UBS Group AG - Interim / Quarterly Report 2020

6-K 1 6k2q20pillar3.htm 6k2q20pillar3

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

Date: August 14, 2020

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 Second Quarter 2020 Report, which appears immediately following this page.

30 June 2020 Pillar 3 report

UBS Group and significant regulated subsidiaries and sub-groups

Terms used in this report, unless the context requires otherwise

| “UBS,”
“UBS Group,” “UBS Group AG consolidated,” “Group,” “the Group,” “we,” “us” and
“our” | UBS Group AG and its consolidated
subsidiaries |
| --- | --- |
| “UBS AG consolidated” | UBS AG and its consolidated
subsidiaries |
| “UBS Group AG” and “UBS Group AG
standalone” | UBS Group AG on a standalone basis |
| “UBS AG” and “UBS AG standalone” | UBS AG on a standalone basis |
| “UBS Switzerland AG” and “UBS Switzerland AG
standalone” | UBS Switzerland AG on a standalone
basis |
| “UBS Europe SE consolidated” | UBS Europe SE and its consolidated
subsidiaries |
| “UBS Americas Holding LLC” and “UBS Americas Holding LLC consolidated” | UBS Americas Holding LLC and its
consolidated subsidiaries |

Table of contents
Introduction and basis for
preparation
UBS Group
6	Section
1	Key metrics
9	Section
2	Regulatory exposures and
risk-weighted assets
13	Section
3	Credit risk
26	Section
4	Counterparty credit risk
34	Section
5	Securitizations
36	Section
6	Market risk
40	Section
7	Going and gone concern
requirements and eligible capital
49	Section
8	Total loss-absorbing capacity
51	Section
9	Leverage ratio
54	Section
10	Liquidity coverage ratio
56	Section
11	Requirements for global
systemically important banks and related indicators
Significant regulated
subsidiaries and sub-groups
58	Section
1	Introduction
58	Section
2	UBS AG standalone
63	Section
3	UBS Switzerland AG standalone
70	Section
4	UBS Europe SE consolidated
71	Section
5	UBS Americas Holding LLC
consolidated
Appendix
73	Abbreviations frequently used
in our financial reports
75	Cautionary statement

Contacts

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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]

+41-44-235 6652

Shareholder Services

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

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

[email protected]

+41-44-235 6652

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For global registered share-related inquiries in the US.

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Imprint

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

Introduction and basis for preparation

Scope of Basel III Pillar 3 disclosures

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

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

As UBS is considered a systemically relevant bank (an SRB) under Swiss banking law, UBS Group AG and UBS AG are required to comply with regulations based on the Basel III framework as applicable to Swiss SRBs on a consolidated basis. Capital and other regulatory information as of 30 June 2020 for UBS Group AG consolidated is provided in the “Capital management” section of our second quarter report and for UBS AG consolidated in the “Capital management” section of our UBS AG second quarter 2020 report, available under “Quarterly reporting” at www.ubs.com/investors .

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

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

This Pillar 3 report has been prepared in accordance with Swiss Financial Market Supervisory Authority (FINMA) Pillar 3 disclosure requirements (FINMA Circular 2016/1, “Disclosure – banks”) as revised on 31 October 2019, the underlying BCBS guidance “Revised Pillar 3 disclosure requirements” issued in January 2015, the “Frequently asked questions on the revised Pillar 3 disclosure requirements” issued in August 2016, the “Pillar 3 disclosure requirements – consolidated and enhanced framework” issued in March 2017 and the subsequent “Technical Amendment – Pillar 3 disclosure requirements – regulatory treatment of accounting provisions” issued in August 2018.

Significant regulatory developments, and disclosure requirements and changes effective in this quarter

COVID-19 temporary regulatory measures

I n May 2020, FINMA published guidance related to regulatory exemptions that were provided in the first quarter of 2020 in light of the COVID-19 pandemic. Based on such guidance, the temporary exemption that permits banks to exclude central bank sight deposits from the leverage ratio denominator (the LRD) for the purpose of calculating going concern ratios has been extended for all banks from 1 July 2020 until 1 January 2021.

FINMA announced in May 2020 that the previously introduced temporary exemption, freezing the total number of backtesting exceptions until 1 July 2020 at a level of 1 February 2020, will be introduced into supervisory practice; the content of the exemption therefore continues to apply beyond 1 July 2020. UBS Group AG did not benefit from this measure in the first two quarters of 2020.

The loan guarantee program that was set up by the Swiss Federal Council in March 2020 to support small and medium-sized entities (SMEs) via Swiss banks permits the issuance of new credit lines until 31 July 2020. As of 17 July 2020, we had committed CHF 2.7 billion of loans up to CHF 0.5 million, which are 100% guaranteed by the Swiss government, and CHF 0.5 billion of loans between CHF 0.5 million and CHF 20 million, which are 85% government-guaranteed. As of the same date, CHF 1.5 billion (i.e., 47% of the committed funds) had been drawn under the program. The Swiss Federal Council issued a draft law in July 2020 with a planned duration until 31 December 2032, seeking to transpose the loan guarantee program created under the emergency law in March 2020 into a federal law. The law will include provisions to terminate temporary measures early.

US regulatory authorities temporarily eased the supplementary leverage ratio (SLR) requirements for subsidiary banks of bank holding companies and intermediate holding companies in May 2020. UBS Americas Holding LLC has been subject to SLR requirements for local US reporting since 1 April 2020. The relief also permits exclusion of US Treasury securities and deposits at Federal Reserve Banks from the SLR denominator through March 2021.

The EU has adjusted the Capital Requirements Regulation in order to mitigate unintended consequences stemming from the COVID-19 pandemic, including the possibility to exclude central bank deposits and unsettled trades from the LRD. The measures are expected to have a limited impact on UBS Europe SE.

® Refer to the “UBS Group AG consolidated,” “UBS AG standalone” and “UBS Switzerland AG standalone” sections of this report for more information about the effects of the temporary exemption granted by FINMA in connection with COVID-19

® Refer to the “Significant regulated subsidiaries and sub-groups” section of this report for more information about the implementation of SLR requirements for UBS Americas Holding LLC

Revision of the Swiss Banking Act

In June 2020, the Swiss Federal Council adopted a dispatch on the partial revision of the Swiss Banking Act.

The proposed measures would strengthen the Swiss depositor protection scheme by requiring banks to deposit half of their contribution obligations for the deposit protection scheme in securities or cash with a custodian. An adjustment to the Intermediated Securities Act would require custodians of securities to separate their own portfolios from the portfolios of their clients. Furthermore, the revision amends the section of the Swiss Banking Act on bank insolvency provisions, including the ranking of claims in case of a bail-in and the required subordination of bail-in bonds, except those issued by a holding company with pari-passu liabilities of less than 5% of gone concern eligible bail-in bonds.

The revised Swiss Banking Act is not expected to come into force until the start of 2022. We expect moderate additional costs for all Switzerland-based Group entities in scope.

First publication of the Pillar 3 ”CCR8 – Exposures to central counterparties” table

Following the adoption of the FINMA revisions to the capital treatment concerning UBS’s exposures to central counterparties in January 2020, we disclose the semiannual “CCR8 – Exposures to central counterparties” table for the first time in this report.

Simplification of Pillar 3 disclosures

Considering the current immaterial business volumes and declining trend of total securitization exposures over the past years, we have condensed the following semiannual Pillar 3 disclosures into one single tabular disclosure titled ”Securitization exposures in the banking and trading book and associated regulatory capital requirements”:

– ”SEC1 – Securitization exposures in the banking book”;

– ”SEC2 – Securitization exposures in the trading book”;

– ”SEC3 – Securitization exposures in the banking book and associated regulatory capital requirements – bank acting as originator or as sponsor”; and

– ”SEC4 – Securitization exposures in the banking book and associated regulatory capital requirements – bank acting as investor.”

The new table is presented for the first time in this report.

Market risk RWA are mainly based on the internal models approach, with the exception of securitization exposures in the trading book, which are subject to the standardized approach. From the second quarter of 2020 onward, the MR1 table is therefore no longer separately presented and RWA from securitization exposures in the trading book continues to be disclosed in the “OV1 – Overview of RWA” and “Regulatory exposures and risk-weighted assets” tables as well as in the narrative of section 5 on securitization exposures in the trading book.

Removal of market risk RWA multiplier

When our value-at-risk (VaR) model was structurally changed in the first quarter of 2016, FINMA introduced a temporary market risk RWA multiplier of 1.3 to be applied in the calculation of VaR and stressed VaR (SVaR) RWA. As of 30 June 2020, we have removed this specific multiplier following the demonstration of model performance in certain sub-portfolios.

Changes to accounting treatment affecting Pillar 1 and Pillar 3 disclosures of UBS AG standalone

In June 2020, we aligned the accounting treatment of investments in associates in the UBS AG IFRS standalone accounts with the ”equity method” accounting applied in the UBS Group IFRS financial statements. Previously, we had applied a ”cost less impairment” approach for these investments in the UBS AG standalone IFRS financial statements. Effective 30 June 2020, UBS AG standalone CET1 capital, LRD and RWA increased by approximately USD 0.9 billion, USD 0.9 billion and USD 2.4 billion, respectively.

® Refer to the “UBS AG standalone” section of this report for more information about the restated comparatives

Results of the annual Comprehensive Capital Analysis and Review

In June 2020, the Federal Reserve Board released the results of its annual Dodd–Frank Act Stress Tests (DFAST) and Comprehensive Capital Analysis and Review (CCAR). UBS Americas Holding LLC exceeded minimum capital requirements under the severely adverse scenario and the Federal Reserve Board did not object to its capital plan. As a result, UBS Americas Holding LLC will no longer be subject to the qualitative assessment component of CCAR. The Federal Reserve Board also conducted sensitivity analyses to model the economic effects of the COVID-19 pandemic. As a result of these supplementary analyses, the Federal Reserve Board determined that firms should resubmit revised capital plans based on a new stress scenario that is to be provided to supervised firms by 30 September 2020.

Frequency and comparability of Pillar 3 disclosures

FINMA has specified the reporting frequency for each disclosure, as outlined in the table on pages 7 and 8 of our 31 December 2019 Pillar 3 report, available under “Pillar 3 disclosures” at www.ubs.com/investors .

In line with the FINMA-specified disclosure frequency and requirements for disclosure with regard to comparative periods, we provide quantitative comparative information as of 31 March 2020 for disclosures required on a quarterly basis and as of 31 December 2019 for disclosures required on a semiannual basis. Where specifically required by FINMA and/or the BCBS, we disclose comparative information for additional reporting dates.

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

® Refer to our 31 March 2020 Pillar 3 report, available under “Pillar 3 disclosures” at www.ubs.com/investors , for more information about previously published quarterly movement commentary

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

UBS Group

UBS Group AG consolidated

Section 1 Key metrics

Key metrics of the second quarter of 2020

Quarterly | The KM1 and KM2 tables on the following pages are based on the Basel Committee on Banking Supervision (BCBS) Basel III rules; however, they do not reflect the effects of the temporary exemption granted by the Swiss Financial Market Supervisory Authority (FINMA) in connection with COVID-19 that permits banks to exclude central bank sight deposits from the leverage ratio calculation. The KM2 table includes a reference to the total loss-absorbing capacity (TLAC) term sheet, published by the Financial Stability Board (the FSB). The FSB provides this term sheet at www.fsb.org/2015/11/total-loss-absorbing-capacity-tlac-principles-and-term-sheet .

During the second quarter of 2020, our common equity tier 1 (CET1) capital increased by USD 1.5 billion to USD 38.1 billion, mainly as a result of operating profit before tax and foreign currency effects, which were partially offset by current taxes, defined benefit plans and accruals for capital returns to shareholders. Our Tier 1 capital increased by USD 1.6 billion to USD 53.5 billion, predominantly driven by the aforementioned USD 1.5 billion increase in CET1 capital. Total capital increased by USD 1.1 billion to USD 58.9 billion from the aforementioned increase in CET1 capital, and was partially offset by the decrease in eligibility of a Tier 2 capital instrument amounting to USD 0.5 billion due to the shortening of its residual tenor.

® Refer to the “Introduction and basis for preparation” section of this report for more information about the COVID-19-related temporary regulatory measures, and to “Effects of the application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in the “Going and gone concern requirements and eligible capital“ section of this report for additional information

The TLAC available as of 30 June 2020 of USD 93.7 billion included CET1 capital of USD 38.1 billion, additional tier 1 and tier 2 capital instruments of USD 15.4 billion and USD 7.7 billion, respectively, eligible under the TLAC framework, and non-regulatory capital elements of TLAC of USD 32.4 billion, as disclosed in section 8 of this report. Under the Swiss systemically relevant bank (SRB) framework, TLAC excludes 45% of the gross unrealized gains on debt instruments measured at fair value through other comprehensive income for accounting purposes, which for regulatory capital purposes is measured at the lower of cost or market value. This amount was USD 0.1 billion as of 30 June 2020, and is included as total capital in the KM1 table, and as available TLAC in the KM2 table in this section.

Our available TLAC was stable at USD 93.7 billion, as the aforementioned USD 1.6 billion increase of Tier 1 capital, three new issuances of TLAC instruments amounting to USD 0.8 billion and interest rate risk hedge, foreign currency translation and other effects were offset by a decrease in the eligibility of two TLAC instruments of USD 2.9 billion due to the shortening of their residual tenor.

Risk-weighted assets (RWA) were stable at USD 286.4 billion, primarily driven by an increase in credit risk RWA, partly offset by a reduction in counterparty credit risk (CCR) RWA and market risk RWA.

The leverage ratio exposure increased by USD 18 billion to USD 974 billion, driven by an increase of on-balance sheet exposures (excluding derivatives and SFT) of USD 37 billion, partially offset by lower derivative exposures of USD 14 billion and a decrease in SFT exposures of USD 5 billion.

High-quality liquid assets (HQLA) increased by USD 36 billion, driven by greater average cash balances due to increased debt issuances, lower net funding consumption by the business divisions and higher customer deposit balances in Global Wealth Management. Net cash outflows increased by USD 11.4 billion due to reduced average net inflows from secured financing transactions and higher average outflows from customer deposits, partly offset by higher average inflows from derivative transactions. p

Quarterly |

KM1: Key metrics
USD million, except where
indicated
		30.6.20	31.3.20	31.12.19	30.9.19	30.6.19
Available capital (amounts)
1	Common equity tier 1 (CET1)	38,146	36,691	35,582	34,673	34,948
1a	Fully loaded ECL accounting model CET1 1	38,102	36,656	35,538	34,635	34,904
2	Tier 1	53,537	51,916	51,888	50,702	49,993
2a	Fully loaded ECL accounting model Tier 1 1	53,492	51,882	51,844	50,664	49,949
3	Total capital	58,908	57,784	57,614	56,396	56,345
3a	Fully loaded ECL accounting model total capital 1	58,863	57,750	57,570	56,358	56,302
Risk-weighted assets
(amounts)
4	Total risk-weighted assets (RWA)	286,436	286,256	259,208	264,626	262,135
4a	Minimum capital requirement 2	22,915	22,901	20,737	21,170	20,971
4b	Total risk-weighted assets (pre-floor)	286,436	286,256	259,208	264,626	262,135
Risk-based capital ratios as
a percentage of RWA
5	Common equity tier 1 ratio (%)	13.32	12.82	13.73	13.10	13.33
5a	Fully loaded ECL accounting model Common equity tier 1 ratio (%) 1	13.30	12.81	13.71	13.09	13.32
6	Tier 1 ratio (%)	18.69	18.14	20.02	19.16	19.07
6a	Fully loaded ECL accounting model Tier 1 ratio (%) 1	18.67	18.12	20.00	19.15	19.05
7	Total capital ratio (%)	20.57	20.19	22.23	21.31	21.49
7a	Fully loaded ECL accounting model total capital ratio (%) 1	20.55	20.17	22.21	21.30	21.48
Additional CET1 buffer
requirements as a percentage of RWA
8	Capital conservation buffer requirement (2.5% from 2019) (%)	2.50	2.50	2.50	2.50	2.50
9	Countercyclical buffer requirement (%)	0.02	0.02	0.08	0.10	0.09
9a	Additional countercyclical buffer for Swiss mortgage loans (%)	0.00	0.00	0.23	0.21	0.22
10	Bank G-SIB and/or D-SIB additional requirements (%)	1.00	1.00	1.00	1.00	1.00
11	Total of bank CET1-specific buffer requirements (%)	3.52	3.52	3.58	3.60	3.59
12	CET1 available after meeting the bank’s minimum capital
requirements (%)	8.82	8.32	9.23	8.60	8.83
Basel III leverage ratio 3
13	Total Basel III leverage ratio exposure measure	974,348	955,932	911,325	901,914	911,379
14	Basel III leverage ratio (%)	5.49	5.43	5.69	5.62	5.49
14a	Fully loaded ECL accounting model Basel III leverage ratio (%) 1	5.49	5.43	5.69	5.62	5.48
Liquidity coverage ratio 4
15	Total HQLA	206,693	170,630	166,215	167,916	176,173
16	Total net cash outflow	133,786	122,383	124,112	122,025	121,314
17	LCR (%)	155	139	134	138	145
1 The fully loaded ECL accounting model excludes the
transitional relief of recognizing ECL allowances and provisions in CET1
capital in accordance with FINMA Circular 2013/1 “Eligible capital – banks.”
2 Calculated as 8% of total RWA, based on total capital minimum
requirements, excluding CET1 buffer requirements. 3 Leverage ratio
exposures and leverage ratios for 30 June 2020 and 31 March 2020 do not
reflect the effects of the temporary exemption that has been granted by FINMA
in connection with COVID-19. Refer to the “Introduction and basis for
preparation” section of this report and to “Application of the temporary
COVID-19-related FINMA exemption of central bank sight deposits” in the “Going
and gone concern requirements and eligible capital“ section for more
information. 4 Calculated based on quarterly average. Refer to
“Liquidity coverage ratio” in section 10 of this report for more information.

UBS Group AG consolidated

Quarterly |

| KM2: Key metrics – TLAC
requirements (at resolution group level) 1 | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| USD million, except where
indicated | | | | | | |
| | | 30.6.20 | 31.3.20 | 31.12.19 | 30.9.19 | 30.6.19 |
| 1 | Total loss-absorbing capacity (TLAC) available | 93,658 | 93,718 | 89,660 | 88,197 | 87,388 |
| 1a | Fully loaded ECL accounting model TLAC available 2 | 93,613 | 93,684 | 89,616 | 88,159 | 87,344 |
| 2 | Total RWA at the level of the resolution group | 286,436 | 286,256 | 259,208 | 264,626 | 262,135 |
| 3 | TLAC as a percentage of RWA (%) | 32.70 | 32.74 | 34.59 | 33.33 | 33.34 |
| 3a | Fully loaded ECL accounting model TLAC as a percentage of fully
loaded ECL accounting model RWA (%) 2 | 32.68 | 32.73 | 34.57 | 33.31 | 33.32 |
| 4 | Leverage ratio exposure measure at the level of the resolution
group 3 | 974,348 | 955,932 | 911,325 | 901,914 | 911,379 |
| 5 | TLAC as a percentage of leverage ratio exposure measure (%) 3 | 9.61 | 9.80 | 9.84 | 9.78 | 9.59 |
| 5a | Fully loaded ECL accounting model TLAC as a percentage of fully
loaded ECL accounting model leverage exposure measure (%) 2,3 | 9.61 | 9.80 | 9.83 | 9.77 | 9.58 |
| 6a | Does the subordination exemption in the antepenultimate
paragraph of Section 11 of the FSB TLAC Term Sheet apply? | No | | | | |
| 6b | Does the subordination exemption in the penultimate paragraph of
Section 11 of the FSB TLAC Term Sheet apply? | No | | | | |
| 6c | If the capped subordination exemption applies, the amount of
funding issued that ranks pari passu with excluded liabilities and that is
recognized as external TLAC, divided by funding issued that ranks pari passu
with excluded liabilities and that would be recognized as external TLAC if no
cap was applied (%) | N/A – Refer to our response to 6b. | | | | |
| 1 Resolution group level is defined as the UBS Group AG
consolidated level. 2 The fully loaded ECL accounting model excludes the
transitional relief of recognizing ECL allowances and provisions in CET1
capital in accordance with FINMA Circular 2013/1 “Eligible capital –
banks.” 3 Leverage ratio exposures and leverage ratios for 30 June
2020 and 31 March 2020 do not reflect the effects of the temporary exemption
that has been granted by FINMA in connection with COVID-19. Refer to the
“Introduction and basis for preparation” section of this report and to
“Application of the temporary COVID-19-related FINMA exemption of central
bank sight deposits” in the “Going and gone concern requirements and eligible
capital“ section for more information. | | | | | | |

Section 2 Regulatory exposures and risk-weighted assets

Our approach to measuring risk exposure and risk-weighted assets

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

For information about the measurement of risk exposures and RWA, refer to pages 12–14 of our 31 December 2019 Pillar 3 report, available under “Pillar 3 disclosures” at www.ubs.com/investors . p

RWA development in the second quarter of 2020

Quarterly | The OV1 table on the next page provides an overview of our RWA and the related minimum capital requirements by risk type. The table presented is based on the respective FINMA template and empty rows indicate current non-applicability to UBS.

During the second quarter of 2020, RWA increased by USD 0.2 billion to USD 286.4 billion, primarily driven by an increase in credit risk RWA of USD 2.9 billion, partly offset by a reduction in counterparty credit risk (CCR) RWA of USD 1.6 billion and market risk RWA of USD 0.9 billion.

Credit risk RWA under the internal ratings-based approach increased by USD 2.9 billion, mainly due to business growth in Global Wealth Management and Personal & Corporate Banking. Changes in credit ratings and loss given default resulted in an increase of less than USD 1.0 billion in RWA during the second quarter of 2020. Counterparty credit risk RWA on derivatives including those under the standardized approach and the internal model method decreased by USD 2.7 billion, mainly as a result of lower volumes in Global Markets. RWA on securities financing transactions, including those subject to value-at-risk (VaR) and other counterparty credit risk treatments, increased by USD 1.1 billion, mainly driven by increased prime brokerage volumes in Global Markets. Market risk RWA decreased by USD 0.9 billion, primarily driven by the removal of a model multiplier, as well as the impact of client activity and market conditions on stressed and regulatory VaR.

The flow tables for credit risk, counterparty credit risk and market risk RWA in the respective sections of this report provide further details regarding the movements in RWA in the second quarter of 2020. More information about capital management and RWA, including details regarding movements in RWA during the second quarter of 2020, is provided on pages 53–54 in the “Capital management” section of our second quarter 2020 report, available under “Quarterly reporting” at www.ubs.com/investors . p

UBS Group AG consolidated

Quarterly |

OV1: Overview of RWA
		RWA			Minimum capital requirements 1
USD million		30.6.20	31.3.20	31.12.19	30.6.20
1	Credit risk (excluding
counterparty credit risk)	133,180	130,236	121,244	10,654
2	of which: standardized
approach (SA)	30,144	30,159	28,386	2,412
2a	of which:
non-counterparty-related risk	13,219	13,061	13,135	1,058
3	of which: foundation
internal ratings-based (F-IRB) approach
4	of which: supervisory
slotting approach
5	of which: advanced internal
ratings-based (A-IRB) approach	103,036	100,076	92,858	8,243
6	Counterparty credit risk 2	39,983	41,560	36,354	3,199
7	of which: SA for
counterparty credit risk (SA-CCR) 3	5,903	7,254	4,699	472
8	of which: internal model
method (IMM)	19,284	20,582	20,275	1,543
8a	of which: value-at-risk
(VaR)	8,055	6,663	5,502	644
9	of which: other CCR	6,741	7,061	5,879	539
10	Credit valuation adjustment
(CVA)	4,523	3,889	1,900	362
11	Equity positions under the
simple risk weight approach 4	2,646	3,136	3,261	212
12	Equity investments in funds
– look-through approach 5	705	671		56
13	Equity investments in funds
– mandate-based approach 5	611	735		49
14	Equity investments in funds
– fallback approach 5	25	110		2
15	Settlement risk	395	1,201	357	32
16	Securitization exposures in
banking book	598	607	633	48
17	of which securitization
internal ratings-based approach (SEC-IRBA)
18	of which securitization
external ratings-based approach (SEC-ERBA), including
internal assessment approach (IAA)	564	574	598	45
19	of which securitization
standardized approach (SEC-SA)	34	33	35	3
20	Market Risk	14,228	15,096	6,556	1,138
21	of which: standardized
approach (SA)	370	449	419	30
22	of which: internal model
approaches (IMA)	13,859	14,647	6,137	1,109
23	Capital charge for switch
between trading book and banking book 6
24	Operational risk	77,542	77,542	77,542	6,203
25	Amounts below thresholds for
deduction (250% risk weight) 7	12,005	11,473	11,361	960
25a	of which: Deferred tax
assets	9,212	8,705	8,951	737
26	Floor adjustment 8
27	Total	286,436	286,256	259,208	22,915
1 Calculated based on 8% of RWA. 2 Excludes settlement risk,
which is separately reported in line 15 “Settlement risk.” Includes RWA with
central counterparties. The split between the sub-components of counterparty
credit risk refers to the calculation of the exposure measure.
3 Calculated in accordance with the standardized approach for
counterparty credit risk (SA-CCR) from 1 January 2020 onward, whereas periods
prior to 2020 were calculated in accordance with the current exposure method
(CEM). 4 Information as of 31 December 2019 includes investments in funds
calculated based on the simple risk-weight approach, whereas from 1 January
2020 onward investments in funds are disclosed in rows 12, 13 and 14 based on
risk weighting in accordance with the new regulation for investments in
funds. 5 From 2020 onward, the risk weighting has been calculated in
accordance with the regulation for investments in funds. 6 Not applicable
until the implementation of the final rules on the minimum capital
requirements for market risk (the Fundamental Review of the Trading Book).
7 Includes items subject to threshold deduction treatment that do not exceed
their respective threshold and are risk weighted at 250%. Items subject to
threshold deduction treatment include significant investments in common
shares of non-consolidated financial institutions (banks, insurance and other
financial entities) and deferred tax assets arising from temporary
differences. 8 No floor effect, as 80% of our Basel I RWA, including the
RWA equivalent of the Basel I capital deductions, do not exceed our Basel III
RWA, including the RWA equivalent of the Basel III capital deductions. For
the status of the finalization of the Basel III capital framework, refer to
the “Regulatory and legal developments” section of our Annual Report 2019,
which outlines how the proposed floor calculation would differ in significant
aspects from the current approach.

