UBS Group AG - Audit Report / Information 2019

6-K 1 6k2q19ubsbaseIIIpillar3.htm 6k2q19ubsbaselIIIpillar3

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

Date: August 27, 2019

UBS Group AG

Commission File Number: 1-36764

UBS AG

Commission File Number: 1-15060

(Registrants' Name)

Bahnhofstrasse 45, Zurich, Switzerland and Aeschenvorstadt 1, Basel, Switzerland

(Address of principal executive offices)

Indicate by check mark whether the registrants file or will file annual reports under cover of Form 20‑F or Form 40-F.

Form 20-F x Form 40-F o

This Form 6-K consists of the Basel III Pillar 3 disclosure for UBS Group AG and significant regulated subsidiaries report as of 30 June 2019, which appears immediately following this page.

30 June 2019 Pillar 3 report

UBS Group and significant regulated subsidiaries and sub-groups

Table of contents
Introduction and basis for
preparation
UBS Group AG
6	Section
1	Key metrics
8	Section
2	Risk-weighted assets
12	Section
3	Credit risk
24	Section
4	Counterparty credit risk
31	Section
5	Securitizations
36	Section
6	Market risk
40	Section
7	Interest rate risk in the
banking book
43	Section
8	Going and gone concern
requirements and eligible capital
50	Section
9	Total loss-absorbing capacity
52	Section
10	Leverage ratio
55	Section
11	Liquidity coverage ratio
57	Section
12	Requirements for global
systemically important banks and related indicators
Significant regulated
subsidiaries and sub-groups
60	Section
1	Introduction
60	Section
2	UBS AG standalone
64	Section
3	UBS Switzerland AG standalone
70	Section
4	UBS Europe SE consolidated
71	Section
5	UBS Americas Holding LLC
consolidated

Contacts

Switchboards

For all general inquiries www.ubs.com/contact

Zurich +41-44-234 1111 London +44- 207-567 8000 New York +1-212-821 3000 Hong Kong +852-2971 8888 Singapore +65-6495 8000

Investor Relations

UBS’s Investor Relations team supports institutional, professional and retail investors from our offices in Zurich, New York and Krakow.

UBS Group AG, Investor Relations P.O. Box, CH-8098 Zurich, Switzerland

www.ubs.com/investors

Zurich +41-44-234 4100 New York +1-212-882 5734

Media Relations

UBS’s Media Relations team supports global media and journalists from our offices in Zurich, London, New York and Hong Kong.

www.ubs.com/media

Zurich +41-44-234 8500 [email protected]

London +44-20-7567 4714 [email protected]

New York +1-212-882 5858 [email protected]

Hong Kong +852-2971 8200 [email protected]

Office of the Group Company Secretary

The Group Company Secretary receives inquiries regarding compensation and related issues addressed to members of the Board of Directors.

UBS Group AG, Office of the Group Company Secretary P.O. Box, CH-8098 Zurich, Switzerland

[email protected]

+41-44-235 6652

Shareholder Services

UBS’s Shareholder Services team, a unit of the Group Company Secretary Office, is responsible for the registration of UBS Group AG registered shares.

UBS Group AG, Shareholder Services P.O. Box, CH-8098 Zurich, Switzerland

[email protected]

+41-44-235 6652

US Transfer Agent

For global registered share-related inquiries in the US.

Computershare Trust Company NA P.O. Box 505000 Louisville, KY 40233-5000, USA

Shareholder online inquiries: https://www-us.computershare.com/ investor/Contact

Shareholder website: www.computershare.com/investor

Calls from the US +1-866-305-9566 Calls from outside the US +1-781-575-2623 TDD for hearing impaired +1-800-231-5469 TDD for foreign shareholders +1-201-680-6610

Imprint

Publisher: UBS Group AG, Zurich, Switzerland | www.ubs.com Language: English

Introduction and basis for preparation

Introduction and basis for preparation

Scope and location of Basel III Pillar 3 disclosures

The Basel Committee on Banking Supervision (BCBS) Basel III capital adequacy framework consists of three complementary pillars. Pillar 1 provides a framework for measuring minimum capital requirements for the credit, market, operational and non-counterparty-related risks faced by banks. Pillar 2 addresses the principles of the supervisory review process, emphasizing the need for a qualitative approach to supervising banks. Pillar 3 requires banks to publish a range of disclosures, mainly covering risk, capital, leverage, liquidity and remuneration.

This report provides Pillar 3 disclosures for UBS Group AG and prudential key figures and regulatory information for UBS AG standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated and UBS Americas Holding LLC consolidated in the respective sections under “Significant regulated subsidiaries and sub-groups.”

As UBS is considered a systemically relevant bank (SRB) under Swiss banking law, UBS Group AG and UBS AG are required to comply with regulations based on the Basel III framework as applicable to Swiss SRBs on a consolidated basis. Capital and other regulatory information as of 30 June 2019 for UBS Group AG consolidated is provided in the “Capital management” section of our second quarter 2019 report and for UBS AG consolidated in the “Capital management” section of the UBS AG second quarter 2019 report, which are available under “Quarterly reporting” at www.ubs.com/investors .

Local regulators may also require the publication of Pillar 3 information at a subsidiary or sub-group level. Where applicable, these local disclosures are provided under “Holding company and significant regulated subsidiaries and sub-groups” at www.ubs.com/investors.

Significant BCBS and FINMA capital adequacy, liquidity and funding, and related disclosure requirements

This Pillar 3 report has been prepared in accordance with FINMA Pillar 3 disclosure requirements (FINMA Circular 2016/1, “Disclosure – banks”) issued on 16 July 2018, the underlying BCBS guidance “Revised Pillar 3 disclosure requirements” issued in January 2015, the “Frequently asked questions on the revised Pillar 3 disclosure requirements” issued in August 2016, the “Pillar 3 disclosure requirements – consolidated and enhanced framework” issued in March 2017 and the subsequent “Technical Amendment – Pillar 3 disclosure requirements – regulatory treatment of accounting provisions” issued in August 2018.

Changes to Pillar 3 disclosure requirements

In line with BCBS and FINMA requirements, the following disclosures are published for the first time, effective as of 30 June 2019:

– “TLAC1 – TLAC composition for G-SIBs (at resolution group level)” applicable to UBS Group AG consolidated;

– “TLAC3 – Resolution entity – creditor ranking at legal entity level” applicable to UBS Group AG at a legal entity level;

– “IRRBBA – IRRBB risk management objective and policies – qualitative requirements” applicable to UBS Group AG consolidated;

– “IRRBB1 – Quantitative information on IRRBB” applicable to UBS Group AG consolidated; and

– “IRRBBA1 – Quantitative disclosures relating to the position structure and interest rate reset of IRRBB risk” applicable to UBS Group AG consolidated.

We currently expect to provide the "TLAC2 – Material subgroup entity – creditor ranking at legal entity level” disclosure in our 31 December 2019 Pillar 3 report. The “CR1 – Credit quality of assets” table in this report has been revised to address additional disclosure requirements with regard to the allocation of the accounting provisions for credit losses between the standardized approach and the internal ratings-based approach, as required by the aforementioned BCBS Technical Amendment issued in August 2018.

Significant BCBS requirements to be adopted in the second half of 2019 or later

BCBS initial margin offset in the leverage ratio and new disclosure requirements

The BCBS agreed to align the leverage ratio measurement of client-cleared derivatives with the standardized approach to measuring counterparty credit risk exposures (SA-CCR). We expect these provisions will become effective as of 1 January 2022. This treatment permits both cash and non-cash forms of segregated initial margin, as well as cash and non-cash variation margin, received from a client to offset the replacement cost and potential future exposure for client-cleared derivatives only. This will help to mitigate any potential effect on the leverage ratio denominator from the finalization of the Basel III capital framework, which takes effect from 1 January 2022.

The BCBS also introduced a new disclosure standard, effective as of 1 January 2022, which sets out additional requirements for banks to disclose their leverage ratios based on quarter-end and daily average values of securities financing transactions.

Frequency and comparability of Pillar 3 disclosures

FINMA has specified the reporting frequency for each disclosure, as outlined in the table on pages 5 and 6 of our 31 December 2018 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors .

In line with the FINMA-specified disclosure frequency and requirements for disclosure with regard to comparative periods, we provide quantitative comparative information as of 31 March 2019 for disclosures required on a quarterly basis, and as of 31 December 2018 for disclosures required on a semiannual basis. Where specifically required by FINMA and/or BCBS, we disclose comparative information for additional reporting dates. The new TLAC1, TLAC3 and IRRBB disclosures are provided for the first time as of 30 June 2019 in this report without comparative information. The IRRBB disclosure will be provided on an annual basis from 31 December 2019 onward.

Where required, movement commentary is aligned with the corresponding disclosure frequency required by FINMA and always refers to the latest comparative period. Throughout this report, signposts are displayed at the beginning of a section, table or chart – Annual | Semiannual | Quarterly | – indicating whether the disclosure is provided annually, semiannually or quarterly. A triangle symbol – p p p – indicates the end of the signpost.

® Refer to our 31 March 2019 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors , for more information about previously published quarterly movement commentary

UBS Group AG

Section 1 Key metrics

Key metrics of the second quarter of 2019

Quarterly | The KM1 and KM2 tables below are based on Basel Committee on Banking Supervision (BCBS) Basel III phase-in rules. The KM2 table includes a reference to the total loss-absorbing capacity (TLAC) term sheet, published by the Financial Stability Board (FSB). The website of the FSB provides this term sheet, at www.fsb.org/2015/11/total-loss-absorbing-capacity-tlac-principles-and-term-sheet .

During the second quarter of 2019, our common equity tier 1 (CET1) capital increased by USD 0.3 billion to USD 34.9 billion, mainly as a result of operating profit before tax and foreign currency translation effects, partly offset by accruals for capital returns to shareholders, compensation-related regulatory capital accruals, share repurchases under our share repurchase program and current tax expense.

® Refer to “UBS shares” in the “Capital management” section of our second quarter 2019 report for more information about the share repurchase program

The TLAC available as of 30 June 2019 included CET1 capital, additional tier 1 and tier 2 capital instruments eligible under the TLAC framework, and non-regulatory capital elements of TLAC. Under the Swiss systemically relevant bank (SRB) framework, including transitional arrangements, TLAC excludes 45% of the gross unrealized gains on debt instruments measured at fair value through other comprehensive income for accounting purposes, which for regulatory capital purposes is measured at the lower of cost or market value. This amount was negligible as of 30 June 2019 but is included as available TLAC in the KM2 table below and in the TLAC1 table on page 50 of this report.

Risk-weighted assets (RWA) decreased by USD 5.4 billion to USD 262.1 billion, mainly as a result of decreases in credit risk RWA and market risk RWA. Leverage ratio exposure remained stable during the quarter. High-quality liquid assets decreased by USD 9.9 billion, primarily driven by lower average cash balances, reflecting increased funding consumption by the business divisions. p

Quarterly |

KM1: Key metrics
USD million, except where
indicated
		30.6.19	31.3.19	31.12.18	30.9.18 3	30.6.18 3
Available capital (amounts) 1
1	Common equity tier 1 (CET1)	34,948	34,658	34,119	34,816	34,116
1a	Fully loaded ECL accounting model	34,904	34,613	34,071	34,816	34,116
2	Tier 1	49,993	49,436	46,279	45,972	45,353
2a	Fully loaded ECL accounting model Tier 1	49,949	49,391	46,231	45,972	45,353
3	Total capital	56,345	56,148	52,981	52,637	52,450
3a	Fully loaded ECL accounting model total capital	56,302	56,103	52,933	52,637	52,450
Risk-weighted assets
(amounts)
4	Total risk-weighted assets (RWA)	262,135	267,556	263,747	257,041	254,603
4a	Minimum capital requirement 2	20,971	21,404	21,100	20,563	20,368
4b	Total risk-weighted assets (pre-floor)	262,135	267,556	263,747	257,041	254,603
Risk-based capital ratios as
a percentage of RWA 1
5	Common equity tier 1 ratio (%)	13.33	12.95	12.94	13.55	13.40
5a	Fully loaded ECL accounting model Common equity tier 1 (%)	13.32	12.94	12.92	13.55	13.40
6	Tier 1 ratio (%)	19.07	18.48	17.55	17.89	17.81
6a	Fully loaded ECL accounting model Tier 1 ratio (%)	19.05	18.46	17.53	17.89	17.81
7	Total capital ratio (%)	21.49	20.99	20.09	20.48	20.60
7a	Fully loaded ECL accounting model total capital ratio (%)	21.48	20.97	20.07	20.48	20.60
Additional CET1 buffer
requirements as a percentage of RWA
8	Capital conservation buffer requirement (2.5% from 2019) (%)	2.50	2.50	1.88	1.88	1.88
9	Countercyclical buffer requirement (%)	0.09	0.10	0.08	0.05	0.06
9a	Additional countercyclical buffer for Swiss mortgage loans (%)	0.22	0.21	0.21	0.21	0.20
10	Bank G-SIB and/or D-SIB additional requirements (%)	1.00	1.00	0.75	0.75	0.75
11	Total of bank CET1 specific buffer requirements (%) 1	3.59	3.60	2.71	2.68	2.68
12	CET1 available after meeting the bank’s minimum capital
requirements (%) 1	8.83	8.45	8.44	9.05	8.90
Basel III leverage ratio
13	Total Basel III leverage ratio exposure measure	911,379	910,993	904,598	915,066	910,383
14	Basel III leverage ratio (%) 1	5.49	5.43	5.12	5.02	4.98
14a	Fully loaded ECL accounting model Basel III leverage ratio (%) 1	5.48	5.42	5.11	5.02	4.98
Liquidity coverage ratio
15	Total HQLA	176,173	186,038	173,389	176,594	183,202
16	Total net cash outflow	121,314	121,521	127,352	130,750	127,324
17	LCR ratio (%)	145	153	136	135	144
1 Based on BCBS Basel III phase-in rules. 2 Calculated as 8%
of total RWA, based on total capital minimum requirements, excluding CET1
buffer requirements. 3 In line with the change of the presentation
currency of UBS Group AG’s and UBS AG’s consolidated and standalone financial
statements from Swiss francs to US dollars in October 2018, prior periods
were translated to US dollars at the respective spot rates prevailing on the
relevant reporting dates.

Quarterly |

| KM2: Key metrics – TLAC requirements
(at resolution group level) 1 | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| USD million, except where
indicated | | | | | | |
| | | 30.6.19 | 31.3.19 | 31.12.18 | 30.9.18 2 | 30.6.18 2 |
| 1 | Total loss-absorbing capacity (TLAC) available | 87,388 | 87,477 | 83,740 | 81,711 | 82,211 |
| 1a | Fully loaded ECL accounting model TLAC available | 87,344 | 87,433 | 83,692 | 81,711 | 82,211 |
| 2 | Total RWA at the level of the resolution group | 262,135 | 267,556 | 263,747 | 257,041 | 254,603 |
| 3 | TLAC as a percentage of RWA (%) | 33.34 | 32.69 | 31.75 | 31.79 | 32.29 |
| 3a | Fully loaded ECL accounting model TLAC as a percentage of fully
loaded ECL accounting model RWA (%) | 33.32 | 32.68 | 31.73 | 31.79 | 32.29 |
| 4 | Leverage ratio exposure measure at the level of the resolution
group | 911,379 | 910,993 | 904,598 | 915,066 | 910,383 |
| 5 | TLAC as a percentage of leverage ratio exposure measure (%) | 9.59 | 9.60 | 9.26 | 8.93 | 9.03 |
| 5a | Fully loaded ECL accounting model TLAC as a percentage of fully
loaded ECL accounting model Leverage exposure measure (%) | 9.58 | 9.60 | 9.25 | 8.93 | 9.03 |
| 6a | Does the subordination exemption in the antepenultimate
paragraph of Section 11 of the FSB TLAC Term Sheet apply? | No | | | | |
| 6b | Does the subordination exemption in the penultimate paragraph of
Section 11 of the FSB TLAC Term Sheet apply? | No | | | | |
| 6c | If the capped subordination exemption applies, the amount of
funding issued that ranks pari passu with excluded liabilities and that is
recognized as external TLAC, divided by funding issued that ranks pari passu
with excluded liabilities and that would be recognized as external TLAC if no
cap was applied (%) | N/A – Refer to our response to 6b. | | | | |
| 1 Resolution group level is defined as the UBS Group AG
consolidated level. 2 In line with the change of the presentation currency
of UBS Group AG’s and UBS AG’s consolidated and standalone financial
statements from Swiss francs to US dollars in October 2018, prior-period
disclosures were translated to US dollars at the respective spot rates
prevailing on the relevant reporting dates. | | | | | | |

UBS Group AG

Section 2 Risk-weighted assets

Our approach to measuring risk exposure and risk-weighted assets

Depending on the purpose, the measurement of risk exposure that we apply may differ. Exposures may be measured for financial accounting purposes under International Financial Reporting Standards (IFRS), for deriving our regulatory capital requirements or for internal risk management and control purposes. Our Pillar 3 disclosures are generally based on measures of risk exposure used to derive the regulatory capital required under Pillar 1. Our risk-weighted assets (RWA) are calculated according to the Basel Committee on Banking Supervision (BCBS) Basel III framework, as implemented by the Swiss Capital Adequacy Ordinance issued by the Swiss Federal Council and by the associated circulars issued by the Swiss Financial Market Supervisory Authority (FINMA).

For information about the measurement of risk exposures and RWA, refer to pages 9–12 of our 31 December 2018 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors .

RWA development in the second quarter of 2019

Quarterly | The OV1 table below provides an overview of our risk-weighted assets (RWA) and the related minimum capital requirements by risk type. The FINMA template includes rows that are currently not applicable to UBS and therefore have been left empty.

During the second quarter of 2019, RWA decreased by USD 5.4 billion to USD 262.1 billion, mainly as a result of decreases of USD 3.4 billion in credit risk RWA and USD 2.0 billion in market risk RWA.

Counterparty credit risk RWA measured under the standardized approach as disclosed in line 7 of the OV1 table below increased by USD 0.6 billion, mainly driven by increases in derivatives exposures in the Investment Bank.

Equity positions under the simple risk weight approach decreased by USD 0.7 billion, primarily driven by the sale of a limited number of positions in the Investment Bank’s Foreign Exchange, Rates and Credit business.

The flow tables for credit risk, counterparty credit risk and market risk RWA in the respective sections of this report provide further details regarding the movements in RWA in the second quarter of 2019. More information about capital management and RWA, including details of movements in RWA during the second and first quarters of 2019, is provided on pages 53–54 of our second quarter 2019 report and on pages 52 – 53 of our first quarter 2019 report, both available under “Quarterly reporting” at www.ubs.com/investors . p

Quarterly |

OV1: Overview of RWA — USD million		RWA			Minimum capital requirements 1
		30.6.19	31.3.19	31.12.18	30.6.19
1	Credit risk (excluding
counterparty credit risk)	114,991	118,419	112,991	9,199
2	of which: standardized
approach (SA) 2	28,287	28,971	25,972	2,263
3	of which: foundation
internal ratings-based (F-IRB) approach
4	of which: supervisory slotting
approach
5	of which: advanced internal
ratings-based (A-IRB) approach	86,703	89,448	87,019	6,936
6	Counterparty credit risk 3	37,487	36,793	34,282	2,999
7	of which: SA for
counterparty credit risk (SA-CCR) 4	5,793	5,183	5,415	463
8	of which: internal model
method (IMM)	20,133	19,371	17,624	1,611
8a	of which: value-at-risk
(VaR)	5,453	5,889	5,036	436
9	of which: other CCR	6,107	6,351	6,207	489
10	Credit valuation adjustment
(CVA)	2,553	2,631	2,816	204
11	Equity positions under the
simple risk weight approach 5	3,302	3,960	3,658	264
12	Equity investments in funds
– look-through approach 6
13	Equity investments in funds
– mandate-based approach 6
14	Equity investments in funds
– fall-back approach 6
15	Settlement risk	415	384	375	33
16	Securitization exposures in
banking book	664	703	709	53
17	of which securitization
internal ratings-based approach (SEC-IRBA)
18	of which securitization
external ratings-based approach (SEC-ERBA) including internal assessment
approach (IAA)	657	696	701	53
19	of which securitization
standardized approach (SEC-SA)	7	7	8	1
20	Market Risk	10,977	12,985	19,992	878
21	of which: standardized
approach (SA)	452	643	452	36
22	of which: internal model
approaches (IMA)	10,526	12,343	19,541	842
23	Capital charge for switch
between trading book and banking book
24	Operational risk	80,345	80,345	77,558	6,428
25	Amounts below thresholds for
deduction (250% risk weight) 7	11,402	11,335	11,365	912
26	Floor adjustment 8	0	0	0	0
27	Total	262,135	267,556	263,747	20,971
1 Calculated based on 8% of RWA. 2 Includes
non-counterparty-related risk not subject to the threshold deduction
treatment (30 June 2019: RWA USD 12,912 million; 31 March 2019: RWA USD
12,779 million; 31 December 2018: RWA USD 9,514 million).
Non-counterparty-related risk (30 June 2019: RWA USD 8,853 million;
31 March 2019: RWA USD 8,747 million; 31 December 2018:
RWA USD 8,782 million), which is subject to the threshold treatment, is
reported in line 25 “Amounts below thresholds for deduction (250% risk
weight).” 3 Excludes settlement risk, which is separately reported in line
15 “Settlement risk.” Includes RWA with central counterparties. A new
regulation for the calculation of RWA for exposure to central counterparties
will be implemented by 1 January 2020. The split between the subcomponents of
counterparty credit risk refers to the calculation of the exposure
measure. 4 Calculated in accordance with the current exposure method
(CEM), until SA-CCR is implemented by 1 January 2020. 5 Includes
investments in funds. Items subject to threshold deduction treatments that do
not exceed their respective threshold are risk weighted at 250% (30 June
2019: RWA USD 2,548 million; 31 March 2019: RWA USD 2,588 million; 31
December 2018: RWA USD 2,583 million) and are separately included in line 25
“Amounts below thresholds for deduction (250% risk weight).” 6 A new
regulation for the calculation of RWA for investments in funds will be
implemented by 1 January 2020. 7 Includes items subject to
threshold deduction treatments that do not exceed their respective threshold
and risk weighted at 250%. Items subject to threshold deduction treatments
are significant investments in common shares of non-consolidated financial
institutions (banks, insurance and other financial entities) and deferred tax
assets arising from temporary differences, both of which are measured against
their respective threshold. 8 No floor effect, as 80% of our Basel I RWA
including the RWA equivalent of the Basel I capital deductions do not exceed
our Basel III RWA including the RWA equivalent of the Basel III capital
deductions. For the status of the finalization of the Basel III capital
framework, refer to the “Regulatory and legal developments” section of our
Annual Report 2018, available under “Annual reporting” at
www.ubs.com/investors, which outlines how the proposed floor calculation
would differ in significant aspects from the current approach.

UBS Group AG

The table below is provided on a voluntary basis to complement other disclosures provided, is aligned with the principles applied in the OV1 table shown above and presents the net exposure at default (EAD) and RWA by risk type and FINMA-defined asset class, which forms the basis for the calculation of RWA. These exposures are further subdivided into standardized approaches and advanced internal ratings-based (A-IRB) or model-based approaches. For credit risk, the classification defines the method used to derive the risk weight factors, through either internal ratings (A-IRB) or external ratings (standardized approach). The split between standardized approaches and A-IRB or model-based approaches for counterparty credit risk refers to the exposure measure, whereas the split in templates CCR3 and CCR4 refers to the risk-weighting approach. Market and operational risk RWA, excluding securitization and re-securitization in the trading book, are derived using model calculations and are therefore included in the model-based approach columns.

The table below provides references to sections in this report containing more information about the specific topics.

| Regulatory exposures and
risk-weighted assets | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 30.6.19 | | | | | | | | |
| | A-IRB / model-based approaches | | | Standardized approaches 2 | | | Total | |
| USD million | Net EAD | RWA | Section or table reference | Net EAD | RWA | Section or table reference | Net EAD | RWA |
| Credit risk (excluding
counterparty credit risk) | 529,925 | 86,703 | 3 | 49,922 | 28,287 | 3 | 579,847 | 114,991 |
| Central governments and central banks | 140,098 | 3,064 | CR6, CR7 | 11,017 | 885 | CR4, CR5 | 151,115 | 3,949 |
| Banks and securities dealers | 15,953 | 4,762 | CR6, CR7 | 5,132 | 1,172 | CR4, CR5 | 21,086 | 5,934 |
| Public-sector entities, multilateral development banks | 6,822 | 817 | CR6, CR7 | 949 | 278 | CR4, CR5 | 7,771 | 1,095 |
| Corporates: specialized lending | 23,511 | 11,798 | CR6, CR7 | | | CR4, CR5 | 23,511 | 11,798 |
| Corporates: other lending | 52,992 | 29,669 | CR6, CR7 | 6,080 | 4,864 | CR4, CR5 | 59,073 | 34,533 |
| Central counterparties | | | | 376 | 14 | | 376 | 14 |
| Retail | 290,548 | 36,593 | CR6, CR7 | 12,367 | 8,162 | CR4, CR5 | 302,914 | 44,755 |
| Residential mortgages | 145,852 | 27,678 | | 6,662 | 2,860 | | 152,514 | 30,538 |
| Qualifying revolving retail
exposures (QRRE) | 1,836 | 647 | | | | | 1,836 | 647 |
| Other retail 1 | 142,860 | 8,269 | | 5,705 | 5,302 | | 148,565 | 13,571 |
| Non-counterparty-related risk | | | | 14,001 | 12,912 | CR4, CR5 | 14,001 | 12,912 |
| Property, equipment and
software | | | | 12,645 | 12,645 | | 12,645 | 12,645 |
| Other | | | | 1,356 | 267 | | 1,356 | 267 |
| Counterparty credit risk 2 | 84,322 | 25,587 | 4 | 82,687 | 11,900 | 4 | 167,009 | 37,487 |
| Central governments and central banks | 7,144 | 747 | CCR3, CCR4 | 3,460 | 106 | CCR3, CCR4 | 10,604 | 853 |
| Banks and securities dealers | 17,067 | 5,077 | CCR3, CCR4 | 3,014 | 835 | CCR3, CCR4 | 20,081 | 5,911 |
| Public-sector entities, multilateral development banks | 1,839 | 345 | CCR3, CCR4 | 504 | 23 | CCR3, CCR4 | 2,344 | 368 |
| Corporates incl. specialized lending | 42,391 | 19,023 | CCR3, CCR4 | 20,343 | 8,761 | CCR3, CCR4 | 62,734 | 27,784 |
| Central counterparties | 15,881 | 396 | | 49,149 | 1,621 | | 65,031 | 2,017 |
| Retail | | | | 6,216 | 554 | CCR3, CCR4 | 6,216 | 554 |
| Credit valuation adjustment
(CVA) | | 1,106 | 4, CCR2 | | 1,447 | 4, CCR2 | | 2,553 |
| Equity positions in the
banking book (CR) | 788 | 3,302 | 3, CR10 | | | | 788 | 3,302 |
| Settlement risk | 30 | 74 | | 167 | 340 | | 197 | 415 |
| Securitization exposure in
the banking book | | | | 203 | 664 | 5 | 203 | 664 |
| Market risk | | 10,526 | 6 | 720 | 452 | 5, 6 | 720 | 10,977 |
| Value-at-risk (VaR) | | 1,439 | MR2 | | | | | 1,439 |
| Stressed value-at risk (SVaR) | | 3,448 | MR2 | | | | | 3,448 |
| Add-on for risks-not-in-VaR (RniV) | | 4,114 | MR2 | | | | | 4,114 |
| Incremental risk charge (IRC) | | 1,524 | MR2 | | | | | 1,524 |
| Comprehensive risk measure (CRM) 3 | | | | | | | | 0 |
| Securitization / re-securitization in the trading book | | | | 720 | 452 | MR1 | 720 | 452 |
| Operational risk | | 80,345 | | | | | | 80,345 |
| Amounts below thresholds for
deduction (250% risk weight) | 1,019 | 2,548 | | 3,541 | 8,853 | | 4,560 | 11,402 |
| Deferred tax assets | | | | 3,541 | 8,853 | | 3,541 | 8,853 |
| Significant investments in non-consolidated financial
institutions | 1,019 | 2,548 | | | | | 1,019 | 2,548 |
| Total | 616,084 | 210,191 | | 137,240 | 51,944 | | 753,324 | 262,135 |

