Annual Report 2024
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
☐
REGISTRATION
STATEMENT
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
☑
EXCHANGE ACT OF 1934
For the fiscal year ended
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
☐
SHELL COMPANY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number:
(Jurisdiction of Incorporation or Organization)
,
,
,
,
(Address of Principal Executive Offices)
UBS AG meets the conditions set forth in General Instruction (I)(1)(a)
and (b) of Form 10-K, as applied to annual
reports on Form 20-F,
and is therefore filing this Form 20-F with the reduced
disclosure format.
, New York
Telephone:
-
(Name, Telephone,
E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of
the Act:
Please see page 3.
Securities registered or to be registered pursuant to Section 12(g) of
the Act:
Please see page 3.
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:
Please see page 3.
Annual Report 2024
Indicate the number of outstanding shares of each of the issuer’s classes of capital
or common stock as of 31 December 2024:
UBS AG
Ordinary shares, par value USD 0.10 per share:
(none of which are treasury shares)
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.
Yes
☐
☑
If this report is an annual or transition report, indicate by check mark if the registrant is not required
to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes
☐
☑
Note — Checking the box above will not relieve any registrant required to
file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 from their obligations under those
Sections.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
☑
No
☐
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during
the preceding 12 months (or for such shorter period
that the registrant was required to submit such files).
☑
No
☐
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer
or an
emerging growth company.
See the definitions of “large accelerated filer”, “accelerated filer” and
“emerging growth company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
☑
☐
If an emerging growth company that prepares its financial statements
in accordance with U.S. GAAP,
indicate by check mark
if the registrant has elected not to use the extended transition period for
complying with any new or revised financial
accounting standards† provided pursuant to Section 13(a) of the Exchange
Act.
☐
† The term “new or revised financial accounting standard” refers to any update
issued by the Financial Accounting Standards
Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and
attestation to its management’s assessment of
the
effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared
or issued its audit report.
☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check
mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously
issued financial statements.
☐
Indicate by check mark whether any of those error corrections are restatements
that required a recovery analysis of incentive-
based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant
to
§240.10D-1(b).
☐
Indicate by check mark which basis of accounting the registrant has used
to prepare the financial statements included in this
filing.
U.S. GAAP
☐
Standards Board
☑
Other
☐
Annual Report 2024
If “Other” has been checked in response to the previous question, indicate by
check mark which financial statement item the
registrant has elected to follow.
Item 17
☐
Item 18
☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the
Exchange Act)
Yes
☐
☑
Securities registered or to be registered
pursuant to Section 12(b) of the Act:
Title of each class
Trading
symbol(s)
Name of each
exchange on
which registered
ETRACS Alerian MLP Index ETN Series B due July 18, 2042
AMUB
NYSE Arca
ETRACS Quarterly Pay 1.5x Leveraged MarketVector
BDC Liquid Index ETN due June 10,
2050
BDCX
NYSE Arca
ETRACS MarketVector
Business Development Companies Liquid Index ETN due April 26,
2041
BDCZ
NYSE Arca
ETRACS Monthly Pay 1.5x Leveraged Closed-End Fund Index
ETN due June 10, 2050
CEFD
NYSE Arca
ETRACS Monthly Pay 2xLeveraged US High Dividend Low Volatility
ETN Series B due
October 21, 2049
HDLB
NYSE Arca
ETRACS IFED Invest with the Fed TR Index ETN due September 15,
2061
IFED
NYSE Arca
ETRACS 2x Leveraged US Value
Factor TR ETN due February 9, 2051
IWDL
NYSE Arca
ETRACS 2x Leveraged US Growth Factor TR ETN due February 9, 2051
IWFL
NYSE Arca
ETRACS 2x Leveraged US Size Factor TR ETN due February 9, 2051
IWML
NYSE Arca
E-TRACS Alerian MLP Infrastructure Index Series B due April 2, 2040
MLPB
NYSE Arca
ETRACS Quarterly Pay 1.5x Leveraged Alerian MLP Index ETN due
June 10, 2050
MLPR
NYSE Arca
ETRACS 2x Leveraged MSCI US Momentum Factor TR ETN due February
9, 2051
MTUL
NYSE Arca
ETRACS Monthly Pay 1.5x Leveraged Mortgage REIT ETN due June 10, 2050
MVRL
NYSE Arca
ETRACS Monthly Pay 2xLeveraged Preferred Stock ETN due September
25, 2048
PFFL
NYSE Arca
ETRACS 2x Leveraged MSCI US Quality Factor TR ETN due February
9, 2051
QULL
NYSE Arca
ETRACS 2x Leveraged US Dividend Factor TR ETN due February 9, 2051
SCDL
NYSE Arca
ETRACS Monthly Pay 2xLeveraged US Small Cap High Dividend
ETN Series B due
November 10, 2048
SMHB
NYSE Arca
ETRACS CMCI Total Return
ETN Series B due April 5, 2038
UCIB
NYSE Arca
ETRACS 2x Leveraged MSCI US Minimum Volatility
Factor TR ETN due February 9, 2051
USML
NYSE Arca
ETRACS Gold Shares Covered Call ETN due February 2, 2033
GLDI
NASDAQ
ETRAC Silver Shares Covered Call ETN due April 21, 2033
SLVO
NASDAQ
ETRAC Crude Oil Shares Covered Call ETN due April 24, 2037
USOI
NASDAQ
Securities registered or to be registered
pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act:
None
Annual Report 2024
Cautionary Statement:
Refer to the
Cautionary Statement Regarding Forward
-Looking Statements
Report 2024
(page 271).
Cross-reference table
Set forth below are the respective items of SEC Form 20-F,
and the locations in this document where the corresponding
information can be found.
●
Annual Report
●
Supplement
refers to certain supplemental information contained in this forepart of
the Form 20-F,
starting on page 9
following the cross-reference table.
●
Financial Statements
refers to the consolidated financial statements of UBS AG, contained in the Annual
Report.
In the cross-reference table below,
page numbers refer either to the Annual Report or the Supplement, as noted.
Please see page 3 of the Annual Report for definitions of terms used in this Form
20-F relating to UBS.
Form 20-F item
Response or location in this filing
Item 1
.
Identity of Directors,
Senior Management and
Advisors.
Not applicable.
Item 2
.
Offer Statistics and
Expected Timetable.
Not applicable.
Item 3.
B – Capitalization and
Indebtedness.
Not applicable.
C – Reasons for the Offer and
Use of Proceeds.
Not applicable.
D – Risk Factors.
Annual Report,
(24-36).
Item 4
.
Information on the Company.
A
– History and Development
of the Company
Not required under the reduced disclosure format.
B – Business Overview.
Annual Report,
Our businesses
C – Organizational Structure.
Not required under the reduced disclosure format.
D – Property, Plant and
Equipment.
Annual Report,
Property, plant and
equipment
(257).
Information required by SEC
Regulation S-K Part 1400
Annual Report,
Information required
by Subpart 1400 of Regulation S-K
(258-263),
Loss
history statistics
(71-72), and Note 10 to the Financial Statements (
Financial assets at
amortized cost and other positions in scope of expected credit
loss measurement)
182).
Item 4A
.
Unresolved Staff
Comments.
None.
Item 5
.
Operating and Financial Review and Prospects.
A
– Operating Results.
Annual Report,
Financial and operating performance
Statements (
Summary of material accounting policies
) (150-166).
B – Liquidity and Capital
Resources.
Not required under the reduced disclosure format.
C—Research and Development,
Patents and Licenses, etc.
Not required under the reduced disclosure format.
D—Trend Information.
Not required under the reduced disclosure format.
E—Critical Accounting
Estimates
Not applicable.
Item 6.
A
– Directors and Senior
Management.
Not required under the reduced disclosure format.
B – Compensation.
Not required under the reduced disclosure format.
C – Board practices.
1: Annual Report,
Board of Directors
(112-121). The term of office
for members of the
Board of Directors and its Chairman expires after completion of the next
Annual General
Meeting.
2: Annual Report,
Change of control and defense measures
Financial Statements (
Related parties
) (246-248).
3: Annual Report,
Audit Committee
Compensation Committee
(120), and
Auditors
(131-133).
Annual Report 2024
D—Employees.
Not required under the reduced disclosure format.
E—Share Ownership.
Not required under the reduced disclosure format.
F—Disclosure of a registrant’s
action to recover erroneously
awarded compensation.
Not applicable.
Item 7.
A—Major Shareholders.
Not required under the reduced disclosure format.
B—Related Party Transactions.
Not required under the reduced disclosure format.
C—Interests of Experts and
Counsel.
Not applicable.
Item 8
.
Financial Information.
A—Consolidated Statements
and Other Financial Information.
1, 2, 3, 4: Please see Item 18 of this Form 20-F.
5: Not applicable.
6: Annual Report,
Our businesses
Financial and operating performance
and Note 3b to the Financial Statements (
Segment reporting by geographic location
)
(172)
7: Annual Report, Note 18 to the Financial Statements (
Provisions and contingent
liabilities
) (189-196).
For developments during the year, please see also the
note
Provisions and contingent
liabilities
reports for the First, Second and Third Quarters 2024, filed on Forms 6-K
dated May 7,
2024, August 23, 2024 and November 8, 2024, respectively.
The disclosures in each such
Quarterly Report speak only as of their respective dates.
8: Annual Report,
(111).
B—Significant Changes.
None.
Item 9
.
The Offer and Listing.
A
– Offer and Listing Details.
Not applicable.
B—Plan of Distribution.
Not applicable.
C—Markets.
Cover page (3). UBS AG shares are not listed.
D—Selling Shareholders.
Not applicable.
E—Dilution.
Not applicable.
F—Expenses of the Issue.
Not applicable.
Item 10
.
Additional Information.
A—Share Capital.
Not applicable.
B—Memorandum and Articles
of Association.
1: Supplement (10-13).
2: Supplement (10-13).
3: Annual Report,
Share
capital structure
(110-111),
Shareholders' participation rights
(111), and
Elections and terms of office
4: Supplement (10-13).
5: Supplement (10-13).
6: Annual report,
Share
capital structure
(110-111), and
Shareholders’ participation
rights
7: Annual Report,
Change of control and defense measures
8: There is no requirement for UBS AG shareholders to disclose ownership,
as UBS AG
shares are not listed.
9: Supplement (10-13) and Annual Report,
Share
capital structure
(110-111),
Shareholders' participation rights
Elections and terms of office
Change of
control and defense measures
10: Supplement (10-13).
Annual Report 2024
C—Material Contracts.
UBS AG entered into a definitive merger agreement with Credit
Suisse AG on 7
December 2023, which was filed as Exhibit 4.3 to UBS AG's Annual Report on
Form 20-
F for the fiscal year ended December 31, 2023. Also, UBS Switzerland AG and Credit
Suisse (Schweiz) AG entered into a merger agreement
on 9 February 2024, which was
filed as Exhibit 4.4 to UBS AG's Annual Report on Form 20-F for the fiscal year
ended
December 31, 2023. The mergers described in these agreements were
carried out with
some procedural simplifications and without any consideration given that
both companies
were, at the time of merger, wholly-owned
by the same parent entity. Upon completion
on 31 May 2024 for UBS AG and on 1 July 2024 for UBS Switzerland AG, all assets and
liabilities of Credit Suisse AG and Credit Suisse (Schweiz) AG, respectively,
were
transferred automatically to UBS AG and UBS Switzerland AG, respectively.
For further
information, please see
Integration of Credit Suisse
on page 4 of the Annual Report.
The Asset Transfer Agreement by which
certain assets and liabilities of UBS AG were
transferred to UBS Switzerland AG is filed as Exhibit 4.1, and is described
in Note 34 to
the Financial Statements (
Supplemental Guarantor Information
) on page 252 of the
Annual Report.
D—Exchange Controls.
Other than in relation to economic sanctions, there are no restrictions under
the Articles
of Association of UBS AG, nor under Swiss law,
as presently in force, that limit the right
of non-resident or foreign owners to hold UBS’s
securities freely. There
are currently no
Swiss foreign exchange controls or other Swiss laws restricting the import
or export of
capital by UBS or its subsidiaries, nor restrictions affecting the remittance
of dividends,
interest or other payments to non-resident holders of UBS securities. The
Swiss federal
government may impose sanctions on particular countries, regimes, organizations
or
persons which may create restrictions on exchange of control. A current
list, in German,
French and Italian, of such sanctions can be found at www.seco
-admin.ch. UBS may also
be subject to sanctions regulations from other jurisdictions where it operates
imposing
further restrictions.
E—Taxation.
UBS AG has no shareholders other than UBS Group AG, which is a Swiss company
.
F—Dividends and Paying
Agents.
Not applicable.
G—Statement by Experts.
Not applicable.
H—Documents on Display.
UBS files periodic reports and other information with the Securities and Exchange
Commission. You
may read and copy any document that we file with the SEC on the
SEC’s website,
www.sec.gov
. Much of this information may also be found on the UBS
website at
www.ubs.com/investors
.
I—Subsidiary Information.
Not applicable.
J—Annual Report to Security
Holders
Not applicable
Item 11
.
Quantitative and Qualitative Disclosures About Market Risk.
(a) Quantitative Information
About Market Risk.
Annual Report,
Market risk
(72-80),
Total
loss-absorbing capacity
(92-95) and
Currency
Management
(108).
(b) Qualitative Information
About Market Risk.
Annual Report,
Market risk
(72-80),
Total
loss-absorbing capacity
(92-95) and
Currency
Management
(108).
(c) Interim Periods.
Not applicable.
Item 12.
A
– Debt Securities
Not applicable.
B – Warrants and
Rights
Not applicable.
C – Other Securities
Not applicable.
D – American Depositary Shares
Not applicable.
Item 13
.
Defaults, Dividend
Arrearages and Delinquencies.
There has been no material default in respect of any indebtedness of UBS or any of
its
significant subsidiaries or any arrearages of dividends or any other material delinquency
not cured within 30 days relating to any preferred stock of UBS AG or any of its
significant subsidiaries.
Item 14.
to the Rights of Security Holders
and Use of Proceeds.
None.
Item 15.
(a)
Disclosure Controls and
Procedures
Annual Report,
US disclosure requirements
(133), and
Exhibit 12 to this Form 20-
F.
Annual Report 2024
(b) Management’s Annual
Report on Internal Control over
Financial Reporting
Annual Report,
Management’s
report on internal control
over financial reporting
(c) Attestation Report of the
Registered Public Accounting
Firm
Annual Report,
Report of Independent Registered Public Accounting Firm
(136-141).
(d) Changes in Internal Control
over Financial Reporting
None.
Item 16A.
Audit Committee
Financial Expert.
Not required under the reduced disclosure format.
Item 16B.
Code of Ethics.
Not required under the reduced disclosure format.
Item 16C.
Principal Accountant
Fees and Services.
Annual Report,
Auditors
None of the non-audit services so disclosed were approved by the Audit Committee
pursuant to paragraph (c) (7)(i)(C) of Rule 2-01 of Regulation S-X.
Item 16D.
Listing Standards for Audit
Committees.
Not applicable.
Item 16E.
Purchases of Equity
Securities by the Issuer and
Affiliated Purchasers.
UBS AG does not have any class of equity securities registered pursuant
to Section 12 of
the Exchange Act.
Item 16F.
Changes in
Registrant’s Certifying
Accountant.
Not applicable.
Item 16G.
Corporate
Governance.
UBS AG has debt securities listed on the New York
Stock Exchange (NYSE), and
therefore discloses below the key differences from its corporate governance
practices to
the NYSE standards relevant to US-listed companies.
Responsibility of the Audit Committee regarding independent auditors
Our Audit Committee is responsible for the compensation, retention and oversight
of
independent auditors. It assesses the performance and qualifications of
external auditors
and submits proposals for appointment, reappointment or removal of independent
auditors to the BoD. As required by the Swiss Code of Obligations, the BoD submits
its
proposals for a shareholder vote at the annual general meeting (AGM). Under
NYSE
standards audit committees are responsible for appointing independent auditors.
Discussion of risk assessment and risk management policies by the
Risk Committee
As per the Organization Regulations of UBS AG, the Risk Committee,
instead of the
Audit Committee, as per NYSE standards, oversees our risk principles and
risk capacity
on behalf of the BoD. The Risk Committee is responsible for monitoring our
adherence
to those risk principles and monitoring whether business divisions and
control units
maintain appropriate systems of risk management and control.
Supervision of the internal audit function
Although under NYSE standards only audit committees supervise internal
audit
functions, the Chairman of the BoD (the Chairman) and the Audit Committee
share the
supervisory responsibility and authority with respect to the internal
audit function.
Responsibility of the Compensation Committee for performance
evaluations of senior
management of UBS Group AG
In line with Swiss law, UBS Group
AG’s Compensation Committee, together
with its
BoD, proposes for shareholder approval at the UBS Group AG AGM the maximum
aggregate amount of compensation for the BoD, the maximum aggregate amount
of fixed
compensation for the Group Executive Board (the GEB) and the aggregate
amount of
variable compensation for the GEB. As UBS AG’s
BoD members are the same as the
UBS Group AG BoD members, this approval by group shareholders is also applicable
for
UBS AG. The members of the Compensation Committee are elected by
the AGM. Under
NYSE standards it is the responsibility of compensation committees to evaluate
senior
management’s performance
and to determine and approve, as a committee or together
with the other independent directors, the compensation thereof.
Proxy statement reports of the Audit Committee and the Compensation Committee
NYSE standards require the aforementioned committees to submit their reports
directly to
shareholders. However, under Swiss law all reports
to shareholders, including those from
Annual Report 2024
the aforementioned committees, are provided to and approved by the BoD, which
has
ultimate responsibility to the shareholders.
Shareholder votes on equity compensation plans
NYSE standards require shareholder approval for establishing all equity
compensation
plans and material revisions thereto. However,
as per Swiss law, the BoD approves
compensation plans. Shareholder approval is only mandatory if
equity-based
compensation plans require an increase in capital. No shareholder approval
is required if
shares for such plans are purchased in the market.
Item 16H.
Mine Safety
Disclosure.
Not applicable.
Item 16I.
Disclosure Regarding
Foreign Jurisdictions that
Prevent Inspections
Not applicable.
Item 16J.
Insider trading
policies
UBS has
dispositions of its securities by its employees and senior management,
implementing
procedures designed to promote compliance with relevant insider trading
rules and
regulations:
UBS Group Global Policy on Personal Investment
,
UBS Group Pre-
Clearance and Disclosure Requirements
for Group Senior Management
, and
UBS Group
Dealing in UBS Shares and UBS Long Term
Debt Securities by UBS
. These are filed as
Exhibits 11.1, 11.2
and 11.3 hereto.
Item 16K.
Cybersecurity.
Annual Report,
Operational risks affect our business
Risk management and
control
Cybersecurity governance
Item 17.
Financial Statements.
Not applicable.
Item 18.
Annual Report,
Financial statements
(134-254), and
Additional regulatory information
(255-263).
Item 19.
Exhibits
Supplement (14).
Annual Report 2024
Supplemental information
Disclosure Pursuant To
Section 219 of the Iran Threat Reduction And Syrian
Human Rights Act
Section 219 of the US Iran Threat Reduction and Syria Human Rights Act of
2012 (“ITRA”) added Section 13(r) to the US
Securities Exchange Act of 1934, as amended (the “Exchange Act”) requiring
each SEC reporting issuer to disclose in its
annual and, if applicable, quarterly reports whether it or any of its affiliates
have knowingly engaged in certain activities,
transactions or dealings relating to Iran or with the Government of Iran
or certain designated natural persons or entities
involved in terrorism or the proliferation of weapons of mass destruction during
the period covered by the report. The required
disclosure may include reporting of activities not prohibited by US or other
law, even if conducted outside the
US by non-US
affiliates in compliance with local law.
Pursuant to Section 13(r) of the Exchange Act, we note the following for
the period
covered by this annual report:
UBS has a Group Sanctions Policy that prohibits transactions involving
sanctioned countries, including Iran, and sanctioned
individuals and entities. However, UBS Switzerland
AG maintains one account involving the Iranian government under
the
auspices of the United Nations in Geneva after agreeing with the Swiss government
that it would do so only under certain
conditions. These conditions include that payments involving the account
must: (1) be made within Switzerland; (2) be
consistent with paying rent, salaries, telephone and other expenses necessary for
its operations in Geneva; and (3) not involve
any Specially Designated Nationals (SDNs) blocked or otherwise restricted under
US or Swiss law. The corrected gross
revenues for this UN-related account in 2023 were approximately USD 79,646
(CHF 67,022) and in 2022 approximately USD
24,540 (CHF 22,702).
In 2024, the gross revenues for this UN-related account were approximately USD 87,553
(CHF 79,481).
We do not
allocate expenses to specific client accounts in a way that enables us to calculate net profits
with respect to any
individual account. UBS AG intends to continue maintaining this account pursuant
to the conditions it has established with the
Swiss Government and consistent with its Group Sanctions Policy.
As previously reported, UBS had certain outstanding legacy trade finance arrangements
issued on behalf of Swiss client
exporters in favor of their Iranian counterparties. In February 2012 UBS ceased accepting
payments on these outstanding
export trade finance arrangements and worked with the Swiss government
who insured these contracts (Swiss Export Risk
Insurance "SERV").
On December 21, 2012, UBS and the SERV
entered into certain Transfer and Assignment
Agreements
under which SERV
purchased all of UBS's remaining receivables under or in connection with
Iran-related export finance
transactions. Hence, the SERV
is the sole beneficiary of said receivables. There was no financial activity
involving Iran in
connection with these trade finance arrangements in 2024, and no gross revenue
or net profit.
In connection with these trade finance arrangements, UBS Switzerland AG has maintained
one existing account relationship
with an Iranian bank. This account was established prior to the US designation
of this bank and maintained due to the existing
trade finance arrangements.
In 2007, following the designation of the bank pursuant to sanctions issued by the US,
UN and
Switzerland, the account was blocked under Swiss law and remained
subject to blocking requirements until January 2016.
Client assets as of 31 December 2024 were CHF 3,097.40. Gross revenues were
USD 15 equivalent (CHF14).
In addition to the above, during 2024, up until the merger with UBS AG, Credit Suisse
AG processed a small number of de
minimis payments related to the operation of Iranian diplomatic missions in Switzerland
and related to fees for ministerial
government functions such as issuing passports and visas. After the merger,
UBS continued to process these payments
originally associated with Credit Suisse. Processing these payments is permitted
under Swiss law. Revenues and profits
from
these activities are not calculated but would be negligible.
Annual Report 2024
Item 10.
Additional Information.
B—Memorandum and Articles of Association.
Please see the Articles of Association of UBS AG (Exhibit 1.1 to this Form
20-F) and the Organization Regulations of UBS
AG (Exhibit 1.2 to this Form 20-F).
Set forth below is a summary of the material provisions of the Articles of Association
of UBS AG (the “Articles”),
Organization Regulations of UBS AG (the “Organization
Regulations”) and relevant Swiss laws, in particular the Swiss Code
of Obligations, relating to the ordinary shares of UBS AG (the “shares”).
This description does not purport to be complete and
is qualified in its entirety by references to Swiss law,
including Swiss company law,
and to the Articles and Organization
Regulations.
The principal legislation under which UBS AG operates, and under which the shares are
issued, is the Swiss Code of
Obligations.
Shares and Shareholders
Shares
The shares are registered shares
(Namenaktien)
securities (
einfache Wertrechte
) (in the sense of the Swiss Code of Obligations).
The shares are fully paid up, and there is no
liability of shareholders to further capital calls by UBS AG. The shares rank
pari passu
including voting rights, entitlement to dividends, share of the liquidation
proceeds in case of the liquidation of UBS AG,
preemptive rights in the event of a share issue (
Bezugsrechte
) and advance subscription rights in the event of the issuance of
equity-linked securities (
Vorwegzeichnungsrechte
).
Share Register
Swiss law distinguishes between registration with and without voting
rights. Shareholders must be registered in our share
register as shareholders with voting rights in order to vote (and assert or exercise
other rights relating to voting rights)and
participate in shareholders’ meetings.
Swiss law and the Articles require UBS AG to keep a share register in which the names,
addresses and nationality (or
registered office in the case of legal entities) of the owners of the
shares are recorded. The main function of the share register is
to register shareholders entitled to vote (and assert or exercise other rights relating
to voting rights)and participate in
shareholders’ meetings.
A shareholder will be registered in our share register with voting rights upon disclosure
of its name, address and nationality (or
registered office in the case of legal entities). However,
we may decline a registration with voting rights if the shareholder does
not declare that it has acquired the shares in its own name and for its own account. If the shareholder
refuses to make such
declaration, it will be registered in our share register as a shareholder without
voting rights.
In order to register shares in our share register,
a shareholder must file a share registration form with the share register.
Failing
such registration, a shareholder may not vote at or participate in shareholders’
meetings, but will be entitled to receive
dividends and other rights with financial value, such as preemptive rights in the event of
a share issue (
Bezugsrechte
) and
advance subscription rights in the event of the issuance of equity-linked
securities (
Vorwegzeichnungsrechte
), and its share of
liquidation proceeds. Shareholders registered in our share register may at
any time request from us a confirmation of the shares
that they hold according to our share register.
Shareholders’ Meetings
A shareholders’ meeting is convened by the Board of Directors (the “BoD”) or,
if necessary, by the company’s
statutory
auditors upon notification of the shareholders at least 20 days prior to such meeting.
An invitation to any shareholders’ meeting
will be sent to all registered shareholders. The Articles do not require a minimum number
of shareholders to be present in order
to hold a shareholders’ meeting.
Unless otherwise provided by Swiss law or the Articles (as indicated below),
resolutions require the approval of a majority of
the votes represented, excluding blank and invalid ballots, at a shareholders’
meeting in order to be passed.
Annual Report 2024
Under Swiss corporate law (or Swiss banking law,
as the case may be), a resolution passed at a shareholders’ meeting with the
approval of at least a two-thirds of the votes, and a majority of the aggregate
nominal value of shares, in each case represented
at such meeting is required in order to approve:
●
A change in the corporation’s stated purpose
in its articles of association;
●
The consolidation of shares, unless the consent of all the shareholders concerned
is required;
●
The restriction or exclusion of preemptive rights in the event of a share
issue (
Bezugsrechte
);
●
The conversion of participation certificates into shares;
●
The introduction of shares with preferential voting rights;
●
Any restriction on the transferability of registered shares;
●
Any change in the currency of the share capital;
●
The introduction of a casting vote for the person chairing the shareholders’
meeting;
●
A provision of the articles of association on holding the shareholders’ meeting abroad;
●
The delisting of the equity securities of the corporation;
●
The creation of conditional capital, the introduction of a capital band or,
in accordance with Swiss banking law,
the
introduction of reserve capital;
●
An increase in share capital in consideration of contributions in kind,
or by off-set of a claim, or involving the
granting of special privileges, or from the transformation of reserves into share
capital;
●
A change of domicile of the corporation;
●
The introduction of an arbitration clause in the articles of association;
●
Dispensing with the designation of an independent voting representative for
conducting a virtual shareholders’
meeting in the case of corporations whose shares are not listed on a stock exchange
(e.g., UBS AG); or
●
Dissolution of the corporation.
Under the Articles, a resolution passed at a shareholders’ meeting with the
approval of at least two-thirds of the votes
represented at such meeting is required in order to approve:
●
A change to the provisions in the Articles regarding the number of members of
the BoD;
●
Removal of one-quarter or more of the members of the BoD; or
●
The deletion or modification of the provision of the Articles establishing these
supermajority requirements.
At shareholders’ meetings, a shareholder can be represented by a legal
representative or under a written power of attorney by a
proxy who does not need to be a shareholder or,
under a written or electronic power of attorney,
by the independent proxy.
Net Profits and Dividends
Swiss law requires that at least 5% of the annual net profits of a corporation must
be retained and booked as statutory retained
earnings until these retained earnings equal, together with the corporation’s
statutory capital reserve, no less than 50% of the
corporation’s share capital registered
in the commercial register. Any remaining
net profit of the corporation may be allocated,
subject to the provisions of the Swiss Code of Obligations and of the Federal
Banking Act, by the shareholders represented at
the applicable shareholders’ meeting.
Under Swiss law, dividends
may be paid by a corporation only if, based on its audited standalone statements prepared
in
accordance with Swiss law, the
corporation has sufficient distributable profits from the previous
financial years or if the
reserves of the corporation are sufficient to allow distribution
of a dividend. In either event, dividends may be paid by the
corporation only after approval by the shareholders’ meeting. The BoD may
propose to the shareholders that a dividend be
paid, but cannot itself set the dividend. The corporation’s
statutory auditors must confirm that any dividend proposal of the
BoD is in accordance with Swiss law and the corporation’s
articles of association.
Dividends are usually due and payable after the shareholders’ resolution relating
to the allocation of profits has been passed.
Under Swiss law, the statute of
limitations in respect of dividend payments is five years.
Preemptive and Advance Subscription Rights
Under Swiss law, any share
issue, whether for cash or non-cash consideration or for no consideration,
is subject to the prior
approval of the shareholders’ meeting. Existing shareholders of a Swiss corporation
have certain preemptive rights in the event
of a share issue (
Bezugsrechte
) and advance subscription rights in the event of the issuance of equity-linked
securities
(
Vorwegzeichnungsrechte
) to subscribe for the new shares or equity-linked securities, as the case may be, in
proportion to the
nominal amount of shares held. However,
the articles of association of the corporation or a resolution approved at a
shareholders’ meeting by at least two-thirds of the votes and a majority
of the aggregate nominal value of the shares, in each
case represented at the meeting, may limit or exclude such preemptive or advance
subscription rights in certain limited
circumstances.
Annual Report 2024
Notices
Notices to the shareholders may,
at the choice of the BoD, be validly given by publication in the Swiss Official Gazette of
Commerce or in a form that allows proof by text. The BoD may designate further means
of publication as well.
Board of Directors
Borrowing Power
Neither Swiss law nor the Articles restrict in any way our power to borrow and raise
funds, provided that any such borrowing
is entered into on arms’ length terms.
Listed companies, such as UBS Group AG, may grant loans to members of their
BoD based on their articles of association.
UBS Group AG’s articles of association
restrict its ability to grant loans to members of its BoD as follows: First, loans to
the
independent members of the BoD shall be made in accordance with the customary
business and market conditions. Second,
loans to the non-independent members of the BoD shall be made in the ordinary
course of business on substantially the same
terms as those granted to UBS employees. Third, the total amount of such
loans shall not exceed CHF 20m per member. As
all
the members of UBS AG’s BoD are
part of UBS Group AG’s BoD, these restrictions
are enforced with respect to the UBS
AG’s BoD members even though
this provision of Swiss law is not applicable to UBS AG.
BoD Compensation
The BoD is ultimately responsible for approving the compensation strategy
and principles proposed by the Compensation
Committee, which determines compensation-related matters in line with the
principles set forth in the Articles. As determined
in the Articles and the Organization Regulations, the Compensation
Committee supports the BoD with its duties to set
guidelines on compensation and benefits, to oversee implementation thereof,
to approve certain compensation, such as the total
compensation for the Chairman and the non-independent BoD members,
and, upon proposal of the Chairman, proposes the
remuneration / fee framework for independent BoD members for approval by
the BoD.
All the members of the BoD of UBS AG are part of the UBS Group AG BoD. For
UBS Group AG, the Compensation
Committee supports the BoD with its duties to set guidelines on compensation
and benefits, to oversee implementation thereof,
to approve certain compensation and to scrutinize executive performance.
Annually, and on behalf of the Group
BoD, the
Compensation Committee of UBS Group AG (among other things):
●
approves the total compensation for the Chairman and the non-independent
BoD members;
●
proposes the remuneration / fee framework for independent BoD members
for approval by the BoD;
●
upon proposal of the Chairman and Group CEO, approves the remuneration
/ fee frameworks for external supervisory
board members of significant Group entities;
●
proposes to the BoD, for approval by the annual general meeting, the
maximum aggregate amounts of BoD
compensation and GEB fixed compensation and the aggregate amount of variable
compensation for the GEB.
For the Chairman and Vice
Chairman, fees are paid 50% in cash and 50% in shares, which are blocked for four years.
Other
members of the UBS Group AG BoD receive at a minimum 50% of their fees in UBS Group
AG shares, which are blocked for
four years, and they may elect to receive up to 100% of their fees to purchase blocked
UBS shares. The number of shares is
calculated based on the average closing price of the 10 trading days leading up to
and including the grant date.
Conflicts of Interests
Swiss law requires directors and members of senior management to inform
the BoD immediately and comprehensively of any
conflicts of interest affecting them. The BoD then has to take the measures
required to safeguard the interests of the
corporation. Directors and officers are personally liable
to the corporation for any breach of these provisions. In addition,
Swiss law contains a provision under which payments made to a shareholder,
a director, a person involved in the corporation's
management activities and a member of the advisory board or any person associated
therewith, other than at arm’s length,
must
be repaid to the corporation if they were unduly taken.
In addition, the Organization Regulations provide that
the member of the BoD or senior management with a conflict of interest
shall participate in discussions and a double vote (meaning a vote with and a vote without
the conflicted individual) shall take
place. A binding decision on the matter requires the same outcome in both
votes. This is subject to exceptional circumstances
in which the best interests of UBS dictate that the member of the BoD or senior
management with a conflict of interest shall
not participate in the discussions and decision-making involving the
interest at stake.
Retirement of Board Members
There is no age-limit requirement for retirement of the members of the BoD. The term
of office for each BoD member is until
the next annual general meeting of shareholders, and no BoD member may serve
for more than 10 consecutive terms of office.
In exceptional circumstances the BoD can extend this limit.
Annual Report 2024
The Company
Repurchase of Shares
Swiss law limits a corporation’s ability
to hold or repurchase its own shares. We
and our subsidiaries may repurchase shares
only if and to the extent that (i) we have freely distributable reserves in the amount of the purchase
price and (ii) the aggregate
nominal value of all shares held by us and our subsidiaries does not exceed
10% of our nominal share capital (or 20% of our
nominal share capital in specific circumstances). Repurchases for cancellation
purposes approved by the shareholders’ meeting
are not subject to the 10% threshold for own shares within the meaning of
article 659 paragraph 2 of the Swiss Code of
Obligations. We
must create a special reserve in our standalone financial statements prepared
in accordance with Swiss law in
the amount of the purchase price of any repurchased shares. Furthermore,
in our consolidated financial statements, own shares
are recorded at cost and reported as treasury shares, resulting in a reduction
in total shareholders’ equity.
Shares held by us or
any of our subsidiaries do not carry any rights to vote at shareholders’ meetings.
Sinking Fund Provisions
There are no provisions in Swiss law or in the Articles requiring us to put resources aside for
the exclusive purpose of
redeeming bonds or repurchasing shares.
Registration and Business Purpose
UBS AG was incorporated and registered as a corporation limited by shares (
Aktiengesellschaft
) under the laws of Switzerland.
It is entered into the commercial registers of Canton Zurich and Canton
Basel-City on February 28, 1978 under the registration
number CHE-101.329.561 and has registered domiciles in Zurich and
Basel, Switzerland. The business purpose of UBS AG,
as set forth in article 2 of the Articles, is the operation of a bank, with a scope of operations extending
to all types of banking,
financial, advisory,
trading and service activities in Switzerland and abroad.
UBS AG may establish branches and
representative offices as well as banks, finance companies and
other enterprises of any kind in Switzerland and abroad, hold
equity interests in these companies, and conduct their management.
UBS AG is authorized to acquire, mortgage and sell real
estate and building rights in Switzerland and abroad. UBS AG may borrow and invest
money on the capital markets. UBS AG
is part of the group of companies controlled by the group parent company
UBS Group AG. It may promote the interests of the
group parent company or other group companies. It may provide loans, guarantees
and other kinds of financing and security
for group companies. UBS AG is a wholly owned subsidiary of UBS Group
AG.
Duration and Liquidation
UBS AG has an unlimited duration.
Under Swiss law, we may be dissolved
at any time by way of liquidation or in the case of a merger in accordance
with the
Swiss Federal Act on Merger, Demerger,
Transformation of Assets of October 3, 2003, as amended,
based on a resolution
passed at a shareholders’ meeting with the approval of at least two-thirds
of the votes, and a majority of the aggregate nominal
value of shares, in each case represented at such meeting. As UBS AG is a Swiss bank, the
Swiss Financial Market
Supervisory Authority FINMA is the only competent authority to open restructuring
or liquidation (bankruptcy) proceedings
with respect to UBS AG.
Under Swiss law, any surplus arising
out of a liquidation (after the settlement of all claims of all creditors) must be used
first to
repay the nominal share capital of UBS AG. Thereafter,
any balance must be distributed to shareholders in proportion to the
paid-up nominal value of shares held.
Other
, Aeschengraben 27, 4051
, PCAOB number
, have been appointed as statutory
auditors and as auditors of the consolidated accounts of UBS AG. The auditors
are subject to election each year by the
shareholders at the annual general meeting.
Annual Report 2024
Item 19.
Exhibits.
Exhibit
number
Description
1.1
. (Incorporated by reference to Form 6-K of UBS AG filed
on May 13, 2024)
1.2
2(b)
Instruments defining the rights of the holders of long-term debt issued by
UBS Group AG and its subsidiaries.
We agree to furnish
to the SEC upon request, copies of the instruments, including indentures, defining
the rights of
the holders of our long-term debt and of our subsidiaries’ long-term debt.
2(d)
4.1
(Incorporated by
reference to Form 6-K of UBS AG filed on June 17, 2015)
11.1
11.2
11.3
12
13
15
17
97
(Incorporated by reference to Exhibit 97 to UBS's Annual
Report on Form 20-F for the fiscal year ended December 31, 2023)
101
Interactive Data Files (sections of the Annual Report formatted in inline XBRL (Extensible
Business Reporting
Language)). Furnished electronically herewith.
Annual Report 2024
SIGNATURES
The registrant hereby certifies that it meets
all of the requirements for filing on Form 20-F and that
it has duly
caused the undersigned to sign this annual report
on its behalf.
UBS AG
_/s/
Sergio Ermotti _______________
Name:
Sergio Ermotti
Title:
President of the Executive Board
Name:
Todd Tuckner
Title:
Chief Financial Officer
Name:
Steffen Henrich
Title:
Controller
Date: March 17, 2025
Contents
2
1
Our business model and environment
4
6
14
15
20
24
2
Financial and
operating performance
37
38
44
45
47
48
50
50
3
Risk, capital, liquidity and funding,
and balance sheet
52
88
4
Corporate governance
109
5
Financial
statements
134
253
6
Additional
regulatory information
256
A
Appendix
264
268
270
271
Corporate information
UBS AG
Art. 620ff. of the Swiss Code of Obligations as
an Aktiengesellschaft, a
corporation limited by shares. The addresses and telephone
numbers of the
two registered offices of UBS AG are: Bahnhofstrasse 45, CH-8001
Zurich,
Switzerland, telephone +41-44-234 11 11;
and Aeschenvorstadt 1, CH-4051
Basel, Switzerland, telephone +41-61-288
50 50. The corporate identification
number is CHE-101.329.561. UBS AG is
a bank. The company was formed on
29 June 1998, when Union Bank of Switzerland
(founded in 1862) and
Swiss Bank Corporation (founded in 1872)
merged to form UBS AG.
Contacts
Switchboards
For all general inquiries
ubs.com/contact
Zurich +41-44-234 1111
London +44-207-567 8000
New York +1-212-821 3000
Hong Kong SAR +852-2971 8888
Singapore +65-6495 8000
Investor Relations
UBS’s Investor Relations team manages
relationships with institutional investors,
research analysts and credit rating agencies.
ubs.com/investors
Zurich +41-44-234 4100
New York +1-212-882 5734
Media Relations
UBS’s Media Relations team manages
relationships with global media and
journalists.
ubs.com/media
Zurich +41-44-234 8500
mediarelations@ubs.com
London +44-20-7567 4714
ubs-media-relations@ubs.com
New York +1-212-882 5858
mediarelations@ubs.com
Hong Kong SAR +852-2971 8200
sh-mediarelations-ap@ubs.com
Office of the Group Company Secretary
The Group Company Secretary handles
inquiries directed to the Chairman or to other
members of the Board of Directors.
UBS Group AG, Office of the
Group Company Secretary
PO Box, CH-8098 Zurich, Switzerland
sh-company-secretary@ubs.com
Zurich +41-44-235 6652
Shareholder Services
UBS’s Shareholder Services team, a unit
of the Group Company Secretary’s office,
manages relationships with shareholders
and the registration of UBS Group AG
registered shares.
UBS Group AG, Shareholder Services
PO Box, CH-8098 Zurich, Switzerland
sh-shareholder-services@ubs.com
Zurich +41-44-235 6652
US Transfer Agent
For global registered share-related
inquiries in the US.
Computershare Trust Company NA
PO Box 43006
Providence, RI, 02940-3006, USA
Shareholder online inquiries:
www.computershare.com/us/
investor-inquiries
Shareholder website:
computershare.com/investor
Calls from the US
+1-866-305-9566
Calls from outside the US
+1-781-575-2623
TDD for hearing impaired
+1-800-231-5469
TDD for foreign shareholders
+1-201-680-6610
Corporate calendar UBS AG
Information about future publication dates is available
at
ubs.com/global/en/investor-relations/events/calendar.html
Imprint
Publisher: UBS AG, Zurich, Switzerland | ubs.com
Language: English
© UBS 2025. The key symbol and UBS are among
the registered and
unregistered trademarks of UBS. All rights reserved.
Annual Report 2024
Our key figures
UBS AG consolidated key figures
As of or for the year ended
USD m, except where indicated
31.12.24
31.12.23
31.12.22
Results
Total revenues
Credit loss expense / (release)
Operating expenses
Operating profit / (loss) before tax
Net profit / (loss) attributable to shareholders
Profitability and growth
1,2
Return on equity (%)
Return on tangible equity (%)
Return on common equity tier 1 capital (%)
Return on leverage ratio denominator, gross (%)
Cost / income ratio (%)
Net profit growth (%)
Resources
1
Total assets
Equity attributable to shareholders
Common equity tier 1 capital
3
Risk-weighted assets
3
Common equity tier 1 capital ratio (%)
3
Going concern capital ratio (%)
3
Total loss-absorbing capacity ratio (%)
3
Leverage ratio denominator
3
Common equity tier 1 leverage ratio (%)
3
Liquidity coverage ratio (%)
4
Net stable funding ratio (%)
Other
Invested assets (USD bn)
2,5
Personnel (full-time equivalents)
1 Refer to
the “Targets,
capital guidance
and ambitions”
section of
the UBS
Group Annual
Report 2024,
available under
“Annual
reporting” at
ubs.com/investors,
for more
information about
our performance
measurement.
2 Refer to “Alternative performance
measures” in the appendix to this report for the definition and calculation method.
3 Based on the Swiss systemically relevant bank framework as of 1
January
2020. Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information.
4 The disclosed ratios represent averages for the fourth quarter of each year presented, which were
calculated based on an average of 64 data points in the fourth quarter of 2024 and 63 data points in the fourth quarter of 2023. Refer to the “Capital, liquidity and funding, and balance sheet” section
of this report
for more information.
5 Consists of invested assets for
Global Wealth Management, Asset
Management (including invested assets from
associates) and Personal
Corporate Banking. Refer to “Note
31 Invested
assets and net new money” in the “Consolidated financial statements” section of this report for more information.
Alternative performance measures
An
alternative
performance
measure
(an
APM)
is
a
financial
measure
of
historical
or
future
financial
performance,
financial
position
or
cash
flows
other
than
a
financial
measure
defined
or
specified
in
the
applicable
recognized
accounting standards or
in other
applicable regulations. A
number of APMs
are reported in
UBS’s external
reports (annual,
quarterly and other reports). APMs are used to provide a more complete picture of operating performance and to reflect
management’s view
of the
fundamental drivers
of the
business results.
A definition
of each APM,
the method
used to
calculate it
and the
information content
are
presented
under “Alternative
performance
measures”
in the
appendix to
this report. These APMs may qualify as non-GAAP measures as defined
by US Securities and Exchange Commission (SEC)
regulations.
1
Annual Report 2024
Terms used in this report
”UBS”, ”UBS Group”, “UBS Group AG consolidated”,
“Group” and “the
Group”
UBS Group AG and its consolidated subsidiaries
“UBS AG”, “UBS AG consolidated“,
“we”,
“us” and “our”
UBS AG and its consolidated subsidiaries
“Credit Suisse AG” and “Credit Suisse AG consolidated”
Credit Suisse AG and its consolidated subsidiaries before the merger
with UBS AG
“Credit Suisse Group”
Credit Suisse Group AG and its consolidated subsidiaries, before the
acquisition by UBS
“Credit Suisse”
Credit Suisse AG and its consolidated subsidiaries before the merger
with UBS AG, Credit Suisse Services AG and other small
former Credit
Suisse Group entities now directly held by UBS Group AG
“UBS Group AG”
UBS Group AG on a standalone basis
“Credit Suisse Group AG”
Credit Suisse Group AG on a standalone basis
“UBS AG standalone”
UBS AG on a standalone basis
“UBS Switzerland AG”
UBS Switzerland AG on a standalone basis
“UBS Europe SE consolidated”
UBS Europe SE and its consolidated subsidiaries
“UBS Americas Holding LLC”
UBS Americas Holding LLC and its consolidated
subsidiaries
“1m”
One million, i.e. 1,000,000
“1bn”
One billion, i.e. 1,000,000,000
“1trn”
One trillion, i.e. 1,000,000,000,000
In this report, unless the context requires
otherwise, references to any gender shall
apply to all genders.
Comparability
Profit
and
loss
and
other
flow-based
information
for
the
year
ended
31 December
2024
includes
seven
months
of
consolidated data
following the
merger of
UBS AG and
Credit Suisse AG (June
to December
2024) and five
months of
pre-merger UBS AG data only
(January to May 2024). Comparative
information for the years
ended 31 December 2023
and 31 December 2022 includes pre-merger UBS AG
data only.
Balance
sheet
information
as
at
31 December
2024
includes
post-merger
consolidated
information.
Balance
sheet
information as at 31 December 2023 and 31 December
2022 reflects pre-merger UBS AG information only.
Annual Report 2024
Our business model and
environment
Management report
Integration of Credit Suisse
On 12 June
2023, UBS Group
AG acquired
Credit Suisse
Group AG, succeeding
by operation
of Swiss law
to all
assets
and liabilities of
Credit Suisse Group
AG. Since the acquisition,
we successfully executed
our integration plans,
we won
back, retained and
grew client
assets. Throughout
2024 we continued
to make significant
progress with
respect to the
integration of Credit Suisse, and we are
on track to substantially complete the integration by the end of
2026.
The
merger
of
UBS AG
and
Credit
Suisse AG
was
completed
on
31 May
2024.
UBS AG
succeeded
to
all
rights
and
obligations
of
Credit
Suisse AG,
including
all
outstanding
Credit
Suisse AG
debt
instruments.
On
7 June
2024,
we
completed the transition
to a single
US intermediate
holding company,
and,
on 1 July 2024,
we completed the
merger
of UBS Switzerland
AG and
Credit Suisse
(Schweiz) AG.
UBS Switzerland AG
succeeded to
all rights
and obligations
of
Credit Suisse (Schweiz) AG.
›
Refer to “Note 2 Accounting for the merger of
UBS AG and Credit Suisse AG” in the “Consolidated
financial statements” section of
this report for more information about the accounting for
the merger of UBS AG and Credit Suisse AG
The significant-legal-entity
mergers
were key
for the
start
of large-scale
client
account
migrations
and facilitated
the ongoing
decommissioning
of legacy
Credit Suisse
platforms
in the
second half
of 2024.
In the
fourth quarter
of 2024,
we completed
the migration
of our Global
Wealth Management
client accounts
in Luxembourg,
Hong Kong,
Singapore and
Japan to UBS
platforms.
We expect the
first wave of
Swiss business
migrations
to commence in
the second quarter
of 2025.
We reduced
to zero
the amount
of funding
outstanding under
the Emergency
Liquidity Assistance
(ELA) facility
in the
second quarter of 2024 with Credit Suisse (Schweiz) AG fully
repaying the remainder of the funding.
›
Refer to “Integration of Credit Suisse” in the “Our
strategy, business model and environment” section of the UBS Group Annual
Report 2024, available under “Annual reporting” at
ubs.com/investors
, for more information
Other developments
In June 2024, the Credit
Suisse supply chain finance funds
(the SCFFs) made a voluntary
offer to the SCFFs’ investors
to
redeem all
outstanding fund
units. The offer
expired on
31 July 2024, and
fund units representing
around 92%
of the
SCFFs’ net asset value were tendered in the offer and accepted. Fund units
accepted in the offer were redeemed at 90%
of the
net asset
value determined
on 25
February 2021,
net of
any payments
made by
the relevant
fund to
the fund
investors since that time.
Investors whose units were redeemed released any claims
they may have had
against the SCFFs,
Credit Suisse or UBS.
The offer aimed to
provide fund investors with
an accelerated exit from
their positions and a
high
level of financial recovery and was funded by the acquisition
of a new class of fund units by UBS. The offer did not have
a material effect on
the financial results or common
equity tier 1 capital of
UBS Group AG, given provisions
recorded in
connection
with
the
acquisition
of
the
Credit
Suisse
Group.
On
a
subsidiary
level,
UBS AG
on
a
consolidated
basis
recorded in the second quarter of 2024 a provision
of around USD 0.9bn in connection with the offer.
The offer did not
have a material
effect on
UBS AG on
a standalone
basis. The investment
in the SCFFs
is managed
in the Non-core
and
Legacy division.
On 13 August 2024, UBS entered
into an agreement to
sell Select Portfolio Servicing, the
US mortgage servicing business
of
Credit
Suisse,
managed
in
the
Non-core
and
Legacy
business
division.
Completion
of
the
transaction
is
subject
to
regulatory approvals and
other customary
closing conditions.
UBS AG does
not expect
to recognize a
material profit or
loss upon completion of the transaction. Based on balances
as of 31 December 2024, the completion of the transaction
would reduce UBS AG’s risk-weighted assets
by around USD 1.3bn and UBS AG’s leverage ratio denominator by around
USD 1.7bn.
In October 2024,
UBS entered into
an agreement to
sell to American
Express Swiss Holdings
GmbH (American
Express)
its 50% interest in
Swisscard AECS GmbH (Swisscard), a
joint venture in Switzerland between UBS
and American Express,
subject to certain closing conditions.
Also in October 2024, UBS entered
into an agreement with Swisscard to
transition
the Credit
Suisse-branded card
portfolios to
UBS. In January
2025, UBS completed
the purchase
of the
card portfolios,
with the
actual client
migration expected
to take
place over
the following
quarters. The
two transactions
will result
in
similar profit and loss effects over
the course of 2025 and, therefore,
on a net basis are not
expected to have a material
impact for UBS. In 2024, UBS AG recorded an expense of USD 41m in connection with
the termination of the Swisscard
joint venture.
Annual Report 2024
Material weakness in internal control over financial reporting
As a registrant
with the US Security
and Exchange Commission
(the SEC), UBS
AG is subject to
requirements under
the
Sarbanes–Oxley Act of
2002 with respect
to financial reporting.
This requires us
to perform system
and process evaluation
and testing of internal control over
financial reporting to enable
management to assess the effectiveness
of our internal
controls. A material weakness
is a deficiency or a combination
of deficiencies in internal control
over financial reporting
such that there
is a reasonable
possibility that
a material misstatement
of a registrant’s
financial statements
will not be
prevented or detected on a timely basis.
Following the
acquisition
and merger
of Credit
Suisse
Group
AG into
UBS Group
AG in
June 2023,
Credit Suisse
AG
concluded that as
of 31 December 2023
its internal control
over financial reporting
continued to be
ineffective. In May
2024, Credit Suisse AG and UBS AG merged with
UBS AG as the surviving entity. Although Credit Suisse AG is
no longer
a separate
legal entity,
numerous of
its booking,
accounting and
risk management
systems remain
in use
for activities
that have not yet been exited or migrated to UBS systems.
In 2024, in
light of the
increased complexity of the
internal accounting and control
environment, the remaining migration
efforts
still
underway
and
limited
time
to
demonstrate
operating
effectiveness
and
sustainability
of
the
post-merger
integrated
control
environment,
management
has
concluded
that
additional
evidence
of
effective
operation
of
the
remediated controls is required to
conclude that the risk assessment
processes are operating effectively
on a sustainable
basis. In light
of the above,
management has concluded that
there is a
material weakness in internal
control over financial
reporting at 31 December 2024.
›
Refer to the “Risk factors” section and to
“Management’s report on internal control over financial reporting” in the “Consolidated
financial statements” section of this report for more information
about management’s assessment of internal control over
financial reporting as of 31 December 2024 and
the remediation of Credit Suisse material weaknesses
Annual Report 2024 |
Our business model and environment | Our
businesses
6
Our businesses
We
operate
through
five
business
divisions:
Global
Wealth
Management,
Personal
Corporate
Banking,
Asset
Management, the
Investment Bank and
Non-core and Legacy.
Our global reach and the breadth of our
expertise are the
major assets setting us apart from our competitors. Our Group functions are
support and
control functions
that provide
services to the Group. Virtually all costs incurred by the Group functions are allocated to the
business divisions, leaving a
residual
amount
that
we
refer
to
as
Group
Items
in
our
segment
reporting.
We
see
collaboration,
both
within
and
between business divisions,
as key to our growth.
›
Refer to the “Our strategy” section of the UBS
Group Annual Report 2024, available under “Annual
reporting” at
ubs.com/investors,
Global Wealth Management
We are the largest
truly global wealth
manager and are
focused on serving
the needs of
ultra high and
high net worth
individuals
through
trusted
relationships
with
our
advisors.
Our
global
reach,
our
advisory
approach
led
by
the
Chief
Investment Office (the CIO) and
access to our comprehensive platform with
its broad array of solutions,
supported by our
premium brand,
are key differentiators.
Global Wealth
Management is organized
into five
regional business units
covering the US,
Switzerland, Asia Pacific,
EMEA
and Latin America,
as well as capability-related and support units. Capability business units,
such as the Chief Investment
Office and the
newly created GWM
Solutions,
help to efficiently
deliver integrated
solutions tied into
the CIO-led
value
proposition.
For
regional
reporting
purposes,
we
disclose
selected
information
about
the
Americas,
Switzerland,
Asia
Pacific, EMEA and Global regions.
Integration of Credit Suisse and organizational changes
The acquisition
of the
Credit Suisse
Group in
2023 enhanced
our leading
global position,
increased our
scale and
has
expanded our
capabilities. Since then,
we have
made substantial progress
with the
integration of
our wealth
management
businesses. Our
client migration
is underway,
with more
than 90%
of all
assets outside
of Switzerland
migrated onto
UBS
platforms
by
year-end
2024.
In
the
fourth
quarter
of
2024,
we
completed
the
migration
of
our
Global
Wealth
Management client accounts in Luxembourg, Hong Kong, Singapore and Japan
,
followed by accounts in Italy in January
2025, and are currently focused on Swiss client account
and platform migrations.
›
Refer to the “Integration of Credit Suisse” section of this
report for more information
Since 1 July 2024, Global
Wealth Management has been jointly
managed by two Co-Presidents. On
that date, Iqbal Khan
became
Co-President
Global
Wealth
Management
and
Robert
Karofsky
became
Co-President
Global
Wealth
Management and President UBS Americas. On 1 September
2024, Mr. Khan also became President UBS Asia Pacific
.
In recognition
of the
increased
size and
potential of
our wealth
management
business
in Latin
America following
the
acquisition of the Credit Suisse Group, Global
Wealth Management Latin America became a
new business unit in 2024.
Also in
2024, we
introduced GWM
Solutions,
which is
aimed at
combining all
client solutions
across UBS
into a
single
unit in order to more effectively, efficiently and consistently deliver
products and capabilities to our clients.
An
integral
part
of our
growth
plans
is
to
improve
profitability
across
our
Americas
wealth
business,
which
manages
USD 2.1trn in invested assets and is a key pillar of our strategy and value proposition to clients. We are executing on our
targeted investments to
enhance and build
out our multi-disciplinary
coverage model
of the ultra
high net worth
client
segment and increase penetration of the high net worth and core affluent segments to further drive scale. These growth
initiatives will be
supported by investments in
our banking capabilities and
technology,
as well as
increased cost discipline.
How we do business
With our
distinctive approach to wealth
management,
and by offering advice,
expertise and solutions,
we help our clients
pursue what
matters most
to them.
Our alignment
of our
core offering
across UBS
and Credit
Suisse platforms
is near
completion, and clients across our entire
franchise can benefit from the best UBS has
to offer regardless of the platform
they are on.
Our investment
advice to
clients is
led by
our global
CIO, which
produces the
UBS House
View
, identifying
investment
opportunities
designed
to
protect
and
increase
our
clients’
wealth
over
the
long
term.
CIO
views
drive
investment
recommendations for advisory
clients and investment
decisions for discretionary
clients,
representing USD 1.8trn in
fee-
generating assets globally.
Through
our
platforms,
we
offer
to
our
clients
a
broad
range
of
securities
and
investment
products.
In
addition
to
traditional equity and fixed-income securities, our investment specialists
source and craft a range of
investment products,
including
separately
managed
accounts
(SMAs),
structured
products,
sustainable-
and
impact-investing
products,
and
alternative investments. Our alternatives offering gives clients access to private markets, hedge
funds and real assets. We
offer our own private equity multi-manager investments and
enable clients to access selected single-manager funds and
open-ended programs.
Annual Report 2024 |
Our business model and environment | Our
businesses
7
To
complement
this
offering,
we
provide
clients
with
advice
on
wealth
planning,
sustainability-focused
and
impact
investing, and corporate and banking services. Our specialist teams also advise
on art and collecting, family strategy and
governance, philanthropy, next generation, and wealth transition
.
›
Refer to the UBS Group Sustainability Report 2024, available
under “Annual reporting” at
ubs.com/investors
, for more
information about sustainability matters
In addition
to our
investment management
products and
solutions, we
also offer
extensive mortgage,
securities-based
and structured lending expertise, catering to clients’ sophisticated
lending needs.
The newly created GWM Solutions brings
all client solutions into a
single unit in order to
more efficiently and consistently
deliver integrated solutions tied
into the CIO-led value
proposition. GWM Solutions presents
an opportunity to leverage
cross-divisional capabilities
to serve every
aspect of our
clients’ financial needs.
We are now
extending the breadth
and
depth of our offering into
the areas of alternative investment and
corporate finance solutions. In 2024, we
combined our
private market and hedge fund manager selection
franchises from Global Wealth Management
and Asset Management
to create a new business
unit,
called Unified Global Alternatives
,
which sits operationally within
the Asset Management
business
division
and
additionally
reports
to
Global
Wealth
Management.
We
also
formed
Unified
Global
Banking,
combining
Global Wealth
Management’s
corporate
finance
capabilities
with
Global
Banking
to
service
the
traditional
corporate finance needs of our Global Wealth Management
clients and their companies.
We are
investing in
our operating
platforms and
tools to
better serve our
clients’ needs,
improve their
experience, enhance
overall
advisor
productivity
and
improve
operational
resilience.
We
aim
to
make
our
service
delivery
faster,
more
responsive, and
more convenient
for our
clients. Our
platform for
discretionary mandates
provides significant
flexibility
and solutions.
For example,
UBS My Way
, which
is now
also available
on the
Credit Suisse
platform, enables
clients to
personalize
their
portfolios
beyond
traditional
mandates,
providing
transparency
and
performance
insights.
As
of
31 December 2024, it has reached over USD 15bn in invested
assets.
In Asia Pacific and Switzerland, the Direct Investment Insights function on our online banking platform enables clients to
trade directly based
on CIO insights
via their smartphones
and other digital
devices.
UBS Advice Compass
in one-to-one
meetings with
their clients
to review
in depth
all important
portfolio aspects
enhanced with
actionable
next steps and investment
opportunities. Clients are
thus offered an
enhanced ability to
monitor their portfolios
and to
put their investment strategy
into action in line with CIO research.
For the
benefit of
our clients
and to
further empower
our advisors,
we are
also leveraging
investments in
the artificial
intelligence (AI) space.
We are
using AI-powered tools
to enhance our
capabilities and
platforms, for example
Red, our
internal chatbot that builds on generative AI
capabilities,
was rolled out to around
7,000 employees in the fourth quarter
of 2024.
In the
US, 13
million AI-generated insights
were delivered
to US
advisors in
2024. Additionally, we
are connecting
our clients with leaders in the
AI space and providing them with
thought leadership, content and solutions
regarding AI
investment opportunities.
In addition, we
are continuing to
broaden our offering
across asset classes
and themes, collaborating
with best-in-class
managers across the most relevant strategies.
Annual Report 2024 |
Our business model and environment | Our
businesses
8
Competition
Our main competitors fall into two categories: competitors with
a strong position in the Americas but with more
limited
global footprints,
such as
Morgan
Stanley, JPMorgan
Chase, Wells
Fargo
and Bank
of America;
and
competitors
with
international footprints but with a smaller presence
than UBS in the US, such as Julius Baer, BNP
Paribas, Deutsche Bank
and HSBC.
We also
compete with
fintech firms
in some
regions and
products. We
have strong
positions in
the largest
wealth region (the US)
and the fastest-growing
wealth regions (Asia
Pacific and the
Middle East). The size
of our global
franchise,
our
bespoke
cross-divisional
solutions
and
our
premium
brand
and
reputation
differentiate
us
from
our
competitors and would be difficult to replicate.
Personal Corporate Banking
As the
leading bank
in Switzerland,
our home
market, we
provide a
comprehensive
range of
financial products
and services
to private, corporate
and institutional
clients. With
Personal Corporate
Banking at its core,
Switzerland is
the only region
where we operate in all of our business
areas. We are fully committed to maintaining
our leadership in our home
market.
Swiss clients
and the
Swiss economy
benefit from
UBS’s unparallelled
global reach
and capabilities.
We are a
go-to bank
for
entrepreneurs in Switzerland,
providing comprehensive
support at every stage of the entrepreneurial
journey. Drawing on
an extensive branch network and
highly qualified client advisors, complemented by modern digital banking services and
customer service
centers, we
are able to
serve more than
one-third of
Swiss households
and more than
90% of large
Swiss
companies.
In 2024,
UBS was named
“Best Bank in
Switzerland”
by Euromoney for
the tenth time
since 2012.
Personal Corporate Banking is organized into
10 regions, covering distinct Swiss economic areas.
We operate a multi-
channel approach, and we are constantly developing our digital
and remote channels.
Integration of Credit Suisse and organizational changes
We continue to make progress related
to the integration of Credit Suisse,
and we are on track to substantially
complete
the
integration
by
the
end
of
2026.
We
are
currently
focused
on
client
account
and
platform
migrations
and
decommissioning applications
and infrastructure.
We expect the first wave of Swiss business migrations to commence in
the second quarter of 2025.
On 1 July 2024, the
merger of UBS Switzerland AG and
Credit Suisse (Schweiz) AG was completed
and was a critical
step
on our integration journey.
For the time being,
the Credit Suisse brand
will remain in
use in Switzerland,
and consumer
finance services will continue to be provided through the
BANK-now subsidiary.
›
Refer to the “Integration of Credit Suisse” section of this
report for more information
How we do business
We provide our personal banking clients with access to a comprehensive, life-cycle-based
offering. This includes a broad
range of basic
banking products,
from payments
to deposits,
cards and
convenient online
and mobile banking,
as well
as
lending
(predominantly
mortgages),
investments
and
retirement
planning
services.
Personal
Corporate
Banking
works closely
with Global
Wealth Management to
provide our clients
with access to
leading wealth
management services.
Our corporate and institutional clients benefit from our banking, financing and investment
solutions, in particular access
to
equity
and
debt
capital
markets,
syndicated
and
structured
credit,
private
placements,
leasing,
and
traditional
financing. We offer transaction banking solutions for payment and
cash management services, trade and export finance,
and global custody solutions for institutional clients.
We work
closely with
the Investment
Bank to
offer capital
market and
foreign exchange
products, hedging
strategies,
and trading
capabilities, as
well as
corporate
finance advice.
In cooperation
with Asset
Management, we
also provide
fund and portfolio management solutions.
In our corporate business, we take a holistic approach
to client dialogue. We seek to provide practical,
tailored solutions
with a
deep understanding
of our
clients’ business
operations and
collaborate with
partners to
offer a
comprehensive
range of products and services. We
also launched sustainability-linked loans for
commodity trade finance and corporate
clients.
In 2024, we continued to focus on
helping our clients to achieve
their sustainability goals, as companies
and individuals
consider the best ways to transition to a lower-carbon economy
.
›
Refer to the UBS Group Sustainability Report 2024, available
under “Annual reporting” at
ubs.com/investors
, for more
information about sustainability matters
We see
a strong
partner network
as essential
for UBS’s
success in
Switzerland. To
meet the
increasing expectations
of
our clients, we
have established
strong partnerships
that create
significant value,
for example,
for homeowners,
where
protecting property
value is
crucial. Through
our new
partnership with
NORM, we
offer a
digital, user-friendly
energy
analysis and a specific roadmap
for sustainable renovations. Additionally, we have
introduced
UBS Loan Green
sustainability in investment and commercial properties.
Annual Report 2024 |
Our business model and environment | Our
businesses
9
Through
our
collaboration
with
Fasoon
and
Startups.ch
we
actively
support
clients
in
founding
their
businesses
and
getting started
financially
from
the
very
beginning.
Our
UBS Marketplace
corporate clients throughout their life cycle.
We are building stronger relationships with our mortgage clients throughout the entire property ownership lifecycle
with
comprehensive services, including
property acquisition, renovation,
maintenance, and sale.
Our exclusive partnership
with
SMG Swiss Marketplace
Group enables us
to expand our
ecosystem to Switzerland’s
largest real estate
portals, such as
Homegate
and
Immoscout24.
Through
our
partner
Brixel
promotion
financing.
Our
collaboration
with
Houzy
,
Switzerland’s
leading
homeowner
platform,
connects
our
clients
with a nationwide network of qualified craftsmen.
Competition
In Personal Banking,
our main competitors
are the cantonal
banks, Raiffeisen, PostFinance
and other regional
and local
Swiss banks; we also face competition from international neobanks and other national digital market participants. Areas
of competition are basic banking services, mortgages and
foreign exchange, as well as investment mandates and
funds.
In the corporate and institutional
business, the cantonal banks and foreign
banks are our main competitors. We
compete
in basic banking services, cash management, trade and
export finance, asset servicing, investment advice for institutional
clients, corporate finance and lending, and cash
and securities transactions for banks. We
also support the international
business
activities
of our
Swiss
corporate
clients
through
local
hubs
in
New
York,
Frankfurt,
Singapore and
the
Hong
Kong
SAR,
where
we
compete
with
other
foreign
banks
that
have
global
operations.
No
other
Swiss
bank
offers
its
corporate clients local banking capabilities abroad.
Asset Management
We are a global, large-scale and
diversified asset manager offering investment capabilities and
strategies,
across all major
traditional and alternative asset classes, to institutions,
wholesale intermediaries and Global Wealth Management clients.
Following the acquisition of the Credit Suisse Group,
we have become one of the leading Europe-based asset managers,
with total invested assets of USD 1.8trn. We are focused
on meeting the evolving needs of our clients by capitalizing
on
the products and areas
where we have
a differentiated and
scalable offering and
by expanding our
strong partnerships
with the other business divisions across the Group.
Asset
Management
is
organized
into
five
areas:
Client
Coverage;
Global
Real
Assets;
Investments;
Unified
Global
Alternatives; and
the Chief
Operating Officer
(COO) area.
We cover
the main
asset management
markets globally
and
have a
local presence
in 24
locations across
four regions:
the Americas;
Asia Pacific;
EMEA; and
Switzerland. We
have
nine main hubs: Chicago; the Hong Kong SAR; London;
New York; Shanghai; Singapore; Sydney; Tokyo; and
Zurich.
Integration of Credit Suisse and organizational changes
We continued to move
at pace with the
integration of Credit Suisse.
This included the completion
of a number of
legal
entity transactions that enabled us to combine
our core operating entities and teams in each region.
Alongside that, we
made significant
strides toward
bringing together
our fund
offerings and
also
commenced
the technical
migration
of
clients’ investment portfolios onto the UBS platform.
During
2024,
we
completed
a
number
of
non-core
divestments,
including
the
sales
of
our
Brazilian
real
estate
fund
management business
(Credit Suisse
Hedging-Griffo Real
Estate), Credit
Suisse Insurance
Linked Strategies
Ltd and
our
62%
majority
stake
in
Credit
Suisse
Investment
Partners.
We
also
transferred
the
management
of
our
Quantitative
Investment Strategies business to a systematic investment
manager.
›
Refer to the “Integration of Credit Suisse” section of this
report for more information
On 1 March 2024, Aleksandar Ivanovic became President
Asset Management.
We also
took a
number of
steps to
increase our
operational efficiency
and simplify
our organization.
This included
the
reorganization and integration of our former Products functions
into the Client Coverage and COO areas.
To capture the
growing client demand
for alternatives, at the
end of 2024
we combined our manager
selection franchises
from Global
Wealth Management and
Asset Management to
create a new
business unit
called Unified
Global Alternatives
(UGA). UGA sits operationally within the Asset Management business division, and additionally reports to Global Wealth
Management.
With a combined USD 286bn in invested assets across Asset Management and Global Wealth Management, UGA is one
of the leading global alternative players. By bringing together the breadth
of our capabilities, we can better leverage and
scale our deep expertise in sourcing,
monitoring and managing investments. Given
our ability to work flexibly alongside
third-party alternatives managers across products,
we believe we can strengthen our strategic
partnerships with best-in-
class general partners, and together deliver new and
innovative solutions for clients.
Following the shift of our Real Estate
Private Markets (REPM) multi-manager capabilities
to UGA, the remaining REPM
business area has been renamed as Global Real Assets.
Annual Report 2024 |
Our business model and environment | Our
businesses
10
How we do business
We are committed to
delivering investment excellence and to
creating value for our clients that
endures through cycles.
We
offer
a
range
of
investment
products
and
services
across
all
major
traditional
and
alternative
asset
classes
and
investing styles,
and we
also draw
on the
breadth of
our capabilities
to offer
asset allocation
and currency
investment
strategies across the risk–return spectrum, customized multi-asset
solutions, and advisory and fiduciary services. In order
to
support
our
clients’
sustainability
objectives,
we
offer
a
comprehensive
range
of
products
and
solutions
which
incorporates a variety of approaches, including active
ownership,
as well as impact-
and transition-focused strategies.
›
Refer to the UBS Group Sustainability Report 2024,
available under “Annual reporting” at
ubs.com/investors
, for more
information about sustainability matters
To serve our clients’ alternative investment needs, our UGA business maintains,
manages and curates one of the world’s
premier
open
architecture
platforms
across
hedge
funds,
private
equity,
private
credit,
real
estate,
infrastructure
and
multi-alternative
investment
products.
We
are
also
able
to
provide
access
to
exclusive
co-investments
and
secondary
market opportunities for our
more sophisticated clients. In
addition, we offer access
to a comprehensive range
of direct
investment capabilities
across hedge
funds and
real assets,
as well
as our
leading
non-investment-grade
fixed-income
capabilities managed through our Credit Investment Group.
We
continue to expand our index
and exchange-traded funds capabilities, building on our
position as the largest Europe-
based manager of
indexed investments.
We are
able to
leverage our
specialist teams,
proprietary technology and
expertise
in customization to provide our clients with a compelling range
of solutions across asset classes.
We also
collaborate across
business divisions
to deliver
our best
capabilities to
clients. For
example, our
SMA initiative
with Global Wealth Management
in the US continues
to gain momentum,
with USD 195bn in
invested assets. Building
on the success
of this platform,
we are also
extending our offering
to meet the
needs of wholesale
clients in this
attractive
market.
Our
Partnerships
Solutions
business
draws
on
our
value
chain
across
the
Group
to
provide
customized
full-service
fiduciary,
investments
and
technology
solutions
for
clients.
Those
include
curated
access
to
best-in-class
third-party
traditional and
alternative
investment
managers, as
well
as a
comprehensive
suite of
proprietary
technology solutions
and research services.
We are building on
our extensive and long-standing
presence in the
Asia Pacific region, particularly
in China, where we
have enhanced our onshore presence through our joint ventures.
To better serve our clients’ needs,
enable further scalability and growth
across our business, and
position us to seize the
opportunities
presented
by
generative
artificial
intelligence,
we
are
transforming
our
front-to-back
business,
our
operating
model
and
our
technology
platform.
This
includes
our
UBS Advantage
streamline trading
and portfolio
implementation across
our active
and index
capabilities through an
integrated technology
architecture. We also remain
focused on capturing structural
efficiencies to support our profitable
growth. This includes
refining our strategic product offering, further streamlining our organization,
and realizing integration-related synergies.
Competition
Our main
competitors are global
firms with wide-ranging
capabilities and distribution
channels, such as
AllianceBernstein,
Allianz
Asset
Management,
Amundi,
BlackRock,
DWS,
Franklin
Templeton,
Invesco,
J.P. Morgan
Asset
Management,
Morgan Stanley Investment Management,
Schroders, State Street Global
Advisors and T. Rowe Price,
as well as
firms with
a specific market or asset-class focus.
Annual Report 2024 |
Our business model and environment | Our
businesses
11
Investment Bank
The
Investment
Bank
provides
services
to institutional,
corporate
and wealth
management
clients, helping
them
raise
capital,
invest
and
manage
risks,
while
targeting
attractive
and
sustainable
risk-adjusted
returns
for
the
Group’s
shareholders. Our traditional strengths are in
equities, foreign exchange, research, advisory
services and capital markets,
complemented by
a focused
rates and
credit platform.
We use
our data-driven
research and
technology capabilities
to
help
clients
adapt
to
evolving
market
structures
and
changes
in
regulatory,
technological,
economic
and
competitive
landscapes.
Aiming to deliver market-leading
solutions by using our
intellectual capital and electronic
platforms, we work closely
with
Global Wealth
Management,
Personal
Corporate Banking
and Asset
Management
to bring
the best
of the
Group’s
capabilities to our clients. We do so while being disciplined
about balance sheet deployment and costs.
Our two business
areas, Global Banking and
Global Markets, are organized
globally by product. Our
business is regionally
diversified, with a presence in more than
30 countries. We cover the main
investment banking markets globally and have
major financial hubs across four regions:
the Americas; Asia Pacific; EMEA; and Switzerland.
Our priority is
providing high-quality execution
and seamless client
service, through an
integrated, solutions-led approach,
with disciplined growth in the advisory and execution businesses, while accelerating our digital transformation. In Global
Banking, we position ourselves as trusted advisors via our
client coverage and ability to provide access to the wider suite
of UBS’s capabilities. In Global
Markets, we enable clients to
buy, sell and finance
securities on capital markets worldwide
and to manage their risks and liquidity.
Integration of Credit Suisse and organizational changes
The acquisition of
the Credit Suisse
Group in 2023
accelerated the Investment Bank’s
existing growth strategy,
reinforcing
and strengthening
our coverage
and presenting
a powerful
opportunity to
enhance capabilities
and client
relevance in
key products and regions.
The
Investment
Bank
has
benefited
significantly
from
the
integration
of
Credit
Suisse,
in
terms
of
clients,
talent
and
capabilities.
And the integration has also helped
us to build a more sustainable market
share in a range of products and
markets. The
transfer of
Credit Suisse
positions onto
UBS infrastructure
is now
complete, and
all in-scope
clients have
been onboarded.
›
Refer to the “Integration of Credit Suisse” section of this
report for more information
On 1 July 2024, George Athanasopoulos and Marco Valla joined the Group Executive Board as Co-Presidents Investment
Bank. They replaced Robert Karofsky, who on that date became Co-President Global Wealth Management and President
UBS Americas.
In 2024, GWM Solutions was introduced and is aimed at combining all client solutions across UBS into a single construct
so as
to
more
effectively,
efficiently
and
consistently
deliver
products
and
capabilities
to our
clients.
As part
of GWM
Solutions, we announced
the formation of
Unified Global Banking,
combining Global Wealth
Management’s corporate
finance
capabilities
with
Global
Banking
to
service
the
traditional
corporate
finance
needs
of
our
Global
Wealth
Management clients and their companies.
How we do business
The Investment Bank consists of
two areas: Global Markets, which is
supported by Investment Bank Research;
and Global
Banking. Our global coverage model utilizes our international industry expertise and product capabilities to meet clients’
emerging needs.
Our Global Banking business
offers a broad range
of investment banking products
and services to our
clients. We work
with our clients to
understand their business
needs and provide
ideas that support
growth and help
them achieve their
objectives. Global
Banking advises
clients on strategic
business opportunities,
such as
mergers, acquisitions
and related
strategic matters,
and helps
them raise
capital, in
both public
and private
markets, to
fund their
activities. With
teams
located across
the Americas,
EMEA and
Asia Pacific
regions, our
banking coverage
offers clients
local market
expertise
coupled with access to a global network.
Our Global Markets business helps clients engage
with local markets globally, providing nimble,
innovative and bespoke
access to
solutions, from
market and
insight tools
to trade
strategies and
execution. Global
Markets enables
clients to
buy, sell and finance securities on
capital markets worldwide and to manage their
risks and liquidity. We distribute, trade,
finance and clear cash equities and equity-linked products, as well as structuring, originating and
distributing new equity
and equity-linked issues. From origination
and distribution to managing risk and
providing liquidity in foreign exchange,
rates,
credit
and
precious
metals,
we
help
clients
to
realize
their
financial
goals.
We
provide
flexible,
innovative
and
bespoke access to solutions, from market and insight tools to trading
strategies and execution.
Annual Report 2024 |
Our business model and environment | Our
businesses
12
Our Investment
Bank Research
business continues
to publish
research based
on primary
data to
concentrate
on data-
driven outcomes and offers clients differentiated content about major financial markets and securities around the globe,
with analysts
based in
more than
20 countries
and with
coverage of
more than
3,700 stocks
in 49
different countries.
HOLT
, a framework that helps investors to make better
decisions,
was successfully transferred from Credit Suisse
to UBS
in October 2024 and is an
addition to our data capabilities
,
which include
Quant Research
UBS Evidence Lab
.
HOLT
provides investors with a robust framework to analyze,
value and compare 20,000 companies globally.
Our capabilities, core products
and services have
been enhanced by
the integration, which has
enabled us to
deliver these
products and services to
an expanded institutional
and corporate client
base. In addition, we
are now better
positioned
to serve Global Wealth Management,
offering investment banking capabilities,
and to further enhance our
connections
with
wealth
management
clients.
The
integration
of
Credit
Suisse
is
expected
to
drive
further
changes
in
our
future
revenue footprint. Our increased
scale will enhance our competitive
positioning within each region
and product set and
rebalance our footprint.
We seek to develop new
products and solutions consistent
with our capital-efficient business
model, typically related
to
new technologies or changing market standards.
The Investment Bank offers
clients global advice and
access to the world’s
primary,
secondary and private capital markets,
including through an
array of sustainability-focused
advice, products, research
and events. We
help meet clients’
needs
with respect to
environmental, social
and governance
(ESG) considerations
and sustainable
finance, helping
to reshape
business models and investment opportunities and to develop
sustainable finance products and solutions.
In Global
Markets, we
develop products
and solutions
designed to
meet clients’
specific and
increasingly detailed
ESG
objectives. In
Global Banking,
the ESG
Advisory Group
supports UBS’s
clients globally in
assessing their
ESG / sustainability
profile and linking
such profiles to
investor demand
and valuation.
The ESG research
team delivers thematic
reports on
ESG
and
sustainability-related
topics.
More
generally,
through
our
research,
we
address
ways
in
which
ESG
factors
connect to individual markets, sectors and companies in
our coverage.
›
Refer to the UBS Group Sustainability Report 2024,
available under “Annual reporting” at
ubs.com/investors
, for more
information about sustainability matters
The Investment Bank
strives to
be the digital
investment bank of
the future,
focused on delivering
innovation-led solutions
and efficiencies for
our clients. Our
digital strategy harnesses
technology to provide
access to sources
of unique, global
liquidity, personalized advice and differentiated content. As the world around us changes, our digital capabilities harness
emerging
technologies
and
create
new
products
and
solutions,
which
help
our
clients
to
adapt
to
evolving
market
structures and achieve their investment goals.
Our
ambition
to
be
the
most
client-focused,
efficient
and
data-driven
investment
bank
is
being
realized
through
the
simplification of technology architecture, increased
speed and quality of
delivery and the attraction
of best-in-class talent.
As we look forward to the continued
evolution
of our digital capabilities, we will see increased adoption of
technologies,
such as generative
artificial intelligence, the consistent
re-use of platforms
and products, and
the continued drive to
make
progress in our overall strategic imperatives, with regard to a
new, combined Investment Bank.
Joint efforts between
the Investment Bank
and the other
business divisions (for
example, our work
with Global
Wealth
Management through GWM Solutions coverage) and, externally, strategic partnerships (for example, UBS BB jointly with
Banco
do
Brasil,
focused
on
Latin
America)
continue
to
be
key
strategic
priorities.
Partnerships
with
Global
Wealth
Management and Asset Management enable us to provide clients with broad access to financing, global capital markets
and portfolio solutions.
We expect
these initiatives to
continue to lead
to growth by
delivering global products
to each
region, leveraging our global connectivity across borders and
sharing and strengthening our best client relationships.
Competition
Our global
reach presents attractive options
for growth. In
the Americas, the
largest investment banking
fee pool globally,
we
continue
to focus
on
increasing
market
share
in our
core
Global
Banking
and
Global Markets
businesses.
In
Asia
Pacific,
we
plan
to
capture
opportunities
arising
from
expected
market
internationalization and
growth
in
China
and
other markets,
and to strengthen
our presence
in the region.
In EMEA, we
plan to leverage
our strong base
and brand
recognition to further gain market share
.
Competing firms operate
in many
of our markets,
but our strategy
differentiates us, with our
focus on selective
leadership
in the areas
where we have
chosen to compete
and a business
model that leverages
talent and technology
rather than
balance sheet. Our
main competitors are
the major global
investment banks (e.g.
Morgan Stanley and
Goldman Sachs)
and corporate investment
banks (e.g. Bank
of America, Barclays,
Citigroup, BNP Paribas,
Deutsche Bank and
JPMorgan
Chase). In certain products and regions,
we also compete with boutique investment banks and fintech
firms.
Annual Report 2024 |
Our business model and environment | Our
businesses
13
Non-core and Legacy
Non-core
and
Legacy
includes
positions
and
businesses
not
aligned
with
our
long-term
strategy
and
risk
appetite.
It
consists of
selected assets
and liabilities
from the
former Credit
Suisse business
divisions, as
well as
residual assets
and
liabilities from
UBS’s former Non-core and Legacy Portfolio that preceded
the acquisition of the Credit Suisse Group and
smaller amounts
of assets
and liabilities
of UBS’s
business divisions
that have
been assessed
as not
strategic in
light of
the acquisition.
We have made strong progress in actively reducing Non-core
and Legacy’s assets and liabilities.
›
Refer to the “Integration of Credit Suisse” section of this
report for more information
Our key priorities and operations
We will continue to actively wind down Non-core and Legacy’s positions in order to reduce operating costs and financial
resource
consumption,
with a
focus on
economic profitability,
and to
enable us
to simplify
infrastructure.
Incremental
costs or losses may arise in connection with the reduction
of such assets and liabilities.
Our key priorities continue to be as follows.
–
Reduce RWA and LRD, freeing up
capital for the UBS Group. We
aim to achieve a share
of below 5% of Group RWA
by the end of
2026. We will continue to
actively pursue the acceleration of
the natural roll-off through active
unwinds.
–
Reduce
operating
costs
and
financial
resource
consumption
by integrating
onto the
core platform,
simplifying
and
decommissioning
infrastructure,
and
minimize
the
number
of
legal
entities.
We
aim
to
exit
2026
with
around
USD 0.8bn in underlying operating expenses (excluding
litigation).
–
Execute the de-risking strategy in an orderly manner to protect the client franchise, working in partnership
with other
business divisions.
Non-core and
Legacy includes
financial and
non-financial
assets, operating
expenses
and funding
costs
related
to the
following legacy Credit Suisse businesses: loans primarily related to corporate clients and emerging markets, the residual
securitized products businesses, the macro
trading business, including rates and foreign
exchange, the legacy life-finance
business, the equities portfolio, including
the remaining equity swaps, share
back-lending positions and legacy structured
renewables-linked
positions, and
the residual
credit business.
It also
includes residual
trades from
businesses exited
by
the pre-integration
UBS Investment
Bank, mainly
in 2012.
The portfolio
additionally encompasses
positions relating
to
legal matters transferred to it at the time of its formation
in 2023.
Group functions
Our Group functions are support and control functions that provide services to
the Group, focusing on effectiveness, risk
mitigation and efficiency.
How we are organized
Our Group
functions
include
the
following major
areas:
Group
Services
(which consists
of
the
Group
Operations
and
Technology
Office,
Group
Compliance,
Regulatory
Governance,
Group
Finance, Group
Risk Control
,
Group
Human
Resources
and
Corporate
Services,
Communications
Branding,
Group
Legal,
the
Group
Integration
Office,
Group
Sustainability and Impact and the Chief Strategy
Office)
and Group Treasury.
Virtually all costs incurred
by the Group functions
are allocated to
the business divisions, leaving
a residual amount
that
we refer to as Group Items
in our segment reporting in accordance with IFRS
Accounting Standards. Certain activities are
retained centrally, where not
directly related to the
businesses, such as group
hedging and own debt
activities in Group
Treasury
and
certain
other
costs
that
are
mainly
related
to
deferred
tax
assets
and
costs
relating
to
our
legal
entity
transformation program.
Most of
our employees
in the
Group functions
are employed
by UBS
Business Solutions
AG or
another of
our service
company subsidiaries of
UBS Group AG.
The costs of
the Group functions
employees in UBS
Business Solutions
AG are
reflected as
compensation expense
in UBS
Group AG
reporting and
as general
and administrative
expense in
UBS AG
reporting.
Group Services
The
vast
majority
of
the
support
and
control
functions
are
fully
aligned
or
shared
among
the
business
divisions.
The
activities
of
the
businesses
and
support
and
control
functions
are
closely
aligned
to
improve
efficiency
and
create
a
working environment built on accountability and collaboration.
Group Treasury
Group Treasury
manages balance sheet structural risk (e.g. interest rate, structural foreign exchange and collateral risks),
as well
as the
risks associated
with our
liquidity,
capital and
funding portfolios.
Group Treasury
serves all
five business
divisions, and its risk management is integrated into the
Group risk governance framework.
Annual Report 2024 |
Our business model and environment | Our
environment
14
Our environment
Market environment
Global economic developments in 2024
1
Although global
economic growth
slowed slightly
in 2024,
to 3.2%
from 3.4%
in 2023,
there was
more growth
than
had been expected, helped by the strength of the US economy,
slowing inflation, and central bank rate cuts.
The
resilience
of
the
US
economy
was
the
main
surprise
relative
to
projections
coming
into
2024.
Robust
consumer
spending and greater business
investment in artificial
intelligence (AI) helped
US GDP to
grow by 2.8%,
close to the
2.9%
increase registered in 2023.
Growth in other developed economies was more muted. The Eurozone’s GDP expanded by 0.7%, which was marginally
better than the
0.5% registered in
2023. Germany was
the main drag, with
the region’s largest
economy held back
by
weak consumer demand, high energy
prices and challenges in major export
markets, including intensifying competition
to its important
automotive industry.
In contrast, Swiss
GDP growth accelerated
to 1.4%, up
from 0.7%
in 2023, with
improving consumer demand offsetting weakness in the manufacturing
sector.
China’s
post-pandemic
rebound
continued
to
be
disappointing,
with
GDP
growth
at
4.8%,
compared
with
5.2%
in
2023. Consumers were cautious
about spending against a
backdrop of job
insecurity and falling property prices.
Stimulus
from the government came late in the year and has yet
to revive consumer confidence.
Inflation continued its
trend toward normalization
after the multi-decade
highs experienced in
the wake of
the COVID-
19 pandemic. Lower inflation in the Eurozone
and the UK led the European Central
Bank and the Bank of England to cut
rates by
100 basis points
and 50 basis
points, respectively.
Meanwhile, low
inflation in
Switzerland (1.1%
in 2024)
led
the Swiss National
Bank (the
SNB) to cut
interest rates by
125 basis points. The
US Federal Reserve
cut interest rates
by
100 basis points, less than had been expected earlier in 2024. The consumer price index
in the US rose 2.9% in the year
to December 2024, compared with 3.4% in 2023.
Strong
US
earnings
growth,
lower
interest
rates,
and
optimism
about
AI
helped
the
SP
500
deliver
a
25%
return,
contributing to a 20.7%
return for the
MSCI All Country
World Index. The MSCI
Europe index gained
10.3%, with the
MSCI Switzerland
returning
6.6%. Emerging
market
equities returned
8.1% in
US dollar
terms, with
the MSCI
China
returning 19.8%, helped by government pledges of more
forceful stimulus.
It was a volatile
year for bond markets,
amid shifting expectations over
the timing, pace and
magnitude of interest rate
cuts from
central banks.
The yield
on 10-year
US Treasuries
rose from
3.9% at
the start
of 2024
to 4.6%,
boosted by
stronger US
economic
data and
the anticipation
of higher
inflation under
the new
US administration.
The yield
on 10-
year German bunds also rose, despite concerns over weak
growth in Germany and the Eurozone.
Economic and market outlook for 2025
1
We expect economic uncertainty to remain high in 2025, with the potential for significant policy developments from the
new US administration and with
geopolitical risks still elevated. However, our
base case is for 2025
to be another resilient
year for the global economy, and our projections show only
a slight slowing of global GDP growth, to 3.0% in 2025.
In the US, we expect healthy consumption, further easing of fiscal policy and interest rate cuts from the Federal Reserve.
This should
help mitigate
the potential
drag from
higher trade
tariffs. Our
base case
is for
US GDP
to grow
by around
2%. The prospect of higher tariffs on exports to
the US could prove a headwind to growth in Europe
and Asia. Although
China could
counter with
further stimulus,
we expect growth
there to
slow further,
to 4.0%
in 2025,
due to
the continued
weakness
in the
property
market and
consumer demand.
For the
Eurozone, we
expect
growth to
stabilize,
with GDP
increasing by
0.9% in
2025, as
falling interest
rates and
higher levels
of savings
support both
consumer spending
and
corporate investments. For
Switzerland, we expect
GDP growth of
1.3%, supported by
stronger external demand
from
the Eurozone.
Regarding
interest
rates, we
still see
Federal Reserve
rates as
restrictive
and expect
further
cuts in
2025, despite
the resilience
of the
US economy.
Our view
is that
subdued growth
and slowing
inflation in
the Eurozone
will prompt
the European
Central Bank
to continue cutting
interest rates
in 2025. We also
expect the SNB
to further cut
rates amid low
inflation.
We expect a combination of continued economic growth, monetary easing, and advances in AI to contribute to another
positive
year
for
the
SP
500.
Although
a
relaxation
of
regulations
on
businesses
by
the
incoming
US administration
could further support stocks, international markets could face
pressure from US tariffs.
We see only a
modest downside to government
bond yields, as resilient
US growth and above-target US
inflation partially
offset
the
likely
impact
of
lower
central
bank
interest
rates.
We
believe
that
the
threat
of
tariffs
and
geopolitical
uncertainty are likely to maintain the strength of the
US dollar for at least the first half of 2025.
1
Annual Report 2024 |
Our business model and environment |
Regulation and supervision
15
Regulation and supervision
As a financial
services provider
based in Switzerland,
the UBS Group
is subject to
consolidated supervision
by the Swiss
Financial Market Supervisory Authority
(FINMA). The Group’s entities
are also regulated and
supervised by authorities in
each
country
where
we
conduct business.
Through
UBS AG
and
UBS Switzerland
AG,
which are
licensed
as
banks
in
Switzerland, UBS may engage in a full range of financial services activities
in Switzerland and abroad, including personal
banking, commercial banking, investment banking and asset management.
UBS is
a global
systemically important
bank, as
designated by
the Financial
Stability
Board, and
a systemically
relevant
bank
(an SRB)
in Switzerland,
UBS Group
entities
are
subject
to stricter
regulatory
requirements
and supervision
than
most other Swiss banks.
›
Refer to the “Integration of Credit Suisse” section
of this report for more information
›
Refer to the “Regulatory and legal developments”
and “Risk factors” sections of this report for
more information
Regulation and supervision in Switzerland
Supervision
UBS Group AG and its subsidiaries, including UBS AG, are subject to consolidated supervision by FINMA under the Swiss
Banking Act and related ordinances, which impose standards for
matters such as capital adequacy
and risk diversification
rules,
liquidity,
internal
control
systems,
business
conduct,
and
corporate
governance.
FINMA
meets
its
statutory
supervisory responsibilities
through
licensing, regulation,
supervision, and
enforcement.
It is
responsible
for prudential
supervision and mandates audit firms to perform regulatory
audits and other supervisory tasks on its behalf.
Capital adequacy and liquidity regulation
As an internationally active
Swiss systemically important bank
(an SIB), UBS is subject
to capital and total loss-absorbing
capacity (TLAC)
requirements
at both
the group
level, for
UBS Group AG,
and the
parent bank
level, for
UBS AG, that
are based
on both
risk-weighted
assets and
the leverage
ratio denominator,
and are
among the
most stringent
in the
world. UBS Group AG, UBS AG and UBS
Switzerland AG are also subject to liquidity requirements and to
minimum long-
term funding requirements for Swiss SIBs.
›
Refer to the “Risk, capital, liquidity and funding,
and balance sheet” section of this report for
more information about the Swiss
SRB framework and the Swiss too-big-to-fail (TBTF)
requirements
›
Refer to “Liquidity and funding management” in
the “Risk, capital, liquidity and funding, and balance
sheet” section of this report
for more information about liquidity coverage ratio and net
stable funding ratio requirements
Regulation and supervision outside Switzerland
Regulation and supervision in the US
In the
US, UBS
is subject
to regulation
and supervision
by the
Board
of Governors
of the
Federal Reserve
System (the
Federal Reserve Board)
under a number of laws.
UBS Group AG and
UBS AG are subject
to the Bank Holding
Company
Act, pursuant to which the Federal Reserve Board
has supervisory authority over our US operations.
In addition to being
a financial holding company under the
Bank Holding Company Act, UBS AG has
US branches, which
are authorized
and supervised
by the
Office of
the Comptroller
of the
Currency (the
OCC). UBS AG
and Credit
Suisse
International are registered as swap dealers
with the Commodity Futures Trading Commission
(the CFTC) and registered
as securities-based swap dealers with the Securities and Exchange
Commission (the SEC).
UBS Americas
Holding LLC
is the
intermediate
holding
company for
our operations
in the
US outside
of the
UBS AG
branch network, as
required under the Dodd–Frank
Act, and is
subject to requirements established
by the Federal
Reserve
Board related
to risk-based
capital, liquidity,
the Comprehensive
Capital Analysis
and Review
(CCAR) stress
testing and
capital planning process, and resolution planning and governance.
UBS Bank USA,
a Federal Deposit
Insurance Corporation
(FDIC)-insured depository
institution subsidiary,
is licensed and
regulated by state regulators in Utah and is also supervised
by the FDIC.
UBS Financial Services Inc., UBS Securities LLC,
Credit Suisse Securities (USA) LLC and
several other US subsidiaries of UBS
are subject to regulation by a
number of different government agencies and
self-regulatory organizations, including the
SEC,
the
Financial
Industry
Regulatory
Authority,
the
CFTC,
the
Municipal
Securities
Rulemaking
Board
and
national
securities exchanges,
depending on
the nature
of their
business. Certain
of our
activities in
the US
are subject
to regulation
by the Consumer Financial Protection Bureau.
Regulation and supervision in the UK
Our regulated UK operations are mainly
subject to the authority of the Prudential Regulation
Authority (the PRA), which
is part of the Bank of England (the BoE), and the Financial Conduct Authority
(the FCA). We are also subject to the rules
of the London Stock Exchange and other securities and commodities
exchanges of which UBS AG is a member.
UBS AG has a UK-registered branch, UBS AG
London Branch, which serves as a
global booking center for our Investment
Bank,
with
regulated
subsidiaries
that
provide
asset
management
services.
Credit
Suisse
International,
Credit
Suisse
Securities (Europe)
Limited and
Credit Suisse
(UK) Limited
are authorized
and regulated
by the
FCA and
subject to
the
authority of the PRA.
Annual Report 2024 |
Our business model and environment |
Regulation and supervision
16
Regulation and supervision in Europe
UBS Europe SE, headquartered
in Germany,
is subject to the direct
supervision of the European
Central Bank (the ECB),
as well
as
to continued
conduct,
consumer
protection
and anti-money
-laundering-related
supervision
by
the
German
Federal Financial Supervisory Authority (BaFin) and supervisory support
by the German Bundesbank. The entity is subject
to
EU
and
German
laws
and
regulations.
UBS
Europe
SE
maintains
branches
in
Denmark,
France,
Ireland,
Italy,
Luxembourg, the
Netherlands, Poland,
Portugal, Spain,
Sweden and
Switzerland, and
is subject
to conduct supervision
by authorities in all those countries.
In Italy, Credit
Suisse (Italy) SpA
is supervised by
the Bank of
Italy and the
Commissione Nazionale per le
Società e la Borsa.
In
Spain,
Credit
Suisse
Bank
(Europe)
SA
is
supervised
by
the
Bank
of
Spain,
the
Comisión
Nacional
del
Mercado
de
Valores and
the Servicio
Ejecutivo
de la
Comisión de
Prevención del
Blanqueo
de Capitales
e Infracciones
Monetarias.
Credit Suisse Bank (Europe)
SA operates a branch
in the Netherlands, which
is subject to conduct supervision
by the De
Nederlandsche Bank
and De Autoriteit
Financiële Markten. We
expect to wind
down or consolidate
Credit Suisse (Italy)
SpA and Credit Suisse Bank (Europe) SA into UBS Europe
SE in accordance with the intermediate EU parent undertaking
requirement, which in agreement with the ECB is to be implemented
by June 2025.
Regulation and supervision in Asia Pacific
We operate
in numerous
locations in Asia
Pacific, including
Singapore, the
Hong Kong SAR,
mainland China,
Australia
and Japan. The
operations in these
locations are subject
to regulation and
supervision by local
financial regulators.
Our
Asia Pacific regional hubs are in Singapore
and the Hong Kong SAR.
In Singapore,
UBS AG Singapore Branch,
UBS Securities Pte
Ltd, UBS
Asset Management (Singapore)
Ltd and Credit
Suisse
Securities (Singapore)
Pte Limited are
supervised by the
Monetary Authority
of Singapore
and the Singapore
Exchange.
Credit Suisse (Singapore) Limited is supervised by the Monetary
Authority of Singapore.
In the Hong Kong SAR, UBS
AG Hong Kong Branch is supervised
by the Hong Kong Monetary
Authority. UBS Securities
Hong Kong
Limited, UBS Securities
Asia Limited, UBS
Asset Management (Hong
Kong) Limited, Credit
Suisse (Hong Kong)
Limited
and
Credit
Suisse
Securities
(Hong
Kong)
Limited
are
supervised
by
the
Hong
Kong
Securities
and
Futures
Commission. In
addition, UBS
Securities Hong
Kong Limited
and Credit
Suisse (Hong
Kong) Limited
are supervised
by
Hong Kong Exchanges and Clearing Limited.
In mainland China,
we have
multiple licenses
to operate the
respective business
lines of UBS
AG and Credit
Suisse AG,
and the
various entities
are subject
to regulation
by a
number of
different government
agencies. The
People’s Bank
of
China oversees China’s
macro capital markets
policies and ensures
coordinated supervisory
approaches by the
National
Administration of
Financial Regulation
(the China
Banking and
Insurance Regulatory
Commission until
May 2023),
the
China Securities Regulatory Commission and a number
of exchanges.
In
Australia,
UBS AG
Australia
Branch
is
supervised
by
the
Australian
Prudential
Regulation
Authority,
the
Australian
Securities
and
Investments
Commission,
the
Australian
Transaction
Reports
and
Analysis
Centre,
the
Reserve
Bank
of
Australia, and the
Australian Securities Exchange.
UBS Securities Australia
Ltd, UBS Asset
Management Limited and
Credit
Suisse Equities (Australia) Limited are supervised by
the Australian Securities and Investments Commission, the Australian
Transaction Reports and Analysis Centre and the Australian
Securities Exchange.
In Japan,
UBS Securities Japan
Co., Ltd.
and Credit Suisse
Securities (Japan) Limited
are supervised by
the Financial
Services
Agency and
the Japan
Exchange Group.
UBS AG Tokyo
Branch is
supervised by
the Financial
Services
Agency and
the
Bank of
Japan. UBS
SuMi TRUST
Wealth Management
Co., Ltd.
is supervised
by the
Financial Services
Agency and
the
Japanese
Ministry
of Finance.
UBS Asset
Management
(Japan)
Ltd and
UBS Japan
Advisors
Inc.
are
supervised
by the
Financial Services Agency.
Financial crime prevention
Combating money laundering and terrorist financing has been a major
focus of many governments in recent years. Laws
and regulations, including the Swiss Banking Act and the US Bank Secrecy Act, require effective policies, procedures and
controls to detect,
prevent and report
money laundering and
terrorist financing, and
the verification of
client identities.
Failure to introduce
and maintain adequate
programs to prevent
money laundering and
terrorist financing can
result in
significant legal and reputational
risk and fines.
We are
also subject
to laws
and regulations
prohibiting
corrupt or
illegal payments
to government
officials and
other
persons, including
the US
Foreign Corrupt
Practices Act
and the
UK Bribery
Act. We
maintain policies,
procedures and
internal controls intended to comply with those regulations.
›
Refer to “Non-financial risk” in the “Risk
management and control” section of this report for more information
Data protection
We
are
subject
to
regulations
concerning
the
use
and
protection
of
customer,
employee
and
other
personal
and
confidential information. This includes provisions under Swiss law,
the EU General Data Protection Regulation (the GDPR)
and laws of other jurisdictions.
›
Refer to the “Risk factors” section of this report for
more information about regulatory change
Annual Report 2024 |
Our business model and environment |
Regulation and supervision
17
Recovery and resolution
Swiss TBTF legislation
requires each Swiss
SRB to establish
an emergency plan
to maintain systemic
functions in case
of
impending insolvency. In response to these Swiss requirements and similar ones in other jurisdictions, UBS has developed
recovery plans and
resolution strategies, as
well as plans
for restructuring or
winding down businesses
if the firm could
not otherwise be stabilized.
In 2013, FINMA
stated its preference
for a single point
of entry (an
SPE) strategy
for globally
active SRBs, such
as UBS, with
a bail
in at
the group
holding company
level. UBS
has made
structural,
financial
and operational
changes to
facilitate
an SPE
strategy and is
confident that a
resolution of the
bank is
operationally executable and legally enforceable. In 2023,
UBS
acquired the Credit Suisse Group and merged Credit Suisse Group AG into
UBS Group AG. UBS Group AG subsumed all
the capital and loss-absorbing instruments
of Credit Suisse Group AG with the acquisition.
A bail in remains operationally
executable for
the combined UBS
Group and an
SPE resolution
strategy remains
the preferred
strategy for
UBS.
FINMA evaluates the recovery and resolution plans of Swiss SRBs on a regular basis. In October 2024, FINMA announced
that it had suspended
the annual approval of
UBS’s recovery and emergency
plans and determined that
the integration
of Credit Suisse
required adjustments by UBS
to ensure continued resolvability.
While FINMA recognized that
UBS remains
resolvable
under
its
existing
preferred
resolution
strategy,
it
noted
that
UBS’s
resolution
planning
must
be
further
developed to increase the available options
for FINMA in case of
resolution. The preferred resolution strategy involves the
recapitalization via a bail in at the group holding company level and a restructuring of the business into a viable business
model. As additional optionality, an alternative resolution
strategy based on an orderly market exit (either via disposal
or
wind-down or a combination of both) is expected by FINMA,
and initial concepts are under discussion. This is in line
with
the TBTF report of
the Swiss Federal
Council, issued in
April 2024, which
will also require
amendments to legislation
to
provide authorities
with more
options to
increase flexibility
in case
of a
crisis and
increase legal
certainty for
executing
these alternative resolution options.
Crisis management framework
The UBS Group’s crisis management framework
assigns responsibility and actions depending on the
nature of the stress
incident and the scale of the response needed.
–
For incident,
risk and
crisis
management,
the Group
Crisis Task
Force
works with
incident management
teams that
provide monitoring and early
warning indicators at the
local / regional level, without
needing to activate protocols
at
the Group
level. If
a local
response is
insufficient, global
task forces
and crisis
management teams
provide decision-
making
guidance
and
coordination,
including
crisis
management
plans,
protocols
and
playbooks,
and
contingency
funding plans.
–
The Group Executive Board (the GEB) and the Board of Directors
(the BoD) would evaluate and decide upon the need
to activate
the Global
Recovery
Plan (the
GRP) if
a stress
event reached
a severity
requiring activation
based on
the
GRP’s recovery risk indicators.
–
FINMA has the
authority to determine
whether the
point of non-viability,
as defined
by Swiss law,
has been reached
and, as
part
of the
resolution
plan,
has the
power
to
order
the
bail
in
of creditors
to recapitalize
and stabilize
the
Group, limit
payments
of dividends
and interest,
alter
our legal
structure, take
actions to
reduce business
risk, and
order a restructuring of the bank.
Annual Report 2024 |
Our business model and environment |
Regulation and supervision
18
Global Recovery Plan
The GRP
provides a
tool to
restore
financial strength
if UBS
comes under
severe capital
or liquidity
stress. Quantitative
and qualitative triggers are monitored daily and are subject to
predefined governance and escalation processes. Recovery
options
are
linked
to
owners
and
checklists,
with
the
objectives
of
preserving
capital,
raising
capital
or
liquidity,
or
disposing of or winding down businesses.
Global Resolution Strategy
FINMA is required
to produce
a global resolution
plan for UBS.
The plan includes
setting out measures
that FINMA can
take to
resolve UBS
in an orderly
manner if
the Group
enters resolution.
The SPE
bail-in strategy
would involve
writing
down the
Group’s re
maining equity
and additional
tier 1 and
tier 2 instruments,
as well
as the
bailing in
of the
TLAC-
eligible senior unsecured
bonds at the
UBS Group AG
level. An internal
recapitalization of
undercapitalized subsidiaries
would be
executed simultaneously
with losses
transmitted
to UBS AG
and, ultimately,
UBS Group
AG. Post-resolution
restructuring measures could include
disposals or wind-down of businesses and assets
.
Local recovery and resolution plans
The Swiss
emergency plan
demonstrates how UBS’s
systemically important
functions and
critical operations in
Switzerland
can continue if
the UBS Group
cannot be restructured.
This is achieved
mainly by operating
the Swiss-booked
business
in a separate legal entity,
UBS Switzerland AG, and by ensuring its financial and operational
self-sufficiency to enable its
continued operation throughout a crisis.
The
US
resolution
plan
sets
out
the
steps
that
could
be
taken
to
resolve
the
US
intermediate
holding
company,
UBS
Americas Holding LLC, and its subsidiaries if
it suffered material financial distress and UBS
Group was unable or unwilling
to provide
financial support.
As required
by US
regulations, our
US plan
contemplates that
UBS Americas
Holding LLC
will commence US bankruptcy
proceedings. Prior to this,
the plan envisages UBS
Americas Holding LLC downstreaming
financial
resources
to
its respective
subsidiaries
to facilitate
an orderly
wind-down
or
disposal
of businesses.
The
next
updated plan has to be submitted by October 2025.
UBS Europe SE
updates a
local recovery
plan annually
based on
ECB requirements
and resolution
planning information
and capabilities based on
Single Resolution Board requirements. On the
basis of such information,
the Internal Resolution
Team, composed of members of the Single Resolution Board,
produces a resolution plan for UBS Europe SE.
Annual Report 2024 |
Our business model and environment |
Regulation and supervision
19
UBS operates a UK banking subsidiary
with Credit Suisse International, which
is in the process of being wound down
as
part of Non-core and Legacy. Credit Suisse International is subject to the
UK Resolvability Assessment Framework, under
which it is required to assess its recovery planning and resolvability planning capabilities
against the standards defined in
the UK Resolvability Assessment Framework
on an annual basis and confirm its compliance
to the BoE and PRA. The UK
authorities have
confirmed that
as of
January
2025 Credit
Suisse International
is no
longer subject
to the
UK internal
minimum requirements for own funds and eligible liabilities.
Other local recovery and resolution plans exist for various
UBS AG entities and jurisdictions.
Regulatory trends
Regulatory
policy
discussions
resulting
from
the
March
2023
banking
turmoil
continued
throughout
2024.
At
the
supranational level, the focus
was on liquidity and
interest rate risks, supervision, and
the impact of technology
and social
media on depositor behavior, but
there have been no
specific policy proposals to
date. Discussions in Switzerland
focused
on a
thorough analysis
of the
Credit Suisse
crisis and
proposals aimed
at strengthening
the financial
stability of
Swiss
financial
institutions
and
the
financial
sector
going
forward.
Now
that
the
parliamentary
investigation
committee
has
released its report, the official analysis of the Credit Suisse
crisis has been concluded.
The final Basel III implementation was a key theme across jurisdictions
with further divergence emerging. While the final
Basel III
regulations
have
been
implemented
in
Switzerland
as
of
1 January
2025,
implementation
timelines
are
increasingly varying across other major jurisdictions.
The trend
of further
digitalization in the
banking industry
has triggered
regulatory policy
responses across
jurisdictions.
In particular, the field of artificial intelligence (AI) has seen rapid technical and market
developments. In response to this,
various international organizations
have advanced work
to define global
high-level principles, applicable
across industries.
At the same time, and in parallel with global efforts,
jurisdictional approaches differ. Notably, the EU is
implementing an
expansive AI
Act, which
came into
force on
1 August 2024.
Other jurisdictions,
including the
US and
Switzerland, are
taking a more measured approach,
emphasizing and clarifying the applicability of existing
laws and building capacity and
understanding of the technology, before taking
targeted regulatory action. Separately, applications
of distributed ledger
technology and market
adoption of digital
assets continue
to grow, while
the maturity
of the regulatory
landscape has
increased. 2024 saw the introduction
of the EU Markets in Crypto
-Assets Act, which seeks to
harmonize stablecoin and
crypto asset
regulation in
the EU.
In the
US, the
change in
administration has
resulted in
a more
accommodative regulatory
sentiment toward digital
assets, driving a
shift in
the regulatory approach
across responsible agencies.
Meanwhile, various
central banks
are experimenting
with central
bank digital
currencies to
understand the
benefits and
risk, but
often without
any commitment toward implementation.
Operational resilience and
banks’ management of
third-party risk has
continued to receive
a heightened regulatory and
supervisory
focus,
including
the
management
of
cyber
risks
related
to
third-party
vendors
and
how
banks
ensure
compliance
with
minimum
standards.
This
has
been
caused,
in
part,
by
high-profile
incidents.
Many
jurisdictions
are
working on expanding incident reporting, including
for cybersecurity incidents. Separately, the interconnectedness
with,
and dependence on, third-party
providers has been in focus,
including via the Basel
Committee on Banking Supervision
reviewing principles
for the
sound management
of third-party
risk in the
banking industry
and the
UK implementing
a
critical third-party
regime. Finally, regulators
such as the
Monetary Authority in
Singapore have started
to consider risks
to banks related to quantum computing.
Sustainable finance stayed high on the
policy agenda but with implementation of prescriptive legislation
diverging across
jurisdictions, and the
EU proposing recently
to simplify its
sustainability reporting and
due diligence requirements.