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

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

| Regulatory exposures and
risk-weighted assets — 30.6.20 | A-IRB / model-based approach | | | Standardized approach | | | Total | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| USD million | Net EAD | RWA | Section or table reference | Net EAD | RWA | Section or table reference | Net EAD | RWA |
| Credit risk (excluding
counterparty credit risk) | 636,927 | 103,036 | 3 | 51,894 | 30,144 | 3 | 688,821 | 133,180 |
| Central governments and central banks | 198,976 | 3,343 | CR6, CR7 | 10,048 | 913 | CR4, CR5 | 209,025 | 4,256 |
| Banks and securities dealers | 17,763 | 5,948 | CR6, CR7 | 6,129 | 1,479 | CR4, CR5 | 23,892 | 7,427 |
| Public-sector entities, multilateral development banks | 10,169 | 1,041 | CR6, CR7 | 1,490 | 368 | CR4, CR5 | 11,659 | 1,409 |
| Corporates: specialized lending | 25,207 | 11,963 | CR6, CR7 | | | | 25,207 | 11,963 |
| Corporates: other lending | 61,820 | 38,067 | CR6, CR7 | 7,799 | 6,381 | CR4, CR5 | 69,619 | 44,448 |
| Central counterparties | | | | 775 | 24 | | 775 | 24 |
| Retail | 322,991 | 42,674 | | 11,538 | 7,760 | CR4, CR5 | 334,529 | 50,434 |
| Residential mortgages | 155,269 | 30,337 | CR6, CR7 | 6,171 | 2,619 | | 161,440 | 32,956 |
| Qualifying revolving retail
exposures (QRRE) | 1,660 | 661 | CR6, CR7 | | | | 1,660 | 661 |
| Other retail 1 | 166,062 | 11,676 | CR6, CR7 | 5,367 | 5,141 | | 171,428 | 16,817 |
| Non-counterparty-related risk | | | | 14,115 | 13,220 | CR4, CR5 | 14,115 | 13,219 |
| Property, equipment and
software | | | | 12,829 | 12,829 | | 12,829 | 12,829 |
| Other | | | | 1,286 | 391 | | 1,286 | 391 |
| Counterparty credit risk 2 | 108,774 | 27,339 | 4 | 78,905 | 12,644 | 4 | 187,679 | 39,983 |
| Central governments and central banks | 8,818 | 1,068 | CCR3, CCR4 | 1,875 | 135 | CCR3, CCR4 | 10,693 | 1,204 |
| Banks and securities dealers | 20,801 | 5,663 | CCR3, CCR4 | 2,673 | 855 | CCR3, CCR4 | 23,474 | 6,518 |
| Public-sector entities, multilateral development banks | 2,013 | 347 | CCR3, CCR4 | 755 | 47 | CCR3, CCR4 | 2,768 | 395 |
| Corporates incl. specialized lending | 54,921 | 19,695 | CCR3, CCR4 | 23,605 | 9,642 | CCR3, CCR4 | 78,526 | 29,338 |
| Central counterparties | 22,113 | 457 | CCR8 | 40,211 | 959 | CCR8 | 62,325 | 1,416 |
| Retail | 108 | 108 | CCR3, CCR4 | 9,785 | 1,005 | CCR3, CCR4 | 9,893 | 1,113 |
| Credit valuation adjustment
(CVA) | | 3,082 | 4, CCR2 | | 1,441 | 4, CCR2 | | 4,523 |
| Equity positions under the
simple risk weight approach 3 | 634 | 2,646 | 3, CR10 | | | | 634 | 2,646 |
| Equity investments in funds
in the banking book (CR) 4 | 284 | 1,341 | | | | | 284 | 1,341 |
| Settlement risk | 835 | 215 | | 491 | 180 | | 1,325 | 395 |
| Securitization exposure in
the banking book | | | | 176 | 598 | 5,6 | 176 | 598 |
| Market risk 5 | | 13,859 | 6 | 655 | 370 | 6 | 655 | 14,228 |
| Value-at-risk (VaR) | | 1,848 | MR2 | | | | | 1,848 |
| Stressed value-at risk (SVaR) | | 3,619 | MR2 | | | | | 3,619 |
| Add-on for risks-not-in-VaR (RniV) | | 7,021 | MR2 | | | | | 7,021 |
| Incremental risk charge (IRC) | | 1,371 | MR2 | | | | | 1,371 |
| Comprehensive risk measure (CRM) 6 | | | | | | | | |
| Securitization / re-securitization in the trading book 5 | | | | 655 | 370 | 5 | 655 | 370 |
| Operational risk | | 77,542 | | | | | | 77,542 |
| Amounts below thresholds for
deduction (250% risk weight) | 1,117 | 2,793 | | 3,685 | 9,212 | | 4,802 | 12,005 |
| Deferred tax assets | | | | 3,685 | 9,212 | | 3,685 | 9,212 |
| Significant investments in non-consolidated financial
institutions | 1,117 | 2,793 | | | | | 1,117 | 2,793 |
| Total | 736,409 | 231,847 | | 147,964 | 54,589 | | 884,373 | 286,436 |

UBS Group AG consolidated

Regulatory exposures and risk-weighted assets (continued) — 31.12.19	A-IRB / model-based approach			Standardized approach			Total
USD million	Net EAD	RWA	Section or table reference	Net EAD	RWA	Section or table reference	Net EAD	RWA
Credit risk (excluding
counterparty credit risk)	551,748	92,858	3	49,939	28,386	3	601,687	121,244
Central governments and central banks	138,880	2,482	CR6, CR7	10,687	938	CR4, CR5	149,567	3,420
Banks and securities dealers	17,614	6,102	CR6, CR7	5,541	1,314	CR4, CR5	23,155	7,416
Public-sector entities, multilateral development banks	8,012	844	CR6, CR7	920	238	CR4, CR5	8,932	1,082
Corporates: specialized lending	23,313	11,475	CR6, CR7				23,313	11,475
Corporates: other lending	52,533	31,836	CR6, CR7	6,017	4,824	CR4, CR5	58,550	36,660
Central counterparties				474	16		474	16
Retail	311,396	40,118		12,074	7,923	CR4, CR5	323,469	48,041
Residential mortgages	149,255	29,133	CR6, CR7	6,466	2,641		155,721	31,774
Qualifying revolving retail
exposures (QRRE)	1,944	687	CR6, CR7				1,944	687
Other retail 1	160,197	10,298	CR6, CR7	5,608	5,282		165,805	15,580
Non-counterparty-related risk				14,226	13,135	CR4, CR5	14,226	13,135
Property, equipment and
software				12,756	12,756		12,756	12,756
Other				1,470	378		1,470	378
Counterparty credit risk 2	102,536	25,777	4	70,327	10,577	4	172,863	36,354
Central governments and central banks	7,070	670	CCR3, CCR4	2,091	104	CCR3, CCR4	9,161	774
Banks and securities dealers	18,078	5,376	CCR3, CCR4	2,328	660	CCR3, CCR4	20,407	6,036
Public-sector entities, multilateral development banks	1,917	423	CCR3, CCR4	755	45	CCR3, CCR4	2,673	469
Corporates incl. specialized lending	48,331	18,759	CCR3, CCR4	17,402	7,722	CCR3, CCR4	65,733	26,481
Central counterparties	27,139	547	CCR8	41,531	1,343	CCR8	68,671	1,891
Retail			CCR3, CCR4	6,219	703	CCR3, CCR4	6,219	703
Credit valuation adjustment
(CVA)		974	4, CCR2		926	4, CCR2		1,900
Equity positions under the
simple risk weight approach 3	778	3,261	3, CR10				778	3,261
Equity investments in funds
in the banking book (CR) 4
Settlement risk	30	54		183	303		213	357
Securitization exposure in
the banking book				188	633	5,6	188	633
Market risk 5		6,137	6	670	419	6	670	6,556
Value-at-risk (VaR)		487	MR2					487
Stressed value-at risk (SVaR)		2,082	MR2					2,082
Add-on for risks-not-in-VaR (RniV)		2,344	MR2					2,344
Incremental risk charge (IRC)		1,224	MR2					1,224
Comprehensive risk measure (CRM) 6
Securitization / re-securitization in the trading book 5				670	419	5	670	419
Operational risk		77,542						77,542
Amounts below thresholds for
deduction (250% risk weight)	964	2,410		3,580	8,951		4,544	11,361
Deferred tax assets				3,580	8,951		3,580	8,951
Significant investments in non-consolidated financial
institutions	964	2,410					964	2,410
Total	656,055	209,014		124,887	50,194		780,942	259,208
1 Consists primarily of Lombard lending, which represents loans
made against the pledge of eligible marketable securities or cash, as well as
exposures to small businesses, private clients and other retail customers
without mortgage financing. 2 The split between A-IRB / model-based
approach and standardized approach for counterparty credit risk refers to the
exposure measure, whereas the split in CCR3 and CCR4 refers to the risk
weight approach. As of 30 June 2020, USD 117,863 million of EAD (31 December 2019,
USD 97,845 million) was subject to the A-IRB risk weight approach, and USD
7,491 million of EAD (31 December 2019, USD 6,348 million) was subject to the
standardized risk weight approach. 3 Comparative period prior to 2020
includes investments in funds calculated based on the simple risk-weight
approach, whereas from 1 January 2020 onward investments in funds are
disclosed in row “Equity investments in funds in the banking book (CR)” based
on the new regulation for investments in funds risk weighting. 4 From 2020
onward based on the regulation for investments in funds risk weighting. 5
From the second quarter of 2020 onward, RWA from securitization exposures in
the trading book continue to be disclosed in the “OV1 – Overview of RWA” and
“Regulatory exposures and risk-weighted assets” tables and the MR1 table is
therefore no longer separately presented. Refer to the “Introduction and
basis for preparation” section of this report for more information. 6 As
of 30 June 2020 and 31 December 2019, the CRM-based capital requirement was
not applicable to us, as we did not hold eligible correlation trading
positions.

Section 3 Credit risk

Introduction

Semiannual | This section provides information about the exposures subject to the Basel III credit risk framework, as presented in the “Regulatory exposures and risk-weighted assets” table on pages 11–12 of this report. Information about counterparty credit risk is reflected in the “Counterparty credit risk” section on pages 26–33 of this report. Securitization positions are reported in the “Securitizations” section on pages 34–35 of this report.

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

For information about credit risk exposure categories, credit risk management and credit risk mitigation (CRM), refer to pages 26–27, 31 and 35–38 of our 31 December 2019 Pillar 3 report, which is available under ”Pillar 3 disclosures” at www.ubs.com/investors . p

Credit risk exposure categories

Semiannual | The definitions of the Swiss Financial Market Supervisory Authority (FINMA)-defined Pillar 3 credit risk exposure categories “Loans” and “Debt securities” below, as referred to in the “CR1: Credit quality of assets” and “CR3: Credit risk mitigation techniques – overview” tables in this section, provide a link to the IFRS balance sheet structure.

The Pillar 3 category “Loans” comprises financial instruments held with the intent to collect the contractual payments and includes the following IFRS balances to the extent that they are subject to the credit risk framework:

– balances at central banks;

– Loans and advances to banks ;

– Loans and advances to customers ;

– Other financial assets measured at amortized cost, excluding money market instruments, checks and bills and other debt instruments;

– traded loans in the banking book that are included within Financial assets at fair value held for trading ;

– brokerage receivables;

– loans including structured loans that are included within Financial assets at fair value not held for trading ; and

– other non-financial assets.

The Pillar 3 category “Debt securities” includes the following IFRS balances to the extent that they are subject to the credit risk framework:

– money market instruments, checks and bills and other debt instruments that are included within Other financial assets measured at amortized cost ;

– Financial assets at fair value held for trading, excluding traded loans;

– Financial assets at fair value not held for trading, excluding loans; and

– Financial assets measured at fair value through other comprehensive income. p

UBS Group AG consolidated

Credit quality of assets

Semiannual | The CR1 table below provides a breakdown of defaulted and non-defaulted loans, debt securities and off-balance sheet exposures. The table includes a split of expected credit loss (ECL) accounting provisions based on the standardized approach and the internal ratings-based approach.

The increases in the total carrying amount of loans and debt securities of USD 61.5 billion and USD 19.2 billion, respectively, are explained in the CR3 table of this report. The increase in the total carrying amount of off-balance sheet exposures of USD 11.3 billion was driven by new loan commitments and financing activities.

For information about the definitions of default and credit-impairment, refer to page 136 of our Annual Report 2019, which is available under ”Annual reporting” at www.ubs.com/investors.

More information about the net value movements related to Loans and Debt securities shown in the table is provided on page 15 of this report in the “CR3: Credit risk mitigation techniques – overview” table. p

Semiannual |

| CR1: Credit quality of assets | | Gross carrying amounts of: | | Allowances / impairments | Of which: ECL accounting provisions for credit losses on SA
exposures | | Of which: ECL accounting provisions for credit losses on IRB
exposures (stage 1, 2, 3) | Net values |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| USD million | | Defaulted exposures 1 | Non-defaulted exposures | | Allocated in regulatory category of Specific (stage 3 credit-impaired) | Allocated in regulatory category of General (stage 1 & 2) | | |
| 30.6.20 | | | | | | | | |
| 1 | Loans 2 | 3,564 | 516,755 | (1,244) 4 | (115) | (75) | (1,054) | 519,076 |
| 2 | Debt securities | | 81,980 | | | | | 81,980 |
| 3 | Off-balance sheet exposures 3 | 290 | 63,927 | (168) 4 | (1) | (2) | (165) | 64,048 |
| 4 | Total | 3,854 | 662,662 | (1,411) 4 | (116) | (77) | (1,218) | 665,104 |
| 31.12.19 | | | | | | | | |
| 1 | Loans 2 | 2,981 | 455,494 | (911) 4 | (114) | (68) | (729) | 457,564 |
| 2 | Debt securities | | 62,766 | | | | | 62,766 |
| 3 | Off-balance sheet exposures 3 | 132 | 52,725 | (78) 4 | (1) | (3) | (75) | 52,778 |
| 4 | Total | 3,113 | 570,986 | (989) 4 | (115) | (71) | (804) | 573,108 |
| 1 Defaulted exposures are in line with credit-impaired exposures
(stage 3) under IFRS 9. Refer to Note 23 “Expected credit loss measurement“
of our Annual Report 2019 for more information about IFRS 9. 2 Loan
exposure is reported in line with the Pillar 3 definition. Refer to “Credit
risk exposure categories” in this section for more information about the
classification of Loans and Debt securities. 3 Off-balance sheet exposures
include unutilized credit facilities, guarantees provided and forward
starting loan commitments but exclude prolongations of loans that do not
increase the initially committed loan amount. Unutilized credit facilities
exclude unconditionally revocable as well as uncommitted credit facilities,
even if they attract RWA. 4 Expected credit loss allowances and provisions
amount to USD 1,489 million as of 30 June 2020, as disclosed in Note 10 of
the UBS Group AG second quarter 2020 report. This Pillar 3 table excludes ECL
on revocable off-balance sheet exposures (30 June 2020:
USD 65 million; 31 December 2019: USD 35 million), ECL on
exposures subject to counterparty credit risk (30 June 2020: USD 6 million;
31 December 2019: USD 5 million) and ECL on irrevocable committed
prolongation of loans that do not give rise to additional credit exposures of
USD 7 million as of 30 June 2020. | | | | | | | | |

Semiannual | The CR2 table below illustrates changes in stock of defaulted loans, debt securities and off-balance sheet exposures for the first half year of 2020. The total amount of defaulted loans and debt securities was USD 3.9 billion as of 30 June 2020. p

Semiannual |

| CR2: Changes in stock of
defaulted loans, debt securities and off-balance sheet exposures — USD million | | For the half year ended 30.6.20 1 | For the half year ended 31.12.19 1 |
| --- | --- | --- | --- |
| 1 | Defaulted loans, debt
securities and off-balance sheet exposures as of the beginning of the half
year | 3,113 | 2,920 |
| 2 | Loans and debt securities that have defaulted since the last
reporting period | 1,314 | 780 |
| 3 | Returned to non-defaulted status | (337) | (225) |
| 4 | Amounts written off | (103) | (70) |
| 5 | Other changes | (133) | (292) |
| 6 | Defaulted loans, debt
securities and off-balance sheet exposures as of the end of the half year | 3,854 | 3,113 |
| 1 Off-balance sheet exposures include unutilized credit
facilities, guarantees provided and forward starting loan commitments but
exclude prolongations of loans that do not increase the initially committed
loan amount. Unutilized credit facilities exclude unconditionally revocable
as well as uncommitted credit facilities, even if they attract RWA. | | | |

Credit risk mitigation

Semiannual | The CR3 table below provides a breakdown of loans and debt securities into unsecured and partially or fully secured exposures, with additional information about the security type.

The carrying amount for unsecured exposures increased by USD 65.3 billion to USD 267 billion, mainly as a result of higher balances at central banks to maintain increased liquidity levels presented under loans and purchases of high-quality liquid assets (HQLA) presented under debt securities. The carrying amount of partially or fully secured exposures increased by USD 15.5 billion to USD 334.1 billion, mainly as a result of an increase in secured loans and mortgages to customers related to government-guaranteed lending programs. p

Semiannual |

| CR3: Credit risk mitigation
techniques – overview 1 | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | Secured portion of exposures partially or fully secured: | | |
| USD million | | Exposures fully unsecured: carrying amount | Exposures partially or fully secured: carrying amount | Total: carrying amount | Exposures secured by collateral | Exposures secured by financial guarantees | Exposures secured by credit derivatives |
| 30.6.20 | | | | | | | |
| 1 | Loans 2 | 185,026 | 334,050 | 519,076 | 320,139 | 3,368 | 11 |
| 2 | Debt securities | 81,980 | | 81,980 | | | |
| 3 | Total | 267,006 | 334,050 | 601,056 | 320,139 | 3,368 | 11 |
| 4 | of which: defaulted | 657 | 2,089 | 2,745 | 1,440 | 212 | |
| 31.12.19 | | | | | | | |
| 1 | Loans 2 | 138,961 | 318,603 | 457,564 | 307,400 | 1,125 | |
| 2 | Debt securities | 62,766 | | 62,766 | | | |
| 3 | Total | 201,727 | 318,603 | 520,330 | 307,400 | 1,125 | |
| 4 | of which: defaulted | 504 | 1,823 | 2,327 | 1,167 | 225 | |
| 1 Exposures in this table represent carrying amounts in
accordance with the regulatory scope of consolidation. 2 Loan exposure is
reported in line with the Pillar 3 definition. Refer to “Credit risk exposure
categories” in this section for more information about the classification of
Loans and Debt securities. | | | | | | | |

UBS Group AG consolidated

Standardized approach – credit risk mitigation

Semiannual | The CR4 table below illustrates the effect of CRM on the calculation of capital requirements under the standardized approach. In the first half of 2020, off-balance sheet exposures before credit conversion factors (CCF) and CRM under the Corporates asset class increased by USD 5.8 billion to USD 14.6 billion, reflecting increases in margin loan commitments in the Investment Bank as well as exposures to certain clients within Global Wealth Management. p

Semiannual |

| CR4: Standardized approach –
credit risk exposure and credit risk mitigation (CRM) effects | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | Exposures before CCF and CRM 1 | | | Exposures post-CCF and post-CRM | | | RWA and RWA density | |
| USD million, except where
indicated | | On-balance sheet amount | Off-balance sheet amount | Total | On-balance sheet amount | Off-balance sheet amount | Total | RWA | RWA density in % |
| 30.6.20 | | | | | | | | | |
| Asset classes 2 | | | | | | | | | |
| 1 | Central governments and central banks | 10,043 | | 10,043 | 10,042 | | 10,042 | 912 | 9.1 |
| 2 | Banks and securities dealers | 5,655 | 998 | 6,653 | 5,654 | 475 | 6,129 | 1,478 | 24.1 |
| 3 | Public-sector entities and multilateral development banks | 1,183 | 869 | 2,053 | 1,183 | 307 | 1,490 | 368 | 24.7 |
| 4 | Corporates | 6,570 | 14,643 | 21,212 | 6,509 | 2,071 | 8,580 | 6,407 | 74.7 |
| 5 | Retail | 11,789 | 3,982 | 15,771 | 11,422 | 116 | 11,538 | 7,760 | 67.3 |
| 6 | Equity | | | | | | | | |
| 7 | Other assets 3 | 14,048 | 67 | 14,115 | 14,048 | 67 | 14,115 | 13,219 | 93.6 |
| 8 | Total | 49,288 | 20,559 | 69,847 | 48,859 | 3,035 | 51,894 | 30,144 | 58.1 |
| 31.12.19 | | | | | | | | | |
| Asset classes 2 | | | | | | | | | |
| 1 | Central governments and central banks | 10,687 | | 10,687 | 10,687 | | 10,687 | 938 | 8.8 |
| 2 | Banks and securities dealers | 5,072 | 928 | 6,000 | 5,071 | 464 | 5,536 | 1,314 | 23.7 |
| 3 | Public-sector entities and multilateral development banks | 844 | 372 | 1,216 | 844 | 74 | 918 | 237 | 25.9 |
| 4 | Corporates | 6,310 | 8,823 | 15,133 | 5,847 | 651 | 6,499 | 4,839 | 74.5 |
| 5 | Retail | 12,141 | 4,071 | 16,212 | 11,974 | 100 | 12,074 | 7,923 | 65.6 |
| 6 | Equity | | | | | | | | |
| 7 | Other assets 3 | 14,226 | | 14,226 | 14,226 | | 14,226 | 13,135 | 92.3 |
| 8 | Total | 49,280 | 14,194 | 63,475 | 48,648 | 1,290 | 49,939 | 28,386 | 56.8 |
| 1 Exposures in this table represent carrying amounts in
accordance with the regulatory scope of consolidation. 2 The CRM effect is
reflected in the original asset class, i.e., CRM effects of purchased credit
protection by means of guarantees or credit derivatives are reflected in the
asset class of the obligor. Refer to “CR5: Standardized approach – exposures
by asset classes and risk weights” for a view of the CRM effect reflected in
the asset class of the protection provider. 3 Excludes securitization
exposures and RWA under the standardized approach. Refer to the “Regulatory
exposures and risk-weighted assets” table in section 2 and to section 5 of
this report for more information. | | | | | | | | | |

IRB approach – credit derivatives used as credit risk mitigation

Semiannual | Probability of default (PD) substitution is only applied in the risk-weighted assets (RWA) calculation when the PD of the hedge provider is lower than the PD of the obligor. In addition, the default correlation between the obligor and the hedge provider is taken into account through the double default approach. Credit derivatives with tranched cover or first-loss protection are recognized through the securitization framework. Refer to the “CCR6: Credit derivatives exposures” table in section 4 of this report for notional and fair value information about credit derivatives used as CRM. p

Semiannual |

| CR7: IRB – effect on RWA of
credit derivatives used as CRM techniques 1 | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | 30.6.20 | | 31.12.19 | |
| USD million | | Pre-credit derivatives RWA | Actual RWA | Pre-credit derivatives RWA | Actual RWA |
| 1 | Central governments and central banks – FIRB | | | | |
| 2 | Central governments and central banks – AIRB | 3,159 | 3,159 | 2,446 | 2,446 |
| 3 | Banks and securities dealers – FIRB | | | | |
| 4 | Banks and securities dealers – AIRB | 5,777 | 5,777 | 5,911 | 5,911 |
| 5 | Public-sector entities, multilateral development banks – FIRB | | | | |
| 6 | Public-sector entities, multilateral development banks – AIRB | 1,046 | 1,046 | 847 | 847 |
| 7 | Corporates: specialized lending – FIRB | | | | |
| 8 | Corporates: specialized lending – AIRB | 12,003 | 12,003 | 11,525 | 11,525 |
| 9 | Corporates: other lending – FIRB | | | | |
| 10 | Corporates: other lending – AIRB | 38,811 | 38,503 | 32,394 | 32,144 |
| 11 | Retail: mortgage loans | 30,319 | 30,319 | 29,118 | 29,118 |
| 12 | Retail exposures: qualifying revolving retail (QRRE) | 661 | 661 | 687 | 687 |
| 13 | Retail: other | 11,567 | 11,567 | 10,180 | 10,180 |
| 14 | Equity positions (PD / LGD approach) | | | | |
| 15 | Total | 103,344 | 103,036 | 93,108 | 92,858 |
| 1 The CRM effect is reflected in the original asset class, i.e.,
CRM effects of purchased credit protection by means of credit derivatives are
reflected in the asset class of the obligor. Refer to “CR6: IRB – Credit risk
exposures by portfolio and PD range” for a view of the CRM effect reflected
in the asset class of the protection provider. | | | | | |

UBS Group AG consolidated

Credit risk under the standardized approach

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

Semiannual |

| CR5: Standardized approach –
exposures by asset classes and risk weights | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| USD million | | | | | | | | | | | |
| Risk weight | | 0% | 10% | 20% | 35% | 50% | 75% | 100% | 150% | Others | Total credit exposures amount (post-CCF and post-CRM) 3 |
| 30.6.20 | | | | | | | | | | | |
| Asset classes | | | | | | | | | | | |
| 1 | Central governments and central banks | 8,934 | | 207 | | 71 | | 836 | | | 10,048 |
| 2 | Banks and securities dealers | | | 5,319 | | 784 | | 26 | | | 6,129 |
| 3 | Public-sector entities and multilateral development banks | 149 | | 1,128 | | 143 | | 70 | | | 1,490 |
| 4 | Corporates | | | 2,088 | | 125 | 1,219 2 | 5,130 | 12 | | 8,574 |
| 5 | Retail | | | | 5,433 | | 1,331 | 4,600 | 173 | | 11,538 |
| 6 | Equity | | | | | | | | | | |
| 7 | Other assets | 894 | | | | | | 13,221 | | | 14,115 |
| 8 | Total | 9,977 | | 8,743 | 5,433 | 1,124 | 2,550 | 23,883 | 186 | | 51,894 |
| 9 | of which: mortgage loans | | | | 5,433 | | 84 | 655 | | | 6,171 |
| 10 | of which: past due 1 | | | | | | | 274 | | | 274 |
| 31.12.19 | | | | | | | | | | | |
| Asset classes | | | | | | | | | | | |
| 1 | Central governments and central banks | 9,540 | | 225 | | 58 | | 864 | | | 10,687 |
| 2 | Banks and securities dealers | | | 4,863 | | 673 | | 5 | | | 5,541 |
| 3 | Public-sector entities and multilateral development banks | 398 | | 256 | | 155 | | 110 | | | 920 |
| 4 | Corporates | | | 1,831 | | 137 | 172 2 | 4,348 | 2 | | 6,491 |
| 5 | Retail | | | | 5,846 | | 1,622 | 4,496 | 109 | | 12,074 |
| 6 | Equity | | | | | | | | | | |
| 7 | Other assets | 1,091 | | | | | | 13,135 | | | 14,226 |
| 8 | Total | 11,030 | | 7,175 | 5,846 | 1,023 | 1,794 | 22,959 | 112 | | 49,939 |
| 9 | of which: mortgage loans | | | | 5,846 | | 99 | 521 | | | 6,466 |
| 10 | of which: past due 1 | | | | | | | 242 | | | 242 |
| 1 Includes mortgage loans. 2 Relates to structured margin
lending exposures based on the methodology agreed with FINMA. 3 The CRM
effect is reflected in the asset class of the protection provider. Refer to
“CR4: Standardized approach – credit risk exposure and credit risk mitigation
(CRM) effects” for a view of the CRM effect reflected in the asset class of
the obligor. | | | | | | | | | | | |

Credit risk under internal ratings-based approaches

Semiannual | The CR6 table on the following pages provides information about credit risk exposures under the A-IRB approach, including a breakdown of the main parameters used in A-IRB models for the calculation of capital requirements, presented by portfolio and PD range across FINMA-defined asset classes. Exposures subject to credit risk mitigation through financial guarantees and credit derivatives are reflected in the asset class of the protection provider.

As of 30 June 2020, exposures before the application of CCFs increased by USD 98 billion to USD 898 billion across various asset classes, resulting in an overall RWA increase of USD 10 billion.

In the Central governments and central banks asset class, total exposures pre-CCF increased by USD 61 billion to USD 200 billion, as a result of maintaining increased liquidity levels.

In the Corporates: other lending asset class, total exposure pre-CCF increased by USD 10 billion to 96 billion and RWA increased by USD 6 billion to USD 38 billion, primarily driven by an increase in Lombard loans, fixed-term mortgages and fixed-term loans.

In the Retail: residential mortgages asset class, total exposures pre-CCF increased by USD 6 billion to USD 157 billion and RWA increased by USD 1 billion to USD 30 billion, reflecting business growth and recalibration of risk parameters for real estate portfolios and Lombard loans in Global Wealth Management and Personal & Corporate Banking.

In the Retail: other retail asset class, total exposures pre-CCF increased by USD 15 billion to USD 372 billion and RWA increased by USD 1 billion to USD 12 billion, mainly due to business growth and changes in credit ratings and loss given default with regard to Lombard exposures in Global Wealth Management.

