UBS Group AG - Interim / Quarterly Report 2017

6-K 1 6k3q17ubsbaselIIIpillar3.htm 6k3q17ubsbaselIIIpillar3

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: October 27, 2017

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 UBS Group AG Third Quarter 2017 Report, which appears immediately following this page.

UBS Group AG and significant regulated subsidiaries and sub-groups

Third quarter 2017 Pillar 3 report

Table of contents
UBS Group AG consolidated
2	Section 1 Introduction
3	Section 2 Risk-weighted
assets
8	Section 3 Going and
gone concern requirements and eligible capital
15	Section 4 Leverage ratio
18	Section 5 Liquidity coverage
ratio
Significant regulated
subsidiaries and sub-groups
22	Section 1 Introduction
22	Section 2 UBS AG
standalone
26	Section 3 UBS
Switzerland AG standalone
31	Section 4 UBS Limited
standalone
31	Section 5 UBS Americas Holding
LLC consolidated

Contacts

Switchboards

For all general inquiries www.ubs.com/contact

Zurich +41-44-234 1111 London +44-20-7568 0000 New York +1-212-821 3000 Hong Kong +852-2971 8888

Investor Relations

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

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

www.ubs.com/investors

Hotline Zurich +41-44-234 4100 Hotline New York +1-212-882 5734 Fax (Zurich) +41-44-234 3415

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 5857 [email protected]

Hong Kong +852-2971 8200 [email protected]

Office of the Group Company Secretary

The Group Company Secretary receives inquiries on 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]

Hotline +41-44-235 6652 Fax +41-44-235 8220

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]

Hotline +41-44-235 6652 Fax +41-44-235 8220

US Transfer Agent

For global registered share-related inquiries in the US.

Computershare Trust Company NA P.O. Box 30170 College Station TX 77842-3170, 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

UBS Group AG consolidated

Section 1 Introduction

Regulatory framework and scope of Basel III Pillar 3 disclosures

The 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 quarterly report provides Pillar 3 disclosures for UBS Group AG on a consolidated basis. As UBS is considered a systemically relevant bank (SRB) under Swiss banking law, UBS Group AG is required to comply with regulations based on the Basel III framework as applicable to Swiss SRBs on a consolidated basis. Capital information as of 30 September 2017 for UBS Group AG consolidated is provided in the “Capital management” section of our third quarter 2017 report under “Quarterly reporting” at www.ubs.com/investors .

Pillar 3 rules also require us to disclose certain regulatory information for the significant banking subsidiaries UBS AG, UBS Switzerland AG and UBS Limited, as well as the significant sub-groups under UBS AG and UBS Americas Holding LLC. This information is provided in the “Significant regulated subsidiaries and sub-groups” section of this report, except for UBS AG on a consolidated basis, for which capital and other regulatory information is provided in the UBS AG third quarter 2017 report, which will be available as of 1 November 2017 under “Quarterly reporting” at www.ubs.com/investors.

Except where indicated, UBS Pillar 3 disclosures are based on phase-in rules under the Basel III framework, as implemented by the Swiss Federal Council’s Swiss Capital Adequacy Ordinance and as required by FINMA regulation.

BCBS publishes enhanced Pillar 3 disclosure requirements

In March 2017, the Basel Committee on Banking Supervision (BCBS) issued a consolidated and enhanced framework for Pillar 3 disclosure requirements. This draft includes the following enhancements: i) all existing BCBS disclosure requirements have been consolidated into the Pillar 3 framework, including the composition of capital, the leverage ratio, the liquidity ratios, the indicators for determining global systemically important banks (G-SIBs), the countercyclical buffer, interest rate risk in the banking book and remuneration; ii) a “dashboard” of banks’ key prudential metrics has been introduced; iii) a new requirement has been included for banks to break down prudential valuation adjustments as well as the underlying calculation methodology; and iv) ongoing reforms have been incorporated into the regulatory framework, such as the total loss-absorbing capacity regime for G-SIBs and the revised market risk framework.

The implementation dates for these consolidated and enhanced BCBS requirements are staggered from year-end 2017 to 2019. The related FINMA regulation is expected to be completed during 2017, with implementation dates in 2018 and 2019.

Format, frequency and comparability of Pillar 3 disclosures

Certain Pillar 3 disclosures follow a fixed format defined by FINMA, including column or row labeling, whereas other disclosures are flexible and may be modified to a certain degree to present the most relevant information. Pillar 3 requirements are presented under the relevant FINMA table / template reference (e.g., OV1, CR8). Naming conventions used in our Pillar 3 disclosures are based on the FINMA guidance and may not reflect UBS’s own naming conventions. The reporting frequency for each disclosure follows the respective FINMA-specified interval, which is either quarterly, semiannual or annual. For more information on disclosure frequencies, refer to the Basel III Pillar 3 UBS Group AG 2016 report under “Pillar 3 disclosures” at www.ubs.com/investors . Comparative-period information and commentary on movements are provided in line with the FINMA-specified frequency.

Section 2 Risk-weighted assets

Our approach to measuring risk exposure and risk-weighted assets

Measures of risk exposure may differ, depending on whether the exposures are calculated for financial accounting purposes under International Financial Reporting Standards (IFRS), for deriving our regulatory capital requirement 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 to underpin those risks. The calculation of risk-weighted assets (RWA) follows the Bank for International Settlements (BIS) Basel III framework, as implemented by the Swiss Capital Adequacy Ordinance issued by the Swiss Federal Council on a phase-in basis.

® Refer to the Basel III Pillar 3 UBS Group AG 2016 report under “Pillar 3 disclosures” at www.ubs.com/investors for more information

RWA development in the quarter

The table below provides an overview of RWA and the related minimum capital requirements by risk type. During the third quarter of 2017, phase-in RWA increased by CHF 1.4 billion to CHF 239.2 billion. The increase was mainly driven by a CHF 1.7 billion increase in credit risk and a CHF 0.4 billion increase in market risk, partly offset by a CHF 0.7 billion decrease in counterparty credit risk. The flow tables on the subsequent pages provide further detail on the movements in credit risk, counterparty credit risk and market risk RWA in the third quarter of 2017. More information on capital management and RWA, including detail on movements in RWA during the third quarter of 2017, is provided on pages 64–65 of our third quarter 2017 report under “Quarterly reporting” at www.ubs.com/investors .

OV1: Overview of RWA		a	b	c
		RWA¹		Minimum capital requirements²
CHF million		30.9.17	30.6.17	30.9.17
1	Credit risk (excluding
counterparty credit risk)	96,349	94,647	7,708
2	of which: standardized
approach (SA)³	22,727	22,892	1,818
3	of which: internal
ratings-based (IRB) approach	73,621	71,755	5,890
4	Counterparty credit
risk⁴	33,362	34,060	2,669
5	of which: SA for
counterparty credit risk (SA-CCR)⁵	10,668	10,587	853
6	of which: internal model
method (IMM)⁶	22,694	23,474	1,816
7	Equity positions in banking
book under market-based approach⁷	2,585	2,393	207
8	Equity investments in funds
– look-through approach⁸
9	Equity investments in funds
– mandate-based approach⁸
10	Equity investments in funds
– fall-back approach⁸
11	Settlement risk	256	478	20
12	Securitization exposure in
banking book	1,566	1,897	125
13	of which: IRB ratings-based
approach (RBA)	1,117	1,373	89
14	of which: IRB supervisory
formula approach (SFA)	449	523	36
15	of which: SA / simplified
supervisory formula approach (SSFA)
16	Market Risk	14,086	13,667	1,127
17	of which: standardized
approach (SA)	617	378	49
18	of which: internal model
approaches (IMM)	13,469	13,289	1,078
19	Operational risk	79,422	79,422	6,354
20	of which: basic indicator
approach
21	of which: standardized
approach
22	of which: advanced
measurement approach	79,422	79,422	6,354
23	Amounts below thresholds for
deduction (250% risk weight)⁹	11,564	11,254	925
24	Floor adjustment¹⁰	0	0	0
25	Total	239,190	237,818	19,135
1 Based on phase-in rules. 2 Calculated based on 8% of
RWA. 3 Includes non-counterparty-related risk not subject to the threshold
deduction treatment (30 September 2017: RWA CHF 8,721 million; 30 June 2017:
RWA CHF 8,493 million). Non-counterparty-related risk (30 September 2017: RWA
CHF 9,703 million; 30 June 2017: RWA CHF 9,449 million), which is subject to
the threshold treatment, is reported in line 23 “Amounts below
thresholds for deduction (250% risk weight).” 4 Excludes settlement risk,
which is separately reported in line 11 “Settlement risk.” Includes credit
valuation adjustments and RWA with central counterparties. 5 Calculated in
accordance with the current exposure method (CEM), until SA-CCR is
implemented by 1 January 2018. The split between lines 5 and 6 refers to the
calculation of the exposure measure. 6 Includes advanced credit valuation
adjustment (30 September 2017: RWA CHF 2,298 million; 30 June 2017: RWA CHF
2,707 million). 7 Includes investments in funds. Items subject to
threshold deduction treatments that do not exceed their respective threshold
are risk weighted at 250% (30 September 2017: RWA CHF 1,862 million; 30 June
2017: RWA CHF 1,804 million) and are separately included in line 23 “Amounts
below thresholds for deduction (250% risk weight).” 8 New regulation for
the calculation of RWA for investments in funds will be implemented by 1
January 2018. 9 Includes items subject to threshold deduction treatments
that do not exceed their respective threshold and which are 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. 10 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. Refer to the “Recent developments” section of our first quarter
2017 report, under “Quarterly reporting” at www.ubs.com/investors for the
status of the finalization of the BCBS capital framework, where the proposed
floor calculation would differ in significant aspects from the current
approach.

UBS Group AG consolidated

Definitions of credit risk and counterparty credit risk RWA movement table components for CR8 and CCR7

References from the below table link to the line numbers provided in the movement tables below and on the next page.

Reference	Description
2	Asset size	Movements arising in the ordinary course
of business, such as new transactions, sales and write-offs.
3	Asset quality / Credit quality of
counterparties	Movements resulting from changes in the
underlying credit quality of counterparties. These are caused by changes to
risk parameters, such as counterparty ratings, loss given default estimates
or credit hedges.
4	Model updates	Movements arising from the
implementation of new models and from parameter changes to existing models.
The RWA effect of model updates is estimated based on the portfolio at the
time of the change implementation.
5	Methodology and policy	Movements due to methodological changes
in calculations driven by regulatory policy changes, including revisions to
existing regulations, new regulations and add-ons mandated by the regulator.
The effect of methodology and policy changes on RWA is estimated based on the
portfolio at the time of the change implementation.
6	Acquisitions and disposals	Movements as a result of disposal or
acquisition of business operations, quantified based on the credit risk exposures
as of the end of the quarter preceding a disposal or following an
acquisition. Purchases and sales of exposures in the ordinary course of
business are reflected under asset size.
7	Foreign exchange movements	Movements as a result of exchange rate
changes of the transaction currencies against the Swiss franc.
8	Other	Movements due to changes that cannot be
attributed to any other category.

