Hedge accounting	12 Months Ended
Hedge accounting	Dec. 31, 2022
Entity [Table]
Disclosure Of General Hedge Accounting Explanatory	Note 25 Hedge accounting Derivatives designated in hedge accounting relationships The Group applies hedge accounting to interest rate risk and foreign exchange risk, including structural foreign exchange risk related to net investments in foreign operations. › Refer to “Market risk” in the “Risk management and control” section of this report for more information about how risks arise and how they are managed by the Group Hedging instruments and hedged risk Interest rate swaps are designated in fair value hedges or cash flow hedges of interest rate risk arising solely from changes in benchmark interest rates. Fair value changes arising from such risk are usually the largest component of the overall change in the fair value of the hedged position in transaction currency. Cross-currency swaps are designated as fair value hedges of foreign exchange risk. Foreign exchange forwards and foreign exchange swaps are mainly designated as hedges of structural foreign exchange risk related to net investments in foreign operations. In both cases the hedged risk arises solely from changes in the spot foreign exchange rate. The notional of the designated hedging instruments matches the notional of the hedged items, except when the interest rate swaps are re-designated in cash flow hedges, in which case the hedge ratio designated is determined based on the swap sensitivity. Hedged items and hedge designation Fair value hedges of interest rate risk related to debt instruments and loan assets Fair value hedges of interest rate risk related to debt instruments and loan assets involve swapping fixed cash flows associated with the debt issued, debt securities held and long-term fixed-rate mortgage loans in Swiss francs to floating cash flows by entering into interest rate swaps that either receive fixed and pay floating cash flows or that pay fixed and receive floating cash flows. Designations have been made in US dollars, euro, Swiss francs, Australian dollars, yen, pounds sterling and Singapore dollars. For new hedging instruments and hedged risk designations entered into starting from 2021 in these currencies (with the exception of euro), the benchmark rate was the relevant alternative reference rate (ARR). Following the interbank offered rate (IBOR) transition for swaps with LCH (formerly the London Clearing House) in December 2021, the benchmark hedge rate for Swiss franc, yen and pound sterling designations was changed from an IBOR rate to the relevant ARR with the hedge relationship continuing in accordance with Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) . Cash flow hedges of forecast transactions The Group hedges forecast cash flows on non-trading financial assets and liabilities that bear interest at variable rates or are expected to be refinanced or reinvested in the future, due to movements in future market rates. The amounts and timing of future cash flows, representing both principal and interest flows, are projected on the basis of contractual terms and other relevant factors, including estimates of prepayments and defaults. The aggregate principal balances and interest cash flows across all portfolios over time form the basis for identifying the non -trading interest rate risk of the Group, which is hedged with interest rate swaps, the maximum maturity of which is 15 years. Cash flow forecasts and risk exposures are monitored and adjusted on an ongoing basis, and consequently additional hedging instruments are traded and designated, or are terminated resulting in a hedge discontinuance. Hedge designations have been made in the following currencies: US dollars, euro, Swiss francs, pounds sterling and Hong Kong dollars. The cash flow hedges in Swiss francs, pounds sterling and certain cash flow hedges in US dollars were discontinued and replaced with new ARR designations in December 2021. In addition, the transition of floating rate hedged items in USD to ARR rates in January 2022 resulted in the update of the hedged risk to ARR in the affected hedge relationships without discontinuation of hedge accounting in accordance with Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) . Fair value hedges of foreign exchange risk related to issued debt instruments Debt instruments denominated in currencies other than the US dollar are designated in fair value hedges of spot foreign exchange risk, in addition to and separate from the fair value hedges of interest rate risk. Cross-currency swaps economically convert debt denominated in currencies other than the US dollar to US dollars. Hedges of net investments in foreign operations The Group applies hedge accounting for certain net investments in foreign