Notable
activity was observed related to sustainability reporting disclosures, with ongoing implementation and alignment efforts.
In addition,
there was
increased
policy attention
regarding
transition plans
as a
strategic tool
for decarbonization
and
adaptation to a low-carbon
future and, in some
jurisdictions, also as a
climate risk management
tool. Policymakers also
advanced developments
on prudential
disclosure standards
for the
supervision of
climate-related financial
risks. Finally,
additional regulation was focused on voluntary carbon markets,
including on market integrity and credit quality.
Policymakers maintained
focus on
financial stability
risks in
the non-bank
financial intermediation
(the NBFI)
sector. At
the global
level, work
focused on
banks’ counterparty
credit risk
management, as
well as
risks within
the NBFI
sector,
including preparedness for margin
and collateral calls, liquidity
management in funds, and
proposals to manage excessive
leverage. The EU reviewed
the adequacy of macroprudential
tools for NBFI firms,
and the Bank of
England completed a
first-of-its-kind, system-wide stress test to understand the
role that NBFI firms play during an economic shock.
Anti-money-laundering
was
prominent
on
policymakers’
agendas,
with
increased
due
diligence
requirements
for
the
financial
industry
in
Switzerland,
while
sanctions
remained
a
crucial
component
of
western
countries’
strategies
to
counter Russian aggression in Ukraine.
Finally, while market structure
reforms have been
largely implemented in the
US, similar issues
are under discussion across
jurisdictions in Europe, notably the element of the reforms related to the shortening
of the standard settlement cycle for
security transactions from two business days to one business
day.
Annual Report 2024 |
Our business model and environment |
Regulation and supervision
20
In 2025,
various jurisdictions,
including the
EU, UK,
and US,
are shifting
their stated
policy and
regulatory approaches
toward
promoting
a
growth-
and
competitiveness-focused
agenda,
with
related
measures
to
simplify
and
boost
the
framework conditions, while other jurisdictions, including Switzerland, remain focused on strengthening their regulatory
environment as a consequence of
the events in March
2023. This adds to
the ongoing trend of
regulatory fragmentation.
However, we believe
the continued
adaptations made to
our business
model and
our proactive management
of regulatory
change
put
us
in
a
strong
position
to
absorb
upcoming
challenges
in
the
regulatory
environment.
We
trust
that
our
strengthened standing as a combined organization with a strong capital position
and a balance sheet for all seasons will
enable us to cope with any potential challenges.
›
Refer to the “Regulatory and legal developments”
and the “Risk, capital, liquidity and funding,
and balance sheet” sections of this
report for more information
Regulatory and legal developments
Developments related to the acquisition of the Credit Suisse
Group
In April
2024, the
Swiss Federal
Council released
its report
on banking
stability that
evaluates the
regulation of
systemically
important banks
(SIBs). The
report includes
a comprehensive
review of
the acquisition
of the
Credit Suisse
Group and
concludes that
the existing
Swiss too-big-to-fail
(TBTF) regime
must be
further developed
and strengthened.
The Swiss
Federal Council proposes
to introduce measures
focused on three
areas: strengthening prevention,
strengthening liquidity
and expanding the crisis toolkit.
Measures include proposals
to strengthen the capital
base, to improve
resolvability and tighten
capital requirements for
global
systemically
important
banks
(G-SIBs),
including
the
introduction
of
forward-looking
elements
for
institution-
specific Pillar 2
capital surcharges
and more
stringent capital adequacy
requirements for
the parent
bank regarding
foreign
participations. The Swiss Federal Council also recommended measures related to corporate governance, such as a senior
management regime and regulations regarding variable compensation. To strengthen liquidity, the Swiss Federal Council
intends to significantly expand the potential for the Swiss National Bank
(the SNB) to provide more liquidity in a crisis, as
well as an obligation for SIBs to prepare collateral
for that purpose. Furthermore, the Swiss Federal
Council reiterated its
support for the
introduction of a
public liquidity backstop.
To expand the
crisis toolkit, the
Swiss Federal Council
proposed
measures that aim to minimize legal risks associated with the
execution of resolution measures.
In October
2024, the
Swiss Financial
Market Supervisory
Authority (FINMA)
published its
2024 resolution
reporting
for UBS.
›
Refer to “Recovery and resolution” in the “Regulation
and supervision” section of this report for more information
In December
2024, the
Swiss parliamentary
investigation committee
(
Parlamentarische Untersuchungskommission
, the
PUK) published
its report
that examined
the authorities’
role and
actions in
the context
of the
Credit Suisse
crisis. The
PUK
identified
a
need
for
improvement
and
action
at
both
the
enforcement
and
legislative
levels
and
made
recommendations regarding potential improvements to the crisis toolkit.
The Swiss Federal Council stated that the PUK’s
proposals will be covered in the implementation of the Federal
Council’s proposed measures.
In February 2025, the Economic Affairs and
Taxation Committee agreed to extend the suspension of its
discussion on the
introduction
of
a
public
liquidity
backstop
until
the
end
of
2026.
The
Committee
stated
that
the
design
of
a
public
liquidity backstop can only be defined in the overall context of Switzerland’s TBTF
regulation. The discussion was initially
suspended in August 2024 in order to take into account
the PUK’s report.
Based
on
its
report
on
banking
stability
from
April
2024,
the
Swiss
Federal
Council
is
expected
to
launch
a
public
consultation in
May 2025
on the
implementation of
the proposed
measures. The
measures will
include changes
at the
ordinance level, which
can be adopted
by the Swiss
Federal Council, and
legislative amendments, which
will be submitted
to
the
Parliament.
In
February
2025,
the
Swiss
Federal
Department
of
Finance
indicated
that
the
capital
adequacy
requirements for foreign participations will be regulated at the legislative level, rather than at the ordinance level. Due to
the broad
range of
possible outcomes,
the impact of
the proposals on
UBS can
be assessed
only when
the implementation
details become clearer.
Annual Report 2024 |
Our business model and environment |
Regulatory and legal developments
21
Developments related to the implementation of the final
Basel III standards
In Switzerland,
the amendments
to the Capital
Adequacy Ordinance
(the CAO) that
incorporate
the final Basel
III standards
into Swiss law,
including the five new ordinances that contain the
implementing provisions for the revised CAO, entered
into force on 1 January 2025.
The adoption of the final Basel III
standards led to a similar impact
on UBS AG consolidated
as on UBS Group, with
a USD 1bn increase in
UBS AG’s RWA, resulting
in a minimal impact
on the CET1 capital
ratio. The
USD 1bn
increase
was primarily
driven by
a USD
7bn increase
in market
risk RWA
and a
USD 3bn
increase
in credit
valuation
adjustment-related RWA resulting from
the implementation of
the Fundamental Review
of the
Trading Book
(the FRTB)
framework,
largely offset
by a USD 7bn
reduction in
operational
risk RWA and
a USD 1bn reduction
in credit
risk RWA. We
will provide in our first quarter 2025 report
an update on further improvements
from mitigating actions and our dialogue
with FINMA regarding
various aspects of
the final Basel III
rules. These changes
do not take into account
the impact of the
output floor.
The output floor,
which is being
phased in until
2028, is currently
not binding
for UBS AG.
In
the
EU,
the
final
Basel III
requirements
became
applicable
as
of
1 January
2025,
except
for
the
market
risk
capital
requirements, the implementation
of which has
been delayed until
at least 1 January
2026, as confirmed
by the European
Commission in June 2024. The overall impact on UBS is limited.
In September
2024, the
UK Prudential
Regulatory Authority
(the PRA)
published its
final rules
covering the
implementation
of the final Basel III standards.
As part of the
package, the PRA announced the pushing
back of the implementation date,
from 1 July 2025 to 1 January
2026, with full phase-in of the
output floor by 1 January 2030. In
January 2025, the PRA
announced that it has
further postponed the
implementation of the
final Basel III standards
until 1 January 2027,
citing
the need for greater clarity on US plans. In its announcement, the PRA left open the possibility of further postponement.
The date for the full phase-in of the output floor continues to be 1 January 2030. The overall
impact on UBS is expected
to be limited.
In the US, the banking agencies, including the
Federal Reserve Board, have been discussing amendments to their original
proposals regarding
the implementation
of the
final Basel III
standards. The
timing and
the content
of a
re-proposal of
the July 2023 version
of the final
Basel III rules remain
uncertain
as the change
in principals at
the US banking
agencies
has yet to be completed.
Other developments related to prudential regulation
In April 2024, the
SNB announced that
it will raise the
minimum reserve requirement
for domestic banks from
2.5% to
4%, and it will therefore
amend the National Bank
Ordinance as of 1 July
2024. The SNB also announced
that liabilities
arising from cancelable customer deposits (excluding tied pension
provisions) will be included in full in the calculation of
the minimum
reserve requirement,
as is
the case
with the
other relevant
liabilities. This
revokes the
previous exception
under which only 20% of these
liabilities counted toward the calculation. Based
on the latest internal assessments,
UBS
expects a negative impact of around USD 35m per annum
on net interest income to result from these changes.
In
June
2024,
EU
legislators
published
the
final
banking
rules
that
include
amendments
to
the
Capital
Requirements
Regulation and the
Capital Requirements Directive. The
rules entered into
force on 9 July
2024. The amendments
include,
alongside measures to
implement the final
elements of the Basel III
standards, a requirement for
non-EU firms to
establish
a
physical
presence
within
the
EU
when
providing
certain
banking
services,
including
deposit-taking
and
commercial
lending, to EU-domiciled clients
and counterparties, unless
an exemption is
obtained. The changes
will affect the
cross-
border provision of lending services and will require UBS to adapt its approaches to providing such services to clients and
counterparties
in
the
EU.
The
requirement
will
become
effective
in
January
2027,
with
grandfathering
provisions
for
contracts entered into before 11 July 2026.
In August 2024, the Federal
Reserve Board assigned UBS
Americas Holding LLC a stress
capital buffer (an SCB)
of 9.3%
as of
1 October
2024
(previously
9.1%)
under
the
Federal
Reserve
Board’s
SCB
rule,
resulting
in a
total
CET1
capital
requirement
of 13.8%.
The
SCB for
our
US-based
intermediate
holding company
is based
on
the
previously
released
results
of
the
Federal
Reserve
Board’s
2024
Dodd–Frank
Act
Stress
Test
(DFAST),
where
UBS
Americas
Holding
LLC
exceeded the minimum capital requirements under the sev
erely adverse scenario.
Developments in the regulation of financial markets
In September 2024, the Swiss Federal Council submitted for parliamentary approval a mutual recognition agreement (an
MRA) with the UK regarding financial services. The agreement
facilitates cross-border financial activities based on
a new
model
for
regulatory
cooperation
and
an
outcomes-based
mutual
recognition
of
domestic
rules.
The
MRA
is
supplemented
by
an
enhanced
and
closer
supervisory
process
and
additional
supervisory
arrangements
where
new
market access is granted.
It is expected
that the Parliaments
in Switzerland and the
UK will grant approval
for the MRA
in 2025.
In November 2024, the EU finalized
changes to the existing European
Market Infrastructure Regulation (the EMIR),
with
the changes entering into
force in December 2024.
The revised EMIR rules
require relevant EU market participants
to hold
active accounts at EU
Central Counterparties and
to clear a
representative portion of
certain derivative contracts
within
the EU, effective
June 2025. Other
changes include enhanced
transparency on clearing
services to clients,
new clearing
threshold calculation methodology, and new rules
on initial margin model validation. The impact
of the revised EMIR on
UBS and
its in-scope
clients will depend
on the
final design
of the
technical implementation standards,
which are
expected
to be published later in 2025.
Annual Report 2024 |
Our business model and environment |
Regulatory and legal developments
22
In January 2025,
the Swiss Securities Post-Trade
Council recommended that the
transition to a
shortened settlement cycle
for securities transactions for the
domestic markets in Switzerland and Liechtenstein from
two business days (T+2) to one
business day (T+1) should occur in October 2027, in alignment
with the EU and the UK.
In February 2025, the European Commission published a legislative proposal to shorten the settlement cycle in the EU to
T+1,
setting
11 October
2027
as
the
appropriate
date
for
the
transition.
The
proposal
is
in
alignment
with
the
recommendations from the European Securities and Markets
Authority from November 2024.
In February 2025, the UK announced that the transition to a T+1 settlement cycle will occur on 11 October 2027, in line
with
the
recommendations
included
in
the
UK
Accelerated
Settlement
Taskforce’s
report
from
March
2024
and
its
implementation plan from February 2025.
In the US, a shortened T+1 settlement cycle has applied to
securities transactions since May 2024.
UBS
implemented
the
required
enhancements
based
on
the
US
rules
and
will
prepare
for
further
implementation
according to the evolving rules and market practice
in other jurisdictions.
Developments related to environmental,
social and governance matters
In June 2024,
the Swiss Federal
Council launched a
consultation on a
proposed extension of
the application scope
and
substance of the existing sustainability reporting requirements under the Swiss Code of Obligations. Under the proposed
rules,
a
wider
scope
of
companies
would
have
to
report
on
the
risks
of
their
business
activities
in
the
areas
of
the
environment, human rights and
corruption, as well as on
measures taken against such
risks. Affected companies would
have
the
choice
of
reporting
according
to
either
the
EU
sustainability
reporting
requirements
or
another
equivalent
standard for sustainability
reporting. The consultation
closed in October
2024. The impact
of the proposals
on UBS can
be assessed only when the
implementation details become
clearer.
If the changes are
adopted as proposed, UBS
will be
subject to the extended requirements.
In November 2024, the
Swiss Federal Council
adopted the Climate
Protection Ordinance to
the Climate and Innovation
Act. The ordinance entered
into force on 1 January
2025, and it introduces,
among other matters,
measures to support
financial flows
contributing
to achieving
the Swiss
climate targets.
The main
instrument to
measure progress
made by
the financial sector toward this goal will continue to be the voluntary climate tests conducted
by the Swiss Federal Office
for the Environment. UBS participates in the bi-annual climate
tests conducted by the Swiss authorities.
In December 2024,
the Swiss Federal
Council launched a
consultation on amending
the Ordinance on
Climate Disclosures
to
adapt
it
to
the
latest
international
developments.
As
the
recommendations
of
the
Task
Force
on
Climate-related
Financial Disclosures (the
TCFD) have been
incorporated into international
standards, the Federal
Council proposes that
companies meet the
obligation to report
on climate-related
matters by applying
an internationally recognized
standard
or the
sustainability reporting
standard used
in the
EU. The
draft proposal
also establishes
minimum requirements
for
transition plans for financial flows that describe the planned path to a net-zero target by 2050. The consultation will last
until March 2025, and the
amended Ordinance on Climate Disclosures is
expected to enter into force on
1 January 2026.
UBS is within the scope of the new requirements, with the
impact on UBS dependent on the final ordinance.
In December
2024, FINMA
published a
new circular,
applicable to
banks and
insurers, on
the management
of climate-
and
other
nature-related
financial
risks.
The
circular
sets
out
provisions
for
governance
and
institution-wide
risk
management, as well as provisions for risk identification, materiality
assessment and scenario analysis regarding climate-
and nature-related
financial risks.
Implementation will
be guided
by international
frameworks and
standards, including
the Basel Committee on Banking Supervision Principles
for the effective management and supervision
of climate-related
financial risks.
The circular
will enter
into force
on 1 January
2026 and
will initially
apply exclusively
to climate-related
financial risks. From 1 January 2028, the
circular will apply to all
nature-related financial risks. UBS is assessing
the impact
of the requirements,
which will be addressed in a multi-year implementation
plan.
In May
2024, the
European
Council
approved the
new
Corporate Sustainability
Due Diligence
Directive (the
CSDDD),
which entered into force on 25 July 2024. The CSDDD requires in-scope
companies to identify and address potential and
actual adverse human rights and environmental impacts in their own operations, their subsidiaries and, where related
to
their value
chain(s), those
of their
business partners.
In addition,
the CSDDD
requires large companies
to adopt
a transition
plan for climate change mitigation
aligned with the 2050
climate neutrality objective of
the Paris Agreement, as
well as
intermediate
targets
under
the
European
Climate
Law.
The
July
2026
deadline
provided
for
the
transposition
of
the
CSDDD into Member States’ national laws and the July
2027 start date of the first phase of the CSDDD application
may
be postponed by one
year in light of
the changes to the
CSDDD proposed by the
European Commission in February 2025
as part of
its recent initiative
to simplify sustainability
regulations. UBS expects its
EU entities will
be required to
implement
the CSDDD rules. The full scope
of application will depend on the
implementation guidelines, which are
expected to be
developed by the
European Commission
by July 2026
(instead of July
2027) according to
the newly
proposed timeline,
and
on
the
changes
to
the
CSDDD
to
be
agreed
by
EU
legislators
in
light
of
the
European
Commission’s
legislative
proposal from February 2025.
In
November
2024,
the
European
Commission
announced
an
intention
to
streamline
and
simplify
sustainability
regulations,
including
the
Taxonomy
Regulation,
the
Corporate
Sustainability
Reporting
Directive
and
the
CSDDD.
Concrete proposals to
that effect
were
unveiled in February
2025 and will
now be
subject to the
EU legislative
process
involving the
European Parliament
and Council.
The impact
on UBS
can be
assessed only
when the
proposed changes
and their details have been agreed by EU legislators later in 2025.
Annual Report 2024 |
Our business model and environment |
Regulatory and legal developments
23
In February 2025,
the US Securities
and Exchange
Commission (the SEC
)
stated its
intention to withdraw
its regulation
mandating
climate
disclosures
by
SEC
reporting
companies,
which
would
have
included
UBS.
Effectiveness
of
the
regulation had previously been stayed by the SEC pending resolution
of litigation challenging it.
Developments related to tax matters
In August 2024, the
Swiss Federal Council launched a
consultation related to the
existing withholding tax exemption that
applies
to
TBTF
instruments
issued
by
no
later
than
31 December
2026.
The
Federal
Council
had
recommended
an
unlimited extension of
the exemption as
part of a
broader reform
package in its
April 2024 report
on banking stability.
As these
reforms are
not expected
to enter
into force
before the
expiry of
the existing
special rules,
the Swiss
Federal
Council proposes to extend the current
exemption, from 31 December 2026 to 31 December 2031,
to ensure that banks
can continue to issue capital instruments on competitive
terms.
In September 2024, the Swiss
Federal Council introduced the Income Inclusion
Rule (the IIR), a measure
developed by the
Organisation for Economic Co-operation and
Development (the OECD) as part
of the minimum corporate taxation rules
applicable to
corporate
groups with
a worldwide
turnover
of at
least EUR 750m.
Under the
IIR, the
profits of
foreign
subsidiaries
and
branches
of
Swiss
corporate
groups
will
be
taxed
at
a
minimum
rate
of
15%
on
the
OECD
global
minimum tax
base
with respect
to each
jurisdiction
in
which the
corporate
groups
operate.
The
IIR complements
the
Swiss supplementary tax that was introduced in January 2024. The IIR
became effective on 1 January 2025. UBS’s overall
tax
impact from
the
IIR is
limited, given
that
UBS is
subject
to a
corporate
tax burden
of more
than
15%
in the
vast
majority of countries in which it operates.
Other regulatory and legal developments
In April 2024,
the US Department
of Labor (the
DOL) adopted
a new Retirement
Security Rule,
related amendments
to
existing rules
governing transactions
between covered
plans and parties
in interest, and
amendments to
the “qualified
professional asset manager”
transaction exemption. The
effective date of
the Retirement Security
Rule, and the
related
amendments to
PTE 2020-02
have been
stayed by
a court
pending resolution
of litigation
challenging the
regulations.
The Retirement Security Rule, if it becomes effective,
would expand the scope of transactions subject to requirements of
the
Employment
Retirement
Income
Security
Act
by
expanding
the
relationships
and
advice
that
create
a
fiduciary
relationship between an investment professional and a plan or beneficiary, particularly in relation to individual retirement
accounts
(IRAs).
The
amendments
to
existing
transaction
exemptions
generally
limit
or
prohibit
the
use
of
those
exemptions for
transactions
involving IRAs,
with the
intention of
requiring transactions
involving IRAs
to rely
upon an
exemption (PTE
2020-2) imposing
specific impartiality,
conflict-of-interest and
compliance requirements.
Global Wealth
Management US treats established IRA accounts as fiduciary
relationships in accordance with PTE 2020-2.
In connection with the adoption of
the Retirement Security Rule, the DOL
also amended PTE 2020-2. These amendments
would, if they become effective, expand the scope of affiliated persons
for which a criminal conviction or determinations
of misconduct disqualify
an investment professional
from using the exemption
and add a one-year
transition period for
a
newly
disqualified
investment
professional
to
transition
the
related
business.
The
amendments
to
the
qualified
professional asset manager exemption
would also expand the
scope of events that
may trigger disqualification and
add
a similar
one-year transition
provision. In
each case,
the DOL
would retain
the ability
to grant
an individual
exemption
from the disqualification.
In May 2024, the Swiss Federal Council adopted a dispatch on strengthening
its anti-money-laundering framework. Key
elements
include
a
non-publicly
accessible
federal
register
of
beneficial
owners,
due
diligence
for
particularly
risky
activities in legal professions, measures to prevent
the circumvention of applicable sanctions under the
Embargo Act, and
due diligence obligations for cash payments in the real estate
business and in precious metals trading. The measures
are
subject
to
parliamentary
approval
and,
therefore,
entry
into
force
is
not
expected
before
2026.
Although
the
final
assessment will only
be concluded once
the final law
has been published,
UBS expects that
additional operational controls
will be required to implement the amended framework.
In July 2024, the
EU published the Artificial Intelligence Act
(the EU AI Act). Among
other matters, the EU AI
Act classifies
AI according to its risk, with the majority of obligations being placed on providers
of high-risk AI systems and with some
obligations for users
who deploy an AI
system in a
professional capacity. The EU
AI Act entered
into force in
August 2024,
and it will be
phased in over
the next 36 months.
UBS is assessing the
potential impact of
the uses of
AI and the
EU AI
Act.
In November 2024, the
PRA and the
Financial Conduct Authority
published a consultation
on changes to remuneration
rules for senior management functions
and material risk takers. The consultation
covers changes to several aspects of
the
PRA remuneration rulebook,
including the reduction
of the seven
-year minimum deferral
period to five
years for senior
managers and
allowing deferred remuneration
awards to vest
on a
pro rata basis
from the time
of award.
UBS is
reviewing
the proposals.
Annual Report 2024 |
Our business model and environment |
Risk factors
24
Risk factors
Certain risks,
including those
described below,
may affect
our ability
to execute
our strategy
or our
business activities,
financial condition, results of operations and prospects. We
are inherently exposed to multiple risks, many of which may
become apparent only with the benefit of hindsight.
As a result, risks that we do
not consider to be material, or
of which
we are
not currently
aware, could also
adversely affect
us. Within each category,
the risks that
we consider to
be most
material are presented first.
Strategy, management and operational risks
UBS’s acquisition of Credit Suisse Group AG exposes UBS AG to heightened
litigation risk and regulatory scrutiny and
entails significant additional costs, liabilities and business
integration risks
UBS
Group
AG
acquired
Credit
Suisse
Group
AG
under
exceptional
circumstances
and
the
continued
outflows
and
deteriorating overall financial position of Credit Suisse, in
order to avert a failure of Credit Suisse
and thus damage to the
Swiss financial
center and
to global
financial stability.
The acquisition
was effected
through
a merger
of Credit
Suisse
Group AG with
and into UBS
Group AG, with
UBS Group
AG succeeding
to all assets
and all liabilities
of Credit
Suisse
Group
AG,
becoming
the
direct
or
indirect
shareholder
of
the
former
Credit
Suisse
Group
AG’s
direct
and
indirect
subsidiaries. Therefore,
on a consolidated
basis, all assets,
risks and liabilities
of the Credit
Suisse Group
became a part
of UBS. This
includes all
ongoing and
future litigation,
regulatory and
similar matters
arising out of
the business
of the
Credit Suisse Group, thereby
materially
increasing UBS’s exposure to litigation
and investigation risks.
We have incurred and
will continue to incur,
substantial integration and restructuring costs
as we combine the
operations
of UBS and
Credit Suisse.
In addition,
we may
not realize
all of the
expected cost
reductions and
other benefits
of the
transaction. We
may not
be able
to successfully
execute our
strategic plans
or to
achieve the
expected benefits
of the
acquisition of
the Credit
Suisse Group.
The success
of the
transaction, including
anticipated benefits
and cost
savings,
will depend,
in part,
on the
ability to
successfully complete
the integration
of the
operations of
both firms
rapidly and
effectively, while maintaining stability of operations and
high levels of service to customers of the combined franchise.
Our ability to
complete the integration
of Credit Suisse
will depend on
a number of
factors, some of
which are outside
of our control, including our ability to:
–
combine the operations of the two firms in a
manner that preserves client service, simplifies infrastructure
and results
in
operating
cost
savings,
including
the
successful
transfer
of
clients
from
legacy
Credit
Suisse
platforms
to
UBS
platforms in Switzerland,
our largest booking center;
–
maintain deposits
and client
invested assets
in our
Global Wealth
Management
division and
in Switzerland,
and to
attract additional deposits and invested assets to the combined
firm;
–
achieve cost reductions at the levels and in the timeframe
we plan;
–
enhance, integrate
and, where
necessary, remediate
risk management
and financial
control
and other
systems
and
frameworks, including to remediate the material weakness in Credit Suisse’s internal controls over financial reporting;
–
complete the
simplification of
the legal
structure of
the combined
firm in
an expedited
manner, including
obtaining
regulatory approvals and licenses required to implement the
changes;
–
retain staff and reverse attrition of staff in certain of Credit
Suisse’s business areas;
–
successfully execute the wind-down of the assets and
liabilities in our Non-core and Legacy division and
release capital
and resources for other purposes;
–
decommission
the
information
technology
and
other
legacy
Credit
Suisse
operational
infrastructure
to
simplify
our
infrastructure,
reduce operational complexity and lower our operating expenses;
and
–
resolve outstanding litigation, regulatory and similar matters, including matters relating to Credit
Suisse, on terms that
are not significantly adverse to us, as well as to successfully remediate outstanding regulatory and supervisory matters
and meet other regulatory commitments.
The
level
of
success
in
the
absorption
of
Credit
Suisse,
in
the
integration
of
the
two
groups
and
their
businesses,
particularly
in
the
area
of
the
Swiss
domestic
bank,
as
well
as
the
domestic
and
international
wealth
management
businesses, the execution of the
planned strategy regarding cost reductions
and divestment of any non-core
assets, and
the level of resulting impairments and write-downs, may impact the operational results,
share price and the credit rating
of
UBS
entities.
The
combined
Group
will
be
required
to
devote
significant
management
attention
and
resources
to
integrating
its
business
practices
and
support
functions.
The
diversion
of
management’s
attention
and
any
delays
or
difficulties encountered in connection with the transaction and the coordination of the two
companies’ operations could
have an
adverse effect
on the
business, financial
results, financial
condition or
the share
price of
the combined
Group
following the transaction. The coordination process may
also result in additional and unforeseen expenses.
Annual Report 2024 |
Our business model and environment |
Risk factors
25
Substantial changes in regulation may adversely affect our
businesses and our ability to execute our strategic plans
Since the
financial crisis
of 2008,
we have
been subject
to significant
regulatory
requirements,
including recovery
and
resolution planning,
changes in
capital and
prudential standards,
changes in
taxation regimes
as a
result of
changes in
governmental administrations,
new and
revised market
standards and
fiduciary duties,
as well
as new
and developing
environmental,
social
and
governance
(ESG)
standards
and
requirements.
Notwithstanding
attempts
by
regulators
to
align
their
efforts,
the
measures
adopted
or
proposed
for
banking
regulation
differ
significantly
across
the
major
jurisdictions, making
it increasingly
difficult to
manage a
global institution.
Regulatory reviews
of the events
leading to
the failures
of US
banks and
the acquisition
of Credit
Suisse by
UBS Group
in 2023,
as well
as regulatory
measures to
complete the implementation of the Basel 3 standards,
may increase capital, liquidity and other requirements
applicable
to banks,
including UBS
AG. Swiss
regulatory
changes with
regard
to such
matters as
capital and
liquidity have
often
proceeded more
quickly than those
in other major
jurisdictions, and Switzerland’s
requirements for
major international
banks are among the strictest of the major financial
centers. Switzerland has implemented the final Basel 3 requirements
effective 1 January 2025, at least a year
ahead of the EU and the UK and likely several years ahead
of the United States.
In addition,
Switzerland
is expected
to introduce
in 2025
proposals
for
changes
in
regulation
following
the
failure
of
Credit Suisse that will likely
include changes to capital and liquidity
requirements for UBS,
the remaining Swiss G-SIB,
as
well as
changes to
the supervisory
regime.
Increased
capital or
liquidity requirements
would put
us at
a disadvantage
when
competing
with
peer
financial
institutions
subject
to
lower
capital
or
liquidity
requirements
or
more
lenient
regulation and increase our competitive disadvantage
in some areas with unregulated non-bank
competitors.
Our
implementation
of
additional
regulatory
requirements
and
changes
in
supervisory
standards,
as
well
as
our
compliance with
existing laws
and regulations,
continue
to receive
heightened scrutiny
from supervisors.
If we
do not
meet supervisory expectations in relation to these or other
matters, or if additional supervisory or regulatory issues arise,
we would
likely be
subject to
further
regulatory scrutiny,
as well
as measures
that may
further
constrain our
strategic
flexibility.
Resolvability and
resolution
and recovery
planning:
We have
moved significant
operations into
subsidiaries to
improve
resolvability and meet other regulatory requirements, and this
has resulted in substantial implementation costs, increased
our
capital
and
funding
costs
and
reduced
operational
flexibility.
For
example,
we
have
transferred
all
of
our
US
subsidiaries
under
a
US
intermediate
holding
company
to
meet
US
regulatory
requirements
and
have
transferred
substantially all the operations of Personal Corporate Banking and Global Wealth Management booked in Switzerland
to UBS Switzerland AG to improve resolvability.
These
changes
create
operational,
capital,
liquidity,
funding
and
tax
inefficiencies.
Our
operations
in
subsidiaries
are
subject
to
local
capital,
liquidity,
stable
funding,
capital
planning
and
stress
testing
requirements.
These
requirements
have resulted in increased capital and liquidity requirements in
affected subsidiaries, which limit our operational flexibility
and negatively affect our
ability to benefit
from synergies between business
units and to
distribute earnings to
the Group.
Under the Swiss too-big-to-fail (TBTF) framework, we are required to put in place viable emergency plans to
preserve the
operation
of
systemically
important
functions
in
the
event
of
a
failure.
Moreover,
under
this
framework
and
similar
regulations in
the US,
the UK,
the EU
and other
jurisdictions in
which we
operate, we
are required
to prepare
credible
recovery and resolution
plans detailing the
measures that would
be taken to recover
in a significant adverse
event or in
the
event
of winding
down
the
Group,
UBS AG
or the
operations
in a
host
country
through
resolution
or
insolvency
proceedings. If a recovery or resolution plan that we
produce is determined by the relevant authority to be inadequate or
not credible, relevant regulation may permit the authority to place limitations on the scope or size of our
business in that
jurisdiction, or oblige us
to hold higher amounts
of capital or liquidity
or to change our
legal structure or business
in order
to remove the relevant impediments to resolution.
The
authorities
in
Switzerland
and
internationally
have
published
lessons
learned
from
the
Credit
Suisse
and
the
US
regional bank
failures, which
are expected
to result
in additional
requirements regarding
resolution planning
and early
intervention tools for authorities.
In connection with these
reviews, FINMA has announced
that it would not provide
an
assessment of
the UBS
resolution plans
in 2024
as it
expects to
make adjustments
to our
resolution plan
requirements
based on lessons learned reviews as well
as potential changes in its recovery and resolution authority under
amendments
that are
expected to
be proposed
to Swiss
law. We
expect to
make adjustments
to our resolution
plans to
reflect additional
guidance from FINMA and may be required to make
further adjustment to reflect any changes to law that are
enacted.
Capital and prudential
standards:
As an internationally
active Swiss systemically
relevant bank, we
are subject to
capital
and total loss-absorbing capacity
(TLAC) requirements that are
among the most stringent in
the world. Moreover, many
of our subsidiaries must comply with minimum capital, liquidity and similar requirements and, as a result, UBS Group AG
and UBS AG have contributed a
significant portion of their capital and
provide substantial liquidity to these
subsidiaries.
These
funds
are
available
to
meet
funding
and
collateral
needs
in
the
relevant
entities,
but
are
generally
not
readily
available for use by the Group as a whole.
Our risk-weighted assets
(RWA) and leverage
ratio denominator (LRD)
are affected as
Switzerland has implemented
the
final standards promulgated by the
Basel Committee on Banking Supervision
(the BCBS) and may be further
affected as
provisions
of
the
standards
are
phased
in.
Although
these
final
Basel
3
standards
have
now
been
implemented
in
Switzerland, other major banking centers
have delayed implementation or have
not yet enacted the final standards
into
regulation. Extended delay in implementation
by other jurisdictions may
lead to higher capital requirements
for UBS AG
relative to peers.
Annual Report 2024 |
Our business model and environment |
Risk factors
26
In connection with the acquisition of the Credit
Suisse Group, FINMA has permitted Credit Suisse
entities to continue to
apply certain
prior
interpretations
and
has provided
supervisory
rulings
on
the
treatment
of certain
items for
RWA or
capital purposes. In general,
these interpretations require
that UBS phase out
the treatment over
the next several years.
In addition,
FINMA has
agreed
that the
additional capital
requirement applicable
to Swiss
systemically relevant
banks,
which is based on market
share in Switzerland and
leverage ratio denominator (LRD),
will not increase as a
result of the
acquisition of the Credit Suisse Group before the end
of 2025. The phase-out or end of these periods will
likely increase
our overall capital requirements.
The report of
the Swiss Federal
Council on the
failure of Credit
Suisse recommends
changes to Swiss
capital regulation
that, if
adopted, may
have the
effect of
substantially increasing
UBS’s capital
requirements. The
Swiss Federal
Council
has indicated
that it
will publish
proposed amendments
to law
and revisions
to banking
ordinances to
implement the
recommendations for public comment in
May 2025. Certain of
the measures recommended in the
Federal Council report
could require additional capital at UBS AG.
Increases in capital and
changes in liquidity requirements may, in
the aggregate require us to
maintain significantly higher
levels
of capital,
which
may
have
an affect
on
our
ability
to meet
our
ambitions
for
return
on capital
and
for
capital
returns to shareholders. Higher capital or liquidity requirements applied to UBS Group
or UBS AG relative to competitors
in Switzerland or abroad may affect UBS AG’s ability to compete with firms subject to less stringent capital requirements
and increase UBS AG’s costs to serve customers.
Market regulation and fiduciary standards:
Our wealth and asset management
businesses operate in an environment
of
increasing regulatory scrutiny and changing standards
with respect to fiduciary and
other standards of care and
the focus
on mitigating
or eliminating
conflicts of
interest between
a manager
or advisor
and the
client, which
require effective
implementation
across
the
global systems
and
processes
of investment
managers
and
other
industry
participants.
For
example, we
have made
material changes
to our
business processes,
policies and
the terms
on which we
interact with
these clients
in order
to comply
with US
Securities and
Exchange Commission
(SEC) Regulation
Best Interest,
which is
intended to enhance and clarify
the duties of brokers and investment
advisers to retail customers, and
the Volcker Rule,
which
limits
our
ability
to
engage
in
proprietary
trading,
as
well
as
changes
in
European
and
Swiss
market
conduct
regulation. Future changes
in the regulation
of our duties
to customers may
require us to
make further
changes to our
businesses, which would result
in additional expense and may
adversely affect our business.
We may also
become subject
to other similar regulations substantively
limiting the types of activities in which
we may engage or the
way we conduct
our operations.
In many
instances, we provide
services on
a cross-border basis,
and we
are therefore sensitive
to barriers restricting
market
access for
third-country firms.
In particular,
efforts in
the EU
to harmonize
the regime
for third-country
firms to
access
the European market may have the effect of creating new barriers that adversely affect our ability to conduct business in
these
jurisdictions
from
Switzerland.
In
addition,
a
number
of
jurisdictions
are
increasingly
regulating
cross-border
activities based on
determinations of equivalence of
home country regulation,
substituted compliance or
similar principles
of
comity.
A
negative
determination
with
respect
to
Swiss
equivalence
could
limit
our
access
to
the
market
in
those
jurisdictions and
may negatively
influence our
ability to
act as a
global firm. For
example, the
EU declined to
extend its
equivalence determination for Swiss exchanges, which lapsed as
of 30 June 2019.
UBS AG has
experienced cross-border outflows over
a number of
years as a
result of heightened
focus by fiscal
authorities
on cross-border
investment
and fiscal
amnesty
programs,
in
anticipation
of the
implementation
in Switzerland
of the
global automatic exchange of tax
information, and as a result of the
measures UBS AG has implemented
in response to
these
changes.
Further
changes
in
local
tax
laws
or
regulations
and
their
enforcement,
additional
cross-border
tax
information exchange regimes,
national tax amnesty
or enforcement programs
or similar actions may
affect our clients’
ability or willingness to do business with us and could result
in additional cross-border outflows.
Our reputation is critical to our success
Our reputation is critical to the success of our strategic plans, business and prospects. Reputational damage is difficult to
reverse,
and
improvements
tend
to
be
slow
and
difficult
to
measure.
In
the
past,
our
reputation
has
been
adversely
affected
by
our
losses
during
the
2008
financial
crisis,
investigations
into
our
cross-border
private
banking
services,
criminal resolutions
of London
Interbank Offered
Rates (LIBOR)-related
and foreign
exchange matters,
as well
as other
matters. We
believe that
reputational damage
as a
result of
these events
was an
important factor
in our loss
of clients
and client assets across our asset-gathering businesses.
The Credit Suisse Group was more
recently subject to significant
litigation and
regulatory matters and
to financial
losses that adversely
affected its
reputation and the
confidence of
clients,
which played a significant role
in the events leading to the
acquisition of the Credit
Suisse Group in March
2023. These
events, or new events
that cause reputational damage,
could have a material
adverse effect on
our results of operation
and financial condition, as well as our ability to achieve our
strategic goals and financial targets.
Annual Report 2024 |
Our business model and environment |
Risk factors
27
Operational risks affect our business
Our
businesses
depend
on
our
ability
to
process
a
large
number
of
transactions,
many
of
which
are
complex,
across
multiple and diverse markets in different currencies,
to comply with requirements of many different
legal and regulatory
regimes
to
which
we
are
subject
and
to
prevent,
or
promptly
detect
and
stop,
unauthorized,
fictitious
or
fraudulent
transactions. We also rely on access to, and
on the functioning of, systems maintained by
third parties, including clearing
systems, exchanges,
information processors
and central
counterparties. Any
failure of
our or
third-party
systems could
have
an
adverse
effect
on
us.
These
risks
may
be
greater
as
we
deploy
newer
technologies,
such
as
blockchain,
or
processes, platforms or products
that rely on these technologies.
Our operational risk management
and control systems
and processes
are
designed
to help
ensure
that
the
risks
associated
with
our
activities
–
including
those
arising
from
process error,
failed execution,
misconduct, unauthorized
trading, fraud,
system failures,
financial crime,
cyberattacks,
breaches of information security,
inadequate or ineffective access controls and failure of security and physical protection
– are
appropriately controlled.
If our
internal controls
fail or
prove ineffective
in identifying
and remedying
these risks,
we could suffer
operational failures
that might result
in material losses.
The acquisition of
the Credit Suisse
Group may
elevate these risks,
particularly during
the first
phases of
integration, as
the firms
have historically
operated under different
procedures, IT systems, risk policies and structures
of governance.
As a
meaningful proportion
of our
staff have
been and
will continue
working from
outside the
office, we
have faced,
and will
continue to
face, new
challenges and
operational risks,
including maintenance
of supervisory
and surveillance
controls, as well as
increased fraud and
data security risks. While
we have taken
measures to manage
these risks, these
measures could prove not to be effective.
We use automation
as part of
our efforts to
improve efficiency, reduce the risk of error
and improve our
client experience.
We intend to expand the use
of robotic processing, machine learning and artificial
intelligence (AI) to further these goals.
Use of these
tools presents
their own
risks, including
the need
for effective
design and
testing; the
quality of
the data
used for development and
operation of machine
learning and AI tools
may adversely affect
their functioning and result
in errors and other operational risks.
Financial services
firms have
increasingly been
subject to
breaches of
security and
to cyber-
and other
forms of
attack,
some of
which are
sophisticated
and targeted
attacks intended
to gain
access to
confidential information
or systems,
disrupt service or
steal or destroy
data, which may
result in business
disruption or the
corruption or loss
of data at
UBS
AG’s
locations
or
those
of
third
parties.
Cyberattacks
by
hackers,
terrorists,
criminal
organizations,
nation
states
and
extremists have
also increased
in frequency
and sophistication.
Current geopolitical
tensions have
also led
to increased
risk
of
cyberattack
from
foreign
state
actors.
In
particular,
the
Russia–Ukraine
war
and
the
imposition
of
significant
sanctions on
Russia by
Switzerland,
the US,
the EU,
the UK
and others
has resulted
and may
continue to
result
in an
increase in the risk of cyberattacks.
Such attacks may occur on
our own systems or on
the systems that are operated
by
external service providers, may be attempted through the introduction of ransomware, viruses or malware, phishing and
other forms
of social
engineering, distributed denial
of service
attacks and
other means.
These attempts
may occur
directly
or using
equipment or
security passwords
of our
employees, third-party
service providers
or other
users. Cybersecurity
risks
also
have
increased
due
to
the
widespread
use
of
digital
technologies,
cloud
computing
and
mobile
devices
to
conduct financial business
and transactions, as
well as due
to generative AI,
which increases the
capabilities of adversaries
to
mount
sophisticated
phishing
attacks,
for
example,
through
the
use
of
deepfake
technologies,
and
presents
new
challenges to
the protection
of our systems
and networks
and the
confidentiality and
integrity of
our data.
During the
first quarter of 2023, a third-party
vendor, ION XTP, suffered a ransomware
attack, which resulted in some disruption
to
our exchange-traded derivatives clearing activities, although we restored our services within 36 hours, using an available
alternative solution.
In addition
to external
attacks, we
have experienced
loss of
client data
from failure
by employees
and others to follow internal policies and procedures and
from misappropriation of our data by employees and others.
We may not be able to anticipate, detect or recognize threats to our systems
or data and our preventative measures may
not
be
effective
to
prevent
an
attack
or
a
security
breach.
In
the
event
of
a
security
breach,
notwithstanding
our
preventative measures, we may not immediately detect a particular breach or attack. The acquisition of the Credit Suisse
Group may elevate
and intensify these risks,
as would-be attackers
have a larger potential
target in the combined
bank
and
differences
in
systems,
policies,
and
platforms
could
make
threat
detection
more
difficult.
In
addition,
the
implementation
of
the
large-scale
technological
change
program
that
is
necessary
to
integrate
the
combined
bank’s
systems at pace
may also result
in increased risks.
Once a particular
attack is detected, time
may be required
to investigate
and assess the nature and extent of the attack,
and to restore and test systems and data.
If a successful attack occurs at
a service provider, as we have
recently experienced, we may be
dependent on the service provider’s
ability to detect the
attack, investigate
and assess
the attack
and successfully
restore the
relevant systems
and data.
A successful
breach or
circumvention of security of our or a service provider’s systems
or data could have significant negative consequences
for
us,
including
disruption
of
our
operations,
misappropriation
of
confidential
information
concerning
us
or
our
clients,
damage to
our systems, financial
losses for
us or
our clients, violations
of data
privacy and similar
laws, litigation exposure,
and damage to our reputation. We may be subject to enforcement actions as regulatory focus on
cybersecurity increases
and regulators
have announced new
rules, guidance and
initiatives on
ransomware and other
cybersecurity-related issues.
Annual Report 2024 |
Our business model and environment |
Risk factors
28
We are subject to complex and frequently changing laws
and regulations governing the protection of client
and personal
data, such as the EU General Data
Protection Regulation. Ensuring that
we comply with applicable laws and regulations
when we collect, use and transfer personal information
requires substantial resources
and may affect the ways in which
we conduct our business. In
the event that we fail
to comply with applicable laws,
we may be exposed to
regulatory fines
and penalties and
other sanctions.
We may also
incur such penalties
if our vendors
or other service
providers or
clients
or counterparties fail to comply with these laws or to maintain appropriate controls over protected data. In addition, any
loss or exposure of client or other data may adversely
damage our reputation and adversely affect
our business.
A major focus of US and other countries’ governmental policies
relating to financial institutions in recent
years has been
on fighting
money
laundering
and
terrorist
financing.
We
are
required
to
maintain
effective
policies,
procedures
and
controls to detect,
prevent and report
money laundering and
terrorist financing, and
to verify the identity
of our clients
under the
laws of
many of
the countries
in which
we operate.
We are
also subject
to laws
and regulations
related
to
corrupt and illegal payments to government officials by others, such as the
US Foreign Corrupt Practices Act and the UK
Bribery Act. We have implemented policies, procedures and internal controls that are designed to comply with such laws
and regulations.
Notwithstanding
this, regulators
have
found deficiencies
in the
design and
operation of
anti-money-
laundering
programs
in
our
US
operations.
We
have
undertaken
a
significant
program
to
address
these
regulatory
findings with the objective of fully meeting regulatory expectations for our programs. Failure to maintain and implement
adequate
programs
to
combat
money
laundering,
terrorist
financing
or corruption,
or any
failure
of our
programs
in
these areas, could have
serious consequences both from
legal enforcement action
and from damage to
our reputation.
Frequent changes in
sanctions imposed and
increasingly complex sanctions
imposed on countries,
entities and individuals,
as exemplified by the breadth and scope
of the sanctions imposed in relation to
the war in Ukraine, increase our
cost of
monitoring and complying with sanctions requirements and increase the risk that we will not identify in a timely manner
client activity that is subject to a sanction.
As a
result
of
new
and
changed
regulatory
requirements
and
the
changes
we
have
made
in
our
legal
structure,
the
volume, frequency
and complexity
of our
regulatory
and other
reporting
has remained
elevated. Regulators
have also
significantly
increased
expectations
regarding
our
internal
reporting
and
data
aggregation,
as
well
as
management
reporting.
We
have
incurred,
and
continue
to
incur,
significant
costs
to
implement
infrastructure
to
meet
these
requirements.
Failure
to
meet
external
reporting
requirements
accurately
and
in
a
timely
manner
or
failure
to
meet
regulatory expectations of
internal reporting, data aggregation
and management reporting
could result in enforcement
action or other adverse consequences for us.
In addition, despite
the contingency plans
that we have
in place, our
ability to conduct
business may be
adversely affected
by a
disruption in
the infrastructure
that supports
our businesses
and the
communities in
which we
operate. This
may
include
a
disruption
due
to
natural
disasters,
pandemics,
civil
unrest,
war
or
terrorism
and
involve
electrical,
communications, transportation
or other services
that we
use or that
are used
by third
parties with whom
we conduct
business.
We depend on our risk management and control processes to avoid
or limit potential losses in our businesses
Controlled risk-taking
is a
major part
of the
business of
a financial
services firm.
Some losses
from risk-taking
activities
are inevitable, but,
to be
successful over
time, we
must balance
the risks
we take
against the
returns generated. Therefore,
we must diligently identify,
assess, manage and control
our risks, not only
in normal market
conditions but also as
they
might develop under more extreme,
stressed conditions, when concentrations of exposures
can lead to severe losses.
We have
not always
been able
to prevent
serious losses
arising from
risk management
failures and
extreme or
sudden
market
events.
We
recorded
substantial
losses
on
fixed-income
trading
positions
in
the
2008
financial
crisis,
in
the
unauthorized trading incident in
2011 and, more recently,
positions resulting from
the default of a US
prime brokerage
client. Credit
Suisse has
suffered
very significant
losses from
the default
of the US
prime brokerage
client and
losses in
supply
chain
finance
funds
managed
by
it,
as
well
as
other
matters.
As
a
result
of
these,
Credit
Suisse
is
subject
to
significant regulatory
remediation obligations
to address
deficiencies in
its risk
management
and control
systems, that
continue following the merger.
We
regularly
revise
and
strengthen
our
risk
management
and
control
frameworks
to
seek
to
address
identified
shortcomings. Nonetheless, we could suffer further
losses in the future if, for example:
–
we do not fully identify the risks in our portfolio, in particular
risk concentrations and correlated risks;
–
our
assessment
of
the
risks
identified,
or
our
response
to
negative
trends,
proves
to
be
untimely,
inadequate,
insufficient or incorrect;
–
our risk models prove insufficient to predict the scale of financial
risks the bank faces;
–
markets
move in
ways that
we do
not expect
– in
terms of
their speed,
direction,
severity
or correlation
– and
our
ability to manage risks in the resulting environment is, therefore,
affected;
–
third parties
to whom
we have
credit exposure
or whose
securities we
hold are
severely affected
by events
and we
suffer defaults and impairments beyond the level implied
by our risk assessment; or
–
collateral or other
security provided by
our counterparties
and clients proves
inadequate to
cover their obligations
at
the time of default.
We also hold legacy risk positions, primarily in Non-core and Legacy, that, in many cases, are illiquid and may deteriorate
in value. The acquisition of the Credit
Suisse Group and the integration of
UBS AG with Credit Suisse AG has
increased,
materially, the
portfolio of
business that
is outside
of our
risk appetite
and subject
to exit
that will
be managed
in the
Non-core and Legacy segment.
Annual Report 2024 |
Our business model and environment |
Risk factors
29
We also manage
risk on behalf
of our clients.
The performance of assets
we hold for
our clients may
be adversely affected
by the same aforementioned
factors. If clients suffer
losses or the performance
of their assets held
with us is not
in line
with relevant benchmarks against
which clients assess investment
performance, we may suffer
reduced fee income and
a decline in assets under management, or withdrawal of mandates.
Investment positions, such
as equity investments
made as part
of strategic initiatives
and seed investments
made at the
inception of funds that we
manage, may also be affected
by market risk factors. These
investments are often not
liquid
and generally
are intended
or required
to be
held beyond
a normal
trading horizon.
Deteriorations in
the fair
value of
these positions would have a negative effect on our earnings.
We may be unable to identify or capture revenue or competitive
opportunities, or retain and attract qualified
employees
The financial
services
industry
is characterized
by intense
competition,
continuous
innovation, restrictive,
detailed
and
sometimes
fragmented
regulation
and
ongoing
consolidation.
We
face
competition
at
the
level
of
local
markets
and
individual business lines and from global financial institutions that are comparable to us in their size and breadth, as well
as competition from
new technology-based market
entrants, which may not
be subject to the
same level of regulation.
Barriers to entry in individual markets and pricing levels are being eroded
by new technology. We
expect these trends to
continue and competition
to increase.
Our competitive
strength and
market position
could be eroded
if we are
unable
to
identify
market
trends
and
developments,
do
not
respond
to
such
trends
and
developments
by
devising
and
implementing adequate
business strategies,
do not adequately
develop or update
our technology,
including our
digital
channels and tools, or are unable to attract
or retain the qualified people needed.
The
amount
and
structure
of
our
employee
compensation
is
affected
not
only
by
our
business
results
but
also
by
competitive factors and regulatory considerations.
In response
to the
demands of
various stakeholders,
including regulatory
authorities and
shareholders, and
in order
to
better
align
the
interests
of
our
staff
with
other
stakeholders,
we
have
increased
average
deferral
periods
for
stock
awards, expanded forfeiture provisions and, to a more limited extent, introduced clawback
provisions for certain awards
linked to business
performance. We
have also
introduced individual
caps on the
proportion of
fixed to variable
pay for
the members of
the Executive Board (EB),
as well as
certain other employees. UBS
is also required to
maintain and enforce
provisions
requiring
UBS
to
recover
from
EB
members
and
certain
other
executives
a
portion
of
performance-based
incentive compensation
in the
event that
the UBS
Group and
UBS AG,
or another
entity with
securities listed
on a
US
national securities exchange, is required
to restate its financial statements as a result
of a material error.
Constraints on the
amount or structure of
employee compensation, higher levels of
deferral, performance conditions and
other circumstances triggering the forfeiture of unvested awards may adversely
affect our ability to retain and attract key
employees, particularly where we compete with companies that are not subject to
these constraints. The loss of key staff
and the inability to
attract qualified replacements
could seriously compromise
our ability to execute
our strategy and
to
successfully
improve
our
operating
and
control
environment,
and
could
affect
our
business
performance.
This
risk
is
intensified by
elevated levels
of attrition
among Credit
Suisse employees.
Swiss law
requires that
shareholders approve
the compensation of
the UBS Group
AG Board of
Directors (the Group
Board) and the
UBS Group AG
Group Executive
Board (GEB) each
year. If UBS Group
AG’s shareholders fail to
approve the compensation for
the GEB or
the Group Board,
this could have an adverse effect on our ability to retain
experienced directors and our senior management.
Our operating results, financial condition and ability to pay
our obligations in the future may be affected by funding,
dividends and other distributions received directly or indirectly
from its subsidiaries, which may be subject to restrictions
UBS AG’s ability to pay
its obligations in the future will depend
on the level of funding, dividends
and other distributions,
if
any,
received
from
UBS
Switzerland
AG
and
other
subsidiaries.
The
ability
of
such
subsidiaries
to
make
loans
or
distributions,
directly
or indirectly,
to UBS
AG
may
be restricted
as a
result
of
several
factors,
including
restrictions
in
financing agreements
and the
requirements
of applicable
law and
regulatory,
fiscal or
other restrictions.
In particular,
UBS
AG’s
direct
and
indirect
subsidiaries,
including
UBS
Switzerland
AG,
UBS
Americas
Holding
LLC,
Credit
Suisse
Holdings (USA) Inc., UBS
Europe SE and
Credit Suisse International,
are subject to
laws and regulations
that require
the
entities to
maintain minimum
levels of
capital
and liquidity,
that restrict
dividend
payments,
that authorize
regulatory
bodies to block or reduce the flow of funds from those subsidiaries to UBS Group AG, or that could affect their ability to
repay
any
loans
made
to,
or
other
investments
in,
such
subsidiary
by
UBS
AG
or another
member
of
the
Group.
For
example,
in
the
early
stages
of
the
COVID-19
pandemic,
the
European
Central
Bank
ordered
all
banks
under
its
supervision
to cease
dividend
distributions,
and the
Board
of Governors
of the
Federal
Reserve
System
limited capital
distributions by bank holding companies
and intermediate holding companies.
Restrictions and regulatory actions
could
impede access
to funds
that
UBS Group
AG may
need to
meet its
obligations
or to
pay dividends
to shareholders.
In
addition, UBS Group AG’s right to participate
in a distribution of assets upon a subsidiary’s liquidation
or reorganization
is subject to all prior claims of the subsidiary’s creditors.
Furthermore, UBS AG
may guarantee some
of the payment
obligations of certain
of the Group’s subsidiaries
from time
to time. These guarantees may
require UBS AG to provide substantial
funds or assets to subsidiaries
or their creditors or
counterparties at a time when UBS AG is in need of liquidity
to fund its own obligations.
Annual Report 2024 |
Our business model and environment |
Risk factors
30
Market, credit and macroeconomic risks
Performance in the financial services industry is affected
by market conditions and the macroeconomic climate
Our
businesses
are
materially
affected
by
market
and
macroeconomic
conditions.
A
market
downturn
and
weak
macroeconomic conditions can be
precipitated by a
number of
factors, including geopolitical
events, such as
international
armed conflicts,
war,
or acts
of terrorism,
the imposition
of sanctions,
global trade
or global
supply chain
disruptions,
including
energy
shortages
and
food
insecurity,
changes
in
monetary
or
fiscal
policy,
changes
in
trade
policies
or
international trade
disputes, significant
inflationary or deflationary
price changes,
disruptions in
one or
more concentrated
economic
sectors,
natural
disasters,
pandemics
or
local
and
regional
civil
unrest.
Such
developments
can
have
unpredictable and destabilizing effects.
Adverse changes in interest rates,
credit spreads, securities prices, market
volatility and liquidity, foreign exchange
rates,
commodity prices, and
other market fluctuations,
as well as changes
in investor sentiment,
can affect our earnings
and
ultimately our financial
and capital positions. As
financial markets are global
and highly interconnected, local
and regional
events
can
have
widespread
effects
well
beyond
the
countries
in
which
they
occur.
Any
of
these
developments
may
adversely affect our business or financial results.
As a
result of
significant volatility
in the
market, our
businesses
may experience
a decrease
in client
activity levels
and
market
volumes,
which
would
adversely
affect
our
ability
to
generate
transaction
fees,
commissions
and
margins,
particularly in Global Wealth Management and
the Investment Bank. A market downturn
would likely reduce the volume
and valuation of
assets that
we manage on
behalf of clients,
which would reduce
recurring fee
income that is
charged
based on invested assets, primarily in Global Wealth Management and Asset Management, and performance-based fees
in Asset Management.
Such a downturn
could also cause
a decline in the
value of assets that
we own and account
for
as investments or trading positions. In addition, reduced market
liquidity or volatility may limit trading opportunities and
therefore may reduce transaction-based income and may also
impede our ability to manage risks.
Health emergencies, including
pandemics and measures
taken by governmental authorities
to manage them,
may have
effects
such
as
labor
market
displacements,
supply
chain
disruptions,
and
inflationary
pressures,
and
adversely
affect
global
and
regional
economic
conditions,
resulting
in
contraction
in
the
global
economy,
substantial
volatility
in
the
financial markets, crises
in markets for
goods and services, disruptions
in real estate
markets, increased unemployment,
increased
credit
and
counterparty
risk,
and
operational
challenges,
as
we
saw
with
the
COVID-19
pandemic.
Such
economic or market disruptions,
including inflationary pressures, may lead
to reduced levels of
client activity and demand
for
our
products
and
services,
increased
utilization
of
lending
commitments,
significantly
increased
client
defaults,
continued
and
increasing
credit
and
valuation
losses
in
our
loan
portfolios,
loan
commitments
and
other
assets,
and
impairments of
other financial
assets.
A fall
in equity
markets
and a
consequent decline
in invested
assets would
also
reduce recurring
fee income in our Global
Wealth Management and
Asset Management businesses,
as we experienced
in the second
quarter of 2022. These
factors and other
consequences of a
health emergency may
negatively affect
our
financial condition, including
possible constraints on capital
and liquidity,
as well as resulting
in a higher cost
of capital,
and possible downgrades to our credit ratings.
Geopolitical events:
may
have
significant
impacts
on
global
markets,
exacerbate
global
inflationary
pressures
and
slow
global
growth.
In
addition, the ongoing conflicts may continue to cause significant population displacement, and lead to shortages of vital
commodities, including
energy shortages
and food
insecurity outside
the areas
immediately involved
in armed
conflict.
Governmental responses to
the armed conflicts,
including, with respect
to the Russia–Ukraine
war, coordinated successive
sets of
sanctions
on
Russia
and Belarus,
and
Russian
and
Belarusian
entities
and
nationals,
and
the
uncertainty
as to
whether the
ongoing conflicts will
widen and intensify,
may continue to
have significant
adverse effects
on the market
and macroeconomic conditions,
including in ways
that cannot be
anticipated.
If individual countries
impose restrictions
on cross-border payments
or trade,
or other exchange
or capital controls,
or change their
currency (for example,
if one
or more
countries should leave
the Eurozone,
as a
result of the
imposition of sanctions
on individuals,
entities or
countries,
or escalation
of trade
restrictions and
other
actions
between
the
US, or
other
countries,
and
China), we
could
suffer
adverse effects
on our business,
losses from enforced
default by counterparties,
be unable to
access our
own assets
or
be unable to effectively manage our risks.
We could
be materially
affected
if a
crisis develops,
regionally or
globally, as
a result
of disruptions
in markets
due to
macroeconomic or political developments, trade
restrictions, or the failure of a major
market participant. Over time, our
strategic plans have
become more heavily
dependent on our
ability to generate
growth and
revenue in emerging
markets,
including China, causing us to be more exposed to the risks
associated with such markets.
Global Wealth Management derives
revenues from all the principal regions
but has a greater concentration
in Asia than
many peers and a
substantial presence in
the US, unlike
many European peers.
The Investment Bank’s
business is more
heavily weighted to Europe and Asia than our peers, while its derivatives business is more heavily weighted to structured
products
for
wealth
management
clients,
in
particular
with
European
and
Asian
underlyings.
Our
performance
may
therefore be more affected
by political, economic and
market developments in these
regions and businesses than
some
other financial service providers.
Annual Report 2024 |
Our business model and environment |
Risk factors
31
The extent to which ongoing conflicts, current inflationary pressures
and related adverse economic conditions affect our
businesses, results of operations and financial condition, as well as our regulatory capital and liquidity ratios, will depend
on future
developments,
including the
effects
of the
current
conditions on
our clients,
counterparties, employees
and
third-party service providers.
Our credit risk exposure to clients, trading counterparties
and other financial institutions would increase under adverse
or other economic conditions
Credit risk is an integral part of many of our activities,
including lending, underwriting and derivatives activities. Adverse
economic or market conditions, or the imposition of sanctions or other
restrictions on clients, counterparties or financial
institutions, may lead
to impairments and
defaults on these
credit exposures.
Losses may be
exacerbated by declines
in
the value
of collateral
securing loans and
other exposures. In
our prime
brokerage, securities finance
and Lombard lending
businesses, we
extend substantial amounts
of credit against
securities collateral the
value or
liquidity of
which may decline
rapidly.
Market
closures and
the imposition
of exchange
controls, sanctions
or other
measures
may limit
our ability
to
settle existing transactions
or to realize
on collateral, which
may result in
unexpected increases
in exposures. Our
Swiss
mortgage and corporate lending portfolios,
which have increased substantially as
a result of the Credit
Suisse acquisition,
are
a
large
part
of
our
overall
lending.
We
are
therefore
exposed
to
the
risk
of
adverse
economic
developments
in
Switzerland, including property valuations
in the housing market, the strength
of the Swiss franc and its effect
on Swiss
exports, a return to negative interest rates applied by the Swiss National Bank, economic conditions within the Eurozone
or
the
EU,
and
the
evolution
of
agreements
between
Switzerland
and
the
EU
or
European
Economic
Area,
which
represent Switzerland’s largest
export market. We have
exposures related to real
estate in various countries, including
a
substantial Swiss mortgage portfolio. Although we believe this portfolio is prudently managed,
we could nevertheless be
exposed to losses if a substantial deterioration in the Swiss real
estate market were to occur.
As we experienced in 2020, under the IFRS 9 expected credit loss (ECL) regime, credit
loss expenses may increase rapidly
at the onset of
an economic downturn as
a result of higher
levels of credit impairments
(stage 3), as well as
higher ECL
from stages 1 and
2. Substantial increases
in ECL
could exceed expected loss
for regulatory capital
purposes and adversely
affect our common equity tier 1 (CET1) capital and regulatory
capital ratios.
Interest rate trends and changes could negatively affect our
financial results
UBS’s businesses
are sensitive
to changes
in interest
rate trends.
A prolonged
period of
low or
negative interest
rates,
particularly in Switzerland
and the Eurozone,
adversely affected
the net interest
income generated by
UBS’s Personal
Corporate
Banking and
Global
Wealth
Management
businesses
prior
to 2022.
Actions that
UBS AG
took
to mitigate
adverse effects
on income, such
as the
introduction of
selective deposit
fees or
minimum lending
rates, contributed
to
outflows of customer
deposits (a
key source
of funding
for UBS AG),
net new
money outflows
and a declining
market
share in its Swiss lending business.
During 2022, interest
rates increased sharply in
the US and most
other markets, including a
shift from negative
to positive
central bank policy rates in the Eurozone and Switzerland, as central banks
responded to higher inflation. Higher interest
rates generally benefit UBS AG’s net interest income. However, as returns on alternatives to deposits increase with
rising
interest rates, such as returns on money market
funds, UBS AG experienced outflows from customer
deposits and shifts
of deposits from
lower-interest account
types to accounts
bearing higher
interest rates, such
as savings and
certificates
of deposit, starting with effects in the US, where rates had rapidly increased. In addition, higher-for-longer interest rates,
such as those experienced
in 2023, have
led to similar
shifts in euro
and Swiss franc
deposits. Sustained higher
interest
rates
also may
adversely
affect
our credit
counterparties.
Customer
deposit
outflows
could require
UBS
AG to
obtain
alternative funding, which would likely be more costly than
customer deposits.
Currency
fluctuation may have an adverse effect
on our profits, balance sheet and regulatory capital
We
are
subject
to
currency
fluctuation
risks
as
a
substantial
portion
of
our
assets
and
liabilities
are
denominated
in
currencies other than UBS AG’s presentation
currency,
the US dollar.
In order to hedge our CET1 capital
ratio, our CET1
capital must have
foreign currency
exposure, which leads
to currency sensitivity.
As a consequence,
it is not possible
to
simultaneously fully hedge both CET1 capital and the CET1 capital ratio. Accordingly,
changes in foreign exchange rates
may adversely affect our profits, balance
sheet, and capital, leverage and liquidity coverage
ratios.
Annual Report 2024 |
Our business model and environment |
Risk factors
32
Regulatory and legal risks
Material legal and regulatory risks arise in the conduct of
our business
As a global
financial services
firm operating
in more
than 50 countries,
we are
subject to many
different legal,
tax and
regulatory regimes,
including extensive regulatory
oversight, and are
exposed to significant
liability risk. We
are subject
to a large number of claims,
disputes, legal proceedings and government investigations, and
we expect that our ongoing
business activities will continue to give rise to such matters in the future. In addition,
UBS inherited claims against Credit
Suisse entities as part of the acquisition, including matters that may be material to the operating results of
the combined
Group. The
extent of
our financial
exposure
to these
and other
matters is
material and
could substantially
exceed the
level of
provisions
that we
have established.
We
are
not able
to predict
the financial
and non-financial
consequences
these matters may have when resolved.
We may be subject to adverse preliminary determinations or court decisions that may negatively affect public perception
and our
reputation,
result
in prudential
actions from
regulators, and
cause us
to record
additional
provisions
for
such
matters even when we believe we have substantial
defenses and expect to ultimately achieve a more
favorable outcome.
This risk is
illustrated by the
award of aggregate
penalties and
damages of
EUR 4.5bn against
UBS by the
court of first
instance
in France.
This
award
was
reduced
to an
aggregate
of EUR
1.8bn against
by the
Court of
Appeal,
and, in
a
further appeal, the French Supreme Court
referred the case back to the
Paris Court of Appeal to reconsider
the amount
after a new trial.
Litigation,
regulatory
and
similar
matters
may
also
result
in
non-monetary
penalties
and consequences.
Among
other
things,
a
guilty
plea
to,
or
conviction
of,
a
crime
(including
as
a
result
of
termination
of
the
Deferred
Prosecution
Agreement Credit Suisse
entered into with
the US Department
of Justice in
2021 to resolve
its Mozambique matter)
could
have material consequences for UBS.
Resolution of regulatory proceedings has required us to obtain waivers of regulatory disqualifications to maintain certain
operations, may entitle
regulatory authorities
to limit, suspend
or terminate licenses
and regulatory authorizations,
and
may permit financial market utilities to limit, suspend or terminate our participation in them. UBS and Credit Suisse have
each required waivers or exemptions
in order to continue to act
as investment manager to pension plans and
registered
investment companies
in the
US, among
other things;
failure to
obtain such
waivers, or
any limitation,
suspension
or
termination of
licenses, authorizations
or participations
arising from
a disqualifying
event, could
have material
adverse
consequences for us.
Our settlements with
governmental authorities in
connection with foreign
exchange, LIBOR and
other benchmark interest
rates starkly
illustrate the
significantly increased
level of
financial and
reputational risk
now associated
with regulatory
matters
in
major
jurisdictions.
In
connection
with
investigations
related
to
LIBOR
and
other
benchmark
rates,
and
to
foreign exchange
and precious
metals, very
large fines
and disgorgement
amounts
were assessed
against us,
and we
were required to enter guilty pleas despite our full cooperation
with the authorities in the investigations and despite
our
receipt of conditional leniency
or conditional immunity from anti
-trust authorities in a number
of jurisdictions, including
the US and Switzerland.
For a number
of years, we
have been, and
we continue to
be, subject to
a very high
level of regulatory
scrutiny and to
certain regulatory
measures that
constrain our
strategic flexibility.
We believe we
have remediated
the deficiencies
that
led to significant losses in the past
and made substantial changes in our controls and
conduct risk frameworks to address
the
issues
highlighted
by
past
regulatory
resolutions.
We
have
also
undertaken
extensive
efforts
to
implement
new
regulatory requirements and meet heightened supervisory expectations. Prior to its acquisition by UBS, Credit Suisse was
also
subject
to
a
high
level
of
regulatory
scrutiny
and
had
significant
regulatory
and
other
remediation
programs
to
address identified issues,
including as a result
of the Archegos, Mozambique,
supply chain finance
and cross-border tax
matters. As part
of the integration
of Credit Suisse,
UBS is addressing
these matters and
will likely remain
under additional
regulatory scrutiny until the integration is substantially comp
leted.
We continue
to be
in active
dialogue with
regulators concerning
the actions
we are
taking to
improve our
operational
risk management, risk control, anti-money-laundering, data
management and other frameworks, and otherwise seek to
meet supervisory expectations, but there can be no assurance that our efforts will have the desired effects. As a result of
this history, our level of risk with respect to regulatory enforcement
may be greater than that of some of our peers.
If we experience financial difficulties, FINMA has the power
to open restructuring or liquidation proceedings or impose
protective measures in relation to UBS AG or UBS Switzerland
AG, and such proceedings or measures may have a
material adverse effect on creditors
Under the
Swiss Banking
Act, FINMA
is able
to exercise
broad statutory
powers with
respect to
Swiss banks
and Swiss
parent
companies
of
financial
groups,
such
as
UBS
Group
AG,
UBS
AG
and
UBS Switzerland AG,
if
there
is
justified
concern that an
entity is over
-indebted, has
serious liquidity
problems or,
after the
expiration of
any relevant
deadline,
no
longer
fulfills
capital
adequacy
requirements.
Such
powers
include
ordering
protective
measures,
instituting
restructuring
proceedings
(and
exercising
any
Swiss
resolution
powers
in
connection
therewith),
and
instituting
liquidation proceedings,
all of
which may
have a
material adverse
effect on
shareholders and
creditors or
may prevent
UBS AG or UBS Switzerland AG from paying dividends
or making payments on debt obligations.
UBS would
have limited
ability
to challenge
any such
protective
measures,
and creditors
and shareholders
would
also
have limited ability under Swiss
law or in Swiss courts
to reject them, seek their suspension,
or challenge their imposition,
including measures that require
or result in the deferment of payments.
Annual Report 2024 |
Our business model and environment |
Risk factors
33
If restructuring proceedings are
opened with respect
to UBS AG
or UBS Switzerland
AG the resolution
powers that FINMA
may exercise
include the
power to:
(i) transfer all
or some
of the
assets, debt
and other
liabilities, and
contracts of
the
entity subject
to proceedings
to another
entity; (ii) stay
for a
maximum of
two business
days (a)
the termination
of, or
the exercise of rights to terminate, netting rights, (b)
rights to enforce or dispose of certain types of
collateral or (c) rights
to transfer claims, liabilities or
certain collateral, under contracts to
which the entity subject to
proceedings is a party; and
(iii) partially or fully write down the equity
capital and regulatory capital instruments and, if such
regulatory capital is fully
written down,
write down
or convert
into equity
the other
debt instruments
of the
entity subject
to proceedings. Creditors
would have
no right
to reject,
or to
seek the
suspension of,
any restructuring
plan pursuant
to which
such resolution
powers are exercised.
They would have
only limited rights
to challenge any
decision to exercise
resolution powers or
to
have that decision reviewed by a judicial or administrative
process or otherwise.
Upon full
or partial
write-down
of the
equity and
regulatory
capital
instruments
of the
entity
subject to
restructuring
proceedings, the relevant
shareholders and creditors
would receive no payment
in respect of debt that
is written down,
the write-down would be permanent,
and the investors would likely
not, at such time or
at any time thereafter,
receive
any
shares
or
other
participation
rights,
or
be
entitled
to
any
write-up
or
any
other
compensation
in
the
event
of
a
potential subsequent recovery of the debtor. If FINMA orders the conversion of debt of
the entity subject to restructuring
proceedings into equity, the securities received by the investors may be worth
significantly less than the original debt
and
may have a significantly different
risk profile. In addition, creditors
receiving equity would be effectively
subordinated to
all
creditors
of
the
restructured
entity
in
the
event
of
a
subsequent
winding
up,
liquidation
or
dissolution
of
the
restructured entity,
which would increase the risk that investors would
lose all or some of their investment.
FINMA has significant discretion in the exercise of its powers in connection with restructuring proceedings. Furthermore,
certain categories of debt obligations, such as certain types of
deposits, are subject to preferential treatment. As a result,
holders of obligations
of an entity
subject to a
Swiss restructuring
proceeding may
have their obligations
written down
or converted
into equity even
though obligations ranking
on par
with such obligations
are not written
down or
converted.
Developments in sustainability, climate, environmental and social
standards and regulations may affect our business and
impact our ability to fully realize our goals
We
are
subject
to
separate,
and
sometimes
conflicting,
ESG
regulations
and
regulator
expectations
in
the
various
jurisdictions in
which UBS
AG operates.
For example,
in certain
jurisdictions, we
are required
to set
diversity targets
or
other ESG-related goals
that are considered illegal
or contrary to
regulatory expectations in
other jurisdictions. In
addition,
with respect to
decarbonization mandates, there is
substantial uncertainty as to
the scope of
actions that may
be required
of us,
governments and others
to achieve the
goals we have
set, and many
of our goals
and objectives are only
achievable
with a
combination of
government and
private action.
National and
international standards
and expectations,
industry
and
scientific
practices,
regulatory
taxonomies,
and
disclosure
obligations
addressing
these
matters
are
relatively
immature
and
are
rapidly
evolving.
In
addition,
there
are
significant
limitations
in
the
data
available
to
measure
our
climate and other goals. Although
we have defined and disclosed
our goals based on the
standards existing at the
time
of
disclosure,
there
can
be
no
assurance
(i) that
the
various
ESG
regulatory
and
disclosure
regimes
under
which
we
operate
will
not
come
into
further
conflict
with
one
another,
(ii) that
the
current
standards
will
not
be
interpreted
differently than our understanding or change in a manner
that substantially increases the cost or effort for us to achieve
such goals or (iii) that additional data or
methods, whether voluntary or required by regulation, may substantially change
our calculation of
our goals
and ambitions. It
is possible that
such goals may
prove to
be considerably more
difficult or
even
impossible
to
achieve.
The
evolving
standards
may
also
require
us
to
substantially
change
the
stated
goals
and
ambitions. If we are
not able to achieve the goals
we have set, or can
only do so at significant
expense to our business,
we
may
fail
to
meet
regulatory
expectations,
incur
damage
to
our
reputation
or
be
exposed
to
an
increased
risk
of
litigation or other adverse action.
While ESG regulatory regimes and
international standards are being developed, including
to require consideration of ESG
risks in investment decisions,
some jurisdictions, notably in
the US, have developed rules
restricting the consideration
of
ESG factors in investment
and business decisions. Under
these anti-ESG rules, companies
that are perceived
as boycotting
or discriminating against certain industries may be
restricted from doing business with certain governmental
entities. Our
businesses
may
be
adversely
affected
if
we
are
considered
as
discriminating
against
companies
based
on
ESG
considerations, or if further anti-ESG rules are developed
or broadened.
Material weaknesses of Credit Suisse controls over financial
reporting
In March 2023,
prior to the
acquisition by UBS
Group AG, the
Credit Suisse Group
and Credit Suisse
AG disclosed that
their management had identified material weaknesses in
internal control over financial reporting as
a result of which, the
Credit
Suisse
Group
and
Credit
Suisse
AG
had
concluded
that,
as
of
31
December
2022, their
internal controls
over
financial reporting
were not
effective, and
for the same
reasons, reached
the same conclusion
regarding 31
December
2021. A
material weakness
is a
deficiency or
a combination
of deficiencies
in internal
controls over
financial reporting
such that there
is a reasonable
possibility that
a material misstatement
of a registrant’s
financial statements
will not be
prevented or detected on
a timely basis.
The material weaknesses result
in a risk
that a material
error may not
be detected
by internal
controls that
could result
in a
material misstatement
to the
company’s reported
financial results.
Following
the acquisition
and merger
of Credit
Suisse Group
AG into
UBS Group
AG in
June 2023,
Credit Suisse
AG concluded
that as of 31 December 2023 its internal control over
financial reporting continued to be ineffective.
For the year ended
31 December 2023, UBS AG concluded that its internal control
over financial reporting was effective.
Annual Report 2024 |
Our business model and environment |
Risk factors
34
In June
2024 Credit
Suisse AG
and UBS
AG merged
with UBS
AG as
the surviving
entity. Although
Credit Suisse
is no
longer
a
separate
legal
entity,
numerous
of
its
booking,
accounting
and
risk
management
systems
remain
in
use
for
activities that have not yet been exited or migrated to
UBS AG’s systems.
The material weaknesses
that were identified
by Credit Suisse
related to the
failure to design
and maintain an
effective
risk
assessment
process
to
identify
and
analyze
the
risk
of
material
misstatements
in
its
financial
statements
and
the
failure to
design
and maintain
effective
monitoring activities
relating
to (i)
providing
sufficient
management
oversight
over the internal control evaluation
process to support Credit Suisse
internal control objectives; (ii)
involving appropriate
and sufficient
management resources
to support
the risk
assessment and
monitoring objectives;
and (iii)
assessing and
communicating the
severity of
deficiencies in
a timely
manner to
those parties
responsible for
taking corrective
action.
These material weaknesses contributed to an additional material weakness, as the Credit Suisse Group management did
not design and maintain effective controls over the classification and presentation of the consolidated statement of cash
flows under US GAAP.
Since
the
Credit
Suisse
acquisition,
we
have
executed
a
remediation
program
to
address
the
identified
material
weaknesses
and
have
implemented
additional
controls
and
procedures.
As
of
31
December
2024,
management
has
assessed that the
changes to
internal controls
made to
address the
material weakness
relating to
the classification
and
presentation of
the consolidated
statement of
cash flows
as well
as assessment
and communication
of the
severity of
deficiencies are designed and operating effectively.
The remaining material weakness relates to the risk assessment of internal controls. We have implemented an enhanced
severity assessment
framework and
additional management
oversight of
severity assessments
and have
integrated the
Credit
Suisse
control
frameworks
into
the
UBS
AG’s
internal
control
framework
and
risk
assessment
and
evaluation
processes in 2024. In addition, UBS AG has reviewed the processes, systems and internal
control processes in connection
with
the
integration
of
the
financial
accounting
and
controls
environment
of
Credit
Suisse
into
UBS
AG,
and
implementation of updated
or additional processes
and controls to
reflect the increase
in complexity of
the accounting
and financial control environment following the acquisition.
Management has assessed
that the risk
assessment process was
designed effectively. However,
in light of
the increased
complexity of
the internal
accounting and
control environment,
the remaining
migration efforts
still underway
and the
limited time
to demonstrate operating
effectiveness and sustainability
of the
post-merger integrated control
environment,
management
has
concluded
that
additional
evidence
of
effective
operation
of
the
remediated
controls
is required
to
conclude
that
the
risk
assessment
processes
is
operating
effectively
on
a
sustainable
basis.
In
light
of
the
above,
management has concluded that there is a material
weakness in internal control over financial reporting at 31
December
2024 and, as a result, that our disclosure controls and procedures
were also not effective as of that date.
Our financial results may be negatively affected by changes
to assumptions and valuations, as well as changes to
accounting standards
We
prepare
our
consolidated
financial
statements
in
accordance
with
IFRS
Accounting
Standards.
The
application
of
these accounting
standards requires the use
of judgment
based on
estimates and
assumptions that may
involve significant
uncertainty at
the time
they are
made. This
is the
case, for
example, with
respect to
the measurement
of fair
value of
financial
instruments,
the
recognition
of
deferred
tax
assets
(DTAs),
the
assessment
of
the
impairment
of
goodwill,
expected
credit
losses
and
estimation
of
provisions
for
litigation,
regulatory
and
similar
matters.
Such
judgments,
including the underlying
estimates and assumptions,
which encompass historical
experience, expectations of
the future
and other
factors, are
regularly
evaluated
to determine
their continuing
relevance
based on
current
conditions.
Using
different assumptions could cause the reported results to differ.
Changes in assumptions, or failure to make the changes
necessary to reflect
evolving market conditions,
may have a
significant effect
on the financial
statements in the
periods
when
changes
occur.
Estimates
of
provisions
may
be
subject
to
a
wide
range
of
potential
outcomes
and
significant
uncertainty.
For example, the broad
range of potential outcomes
in our legal proceedings
in France and in a
number of
Credit
Suisse’s
legal
proceedings
increase
the
uncertainty
associated
with
assessing
the
appropriate
provision.
If
the
estimates and assumptions in
future periods deviate from the
current outlook, our financial
results may also be
negatively
affected.
Changes to IFRS
Accounting Standards or
interpretations thereof may
cause future reported
results and
financial positions
to differ
from current
expectations, or
historical results
to differ
from those
previously reported
due to the
adoption of
accounting
standards
on
a
retrospective
basis.
Such
changes
may
also
affect
our
regulatory
capital
and
ratios.
For
example, the
introduction of
the ECL regime
under IFRS 9
in 2018 fundamentally
changed how
credit risk arising
from
loans, loan commitments, guarantees
and certain revocable facilities
is accounted for. Under
the ECL regime, credit
loss
expenses may
increase rapidly
at the
onset of an
economic downturn
as a
result of
higher levels
of credit
impairments
(stage 3), as well as higher ECL from stages 1 and 2, only gradually diminishing once the economic outlook improves. As
we observed
in 2020,
this effect may
be more
pronounced in a
deteriorating economic environment.
Substantial increases
in ECL could
exceed expected
loss for regulatory
capital purposes
and adversely
affect our
CET1 capital
and regulatory
capital ratios.
Annual Report 2024 |
Our business model and environment |
Risk factors
35
We may be unable to maintain our capital strength
Capital
strength
enables
us
to grow
our
businesses
and
absorb
increases
in
regulatory
and
capital
requirements.
Our
ability to
maintain our
capital
ratios is
subject to
numerous risks,
including the
financial results
of our
businesses,
the
effect of changes to
capital standards,
methodologies and interpretations that may
adversely affect the calculation of our
capital
ratios, the
imposition
of risk
add-ons
or capital
buffers,
and the
application
of additional
capital,
liquidity
and
similar requirements to subsidiaries. Our capital and leverage ratios are driven primarily by RWA, LRD and eligible capital,
all of which
may fluctuate
based on
a number
of factors,
some of
which are
outside of
our control.
The results
of our
businesses may
be adversely
affected by
events arising from
other risk
factors described
herein. In
some cases, such
as
litigation and regulatory risk and operational risk events,
losses may be sudden and large.
Our eligible capital may be
reduced by losses recognized within net
profit or other comprehensive income.
Eligible capital
may also
be reduced
for other
reasons, including
acquisitions that
change the
level of
goodwill, changes
in temporary
differences
related
to
DTAs
included
in
capital,
adverse
currency
movements
affecting
the
value
of
equity,
prudential
adjustments that may be required due to the valuation uncertainty associated with certain types of positions, changes in
regulatory
interpretations
on the
inclusion
or exclusion
of items
contributing
to our
shareholders
’
capital, and changes
in the value
of certain pension
fund assets and
liabilities or in
the interest rate and
other assumptions
used to calculate the changes in our net defined benefit
obligation recognized in other comprehensive income.
RWA
are
driven
by
our
business
activities,
by
changes
in
the
risk
profile
of
our
exposures,
by
changes
in
our
foreign
currency exposures and foreign exchange rates, and by regulation.
For instance, substantial market volatility, a widening
of credit spreads,
adverse currency movements,
increased counterparty
risk, deterioration in the
economic environment
or increased
operational risk
could result
in an
increase in
RWA. Changes
in the
calculation of
RWA, the
imposition of
additional
supplemental RWA
charges or
multipliers applied
to certain
exposures and
other methodology
changes,
as
well as the
finalization of the
Basel III framework and
Fundamental Review of the
Trading Book promulgated by
the BCBS,
which are expected to affect our RWA.
The
leverage
ratio
is
a
balance
sheet-driven
measure
and
therefore
limits
balance
sheet-intensive
activities,
such
as
lending, more
than activities
that are
less balance
sheet intensive,
and it
may constrain
our business
even if
we satisfy
other
risk-based
capital
requirements.
Our
LRD
is
driven
by,
among
other
things,
the
level
of
client
activity,
including
deposits and loans,
foreign exchange
rates, interest rates,
other market
factors and changes
in required liquidity.
Many
of these factors are wholly or partly outside of our control.
The effect of taxes on our financial results is significantly
influenced by tax law changes and reassessments of our
deferred tax assets and, also, operating losses of certain entities with
no associated tax benefit
Our
effective
tax
rate
is highly
sensitive
to
our
performance,
our
expectation
of
future
profitability
and
any
potential
increases or
decreases in
statutory tax
rates, such as
any potential
increase or
decrease in
the US
federal corporate
tax
rate.
Furthermore,
based
on
prior
years’
tax
losses
and
deductible
temporary
differences,
we
have
recognized
DTAs
reflecting
the
probable
recoverable
level
based
on
future
taxable
profit
as
informed
by
our
business
plans.
If
our
performance is expected to produce diminished taxable
profit in future years, particularly in the US, we
may be required
to write down
all or a
portion of the
currently recognized
DTAs
through the
income statement
in excess of
anticipated
amortization. This
would have
the effect
of increasing
our
effective
tax rate
in the
year in
which any
write-downs are
taken.
Conversely,
if
we
expect
the
performance
of
entities
in
which
we
have
unrecognized
tax
losses
to
improve,
particularly
in
the
US or
the
UK, we
could potentially
recognize
additional
DTAs.
The
effect
of doing
so
would
be to
reduce our
effective tax
rate in
years in
which additional
DTAs
are recognized
and to
increase our
effective
tax rate
in
future years. Our
effective tax rate
is also sensitive to
any future reductions
in statutory tax
rates, particularly in
the US,
which would cause
the expected
future tax
benefit from
items such as
tax loss carry
-forwards in
the affected
locations
to
diminish
in
value.
This,
in
turn,
would
cause
a
write-down
of
the
associated
DTAs.
Conversely,
an
increase
in
US
corporate tax rates would result in an increase
in the Group’s DTAs.
We generally revalue our
DTAs in the
fourth quarter of the financial year
based on a reassessment of future
profitability
taking into
account our
updated
business plans.
We
consider
the performance
of our
businesses and
the accuracy
of
historical forecasts,
tax rates and
other factors in
evaluating the recoverability
of our DTAs,
including the remaining
tax
loss carry-forward
period and our assessment
of expected future
taxable profits over
the life of DTAs.
Estimating future
profitability is
inherently subjective
and is particularly
sensitive to future
economic, market
and other conditions,
which
are difficult to predict.
Our results
in past
years have
demonstrated that
changes in
the recognition
of DTAs
can have
a very
significant effect
on our
reported
results.
Any
future
change in
the manner
in which
UBS
AG remeasures
DTAs
could affect
UBS AG’s
effective tax rate, particularly in the year in which the
change is made.
Annual Report 2024 |
Our business model and environment |
Risk factors
36
Our
full-year
effective tax
rate
would
be
impacted
if
aggregate tax
expenses
in
respect of
profits
from
branches and
subsidiaries
without loss
coverage differ
from what is
expected or
if certain
branches and
subsidiaries
incur operating
losses
that
we cannot
benefit
from through
the income
statement.
In particular,
operating
losses
at entities
or branches
that cannot
offset for
tax purposes
taxable profits
in other
Group entities,
and which do
not result
in additional
DTA recognition,
would
increase our effective
tax rate.
In addition, tax
laws or
the tax
authorities in countries
where we
have undertaken legal
structure changes
may cause entities
to be subject to
taxation as permanent
establishments or
may prevent the
transfer of
tax losses incurred
in one legal entity
to newly organized
or reorganized
subsidiaries
or affiliates,
or may impose limitations
on the
utilization
of tax
losses that
relate to
businesses
formerly
conducted by
the transferor.
Were this
to occur
in situations
where there were also limited planning
opportunities to utilize
the tax losses in the originating entity,
the DTAs associated
with such tax
losses may be
required to be
written down
through the income
statement.
Changes in tax law may materially
affect our effective
tax rate and, in some cases,
may substantially
affect the profitability
of certain activities. In addition, statutory and regulatory changes, as well as changes to the way in
which courts and tax
authorities interpret
tax laws, including assertions
that we are required to pay taxes in a jurisdiction
as a result of activities
connected to that jurisdiction
constituting a permanent
establishment or similar
theory, and changes in our assessment
of
uncertain
tax positions,
could cause the
amount of taxes
we ultimately
pay to materially
differ from
the amount accrued.
We may incur material future tax liabilities in connection
with the combination with Credit Suisse
In
the
past,
the
Credit
Suisse
Group
has
recorded
significant
impairments
of
the
tax
value
of
its
participations
in
subsidiaries below
their tax
acquisition costs.
Following the
acquisition of
the Credit
Suisse Group
and the
subsequent
combination of Credit Suisse AG with UBS AG, tax acquisition costs of certain participations held by Credit Suisse Group
AG and
its subsidiaries
have
been transferred
to UBS
AG. UBS
Group
AG and
its subsidiaries
may become
subject
to
additional Swiss tax on
future reversals
of such impairments
for Swiss tax purposes.
Reversals of prior
impairments may
occur to the extent that the net asset
value of the previously impaired subsidiary increases, e.g., as a result of an increase
in retained earnings. Although it is difficult to quantify
this additional future tax exposure,
as various potential mitigants
(e.g., transfers of assets and liabilities, business activities, subsidiary investments,
as well as other restructuring measures
within the combined Group in the course of the
integration) exist, it may be material.
Liquidity and funding risk
Liquidity and funding management are critical to UBS AG’s
ongoing performance
The viability
of our
business depends
on the
availability of
funding sources,
and our
success depends
on our
ability to
obtain funding
at times,
in amounts,
for tenors
and at
rates that
enable us
to efficiently
support our
asset base
in all
market conditions. Our
funding sources
have generally been
stable, but could
change in the
future because
of, among
other things,
general market
disruptions or
widening credit
spreads, which
could also
influence the
cost of
funding. A
substantial part of our liquidity
and funding requirements are met using short-term unsecured funding
sources, including
retail and wholesale
deposits and the regular
issuance of money market
securities. A change in the
availability of short-
term funding could occur quickly.
The addition
of loss-absorbing
debt as
a component
of capital
requirements,
the regulatory
requirements
to maintain
minimum TLAC at UBS AG and at certain of its subsidiaries, as well as the power of
resolution authorities to bail in TLAC
instruments and
other debt obligations,
and uncertainty
as to how
such powers will
be exercised,
caused and
may still
cause a further increase in UBS’s cost of funding, and could potentially increase the total amount of funding required, in
the absence of other changes in its business.
Reductions in our credit ratings
may adversely affect the market value
of the securities and
other obligations and increase
our funding costs,
in particular with
regard to funding from
wholesale unsecured sources, and could
affect the availability
of certain kinds of funding. In addition,
as experienced in connection with the Moody’s Investors Service Ltd. downgrade
of UBS AG’s long-term debt rating in June 2012, rating downgrades can require
us to post additional collateral or make
additional
cash
payments
under
trading
agreements.
Our
credit
ratings,
together
with
our
capital
strength
and
reputation, also contribute to
maintaining client and counterparty confidence,
and it is
possible that rating changes
could
influence the performance of some of our businesses. The acquisition of the Credit Suisse Group has elevated these
risks
and
may
cause
these
risks
to
intensify.
Upon
the
close
of
the
acquisition
in
June
2023,
Fitch
Ratings
Ireland
Limited
downgraded
the
Long-Term
Issuer
Default
Ratings
(IDRs)
of
UBS
AG
to
“A+”
from
“AA–”.
Fitch
Ratings
Ltd.
also
upgraded Credit Suisse AG’s Long-Term
IDR to “A+” from “BBB+”.
The requirement
to maintain
a liquidity
coverage
ratio of
high-quality
liquid assets
to estimated
stressed short-term
net cash
outflows,
and other
similar liquidity
and funding
requirements, oblige
us to maintain
high levels
of overall
liquidity, limit our
ability to optimize
interest income and expense,
make certain lines
of business less attractive
and reduce our overall ability
to generate profits. The liquidity coverage
ratio and net stable funding ratio requirements
are intended to ensure that we
are not overly reliant on short-term funding
and that we have sufficient long-term funding
for illiquid assets. The relevant
calculations make assumptions about the relative likelihood and amount of outflows of funding and available sources of
additional funding
in market-wide and
firm-specific stress situations. In
an actual
stress situation, however,
our funding
outflows could
exceed the
assumed amounts.
Further, UBS AG is subject
to increased
liquidity requirements
related to too-
big-to-fail (TBTF)
measures under
the direction of
FINMA, which became
effective on 1 January
2024.
Annual Report 2024 |
Financial and operating performance | Accounting
and financial reporting
37
Financial and operating
performance
Management report
Accounting and financial reporting
Critical accounting estimates and judgments
In
preparing
our
financial
statements
in
accordance
with
IFRS
Accounting
Standards,
as
issued
by
the
International
Accounting
Standards
Board
(the
IASB),
we
apply
judgment
and
make
estimates
and
assumptions
that
may
involve
significant
uncertainty
at
the
time
they
are
made.
We
regularly
reassess
those
estimates
and
assumptions,
which
encompass historical
experience, expectations
of the
future and
other pertinent
factors, to
determine their
continuing
relevance based on current
conditions and update them
as necessary.
Changes in estimates and
assumptions may have
significant
effects
on the
financial
statements.
Furthermore,
actual
results
may
differ
significantly from
our estimates,
which could result in significant losses to UBS
AG, beyond what we expected or provided for.
Key
areas
involving
a
high
degree
of
judgment
and
areas
where
estimates
and
assumptions
are
significant
to
the
consolidated financial statements include
the following (note references below
are found in the “Consolidated financial
statements” section of this report):
–
determination of carrying amounts of assets and liabilities
and treatment of reserves for business combinations
under
common control (refer to “Note 2 Accounting for the merger
of UBS AG and Credit Suisse AG”);
–
expected credit loss measurement (refer to “Note 20 Expected
credit loss measurement”);
–
fair value measurement (refer to “Note 21 Fair value
measurement”);
–
income taxes (refer to “Note 9 Income taxes”);
–
provisions and contingent liabilities (refer to “Note 18 Provisions
and contingent liabilities”);
–
post-employment benefit plans (refer to “Note 26 Post-employment
benefit plans”);
–
goodwill (refer to “Note 13 Goodwill and intangible assets”);
and
–
consolidation of structured entities (refer to “Note 28 Interests
in subsidiaries and other entities”).
›
Refer to “Note 1 Summary of material accounting
policies” in the “Consolidated financial statements”
section of this report and to
the “Risk factors” section of this report for more information
Accounting and financial reporting changes after 2024
IFRS 18,
Presentation and Disclosure in Financial Statements
In
April
2024,
the
IASB
issued
a
new
standard,
IFRS 18,
Presentation
and
Disclosure
in
Financial
Statements
,
which
replaces IAS 1,
Presentation of Financial Statements
, and is effective from 1 January 2027. The main changes introduced
by
IFRS 18
relate
to
the
structure
of
income
statements,
new
disclosure
requirements
for
management
performance
measures and enhanced guidance on aggregation and disaggregation of information. UBS is assessing the impact of the
new requirements on its reporting
but expects it to be limited.
Amendments to IFRS 9,
Financial Instruments
, and IFRS 7,
Financial Instruments: Disclosures
In
May
2024,
the
IASB
issued
Amendments
to
the
Classification
and
Measurement
of
Financial
Instruments
–
Amendments
to
IFRS 9
and
IFRS 7
settled
through
electronic
transfer
systems
and
classification
of
financial
assets,
and
they
introduce
new
disclosure
requirements. The Amendments are effective
from 1 January 2026, with early application permitted either for the entire
set of amendments
or for only
those that
relate to
classification of
financial instruments.
UBS is currently
assessing the
impact of the new requirements on
its financial statements.
Annual Report 2024 |
Financial and operating performance | UBS
AG consolidated performance
38
UBS AG consolidated performance
Income statement
For the year ended
% change from
USD m
31.12.24
31.12.23
31.12.22
31.12.23
Net interest income
Other net income from financial instruments measured
at fair value through profit or loss
Net fee and commission income
Other income
Total revenues
Credit loss expense / (release)
Personnel expenses
General and administrative expenses
Depreciation, amortization and impairment of non-financial
assets
Operating expenses
Operating profit / (loss) before tax
Tax expense / (benefit)
Net profit / (loss)
Net profit / (loss) attributable to non-controlling interests
Net profit / (loss) attributable to shareholders
Comprehensive income
Total comprehensive income
Total comprehensive income attributable to non-controlling interests
Total comprehensive income attributable to shareholders
Integration-related expenses, by business division and Group Items
For the year ended
USD m
31.12.24
31.12.23
Global Wealth Management
Personal Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items
Total integration-related expenses
of which: total revenues
of which: operating expenses
of which: personnel expenses
of which: general and administrative expenses
of which: depreciation, amortization and impairment of non-financial
assets
2024 compared with 2023
The legal merger of UBS AG and Credit Suisse AG on 31 May 2024
has had a significant impact on the results from June
2024 onward.
This discussion
and analysis of
results compares
the 2024 financial
year,
which covers seven
full months
of post-merger
results, with
the 2023 financial
year,
which included
only pre-merger
results. This
is a material
driver in
many of the increases across both revenues
and operating expenses.
›
Refer to “Note 2 Accounting for the merger of
UBS AG and Credit Suisse AG” in the “Consolidated
financial statements” section of
this report for more information about the accounting for
the merger of UBS AG and Credit Suisse AG
Results 2024 vs 2023
In 2024,
net profit attributable
to shareholders decreased
by USD 1,809m
to USD 1,481m, and
included a
net tax
expense
of USD 900m.
Annual Report 2024 |
Financial and operating performance | UBS
AG consolidated performance
39
Operating profit before tax decreased by USD 2,088m, or 46%, to USD 2,433m, reflecting higher operating expenses
and an
increase in
net credit
loss expenses,
partly offset
by higher
total revenues
.
Operating expenses
increased by
USD 10,335m, or 36%, to USD 39,346m
and included USD 3,737m
of integration-related expenses. This increase
was
mainly
driven
by
increases
of
USD 5,430m
in
general
and
administrative
expenses
and
USD 4,303m
in
personnel
expenses, as well
as a USD
602m increase
in depreciation, amortization
and impairment of
non-financial assets. Net
credit loss expenses were USD 544m, compared with USD 143m in 2023.
Total revenues increased by USD 8,648m, or
26%, to USD 42,323m, mainly driven
by a USD 3,137m increase in total combined net
interest income and other net
income
from
financial
instruments
measured
at
fair
value
through
profit
and
loss,
USD 4,828m
higher
net
fee
and
commission income,
and a USD 682m
increase in other income.
Integration
-related
expenses
are
defined
as
expenses
that
are
temporary,
incremental
and
directly
related
to
the
integration
of
Credit
Suisse
into
UBS,
including
costs
of
internal
staff
and
contractors
substantially
dedicated
to
integration activities, retention awards, redundancy costs, incremental expenses from the shortening of useful lives of
property,
equipment
and
software,
and
impairment
charges
relating
to
these
assets.
Classification
as
integration-
related expenses
does not
affect the
timing of
recognition and
measurement of
those expenses
or the
presentation
thereof in the income statement.
Integration
-related expenses
in general
and administrative
expenses primarily
included shared
services costs
charged
from other
companies in
the UBS
Group reporting
scope, consulting
fees and
outsourcing costs
.
Integration-related
personnel expenses were mainly due to salaries and variable compensation related to the integration of Credit Suisse.
In addition, there
was accelerated
depreciation of properties
and leasehold improvements
in depreciation, amortization
and impairment of non-financial assets
.
Total revenues
Net interest income and other net income from financial instruments
measured at fair value through profit or loss
Total
combined
net
interest
income
and other
net
income
from
financial
instruments
measured
at
fair
value
through
profit or loss
increased by USD 3,137m
to USD 17,637m, mainly
driven by
the consolidation of
Credit Suisse AG revenues.
Global Wealth Management increased by USD 858m to USD
7,373m, mainly driven by the consolidation of Credit Suisse
AG
revenues.
The
remaining
variance
included
a
decrease
in
net
interest
income,
reflecting
lower
deposit
and
loan
revenues and
higher liquidity
and funding
costs, and
an increase
in transaction-based
income, mainly
driven by
higher
levels of client activity, particularly in the Asia Pacific and
Americas regions.
Personal Corporate
Banking increased by
USD 1,183m
to USD 4,755m, predominantly
driven by the
consolidation of
Credit Suisse AG revenues.
The
Investment
Bank
increased
by
USD 1,106m
to
USD 6,129m.
The
overall
increase
was
mainly
attributable
to
the
Derivatives
Solutions
business,
mostly
driven
by
increases
in
Equity
Derivatives
and
Foreign
Exchange.
In
addition,
Financing
revenues
increased,
particularly
in
the
Capital
Markets
Financing
business.
Global
Banking
revenues
also
increased mainly due to higher revenues across Public
Capital Markets, primarily driven by Leveraged Capital Markets.
›
Refer to “Note 4 Net interest income and other
net income from financial instruments measured at fair value through
profit or
loss” in the “Consolidated financial statements”
section of this report for more information
Net interest income and other net income from financial instruments measured at fair value through profit or loss
For the year ended
% change from
USD m
31.12.24
31.12.23
1
31.12.22
31.12.23
Net interest income from financial instruments measured
at amortized cost and fair value through other
comprehensive income
Net interest income from financial instruments measured
at fair value through profit or loss and other
Other net income from financial instruments measured
at fair value through profit or loss
Total
Global Wealth Management
of which: net interest income
of which: transaction-based income from foreign exchange and other
intermediary activity
2
Personal Corporate Banking
of which: net interest income
of which: transaction-based income from foreign exchange and other
intermediary activity
2
Asset Management
Investment Bank
Non-core and Legacy
Group Items
1 Comparative-period information
has been restated for
changes in business
division perimeters, Group
Treasury allocations
and Non-core and
Legacy cost allocations.
Refer to “Note 3
Segment reporting” in
the
“Consolidated financial statements” section of this
report for more information about the relevant
changes.
2 Mainly includes spread-related income in
connection with client-driven transactions,
foreign currency
translation effects and
income and expenses
from precious metals,
which are included
in the income
statement line Other
net income from
financial instruments measured
at fair value
through profit or
loss. The
amounts reported on this line are
one component of Transaction
-based income in the management discussion
and analysis of Global Wealth
Management and Personal
Corporate Banking in the “Global
Wealth
Management” and “Personal Corporate Banking” sections of this report, respectively.
Net fee and commission income
Net fee and commission income
increased by USD 4,828m to USD 23,438m, mainly driven
by the consolidation of Credit
Suisse AG revenues.
Annual Report 2024 |
Financial and operating performance | UBS
AG consolidated performance
40
Fees
from portfolio
management
increased
by USD
2,237m
to
USD 11,328m,
and
investment
fund
fees
increased
by
USD 939m
to
USD 5,669m,
predominantly
in
Global
Wealth
Management
and
Asset
Management,
respectively.
The
increase in Global Wealth Management was mainly
due to positive market performance
and the consolidation of Credit
Suisse AG
revenues. For Asset
Management, the increase
was mainly
from the
consolidation of
Credit Suisse
AG revenues,
positive market performance and foreign currency effects, as well as the
revaluation of a real estate fund co-investment,
partly offset by the effects of continued margin compression
.
Net brokerage fees increased by USD 1,002m to USD 4,081m, largely
as a result of the consolidation of
Credit Suisse AG
revenues.
The
remaining
variance
included
an
increase
in
Cash
Equities
across
all
regions
in Execution
Services
in
the
Investment Bank. There
was also an increase
in Global Wealth
Management which was
driven by higher levels
of client
activity, particularly in the Asia Pacific and
Americas regions,
and the consolidation of Credit Suisse AG transaction-based
income.
›
Refer to “Note 5 Net fee and commission
income” in the “Consolidated financial statements”
section of this report for more
information
Other income
Other income was USD 1,248m, compared with USD 566m in 2023, and included the consolidation of Credit Suisse AG
income. Included in other income was a loss of USD 80m related to an investment
in an associate, compared with a loss
of USD 255m related to
an investment in an associate
recognized in 2023.
In addition, there was
a USD 125m net gain
in Asset Management
from the
sale of non-strategic
businesses,
as well as
a USD 119m
gain related
to the sale
of our
investment
in
an
associate.
Other
income
also
included
higher
costs
charged
to
shared
services
subsidiaries
of
UBS Group AG.
›
Refer to “Note 6 Other income” in the “Consolidated
financial statements”
section of this report for more information
›
Refer to “Note 29 Changes in organization and
acquisitions and disposals of subsidiaries and businesses”
in the “Consolidated
financial statements”
section of this report for more information about disposals
of subsidiaries and businesses
Credit loss expense / release
Total net credit loss expenses were USD 544m, reflecting net releases of USD 63m related to stage 1 and 2 positions and
net expenses of USD 608m related to credit
-impaired stage 3 positions. Credit loss
expenses were USD 143m in 2023.
›
Refer to “Note 10 Financial assets at amortized
cost and other positions in scope of expected
credit loss measurement” and
“Note 20 Expected credit loss measurement” in the “Consolidated
financial statements” section of this report for more
information about credit loss expenses / releases
›
Refer to the “Risk factors” section of this report for
more information
Credit loss expense / (release)
Performing positions
Credit-impaired positions
USD m
Stages 1 and 2
Stage 3
Total
For the year ended 31.12.24
Global Wealth Management
Personal Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items
Total
For the year ended 31.12.23
Global Wealth Management
Personal Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items
Total
For the year ended 31.12.22
Global Wealth Management
Personal Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items
Total
Annual Report 2024 |
Financial and operating performance | UBS
AG consolidated performance
41
Operating expenses
Personnel expenses
Personnel expenses increased
by USD 4,303m to
USD 19,958m, mainly driven
by the consolidation
of Credit Suisse AG
expenses reflecting the combined workforce resulting from the merger.
Salaries and variable compensation increased by
USD 3,731m,
including
a
USD 744m
increase
in
financial
advisor
compensation
as
a
result
of
higher
compensable
revenues.
›
Refer to “Note 7 Personnel expenses”, “Note 26
Post-employment benefit plans” and “Note 27
Employee benefits: variable
compensation” in the “Consolidated financial statements”
section of this report for more information
General and administrative expenses
General
and
administrative
expenses
increased
by
USD 5,430m
to
USD 16,548m,
largely
driven
by
an
increase
of
USD 2,659m
in
shared
services
costs
for
Technology,
Finance,
Risk
charged
by
other
subsidiaries
of
UBS
Group AG,
resulting
from
the
consolidation
of
Credit
Suisse AG
expenses.
General
and
administrative
expenses
also
included
USD 698m higher expenses
for litigation, regulatory
and similar matters
,
largely reflecting
UBS’s decision from
2024 to
fund an
offer by
the Credit
Suisse supply
chain finance
funds to
redeem all
of the
outstanding units
of the
respective
funds. In addition, there were increases
of USD 520m in consulting, legal and audit fees, USD 354m in technology costs
and USD 351m in outsourcing costs.
›
Refer to “Note 8 General and administrative expenses”
and “Note 18 Provisions and contingent liabilities” in
the “Consolidated
financial statements” section of this report for more information
Depreciation, amortization and impairment of non-financial
assets
Depreciation,
amortization
and
impairment
of
non-financial
assets
increased
by
USD 602m
to
USD 2,840m,
which
included the
consolidation of
Credit Suisse AG
expenses,
as well as
an increase
in amortization
of internally
generated
capitalized software and
depreciation of real
estate leases, partly
offset by a
USD 206m decrease in
impairment, following
the impairment of software projects in 2023, resulting from a reprioritization of software development activity following
the acquisition of the Credit Suisse Group
.
Operating expenses
For the year ended
% change from
USD m
31.12.24
31.12.23
31.12.22
31.12.23
Personnel expenses
of which: salaries
of which: variable compensation
of which: performance awards
of which: financial advisors
1
of which: other
of which: other personnel expenses
2
General and administrative expenses
of which: net expenses for litigation, regulatory and similar
matters
Depreciation, amortization and impairment of non-financial
assets
Total operating expenses
1 Financial advisor compensation consists of cash
compensation, determined using a formulaic
approach based on production, and deferred
awards. It also includes
expenses related to compensation commitments
with financial advisors
entered into
at the time
of recruitment
that are subject
to vesting
requirements.
2 Consists of expenses
related to
contractors, social
security, post-employment
benefit plans,
and other
personnel expenses. Refer to “Note 7 Personnel expenses” in the “Consolidated financial statements”
section of this report for more information.
Tax
Income tax
expenses of
USD 900m were
recognized for
UBS AG in
2024, representing
an effective
tax rate
of 37.0%
compared with USD 1,206m for 2023, which represented
an effective tax rate of 26.7%.
The income
tax expenses
for 2024 included
a net
Swiss tax expense
of USD 461m and
a net
non-Swiss tax
expense of
USD 439m.
The net Swiss
tax expense included
current tax expenses of
USD 567m in respect
of taxable profits
of UBS Switzerland AG
and other
Swiss entities
and a deferred
tax benefit of
USD 106m that
mainly related to
a USD
65m net upward
revaluation
of deferred tax assets (DTAs).
The net
non-Swiss tax expense
included current tax
expenses of USD 831m
that mainly related
to US
corporate alternative
minimum tax
with an
equivalent deferred
tax benefit
for DTAs recognized
in respect
of tax
credits carried
forward and
USD 608m in respect of other taxable profits of non-Swiss
subsidiaries and branches.
These
current
tax
expenses
were
partly
offset
by
a
net
non-Swiss
deferred
tax
benefit,
which
reflected
benefits
of
USD 831m related to the
aforementioned deferred tax benefit,
USD 417m in respect of
a net upward
revaluation of DTAs
and USD 252m in respect
of an increase
in deferred tax asset
recognition for UBS AG’s
US branch. These benefits
were
partly
offset
by
an
expense
of
USD 500m
that
primarily
related
to
the
amortization
of
DTAs
previously
recognized
in
relation to tax losses carried forward and deductible temporary
differences.
›
Refer to “Note 9 Income taxes”
in the “Consolidated financial statements”
section of this report for more information
›
Refer to the “Risk factors” section of this report for
more information
Annual Report 2024 |
Financial and operating performance | UBS
AG consolidated performance
42
Total comprehensive income attributable to shareholders
In 2024, total
comprehensive income
attributable to
shareholders was
USD 747m, reflecting
net profit
of USD 1,481m
and negative other comprehensive income (OCI),
net of tax, of USD 735m.
Foreign currency translation OCI was negative USD 1,261m, mainly due to the US dollar strengthening against the Swiss
franc and the euro.
OCI related
to cash
flow hedges
was USD 635m, mainly
reflecting net
losses on
hedging instruments that
were reclassified
from OCI to the income statement, partly
offset by net unrealized losses on US
dollar hedging derivatives resulting from
increases in the relevant US dollar long-term interest rates.