Credit risk RWA development in the quarter

Credit risk RWA increased by CHF 1.9 billion to CHF 73.6 billion as of 30 September 2017.

The CHF 2.4 billion asset size increase resulted from an increase in trading portfolio assets and higher lending in our Corporate Client Solutions business within the Investment Bank. The CHF 0.3 billion increase from methodology and policy updates was due to an increase in the internal ratings-based (IRB) multiplier on Investment Bank exposures to corporates.

| CR8: RWA flow statements of
credit risk exposures under IRB | | |
| --- | --- | --- |
| | | a |
| CHF million | | RWA |
| 1 | RWA as of 30.6.17 | 71,755 |
| 2 | Asset size | 2,440 |
| 3 | Asset quality | (1,126) |
| 4 | Model updates | 40 |
| 5 | Methodology and policy | 349 |
| 5a | of which: regulatory add-ons | 349 |
| 6 | Acquisitions and disposals | 0 |
| 7 | Foreign exchange movements | 432 |
| 8 | Other | (269) |
| 9 | RWA as of 30.9.17 | 73,621 |

Counterparty credit risk RWA development in the quarter

Counterparty credit risk (CCR) RWA under internal model method (IMM) and value-at-risk (VaR) decreased by CHF 0.4 billion during the third quarter of 2017.

| CCR7: RWA flow statements of
CCR exposures under internal model method (IMM) and value-at-risk (VaR)¹ | | a1 | a2 | a |
| --- | --- | --- | --- | --- |
| | | Derivatives | SFTs | Total Amounts |
| CHF million | | Subject to IMM | Subject to VaR | (sum of a1 and a2) |
| 1 | RWA as of 30.6.17 | 16,648 | 4,118 | 20,766 |
| 2 | Asset size | (273) | 63 | (211) |
| 3 | Credit quality of counterparties | (396) | (227) | (623) |
| 4 | Model updates | 0 | 0 | 0 |
| 5 | Methodology and policy | 278 | 71 | 349 |
| 5a | of which: regulatory add-ons | 278 | 71 | 349 |
| 6 | Acquisitions and disposals | 0 | 0 | 0 |
| 7 | Foreign exchange movements | 294 | 72 | 366 |
| 8 | Other | (250) | 0 | (250) |
| 9 | RWA as of 30.9.17 | 16,301 | 4,096 | 20,397 |
| 1 Excludes advanced credit valuation adjustment RWA of CHF 2,298
million as of 30 September 2017 (30 June 2017: CHF 2,707 million). | | | | |

UBS Group AG consolidated

Market risk RWA development in the quarter

The four main components that contribute to market risk RWA are VaR, stressed value-at-risk (SVaR), incremental risk charge (IRC) and comprehensive risk measure (CRM). VaR and SVaR components include the RWA charge for risks-not-in-VaR. The “MR2: RWA flow statements of market risk exposures under an internal models approach” table on the following page provides a breakdown of the market risk RWA movement in the third quarter of 2017 across these components, according to BCBS-defined movement categories. These categories are described below.

Definitions of market risk RWA movement table components for MR2

References from the below table link to the line numbers provided in the movement table on the next page.

Reference	Description	Definition
1 / 8c	RWA as of previous and current
reporting period end (end of period)	Quarter-end RWA
1a / 8b	Regulatory adjustment	Indicates the difference between row lines
1 and 1b, and 8c and 8a, respectively.
1b / 8a	RWA at previous and current quarter
end (end of day)	For a given component (e.g., VaR), this
refers to the RWA computed whenever that component’s snapshot quarter-end
figure is higher than the 60-day average for regulatory VaR, and the 12-week
average for SVaR and IRC, thus determining the quarter-end RWA. The
regulatory adjustment would be zero, if the quarter-end RWA were triggered by
the snapshot quarter-end figure.
	Movement of
end-of-day RWA
2	Movement in risk levels	Movements due to changes in positions
and risk levels.
3	Model updates / changes	Movements due to routine updates to
model parameters and model changes.
4	Methodology and policy	Movements due to methodological changes
in calculations driven by regulatory policy changes, including revisions of
existing regulations, new regulations and add-ons mandated by the regulator.
5	Acquisitions and disposals	Movements due to the disposal or
acquisition of business operations, quantified based on the market risk
exposures at the end of the quarter preceding a disposal or following an
acquisition. Purchases and sales of exposures in the ordinary course of
business are reflected in “Movements in risk levels.”
6	Foreign exchange movements	Movements due to changes in exchange
rates. Note that the effect of movements in exchange rates is captured in “Movement
in risk levels,” since exchange rate movements are part of the effects of
market movements on risk levels.
7	Other	Movements due to changes that cannot be
attributed to any other category.

RWA flow

Market risk-based RWA increased by CHF 0.2 billion, mainly as higher average regulatory VaR levels during the third quarter of 2017 were largely offset by the effects of an enhancement to VaR model parameters. The VaR multiplier remained unchanged at 3.

| MR2: RWA flow statements of
market risk exposures under an internal models approach¹ | | a | b | c | d | e | f |
| --- | --- | --- | --- | --- | --- | --- | --- |
| CHF million | | VaR | Stressed VaR | IRC | CRM | Other | Total RWA |
| 1 | RWA as of 30.6.17 | 2,458 | 7,350 | 3,383 | 97 | | 13,289 |
| 1a | Regulatory adjustment | (1,531) | (6,460) | 0 | (41) | | (8,032) |
| 1b | RWA at previous quarter-end
(end of day) | 927 | 891 | 3,383 | 56 | | 5,258 |
| 2 | Movement in risk levels | 307 | 896 | 117 | 0 | | 1,320 |
| 3 | Model updates / changes | (487) | (183) | 0 | 0 | | (670) |
| 4 | Methodology and policy | | | | | | |
| 5 | Acquisitions and disposals | | | | | | |
| 6 | Foreign exchange movements | | | | | | |
| 7 | Other | | | | 11 | | 11 |
| 8a | RWA at the end of the reporting period (end of day) | 747 | 1,604 | 3,500 | 68 | | 5,919 |
| 8b | Regulatory adjustment | 2,727 | 4,813 | 0 | 10 | | 7,550 |
| 8c | RWA as of 30.9.17 | 3,474 | 6,417 | 3,500 | 78 | | 13,469 |
| 1 Components that describe movements in RWA are presented in
italic. | | | | | | | |

UBS Group AG consolidated

Section 3 Going and gone concern requirements and eligible capital

The table below provides details on the Swiss SRB going and gone concern requirements as required by FINMA. More information on capital management is provided on pages 58–67 of our third quarter 2017 report, available under “Quarterly reporting” at www.ubs.com/investors .

| Swiss SRB going and gone
concern requirements and information¹ | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| As of 30.9.17 | Swiss SRB, including transitional arrangements (phase-in) | | | | Swiss SRB as of 1.1.20 (fully applied) | | | |
| CHF million, except where
indicated | RWA | | LRD | | RWA | | LRD | |
| Required loss-absorbing
capacity | in % | | in % | | in % | | in % | |
| Common equity tier 1 capital | 9.22 | 22,046 | 2.60 | 23,061 | 10.22 | 24,312 | 3.50 | 30,969 |
| of which: minimum capital | 5.80 | 13,873 | 2.10 | 18,626 | 4.50 | 10,708 | 1.50 | 13,273 |
| of which: buffer capital | 3.20 | 7,654 | 0.50 | 4,435 | 5.50 | 13,088 | 2.00 | 17,697 |
| of which: countercyclical
buffer² | 0.22 | 519 | | | 0.22 | 516 | | |
| Maximum additional tier 1
capital | 3.00 | 7,176 | 0.90 | 7,983 | 4.30 | 10,232 | 1.50 | 13,273 |
| of which: high-trigger
loss-absorbing additional tier 1 minimum capital | 2.20 | 5,262 | 0.90 | 7,983 | 3.50 | 8,329 | 1.50 | 13,273 |
| of which: high-trigger
loss-absorbing additional tier 1 buffer capital | 0.80 | 1,914 | | | 0.80 | 1,904 | | |
| Total going concern capital | 12.22 | 29,221 | 3.50 | 31,044 | 14.52³ | 34,545 | 5.00³ | 44,242 |
| Base gone concern loss-absorbing capacity, including applicable
add-ons | 6.20⁴ | 14,830 | 2.00⁴ | 17,739 | 14.30³ | 34,029 | 5.00³ | 44,242 |
| Total gone concern
loss-absorbing capacity | 6.20 | 14,830 | 2.00 | 17,739 | 14.30 | 34,029 | 5.00 | 44,242 |
| Total loss-absorbing
capacity | 18.42 | 44,051 | 5.50 | 48,783 | 28.82 | 68,573 | 10.00 | 88,483 |
| Eligible loss-absorbing
capacity | | | | | | | | |
| Common equity tier 1 capital | 15.07 | 36,045 | 4.06 | 36,045 | 13.71 | 32,621 | 3.69 | 32,621 |
| High-trigger loss-absorbing
additional tier 1 capital⁵˒⁶ | 6.80 | 16,273 | 1.83 | 16,273 | 3.73 | 8,872 | 1.00 | 8,872 |
| of which: high-trigger
loss-absorbing additional tier 1 capital | 2.72 | 6,506 | 0.73 | 6,506 | 2.73 | 6,506 | 0.74 | 6,506 |
| of which: low-trigger
loss-absorbing additional tier 1 capital | 0.45 | 1,078 | 0.12 | 1,078 | 0.99 | 2,366 | 0.27 | 2,366 |
| of which: high-trigger
loss-absorbing tier 2 capital | 0.35 | 846 | 0.10 | 846 | | | | |
| of which: low-trigger
loss-absorbing tier 2 capital | 3.28 | 7,844 | 0.88 | 7,844 | | | | |
| Total going concern capital | 21.87 | 52,318 | 5.90 | 52,318 | 17.44 | 41,493 | 4.69 | 41,493 |
| Gone concern loss-absorbing
capacity | 12.05 | 28,830 | 3.25 | 28,830 | 15.50 | 36,895 | 4.17 | 36,895 |
| of which: TLAC-eligible
senior unsecured debt | 11.32 | 27,081 | 3.05 | 27,081 | 11.38 | 27,081 | 3.06 | 27,081 |
| Total gone concern
loss-absorbing capacity | 12.05 | 28,830 | 3.25 | 28,830 | 15.50 | 36,895 | 4.17 | 36,895 |
| Total loss-absorbing
capacity | 33.93 | 81,148 | 9.15 | 81,148 | 32.94 | 78,388 | 8.86 | 78,388 |
| Risk-weighted assets /
leverage ratio denominator | | | | | | | | |
| Risk-weighted assets | | 239,190 | | | | 237,963 | | |
| Leverage ratio denominator | | | | 886,969 | | | | 884,834 |
| 1 This table does not include the effect of any gone concern
requirement rebate. 2 Going concern capital ratio requirements as of 30
September 2017 include countercyclical buffer requirements of 0.22% for the
phase-in and fully applied requirement. 3 Includes applicable add-ons of
1.44% for RWA and 0.5% for leverage ratio denominator (LRD). 4 Includes
applicable add-ons of 0.36% for RWA and 0.13% for LRD. 5 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. Low-trigger loss-absorbing AT1 capital was partly offset by
required deductions for goodwill on a phase-in basis. 6 Includes
outstanding high- and 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. | | | | | | | | |

Explanation of the difference between the IFRS and regulatory scope of consolidation

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 active in banking and finance. However, subsidiaries consolidated under IFRS whose business is outside the banking and finance sector are excluded from the regulatory scope of consolidation.