Information about credit risk RWA for the first quarter of 2020, including details regarding movements in RWA, is provided on pages 8–11 of our 31 March 2020 Pillar 3 report, available under “Pillar 3 disclosures” at www.ubs.com/investors , and for the second quarter of 2020 on page 25 of this report. p

UBS Group AG consolidated

Semiannual |

| CR6: IRB – Credit risk
exposures by portfolio and PD range — USD million, except where
indicated | Original on-balance sheet gross exposure | Off-balance sheet exposures pre-CCF | Total exposures pre-CCF | Average CCF in % | EAD post-CCF and post-CRM 1 | Average PD in % | Number of obligors (in thousands) | Average LGD in % | Average maturity in years | RWA | RWA density in % | EL | Provisions 2 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Central governments and
central banks as of 30.6.20 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 197,825 | 2,178 | 200,002 | 55.3 | 198,965 | 0.0 | 0.1 | 31.5 | 1.1 | 3,334 | 1.7 | 8 | |
| 0.15 to <0.25 | 0 | | 0 | | 0 | 0.2 | <0.1 | 63.1 | 1.0 | 0 | 39.9 | 0 | |
| 0.25 to <0.50 | 0 | | 0 | | 0 | 0.3 | <0.1 | 45.0 | 1.0 | 0 | 44.4 | 0 | |
| 0.50 to <0.75 | 3 | | 3 | | 3 | 0.7 | <0.1 | 52.9 | 1.1 | 3 | 78.0 | 0 | |
| 0.75 to <2.50 | 0 | 7 | 7 | 51.9 | 4 | 1.8 | <0.1 | 30.4 | 2.6 | 3 | 75.5 | 0 | |
| 2.50 to <10.00 | 0 | 3 | 4 | 57.0 | 2 | 2.7 | <0.1 | 29.0 | 2.6 | 2 | 75.6 | 0 | |
| 10.00 to <100.00 | 0 | 0 | 0 | 10.4 | 0 | 13.0 | <0.1 | 45.0 | 1.0 | 0 | 207.0 | 0 | |
| 100.00 (default) | 12 | 4 | 16 | 3.5 | 1 | 100.0 | <0.1 | 65.1 4 | 3.5 5 | 2 | 106.0 | 11 | |
| Subtotal | 197,841 | 2,192 | 200,033 | 55.2 | 198,976 | 0.0 | 0.1 | 31.5 | 1.1 | 3,343 | 1.7 | 19 | 12 |
| Central governments and
central banks as of 31.12.19 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 138,755 | 207 | 138,961 | 49.4 | 138,852 | 0.0 | 0.1 | 30.4 | 1.0 | 2,455 | 1.8 | 3 | |
| 0.15 to <0.25 | 0 | | 0 | | 0 | 0.2 | <0.1 | 65.8 | 1.0 | 0 | 41.8 | 0 | |
| 0.25 to <0.50 | 0 | | 0 | | 0 | 0.3 | <0.1 | 45.0 | 1.0 | 0 | 44.4 | 0 | |
| 0.50 to <0.75 | 4 | | 4 | | 4 | 0.7 | <0.1 | 53.1 | 1.1 | 3 | 77.7 | 0 | |
| 0.75 to <2.50 | 1 | 0 | 1 | 55.0 | 1 | 1.4 | <0.1 | 39.4 | 2.5 | 1 | 111.6 | 0 | |
| 2.50 to <10.00 | 0 | 1 | 1 | 76.1 | 1 | 2.7 | <0.1 | 10.2 | 4.4 | 0 | 33.0 | 0 | |
| 10.00 to <100.00 | 0 | 0 | 0 | 9.7 | 0 | 13.0 | <0.1 | 45.0 | 1.0 | 0 | 206.7 | 0 | |
| 100.00 (default) | 13 | 36 | 49 | 55.0 | 22 | 100.0 | <0.1 | 21.8 4 | 4.3 5 | 23 | 106.0 | 11 | |
| Subtotal | 138,772 | 243 | 139,016 | 50.4 | 138,880 | 0.0 | 0.1 | 30.4 | 1.0 | 2,482 | 1.8 | 14 | 11 |
| Banks and securities
dealers as of 30.6.20 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 12,069 | 2,658 | 14,727 | 52.3 | 13,295 | 0.0 | 0.5 | 39.6 | 1.1 | 2,050 | 15.4 | 3 | |
| 0.15 to <0.25 | 1,392 | 681 | 2,073 | 41.4 | 1,321 | 0.2 | 0.3 | 53.0 | 1.2 | 652 | 49.4 | 2 | |
| 0.25 to <0.50 | 453 | 341 | 794 | 50.4 | 517 | 0.4 | 0.2 | 61.8 | 1.1 | 433 | 83.8 | 1 | |
| 0.50 to <0.75 | 237 | 240 | 477 | 43.9 | 303 | 0.7 | 0.1 | 55.3 | 1.1 | 307 | 101.3 | 1 | |
| 0.75 to <2.50 | 966 | 619 | 1,585 | 49.6 | 1,058 | 1.4 | 0.2 | 53.4 | 1.2 | 1,295 | 122.4 | 8 | |
| 2.50 to <10.00 | 424 | 2,262 | 2,686 | 45.1 | 1,262 | 3.3 | 0.2 | 27.4 | 1.0 | 1,190 | 94.3 | 14 | |
| 10.00 to <100.00 | 2 | 14 | 16 | 31.6 | 7 | 12.9 | <0.1 | 52.8 | 1.7 | 21 | 303.6 | 3 | |
| 100.00 (default) | | | | | | | | | | | | | |
| Subtotal | 15,544 | 6,815 | 22,359 | 48.0 | 17,763 | 0.4 | 1.5 | 41.5 | 1.1 | 5,948 | 33.5 | 33 | 15 |
| Banks and securities dealers
as of 31.12.19 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 11,797 | 1,914 | 13,711 | 50.6 | 12,591 | 0.0 | 0.5 | 39.0 | 1.0 | 1,877 | 14.9 | 3 | |
| 0.15 to <0.25 | 691 | 2,191 | 2,882 | 84.3 | 2,304 | 0.2 | 0.3 | 50.4 | 2.1 | 1,335 | 58.0 | 2 | |
| 0.25 to <0.50 | 665 | 431 | 1,097 | 52.1 | 815 | 0.4 | 0.2 | 47.4 | 1.5 | 532 | 65.3 | 1 | |
| 0.50 to <0.75 | 478 | 287 | 765 | 44.2 | 577 | 0.6 | 0.1 | 45.3 | 1.0 | 478 | 82.8 | 2 | |
| 0.75 to <2.50 | 830 | 574 | 1,404 | 47.5 | 922 | 1.4 | 0.2 | 46.3 | 1.3 | 1,013 | 109.8 | 6 | |
| 2.50 to <10.00 | 282 | 462 | 744 | 44.8 | 377 | 3.6 | 0.2 | 64.4 | 1.1 | 810 | 214.7 | 9 | |
| 10.00 to <100.00 | 44 | 11 | 54 | 43.3 | 27 | 14.2 | <0.1 | 38.2 | 1.2 | 57 | 212.6 | 4 | |
| 100.00 (default) | | | | | | | | | | | | | |
| Subtotal | 14,786 | 5,870 | 20,657 | 62.2 | 17,614 | 0.3 | 1.5 | 42.0 | 1.2 | 6,102 | 34.6 | 28 | 11 |

| CR6: IRB – Credit risk exposures by portfolio and PD range
(continued) — USD million, except where
indicated | Original on-balance sheet gross exposure | Off-balance sheet exposures pre-CCF | Total exposures pre-CCF | Average CCF in % | EAD post-CCF and post-CRM 1 | Average PD in % | Number of obligors (in thousands) | Average LGD in % | Average maturity in years | RWA | RWA density in % | EL | Provisions 2 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Public-sector entities,
multilateral development banks as of 30.6.20 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 8,895 | 1,234 | 10,129 | 17.5 | 9,112 | 0.0 | 0.3 | 37.2 | 1.1 | 741 | 8.1 | 1 | |
| 0.15 to <0.25 | 270 | 288 | 559 | 11.5 | 304 | 0.2 | 0.2 | 31.2 | 2.6 | 79 | 26.1 | 0 | |
| 0.25 to <0.50 | 617 | 308 | 925 | 28.3 | 704 | 0.3 | 0.2 | 25.0 | 2.5 | 195 | 27.7 | 1 | |
| 0.50 to <0.75 | 38 | 23 | 61 | 24.3 | 44 | 0.6 | <0.1 | 29.9 | 2.8 | 21 | 48.7 | 0 | |
| 0.75 to <2.50 | 1 | 0 | 1 | 96.4 | 1 | 1.0 | <0.1 | 12.0 | 1.2 | 0 | 16.9 | 0 | |
| 2.50 to <10.00 | 1 | 0 | 1 | 0.0 | 1 | 2.9 | <0.1 | 9.1 | 5.0 | 0 | 26.6 | 0 | |
| 10.00 to <100.00 | | | | | | | | | | | | | |
| 100.00 (default) | 4 | | 4 | | 4 | 100.0 | <0.1 | | 1.0 5 | 4 | 106.0 | 0 | |
| Subtotal | 9,827 | 1,854 | 11,680 | 18.5 | 10,169 | 0.1 | 0.7 | 36.1 | 1.2 | 1,041 | 10.2 | 2 | 0 |
| Public-sector entities,
multilateral development banks as of 31.12.19 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 6,854 | 754 | 7,609 | 12.8 | 6,951 | 0.0 | 0.3 | 35.3 | 1.1 | 543 | 7.8 | 1 | |
| 0.15 to <0.25 | 277 | 239 | 516 | 11.8 | 305 | 0.2 | 0.2 | 30.7 | 2.7 | 82 | 26.9 | 0 | |
| 0.25 to <0.50 | 608 | 405 | 1,013 | 25.7 | 713 | 0.3 | 0.2 | 25.3 | 2.5 | 198 | 27.8 | 1 | |
| 0.50 to <0.75 | 33 | 7 | 41 | 10.0 | 34 | 0.6 | <0.1 | 28.7 | 2.7 | 16 | 47.3 | 0 | |
| 0.75 to <2.50 | 1 | 0 | 1 | 97.9 | 1 | 1.0 | <0.1 | 13.4 | 1.2 | 0 | 18.9 | 0 | |
| 2.50 to <10.00 | 1 | 6 | 7 | 54.7 | 4 | 2.9 | <0.1 | 6.0 | 5.0 | 1 | 17.6 | 0 | |
| 10.00 to <100.00 | | | | | | | | | | | | | |
| 100.00 (default) | 4 | | 4 | | 4 | 100.0 | <0.1 | | 1.0 5 | 4 | 106.0 | | |
| Subtotal | 7,779 | 1,412 | 9,191 | 16.5 | 8,012 | 0.1 | 0.8 | 34.2 | 1.3 | 844 | 10.5 | 2 | 1 |
| Corporates: specialized
lending as of 30.6.20 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 2,451 | 480 | 2,931 | 73.3 | 2,803 | 0.1 | 0.5 | 13.9 | 2.0 | 199 | 7.1 | 0 | |
| 0.15 to <0.25 | 1,802 | 378 | 2,180 | 68.0 | 2,059 | 0.2 | 0.3 | 15.4 | 2.1 | 309 | 15.0 | 1 | |
| 0.25 to <0.50 | 4,372 | 2,000 | 6,371 | 35.9 | 5,045 | 0.4 | 0.6 | 28.0 | 1.8 | 1,622 | 32.2 | 5 | |
| 0.50 to <0.75 | 4,619 | 3,475 | 8,094 | 26.8 | 5,506 | 0.6 | 0.6 | 31.7 | 1.6 | 2,677 | 48.6 | 11 | |
| 0.75 to <2.50 | 7,274 | 2,350 | 9,624 | 37.4 | 8,126 | 1.4 | 1.4 | 31.0 | 1.7 | 5,439 | 66.9 | 36 | |
| 2.50 to <10.00 | 1,402 | 329 | 1,731 | 58.1 | 1,593 | 3.4 | 0.3 | 35.6 | 1.5 | 1,631 | 102.4 | 20 | |
| 10.00 to <100.00 | 4 | 0 | 4 | 100.0 | 4 | 11.0 | <0.1 | 60.0 | 1.0 | 9 | 258.2 | 0 | |
| 100.00 (default) | 167 | 7 | 174 | 68.3 | 72 | 100.0 | 0.1 | 57.6 4 | 3.0 5 | 76 | 106.0 | 100 | |
| Subtotal | 22,089 | 9,020 | 31,109 | 36.9 | 25,207 | 1.2 | 3.8 | 27.8 | 1.8 | 11,963 | 47.5 | 174 | 115 |
| Corporates: specialized
lending as of 31.12.19 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 1,947 | 420 | 2,367 | 77.3 | 2,271 | 0.1 | 0.4 | 14.9 | 2.1 | 174 | 7.6 | 0 | |
| 0.15 to <0.25 | 1,501 | 524 | 2,024 | 60.7 | 1,819 | 0.2 | 0.3 | 15.9 | 2.0 | 265 | 14.6 | 1 | |
| 0.25 to <0.50 | 3,812 | 2,141 | 5,953 | 31.3 | 4,464 | 0.4 | 0.6 | 27.3 | 2.0 | 1,436 | 32.2 | 4 | |
| 0.50 to <0.75 | 4,141 | 3,420 | 7,560 | 31.5 | 5,141 | 0.6 | 0.6 | 31.8 | 1.5 | 2,470 | 48.0 | 10 | |
| 0.75 to <2.50 | 7,333 | 2,377 | 9,710 | 36.8 | 8,206 | 1.4 | 1.4 | 31.7 | 1.7 | 5,550 | 67.6 | 37 | |
| 2.50 to <10.00 | 1,163 | 296 | 1,459 | 61.0 | 1,343 | 3.5 | 0.3 | 39.2 | 1.5 | 1,507 | 112.2 | 19 | |
| 10.00 to <100.00 | 0 | | 0 | | 0 | 12.0 | <0.1 | 65.0 | 1.0 | 0 | 289.5 | 0 | |
| 100.00 (default) | 167 | 2 | 168 | 75.9 | 70 | 100.0 | 0.1 | 58.3 4 | 3.1 5 | 74 | 106.0 | 98 | |
| Subtotal | 20,063 | 9,178 | 29,241 | 37.5 | 23,313 | 1.2 | 3.8 | 28.5 | 1.8 | 11,475 | 49.2 | 169 | 112 |

UBS Group AG consolidated

| CR6: IRB – Credit risk exposures by portfolio and PD range
(continued) — USD million, except where
indicated | Original on-balance sheet gross exposure | Off-balance sheet exposures pre-CCF | Total exposures pre-CCF | Average CCF in % | EAD post-CCF and post-CRM 1 | Average PD in % | Number of obligors (in thousands) | Average LGD in % | Average maturity in years | RWA | RWA density in % | EL | Provisions 2 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Corporates: other lending
as of 30.6.20 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 15,863 | 19,429 | 35,292 | 33.2 | 19,690 | 0.0 | 3.8 | 34.5 | 1.6 | 4,010 | 20.4 | 3 | |
| 0.15 to <0.25 | 6,463 | 7,520 | 13,983 | 34.9 | 8,592 | 0.2 | 1.7 | 36.6 | 2.4 | 3,498 | 40.7 | 5 | |
| 0.25 to <0.50 | 3,944 | 3,844 | 7,788 | 37.3 | 5,307 | 0.4 | 2.5 | 34.9 | 2.2 | 2,715 | 51.2 | 7 | |
| 0.50 to <0.75 | 4,038 | 2,762 | 6,800 | 41.9 | 5,218 | 0.6 | 2.4 | 32.5 | 1.9 | 3,246 | 62.2 | 11 | |
| 0.75 to <2.50 | 9,499 | 6,936 | 16,436 | 42.5 | 12,530 | 1.4 | 11.2 | 30.9 | 2.2 | 9,466 | 75.5 | 54 | |
| 2.50 to <10.00 | 5,978 | 7,761 | 13,739 | 37.6 | 8,936 | 4.4 | 4.8 | 33.0 | 2.2 | 13,102 | 146.6 | 127 | |
| 10.00 to <100.00 | 342 | 323 | 665 | 57.9 | 530 | 15.2 | 0.1 | 26.7 | 2.2 | 951 | 179.5 | 18 | |
| 100.00 (default) | 1,392 | 228 | 1,619 | 46.8 | 1,017 | 100.0 | 0.7 | 32.7 4 | 2.7 5 | 1,078 | 106.0 | 486 | |
| Subtotal | 47,520 | 48,801 | 96,322 | 36.5 | 61,820 | 2.8 | 27.3 | 33.6 | 2.0 | 38,067 | 61.6 | 711 | 878 |
| Corporates: other lending as
of 31.12.19 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 13,796 | 18,886 | 32,682 | 34.4 | 16,701 | 0.0 | 3.4 | 37.3 | 1.8 | 3,682 | 22.0 | 9 | |
| 0.15 to <0.25 | 3,965 | 5,479 | 9,444 | 37.2 | 5,489 | 0.2 | 1.6 | 32.5 | 2.4 | 2,016 | 36.7 | 3 | |
| 0.25 to <0.50 | 4,094 | 3,403 | 7,497 | 35.3 | 5,233 | 0.4 | 2.5 | 33.6 | 2.0 | 2,715 | 51.9 | 6 | |
| 0.50 to <0.75 | 2,997 | 2,434 | 5,431 | 41.0 | 4,060 | 0.6 | 2.4 | 32.9 | 1.8 | 2,207 | 54.4 | 8 | |
| 0.75 to <2.50 | 9,093 | 8,342 | 17,435 | 37.9 | 12,372 | 1.4 | 11.1 | 30.8 | 2.1 | 9,329 | 75.4 | 52 | |
| 2.50 to <10.00 | 4,303 | 7,958 | 12,261 | 38.5 | 7,399 | 4.1 | 4.9 | 32.1 | 2.4 | 10,543 | 142.5 | 100 | |
| 10.00 to <100.00 | 319 | 286 | 604 | 58.8 | 487 | 17.6 | 0.1 | 13.6 | 1.8 | 506 | 103.9 | 11 | |
| 100.00 (default) | 1,091 | 166 | 1,257 | 44.9 | 790 | 100.0 | 0.7 | 33.1 4 | 2.7 5 | 838 | 106.0 | 385 | |
| Subtotal | 39,657 | 46,955 | 86,612 | 36.6 | 52,533 | 2.7 | 26.6 | 33.5 | 2.0 | 31,836 | 60.6 | 575 | 554 |
| Retail: residential
mortgages as of 30.6.20 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 66,295 | 1,706 | 68,001 | 58.3 | 67,295 | 0.1 | 129.6 | 18.6 | | 2,806 | 4.2 | 11 | |
| 0.15 to <0.25 | 15,046 | 375 | 15,421 | 71.2 | 15,314 | 0.2 | 22.0 | 21.7 | | 1,364 | 8.9 | 6 | |
| 0.25 to <0.50 | 22,364 | 632 | 22,996 | 76.5 | 22,849 | 0.4 | 29.1 | 22.8 | | 3,349 | 14.7 | 18 | |
| 0.50 to <0.75 | 14,569 | 458 | 15,026 | 79.4 | 14,934 | 0.6 | 16.0 | 23.6 | | 3,431 | 23.0 | 22 | |
| 0.75 to <2.50 | 22,774 | 1,598 | 24,372 | 76.6 | 23,998 | 1.3 | 28.5 | 27.5 | | 10,495 | 43.7 | 89 | |
| 2.50 to <10.00 | 8,763 | 432 | 9,195 | 74.8 | 9,086 | 4.3 | 10.5 | 23.9 | | 6,812 | 75.0 | 93 | |
| 10.00 to <100.00 | 1,082 | 38 | 1,120 | 87.3 | 1,115 | 15.3 | 1.2 | 22.3 | | 1,359 | 121.9 | 38 | |
| 100.00 (default) | 701 | 6 | 707 | 64.5 | 679 | 100.0 | 1.0 | 3.6 4 | | 720 | 106.0 | 26 | |
| Subtotal | 151,593 | 5,246 | 156,839 | 70.4 | 155,269 | 1.2 | 237.8 | 21.7 | | 30,337 | 19.5 | 304 | 130 |
| Retail: residential
mortgages as of 31.12.19 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 64,019 | 1,427 | 65,447 | 60.5 | 64,883 | 0.1 | 129.2 | 18.5 | | 2,692 | 4.1 | 10 | |
| 0.15 to <0.25 | 14,093 | 290 | 14,383 | 75.6 | 14,312 | 0.2 | 21.0 | 22.5 | | 1,324 | 9.3 | 6 | |
| 0.25 to <0.50 | 21,278 | 505 | 21,783 | 81.3 | 21,688 | 0.3 | 28.4 | 23.3 | | 3,238 | 14.9 | 18 | |
| 0.50 to <0.75 | 14,121 | 363 | 14,484 | 87.7 | 14,439 | 0.6 | 16.2 | 24.0 | | 3,377 | 23.4 | 22 | |
| 0.75 to <2.50 | 22,450 | 1,358 | 23,808 | 80.0 | 23,536 | 1.3 | 28.5 | 26.7 | | 10,025 | 42.6 | 85 | |
| 2.50 to <10.00 | 8,416 | 318 | 8,734 | 82.6 | 8,678 | 4.4 | 10.8 | 23.5 | | 6,479 | 74.7 | 90 | |
| 10.00 to <100.00 | 981 | 26 | 1,007 | 94.8 | 1,006 | 15.8 | 1.2 | 22.6 | | 1,245 | 123.8 | 35 | |
| 100.00 (default) | 735 | 2 | 737 | 67.1 | 711 | 100.0 | 1.1 | 3.5 4 | | 754 | 106.0 | 26 | |
| Subtotal | 146,093 | 4,290 | 150,383 | 74.3 | 149,255 | 1.2 | 236.3 | 21.7 | | 29,133 | 19.5 | 292 | 110 |

UBS Group AG consolidated

| CR6: IRB – Credit risk exposures by portfolio and PD range
(continued) — USD million, except where
indicated | Original on-balance sheet gross exposure | Off-balance sheet exposures pre-CCF | Total exposures pre-CCF | Average CCF in % | EAD post-CCF and post-CRM 1 | Average PD in % | Number of obligors (in thousands) | Average LGD in % | Average maturity in years | RWA | RWA density in % | EL | Provisions 2 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Retail: other retail as of
30.6.20 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 106,954 | 217,503 | 324,457 | 18.3 | 146,586 | 0.0 | 172.7 | 30.7 | | 6,069 | 4.1 | 19 | |
| 0.15 to <0.25 | 2,310 | 6,556 | 8,866 | 17.9 | 3,481 | 0.2 | 4.8 | 26.6 | | 355 | 10.2 | 2 | |
| 0.25 to <0.50 | 3,122 | 6,703 | 9,825 | 19.0 | 4,396 | 0.4 | 6.4 | 28.7 | | 779 | 17.7 | 4 | |
| 0.50 to <0.75 | 2,573 | 10,748 | 13,321 | 17.7 | 4,478 | 0.6 | 6.7 | 28.4 | | 1,292 | 28.9 | 9 | |
| 0.75 to <2.50 | 3,925 | 9,452 | 13,377 | 20.6 | 5,874 | 1.1 | 41.7 | 29.6 | | 2,006 | 34.2 | 20 | |
| 2.50 to <10.00 | 782 | 810 | 1,592 | 19.7 | 939 | 5.0 | 1.6 | 56.2 | | 894 | 95.2 | 31 | |
| 10.00 to <100.00 | 83 | 62 | 145 | 23.6 | 98 | 20.7 | 0.6 | 25.5 | | 59 | 60.6 | 5 | |
| 100.00 (default) | 215 | 21 | 235 | 0.1 | 209 | 100.0 | <0.1 | 15.0 4 | | 222 | 106.0 | 18 | |
| Subtotal | 119,963 | 251,854 | 371,818 | 18.3 | 166,062 | 0.3 | 234.6 | 30.6 | | 11,676 | 7.0 | 108 | 83 |
| Retail: other retail as of
31.12.19 | | | | | | | | | | | | | |
| 0.00 to <0.15 | 108,053 | 226,115 | 334,169 | 18.4 | 149,666 | 0.0 | 201.8 | 32.5 | | 6,535 | 4.4 | 20 | |
| 0.15 to <0.25 | 1,977 | 3,610 | 5,587 | 18.9 | 2,660 | 0.2 | 4.5 | 29.7 | | 304 | 11.4 | 1 | |
| 0.25 to <0.50 | 1,405 | 2,235 | 3,640 | 18.2 | 1,811 | 0.4 | 2.2 | 34.4 | | 385 | 21.3 | 2 | |
| 0.50 to <0.75 | 837 | 1,193 | 2,031 | 18.4 | 1,056 | 0.6 | 1.7 | 33.1 | | 315 | 29.9 | 2 | |
| 0.75 to <2.50 | 2,793 | 7,052 | 9,845 | 15.0 | 3,846 | 1.1 | 42.5 | 35.4 | | 1,568 | 40.8 | 14 | |
| 2.50 to <10.00 | 860 | 773 | 1,633 | 16.5 | 980 | 5.6 | 1.4 | 64.5 | | 1,073 | 109.5 | 41 | |
| 10.00 to <100.00 | 166 | 26 | 192 | 31.9 | 175 | 15.4 | 0.7 | 30.8 | | 115 | 65.7 | 9 | |
| 100.00 (default) | 4 | 7 | 11 | 2.3 | 4 | 100.0 | <0.1 | 42.5 4 | | 4 | 106.0 | 5 | |
| Subtotal | 116,096 | 241,012 | 357,108 | 18.3 | 160,197 | 0.1 | 254.9 | 32.8 | | 10,298 | 6.4 | 95 | 9 |
| Total 30.6.20 | 565,598 | 332,172 | 897,770 | 22.8 | 636,927 | 0.7 | 1,496.8 | 29.3 | 1.3 6 | 103,036 | 16.2 | 1,381 | 1,262 |
| Total 31.12.19 | 484,669 | 314,965 | 799,634 | 22.9 | 551,748 | 0.7 | 1,532.1 | 29.4 | 1.3 6 | 92,858 | 16.8 | 1,208 | 836 |
| 1 The CRM effect is reflected in the asset class of the
protection provider. Refer to “CR7: IRB – effect on RWA of credit derivatives
used as CRM techniques” for a view of the CRM effect reflected in the asset
class of the obligor. 2 In line with the BCBS Pillar 3 disclosure
requirements, provisions are only provided for the sub-totals by asset
class. 3 For the calculation of the “EAD post-CCF and post-CRM” column, a
balance factor approach is used instead of a CCF approach. The EAD is calculated
by multiplying the on-balance sheet exposure with a fixed factor of 1.4. 4
Average LGD for defaulted exposures disclosed in the table are not used to
calculate RWA. The disclosed number is derived using ECL accounting
provisions (stage 3) divided by total exposures pre-CCF. 5 Average
maturity for defaulted exposures disclosed in the table is not used to
calculate RWA. The comparative-period number has been restated for Central
governments and central banks to cap it to five years or below. 6 Retail
asset classes are excluded from the average maturity as they are not subject
to maturity treatment. | | | | | | | | | | | | | |

Credit risk RWA development in the second quarter of 2020

Quarterly | The CR8 table below provides a breakdown of the credit risk RWA movements in the second quarter of 2020 across movement categories defined by the Basel Committee on Banking Supervision (BCBS). These categories are described on page 50 of our 31 December 2019 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors .

Credit risk RWA under the A-IRB approach increased by USD 3 billion (of which USD 1 billion is due to FX increase, mainly driven by depreciation of the US dollar against the Swiss Franc) to USD 103 billion as of 30 June 2020.

The RWA increase from asset size movements of USD 0.5 billion was predominantly driven by increases in Lombard loans, and unutilized credit lines in Global Wealth Management and Personal & Corporate Banking.

The increase in RWA from asset quality of USD 0.9 billion was mainly due to rating deteriorations during the quarter in Global Wealth Management. Model updates of USD 0.9 billion were mainly driven by recalibration of risk parameters for real estate portfolios and Lombard loans in Personal & Corporate Banking and Global Wealth Management. p

Quarterly |

| CR8: RWA flow statements of
credit risk exposures under IRB — USD million | | For the quarter ended 30.6.20 | For the quarter ended 31.3.20 |
| --- | --- | --- | --- |
| 1 | RWA as of the beginning of
the quarter | 100,076 | 92,858 |
| 2 | Asset size | 536 | 7,543 |
| 3 | Asset quality | 863 | (241) |
| 4 | Model updates | 870 | |
| 5 | Methodology and policy | | 60 |
| 5a | of which: regulatory add-ons | | 60 |
| 6 | Acquisitions and disposals | | |
| 7 | Foreign exchange movements | 1,098 | (144) |
| 8 | Other | (407) | |
| 9 | RWA as of the end of the
quarter | 103,036 | 100,076 |

Equity exposures

Semiannual | The table below provides information about our equity exposures under the simple risk weight method. RWA on equity exposures under the simple risk weight method decreased by USD 0.6 billion, mainly due to the exclusion of investments in funds. p

Semiannual |

| CR10: IRB (equities under the
simple risk-weight method) 1 — USD million, except where
indicated | On-balance sheet amount | Risk weight in % 2 | Exposure amount 3 | RWA 2 |
| --- | --- | --- | --- | --- |
| 30.6.20 | | | | |
| Exchange-traded equity exposures | 39 | 300 | 39 | 123 |
| Other equity exposures | 595 | 400 | 595 | 2,523 |
| Total | 634 | | 634 | 2,646 |
| 31.12.19 | | | | |
| Exchange-traded equity exposures | 34 | 300 | 34 | 107 |
| Other equity exposures | 1,010 | 400 | 744 | 3,154 |
| Total | 1,043 | | 777 | 3,261 |
| 1 This table includes investment in funds until 31 December
2019, and excludes significant investments in the common shares of
non-consolidated financial institutions (banks, insurance and other financial
entities) that are subject to the threshold treatment and risk weighted at
250%. 2 RWA are calculated post-application of the A-IRB multiplier of 6%,
therefore the respective risk weight is higher than 300% and 400%. 3 The
exposure amount for equities in the banking book is based on the net
position. | | | | |

UBS Group AG consolidated

Section 4 Counterparty credit risk

Introduction

Semiannual | This section provides information about the exposures subject to the Basel III counterparty credit risk (CCR) framework, as presented in the “Regulatory exposures and risk-weighted assets” table on pages 11–12 of this report.