operations, which include subsidiaries, branches and associates. Upon maturity of hedging instruments, typically two months, the hedge relationship is terminated and new designations are made to reflect any changes in the net investments in foreign operations. Economic relationship between hedged item and hedging instrument The economic relationship between the hedged item and the hedging instrument is determined based on a qualitative analysis of their critical terms. In cases where hedge designation takes place after origination of the hedging instrument, a quantitative analysis of the possible behavior of the hedging derivative and the hedged item during their respective terms is also performed. Sources of hedge ineffectiveness In hedges of interest rate risk, hedge ineffectiveness can arise from mismatches of critical terms and / or the use of different curves to discount the hedged item and instrument, or from entering into a hedge relationship after the trade date of the hedging derivative. In hedges of foreign exchange risk related to debt issued, hedge ineffectiveness can arise due to the discounting of the hedging instruments and undesignated risk components and lack of such discounting and risk components in the hedged items. In hedges of net investments in foreign operations, ineffectiveness is unlikely unless the hedged net assets fall below the designated hedged amount. The exceptions are hedges where the hedging currency is not the same as the currency of the foreign operation, where the currency basis may cause ineffectiveness. Hedge ineffectiveness from financial instruments measured at fair value through profit or loss is recognized in Other net income. Derivatives not designated in hedge accounting relationships Non-hedge accounted derivatives are mandatorily held for trading with all fair value movements taken to Other net income from financial instruments measured at fair value through profit or loss , even when held as an economic hedge or to facilitate client clearing. The one exception relates to forward points on certain short- and long -duration foreign exchange contracts acting as economic hedges, which are reported in Net interest income. All hedges: designated hedging instruments and hedge ineffectiveness As of or for the year ended 31.12.22 Carrying amount USD m Notional amount Derivative financial assets Derivative financial liabilities Changes in fair value of hedging instruments 1 Changes in fair value of hedged items 1 Hedge ineffectiveness recognized in the income statement Interest rate risk Fair value hedges 92,415 0 0 (5,195) 5,169 (27) Cash flow hedges 75,304 2 5 (5,813) 5,760 (53) Foreign exchange risk Fair value hedges 2 20,566 845 3 (1,088) 1,105 18 Hedges of net investments in foreign operations 14,009 7 529 336 (337) (1) As of or for the year ended 31.12.21 Carrying amount USD m Notional amount Derivative financial assets Derivative financial liabilities Changes in fair value of hedging instruments 1 Changes in fair value of hedged items 1 Hedge ineffectiveness recognized in the income statement Interest rate risk Fair value hedges 89,525 0 7 (1,604) 1,602 (2) Cash flow hedges 79,573 12 1 (1,185) 990 (196) Foreign exchange risk Fair value hedges 2 27,875 87 261 (2,139) 2,181 42 Hedges of net investments in foreign operations 13,939 23 105 497 (497) 0 1 Amounts used as the basis for recognizing hedge ineffectiveness for the period. 2 The foreign currency basis spread of cross-currency swaps designated as hedging derivatives is excluded from the hedge accounting designation and accounted for as a cost of hedging with amounts deferred in Other comprehensive income within Equity. Fair value hedges: designated hedged items USD m 31.12.22 31.12.21 Interest rate risk FX risk Interest rate risk FX risk Debt issued measured at amortized cost Carrying amount of designated debt issued 68,529 20,566 74,700 27,875 of which: accumulated amount of fair value hedge adjustment (6,057) 478 Other financial assets measured at amortized cost – debt securities Carrying amount of designated debt securities 4,577 2,677 of which: accumulated amount of fair value hedge adjustment (180) (7) Loans and advances to customers Carrying amount of designated loans 14,270 13,835 of which: accumulated amount of fair value hedge adjustment (1,249) (109) of which: accumulated amount of fair value hedge adjustment subject to amortization attributable to the portion of the portfolio that ceased to be part of hedge accounting (51) 3 Fair value hedges: profile of the timing of the nominal amount of the hedging instrument 31.12.22 USD bn Due within 1 month Due between 1 and 3 months Due between 3 and 12 months Due between 1 and 5 years Due after 5 years Total Interest rate swaps 0 4 10 53 26 92 Cross-currency swaps 0 1 2 