The key difference between the IFRS and regulatory capital scope of consolidation relates to the following entities as of 30 September 2017 :

– 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

– joint ventures that are fully consolidated for regulatory capital purposes, but which are accounted for using the equity method under IFRS

– UBS Capital Securities (Jersey) Ltd., which has issued preferred securities and is consolidated for regulatory capital purposes but not for IFRS purposes. This entity holds notes issued by UBS AG, which are eliminated in the consolidated regulatory capital accounts. This entity does not have material third-party asset balances and its equity is attributable to non-controlling interests

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 column “Balance sheet in accordance with IFRS scope of consolidation” and the “Balance sheet in accordance with regulatory scope of consolidation” column in the “Reconciliation of accounting balance sheet to balance sheet under the regulatory scope of consolidation” table. As of 30 September 2017 , 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 consolidated neither under IFRS nor under the regulatory scope. These investments mainly consisted of infrastructure holdings and joint operations (e.g., settlement and clearing institutions, 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 on the legal structure of the UBS Group and on the IFRS scope of consolidation is provided on pages 13–14 and 325–326, respectively, of our Annual Report 2016, available under “Annual reporting” at www.ubs.com/investors .

| Main legal entities
consolidated under IFRS but not included in the regulatory scope of
consolidation | | | |
| --- | --- | --- | --- |
| | 30.9.17 | | |
| CHF million | Total assets¹ | Total equity¹ | Purpose |
| UBS Asset Management Life Ltd | 9,986 | 40 | Life Insurance |
| A&Q Alternative Solution Limited | 373 | 366² | Investment vehicle for multiple investors |
| A&Q Alternative Solution Master Limited | 372 | 370² | Investment vehicle for multiple investors |
| A&Q Alpha Select Hedge Fund XL | 170 | 85² | Investment vehicle for multiple investors |
| UBS Life Insurance Company USA | 164 | 41 | Life Insurance |
| A&Q Alpha Select Hedge Fund Limited | 123 | 122² | Investment vehicle for multiple investors |
| A&Q Global Alpha Strategies XL Limited | 108 | 54² | Investment vehicle for multiple investors |
| 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. | | | |

UBS Group AG consolidated

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 BIS 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 “Composition of capital” table.

| Reconciliation of accounting balance
sheet to balance sheet under the regulatory scope of consolidation — As of 30.9.17 | 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 | References¹ |
| --- | --- | --- | --- | --- | --- |
| CHF million | | | | | |
| Assets | | | | | |
| Cash and balances with central banks | 94,563 | | | 94,563 | |
| Due from banks | 15,047 | (176) | | 14,871 | |
| Cash collateral on securities borrowed | 16,614 | | | 16,614 | |
| Reverse repurchase agreements | 87,889 | | | 87,889 | |
| Trading portfolio assets | 114,297 | (10,246) | | 104,052 | |
| Positive replacement values | 119,462 | 10 | | 119,472 | |
| Cash collateral receivables on derivative instruments | 24,928 | | | 24,928 | |
| Loans | 314,536 | 85 | | 314,621 | |
| Financial assets designated at fair value | 50,738 | | | 50,738 | |
| Financial assets available for sale | 13,043 | (31) | | 13,012 | |
| Financial assets held to maturity | 9,005 | | | 9,005 | |
| Consolidated participations | 0 | 102 | | 102 | |
| Investments in associates | 987 | | | 987 | |
| of which: goodwill | 340 | | | 340 | 4 |
| Property, equipment and software | 8,647 | (58) | | 8,590 | |
| Goodwill and intangible assets | 6,388 | | | 6,388 | |
| of which: goodwill | 6,155 | | | 6,155 | 4 |
| of which: intangible assets | 233 | | | 233 | 5 |
| Deferred tax assets | 12,670 | 1 | | 12,671 | |
| of which: deferred tax
assets recognized for tax loss carry-forwards | 8,113 | 0 | | 8,113 | 9 |
| of which: deferred tax
assets on temporary differences | 4,557 | 1 | | 4,558 | 12 |
| Other assets | 24,783 | (192) | | 24,591 | |
| of which: net defined
benefit pension and other post-employment assets | 0 | | | 0 | 10 |
| Total assets | 913,599 | (10,505) | 0 | 903,094 | |

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

| As of 30.9.17 | 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 | References¹ |
| --- | --- | --- | --- | --- | --- |
| CHF million | | | | | |
| Liabilities | | | | | |
| Due to banks | 10,639 | (34) | | 10,605 | |
| Cash collateral on securities lent | 2,435 | | | 2,435 | |
| Repurchase agreements | 17,535 | | | 17,535 | |
| Trading portfolio liabilities | 30,620 | | | 30,620 | |
| Negative replacement values | 115,457 | 8 | | 115,465 | |
| Cash collateral payables on derivative instruments | 31,899 | | | 31,899 | |
| Due to customers | 401,711 | (45) | | 401,665 | |
| Financial liabilities designated at fair value | 56,585 | | | 56,585 | |
| Debt issued | 133,497 | (11) | | 133,486 | |
| of which: amount eligible
for high-trigger loss-absorbing additional tier 1 capital² | 5,189 | | | 5,189 | 13 |
| of which: amount eligible
for low-trigger loss-absorbing additional tier 1 capital² | 2,366 | | | 2,366 | 13 |
| of which: amount eligible
for low-trigger loss-absorbing tier 2 capital³ | 7,844 | | | 7,844 | 7 |
| of which: amount eligible
for capital instruments subject to phase-out from tier 2 capital⁴ | 683 | | | 683 | 8 |
| Provisions | 3,136 | | | 3,136 | |
| Other liabilities | 55,848 | (10,368) | | 45,480 | |
| of which: amount eligible
for high-trigger loss-absorbing capital (Deferred Contingent Capital Plan
(DCCP))⁵ | 950 | | | 950 | 13 |
| of which: deferred tax
liabilities related to goodwill | 53 | | | 53 | 4 |
| of which: deferred tax
liabilities related to other intangible assets | 4 | | | 4 | 5 |
| Total liabilities | 859,364 | (10,451) | 0 | 848,913 | |
| Equity | | | | | |
| Share capital | 385 | | | 385 | 1 |
| Share premium | 25,782 | | | 25,782 | 1 |
| Treasury shares | (2,155) | | | (2,155) | 3 |
| Retained earnings | 35,107 | (165) | | 34,942 | 2 |
| Other comprehensive income recognized directly in equity, net of
tax | (5,626) | 111 | | (5,515) | 3 |
| of which: unrealized gains /
(losses) from cash flow hedges | 621 | | | 621 | 11 |
| Equity attributable to UBS
Group AG shareholders | 53,493 | (55) | | 53,438 | |
| Equity attributable to non-controlling interests | 743 | | | 743 | 6 |
| Total equity | 54,236 | (55) | | 54,181 | |
| Total liabilities and equity | 913,599 | (10,505) | | 903,094 | |
| 1 References link the lines of this table to the respective
reference numbers provided in the “References” column in the “Composition of
capital” table. 2 Represents IFRS carrying value. 3 IFRS carrying value
is CHF 8,256 million. 4 IFRS carrying value is CHF 886 million. 5 IFRS
carrying value is CHF 1,869 million. Refer to the “Compensation” section of
our Annual Report 2016 for more information on DCCP. | | | | | |

UBS Group AG consolidated

Composition of capital

The table below and on the following pages provides the “Composition of capital” as defined by BIS and FINMA. Reference is made to items reconciling to the balance sheet under the regulatory scope of consolidation as disclosed in the “Reconciliation of accounting balance sheet to balance sheet under the regulatory scope of consolidation” table. Where relevant, the effect of phase-in arrangements is disclosed as well.

Refer to “Capital instruments of UBS Group AG consolidated and UBS AG consolidated and standalone” 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 key features of our regulatory capital instruments, as well as the full terms and conditions.