Regulatory exposures and risk-weighted assets (continued)
31.12.18
	A-IRB / model-based approaches			Standardized approaches 2			Total
USD million	Net EAD	RWA	Section or table reference	Net EAD	RWA	Section or table reference	Net EAD	RWA
Credit risk (excluding
counterparty credit risk)	533,587	87,019	3	56,467	25,972	3	590,054	112,990
Central governments and central banks	139,632	2,537	CR6, CR7	17,854	748	CR4, CR5	157,485	3,285
Banks and securities dealers	15,454	5,272	CR6, CR7	7,456	1,842	CR4, CR5	22,910	7,114
Public-sector entities, multilateral development banks	8,093	769	CR6, CR7	1,232	349	CR4, CR5	9,324	1,118
Corporates: specialized lending	22,858	12,156	CR6, CR7			CR4, CR5	22,858	12,156
Corporates: other lending	60,639	30,588	CR6, CR7	6,467	5,010	CR4, CR5	67,106	35,599
Central counterparties				284	27		284	27
Retail	286,912	35,697	CR6, CR7	12,650	8,481	CR4, CR5	299,562	44,178
Residential mortgages	142,413	26,696		6,685	2,884		149,098	29,580
Qualifying revolving retail
exposures (QRRE)	1,772	624					1,772	624
Other retail 1	142,726	8,377		5,966	5,597		148,692	13,974
Non-counterparty-related risk				10,524	9,514	CR4, CR5	10,524	9,514
Property, equipment and
software				9,305	9,305		9,305	9,305
Other				1,219	209		1,219	209
Counterparty credit risk 2	83,202	22,660	4	85,179	11,622	4	168,381	34,282
Central governments and central banks	6,068	693	CCR3, CCR4	2,997	353	CCR3, CCR4	9,065	1,046
Banks and securities dealers	16,843	5,118	CCR3, CCR4	3,166	955	CCR3, CCR4	20,009	6,073
Public-sector entities, multilateral development banks	1,988	249	CCR3, CCR4	670	39	CCR3, CCR4	2,658	288
Corporates incl. specialized lending	41,673	16,253	CCR3, CCR4	16,850	7,849	CCR3, CCR4	58,522	24,102
Central counterparties	16,630	346		51,139	1,795		67,769	2,142
Retail				10,358	631	CCR3, CCR4	10,358	631
Credit valuation adjustment
(CVA)		1,479	4, CCR2		1,338	4, CCR2		2,816
Equity positions in the
banking book (CR)	879	3,658	3, CR10				879	3,658
Settlement risk	58	89		222	285		280	375
Securitization exposure in
the banking book				213	709	5	213	709
Market risk		19,541	6	500	452	5, 6	500	19,992
Value-at-risk (VaR)		2,454	MR2					2,454
Stressed value-at risk (SVaR)		5,866	MR2					5,866
Add-on for risks-not-in-VaR (RniV)		8,915	MR2					8,915
Incremental risk charge (IRC)		2,299	MR2					2,299
Comprehensive risk measure (CRM)		7						7
Securitization / re-securitization in the trading book				500	452	MR1	500	452
Operational risk		77,558						77,558
Amounts below thresholds for
deduction (250% risk weight)	975	2,583		3,513	8,782		4,487	11,365
Deferred tax assets				3,513	8,782		3,513	8,782
Significant investments in non-consolidated financial institutions	975	2,583					975	2,583
Total	618,701	214,587		146,094	49,159		764,795	263,747
1 Consists primarily of Lombard lending, which represents loans
made against the pledge of eligible marketable securities or cash, as well as
exposures to small businesses, private clients and other retail customers
without mortgage financing. 2 The split between A-IRB / model-based
approaches and standardized approaches for counterparty credit risk refers to
the exposure measure, whereas the split in CCR3 and CCR4 refers to the risk
weight approach. As of 30 June 2019, USD 95,241 million of EAD (31 December
2018: USD 93,933 million) was subject to the A-IRB approach, and USD 6,737
million of EAD (31 December 2018: USD 6,679 million) was subject to the
standardized approach. 3 As of 30 June 2019, the CRM-based capital
requirement is not applicable to us, as we no longer held eligible
correlation trading positions.

UBS Group AG

Section 3 Credit risk

Introduction

This section provides information about the exposures subject to the Basel III credit risk framework, as presented in the “Regulatory exposures and risk-weighted assets” table on pages 10 –11 of this report. Information about counterparty credit risk is reflected in the “Counterparty credit risk” section on pages 24 – 30 of this report. Securitization positions are reported in the “Securitizations” section on pages 31 –35 of this report.

The tables in this section provide details regarding the exposures used to determine the firm’s credit risk-related regulatory capital requirements. The parameters applied under the advanced internal ratings-based (A-IRB) approach are generally based on the same methodologies, data and systems we use for internal credit risk quantification, except where certain treatments are specified by regulatory requirements. These include, for example, the application of regulatory prescribed floors and multipliers, and differences with respect to eligibility criteria and exposure definitions. The exposure information presented in this section may therefore differ from our internal management view disclosed in the “Risk management and control” sections of our quarterly and annual reports. Similarly, the measure of credit risk exposure for regulatory capital also differs from how it is defined under International Financial Reporting Standards (IFRS).

For information about credit risk exposure categories, credit risk management and credit risk mitigation, refer to pages 23–24, 27, 30 and 31–33 of our 31 December 2018 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors .

Credit quality of assets

Semiannual | The CR1 table below provides a breakdown of loans, debt securities and off-balance sheet exposures into defaulted and non-defaulted exposures. It was revised to additionally include the split of ECL accounting provisions based on the standardized approach and internal ratings-based approach. The CR2 table illustrates changes in stock of defaulted loans, debt securities and off-balance sheet exposures for the first half year of 2019.

For information about the definitions of default and credit-impaired, refer to page 152 of our Annual Report 2018, which is available under “Annual reporting” at www.ubs.com/investors.

More information about the credit risk mitigation techniques related to the defaulted loans and debt securities is provided in the CR3 table on the following page. p

Semiannual |

| CR1: Credit quality of assets | | Gross carrying values of: | | Allowances / impairments | Of which: ECL accounting provisions for credit losses on SA
exposures | | Of which: ECL accounting provisions for credit losses on IRB
exposures (Stage 1, 2, 3) | Net values |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| USD million | | Defaulted exposures 1 | Non-defaulted exposures | | Allocated in regulatory category of Specific (Stage 3 credit-impaired) | Allocated in regulatory category of General (Stage 1 & 2) | | |
| 30.6.19 | | | | | | | | |
| 1 | Loans 2 | 2,703 | 446,046 | (902) 3 | (148) | (56) | (698) | 447,847 |
| 2 | Debt securities | | 67,788 | | | | | 67,788 |
| 3 | Off-balance sheet exposures | 285 | 332,449 | (122) | (1) | (3) | (118) | 332,612 |
| 4 | Total | 2,988 | 846,283 | (1,024) 3 | (149) | (60) | (815) | 848,247 |
| 31.12.18 | | | | | | | | |
| 1 | Loans 2 | 2,886 | 460,119 | (931) 3 | (124) | (58) | (750) | 462,073 |
| 2 | Debt securities | | 69,902 | | | | | 69,902 |
| 3 | Off-balance sheet exposures | 383 | 304,595 | (116) | (1) | (1) | (114) | 304,863 |
| 4 | Total | 3,269 | 834,616 | (1,047) 3 | (125) | (59) | (864) | 836,838 |
| 1 Defaulted exposures are in line with credit-impaired exposures
(stage 3) under IFRS 9. Refer to Note 10 “Expected credit loss measurement“
of our second quarter 2019 report under “Quarterly reporting” at
www.ubs.com/investors for more information about IFRS 9. 2 Loan exposure
is reported in line with the Pillar 3 definition. Refer to “Credit risk
exposure categories” on page 23 of our 31 December 2018 Pillar 3 report,
which is available under “Pillar 3 disclosures” at www.ubs.com/investors for
more information about the classification of Loans and Debt securities. 3
Excludes ECL on exposures subject to counterparty credit risk (30 June 2019:
USD 5 million; 31 December 2018: USD 4 million). | | | | | | | | |

Semiannual |

| CR2: Changes in stock of
defaulted loans, debt securities and off-balance sheet exposures — USD million | | For the half year ended 30.6.19 | For the half year ended 31.12.18 |
| --- | --- | --- | --- |
| 1 | Defaulted loans, debt
securities and off-balance sheet exposures as of the beginning of the half year | 3,269 | 3,215 |
| 2 | Loans and debt securities that have defaulted since the last
reporting period | 336 | 381 |
| 3 | Returned to non-defaulted status | (205) | (56) |
| 4 | Amounts written off | (72) | (172) |
| 5 | Other changes | (341) | (99) |
| 6 | Defaulted loans, debt securities
and off-balance sheet exposures as of the end of the half year | 2,988 | 3,269 |

UBS Group AG

Credit risk mitigation

Semiannual | The table below provides a breakdown of loans and debt securities into unsecured and partially or fully secured exposures, with additional information about security type.

Total carrying amount of loans decreased by USD 14 billion to USD 448 billion in the first half of 2019. This was primarily driven by a decrease in cash and balances at central banks that are unsecured, mainly resulting from client-driven activity that affected funding consumption by the business divisions. In addition, certain collar financing transactions in the Investment Bank were excluded from the carrying amount of loans due to their non-credit bearing nature. The total carrying value of debt securities decreased by USD 2 billion to USD 68 billion, mainly in government bills and bonds in the Investment Bank. p

Semiannual |

| CR3: Credit risk mitigation
techniques – overview | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | Secured portion of exposures partially or fully secured: | | |
| USD million | | Exposures fully unsecured: carrying amount | Exposures partially or fully secured: carrying amount | Total: carrying amount | Exposures secured by collateral | Exposures secured by financial guarantees | Exposures secured by credit derivatives |
| 30.6.19 | | | | | | | |
| 1 | Loans 2 | 134,317 | 313,530 | 447,847 | 302,665 | 1,174 | 36 |
| 2 | Debt securities | 67,788 | | 67,788 | | | |
| 3 | Total | 202,104 | 313,530 | 515,635 | 302,665 | 1,174 | 36 |
| 4 | of which: defaulted | 342 | 1,709 | 2,051 | 1,137 | 316 | |
| 31.12.18 | | | | | | | |
| 1 | Loans 2 | 145,458 | 316,615 | 462,073 | 304,900 | 1,204 | 38 |
| 2 | Debt securities | 69,902 | | 69,902 | | | |
| 3 | Total | 215,360 | 316,615 | 531,975 | 304,900 | 1,204 | 38 |
| 4 | of which: defaulted | 412 | 1,815 | 2,227 | 1,215 | 320 | |
| 1 Exposures in this table represent carrying values in
accordance with the regulatory scope of consolidation. 2 Loan exposure is
reported in line with the Pillar 3 definition. Refer to “Credit risk exposure
categories” on page 23 of our 31 December 2018 Pillar 3 report, which is
available under “Pillar 3 disclosures” at www.ubs.com/investors for more
information about the classification of Loans and Debt securities. | | | | | | | |

Standardized approach – credit risk mitigation

Semiannual | The table below illustrates the effect of credit risk mitigation (CRM) on the calculation of capital requirements under the standardized approach. p

Semiannual |

| CR4: Standardized approach –
credit risk exposure and credit risk mitigation (CRM) effects | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | Exposures before CCF and CRM 1 | | | Exposures post CCF and CRM | | | RWA and RWA density | |
| USD million, except where
indicated | | On-balance sheet amount | Off-balance sheet amount | Total | On-balance sheet amount | Off-balance sheet amount | Total | RWA | RWA density in % |
| 30.6.19 | | | | | | | | | |
| Asset classes 2 | | | | | | | | | |
| 1 | Central governments and central banks | 11,015 | | 11,015 | 11,011 | | 11,011 | 882 | 8.0 |
| 2 | Banks and securities dealers | 4,415 | 1,203 | 5,618 | 4,412 | 720 | 5,132 | 1,169 | 22.8 |
| 3 | Public-sector entities and multilateral development banks | 907 | 323 | 1,231 | 890 | 64 | 954 | 281 | 29.5 |
| 4 | Corporates | 5,975 | 4,177 | 10,151 | 5,892 | 565 | 6,457 | 4,880 | 75.6 |
| 5 | Retail | 12,428 | 4,364 | 16,792 | 12,235 | 131 | 12,367 | 8,162 | 66.0 |
| 6 | Equity | | | | | | | | |
| 7 | Other assets | 14,001 | | 14,001 | 14,001 | | 14,001 | 12,912 | 92.2 |
| 8 | Total | 48,741 | 10,067 | 58,808 | 48,442 | 1,481 | 49,922 | 28,287 | 56.7 |
| 31.12.18 | | | | | | | | | |
| Asset classes 2 | | | | | | | | | |
| 1 | Central governments and central banks | 17,859 | | 17,859 | 17,851 | | 17,851 | 746 | 4.2 |
| 2 | Banks and securities dealers | 6,749 | 1,179 | 7,928 | 6,733 | 722 | 7,456 | 1,842 | 24.7 |
| 3 | Public-sector entities and multilateral development banks | 1,180 | 277 | 1,457 | 1,179 | 55 | 1,235 | 351 | 28.4 |
| 4 | Corporates | 6,146 | 4,523 | 10,669 | 6,087 | 722 | 6,810 | 5,058 | 74.3 |
| 5 | Retail | 12,786 | 4,230 | 17,016 | 12,437 | 155 | 12,592 | 8,461 | 67.2 |
| 6 | Equity | | | | | | | | |
| 7 | Other assets | 10,524 | | 10,524 | 10,524 | | 10,524 | 9,513 | 90.4 |
| 8 | Total | 55,244 | 10,208 | 65,452 | 54,812 | 1,655 | 56,467 | 25,972 | 46.0 |
| 1 Exposures in this table represent carrying values in
accordance with the regulatory scope of consolidation. 2 The CRM effect is
reflected on the original asset class. | | | | | | | | | |

UBS Group AG

IRB approach – credit derivatives used as credit risk mitigation

Semiannual | The probability of default (PD) substitution is only applied in the RWA calculation when the PD of the hedge provider is lower than the PD of the obligor. In addition, default correlation between the obligor and hedge provider is taken into account through the double default approach. Credit derivatives with tranched cover or first-loss protection are recognized through the securitization framework. Refer to the “CCR6: Credit derivatives exposures” table in the “Counterparty credit risk” section on page 30 of this report for notional and fair value information about credit derivatives used as credit risk mitigation. p

Semiannual |

| CR7: IRB – effect on RWA of
credit derivatives used as CRM techniques 1 | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | 30.6.19 | | 31.12.18 | |
| USD million | | Pre-credit derivatives RWA | Actual RWA | Pre-credit derivatives RWA | Actual RWA |
| 1 | Central governments and central banks – FIRB | | | | |
| 2 | Central governments and central banks – AIRB | 3,034 | 3,033 | 2,502 | 2,500 |
| 3 | Banks and securities dealers – FIRB | | | | |
| 4 | Banks and securities dealers – AIRB | 4,755 | 4,755 | 5,240 | 5,240 |
| 5 | Public-sector entities, multilateral development banks – FIRB | | | | |
| 6 | Public-sector entities, multilateral development banks – AIRB | 823 | 823 | 798 | 798 |
| 7 | Corporates: Specialized lending – FIRB | | | | |
| 8 | Corporates: Specialized lending – AIRB | 11,835 | 11,835 | 12,172 | 12,172 |
| 9 | Corporates: Other lending – FIRB | | | | |
| 10 | Corporates: Other lending – AIRB | 30,039 | 29,794 | 31,083 | 30,612 |
| 11 | Retail: mortgage loans | 27,666 | 27,666 | 26,696 | 26,696 |
| 12 | Retail exposures: qualifying revolving retail (QRRE) | 647 | 647 | 624 | 624 |
| 13 | Retail: other | 8,151 | 8,151 | 8,377 | 8,377 |
| 14 | Equity positions (PD/LGD approach) | | | | |
| 15 | Total | 86,950 | 86,703 | 87,493 | 87,019 |
| 1 The CRM effect is reflected on the original asset class. | | | | | |

Credit risk under the standardized approach

Semiannual | The standardized approach is generally applied where it is not possible to use the A-IRB approach. The table below illustrates the exposures by asset classes and the risk weights applied. p

Semiannual |

| CR5: Standardized approach –
exposures by asset classes and risk weights | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| USD million | | | | | | | | | | | |
| Risk weight | | 0% | 10% | 20% | 35% | 50% | 75% | 100% | 150% | Others | Total credit exposures amount (post CCF and CRM) |
| 30.6.19 | | | | | | | | | | | |
| Asset classes | | | | | | | | | | | |
| 1 | Central governments and central banks | 9,924 | | 226 | | 53 | | 813 | | | 11,017 |
| 2 | Banks and securities dealers | | | 4,655 | | 471 | | 6 | | | 5,132 |
| 3 | Public-sector entities and multilateral development banks | 161 | | 528 | | 174 | | 85 | | | 949 |
| 4 | Corporates | | | 1,826 | | 147 | 185 | 4,297 | 2 | | 6,457 |
| 5 | Retail | | | | 5,805 | 36 | 1,763 | 4,707 | 55 | | 12,367 |
| 6 | Equity | | | | | | | | | | |
| 7 | Other assets | 1,089 | | | | | | 12,912 | | | 14,001 |
| 8 | Total | 11,174 | | 7,235 | 5,805 | 881 | 1,948 | 22,821 | 58 | | 49,922 |
| 9 | of which: mortgage loans | | | | 5,805 | | 115 | 742 | | | 6,662 |
| 10 | of which: past due 1 | | | | | | | 86 | | | 86 |
| 31.12.18 | | | | | | | | | | | |
| Asset classes | | | | | | | | | | | |
| 1 | Central governments and central banks | 17,061 | | 42 | | 24 | | 727 | | | 17,854 |
| 2 | Banks and securities dealers | | | 6,259 | | 1,192 | | 4 | 0 | | 7,456 |
| 3 | Public-sector entities and multilateral development banks | 101 | | 771 | | 330 | | 30 | 0 | | 1,232 |
| 4 | Corporates | | | 1,961 | | 138 | 266 | 4,385 | 2 | | 6,751 |
| 5 | Retail | | | | 5,809 | | 1,811 | 4,910 | 120 | | 12,650 |
| 6 | Equity | | | | | | | | | | |
| 7 | Other assets | 1,010 | | | | | | 9,513 | | | 10,524 |
| 8 | Total | 18,172 | | 9,033 | 5,809 | 1,684 | 2,077 | 19,570 | 122 | | 56,467 |
| 9 | of which: mortgage loans | | | | 5,809 | | 97 | 778 | | | 6,685 |
| 10 | of which: past due 1 | | | | | | | 112 | | | 112 |
| 1 Includes mortgage loans. | | | | | | | | | | | |

Credit risk under internal ratings-based approaches

Semiannual | The tables in this sub-section provide information about credit risk exposures under the A-IRB approach, including the main parameters used in A-IRB models for the calculation of capital requirements, presented by portfolio and PD range.

Under the A-IRB approach, the required capital for credit risk is quantified through empirical models that we have developed to estimate the PD, loss given default (LGD), exposure at default (EAD) and other parameters, subject to FINMA approval. The proportion of EAD covered by either the standardized or the A-IRB approach is provided in the “Regulatory exposures and risk-weighted assets” table on pages 10–11 of this report.

The CR6 table on the following pages provides a breakdown of the key parameters used for the calculation of capital requirements under the A-IRB approach, shown by PD range across FINMA-defined asset classes.

As of 30 June 2019, exposures before the application of the credit conversion factors (CCFs) increased by USD 6 billion to USD 780 billion. Off-balance sheet exposures increased on a net basis by USD 10 billion, almost entirely in Global Wealth Management, due to a business-driven increase in unutilized credit lines in the asset class "Retail: other retail". On-balance sheet exposures decreased on a net basis by USD 4 billion, mainly relating to the Investment Bank in the asset class "Corporates: other lending", predominantly driven by the exclusion of certain collar financing transactions in the amount of USD 8 billion due to their non-credit bearing nature. This decrease was partly offset by increases in the asset class "Residential mortgages' in Global Wealth Management and Personal & Corporate Banking.

Information about credit risk risk-weighted assets (RWA) for the first quarter of 2019, including details of movements in RWA, is provided on pages 9–10 of our 31 March 2019 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors and for the second quarter of 2019 on page 23 of this report. p

UBS Group AG

Semiannual |

| CR6: IRB – Credit risk
exposures by portfolio and PD range — USD million, except where
indicated | Original on-balance sheet gross exposure | Off-balance sheet exposures pre-CCF | Total exposures pre-CCF | Average CCF in % | EAD post-CCF and post-CRM | Average PD in % | Number of obligors (in thousands) | Average LGD in % | Average maturity in years | RWA | RWA density in % | EL | Provisions 1 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Central governments and
central banks as of 30.6.19 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 139,976 | 187 | 140,163 | 50.6 | 140,066 | 0.0 | 0.1 | 41.1 | 1.0 | 3,030 | 2.2 | 4 | |
| 0.15 to <0.25 | 0 | 0 | 0 | 0.0 | 0 | 0.2 | <0.1 | 64.1 | 1.0 | 0 | 40.6 | 0 | |
| 0.25 to <0.50 | 1 | 0 | 1 | 0.0 | 1 | 0.3 | <0.1 | 54.5 | 1.0 | 1 | 53.7 | 0 | |
| 0.50 to <0.75 | 5 | 0 | 5 | 0.0 | 5 | 0.7 | <0.1 | 52.9 | 1.1 | 4 | 77.5 | 0 | |
| 0.75 to <2.50 | 1 | 0 | 1 | 55.0 | 1 | 1.1 | <0.1 | 37.3 | 2.7 | 1 | 101.6 | 0 | |
| 2.50 to <10.00 | 0 | 4 | 4 | 56.3 | 2 | 3.6 | <0.1 | 56.4 | 2.4 | 4 | 166.2 | 0 | |
| 10.00 to <100.00 | 0 | 0 | 0 | 9.8 | 0 | 13.9 | <0.1 | 44.9 | 1.0 | 0 | 211.4 | 0 | |
| 100.00 (default) | 13 | 37 | 51 | 55.0 | 23 | 100.0 | <0.1 | | | 25 | 106.0 | 10 | |
| Subtotal | 139,996 | 228 | 140,224 | 51.4 | 140,098 | 0.0 | 0.1 | 41.1 | 1.0 | 3,064 | 2.2 | 14 | 12 |
| Central governments and
central banks as of 31.12.18 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 139,551 | 19 | 139,570 | 46.7 | 139,558 | 0.0 | 0.1 | 29.1 | 1.0 | 2,474 | 1.8 | 3 | |
| 0.15 to <0.25 | 0 | 0 | 0 | 0.0 | 0 | 0.2 | <0.1 | 55.2 | 1.0 | 0 | 34.7 | 0 | |
| 0.25 to <0.50 | 3 | 0 | 3 | 9.8 | 3 | 0.3 | <0.1 | 54.9 | 1.0 | 1 | 54.2 | 0 | |
| 0.50 to <0.75 | 9 | 0 | 9 | 0.0 | 9 | 0.7 | <0.1 | 97.9 | 1.1 | 13 | 143.1 | 0 | |
| 0.75 to <2.50 | 2 | 0 | 2 | 55.0 | 1 | 1.0 | <0.1 | 38.3 | 2.6 | 1 | 101.5 | 0 | |
| 2.50 to <10.00 | 4 | 12 | 15 | 52.1 | 10 | 3.6 | <0.1 | 54.3 | 2.7 | 16 | 162.2 | 0 | |
| 10.00 to <100.00 | 28 | 0 | 28 | 9.8 | 28 | 13.9 | <0.1 | 5.0 | 1.0 | 8 | 27.1 | 0 | |
| 100.00 (default) | 13 | 37 | 50 | 55.0 | 23 | 100.0 | <0.1 | | | 25 | 106.0 | 10 | |
| Subtotal | 139,609 | 68 | 139,676 | 52.2 | 139,632 | 0.0 | 0.2 | 29.1 | 1.0 | 2,537 | 1.8 | 14 | 11 |
| Banks and securities
dealers as of 30.6.19 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 12,528 | 1,769 | 14,296 | 53.9 | 13,516 | 0.0 | 0.5 | 41.7 | 1.1 | 2,355 | 17.4 | 6 | |
| 0.15 to <0.25 | 836 | 545 | 1,381 | 39.1 | 670 | 0.2 | 0.3 | 54.9 | 1.3 | 345 | 51.5 | 1 | |
| 0.25 to <0.50 | 559 | 452 | 1,011 | 49.4 | 663 | 0.4 | 0.2 | 62.1 | 1.0 | 541 | 81.6 | 2 | |
| 0.50 to <0.75 | 316 | 206 | 522 | 40.7 | 354 | 0.6 | 0.1 | 51.3 | 1.1 | 307 | 86.7 | 1 | |
| 0.75 to <2.50 | 539 | 268 | 807 | 27.7 | 484 | 1.4 | 0.2 | 61.5 | 0.9 | 724 | 149.5 | 4 | |
| 2.50 to <10.00 | 244 | 269 | 513 | 43.4 | 264 | 5.1 | 0.2 | 51.4 | 1.0 | 488 | 184.7 | 6 | |
| 10.00 to <100.00 | 0 | 4 | 4 | 29.5 | 1 | 17.0 | <0.1 | 12.2 | 1.2 | 1 | 67.9 | 0 | |
| 100.00 (default) | | | | | | | | | | | | | |
| Subtotal | 15,022 | 3,513 | 18,535 | 47.4 | 15,953 | 0.2 | 1.5 | 44.1 | 1.1 | 4,762 | 29.8 | 20 | 8 |
| Banks and securities dealers
as of 31.12.18 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 11,855 | 1,805 | 13,659 | 54.1 | 12,639 | 0.1 | 0.5 | 43.0 | 1.1 | 2,433 | 19.2 | 4 | |
| 0.15 to <0.25 | 1,011 | 458 | 1,469 | 45.8 | 793 | 0.2 | 0.3 | 49.3 | 1.3 | 364 | 45.9 | 1 | |
| 0.25 to <0.50 | 454 | 391 | 845 | 51.9 | 570 | 0.4 | 0.2 | 61.8 | 1.1 | 455 | 79.8 | 1 | |
| 0.50 to <0.75 | 167 | 263 | 430 | 42.4 | 221 | 0.6 | 0.1 | 62.9 | 1.1 | 243 | 110.0 | 1 | |
| 0.75 to <2.50 | 974 | 304 | 1,278 | 45.9 | 866 | 1.7 | 0.2 | 48.3 | 1.4 | 1,098 | 126.8 | 7 | |
| 2.50 to <10.00 | 320 | 388 | 708 | 44.6 | 363 | 4.7 | 0.2 | 52.5 | 1.0 | 674 | 185.5 | 9 | |
| 10.00 to <100.00 | 0 | 12 | 12 | 28.0 | 3 | 15.9 | <0.1 | 32.5 | 1.0 | 5 | 165.1 | 0 | |
| 100.00 (default) | | | | | | | | | | | | | |
| Subtotal | 14,780 | 3,621 | 18,401 | 50.0 | 15,454 | 0.3 | 1.5 | 44.8 | 1.1 | 5,272 | 34.1 | 22 | 7 |