12 5 21 31.12.21 USD bn Due within 1 month Due between 1 and 3 months Due between 3 and 12 months Due between 1 and 5 years Due after 5 years Total Interest rate swaps 0 8 10 49 22 90 Cross-currency swaps 1 1 6 13 6 28 Cash flow hedge reserve on a pre-tax basis USD m 31.12.22 31.12.21 Amounts related to hedge relationships for which hedge accounting continues to be applied (4,692) 26 Amounts related to hedge relationships for which hedge accounting is no longer applied (540) 743 Total other comprehensive income recognized directly in equity related to cash flow hedges, on a pre-tax basis (5,232) 769 Foreign currency translation reserve on a pre -tax basis USD m 31.12.22 31.12.21 Amounts related to hedge relationships for which hedge accounting continues to be applied 284 (45) Amounts related to hedge relationships for which hedge accounting is no longer applied 266 262 Total other comprehensive income recognized directly in equity related to hedging instruments designated as net investment hedges, on a pre-tax basis 550 217 Interest rate benchmark reform The Group continues to apply the relief provided by Interest Rate Benchmark Reform (amendments to IFRS 9, IAS 39 and IFRS 7) , published by the IASB in September 2019, mainly to its hedges in USD . The cessation date for USD LIBOR is 30 June 2023. The following table provides details on the notional amount and carrying amount of the hedging instruments in the hedge relationships where the designated risk is LIBOR and maturing after the cessation date of the applicable interest rate benchmarks. Hedges of net investments in foreign operations are not affected by the amendments. › Refer to Note 1a item 2j for more information about the relief provided by the amendments to IFRS 9 and IFRS 7 related to interest rate benchmark reform › Refer to Note 24 for more information about the transition progress › Refer to earlier parts of this Note for the information about the transition progress of fair value and cash flow hedges Hedging instruments referencing LIBOR 31.12.22 31.12.21 Carrying amount Carrying amount USD m Notional amount Derivative financial assets Derivative financial liabilities Notional amount Derivative financial assets Derivative financial liabilities Interest rate risk Fair value hedges 20,383 0 0 23,367 0 0 Cash flow hedges 2,179 0 0 10,803 0 0
UBS AG
Entity [Table]
Disclosure Of General Hedge Accounting Explanatory	Note 25 Hedge accounting Derivatives designated in hedge accounting relationships UBS AG applies hedge accounting to interest rate risk and foreign exchange risk, including structural foreign exchange risk related to net investments in foreign operations. › Refer to “Market risk” in the “Risk management and control” section of this report for more information about how risks arise and how they are managed by UBS AG Hedging instruments and hedged risk Interest rate swaps are designated in fair value hedges or cash flow hedges of interest rate risk arising solely from changes in benchmark interest rates. Fair value changes arising from such risk are usually the largest component of the overall change in the fair value of the hedged position in transaction currency. Cross-currency swaps are designated as fair value hedges of foreign exchange risk. Foreign exchange forwards and foreign exchange swaps are mainly designated as hedges of structural foreign exchange risk related to net investments in foreign operations. In both cases the hedged risk arises solely from changes in the spot foreign exchange rate. The notional of the designated hedging instruments matches the notional of the hedged items, except when the interest rate swaps are re-designated in cash flow hedges, in which case the hedge ratio designated is determined based on the swap sensitivity. Hedged items and hedge designation Fair value hedges of interest rate risk related to debt instruments and loan assets Fair value hedges of interest rate risk related to debt instruments and loan assets involve swapping fixed cash flows associated with the debt issued, funding from UBS Group AG, debt securities held and long -term fixed-rate mortgage loans in Swiss francs to floating cash flows by entering into interest rate swaps that either receive fixed and pay floating cash flows or that pay fixed and receive floating cash flows. Designations have been made in US dollars, euro, Swiss francs, Australian dollars, yen, pounds sterling and Singapore dollars. For new hedging instruments and hedged risk designations entered into starting from 2021 in these currencies (with the exception of euro), the benchmark rate was the relevant alternative reference rate (ARR). Following the interbank offered rate (IBOR) transition for swaps with LCH (formerly the London Clearing House) in December 2021, the benchmark