CCR arises from over-the-counter (OTC) and exchange-traded derivatives (ETDs), securities financing transactions (SFTs) and long settlement transactions. Within traded products, we determine the regulatory credit exposure on the majority of our derivatives portfolio by applying the effective expected positive exposure (EEPE) and stressed expected positive exposure (stressed EPE) as defined in the Basel III framework. For the rest of the portfolio, we have applied the standardized approach for counterparty credit risk (SA-CCR) since 1 January 2020, whereas figures for prior periods were calculated in accordance with the current exposure method (CEM). For the majority of securities financing transactions (securities borrowing, securities lending, margin lending, repurchase agreements and reverse repurchase agreements), we determine the regulatory credit exposure using the close-out period (COP) approach. p

® Refer to the “Introduction and basis for preparation” section of our 31 March 2020 Pillar 3 report for more information about the implementation of SA-CCR

Counterparty credit risk exposure

Semiannual | Exposure at default (EAD) post credit-risk mitigation (CRM) related to CCR increased by USD 21.2 billion to USD 125.4 billion and RWA increased by USD 4.1 billion to USD 38.6 billion as of 30 June 2020. EAD post-CRM on SFTs increased by USD 16.3 billion to USD 63.8 billion, mainly driven by higher volumes in the Investment Bank resulting in an increase of RWA of USD 3.3 billion. EAD post-CRM on derivatives increased by USD 4.9 billion to USD 61.5 billion, mainly driven by higher volumes as well as the revised methodology for the calculation of exposure at default on derivatives (SA-CCR), resulting in an increase in RWA of USD 0.8 billion. p

Semiannual |

| CCR1: Analysis of counterparty
credit risk (CCR) exposure by approach — USD million, except where
indicated | | Replacement cost | Potential future exposure | EEPE | Alpha used for computing regulatory EAD | EAD post-CRM | RWA |
| --- | --- | --- | --- | --- | --- | --- | --- |
| 30.6.20 | | | | | | | |
| 1 | SA-CCR (for derivatives) 1 | 5,395 | 6,533 | | 1.4 | 16,700 | 4,965 |
| 2 | Internal model method (for derivatives) | | | 28,005 | 1.6 | 44,808 | 19,073 |
| 3 | Simple approach for credit risk mitigation (for SFTs) | | | | | | |
| 4 | Comprehensive approach for credit risk mitigation (for SFTs) | | | | | 21,993 | 6,720 |
| 5 | VaR (for SFTs) | | | | | 41,853 | 7,810 |
| 6 | Total | | | | | 125,354 | 38,567 |
| 31.12.19 | | | | | | | |
| 1 | SA-CCR (for derivatives) 1 | 5,276 2 | 5,947 | | 1.0 | 11,224 | 3,376 |
| 2 | Internal model method (for derivatives) | | | 28,391 | 1.6 | 45,426 | 19,896 |
| 3 | Simple approach for credit risk mitigation (for SFTs) | | | | | | |
| 4 | Comprehensive approach for credit risk mitigation (for SFTs) | | | | | 17,572 | 5,858 |
| 5 | VaR (for SFTs) | | | | | 29,971 | 5,333 |
| 6 | Total | | | | | 104,192 | 34,463 |
| 1 Calculated in accordance with the standardized approach for
counterparty credit risk (SA-CCR) since 1 January 2020, whereas figures for
prior periods were calculated in accordance with the current exposure method
(CEM). 2 Replacement costs include collateral mitigation for on- and
off-balance sheet exposures related to CCR for derivative transactions. | | | | | | | |

Semiannual | In addition to the default risk capital requirements for CCR based on the advanced internal ratings-based (A-IRB) approach or standardized approach, we are required to add a capital charge to derivatives to cover the risk of mark-to-market losses associated with the deterioration of counterparty credit quality, referred to as the CVA. The advanced CVA value-at-risk (VaR) approach has been used to calculate the CVA capital charge where we apply the internal model method (IMM). Where this is not the case, the standardized CVA approach has been applied.

EAD post-CRM increased by USD 1.2 billion to USD 50.3 billion and the credit valuation adjustment RWA increased by USD 2.6 billion to USD 4.5 billion during the period, primarily due to increased trading volumes and market volatility during the period, as well as the revised methodology for the calculation of exposure at default on derivatives (SA-CCR). p

Semiannual |

| CCR2: Credit valuation
adjustment (CVA) capital charge | | | | | |
| --- | --- | --- | --- | --- | --- |
| | | 30.6.20 | | 31.12.19 | |
| USD million | | EAD post-CRM 1 | RWA | EAD post-CRM 1 | RWA |
| | Total portfolios subject to the advanced CVA capital charge | 43,939 | 3,082 | 44,520 | 974 |
| 1 | (i) VaR component (including the 3× multiplier) | | 906 | | 180 |
| 2 | (ii) Stressed VaR component (including the 3× multiplier) | | 2,176 | | 794 |
| 3 | All portfolios subject to the standardized CVA capital charge | 6,380 | 1,441 | 4,630 | 926 |
| 4 | Total subject to the CVA
capital charge | 50,318 | 4,523 | 49,150 | 1,900 |
| 1 Comparative figures for EAD post-CRM have been adjusted to
include stressed exposure at default on derivatives. | | | | | |

Semiannual | The CCR3 table below provides information about our CCR exposures under the standardized approach. Total CCR exposures increased by USD 1.1 billion to USD 7.5 billion, primarily driven by increases in our Investment Bank and Global Wealth Management business mainly due to increased derivative exposure reflecting higher volumes and the implementation of SA-CCR, as well as increases in securities financing transactions (SFTs). p

Semiannual |

| CCR3: Standardized approach –
CCR exposures by regulatory portfolio and risk weights | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| USD million | | | | | | | | | | |
| Risk weight | | 0% | 10% | 20% | 50% | 75% | 100% | 150% | Others | Total credit exposure |
| | Regulatory portfolio as of
30.6.20 | | | | | | | | | |
| 1 | Central governments and central banks | 164 | | | | | | | | 164 |
| 2 | Banks and securities dealers | | | 15 | 436 | | 3 | | | 453 |
| 3 | Public-sector entities and multilateral development banks | | | 38 | 275 | | 18 | | | 331 |
| 4 | Corporates | | | 6 | 5 | 4,319 1 | 1,988 | 9 | | 6,327 |
| 5 | Retail | | | | | 7 | 209 | | | 216 |
| 6 | Equity | | | | | | | | | |
| 7 | Other assets | | | | | | | | | |
| 8 | Total | 164 | | 58 | 716 | 4,326 | 2,218 | 9 | | 7,491 |
| | Regulatory portfolio as of
31.12.19 | | | | | | | | | |
| 1 | Central governments and central banks | 207 | | | | | | | | 207 |
| 2 | Banks and securities dealers | | | 63 | 72 | | 4 | | | 140 |
| 3 | Public-sector entities and multilateral development banks | | | 31 | 446 | | 11 | | | 488 |
| 4 | Corporates | | | 9 | 101 | 3,952 1 | 1,302 | 26 | | 5,389 |
| 5 | Retail | | | | | 1 | 123 | | | 124 |
| 6 | Equity | | | | | | | | | |
| 7 | Other assets | | | | | | | | | |
| 8 | Total | 207 | | 102 | 620 | 3,954 | 1,439 | 26 | | 6,348 |
| 1 Relates to structured margin lending exposures based on the
methodology agreed with FINMA. | | | | | | | | | | |

UBS Group AG consolidated

Semiannual | Information about RWA, including details of movements in CCR RWA, is provided on pages 6–10 of our 31 March 2020 Pillar 3 report, available under “Pillar 3 disclosures” at www.ubs.com/investors , and on page 32 of this report .

The CCR4 table below and on the following pages provides a breakdown of the key parameters used for the calculation of capital requirements under the A-IRB approach, by a probability of default (PD) range across Swiss Financial Market Supervisory Authority (FINMA)-defined asset classes. EAD post-CRM increased by USD 20.0 billion to USD 117.9 billion and RWA increased by USD 3.1 billion to USD 32.7 billion during the period. These increases are mainly related to the Investment Bank, with increases in EAD post-CRM of USD 15.7 billion and RWA of USD 2.7 billion, primarily reflecting increased volumes and trading activity in both Securities Financing Transactions and Derivatives, as well as in Global Wealth Management, with increases in EAD post-CRM of USD 3.4 billion and RWA of USD 0.4 billion, primarily in derivative transactions. p

Semiannual |

| CCR4: IRB – CCR exposures by
portfolio and PD scale — USD million, except where
indicated | EAD post-CRM | Average PD in % | Number of obligors (in thousands) | Average LGD in % | Average maturity in years 1 | RWA | RWA density in % |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Central governments and
central banks as of 30.6.20 | | | | | | | |
| 0.00 to <0.15 | 9,795 | 0.0 | 0.2 | 38.6 | 0.4 | 629 | 6.4 |
| 0.15 to <0.25 | 203 | 0.2 | <0.1 | 47.0 | 0.7 | 57 | 28.1 |
| 0.25 to <0.50 | 437 | 0.3 | <0.1 | 96.4 | 1.0 | 438 | 100.4 |
| 0.50 to <0.75 | 56 | 0.7 | <0.1 | 55.0 | 1.0 | 45 | 80.4 |
| 0.75 to <2.50 | 37 | 0.9 | <0.1 | 57.2 | 0.4 | 32 | 86.5 |
| 2.50 to <10.00 | 2 | 2.6 | <0.1 | 70.2 | 1.0 | 3 | 173.8 |
| 10.00 to <100.00 | | | | | | | |
| 100.00 (default) | | | | | | | |
| Subtotal | 10,528 | 0.1 | 0.2 | 41.4 | 0.4 | 1,203 | 11.4 |
| Central governments and
central banks as of 31.12.19 | | | | | | | |
| 0.00 to <0.15 | 8,443 | 0.0 | 0.1 | 35.4 | 0.4 | 490 | 5.8 |
| 0.15 to <0.25 | 129 | 0.2 | <0.1 | 50.3 | 0.6 | 37 | 28.6 |
| 0.25 to <0.50 | 261 | 0.3 | <0.1 | 53.1 | 0.7 | 149 | 57.3 |
| 0.50 to <0.75 | 108 | 0.7 | <0.1 | 55.0 | 1.0 | 87 | 80.4 |
| 0.75 to <2.50 | 13 | 1.0 | <0.1 | 44.7 | 0.8 | 11 | 87.2 |
| 2.50 to <10.00 | | | | | | | |
| 10.00 to <100.00 | | | | | | | |
| 100.00 (default) | | | | | | | |
| Subtotal | 8,954 | 0.1 | 0.1 | 36.3 | 0.4 | 774 | 8.6 |
| Banks and securities
dealers as of 30.6.20 | | | | | | | |
| 0.00 to <0.15 | 15,403 | 0.1 | 0.4 | 50.4 | 0.7 | 2,836 | 18.4 |
| 0.15 to <0.25 | 4,782 | 0.2 | 0.2 | 49.1 | 0.6 | 1,578 | 33.0 |
| 0.25 to <0.50 | 1,753 | 0.4 | 0.2 | 47.3 | 0.7 | 838 | 47.8 |
| 0.50 to <0.75 | 365 | 0.6 | 0.1 | 58.7 | 0.9 | 329 | 90.2 |
| 0.75 to <2.50 | 690 | 1.1 | 0.2 | 49.8 | 0.8 | 660 | 95.6 |
| 2.50 to <10.00 | 27 | 3.6 | <0.1 | 71.7 | 1.0 | 56 | 210.1 |
| 10.00 to <100.00 | 0 | 22.0 | <0.1 | 45.0 | 1.0 | 0 | 241.3 |
| 100.00 (default) | | | | | | | |
| Subtotal | 23,021 | 0.2 | 1.1 | 50.0 | 0.6 | 6,297 | 27.4 |
| Banks and securities dealers
as of 31.12.19 | | | | | | | |
| 0.00 to <0.15 | 13,108 | 0.1 | 0.4 | 48.9 | 0.8 | 2,539 | 19.4 |
| 0.15 to <0.25 | 4,287 | 0.2 | 0.2 | 48.7 | 0.8 | 1,568 | 36.6 |
| 0.25 to <0.50 | 1,615 | 0.4 | 0.2 | 46.6 | 0.7 | 766 | 47.4 |
| 0.50 to <0.75 | 650 | 0.7 | 0.1 | 63.1 | 0.8 | 632 | 97.3 |
| 0.75 to <2.50 | 573 | 1.1 | 0.1 | 38.6 | 0.9 | 404 | 70.5 |
| 2.50 to <10.00 | 33 | 3.2 | <0.1 | 73.5 | 1.0 | 71 | 217.8 |
| 10.00 to <100.00 | 1 | 14.9 | <0.1 | 90.0 | 1.0 | 6 | 431.9 |
| 100.00 (default) | | | | | | | |
| Subtotal | 20,267 | 0.2 | 1.1 | 48.9 | 0.8 | 5,985 | 29.5 |

| CCR4: IRB – CCR exposures by portfolio and PD scale (continued) — USD million, except where
indicated | EAD post-CRM | Average PD in % | Number of obligors (in thousands) | Average LGD in % | Average maturity in years 1 | RWA | RWA density in % |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Public-sector entities,
multilateral development banks as of 30.6.20 | | | | | | | |
| 0.00 to <0.15 | 2,143 | 0.0 | 0.1 | 36.1 | 1.3 | 136 | 6.3 |
| 0.15 to <0.25 | 265 | 0.2 | <0.1 | 51.1 | 1.0 | 79 | 29.8 |
| 0.25 to <0.50 | | | | | | | |
| 0.50 to <0.75 | 0 | 0.6 | <0.1 | 100.0 | 2.0 | 0 | 134.6 |
| 0.75 to <2.50 | | | | | | | |
| 2.50 to <10.00 | | | | | | | |
| 10.00 to <100.00 | | | | | | | |
| 100.00 (default) | 29 | 100.0 | <0.1 | | 3.3 | 31 | 106.0 |
| Subtotal | 2,438 | 1.2 | 0.1 | 37.4 | 1.3 | 246 | 10.1 |
| Public-sector entities,
multilateral development banks as of 31.12.19 | | | | | | | |
| 0.00 to <0.15 | 2,102 | | 0.1 | 36.1 | 1.1 | 133 | 6.3 |
| 0.15 to <0.25 | 58 | 0.2 | <0.1 | 86.5 | 1.0 | 27 | 46.7 |
| 0.25 to <0.50 | 4 | 0.4 | <0.1 | 86.9 | 1.0 | 4 | 114.7 |
| 0.50 to <0.75 | | | | | | | |
| 0.75 to <2.50 | 0 | 1.0 | <0.1 | 35.0 | 1.0 | 0 | 60.4 |
| 2.50 to <10.00 | | | | | | | |
| 10.00 to <100.00 | | | | | | | |
| 100.00 (default) | 22 | 100.0 | <0.1 | | 3.4 | 23 | 106.0 |
| Subtotal | 2,185 | 1.0 | 0.1 | 37.2 | 1.1 | 187 | 8.6 |
| Corporates: including
specialized lending as of 30.6.20 2 | | | | | | | |
| 0.00 to <0.15 | 49,085 | 0.0 | 12.2 | 35.0 | 0.5 | 6,587 | 13.4 |
| 0.15 to <0.25 | 8,386 | 0.2 | 1.9 | 52.2 | 0.6 | 4,459 | 53.2 |
| 0.25 to <0.50 | 2,635 | 0.4 | 0.8 | 87.4 | 0.8 | 3,821 | 145.0 |
| 0.50 to <0.75 | 3,590 | 0.6 | 0.8 | 39.9 | 0.5 | 3,429 | 95.5 |
| 0.75 to <2.50 | 6,059 | 1.2 | 1.6 | 27.5 | 0.5 | 4,936 | 81.5 |
| 2.50 to <10.00 | 2,442 | 3.1 | 0.2 | 7.7 | 0.2 | 828 | 33.9 |
| 10.00 to <100.00 | 2 | 22.0 | <0.1 | 19.9 | 1.0 | 4 | 173.4 |
| 100.00 (default) | 0 | 100.0 | <0.1 | | 1.0 | 0 | 106.0 |
| Subtotal | 72,199 | 0.3 | 17.5 | 37.6 | 0.5 | 24,065 | 33.3 |
| Corporates: including
specialized lending as of 31.12.19 2 | | | | | | | |
| 0.00 to <0.15 | 40,175 | 0.0 | 11.6 | 35.7 | 0.5 | 5,807 | 14.5 |
| 0.15 to <0.25 | 6,620 | 0.2 | 1.7 | 57.5 | 0.7 | 4,217 | 63.7 |
| 0.25 to <0.50 | 2,305 | 0.4 | 0.8 | 83.7 | 0.9 | 3,494 | 151.6 |
| 0.50 to <0.75 | 3,351 | 0.6 | 0.9 | 36.9 | 0.6 | 3,000 | 89.5 |
| 0.75 to <2.50 | 5,708 | 1.2 | 1.5 | 28.9 | 0.5 | 4,655 | 81.5 |
| 2.50 to <10.00 | 2,182 | 3.2 | 0.2 | 10.1 | 0.2 | 940 | 43.1 |
| 10.00 to <100.00 | 2 | 14.9 | <0.1 | 90.0 | 1.0 | 10 | 431.9 |
| 100.00 (default) | 1 | 100.0 | <0.1 | | 1.0 | 1 | 106.0 |
| Subtotal | 60,344 | 0.3 | 16.7 | 38.4 | 0.6 | 22,125 | 36.7 |

UBS Group AG consolidated

Semiannual | The fair value of collateral received for derivatives increased by USD 7.9 billion to USD 66.7 billion and the fair value of collateral posted for derivatives increased by USD 11.2 billion to USD 53.8 billion, mainly in the Investment Bank, primarily due to increased market volatility resulting in increased margin requirements as well as lower interest rates during the period. The fair value of collateral received for securities financing transactions (SFTs) decreased by USD 25.5 billion to USD 615.4 billion, mainly in the Prime Brokerage business within the Investment Bank, primarily due to client-driven de-leveraging. p

Semiannual |

| CCR5: Composition of collateral
for CCR exposure 1 | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Collateral used in derivative transactions | | | | | | Collateral used in SFTs | |
| | Fair value of collateral received | | | Fair value of posted collateral | | | Fair value of collateral received | Fair value of posted collateral |
| USD million | Segregated 2 | Unsegregated | Total | Segregated 3 | Unsegregated | Total | | |
| 30.6.20 | | | | | | | | |
| Cash – domestic currency 4 | 2,150 | 19,145 | 21,295 | 2,468 | 10,045 | 12,513 | 36,710 | 77,581 |
| Cash – other currencies 4 | | 24,387 | 24,387 | 1,913 | 16,644 | 18,557 | 10,543 | 34,675 |
| Sovereign debt | 6,139 | 7,858 | 13,997 | 9,230 | 6,621 | 15,851 | 233,058 | 171,259 |
| Other debt securities | | 3,318 | 3,318 | 2,442 | 186 | 2,628 | 79,662 | 35,842 |
| Equity securities | 3,662 | 16 | 3,677 | 2,838 | 1,436 | 4,273 | 255,428 | 150,127 |
| Total | 11,950 | 54,723 | 66,673 | 18,891 | 34,931 | 53,822 | 615,402 | 469,483 |
| 31.12.19 | | | | | | | | |
| Cash – domestic currency 4 | 2,369 | 18,398 | 20,767 | 1,179 | 7,736 | 8,915 | 30,621 | 76,209 |
| Cash – other currencies 4 | | 18,735 | 18,735 | 1,429 | 12,308 | 13,736 | 8,955 | 31,899 |
| Sovereign debt | 6,432 | 6,150 | 12,582 | 8,373 | 5,243 | 13,616 | 232,051 | 162,091 |
| Other debt securities | | 2,231 | 2,231 | 1,643 | 409 | 2,052 | 78,903 | 28,532 |
| Equity securities | 4,391 | 18 | 4,409 | 4,138 | 180 | 4,317 | 290,369 | 168,088 |
| Total | 13,192 | 45,532 | 58,725 | 16,761 | 25,874 | 42,635 | 640,899 | 466,820 |
| 1 This table includes collateral received and posted with and
without the right of rehypothecation, but excludes securities placed with
central banks related to undrawn credit lines and for payment, clearing and
settlement purposes for which there were no associated liabilities or
contingent liabilities. 2 Includes collateral received in derivative
transactions, primarily initial margins, that is placed with a third-party
custodian and to which UBS has access only in the case of counterparty
default. 3 Includes collateral posted to central counterparties, where we
apply a 0% risk weight for trades that we have entered into on behalf of a
client and where the client has signed a legally enforceable agreement
stipulating that the default risk of that central counterparty is carried by
the client. 4 Cash collateral received and posted for derivatives and SFTs
are subject to netting recognized on the IFRS balance sheet. | | | | | | | | |

Semiannual | Notionals for credit derivatives where UBS is a seller of protection increased by USD 1 billion, primarily due to increased market volatility, partly offset by trade compressions, terminations and maturities during the period. p

Semiannual |

| CCR6: Credit derivatives
exposures | 30.6.20 | | 31.12.19 | |
| --- | --- | --- | --- | --- |
| USD million | Protection bought | Protection sold | Protection bought | Protection sold |
| Notionals 1 | | | | |
| Single-name credit default swaps | 35,166 | 36,020 | 37,578 | 38,687 |
| Index credit default swaps | 36,635 | 31,782 | 32,426 | 27,887 |
| Total return swaps | 2,133 | 901 | 3,692 | 1,606 |
| Credit options | 3,436 | 556 | 3,757 | 56 |
| Total notionals | 77,370 | 69,260 | 77,452 | 68,236 |
| Fair values | | | | |
| Positive fair value (asset) | 1,081 | 878 | 682 | 1,338 |
| Negative fair value
(liability) | 1,408 | 1,295 | 2,050 | 916 |
| 1 Includes notional amounts for client-cleared transactions. | | | | |

UBS Group AG consolidated

Counterparty credit risk risk-weighted assets

Quarterly | CCR RWA on derivatives under the internal model method (IMM) decreased by USD 1.3 billion to USD 19.3 billion during the second quarter of 2020, primarily in the Investment Bank as a result of lower volumes in Global Markets. CCR RWA on securities financing transactions (SFTs) under the value-at-risk (VaR) approach increased by USD 1.4 billion to USD 8.1 billion during the second quarter of 2020, mainly driven by increased trading activity. For definitions of CCR RWA movement table components, refer to “Definitions of credit risk and counterparty credit risk RWA movement table components for CR8 and CCR7” on page 50 of our 31 December 2019 Pillar 3 report, available under “Pillar 3 disclosures” at www.ubs.com/investors . p

Quarterly |

| CCR7: RWA flow statements of
CCR exposures under internal model method (IMM) and value-at-risk (VaR) | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | | For the quarter ended 30.6.20 | | | For the quarter ended 31.3.20 | | |
| USD million | | Derivatives | SFTs | Total | Derivatives | SFTs | Total |
| | | Subject to IMM | Subject to VaR | | Subject to IMM | Subject to VaR | |
| 1 | RWA as of the beginning of the quarter | 20,582 | 6,663 | 27,245 | 20,275 | 5,502 | 25,777 |
| 2 | Asset size | (1,878) | 922 | (956) | 1,091 | 1,421 | 2,511 |
| 3 | Credit quality of counterparties | (167) | 10 | (157) | (434) | (180) | (614) |
| 4 | Model updates | 310 | 400 | 710 | (133) | | (133) |
| 5 | Methodology and policy | (60) | | (60) | | | |
| 5a | of which: regulatory add-ons | | | | | | |
| 6 | Acquisitions and disposals | | | | | | |
| 7 | Foreign exchange movements | 206 | 60 | 267 | (217) | (79) | (296) |
| 8 | Other | 290 | | 290 | | | |
| 9 | RWA as of the end of the
quarter | 19,284 | 8,055 | 27,339 | 20,582 | 6,663 | 27,245 |

Semiannual | The CCR8 table below presents a breakdown of the Group’s RWA by type of exposure to central counterparties. p

Semiannual |

| CCR8: Exposures to central
counterparties | | | |
| --- | --- | --- | --- |
| USD million | | | |
| 30.6.20 | | EAD (post-CRM) | RWA |
| 1 | Exposures to QCCPs (total) 1 | 62,167 | 1,264 |
| 2 | Exposures for trades at QCCPs (excluding initial margin and
default fund contributions); of which | 34,584 | 401 |
| 3 | (i) OTC derivatives | 1,420 | 27 |
| 4 | (ii) Exchange-traded derivatives | 22,470 | 160 |
| 5 | (iii) Securities financing transactions | 10,694 | 214 |
| 6 | (iv) Netting sets where cross-product netting has been approved | | |
| 7 | Segregated initial margin | | |
| 8 | Non-segregated initial margin 2 | 25,665 | 237 |
| 9 | Pre-funded default fund contributions | 1,917 | 625 |
| 10 | Unfunded default fund contributions | | |
| 11 | Exposures to non-QCCPs
(total) | 158 | 153 |
| 12 | Exposures for trades at non-QCCPs (excluding initial margin and
default fund contributions); of which | 135 | 51 |
| 13 | (i) OTC derivatives | 0 | 0 |
| 14 | (ii) Exchange-traded derivatives | 4 | 3 |
| 15 | (iii) Securities financing transactions | 131 | 49 |
| 16 | (iv) Netting sets where cross-product netting has been approved | | |
| 17 | Segregated initial margin | | |
| 18 | Non-segregated initial margin 2 | 16 | 12 |
| 19 | Pre-funded default fund contributions | 7 | 89 |
| 20 | Unfunded default fund contributions | | |
| 1 A qualifying central counterparty (QCCP) is an entity licensed
by the regulator to operate as a CCP. 2 Exposures associated with initial
margin, where the exposures are measured under the IMM or the VaR approach,
have been included within the exposures for trades. The exposure for
non-segregated initial margin, i.e., not bankruptcy-remote in accordance with
FINMA Circular 2017/7, reflects the replacement costs under SA-CCR multiplied
by an alpha factor of 1.4. The risk-weighted assets reflect the exposure
multiplied by the applied risk-weight of derivatives. Under SA-CCR,
collateral posted to a segregated, bankruptcy-remote account does not
increase the value of replacement costs. | | | |

UBS Group AG consolidated

Section 5 Securitizations

Introduction

Semiannual | This section provides details of traditional and synthetic securitization exposures in the banking and trading book based on the revised Basel III securitization framework, applicable since 1 January 2018.

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

We act in different roles in securitization transactions. As originator, we create or purchase financial assets, which are then securitized in traditional or synthetic securitization transactions, enabling us to transfer significant risk to third-party investors. As sponsor, we manage, provide financing for or advise on securitization programs. In line with the Basel III framework, sponsoring includes underwriting activities. In all other cases, we act as an investor by taking securitization positions. p

Securitization exposures in the banking and trading book

Semiannual | Based on the current immaterial business volumes and declining trend of total securitization exposures over the past years, we have condensed the following semiannual Pillar 3 disclosures into one single tabular disclosure titled ”Securitization exposures in the banking and trading book and regulatory capital requirements”:

– ”SEC1 – Securitization exposures in the banking book”;

– ”SEC2 – Securitization exposures in the trading book”;

– ”SEC3 – Securitization exposures in the banking book and associated regulatory capital requirements – bank acting as originator or as sponsor”; and

– ”SEC4 – Securitization exposures in the banking book and associated regulatory capital requirements – bank acting as investor.”

The new table outlines the carrying values on the balance sheet in the banking and trading books as of 30 June 2020 and 31 December 2019. Additionally, the table provides the market risk RWA from securitization and the capital charge after application of the revised securitization framework caps.

Development of securitization exposures in the first half of 2020

In the first half of 2020, securitization exposures in the banking book decreased from USD 188 million to USD 176 million, reflecting the amortization of exposure. The securitization exposures in the trading book decreased from USD 352 million to USD 334 million, mainly related to secondary trading in commercial mortgage-backed securities in the Investment Bank. p

Semiannual |

| Securitization exposures in the
banking and trading book and associated regulatory capital requirements — USD million | Carrying Value | RWA | Total Capital Charge after cap |
| --- | --- | --- | --- |
| 30.6.20 | | | |
| Asset Classes – Banking Book 1 | | | |
| Retail | 78 | 534 | 43 |
| Wholesale | 98 | 64 | 5 |
| Re-securitization | 0 | 0 | 0 |
| Total Banking Book | 176 | 598 | 48 |
| Asset Classes – Trading Book | | | |
| Retail | 19 | 180 | 15 |
| Wholesale | 303 | 174 | 14 |
| Re-securitization | 12 | 16 | 1 |
| Total Trading Book | 334 | 370 | 30 |
| Total | 510 | 968 | 78 |
| 31.12.19 | | | |
| Asset Classes – Banking Book 1 | | | |
| Retail | 82 | 564 | 45 |
| Wholesale | 106 | 69 | 6 |
| Re-securitization | 0 | 0 | 0 |
| Total Banking Book | 188 | 633 | 51 |
| Asset Classes – Trading Book | | | |
| Retail | 23 | 199 | 16 |
| Wholesale | 316 | 201 | 16 |
| Re-securitization | 13 | 19 | 2 |
| Total Trading Book | 352 | 419 | 34 |
| Total | 540 | 1,052 | 85 |
| 1 Of the securitization exposures in the banking book, 56% carry
a risk weighting of up to 100% as of 30 June 2020 (31 December 2019: 56%). | | | |

UBS Group AG consolidated

Section 6 Market risk

Overview

Semiannual | The amount of capital required to underpin market risk in the regulatory trading book is calculated using a variety of methods approved by the Swiss Financial Market Supervisory Authority (FINMA). The components that contribute to market risk risk-weighted assets (RWA) are value-at-risk (VaR), stressed value-at-risk (SVaR), an add-on for risks that are potentially not fully modeled in VaR (risks not in VaR, or RniV), the incremental risk charge (IRC) and the securitization framework for securitization positions in the trading book. Refer to pages 72–73, 85 and 87–89 of our 31 December 2019 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors , for more information about each of these components. p

Market risk risk-weighted assets

Market risk RWA development in the second quarter of 2020

Quarterly | The three main components that contribute to market risk RWA are VaR, SVaR and IRC. VaR and SVaR components include the RWA charge for RniV.

The MR2 table on the next page provides a breakdown of the market risk RWA under an internal models approach movement in the second quarter of 2020 across these components, according to the movement categories defined by the Basel Committee on Banking Supervision (BCBS).

These categories are described on page 81 of our 31 December 2019 Pillar 3 report, available under “Pillar 3 disclosures” at www.ubs.com/investors .

Market risk RWA under an internal models approach decreased by USD 0.8 billion to USD 13.9 billion in the second quarter of 2020, driven by a decrease of USD 3.3 billion from regulatory policy changes from the removal of the model multiplier of 1.3 introduced by FINMA in 2016, as well as a decrease in asset size and other movements in the Investment Bank’s Global Markets business from client activity and asset price movements. This was partly offset by an increase related to the ongoing parameter update of our VaR model, and an increase from regulatory add-ons, which reflected updates from the monthly risks-not-in-VaR assessment.

