting the non-linearity of credit losses.
As shown
 
in
 
the
 
table
 
on the
 
bottom
 
of
 
this
 
page,
 
the
 
ECL
for
 
stage 1
 
and
 
stage
 
2
 
positions
 
would
 
have
 
been
 
USD
387
million
 
(31
 
December
 
2020:
USD
 
442
 
million)
 
instead
 
o
f
USD
503
 
million
 
(31 December
 
2020:
 
USD
639
 
million)
 
if
 
ECL
had
 
been
 
determined
 
solely
 
on
 
the
 
baseline
 
scenario.
 
The
weighted
 
average
 
ECL
 
therefore
 
amounts
 
to
130
%
(31 December 2020:
145
%) of the baseline value. The effects of
weighting
 
each
 
of
 
the
 
four
 
scenarios
 
100%
 
are
 
shown
 
in
 
the
table below.
Stage allocation and SICR
The
 
determination
 
of
 
what
 
constitutes
 
a
n
 
SICR
 
is
 
based
 
on
management
 
judgment, as
 
explained in
 
Note 1a. Changing
 
the
SICR trigger
 
will have
 
a direct
 
effect on
 
ECLs, as
 
more or
 
fewer
positions would be subject to lifetime ECLs under any scenario.
 
The
 
relevance
 
of
 
the
 
SICR
 
trigger
 
on
 
overall
 
ECL
 
is
demonstrated
 
in
 
the
 
table
 
below
 
with
 
the
 
indication
 
that
 
the
ECL allowances
 
and provisions
 
for stage 1 and
 
stage 2 positions
would have been USD
1,060
 
million if all non-impaired
 
positions
across
 
the
 
portfolio
 
had
 
been
 
measured
 
for
 
lifetime
 
ECLs
irrespective
 
of their actual SICR status. This
 
amount compares to
actual
 
stage 1
 
and
 
2
 
allowances
 
and
 
provisions
 
of
 
USD
503
million as
 
of 31 December
 
2021.
Potential
 
effect on
 
stage 1
 
and stage
 
2 positions
 
from changing
 
scenario
 
weights
 
or moving
 
to an ECL
 
lifetime
 
calculation
 
as of 31
 
December
 
2021
Maturity profile
The maturity profile is an important driver for changes
 
in ECL due
to transfers
 
to stage 2
 
and from
 
stage 2 to
 
stage 1. The
 
current
maturity profile of most lending books is relatively
 
short; hence a
movement
 
to
 
stage 2
 
may
 
have
 
a
 
moderate
 
effect
 
on
 
ECLs.
 
A
significant portion
 
of our
 
lending to
 
SMEs is
 
documented under
multi-purpose
 
credit agreements,
 
which allow
 
for various
 
forms
of
 
utilization
 
but
 
are
 
unconditionally
 
cancelable
 
by
 
UBS
 
at
 
any
time. For drawings under such agreements with a
 
fixed maturity,
the respective term is applied for ECL calculations,
 
or a maximum
of 12 months in stage 1. For unused credit lines and all
 
drawings
that have no fixed
 
maturity (e.g., current accounts),
 
UBS generally
applies a
 
12-month maturity
 
from the
 
reporting date,
 
given the
credit review policies, which require either
 
continuous monitoring
of key indicators
 
and behavioral patterns
 
for smaller positions
 
or
an annual
 
formal review
 
for any
 
other limit.
 
The ECLs
 
for these
products
 
are
 
sensitive
 
to
 
shortening
 
or
 
extending
 
the
 
maturity
assumption.
Actual ECL
allowances and
provisions,
including staging
(as per Note 9)
 
Pro forma ECL allowances and provisions, including staging
 
and assuming application of 100% scenario weighting
 
Pro forma ECL
allowances and
provisions,
assuming all
positions being
subject to lifetime
ECL
 
Scenarios
Weighted average
100% Baseline
100% Upside
100% Mild
downside
100% Severe
downside
Weighted average
USD million, except where indicated
Segmentation
Private clients with mortgages
(95)
(53)
(52)
(119)
(207)
(277)
Real estate financing
(62)
(50)
(48)
(101)
(97)
(118)
Large corporate clients
(150)
(116)
(107)
(148)
(244)
(257)
SME clients
(65)
(56)
(55)
(71)
(91)
(117)
Other segments
(130)
(112)
(108)
(135)
(166)
(291)
Total
(503)
(387)
(370)
(574)
(806)
(1,060)
UBS AG  
Entity [Table]  
Disclosure Of Financial Assets Explanatory
Additional information
Note 20
 
Expected credit loss measurement
a) Expected credit losses in the period
Total
 
net
 
credit
 
loss
 
releases
 
were
 
USD
148
 
million
 
in
 
2021,
reflecting
 
net
 
credit
 
loss
 
releases
 
of
 
USD
123
 
million
 
related
 
to
stage 1 and 2
 
positions and USD
25
 
million net credit loss
 
releases
related to credit-impaired (stage 3) positions.
Stage 1
 
and
 
2
 
net
 
credit
 
loss
 
releases
 
of
 
USD
123
 
million
included
 
a
 
USD
68
 
million
 
partial
 
net
 
release
 
of
 
a
 
post-model
adjustment,
 
due
 
to
 
the
 
continued
 
positive
 
trend
 
in
macroeconomic
 
scenario
 
input
 
data
 
during
 
the
 
year,
 
a
 
USD
45
million
 
net
 
release
 
from
 
a
 
number
 
of
 
model
 
and
 
methodology
changes
 
and
a
residual
USD
 
10
 
million
 
net
 
release
from
remeasurements
 
within
 
the
 
loan
 
book,
 
derecognized
transactions, partially offset by expenses from new transactions
.
 
›
 
Refer to Note 20b
 
for more information regarding changes to
ECL model, scenarios,
 
scenario weights and the post-model
adjustment and to Note 20c for more information
 
regarding the
development of ECL allowances and
 
provisions
Stage 3 net releases of USD
25
 
million were recognized across
a number of defaulted
 
positions with a USD
24
 
million net release
in Personal & Corporate Banking.
Credit loss (expense) / release
USD million
Global
 
Wealth
 
Management
Personal &
 
Corporate
 
Banking
Asset
Management
Investment
 
Bank
Group
 
Functions
Total
For the year ended 31.12.21
Stages 1 and 2
28
62
0
34
0
123
Stage 3
1
24
(1)
0
0
25
Total credit loss (expense) / release
29
86
(1)
34
0
148
For the year ended 31.12.20
Stages 1 and 2
(48)
(129)
0
(88)
0
(266)
Stage 3
(40)
(128)
(2)
(217)
(42)
(429)
Total credit loss (expense) / release
(88)
(257)
(2)
(305)
(42)
(695)
For the year ended 31.12.19
Stages 1 and 2
3
23
0
(4)
0
22
Stage 3
(23)
(44)
0
(26)
(7)
(100)
Total credit loss (expense) / release
(20)
(21)
0
(30)
(7)
(78)
b) Changes to ECL models, scenarios, scenario weights and key inputs
Refer to
 
Note 1a
 
for information
 
about the
 
principles governing
expected credit loss
 
(ECL) models, scenarios,
 
scenario weights and
key inputs applied.
 