›
Refer to “Statement of comprehensive income” in the
“Consolidated financial statements” section of this
report for more
information
›
Refer to “Note 25 Hedge accounting”
in the “Consolidated financial statements”
section of this report for more information about
cash flow hedges of forecast transactions
Sensitivity to interest rate movements
As of 31 December 2024, it
is estimated that a parallel
shift in yield curves
by +100 basis points
could lead to a combined
increase in annual net
interest income from
our banking book of
approximately USD 1.2bn
in the first year
after such a
shift. Of this
increase, approximately
USD 0.7bn, USD 0.4bn
and USD 0.1bn
would result
from changes
in Swiss
franc,
US dollar and euro interest rates, respectively.
A parallel
shift in
yield curves
by –100
basis points
could lead
to a
combined increase
in annual
net interest
income of
approximately USD 0.6bn.
Of this increase,
approximately USD 1.1bn
would result from
changes in Swiss
franc interest
rates, driven by both contractual and assumed flooring benefits
under negative interest rates. US dollar and euro interest
rates would lead to an offsetting decrease
of USD 0.4bn and USD 0.1bn, respectively.
These estimates are based on a
hypothetical scenario of an immediate change
in interest rates, equal across all
currencies
and relative
to
implied
forward
rates
as of
31 December
2024 applied
to
our
banking
book.
These
estimates
further
assume no change
to balance
sheet size
and product
mix, stable
foreign exchange
rates, and
no specific management
action. These estimates do not represent
net interest income forecasts.
Seasonal characteristics
Our revenues
may show
seasonal patterns,
notably in
the Investment
Bank and
transaction-based revenues
for Global
Wealth Management, and
typically reflect the
highest client
activity levels in
the first quarter, with lower
levels throughout
the rest of the year,
especially during the summer months and the end-of-year
holiday season.
Key figures
Below we provide an overview of selected key figures of UBS AG consolidated. For further information about key figures
related to capital management, refer
to the “Capital, liquidity and funding, and balance sheet” section
of this report.
Cost / income ratio
The cost / income ratio was 93.0%, compared with 86.2%, reflecting an increase in operating expenses, partly offset by
an increase in total revenues.
Return on common equity tier 1 capital
The return on common
equity tier 1 (CET1) capital
was 2.2%, compared
with 7.6%, reflecting
a USD 1,809m decrease
in net profit attributable to shareholders
and a USD 24.3bn increase in average
CET1 capital.
Annual Report 2024 |
Financial and operating performance | UBS
AG consolidated performance
43
CET1 capital
CET1 capital increased by
USD 29.7bn to USD 73.8bn as of
31 December 2024, primarily due
to the merger of UBS AG
and Credit Suisse AG, which resulted in an increase of USD 41.4bn as of the date of the merger,
operating profit before
tax of USD 2.4bn and an increase in eligible deferred
tax assets on temporary differences of
USD 2.6bn. These increases
were partly offset
by dividend
accruals of
USD 13.0bn, current tax
expense of
USD 2.0bn, and
foreign currency translation
losses of USD 1.3bn.
Risk-weighted assets
Risk-weighted assets
(RWA)
increased by
USD 161.1bn to
USD 495.1bn, predominantly
due to
the merger
of UBS AG
and
Credit
Suisse AG,
which
resulted
in
a
USD 190.0bn
increase
in
RWA.
Excluding
that
merger,
RWA
decreased
by
USD 28.9bn, primarily driven by
decreases of USD 23.3bn
due to asset size and
other movements and USD
10.2bn due
to currency effects, partly offset
by an increase of USD 4.6bn due to model updates and
methodology changes.
CET1 capital ratio
Our CET1 capital
ratio increased
to 14.9% from
13.2%, reflecting
a USD 29.7bn
increase in
CET1 capital, partly
offset
by a USD 161.1bn increase in RWA.
Leverage ratio denominator
The leverage ratio
denominator (the LRD)
increased by USD 418.9bn
to USD 1,523.3bn, predominantly due
to the merger
of UBS AG and Credit
Suisse AG, which resulted
in a USD 516.4bn increase
in the LRD. Excluding
that merger,
the LRD
decreased by USD 97.5bn, driven
by currency effects of
USD 49.9bn and asset size
and other movements of
USD 47.6bn.
CET1 leverage ratio
Our CET1 leverage ratio increased to 4.8% from 4.0%, due to the
aforementioned increase in CET1 capital, partly offset
by the aforementioned increase in the LRD.
Personnel
The number of internal personnel
employed as of 31
December 2024 was 68,982
(full-time equivalents), a
net increase
of 21,392 compared with
31 December 2023, predominantly driven by
the legal merger of
UBS AG and Credit Suisse AG
on 31 May 2024.
Equity, CET1 capital and returns
As of or for the year ended
USD m, except where indicated
31.12.24
31.12.23
31.12.22
Net profit
Net profit attributable to shareholders
Equity
Equity attributable to shareholders
less: goodwill and intangible assets
Tangible equity attributable to shareholders
less: other CET1 deductions
CET1 capital
Return on equity
Return on equity (%)
Return on tangible equity (%)
Return on CET1 capital (%)
Annual Report 2024 |
Financial and operating performance | Global
Wealth Management
44
Global Wealth Management
Global Wealth Management
1
As of or for the year ended
% change from
USD m, except where indicated
31.12.24
31.12.23
2
31.12.23
Results
Net interest income
5,901
5,345
10
Recurring net fee income
3
12,082
10,143
19
Transaction-based income
3
4,122
3,079
34
Other income
43
(28)
Total revenues
22,148
18,539
19
Credit loss expense / (release)
(1)
25
Operating expenses
18,893
14,900
27
Business division operating profit / (loss) before tax
3,255
3,614
(10)
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
3
(9.9)
(26.2)
Cost / income ratio (%)
3
85.3
80.4
Financial advisor compensation
4
5,292
4,548
16
Net new money (USD bn)
3
13.0
75.0
Invested assets (USD bn)
3
4,182
3,187
31
Loans, gross (USD bn)
5
302.2
218.3
38
Customer deposits (USD bn)
5
470.6
355.3
32
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
3,6
0.4
0.3
Advisors (full-time equivalents)
9,803
8,838
11
1 Comparatives may differ due to adjustments following
organizational changes, restatements due to the
retrospective adoption of new accounting standards or changes
in accounting policies, and events after
the
reporting period.
2 Comparative figures
have been restated for
changes in Group Treasury
allocations. Refer to
“Note 3 Segment reporting”
in the “Consolidated financial
statements” section of this
report for
more information.
3 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.
4 Relates to licensed professionals with the ability to provide investment
advice to clients in the
Americas. Consists of
cash compensation, determined using
a formulaic approach based
on production, and deferred
awards. Also includes
expenses related to compensation
commitments
with financial advisors entered into at the
time of recruitment that are subject
to vesting requirements. Recruitment
loans to financial advisors were
USD 1,683m as of 31 December 2024.
5 Loans and Customer
deposits in this table include customer brokerage
receivables and payables, respectively, which are presented in a separate reporting line on the balance sheet.
6 Refer to the “Risk management and control” section
of this report for more information about (credit-)impaired exposures. Excludes loans to financial advisors.
2024 compared with 2023
Results
Profit before
tax decreased by
USD 359m, or 10%,
to USD 3,255m, mainly
driven by higher
operating expenses, partly
offset by higher total revenues, and included
a positive impact from the merger of UBS
AG and Credit Suisse AG.
Total revenues
Total revenues increased by USD 3,609m, or 19%, to USD 22,148m, mainly due to
the consolidation of Credit Suisse AG
revenues. The remaining increase
largely reflected increases in recurring
net fee income and transaction-based income.
Net
interest
income
increased
by
USD 556m,
or
10%,
to
USD 5,901m,
mainly
driven
by
the
consolidation
of
Credit
Suisse AG net
interest income.
The remaining
variance was
due to
lower deposit
revenues, mainly
as a
result of
lower
margins, and included the effects of shifts to
lower-margin deposit products. The change was also due to higher liquidity
and funding costs, as well as lower loan revenues, reflecting lower
average volumes.
Recurring
net
fee
income
increased
by
USD 1,939m,
or
19%,
to
USD 12,082m,
mainly
driven
by
positive
market
performance and the consolidation of Credit Suisse AG recurring
net fee income.
Transaction-based income
increased by
USD 1,043m, or
34%, to
USD 4,122m, mainly
driven by
higher levels
of client
activity, particularly in
the Asia Pacific
and Americas regions,
and due to
the consolidation of
Credit Suisse AG transaction-
based income.
Other income was USD 43m, compared
with other income of negative
USD 28m. Other income in 2024 included
a loss
of USD 21m related
to an investment
in an associate, compared
with a loss
of USD 64m
related to an
investment in an
associate recognized in
2023. The change in
other income was
also due to an
increase in shared services
costs charged
to other subsidiaries of UBS Group AG, which was mainly related
to secondments.
Credit loss expense / release
Net credit loss releases were
USD 1m, compared with net expenses of USD 25m
in 2023.
Annual Report 2024 |
Financial and operating performance | Global
Wealth Management
45
Operating expenses
Operating expenses
increased by
USD 3,993m, or
27%, to USD
18,893m, mainly
driven by the
consolidation of
Credit
Suisse
AG
operating
expenses
and
higher
personnel
expenses
(primarily
reflecting
an
increase
in
financial
advisor
compensation as a result of higher compensable revenues
), as well as by higher integration-related expenses and
higher
technology expenses.
Cost / income ratio
The
cost / income
ratio
increased
to
85.3%
from
80.4%,
as
an
increase
in
operating
expenses
more
than
offset
an
increase in total revenues.
Invested assets
Invested assets increased
by USD 995bn, or
31%, to USD 4,182bn,
mainly driven by
the consolidation of
Credit Suisse AG
invested
assets,
positive
market
performance
of
USD 114bn
and
net
new
money
inflows,
offset
by
negative
foreign
currency effects of USD 41bn.
Loans
Loans increased
by USD
83.9bn to
USD 302.2bn,
mainly
driven by
the consolidation
of Credit
Suisse AG
loans, partly
offset by negative foreign currency
effects and negative net new loans.
›
Refer to the “Risk management and control” section of this
report for more information
Customer deposits
Customer deposits
increased by
USD 115.3bn to
USD 470.6bn, mainly
driven by
the consolidation
of Credit
Suisse AG
customer deposits and net new deposit inflows, partly offset
by negative foreign currency effects.
Personal Corporate Banking
Personal Corporate Banking – in Swiss francs
1
As of or for the year ended
% change from
CHF m, except where indicated
31.12.24
31.12.23
2
31.12.23
Results
Net interest income
3,554
2,743
30
Recurring net fee income
3
1,190
851
40
Transaction-based income
3
1,529
1,179
30
Other income
32
(83)
Total revenues
6,305
4,689
34
Credit loss expense / (release)
348
46
660
Operating expenses
4,152
2,589
60
Business division operating profit / (loss) before tax
1,805
2,055
(12)
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
3
(12.2)
20.5
Cost / income ratio (%)
3
65.9
55.2
Net interest margin (bps)
3
168
188
Loans, gross (CHF bn)
245.3
146.8
67
Customer deposits (CHF bn)
255.5
169.6
51
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
3,4
1.5
0.9
1
Comparatives may differ due to adjustments
following organizational changes, restatements
due to the retrospective adoption of
new accounting standards or changes in
accounting policies, and events
after the
reporting period.
2
Comparative figures have been restated for changes in Group Treasury allocations. Refer to “Note 3 Segment reporting” in the “Consolidated financial statements” section of this report for more
information.
3
Refer to “Alternative performance measures” in the
appendix to this report for the definition and calculation method.
4
Refer to the “Risk management and control” section of this report for more
information about (credit-)impaired exposures.
Annual Report 2024 |
Financial and operating performance | Personal
Corporate Banking
46
2024 compared with 2023
Results
Profit before
tax decreased
by CHF 250m, or
12%, to CHF 1,805m,
as higher total
revenues were
more than
offset by
higher operating expenses and net credit loss expenses.
Total revenues
Total
revenues increased by CHF
1,616m, or 34%, to CHF 6,305m, mainly
due to the consolidation of Credit
Suisse AG
revenues, with the remaining variance
largely reflecting increases in all revenue
lines.
Net interest income increased by CHF 811m
to CHF 3,554m, largely reflecting the
consolidation of Credit Suisse AG net
interest income.
Recurring net fee
income increased by
CHF 339m
to CHF 1,190m,
mainly due to
the consolidation
of Credit Suisse
AG
recurring net fee
income, as well
as an increase
in revenues due
to higher investment
product levels, reflecting
positive
market performance and net new inflows.
Transaction-based income increased
by CHF 350m to CHF
1,529m, largely due to
the consolidation of Credit
Suisse AG
transaction-based income.
Other
income
was
positive
CHF 32m,
compared
with
negative
CHF 83m.
Other
income
in
2024
included
a
loss
of
CHF 54m related to an investment in an associate, compared
with a loss of CHF 161m recognized in 2023.
Credit loss expense / release
Net credit
loss expenses were
CHF 348m, mainly
due to the
consolidation of
Credit Suisse AG,
and reflected
net credit
loss expenses on credit-impaired positions
,
primarily in the legacy Credit Suisse corporate
loan book, partly offset by net
credit loss releases related to
performing positions. Net credit loss expenses
in 2023 were CHF 46m.
Operating expenses
Operating
expenses
increased
by
CHF 1,563m,
or
60%,
to
CHF 4,152m,
largely
due
to
the
consolidation
of
Credit
Suisse AG expenses, and included higher integration-related
expenses.
Cost / income ratio
The cost / income ratio increased
to 65.9% from 55.2%, as
the relative increase
in operating expenses was higher than
the relative increase in total revenues.
Personal Corporate Banking – in US dollars
1
As of or for the year ended
% change from
USD m, except where indicated
31.12.24
31.12.23
2
31.12.23
Results
Net interest income
4,035
3,059
32
Recurring net fee income
3
1,350
949
42
Transaction-based income
3
1,734
1,314
32
Other income
39
(105)
Total revenues
7,159
5,216
37
Credit loss expense / (release)
393
50
679
Operating expenses
4,714
2,889
63
Business division operating profit / (loss) before tax
2,052
2,277
(10)
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
3
(9.9)
27.2
Cost / income ratio (%)
3
65.9
55.4
Net interest margin (bps)
3
168
189
Loans, gross (USD bn)
270.2
174.4
55
Customer deposits (USD bn)
281.4
201.5
40
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)
3,4
1.5
0.9
1
Comparatives may differ due to adjustments
following organizational changes, restatements
due to the retrospective adoption of new
accounting standards or changes in accounting
policies, and events after the
reporting period.
2
Comparative figures have been restated for changes in Group Treasury allocations. Refer to “Note 3 Segment reporting” in the “Consolidated financial statements” section of this report for more
information.
3
Refer to “Alternative performance measures” in the appendix
to this report for the definition and calculation method.
4
Refer to the “Risk management and control” section of this report for more
information about (credit-)impaired exposures.
Annual Report 2024 |
Financial and operating performance | Asset
Management
47
Asset Management
Asset Management
1
As of or for the year ended
% change from
USD m, except where indicated
31.12.24
31.12.23
2
31.12.23
Results
Net management fees
3
2,538
1,977
28
Performance fees
136
70
94
Net gain from disposals
125
23
437
Total revenues
2,799
2,071
35
Credit loss expense / (release)
0
(1)
Operating expenses
2,334
1,706
37
Business division operating profit / (loss) before tax
465
366
27
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
4
27.1
(73.8)
Cost / income ratio (%)
4
83.4
82.4
Gross margin on invested assets (bps)
4
18
18
Information by business line / asset
class
Net new money (USD bn)
4
Equities
28.1
0.2
Fixed Income
23.8
29.5
of which: money market
17.9
23.6
Multi-asset Solutions
2.9
3.3
Hedge Fund Businesses
(4.0)
(3.9)
Real Estate Private Markets
1.0
2.7
Total net new money excluding associates
51.9
31.8
of which: net new money excluding money market
34.0
8.1
Associates
5
8.8
0.5
Total net new money
60.6
32.3
Invested assets (USD bn)
4
Equities
755
539
40
Fixed Income
464
323
44
of which: money market
157
131
20
Multi-asset Solutions
268
180
49
Hedge Fund Businesses
58
54
9
Real Estate Private Markets
143
102
40
Total invested assets excluding associates
1,689
1,199
41
of which: passive strategies
807
540
49
Associates
5
84
24
255
Total invested assets
1,773
1,222
45
Information by region
Invested assets (USD bn)
4
Americas
443
350
27
Asia Pacific
6
224
153
46
EMEA (excluding Switzerland)
435
314
39
Switzerland
670
405
65
Total invested assets
1,773
1,222
45
Information by channel
Invested assets (USD bn)
4
Third-party institutional
1,008
659
53
Third-party wholesale
169
126
35
UBS’s wealth management businesses
512
414
24
Associates
5
84
24
255
Total invested assets
1,773
1,222
45
1 Comparatives may differ due to adjustments
following organizational changes, restatements
due to the retrospective adoption
of new accounting standards or changes
in accounting policies, and events
after the
reporting period.
2 Comparative figures have been restated for changes in Group Treasury allocations. Refer to “Note 3 Segment reporting” in the “Consolidated financial statements” section of this report for more
information.
3 Net management
fees include transaction
fees, fund
administration revenues
(including net interest
and trading income
from lending activities
and foreign-exchange hedging
as part of
the fund
services offering), distribution fees, incremental fund-related expenses, gains or losses from seed money and co-investments, funding costs, the negative pass-through impact of third-party
performance fees, and other
items that are not Asset Management’s
performance fees.
4 Refer to “Alternative
performance measures” in the appendix to
this report for the definition and
calculation method.
5 The invested assets
and net
new money amounts reported for associates are prepared in accordance with their local regulatory requirements and practices.
6 Includes invested assets from associates.
Annual Report 2024 |
Financial and operating performance | Asset
Management
48
2024 compared with 2023
Results
Profit before
tax increased
by USD 99m, or 27%,
to USD 465m, mainly
reflecting the
impact from the
consolidation of
Credit Suisse AG, including net gains of USD
125m from the sale of non-strategic businesses.
Total revenues
Total
revenues
increased
by
USD 728m,
or
35%,
to
USD 2,799m,
primarily
reflecting
the
consolidation
of
Credit
Suisse AG revenues, and included USD 125m net
gains from the aforementioned sales.
Net
management
fees
increased
by
USD 561m,
or
28%,
to
USD 2,538m,
largely
attributable
to
the
consolidation
of
Credit Suisse AG
net management
fees, positive
market performance
and foreign currency
effects, and the
revaluation
of a
real estate fund
co-investment, partly
offset by
continued margin
compression.
In addition,
2023 included
the fee
income of the former UBS
Hana Asset Management Co.
and negative pass-through fees,
with the corresponding offset
in performance fees.
Performance fees increased by USD 66m, or 94%, to USD
136m, mainly due to increases in Hedge Fund Businesses
and
Fixed Income, and included Credit Suisse AG performance fees. These increases were partly offset by lower performance
fees due to 2023 including the aforementioned pass-through
fees.
Operating expenses
Operating
expenses
increased
by
USD 628m,
or
37%,
to
USD 2,334m,
largely
due
to
the
consolidation
of
Credit
Suisse AG operating expenses, and included higher integration
-related expenses.
Cost / income ratio
The cost / income ratio increased
to 83.4% from 82.4%,
as the relative increase
in operating expenses was higher
than
the relative increase in total revenues
.
Invested assets
Invested assets increased by
USD 551bn, or 45%, to
USD 1,773bn, mainly reflecting the impact
of the merger of
UBS AG
and Credit Suisse AG and related
business transfers, positive market performance of USD 140bn
and net new money of
USD 61bn, partly offset by negative foreign
currency effects of USD 48bn. Excluding money
market flows and associates,
net new money was USD 34bn.
Investment Bank
Investment Bank
1
As of or for the year ended
% change from
USD m, except where indicated
31.12.24
31.12.23
2
31.12.23
Results
Advisory
871
604
44
Capital Markets
1,511
1,005
50
Global Banking
2,382
1,609
48
Execution Services
3
1,714
1,336
28
Derivatives Solutions
3
3,446
2,860
21
Financing
2,296
1,980
16
Global Markets
7,455
6,175
21
of which: Equities
5,563
4,457
25
of which: Foreign Exchange, Rates and Credit
1,893
1,718
10
Total revenues
9,837
7,784
26
Credit loss expense / (release)
98
67
47
Operating expenses
8,753
7,588
15
Business division operating profit / (loss) before tax
987
130
658
Performance measures and other information
Pre-tax profit growth (year-on-year, %)
4
658.5
(92.9)
Cost / income ratio (%)
4
89.0
97.5
1 Comparatives may differ due to adjustments
following organizational changes, restatements
due to the retrospective adoption of
new accounting standards or changes in
accounting policies, and events
after the
reporting period.
2
Comparative figures have been restated for changes in Group Treasury allocations. Refer to “Note 3 Segment reporting” in the “Consolidated financial statements” section of this report for more
information.
3
Comparative figures for the year ended 31
December 2023 have been restated as a result of the
shift of the foreign exchange products that are traded over electronic
platforms from Execution Services
to Derivatives Solutions. The restatement had no effect on total Global Markets
revenues.
4
Refer to “Alternative performance measures” in the appendix
to this report for the definition and calculation method.
Annual Report 2024 |
Financial and operating performance | Investment
Bank
49
2024 compared with 2023
Results
Profit
before
tax
increased
by
USD 857m
to
USD 987m,
mainly
due
to
higher
total
revenues,
partly
offset
by
higher
operating expenses.
Total revenues
Total
revenues
increased
by USD 2,053m,
or 26%,
to USD 9,837m,
reflecting
increases
in Global
Markets and
Global
Banking.
Global Banking
Global
Banking
revenues
increased
by
USD 773m,
or
48%,
to
USD 2,382m,
reflecting
higher
Capital
Markets
and
Advisory revenues.
Advisory
revenues
increased
by
USD 267m,
or
44%,
to
USD 871m,
mostly
due
to
higher
merger
and
acquisition
transaction revenues.
Capital Markets
revenues increased
by USD 506m,
or 50%,
to USD 1,511m,
mainly
due to
higher revenues
across all
products, led by Leveraged Capital Markets.
Global Markets
Global Markets
revenues increased
by USD 1,280m, or
21%, to USD 7,455m,
driven by higher
Derivatives Solutions
,
Execution Services and Financing revenues.
Execution Services revenues
increased by USD 378m,
or 28%, to USD 1,714m,
mainly due to increases
in Cash Equities
across all regions.
Derivatives Solutions revenues
increased by USD 586m, or
21%, to USD 3,446m, mainly
reflecting increases in Equity
Derivatives and Foreign Exchange.
Financing revenues increased
by USD 316m, or
16%, to USD 2,296m
,
mainly driven
by Capital Markets
Financing,
and
included a USD 51m gain from the sale of our investment
in an associate.
Equities
Global Markets Equities revenues
increased by USD 1,106m,
or 25%, to USD 5,563m, mainly
due to increases in Equity
Derivatives,
Cash Equities and Financing,
as well as the aforementioned gain from
sale.
Foreign Exchange, Rates and Credit
Global Markets Foreign
Exchange, Rates and Credit
revenues increased by
USD 175m, or 10%, to
USD 1,893m, mainly
driven by increases in Foreign Exchange.
Credit loss expense / release
Net credit
loss expenses were
USD 98m, compared
with net
credit loss
expenses of
USD 67m, reflecting
net credit
loss
expenses on performing and credit-impaired
positions, including the impact of model updates.
Operating expenses
Operating
expenses
increased
by
USD 1,165m,
or
15%,
to
USD 8,753m,
and
included
higher
integration-related
expenses,
with
the
remaining
increase
reflecting
higher
personnel
expenses
(including
secondment
of
Credit
Suisse
employees prior to the
merger of UBS AG and
Credit Suisse AG, as well as
variable compensation)
and higher technology
expenses.
Cost / income ratio
The cost / income ratio decreased to 89.0% from 97.5%, as the increase in total revenues more than offset
the increase
in operating expenses.
Annual Report 2024 |
Financial and operating performance | Non-core
and Legacy
50
Non-core and Legacy
Non-core and Legacy
1
As of or for the year ended
% change from
USD m
31.12.24
31.12.23
2
31.12.23
Results
Total revenues
335
58
474
Credit loss expense / (release)
55
1
Operating expenses
3,673
1,010
264
Operating profit / (loss) before tax
(3,392)
(952)
256
1 Comparatives may differ due to adjustments
following organizational changes, restatements
due to the retrospective adoption of
new accounting standards or changes in
accounting policies, and events
after the
reporting period.
2 Comparative figures have been restated for changes in Group Treasury allocations. Refer to “Note 3 Segment reporting” in the “Consolidated financial statements” section of this report for more
information.
2024 compared with 2023
Results
Loss before tax was USD 3,392m, primarily due to the impact of the merger of UBS AG and Credit Suisse AG, compared
with a loss before tax of USD 952m.
Total revenues
Total
revenues
were
USD 335m, which
was
USD 277m
higher than
the amount
recorded
in 2023,
mainly
due to
the
consolidation of
Credit Suisse
AG revenues.
In 2024,
total revenues
reflected net
gains from
position exits,
along with
net interest income from securitized products and credit products. Total
revenues in 2024 also included a USD 67m gain
from the sale of our investment in an associate
.
Credit loss expense / release
Net credit
loss expenses
were
USD 55m, almost
entirely
driven by
credit-impaired
positions, compared
with net
credit
loss expenses of USD 1m.
Operating expenses
Operating expenses were
USD 3,673m, compared
with operating expenses
of USD 1,010m recorded
in 2023, with
the
change largely due to the consolidation of Credit Suisse AG expenses, and included a USD 606m increase in integration-
related expenses.
Operating expenses
also included
litigation expenses
of USD 1,338m,
largely reflecting
UBS agreeing
in
the
second
quarter
of
2024
to
fund
an
offer
by
the
Credit
Suisse
supply
chain
finance
funds
to
redeem
all
the
outstanding units of the respective funds. 2023 included USD 665m of expenses related to the US residential mortgage-
backed securities litigation matter,
which was settled in the third quarter of 2023.
Group Items
Group Items
1
As of or for the year ended
% change from
USD m
31.12.24
31.12.23
2
31.12.23
Results
Total revenues
45
6
653
Credit loss expense / (release)
0
1
Operating expenses
979
919
7
Operating profit / (loss) before tax
(935)
(914)
2
1 Comparatives may differ due to adjustments
following organizational changes,
restatements due to the retrospective adoption
of new accounting standards or changes
in accounting policies, and events
after the
reporting period.
2
Comparative figures have been restated for changes in Group Treasury allocations. Refer to “Note 3 Segment reporting” in the “Consolidated financial statements” section of this report for more
information.
2024 compared with 2023
Results
Loss
before
tax
increased
by
USD 21m
to
USD 935m,
mainly
due
to
higher
shared
services
costs
charged
by
other
subsidiaries of UBS Group AG, partly offset
by lower integration-related expenses.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
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51
Risk, capital, liquidity and
funding, and balance sheet
Management report
Audited information according to IFRS 7 and IAS 1
Risk and capital disclosures
provided in line with
the requirements of
IFRS 7,
Financial Instruments: Disclosures,
and IAS 1,
Presentation
of
Financial
Statements,
form
part
of
the
financial
statements
included
in
the
“Consolidated
financial
statements” section of
this report and
are audited by the
independent registered public
accounting firm Ernst
Young
Ltd, Basel. This information is marked as “Audited” within
this section of the report.
Signposts
The
Audited |
signpost that is displayed at the beginning
of a section, table or chart indicates that
those items have been audited. A triangle
symbol –
indicates the end of the audited section, table
or chart.
Annual Report 2024 |
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52
Risk management and control
Table of contents
53
54
55
57
59
60
72
81
83
87
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53
Risk management and control
With
regard
to
the
ongoing
integration
of
Credit
Suisse,
we
have
substantially
completed
the
initial
phases
of
the
integration, focusing on the
alignment of governance
structures and frameworks
(aligning Credit Suisse policies
to UBS
standards) and
the merger
or reparenting
of key
legal entities,
including the
merger of
Credit Suisse AG
with UBS AG,
the
merger
of
Credit
Suisse
(Schweiz) AG
with
UBS
Switzerland AG
and
the
reparenting
of
Credit
Suisse
Holdings (USA), Inc. in connection
with the transition
to a single
US intermediate holding
company. These steps
set the
stage for the next critical phase of client account and
data migrations. In 2024, we completed client account
migrations
in Hong
Kong,
Singapore
and
Japan,
and
in some
locations
in Europe.
Our
goal
is to
ensure a
smooth
and
seamless
transition for our clients,
minimizing any disruption. We are
also working toward a
fully integrated risk framework, which
is expected
to
be
achieved
by the
end
of
2025,
and
a
single-model
risk
management
framework
by retiring
and / or
integrating legacy Credit Suisse models into the UBS risk
management framework.
Following the
merger of
UBS AG and
Credit Suisse AG
on 31 May
2024, the
risk profile
of UBS AG
consolidated does
not differ materially from that of UBS Group AG consolidated
.
The changes over the year primarily reflect this merger.
Top and emerging risks
An overview
of our
top and
emerging risks,
from a
risk management
perspective, is
disclosed below.
Investors should
also carefully review all information set out in the “Risk factors” section of this report, where we discuss these and other
material
risks
that
could
have
an
effect
on
our
ability
to
execute
our
strategy
and
may
affect
our
business
activities,
financial condition, results of operations and business
prospects.
Top and emerging risk
Description
Geopolitical uncertainty
UBS AG remains watchful of a range of geopolitical
developments and political changes in
a number of countries, as
well as international tensions arising
from the Russia–Ukraine war and global trade relations,
and UBS AG continues
to
monitor conflicts in the Middle East. Geopolitical
tensions will continue to create uncertainty
and complicate the
energy price outlook.
Macroeconomic risks
UBS AG is exposed to a number of macroeconomic
risks,
as well as general market conditions. As noted
in “Market,
credit and macroeconomic risks” in the “Risk factors”
section of this report, these external pressures may have
a
significant adverse effect on UBS AG’s business
activities and related financial results, primarily through reduced
margins and revenues, asset impairments and other
valuation adjustments,
and exit prices for its Non-core and Legacy
portfolio.
Accordingly, these macroeconomic factors are considered in the development of stress-testing scenarios
for
UBS AG’s ongoing risk management activities.
Inflation has abated to some extent in major
Western economies, though there are still concerns
that inflation could
return, including upward pressure on interest rates. Central banks’
monetary policy remains in the spotlight. In China,
stress in the property sector and strained local government
finances continue to have an adverse impact
on economic
growth, raising the risk of financial instability. This combination of factors translates
into a more uncertain and volatile
environment, which increases the risk of financial market
disruption.
The commercial real estate sector continues to be a
source of concerns, especially the office sector in
the US, given
structural changes (higher interest rates and the shift
to remote working).
UBS AG remains focused on non-bank financial intermediation
and growth in private markets, given their significance
and interconnectivity across the financial sector, with the potential to create spillover
effects into the broader financial
system. Across its business divisions UBS AG undertakes
a broad range of private-markets-related activities, including
financing, advisory services,
investment facilitation and asset management.
Regulatory and legal risks
UBS AG is exposed to substantial changes in
the regulation of its businesses that could have
a material adverse effect
on its business, as discussed in the “Regulatory
and legal developments” section of this
report and in “Regulatory and
legal risks” in the “Risk factors” section of this
report.
As a global financial services firm, UBS AG
is subject to many different legal, tax and regulatory regimes
and extensive
regulatory oversight. UBS AG is exposed to significant
liability risk, and it is subject to various claims,
disputes, legal
proceedings and government investigations,
as noted in “Regulatory and legal risks”
in the “Risk factors” section of
this report. Information about litigation, regulatory and
similar matters considered significant is disclosed in
“Note 18
Provisions and contingent liabilities” in the “Consolidated
financial statements” section of this report.
Cyber risks
Global geopolitical trends increase the likelihood of external
state-driven cyber activity. Alongside a general trend
toward more sophisticated forms of ransomware and other
cyber threats, there is a risk of operational disruption
to
business activities at UBS AG’s locations and
those of third-party suppliers or corruption or
loss of data. Additionally, as
a result of the dynamic and material nature of recent geopolitical
and environmental events and the operational
complexity of all its businesses,
UBS AG is continually exposed to operational
resilience scenarios such as process error,
failed execution, system failures,
loss of third-party service and fraud.
›
Refer to “Non-financial risk” and “Cybersecurity and information security”
in this section for more information
Conduct risks
Conduct risks are inherent in UBS AG’s businesses. Achieving
fair outcomes for its clients, upholding
market integrity
and cultivating the highest standards of employee
conduct are of critical importance to UBS AG. Management
of
conduct risks is an integral part of UBS AG’s
risk management framework.
›
Refer to “Non-financial risk” in this section and “Strategy,
management and operational risks” in the “Risk factors”
section of this report for more information
Annual Report 2024 |
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54
Top and emerging risk
Description
Financial crime risks
Financial crime (including money laundering,
terrorist financing, sanctions violations, fraud,
bribery, and corruption)
presents significant risk and is subject to heightened
regulatory expectations and attention.
This requires investment in
people and systems, while emerging technologies
and changing geopolitical risks further increase
the complexity of
identifying and preventing financial crime, in particular
managing the continuously evolving sanctions
environment.
›
Refer to “Non-financial risk” in this section for more information
Sustainability and climate risks
Sustainability and climate risks continue to be in
focus for UBS AG, for regulators and for
stakeholders. To address
these emerging risks, UBS AG has further
enhanced its transition and physical risk
methodologies and updated its
guidelines on sustainable finance and
on carbon and environmental markets.
›
Refer to “Sustainability and climate risk” in the “Risk management and control” section of the UBS Group
Annual
Report 2024, available under “Annual reporting” at
ubs.com/investors
, for more information
›
Refer to “Appendix 1 – Governance” to the UBS Group Sustainability Report 2024, available under “Annual reporting”
at ubs.com/investors
, for a full description of our sustainability and climate risk policy framework
Regulatory requirements and industry guidelines are emerging
simultaneously in various jurisdictions, leading
to an
increased risk of divergence, which in turn
increases the risk that UBS AG may not comply with
all relevant regulations.
New technologies
New risks related to client demand for distributed
ledger technology, blockchain-based assets and virtual currencies
continue to emerge.
UBS AG’s exposure to these risks is currently limited,
and relevant control frameworks are
continuously being enhanced and implemented.
Furthermore, technological developments in
the areas of artificial
intelligence (AI) and digitization will have
a significant impact and create not only opportunities
but also heightened
operational risks.
As the digitalization of UBS AG’s business
and the marketplace results in the adoption of
new technologies,
the
responsible use of AI and the increasing regulatory and client
expectations on ensuring ethical data usage are
becoming more important. With rapidly advancing
technology and changing communication
preferences, there is
heightened focus on electronic communications,
including the use of approved communication
channels and
appropriate recordkeeping.
›
Refer to “Non-financial risk” in this section for more information
Risk oversight
Risk governance
The risk
governance of
UBS AG is
modeled on
that of
the UBS Group,
with the
same three
lines of
defense and
equal
governance structure in terms of key roles and responsibility
for risk management.
›
Refer to “Risk governance” in the “Risk
management and control” section of the UBS Group Annual
Report 2024, available under
“Annual reporting” at
ubs.com/investors,
Risk identification
Risk identification at
UBS AG is the
process of systematically
identifying, assessing and
cataloguing risks across
all business
activity
and
risk
categories.
It
is
a
fundamental
component
of
UBS AG’s
risk
management
approach,
ensuring
that
a
comprehensive
understanding
of
its
risk
exposure
is
maintained.
UBS AG’s
structured
risk
identification
framework
integrates
both bottom
-up
and top-down
risk
identification approaches
and enhances
its ability
to capture,
measure,
monitor and control risks,
in alignment with
global regulatory expectations.
The process involves
subject matter experts
from both the first and second lines of defense, including senior management across the organization, and is conducted
periodically, complementing day-to-day risk identification and risk management frameworks. By anchoring to a common
risk taxonomy and
risk materiality approach,
UBS AG ensures
consistent categorization and
prioritization of risks
across
business
divisions
and
significant
entities.
Additionally,
documenting
root-cause
drivers
and
early
warning
signs
strengthens UBS AG’s ability to monitor emerging
risks.
Various
review
and
approval
steps
are
embedded
throughout
the
process
to
maximize
risk
transparency,
including
presentation at
senior governance
bodies for
each
business
division, applicable
significant entities
and at
the
UBS AG
level. The output of the process helps ensure
that stress-testing exercises take into
account the firm’s key vulnerabilities,
while also supporting broader risk management activity.
Internal risk reporting
Comprehensive
and transparent
reporting of
risks is
central to
our risk
governance framework’s
control and
oversight
responsibilities and required by
our risk management
and control principles.
Accordingly, risks are reported at a
frequency
and level
of detail
commensurate
with the
extent
and
variability of
the
risk and
the
needs of
the various
governance
bodies, regulators
and risk
authority holders.
Data used
to produce
risk reports
is generally
aligned with
that used
by
both the business divisions and control functions for managing and monitoring risks. This alignment ensures consistency
in risk assessment and decision-making across the
organization.
As UBS AG’s risk profile
is closely aligned to
that of the
Group, it relies on
the internal risk reporting
framework for the
Group to cover the reporting for UBS AG.
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55
The Group
Risk Report
provides a
detailed qualitative
and quantitative
monthly
overview of
developments
in financial
and non-financial risks at the
firm-wide level. The Group Risk Report
is distributed internally to the
BoD and the Executive
Board (EB),
and senior
members of
Risk Control,
Internal Audit
(IA), Finance
and Legal.
Risk reports
are also
produced
covering significant Group
entities and branches
(i.e. entities and
branches subject
to enhanced standards
of corporate
governance),
which also include significant entities and branches of
UBS AG.
Monthly divisional
risk reports
are supplemented
with daily
or weekly
reports, at
various levels
of granularity,
covering
market and
credit risks of
the business
divisions to
enable risk
officers and
senior management
to monitor
and control
our risk profile.
Our internal risk
reporting covers financial and
non-financial risks and is
supported by risk
data and measurement systems
that are
used for risk
management and
monitoring purposes
and also
for external
disclosure and
regulatory reporting.
Dedicated
units
within
Risk
Control
assume
responsibility
for
measurement,
analysis
and
reporting
of
risk
and
for
overseeing the quality and
integrity of risk-related
data. Our risk data
and measurement systems
are subject to
periodic
review by IA, which applies a risk-based audit approach.
Risk categories
UBS AG categorizes
its risk
exposures in
line with
the UBS Group
and as
outlined in
the table
below.
The risk
appetite
framework is designed to capture all risk categories.
›
Refer to “Risk appetite framework” in this
section for more information
Risk
managed by
Independent
oversight by
Financial risks
Audited |
Credit risk
:
the risk of loss resulting from the failure of a client or counterparty
(including an issuer) to meet its
contractual obligations toward UBS AG.
This includes loan underwriting risk and settlement
risk.
Loan underwriting risk:
for further distribution.
Settlement risk:
but does not receive an expected value in return
from the counterparty.
›
Refer to “Credit risk” in this section for more information
Business
divisions
Risk Control
Audited |
Market risk
: the risk of loss resulting from adverse movements in
market variables. Market risks are actively taken
as part of trading activities but can also arise from non-trading
activities. Market variables include observable
variables,
such as interest rates, foreign exchange rates, equity
prices, credit spreads and commodity (including precious
metal)
prices, as well as variables that may be unobservable
or only indirectly observable, such as volatilities
and correlations.
Market risk includes issuer risk and investment
risk.
Issuer risk:
derivatives referencing the issuer was subject to a credit-related
event.
Investment risk:
›
Refer to “Market risk” in this section for more information
Business
divisions and
Group
Treasury
Risk Control
Treasury risk:
well as structural exposures, including pension risks.
Audited |
Liquidity risk:
Audited |
Funding risk:
strategy.
›
Refer to “Liquidity and funding management” in the “Capital, liquidity and funding, and balance sheet” section of this
report for more information
Interest rate risk in the banking book:
the risk to the firm’s capital and earnings
arising from the adverse effects of
interest rate movements on the firm’s banking book
positions. The risk is transferred from the originating
business
divisions, i.e. Global Wealth Management and Personal
Corporate Banking, to Group Treasury to risk manage this
centrally and benefit from firm-wide netting
while leaving the business divisions with
margin management.
›
Refer to “Market risk” in this section for more information
Structural foreign exchange risk:
with an adverse translation effect on capital held
in currencies other than the US dollar.
Group
Treasury
Risk Control
Pension risk:
decreases in the fair value of assets held in defined benefit
pension funds and / or changes in the
value of defined
benefit pension obligations due to changes in
actuarial assumptions (e.g. discount rate,
life expectancy and rate of
pension increase) and / or changes to plan designs.
Group
Treasury and
Human
Resources
Risk Control
and Finance
Country risk:
transfer risk, which involves a country’s
authorities preventing or restricting the payment of an
obligation, as well as
systemic risk events arising from country-specific political
or macroeconomic developments.
›
Refer to “Country risk” in this section for more information
Business
divisions
Risk Control
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56
Risk
managed by
Independent
oversight by
Financial risks (continued)
Sustainability and climate risk:
capital, human rights, and other environmental and
social matters. Sustainability and climate risks
may manifest as credit,
market, liquidity, business and non-financial risks for UBS AG resulting in potential
adverse financial, liability and
reputational impacts. These risks extend to the value
of investments and may also affect the value
of collateral (e.g. real
estate). Sustainability and climate risk includes transition
risk and physical risk.
Transition risk:
cover the financial impact on clients or on UBS
AG itself as reflected in the creditworthiness of UBS AG’s
counterparties
or the value of collateral held by UBS AG.
Physical risk:
from chronic climate risks,
which arise from an incrementally changing climate.
These effects may include increased
temperature and sea-level rise, and the gradual
changes may affect productivity and property values and increase
the
severity and frequency of acute hazards.
›
Refer to “Sustainability and climate risk” in the “Risk management and control” section of the UBS Group
Annual Report
2024, available under “Annual reporting” at
ubs.com/investors
, for more information
Business
divisions
Risk Control
Capital risk:
capital requirements.
›
Refer to “Capital management” in the “Capital, liquidity and funding, and balance sheet” section of this report
for more
information
Group
Treasury
Risk Control
and Finance
Business risk:
the extent they are not offset by a decrease in expenses. For
example, changes in the competitive landscape,
client
behavior or market conditions can have a negative
impact.
Business
divisions
Risk Control
and Finance
Strategic risk:
the idiosyncratic risk arising from the impact
of strategic decisions on UBS, which can be
driven by
exogenous factors,
such as changes in the industry environment, or by
endogenous factors,
such as constraints related to
or execution of strategic decisions.
›
Refer to “Strategy, management and operational
risks” in the “Risk factors” section of this report for more information
Business
divisions and
Group
functions
Finance, Chief
Strategy Office
and Risk
Control
Non-financial risks
Compliance risk:
firm’s Code of Conduct and Ethics.
›
Refer to “Non-financial risk” in this section for more information
Business
divisions
GCRG
Employment risk:
policies governing employment practices, discrimination, compensation and employee-related taxes and benefits.
Human
Resources
Conduct risk:
undermines the integrity of the financial system
or impairs effective competition to the detriment
of consumers.
GCRG
Market conduct risk:
the risk of failure to maintain appropriate standards to
ensure fair and effective markets and
meet legal / regulatory requirements and expectations governing
activities undertaken on or through a market
or in
pricing- / transaction-related bilateral interactions
between counterparties.
GCRG
Client suitability risk:
the risk arising from an inability to demonstrate
adherence to applicable investment suitability
standards, laws, rules and regulations.
GCRG
Financial crime risk:
sanctions or embargo violations, internal
and external fraud, bribery, and corruption).
›
Refer to “Non-financial risk” in this section for more information
Business
divisions and
Financial
Crime
Prevention
GCRG
Operational risk:
causes (deliberate, accidental or natural).
›
Refer to “Non-financial risk” in this section for more information
Business
divisions
GCRG
Cybersecurity and information-security
risk:
hardware or software, or human error, leading to a material impact on confidentiality, integrity or availability of UBS’s
data or information systems.
›
Refer to “Non-financial risk” in this section for more information
Business
divisions and
GOTO
GCRG
Model risk:
decisions, or reputational damage) resulting from decisions
based on incorrect / inadequate or misused model
outputs
and reports.
›
Refer to “Model risk” in this section for more information
Business
divisions and
Group
functions
Risk Control
Legal risk:
of contractual or other legal obligations; (iii) an inability or failure to enforce
or protect contractual rights or non-contractual
rights sufficiently to protect UBS AG’s interests; and (iv)
being party to a claim or investigated by a regulator or public
authority
in respect of any of the above (and the
risk of loss of attorney–client privilege in the context of any such claim).
Business
divisions
Legal
Reputational risk:
view of clients, shareholders, regulators, employees
or society,
which may lead to potential financial loss
and / or loss of
market share.
›
Refer to “Non-financial risk” in this section for more information
All business
divisions and
Group
functions
All control
functions
Annual Report 2024 |
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57
Overview of risks arising from our business activities
Key risks by business division and Group functions
Business divisions and Group functions
Key financial risks arising from business activities
Global Wealth Management
Credit risk
other real assets (such as ships and aircraft), private equity
and hedge fund interest, and investors’ uncalled
capital commitments, as well as from collateralized
clients’ derivatives trading. Also includes
unsecured
lending, i.e. cash-flow-based corporate lending
to entities owned and controlled by UBS AG’s
Global Wealth
Management clients, and recourse-based lending.
Limited contribution to
market risk
rate risk in the banking book related to Global
Wealth Management is transferred to and managed
by Group
Treasury.
Personal Corporate Banking
Credit risk
lending, commodity trade finance,
trade and export finance, consumer finance,
and lending to banks and
other regulated clients, as well as a small amount
of derivatives trading activity.
Minimal contribution to
market risk
. Interest rate risk in the banking book related to
Personal Corporate
Banking is transferred to and managed by Group Treasury.
Asset Management
Limited exposure to
credit risk
market risk
investments in funds managed by Asset Management.
Indirect exposure to credit risk and market risk from client assets invested
in Asset Management funds,
which
can adversely impact management and performance
fees and cause heightened fund outflows
and liquidity
risk.
Investment Bank
Credit risk
and securities financing.
Market risk
Non-core and Legacy
Credit risk
and commercial real estate collateral, a material corporate
loan portfolio and a counterparty credit trading
portfolio with lending against securities collateral
and derivatives.
Market risk
simple credit, interest rate and equity derivative transactions.
Group functions
Credit risk
,
market risk
treasury risk
sheet (asset and liability management),
capital, profit or loss, and liquidity and funding.
All business divisions and the Group functions
are exposed to
country risk, sustainability and climate
risk
non-financial risk
. Non-financial risk is an
inevitable consequence of being an operating
firm and can arise as a result of UBS AG’s past and
current business activities.
Risk appetite framework
Our risk
appetite is
defined at
the aggregate
Group level
and reflects
the risk
that we
are willing
to accept
or wish
to
avoid. It is set via complementary qualitative and quantitative risk appetite statements defined at a firm-wide level and is
embedded throughout our business divisions and legal entities by
Group, business division and legal entity policies, limits
and authorities. Our risk appetite is reviewed and recalibrated annually, with the aim of ensuring that risk-taking at every
level of
the organization
is in
line with
our strategic
priorities, our
capital and
liquidity plans,
our
Pillars, Principles
and
Behaviors
,
and
minimum
regulatory
requirements.
It
is
governed
by
a
single
overarching
policy
and
conforms
to
the
Financial Stability Board’s
Principles for an
Effective Risk Appetite
Framework. The “Risk
appetite framework” chart
below
shows the key elements of the framework.
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Risk principles and risk culture
Qualitative risk appetite statements aim to ensure
we maintain the desired risk culture.
Maintaining a strong risk culture
is a
prerequisite
for success
in today’s
highly complex
operating environment
and a
source
of sustainable
competitive
advantage.
Our risk appetite
framework combines
all the important
elements of our
risk culture,
expressed in our
Pillars, Principles
and
Behaviors
,
our
risk
management
and
control
principles,
our
Code
of
Conduct
and
Ethics,
and
our
Total
Reward
Principles. They
help to
create a
solid foundation
for promoting
risk awareness,
leading to
appropriate risk-taking
and
the establishing of robust risk management and control
processes.
›
Refer to “Employees” in the “How we create value
for our stakeholders” section of the UBS Group
Annual Report 2024, available
under “Annual reporting” at
ubs.com/investors
, for more information about our Pillars, Principles
and Behaviors
›
Refer to the Code of Conduct and Ethics of
UBS, available at
ubs.com/code
Risk management and control principles
Protection of financial strength
Protecting UBS AG’s financial strength by controlling its risk exposure
and avoiding potential risk concentrations
at individual exposure levels, at specific portfolio levels
and at an aggregate firm-wide level across all risk types.
Protection of reputation
Protecting UBS AG’s reputation through a sound risk culture characterized
by a holistic and integrated view of
risk, performance and reward, and through full compliance
with its standards and principles, particularly its
Code of Conduct and Ethics.
Business management accountability
Maintaining management accountability, whereby business management owns
all risks assumed throughout
UBS AG and is responsible for the continuous
and active management of all risk exposures
to provide for
balanced risk and return.
Independent controls
Independent control functions that monitor the
effectiveness of the businesses’ risk management
and oversee
risk-taking activities.
Risk disclosure
Disclosure of risks to senior management, the BoD,
investors, regulators, credit rating agencies
and other
stakeholders with an appropriate level of comprehensiveness
and transparency.
Quantitative risk appetite objectives
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
59
The quantitative risk appetite objectives are complemented by a standardized
set of quantitative firm-wide non-financial
risk appetite objectives
.
Non-financial risk
events exceeding predetermined
risk tolerances, expressed
as percentages
of
UBS AG’s total revenue and operational
risk regulatory capital, trigger a
review of key loss
drivers and required mitigation
measures, and are reported
in the Group Risk Report.
Risk
appetite
statements
are
set
for
certain
legal
entities,
which
must
be
consistent
with
the
firm-wide
risk
appetite
framework and
approved in
accordance with
Group and
legal entity
regulations. Differences
may exist
that reflect
the
specific nature, size, complexity and regulations applicable
to the relevant legal entity.
Portfolio and position limits
With the risk profile
of UBS AG closely
aligned to that
of the Group
since the merger
of UBS AG and Credit
Suisse AG,
we ensure
that UBS AG’s
risk exposure
remains within
the desired
risk capacity
through
a comprehensive
suite of
risk
portfolio limits set at Group level.
Since
the
aforementioned
merger,
UBS
has
significantly
extended
its
set
of
combined
portfolio
limits
to
oversee
the
aggregate
risk profile.
Only certain
market risk
limits continue
to be
separately
monitored on
the legacy
Credit Suisse
infrastructure until these positions are migrated to UBS infrastructure.
›
Refer to “Credit risk” in this section for more information about
counterparty limits
Risk measurement
Audited |
We apply a
variety of methodologies
and measurements
to quantify the
risks of our
portfolios and potential
risk
concentrations. Risks that are
not fully reflected within standard
measures are subject to
additional controls, which may
include
preapproval
of
specific
transactions
and
the
application
of
specific
restrictions.
Models
to
quantify
risk
are
generally developed by dedicated units within control
functions and are subject to independent validation.
›
Refer to “Credit risk”, “Market risk” and “Non-financial
risk” in this section for more information about model
confirmation
procedures
Stress testing
We perform stress testing to
estimate losses that could
result from extreme yet plausible macroeconomic and
geopolitical
stress events to
identify, better understand and
manage our potential
vulnerabilities and risk
concentrations. Stress testing
has a
key
role
in our
limits
framework
at the
firm-wide,
business
division,
legal
entity
and portfolio
levels. Stress
test
results are regularly
reported to the
BoD and the EB. We
also provide detailed
stress loss analyses
to the Swiss Financial
Market
Supervisory
Authority
(FINMA)
and
regulators
of
our
legal
entities
in
accordance
with
their
requirements.
As
described
in
“Risk
appetite
framework”,
stress
testing
has
a
central
role
in
our
risk
appetite
and
business
planning
processes.
The combined stress-testing
(CST) framework is scenario
based and aims to
quantify overall firm-wide
losses that could
result
from
various
potential
global
systemic
events.
The
framework
captures
all
material
risks,
as
covered
in
“Risk
categories”.
Scenarios are forward looking and encompass macroeconomic and geopolitical stress events calibrated
to different levels
of severity.
In each
scenario we
assume changes
in a
wide range
of macroeconomic
and market
variables to
stress the
key risk drivers of our portfolios. We also
capture the business risk resulting from
lower fee, interest and trading income
net of
lower expenses.
These effects
are measured
for all
businesses and
material risk
types to
calculate the
aggregate
estimated effect of the given
scenario on profit or loss,
other comprehensive income, risk-weighted
assets, the leverage
ratio
denominator
and,
ultimately,
capital
and
leverage
ratios.
The
assumed
changes
in
macroeconomic
and
market
variables are updated periodically to account for changes
in the current and possible future market environment.
At least once a year, the Risk Committee approves the most relevant scenario, known
as the binding scenario, for use as
the main scenario for regular CST reporting and for monitoring risk exposure against our minimum capital, earnings and
leverage
ratio
objectives
in
our
risk
appetite
framework.
In
2024,
the
binding
scenario
for
CST
was
the
internal
stagflationary geopolitical crisis
scenario. This
scenario assumes
that a
geopolitical event
leads to
economic regionalization
and fears
of prolonged
stagflation.
Central banks
signal a
firm commitment
to price
stability and
continue to
tighten
monetary policy, triggering a broad rise in interest rates
and impacting economic activity and asset values.
With regard to treasury risk, we
routinely analyze the effect of movements
in interest rates and changes in the
structure
of
yield
curves.
We
also
perform
stress
testing
to
determine
the
optimal
asset
and
liability
structure,
enabling
us
to
maintain an
appropriately balanced
liquidity and
funding position
under various
scenarios. These
scenarios differ
from
those
outlined
above,
because
they
focus
on
specific
situations
that
could
generate
liquidity
and
funding
stress,
as
opposed to the scenarios used in the CST framework,
which focus on the effect on profit or loss and capital.
›
Refer to “Credit risk” and “Market risk” in this
section for more information about stress loss measures
›
Refer to the “Capital, liquidity and funding,
and balance sheet” section of this report for more information
about stress testing
›
Refer to “Note 20 Expected credit loss measurement”
in the “Consolidated financial statements” section
of this report for more
information about scenarios used for expected
credit loss measurement
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
60
Risk concentrations
Audited |
Risk concentrations may exist where one or several positions within
or across different
risk categories could result
in
significant
losses
relative
to
UBS AG’s
financial
strength.
Identifying
such
risk
concentrations
and
assessing
their
potential impact is a critical component of our risk management
and control process.
For financial risks, we consider a number of elements, such
as shared characteristics of positions, the size of the portfolio
and the sensitivity of positions to changes in the underlying risk factors. Also
important in our assessment is the liquidity
of the markets
where the positions
are traded, as
well as the
availability and effectiveness
of hedges or
other potential
risk-mitigating factors. Particular attention is given to identification of wrong-way risk and risk on risk. Wrong-way risk is
defined as
a positive
correlation between
the size
of the
exposure and
the likelihood
of a
loss. Risk
on risk
refers to
a
situation where a position and its risk mitigation can be impacted
by the same event.
For non-financial risks, risk concentrations may result from, for example, a single operational risk issue that is large on its
own (i.e. it
has the potential
to produce a
single high-impact
loss or a
number of losses
that together
are high impact)
or related risk issues that may link together to create
a high impact.
Risk
concentrations
are
subject
to
increased
oversight
by
Group
Risk
Control
and
Group
Compliance,
Regulatory
Governance, and assessed
to determine whether they
should be reduced
or mitigated, depending on
the available means
to do
so. It is
possible that
material losses
could occur
on financial
or non-financial
risks, particularly
if the
correlations
that emerge in a stressed environment differ markedly from those
envisaged by risk models.
›
Refer to
“
Credit risk
”
“
Market risk
”
concentrations are monitored and mitigated
›
Refer to the
“
Risk factors
”
Credit risk
Audited |
Main sources of credit risk
–
In Global Wealth
Management, credit risk arises
from collateralized lending, primarily against
securities, residential and
commercial
real
estate,
other
real
assets
(such
as
ships
and
aircraft),
private
equity
and
hedge
fund
interest,
and
investors’ uncalled
capital commitments,
as well
as from
collateralized clients’
derivatives trading.
In addition,
credit
risk also arises from
unsecured lending, i.e. cash-flow-based corporate lending
to entities owned and controlled
by our
Global Wealth Management clients, and recourse-based lending.
–
A
substantial
portion
of
our
credit
risk
arises
from
Personal
Corporate
Banking’s
lending
exposure,
including
mortgage loans, secured mainly by owner-occupied properties and income-producing real estate, as well as corporate
loans, that depends on the performance of the Swiss economy
and real estate market.
–
The Investment
Bank’s credit
risk arises
mainly from
lending, derivatives
trading and
securities financing.
Derivatives
trading and securities financing are mainly
investment grade. Loan underwriting activity can
be lower rated and gives
rise to temporary concentrated exposure.
–
Credit risk in
Non-core and Legacy
relates to large,
less-liquid structured
financing transactions,
including some
with
residential and commercial real estate collateral, a corporate loan portfolio and
a counterparty credit trading portfolio
with lending against securities collateral and derivatives.
Audited |
Overview of measurement, monitoring and management
techniques
–
Credit risk
from transactions
with individual
counterparties
is based
on our
estimates of
probability of
default (PD),
exposure at default (EAD) and loss given default (LGD). Limits are established for individual counterparties and groups
of
related
counterparties
covering
banking
and
traded
products,
and
for
settlement
amounts.
Risk
authorities
are
approved by the
Board of Directors
and are delegated
to the President
of the Executive
Board, the Chief
Risk Officer
(the CRO) and divisional CROs, based on risk
exposure amounts, internal credit rating and potential
for losses.
–
Limits apply not only to the current outstanding
amount but also to contingent commitments and the potential future
exposure of traded products.
–
The Investment Bank monitoring, measurement and limit framework distinguishes between
exposures intended to be
held to maturity (take-and-hold exposures) and those intended
for distribution or risk transfer (temporary exposures).
–
We use models to derive portfolio credit risk measures of expected loss, statistical loss and stress loss at firm-wide and
business division levels, and to establish portfolio limits.
–
Credit risk concentrations can arise if clients are engaged
in similar activities, located in the same geographical
region
or have
comparable economic
characteristics,
e.g. if
their
ability to
meet contractual
obligations
would
be similarly
affected by changes
in economic, political
or other conditions.
To avoid credit risk
concentrations, we establish
limits
and operational controls that
constrain risk concentrations at portfolio,
sub-portfolio or counterparty levels
for sector
exposure, country risk exposure and specific product exposures.
Credit risk profile of UBS AG
The exposures
detailed in
this section
are based
on management’s
view of
credit risk,
which differs
in certain
respects
from the expected credit loss (ECL) measurement requirements
of IFRS Accounting Standards.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
61
Internally, we
classify credit
risk exposures
into two
broad categories:
banking products
and traded
products. Banking
products include drawn loans,
guarantees and loan commitments,
amounts due from banks,
balances at central banks,
and other
financial assets at
amortized cost. Traded
products include over-the-counter
(OTC) derivatives, exchange-traded
derivatives
(ETD)
and
securities
financing
transactions
(SFTs),
consisting
of
securities
borrowing
and
lending,
and
repurchase and reverse repurchase agreements.
Banking and traded products exposure in our business divisions and Group Items
31.12.24
USD m
Global
Wealth
Management
Personal
Corporate
Banking
Asset
Management
Investment
Bank
Non-core
and Legacy
Group
Items
Total
Banking products exposure, gross
1,2
of which: loans and advances to customers (on-balance sheet)
of which: guarantees and irrevocable loan commitments (off-balance sheet)
Committed unconditionally revocable credit lines
3
Traded products exposure, gross
2,4
of which: over-the-counter derivatives
of which: securities financing transactions
of which: exchange-traded derivatives
Total credit-impaired exposure, gross
1
Total allowances and provisions for expected credit losses
of which: stage 1
of which: stage 2
of which: stage 3
31.12.23
5
USD m
Global
Wealth
Management
Personal
Corporate
Banking
Asset
Management
Investment
Bank
Non-core
and Legacy
Group
Items
Total
Banking products exposure, gross
1,2
of which: loans and advances to customers (on-balance sheet)
of which: guarantees and irrevocable loan commitments (off-balance sheet)
Committed unconditionally revocable credit lines
3
Traded products exposure, gross
2,4
of which: over-the-counter derivatives
of which: securities financing transactions
of which: exchange-traded derivatives
Total credit-impaired exposure, gross
1
Total allowances and provisions for expected credit losses
of which: stage 1
of which: stage 2
of which: stage 3
1 IFRS 9 gross exposure
for banking products includes the
following financial instruments in scope
of expected credit loss measurement:
balances at central banks,
amounts due from banks,
loans and advances to
customers, other
financial assets at
amortized cost, guarantees
and irrevocable loan
commitments.
2 Internal management view
of credit risk,
which differs in
certain respects from
IFRS Accounting Standards.
3 Commitments that can be canceled by UBS AG at any time but expose
UBS AG to credit risk if the client has the ability to draw the facility before
UBS AG can take action. These commitments are subject to expected
credit loss requirements.
4 As counterparty risk for traded products is managed at counterparty level, no further split between exposures in the Investment
Bank, Non-core and Legacy, and Group Items is provided.
5 Comparative-period
information has
been restated
for changes
in Group
Treasury
allocations. Refer
to “Note
3 Segment
reporting” in
the “Consolidated
financial statements”
section of
this report
for more
information.
Banking products
›
Refer to “Note 1 Summary of material accounting
policies” in the “Consolidated financial statements”
section of this report for
more information about our accounting policy for allowances
and provisions for ECL
›
Refer to “Note 10 Financial assets at amortized
cost and other positions in scope of expected
credit loss measurement” and
“Note 20 Expected credit loss measurement” in the “Consolidated
financial statements” section of this report for more
information about ECL measurement requirements under IFRS
Accounting Standards
›
Refer to “Note 14 Other assets” in the “Consolidated
financial statements” section of this report for
more details
Global Wealth Management, Personal Corporate Banking, and Investment Bank: banking products exposure, by
internal UBS ratings
1,2
USD m, except where indicated
31.12.24
31.12.23
Investment
grade /
Rating
1–5
Sub-investment grade
Defaulted /
Credit-
impaired
Banking
products
exposure,
gross
Investment
grade /
Rating
1–5
Sub-investment grade
Defaulted /
Credit-
impaired
Banking
products
exposure,
gross
Business divisions
Rating
6–9
Rating
10–13
Rating
6–9
Rating
10–13
Global Wealth Management
278,566
46,912
2,166
1,421
329,065
198,159
34,726
1,641
925
235,450
Personal Corporate Banking
229,372
84,758
8,601
4,187
326,918
134,095
63,357
6,724
1,698
205,873
Investment Bank
26,357
16,699
15,588
595
59,239
17,954
11,644
6,662
331
36,591
1 Excluding balances at central banks and Group Treasury
reallocations.
2 The ratings of the major credit rating
agencies, and their mapping to our internal
rating scale, are shown in the “Internal UBS rating
scale
and mapping of external ratings” table in this section.
Global Wealth Management
Gross banking products exposure increased by USD 111bn to USD 454bn
as of 31 December 2024, driven
by the merger
of UBS AG and Credit Suisse AG.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
62
Our Global
Wealth
Management
loan portfolio
is mainly
secured
by securities
(Lombard
loans) and
by residential
real
estate. As of 31 December 2024, most
of our USD 179bn of Lombard
loans, including traded products
collateralized by
securities, were of high
quality,
with 92% rated as
investment grade based on
our internal ratings. Moreover,
Lombard
loans
are
typically
uncommitted,
short-term
in
nature
and
can
be
canceled
immediately
if
the
collateral
quality
deteriorates and
margin calls
are not met.
Lending values
in the
Lombard book are
derived by
applying discounts (haircuts)
to the
pledged collateral’s
market value
in line
with a
possible adverse
change in
market value
over a
given close-out
period and confidence level. Less-liquid or
more volatile collateral will typically have
larger haircuts. In 2024, the Lombard
book, including traded products, increased
approximately 29%, driven by the merger of UBS
AG and Credit Suisse AG.
The residential real estate portfolio
increased by approximately 47% in 2024, due
to the aforementioned merger.
Specialized
financings
as
of
31 December
2024
accounted
for
approximately
13%
of
the
total
banking
products
exposure. This portfolio
mainly consists of
commercial real estate loans,
financing for ships,
yachts and aircraft, unsecured
lending, and
loans collateralized
with uncalled
capital commitments
.
As a
result
of the
aforementioned
merger,
these
financings almost doubled in 2024.
›
Refer to “Lending secured by real estate” and “Lombard lending”
in this section for further information about
these types of
lending
Collateralization of Loans and advances to customers
1
Global Wealth Management
Personal Corporate Banking
USD m, except where indicated
31.12.24
31.12.23
31.12.24
31.12.23
Secured by collateral
Residential real estate
Commercial / industrial real estate
Cash
Equity and debt instruments
Other collateral
2
Subject to guarantees
Uncollateralized and not subject to guarantees
Total loans and advances to customers, gross
Allowances
Total loans and advances to customers, net of allowances
Collateralized loans and advances to customers as a percentage of
total loans and advances to customers, gross (%)
1 Collateral arrangements
generally incorporate
a range
of collateral, including
cash, equity
and debt instruments,
real estate and
other collateral.
For the
purpose of this
disclosure, UBS
AG applies
a risk-based
approach that generally prioritizes collateral
according to its liquidity profile.
In the case of loan facilities
with funded and unfunded elements,
the collateral is first allocated
to the funded element. For
legacy Credit
Suisse a risk-based approach is applied
that generally prioritizes real estate
collateral and prioritizes other collateral
according to its liquidity profile.
In the case of loan facilities with
funded and unfunded elements,
the collateral is proportionately allocated.
2 Includes but is not limited to life insurance contracts, rights in respect of subscription
or capital commitments from fund partners, inventory, gold and other commodities.
Personal Corporate Banking
Gross banking
products
exposure
increased
by USD 153bn
to USD 428bn
as of 31 December 2024, due to the
merger
of UBS AG and Credit Suisse AG.
The exposure
is mainly
driven by
our Swiss
mortgage portfolio,
our Swiss
corporate banking
portfolio and,
to a
lesser
extent, our commodity trade finance portfolio. As of 31 December 2024, the majority of the banking products exposure
was rated investment grade, and 87% of loans and advances to customers were secured by collateral, mainly
residential
and
commercial
property.
The
total
unsecured
amount
mainly
consists
of
cash-flow-based
lending
to
corporate
counterparties.
Our Swiss corporate
banking products take
-and-hold portfolio exposure
was USD 73bn (CHF 66bn)
as of 31 December
2024
and
increased
by
USD 35bn
compared
with
31 December
2023,
due
to
the
merger
of
UBS AG
and
Credit
Suisse AG.
The
portfolio
consists
of
loans,
guarantees
and
loan
commitments
to
multi-national
and
domestic
counterparties. The
small and medium-sized
entity portfolio, in
particular,
is well diversified
across industries.
However,
such companies are reliant
on the domestic economy and
the economies to which they
export, in particular the EU
and
the US.
Our
commodity
trade
finance
portfolio
focuses
on
energy
and
base-metal
trading
companies,
where
the
related
commodity
price
risk
is hedged
to a
large
extent
by the
commodity
trader.
The
majority of
limits
in this
business
are
uncommitted,
transactional
and
short-term
in
nature.
Our
portfolio
size
was
USD 9bn
(CHF 8bn)
as
of
31 December
2024,
compared
with
USD 6bn
(CHF 5bn)
as
of
31 December
2023.
The
increase
of
USD 3bn
was
due
to
the
aforementioned merger.
A considerable part of the exposure correlates
with commodity prices.
Swiss mortgage loan portfolio
Our Swiss mortgage loan portfolio secured
by residential and commercial
real estate in Switzerland
continued to be our
largest
loan
portfolio.
These
mortgage
loans
(including
loans
on
owner-occupied
commercial
real
estate),
totaling
USD 313bn
(CHF 284bn)
as
of
31 December
2024,
mainly
originated
from
Personal
Corporate
Banking,
with
contributions
also
from
Global
Wealth
Management
Region
Switzerland.
The
increase
of
USD 112bn
compared
with
31 December 2023 was due to the aforementioned
merger.
Of
the
aggregate
amount
of
Swiss
residential
mortgages,
99.9%
would
continue
to
be
covered
by
the
real
estate
collateral even if the
collateral value were to decrease
20%, and more than
99% would remain covered by
the real estate
collateral if the collateral value were to decrease 30%.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
63
Swiss mortgages: exposure by exposure segments and loan-to-value (LTV)
buckets
1
USD bn, except where indicated
31.12.24
31.12.23
LTV buckets
Exposure segment
≤30%
31–50%
51–60%
61–70%
71–80%
81–100%
100%
Total
Total
Residential mortgages
Exposure
154.4
61.8
14.1
5.5
1.5
0.3
0.1
237.6
162.4
Income-producing real estate
Exposure
39.4
14.3
2.7
1.0
0.2
0.1
0.1
57.7
25.5
Corporates
Exposure
10.7
3.4
0.7
0.4
0.2
0.1
0.2
15.7
12.2
Other segments
Exposure
1.4
0.5
0.1
0.1
0.0
0.0
0.0
2.2
1.1
Mortgage-covered exposure
Exposure
206.0
80.0
17.7
6.9
1.9
0.5
0.3
313.2
201.1
as a percentage of total
66
26
6
2
1
0
0
100
100
Mortgage-covered exposure 31.12.23
Exposure
129.5
52.4
12.4
5.1
1.4
0.3
0.1
201.1
as a percentage of total
64
26
6
3
1
0
0
100
1 The amount of each mortgage loan is allocated across
the LTV buckets
to indicate the portion at risk at the various value
levels shown; for example, a loan of 75 with
an LTV ratio of 75%
(i.e. a collateral value of
100) would result in allocations of 30 in the less-than-or-equal-to-30% LTV
bucket, 20 in the 31–50% bucket, 10 in the 51–60% bucket,
10 in the 61–70% bucket and 5 in the 71–80% bucket.
Investment Bank
The Investment
Bank’s lending
activities are
largely associated
with corporate
and non-bank
financial institutions.
The
business is broadly diversified across industry
sectors but concentrated in North America.
Gross banking products exposure decreased
by USD 9bn to USD 73bn as of 31 December
2024, driven by a decrease in
balances at
central banks,
partly offset
by an
increase in
guarantees and
irrevocable loan
commitments and
loans and
advances to
customers due
to the
merger of
UBS AG and
Credit Suisse
AG. The
banking products
exposure is
almost
equally distributed between investment grade and sub-investment grade rating, with a slight predominance of
the latter.
Mandated loan underwriting commitments on a notional basis were USD
4.6bn as of 31 December 2024 (31 December
2023: USD 2.1bn), reflecting new
mandates during the
year. As of
31 December 2024, USD 0.2bn of
these commitments
had not yet been distributed
as originally planned. The
loan underwriting commitments
reported as of the end
of 2023
were fully syndicated or canceled in 2024.
Loan underwriting exposures are classified
as held for trading,
with fair values reflecting the
market conditions at the end
of 2024. Credit hedges are in place to help protect against
fair value movements in the portfolio.
›
Refer to “Credit risk models” in this section for
more information about rating grades and rating agency
mappings
Investment Bank: banking products exposure, by geographical region
1
31.12.24
31.12.23
USD m
%
USD m
%
Asia Pacific
5,821
9.8
4,618
12.6
Latin America
778
1.3
745
2.0
Middle East and Africa
392
0.7
249
0.7
North America
37,567
63.4
19,901
54.4
Switzerland
132
0.2
135
0.4
Rest of Europe
14,550
24.6
10,943
29.9
Exposure
59,239
100.0
36,591
100.0
1 Excluding balances at central banks and Group Treasury reallocations.
Investment Bank: banking products exposure, by industry sector
1
31.12.24
31.12.23
USD m
%
USD m
%
Banks
6,895
11.6
5,092
13.9
Chemicals
2,376
4.0
587
1.6
Electricity, gas, water supply
443
0.7
359
1.0
Financial institutions, excluding banks
21,295
35.9
15,562
42.5
Manufacturing
5,174
8.7
1,889
5.2
Mining
1,461
2.5
894
2.4
Public authorities
587
1.0
258
0.7
Real estate and construction
2,234
3.8
1,718
4.7
Retail and wholesale
5,249
8.9
2,945
8.0
Technology and communications
7,277
12.3
2,033
5.6
Transport and storage
839
1.4
341
0.9
Other
5,409
9.1
4,913
13.4
Exposure
59,239
100.0
36,591
100.0
1 Excluding balances at central banks and Group Treasury reallocations.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
64
Non-core and Legacy
Gross banking products
exposure increased
by USD 30bn to
USD 34bn as of
31 December 2024,
due to the
merger of
UBS AG and Credit Suisse AG.
As of 31 December 2024, Non-core and Legacy had no
mandated loan underwriting commitments.
›
Refer to “Balance sheet assets” in the “Capital,
liquidity and funding, and balance sheet” section
of this report for more
information
›
Refer to the “Our businesses” section of this
report for more information
›
Refer to the “Non-core and Legacy” section of this
report for more information
Group Items
Gross banking
products exposure,
which arises
primarily in
connection with
treasury activities,
decreased by
USD 12bn
to USD 20bn as of
31 December 2024, due to decreases
in amounts due from banks
and other financial assets measured
at amortized cost. This was partly offset by an increase
in balances at central banks.
›
Refer to “Balance sheet assets” in the “Capital,
liquidity and funding, and balance sheet” section
of this report for more
information
›
Refer to the “Group Items” section of this report for more information
Traded products
Audited |
Counterparty credit
risk (CCR)
arising from
traded products,
which include
OTC derivatives,
ETD exposures
and
SFTs originating in the Investment
Bank, Non-core and Legacy,
and Group Treasury, is generally
managed on a close-out
basis. This takes
into account possible
effects of market
movements on the
exposure and any
associated collateral
over
the time
it would
take to
close out
our positions.
Limits are
applied to
the potential
future exposure
per counterparty,
with
the
size
of
the
limit
dependent
on
the
counterparty’s
creditworthiness
(as
determined
by
Risk
Control).
Limit
frameworks are also used to control overall exposure
to specific sectors. Such portfolio limits are monitored and reported
to senior management.
Trading in OTC derivatives
is conducted through central
counterparties where practicable.
Where central counterparties
are not used, we have clearly defined
policies and processes for trading on a
bilateral basis. Trading is typically conducted
under bilateral International Swaps and Derivatives
Association agreements or similar master netting agreements,
which
generally
permit
close-out
and
netting
of
transactions
in
case
of
default,
subject
to
applicable
law.
For
certain
counterparties, initial margin is taken
to cover some or all of the
calculated close-out exposure. This is in addition
to the
variation
margin
taken
to
settle
changes
in
market
value
of
transactions.
For
most
major
market
participant
counterparties, we
use two-way collateral
agreements under which
either party can
be required to
provide collateral
in
the form
of cash or
marketable securities when
the exposure exceeds
specified levels. Non-cash
collateral typically consists
of well-rated government debt or other collateral acceptable
to Risk Control and permitted by applicable regulations.
In
the
tables
below,
OTC
derivatives
exposures
are
generally
presented
as
net
positive
replacement
values
after
the
application
of
legally
enforceable
netting
agreements
and
the
deduction
of
cash
and
marketable
securities
held
as
collateral.
SFT
exposures
are
reported
taking
into
account
collateral
received,
and
ETD
exposures
take
into
account
collateral margin calls.
›
Refer to “Note 11 Derivative instruments”
in the “Consolidated financial statements” section
of this report for more information
about OTC derivatives settled through central counterparties
›
Refer to “Note 22 Offsetting financial assets and financial
liabilities” in the “Consolidated financial statements”
section of this
report for more information about the effect of netting and collateral
arrangements on derivative exposures
Investment Bank, Non-core and Legacy,
and Group Treasury:
traded products exposure, by internal UBS ratings
1
USD m, except where indicated
31.12.24
31.12.23
Investment
grade /
Rating
1–5
Sub-investment grade
Defaulted /
Credit-
impaired
Traded
products
exposure,
net
2
Investment
grade /
Rating
1–5
Sub-investment grade
Defaulted /
Credit-
impaired
Traded
products
exposure,
net
2
Product
Rating
6–9
Rating
10–13
Rating
6–9
Rating
10–13
OTC derivatives
16,266
841
40
211
17,357
7,307
701
3
6
8,017
ETD
10,245
109
0
0
10,353
9,735
61
0
0
9,796
SFTs
18,063
289
0
0
18,352
16,631
151
10
0
16,792
Traded products exposure, net
2
44,573
1,239
40
211
46,062
33,672
914
14
6
34,605
1 The ratings
of the major credit
rating agencies, and
their mapping to our
internal rating scale,
are shown in the
“Internal UBS rating
scale and mapping of
external ratings” table in
this section.
2 After credit
valuation adjustments and hedges.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
65
Investment Bank, Non-core and Legacy,
and Group Treasury:
net OTC derivatives and SFT exposure, by geographical
region
Net OTC derivatives exposure
Net SFT exposure
31.12.24
31.12.23
31.12.24
31.12.23
USD m
%
USD m
%
USD m
%
USD m
%
Asia Pacific
5,126
29.5
970
12.1
2,307
12.6
2,510
14.9
Latin America
88
0.5
93
1.2
27
0.1
0
0.0
Middle East and Africa
111
0.6
232
2.9
511
2.8
414
2.5
North America
4,165
24.0
3,118
38.9
4,946
27.0
3,044
18.1
Switzerland
2,522
14.5
900
11.2
494
2.7
499
3.0
Rest of Europe
5,345
30.8
2,704
33.7
10,066
54.9
10,324
61.5
Exposure
17,357
100.0
8,017
100.0
18,352
100.0
16,792
100.0
Investment Bank, Non-core and Legacy,
and Group Treasury:
net OTC derivatives and SFT exposure, by industry sector
Net OTC derivatives exposure
Net SFT exposure
31.12.24
31.12.23
31.12.24
31.12.23
USD m
%
USD m
%
USD m
%
USD m
%
Banks
1,673
9.6
1,544
19.3
1,577
8.6
1,200
7.1
Chemicals
7
0.0
17
0.2
0
0.0
0
0.0
Electricity, gas, water supply
138
0.8
111
1.4
0
0.0
0
0.0
Financial institutions, excluding banks
14,804
85.3
5,721
71.4
16,357
89.1
15,093
89.9
Manufacturing
32
0.2
29
0.4
0
0.0
0
0.0
Mining
65
0.4
0
0.0
0
0.0
0
0.0
Public authorities
446
2.6
441
5.5
417
2.3
496
3.0
Retail and wholesale
9
0.1
18
0.2
0
0.0
0
0.0
Transport, storage and communication
24
0.1
74
0.9
0
0.0
3
0.0
Other
159
0.9
63
0.8
0
0.0
0
0.0
Exposure
17,357
100.0
8,017
100.0
18,352
100.0
16,792
100.0
Credit risk mitigation
Audited |
UBS AG actively
manages credit
risk in
its portfolios
by taking collateral
against exposures
and by utilizing
credit
hedging.
Lending secured by real estate
Audited |
UBS AG uses a scoring model as part of a
standardized front-to-back process for credit decisions on originating or
modifying Swiss mortgage loans. The model’s two key factors
are the LTV
ratio and an affordability calculation.
The calculation of affordability takes
into account interest payments, minimum amortization
requirements and potential
property maintenance costs
in relation to gross
income or rental
income for rental properties.
The imputed interest
rate
is set at 5% per annum, independently of the current interest
rate environment.
For residential
properties
occupied
by the
borrower,
the maximum
LTV
for the
standard
approval
process
is 80%.
For
income-producing real estate
(IPRE), the maximum
LTV allowed within
the standard approval
process ranges from
30%
to 75%, depending on the type and age of the property,
and the amount of renovation work needed.
Audited |
The value assigned to each
property is based on the
lowest value determined from model-derived
valuations, the
purchase price, an asset value for IPRE and, in some cases,
an additional external valuation.
To
take
market
developments
into
account
for
external
valuation
models,
an
external
vendor
regularly
updates
the
parameters and / or
refines the
architecture for
each model.
Model changes
and parameter
updates are
subject to
the
same validation procedures as our internally developed
models.
Audited |
UBS AG similarly
applies underwriting
guidelines for
its Global
Wealth Management
Region Americas
mortgage
loan portfolio, taking
into account loan
affordability and collateral
sufficiency. LTV standards
are defined for the
various
mortgage types, such
as residential mortgages
or investment properties,
based on
associated risk factors,
such as
property
type and
loan size
and purpose.
The maximum
LTV allowed
within the standard
approval process
ranges from
% to
%. In addition to
LTV, other credit risk
metrics, such as debt-to-income ratios,
credit scores and required
client reserves,
are also part of our underwriting guidelines.
A risk limit framework is applied to
the Global Wealth Management Region Americas mortgage loan portfolio. Limits
are
set
to
govern
exposures
within
LTV
categories,
geographic
concentrations,
portfolio
growth
and
high-risk
mortgage
segments, such
as interest-only loans.
These limits
are monitored by
a specialized
credit risk
monitoring team and
reported
to senior
management. Supplementing
this limit
framework is
a real
estate lending
policy and
procedures framework,
set up to
govern real estate
lending activities. Quality
assurance and quality
control programs monitor
compliance with
mortgage underwriting and documentation requirements.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
66
For
UBS AG’s
mortgage
loan
portfolio
in
the
Global
Wealth
Management
regions
of
EMEA
and
Asia
Pacific,
global
underwriting guidelines with
regional variations are applied
to allow for regulatory
and market differentials.
As in other
regions, the underwriting guidelines
take into account affordability
and collateral sufficiency.
Affordability is assessed at
a stressed
interest rate
using, for
residential real
estate, the
borrowers’ sustainable
income and
declared liabilities,
and
for commercial real
estate the quality
and sustainability of
rental income. For
interest-only loans, a
declared and evidenced
repayment strategy
must be in
place. The applicable
LTV for each
mortgage is based
on the quality
and liquidity
of the
property
and assessed
against
valuations
from bank-appointed
third-party
valuers.
Maximum
LTV
varies
from
% to
%, depending on
the type and
location of
the property, as
well as
other factors. Serviceability
may be
further supported
by personal
guarantees from
related third
parties. The
overall portfolio
is centrally
assessed against
a number
of stress
scenarios to ensure that exposures remain within predefined
stress limits.
›
Refer to “Swiss mortgage loan portfolio” in this
section for more information about LTV in the Swiss mortgage portfolio
Lombard lending
Audited |
Lombard loans are
secured by pledges of marketable
securities, guarantees and other
forms of collateral. Eligible
financial
securities
are
primarily
liquid
and
actively
traded
transferable
securities
(such
as
bonds,
equities
and
certain
hybrid securities),
and other
transferable
securities, such
as approved
structured
products
for which
regular
prices are
available and the issuer of the security provides a
market. To
a lesser degree, less-liquid collateral is also
used.
Lending
values
are
derived
by
applying
discounts
(haircuts)
to
the
pledged
collateral’s
market
value.
Haircuts
for
marketable securities are calculated to cover a possible
adverse change in market value over a
given close-out period and
confidence level. Less-liquid or more volatile collateral
will typically have larger haircuts.
Concentration and correlation risks
across collateral posted are
assessed at a counterparty
level, and at a divisional
level
across
counterparties.
Targeted
firm-wide
reviews
of
concentration
are
also
performed.
Concentration
of
collateral
in
single securities,
issuers or
issuer groups,
industry sectors,
countries, regions
or currencies
may result
in higher
risk and
reduced
liquidity.
In
such
cases,
the
lending
value
of
the
collateral,
margin
call
and
close-out
levels
are
adjusted
accordingly.
Exposures
and collateral
market
values are
monitored
daily, with
the
aim
of ensuring
that
the
credit exposure
always
remains within the
established risk
tolerance. A shortfall
occurs when the
lending value
drops below the
exposure; if it
exceeds a defined
trigger level, a
margin call is
initiated, requiring the
client to provide
additional collateral,
reduce the
exposure or take other action to bring exposure in line with the agreed lending value of the collateral. If a shortfall is not
corrected
within
the
required
period,
a
close-out
is
initiated,
through
which
collateral
is
liquidated,
open
derivative
positions are closed and guarantees are called.
Stress
testing
of
collateralized
exposures
is
conducted
to
simulate
market
events
that
reduce
collateral
market
value,
increase exposure
of traded
products, or
do both.
For certain
classes of
counterparties, limits
on such
calculated stress
exposures are applied and controlled at a counterparty level.
Also, portfolio limits are applied across certain businesses or
collateral types.
›
Refer to “Stress loss” in this section for more information
about our stress testing
Credit hedging
Audited |
UBS AG
uses
single-name
credit
default
swaps
(CDSs),
credit-index
CDSs,
structured
portfolio
hedges
(SPHs),
bespoke protection and other instruments to actively
manage credit risk. The aim is
to reduce concentrations of risk from
specific counterparties, sectors or portfolios
and, for CCR, the
profit or loss effect arising
from changes in credit valuation
adjustments.
UBS AG
has
strict
guidelines
with regard
to taking
credit
hedges
into
account
for
credit
risk
mitigation
purposes.
For
example,
when
monitoring
exposures
against
counterparty
limits,
UBS AG
does
not
usually
apply
certain
credit
risk
mitigants, such
as proxy
hedges (credit
protection on
a correlated
but different
name) or
credit-index CDSs,
to reduce
counterparty exposures.
SPHs are
structured to
achieve true
risk transfer
by providing explicit
protection against
events
that could cause a loss in the referenced hedged positions, with the
hedge payoff matched to the actual loss incurred on
those positions (i.e.
no basis risk).
Buying credit protection,
if unfunded, also
creates credit exposure
with regard to
the
protection
provider.
UBS AG
monitors
and
limits
exposures
to
credit
protection
providers
and
also
monitors
the
effectiveness of credit hedges.
›
Refer to “Note 11 Derivative instruments”
in the “Consolidated financial statements”
section of this report for more information
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors,
for more information
about risk transfer through synthetic securitizations
Mitigation of settlement risk
To
mitigate settlement risk,
actual settlement
volumes are
reduced by
using multi-lateral and
bilateral agreements
with
counterparties, including
payment netting.
In relation to
the exchange of
cash or securities,
transactions can
be settled
on a delivery-versus-payment basis.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
67
Foreign
exchange
transactions
are
UBS AG’s
most
significant
source
of
settlement
risk.
UBS AG
is
a
member
of
CLSSettlement (operated
by CLS,
formerly known
as Continuous
Linked Settlement),
an industry
utility that
provides a
multi-lateral
framework
to
settle
transactions
on
a
payment-versus-payment
basis,
thus
reducing
foreign-exchange-
related settlement risk relative
to the volume of business.
However, mitigation of settlement
risk through CLS and
other
means does not fully eliminate credit risk
in foreign exchange transactions resulting from changes
in exchange rates prior
to settlement, which is managed as part of UBS AG’s overall
credit risk management of OTC derivatives.
Credit risk models
Basel III – A-IRB credit risk models
Audited |
UBS AG
has
developed
tools
and
models
to
estimate
future
credit
losses
that
may
be
implicit
in
our
current
portfolio.
Exposures to individual counterparties are measured using three generally accepted parameters: PD, EAD and LGD. For a
given credit facility, the product of these three parameters results
in the expected loss (the EL). These parameters
are the
basis for the
majority of our
internal measures of
credit risk, and
key inputs for
regulatory capital
calculation under
the
advanced internal ratings-based (A-IRB) approach of the Basel III framework. Models are also used to derive the portfolio
credit risk measures of EL, statistical loss and stress loss.
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors,
for more information
about the regulatory capital calculation under the A-IRB approach
and key credit risk models applied to UBS AG exposures
Audited |
Internal UBS rating scale and mapping of external ratings
Internal UBS rating
1-year PD range, in %
Description
Moody’s Investors
Service mapping
SP mapping
Fitch mapping
0 and 1
0.00–0.02
Investment grade
Aaa
AAA
AAA
2
0.02–0.05
Aa1 to Aa3
AA+ to AA–
AA+ to AA–
3
0.05–0.12
A1 to A3
A+ to A–
A+ to A–
4
0.12–0.25
Baa1 to Baa2
BBB+ to BBB
BBB+ to BBB
5
0.25–0.50
Baa3
BBB–
BBB–
6
0.50–0.80
Sub-investment grade
Ba1
BB+
BB+
7
0.80–1.30
Ba2
BB
BB
8
1.30–2.10
Ba3
BB–
BB–
9
2.10–3.50
B1
B+
B+
10
3.50–6.00
B2
B
B
11
6.00–10.00
B3
B–
B–
12
10.00–17.00
Caa1 to Caa2
CCC+ to CCC
CCC+ to CCC
13
17
Caa3 to C
CCC– to C
CCC– to C
Counterparty is in default
Default
Defaulted
D
D
Probability of default
PD estimates
the likelihood
of a
counterparty defaulting
on its
contractual obligations
over the
next 12 months
and is
assessed using rating tools tailored to the various categories
of counterparties.
The ratings of major credit rating agencies, and their mapping to the UBS masterscale and internal PD bands, are shown
in the
“Internal UBS
rating scale
and mapping
of external
ratings” table
above. For
Moody’s and
SP, the
mapping is
based on the
long-term average of
one-year default rates
available from these
rating agencies, with
Fitch ratings being
mapped to the equivalent
SP ratings. For each
external rating category,
the average default rate
is compared with our
internal PD bands to derive a periodically reviewed mapping
to our internal rating scale.
Exposure at default
EAD is the amount
expected to be
owed by a counterparty
at the time of
possible default. EAD
is derived from
current
exposure to the counterparty and possible future
exposure development.
The EAD of an on-balance
sheet loan is its
notional amount,
while for off-balance
sheet commitments
that are not drawn,
credit conversion
factors (CCFs)
are used in order
to obtain an
expected on-balance
sheet amount.
For traded products under the internal model method for derivatives and the repo value-at-risk
approach for SFTs,
EAD is
derived by
modeling the
range of
possible exposure outcomes
at various
points in
time using
a
simulation based on
a
scenario-consistent
technique.
UBS AG assesses
the net
amount that
may be
owed to
it or
that it
may owe
to others,
taking
into account
the effect of
market movements
over the potential
time it would
take to close
out positions.
Exposures where
there is
a material
correlation between
the factors
driving the
credit quality
of the
counterparty
and
those driving the potential
future value of UBS AG’s
traded products exposure (wrong-way risk)
are assessed, and specific
controls to mitigate such risks have been established.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
68
Loss given default
LGD is the
magnitude of the
likely loss if
there is a
default. UBS AG’s LGD
estimates, which consider
downturn conditions,
include loss of principal,
interest and other amounts less
recovered amounts. UBS AG determines LGD based on
the likely
recovery
rate
of
claims
against
defaulted
counterparties,
which
depends
on
the
type
of
counterparty
and
any
credit
mitigation
due
to
collateral
or
guarantees.
UBS AG’s
estimates
are
supported
by
internal
loss
data
and
external
information, where
available. If collateral
is held,
such as marketable
securities or a
mortgage on a
property,
LTV
ratios
are typically a key parameter in determining LGD. For risk-weighted asset (RWA) calculation, floors are applied to LGD in
line with regulation.
Expected loss
UBS AG uses the
concept of EL
to quantify future
credit losses that
may be implicit
in its current
portfolio. The EL
for a
given credit facility is the product of the three components described above, i.e. PD, EAD and LGD. The EL is aggregated
for individual counterparties to derive expected portfolio
credit losses.
IFRS 9 – ECL credit risk models
Expected credit loss
ECL is defined as the difference between contractual cash flows and those UBS AG expects to receive, discounted
at the
effective interest
rate (EIR) or
contractual interest
rate. For loan
commitments and other
credit facilities in
scope of ECL
requirements, expected cash shortfalls are determined by considering expected future drawdowns. Rather than focusing
on an
average
through-the-cycle
(TTC)
expected
annual loss,
the
purpose
of ECL
is
to estimate
the
amount of
losses
inherent in
a portfolio
based on
current conditions
and future
outlook (a
point-in-time (PIT)
measure), whereby
such a
forecast has
to be unbiased
(i.e. exclude conservative
adjustments) and include
all information available
without undue
cost
and
effort,
and
address
multiple
scenarios
where
there
is perceived
non-linearity
between
changes
in
economic
conditions
and
their
effect
on
credit
losses.
From
a
credit
risk
modeling
perspective,
ECL
parameters
are
generally
derivations of the factors assessed for regulatory Basel
III EL.
Comparison of Basel III EL and IFRS 9 ECL credit risk
models
The IFRS 9 ECL concept has a
number of key differences
from the Basel III credit
risk models, both in the loss
estimation
process
and
the
result
thereof.
Most
notably,
regulatory
Basel III
EL
parameters
are
TTC / downturn
estimates,
which
might
include
a
margin
of
conservatism,
while
IFRS 9
ECL
parameters
are
typically
PIT,
reflecting
current
economic
conditions and
future
outlook. The
table below
summarizes the
main differences.
Stage 1 and 2 ECL
releases
in 2024
were USD 63m and the respective
allowances and provisions as of
31 December 2024 were
USD 1,110m. This included
ECL allowances and provisions
of USD 749m related to
positions under the Basel III A-IRB
approach. Basel III EL for
non-
defaulted positions was USD 1,238m.
›
Refer to “Note 1 Summary of material accounting
policies” in the “Consolidated financial statements”
section of this report for
more information about our accounting policy for allowances
and provisions for ECL including key definitions
relevant for the ECL
calculation under IFRS 9
The table below shows the main differences between the
two expected loss measures.
Basel III EL (A-IRB approach)
IFRS 9 ECL
Scope
The Basel III A-IRB approach applies to most credit risk
exposures.
It includes transactions measured at amortized
cost, at fair value
through profit or loss and at fair value through OCI, including
loan commitments and financial guarantees.
The IFRS 9 ECL calculation mainly applies to financial
assets
measured at amortized cost and debt instruments
measured at
fair value through OCI, as well as loan commitments
and financial
guarantees not at fair value through profit or loss.
12-month versus
lifetime
expected loss
The Basel III A-IRB approach takes into account expected
losses
resulting from expected default events occurring within
the next
12 months.
In the absence of a significant increase in credit risk
(an SICR), a
maximum 12-month ECL is recognized. Once an
SICR event has
occurred, a lifetime ECL is recognized considering
expected
default events over the life of the transaction.
Exposure at
default
(EAD)
EAD is the amount we expect a counterparty
to owe us at the
time of a possible default. For banking products,
EAD equals the
book value as of the reporting date; for traded products,
the vast
majority of EAD is modeled. For lending, EAD
is expected to
remain constant over a 12-month period. For loan
commitments,
a credit conversion factor is applied to model expected
future
drawdowns.
EAD is generally calculated on the basis of the
cash flows that are
expected to be outstanding at the individual
points in time during
the life of the transaction.
For loan commitments, a credit
conversion factor is applied to model expected
future drawdowns.
Probability of
default
(PD)
PD estimates are determined on a through-the-cycle
(TTC) basis.
They represent historical average PDs, taking into account
observed losses over a prolonged historical period,
and therefore
are less sensitive to movements in the underlying
economy.
PD estimates are determined on a point-in-time
(PIT) basis, based
on current conditions and incorporating forecasts for
future
economic conditions at the reporting date.
Loss given
default
(LGD)
LGD includes prudential adjustments, such
as downturn LGD
assumptions and floors. Similar to PD, LGD
is determined on a
TTC basis.
LGD should reflect the losses that are reasonably expected
and
prudential adjustments should therefore not be applied.
Similar to
PD, LGD is determined on the basis of a PIT
approach.
Use of scenarios
No use of scenarios.
Multiple forward-looking scenarios have to be taken
into account
to determine a probability-weighted ECL.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
69
Further key aspects of credit risk models
Stress loss
UBS AG
complements
its
statistical
modeling
approach
with
scenario-based
stress
loss
measures.
Stress
tests
are
run
regularly to
monitor potential
effects
of extreme,
but nevertheless
plausible, events
on its
portfolios, under
which key
credit
risk
parameters
are
assumed
to
deteriorate
substantially.
Where
considered
appropriate
limits
on
this
basis
are
applied.
Stress scenarios and methodologies are tailored to portfolios’
natures, ranging from regionally focused to global systemic
events and varying in time horizon.
›
Refer to “Stress testing” in this section for more information
about the stress-testing framework
Credit risk model confirmation
UBS AG’s
approach
to
model
confirmation
involves
both
quantitative
methods,
such
as
monitoring
compositional
changes
in
portfolios
and
results
of
backtesting,
and
qualitative
assessments,
such
as
feedback
from
users
on
model
output as
a practical
indicator of
a model’s
performance and
reliability.
In addition,
changes in
market, regulatory
and
business practices are assessed.
Material
changes
in
portfolio
composition
may
invalidate
the
conceptual
soundness
of
a
model.
UBS AG
therefore
performs
regular analyses
of the
evolution
of portfolios
to identify
such changes
in the
structure and
credit quality
of
portfolios.
›
Refer to “Model risk” in this section for more information
Backtesting
We monitor the performance
of models by backtesting
and benchmarking them, with
model outcomes compared
with
actual results, based
on our internal experience and
externally observed results. To
assess the predictive
power of credit
exposure models for
traded products, such
as OTC derivatives
and ETD products,
we statistically compare
predicted future
exposure distributions at different
forecast horizons with realized values.
For PD, we derive a predicted distribution of the number of defaults. The observed number of defaults is compared with
the upper tail of the predicted distribution. If the observed number
of defaults is higher than a given upper tail quantile,
we conclude
there is
evidence
that the
model may
underpredict
the number
of defaults.
Based on
historical
long-run
average
default rates
and, if
required, additional
margin
of conservatism,
we
also
derive
PD calibration
targets
and a
lower boundary. As a general
rule, follow-up actions,
such as a recalibration of
the rating tool,
are defined if the portfolio
average PD lies below the derived lower boundary.
For LGD, backtesting statistically
tests whether the mean
difference between the observed
and predicted LGD is
zero. If
the test fails, there is evidence that
our predicted LGD is too low. In such
cases, and where these differences are
outside
expectations,
follow-up actions, such as a recalibration of the models, are
taken.
CCFs,
used
for
the
calculation
of
EAD
for
undrawn
facilities,
are
dependent
on
several
credit
facility
contractual
dimensions.
We
compare
the
predicted
amount
drawn
with
observed
historical
use
of
such
facilities
by
defaulted
counterparties. If
any statistically
significant deviation
is observed,
follow-up actions,
such as an
update of
the relevant
CCFs, are performed.
Changes to models and model parameters during the period
As
part
of
our
continuous
efforts
to
enhance
models
to
reflect
market
developments
and
newly
available
data,
we
updated several models in 2024.
In Personal
Corporate
Banking and
Global Wealth
Management,
we implemented
a new
Swiss corporate
PD model
and updated
the retail
and corporate
LGD parameters
of the
Swiss LGD
model. In
addition, we
implemented an
RWA
add-on
for
IPRE
mortgages
to private
clients in
Switzerland
as an
alternative
to recalibrating
the
PD model.
In
Global
Wealth
Management,
the
conservative
fixed
RWA
add-on
for
concentrated
equity
lending
and
lending
against
concentrated
hedge fund
and private
equity collateral
was replaced
by a
dynamic RWA
buffer calculation
based on
a
detailed transactional risk
assessment that will
be in place
until the expected
go-live of dedicated
models in the
second
half of 2025.
In the Investment Bank, new PD models for broker-dealers and mortgage originators went live, and PD models for banks
and hedge
funds were
recalibrated. In
addition, certain
RWA multipliers
were adjusted
as a
result of
improvements to
models,
and
the
majority
of
the
mortgage
originators
portfolio
has
been
switched
from
the
A-IRB
approach
to
the
securitization standardized approach framework. Furthermore, we
deployed a new US
commercial real estate LGD model
across the
Investment
Bank
and Global
Wealth
Management, and
in
Global Wealth
Management
we
implemented
a
supervisory slotting model for the commercial real estate portfolio
outside the US and Switzerland.
For the sovereign
portfolio on the
legacy Credit Suisse
infrastructure, we rolled
out the UBS
sovereign PD model,
replacing
the previous
Credit Suisse
model. In
addition, the
Credit Suisse
PD model
for fund-linked
products and
the equity
REIT
supervisory
slotting
model
were
decommissioned,
as
there
was
no
remaining
exposure
on
the
legacy
Credit
Suisse
infrastructure.
The
Credit
Suisse
models
for
hedge
funds
and
broker-dealers
were
also
decommissioned,
due
to
the
reduced remaining materiality
of the respective portfolios
on the legacy Credit
Suisse infrastructure, with
the remaining
exposure now
subject to
the standardized
approach for
the calculation
of risk-weighted
assets. For
positions that
have
migrated from Credit Suisse to UBS infrastructure,
UBS models have been adopted accordingly.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
70
Where required,
changes
to
models and
model
parameters
were
approved by
the
Swiss Financial
Market
Supervisory
Authority (FINMA) before implementation.
›
Refer to “Risk-weighted assets” in the “Capital,
liquidity and funding, and balance sheet” section
of this report for more
information about the effect of the changes to models
and model parameters on credit risk RWA
Credit-risk-model-related regulatory capital developments
In Switzerland,
the amendments
to the
Capital Adequacy
Ordinance
that
incorporate
the final
Basel III
standards
into
Swiss law entered
into force on 1 January
2025, together with implementing
ordinances issued by
FINMA in 2024. The
adoption
of
the
final
Basel III
standards
led
to
a
number
of
revisions
to
the
internal
ratings-based
(IRB)
approaches,
namely: (i) removing the
option of using the
A-IRB approach
for certain asset
classes (including general corporates
with
consolidated annual
revenues greater
than EUR 500m,
and banks
and other
financial institutions);
(ii) placing floors
on
certain model inputs under the IRB
approach, e.g. PD and LGD; and (iii) introducing various requirements to reduce RWA
variability (e.g. for LGD). In addition, the removal of the internal
model approach for credit valuation adjustment became
effective on 1 January 2025. The aforementioned
revisions have been adopted for all FINMA-regulated
entities.
›
Refer to “Capital management objectives” in the “Capital,
liquidity and funding, and balance sheet” section
of this report for
more information about the development of RWA
›
Refer to “Risk measurement” in this section for
more information about our approach to model confirmation
procedures
›
Refer to the “Regulatory and legal developments”
and “Risk factors” sections of this report for
more information
Credit policies for distressed assets
Non-performing
Audited |
In line with the
regulatory definition,
we report a
claim as non-performing
when: (i) it is
more than 90
days past
due; (ii) it is subject to restructuring proceedings, where
preferential conditions concerning interest
rates, subordination,
tenor,
etc. have been granted in order to avoid default of the counterparty (forbearance);
(iii) the counterparty is subject
to
bankruptcy / enforced
liquidation
proceedings
in
any
form,
even
if
there
is
sufficient
collateral
to
cover
the
due
payment; or (iv) there is other evidence that payment
obligations will not be fully met without recourse to collateral.
Default and credit impaired
UBS AG uses a single
definition of default for
classifying assets and
determining the PD
of its obligors for
risk modeling
purposes.
The
definition
of
default
is
based
on
quantitative
and
qualitative
criteria.
A
counterparty
is
classified
as
defaulted when material
payments of
interest, principal or
fees are overdue
for more than
90 days, or
more than 180 days
for certain exposures in
relation to loans to
private and commercial clients in
Personal Corporate Banking
and to private
clients of Global
Wealth Management
Region Switzerland.
UBS AG does
not consider
the general 90-day
presumption
for default
recognition appropriate
for those
portfolios, given
the cure
rates, which
show that
strict application
of the
90-day criterion would
not accurately reflect the
inherent credit risk. Counterparties are also
classified as defaulted when:
bankruptcy,
insolvency
proceedings
or
enforced
liquidation
have
commenced;
obligations
have
been
restructured
on
preferential terms (forbearance);
or there is
other evidence that
payment obligations
will not
be fully
met without
recourse
to collateral. The latter may
be the case even
if, to date, all
contractual payments have been made
when due. If one
claim
against a counterparty is defaulted on, generally all claims against
the counterparty are treated
as defaulted.
An instrument
is classified
as credit
impaired
if the
counterparty
is classified
as defaulted
and / or
the instrument
is identified
as purchased credit
impaired (PCI). An
instrument is PCI if
it has been purchased
at a deep discount to its carrying
amount
following a
risk
event
of
the
issuer
or
originated with
a
defaulted counterparty.
Once
a
financial asset
is
classified as
defaulted /
credit impaired
(except PCI),
it
is
reported as
a
stage 3 instrument
and
remains as
such
unless all
past
due
amounts
have
been
rectified,
additional
payments
have
been
made
on
time,
the
position
is
not
classified
as
credit-
restructured, and there is general
evidence of credit recovery. A three-month
probation period is applied before
a transfer
back to stages
1 or 2 can be
triggered. However,
most instruments
remain in stage
3 for a longer
period of time.
Forbearance (credit restructuring)
Audited |
If payment default is imminent
or default has already
occurred, concessions to
borrowers in financial difficulties
may be
granted that would otherwise not be considered in the normal course of business, such as offering preferential interest rates,
extending
maturity,
modifying
the
schedule
of
repayments,
debt / equity
swap,
subordination,
etc.
When
a
forbearance
measure takes
place, each case
is considered
individually, and
the exposure
is generally
classified as
defaulted. Forbearance
classification
remains
until
the
loan
is
repaid
or
written
off,
non-preferential
conditions
are
granted
that
supersede
the
preferential conditions
or the
counterparty
has recovered,
and the
preferential conditions
no
longer exceed
UBS AG’s risk
tolerance.
Contractual
adjustments
when
there
is
no
evidence
of
imminent
payment
default,
or
where
changes
to
terms
and
conditions are within UBS AG’s
usual risk tolerance, are not considered to be forborne.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
71
Loss history statistics
An
instrument
is
classified
as
credit
impaired
if
the
counterparty
has
defaulted.
This
also
includes
credit-impaired
exposures for which
no loss has
occurred or for
which no allowance
has been recognized
(e.g. UBS AG expect
s
to fully
recover the exposures via collateral
held).
Coverage ratios are
calculated for
the core loan
portfolio by taking
ECL allowances
and provisions divided
by the
gross
carrying amount
of the
exposures. Core
loan exposure
is defined
as the
sum of
Loans and
advances to
customers and
Loans to financial advisors.
The
total
combined
on-
and
off-balance
sheet
coverage
ratio
was
37 basis
points
as
of
31 December
2024,
15 basis
points higher
than the
ratio as
of 31 December
2023. The
combined stage 1
and 2
ratio of
10 basis points
was unchanged
compared with the ratio as of 31 December 2023; the stage 3 ratio was 31%, 9 percentage points higher than the ratio
as of 31 December 2023.
›
Refer to “Note 10 Financial assets at amortized
cost and other positions in scope of expected
credit loss measurement” and
“Note 20 Expected credit loss measurement” in the “Consolidated
financial statements” section of this report for more
information about ECL measurement and the calculation
of the coverage ratio
›
Refer to “Note 14 Other assets”
in the “Consolidated financial statements” section
of this report for more details
›
Refer to the “UBS AG consolidated performance”
section of this report for more information about credit loss expense
/ release
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
72
Loss history statistics
USD m, except where indicated
31.12.24
31.12.23
31.12.22
Banking products, core exposure and off-balance sheet, gross
1
879,853
562,095
509,024
of which: amounts due from banks and loans and advances to customers, gross
608,330
434,780
402,801
Credit-impaired exposure, gross (stage 3)
7,492
2,966
2,455
of which: credit-impaired amounts due from banks and loans
and advances to customers (stage 3)
7,120
2,586
2,012
Non-performing amounts due from banks and loans and
advances to customers
6,044
2,793
2,333
ECL allowances and provisions for credit losses
2
3,527
1,244
1,091
of which: core loan exposure (all stages)
3,203
1,172
1,043
of which: amounts due from banks and loans and advances to customers
(all stages)
2,872
942
789
of which: amounts due from banks and loans and advances to customers
(stage 3)
2,266
377
474
Write-offs (stage 3)
380
77
95
of which: write-offs for amounts due from banks and loans
and advances to customers
361
62
74
Credit loss expense / (release)
3
544
143
29
Ratios
Credit-impaired lending assets as a percentage of total lending
assets, gross (%)
4
1.2
0.6
0.5
Non-performing lending assets as a percentage of total lending
assets, gross (%)
4
1.0
0.6
0.6
ECL allowances for lending assets as a percentage of total lending
assets, gross (%)
4
0.5
0.2
0.2
Write-offs as a percentage of average gross lending assets outstanding
during the period (%)
4
0.1
0.0
0.0
1 Includes amounts due from
banks, core loan
exposure (Loans and advances
to customers and Loans
to financial advisors) and off
balance sheet items defined
as guarantees and loan
commitments.
2 Includes
provisions for ECL of guarantees and
loan commitments
and allowances for securities financing
transactions.
3 Includes credit loss expense /
(release) for other financial assets at
amortized cost, guarantees, loan
commitments, and securities financing transactions.
4 Lending assets include amounts due from banks and loans and advances to customers.
Market risk
Audited |
Main sources of market risk
Market risks arise from both trading and non-trading
business activities.
–
Trading market risks arise
primarily in the Investment
Bank, Non-core and Legacy
and, to a lesser
extent, Global Wealth
Management. In the Investment Bank these risks are mainly connected with primary debt and equity underwriting, as
well as securities
and derivatives trading for
market-making and client facilitation.
In Non-core and
Legacy,
market risks
arise mainly from structured trades, portfolios
of loans and securitized products, and
both complex and simple credit,
interest rate
and equity
derivative transactions.
A limited
contribution to
market risk
in Global
Wealth Management
comes from municipal securities and taxable fixed-income securities.
–
Non-trading market
risks arise predominantly
in the form
of interest rate
and foreign exchange
risks connected
with
personal banking and lending in our wealth management
businesses, the Swiss business of our Personal Corporate
Banking business division, the Investment Bank’s lending
business, and treasury activities.
–
Group Treasury assumes market risks
in the process of
managing interest rate risk, structural foreign
exchange risk and
the Group’s liquidity and funding profile, including high-quality
liquid assets (HQLA).
–
Equity and
debt
investments
can
also give
rise to
market
risks, as
can
some aspects
of employee
benefits,
such
as
defined benefit pension schemes.
Audited |
Overview of measurement, monitoring and management techniques
–
Market
risk limits
are
set for
the Group,
the
business
divisions and
Group
Treasury
at granular
levels in
the various
business lines, reflecting the nature and magnitude of the
market risks.
–
Management value-at-risk (VaR) measures exposures under
the market risk framework, including trading market risks
and some non-trading
market risks.
Non-trading market
risks not included
in VaR
are covered
in the risks
controlled
by the Market and Treasury Risk Control functions.
–
Our primary portfolio measures of market risk are liquidity-adjusted stress
loss and VaR. Both are subject to limits that
are approved
by the
Board of
Directors (the
BoD). Market
risk measurement
for certain
legacy Credit
Suisse components
can
differ
from
UBS AG
excluding
the
aforementioned
legacy
Credit
Suisse
components,
as
set
out
below.