Composition of capital — As of 30.9.17		Numbers phase-in	Effect of the transition phase	References¹
CHF million, except where
indicated
1	Directly issued qualifying common share (and equivalent for
non-joint stock companies) capital plus related stock
surplus	26,167		1
2	Retained earnings	34,942		2
3	Accumulated other comprehensive income (and other
reserves)	(7,670)		3
4	Directly issued capital subject to phase-out from common equity
tier 1 (CET1) capital (only applicable to non-joint stock
companies)
5	Common share capital issued by subsidiaries and held by third
parties (amount allowed in Group CET1 capital)
6	Common equity tier 1 capital
before regulatory adjustments	53,438
7	Prudential valuation
adjustments	(55)
8	Goodwill, net of tax, less additional tier 1 (AT1) capital	(5,154)	(1,288)	4
9	Intangible assets, net of tax	(229)		5
10	Deferred tax assets recognized for tax loss carry-forwards²	(6,577)	(1,644)	9
11	Unrealized (gains) / losses from cash flow hedges, net of tax	(621)		11
12	Expected losses on advanced internal ratings-based portfolio
less general provisions	(515)
13	Securitization gain on sale
14	Own credit related to financial liabilities designated at fair
value, net of tax, and replacement values	105
15	Defined benefit plans	0		10
16	Compensation and own shares-related capital components (not
recognized in net profit)³	(1,505)		13
17	Reciprocal crossholdings in common equity
17a	Qualifying interest where a controlling influence is exercised
together with other owners (CET1 instruments)
17b	Consolidated investments (CET1 instruments)
18	Investments in the capital of banking, financial and insurance
entities that are outside the scope of regulatory consolidation, net of eligible short positions, 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, net of eligible short
positions (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)	(790)	(491)	12
22	Amount exceeding the 15% threshold	0	0
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 investments treated according to the
PD/LGD approach
26a	Other adjustments relating to the application of an
internationally accepted accounting standard	(190)
26b	Other deductions	(1,861)
27	Regulatory adjustments applied to common equity tier 1 due to
insufficient additional tier 1 and tier 2 to cover deductions	0
28	Total regulatory adjustments
to common equity tier 1	(17,393)	(3,424)

Composition of capital (continued)

As of 30.9.17		Numbers phase-in	Effect of the transition phase	References¹
CHF million, except where
indicated
29	Common equity tier 1 capital
(CET1)	36,045	(3,424)
30	Directly issued qualifying additional tier 1 instruments plus
related stock surplus	8,872	0
31	of which: classified as
equity under applicable accounting standards
32	of which: classified as
liabilities under applicable accounting standards	8,872		13
33	Directly issued capital instruments subject to phase-out from
additional tier 1
34	Additional tier 1 instruments (and CET1 instruments not included
in line 5) issued by subsidiaries and held by third parties (amount allowed in Group AT1)	687	(687)	6
35	of which: instruments issued
by subsidiaries subject to phase-out	687	(687)
36	Additional tier 1 capital
before regulatory adjustments	9,559	(687)
37	Investments in own additional tier 1 instruments
38	Reciprocal crossholdings in additional tier 1 instruments
38a	Qualifying interest where a controlling influence is exercised
together with other owner (AT1 instruments)
38b	Holdings in companies which are to be consolidated (AT1
instruments)
39	Investments in the capital of banking, financial and insurance
entities that are outside the scope of regulatory consolidation, net of
eligible short positions, 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
(net of eligible short positions)
41	National specific regulatory adjustments	(1,288)	1,288
42	Regulatory adjustments applied to additional tier 1 due to
insufficient tier 2 to cover deductions
	Tier 1 adjustments on impact
of transitional arrangements	(1,288)	1,288
	of which: goodwill net of
tax, offset against additional loss-absorbing tier 1 capital	(1,288)	1,288
42a	Excess of the adjustments which are allocated to the common
equity tier 1 capital
43	Total regulatory adjustments
to additional tier 1 capital	(1,288)	1,288
44	Additional tier 1 capital
(AT1)	8,270	602
45	Tier 1 capital (T1 = CET1 +
AT1)	44,315	(2,822)
46	Directly issued qualifying tier 2 instruments plus related stock
surplus⁴	8,037	0	7, 13
47	Directly issued capital instruments subject to phase-out from
tier 2	699	(699)	8
48	Tier 2 instruments (and CET1 and AT1 instruments not included in
lines 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	8,736	(699)
52	Investments in own tier 2 instruments⁵	(17)	16	7, 8
53	Reciprocal crossholdings in tier 2 instruments
53a	Qualifying interest where a controlling influence is exercised
together with other owner (tier 2 instruments)
53b	Investments to be consolidated (tier 2 instruments)
54	Investments in the capital of banking, financial and insurance
entities that are outside the scope of regulatory consolidation, net of
eligible short positions, where the bank does not own more than 10% of the
issued common share capital of the entity (amount above the 10% threshold)
55	Significant investments in the capital banking, financial and
insurance entities that are outside the scope of regulatory consolidation
(net of eligible short positions)
56	National specific regulatory adjustments
56a	Excess of the adjustments
which are allocated to the AT1 capital
57	Total regulatory adjustments
to tier 2 capital	(17)	16

UBS Group AG consolidated

Composition of capital (continued)

As of 30.9.17		Numbers phase-in	Effect of the transition phase
CHF million, except where
indicated
58	Tier 2 capital (T2)	8,718	(683)
	of which: high-trigger
loss-absorbing capital	88	13
	of which: low-trigger loss-absorbing
capital	7,844	7
59	Total capital (TC = T1 + T2)	53,033	(3,505)
	Amount with risk weight pursuant to the transitional arrangement
(phase-in)		(1,227)
	of which: net defined
benefit pension assets
	of which: deferred tax
assets on temporary differences		1,227
60	Total risk-weighted assets	239,190	(1,227)
	Capital ratios and buffers
61	Common equity tier 1 (as a percentage of risk-weighted assets)	15.1
62	Tier 1 (pos 45 as a percentage of risk-weighted assets)	18.5
63	Total capital (pos 59 as a percentage of risk-weighted assets)	22.2
64	CET1 requirement (base capital, buffer capital and
countercyclical buffer requirements) plus G-SIB buffer requirement, expressed
as a percentage of risk-weighted assets⁶	6.5
65	of which: capital buffer
requirement	1.3
66	of which: bank-specific
countercyclical buffer requirement	0.2
67	of which: G-SIB buffer
requirement	0.5
68	Common equity tier 1 available to meet buffers (as a percentage
of risk-weighted assets)	15.1
68a–f	Not applicable for systemically relevant banks according to
FINMA Circular 11/2
72	Non-significant investments in the capital of other financials	1,255
73	Significant investments in the common stock of financials	707
74	Mortgage servicing rights, net of tax	0
75	Deferred tax assets arising from temporary differences, net of
tax	4,672
	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
1 References link the lines of this table to the respective
reference numbers provided in the “References” column in the “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
CHF 455 million in DCCP-related charge for regulatory capital purposes.
4 Consists of loss-absorbing tier 2 capital of CHF 7,845 million, 45% of
the gross unrealized gains on available for sale equity and debt instruments
of CHF 103 million in line with BIS rules and deferred contingent capital
plan instruments of CHF 88 million. 5 Consists of own instruments for
loss-absorbing tier 2 capital of CHF 1 million and for phase-out tier 2
capital instruments of CHF 16 million. 6 BCBS requirements are exceeded by
our Swiss SRB requirements. Refer to the “Capital Management“ section of our
Annual Report 2016 for more information on the Swiss SRB requirements.

Section 4 Leverage ratio

BIS Basel III leverage ratio

The BIS 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. In addition, balance sheet assets deducted from our tier 1 capital are excluded from LRD, which leads to a difference between phase-in and fully applied LRD for deferred tax assets and net defined benefit pension plan assets.

The “Reconciliation of IFRS total assets to BIS Basel III total on-balance sheet exposures excluding derivatives and securities financing transactions” table below shows the difference between total IFRS assets per IFRS consolidation scope and the BIS total on-balance sheet exposures, which are the starting point for calculating the BIS LRD as shown in the “BIS Basel III leverage ratio common disclosure” table on the next page. The difference is due to the application of the regulatory scope of consolidation for the purpose of the BIS calculation. In addition, carrying values for derivative financial instruments and securities financing transactions are deducted from IFRS total assets. They are measured differently under BIS leverage ratio rules and are therefore added back in separate exposure line items in the “BIS Basel III leverage ratio common disclosure” table on the next page.

As of 30 September 2017, our BIS Basel III leverage ratio was 4.7% on a fully applied basis and 5.0% on a phase-in basis. The BIS Basel III LRD was CHF 884.8 billion on a fully applied basis and CHF 887.0 billion on a phase-in basis. Information on our Swiss SRB leverage ratio and the movement in our LRD on a fully applied basis compared with the prior quarter is provided on pages 66–67 of our third quarter 2017 report, available under “Quarterly reporting” at www.ubs.com/investors .

Difference between the Swiss SRB and BIS leverage ratio

The LRD is the same under Swiss SRB and BIS rules. However, there is a difference in the capital numerator between the two frameworks. Under BIS rules, only common equity tier 1 and additional tier 1 capital are included in the numerator. Under Swiss SRB 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 TLAC-eligible senior unsecured debt.

| Reconciliation of IFRS total
assets to BIS Basel III total on-balance sheet exposures excluding
derivatives and securities financing transactions — CHF million | 30.9.17 | 30.6.17 |
| --- | --- | --- |
| On-balance sheet exposures | | |
| IFRS total assets | 913,599 | 890,831 |
| Adjustment for investments in banking, financial, insurance or
commercial entities that are consolidated for accounting purposes but outside
the scope of regulatory consolidation | (10,505) | (10,696) |
| 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 assets¹ | (144,400) | (144,599) |
| Less carrying value of securities financing transactions in IFRS
total assets² | (123,932) | (107,061) |
| Adjustments to accounting values | 0 | 0 |
| On-balance sheet items
excluding derivatives and securities financing transactions, but including
collateral | 634,762 | 628,475 |
| Asset amounts deducted in determining BIS Basel III tier 1
capital | (14,744) | (14,408) |
| Total on-balance sheet
exposures (excluding derivatives and securities financing transactions) | 620,018 | 614,067 |
| 1 Consists of positive replacement values and cash collateral
receivables on derivative instruments in accordance with the regulatory scope
of consolidation. 2 Consists of cash collateral on securities borrowed,
reverse repurchase agreements, margin loans and prime brokerage receivables
related to securities financing transactions in accordance with the
regulatory scope of consolidation. | | |