Governance
Comprehensive
 
cross-functional and
 
cross-divisional
 
governance
processes
 
are
 
in
 
place
 
and
 
are
 
used
 
to
 
discuss
 
and
 
approve
scenario
 
updates
 
and
 
weights,
 
to
 
assess
 
whether
 
significant
increases in credit risk resulted in stage transfers, to
 
review model
outputs
 
and
 
to
 
reach
 
conclusions
 
regarding
 
post-model
adjustments.
 
Model changes
During 2021, the model review
 
and enhancement process led to
adjustments of
 
the probability
 
of default
 
(PD), loss
 
given default
(LGD)
 
and
 
credit
 
conversion
 
factor
 
(CCF)
 
models,
 
resulting
 
in
 
a
USD
45
 
million decrease
 
in ECL
 
allowances. An
 
amount of
 
USD
25
 
million related
 
to the
Large corporate
 
clients
 
segment in
 
the
Investment
 
Bank. The
 
remainder
 
related
 
to
 
various segments
 
in
Personal & Corporate Banking and Global Wealth Management.
Scenario and key input updates
During
 
2021,
 
the
 
scenarios
 
and
 
related
 
macroeconomic
 
factors
were updated
 
from those
 
that were
 
applied at
 
the end
 
of 2020
by
 
taking
 
into
 
account
 
the
 
prevailing
 
economic
 
and
 
political
conditions
 
and
 
uncertainty.
 
As
 
the
 
economic
 
development
 
was
more
 
positive
 
than
 
anticipated
 
following
 
the
 
COVID-19-related
downturn,
 
the
 
forward
-
looking
 
scenarios
 
benefited
 
from
 
an
improved forecast starting level.
 
The projections of
 
the baseline scenario,
 
which are aligned
 
to
the
 
economic
 
and
 
market
 
assumptions
 
used
 
for
 
UBS
 
AG
’s
business planning purposes,
 
are broadly in
 
line with external
 
data,
such as
 
from Bloomberg
 
Consensus, Oxford
 
Economics and
 
the
International
 
Monetary
 
Fund
 
World
 
Economic
 
Outlook.
 
The
economic
 
performance
 
during
 
2021
 
in
 
relevant
 
markets,
especially in the
 
US and in
 
Switzerland, highlighted an
 
accelerated
improvement
 
after
 
the
 
COVID-19-related
 
shocks.
 
The
 
scenario
assumes continued growth in 2022 in
 
all key markets, albeit at a
slower rate than
 
seen in 2021,
 
and unemployment rates
 
are not
expected to fall noticeably below the current levels. Interest rates
are expected to
 
remain low in
 
line with the
 
central bank policies
pursued in the Eurozone and Switzerland, and any potential rises
in the US would be
 
limited in the foreseeable
 
future. House prices
are
 
expected
 
to
 
reflect
 
the
 
momentum
 
and
 
continue
 
to
 
rise,
especially in Switzerland and, to a lesser degree, in the US.
The
 
narrative
 
of
 
the
 
hypothetical
 
severe
 
downside
 
scenario,
which
 
is the
 
Group’s binding
 
stress
 
scenario, has
 
been adapted
and assumes that, while
 
the immediate risks
 
from COVID-19 have
decreased,
 
the
 
associated
 
disruptions
 
and
 
the
 
consequences
 
of
the
 
unprecedented
 
monetary
 
and
 
fiscal
 
stimulus
 
measures
 
will
remain
 
critical.
 
Concerns
 
regarding
 
the
 
sustainability
 
of
 
public
debt, following the
 
marked deterioration of
 
fiscal positions, lead
to
 
a
 
loss
 
of
 
confidence
 
and
 
market
 
turbulence,
 
while
protectionism results
 
in a
 
fall in
 
global trade.
 
Governments and
central banks have limited
 
scope to support the economies.
 
As a
consequence,
 
the
 
Eurozone
 
and
 
China
 
suffer
 
a
 
hard
 
landing,
under
 
this
 
scenario
 
which
 
severely
 
affects
 
the
 
Swiss
 
export-
oriented
 
economy,
 
and
 
the
 
US
 
economy
 
contracts
 
as
 
global
demand
 
is
 
significantly
 
affected.
 
Given
 
the
 
severity
 
of
 
the
macroeconomic
 
impact,
 
unemployment
 
rates
 
rise
 
to
 
historical
highs and real estate sectors contract sharply.
With effect
 
from the
 
second quarter,
 
the hypothetical
 
upside
and mild downside scenarios, which
 
were viewed as less
 
plausible
as
 
of
 
31
 
December
 
2020 and
 
had
 
a
 
probability
 
weight
 
of
 
zero
attached,
 
were
 
redesigned
 
and
 
reintroduced
 
in
 
the
 
ECL
calculation.
 
These
 
two
 
scenarios
 
have
 
become
 
more
 
relevant
following
 
this
 
update,
 
as
 
they
 
better
 
reflect
 
a
 
more
 
positive
outlook
 
with
 
regard
 
to
 
COVID-19
 
and
 
market
 
expectations
regarding a potential change in
 
central bank policies, respectively.
 
The
 
upside
 
scenario
 
is
 
based
 
on
 
positive
 
developments
following
 
COVID-19 and
 
strong economic
 
activity
 
supported by
pent-up demand in certain
 
sectors, as well
 
as the expectation
 
that
interest rates
 
will remain
 
relatively low
 
in the
 
near future.
 
Asset
prices rise significantly, but
 
a view that currently
 
observed higher
inflation rates are temporary and spare economic
 
capacity would
mean that
 
consumer prices
 
remain moderate
 
in the
 
first year
 
of
the scenario.
The
 
mild
 
downside
 
scenario
 
focuses
 
on
 
the
 
implications
 
of
rising concerns regarding inflationary trends
 
following a recovery
from
 
COVID-19.
 
Higher-than-expected
 
inflation
 
data
 
triggers
 
a
steepening of
 
yield curves
 
across the
 
globe and
 
leads to
 
market
volatility.
 
Higher
 
interest
 
rates
 
lead
 
to
 
a
 
sell-off
 
in
 
assets
 
and
 
a
period
 
of
 
deleveraging
 
under
 
this
 
scenario.
 
With
 
inflation
remaining high, central
 
banks start hiking
 
their policy rates
 
after
a few
 
quarters, leading
 
to further
 
increases in
 
interest rates
 
and
impacting corporate
 
and private
 
debt sustainability.
 
A recessionary
period is the consequence.
The table
 
on the
 
following page
 
details the
 
key assumptions
for the four scenarios applied as of 31 December 2021.
Scenario weights and post-model adjustments
With the weighting of
 
four scenarios above 0%
 
and considering
the generally
 
more positive
 
outlook regarding
 
an abating
 
effect
on
 
the
 
world
 
economy
 
from
 
the
 
COVID-19
 
pandemic,
 
the
distribution of
 
weights shifted
 
during 2021.
 