These
positions continue to be managed
on legacy Credit Suisse infrastructure
until full migration of these positions
to UBS
infrastructure or the liquidation of the positions.
–
These measures are
complemented by
concentration and
granular limits for
general and specific
market risk factors.
Our trading businesses are subject
to multiple market risk limits, which
take into account the extent of
market liquidity
and volatility, business outlook and growth,
and, for our single-name exposures, issuer credit quality.
–
Trading
market
risks
are
managed
at
portfolio
level.
As
risk
factor
sensitivities
change
due
to
new
transactions,
transaction expiries or changes
in market levels, risk
factors are dynamically
rehedged to remain
within limits. We
do
not generally seek to distinguish in the trading portfolio between
specific positions and associated hedges.
–
Issuer
risk
for
credit
products
is
controlled
by
limits
applied
at
the
business
division
level
based
on
jump-to-zero
measures, which estimate maximum default exposure (the
default event loss assuming zero recovery).
–
Non-trading
foreign
exchange
risks
are
managed
under
market
risk
limits,
with
the
exception
of
Group
Treasury
management of consolidated capital activity.
Annual Report 2024 |
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balance sheet | Risk management and control
73
Our CRO Treasury function applies a holistic risk framework, setting the appetite for treasury-related risk-taking activities
across UBS AG. Key elements of the framework include an overarching
regulatory (interest rate risk in the banking book
(IRRBB)) delta economic value of
equity (EVE) target, set by the
BoD. Limits are also set by
the BoD to balance the effect
of foreign exchange movements on our common equity tier 1 (CET1) capital and CET1 capital ratio. Non-trading interest
rate and
foreign exchange
risks are
included in
firm-wide statistical
and stress-testing
metrics, which
flow into
our risk
appetite framework.
Equity
and
debt
investments
are
subject
to
a
range
of
risk
controls,
including
preapproval
of
new
investments
for
commercial purposes by business
management and Risk Control
and regular monitoring and
reporting by Group Finance.
They are also included in firm-wide statistical and stress-testing
metrics.
›
Refer to “Currency management” in the “Capital, liquidity
and funding, and balance sheet” section of
this report for more
information about Group Treasury’s management of foreign exchange risks
›
Refer to the “Capital, liquidity and funding,
and balance sheet” section of this report for more information
about the sensitivity
of our CET1 capital and CET1 capital ratio to currency
movements
Market risk stress loss
The
measurement
and
management
of
market
risks
include
an
extensive
set
of
stress
tests
and
scenario
analyses,
continuously evaluated to
ensure that losses
resulting from an
extreme yet plausible
event do
not exceed
our risk
appetite.
Liquidity-adjusted stress
Liquidity-adjusted
stress
is
our
primary
stress
loss
measure
for
firm-wide
market
risk.
The
framework
captures
the
economic
losses
that
could
arise
under
specified
stress
scenarios.
Shocks
are
applied
to
positions
based
on
expected
market movements in the liquidity-adjusted holding periods
resulting from the specified scenario.
The holding periods used for
liquidity-adjusted stress are calibrated to reflect
the time needed to reduce
or hedge the risk
of
positions
in
each
major
risk
factor
in
a
stressed
environment.
We
apply
minimum
holding
periods,
regardless
of
observed liquidity levels, as identification of and reaction
to a crisis may not always be immediate.
The expected market movements are derived using historical market behavior (based on analysis of
historical events) and
forward-looking analysis including consideration of defined
scenarios that have not occurred in the past.
Stress-based limits apply at several
levels of the organizational hierarchy. Liquidity
-adjusted stress is also the core
market
risk component of our combined stress test framework and
therefore integral to our overall risk appetite framework.
›
Refer to “Risk appetite framework” in this
section for more information
›
Refer to “Stress testing” in this section for more information
about our stress-testing framework
Value-at-risk
VaR definition
Audited |
VaR
is a
statistical
measure
of market
risk, quantifying
the potential
market risk
losses over
a
set time
horizon
(holding period) at an established level of confidence. VaR assumes no change in UBS AG’s trading
positions over the set
time horizon.
We calculate VaR daily.
The profit or loss
distribution from which VaR
is estimated is
derived from our internally
developed
VaR model,
which simulates
returns over
the holding
period for
risk factors
our trading
positions are
sensitive to,
and
subsequently
quantifies the profit / loss effect
of these risk
factor returns on
our trading positions. Systematic
commodity,
credit,
equity,
foreign
exchange
rate
and
interest
rate
risk
factor
returns
are
based
on
a
pure
historical
simulation
approach.
An
unweighted
five-year
look-back
window
is
used
for
UBS AG
excluding
certain
legacy
Credit
Suisse
components and an exponentially weighted two-year window for the aforementioned legacy Credit Suisse components.
Modeling idiosyncratic
and specific
risks for
equity and
credit risk
factors using
historical simulation
is challenging,
due
to the
limited availability
of continuous
good-quality historical
data. Wherever
possible, historical
simulation to
model-
specific risk is used for
the legacy Credit Suisse components;
however, both traded market risk portfolios rely upon
factor
models to
distinguish systematic and
idiosyncratic returns. For
UBS AG excluding
certain legacy Credit
Suisse components,
idiosyncratic returns are simulated through a
Monte Carlo model, aggregating the sum
of systematic and residual returns
in such a
way that
systematic and
residual risk
are consistently
captured. For
the legacy
Credit Suisse
components, the
available distribution
of idiosyncratic
returns is
used to
determine an
extreme scenario
for a
given risk
factor’s specific
risk;
the
resultant
VaR
and
extreme
scenario
loss
for
a
given
risk
factor
are
aggregated
using
a
zero-correlation
assumption.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
74
For
both
UBS AG
excluding
certain
legacy
Credit
Suisse
components
and
the
aforementioned
legacy
Credit
Suisse
components,
VaR
models
are
used for
internal
management
purposes
and
for
determining
market
risk risk-weighted
assets
(RWA),
although
the
two
use
cases
consider
different
confidence
levels
and
time
horizons.
For
internal
management
purposes,
risk
limits
are
established
and
exposures
measured
using
VaR
at
a
%
confidence
level
for
UBS AG
excluding
certain
legacy
Credit
Suisse
components
and
%
for
the
aforementioned
legacy
Credit
Suisse
components,
with a 1-day holding period, aligned to the
way we consider the risks associated with our trading
activities.
The regulatory
measure of
market risk
used to
underpin the
market risk
capital requirements
under Basel III
involves a
measure equivalent to a
% confidence level using a 10-day holding
period. To calculate a 10-day holding period
VaR,
we use 10-day risk factor returns.
The portfolio
populations for
management and
regulatory VaR
are slightly
different. The
one for
regulatory VaR
meets
regulatory
requirements
for
inclusion
in
regulatory
VaR.
Management
VaR
includes
a
broader
range
of
positions.
For
example, regulatory
VaR excludes
credit spread
risks from
the securitization
portfolio, which
are treated
instead under
the securitization approach for regulatory purposes.
We also
use stressed
VaR (SVaR)
for the
calculation of
market risk
RWA. SVaR
uses broadly
the same
methodology as
regulatory
VaR and
is calculated
using the
same
population,
holding
period (10-day)
and confidence
level (
%). For
SVaR, both for UBS AG excluding
certain legacy Credit Suisse
components and the aforementioned
legacy Credit Suisse
components, the
most significant
one-year period
of financial
stress from
a historical
dataset covering
the period
from
1 January 2007 to the present is identified.
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors,
for more information
about the regulatory capital calculation under the advanced
internal ratings-based approach
Management VaR for the period
UBS AG excluding
certain legacy
Credit Suisse
components continued
to maintain
generally low
levels of management
VaR.
Average management
VaR
(1-day,
95% confidence
level) decreased
to USD 12m
from USD 15m
in 2024,
mainly
driven by the Investment Bank’s Global Markets business.
Average management VaR (1-day, 98% confidence level) of the legacy Credit
Suisse components was USD 12m in 2024,
driven by Non-core and Legacy positions.
Audited |
Management value-at-risk (1-day, 95% confidence level, 5 years of historical data) of the business divisions and Group
Items excluding certain legacy Credit Suisse components, by general market risk type
1,2
For the year ended 31.12.24
USD m
Equity
Interest
rates
Credit
spreads
Foreign
exchange
Commodities
Min.
Max.
Average
31.12.24
Total management VaR
Average (per business division and risk type)
Global Wealth Management
Personal Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items
Diversification effect
3,4
(
6
)
(
8
)
(
1
)
(
5
)
(
4
)
(
1
)
For the year ended 31.12.23
USD m
Equity
Interest
rates
Credit
spreads
Foreign
exchange
Commodities
Min.
Max.
Average
31.12.23
Total management VaR
Average (per business division and risk type)
Global Wealth Management
Personal Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items
Diversification effect
3,4
(
6
)
(
6
)
(
1
)
(
4
)
(
4
)
(
1
)
1 The legacy
Credit Suisse components
not included in the
UBS AG management
VaR predominantly
reflect the portfolio in
Non-core and Legacy.
These positions continue
to be managed on
legacy Credit Suisse
infrastructure based on legacy Credit Suisse management VaR methodology until full migration of these positions
to UBS infrastructure or the liquidation of the positions. This process is ongoing, and
the management
VaR of the legacy Credit Suisse components is
expected to continue decreasing over time.
2 Statistics at individual levels may not be
summed to deduce the corresponding aggregate figures. The minima and maxima
for each level
may occur on
different days, and,
likewise, the
VaR for
each business line
or risk type,
being driven by
the extreme loss
tail of the
corresponding distribution of
simulated profits and
losses for that
business line or risk type,
may well be driven by different
days in the historical time series,
rendering invalid the simple
summation of figures to arrive at
the aggregate total.
3 The difference between the
sum of
the standalone VaR
for the business
divisions and Group
Items and the
total VaR.
4 As the
minima and maxima for
different business divisions
and Group Items
occur on different
days, it is
not meaningful to
calculate a portfolio diversification effect.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
75
Management value-at-risk (1-day, 98% confidence level, 2 years of historical data) of certain legacy Credit
Suisse
components of the business divisions and Group Items, by general market risk type
1,2
For the year ended 31.12.24
USD m
Equity
Interest
rates
Credit
spreads
Foreign
exchange
Commodities
Min.
Max.
Average
31.12.24
Total management VaR
Average (per business division and risk type)
Global Wealth Management
Personal Corporate Banking
Asset Management
Investment Bank
Non-core and Legacy
Group Items
Diversification effect
3,4
(
3
)
(
1
)
(
2
)
(
2
)
1 The legacy
Credit Suisse components
not included in the
UBS AG management
VaR predominantly
reflect the portfolio in
Non-core and Legacy.
These positions continue
to be managed on
legacy Credit Suisse
infrastructure based on legacy Credit Suisse management VaR methodology until full migration of these positions
to UBS infrastructure or the liquidation of the positions. This process is ongoing, and
the management
VaR of the legacy Credit Suisse components is
expected to continue decreasing over time.
2 Statistics at individual levels may not be
summed to deduce the corresponding aggregate figures. The minima and maxima
for each level
may occur on
different days, and,
likewise, the
VaR for
each business line
or risk type,
being driven by
the extreme loss
tail of the
corresponding distribution of
simulated profits and
losses for that
business line or risk type,
may well be driven by different
days in the historical time series,
rendering invalid the simple
summation of figures to arrive at
the aggregate total.
3 The difference between
the sum of
the standalone VaR
for the business
divisions and Group
Items and the
total VaR.
4 As the
minima and maxima for
different business divisions
and Group Items
occur on different
days, it is
not meaningful to
calculate a portfolio diversification effect.
VaR limitations
Audited |
Actual realized market risk losses may differ
from those implied by VaR
for a variety of reasons.
–
VaR is calibrated to a specified level of confidence and
may not indicate potential losses beyond this confidence
level.
–
The 1-day time horizon used
for VaR for internal management
purposes (a 10-day horizon for regulatory
VaR) may not
fully capture market risk of positions that cannot be closed
out or hedged within the specified period.
–
In
some
cases,
VaR
calculations
approximate
the
effect
of
changes
in
risk
factors
on
the
values
of
positions
and
portfolios.
–
Effects
of
extreme
market
movements
are
subject
to
estimation
errors,
which
may
result
from
non-linear
risk
sensitivities,
and
the
potential
for
actual
volatility
and
correlation
levels
to
differ
from
assumptions
implicit
in
VaR
calculations.
–
The choice of a
longer historical window means
sudden increases in market
volatility will tend not
to increase VaR as
quickly as
the use
of shorter
historical observation
periods, but
such increases
will affect
VaR for
a longer
period of
time. Similarly, after periods
of increased volatility, as markets
stabilize, VaR predictions will remain
more conservative
for a period of time, influenced by the length of the historical
observation period.
SVaR is subject
to the limitations
noted for VaR
above, but the
use of one-year
datasets avoids the
smoothing effect of
longer datasets used
for VaR. In addition,
the ability to
select a one-year
period outside of
recent market
history allows
for a
wider variety
of potential
loss events.
Therefore, although
the significant
period of
stress during
the 2007–2009
financial crisis is no
longer contained in the
look-back window used for management
and regulatory VaR, SVaR
continues
to use that data. This approach
aims to reduce the procyclicality of the regulatory capital
requirements for market risks.
We recognize
that no
single measure
can encompass
all
risks associated
with a
position or
portfolio. We
use a
set of
metrics
with
both
overlapping
and
complementary
characteristics
to
create
a
holistic
framework
that
aims
to
ensure
material completeness of risk
identification and measurement. As
a statistical aggregate
risk measure, VaR supplements
our comprehensive stress-testing framework.
We also have a framework to identify and quantify potential
risks not fully captured by our VaR model and refer
to such
risks as risks not in VaR. The framework underpins these potential
risks with additional regulatory capital.
Backtesting of VaR
VaR backtesting is a performance measurement
process in which a 1-day VaR prediction is compared with the realized 1-
day profit or loss. We compute
backtesting VaR using a 99%
confidence level
and 1-day holding period
for the regulatory
VaR population.
Since 99%
VaR is defined
as a risk
measure that
operates on
the lower
tail of
the profit or
loss distribution,
99% backtesting
VaR is a negative
number. Backtesting
revenues exclude
non-trading revenues,
such as
valuation
reserves,
fees
and
commissions, and
revenues from
intraday trading,
so
as
to
provide
a
like-for-like comparison.
A
backtesting
exception occurs
when backtesting
revenues are lower
than the previous
day’s backtesting
VaR.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
76
Statistically, given the 99% confidence level,
two or three backtesting exceptions a
year can be expected. More than
four
exceptions could
indicate that
the VaR
model is not
performing appropriately,
as could too
few exceptions
over a
long
period. However,
as noted
for VaR
limitations above,
a sudden
increase (or
decrease) in
market volatility
relative to
the
volatility observed
in the look
-back window
could lead
to a
higher (or lower)
number of
exceptions. Therefore,
Group-
level backtesting exceptions
are investigated, as are
exceptional positive backtesting
revenues, with the
results reported
to senior business management and regulators.
UBS AG excluding
certain legacy
Credit Suisse
components had
no new
negative backtesting
exceptions in
2024. The
number of
negative backtesting
exceptions
within the
most recent
250-business-day
window remained
at zero
at the
end of 2024.
For
legacy
Credit
Suisse
components,
the
number
of
negative
backtesting
exceptions
within
the
most
recent
250-
business-day window was three at the end of 2024.
As the number
of negative
backtesting exceptions
for both UBS
AG excluding certain
legacy Credit Suisse
components
and
the
aforementioned
legacy
Credit
Suisse
components
was
below
five,
the
Swiss
Financial
Market
Supervisory
Authority
(FINMA)
VaR
multiplier
derived
from
negative
backtesting
exceptions
for
market
risk
RWA
was
unchanged
compared with 2023, at 3.0.
VaR model confirmation
In addition
to the
for-regulatory-purposes
backtesting described
above, we
conduct extended
backtesting for
internal
model confirmation purposes. This includes
observing model performance across the entire profit or loss
distribution (not
just the tails) and at multiple levels within the business
division hierarchies.
›
Refer to “Risk measurement” in this section for
more information about our approach to model confirmation
procedures
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
77
VaR model developments in 2024
Audited |
In January 2024 we made two material VaR model changes to the VaR
model of UBS AG excluding certain legacy
Credit
Suisse
components:
(i) the
integration
of
time
decay
into
regulatory
VaR
and
stressed
VaR
for
derivatives
with
optionality
and
(ii) an
improvement
in
the
profit
or
loss
representation
of
derivatives
with
multiple
underlyings.
As
reported in the UBS AG first quarter 2024 report
,
the two changes resulted in a significant increase
in market risk RWA.
In the
second quarter
of 2024,
certain components
of the
legacy Credit
Suisse VaR
model were
upgraded: (i) the
full-
revaluation
framework
was
extended
to
include
interest
rate
and
interest
rate
volatility
risk
factors;
(ii) empirical
correlations in the aggregation of specific risk
for the price risk of fund-linked products were added;
and (iii) a two-factor
regression model for traded loans was introduced. These changes did not have a material impact on market risk RWA.
Market-risk-related regulatory capital developments
The Basel
Committee on
Banking Supervision
(the BCBS)
final Basel III
standards on
the minimum
capital requirements
for market risk, known
as the Fundamental Review
of the Trading Book (the FRTB),
entered into force on 1 January 2025.
FINMA issued implementing
ordinances to
support these
changes. These ordinances
are effective
from 1 January
2025
and
provide
technical
details
for
the
revised
Capital
Adequacy
Ordinance,
ensuring
alignment
with
international
standards. Key elements of the revised market risk framework include:
(i) changes to the internal model-based approach,
including
changes
to
the
model
approval
and
performance
measurement
process;
(ii) changes
to
the
standardized
approach with the aim
of providing a credible
fallback method for an
internal model-based approach; and
(iii) a revised
boundary between the trading book and the banking book.
As part
of going
live with
the FRTB, UBS AG
has adopted
the standardized approach
for all
FINMA-regulated legal entities.
›
Refer to “Risk-weighted assets” in the “Capital,
liquidity and funding, and balance sheet” section
of this report for more
information about the development of RWA including the regulatory add-on
›
Refer to “Risk measurement” in this section for
more information about our approach to model confirmation
procedures
›
Refer to the “Regulatory and legal developments”
and “Risk factors” sections of this report for
more information
Interest rate risk in the banking book
Sources of interest rate risk in the banking book
Audited |
IRRBB arises
from balance
sheet positions
such as
Amounts due
from banks,
Loans and
advances to
customers,
Financial assets at fair
value not held for
trading, Financial assets
measured at amortized
cost, Customer deposits,
Debt
issued measured
at amortized
cost, and
Derivative financial
instruments, including
those subject
to hedge
accounting.
Fair value changes to these positions may affect other comprehensive income (OCI) or the income statement, depending
on their accounting treatment.
UBS AG’s
largest
banking
book
interest
rate
exposures
arise
from
customer
deposits
and
lending
products
in
Global
Wealth Management and Personal Corporate Banking, as well
as from debt issuance, liquidity buffers and interest
rate
hedges in
Group Treasury.
The inherent
interest rate
risks stemming
from Global
Wealth Management
and Personal
Corporate
Banking
are
generally
transferred
to
Group
Treasury,
to
manage
them
centrally
together
with
UBS AG’s
modeled interest rate
duration assigned to
equity, goodwill and
real estate. This
makes the netting
of interest rate
risks
across
different
sources
possible,
while
leaving
the
originating
businesses
with
commercial
margin
and
volume
management. The residual
interest rate risk
is mainly
hedged with interest
rate swaps, to
the vast majority
of which hedge
accounting is applied. Short-term
exposures and HQLA classified as
Financial assets at fair value
not held for trading are
hedged with derivatives
accounted for
on a mark-to-market
basis. Long-term fixed-rate
debt issued and
HQLA hedged
with external interest rate swaps are designated in fair value
hedge accounting relationships.
Risk management and governance
IRRBB is measured using several metrics, the most
relevant of which are the following.
–
EVE sensitivity
to yield
curve moves
is calculated
as changes
in the
present value
of future
cash flows
irrespective of
accounting treatment.
These yield curve
moves are also
the key
risk factors for
statistical and stress-based
measures,
e.g. VaR and stress scenarios, as well as the
regulatory interest rate scenarios. These are
measured and reported daily.
The regulatory IRRBB
EVE exposure is
the most adverse
regulatory interest rate scenario
that is netted
across currencies.
It excludes the sensitivity from additional tier 1 (AT1) capital instruments (as per
specific FINMA requirements) and the
modeled
interest
rate
duration
assigned
to
equity,
goodwill
and
real
estate.
UBS AG
also
applies
granular
internal
interest rate shock scenarios to its banking book positions
to monitor its specific risk profile.
–
Net
interest
income
(NII) sensitivities
to yield
curve
moves
are
calculated
as changes
of baseline
NII over
a
set time
horizon, which we
internally compute
by assuming interest
rates in all
currencies develop
according to their
market-
implied forward rates and assuming constant business volumes
and product mix and no specific management actions.
The sensitivities are measured and reported monthly.
UBS AG actively manages
IRRBB, with the
aim of reducing
the volatility of
NII subject to
limits and triggers
for EVE
and
NII exposure at consolidated and significant legal entity levels.
The
Asset
and Liability
Committee
(the
ALCO)
of UBS
AG
and, where
relevant,
ALCOs at
a
legal
entity
level perform
independent oversight over the management of IRRBB,
which is also subject to Internal Audit and model governance.
›
Refer to “Internal Audit” in the “Corporate
governance” section of this report and to “Risk
measurement” in this section for more
information
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
78
Key modeling assumptions
The cash
flows from
customer deposits
and lending
products used
in calculation
of EVE
sensitivity exclude
commercial
margins and
other spread
components, are
aggregated
by daily
time buckets
and are
discounted using
risk-free
rates.
UBS AG’s external issuances are
discounted using its senior
debt curve, and capital
instruments are modeled
to the first
call date.
NII sensitivity, which includes
commercial margins, is
calculated over a
one-year time horizon,
assuming constant
balance sheet structure and volumes, and considers
embedded interest rate options.
The average repricing
maturity of non-maturing
deposits and
loans is
determined via
target replication
portfolios designed
to protect
product margins. Optimal
replicating portfolios are
determined at granular
currency- and product-specific
levels
by simulating and applying a real-world market rate
model to historically calibrated client rate and volume models.
UBS AG uses an
econometric prepayment model
to forecast prepayment
rates on US
mortgage loans in
UBS Bank USA
and
agency
mortgage-backed
securities
(MBSs)
held
in
various
liquidity
portfolios
of
UBS
Americas
Holding
LLC
consolidated.
These
prepayment
rates
are
used
to
forecast
both
mortgage
loan
and
MBS
balances
under
various
macroeconomic
scenarios.
The
prepayment
model
is
used
for
a
variety
of
purposes,
including
risk
management
and
regulatory
stress
testing.
Swiss
mortgages
and
fixed-term
deposits
generally
do
not
carry
similar
optionality,
due
to
prepayment and early redemption penalties.
Effect of interest rate changes on shareholders’ equity and
CET1 capital
The “Accounting and
capital effect
of changes in
interest rates” table
below shows the
effects on shareholders’
equity
and CET1
capital of gains
and losses from
changes in interest
rates in
the main
banking book positions.
We use derivatives
to hedge
interest
rate risks
in the
banking book
and these
reflect changes
in interest
rates as
an immediate
fair value
gain or loss, recognized either in the income statement or through OCI.
Where hedged items are accrual accounted, we
aim to minimize accounting asymmetries by applying hedge
accounting to reflect the economic hedge relationship.
In a rising
rate scenario, we
would have an
initial decrease in
shareholders’ equity as
a result of
fair value losses
on our
derivatives recognized
in OCI,
while we would
expect higher
NII over time
as rates increase.
The effect
on CET1 capital
would be much lower, as gains and losses on interest
rate swaps designated as cash flow hedges are
not recognized for
regulatory capital purposes.
Accounting and capital effect of changes in interest rates
1
Recognition
Shareholders’ equity
CET1 capital
Timing
Income statement / OCI
Gains
Losses
Gains
Losses
Loans and deposits at amortized cost
2,3
Gradual
Income statement
l
l
l
l
Other financial assets and liabilities measured at amortized
cost
2
Gradual
Income statement
l
l
l
l
Debt issued measured at amortized cost
2,3
Gradual
Income statement
l
l
l
l
Receivables and payables from securities financing transactions
2
Gradual
Income statement
l
l
l
l
Financial assets at fair value not held for trading
Immediate
Income statement
l
l
l
l
Financial assets at fair value through other comprehensive income
Immediate
OCI
l
l
l
Derivatives designated as cash flow hedges
Immediate
OCI
4
l
l
Derivatives designated as fair value hedges
5
Immediate
Income statement
l
l
l
l
Derivatives transacted as economic hedges
Immediate
Income statement
l
l
l
l
1 Refer to the “Reconciliation
of equity under IFRS
Accounting Standards to Swiss SRB
common equity tier 1
capital” table in the
“Capital, liquidity and funding,
and balance sheet” section of
this report for more
information about the differences between shareholders’ equity
and CET1 capital.
2 For fixed-rate financial instruments,
changes in interest rates affect the income
statement when these instruments roll over and
reprice.
3 For hedge-accounted
items, a fair
value adjustment
is applied in
line with the
treatment of the
hedging derivatives.
4 Excluding hedge
ineffectiveness that is
recognized in the
income statement in
accordance with IFRS Accounting Standards.
5 The fair value of
the derivatives is offset by
the fair value adjustment of
the hedged items. Under
the fair value hedge program
applied to cross-currency swaps and
foreign currency debt, the foreign currency basis spread is excluded from the hedge designation and accounted for through OCI, which is included in CET1.
Economic value of equity sensitivity
Audited
|
The
EVE
sensitivity
in
UBS AG’s
banking
book
to
a
+1-basis-point
parallel
shift
in
yield
curves
was
negative
USD
m as of 31
December 2024, compared
with negative USD
m as of 31
December 2023. This
excluded the
sensitivity of
USD
m from
AT1
capital instruments
(as per
specific FINMA
requirements)
in contrast
to general
BCBS
guidance. The
exposure in
the banking
book of
UBS AG increased
in 2024,
driven by
net interest
income stabilization
initiatives and the merger of UBS AG and Credit Suisse
AG on 31 May 2024.
The majority of UBS AG’s IRRBB is a reflection of
the net asset duration that it ran to offset our
modeled sensitivity of net
USD
m (31 December 2023:
USD
m) assigned to
our equity, goodwill and real
estate, with the
aim of generating
a
stable
NII contribution.
Of
this,
USD
m
and
USD
m
were
attributable
to the
US
dollar
and
the
Swiss
franc
portfolios, respectively,
(31 December 2023: USD
m and USD
m, respectively).
In addition to
the aforementioned sensitivity, UBS AG calculates
the six interest
rate shock scenarios prescribed
by FINMA.
The
“Parallel
up” scenario,
assuming
all positions
were
measured
at
fair
value,
was the
most severe
and would
have
resulted
in
a
change
in
EVE
of
negative
USD
bn,
or
%,
of
our
tier 1
capital
(31 December
2023:
negative
USD
bn, or
%), which is well
below the
% threshold as
per the BCBS
supervisory outlier test
for high levels
of
IRRBB.
The immediate effect on UBS AG’s tier 1 capital in the “Parallel
up” scenario as of 31 December 2024 would have been
a decrease of approximately USD
bn, or
% (31 December 2023: USD
bn, or
%), reflecting the fact that the
vast majority of UBS AG’s banking book is accrual accounted or subject to hedge accounting. The “Parallel up” scenario
would subsequently have a positive effect on NII, assuming
a constant balance sheet.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
79
As
the
overall
interest
rate
risk
sensitivity
shows
a
greater
impact
from
slower
asset
repricing
compared
with
faster
liabilities repricing, the “Parallel down”
scenario was the most beneficial and
would have resulted in a change
in EVE of
positive USD
bn (31 December
2023: positive
USD
bn) and
a small
positive immediate
effect on
UBS AG‘s tier 1
capital.
Net interest income sensitivity
The main NII
sensitivity in the
banking book resides
in Global Wealth
Management and Personal
Corporate
Banking.
UBS AG assigns a target duration to its investment of equity portfolio, and Group Treasury
actively manages the residual
IRRBB. This
sensitivity is
assessed using
a number
of scenarios
assuming parallel
and non-parallel
shifts in
yield curves,
with various degrees of severity,
and UBS AG has set and monitors thresholds for the NII sensitivity to immediate parallel
shocks of –200 and +200 basis points under the assumption of no change to balance sheet size and product
mix, stable
foreign exchange rates, and no specific management
action.
›
Refer to the “UBS AG consolidated performance”
section of this report for more information about sensitivity
to interest rate
movements
Audited |
Interest rate risk – banking book
31.12.24
USD m
Effect on EVE
1
Effect on EVE
1
Scenarios
CHF
EUR
GBP
USD
Other
Total
Additional tier 1 (AT1) capital
instruments
Total
+1 bp
(
10.5
)
(
1.3
)
(
0.3
)
(
24.6
)
(
0.5
)
(
37.1
)
(
31.6
)
Parallel up
2
(
1,510.7
)
(
251.8
)
(
64.4
)
(
4,747.8
)
(
96.2
)
(
6,670.9
)
(
5,661.1
)
Parallel down
2
(
1,183.4
)
Steepener
3
(
748.7
)
(
4.0
)
(
10.6
)
(
1,253.2
)
(
9.2
)
(
2,025.8
)
(
1,858.2
)
Flattener
4
(
37.8
)
(
2.2
)
(
11.0
)
Short-term up
5
(
150.2
)
(
112.6
)
(
24.0
)
(
1,815.4
)
(
46.8
)
(
2,148.9
)
(
1,658.3
)
Short-term down
6
(
510.8
)
31.12.23
USD m
Effect on EVE
1
Effect on EVE
1
Scenarios
CHF
EUR
GBP
USD
Other
Total
Additional tier 1 (AT1) capital
instruments
Total
+1 bp
(
4.3
)
(
0.7
)
(
23.1
)
(
28.1
)
(
23.3
)
Parallel up
2
(
608.9
)
(
142.9
)
(
4,522.3
)
(
15.0
)
(
5,287.0
)
(
4,398.7
)
Parallel down
2
(
11.8
)
(
1,028.0
)
Steepener
3
(
335.2
)
(
16.0
)
(
13.1
)
(
973.6
)
(
23.0
)
(
1,361.0
)
(
1,265.1
)
Flattener
4
(
6.8
)
(
94.1
)
Short-term up
5
(
38.5
)
(
48.4
)
(
1,909.8
)
(
1,976.3
)
(
1,498.9
)
Short-term down
6
(
14.3
)
(
10.0
)
(
498.9
)
1 Economic value
of equity.
2 Rates across
all tenors move
by ±150 bps
for Swiss franc,
±200 bps for
euro and US
dollar, and
±250 bps for
pound sterling.
3 Short-term rates
decrease and long-term
rates
increase.
4 Short-term rates increase and long-term rates decrease.
5 Short-term rates increase more than long-term rates.
6 Short-term rates decrease more than long-term rates.
Other market risk exposures
Own credit
UBS AG is
exposed to
changes in
its own
credit reflected
in the
valuation of
financial liabilities
designated at
fair value
when UBS AG’s
own credit
risk would
be considered
by market
participants, except
for fully
collateralized liabilities
or
other obligations for which it is established market practice
to not include an own-credit component.
›
Refer to “Note 21 Fair value measurement” in the “Consolidated
financial statements” section of this report for more information
about own credit
Structural foreign exchange risk
Upon consolidation,
assets and
liabilities held
in foreign
operations are
translated into
US dollars
at the
closing foreign
exchange rate on the
balance sheet date. Value changes (in
US dollars) of non-US-dollar assets
or liabilities due to
foreign
exchange movements are recognized in OCI
and therefore affect
shareholders’ equity and CET1 capital.
Group
Treasury
uses
strategies
to
manage
this
foreign
currency
exposure,
including
matched
funding
of
assets
and
liabilities and net investment hedging.
›
Refer to the “Capital, liquidity and funding,
and balance sheet” section of this report for more information
about our exposure to
and management of structural foreign exchange risk
›
Refer to “Note 11 Derivative instruments”
in the “Consolidated financial statements” section
of this report for more information
about our hedges of net investments in foreign operations
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
80
Equity investments and investment fund units
Audited |
UBS AG
makes
direct
investments
in
a
variety
of
entities
and
buys
equity
holdings
in
both
listed
and
unlisted
companies,
with
the
aim
of
supporting
its
business
activities
and
delivering
strategic
value
to
the
firm.
This
includes
investments in
exchange and
clearing house
memberships, as
well as
minority investments
in early-stage
fintechs and
technology companies
via UBS
Next. UBS AG
may also
make investments
in funds
that it
manages in
order to
fund or
seed them at
inception or to
demonstrate that UBS
AG’s interests align
with those of
investors. UBS AG also
buys, and
is sometimes required
by agreement
or regulation
to buy,
securities and
units from
investment vehicles
that it ha
s
sold
to clients.
The
fair
value
of
equity
investments
tends
to
be
influenced
by
factors
specific
to
the
individual
investments.
Equity
investments are generally intended
to be held for the
medium or long term
and may be subject
to lock-up agreements.
For these reasons, UBS AG
generally does not control
these exposures by using
market risk measures applied
to trading
activities. However,
such equity
investments are
subject to
a different
range of
controls, including
preapproval
of new
investments for commercial purposes by business management and Risk Control, portfolio and concentration limits, and
regular monitoring
and reporting
to senior
management. They
are also
included in
the firm-wide
statistical and
stress-
testing metrics, which flow into the risk appetite framework.
As of 31 December 2024, UBS AG held equity investments and investment fund units totaling USD
bn (31 December
2023: USD
bn), of
which USD
bn (31 December
2023: USD
bn) was
classified as
Financial assets
at fair
value
not held for trading and USD
bn (31 December 2023: USD
bn) as Investments in associates.
›
Refer to “Note 21 Fair value measurement” and “Note 28
Interests in subsidiaries and other entities”
in the “Consolidated
financial statements” section of this report for more information
›
Refer to “Note 1 Summary of material accounting
policies” in the “Consolidated financial statements”
section of this report for
more information about the classification of financial instruments
Debt investments
Audited |
Debt investments classified
as Financial assets
measured at
fair value through
other comprehensive
income as of
31 December
2024
can
broadly
be
categorized
as
money
market
instruments
and
debt
securities
primarily
held
for
statutory,
regulatory or liquidity reasons.
The risk control framework applied to debt instruments classified
as Financial assets measured at fair value through other
comprehensive income depends on
the nature
of the
instruments and the
purpose for which
we hold
them. UBS AG’s
exposures
may be
included
in market
risk limits
or be
subject
to specific
monitoring
and interest
rate sensitivity
analysis.
They
are also included
in the firm-wide
statistical
and stress-testing
metrics, which
flow into our
risk appetite
framework.
Debt instruments
classified
as Financial
assets
measured
at fair
value through
other
comprehensive
income
had a
fair
value of USD
bn as of 31 December 2024 (31 December 2023: USD
bn).
›
Refer to “Note 21 Fair value measurement” in the “Consolidated
financial statements”
section of this report for more information
›
Refer to “Economic value of equity sensitivity”
in this section for more information
›
Refer to “Note 1 Summary of material accounting
policies” in the “Consolidated financial statements”
section of this report for
more information about the classification of financial instruments
Pension risk
We provide a number of pension plans for past and current
employees, some classified as defined benefit pension plans
under IFRS Accounting Standards,
which can have a material effect
on our equity under IFRS Accounting Standards
and
CET1 capital.
Pension risk is the risk that defined benefit plans’ funded status
might decrease, negatively affecting our capital. This can
result from
falls in
the value
of a
plan’s assets
or in
the investment
returns, increases
in defined
benefit obligations,
or
combinations of the above.
Important risk factors affecting the fair
value of pension plans’ assets include equity
market returns, interest rates, bond
yields,
and
real
estate
prices.
Important
risk
factors
affecting
the
present
value
of
expected
future
benefit
payments
include high-grade bond yields, interest rates, inflation rates,
and life expectancy.
Pension risk is
included in our
firm-wide statistical and
stress-testing metrics, which flow
into our risk
appetite framework.
The potential effects are thus captured in the post-stress
capital ratio calculations.
›
Refer to “Note 1 Summary of material accounting
policies” and “Note 26 Post-employment benefit plans”
in the “Consolidated
financial statements”
section of this report for more information about defined
benefit plans
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
81
Country risk
Country risk framework
Country
risk
includes
all
country-specific
events
occurring
in
a
sovereign
jurisdiction
that
may
lead
to
impairment
of
UBS AG’s exposures.
It may
take the
form of:
(i) sovereign risk,
which is
the ability
and willingness
of a
government to
honor its
financial commitments; (ii) transfer risk,
which arises if
a counterparty or
issuer cannot acquire
foreign currencies
following a
moratorium by
a central
bank on
foreign exchange
transfers; or
(iii) “other” country
risk. “Other”
country
risk may
manifest
itself through
increased
and multiple
counterparty
and issuer
default
risk (systemic
risk) or
through
events that
may affect
a country’s
standing, such
as adverse
shocks affecting
political stability
or institutional
and / or
legal frameworks.
UBS AG
assigns
a
country
rating
to
each
country,
which
reflects
its
view
of
a
country’s
creditworthiness
and
of
the
probability
of
a
country
risk
event
occurring.
Country
ratings
are
mapped
to
statistically
derived
default
probabilities,
described under
“Probability
of default”
in this
section.
UBS AG
uses this
internal
analysis
to set
the
credit ratings
of
governments and central banks,
estimate the probability of
a transfer event occurring,
and establish rules
on how aspects
of
country
risk
should
be
incorporated
in
counterparty
ratings
of
non-sovereign
entities
domiciled
in
the
respective
country.
Country
ratings
are
also
used
to
define
UBS AG’s
risk
appetite
regarding
foreign
countries.
A
country
risk
limit
(i.e.
maximum aggregate exposure) applies to exposures to counterparties or issuers of securities and financial investments in
the
given
foreign
country.
UBS AG
may
limit
the
extension
of
credit,
transactions
in
traded
products
or
positions
in
securities based on a country risk ceiling even if its exposure
to a counterparty is otherwise acceptable.
UBS AG’s country risk framework differs across the firm, and alignment of approaches is part of the ongoing integration
of Credit Suisse.
For internal
measurement and
control of
country risk,
UBS AG also
considers
the financial
effect of
market disruptions
arising prior to, during
and after a
country crisis. These may
take the form of
a severe deterioration in a
country’s debt,
equity
or
other
asset
markets,
or
a
sharp
depreciation
of
its
currency.
UBS AG
uses
stress
testing
to
assess
potential
financial
effects
of
severe
country
or
sovereign
crises.
This
involves
the
developing
of
plausible
stress
scenarios
for
combined stress testing and
the identification of countries
that may potentially
be subject to a
crisis event, determining
potential losses and making assumptions
about recovery rates depending on
the types of credit
transactions involved and
their economic importance to the affected countries.
Country risk exposure
Country risk exposure measure
The presentation
of country risk
follows UBS AG’s internal
risk view,
where the
basis for measuring
exposures depends
on the product category in which the
exposures are classified. In addition
to the classification of exposures
into banking
products and
traded products,
covered in
“Credit risk
profile of
UBS AG” in
this section,
for UBS AG
excluding certain
legacy Credit Suisse components the trading
inventory is also shown. Issuer
risk on securities (such as
bonds and equities)
and risk relating to underlying reference assets for derivative positions are
classified under trading inventory. The trading
inventory is
managed on
a net
basis, and
the value
of long
positions is
netted against
that of
short positions
with the
same underlying issuer.
Net exposures are floored at zero per issuer.
As a result, potentially offsetting benefits of certain
hedges and short positions across issuers are
not recognized.
UBS AG does not recognize any expected recovery values when reporting country exposures as exposure before hedges,
except for risk-reducing effects of master netting agreements and collateral held in either cash
or portfolios of diversified
marketable
securities,
which
are
deducted
from
the
potential
exposure
values.
Within
banking
products
and
traded
products, risk-reducing effects of credit
protection are generally taken
into account on
a notional basis
when determining
the net of hedge exposures.
Country risk exposure allocation
In general, exposures
are shown against
the country of
domicile of the
contractual counterparty or
the issuer of
the
security.
For
some
counterparties
whose
economic
substance
in
terms
of
assets
or
source
of
revenues
is
primarily
located in a different country, the exposure is allocated to
the risk domicile of those assets or revenues.
In the case
of derivatives,
UBS AG shows
the counterparty’s
risk potential
exposure against
the counterparty’s
country
of risk (presented
within traded
products). In
addition, risk
associated with
an instantaneous
fall in value
of underlying
reference assets
to zero (assuming
no recovery) is
shown against
the country of
risk of the issuer
of the reference
asset
(presented
within
the
trading
inventory
for
UBS AG
excluding
certain
legacy
Credit
Suisse
components
only).
This
approach
enables
UBS AG
to
capture
both
counterparty
and,
where
applicable,
issuer
elements
of
risk
arising
from
derivatives and
applies comprehensively
for all
derivatives,
including single
-name credit
default swaps
and other
credit
derivatives.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Risk management and control
82
Top 20 country risk exposures
The
table
below
shows
UBS AG’s
20
largest
country
exposures
by
product
type,
excluding
its
home
country,
as
of
31 December 2024 compared with 31 December
2023.
Compared with
2023, UBS AG’s
net exposure
generally increased
due to the
merger of
UBS AG and Credit
Suisse AG.
The list of
UBS AG’s top
20 countries
remained broadly
unchanged, with
two new
entries (Belgium
and Ireland)
at the
bottom of
the
list, with
the
exposure
to each
of those
two
not exceeding
USD 2.0bn.
Based
on the
sovereign
rating
categories, as of 31 December 2024, 85%
of UBS AG’s emerging market country exposure was rated investment grade,
compared with 88% as of 31 December 2023.
Israel and Middle East
As
of
31 December
2024,
UBS AG’s
direct
country
risk
exposure
to
Israel
was
USD 284m,
mainly
from
lending
and
collateralized
over-the-counter
derivatives
exposure
within
the
Investment
Bank,
and
its
direct
exposure
to
Gulf
Cooperation Council countries was USD 4.0bn.
As of 31 December 2024,
UBS AG’s direct exposure to Egypt,
Jordan and
Lebanon was limited,
and there was no direct exposure
to Iran, Iraq or Syria.
Russia
UBS AG’s
direct
country
risk
exposure
to
Russia
contributed
USD 365m
to
its
total
emerging
market
exposure
of
USD 27.2bn as of
31 December 2024.
This included
cash account
balances, loans and
trade finance exposures
in Non-
core and Legacy
and Personal
Corporate Banking.
UBS AG had no
material direct
country risk exposure
to Belarus or
to Ukraine as
of 31 December
2024. Potential second
-order impacts,
such as European
energy security,
continue to be
monitored.
Top
20 country risk net exposures, by product type
USD m
Total
Banking products
(loans, guarantees, loan
commitments)
Traded products
(counterparty risk from derivatives
and securities financing)
after master netting agreements
and net of collateral
Trading inventory
(securities and potential
benefits / remaining
exposure from derivatives)
Net of hedges
1
Net of hedges
1
Net of hedges
Net long per issuer
31.12.24
31.12.23
31.12.24
31.12.23
31.12.24
31.12.23
31.12.24
2
31.12.23
United States
228,353
165,639
156,763
104,845
28,847
27,463
42,744
33,331
United Kingdom
35,637
40,836
15,644
22,248
18,112
16,922
1,880
1,666
Germany
30,205
20,864
15,247
7,212
7,162
7,533
7,796
6,118
Japan
25,819
18,328
20,131
13,300
4,757
4,457
931
571
Australia
16,920
8,446
6,357
1,964
8,404
4,443
2,158
2,038
France
14,729
9,125
2,007
1,466
4,936
3,206
7,786
4,453
Singapore
12,260
10,310
3,568
2,122
3,565
3,362
5,127
4,827
Canada
8,516
8,722
835
550
2,839
2,741
4,843
5,431
Luxembourg
7,649
3,947
6,360
3,212
1,191
566
99
169
Netherlands
5,446
3,804
1,830
812
2,572
2,051
1,044
941
China
4,910
4,993
1,661
1,015
1,278
835
1,971
3,144
South Korea
4,368
4,312
602
437
666
647
3,100
3,228
Hong Kong SAR
3,792
2,776
1,490
884
1,190
885
1,111
1,007
Italy
3,355
1,459
1,542
751
909
470
904
238
Sweden
3,334
3,259
413
225
1,479
1,545
1,442
1,490
Spain
2,099
1,316
937
669
661
321
502
325
Norway
1,809
2,114
70
58
440
530
1,299
1,526
Belgium
1,742
610
614
128
421
229
706
253
Finland
1,713
1,185
76
44
303
341
1,335
800
Ireland
1,673
577
1,146
176
475
332
53
69
Total top 20
3
414,329
312,622
237,293
162,118
90,207
78,879
86,831
71,625
1 Before deduction of IFRS 9 ECL allowances and provisions.
2 Trading inventory exposures are for
UBS AG excluding legacy Credit Suisse components only.
3 Excluding Switzerland, supranationals, global funds
and legacy Credit Suisse shipping finance exposures.
Emerging markets¹ net exposure², by internal UBS country rating category
USD m
31.12.24
31.12.23
Investment grade
23,025
19,328
Sub-investment grade
4,155
2,697
Total
27,180
22,025
1 UBS AG classifies countries as emerging markets
based on per capita GDP,
historical real GDP growth, alignment with
international institutions (such as the BIS,
the World Bank, the IMF and
the MSCI) and other
factors.
2 Net of credit hedges (for banking products and for traded products); net long per issuer (for trading inventory) for
UBS AG excluding legacy Credit Suisse components only. Before deduction of IFRS
9 ECL
allowances and provisions.
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Non-financial risk
Compliance risk, financial crime
risk and operational risk
are independently overseen by
Group Compliance, Regulatory
Governance (GCRG) and are covered
in this section. Legal risk is overseen by
Group Legal. Reputational risk
is managed
by the business divisions and Group functions and
overseen by control functions.
›
Refer to “Top and emerging risks” in this section for more information about legal risk
Compliance risk
Achieving fair
outcomes for
our clients,
upholding market
integrity and
cultivating
the highest
standards of
employee
conduct are of critical importance
to us. Therefore, we maintain a
conduct risk framework across
our activities, which is
designed to align
our standards and
conduct with these
objectives and to
retain momentum on
fostering a strong
culture.
Suitability risk,
product selection,
cross-divisional service
offerings, quality
of advice
and price
transparency continue
to
be areas of heightened focus for
the Group, UBS AG and for
the industry as a whole.
Cross-border risk (including the risk
of
unintended
permanent
establishment)
remains
an
area
of
regulatory
attention
for
global
financial
institutions,
including a focus on market access,
such as third-country market access into the European Economic Area. We maintain
a series
of controls
designed to
address these
risks, and
we are
increasing the
number of
automated controls,
thereby
increasing overall control coverage.
Reputational risk, regulatory fragmentation related to environmental, social and governance topics, and the elevated risk
of greenwashing arising from our service offering, disclosures and
commitments remain key risks for 2025.
›
Refer to “Top and emerging risks” in this section for more information
Financial crime risk
Financial
crime,
including
money
laundering,
terrorist
financing,
sanctions
violations,
fraud,
bribery
and
corruption,
presents
a
major
risk,
as
technological
innovation
and
geopolitical
developments
increase
the
complexity
of
doing
business and heightened regulatory attention continues.
An
effective
financial
crime
prevention
program
therefore
remains
essential,
and
we
continue
to
focus
on
strategic
enhancements to
our
global anti-money-laundering,
know-your-client and
sanctions programs.
Money
laundering and
financial
fraud techniques
are becoming
increasingly
sophisticated,
and geopolitical
volatility
makes the
sanctions
landscape
more complex. The
extensive and
continuously evolving sanctions arising
from the
Russia–Ukraine war require
constant
attention to
manage circumvention
risks, while conflicts
in the Middle
East may further
increase terrorist-financing
risks.
›
Refer to “Top and emerging risks” in this section for more information
Operational risk
There is an
increased risk
of cyber-related
operational disruption
to business activities
at our locations
and / or those
of
third-party
suppliers
due
to
operating
a
more
complex
set
of
legal
entities
since
the
merger
of
UBS AG
and
Credit
Suisse AG
and
the
increasingly
dynamic
threat
environment,
which
is
intensified
by
current
geopolitical
factors
and
evidenced by continuing high volumes of, and the increasing sophistication of, cyberattacks against financial
institutions
globally and on third-party service
providers.
We remain on
heightened alert to respond
to and mitigate elevated
cyber- and information-security
threats, and continue
to
invest
in
improving
our
technology
infrastructure
and
information-security
governance
to
improve
our
defense,
detection and
response capabilities
against attacks.
In addition,
we are
implementing a
global framework
designed to
drive enhancements
in operational
resilience across
all business
divisions and
relevant
jurisdictions, as
well as
working
with the third-party service providers
that are of critical
importance to our operations to
assess their operational resilience
against our standards.
The increasing
interest in
data-driven advisory
processes and
the use
of artificial
intelligence (AI)
and machine
learning
are opening
up new
questions
related to
the fairness
of AI
algorithms,
data life-cycle
management,
data ethics,
data
privacy and security, and records management.
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Legal entity integration, including
that of existing Credit Suisse
businesses, and the closing of
legacy businesses introduce
operational complexity
and the
risk that
businesses in wind-down
are not
effectively managed.
These risks
continue to
be carefully monitored in addition to the delivery of consolidated
financial and regulatory reporting submissions.
›
Refer to “Top and emerging risks” in this section for more information
Non-financial risk framework
We follow a firm-wide non-financial risk framework that establishes requirements for identifying, controlling, managing,
assessing and mitigating
compliance risk, financial
crime risk and
operational risk to
maintain the safety
and soundness
of the firm and to protect its financial position and reputation
.
The framework is built on the following pillars:
–
classifying
inherent risks
through
19
non-financial
risk taxonomies,
which
define
the
universe
of non-financial
risks
that can arise as a consequence of our business activities
and external factors;
–
performing
control
assurance
activities,
including
self-assessing
the
design
and
operating
effectiveness
of
controls,
first- and second-line-of-defense control reviews,
and independent control testing;
–
defining
the
non-financial
risk
appetite
(including
relevant
indicators
for
each
non-financial
risk
taxonomy)
and
assessing risk exposure against appetite;
–
assessing inherent
and residual risk
through risk
assessment processes and
determining whether additional
remediation
plans are required to address identified deficiencies;
and
–
proactively and sustainably remediating identified control deficiencies.
Reputational risk is an integral part of the non-financial risk framework. It is one of the key impacts of non-financial risk,
alongside regulatory and financial risks.
Divisional Presidents
are accountable
for the
effectiveness of
non-financial risk
management and
for the
robustness of
the front-to-back control
environment within their
business divisions, and
legal-entity-responsible executives are in
charge
of non-financial
risk management
within their
legal entities.
Group function
heads are
accountable for
supporting the
divisional Presidents and legal
-entity-responsible executives of
our legal entities in
the discharge of this
responsibility, by
confirming completeness
and effectiveness
of the control
environment and non-financial
risk management
within their
Group functions. Collectively,
divisional Presidents, central
Group function heads
and legal-entity-responsible executives
are in charge of implementing the non-financial risk framework
.
GCRG owns
the firm’s
non-financial risk
framework,
and it
is responsible
for providing
an independent
and objective
view of the adequacy
of non-financial risk management
across the firm and
ensuring that compliance risk,
financial crime
risk
and
operational
risk
are
understood,
owned
and
managed
in
accordance
with
our
risk
appetite.
Compliance
Operational
Risk
Control
(CORC)
business-
or
function-aligned
teams
are
embedded
within
the
GCRG
function,
reporting to the Chief Compliance and Governance Officer
,
who is a member of the Executive Board (the EB).
The non-financial risk
framework forms the
common basis for
managing and assessing
compliance risk, financial
crime
risk
and
operational
risk,
and
there
are
additional
CORC
activities
intended
to
ensure
we
are
able
to
demonstrate
compliance with applicable laws, rules and regulations.
All functions
within UBS
are required
to periodically
assess the
design and
operating effectiveness
of key
internal non-
financial risk controls.
Key control deficiencies identified during the internal control and risk
assessment processes must be reported in the non-
financial
risk
inventory,
and
sustainable
remediation
must
be
defined
and
executed.
These
control
deficiencies
are
assigned to
owners at
senior management
level and
the remediation
progress is
reflected
in the
respective managers’
annual performance
measurement and
objectives. To
assist with
prioritizing the
most material
control deficiencies
and
measuring aggregated risk exposure, irrespective of origin,
a common rating methodology is applied
across all three lines
of defense, as well as by external audit.
In 2024, we focused on finalizing the rollout of
the framework to the combined organization and ensuring adherence to
the
framework
standards.
We
continue
to
improve
effectiveness
by
simplifying
and
automating
non-financial
risk
framework-related processes.
Reputational risk management
Our reputation
is ultimately
defined by
our ability
to adhere
to the
three
keys: our
Pillars, Principles
and Behaviors
. In
accordance with
our Code
of Conduct
and Ethics,
it is
the responsibility
of the
Board
of Directors
(the BoD)
and each
employee to refrain from any conduct
which may pose a risk to our reputation.
All employees are responsible for carefully evaluating
the reputational risks involved in all
business activities. Reputational
risk
is
considered
as
part
of
standard
risk
identification
and
assessment
processes
governed
by
relevant
frameworks
relating to new and existing clients, transactions, products and services. The business divisions and Group functions have
primary responsibility for identifying,
assessing and managing reputational risk. The control functions
are responsible for
providing independent oversight and challenge and must raise their concerns
if they disagree with the assessment of the
business
divisions
or
Group
functions
of
any
reputational
risk.
For
instances
where
the
inherent
reputational
risk
is
determined
to
be
high,
these
cases
must
be
escalated
to
the
relevant
divisional
management
team
for
review
and
decision. At
the discretion
of those
teams, cases
may also
be presented
to the
EB for
further
evaluation and
decision
through the respective divisional President.
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Cybersecurity and information security
Risk management and strategy
Cybersecurity
and
information-security
(CIS)
risk
is
the
risk
that
a
malicious
internal or
external
act,
or
a
failure
of
IT
hardware or software, or human error may
have a material impact on
confidentiality, integrity,
or availability of UBS AG’s
data or information systems.
CIS
risk
is
a
key
operational
risk
facing
UBS,
and
we
devote
considerable
resources
to
establishing
and
maintaining
processes for
assessing, identifying
and managing
CIS risk
through our
global workforce
and cyber-operations
centers
around the world.
›
Refer to “Risk governance” in this section
for information about our risk governance
framework
In line
with our
overall non-financial
risk management
framework,
we take
a cross-functional
approach to
addressing
CIS risk, with
the Group Operations and
Technology Office (GOTO), business divisions, GCRG, Group Risk Control,
Group
Legal, and
Internal Audit
all playing key
roles. Our risk
control framework follows
the three-lines-of-defense model. GOTO
establishes the policies
and procedures designed to
safeguard our information systems
and the information
those systems
collect and
process.
The business
divisions, together
with GOTO,
are
then responsible
for implementing
those policies
and procedures as part of the first
line of defense. GCRG leads the second line of defense,
by convening and consulting
with additional
control
functions
to provide
independent
oversight, and
challenges
the first
line’s
CIS framework
and
implementation. As the third line
of defense, Internal Audit
conducts independent reviews and validates the
first-line and
second-line processes and functions.
accountability for the Group-wide CIS program. The committee is
jointly chaired by the Chief Operations
and Technology
Officer and the Chief
Compliance and Governance Officer. The Head
Internal Audit is a permanent
guest. The committee
meets on a monthly basis
and serves as a platform
for interaction across the
three lines of defense for
the identification
and effective governance of CIS strategy, risks and regulatory obligations.
Following the merger of UBS AG and Credit Suisse AG on 31 May 2024, UBS established a unified governance structure
and
consolidated
CIS
leadership
under
a
single
Group
Chief
Information
Security
Officer
(Group
CISO)
function.
This
unified governance
ensures that
consistent and robust
security measures
are embedded
across the
entire organization.
Consequently,
the
role
of
the
Credit
Suisse
Chief
Information
Security
Officer
has
been
dissolved,
and
all
CIS
responsibilities are now managed centrally by the Group CISO.
We have raised the profile and highlighted the
role of our
regional CISOs
to better
position our
ability to
engage
with regulators
and other
key stakeholders.
All regional
CISOs
now report directly to the Group CISO.
›
Refer to “Cybersecurity governance” in
“Board of Directors” in the “Corporate governance”
section of this report for more
information
CIS program
Our CIS program
is led by
the Group
CISO, who
reports both
to the
Chief Operations
and Technology
Officer and
the
Chief Compliance and Governance Officer.
The CIS program is designed
to identify,
prevent, detect and respond
to CIS
events, with the goal of maintaining the integrity and availability of our technology infrastructure and the confidentiality
and
integrity
of
our
information.
Our
Group
CISO,
senior
management
within
GOTO
and
management
personnel
overseeing the CIS program all have substantial
relevant expertise in the areas
of cybersecurity and information security.
Our CIS program includes the following elements:
–
Threat intelligence:
cyber-threat
intelligence
team
analyzes
such
information
and
uses
it
to
enhance
existing
defense
capabilities,
to
respond to identified
threats and to
adjust our
CIS strategy
where needed.
In 2024,
the team’s remit
was expanded
to include providing research, analysis and advice on CIS risks associated
with emerging technologies,
including AI.
–
Preventative and detection
controls:
include system hardening, firewalls, intrusion prevention
and detection systems, and other controls. External
network
connections are identified
and recorded in
an inventory. Access
rights are defined
for information assets,
and IT systems
and
applications
enforce
authentication.
We
maintain
access
controls
and
approval
processes
designed
to
prevent
unauthorized access.
–
Cyber-defense
and
incident
response
capabilities
:
The
Cybersecurity
Operations
Center
is responsible
for
providing
24/7/365 real-time monitoring, detection
and response capabilities
for cyberattacks and acting
as the primary
interface
for cybersecurity events.
Incidents assessed as
having the potential
to adversely affect our
critical operations are
subject
to
mandatory
management
notification.
If
assessed
as
potentially
significant,
cybersecurity
and
data
incidents
are
managed under our crisis management framework.
–
Education and
training:
All UBS
staff, including
the external
workforce,
receive appropriate
CIS awareness
training,
commensurate with their roles and responsibilities.
–
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–
Monitoring
and
testing:
vulnerability assessments, penetration
and testing
engagements based
on specific
threat scenarios
that simulate
tactics,
techniques
and
procedures
that
might
be
used
against
our
systems,
as
mandated
by
our
policy
regulations.
This
includes testing by internal and external
red teams (simulating attacks by potential adversaries). Actual
security-related
events are directly correlated with threat scenarios
to monitor and detect potential threats,
such as network-intrusion
and malware-driven events.
Our deployed
security measures are
designed with
the objective of
isolating and
containing
threats that are detected to allow for effective incident response
and analysis.
CIS assessment framework
Our CIS
assessment framework
includes internal
and external
cybersecurity risk
assessments for
applications and
bank
processes alongside
a structured
risk assessment process
of third-party
service providers.
These processes
are designed,
along with our security capabilities, to support business
objectives and priorities.
We conduct
assessments to
evaluate and
test our
CIS program
and provide
guidance on
operating and
improving the
program, including
the design
and operational
effectiveness
of the
security and
resiliency of
our information
systems.
Our assessments,
along with
our threat
intelligence capabilities,
are used
to assess
and prioritize
programs to
improve
our security, our incident response capabilities and our operational resilience. As the cyber-threat landscape evolves at an
increasing pace, we
seek to enhance
our CIS controls
to meet developing
threats. We
have ongoing programs
that are
intended
to
increase
our
CIS
maturity
across
various
dimensions,
including
governance,
identification,
protection
and
detection, as well as cyberattack response and recovery,
and risk from third-party service providers.
We recognize
that we
will never
be able
to completely
eliminate the
risk of
a future
cyberattack, but,
by using
a risk-
based approach, we
work toward reducing
the likelihood of
a successful attack
and toward mitigation
of the potential
business impact of such an attack.
The BoD,
its Risk
Committee and
the EB
receive regular
presentations and
reports throughout
the year
from our
Chief
Operations and Technology Officer and our Group
CISO on internal and external CIS
developments, threats and risks. In
addition, on a quarterly basis, the BoD receives
reports on the performance of CIS risk appetite metrics, including metrics
on vulnerabilities and third-party CIS
risks and incidents, and
is notified promptly if
a Board-level CIS risk limit
is breached.
The
Risk
Committee
of
the
BoD
and
the
EB
also
receive
regular
updates
on
CIS
strategy,
risks
and
alignment
with
regulatory requirements.
›
Refer to “Crisis management framework” in the
“Regulation and supervision” section of this
report for more information about
our crisis management framework
Non-financial risk capital measurement
The non-financial risk framework underpins the calculation of regulatory capital for operational risk, which enables us to
quantify operational
risk and
define effective
risk-mitigating management
incentives as
part of
the related
operational
risk capital allocation approach to the business divisions.
In 2024, we measured
non-financial risk exposure
and calculated operational
risk regulatory capital
using the advanced
measurement
approach
(AMA)
in
accordance
with
Swiss
Financial
Market
Supervisory
Authority
(FINMA)
and
international requirements. As reported
in the UBS AG Annual
Report 2023, total operational-risk-related
risk-weighted
assets (RWA) are derived by an aggregation of the respective
AMA models of UBS and legacy Credit Suisse.
The AMA
models
are reviewed
regularly to
maintain risk
sensitivity and
recalibrated at
least annually.
Furthermore, the
models are subject to an
independent validation performed by Model Risk
Management Control in line
with our model
risk management framework.
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For model
calibration purposes,
and in
line with
regulatory expectations,
the AMA
capital model
methodology
utilizes
both historical internal losses and external losses suffered by
the broader industry. Initial model outputs driven by
the loss
history are reviewed
and adjusted to
reflect fast-changing external
developments, such as
new regulations, geopolitical
change,
volatile
market
and
economic
conditions,
and
internal
factors
(e.g.
changes
in
business
strategy
and
control
framework enhancements). The
resulting baseline
data-driven frequency and
severity distributions
are reviewed
by subject
matter
experts
and
where
necessary
adjusted
based
on
a
review
of
qualitative
information
about
the
business
environment and internal control factors, as well as expert
judgment, with the aim of forecasting losses. Any changes to
regulatory capital as a result of a
recalibration or methodology changes are
subject to FINMA approval.
The AMA was replaced by the
standardized approach for determining regulatory
capital on 1 January 2025, in
line with
the final Basel Committee on Banking Supervision (BCBS) Basel III standards.
The adoption of the standardized approach
is expected to lead to a USD 7bn decrease in operation
al risk RWA to USD 138bn from USD 145bn
under the AMA.
We
will report RWA under the
revised framework for the first time
in the first quarter of
2025, and we will provide
an update
in our first quarter 2025
report on further improvements from mitigating actions
and our dialogue with FINMA regarding
various aspects of the final Basel III rules.
›
Refer to “Capital management objectives” in the “Capital,
liquidity and funding, and balance sheet” section
of this report for
more information about the capital impacts from the adoption
of the final Basel III standards on 1 January 2025
Although the AMA capital model
is being replaced for regulatory
capital reporting activities, we will continue
to maintain
a
non-financial
risk
measurement
model,
closely
aligned
with
the
historical
UBS
AMA
calibration
and
governance
practices. The related model has been
refined and enhanced to reflect
the full risk exposures after the acquisition
of the
Credit Suisse Group and to support broader internal usage as
referenced.
Model risk
Main sources of model risk
We rely on models to inform risk
management and control decisions, to measure risks or exposures, to value
instruments
or positions, to conduct
stress testing, to assess
adequacy of capital,
and to manage
clients’ assets and our
own assets.
Models may also be used
to measure and monitor
compliance with rules and
regulations, for surveillance activities
,
and
to meet financial or regulatory reporting requirements. Our artificial intelligence (AI)-based solutions may rely on models,
and models may include functionalities defined as AI.
Model risk
is defined
as the
risk of
adverse consequences
(e.g. financial
losses or
reputational damage)
resulting from
incorrect or
misused models. AI-specific
risks are
managed in
conjunction with
other relevant risk
frameworks, and specific
guidelines for the recognition of those risks apply.
Overview of measurement, monitoring and management
techniques
Our model governance
framework establishes requirements for
identifying, measuring, monitoring, reporting,
controlling
and mitigating model risk. All
the models that we use are
subject to governance and controls throughout
their life cycles,
with rigor,
depth and
frequency determined
by the
model’s materiality
and complexity.
This is
designed to
ensure that
risks arising from model use are identified, understood, managed, monitored, controlled and
reported on both a model-
specific and an aggregated level. Before approval for use
is granted, all our models are independently validated.
Once
approved
for
use,
a
model
is
subject
to
ongoing
model
monitoring,
regular
model
confirmation
and
periodic
revalidation, ensuring that the model is only used if it continues
to be fit for purpose.
Our
model
risk
governance
framework
follows
our
overarching
risk
governance
framework
along
the
three
lines
of
defense, with: (i) the
business divisions and
Group functions (including
Risk Control, Finance
and Compliance) responsible
for
the
development,
maintenance
and
appropriate
use
of
the
models;
(ii) the
Model
Risk
Management
Control
function, headed
by the
Chief Model
Risk Officer,
responsible
for independent
review, oversight
and challenge
of the
models;
and
(iii) Internal
Audit,
responsible
for
the
assessment
of
the
design
and
operating
effectiveness
and
the
sustainability of the related processes.
Model risk is included in the firm-wide risk appetite framework.
Model
oversight
committees
and
forums
ensure
that
model
risk
is
overseen
at
different
levels
of
the
organization,
appropriate model risk management and control actions are taken and, where necessary, escalated to the next level. The
Group Model
Governance
Committee is
our most
senior oversight
and escalation
body for
all models
in scope
of our
model governance framework. It is co-chaired by the Group Chief Risk Officer and
the Group CFO and is responsible for:
(i) reviewing and approving
changes to the
framework; (ii) approving
the model risk
appetite statement;
(iii) overseeing
adherence to the UBS model risk governance framework;
and (iv) monitoring model risk at a firm-wide level.
The migration
of client
accounts and
positions to
UBS infrastructure
impacts models
to some extent.
Respective model
integration plans are defined and overseen by the Group Model Governance Committee. The legacy Credit Suisse model
inventory has been reduced by more than 50% since
June 2023, with certain legacy Credit Suisse models still being
used
until they are retired or integrated into the UBS risk management
framework.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet
88
Capital, liquidity and funding, and balance sheet
Table of contents
89
89
89
92
96
97
99
99
99
100
101
101
101
102
102
105
107
108
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
89
Capital management
Capital management objectives
Audited |
An adequate level of
common equity tier 1
(CET1) capital and total
loss-absorbing capacity (TLAC)
meeting both
internal assessment and regulatory requirements
is a prerequisite for conducting our
business activities.
We
are
therefore
committed
to
maintaining
a
strong
CET1
capital
and
TLAC
position
at
all
times,
in
order
to
meet
regulatory capital requirements and our target capital ratios,
and to support the growth of our businesses.
As of 31 December 2024, the
CET1 capital ratio was
14.9% and CET1 leverage ratio
4.8%, each above the requirements
for Swiss
systemically relevant banks
(SRBs) and
Basel Committee
on Banking
Supervision (BCBS) requirements.
We believe
that our capital strength, consistent
with our capital guidance, is a
source of confidence for our
stakeholders, contributes
to our sound credit ratings and is one of the foundations
of our success.
In
Switzerland,
the
amendments
to
the
Capital
Adequacy
Ordinance
(the
CAO)
that
incorporate
the
final
Basel III
standards
into
Swiss
law,
including
the
five
new
ordinances
that
contain
the
implementing
provisions
for
the
revised
CAO, entered into force on 1 January 2025. The adoption
of the final Basel III standards in January
2025 led to a similar
impact
on
UBS AG
consolidated
as
on
UBS
Group,
with
a
USD 1bn
increase
in
UBS AG’s
consolidated
risk-weighted
assets (RWA),
resulting in
a minimal
impact on
the CET1
capital ratio.
The USD 1bn
increase was
primarily driven
by a
USD 7bn increase in market risk RWA and a USD 3bn increase in credit valuation adjustment-related RWA resulting from
the implementation of the
Fundamental Review of the
Trading Book (the FRTB)
framework, largely offset
by a USD 7bn
reduction in operational risk RWA and a
USD 1bn reduction in credit risk RWA.
We will provide in our first quarter
2025
report
an update
on further
improvements
from
mitigating actions
and our
dialogue
with the
Swiss
Financial
Market
Supervisory Authority
(FINMA) regarding
various aspects of
the final
Basel III rules. These
changes do
not take into
account
the impact of the
output floor. The output
floor, which is being
phased in until 2028, is
currently not binding for UBS AG.
In
UBS AG’s
consolidated
leverage
ratio
denominator
(LRD),
the
adoption
led
to
a
single-digit
percentage
increase,
reducing the CET1 leverage ratio by around 10 basis points.
›
Refer to “We may be unable to maintain our capital
strength” in the “Risk factors” section of this report for
more information
about capital ratio-related risks
›
Refer to the “Regulatory and legal developments”
section of this report for more information about the incorporation
of final
Basel III standards
›
Refer to “Capital and capital ratios of our significant
regulated subsidiaries” in this section for more information
Swiss SRB total loss-absorbing capacity framework
The disclosures
in this section
are provided
for UBS AG
on a consolidated
basis and
focus on key
developments during
the reporting period and information in accordance
with the Basel III framework, as applicable to Swiss
SRBs.
Additional
regulatory
disclosures
for
UBS AG
on
a
consolidated
basis
are
provided
in
the
31 December
2024
Pillar 3
Report, available under “Pillar 3 disclosures” at
ubs.com/investors
.
Capital and other regulatory information
for UBS Group AG consolidated in
accordance with the Basel III framework,
as
applicable
to
Swiss
SRBs,
is
provided
in
the
UBS
Group
Annual
Report
2024,
available
under
“Annual
reporting”
at
ubs.com/investors
.
Merger of UBS AG and Credit Suisse AG
On 31 May
2024, the
merger of
UBS AG and
Credit Suisse AG
was completed,
with UBS AG
becoming the
sole Swiss
parent
entity,
succeeding by
operation of
Swiss law
to all
assets and
liabilities of
Credit
Suisse AG, and
becoming the
direct or indirect shareholder
of all of the former direct and indirect subsidiaries
of Credit Suisse AG. UBS has accounted
for the
acquisition as
a business
combination under
common control
accounting principles.
As part
of this
method of
accounting, the
assets and
liabilities of
Credit
Suisse AG have
been converted
from
US generally
accepted accounting
principles to IFRS Accounting Standards. Prior periods
have not been restated.
The merger of
UBS AG and Credit
Suisse AG resulted in
a USD 190.0bn increase
in RWA and a
USD 41.4bn increase
in
CET1 capital as of the date of the merger.
Regulatory framework
The Basel III framework came
into effect in Switzerland
on 1 January 2013 and
is embedded in the CAO.
The CAO also
includes the too-big-to-fail (TBTF) provisions applicable
to Swiss SRBs.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
90
Under the
Swiss SRB
framework,
going and
gone concern
requirements represent
UBS AG’s TLAC
requirement.
TLAC
encompasses regulatory capital, such
as CET1 capital,
loss-absorbing additional tier 1 (AT1)
and tier 2 capital
instruments,
and liabilities that can be written down
or converted into equity in case of resolution
or for the purpose of restructuring
measures.
Capital and other instruments contributing to total loss-absorbing
capacity
In addition to CET1 capital, the following instruments contribute
to loss-absorbing capacity:
–
loss-absorbing
AT1 capital instruments
(high and low
trigger);
–
non-Basel III-compliant tier 2 capital instruments; and
–
TLAC-eligible unsecured debt instruments.
Under
the
Swiss
SRB
rules,
going
concern
capital
includes
CET1
capital
and
high-trigger
loss-absorbing
AT1
capital
instruments.
Existing
outstanding
low-trigger
loss-absorbing
AT1
capital
instruments
are
available
to
meet
the
going
concern capital
requirements at
the UBS AG
consolidated
level, as
agreed with
FINMA, until
their first
call date.
As of
their first call date, these instruments are eligible to meet
the gone concern requirements.
Outstanding
high-
and
low-trigger
loss-absorbing
tier 2
capital
instruments,
non-Basel III-compliant
tier 2
capital
instruments and TLAC-eligible unsecured debt instruments are
eligible to meet gone concern
requirements until one year
before
maturity.
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 (i.e. are
in the last year
of eligibility). However,
once at least 75%
of
the minimum gone concern requirement has been
met with instruments that have a remaining
maturity of greater than
two years, all
instruments that have
a remaining maturity
of between one
and two years
remain eligible to be
included
in the total gone concern capital.
›
Refer to “Bondholder information”,
available at
ubs.com/investors,
and terms and conditions of capital instruments
Total loss-absorbing capacity and leverage ratio requirements
Going concern capital requirements
Under
the
Swiss
SRB
requirements,
total
going
concern
minimum
requirements
for
all
Swiss
SRBs
are
a
capital
ratio
requirement of 12.86% of RWA and a leverage ratio requirement
of 4.5%. In addition to these minimum requirements,
an add-on
reflecting the degree of
systemic importance is
applied, based on
market share and
LRD. The applicable
market
share add-on and
LRD requirements
for UBS AG were
both unchanged at
0.72% of RWA
and 0.25% of LRD,
resulting
in add-ons of 1.44% of RWA and
0.50% of LRD.
The
Swiss
countercyclical
capital
buffer,
at
a
maximum
level
of
2.5%
on
risk-weighted
positions
that
are
directly
or
indirectly backed
by residential
properties in
Switzerland, increased
the minimum
CET1 capital
requirement by
37 basis
points as
of 31 December 2024.
We also
continued to apply
countercyclical buffer requirements introduced
in other BCBS
member jurisdictions,
which
resulted in
an additional
buffer
requirement
of
15 basis points
as of
31 December
2024.
Overall,
countercyclical
capital
buffers
contributed
52 basis
points
to
the
minimum
CET1
capital
requirement
as
of
31 December 2024.
The UBS AG
going concern
requirements include
the FINMA
Pillar 2 capital
add-on of
USD 338m related
to the
supply
chain
finance
funds
matter
at
Credit
Suisse.
This
Pillar 2
capital
add-on
results
in
an
additional
CET1
capital
ratio
requirement
of 7 basis
points and
an additional
CET1 leverage
ratio requirement
of 2 basis
points as
of 31 December
2024.
The
total
going
concern
capital
requirements
applicable
are
14.89%
of
RWA
(including
countercyclical
buffer
requirements and the Pillar 2 add-on) and 5.02% of LRD. Furthermore, of the total going
concern capital requirement of
14.89% of
RWA, at
least 10.59%
must be
met with
CET1 capital,
while a
maximum of
4.3% can
be met
with high-
trigger loss-absorbing AT1
capital instruments (and
our existing outstanding
low-trigger AT1 capital
instruments, which
qualify until their first call date as mentioned above).
Similarly, of the total going
concern leverage ratio requirement of 5.02%, at least
3.52% must be met with
CET1 capital,
while
a
maximum
of
1.5%
can
be
met
with
high-trigger
loss-absorbing
AT1
capital
instruments
(and
our
existing
outstanding low-trigger AT1 capital instruments, which qualify until
their first call date as mentioned above).
Gone concern loss-absorbing capacity requirements
As an internationally active Swiss SRB, UBS AG is
also subject to gone concern loss-absorbing capacity requirements. The
gone concern requirements also include add-ons for
market share and LRD.
In
November
2022, the
Swiss
Federal
Council
adopted
amendments
to
the
Banking
Act and
the
Banking
Ordinance,
which entered into force as of 1 January 2023.
The amendments replaced the resolvability discount on the gone concern
capital
requirements
for
systemically
important
banks
(SIBs),
including
UBS,
with
reduced
base
gone
concern
capital
requirements equivalent to 75% of the
total going concern requirements (excluding countercyclical
buffer requirements
and the
Pillar 2 add-on).
In addition,
as of
July 2024,
FINMA has
the authority
to impose
a surcharge
of up
to 25%
of
the total
going concern
requirements
(excluding countercyclical
buffer requirements
and the
Pillar 2 add-on)
based on
obstacles
to
an
SIB’s
resolvability
identified
in
future
resolvability
assessments.
Our
total
gone
concern
requirements
remained substantially unchanged in 2024.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
91
Our
gone
concern
requirements
can
be
reduced
when
higher-quality
capital
instruments
(CET1
capital,
low-trigger
loss-absorbing AT1 or certain
low-trigger tier 2 capital
instruments)
are used to meet
gone concern requirements.
As of
31 December 2024, UBS did not use any higher-quality capital
instruments to fulfill gone concern requirements.
From 1 January 2022
onward, the gone
concern requirement after
the potential reduction
for the use
of higher-quality
capital instruments has been floored at 10.0% and 3.75%
for the RWA- and LRD-based requirements, respectively.
In
this
report,
we
refer
to
the
RWA-based
gone
concern
requirements
as
gone
concern
loss-absorbing
capacity
requirements and the RWA-based gone concern ratio is
referred to as the gone concern loss-absorbing capacity ratio.
The table below provides the RWA- and LRD-based requirements
and information as of 31 December 2024.
Swiss SRB going and gone concern requirements and information
As of 31.12.24
RWA
LRD
USD m, except where indicated
in %
in %
Required going concern capital
Total going concern capital
1
1
Common equity tier 1 capital
2
of which: minimum capital
of which: buffer capital
of which: countercyclical buffer
Maximum additional tier 1 capital
of which: additional tier 1 capital
of which: additional tier 1 buffer capital
Eligible going concern capital
Total going concern capital
Common equity tier 1 capital
Total loss-absorbing additional tier 1 capital
3
of which: high-trigger loss-absorbing additional tier 1 capital
of which: low-trigger loss-absorbing additional tier 1 capital
3
0.25
1,245
Required gone concern capital
Total gone concern loss-absorbing capacity
4,5,6
of which: base requirement including add-ons for market share and LRD
7
7
Eligible gone concern capital
Total gone concern loss-absorbing capacity
Total tier 2 capital
of which: non-Basel III-compliant tier 2 capital
TLAC-eligible unsecured debt
Total loss-absorbing capacity
Required total loss-absorbing capacity
Eligible total loss-absorbing capacity
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
Leverage ratio denominator
1 Includes applicable add-ons of 1.51% for risk-weighted assets (RWA) and 0.52% for leverage ratio denominator (LRD), of which 7 basis points for RWA and 2 basis points for LRD reflect the FINMA Pillar 2 capital
add-on of USD 338m related to the supply chain finance funds matter at Credit Suisse.
2 Our minimum CET1 leverage ratio requirement of 3.52% consists
of a 1.5% base requirement, a 1.5% base buffer capital
requirement, a 0.25% LRD add-on requirement, a
0.25% market share add-on requirement
based on our Swiss credit business and a
0.02% Pillar 2 capital add-on related
to the supply chain finance funds matter
at Credit Suisse.
3 Existing outstanding low-trigger additional tier 1 capital instruments qualify as going concern capital at the UBS AG consolidated level, as agreed with FINMA, until their first call date. As of their
first call date, these instruments are eligible to meet the
gone concern requirements.
4 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.
Once at least 75%
of the minimum gone
concern requirement has
been met with instruments
that have a remaining
maturity of greater than
two years, all
instruments that have
a remaining
maturity of between one and two years remain eligible to be included in the total gone concern capital.
5 From 1 January 2023, the resolvability discount
on the gone concern capital requirements for systemically
important banks (SIBs) has been replaced with reduced base gone
concern capital requirements equivalent to 75% of the total going concern requirements
(excluding countercyclical buffer requirements and the Pillar
2 add-on).
6 As of July 2024, FINMA has the
authority to impose a surcharge of up
to 25% of the total going concern capital
requirements (excluding countercyclical buffer requirements
and the Pillar 2 add-on)
should obstacles to an SIB’s resolvability be identified in future resolvability
assessments.
7 Includes applicable add-ons of 1.08% for RWA and 0.38% for LRD.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
92
Total loss-absorbing capacity
Swiss SRB going and gone concern information
USD m, except where indicated
31.12.24
31.12.23
Eligible going concern capital
Total going concern capital
Total tier 1 capital
Common equity tier 1 capital
Total loss-absorbing additional tier 1 capital
of which: high-trigger loss-absorbing additional tier 1 capital
of which: low-trigger loss-absorbing additional tier 1 capital
Eligible gone concern capital
Total gone concern loss-absorbing capacity
Total tier 2 capital
of which: non-Basel III-compliant tier 2 capital
TLAC-eligible unsecured debt
Total loss-absorbing capacity
Total loss-absorbing capacity
Risk-weighted assets / leverage ratio denominator
Risk-weighted assets
Leverage ratio denominator
Capital and loss-absorbing capacity ratios (%)
Going concern capital ratio
of which: common equity tier 1 capital ratio
Gone concern loss-absorbing capacity ratio
Total loss-absorbing capacity ratio
Leverage ratios (%)
Going concern leverage ratio
of which: common equity tier 1 leverage ratio
Gone concern leverage ratio
Total loss-absorbing capacity leverage ratio
Audited |
Reconciliation of equity under IFRS Accounting Standards to Swiss SRB common equity tier 1 capital
USD m
31.12.24
31.12.23
Total equity under IFRS Accounting Standards
Equity attributable to non-controlling interests
(
662
)
(
335
)
Defined benefit plans, net of tax
(
822
)
(
336
)
Deferred tax assets recognized for tax loss carry-forwards
(
2,288
)
(
3,004
)
Deferred tax assets for unused tax credits
(
688
)
(
97
)
Deferred tax assets on temporary differences, excess over threshold
(
1,233
)
Goodwill, net of tax
1
(
6,207
)
(
5,750
)
Intangible assets, net of tax
(
103
)
(
146
)
Expected losses on advanced internal ratings-based portfolio less provisions
(
569
)
(
532
)
Unrealized (gains) / losses from cash flow hedges, net of tax
Own credit related to (gains) / losses on financial liabilities
measured at fair value that existed at the balance sheet date, net of tax
Own credit related to (gains) / losses on derivative financial instruments
that existed at the balance sheet date
(
62
)
(
63
)
Prudential valuation adjustments
(
167
)
(
177
)
Accruals for dividends to shareholders
(
13,000
)
2
(
3,000
)
Other
(
69
)
(
39
)
Total common equity tier 1 capital
1 Includes goodwill
related to
significant investments
in financial institutions
of USD
m as
of 31
December 2024
(31 December
2023: USD
m) presented
on the balance
sheet line
Investments in
associates.
2 Reflects a proposed ordinary dividend
distribution of USD
bn and the appropriation of
USD
bn to a special
dividend reserve, both subject
to approval at the
Annual General Meeting in
the second quarter of
2025. The decision on the distribution of the special dividend is intended to be made
at an Extraordinary General Meeting in the second half of 2025, considering any proposed requirements from Switzerland’s ongoing
review of its capital regime.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
93
Total loss-absorbing capacity and movement
TLAC increased by USD 70.7bn to USD 181.8bn
as of 31 December 2024.
Going concern capital and movement
Audited |
CET1 capital mainly consists of: share capital; share premium, which primarily consists of additional paid-in capital
related to
shares issued;
and retained
earnings.
A detailed
reconciliation
of equity
under IFRS
Accounting
Standards to
CET1
capital is provided
in the
“Reconciliation of equity under IFRS
Accounting Standards to Swiss
SRB common equity
tier 1
capital” table.
CET1 capital increased by USD
bn to USD
bn as of 31 December 2024,
primarily due to the merger
of UBS AG
and Credit Suisse AG (which resulted in an increase of USD
bn as of the date of the merger), operating profit before
tax of USD
bn and an increase in eligible deferred
tax assets on temporary differences
of USD
bn. These increases
were partly offset
by dividend
accruals of USD
bn, current tax
expense of
USD
bn, and
foreign currency translation
losses of USD
bn. Accruals for dividends
to UBS Group AG of USD
bn as of
31 December 2024 reflect a proposed
ordinary
dividend
distribution
of
USD
bn
and
the
appropriation
of
USD
bn
to
a
special
dividend
reserve,
both
subject to approval at the Annual
General Meeting in the second quarter of 2025.
The decision on the distribution of the
special dividend is intended to be made at an
Extraordinary General Meeting in the second half of 2025, considering any
proposed requirements from Switzerland’s ongoing review
of its capital regime.
Loss-absorbing AT1 capital
issued by the
Group and on
lent to UBS AG
increased by USD
bn to USD
bn, mainly
driven by new
issuances of AT1
capital instruments of
USD
bn, USD
bn of AT1
capital instruments recognized
by
UBS AG upon
the merger
of UBS AG
and Credit
Suisse AG, and
positive impacts
from interest
rate risk
hedge, foreign
currency translation and other effects. These increases were partly
offset by the call of AT1
capital instruments equivalent
to USD
bn.
Following the approval of
a maximum amount of
conversion capital by UBS
Group AG’s shareholders at the 2024
Annual
General
Meeting,
AT1
capital
instruments
issued
from
the
beginning
of
the
fourth
quarter
of
2023
are,
upon
the
occurrence of a trigger event or a viability event, subject
to conversion into UBS Group AG ordinary shares rather
than a
write-down.
AT1
capital
instruments
issued
prior
to
the
fourth
quarter
of
2023 remain
subject
to
a
write-down.
The
corresponding AT1 capital instruments on lent to UBS AG
contain the same provisions.
›
Refer to “Conversion capital”
in the “Corporate Governance” section of the
UBS Group Annual Report 2024, available under
“Annual Reporting” at
ubs.com/investors
, for more information about conversion capital
Gone concern loss-absorbing capacity and movement
Audited |
Total gone concern loss-absorbing
capacity increased by USD
bn to USD
bn as of 31 December 2024 and
included USD
bn of TLAC-eligible
unsecured debt issued
by the Group and
on lent to UBS
AG.
The
increase
of
USD 37.7bn
mainly
reflected
TLAC-eligible
unsecured
debt
instruments
totaling
an
equivalent
of
USD 41.6bn recognized by UBS AG upon the
merger of UBS AG and Credit Suisse AG
and new issuances of USD 9.7bn
equivalent
of TLAC-eligible
unsecured debt
instruments.
These
increases were
partly offset
by the
call of
USD 10.3bn
equivalent of TLAC-eligible unsecured debt instruments, as well as USD 3.1bn equivalent
of unsecured debt instruments
and USD 0.3bn
tier 2
instruments ceasing
to be
eligible
as gone
concern capital
as they
entered
the final
year before
maturity.
Loss-absorbing capacity and leverage ratios
Our CET1 capital
ratio increased
to 14.9% from
13.2%, reflecting
a USD 29.7bn
increase in
CET1 capital, partly
offset
by a USD 161.1bn increase in RWA
.
Our CET1 leverage ratio increased to 4.8% from 4.0%, due to the aforementioned increase in CET1 capital,
partly offset
by a USD 418.9bn increase in the LRD.
Our going
concern
capital
ratio
increased
to
18.1%
from
17.0%,
reflecting
a
USD 33.0bn
increase
in
going
concern
capital, partly offset by a USD 161.1bn increase in RWA.
Our going concern
leverage ratio
increased to 5.9%
from 5.1%, due
to the aforementioned
increase in going
concern
capital, partly offset by a USD 418.9bn increase in the LRD.
Our gone
concern loss-absorbing
capacity ratio
increased to
18.6% from
16.3%, due
to an
increase in
gone concern
loss-absorbing capacity of USD 37.7bn, partly offset by the
aforementioned increase in RWA.
Our gone concern leverage ratio increased to
6.1% from 4.9%, driven by the aforementioned
increase in gone concern
loss-absorbing capacity, partly offset by the increase in the
LRD.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
94
Swiss SRB total loss-absorbing capacity movement
USD m
Going concern capital
Swiss SRB
Common equity tier 1 capital as of 31.12.23
Operating profit / (loss) before tax
Current tax (expense) / benefit
Foreign currency translation effects, before tax
Eligible deferred tax assets on temporary differences
CET1 capital taken over from Credit Suisse AG consolidated as of the date of the merger
Accruals for proposed dividends to shareholders
1
Other
Common equity tier 1 capital as of 31.12.24
Loss-absorbing additional tier 1 capital as of 31.12.23
Issuance of high-trigger loss-absorbing additional tier 1 capital
Call of high-trigger loss-absorbing additional tier 1 capital
Instruments recognized by UBS AG upon the merger of UBS AG and Credit
Suisse AG
Interest rate risk hedge, foreign currency translation and other effects
Loss-absorbing additional tier 1 capital as of 31.12.24
Total going concern capital as of 31.12.23
Total going concern capital as of 31.12.24
Gone concern loss-absorbing capacity
Tier 2 capital as of 31.12.23
Debt no longer eligible as gone concern loss-absorbing capacity
due to residual tenor falling to below one year
Interest rate risk hedge, foreign currency translation and other effects
Tier 2 capital as of 31.12.24
TLAC-eligible unsecured debt as of 31.12.23
Issuance of TLAC-eligible unsecured debt
Call of TLAC-eligible unsecured debt
Debt no longer eligible as gone concern loss-absorbing capacity
due to residual tenor falling to below one year
Instruments recognized by UBS AG upon the merger of UBS AG and Credit
Suisse AG
Interest rate risk hedge, foreign currency translation and other effects
TLAC-eligible unsecured debt as of 31.12.24
Total gone concern loss-absorbing capacity as of 31.12.23
Total gone concern loss-absorbing capacity as of 31.12.24
Total loss-absorbing capacity
Total loss-absorbing capacity as of 31.12.23
Total loss-absorbing capacity as of 31.12.24
1 Reflects a proposed ordinary dividend distribution
of USD 6.5bn and the appropriation of USD 6.5bn
to a special dividend reserve, both
subject to approval at the Annual General
Meeting in the second quarter of
2025. The
decision on the
distribution of the
special dividend is
intended to be
made at an
Extraordinary General
Meeting in
the second half
of 2025, considering
any proposed requirements
from Switzerland’s
ongoing review of its capital regime.
Additional information
Active management of sensitivity to foreign exchange movements
Group
Treasury
is mandated
to
minimize
adverse
effects
from
changes
in
foreign
currency
rates
on our
CET1
capital
and / or CET1 capital
ratio of UBS AG
consolidated.
A significant portion
of our CET1
capital and RWA
is denominated
in Swiss francs, euro, pounds
sterling and other currencies.
In order to hedge the CET1
capital ratio, CET1 capital needs
to have foreign currency exposure,
leading to foreign currency
rates sensitivity of CET1 capital.
Consequently,
it is not possible to simultaneously
fully hedge CET1 capital and the
CET1 capital ratio. As the proportion
of
RWA
denominated
in
currencies
other
than
the
US
dollar
outweighs
CET1
capital
in
such
currencies,
a
significant
appreciation of the
US dollar against
such currencies could
benefit our capital
ratios, while a
significant depreciation
of
the US dollar against these currencies could adversely affect
our capital ratios.
The UBS AG Asset
and Liability Committee
has mandated Group
Treasury to adjust
the currency
mix of CET1
capital of
UBS AG consolidated,
within limits set by
the Board of
Directors, to balance
the effect of
foreign exchange movements
on CET1 capital and
the CET1 capital ratio. Limits
are in place for
the sensitivity of both CET1
capital and the CET1 capital
ratio to an appreciation or depreciation of 10% in the value
of the US dollar against other currencies.
Sensitivity to currency movements
Risk-weighted assets
We
estimate
that
a
10%
depreciation
of
the
US
dollar
against
other
currencies
would
have
increased
our
RWA
by
USD 21bn and our CET1 capital by USD 2.6bn as of 31 December 2024 (31 December 2023: USD 15bn and USD 1.5bn,
respectively) and decreased our CET1 capital
ratio by 11 basis points (31 December 2023: 12 basis points).
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
95
Conversely, a 10%
appreciation of the
US dollar against
other currencies would
have decreased our
RWA by USD 19bn
and our
CET1 capital
by USD 2.3bn
(31 December
2023: USD 13bn
and USD 1.4bn,
respectively) and
increased our
CET1 capital ratio by 11 basis points (31 December 2023:
12 basis points).
Leverage ratio denominator
Our leverage ratio is also sensitive to
foreign exchange movements as a result of the currency mix of our capital
and LRD.
When adjusting the currency mix in capital,
potential effects on the going concern leverage
ratio are taken into account
and the sensitivity of the
going concern leverage ratio to
an appreciation or depreciation
of 10% in the value
of the US
dollar against other currencies is actively monitored.
We
estimate
that
a
10%
depreciation
of
the
US
dollar
against
other
currencies
would
have
increased
our
LRD
by
USD 97bn as of 31 December
2024 (31 December 2023: USD 69bn)
and decreased our CET1 leverage
ratio by 13 basis
points (31
December 2023:
10 basis points).
Conversely, a
10% appreciation
of the
US dollar
against other
currencies
would have decreased our
LRD by USD 88bn (31
December 2023: USD 62bn)
and increased our
CET1 leverage ratio by
13 basis points (31 December 2023: 11 basis points).
The aforementioned sensitivities
do not
consider foreign currency
translation effects related
to defined
benefit plans other
than those related to the currency translation of the net
equity of foreign operations.
Capital and capital ratios of our significant regulated
subsidiaries
UBS AG has contributed a
significant portion of capital
to, and provided
substantial liquidity to its
subsidiaries. Many of
these
subsidiaries
are
subject
to
regulations
requiring
compliance
with
minimum
capital,
liquidity
and
similar
requirements. Regulatory capital components
and capital ratios
of our
significant regulated subsidiaries
determined under
the regulatory framework of each subsidiary’s home jurisdiction are provided in the “Financial and regulatory key figures
for our significant regulated subsidiaries and
sub-groups” section of the UBS Group Annual
Report 2024, available under
“Annual
reporting”
at
ubs.com/investors
.
Supervisory
authorities
generally
have
discretion
to
impose
higher
requirements,
or
to
otherwise
limit
the
activities
of
subsidiaries.
Supervisory
authorities
also
may
require
entities
to
measure capital and leverage
ratios on a stressed basis and
may limit the ability of the
entity to engage in new activities
or take capital actions based on the results of those tests.
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors
,
for more capital and
other regulatory information about our significant regulated
subsidiaries and sub-groups
Joint liability of UBS AG and UBS Switzerland AG
In June
2015, upon the
transfer of the
Personal Corporate
Banking and Global
Wealth Management businesses booked
in
Switzerland
from
UBS AG
to
UBS
Switzerland AG,
UBS AG
and
UBS
Switzerland AG
assumed
joint
liability
for
obligations
transferred
to UBS
Switzerland AG
and
existing
at
UBS AG,
respectively.
Under
certain
circumstances,
the
Swiss
Banking
Act
and
FINMA’s
Banking
Insolvency
Ordinance
authorize
FINMA
to
modify,
extinguish
or
convert
to
common equity liabilities of a bank in connection with a reso
lution or insolvency of such bank.
The joint liability amounts have declined
as obligations matured, terminated or were novated following
the transfer date.
As
of
31 December
2024,
the
liability
of
UBS
Switzerland AG
amounted
to
CHF 2.4bn
(USD 2.6bn),
a
decrease
of
CHF 0.4bn
(USD 0.7bn)
compared
with
31 December
2023.
The
respective
liability
of
UBS AG
has
been
substantially
extinguished.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
96
Risk-weighted assets
RWA development in 2024
During 2024, RWA increased by USD 161.1bn to USD 495.1bn, predominantly due to the merger of UBS AG and Credit
Suisse AG, which
resulted in
a USD 190.0bn
increase in
RWA. Excluding
that merger,
RWA decreased
by USD 28.9bn,
primarily driven
by decreases
of USD 23.3bn
due to
asset size
and other
movements and
USD 10.2bn due
to currency
effects, partly offset by an increase
of USD 4.6bn due to model updates and methodology changes.
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors
, for more information
about RWA movements and definitions of RWA movement key drivers on a UBS Group AG
consolidated basis
Movement in risk-weighted assets, by key driver
USD bn
RWA as of
31.12.23
Currency
effects
Model updates
and
methodology
changes
Asset size and
other
1
Merger of UBS
AG and Credit
Suisse AG on
30.6.24
2
RWA as of
31.12.24
Credit and counterparty credit risk
3
Non-counterparty-related risk
4
Market risk
Operational risk
Total
1 Includes the
Pillar 3 categories
“Asset size”,
“Credit quality of counterparties”,
“Acquisitions and
disposals” and “Other”.
For more information,
refer to the
31 December 2024
Pillar 3 Report, available
under
“Pillar 3 disclosures” at ubs.com/investors.
2 Reflects the RWA acquired as
part of the merger of UBS
AG and Credit Suisse AG
as reported in the UBS
AG second quarter 2024 report,
available under “Quarterly
reporting” at ubs.com/investors. Subsequent changes in
this portfolio in the
second half of 2024
are shown under currency
effects, model updates and methodology changes
or asset size and
other changes.
3 Includes
settlement risk, credit valuation adjustments, equity and investments in funds exposures in the banking book, and securitization exposures in the banking book.
4 Non-counterparty-related risk includes deferred tax
assets recognized for temporary differences, property,
equipment, software and other items.
Credit and counterparty credit risk
Credit and counterparty credit risk RWA increased by USD 72.2bn to USD 292.3bn as of 31 December 2024, mainly due
to the
merger
of UBS AG
and Credit
Suisse AG,
which resulted
in a
USD 115.2bn
increase
in credit
and counterparty
credit
risk
RWA.
Excluding
that
merger,
RWA
decreased
by
USD 43.0bn,
primarily
driven
by
asset
size
and
other
movements of USD 26.6bn, currency effects of USD 9.8bn and model updates and methodology changes of
USD 6.6bn.
Asset size
and other
movements
decreased
RWA
by USD
26.6bn,
mainly
due
to lower
RWA in
Non-core
and
Legacy,
primarily driven by our actions to actively unwind the portfolio, in addition
to the natural roll-off, and, to a lesser extent,
due to
lower RWA
from loans
and loan
commitments across
Personal
Corporate Banking,
the Investment
Bank and
Global Wealth Management, as well as reductions of RWA
in Group Treasury.
Model updates
and methodology
changes resulted
in an
RWA decrease
of USD 6.6bn,
mainly due
to the
phase-out of
certain multipliers following improvements to models.
›
Refer to “Credit risk” in the “Risk management and
control” section of this report for more information about
credit and
counterparty credit risk developments
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors,
about credit and counterparty credit risk developments on a UBS
Group AG consolidated basis
Market risk
Market risk
RWA increased
by USD 12.5bn
to USD 27.2bn
as of 31
December 2024,
primarily driven
by an increase
of
USD 6.5bn from the
FINMA-approved integration
of time decay
into regulatory value
-at-risk (VaR)
and stressed
VaR for
derivatives with optionality, which was partly
offset by an improvement in
the profit and loss
representation of derivatives
with multiple underlying in the first quarter of 2024,
as well as from the capital buffer newly introduced by FINMA in the
third quarter of
2024 to capitalize potential
maturity mismatches between
positions and hedges
in the incremental
risk
charge.
The
merger
of
UBS AG
and
Credit
Suisse AG
resulted
in
a
USD 4.1bn
increase
in
market
risk
RWA.
Further
increases
in
market
risk
RWA
were
due
to
increases
in
asset
size
and
other
movements
of
USD 1.9bn,
mainly
in
the
Investment Bank.
›
Refer to “Market risk” in the “Risk management
and control” section of this report for more information about
market risk
developments
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors,
about market risk developments on a UBS Group AG
consolidated basis
Operational risk
Operational risk
RWA
increased
by USD
68.9bn to
USD 145.4bn
as of
31 December
2024 primarily
as a
result
of the
merger of
UBS AG and
Credit
Suisse AG, which
resulted
in a
USD 64.2bn increase
in operational
risk RWA.
Excluding
that
merger,
RWA
increased
by USD
4.8bn,
driven by
a
recalibration
of the
advanced
measurement
approach
(AMA)
used for the calculation of operational risk capital. In addition,
in the first quarter of 2024, we updated the
methodology
that we use to allocate operational risk RWA
to the business divisions and Group Items.
›
Refer to “Non-financial risk capital measurement” in the
“Risk management and control” section of this
report for more
information about the AMA, which has been
used to measure operational risk exposure and calculate
operational risk regulatory
capital
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
97
Risk-weighted assets, by business division and Group Items
1
USD bn
Global Wealth
Management
Personal
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Non-core and
Legacy
Group
Items
Total
RWA
31.12.24
Credit and counterparty credit risk
2
Non-counterparty-related risk
3
Market risk
Operational risk
Total
31.12.23
Credit and counterparty credit risk
2
Non-counterparty-related risk
3
Market risk
Operational risk
Total
31.12.24 vs 31.12.23
Credit and counterparty credit risk
2
Non-counterparty-related risk
3
Market risk
Operational risk
Total
1 From the first quarter of 2024 onward, we
have started to further push out risk-weighted assets
from Group Items to the business divisions. Prior periods have
been restated to reflect these changes. Refer to “Note 3
Segment reporting” in the “Consolidated financial
statements” section of this report for more
information about the realignment of the
business divisions.
2 Includes settlement risk, credit valuation
adjustments,
equity and investments in funds exposures in the banking
book, and securitization exposures in the banking book.
3 Non-counterparty-related risk includes deferred tax assets recognized for
temporary differences
(31 December 2024: USD 17.9bn; 31 December 2023: USD 11.3bn), as well as property, equipment, software
and other items (31 December 2024: USD 12.2bn; 31 December 2023: USD 11.4bn).
Leverage ratio denominator
During 2024, the
LRD increased
by USD 418.9bn
to USD 1,523.3bn,
predominantly due
to the merger
of UBS AG and
Credit Suisse
AG, which
resulted
in a
USD 516.4bn
increase
in the
LRD. Excluding
that merger,
the LRD
decreased
by
USD 97.5bn,
driven by currency effects of USD 49.9bn
and asset size and other movements of USD 47.6bn.
Movement in leverage ratio denominator, by key driver
USD bn
LRD as of
31.12.23
Currency
effects
Asset size and
other
Merger of UBS
AG and Credit
Suisse AG on
30.6.24
1
LRD as of
31.12.24
On-balance sheet exposures (excluding derivatives and securities
financing transactions)
2
Derivatives
2
Securities financing transactions
Off-balance sheet items
Deduction items
Total
1 Reflects the LRD
acquired as part of
the merger of UBS
AG and Credit
Suisse AG as
reported in the UBS
AG second quarter
2024 report, available
under “Quarterly reporting”
at ubs.com/investors.
Subsequent
changes in this
portfolio in the
second half of
2024 are shown
under currency effects,
model updates and
methodology changes
or asset size
and other changes.
2 Prior to the
fourth quarter of
2024, certain
exposures related to derivative cash collateral
were included in On-balance sheet exposures.
From the fourth quarter of
2024 onward, we have refined
the approach to include these exposures
in Derivatives, which
had no bottom-line impact on total LRD. The comparative period has not been
restated.
The LRD movements described below exclude currency
effects and the impact of the merger.
On-balance
sheet
exposures
(excluding
derivatives
and
securities
financing
transactions)
decreased
by
USD 81.0bn,
reflecting a decrease in cash and balances at central banks, mainly due to repayment of funding from the Swiss National
Bank, as
well as
a decrease
in
lending balances
due to
negative
net new
loans
in
Personal
Corporate
Banking and
Global Wealth
Management. There
were also
decreases in
trading portfolio
assets due
to unwinding
activities in
Non-
core
and
Legacy
and
financial
assets
reflecting
maturities
of
the
high-quality
liquid
asset
portfolio
securities.
These
decreases
were
partly offset
by an
increase
in trading
portfolio assets
driven by
higher
inventory held
to hedge
client
positions in the Investment Bank.
Derivative exposures increased by USD 18.0bn mainly
due to market-driven movements on foreign currency
contracts in
the Investment Bank, partly offset by lower trading
volumes in Non-core and Legacy.
Securities financing transactions increased by USD 16.5bn,
mainly reflecting higher cash reinvestment in Group
Treasury
and brokerage receivables reflecting
increases in client activity levels.
Off-balance sheet items decreased
by USD 2.1bn, mainly driven by lower commitments.
›
Refer to “Balance sheet and off-balance sheet” in this
section for more information about balance sheet
movements
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Capital management
98
Leverage ratio denominator, by business division and Group Items
1
USD bn
Global Wealth
Management
Personal
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
Group Items
Total
31.12.24
On-balance sheet exposures
2
Derivatives
2
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
Total
31.12.23
On-balance sheet exposures
2
Derivatives
2
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
Total
31.12.24 vs 31.12.23
On-balance sheet exposures
Derivatives
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
Total
1 From the first
quarter of 2024
onward, we have
started to further push
out LRD from Group
Items to the business
divisions. Prior
periods have been
restated to reflect these
changes. Refer to
“Note 3 Segment
reporting” in the “Consolidated financial statements” section of
this report for more information about the realignment
of the business divisions.
2 Prior to the fourth quarter of 2024,
certain exposures related to
derivative cash collateral were
included in On-balance sheet
exposures. From the
fourth quarter of 2024
onward, we have refined
the approach to include
these exposures in Derivatives,
which had no bottom-line
impact on total LRD. The comparative period has not been restated.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Liquidity and funding management
99
Liquidity and funding management
We
manage the
structural risks
of our
balance sheet,
including interest
rate
risk, structural
foreign
exchange
risk and
collateral risk,
as well
as liquidity
and funding
risk. This
section provides information
about liquidity
and funding
regulatory
requirements,
governance, management
(including sources
of liquidity
and funding),
contingency planning,
and stress
testing.
The
balances
disclosed
in
this
section
represent
year-end
positions,
unless
indicated
otherwise.
Intra-period
balances fluctuate in the ordinary course of business
and may differ from year-end positions.
Following the completion of the merger of UBS AG and Credit Suisse AG in May 2024, Credit Suisse AG became part of
the overall liquidity and funding management of UBS AG.
Strategy, objectives and governance
Audited |
and regulatory liquidity
and funding requirements
are prudently managed.
We measure liquidity
and funding risk using
internal
and
regulatory
models
and
metrics.
We
define
and
implement
internal
stress
testing
across
different
time
horizons, scenarios
and currencies
to ensure
we have
sufficient liquidity
and funding,
while remaining
compliant
with
regulatory
liquidity
and
funding
requirements.
Our
liquidity
and
funding
strategy
is
proposed
by
Group
Treasury
and
approved by the Asset and Liability Committee (the ALCO) of UBS AG, which is a committee
of the Executive Board (the
EB) that is overseen by the Risk Committee of the Board
of Directors (the BoD).
Liquidity
and funding
limits
and other
indicators
(including
early-warning
indicators)
are
set
at UBS AG
(consolidated)
and, where appropriate, at legal entity and business-division levels. Key limits (which are under the authority of the BoD)
and indicators linked to these
limits are reviewed and reconfirmed at
least once a year by the BoD
of UBS AG, the EB of
UBS AG, the ALCO of UBS AG and the Group Treasurer, taking into consideration the
Group’s business strategy and risk
appetite. Treasury
Risk Control
provides independent
oversight over
liquidity and
funding risk,
including the
setting of
key internal limits and early-warning indicators associated
with these limits.
›
Refer to the “Corporate governance”
and “Risk management and control” sections of
this report for more information
Group
Treasury
monitors
and
oversees
the
implementation
and
execution
of
our
liquidity
and
funding
strategy
and
manages liquidity
and funding
risk within
the limits
and other
relevant indicators,
thereby adhering
to the
internal risk
appetite and regulatory requirements. This includes the management of both our
cash and non-cash collateral, including
our high-quality liquid assets (HQLA),
and centralizes the Group’s access
to wholesale funding markets in Group
Treasury.
To
complement
our
business-as-usual
management,
Group
Treasury
maintains
a
Contingency
Funding
Plan
and
contributes to plans for recovery and resolution,
defining crisis management processes throughout the crisis
continuum.
Group Treasury
reports on
the liquidity
and funding
status and
position, at
least monthly,
to the
ALCO of
UBS AG and
the Risk Committee of the BoD.
Liquidity and funding stress testing
Audited |
three-month
idiosyncratic
and
market-wide
liquidity
stress
event
and
to
ensure
that
the
firm
has
sufficient
long-term
funding to
maintain franchise
assets at
a constant
level under
stressed
market
conditions
for up
to one
year,
in both
cases without government support and allowing for discrete
management actions.
Group Treasury maintains a
diversified, high-quality pool of
unencumbered liquid assets under
Treasury control. The liquid
asset portfolio is
managed dynamically,
so as to
operate at
all times within
the internal
risk appetite and
other relevant
Group, UBS AG and subsidiary liquidity and funding requirements.
Our liquidity
and funding
stress testing
has been
further refined
to cover
three main
stress scenarios:
a combined
(i.e.
market and idiosyncratic) scenario, an idiosyncratic scenario, and
a structural market-wide scenario.
›
Refer to “Risk measurement” in the “Risk management
and control” section of this report for more information about
stress
testing
Combined (market and idiosyncratic) scenario
In
this
scenario,
UBS
faces
the
consequences
of
both
a
severely
deteriorated
macroeconomic
and
financial
market
environment and
a UBS-specific
event, resulting
in an
acute loss
of liquidity
over a
relatively short
period of
time. This
scenario represents
severe
yet plausible
events encompassing
both
market-wide
and idiosyncratic
elements,
in which,
however,
franchise client relationships are materially maintained.
UBS ensures
that its
liquidity risk
appetite objective
is met
by maintaining
a cumulative
liquidity surplus
on each
day in
the three-month stress horizon.
The liquidity gap is
assessed by modeling the
stressed liquidity value of
the liquidity buffer
and stressed liquidity inflows and outflows under the scenario.
Idiosyncratic scenario
In this three
-month stress
scenario, UBS is
subject to a
significant and
unforeseen event
specific to UBS.
This materially
damages the market’s
perception of the
reputation and
creditworthiness of
UBS. The event
occurs in otherwise
benign
macroeconomic and financial market conditions. UBS’s difficulties throughout the
scenario are limited to UBS
and do not
trigger material market moves.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Liquidity and funding management
100
Structural market-wide scenario
In this scenario, UBS is subject
to a significant deterioration of macroeconomic
and financial market conditions
globally.
Macroeconomic shocks
result in
deteriorated financial
market conditions
over the
scenario horizon
of one
year.
UBS is
assumed to be affected equally relative
to other global financial institutions.
UBS ensures that
its funding risk
appetite objective
is met by
maintaining a
positive cumulative
behavioral liquidity
gap
across the
3-month,
6-month,
9-month
and
12-month
tenors.
The
liquidity
gap
is assessed
by
modeling
the
stressed
liquidity value of the liquidity buffer and the stressed liquidity inflows
and outflows under the scenario.
Management of liquidity and funding risk
Audited
|
maintains
a
well-balanced
and
diversified
liability
structure.
Group
Treasury
also
looks
to
create
the
optimal
liability
structure to finance our businesses
in a reliable and
cost-efficient manner. Our funding activities are planned by
analyzing
the overall liquidity and funding requirements,
taking into account the amount
of stable funding that would
be needed
to support ongoing business activities through periods
of difficult market conditions.
The funding
strategy of
UBS AG is
set annually
in the
Funding Plan
and is
reviewed on
an ongoing
basis. The
Funding
Plan is developed by Group Treasury and approved by the
ALCO of UBS AG.