UBS Group AG consolidated

| BIS Basel III leverage ratio common disclosure — CHF million, except where
indicated | | 30.9.17 | 30.6.17 |
| --- | --- | --- | --- |
| | On-balance sheet exposures | | |
| 1 | On-balance sheet items excluding derivatives and SFTs, but
including collateral | 634,762 | 628,475 |
| 2 | (Asset amounts deducted in determining Basel III tier 1 capital) | (14,744) | (14,408) |
| 3 | Total on-balance sheet
exposures (excluding derivatives and SFTs) | 620,018 | 614,067 |
| | Derivative exposures | | |
| 4 | Replacement cost associated with all derivatives transactions
(i.e., net of eligible cash variation margin) | 44,622 | 42,545 |
| 5 | Add-on amounts for PFE associated with all derivatives
transactions | 87,122 | 83,041 |
| 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) | (13,090) | (11,303) |
| 8 | (Exempted CCP leg of client-cleared trade exposures) | (19,091) | (17,020) |
| 9 | Adjusted effective notional amount of all written credit derivatives¹ | 108,523 | 108,420 |
| 10 | (Adjusted effective notional offsets and add-on deductions for
written credit derivatives)² | (106,178) | (106,029) |
| 11 | Total derivative exposures | 101,908 | 99,653 |
| | Securities financing
transaction exposures | | |
| 12 | Gross SFT assets (with no recognition of netting), after
adjusting for sale accounting transactions | 194,383 | 174,874 |
| 13 | (Netted amounts of cash payables and cash receivables of gross
SFT assets) | (70,451) | (67,813) |
| 14 | CCR exposure for SFT assets | 8,716 | 8,751 |
| 15 | Agent transaction exposures | 0 | 0 |
| 16 | Total securities financing
transaction exposures | 132,648 | 115,811 |
| | Other off-balance sheet
exposures | | |
| 17 | Off-balance sheet exposure at gross notional amount | 94,760 | 96,671 |
| 18 | (Adjustments for conversion to credit equivalent amounts) | (62,365) | (63,228) |
| 19 | Total off-balance sheet
items | 32,395 | 33,443 |
| | Total exposures (leverage
ratio denominator), phase-in | 886,969 | 862,975 |
| | (Additional asset amounts deducted in determining Basel III tier
1 capital fully applied) | (2,135) | (2,096) |
| | Total exposures (leverage
ratio denominator), fully applied | 884,834 | 860,879 |
| | Capital and total exposures
(leverage ratio denominator), phase-in | | |
| 20 | Tier 1 capital | 44,315 | 43,421 |
| 21 | Total exposures (leverage ratio denominator) | 886,969 | 862,975 |
| | Leverage ratio | | |
| 22 | Basel III leverage ratio
phase-in (%) | 5.0 | 5.0 |
| | Capital and total exposures
(leverage ratio denominator), fully applied | | |
| 20 | Tier 1 capital | 41,493 | 40,668 |
| 21 | Total exposures (leverage ratio denominator) | 884,834 | 860,879 |
| | Leverage ratio | | |
| 22 | Basel III leverage ratio
fully applied (%) | 4.7 | 4.7 |
| 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. | | | |

BIS Basel III leverage ratio summary comparison — CHF million		30.9.17	30.6.17
1	Total consolidated assets as per published financial statements	913,599	890,831
2	Adjustment for investments in banking, financial, insurance or
commercial entities that are consolidated for accounting purposes but outside
the scope of regulatory consolidation¹	(25,249)	(25,104)
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	(42,492)	(44,946)
5	Adjustment for securities financing transactions (i.e., repos
and similar secured lending)	8,716	8,751
6	Adjustment for off-balance sheet items (i.e., conversion to
credit equivalent amounts of off-balance sheet exposures)	32,395	33,443
7	Other adjustments	0	0
8	Leverage ratio exposure (leverage
ratio denominator), phase-in	886,969	862,975
1 This item includes assets that are deducted from tier 1
capital.

BIS Basel III leverage ratio
CHF million, except where
indicated
Phase-in	30.9.17	30.6.17	31.3.17	31.12.16
Total tier 1 capital	44,315	43,421	43,182	44,941
BIS total exposures (leverage ratio denominator)	886,969	862,975	883,408	874,925
BIS Basel III leverage ratio (%)	5.0	5.0	4.9	5.1
Fully applied	30.9.17	30.6.17	31.3.17	31.12.16
Total tier 1 capital	41,493	40,668	40,317	39,844
BIS total exposures (leverage ratio denominator)	884,834	860,879	881,183	870,470
BIS Basel III leverage ratio (%)	4.7	4.7	4.6	4.6

UBS Group AG consolidated

Section 5 Liquidity coverage ratio

High-quality liquid assets

High-quality liquid assets (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, 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.

High-quality liquid assets
	Average 3Q17¹			Average 2Q17¹
CHF billion	Level 1 weighted liquidity value²	Level 2 weighted liquidity value²	Total weighted liquidity value²	Level 1 weighted liquidity value²	Level 2 weighted liquidity value²	Total weighted liquidity value²
Cash balances³	110	0	110	114	0	114
Securities	60	16	76	66	15	80
Total high-quality liquid
assets⁴	170	16	186	179	15	194
1 Calculated based on an average of 64 data points in the third
quarter of 2017 and 60 data points in the second quarter of 2017. 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.

Liquidity coverage ratio

In the third quarter of 2017, our liquidity coverage ratio (LCR) increased 11 percentage points to 142%, remaining above the 110% Group LCR minimum communicated by FINMA. The increase in LCR was mainly driven by lower average net cash outflows from financial liabilities at fair value and other unsecured wholesale funding, as well as additional debt issuances. These effects more than offset the negative impact from a reduction in overall HQLA due to lower deposit volumes and higher funding in our US operations to meet our liquidity requirements.

Liquidity coverage ratio
		Average 3Q17¹		Average 2Q17
CHF billion, except where
indicated		Unweighted value	Weighted value²	Unweighted value	Weighted value²
High-quality liquid assets
1	High-quality liquid assets	188	186	196	194
Cash outflows
2	Retail deposits and deposits from small business customers	231	25	232	25
3	of which: stable deposits	36	1	39	1
4	of which: less stable
deposits	195	24	193	24
5	Unsecured wholesale funding	180	102	196	113
6	of which: operational
deposits (all counterparties)	35	9	35	9
7	of which: non-operational
deposits (all counterparties)	133	82	146	90
8	of which: unsecured debt	11	11	15	15
9	Secured wholesale funding		75		77
10	Additional requirements:	83	25	88	29
11	of which: outflows related
to derivatives and other transactions	42	17	45	19
12	of which: outflows related
to loss of funding on debt products³	0	0	0	0
13	of which: committed credit
and liquidity facilities	41	8	44	10
14	Other contractual funding obligations	15	14	18	15
15	Other contingent funding obligations	222	5	206	6
16	Total cash outflows		247		266
Cash inflows
17	Secured lending	271	76	292	77
18	Inflows from fully performing exposures	59	31	59	31
19	Other cash inflows	10	10	10	10
20	Total cash inflows	340	117	361	118
			Average 3Q17¹		Average 2Q17
CHF billion, except where
indicated			Total adjusted value⁴		Total adjusted value⁴
Liquidity coverage ratio
21	High-quality liquid assets		186		194
22	Net cash outflows		131		148
23	Liquidity coverage ratio (%)		142		131
1 Calculated based on an average of 64 data points in the third
quarter of 2017 and 60 data points in the second quarter of 2017. 2
Calculated after the application of 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.

Significant regulated subsidiaries and sub-groups

Section 1 Introduction

The sections below include required information on the regulatory capital components and capital ratios, as well as leverage and liquidity coverage ratios where required, of UBS AG standalone, UBS Switzerland AG standalone, UBS Limited standalone and UBS Americas Holding LLC consolidated. UBS AG consolidated capital and leverage ratio information is provided in the UBS AG third quarter 2017 report, which will be available as of 1 November 2017 under “Quarterly reporting” at www.ubs.com/investors .

Local regulators may also require 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 .

Capital information in this section is based on Pillar 1 capital 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

Swiss SRB going concern requirements and information

Under Swiss SRB regulations, article 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.

The FINMA decree issued in 2017 newly establishes the measure of total going concern capital for UBS AG. Common equity tier 1 (CET1) and high-trigger additional tier 1 capital instruments are eligible as going concern capital, and low-trigger tier 2 capital instruments remain eligible until the earlier of (i) their maturity or the first call date or (ii) 31 December 2019. Capital requirements based on risk-weighted assets (RWA) and leverage ratio denominator (LRD) are the same under phase-in and fully applied rules. The capital requirements based on RWA include a minimum CET1 capital requirement of 10% plus the effects from countercyclical buffers (CCBs), and a total going concern capital requirement of 14.3% plus the effects from CCBs. The capital requirements based on LRD include a minimum CET1 capital requirement of 3.5% and a total going concern leverage ratio requirement of 5.0%. Compared with the requirements set by the December 2013 FINMA decree, the total capital requirement increased 0.3 percentage points and the total leverage ratio requirement increased 1.6 percentage points. Additionally, for direct and indirect investments, including holding of regulatory capital instruments of UBS AG in subsidiaries that are active in banking and finance, the new FINMA decree abolishes the threshold deduction approach by introducing a risk-weighting approach, with a phase-in period until 1 January 2028. Starting 1 July 2017, these investments have been risk-weighted at 200%. As of 1 January 2019, the risk weights will gradually be raised by 5 percentage points per year for Swiss-domiciled investments and by 20 percentage points per year for foreign-domiciled investments until the fully applied risk weights are 250% and 400%, respectively.

Going concern capital, leverage ratio denominator and risk-weighted assets

Our phase-in going concern capital increased by CHF 26.2 billion and our phase-in risk-weighted assets increased by CHF 49 billion, primarily resulting from the aforementioned application of the new FINMA decree, which changed the treatment for investments in subsidiaries that are active in banking and finance.

Our LRD increased by CHF 31 billion, driven by the aforementioned change related to the treatment for investments, as well as currency- and asset size-related movements.

Swiss SRB going concern requirements and information

| Swiss SRB going concern
requirements and information | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| As of 30.9.17 | Swiss SRB, including transitional arrangements (phase-in) | | | | Swiss SRB after transition (fully applied) | | | |
| CHF million, except where
indicated | RWA | | LRD | | RWA | | LRD | |
| Required loss-absorbing
capacity | in %¹ | | in %¹ | | in % | | in % | |
| Common equity tier 1 capital | 10.02 | 28,333 | 3.50 | 20,895 | 10.02 | 37,244 | 3.50 | 20,885 |
| of which: minimum capital | 4.50 | 12,727 | 1.50 | 8,955 | 4.50 | 16,729 | 1.50 | 8,951 |
| of which: buffer capital | 5.50 | 15,555 | 2.00 | 11,940 | 5.50 | 20,447 | 2.00 | 11,934 |
| of which: countercyclical
buffer² | 0.02 | 52 | | | 0.02 | 68 | | |
| Maximum additional tier 1
capital | 4.30 | 12,161 | 1.50 | 8,955 | 4.30 | 15,986 | 1.50 | 8,951 |
| of which: high-trigger
loss-absorbing additional tier 1 minimum capital | 3.50 | 9,898 | 1.50 | 8,955 | 3.50 | 13,012 | 1.50 | 8,951 |
| of which: high-trigger
loss-absorbing additional tier 1 buffer capital | 0.80 | 2,263 | | | 0.80 | 2,974 | | |
| Total going concern capital | 14.32³ | 40,494 | 5.00³ | 29,850 | 14.32³ | 53,230 | 5.00³ | 29,836 |
| Eligible loss-absorbing
capacity | | | | | | | | |
| Common equity tier 1 capital | 17.51 | 49,532 | 8.30 | 49,532 | 13.25 | 49,247 | 8.25 | 49,247 |
| High-trigger loss-absorbing
additional tier 1 capital⁴ | 4.07 | 11,514 | 1.93 | 11,514 | 0.99 | 3,670 | 0.62 | 3,670 |
| of which: high-trigger
loss-absorbing additional tier 1 capital | 1.30 | 3,670 | 0.61 | 3,670 | 0.99 | 3,670 | 0.62 | 3,670 |
| of which: low-trigger
loss-absorbing tier 2 capital | 2.77 | 7,844 | 1.31 | 7,844 | | | | |
| Total going concern capital | 21.59 | 61,046 | 10.23 | 61,046 | 14.23 | 52,917 | 8.87 | 52,917 |
| Risk-weighted assets /
leverage ratio denominator | | | | | | | | |
| Risk-weighted assets | 282,813 | | | | 371,760 | | | |
| Leverage ratio denominator | | | 597,002 | | | | 596,716 | |
| 1 By FINMA decree, requirements on a phase-in basis exceed those
based on the transitional arrangements of the Swiss Capital Adequacy
Ordinance, i.e., a total going concern capital ratio requirement of 12% plus
the effect of countercyclical buffer (CCB) requirements of 0.02%, of which 9%
plus the effect of CCB requirements of 0.02% must be satisfied with CET1
capital, and a total going concern leverage ratio requirement of 3.5%, of
which 2.6% must be satisfied with CET1 capital. 2 Going concern capital
ratio requirements as of 30 September 2017 include CCB requirements of 0.02%
for the phase-in and fully applied requirement. 3 Includes applicable
add-ons of 1.44% for RWA and 0.5% for LRD. 4 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. Outstanding low-trigger loss-absorbing tier 2 capital
instruments are subject to amortization starting five years prior to their
maturity. | | | | | | | | |