As of
 
31 December
2021, 5 percentage points of the weight of the baseline scenario
and 10 percentage
 
points of
 
the severe
 
downside scenario were
redistributed to the upside
 
scenario (5%) and the mild downside
scenario (10%), as shown in the table below.
Although the scenarios and
 
weight allocation were
 
established
in
 
line
 
with
 
the
 
general
 
market
 
sentiment
 
that
 
COVID-19
 
has
passed its peak
 
and a gradual return
 
to normal is the
 
most likely
path,
 
significant
 
uncertainties
 
still
 
remain.
 
Models,
 
which
 
are
based
 
on
 
supportable
 
statistical
 
information
 
from
 
past
experiences
 
regarding
 
interdependencies
 
of
 
macroeconomic
factors
 
and
 
their
 
implications
 
for
 
credit
 
risk
 
portfolios,
 
cannot
comprehensively reflect extraordinary events, such as a pandemic
or a fundamental change in the world political order. Especially
 
in
these
 
uncertain
 
times,
 
it
 
is
 
in
 
the
 
realm
 
of
 
possibilities
 
that
 
the
generally accepted view that the effects of COVID-19 are abating
may prove to be disappointed by
 
the emergence of new variants
of
 
the
 
virus,
 
which
 
may
 
be
 
more
 
harmful
 
and
 
may
 
undermine
current
 
vaccination
 
efforts.
 
Political
 
events
 
involving
 
tensions
between
 
major
 
global
 
forces
 
may
 
introduce
 
unforeseen
challenges, such
 
as disruptions
 
in the
 
global supply
 
chain and
 
a
distortion of energy markets. Such events could affect economies
severely and change
 
the baseline assumptions
 
significantly. Rather
than
 
creating multiple
 
additional
 
scenarios
 
to
 
gauge these
 
risks
and applying model
 
parameters that lack
 
supportable information
and
 
cannot
 
be
 
robustly
 
validated,
 
management
 
continued
 
to
apply
 
significant
 
post
-
model
 
adjustments.
These
 
adjustments
 
were
 
benchmarked
 
against
 
coverage
 
ratio
 
levels
 
as
 
of
 
30 June
2021
,
 
when
 
a
 
partial
net
 
release
 
of
 
USD
 
91
 
million
 
was
recognized, corresponding to one third of
 
the accumulated effect
of
 
scenario
 
improvements,
 
following
 
comprehensive
 
expert
assessment and judgment, and
 
were also deemed appropriate
 
for
year-end 2021 reporting. The post-model adjustments relating to
COVID-19 amounted to
 
USD
224
 
million as of
 
31 December 2021
(2020: USD
117
 
million in addition to
 
overlays of USD
16
 
million
for
 
other
 
aspects,
 
where
 
model
 
results
 
were
 
deemed
 
to
 
be
uncertain).
 
 
 
ECL scenario
Assigned weights in %
31.12.21
31.12.20
Upside
5.0
0.0
Baseline
55.0
60.0
Mild downside
10.0
0.0
Severe downside
30.0
40.0
Scenario assumptions
One year
 
Three years cumulative
 
31.12.21
Upside
Baseline
Mild
downside
Severe
downside
Upside
Baseline
Mild
downside
Severe
downside
Real GDP growth (% change)
United States
9.1
4.4
(0.1)
(5.9)
17.8
10.1
1.8
(3.8)
Eurozone
9.4
3.9
(0.1)
(8.7)
17.3
7.5
0.9
(10.3)
Switzerland
5.5
2.4
(0.9)
(6.6)
13.1
5.8
(0.1)
(5.7)
Consumer price index (% change)
United States
3.1
2.2
5.7
(1.2)
9.5
6.3
13.0
0.4
Eurozone
2.3
1.4
4.2
(1.3)
8.0
4.8
10.4
(1.7)
Switzerland
1.8
0.3
3.5
(1.8)
6.1
1.7
9.0
(1.6)
Unemployment rate (end-of-period level, %)
United States
3.0
3.9
6.1
10.9
3.0
3.5
7.2
10.8
Eurozone
6.2
7.4
8.7
12.9
6.0
7.2
9.1
15.1
Switzerland
2.3
2.5
3.4
5.2
1.6
2.3
4.2
5.9
Fixed income: 10-year government bonds (change in yields, basis points)
USD
50.0
16.5
259.2
(50.0)
170.0
41.2
329.2
(15.0)
EUR
40.0
11.1
283.8
(35.0)
140.0
34.9
349.3
(25.0)
CHF
50.0
12.1
245.5
(70.0)
150.0
34.4
307.3
(35.0)
Equity indices (% change)
S&P 500
12.0
14.1
(27.0)
(50.2)
35.5
24.7
(21.8)
(40.1)
EuroStoxx 50
16.0
12.3
(23.4)
(57.6)
41.6
20.7
(19.9)
(50.4)
SPI
14.0
12.1
(22.9)
(53.6)
37.9
19.1
(19.6)
(44.2)
Swiss real estate (% change)
Single-Family Homes
 
5.1
4.4
(4.3)
(17.0)
15.5
7.4
(8.8)
(30.0)
Other real estate (% change)
United States (S&P / Case-Shiller)
10.0
3.5
(2.3)
(9.5)
21.7
7.1
(8.7)
(26.3)
Eurozone (House Price Index)
8.4
5.1
(4.0)
(5.4)
17.8
9.6
(7.6)
(10.8)
Scenario assumptions
One year
 
Three years cumulative
 
31.12.20
Baseline
Severe downside
Baseline
Severe downside
Real GDP growth (% change)
United States
2.7
(5.9)
9.1
(3.8)
Eurozone
2.5
(8.7)
9.9
(10.3)
Switzerland
3.3
(6.6)
9.0
(5.7)
Consumer price index (% change)
United States
1.7
(1.2)
5.5
0.4
Eurozone
1.4
(1.3)
3.9
(1.7)
Switzerland
0.3
(1.8)
0.9
(1.6)
Unemployment rate (end-of-period level, %)
United States
5.5
12.1
4.5
9.9
Eurozone
9.5
14.1
8.0
16.4
Switzerland
3.8
6.1
3.2
6.8
Fixed income: 10-year government bonds (change in yields, basis points)
USD
22.0
(50.0)
46.0
(15.0)
EUR
4.0
(35.0)
21.0
(25.0)
CHF
13.0
(70.0)
31.0
(35.0)
Equity indices (% change)
S&P 500
(2.9)
(50.2)
(1.7)
(40.1)
EuroStoxx 50
3.8
(57.6)
13.5
(50.4)
SPI
(0.8)
(53.6)
5.8
(44.2)
Swiss real estate (% change)
Single-Family Homes
 
3.4
(17.0)
7.1
(30.0)
Other real estate (% change)
United States (S&P / Case-Shiller)
2.5
(15.3)
9.2
(28.7)
Eurozone (House Price Index)
1.1
(22.9)
7.2
(35.4)
c) Development of ECL allowances and provisions
The ECL
 
allowances and
 
provisions recognized
 
in the
 
period are
impacted by a variety of factors, such as:
–
 
origination of new instruments during the period;
 