The VaR multiplier remained unchanged, at 3.0, compared with the first quarter of 2020. FINMA’s freeze on back-testing exceptions did not affect this multiplier. p

Quarterly |

| MR2: RWA flow statements of
market risk exposures under an internal models approach 1 — USD million | | VaR | Stressed VaR | IRC | Total RWA |
| --- | --- | --- | --- | --- | --- |
| 1 | RWA as of 31.12.19 | 901 | 4,012 | 1,224 | 6,137 |
| 1a | Regulatory adjustment | (382) | (2,500) | 0 | (2,882) |
| 1b | RWA at previous quarter-end (end of day) | 519 | 1,512 | 1,224 | 3,255 |
| 2 | Movement in risk levels | 1,410 | 1,981 | (368) | 3,023 |
| 3 | Model updates / changes | 866 | (723) | 98 | 241 |
| 4 | Methodology and policy | 0 | 0 | 0 | 0 |
| 5 | Acquisitions and disposals | 0 | 0 | 0 | 0 |
| 6 | Foreign exchange movements | 0 | 0 | 0 | 0 |
| 7 | Other | (256) | (217) | 0 | (473) |
| 8a | RWA at the end of the reporting period (end of day) | 2,539 | 2,552 | 954 | 6,045 |
| 8b | Regulatory adjustment | 1,247 | 7,052 | 304 | 8,602 |
| 8c | RWA as of 31.3.20 | 3,786 | 9,604 | 1,258 | 14,647 |
| 1 | RWA as of 31.3.20 | 3,786 | 9,604 | 1,258 | 14,647 |
| 1a | Regulatory adjustment | (1,247) | (7,052) | (304) | (8,602) |
| 1b | RWA at previous quarter-end (end of day) | 2,539 | 2,552 | 954 | 6,045 |
| 2 | Movement in risk levels | (1,604) | (1,110) | 417 | (2,298) |
| 3 | Model updates / changes | 702 | 1,234 | 0 | 1,937 |
| 4 | Methodology and policy | (378) | (618) | 0 | (995) |
| 5 | Acquisitions and disposals | 0 | 0 | 0 | 0 |
| 6 | Foreign exchange movements | 0 | 0 | 0 | 0 |
| 7 | Other | 608 | 880 | 0 | 1,488 |
| 8a | RWA at the end of the reporting period (end of day) | 1,868 | 2,939 | 1,371 | 6,177 |
| 8b | Regulatory adjustment | 2,281 | 5,401 | 0 | 7,682 |
| 8c | RWA as of 30.6.20 | 4,149 | 8,339 | 1,371 | 13,859 |
| 1 Components that describe movements in RWA are presented in
italics. | | | | | |

UBS Group AG consolidated

Securitization positions in the trading book

Semiannual | Our exposure to securitization positions in the trading book includes exposures arising from secondary trading in commercial mortgage-backed securities in the Investment Bank, and limited positions in the Non-core and Legacy Portfolio within Group Functions that we continue to wind down. Refer to the “Regulatory exposures and risk-weighted assets” table on pages 11–12 of this report and to the “Securitizations” section of this report for more information.

Securitization exposures in the trading book is the only relevant disclosure component of market risk under the standardized approach. Our market risk RWA from securitization exposures in the trading book decreased from USD 419 million as of 31 December 2019 to USD 370 million as of 30 June 2020. p

® Refer to the “Securitizations” section of this report for more information about the securitization exposures in the trading book

Regulatory calculation of market risk

Semiannual | The MR3 table below shows minimum, maximum, average and period-end regulatory VaR, stressed VaR, the IRC and the comprehensive risk capital charge. Since the second quarter of 2019, we have not held eligible correlation trading positions.

During the first half of 2020, 10-day 99% regulatory VaR and SVaR increased, driven by the Investment Bank’s Global Markets business from unprecedented and sharp market moves across asset classes along with time series updates incorporating the punitive shocks observed in March, as well as from new business transactions. p

Semiannual |

| MR3: IMA values for trading
portfolios | | For the six-month period ended 30.6.20 | For the six-month period ended 31.12.19 | For the six-month period ended 30.6.19 |
| --- | --- | --- | --- | --- |
| USD million | | | | |
| | VaR (10-day 99%) | | | |
| 1 | Maximum value | 139 | 78 | 88 |
| 2 | Average value | 46 | 19 | 31 |
| 3 | Minimum value | 5 | 0 | 17 |
| 4 | Period end | 56 | 16 | 24 |
| | Stressed VaR (10-day 99%) | | | |
| 5 | Maximum value | 261 | 96 | 143 |
| 6 | Average value | 100 | 51 | 74 |
| 7 | Minimum value | 36 | 22 | 45 |
| 8 | Period end | 86 | 45 | 61 |
| | Incremental risk charge
(99.9%) | | | |
| 9 | Maximum value | 127 | 139 | 141 |
| 10 | Average value | 94 | 104 | 107 |
| 11 | Minimum value | 63 | 76 | 87 |
| 12 | Period end | 110 | 98 | 105 |
| | Comprehensive risk capital
charge (99.9%) | | | |
| 13 | Maximum value | | | |
| 14 | Average value | | | |
| 15 | Minimum value | | | |
| 16 | Period end | | | |
| 17 | Floor (standardized measurement method) | | | |

MR4: Comparison of VaR estimates with gains/losses

Semiannual | The “Group: development of regulatory backtesting revenues and actual trading revenues against backtesting VaR” chart below shows the six-month development of backtesting VaR against the Group’s backtesting revenues and actual trading revenues for the first half of 2020. The chart shows both the 99% and the 1% backtesting VaR. The asymmetry between the negative and positive tails is a result of the long gamma risk profile that has been run historically in the Investment Bank.

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

There were three new Group VaR backtesting exceptions in the first half of 2020. The total number of backtesting exceptions within the most recent 250-business-day window increased from 0 to 3. These resulted from the unprecedented price moves in various asset classes during the first quarter of 2020. The FINMA VaR multiplier for market risk RWA remained 3.0, as the increase in backtesting exceptions did not trigger a higher multiplier.

On 14 April 2020, in light of the COVID-19 pandemic and its impact on the financial markets, FINMA announced that the total number of backtesting exceptions will be temporarily frozen at the level reported on 1 February 2020. Since UBS Group recorded no backtesting exceptions in the 250 trading days leading up to 1 February 2020 and noted only 3 negative exceptions between 1 February 2020 and 30 June 2020, this temporary FINMA exemption had no effect on our market risk RWA in the first half of 2020. p

Semiannual |

UBS Group AG consolidated

Section 7 Going and gone concern requirements and eligible capital

Quarterly I The table below provides details of the Swiss systemically relevant bank (SRB) going and gone concern capital requirements as required by the Swiss Financial Market Supervisory Authority (FINMA); however, it does not reflect the effects of the temporary exemption granted by FINMA on 25 March 2020 in connection with COVID-19, which permits the exclusion of central bank sight deposits from the going concern leverage ratio calculation. The respective effect is presented on the next page. More information about capital management is provided on pages 46–56 in the “Capital management” section of our second quarter 2020 report, available under ”Quarterly reporting” at www.ubs.com/investors. p

Quarterly |

| Swiss SRB going and gone
concern requirements and information — As of 30.6.20 | RWA | | LRD 1 | |
| --- | --- | --- | --- | --- |
| USD million, except where
indicated | in % | | in % | |
| Required going concern
capital | | | | |
| Total going concern capital | 13.96 2 | 39,979 | 4.88 2 | 47,499 |
| Common equity tier 1 capital | 9.66 | 27,663 | 3.38 | 32,884 |
| of which: minimum capital | 4.50 | 12,890 | 1.50 | 14,615 |
| of which: buffer capital | 5.14 | 14,723 | 1.88 | 18,269 |
| of which: countercyclical
buffer | 0.02 | 50 | | |
| Maximum additional tier 1
capital | 4.30 | 12,317 | 1.50 | 14,615 |
| of which: additional tier 1
capital | 3.50 | 10,025 | 1.50 | 14,615 |
| of which: additional tier 1 buffer
capital | 0.80 | 2,291 | | |
| Eligible going concern
capital | | | | |
| Total going concern capital | 18.69 | 53,537 | 5.49 | 53,537 |
| Common equity tier 1 capital | 13.32 | 38,146 | 3.92 | 38,146 |
| Total loss-absorbing
additional tier 1 capital 3 | 5.37 | 15,390 | 1.58 | 15,390 |
| of which: high-trigger
loss-absorbing additional tier 1 capital | 4.50 | 12,899 | 1.32 | 12,899 |
| of which: low-trigger
loss-absorbing additional tier 1 capital | 0.87 | 2,491 | 0.26 | 2,491 |
| Required gone concern
capital 4 | | | | |
| Total gone concern
loss-absorbing capacity | 10.44 | 29,897 | 3.72 | 36,203 |
| of which: base requirement | 12.86 | 36,836 | 4.50 | 43,846 |
| of which: additional
requirement for market share and LRD | 1.08 | 3,094 | 0.38 | 3,654 |
| of which: applicable
reduction on requirements | (3.50) | (10,032) | (1.16) | (11,296) |
| of which: rebate granted
(equivalent to 42.5% of maximum rebate) 5 | (2.27) | (6,501) | (0.80) | (7,764) |
| of which: reduction for
usage of low-trigger tier 2 capital instruments | (1.23) | (3,532) | (0.36) | (3,532) |
| Eligible gone concern
capital | | | | |
| Total gone concern
loss-absorbing capacity | 13.97 | 40,021 | 4.11 | 40,021 |
| Total tier 2 capital | 2.65 | 7,598 | 0.78 | 7,598 |
| of which: low-trigger
loss-absorbing tier 2 capital | 2.47 | 7,063 | 0.72 | 7,063 |
| of which: non-Basel
III-compliant tier 2 capital | 0.19 | 534 | 0.05 | 534 |
| TLAC-eligible senior
unsecured debt | 11.32 | 32,423 | 3.33 | 32,423 |
| Total loss-absorbing
capacity | | | | |
| Required total
loss-absorbing capacity | 24.40 | 69,876 | 8.59 | 83,703 |
| Eligible total
loss-absorbing capacity | 32.66 | 93,557 | 9.60 | 93,557 |
| Risk-weighted assets /
leverage ratio denominator | | | | |
| Risk-weighted assets | | 286,436 | | |
| Leverage ratio denominator 1 | | | | 974,348 |
| 1 LRD-based requirements and eligible capital presented in this
table do not reflect the effects of the temporary exemption that has been
granted by FINMA in connection with COVID-19. Refer to the “Introduction and
basis for preparation” section of this report and to the COVID-19-related
information in this section for more information. 2 Includes
applicable add-ons of 1.08% for RWA and 0.375% for LRD. 3 Includes
outstanding low-trigger loss-absorbing additional tier 1 (AT1) capital
instruments, which are available under the Swiss SRB framework to meet the
going concern requirements until their first call date. As of their first
call date, these instruments are eligible to meet the gone concern
requirements. 4 From 1 January 2020 onward, a maximum of 25% of the gone
concern requirements can be met with instruments that have a
remaining maturity of between one and two years. 5 Based on the actions we
completed up to December 2019 to improve resolvability, FINMA granted an
increase of rebate on the gone concern requirement from 42.5% to 47.5% of the
maximum rebate, effective from 1 July 2020. | | | | |

Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits

In line with the FINMA exemption rules that apply until 1 January 2021, the eligible leverage ratio denominator (LRD) relief applicable to UBS is reduced by the going concern LRD equivalent of the capital distribution that UBS plans to make for the financial year 2019.

The table below summarizes the effects on our Swiss SRB going concern capital requirements and information. The FINMA exemption rules have no effect on our Swiss SRB gone concern capital requirements and ratios.

Outside of this section, for simplicity and due to the short-term nature of the FINMA exemption, we have chosen to present LRD excluding the temporary FINMA exemption.

The LRD reflecting the aforementioned temporary FINMA exemption under Basel Committee on Banking Supervision (BCBS) rules is identical to the Swiss SRB number presented in the table below. The BCBS Basel III leverage ratio was 6.05% after the temporary FINMA exemption was reflected.

| Swiss SRB going concern
requirements and information including temporary FINMA exemption — As of 30.6.20 | LRD | |
| --- | --- | --- |
| USD million, except where
indicated | in % | |
| Leverage ratio denominator
before temporary exemption | | 974,348 |
| Effective relief | | (89,202) |
| of which: central bank sight
deposits eligible for relief | | (142,987) |
| of which: reduction of
relief due to paid and planned dividend distribution 1 | | 53,785 |
| Leverage ratio denominator
after temporary exemption | | 885,146 |
| Required going concern
capital | | |
| Total going concern capital | 4.88 | 43,151 |
| Common equity tier 1 capital | 3.38 | 29,874 |
| Eligible going concern
capital | | |
| Total going concern capital | 6.05 | 53,537 |
| Common equity tier 1 capital | 4.31 | 38,146 |
| 1 Represents the leverage ratio denominator equivalent to a
4.875% going concern leverage ratio requirement applied to the planned 2019
dividend of USD 2,622 million, which includes the first installment of the
2019 dividend (USD 0.365 per share, paid on 7 May 2020) and the special
dividend reserve of USD 0.365 per share (this reserve is earmarked for
distribution based on the decision to be taken at an extraordinary general
meeting (EGM) planned for 19 November 2020). | | |

UBS Group AG consolidated

Explanation of the differences between the IFRS and regulatory scopes 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 are 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 scope of consolidation as of 30 June 2020 relates to investments in insurance, real estate and commercial companies, as well as investment vehicles, which are consolidated under IFRS, but not for regulatory capital purposes, where they are subject to risk-weighting.

The table below provides a list of the most significant entities that were included in the IFRS scope of consolidation but not in the regulatory scope of consolidation. These entities account for most of the difference between the “Balance sheet in accordance with IFRS scope of consolidation” and the “Balance sheet in accordance with regulatory scope of consolidation” columns in the CC2 table. This difference is mainly reflected in financial assets at fair value not held for trading and other financial liabilities designated at fair value. As of 30 June 2020, entities consolidated under either the IFRS or the regulatory scope of consolidation did not report any significant capital deficiencies.

In the banking book, certain equity investments are not consolidated under IFRS or under the regulatory scope. As of 30 June 2020, 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 SIX Group. These investments are risk-weighted based on applicable threshold rules.

More information about the legal structure of the UBS Group and on the IFRS scope of consolidation is provided on pages 15 and 312–313, respectively, of our Annual Report 2019, available under “Annual reporting” at www.ubs.com/investors .

Semiannual |

| Main legal entities
consolidated under IFRS but not included in the regulatory scope of
consolidation | | | |
| --- | --- | --- | --- |
| | 30.6.20 | | |
| USD million | Total assets 1 | Total equity 1 | Purpose |
| UBS Asset Management Life Ltd | 26,754 | 42 | Life Insurance |
| UBS Life Insurance Company USA | 106 | 44 | Life insurance |
| 1 Total assets and total equity on a standalone basis. | | | |

Semiannual | The CC2 table below and on the following page provides a reconciliation of the IFRS balance sheet to the balance sheet according to the regulatory scope of consolidation as defined by the BCBS and FINMA. Lines in the balance sheet under the regulatory scope of consolidation are expanded and referenced where relevant to display all components that are used in the “CC1: Composition of regulatory capital” table. Refer to the “Main legal entities consolidated under IFRS but not included in the regulatory scope of consolidation” table in this section of this report for more information about the most significant entities consolidated under IFRS but not included in the regulatory scope of consolidation. p

Semiannual |

| CC2: Reconciliation of
accounting balance sheet to balance sheet under the regulatory scope of
consolidation — As of 30.6.20 | Balance sheet in accordance with IFRS scope of consolidation | Effect of deconsolidated entities for regulatory consolidation | Balance sheet in accordance with regulatory scope of
consolidation | Ref 1 |
| --- | --- | --- | --- | --- |
| USD million | | | | |
| Assets | | | | |
| Cash and balances at central banks | 149,549 | 0 | 149,549 | |
| Loans and advances to banks | 15,633 | (276) | 15,357 | |
| Receivables from securities financing transactions | 85,271 | | 85,271 | |
| Cash collateral receivables on derivative instruments | 30,846 | | 30,846 | |
| Loans and advances to customers | 344,652 | 56 | 344,708 | |
| Other financial assets measured at amortized cost | 27,253 | (185) | 27,068 | |
| Total financial assets
measured at amortized cost | 653,205 | (405) | 652,800 | |
| Financial assets at fair value held for trading | 98,046 | (39) | 98,007 | |
| of which: assets pledged as
collateral that may be sold or repledged by counterparties | 38,505 | | 38,505 | |
| Derivative financial instruments | 152,008 | 11 | 152,019 | |
| Brokerage receivables | 19,848 | | 19,848 | |
| Financial assets at fair value not held for trading | 94,292 | (26,395) | 67,897 | |
| Total financial assets
measured at fair value through profit or loss | 364,194 | (26,424) | 337,770 | |
| Financial assets measured at
fair value through other comprehensive income | 8,624 | 0 | 8,624 | |
| Investments in associates | 1,054 | 96 | 1,150 | |
| of which: goodwill | 20 | | 20 | 4 |
| Property, equipment and software | 12,875 | (46) | 12,829 | |
| Goodwill and intangible assets | 6,414 | | 6,414 | |
| of which: goodwill | 6,259 | | 6,259 | 4 |
| of which: intangible assets | 155 | | 155 | 5 |
| Deferred tax assets | 9,294 | 0 | 9,294 | |
| of which: deferred tax
assets recognized for tax loss carry-forwards | 5,829 | 0 | 5,829 | 6 |
| of which: deferred tax
assets on temporary differences | 3,465 | 0 | 3,465 | 10 |
| Other non-financial assets | 8,177 | (6) | 8,171 | |
| of which: net defined
benefit pension and other post-employment assets | 0 | | 0 | 8 |
| Total assets | 1,063,838 | (26,785) | 1,037,053 | |

UBS Group AG consolidated

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

| As of 30.6.20 | Balance sheet in accordance with IFRS scope of consolidation | Effect of deconsolidated entities for regulatory consolidation | Balance sheet in accordance with regulatory scope of
consolidation | Ref 1 |
| --- | --- | --- | --- | --- |
| USD million | | | | |
| Liabilities | | | | |
| Amounts due to banks | 12,410 | (20) | 12,389 | |
| Payables from securities financing transactions | 12,019 | | 12,019 | |
| Cash collateral payables on derivative instruments | 36,882 | | 36,882 | |
| Customer deposits | 474,254 | 27 | 474,281 | |
| Debt issued measured at amortized cost | 126,744 | (3) | 126,741 | |
| of which: amount eligible
for high-trigger loss-absorbing additional tier 1 capital | 11,041 | | 11,041 | 9 |
| of which: amount eligible
for low-trigger loss-absorbing additional tier 1 capital | 2,491 | | 2,491 | 9 |
| of which: amount eligible
for low-trigger loss-absorbing tier 2 capital | 7,063 | | 7,063 | 11 |
| of which: amount eligible
for capital instruments subject to phase-out from tier 2 capital | 534 | | 534 | 12 |
| Other financial liabilities measured at amortized cost | 9,699 | (201) | 9,498 | |
| Total financial liabilities
measured at amortized cost | 672,007 | (198) | 671,809 | |
| Financial liabilities at fair value held for trading | 34,426 | 0 | 34,426 | |
| Derivative financial instruments | 152,280 | 3 | 152,283 | |
| Brokerage payables designated at fair value | 40,248 | | 40,248 | |
| Debt issued designated at fair value | 58,864 | 0 | 58,864 | |
| Other financial liabilities designated at fair value | 37,902 | (26,590) | 11,311 | |
| Total financial liabilities
measured at fair value through profit or loss | 323,721 | (26,588) | 297,133 | |
| Provisions | 2,601 | 0 | 2,601 | |
| Other non-financial liabilities | 8,302 | (1) | 8,301 | |
| of which: amount eligible
for high-trigger loss-absorbing capital (Deferred Contingent Capital Plan
(DCCP)) 2 | 1,408 | | 1,408 | 9 |
| of which: deferred tax
liabilities related to goodwill | 276 | | 276 | 4 |
| of which: deferred tax
liabilities related to other intangible assets | 2 | | 2 | 5 |
| Total liabilities | 1,006,630 | (26,786) | 979,844 | |
| Equity | | | | |
| Share capital | 338 | | 338 | 1 |
| Share premium | 17,125 | | 17,125 | 1 |
| Treasury shares | (3,592) | | (3,592) | 3 |
| Retained earnings | 35,991 | (12) | 35,979 | 2 |
| Other comprehensive income recognized directly in equity, net of
tax | 7,173 | 14 | 7,187 | 3 |
| of which: unrealized gains /
(losses) from cash flow hedges | 2,871 | | 2,871 | 7 |
| Equity attributable to
shareholders | 57,035 | 2 | 57,036 | |
| Equity attributable to non-controlling interests | 173 | | 173 | |
| Total equity | 57,207 | 2 | 57,209 | |
| Total liabilities and equity | 1,063,838 | (26,785) | 1,037,053 | |
| 1 References link the lines of this table to the respective
reference numbers provided in the “References” column in the “CC1:
Composition of regulatory capital” table in this section. 2 IFRS carrying
amount of total DCCP liabilities was USD 1,858 million as of 30 June 2020.
Refer to the “Compensation” section of our Annual Report 2019 for more
information about the DCCP. | | | | |

Semiannual | The CC1 table below and on the following pages provides the composition of capital in the format prescribed by the BCBS and FINMA, and is based on BCBS Basel III rules, unless stated otherwise. Reference is made to items reconciling to the balance sheet under the regulatory scope of consolidation as disclosed in the “CC2: Reconciliation of accounting balance sheet to balance sheet under the regulatory scope of consolidation” table.

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

Semiannual |

| CC1: Composition of regulatory
capital — As of 30.6.20 | | Amounts | References 1 |
| --- | --- | --- | --- |
| USD million except where
indicated | | | |
| | Common Equity Tier 1
capital: instruments and reserves | | |
| 1 | Directly issued qualifying common share (and equivalent for
non-joint stock companies) capital plus related stock surplus | 17,463 | 1 |
| 2 | Retained earnings | 35,979 | 2 |
| 3 | Accumulated other comprehensive income (and other reserves) | 3,594 | 3 |
| 4 | Directly issued capital subject to phase-out from CET1 (only
applicable to non-joint stock companies) | | |
| 5 | Common share capital issued by subsidiaries and held by third
parties (amount allowed in group CET1) | | |
| 6 | Common Equity Tier 1 capital
before regulatory adjustments | 57,036 | |
| | Common Equity Tier 1
capital: regulatory adjustments | | |
| 7 | Prudent valuation adjustments | (155) | |
| 8 | Goodwill (net of related tax liability) | (6,003) | 4 |
| 9 | Other intangibles other than mortgage servicing rights (net of
related tax liability) | (153) | 5 |
| 10 | Deferred tax assets that rely on future profitability, excluding
those arising from temporary differences (net of related tax liability) 2 | (6,093) | 6 |
| 11 | Cash flow hedge reserve | (2,871) | 7 |
| 12 | Shortfall of provisions to expected losses | (262) | |
| 13 | Securitization gain on sale | | |
| 14 | Gains and losses due to changes in own credit risk on fair
valued liabilities | (39) | |
| 15 | Defined benefit pension fund net assets | 0 | 8 |
| 16 | Investments in own shares (if not already subtracted from
paid-in capital on reported balance sheet) 3 | (1,185) | 9 |
| 17 | Reciprocal cross-holdings in common equity | | |
| 17a | Qualified holdings where a significant influence is exercised
with other owners (CET1 instruments) | | |
| 17b | Immaterial investments (CET1 items) | | |
| 18 | Investments in the capital of banking, financial and insurance
entities that are outside the scope of regulatory consolidation, where the
bank does not own more than 10% of the issued share capital (amount above 10%
threshold) | | |
| 19 | Significant investments in the common stock of banking,
financial and insurance entities that are outside the scope of regulatory
consolidation (amount above 10% threshold) | | |
| 20 | Mortgage servicing rights (amount above 10% threshold) | | |
| 21 | Deferred tax assets arising from temporary differences (amount
above 10% threshold, net of related tax liability) | | 10 |
| 22 | Amount exceeding the 15% threshold | | |
| 23 | of which: significant
investments in the common stock of financials | | |
| 24 | of which: mortgage servicing
rights | | |
| 25 | of which: deferred tax
assets arising from temporary differences | | |
| 26 | Expected losses on equity investment under the PD / LGD approach | | |
| 26a | Further adjustments to financial statements in accordance with a
recognized international accounting standard | (163) | |
| 26b | Other adjustments | (1,967) | |
| 27 | Regulatory adjustments applied to Common Equity Tier 1 due to
insufficient Additional Tier 1 and Tier 2 to cover deductions | | |
| 28 | Total regulatory adjustments
to Common Equity Tier 1 | (18,890) | |
| 29 | Common Equity Tier 1 capital
(CET1) | 38,146 | |

UBS Group AG consolidated

CC1: Composition of regulatory capital (Continued) — As of 30.6.20		Amounts	References 1
USD million except where
indicated
	Additional Tier 1 capital:
instruments
30	Directly issued qualifying additional Tier 1 instruments plus
related stock surplus	15,394
31	of which: classified as
equity under applicable accounting standards
32	of which: classified as
liabilities under applicable accounting standards	15,394
33	Directly issued capital instruments subject to phase-out from
additional Tier 1
34	Additional Tier 1 instruments (and CET1 instruments not included
in row 5) issued by subsidiaries and held by third parties (amount allowed in
group AT1)
35	of which: instruments issued
by subsidiaries subject to phase-out
36	Additional Tier 1 capital
before regulatory adjustments	15,394
	Additional Tier 1 capital:
regulatory adjustments
37	Investments in own additional Tier 1 instruments	(4)
38	Reciprocal cross-holdings in additional Tier 1 instruments
38a	Qualified holdings where a significant influence is exercised
with other owners (AT1 instruments)
38b	Immaterial investments (AT1 instruments)
39	Investments in the capital of banking, financial and insurance
entities that are outside the scope of regulatory consolidation, where the
bank does not own more than 10% of the issued common share capital of the
entity (amount above 10% threshold)
40	Significant investments in the capital of banking, financial and
insurance entities that are outside the scope of regulatory consolidation
41	Other adjustments
42	Regulatory adjustments applied to additional Tier 1 due to
insufficient Tier 2 to cover deductions
42a	Regulatory adjustments applied to CET1 capital due to
insufficient additional Tier 1 to cover deductions
43	Total regulatory adjustments
to additional Tier 1 capital
44	Additional Tier 1 capital
(AT1)	15,390	9
45	Tier 1 capital (T1 = CET1 +
AT1)	53,537
	Tier 2 capital: instruments
and provisions
46	Directly issued qualifying Tier 2 instruments plus related stock
surplus	4,846 4	11
47	Directly issued capital instruments subject to phase-out from
Tier 2	550	12
48	Tier 2 instruments (and CET1 and AT1 instruments not included in
rows 5 or 34) issued by subsidiaries and held by third parties (amount
allowed in group Tier 2)
49	of which: instruments issued
by subsidiaries subject to phase-out
50	Provisions
51	Tier 2 capital before
regulatory adjustments	5,396
	Tier 2 capital: regulatory
adjustments
52	Investments in own Tier 2 instruments 5	(24)	11, 12
53	Reciprocal cross-holdings in Tier 2 instruments and other TLAC
liabilities
53a	Qualified holdings where a significant influence is exercised
with other owners (T2 instruments and other TLAC instruments)
53b	Immaterial investments (T2 instruments and other TLAC
instruments)
54	Investments in the capital and other TLAC liabilities of banking,
financial and insurance entities that are outside the scope of regulatory
consolidation, where the bank does not own more than 10% of the issued common
share capital of the entity (amount above 10% threshold)
55	Significant investments in the capital and other TLAC
liabilities of banking, financial and insurance entities that are outside the
scope of regulatory consolidation (net of eligible short positions)
56	Other adjustments
56a	Excess of the adjustments, which are allocated to the AT1
capital
57	Total regulatory adjustments
to Tier 2 capital	(24)
58	Tier 2 capital (T2)	5,371
59	Total regulatory capital (TC
= T1 + T2)	58,908
60	Total risk-weighted assets	286,436

CC1: Composition of regulatory capital (Continued) — As of 30.6.20		Amounts
USD million except where
indicated
	Capital ratios and buffers
61	Common Equity Tier 1 (as a percentage of risk-weighted assets)	13.32
62	Tier 1 (as a percentage of risk-weighted assets)	18.69
63	Total capital (as a percentage of risk-weighted assets)	20.57
64	Institution-specific buffer requirement (capital conservation
buffer plus countercyclical buffer requirements plus higher loss absorbency
requirement, expressed as a percentage of risk-weighted assets) 6	3.52
65	of which: capital
conservation buffer requirement	2.50
66	of which: bank-specific
countercyclical buffer requirement	0.02
67	of which: higher loss
absorbency requirement	1.00
68	Common Equity Tier 1 (as a percentage of risk-weighted assets)
available after meeting the bank’s minimum capital requirements	8.82
	Amounts below the thresholds
for deduction (before risk weighting)
72	Non-significant investments in the capital and other TLAC
liabilities of other financial entities	1,750
73	Significant investments in the common stock of financial
entities	1,103
74	Mortgage servicing rights (net of related tax liability)
75	Deferred tax assets arising from temporary differences (net of
related tax liability)	3,685
	Applicable caps on the
inclusion of provisions in Tier 2
76	Provisions eligible for inclusion in Tier 2 in respect of
exposures subject to standardized approach (prior to application of cap)
77	Cap on inclusion of provisions in Tier 2 under standardized
approach
78	Provisions eligible for inclusion in Tier 2 in respect of
exposures subject to internal ratings-based approach (prior to application of
cap)
79	Cap for inclusion of provisions in Tier 2 under internal
ratings-based approach
	Capital instruments subject
to phase-out arrangements (only applicable between 1 Jan 2018 and 1 Jan 2022)
according to CAO Art. 141
80	Current cap on CET1 instruments subject to phase-out
arrangements
81	Amount excluded from CET1 due to cap (excess over cap after
redemptions and maturities)
82	Current cap on AT1 instruments subject to phase-out arrangements
83	Amount excluded from AT1 due to cap (excess over cap after
redemptions and maturities)
84	Current cap on T2 instruments subject to phase-out arrangements	1,179
85	Amount excluded from T2 due to cap (excess over cap after
redemptions and maturities)
1 References link the lines of this table to the respective
reference numbers provided in the “References” column in the “CC2:
Reconciliation of accounting balance sheet to balance sheet under the
regulatory scope of consolidation” table in this section. 2 IFRS netting
for deferred tax assets and liabilities is reversed for items deducted from
CET1 capital. 3 Includes USD 450 million in compensation-related
charge for regulatory capital purposes. 4 Consists of instruments with a
IFRS carrying amount of USD 7.1 billion less amortization of instruments
where remaining maturity is between one and five years, and 45% of the gross
unrealized gains on debt instruments measured at fair value through other
comprehensive income, which are measured at the lower of cost or market value
for regulatory capital purposes. 5 Includes own instruments subject to
phase-out from tier 2 capital of USD 15.6 million and Tier 2-eligible
instruments of USD 8.6 million. 6 BCBS requirements are exceeded by our
Swiss SRB requirements. Refer to the “Capital management“ section of our
second quarter 2020 report for more information about the Swiss SRB
requirements.