| CR6: IRB – Credit risk exposures by portfolio and PD range
(continued) — USD million, except where
indicated | Original on-balance sheet gross exposure | Off-balance sheet exposures pre-CCF | Total exposures pre-CCF | Average CCF in % | EAD post-CCF and post-CRM | Average PD in % | Number of obligors (in thousands) | Average LGD in % | Average maturity in years | RWA | RWA density in % | EL | Provisions 1 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Public-sector entities,
multilateral development banks as of 30.6.19 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 5,615 | 918 | 6,533 | 19.1 | 5,808 | 0.0 | 0.4 | 35.6 | 1.2 | 514 | 8.9 | 1 | |
| 0.15 to <0.25 | 308 | 165 | 473 | 12.5 | 328 | 0.2 | 0.2 | 31.1 | 2.6 | 87 | 26.4 | 0 | |
| 0.25 to <0.50 | 559 | 336 | 896 | 22.0 | 633 | 0.3 | 0.2 | 26.6 | 2.6 | 192 | 30.4 | 1 | |
| 0.50 to <0.75 | 36 | 3 | 39 | 14.0 | 37 | 0.6 | <0.1 | 28.8 | 3.1 | 18 | 48.5 | 0 | |
| 0.75 to <2.50 | 1 | 3 | 3 | 96.9 | 3 | 1.0 | <0.1 | 11.3 | 1.1 | 1 | 18.7 | 0 | |
| 2.50 to <10.00 | 26 | 14 | 40 | 54.9 | 9 | 2.9 | <0.1 | 5.5 | 5.0 | 1 | 16.1 | 0 | |
| 10.00 to <100.00 | | | | | | | | | | | | | |
| 100.00 (default) | 4 | 0 | 4 | 0.0 | 4 | 100.0 | <0.1 | | | 4 | 106.0 | 0 | |
| Subtotal | 6,549 | 1,439 | 7,988 | 19.5 | 6,822 | 0.1 | 0.8 | 34.4 | 1.4 | 817 | 12.0 | 1 | 1 |
| Public-sector entities,
multilateral development banks as of 31.12.18 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 6,816 | 909 | 7,725 | 19.2 | 6,990 | 0.0 | 0.4 | 37.2 | 1.1 | 433 | 6.2 | 1 | |
| 0.15 to <0.25 | 350 | 221 | 571 | 12.0 | 377 | 0.2 | 0.2 | 29.9 | 2.6 | 99 | 26.4 | 0 | |
| 0.25 to <0.50 | 581 | 332 | 913 | 24.3 | 662 | 0.3 | 0.2 | 27.4 | 2.7 | 210 | 31.7 | 1 | |
| 0.50 to <0.75 | 44 | 1 | 44 | 27.6 | 44 | 0.6 | <0.1 | 31.7 | 3.0 | 23 | 51.9 | 0 | |
| 0.75 to <2.50 | 1 | 3 | 5 | 90.4 | 4 | 1.1 | <0.1 | 17.8 | 1.1 | 1 | 28.1 | 0 | |
| 2.50 to <10.00 | 5 | 20 | 25 | 53.3 | 16 | 2.8 | <0.1 | 5.5 | 4.9 | 3 | 17.0 | 0 | |
| 10.00 to <100.00 | | | | | | | | | | | | | |
| 100.00 (default) | | | | | | | | | | | | | |
| Subtotal | 7,797 | 1,487 | 9,284 | 19.9 | 8,093 | 0.1 | 0.8 | 36.0 | 1.3 | 769 | 9.5 | 2 | 1 |
| Corporates: specialized
lending as of 30.6.19 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 2,122 | 540 | 2,662 | 68.2 | 2,490 | 0.1 | 0.5 | 12.9 | 2.1 | 168 | 6.8 | 0 | |
| 0.15 to <0.25 | 1,027 | 180 | 1,207 | 79.9 | 1,171 | 0.2 | 0.3 | 17.7 | 2.0 | 197 | 16.8 | 0 | |
| 0.25 to <0.50 | 3,709 | 2,145 | 5,854 | 32.3 | 4,365 | 0.4 | 0.6 | 27.8 | 1.9 | 1,435 | 32.9 | 4 | |
| 0.50 to <0.75 | 4,605 | 3,061 | 7,667 | 28.8 | 5,427 | 0.6 | 0.6 | 30.8 | 1.6 | 2,568 | 47.3 | 11 | |
| 0.75 to <2.50 | 7,814 | 2,534 | 10,348 | 36.9 | 8,749 | 1.4 | 1.5 | 32.6 | 1.6 | 5,972 | 68.3 | 39 | |
| 2.50 to <10.00 | 1,089 | 246 | 1,336 | 56.0 | 1,226 | 3.4 | 0.3 | 39.5 | 1.5 | 1,371 | 111.8 | 16 | |
| 10.00 to <100.00 | | | | | | | | | | | | | |
| 100.00 (default) | 177 | 13 | 190 | 18.9 | 82 | 100.0 | 0.1 | | | 87 | 106.0 | 97 | |
| Subtotal | 20,544 | 8,720 | 29,264 | 36.3 | 23,511 | 1.3 | 3.8 | 28.9 | 1.7 | 11,798 | 50.2 | 169 | 113 |
| Corporates: specialized
lending as of 31.12.18 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 1,853 | 327 | 2,180 | 71.4 | 2,087 | 0.1 | 0.4 | 13.5 | 1.9 | 137 | 6.6 | 0 | |
| 0.15 to <0.25 | 994 | 161 | 1,155 | 77.4 | 1,118 | 0.2 | 0.3 | 18.3 | 1.9 | 190 | 17.0 | 0 | |
| 0.25 to <0.50 | 3,712 | 2,006 | 5,718 | 40.3 | 4,496 | 0.4 | 0.6 | 30.9 | 1.8 | 1,627 | 36.2 | 5 | |
| 0.50 to <0.75 | 4,446 | 2,875 | 7,321 | 34.0 | 5,360 | 0.6 | 0.6 | 32.1 | 1.6 | 2,643 | 49.3 | 11 | |
| 0.75 to <2.50 | 7,379 | 2,467 | 9,846 | 36.0 | 8,266 | 1.3 | 1.5 | 33.7 | 1.6 | 5,819 | 70.4 | 38 | |
| 2.50 to <10.00 | 1,195 | 289 | 1,483 | 64.4 | 1,381 | 3.3 | 0.4 | 40.5 | 1.7 | 1,581 | 114.5 | 18 | |
| 10.00 to <100.00 | | | | | | | | | | | | | |
| 100.00 (default) | 232 | 46 | 278 | 53.5 | 150 | 100.0 | 0.1 | | | 159 | 106.0 | 107 | |
| Subtotal | 19,810 | 8,171 | 27,981 | 39.7 | 22,858 | 1.6 | 3.8 | 30.6 | 1.7 | 12,156 | 53.2 | 180 | 121 |

UBS Group AG

| CR6: IRB – Credit risk exposures by portfolio and PD range
(continued) — USD million, except where
indicated | Original on-balance sheet gross exposure | Off-balance sheet exposures pre-CCF | Total exposures pre-CCF | Average CCF in % | EAD post-CCF and post-CRM | Average PD in % | Number of obligors (in thousands) | Average LGD in % | Average maturity in years | RWA | RWA density in % | EL | Provisions 1 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Corporates: other lending
as of 30.6.19 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 15,564 | 20,154 | 35,718 | 37.6 | 18,265 | 0.0 | 3.9 | 37.9 | 1.7 | 3,777 | 20.7 | 25 | |
| 0.15 to <0.25 | 4,176 | 5,345 | 9,521 | 39.3 | 5,573 | 0.2 | 1.7 | 34.0 | 2.4 | 2,173 | 39.0 | 3 | |
| 0.25 to <0.50 | 3,207 | 4,024 | 7,231 | 39.8 | 4,776 | 0.4 | 2.5 | 34.4 | 2.3 | 2,626 | 55.0 | 6 | |
| 0.50 to <0.75 | 3,733 | 2,418 | 6,151 | 40.4 | 4,814 | 0.6 | 2.6 | 33.6 | 1.9 | 2,959 | 61.5 | 10 | |
| 0.75 to <2.50 | 8,838 | 5,029 | 13,867 | 44.4 | 11,167 | 1.4 | 11.2 | 29.3 | 2.1 | 7,502 | 67.2 | 44 | |
| 2.50 to <10.00 | 4,015 | 7,707 | 11,722 | 40.0 | 7,107 | 4.0 | 4.8 | 31.3 | 2.3 | 9,301 | 130.9 | 87 | |
| 10.00 to <100.00 | 259 | 326 | 584 | 55.5 | 439 | 15.5 | 0.1 | 14.7 | 1.8 | 434 | 98.8 | 8 | |
| 100.00 (default) | 1,074 | 186 | 1,260 | 42.5 | 851 | 100.0 | 0.7 | | | 898 | 106.0 | 376 | |
| Subtotal | 40,865 | 45,188 | 86,054 | 39.5 | 52,992 | 2.7 | 27.4 | 33.9 | 2.0 | 29,669 | 56.0 | 560 | 521 |
| Corporates: other lending as
of 31.12.18 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 18,566 | 21,196 | 39,763 | 37.4 | 20,917 | 0.0 | 3.9 | 36.7 | 1.8 | 5,157 | 24.7 | 8 | |
| 0.15 to <0.25 | 4,347 | 6,500 | 10,847 | 37.4 | 6,099 | 0.2 | 1.6 | 33.4 | 2.4 | 2,417 | 39.6 | 4 | |
| 0.25 to <0.50 | 3,604 | 4,593 | 8,197 | 40.3 | 5,328 | 0.4 | 2.5 | 30.2 | 2.2 | 2,612 | 49.0 | 6 | |
| 0.50 to <0.75 | 3,111 | 2,516 | 5,627 | 43.6 | 4,204 | 0.6 | 2.6 | 37.8 | 1.8 | 2,906 | 69.1 | 10 | |
| 0.75 to <2.50 | 7,481 | 6,155 | 13,637 | 41.2 | 10,142 | 1.4 | 11.4 | 26.4 | 2.3 | 5,980 | 59.0 | 38 | |
| 2.50 to <10.00 | 9,116 | 7,861 | 16,977 | 39.3 | 12,321 | 3.4 | 4.8 | 18.1 | 2.2 | 9,783 | 79.4 | 85 | |
| 10.00 to <100.00 | 297 | 285 | 582 | 52.8 | 449 | 15.3 | 0.1 | 16.7 | 2.0 | 484 | 107.8 | 9 | |
| 100.00 (default) | 1,385 | 409 | 1,794 | 41.5 | 1,178 | 100.0 | 0.7 | | | 1,249 | 106.0 | 385 | |
| Subtotal | 47,908 | 49,516 | 97,424 | 38.9 | 60,639 | 3.1 | 27.5 | 30.1 | 2.1 | 30,588 | 50.4 | 546 | 533 |
| Retail: residential
mortgages as of 30.6.19 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 63,360 | 1,448 | 64,808 | 58.1 | 64,200 | 0.1 | 129.9 | 19.0 | | 2,602 | 4.1 | 11 | |
| 0.15 to <0.25 | 13,740 | 307 | 14,047 | 71.8 | 13,961 | 0.2 | 21.0 | 22.9 | | 1,260 | 9.0 | 6 | |
| 0.25 to <0.50 | 21,020 | 549 | 21,569 | 76.4 | 21,439 | 0.4 | 28.2 | 23.8 | | 3,150 | 14.7 | 18 | |
| 0.50 to <0.75 | 13,774 | 396 | 14,170 | 82.2 | 14,100 | 0.6 | 15.7 | 24.3 | | 3,236 | 22.9 | 22 | |
| 0.75 to <2.50 | 21,465 | 1,350 | 22,815 | 74.3 | 22,468 | 1.3 | 28.1 | 27.6 | | 9,574 | 42.6 | 84 | |
| 2.50 to <10.00 | 7,816 | 312 | 8,128 | 80.2 | 8,066 | 4.4 | 9.8 | 24.4 | | 5,947 | 73.7 | 85 | |
| 10.00 to <100.00 | 882 | 22 | 904 | 84.2 | 901 | 15.6 | 1.2 | 24.4 | | 1,148 | 127.4 | 34 | |
| 100.00 (default) | 739 | 7 | 746 | 38.9 | 717 | 100.0 | 1.1 | | | 760 | 106.0 | 24 | |
| Subtotal | 142,796 | 4,392 | 147,188 | 70.1 | 145,852 | 1.2 | 235.0 | 22.3 | | 27,678 | 19.0 | 283 | 123 |
| Retail: residential
mortgages as of 31.12.18 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 62,193 | 1,272 | 63,465 | 56.8 | 62,916 | 0.1 | 129.5 | 19.4 | | 2,460 | 3.9 | 10 | |
| 0.15 to <0.25 | 13,409 | 229 | 13,638 | 69.0 | 13,567 | 0.2 | 20.7 | 23.3 | | 1,186 | 8.7 | 6 | |
| 0.25 to <0.50 | 20,155 | 479 | 20,634 | 81.1 | 20,544 | 0.4 | 27.8 | 24.2 | | 2,955 | 14.4 | 18 | |
| 0.50 to <0.75 | 13,276 | 425 | 13,701 | 87.8 | 13,649 | 0.6 | 15.4 | 24.5 | | 3,063 | 22.4 | 21 | |
| 0.75 to <2.50 | 21,252 | 1,318 | 22,570 | 77.9 | 22,278 | 1.3 | 27.1 | 28.3 | | 9,433 | 42.3 | 85 | |
| 2.50 to <10.00 | 7,608 | 260 | 7,868 | 83.5 | 7,825 | 4.3 | 10.2 | 25.1 | | 5,715 | 73.0 | 85 | |
| 10.00 to <100.00 | 912 | 25 | 937 | 84.2 | 933 | 15.3 | 1.2 | 24.4 | | 1,140 | 122.2 | 35 | |
| 100.00 (default) | 723 | 5 | 729 | 68.8 | 702 | 100.0 | 1.1 | | | 744 | 106.0 | 25 | |
| Subtotal | 139,529 | 4,013 | 143,542 | 72.5 | 142,413 | 1.2 | 232.8 | 22.7 | | 26,696 | 18.7 | 286 | 151 |

UBS Group AG

Credit risk RWA development in the second quarter of 2019

Quarterly | The CR8 table below provides a breakdown of the credit risk RWA movements in the second quarter of 2019 across movement categories defined by the Basel Committee on Banking Supervision (BCBS). These categories are described on page 45 of our 31 December 2018 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors .

Credit risk RWA under the advanced internal ratings-based (A-IRB) approach decreased by USD 2.7 billion to USD 86.7 billion as of 30 June 2019.

The RWA decrease from asset size movements of USD 1.5 billion was mainly driven by decreases in loan exposures, margin loans and unutilized credit facilities in the Investment Bank’s Corporate Client Solutions business.

The RWA decrease of USD 1 billion from asset quality was primarily driven by improved probability of default (PD) and loss given default (LGD) distribution across Swiss residential mortgages and income-producing real estate exposures in Personal & Corporate Banking and Global Wealth Management.

Methodology and policy changes reduced RWA by USD 2.1 billion, predominantly driven by the exclusion of certain collar financing transactions in the Investment Bank from credit risk RWA due to their non-credit bearing nature.

The aforementioned decreases were partly offset by a USD 0.5 billion increase in RWA from model updates, driven by the continued phasing-in of RWA increases related to probability of default (PD) and loss given default (LGD) changes from the implementation of revised models for Swiss residential mortgages, affecting Personal & Corporate Banking and Global Wealth Management. p

Quarterly |

| CR8: RWA flow statements of
credit risk exposures under IRB — USD million | | For the quarter ended 30.6.19 | For the quarter ended 31.3.19 |
| --- | --- | --- | --- |
| 1 | RWA as of the beginning of
the quarter | 89,448 | 87,019 |
| 2 | Asset size | (1,454) | 3,212 |
| 3 | Asset quality | (989) | (70) |
| 4 | Model updates | 520 | 430 |
| 5 | Methodology and policy | (2,119) | (102) |
| 6 | Acquisitions and disposals | (53) | 0 |
| 7 | Foreign exchange movements | 976 | (667) |
| 8 | Other | 375 | (374) |
| 9 | RWA as of the end of the
quarter | 86,703 | 89,448 |

Equity exposures

Semiannual | The table below provides information about our equity exposures under the simple risk weight method. p

Semiannual |

| CR10: IRB (equities under the
simple risk-weight method) 1 — USD million, except where
indicated | On-balance sheet amount | Risk weight in % 2 | Exposure amount 3 | RWA 2 |
| --- | --- | --- | --- | --- |
| 30.6.19 | | | | |
| Exchange-traded equity exposures | 50 | 300 | 37 | 119 |
| Other equity exposures | 999 | 400 | 751 | 3,182 |
| Total | 1,049 | | 788 | 3,302 |
| 31.12.18 | | | | |
| Exchange-traded equity exposures | 66 | 300 | 65 | 208 |
| Other equity exposures | 1,122 | 400 | 814 | 3,450 |
| Total | 1,188 | | 879 | 3,658 |
| 1 This table excludes significant investments in the common
shares of non-consolidated financial institutions (banks, insurance and other
financial entities) that are subject to the threshold treatment and risk
weighted at 250%. 2 RWA are calculated post-application of the A-IRB
multiplier of 6%, therefore the respective risk weight is higher than 300%
and 400%. 3 The exposure amount for equities in the banking book is based
on the net position. | | | | |

UBS Group AG

Section 4 Counterparty credit risk

Counterparty credit risk (CCR) arises from over-the-counter and exchange-traded derivatives, securities financing transactions (SFTs) and long settlement transactions. Within traded products we determine the regulatory credit exposure on the majority of our derivatives portfolio by applying the effective expected positive exposure (EEPE) and stressed expected positive exposure methods as defined in the Basel III framework. For the rest of the portfolio we apply the current exposure method (CEM) based on the replacement value of derivatives in combination with a regulatory prescribed add-on. For the majority of SFTs we determine the regulatory credit exposure using the close-out period approach.

Counterparty credit risk RWA

Quarterly | This sub-section consists of disclosures regarding the quarterly credit risk risk-weighted assets (RWA) development. p

Counterparty credit risk RWA development in the second quarter of 2019

Quarterly | The CCR7 table below provides a breakdown of the CCR RWA movements in the second quarter of 2019 across the movement categories defined by the Basel Committee on Banking Supervision (BCBS). These categories are described on page 45 of our 31 December 2018 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors .

CCR RWA under the internal model method (IMM) increased by USD 0.8 billion during the second quarter of 2019, primarily due to mark-to-market effects on derivatives held and higher embedded spreads on new trades compared with those rolling off in our Foreign Exchange, Rates and Credit business in the Investment Bank.

CCR RWA under the VaR decreased by USD 0.4 billion to USD 5.5 billion, primarily reflecting lower sourcing requirements for non-cash collateral within Group Treasury. p

Quarterly |

| CCR7: RWA flow statements of
CCR exposures under internal model method (IMM) and value-at-risk (VaR) | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | | For the quarter ended 30.6.19 | | | For the quarter ended 31.3.19 | | |
| | | Derivatives | SFTs | Total | Derivatives | SFTs | Total |
| USD million | | Subject to IMM | Subject to VaR | | Subject to IMM | Subject to VaR | |
| 1 | RWA as of the beginning of
the quarter | 19,371 | 5,889 | 25,260 | 17,624 | 5,036 | 22,660 |
| 2 | Asset size | 727 | (603) | 124 | 1,147 | 900 | 2,047 |
| 3 | Credit quality of counterparties | 9 | (85) | (76) | 15 | (189) | (174) |
| 4 | Model updates | 0 | 0 | 0 | 0 | 0 | 0 |
| 5 | Methodology and policy | 0 | 244 | 244 | 621 | 150 | 771 |
| 5a | of which: regulatory add-ons | 0 | 0 | 0 | 450 | 150 | 600 |
| 6 | Acquisitions and disposals | 0 | 0 | 0 | 0 | 0 | 0 |
| 7 | Foreign exchange movements | 26 | 9 | 35 | (36) | (8) | (44) |
| 8 | Other | 0 | 0 | 0 | 0 | 0 | 0 |
| 9 | RWA as of the end of the
quarter | 20,133 | 5,453 | 25,587 | 19,371 | 5,889 | 25,260 |

Counterparty credit risk exposure

Semiannual | This sub-section provides information about our CCR exposures, credit valuation adjustment (CVA) capital charge and credit derivatives exposures. This sub-section excludes CCR exposures to central counterparties; CVA is separately covered in the CCR2 table.

Exposure at default (EAD) post credit risk mitigation (CRM) related to CCR increased by USD 1.4 billion to USD 102.0 billion and RWA increased by USD 3.3 billion to USD 35.5 billion as of 30 June 2019. EAD post CRM on derivative exposures decreased by USD 3.4 billion, primarily reflecting lower levels of client activity in Global Wealth Management, partly offset by higher levels of client activity in the Investment Bank. As the decrease in derivative exposures in Global Wealth Management was driven by obligors with favorable credit ratings, the effect on RWA was limited. RWA for derivatives increased by USD 3.1 billion in the first half of 2019 as a result of an increase in expected positive exposure (EEPE) from the Investment Bank and a regulatory add-on of USD 0.6 billion for certain portfolios in Corporate Center awaiting the development of a formalized rating tool. p

Semiannual |

| CCR1: Analysis of counterparty
credit risk (CCR) exposure by approach — USD million, except where
indicated | | Replacement cost | Potential future exposure | EEPE | Alpha used for computing regulatory EAD | EAD post-CRM | RWA |
| --- | --- | --- | --- | --- | --- | --- | --- |
| 30.6.19 | | | | | | | |
| 1 | SA-CCR (for derivatives) 1 | 5,767 2 | 6,723 | | 1.0 1 | 12,490 | 4,297 |
| 2 | Internal model method (for derivatives) | | | 26,468 | 1.6 | 42,349 | 19,874 |
| 3 | Simple approach for credit risk mitigation (for SFTs) | | | | | | |
| 4 | Comprehensive approach for credit risk mitigation (for SFTs) | | | | | 21,048 | 5,982 |
| 5 | VaR (for SFTs) | | | | | 26,091 | 5,317 |
| 6 | Total | | | | | 101,978 | 35,470 |
| 31.12.18 | | | | | | | |
| 1 | SA-CCR (for derivatives) 1 | 8,670 2 | 8,168 | | 1.0 1 | 16,838 | 3,664 |
| 2 | Internal model method (for derivatives) | | | 25,889 | 1.6 | 41,423 | 17,375 |
| 3 | Simple approach for credit risk mitigation (for SFTs) | | | | | | |
| 4 | Comprehensive approach for credit risk mitigation (for SFTs) | | | | | 17,202 | 6,163 |
| 5 | VaR (for SFTs) | | | | | 25,149 | 4,939 |
| 6 | Total | | | | | 100,612 | 32,140 |
| 1 Standardized approach for CCR. Calculated in accordance with
the current exposure method (CEM) until the implementation of SA-CCR with
expected effective date 1 January 2020, when an alpha factor of 1.4 will be
used for calculating regulatory EAD. 2 Replacement costs include
collateral mitigation for on- and off-balance sheet exposures related to CCR
for derivative transactions. | | | | | | | |

Semiannual | In addition to the default risk capital requirements for CCR based on the advanced internal ratings-based or standardized approach, we are required to add a capital charge to derivatives to cover the risk of mark-to-market losses associated with the deterioration of counterparty credit quality, referred to as CVA. The advanced CVA VaR approach has been used to calculate the CVA capital charge where we apply the IMM. Where this is not the case, the standardized CVA approach has been applied. More information about our portfolios subject to the CVA capital charge as of 30 June 2019 is provided in the table below. p

Semiannual |

| CCR2: Credit valuation adjustment
(CVA) capital charge | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | 30.6.19 | | 31.12.18 | |
| USD million | | EAD post-CRM 1 | RWA | EAD post-CRM 1 | RWA |
| | Total portfolios subject to the advanced CVA capital charge | 22,052 | 1,106 | 26,680 | 1,479 |
| 1 | (i) VaR component (including the 3× multiplier) | | 205 | | 271 |
| 2 | (ii) Stressed VaR component (including the 3× multiplier) | | 900 | | 1,208 |
| 3 | All portfolios subject to the standardized CVA capital charge | 4,842 | 1,447 | 4,946 | 1,338 |
| 4 | Total subject to the CVA
capital charge | 26,894 | 2,553 | 31,626 | 2,816 |
| 1 Includes EAD of the underlying portfolio subject to the
respective CVA charge. | | | | | |

UBS Group AG

Semiannual | The table below provides information about our CCR under the standardized approach. Total CCR exposures in the 75% risk weight bucket decreased by USD 0.8 billion to USD 4.2 billion, primarily driven by exposure decreases in the Investment Bank’s Corporate Client Solutions business. p

Semiannual |

| CCR3: Standardized approach –
CCR exposures by regulatory portfolio and risk weights | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| USD million | | | | | | | | | | |
| Risk weight | | 0% | 10% | 20% | 50% | 75% | 100% | 150% | Others | Total credit exposure |
| | Regulatory portfolio as of
30.6.19 | | | | | | | | | |
| 1 | Central governments and central banks | 169 | | | | | 3 | | | 172 |
| 2 | Banks and securities dealers | | | 112 | 117 | | 3 | | | 232 |
| 3 | Public-sector entities and multilateral development banks | | | 99 | 228 | | 71 | | | 398 |
| 4 | Corporates | | | 22 | 105 | 4,213 | 1,472 | 2 | | 5,813 |
| 5 | Retail | | | | | 5 | 117 | | | 123 |
| 6 | Equity | | | | | | | | | |
| 7 | Other assets | | | | | | | | | |
| 8 | Total | 169 | | 232 | 450 | 4,218 | 1,666 | 2 | | 6,737 |
| | Regulatory portfolio as of
31.12.18 | | | | | | | | | |
| 1 | Central governments and central banks | 202 | | | | | 0 | | | 202 |
| 2 | Banks and securities dealers | | | 31 | 176 | 0 | 4 | 0 | | 210 |
| 3 | Public-sector entities and multilateral development banks | | | 0 | | | | | | 1 |
| 4 | Corporates | | | | 99 | 4,974 | 1,045 | 0 | | 6,119 |
| 5 | Retail | | | | | 18 | 128 | | | 147 |
| 6 | Equity | | | | | | | | | |
| 7 | Other assets | | | | | | | | | |
| 8 | Total | 202 | | 32 | 275 | 4,993 | 1,177 | 0 | | 6,679 |

Semiannual | Information about RWA, including details of movements in counterparty credit risk RWA, is provided on pages 9–10 of our 31 March 2019 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors , and on page 24 of this report.