–
 
effect of passage of time as the ECLs on an instrument for the
remaining
 
lifetime
 
decrease
 
(all
 
other
 
factors
 
remaining
 
the
same);
–
 
discount
 
unwind
 
within ECLs
 
as
 
it
 
is
 
measured
 
on
 
a
 
present
value basis;
–
 
derecognition of instruments in the period;
–
 
change in individual asset quality of instruments;
–
 
effect
 
of
 
updating
 
forward-looking
 
scenarios
 
and
 
the
respective weights;
movements from a
 
maximum 12-month
 
ECL to the
 
recognition
of
 
lifetime ECLs
 
(and
 
vice versa)
 
following transfers
 
between
stages 1 and 2;
 
–
 
movements
 
from
 
stages 1
 
and
 
2
 
to
 
stage 3
 
(credit-impaired
status) when
 
default has
 
become certain
 
and PD
 
increases to
100% (or vice versa);
–
 
changes in models or updates to model parameters;
–
 
write-off; and
–
 
foreign
 
exchange
 
translations
 
for
 
assets
 
denominated
 
in
foreign currencies and other movements.
The following table explains the changes in
 
the ECL allowances and provisions for on-
 
and off-balance sheet financial instruments and
credit lines in
 
scope of ECL requirements
 
between the beginning and the
 
end of the period due
 
to the factors listed on
 
the previous
page.
Development of ECL allowances and
 
provisions
USD million
Total
Stage 1
Stage 2
Stage 3
Balance as of 31 December 2020
(1,468)
(306)
(333)
(829)
Net movement from new and derecognized transactions
1
(59)
(72)
13
0
of which: Private clients with mortgages
(7)
(10)
3
0
of which: Real estate financing
(7)
(11)
4
0
of which: Large corporate clients
(13)
(21)
7
0
of which: SME clients
(8)
(8)
0
0
of which: Other
(24)
(23)
(2)
0
 
of which: Financial intermediaries and hedge funds
(21)
(18)
(4)
0
 
of which: Loans to financial advisors
0
(1)
1
0
Remeasurements with stage transfers
2
(40)
8
0
(49)
of which: Private clients with mortgages
(9)
4
(13)
0
of which: Real estate financing
(3)
1
(4)
0
of which: Large corporate clients
2
(2)
12
(8)
of which: SME clients
(27)
5
4
(36)
of which: Other
(3)
0
2
(4)
 
of which: Financial intermediaries and hedge funds
2
(1)
3
0
 
of which: Loans to financial advisors
0
1
(1)
0
Remeasurements without stage transfers
3
203
55
74
74
of which: Private clients with mortgages
33
8
26
(1)
of which: Real estate financing
30
13
13
3
of which: Large corporate clients
44
5
21
17
of which: SME clients
53
(1)
1
53
of which: Other
44
29
14
2
 
of which: Financial intermediaries and hedge funds
27
15
12
0
 
of which: Loans to financial advisors
6
8
1
(3)
Model changes
4
45
29
16
0
Movements with profit or loss impact
5
148
19
104
25
Movements without profit or loss impact (write-off, FX and other)
6
154
5
9
141
Balance as of 31 December 2021
(1,165)
(282)
(220)
(662)
1 Represents the
 
increase and decrease
 
in allowances
 
and provisions resulting
 
from financial instruments
 
(including guarantees
 
and facilities) that
 
were newly originated,
 
purchased or renewed
 
and from the
 
final
derecognition of loans or facilities on
 
their maturity date or earlier.
 
2 Represents the remeasurement between 12-month and lifetime
 
ECL due to stage transfers.
 
3 Represents the change in allowances and provisions
related to
 
changes in
 
model inputs
 
or assumptions,
 
including changes
 
in forward
 
-looking macroeconomic
 
conditions,
 
changes in
 
the exposure
 
profile,
 
PD and
 
LGD changes,
 
and unwinding
 
of the
 
time value.
 
4 Represents the change in the allowances and provisions related to changes in models and methodologies.
 
5 Includes ECL movements from new and derecognized transactions, remeasurement changes, model and
methodology changes.
 
6 Represents the
 
decrease in
 
allowances and
 
provisions resulting
 
from write-offs
 
of the ECL
 
allowance against
 
the gross carrying
 
amount when all
 
or part of
 
a financial asset
 
is deemed
uncollectible or forgiven and movements in foreign exchange rates.
In
 
2021,
 
ECL
 
allowances
 
and
 
provisions
 
decreased
 
by
 
USD
148
million from net credit loss releases impacting profit or loss:
–
 
a
 
USD
59
 
million
 
net
 
increase
 
from
 
new
 
and
 
derecognized
transactions
 
that
 
resulted
 
from
 
a
 
USD
72
 
million
 
stage 1
increase
 
primarily
 
in
 
the
 
corporate
 
lending
 
and
 
real
 
estate
lending portfolio,
 
offset by
 
a USD
13
 
million net release
 
from
stage 2
 
positions,
 
driven
 
by
 
positions
 
that
 
were
 
terminated
before their contractual maturity;
 
–
 
a USD
163
 
million net decrease from book quality movements
that
 
resulted
 
from
 
a
 
USD
203
 
million
 
net
 
decrease
 
from
remeasurements
 
without
 
stage transfers,
 
with
 
approximately
half of
 
that related to
 
corporate lending –
 
another significant
portion related to
 
real estate related
 
lending, primarily due
 
to
the partial release of a
 
post-model adjustment, partially offset
by USD
40
 
million from transactions moving
 
from stages 1 and
2
 
into
 
stages 2
 
and
 
3,
 
respectively,
 
primarily
 
related
 
to
 
SME
clients;
 
and
–
 
a USD
45
 
million net decrease that resulted from a number
 
of
model changes.
 
An amount
 
of USD
25
 
million related
 
to the
Large corporate
 
clients
 
segment in
 
the Investment
 
Bank. The
remainder related to various
 
segments in Personal &
 
Corporate
Banking and Global Wealth Management.
 
In
 
addition
 
to
 
the
 
movements
 
im
pacting
 
profit
 
or
 
loss,
allowances decreased by USD
154
 
million as a result
 
of USD
137
million
 
of write
 
offs and
 
USD
18
 
million from
 
foreign exchange
and other movements, both of which
 
did not impact the income
statement.
Development of ECL allowances and
 
provisions
USD million
Total
Stage 1
Stage 2
Stage 3
Balance as of 31 December 2019
(1,029)
(181)
(160)
(688)
Net movement from new and derecognized transactions
1
(28)
(90)
17
46
of which: Private clients with mortgages
(2)
(3)
2
0
of which: Real estate financing
(3)
(5)
2
0
of which: Large corporate clients
(32)
(29)
(4)
0
of which: SME clients
(16)
(14)
(3)
0
of which: Other
26
(39)
20
46
 
of which: Securities financing transactions REIT
32
(1)
15
17
 
of which: Loans to financial advisors
9
(1)
9
0
 
of which: Lombard loans
23
(6)
0
29
 
of which Financial intermediaries
 
(20)
(15)
(5)
0
Remeasurements with stage transfers
2
(427)
45
(134)
(338)
of which: Private clients with mortgages
(19)
(2)
(17)
0
of which: Real estate financing
(6)
3
(9)
0
of which: Large corporate clients
(224)
34
(83)
(175)
of which: SME clients
(43)
(1)
(11)
(31)
of which: Other
(134)
11
(14)
(131)
 
of which: Securities financing transactions REIT
(36)
0
(18)
(19)
 