UBS Group AG consolidated

Semiannual | The CCyB1 table below provides details of the underlying exposures and risk-weighted assets (RWA) used in the computation of the countercyclical buffer requirement applicable to UBS Group AG consolidated. Further information about the methodology of geographical allocation used is provided on page 149 of our Annual Report 2019, available under ”Annual reporting” at www.ubs.com/investors .

Luxembourg introduced a countercyclical buffer requirement of 0.25%, effective from 1 January 2020. Following the outbreak of the COVID-19 pandemic, several countries reduced their countercyclical capital buffers (CCyB): Hong Kong decreased its CCyB rate from 2% to 1% and Sweden decreased its CCyB rate from 2.5% to 0%, both effective from 16 March 2020; the United Kingdom decreased its CCyB rate from 1% to 0%, effective from 24 March 2020; and France decreased its CCyB rate from 0.25% to 0%, effective from 1 April 2020. p

Semiannual |

| CCyB1: Geographical
distribution of credit exposures used in the countercyclical capital buffer | | | | | |
| --- | --- | --- | --- | --- | --- |
| USD million, except where
indicated | | | | | |
| Geographical breakdown | Countercyclical capital buffer rate, % | Exposure values and/or risk-weighted assets used in the
computation of the countercyclical capital buffer | | Bank-specific countercyclical capital buffer rate, % | Countercyclical amount |
| | | Exposure values 1 | Risk-weighted assets | | |
| Hong Kong | 1.00 | 6,110 | 2,378 | | |
| Luxembourg | 0.25 | 16,935 | 3,018 | | |
| Sum | | 23,045 | 5,396 | | |
| Total | | 568,233 | 179,163 | 0.02 | 50 |
| 1 Includes private sector exposures in the countries that are
Basel Committee on Banking Supervision member jurisdictions under categories
“Credit risk,” “Counterparty credit risk,” “Equity positions in the banking
book,” “Settlement risk,” “Securitization exposures in the banking book” and
“Amounts below thresholds for deduction” as shown in the “Regulatory
exposures and risk-weighted assets” table in section 2 of this report. | | | | | |

Section 8 Total loss-absorbing capacity

Resolution group – composition of total loss-absorbing capacity (TLAC)

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

In the first half of 2020, our total loss absorbing capacity (TLAC) increased by USD 4.0 billion to USD 93.7 billion, mainly driven by an increase of our CET1 capital of USD 2.6 billion and five new issuances of non-regulatory capital instruments amounting to USD 2.6 billion denominated in both euro and US dollars as well as interest rate hedge, foreign currency and other effects of USD 1.4 billion across all TLAC components.

These increases were partially offset by a USD 1.4 billion decrease in eligibility of two non-regulatory capital instruments due to the shortening of their residual tenor and the call of a USD 1.25 billion high-trigger loss absorbing additional tier 1 (AT1) capital instrument denominated in US dollars. p

Semiannual |

| TLAC1: TLAC composition for
G-SIBs (at resolution group level) | | 30.6.20 | 31.12.19 |
| --- | --- | --- | --- |
| USD million, except where
indicated | | | |
| | Regulatory capital elements
of TLAC and adjustments | | |
| 1 | Common Equity Tier 1 capital
(CET1) | 38,146 | 35,582 |
| 2 | Additional Tier 1 capital (AT1) before TLAC adjustments | 15,390 | 16,306 |
| 3 | AT1 ineligible as TLAC as issued out of subsidiaries to third
parties | | |
| 4 | Other adjustments | | |
| 5 | Total AT1 instruments
eligible under the TLAC framework | 15,390 | 16,306 |
| 6 | Tier 2 capital (T2) before TLAC adjustments | 5,371 | 5,726 |
| 7 | Amortized portion of T2 instruments where remaining maturity

1 year | 2,327 | 1,724 |
| 8 | T2 capital ineligible as TLAC as issued out of subsidiaries to
third parties | | |
| 9 | Other adjustments | | |
| 10 | Total T2 instruments
eligible under the TLAC framework | 7,698 | 7,450 |
| 11 | TLAC arising from regulatory
capital | 61,235 | 59,338 |
| | Non-regulatory capital
elements of TLAC | | |
| 12 | External TLAC instruments issued directly by the bank and
subordinated to excluded liabilities | | |
| 13 | External TLAC instruments issued directly by the bank which are
not subordinated to excluded liabilities but meet all other TLAC term sheet
requirements | 32,423 | 30,322 |
| 14 | of which: amount eligible as
TLAC after application of the caps | | |
| 15 | External TLAC instruments issued by funding vehicles prior to 1
January 2022 | | |
| 16 | Eligible ex ante commitments to recapitalize a G-SIB in
resolution | | |
| 17 | TLAC arising from
non-regulatory capital instruments before adjustments | 32,423 | 30,322 |
| | Non-regulatory capital
elements of TLAC: adjustments | | |
| 18 | TLAC before deductions | 93,658 | 89,660 |
| 19 | Deductions of exposures between multiple-point-of-entry (MPE) resolution
groups that correspond to items eligible for TLAC (not applicable to SPE
G-SIBs) | | |
| 20 | Deduction of investments in own other TLAC liabilities | | |
| 21 | Other adjustments to TLAC | | |
| 22 | TLAC after deductions | 93,658 | 89,660 |
| | Risk-weighted assets and
leverage exposure measure for TLAC purposes | | |
| 23 | Total risk-weighted assets adjusted as permitted under the TLAC
regime | 286,436 | 259,208 |
| 24 | Leverage exposure measure 1 | 974,348 | 911,325 |
| | TLAC ratios and buffers | | |
| 25 | TLAC (as a percentage of risk-weighted assets adjusted as
permitted under the TLAC regime) | 32.70 | 34.59 |
| 26 | TLAC (as a percentage of leverage exposure) 1 | 9.61 | 9.84 |
| 27 | CET1 (as a percentage of risk-weighted assets) available after
meeting the resolution group’s minimum capital and TLAC requirements | 8.82 | 9.23 |
| 28 | Institution-specific buffer requirement (capital conservation
buffer plus countercyclical buffer requirements plus higher loss absorbency
requirement, expressed as a percentage of risk-weighted assets) | 3.52 | 3.58 |
| 29 | of which: capital
conservation buffer requirement | 2.50 | 2.50 |
| 30 | of which: bank-specific
countercyclical buffer requirement | 0.02 | 0.08 |
| 31 | of which: higher loss
absorbency requirement | 1.00 | 1.00 |
| 1 The leverage ratio exposure and leverage ratio for 30 June
2020 do not reflect the effects of the temporary exemption that has been
granted by FINMA in connection with COVID-19. Refer to the “Introduction and
basis for preparation” section of this report and to “Application of the
temporary COVID-19-related FINMA exemption of central bank sight deposits” in
the “Going and gone concern requirements and eligible capital“ section for
more information. | | | |

UBS Group AG consolidated

Resolution entity – creditor ranking at legal entity level

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

UBS Group AG issues loss-absorbing additional tier 1 capital instruments and TLAC-eligible senior unsecured debt.

UBS Group AG grants Deferred Contingent Capital Plan (DCCP) awards to UBS Group employees. Awards granted since February 2015 qualify as Basel III AT1 capital on a UBS Group consolidated basis and totaled USD 1,858 million as of 30 June 2020 (31 December 2019: USD 1,962 million). The related liabilities of UBS Group AG on a standalone basis of USD 1,397 million (31 December 2019: USD 1,583 million) are not included in the table below, as these do not give rise to a current claim until the awards are legally vested.

As of 30 June 2020, the TLAC available on a UBS Group AG consolidated basis amounted to USD 93,658 million (31 December 2019: USD 89,660 million).

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

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

Financial information for UBS Group AG standalone for the six months ended 30 June 2020 is provided under “Holding company and significant regulated subsidiaries and sub-groups” at www.ubs.com/investors . p

Semiannual |

| TLAC3 – creditor ranking at
legal entity level for the resolution entity, UBS Group AG — As of 30.6.20 | | Creditor ranking | | | Total |
| --- | --- | --- | --- | --- | --- |
| USD million | | 1 | 2 | 3 | |
| 1 | Description of creditor ranking | Common shares (most junior) 2 | Additional Tier 1 | Bail-in debt and pari passu liabilities (most senior) | |
| 2 | Total capital and liabilities net of credit risk mitigation 1 | 40,465 | 13,252 | 37,209 | 90,926 |
| 3 | Subset of row 2 that are excluded liabilities | | | | |
| 4 | Total capital and liabilities less excluded liabilities (row 2
minus row 3) | 40,465 | 13,252 3 | 37,209 4,5 | 90,926 |
| 5 | Subset of row 4 that are potentially eligible as TLAC | 40,465 | 12,862 | 31,269 6 | 84,596 |
| 6 | Subset of row 5 with 1 year ≤ residual maturity < 2
years | | | 2,817 | 2,817 |
| 7 | Subset of row 5 with 2 years ≤ residual maturity < 5
years | | | 15,882 | 15,882 |
| 8 | Subset of row 5 with 5 years ≤ residual maturity < 10
years | | | 9,933 | 9,933 |
| 9 | Subset of row 5 with residual maturity ≥ 10 years, but
excluding perpetual securities | | | 2,637 | 2,637 |
| 10 | Subset of row 5 that is perpetual securities | 40,465 | 12,862 | | 53,327 |
| 1 No credit risk mitigation is applied to capital and
liabilities for UBS Group AG standalone. 2 Common shares, including the
associated reserves, are equal to equity attributable to shareholders as
disclosed in the UBS Group AG standalone financial information for the six
months ended 30 June 2020, which was prepared in accordance with the
principles of the Swiss Law on Accounting and Financial Reporting (32nd title
of the Swiss Code of Obligations). 3 Includes interest expense accrued on
AT1 capital instruments, which does not qualify as TLAC. 4 Includes
interest expense accrued on bail-in debt, interest-bearing liabilities that
comprise loans from UBS AG and UBS Switzerland AG, and negative replacement
values, as well tax and other liabilities that are not excluded liabilities
under Swiss law that rank pari passu to bail-in debt. 5 Bail-in debt
of USD 2.6 billion was issued during the six months ended 30 June 2020. 6
Bail-in debt of USD 4.8 billion has residual maturity of less than one year
and is not potentially eligible as TLAC. | | | | | |

Section 9 Leverage ratio

Basel III leverage ratio

Quarterly | The Basel Committee on Banking Supervision (BCBS) leverage ratio is calculated by dividing the period-end tier 1 capital by the period-end leverage ratio denominator (LRD), as summarized in the table below. The LRD presented below does not reflect the effects of the temporary exemption related to the central bank sight deposit exclusion from the leverage ratio calculation granted by the Swiss Financial Market Supervisory Authority (FINMA) on 25 March 2020 in connection with COVID-19. The effects of such temporary exemption are presented in the “Going and gone concern requirements and eligible capital“ section of this report. p

® Refer to the ”Introduction and basis for preparation” section of this report for more information about the COVID-19-related temporary regulatory measures

Quarterly |

BCBS Basel III leverage ratio
USD million, except where
indicated
	30.6.20	31.3.20	31.12.19	30.9.19	30.6.19
Total tier 1 capital	53,537	51,916	51,888	50,702	49,993
BCBS total exposures (leverage ratio denominator) 1	974,348	955,932	911,325	901,914	911,379
BCBS Basel III leverage
ratio (%) 1	5.5	5.4	5.7	5.6	5.5
1 Leverage ratio denominators (LRDs) and leverage ratios for 30
June 2020 and 31 March 2020 do not reflect the effects of the temporary
exemption that has been granted by FINMA in connection with COVID-19. Refer
to the “Introduction and basis for preparation” section of this report and to
“Application of the temporary COVID-19-related FINMA exemption of central
bank sight deposits” in the “Going and gone concern requirements and eligible
capital“ section for more information.

Quarterly | The LRD consists of International Financial Reporting Standards (IFRS) on-balance sheet assets and off-balance sheet items. Derivative exposures are adjusted for a number of items, including replacement values and eligible cash variation margin netting, the current exposure method add-on and net notional amounts for written credit derivatives. The LRD also includes an additional charge for counterparty credit risk related to securities financing transactions (SFTs).

The “Reconciliation of IFRS total assets to BCBS Basel III total on-balance sheet exposures excluding derivatives and securities financing transactions” table on the next page shows the difference between total IFRS assets per IFRS consolidation scope and the BCBS total on-balance sheet exposures. Those exposures are the starting point for calculating the BCBS LRD as shown in the “LR2: BCBS Basel III leverage ratio common disclosure” table in this section. The difference is due to the application of the regulatory scope of consolidation for the purpose of the BCBS calculation. In addition, carrying amounts for derivative financial instruments and SFTs are deducted from IFRS total assets. They are measured differently under BCBS leverage ratio rules and are therefore added back in separate exposure line items in the LR2 table. p

Difference between the Swiss SRB and BCBS leverage ratio

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

UBS Group AG consolidated

The tables presented below and on the next page do not reflect the effects of the temporary exemption granted by FINMA on 25 March 2020 in connection with COVID-19, that permits the exclusion of central bank sight deposits from the leverage ratio calculation. The effects of the temporary exemption granted by FINMA in connection with COVID-19 are presented in the “Going and gone concern requirements and eligible capital“ section of this report.

® Refer to the “Introduction and basis for preparation” section of this report for more information about the COVID-19-related temporary regulatory measures

Quarterly |

| Reconciliation of IFRS total
assets to BCBS Basel III total on-balance sheet exposures excluding
derivatives and securities financing transactions 1 — USD million | 30.6.20 | 31.3.20 |
| --- | --- | --- |
| On-balance sheet exposures | | |
| IFRS total assets | 1,063,838 | 1,098,099 |
| Adjustment for investments in banking, financial, insurance or
commercial entities that are consolidated for accounting purposes but outside
the scope of regulatory consolidation | (26,785) | (23,285) |
| 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 | | |
| Adjustment for fiduciary assets recognized on the balance sheet
pursuant to the operative accounting framework but excluded from the leverage
ratio exposure measure | | |
| Less carrying amount of derivative financial instruments in IFRS
total assets 2 | (182,866) | (252,537) |
| Less carrying amount of securities financing transactions in
IFRS total assets 3 | (112,995) | (117,778) |
| Adjustments to accounting values | | |
| On-balance sheet items
excluding derivatives and securities financing transactions, but including
collateral | 741,193 | 704,500 |
| Asset amounts deducted in determining BCBS Basel III tier 1
capital | (12,674) | (13,084) |
| Total on-balance sheet
exposures (excluding derivatives and securities financing transactions) | 728,519 | 691,415 |
| 1 This table does not reflect the effects of the temporary
exemption granted by FINMA in connection with COVID-19. Refer to the
“Introduction and basis for preparation” section of this report and to
“Application of the temporary COVID-19-related FINMA exemption of central
bank sight deposits” in the “Going and gone concern requirements and eligible
capital“ section for more information. 2 Consists of derivative financial
instruments and cash collateral receivables on derivative instruments in
accordance with the regulatory scope of consolidation. 3 Consists of
receivables from securities financing transactions, margin loans, prime
brokerage receivables and financial assets at fair value not held for trading
related to securities financing transactions in accordance with the
regulatory scope of consolidation. | | |

Quarterly |

| LR1: BCBS Basel III leverage
ratio summary comparison 1 — USD million | | 30.6.20 | 31.3.20 |
| --- | --- | --- | --- |
| 1 | Total consolidated assets as per published financial statements | 1,063,838 | 1,098,099 |
| 2 | Adjustment for investments in banking, financial, insurance or
commercial entities that are consolidated for accounting purposes but outside
the scope of regulatory consolidation 2 | (39,458) | (36,370) |
| 3 | Adjustment for fiduciary assets recognized on the balance sheet
pursuant to the operative accounting framework but excluded from the leverage
ratio exposure measure | | |
| 4 | Adjustments for derivative financial instruments | (90,338) | (145,801) |
| 5 | Adjustment for securities financing transactions (i.e., repos
and similar secured lending) | 9,830 | 10,118 |
| 6 | Adjustment for off-balance sheet items (i.e., conversion to
credit equivalent amounts of off-balance sheet exposures) | 30,476 | 29,885 |
| 7 | Other adjustments | | |
| 8 | Leverage ratio exposure
(leverage ratio denominator) | 974,348 | 955,932 |
| 1 This table does not reflect the effects of the temporary
exemption granted by FINMA in connection with COVID-19. Refer to the
“Introduction and basis for preparation” section of this report and to
“Application of the temporary COVID-19-related FINMA exemption of central
bank sight deposits” in the “Going and gone concern requirements and eligible
capital“ section for more information. 2 Includes assets that are
deducted from tier 1 capital. | | | |

Quarterly | During the second quarter of 2020, LRD increased by USD 18 billion to USD 974 billion. On-balance sheet exposures (excluding derivatives and SFTs) increased by USD 37 billion, mainly driven by an increase in high-quality liquid assets (HQLA) in the liquidity buffer portfolio in Group Functions, higher cash and balances with central banks across multiple businesses and higher trading portfolio assets in the Investment Bank. Derivative exposures decreased by USD 14 billion mainly driven by foreign exchange and equity / index contracts in the Investment Bank, reflecting roll-offs and market-driven movements. SFTs decreased by USD 5 billion, mainly due to lower collateral sourcing in Group Functions. p

® Refer to the “Introduction and basis for preparation” section of this report for more information about the COVID-19-related temporary regulatory measures, and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in the “Going and gone concern requirements and eligible capital“ section of this report for additional information

Quarterly |

| LR2: BCBS Basel III leverage
ratio common disclosure 1 — USD million, except where
indicated | | 30.6.20 | 31.3.20 |
| --- | --- | --- | --- |
| | On-balance sheet exposures | | |
| 1 | On-balance sheet items excluding derivatives and SFTs, but
including collateral | 741,193 | 704,500 |
| 2 | (Asset amounts deducted in determining Basel III tier 1 capital) | (12,674) | (13,084) |
| 3 | Total on-balance sheet
exposures (excluding derivatives and SFTs) | 728,519 | 691,415 |
| | Derivative exposures | | |
| 4 | Replacement cost associated with all derivatives transactions
(i.e., net of eligible cash variation margin) | 49,952 | 65,769 |
| 5 | Add-on amounts for PFE associated with all derivatives
transactions | 74,580 | 77,082 |
| 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) | (19,254) | (20,839) |
| 8 | (Exempted CCP leg of client-cleared trade exposures) | (13,609) | (16,227) |
| 9 | Adjusted effective notional amount of all written credit
derivatives 2 | 68,072 | 75,646 |
| 10 | (Adjusted effective notional offsets and add-on deductions for
written credit derivatives) 3 | (67,214) | (74,695) |
| 11 | Total derivative exposures | 92,528 | 106,736 |
| | Securities financing
transaction exposures | | |
| 12 | Gross SFT assets (with no recognition of netting), after
adjusting for sale accounting transactions | 208,211 | 228,572 |
| 13 | (Netted amounts of cash payables and cash receivables of gross
SFT assets) | (95,216) | (110,794) |
| 14 | CCR exposure for SFT assets | 9,830 | 10,118 |
| 15 | Agent transaction exposures | | |
| 16 | Total securities financing
transaction exposures | 122,825 | 127,896 |
| | Other off-balance sheet
exposures | | |
| 17 | Off-balance sheet exposure at gross notional amount | 100,676 | 90,163 |
| 18 | (Adjustments for conversion to credit equivalent amounts) | (70,200) | (60,277) |
| 19 | Total off-balance sheet
items | 30,476 | 29,885 |
| | Total exposures (leverage
ratio denominator) | 974,348 | 955,932 |
| | Capital and total exposures
(leverage ratio denominator) | | |
| 20 | Tier 1 capital | 53,537 | 51,916 |
| 21 | Total exposures (leverage
ratio denominator) | 974,348 | 955,932 |
| | Leverage ratio | | |
| 22 | Basel III leverage ratio (%) | 5.5 | 5.4 |
| 1 This table does not reflect the effects of the temporary
exemption granted by FINMA in connection with COVID-19. Refer to the
“Introduction and basis for preparation” section of this report and to
“Application of the temporary COVID-19-related FINMA exemption of central
bank sight deposits” in the “Going and gone concern requirements and eligible
capital“ section for more information. 2 Includes protection sold,
including agency transactions. 3 Protection sold can be offset with
protection bought on the same underlying reference entity, provided that the
conditions according to the Basel III leverage ratio framework and disclosure
requirements are met. | | | |

UBS Group AG consolidated

Section 10 Liquidity coverage ratio

Liquidity coverage ratio

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

| Pillar 3 disclosure
requirement | Quarterly Report 2020
section | Disclosure | Second quarter 2020 page
number |
| --- | --- | --- | --- |
| Concentration of funding sources | Treasury management | Liabilities by product and currency | 45 |

High-quality liquid assets

Quarterly | HQLA must be easily and immediately convertible into cash at little or no loss of value, especially during a period of stress. HQLA are assets that are of low risk and are unencumbered. Other characteristics of HQLA are ease and certainty of valuation, low correlation with risky assets, listing of the assets on a developed and recognized exchange, existence of an active and sizable market for the assets, and low volatility. Our HQLA predominantly consist of assets that qualify as Level 1 in the LCR framework, including cash, central bank reserves and government bonds. p

Quarterly |

High-quality liquid assets
	Average 2Q20 1			Average 1Q20 1
USD billion	Level 1 weighted liquidity value 2	Level 2 weighted liquidity value 2	Total weighted liquidity value 2	Level 1 weighted liquidity value 2	Level 2 weighted liquidity value 2	Total weighted liquidity value 2
Cash balances 3	145		145	106		106
Securities (on- and off-balance sheet)	47	15	62	48	17	65
Total high-quality liquid
assets 4	191	15	207	154	17	171
1 Calculated based on an average of 65 data points in the second
quarter of 2020 and 63 data points in the first quarter of 2020. 2
Calculated after the application of haircuts and, where applicable, caps on
Level 2 assets. 3 Includes cash and balances with central banks and other
eligible balances as prescribed by FINMA. 4 Calculated in accordance with
FINMA requirements.

LCR development during the second quarter of 2020

Quarterly | In the second quarter of 2020, the UBS Group LCR increased 16 percentage points to 155%, remaining above the 110% Group LCR minimum requirement communicated by the Swiss Financial Market Supervisory Authority (FINMA). The LCR increase was primarily driven by higher average HQLA balances due to increased debt issuances, lower net funding consumption by the business divisions and higher customer deposit balances in Global Wealth Management. In addition, net cash outflows increased due to reduced average net inflows from secured financing transactions and higher average outflows from customer deposits, partly offset by higher average inflows from derivative transactions. p

Quarterly |

LIQ1: Liquidity coverage ratio
		Average 2Q20 1		Average 1Q20 1
USD billion, except where
indicated		Unweighted value	Weighted value 2	Unweighted value	Weighted value 2
High-quality liquid assets
1	High-quality liquid assets	209	207	176	171
Cash outflows
2	Retail deposits and deposits from small business customers	269	30	254	29
3	of which: stable deposits	38	1	33	1
4	of which: less stable
deposits	231	29	220	28
5	Unsecured wholesale funding	210	114	199	110
6	of which: operational
deposits (all counterparties)	44	11	44	11
7	of which: non-operational
deposits (all counterparties)	153	90	144	89
8	of which: unsecured debt	13	13	11	11
9	Secured wholesale funding		65		71
10	Additional requirements:	83	25	74	23
11	of which: outflows related
to derivatives and other transactions	46	17	41	16
12	of which: outflows related
to loss of funding on debt products 3	0	0	0	0
13	of which: committed credit
and liquidity facilities	37	8	32	7
14	Other contractual funding obligations	13	11	13	11
15	Other contingent funding obligations	254	6	229	6
16	Total cash outflows		251		250
Cash inflows
17	Secured lending	289	69	303	81
18	Inflows from fully performing exposures	68	31	70	31
19	Other cash inflows	17	17	15	15
20	Total cash inflows	374	117	388	127
		Average 2Q20 1		Average 1Q20 1
USD billion, except where
indicated			Total adjusted value 4		Total adjusted value 4
Liquidity coverage ratio
21	High-quality liquid assets		207		171
22	Net cash outflows		134		122
23	Liquidity coverage ratio (%)		155		139
1 Calculated based on an average of 65 data points in the second
quarter of 2020 and 63 data points in the first quarter of 2020. 2
Calculated after the application of haircuts and inflow and outflow rates.
3 Includes outflows related to loss of funding on asset-backed
securities, covered bonds, other structured financing instruments,
asset-backed commercial papers, structured entities (conduits), securities
investment vehicles and other such financing facilities. 4 Calculated
after the application of haircuts and inflow and outflow rates as well as,
where applicable, caps on Level 2 assets and cash inflows.

UBS Group AG consolidated

Section 11 Requirements for global systemically important banks and related indicators

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

Based on the published indicators, G-SIBs are subject to additional CET1 capital buffer requirements in a range from 1.0% to 3.5%. In November 2019, the FSB confirmed that the requirement for UBS continues to be 1.0%. As our Swiss systemically relevant bank (SRB) Basel III capital requirements exceed the BCBS requirements including the G-SIB buffer, we are not affected by these additional G-SIB requirements.

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

Our G-SIB indicators as of 31 December 2019 were published in July 2020 under “Pillar 3 disclosures” at www.ubs.com/investors . p

Significant regulated subsidiaries and sub-groups

Section 1 Introduction

Quarterly | The sections below include capital and other regulatory information as of 30 June 2020 for UBS AG standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated and UBS Americas Holding LLC consolidated.

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. p

Section 2 UBS AG standalone

Key metrics of the second quarter of 2020

Quarterly | The table on the next page is based on the Basel Committee on Banking Supervision (BCBS) Basel III rules. The temporary exemption of central bank sight deposits for the leverage ratio calculation granted by the Swiss Financial Market Supervisory Authority (FINMA) in connection with COVID-19 had no net effect on UBS AG as of 30 June 2020.

During the second quarter of 2020, common equity tier 1 (CET1) capital increased by USD 2.8 billion to USD 51.8 billion, mainly due to operating profit and effects from a change in accounting treatment of investments in associates partially offset by accruals for capital returns. Tier 1 capital increased by USD 3.0 billion to USD 65.4 billion, mainly due to the aforementioned increase in CET1. Risk-weighted assets (RWA) decreased by USD 6.9 billion to USD 310.8 billion during the second quarter of 2020, primarily driven by decreases in market risk RWA, lower credit and counterparty credit risk RWA as well as operational risk RWA. Leverage ratio exposure decreased by USD 1.0 billion, predominantly driven by a decrease in derivative exposures which was largely offset by an overall increase of on-balance sheet exposures.