Significant regulated subsidiaries and sub-groups

Current and former Swiss SRB going concern information¹	Swiss SRB, including transitional arrangements (phase-in)	Swiss SRB after transition (fully applied)	Former Swiss SRB (phase-in)	Former Swiss SRB (phase-in)
CHF million, except where
indicated	30.9.17	30.9.17	30.6.17	31.12.16
Going concern capital
Common equity tier 1 capital	49,532	49,247	50,006	51,331
Deductions from common equity tier 1 capital			(15,115)	(17,348)
Total common equity tier 1
capital	49,532	49,247	34,891	33,983
High-trigger loss-absorbing additional tier 1 capital	3,670	3,670	3,642	3,919
Low-trigger loss-absorbing additional tier 1 capital²			1,095	1,071
Deductions from high- and low-trigger loss-absorbing additional
tier 1 capital			(4,738)	(4,990)
Total loss-absorbing
additional tier 1 capital	3,670	3,670	0	0
Total tier 1 capital	53,203	52,917	34,891	33,983
Low-trigger loss-absorbing tier 2 capital³	7,844		8,080	10,402
Non-Basel III-compliant tier 2 capital⁴			1,326	1,340
Deductions from tier 2 capital			(9,406)	(11,742)
Total tier 2 capital	7,844		0	0
Total going concern capital	61,046	52,917
Total capital			34,891	33,983
Risk-weighted assets /
leverage ratio denominator
Risk-weighted assets	282,813	371,760	233,737	232,422
of which: Direct and
indirect investments in Swiss-domiciled subsidiaries⁵	31,650	39,562
of which: Direct and
indirect investments in foreign-domiciled subsidiaries⁵	81,034	162,069
Leverage ratio denominator	597,002	596,716	566,091	561,979
Capital ratios (%)
Tier 1 capital ratio			14.9	14.6
Total capital ratio			14.9	14.6
Total going concern capital ratio	21.6	14.2
of which: CET1 capital ratio	17.5	13.2	14.9	14.6
Leverage ratios (%)
Tier 1 leverage ratio			6.2	6.0
Total leverage ratio			6.2	6.0
Total going concern leverage ratio	10.2	8.9
of which: CET1 leverage
ratio	8.3	8.3	6.2	6.0
1 The term “Going concern capital” is used in this table in
reference to the information presented under the current Swiss SRB framework
only and does not apply to the information presented under the former Swiss
SRB framework. 2 The relevant capital instrument was issued after the new
Swiss SRB framework had been implemented and therefore does not qualify as
going concern capital. 3 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. 4 Non-Basel
III compliant tier 2 capital instruments do not qualify as going concern
capital. 5 Carrying value for direct and indirect investments, including
holding of regulatory capital instruments in Swiss-domiciled subsidiaries, is
CHF 15,825 million and for direct and indirect investments, including holding
of regulatory capital instruments in foreign-domiciled subsidiaries, is CHF
40,517 million, currently risk weighted at 200%. Risk weights are gradually
increased by 5% per year for Swiss-domiciled investments and 20% per year for
foreign-domiciled investments starting 1 January 2019 until the fully applied
risk weights of 250% and 400%, respectively, are applied.

Leverage ratio information

| Swiss SRB leverage ratio
denominator | Swiss SRB, incl. transitional arrangements (phase-in) | Swiss SRB after transition (fully applied) | Former Swiss SRB (phase-in) | Former Swiss SRB (phase-in) |
| --- | --- | --- | --- | --- |
| | 30.9.17 | 30.9.17 | 30.6.17 | 31.12.16 |
| Leverage ratio denominator
(CHF billion) | | | | |
| Swiss GAAP total assets | 468.1 | 468.1 | 453.6 | 439.5 |
| Difference between Swiss GAAP and IFRS total assets | 114.7 | 114.7 | 116.8 | 151.3 |
| Less: derivative exposures and SFTs¹ | (221.1) | (221.1) | (213.3) | (248.3) |
| On-balance sheet exposures
(excluding derivative exposures and SFTs) | 361.6 | 361.6 | 357.1 | 342.5 |
| Derivative exposures | 97.7 | 97.7 | 96.0 | 98.5 |
| Securities financing transactions | 104.2 | 104.2 | 93.3 | 93.5 |
| Off-balance sheet items | 35.7 | 35.7 | 34.3 | 40.7 |
| Items deducted from Swiss SRB tier 1 capital | (2.1) | (2.4) | (14.7) | (13.2) |
| Total exposures (leverage
ratio denominator) | 597.0 | 596.7 | 566.1 | 562.0 |
| 1 Consists of positive replacement values, cash collateral
receivables on derivative instruments, cash collateral on securities
borrowed, reverse repurchase agreements, margin loans and prime brokerage
receivables related to securities financing transactions, which are presented
separately under Derivative exposures and Securities financing transactions
in this table. | | | | |

| BIS Basel III leverage ratio
(phase-in) — CHF million, except where indicated | 30.9.17 | 30.6.17 | 31.3.17 | 31.12.16 |
| --- | --- | --- | --- | --- |
| Total tier 1 capital | 54,363 | 34,891 | 33,632 | 33,983 |
| Total exposures (leverage ratio denominator) | 597,002 | 566,091 | 577,990 | 561,979 |
| BIS Basel III leverage ratio (%) | 9.1 | 6.2 | 5.8 | 6.0 |

Liquidity coverage ratio

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

Liquidity coverage ratio
	Weighted value¹
CHF billion, except where
indicated	Average 3Q17²	Average 2Q17
High-quality liquid assets	87	87
Total net cash outflows	65	68
of which: cash outflows	179	188
of which: cash inflows	114	120
Liquidity coverage ratio (%)	134	128
1 Calculated after the application of haircuts and inflow and
outflow rates. 2 Calculated based on an average of 64 data points in the
third quarter of 2017 and 60 data points in the second quarter of 2017.

Significant regulated subsidiaries and sub-groups

Section 3 UBS Switzerland AG standalone

Swiss SRB going and gone concern requirements and information

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 September 2017, the phase-in going concern capital and leverage ratio requirements for UBS Switzerland AG standalone were 12.50% and 3.5%, respectively. The gone concern requirements on a phase-in basis were 6.2% for the RWA-based requirement and 2.0% for the LRD-based requirement.

| Swiss SRB going and gone
concern requirements and information¹ | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| As of 30.9.17 | Swiss SRB, including transitional arrangements (phase-in) | | | | Swiss SRB as of 1.1.20 (fully applied) | | | |
| CHF million, except where
indicated | RWA | | LRD | | RWA | | LRD | |
| Required loss-absorbing
capacity | in %² | | in % | | in % | | in % | |
| Common equity tier 1 capital | 9.50 | 9,191 | 2.60 | 7,936 | 10.50 | 10,158 | 3.50 | 10,683 |
| of which: minimum capital | 5.80 | 5,612 | 2.10 | 6,410 | 4.50 | 4,354 | 1.50 | 4,578 |
| of which: buffer capital | 3.20 | 3,096 | 0.50 | 1,526 | 5.50 | 5,322 | 2.00 | 6,105 |
| of which: countercyclical
buffer³ | 0.50 | 482 | | | 0.50 | 482 | | |
| Maximum additional tier 1
capital | 3.00 | 2,903 | 0.90 | 2,747 | 4.30 | 4,161 | 1.50 | 4,578 |
| of which: high-trigger
loss-absorbing additional tier 1 minimum capital | 2.20 | 2,129 | 0.90 | 2,747 | 3.50 | 3,387 | 1.50 | 4,578 |
| of which: high-trigger
loss-absorbing additional tier 1 buffer capital | 0.80 | 774 | | | 0.80 | 774 | | |
| Total going concern capital | 12.50 | 12,093 | 3.50 | 10,683 | 14.80⁴ | 14,319 | 5.00⁴ | 15,261 |
| Base gone concern loss-absorbing capacity, including applicable
add-ons | 6.20⁵ | 5,999 | 2.00⁵ | 6,105 | 14.30⁴ | 13,837 | 5.00⁴ | 15,261 |
| Total gone concern
loss-absorbing capacity | 6.20 | 5,999 | 2.00 | 6,105 | 14.30 | 13,837 | 5.00 | 15,261 |
| Total loss-absorbing
capacity | 18.70 | 18,093 | 5.50 | 16,788 | 29.10 | 28,156 | 10.00 | 30,523 |
| Eligible loss-absorbing
capacity | | | | | | | | |
| Common equity tier 1 capital | 10.62 | 10,272 | 3.37 | 10,272 | 10.62 | 10,272 | 3.37 | 10,272 |
| High-trigger loss-absorbing
additional tier 1 capital | 2.07 | 2,000 | 0.66 | 2,000 | 2.07 | 2,000 | 0.66 | 2,000 |
| of which: high-trigger
loss-absorbing additional tier 1 capital | 2.07 | 2,000 | 0.66 | 2,000 | 2.07 | 2,000 | 0.66 | 2,000 |
| Total going concern capital | 12.68 | 12,272 | 4.02 | 12,272 | 12.68 | 12,272 | 4.02 | 12,272 |
| Gone concern loss-absorbing
capacity | 6.10 | 5,900 | 1.93 | 5,900 | 6.10 | 5,900 | 1.93 | 5,900 |
| of which: TLAC-eligible
senior unsecured debt | 3.51 | 3,400 | 1.11 | 3,400 | 3.51 | 3,400 | 1.11 | 3,400 |
| Total gone concern
loss-absorbing capacity | 6.10 | 5,900 | 1.93 | 5,900 | 6.10 | 5,900 | 1.93 | 5,900 |
| Total loss-absorbing
capacity | 18.78 | 18,172 | 5.95 | 18,172 | 18.78 | 18,172 | 5.95 | 18,172 |
| Risk-weighted assets /
leverage ratio denominator | | | | | | | | |
| Risk-weighted assets | | 96,763 | | | | 96,763 | | |
| Leverage ratio denominator | | | | 305,229 | | | | 305,229 |
| 1 This table does not include the effect of any gone concern
requirement rebate. Refer to the "Capital management" section of
the UBS Group third quarter 2017 report. UBS Switzerland AG is compliant with
all regulatory requirements. 2 The total loss-absorbing capacity ratio
requirement of 18.70% is the current phase-in requirement according to the
Swiss Capital Adequacy Ordinance. In addition, FINMA has defined a total
capital ratio requirement, which is the sum of 14.4% and the effect of CCB
requirements of 0.50%, 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 phase-in requirements. 3 Going
concern capital ratio requirements as of 30 September 2017 include CCB
requirements of 0.50% for the phase-in and fully applied requirement. 4
Includes applicable add-ons of 1.44% for RWA and 0.5% for LRD. 5 Includes
applicable add-ons of 0.36% for RWA and 0.13% for LRD. | | | | | | | | |