of which: Loans to financial advisors
(12)
7
(7)
(11)
 
of which: Lombard loans
(36)
0
0
(36)
 
of which Commodity trade finance
(59)
0
0
(59)
Remeasurements without stage transfers
3
(271)
(88)
(47)
(136)
of which: Private clients with mortgages
(34)
(19)
(8)
(7)
of which: Real estate financing
(14)
(4)
(11)
1
of which: Large corporate clients
(149)
(53)
(17)
(79)
of which: SME clients
(13)
0
(7)
(6)
of which: Other
(60)
(11)
(4)
(44)
 
of which: Loans to financial advisors
(18)
(12)
(3)
(3)
 
of which: Lombard loans
(3)
6
0
(9)
 
of which: Credit cards
(12)
0
0
(12)
Model changes
4
32
21
11
0
Movements with profit or loss impact
5
(694)
(112)
(154)
(429)
Movements without profit or loss impact (write-off, FX and other)
6
254
(14)
(19)
287
Balance as of 31 December 2020
(1,468)
(306)
(333)
(829)
1 Represents the
 
increase and decrease
 
in allowances
 
and provisions resulting
 
from financial
 
instruments (including guarantees
 
and facilities) that
 
were newly originated,
 
purchased or renewed
 
and from the
 
final
derecognition of loans or facilities on
 
their maturity date or earlier.
 
2 Represents the remeasurement between 12-month and lifetime
 
ECL due to stage transfers.
 
3 Represents the change in allowances and provisions
related to
 
changes in
 
model inputs
 
or assumptions,
 
including changes
 
in forward
 
-looking macroeconomic
 
conditions,
 
changes in
 
the exposure
 
profile,
 
PD and
 
LGD changes,
 
and unwinding
 
of the
 
time value.
 
4 Represents the change in the allowances and provisions related to changes in models and methodologies.
 
5 Includes ECL movements from new and derecognized transactions, remeasurement changes, model and
methodology changes.
 
6 Represents the
 
decrease in
 
allowances and
 
provisions resulting
 
from write-offs
 
of the ECL
 
allowance against
 
the gross carrying
 
amount when all
 
or part of
 
a financial asset
 
is deemed
uncollectible or forgiven and movements in foreign exchange rates.
As explained in Note
 
1a, the assessment of
 
a significant increase
in
 
credit
 
risk
 
(
SICR
)
 
considers
 
a
 
number
 
of
 
qualitative
 
and
quantitative
 
factors
 
to
 
determine
 
whether
 
a
 
stage
 
transfer
between
 
stage 1
 
and
 
stage 2
 
is
 
required,
 
although
 
the
 
primary
assessment considers changes in PD based
 
on rating analyses and
economic outlook. Additionally, UBS
 
AG takes into consideration
counterparties that
 
have moved
 
to a
 
credit watch
 
list and
 
those
with payments that are at least 30 days past due.
ECL stage 2 ("significant deterioration
 
in credit risk”) allowances / provisions as of 31 December
 
2021 – classification by trigger
USD million
Stage 2
of which:
PD layer
of which:
watch list
of which:
≥30 days
 
past due
On-and off-balance sheet
 
(220)
(158)
(22)
(39)
of which: Private clients with mortgages
(71)
(54)
0
(17)
of which: Real estate financing
(43)
(38)
0
(4)
of which: Large corporate clients
(55)
(40)
(15)
0
of which: SME clients
(30)
(19)
(7)
(4)
of which: Financial intermediaries and hedge funds
(6)
(6)
0
0
of which: Loans to financial advisors
(3)
0
0
(3)
of which: Credit cards
(11)
0
0
(11)
of which: Other
(1)
(1)
0
0
d) Maximum exposure to credit risk
The tables below provide
 
UBS AG’s maximum exposure
 
to credit
risk for financial instruments subject to ECL requirements and the
respective
 
collateral
 
and
 
other
 
credit
 
enhancements
 
mitigating
credit risk for these classes of financial instruments.
 
The
 
maximum
 
exposure
 
to
 
credit
 
risk
 
includes
 
the
 
carrying
amounts of financial
 
instruments recognized on
 
the balance sheet
subject
 
to
 
credit
 
risk
 
and
 
the
 
notional
 
amounts
 
for
 
off-balance
sheet arrangements.
 
Where information
 
is available,
 
collateral is
presented at fair value.
 
For other collateral, such as
 
real estate, a
reasonable alternative
 
value is
 
used. Credit
 
enhancements, such
as credit derivative contracts
 
and guarantees, are included
 
at their
notional amounts. Both are capped at the maximum
 
exposure to
credit risk for which
 
they serve as
 
security. The “Risk management
and control” section of this
 
report describes management’s view
of credit risk and
 
the related exposures,
 
which can differ
 
in certain
respects from the requirements of IFRS
Maximum exposure to credit risk
 
31.12.21
Collateral
1,2
Credit enhancements
1
Exposure to
credit risk
after collateral
and credit
enhancements
USD billion
Maximum
exposure to
credit risk
Cash
collateral
received
Collateralized
by securities
Secured by
real estate
Other
collateral
3
Netting
Credit
derivative
contracts
Guarantees
 
Financial assets measured at
 
amortized cost on the balance sheet
Cash and balances at central banks
192.8
 
 
 
 
 
 
192.8
Loans and advances to banks
4
15.4
0.1
 
0.1
15.1
Receivables from securities financing transactions
75.0
0.0
68.0
6.9
 
 
 
0.0
Cash collateral receivables on derivative instruments
5,6
30.5
 
18.4
 
 
12.1
Loans and advances to customers
7
398.7
38.2
128.7
191.3
20.2
 
 
4.0
16.4
Other financial assets measured at amortized cost
26.2
0.2
0.1
0.0
1.3
 
 
24.7
Total financial assets measured at amortized cost
738.6
38.4
196.9
191.3
28.4
18.4
0.0
4.0
261.1
Financial assets measured at fair value
 
through other comprehensive income – debt
8.8
 
 
 
 
 
 
 
8.8
Total maximum exposure to credit risk
 
reflected on the balance sheet in scope of ECL
747.5
38.4
196.9
191.3
28.4
18.4
0.0
4.0
270.0
Guarantees
8
20.9
1.3
6.5
0.2
2.5
 
2.3
8.1
Loan commitments
8
39.4
0.5
4.0
2.4
7.3
 
0.3
1.7
23.1
Forward starting transactions, reverse repurchase
and securities borrowing agreements
1.4
 
1.4
 
 
 
 
 
0.0
Committed unconditionally revocable credit lines
42.3
0.3
9.0
6.2
3.9
 
 
0.5
22.5
Total maximum exposure to credit risk not
 
reflected on the balance sheet, in scope of ECL
104.1
2.2
20.9
8.7
13.7
0.0
0.3
4.5
53.7
31.12.20
Collateral
1,2
Credit enhancements
1
Exposure to
credit risk
after collateral
and credit
enhancements
USD billion
Maximum
exposure to
credit risk
Cash
collateral
received
Collateralized
by securities
Secured by
real estate
Other
collateral
3
Netting
Credit
derivative
contracts
Guarantees
 