High-quality liquid assets (HQLA) increased by USD 23.9 billion driven by greater average cash balances due to increased debt issuances and lower net funding consumption by the business divisions. Net cash outflows increased by USD 3.9 billion, due to reduced average net inflows from secured financing transactions (SFTs). p

® Refer to the “Introduction and basis for preparation” section of this report for more information about the COVID-19-related temporary regulatory measures

® Refer to the “Introduction and basis for preparation” section of this report for more information about the change in accounting treatment of investments in associates

Quarterly |

KM1: Key metrics
USD million, except where
indicated
		30.6.20	31.3.20	31.12.19	30.9.19	30.6.19
Available capital (amounts)
1	Common equity tier 1 (CET1)	51,810	48,998	49,521	50,458	51,261
1a	Fully loaded ECL accounting model CET1 1	51,808	48,994	49,518	50,456	51,258
2	Tier 1	65,361	62,382	63,893	64,545	64,315
2a	Fully loaded ECL accounting model tier 1 1	65,359	62,379	63,891	64,543	64,312
3	Total capital	70,612	68,130	69,576	70,194	70,612
3a	Fully loaded ECL accounting model total capital 1	70,610	68,127	69,574	70,191	70,609
Risk-weighted assets
(amounts)
4	Total risk-weighted assets (RWA)	310,752	317,621	287,999	297,200	294,348
4a	Minimum capital requirement 2	24,860	25,410	23,040	23,776	23,548
4b	Total risk-weighted assets (pre-floor)	310,752	317,621	287,999	297,200	294,348
Risk-based capital ratios as
a percentage of RWA
5	Common equity tier 1 ratio (%)	16.67	15.43	17.19	16.98	17.41
5a	Fully loaded ECL accounting model CET1 ratio (%) 1	16.67	15.43	17.19	16.98	17.41
6	Tier 1 ratio (%)	21.03	19.64	22.19	21.72	21.85
6a	Fully loaded ECL accounting model tier 1 ratio (%) 1	21.03	19.64	22.18	21.72	21.85
7	Total capital ratio (%)	22.72	21.45	24.16	23.62	23.99
7a	Fully loaded ECL accounting model total capital ratio (%) 1	22.72	21.45	24.16	23.62	23.99
Additional CET1 buffer
requirements as a percentage of RWA
8	Capital conservation buffer requirement (2.5% from 2019) (%)	2.50	2.50	2.50	2.50	2.50
9	Countercyclical buffer requirement (%)	0.02	0.01	0.07	0.08	0.08
9a	Additional countercyclical buffer for Swiss mortgage loans (%)	0.00	0.00	0.00	0.00	0.00
10	Bank G-SIB and/or D-SIB additional requirements (%) 3
11	Total of bank CET1-specific buffer requirements (%)	2.52	2.51	2.57	2.58	2.58
12	CET1 available after meeting the bank’s minimum capital
requirements (%)	12.17	10.93	12.69	12.48	12.91
Basel III leverage ratio 4
13	Total Basel III leverage ratio exposure measure	573,741	574,692	589,127	609,656	618,704
14	Basel III leverage ratio (%)	11.39	10.85	10.85	10.59	10.40
14a	Fully loaded ECL accounting model Basel III leverage ratio (%) 1	11.39	10.85	10.84	10.59	10.39
Liquidity coverage ratio 5
15	Total HQLA	91,877	67,963	73,805	76,330	82,201
16	Total net cash outflow	52,209	48,320	53,960	55,607	56,626
17	LCR (%)	178	141	137	137	145
1 The fully loaded ECL accounting model excludes the
transitional relief of recognizing ECL allowances and provisions in CET1
capital in accordance with FINMA Circular 2013/1 “Eligible capital –
banks.” 2 Calculated as 8% of total RWA, based on total capital minimum
requirements, excluding CET1 buffer requirements. 3 Swiss SRB going
concern requirements and information for UBS AG standalone is provided on the
following pages in this section. 4 The temporary exemption granted by
FINMA in connection with COVID-19 had no net effect on UBS AG standalone.
Refer to the “Introduction and basis for preparation” section of this report
and to the next page in this section for more information.
5 Calculated based on quarterly average. Refer to “Liquidity coverage ratio”
in this section for more information.

Significant regulated subsidiaries and sub-groups

Swiss SRB going and gone concern requirements and information

Quarterly | From 1 January 2020, UBS AG standalone is subject to a gone concern capital requirement based on the sum of (i) its third party exposure on a standalone basis, (ii) a buffer requirement equal to 30% of the Group’s gone concern capital requirement on UBS AG’s consolidated exposure, and (iii) the nominal value of the gone concern instruments issued by UBS entities and held by the parent bank. A transitional period until 2024 has been granted for the buffer requirement. ”Gone concern capital coverage ratio” represents how much gone concern capital is available to meet the gone concern requirement.

More information about the going concern requirements and

information is provided on page 115 of our 31 December 2019 Pillar 3 report, available under “Pillar 3 disclosures” at www.ubs.com/investors.

In connection with COVID-19, FINMA has permitted banks to temporarily exclude central bank sight deposits from the leverage ratio denominator (LRD) for the purpose of calculating going concern ratios. This exemption applies until 1 January 2021. Applicable dividends or similar distributions approved by shareholders after 25 March 2020 reduce the relief by the LRD equivalent of the capital distribution. This exemption had no net effect on UBS AG standalone as of 30 June 2020.

® Refer to the “Introduction and basis for preparation” section of this report for more information about the COVID-19-related temporary regulatory measures

The table below provides details of the Swiss systematically relevant bank (SRB) RWA- and LRD-based going and gone concern requirements and information as required by FINMA; details on eligible gone concern instruments are provided on the next page. p

Quarterly |

| Swiss SRB going and gone
concern requirements and information — As of 30.6.20 | RWA, phase-in | | RWA, fully applied as of 1.1.28 | | LRD 1 | |
| --- | --- | --- | --- | --- | --- | --- |
| USD million, except where
indicated | in % | | in% | | in % | |
| Required going concern
capital | | | | | | |
| Total going concern capital | 13.96 2 | 43,366 | 13.96 2 | 54,088 | 4.88 2 | 27,970 |
| Common equity tier 1 capital | 9.66 | 30,004 | 9.66 | 37,422 | 3.38 | 19,364 |
| of which: minimum capital | 4.50 | 13,984 | 4.50 | 17,441 | 1.50 | 8,606 |
| of which: buffer capital | 5.14 | 15,973 | 5.14 | 19,922 | 1.88 | 10,758 |
| of which: countercyclical
buffer | 0.02 | 47 | 0.02 | 59 | | |
| Maximum additional tier 1
capital | 4.30 | 13,362 | 4.30 | 16,666 | 1.50 | 8,606 |
| of which: additional tier 1
capital | 3.50 | 10,876 | 3.50 | 13,565 | 1.50 | 8,606 |
| of which: additional tier 1
buffer capital | 0.80 | 2,486 | 0.80 | 3,101 | | |
| Eligible going concern
capital | | | | | | |
| Total going concern capital | 21.03 | 65,361 | 16.86 | 65,361 | 11.39 | 65,361 |
| Common equity tier 1 capital | 16.67 | 51,810 | 13.37 | 51,810 | 9.03 | 51,810 |
| Total loss-absorbing
additional tier 1 capital | 4.36 | 13,551 | 3.50 | 13,551 | 2.36 | 13,551 |
| of which: high-trigger
loss-absorbing additional tier 1 capital | 3.56 | 11,058 | 2.85 | 11,058 | 1.93 | 11,058 |
| of which: low-trigger
loss-absorbing additional tier 1 capital | 0.80 | 2,493 | 0.64 | 2,493 | 0.43 | 2,493 |
| Risk-weighted assets /
leverage ratio denominator | | | | | | |
| Risk-weighted assets | | 310,752 | | 387,578 | | |
| Leverage ratio denominator | | | | | | 573,741 |
| Required gone concern
capital 3 | Higher of RWA- or LRD-based | | | | | |
| Total gone concern
loss-absorbing requirement | | 32,350 | | | | |
| Eligible gone concern
capital | | | | | | |
| Total gone concern
loss-absorbing capacity | | 39,993 | | | | |
| Gone concern coverage
capital ratio | 123.63 | | | | | |
| 1 LRD-based requirements and eligible capital presented in this
table do not reflect the effects of the temporary exemption that has been
granted by FINMA in connection with COVID-19. Refer to the “Introduction and
basis for preparation” section of this report for more information. 2
Includes applicable add-ons of 1.08% for RWA and 0.375% for LRD. 3 From 1
January 2020 onward, a maximum of 25% of the gone
concern requirements can be met with instruments that have a
remaining maturity of between one and two years. | | | | | | |

Quarterly |

| Swiss SRB going and gone
concern information — USD million, except where
indicated | 30.6.20 1 | 31.3.20 | 31.12.19 |
| --- | --- | --- | --- |
| Eligible going concern
capital | | | |
| Total going concern capital | 65,361 | 59,919 | 61,479 |
| Total tier 1 capital | 65,361 | 59,919 | 61,479 |
| Common equity tier 1 capital | 51,810 | 48,998 | 49,521 |
| Total loss-absorbing
additional tier 1 capital | 13,551 | 10,921 | 11,958 |
| of which: high-trigger
loss-absorbing additional tier 1 capital | 11,058 | 10,921 | 11,958 |
| of which: low-trigger
loss-absorbing additional tier 1 capital 2 | 2,493 | | 11,958 |
| Eligible gone concern
capital | | | |
| Total gone concern
loss-absorbing capacity | 39,993 | 44,137 | |
| Total tier 1 capital | | 2,463 | |
| of which: low-trigger
loss-absorbing additional tier 1 capital 2 | | 2,463 | |
| Total tier 2 capital | 7,570 | 7,521 | |
| of which: low-trigger
loss-absorbing tier 2 capital | 7,043 | 6,995 | |
| of which: non-Basel
III-compliant tier 2 capital | 527 | 526 | |
| TLAC-eligible senior
unsecured debt | 32,423 | 34,153 | |
| Total loss-absorbing
capacity | | | |
| Total loss-absorbing
capacity | 105,355 | 104,056 | 61,479 |
| Risk-weighted assets /
leverage ratio denominator | | | |
| Risk-weighted assets, phase-in | 310,752 | 317,621 | 287,999 |
| of which: direct and
indirect investments in Switzerland-domiciled subsidiaries 3 | 35,213 | 34,211 | 34,418 |
| of which: direct and
indirect investments in foreign-domiciled subsidiaries 3 | 105,179 | 105,384 | 96,307 |
| Risk-weighted assets, fully applied as of 1.1.28 | 387,578 | 394,393 | 374,351 |
| of which: direct and
indirect investments in Switzerland-domiciled subsidiaries 3 | 41,920 | 40,727 | 41,973 |
| of which: direct and
indirect investments in foreign-domiciled subsidiaries 3 | 175,298 | 175,639 | 175,104 |
| Leverage ratio denominator 4 | 573,741 | 574,692 | 589,127 |
| Capital and loss-absorbing
capacity ratios (%) | | | |
| Going concern capital ratio, phase-in 5 | 21.0 | 18.9 | 23.1 |
| of which: common equity tier
1 capital ratio, phase-in | 16.7 | 15.4 | 17.2 |
| Going concern capital ratio, fully applied as of 1.1.28 | 16.9 | 15.2 | 16.4 |
| of which: common equity tier
1 capital ratio, fully applied as of 1.1.28 | 13.4 | 12.4 | 13.2 |
| Leverage ratios (%) 4 | | | |
| Going concern leverage ratio, phase-in 5 | | | 11.3 |
| Going concern leverage ratio, fully applied as of 1.1.20 | 11.4 | 10.4 | 10.4 |
| of which: common equity tier
1 leverage ratio, fully applied as of 1.1.20 | 9.0 | 8.5 | 8.4 |
| Gone concern capital
coverage ratio (%) | | | |
| Gone concern capital coverage ratio | 123.6 | 142.7 | |
| 1 In June 2020, we aligned the accounting treatment of
investments in associates in the UBS AG IFRS standalone accounts with the
“equity method” accounting applied in the UBS Group IFRS financial
statements. Previously, we had applied a “cost less impairment” approach for
these investments in the UBS AG IFRS standalone accounts. Effective 30 June
2020, UBS AG standalone CET1 capital, LRD and RWA increased by approximately
USD 0.9 billion, USD 0.9 billion and
USD 2.4 billion, respectively. 2 The relevant capital
instruments were issued after the new Swiss SRB framework had been
implemented and therefore do not meet going concern capital requirements in
all entities. Effective from 30 June 2020, these instruments can
qualify as going concern capital of UBS AG, as agreed with FINMA. 3
Carrying amounts for direct and indirect investments including holding of
regulatory capital instruments in Switzerland-domiciled subsidiaries
(30 June 2020: USD 16,768 million;
31 March 2020: USD 16,291 million; 31 December 2019:
USD 16,789 million) and for direct and indirect investments
including holding of regulatory capital instruments in foreign-domiciled
subsidiaries (30 June 2020: USD 43,825 million;
31 March 2020: USD 43,910 million;
31 December 2019: USD 43,776 million) are risk weighted
at 210% and 240%, respectively, for the current year
(31 December 2019: 205% and 220%, respectively). Risk weights will
gradually increase 5 percentage points per year for
Switzerland-domiciled investments and 20 percentage points per year for
foreign-domiciled investments until the fully applied risk weights of 250%
and 400%, respectively, are applied. 4 Leverage ratio denominators
(LRDs) and leverage ratios for 30 June 2020 and
31 March 2020 do not reflect the effects of the temporary exemption
that has been granted by FINMA in connection with COVID-19. Refer to the
“Introduction and basis for preparation” section of this report for more
information. The effects of the temporary exemption granted by FINMA in
connection with COVID-19 are presented on the previous page in this
section. 5 As of 31 December 2019, Tier 2 capital of
USD 5,153 million was eligible as going concern capital due to the
transitional arrangements. The going concern phase-in capital ratios and leverage
ratios presented for 2019 include this component. | | | |

Significant regulated subsidiaries and sub-groups

Leverage ratio information

Quarterly | Due to the adjustment for paid and planned dividends, the temporary exemption of central bank sight deposits for leverage ratio calculation granted by FINMA on 25 March 2020 in connection with COVID-19 had no net effect on UBS AG standalone as of 30 June 2020. p

® Refer to the “Introduction and basis for preparation” section of this report for more information about the COVID-19-related temporary regulatory measures

Quarterly |

| Swiss SRB leverage ratio
denominator 1 — USD billion | 30.6.20 | 31.3.20 | 31.12.19 |
| --- | --- | --- | --- |
| Leverage ratio denominator | | | |
| Swiss GAAP total assets | 493.9 | 487.5 | 478.9 |
| Difference between Swiss GAAP and IFRS total assets | 149.9 | 200.3 | 122.3 |
| Less: derivative exposures and SFTs 2 | (262.5) | (322.7) | (220.4) |
| Less: funding provided to significant regulated subsidiaries
eligible as gone concern capital | (19.1) | (18.5) | |
| On-balance sheet exposures
(excluding derivative exposures and SFTs) | 362.2 | 346.7 | 380.8 |
| Derivative exposures | 90.9 | 108.2 | 94.8 |
| Securities financing transactions | 98.5 | 96.3 | 92.6 |
| Off-balance sheet items | 22.9 | 24.3 | 21.7 |
| Items deducted from Swiss SRB tier 1 capital | (0.7) | (0.8) | (0.8) |
| Total exposures (leverage
ratio denominator) | 573.7 | 574.7 | 589.1 |
| 1 The temporary exemption granted by FINMA in connection with
COVID-19 had no net effect on UBS AG standalone. 2 Consists of derivative
financial instruments, cash collateral receivables on derivative instruments,
receivables from securities financing transactions, and margin loans, as well
as prime brokerage receivables and financial assets at fair value not held
for trading, both related to securities financing transactions, in accordance
with the regulatory scope of consolidation, which are presented separately
under Derivative exposures and Securities financing transactions in this
table. | | | |

Quarterly |

| BCBS Basel III leverage ratio — USD million, except where
indicated | 30.6.20 | 31.3.20 | 31.12.19 | 30.9.19 | 30.6.19 |
| --- | --- | --- | --- | --- | --- |
| Total tier 1 capital | 65,361 | 62,382 | 63,893 | 64,545 | 64,315 |
| Total exposures (leverage ratio denominator) 1 | 573,741 | 574,692 | 589,127 | 609,656 | 618,704 |
| BCBS Basel III leverage
ratio (%) 1 | 11.4 | 10.9 | 10.8 | 10.6 | 10.4 |
| 1 The temporary exemption granted by FINMA in connection with
COVID-19 had no net effect on UBS AG standalone. | | | | | |

Liquidity coverage ratio

Quarterly | UBS AG is required to maintain a liquidity coverage ratio (LCR) of 105% as communicated by FINMA. p

Quarterly |

Liquidity coverage ratio
	Weighted value 1
USD billion, except where
indicated	Average 2Q20 2	Average 1Q20 2
High-quality liquid assets	92	68
Total net cash outflows	52	48
of which: cash outflows	157	160
of which: cash inflows	104	112
Liquidity coverage ratio (%)	178	141
1 Calculated after the application of haircuts and inflow and
outflow rates as well as, where applicable, caps on Level 2 assets and cash
inflows. 2 Calculated based on an average of 65 data points in the second
quarter of 2020 and 63 data points in the first quarter of 2020.

Section 3 UBS Switzerland AG standalone

Key metrics of the second quarter of 2020

Quarterly | The table below is based on the Basel Committee on Banking Supervision (BCBS) Basel III rules; however, it does not reflect the effects of the temporary exemption of central bank sight deposits for leverage ratio calculations granted by the Swiss Financial Market Supervisory Authority (FINMA) in connection with COVID-19.

During the second quarter of 2020, common equity tier 1 (CET1) capital increased by CHF 0.3 billion to CHF 11.8 billion, mainly due to operating profit. Risk-weighted assets (RWA) were stable during the quarter. Leverage ratio exposure increased by CHF 6.0 billion to CHF 323.1 billion, mainly driven by an increase in cash and balances at central banks, as well as higher loans and advances to customers.

High-quality liquid assets (HQLA) increased by CHF 10.6 billion, driven by higher average cash balances. Net cash outflows increased by CHF 8.8 billion, due to reduced average net inflows from secured financing transactions (SFTs) and increased average outflows from intercompany transactions. p

® Refer to the following pages for more information about the effects of the temporary exemption granted by FINMA in connection with COVID-19 on UBS Switzerland AG standalone

Quarterly |

KM1: Key metrics
CHF million, except where
indicated
		30.6.20	31.3.20	31.12.19	30.9.19	30.6.19
Available capital (amounts)
1	Common equity tier 1 (CET1)	11,776	11,427	10,895	10,875	10,654
1a	Fully loaded ECL accounting model CET1 1	11,774	11,422	10,890	10,871	10,649
2	Tier 1	16,479	16,137	15,606	15,124	14,894
2a	Fully loaded ECL accounting model tier 1 1	16,476	16,132	15,601	15,120	14,889
3	Total capital	16,479	16,137	15,606	15,124	14,894
3a	Fully loaded ECL accounting model total capital 1	16,476	16,132	15,601	15,120	14,889
Risk-weighted assets
(amounts)
4	Total risk-weighted assets (RWA)	105,304	104,489	99,667	97,927	96,640
4a	Minimum capital requirement 2	8,424	8,359	7,973	7,834	7,731
4b	Total risk-weighted assets (pre-floor)	92,740	92,981	89,234	90,338	91,013
Risk-based capital ratios as
a percentage of RWA
5	Common equity tier 1 ratio (%)	11.18	10.94	10.93	11.10	11.02
5a	Fully loaded ECL accounting model CET1 ratio (%) 1	11.18	10.93	10.93	11.10	11.02
6	Tier 1 ratio (%)	15.65	15.44	15.66	15.44	15.41
6a	Fully loaded ECL accounting model tier 1 ratio (%) 1	15.65	15.44	15.65	15.44	15.41
7	Total capital ratio (%)	15.65	15.44	15.66	15.44	15.41
7a	Fully loaded ECL accounting model total capital ratio (%) 1	15.65	15.44	15.65	15.44	15.41
Additional CET1 buffer
requirements as a percentage of RWA 3
8	Capital conservation buffer requirement (2.5% from 2019) (%)	2.50	2.50	2.50	2.50	2.50
9	Countercyclical buffer requirement (%)	0.01	0.01	0.01	0.01	0.01
9a	Additional countercyclical buffer for Swiss mortgage loans (%)	0.00	0.00	0.57	0.57	0.57
10	Bank G-SIB and/or D-SIB additional requirements (%) 4
11	Total of bank CET1-specific buffer requirements (%)	2.51	2.51	2.51	2.51	2.51
12	CET1 available after meeting the bank’s minimum capital
requirements (%)	6.68	6.44	6.43	6.60	6.52
Basel III leverage ratio 5
13	Total Basel III leverage ratio exposure measure	323,068	317,071	302,304	309,750	311,212
14	Basel III leverage ratio (%)	5.10	5.09	5.16	4.88	4.79
14a	Fully loaded ECL accounting model Basel III leverage ratio (%) 1	5.10	5.09	5.16	4.88	4.78
Liquidity coverage ratio 6
15	Total HQLA	85,180	74,602	67,105	64,835	67,160
16	Total net cash outflow	61,847	53,059	51,561	49,242	48,761
17	LCR (%)	138	141	130	132	138
1 The fully loaded ECL accounting model excludes the
transitional relief of recognizing ECL allowances and provisions in CET1
capital in accordance with FINMA Circular 2013/1 “Eligible capital –
banks.” 2 Calculated as 8% of total RWA, based on total capital
minimum requirements, excluding CET1 buffer requirements. 3 As Annex 8 of
the Swiss Capital Adequacy Ordinance (the CAO) does not apply to systemically
relevant banks, we can abstain from disclosing the information required in
lines 12a–12e. We nevertheless provide information about the Swiss
sector-specific countercyclical buffer in row 9a pursuant to Art. 44 of the
CAO. 4 Swiss SRB going and gone concern requirements and information for
UBS Switzerland AG are provided on the next page. 5 Leverage ratio
exposures and leverage ratios for 30 June 2020 and 31 March 2020 do not
reflect the effects of the temporary exemption that has been granted by FINMA
in connection with COVID-19. Refer to the “Introduction and basis for preparation”
section of this report and to “Application of the temporary COVID-19-related
FINMA exemption of central bank sight deposits” in this section for more
information. 6 Calculated based on quarterly average. Refer to
“Liquidity coverage ratio” in this section for more information.

Significant regulated subsidiaries and sub-groups

Swiss SRB going and gone concern requirements and information

Quarterly | UBS Switzerland AG is considered a systemically relevant bank (SRB) under Swiss banking law and is subject to capital regulations on a standalone basis . As of 30 June 2020, the going concern capital requirement for UBS Switzerland AG standalone was 13.95%, including a countercyclical buffer of 0.01%, whereas the going concern leverage ratio requirement was 4.875%. The gone concern requirements were 8.64% for the RWA-based requirement and 3.02% for the leverage ratio denominator (LRD)-based requirement.

The Swiss SRB framework and requirements applicable to UBS Switzerland AG standalone are similar to those applicable to UBS Group AG consolidated, with the exception of a lower gone concern requirement effective from 1 January 2020, corresponding to 62% of the Group’s gone concern requirement (before applicable reductions).

In connection with COVID-19, FINMA has permitted banks to temporarily exclude central bank sight deposits from the LRD for the purpose of calculating going concern ratios. This exemption applies until 1 January 2021. Applicable dividends or similar distributions approved by shareholders after 25 March 2020 reduce the relief by the LRD equivalent of the capital distribution, except where dividends are paid to a regulated Swiss parent company or to an unregulated Swiss parent company which in turn pays no dividend. The effect of this exemption is that UBS Switzerland AG is eligible to reduce its LRD by USD 73 billion to USD 251 billion as of 30 June 2020. p

Quarterly |

| Swiss SRB going and gone
concern requirements and information — As of 30.6.20 | RWA | | LRD 1 | |
| --- | --- | --- | --- | --- |
| CHF million, except where
indicated | in % | | in % | |
| Required going concern
capital | | | | |
| Total going concern capital | 13.95 2 | 14,689 | 4.88 2 | 15,750 |
| Common equity tier 1 capital | 9.65 | 10,161 | 3.38 | 10,904 |
| of which: minimum capital | 4.50 | 4,739 | 1.50 | 4,846 |
| of which: buffer capital | 5.14 | 5,413 | 1.88 | 6,058 |
| of which: countercyclical
buffer | 0.01 | 10 | | |
| Maximum additional tier 1
capital | 4.30 | 4,528 | 1.50 | 4,846 |
| of which: additional tier 1
capital | 3.50 | 3,686 | 1.50 | 4,846 |
| of which: additional tier 1
buffer capital | 0.80 | 842 | | |
| Eligible going concern
capital | | | | |
| Total going concern capital | 15.65 | 16,479 | 5.10 | 16,479 |
| Common equity tier 1 capital | 11.18 | 11,776 | 3.65 | 11,776 |
| Total loss-absorbing
additional tier 1 capital | 4.47 | 4,703 | 1.46 | 4,703 |
| of which: high-trigger
loss-absorbing additional tier 1 capital | 4.47 | 4,703 | 1.46 | 4,703 |
| Required gone concern
capital 3 | | | | |
| Total gone concern
loss-absorbing capacity | 8.64 | 9,101 | 3.02 | 9,765 |
| of which: base requirement | 7.97 | 8,396 | 2.79 | 9,014 |
| of which: additional
requirement for market share and LRD | 0.67 | 705 | 0.23 | 751 |
| Eligible gone concern
capital | | | | |
| Total gone concern
loss-absorbing capacity | 10.34 | 10,892 | 3.37 | 10,892 |
| TLAC-eligible senior
unsecured debt | 10.34 | 10,892 | 3.37 | 10,892 |
| Total loss-absorbing capacity | | | | |
| Required total
loss-absorbing capacity | 22.59 | 23,791 | 7.90 | 25,514 |
| Eligible total
loss-absorbing capacity | 25.99 | 27,371 | 8.47 | 27,371 |
| Risk-weighted assets /
leverage ratio denominator | | | | |
| Risk-weighted assets | | 105,304 | | |
| Leverage ratio denominator | | | | 323,068 |
| 1 LRD-based requirements and eligible capital presented in this
table do not reflect the effects of the temporary exemption that has been
granted by FINMA in connection with COVID-19. Refer to the “Introduction and
basis for preparation” section of this report for more information. The
effects of temporary exemption granted by FINMA in connection with COVID-19
are presented on the next page. 2 Includes applicable add-ons of 1.08% for
RWA and 0.375% for LRD. 3 From 1 January 2020 onward, a maximum of 25% of
the gone concern requirements can be met with instruments that have
a remaining maturity of between one and two years. | | | | |

Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits

The LRD is the same under Swiss SRB and BCBS rules, therefore the LRD after the aforementioned temporary FINMA exemption under BCBS rules is identical to the Swiss SRB number presented in the table below. The BCBS Basel III leverage ratio was 6.58% after considering the temporary FINMA exemption.

| Swiss SRB going concern
requirements and information including temporary FINMA exemption — As of 30.6.20 | LRD | |
| --- | --- | --- |
| CHF million, except where
indicated | in % | |
| Leverage ratio denominator
before temporary exemption | | 323,068 |
| Effective relief | | (72,514) |
| of which: central bank sight
deposits eligible for relief | | (72,514) |
| Leverage ratio denominator
after temporary exemption | | 250,553 |
| Required going concern
capital | | |
| Total going concern capital | 4.88 | 12,214 |
| Common equity tier 1 capital | 3.38 | 8,456 |
| Eligible going concern
capital | | |
| Total going concern capital | 6.58 | 16,479 |
| Common equity tier 1 capital | 4.70 | 11,776 |

Significant regulated subsidiaries and sub-groups

Swiss SRB loss-absorbing capacity

Quarterly |

| Swiss SRB going and gone
concern information — CHF million, except where
indicated | 30.6.20 | 31.3.20 | 31.12.19 |
| --- | --- | --- | --- |
| Eligible going concern
capital | | | |
| Total going concern capital | 16,479 | 16,137 | 15,606 |
| Total tier 1 capital | 16,479 | 16,137 | 15,606 |
| Common equity tier 1 capital | 11,776 | 11,427 | 10,895 |
| Total loss-absorbing
additional tier 1 capital | 4,703 | 4,710 | 4,711 |
| Eligible gone concern
capital | | | |
| Total gone concern
loss-absorbing capacity | 10,892 | 10,910 | 10,915 |
| TLAC-eligible senior
unsecured debt | 10,892 | 10,910 | 10,915 |
| Total loss-absorbing
capacity | | | |
| Total loss-absorbing
capacity | 27,371 | 27,047 | 26,521 |
| Risk-weighted assets /
leverage ratio denominator | | | |
| Risk-weighted assets | 105,304 | 104,489 | 99,667 |
| Leverage ratio denominator 1 | 323,068 | 317,071 | 302,304 |
| Capital and loss-absorbing
capacity ratios (%) | | | |
| Going concern capital ratio | 15.6 | 15.4 | 15.7 |
| of which: common equity tier
1 capital ratio | 11.2 | 10.9 | 10.9 |
| Gone concern loss-absorbing capacity ratio | 10.3 | 10.4 | 11.0 |
| Total loss-absorbing
capacity ratio | 26.0 | 25.9 | 26.6 |
| Leverage ratios (%) 1 | | | |
| Going concern leverage ratio | 5.1 | 5.1 | 5.2 |
| of which: common equity tier
1 leverage ratio | 3.6 | 3.6 | 3.6 |
| Gone concern leverage ratio | 3.4 | 3.4 | 3.6 |
| Total loss-absorbing
capacity leverage ratio | 8.5 | 8.5 | 8.8 |
| 1 Leverage ratio denominators (LRDs) and leverage ratios for 30
June 2020 and 31 March 2020 do not reflect the effects of the temporary
exemption that has been granted by FINMA in connection with COVID-19. Refer
to the “Introduction and basis for preparation” section of this report for
more information. The effects of the temporary exemption granted by FINMA in
connection with COVID-19 are presented in the preceding table. | | | |