›
Refer to “Balance sheet and off-balance sheet” in this
section for more information about the development
of our short- and
long-term debt during 2024
Global Wealth Management
and Personal
Corporate
Banking provide
significant, cost-efficient
and stable
sources of
funding. These include deposits
and debt issued through the
Swiss central mortgage institutions and
UBS’s covered bond
programs,
which use a
portion of our
portfolio of Swiss
residential mortgages as
collateral to generate
long-term funding.
In addition,
we have
several short-,
medium- and
long-term funding
programs under
which we
issue senior unsecured
debt and structured
notes, as well
as short-term debt.
These programs enable
UBS to source
funding from institutional
and private
investors who are
active in
Europe, the
US and Asia
Pacific. Collectively,
these broad
product offerings
and
funding sources, together with the global scope of our business activities,
support our funding stability.
Internal funding and funds transfer pricing
We use our
global liquidity and funding
framework to govern the
liquidity management of our
branches and subsidiaries.
Group Treasury
meets internal demands for funding
by channeling funds from
entities generating surplus cash to
those
in need of financing, except in circumstances where
transfer restrictions exist.
Funding costs and benefits
are allocated to our
business divisions according to
our liquidity and
funding risk management
framework. Our internal funds transfer pricing system aims to
balance funding supply and demand.
Credit ratings
Credit ratings
can affect
the cost and
availability of
funding, especially from
wholesale unsecured
sources. UBS’s
credit
ratings can
also influence
the performance of
some of
our businesses
and the
levels of
client and
counterparty confidence.
Rating agencies
take into
account a
range of
factors when
assessing creditworthiness
and setting
credit ratings.
These
include
the
company’s
strategy,
its
business
position
and
franchise
value,
stability
and
quality
of
earnings,
capital
adequacy,
risk
profile
and
management,
liquidity
management,
diversification
of
funding
sources,
asset
quality,
and
corporate governance. Credit ratings reflect the
opinions of the rating agencies and can change at any time.
In evaluating
our liquidity
and funding
requirements, we
consider the
potential effect
of a
reduction in
our long-term
credit ratings
and a
corresponding reduction
in short-term
ratings. If
our credit
ratings were
to be
downgraded, rating
trigger clauses could result in an immediate cash settlement or the
need to deliver additional collateral to counterparties
from contractual obligations
related to over-the-counter
(OTC) derivative
positions and other
obligations. Based
on our
credit ratings as of 31 December 2024, in the event of a one-notch reduction in our long-term credit
ratings of UBS AG,
UBS Europe SE, UBS Switzerland AG
and Credit Suisse International,
we would have been required to provide USD 0.0bn
in cash or
other collateral. In
the event of
a two-notch reduction,
it would have
been USD 0.3bn and
for a three-notch
downgrade, USD 1.1bn. In
the two- and three-notch
scenarios the collateral
requirements predominantly relate
to OTC
derivative positions.
During 2024, Moody’s upgraded the long-term senior unsecured
debt ratings of UBS AG to Aa2 from Aa3.
›
Refer to “Liquidity and funding management are critical
to UBS AG’s ongoing performance” in the “Risk factors” section of this
report for more information
Contingency Funding Plan
Audited
|
sufficient liquidity to meet
payment obligations in a
liquidity and funding stress scenario.
The plan specifies the
processes,
tools and responsibilities
that we have
available to effectively
manage liquidity and
funding through
these periods. Our
funding
diversification
and
global
scope
help
to
protect
our
liquidity
position
in
the
event
of
a
crisis. Our
contingent
funding sources include our HQLA portfolios, available
Central Bank eligible non-HQLA collateral for liquidity
facilities at
several
major
central
banks,
contingent
reductions
of
trading
portfolio
assets,
and
other
actions
available
to
management.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Liquidity and funding management
101
Liquidity coverage ratio
The liquidity coverage ratio (the LCR) measures the short-term resilience of
a bank’s liquidity profile by assessing whether
sufficient HQLA are
available to meet
expected net cash
outflows from
a significant liquidity
stress scenario,
as defined
by the relevant regulator.
For UBS AG, HQLA
are low-risk unencumbered assets
under the control
of Group Treasury
that are easily
and immediately
convertible into
cash at
little or
no loss
of value,
in order
to meet
liquidity needs.
Our HQLA
predominantly consist
of
assets that qualify as Level 1 in the LCR framework, including
cash, central bank reserves and government bonds.
HQLA
are held by UBS AG and its subsidiaries and
may include amounts that are available to meet funding
and collateral needs
in
certain
jurisdictions
but
are
not
readily
available
for
use
by
UBS AG
consolidated
as
a
whole.
These
limitations
are
typically the result of local regulatory requirements,
including local LCR and large exposure requirements.
Funds that are
effectively restricted
in subsidiaries
and branches
are excluded
from the
calculation of
UBS AG consolidated
HQLA. On
this basis, USD 56.3bn of assets were excluded from
our daily average UBS AG consolidated HQLA for the fourth
quarter
of 2024.
Amounts held
in excess
of local
liquidity requirements
that are
not subject
to other
restrictions are
generally
available for transfer within UBS AG consolidated.
Basel Committee on
Banking Supervision (BCBS) standards
require an LCR
of at least
100%. In a
period of financial stress,
the Swiss
Financial Market
Supervisory Authority
(FINMA) may
permit banks
to use
their HQLA
and allow
their LCR
to
temporarily fall below
the minimum threshold.
We monitor the
LCR in all
significant currencies in
order to manage
any
currency mismatches between HQLA and the net expected
cash outflows in times of stress.
Our daily average LCR
of UBS AG consolidated
for the fourth quarter
of 2024 was 186.1%,
compared with 189.7%
in
the fourth quarter of 2023.
The HQLA
of UBS AG consolidated
for the
fourth quarter of
2024 increased by
USD 77.1bn to USD 331.6bn,
substantially
related to
the merger
of UBS AG
and Credit
Suisse AG,
partly offset
by a
reduction of
HQLA following
an increase
in
non-HQLA-related securities
financing transactions,
lower cash
available from
additional funding
of trading assets
,
and
higher margin requirements. The net cash outflows of UBS
AG consolidated for the fourth quarter of 2024 increased by
USD 43.9bn to USD 178.2bn, mainly due to
higher outflows from customer deposits as
a result of the merger
of UBS AG
and Credit Suisse AG.
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors,
for more information
about the LCR on a UBS Group AG consolidated
basis
Liquidity coverage ratio
USD bn, except where indicated
Average 4Q24
1
Average 4Q23
1
High-quality liquid assets
331.6
254.5
Total net cash outflows
2
178.2
134.3
Liquidity coverage ratio (%)
3
186.1
189.7
1 Calculated based on an average of 64 data points in the fourth quarter of 2024 and 63 data
points in the fourth quarter of 2023.
2 Represents the net cash outflows expected over a stress period of 30 calendar
days.
3 Calculated after the application of haircuts and inflow and outflow rates, as well as,
where applicable, caps on Level 2 assets and cash inflows.
Too-big-to-fail liquidity requirements
The too-big-to-fail (TBTF)
liquidity requirements communicated
by FINMA in the
third quarter of
2023 became effective
on
1 January
2024.
The
affected
legal
entities
of
UBS AG
consolidated
were
compliant
with
these
requirements
throughout 2024.
Net stable funding ratio
The net stable funding ratio
(the NSFR) framework is intended
to limit overreliance on
short-term wholesale funding, to
encourage a better
assessment of funding
risk across all
on-
and off-balance sheet
items and
to promote funding
stability.
The
NSFR
has
two
components:
available
stable
funding
(ASF),
as
numerator,
and
required
stable
funding
(RSF),
as
denominator.
ASF is
the portion
of capital
and liabilities
expected to
be available
over the
period of
one year.
RSF is
a
measure of the stable funding requirement
of assets based on their maturity,
encumbrance and other characteristics, as
well as the
potential for contingent
calls on funding
liquidity from off-balance sheet exposures.
The BCBS NSFR
regulatory
framework requires a ratio of at
least 100%.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Liquidity and funding management
102
As of 31 December 2024, the NSFR of UBS AG consolidated
increased 4.5 percentage points to 124.1%.
Available stable funding increased by USD 244.4bn to
USD 847.0bn, predominantly driven by the contribution
of Credit
Suisse after the merger, mainly reflecting deposit balances,
regulatory capital and debt issued.
Required stable funding increased by USD
178.7bn to USD 682.5bn, predominantly driven
by the contribution of Credit
Suisse after the merger, substantially reflecting lending assets.
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors,
for more information
about the NSFR on a UBS Group AG consolidated
basis
Net stable funding ratio
USD bn, except where indicated
31.12.24
31.12.23
Available stable funding (ASF)
847.0
602.6
Required stable funding (RSF)
682.5
503.8
Net stable funding ratio (%)
124.1
119.6
Balance sheet and off-balance sheet
Balance sheet
The
balances
disclosed
in
this
section
represent
year-end
positions,
unless
indicated
otherwise.
Intra-period
balances
fluctuate in the ordinary course of business and may differ from year
-end positions. Refer to the “Consolidated financial
statements”
section of this report for more information about the development of UBS AG’s financial position. For more
information about
the effects
of the
merger of
UBS AG
and Credit
Suisse AG
on the
balance sheet,
refer
to “Note
2
Accounting for the merger of
UBS AG and Credit Suisse
AG” in the “Consolidated financial
statements” section of this
report.
Balance sheet assets
Total
assets were USD 1,568.1bn
as of 31 December
2024. The increase
of USD 412.1bn compared
with 31 December
2023 was primarily
related to the merger
of UBS AG and
Credit Suisse AG, which
contributed USD 489.3bn in May
2024.
Cash
and
balances
at
central
banks
increased
by
USD 51.5bn,
mainly
reflecting
the
aforementioned
merger,
which
contributed USD 114.8bn in
May 2024. Excluding
the effects of
the merger, cash
and balances at
central banks decreased
by USD 63.3bn,
mainly due
to net
investments in
securities financing
transactions at
amortized cost,
the repayment
of
funding from the Swiss National
Bank (the SNB) and currency
effects,
partly offset by inflows from
the disposal of high-
quality liquid asset (HQLA) portfolio securities.
Lending
assets
increased
by
USD 171.7bn,
predominantly
reflecting
the
aforementioned
merger,
which
contributed
USD 229.8bn
in
May
2024.
Excluding
the
effects
of
the
merger,
lending
assets
decreased
by
USD 58.1bn,
primarily
reflecting currency effects and
negative net new loans
in Personal Corporate
Banking and Global Wealth
Management.
Securities
financing
transactions
at
amortized
cost
increased
by
USD 44.2bn
to
USD 118.3bn,
reflecting
the
aforementioned
merger,
which
added
USD 28.4bn
in
May
2024.
Excluding
the
effects
of
the
merger,
there
was
an
increase of USD 15.8bn, mainly reflecting higher cash reinvestment
in Group Treasury.
Trading assets increased by USD 24.1bn, mainly driven by the aforementioned merger, which contributed USD 15.5bn in
May 2024, with the remaining increase of USD 8.6bn reflecting a higher inventory held in the Investment Bank to hedge
client positions.
Derivatives and
cash collateral
receivables on
derivative instruments
increased by
USD 66.4bn, mainly
as a
result of
the
aforementioned merger, which contributed USD 42.3bn
in May 2024. Excluding the effects of the merger,
there was an
increase
of
USD 24.1bn,
mainly
in
foreign
currency
contracts,
reflecting
market-driven
increases,
partly
offset
by
a
decrease in interest rate contracts,
primarily reflecting unwinding activities in Non-core and Legacy.
Brokerage
receivables
increased
by
USD 5.0bn,
mainly
reflecting
higher
client
activity
levels.
Other
financial
assets
measured
at
amortized
cost
increased
by
USD 5.0bn,
mainly
due
the
aforementioned
merger,
which
contributed
USD 10.9bn
in May
2024. Excluding
the
effects
of the
merger,
there
was
a
decrease
of USD
5.9bn,
mainly
reflecting
HQLA portfolio securities maturing.
Other financial assets measured at
fair value increased by USD 31.4bn to
USD 97.4bn, mainly reflecting the effects of
the
aforementioned merger,
which contributed USD
36.6bn in May
2024. Excluding the
effects of the
merger, there was
a
decrease of USD 5.2bn, mainly reflecting
unwinding activities in Non-core
and Legacy.
Non-financial assets increased by
USD 12.9bn, primarily reflecting the effects of the merger.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Balance sheet and off-balance
sheet
103
Assets
As of
% change from
USD bn
31.12.24
31.12.23
31.12.23
Cash and balances at central banks
Lending
1
Securities financing transactions at amortized cost
Trading assets
Derivatives and cash collateral receivables on derivative instruments
Brokerage receivables
Other financial assets measured at amortized cost
Other financial assets measured at fair value
2
Non-financial assets
Total assets
1 Consists of Loans and advances to customers and Amounts due from banks.
2 Consists of Financial assets at fair value not held for trading and Financial assets measured at
fair value through other comprehensive
income.
Asset encumbrance
The table below provides a breakdown of on- and off-balance sheet assets between encumbered assets, unencumbered
assets and assets that cannot be pledged as collateral.
Assets are presented as
Encumbered if they have
been pledged as collateral
against an existing liability
or are otherwise
not available for
securing additional funding.
Included within the
latter category are
assets protected under
client asset
segregation rules,
financial assets
for unit-linked
investment contracts
and assets
held in certain
jurisdictions to
comply
with explicit minimum local asset maintenance requirements.
Assets
that
cannot
be
pledged
as
collateral
represent
assets
that
are
not
encumbered
but
by
their
nature
are
not
considered available to secure funding or meet collateral
needs.
All other
assets are
presented
as Unencumbered.
This
category
consists of
cash and
securities readily
realizable
in the
normal
course
of
business,
which
include
HQLA
and
unencumbered
positions
in
the
trading
portfolio
of
UBS AG.
Unencumbered
assets
also
includes
loans
and
advances
to
customers
and
amounts
due
from
banks.
Unencumbered
assets that
are considered
to be
available to
secure funding
at the
legal-entity level
may be
subject to
restrictions that
limit the total amount of assets available to UBS AG as a
whole.
›
Refer to “Note 23 Restricted and transferred financial
assets”
in the “Consolidated financial statements” section
of this report for
more information
Asset encumbrance as of 31 December 2024
USD bn
Encumbered
Unencumbered assets
Assets that cannot be
pledged as collateral
Total Group
Assets pledged
as collateral
Assets otherwise
restricted and not
available to secure
funding
Balance sheet
Cash and balances at central banks
0.1
0.0
223.3
Amounts due from banks
2.5
0.0
18.1
Receivables from securities financing transactions
measured at amortized cost
118.3
118.3
Cash collateral receivables on derivative instruments
8.0
35.9
44.0
Loans and advances to customers
0.2
0.1
587.3
Other financial assets measured at amortized cost
1
4.2
8.7
59.3
Total financial assets measured at amortized cost
15.0
163.0
1,050.3
Financial assets at fair value held for trading
1
0.3
0.0
159.2
Derivative financial instruments
186.4
186.4
Brokerage receivables
25.9
25.9
Financial assets at fair value not held for trading
1
20.4
26.1
95.2
Total financial assets measured at fair value through
profit or loss
20.6
238.4
466.7
Financial assets measured at fair value through other
comprehensive income
1.9
2.2
Non-financial assets
27.2
48.8
Total balance sheet assets as of 31 December 2024
37.5
428.7
1,568.0
Total balance sheet assets as of 31 December 2023
30.7
286.7
1,156.0
Off-balance sheet
Fair value of securities accepted as collateral as of
31 December 2024
7.5
0.0
581.8
Fair value of securities accepted as collateral as of
31 December 2023
5.3
489.5
Total balance sheet assets and off-balance sheet
securities accepted as collateral as of 31 December 2024
45.0
2
428.7
2,149.8
Total balance sheet assets and off-balance sheet
securities accepted as collateral as of 31 December 2023
2
1 Includes assets pledged
as collateral that
may be sold or
repledged by counterparties.
The respective amounts
are disclosed in “Note
23 Restricted and
transferred financial assets”
in the “Consolidated financial
statements” section of this report.
2 Includes high-quality liquid assets (31 December 2024: USD 339.0bn; 31 December 2023: USD 261.7bn).
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Balance sheet and off-balance
sheet
104
Balance sheet liabilities
Total liabilities were USD 1,473.4bn as of
31 December 2024. The
increase of USD 373.0bn compared with
31 December
2023 was primarily
related to the merger
of UBS AG and
Credit Suisse AG, which
contributed USD 429.7bn in May
2024.
Short-term borrowings were
broadly stable, with the
increase of USD 20.7bn
in May 2024 relating
to the effects
of the
aforementioned merger, broadly
offset by
the repayment of
the funding from
the SNB,
as well
as maturities of
commercial
paper and certificate of deposits.
Securities
financing
transactions
at
amortized
cost
increased
by
USD 9.0bn,
primarily
reflecting
the
effects
of
the
aforementioned merger.
Customer deposits
increased by
USD 193.8bn, with
an increase
of USD 224.6bn in
May 2024
relating to the aforementioned merger. Excluding the effects of the merger, there was a decrease of USD 30.8bn, mainly
reflecting
currency
effects
and
net
new
deposit
outflows.
Funding
from
UBS
Group AG
measured
at
amortized
cost
increased
by
USD 40.6bn,
mainly
reflecting
the
effects
of
the
aforementioned
merger.
Debt
issued
designated
at
fair
value and
long-term debt
issued measured
at amortized
cost increased
by USD 54.3bn,
mainly reflecting
the effects
of
the aforementioned merger, which contributed USD 70.5bn in May 2024. Excluding the effects of the merger,
there was
a decrease of USD 16.2bn, mainly driven by net redemptions
and currency effects.
Derivatives and cash
collateral payables on derivative
instruments increased by USD 41.4bn
to USD 217.0bn. The increase
was mainly related
to the aforementioned
merger, which added
USD 39.7bn in May
2024. Excluding the
effects of the
merger, there was an increase of
USD 1.7bn, mainly reflecting an increase in foreign
currency contracts in the Investment
Bank,
largely
offset
by
a
decrease
in
interest
rate
contracts,
primarily
reflecting
unwinding
activities
in
Non-core
and
Legacy. Brokerage payables increased by USD 6.7bn, mainly
reflecting higher client activity levels as on the asset
side.
Other financial liabilities
measured at amortized
cost increased by
USD 9.1bn, Other financial
liabilities measured at
fair
value increased by USD 6.6bn and Non-financial liabilities increased by USD 7.8bn, all mostly due to the aforementioned
merger.
›
Refer to the “Capital management” section of
this report for more information
Equity
Equity attributable to shareholders increased
by USD 38,769m to USD 94,003m
as of 31 December 2024.
This
increase
was
mainly
driven
by
the
effects
of
the
merger
of
UBS AG
and
Credit
Suisse AG,
which
resulted
in
an
increase
in
equity
of
USD 41,432m
as
of
the
date
of
the
merger
and
total
comprehensive
income
attributable
to
shareholders
of
USD 747m,
reflecting
net
profit
of
USD 1,481m
and
negative
other
comprehensive
income
(OCI)
of
USD 735m.
OCI mainly
included
negative
OCI related
to foreign
currency
translation
of USD 1,261m
,
partly
offset
by
cash flow hedge OCI of USD 635m.
These increases were partly offset by a dividend distribution
of USD 3,000m to UBS Group AG.
›
Refer to the “UBS AG consolidated performance”
and “Consolidated financial statements” sections
of this report for more
information about OCI
›
Refer to the “Reconciliation of equity under IFRS
Accounting Standards to Swiss SRB common equity tier
1 capital” table in this
section for more information about the effects of OCI on common
equity tier 1 capital
Liabilities and equity
As of
% change from
USD bn
31.12.24
31.12.23
31.12.23
Short-term borrowings
1,2
Securities financing transactions at amortized cost
Customer deposits
Funding from UBS Group AG measured at amortized cost
Debt issued designated at fair value and long-term debt issued measured
at amortized cost
2
Trading liabilities
Derivatives and cash collateral payables on derivative instruments
Brokerage payables
Other financial liabilities measured at amortized cost
Other financial liabilities designated at fair value
Non-financial liabilities
Total liabilities
Share capital
Share premium
Retained earnings
Other comprehensive income
3
Total equity attributable to shareholders
Equity attributable to non-controlling interests
Total equity
Total liabilities and equity
1 Consists of short-term debt issued measured at amortized cost and amounts due to banks, which includes amounts due to
central banks.
2 The classification of debt issued measured at amortized cost into short-
term and long-term is
based on original contractual
maturity and therefore long-term
debt also includes debt
with a remaining time
to maturity of less
than one year.
This classification does
not consider any
early
redemption features.
3 Excludes other comprehensive income related to defined benefit plans and own credit, which is recorded directly in Retained earnings.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Balance sheet and off-balance
sheet
105
Liabilities by product and currency
USD equivalent
All currencies
of which: USD
of which: CHF
of which: EUR
USD bn
31.12.24
31.12.23
31.12.24
31.12.23
31.12.24
31.12.23
31.12.24
31.12.23
Short-term borrowings
53.9
54.0
22.5
35.6
5.7
4.3
11.7
5.9
of which: amounts due to banks
23.3
16.7
8.1
8.1
5.4
3.9
3.1
0.7
of which: short-term debt issued
1,2
30.5
37.3
14.5
27.6
0.3
0.3
8.6
5.2
Securities financing transactions at amortized cost
14.8
5.8
7.9
5.1
3.8
0.0
2.9
0.3
Customer deposits
749.5
555.7
312.5
236.4
298.2
216.0
71.5
51.5
of which: demand deposits
225.0
146.2
55.7
36.8
108.7
61.5
33.2
24.7
of which: retail savings / deposits
182.3
152.7
34.9
28.9
143.3
119.2
4.0
4.5
of which: sweep deposits
41.9
41.0
41.9
41.0
0.0
0.0
0.0
0.0
of which: time deposits
300.3
215.8
179.9
129.6
46.1
35.4
34.3
22.3
Funding from UBS Group AG measured at amortized cost
107.9
67.3
74.4
44.6
2.6
2.0
27.6
18.9
Debt issued designated at fair value and long-term debt issued
measured at amortized cost
2
173.1
118.8
86.2
75.2
40.5
18.8
30.4
14.4
Trading liabilities
35.2
31.7
14.4
12.0
1.3
1.0
10.0
8.9
Derivatives and cash collateral payables on derivative instruments
217.0
175.6
183.4
146.7
4.4
4.1
18.3
15.2
Brokerage payables
49.0
42.3
38.1
31.4
0.5
0.7
3.4
2.4
Other financial liabilities measured at amortized cost
21.8
12.7
12.9
7.6
3.2
1.9
1.9
1.0
Other financial liabilities designated at fair value
34.0
27.4
6.5
5.7
0.1
0.1
5.6
4.1
Non-financial liabilities
17.0
9.2
8.7
2.4
3.2
2.0
2.5
2.5
Total liabilities
1,473.4
1,100.4
767.5
602.7
363.3
251.0
185.8
125.0
1 Short-term debt issued consists of certificates of deposit, commercial paper,
acceptances and promissory notes, and other money market paper.
2 The classification of debt issued measured at amortized cost into
short-term and long-term is based
on original contractual
maturity and therefore long-term
debt also includes debt
with a remaining time to
maturity of less than
one year.
This classification does not
consider any
early redemption features.
Off-balance sheet
In the
normal course
of business,
UBS AG enters
into transactions
where, pursuant
to IFRS
Accounting Standards,
the
maximum contractual exposure
may not
be recognized in
whole or
in part
on its
balance sheet. These
transactions include
derivative instruments, guarantees,
loan commitments and similar arrangements.
When UBS AG incurs an
obligation or becomes
entitled to an asset
through these arrangements,
it recognizes them on
the balance
sheet. It
should be
noted that
in certain
instances the
amount recognized
on the
balance sheet
does not
represent the full gain or loss potential inherent in such arrangements.
The
following
paragraphs
provide
more
information
about
certain
off-balance
sheet
arrangements.
Additional
off-
balance sheet
information is
primarily provided
in Notes 10, 11,
18, 20, 21h,
23 and 28
in the “Consolidated
financial
statements” section of this report
.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Balance sheet and off-balance
sheet
106
Guarantees,
loan commitments and similar arrangements
In the
normal course
of business,
UBS AG issues
various forms
of guarantees,
commitments to
extend credit,
standby
and
other
letters
of
credit
to
support
clients,
forward
starting
transactions,
note
issuance
facilities,
and
revolving
underwriting facilities.
With the
exception of
related premiums,
generally these
guarantees and
similar obligations
are
kept as off-balance sheet items, unless a provision
to cover probable losses or expected credit
losses is required.
Guarantees
represent
irrevocable
assurances
that,
subject
to
the
satisfying
of
certain
conditions,
UBS AG
will
make
payments if its clients fail to fulfill their obligations to third parties. As of 31 December 2024, the net exposure (i.e. gross
values less sub-participations) from guarantees and
similar instruments was USD 38.4bn, compared
with USD 31.5bn as
of
31 December
2023.
The
increase
of
USD 6.9bn
mainly
reflected
the
effect
of
the
merger
of
UBS AG
and
Credit
Suisse AG, partly offset by business
-driven lower volumes. Fee
income from issuing guarantees
compared with total net
fee and commission income was insignificant for both 2024 and
2023.
UBS AG also enters
into commitments to
extend credit
in the form
of credit lines
available to secure
the liquidity needs
of clients. For the majority of irrevocable loan commitments, UBS AG is committed to provide credit at
any time within a
contractual maturity period of
up to three
years from the
balance sheet date.
During 2024, irrevocable
loan commitments
increased by USD 35.6bn to
USD 79.6bn and committed unconditionally revocable
credit lines increased by
USD 101.5bn
to
USD 148.9bn,
both
predominantly
driven
by
the
aforementioned
merger.
Forward
starting
reverse
repurchase
and
securities
borrowing
agreements
increased
by USD
14.5bn,
mainly
reflecting
fluctuations
in
levels
of business
division
activity in short-dated securities financing transactions.
Off-balance sheet
As of
% change from
USD bn
31.12.24
31.12.23
31.12.23
Guarantees
1,2
38.4
31.5
22
Irrevocable loan commitments
1
79.6
44.0
81
Committed unconditionally revocable credit lines
148.9
47.4
214
Forward starting reverse repurchase and securities borrowing agreements
24.9
10.4
140
1 Guarantees and irrevocable loan commitments are shown net of sub-participations.
2 Includes guarantees measured at fair value through profit or loss.
If customers
fail to
meet their
obligations, the
maximum exposure
to credit
risk of
UBS AG is
generally the
contractual
amount of these instruments. The risk is similar to the risk involved in extending loan facilities and is subject
to the same
risk management
and control
framework.
In 2024,
UBS AG recognized
net credit
loss releases
of USD 11m
related to
irrevocable loan commitments,
guarantees and
other credit facilities
in the scope
of expected
credit loss measurement,
compared with
net credit
loss releases
of USD
13m in
2023. Provisions
recognized for
irrevocable
loan commitments,
guarantees
and
other
credit
facilities
in
the
scope
of
expected
credit
loss
measurement
were
USD 332m
as
of
31 December 2024, compared with USD 188m as of 31
December 2023.
›
Refer to “Note 10 Financial
assets at
amortized
cost and
other positions
in scope
of expected
credit loss
measurement”
and “Note 20
Expected
credit loss
measurement”
in the “Consolidated
financial
statements”
section of this report for more information about
provisions for expected credit losses
For
certain
obligations,
UBS AG
enters
into
partial
sub-participations
to
mitigate
various
risks
from
guarantees
and
irrevocable loan
commitments. A
sub-participation is
an agreement
by another
party to
take a
share of
the loss
in the
event that the obligation is not fulfilled by the obligor and, where applicable, to fund a part of the credit
facility. UBS AG
retains the contractual relationship
with the obligor, and
the sub-participant has
only an indirect relationship.
Generally,
UBS AG only enters
into sub-participation
agreements with
banks to which
it ascribes
a credit rating
equal to or
better
than that of the obligor.
UBS AG also provides
representations, warranties and indemnifications to third
parties in the normal course of business.
Support provided to non-consolidated investment funds
In 2024, UBS
AG did not
provide material
support, financial
or otherwise,
to unconsolidated
investment funds
when it
was not contractually obligated to do so, nor does it currently
have an intention to do so.
Clearing house and exchange memberships
UBS AG is a member
of numerous securities
and derivative exchanges
and clearing houses. In
connection with some
of
these memberships, UBS AG
may be required
to pay
a share of
the financial obligations
of another member
who defaults,
or UBS AG
may be
otherwise exposed
to additional
financial obligations.
While the
membership rules
vary,
obligations
generally would
arise only
if the
exchange or
clearing house
had exhausted
its resources. UBS AG
considers the probability
of a material loss due to such obligations to be remote.
Deposit insurance
Swiss banking
law and
the deposit
insurance system
require Swiss
banks and
securities dealers
to jointly
guarantee an
amount of
up to
CHF 7.9bn
for privileged
client deposits
in the
event that
a Swiss
bank or
securities dealer
becomes
insolvent. As of 31 December 2024, FINMA
estimates UBS AG’s share in the
deposit insurance system to be CHF 1.6bn.
This
represents
a
contingent
payment
obligation
and
exposes
UBS AG
to
additional
risk.
As
of
31 December
2024,
UBS AG considered the probability of a
material loss from its obligations to be remote.
UBS AG is
also subject to,
or is
a member of,
other deposit protection
schemes in other
countries. However, no
contingent
payment obligation existed as of 31 December 2024 from
any other material scheme.
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Balance sheet and off-balance
sheet
107
Material cash requirements
The material cash
requirements of UBS AG
as of
31 December 2024 are
represented by the
residual contractual maturities
for non-derivative and
non-trading financial
liabilities included
in the table
presented in
“Note 24b Maturity
analysis of
financial liabilities on an undiscounted basis”
in the “Consolidated financial statements”
section of this report. Included
in
that
table
are
Debt
issued
designated
at
fair
value
(USD 114.1bn),
Debt
issued
measured
at
amortized
cost
(USD 108.5bn) and
Funding from
UBS Group
AG measured
at amortized
cost (USD
143.8bn). The
amounts represent
estimated future interest and principal payments
on an undiscounted basis.
In
the
normal
course
of
business,
UBS AG
also
issues
or
enters
into
various
forms
of
guarantees,
irrevocable
loan
commitments and other similar arrangements that may result in an outflow of cash in the future. The maturity profile
of
these
obligations,
which
are
presented
off-balance
sheet,
are
included
in
“Note 24b
Maturity
analysis
of
financial
liabilities on an undiscounted basis” in the “Consolidated
financial statements” section of this report.
Cash flows
As we are a global financial institution, our cash flows are complex and often may bear little relation to our net earnings
and net
assets.
Consequently,
we believe
that a
traditional cash
flow analysis
is less
meaningful when
evaluating
our
liquidity position than the
liquidity,
funding and capital
management frameworks and
measures described elsewhere
in
this section.
›
Refer to the “Liquidity and funding management”
section of this report for more information
Cash and cash equivalents
As of
31 December 2024,
cash and
cash equivalents
totaled USD 243.4bn,
an increase
of USD 52.9bn
compared with
31 December
2023,
driven
by net
cash
inflows
from
investing activities.
These
inflows
were
partly
offset
by
net
cash
outflows
from
financing
and
operating
activities,
as
well
as
negative
foreign
exchange
effects,
largely
reflecting
the
strengthening of the US dollar against the Swiss franc
in 2024.
Operating activities
Net cash outflows from operating activities were USD 27.1bn in 2024, compared
with outflows of USD 28.2bn in 2023.
The net negative change in operating assets and liabilities of USD 41.7bn was mainly driven
by a USD 27.6bn movement
in financial assets and liabilities at fair value
held for trading and derivative financial
instruments, a USD 19.6bn increase
in receivables from
securities financing transactions
measured at amortized
cost, outflows from
a USD 13.4bn decrease
in customer
deposits
and
a
USD 6.1bn
negative
movement
in
cash
collateral
on
derivative
instruments.
These
effects
were
partly offset
by inflows
from
a
USD 21.2bn
decrease
in loans
and advances
to customers
,
a
USD 2.3bn
positive
movement
in
financial
assets
at
fair
value
not
held
for
trading
and
a
USD 1.8bn
positive
movement
in
brokerage
receivables
and
payables.
Non-cash
items
included
in
net
profit
and
other
adjustments
are
mainly
to
remove
the
net
impact of non-cash effects in the balance sheet, such as
foreign currency effects.
Investing activities
Investing activities resulted in a
net cash inflow of USD 122.4bn
in 2024, compared with a
net outflow of USD 4.9bn in
2023, primarily reflecting the effect of cash and cash equivalents acquired upon the merger of
UBS AG and Credit Suisse
AG in the amount
of USD 121.3bn, as well as
net inflows from debt securities
measured at amortized cost of
USD 2.4bn.
Financing activities
Financing activities
resulted in a net cash outflow of USD 32.1bn in 2024, compared with inflow of USD 19.7bn in 2023,
mainly
due
to USD
15.3bn
of net
cash
used
to repay
debt
designated
at fair
value
and long-term
debt
measured
at amortized
cost, USD
10.3bn repayment
of funding
from the
Swiss National
Bank, and
USD 6.2bn
of net
cash used
to repay
short-term
debt measured
at amortized cost.
These outflows
were partly offset
by net issuance
proceeds of USD
3.6bn from securities
financing transactions
measured at amortized
cost.
›
Refer to “Primary financial statements and share information”
in the “Consolidated financial statements” section
of this report for
more information about cash flows
Statement of cash flows (condensed)
For the year ended
USD bn
31.12.24
31.12.23
Net cash flow from / (used in) operating activities
(27.1)
(28.2)
Net cash flow from / (used in) investing activities
122.4
(4.9)
Net cash flow from / (used in) financing activities
(32.1)
19.7
Effects of exchange rate differences on cash and cash equivalents
(10.3)
8.7
Net increase / (decrease) in cash and cash equivalents
52.9
(4.7)
Cash and cash equivalents at the end of the year
243.4
190.5
Annual Report 2024 |
Risk, capital, liquidity and funding, and
balance sheet | Currency management
108
Currency management
Strategy, objectives and governance
Group Treasury
focuses on three main areas of currency risk management: (i) currency-matched funding and investment
of non-US-dollar assets and liabilities; (ii) the sell-down of foreign currency IFRS Accounting Standards profits
and losses;
and
(iii) selective
hedging
of
anticipated
non-US-dollar
profits
and
losses
to
further
mitigate
the
effect
of
structural
imbalances in the balance sheet.
Currency-matched funding and investment of non-US-dollar
assets and liabilities
For monetary balance sheet items and other investments, as far as is practical and efficient, UBS AG follows
the principle
of matching the currencies of its assets and liabilities for funding purposes. This
avoids profits and losses arising from the
translation of non-US-dollar assets and liabilities.
Net investment hedge accounting is applied to non-US-dollar core investments to
balance the effect of foreign exchange
movements on both common equity tier 1 (CET1) capital
and the CET1 capital ratio.
›
Refer to “Note 1 Summary of material accounting
policies” and “Note 25 Hedge accounting” in the
“Consolidated financial
statements”
section of this report for more information
›
Refer to “Capital management” in this section for
more information about UBS AG’s active management of sensitivity to currency
movements and the effect thereof on the key ratios
Sell-down of non-US-dollar reported profits and losses
Income statement
items of
UBS AG
subsidiaries and
branches with
a functional
currency
other than
the US
dollar are
translated
into
US
dollars
at
average
exchange
rates.
To
reduce
earnings
volatility
on
the
translation
of
previously
recognized
earnings
in
foreign
currencies,
Group
Treasury
centralizes
the
profits
and
losses
(under
IFRS
Accounting
Standards)
arising
in
UBS AG
and
its
branches
and
sells
or
buys
the
profit
or
loss
for
US
dollars
on
a
monthly
basis.
UBS AG subsidiaries
follow a similar
monthly sell-down
process into
their own
functional currencies.
Retained earnings
in subsidiaries and branches
with a functional currency
other than the US
dollar are integrated
and managed as part
of
UBS AG’s net investment hedge accounting program.
Annual Report 2024 |
Corporate governance
109
Corporate governance
Management report
Audited information according to the Swiss law and applicable regulatory
requirements and guidance
Disclosures
provided
are
in
line
with
the
requirements
of
the
Swiss
Code
of
Obligations
(tables
containing
such
information are marked as “Audited” throughout this section),
as well as other applicable regulations and guidance.
Table of contents
110
110
110
111
112
122
131
131
133
Annual Report 2024 |
Corporate governance
110
Corporate governance
UBS AG
is incorporated
and domiciled in
Switzerland and operates
under Art.
620 et
seq. of
the Swiss
Code of
Obligations
and Swiss banking law
as an
Aktiengesellschaft
, a corporation limited
by shares. The addresses
and telephone numbers
of the two registered offices of UBS AG are: Bahnhofstrasse 45, CH-8001 Zurich,
Switzerland, telephone +41-44-234 11
11;
and
Aeschenvorstadt
1,
CH-4051
Basel,
Switzerland,
telephone
+41-61-288
50
50.
The
corporate
identification
number is CHE-101.329.561.
The company was incorporated with unlimited duration on 29
June 1998, when Union Bank of Switzerland (founded in
1862) and
Swiss Bank Corporation
(founded in 1872)
merged to form
UBS AG. UBS
AG is
a regulated bank
in Switzerland
and is 100%
owned by
UBS Group
AG, the ultimate
parent of
the UBS
Group. UBS
AG’s purpose,
in accordance
with
art. 2 of its Articles
of Association, as
amended on 23 April
2024, is the operation
of a bank and
its scope extends to
a
full range of financial services activities in Switzerland and
abroad.
As a
non-US
company
with
securities listed
on
the
New
York
Stock
Exchange
(the NYSE),
UBS AG
complies
with the
relevant corporate
governance standards
applicable to
foreign private
issuers listing
debt securities.
In addition,
it also
follows
the
standards
established
in
the
Swiss
Code
of
Best
Practice
for
Corporate
Governance.
The
Organization
Regulations of UBS
AG, adopted by the
Board of Directors
of UBS AG (the
BoD) based on
Art. 716b of
the Swiss Code
of
Obligations
and
Art.
24
and
26
of
the
Articles
of
Association
of
UBS
AG
(the
AoA),
constitute
UBS
AG’s
primary
corporate governance guidelines.
Operational structure
Operational structure
As at 31 December 2024, the operational structure
of UBS AG is composed of
the Global Wealth Management, Personal
Corporate Banking, Asset
Management, the Investment Bank,
and Non-core and Legacy
business divisions, as well as
Group functions.
›
Refer to the “Our businesses” section of this
report for more information about our business divisions
and Group functions
Share capital structure
Ordinary share capital
At the
end of
2024, UBS
AG had
3,858,408,466 issued
fully paid
registered shares,
with a
nominal value
of USD 0.10
each, equating to a share capital of USD 385,840,846.60.
Under Swiss company
law, shareholders
must approve, in
a general meeting
of shareholders, any
increase or reduction
in the ordinary share capital, the creation of conditional share
capital or the introduction of a capital band.
Conditional capital
At year-end 2024, the following conditional capital was
available to the BoD.
–
Conditional
capital
in
the
amount
of
USD 38,000,000,
for
the
issuance
of
a
maximum
of
380,000,000
fully
paid
registered shares with a nominal value of USD 0.10 each, to be issued through the voluntary or mandatory exercise of
conversion rights and /
or warrants granted
in connection with the
issuance of bonds or
similar financial instruments
on
national
or
international
capital
markets.
This
conditional
capital
allowance
was
approved
at
the
Extraordinary
General
Meeting
(the
EGM)
held
on
26 November
2014,
having
originally
been
approved
at
the
Annual
General
Meeting (the AGM) of UBS AG on 14 April 2010. The BoD has
not made use of such allowance.
›
Refer to article 4a of the AoA for more information
about the terms and conditions of the issue
of shares out of existing
conditional capital – the AoA are available at
Annual Report 2024 |
Corporate governance
111
Conversion capital
On 31
December 2024, UBS
AG had
conversion capital in
the amount of
USD 70,000,000, for the
issuance of
a maximum
of 700,000,000 fully paid registered shares
with a nominal value of USD 0.10 each. The issuance
of fully paid registered
shares only occurs
through the mandatory conversion
of claims arising
upon the occurrence of
one or more
trigger events
under financial market
instruments with contingent
conversion features issued
by UBS AG.
The creation of
this conversion
capital was approved at the AGM held on 23 April 2024.
›
Refer to article 4b of the AoA for more information
about the terms and conditions of the
issue of shares out of existing
conversion capital – the AoA are available at
Capital band and reserve capital
As of the date of this report, UBS AG had not introduced
any capital band or any reserve capital
.
Shares
UBS AG has
a single class
of shares, which
are registered
shares in the
form of uncertificated
securities (in the
sense of
the Swiss Code of
Obligations) and intermediary
-held securities (in
the sense of the
Swiss Federal Act on
Intermediated
Securities). Each registered
share has a
nominal value
of USD 0.10 and
carries one vote.
UBS AG imposes
no limitation
on the rights to own its securities.
Dividend distributions
The decision to pay a dividend
and the amount of any dividend
depend on a variety of factors, including
our profits, cash
flow generation and capital ratios.
For the 2024 financial year, the BoD is proposing at the 2025 AGM to the
shareholder for approval an ordinary dividend
distribution of
USD 6,500m,
to be
paid out
shortly after
the AGM,
and the
appropriation of
USD 6,500m
to a
special
dividend reserve. The decision on
the distribution of the special dividend is
intended to be made at
an EGM in the second
half of 2025, considering any proposed requirements from
Switzerland’s ongoing review of its capital regime.
On 31 December 2024,
UBS AG had
3,858,408,466 issued shares
with a nominal
value of USD 0.10
each, equating to
a share capital of USD 385,840,846.60. All
shares carry voting rights, were fully
paid in and eligible for dividends. There
are no preferential rights associated with these shares, and
no other classes of shares have been issued by UBS
AG.
Shareholders’ participation rights
Voting rights
The sole direct shareholder of UBS AG is UBS Group AG, which holds 100% of UBS AG shares. These shares are entitled
to voting rights without restriction.
Statutory quorums
Motions are decided at a general meeting by a majority of the votes represented, excluding blank and invalid ballots. For
the approval of
certain specific issues, the
Swiss Code of Obligations
requires a positive
vote from a two-thirds
majority
of the
votes represented
at the given
general meeting
and from
a majority
of the
nominal value
of shares
represented
thereat. Such issues include creating shares with privileged voting rights, introducing restrictions
on the transferability of
registered shares, creating conditional capital or introducing a capital band or reserve
capital and restricting or excluding
shareholders’ preemptive rights.
The AoA also require a two-thirds majority of votes represented
for approval of any change to their provisions regarding
the number of BoD members, any decision to remove one-quarter or more of
the BoD members and any modification to
the provision establishing this qualified quorum.
Convocation of general meetings of shareholders
The AGM
must be
held within
six months
of the
close of
the financial
year (i.e.
31 December). In
2025, the
AGM will
take place on 8 April.
EGMs
may
be
convened
whenever
the
BoD
or
the
auditors
consider
it
necessary.
Shareholders
individually
or
jointly
representing at least
10% of the
share capital may
at any time,
including during an
AGM, require, by
way of a
written
statement, that an EGM be convened to address a specific
issue they put forward.
Annual Report 2024 |
Corporate governance
112
Board of Directors
The BoD, led by the Chairman, consists of at least 5 and
no more than 12 members, as per our AoA.
The BoD, led
by the Chairman,
decides on the strategy
of UBS AG upon
recommendation by the President
of its Executive
Board (the EB)
and exercises the
ultimate supervision of
management. Its ultimate
responsibility for the
success of UBS AG
is exercised subject to the parameters set by the Group.
Members of the Board of Directors
Non-executive
members of the
Board
Position
Initial
election
Step
down
UBS business address
Colm Kelleher
Chairman of the BoD
2022
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Lukas Gähwiler
Vice Chairman /
member of the Risk Committee
2022
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Jeremy Anderson
Chairperson of Audit Committee
2018
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Claudia Böckstiegel
Member of the BoD
2021
Bahnhofstrasse 45, 8001 Zurich, Switzerland
William C. Dudley
Member of the Risk Committee
2019
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Patrick Firmenich
Member of the Audit Committee
2021
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Fred Hu
Member of the Compensation Committee
(as of 23.4.2024)
2018
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Mark Hughes
Chairperson of the Risk Committee
2020
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Gail Kelly
Member of the BoD
2024
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Nathalie Rachou
Member of the Audit Committee (as of
24.4.2024) / member of the Risk Committee
(until 24.4.2024)
2020
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Julie G. Richardson
Chairperson of the Compensation
Committee / member of the Risk Committee
2017
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Dieter Wemmer
Member of the Audit Committee /
member of the Compensation Committee
(both until 24.4.2024)
2016
23.4.2024
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Jeanette Wong
Member of the Audit Committee /
member of the Compensation Committee
2019
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Renata Jungo
Brüngger
Candidate to the UBS AG Board
Proposed
for election
at the 2025
AGM
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Lila Tretikov
Candidate to the UBS AG Board
Proposed
for election
at the 2025
AGM
Bahnhofstrasse 45, 8001 Zurich, Switzerland
No current
BoD member
has either
an employment
contract
or a
significant business
connection to
UBS or
any of
its
subsidiaries. No member of the
BoD currently carries out operational
management tasks within the Group.
Except for the
Vice Chairman,
who was
Chairman of
UBS Switzerland
AG until
April 2022,
and Gail
Kelly, who
was a
Senior Global
Advisor for UBS until September 2023, no
BoD member has carried out operational management tasks within
the Group
over the
past three
years. All
members of
the BoD
are also
members of
UBS Group
AG’s Board
of Directors,
and committee
membership is the same for both entities.
In 2024, the
BoD had three
permanent committees:
the Audit Committee,
the Compensation
Committee and
the Risk
Committee.
The following biographies provide information about the BoD members who were in office after the 2024 AGM and the
Company Secretary.
Annual Report 2024 |
Corporate governance
113
Colm Kelleher
Chairman of the Board of Directors,
independent and non-
executive member of the Board since 2022
Nationality:
Year of birth:
Colm Kelleher
was elected
Chairman of
UBS in April
2022. In
March 2023,
he
led
the successful
negotiations for
UBS
to acquire
the Credit
Suisse
Group. He served as
President of Morgan Stanley until
retiring from that
firm
in
2019,
overseeing
both
the
Institutional
Securities
Business
and
Wealth
Management.
Before
that,
he
was
Co-President
and
then
President
of
Morgan
Stanley
Institutional
Securities.
During
the
global
financial
crisis,
he
held
the
position
of
CFO
and
Co-Head
Corporate
Strategy from 2007 to 2009.
Mr. Kelleher is a well-respected leader in
the
financial services sector. His 30-year
career with Morgan Stanley
attests to
his
solid
leadership
experience
in
banking
and
excellent
relationships
around the
world. He
has a
deep understanding
of the
global banking
landscape
and
broad
banking
experience
across
all
the
geographical
regions and major business areas in which UBS operates.
Professional experience
2016 – 2019
President,
Morgan Stanley, responsible for Institutional
Securities and Wealth Management
2011 – 2016
CEO of Morgan Stanley International, Morgan
Stanley
2013 – 2015
President, Institutional Securities, Morgan Stanley
2010 – 2012
Co-President, Institutional Securities, Morgan Stanley
2007 – 2009
CFO and Co-Head Corporate Strategy, Morgan Stanley
2006 – 2007
Head Global Capital Markets, Morgan Stanley
2004 – 2006
Co-Head Fixed Income, Europe, Morgan Stanley
1989 – 2004
Various roles, Morgan Stanley
Education
–
Master’s degree, modern history, the University of Oxford
–
Fellow of the Institute of Chartered Accountants in England
and
Wales
Listed company boards
–
Member of the Board of Norfolk Southern Corporation
(chair of the
finance and risk management committee)
Other activities and functions
–
Chairman of the Board of Directors of UBS Group AG
–
Member of the Board of Directors of the Bretton Woods Committee
–
Member of the Board of the Swiss Finance Council
–
Member of the International Monetary Conference
–
Member of the Board of the Bank Policy Institute
–
Member of the Board of Americans for Oxford
–
Visiting Professor of Banking and Finance, Loughborough Business
School
–
Member of the European Financial Services Round Table
–
Member of the European Banking Group
–
Member of the International Advisory Council
of the China Securities
Regulatory Commission
–
Member of the Chief Executive’s Advisory Council (Hong
Kong)
Key competencies
–
Banking (wealth management, asset management, personal
and
corporate banking)
and insurance
–
Investment banking, capital markets
–
Finance, audit, accounting
–
Risk management, compliance and legal
Leadership experience
–
CEO, Chairman
Annual Report 2024 |
Corporate governance
114
Lukas Gähwiler
Vice Chairman, non-independent and non-executive
member of the Board since 2022
–
Member of the Risk Committee since 2023
Nationality:
Year of birth:
Lukas
Gähwiler
brings
a
wealth
of
industry
experience
and
an
in-depth
understanding
of
UBS
to
the
Board
of
Directors
of
UBS.
He
served
as
Chairman
of
the
Board
of
UBS
Switzerland
AG
for
five
years
and
was
previously a
member of
the Group
Executive Board
of UBS
and President
UBS Switzerland,
responsible for
the private
clients, wealth
management,
corporate
and
institutional
clients,
investment
banking,
and
asset
management businesses in UBS’s
home market. Before
joining UBS, Mr.
Gähwiler worked for Credit Suisse for over
twenty years, his last role being
Chief Credit
Officer, Global
Private and
Corporate Banking.
In addition
to
his
leadership
and
industry
experience
across
all
parts
of
the
banking
business, his
strong connections
and network,
particularly in
Switzerland,
are instrumental
for the
firm. After
the acquisition
of the
Credit Suisse
Group
in 2023,
Mr. Gähwiler served
as Chairman
of Credit Suisse
AG.
Professional experience
2023 – May 2024
Chairman of the Board of Directors of Credit Suisse AG
2017 – 2022
Chairman of the Board of Directors
of UBS Switzerland AG
2010 – 2016
Member of the Group Executive Board,
UBS and President UBS Switzerland
2003 – 2010
Chief Credit Officer, Global Private and Corporate
Banking, Credit Suisse
2002 – 2003
Head Credit Risk Management, Corporate Clients
Switzerland, Credit Suisse
1998 – 2001
Chief of Staff to CEO, Private and Corporate Clients,
Credit Suisse
1990 – 1998
Various senior front office roles in Corporate Clients in
Switzerland and North America, Credit Suisse
1981 – 1986
Client Advisor Retail and Wealth Management,
St.Galler Kantonalbank
Education
–
Advanced Management Program, Harvard Business School
–
MBA program, International Bankers School, New
York
–
Bachelor’s degree, business administration, University of Applied
Sciences, St. Gallen
Non-listed company boards
–
Vice Chairman of the Board of Directors of Pilatus Aircraft Ltd
–
Member of the Board of Directors of Ringier AG
Other activities and functions
–
Vice Chairman of the Board of Directors of UBS Group AG
–
Member of the Board and Board Committee of economiesuisse
–
Chairman of the Employers Association of Banks in
Switzerland
–
Member of the Board of Directors of the Swiss Employers Association
–
Member of the Board of Directors and the Board of Directors
Committee of the Swiss Bankers Association
–
Member of the Board of the Swiss Finance Council
–
Member of the Board of Trustees of Avenir Suisse
Key competencies
–
Banking (wealth management, asset management, personal
and
corporate banking)
and insurance
–
Finance, audit, accounting
–
Risk management, compliance and legal
–
Human resources management, including compensation
Leadership experience
–
CEO, Chairman
Jeremy Anderson
Independent and non-executive member of the
Board since
2018
–
Chairperson of the Audit Committee since 2018
Nationality:
Year of birth:
Jeremy Anderson is a financial services veteran, with more than 30 years’
experience working
in the
banking and
insurance sector
in an
advisory
capacity,
covering a broad
range of topics,
including strategy,
audit and
risk management,
technology-enabled transformation,
mergers, and
bank
restructuring. Before retiring from KPMG in
2017, he was its
Chairman of
Global Financial Services.
Mr. Anderson is also an IT
expert, having started
out
as
a
software
developer
in
the
early
1980s,
before
working
in
IT
consulting and developing a broad
knowledge of systems integration
and
IT outsourcing services,
as well as
software development.
He cemented
his
reputation as a
tech specialist by
becoming a
founding sponsor
of KPMG’s
Global Fintech Network in 2014.
Professional experience
2010 – 2017
Chairman of Global Financial Services, KPMG International
2008 – 2011
Head of Clients and Markets KPMG Europe, KPMG
International
2006 – 2011
Head of Financial Services KPMG Europe, KPMG
International
2004 – 2006
Head of Financial Services KPMG UK, KPMG International
2002 – 2004
Member of the Group Management Board and Head of
UK operations, Atos Origin SA
1985 – 2002
KPMG consulting UK, KPMG
1980 – 1985
Software developer, Triad
Computing Systems
Education
–
Bachelor’s degree, economics, University College London
Listed company boards
–
Member of the Board of Prudential plc (chair of the
risk committee)
Non-listed company boards
–
Chairman of Lamb’s Passage Holding Ltd
Other activities and functions
–
Member of the Board of Directors of UBS Group AG
–
Member of the Board of Credit Suisse International
–
Trustee of the UK’s Productivity Leadership Group
Key competencies
–
Banking (wealth management, asset management, personal
and
corporate banking)
and insurance
–
Finance, audit, accounting
–
Risk management, compliance and legal
–
Technology,
including artificial intelligence and cybersecurity
Leadership experience
–
Executive board leadership
Annual Report 2024 |
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115
Claudia Böckstiegel
Independent and non-executive member of the Board since
2021
Nationality:
Year of birth:
Claudia
Böckstiegel
has
been
General
Counsel
and
a
member
of
the
Enlarged
Executive
Committee
of
Roche
Holding
AG
since
2020.
She
started
her
professional
career
as
an
attorney
in
private
practice
in
Germany,
then
joined
the
Swiss
pharmaceutical
company
Roche
in
Germany in 2001
and subsequently
held various global
legal management
positions in Switzerland. Ms. Böckstiegel brings a wealth
of know-how in
a highly regulated
sector,
including safety,
health,
and environment and
sustainability.
Her responsibilities
at Roche
Holding AG
include a
broad
range of topics, such as patents, audit and risk
advisory, and compliance.
Professional experience
2020 – date
General Counsel and member of the Enlarged Executive
Committee, Roche Holding AG
2016 – 2020
Head of Legal Diagnostics, F. Hoffmann-La Roche Ltd,
Basel, Switzerland, Roche Group
2010 – 2016
Head Legal Business, Roche Diagnostics International
Ltd,
Rotkreuz, Switzerland, Roche Group
2005 – 2010
Head Legal Business, Roche Diagnostics GmbH,
Mannheim, Germany, Roche Group
2001 – 2005
Legal Counsel, Roche Diagnostics GmbH, Mannheim,
Germany, Roche Group
1995 – 2001
Attorney (Partner), Philipp Littig, Mannheim, Germany
1992 – 1995
Attorney (Associate), Dr. Hermann Büttner, Karlsruhe,
Germany
Education
–
Master’s degree, law, Universities of Mannheim and Heidelberg
–
Master of Laws (LL.M.), Georgetown University, Washington, DC
Listed company boards
–
Member of the Enlarged Executive Committee of Roche
Holding AG
Other activities and functions
–
Member of the Board of Directors of UBS Group AG
–
Member of the Chairman’s Committee of the Board of
the Chamber
of Commerce Germany-Switzerland
Key competencies
–
Finance, audit, accounting
–
Risk management, compliance and legal
–
Regulatory authority, central bank
–
Environmental, social and governance (ESG)
Leadership experience
–
Executive board leadership
William C. Dudley
Independent and non-executive member of the Board since
2019
–
Member of the Risk Committee since 2019
Nationality:
Year of birth:
William C. Dudley served as
the President and CEO of the
Federal Reserve
Bank of New York for nine
years. He demonstrated
exceptional leadership
in monetary
policy and as
a top
regulator,
including during the
years of
the global financial crisis. During that period, his additional area
of focus
included
cultural
behavior
and
social
and
governance
topics
in
the
financial
services
industry.
He
also
served
as
the
Vice
Chairman
and
a
permanent member of the Federal Open Market Committee. Mr.
Dudley
brings a
wealth of
experience in
banking and
research thanks
to his
former
management positions at
Goldman Sachs
Group and
Morgan Guaranty
Trust.
Professional experience
2009 – 2018
President and CEO, the Federal Reserve Bank of New York
2007 – 2009
Executive Vice President and Head Markets Group,
the Federal Reserve Bank of New York
2006
Senior advisor (part-time), Goldman Sachs Group
2002 – 2005
Partner and Director US Economic Research Group,
Goldman Sachs Group
1996 – 2002
Managing Director and Director US Economic Research
Group, Goldman Sachs Group
1983 – 1996
Economist at Goldman Sachs Group, Morgan Guaranty
Trust Company,
and Board of Governors of the Federal
Reserve System
Education
–
Bachelor of Arts, New College of Florida
–
Doctorate, economics, University of California, Berkeley
Non-listed company boards
–
Member of the Advisory Board of Suade Labs
Other activities and functions
–
Member of the Board of Directors of UBS Group AG
–
Senior Advisor to the Griswold Center for Economic Policy
Studies,
Princeton University
–
Member of the Group of Thirty
–
Member of the Council on Foreign Relations
–
Chairman of the Bretton Woods Committee Board of Directors
–
Member of the Board of the Council for Economic
Education
Key competencies
–
Investment banking, capital markets
–
Risk management, compliance and legal
–
Regulatory authority, central bank
–
Environmental, social and governance (ESG)
Leadership experience
–
CEO, Chairman
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116
Patrick Firmenich
Independent and non-executive member of the Board since
2021
–
Member of the Audit Committee since 2021
Nationality:
Year of birth:
Patrick Firmenich
was Chairman
of the
Board of
Firmenich International
SA, a privately owned
fragrances and flavorings company,
from 2016 to
2023 and
its CEO
for 12
years. In
2023, he
became Vice
Chairman of
dsm–firmenich,
a
listed
company.
He
has
demonstrated
his
entrepreneurial
leadership
by
significantly
advancing
the
Firmenich
group’s
global
position
through
organic
and
in-organic
growth
and
succeeded in
transforming the
organization to
continuously respond
to
client
needs
and
the
market
environment.
He
developed
an
ambitious
sustainability strategy for the group
to lead the industry
in health, safety
and environmental performance.
Before joining Firmenich,
he held several
positions
in
the
legal
and
banking
sectors,
including
working
as
an
international investment banking analyst.
Professional experience
2016 – 2023
Chairman of the Board of Firmenich International
SA,
Geneva
2014 – 2016
Vice Chairman of the Board, Firmenich International
SA,
Geneva
2002 – 2014
CEO, Firmenich SA, Geneva
2001 – 2002
Corporate Vice President, Special Operations,
Firmenich SA, Geneva
1997 – 2001
Vice President Fine Fragrance worldwide and
Président Directeur Général, Firmenich Cie, Paris,
and Firmenich Inc, New York
1993 – 1997
Vice President Fine Fragrance North America,
Firmenich Inc, New York
1990 – 1993
Account Manager, Firmenich Cie, Paris
1988 – 1989
Analyst, International Investment Banking,
Credit Suisse
First Boston
1988
Production administrator, Firmenich SA de CV, Mexico
1984 – 1986
Attorney, Business Law, Patry,
Junet, Simon Le Fort,
Geneva
Education
–
Master’s degree, law, University of Geneva, admitted to the bar
in Geneva
–
MBA, INSEAD Fontainebleau
Listed company boards
–
Vice Chairman of the Board of dsm–firmenich (chair of
the
governance and nomination committee)
Other activities and functions
–
Member of the Board of Directors of UBS Group AG
–
Member of the Board of Directors of INSEAD and La Fondation
Mondiale INSEAD
–
Member of the Advisory Council of the Swiss Board Institute
Key competencies
–
Finance, audit, accounting
–
Risk management, compliance and legal
–
Human resources management, including compensation
–
Environmental, social and governance (ESG)
Leadership experience
–
CEO, Chairman
Fred Hu
Independent and non-executive member of the Board since
2018
–
Member of the Compensation Committee since 2024
Nationality:
Year of birth:
Fred Hu has been the Chairman and CEO of Primavera Capital Group, an
Asia-based private investment firm focused on emerging technology and
innovative industries, since
founding it
in 2010.
In that
role he
oversees
the
overall
strategy,
talent
development, and
culture
and
assumes
the
primary
responsibilities
for
establishing
and
maintaining
the
long-term
partnerships
with
global
investors.
Prior
to
that,
he
was
a
Partner
and
Chairman for
Greater China
at Goldman
Sachs. Mr.
Hu has
a profound
understanding
of
China’s
economy
and
rapidly
developing
financial
system,
and
a
vast
amount
of
experience
in
founding,
advising
and
investing in leading firms in
the tech, consumer and
health-care sectors in
China and
globally.
He has
worked at
the IMF
and advised
the Chinese
government on economic policy.
Professional experience
2010 – date
Founder, Chairman and CEO, Primavera Capital Group,
China
2008 – 2010
Partner and Chairman of Greater China, Goldman Sachs
2004 – 2008
Partner and Co-Head, Investment Banking, China,
Goldman Sachs
Education
–
Master’s degree, engineering science, Tsinghua University
–
Master’s degree and doctorate, economics, Harvard University
Listed company boards
–
Non-executive Chairman of the Board of Yum China Holdings (chair
of the nomination and governance committee)
–
Member of the Board of ICBC (chair of the nomination
committee)
Non-listed company boards
–
Chairman of Primavera Capital Ltd
Other activities and functions
–
Member of the Board of Directors of UBS Group AG
–
Trustee of the China Medical Board
–
Co-Chairman of the Nature Conservancy Asia Pacific Council
–
Member of the Board of Trustees, the Institute for Advanced Study
Key competencies
–
Banking (wealth management, asset management, personal
and
corporate banking)
and insurance
–
Investment banking, capital markets
–
Technology,
including artificial intelligence and cybersecurity
–
Regulatory authority, central bank
Leadership experience
–
CEO, Chairman
Annual Report 2024 |
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117
Mark Hughes
Independent and non-executive member of the Board since
2020
–
Chairperson of the Risk Committee since 2020
Nationality:
Year of birth:
Mark Hughes is a highly experienced professional in the financial services
sector, having spent more than 35 years working for RBC (the
Royal Bank
of Canada) in Canada, the US and
the UK. In his final role as Group
Chief
Risk Officer of RBC, he
was responsible for the strategic management of
risk on an enterprise-wide basis and oversaw all risk functions. During
his
career, Mr. Hughes has also
held senior
management positions
in the
front
office and key operational roles. Currently, he is a frequent lecturer
at the
University of
Leeds and
the University
of Manchester
(both in
England) and
is
chair
of
the
Global
Risk
Institute,
bringing
an
enormous
amount
of
experience as a risk specialist to the Board of Directors of UBS.
Professional experience
2014 – 2018
Group Chief Risk Officer and member
Group Executive Committee, RBC
2013
Deputy Chief Risk Officer, RBC
2008 – 2013
COO, RBC Capital Markets, RBC
2001 – 2008
Head of Global Credit, RBC
1999 – 2001
Head of Debt Products, RBC
1998 – 1999
Senior Vice President and General Manager USA, RBC
1997 – 1998
Senior Vice President Financial Services, RBC
1982 – 1996
Various positions, RBC
Education
–
Bachelor of Laws (LL.B.), University of Leeds
–
MBA, finance, University of Manchester
Other activities and functions
–
Member of the Board of Directors of UBS Group AG
–
Chair of the Board of Directors of the Global Risk Institute
–
Senior advisor to McKinsey Company
Key competencies
–
Banking (wealth management, asset management,
personal and corporate banking) and insurance
–
Investment banking, capital markets
–
Risk management, compliance and legal
–
Technology,
including artificial intelligence and cybersecurity
Leadership experience
–
Executive board leadership
Gail Kelly
Non-independent and non-executive member of the
Board
since 2024
Nationality:
Year of birth:
Gail Kelly brings to the
board more than 35
years of banking experience
in South Africa
and Australia.
She served
as the Group
CEO and
Managing
Director for two banks in Australia: St. George
Bank, from 2002 to 2007,
followed by
Westpac Banking
Corporation, from
2008 to
2015. During
her tenure as
CEO, Ms. Kelly
navigated Westpac through the
challenges
of the global financial crisis in 2008 and 2009 and
the successful merger
with
St.
George
Bank
in
2008,
the
largest
in-market
financial
services
merger
in
Australia.
At
the
time
of
her
retirement
from
that
firm,
the
Westpac Group was the
12th largest bank
in the world
in terms of
market
capitalization. After
her executive
career,
Ms. Kelly
continues to
hold a
portfolio
of
roles,
leveraging
her
experience
and
insights
as
a
global
leader. She was a Senior Global Advisor for UBS from 2016 to 2023.
Professional experience
2008 – 2015
Group CEO and Managing Director,
Westpac Banking Corporation
2002 – 2007
Group CEO and Managing Director, St. George Bank
1999 – 2001
Group Executive, Customer Service Division,
Commonwealth Bank of Australia
1997 – 1999
Group Manager, Strategic Marketing, Commonwealth
Bank of Australia
1990 – 1997
Various General Manager positions, Nedbank Group,
South Africa
Education
–
Bachelor of Arts, the University of Cape Town
–
MBA, University of Witwatersrand,
Johannesburg
Listed company boards
–
Member of the Board of Singtel Communications (chair of
the
executive resource and compensation committee)
Other activities and functions
–
Member of the Board of Directors of UBS Group AG
–
Member of the Group of Thirty
–
Member of the Board of Directors of the Bretton Woods Committee
–
Member of the Board of Directors of the Australia Philanthropic
Services
–
Member of the Australian American Leadership
Dialogue Advisory
Board
–
Senior advisor to McKinsey Company
Key competencies
–
Banking (wealth management, asset management, personal
and
corporate banking) and insurance
–
Investment banking, capital markets
–
Human resources management, including compensation
–
Regulatory authority, central bank
Leadership experience
–
CEO, Chairman
Annual Report 2024 |
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118
Nathalie Rachou
Independent and non-executive member of the Board since
2020
–
Member of the Audit Committee since 2024
Nationality:
Year of birth:
Nathalie Rachou is
a seasoned expert
in financial
services, having held
a
number of banking positions, such as CEO
of Prime Brokerage and head
of a business line in
Capital Markets at Crédit Agricole
Indosuez in the UK
and in France. In 1999, she
founded a London-based asset management
company that
merged with
a French
asset manager and
continued as a
senior
adviser
until
2020.
Alongside
these
roles,
Ms.
Rachou
brings
extensive experience from serving
as a board member
of Société Générale
for
12
years.
Currently,
she
sits
on
the
boards
of
two
other
listed
companies:
the
pan-European
bourse,
Euronext
N.V.
,
and
Lancashire
Holdings Limited,
a provider of
global insurance
and reinsurance products.
Professional experience
2015 – 2020
Senior Advisor, Clartan Associés
(formerly Rouvier Associés), France
1999 – 2014
Founding partner and CEO,Topiary Finance Ltd, UK
1996 – 1999
Head of Global Foreign Exchange and Currency Options,
Crédit Agricole Indosuez (formerly Banque Indosuez), UK
1991 – 1996
Corporate Secretary and Secretary to the
Board of Directors, Crédit Agricole Indosuez, France
1986 – 1991
COO, Carr Futures, France (owned by Banque Indosuez),
Crédit Agricole Indosuez, France
1983 – 1986
Head of Asset and Liability Management Market Risks,
Crédit Agricole Indosuez, France
1978 – 1982
Position in Forex Exchange Sales, Crédit Agricole Indosuez,
France and UK
Education
–
Master’s degree, management, HEC Paris
–
MBA, INSEAD Fontainebleau
Listed company boards
–
Member of the Board of Euronext N.V.
(chair of the remuneration committee)
–
Member of the Board of Lancashire Holdings Limited
Non-listed company boards
–
Member of the Board of the African Financial Institutions
Investment
Platform
Other activities and functions
–
Member of the Board of Directors of UBS Group AG
–
Member of the Board of Directors of Fondation Léopold Bellan
Key competencies
–
Banking (wealth management, asset management,
personal and corporate banking) and insurance
–
Investment banking, capital markets
–
Finance, audit, accounting
–
Risk management, compliance and legal
Julie G. Richardson
Independent and non-executive member of the Board since
2017
–
Chairperson of the Compensation Committee since 2019
–
Member of the Risk Committee since 2017
Nationality:
Year of birth:
Julie G. Richardson
spent more
than 25 years
on Wall
Street as a
senior
investment banker and
private equity investor,
with a focus
on telecom,
media
and
technology.
She
began
her
career
at
Merrill
Lynch,
before
moving to JPMorgan Chase, where she
headed the telecommunications,
media and technology investment banking
group. Later,
she moved into
private equity, as head, and subsequently senior advisor, of the New York
office
of
Providence
Equity
Partners,
where
she
spearheaded
many
important
investments
and
buyouts.
Throughout
her
career,
Ms.
Richardson has
spent substantial amounts
of time
with both
incumbent
and new technology
companies, acting as
an independent board
member
of a digital
knowledge management
company,
a leading
cloud monitoring
firm and a cyber insurance company.
Professional experience
2012 – 2014
Senior advisor, Providence Equity Partners, New York
2003 – 2012
Partner and Head of the New York office,
Providence Equity Partners, New York
1998 – 2003
Vice Chairman of the Investment Banking division
of
JPMorgan Chase Co. and Head of its Global
Telecommunications, Media and Technology
group
1986 – 1998
Various positions
at Merrill Lynch, final position: Managing
Director Media and Communications Investment Banking
Education
–
Bachelor’s degree, business administration, University of
Wisconsin–Madison
Listed company boards
–
Member of the Board of Yext (chair of the audit committee) (stepped
down in February 2025)
–
Member of the Board of Datadog (chair of the audit committee)
Non-listed company boards
–
Member of the Board of Fivetran
–
Member of the Board of Coalition, Inc.
Other activities and functions
–
Member of the Board of Directors of UBS Group AG
Key competencies
–
Investment banking, capital markets
–
Risk management, compliance and legal
–
Human resources management, including compensation
–
Technology,
including artificial intelligence and cybersecurity
Annual Report 2024 |
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119
Jeanette Wong
Independent and non-executive member of the Board since
2019
–
Member of the Compensation Committee since 2020
–
Member of the Audit Committee since 2019
Nationality:
Year of birth:
Jeanette Wong has
more than 30
years of operational
experience in the
financial sector in Singapore. She retired from DBS Group in 2019,
where
she
was
Group
Executive
responsible
for
the
institutional
banking
business, a post that encompassed corporate banking, global transaction
services,
strategic
advisory,
and
mergers
and
acquisitions.
She
has
also
held the positions of
Director of DBS Bank
(China) Limited, Chairperson
of
DBS Bank (Taiwan)
Ltd and CFO
of DBS Group.
During a
16-year career
with JPMorgan, Ms. Wong helped build up
its Asia FX, fixed income and
emerging markets business. She brings extensive experience from serving
as a member
of the board
of directors of
two high-value listed
companies.
Professional experience
2008 – 2019
Group Executive institutional banking business, DBS Bank,
Singapore
2003 – 2008
CFO, DBS Bank, Singapore
2003
Chief Administration Officer, DBS Bank, Singapore
1997 – 2002
Country Manager Singapore, JPMorgan, Singapore
1986 – 1997
Various roles in Global Markets and Emerging Markets
Sales and Trading business, Asia, JPMorgan, Singapore
1984 – 1986
Manager, Private Banking, Citibank, Singapore
1982 – 1984
Manager, Corporate Banking, Paribas, Singapore
Education
–
Bachelor’s degree, business administration, the National University
of Singapore
–
MBA, University of Chicago
Listed company boards
–
Member of the Board of Prudential plc
–
Member of the Board of Singapore Airlines Limited
Non-listed company boards
–
Member of the Board of GIC Pte Ltd
–
Member of the Board of PSA International
–
Member of the Board of Pavilion Capital Holdings Pte Ltd
Other activities and functions
–
Member of the Board of Directors of UBS Group AG
–
Chairman of the CareShield Life Council
–
Member of the Securities Industry Council
–
Member of the Board of Trustees of the National University
of Singapore
Key competencies
–
Banking (wealth management, asset management,
personal and corporate banking) and insurance
–
Investment banking, capital markets
–
Finance, audit, accounting
–
Environmental, social and governance (ESG)
Leadership experience
–
Executive board leadership
Markus Baumann
Company Secretary since 2017
Nationality:
Year of birth:
1963
Markus Baumann
joined UBS
in 1979
as a
banking apprentice
and has now been with the firm for more than 40 years.
He has
held
a
broad
range
of
leadership
roles
across
the
Group
in
Switzerland, the US
and Japan, including
COO EMEA for
Asset
Management and COO of Group Internal Audit. Since 2015, he
has supported the
Chairmen of the Board
of Directors as
Chief
of Staff and later as Group Company Secretary.
Professional experience
2017 – date
Group Company Secretary of UBS Group AG and
Company Secretary of UBS AG
2015 – 2016
Chief of Staff to the Chairman of the
Board of Directors, UBS
2006 – 2015
COO, Group Internal Audit, UBS
2005 – 2006
Head Global Reporting Controlling, Global
Asset Management, UBS
2002 – 2004
Head Management Support CEO EMEA, Global
Asset Management, UBS
1998 – 2002
COO EMEA, Global Asset Management, UBS
1979 – 1997
Various positions, Union Bank of Switzerland
Education
–
Swiss Federal Diploma as a Business Analyst
–
MBA, INSEAD Fontainebleau
Other activities and functions
–
Chairman of the Board of Directors of the Savoy Baur en
Ville, Zurich
Annual Report 2024 |
Corporate governance
120
Elections and terms of office
UBS AG’s sole shareholder,
UBS Group AG, annually elects each member of the
BoD individually.
Organizational principles and structure
Following
each
AGM,
the
BoD meets
to
appoint
one
or
more
Vice
Chairmen,
the
BoD committee
members
and the
respective committee
Chairpersons. At
the same meeting,
the BoD appoints
the Company Secretary,
who, pursuant to
the Organization Regulations, acts as secretary
to the BoD and its committees.
Pursuant to the AoA and the Organization Regulations, the BoD meets as often as business requires, but it must meet at
least six times a year. In 2024, the BoD met 32 times jointly with the Board of Directors of UBS Group AG and four times
in standalone UBS AG meetings.
BoD committees
The committees listed below
assist the BoD in fulfilling
the performance of its responsibilities.
Each committee meets as
often as its business requires, but at least four times a year for the Audit Committee, the Compensation Committee and
the Risk Committee.
Audit Committee
Throughout 2024, the
Audit Committee consisted
of four independent BoD
members; Jeremy
Anderson (Chairperson),
Patrick
Firmenich,
Dieter
Wemmer
and
Jeanette
Wong.
After
the
AGM,
Nathalie
Rachou
joined
the
committee
after
Dieter
Wemmer
stepped
down
from
the
BoD.
All
Audit
Committee
members
have
accounting
or
related
financial
management expertise
and, in
compliance with
the rules
established pursuant
to the
2002 US
Sarbanes–Oxley Act,
at
least one
member qualifies
as a
financial expert.
The NYSE
standards on
corporate governance
and Rule
10A-3 under
the US
Securities Exchange
Act set
more stringent
independence requirements
for members
of audit
committees than
for the other members of the BoD. Throughout 2024, all members of
the Audit Committee satisfied these requirements,
in that they did not receive, directly or indirectly, any consulting, advisory
or compensatory fees from any member of the
Group other than in their capacity
as a BoD member,
did not hold, directly or indirectly,
UBS AG shares in excess of 5%
of the
outstanding capital,
and did
not serve
on the
audit committees
of more
than two
other public
companies.
The
function of the Audit Committee is to support the Board in fulfilling
its oversight duty relating to financial reporting
and
internal controls
over financial
reporting,
the effectiveness
of the
external and
internal audit
functions,
as well
as the
whistleblowing procedures.
Management is
responsible
for the
preparation, presentation
and integrity
of the
financial
statements,
while
the
external
auditors
are
responsible
for
auditing
financial
statements.
The
Audit
Committee’s
responsibility is one of oversight and review
.
Compensation Committee
Throughout
2024,
the
Compensation
Committee
consisted
of
three
independent
BoD
members,
Julie
G.
Richardson
(Chairperson), Dieter Wemmer
and Jeanette
Wong;
at the
AGM, Fred Hu
joined the
committee replacing Dieter
Wemmer,
who stepped down from the BoD. The function of
the Compensation Committee is to support the Board
in its duties to
set guidelines on compensation and
benefits, to oversee implementation
thereof, to approve
certain compensation and
to scrutinize executive performance.
Risk Committee
In
2024,
the
Risk
Committee
consisted
of
four
independent
BoD
members,
Mark
Hughes
(Chairperson),
William
C.
Dudley,
Nathalie
Rachou,
Julie
G.
Richardson
and
the
Vice
Chairman,
Lukas
Gähwiler.
Immediately
after
the
AGM,
Nathalie Rachou stepped down
from this committee.
The function of the Risk
Committee is to oversee
and support the
Board in fulfilling its duty to set and supervise an
appropriate risk management and control
framework in the areas of:
(i)
financial and non-financial risks; and
(ii)
balance sheet, treasury and capital management,
including funding, liquidity and equity attribution.
Cybersecurity governance
Cybersecurity,
as one of the
inherently highest and
most rapidly evolving
non-financial risks,
is a key focus
for the BoD.
It is primarily
covered by
the Risk
Committee through
a combination
of (i) regular
reporting as part
of the
monthly risk
reports
and
quarterly
cybersecurity
updates,
and
(ii) dedicated
deep
dives
on
specific
cybersecurity
topics,
including
assessments
of
actual
cybersecurity
incidents
in
the
industry,
assessments
of
the
firm’s
security
posture
and
related
continuous
improvement
measures.
In
addition,
the
BoD
members
receive
periodic
updates
from
the
Group
Chief
Information Security Office on key cybersecurity threats and
incidents across the globe and industries, and
education and
training sessions are organized regularly for
all BoD members.
Annual Report 2024 |
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121
With respect
to the BoD,
Jeremy Anderson, Fred
Hu, Mark Hughes
and Julie G.
Richardson all have
expertise in technology
and cybersecurity.
Mr. Anderson
is an
IT expert,
having started
out as
a software
developer in
the early
1980s, before
working in IT
consulting and
developing a broad
knowledge of systems
integration and
IT outsourcing
services, as well
as software development.
He cemented
his reputation as
a tech specialist
by becoming a
founding sponsor
of KPMG’s
Global Fintech Network in
2014. Mr. Hu has
a master’s degree
in engineering science
from Tsinghua University and
has
a vast amount of
experience in founding,
advising and investing
in leading firms
in the tech,
consumer and health-care
sectors in China and globally. Mr. Hughes gained substantial experience overseeing cybersecurity risk as the Group Chief
Risk Officer
at Royal
Bank of
Canada.
As current
chair of
the Global Risk
Institute, he
brings additional
know-how as
a
risk specialist
to the
BoD. Finally,
Ms. Richardson
has spent
significant time
with both
incumbent and
new technology
companies, including being a board member
of a digital knowledge management company, a
leading cloud monitoring
firm and a cyber insurance company.
The BoD is
supported in overseeing risk
at the executive management
level by the
cybersecurity expertise of Mike
Dargan,
who is the Group Chief
Operations and Technology Officer, and Markus Ronner,
who is the Group Chief
Compliance and
Governance
Officer.
Mr.
Dargan
is responsible
for
delivering
digital
platforms,
technology
services,
infrastructure,
and
operations,
including
cybersecurity
and
information
security.
Previously,
he
was
Group
Chief
Digital
and
Information
Officer, after leading our Group Technology function since joining UBS
in 2016. In addition to this remit, he
was also UBS
Group AG’s
Group Executive
Board (GEB)
sponsor for
our digital
assets strategy
and a
sponsor of
artificial intelligence
and our agile transformation, which were
integrated into his area of responsibility
in 2023. Prior to joining UBS, he
held
various senior roles in technology, corporate strategy and investment banking at
Standard Chartered Bank, Merrill Lynch,
and Oliver
Wyman. Mr.
Ronner has
been with
UBS for
more than
40 years
and held
various positions
across the
firm,
including manager of the Group-wide
too-big-to-fail program, COO Wealth
Management Swiss Bank, Head
Products
and Services
of Wealth
Management
Swiss
Bank,
COO
Asset
Management,
and
Head
Group
Internal
Audit.
In his
current position, he
is responsible for
overseeing compliance,
financial crime prevention
and operational risk
control,
as
well as regulatory and governance functions at the Group
level.
›
Refer to “Non-financial risk” in the “Risk
management and control” section of this report for information
about cybersecurity
Important business connections of independent members
of the Board of Directors
As a
global
financial
services
provider
and
a
major
Swiss
bank,
we
enter
into
business
relationships
with
many
large
companies, including some in which BoD members have
management or independent board responsibilities.
Our
Organization
Regulations
require
one-third
of
UBS AG
BoD
members
to
be
independent.
For
this
purpose,
independence is determined in accordance with FINMA Circular 2017/1
“Corporate governance – banks” and the NYSE
rules.
In 2024, our BoD met the standards of the Organization Regulations for the percentage
of directors who are considered
independent under the criteria described above.
All relationships
and transactions
with
UBS
AG’s independent
BoD members
are
conducted in
the
ordinary
course
of
business
and
are
on
the
same
terms
as
those
prevailing
at
the
time
for
comparable
transactions
with
non-affiliated
persons. All relationships and transactions with BoD members’
associated companies are conducted at arm’s length.
Checks and balances: Board of Directors and Executive Board
We
operate
under a
strict dual
board
structure,
as mandated
by Swiss
banking law.
The separation
of responsibilities
between
the
BoD
and
the
EB
is
clearly
defined
in
the
Organization
Regulations.
The
BoD
decides
on
the
strategy
of
UBS AG,
upon
recommendations
by
the
President
of
the
EB,
and
exercises
ultimate
supervision
over
management;
whereas the EB, headed by the President of the
EB, has executive management responsibility. The functions of Chairman
and President of the
EB are assigned to
two different people, leading to a
separation of powers. This structure establishes
checks and
balances and
preserves the
institutional independence
of the
BoD from
the executive
management of
UBS
AG, for which responsibility
is delegated to the
EB, under the
leadership of the
President of the
EB. No member
of one
board may simultaneously be a member of the
other.
Supervision and
control of
the EB remain
with the
BoD. The authorities
and responsibilities of
the two
bodies are
governed
by the AoA and the Organization Regulations.
Although the recruiting process for
BoD and EB members takes
into account a broad spectrum of
factors, such as skills,
backgrounds,
experience
and
expertise,
our
approach
with
regard
to
diversity
considerations
does
not
constitute
a
diversity policy within the
meaning of the EU
Directive on Non-Financial
Reporting, and Swiss
law does not require
UBS
to maintain such a policy.
Annual Report 2024 |
Corporate governance
122
Executive Board
The BoD delegates the management of the business to the
Executive Board (the EB).
Responsibilities, authorities and organizational principles
of the Executive Board
At UBS AG,
management of the
business is also
delegated, and its
EB, under the
leadership of the
President of
the EB,
has executive management
responsibility for UBS
AG and its business.
All members of
the EB are
members of the
GEB.
Sabine Keller-Busse, who serves as President UBS Switzerland AG, and Ulrich Körner, who served as CEO of Credit Suisse
AG until 30 June 2024, are both not members
of the EB. In 2024, the EB held 31 combined meetings with
the GEB and
four UBS AG standalone meetings.
UBS AG
EB
has two
permanent
committees:
the
Asset
and Liability
Committee
(the
ALCO) and
the
Finance
and Risk
Committee (the FRC).
The ALCO
is responsible
for managing
UBS AG’s
assets and
liabilities in
line with
the UBS
AG and
Group strategy
and
regulatory requirements. In 2024, the ALCO held 11 meetings.
The FRC is responsible for supervising and controlling UBS AG’s business, financial
and risk profile of the overall UBS AG
standalone as well as the entity’s business activities in Switzerland
and cross-jurisdictional branch-related matters, in line
with the UBS AG and Group strategy and regulatory
requirements. The FRC is also responsible for
ensuring the financial
and risk profile of UBS AG
standalone complies with the agreed risk appetite, by
ascertaining that appropriate and timely
actions are taken. In 2024, the FRC held four meetings.
Executive Board
Position
Initial
appointment
to the EB
Step-down
date
UBS business address
Sergio P.
Ermotti
President of the Executive Board
(also from 2011 to 2020)
2023
Bahnhofstrasse 45, 8001 Zurich, Switzerland
George
Athanasopoulos
Co-President Investment Bank
1.7.2024
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Michelle Bereaux
Integration Officer
2023
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Michael Dargan
Chief Operations and Technology Officer
2021
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Aleksandar Ivanovic
President Asset Management
1.3.2024
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Robert Karofsky
Co-President Global Wealth Management
and President UBS Americas
2018
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Iqbal Khan
Co-President Global Wealth Management
and President UBS Asia Pacific
2019
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Barbara Levi
General Counsel
2021
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Beatriz Martin
Jimenez
Head Non-core and Legacy and
President UBS Europe, Middle East and
Africa
2023
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Markus Ronner
Chief Compliance and Governance Officer
2018
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Stefan Seiler
Head Human Resources Corporate
Services
2023
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Todd Tuckner
Chief Financial Officer
2023
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Marco Valla
Co-President Investment Bank
1.7.2024
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Damian Vogel
Chief Risk Officer
1.7.2024
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Christian Bluhm
Chief Risk Officer
2016
1.7.2024
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Suni Harford
President Asset Management
2019
1.3.2024
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Naureen Hassan
President UBS Americas
2022
1.7.2024
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Edmund Koh
President UBS Asia Pacific
2019
1.9.2024
Bahnhofstrasse 45, 8001 Zurich, Switzerland
The following biographies provide information about the
EB members in office on 31 December 2024.
Annual Report 2024 |
Corporate governance
123
Sergio P.
Ermotti
President of the Executive Board,
member of the EB
from 2011 to 2020 and since 2023
Nationality:
Year of birth:
Sergio P. Ermotti has been Group CEO of UBS Group
AG and President of
the Executive Board
of UBS AG since
2023. He was also
the Group CEO
from
2011
to
2020.
He
re-joined
UBS
from
Swiss
Re,
where
he
was
Chairman of
the Board
of
Directors
until
2023. Prior
to
joining UBS
in
2011, he was at UniCredit
Group, where from 2007 to 2010
he served as
Group
Deputy CEO
and Head
of Corporate
Investment Banking
and
Private
Banking,
prior
to
which
he
served
as
Head
of
the
Markets
Investment
Banking
Division.
Before
that,
he
held
various
positions
at
Merrill Lynch Co. in the areas of equity derivatives and capital markets.
He
became
Co-Head
of
Global
Equity
Markets
and
a
member
of
the
Executive
Management
Committee
for
Global
Markets
Investment
Banking in 2001.
Professional experience
2023 – date
Group CEO, UBS Group AG, and
President of
the Executive Board,
UBS AG
2021 – 2023
Chairman of the Board of Directors, Swiss Re
2020 – 2021
Member of the Board of Directors, Swiss Re
2011 – 2020
Group CEO, UBS
2011
Chairman and CEO UBS Group Europe, Middle East and
Africa, and member of the Group Executive Board,
UBS
2007 – 2010
Group Deputy CEO and Head Corporate Investment
Banking and Private Banking, UniCredit
2005 – 2007
Head Markets Investment Banking Division, UniCredit
1987 – 2004
Various senior management positions, Merrill Lynch Co
Education
–
Swiss-certified banking expert
–
Advanced Management Programme, the University of Oxford
Listed company boards
–
Member of the Board of Ermenegildo Zegna N.V. (Lead Non-Executive
Director)
Non-listed company boards
–
Member of the Board of Società Editrice del Corriere del Ticino
SA
Other activities and functions
–
Group CEO of
UBS Group AG
–
Member of the Board of Innosuisse,
the Swiss Innovation Agency
–
Member of Institut International d’Etudes Bancaires
–
Member of the WEF International Business Council
and Governor of
the Financial Services / Banking Community
–
Member of the MAS International Advisory Panel
–
Member of the Board of the Institute of International
Finance
–
Member of the Board of the Swiss-American Chamber of
Commerce
Annual Report 2024 |
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124
George Athanasopoulos
Co-President Investment Bank,
member of the EB since July 2024
Nationality:
Year of birth:
George Athanasopoulos became Co-President of the
Investment Bank in
July
2024.
He
jointly
manages
the
Investment
Bank
with
Marco
Valla
across all regions
to ensure an
unparalleled global offering for
our client
franchise. Having worked in financial markets for more than 30 years, he
brings a
wealth of
experience into
the position.
He started
his career
in
1992, working in
Europe and Asia
for NatWest Markets
and Merrill Lynch.
Before joining
UBS in
2010, he
was General
Manager at
Eurobank EFG
and previously worked for Barclays Capital,
most recently responsible for
Global Foreign Exchange
and Global Emerging
Markets Distribution.
Since
joining UBS
in 2010,
Mr.
Athanasopoulos has
held various
senior roles,
including Co-Head Global Markets from 2020 to June 2024 and Head of
Global Family and Institutional Wealth from 2022 to June 2024.
Professional experience
July 2024 –
date
Co-President of the Investment Bank,
UBS Group AG and UBS AG
2022 – June
2024
Head Global Family and Institutional Wealth, UBS
2020 – June
2024
Co-Head of Global Markets, UBS
2016 – 2019
Global Head of Foreign Exchange, Rates and Credit and
Head of Non-Core, UBS
2013 – 2016
Global Co-Head of Foreign Exchange,
Rates and Credit, UBS
2011 – 2013
Co-Head of Global Foreign Exchange and
Precious Metals, UBS
2010 – 2011
Head of Global Foreign Exchange Distribution, UBS
2009 – 2010
General Manager, Group Head of Trading, Sales and
Structuring, Eurobank EFG
2008 – 2009
Global Head of Foreign Exchange and Emerging
Markets Distribution, Barclays Capital
2004 – 2008
Various management positions in FX Markets,
Barclays Capital
Education
–
Master’s degree, shipping, trade and finance, Bayes Business
School
–
Diploma in mechanical engineering, the National Technical University
of Athens
Other activities and functions
–
Member of the Group Executive Board of
UBS Group AG
Michelle Bereaux
Integration Officer,
member of the EB since 2023
Nationality:
Year of birth:
Michelle Bereaux
was appointed
Group Integration
Officer,
UBS Group
AG, and
Integration Officer,
UBS AG
in 2023.
Working closely
with all
Group
Executive
Board
(GEB)
members
and
workstream
leads,
she
manages
the
Group
Integration
function
to
ensure
the
coherent
and
consistent execution of
integration plans and milestones
for consolidating
Credit Suisse
into UBS.
Ms. Bereaux
has been
at UBS
for more
than 25
years and has held
various leadership roles across the
firm. She has served
as both COO and Head
HR for our Investment Bank,
has successfully led
multiple firm-wide cost
and transformation projects,
and, most recently,
served as COO and
UK Country Head of
Asset Management. She brings
both
a
wealth
of
transformation
experience
and
a
strong
legal,
HR,
investment
banking
and
asset
management
background
to
lead
our
integration efforts.
Professional experience
2023 – date
Group Integration Officer, UBS Group AG and
Integration Officer, UBS AG
2021 – 2023
Country Head UBS Asset Management UK and
CEO Asset Management UK Ltd
2020 – 2023
COO, UBS Asset Management
2018 – 2020
Head of Group Efficiency and Cost Management,
UBS Business Solutions AG
2015 – 2018
Non-Executive Director and Chairman Remuneration
Committee, UBS Limited
2011 – 2014
Global Head Human Resources, UBS Investment Bank
2011
Global Strategic Projects at CEO Management Office,
UBS Investment Bank
2009 – 2010
Chief of Staff and Joint Global COO,
UBS Investment Bank
Education
–
Bachelor’s degree, law, the University of Cambridge
–
Bachelor’s degree, politics, economics and law, the University of
Buckingham
Other activities and functions
–
Member of the Group Executive Board of
UBS Group AG
Annual Report 2024 |
Corporate governance
125
Mike Dargan
Chief Operations and Technology Officer, member of the EB since
2021
Nationality:
Year of birth:
Mike
Dargan
was
appointed
Group
Chief
Operations
and
Technology
Officer for
UBS Group AG and
Chief Operations and
Technology Officer
for UBS
AG in
2023 and
is accountable
for delivering
digital platforms,
technology
services,
infrastructure,
and
operations,
including
cybersecurity and
information security.
In addition,
he is
responsible for
driving Group-wide innovation and
digitalization by defining and
driving
the implementation of the firm’s strategy for artificial intelligence, digital
assets
and
other
emerging
technologies.
In
his
role,
Mr.
Dargan
also
oversees the
capabilities and
tools to
migrate Credit
Suisse clients
and data
to UBS
platforms, facilitating
the firm’s key
legal entity transactions
and
the decommissioning of the Credit
Suisse applications and infrastructure
after
these
migrations.
Previously,
he
was
Group
Chief
Digital
and
Information Officer (CDIO), after leading our Group Technology
function
since joining UBS
in 2016. Prior
to joining
UBS, he held
various senior roles
in
technology,
corporate
strategy
and
investment
banking
at
Standard
Chartered Bank, Merrill Lynch, and Oliver Wyman.
Professional experience
2023 – date
Group Chief Operations and Technology Officer,
UBS Group AG, and Chief Operations and
Technology Officer,
UBS AG
2021 – date
President of the Executive Board,
UBS Business Solutions AG
2021 – 2023
Group CDIO, UBS Group AG, and CDIO, UBS AG
2016 – 2021
Head Group Technology,
UBS
2015 – 2016
CIO for Corporate and Institutional Banking,
Standard Chartered Bank
2014 – 2015
Global Group Technology and Operations Head for
Global Markets, Wealth Management, Private Banking
and Securities Services, Group Technology and Operations
Engineering, Standard Chartered Bank
2013 – 2014
CIO for Financial Markets, Standard Chartered Bank
2009 – 2013
Global Head of Strategy and Corporate MA,
Global Markets, Standard Chartered Bank
2005 – 2009
Head Corporate Strategy MA, EMEA and Pacific Rim,
Merrill Lynch
Education
–
Master’s degree, politics, philosophy and economics,
St. John’s College, the University of Oxford
Other activities and functions
–
Member of the Group Executive Board of
UBS Group AG
–
Member of the Board of Directors and President of the Executive
Board of UBS Business Solutions AG
–
Member of the Board of UBS Optimus Foundation
–
Member of the Advisory Board of SCION Association
Aleksandar Ivanovic
President Asset Management,
member of the EB since March 2024
Nationality:
Year of birth:
Aleksandar Ivanovic
was appointed
President Asset
Management in
March
2024. With his experience and broad
network across the UBS Group,
he
is leading
the Asset Management
business division forward,
creating an
even
stronger
organization
through
integration
and
providing
cross-
divisional solutions to
clients with industry-leading capabilities
on a truly
global
scale.
Before
joining
the
EB,
he
was
Head
Client
Coverage and
Head of
the EMEA
and Switzerland
regions for
Asset Management
at UBS.
In those functions Mr.
Ivanovic played a key role in the development and
execution
of
our
strategy
for
Asset
Management
while
leading
the
engagement with
our institutional
and wholesale
clients, as
well as
the
ongoing
partnership
with
Global
Wealth
Management.
Starting
as
an
apprentice at UBS in
1992, he has worked
in all our business
divisions and
later held various leadership roles at Credit Suisse and Morgan Stanley.
Professional experience
March 2024 – date
President Asset Management, UBS Group AG and
UBS AG
2019 – Feb. 2024
Head Region EMEA, Asset Management, UBS
2018 – Feb. 2024
Head Client Coverage, Asset Management, UBS
2018 – Feb. 2024
Head Region Switzerland, Asset Management, UBS
2017 – 2018
Head Institutional Client Coverage,
Asset Management, UBS
2011 – 2016
Head of Europe, Middle East and Africa, Distribution,
Financial Engineering, Structured Products,
Institutional Equity Derivatives, London,
Morgan Stanley
2008 – 2011
Head of Distribution Northern Europe, Structured
Products, Institutional Equity Derivatives, London,
Credit Suisse
2000 – 2008
Various positions in Global Markets,
UBS Investment Bank, London / Switzerland, UBS
Education
–
Master’s degree, finance, London Business School
–
Bachelor’s degree, Economics and Business Administration,
Hochschule für Wirtschaft Zurich
Other activities and functions
–
Member of the Group Executive Board of
UBS Group AG
–
Chairman of UBS Asset Management AG
Annual Report 2024 |
Corporate governance
126
Robert Karofsky
Co-President Global Wealth Management and
President UBS Americas,
member of the EB since 2018
Nationality:
Year of birth:
1967
Robert Karofsky
became Co-President
Global Wealth
Management and
President UBS
Americas in July
2024. He jointly
manages Global Wealth
Management across all regions to
ensure an unparalleled global offering
for our wealth management client franchise. As President UBS Americas,
he is responsible for
the cross-divisional collaboration and represents
the
Group to the broader public in the Americas. Mr.
Karofsky was President
Investment
Bank
from
2021
to
June
2024
and
previously
Co-President
Investment Bank
from 2018
to 2021.
Before that
he was President
UBS
Securities
LLC
from
2015
to
2021.
He
reshaped
the
Investment
Bank
business
division,
realigning
efforts
around
clients’
evolving
needs,
focusing resources on opportunities for profitable
growth and reinvesting
in
UBS’s digital
transformation. Before
joining UBS,
he acquired
know-
how in investment banking as an analyst and trader,
working for various
financial
institutions,
including
Morgan
Stanley,
Deutsche
Bank
and
AllianceBernstein.
Professional experience
July 2024 – date
Co-President Global Wealth Management and President
UBS Americas, UBS Group AG and UBS AG
2021 – June 2024
President Investment Bank, UBS
2018 – 2021
Co-President Investment Bank, UBS
2015 – 2021
President UBS Securities LLC, UBS
2014 – 2018
Global Head Equities, UBS
2011 – 2014
Global Head of Equity Trading, AllianceBernstein
2008 – 2010
Co-Head of Global Equities, Deutsche Bank
2005 – 2008
Head of North American Equities, Deutsche Bank
Education
–
Bachelor’s degree, economics, Hobart and William Smith
Colleges,
New York
–
MBA, finance and statistics, the University of Chicago
Booth School of
Business
Other activities and functions
–
Member of the Group Executive Board of
UBS Group AG
–
Member of the Board of UBS Americas Holding LLC
–
Member of the Board of UBS Optimus Foundation
Iqbal Khan
Co-President Global Wealth Management and
President UBS Asia Pacific,
member of the EB since 2019
Nationality:
Year of birth:
Iqbal Khan became
Co-President Global Wealth
Management in
July 2024
and
President UBS
Asia Pacific
in September
2024. He
jointly manages
Global Wealth Management across
all regions to
ensure an unparalleled
global offering for our wealth
management client franchise. As Regional
President
UBS
Asia
Pacific,
he
is
responsible
for
the
cross-divisional
collaboration and represents the Group
to the broader public in
the Asia
Pacific region.
Previously,
he was
President Global
Wealth Management
from 2022 to
June 2024
and President
UBS Europe,
Middle East
and Africa
from 2021 to
2023. He joined
UBS in 2019
as Co-President Global
Wealth
Management. Prior to UBS, Mr. Khan was at Credit
Suisse, holding senior
leadership positions as CFO
Private Banking
Wealth Management and
CEO International
Wealth Management.
He joined
Ernst
Young in 2001,
holding
numerous
leadership
positions
and
becoming
a
very
young
executive
and
a
partner of
the firm’s
Swiss arm;
when leaving
Ernst
Young, he was lead auditor of UBS.
Professional experience
September
2024
–
date
President UBS Asia Pacific, UBS Group AG and UBS AG
July 2024 – date
Co-President Global Wealth Management, UBS Group
AG and UBS AG
2022 – June 2024
President Global Wealth Management, UBS
2021 – 2023
President UBS Europe, Middle East and Africa, UBS
2019 – 2022
Co-President Global Wealth Management, UBS
2015 – 2019
CEO International Wealth Management, Credit Suisse
2013 – 2015
CFO Private Banking Wealth Management,
Credit Suisse
2011 – 2013
Managing Partner Assurance and Advisory Services –
Financial Services, Ernst Young
2009 – 2011
Industry Lead Partner Banking and Capital Markets,
Switzerland and EMEA Private Banking, Ernst
Young
2001 – 2009
Various positions in Ernst Young
Education
–
Swiss Certified Public Accountant
–
Advanced Master of International Business Law (LL.M.)
degree,
University of Zurich
Other activities and functions
–
Member of the Group Executive Board of
UBS Group AG
–
Member of the Board of UBS Optimus Foundation
Annual Report 2024 |
Corporate governance
127
Barbara Levi
General Counsel, member of the EB since 2021
Nationality:
Year of birth:
Barbara
Levi
has
been
Group
General
Counsel,
UBS
Group
AG
and
General Counsel,
UBS AG
and
manages
the
Group’s
legal
affairs,
ensuring
effective
and
timely
assessment of
legal matters
impacting the
Group and
its businesses.
A
qualified attorney-at-law, she has
been admitted to
the Supreme Court
of
the United States, the New York State bar and
the bar of Milan, Italy, and
has worked in
several law firms
in New York
and Milan. Ms.
Levi began
her corporate career
with Novartis Group
in 2004 and
worked there for
16 years,
holding a
number of
senior legal
roles
across
Europe.
Before
joining UBS,
she served
as Chief
Legal Officer
External Affairs
at
Rio
Tinto Group
and, before
that, as
General Counsel,
based in
London. In
both roles, she was a member of that company’s executive
committee.
Professional experience
2021 – date
Group General Counsel, UBS Group AG, and General
Counsel, UBS AG
2021
Chief Legal Officer External Affairs, Rio Tinto Group
2020 – 2021
Group General Counsel, Rio Tinto Group
2019
Group Legal Head, MA and Strategic Transactions,
Novartis
2016 – 2019
Global General Counsel, Sandoz International GmbH,
Novartis
2014 – 2016
Global Legal Head, Product Strategy Commercialization,
Novartis
2013 – 2014
Global Legal Head, TechOps, Primary Care and Established
Medicines, Novartis
2009 – 2013
Head of Legal Compliance, Region Asia-Pacific,
Middle
East, and African Countries, Region Group Emerging
Markets, Novartis
Education
–
Law degree, the University of Milan
–
Master of Laws (LL.M.), banking, corporate and finance
law, Fordham
University School of Law, New York
Other activities and functions
–
Member of the Group Executive Board of
UBS Group AG
–
Member of the Board of Directors of the European General Counsel
Association
–
Member of the Legal Committee of the Swiss-American
Chamber of
Commerce
Beatriz Martin Jimenez
Head Non-core and Legacy and President UBS Europe,
Middle East and Africa,
member of the EB since 2023
Nationality:
Year of birth:
Beatriz
Martin
Jimenez
became Head
Non-core
and
Legacy,
as
well
as
President UBS Europe, Middle East and Africa of UBS Group AG and
UBS
AG
since March 2024 and the UBS Chief Executive for the
UK since 2019. In
her role as the
GEB Lead for Sustainability and Impact, she
is responsible
for the implementation of the Group’s sustainability and impact strategy.
As Head Non-core and Legacy, she effectively manages the derisking and
cost
efforts
for
the
integration
of
Credit
Suisse
into
UBS.
Her
responsibilities as Regional President UBS Europe,
Middle East and Africa
include the cross-divisional collaboration
and representation of the Group
to the broader public in the region. Before
joining UBS in 2012, she held
various
roles
in
fixed
income
sales
and
trading
at
Morgan
Stanley
and
Deutsche Bank.
Professional experience
2023 – date
Head Non-core and Legacy and President UBS Europe,
Middle East and Africa, UBS Group AG and UBS AG
March 2024 – date
UBS GEB Lead for Sustainability and Impact, UBS
Group AG
2019 – date
UK Chief Executive, UBS AG London Branch
2020 – 2023
Group Treasurer,
UBS Group AG
2022 – 2023
Chief Transformation Officer,
UBS Group AG
2015 – 2020
COO, UBS Investment Bank
2015 – 2019
UK COO, UBS AG London Branch and UBS Limited
2012 – 2015
Chief of Staff to CEO, UBS Investment Bank
1996 – 2012
Various positions in Global Markets, Morgan Stanley
and Deutsche Bank
Education
–
Master of Business Administration, Universidad Autónoma
de Madrid,
Madrid
–
Erasmus Exchange programme, Hochschule für Bankwirtschaft,
Frankfurt
Other activities and functions
–
Member of the Group Executive Board of
UBS Group AG
–
Member of the Supervisory Board of UBS Europe
SE
–
Member of the Board of Directors of Credit Suisse International
–
Chair of the Board of UBS Optimus Foundation
Annual Report 2024 |
Corporate governance
128
Markus Ronner
Chief Compliance and Governance Officer, member of the EB
since 2018
Nationality:
Year of birth:
Markus Ronner has
served as Group
Chief Compliance and
Governance
Officer
and
Chief
Compliance
and
Governance
Officer,
UBS
AG
2018, overseeing compliance, financial crime prevention and operational
risk control as well as
regulatory and governance functions at the Group
level. In more than 40
years at UBS, he
has acquired deep expertise
across
businesses and
in non-financial
risk management
and control.
In that
time,
Mr. Ronner has held a variety
of senior positions
across the firm, including
managing
the
Group-wide
too-big-to-fail
program,
COO
Wealth
Management
Swiss
Bank,
Head
Products
and
Services
of
Wealth
Management Swiss
Bank, COO Asset
Management, and Head
Group
Internal
Audit.
From
2022
until
2023,
he
served
as
Chairman
of
UBS
Switzerland AG, the leading Swiss universal bank.
Professional experience
2018 – date
Group Chief Compliance and Governance Officer,
UBS Group AG, and Chief Compliance and Governance
Officer,
UBS AG
2022 – 2023
Chairman of UBS Switzerland AG
2012 – 2018
Head Group Regulatory and Governance, UBS
2011 – 2013
Manager Group-wide too-big-to-fail program, UBS
2010 – 2011
COO Wealth Management Swiss Bank, UBS
2009 – 2010
Head Products and Services of Wealth Management
Swiss Bank, UBS
2007 – 2009
COO Asset Management, UBS
2001 – 2007
Head Group Internal Audit, UBS
Education
–
Swiss Banking Diploma
Other activities and functions
–
Member of the Group Executive Board of
UBS Group AG
Stefan Seiler
Head Human Resources Corporate Services, member
of the EB
since 2023
Nationality:
Year of birth:
Stefan
Seiler
has
been
Head
Group
Human
Resources
Corporate
Services,
UBS
Group
AG
and
Head
Human
Resources
Corporate
Services,
UBS
AG
Resources
and
Corporate
Services
function,
ensuring
effective
and
efficient
alignment of
our people,
real
estate and
vendor management
strategies.
His
responsibility
was
expanded
to
include
Group
Communications and Branding in July
2024. Mr.
Seiler started his career
at the Swiss Military Academy at ETH
Zurich and, after working for Credit
Suisse from 2002 to 2006, he
returned to the Swiss Military Academy as
Department Head
of Leadership
and
Communication. Mr.
Seiler joined
UBS in 2011
and became
Group Head
HR in 2018
after gaining
experience
as Head HR for Switzerland and Group Functions, as well as Global Head
Talent
and Recruiting. During his
career,
he has lived
in Switzerland, the
UK, the US and Singapore.
Professional experience
2023 – date
Head Group Human Resources Corporate Services,
UBS Group AG and Head Human Resources Corporate
Services, UBS AG
2018 – 2023
Group Head Human Resources, UBS
2016 – 2018
Global Head Talent Recruiting, UBS
2014 – 2016
Head HR UBS Switzerland and Global Head HR Group
Control CEO Functions, UBS
2012 – 2016
Head HR UBS Switzerland, UBS
2011 – 2012
Global Head HR Corporate Center, UBS
2010 – 2011
Visiting Professor, Nanyang Business School, Singapore
2006 – 2011
Department Head of Leadership and Communication,
Swiss Military Academy, ETH Zurich
2002 – 2006
Assessment specialist, HR Transformation Manager and
Global Lead for Human Capital Management
Implementation Group Functions, Credit Suisse, Zurich and
New York
Education
–
Master of Science (lic. Phil.), Educational Psychology, University of
Fribourg
–
PhD in Educational Psychology, University of Fribourg
Other activities and functions
–
Member of the Group Executive Board of
UBS Group AG
–
Member of the Foundation Board of the Pension Fund of
UBS
–
Member of the Foundation Council of the UBS Center for
Economics
in Society,
University of Zurich
–
Chairman of the Foundation Board of the Swiss Finance Institute
–
Member of the IMD Foundation Board
–
Adjunct Professor for Leadership and Strategic Human Resource
Management, Nanyang Technological University (NTU), Singapore
Annual Report 2024 |
Corporate governance
129
Todd
Tuckner
Chief Financial Officer, member of the EB since 2023
Nationality:
Year of birth:
Todd
Tuckner
was appointed to
the EB of
UBS AG in
2023 and became
Group CFO, UBS Group
AG and CFO,
UBS AG
of
the
acquisition
of
the
Credit
Suisse
Group
in
2023.
In
his
role,
he
oversees
the
Group’s
financial
accounting,
controlling,
forecasting,
planning and
reporting processes,
ensuring the
transparency in
and the
assessment of
the financial
performance of
the Group
and the
business
divisions. He is also responsible for
managing and controlling the Group’s
tax
affairs,
treasury
and
capital
management,
including
funding
and
liquidity
risk,
and
regulatory
capital
ratios.
Additionally,
he
coordinates
relations with analysts and investors alongside
the President of the EB. He
was
previously
CFO
and
Head
Business
Performance
and
Risk
Management for our Global Wealth Management
business. Mr.
Tuckner
joined UBS
in 2004
after working
for KPMG
for 17
years and
has since
held various leadership roles across the Group Finance function.
Professional experience
2023 – date
Group CFO, UBS Group AG and CFO, UBS AG
2020 – 2023
CFO and Head Business Performance and Risk
Management,
Global Wealth Management, UBS
2016 – 2021
Group Controller and Chief Accounting Officer, UBS
2012 – 2019
Group Finance COO, UBS
2009 – 2012
Group Head Tax Accounting Policy,
UBS
2004 – 2009
Group Head Tax – Americas, UBS
1987 – 2004
Various management positions, KPMG LLP, New York
Education
–
Bachelor’s degree, economics, Princeton University
–
MBA, accounting, New York University
Other activities and functions
–
Member of the Group Executive Board of
UBS Group AG
Marco Valla
Co-President Investment Bank, member of the EB since July
2024
Nationality:
Year of birth:
Marco Valla became Co-President
of the Investment
Bank in July
2024. He
jointly manages the Investment
Bank with George Athanasopoulos
across
all
regions
to
ensure
an
unparalleled
global
offering
for
our
client
franchise. Having
spent more
than 30
years in
investment banking,
he
brings
together
a
unique
set
of
capabilities
to
drive
UBS’s
competitive
position,
creating
a
powerful
proposition
for
clients,
employees,
and
shareholders. He began his career at Credit Suisse First Boston in 1994
as
an Investment Banking analyst, before working for Lehman Brothers and
Barclays. During
his tenure
at Barclays,
he was
the Global
Head of
TMT
and
Consumer
Retail
Investment
Banking,
overseeing
the
coverage
of
technology, media, telecommunications, consumer and retail clients, and
a member of the Investment Banking
Management Committee. Mr. Valla
has
held
increasingly
senior
management
roles
and
advised
over
300
completed transactions across various industries.