Financial assets measured at
 
amortized cost on the balance sheet
Cash and balances at central banks
158.2
 
 
 
 
 
 
158.2
Loans and advances to banks
4
15.3
0.1
 
15.2
Receivables from securities financing transactions
74.2
0.0
67.1
 
7.0
 
 
 
0.0
Cash collateral receivables on derivative instruments
5,6
32.7
 
21.1
 
 
11.6
Loans and advances to customers
7
381.0
27.0
118.2
194.6
21.7
 
0.0
4.4
15.1
Other financial assets measured at amortized cost
27.2
0.1
0.2
0.0
1.3
 
 
 
25.5
Total financial assets measured at amortized cost
688.7
27.2
185.7
194.6
30.1
21.1
0.0
4.4
225.6
Financial assets measured at fair value
 
through other comprehensive income – debt
8.3
 
 
 
 
 
 
 
8.3
Total maximum exposure to credit risk
 
reflected on the balance sheet in scope of ECL
697.0
27.2
185.7
194.6
30.1
21.1
0.0
4.4
233.9
Guarantees
8
17.0
0.7
5.0
0.2
1.7
 
2.5
7.0
Loan commitments
8
41.2
0.0
4.2
2.1
6.8
 
0.4
2.4
25.3
Forward starting transactions, reverse repurchase
and securities borrowing agreements
3.2
 
3.2
 
 
 
 
 
0.0
Committed unconditionally revocable credit lines
42.0
0.1
10.3
6.2
2.7
 
 
0.0
22.7
Total maximum exposure to credit risk not
 
reflected on the balance sheet, in scope of ECL
103.5
0.8
22.7
8.5
11.2
0.0
0.4
4.9
54.9
1 Of which: USD
1,443
 
million for 31 December 2021 (31 December 2020: USD
1,983
 
million) relates to total credit-impaired financial assets measured at amortized cost and USD
130
 
million for 31 December 2021
(31 December 2020: USD
154
 
million) to total off-balance sheet
 
financial instruments and credit lines
 
for credit-impaired positions.
 
2 Collateral arrangements generally
 
incorporate a range of
 
collateral, including
cash, securities, real
 
estate and other collateral.
 
UBS AG applies
 
a risk-based approach
 
that generally prioritizes
 
collateral according to
 
its liquidity profile.
 
3 Includes but is not
 
limited to life insurance
 
contracts,
inventory, mortgage loans, gold and other commodities.
 
4 Loans and advances to banks include amounts held with third-party banks on behalf of clients. The credit risk associated with these balances may be borne
by those clients.
 
5 Included within Cash collateral
 
receivables on derivative instruments are
 
margin balances due from exchanges or
 
clearing houses. Some of
 
these margin balances reflect amounts transferred
 
on
behalf
 
of
 
clients
 
who
 
retain
 
the
 
associated
 
credit
 
risk.
 
6 The
 
amount
 
shown
 
in
 
the
 
“Netting”
 
column
 
represents
 
the
 
netting
 
potential
 
not
 
recognized
 
on
 
the
 
balance
 
sheet.
 
Refer
 
to
 
Note 22
 
for
 
more
information.
 
7 In 2021, the collateral allocation
 
was updated to reflect
 
additional cash collateral and
 
custody accounts that are also
 
available
 
as security for certain
 
on-balance sheet lending. This
 
resulted in an
increase in loans secured by cash, with an offsetting reduction in loans secured by real estate and loans secured by securities.
 
8 The amount shown in the “Guarantees” column includes sub-participations.
e) Financial assets subject to credit risk by rating category
The
 
table
 
below
 
shows
 
the
 
credit
 
quality
 
and
 
the
 
maximum
exposure to credit risk based on the Group’s internal credit rating
system and year-end
 
stage classification. Under IFRS 9, the credit
risk rating reflects the Group’s assessment of the probability of
default
 
of
 
individual
 
counterparties,
 
prior
 
to
 
substitutions.
 
The
amounts presented are gross of impairment allowances.
›
 
Refer to the “Risk management and control”
 
section of this
report for more details
 
regarding the Group’s internal grading
system
Financial assets subject to credit risk by rating
 
category
USD million
31.12.21
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total gross
carrying
amount
ECL
allowances
Net carrying
amount
(maximum
exposure to
credit risk)
Financial assets measured at amortized cost
Cash and balances at central banks
191,015
1,802
0
0
0
0
192,817
0
192,817
of which: stage 1
191,015
1,802
0
0
0
0
192,817
0
192,817
Loans and advances to banks
407
12,552
1,123
795
490
1
15,368
(8)
15,360
of which: stage 1
407
12,552
1,098
795
488
0
15,340
(7)
15,333
of which: stage 2
0
0
24
0
2
0
27
(1)
26
of which: stage 3
0
0
0
0
0
1
1
0
1
Receivables from securities financing transactions
 
34,386
11,267
10,483
17,440
1,439
0
75,014
(2)
75,012
of which: stage 1
34,386
11,267
10,483
17,440
1,439
0
75,014
(2)
75,012
Cash collateral receivables on derivative instruments
7,466
13,476
5,878
3,647
47
0
30,514
0
30,514
of which: stage 1
7,466
13,476
5,878
3,647
47
0
30,514
0
30,514
Loans and advances to customers
5,295
232,663
67,620
70,394
21,423
2,148
399,543
(850)
398,693
of which: stage 1
5,295
231,583
65,083
63,298
16,362
0
381,622
(126)
381,496
of which: stage 2
0
1,080
2,536
7,096
5,061
0
15,773
(152)
15,620
of which: stage 3
0
0
0
0
0
2,148
2,148
(572)
1,577
Other financial assets measured at amortized cost
12,564
6,705
321
6,097
394
264
26,346
(109)
26,236
of which: stage 1
12,564
6,696
307
5,887
317
0
25,772
(27)
25,746
of which: stage 2
0
10
13
209
77
0
309
(7)
302
of which: stage 3
0
0
0
0
0
264
264
(76)
189
Total financial assets measured at amortized cost
251,133
278,465
85,424
98,372
23,793
2,414
739,601
(969)
738,632
On-balance sheet financial instruments
Financial assets measured at FVOCI – debt instruments
3,996
4,771
0
77
0
0
8,844
0
8,844
Total on-balance sheet financial instruments
255,130
283,236
85,424
98,449
23,793
2,414
748,445
(969)
747,477
Off-balance sheet positions subject to expected
 
credit loss by rating category
USD million
31.12.21
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total off -
balance sheet
exposure
(maximum
exposure to
credit risk)
ECL provisions
Off-balance sheet financial instruments
Guarantees
 