The CCR4 table below and on the following pages provides a breakdown of the key parameters used for the calculation of capital requirements under the advanced internal ratings-based (A-IRB) approach, by PD range across FINMA-defined asset classes. As of 30 June 2019, EAD post CRM increased slightly by USD 1 billion to USD 95 billion, while RWA increased by USD 3 billion, resulting in an increase in RWA density. The increase in RWA was mainly due to a business-driven exposure increase of USD 4 billion in the “Corporates: including specialized lending” asset class, primarily from the Investment Bank. The business-driven movements of EAD post CRM in the “Central governments and central banks” and “Retail: other retail” asset classes were related to obligors with favorable credit ratings, resulting in a limited effect on RWA. p

Semiannual |

| CCR4: IRB – CCR exposures by
portfolio and PD scale — USD million, except where
indicated | EAD post-CRM | Average PD in % | Number of obligors (in thousands) | Average LGD in % | Average maturity in years | RWA | RWA density in % |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Central governments and
central banks as of 30.6.19 | | | | | | | |
| 0.00 to <0.15 | 9,795 | 0.0 | 0.1 | 33.4 | 0.3 | 489 | 5.0 |
| 0.15 to <0.25 | 200 | 0.2 | <0.1 | 44.8 | 1.0 | 64 | 32.3 |
| 0.25 to <0.50 | 213 | 0.3 | <0.1 | 55.0 | 1.0 | 116 | 54.5 |
| 0.50 to <0.75 | 195 | 0.7 | <0.1 | 54.2 | 1.0 | 151 | 77.4 |
| 0.75 to <2.50 | 23 | 0.9 | <0.1 | 53.3 | 0.5 | 20 | 85.2 |
| 2.50 to <10.00 | 5 | 2.6 | <0.1 | 80.0 | 1.0 | 11 | 198.1 |
| 10.00 to <100.00 | | | | | | | |
| 100.00 (default) | | | | | | | |
| Subtotal | 10,432 | 0.1 | 0.2 | 34.5 | 0.3 | 851 | 8.2 |
| Central governments and
central banks as of 31.12.18 | | | | | | | |
| 0.00 to <0.15 | 8,415 | 0.0 | 0.1 | 44.0 | 0.3 | 740 | 8.8 |
| 0.15 to <0.25 | 197 | 0.2 | <0.1 | 65.3 | 0.9 | 93 | 47.0 |
| 0.25 to <0.50 | 128 | 0.3 | <0.1 | 84.3 | 1.0 | 106 | 83.4 |
| 0.50 to <0.75 | 100 | 0.7 | <0.1 | 45.0 | 1.0 | 85 | 85.1 |
| 0.75 to <2.50 | 23 | 1.0 | <0.1 | 53.8 | 0.8 | 21 | 90.2 |
| 2.50 to <10.00 | 0 | 2.6 | <0.1 | 88.8 | 1.0 | 0 | 229.2 |
| 10.00 to <100.00 | | | | | | | |
| 100.00 (default) | | | | | | | |
| Subtotal | 8,864 | 0.1 | 0.2 | 45.1 | 0.5 | 1,046 | 11.8 |
| Banks and securities
dealers as of 30.6.19 | | | | | | | |
| 0.00 to <0.15 | 13,548 | 0.1 | 0.4 | 49.3 | 0.8 | 2,706 | 20.0 |
| 0.15 to <0.25 | 3,892 | 0.2 | 0.2 | 48.9 | 0.9 | 1,422 | 36.5 |
| 0.25 to <0.50 | 1,490 | 0.4 | 0.2 | 43.4 | 0.7 | 651 | 43.7 |
| 0.50 to <0.75 | 559 | 0.7 | 0.1 | 60.3 | 1.1 | 545 | 97.5 |
| 0.75 to <2.50 | 303 | 1.3 | 0.2 | 63.4 | 0.7 | 370 | 122.2 |
| 2.50 to <10.00 | 57 | 3.7 | 0.1 | 74.0 | 1.0 | 132 | 233.9 |
| 10.00 to <100.00 | | | | | | | |
| 100.00 (default) | | | | | | | |
| Subtotal | 19,849 | 0.2 | 1.1 | 49.4 | 0.8 | 5,827 | 29.4 |
| Banks and securities dealers
as of 31.12.18 | | | | | | | |
| 0.00 to <0.15 | 13,103 | 0.1 | 0.4 | 50.5 | 0.8 | 2,672 | 20.4 |
| 0.15 to <0.25 | 3,927 | 0.2 | 0.2 | 48.3 | 0.8 | 1,415 | 36.0 |
| 0.25 to <0.50 | 1,458 | 0.4 | 0.2 | 49.9 | 0.8 | 764 | 52.4 |
| 0.50 to <0.75 | 636 | 0.7 | 0.1 | 58.8 | 0.8 | 551 | 86.7 |
| 0.75 to <2.50 | 352 | 1.2 | 0.2 | 63.7 | 0.8 | 432 | 122.8 |
| 2.50 to <10.00 | 320 | 7.5 | 0.1 | 12.0 | 0.2 | 132 | 41.2 |
| 10.00 to <100.00 | 0 | 13.0 | <0.1 | 66.0 | 1.0 | 10 | 0.0 |
| 100.00 (default) | | | | | | | |
| Subtotal | 19,799 | 0.3 | 1.1 | 49.9 | 0.8 | 5,976 | 30.2 |

UBS Group AG

| CCR4: IRB – CCR exposures by portfolio and PD scale (continued) — USD million, except where
indicated | EAD post-CRM | Average PD in % | Number of obligors (in thousands) | Average LGD in % | Average maturity in years | RWA | RWA density in % |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Public-sector entities,
multilateral development banks as of 30.6.19 | | | | | | | |
| 0.00 to <0.15 | 1,886 | 0.0 | 0.1 | 37.0 | 1.1 | 122 | 6.5 |
| 0.15 to <0.25 | 31 | 0.2 | <0.1 | 58.4 | 1.1 | 10 | 33.4 |
| 0.25 to <0.50 | 7 | 0.3 | <0.1 | 73.8 | 1.0 | 6 | 90.9 |
| 0.50 to <0.75 | | | | | | | |
| 0.75 to <2.50 | 1 | 1.0 | <0.1 | 75.5 | 1.0 | 1 | 168.4 |
| 2.50 to <10.00 | | | | | | | |
| 10.00 to <100.00 | | | | | | | |
| 100.00 (default) | 22 | 100.0 | <0.1 | | | 23 | 106.0 |
| Subtotal | 1,946 | 1.2 | 0.1 | 37.2 | 1.1 | 163 | 8.4 |
| Public-sector entities,
multilateral development banks as of 31.12.18 | | | | | | | |
| 0.00 to <0.15 | 2,519 | 0.0 | 0.1 | 43.7 | 1.1 | 223 | 8.8 |
| 0.15 to <0.25 | 86 | 0.2 | <0.1 | 53.2 | 1.1 | 28 | 32.3 |
| 0.25 to <0.50 | 39 | 0.4 | <0.1 | 61.3 | 1.0 | 24 | 62.6 |
| 0.50 to <0.75 | 0 | 0.0 | <0.1 | 0.0 | 0.0 | 0 | 0.0 |
| 0.75 to <2.50 | 0 | 1.0 | <0.1 | 35.0 | 1.0 | 0 | 60.4 |
| 2.50 to <10.00 | 0 | 2.7 | <0.1 | 35.0 | 1.0 | 0 | 87.4 |
| 10.00 to <100.00 | | | | | | | |
| 100.00 (default) | 12 | 100.0 | <0.1 | | | 13 | 106.0 |
| Subtotal | 2,657 | 0.5 | 0.1 | 44.1 | 1.1 | 288 | 10.8 |
| Corporates: including
specialized lending as of 30.6.19 1 | | | | | | | |
| 0.00 to <0.15 | 36,389 | 0.0 | 12.7 | 35.2 | 0.6 | 5,205 | 14.3 |
| 0.15 to <0.25 | 7,062 | 0.2 | 1.7 | 53.2 | 0.7 | 4,116 | 58.3 |
| 0.25 to <0.50 | 2,222 | 0.4 | 0.9 | 82.1 | 0.9 | 3,312 | 149.1 |
| 0.50 to <0.75 | 3,661 | 0.6 | 1.0 | 57.1 | 0.6 | 4,879 | 133.3 |
| 0.75 to <2.50 | 5,367 | 1.2 | 1.7 | 28.0 | 0.5 | 4,388 | 81.8 |
| 2.50 to <10.00 | 2,219 | 3.2 | 0.4 | 12.2 | 0.2 | 1,190 | 53.6 |
| 10.00 to <100.00 | | | | | | | |
| 100.00 (default) | 1 | 100.0 | <0.1 | | | 1 | 106.0 |
| Subtotal | 56,921 | 0.3 | 18.5 | 39.1 | 0.6 | 23,092 | 40.6 |
| Corporates: including
specialized lending as of 31.12.18 1 | | | | | | | |
| 0.00 to <0.15 | 35,475 | 0.0 | 12.0 | 35.0 | 0.6 | 4,717 | 13.3 |
| 0.15 to <0.25 | 6,761 | 0.2 | 1.6 | 51.0 | 0.6 | 3,688 | 54.6 |
| 0.25 to <0.50 | 2,194 | 0.4 | 0.9 | 78.3 | 1.0 | 2,815 | 128.3 |
| 0.50 to <0.75 | 2,351 | 0.6 | 1.0 | 68.2 | 0.6 | 3,668 | 156.0 |
| 0.75 to <2.50 | 4,311 | 1.2 | 1.6 | 28.2 | 0.7 | 3,569 | 82.8 |
| 2.50 to <10.00 | 1,311 | 3.2 | 0.3 | 13.8 | 0.4 | 819 | 62.4 |
| 10.00 to <100.00 | 0 | 13.0 | <0.1 | 5.0 | 1.0 | 0 | 36.7 |
| 100.00 (default) | 1 | 100.0 | <0.1 | | | 1 | 106.0 |
| Subtotal | 52,403 | 0.3 | 17.3 | 39.3 | 0.6 | 19,276 | 36.8 |

UBS Group AG

Semiannual | The fair value of collateral received for securities financing transactions increased by USD 15.0 billion to USD 635.7 billion, resulting from client activities in the Investment Bank and Corporate Center. p

Semiannual |

| CCR5: Composition of collateral
for CCR exposure 1 | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Collateral used in derivative transactions | | | | | | Collateral used in SFTs | |
| | Fair value of collateral received | | | Fair value of posted collateral | | | Fair value of collateral received | Fair value of posted collateral |
| USD million | Segregated 2 | Unsegregated | Total | Segregated 3 | Unsegregated | Total | | |
| 30.6.19 | | | | | | | | |
| Cash – domestic currency | 2,492 | 17,321 | 19,813 | 1,584 | 6,508 | 8,093 | 30,459 | 78,118 |
| Cash – other currencies | | 20,106 | 20,106 | 1,658 | 13,742 | 15,400 | 10,467 | 41,381 |
| Sovereign debt | 6,569 | 6,780 | 13,349 | 8,301 | 6,009 | 14,310 | 229,076 | 169,360 |
| Other debt securities | | 3,177 | 3,177 | 1,441 | 1,026 | 2,467 | 99,247 | 40,954 |
| Equity securities | 3,776 | 28 | 3,804 | 999 | 566 | 1,565 | 266,468 | 149,513 |
| Total | 12,837 | 47,412 | 60,249 | 13,983 | 27,852 | 41,835 | 635,717 | 479,327 |
| 31.12.18 | | | | | | | | |
| Cash – domestic currency | 2,042 | 16,958 | 19,000 | 1,221 | 6,980 | 8,200 | 33,134 | 72,932 |
| Cash – other currencies | | 19,784 | 19,285 | 1,591 | 13,808 | 15,399 | 12,987 | 49,636 |
| Sovereign debt | 5,552 | 8,656 | 14,208 | 7,995 | 5,444 | 13,439 | 252,257 | 176,260 |
| Other debt securities | | 2,277 | 2,277 | 812 | 135 | 946 | 79,359 | 32,851 |
| Equity securities | 4,778 | 23 | 4,801 | 1,570 | 1,465 | 3,035 | 243,027 | 145,939 |
| Total | 12,372 | 47,698 | 59,571 | 13,190 | 27,831 | 41,020 | 620,764 | 477,617 |
| 1 This table includes collateral received and posted with and
without the right of rehypothecation, but excludes securities placed with
central banks related to undrawn credit lines and for payment, clearing and
settlement purposes for which there were no associated liabilities or
contingent liabilities. 2 Includes collateral received in derivative
transactions, primarily initial margins, that is placed with a third-party
custodian and to which UBS has access only in the case of counterparty
default. 3 Includes collateral posted to central counterparties, where we
apply a 0% risk weight for trades that we have entered into on behalf of a
client and where the client has signed a legally enforceable agreement
stipulating that the default risk of that central counterparty is carried by
the client. | | | | | | | | |

Semiannual | Notionals of credit derivatives decreased by USD 5.4 billion for protection bought and by USD 5.8 billion for protection sold, primarily due to trade roll-offs and compression activities in the Investment Bank’s Foreign Exchange, Rates and Credit business and Equities business. The decrease was partly offset by an increase in credit options in the Investment Bank’s Corporate Client Solutions business due to hedging of new loan commitments. p

Semiannual |

| CCR6: Credit derivatives
exposures | 30.6.19 | | 31.12.18 | |
| --- | --- | --- | --- | --- |
| USD million | Protection bought | Protection sold | Protection bought | Protection sold |
| Notionals 1 | | | | |
| Single-name credit default swaps | 37,191 | 42,151 | 43,265 | 44,875 |
| Index credit default swaps | 36,410 | 29,482 | 37,006 | 32,309 |
| Total return swaps | 4,236 | 1,697 | 4,726 | 1,976 |
| Credit options | 5,861 | 57 | 4,065 | 57 |
| Other credit derivatives | | | | |
| Total notionals | 83,698 | 73,388 | 89,063 | 79,218 |
| Fair values | | | | |
| Positive fair value (asset) | 947 | 1,314 | 1,117 | 815 |
| Negative fair value
(liability) | 2,059 | 1,260 | 1,612 | 1,232 |
| 1 Includes notional amounts for client-cleared transactions. | | | | |

Section 5 Securitizations

Introduction

This section provides details of traditional and synthetic securitization exposures in the banking and trading book based on the Basel III securitization framework.

In a traditional securitization, a pool of loans (or other debt obligations) is typically transferred to structured entities that have been established to own the loan pool and to issue tranched securities to third-party investors referencing this pool of loans. In a synthetic securitization, legal ownership of securitized pools of assets is typically retained, but associated credit risk is transferred to structured entities typically through guarantees, credit derivatives or credit-linked notes. Hybrid structures with a mix of traditional and synthetic features are disclosed as synthetic securitizations.

As of 30 June 2019, we did not use internal ratings for purposes of calculating RWA for securitization positions in the banking book. More information about regulatory capital treatment of securitization exposures is provided on page 73 of our 31 December 2018 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors .

Securitization exposures in the banking and trading book

Semiannual | The tables SEC1 and SEC2 outline the carrying values on the balance sheet in the banking and trading books as of 30 June 2019 and 31 December 2018. The securitization activity is further broken down by our role (originator, sponsor or investor) and by securitization type (traditional or synthetic). Amounts disclosed in the “Traditional” column of these tables reflect the total outstanding notes at par value issued by the securitization vehicle at issuance. For synthetic securitization transactions, the amounts disclosed generally reflect the balance sheet carrying values of the securitized exposures at issuance.

The tables SEC3 and SEC4 provide the regulatory capital requirements associated with the securitization exposure differentiated by our role in the securitization process.

Development in RWA related to securitization exposures in the first half of 2019

In the first half of 2019, securitization exposures in the banking book and the related RWA were stable, however securitization exposures in the trading book increased from USD 280 million to USD 390 million, mainly arising from secondary trading in commercial mortgage-backed securities in the Investment Bank. p

UBS Group AG

Semiannual |

| SEC1: Securitization exposures
in the banking book | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | Bank acts as originator | | | Bank acts as sponsor | | | Bank acts as originator & sponsor | | | Bank acts as investor | | | Total |
| USD million | | Traditional | Synthetic | Subtotal | Traditional | Synthetic | Subtotal | Traditional | Synthetic | Subtotal | Traditional | Synthetic | Subtotal | |
| 30.6.19 | | | | | | | | | | | | | | |
| Asset classes | | | | | | | | | | | | | | |
| 1 | Retail (total) | 84 | | 84 | | | | | | | 1 | | 1 | 85 |
| 2 | of which: residential
mortgage | 84 | | 84 | | | | | | | 1 | | 1 | 85 |
| 3 | of which: credit card
receivables | | | | | | | | | | | | | |
| 4 | of which: student loans | | | | | | | | | | | | | |
| 5 | of which: consumer loans | | | | | | | | | | | | | |
| 6 | of which: other retail
exposures | | | | | | | | | | | | | |
| 7 | Wholesale (total) | | | | 0 | | 0 | | | | 118 | | 118 | 118 |
| 8 | of which: loans to
corporates or SME | | | | | | | | | | | | | |
| 9 | of which: commercial
mortgage | | | | 0 | | 0 | | | | | | | 0 |
| 10 | of which: lease and
receivables | | | | | | | | | | | | | |
| 11 | of which: trade receivables | | | | | | | | | | | | | |
| 12 | of which: other wholesale | | | | | | | | | | 118 | | 118 | 118 |
| 13 | Re-securitization | | | | | | | | | | | | | |
| 14 | Total securitization / re-securitization (including retail and
wholesale) | 84 | | 84 | 0 | | 0 | | | | 119 | | 119 | 203 |
| 31.12.18 | | | | | | | | | | | | | | |
| Asset classes | | | | | | | | | | | | | | |
| 1 | Retail (total) | 87 | | 87 | | | | | | | 1 | | 1 | 88 |
| 2 | of which: residential
mortgage | 87 | | 87 | | | | | | | 1 | | 1 | 88 |
| 3 | of which: credit card
receivables | | | | | | | | | | | | | |
| 4 | of which: student loans | | | | | | | | | | | | | |
| 5 | of which: consumer loans | | | | | | | | | | | | | |
| 6 | of which: other retail
exposures | | | | | | | | | | | | | |
| 7 | Wholesale (total) | | | | 0 | | 0 | | | | 125 | | 125 | 126 |
| 8 | of which: loans to
corporates or SME | | | | | | | | | | | | | |
| 9 | of which: commercial
mortgage | | | | 0 | | 0 | | | | | | | 0 |
| 10 | of which: lease and
receivables | | | | | | | | | | | | | |
| 11 | of which: trade receivables | | | | | | | | | | | | | |
| 12 | of which: other wholesale | | | | | | | | | | 126 | | 126 | 126 |
| 13 | Re-securitization | | | | | | | | | | | | | |
| 14 | Total securitization / re-securitization (including retail and
wholesale) | 87 | | 87 | 0 | | 0 | | | | 126 | | 126 | 213 |

Semiannual |

| SEC2: Securitization exposures
in the trading book | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | Bank acts as originator | | | Bank acts as sponsor | | | Bank acts as originator & sponsor | | | Bank acts as investor | | | Total |
| USD million | | Traditional | Synthetic | Subtotal | Traditional | Synthetic | Subtotal | Traditional | Synthetic | Subtotal | Traditional | Synthetic | Subtotal | |
| 30.6.19 | | | | | | | | | | | | | | |
| Asset classes | | | | | | | | | | | | | | |
| 1 | Retail (total) | 2 | | 2 | 6 | | 6 | | | | 14 | | 14 | 23 |
| 2 | of which: residential
mortgage | 2 | | 2 | 6 | | 6 | | | | 14 | | 14 | 23 |
| 3 | of which: credit card
receivables | | | | | | | | | | | | | |
| 4 | of which: student loans | | | | | | | | | | | | | |
| 5 | of which: consumer loans | | | | | | | | | | | | | |
| 6 | of which: other retail
exposures | | | | | | | | | | | | | |
| 7 | Wholesale (total) | 21 | | 21 | 1 | | 1 | 299 | | 299 | 29 | | 29 | 351 |
| 8 | of which: loans to
corporates or SME | | | | | | | | | | | | | |
| 9 | of which: commercial
mortgage | 21 | | 21 | 1 | | 1 | 299 | | 299 | 28 | | 28 | 350 |
| 10 | of which: lease and
receivables | | | | | | | | | | | | | |
| 11 | of which: trade receivables | | | | | | | | | | | | | |
| 12 | of which: other wholesale | | | | | | | | | | 1 | | 1 | 1 |
| 13 | Re-securitization | | 6 | 6 | | | | | | | 10 | | 10 | 16 |
| 14 | Total securitization / re-securitization (including retail and
wholesale) | 24 | 6 | 30 | 7 | | 7 | 299 | | 299 | 53 | | 53 | 390 |
| 31.12.18 | | | | | | | | | | | | | | |
| Asset classes | | | | | | | | | | | | | | |
| 1 | Retail (total) | 3 | | 3 | 7 | | 7 | | | | 13 | | 13 | 22 |
| 2 | of which: residential
mortgage | 3 | | 3 | 7 | | 7 | | | | 13 | | 13 | 22 |
| 3 | of which: credit card
receivables | | | | | | | | | | | | | |
| 4 | of which: student loans | | | | | | | | | | | | | |
| 5 | of which: consumer loans | | | | | | | | | | | | | |
| 6 | of which: other retail
exposures | | | | | | | | | | | | | |
| 7 | Wholesale (total) | 1 | 4 | 5 | 1 | | 1 | 222 | | 222 | 16 | | 16 | 244 |
| 8 | of which: loans to
corporates or SME | | | | | | | | | | | | | |
| 9 | of which: commercial
mortgage | 1 | | 1 | 1 | | 1 | 222 | | 222 | 14 | | 14 | 238 |
| 10 | of which: lease and
receivables | | | | | | | | | | | | | |
| 11 | of which: trade receivables | | | | | | | | | | | | | |
| 12 | of which: other wholesale | | 4 | 4 | | | | | | | 3 | | 3 | 6 |
| 13 | Re-securitization | | 3 | 3 | | | | 1 | | 1 | 10 | | 10 | 13 |
| 14 | Total securitization / re-securitization (including retail and
wholesale) | 4 | 6 | 10 | 8 | | 8 | 223 | | 223 | 39 | | 39 | 280 |

UBS Group AG

Semiannual |

| SEC3: Securitization exposures
in the banking book and associated regulatory capital requirements – bank
acting as originator or as sponsor | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| USD million | | Total exposure values | Exposure values (by RW bands) | | | | | Exposure values (by regulatory approach) | | | Total RWA | RWA (by regulatory approach) | | | Total capital charge after cap | Capital charge after cap | | | |
| 30.6.19 | | | ≤20% RW | >20% to 50% RW | >50% to 100% RW | >100% to <1250% RW | 1250% RW | SEC-IRBA | SEC-ERBA | SEC-SA | 1250% | SEC-IRBA | SEC-ERBA | SEC-SA | 1250% | SEC-IRBA | SEC-ERBA | SEC-SA | 1250% |
| Asset classes | | | | | | | | | | | | | | | | | | | |
| 1 | Total exposures | 84 | | | | 64 | 21 | | 84 | 0 | 580 | | 580 | 0 | 46 | | 46 | 0 | |
| 2 | Traditional securitization | 84 | | | | 64 | 21 | | 84 | 0 | 580 | | 580 | 0 | 46 | | 46 | 0 | |
| 3 | of which: securitization | 84 | | | | 64 | 21 | | 84 | 0 | 580 | | 580 | 0 | 46 | | 46 | 0 | |
| 4 | of which: retail underlying | 84 | | | | 64 | 21 | | 84 | | 580 | | 580 | 0 | 46 | | 46 | 0 | |
| 5 | of which: wholesale | 0 | | | | 0 | 0 | | | 0 | 0 | | | 0 | 0 | | | 0 | |
| 6 | of which: re-securitization | 0 | | | | | 0 | | | | 0 | | | | 0 | | | | |
| 7 | of which: senior | | | | | | | | | | | | | | | | | | |
| 8 | of which: non-senior | | | | | | | | | | | | | | | | | | |
| 9 | Synthetic securitization | | | | | | | | | | | | | | | | | | |
| 10 | of which: securitization | | | | | | | | | | | | | | | | | | |
| 11 | of which: retail underlying | | | | | | | | | | | | | | | | | | |
| 12 | of which: wholesale | | | | | | | | | | | | | | | | | | |
| 13 | of which: re-securitization | | | | | | | | | | | | | | | | | | |
| 14 | of which: senior | | | | | | | | | | | | | | | | | | |
| 15 | of which: non-senior | | | | | | | | | | | | | | | | | | |
| 31.12.18 | | | | | | | | | | | | | | | | | | | |
| Asset classes | | | | | | | | | | | | | | | | | | | |
| 1 | Total exposures | 87 | | | 0 | 67 | 20 | | 87 | | 589 | | 589 | | 47 | | 47 | | |
| 2 | Traditional securitization | 87 | | | 0 | 67 | 20 | | 87 | | 589 | | 589 | | 47 | | 47 | | |
| 3 | of which: securitization | 87 | | | 0 | 67 | 20 | | 87 | | 589 | | 589 | | 47 | | 47 | | |
| 4 | of which: retail underlying | 87 | | | | 67 | 20 | | 87 | | 589 | | 589 | | 47 | | 47 | | |
| 5 | of which: wholesale | 0 | | | 0 | | | | 0 | | 0 | | 0 | | 0 | | 0 | | |
| 6 | of which: re-securitization | | | | | | | | | | | | | | | | | | |
| 7 | of which: senior | | | | | | | | | | | | | | | | | | |
| 8 | of which: non-senior | | | | | | | | | | | | | | | | | | |
| 9 | Synthetic securitization | | | | | | | | | | | | | | | | | | |
| 10 | of which: securitization | | | | | | | | | | | | | | | | | | |
| 11 | of which: retail underlying | | | | | | | | | | | | | | | | | | |
| 12 | of which: wholesale | | | | | | | | | | | | | | | | | | |
| 13 | of which: re-securitization | | | | | | | | | | | | | | | | | | |
| 14 | of which: senior | | | | | | | | | | | | | | | | | | |
| 15 | of which: non-senior | | | | | | | | | | | | | | | | | | |

Semiannual |

| SEC4: Securitization exposures
in the banking book and associated regulatory capital requirements – bank
acting as investor | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| USD million | | Total exposure values | Exposure values (by RW bands) | | | | | Exposure values (by regulatory approach) | | | | Total RWA | RWA (by regulatory approach) | | | | Total capital charge after cap | Capital charge after cap | | | |
| 30.6.19 | | | ≤20% RW | >20% to 50% RW | >50% to 100% RW | >100% to <1250% RW | 1250% RW | SEC-IRBA | SEC-ERBA | SEC-SA | 1250% | | SEC-IRBA | SEC-ERBA | SEC-SA | 1250% | | SEC-IRBA | SEC-ERBA | SEC-SA | 1250% |
| Asset classes | | | | | | | | | | | | | | | | | | | | | |
| 1 | Total exposures | 119 | | | 118 | | 1 | | 118 | | 1 | 84 | | 77 | | 7 | 7 | | 6 | | 1 |
| 2 | Traditional securitization | 119 | | | 118 | | 1 | | 118 | | 1 | 84 | | 77 | | 7 | 7 | | 6 | | 1 |
| 3 | of which: securitization | 119 | | | 118 | | 1 | | 118 | | 1 | 84 | | 77 | | 7 | 7 | | 6 | | 1 |
| 4 | of which: retail underlying | 1 | | | | | 1 | | | | 1 | 7 | | | | 7 | 1 | | 0 | | 1 |
| 5 | of which: wholesale | 118 | | | 118 | | | | 118 | | | 77 | | 77 | | | 6 | | 6 | | |
| 6 | of which: re-securitization | | | | | | | | | | | | | | | | | | | | |
| 7 | of which: senior | | | | | | | | | | | | | | | | | | | | |
| 8 | of which: non-senior | | | | | | | | | | | | | | | | | | | | |
| 9 | Synthetic securitization | | | | | | | | | | | | | | | | | | | | |
| 10 | of which: securitization | | | | | | | | | | | | | | | | | | | | |
| 11 | of which: retail underlying | | | | | | | | | | | | | | | | | | | | |
| 12 | of which: wholesale | | | | | | | | | | | | | | | | | | | | |
| 13 | of which: re-securitization | | | | | | | | | | | | | | | | | | | | |
| 14 | of which: senior | | | | | | | | | | | | | | | | | | | | |
| 15 | of which: non-senior | | | | | | | | | | | | | | | | | | | | |
| 31.12.18 | | | | | | | | | | | | | | | | | | | | | |
| Asset classes | | | | | | | | | | | | | | | | | | | | | |
| 1 | Total exposures | 126 | | | 49 | 77 | 1 | | 126 | | 1 | 121 | | 112 | | 8 | 10 | | 9 | | 1 |
| 2 | Traditional securitization | 126 | | | 49 | 77 | 1 | | 126 | | 1 | 121 | | 112 | | 8 | 10 | | 9 | | 1 |
| 3 | of which: securitization | 126 | | | 49 | 77 | 1 | | 126 | | 1 | 121 | | 112 | | 8 | 10 | | 9 | | 1 |
| 4 | of which: retail underlying | 1 | | | | | 1 | | | | 1 | 8 | | | | 8 | 1 | | | | 1 |
| 5 | of which: wholesale | 126 | | | 49 | 77 | | | 126 | | | 112 | | 112 | | | 9 | | 9 | | |
| 6 | of which: re-securitization | | | | | | | | | | | | | | | | | | | | |
| 7 | of which: senior | | | | | | | | | | | | | | | | | | | | |
| 8 | of which: non-senior | | | | | | | | | | | | | | | | | | | | |
| 9 | Synthetic securitization | | | | | | | | | | | | | | | | | | | | |
| 10 | of which: securitization | | | | | | | | | | | | | | | | | | | | |
| 11 | of which: retail underlying | | | | | | | | | | | | | | | | | | | | |
| 12 | of which: wholesale | | | | | | | | | | | | | | | | | | | | |
| 13 | of which: re-securitization | | | | | | | | | | | | | | | | | | | | |
| 14 | of which: senior | | | | | | | | | | | | | | | | | | | | |
| 15 | of which: non-senior | | | | | | | | | | | | | | | | | | | | |

UBS Group AG

Section 6 Market risk

Overview

The amount of capital required to underpin market risk in the regulatory trading book is calculated using a variety of methods approved by FINMA. The components of market risk risk-weighted assets (RWA) are value-at-risk (VaR), stressed VaR (SVaR), an add-on for risks that are potentially not fully modeled in VaR, the incremental risk charge (IRC), the comprehensive risk measure (CRM) for the correlation portfolio and the securitization framework for securitization positions in the trading book. Refer to pages 72–73, 85 and 87–89 of our 31 December 2018 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors , for more information about each of these components.