Professional experience
July 2024 – date
Co-President of the Investment Bank, UBS Group AG
and UBS AG
2023 – June 2024
Co-Head of Global Banking, Investment Banking,
UBS
2020 – 2023
Global Head of TMT and Consumer Retail, Investment
Banking Member of the Investment Banking
Management Committee, Barclays
2013 – 2019
Global Co-Head of Consumer Retail Group, Investment
Banking, Barclays
2008 – 2013
Managing Director, Retail Group, Investment Banking,
Barclays
2005 – 2008
Managing Director, Retail Group, Investment Banking,
Lehman Brothers
1994 – 2005
Investment Banking, Credit Suisse First Boston
Education
–
Bachelor’s degree, economics and Italian literature, University of
California, Berkeley
Other activities and functions
–
Member of the Group Executive Board of
UBS Group AG
–
Member of the Board of Directors of Good Shepherd Services
–
Member of the Board of the Mount Sinai Department
of Urology
Annual Report 2024 |
Corporate governance
130
Damian Vogel
Chief Risk Officer, member of the EB since July 2024
Nationality:
Year of birth:
Damian Vogel
was appointed
Group Chief
Risk Officer,
UBS Group
AG
and Chief
Risk Officer,
UBS AG
development of the Group’s risk
management and control framework
for
various risk categories and the implementation
of its independent control
frameworks. He
has sound
financial services
experience, as
well as
risk
management experience, which
he has
gained during
his career
at UBS
and
Credit
Suisse. Since
joining UBS
in
2010, he
has
held various
risk-
related
leadership roles
across
Global Wealth
Management, Personal
Corporate Banking
and
the Switzerland
region
before
being appointed
Chief
Risk
Officer
for
Credit
Suisse
and
Group
Risk
Control
Head
of
Integration in 2023.
In his most
recent role, he was
responsible for the
risk
control related
integration activities, defining the
best possible setup
for
the combined Group Risk Control function
and assisting with the shaping
of the risk function of the future.
Professional experience
July 2024 – date
Group Chief Risk Officer, UBS Group AG and Chief Risk
Officer, UBS AG
2023 – June 2024
Chief Risk Officer, Credit Suisse AG
Group Risk Control Head Integration, UBS
2018 – 2023
Chief Risk Officer Global Wealth Management, UBS
2016 – 2018
Chief Risk Officer Personal Corporate Banking and
Region Switzerland, Zurich, UBS
2012 – 2016
Portfolio Underwriter and Head Risk Control Swiss
Corporates, Zurich, UBS
2010 – 2011
Project Manager within Chief Risk Officer Wealth
Management and Swiss Bank, Zurich, UBS
2009 – 2010
Credit Risk Manager, Credit Risk Management
Investment Banking, New York, Credit Suisse
2008 – 2009
Head Structured Lombard Solutions, Credit Risk
Management Private Banking, Zurich, Credit Suisse
1999 – 2008
Various management positions in Credit Suisse
Education
–
Bachelor’s degree, business and administration, University of Applied
Sciences, Visp
–
Executive Program, Stanford University Graduate School of Business
–
Master of Advanced Study, corporate finance, University of Lucerne
Other activities and functions
–
Member of the Group Executive Board of
UBS Group AG
–
Member of the Board of UBS Switzerland AG
–
Member of Foundation Board of the International
Financial Risk
Institute
Annual Report 2024 |
Corporate governance
131
Change of control and defense measures
Our Articles
of Association
(the
AoA) do
not
provide
any
measures
for
delaying,
deferring or
preventing
a change
of
control.
Clauses on change of control
Neither
the
terms
regulating
the
BoD
members’
mandate
nor
any
employment
contracts
with
EB
members
contain
change of control clauses.
All employment contracts with
EB members stipulate a
notice period of six
to twelve months. During
the notice period,
EB members are entitled to their salaries and the continuation of existing employment benefits and may be eligible to be
considered for a discretionary performance award based
on their contribution during their tenure.
In case
of a
change of
control, we
may, at
our discretion,
accelerate the
vesting of
and /
or relax
applicable forfeiture
provisions of employees’ awards.
Auditors
Audit is an
integral part of
corporate governance. While
safeguarding their
independence, the
external auditors closely
coordinate their work with Internal Audit (IA). The Audit Committee and, ultimately,
the BoD supervise the effectiveness
of audit work.
›
Refer to “Board of Directors” in this section for more information
about the Audit Committee
External independent auditors
The 2024
AGM re-elected
Ernst Young
Ltd (EY)
as auditors
for UBS
AG for
the 2024
financial year.
UBS Group
also
appointed EY as the auditors of the Credit Suisse entities
for the 2024 financial year.
EY assumes
virtually all
auditing functions
according to
laws, regulatory
requests and
the AoA.
Robert Jacob
is the
EY
lead partner
in charge
of the
overall coordination
of the
UBS Group
financial and
regulatory audits
and the
co-signing
partner of
the financial
audit. In
2020, Maurice
McCormick became
the lead
audit partner
for the
financial statement
audit and has an incumbency limit of five years. Mr. Jacob will be succeeded in 2025
by Isabelle Santenac, who will take
over as the EY partner
overseeing UBS Group’s financial
audits and as the lead audit
partner for the financial statement
audit, with a five-year term. At the same time, Mr. McCormick will be succeeded by Robert Wadley,
who will assume the
role of
co-signing partner
for the
financial statement
audit, with
a seven-year
incumbency limit.
In 2021,
Hannes Smit
became the Lead Auditor
to the Swiss Financial
Market Supervisory Authority (FINMA),
with an incumbency limit
of seven
years. Daniel Martin has been the co-signing partner for the FINMA audit since 2019,
with an incumbency limit of seven
years.
During 2024, the Audit Committee held 14 meetings with the
external auditors.
Review of UBS AG audit engagement
Forvis Mazars has been appointed as auditors of UBS Europe SE, a
subsidiary of UBS AG, as EU rules require UBS Europe
SE to rotate its external auditors in
the 2024 financial year. In connection with this required change, and in consideration
of governance
best practices,
the
BoD considered
whether
it would
propose
to shareholders
a
rotation
of the
Group
auditor concurrent
with the
change at
UBS Europe
SE. Under
the direction
of the
Audit Committee,
UBS conducted
a
formal
review
of the
UBS AG
audit engagement
including
soliciting
proposals
from
potential
auditors.
In early
2022,
based on the results of this assessment, the BoD decided
to retain EY as the Group’s external auditors.
Audit effectiveness assessment
The Audit Committee
assesses the performance,
effectiveness and
independence of the
external auditors on an
annual
basis. The assessment is generally
based on interviews with senior
management and survey feedback
from stakeholders
across the Group. Assessment criteria include quality of service delivery, quality and competence of the audit team,
value
added
as
part
of
the
audit,
insightfulness,
and
the
overall
relationship
with
EY.
Based
on
its
own
analysis
and
the
assessment results, including
feedback received
as part of the
review of the
Group audit engagement
described above,
the Audit Committee concluded that EY’s audit has been effective.
Services performed by EY and related fees
The Audit Committee
oversees all services
provided to
UBS by the
external auditors. For
services requiring
the approval
from
the
Audit
Committee,
a
preapproval
may
be
granted
either
for
a
specific
mandate
or
in
the
form
of
a
blanket
preapproval authorizing
a limited and
well-defined type and
scope of services.
The fees (including
expenses) paid to
EY
are set forth in the table below. In addition, EY received USD 52m
in 2024 (USD 27m in 2023) for services performed on
behalf of our investment funds, many of which have independent
fund boards or trustees.
Annual Report 2024 |
Corporate governance
132
Audit
work
includes
all
services
necessary
to
perform
the
audit
for
UBS
AG
in
accordance
with
applicable
laws
and
generally
accepted
auditing
standards,
as
well
as
other
assurance
services
that
conventionally
only
the
auditor
can
provide. These include statutory and regulatory audits, attestation
services and the review of documents to be filed with
regulatory
bodies.
The
additional
services
classified
as audit
in 2024
included
several
engagements
for
which
EY
was
mandated at the request of FINMA.
Audit-related
work
consists
of
assurance
and
related
services
traditionally
performed
by
auditors,
such
as
attestation
services related to financial reporting, internal control reviews and performance standard reviews, as well as consultation
concerning financial accounting and reporting standards.
Tax
work
involves
services
performed
by
professional
staff
in
EY’s
tax
division
and
includes
tax
compliance
and
tax
consultation with respect to our own affairs.
“Other” services are permitted services, which include technical
IT security control reviews and assessments.
Fees paid to EY
UBS AG and its subsidiaries paid the following fees (including expenses) to EY.
For the year ended
USD m
31.12.24
31.12.23
Audit
Global audit fees
Additional services classified as audit (services required
by law or statute, including work of a non-recurring nature mandated by
regulators)
Total audit
Non-audit
Audit-related fees
of which: assurance and attestation services
of which: control and performance reports
of which: consultation concerning financial accounting and
reporting standards
Tax fees
All other fees
Total non-audit
Special auditors for potential capital increases
At
the
AGM
on
23 April
2024,
BDO
AG
was
reappointed
as
special
auditors
for
a
three-year
term
of
office.
Special
auditors provide audit opinions in connection with potential
capital increases independently from
other auditors.
Internal Audit
IA performs the
internal auditing role
for UBS
AG. It is
an independent function
that provides
expertise and
insights to
confirm controls are functioning correctly
and highlight where UBS needs to better manage
current and emerging risks.
IA supports the BoD in discharging its
governance responsibilities by taking a dynamic approach to
audit, issue assurance
and risk assessment, confirming where
controls are functioning well and
highlighting where UBS needs to
better manage
current and emerging risks.
By doing so, it drives
action to prevent
unexpected loss or damage
to the firm’s reputation.
To support the achievement of UBS’s objectives, IA independently,
objectively and systematically assesses the:
(i)
soundness of UBS AG’s risk and control culture;
(ii)
reliability and integrity of financial and operational
information, including whether activities are properly,
accurately
and completely recorded, and the quality of underlying data
and models; and
(iii)
design, operating effectiveness and sustainability of:
–
processes to define strategy and risk appetite, as well as
the overall adherence to the approved strategy;
–
governance processes;
–
risk management, including whether risks are appropriately
identified and managed;
–
internal controls, specifically whether they are commensurate
with the risks taken;
–
remediation activities; and
–
processes
to
comply
with
legal
and
regulatory
requirements,
internal
policies,
and
UBS
AG’s
constitutional
documents and contracts.
Annual Report 2024 |
Corporate governance
133
Audit
reports
that
include
significant
issues
are
provided
to
the
President
of
the
EB,
relevant
EB
members
and
other
responsible management. The
Chairman, the
Audit Committee and
the Risk
Committee of the
BoD are
regularly informed
of such issues.
In addition, IA
provides independent assurance on
the effective and sustainable
remediation of control deficiencies
within
its mandate,
taking a
prudent and
conservative
risk-based approach
and assessing
at the
issue level
whether
the root
cause and the potential exposure for the firm have been holistically and sustainably addressed. IA also cooperates closely
with risk control functions and internal and external legal advisors
on investigations into major control issues.
To ensure IA’s independence from management, the
IA Executive UBS AG reports to
the Chairman of the BoD and
to the
Audit
Committee,
which
assesses
annually
whether
IA
has
sufficient
resources
to
perform
its
function,
as
well
as
its
independence and
performance. In
the Audit
Committee’s assessment,
IA is
sufficiently resourced
to fulfill
its mandate
and
complete
its
auditing
objectives.
IA’s
role,
position,
responsibilities
and
accountability
are
set
out
in
UBS
AG’s
Organization
Regulations
and
the
Charter
for
IA
.
IA
has
unrestricted
access
to
all
accounts,
books,
records,
systems,
property
and
personnel,
and
must
be
provided
with
all
information
and
data
that
it
needs
to
fulfill
its
auditing
responsibilities. IA
also conducts special
audits at
the request
of the
Audit Committee, or
other BoD
members, committees
or the President of the EB in consultation with the Audit
Committee.
IA enhances the efficiency of its work through coordination
and close cooperation with the external auditors.
Information policy
We provide regular information to
our shareholder and to the wider financial community.
Financial reports for UBS AG are expected to be published
on the following dates:
First quarter 2025
8 May 2025
Second quarter 2025
8 August 2025
Third quarter 2025
4 November 2025
The annual general meetings of the shareholders of UBS
AG will take place on the following dates:
2025
8 April 2025
2026
14 April 2026
›
Refer to the corporate calendar available at
ubs.com/investors
dates
Our annual and
quarterly publications are available in
fully online and .pdf
formats
at
ubs.com/investors
, under “Financial
information”.
Financial reporting policies
We report UBS
AG’s results for
each financial quarter,
with the exception of
the fourth quarter,
including a breakdown
of results
by business
division
and
disclosures
or key
developments
relating
to
risk
management
and control,
capital,
liquidity and funding management. With the exception of the
fourth quarter, each quarter we publish quarterly financial
reports for UBS AG.
The consolidated financial
statements of
UBS AG are
prepared in accordance
with IFRS Accounting
Standards as issued
by the International Accounting Standards Board.
›
Refer to “Note 1 Summary of material accounting
policies” in the “Consolidated financial statements”
section of this report for
more information about the basis of accounting
US disclosure requirements
As a
foreign private
issuer,
we must
file reports
and other
information, including
certain financial
reports, with
the US
Securities and Exchange Commission (the SEC) under the
US federal securities laws.
An evaluation of the
effectiveness of our
disclosure controls and
procedures (as defined
in Rule 13a–15e)
under the US
Securities Exchange Act of 1934 has been carried out, under the supervision of management,
including the Group CEO,
the Group
CFO and
the Group
Controller. Based
on that
evaluation, and
reflecting the
determination that
our internal
control over financial reporting was not effective as
of 31 December 2024, the President of the Executive
Board and the
CFO concluded that our disclosure controls and procedures
were not effective as of 31 December 2024.
No significant
changes have
been made
to our internal
controls or to
other factors
that could
significantly affect
these
controls subsequent to the date of their evaluation.
›
Refer to the
Annual Report 2024 |
Financial statements | Consolidated financial
statements
134
Financial statements
Consolidated financial statements
Table of contents
135
136
137
142
142
142
143
144
145
147
148
150
150
1
167
2
169
3a
172
3b
173
173
4
173
5
174
6
174
7
174
8
175
9
178
178
10
182
11
184
12
184
13
186
14
187
15
188
16
188
17
189
18
197
19
198
198
20
209
21
223
22
225
23
227
24
230
25
233
26
238
27
242
28
246
29
246
30
249
31
250
32
250
33
252
34
253
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial information
135
Management’s report on internal control over financial
reporting
Management’s responsibility for internal control over financial reporting
The Board of
Directors and management
of UBS AG are
responsible for establishing
and maintaining adequate
internal
control
over
financial
reporting.
UBS
AG’s
internal
control
over
financial
reporting
is
designed
to
provide
reasonable
assurance
regarding
the
preparation
and
fair
presentation
of
published
financial
statements
in
accordance
with
IFRS
Accounting Standards as issued by the International Accounting
Standards Board (IASB).
UBS AG’s internal control over financial reporting includes
those policies and procedures that:
–
pertain
to
the
maintenance
of
records
that,
in
reasonable
detail,
accurately
and
fairly
reflect
transactions
and
dispositions of assets;
–
provide reasonable assurance
that transactions are
recorded as necessary
to permit preparation
and fair presentation
of financial statements,
and that
receipts and expenditures
of the company
are being made
only in accordance
with
authorizations of UBS AG management; and
–
provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or
disposition
of the company’s assets that could have a material effect
on the financial statements.
Because
of its
inherent
limitations,
internal
control
over
financial
reporting
may
not
prevent
or detect
misstatements.
Also, projections
of any
evaluation of
effectiveness to
future
periods are
subject to
the risk
that controls
may become
inadequate
because
of
changes
in
conditions,
or
that
the
degree
of
compliance
with
the
policies
or
procedures
may
deteriorate.
Management’s assessment of internal control over financial reporting
as of 31 December
2024
UBS
AG
management
has
assessed
the
effectiveness
of
UBS
AG’s
internal
control
over
financial
reporting
as
of
31 December
2024
based
on
the
criteria
set
forth
by
the
Committee
of
Sponsoring
Organizations
of
the
Treadway
Commission
(COSO) in
Internal Control
– Integrated
Framework
(2013 Framework).
Based on
this assessment
for the
reasons discussed below,
management believes that,
as of 31 December
2024, UBS AG’s
internal control over financial
reporting
was
not
effective
because
of
the
material
weakness
described
below
related
to
the
Credit
Suisse
business
acquired in 2023.
A material weakness is a deficiency or a combination of deficiencies
in internal control over financial reporting such that
there is a reasonable
possibility that a
material misstatement of a
registrant’s financial statements
will not be prevented
or detected on a timely basis.
Prior to the acquisition, Credit Suisse management had identified and
disclosed three material weaknesses, one of which
related
to
controls
to
design
and
maintain
an
effective
risk
assessment
process.
Management
concluded
that
as
of
31 December 2024, changes made to
the risk assessment process were designed effectively,
but that additional time, in
part
due
to
the
broader
integration
and
migration
efforts
underway,
is
required
to
conclude
that
these
controls
are
operating effectively on a sustained basis.
Remediation of Credit Suisse material weaknesses
In March 2023,
prior to the
acquisition by UBS
Group AG, the
Credit Suisse Group
and Credit Suisse
AG disclosed that
their management had identified material weaknesses in internal control over financial reporting as a result of which the
Credit
Suisse
Group
and
Credit
Suisse
AG
had
concluded
that,
as
of
31
December
2022,
their
internal
control
over
financial reporting
was not
effective,
and for
the same
reasons, reached
the same
conclusion regarding
31 December
2021. Following the
acquisition and merger
of Credit Suisse
Group AG into
UBS Group AG
in June 2023, Credit
Suisse
AG concluded that as
of 31 December 2023
its internal control over
financial reporting continued
to be ineffective.
For
the year ended 31 December 2023, UBS AG concluded that
its internal control over financial reporting was effective.
In May 2024,
Credit Suisse
AG and UBS
AG merged with
UBS AG as
the surviving
entity. Although Credit
Suisse AG
is
no longer a
separate legal entity,
numerous of its
booking, accounting and
risk management systems
remain in use
for
activities that have not yet been exited or migrated to UBS
systems.
The material weaknesses
that were identified
by Credit Suisse
related to the
failure to design
and maintain an
effective
risk
assessment
process
to
identify
and
analyze
the
risk
of
material
misstatements
in
its
financial
statements
and
the
failure to
design
and maintain
effective
monitoring activities
relating
to (i)
providing
sufficient
management
oversight
over the internal control evaluation
process to support Credit Suisse
internal control objectives; (ii)
involving appropriate
and sufficient
management resources
to support
the risk
assessment and
monitoring objectives;
and (iii)
assessing and
communicating the
severity of
deficiencies in
a timely
manner to
those parties
responsible for
taking corrective
action.
These material weaknesses contributed to an additional material weakness, as the Credit Suisse Group management did
not design and maintain effective controls over the classification and presentation of the consolidated statement of cash
flows under US GAAP.
Since
the
Credit
Suisse
acquisition,
we
have
executed
a
remediation
program
to
address
the
identified
material
weaknesses
and
have
implemented
additional
controls
and
procedures.
As
of
31
December
2024,
management
has
assessed that the changes to internal controls made to address the material weaknesses relating to the classification and
presentation of
the consolidated
statement of
cash flows
as well
as assessment
and communication
of the
severity of
deficiencies are designed and operating effectively.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial information
136
The remaining material weakness relates to the
risk assessment of internal controls. We have
integrated the Credit Suisse
control framework
into the
UBS internal
control framework
and risk
assessment and
evaluation
processes
in 2024.
In
addition, UBS has
reviewed the
processes, systems
and internal control
processes in
connection with the
integration of
the financial
accounting and controls
environment of Credit
Suisse into
UBS, and
implementation of updated
or additional
processes and controls to
reflect the increase in
complexity of the accounting
and financial control environment
following
the acquisition.
Management has assessed
that the risk
assessment process was
designed effectively. However,
in light of
the increased
complexity of the
internal accounting and
control environment, the
remaining migration efforts
still underway and
limited
time
to
demonstrate
operating
effectiveness
and
sustainability
of
the
post-merger
integrated
control
environment,
management
has
concluded
that
additional
evidence
of
effective
operation
of
the
remediated
controls
is required
to
conclude
that
the
risk
assessment
processes
are
operating
effectively
on
a
sustainable
basis.
In
light
of
the
above,
management has concluded that there is a material
weakness in internal control over financial reporting at 31
December
2024.
Report of the independent registered public accounting
firm included in this report
The accompanying report of the independent registered public accounting firm on the consolidated financial statements
Report of independent registered public accounting firm on the consolidated financial statements
of UBS AG is included
in our
filing on
17 March
2025 with
the Securities
and Exchange
Commission on
Form 20-F
pursuant to
US reporting
obligations.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial information
137
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial information
138
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial information
139
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial information
140
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial information
141
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
142
UBS AG consolidated financial statements
Primary financial statements and share information
Audited |
Income statement
For the year ended
USD m
Note
31.12.24
31.12.23
31.12.22
Interest income from financial instruments measured at
amortized cost and fair value through
other comprehensive income
4
Interest expense from financial instruments measured at
amortized cost
4
(
29,745
)
(
19,643
)
(
6,696
)
Net interest income from financial instruments measured
at fair value through profit or loss and other
4
Net interest income
4
Other net income from financial instruments measured
at fair value through profit or loss
4
Fee and commission income
5
Fee and commission expense
5
(
2,369
)
(
1,790
)
(
1,823
)
Net fee and commission income
5
Other income
6
Total revenues
Credit loss expense / (release)
20
Personnel expenses
7
General and administrative expenses
8
Depreciation, amortization and impairment of non-financial
assets
12, 13
Operating expenses
Operating profit / (loss) before tax
Tax expense / (benefit)
9
Net profit / (loss)
Net profit / (loss) attributable to non-controlling interests
Net profit / (loss) attributable to shareholders
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
143
Statement of comprehensive income
For the year ended
USD m
Note
31.12.24
31.12.23
31.12.22
Comprehensive income attributable to shareholders
Net profit / (loss)
Other comprehensive income that may be reclassified to the income
statement
Foreign currency translation
Foreign currency translation movements related to net assets of foreign operations, before tax
(
2,629
)
(
869
)
Effective portion of changes in fair value of hedging instruments
designated as net investment hedges, before tax
(
912
)
Foreign currency translation differences on foreign operations reclassified to the
income statement
Effective portion of changes in fair value of hedging instruments
designated as net investment hedges reclassified
to
the income statement
(
12
)
(
28
)
(
4
)
Income tax relating to foreign currency translations, including the effect of
net investment hedges
(
17
)
Subtotal foreign currency translation, net of tax
(
1,261
)
1
(
519
)
Financial assets measured at fair value through other comprehensive income
Net unrealized gains / (losses), before tax
(
440
)
Net realized (gains) / losses reclassified to the income statement
from equity
Reclassification of financial assets to Other financial assets measured
at amortized cost
2
Income tax relating to net unrealized gains / (losses)
(
3
)
Subtotal financial assets measured at fair value through other comprehensive
income, net of tax
Cash flow hedges of interest rate risk
25
Effective portion of changes in fair value of derivative instruments designated
as cash flow hedges, before tax
(
1,198
)
(
36
)
(
5,758
)
Net (gains) / losses reclassified to the income statement from
equity
(
159
)
Income tax relating to cash flow hedges
(
74
)
(
309
)
Subtotal cash flow hedges, net of tax
(
4,793
)
Cost of hedging
25
Cost of hedging, before tax
(
87
)
(
19
)
Income tax relating to cost of hedging
Subtotal cost of hedging, net of tax
(
87
)
(
19
)
Total other comprehensive income that may be reclassified to the income statement, net
of tax
(
714
)
(
5,260
)
Other comprehensive income that will not be reclassified to the income
statement
Defined benefit plans
26
Gains / (losses) on defined benefit plans, before tax
(
106
)
(
103
)
Income tax relating to defined benefit plans
(
33
)
Subtotal defined benefit plans, net of tax
(
86
)
(
136
)
Own credit on financial liabilities designated at fair value
21
Gains / (losses) from own credit on financial liabilities designated
at fair value, before tax
(
861
)
Income tax relating to own credit on financial liabilities designated
at fair value
(
10
)
(
71
)
Subtotal own credit on financial liabilities designated at
fair value, net of tax
(
790
)
Total other comprehensive income that will not be reclassified to the income statement,
net of tax
(
21
)
(
927
)
Total other comprehensive income
(
735
)
(
4,383
)
Total comprehensive income attributable to shareholders
Comprehensive income attributable to non-controlling
interests
Net profit / (loss)
Total other comprehensive income that will not be reclassified to the income statement,
net of tax
(
48
)
(
14
)
Total comprehensive income attributable to non-controlling interests
Total comprehensive income
Net profit / (loss)
Other comprehensive income
(
783
)
(
4,396
)
of which: other comprehensive income that may be reclassified
to the income statement
(
714
)
(
5,260
)
of which: other comprehensive income that will not be reclassified
to the income statement
(
69
)
(
924
)
Total comprehensive income
1 Mainly reflects a strengthening of the
US dollar against the Swiss franc and
the euro.
2 Effective 1 April 2022, a portfolio
of assets previously classified as Financial assets
measured at fair value through other
comprehensive income was reclassified to Other financial assets measured at amortized cost. Refer to Note 14a for more information.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
144
Balance sheet
USD m
Note
31.12.24
31.12.23
Assets
Cash and balances at central banks
Amounts due from banks
10
Receivables from securities financing transactions measured at amortized
cost
10, 22
Cash collateral receivables on derivative instruments
10, 22
Loans and advances to customers
10
Other financial assets measured at amortized cost
10, 14a
Total financial assets measured at amortized cost
Financial assets at fair value held for trading
21
of which: assets pledged as collateral that may be sold or repledged
by counterparties
Derivative financial instruments
11, 21, 22
Brokerage receivables
21
Financial assets at fair value not held for trading
21
Total financial assets measured at fair value through profit or loss
Financial assets measured at fair value through other comprehensive income
21
Investments in associates
28b
Property, equipment and software
12
Goodwill and intangible assets
13
Deferred tax assets
9
Other non-financial assets
14b
Total assets
Liabilities
Amounts due to banks
15a
Payables from securities financing transactions measured at amortized cost
22
Cash collateral payables on derivative instruments
22
Customer deposits
15a
Funding from UBS Group AG measured at amortized cost
15b
Debt issued measured at amortized cost
17
Other financial liabilities measured at amortized cost
19a
Total financial liabilities measured at amortized cost
Financial liabilities at fair value held for trading
21
Derivative financial instruments
11, 21, 22
Brokerage payables designated at fair value
21
Debt issued designated at fair value
16, 21
Other financial liabilities designated at fair value
19b, 21
Total financial liabilities measured at fair value through profit or loss
Provisions
18a
Other non-financial liabilities
19c
Total liabilities
Equity
Share capital
Share premium
Retained earnings
Other comprehensive income recognized directly in equity, net of tax
Equity attributable to shareholders
Equity attributable to non-controlling interests
Total equity
Total liabilities and equity
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
145
Statement of changes in equity
USD m
Share
capital
Share
premium
Retained
earnings
Balance as of 31 December 2021
Premium on shares issued and warrants exercised
(
14
)
2
Tax (expense) / benefit
Dividends
(
4,200
)
Translation effects recognized directly in retained earnings
Share of changes in retained earnings of associates and
joint ventures
New consolidations / (deconsolidations) and other increases
/ (decreases)
Total comprehensive income for the year
of which: net profit / (loss)
of which: OCI, net of tax
Balance as of 31 December 2022
Premium on shares issued and warrants exercised
(
19
)
2
Tax (expense) / benefit
Dividends
(
6,000
)
Translation effects recognized directly in retained earnings
Share of changes in retained earnings of associates and
joint ventures
(
1
)
Share capital currency change
(
48
)
New consolidations / (deconsolidations) and other increases
/ (decreases)
3
Total comprehensive income for the year
of which: net profit / (loss)
of which: OCI, net of tax
(
927
)
Balance as of 31 December 2023
Equity recognized due to the merger of UBS AG and Credit Suisse
AG
4
(
18,848
)
Premium on shares issued and warrants exercised
(
20
)
2
Tax (expense) / benefit
Dividends
(
3,000
)
Translation effects recognized directly in retained earnings
(
33
)
Share of changes in retained earnings of associates and
joint ventures
(
3
)
New consolidations / (deconsolidations) and other increases
/ (decreases)
(
431
)
5
Total comprehensive income for the year
of which: net profit / (loss)
of which: OCI, net of tax
(
21
)
Balance as of 31 December 2024
1 Excludes other comprehensive income related to defined benefit plans and own credit, which is recorded directly in Retained earnings.
2 Includes decreases related to recharges by UBS Group AG for share-based
compensation awards granted to employees of UBS AG or its subsidiaries.
3 Includes an increase of USD
m related to the issuance of high-trigger loss-absorbing additional tier 1 capital with an equity conversion
feature.
4 Refer to
Note 2 for
more information.
5 Mainly reflecting
effects from transactions
between Credit Suisse
AG and its
subsidiaries and UBS
AG and its
subsidiaries prior to
the merger in
May 2024.
6 Includes an increase of USD
m in the second quarter of 2024 due to the merger of UBS AG and Credit Suisse AG.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
146
Other comprehensive
income recognized
directly in equity,
net of tax
1
of which:
foreign currency
translation
of which:
financial assets at
fair value through OCI
of which:
cash flow
hedges
Total equity
attributable to
shareholders
Non-controlling
interests
Total equity
(
7
)
(
14
)
(
14
)
(
4,200
)
(
9
)
(
4,209
)
(
69
)
(
69
)
(
3
)
(
3
)
(
7
)
(
3
)
(
5,260
)
(
519
)
(
4,793
)
(
5,260
)
(
519
)
(
4,793
)
(
4,383
)
(
14
)
(
4,396
)
(
133
)
(
4
)
(
4,234
)
(
19
)
(
19
)
(
6,000
)
(
4
)
(
6,004
)
(
127
)
(
127
)
(
1
)
(
1
)
(
31
)
(
2,961
)
(
291
)
(
291
)
(
20
)
(
20
)
(
3,000
)
(
30
)
(
3,029
)
(
3
)
(
3
)
(
405
)
6
(
51
)
6
(
714
)
(
1,261
)
(
714
)
(
1,261
)
(
735
)
(
48
)
(
783
)
(
2,585
)
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
147
Share information and earnings per share
Ordinary share capital
As
of
31 December
2024,
UBS
AG
had
. The
shares were entirely held by
UBS Group AG.
Conditional capital
As of 31 December 2024, the following conditional capital was available to the Board of Directors
(the BoD) of UBS AG:
–
Conditional
capital
in
the
amount
of
USD
,
for
the
issuance
of
a
maximum
of
registered shares with a nominal value of USD
conversion rights and /
or warrants granted
in connection with the
issuance of bonds or
similar financial instruments
on national or international
capital markets. This
conditional capital
allowance was
approved at
the Extraordinary
General Meeting
held on
26 November
2014, having
originally been
approved at
the Annual
General Meeting
(the AGM) of UBS AG
on 14 April 2010. The BoD
has not made use of
such allowance.
Conversion capital
As
of
31 December
2024,
UBS
AG
had
conversion
capital
in
the
amount
of
USD
,
for
the
issuance
of
a
maximum of
registered
shares only
occurs through
the mandatory
conversion of
claims arising
upon the
occurrence of
one or more
trigger events
under financial
market instruments
with contingent
conversion features
issued by
UBS AG. The
creation
of this conversion capital was approved at the AGM
held on 23 April 2024.
Capital band and reserve capital
As of 31 December 2024, UBS AG has not introduced
a capital band or any reserve capital.
Earnings per share
In 2015,
UBS AG
shares were delisted
from the
SIX Swiss
Exchange and the
New York
Stock Exchange. As
of 31 December
2024,
% of UBS AG’s issued
shares were held by UBS
Group AG and therefore were
not publicly traded. Accordingly,
earnings per share information is not provided for UBS AG.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
148
Statement of cash flows
For the year ended
USD m
31.12.24
31.12.23
31.12.22
Cash flow from / (used in) operating activities
Net profit / (loss)
Non-cash items included in net profit and other adjustments:
Depreciation, amortization and impairment of non-financial
assets
Credit loss expense / (release)
Share of net (profit) / loss of associates and joint ventures
and impairment related to associates
(
73
)
(
32
)
Deferred tax expense / (benefit)
(
1,106
)
(
222
)
Net loss / (gain) from investing activities
(
225
)
(
1,515
)
Net loss / (gain) from financing activities
(
3,643
)
(
16,587
)
Other net adjustments
1
(
10,383
)
Net change in operating assets and liabilities:
1,2
Amounts due from banks and amounts due to banks
(
708
)
(
10,093
)
3
(
1,088
)
Receivables from securities financing transactions measured at amortized
cost
(
19,580
)
(
4,993
)
Payables from securities financing transactions measured at amortized cost
(
1,247
)
Cash collateral on derivative instruments
(
6,132
)
Loans and advances to customers
Customer deposits
(
13,407
)
(
9,409
)
Financial assets and liabilities at fair value held for trading and derivative financial
instruments
(
27,623
)
(
16,017
)
Brokerage receivables and payables
(
6,101
)
Financial assets at fair value not held for trading and other financial assets
and liabilities
(
4,661
)
Provisions and other non-financial assets and liabilities
(
437
)
Income taxes paid, net of refunds
(
1,500
)
(
1,541
)
(
1,495
)
Net cash flow from / (used in) operating activities
(
27,065
)
4
(
28,202
)
Cash flow from / (used in) investing activities
Cash and cash equivalents obtained due to the merger of UBS
AG and Credit Suisse AG
5
Purchase of subsidiaries, business, associates and intangible assets
(
64
)
(
4
)
(
3
)
Disposal of subsidiaries, business, associates and intangible assets
6
Purchase of property, equipment and software
(
1,512
)
(
1,283
)
(
1,478
)
Disposal of property, equipment and software
Net (purchase) / redemption of financial assets measured
at fair value through other comprehensive income
(
3
)
(
699
)
Purchase of debt securities measured at amortized cost
(
5,962
)
(
14,244
)
(
30,792
)
Disposal and redemption of debt securities measured at amortized
cost
Net cash flow from / (used in) investing activities
(
4,924
)
(
12,283
)
Table
continues below.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
149
Statement of cash flows (continued)
Table
continued from above.
For the year ended
USD m
31.12.24
31.12.23
31.12.22
Cash flow from / (used in) financing activities
Repayment of Swiss National Bank funding
7
(
10,304
)
Net issuance (repayment) of short-term debt measured at amortized
cost
(
6,163
)
(
12,249
)
Distributions paid on UBS AG shares
(
3,000
)
(
6,000
)
(
4,200
)
Issuance of debt designated at fair value and long-term debt measured
at amortized cost
8
Repayment of debt designated at fair value and long-term debt measured
at amortized cost
8
(
118,286
)
(
85,541
)
(
67,670
)
Inflows from securities financing transactions measured at amortized
cost
9
Outflows from securities financing transactions measured at amortized
cost
9
(
2,688
)
Net cash flows from other financing activities
(
965
)
(
501
)
(
595
)
Net cash flow from / (used in) financing activities
(
32,137
)
(
5,257
)
Total cash flow
Cash and cash equivalents at the beginning of the year
Net cash flow from / (used in) operating, investing and financing
activities
(
13,435
)
(
6,911
)
Effects of exchange rate differences on cash and cash equivalents
1
(
10,315
)
(
5,645
)
Cash and cash equivalents at the end of the year
10
11
of which: cash and balances at central banks
12
of which: amounts due from banks
12
of which: money market paper
12,13
Additional information
Net cash flow from / (used in) operating activities includes:
Interest received in cash
Interest paid in cash
Dividends on equity investments, investment funds and associates
received in cash
14
1 Foreign currency
translation and foreign
exchange effects on
operating assets and
liabilities and on
cash and cash
equivalents are presented
within the Other
net adjustments line,
with the exception
of foreign
currency hedge effects related to foreign exchange swaps, which are presented on the line Financial assets and liabilities at fair value held for trading and derivative
financial instruments.
2 Excludes non-cash items
arising from the accounting for
the merger of UBS
AG and Credit Suisse
AG. Refer to
Note 2 for more
information.
3 Mainly reflects funding provided
to Credit Suisse.
4 Includes cash receipts from
the sale of
loans and loan commitments of USD
m within Non-core and Legacy.
5 Refer to Note 2 for more information about the merger of UBS AG and Credit Suisse AG.
6 Includes dividends received from associates.
7 Reflects the repayment of the
Emergency Liquidity Assistance facility to
the Swiss National Bank, which
was recognized in the
balance sheet line Amounts due to
banks.
8 Includes funding from UBS Group
AG
measured at amortized cost (recognized on
the balance sheet in Funding from
UBS Group AG) and measured
at fair value (recognized on
the balance sheet in Other financial
liabilities designated at fair value).
9
Reflects cash flows from securities financing transactions measured at amortized cost
that use UBS debt instruments as the underlying.
10 As of 31 December 2024, the balance includes
USD
m (31 December
2023: USD
m; 31 December 2022:
USD
m) of Cash and cash
equivalents not available for
general use by the
UBS AG, which
consisted of USD
m (31 December 2023: USD
m; 31 December
2022: USD
m) considered by UBS AG
as restricted (refer to
Note 23 for more information)
and USD
m (31 December 2023:
USD
m; 31 December 2022:
USD
m) placed at central
banks to
meet local statutory minimum reserve requirements.
11 The balance includes USD
bn related to cash held in Assets
of disposal groups held for sale,
recognized within Other non-financial assets.
12 Includes
only balances with an original maturity of three
months or less.
13 Money market paper is included
in the balance sheet under Financial
assets at fair value not held for
trading (31 December 2024: USD
m;
31 December 2023:
USD
m; 31 December
2022:
USD
m), Other
financial assets
measured
at amortized
cost (31
December 2024:
USD
m; 31 December
2023:
USD
m; 31 December
2022:
USD
m) and Financial assets at fair
value held for trading (31 December 2024: USD
m; 31 December 2023: USD
m; 31 December 2022: USD
m).
14 Includes dividends received from associates reported
within Net cash flow from / (used in) investing activities.
Changes in liabilities arising from financing activities
USD m
Debt issued
measured at
amortized
cost
of which:
short-term
1
of which:
long-term
2
Securities
financing
transactions
measured at
amortized
cost
3
Debt issued
designated
at fair value
Swiss
National
Bank
funding
4
Over-the-
counter debt
instruments
5
Funding
from UBS
Group AG
6
Total
Balance as of 31 December 2022
Cash flows
(
122
)
Non-cash changes
of which: foreign currency translation
(
50
)
of which: fair value changes
of which: hedge accounting and other effects
Balance as of 31 December 2023
Changes arising upon the merger of UBS AG and Credit
Suisse AG
7
Cash flows
(
10,590
)
(
6,163
)
(
4,427
)
(
10,059
)
(
10,304
)
(
2,601
)
(
28,172
)
Non-cash changes
(
2,610
)
(
613
)
(
1,997
)
(
146
)
(
326
)
(
1,487
)
(
4,166
)
of which: foreign currency translation
(
2,045
)
(
613
)
(
1,432
)
(
146
)
(
2,328
)
(
104
)
(
2,558
)
(
7,117
)
of which: fair value changes
(
207
)
(
66
)
of which: hedge accounting and other effects
(
565
)
(
565
)
(
221
)
(
14
)
Balance as of 31 December 2024
1 Debt with an original contractual maturity of less than one year.
2 Debt with an original maturity greater than or equal to one year.
The classification of debt issued into short-term and long-term does not consider
any early redemption features.
3 Reflects securities financing transactions measured at amortized cost that use UBS debt instruments as the underlying.
4 Reflects the Emergency Liquidity Assistance facility from the
Swiss National Bank, which was recognized in
the balance sheet line Amounts due to banks.
5 Included in balance sheet line Other financial liabilities
designated at fair value.
6 Includes funding from UBS Group
AG measured at amortized cost (refer to Note 15b) and measured at fair value (refer to Note 19b).
7 Refer to Note 2 for more information about the merger of UBS AG and Credit Suisse AG.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
150
Notes to the UBS AG consolidated financial statements
Note 1
Summary of material accounting policies
The following table provides an overview of information included in this Note.
151
a)
151
151
1)
152
2)
152
a.
152
b.
156
c.
156
d.
156
e.
157
f.
157
g.
160
h.
161
i.
161
j.
162
3)
162
4)
163
5)
163
6)
164
7)
164
8)
164
9)
165
10)
165
11)
165
12)
166
b)
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
151
Note 1
Summary of material accounting policies (continued)
a) Material accounting policies
This Note describes
the material accounting
policies applied in
the preparation
of the consolidated
financial statements
(the Financial
Statements)
of UBS AG
and its
subsidiaries
(UBS AG).
On 6
March
2025, the
Financial
Statements
were
authorized for issue by the Board of Directors
(the BoD).
Basis of accounting
The
Financial
Statements
have
been
prepared
in
accordance
with
IFRS
Accounting
Standards,
as
issued
by
the
International Accounting Standards Board (the IASB),
and are presented in US dollars.
Disclosures marked as audited in the “Risk, capital, liquidity
and funding, and balance sheet” section of this report form
an integral part of the Financial Statements. These disclosures relate to requirements under IFRS 7,
Financial Instruments:
Disclosures
, and IAS 1,
Presentation of Financial Statements
, and are not repeated in this section.
The
accounting
policies
described
in
this
Note
have
been
applied
consistently
in
all
years
presented
unless
otherwise
stated in Note 1b.
Critical accounting estimates and judgments
Preparation of these Financial Statements under
IFRS Accounting Standards requires management to apply
judgment and make estimates and assumptions that
affect reported amounts of assets, liabilities,
income and expenses and disclosure,
of contingent assets and liabilities,
and may involve significant uncertainty
at the
time they are made. Such estimates and
assumptions are based on the best
available information. UBS AG regularly reassesses such estimates and assumptions,
which encompass historical
experience, expectations of
the future and
other pertinent factors,
to determine their
continuing relevance based
on current conditions,
updating them as necessary. Changes in those
estimates and assumptions may have a significant effect on
the Financial Statements. Furthermore, actual results
may differ significantly from UBS AG’s estimates, which could
result in significant losses to UBS AG,
beyond what was anticipated or provided for.
The following
areas contain
estimation uncertainty
or require
critical judgment
and have
a significant
effect on
amounts recognized
in the
Financial
Statements:
–
determination of carrying amounts of assets
and liabilities and treatment of reserves for business
combinations under common control (refer to item
1 in
this Note and Note 2)
–
expected credit loss measurement (refer to item 2g in this Note
and to Note 20);
–
fair value measurement (refer to item 2f in this Note
and to Note 21);
–
income taxes (refer to item 6 in this Note and to Note
9);
–
provisions and contingent liabilities (refer to item 10 in this
Note and to Note 18);
–
post-employment benefit plans (refer to item 5 in
this Note and to Note 26);
–
goodwill (refer to item 9 in this Note and to Note
13); and
–
consolidation of structured entities (refer to item 1 in this Note
and to Note 28).
1) Consolidation and business combinations
Consolidation
The Financial Statements include the financial statements of UBS AG and its subsidiaries, presented as a single economic
entity; intercompany
transactions and
balances have
been eliminated.
UBS AG consolidates
all entities
that it
controls,
including
structured
entities
(SEs),
which
is
the
case
when
it
has:
(i) power
over
the
relevant
activities
of
the
entity;
(ii) exposure to the entity‘s variable returns;
and (iii) the ability to use its power to affect
its own returns.
Consideration is
given to
all facts
and circumstances to
determine whether
UBS AG has power
over another
entity, i.e.
the current ability to direct the relevant activities of an entity when
decisions about those activities need to be made.
Subsidiaries,
including
SEs,
are
consolidated
from the
date
when
control
is gained
and deconsolidated
from
the
date
when control ceases. Control, or the lack thereof, is reassessed if facts and circumstances
indicate that there is a change
to one or more elements required to establish that control
is present.
›
Refer to Note 28
for more information
Critical accounting estimates and judgments
Each individual entity is assessed for consolidation in line with the aforementioned consolidation principles. The assessment of
control can be complex and
requires
the use
of significant judgment,
in particular in
determining whether UBS AG
has power over
the entity.
As the
nature and
extent of UBS AG’s
involvement is unique for
each entity,
there is no
uniform consolidation outcome by entity.
When carrying out the
consolidation assessment, judgment is
exercised considering all
the relevant facts
and circumstances, including
the nature and
activities of the
investee, as
well as the
substance of voting
and similar
rights.
›
Refer to Note 28
for more information
Transactions with subsidiaries of UBS Group AG that are outside
of the consolidation scope of UBS AG are
accounted for
and
presented
as
transactions
with
third
parties.
This
may
lead
to
differences
in
presentation
between
the
financial
statements of UBS Group and those of UBS AG, e.g. personnel expenses incurred by UBS Business Solutions entities and
recharged to UBS AG entities are presented by UBS AG in
General and administrative expenses
.
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Note 1
Summary of material accounting policies (continued)
Business combinations
Business combinations are
accounted for using
the acquisition method.
The amount of
non-controlling interests,
if any,
is measured at the non-controlling interest’s proportionate
share of the acquiree’s identifiable net assets.
Business combinations under common control
A business combination in which
the combining entities or
businesses are ultimately
controlled by UBS both
before and
after the business
combination and where that
control is not
transitory is considered to
constitute a business
combination
under common control
as defined by IFRS 3,
Business Combinations
. Business combinations
under common control
are
outside the scope of IFRS 3.
Critical accounting estimates and judgments
UBS AG accounts
for business
combinations under common
control using
the historic
carrying values
of assets
and liabilities
of the
transferred entity
or
business as of the date of the transfer,
determined under IFRS Accounting Standards. The balances of each of the equity reserves of
the transferred entity,
accumulated after that entity becomes
part of the UBS Group, are
combined with the corresponding
equity reserves (
Share premium
,
Retained earnings
Other comprehensive income recognized directly in
equity, net
of tax
) of UBS AG. The
difference between the aggregate
carrying value of the
assets and
liabilities and equity reserves is recognized as an adjustment to
Share premium
, net of any consideration that may be payable. Comparative periods prior to
the date of the business combination under
common control are not restated, because such transactions
are accounted for prospectively.
2) Financial instruments
a. Recognition
UBS AG generally recognizes
financial instruments when
it becomes a
party to contractual
provisions of an
instrument.
However,
UBS AG does not recognize assets received
in transfers that do not qualify for derecognition
by the transferor
(applying
derecognition
principles
under
IFRS
Accounting
Standards
as
described
in
item
2e
below).
UBS AG
applies
settlement date accounting to all
standard purchases and
sales of non-derivative financial instruments
.
UBS AG may act
in a fiduciary
capacity, which results in it holding or
placing assets on
behalf of individuals,
trusts, retirement benefit plans
and other institutions.
Unless these items
meet the definition
of an asset
and the recognition
criteria are
satisfied, they
are not recognized on UBS AG’s balance
sheet and the related income is excluded from
the Financial Statements.
Client cash balances associated with derivatives clearing
and execution services are not recognized on the
balance sheet
if, through contractual
agreement, regulation
or practice, UBS AG
neither obtains
benefits from
nor controls such
cash
balances.
b. Classification, measurement and presentation
Financial assets
Where the contractual
terms of a debt
instrument result in cash
flows that are
solely payments of principal and
interest
(SPPI) on
the principal
amount outstanding,
the debt
instrument is
classified as
measured at
amortized cost
if it is
held
within a business model that has an objective of holding financial assets to collect contractual cash flows, or at fair value
through other comprehensive income (FVOCI) if it
is held within a
business model that has an
objective of both collecting
contractual cash flows and selling financial assets.
All other
financial
assets
are measured
at fair
value
through
profit or
loss (FVTPL),
including those
held for
trading
or
those managed on a fair value basis, except for derivatives designated in certain hedge accounting relationships
(refer to
item 2j in this Note for more information).
Business model assessment and contractual cash flow characteristics
UBS AG determines the nature of a business model by considering the way portfolios
of financial assets are managed to
achieve a particular business objective at the time an asset
is recognized.
In assessing
whether contractual
cash flows
are SPPI,
UBS AG considers
whether the
contractual terms
of the
financial
asset
contain
a
term
that
could
change
the
timing
or
amount
of
contractual
cash
flows
arising
over
the
life
of
the
instrument. This assessment includes contractual
cash flows that may vary
due to environmental, social and governance
(ESG) triggers.
Financial liabilities
Financial liabilities measured at amortized cost
Financial liabilities
measured at
amortized cost
include
Debt issued
measured at
amortized cost
Funding from
UBS
Group AG
measured at amortized cost
. The latter includes contingent capital instruments issued to UBS Group
AG prior
to November 2023 that contain contractual provisions under
which the principal amounts would be written down upon
either a specified common equity tier 1 (CET1) ratio breach or a determination by the Swiss Financial Market Supervisory
Authority (FINMA) that a viability event has occurred. Such contractual provisions are not derivatives, as the underlying is
deemed
to
be
a
non-financial
variable
specific
to
a
party
to
the
contract.
Issuances
after
November
2023
include
a
contractual equity conversion feature with the same triggers, i.e. a CET1 ratio breach or FINMA viability event. When the
debt is
issued in
US dollars,
these conversion
features
are classified
as equity
and are
accounted for
in
Share premium
separately from the amortized cost debt host.
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Note 1
Summary of material accounting policies (continued)
When the legal bail-in mechanism for write-down
or conversion into equity does not form part
of the contractual terms
of issued debt instruments, it does not affect the accounting classification
of these instruments as debt or equity.
If a debt were to be written down or converted into equity in a future period, it would be partially or fully derecognized,
with
the
difference
between
its
carrying
amount
and
the
fair
value
of
any
equity
issued
recognized
in
the
income
statement,
with the conversion features classified as equity always remaining
in
Equity attributable to shareholders
.
Financial liabilities measured at fair value through profit or
loss
UBS AG designates certain issued debt instruments
as financial liabilities at fair value
through profit or loss, on the
basis
that such financial instruments
include embedded derivatives
that are not
closely related and
which significantly impact
the
cash
flows
of
the
instrument
and / or
are
managed
on
a
fair
value
basis
(refer
to
the
table
below
for
more
information).
Financial
instruments
including
embedded
derivatives
arise
predominantly
from
the
issuance
of
certain
structured debt instruments.
Measurement and presentation
On initial recognition, financial instruments are measured at fair value adjusted for directly attributable transaction costs,
unless the instrument is classified
at FVTPL, in which case
transaction costs are excluded.
Financial instruments acquired
through business combinations under
common control are initially
measured using the historic
carrying values of
financial
assets and financial
liabilities of the
transferred entity
or business as
of the date
of the transfer,
determined under
IFRS
Accounting Standards.
After
initial recognition,
UBS AG classifies,
measures and
presents its
financial assets
and liabilities
in accordance
with
IFRS 9, as described in the table below.
Classification, measurement and presentation
of financial assets
Financial assets classification
Significant items included
Measurement and presentation
Measured at
amortized cost
This classification includes:
–
cash and balances at central banks;
–
amounts due from banks;
–
receivables from securities financing transactions;
–
cash collateral receivables on derivative
instruments;
–
residential and commercial mortgages;
–
corporate loans;
–
secured loans, including Lombard loans, and
unsecured loans;
and
–
debt securities held as high-quality liquid
assets
(HQLA).
Measured at amortized cost using the effective interest
method less allowances for expected credit losses
(ECL)
(refer to items 2d and 2g in this Note for more information).
The following items are recognized in the income
statement:
–
interest income, which is accounted for in accordance
with item 2d in this Note;
–
ECL and reversals; and
–
foreign exchange (FX) translation gains and losses.
When a financial asset at amortized cost is derecognized,
the gain or loss is recognized in the income statement.
For amounts arising from settlement of certain derivatives,
see below in this table.
Measured at
FVOCI
Debt
instruments
measured at
FVOCI
This classification primarily includes debt securities
held as HQLA.
Measured at fair value,
with unrealized gains and losses
reported in
Other comprehensive income
, net of applicable
income taxes, until such investments are derecognized.
Upon derecognition, any accumulated balances in
Other
comprehensive income
statement and reported within
Other income.
The following items, which are determined on the
same
basis as for financial assets measured at amortized
cost, are
recognized in the income statement:
–
interest income, which is accounted for in accordance
with item 2d in this Note;
–
ECL and reversals; and
–
FX translation gains and losses.
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Note 1
Summary of material accounting policies (continued)
Classification, measurement and presentation
of financial assets
Financial assets classification
Significant items included
Measurement and presentation
Measured at
FVTPL
Held for
trading
Financial assets held for trading include:
–
all derivatives with a positive replacement value,
except
those that are designated and effective hedging
instruments; and
–
other financial assets acquired principally for the
purpose of selling or repurchasing in the near term, or
that are part of a portfolio of identified financial
instruments that are managed together and for
which
there is evidence of a recent actual pattern of short-
term profit taking. Included in this category are debt
instruments (including those in the form of
securities,
money market paper,
and traded corporate and bank
loans) and equity instruments.
Measured at fair value,
with changes recognized in the
income statement.
Derivative assets (including derivatives that
are designated
and effective hedging instruments) are generally
presented as
Derivative financial instruments
, except those
exchange-traded derivatives (ETD) and over-the-counter
(OTC)-cleared derivatives that are legally settled on
a daily
basis or economically net settled on a daily basis,
which
are presented within
Cash collateral receivables on
derivative instruments.
Changes in fair value, initial transaction costs,
dividends
and gains and losses arising on disposal or redemption
are
recognized in
Other net income from financial
instruments measured at fair value through
profit or loss
,
except interest income on instruments other than
derivatives (refer to item 2d in this Note), interest on
derivatives designated as hedging instruments
in hedges
of interest rate risk and forward points on certain short-
and long-duration FX contracts acting as economic
hedges,
which are reported in
Net interest income.
Changes in the fair value of derivatives that
are
designated and effective hedging instruments are
presented either in the income statement or
Other
comprehensive income
, depending on the type of hedge
relationship (refer to item 2j in this Note for more
information).
Mandatorily
measured at
FVTPL – Other
Financial assets mandatorily measured at FVTPL that
are
not held for trading include:
–
certain structured instruments, certain commercial
loans, and receivables from securities financing
transactions that are managed on a fair value basis;
–
loans managed on a fair value basis,
including those
hedged with credit derivatives;
–
certain debt securities held as HQLA and
managed on a
fair value basis;
–
brokerage receivables, for which contractual cash flows
do not meet the SPPI criterion because the aggregate
balance is accounted for as a single unit of
account,
with interest being calculated on the individual
components;
–
equity instruments; and
–
assets held under unit-linked investment contracts.
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Note 1
Summary of material accounting policies (continued)
Classification, measurement and presentation
of financial liabilities
Financial liabilities classification
Significant items included
Measurement and presentation
Measured at amortized cost
This classification includes:
–
demand and time deposits;
–
retail savings / deposits;
–
sweep deposits;
–
payables
from securities financing transactions;
–
non-structured debt issued;
–
subordinated debt;
–
commercial paper and certificates of deposit;
–
obligations against funding from UBS Group AG;
and
–
cash collateral payables on derivative instruments.
Measured at amortized cost using the effective interest
method.
When a financial liability at amortized cost is
derecognized, the gain or loss is recognized in the income
statement.
Interest income generated from client deposits
derecognized pursuant to certain deposit sweep
programs
is presented within
Net interest income from financial
instruments measured at fair value through
profit or loss
and other
.
Measured at
FVTPL
Held for trading
Financial liabilities held for trading include:
–
all derivatives with a negative replacement value
(including certain loan commitments),
except those
that are designated and effective hedging
instruments; and
–
obligations to deliver financial instruments,
such as
debt and equity instruments, that UBS AG has
sold to
third parties but does not own (short positions).
Measurement and presentation of financial liabilities
classified at FVTPL follow the same principles
as for
financial assets classified at FVTPL, except that
the amount
of change in the fair value of a financial liability
designated at FVTPL that is attributable to changes
in
UBS AG’s own credit risk is presented in
Other
comprehensive income
Retained earnings
and is never reclassified to the income statement.
Derivative liabilities (including derivatives that
are
designated and effective hedging instruments)
are
generally presented as
Derivative financial instruments
,
except those exchange-traded and OTC-cleared
derivatives that are legally settled on a daily basis
or
economically net settled on a daily basis, which
are
presented within
Cash collateral payables on derivative
instruments.
Designated at
FVTPL
Financial liabilities designated
at FVTPL include:
–
issued hybrid debt instruments,
primarily equity-
linked, credit-linked and rates-linked bonds or notes;
–
issued debt instruments managed on a fair
value
basis;
–
obligations against funding from UBS Group AG
managed on a fair value basis;
–
certain payables from securities financing
transactions;
–
amounts due under unit-linked investment
contracts,
the cash flows of which are linked to financial
assets
measured at FVTPL and eliminate an accounting
mismatch;
and
–
brokerage payables, which arise in conjunction with
brokerage receivables and are measured at FVTPL to
achieve measurement consistency.
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Note 1
Summary of material accounting policies (continued)
c. Loan commitments and financial guarantees
Loan
commitments
are
arrangements
to
provide
credit
under
defined
terms
and
conditions.
Irrevocable
loan
commitments
are
classified
as:
(i) derivative
loan
commitments
measured
at
fair
value
through
profit
or
loss;
(ii) loan
commitments
designated
at
fair
value
through
profit
or
loss;
or (iii)
loan commitments
not
measured
at
fair
value,
in
which case the ECL requirements as set out
in item 2g in this Note apply.
Financial guarantee contracts are contracts that require UBS AG to make specified payments
to reimburse the holder for
an incurred loss because a specified debtor
fails to make payments when due in
accordance with the terms of a specified
debt instrument.
The ECL
requirements as
set out
in item
2g in
this Note
apply to
financial guarantees
issued that
are
not accounted for at FVTPL.
Financial
guarantee
contracts
held
by
UBS
for
credit
risk
mitigation
purposes
that
are
assessed
to
be
integral
to
the
guaranteed
exposure
are
accounted
for
as
a
component
of
that
exposure,
with
cash
flows
expected
from
the
credit
enhancement included in the measurement of the ECL of the respective
exposure. Rights to reimbursement arising from
financial
guarantees
held
that
are
not
integral
to
the
terms
of
the
exposure
they
cover
are
recognized
when
their
realization is considered to be virtually certain.
d. Interest income and expense
Interest income
from financial
instruments measured
at amortized
cost and
FVOCI and
interest expense
from financial
instruments measured at amortized cost are recognized in the income statement based on
the effective interest method.
When
calculating
the
effective
interest
rate
(the
EIR)
for
financial
instruments
(other
than
credit-impaired
financial
instruments), UBS AG estimates
future cash flows considering
all contractual terms
of the instrument, but not
expected
credit losses, with the EIR applied to the gross
carrying amount of the financial asset or the
amortized cost of a financial
liability. However,
when a financial asset becomes credit impaired after
initial recognition, interest income is determined
by applying the EIR
to the amortized cost of
the instrument, which represents the gross carrying amount adjusted
for any
credit loss allowance.
Upfront fees, including fees on loan commitments not measured at fair value where a loan is expected to be issued, and
direct costs are
included within the
initial measurement
of a financial
instrument measured
at amortized
cost or FVOCI
and recognized over the expected life of the instrument
as part of its EIR.
Fees related to loan commitments
where no loan is expected to
be issued, as well as
loan syndication fees where UBS AG
does not
retain a
portion of
the syndicated
loan or
where UBS
AG does
retain a
portion of
the syndicated
loan at
the
same effective yield for comparable risk as other participants, are included in
Net fee and commission income
recognized over the life of the commitment or when syndication
occurs.
›
Refer to item 3 in this Note for more information
Interest
income
on
financial
assets,
excluding
derivatives,
is
included
in
interest
income
when
positive
and
in
interest
expense
when
negative.
Similarly,
interest
expense
on
financial
liabilities,
excluding
derivatives,
is
included
in
interest
expense, except when interest rates are negative,
in which case it is included in interest income.
›
Refer to item 2b in this Note and Note 4
for more information
e. Derecognition
Financial assets
UBS AG
derecognizes
a
transferred
financial
asset,
or
a
portion
of
a
financial
asset,
if
the
purchaser
has
obtained
substantially all the risks and rewards of the asset or a significant part of the risks and rewards combined with a practical
ability to sell or pledge the asset.
Where
financial
assets
have
been
pledged
as
collateral
or
in
similar
arrangements,
they
are
considered
to
have
been
transferred
if the
counterparty
has received
the contractual
rights to
the
cash flows
of the
pledged assets,
as
may be
evidenced
by,
for
example,
the
counterparty’s
right to
sell or
repledge
the
assets.
In
transfers
where
control
over
the
financial
asset
is
retained,
UBS AG
continues
to
recognize
the
asset
to
the
extent
of
its
continuing
involvement,
determined by the extent to which it is exposed to changes
in the value of the transferred asset following the transfer.
›
Refer to Note 23 for more information
Financial liabilities
UBS AG
derecognizes
a
financial
liability
when
it
is extinguished
,
i.e.
when
the
obligation
specified
in
the
contract
is
discharged, canceled or expires. When an existing financial liability is exchanged for a new one from the same lender on
substantially
different
terms,
or
the
terms
of
an
existing
liability
are
substantially
modified,
the
original
liability
is
derecognized
and
a
new
liability
recognized
with
any
difference
in
the
respective
carrying
amounts
recorded
in
the
income statement.
Most
OTC
derivative
contracts
and
exchange-traded
futures
and
option
contracts
cleared
through
central
clearing
counterparties
and exchanges are
considered to be
settled on a
daily basis, as
the payment or
receipt of a
variation margin
on a daily basis represents a legal or economic settlement,
which results in derecognition of the associated derivatives.
›
Refer to Note 22 for more information
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Note 1
Summary of material accounting policies (continued)
f. Fair value of financial instruments
UBS AG
accounts
for
a
significant
portion
of
its
assets
and
liabilities
at
fair
value.
Fair
value
is
the
price
on
the
measurement date
that would be received
for the sale of
an asset or paid
to transfer a liability in
an orderly transaction
between market
participants in the
principal market,
or in the most
advantageous market
in the absence
of a principal
market.
›
Refer to Note 21 for more information
Critical accounting estimates and judgments
The use of valuation techniques, modeling assumptions and estimates of
unobservable market inputs in the fair valuation of
financial instruments requires
significant
judgment
and
could
affect
the
amount
of
gain
or
loss
recorded
for
a
particular
position.
Valuation
techniques
that
rely
more
heavily
on
unobservable inputs
and sophisticated
models inherently
require a
higher level
of judgment
and may
require adjustment
to reflect
factors that
market
participants would consider in estimating fair value,
such as close-out costs, which are presented in Note 21d.
UBS AG’s governance
framework over
fair value
measurement is described
in Note 21b,
and UBS AG provides
a sensitivity analysis
of the
estimated effects
arising from changing significant unobservable
inputs in Level 3 financial instruments to reasonably
possible alternative assumptions in Note
21f.
›
Refer to Note 21 for more information
g. Allowances and provisions for expected credit losses
ECL are
recognized for
financial assets
measured at
amortized cost,
financial assets
measured at
FVOCI, fee
and lease
receivables, financial guarantees, and loan commitments
not measured at fair value, including those acquired
through a
business
combination
under
common
control.
ECL
are
also
recognized
on
the
undrawn
portion
of
committed
unconditionally revocable credit lines, which include UBS
AG’s credit card limits and master credit facilities, as UBS
AG is
exposed
to
credit
risk
because
the
borrower
has
the
ability
to
draw
down
funds
before
UBS AG
can
take
credit
risk
mitigation actions.
Recognition of expected credit losses
ECL are recognized on the following basis.
–
Stage 1 –
those instruments
for which
no significant
increase in
credit risk
(SICR) has
been observed
(see
Significant
increase in credit
risk
of lifetime ECL that would result if a default occurs in the 12 months after the reporting date, weighted
by the risk of
a default occurring.
–
Stage 2
–
those
instruments
for
which
an
SICR
is
observed
but
which
are
not
credit
impaired:
Lifetime
ECL
are
recognized reflecting lifetime cash shortfalls that would result from
all possible default events over the expected life of
a financial instrument,
weighted by the
risk of a
default occurring. When
an SICR is
no longer observed,
the instrument
will move back to stage 1.
–
Stage 3 – credit-impaired financial instruments (as determined by the occurrence of one or more loss events): Lifetime
ECL are
always recognized
by estimating
expected cash
flows based
on a
chosen recovery
strategy. Credit-impaired
exposures may include positions for which no allowance has been recognized, for example because they are expected
to be fully recoverable through collateral held.
–
Changes in lifetime ECL since initial recognition are also
recognized for assets that are purchased credit impaired (PCI).
PCI financial
instruments include
those that
are purchased
at a
deep discount
or newly
originated with
a defaulted
counterparty;
they remain a separate category until derecognition.
All or part
of a financial
asset is written
off if it
is deemed uncollectible
or forgiven. Write-offs
reduce the principal
amount
of a claim
and are charged against
related allowances for credit
losses. Recoveries, in part or
in full, of
amounts previously
written off are generally credited to
Credit loss expense / (release)
.
ECL are recognized in the income statement in
Credit loss expense / (release)
. A corresponding ECL allowance is reported
as a decrease
in the carrying
amount of financial
assets measured at
amortized cost on
the balance sheet.
For financial
assets that
are measured
at FVOCI,
the carrying
amount is
not reduced,
but an
accumulated
amount is
recognized in
Other comprehensive
income
. For
off-balance sheet
financial instruments
and other
credit lines,
provisions for
ECL are
presented in
Provisions.
Default and credit impairment
UBS AG applies a single definition of default for
credit risk management purposes, regulatory
reporting and ECL, with a
counterparty classified as defaulted based on quantitative
and qualitative criteria.
›
Refer to the “Risk management and control” section of this
report for more information
Measurement of expected credit losses
IFRS 9 ECL reflect
an unbiased, probability
-weighted estimate
based on loss
expectations resulting
from default
events.
The method
used to
calculate ECL
applies the
following principal
factors: probability
of default
(PD), loss
given default
(LGD) and
exposure
at default
(EAD). Parameters
are generally
determined on
an individual
financial asset
level. Based
on the materiality of
the portfolio, for
credit card
exposures and personal
account overdrafts
in Switzerland, a portfolio
approach is applied that
derives an average PD
and LGD for
the entire portfolio. PDs
and LGDs used in
the ECL calculation
are point-in-time (PIT)-based
for key portfolios
and consider
both current
conditions and expected
cyclical changes. For
material portfolios, PDs
and LGDs are determined
for different scenarios, whereas EAD projections are
treated as scenario
independent.
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Note 1
Summary of material accounting policies (continued)
For the
purpose
of determining
the ECL
-relevant
parameters,
UBS AG
leverages
its Basel
III advanced
internal
ratings-
based (A-IRB)
models that
are
also used
in determining
expected
loss (EL)
and risk-weighted
assets under
the Basel III
framework and Pillar 2 stress loss models. Adjustments have been made to
these models and IFRS-9-related models have
been developed that consider the complexity, structure and
risk profile of relevant portfolios and take account
of the fact
that PDs and LGDs used in the ECL calculation are
PIT based, as opposed to the corresponding Basel III through-the-cycle
(TTC)
parameters.
All
models
that
are
relevant
for
measuring
expected
credit
losses
are
subject
to
UBS AG’s
model
validation and oversight processes.
Probability of default:
PD represents the probability
of a default over a
specified time period. A 12-month
PD represents
the probability of default determined for the next 12 months and a lifetime PD represents
the probability of default over
the remaining lifetime
of the instrument.
PIT PDs are
derived from TTC
PDs and scenario
forecasts. The modeling
is region,
industry and
client segment
specific and considers
both macroeconomic
scenario dependencies
and client-idiosyncratic
information.
Exposure at default:
EAD represents an estimate of
the exposure to credit
risk at the time
of a potential default occurring,
considering expected repayments, interest payments and accruals,
discounted at the EIR. Future drawdowns on facilities
are considered through
a credit conversion
factor (a CCF)
that is reflective
of historical
drawdown and default
patterns
and the characteristics of the respective portfolios.
Loss given default:
LGD represents an estimate
of the loss at the time of a potential
default occurring,
taking into account
expected
future
cash
flows
from
collateral
and
other
credit
enhancements,
or
expected
payouts
from
bankruptcy
proceedings
for unsecured claims
and, where applicable,
time to realization
of collateral and
the seniority of
claims. LGD is
commonly expressed
as a percentage
of EAD.
Estimation of expected credit losses
Number of scenarios and estimation of scenario weights
Determination
of probability-weighted
ECL requires evaluating
a range of
diverse and
relevant future economic
conditions,
especially
with a view to
modeling the
non-linear effect
of assumptions
about macroeconomic
factors on the
estimate.
To accommodate
this requirement,
UBS AG
uses different
economic
scenarios
in the
ECL calculation.
Each
scenario
is
represented by
a specific
scenario
narrative,
which
is relevant
considering
the exposure
of key
portfolios to
economic
risks, and for
which a set
of consistent macroeconomic variables
is determined. The
estimation of the
appropriate weights
for
these
scenarios
is
predominantly
judgment
based.
The
assessment
is
based
on
a
holistic
review
of
the
prevailing
economic or
political conditions,
which
may exhibit
different
levels of
uncertainty.
It takes
into account
the impact
of
changes in the nature and severity of the underlying scenario
narratives and the projected economic variables.
The determined weights constitute
the probabilities that
the respective set of
macroeconomic conditions will
occur and
not that the chosen particular narratives with the related
macroeconomic variables will materialize.
Macroeconomic and other factors
The range
of macroeconomic,
market and
other factors
that is
modeled as
part of
the scenario
determination is
wide,
and historical information
is used to support
the identification of
the key factors.
As the forecast
horizon increases, the
availability of
information decreases,
requiring an
increase
in judgment.
For cycle-sensitive
PD and
LGD determination
purposes, UBS AG
projects the
relevant economic
factors for
a period
of three
years before
reverting, over
a specified
period, to cycle-neutral PD and LGD for longer-term
projections.
Factors relevant
for ECL
calculation vary
by type
of exposure.
Regional and
client-segment characteristics
are generally
taken into account, with specific focus on Switzerland and
the US, considering UBS AG’s key ECL-relevant portfolios.
For
UBS AG,
the
following
forward-looking
macroeconomic
variables
represent
the
most
relevant
factors
for
ECL
calculation:
–
gross domestic product (GDP) growth rates, given their significant
effect on borrowers’ performance;
–
unemployment rates, given their significant effect on private
clients’ ability to meet contractual obligations;
–
house price indices, given their significant effect on mortgage
collateral valuations;
–
interest rates, given their significant effect on counterparties’
abilities to service debt;
–
consumer price
indices, given
their overall
relevance for
companies’ performance,
private clients’
purchasing power
and economic stability; and
–
equity indices, given that they are an important factor
in UBS AG’s corporate rating tools.
›
Refer to Note 20 for more information
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
159
Note 1
Summary of material accounting policies (continued)
ECL measurement period
The period for which
lifetime ECL are
determined is based on
the maximum contractual
period that UBS AG
is exposed
to
credit
risk,
taking
into
account
contractual
extension,
termination
and
prepayment
options.
For
irrevocable
loan
commitments and
financial guarantee
contracts, the
measurement period
represents
the maximum
contractual period
for which UBS AG has an obligation to extend credit.
Additionally, some financial instruments include both an on-demand loan and a revocable undrawn commitment, where
the contractual cancellation right does not limit UBS
AG’s exposure to credit risk to the contractual notice period,
as the
client has
the ability to
draw down funds
before UBS AG can
take risk-mitigating actions.
In such
cases UBS AG is
required
to estimate
the period
over which
it is
exposed to
credit risk.
This applies
to UBS AG’s
credit card
limits, which
do not
have a defined
contractual maturity
date, are callable
on demand and
where the drawn
and undrawn components
are
managed as one
exposure. The exposure
arising from UBS
AG’s credit card
limits is not
significant and is
managed at a
portfolio level, with
credit actions triggered
when balances are
past due. An
ECL measurement
period of seven
years is
applied for credit card limits,
capped at 12 months
for stage 1 balances, as a proxy
for the period that UBS AG
is exposed
to credit risk.
Customary master credit
agreements in the
Swiss corporate market
also include
on-demand loans and
revocable undrawn
commitments.
For
smaller
commercial
facilities,
a
risk-based
monitoring
(RbM)
approach
is
in
place
that
highlights
negative
trends
as
risk
events,
at
an
individual
facility
level,
based
on
a
combination
of
continuously
updated
risk
indicators. The risk
events trigger additional
credit reviews by
a risk officer,
enabling informed credit decisions
to be taken.
Larger
corporate
facilities
are
not
subject
to
RbM,
but
are
reviewed
at
least
annually
through
a
formal
credit
review.
UBS AG has
assessed these
credit risk
management practices
and considers
both the
RbM approach
and formal
credit
reviews
as
substantive
credit
reviews
resulting
in
a
re-origination
of
the
given
facility.
Following
this,
a
12-month
measurement period from the reporting
date is used for
both types of facilities as
an appropriate proxy of the
period over
which UBS AG
is exposed
to credit
risk, with
12 months
also used
as a
look-back period
for assessing
an SICR,
always
from the respective reporting date.
Significant increase in credit risk
Financial instruments subject
to ECL are
monitored on an
ongoing basis. To
determine whether the
recognition of a
maximum 12
-month ECL
continues to
be appropriate,
an assessment
is
made as
to whether
an SICR
has occurred
since initial recognition of the financial instrument, applying both
quantitative and qualitative factors.
Primarily, UBS AG assesses changes in
an instrument’s risk of default
on a quantitative basis by
comparing the annualized
forward-looking and scenario-weighted lifetime PD of an
instrument determined at two different dates:
–
at the reporting date; and
–
at inception of the instrument.
If, based on
UBS AG’s quantitative
modeling, an
increase exceeds
a set threshold,
an SICR
is deemed to
have occurred
and the instrument is transferred to stage 2 with lifetime
ECL recognized.
The threshold
applied varies
depending on
the original
credit quality
of the
borrower, with
a higher
SICR threshold
set
for those
instruments with
a low
PD at
inception. The
SICR assessment
based on
PD changes
is made
at an
individual
financial asset
level. A
high-level overview
of the
SICR trigger,
which is
a multiple
of the
annualized remaining
lifetime
PIT
PD expressed
in rating
downgrades,
is provided
in the
“SICR thresholds”
table
below. The
actual
SICR
thresholds
applied are defined on a more granular level by interpolating
between the values shown in the table.
SICR thresholds
Internal rating at origination
of the instrument
Rating downgrades /
SICR trigger
0–3
3
4–8
2
9–13
1
›
Refer to the “Risk management and control” section of this
report for more details about UBS AG’s internal rating system
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
160
Note 1
Summary of material accounting policies (continued)
Irrespective of
the SICR
assessment based
on default
probabilities, credit
risk is
generally deemed
to have
significantly
increased for an instrument if contractual payments
are more than 30 days past due. For certain
less material portfolios,
specifically the Swiss
credit card portfolio, the
30-day past due
criterion is used
as the primary
indicator of an
SICR. Where
instruments are transferred
to stage 2 due
to the 30-day
past due criterion,
a minimum period
of six months
is applied
before a
transfer back
to stage 1 can
be triggered,
where applicable.
For instruments
in Personal
Corporate Banking
and Global
Wealth Management
Region Switzerland
that
are between
90 and
180
days past
due but
have not
been
reclassified to stage 3, a one-year period is applied before
a transfer back to stage 1 can be triggered.
Additionally,
based
on
individual
counterparty-specific
indicators,
external
market
indicators
of
credit
risk
or
general
economic conditions, counterparties may be moved to a watch list, which is used as a secondary qualitative indicator for
an
SICR.
Exception
management
is
further
applied,
allowing
for
individual
and
collective
adjustments
on
exposures
sharing the same credit risk characteristics to take account
of specific situations that are not otherwise fully reflected.
In general, the overall SICR determination process does not
apply to Lombard loans, securities financing transactions and
certain
other
asset-based
lending
transactions,
because
of
the
risk
management
practices
adopted,
including
daily
monitoring processes
with strict
margining. If
margin calls
are not
satisfied, a
position is
closed out
and classified
as a
stage 3 position. In exceptional cases, an individual adjustment and a transfer into stage 2 may be made to take account
of specific facts.
Credit risk
officers are
responsible for
the identification
of an
SICR, which
for accounting
purposes is
in some
respects
different
from
internal
credit
risk
management
processes.
This
difference
mainly
arises
because
ECL
accounting
requirements are instrument specific, such that a
borrower can have multiple exposures allocated
to different stages, and
maturing loans in stage 2 will migrate to stage 1 upon renewal irrespective of the
actual credit risk at that time. Under a
risk-based
approach,
a
holistic
counterparty
credit
assessment
and
the
absolute
level
of
risk
at
any
given
date
will
determine what risk-mitigating actions may be warranted.
›
Refer to the “Risk management and control” section of this
report for more information
Critical accounting estimates and judgments
The calculation of ECL requires
management to apply significant
judgment and make estimates
and assumptions that can
result in significant changes to
the
timing and the amount of ECL recognized.
Determination of a significant increase in
credit risk
IFRS 9 does not include a definition of what constitutes an
SICR, with UBS AG’s assessment considering qualitative and quantitative criteria. An IFRS 9 ECL
Management Forum has been established to
review and challenge the SICR results.
Scenarios, scenario weights and macroeconomic
variables
ECL reflect
an unbiased
and probability-weighted amount,
which UBS AG
determines by
evaluating a
range of
possible outcomes.
Management selects
forward-looking
scenarios
that
include
relevant
macroeconomic
variables
and
management’s
assumptions
around
future
economic
conditions.
IFRS 9
Scenario Sounding
Sessions,
in addition
to the IFRS
9 ECL
Management Forum,
are in place
to derive,
review and
challenge the
scenario selection
and weights,
and to determine whether any additional post-model
adjustments are required that may significantly affect ECL.
ECL measurement period
Lifetime ECL are generally
determined based upon
the contractual maturity
of the transaction, which
significantly affects ECL. For
credit card limits and
Swiss
callable master credit
facilities, judgment is required,
as UBS AG must
determine the period over
which it is
exposed to credit
risk. A seven-year
period is
applied for credit card limits, capped at 12 months for
stage 1 positions, and a 12-month period
applied for master credit facilities.
Modeling and post-model adjustments
A number of
complex models have
been developed or
modified to calculate
ECL, with additional
post-model adjustments required
that may significantly
affect ECL. The models are governed by UBS AG’s model validation controls
and approved by the GMGC. The post-model adjustments are approved by the
ECL Management Forum and endorsed by the
GMGC.
A sensitivity analysis covering key macroeconomic
variables, scenario weights and SICR trigger
points on ECL measurement is provided in Note 20f.
›
Refer to Note 20 for more information
h. Restructured and modified financial assets
When payment default is expected,
or where default has already occurred, UBS AG may grant concessions to borrowers
in financial difficulties that
it would not consider
in the normal course of
its business, such as preferential
interest rates,
extension of maturity,
modifying the schedule of repayments, debt
/ equity swap, subordination, etc.
›
Refer to the “Risk management and control” section of this
report for more information
Modifications result in an
alteration of future contractual cash
flows and can
occur within UBS AG’s normal
risk tolerance
or as part of a credit
restructuring where a counterparty
is in financial difficulties. The
restructuring or modification of
a
financial asset
could lead
to
a
substantial change
in
the
terms
and conditions,
resulting
in
the
original
financial
asset
being
derecognized
and
a
new
financial
asset
being
recognized.
Where
the
modification
does
not
result
in
a
derecognition, any difference between
the modified contractual cash
flows discounted at the
original EIR and
the existing
gross carrying amount of the given financial asset is recognized
in the income statement as of the date of modification.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
161
Note 1
Summary of material accounting policies (continued)
i. Offsetting
UBS AG presents
recognized financial
assets and liabilities
net on its
balance sheet only
if (i) it has
a legally enforceable
right to set off
the recognized amounts
and (ii) it intends either
to settle on a net
basis or to realize
the asset and settle
the
liability
simultaneously.
Netted
positions
include,
for
example,
certain
derivatives
and
repurchase
and
reverse
repurchase transactions with various counterparties,
exchanges and clearing houses.
In
assessing
whether
UBS AG
intends
to
either
settle
on
a
net
basis,
or
to
realize
the
asset
and
settle
the
liability
simultaneously, emphasis is
placed on the effectiveness
of operational settlement
mechanics in eliminating
substantially
all credit and liquidity exposure between the counterparties. This condition precludes offsetting
on the balance sheet for
substantial amounts of UBS AG’s financial assets
and liabilities, even though they may be
subject to enforceable netting
arrangements. Repurchase arrangements
and securities financing transactions
are presented net
only to the extent
that
the settlement
mechanism
eliminates, or
results in
insignificant, credit
and liquidity
risk, and
processes the
receivables
and payables in a single settlement process or cycle.
›
Refer to Note 22
for more information
j. Hedge accounting
UBS AG applies hedge accounting requirements of
IFRS 9 where the criteria for documentation and hedge effectiveness
are met.
If a
hedge relationship
no longer
meets the
criteria for
hedge accounting,
hedge accounting
is discontinued.
Voluntary discontinuation of
hedge accounting is not permitted under IFRS 9.
Fair value hedges of interest rate risk related to
debt instruments and loan assets
The
fair
value
change
of
the
hedged
item
attributable
to
a
hedged
risk
is reflected
as
an
adjustment
to
the
carrying
amount
of
the
hedged
item
and
recognized
in
the
income
statement
along
with
the
change
in
the
fair
value
of
the
hedging instrument.
Fair value hedges of FX risk related to debt instruments
The fair value change of the hedged item attributable
to the hedged risk is reflected
in the measurement of the hedged
item and
recognized
in the
income statement
along with
the change
in the
fair value
of the
hedging instrument.
The
foreign currency basis spread of cross-currency swaps designated as
hedging derivatives is excluded from the
designation
and accounted
for
as a
cost of
hedging with
amounts
deferred
in
Other
comprehensive
income
Equity
.
These
amounts are released to the income
statement over the term of the hedged item.
Discontinuation of fair value hedges
Discontinuations for reasons
other than
derecognition of the
hedged item result
in an
adjustment to the
carrying amount,
which
is
amortized
to
the
income
statement
over
the
remaining
life
of
the
hedged
item
using
the
effective
interest
method. If the hedged item is derecognized, the unamortized fair value adjustment or deferred
cost of hedging amount
is recognized immediately in the income statement
as part of any derecognition gain or loss.
Cash flow hedges of forecast transactions
Fair value gains or
losses associated with the
effective portion of derivatives designated as
cash flow hedges for cash
flow
repricing
risk are
recognized
initially
in
Other
comprehensive
income
Equity
Interest
income
from financial
instruments measured
at amortized
cost and
fair value
through other
comprehensive income
Interest
expense
from
financial
instruments
measured
at
amortized
cost
affect profit
or loss, including
discontinued hedges
for which forecast
cash flows are
expected to
occur.
If the
forecast
transactions
are
no
longer
expected
to occur,
the
deferred
gains
or
losses
are
immediately
reclassified
to the
income
statement.
Hedges of net investments in foreign operations
Gains or losses
on the hedging
instrument relating
to the
effective portion
of a
hedge are
recognized directly
in
Other
comprehensive income
Equity
, while any gains
or losses relating
to the ineffective
and / or undesignated portion
(for example, the
interest element of
a forward contract) are
recognized in the
income statement. Upon
disposal or partial
disposal of the foreign
operation, the cumulative
value of any such
gains or losses
recognized in
Equity
the entity
is reclassified to
Other income
.
›
Refer to Note 25 for more information
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
162
Note 1
Summary of material accounting policies (continued)
3) Fee and commission income and expenses
UBS AG earns fee income from the diverse range of services it provides to its clients. Fee income can be divided into two
broad
categories:
fees
earned from
services
that
are
provided
over
a
certain
period
of time,
such
as
management
of
clients’ assets, custody services
and certain advisory
services; and fees
earned from PIT services,
such as underwriting fees,
deal-contingent merger and acquisitions fees, and brokerage fees (e.g. securities and derivatives execution
and clearing).
UBS AG recognizes fees earned from PIT services
when it has fully provided the service
to the client. Where the contract
requires services to be provided
over time, income is recognized on a systematic
basis over the life of the agreement.
Consideration
received
is allocated
to the
separately
identifiable performance
obligations
in a
contract.
Owing to
the
nature
of
UBS AG’s
business,
contracts
that
include
multiple
performance
obligations
are
typically
those
that
are
considered to include a
series of similar performance
obligations fulfilled over time
with the same pattern
of transfer to
the client, e.g.
management of
client assets and
custodial services.
As a consequence,
UBS AG is not
required to
apply
significant judgment in allocating the consideration received
across the various performance obligations.
PIT services
are generally
for a
fixed price
or dependent
on deal
size, e.g.
a fixed
number of
basis points
of trade
size,
where the amount of revenue is known when the performance obligation is met. Fixed-over-time fees are recognized on
a straight-line
basis over
the performance period.
Custodial and asset
management fees
can be
variable through
reference
to
the
size
of
the
customer
portfolio.
However,
they
are
generally
billed
on
a
monthly
or
quarterly
basis
once
the
customer’s
portfolio
size
is
known
or
known
with
near
certainty
and
therefore
also
recognized
ratably
over
the
performance
period.
UBS AG
does
not
recognize
performance
fees
related
to
management
of
clients’
assets
or
fees
related to contingencies beyond UBS AG’s control until such
uncertainties are resolved.
UBS AG’s fees are generally earned from
short-term contracts. As a result, UBS AG’s contracts do
not include a financing
component or
result in
the recognition
of significant
receivables or
prepayment assets.
Furthermore, due
to the
short-
term nature of such contracts,
UBS AG has not capitalized
any material costs to
obtain or fulfill a contract
or generated
any significant contract assets or liabilities.
UBS AG presents expenses primarily in
line with their nature in the
income statement, differentiating between
expenses
that
are
directly
attributable
to the
satisfaction
of
specific
performance
obligations
associated
with
the
generation
of
revenues, which are generally
presented within
Total revenues
Fee and commission expense
, and those
that are related
to
personnel,
general
and
administrative
expenses,
or
depreciation
and
amortization
which
are
presented
within
Operating expenses
. For
derivatives execution and
clearing services (where
UBS AG acts
as an
agent), UBS AG
only records
its specific
fees in
the income
statement, with
fees payable
to other
parties not
recognized as
an expense
but instead
directly offset against the associated income collected from the
given client.
›
Refer to Note 5 for more information, including the
disaggregation of revenues
4) Share-based and other deferred compensation plans
UBS AG recognizes expenses for deferred compensation awards over the period that the
employee is required to provide
service to
become entitled
to the
award. Where
the service
period is
shortened, for
example in
the case
of employees
affected by restructuring programs or mutually agreed termination provisions, recognition of such expense is accelerated
to the
termination date.
Where no
future service
is required,
such as
for employees
who are
eligible for
retirement
or
who
have
met
certain
age
and
length-of-service
criteria,
the
services
are
presumed
to
have
been
received
and
compensation expense is
recognized over the
performance year or,
in the case of
off-cycle awards,
immediately on the
grant date.
Share-based compensation plans
UBS Group AG is the
grantor of and maintains the
obligation to settle share-based compensation plans that
are awarded
to employees
of UBS
AG. As
a consequence,
UBS AG
classifies the
awards
of UBS
Group
AG shares
as equity-settled
share-based payment transactions. UBS AG recognizes
the fair value of awards granted to its employees by reference
to
the fair value of UBS Group
AG’s equity instruments on the date of
grant, taking into account the terms and
conditions
inherent in the award,
including, where relevant,
dividend rights, transfer
restrictions in effect
beyond the vesting date,
market conditions, and non-vesting conditions.
For equity-settled awards,
fair value is
not remeasured unless the
terms of the award
are modified such that
there is an
incremental
increase
in
value.
Expenses
are
recognized,
on
a
per-tranche
basis,
over
the
service
period
based
on
an
estimate of
the number
of instruments
expected to
vest and
are adjusted
to reflect
the actual
outcomes of
service or
performance conditions.
For equity-settled
awards, forfeiture
events resulting
from a
breach of
a non-vesting
condition (i.e.
one that
does not
relate to a service or performance condition) do not result
in any adjustment to the share-based compensation
expense.
For cash-settled
share-based
awards,
fair
value
is remeasured
at
each
reporting
date,
so that
the
cumulative
expense
recognized equals the cash distributed.
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| Consolidated financial statements | UBS
AG consolidated financial statements
163
Note 1
Summary of material accounting policies (continued)
Other deferred compensation plans
Compensation
expense
for
other
deferred
compensation
plans
is
recognized
on
a
per-tranche
or
straight-line
basis,
depending on
the nature
of the
plan. The
amount recognized
is measured
based on
the present
value of
the amount
expected to be paid under the
plan and is remeasured at each reporting date, so
that the cumulative expense recognized
equals the cash or the fair value of respective financial
instruments distributed.
›
Refer to Note 27 for more information
5) Post-employment benefit plans
Defined benefit plans
Defined benefit plans specify an amount of benefit
that an employee will receive, which usually depends on one or
more
factors,
such as age,
years of service
and compensation.
The defined benefit
liability recognized
in the balance
sheet is
the present value of the
defined benefit obligation,
measured using the projected
unit credit method, less the
fair value
of the
plan’s assets
at
the
balance
sheet
date,
with changes
resulting
from
remeasurements
recorded
immediately
in
Other comprehensive income
. If the fair value of the plan’s assets is higher than the present value of the defined benefit
obligation, the recognition of
the resulting net asset is limited
to the present value of
economic benefits available in the
form of
refunds from
the plan
or reductions
in future
contributions to
the plan.
Calculation of
the net
defined benefit
obligation or
asset takes
into account
the specific
features of
each plan,
including risk
sharing between
employee and
employer, and
is calculated periodically by independent qualified actuaries.
Critical accounting estimates and judgments
The net defined benefit
liability or asset at
the balance sheet date
and the related personnel
expense depend on the
expected future benefits to
be provided,
determined
using
a
number
of
economic
and
demographic assumptions.
A
range
of
assumptions
could
be
applied,
and
different
assumptions could
significantly alter the defined
benefit liability or asset and
pension expense recognized. The most
significant assumptions include life expectancy,
discount
rate, expected
salary increases,
pension increases
and interest
credits on
retirement savings
account balances. Sensitivity
analysis for
reasonable possible
movements in each significant assumption for
UBS AG‘s post-employment obligations
is provided in Note 26.
›
Refer to Note 26
for more information
Defined contribution plans
A
defined
contribution
plan
pays
fixed
contributions
into
a
separate
entity
from
which
post-employment
and
other
benefits
are
paid.
UBS AG
has
no
legal
or
constructive
obligation
to
pay
further
amounts
if
the
plan
does
not
hold
sufficient
assets
to
pay
employees
the
benefits
relating
to
employee
service
in
the
current
and
prior
periods.
Compensation expense is
recognized when the
employees have rendered
services in exchange for
contributions. This is
generally in the year of contribution. Prepaid contributions are recognized as an asset to the extent that a cash refund or
a reduction in future payments is available.
6) Income taxes
UBS AG is subject
to the income
tax laws of
Switzerland and
those of the
non-Swiss jurisdictions
in which UBS AG
has
business operations.
UBS AG’s provision for income taxes is composed of current and deferred taxes. Current income taxes represent taxes to
be paid or refunded for the current period or previous periods
.
Deferred tax assets
(DTAs) and
deferred tax liabilities
(DTLs) are recognized
for temporary differences
between the carrying
amounts and
tax bases
of assets
and liabilities
that will
result in
deductible
or taxable
amounts,
respectively
in future
periods. DTAs may also arise
from other sources, including unused
tax losses and unused tax
credits. DTAs and DTLs are
measured using
the applicable
tax rates
and laws
that
have been
enacted
or substantively
enacted
by the
end of
the
reporting period and that will be in effect when such differences
are expected to reverse.
DTAs are recognized
only to the extent
it is probable
that sufficient taxable
profits will be
available against which
these
differences can
be used
.
When an
entity
or tax
group has
a history
of recent
losses, DTAs
are only
recognized
to the
extent that there are sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable
profit will be available against which the unused tax losses
can be utilized.
Deferred and current tax
assets and liabilities are
offset when: (i) they arise
in the same tax
reporting group; (ii) they relate
to the
same tax
authority; (iii) the
legal right
to offset
exists; and
(iv) with respect
to current
taxes they
are intended
to
be settled net or realized simultaneously.
Current and deferred taxes are recognized as income tax benefit or expense
in the income statement, except for current
and deferred taxes recognized in relation to: (i)
the acquisition of a subsidiary (for which
such amounts would affect the
amount of goodwill arising from the acquisition); (ii) unrealized gains or losses on
financial instruments that are classified
at
FVOCI;
(iii) changes
in
fair
value
of
derivative
instruments
designated
as
cash
flow
hedges;
(iv) remeasurements
of
defined benefit
plans; or
(v) certain
foreign currency
translations
of foreign
operations.
Amounts relating
to points
(ii)
through (v) above are recognized in
Other comprehensive income
Equity
.
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AG consolidated financial statements
164
Note 1
Summary of material accounting policies (continued)
UBS AG reflects the
potential effect of
uncertain tax positions
for which acceptance
by the relevant
tax authority is
not
considered probable by
adjusting current or deferred
taxes, as applicable, using
either the most
likely amount or
expected
value methods,
depending on which
method is
deemed a better
predictor of the
basis on which,
and extent
to which,
the uncertainty will be resolved.
Critical accounting estimates and judgments
Tax laws are complex,
and judgment
and interpretations
about the
application of
such laws
are required when
accounting for
income taxes.
UBS AG considers
the performance of
its businesses and
the accuracy of
historical forecasts and
other factors when
evaluating the
recoverability of its
DTAs, including
the
remaining tax loss carry-forward period, and its
assessment of expected future taxable profits in
the forecast period used for recognizing DTAs.
Estimating
future profitability and business plan forecasts is inherently subjective
and is particularly sensitive to future economic,
market and other conditions.
Forecasts are
reviewed annually,
but adjustments may be
made at other
times, if required.
If recent losses
have been incurred,
convincing evidence is
required to prove there is sufficient future profitability
given that the value of
UBS AG’s DTAs may be affected, with
effects primarily recognized through the
income statement.
In addition, judgment is
required to assess the expected
value of uncertain tax
positions and the related
probabilities, including interpretation
of tax laws,
the resolution of any income tax-related appeals and litigation.
›
Refer to Note 9 for more information
7) Investments in associates
Interests in entities where UBS AG has significant influence
over the financial and operating policies of these entities but
does
not
have
control
are
classified
as
investments
in
associates
and
accounted
for
under
the
equity
method
of
accounting. Typically,
UBS AG has significant influence when it holds, or has the ability to hold, between 20% and 50%
of an entity’s voting rights. Investments
in associates are initially recognized at cost, and the
carrying amount is increased
or decreased after the date of acquisition
to recognize UBS AG’s share
of the investee’s comprehensive income
and any
impairment losses.
The net
investment in
an associate
is impaired
if there
is objective
evidence of
a loss
event and
the
carrying amount of the investment in the associate exceeds
its recoverable amount.
›
Refer to Note 28 for more information
8) Property, equipment and software
Property,
equipment and
software
development costs are capitalized
only when the costs can be measured
reliably and it is probable
that future economic
benefits
will
arise.
Depreciation
of
property,
equipment
and
software
begins
when
they
are
available
for
use
and
is
calculated on a straight-line basis over an asset’s estimated
useful life.
Property,
equipment
and
software
are
generally
tested
for
impairment
at
the
appropriate
cash-generating
unit
level,
alongside goodwill and intangible assets as
described in item 9 in this Note.
An impairment charge is recognized for
such
assets
if
the
recoverable
amount
is
below
its
carrying
amount.
The
recoverable
amounts
of
such
assets,
other
than
property that has a
market price, are
generally determined using
a replacement cost
approach that reflects
the amount
that would be currently required by a market participant to replace the service capacity of the asset. If such assets are no
longer used, they are tested individually for impairment.
›
Refer to Note 12 for more information
9) Goodwill and other separately identifiable intangible
assets
Goodwill represents
the
excess
of
the
consideration over
the
fair
value
of
identifiable assets,
liabilities and
contingent
liabilities
acquired that
arises in
a business
combination.
Goodwill
is not
amortized
but is
assessed
for impairment
at the
end
of
each
reporting
period,
or when
indicators
of impairment
exist.
UBS AG
tests
goodwill
for impairment
annually,
irrespective
of whether there
is any indication
of impairment.
Business
combinations
under common
control
do not
result in
recognition
of goodwill
or other
intangible
assets incremental
to those
already recognized
by the acquired
entity prior
to the date
of transfer.
Goodwill assumed
is subsequently
allocated
to respective
cash-generating
units and tested
for impairment.
An impairment charge
is recognized in the income
statement if the carrying
amount exceeds the recoverable
amount of a
cash-generating
unit.
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AG consolidated financial statements
165
Note 1
Summary of material accounting policies (continued)
Critical accounting estimates and judgments
UBS AG‘s methodology for goodwill
impairment testing is based on
a model that is most sensitive
to the following key assumptions:
(i) forecasts of earnings
available to shareholders (typically
estimated on a discrete basis for
years one to three but could
extend up to five years, as permitted
under IFRS Accounting
Standards, in order to reflect facts and circumstances specific to a cash-generating
unit); (ii) changes in the discount rates; and (iii) changes
in the long-term
growth rate.
Earnings available to shareholders are estimated on the basis of forecast results, which are part of the business plan approved by the BoD. The discount
rates and
growth rates
are determined
using external information,
and also
considering inputs from
both internal and
external analysts and
the view
of
management.
The key assumptions used to determine the recoverable amounts of each cash-generating unit are tested for sensitivity by
applying reasonably possible
changes to those assumptions.
›
Refer to Notes 3 and 13 for more information
10) Provisions and contingent liabilities
Provisions are
liabilities of
uncertain timing or
amount, and
are generally recognized
in accordance
with IAS 37,
Provisions,
Contingent Liabilities and Contingent
Assets
, when: (i) UBS AG has
a present obligation as
a result of a past event;
(ii) it
is probable that
an outflow of resources
will be required
to settle the obligation;
and (iii) a reliable
estimate of the
amount
of the
obligation can
be made.
IAS 37 provisions
are measured
considering the
best estimate
of the
consideration required
to settle the present obligation at the balance sheet
date.
When conditions required to recognize a provision are not met, a contingent liability is disclosed, unless the likelihood of
an outflow
of resources
is remote.
Contingent liabilities
are also
disclosed for
possible obligations
that arise
from past
events,
the existence of which
will be confirmed only
by uncertain future events not
wholly within the control
of UBS AG.
Critical accounting estimates and judgments
Recognition of provisions often involves significant judgment in assessing the existence of an obligation that results from past events and in
estimating the
probability, the timing and the amount of any outflows of resources. This is particularly the case for litigation, regulatory and similar matters, which, due to
their nature, are subject to many uncertainties,
making their outcome difficult to predict.
The amount of any provision
recognized is sensitive to the assumptions used,
and there could be a
wide range of possible outcomes for any
particular
matter.
Management regularly reviews all the available information regarding such matters, including legal advice, to assess whether the recognition criteria
for
provisions have been satisfied and to determine the
timing and the amount of any potential outflows.
›
Refer to Note 18 for more information
11) Foreign currency translation
Transactions
denominated in a foreign currency
are translated into the functional
currency of the reporting entity
at the
spot exchange
rate
on the
date of
the transaction.
At the
balance sheet
date, all
monetary
assets, including
those at
FVOCI, and
monetary
liabilities
denominated
in foreign
currency
are
translated
into
the functional
currency
using the
closing exchange rate. Translation
differences are
reported in
Other net income from
financial instruments measured
at
fair value through profit or loss
.
Non-monetary items measured at historical cost are translated
at the exchange rate on the date of the transaction.
Upon
consolidation,
assets
and liabilities
of foreign
operations
are translated
into
US dollars,
UBS AG’s
presentation
currency,
at the closing exchange rate on the balance sheet date,
and income and expense items and other comprehensive
income
are translated at the
average rate for
the period. The
resulting foreign currency translation differences are recognized in
Equity
and UBS AG no
longer controls
the foreign operation.
Share
capital issued and share premium held are
translated at the historic average rate, with the
difference between the
historic average rate and the spot rate
realized upon repayment of share capital reported as
Share premium.
amounts recognized
in
Other comprehensive
income
are translated at
the closing exchange
rate as
of the
balance sheet dates,
with any
translation effects adjusted through
Retained earnings
.
›
Refer to Note 32 for more information
12) Cash and cash equivalents
For the purposes of the statement of cash flows, cash and
cash equivalents consist of balances with an original
maturity
of three months or less including cash, money market
paper and balances with central and other banks.
In certain
circumstances cash
and cash
equivalent balances
held are
not available
for the
use by
UBS AG,
for example
amounts placed at central banks to meet local statutory minimum reserve requirements, balances protected
under client
asset segregation rules and balances pledged under depositor
protection schemes.
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166
Note 1
Summary of material accounting policies (continued)
b) Changes in IFRS Accounting Standards and Interpretations
IFRS 18,
Presentation and Disclosure in Financial Statements
In
April
2024,
the
IASB
issued
a
new
standard,
IFRS 18,
Presentation
and
Disclosure
in
Financial
Statements,
replaces IAS 1,
Presentation of Financial Statements
. The main changes introduced by IFRS 18 relate
to:
–
the structure of income statements;
–
new disclosure requirements for management performance
measures; and
–
enhanced guidance on aggregation and disaggregation
of information on the face of
financial statements and in the
notes thereto.
IFRS 18 is
effective from
1 January 2027
and will
also apply
to comparative
information. UBS
AG will
first apply
these
new requirements in the Annual Report 2027 and, for interim
reporting, in the first quarter 2027 interim report. UBS AG
is assessing the
impact of
the new
requirements on
its reporting
but expects
it to be
limited. UBS
AG will evaluate
the
grouping of items
in the primary
financial statements
and in the
notes thereto
based on new
principles of aggregation
and disaggregation in IFRS 18.
Amendments to IFRS 9,
Financial Instruments
, and IFRS 7,
Financial Instruments: Disclosures
In
May
2024,
the
IASB
issued
Amendments
to
the
Classification
and
Measurement
of
Financial
Instruments
–
Amendments to IFRS 9 and IFRS 7
The Amendments relate to:
–
derecognition of financial liabilities settled through electronic transfer
systems;
–
assessment of contractual cash
flow characteristics in classifying
financial assets, including those
with environmental,
social and corporate
governance and similar features,
non-recourse features, and
contractually linked instruments; and
–
disclosure
of
information
about
financial
instruments
with
contingent
features
that
can
change
the
amount
of
contractual cash flows, as well as equity instruments designated
at fair value through other comprehensive income.
The
Amendments
are
effective
from
1 January
2026,
with
early
application
permitted
either
for
the
entire
set
of
amendments
or
for
only
those
that
relate
to
classification
of
financial
instruments.
UBS
AG
is
currently
assessing
the
impact of the new requirements on its financial statements.
Other amendments to IFRS Accounting Standards
The IASB has issued
a number of
minor amendments to
IFRS Accounting Standards,
effective from
1 January 2024 and
later. These amendments do not have or
are not expected to
have a significant effect on
UBS AG when they are adopted.
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AG consolidated financial statements
167
Note 2
Accounting for the merger of UBS AG and Credit Suisse
AG
Merger of UBS AG and Credit Suisse AG
The
merger
of
UBS AG
and
Credit
Suisse AG
effected
on
31 May
2024
with
no
consideration
payable
by
UBS AG
constitutes a
business combination
under common
control accounted
for based
on
the accounting
policies
set out
in
Note 1 to these financial statements.
Assets and liabilities
UBS AG accounted for the merger
with Credit Suisse AG using the
historic carrying values of the
assets and liabilities of
Credit Suisse AG as at the date of the transaction
(31 May 2024), determined under IFRS Accounting Standards.
–
No fair
value adjustments
were made
to assets
and liabilities
(which is
different to
the UBS
Group AG
consolidated
financial
statements
where
acquisition
method
accounting
was
required
under
IFRS
3,
Business
Combinations
,
on
31 May 2023 for the acquisition of Credit Suisse Group
AG).
–
UBS AG has
elected to
retain historic
accumulated depreciation
and impairment
of non-financial
assets arising
since
31 May 2023, i.e. the date on which Credit Suisse AG came
to be under the common control of UBS Group AG.
–
Expected credit
loss allowances
and provisions for
performing and
credit-impaired exposures
were recognized
under
IFRS 9.
–
No new goodwill, intangible assets or contingent liabilities have
been recognized as a result of the merger of UBS AG
and Credit Suisse AG.
–
Uniform
accounting
policies
for
like
transactions
and
events
have
been
applied
throughout
UBS
AG
and
Credit
Suisse AG as of 31 May 2023 (the date of the acquisition
of Credit Suisse Group AG by UBS Group AG).
Equity reserves
UBS AG
has taken
on the
carrying
amount of
the total
IFRS equity
of Credit
Suisse
AG as
of 31
May 2024.
This was
allocated to the individual components of equity for UBS
AG as follows:
–
The individual
equity reserve
balances of
Credit Suisse
AG recorded
from 31 May
2023 to
31 May 2024
have been
added to the corresponding equity reserves of UBS AG, with the exception of the foreign currency translation reserve.
–
UBS AG has elected to reset the foreign
currency translation reserve. As a result, the net investment
hedge accounting
reserve has
been added
to
Retained earnings
Suisse. The remaining balance of the foreign currency translation
reserve was then added to
Share premium
.
–
Equity reserve
balances of
Credit Suisse AG
recorded prior
to 31 May
2023 (i.e.
the date
on which
Credit Suisse AG
came under the common control of UBS Group AG) have
not been individually retained.
–
The difference between the net carrying value of the Credit Suisse AG assets and liabilities as
of 31 May 2024 and the
individual
equity
reserve
balances
established
as
outlined
above
has
been
recognized
as
an
adjustment
to
Share premium
UBS Group AG).
Comparability
Income statement,
statement of
comprehensive income
and statement
of cash
flows for
the year
ended 31
December
2024
include
seven
months
of
consolidated
data
following
the
merger
of
UBS
AG
and
Credit
Suisse
AG
(June
to
December
2024) and
five
months
of
pre-merger
UBS AG
data
only
(January
to
May
2024).
Statement
of
changes in
equity includes seven months of consolidated data, following the addition of the equity reserve balances of Credit Suisse
AG recorded from 31 May 2023 to 31 May 2024 as described
above, and five months of pre-merger UBS AG data only.
Comparative information for
the years ended 31
December 2023 and
31 December 2022 includes
pre-merger UBS
AG
data only.
Balance
sheet
information
as
at
31
December
2024
includes
post-merger
consolidated
information.
Balance
sheet
information as at 31 December 2023 reflects pre-merger
UBS AG information only.
The comparative
periods prior
to the
merger date
have not
been restated
,
as the
transaction has
been accounted
for
prospectively since 31 May 2024, i.e. the date on which the
merger of UBS AG and Credit Suisse AG was effected.
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AG consolidated financial statements
168
Note 2
Accounting for the merger of UBS AG and Credit Suisse
AG (continued)
The table below
presents the assets, liabilities
and equity of
Credit Suisse AG that were recognized by
UBS AG on 31 May
2024 as a result of the merger.
Credit Suisse AG assets, liabilities and equity
transferred to UBS AG on the merger date
USD m
Assets
Cash and balances at central banks
Amounts due from banks
Receivables from securities financing transactions measured at amortized
cost
Cash collateral receivables on derivative instruments
Loans and advances to customers
Other financial assets measured at amortized cost
Total financial assets measured at amortized cost
Financial assets at fair value held for trading
Derivative financial instruments
Brokerage receivables
Financial assets at fair value not held for trading
Total financial assets measured at fair value through profit or loss
Financial assets measured at fair value through other comprehensive income
Investments in associates
Property, equipment and software
Goodwill and intangible assets
Deferred tax assets
Other non-financial assets
Total assets
Liabilities
Amounts due to banks
Payables from securities financing transactions measured at amortized cost
Cash collateral payables on derivative instruments
Customer deposits
Funding from UBS Group AG measured at amortized cost
Debt issued measured at amortized cost
Other financial liabilities measured at amortized cost
Total financial liabilities measured at amortized cost
Financial liabilities at fair value held for trading
Derivative financial instruments
Brokerage payables designated at fair value
Debt issued designated at fair value
Other financial liabilities designated at fair value
Total financial liabilities measured at fair value through profit or loss
Provisions
Other non-financial liabilities
Total liabilities
Equity
Equity attributable to shareholders
1
Equity attributable to non-controlling interests
Total equity
1 Refer to the Statement of changes in equity in this report for more information.
Transactions
between
UBS AG
and
Credit
Suisse AG
have
been
eliminated
from
the
balances
presented
in
the
table
above. They amounted to USD
bn of assets and USD
bn of liabilities of Credit Suisse AG.
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AG consolidated financial statements
169
Note 2
Accounting for the merger of UBS AG and Credit Suisse
AG (continued)
Transactions related to businesses and subsidiaries
of Credit Suisse
In June 2024, the Credit
Suisse supply chain finance
funds (the SCFFs) made
a voluntary offer to the
SCFFs’ investors to
redeem all outstanding fund units.
›
Refer to Note 18 for more information
In August
2024 and
October
2024, respectively,
UBS AG
has also
entered
into the
agreements
to sell
Select
Portfolio
Servicing, the US mortgage servicing business of Credit Suisse,
and its
% interest in Swisscard AECS GmbH.
›
Refer to Note 29 for more information
Note 3a
Segment reporting
UBS AG’s
businesses
are
organized
globally
into
five
business
divisions:
Global
Wealth
Management,
Personal
Corporate Banking,
Asset Management,
the Investment
Bank, and
Non-core and
Legacy.
All five business
divisions are
supported by Group functions
and qualify as reportable
segments for the purpose of
segment reporting. Together
with
Group functions,
the five business divisions reflect the
management structure of UBS AG.
–
Global Wealth
Management
ranges from investment
management to estate
planning and corporate
finance advice, in
addition to specific
wealth
management and banking products and services.
–
Personal
Corporate
Banking
retirement, financing,
investments and
strategic transactions,
in Switzerland,
through its
branch network
and digital
channels.
–
Asset Management
across
all
major
traditional
and
alternative
asset
classes,
as
well
as
advisory
support
to
institutions,
wholesale
intermediaries and wealth management clients.
–
The
Investment Bank
to
help
them
raise
capital,
grow
their
businesses,
invest
and
manage
risks.
Its
offering
includes
research,
advisory
services, facilitating clients raising debt
and equity from the public
and private markets and capital
markets, cash and
derivatives trading across equities and fixed income, and
financing.
–
Non-core and Legacy
consists of selected
assets and liabilities
from the Credit
Suisse business divisions,
as well as
residual assets and
liabilities
from UBS’s former Non-core and
Legacy Portfolio that preceded the acquisition of
the Credit Suisse Group and
smaller
amounts of
assets and
liabilities of
UBS’s business
divisions that
have been
assessed as
not strategic
in light
of that
acquisition.