hedge rate for Swiss franc, yen and pound sterling designations was changed from an IBOR rate to the relevant ARR with the hedge relationship continuing in accordance with Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) . Cash flow hedges of forecast transactions UBS AG hedges forecast cash flows on non-trading financial assets and liabilities that bear interest at variable rates or are expected to be refinanced or reinvested in the future, due to movements in future market rates. The amounts and timing of future cash flows, representing both principal and interest flows, are projected on the basis of contractual terms and other relevant factors, including estimates of prepayments and defaults. The aggregate principal balances and interest cash flows across all portfolios over time form the basis for identifying the non-trading interest rate risk of UBS AG, which is hedged with interest rate swaps, the maximum maturity of which is 15 years. Cash flow forecasts and risk exposures are monitored and adjusted on an ongoing basis, and consequently additional hedging instruments are traded and designated, or are terminated resulting in a hedge discontinuance. Hedge designations have been made in the following currencies: US dollars, euro, Swiss francs, pounds sterling and Hong Kong dollars. The cash flow hedges in Swiss francs, pounds sterling and certain cash flow hedges in US dollars were discontinued and replaced with new ARR designations in December 2021. In addition, the transition of floating rate hedged items in USD to ARR rates in January 2022 resulted in the update of the hedged risk to ARR in the affected hedge relationships without discontinuation of hedge accounting in accordance with Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) . Fair value hedges of foreign exchange risk related to issued debt instruments Debt instruments denominated in currencies other than the US dollar are designated in fair value hedges of spot foreign exchange risk, in addition to and separate from the fair value hedges of interest rate risk. Cross-currency swaps economically convert debt denominated in currencies other than the US dollar to US dollars. Hedges of net investments in foreign operations UBS AG applies hedge accounting for certain net investments in foreign operations, which include subsidiaries, branches and associates. Upon maturity of hedging instruments, typically two months, the hedge relationship is terminated and new designations are made to reflect any changes in the net investments in foreign operations. Economic relationship between hedged item and hedging instrument The economic relationship between the hedged item and the hedging instrument is determined based on a qualitative analysis of their critical terms. In cases where hedge designation takes place after origination of the hedging instrument, a quantitative analysis of the possible behavior of the hedging derivative and the hedged item during their respective terms is also performed. Sources of hedge ineffectiveness In hedges of interest rate risk, hedge ineffectiveness can arise from mismatches of critical terms and / or the use of different curves to discount the hedged item and instrument, or from entering into a hedge relationship after the trade date of the hedging derivative. In hedges of foreign exchange risk related to debt issued, hedge ineffectiveness can arise due to the discounting of the hedging instruments and undesignated risk components and lack of such discounting and risk components in the hedged items. In hedges of net investments in foreign operations, ineffectiveness is unlikely unless the hedged net assets fall below the designated hedged amount. The exceptions are hedges where the hedging currency is not the same as the currency of the foreign operation, where the currency basis may cause ineffectiveness. Hedge ineffectiveness from financial instruments measured at fair value through profit or loss is recognized in Other net income. Derivatives not designated in hedge accounting relationships Non-hedge accounted derivatives are mandatorily held for trading with all fair value movements taken to Other net income from financial instruments measured at fair value through profit or loss , even when held as an economic hedge or to facilitate client clearing. The one exception relates to forward points on certain short- and long -duration foreign exchange contracts acting as economic hedges, which are reported in Net interest income. All hedges: designated hedging instruments and hedge ineffectiveness As of or for the year ended 31.12.22 USD m Notional amount Carrying amount Changes in fair value of hedging instruments 1 Changes in fair value of hedged items 1 Hedge ineffectiveness recognized in the income statement Derivative financial