Market risk risk-weighted assets

Market risk RWA development in the second quarter of 2019

Quarterly | The MR2 table below provides a breakdown of the market risk RWA movement in the second quarter of 2019 across the main components, according to the movement categories defined by the Basel Committee on Banking Supervision. VaR and SVaR components include the RWA charge for risks-not-in-VaR. These categories are described on page 81 of our 31 December 2018 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors .

Market risk RWA decreased by USD 1.8 billion in the second quarter of 2019, primarily driven by a reduction from regulatory add-ons reflecting updates from the monthly risks-not-in-VaR assessment.

As of 30 June 2019, the CRM-based capital requirement was not applicable to us, as we no longer held eligible correlation trading positions.

The VaR multiplier remained unchanged, at 3.0, compared with the first quarter of 2019. p

Quarterly |

| MR2: RWA flow statements of
market risk exposures under an internal models approach 1 — USD million | | VaR | Stressed VaR | IRC | CRM | Total RWA |
| --- | --- | --- | --- | --- | --- | --- |
| 1 | RWA as of 31.12.18 | 5,085 | 12,149 | 2,299 | 7 | 19,541 |
| 1a | Regulatory adjustment | (2,167) | (8,470) | (1,059) | (7) | (11,702) |
| 1b | RWA at previous quarter-end (end of day) | 2,918 | 3,680 | 1,240 | 0 | 7,838 |
| 2 | Movement in risk levels | (1,771) | (831) | (26) | 0 | (2,628) |
| 3 | Model updates / changes | (12) | 41 | 0 | 0 | 29 |
| 4 | Methodology and policy | 0 | 0 | 0 | 0 | 0 |
| 5 | Acquisitions and disposals | 0 | 0 | 0 | 0 | 0 |
| 6 | Foreign exchange movements | 0 | 0 | 0 | 0 | 0 |
| 7 | Other | (205) | (495) | 0 | 0 | (700) |
| 8a | RWA at the end of the reporting period (end of day) | 929 | 2,395 | 1,214 | 0 | 4,539 |
| 8b | Regulatory adjustment | 2,298 | 5,506 | 0 | 0 | 7,804 |
| 8c | RWA as of 31.3.19 | 3,227 | 7,901 | 1,214 | 0 | 12,343 |
| 1 | RWA as of 31.3.19 | 3,227 | 7,901 | 1,214 | | 12,343 |
| 1a | Regulatory adjustment | (2,298) | (5,506) | 0 | | (7,804) |
| 1b | RWA at previous quarter-end (end of day) | 929 | 2,395 | 1,214 | | 4,539 |
| 2 | Movement in risk levels | (163) | (442) | 168 | | (438) |
| 3 | Model updates / changes | (27) | (32) | (70) | | (128) |
| 4 | Methodology and policy | 0 | 0 | 0 | | 0 |
| 5 | Acquisitions and disposals | 0 | 0 | 0 | | 0 |
| 6 | Foreign exchange movements | 0 | 0 | 0 | | 0 |
| 7 | Other | (53) | (71) | 0 | | (124) |
| 8a | RWA at the end of the reporting period (end of day) | 687 | 1,850 | 1,312 | | 3,849 |
| 8b | Regulatory adjustment | 1,874 | 4,591 | 212 | | 6,677 |
| 8c | RWA as of 30.6.19 | 2,561 | 6,441 | 1,524 | | 10,526 |
| 1 Components that describe movements in RWA are presented in
italic. | | | | | | |

Securitization positions in the trading book

Semiannual | Our exposure to securitization positions in the trading book includes exposures arising from secondary trading in commercial mortgage-backed securities in the Investment Bank, and limited positions in Corporate Center – Non-core and Legacy Portfolio that we continue to wind down. Refer to the “Securitizations” section on pages 31–35 of this report for more information.

The table below provides information about market risk RWA from securitization exposures in the trading book. p

Semiannual |

| MR1: Market risk under
standardized approach | | | |
| --- | --- | --- | --- |
| | | RWA | |
| USD million | | 30.6.19 | 31.12.18 |
| | Outright products | | |
| 1 | Interest rate risk (general and specific) | | |
| 2 | Equity risk (general and specific) | | |
| 3 | Foreign exchange risk | | |
| 4 | Commodity risk | | |
| | Options | | |
| 5 | Simplified approach | | |
| 6 | Delta-plus method | | |
| 7 | Scenario approach | | |
| 8 | Securitization | 452 | 452 |
| 9 | Total | 452 | 452 |

UBS Group AG

Regulatory calculation of market risk

Semiannual | The table below shows minimum, maximum, average and period-end regulatory VaR, SVaR, the IRC and the comprehensive risk capital charge. As of 30 June 2019 we no longer held eligible correlation trading positions.

During the first half of 2019, average 10-day 99% regulatory VaR and SVaR decreased, driven by the Equities business, reflecting a reduction in market volatility as well as a decrease in client activity along with an overall reduction in credit exposure in the Investment Bank’s Foreign Exchange, Rates and Credit business, compared with the higher levels observed in the second half of 2018. p

Semiannual |

| MR3: IMA values for trading
portfolios — USD million | | For the six-month period ended 30.6.19 | For the six-month period ended 31.12.18 | For the six-month period ended 30.6.18 |
| --- | --- | --- | --- | --- |
| | VaR (10-day 99%) | | | |
| 1 | Maximum value | 88 | 107 | 181 |
| 2 | Average value | 31 | 38 | 52 |
| 3 | Minimum value | 17 | 6 | 2 |
| 4 | Period end | 24 | 79 | 65 |
| | Stressed VaR (10-day 99%) | | | |
| 5 | Maximum value | 143 | 202 | 334 |
| 6 | Average value | 74 | 93 | 107 |
| 7 | Minimum value | 45 | 35 | 23 |
| 8 | Period end | 61 | 98 | 122 |
| | Incremental risk charge
(99.9%) | | | |
| 9 | Maximum value | 141 | 247 | 342 |
| 10 | Average value | 107 | 193 | 222 |
| 11 | Minimum value | 87 | 99 | 153 |
| 12 | Period end | 105 | 99 | 192 |
| | Comprehensive risk capital
charge (99.9%) | | | |
| 13 | Maximum value | | 5 | 5 |
| 14 | Average value | | 1 | 4 |
| 15 | Minimum value | | 0 | 3 |
| 16 | Period end | | 0 | 5 |
| 17 | Floor (standardized measurement method) | | 0 | 1 |

MR4: Comparison of VaR estimates with gains/losses

Semiannual | The “Group: development of backtesting revenues and actual trading revenues against backtesting VaR (1-day, 99% confidence)” chart below shows the six-month development of backtesting VaR against the Group’s backtesting revenues and actual trading revenues for the first half of 2019. The chart shows both, the 99% and the 1% backtesting VaR. The asymmetry between the negative and positive tails is a result of the long gamma risk profile that has been run historically in the Investment Bank.

The actual trading revenues include, in addition to backtesting revenues, intraday revenues.

There were no Group VaR negative backtesting exceptions in the first half of 2019, and the total number of negative backtesting exceptions within the most recent 250-business-day window decreased from 2 to 1. The FINMA VaR multiplier for market risk RWA remained unchanged at 3.0 as of 30 June 2019.

More information about the backtesting exceptions that occurred during 2018 is provided on pages 157–158 of our Annual Report 2018, which is available under “Annual reporting” at www.ubs.com/investors , and on page 86 of our 31 December 2018 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors . p

Semiannual |

UBS Group AG

Section 7 Interest rate risk in the banking book

Annual | Interest rate risk in the banking book (IRRBB) arises from balance sheet positions such as Loans and advances to banks , Loans and advances to customers , Financial assets at fair value not held for trading , Financial assets measured at amortized cost , Customer deposits , Debt issued measured at amortized cost and derivatives, including those used for cash flow hedge accounting purposes. These positions may affect Other comprehensive income (OCI) or the income statement, depending on their accounting treatment.

IRRBB is measured using a number of metrics, the most relevant of which are the following:

– Interest rate sensitivity to a +1 basis point parallel shift in yield curves. This metric is also the key risk factor for statistical and stress-based measures, such as value-at-risk and stress scenarios (including economic value of equity (EVE)) and is measured and reported with a daily frequency.

– Net interest income (NII) sensitivity assesses the change in NII over a set time horizon compared with the baseline NII, which is calculated assuming that interest rates in all currencies develop according to their market-implied forward rates and under the assumption of constant business volumes and no specific management actions. NII sensitivity is measured and reported on a monthly basis.

The disclosures below take into account the revised FINMA Circular 2019/2, which sets out minimum standards for the measurement, management, monitoring and control of interest rate risks in the banking book.

Our largest banking book interest rate exposures arise from client deposits and lending products in Global Wealth Management and Personal & Corporate Banking. The inherent interest rate risks are generally transferred from Global Wealth Management and Personal & Corporate Banking to Group Treasury, to manage them centrally within Corporate Center. This allows for the netting of interest rate risks across different sources, while leaving the originating businesses with commercial margin and volume management. The residual interest rate risk is mainly hedged with interest rate swaps, to the vast majority of which we apply hedge accounting. Short-term exposures and high-quality liquid assets classified as Financial assets at fair value not held for trading are hedged with derivatives accounted for on a mark-to-market basis. Long-term fixed-rate debt issued is hedged with interest rate swaps designated in fair value hedge accounting relationships.

We actively manage IRRBB, with the objective of reducing the volatility of NII, while keeping the EVE sensitivity within set internal risk limits.

EVE and NII sensitivity are monitored against limits and triggers, both at consolidated and at significant legal entity levels. We also assess the sensitivity of EVE and NII under stressed market conditions by applying a suite of parallel and non-parallel interest rate scenarios, as well as specific economic scenarios.

The Interest Rate Risk in the Banking Book Strategy Committee, a subcommittee of the Group Asset and Liability Management Committee (ALCO), and, where relevant, ALCOs at a legal entity level perform independent oversight over the management of IRRBB. IRRBB is also subject to Group Internal Audit and model governance. Refer to “Group Internal Audit” in the “Corporate governance” section and to “Risk measurement” in the “Risk management and control” section of our Annual Report 2018 for more information.

The cash flows from client deposits and lending products used in the calculation of EVE sensitivity exclude commercial margins and other spread components, are aggregated for each business day and are discounted using risk-free rates. Our external issuances are discounted using UBS’s fund transfer curve, and capital instruments are modelled to the first call date. NII sensitivity is calculated over a one-year time horizon assuming constant balance sheet structure and volumes and considers the flooring impact of embedded interest rate options.

The average repricing maturity of non-maturing deposits and loans is determined via a replication portfolio strategy that protects product margin. The optimal replicating portfolio is determined at a granular currency- and product-specific level by simulating and applying a real-world market rate model to historically calibrated client rate and volume models.

We use an econometric prepayment model to forecast prepayment rates on US mortgage whole loans in UBS Bank USA, as well as agency mortgage-backed securities (MBS) held in various liquidity portfolios of UBS Americas Holding LLC consolidated. These prepayment rates are used to forecast both mortgage whole loan and MBS balances under various macroeconomic scenarios. The prepayment model is used for a variety of purposes, including risk management and regulatory stress testing. Mortgages in Switzerland generally do not carry similar optionality, due to prepayment penalties.

The interest rate risk sensitivity figures presented in the IRRBB1 table below represent the effect of six interest rate scenarios defined by FINMA on the theoretical present value of the banking book as well as the impact of the two parallel shock scenarios on the net interest income of the banking book. EVE sensitivity excludes equity, goodwill, real estate and additional tier 1 (AT1) capital instruments.

As of 30 June 2019, the most adverse of the six FINMA interest rate scenarios with regard to EVE was the “Parallel up” scenario (+200 basis points for US dollars and +150 basis points for Swiss francs), resulting in a change of the economic value of equity of negative USD 4.5 billion, representing a pro-forma effect equal to 9.0% of tier 1 capital, which is well below the threshold of 15% of tier 1 capital of the regulatory outlier test in the IRRBB regulation. The immediate effect of the “Parallel up” scenario on tier 1 capital as of 30 June 2019 would be a reduction of 0.5%, or USD 0.2 billion, relating to the part of our banking book that is measured at fair value through profit or loss with recognition in eligible capital and a positive effect from pension funds.

The more adverse of the two parallel interest rate scenarios with regard to NII over the next 12 months was the “Parallel up” scenario, resulting in a potential change of negative USD 0.4 billion. This excludes the contribution from cash held at central banks as per FINMA Pillar 3 disclosure requirements. With the inclusion of the cash held at central banks, the NII would increase by USD 0.9 billion under the “Parallel up” scenario. p

® Refer to our second quarter 2019 report for more information about IRRBB

USD Scenarios 1	Description
Parallel up	rates for all tenors move by +200
bps
Parallel down	rates for all tenors move by –200
bps
Steepener	front-end moves by –195 bps,
long-end by +134 bps
Flattener	front-end moves by +240 bps,
long-end by –89 bps
Short-term up	front-end moves by +300 bps,
long-end by +1 bp
Short-term down	front-end moves by –300 bps,
long-end by –1 bp

1 The six scenarios for other currencies have a similar shape, but different magnitude: the parallel shocks are 150 basis points for CHF, 200 basis points for EUR, and 250 basis points for GBP. The term “front-end” stands for overnight tenor and “long-end” for a 20-year tenor of the yield curve. Refer to FINMA Circular 2019/2 for more information.

UBS Group AG

Annual |

| IRRBB1: Quantitative
information on IRRBB | | |
| --- | --- | --- |
| As of 30.6.19 | | |
| USD million | Delta EVE – Change of economic value of equity | Delta NII – Change of Net interest income 2 |
| Parallel up | (4,504) | (355) |
| Parallel down | 3,807 | 204 |
| Steepener | (749) | |
| Flattener | (298) | |
| Short rate up | (1,908) | |
| Short rate down | 2,048 | |
| Maximum 1 | (4,504) | (355) |
| Period | | 30.6.19 |
| Tier 1 capital | 49,993 | |
| 1 “Maximum” indicates the most adverse interest rate scenario as
shown in the table. 2 Disclosure of the NII sensitivity is only required
for the two parallel shock scenarios. The NII estimates are based on
hypothetical scenarios of immediate changes in interest rates and assume no
change to balance sheet size and structure, constant foreign exchange rates
and no specific management action. Furthermore, the change in NII does not
include the contribution from cash held at central banks. | | |

Annual |

| IRRBBA1: Quantitative
disclosures relating to the position structure and interest rate reset of
IRRBB risk | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| As of 30.6.19 | | Volume 1 | | | | Average interest rate repricing period (in years) | | Maximum interest rate repricing period (in years) for exposures
with modelled interest rate repricing dates | |
| USD million, except where
indicated | | Total | of which: CHF | of which: EUR | of which: USD | Total | of which: CHF | Total | of which: CHF |
| Determined repricing period | Loans and advances to banks | 12,193 | 4,459 | 3,628 | 4,086 | 0.69 | 0.91 | | |
| | Loans and advances to customers | 144,803 | 35,569 | 12,117 | 73,908 | 0.64 | 1.38 | | |
| | Money market mortgages | 39,551 | 39,551 | | | 0.15 | 0.15 | | |
| | Fixed-rate mortgages | 83,709 | 83,709 | 0 | 0 | 4.13 | 4.13 | | |
| | Financial investments | 50,450 | 1,231 | 4,974 | 31,685 | 1.80 | 3.72 | | |
| | Other receivables | 172,358 | | 26,125 | 95,684 | 0.13 | 0.10 | | |
| | Receivables from interest rate derivatives | 687,361 | 104,235 | 145,253 | 353,448 | 1.29 | 0.98 | | |
| | Amounts due to banks | (12,816) | (3,360) | (11) | (9,269) | 1.37 | 1.46 | | |
| | Customer deposits | (52,696) | (195) | (1,284) | (39,129) | 0.40 | 0.49 | | |
| | Medium-term notes | (75) | (73) | (1) | | 2.73 | 2.72 | | |
| | Bonds and covered bonds | (97,060) | (9,984) | (32,653) | (46,605) | 1.81 | 5.05 | | |
| | Other liabilities | (117,535) | 0 | (22,200) | (64,966) | 0.11 | 0.01 | | |
| | Liabilities from interest rate derivatives | (687,321) | (127,566) | (93,615) | (341,800) | 0.68 | 0.86 | | |
| Undetermined repricing period | Loans and advances to banks | | | | | | | | |
| | Loans and advances to customers | 15,739 | 2,030 | 3,114 | 9,186 | 1.17 | 0.91 | | |
| | Variable-rate mortgages | 17,921 | | | 14,482 | 3.92 | | | |
| | Other receivables on sight | 2,173 | 2,173 | | | 1.31 | 1.31 | | |
| | Liabilities on sight in personal and current accounts | (261,637) | (83,101) | (55,465) | (101,572) | 1.30 | 1.32 | | |
| | Other liabilities on sight | | | | | | | | |
| | Liabilities from client deposits, callable but not transferable | (112,048) | (112,048) | | | 2.16 | 2.16 | | |
| | Total | 409,519 | 199,352 | 58,579 | 125,241 | 1.20 | 1.74 | 10 | 10 |
| 1 The volume figures cover only banking book positions excluding
subordinated liabilities and are risk-based measures which differ from the
accounting values on the IFRS balance sheet. | | | | | | | | | |

Section 8 Going and gone concern requirements and eligible capital

The table below provides details of the Swiss systemically relevant bank (SRB) going and gone concern capital requirements as required by FINMA. More information about capital management is provided on pages 47–56 of our second quarter 2019 report, which is available under “Quarterly reporting” at www.ubs.com/investors .

Quarterly |

| Swiss SRB going and gone
concern requirements and information | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Swiss SRB, including transitional arrangements | | | | Swiss SRB as of 1.1.20 | | | |
| As of 30.6.19 | RWA | | LRD | | RWA | | LRD | |
| USD million, except where
indicated | in % | | in % | | in % | | in % | |
| Required going concern
capital | | | | | | | | |
| Total going concern capital | 13.89 | 36,401 | 4.50 | 41,012 | 14.61 1 | 38,289 | 5.00 1 | 45,569 |
| Common equity tier 1 capital | 9.99 | 26,178 | 3.20 | 29,164 | 10.31 | 27,017 | 3.50 | 31,898 |
| of which: minimum capital | 4.90 | 12,845 | 1.70 | 15,493 | 4.50 | 11,796 | 1.50 | 13,671 |
| of which: buffer capital | 4.78 | 12,530 | 1.50 | 13,671 | 5.50 | 14,417 | 2.00 | 18,228 |
| of which: countercyclical
buffer | 0.31 | 803 | | | 0.31 | 803 | | |
| Maximum additional tier 1
capital | 3.90 | 10,223 | 1.30 | 11,848 | 4.30 | 11,272 | 1.50 | 13,671 |
| of which: additional tier 1
capital | 3.10 | 8,126 | 1.30 | 11,848 | 3.50 | 9,175 | 1.50 | 13,671 |
| of which: additional tier 1
buffer capital | 0.80 | 2,097 | | | 0.80 | 2,097 | | |
| Eligible going concern
capital | | | | | | | | |
| Total going concern capital | 21.22 | 55,618 | 6.10 | 55,618 | 19.07 | 49,993 | 5.49 | 49,993 |
| Common equity tier 1 capital | 13.33 | 34,948 | 3.83 | 34,948 | 13.33 | 34,948 | 3.83 | 34,948 |
| Total loss-absorbing
additional tier 1 capital | 7.89 | 20,670 | 2.27 | 20,670 | 5.74 | 15,045 | 1.65 | 15,045 |
| of which: high-trigger
loss-absorbing additional tier 1 capital | 4.81 | 12,609 | 1.38 | 12,609 | 4.81 | 12,609 | 1.38 | 12,609 |
| of which: low-trigger
loss-absorbing additional tier 1 capital 2 | 0.93 | 2,436 | 0.27 | 2,436 | 0.93 | 2,436 | 0.27 | 2,436 |
| of which: low-trigger
loss-absorbing tier 2 capital 3 | 2.15 | 5,625 | 0.62 | 5,625 | | | | |
| Required gone concern
capital | | | | | | | | |
| Total gone concern
loss-absorbing capacity | 9.74 | 25,542 | 3.36 | 30,622 | 10.69 | 28,014 | 3.82 | 34,804 |
| of which: base requirement | 10.52 | 27,577 | 3.63 | 33,038 | 12.86 | 33,711 | 4.50 | 41,012 |
| of which: additional requirement
for market share and LRD | 1.08 | 2,831 | 0.38 | 3,418 | 1.44 | 3,775 | 0.50 | 4,557 |
| of which: applicable
reduction on requirements | (1.86) | (4,865) | (0.64) | (5,833) | (3.61) | (9,471) | (1.18) | (10,765) |
| of which: rebate granted
(equivalent to 40% of maximum rebate) | (1.86) | (4,865) | (0.64) | (5,833) | (2.29) | (5,998) | (0.80) | (7,291) |
| of which: reduction for
usage of low-trigger tier 2 capital instruments | | | | | (1.33) | (3,474) | (0.38) | (3,474) |
| Eligible gone concern
capital | | | | | | | | |
| Total gone concern
loss-absorbing capacity | 12.11 | 31,744 | 3.48 | 31,744 | 14.26 | 37,370 | 4.10 | 37,370 |
| Total tier 2 capital | 0.77 | 2,024 | 0.22 | 2,024 | 2.92 | 7,649 | 0.84 | 7,649 |
| of which: low-trigger
loss-absorbing tier 2 capital | 0.50 | 1,322 | 0.15 | 1,322 | 2.65 | 6,947 | 0.76 | 6,947 |
| of which: non-Basel
III-compliant tier 2 capital | 0.27 | 702 | 0.08 | 702 | 0.27 | 702 | 0.08 | 702 |
| TLAC-eligible senior
unsecured debt | 11.34 | 29,721 | 3.26 | 29,721 | 11.34 | 29,721 | 3.26 | 29,721 |
| Total loss-absorbing
capacity | | | | | | | | |
| Required total
loss-absorbing capacity | 23.63 | 61,944 | 7.86 | 71,634 | 25.29 | 66,303 | 8.82 | 80,373 |
| Eligible total
loss-absorbing capacity | 33.33 | 87,363 | 9.59 | 87,363 | 33.33 | 87,363 | 9.59 | 87,363 |
| Risk-weighted assets /
leverage ratio denominator | | | | | | | | |
| Risk-weighted assets | 262,135 | | | | 262,135 | | | |
| Leverage ratio denominator | | | 911,379 | | | | 911,379 | |
| 1 Includes applicable add-ons of 1.44% for RWA and 0.5% for
LRD. 2 Includes outstanding low-trigger loss-absorbing additional tier 1
(AT1) capital instruments, which are available under the transitional rules
of the Swiss SRB framework to meet the going concern requirements until their
first call date, even if the first call date is after 31 December 2019. As of
their first call date, these instruments are eligible to meet the gone
concern requirements. 3 Includes outstanding low-trigger loss-absorbing
tier 2 capital instruments, which are available under the transitional rules
of the Swiss SRB framework to meet the going concern requirements until the
earlier of (i) their maturity or first call date or (ii) 31 December 2019,
and to meet gone concern requirements thereafter. Outstanding low-trigger
loss-absorbing tier 2 capital instruments are subject to amortization
starting five years prior to their maturity, with the amortized portion
qualifying as gone concern loss-absorbing capacity. Instruments available to
meet gone concern requirements are eligible until one year before maturity,
with a haircut of 50% applied in the last year of eligibility. | | | | | | | | |

UBS Group AG

Explanation of the differences between the IFRS and regulatory scopes of consolidation

Quarterly | The scope of consolidation for the purpose of calculating Group regulatory capital is generally the same as the consolidation scope under International Financial Reporting Standards (IFRS) and includes subsidiaries that are directly or indirectly controlled by UBS Group AG and are active in banking and finance. However, subsidiaries consolidated under IFRS the business of which is outside the banking and finance sector are excluded from the regulatory scope of consolidation.

The key differences between the IFRS and regulatory capital scopes of consolidation as of 30 June 2019 related to investments in insurance, real estate and commercial companies as well as investment vehicles that are consolidated under IFRS, but not for regulatory capital purposes, where they are subject to risk-weighting.

The table below provides a list of the most significant entities that were included in the IFRS scope of consolidation, but not in the regulatory capital scope of consolidation. These entities account for most of the difference between the “Balance sheet in accordance with IFRS scope of consolidation” and the “Balance sheet in accordance with regulatory scope of consolidation” columns in the CC2 table and such difference is mainly related to financial assets at fair value not held for trading and other financial liabilities designated at fair value. As of 30 June 2019 , entities consolidated under either the IFRS or the regulatory scope of consolidation did not report any significant capital deficiencies.

In the banking book, certain equity investments are not consolidated under either the IFRS or the regulatory scope of consolidation. As of 30 June 2019, these investments mainly consisted of infrastructure holdings and joint operations (e.g., settlement and clearing institutions, and stock and financial futures exchanges) and included our participation in the SIX Group. These investments were risk-weighted based on applicable threshold rules.