–
Our Group functions are
support and control functions
that provide services to
the Group. Virtually
all costs incurred
by the
Group functions
are allocated
to the
business divisions,
leaving a
residual amount
that we
refer to
as
Group
Items
the Group
Operations and
Technology Office,
Group Compliance,
Regulatory
Governance, Group
Finance, Group
Risk Control, Group Human Resources and Corporate Services, Communications
Branding, Group Legal, the Group
Integration Office, Group Sustainability and Impact and the
Chief Strategy Office) and Group Treasury.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
170
Note 3a
Segment reporting (continued)
Financial information about
the five business divisions
and Group Items
is presented separately
in internal management
reports to the Executive Board,
which is considered the
“chief operating decision-maker”
pursuant to IFRS 8,
Operating
Segments
.
UBS AG’s
internal
accounting
policies,
which
include
management
accounting
policies
and
service-level
agreements,
determine
the
revenues
and
expenses
directly
attributable
to
each
reportable
segment.
Transactions
between
the
reportable segments are carried out at internally agreed rates and are
reflected in the operating results of the reportable
segments.
Revenue-sharing
agreements
are
used
to
allocate
external
client
revenues
to
reportable
segments
where
several
reportable
segments
are
involved
in
the
value
creation
chain.
Total
intersegment
revenues
for
UBS AG
are
immaterial, as the majority of the
revenues are allocated across the segments by
means of revenue-sharing agreements.
Interest income earned
from managing UBS
AG’s consolidated
equity is allocated
to the reportable
segments based on
average attributed equity and currency composition. Assets and
liabilities of the reportable segments are funded
through
and invested with Group functions, and the net interest
margin is reflected in the results of each reportable segment.
Segment
assets
are
based
on
a
third-party
view
and
do
not
include
intercompany
balances.
This
view
is
in
line
with
internal reporting to management. If one operating segment is involved in
an external transaction together with another
operating segment
or Group
function, additional
criteria are
considered to
determine the
segment that
will report
the
associated
assets.
This
will
include
a
consideration
of
which
segment’s
business
needs
are
being
addressed
by
the
transaction
and
which
segment
is
providing
the
funding
and
/
or
resources.
Allocation
of
liabilities
follows
the
same
principles.
Non-current assets
disclosed
for segment
reporting purposes
represent assets
that are
expected to
be recovered
more
than
12
months
after
the
reporting
date,
excluding
financial
instruments,
deferred
tax
assets
and
post-employment
benefits.
As part
of the
continued
refinement
of UBS
AG’s reporting
structure
and organizational
setup,
in the
first
quarter
of
2024
certain
changes
to
Group
Treasury
allocations
were
made
with
an
impact
on
segment
reporting
for
UBS AG’s
business divisions and Group Items. Prior-period information
has been adjusted for comparability.
UBS AG has allocated to the
business divisions nearly all Group
Treasury costs that historically were retained
and reported
in Group Items.
Costs that continue
to be retained
in Group Items
include costs related
to hedging and
own debt, and
deferred tax
asset funding
costs. In
parallel with
these changes,
UBS AG has
increased the
allocation of
balance sheet
resources from Group Treasury to the business divisions.
Following the changes outlined
above, prior-period information for
the twelve-month period ended
31 December 2023
has
been
restated,
resulting
in
decreases
in
Operating
profit / (loss)
before
tax
of
USD
m
for
Global
Wealth
Management
and USD
m for
Personal
Corporate
Banking, and
increases in
Operating
profit / (loss)
before
tax of
USD
m for Group Items, USD
m for the Investment Bank and
USD
m for Asset Management, with no
change to
Non-core and Legacy.
Prior-period
information
as
of
31 December
2023
has
also
been
restated,
resulting
in
increases
of
Total
assets
of
USD
bn
in
Global
Wealth
Management,
USD
bn
in
Personal
Corporate
Banking
and
USD
bn
in
the
Investment Bank, with a corresponding decrease of assets
of USD
bn in Group Items.
These changes had no effect on the reported results or financial
position of UBS AG.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
171
Note 3a
Segment reporting (continued)
USD m
Global Wealth
Management
Personal
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
Group
Items
UBS AG
For the year ended 31 December 2024
Net interest income
(
54
)
(
3,484
)
(
12
)
(
1,708
)
Non-interest income
Total revenues
Credit loss expense / (release)
(
1
)
Operating expenses
Operating profit / (loss) before tax
(
3,392
)
(
935
)
Tax expense / (benefit)
Net profit / (loss)
Additional information
Total assets
Additions to non-current assets
USD m
Global Wealth
Management
Personal
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
Group
UBS AG
For the year ended 31 December 2023
1
Net interest income
(
37
)
(
2,586
)
(
1,238
)
Non-interest income
Total revenues
Credit loss expense / (release)
(
1
)
Operating expenses
Operating profit / (loss) before tax
(
952
)
(
914
)
Tax expense / (benefit)
Net profit / (loss)
Additional information
Total assets
1
Additions to non-current assets
USD m
Global Wealth
Management
Personal
Corporate
Banking
Asset
Management
Investment
Bank
Non-core and
Legacy
Group
Items
UBS AG
For the year ended 31 December 2022
Net interest income
(
19
)
(
241
)
(
690
)
Non-interest income
2
Total revenues
(
267
)
Credit loss expense / (release)
(
12
)
Operating expenses
Operating profit / (loss) before tax
(
1,091
)
Tax expense / (benefit)
Net profit / (loss)
Additional information
Total assets
Additions to non-current assets
1 Comparative-period information has been restated for Group Treasury allocations.
2 Includes an USD
m gain in Asset Management related to the sale of UBS AG‘s shareholding in Mitsubishi Corp.-UBS Realty
Inc.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
172
Note 3b
Segment reporting by geographic location
The
operating
regions
shown
in
the
table
below
correspond
to
the
regional
management
structure
of
UBS AG.
The
allocation of total revenues to these
regions reflects, and is consistent with,
the basis on which the business is
managed
and its performance
is evaluated.
These allocations
involve assumptions
and judgments
that management
considers to
be reasonable and
may be refined
to reflect changes
in estimates or
management structure.
The main principles
of the
allocation methodology are
that client revenues
are attributed to
the domicile of
the given client
and trading and
portfolio
management
revenues are
attributed
to the
country where
the risk
is managed.
This
revenue attribution
is consistent
with the mandate of the regional Presidents. Certain revenues, such as those related to Non-core and Legacy and Group
Items, are included in the
Global
The geographic analysis
of non-current assets
is based on
the location of
the entity in
which the given
assets are recorded.
For the year ended 31 December 2024
Total revenues
Total non-current assets
USD bn
Share %
USD bn
Share %
Americas
1
Asia Pacific
Europe, Middle East and Africa (excluding Switzerland)
Switzerland
Global
Total
For the year ended 31 December 2023
Total revenues
2
Total non-current assets
USD bn
Share %
USD bn
Share %
Americas
1
Asia Pacific
Europe, Middle East and Africa (excluding Switzerland)
Switzerland
Global
Total
For the year ended 31 December 2022
Total revenues
Total non-current assets
USD bn
Share %
USD bn
Share %
Americas
1
Asia Pacific
Europe, Middle East and Africa (excluding Switzerland)
Switzerland
Global
Total
1 Predominantly related to the US.
2 Comparative-period information has been restated for changes in Group Treasury
allocations.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
173
Income statement notes
Note 4
Net interest
income and other net
income from financial instruments
measured at fair value
through
profit or loss
For the year ended
USD m
31.12.24
31.12.23
31.12.22
Net interest income from financial instruments measured
at fair value through profit or loss and other
Other net income from financial instruments measured
at fair value through profit or loss
1
Total net income from financial instruments measured at fair value through profit or loss and
other
Net interest income
Interest income from loans and deposits
2
Interest income from securities financing transactions measured
at amortized cost
3
Interest income from other financial instruments measured
at amortized cost
Interest income from debt instruments measured at fair
value through other comprehensive income
Interest resulting from derivative instruments designated as cash
flow hedges
(
1,943
)
(
1,898
)
Total interest income from financial instruments measured at amortized cost and fair
value through other comprehensive income
Interest expense on loans and deposits
4
Interest expense on securities financing transactions measured
at amortized cost
5
Interest expense on debt issued
Interest expense on lease liabilities
Total interest expense from financial instruments measured at amortized cost
Total net interest income from financial instruments measured at amortized cost and fair
value through other comprehensive income
(
777
)
Total net interest income from financial instruments measured at fair value through profit or loss
and other
Total net interest income
1 Includes net losses from financial liabilities
designated at fair value of
USD
m (net losses of USD
m in 2023 and net gains
of USD
m in 2022). This complementary
“of which” information for
financial liabilities designated at fair value excludes
fair value changes on hedges related to
financial liabilities designated at fair value, and foreign currency
translation effects arising from translating foreign currency
transactions into the respective
functional currency, both
of which are reported
within Other net income from
financial instruments measured at fair
value through profit or
loss. Net gains /
(losses) from financial
liabilities designated at fair value included
net losses of USD
m (net losses of USD
m and net gains of
USD
m in 2023 and 2022,
respectively) from financial liabilities related to
unit-linked investment
notes issued by UBS AG’s Asset Management business division. These gains / (losses) are fully offset within Other net income from financial instruments measured at fair value through profit or loss by the fair value
change on the financial assets hedging the
unit-linked investment contracts,
which are not disclosed as part
of Net gains / (losses) from financial
liabilities designated at fair value.
2 Consists of interest income
from cash and balances at central banks, amounts due from banks and customers, and cash collateral receivables on derivative instruments, as well as negative interest on
amounts due to banks, customer deposits,
and cash collateral payables on derivative instruments.
3 Includes negative interest, including fees, on payables from securities financing transactions
measured at amortized cost.
4 Consists of interest expense
on amounts due to banks, cash collateral payables
on derivative instruments, customer deposits,
and funding from UBS Group AG measured at amortized cost, as
well as negative interest on cash and balances at
central banks, amounts
due from banks,
and cash collateral receivables
on derivative instruments.
5 Includes negative interest,
including fees, on
receivables from securities financing
transactions measured at
amortized cost.
Total
combined
net
interest
income
and other
net
income
from
financial
instruments
measured
at
fair
value
through
profit or loss
increased by USD
m to
USD
m, mainly
driven by
the consolidation of
Credit Suisse AG revenues.
Note 5
Net fee and commission income
For the year ended
USD m
31.12.24
31.12.23
31.12.22
Underwriting fees
MA and corporate finance fees
Brokerage fees
Investment fund fees
Portfolio management and related services
Other
Total fee and commission income
1
of which: recurring
of which: transaction-based
of which: performance-based
Fee and commission expense
Net fee and commission income
1 For the
year ended 31 December
2024, reflects third-party
fee and commission
income of USD
m for Global
Wealth Management, USD
m for Personal
Corporate Banking,
USD
m for Asset
Management, USD
m for the Investment Bank, USD
m for Non-core and Legacy and negative USD
m for Group Items (for the year ended 31 December 2023: USD
m for Global Wealth Management,
USD
m for Personal
Corporate Banking, USD
m for Asset Management,
USD
m for the Investment
Bank, USD
m for Non-core and
Legacy and negative USD
m for Group Items;
for the year
ended 31 December 2022: USD
m for Global Wealth
Management, USD
m for Personal
Corporate Banking,
USD
m for Asset Management,
USD
m for the Investment
Bank, USD
m for
Non-core and Legacy and USD
m for Group Items).
Net fee and commission income
increased by USD
m to USD
m, mainly driven by the
consolidation of Credit
Suisse AG revenues.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
174
Note 6
Other income
For the year ended
USD m
31.12.24
31.12.23
31.12.22
Associates, joint ventures and subsidiaries
Net gains / (losses) from acquisitions and disposals of
subsidiaries
1
Net gains / (losses) from disposals of investments in associates
and joint ventures
2
Share of net profits of associates and joint ventures
3
(
163
)
Total
(
138
)
Net gains / (losses) from disposals of financial assets measured
at fair value through other comprehensive income
(
1
)
(
1
)
Income from properties
4
Net gains / (losses) from properties held for sale
(
16
)
Income from shared services provided to UBS Group AG or its subsidiaries
Other
5
6
7
Total other income
1 Includes foreign exchange gains / (losses) reclassified
from other comprehensive income related to the
disposal or closure of foreign operations.
Refer to Note 29 for more information about
UBS AG’s acquisitions
and disposals of subsidiaries and businesses.
2 Includes an USD
m gain related to the sale of UBS AG’s shareholding in Mitsubishi Corp.-UBS Realty Inc.
3 2024 includes a loss of USD
m due to UBS's share
of proportionate impairment losses reflected in the profit and loss of an associate (2023: loss of USD
m).
4 Includes rent received from third parties.
5 2024 includes gains of USD
m related to the repurchase
of UBS AG‘s own debt instruments (compared with a gain of USD
m in 2023 and a gain of USD
m in 2022).
6 Includes USD
m net gains in Asset Management from the sale of the Brazilian real estate fund
management business.
7 Mainly relates to a portion of the total USD
m gain on the sale of UBS AG’s domestic wealth management business in Spain of USD
m (with the remaining amount disclosed within
Net gains / (losses) from acquisitions and disposals of subsidiaries) and income of USD
m related to a legacy litigation settlement and a legacy bankruptcy claim.
Note 7
Personnel expenses
For the year ended
USD m
31.12.24
31.12.23
31.12.22
Salaries
1
Variable compensation
2
of which: performance awards
of which: financial advisors
3
of which: other
Contractors
Social security
Post-employment benefit plans
4
of which: defined benefit plans
of which: defined contribution plans
Other personnel expenses
Total personnel expenses
1 Includes role-based allowances.
2 Refer to Note
27 for more information.
3 Financial advisor compensation
consists of cash compensation,
determined using a formulaic
approach based on production,
and
deferred awards. It also includes expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements.
4 Refer to Note 26 for more
information. Includes curtailment
gains of USD
m for the
year ended 31
December 2024 (for
the year ended 31
December 2023: USD
m; for the
year ended 31 December
2022: USD
m), which represent a
reduction in the defined benefit obligation related to the Swiss pension plans resulting from a decrease in headcount following restructuring activities.
Personnel expenses increased
by USD
m to USD
m, mainly driven
by the consolidation
of Credit Suisse AG
expenses.
Note 8
General and administrative expenses
For the year ended
USD m
31.12.24
31.12.23
31.12.22
Outsourcing costs
Technology costs
Consulting, legal and audit fees
Real estate and logistics costs
Market data services
Marketing and communication
Travel and entertainment
Litigation, regulatory and similar matters
1
Other
of which: shared services costs charged by UBS Group AG or its subsidiaries
Total general and administrative expenses
1
Reflects the net increase,
including recoveries from third parties,
in provisions for litigation, regulatory
and similar matters recognized in
the income statement. Refer to
Note 18 for more information.
In 2024, in
accordance with the applicable contractual arrangements, UBS AG received
a reimbursement of USD 177m from a direct subsidiary of UBS Group AG.
General
and
administrative
expenses
increased
by
USD
m
to
USD
m,
which
included
the
effect
of
consolidating Credit Suisse AG expenses.
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AG consolidated financial statements
175
Note 9
Income taxes
For the year ended
USD m
31.12.24
31.12.23
31.12.22
Tax expense / (benefit)
Swiss
Current
Deferred
(
106
)
(
22
)
Total Swiss
Non-Swiss
Current
Deferred
(
1,000
)
(
262
)
Total non-Swiss
Total income tax expense / (benefit) recognized in the income statement
Income tax recognized in the income statement
The Swiss current tax expenses related to taxable profits
of UBS Switzerland AG and other Swiss entities.
The net Swiss deferred tax benefit mainly related to a net
upward revaluation of deferred tax assets (DTAs) of USD
m.
The non-Swiss
current tax
expenses
included USD
m that
mainly related
to US
corporate
alternative
minimum tax
with an
equivalent deferred
tax benefit
for DTAs recognized
in respect of
tax credits
carried forward
and USD
m in
respect of other taxable profits of non-Swiss subsidiaries
and branches.
The
net
non-Swiss
deferred
tax
benefit
included
benefits
of
USD
m
related
to
the
aforementioned
deferred
tax
benefit, USD
m in respect of
a net upward revaluation
of DTAs and USD
m in respect of
an increase in deferred
tax asset
recognition for UBS AG’s
US branch.
These benefits were
partly offset by
an expense of
USD
m that primarily
related
to
the
amortization
of
DTAs
previously
recognized
in
relation
to
tax
losses
carried
forward
and
deductible
temporary differences.
For the year ended
USD m
31.12.24
31.12.23
31.12.22
Operating profit / (loss) before tax
of which: Swiss
of which: non-Swiss
Income taxes at Swiss tax rate of
% for 2024,
% for 2023 and
% for 2022
Increase / (decrease) resulting from:
Non-Swiss tax rates differing from Swiss tax rate
(
66
)
(
43
)
Tax effects of losses not recognized
Previously unrecognized tax losses now utilized
(
454
)
(
401
)
(
217
)
Non-taxable and lower-taxed income
(
232
)
(
165
)
(
316
)
Non-deductible expenses and additional taxable income
Adjustments related to prior years, current tax
(
35
)
(
15
)
(
33
)
Adjustments related to prior years, deferred tax
(
27
)
Change in deferred tax recognition
(
608
)
(
273
)
(
217
)
Adjustments to deferred tax balances arising from changes
in tax rates
Other items
Income tax expense / (benefit)
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
176
Note 9
Income taxes (continued)
The components of
operating profit before tax,
and the differences between
income tax expense
reflected in the
financial
statements and the amounts calculated at the Swiss tax rate,
are provided in the table above and explained
below.
Component
Description
Non-Swiss tax rates
differing from the
Swiss tax rate
To the extent that UBS AG profits or losses arise outside Switzerland, the applicable local
tax rate may differ from the
Swiss tax rate. This item reflects, for such profits, an adjustment
from the tax expense that would arise at the
Swiss tax
rate to the tax expense that would arise at the
applicable local tax rate. Similarly, it reflects, for such losses, an adjustment
from the tax benefit that would arise at the Swiss
tax rate to the tax benefit that would arise
at the applicable local tax
rate.
Tax effects of losses
not recognized
This item relates to tax losses of entities arising in the
year that are not recognized as DTAs and where no tax benefit arises
in relation to those losses. Therefore, the tax benefit calculated
by applying the local tax rate to those losses
as described
above is reversed.
Previously
unrecognized tax losses
now utilized
This item relates to taxable profits of the year that are offset by tax losses
of previous years for which no DTAs were
previously recorded. Consequently, no current tax or deferred tax expense arises in relation to those taxable
profits and
the tax expense
calculated by applying the local tax rate on
those profits is reversed.
Non-taxable and lower-
taxed income
This item relates to tax deductions for the year in
respect of permanent differences. These include deductions in respect
of
profits that are either not taxable or are taxable at a lower rate
of tax than the local tax rate. They also
include deductions
made for tax purposes, which are not reflected in the
accounts.
Non-deductible
expenses and
additional taxable
income
This item relates to additional taxable income for
the year in respect of permanent differences. These include
income that
is recognized for tax purposes by an entity but is
not included in its profit that is reported in the financial
statements, as
well as expenses for the year that are non-deductible
(e.g. client entertainment costs are not deductible
in certain
locations).
Adjustments related to
prior years, current tax
This item relates to adjustments to current tax expense for
prior years (e.g. if the tax payable for a year
is agreed with the
tax authorities in an amount that differs from the amount
previously reflected in the financial statements).
Adjustments related to
prior years, deferred
tax
This item relates to adjustments to deferred tax positions
recognized in prior years (e.g. if a tax loss for
a year is fully
recognized and the amount of the tax loss agreed with
the tax authorities is expected to differ from the
amount previously
recognized as DTAs in the accounts).
Change in deferred tax
recognition
This item relates to changes in DTAs, including changes in DTAs previously recognized resulting from reassessments
of
expected future taxable profits. It also includes changes
in temporary differences in the year, for which deferred tax is not
recognized.
Adjustments to
deferred tax balances
arising from changes in
tax rates
This item relates to remeasurements of DTAs and liabilities recognized due to changes
in tax rates. These have the effect
of changing the future tax saving that is expected from tax
losses or deductible tax differences and therefore the amount
of DTAs recognized or, alternatively,
changing the tax cost of additional taxable
income from taxable temporary
differences and therefore the deferred tax liability.
Other items
Other items include other differences between profits or losses
at the local tax rate and the actual local tax
expense or
benefit, including movements in provisions for uncertain
positions in relation to the current year and other items.
Income tax recognized directly in equity
A net tax expense
of USD
m was recognized
in
Other comprehensive
income
m) and
a net tax benefit of USD
m was recognized in
Share premium
m).
Deferred tax assets and liabilities
UBS AG has
gross
DTAs,
valuation
allowances
and recognized
DTAs
related
to tax
loss carry
-forwards
and deductible
temporary differences, as well as deferred tax liabilities in respect of taxable temporary differences, as shown in
the table
below.
The valuation
allowances reflect
DTAs
that were
not recognized
because, as
of the
last remeasurement
period,
management
did not
consider
it probable
that
there
would be
sufficient
future
taxable
profits
available
to utilize
the
related tax loss carry-forwards and deductible
temporary differences.
The recognition of DTAs
is supported by forecasts of
taxable profits for the entities
concerned. In addition, tax planning
opportunities are available that would
result in additional future taxable
income and these would
be utilized, if
necessary.
Deferred tax
liabilities are recognized
in respect of
investments in subsidiaries,
branches and associates,
and interests
in
joint arrangements,
except to
the extent
that UBS AG
can control
the timing
of the
reversal
of the
associated taxable
temporary difference,
and it is probable that such
will not reverse in the foreseeable future. However, as of 31 December
2024, this exception was not considered to apply to any
taxable temporary differences.
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| Consolidated financial statements | UBS
AG consolidated financial statements
177
Note 9
Income taxes (continued)
USD m
31.12.24
31.12.23
Deferred tax assets
1
Gross
Valuation
allowance
Recognized
Gross
Valuation
allowance
Recognized
Tax loss carry-forwards
(
17,594
)
(
8,496
)
Unused tax credits
Temporary differences
(
2,594
)
(
579
)
of which: related to real estate costs capitalized for US
tax
purposes
of which: related to compensation and benefits
(
503
)
(
205
)
of which: related to cash flow hedges
of which: other
(
2,090
)
(
374
)
Total deferred tax assets
(
20,188
)
2
(
9,076
)
2
of which: related to the US
of which: related to other locations
Deferred tax liabilities
Total deferred tax liabilities
1 After offset of DTLs, as applicable.
2 As of 31 December 2024, UBS AG recognized DTAs of USD
m (31 December 2023: USD
m) in respect of entities that incurred losses in either 2024 or 2023.
In general, US federal tax losses incurred prior
to 31 December 2017 can be carried
forward for 20 years. US federal tax
losses incurred after that date
can be carried forward indefinitely,
although the utilization of such
losses is limited to
80%
of the
entity’s future
year taxable
profits. UK
tax losses
can also
be carried
forward indefinitely;
they can
shelter up
to
either 25% or 50%
of future year taxable
profits, depending on when
the tax losses
arose. The amounts of
US tax loss
carry-forwards that
are included
in the table
below are
based on their
amount for
federal tax
purposes rather
than for
state and local tax purposes.
Unrecognized tax loss carry-forwards
USD m
31.12.24
31.12.23
Within 1 year
From 2 to 5 years
From 6 to 10 years
From 11 to 20 years
No expiry
Total
of which: related to the US
1
of which: related to the UK
of which: related to other locations
1 Related to UBS AG’s US branch.
Pillar Two top-up taxes under Global Anti-Base Erosion
rules
Certain
countries
in
which
UBS AG
operates
have
enacted
legislation
implementing
the
Pillar
Two
Global
Anti-Base
Erosion rules published by the Organisation for Economic Co-operation and Development that introduced domestic top-
up taxes that applied to local UBS AG entities during 2024. These include Switzerland,
the UK, Japan, Canada and most
EU Member
States. Moreover,
Switzerland and,
also, most
EU Member
States had
enacted legislation
by 31 December
2024
that
introduced
non-domestic
top-up
taxes
that
are
effective
from
1 January
2025,
which
apply
to
UBS AG’s
worldwide entities.
The exception in paragraph
4A of IAS
12,
Income Taxes
, which requires that
deferred tax assets and
deferred tax liabilities
be neither recognized nor disclosed in respect of such top-up taxes, has been applied
for the purposes of these financial
statements.
UBS AG’s current
tax expenses
for 2024
do not
include a
material expense
in relation
to top-up
taxes because,
to the
extent that UBS AG’s
profits arose in entities
to which top-up
taxes applied, these
were almost all in
countries that had
effective tax rates of 15% or more.
An assessment of UBS AG’s potential future exposure to
top-up taxes under legislation that was enacted or
substantively
enacted to
implement the
Pillar Two
model rules
by 31 December 2024
but was
not yet
in effect
was performed,
reflecting
country-by-country reporting and, also, the corporate
tax expenses of UBS AG entities that are expected
in future years.
This assessment
indicated that
UBS AG’s profits
in future
years are
expected to
be almost
entirely earned
in countries
with corporate tax
expenses that are
at an effective
tax rate of 15%
or more and will
not, therefore, be
subject to top-
taxes. Consequently, UBS AG is
not expected to have a
material annual exposure to
top-up taxes for future
years under
this legislation.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
178
Balance sheet notes
Note 10
Financial assets at amortized cost and other positions in
scope of expected credit loss measurement
The tables
below provide
information about
financial instruments
and certain
credit
lines that
are
subject to
expected
credit loss (ECL
)
requirements.
UBS AG’s ECL
disclosure segments,
or “ECL segments”
are aggregated
portfolios based
on shared risk characteristics and on the
same or similar rating methods applied. The
key segments are presented in the
table below.
›
Refer to Note 20 for more information about expected
credit loss measurement
Segment
Segment description
Description of credit risk sensitivity
Business division
Private clients with
mortgages
Lending to private clients secured by
owner-occupied real estate and
personal account overdrafts of those
clients
Sensitive to Swiss GDP, interest rate
environment, unemployment levels, real
estate collateral values and other regional
aspects
–
Personal Corporate Banking
–
Global Wealth Management
Real estate financing
Rental or income-producing real estate
financing to private and corporate
clients secured by real estate
Sensitive to Swiss GDP, unemployment
levels,
the interest rate environment, real
estate collateral values and other regional
aspects
–
Personal Corporate Banking
–
Global Wealth Management
–
Investment Bank
Large corporate clients
Lending to large corporate and multi-
national clients
Sensitive to GDP developments,
unemployment levels, credit default swap
(CDS) indices, seasonality, business cycles
and collateral values (diverse collateral,
including real estate and other collateral
types)
–
Personal Corporate Banking
–
Investment Bank
–
Global Wealth Management
–
Non-core and Legacy
SME clients
Lending to small and medium-sized
corporate clients
Sensitive to GDP developments,
unemployment levels, the interest rate
environment and, to some extent,
seasonality,
business cycles and collateral
values (diverse collateral,
including real
estate and other collateral types)
–
Personal Corporate Banking
Lombard
Loans secured by pledges of marketable
securities, guarantees and other forms
of collateral (including hedge funds,
private equity and unlisted equities)
Sensitive to equity and debt markets (e.g.
changes in collateral values)
–
Global Wealth Management
Credit cards
Credit card exposures in Switzerland
and the US
Sensitive to unemployment levels
–
Personal Corporate Banking
–
Global Wealth Management
Commodity trade
finance
Working capital financing of commodity
traders, generally extended on a self-
liquidating transactional basis
Sensitive primarily to the strength of
individual transaction structures and
collateral values (price volatility of
commodities),
as the primary source for
debt service is directly linked to the
shipments financed
–
Personal Corporate Banking
Consumer financing
Consumer loans and car leasing
Sensitive to unemployment levels
–
Personal Corporate Banking
Ship financing
Ship financing mainly includes bulk
carriers, oil tankers, containers and
liquefied natural gas carriers
Sensitive to real GDP, earnings of tankers
and earnings of bulk carriers
–
Global Wealth Management
Aircraft financing
Corporate aircraft financing
Sensitive to collateral values
–
Global Wealth Management
Financial intermediaries
and hedge funds
Lending to financial institutions and
pension funds, including exposures to
broker-dealers and clearing houses
Sensitive to GDP development, CDS
indices, the interest rate environment,
price and volatility risks in financial
markets, regulatory and political risk, and
collateral values (diverse collateral,
including real estate and other collateral
types)
–
Personal Corporate Banking
–
Investment Bank
–
Global Wealth Management
–
Non-core and Legacy
›
Refer to Note 20f for more details regarding sensitivity
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
179
Note 10
Financial assets at amortized cost and other positions in
scope of expected credit loss measurement
(continued)
The tables
below provide
ECL exposure
and ECL
allowance and
provision
information about
financial instruments
and
certain non-financial instruments that are
subject to ECLs.
USD m
31.12.24
Carrying amount
1
ECL allowances
Financial instruments measured at amortized cost
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Cash and balances at central banks
(
186
)
(
186
)
Amounts due from banks
(
42
)
(
1
)
(
5
)
(
36
)
Receivables from securities financing transactions measured at amortized
cost
(
2
)
(
2
)
Cash collateral receivables on derivative instruments
Loans and advances to customers
(
2,830
)
(
276
)
(
323
)
(
2,230
)
of which: Private clients with mortgages
(
166
)
(
46
)
(
70
)
(
50
)
of which: Real estate financing
(
100
)
(
24
)
(
27
)
(
49
)
of which: Large corporate clients
(
828
)
(
72
)
(
123
)
(
632
)
of which: SME clients
(
963
)
(
55
)
(
47
)
(
860
)
of which: Lombard
(
107
)
(
6
)
(
101
)
of which: Credit cards
(
41
)
(
6
)
(
11
)
(
25
)
of which: Commodity trade finance
(
122
)
(
9
)
(
113
)
of which: Ship / aircraft financing
(
31
)
(
14
)
(
16
)
of which: Consumer financing
(
137
)
(
15
)
(
19
)
(
102
)
Other financial assets measured at amortized cost
(
135
)
(
25
)
(
7
)
(
103
)
of which: Loans to financial advisors
(
41
)
(
4
)
(
1
)
(
37
)
Total financial assets measured at amortized cost
(
3,195
)
(
304
)
(
521
)
(
2,369
)
Financial assets measured at fair value through other comprehensive income
Total on-balance sheet financial assets in scope of ECL requirements
(
3,195
)
(
304
)
(
521
)
(
2,369
)
Total exposure
ECL provisions
Off-balance sheet (in scope of ECL)
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Guarantees
(
61
)
(
16
)
(
24
)
(
22
)
of which: Large corporate clients
(
18
)
(
6
)
(
9
)
(
2
)
of which: SME clients
(
27
)
(
5
)
(
15
)
(
7
)
of which: Financial intermediaries and hedge funds
(
1
)
(
1
)
of which: Lombard
(
4
)
(
1
)
(
3
)
of which: Commodity trade finance
(
1
)
(
1
)
Irrevocable loan commitments
(
192
)
(
105
)
(
61
)
(
26
)
of which: Large corporate clients
(
155
)
(
91
)
(
54
)
(
10
)
Forward starting reverse repurchase and securities borrowing agreements
Committed unconditionally revocable credit lines
(
75
)
(
59
)
(
17
)
of which: Real estate financing
(
6
)
(
4
)
(
2
)
of which: Large corporate clients
(
22
)
(
14
)
(
7
)
(
2
)
of which: SME clients
(
34
)
(
28
)
(
6
)
of which: Lombard
of which: Credit cards
(
8
)
(
6
)
(
2
)
Irrevocable committed prolongation of existing loans
(
3
)
(
3
)
Total off-balance sheet financial instruments and other credit lines
(
332
)
(
183
)
(
102
)
(
48
)
Total allowances and provisions
(
3,527
)
(
487
)
(
623
)
(
2,417
)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective
ECL allowances.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
180
Note 10
Financial assets at amortized cost and other positions in
scope of expected credit loss measurement
(continued)
USD m
31.12.23
Carrying amount
1
ECL allowances
Financial instruments measured at amortized
cost
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Cash and balances at central banks
(
26
)
(
26
)
Amounts due from banks
(
7
)
(
6
)
(
1
)
Receivables from securities financing transactions measured at amortized
cost
(
2
)
(
2
)
Cash collateral receivables on derivative instruments
Loans and advances to customers
(
935
)
(
173
)
(
185
)
(
577
)
of which: Private clients with mortgages
(
156
)
(
39
)
(
89
)
(
28
)
of which: Real estate financing
(
46
)
(
20
)
(
25
)
(
1
)
of which: Large corporate clients
(
241
)
(
34
)
(
32
)
(
174
)
of which: SME clients
(
262
)
(
34
)
(
24
)
(
204
)
of which: Lombard
(
22
)
(
5
)
(
17
)
of which: Credit cards
(
42
)
(
6
)
(
11
)
(
24
)
of which: Commodity trade finance
(
119
)
(
7
)
(
111
)
Other financial assets measured at amortized cost
(
87
)
(
16
)
(
5
)
(
66
)
of which: Loans to financial advisors
(
49
)
(
4
)
(
1
)
(
44
)
Total financial assets measured at amortized cost
(
1,057
)
(
197
)
(
217
)
(
643
)
Financial assets measured at fair value through other comprehensive income
Total on-balance sheet financial assets within the scope of ECL requirements
(
1,057
)
(
197
)
(
217
)
(
643
)
Total exposure
ECL provisions
Off-balance sheet (within the scope of ECL)
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Guarantees
(
40
)
(
14
)
(
7
)
(
19
)
of which: Large corporate clients
(
10
)
(
3
)
(
2
)
(
6
)
of which: SME clients
(
7
)
(
1
)
(
1
)
(
5
)
of which: Financial intermediaries and hedge funds
(
12
)
(
8
)
(
3
)
of which: Lombard
(
1
)
(
1
)
of which: Commodity trade finance
(
1
)
(
1
)
Irrevocable loan commitments
(
95
)
(
55
)
(
38
)
(
2
)
of which: Large corporate clients
(
76
)
(
45
)
(
28
)
(
2
)
Forward starting reverse repurchase and securities borrowing agreements
Committed unconditionally revocable credit lines
(
49
)
(
39
)
(
10
)
of which: Real estate financing
(
4
)
(
3
)
(
1
)
of which: Large corporate clients
(
6
)
(
4
)
(
3
)
of which: SME clients
(
21
)
(
17
)
(
3
)
of which: Lombard
of which: Credit cards
(
10
)
(
8
)
(
2
)
of which: Commodity trade finance
Irrevocable committed prolongation of existing loans
(
4
)
(
3
)
Total off-balance sheet financial instruments and credit lines
(
188
)
(
111
)
(
56
)
(
21
)
Total allowances and provisions
(
1,244
)
(
308
)
(
272
)
(
664
)
1 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL
allowances.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
181
Note 10
Financial assets at amortized cost and other positions in
scope of expected credit loss measurement
(continued)
Coverage ratios are
calculated for
the core loan
portfolio by taking
ECL allowances
and provisions
divided by the
gross
carrying amount
of the
exposures. Core
loan exposure
is defined
as the
sum of
Loans and
advances to
customers
Loans to financial advisors
.
These ratios are influenced by the following key factors:
–
Lombard loans are generally secured with marketable securities in portfolios that are, as a rule, highly diversified,
with
strict lending policies that are intended to ensure that
credit risk is minimal under most circumstances;
–
mortgage loans
to private
clients and real
estate financing
are controlled
by conservative
eligibility criteria,
including
low loan-to-value ratios and strong debt service capabilities;
–
the amount of unsecured retail lending (including credit cards)
is insignificant;
–
contractual
maturities
in
the
loan portfolio,
which
are
a
factor
in the
calculation
of
ECLs,
are
generally
short,
with
Lombard lending
typically having
average
contractual
maturities of
12 months
or less,
real estate
lending generally
between two
and three
years in
Switzerland, with
long-dated
maturities in
the US,
and corporate
lending between
one and two years with related loan commitments up to
four years; and
–
write-offs of
ECL allowances against
the gross
loan balances
when all
or part
of a
financial asset
is deemed
uncollectible
or forgiven reduce the coverage ratios.
The total combined
on- and off-balance
sheet coverage
ratio was at
points higher
than the
ratio as
of 31 December
2023. The
combined stage 1
and 2
ratio of
compared with the ratio as of 31 December 2023; the stage 3 ratio was
%,
as of 31 December 2023.
31.12.24
Gross carrying amount (USD m)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 12
Stage 3
Private clients with mortgages
Real estate financing
Total real estate lending
Large corporate clients
SME clients
Total corporate lending
Lombard
Credit cards
Commodity trade finance
Ship / aircraft financing
Consumer financing
Other loans and advances to customers
Loans to financial advisors
Total other lending
Total
1
Gross exposure (USD m)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 12
Stage 3
Private clients with mortgages
Real estate financing
Total real estate lending
Large corporate clients
SME clients
Total corporate lending
Lombard
Credit cards
Commodity trade finance
Ship / aircraft financing
Consumer financing
Financial intermediaries and hedge funds
Other off-balance sheet commitments
Total other lending
Total
2
Total on- and off-balance sheet
3
1 Includes Loans and advances to
customers and Loans to financial
advisors, which are presented
on the balance sheet line Other
financial assets measured at amortized cost.
2 Excludes Forward starting
reverse
repurchase and securities borrowing agreements.
3 Includes on-balance sheet exposure, gross and off-balance sheet exposure (notional) and the related
ECL coverage ratio (bps).
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
182
Note 10
Financial assets at amortized cost and other positions in
scope of expected credit loss measurement
(continued)
31.12.23
Gross carrying amount (USD m)
ECL coverage (bps)
On-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 12
Stage 3
Private clients with mortgages
Real estate financing
Total real estate lending
Large corporate clients
SME clients
Total corporate lending
Lombard
Credit cards
Commodity trade finance
Other loans and advances to customers
Loans to financial advisors
Total other lending
Total
1
Gross exposure (USD m)
ECL coverage (bps)
Off-balance sheet
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 12
Stage 3
Private clients with mortgages
Real estate financing
Total real estate lending
Large corporate clients
SME clients
Total corporate lending
Lombard
Credit cards
Commodity trade finance
Financial intermediaries and hedge funds
Other off-balance sheet commitments
Total other lending
Total
2
Total on- and off-balance sheet
3
1 Includes Loans
and advances to
customers and Loans
to financial advisors,
which are presented
on the balance
sheet line Other
financial assets measured
at amortized cost.
2 Excludes Forward
starting reverse
repurchase and securities borrowing agreements.
3 Includes on-balance sheet exposure, gross and off-balance sheet exposure (notional) and the related
ECL coverage ratio (bps).
Note 11
Derivative instruments
Overview
Over-the-counter (OTC) derivative
contracts are usually traded under a standardized International Swaps
and Derivatives
Association (ISDA)
master agreement
or other
recognized local
industry-standard master
agreements between
UBS AG
and
its
counterparties.
Terms
are
negotiated
directly
with
counterparties
and
the
contracts
have
industry-standard
settlement
mechanisms
prescribed
by
ISDA
or
similar
industry-standard
solutions.
Other
OTC
derivatives
are
cleared
through clearing houses,
in particular interest
rate swaps with
LCH, where a
settled-to-market method has
been generally
adopted, under
which cash
collateral exchanged
on a
daily basis
is considered
to legally
settle the
market value
of the
derivatives. Regulators
in various
jurisdictions have
introduced rules
requiring the
payment and
collection of
initial and
variation margins on certain OTC derivative contracts, which may
have a bearing on price and other relevant
terms.
Exchange-traded derivatives (ETD) are standardized in terms of their amounts and
settlement dates, and are bought and
sold
on
regulated
exchanges.
Exchanges
offer
the
benefits
of
pricing
transparency,
standardized
daily
settlement
of
changes in value and, consequently, reduced credit risk.
Most of UBS AG’s
derivative transactions relate to
sales and market-making
activity. Sales activities
include the structuring
and marketing of derivative products
to customers to enable
them to take, transfer,
modify or reduce current
or expected
risks. Market-making aims to
directly support the facilitation and
execution of client activity,
and involves quoting bid and
offer prices to other market participants with the aim of generating revenues based on spread and volume. UBS AG also
uses various derivative instruments for hedging purposes.
›
Refer to Notes 16 and 21 for more information about
derivative instruments
›
Refer to Note 25 for more information about derivatives
designated in hedge accounting relationships
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
183
Note 11
Derivative instruments (continued)
Risks of derivative instruments
The derivative financial assets shown on the
balance sheet can be an important component of UBS AG’s credit
exposure;
however,
the
positive
replacement
values
related
to
a
respective
counterparty
are
rarely
an
adequate
reflection
of
UBS AG’s credit exposure in its derivatives business with that counterparty. This is
generally the case because, on the one
hand, replacement values can increase over time (potential future exposure), while, on the other hand, exposure may be
mitigated by entering into master netting agreements and bilateral collateral arrangements. Both the exposure measures
used internally
by UBS AG
to control
credit risk
and the
capital requirements imposed
by regulators
reflect these additional
factors.
›
Refer to Note 22 for more information about derivative
financial assets and liabilities after consideration
of netting potential
permitted under enforceable netting arrangements
›
Refer to the “Risk management and control” section of this
report for more information about the risks arising from derivative
instruments
Derivative instruments
31.12.24
31.12.23
USD bn
Derivative
financial
assets
Derivative
financial
liabilities
Notional
amounts related
to derivative
financial assets
and liabilities
1,2
Other
notional
amounts
1,3
Derivative
financial
assets
Derivative
financial
liabilities
Notional
amounts related
to derivative
financial assets
and liabilities
1,2
Other
notional
amounts
1,3
Interest rate
of which: forwards (OTC)
4
of which: swaps (OTC)
of which: options (OTC)
of which: futures (ETD)
of which: options (ETD)
Credit derivatives
of which: credit default swaps (OTC)
of which: total return swaps (OTC)
Foreign exchange
of which: forwards (OTC)
of which: swaps (OTC)
of which: options (OTC)
Equity / index
of which: swaps (OTC)
of which: options (OTC)
of which: futures (ETD)
of which: options (ETD)
of which: client-cleared transactions (ETD)
Commodities
of which: swaps (OTC)
of which: options (OTC)
of which: futures (ETD)
of which: forwards (ETD)
of which: client-cleared transactions (ETD)
Other
5
Total derivative instruments,
based on netting under IFRS Accounting Standards
6
1 In cases where derivative financial instruments are
presented on a net basis on the balance
sheet, the respective notional amounts of the netted derivative
financial instruments are still presented on a gross
basis.
2 Notional amounts of client-cleared
ETD and OTC transactions through central clearing counterparties
are not disclosed, as they
have a significantly different risk profile.
3 Other notional amounts relate
to derivatives
that are cleared through either
a central counterparty or an
exchange and settled on a
daily basis (except for
OTC derivatives
settled through collateralized-to-market arrangements, which are presented under
Derivative
financial assets and Derivative financial liabilities). The fair value of these derivatives is presented on the balance sheet net of the corresponding cash margin under Cash collateral receivables on derivative instruments
and Cash collateral payables on derivative instruments and was not material for any of the periods presented.
4 Includes certain forward starting repurchase and reverse repurchase agreements that are classified as
measured at fair value through profit or
loss and are recognized within derivative
instruments.
5 Includes mainly derivative loan commitments
measured at FVTPL, as well as unsettled
purchases and sales of non-
derivative financial instruments
for which the
changes in the
fair value between
trade date and
settlement date are
recognized as derivative
financial instruments.
6 Derivative financial
assets and liabilities
are
presented net on the balance sheet
if UBS AG has the
unconditional and legally enforceable right
to offset the recognized amounts,
both in the normal course
of business and in the event
of default, bankruptcy or
insolvency of
the entity
and all
of the
counterparties, and
intends either
to settle
on a
net basis
or to
realize the
asset and
settle the
liability simultaneously.
Refer to
Note 22
for more
information on
netting
arrangements.
On
a
notional
amount
basis,
approximately
%
of
OTC
interest
rate
contracts
held
as
of
31 December
2024
(31 December 2023:
%) mature
within one year,
% (31 December 2023:
%) within one to
five years and
%
(31 December 2023:
%) after five years.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
184
Note 11
Derivative instruments (continued)
Notional amounts of interest rate contracts cleared through either a central counterparty
or an exchange that are legally
settled or economically
net settled on a
daily basis are
presented under
Other notional amounts
are categorized into maturity
buckets on the basis
of contractual maturities of
the cleared underlying derivative
contracts.
Other notional
amounts related
to interest
rate contracts
increased by
USD
trn compared
with 31 December
2023,
mainly reflecting the merger of
UBS AG and Credit Suisse AG, and higher business
volume in the Investment Bank, partly
offset by unwinding activities in Non-core and Legacy.
Note 12
Property, equipment and software
At historical cost less accumulated depreciation
USD m
Owned
properties and
equipment
1
Leased
properties and
equipment
2
Software
Projects in
progress
2024
2023
Historical cost
Balance at the beginning of the year
Balance recognized upon the merger of UBS AG and Credit Suisse
AG
3
Additions
Disposals / write-offs
4
(
464
)
(
118
)
(
357
)
(
940
)
(
1,449
)
Reclassifications
5
(
12
)
(
1,388
)
(
158
)
Foreign currency translation
(
597
)
(
112
)
(
212
)
(
34
)
(
955
)
Balance at the end of the year
Accumulated depreciation
Balance at the beginning of the year
Accumulated depreciation recognized upon the merger
of UBS AG and
Credit Suisse AG
3
Depreciation
Impairment
6
Disposals / write-offs
4
(
462
)
(
118
)
(
357
)
(
937
)
(
1,445
)
Reclassifications
5
(
32
)
(
3
)
(
5
)
(
40
)
Foreign currency translation
(
407
)
(
69
)
(
118
)
(
594
)
Balance at the end of the year
Net book value
Net book value at the beginning of the year
Net book value at the end of the year
7
1 Includes leasehold improvements and IT hardware.
2 Represents right-of-use assets recognized by UBS AG as lessee. UBS AG predominantly enters into lease contracts, or contracts that include lease components,
in relation to real
estate, including offices,
retail branches and
sales offices. The
total cash outflow for
leases during 2024 was
USD
m (2023: USD
m). Interest expense on
lease liabilities is included
within
Interest expense from financial instruments measured at amortized cost and Lease liabilities is included within Other financial liabilities measured at amortized cost. Refer to Notes 4 and 19a, respectively. There
were
no material gains or losses arising from sale-and-leaseback
transactions in 2024 and in 2023.
3 Refer to Note 2 for more information
about the merger of UBS AG
and Credit Suisse AG.
4 Includes write-offs of
fully depreciated assets.
5 The total reclassification amount for
the respective periods represents net reclassifications from
/ to Other non-financial assets.
6 Impairment charges recorded in 2024 generally
relate
to assets that
are no longer
used, of which
USD
m for Group
Items. The
recoverable amount
based on a
value-in-use approach
was determined
to be zero.
7 Consists of
USD
m related to
software and
USD
m related to Owned properties and equipment.
Note 13
Goodwill and intangible assets
Introduction
UBS AG performs an impairment test on its goodwill assets
on an annual basis or when indicators of impairment exist.
UBS AG considers Asset Management,
as reported in Note 3a, as a separate cash-generating unit (a CGU), as that is the
level at which the
performance of investment (and the
related goodwill) is reviewed and
assessed by management. Given
that a
significant amount
of goodwill
in Global Wealth
Management relates
to the
acquisition of
PaineWebber Group,
Inc. in 2000, which mainly affected the Americas portion
of the business, this goodwill remains separately monitored
by
the
Americas,
despite
the
formation
of
Global
Wealth
Management
in
2018.
Therefore,
goodwill
for
Global
Wealth
Management
is
separately
considered
for
impairment
at
the
level
of
two
CGUs:
Americas;
and
Switzerland
and
International (consisting of EMEA, Asia Pacific and Global).
The impairment
test is
performed for
each CGU
to which
goodwill is
allocated by
comparing the
recoverable amount
with the
carrying amount
of the
respective CGU.
UBS AG determines
the recoverable
amount of
the respective
CGUs
based on their value in use. An impairment
charge is recognized if the carrying amount exceeds the recoverable
amount.
Upon the merger of
UBS AG and Credit Suisse
AG in May 2024, an
existing goodwill balance
of USD
bn in Personal
31 December 2024.
›
Refer to Note 2 for more information about the merger
of UBS AG and Credit Suisse AG
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
185
Note 13
Goodwill and intangible assets (continued)
As
of
31 December
2024,
total
goodwill
recognized
on
the
balance
sheet
was
USD
bn,
of
which
USD
bn
was
carried by
the Global
Wealth Management
Americas CGU,
USD
bn was
carried by
the Global
Wealth Management
Switzerland and International
CGU, USD
bn was
carried by
Asset Management and
USD
bn was
carried by
Personal
goodwill
balances
as
of
31 December
2024
allocated
to
these
CGUs
were
not
impaired.
For
each
of
the
CGUs,
the
recoverable amount substantially
exceeded the
carrying value as
of 31 December 2024,
and there was
no indication of
a significant risk of goodwill impairment based on the testing
performed as of 31 December 2024.
Methodology for goodwill impairment testing
The recoverable
amounts are
determined using
a discounted
cash flow
model, which
has been
adapted to
use inputs
that consider features of
the banking business and its
regulatory environment.
The recoverable amount of
a CGU is the
sum of
the discounted
earnings attributable
to shareholders
from the
first three
forecast years
and the
terminal value,
adjusted for the effect of the capital
assumed to be needed over the next
three years and to support growth beyond that
period. The
terminal value,
which covers
all periods
beyond the
third year,
is calculated
on the
basis of
the forecast
of
the third-year
profit, the
discount rate
and the
long-term growth
rate, as well
as the
implied perpetual
capital growth.
For the
Global Wealth
Management
Americas CGU,
the
methodology
is consistently
applied,
but
the
forecast
period
covers five
years (with
a terminal
value thereafter) in
order to provide
for the
CGU’s specific planning
assumptions, namely
the ongoing investments
in the core
banking infrastructure
in the US to
enhance the
product capabilities and
offerings
in this
market in
the medium
term. The
extended forecast period
of five
years did
not trigger, defer or
avoid an
impairment
of goodwill as of 31 December 2024.
The
carrying
amount
for
each
CGU
is
determined
by
reference
to
UBS’s
equity
attribution
framework.
Within
this
framework,
UBS
attributes
equity
to
the
businesses
on
the
basis
of
their
risk-weighted
assets
and
leverage
ratio
denominator
(both
metrics
include
resource
allocations
from
Group
functions
to
the
business
divisions),
or
by
their
common equity tier 1
(CET1) capital equivalent
of risk-based capital
if higher, their
goodwill and their
intangible assets,
as
well
as
attributed
equity
related
to
certain
CET1
capital
deduction
items.
The
framework
is
primarily
used
for
the
purpose
of
measuring
the
performance
of
the
businesses
and
includes
certain
management
assumptions.
Attributed
equity
is
equal
to
the
capital
a
CGU
requires
to
conduct
its
business
and
is
currently
considered
a
reasonable
approximation of
the carrying
amount of
the CGUs.
The attributed
equity methodology
is also
applied in
the business
planning process, the inputs from which are used in calculating the
recoverable amounts of the respective CGU.
Assumptions
Valuation
parameters
used
within
UBS AG’s
impairment
test
model are
linked
to external
market
information,
where
applicable. The
model used
to determine
the recoverable
amount is
most sensitive
to changes
in the
forecast earnings
available to shareholders in years one to three, to changes in the discount rates and to changes in the long-term growth
rate. The applied
long-term growth
rate is based
on long-term economic
growth rates for
different regions
worldwide.
Earnings available
to
shareholders
are
estimated
on
the
basis of
forecast
results,
which
are
part
of the
business
plan
approved by the Board of Directors.
The
discount
rates
are
determined
by
applying
a
capital
asset
pricing
model-based
approach,
as
well
as
considering
quantitative and qualitative inputs from both internal and external analysts and the view of management. They also take
into account
regional differences
in risk-free
rates at
the level of
the individual
CGUs. In line
with discount
rates, long-
term growth rates are determined at the regional level based
on nominal GDP growth rate forecasts.
Key
assumptions
used
to
determine
the
recoverable
amounts
of
each
CGU
are
tested
for
sensitivity
by
applying
a
reasonably possible change to
those assumptions. Forecast earnings available
to shareholders were changed by
%, the
discount rates
were changed by
points. Under all scenarios,
reasonably possible changes
in key assumptions did
not result in an
impairment of goodwill
or
intangible
assets
reported
by
Global
Wealth
Management
Americas,
Global
Wealth
Management
Switzerland
and
International, and Asset Management.
If the estimated earnings
and other assumptions in future periods
deviate from the current outlook,
the value of goodwill
attributable to
Global Wealth
Management Americas,
Global Wealth
Management
Switzerland and
International, and
Asset Management may become impaired in the
future, giving rise to losses
in the income statement. Recognition of any
impairment of
goodwill would
reduce IFRS
Accounting Standards
equity and
net profit.
It would
not affect
cash flows
and,
as
goodwill
is
required
to
be
deducted
from
capital
under
the
Basel III
capital
framework,
no
effect
would
be
expected on UBS AG’s capital ratios.
Discount and growth rates
Discount rates
Growth rates
In %
31.12.24
31.12.23
31.12.24
31.12.23
Global Wealth Management Americas
Global Wealth Management Switzerland and International
Asset Management
Personal Corporate Banking
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
186
Note 13
Goodwill and intangible assets (continued)
USD m
Goodwill
Intangible
assets
1
2024
2023
Historical cost
Balance at the beginning of the year
Balance recognized upon the merger of UBS AG and Credit Suisse
AG
2
Additions
Disposals
3
(
1
)
(
1
)
(
40
)
Reclassifications
4
(
384
)
(
384
)
Foreign currency translation
(
52
)
(
61
)
(
113
)
Balance at the end of the year
Accumulated amortization and impairment
Balance at the beginning of the year
Balance recognized upon the merger of UBS AG and Credit Suisse
AG
2
Amortization
Impairment / (reversal of impairment)
Disposals
3
(
30
)
Reclassifications
4
(
96
)
(
96
)
Foreign currency translation
(
23
)
(
23
)
Balance at the end of the year
Net book value at the end of the year
of which: Global Wealth Management Americas
of which: Global Wealth Management Switzerland and International
of which: Personal Corporate Banking
of which: Asset Management
of which: Investment Bank
of which: Non-core and Legacy
1 Intangible assets
mainly include customer
relationships, core
deposits, contractual
rights and the
fully amortized branch
network intangible asset
recognized in connection
with the acquisition
of PaineWebber
Group, Inc. in 2000.
2 Refer to Note 2
for more information about the
merger of UBS AG
and Credit Suisse AG.
3 Reflects the derecognition of
goodwill allocated to businesses
and intangible assets held
by
entities that have been disposed of.
4 In 2024, certain intangible assets were reclassified to Assets of disposal group held for sale. Refer to Note
29 for more information.
The table below presents estimated aggregated
amortization expenses for intangible assets.
USD m
Intangible assets
Estimated aggregated amortization expenses for:
2025
2026
2027
2028
2029
Thereafter
Not amortized due to indefinite useful life
Total
Note 14
Other assets
a) Other financial assets measured at amortized cost
USD m
31.12.24
31.12.23
Debt securities
Loans to financial advisors
Fee- and commission-related receivables
Finance lease receivables
Settlement and clearing accounts
Accrued interest income
Other
1
Total other financial assets measured at amortized cost
1 Predominantly includes cash collateral provided to exchanges and clearing houses to secure securities trading activity through
those counterparties.
Effective 1 April
2022, UBS reclassified
a portfolio of
HQLA financial assets
from
Financial assets
measured at fair
value
through other comprehensive income
bn (the Portfolio) to
Other financial assets measured at
amortized cost
.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
187
Note 14
Other assets (continued)
The Portfolio’s cumulative fair value losses of USD
m pre-tax and USD
m post-tax, previously recognized in Other
comprehensive income,
were removed
from equity
and adjusted
against the
value of
the assets
on the
reclassification
date, so
that the
Portfolio was
measured as
if the
assets had
always been
classified at
amortized cost,
with a
value of
USD
bn as
on 1
April 2022.
The reclassification
has had
no effect
on the
income statement. At
the time,
the accounting
reclassification
arose
as
a
direct
result
of
the
planned
transformation
of
UBS’s
Global
Wealth
Management
Americas
business, involving significant growth
and extension of
the business, generating substantial
cash balances, with
a number
of new saving and deposit products being launched that are longer in duration. Additional lending, and a broader range
of customer
segments were
targeted. As
a consequence,
the Portfolio
is no
longer held
in a
business model
to collect
the contractual
cash flows
and sell
the assets
but
is instead
solely held
to collect
the contractual
cash flows
until the
assets mature, requiring a reclassification of the Portfolio
in line with IFRS 9 with effect from 1 April 2022.
b) Other non-financial assets
USD m
31.12.24
31.12.23
Precious metals and other physical commodities
Deposits and collateral provided in connection with litigation,
regulatory and similar matters
1
Prepaid expenses
Current tax assets
VAT,
withholding tax and other tax receivables
Properties and other non-current assets held for sale
Assets of disposal groups held for sale
2
Other
Total other non-financial assets
1 Refer to Note 18 for more information.
2 Refer to Note 29 for more information about the agreement to sell Select Portfolio
Servicing.
Note 15
Amounts due to banks, customer deposits, and funding
from UBS Group AG
a) Amounts due to banks and customer deposits
USD m
31.12.24
31.12.23
Amounts due to banks
Customer deposits
of which: demand deposits
of which: retail savings / deposits
of which: sweep deposits
of which: time deposits
1
Total amounts due to banks and customer deposits
1 Includes customer deposits in UBS AG Jersey Branch and UBS AG Guernsey Branch placed by UBS
Switzerland AG and UBS AG Swiss Branch on behalf of their clients.
Customer deposits increased by USD
bn, with the increase of USD
bn in May 2024 relating to the merger
of
UBS
AG
and
Credit
Suisse
AG.
Excluding
the
effects
of
the
merger,
there
was
a
decrease
of
USD
bn,
driven
by
currency effects and net new deposit outflows mainly in time deposits due to maturities, partly
offset by shifts into retail
savings / deposits as a result of the aforementioned maturities.
b) Funding from UBS Group AG measured at amortized
cost
USD m
31.12.24
31.12.23
Debt contributing to total loss-absorbing capacity (TLAC)
Debt eligible as high-trigger loss-absorbing additional tier
1 capital instruments
1
Debt eligible as low-trigger loss-absorbing additional
tier 1 capital instruments
Other
2
Total funding from UBS Group AG measured at amortized cost
3,4
1 For 31 December 2024, includes
USD
bn (31 December 2023: USD
bn) that are, upon the occurrence
of a trigger event or a viability event,
subject to conversion into ordinary UBS shares.
2 Includes debt
no longer
eligible as
TLAC having
a residual
maturity of
less than
one year
and high-trigger
loss-absorbing additional
tier 1
capital instruments
that ceased
to be
eligible when
UBS Group
AG issued
notice of
redemption.
3 The Total funding from UBS Group AG measured at amortized cost consists of subordinated
debt of UBS AG and its subsidiaries toward UBS Group AG. Subordinated debt consists of unsecured
debt
obligations that are contractually subordinated in right
of payment to all other present and future non-subordinated
obligations of the respective issuing entity.
All instruments contributing to TLAC are subordinated
since 1.1.2020.
4 UBS AG has also recognized funding from UBS Group AG that is designated at fair value.
Refer to Note 19b for more information.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
188
Note 15
Amounts due to banks, customer deposits, and funding
from UBS Group AG (continued)
UBS AG uses interest rate and foreign exchange derivatives to
manage the risks inherent in certain debt
instruments held
at amortized cost. In
some cases, UBS AG
applies hedge accounting
for interest rate risk
as discussed in item
2j in Note
1a and Note 25.
As a result of
applying hedge accounting, the life-to-date adjustment to
the carrying amount of
Funding
from UBS Group AG measured at amortized cost
bn as of 31 December 2024 and a decrease
of USD
bn as of 31 December 2023. The movement was mainly the
result of the merger of UBS AG and Credit Suisse
AG.
Of the
Total funding
from UBS
Group AG
measured at
amortized cost
bn
pays a fixed interest rate and USD
bn pays a floating rate of interest.
›
Refer to Note 24 for maturity information
Note 16
Debt issued designated at fair value
USD m
31.12.24
31.12.23
Issued debt instruments
Equity-linked
1
Rates-linked
Credit-linked
Fixed-rate
Commodity-linked
Other
Total debt issued designated at fair value
2
of which: issued by UBS AG with original maturity greater than one
year
3
of which: issued by Credit Suisse International standalone
with original maturity greater than one year
3
1 Includes investment
fund unit-linked
instruments issued.
2 As of
31 December 2024,
% of Total
debt issued designated
at fair value
was unsecured.
3 Based on
original contractual
maturity without
considering any early redemption features.
Note 17
Debt issued measured at amortized cost
USD m
31.12.24
31.12.23
Short-term debt
1
Senior unsecured debt
of which: issued by UBS AG with original maturity greater than one
year
Covered bonds
Subordinated debt
of which: eligible as non-Basel III-compliant tier 2 capital
instruments
Debt issued through the Swiss central mortgage institutions
Other long-term debt
Long-term debt
2
Total debt issued measured at amortized cost
3,4
1 Debt with an original contractual maturity
of less than one year,
includes mainly certificates of deposit and
commercial paper.
2 Debt with an original contractual
maturity greater than or equal to one year.
The
classification of debt
issued into
short-term and long
-term does not
consider any early
redemption features.
3 Net of
bifurcated embedded derivatives,
the fair value
of which was
not material
for the
periods
presented.
4 Except for Covered bonds (
% secured), Debt issued through the Swiss central mortgage institutions (
% secured) and Other long-term debt (
% secured),
% of the balance was unsecured
as of 31 December 2024.
UBS AG uses interest rate and foreign exchange derivatives to
manage the risks inherent in certain debt
instruments held
at amortized cost.
In some cases,
UBS AG applies hedge
accounting for interest rate
risk as discussed
in item 2j
in Note 1a
and Note 25. As
a result of
applying hedge accounting, the
life-to-date adjustment to the
carrying amount of
Debt issued
measured at amortized cost
bn as of 31 December 2024
and a decrease of
USD
bn as of
31 December 2023, reflecting changes in fair value
due to interest rate movements.
Subordinated debt consists
of unsecured debt
obligations that are
contractually subordinated
in right of
payment to all
other
present
and
future
non-subordinated
obligations
of
the
respective
issuing
entity.
All
of
the
subordinated
debt
instruments outstanding as of 31 December 2024 pay a
fixed rate of interest.
›
Refer to Note 24 for maturity information
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
189
Note 18
Provisions and contingent liabilities
a) Provisions
The table below presents an overview of total provisions.
USD m
31.12.24
31.12.23
Provisions other than provisions for expected credit losses
Provisions for expected credit losses
1
Total provisions
1 Refer to Note 10 for more information about ECL provisions recognized for off-balance sheet financial instruments and credit lines.
The following table presents additional information for
provisions other than provisions for expected
credit losses.
Litigation,
regulatory and
similar matters
1
Restructuring
2
Real estate
3
Other
4
Total 2024
Balance at the beginning of the year
Provisions recognized upon merger of UBS AG and Credit Suisse AG
5
Increase in provisions recognized in the income statement
6
Release of provisions recognized in the income statement
(
199
)
(
167
)
(
3
)
(
78
)
(
448
)
Reclassifications
6
Provisions used in conformity with designated purpose
(
1,580
)
6
(
472
)
(
17
)
(
34
)
(
2,103
)
Foreign currency translation and other movements
(
99
)
(
1
)
(
19
)
(
115
)
Balance at the end of the year
1 Consists of provisions for losses resulting from legal, liability and compliance risks.
2 Consists of USD
m of provisions for onerous contracts related to real estate as of 31 December 2024 (31 December 2023:
USD
m); USD
m of
personnel-related restructuring
provisions as
of 31
December 2024
(31 December
2023: USD
m) and
onerous contracts
related to
technology.
3 Mainly includes
provisions for
reinstatement costs with respect to leased
properties.
4 Mainly includes provisions related to employee
benefits, VAT
and operational risks.
5 Refer to Note 2 for more information
about the merger of UBS AG
and Credit Suisse AG.
6 Mainly relating to the funding
by UBS AG of the offer
made in June 2024 by
the Credit Suisse supply chain finance
funds to redeem all of
their outstanding units. As a
result of the offer,
UBS AG increased the IAS 37 Provisions related
to litigation, regulatory and similar matters by
USD
m with a corresponding impact on the
income statement, as the probability of an outflow
of resources increased,
bringing the total IAS 37 provision for this matter to USD
m. The provision has been used to recognize the funding obligation, which was
accounted for as a derivative liability with a fair value of USD
m.
Post the expiry of the offer, USD
m was reclassified from derivative liabilities back into IAS 37 provisions in relation to investors who did not
accept the redemption offer.
Restructuring provisions
are generally
recognized as
a consequence
of management
agreeing to
materially change
the
scope of the
business or the
manner in which
it is conducted,
including changes in
management structures. Restructuring
provisions relate
to onerous
contracts and
personnel-related
provisions. Onerous
contracts for
property are
recognized
when UBS AG is committed
to pay for non-lease components,
such as utilities, service
charges, taxes and maintenance,
when
a
property
is
vacated
or
not
fully
recovered
from
sub-tenants.
Personnel-related
restructuring
provisions
are
generally used
within a
short
period of
time. The
level of
personnel-related
provisions
can
change when
natural
staff
attrition reduces the number of people affected
by a restructuring event, and therefore
results in lower estimated costs.
Information about provisions
and contingent liabilities
in respect of
litigation, regulatory
and similar matters,
as a class,
is included in Note 18b. There are no material contingent
liabilities associated with the other classes of provisions.
b) Litigation, regulatory and similar matters
UBS operates in
a legal and
regulatory environment that
exposes it to
significant litigation and
similar risks arising
from
disputes and
regulatory
proceedings.
As a
result,
UBS
is involved
in various
disputes
and legal
proceedings,
including
litigation,
arbitration,
and
regulatory
and
criminal
investigations.
“UBS”,
“we”
and
“our”,
for
purposes
of this
Note,
refer to UBS AG and / or one or more of its subsidiaries,
as applicable.
Such
matters
are
subject
to
many
uncertainties,
and
the
outcome
and
the
timing
of
resolution
are
often
difficult
to
predict,
particularly
in
the
earlier
stages
of
a
case.
There
are
also
situations
where
UBS
may
enter
into
a
settlement
agreement.
This
may
occur
in
order
to
avoid
the
expense,
management
distraction
or
reputational
implications
of
continuing to contest
liability, even for
those matters for
which UBS believes
it should be
exonerated. The uncertainties
inherent in
all such
matters
affect
the amount
and timing
of any
potential outflows
for
both matters
with respect
to
which provisions have
been established and
other contingent liabilities.
UBS makes provisions
for such matters
brought
against it when,
in the opinion of
management after seeking legal
advice, it is
more likely than not
that UBS has a
present
legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required, and
the amount
can be
reliably
estimated. Where
these factors
are otherwise
satisfied, a
provision may
be established
for
claims that have not yet been asserted
against UBS, but are nevertheless expected to be,
based on UBS’s experience with
similar asserted claims. If any of those conditions is not met, such matters result in contingent liabilities. If the amount of
an
obligation
cannot
be
reliably
estimated,
a
liability
exists
that
is
not
recognized
even
if
an
outflow
of
resources
is
probable. Accordingly, no provision is established even if the potential outflow of resources
with respect to such matters
could be
significant. Developments
relating to
a matter
that occur
after the
relevant reporting
period, but
prior to
the
issuance of financial
statements, which affect
management’s assessment
of the provision
for such matter
(because, for
example, the developments provide evidence of conditions that existed at the end of the reporting period), are adjusting
events
after
the
reporting
period
under
IAS
10
and
must
be
recognized
in
the
financial
statements
for
the
reporting
period.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
190
Note 18
Provisions and contingent liabilities (continued)
Specific
litigation,
regulatory
and
other
matters
are
described
below,
including
all
such
matters
that
management
considers to
be material
and others
that management
believes to
be of
significance to
UBS due
to potential
financial,
reputational and other
effects. The amount of
damages claimed, the size
of a transaction
or other information is
provided
where available and appropriate in order to assist users in considering
the magnitude of potential exposures.
In the case of certain matters below, we
state that we have established a provision,
and for the other matters, we make
no such statement.
When we
make this statement
and we
expect disclosure
of the
amount of a
provision to prejudice
seriously our position with other parties in the matter because it would reveal
what UBS believes to be the probable and
reliably estimable
outflow, we
do not
disclose that
amount. In
some cases
we are
subject to
confidentiality obligations
that preclude
such disclosure.
With respect
to the
matters
for which
we do
not state
whether
we have
established a
provision, either: (a) we have
not established a provision;
or (b) we have established
a provision but expect disclosure
of
that fact
to prejudice
seriously our
position with
other parties
in the
matter because
it would
reveal the
fact that
UBS
believes an outflow of resources to be probable and reliably estimable.
With respect to certain litigation, regulatory and similar matters for which we have established provisions, we are able to
estimate the expected
timing of outflows.
However, the aggregate
amount of the
expected outflows for
those matters
for which
we are
able to
estimate expected
timing is
immaterial relative
to our
current and
expected levels
of liquidity
over the relevant time periods.
The aggregate amount provisioned for litigation, regulatory and similar matters
as a class is disclosed in the “Provisions”
table in Note 18a above.
UBS provides below an estimate of the
aggregate liability for its litigation, regulatory
and similar
matters
as a
class of
contingent
liabilities. Estimates
of
contingent
liabilities are
inherently
imprecise
and
uncertain
as
these estimates require UBS to make speculative legal assessments as to claims and proceedings that involve unique
fact
patterns or
novel legal
theories, that
have not
yet been
initiated or
are at
early stages
of adjudication,
or as
to which
alleged damages have
not been quantified
by the claimants.
Taking into account
these uncertainties and
the other factors
described herein, UBS estimates the future losses that could arise from litigation, regulatory and similar matters disclosed
below
for
which
an
estimate
is
possible,
that
are
not
covered
by
existing
provisions
are
in
the
range
of
USD
bn
to
USD
bn.
Litigation, regulatory and
similar matters may also
result in non-monetary
penalties and consequences.
A guilty plea to,
or conviction
of, a
crime could
have material
consequences for
UBS. Resolution
of regulatory
proceedings may
require
UBS to obtain waivers of regulatory disqualifications to maintain certain operations,
may entitle regulatory authorities to
limit,
suspend
or
terminate
licenses
and
regulatory
authorizations,
and
may
permit
financial
market
utilities
to
limit,
suspend or terminate UBS’s participation in
such utilities. Failure to obtain such waivers,
or any limitation, suspension or
termination of licenses, authorizations or participations, could
have material consequences for UBS.
Provisions for litigation, regulatory and similar matters
by business division and in Group Items
1
USD m
Global Wealth
Manage-
ment
Personal
Corporate
Banking
Asset
Manage-
ment
Investment
Bank
Non-core
and
Legacy
Group
Total
Balance at the beginning of the year
Provisions recognized upon merger of UBS AG and Credit Suisse AG
2
Increase in provisions recognized in the income statement
3
Release of provisions recognized in the income statement
(
18
)
(
9
)
(
171
)
(
2
)
(
199
)
Reclassifications
3
Provisions used in conformity with designated purpose
3
(
55
)
(
20
)
(
20
)
(
1,481
)
(
4
)
(
1,580
)
Foreign currency translation and other movements
(
69
)
(
10
)
(
11
)
(
10
)
(
99
)
Balance at the end of the year
1 Provisions, if
any, for the
matters described in items
2 and 10 of
this Note are recorded
in Global Wealth
Management. Provisions,
if any, for
the matters described in
items 5, 6, 7,
8, 9 and 11
of this Note are
recorded in Non-core
and Legacy.
Provisions, if
any, for
the matters described
in item 1
of this Note
are allocated between
Global Wealth Management,
Personal Corporate
Banking and Non-core
and Legacy.
Provisions, if any, for the matters described in item 3 of this Note are allocated between the
Investment Bank, Noncore and Legacy and Group Items. Provisions,
if any, for the matters described in item 4 of this Note
are allocated between Global Wealth Management
and Personal Corporate
Banking. Provisions, if any,
for the matters described in item
12 of this Note are allocated
between the Investment Bank and
Non-core
and Legacy.
2 Refer to Note 2 for more information about the merger of UBS AG and Credit Suisse AG.
3 Mainly relates to the funding by UBS AG of the offer made in June 2024 by the Credit Suisse supply chain
finance funds to redeem all of their outstanding
units. As a result of the
offer, UBS AG
increased the IAS 37 Provisions related
to litigation, regulatory and similar matters
by USD
m with a corresponding impact
on the income statement, as the probability of an
outflow of resources increased, bringing the total IAS 37 provision
for this matter to USD
m. The provision has been used to recognize
the funding obligation,
which was accounted for
as a derivative liability
with a fair value
of USD
m. Post the expiry
of the offer,
USD
m was reclassified from
derivative liabilities back into
IAS 37 provisions in
relation to investors
who did not accept the redemption offer.
1. Inquiries regarding cross-border wealth management businesses
Tax and regulatory authorities in a number of
countries have made inquiries,
served requests for information or
examined
employees located in their
respective jurisdictions
relating to the
cross-border wealth
management services provided
by
UBS and other financial
institutions. Credit Suisse
offices in various locations,
including the UK, the
Netherlands, France
and
Belgium,
have
been
contacted
by
regulatory
and
law
enforcement
authorities
seeking
records
and
information
concerning
investigations
into
Credit
Suisse’s
historical
private
banking
services
on
a
cross-border
basis
and
in
part
through its local branches and banks. The
UK and French aspects of these issues
have been closed. UBS is continuing to
cooperate with the authorities.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
191
Note 18
Provisions and contingent liabilities (continued)
Since 2013, UBS (France) S.A., UBS AG and certain former employees have been under investigation in
France in relation
to UBS’s cross-border business with French clients. In connection with this investigation, the
investigating judges ordered
UBS AG to provide bail (“
caution
”) of EUR
bn.
In 2019, the court
of first instance
returned a verdict
finding UBS AG
guilty of unlawful solicitation
of clients on
French
territory
and aggravated
laundering of
the proceeds
of tax
fraud, and
UBS (France)
S.A. guilty
of aiding
and abetting
unlawful solicitation
and of
laundering the
proceeds of
tax fraud.
The court
imposed fines
aggregating
EUR
bn on
UBS AG and UBS (France) S.A. and
awarded EUR
m of civil damages to the
French state. A trial in the Paris
Court of
Appeal took place in March 2021. In December
2021, the Court of Appeal found UBS
AG guilty of unlawful solicitation
and aggravated
laundering
of the
proceeds of
tax
fraud. The
court
ordered a
fine of
EUR
m, the
confiscation
of
EUR
bn, and awarded civil
damages to the French
state of EUR
m. UBS appealed the
decision to the French
Supreme
Court.
The
Supreme
Court
rendered
its
judgment
on
15 November
2023.
It
upheld
the
Court
of
Appeal’s
decision
regarding unlawful solicitation and aggravated
laundering of the proceeds of tax
fraud, but overturned the confiscation
of EUR
bn, the
penalty of
EUR
m and
the EUR
m of
civil damages
awarded to
the French
state. The
case has
been remanded to
the Court of
Appeal for a
retrial regarding these
overturned elements. The
French state has
reimbursed
the EUR
m of civil damages to UBS AG.
In May 2014, Credit Suisse entered into
settlement agreements with the SEC, Federal Reserve and
New York Department
of Financial Services and
entered into an agreement with
the US Department of
Justice (DOJ) to plead
guilty to conspiring
to aid and abet
US taxpayers in
filing false tax
returns (2014 Plea
Agreement). Credit Suisse
continued to report
to and
cooperate with US
authorities in accordance
with its obligations
under the 2014
Plea Agreement, including
by conducting
a review of cross-border
services provided by Credit
Suisse. In this connection,
Credit Suisse provided information
to US
authorities regarding potentially
undeclared US assets
held by clients
at Credit Suisse.
UBS continues to
cooperate with
the ongoing investigation by the DOJ.
Our balance sheet
at 31 December
2024 reflected
a provision
in an amount
that UBS
believes to
be appropriate under
the applicable accounting standard. As in the case of other matters
for which we have established provisions, the future
outflow
of
resources
in
respect
of
such
matters
cannot
be
determined
with
certainty
based
on
currently
available
information and accordingly may ultimately
prove to be substantially greater
(or may be less) than the provision that
we
have recognized.
2. Madoff
In relation to the Bernard L. Madoff Investment Securities LLC (BMIS) investment fraud,
UBS AG, UBS (Luxembourg) S.A.
(now UBS Europe SE, Luxembourg branch) and certain other UBS
subsidiaries have been subject to inquiries by a
number
of regulators,
including the
Swiss Financial Market
Supervisory Authority
(FINMA) and the
Luxembourg Commission
de
Surveillance du
Secteur Financier.
Those inquiries
concerned two
third-party funds
established under
Luxembourg law,
substantially all assets of which
were with BMIS,
as well as certain
funds established in offshore
jurisdictions with either
direct or
indirect exposure
to BMIS. These
funds faced severe
losses, and the
Luxembourg funds
are in
liquidation. The
documentation
establishing
both
funds
identifies
UBS
entities
in
various
roles,
including
custodian,
administrator,
manager,
distributor and promoter,
and indicates that UBS employees serve as board
members.
In 2009 and 2010,
the liquidators of
the two Luxembourg
funds filed claims
against UBS entities,
non-UBS entities and
certain
individuals,
including
current
and former
UBS
employees,
seeking
amounts
totaling
approximately
EUR
bn,
which includes amounts that the funds may be held liable
to pay the trustee for the liquidation of BMIS (BMIS Trustee).
A large number of alleged beneficiaries have filed claims against UBS entities (and non-UBS entities) for purported losses
relating to the Madoff fraud. The majority of these
cases have been filed in Luxembourg, where decisions that the claims
in
eight
test
cases
were
inadmissible
have
been
affirmed
by
the
Luxembourg
Court
of
Appeal,
and
the
Luxembourg
Supreme Court has dismissed a further appeal in one of
the test cases.
In the US, the BMIS Trustee
filed claims against UBS entities, among others, in
relation to the two Luxembourg funds and
one of the offshore funds. The total amount
claimed against all defendants in these
actions was not less than USD
bn.
In 2014,
the US
Supreme Court
rejected the
BMIS Trustee’s
motion for
leave to
appeal decisions,
dismissing all
claims
against UBS defendants except those for the recovery of approximately USD
m of payments alleged to be fraudulent
conveyances and
preference payments.
Similar claims
have been
filed against
Credit Suisse
entities seeking
to recover
redemption payments.
In 2016,
the bankruptcy
court dismissed
these claims
against the
UBS entities
and most
of the
Credit Suisse entities.
In 2019, the
Court of Appeals
reversed the
dismissal of the
BMIS Trustee’s remaining
claims. The
case has been remanded to the Bankruptcy Court for further
proceedings.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
192
Note 18
Provisions and contingent liabilities (continued)
3. Foreign exchange, LIBOR and benchmark rates, and other
trading practices
Foreign-exchange-related
regulatory
matters:
concerning
possible
manipulation
of
foreign
exchange
markets
and
precious
metals
prices.
As
a
result
of
these
investigations, UBS entered
into resolutions with
Swiss, US and
UK regulators and
the European
Commission. UBS was
granted conditional immunity by the
Antitrust Division of the DOJ
and by authorities in other
jurisdictions in connection
with potential
competition law violations
relating to foreign
exchange and
precious metals businesses.
In December
2021,
the European Commission issued a decision imposing a fine of EUR
m on Credit Suisse entities based on findings of
anticompetitive
practices
in
the
foreign
exchange
market.
Credit
Suisse
has
appealed
the
decision
to
the
European
General Court. UBS received leniency and accordingly
no fine was assessed.
Foreign-exchange-related civil litigation:
jurisdictions against UBS, Credit Suisse and other banks on behalf of putative classes of persons who engaged in foreign
currency transactions with any
of the defendant banks.
UBS and Credit
Suisse have resolved US
federal court class actions
relating
to
foreign
currency
transactions
with
the
defendant
banks
and
persons
who
transacted
in
foreign
exchange
futures contracts
and options
on such
futures.
Certain class
members
have excluded
themselves from
that settlement
and filed individual actions in US and English courts against UBS, Credit Suisse and other banks, alleging violations of US
and
European
competition
laws
and
unjust
enrichment.
UBS,
Credit
Suisse
and
the
other
banks
have
resolved
those
individual
matters.
Credit
Suisse
and
UBS,
together
with
other
financial
institutions,
were
named
in
a
consolidated
putative class action in Israel, which made allegations similar
to those made in the actions pursued in other
jurisdictions.
In April 2022,
Credit Suisse entered
into an agreement
to settle all
claims in this
action. In February
2024, UBS entered
into an agreement to settle all claims in this action. Both
settlements remain subject to court approval.
A
putative
class
action
was
filed
in
federal
court
against
UBS
and
numerous
other
banks
on
behalf
of
persons
and
businesses in the US
who directly purchased foreign
currency from the defendants
and alleged co-conspirators
for their
own end use. In May 2024, the Second Circuit upheld the
district court’s dismissal of the case.
LIBOR
and
other
benchmark-related
regulatory
matters:
regarding potential improper attempts by UBS,
among others, to manipulate LIBOR and
other benchmark rates at certain
times. UBS and
Credit Suisse
reached settlements
or otherwise
concluded investigations
relating to
benchmark interest
rates with the
investigating authorities.
UBS was
granted conditional
leniency or conditional
immunity from authorities
in certain
jurisdictions, including
the Antitrust
Division of
the DOJ
and the
Swiss Competition
Commission (WEKO),
in
connection with potential antitrust or competition
law violations related to certain
rates. However, UBS has not reached
a final settlement with WEKO, as the Secretariat
of WEKO has asserted that UBS does not qualify for full
immunity.
LIBOR and other
benchmark-related civil litigation:
the federal
courts in
New York
against UBS
and numerous
other banks
on behalf
of parties
who transacted
in certain
interest rate benchmark-based derivatives.
Also pending in
the US and
in other jurisdictions are
a number of other
actions
asserting losses related
to various products
whose interest
rates were
linked to LIBOR
and other benchmarks,
including
adjustable
rate
mortgages,
preferred
and
debt
securities,
bonds
pledged
as
collateral,
loans,
depository
accounts,
investments
and
other
interest-bearing
instruments.
The
complaints
allege
manipulation,
through
various
means,
of
certain
benchmark
interest
rates,
including
USD LIBOR,
Yen
LIBOR,
EURIBOR,
CHF LIBOR,
and
GBP
LIBOR
and
seek
unspecified compensatory and other damages under various
legal theories.
USD LIBOR class and individual actions
in the US:
Beginning in 2013, putative class
actions were filed in
US federal district
courts (and subsequently consolidated in the US District Court for the Southern District of New York (SDNY)) by
plaintiffs
who
engaged
in
over-the-counter
instruments,
exchange-traded
Eurodollar
futures
and
options,
bonds
or
loans
that
referenced
USD LIBOR.
The
complaints
allege
violations
of
antitrust
law
and
the
Commodities
Exchange
Act,
as
well
breach of contract
and unjust enrichment.
Following various rulings
by the district
court and the
Second Circuit
dismissing
certain of the causes of action and allowing
others to proceed, one class action
with respect to transactions in over-the-
counter
instruments
and
several
actions
brought
by
individual
plaintiffs
are
proceeding
in
the
district
court.
UBS
and
Credit
Suisse
have
entered
into
settlement
agreements
in
respect
of
the
class
actions
relating
to
exchange-traded
instruments, bonds and loans. These settlements have received final court approval and the actions have been dismissed
as to UBS and Credit Suisse. In addition,
an individual action was filed in the
Northern District of California against UBS,
Credit Suisse and numerous other
banks alleging that the defendants
conspired to fix the interest
rate used as the basis
for loans to consumers by jointly setting
the USD ICE LIBOR rate and monopolized the market for LIBOR-based consumer
loans and credit cards. The court dismissed the initial complaint and subsequently dismissed an amended complaint with
prejudice. In
January 2024,
plaintiffs appealed
the dismissal
to the
Ninth Circuit
Court of
Appeals, which
affirmed the
dismissal in November 2024.
Other
benchmark
class actions
in
the
US:
The
Yen LIBOR/Euroyen
TIBOR,
EURIBOR
and GBP
LIBOR
actions
have
been
dismissed. Plaintiffs have appealed the dismissals.
In November 2022, defendants moved
to dismiss the complaint in
the CHF LIBOR action. In 2023,
the court approved a
settlement by Credit Suisse of the claims against it in this matter.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
193
Note 18
Provisions and contingent liabilities (continued)
Government bonds:
European
Union
antitrust
rules
between
2007
and
2011
relating
to
European
government
bonds.
The
European
Commission fined
UBS EUR
m. UBS
has appealed
the amount
of the
fine.
Also in
2021, the
European Commission
issued a decision finding that Credit Suisse and four
other banks had breached European Union antitrust rules relating to
supra-sovereign,
sovereign
and
agency
bonds
denominated
in
USD.
The
European
Commission
fined
Credit
Suisse
EUR
m, which amount was confirmed on appeal.
Credit Suisse, together with other financial institutions, was named in two
Canadian putative class actions, which allege
that defendants conspired to
fix the prices of
supranational, sub-sovereign and agency bonds
sold to and
purchased from
investors in
the secondary
market. One
action was
dismissed against
Credit Suisse
in February
2020. In
October 2022,
Credit Suisse
entered into
an agreement
to settle
all claims
in the
second action,
which was
approved by
the court
in
November 2024.
Credit default swap auction litigation
putative class action complaint filed
in the US District
Court for the District
of New Mexico alleging
manipulation of credit
default swap (CDS)
final auction prices.
Defendants filed
a motion to
enforce a
previous CDS class
action settlement
in
the SDNY. In January 2024, the SDNY ruled that, to the extent claims in the New Mexico action arise from conduct
prior
to 30 June 2014, those claims are barred by the SDNY settlement.
The plaintiffs have appealed the SDNY decision.
With respect to
additional matters
and jurisdictions
not encompassed
by the
settlements and
orders referred
to above,
UBS’s balance sheet at 31 December 2024 reflected a provision in an amount
that UBS believes to be appropriate under
the applicable accounting standard. As in the case of other matters
for which we have established provisions, the future
outflow
of
resources
in
respect
of
such
matters
cannot
be
determined
with
certainty
based
on
currently
available
information and accordingly may ultimately
prove to be substantially greater
(or may be less) than the provision that
we
have recognized.
4. Swiss retrocessions
The Federal Supreme Court of Switzerland
ruled in 2012, in a test case
against UBS, that distribution fees paid
to a firm
for distributing third-party and intra-group investment funds and structured products must be disclosed and surrendered
to clients who have entered
into a discretionary mandate
agreement with the firm,
absent a valid waiver.
FINMA issued
a supervisory note to
all Swiss banks
in response to
the Supreme
Court decision. UBS
has met the FINMA
requirements
and has notified all potentially affected clients.
The Supreme
Court decision has
resulted, and
continues to
result, in
a number
of client
requests to
disclose and
potentially
surrender retrocessions.
Client requests
are assessed
on a
case-by-case basis.
Considerations taken
into account
when
assessing these cases
include, among other things,
the existence of
a discretionary mandate and
whether or not
the client
documentation contained a valid waiver with respect to
distribution fees.
UBS’s balance
sheet at
31 December 2024
reflected a
provision with
respect to
matters described
in this
item 4
in an
amount that UBS
believes to be
appropriate under the
applicable accounting standard. The
ultimate exposure will
depend
on client requests and
the resolution thereof, factors that are
difficult to predict and
assess. Hence, as in the
case of other
matters for which
we have established
provisions, the future
outflow of resources
in respect of
such matters cannot
be
determined
with
certainty
based
on
currently
available
information
and
accordingly
may
ultimately
prove
to
be
substantially greater (or may be less) than the provision that
we have recognized.
5. Mortgage-related matters
Government and regulatory related matters
:
DOJ RMBS settlement
(CSS LLC) and
its current
and former US
subsidiaries and
US affiliates
reached a
settlement with the
US Department
of
Justice (DOJ) related to its legacy
Residential Mortgage-Backed Securities (RMBS) business, a business
conducted through
2007. The
settlement resolved potential
civil claims
by the
DOJ related
to certain
of those
Credit Suisse
entities’ packaging,
marketing, structuring, arrangement, underwriting,
issuance and sale of RMBS.
Pursuant to the terms of
the settlement
a civil monetary penalty
was paid to the
DOJ in January 2017.
The settlement also required
the Credit Suisse
entities to
provide certain levels of consumer relief measures, including affordable housing payments
and loan forgiveness, and the
DOJ and Credit Suisse
agreed to the appointment of
an independent monitor to oversee
the completion of the
consumer
relief requirements of the
settlement. UBS continues to evaluate its approach toward
satisfying the remaining consumer
relief obligations. The aggregate amount of the
consumer relief obligation increased after 2021 by
% per annum of the
outstanding amount due
until these obligations
are settled. The monitor
publishes reports periodically on
these consumer
relief matters.
Civil litigation: Repurchase
litigations
their roles as
issuer, sponsor,
depositor, underwriter
and/or servicer
of RMBS transactions.
These cases
currently include
repurchase
actions
by
RMBS
trusts
and/or
trustees,
in
which
plaintiffs
generally
allege
breached
representations
and
warranties in respect of mortgage loans and failure
to repurchase such mortgage loans as required
under the applicable
agreements. The amounts disclosed below do not reflect
actual realized plaintiff losses to date. Unless otherwise
stated,
these amounts reflect the original unpaid principal balance
amounts as alleged in these actions.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
194
Note 18
Provisions and contingent liabilities (continued)
DLJ Mortgage Capital,
Inc. (DLJ) is
a defendant in New
York State court in
five actions: An action
brought by Asset Backed
Securities
Corporation
Home
Equity
Loan
Trust,
Series
2006-HE7
alleges
damages
of
not
less
than
USD
m.
In
December 2023, the court granted in part DLJ’s motion to dismiss, dismissing with prejudice all
notice-based claims; the
parties have appealed.
An action by
Home Equity Asset
Trust, Series 2006-8, alleges
damages of not less
than USD
m.
An action by Home Equity Asset
Trust 2007-1 alleges damages of not less
than USD
m. Following a non-jury trial, the
court issued a
decision in December
2024 that the
plaintiff had established
breaches of representations
and warranties
relating to
by the parties or briefed for further decision by the court. An action by Home Equity Asset Trust 2007-2 alleges damages
of not less than USD
m. An action by CSMC Asset-Backed Trust 2007-NC1 does
not allege a damages amount.
6. ATA litigation
Since November 2014, a series of lawsuits have been
filed against a number of banks, including
Credit Suisse, in the US
District Court
for the
Eastern District
of New
York
(EDNY) and
the SDNY
alleging claims
under the
United States
Anti-
Terrorism
Act (ATA)
and the Justice Against Sponsors of Terrorism
Act. The plaintiffs in each of these lawsuits are, or are
relatives
of,
victims
of
various
terrorist
attacks
in
Iraq
and
allege
a
conspiracy
and/or
aiding
and
abetting
based
on
allegations
that
various
international
financial
institutions,
including
the
defendants,
agreed
to
alter,
falsify
or
omit
information
from
payment
messages
that
involved
Iranian
parties
for
the
express
purpose
of
concealing
the
Iranian
parties’ financial
activities and
transactions from
detection by
US authorities.
The lawsuits
allege that
this conduct
has
made it possible for Iran to transfer funds to Hezbollah and other terrorist organizations actively engaged
in harming US
military personnel
and civilians.
In January
2023, the
United States
Court of
Appeals for
the Second
Circuit affirmed
a
September 2019 ruling by the EDNY granting
defendants’ motion to dismiss the first filed
lawsuit. In October 2023, the
United States Supreme Court denied plaintiffs’
petition for a writ of certiorari.
In February 2024, plaintiffs filed a motion
to
vacate
the
judgment
in
the
first
filed
lawsuit.
Of
the
other
seven
cases,
four
are
stayed,
including
one
that
was
dismissed as to Credit Suisse
and most of the
bank defendants prior to
entry of the stay, and in three cases plaintiffs have
filed amended complaints.
7. Customer account matters
Several clients have claimed that a former relationship
manager in Switzerland had exceeded his investment
authority in
the
management
of their
portfolios,
resulting
in
excessive
concentrations
of certain
exposures
and
investment
losses.
Credit Suisse AG has investigated
the claims, as well as transactions among
the clients. Credit Suisse
AG filed a criminal
complaint
against
the
former
relationship
manager
with
the
Geneva
Prosecutor’s
Office
upon
which
the
prosecutor
initiated a
criminal investigation.
Several clients
of the
former relationship
manager
also filed
criminal complaints
with
the Geneva Prosecutor’s Office. In February 2018, the former relationship manager was sentenced to five years in prison
by
the
Geneva
criminal
court
for
fraud,
forgery
and
criminal
mismanagement
and
ordered
to
pay
damages
of
approximately
USD
m.
On appeal,
the
Criminal
Court of
Appeals
of Geneva
and,
subsequently,
the
Swiss
Federal
Supreme Court upheld the main findings of the Geneva
criminal court.
Civil lawsuits have been initiated
against Credit Suisse AG and / or
certain affiliates in various jurisdictions,
based on the
findings established in the criminal proceedings against the
former relationship manager.
In Singapore, in a civil lawsuit against Credit Suisse Trust Limited, the Singapore International Commercial Court issued a
judgment
finding
for
the
plaintiffs and,
in
September 2023,
the
court
awarded
damages
of USD
m, excluding
post-judgment
interest.
This
figure
does
not
exclude
potential
overlap
with
the
Bermuda
proceedings
against
Credit
Suisse Life
(Bermuda) Ltd.,
described below,
and the
court ordered
the parties
to ensure
that there
shall be
no double
recovery in relation to
this award and
the Bermuda proceedings.
On appeal from this
judgment, in July 2024,
the court
ordered some
changes to
the calculation
of damages
and directed
the parties
to agree
adjustments to
the award.
The
court ordered a revised award of USD
m, including interest and costs, in October 2024.
In Bermuda, in the civil lawsuit brought against
Credit Suisse Life (Bermuda) Ltd., the Supreme
Court of Bermuda issued
a judgment finding for the plaintiff and awarded damages of USD
m to the plaintiff. Credit Suisse Life (Bermuda)
Ltd. appealed the decision and in June 2023, the Bermuda Court of Appeal confirmed the award issued by the Supreme
Court of Bermuda
and the finding
that Credit Suisse
Life (Bermuda) Ltd.
had breached its
contractual and fiduciary duties,
but overturning
the
finding
that
Credit
Suisse
Life
(Bermuda)
Ltd.
had
made
fraudulent
misrepresentations.
In
March
2024,
the
Bermuda
Court
of
Appeal
granted
a
motion
by
Credit
Suisse
Life
(Bermuda)
Ltd.
for
leave
to
appeal
the
judgment to
the Judicial
Committee of
the Privy Council
and the
notice of
such appeal was
filed. The
Court of Appeal
also
ordered
that
the
current
stay
continue
pending
determination
of the
appeal
on the
condition
that
the
damages
awarded remain within the escrow account plus interest calculated at the Bermuda statutory
rate of
%. In December
2023, USD
m was released from the escrow account and paid to plaintiffs.
In Switzerland,
civil lawsuits
have been
commenced against
Credit Suisse AG
in the
Court of
First Instance
of Geneva,
with statements of claim served in March 2023 and March
2024.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
195
Note 18
Provisions and contingent liabilities (continued)
8. Mozambique matter
Credit Suisse was subject to investigations by regulatory and enforcement authorities, as well as civil litigation, regarding
certain
Credit
Suisse
entities’
arrangement
of
loan
financing
to
Mozambique
state
enterprises,
Proindicus
S.A.
and
Empresa
Moçambicana
de
Atum
S.A.
(EMATUM),
a
distribution
to
private
investors
of
loan
participation
notes
(LPN)
related to
the EMATUM
financing in
September 2013,
and certain
Credit Suisse
entities’ subsequent
role in
arranging
the exchange of
those LPNs for
Eurobonds issued
by the Republic
of Mozambique.
In 2019, three
former Credit
Suisse
employees pleaded guilty in the EDNY to accepting improper personal benefits in
connection with financing transactions
carried out with two Mozambique state enterprises.
In October 2021, Credit Suisse reached settlements
with the DOJ, the US Securities
and Exchange Commission (SEC), the
UK Financial
Conduct Authority
(FCA) and
FINMA to
resolve inquiries
by these
agencies, including
findings that
Credit
Suisse failed to appropriately
organize and conduct
its business with due
skill and care, and
manage risks. Credit
Suisse
Group AG entered into a three-year Deferred Prosecution Agreement (DPA) with
the DOJ in connection with the criminal
information charging Credit Suisse Group AG with conspiracy to commit wire fraud and Credit Suisse Securities (Europe)
Limited (CSSEL) entered
into a Plea
Agreement and
pleaded guilty
to one count
of conspiracy to
violate the US
federal
wire
fraud
statute.
Under
the
terms
of
the
DPA,
UBS
Group
AG
(as
successor
to
Credit
Suisse
Group
AG)
continued
compliance enhancement and
remediation efforts agreed
by Credit
Suisse, and undertake
additional measures
as outlined
in the DPA. In January 2025, as permitted under the terms of the DPA,
the DOJ elected to extend the term of the DPA by
one year.
9. ETN-related litigation
XIV litigation:
Since March
2018, three
class action
complaints were
filed in
the SDNY
on behalf
of a
putative class
of
purchasers of VelocityShares
Daily Inverse VIX Short-Term
Exchange Traded
Notes linked to the SP 500 VIX Short-Term
Futures Index
(XIV ETNs). The
complaints have
been consolidated
and asserts
claims against
Credit Suisse
for violations
of various anti-fraud and
anti-manipulation provisions of US securities laws
arising from a decline in
the value of XIV
ETNs
in February
2018. On
appeal from
an order
of the
SDNY dismissing
all claims,
the Second
Circuit issued
an order
that
reinstated a portion of the claims. In
decisions in March 2023 and February 2025, the court
granted class certification for
two of the three classes proposed by plaintiffs
and denied class certification of the third proposed
class.
10. Bulgarian former clients matter
In December 2020, the Swiss Office of the Attorney General brought charges against Credit Suisse AG and other parties
concerning the diligence
and controls
applied to
a historical
relationship with
Bulgarian former
clients who
are alleged
to
have
laundered
funds
through
Credit
Suisse
AG
accounts.
In
June
2022,
following
a
trial,
Credit
Suisse
AG
was
convicted
in
the
Swiss
Federal
Criminal
Court
of
certain
historical
organizational
inadequacies
in
its
anti-money-
laundering
framework
and
ordered
to pay
a
fine
of CHF
m. In
addition,
the
court
seized certain
client
assets
in
the
amount
of
approximately
CHF
m
and
ordered
Credit
Suisse
AG
to
pay
a
compensatory
claim
in
the
amount
of
approximately CHF
m. Credit
Suisse AG
appealed the
decision to
the Swiss
Federal Court
of Appeals.
Following the
merger of UBS AG and Credit Suisse AG,
UBS AG confirmed the appeal. In November 2024,
the court issued a judgment
that acquitted
UBS AG and
annulled the fine
and compensatory
claim ordered
by the
first instance
court. The
court of
appeal’s judgment may be appealed to the Swiss Federal
Supreme Court.
11. Supply chain finance funds
Credit
Suisse
has
received
requests
for
documents
and
information
in
connection
with
inquiries,
investigations,
enforcement and
other actions relating
to the supply
chain finance
funds (SCFFs)
matter by FINMA,
the FCA and
other
regulatory and governmental agencies.
In February 2023, FINMA announced
the conclusion of its enforcement
proceedings against Credit Suisse
in connection
with the SCFFs matter. In
its order, FINMA reported that Credit Suisse
had seriously breached applicable Swiss supervisory
laws in
this context
with regard
to risk
management
and appropriate
operational structures.
While FINMA
recognized
that
Credit
Suisse
had
already
taken
extensive
organizational
measures
to
strengthen
its
governance
and
control
processes,
FINMA
ordered
certain
additional
remedial
measures.
These
include
a
requirement
that
Credit
Suisse
documents
the
responsibilities
of
approximately
applicable to UBS Group. FINMA has
also separately opened four enforcement
proceedings against former managers
of
Credit Suisse.
In
May
2023,
FINMA
opened
an
enforcement
proceeding
against
Credit
Suisse
in
order
to
confirm
compliance
with
supervisory
requirements
in
response
to inquiries
from
FINMA’s
enforcement
division
in the
SCFFs
matter.
FINMA
has
closed
the
enforcement
proceeding,
finding
that
Credit
Suisse
breached
its
cooperation
obligations
with
FINMA
Enforcement. FINMA refrained from ordering any remedial measures
as it did not find similar issues with UBS.
In December 2024, the Luxembourg Commission de Surveillance du Secteur Financier (CSSF) concluded its investigation.
The
CSSF
identified
non-compliance
with
several
obligations
under
Luxembourg
law
and
imposed
a
sanction
of
EUR
.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
196
Note 18
Provisions and contingent liabilities (continued)
The Attorney General of the Canton
of Zurich has initiated a criminal
procedure in connection with the SCFFs matter and
several fund investors have joined
the procedure as interested parties. Certain
former and active Credit Suisse
employees,
among others, have been named as accused persons, but
Credit Suisse itself was not made a party to the proceeding.
Certain civil actions have
been filed by fund
investors and other
parties against Credit
Suisse and/or certain officers
and
directors in
various jurisdictions,
which make
allegations including
mis-selling and
breaches of
duties of
care, diligence
and other fiduciary duties. In June 2024, the
Credit Suisse SCFFs made a voluntary offer to
the SCFFs investors to redeem
all outstanding fund units. The offer expired on
31 July 2024, and fund units representing around
% of the SCFFs’ net
asset value were tendered in the offer and accepted. Fund units accepted in the offer were redeemed at
% of the net
asset value determined on 25 February 2021, net of any payments made by the relevant fund to the fund
investors since
that time. Investors whose units were redeemed
released any claims they may have had
against the SCFFs, Credit Suisse
or UBS. The offer was funded by UBS through the purchase
of units of feeder sub-funds.
12. Archegos
Credit Suisse and UBS have received requests for documents and information in connection with inquiries, investigations
and/or
actions
relating
to
their
relationships
with
Archegos
Capital
Management
(Archegos),
including
from
FINMA
(assisted by
a third
party appointed
by FINMA),
the DOJ,
the SEC,
the US
Federal Reserve,
the US
Commodity Futures
Trading Commission (CFTC), the US Senate Banking Committee, the Prudential Regulation Authority (PRA), the FCA, the
WEKO, the Hong Kong
Competition Commission and
other regulatory and
governmental agencies. UBS
is cooperating
with the
authorities
in these
matters. In
July 2023,
CSI and
CSSEL entered
into a
settlement
agreement
with the
PRA
providing
for
the
resolution
of
the
PRA’s
investigation.
Also
in
July
2023,
FINMA
issued
a
decree
ordering
remedial
measures and the Federal Reserve Board issued
an Order to Cease and Desist.
Under the terms of
the order, Credit Suisse
paid
a
civil
money
penalty
and
agreed
to
undertake
certain
remedial
measures
relating
to
counterparty
credit
risk
management, liquidity risk
management and non-financial
risk management, as
well as enhancements
to board oversight
and governance. UBS
Group, as the
legal successor to
Credit Suisse Group AG,
is a party
to the FINMA
decree and Federal
Reserve Board Cease and Desist Order.
Civil actions
relating to
Credit Suisse’s
relationship with
Archegos have
been filed
against Credit
Suisse and/or
certain
officers and directors, including claims for breaches of fiduciary
duties.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
197
Note 19
Other liabilities
a) Other financial liabilities measured at amortized
cost
USD m
31.12.24
31.12.23
Other accrued expenses
Accrued interest expenses
Settlement and clearing accounts
Lease liabilities
Other
Total other financial liabilities measured at amortized cost
b) Other financial liabilities designated at fair value
USD m
31.12.24
31.12.23
Financial liabilities related to unit-linked investment contracts
Securities financing transactions
Over-the-counter debt instruments and other
Funding from UBS Group AG
1
Total other financial liabilities designated at fair value
1 The Funding from UBS Group AG consists
of subordinated debt of UBS AG and its subsidiaries
toward UBS Group AG. Subordinated
debt consists of unsecured debt obligations that are contractually
subordinated
in right of payment to all other present and future non-subordinated obligations of the respective issuing entity.
c) Other non-financial liabilities
USD m
31.12.24
31.12.23
Compensation-related liabilities
of which: financial advisor compensation plans
of which: cash awards and other compensation plans
of which: net defined benefit liability
of which: other compensation-related liabilities
1
Current tax liabilities
Deferred tax liabilities
VAT,
withholding tax and other tax payables
Deferred income
Liabilities of disposal groups held for sale
2
Other
Total other non-financial liabilities
1 Includes liabilities for payroll taxes and untaken vacation.
2 Refer to Note 29 for more information about the agreement to sell Select Portfolio Servicing.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
198
Additional information
Note 20
Expected credit loss measurement
a) Expected credit losses in the period
Total
net credit loss expenses were
USD
m in 2024, reflecting net
credit loss releases of
USD
m related to stage 1
and 2 positions
and net credit
loss expenses of
USD
m related to
credit-impaired (stage
3) positions, predominantly
in the corporate lending portfolios.
›
Refer to Note 20b for more information regarding changes to expected
credit loss
models, scenarios, scenario weights and the
post-model adjustments and to Note 20c for
more information regarding the development of ECL allowances and
provisions
Credit loss expense / (release)
Performing positions
Credit-impaired positions
USD m
Stages 1 and 2
Stage 3
Total
For the year ended 31.12.24
Global Wealth Management
(
49
)
(
1
)
Personal Corporate Banking
(
61
)
Asset Management
Investment Bank
Non-core and Legacy
(
5
)
Group Items
Total
(
63
)
For the year ended 31.12.23
Global Wealth Management
(
2
)
Personal Corporate Banking
Asset Management
(
1
)
(
1
)
Investment Bank
Non-core and Legacy
Group Items
Total
For the year ended 31.12.22
Global Wealth Management
(
5
)
Personal Corporate Banking
Asset Management
Investment Bank
(
18
)
(
12
)
Non-core and Legacy
Group Items
Total
b) Changes to
ECL models, scenarios,
scenario weights
and key inputs
Refer to
Note 1a for
information about
the
principles governing expected
credit
loss (ECL)
models, scenarios,
scenario
weights and
key inputs.
Governance
Comprehensive
cross-functional
and cross-divisional
governance
processes are
in place
and are
used to
discuss and
approve
scenario updates and weights,
to assess whether
significant increases in credit
risk resulted in
stage transfers, to
review
model outputs
and to reach conclusions
regarding post-model
adjustments.
Model changes
During 2024, the model review and
enhancement process led to adjustments
of the probability of default (PD),
loss given
default (LGD) and credit
conversion factor
(CCF) models, resulting
in a USD
m increase in ECL allowances.
This included
an increase
of USD
m in
the Investment
Bank related
to large
corporate
clients and
a USD
m decrease
in Global
Wealth
Management related
to lending for
ship financing.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
199
Note 20
Expected credit loss measurement (continued)
Scenario and
key input updates
During 2024, the scenarios and related macroeconomic factors were updated from
those applied at the end
of 2023 by
considering
the prevailing
economic
and political
conditions
and uncertainty.
The review
focused
on events
that significantly
changed the
economic outlook
during the
year: the
milder inflation
outlook and
the start
of a monetary
policy easing
cycle,
and geopolitical
uncertainties.
ECLs for
legacy Credit
Suisse positions
were calculated
based on
legacy Credit
Suisse models,
including the
same scenario
and scenario
weight inputs
as for UBS’s
existing business
activity.
Baseline scenario
: the projections
of the baseline
scenario, which are
aligned to the
economic and market
assumptions
used for UBS’s business planning purposes, are broadly in line with external benchmarks,
such as those from Bloomberg
Consensus, Oxford Economics and the International Monetary Fund World Economic Outlook. The expectation for 2025
is that global growth
slows due to rising
uncertainty, with the
prospect of renewed
tariff escalation, and
a deceleration
in US economic growth.
Unemployment rates are
forecast to increase somewhat
from their 2024 levels.
After declining
over 2024,
long-term interest rates
are expected
to remain
broadly stable in
2025. The
outlook for
house prices
worldwide
remains resilient, including in Switzerland.
Mild debt
crisis scenario:
The
first hypothetical
downside
scenario is
the mild
debt
crisis scenario.
The mild
debt
crisis
assumes that
political, solvency
and liquidity
concerns cause
a sell-off
of sovereign
debt in
emerging markets
and the
peripheral Eurozone. The
global economy and financial
markets are negatively
affected, and central banks
are assumed
to ease their monetary policy.
Stagflationary geopolitical
crisis scenario:
The second
downside scenario
is aligned
with the
2024 Group binding
stress
scenario and was updated in 2024 to reflect expected risks, resulting in minimal changes. Geopolitical tensions cause an
escalation of
security concerns
and undermine
globalization. The
ensuing economic
regionalization leads
to a
surge in
global commodity prices and further disruptions of supply chains and raises the specter
of prolonged stagflation. Central
banks are forced to further tighten monetary policy to contain
inflationary pressures.
Asset price
appreciation scenario:
The upside scenario
is based
on positive developments,
such as
an easing of
geopolitical
tensions
across
the
globe
and
a
rebound
in
Chinese
economic
growth.
A
combination
of
lower
commodity
prices,
effective monetary
policies and
easing supply chain
disruptions helps
to reduce
inflation. Improved consumer
and business
sentiment
lead
to a
global
economic
rebound,
enabling
central
banks to
normalize
interest
rates,
which causes
asset
prices to increase significantly.
The table below details the key assumptions for the four scenarios applied
as of 31 December 2024.
Scenario generation, review process and governance
A
team
of
economists
within
Group
Risk
Control
develops
the
forward-looking
macroeconomic
assumptions,
with
a
broad range of experts also being involved in that
process.
The scenarios,
their weights
and the
key macroeconomic
and other
factors are
subject to
a critical
assessment by
the
IFRS 9 Scenario
Sounding Sessions
and ECL
Management
Forum, which
include senior
management
from Group
Risk
and Group
Finance. Important
aspects for
the review
include whether
there may
be particular
credit risk
concerns that
may not be capable
of being addressed systematically
and require post-model adjustments
for stage allocation and
ECL
allowances.
The
Group
Model
Governance
Committee
(the
GMGC),
as
the
highest
authority
under
UBS’s
model
governance
framework, ratifies the decisions taken by the ECL Management
Forum.
Scenario weights and post-model adjustments
Scenario weights, as illustrated in the table below,
are unchanged.
However, unquantifiable risks continue to be relevant, as the
geopolitical risks remained high in 2024, and the
impact on
the world economy from
escalations with unforeseeable consequences could be
severe. In the near
term, this uncertainty
relates
primarily
to
developments
in
the
Russia–Ukraine
war
and
Middle
East
conflicts.