assets Derivative financial liabilities Interest rate risk Fair value hedges 92,415 0 0 (5,195) 5,169 (27) Cash flow hedges 75,304 2 5 (5,813) 5,760 (53) Foreign exchange risk Fair value hedges 2 20,566 845 3 (1,088) 1,105 18 Hedges of net investments in foreign operations 13,844 7 528 318 (319) (1) As of or for the year ended 31.12.21 USD m Notional amount Carrying amount Changes in fair value of hedging instruments 1 Changes in fair value of hedged items 1 Hedge ineffectiveness recognized in the income statement Derivative financial assets Derivative financial liabilities Interest rate risk Fair value hedges 89,525 0 7 (1,604) 1,602 (2) Cash flow hedges 79,573 12 1 (1,185) 990 (196) Foreign exchange risk Fair value hedges 2 27,875 87 261 (2,139) 2,181 42 Hedges of net investments in foreign operations 13,761 23 103 492 (491) 0 1 Amounts used as the basis for recognizing hedge ineffectiveness for the period. 2 The foreign currency basis spread of cross-currency swaps designated as hedging derivatives is excluded from the hedge accounting designation and accounted for as a cost of hedging with amounts deferred in Other comprehensive income within Equity. Fair value hedges: designated hedged items USD m 31.12.22 31.12.21 Interest rate risk FX risk Interest rate risk FX risk Debt issued measured at amortized cost Carrying amount of designated debt issued 11,279 5,737 21,653 11,392 of which: accumulated amount of fair value hedge adjustment (1,002) 261 Funding from UBS Group AG Carrying amount of designated debt instruments 57,250 14,828 53,047 16,483 of which: accumulated amount of fair value hedge adjustment (5,055) 218 Other financial assets measured at amortized cost – debt securities Carrying amount of designated debt securities 4,577 2,677 of which: accumulated amount of fair value hedge adjustment (180) (7) Loans and advances to customers Carrying amount of designated loans 14,270 13,835 of which: accumulated amount of fair value hedge adjustment (1,249) (109) of which: accumulated amount of fair value hedge adjustment subject to amortization attributable to the portion of the portfolio that ceased to be part of hedge accounting (51) 3 Fair value hedges: profile of the timing of the nominal amount of the hedging instrument 31.12.22 USD bn Due within 1 month Due between 1 and 3 months Due between 3 and 12 months Due between 1 and 5 years Due after 5 years Total Interest rate swaps 0 4 10 53 26 92 Cross-currency swaps 0 1 2 12 5 21 31.12.21 USD bn Due within 1 month Due between 1 and 3 months Due between 3 and 12 months Due between 1 and 5 years Due after 5 years Total Interest rate swaps 0 8 10 49 22 90 Cross-currency swaps 1 1 6 13 6 28 Cash flow hedge reserve on a pre-tax basis USD m 31.12.22 31.12.21 Amounts related to hedge relationships for which hedge accounting continues to be applied (4,692) 26 Amounts related to hedge relationships for which hedge accounting is no longer applied (540) 743 Total other comprehensive income recognized directly in equity related to cash flow hedges, on a pre-tax basis (5,232) 769 Foreign currency translation reserve on a pre -tax basis USD m 31.12.22 31.12.21 Amounts related to hedge relationships for which hedge accounting continues to be applied 250 (61) Amounts related to hedge relationships for which hedge accounting is no longer applied 266 262 Total other comprehensive income recognized directly in equity related to hedging instruments designated as net investment hedges, on a pre-tax basis 515 201 Interest rate benchmark reform UBS AG continues to apply the relief provided by Interest Rate Benchmark Reform (amendments to IFRS 9, IAS 39 and IFRS 7) , published by the IASB in September 2019, mainly to its hedges in USD . The cessation date for USD LIBOR is 30 June 2023. The following table provides details on the notional amount and carrying amount of the hedging instruments in the hedge relationships where the designated risk is LIBOR and maturing after the cessation date of the applicable interest rate benchmarks. Hedges of net investments in foreign operations are not affected by the amendments. › Refer to Note 1a item 2j for more information about the relief provided by the amendments to IFRS 9 and IFRS 7 related to interest rate benchmark reform › Refer to Note 24 for more information about the transition progress › Refer to earlier parts of this Note for the information about the transition progress of fair value and cash flow hedges Hedging instruments referencing LIBOR 31.12.22 31.12.21 Carrying amount Carrying amount USD m Notional amount Derivative financial assets Derivative financial liabilities Notional amount Derivative financial assets Derivative financial liabilities Interest rate risk Fair value hedges 20,383 0 0 23,367 0 0 Cash flow hedges 2,179 0 0 10,803 0 0