Swiss SRB loss-absorbing capacity

| Swiss SRB going and gone
concern information | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | Swiss SRB, including transitional arrangements (phase-in) | | | Swiss SRB as of 1.1.20 (fully applied) | | |
| CHF million, except where
indicated | 30.9.17 | 30.6.17 | 31.12.16 | 30.9.17 | 30.6.17 | 31.12.16 |
| Going concern capital | | | | | | |
| Common equity tier 1 capital | 10,272 | 10,276 | 10,416 | 10,272 | 10,276 | 10,416 |
| High-trigger loss-absorbing additional tier 1 capital | 2,000 | 2,000 | 1,235¹ | 2,000 | 2,000 | 2,000 |
| Total tier 1 capital | 12,272 | 12,276 | 11,651 | 12,272 | 12,276 | 12,416 |
| Total going concern capital | 12,272 | 12,276 | 11,651 | 12,272 | 12,276 | 12,416 |
| Gone concern loss-absorbing
capacity | | | | | | |
| High-trigger loss-absorbing additional tier 1 capital | | | 765¹ | | | |
| Low-trigger loss-absorbing tier 2 capital | 2,500¹ | 2,500¹ | 2,500¹ | 2,500 | 2,500 | 2,500 |
| TLAC-eligible senior unsecured debt | 3,400 | 3,400 | | 3,400 | 3,400 | |
| Total gone concern
loss-absorbing capacity | 5,900 | 5,900 | 3,265 | 5,900 | 5,900 | 2,500 |
| Total loss-absorbing capacity | | | | | | |
| Total loss-absorbing
capacity | 18,172 | 18,176 | 14,916 | 18,172 | 18,176 | 14,916 |
| Risk-weighted assets /
leverage ratio denominator | | | | | | |
| Risk-weighted assets | 96,763 | 94,525 | 93,281 | 96,763 | 94,525 | 93,281 |
| Leverage ratio denominator | 305,229 | 308,917 | 306,586 | 305,229 | 308,917 | 306,586 |
| Capital and loss-absorbing
capacity ratios (%) | | | | | | |
| Going concern capital ratio | 12.7 | 13.0 | 12.5 | 12.7 | 13.0 | 13.3 |
| of which: common equity tier
1 capital ratio | 10.6 | 10.9 | 11.2 | 10.6 | 10.9 | 11.2 |
| Gone concern loss-absorbing capacity ratio | 6.1 | 6.2 | 3.5 | 6.1 | 6.2 | 2.7 |
| Total loss-absorbing capacity ratio | 18.8 | 19.2 | 16.0 | 18.8 | 19.2 | 16.0 |
| Leverage ratios (%) | | | | | | |
| Going concern leverage ratio | 4.0 | 4.0 | 3.8 | 4.0 | 4.0 | 4.0 |
| of which: common equity tier
1 leverage ratio | 3.4 | 3.3 | 3.4 | 3.4 | 3.3 | 3.4 |
| Gone concern leverage ratio | 1.9 | 1.9 | 1.1 | 1.9 | 1.9 | 0.8 |
| Total loss-absorbing capacity leverage ratio | 6.0 | 5.9 | 4.9 | 6.0 | 5.9 | 4.9 |
| 1 Under the Swiss SRB rules, going concern capital includes CET1
and high-trigger loss-absorbing additional tier 1 capital. Outstanding
low-trigger loss-absorbing tier 2 capital instruments would qualify as going
concern capital until the earlier of (i) their maturity or first call date or
(ii) 31 December 2019. However, as of 30 September 2017, 30 June 2017 and 31
December 2016, the total low-trigger loss-absorbing tier 2 capital of CHF
2,500 million was used to meet the gone concern requirements. Additionally,
as of 31 December 2016, CHF 765 million of high-trigger loss-absorbing
additional tier 1 capital was used to meet the gone concern requirements. | | | | | | |

Significant regulated subsidiaries and sub-groups

Leverage ratio information

| Swiss SRB leverage ratio
denominator | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | Swiss SRB, including transitional arrangements (phase-in) | | | Swiss SRB as of 1.1.20 (fully applied) | | |
| | 30.9.17 | 30.6.17 | 31.12.16 | 30.9.17 | 30.6.17 | 31.12.16 |
| Leverage ratio denominator
(CHF billion) | | | | | | |
| Swiss GAAP total assets | 292.8 | 296.6 | 294.5 | 292.8 | 296.6 | 294.5 |
| Difference between Swiss GAAP and IFRS total assets | 1.7 | 1.6 | 1.5 | 1.7 | 1.6 | 1.5 |
| Less: derivative exposures and SFTs¹ | (35.1) | (40.3) | (32.3) | (35.1) | (40.3) | (32.3) |
| On-balance sheet exposures
(excluding derivative exposures and SFTs) | 259.3 | 257.9 | 263.7 | 259.3 | 257.9 | 263.7 |
| Derivative exposures | 4.9 | 4.7 | 4.7 | 4.9 | 4.7 | 4.7 |
| Securities financing transactions | 29.8 | 34.9 | 26.4 | 29.8 | 34.9 | 26.4 |
| Off-balance sheet items | 11.5 | 11.8 | 12.0 | 11.5 | 11.8 | 12.0 |
| Items deducted from Swiss SRB tier 1 capital | (0.4) | (0.4) | (0.3) | (0.4) | (0.4) | (0.3) |
| Total exposures (leverage
ratio denominator) | 305.2 | 308.9 | 306.6 | 305.2 | 308.9 | 306.6 |
| 1 Consists of positive replacement values, cash collateral
receivables on derivative instruments, cash collateral on securities
borrowed, reverse repurchase agreements, margin loans and prime brokerage
receivables related to securities financing transactions, which are presented
separately under Derivative exposures and Securities financing transactions
in this table. | | | | | | |

| BIS Basel III leverage ratio
(phase-in) — CHF million, except where
indicated | 30.9.17 | 30.6.17 | 31.3.17 | 31.12.16 |
| --- | --- | --- | --- | --- |
| Total tier 1 capital | 12,272 | 12,276 | 12,373 | 12,416 |
| Total exposures (leverage ratio denominator) | 305,229 | 308,917 | 312,371 | 306,586 |
| BIS Basel III leverage ratio (%) | 4.0 | 4.0 | 4.0 | 4.0 |

Liquidity coverage ratio

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

Liquidity coverage ratio
	Weighted value¹
CHF billion, except where
indicated	Average 3Q17²	Average 2Q17
High-quality liquid assets	72	76
Total net cash outflows	51	61
of which: cash outflows	92	97
of which: cash inflows	41	36
Liquidity coverage ratio (%)	140	125
1 Calculated after the application of haircuts and inflow and
outflow rates. 2 Calculated based on an average of 64 data points in the
third quarter of 2017 and 60 data points in the second quarter of 2017.

Capital instruments

| Capital instruments of UBS
Switzerland AG – key features | | | | | |
| --- | --- | --- | --- | --- | --- |
| Presented according to issuance date | | | | | |
| | | Share capital | Additional tier 1 capital | Tier 2 capital | Additional tier 1 capital |
| 1 | Issuer (country of incorporation; if applicable, branch) | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland |
| 1a | Instrument number | 1 | 2 | 3 | 4 |
| 2 | Unique identifier (e.g., ISIN) | N/A | N/A | N/A | N/A |
| 3 | Governing law(s) of the instrument | Swiss | Swiss | Swiss | Swiss |
| | Regulatory treatment | | | | |
| 4 | Transitional Basel III rules¹ | CET1 – Going concern capital | Additional tier 1 – Going concern capital | Tier 2 – Gone concern loss-absorbing capacity⁴ | Additional tier 1 – Going concern capital |
| 5 | Post-transitional Basel III rules² | CET1 – Going concern capital | Additional tier 1 – Going concern capital | Gone concern loss-absorbing capacity⁴ | Additional tier 1 – Going concern capital |
| 6 | Eligible at solo / group / group&solo | UBS Switzerland AG standalone | UBS Switzerland AG standalone | UBS Switzerland AG standalone | UBS Switzerland AG standalone |
| 7 | Instrument type | Ordinary shares | Loan⁵ | Loan⁵ | Loan⁵ |
| 8 | Amount recognized in regulatory capital (currency in million, as
of most recent reporting date)¹ | CHF 10.0 | CHF 1,500 | CHF 2,500 | CHF 500 |
| 9 | Outstanding amount (par value, million) | CHF 10.0 | CHF 1,500 | CHF 2,500 | CHF 500 |
| 10 | Accounting classification³ | Equity attributable to UBS Switzerland AG shareholders | Due to banks held at amortized cost | Due to banks held at amortized cost | Due to banks held at amortized cost |
| 11 | Original date of issuance | – | 1 April 2015 | 1 April 2015 | 11 March 2016 |
| 12 | Perpetual or dated | – | Perpetual | Dated | Perpetual |
| 13 | Original maturity date | – | – | 1 April 2025 | – |
| 14 | Issuer call subject to prior supervisory approval | – | Yes | Yes | Yes |
| 15 | Optional call date, subsequent call dates, if applicable, and
redemption amount | – | First optional repayment date: 1 April 2020 | First optional repayment date: 1 April 2020 | First optional repayment date: 11 March 2021 |
| | | | 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 | Contingent call dates and redemption amount | – | 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 | | |
| | | | – | Early repayment possible upon a change in progressive capital
component requirement, subject to FINMA approval. Repayment amount: 101% of
principal amount, together with accrued and unpaid interest | – |