4,457
7,064
4,535
3,757
1,009
150
20,972
(41)
of which: stage 1
4,457
7,037
4,375
3,075
752
0
19,695
(18)
of which: stage 2
0
27
160
682
258
0
1,127
(8)
of which: stage 3
0
0
0
0
0
150
150
(15)
Irrevocable loan commitments
2,797
14,183
7,651
8,298
6,502
46
39,478
(114)
of which: stage 1
2,797
13,917
7,416
7,127
5,840
0
37,097
(72)
of which: stage 2
0
266
235
1,171
663
0
2,335
(42)
of which: stage 3
0
0
0
0
0
46
46
0
Forward starting reverse repurchase and securities borrowing agreements
0
0
55
1,389
0
0
1,444
0
Total off balance sheet financial instruments
7,254
21,247
12,241
13,444
7,512
196
61,894
(155)
Credit lines
Committed unconditionally revocable credit lines
2,636
16,811
8,627
10,130
4,107
63
42,373
(38)
of which: stage 1
2,636
16,467
8,304
8,724
3,671
0
39,802
(28)
of which: stage 2
0
344
323
1,406
436
0
2,508
(10)
of which: stage 3
0
0
0
0
0
63
63
0
Irrevocable committed prolongation of existing loans
17
2,438
1,422
1,084
602
48
5,611
(3)
of which: stage 1
17
2,438
1,422
1,082
568
0
5,527
(3)
of which: stage 2
0
0
0
1
34
0
36
0
of which: stage 3
0
0
0
0
0
48
48
0
Total credit lines
2,653
19,249
10,049
11,214
4,709
111
47,984
(41)
1 Refer to the “Internal UBS rating scale and mapping of external ratings” table in the “Risk management and
 
control” section of this report for more information on rating categories.
Financial assets subject to credit risk by rating
 
category
USD million
31.12.20
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total gross
carrying
amount
ECL
allowances
Net carrying
amount
(maximum
exposure to
credit risk)
Financial assets measured at amortized cost
Cash and balances at central banks
156,250
1,981
0
0
0
0
158,231
0
158,231
of which: stage 1
156,250
1,981
0
0
0
0
158,231
0
158,231
Loans and advances to banks
543
12,029
1,344
1,182
260
1
15,360
(16)
15,344
of which: stage 1
543
11,974
1,277
1,145
231
0
15,170
(9)
15,160
of which: stage 2
0
55
67
37
29
0
189
(5)
184
of which: stage 3
0
0
0
0
0
1
1
(1)
0
Receivables from securities financing transactions
 
22,998
16,009
15,367
17,995
1,842
0
74,212
(2)
74,210
of which: stage 1
22,998
16,009
15,367
17,995
1,842
0
74,212
(2)
74,210
Cash collateral receivables on derivative instruments
8,196
13,477
7,733
3,243
88
0
32,737
0
32,737
of which: stage 1
8,196
13,477
7,733
3,243
88
0
32,737
0
32,737
Loans and advances to customers
5,813
215,755
67,270
69,217
21,038
2,943
382,036
(1,060)
380,977
of which: stage 1
5,813
214,418
63,000
59,447
15,860
0
358,538
(142)
358,396
of which: stage 2
0
1,338
4,269
9,770
5,178
0
20,556
(215)
20,341
of which: stage 3
0
0
0
0
0
2,943
2,943
(703)
2,240
Other financial assets measured at amortized cost
15,404
4,043
280
6,585
481
560
27,352
(133)
27,219
of which: stage 1
15,404
4,040
269
6,334
389
0
26,435
(34)
26,401
of which: stage 2
0
3
11
251
91
0
357
(9)
348
of which: stage 3
0
0
0
0
0
560
560
(90)
469
Total financial assets measured at amortized cost
209,204
263,295
91,993
98,223
23,709
3,505
689,929
(1,211)
688,717
On-balance sheet financial instruments
Financial assets measured at FVOCI – debt instruments
3,212
5,014
0
32
0
0
8,258
0
8,258
Total on-balance sheet financial instruments
212,417
268,309
91,993
98,255
23,709
3,505
698,187
(1,211)
696,976
Off-balance sheet positions subject to expected
 
credit loss by rating category
USD million
31.12.20
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total off -
balance sheet
exposure
(maximum
exposure to
credit risk)
ECL provisions
Off-balance sheet financial instruments
Guarantees
 
3,482
4,623
3,522
4,293
991
170
17,081
(63)
of which: stage 1
3,482
4,219
2,688
3,558
739
0
14,687
(14)
of which: stage 2
0
404
834
736
252
0
2,225
(15)
of which: stage 3
0
0
0
0
0
170
170
(34)
Irrevocable loan commitments
3,018
14,516
8,583
9,302
5,850
104
41,372
(142)
of which: stage 1
3,018
13,589
6,873
8,739
4,676
0
36,894
(74)
of which: stage 2
0
927
1,711
563
1,174
0
4,374
(68)
of which: stage 3
0
0
0
0
0
104
104
0
Forward starting reverse repurchase and securities borrowing agreements
82
150
0
3,015
0
0
3,247
0
Total off balance sheet financial instruments
6,583
19,289
12,105
16,610
6,840
273
61,700
(205)
Credit lines
Committed unconditionally revocable credit lines
574
15,448
5,958
8,488
11,501
108
42,077
(50)
of which: stage 1
574
14,883
4,517
6,609
10,593
0
37,176
(29)
of which: stage 2
0
565
1,441
1,879
908
0
4,792
(21)
of which: stage 3
0
0
0
0
0
108
108
0
Irrevocable committed prolongation of existing loans
14
1,349
931
632
357
0
3,282
(2)
of which: stage 1
14
1,349
930
630
355
0
3,277
(2)
of which: stage 2
0
1
1
2
1
0
5
0
of which: stage 3
0
0
0
0
0
0
0
0
Total credit lines
588
16,797
6,889
9,119
11,858
109
45,359
(52)
1 Refer to the “Internal UBS rating scale and mapping of external ratings” table in the “Risk management and
 
control” section of this report for more information on rating categories.
f) Sensitivity information
As
 
outlined
 
in
 
Note
 
1a,
 
ECL
 
estimates
 
involve
 
significant
uncertainties at the time they are made.
ECL model
The models applied
 
to determine
 
point-in-time
 
PD and LGD rely
on
 
market
 
and
 
statistical
 
data,
 
which
 
has
 
been
 
found
 
to
correlate
 
well
 
with
 
historically
 
observed
 
defaults
 
in
 
sufficiently
homogeneous
 
segments.
 
The
 
risk
 
sensitivities
 
for
 
each
 
of
 
the
ECL reporting
 
segments to such
 
factors are
 
summarized in
 
Note
9.
Forward-looking scenarios
Depending on the scenario selection
 
and related macro-economic
assumptions for the
 
risk factors, the
 
components of the
 
relevant
weighted
 
average
 
ECL
 
change.
 
This
 
is
 
particularly
 
relevant
 
for
interest rates,
 
which can
 
move in
 
both directions
 
under a
 
given
growth assumption
 
(for example,
 
low growth
 
with high
 
interest
rates
 
in a
 
stagflation
 
scenario,
 
versus
 
low growth
 
and falling
 
interest
rates
 
in
 
a
 
recession).
 
Management generally
 
looks
 
for
 
scenario
narratives
 
that reflect
 
the key risk
 
drivers of
 
a given credit
 
portfolio.
As forecasting models are complex, due to the combination
 
of
multiple
 
factors,
 
simple
 
what-if
 
analyses
 
involving
 
a
 
change
 
of
individual
 
parameters
 
do
 
not
 
necessarily
 
provide
 
realistic
information
 
on
 
the
 
exposure
 
of
 
segments
 
to
 
changes
 
in
 
the
macroeconomy. Portfolio
 
-specific analyses based on their key risk
factors would also not be meaningful, as potential compensatory
effects
 
in
 
other
 
segments
 
would
 
be
 
ignored.
 