Leverage ratio information

Quarterly | The tables in this section do not reflect the effects of the temporary exemption of central bank sight deposits granted by FINMA in connection with COVID-19. p

® Refer to the previous pages for more information about the effects of the temporary exemption granted by FINMA in connection with COVID-19 on UBS Switzerland AG standalone

Quarterly |

| Swiss SRB leverage ratio
denominator 1 — CHF billion | 30.6.20 | 31.3.20 | 31.12.19 |
| --- | --- | --- | --- |
| Leverage ratio denominator | | | |
| Swiss GAAP total assets | 304.3 | 299.5 | 285.0 |
| Difference between Swiss GAAP and IFRS total assets | 4.2 | 4.7 | 3.6 |
| Less: derivative exposures and SFTs 2 | (8.3) | (9.9) | (17.3) |
| On-balance sheet exposures
(excluding derivative exposures and SFTs) | 300.2 | 294.3 | 271.3 |
| Derivative exposures | 5.7 | 6.1 | 4.4 |
| Securities financing transactions | 2.3 | 2.9 | 12.7 |
| Off-balance sheet items | 15.1 | 14.0 | 14.2 |
| Items deducted from Swiss SRB tier 1 capital | (0.2) | (0.3) | (0.3) |
| Total exposures (leverage
ratio denominator) | 323.1 | 317.1 | 302.3 |
| 1 This table does not reflect the effects of the temporary
exemption granted by FINMA in connection with COVID-19. Refer to the
“Introduction and basis for preparation” section of this report and to
“Application of the temporary COVID-19-related FINMA exemption of central
bank sight deposits” in this section for more information. 2 Consists of
derivative financial instruments, cash collateral receivables on derivative
instruments, receivables from securities financing transactions, and margin loans
as well as prime brokerage receivables and financial assets at fair value not
held for trading, both related to securities financing transactions, in
accordance with the regulatory scope of consolidation, which are presented
separately under Derivative exposures and Securities financing transactions
in this table. | | | |

Quarterly |

| BCBS Basel III leverage ratio — CHF million, except where
indicated | 30.6.20 | 31.3.20 | 31.12.19 | 30.9.19 | 30.6.19 |
| --- | --- | --- | --- | --- | --- |
| Total tier 1 capital | 16,479 | 16,137 | 15,606 | 15,124 | 14,894 |
| Total exposures (leverage ratio denominator) 1 | 323,068 | 317,071 | 302,304 | 309,750 | 311,212 |
| BCBS Basel III leverage
ratio (%) 1 | 5.1 | 5.1 | 5.2 | 4.9 | 4.8 |
| 1 Leverage ratio denominators (LRDs) and leverage ratios for 30
June 2020 and 31 March 2020 do not reflect the effects of the temporary
exemption that has been granted by FINMA in connection with COVID-19. Refer
to the “Introduction and basis for preparation” section of this report and to
“Application of the temporary COVID-19-related FINMA exemption of central
bank sight deposits” in this section for more information. | | | | | |

Liquidity coverage ratio

Quarterly | UBS Switzerland AG, as a Swiss SRB, is required to maintain a liquidity coverage ratio (LCR) of 100%. In connection with the Swiss Emergency Plan, UBS Switzerland AG must satisfy additional liquidity requirements. p

Quarterly |

Liquidity coverage ratio
	Weighted value 1
CHF billion, except where
indicated	Average 2Q20 2	Average 1Q20 2
High-quality liquid assets	85	75
Total net cash outflows	62	53
of which: cash outflows	90	86
of which: cash inflows	28	33
Liquidity coverage ratio (%)	138	141
1 Calculated after the application of haircuts and inflow and
outflow rates as well as, where applicable, caps on Level 2 assets and cash
inflows. 2 Calculated based on an average of 65 data points in the second
quarter of 2020 and 64 data points in the first quarter of 2020.

Significant regulated subsidiaries and sub-groups

Capital instruments

Quarterly |

| Capital instruments of UBS
Switzerland AG – key features | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Presented according to issuance date. | | | | | | | | |
| | | Share capital | Additional tier 1 capital | | | | | |
| 1 | Issuer | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland | UBS Switzerland AG, Switzerland |
| 1a | Instrument number | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
| 2 | Unique identifier (e.g., CUSIP, ISIN or Bloomberg identifier for
private placement) | – | – | | | | | |
| 3 | Governing law(s) of the instrument | Swiss | Swiss | | | | | |
| 3a | Means by which enforceability requirement of Section 13 of the
TLAC Term Sheet is achieved (for other TLAC-eligible instruments governed by
foreign law) | n/a | n/a | | | | | |
| | Regulatory treatment | | | | | | | |
| 4 | Transitional Basel III rules 1 | CET1 – Going concern capital | Additional tier 1 capital | | | | | |
| 5 | Post-transitional Basel III rules 2 | CET1 – Going concern capital | Additional tier 1 capital | | | | | |
| 6 | Eligible at solo / group / group and solo | UBS Switzerland AG consolidated and standalone | UBS Switzerland AG consolidated and standalone | | | | | |
| 7 | Instrument type (types to be specified by each jurisdiction) | Ordinary shares | Loan 4 | | | | | |
| 8 | Amount recognized in regulatory capital (currency in millions,
as of most recent reporting date) 1 | CHF 10.0 | CHF 1,500 | CHF 500 | CHF 1,000 | CHF 825 | USD 425 | CHF 475 |
| 9 | Par value of instrument | CHF 10.0 | CHF 1,500 | CHF 500 | CHF 1,000 | CHF 825 | USD 425 | CHF 475 |
| 10 | Accounting classification 3 | Equity attributable to UBS Switzerland AG shareholders | Due to banks held at amortized cost | | | | | |
| 11 | Original date of issuance | – | 1 April 2015 | 11 March 2016 | 18 December 2017 | 12 December 2018 | 12 December 2018 | 11 December 2019 |
| 12 | Perpetual or dated | – | Perpetual | | | | | |
| 13 | Original maturity date | – | – | | | | | |
| 14 | Issuer call subject to prior supervisory approval | – | Yes | | | | | |
| 15 | Optional call date, contingent call dates and redemption amount | – | First optional repayment date: 1 April 2020 | First optional repayment date: 11 March 2021 | First optional repayment date: 18 December 2022 | First optional repayment date: 12 December 2023 | First optional repayment date: 12 December 2023 | First optional repayment date: 11 December 2024 |
| | | | Repayable at any time after the first optional repayment date. Repayment subject to FINMA approval. Optional repayment amount:
principal amount, together with any accrued and unpaid interest thereon | | | | | |
| 16 | Subsequent call dates, if applicable | – | Early repayment possible due to a tax or regulatory event.
Repayment due to tax event subject to FINMA approval. Repayment amount: principal amount, together with accrued and
unpaid interest | | | | | |

| Capital instruments of UBS Switzerland AG – key features
(continued) | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Coupons | | | | | | | |
| 17 | Fixed or floating dividend / coupon | – | Floating | | | | | |
| 18 | Coupon rate and any related index | – | 6-month CHF Libor + 370 bps per annum semiannually | 3-month CHF Libor + 459 bps per annum quarterly | 3-month CHF Libor + 250 bps per annum quarterly | 3-month CHF Libor + 489 bps per annum quarterly | 3-month USD Libor + 547 bps per annum quarterly | 3-month CHF Libor + 433 bps per annum quarterly |
| 19 | Existence of a dividend stopper | – | No | | | | | |
| 20 | Fully discretionary, partially discretionary or mandatory | Fully discretionary | Fully discretionary | | | | | |
| 21 | Existence of step-up or other incentive to redeem | – | No | | | | | |
| 22 | Non-cumulative or cumulative | Non-cumulative | Non-cumulative | | | | | |
| 23 | Convertible or non-convertible | – | Non-convertible | | | | | |
| 24 | If convertible, conversion trigger(s) | – | – | | | | | |
| 25 | If convertible, fully or partially | – | – | | | | | |
| 26 | If convertible, conversion rate | – | – | | | | | |
| 27 | If convertible, mandatory or optional conversion | – | – | | | | | |
| 28 | If convertible, specify instrument type convertible into | – | – | | | | | |
| 29 | If convertible, specify issuer of instrument it converts into | – | – | | | | | |
| 30 | Write-down feature | – | Yes | | | | | |
| 31 | If write-down, write-down trigger(s) | – | Trigger: CET1 ratio is less than 7% | | | | | |
| | | | FINMA determines a write-down necessary to ensure UBS
Switzerland AG’s viability; or UBS Switzerland AG receives a commitment of
governmental support that FINMA determines necessary to ensure UBS
Switzerland AG‘s viability. Subject to applicable conditions | | | | | |
| 32 | If write-down, fully or partially | – | Fully | | | | | |
| 33 | If write-down, permanent or temporary | – | Permanent | | | | | |
| 34 | If temporary write-down, description of write-up mechanism | – | – | | | | | |
| 34a | Type of subordination | Statutory | Contractual | | | | | |
| 35 | Position in subordination hierarchy in liquidation (specify
instrument type immediately senior to instrument in the insolvency creditor hierarchy of the
legal entity concerned). | Unless otherwise stated in the articles of association, once
debts are paid back, the assets of the liquidated company are divided between
the shareholders pro rata based on their contributions and considering the
preferences attached to certain categories of shares (Art. 745, Swiss
Code of Obligations) | Subject to any obligations that are mandatorily preferred by
law, all obligations of UBS Switzerland AG that are unsubordinated or that
are subordinated and do not rank junior, such as all classes of share
capital, or at par, such as tier 1 instruments | | | | | |
| 36 | Non-compliant transitioned features | – | – | | | | | |
| 37 | If yes, specify non-compliant features | – | – | | | | | |
| 1 Based on Swiss SRB (including transitional arrangement)
requirements. 2 Based on Swiss SRB requirements applicable as of 1 January
2020. 3 As applied in UBS Switzerland AG‘s financial statements under
Swiss GAAP. 4 Loans granted by UBS AG, Switzerland. | | | | | | | | |

Significant regulated subsidiaries and sub-groups

Section 4 UBS Europe SE consolidated

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

During the second quarter of 2020, common equity tier 1 (CET1) capital remained stable. Risk-weighted assets (RWA) decreased by EUR 1.6 billion to EUR 13.6 billion, reflecting a decrease in credit risk RWA and credit valuation adjustment (CVA). Leverage ratio exposure decreased by EUR 6.8 billion to EUR 42.2 billion, mainly reflecting a decrease of EUR 3.1 billion in cash held at central banks, a decrease of EUR 3.9 billion in securities financing transactions (SFTs) and a decrease of EUR 0.8 billion in other cash balances. This decrease was partially offset by an increase in high quality liquid asset- (HQLA-) eligible bonds of EUR 2.0 billion. The average liquidity coverage ratio (LCR) remained stable, with a EUR 0.7 billion increase in high-quality liquid assets and a EUR 0.6 billion increase in total net cash outflows, mainly due to treasury management of the excess high-quality liquid assets through securities financing transactions.

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

Quarterly |

KM1: Key metrics 1,2,3
EUR million, except where
indicated
		30.6.20	31.3.20 4	31.12.19 4	30.9.19	30.6.19
Available capital (amounts)
1	Common equity tier 1 (CET1)	3,013	3,043	3,028	3,528	3,543
2	Tier 1	3,303	3,333	3,318	3,818	3,833
3	Total capital	3,303	3,333	3,318	3,818	3,833
Risk-weighted assets
(amounts)
4	Total risk-weighted assets (RWA)	13,559	15,154	15,146	14,407	13,725
4a	Minimum capital requirement 5	1,085	1,212	1,212	1,153	1,098
Risk-based capital ratios as
a percentage of RWA
5	Common equity tier 1 ratio (%)	22.2	20.1	20.0	24.5	25.8
6	Tier 1 ratio (%)	24.4	22.0	21.9	26.5	27.9
7	Total capital ratio (%)	24.4	22.0	21.9	26.5	27.9
Additional CET1 buffer
requirements as a percentage of RWA
8	Capital conservation buffer requirement (2.5% from 2019) (%)	2.5	2.5	2.5	2.5	2.5
9	Countercyclical buffer requirement (%)	0.0	0.1	0.3	0.3	0.2
10	Bank G-SIB and/or D-SIB additional requirements (%)
11	Total of bank CET1-specific buffer requirements (%)	2.5	2.6	2.8	2.8	2.7
12	CET1 available after meeting the bank’s minimum capital
requirements (%) 6	16.4	14.0	14.0	18.5	19.9
Basel III leverage ratio 7
13	Total Basel III leverage ratio exposure measure	42,172	49,004	41,924	50,199	52,291
14	Basel III leverage ratio (%) 8	7.8	6.8	7.9	7.6	7.3
Liquidity coverage ratio 9
15	Total HQLA	15,540	14,839	14,393	14,309	14,367
16	Total net cash outflow 10	11,062	10,457	9,976	9,624	8,773
17	LCR (%) 10	141	142	147	151	165
1 Based on applicable EU Basel III rules. 2 As a
result of the cross-border merger of UBS Limited into UBS Europe SE effective
1 March 2019, UBS Europe SE became a significant regulated subsidiary of
UBS Group AG. The size, scope and business model of the merged entity is now
materially different. 3 There is no local disclosure requirement for
the net stable funding ratio as at 30 June 2020. 4 The
Management Board of UBS Europe SE has proposed a dividend for the 2019
financial year, which will be subject to approval at an Extraordinary General
Meeting in the fourth quarter of 2020. Comparative figures for 31 March
2020 and 31 December 2019 have been restated to align with the UBS Europe
SE Pillar 3 report and other regulatory reports as submitted to the European
Central Bank, which reflect this proposed dividend. 5 Calculated as
8% of total RWA, based on total capital minimum requirements, excluding CET1
buffer requirements. 6 This represents the CET1 ratio that is
available for meeting buffer requirements. It is calculated as the CET1 ratio
minus 4.5% and after considering, where applicable, CET1 capital that has
been used to meet tier 1 and/or total capital ratio requirements under Pillar
1. Comparative figures for 30 June 2019 have been adjusted to adhere to
this presentation. 7 The Total Basel III leverage ratio exposure measure
and the Basel III leverage ratio as of 30 June 2020 have been aligned with
the final information submitted to the European Central Bank and therefore
differ from the information reported for UBS Europe SE in the UBS Group AG
report for the second quarter of 2020 in the table “Financial and regulatory
key figures for our significant regulated subsidiaries and sub-groups.”
8 On the basis of tier 1 capital. 9 Figures as of 30 June
2020 and 31 March 2020 are based on a twelve-month average.
Comparative figures for 31 December 2019 are based on a ten-month
average, as of 30 September 2019 on a seven-month average and as of
30 June 2019 on a four-month average rather than a twelve-month average,
as data produced on the same basis is only available for the period since the
cross-border merger. 10 Revised calculation excludes inflows from
overdrafts that we cannot demand repayment of within 30 days. Comparative
figures and ratios for 30 September 2019 and 30 June 2019 have been
adjusted accordingly.

Section 5 UBS Americas Holding LLC consolidated

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

UBS Americas Holding LLC, as a designated category III bank under US rules, has been subject to a simplification of regulatory capital rules since 1 April 2020. The revisions simplify the framework for regulatory capital deductions and increase the risk weights for mortgage servicing assets, certain deferred tax assets arising from temporary differences and investments in the capital of unconsolidated financial institutions.

During the second quarter of 2020, common equity tier 1 (CET1) capital increased by USD 1.6 billion, predominantly due to the implementation of the Capital Simplification Rule. Risk-weighted assets (RWA) increased by USD 10.5 billion to USD 64.3 billion, mainly driven by higher risk weights under the Capital Simplification Rule. Leverage ratio exposure increased by USD 11.1 billion to USD 146.6 billion during the quarter, primarily driven by higher average assets as well as lower Tier 1 deductions as a result of the implementation of the Capital Simplification Rule.

Quarterly |

KM1: Key metrics 1,2,3
USD million, except where
indicated
		30.6.20 4	31.3.20	31.12.19	30.9.19	30.6.19
Available capital (amounts)
1	Common equity tier 1 (CET1)	13,567	11,975	11,939	11,868	12,900
2	Tier 1	16,610	15,024	14,987	14,923	15,055
3	Total capital	17,376	15,778	15,702	15,640	15,772
Risk-weighted assets
(amounts)
4	Total risk-weighted assets (RWA)	64,324	53,812	54,058	52,947	53,892
4a	Minimum capital requirement 5	5,146	4,305	4,325	4,236	4,311
Risk-based capital ratios as
a percentage of RWA
5	Common equity tier 1 ratio (%)	21.1	22.3	22.1	22.4	23.9
6	Tier 1 ratio (%)	25.8	27.9	27.7	28.2	27.9
7	Total capital ratio (%)	27.0	29.3	29.0	29.5	29.3
Additional CET1 buffer
requirements as a percentage of RWA
8	Capital conservation buffer requirement (2.5% from 2019) (%)	2.5	2.5	2.5	2.5	2.5
9	Countercyclical buffer requirement (%) 6
10	Bank G-SIB and/or D-SIB additional requirements (%) 7
11	Total of bank CET1-specific buffer requirements (%)	2.5	2.5	2.5	2.5	2.5
12	CET1 available after meeting the bank’s minimum capital
requirements (%) 8	16.6	17.8	17.6	17.9	19.4
Basel III leverage ratio
13	Total Basel III leverage ratio exposure measure	146,641	135,534	127,290	123,632	123,008
14	Basel III leverage ratio (%) 9	11.3	11.1	11.8	12.1	12.2
14a	Total Basel III supplementary leverage ratio exposure measure 10	147,672
14b	Basel III supplementary leverage ratio (%) 9,10	11.2
1 For UBS Americas Holding LLC based on applicable US Basel III
rules. 2 There is no local disclosure requirement for liquidity
coverage ratio or net stable funding ratio for UBS Americas Holding LLC as
of 30 June 2020. 3 The adoption of ASU 2019-12 in the
second quarter of 2020 resulted in a retrospective removal of cumulative tax
expense and related balances pertaining to UBS Americas Holding LLC within
the IHC tax group for financial reporting purposes. For the purpose of
regulatory reporting, we have applied this accounting change prospectively
and have not restated the corresponding comparative regulatory key
figures. 4 UBS Americas Holding LLC, as a designated category III
bank, has been subject to a simplification of regulatory capital rules since
1 April 2020. The revisions simplify the framework for regulatory
capital deductions and increase risk weights for mortgage servicing assets,
certain deferred tax assets arising from temporary differences, and
investments in the capital of unconsolidated financial institutions (below
the deduction threshold (25%), resulting in an impact of 0.3% on the CET1
ratio). 5 Calculated as 8% of total RWA, based on total capital
minimum requirements, excluding CET1 buffer requirements. 6 UBS Americas
Holding LLC is currently not subject to the countercyclical buffer
requirement. 7 Not applicable, as requirements have not been
proposed. 8 This represents the CET1 ratio that is available for
meeting buffer requirements. It is calculated as the CET1 ratio minus 4.5%
and after considering, where applicable, CET1 capital that has been used to
meet tier 1 and/or total capital ratio requirements. Figures as of
30 June 2019 have been adjusted to adhere to this presentation.
9 On the basis of tier 1 capital. 10 UBS Americas Holding
LLC, as a designated category III bank, has been subject to supplementary
leverage ratio (SLR) reporting since 1 April 2020. Temporary relief will
be provided by the Federal Reserve Board (the Federal Reserve), the Federal
Deposit Insurance Corporation (the FDIC) and the Office of the Comptroller of
the Currency (the OCC) through March 2021, allowing for the exclusion of US
Treasury securities and deposits at Federal Reserve Banks from the SLR
denominator. This exclusion resulted in an increase in SLR of 135 bps on
30 June 2020.

Significant regulated subsidiaries and sub-groups

Material sub-group entity – creditor ranking at legal entity level

Semiannual | The TLAC2 table below provides an overview of the creditor ranking structure of UBS Americas Holding LLC on a standalone basis.

As of 30 June 2020, UBS Americas Holding LLC had a total loss-absorbing capacity (TLAC) of USD 22,110 million after regulatory capital deductions and adjustments. This amount included Tier 1 capital of USD 16,610 million and USD 5,500 million of internal long-term debt that is eligible as internal TLAC issued to UBS AG, a wholly owned subsidiary of the UBS Group AG resolution entity. p

Semiannual |

| TLAC2 – Material sub-group
entity – creditor ranking at legal entity level — As of 30.6.20 | | Creditor ranking | | | | Total |
| --- | --- | --- | --- | --- | --- | --- |
| USD million | | 1 | 2 | 3 | 4 | |
| 1 | Is the resolution entity the creditor / investor? | No | No | No | No | |
| 2 | Description of creditor ranking | Common Equity (most junior) 1 | Preferred Shares (Additional tier 1) | Subordinated debt | Unsecured loans and other pari passu liabilities (most senior) | |
| 3 | Total capital and liabilities net of credit risk mitigation | 24,977 | 3,150 | 600 | 26,240 | 54,967 |
| 4 | Subset of row 3 that are excluded liabilities | | | | 521 | 521 |
| 5 | Total capital and liabilities less excluded liabilities (row 3
minus row 4) | 24,977 | 3,150 | 600 | 25,719 | 54,446 |
| 6 | Subset of row 5 that are eligible as TLAC | 24,977 | 3,150 | | 5,500 | 33,627 |
| 7 | Subset of row 6 with 1 year ≤ residual maturity < 2
years | | | | | |
| 8 | Subset of row 6 with 2 years ≤ residual maturity < 5
years | | | | 3,300 | 3,300 |
| 9 | Subset of row 6 with 5 years ≤ residual maturity < 10
years | | | | 2,200 | 2,200 |
| 10 | Subset of row 6 with residual maturity ≥ 10 years, but
excluded perpetual securities | | | | | |
| 11 | Subset of row 6 that is perpetual securities | 24,977 | 3,150 | | 0 | 28,127 |
| 1 Equity attributable to shareholders, which includes share
premium and reserves. | | | | | | |

Abbreviations frequently used in our financial reports

ABS asset-backed securities

AEI automatic exchange of information

AGM Annual General Meeting of shareholders

A-IRB advanced internal ratings-based

AIV alternative investment vehicle

ALCO Asset and Liability Committee

AMA advanced measurement approach

AML anti-money laundering

AoA Articles of Association

APAC Asia Pacific

APM alternative performance measure

ARR alternative reference rate

ARS auction rate securities

ASF available stable funding

AT1 additional tier 1

AuM assets under management

BCBS Basel Committee on Banking Supervision

BEAT base erosion and anti-abuse tax

BIS Bank for International Settlements

BoD Board of Directors

BVG Swiss occupational pension plan

CAO Capital Adequacy Ordinance

CCAR Comprehensive Capital Analysis and Review

CCF credit conversion factor

CCP central counterparty

CCR counterparty credit risk

CCRC Corporate Culture and Responsibility Committee

CCyB countercyclical buffer

CDO collateralized debt obligation

CDS credit default swap

CEA Commodity Exchange Act

CEM current exposure method

CEO Chief Executive Officer

CET1 common equity tier 1

CFO Chief Financial Officer

CFTC US Commodity Futures Trading Commission

CHF Swiss franc

CIC Corporate & Institutional Clients

CIO Chief Investment Office

CLS Continuous Linked Settlement

CMBS commercial mortgage-backed security

C&ORC Compliance & Operational Risk Control

CRD IV EU Capital Requirements Directive of 2013

CRM credit risk mitigation (credit risk) or comprehensive risk measure (market risk)

CRR Capital Requirements Regulation

CST combined stress test

CVA credit valuation adjustment

DBO defined benefit obligation

DCCP Deferred Contingent Capital Plan

DJSI Dow Jones Sustainability Indices

DM discount margin

DOJ US Department of Justice

D-SIB domestic systemically important bank

DTA deferred tax asset

DVA debit valuation adjustment

EAD exposure at default

EB Executive Board

EBA European Banking Authority

EC European Commission

ECB European Central Bank

ECL expected credit loss

EIR effective interest rate

EL expected loss

EMEA Europe, Middle East and Africa

EOP Equity Ownership Plan

EPE expected positive exposure

EPS earnings per share

ESG environmental, social and governance

ETD exchange-traded derivatives

ETF exchange-traded fund

EU European Union

EUR euro

EURIBOR Euro Interbank Offered Rate

EVE economic value of equity

EY Ernst & Young (Ltd)

FA financial advisor

FCA UK Financial Conduct Authority

FCT foreign currency translation

FINMA Swiss Financial Market Supervisory Authority

FMIA Swiss Financial Market Infrastructure Act

FSB Financial Stability Board

FTA Swiss Federal Tax Administration

FVA funding valuation adjustment

FVOCI fair value through other comprehensive income

FVTPL fair value through profit or loss

FX foreign exchange

GAAP generally accepted accounting principles

GBP pound sterling

GDP gross domestic product

GEB Group Executive Board

GIA Group Internal Audit

GIIPS Greece, Italy, Ireland, Portugal and Spain

GMD Group Managing Director

GRI Global Reporting Initiative

GSE government sponsored entities

G-SIB global systemically important bank

HQLA high-quality liquid assets

HR human resources

Abbreviations frequently used in our financial reports (continued)

IAA internal assessment approach

IAS International Accounting Standards

IASB International Accounting Standards Board

IBOR interbank offered rate

IFRIC International Financial Reporting Interpretations Committee

IFRS International Financial Reporting Standards

IHC intermediate holding company

IMA internal models approach

IMM internal model method

IRB internal ratings-based

IRC incremental risk charge

IRRBB interest rate risk in the banking book

ISDA International Swaps and Derivatives Association

KRT Key Risk Taker

LAS liquidity-adjusted stress

LCR liquidity coverage ratio

LGD loss given default

LIBOR London Interbank Offered Rate

LLC limited liability company

LRD leverage ratio denominator

LTIP Long-Term Incentive Plan

LTV loan-to-value

M&A mergers and acquisitions

MiFID II Markets in Financial Instruments Directive II

MRT Material Risk Taker

NAV net asset value

NCL Non-core and Legacy Portfolio

NII net interest income

NRV negative replacement value

NSFR net stable funding ratio

NYSE New York Stock Exchange

OCA own credit adjustment

OCI other comprehensive income

OTC over-the-counter

PD probability of default

PFE potential future exposure

PIT point in time

P&L profit or loss

POCI purchased or originated credit-impaired

PRA UK Prudential Regulation Authority

PRV positive replacement value

QCCP qualifying central counterparty

QRRE qualifying revolving retail exposures

RBA role-based allowances

RBC risk-based capital

RbM risk-based monitoring

RMBS residential mortgage-backed securities

RniV risks not in VaR

RoAE return on attributed equity

RoCET1 return on CET1 capital

RoTE return on tangible equity

RoU right-of-use

RV replacement value

RW risk weight

RWA risk-weighted assets

SA standardized approach

SA-CCR standardized approach for counterparty credit risk

SAR stock appreciation right or Special Administrative Region

SBC Swiss Bank Corporation

SDG Sustainable Development Goal

SE structured entity

SEC US Securities and Exchange Commission

SEEOP Senior Executive Equity Ownership Plan

SFT securities financing transaction

SI sustainable investing

SICR significant increase in credit risk

SIX SIX Swiss Exchange

SME small and medium-sized entity

SMF Senior Management Function

SNB Swiss National Bank

SPPI solely payments of principal and interest

SRB systemically relevant bank

SRM specific risk measure

SVaR stressed value-at-risk

TBTF too big to fail

TCJA US Tax Cuts and Jobs Act

TLAC total loss-absorbing capacity

TTC through-the-cycle

UBS RESI UBS Real Estate Securities Inc.

UoM units of measure

USD US dollar

VaR value-at-risk

VAT value added tax

WEKO Swiss Competition Commission

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

Cautionary Statement | This report and the information contained herein are provided solely for information purposes, and are not to be construed as solicitation of an offer to buy or sell any securities or other financial instruments in Switzerland, the United States or any other jurisdiction. No investment decision relating to securities of or relating to UBS Group AG, UBS AG or their affiliates should be made on the basis of this report. Refer to UBS’s Annual Report 2019, UBS’s second quarter 2020 report and UBS’s first quarter 2020 report on Forms 6K, available at www.ubs.com/investors , for additional information.

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

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

UBS Group AG

P.O. Box

CH-8098 Zurich

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/ Ella Campi _____

Name: Ella Campi

Title: Executive Director

UBS AG

By: _/s/ David Kelly_______

Name: David Kelly

Title: Managing Director

By: _/s/ Ella Campi _____

Name: Ella Campi

Title: Executive Director

Date: August 14, 2020

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