More information about the legal structure of the UBS Group and about the IFRS scope of consolidation is provided on pages 12–13 and 328–329, respectively, of our Annual Report 2018, which is available under “Annual reporting” at www.ubs.com/investors . p

Quarterly |

| Main legal entities
consolidated under IFRS but not included in the regulatory scope of
consolidation | | | |
| --- | --- | --- | --- |
| | 30.6.19 | | |
| USD million | Total assets 1 | Total equity 1 | Purpose |
| UBS Asset Management Life Ltd | 25,132 | 41 | Life Insurance |
| A&Q Alpha Select Hedge Fund Limited | 297 | 297 2 | Investment vehicle for multiple investors |
| A&Q Alternative Solution Limited | 244 | 240 2 | Investment vehicle for multiple investors |
| A&Q Alternative Solution Master Limited | 238 | 238 2 | Investment vehicle for multiple investors |
| UBS Life Insurance Company USA | 157 | 43 | Life insurance |
| 1 Total assets and total equity on a standalone basis. 2
Represents the net asset value of issued fund units. These fund units are
subject to liability treatment in the consolidated financial statements in
accordance with IFRS. | | | |

Semiannual | The table below and on the next page provides a reconciliation of the IFRS balance sheet to the balance sheet according to the regulatory scope of consolidation as defined by the Basel Committee on Banking Supervision (BCBS) and FINMA. Lines in the balance sheet under the regulatory scope of consolidation are expanded and referenced where relevant to display all components that are used in the CC1 table. p

Semiannual |

| CC2: Reconciliation of
accounting balance sheet to balance sheet under the regulatory scope of consolidation — As of 30.6.19 | Balance sheet in accordance with IFRS scope of consolidation | Effect of deconsolidated entities for regulatory consolidation | Effect of additional consolidated entities for regulatory
consolidation | Balance sheet in accordance with regulatory scope of
consolidation | Ref 1 |
| --- | --- | --- | --- | --- | --- |
| USD million | | | | | |
| Assets | | | | | |
| Cash and balances at central banks | 101,457 | 0 | | 101,457 | |
| Loans and advances to banks | 12,916 | (235) | | 12,680 | |
| Receivables from securities financing transactions | 92,919 | | | 92,919 | |
| Cash collateral receivables on derivative instruments | 23,774 | | | 23,774 | |
| Loans and advances to customers | 322,655 | 56 | | 322,711 | |
| Other financial assets measured at amortized cost | 22,158 | (345) | | 21,813 | |
| Total financial assets
measured at amortized cost | 575,878 | (524) | 0 | 575,354 | |
| Financial assets at fair value held for trading | 120,173 | (438) | | 119,736 | |
| of which: assets pledged as
collateral that may be sold or repledged by counterparties | 36,010 | | | 36,010 | |
| Derivative financial instruments | 121,686 | 10 | | 121,696 | |
| Brokerage receivables | 16,915 | | | 16,915 | |
| Financial assets at fair value not held for trading | 89,569 | (24,710) | | 64,860 | |
| Total financial assets
measured at fair value through profit or loss | 348,343 | (25,137) | 0 | 323,206 | |
| Financial assets measured at
fair value through other comprehensive income | 7,422 | 0 | 0 | 7,422 | |
| Consolidated participations | 0 | 95 | | 95 | |
| Investments in associates | 1,049 | | | 1,049 | |
| of which: goodwill | 177 | | | 177 | 4 |
| Property, equipment and software | 12,694 | (48) | | 12,645 | |
| Goodwill and intangible assets | 6,624 | 0 | | 6,624 | |
| of which: goodwill | 6,392 | 0 | | 6,393 | 4 |
| of which: intangible assets | 232 | | | 232 | 5 |
| Deferred tax assets | 9,571 | 0 | | 9,571 | |
| of which: deferred tax
assets recognized for tax loss carry-forwards | 5,988 | 0 | | 5,988 | 6 |
| of which: deferred tax
assets on temporary differences | 3,583 | 0 | | 3,583 | 10 |
| Other non-financial assets | 7,146 | (10) | | 7,137 | |
| of which: net defined
benefit pension and other post-employment assets | 3 | | | 3 | 8 |
| Total assets | 968,728 | (25,625) | 0 | 943,103 | |

UBS Group AG

CC2: Reconciliation of accounting balance sheet to balance sheet under the regulatory scope of consolidation ( continued)

| As of 30.6.19 | Balance sheet in accordance with IFRS scope of consolidation | Effect of deconsolidated entities for regulatory consolidation | Effect of additional consolidated entities for regulatory
consolidation | Balance sheet in accordance with regulatory scope of
consolidation | Ref 1 |
| --- | --- | --- | --- | --- | --- |
| USD million | | | | | |
| Liabilities | | | | | |
| Amounts due to banks | 9,494 | | | 9,494 | |
| Payables from securities financing transactions | 6,798 | | | 6,798 | |
| Cash collateral payables on derivative instruments | 31,448 | 0 | | 31,448 | |
| Customer deposits | 433,017 | (38) | | 432,979 | |
| Debt issued measured at amortized cost | 120,805 | (5) | | 120,799 | |
| of which: amount eligible
for high-trigger loss-absorbing additional tier 1 capital | 10,595 | | | 10,595 | 9 |
| of which: amount eligible
for low-trigger loss-absorbing additional tier 1 capital | 2,436 | | | 2,436 | 9 |
| of which: amount eligible
for low-trigger loss-absorbing tier 2 capital | 6,947 | | | 6,947 | 11 |
| of which: amount eligible
for capital instruments subject to phase-out from tier 2 capital | 702 | | | 702 | 12 |
| Other financial liabilities measured at amortized cost | 10,520 | (488) | | 10,032 | |
| Total financial liabilities
measured at amortized cost | 612,082 | (532) | 0 | 611,550 | |
| Financial liabilities at fair value held for trading | 32,261 | 0 | | 32,261 | |
| Derivative financial instruments | 121,087 | 4 | | 121,091 | |
| Brokerage payables designated at fair value | 36,929 | | | 36,929 | |
| Debt issued designated at fair value | 67,984 | 2 | | 67,987 | |
| Other financial liabilities designated at fair value | 34,407 | (25,087) | | 9,321 | |
| Total financial liabilities
measured at fair value through profit or loss | 292,668 | (25,081) | 0 | 267,587 | |
| Provisions | 3,011 | 0 | | 3,010 | |
| Other non-financial liabilities | 7,617 | (2) | | 7,615 | |
| of which: amount eligible
for high-trigger loss-absorbing capital (Deferred Contingent Capital Plan
(DCCP)) 2 | 1,504 | | | 1,504 | 9 |
| of which: deferred tax
liabilities related to goodwill | 265 | | | 265 | 4 |
| of which: deferred tax
liabilities related to other intangible assets | 0 | | | 0 | 5 |
| Total liabilities | 915,378 | (25,615) | 0 | 889,763 | |
| Equity | | | | | |
| Share capital | 338 | | | 338 | 1 |
| Share premium | 17,802 | | | 17,802 | 1 |
| Treasury shares | (2,843) | | | (2,843) | 3 |
| Retained earnings | 32,548 | (18) | | 32,530 | 2 |
| Other comprehensive income recognized directly in equity, net of
tax | 5,335 | 8 | | 5,343 | 3 |
| of which: unrealized gains /
(losses) from cash flow hedges | 1,346 | | | 1,346 | 7 |
| Equity attributable to
shareholders | 53,180 | (10) | 0 | 53,170 | |
| Equity attributable to non-controlling interests | 170 | | | 170 | |
| Total equity | 53,350 | (10) | 0 | 53,340 | |
| Total liabilities and equity | 968,728 | (25,625) | 0 | 943,103 | |
| 1 References link the lines of this table to the respective
reference numbers provided in the “References” column in the “CC1:
Composition of regulatory capital” table. 2 IFRS carrying value is USD
1,671 million. Refer to the “Compensation” section of our Annual Report 2018
for more information about the DCCP. | | | | | |

Composition of capital

Semiannual | The CC1 table below and on the following pages provides the composition of capital as defined by the BCBS and FINMA. Reference is made to items reconciling to the balance sheet under the regulatory scope of consolidation as disclosed in the CC2 table.

Refer to the documents titled “Capital and total loss-absorbing capacity instruments of UBS Group AG consolidated and UBS AG consolidated and standalone – key features” and “UBS Group AG consolidated capital instruments and TLAC-eligible senior unsecured debt” under “Bondholder information” at www.ubs.com/investors for an overview of the main features of our regulatory capital instruments, as well as the full terms and conditions. p

Semiannual |

| CC1: Composition of regulatory
capital — As of 30.6.19 | | Amounts | References 1 |
| --- | --- | --- | --- |
| USD million except where
indicated | | | |
| | Common Equity Tier 1
capital: instruments and reserves | | |
| 1 | Directly issued qualifying common share (and equivalent for
non-joint stock companies) capital plus related stock surplus | 18,140 | 1 |
| 2 | Retained earnings | 32,530 | 2 |
| 3 | Accumulated other comprehensive income (and other reserves) | 2,501 | 3 |
| 4 | Directly issued capital subject to phase-out from CET1 (only
applicable to non-joint stock companies) | | |
| 5 | Common share capital issued by subsidiaries and held by third
parties (amount allowed in group CET1) | | |
| 6 | Common Equity Tier 1 capital before regulatory adjustments | 53,170 | |
| | Common Equity Tier 1
capital: regulatory adjustments | | |
| 7 | Prudent valuation adjustments | (104) | |
| 8 | Goodwill (net of related tax liability) | (6,305) | 4 |
| 9 | Other intangibles other than mortgage servicing rights (net of
related tax liability) | (232) | 5 |
| 10 | Deferred tax assets that rely on future profitability, excluding
those arising from temporary differences (net of related tax liability) 2 | (6,208) | 6 |
| 11 | Cash flow hedge reserve | (1,346) | 7 |
| 12 | Shortfall of provisions to expected losses | (412) | |
| 13 | Securitization gain on sale | | |
| 14 | Gains and losses due to changes in own credit risk on fair
valued liabilities | (109) | |
| 15 | Defined benefit pension fund net assets | (3) | 8 |
| 16 | Investments in own shares (if not already subtracted from
paid-in capital on reported balance sheet) 3 | (1,760) | 9 |
| 17 | Reciprocal cross-holdings in common equity | | |
| 17a | Qualified holdings where a significant influence is exercised
with other owners (CET1 instruments) | | |
| 17b | Immaterial investments (CET1 items) | | |
| 18 | Investments in the capital of banking, financial and insurance
entities that are outside the scope of regulatory consolidation, where the
bank does not own more than 10% of the issued share capital (amount above 10%
threshold) | | |
| 19 | Significant investments in the common stock of banking,
financial and insurance entities that are outside the scope of regulatory
consolidation (amount above 10% threshold) | | |
| 20 | Mortgage servicing rights (amount above 10% threshold) | | |
| 21 | Deferred tax assets arising from temporary differences (amount
above 10% threshold, net of related tax liability) | (266) | 10 |
| 22 | Amount exceeding the 15% threshold | | |
| 23 | of which: significant
investments in the common stock of financials | | |
| 24 | of which: mortgage servicing
rights | | |
| 25 | of which: deferred tax
assets arising from temporary differences | | |
| 26 | Expected losses on equity investment under the PD / LGD approach | | |
| 26a | Further adjustments to financial statements in accordance with a
recognized international accounting standard | (56) | |
| 26b | Other adjustments | (1,421) | |
| 27 | Regulatory adjustments applied to Common Equity Tier 1 due to
insufficient Additional Tier 1 and Tier 2 to cover deductions | | |
| 28 | Total regulatory adjustments
to Common Equity Tier 1 | (18,222) | |
| 29 | Common Equity Tier 1 capital
(CET1) | 34,948 | |

UBS Group AG

CC1: Composition of regulatory capital (Continued) — As of 30.6.19		Amounts	References 1
USD million except where
indicated
	Additional Tier 1 capital:
instruments
30	Directly issued qualifying additional Tier 1 instruments plus
related stock surplus	15,052
31	of which: classified as
equity under applicable accounting standards
32	of which: classified as
liabilities under applicable accounting standards	15,052
33	Directly issued capital instruments subject to phase-out from
additional Tier 1
34	Additional Tier 1 instruments (and CET1 instruments not included
in row 5) issued by subsidiaries and held by third parties (amount allowed in
group AT1)
35	of which: instruments issued
by subsidiaries subject to phase-out
36	Additional Tier 1 capital
before regulatory adjustments	15,052
	Additional Tier 1 capital:
regulatory adjustments
37	Investments in own additional Tier 1 instruments	(7)
38	Reciprocal cross-holdings in additional Tier 1 instruments
38a	Qualified holdings where a significant influence is exercised
with other owners (AT1 instruments)
38b	Immaterial investments (AT1 instruments)
39	Investments in the capital of banking, financial and insurance
entities that are outside the scope of regulatory consolidation, where the
bank does not own more than 10% of the issued common share capital of the
entity (amount above 10% threshold)
40	Significant investments in the capital of banking, financial and
insurance entities that are outside the scope of regulatory consolidation
41	Other adjustments
42	Regulatory adjustments applied to additional Tier 1 due to
insufficient Tier 2 to cover deductions
42a	Regulatory adjustments applied to CET1 capital due to
insufficient additional Tier 1 to cover deductions
43	Total regulatory adjustments to additional Tier 1 capital
44	Additional Tier 1 capital (AT1)	15,045	9
45	Tier 1 capital (T1 = CET1 +
AT1)	49,993
	Tier 2 capital: instruments
and provisions
46	Directly issued qualifying Tier 2 instruments plus related stock
surplus	5,651 4	11
47	Directly issued capital instruments subject to phase-out from
Tier 2	720	12
48	Tier 2 instruments (and CET1 and AT1 instruments not included in
rows 5 or 34) issued by subsidiaries and held by third parties (amount
allowed in group Tier 2)
49	of which: instruments issued
by subsidiaries subject to phase-out
50	Provisions
51	Tier 2 capital before
regulatory adjustments	6,370
	Tier 2 capital: regulatory
adjustments
52	Investments in own Tier 2 instruments 5	(18)	12
53	Reciprocal cross-holdings in Tier 2 instruments and other TLAC
liabilities
53a	Qualified holdings where a significant influence is exercised
with other owners (T2 instruments and other TLAC instruments)
53b	Immaterial investments (T2 instruments and other TLAC
instruments)
54	Investments in the capital and other TLAC liabilities of
banking, financial and insurance entities that are outside the scope of
regulatory consolidation, where the bank does not own more than 10% of the
issued common share capital of the entity (amount above 10% threshold)
55	Significant investments in the capital and other TLAC liabilities
of banking, financial and insurance entities that are outside the scope of
regulatory consolidation (net of eligible short positions)
56	Other adjustments
56a	Excess of the adjustments, which are allocated to the AT1
capital
57	Total regulatory adjustments
to Tier 2 capital	(18)
58	Tier 2 capital (T2)	6,353
59	Total regulatory capital (TC
= T1 + T2)	56,345
60	Total risk-weighted assets	262,135

CC1: Composition of regulatory capital (Continued) — As of 30.6.19		Amounts
USD million except where
indicated
	Capital ratios and buffers
61	Common Equity Tier 1 (as a percentage of risk-weighted assets)	13.33
62	Tier 1 (as a percentage of risk-weighted assets)	19.07
63	Total capital (as a percentage of risk-weighted assets)	21.49
64	Institution-specific buffer requirement (capital conservation
buffer plus countercyclical buffer requirements plus higher loss absorbency
requirement, expressed as a percentage of risk-weighted assets) 6	3.59
65	of which: capital
conservation buffer requirement	2.50
66	of which: bank-specific
countercyclical buffer requirement	0.09
67	of which: higher loss
absorbency requirement	1.00
68	Common Equity Tier 1 (as a percentage of risk-weighted assets)
available after meeting the bank’s minimum capital requirements	8.83
	Amounts below the thresholds
for deduction (before risk weighting)
72	Non-significant investments in the capital and other TLAC
liabilities of other financial entities	1,482
73	Significant investments in the common stock of financial
entities	911
74	Mortgage servicing rights (net of related tax liability)
75	Deferred tax assets arising from temporary differences (net of
related tax liability)	3,787
	Applicable caps on the
inclusion of provisions in Tier 2
76	Provisions eligible for inclusion in Tier 2 in respect of
exposures subject to standardized approach (prior to application of cap)
77	Cap on inclusion of provisions in Tier 2 under standardized
approach
78	Provisions eligible for inclusion in Tier 2 in respect of
exposures subject to internal ratings-based approach (prior to application of
cap)
79	Cap for inclusion of provisions in Tier 2 under internal
ratings-based approach
	Capital instruments subject
to phase-out arrangements (only applicable between 1 Jan 2018 and 1 Jan 2022)
according to ERV Art. 141
80	Current cap on CET1 instruments subject to phase-out
arrangements
81	Amount excluded from CET1 due to cap (excess over cap after
redemptions and maturities)
82	Current cap on AT1 instruments subject to phase-out arrangements
83	Amount excluded from AT1 due to cap (excess over cap after
redemptions and maturities)
84	Current cap on T2 instruments subject to phase-out arrangements	1,715
85	Amount excluded from T2 due to cap (excess over cap after
redemptions and maturities)
1 References link the lines of this table to the respective
reference numbers provided in the “References” column in the “CC2:
Reconciliation of accounting balance sheet to balance sheet under the
regulatory scope of consolidation” table. 2 IFRS netting for deferred tax
assets and liabilities is reversed for items deducted from CET1 capital.
3 Includes USD 510 million in DCCP-related charge for regulatory capital
purposes. 4 Consists of instruments with a IFRS carrying value of USD 6.9
million less amortization of instruments where remaining maturity is more
than one year, and 45% of the gross unrealized gains on debt instruments
measured at fair value through other comprehensive income, which are measured
at the lower of cost or market value for regulatory capital purposes. 5
Consists of own instruments for phase-out tier 2 capital of USD 17.8
million. 6 BCBS requirements are exceeded by our Swiss SRB requirements.
Refer to the “Capital management“ section of our Annual Report 2018 for more
information about the Swiss SRB requirements.

Semiannual | The table below provides details of the underlying exposures and RWA used in the computation of the countercyclical buffer of UBS Group AG. Further information about the methodology of geographical allocation used is provided on page 166 of our Annual Report 2018, in the “Country risk exposure allocation” section. Effective from 1 January 2019, the countercyclical capital buffer rate for Hong Kong increased to 2.5%, whereas the 2% rate for Sweden was no longer subject to phase-in arrangements as compared with 2018. p

Semiannual |

| CCyB1: Geographical
distribution of credit exposures used in the countercyclical capital buffer | | | | | |
| --- | --- | --- | --- | --- | --- |
| USD million, except where
indicated | | | | | |
| Geographical breakdown | Countercyclical capital buffer rate, % | Exposure values and / or risk-weighted assets used in the
computation of the countercyclical capital buffer | | Bank-specific countercyclical capital buffer rate, % | Countercyclical amount |
| | | Exposure values 1 | Risk-weighted assets | | |
| Hong Kong | 2.500 | 6,029 | 2,020 | | |
| Sweden | 2.000 | 1,273 | 390 | | |
| United Kingdom | 1.000 | 38,716 | 8,427 | | |
| Sum | | 46,018 | 10,837 | | |
| Total | | 518,333 | 157,781 | 0.09 | 237 |
| 1 Includes private sector exposures in the countries that are
Basel Committee on Banking Supervision member jurisdictions under categories
“Credit risk,” “counterparty credit risk,” “equity positions in the banking
book,” “settlement risk,” “securitization exposures in the banking book” and
“amounts below thresholds for deduction” as shown in the “Regulatory
exposures and risk-weighted assets” table in section 2 of this report. | | | | | |

UBS Group AG

Section 9 Total loss-absorbing capacity

Resolution Group – composition of total loss absorbing capacity (TLAC)

Semiannual |

The TLAC1 table below is based on Basel Committee on Banking Supervision (BCBS) phase-in rules, and only applicable for UBS Group AG as the ultimate parent entity of the defined UBS resolution group, to which, in case of resolution, resolution tools (e.g. a bail-in) are expected to be applied. p

Semiannual |

| TLAC1: TLAC Composition for
G-SIBs (at resolution group level) | | |
| --- | --- | --- |
| As of 30.6.19 | | |
| USD million, except where
indicated | | |
| | Regulatory capital elements
of TLAC and adjustments | |
| 1 | Common Equity Tier 1 capital (CET1) | 34,948 |
| 2 | Additional Tier 1 capital (AT1) before TLAC adjustments | 15,045 |
| 3 | AT1 ineligible as TLAC as issued out of subsidiaries to third
parties | |
| 4 | Other adjustments | |
| 5 | Total AT1 instruments
eligible under the TLAC framework | 15,045 |
| 6 | Tier 2 capital (T2) before TLAC adjustments | 6,353 |
| 7 | Amortized portion of T2 instruments where remaining maturity

1 year | 1,322 |
| 8 | T2 capital ineligible as TLAC as issued out of subsidiaries to
third parties | |
| 9 | Other adjustments | |
| 10 | Total T2 instruments
eligible under the TLAC framework | 7,675 |
| 11 | TLAC arising from regulatory
capital | 57,668 |
| | Non-regulatory capital
elements of TLAC | |
| 12 | External TLAC instruments issued directly by the bank and
subordinated to excluded liabilities | |
| 13 | External TLAC instruments issued directly by the bank which are
not subordinated to excluded liabilities but meet all other TLAC term sheet
requirements | |
| 14 | of which: amount eligible as
TLAC after application of the caps | n/a |
| 15 | External TLAC instruments issued by funding vehicles prior to 1
January 2022 | 29,721 |
| 16 | Eligible ex ante commitments to recapitalize a G-SIB in
resolution | |
| 17 | TLAC arising from
non-regulatory capital instruments before adjustments | 29,721 |
| | Non-regulatory capital
elements of TLAC: adjustments | |
| 18 | TLAC before deductions | 87,388 |
| 19 | Deductions of exposures between multiple-point-of-entry (MPE)
resolution groups that correspond to items eligible for TLAC (not applicable
to SPE G-SIBs) | n/a |
| 20 | Deduction of investments in own other TLAC liabilities | |
| 21 | Other adjustments to TLAC | |
| 22 | TLAC after deductions | 87,388 |
| | Risk-weighted assets and
leverage exposure measure for TLAC purposes | |
| 23 | Total risk-weighted assets adjusted as permitted under the TLAC
regime | 262,135 |
| 24 | Leverage exposure measure | 911,379 |
| | TLAC ratios and buffers | |
| 25 | TLAC (as a percentage of risk-weighted assets adjusted as
permitted under the TLAC regime) | 33.34 |
| 26 | TLAC (as a percentage of leverage exposure) | 9.59 |
| 27 | CET1 (as a percentage of risk-weighted assets) available after
meeting the resolution group’s minimum capital and TLAC requirements | 8.83 |
| 28 | Institution-specific buffer requirement (capital conservation
buffer plus countercyclical buffer requirements plus higher loss absorbency
requirement, expressed as a percentage of risk-weighted assets) | 3.59 |
| 29 | of which: capital
conservation buffer requirement | 2.50 |
| 30 | of which: bank specific
countercyclical buffer requirement | 0.09 |
| 31 | of which: higher loss
absorbency requirement | 1.00 |

Resolution Entity – creditor ranking at legal entity level

Semiannual | The TLAC3 table below provides an overview of the creditor ranking structure of the resolution entity UBS Group AG on a standalone basis.

As of 30 June 2019, UBS had issued loss-absorbing additional tier 1 (AT1) capital instruments and bail-in debt through UBS Group Funding (Switzerland) AG, a direct subsidiary of UBS Group AG, for a nominal amount of USD 44,645 million. These liabilities are not reflected in the TLAC3 table below. Upon occurrence of a restructuring event, UBS Group AG would automatically be substituted as the issuer of these instruments. It is expected that during the fourth quarter of 2019 UBS Group AG will assume the outstanding capital and debt instruments that were previously issued by UBS Group Funding (Switzerland) AG. New loss absorbing AT1 capital instruments and total loss absorbing-capacity (TLAC)-eligible senior unsecured debt are issued out of UBS Group AG.

UBS Group AG grants Deferred Contingent Capital Plan (DCCP) awards to UBS Group employees. Awards granted since February 2015 qualify as Basel III AT1 capital on a UBS Group consolidated basis and amounted to USD 2,014 million as of 30 June 2019. The related liabilities of UBS Group AG on a standalone basis of USD 1,493 million are not included in the table below, as these do not give rise to a current claim until the awards are legally vested.

As of 30 June 2019, the TLAC available on a UBS Group consolidated basis amounted to USD 87,388 million.

® Refer to “Bondholder information” at www.ubs.com/investors for more information

® Refer to the “TLAC1: composition for G-SIBs (at resolution group level)” table in section 8 of this report for more information about TLAC for UBS Group AG consolidated

Financial information for UBS Group AG standalone for the six months ended 30 June 2019 is provided under “Holding company and significant regulated subsidiaries and sub-groups” at www.ubs.com/investors . p

Semiannual |

| TLAC3: creditor ranking at
legal entity level for the resolution entity UBS Group AG — As of 30.6.19 | | Creditor ranking | | | Total |
| --- | --- | --- | --- | --- | --- |
| USD million | | 1 | 2 | 3 | |
| 1 | Description of creditor ranking | Common shares (most junior) 2 | Additional Tier 1 | Bail-in debt and pari-passu liabilities (most senior) 3 | |
| 2 | Total capital and liabilities net of credit risk mitigation 1 | 39,892 | | 1,030 | 40,921 |
| 3 | Subset of row 2 that are excluded liabilities | | | | |
| 4 | Total capital and liabilities less excluded liabilities (row 2
minus row 3) | 39,892 | | 1,030 | 40,921 |
| 5 | Subset of row 4 that are potentially eligible as TLAC | 39,892 | | | 39,892 |
| 6 | Subset of row 5 with 1 year ≤ residual maturity < 2
years | | | | |
| 7 | Subset of row 5 with 2 years ≤ residual maturity < 5
years | | | | |
| 8 | Subset of row 5 with 5 years ≤ residual maturity < 10
years | | | | |
| 9 | Subset of row 5 with residual maturity ≥ 10 years, but
excluding perpetual securities | | | | |
| 10 | Subset of row 5 that is perpetual securities | 39,892 | | | 39,892 |
| 1 No credit risk mitigation is applied to capital and
liabilities for UBS Group AG standalone. 2 Common shares including the
associated reserves are equal to equity attributable to shareholders as
disclosed in the UBS Group AG standalone financial information for the six
months ended 30 June 2019, which was prepared in accordance with the
principles of the Swiss Law on Accounting and Financial Reporting (32nd title
of the Swiss Code of Obligations). 3 Represents interest-bearing
liabilities which comprise loans from UBS AG and UBS Switzerland AG as well
tax liabilities which are not excluded liabilities under Swiss law that rank
pari-passu to bail-in debt. | | | | | |

UBS Group AG

Section 10 Leverage ratio

BCBS Basel III leverage ratio

Quarterly | The Basel Committee on Banking Supervision (BCBS) leverage ratio is calculated by dividing the period-end tier 1 capital by the period-end leverage ratio denominator (LRD). The LRD consists of IFRS on-balance sheet assets and off-balance sheet items. Derivative exposures are adjusted for a number of items, including replacement value and eligible cash variation margin netting, the current exposure method add-on and net notional amounts for written credit derivatives. The LRD also includes an additional charge for counterparty credit risk related to securities financing transactions (SFTs).

The table on this page shows the difference between total IFRS assets per IFRS consolidation scope and the BCBS total on-balance sheet exposures. Those exposures are the starting point for calculating the BCBS LRD, as shown in the LR2 table on the following page. The difference is due to the application of the regulatory scope of consolidation for the purpose of the BCBS calculation. In addition, carrying values for derivative financial instruments and SFTs are deducted from IFRS total assets. They are measured differently under BCBS leverage ratio rules and are therefore added back in separate exposure line items in the LR2 table.