The
 
table
 
below
indicate
s
 
some
 
sensitivities
 
to
 
ECL
s
 
if
 
a
 
key
 
macroeconomic
variable for the forecasting period is amended
 
across all scenarios
with all other factors remaining unchanged
Potential effect on stage 1 and stage 2
 
positions from changing key parameters as of
 
31 December 2021
USD million
Baseline
Upside
Mild downside
Severe downside
Weighted average
 
Change in key parameters
Fixed income: Government bonds (absolute change)
–0.50%
(1)
0
(29)
(9)
(4)
+0.50%
1
1
39
11
5
+1.00%
4
2
88
23
14
Unemployment rate (absolute change)
–1.00%
(2)
(2)
(30)
(48)
(13)
–0.50%
(1)
(1)
(17)
(27)
(7)
+0.50%
1
1
21
31
8
+1.00%
3
2
47
68
18
Real GDP growth (relative change)
–2.00%
4
2
8
17
10
–1.00%
2
1
4
8
5
+1.00%
(1)
0
(10)
(8)
(4)
+2.00%
(2)
0
(14)
(16)
(7)
House Price Index (relative change)
–5.00%
6
4
50
73
24
–2.50%
3
2
24
34
12
+2.50%
(2)
(1)
(26)
(31)
(11)
+5.00%
(4)
(3)
(46)
(31)
(13)
Equity (S&P500, EuroStoxx, SMI) (relative change)
–10.00%
2
2
5
6
5
–5.00%
1
0
2
3
2
+5.00%
(1)
0
(2)
(3)
(2)
+10.00%
(2)
0
(4)
(6)
(3)
Sensitivities can be more meaningfully
 
assessed in the context
of
 
coherent
 
scenarios
 
with
 
consistently
 
developed
macroeconomic factors.
 
The table on
 
the previous page
 
outlines
favorable and
 
unfavorable effects,
 
based on
 
reasonably possible
alternative changes
 
to the
 
economic conditions
 
for stage 1
 
and
stage 2
 
positions.
 
The
 
ECL
 
impact
 
is
 
calculated
 
for
 
material
portfolios and disclosed for each scenario.
 
The
 
forecasting
 
horizon
 
is
 
limited
 
to
 
three
 
years,
 
with
 
a
model-based
 
mean
 
reversion
 
of
 
PD
 
and
 
LGD
 
assumed
thereafter.
 
Changes
 
to
 
these
 
timelines
 
may
 
have
 
an
 
effect
 
on
ECLs:
 
depending
 
on
 
the
 
cycle,
 
a
 
longer
 
or
 
shorter
 
forecasting
horizon will lead to different
 
annualized lifetime
 
PD and average
LGD estimations.
 
This is currently
 
not deemed to be material
 
for
UBS AG,
 
as a large
 
proportion
 
of loans,
 
including
 
mortgages
 
in
Switzerland,
 
have
maturities
 
that
are
 
within
 
the
 
forecasting
horizon.
As shown in the table on the bottom of this page, the ECL for
stage 1 and
 
stage 2 positions
 
would have been
 
USD
387
 
million
(31 December 2020: USD
442
 
million) instead of USD
503
 
million
(31
 
December
 
2020:
USD
 
639
 
million)
 
if
 
ECL
 
had
 
been
determined solely on
 
the baseline scenario.
 
The weighted average
ECL therefore amounts
 
to
130
% (31 December 2020:
145
%) of
the
 
baseline
 
value.
 
The
 
effects
 
of
 
weighting
 
each
 
of
 
the
 
four
scenarios 100% are shown in the table below.
Stage allocation and SICR
The
 
determination
 
of
 
what
 
constitutes
 
a
n
 
SICR
 
is
 
based
 
on
management judgment,
 
as explained
 
in Note
 
1a. Changing
 
the
SICR trigger
 
will have
 
a direct
 
effect on
 
ECLs, as
 
more or
 
fewer
positions would be subject to lifetime ECLs under any scenario.
 
The
 
relevance
 
of
 
the
 
SICR
 
trigger
 
on
 
overall
 
ECL
 
is
demonstrated in the table below with the indication that the ECL
allowances and provisions
 
for stage 1
 
and stage 2
 
positions would
have been USD
1,060
 
million if all
 
non-impaired positions across
the portfolio had been
 
measured for lifetime ECLs
 
irrespective of
their actual SICR
 
status. This amount
 
compares to actual
 
stage 1
and
 
2
 
allowances
 
and
 
provisions
 
of
 
USD
503
 
million
 
as
 
of
31 December 2021.
Potential
 
effect on
 
stage 1
 
and stage
 
2 positions
 
from changing
 
scenario
 
weights
 
or moving
 
to an ECL
 
lifetime
 
calculation
 
as of 31
 
December
 
2021
Maturity profile
The maturity profile is an important driver for changes
 
in ECL due
to transfers
 
to stage 2
 
and from
 
stage 2 to
 
stage 1. The
 
current
maturity profile of most lending books is relatively
 
short; hence a
movement
 
to
 
stage 2
 
may
 
have
 
a
 
moderate
 
effect
 
on
 
ECLs.
 
A
significant portion
 
of our
 
lending to
 
SMEs is
 
documented under
multi-purpose
 
credit agreements,
 
which allow
 
for various
 
forms
of utilization but are unconditionally
 
cancelable by UBS AG
 
at any
time. For drawings
 
under such agreements
 
with a fixed
 
maturity
the respective term is applied for ECL calculations,
 
or a maximum
of 12 months in stage 1. For unused credit lines and all
 
drawings
that
 
have
 
no
 
fixed
 
maturity
 
(e.g.,
 
current
 
accounts),
 
UBS
 
AG
generally
 
applies a
 
12-month maturity
 
from
 
the reporting
 
date,
given the
 
credit review
 
policies, which
 
require either
 
continuous
monitoring of
 
key indicators
 
and behavioral
 
patterns for
 
smaller
positions or an annual formal review for any other
 
limit. The ECLs
for
 
these
 
products
 
are
 
sensitive
 
to
 
shortening
 
or
 
extending
 
the
maturity assumption.
Actual ECL
allowances and
provisions,
including staging
(as per Note 9)
 
Pro forma ECL allowances and provisions, including staging
 
and assuming application of 100% scenario weighting
 
Pro forma ECL
allowances and
provisions,
assuming all
positions being
subject to lifetime
ECL
 
Scenarios
Weighted average
100% Baseline
100% Upside
100% Mild
downside
100% Severe
downside
Weighted average
USD million, except where indicated
Segmentation
Private clients with mortgages
(95)
(53)
(52)
(119)
(207)
(277)
Real estate financing
(62)
(50)
(48)
(101)
(97)
(118)
Large corporate clients
(150)
(116)
(107)
(148)
(244)
(257)
SME clients
(65)
(56)
(55)
(71)
(91)
(117)
Other segments
(130)
(112)
(108)
(135)
(166)
(291)
Total
(503)
(387)
(370)
(574)
(806)
(1,060)