Significant regulated subsidiaries and sub-groups

| Capital instruments of UBS Switzerland AG – key features
(continued) | | | | | |
| --- | --- | --- | --- | --- | --- |
| | Coupons / dividend | | | | |
| 17 | Fixed or floating dividend / coupon | – | Floating | Floating | Floating |
| 18 | Coupon rate and any related index; frequency of payment | – | 6-month CHF Libor + 370 bps per annum semiannually | 6-month CHF Libor + 200 bps per annum semiannually | 3-month CHF Libor + 459 bps per annum quarterly |
| 19 | Existence of a dividend stopper | – | No | No | No |
| 20 | Fully discretionary, partially discretionary or mandatory | Fully discretionary | Fully discretionary | Mandatory | Fully discretionary |
| 21 | Existence of step-up or other incentive to redeem | – | No | No | No |
| 22 | Non-cumulative or cumulative | Non-cumulative | Non-cumulative | Cumulative | Non-cumulative |
| 23 | Convertible or non-convertible | – | Non-convertible | 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 | Yes | Yes |
| 31 | If write-down, write-down trigger(s) | – | Trigger: CET1 ratio is less than 7% | Trigger: CET1 ratio is less than 5% | 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, full or partial | – | Full | Full | Full |
| 33 | If write-down, permanent or temporary | – | Permanent | Permanent | Permanent |
| 34 | If temporary write-down, description of write-up mechanism | – | – | – | – |
| 35 | Position in subordination hierarchy in liquidation (specify instrument type immediately senior to instrument) | 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 (section 745, Swiss
Civil 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 | 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 unsecured, subordinated and dated 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 | Existence of features, which prevent full recognition under
Basel III | – | – | – | – |
| 37 | If yes, specify non-compliant features | – | – | – | – |
| 1 Based on Swiss SRB phase-in (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 Outstanding low-trigger loss-absorbing tier
2 capital instruments would qualify as going concern capital until the
earlier of (i) their maturity or first call date or (ii) 31 December 2019. As
of 1 January 2020, these instruments may be used to meet the gone concern
requirements until one year before maturity, with a haircut of 50% applied in
the last year of eligibility. However, as of 30 September 2017, the total
low-trigger loss-absorbing tier 2 capital of CHF 2,500 million was used to
meet the gone concern requirements. 5 Loans granted by UBS AG,
Switzerland. | | | | | |

Section 4 UBS Limited standalone

The table below includes required information on the regulatory capital components and capital ratios, as well as leverage ratio, of UBS Limited standalone based on the Pillar 1 capital requirements. 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.

| Prudential key figures¹˒² — GBP million, except where
indicated | | 30.9.17 | 30.6.17 |
| --- | --- | --- | --- |
| 1 | Minimum capital requirement (8% of RWA) | 982 | 976 |
| 2 | Eligible capital | 3,240 | 3,427 |
| 3 | of which: common equity tier
1 (CET1) capital | 2,332 | 2,505 |
| 4 | of which: tier 1 capital | 2,561 | 2,740 |
| 5 | Risk-weighted assets | 12,274 | 12,195 |
| 6 | CET1 capital ratio in % of RWA | 19.0 | 20.5 |
| 7 | Tier 1 capital ratio in % of RWA | 20.9 | 22.5 |
| 8 | Total capital ratio in % of RWA | 26.4 | 28.1 |
| 9 | Countercyclical buffer (CCB) in % of RWA | 0.1 | 0.0 |
| 10 | CET1 capital requirement (including CCB) (%) | 5.8 | 5.8 |
| 11 | Tier 1 capital requirement (including CCB) (%) | 7.3 | 7.3 |
| 12 | Total capital requirement (including CCB) (%) | 9.3 | 9.3 |
| 13 | Basel III leverage ratio (%)³ | 6.2 | 7.2 |
| 14 | Leverage ratio denominator | 41,419 | 37,880 |
| 1 Based on Directive 2013/36/EU and Regulation 575/2013
(together known as “CRD IV”) and their related technical standards, as
implemented in the UK by the Prudential Regulation Authority. 2 There
is no local disclosure requirement for liquidity coverage ratio for UBS
Limited as of 30 September 2017. 3 On the basis of tier 1 capital. | | | |

Section 5 UBS Americas Holding LLC consolidated

The table below includes required information on the regulatory capital components and capital ratios, as well as leverage ratio, of UBS Americas Holding LLC consolidated based on Pillar 1 capital requirements. 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.

| Prudential key figures¹˒² — USD million, except where
indicated | | 30.9.17 | 30.6.17 |
| --- | --- | --- | --- |
| 1 | Minimum capital requirement (8% of RWA) | 3,897 | 4,223 |
| 2 | Eligible capital | 12,882 | 12,543 |
| 3 | of which: common equity tier
1 (CET1) capital | 11,390 | 11,048 |
| 4 | of which: tier 1 capital | 12,166 | 11,830 |
| 5 | Risk-weighted assets | 48,717 | 52,792 |
| 6 | CET1 capital ratio in % of RWA | 23.4 | 20.9 |
| 7 | Tier 1 capital ratio in % of RWA | 25.0 | 22.4 |
| 8 | Total capital ratio in % of RWA | 26.4 | 23.8 |
| 9 | Countercyclical buffer (CCB) in % of RWA | | |
| 10 | CET1 capital requirement (including CCB) (%) | 5.8 | 5.8 |
| 11 | Tier 1 capital requirement (including CCB) (%) | 7.3 | 7.3 |
| 12 | Total capital requirement (including CCB) (%) | 9.3 | 9.3 |
| 13 | Basel III leverage ratio (%)³ | 9.3 | 9.3 |
| 14 | Leverage ratio denominator | 130,135 | 127,648 |
| 1 For UBS Americas Holding LLC based on applicable US Basel III
rules. 2 There is no local disclosure requirement for liquidity coverage
ratio for UBS Americas Holding LLC as of 30 September 2017. 3 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

AIV alternative investment vehicle

AMA advanced measurement approach

AT1 additional tier 1

BCBS Basel Committee on Banking Supervision

BD business division

BIS Bank for International Settlements

BoD Board of Directors

CC Corporate Center

CCAR Comprehensive Capital Analysis and Review

CCF credit conversion factor

CCP central counterparty

CCR counterparty credit risk

CDO collateralized debt obligation

CDR constant default rate

CDS credit default swap

CEA Commodity Exchange Act

CEO Chief Executive Officer

CET1 common equity tier 1

CFO Chief Financial Officer

CHF Swiss franc

CLN credit-linked note

CLO collateralized loan obligation

CMBS commercial mortgage- backed security

CVA credit valuation adjustment

DBO defined benefit obligation

DCCP Deferred Contingent Capital Plan

DOJ Department of Justice

DOL Department of Labor

DTA deferred tax asset

DVA debit valuation adjustment

EAD exposure at default

EC European Commission

ECB European Central Bank

EIR effective interest rate

EMEA Europe, Middle East and Africa

EOP Equity Ownership Plan

EPS earnings per share

ETD exchange-traded derivatives

ETF exchange-traded fund

EU European Union

EUR euro

EURIBOR Euro Interbank Offered Rate

FCA UK Financial Conduct Authority

FCT foreign currency translation

FDIC Federal Deposit Insurance Corporation

FINMA Swiss Financial Market Supervisory Authority

FRA forward rate agreement

FSA UK Financial Services Authority

FSB Financial Stability Board

FTA Swiss Federal Tax

Administration

FTP funds transfer price

FVA funding valuation adjustment

FX foreign exchange

GAAP generally accepted accounting principles

GBP British pound

GEB Group Executive Board

GIIPS Greece, Italy, Ireland, Portugal and Spain

Group ALM Group Asset and Liability Management

G-SIB global systemically important bank

HQLA high-quality liquid assets

IAS International Accounting Standards

IASB International Accounting Standards Board

IFRS International Financial Reporting Standards

IRB internal ratings-based

IRC incremental risk charge

ISDA International Swaps and Derivatives Association

KPI key performance indicator

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

Abbreviations frequently used in our financial reports (continued)

NAV net asset value

NPA non-prosecution agreement

NRV negative replacement value

NSFR net stable funding ratio

OCI other comprehensive income

OTC over-the-counter

PD probability of default

PFE potential future exposure

PRA UK Prudential Regulation Authority

PRV positive replacement value

RBC risk-based capital

RMBS residential mortgage-backed security

RoAE return on attributed equity

RoE return on equity

RoTE return on tangible equity

RWA risk-weighted assets

SE structured entity

SEC US Securities and Exchange Commission

SEEOP Senior Executive Equity Ownership Plan

SFT securities financing transaction

SNB Swiss National Bank

SRB systemically relevant bank

SRM Single Resolution Mechanism

SVaR stressed value-at-risk

TBTF too big to fail

TLAC total loss-absorbing capacity

USD US dollar

VaR value-at-risk

Appendix

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 third quarter 2017 report and its Annual Report 2016, 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 absolute variances are calculated on the basis of rounded figures displayed in the tables and text and may not precisely reflect the percentages, percent changes and absolute variances that would be calculated on the basis of figures that are not rounded.

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

www.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/ Federica Pisacane Rohde___

Name: Federica Pisacane Rohde

Title: Executive Director

UBS AG

By: _/s/ David Kelly____

Name: David Kelly

Title: Managing Director

By: _/s/ Federica Pisacane Rohde___

Name: Federica Pisacane Rohde

Title: Executive Director

Date: October 27, 2017

AI assistant

UBS Group AG Interim / Quarterly Report 2017

998_ffr_2017-10-27_07764f14-7d51-4445-ab79-48290e5c65a7.zip

AI assistant

UBS Group AG — Interim / Quarterly Report 2017

998_ffr_2017-10-27_07764f14-7d51-4445-ab79-48290e5c65a7.zip

More from UBS Group AG

UBS Group AG Interim / Quarterly Report 2017