As of 30 June 2019, our BCBS Basel III leverage ratio was 5.5% and the BCBS Basel III LRD was USD 911 billion. p

Difference between the Swiss SRB and BCBS leverage ratio

Quarterly | The LRD is the same under Swiss SRB and BCBS rules. However, there is a difference in the capital numerator between the two frameworks. Under BCBS rules, only common equity tier 1 and additional tier 1 capital are included in the numerator. Under Swiss SRB rules we are required to meet going as well as gone concern leverage ratio requirements. Therefore, depending on the requirement, the numerator includes tier 1 capital instruments, tier 2 capital instruments and / or total loss-absorbing capacity (TLAC)-eligible senior unsecured debt. p

Quarterly |

| Reconciliation of IFRS total
assets to BCBS Basel III total on-balance sheet exposures excluding
derivatives and securities financing transactions — USD million | 30.6.19 | 31.3.19 |
| --- | --- | --- |
| On-balance sheet exposures | | |
| IFRS total assets | 968,727 | 956,580 |
| Adjustment for investments in banking, financial, insurance or
commercial entities that are consolidated for accounting purposes but outside
the scope of regulatory consolidation | (25,625) | (25,074) |
| Adjustment for investments in banking, financial, insurance or
commercial entities that are outside the scope of consolidation for
accounting purposes but consolidated for regulatory purposes | 0 | 0 |
| Adjustment for fiduciary assets recognized on the balance sheet
pursuant to the operative accounting framework but excluded from the leverage
ratio exposure measure | 0 | 0 |
| Less carrying value of derivative financial instruments in IFRS
total assets 1 | (145,470) | (136,335) |
| Less carrying value of securities financing transactions in IFRS
total assets 2 | (120,008) | (124,070) |
| Adjustments to accounting values | 0 | 0 |
| On-balance sheet items
excluding derivatives and securities financing transactions, but including
collateral | 677,624 | 671,101 |
| Asset amounts deducted in determining BCBS Basel III tier 1
capital | (13,461) | (13,588) |
| Total on-balance sheet
exposures (excluding derivatives and securities financing transactions) | 664,164 | 657,514 |
| 1 Consists of derivative financial instruments and cash
collateral receivables on derivative instruments in accordance with the
regulatory scope of consolidation. 2 Consists of receivables from
securities financing transactions, margin loans, prime brokerage receivables
and financial assets at fair value not held for trading related to securities
financing transactions in accordance with the regulatory scope of consolidation. | | |

Quarterly |

| LR2: BCBS Basel III leverage
ratio common disclosure — USD million, except where
indicated | | 30.6.19 | 31.3.19 |
| --- | --- | --- | --- |
| | On-balance sheet exposures | | |
| 1 | On-balance sheet items excluding derivatives and SFTs, but
including collateral | 677,624 | 671,101 |
| 2 | (Asset amounts deducted in determining Basel III tier 1 capital) | (13,461) | (13,588) |
| 3 | Total on-balance sheet
exposures (excluding derivatives and SFTs) | 664,164 | 657,514 |
| | Derivative exposures | | |
| 4 | Replacement cost associated with all derivatives transactions
(i.e., net of eligible cash variation margin) | 39,849 | 40,032 |
| 5 | Add-on amounts for PFE associated with all derivatives
transactions | 84,806 | 86,524 |
| 6 | Gross-up for derivatives collateral provided where deducted from
the balance sheet assets pursuant to the operative accounting framework | 0 | 0 |
| 7 | (Deductions of receivables assets for cash variation margin
provided in derivatives transactions) | (14,218) | (13,012) |
| 8 | (Exempted CCP leg of client-cleared trade exposures) | (19,289) | (20,126) |
| 9 | Adjusted effective notional amount of all written credit
derivatives 1 | 71,554 | 74,842 |
| 10 | (Adjusted effective notional offsets and add-on deductions for
written credit derivatives) 2 | (69,663) | (73,213) |
| 11 | Total derivative exposures | 93,039 | 95,046 |
| | Securities financing
transaction exposures | | |
| 12 | Gross SFT assets (with no recognition of netting), after
adjusting for sale accounting transactions | 221,683 | 213,202 |
| 13 | (Netted amounts of cash payables and cash receivables of gross
SFT assets) | (101,676) | (89,132) |
| 14 | CCR exposure for SFT assets | 8,672 | 8,075 |
| 15 | Agent transaction exposures | 0 | 0 |
| 16 | Total securities financing
transaction exposures | 128,680 | 132,145 |
| | Other off-balance sheet
exposures | | |
| 17 | Off-balance sheet exposure at gross notional amount | 73,852 | 78,673 |
| 18 | (Adjustments for conversion to credit equivalent amounts) | (48,354) | (52,385) |
| 19 | Total off-balance sheet
items | 25,497 | 26,287 |
| | Total exposures (leverage
ratio denominator) | 911,379 | 910,993 |
| | Capital and total exposures
(leverage ratio denominator) | | |
| 20 | Tier 1 capital | 49,993 | 49,436 |
| 21 | Total exposures (leverage
ratio denominator) | 911,379 | 910,993 |
| | Leverage ratio | | |
| 22 | Basel III leverage ratio (%) | 5.5 | 5.4 |
| 1 Includes protection sold, including agency transactions. 2
Protection sold can be offset with protection bought on the same underlying
reference entity, provided that the conditions according to the Basel III
leverage ratio framework and disclosure requirements are met. | | | |

UBS Group AG

Quarterly | LRD remained stable at USD 911 billion in the second quarter of 2019, as the increase from currency effects was substantially offset by the decrease in asset size and other movements. p

Quarterly |

| LR1: BCBS Basel III leverage
ratio summary comparison — USD million | | 30.6.19 | 31.3.19 |
| --- | --- | --- | --- |
| 1 | Total consolidated assets as per published financial statements | 968,727 | 956,580 |
| 2 | Adjustment for investments in banking, financial, insurance or
commercial entities that are consolidated for accounting purposes but outside
the scope of regulatory consolidation 1 | (39,085) | (38,661) |
| 3 | Adjustment for fiduciary assets recognized on the balance sheet
pursuant to the operative accounting framework but excluded from the leverage
ratio exposure measure | 0 | 0 |
| 4 | Adjustments for derivative financial instruments | (52,432) | (41,289) |
| 5 | Adjustment for securities financing transactions (i.e., repos
and similar secured lending) | 8,672 | 8,075 |
| 6 | Adjustment for off-balance sheet items (i.e., conversion to
credit equivalent amounts of off-balance sheet exposures) | 25,497 | 26,287 |
| 7 | Other adjustments | 0 | 0 |
| 8 | Leverage ratio exposure
(leverage ratio denominator) | 911,379 | 910,993 |
| 1 This item includes assets that are deducted from tier 1
capital. | | | |

Quarterly |

| BCBS Basel III leverage ratio — USD million, except where
indicated | 30.6.19 | 31.3.19 | 31.12.18 | 30.9.18 |
| --- | --- | --- | --- | --- |
| Total tier 1 capital | 49,993 | 49,436 | 46,279 | 45,972 |
| BCBS total exposures (leverage ratio denominator) | 911,379 | 910,993 | 904,598 | 915,066 |
| BCBS Basel III leverage
ratio (%) | 5.5 | 5.4 | 5.1 | 5.0 |

Section 11 Liquidity coverage ratio

LIQ1: Liquidity risk management

Quarterly | We monitor the Liquidity coverage ratio (LCR) in all significant currencies in order to manage any currency mismatch between high-quality liquid assets (HQLA) and the net expected cash outflows in times of stress. p

Quarterly |

| LIQ1: Liquidity risk
management — Pillar 3 disclosure
requirement | Quarterly Rerport | Disclosure | | Second quarter 2019 report |
| --- | --- | --- | --- | --- |
| Concentration of funding sources | Treasury management | – | Funding by product and currency | 46 |

High-quality liquid assets

Quarterly | HQLA must be easily and immediately convertible into cash at little or no loss of value, especially during a period of stress. HQLA are assets that are of low risk and are unencumbered. Other characteristics of HQLA are ease and certainty of valuation, low correlation with risky assets, listing on a developed and recognized exchange, existence of an active and sizeable market, and low volatility. Based on these characteristics, HQLA are categorized as Level 1 (primarily central bank reserves and government bonds) or Level 2 (primarily US and European agency bonds as well as non-financial corporate covered bonds). Level 2 assets are subject to regulatory haircuts and caps. p

Quarterly |

High-quality liquid assets
	Average 2Q19 1			Average 1Q19 1
USD billion	Level 1 weighted liquidity value 2	Level 2 weighted liquidity value 2	Total weighted liquidity value 2	Level 1 weighted liquidity value 2	Level 2 weighted liquidity value 2	Total weighted liquidity value 2
Cash balances 3	108	0	108	115	0	115
Securities (on- and off-balance sheet)	53	15	68	58	13	71
Total high-quality liquid
assets 4	161	15	176	173	13	186
1 Calculated based on an average of 65 data points in the second
quarter of 2019 and 63 data points in the first quarter of 2019. 2
Calculated after the application of haircuts. 3 Includes cash and balances
with central banks and other eligible balances as prescribed by FINMA. 4
Calculated in accordance with FINMA requirements.

UBS Group AG

Liquidity coverage ratio

Quarterly | In the second quarter of 2019, the UBS Group AG liquidity coverage ratio (LCR) decreased by 8 percentage points to 145%, remaining above the 110% Group LCR minimum communicated by the Swiss Financial Market Supervisory Authority (FINMA). The LCR decrease was mainly driven by a reduction in eligible HQLA relating to lower average cash balances, reflecting increased funding consumption by the business divisions. p

Quarterly |

LIQ1: Liquidity coverage ratio
		Average 2Q19 1		Average 1Q19 1
USD billion, except where
indicated		Unweighted value	Weighted value 2	Unweighted value	Weighted value 2
High-quality liquid assets
1	High-quality liquid assets	179	176	188	186
Cash outflows
2	Retail deposits and deposits from small business customers	239	27	238	27
3	of which: stable deposits	31	1	34	1
4	of which: less stable
deposits	207	26	204	26
5	Unsecured wholesale funding	186	106	183	103
6	of which: operational
deposits (all counterparties)	41	10	42	10
7	of which: non-operational
deposits (all counterparties)	132	82	130	82
8	of which: unsecured debt	13	13	11	11
9	Secured wholesale funding		74		73
10	Additional requirements:	75	22	72	24
11	of which: outflows related
to derivatives and other transactions	41	15	38	16
12	of which: outflows related
to loss of funding on debt products 3	0	0	0	0
13	of which: committed credit
and liquidity facilities	34	7	33	7
14	Other contractual funding obligations	14	12	14	13
15	Other contingent funding obligations	241	6	251	6
16	Total cash outflows		247		246
Cash inflows
17	Secured lending	297	85	296	84
18	Inflows from fully performing exposures	65	29	66	29
19	Other cash inflows	11	11	11	11
20	Total cash inflows	373	126	374	124
			Average 2Q19 1		Average 1Q19 1
USD billion, except where
indicated			Total adjusted value 4		Total adjusted value 4
Liquidity coverage ratio
21	High-quality liquid assets		176		186
22	Net cash outflows		121		122
23	Liquidity coverage ratio (%)		145		153
1 Calculated based on an average of 65 data points in the second
quarter of 2019 and 63 data points in the first quarter of 2019. 2
Calculated after the application of haircuts and inflow and outflow rates.
3 Includes outflows related to loss of funding on asset-backed
securities, covered bonds, other structured financing instruments,
asset-backed commercial papers, structured entities (conduits), securities
investment vehicles and other such financing facilities. 4 Calculated
after the application of haircuts and inflow and outflow rates as well as,
where applicable, caps on Level 2 assets and cash inflows.

Section 12 Requirements for global systemically important banks and related indicators

The Financial Stability Board (the FSB) has determined that UBS is a global systemically important bank (G-SIB), using an indicator-based methodology adopted by the Basel Committee on Banking Supervision (the BCBS). Banks that qualify as G-SIBs are required to disclose the 12 indicators for assessing the systemic importance of G-SIBs as defined by the BCBS. These indicators are used for the G-SIB score calculation and cover five categories: size, cross-jurisdictional activity, interconnectedness, substitutability / financial institution infrastructure and complexity.

Based on the published indicators, G-SIBs are subject to additional CET1 capital buffer requirements in a range from 1.0% to 3.5%. In November 2018, the FSB determined that the requirement for UBS is 1.0%. As our Swiss SRB Basel III capital requirements exceed the BCBS requirements including the G-SIB buffer, we are not affected by these additional G-SIB requirements.

In July 2018, the BCBS published a revised assessment methodology and higher loss absorbency requirements. These will take effect in 2021 and the higher loss absorbency surcharge would be applied from 1 January 2023 onward. We do not expect these changes to result in an increase of our additional CET1 capital buffer requirement.

Annual | Our G-SIB indicators as of 31 December 2018 were published in July 2019 under “Pillar 3 disclosures” at www.ubs.com/investors . p

Significant regulated subsidiaries and sub-groups

Section 1 Introduction

The sections below include capital and other regulatory information for UBS AG standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated and UBS Americas Holding LLC consolidated.

C apital information in this section is based on Pillar 1 requirements. Entities may be subject to significant additional Pillar 2 requirements, which represent additional amounts of capital considered necessary and agreed with regulators based on the risk profile of the entities.

Section 2 UBS AG standalone

Key metrics of the second quarter of 2019

Quarterly | The table below is based on Basel Committee on Banking Supervision (BCBS) Basel III phase-in rules. During the second quarter of 2019, common equity tier 1 (CET1) capital increased by USD 2.2 billion to USD 51.3 billion, mainly as a result of operating profit. Risk-weighted assets (RWA) decreased by USD 6.4 billion to USD 294.3 billion, driven by decreases in credit and counterparty credit risk RWA and market risk RWA. Leverage ratio exposure remained stable during the quarter. High-quality liquid assets decreased by USD 4.5 billion as a result of lower average cash balances, reflecting increased funding consumption by the business divisions. Net cash outflows increased by USD 5.2 billion, reflecting higher outflows from intercompany transactions, partly offset by higher third-party cash inflows. p

Quarterly |

KM1: Key metrics
USD million, except where
indicated
		30.6.19	31.3.19	31.12.18	30.9.18 4	30.6.18 4
Available capital (amounts) 1
1	Common equity tier 1 (CET1)	51,261	49,024	49,411	49,810	49,583
1a	Fully loaded ECL accounting model	51,258	49,021	49,411	49,810	49,583
2	Tier 1	64,315	61,839	59,595	59,341	59,161
2a	Fully loaded ECL accounting model tier 1	64,312	61,836	59,595	59,341	59,161
3	Total capital	70,612	68,542	66,295	66,005	66,258
3a	Fully loaded ECL accounting model total capital	70,609	68,539	66,295	66,005	66,258
Risk-weighted assets
(amounts)
4	Total risk-weighted assets (RWA)	294,348	300,734	292,888	288,045	286,457
4a	Minimum capital requirement 2	23,548	24,059	23,431	23,044	22,917
4b	Total risk-weighted assets (pre-floor)	294,348	300,734	292,888	288,045	286,457
Risk-based capital ratios as
a percentage of RWA 1
5	Common equity tier 1 ratio (%)	17.41	16.30	16.87	17.29	17.31
5a	Fully loaded ECL accounting model CET1 (%)	17.41	16.30	16.87	17.29	17.31
6	Tier 1 ratio (%)	21.85	20.56	20.35	20.60	20.65
6a	Fully loaded ECL accounting model tier 1 ratio (%)	21.85	20.56	20.35	20.60	20.65
7	Total capital ratio (%)	23.99	22.79	22.63	22.91	23.13
7a	Fully loaded ECL accounting model total capital ratio (%)	23.99	22.79	22.63	22.91	23.13
Additional CET1 buffer
requirements as a percentage of RWA
8	Capital conservation buffer requirement (2.5% from 2019) (%)	2.50	2.50	1.88	1.88	1.88
9	Countercyclical buffer requirement (%)	0.08	0.09	0.07	0.05	0.08
9a	Additional countercyclical buffer for Swiss mortgage loans (%)	0.00	0.00	0.00	0.00	0.00
10	Bank G-SIB and / or D-SIB additional requirements (%) 3
11	Total of bank CET1 specific buffer requirements (%) 1	2.58	2.59	1.95	1.92	1.96
12	CET1 available after meeting the bank’s minimum capital
requirements (%) 1	12.91	11.80	12.37	12.79	12.81
Basel III leverage ratio
13	Total Basel III leverage ratio exposure measure	618,704	617,329	601,013	619,741	620,074
14	Basel III leverage ratio (%) 1	10.40	10.02	9.92	9.58	9.54
14a	Fully loaded ECL accounting model Basel III leverage ratio (%) 1	10.39	10.02	9.92	9.58	9.54
Liquidity coverage ratio
15	Total HQLA	82,201	86,690	76,456	81,214	83,473
16	Total net cash outflow	56,626	51,434	55,032	59,450	60,786
17	LCR ratio (%)	145	169	139	137	137
1 Based on BCBS Basel III phase-in rules. 2 Calculated as 8%
of total RWA, based on total capital minimum requirements, excluding CET1
buffer requirements. 3 Swiss SRB going concern requirements and
information for UBS AG standalone is provided in the following pages in this
section. 4 In line with the change of the presentation currency of UBS
Group AG’s and UBS AG’s consolidated and standalone financial statements from
Swiss francs to US dollars in October 2018, prior periods were translated to
US dollars at the respective spot rates prevailing on the relevant reporting
dates.

Swiss SRB going concern requirements and information

Quarterly | Under Swiss systemically relevant bank (SRB) regulations, Art. 125 “Reliefs for financial groups and individual institutions” of the Capital Adequacy Ordinance stipulates that the Swiss Financial Market Supervisory Authority (FINMA) may grant, under certain conditions, capital relief to individual institutions to ensure that an individual institution’s compliance with the capital requirements does not lead to a de facto overcapitalization of the group of which it is a part.

FINMA granted relief concerning the regulatory capital requirements of UBS AG on a standalone basis by means of decrees issued on 20 December 2013 and 20 October 2017, the latter effective as of 1 July 2017 and partly replacing the former.

More information is provided in “ Section 2 UBS AG standalone ” of our 31 December 2018 Pillar 3 report, which is available under “ Pillar 3 disclosures ” at www.ubs.com/investors . p

Quarterly |

Significant regulated subsidiaries and sub-groups

Quarterly |

| Swiss SRB going and gone
concern information | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | Swiss SRB, including transitional arrangements | | | Swiss SRB as of 1.1.20 | | |
| USD million, except where
indicated | 30.6.19 | 31.3.19 | 31.12.18 | 30.6.19 | 31.3.19 | 31.12.18 |
| Eligible going concern
capital | | | | | | |
| Total going concern capital | 67,485 | 65,472 | 63,225 | 61,880 | 59,460 | 57,217 |
| Total tier 1 capital | 61,880 | 59,460 | 57,217 | 61,880 | 59,460 | 57,217 |
| Common equity tier 1 capital | 51,261 | 49,024 | 49,411 | 51,261 | 49,024 | 49,411 |
| Total loss-absorbing
additional tier 1 capital | 10,619 | 10,435 | 7,805 | 10,619 | 10,435 | 7,805 |
| of which: high-trigger
loss-absorbing additional tier 1 capital | 10,619 | 10,435 | 7,805 | 10,619 | 10,435 | 7,805 |
| Total tier 2 capital | 5,606 | 6,012 | 6,008 | | | |
| of which: low-trigger
loss-absorbing tier 2 capital 1 | 5,606 | 6,012 | 6,008 | | | |
| Risk-weighted assets /
leverage ratio denominator | | | | | | |
| Risk-weighted assets | 294,348 | 300,734 | 292,888 | 380,200 | 382,634 | 383,578 |
| of which: direct and
indirect investments in Swiss-domiciled subsidiaries 2 | 33,034 | 32,558 | 31,711 | 40,285 | 39,705 | 39,639 |
| of which: direct and
indirect investments in foreign-domiciled subsidiaries 2 | 96,068 | 91,366 | 82,762 | 174,668 | 166,119 | 165,525 |
| Leverage ratio denominator | 618,704 | 617,329 | 601,013 | 618,704 | 617,329 | 601,013 |
| Capital and loss-absorbing
capacity ratios (%) | | | | | | |
| Going concern capital ratio | 22.9 | 21.8 | 21.6 | 16.3 | 15.5 | 14.9 |
| of which: common equity tier
1 capital ratio | 17.4 | 16.3 | 16.9 | 13.5 | 12.8 | 12.9 |
| Leverage ratios (%) | | | | | | |
| Going concern leverage ratio | 10.9 | 10.6 | 10.5 | 10.0 | 9.6 | 9.5 |
| of which: common equity tier
1 leverage ratio | 8.3 | 7.9 | 8.2 | 8.3 | 7.9 | 8.2 |
| 1 Outstanding low-trigger loss-absorbing tier 2 capital
instruments qualify as going concern capital until the earlier of (i) their
maturity or first call date or (ii) 31 December 2019, and are subject to
amortization starting five years prior to their maturity. 2 Carrying
value for direct and indirect investments including holding of regulatory
capital instruments in Swiss-domiciled subsidiaries (30 June 2019:
USD 16,114 million; 31 March 2019: USD 15,882 million), and
for direct and indirect investments including holding of regulatory capital
instruments in foreign-domiciled subsidiaries (30 June 2019:
USD 43,667 million; 31 March 2019: USD 41,530 million),
is risk weighted at 205% and 220%, respectively, for the current year. Risk
weights will gradually increase by 5% per year for Swiss-domiciled
investments and 20% per year for foreign-domiciled investments until the
fully applied risk weights of 250% and 400%, respectively, are applied. | | | | | | |

Leverage ratio information

Quarterly |

Swiss SRB leverage ratio denominator — USD billion	30.6.19	31.3.19	31.12.18
Leverage ratio denominator
Swiss GAAP total assets	501.0	498.4	480.0
Difference between Swiss GAAP and IFRS total assets	121.6	110.8	118.6
Less: derivative exposures and SFTs 1	(238.9)	(225.4)	(236.7)
On-balance sheet exposures
(excluding derivative exposures and SFTs)	383.7	383.8	361.9
Derivative exposures	100.5	98.8	99.3
Securities financing transactions	111.8	111.1	114.2
Off-balance sheet items	23.4	24.2	26.1
Items deducted from Swiss SRB tier 1 capital	(0.6)	(0.5)	(0.5)
Total exposures (leverage
ratio denominator)	618.7	617.3	601.0
1 Consists of derivative financial instruments, cash collateral
receivables on derivative instruments, receivables from securities financing
transactions, and margin loans, as well as prime brokerage receivables and
financial assets at fair value not held for trading, both related to
securities financing transactions, in accordance with the regulatory scope of
consolidation, which are presented separately under Derivative exposures and
Securities financing transactions in this table.

Quarterly |

| BCBS Basel III leverage ratio — USD million, except where
indicated | 30.6.19 | 31.3.19 | 31.12.18 | 30.9.18 |
| --- | --- | --- | --- | --- |
| Total tier 1 capital | 64,315 | 61,839 | 59,595 | 59,341 |
| Total exposures (leverage ratio denominator) | 618,704 | 617,329 | 601,013 | 619,741 |
| BCBS Basel III leverage
ratio (%) | 10.4 | 10.0 | 9.9 | 9.6 |

Liquidity coverage ratio

UBS AG is required to maintain a minimum liquidity coverage ratio of 105% as communicated by FINMA. p

Quarterly |

Liquidity coverage ratio
	Weighted value 1
USD billion, except where
indicated	Average 2Q19 2	Average 1Q19 2
High-quality liquid assets	82	87
Total net cash outflows	57	51
of which: cash outflows	175	171
of which: cash inflows	118	119
Liquidity coverage ratio (%)	145	169
1 Calculated after the application of haircuts and inflow and
outflow rates. 2 Calculated based on an average of 65 data points in the
second quarter of 2019 and 63 data points in the first quarter of 2019.

Significant regulated subsidiaries and sub-groups

Section 3 UBS Switzerland AG standalone

Key metrics of the second quarter of 2019

Quarterly | The table below is based on Basel Committee on Banking Supervision (BCBS) Basel III phase-in rules. During the second quarter of 2019, common equity tier 1 (CET1) capital increased by CHF 0.2 billion to CHF 10.7 billion, mainly as a result of operating profit. Risk-weighted assets (RWA) and leverage ratio exposure remained stable during the quarter. High-quality liquid assets decreased by CHF 4.2 billion as a result of lower average cash balances, reflecting increased funding consumption by the business divisions. Net cash outflows decreased by CHF 3.2 billion, reflecting higher inflows from intercompany transactions. p

Quarterly |

KM1: Key metrics
CHF million, except where
indicated
		30.6.19	31.3.19	31.12.18	30.9.18	30.6.18
Available capital (amounts) 1
1	Common equity tier 1 (CET1)	10,654	10,463	10,225	10,165	10,072
1a	Fully loaded ECL accounting model	10,649	10,457	10,225	10,165	10,072
2	Tier 1	14,894	14,712	14,468	13,165	13,072
2a	Fully loaded ECL accounting model tier 1	14,889	14,706	14,468	13,165	13,072
3	Total capital	14,894	14,712	14,468	13,165	13,072
3a	Fully loaded ECL accounting model total capital	14,889	14,706	14,468	13,165	13,072
Risk-weighted assets
(amounts)
4	Total risk-weighted assets (RWA)	96,640	96,067	95,646	95,541	94,887
4a	Minimum capital requirement 2	7,731	7,685	7,652	7,643	7,591
4b	Total risk-weighted assets (pre-floor)	91,013	90,068	91,457	88,299	88,357
Risk-based capital ratios as
a percentage of RWA 1
5	Common equity tier 1 ratio (%)	11.02	10.89	10.69	10.64	10.61
5a	Fully loaded ECL accounting model CET1 (%)	11.02	10.89	10.69	10.64	10.61
6	Tier 1 ratio (%)	15.41	15.31	15.13	13.78	13.78
6a	Fully loaded ECL accounting model tier 1 ratio (%)	15.41	15.31	15.13	13.78	13.78
7	Total capital ratio (%)	15.41	15.31	15.13	13.78	13.78
7a	Fully loaded ECL accounting model total capital ratio (%)	15.41	15.31	15.13	13.78	13.78
Additional CET1 buffer
requirements as a percentage of RWA 3
8	Capital conservation buffer requirement (2.5% from 2019) (%)	2.50	2.50	1.88	1.88	1.88
9	Countercyclical buffer requirement (%)	0.01	0.01	0.01	0.00	0.00
9a	Additional countercyclical buffer for Swiss mortgage loans (%)	0.57	0.58	0.56	0.56	0.54
10	Bank G-SIB and / or D-SIB additional requirements (%) 4
11	Total of bank CET1 specific buffer requirements (%) 1	2.51	2.51	1.88	1.88	1.88
12	CET1 available after meeting the bank’s minimum capital
requirements (%) 1	6.52	6.39	6.19	6.14	6.11
Basel III leverage ratio
13	Total Basel III leverage ratio exposure measure	311,212	310,545	306,487	303,257	304,046
14	Basel III leverage ratio (%) 1	4.79	4.74	4.72	4.34	4.30
14a	Fully loaded ECL accounting model Basel III leverage ratio (%) 1	4.78	4.74	4.72	4.34	4.30
Liquidity coverage ratio
15	Total HQLA	67,160	71,392	67,427	66,174	68,620
16	Total net cash outflow	48,761	51,945	52,846	53,130	53,731
17	LCR ratio (%)	138	137	128	125	128
1 Based on BCBS Basel III phase-in rules. 2 Calculated as 8%
of total RWA, based on total capital minimum requirements, excluding CET1
buffer requirements. 3 As Annex 8 of Swiss Capital Adequacy Ordinance
(CAO) does not apply to the systemically relevant banks, UBS can abstain from
disclosing the information required in lines 12a–12e. In the event of a
waiver, UBS nevertheless provides information about the Swiss sector-specific
countercyclical buffer in row 9a pursuant to Art. 44 CAO. 4 Swiss SRB going
concern requirements and information for UBS Switzerland AG are provided on
the next page.

Swiss SRB going and gone concern requirements and information

Quarterly | UBS Switzerland AG is considered a systemically relevant bank (SRB) under Swiss banking law and is subject to capital regulations on a standalone basis . As of 30 June 2019, the transitional going concern capital and leverage ratio requirements for UBS Switzerland AG standalone were 14.16% and 4.5%, respectively. The gone concern requirements under transitional arrangements were 9.74% for the RWA-based requirement and 3.36% for the LRD-based requirement. p

Quarterly |

| Swiss SRB going and gone
concern requirements and information | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Swiss SRB, including transitional arrangements | | | | Swiss SRB as of 1.1.20 | | | |
| As of 30.6.19 | RWA | | LRD | | RWA | | LRD | |
| CHF million, except where
indicated | in % 1 | | in % | | in % | | in % | |
| Required going concern
capital | | | | | | | | |
| Total going concern capital | 14.16 | 13,684 | 4.50 | 14,005 | 14.88 2 | 14,380 | 5.00 2 | 15,561 |
| Common equity tier 1 capital | 10.26 | 9,915 | 3.20 | 9,959 | 10.58 | 10,224 | 3.50 | 10,892 |
| of which: minimum capital | 4.90 | 4,735 | 1.70 | 5,291 | 4.50 | 4,349 | 1.50 | 4,668 |
| of which: buffer capital | 4.78 | 4,619 | 1.50 | 4,668 | 5.50 | 5,315 | 2.00 | 6,224 |
| of which: countercyclical
buffer | 0.58 | 560 | | | 0.58 | 560 | | |
| Maximum additional tier 1
capital | 3.90 | 3,769 | 1.30 | 4,046 | 4.30 | 4,156 | 1.50 | 4,668 |
| of which: additional tier 1
capital | 3.10 | 2,996 | 1.30 | 4,046 | 3.50 | 3,382 | 1.50 | 4,668 |
| of which: additional tier 1
buffer capital | 0.80 | 773 | | | 0.80 | 773 | | |
| Eligible going concern
capital | | | | | | | | |
| Total going concern capital | 15.41 | 14,894 | 4.79 | 14,894 | 15.41 | 14,894 | 4.79 | 14,894 |
| Common equity tier 1 capital | 11.02 | 10,654 | 3.42 | 10,654 | 11.02 | 10,654 | 3.42 | 10,654 |
| Total loss-absorbing
additional tier 1 capital | 4.39 | 4,240 | 1.36 | 4,240 | 4.39 | 4,240 | 1.36 | 4,240 |
| of which: high-trigger
loss-absorbing additional tier 1 capital | 4.39 | 4,240 | 1.36 | 4,240 | 4.39 | 4,240 | 1.36 | 4,240 |
| Required gone concern
capital | | | | | | | | |
| Total gone concern loss-absorbing
capacity | 9.74 | 9,417 | 3.36 | 10,457 | 12.01 | 11,608 | 4.20 | 13,071 |
| of which: base requirement | 10.52 | 10,167 | 3.63 | 11,281 | 12.86 | 12,428 | 4.50 | 14,005 |
| of which: additional
requirement for market share and LRD | 1.08 | 1,044 | 0.38 | 1,167 | 1.44 | 1,392 | 0.50 | 1,556 |
| of which: applicable
reduction on requirements | (1.86) | (1,794) | (0.64) | (1,992) | (2.29) | (2,211) | (0.80) | (2,490) |
| of which: rebate granted
(equivalent to 40% of maximum rebate) | (1.86) | (1,794) | (0.64) | (1,992) | (2.29) | (2,211) | (0.80) | (2,490) |
| Eligible gone concern
capital | | | | | | | | |
| Total gone concern
loss-absorbing capacity | 11.30 | 10,924 | 3.51 | 10,924 | 11.30 | 10,924 | 3.51 | 10,924 |
| TLAC-eligible debt | 11.30 | 10,924 | 3.51 | 10,924 | 11.30 | 10,924 | 3.51 | 10,924 |
| Total loss-absorbing
capacity | | | | | | | | |
| Required total
loss-absorbing capacity | 23.90 | 23,100 | 7.86 | 24,461 | 26.89 | 25,988 | 9.20 | 28,631 |
| Eligible total
loss-absorbing capacity | 26.72 | 25,818 | 8.30 | 25,818 | 26.72 | 25,818 | 8.30 | 25,818 |
| Risk-weighted assets /
leverage ratio denominator | | | | | | | | |
| Risk-weighted assets | 96,640 | | | | 96,640 | | | |
| Leverage ratio denominator | | | 311,212 | | | | 311,212 | |
| 1 The total loss-absorbing capacity ratio requirement of 23.90%
is the current requirement based on the transitional rules of the Swiss
Capital Adequacy Ordinance including the aforementioned rebate on the gone
concern requirements. In addition, FINMA has defined a total capital ratio
requirement, which is the sum of 14.4% and the effect of countercyclical
buffer (CCB) requirements of 0.58%, of which 10% plus the effect of CCB
requirements must be satisfied with CET1 capital. These FINMA requirements
will be effective until they are exceeded by the Swiss SRB requirements based
on the transitional rules. 2 Includes applicable add-ons of 1.44% for RWA
and 0.5% for leverage ratio denominator (LRD). | | | | | | | | |

Significant regulated subsidiaries and sub-groups

Swiss SRB loss-absorbing capacity

Quarterly |

| Swiss SRB going and gone
concern information 1 — CHF million, except where
indicated | 30.6.19 | 31.3.19 | 31.12.18 |
| --- | --- | --- | --- |
| Eligible going concern
capital | | | |
| Total going concern capital | 14,894 | 14,712 | 14,468 |
| Total tier 1 capital | 14,894 | 14,712 | 14,468 |
| Common equity tier 1 capital | 10,654 | 10,463 | 10,225 |
| of which: high-trigger
loss-absorbing additional tier 1 capital | 4,240 | 4,248 | 4,243 |
| Eligible gone concern
capital | | | |
| Total gone concern
loss-absorbing capacity | 10,924 | 10,945 | 10,932 |
| TLAC-eligible debt | 10,924 | 10,945 | 10,932 |
| Total loss-absorbing
capacity | | | |
| Total loss-absorbing
capacity | 25,818 | 25,657 | 25,400 |
| Risk-weighted assets /
leverage ratio denominator | | | |
| Risk-weighted assets | 96,640 | 96,067 | 95,646 |
| Leverage ratio denominator | 311,212 | 310,545 | 306,487 |
| Capital and loss-absorbing
capacity ratios (%) | | | |
| Going concern capital ratio | 15.4 | 15.3 | 15.1 |
| of which: common equity tier
1 capital ratio | 11.0 | 10.9 | 10.7 |
| Gone concern loss-absorbing capacity ratio | 11.3 | 11.4 | 11.4 |
| Total loss-absorbing
capacity ratio | 26.7 | 26.7 | 26.6 |
| Leverage ratios (%) | | | |
| Going concern leverage ratio | 4.8 | 4.7 | 4.7 |
| of which: common equity tier
1 leverage ratio | 3.4 | 3.4 | 3.3 |
| Gone concern leverage ratio | 3.5 | 3.5 | 3.6 |
| Total loss-absorbing
capacity leverage ratio | 8.3 | 8.3 | 8.3 |
| 1 The numbers disclosed in the table are identical for Swiss SRB
(including transitional arrangement) requirements and Swiss SRB requirements applicable
as of 1 January 2020. | | | |

Leverage ratio information

Quarterly |

| Swiss SRB leverage ratio
denominator — CHF billion | 30.6.19 | 31.3.19 | 31.12.18 |
| --- | --- | --- | --- |
| Leverage ratio denominator | | | |
| Swiss GAAP total assets | 295.7 | 295.8 | 293.0 |
| Difference between Swiss GAAP and IFRS total assets | 3.6 | 2.8 | 1.8 |
| Less: derivative exposures and SFTs 1 | (39.2) | (36.6) | (32.5) |
| On-balance sheet exposures
(excluding derivative exposures and SFTs) | 260.1 | 262.1 | 262.3 |
| Derivative exposures | 5.0 | 4.1 | 3.7 |
| Securities financing transactions | 34.3 | 32.4 | 28.5 |
| Off-balance sheet items | 12.0 | 12.2 | 12.4 |
| Items deducted from Swiss SRB tier 1 capital | (0.2) | (0.2) | (0.5) |
| Total exposures (leverage
ratio denominator) | 311.2 | 310.5 | 306.5 |
| 1 Consists of derivative financial instruments, cash collateral
receivables on derivative instruments, receivables from securities financing
transactions, and margin loans as well as prime brokerage receivables and
financial assets at fair value not held for trading, both related to
securities financing transactions, in accordance with the regulatory scope of
consolidation, which are presented separately under Derivative exposures and
Securities financing transactions in this table. | | | |

Quarterly |

| BCBS Basel III leverage ratio — CHF million, except where
indicated | 30.6.19 | 31.3.19 | 31.12.18 | 30.9.18 |
| --- | --- | --- | --- | --- |
| Total tier 1 capital | 14,894 | 14,712 | 14,468 | 13,165 |
| Total exposures (leverage ratio denominator) | 311,212 | 310,545 | 306,487 | 303,257 |
| BCBS Basel III leverage
ratio (%) | 4.8 | 4.7 | 4.7 | 4.3 |

Liquidity coverage ratio

Quarterly | UBS Switzerland AG, as a Swiss SRB, is required to maintain a minimum liquidity coverage ratio of 100%. p

Quarterly |

Liquidity coverage ratio
	Weighted value 1
CHF billion, except where
indicated	Average 2Q19 2	Average 1Q19 2
High-quality liquid assets	67	71
Total net cash outflows	49	52
of which: cash outflows	85	86
of which: cash inflows	36	34
Liquidity coverage ratio (%)	138	137
1 Calculated after the application of haircuts and inflow and
outflow rates. 2 Calculated based on an average of 65 data points in the
second quarter of 2019 and 63 data points in the first quarter of 2019.

Significant regulated subsidiaries and sub-groups

Capital instruments

Quarterly |

| Capital instruments of UBS
Switzerland AG – key features | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Presented according to issuance date. | | | | | | | |
| | | Share capital | Additional tier 1 capital | | | | |
| 1 | Issuer | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland | | | | |
| 1a | Instrument number | 1 | 2 | 3 | 4 | 5 | 6 |
| 2 | Unique identifier (e.g., CUSIP, ISIN or Bloomberg identifier for
private placement) | n/a | n/a | | | | |
| 3 | Governing law(s) of the instrument | Swiss | Swiss | | | | |
| 3a | Means by which enforceability requirement of Section 13 of the
TLAC Term Sheet is achieved (for other TLAC-eligible instruments governed by
foreign law) | n/a | n/a | | | | |
| | Regulatory treatment | | | | | | |
| 4 | Transitional Basel III rules 1 | CET1 – Going concern capital | Additional tier 1 capital | | | | |
| 5 | Post-transitional Basel III rules 2 | CET1 – Going concern capital | Additional tier 1 capital | | | | |
| 6 | Eligible at solo / group / group and solo | UBS Switzerland AG consolidated and standalone | UBS Switzerland AG consolidated and standalone | | | | |
| 7 | Instrument type (types to be specified by each jurisdiction) | Ordinary shares | Loan 4 | Loan 4 | Loan 4 | Loan | Loan |
| 8 | Amount recognized in regulatory capital (currency in millions,
as of most recent reporting date) 1 | CHF 10.0 | CHF 1,500 | CHF 500 | CHF 1,000 | CHF 825 | USD 425 |
| 9 | Par value of instrument | CHF 10.0 | CHF 1,500 | CHF 500 | CHF 1,000 | CHF 825 | USD 425 |
| 10 | Accounting classification 3 | Equity attributable to UBS Switzerland AG shareholders | Due to banks held at amortized cost | | | | |
| 11 | Original date of issuance | – | 1 April 2015 | 11 March 2016 | 18 December 2017 | 12 December 2018 | 12 December 2018 |
| 12 | Perpetual or dated | – | Perpetual | | | | |
| 13 | Original maturity date | – | – | | | | |
| 14 | Issuer call subject to prior supervisory approval | – | Yes | | | | |
| 15 | Optional call date, contingent call dates and redemption amount | – | First optional repayment date: 1 April 2020 | First optional repayment date: 11 March 2021 | First optional repayment date: 18 December 2022 | First optional repayment date: 12 December 2023 | First optional repayment date: 12 December 2023 |
| | | | Repayable at any time after the first optional repayment date. Repayment subject to FINMA approval. Optional repayment amount:
principal amount, together with any accrued and unpaid interest thereon | | | | |
| 16 | Subsequent call dates, if applicable | – | Early repayment possible due to a tax or regulatory event.
Repayment due to tax event subject to FINMA approval. Repayment amount: principal amount, together with accrued and
unpaid interest | | | | |

Quarterly |

| Capital instruments of UBS
Switzerland AG – key features (continued) | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | Coupons | | | | | | |
| 17 | Fixed or floating dividend / coupon | – | Floating | | | | |
| 18 | Coupon rate and any related index | – | 6-month CHF Libor + 370 bps per annum semiannually | 3-month CHF Libor + 459 bps per annum quarterly | 3-month CHF Libor + 250 bps per annum quarterly | 3-month CHF Libor + 489 bps per annum quarterly | 3-month USD Libor + 547 bps per annum quarterly |
| 19 | Existence of a dividend stopper | – | No | | | | |
| 20 | Fully discretionary, partially discretionary or mandatory | Fully discretionary | Fully discretionary | | | | |
| 21 | Existence of step-up or other incentive to redeem | – | No | | | | |
| 22 | Non-cumulative or cumulative | Non-cumulative | Non-cumulative | | | | |
| 23 | Convertible or non-convertible | – | Non-convertible | | | | |
| 24 | If convertible, conversion trigger(s) | – | – | | | | |
| 25 | If convertible, fully or partially | – | – | | | | |
| 26 | If convertible, conversion rate | – | – | | | | |
| 27 | If convertible, mandatory or optional conversion | – | – | | | | |
| 28 | If convertible, specify instrument type convertible into | – | – | | | | |
| 29 | If convertible, specify issuer of instrument it converts into | – | – | | | | |
| 30 | Write-down feature | – | Yes | | | | |
| 31 | If write-down, write-down trigger(s) | – | Trigger: CET1 ratio is less than 7% | | | | |
| | | | FINMA determines a write-down necessary to ensure UBS
Switzerland AG’s viability; or UBS Switzerland AG receives a commitment of
governmental support that FINMA determines necessary to ensure UBS
Switzerland AG‘s viability. Subject to applicable conditions | | | | |
| 32 | If write-down, fully or partially | – | Fully | | | | |
| 33 | If write-down, permanent or temporary | – | Permanent | | | | |
| 34 | If temporary write-down, description of write-up mechanism | – | – | | | | |
| 34a | Type of subordination | Statutory | Contractual | | | | |
| 35 | Position in subordination hierarchy in liquidation (specify
instrument type immediately senior to instrument in the insolvency creditor hierarchy of the
legal entity concerned). | Unless otherwise stated in the Articles of Association, once
debts are paid back, the assets of the liquidated company are divided between
the shareholders pro rata based on their contributions and considering the
preferences attached to certain categories of shares (Art. 745, Swiss
Code of Obligations) | Subject to any obligations that are mandatorily preferred by law,
all obligations of UBS Switzerland AG that are unsubordinated or that are
subordinated and do not rank junior, such as all classes of share capital, or
at par, such as tier 1 instruments | | | | |
| 36 | Non-compliant transitioned features | – | – | | | | |
| 37 | If yes, specify non-compliant features | – | – | | | | |
| 1 Based on Swiss SRB (including transitional arrangement)
requirements. 2 Based on Swiss SRB requirements applicable as of 1 January
2020. 3 As applied in UBS Switzerland AG‘s financial statements under
Swiss GAAP. 4 Loans granted by UBS AG, Switzerland. | | | | | | | |

Significant regulated subsidiaries and sub-groups

Section 4 UBS Europe SE consolidated

Quarterly | The table below discloses information about the regulatory capital components, capital ratios, leverage ratio and liquidity of UBS Europe SE consolidated based on the Pillar 1 requirements.

During the second quarter of 2019, common equity tier 1 (CET1) capital remained stable. Risk-weighted assets (RWA) decreased by EUR 0.7 billion, mainly as a result of a decrease in credit risk RWA. Leverage ratio exposure increased by EUR 1.2 billion, reflecting an increase in securities financing transactions and higher trading assets, partly offset by a decrease in derivative add-ons. Net cash outflows increased by EUR 1.3 billion, largely due to Treasury activities.

Entities may also be subject to significant Pillar 2 requirements, which represent additional amounts of capital considered necessary and agreed with regulators based on the risk profile of the entities. p

Quarterly |

KM1: Key metrics 1,2,3
EUR million, except where
indicated
		30.6.19	31.3.19
Available capital (amounts)
1	Common equity tier 1 (CET1)	3,543	3,568
2	Tier 1	3,833	3,858
3	Total capital	3,833	3,858
Risk-weighted assets
(amounts)
4	Total risk-weighted assets (RWA)	13,725	14,432
4a	Minimum capital requirement 4	1,098	1,155
Risk-based capital ratios as
a percentage of RWA
5	Common equity tier 1 ratio (%)	25.8	24.7
6	Tier 1 ratio (%)	27.9	26.7
7	Total capital ratio (%)	27.9	26.7
Additional CET1 buffer
requirements as a percentage of RWA
8	Capital conservation buffer requirement (2.5% from 2019) (%)	2.5	2.5
9	Countercyclical buffer requirement (%)	0.2	0.2
10	Bank G-SIB and / or D-SIB additional requirements (%)
11	Total of bank CET1 specific buffer requirements (%)	2.7	2.7
12	CET1 available after meeting the bank’s minimum capital
requirements (%)	18.6	17.5
Basel III leverage ratio
13	Total Basel III leverage ratio exposure measure	52,291	51,060
14	Basel III leverage ratio (%) 5	7.3	7.6
Liquidity coverage ratio 6
15	Total HQLA	14,367	14,770
16	Total net cash outflow	8,200	6,895
17	LCR ratio (%)	177	214
1 Based on applicable EU Basel III rules. 2 As a result of
the cross-border merger of UBS Limited into UBS Europe SE effective 1 March
2019, UBS Europe SE has become a significant regulated subsidiary of UBS
Group AG. The size, scope and business model of the merged entity is now
materially different. Comparatives for December 2018 have not been provided
in the table because data produced on the same basis is not available. For
more information about the cross-border merger of UBS Limited into UBS Europe
SE, refer to the “Recent developments” section in our first quarter 2019
report. 3 There is no local disclosure requirement for the net stable
funding ratio as at 30 June 2019. 4 Calculated as 8% of total RWA, based
on total capital minimum requirements, excluding CET1 buffer requirements.
5 On the basis of tier 1 capital. 6 Figures as of 30 June 2019 are based
on a four-month average rather than a twelve-month average, as data produced
on the same basis is only available for the period since the cross-border
merger. For 31 March 2019, month-end reporting date values are disclosed.

Section 5 UBS Americas Holding LLC consolidated

The table below discloses information about the regulatory capital components and capital ratios, as well as leverage ratio, of UBS Americas Holding LLC consolidated based on the Pillar 1 requirements (i.e., US Basel III standardized rules).

Quarterly | During the second quarter of 2019, common equity tier 1 (CET1) increased by USD 0.9 billion to USD 12.9 billion, as a result of increases in the share premium related to a fixed asset transfer, operating profit and other comprehensive income. Risk-weighted assets (RWA) decreased by USD 1.4 billion to USD 53.9 billion, mainly driven by a decrease in credit risk RWA. Leverage ratio exposure remained stable during the quarter.

Quarterly |

KM1: Key metrics 1,2
USD million, except where
indicated
		30.6.19	31.3.19	31.12.18 3	30.9.18 4	30.6.18 4
Available capital (amounts)
1	Common equity tier 1 (CET1)	12,900	12,028	11,746	11,068	10,693
2	Tier 1	15,055	14,170	13,887	13,209	12,834
3	Total capital	15,772	14,882	14,601	13,925	13,555
Risk-weighted assets
(amounts)
4	Total risk-weighted assets (RWA)	53,892	55,313	54,063	54,488	52,991
4a	Minimum capital requirement 5	4,311	4,425	4,325	4,359	4,239
Risk-based capital ratios as
a percentage of RWA
5	Common equity tier 1 ratio (%)	23.9	21.7	21.7	20.3	20.2
6	Tier 1 ratio (%)	27.9	25.6	25.7	24.2	24.2
7	Total capital ratio (%)	29.3	26.9	27.0	25.6	25.6
Additional CET1 buffer
requirements as a percentage of RWA
8	Capital conservation buffer requirement (2.5% from 2019) (%)	2.5	2.5	1.9	1.9	1.9
9	Countercyclical buffer requirement (%) 6
10	Bank G-SIB and / or D-SIB additional requirements (%) 7
11	Total of bank CET1 specific buffer requirements (%)	2.5	2.5	1.9	1.9	1.9
12	CET1 available after meeting the bank’s minimum capital
requirements (%) 8	16.9	14.7	15.3	13.9	13.8
Basel III leverage ratio
13	Total Basel III leverage ratio exposure measure	123,008	124,981	122,829	124,982	129,375
14	Basel III leverage ratio (%) 9	12.2	11.3	11.3	10.6	9.9
1 For UBS Americas Holding LLC based on applicable US Basel III
rules. 2 There is no local disclosure requirement for liquidity coverage ratio
or net stable funding ratio for UBS Americas Holding LLC as
of 30 June 2019. 3 Figures as of or for the quarter ended
31 December 2018 have been adjusted for consistency with the
full-year audited financial statements and / or local regulatory reporting,
which were finalized after the publication of our Annual Report 2018 and our
31 December 2018 Pillar 3 report on 15 March 2019. 4 Figures as of
30 September 2018 and 30 June 2018 have been adjusted for
consistency with the local regulatory reporting of the entity. 5
Calculated as 8% of total RWA, based on total capital minimum requirements,
excluding CET1 buffer requirements. 6 Not applicable as the
countercyclical buffer requirement applies only to banking organizations
subject to the advanced approaches capital rules. 7 Not applicable as
requirements have not been proposed. 8 Capital surplus measures excess to
minimum regulatory requirements. As such, it overstates actual excess capital
capacity as it is not measured against additional capital that local
regulators expect is positioned within UBS Americas Holding LLC in order to
resource stressed risk loss exposures arising from the activities that UBS
conducts in UBS Americas Holding LLC. 9 On the basis of tier
1 capital.

Appendix

Abbreviations frequently used in our financial reports

ABS asset-backed security

AEI automatic exchange of information

AGM annual general meeting of shareholders

A-IRB advanced internal ratings-based

AI artificial intelligence

AIV alternative investment vehicle

ALCO Asset and Liability Management Committee

AMA advanced measurement approach

AML anti-money laundering

AoA Articles of Association of UBS Group AG

ASF available stable funding

ASFA advanced supervisory formula approach

AT1 additional tier 1

AuM assets under management

BCBS Basel Committee on Banking Supervision

BD business division

BEAT base erosion and anti-abuse tax

BIS Bank for International Settlements

BoD Board of Directors

BSC Business Solutions Center

BVG Swiss occupational pension plan

CAO Capital Adequacy Ordinance

CC Corporate Center

CCAR Comprehensive Capital Analysis and Review

CCB countercyclical buffer

CCF credit conversion factor

CCP central counterparty

CCR counterparty credit risk

CCRC Corporate Culture and Responsibility Committee

CDO collateralized debt obligation

CDR constant default rate

CDS credit default swap

CEA Commodity Exchange Act

CECL current expected credit loss

CEM current exposure method

CEO Chief Executive Officer

CET1 common equity tier 1

CFO Chief Financial Officer

CFTC US Commodity Futures Trading Commission

CHF Swiss franc

CIC Corporate Institutional Clients

CIO Chief Investment Office

CLN credit-linked note

CLO collateralized loan obligation

CLS continuous linked settlement

CMBS commercial mortgage-backed security

C&ORC Compliance & Operational Risk Control

CRD IV EU Capital Requirements Directive of 2013

CSO Client Strategy Office

CVA credit valuation adjustment

DBO defined benefit obligation

DCCP Deferred Contingent Capital Plan

DJSI Dow Jones Sustainability Indices

DOJ US Department of Justice

DOL US Department of Labor

D-SIB domestic systemically important bank

DTA deferred tax asset

DVA debit valuation adjustment

EAD exposure at default

EBA European Banking Authority

EC European Commission

ECB European Central Bank

ECL expected credit loss(es)

EIR effective interest rate

EL expected loss

EMEA Europe, Middle East and Africa

EOP Equity Ownership Plan

EPE expected positive exposure

EPS earnings per share

ERISA Employee Retirement Income Security Act of 1974

ESG environmental, social and governance

ESMA European Securities and Markets Authority

ESR environmental and social risk

ETD exchange-traded derivative

ETF exchange-traded fund

EU European Union

EUR euro

EURIBOR Euro Interbank Offered Rate

FCA UK Financial Conduct Authority

FCT foreign currency translation

FINMA Swiss Financial Market Supervisory Authority

FINRA US Financial Industry Regulatory Authority

FMIA Swiss Financial Market Infrastructure Act

Abbreviations frequently used in our financial reports (continued)

FRA forward rate agreement

FSB Financial Stability Board

FTA Swiss Federal Tax Administration

FTD first to default

FTP funds transfer pricing

FVA funding valuation adjustment

FVOCI fair value through other comprehensive income

FVTPL fair value through profit or loss

FX foreign exchange

GAAP generally accepted accounting principles

GBP pound sterling

GEB Group Executive Board

GFA Group Franchise Awards

GHG greenhouse gas

GIA Group Internal Audit

GIIPS Greece, Italy, Ireland, Portugal and Spain

GMD Group Managing Director

GRI Global Reporting Initiative

Group ALM Group Asset and Liability Management

G-SIB global systemically important bank

HQLA high-quality liquid assets

HR human resources

IAA internal assessment approach

IAS International Accounting Standards

IASB International Accounting Standards Board

IBOR interbank offered rate

IFRIC International Financial Reporting Interpretations Committee

IFRS International Financial Reporting Standards

IHC intermediate holding companies

IMA internal models approach

IMM internal model method

IPS Investment Platforms and Solutions

IRB internal ratings-based

IRC incremental risk charge

ISDA International Swaps and Derivatives Association

KRT Key Risk Taker

LAC loss-absorbing capacity

LAS liquidity-adjusted stress

LCR liquidity coverage ratio

LGD loss given default

LIBOR London Interbank Offered Rate

LLC limited liability company

LRD leverage ratio denominator

LTV loan-to-value

MiFID II Markets in Financial Instruments Directive II

MiFIR Markets in Financial Instruments Regulation

MRT Material Risk Taker

MTN medium-term note

NAV net asset value

NII net interest income

NRV negative replacement value

NSFR net stable funding ratio

NYSE New York Stock Exchange

OCA own credit adjustment

OCI other comprehensive income

OECD Organisation for Economic Co-operation and Development

OIS overnight index swap

OTC over-the-counter

PD probability of default

PFE potential future exposure

PIT point in time

P&L profit or loss

POCI purchased or originated credit-impaired

PRA UK Prudential Regulation Authority

PRV positive replacement value

QRRE qualifying revolving retail exposures

RBA role-based allowances

RBC risk-based capital

RLN reference-linked note

RMBS residential mortgage-backed securities

RniV risks not in VaR

RoAE return on attributed equity

RoCET1 return on CET1

RoE return on equity

RoTE return on tangible equity

RV replacement value

RW risk weight

RWA risk-weighted assets

Appendix

Abbreviations frequently used in our financial reports (continued)

SA standardized approach

SA-CCR standardized approach for counterparty credit risk

SAR stock appreciation right

SBC Swiss Bank Corporation

SCCL single-counterparty credit limit

SDGs Sustainable Development Goals

SE structured entity

SEC US Securities and Exchange Commission

SEEOP Senior Executive Equity Ownership Plan

SFTs securities financing transactions

SI sustainable investing

SICR significant increase in credit risk

SIX SIX Swiss Exchange

SMA standardized measurement approach

SME small and medium-sized enterprises

SMF Senior Management Function

SNB Swiss National Bank

SPPI solely payments of principal and interest

SRB systemically relevant bank

SRM specific risk measure

SVaR stressed value-at-risk

TBTF too big to fail

TCJA US Tax Cuts and Jobs Act

TLAC total loss-absorbing capacity

TRS total return swap

TTC through the cycle

UoM units of measure

USD US dollar

US IHC US intermediate holding company

VaR value-at-risk

This is a general list of the abbreviations frequently used in our financial reporting. Not all of the listed abbreviations may appear in this particular report.

Cautionary Statement | This report and the information contained herein are provided solely for information purposes, and are not to be construed as solicitation of an offer to buy or sell any securities or other financial instruments in Switzerland, the United States or any other jurisdiction. No investment decision relating to securities of or relating to UBS Group AG, UBS AG or their affiliates should be made on the basis of this report. Refer to UBS’s second quarter 2019 report and its Annual Report 2018, available at www.ubs.com/investors , for additional information.

Rounding | Numbers presented throughout this report may not add up precisely to the totals provided in the tables and text. Percentages, percent changes, and adjusted results are calculated on the basis of unrounded figures. Information on absolute changes between reporting periods, which is provided in text and that can be derived from figures displayed in the tables, is calculated on a rounded basis.

Tables | Within tables, blank fields generally indicate that the field is not applicable or not meaningful, or that information is not available as of the relevant date or for the relevant period. Zero values generally indicate that the respective figure is zero on an actual or rounded basis. Percentage changes are presented as a mathematical calculation of the change between periods.

UBS Group AG

P.O. Box

CH-8098 Zurich

ubs.com

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.

UBS Group AG

By: _/s/ David Kelly_______

Name: David Kelly

Title: Managing Director

By: _/s/ Ella Campi _____

Name: Ella Campi

Title: Executive Director

UBS AG

By: _/s/ David Kelly_______

Name: David Kelly

Title: Managing Director

By: _/s/ Ella Campi _____

Name: Ella Campi

Title: Executive Director

Date: August 27, 2019

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