Models,
which
are
based
on
supportable
statistical
information
from
past
experiences
regarding
interdependencies
of
macroeconomic
factors
and
their implications for credit risk portfolios, cannot comprehensively reflect such extraordinary events, such as a pandemic
or a
fundamental change
in the
world political
order. Rather
than creating
multiple additional
scenarios to
attempt to
gauge these
risks and
applying model
parameters that
lack supportable
information and
cannot be
robustly validated,
management continued to also apply post-model adjustments.
Total
stage 1
and
2
allowances
and
provisions
were
USD
m
as
of
31 December
2024
and
included
post-model
adjustments of
USD
m (31 December
2023: USD
m). Post-model
adjustments are
to address
uncertainty levels,
including those arising from the geopolitical
situation, and to align Credit
Suisse’s model results with the
results expected
under the applicable UBS model, after the migration of positions.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
200
Note 20
Expected credit loss measurement (continued)
Economic scenarios and weights applied
Assigned weights in %
ECL scenario
31.12.24
31.12.23
Asset price appreciation / inflation
Baseline
Mild debt crisis
Stagflationary geopolitical crisis
Scenario assumptions
One year
Three years cumulative
31.12.24
Asset price
inflation
Baseline
Mild debt
crisis
Stagflationary
geopolitical
crisis
Asset price
inflation
Baseline
Mild debt
crisis
Stagflationary
geopolitical
crisis
Real GDP growth (percentage change)
United States
(
1.4
)
(
4.8
)
(
4.4
)
Eurozone
(
1.7
)
(
5.6
)
(
0.1
)
(
5.7
)
Switzerland
(
1.1
)
(
4.8
)
(
4.9
)
Consumer price index (percentage change)
United States
Eurozone
Switzerland
(
0.2
)
Unemployment rate (end-of-period level, %)
United States
Eurozone
Switzerland
Fixed income: 10-year government bonds (change in yields, basis
points)
USD
(
137
)
(
77
)
EUR
(
113
)
(
68
)
CHF
(
4
)
(
22
)
(
1
)
Equity indices (percentage change)
SP 500
(
28.1
)
(
56.5
)
(
14.0
)
(
51.2
)
EuroStoxx 50
(
0.6
)
(
27.9
)
(
56.6
)
(
18.3
)
(
52.7
)
SPI
(
0.6
)
(
26.0
)
(
56.6
)
(
13.0
)
(
52.7
)
Swiss real estate (percentage change)
Single-Family Homes
(
4.3
)
(
18.5
)
(
3.0
)
(
28.6
)
Other real estate (percentage change)
United States (SP / Case–Shiller)
(
7.6
)
(
20.2
)
(
5.2
)
(
30.5
)
Eurozone (House Price Index)
(
6.1
)
(
8.4
)
(
5.6
)
(
12.9
)
Scenario assumptions
One year
Three years cumulative
31.12.23
Asset price
inflation
Baseline
Mild debt
crisis
Stagflationary
geopolitical
crisis
Asset price
inflation
Baseline
Mild debt
crisis
Stagflationary
geopolitical
crisis
Real GDP growth (percentage change)
United States
(
1.6
)
(
4.8
)
(
4.4
)
Eurozone
(
1.7
)
(
5.6
)
(
0.1
)
(
5.7
)
Switzerland
(
1.2
)
(
4.8
)
(
4.9
)
Consumer price index (percentage change)
United States
(
0.1
)
Eurozone
(
0.2
)
Switzerland
(
0.4
)
Unemployment rate (end-of-period level, %)
United States
Eurozone
Switzerland
Fixed income: 10-year government bonds (change in yields, basis
points)
USD
(
82
)
(
215
)
(
78
)
(
155
)
EUR
(
90
)
(
185
)
(
78
)
(
140
)
CHF
(
41
)
(
73
)
(
34
)
(
28
)
Equity indices (percentage change)
SP 500
(
26.6
)
(
51.5
)
(
12.2
)
(
45.6
)
EuroStoxx 50
(
26.4
)
(
51.6
)
(
16.6
)
(
47.2
)
SPI
(
24.5
)
(
51.6
)
(
11.2
)
(
47.2
)
Swiss real estate (percentage change)
Single-Family Homes
(
1.5
)
(
4.4
)
(
18.5
)
(
3.0
)
(
28.6
)
Other real estate (percentage change)
United States (SP / Case–Shiller)
(
8.6
)
(
20.0
)
(
5.2
)
(
30.2
)
Eurozone (House Price Index)
(
5.9
)
(
8.4
)
(
5.2
)
(
12.9
)
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
201
Note 20
Expected credit loss measurement (continued)
c) Development of ECL allowances and provisions
The ECL allowances and provisions recognized
in the period are impacted by a variety
of factors, such as:
–
the effect of selecting and updating forward-looking scenarios
and the respective weights;
–
origination of new instruments during the period;
–
the effect of
passage of
time (lower residual
lifetime PD and
the effect of
discount unwind) as
the ECL on
an instrument
for the remaining lifetime decreases (all other factors remaining
the same);
–
derecognition of instruments in the period;
–
change in individual asset quality of instruments;
–
movements
from
a
maximum
12-month
ECL to
the
recognition
of lifetime
ECL (and
vice versa)
following transfers
between stages 1 and 2;
–
movements from stages 1 and 2 to stage 3 (credit-impaired status)
when default has become certain and PD increases
to 100% (or vice versa);
–
changes in models or updates to model parameters;
–
write-off; and
–
foreign exchange translations for assets denominated in
foreign currencies.
The
table
below
explains
the
changes
in
the
ECL
allowances
and
provisions
for
on-
and
off-balance
sheet
financial
instruments and credit lines
in scope of ECL
requirements between the
beginning and the end
of the period due
to the
factors listed above.
Development of ECL allowances and
provisions
USD m
Total
Stage 1
Stage 2
Stage 3
Balance as of 31 December 2023
(
1,244
)
(
308
)
(
272
)
(
664
)
Merger with Credit Suisse AG
(
2,114
)
(
322
)
(
268
)
(
1,523
)
Net movement from new and derecognized transactions
1
(
16
)
(
6
)
(
21
)
of which: Private clients with mortgages
(
7
)
of which: Real estate financing
of which: Large corporate clients
(
46
)
(
21
)
(
36
)
of which: SME clients
of which: Other
(
2
)
Remeasurements with stage transfers
2
(
453
)
(
31
)
(
445
)
of which: Private clients with mortgages
(
3
)
(
3
)
of which: Real estate financing
(
9
)
(
5
)
(
5
)
of which: Large corporate clients
(
73
)
(
7
)
(
82
)
of which: SME clients
(
318
)
(
9
)
(
312
)
of which: Other
(
50
)
(
8
)
(
46
)
(
1
)
Remeasurements without stage transfers
3
(
26
)
(
175
)
of which: Private clients with mortgages
(
2
)
of which: Real estate financing
of which: Large corporate clients
(
17
)
of which: SME clients
(
94
)
(
100
)
of which: Other
(
59
)
(
28
)
(
65
)
(
9
)
(
21
)
(
3
)
(
1
)
(
6
)
Model changes
4
(
49
)
(
14
)
(
35
)
Movements with profit or loss impact
5
(
544
)
(
55
)
(
608
)
Movements without profit or loss impact (write-off, FX and other)
6
(
28
)
Balance as of 31 December 2024
(
3,527
)
(
487
)
(
623
)
(
2,417
)
1 Represents the
increase and decrease
in allowances
and provisions resulting
from financial instruments
(including guarantees
and facilities) that
were newly originated,
purchased or renewed
and from the
final
derecognition of loans or facilities on
their maturity date or earlier.
2 Represents the remeasurement between 12-month and lifetime
ECL due to stage transfers.
3 Represents the change in allowances and provisions
related to
changes in
model inputs
or assumptions,
including changes
in forward-looking
macroeconomic
conditions,
changes in
the exposure
profile,
PD and
LGD changes,
and unwinding
of the
time value.
4 Represents the change in the allowances and provisions related to changes in models and methodologies.
5 Includes ECL movements from new and derecognized transactions, remeasurement changes, and model
and methodology changes.
6 Represents the decrease in allowances
and provisions resulting from write-offs
of the ECL allowance against
the gross carrying amount when all
or part of a financial asset
is deemed
uncollectible or forgiven and movements in foreign exchange rates.
–
Movements
with
profit
or
loss
impact
:
Stage
1
and
2
ECL
allowances
and
provisions
increased
on
a
net
basis
by
USD
m.
–
Merger
with
Credit
Suisse
AG
portfolios
:
Expected
credit
loss
(ECL)
allowances
and
provisions
of
USD
m
for
performing loans were recognized as of the merger date.
–
Net movement from new
and derecognized transactions
m and stage 2
increases
of USD
m. Stage 2 increases are predominantly driven by expenses
on the corporate lending portfolios.
–
Remeasurements with stage transfers
m increases in stage 2, following a
number of corporate and real
estate lending credit reviews and transfers
to stage 2.
–
Model changes:
refer to Note 20b for more information.
Movements without profit
or loss impact
:
Stage 1 and
2 allowances increased
by USD
m. Stage 3 and
PCI allowances
decreased by USD
m, mainly driven by net write-offs.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
202
Note 20
Expected credit loss measurement (continued)
Development of ECL allowances and
provisions
USD m
Total
Stage 1
Stage 2
Stage 3
Balance as of 31 December 2022
(
1,091
)
(
260
)
(
267
)
(
564
)
Net movement from new and derecognized transactions
1
(
11
)
(
27
)
of which: Private clients with mortgages
(
5
)
(
8
)
of which: Real estate financing
(
2
)
(
4
)
of which: Large corporate clients
(
8
)
of which: SME clients
(
3
)
(
3
)
of which: Other
(
4
)
(
4
)
(
1
)
(
1
)
Remeasurements with stage transfers
2
(
140
)
(
7
)
(
142
)
of which: Private clients with mortgages
(
1
)
of which: Real estate financing
(
2
)
(
5
)
of which: Large corporate clients
(
76
)
(
3
)
(
76
)
of which: SME clients
(
56
)
(
1
)
(
55
)
of which: Other
(
10
)
(
11
)
Remeasurements without stage transfers
3
of which: Private clients with mortgages
(
5
)
(
3
)
of which: Real estate financing
(
1
)
of which: Large corporate clients
(
8
)
of which: SME clients
(
1
)
of which: Other
(
34
)
(
2
)
(
14
)
(
18
)
(
15
)
(
15
)
(
7
)
(
8
)
Model changes
4
(
27
)
(
18
)
(
9
)
Movements with profit or loss impact
5
(
143
)
(
30
)
(
120
)
Movements without profit or loss impact (write-off, FX and other)
6
(
10
)
(
18
)
(
13
)
Balance as of 31 December 2023
(
1,244
)
(
308
)
(
272
)
(
664
)
1 Represents the
increase and decrease
in allowances
and provisions resulting
from financial instruments
(including guarantees
and facilities) that
were newly originated,
purchased or renewed
and from the
final
derecognition of loans or facilities on
their maturity date or earlier.
2 Represents the remeasurement between 12-month and lifetime
ECL due to stage transfers.
3 Represents the change in allowances and provisions
related to
changes in
model inputs
or assumptions,
including changes
in forward-looking
macroeconomic
conditions,
changes in
the exposure
profile,
PD and
LGD changes,
and unwinding
of the
time value.
4 Represents the change in the allowances and provisions related to changes in models and methodologies.
5 Includes ECL movements from new and derecognized transactions, remeasurement changes, and model
and methodology changes.
6 Represents the decrease in allowances
and provisions resulting from write-offs
of the ECL allowance against
the gross carrying amount when all
or part of a financial asset
is deemed
uncollectible or forgiven and movements in foreign exchange rates.
ECL stage 2 (“significant deterioration
in credit risk”) allowances / provisions as of 31 December
2024 – classification by trigger
USD m
Total
of which:
PD layer
of which:
watch list
of which:
≥30 days
past due
Private clients with mortgages
(
71
)
(
47
)
(
1
)
(
22
)
Real estate financing
(
29
)
(
18
)
(
2
)
(
9
)
Large corporate clients
(
194
)
(
96
)
(
95
)
(
4
)
SME clients
(
76
)
(
41
)
(
20
)
(
14
)
Ship / aircraft financing
(
17
)
(
16
)
(
1
)
(
1
)
Financial intermediaries and hedge funds
(
2
)
(
1
)
(
1
)
Loans to financial advisors
(
1
)
(
1
)
Credit cards
(
12
)
(
12
)
Consumer financing
(
19
)
(
12
)
(
7
)
Commodity trade finance
(
1
)
Other
(
201
)
(
189
)
(
10
)
(
1
)
On- and off-balance sheet
(
623
)
(
420
)
(
131
)
(
72
)
d) Maximum exposure to credit risk
The tables
below provide UBS AG’s
maximum exposure to
credit risk for
financial instruments subject
to ECL
requirements
and
the
respective
collateral
and
other
credit
enhancements
mitigating
credit
risk
for
these
classes
of
financial
instruments.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
203
Note 20
Expected credit loss measurement (continued)
The maximum exposure
to credit risk
includes the carrying
amounts of financial
instruments recognized on
the balance
sheet subject to credit risk
and the notional amounts for off-balance sheet
arrangements. Where information is available,
collateral is presented at fair
value. For other collateral, such as
real estate, a reasonable alternative
value is used. Credit
enhancements,
such
as
credit
derivative
contracts
and
guarantees,
are
included
at
their
notional
amounts.
Both
are
capped at
the maximum
exposure to
credit risk
for which
they serve
as security.
The “Risk
management
and control”
section of this
report describes
management’s view
of credit
risk and the
related exposures,
which can differ
in certain
respects from the requirements of IFRS Accounting Standards.
Maximum exposure to credit risk
31.12.24
Collateral
1,2
Credit enhancements
1
Exposure to
credit risk
after collateral
and credit
enhancements
USD bn
Maximum
exposure to
credit risk
Cash
collateral
received
Collateralized
by equity
and debt
instruments
Secured by
real estate
Other
collateral
3
Netting
Credit
derivative
contracts
Guarantees
and sub-
participations
Financial assets measured at
amortized cost on the balance sheet
Cash and balances at central banks
Amounts due from banks
4
Receivables from securities financing transactions
measured at amortized cost
Cash collateral receivables on derivative instruments
5,6
Loans and advances to customers
Other financial assets measured at amortized cost
Total financial assets measured at amortized cost
Financial assets measured at fair value
through other comprehensive income – debt
Total maximum exposure to credit risk
reflected on the balance sheet within the scope of ECL
Guarantees
7
Irrevocable loan commitments
Forward starting reverse repurchase and securities
borrowing agreements
Committed unconditionally revocable credit lines
Total maximum exposure to credit risk not
reflected on the balance sheet within the scope of ECL
31.12.23
Collateral
1,2
Credit enhancements
1
Exposure to
credit risk
after collateral
and credit
enhancements
USD bn
Maximum
exposure to
credit risk
Cash
collateral
received
Collateralized
by equity
and debt
instruments
Secured by
real estate
Other
collateral
3
Netting
Credit
derivative
contracts
Guarantees
and sub-
participations
Financial assets measured at
amortized cost on the balance sheet
Cash and balances at central banks
Amounts due from banks
4
Receivables from securities financing transactions
measured at amortized cost
Cash collateral receivables on derivative instruments
5,6
Loans and advances to customers
Other financial assets measured at amortized cost
Total financial assets measured at amortized cost
Financial assets measured at fair value
through other comprehensive income – debt
Total maximum exposure to credit risk
reflected on the balance sheet within the scope of ECL
Guarantees
7
Irrevocable loan commitments
Forward starting reverse repurchase and securities
borrowing agreements
Committed unconditionally revocable credit lines
Total maximum exposure to credit risk not
reflected on the balance sheet within the scope of ECL
1 Of which: USD
m for 31 December 2024
(31 December 2023: USD
m) relates to total credit-impaired
financial assets measured at amortized
cost and USD
m for 31 December 2024
(31 December
2023: USD
m) to total off-balance sheet financial instruments and
credit lines for credit-impaired positions.
2 Collateral arrangements generally incorporate
a range of collateral, including cash, equity
and debt
instruments, real estate and
other collateral. For
the purpose of this
disclosure, UBS AG
applies a risk-based
approach that generally prioritizes
collateral according to its
liquidity profile. In the
case of loan facilities
with funded and unfunded elements, the collateral
is first allocated to the funded element. For
legacy Credit Suisse a risk-based approach is
applied that generally prioritizes real estate collateral
and prioritizes other
collateral according to
its liquidity profile.
In case of
loan facilities with
funded and unfunded
elements, the
collateral is proportionally
allocated.
3 Includes but is
not limited to
life insurance contracts,
rights in
respect of subscription or capital commitments from fund partners, lien claims on assets of borrowers, inventory,
mortgage loans, gold and other commodities.
4 Amounts due from banks include amounts held with
third-party banks on behalf of clients.
The credit risk associated
with these balances may be
borne by those clients.
5 Included within Cash collateral
receivables on derivative instruments
are margin balances due
from exchanges or clearing houses. Some of these margin balances reflect amounts transferred on behalf of clients who retain the associated credit risk.
6 The amount shown in the “Netting” column represents the
netting potential not recognized on the balance sheet. Refer to Note 22 for more information.
7 Guarantees collateralized by equity and debt instruments include certain overnight repurchase and reverse repurchase
transactions where UBS acts as a sponsoring member for eligible clients when clearing through the Fixed Income Clearing Corporation (the FICC). As part of this arrangement, UBS guarantees the FICC for prompt and
full payment and performance of
the clients‘ respective obligations under
the FICC rules. The
Group minimizes its liability under
these guarantees by obtaining
a security interest in the
cash or high-quality securities
collateral that the clients place with the clearing house; therefore, the risk of loss is expected to be remote.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
204
Note 20
Expected credit loss measurement (continued)
e) Financial assets subject to credit risk by rating category
The table
below shows
the
credit quality
and the
maximum exposure
to credit
risk based
on
UBS AG’s internal
credit
rating system and
year-end stage
classification. Under
IFRS 9, the credit
risk rating reflects
UBS AG’s assessment
of the
probability of default of individual counterparties,
prior to substitutions. The amounts presented are gross of impairment
allowances.
›
Refer to the “Risk management and control” section of this
report for more details regarding UBS AG’s internal grading system
Financial assets subject to credit risk by rating
category
USD m
31.12.24
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total gross
carrying
amount
ECL
allowances
Net carrying
amount
(maximum
exposure to
credit risk)
Financial assets measured at amortized cost
Cash and balances at central banks
(
186
)
of which: stage 1
of which: stage 2
(
186
)
Amounts due from banks
(
42
)
of which: stage 1
(
1
)
of which: stage 2
(
5
)
of which: stage 3
(
36
)
Receivables from securities financing transactions
(
2
)
of which: stage 1
(
2
)
Cash collateral receivables on derivative instruments
of which: stage 1
Loans and advances to customers
(
2,830
)
of which: stage 1
(
276
)
of which: stage 2
(
323
)
of which: stage 3
(
2,230
)
Other financial assets measured at amortized cost
(
135
)
of which: stage 1
(
25
)
of which: stage 2
(
7
)
of which: stage 3
(
103
)
Total financial assets measured at amortized cost
(
3,195
)
On-balance sheet financial instruments
Financial assets measured at FVOCI – debt instruments
Total on-balance sheet financial instruments
(
3,195
)
1 Refer to the “Internal UBS rating scale and mapping of external ratings” table in the “Risk management and
control” section of this report for more information about rating categories.
Financial assets measured at FVOCI – debt instruments
Total on-balance sheet financial instruments
31.12.24
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total carrying
amount
(maximum
exposure to
credit risk)
ECL provision
Off-balance sheet financial instruments
Guarantees
(
61
)
of which: stage 1
(
16
)
of which: stage 2
(
24
)
of which: stage 3
(
22
)
Irrevocable loan commitments
(
192
)
of which: stage 1
(
105
)
of which: stage 2
(
61
)
of which: stage 3
(
26
)
Forward starting reverse repurchase and securities borrowing agreements
Total off-balance sheet financial instruments
(
253
)
Credit lines
Committed unconditionally revocable credit lines
(
75
)
of which: stage 1
(
59
)
of which: stage 2
(
17
)
of which: stage 3
Irrevocable committed prolongation of existing loans
(
3
)
of which: stage 1
(
3
)
of which: stage 2
of which: stage 3
Total credit lines
(
79
)
1 Refer to the “Internal UBS rating scale and mapping of external ratings” table in the “Risk management and
control” section of this report for more information about rating categories.
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Note 20
Expected credit loss measurement (continued)
Financial assets subject to credit risk by rating
category
USD m
31.12.23
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total gross
carrying
amount
ECL
allowances
Net carrying
amount
(maximum
exposure to
credit risk)
Financial assets measured at amortized cost
Cash and balances at central banks
(
26
)
of which: stage 1
of which: stage 2
(
26
)
Amounts due from banks
(
7
)
of which: stage 1
(
6
)
of which: stage 2
(
1
)
of which: stage 3
Receivables from securities financing transactions
(
2
)
of which: stage 1
(
2
)
Cash collateral receivables on derivative instruments
of which: stage 1
Loans and advances to customers
(
935
)
of which: stage 1
(
173
)
of which: stage 2
(
185
)
of which: stage 3
(
577
)
Other financial assets measured at amortized cost
(
87
)
of which: stage 1
(
16
)
of which: stage 2
(
5
)
of which: stage 3
(
66
)
Total financial assets measured at amortized cost
(
1,057
)
On-balance sheet financial instruments
Financial assets measured at FVOCI – debt instruments
Total on-balance sheet financial instruments
(
1,057
)
1 Refer to the “Internal UBS rating scale and mapping of external ratings” table in the “Risk management and
control” section of this report for more information about rating categories.
Off-balance sheet positions subject to expected
credit loss by rating category
USD m
31.12.23
Rating category
1
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total carrying
amount
(maximum
exposure to
credit risk)
ECL provision
Off-balance sheet financial instruments
Guarantees
(
40
)
of which: stage 1
(
14
)
of which: stage 2
(
7
)
of which: stage 3
(
19
)
Irrevocable loan commitments
(
95
)
of which: stage 1
(
55
)
of which: stage 2
(
38
)
of which: stage 3
(
2
)
Forward starting reverse repurchase and securities borrowing agreements
Total off-balance sheet financial instruments
(
134
)
Credit lines
Committed unconditionally revocable credit lines
(
49
)
of which: stage 1
(
39
)
of which: stage 2
(
10
)
of which: stage 3
Irrevocable committed prolongation of existing loans
(
4
)
of which: stage 1
(
3
)
of which: stage 2
of which: stage 3
Total credit lines
(
53
)
1 Refer to the “Internal UBS rating scale and mapping of external ratings” table in the “Risk management and
control” section of this report for more information about rating categories.
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Note 20
Expected credit loss measurement (continued)
f) Sensitivity information
As outlined in Note 1a, ECL estimates involve significant uncertainties
at the time they are made.
ECL models
The models applied to determine point-in-time PD and LGD rely on market and statistical data, which has been found
to
correlate
well
with
historically
observed
defaults
in sufficiently
homogeneous
segments.
The risk
sensitivities
for
each of the ECL reporting segments to such factors are summarized
in Note 10.
Sustainability and climate risk
Sustainability
and
climate
risk
may
negatively
affect
clients
or
portfolios
due
to
direct
or
indirect
transition
costs,
or
exposure to chronic and acute physical risks in locations likely to be impacted by climate change. Such effects could lead
to a deterioration in credit worthiness, which in turn would have
an impact on ECLs.
While
some
macroeconomic
indicators
used
in
the
current
PD
models
could
be
influenced
by
climate
change,
UBS
currently does not use a specific sustainability and climate risk scenario in addition to the typically four general economic
scenarios
applied
to
derive
the
weighted-average
ECL.
The
rationale
for
the
approach
at
this
point
in
time
is
the
significance of model risks and challenges in calibration
and probability weight assessments
given the paucity of data.
Instead, UBS focuses on the process of vetting clients and business transactions, where
both physical and transition risks
for
selected
sensitive
portfolios
use
internally
developed,
counterparty
level,
climate
assessment
models.
This
review
process may lead
to a downward
revision of the
counterparty’s credit
rating, or the
adoption of risk
mitigating actions,
impacting the individual contribution to ECLs.
At the
portfolio
level,
UBS
has started
to
use
stress
loss assumptions
to assess
the
extent
to which
sustainability
and
climate risk may affect the
quality of the loans extended
to small and medium-sized entities,
large corporate clients and
financial institutions.
The tests used were based on a set of
assumptions and methodologies from a mainstream leading climate model vendor
and complemented by
the Network for Greening
the Financial System (the
NGFS) (2023) climate pathway
scenarios. Such
analysis undertaken during 2024 as
part of a regulatory
climate scenario analysis exercise mandated
by FINMA concluded
that the
counterparties are
not expected
to be
significantly impacted
by physical or
transition risks,
mainly as
there are
no material
risk
concentrations
in
high-risk
sectors.
The
analysis
of the
corporate
loan
book has
also
shown
that
any
potential significant impacts from transition
costs or physical risks would materialize
over a time horizon that exceeds
in
most cases the contractual
lifetime of the underlying
assets. The analysis
and its results are
also subject to challenges
in
model assumptions, calibration and heightened model
uncertainty,
as are other climate models in the novel discipline
of
climate
risk
modeling.
Based
on
current
internal
modeling
exercises,
this
conclusion
holds
for
the
portfolio
of
private
clients with mortgages and the portfolio of real estate
financing.
As a result of the aforementioned factors, it was assessed that the magnitude of any impact of sustainability and climate
risk on
the weighted
-average
ECL would
not be
material
as of
31 December
2024. Therefore,
no specific
post-model
adjustment was made in this regard.
›
Refer to the “UBS AG consolidated supplemental
disclosures required under SEC regulations” section of this report for more
information about the maturity profile of UBS AG’s core loan book
Forward-looking scenarios
Depending on
the scenario
selection and
related
macroeconomic
assumptions for
the risk
factors, the
components of
the
relevant
weighted-average
ECL
change.
This
is
particularly
relevant
for
interest
rates,
which
can
move
in
both
directions under
a given
growth
assumption, e.g.
low growth
with high
interest
rates in
a stagflation
scenario, versus
low growth and falling
interest rates
in a recession. Management
generally looks for scenario
narratives that reflect
the
key risk drivers of a given credit portfolio.
As forecasting
models are complex,
due to
the combination of
multiple factors, simple
what-if analyses involving
a change
of individual parameters
do not necessarily provide
realistic information on
the exposure of
segments to changes
in the
macroeconomy.
Portfolio-specific
analyses
based
on
their
key
risk
factors
would
also
not
be
meaningful,
as
potential
compensatory effects in other
segments would be ignored. The table
below indicates some sensitivities to ECLs,
if a key
macroeconomic
variable
for
the
forecasting
period
is
amended
across
all
scenarios
with
all
other
factors
remaining
unchanged.
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Note 20
Expected credit loss measurement (continued)
Potential effect on stage 1 and stage 2 positions
from changing key parameters as of 31 December
2024
USD m
100% Baseline
100%
Stagflationary
geopolitical crisis
100% Mild debt
crisis
Weighted average
Change in key parameters
Fixed income: Government bonds (absolute change)
–0.50%
(
5
)
(
6
)
(
124
)
(
15
)
+0.50%
+1.00%
Unemployment rate (absolute change)
–1.00%
(
6
)
(
10
)
(
117
)
(
18
)
–0.50%
(
3
)
(
5
)
(
63
)
(
9
)
+0.50%
+1.00%
Real GDP growth (relative change)
–2.00%
–1.00%
+1.00%
(
24
)
(
44
)
(
49
)
(
27
)
+2.00%
(
48
)
(
80
)
(
83
)
(
55
)
House Price Index (relative change)
–5.00%
–2.50%
+2.50%
(
6
)
(
14
)
(
102
)
(
20
)
+5.00%
(
9
)
(
23
)
(
188
)
(
33
)
Equity (SP500, EuroStoxx, SMI) (relative change)
–10.00%
–5.00%
+5.00%
(
7
)
(
8
)
(
13
)
(
8
)
+10.00%
(
10
)
(
13
)
(
22
)
(
12
)
Sensitivities
can
be
more
meaningfully
assessed
in
the
context
of
coherent
scenarios
with
consistently
developed
macroeconomic
factors.
The
table
above
outlines
favorable
and
unfavorable
effects,
based
on
reasonably
possible
alternative changes
to the
economic conditions for
stage 1 and
stage 2 positions.
The ECL
impact is
calculated for
material
portfolios and disclosed for each scenario.
The forecasting horizon is limited to three years, with a model-based mean reversion of PD and LGD assumed thereafter.
Changes to these timelines may have an effect on ECLs:
depending on the cycle, a longer or shorter forecasting
horizon
will lead to different annualized lifetime PD and average LGD estimations. This is currently not deemed to be
material for
UBS, as a large
proportion of loans,
including mortgages in
Switzerland, have maturities
that are within the
forecasting
horizon.
Scenario weights and stage allocation
Potential effect on stage 1 and stage 2 positions
from changing scenario weights or moving
to an ECL lifetime calculation as of 31 December
2024
Actual ECL
allowances and
provisions,
including staging
(as per Note 9)
Pro forma ECL
allowances and
provisions,
assuming all
positions being
subject to lifetime
ECL
Scenarios
Weighted average
100% Baseline
100%
Stagflationary
geopolitical crisis
100% Mild debt
crisis
Weighted average
USD m, except where indicated
Segmentation
Private clients with mortgages
(
118
)
(
43
)
(
718
)
(
68
)
(
408
)
Real estate financing
(
57
)
(
40
)
(
164
)
(
49
)
(
185
)
Large corporate clients
(
377
)
(
247
)
(
757
)
(
401
)
(
673
)
SME clients
(
180
)
(
151
)
(
259
)
(
223
)
(
327
)
Ship financing
(
24
)
(
27
)
(
42
)
(
28
)
(
78
)
Consumer financing / credit cards
(
58
)
(
63
)
(
72
)
(
65
)
(
168
)
Other segments
(
295
)
(
246
)
(
370
)
(
283
)
(
395
)
Total
(
1,110
)
(
818
)
(
2,381
)
(
1,116
)
(
2,234
)
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Note 20
Expected credit loss measurement (continued)
Potential effect on stage 1 and stage 2 positions
from changing scenario weights or moving
to an ECL lifetime calculation as of 31 December
2023
Actual ECL
allowances and
provisions,
including staging
(as per Note 9)
Pro forma ECL
allowances and
provisions,
assuming all
positions being
subject to lifetime
ECL
Scenarios
Weighted average
100% Baseline
100%
Stagflationary
geopolitical crisis
100% Mild debt
crisis
Weighted average
USD m, except where indicated
Segmentation
Private clients with mortgages
(
133
)
(
43
)
(
521
)
(
63
)
(
368
)
Real estate financing
(
52
)
(
34
)
(
200
)
(
36
)
(
125
)
Large corporate clients
(
152
)
(
108
)
(
252
)
(
146
)
(
234
)
SME clients
(
103
)
(
85
)
(
186
)
(
96
)
(
164
)
Other segments
(
140
)
(
126
)
(
162
)
(
151
)
(
302
)
Total
(
580
)
(
396
)
(
1,322
)
(
492
)
(
1,193
)
Scenario weights
ECL is sensitive to changing scenario weights, in particular if narratives and parameters are
selected that are not close to
the baseline scenario, highlighting the non-linearity of credit
losses.
As shown
in the
table
above,
the
ECLs for
stage 1
and stage
2 positions
would
have
been
USD
m (31
December
2023: USD
m) instead
of USD
m (31 December
2023: USD
m) if
ECLs had
been determined
solely on
the
baseline scenario
. The weighted-average ECL therefore amounted
to
% (31 December 2023:
%) of the baseline
value. The effects of weighting each of the four scenarios 100%
are shown in the table above.
Stage allocation and SICR
The determination of
what constitutes an
SICR is based
on management judgment,
as explained in
Note 1a. Changing
the SICR trigger will have a direct effect on ECLs, as more or
fewer positions would be subject to lifetime ECLs under any
scenario.
The
relevance
of the
SICR trigger
on overall
ECL is
demonstrated
in the
table
above
with the
indication that
the
ECL
allowances and provisions for stage 1 and stage
2 positions would have been USD
m, if all non-impaired positions
across the portfolio
had been measured for
lifetime ECLs irrespective
of their actual
SICR status. This amount
compares
with actual stage 1 and 2 allowances and provisions of USD
m as of 31 December 2024.
Maturity profile
The maturity
profile
is an
important driver
in ECLs,
in particular
for transactions
in stage
2. A
transfer of
a transaction
into stage
2 may
therefore have a
significant effect on
ECLs. The
current maturity profile
of most
lending books
is relatively
short.
Lending to
large corporate
clients is
generally between
one and
two years,
with related
loan commitments
up to
four
years. Real estate lending is generally between two and three years in Switzerland, with long-dated maturities in the US.
Lombard-lending
contracts
typically
have
average
contractual
maturities
of
12
months
or
less,
and
include
callable
features.
A
significant
portion
of
our
lending
to
SMEs
and
Real
estate
financings
is
documented
under
multi-purpose
credit
agreements, which
allow for
various forms
of utilization
but are
unconditionally cancelable
by UBS
at any
time: (i) for
drawings under such agreements with a fixed
maturity, the respective term is applied for ECL
calculations, or a maximum
of 12 months in stage
1; (ii) for unused credit
lines and all drawings that
have no fixed maturity
(e.g. current accounts),
UBS generally applies a 12-month maturity from the reporting date, given the credit review policies, which require either
continuous monitoring of key indicators and behavioral patterns for smaller positions or an annual formal review for any
other limit. The ECLs for these products are sensitive to
shortening or extending the maturity assumption.
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Note 21
Fair value measurement
a) Valuation principles
All financial and non-financial
assets and liabilities
measured or disclosed
at fair value
are categorized into
one of three
fair
value
hierarchy
levels
in
accordance
with
IFRS
Accounting
Standards.
The
fair
value
hierarchy
is
based
on
the
transparency
of inputs
to the
valuation of
an asset
or liability
as of
the measurement
date. In
certain cases,
the inputs
used to measure fair value may fall within different
levels of the fair value hierarchy.
For disclosure purposes, the level in
the hierarchy within which an instrument is classified in its entirety is based on the lowest level input
that is significant to
the position’s fair value measurement:
–
Level 1 – quoted prices (unadjusted) in active markets
for identical assets and liabilities;
–
Level 2 – valuation techniques for which all significant inputs
are, or are based on, observable market data;
or
–
Level 3 – valuation techniques for which significant inputs
are not based on observable market data.
Fair values are determined using quoted
prices in active markets for
identical assets or liabilities, where available.
Where
the
market
for
a
financial
instrument
or
non-financial
asset
or
liability
is
not
active,
fair
value
is
established
using
a
valuation
technique,
including
pricing
models.
Valuation
adjustments
may
be
made
to
allow
for
additional
factors,
including model, liquidity, credit
and funding risks, which are
not explicitly captured within
the valuation technique, but
which would nevertheless
be considered by
market participants
when establishing a
price. The limitations
inherent in a
particular valuation technique
are considered in
the determination of
the classification of
an asset or
liability within the
fair value
hierarchy. Generally,
the unit
of account
for a
financial instrument
is the
individual instrument,
and UBS
AG
applies valuation adjustments
at an individual instrument
level, consistent with that
unit of account. However,
if certain
conditions are met, UBS AG
may estimate the fair value
of a portfolio of financial
assets and liabilities with substantially
similar and offsetting risk exposures on the basis of the
net open risks.
›
Refer to Note 21d for more information
b) Valuation governance
UBS AG’s fair value
measurement and
model governance
framework includes numerous
controls and
other procedural
safeguards that
are intended
to maximize
the quality
of fair
value measurements
reported
in the
financial statements.
New products and
valuation techniques
must be reviewed
and approved
by key stakeholders
from the
risk and finance
control functions. Responsibility
for the ongoing measurement
of financial and non-financial
instruments at fair value
is
with the business divisions.
Fair
value
estimates
are
validated
by
the
risk
and
finance
control
functions,
which
are
independent
of
the
business
divisions. Independent price verification is performed by Finance through benchmarking the business divisions’ fair
value
estimates
with
observable
market
prices
and
other
independent
sources.
A
governance
framework
and
associated
controls are
in place
in order
to monitor
the quality
of third-party
pricing sources
where
used. For
instruments
where
valuation models are used to
determine fair value, independent
valuation and model control
groups within Finance and
Risk Control
evaluate UBS AG’s
models on
a regular
basis, including
valuation and
model input
parameters, as
well as
pricing. As
a result
of the
valuation controls
employed,
valuation adjustments
may be
made to
the business
divisions’
estimates of fair value to align with independent market
data and the relevant accounting standard.
›
Refer to Note 21d for more information
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Note 21
Fair value measurement (continued)
c) Fair value hierarchy
The table
below provides the
fair value
hierarchy classification of
financial and non-financial
assets and
liabilities measured
at
fair
value.
The
narrative
that
follows
describes
valuation
techniques
used
in
measuring
their
fair
value
of
different
product types
(including significant
valuation inputs
and assumptions
used) and
the factors
considered in
determining
their classification within the fair value hierarchy.
During 2024, and
for Credit-Suisse-related assets and
liabilities for the
period between the
merger date and
31 December
2024, assets and liabilities that were transferred from Level 2 to Level 1, or from Level 1 to Level 2 and were held for the
entire reporting
period,
were not
material. As
of 31 December
2024, Level
3 assets
and Level
3 liabilities
increased by
USD
bn and USD
bn, respectively, compared with 31 December 2023, following the merger of UBS AG
and Credit
Suisse AG.
Determination of fair values from quoted market
prices or valuation techniques
1
31.12.24
31.12.23
USD m
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value on a recurring
basis
Financial assets at fair value held for trading
of which: Equity instruments
of which: Government bills / bonds
of which: Investment fund units
of which: Corporate and municipal bonds
of which: Loans
of which: Asset-backed securities
Derivative financial instruments
of which: Foreign exchange
of which: Interest rate
of which: Equity / index
of which: Credit
of which: Commodities
Brokerage receivables
Financial assets at fair value not held for trading
of which: Financial assets for unit-linked investment contracts
of which: Corporate and municipal bonds
of which: Government bills / bonds
of which: Loans
of which: Securities financing transactions
of which: Asset-backed securities
of which: Auction rate securities
of which: Investment fund units
of which: Equity instruments
Financial assets measured at fair value through other
comprehensive income on a recurring basis
Financial assets measured at fair value through other comprehensive
income
of which: Commercial paper and certificates of deposit
of which: Corporate and municipal bonds
Non-financial assets measured at fair value on a recurring
basis
Precious metals and other physical commodities
Non-financial assets measured at fair value on a non-recurring
basis
Other non-financial assets
2
Total assets measured at fair value
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Note 21
Fair value measurement (continued)
Determination of fair values from quoted market
prices or valuation techniques (continued)
1
31.12.24
31.12.23
USD m
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial liabilities measured at fair value on a
recurring basis
Financial liabilities at fair value held for trading
of which: Equity instruments
of which: Corporate and municipal bonds
of which: Government bills / bonds
of which: Investment fund units
Derivative financial instruments
of which: Foreign exchange
of which: Interest rate
of which: Equity / index
of which: Credit
of which: Commodities
of which: Loan commitments measured at FVTPL
Financial liabilities designated at fair value on a recurring
basis
Brokerage payables designated at fair
value
Debt issued designated at fair value
Other financial liabilities designated at fair value
of which: Financial liabilities related to unit-linked
investment contracts
of which: Securities financing transactions
of which: Funding from UBS Group AG
of which: Over-the-counter debt instruments
and others
Total liabilities measured at fair value
1 Bifurcated embedded derivatives are presented on the
same balance sheet lines as their host
contracts and are not included in this table. The fair value of
these derivatives was not material for the periods presented.
2 Other non-financial assets primarily consist of properties and other non-current assets held for sale, which are measured at the
lower of their net carrying amount or fair value less costs to sell.
Valuation techniques
UBS AG
uses
widely
recognized
valuation
techniques
for
determining
the
fair
value
of
financial
and
non-financial
instruments that are
not actively traded
and quoted. The
most frequently applied
valuation techniques include
discounted
value of expected cash flows, relative value
and option pricing methodologies.
Discounted
value
of
expected
cash
flows
is
a
valuation
technique
that
measures
fair
value
using
estimated
expected
future cash flows from
assets or liabilities and
then discounts these
cash flows using a
discount rate or discount
margin
that
reflects
the
credit and
/ or
funding spreads
required
by the
market
for
instruments with
similar
risk and
liquidity
profiles to
produce
a present
value. When
using such
valuation
techniques,
expected
future cash
flows are
estimated
using an observed
or implied
market price
for the future
cash flows or
by using
industry-standard cash
flow projection
models.
The
discount
factors
within
the
calculation
are
generated
using
industry-standard
yield
curve
modeling
techniques and models.
Relative
value models
measure fair
value based
on the
market prices
of equivalent
or comparable
assets or
liabilities,
making
adjustments
for differences
between the
characteristics
of the observed
instrument and
the instrument
being valued.
Option
pricing
models
incorporate
assumptions
regarding
the
behavior
of
future
price
movements
of
an
underlying
referenced
asset
or
assets
to
generate
a
probability-weighted
future
expected
payoff
for
the
option.
The
resulting
probability-weighted expected
payoff is
then discounted
using discount
factors generated
from industry-standard
yield
curve modeling
techniques and
models. The
option pricing
model may
be implemented
using a
closed-form analytical
formula or other mathematical techniques (e.g. binomial tree
or Monte Carlo simulation).
Where available, valuation techniques use
market-observable assumptions and inputs. If
such data is not
available, inputs
may be derived
by reference
to similar assets
in active markets,
from recent prices
for comparable
transactions or
from
other observable market data.
In such cases,
the inputs selected are
based on historical
experience and practice for
similar
or analogous
instruments, derivation of
input levels
based on
similar products
with observable price
levels, and
knowledge
of current market conditions and valuation approaches.
For
more
complex
instruments,
fair
values
may
be
estimated
using
a
combination
of
observed
transaction
prices,
consensus pricing services and relevant quotes. Consideration is given to
the nature of the quotes (e.g. indicative or firm)
and the
relationship of recently
evidenced market
activity to
the prices
provided by consensus
pricing services.
UBS AG
also
uses
internally
developed
models,
which
are
typically
based on
valuation
methods
and
techniques
recognized
as
standard within
the industry. Assumptions
and inputs
used in
valuation techniques include
benchmark interest
rate curves,
credit
and
funding
spreads
used
in
estimating
discount
rates,
bond
and
equity
prices,
equity
index
prices,
foreign
exchange rates,
levels of market
volatility and correlation.
Refer to Note 21e
for more information.
The discount curves
used by UBS AG incorporate the funding and credit characteristics
of the instruments to which they are applied.
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Note 21
Fair value measurement (continued)
Financial instruments excluding derivatives: valuation and classification in the fair value hierarchy
Product
Valuation and classification in the fair value hierarchy
Government bills
and bonds
Valuation
–
Generally valued using prices obtained directly
from the market.
–
Instruments not priced directly using active-market data are valued using discounted cash flow valuation
techniques that incorporate market data
for similar government instruments.
Fair value
hierarchy
–
Generally traded in active markets with prices that can be obtained directly
from these markets, resulting
in classification as Level 1, while the remaining
positions are classified as Level 2 or Level
3.
Corporate and
municipal bonds
Valuation
–
Generally
valued
using
prices
obtained
directly from
the
market
for
the
security,
or
similar
securities,
adjusted for seniority, maturity and liquidity.
–
When prices are
not available, instruments
are valued
using discounted cash
flow valuation techniques
incorporating the credit spread of the
issuer or similar issuers.
–
For convertible
bonds without
directly comparable
prices, issuances
may be
priced using
a convertible
bond model.
Fair value
hierarchy
–
Generally classified as Level 1 or Level 2, depending
on the depth of trading activity behind price
sources.
–
Level 3 instruments have no suitable pricing information
available.
Traded loans and
loans measured at
fair value
Valuation
–
Valued directly
using market
prices that
reflect recent
transactions or
quoted dealer
prices, where
available.
–
Where no
market price data
is available,
loans are
valued by relative
value benchmarking using
pricing
derived from debt instruments in comparable entities
or different products in the same entity,
or by using
a credit default swap
valuation technique, which requires inputs
for credit spreads, credit
recovery rates
and interest rates.
–
Securitization
lending
facilities
are
valued
using
a
discounted
cashflow
analysis
that
incorporates
adjustments for
any bespoke
features of the
loan and collateral.
Recently originated
commercial real
estate
loans are measured using a securitization
approach based on rating agency guidelines.
Fair value
hierarchy
–
Instruments with suitably deep and liquid pricing
information are classified as Level 2.
–
Positions requiring the
use of valuation
techniques, or for
which the price
sources have insufficient
trading
depth, are classified as Level 3.
Investment fund
units
Valuation
–
Predominantly exchange-traded,
with
readily available
quoted
prices
in
liquid
markets. Where
market
prices are not available, fair value may be measured
using net asset values (NAVs).
Fair value
hierarchy
–
Listed units
are classified
as Level 1,
provided there
is sufficient
trading activity
to justify
active-market
classification, while other positions are classified
as Level 2.
–
Positions for which
NAVs are not
available, or where
the unit or
underlying investments are illiquid,
are
classified as Level 3.
Asset-backed
securities (ABS)
Valuation
–
For liquid securities, the
valuation process will
use trade and price
data, updated for movements
in market
levels between the time of trading and the time of valuation. Less liquid instruments are measured using
discounted expected
cash flows
incorporating price
data for
instruments or
indices with
similar risk
profiles.
Fair value
hierarchy
–
Residential
mortgage-backed
securities,
commercial
mortgage-backed
securities
and
other
ABS
are
generally classified
as
Level 2 when
reliable external
price quotes
are available.
However, if
significant
inputs are unobservable, or if market or fundamental
data is not available, they are classified
as Level 3.
Auction rate
securities (ARS)
Valuation
–
ARS
are
valued
utilizing
a
discounted
cash
flow
methodology.
The
model
captures
interest
rate
risk
emanating from the note coupon, credit risk attributable to the underlying closed-end fund investments,
liquidity risk as a function of the level of trading volume in these
positions, and extension risk, as ARS are
perpetual instruments that require an assumption
regarding their maturity or issuer redemption
date.
Fair value
hierarchy
–
Granular and liquid pricing information is generally not available for ARS. As a result, these securities are
classified as Level 3.
Equity instruments
Valuation
–
Listed equity instruments are generally valued
using prices obtained directly from the market.
–
Unlisted equity holdings, including private
equity positions, are initially
marked at their transaction price
and are
revalued when reliable
evidence of
price movement becomes
available or
when the
position is
deemed to be impaired.
Fair value
hierarchy
–
The majority of
equity securities are
actively traded on
public stock exchanges
where quoted prices
are
readily and regularly available, resulting in Level
1 classification.
–
Equity securities less actively traded will be
classified as Level 2, and illiquid positions
as Level 3.
Financial assets for
unit-linked
investment
contracts
Valuation
–
The majority of assets are listed on exchanges
and fair values are determined using quoted
prices.
Fair value
hierarchy
–
Most assets are classified as Level 1 if actively traded,
or Level 2 if trading is not active.
–
Instruments for which prices are not readily available are classified
as Level 3.
Securities
financing
transactions
Valuation
–
These instruments are valued using discounted expected cash flow techniques. The discount rate applied
is based on funding curves that are relevant
to the collateral eligibility terms.
Fair value
hierarchy
–
Collateral funding curves for these instruments are
generally observable and, as a
result, these positions
are classified as Level 2.
–
Where the
collateral terms
are non-standard,
the funding
curve may
be considered
unobservable,
and
these positions are classified as Level 3.
Brokerage
receivables and
payables
Valuation
–
Fair value is determined based on the value of
the underlying balances.
Fair value
hierarchy
–
Due to their on-demand nature, these receivables
and payables are deemed as Level 2.
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AG consolidated financial statements
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Note 21
Fair value measurement (continued)
Product
Valuation and classification in the fair value hierarchy
Financial liabilities
related to unit-
linked investment
contracts
Valuation
–
The fair
values of
investment contract
liabilities are
determined by
reference to
the fair
value of
the
corresponding assets.
Fair value
hierarchy
–
The
liabilities themselves
are
not actively
traded, but
are
mainly referenced
to
instruments that
are
actively traded and are therefore classified
as Level 2.
Precious metals and
other physical
commodities
Valuation
–
Physical assets are valued using the spot rate
observed in the relevant market.
Fair value
hierarchy
–
Generally traded
in active
markets with
prices that
can be
obtained directly
from these
markets, resulting
in classification as Level 1.
Debt issued
designated at fair
value
Valuation
–
The risk management and the valuation approaches for these instruments are closely aligned with the
equivalent
derivatives
business
and
the
underlying risk,
and
the
valuation
techniques used
for
this
component are the same as the relevant valuation
techniques described below.
Fair value
hierarchy
–
The observability is closely aligned with the equivalent
derivatives business and the underlying risk.
Commercial paper
and certificates of
deposit
Valuation
–
Generally valued using
discounted cash flow
valuation techniques
incorporating the
spread of the
issuer
or similar issuers over the underlying currency
risk-free curve.
Fair value
hierarchy
–
Due to the short-dated nature of
the positions and liquid underlying pricing inputs, they are generally
classified as Level 2.
Derivative instruments: valuation and classification
in the fair value hierarchy
The curves used
for discounting expected cash
flows in the
valuation of collateralized
derivatives reflect the funding
terms
associated with the relevant collateral arrangement for the instrument
being valued. These collateral arrangements differ
across
counterparties
with
respect
to
the
eligible
currency
and
interest
terms
of
the
collateral.
The
majority
of
collateralized derivatives are
measured using a discount
curve based on funding rates
derived from overnight interest
in
the cheapest eligible currency for the respective
counterparty collateral agreement.
Uncollateralized and
partially collateralized
derivatives are
discounted using
the alternative
reference rate
(the ARR)
(or
equivalent)
curve
for
the
currency
of the
instrument.
As described
in
Note 21d,
the
fair
value
of uncollateralized
and
partially collateralized
derivatives
is then
adjusted
by credit
valuation
adjustments
(CVAs),
debit valuation
adjustments
(DVAs) and
funding valuation
adjustments (FVA
s), as
applicable,
to reflect
an estimation
of the
effect
of counterparty
credit risk, UBS AG’s own credit risk, and funding costs
and benefits.
›
Refer to Note 11 for more information about derivative
instruments
Derivative product
Valuation and classification in the fair value hierarchy
Interest rate
contracts
Valuation
–
Interest rate swap contracts
are valued by estimating
future interest cash flows
and discounting those cash
flows using
a rate
that reflects the
appropriate funding rate
for the
position being
measured. The yield
curves used to estimate future index
levels and discount rates are generated using
market-standard yield
curve models using interest rates associated with
current market activity. The key inputs to the models
are
interest rate swap rates, forward rate agreement rates, short-term interest rate futures prices,
basis swap
spreads and inflation swap rates.
–
Interest rate option contracts
are valued using various
market-standard option models, using inputs
that
include interest rate yield curves, inflation curves,
volatilities and correlations.
–
When the maturity
of an interest
rate swap or
option contract exceeds
the term for
which standard market
quotes are observable for
a significant input parameter,
the contracts are valued
by extrapolation from the
last observable point using standard assumptions
or by reference to another observable comparable
input
parameter to represent a suitable proxy for that
portion of the term.
Fair value
hierarchy
–
The majority of interest
rate swaps are classified
as Level 2, as the standard
market contracts that form
the
inputs for yield curve models are generally traded
in active and observable markets.
–
Options are
generally treated
as Level 2,
as the calibration
process enables
the model
output to
be validated
to active-market
levels. Models
calibrated in
this way
are then
used to
revalue the
portfolio of
both standard
options and more exotic products.
–
Interest rate swap
or option contracts
are classified as
Level 3 when the
terms
exceed standard market-
observable quotes.
–
Exotic options for
which appropriate volatility
or correlation input
levels cannot be implied
from observable
market data are classified as Level 3.
Credit derivative
contracts
Valuation
–
Credit derivative
contracts are
valued using
industry-standard models
based primarily
on
market credit
spreads, upfront pricing points and implied recovery rates. Where a derivative credit spread is not directly
available, it may be derived from the price of
the reference cash bond.
–
Asset-backed credit
derivatives are
valued using
a valuation
technique similar
to that
of the
underlying
security with an adjustment to reflect
the funding differences between cash
and synthetic form.
Fair value
hierarchy
–
Single-entity and
portfolio
credit derivative
contracts are
classified as
Level 2
when credit
spreads and
recovery rates
are determined
from actively
traded observable
market data.
Where the
underlying reference
name(s) are not actively traded
and the correlation cannot be
directly mapped to actively traded tranche
instruments, these contracts are classified
as Level 3.
–
Asset-backed
credit
derivatives
follow
the
characteristics
of
the
underlying
security
and
are
therefore
distributed across Level 2 and Level 3.
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AG consolidated financial statements
214
Note 21
Fair value measurement (continued)
Derivative product
Valuation and classification in the fair value hierarchy
Foreign exchange
contracts
Valuation
–
Open spot foreign exchange (FX) contracts are
valued using the FX spot rate observed
in the market.
–
Forward FX contracts are valued using the FX spot rate adjusted for forward pricing points observed from
standard market-based sources.
–
Over-the-counter (OTC) FX
option contracts are
valued using
market-standard option valuation
models.
The models used for
shorter-dated options (i.e. maturities of
five years or less)
tend to be
different from
those used for
longer-dated options
because the models
needed for longer-dated
OTC FX contracts
require
additional consideration of interest rate and FX
rate interdependency.
–
The valuation for
multi-dimensional FX
options uses a
multi-local volatility
model, which is
calibrated to the
observed FX volatilities for all relevant FX pairs.
Fair value
hierarchy
–
The
markets for
FX
spot
and
FX
forward
pricing
points
are
both
actively
traded
and
observable and,
therefore,
such FX contracts are generally classified as
Level 2.
–
A significant proportion of
OTC FX option contracts are
classified as Level 2 as
inputs are derived mostly
from standard market contracts traded in
active and observable markets.
Equity / index
contracts
Valuation
–
Equity forward
contracts have
a single
stock or
index underlying and
are valued
using market-standard
models. The key inputs to the models are stock
prices, estimated dividend rates and equity funding rates
(which are implied
from prices of
forward contracts observed
in the market).
Estimated cash flows
are then
discounted using market-standard discounted cash flow models using a rate that reflects the appropriate
funding rate for
that portion
of the portfolio.
When no market
data is
available for the
instrument maturity,
they are
valued by
extrapolation of
available data,
use of
historical dividend
data, or
use of
data for
a
related equity.
–
Equity option contracts are valued
using market-standard models
that estimate the equity forward
level as
described
for
equity
forward
contracts
and
incorporate
inputs
for
stock
volatility
and
for
correlation
between
stocks
within
a
basket.
The
probability-weighted expected
option
payoff
generated
is
then
discounted
using
market-standard
discounted
cash
flow
models
applying
a
rate
that
reflects
the
appropriate funding rate
for that portion of
the portfolio. When
volatility, forward or
correlation inputs are
not
available,
they
are
valued
using
extrapolation
of
available
data,
historical
dividend,
correlation
or
volatility data, or the equivalent data for
a related equity.
Fair value
hierarchy
–
As inputs are
derived mostly from standard
market contracts traded in
active and observable
markets, a
significant proportion of equity forward contracts
are classified as Level 2.
–
Equity option positions for which inputs are derived
from standard market contracts traded in active and
observable markets are also classified
as Level 2. Level 3 positions are those
for which volatility, forward or
correlation inputs are not observable.
Commodity
contracts
Valuation
–
Commodity forward
and swap
contracts are
measured using
market-standard models
that use
market
forward levels on standard instruments.
–
Commodity
option
contracts
are
measured
using
market-standard
option
models
that
estimate
the
commodity forward level
as described for
commodity forward and
swap contracts, incorporating
inputs
for the volatility of the underlying
index or commodity. For commodity
options on baskets of commodities
or
bespoke
commodity
indices,
the
valuation
technique
also
incorporates
inputs
for
the
correlation
between different commodities or commodity
indices.
Fair value
hierarchy
–
Individual
commodity contracts
are
typically classified
as
Level 2,
because
active
forward and
volatility
market data is available.
Loan commitments
measured at FVTPL
Valuation
–
Valued directly using
market prices that
reflect recent transactions
or quoted dealer
prices, where
available.
–
Where no
market price
data is
available, loan
commitments are
valued by
relative value
benchmarking
using pricing derived
from debt instruments
in comparable entities
or different products
in the same
entity,
or
by
using a
credit default
swap valuation
technique, which
requires inputs
for
credit spreads,
credit
recovery rates and interest rates.
Fair value
hierarchy
–
Instruments with suitably deep and liquid pricing
information are classified as Level 2.
–
Positions requiring the use
of valuation techniques, or
for which the price sources
have insufficient trading
depth, are classified as Level 3.
d) Valuation adjustments and other items
The output
of a
valuation technique
is always
an estimate of
a fair
value that
cannot be
measured with complete
certainty.
As a result,
valuations are adjusted where appropriate
and when such
factors would be
considered by market participants
in estimating fair value, to reflect close-out costs, credit exposure, model-driven valuation uncertainty,
funding costs and
benefits, trading restrictions and other factors.
Deferred day-1 profit or loss reserves
For new
transactions where
the valuation
technique used
to measure
fair value
requires
significant inputs
that are
not
based on observable market data, the financial instrument is initially recognized at the transaction price. The transaction
price may differ from the fair value obtained using
a valuation technique, where any such difference
is deferred and not
initially recognized in the income statement.
Deferred day-1 profit or loss
is generally released into
Other net income from financial
instruments measured at fair value
through profit
or loss
the transaction is closed out.
The table below summarizes the changes in deferred day-1
profit or loss reserves during the respective period.
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AG consolidated financial statements
215
Note 21
Fair value measurement (continued)
Deferred day-1 profit or loss reserves
USD m
2024
2023
2022
Reserve balance at the beginning of the year
Profit / (loss) deferred on new transactions
(Profit) / loss recognized in the income statement
(
215
)
(
275
)
(
295
)
Foreign currency translation
(
6
)
Reserve balance at the end of the year
Own credit
Own credit risk
is reflected in
the valuation of
UBS AG’s fair value
option liabilities where
this component is considered
relevant for valuation purposes by UBS AG’s counterparties
and other market participants.
Changes in
the fair
value of
financial liabilities
designated at
fair value
through profit
or loss
related to
own credit
are
recognized
in
Other
comprehensive
income
Retained
earnings,
with
no
reclassification
to
the
income
statement
in
future
periods.
statement, as UBS AG does not hedge changes in own credit.
Own credit is estimated using own credit adjustment (OCA) curves, which incorporate observable market data,
including
market-observed secondary prices for UBS’s debt
and debt curves of peers. In the
table below, the change in unrealized
own credit consists of changes in fair value that are attributable to the change in UBS
AG’s credit spreads, as well as the
effect of changes in
fair values attributable
to factors other
than credit spreads,
such as redemptions,
effects from time
decay and
changes in
interest and
other market
rates. Realized
own credit
is recognized
when an
instrument with
an
associated
unrealized
OCA
is
repurchased
prior
to
the
contractual
maturity
date.
Life-to-date
amounts
reflect
the
cumulative unrealized change since initial recognition.
›
Refer to Note 16 for more information about debt
issued designated at fair value
Own credit adjustments on financial liabilities
designated at fair value
Included in Other comprehensive income
For the year ended
USD m
31.12.24
31.12.23
31.12.22
Realized gain / (loss)
(
50
)
Unrealized gain / (loss)
(
891
)
(
869
)
Total gain / (loss), before tax
(
941
)
(
861
)
of which: recognized during the period and disclosed in
the Statement of comprehensive income
(
861
)
of which: recognized upon the merger of UBS AG and Credit Suisse
AG
(
1,016
)
1 Refer to Note 2 for more information about the merger of UBS AG and Credit Suisse AG.
USD m
31.12.24
31.12.23
31.12.22
Recognized on the balance sheet as of the end of the period:
Unrealized life-to-date gain / (loss)
(
1,165
)
(
312
)
of which: debt issued designated at fair value
(
780
)
(
208
)
of which: other financial liabilities designated at fair value
(
385
)
(
105
)
Credit valuation adjustments
In
order
to
measure
the
fair
value
of
OTC
derivative
instruments,
including
funded
derivative
instruments
that
are
classified as
Financial assets at
fair value
not held
for trading,
inherent
in
these
instruments.
This
amount
represents
the
estimated
fair
value
of
protection
required
to
hedge
the
counterparty credit risk of
such instruments. A CVA
is determined for each counterparty,
considering all exposures with
that counterparty,
and is dependent on the expected future
value of exposures, default probabilities
and recovery rates,
applicable collateral or netting arrangements, break
clauses, funding spreads, and other contractual
factors.
Funding valuation adjustments
Uncollateralized FVAs reflect the costs and
benefits of funding associated
with uncollateralized and partially
collateralized
derivative
receivables
and
payables
and
are
calculated
as
the
valuation
effect
from
moving
the
discounting
of
the
uncollateralized
derivative
cash
flows
from
the
ARR
to
OCA
using
the
CVA
framework,
including
the
probability
of
counterparty default. An FVA is also
applied to collateralized derivative assets
in cases where the collateral
cannot be sold
or repledged
and in
cases where
collateral agreements
contain optionality
regarding
the type
of collateral
that can
be
pledged or received.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
216
Note 21
Fair value measurement (continued)
Debit valuation adjustments
A DVA is estimated to incorporate own credit in the valuation of derivatives where an FVA is not already recognized. The
DVA calculation
is effectively consistent with
the CVA framework,
being determined for each counterparty,
considering
all exposures
with that
counterparty
and taking
into account
collateral
netting agreements,
expected
future
mark-to-
market movements and UBS AG’s credit default
spreads.
Other valuation adjustments
Instruments that are measured as
part of a
portfolio of combined long
and short positions
are valued at mid-market levels
to ensure consistent valuation
of the long- and
short-component risks. A liquidity
valuation adjustment is then
made to
the overall
net long
or short
exposure to
move the
fair value
to bid
or offer
as appropriate,
reflecting current
levels of
market
liquidity.
The bid–offer
spreads
used in
the calculation
of this
valuation adjustment
are
obtained from
market
transactions and other relevant sources and
are updated periodically.
Uncertainties
associated
with
the
use of
model-based
valuations
are
incorporated
into the
measurement
of fair
value
through the use of model
reserves. These reserves reflect
the amounts that UBS AG estimates
should be deducted from
valuations produced directly
by models to incorporate
uncertainties in the relevant
modeling assumptions, in the
model
and market inputs used,
or in the calibration
of the model output
to adjust for known
model deficiencies. In arriving
at
these
estimates,
UBS AG
considers
a
range
of
market
practices,
including
how
it
believes
market
participants
would
assess these uncertainties. Model reserves
are reassessed periodically in light
of data from market
transactions, consensus
pricing services and other relevant sources.
Other valuation adjustment reserves on the
balance sheet
As of
USD m
31.12.24
31.12.23
Credit valuation adjustments
1
(
125
)
(
37
)
Funding and debit valuation adjustments
(
96
)
(
82
)
Other valuation adjustments
(
1,206
)
(
730
)
of which: liquidity
(
746
)
(
308
)
of which: model uncertainty
(
460
)
(
423
)
1 Amounts do not include reserves against defaulted counterparties.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
217
Note 21
Fair value measurement (continued)
e) Level 3 instruments: valuation techniques and inputs
The table below presents
material Level 3 assets
and liabilities, together
with the valuation techniques
used to measure
fair value,
the inputs
used in
a given
valuation technique
that are
considered significant
as of
31 December 2024
and
unobservable, and a range of values for those unobservable inputs.
The range of
values represents the highest-
and lowest-level inputs used
in the valuation
techniques. Therefore, the range
does not reflect the level of uncertainty regarding a particular input or an assessment of the reasonableness of UBS AG’s
estimates and assumptions, but rather the different underlying characteristics of the relevant assets and liabilities held by
UBS AG. The
ranges will
therefore vary
from period
to period
and parameter
to parameter
based on
characteristics of
the instruments held at each balance sheet date. Furthermore, the ranges of unobservable inputs may
differ across other
financial institutions, reflecting the diversity of the products
in each firm’s inventory.
Valuation techniques and inputs used in the fair value measurement
of Level 3 assets and liabilities
Fair value
Significant
unobservable
input(s)
1
Range of inputs
Assets
Liabilities
Valuation
technique(s)
31.12.24
31.12.23
USD bn
31.12.24
31.12.23
31.12.24
31.12.23
low
high
weighted
average
2
low
high
weighted
average
2
unit
1
Financial assets and liabilities at fair value held for trading and Financial assets at fair
value not held for trading
Corporate and municipal
bonds
Relative value to
market comparable
Bond price equivalent
points
Discounted expected
cash flows
Discount margin
basis
points
Traded loans, loans
designated at fair value
and guarantees
Relative value to
market comparable
Loan price equivalent
points
Discounted expected
cash flows
Credit spread
basis
points
Market comparable
and securitization
model
Credit spread
basis
points
Asset-backed securities
Relative value to
market comparable
Bond price equivalent
points
Investment fund units
3
Relative value to
market comparable
Net asset value
Equity instruments
3
Relative value to
market comparable
Price
Debt issued designated at
fair value
4
Other financial liabilities
designated at fair value
Discounted expected
cash flows
Funding spread
basis
points
Derivative financial instruments
Interest rate
Option model
Volatility of interest
rates
basis
points
IR-to-IR correlation
%
Discounted expected
cash flows
Funding spread
basis
points
Credit
Discounted expected
cash flows
Credit spreads
basis
points
Credit correlation
%
Recovery rates
%
Option model
Credit volatility
%
Equity / index
Option model
Equity dividend yields
%
Volatility of equity
stocks, equity and
other indices
%
Equity-to-FX
correlation
(
65
)
(
40
)
%
Equity-to-equity
correlation
%
Loan commitments
measured at FVTPL
Relative value to
market comparable
Loan price equivalent
points
1 The ranges of significant unobservable
inputs are represented in points, percentages and
basis points. Points are
a percentage of par (e.g. 100
points would be 100% of par).
2 Weighted averages are provided
for most non-derivative financial instruments and were calculated
by weighting inputs based on the fair values of
the respective instruments. Weighted averages
are not provided for inputs related to Other financial
liabilities designated at
fair value and
Derivative financial instruments,
as this would
not be meaningful.
3 The range
of inputs is
not disclosed, as
there is a
dispersion of values
given the diverse
nature of the
investments.
4 Debt issued designated at fair value primarily consists of UBS structured notes, which include variable maturity notes with various equity and foreign exchange underlying risks, as well as rates-linked
and credit-linked notes, all of which have embedded
derivative parameters that are considered to be unobservable.
The equivalent derivative instrument parameters
for debt issued or embedded derivatives for over-
the-counter debt instruments are presented in the respective derivative financial instruments lines in this table.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
218
Note 21
Fair value measurement (continued)
Significant unobservable inputs in Level 3 positions
This section
discusses the
significant unobservable
inputs used
in the valuation
of Level 3
instruments and
assesses the
potential effect that
a change
in each
unobservable input in
isolation may
have on
a fair value
measurement. Relationships
between observable and unobservable inputs have not
been included in the summary below.
Input
Description
Bond price
equivalent
–
Where market prices are not available for a bond, fair value is measured by comparison with observable pricing data from
similar instruments. Factors
considered when selecting
comparable instruments include
credit quality, maturity
and industry
of the issuer. Fair value may be measured
either by a direct price comparison
or by conversion of an instrument
price into a
yield (either as an outright yield or as a spread
to the relevant benchmark rate).
–
For corporate and municipal bonds, the range represents
the range of prices from reference issuances used in
determining
fair value. Bonds priced at 0 are distressed to
the point that no recovery is expected, while prices significantly in excess of
100 or par relate to inflation-linked or
structured issuances that pay a coupon
in excess of the market benchmark
as of the
measurement date.
–
For credit derivatives,
the bond price
range represents the
range of prices
used for reference
instruments, which
are typically
converted to an equivalent yield or credit
spread as part of the valuation process.
Loan price
equivalent
–
Where market prices are not available for a traded loan or a loan commitment, fair value is measured by comparison with
observable pricing data for
similar instruments. Factors
considered when selecting
comparable instruments include
industry
segment, collateral
quality, maturity
and
issuer-specific covenants.
Fair value
may be
measured either
by
a
direct price
comparison or
by conversion of
an instrument
price into
a yield.
The range
represents the range
of prices
derived from
reference issuances of a similar credit
quality used to measure fair value
for loans classified as Level 3. Loans
priced at 0 are
distressed to the point that
no recovery is expected, while a
current price of 100 represents a
loan that is expected to
be
repaid in full.
Credit spread
–
Valuation models
for many credit
derivatives and
other credit-sensitive
products require
an input for
the credit
spread, which
is a reflection
of the
credit quality
of the associated
referenced underlying.
The credit
spread of
a particular
security is quoted
in relation
to the
yield on
a benchmark
security or
reference rate,
typically either
US Treasury
or ARR,
and is
generally
expressed in
terms of
basis points.
An increase
/ (decrease)
in credit
spread will
increase /
(decrease) the
value of
credit
protection offered
by credit
default swaps
and other
credit derivative
products. The
income statement effect
from such
changes depends on
the nature and
direction of the
positions held. Credit
spreads may be negative
where the asset
is more
creditworthy than
the
benchmark against
which
the spread
is
calculated. A
wider
credit spread
represents decreasing
creditworthiness. The range represents
a diverse set of underlyings,
with the lower end of the
range representing credits of
the highest quality and the upper end of the
range representing greater levels of credit
risk.
Discount margin
–
The discount margin (DM)
spread represents the
discount rates applied
to present value cash
flows of an asset
to reflect the
market return
required for
uncertainty in
the estimated
cash flows.
DM spreads
are a
rate or
rates applied
on top
of a
floating index
(e.g. Secured
Overnight Financing
Rate (SOFR))
to
discount expected
cash flows.
Generally, a
decrease /
(increase) in the DM in isolation would result
in a higher / (lower) fair value.
–
The high
end of
the range
relates to securities
that are
priced low
within the
market relative to
the expected cash
flow
schedule. This indicates that the market is pricing an increased risk of credit loss into the security
that is greater than what
is being captured by the expected
cash flow generation process.
The low ends of the ranges
are typical of funding rates on
better-quality instruments.
Funding spread
–
Structured financing transactions are valued using synthetic funding curves
that best represent the assets that are pledged
as collateral for the
transactions. They are not representative of where
UBS AG can fund itself on
an unsecured basis but
provide an
estimate of
where UBS AG
can source
and deploy
secured funding
with counterparties
for a
given type
of
collateral. The funding
spreads are expressed
in terms of basis
points, and if
funding spreads widen,
this increases the
effect
of discounting.
–
A small proportion
of structured debt
instruments and non-structured
fixed-rate bonds within
financial liabilities designated
at fair value had an exposure to funding
spreads that was longer in duration than the
actively traded market.
Volatility
–
Volatility measures the
variability of future
prices for a
particular instrument and
is generally expressed
as a
percentage,
where a
higher number
reflects a
more volatile
instrument, for
which future
price movements
are more
likely to
occur.
Volatility is a key input
into option models, where
it is used to derive
a probability-based distribution
of future prices for
the
underlying instrument. The effect of volatility on individual
positions within the portfolio is driven primarily by whether
the
option contract is a long or short position. In most cases, the fair
value of an option increases as a result of an increase in
volatility and is reduced by
a decrease in volatility. Generally,
volatility used in the measurement
of fair value is derived from
active-market option prices (referred
to as implied
volatility). A key
feature of implied
volatility is the
volatility “smile” or
“skew”, which represents the effect of pricing
options of different option strikes at different
implied volatility levels.
–
Volatilities of
low interest
rates tend to
be much higher
than volatilities
of high interest
rates. In addition,
different currencies
may have significantly different implied volatilities.
Recovery rate
–
The projected recovery rate
reflects the estimated recovery that
will be realized given
expected defaults;
it is an
analogous
pricing input for corporate or sovereign credits. Reduction in recovery rates will result in lower expected cash flows into the
structure upon the default of the
instruments. In general, a significant increase /
(decrease) in the recovery rate
in isolation
would result in significantly higher / (lower) fair value for the respective underlying cash security. The impact of a change
in
recovery rate on a credit derivative position will depend on whether
credit protection has been bought or sold. The recovery
rate is ultimately driven
by the value recoverable
from collateral held
after default occurs
relative to the outstanding
exposure
at that point.
Correlation
–
Correlation measures the
interrelationship between
the movements of
two variables. It is
expressed as a percentage
between
–100%
and
+100%,
where
+100%
represents
perfectly
correlated
variables
(meaning
a
movement
of
one
variable
is
associated with a movement of the other variable in the same direction),
and –100% implies that the variables are inversely
correlated
(meaning
a
movement of
one
variable
is
associated
with
a
movement of
the
other
variable
in
the
opposite
direction). The effect of correlation
on the measurement of fair
value depends on the
specific terms of the instruments
being
valued, reflecting the range of different payoff
features within such instruments.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
219
Note 21
Fair value measurement (continued)
Input
Description
Equity dividend
yields
–
The derivation of a forward price
for an individual stock or index is
important for measuring fair value for forward or swap
contracts and for measuring fair
value using option pricing models.
The relationship between the
current stock price and the
forward price is based on a combination
of expected future dividend levels
and payment timings, and, to a lesser
extent, the
relevant funding
rates applicable
to the stock
in question.
Dividend yields
are generally
expressed as
an annualized
percentage
of the share price, with
the lowest limit of 0% representing a
stock that is not expected to
pay any dividend. The dividend
yield and timing represent
the most significant parameter in
determining fair value for instruments
that are sensitive to
an
equity forward price.
f) Level 3 instruments: sensitivity to changes in unobservable
input assumptions
The table below summarizes
those financial assets and
liabilities classified as Level
3 for which a
change in one or
more
of
the
unobservable
inputs
to
reflect
reasonably
possible
favorable
and
unfavorable
alternative
assumptions
would
change fair value significantly, and the estimated effect thereof. The table below does not represent the estimated effect
of stress
scenarios.
Interdependencies
between
Level 1,
2 and
3 parameters
have not
been
incorporated
in the
table.
Furthermore, direct
interrelationships between
the Level 3 parameters
discussed below
are not
a significant element
of
the valuation uncertainty.
Sensitivity data is estimated
using a number of techniques,
including the estimation
of price dispersion among
different
market participants, variation
in modeling approaches
and reasonably possible
changes to assumptions
used within the
fair value
measurement process.
The sensitivity
ranges are
not always
symmetrical around
the fair
values, as the
inputs
used in valuations are not always precisely in the middle
of the favorable and unfavorable range.
Sensitivity data
is determined at
a product or
parameter level
and then aggregated
assuming no diversification
benefit.
Diversification would
incorporate estimated
correlations across
different sensitivity
results and,
as such,
would result
in
an overall sensitivity that would
be less than the sum
of the individual component sensitivities. However,
UBS AG believes
that the diversification benefit is not significant to this analysis.
Sensitivity of fair value measurements to changes
in unobservable input assumptions
1
31.12.24
31.12.23
USD m
Favorable
changes
Unfavorable
changes
Favorable
changes
Unfavorable
changes
Traded loans, loans measured at fair value and guarantees
(
143
)
(
19
)
Securities financing transactions
(
24
)
(
24
)
Auction rate securities
(
6
)
(
21
)
Asset-backed securities
(
28
)
(
22
)
Equity instruments
(
308
)
(
178
)
Investment fund units
(
181
)
(
23
)
Loan commitments measured at FVTPL
(
42
)
(
10
)
Interest rate derivatives, net
(
70
)
(
18
)
Credit derivatives, net
(
117
)
(
5
)
Foreign exchange derivatives, net
(
2
)
(
4
)
Equity / index derivatives, net
(
617
)
(
285
)
Other
(
161
)
(
39
)
Total
(
1,700
)
(
648
)
1 Sensitivity of issued and over-the-counter debt instruments is reported with the equivalent derivative
or Other.
g) Level 3 instruments: movements during the period
The table below presents
additional information about
material Level 3 assets
and liabilities measured
at fair value on
a
recurring basis.
Level 3 assets
and liabilities
may be
hedged with
instruments classified
as Level 1
or Level 2
in the
fair
value hierarchy, and, as a result, realized and unrealized gains and losses included in the table may not include the effect
of
related
hedging
activity.
Furthermore,
the
realized
and
unrealized
gains
and
losses
presented
in
the
table
are
not
limited
solely
to
those
arising
from
Level
3 inputs,
as
valuations
are
generally
derived
from
both
observable
and
unobservable
parameters.
Assets
and
liabilities
transferred
into
or
out
of
Level 3
are
presented
as
if
those
assets
or
liabilities had been transferred at the beginning of the
year.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
220
Note 21
Fair value measurement (continued)
Movements of Level 3 instruments
USD bn
Balance at
the
beginning
of the
period
Effect from
merger of
UBS AG
and Credit
Suisse AG
1
Net gains /
losses
included in
compre-
hensive
income
2
of which:
related to
instruments
held at the
end of the
period
Purchases
Sales
Issuances
Settlements
Transfers
into
Level 3
Transfers
out of
Level 3
Foreign
currency
translation
Balance
at the end
of the
period
For the twelve months ended 31 December 2024
3
Financial assets at fair value held for
trading
(
0.0
)
(
0.3
)
(
4.2
)
(
3.1
)
(
0.4
)
(
0.1
)
of which: Equity instruments
(
0.1
)
(
0.1
)
(
0.2
)
(
0.0
)
(
0.0
)
(
0.0
)
of which: Corporate and municipal
bonds
(
0.1
)
(
0.1
)
(
0.3
)
(
0.0
)
(
0.0
)
(
0.0
)
of which: Loans
(
0.1
)
(
3.5
)
(
3.0
)
(
0.4
)
(
0.1
)
Derivative financial instruments –
assets
(
0.1
)
(
0.7
)
(
0.4
)
(
0.0
)
of which: Interest rate
(
0.1
)
(
0.1
)
(
0.0
)
of which: Equity / index
(
0.0
)
(
0.3
)
(
0.3
)
(
0.0
)
of which: Credit
(
0.1
)
(
0.0
)
(
0.0
)
(
0.1
)
(
0.0
)
(
0.0
)
Financial assets at fair value not held
for trading
(
0.4
)
(
1.9
)
(
0.4
)
(
0.1
)
of which: Loans
(
0.4
)
(
0.3
)
(
0.1
)
of which: Auction rate securities
(
0.0
)
(
1.1
)
of which: Equity instruments
(
0.0
)
(
0.2
)
(
0.0
)
(
0.0
)
of which: Investment fund units
(
0.0
)
(
0.1
)
(
0.0
)
(
0.0
)
of which: Asset-backed securities
(
0.1
)
(
0.1
)
Derivative financial instruments –
liabilities
(
0.0
)
(
2.0
)
(
0.6
)
(
0.1
)
of which: Interest rate
(
0.0
)
(
0.0
)
(
0.0
)
of which: Equity / index
(
0.0
)
(
1.8
)
(
0.4
)
(
0.1
)
of which: Credit
(
0.1
)
(
0.1
)
(
0.0
)
(
0.1
)
(
0.0
)
(
0.0
)
of which: Loan commitments
measured at FVTPL
(
0.2
)
(
0.0
)
(
0.0
)
(
0.1
)
(
0.1
)
(
0.0
)
Debt issued designated at fair value
(
0.0
)
(
3.5
)
(
2.9
)
(
0.3
)
Other financial liabilities designated
at fair value
(
0.1
)
(
0.1
)
(
0.0
)
(
1.1
)
(
0.1
)
(
0.0
)
For the twelve months ended 31 December 2023
Financial assets at fair value held for
trading
(
0.1
)
(
0.1
)
(
0.8
)
(
0.3
)
of which: Equity instruments
(
0.1
)
(
0.1
)
(
0.1
)
(
0.0
)
of which: Corporate and municipal
bonds
(
0.0
)
(
0.0
)
(
0.3
)
(
0.0
)
of which: Loans
(
0.1
)
(
0.1
)
(
0.4
)
(
0.2
)
Derivative financial instruments –
assets
(
0.3
)
(
0.3
)
(
0.0
)
(
0.5
)
(
0.3
)
of which: Interest rate
(
0.0
)
(
0.2
)
(
0.1
)
(
0.0
)
of which: Equity / index
(
0.2
)
(
0.2
)
(
0.1
)
(
0.2
)
of which: Credit
(
0.1
)
(
0.1
)
(
0.1
)
(
0.0
)
Financial assets at fair value not held
for trading
(
0.7
)
(
0.0
)
(
0.1
)
of which: Loans
(
0.0
)
(
0.0
)
(
0.1
)
(
0.0
)
of which: Auction rate securities
(
0.1
)
of which: Equity instruments
(
0.2
)
of which: Investment fund units
(
0.0
)
(
0.0
)
(
0.1
)
(
0.0
)
Derivative financial instruments –
liabilities
(
0.0
)
(
0.6
)
(
0.2
)
of which: Interest rate
(
0.1
)
(
0.0
)
of which: Equity / index
(
0.4
)
(
0.2
)
of which: Credit
(
0.0
)
(
0.1
)
(
0.0
)
Debt issued designated at fair value
(
3.2
)
(
2.6
)
Other financial liabilities designated at
fair value
(
0.2
)
(
0.0
)
1 Refer to Note 2 for more information about the merger of UBS AG
and Credit Suisse AG.
2 Net gains / losses included in comprehensive income are recognized in
Net interest income and Other net income from
financial instruments measured at fair value
through profit or loss in the
Income statement, and also in Gains
/ (losses) from
own credit on financial liabilities designated
at fair value, before
tax in the Statement of
comprehensive income.
3 Total Level 3 assets as of 31 December
2024 were USD
bn (31 December 2023: USD
bn). Total Level 3 liabilities as of 31 December
2024 were USD
bn (31 December 2023:
USD
bn).
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
221
Note 21
Fair value measurement (continued)
h) Maximum exposure to credit risk for financial instruments
measured at fair value
The tables below provide UBS AG’s maximum exposure to credit risk for financial instruments measured at fair value
and
the respective collateral and other credit
enhancements mitigating credit risk for these
classes of financial instruments.
The maximum exposure
to credit risk
includes the carrying
amounts of financial
instruments recognized on
the balance
sheet subject to credit risk
and the notional amounts for off-balance sheet
arrangements. Where information is available,
collateral is presented at fair
value. For other collateral, such as
real estate, a reasonable alternative
value is used. Credit
enhancements,
such
as
credit
derivative
contracts
and
guarantees,
are
included
at
their
notional
amounts.
Both
are
capped at
the maximum
exposure to
credit risk
for which
they serve
as security.
The “Risk
management
and control”
section of this
report describes
management’s view
of credit
risk and the
related exposures,
which can differ
in certain
respects from the requirements of IFRS Accounting Standards.
Maximum exposure to credit risk
31.12.24
Maximum
exposure to
credit risk
Collateral
Credit enhancements
Exposure to
credit risk
after collateral
and credit
enhancements
USD bn
Cash
collateral
received
Collateralized
by equity and
debt
instruments
Secured by
real estate
Other
collateral
Netting
Credit
derivative
contracts
Guarantees
and sub-
participations
Financial assets measured at
fair value on the balance sheet
1
Financial assets at fair value
held for trading – debt instruments
2,3
Derivative financial instruments
4,5
Brokerage receivables
Financial assets at fair value not
held for trading – debt instruments
6
Total financial assets measured at fair value
Guarantees
31.12.23
Maximum
exposure to
credit risk
Collateral
Credit enhancements
Exposure to
credit risk
after collateral
and credit
enhancements
USD bn
Cash
collateral
received
Collateralized
by equity and
debt
instruments
Secured by
real estate
Other
collateral
Netting
Credit
derivative
contracts
Guarantees
and sub-
participations
Financial assets measured at
fair value on the balance sheet
1
Financial assets at fair value
held for trading – debt instruments
2,3
Derivative financial instruments
4,5
Brokerage receivables
Financial assets at fair value not
held for trading – debt instruments
6
Total financial assets measured at fair value
Guarantees
1 The maximum exposure to loss
is generally equal to the carrying
amount and subject to change over
time with market movements.
2 For the purpose of
this disclosure, collateral and credit
enhancements were
not considered as these
positions are generally
managed under the market
risk framework.
3 Does not include
investment fund units.
4 Includes USD
m (31 December 2023:
USD
m) fair values
of loan
commitments and USD
m (31 December 2023:
USD
m) forward starting reverse
repurchase agreements classified as
derivatives. The
full contractual committed
amount of forward
starting reverse repurchase
agreements (generally highly
collateralized) of
USD
bn (31 December
2023: USD
bn) and derivative
loan commitments (mostly
secured) of USD
bn, of which
USD
bn has been
sub-participated (31
December 2023: USD
bn, of which USD
bn had been sub-participated), is
presented in Note 11 under notional amounts.
5 The amount shown in
the “Netting” column represents the netting
potential not
recognized on the balance sheet. Refer to
Note 22 for more information.
6 Does not include unit-linked investment contracts and investment fund units. Financial assets at fair
value not held for trading collateralized
by equity and debt instruments consisted of structured loans and reverse repurchase and securities borrowing agreements.
Annual Report 2024
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AG consolidated financial statements
222
Note 21
Fair value measurement (continued)
i) Financial instruments not measured at fair value
The table below provides the estimated fair values of financial
instruments not measured at fair value.
Financial instruments not measured at fair value
31.12.24
31.12.23
Carrying
amount
Fair value
Carrying
amount
Fair value
USD bn
Total
Carrying
amount
approximates
fair value
1
Level 1
Level 2
Level 3
Total
Total
Carrying
amount
approximates
fair value
1
Level 1
Level 2
Level 3
Total
Assets
Cash and balances at central banks
Amounts due from banks
Receivables from securities financing
transactions measured at amortized cost
Cash collateral receivables on derivative
instruments
Loans and advances to customers
Other financial assets measured at amortized
cost
Liabilities
Amounts due to banks
Payables from securities financing
transactions measured at amortized cost
2
Cash collateral payables on derivative
instruments
Customer deposits
Funding from UBS Group AG measured at
amortized cost
Debt issued measured at amortized cost
Other financial liabilities measured at
amortized cost
1 Includes certain financial instruments where the carrying
amount is a reasonable approximation of the
fair value due to the instruments’ short-term
nature (instruments that are receivable or
payable on demand or
with a remaining maturity (excluding the effects of callable features) of three months or less).
2 Excludes lease liabilities.
The fair values
included in the
table above have
been calculated for
disclosure purposes
only.
The valuation techniques
and assumptions
described
below relate
only to
the fair
value of
UBS AG’s financial
instruments not
measured
at fair
value. Other institutions may use different
methods and assumptions for their fair value
estimations, and therefore
such
fair value disclosures
cannot necessarily be compared
from one financial
institution to another.
The following principles
were applied when determining fair value estimates for
financial instruments not measured at fair
value.
–
For financial
instruments
with remaining
maturities greater
than three
months, the
fair value
was determined
from
quoted market prices, if available.
–
Where quoted market prices were
not available, the fair values were estimated
by discounting contractual cash flows
using current
market
interest
rates
or appropriate
yield curves
for
instruments
with
similar credit
risk and
maturity.
These estimates generally include adjustments for counterparty
credit risk or UBS AG’s own credit.
–
For short-term financial instruments with
remaining maturities of three months
or less, the carrying amount, which
is
net of credit loss allowances, is generally considered a reasonable
estimate of fair value.
Annual Report 2024
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AG consolidated financial statements
223
Note 22
Offsetting financial assets and financial liabilities
UBS AG
enters
into
netting
agreements
with
counterparties
to
manage
the
credit
risks
associated
primarily
with
repurchase
and
reverse
repurchase
transactions,
securities
borrowing
and
lending,
over-the-counter
derivatives,
and
exchange-traded derivatives. These netting agreements
and similar arrangements generally enable the counterparties
to
set
off
liabilities
against
available
assets
received
in
the
ordinary
course
of
business
and / or
in
the
event
that
the
counterparties to the transaction are unable to fulfill
their contractual obligations.
The tables below
provide a summary
of financial assets
and financial liabilities
subject to offsetting,
enforceable master
netting
arrangements
and
similar
agreements,
as
well
as
financial
collateral
received
or
pledged
to
mitigate
credit
exposures for these financial instruments.
UBS AG
engages
in
a
variety
of
counterparty
credit
risk
mitigation
strategies
in
addition
to
netting
and
collateral
arrangements. Therefore, the net
amounts presented in the
tables below do not purport
to represent their actual
credit
risk exposure.
Financial assets subject to offsetting, enforceable
master netting arrangements and similar
agreements
Assets subject to netting arrangements
Netting recognized on the balance sheet
Netting potential not recognized on
the balance sheet
1
Assets not
subject to netting
arrangements
2
Total assets
As of 31.12.24, USD bn
Gross assets
before netting
Netting with
gross liabilities
3
Net assets
recognized
on the
balance
sheet
Financial
liabilities
Collateral
received
Assets after
consideration
of
netting
potential
Assets
recognized
on the
balance
sheet
Total assets
after
consideration
of netting
potential
Total assets
recognized
on the
balance
sheet
Receivables from securities financing
transactions measured at amortized cost
(
13.3
)
(
3.1
)
(
95.0
)
Derivative financial instruments
(
2.6
)
(
135.6
)
(
27.1
)
Cash collateral receivables on
derivative instruments
4
(
25.9
)
(
2.4
)
Financial assets at fair value
not held for trading
(
87.1
)
(
1.8
)
(
23.3
)
of which: reverse
repurchase agreements
(
87.1
)
(
1.8
)
(
20.6
)
Total assets
(
103.0
)
(
166.4
)
(
147.7
)
As of 31.12.23, USD bn
Receivables from securities financing
transactions measured at amortized cost
(
12.2
)
(
1.5
)
(
55.2
)
Derivative financial instruments
(
2.5
)
(
99.3
)
(
23.4
)
Cash collateral receivables on
derivative instruments
4
(
20.4
)
(
2.5
)
Financial assets at fair value
not held for trading
(
89.6
)
(
1.8
)
(
4.9
)
of which: reverse
repurchase agreements
(
89.6
)
(
1.8
)
(
3.7
)
Total assets
(
104.3
)
(
122.9
)
(
85.9
)
1 For the purpose of this disclosure,
the amounts of financial instruments and cash
collateral presented have been capped so
as not to exceed the net amount
of financial assets presented on the balance
sheet; i.e.
over-collateralization, where
it exists, is
not reflected in
the table.
2 Includes assets
not subject to
enforceable netting arrangements
and other out-of-scope
items.
3 The logic
of the table
results in amounts
presented in the “Netting with gross liabilities”
column corresponding directly to the amounts
presented in the “Netting with gross assets”
column in the liabilities table presented
below. Netting in this column
for
reverse repurchase agreements
presented within the
lines “Receivables from
securities financing transactions
measured at amortized
cost” and “Financial
assets at fair
value not held
for trading” taken
together
corresponds to the amounts presented for repurchase agreements in the “Payables
from securities financing transactions measured at amortized cost” and
“Other financial liabilities designated at fair value” lines in
the liabilities table presented below.
4 The net amount of Cash collateral receivables
on derivative instruments recognized on the balance
sheet includes certain OTC derivatives that
are net settled on a daily basis
either legally or in substance under IAS 32 principles and exchange-traded derivatives that are economically
settled on a daily basis.
Annual Report 2024
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AG consolidated financial statements
224
Note 22
Offsetting financial assets and financial liabilities (continued)
Financial liabilities subject to offsetting, enforceable
master netting arrangements and similar
agreements
Liabilities subject to netting arrangements
Netting recognized on the balance sheet
Netting potential not recognized
on the balance sheet
1
Liabilities not
subject
to netting
arrangements
2
Total liabilities
As of 31.12.24, USD bn
Gross
liabilities
before
netting
Netting with
gross assets
3
Net
liabilities
recognized
on the
balance
sheet
Financial
assets
Collateral
pledged
Liabilities
after
consideration
of netting
potential
Liabilities
recognized
on the
balance
sheet
Total
liabilities
after
consideration
of netting
potential
Total
liabilities
recognized
on the
balance
sheet
Payables from securities financing
transactions measured at amortized cost
(
11.5
)
(
1.1
)
(
12.4
)
4
Derivative financial instruments
(
2.6
)
(
135.6
)
(
30.8
)
Cash collateral payables on
derivative instruments
5
(
20.2
)
(
2.4
)
Other financial liabilities
designated at fair value
(
88.9
)
(
3.8
)
(
4.1
)
of which: repurchase agreements
(
88.9
)
(
3.8
)
(
2.0
)
Total liabilities
(
103.0
)
(
160.7
)
(
49.7
)
As of 31.12.23, USD bn
Payables from securities financing
transactions measured at amortized cost
(
12.1
)
(
0.8
)
(
3.2
)
Derivative financial instruments
(
2.5
)
(
99.3
)
(
24.5
)
Cash collateral payables on
derivative instruments
5
(
17.2
)
(
3.4
)
Other financial liabilities
designated at fair value
(
89.8
)
(
2.5
)
(
4.8
)
of which: repurchase agreements
(
89.8
)
(
2.5
)
(
4.4
)
Total liabilities
(
104.3
)
(
119.7
)
(
36.0
)
1 For the purpose of this disclosure, the amounts of financial instruments and cash collateral presented have been capped so as not to exceed the net amount of financial liabilities presented on the balance sheet; i.e.
over-collateralization, where it
exists, is not reflected
in the table.
2 Includes liabilities not subject to
enforceable netting arrangements and
other out-of-scope items.
3 The logic of
the table results in amounts
presented in the “Netting with gross assets” column corresponding to the amounts
presented in the “Netting with gross liabilities” column in the assets table
presented above. Netting in this column for repurchase
agreements presented within the lines “Payables from securities financing transactions measured at amortized
cost” and “Other financial liabilities designated at fair value” taken together corresponds to
the amounts
presented for reverse repurchase agreements
in the “Receivables from securities
financing transactions measured at
amortized cost” and “Financial assets
at fair value not held
for trading” lines in the
assets table
presented above.
4 Includes collateral
of USD
bn for securities financing
transactions measured at
amortized cost that
use UBS AG debt
instruments as the underlying.
5 The net
amount of Cash
collateral
payables on derivative
instruments recognized on
the balance sheet includes
certain OTC
derivatives that are
net settled on a
daily basis either legally
or in substance under
IAS 32 principles and
exchange-traded
derivatives that are economically settled on a daily basis.
Annual Report 2024
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AG consolidated financial statements
225
Note 23
Restricted and transferred financial assets
This Note
provides information
about restricted
financial assets
(Note 23a),
transfers of
financial assets
(Note 23b
and
23c) and financial assets that are received
as collateral with the right to resell or repledge
these assets (Note 23d).
a) Restricted financial assets
Restricted
financial
assets
consist
of
assets
pledged
as
collateral
against
an existing
liability
or contingent
liability
and
other assets that are otherwise explicitly restricted
such that they cannot be used to secure
funding.
Financial
assets
are
mainly
pledged
as
collateral
in
securities
lending
transactions,
in
repurchase
transactions
and
in
relation to mortgage loans,
which serve as
collateral against loans from
Swiss mortgage institutions and
US Federal Home
Loan Banks,
and in
connection
with the
issuance of
covered bonds.
Of these
pledged mortgage
loans, approximately
USD
bn as of
31 December 2024
could be withdrawn or
used as collateral
for future liabilities,
covered bond issuances
or
used
for
securities
financing
transactions backed
by
available
retained
covered
bonds
without
breaching
existing
collateral requirements (31 December 2023: approximately USD
bn). Existing liabilities against Swiss central mortgage
institutions
and
US
Federal
Home
Loan
Banks
and
for
existing
covered
bond
issuances
were
USD
bn
as
of
31
December 2024 (31 December 2023: USD
bn).
Repurchase
and
securities
lending
arrangements
are
generally
entered
into
under
standard
market
agreements.
For
securities
lending,
the
cash
received
as
collateral
may
be
more
or
less
than
the
fair
value
of
the
securities
loaned,
depending on
the nature
of the
transaction. For
repurchase agreements,
the fair
value of
the collateral
sold under
an
agreement to repurchase is generally in excess of the cash borrowed.
Other restricted financial
assets include assets
protected under client
asset segregation rules,
assets held under
unit-linked
investment contracts to back related liabilities to the policy holders and assets held in certain jurisdictions to comply with
explicit minimum local asset
maintenance requirements. The carrying amount
of the liabilities associated
with these other
restricted financial
assets
is generally
equal to
the carrying
amount of
the assets,
with the
exception of
assets held
to
comply with local asset maintenance requirements, for
which the associated liabilities are greater.
Restricted financial assets
USD m
31.12.24
31.12.23
Restricted
financial assets
of which: assets
pledged as
collateral that
may be sold or
repledged by
counterparties
Restricted
financial assets
of which: assets
pledged as
collateral that
may be sold or
repledged by
counterparties
Financial assets pledged as collateral
Cash and balances at central banks
1
Financial assets at fair value held for trading
Loans and advances to customers
Financial assets at fair value not held for trading
Debt securities classified as Other financial assets measured
at amortized cost
Total financial assets pledged as collateral
Other restricted financial assets
Amounts due from banks
Financial assets at fair value held for trading
Cash collateral receivables on derivative instruments
Loans and advances to customers
Other financial assets measured at amortized cost
2
Financial assets at fair value not held for trading
Financial assets measured at fair value through other comprehensive
income
Other
Total other restricted financial assets
Total financial assets pledged and other restricted financial assets
3
1 Assets pledged
to the
depositor protection
system in
Switzerland.
2 Predominantly
includes cash
collateral provided
to exchanges
and clearing
houses to
secure securities
trading activity
through those
counterparties.
3 Does not
include assets
placed with
central
banks related
to undrawn
credit lines
and for
payment,
clearing and
settlement purposes,
as well
as undrawn
contingency funding
facilities
(31 December 2024: USD
bn; 31 December 2023: USD
bn).
Annual Report 2024
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AG consolidated financial statements
226
Note 23
Restricted and transferred financial assets (continued)
In
addition
to
restrictions
on
financial
assets,
UBS AG
and
its
subsidiaries
are,
in
certain
cases,
subject
to
regulatory
requirements that affect
the transfer
of dividends
and capital
within UBS AG,
as well
as intercompany lending.
Supervisory
authorities also may
require entities to measure
capital and leverage ratios
on a stressed
basis, such as
the Federal Reserve
Board’s Comprehensive Capital Analysis and
Review (CCAR) process, which may
limit the relevant subsidiaries’ ability
to
make distributions of capital based on the results of those
tests.
Supervisory
authorities
generally
have
discretion
to
impose
higher
requirements
or
to
otherwise
limit
the
activities
of
subsidiaries.
Non-regulated subsidiaries are generally
not subject to such requirements and transfer
restrictions. However, restrictions
can
also
be
the
result
of
different
legal,
regulatory,
contractual,
entity-
or
country-specific
arrangements
and
/
or
requirements.
b) Transferred financial assets that are not derecognized
in their entirety
The
table
below
presents
information
for
financial
assets
that
have
been
transferred
but
are
subject
to
continued
recognition in full, as well as recognized
liabilities associated with those transferred assets.
Transferred financial assets subject to continued recognition in full
USD m
31.12.24
31.12.23
Carrying amount
of transferred
assets
Carrying amount of
associated liabilities
recognized
on balance sheet
Carrying amount
of transferred
assets
Carrying amount of
associated liabilities
recognized
on balance sheet
Financial assets at fair value held for trading that may be sold or repledged
by counterparties
Financial assets at fair value not held for trading that may be sold or repledged
by
counterparties
Debt securities classified as Other financial assets measured
at amortized cost that may be
sold or repledged by counterparties
Total financial assets transferred
Transactions in which financial assets are transferred but continue to be
recognized in their entirety on UBS AG’s balance
sheet include
securities lending
and repurchase
agreements,
as well
as other
financial asset
transfers. Repurchase
and
securities lending
arrangements are, for
the most
part, conducted
under standard market
agreements and are
undertaken
with counterparties subject to UBS AG’s normal credit
risk control processes.
›
Refer to Note 1a item 2e for more information about repurchase
and securities lending agreements
Financial assets at
fair value held
for trading that
may be sold
or repledged
by counterparties
include securities lending
and
repurchase
agreements
in
exchange
for
cash
received,
securities
lending
agreements
in
exchange
for
securities
received and other financial asset transfers.
For
securities
lending
and
repurchase
agreements,
a
haircut
of
between
%
and
%
is
generally
applied
to
the
transferred
assets,
which
results
in
associated
liabilities
having
a
carrying
amount
below
the
carrying
amount
of
the
transferred assets. The
counterparties to the
associated liabilities included
in the
table above have
full recourse to
UBS AG.
In securities
lending arrangements
entered into
in exchange
for the
receipt of
other securities
as collateral,
neither the
securities received nor the obligation to return them are recognized on UBS AG’s balance sheet, as the risks and rewards
of
ownership
are
not
transferred
to
UBS AG.
In
cases
where
such
financial
assets
received
are
subsequently
sold
or
repledged in another transaction, this is not considered to
be a transfer of financial assets.
Other financial asset transfers primarily include
securities transferred to collateralize derivative transactions, for which the
carrying amount
of associated liabilities
is not
included in
the table above,
because those replacement
values are
managed
on a
portfolio basis
across counterparties
and product
types, and
therefore there
is no
direct relationship
between the
specific collateral pledged and the associated liability.
Transferred financial assets that are not subject to
derecognition in full but remain on the balance
sheet to the extent of
UBS AG’s continuing involvement were not material as of
31 December 2024 and as of 31 December 2023.
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227
Note 23
Restricted and transferred financial assets (continued)
c) Transferred financial assets that are derecognized
in their entirety with continuing involvement
Continuing involvement in
a transferred and
fully derecognized financial
asset may result from
contractual provisions in
the particular transfer
agreement or from
a separate
agreement, with the
counterparty or
a third party,
entered into
in
connection with the transfer.
The fair
value and
carrying amount of
UBS AG’s continuing
involvement from
transferred positions
as of
31 December
2024 and
31 December
2023 was
not material.
Life-to-date
losses reported
in prior
periods primarily
relate
to legacy
positions in securitization vehicles that have been fully marked
down, with no remaining exposure to loss.
d) Off-balance sheet assets received
The table below presents assets received from third parties that can be sold or repledged and that are not recognized on
the balance sheet but that are held as collateral, including
amounts that have been sold or repledged.
Off-balance sheet assets received
USD m
31.12.24
31.12.23
Fair value of assets received that can be sold or repledged
1
of which: sold or repledged
1 Includes securities
received as initial
margin from its
clients that UBS
AG is required
to remit to
central counterparties,
brokers and
deposit banks through
its exchange-traded
derivative clearing
and execution
services.
2 Does not include off-balance sheet securities (31 December 2024: USD
bn; 31 December 2023: USD
bn) placed with central banks related to undrawn credit lines and for payment, clearing and
settlement purposes for which there are no associated liabilities or contingent liabilities.
Note 24
Maturity analysis of assets and liabilities
a) Maturity analysis of carrying amounts of assets and
liabilities
The table
below provides
an analysis
of carrying
amounts of
balance sheet
assets and
liabilities, as
well as
off-balance
sheet
exposures
by
residual
contractual
maturity
as
of
the
reporting
date.
The
residual
contractual
maturity
of
assets
includes the effect
of callable features.
The residual contractual
maturity of liabilities and
off-balance sheet exposures
is
based on the earliest date on which a third party
could require UBS AG to pay.
Derivative financial instruments
and financial assets
and liabilities at
fair value held for
trading are presented
in the
Due
within 1 month
Assets held to hedge unit-linked investment contracts
(presented within
Financial assets at fair value not
held for trading
)
are
presented
in
the
Due within
1
month
under unit-linked investment contracts (presented within
Other financial liabilities designated at fair value
).
Other financial assets
and liabilities with
no contractual maturity, such
as equity securities,
are presented in
the
Perpetual /
Not applicable
counterparty
of the
instrument
is entitled
to
give.
Where
there
is no
contractual
notice
period,
undated
or perpetual
contracts are presented in the
Perpetual / Not applicable
Non-financial assets
and liabilities
with no
contractual maturity
are generally
included in
the
Perpetual /
Not applicable
column.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
228
Note 24
Maturity analysis of assets and liabilities (continued)
31.12.24
USD bn
Due within
1 month
Due between
1 and 3
months
Due between
3 and 12
months
Due between
1 and 2 years
Due between
2 and 5 years
Due over
5 years
Perpetual /
Not
applicable
Total
Assets
Total financial assets measured at amortized cost
Amounts due from banks
Loans and advances to customers
Other financial assets measured at amortized cost
Total financial assets measured at fair value through profit or
loss
Financial assets at fair value not held for trading
Financial assets measured at fair value through other
comprehensive income
Total non-financial assets
Total assets
Liabilities
Total financial liabilities measured at amortized cost
Customer deposits
Funding from UBS Group AG measured at amortized cost
Debt issued measured at amortized cost
of which: non-subordinated
of which: subordinated
Total financial liabilities measured at fair value through
profit or loss
1
Debt issued designated at fair value
Total non-financial liabilities
Total liabilities
Guarantees, loan commitments and forward starting transactions
2
Irrevocable loan commitments
Guarantees
Forward starting reverse repurchase and securities borrowing
agreements
Irrevocable committed prolongation of existing loans
Total
31.12.23
USD bn
Due within
1 month
Due between
1 and 3
months
Due between
3 and 12
months
Due between
1 and 2 years
Due between
2 and 5 years
Due over
5 years
Perpetual /
Not
applicable
Total
Assets
Total financial assets measured at amortized cost
Amounts due from banks
Loans and advances to customers
Other financial assets measured at amortized cost
Total financial assets measured at fair value through profit or
loss
Financial assets at fair value not held for trading
Financial assets measured at fair value through other
comprehensive income
Total non-financial assets
Total assets
Liabilities
Total financial liabilities measured at amortized cost
Customer deposits
Funding from UBS Group AG measured at amortized cost
Debt issued measured at amortized cost
of which: non-subordinated
of which: subordinated
Total financial liabilities measured at fair value through
profit or loss
1
Debt issued designated at fair value
Total non-financial liabilities
Total liabilities
Guarantees, loan commitments and forward starting transactions
2
Irrevocable loan commitments
Guarantees
Forward starting reverse repurchase and securities borrowing
agreements
Irrevocable committed prolongation of existing loans
Total
1 As of 31 December 2024 and 31
December 2023, the contractual redemption
amount at maturity of debt issued designated
at fair value through profit
or loss and other financial liabilities designated
at fair value
through profit or loss
was not materially
different from the carrying
amount.
2 The notional
amounts associated with
derivative loan commitments,
as well as
forward starting repurchase
and reverse repurchase
agreements, measured at
fair value through
profit or loss
are presented together
with notional amounts
related to derivative
instruments and have
been excluded from
the table above.
Refer to Note
11 for more
information.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
229
Note 24
Maturity analysis of assets and liabilities (continued)
b) Maturity analysis of financial liabilities on an undiscounted
basis
The table below provides
an analysis of financial
liabilities on an undiscounted
basis, including all
cash flows relating
to
principal and
future interest
payments. The
residual contractual
maturities for
non-derivative and
non-trading financial
liabilities are based on the earliest date on
which UBS AG could be contractually required to pay. Derivative positions and
trading liabilities,
predominantly made
up of short
sale transactions,
are presented
in the
Due within 1
month
,
as this provides a conservative reflection of the nature of these trading activities. The residual contractual
maturities may
extend over significantly longer periods.
31.12.24
USD bn
Due within
1 month
Due between
1 and 3
months
Due between
3 and 12
months
Due between
1 and 2 years
Due between
2 and 5 years
Due over
5 years
Perpetual /
Not
applicable
Total
Financial liabilities recognized on balance sheet
1
Amounts due to banks
Payables from securities financing transactions
Cash collateral payables on derivative instruments
Customer deposits
Funding from UBS Group AG measured at amortized cost
2
Debt issued measured at amortized cost
2
Other financial liabilities measured at amortized cost
Total financial liabilities measured at amortized cost
Financial liabilities at fair value held for trading
3,4
Derivative financial instruments
3,5
Brokerage payables designated at fair value
Debt issued designated at fair value
6
Other financial liabilities designated at fair value
Total financial liabilities measured at fair value through
profit or loss
Total
Guarantees, loan commitments and forward starting transactions
Irrevocable loan commitments
7
Guarantees
Forward starting reverse repurchase and securities
borrowing agreements
7
Irrevocable committed prolongation of existing loans
Total
31.12.23
USD bn
Due within
1 month
Due between
1 and 3
months
Due between
3 and 12
months
Due between
1 and 2 years
Due between
2 and 5 years
Due over
5 years
Perpetual /
Not
applicable
Total
Financial liabilities recognized on balance sheet
1
Amounts due to banks
Payables from securities financing transactions
Cash collateral payables on derivative instruments
Customer deposits
Funding from UBS Group AG measured at amortized cost
2
Debt issued measured at amortized cost
Other financial liabilities measured at amortized cost
Total financial liabilities measured at amortized cost
Financial liabilities at fair value held for trading
3,4
Derivative financial instruments
3,5
Brokerage payables designated at fair value
Debt issued designated at fair value
6
Other financial liabilities designated at fair value
Total financial liabilities measured at fair value through
profit or loss
Total
Guarantees, loan commitments and forward starting transactions
Irrevocable loan commitments
7
Guarantees
Forward starting reverse repurchase and securities
borrowing agreements
7
Irrevocable committed prolongation of existing loans
Total
1 Except for financial liabilities at
fair value held for trading
and derivative financial instruments (see
footnote 3), the amounts presented
generally represent undiscounted cash
flows of future interest and
principal
payments.
2 The time-bucket Perpetual / Not applicable
includes perpetual loss-absorbing additional tier 1 capital instruments.
3 Carrying amount is fair value. Management believes that this best represents
the
cash flows
that would
have to
be paid
if these
positions had
to be
settled or
closed out.
4 Contractual
maturities of
financial liabilities
at fair
value
held for
trading are:
USD
bn due
within 1
month
(31 December 2023: USD
bn), USD
bn due between 1 month
and 1 year (31 December
2023: USD
bn) and USD
bn due between 1 and 5
years (31 December 2023: USD
bn).
5 Includes USD
m
(31 December 2023: USD
m) related to fair
values of derivative
loan commitments and forward
starting reverse repurchase agreements
classified as derivatives,
presented within “Due within
1 month”. The
full
contractual committed amount of USD
bn (31 December 2023: USD
bn) is presented in Note 11 under notional amounts.
6 Future interest payments on variable-rate liabilities are determined by reference
to the applicable interest rate prevailing as of
the reporting date. Future principal payments that are variable are
determined by reference to the conditions existing at
the relevant reporting date.
7 Excludes derivative
loan commitments and forward starting reverse repurchase agreements measured at fair value (see footnote 5).
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
230
Note 25
Hedge accounting
Derivatives designated in hedge accounting relationships
UBS AG applies hedge
accounting to interest
rate risk and
foreign exchange
risk, including structural
foreign exchange
risk related to net investments in foreign
operations.
›
Refer to “Market risk” in the “Risk management
and control” section of this report for more information about
how risks arise
and how they are managed by UBS AG
Hedging instruments and hedged risk
Interest rate swaps are
designated in fair
value hedges or
cash flow hedges
of interest rate risk
arising solely
from changes
in benchmark
interest
rates. Fair
value changes
arising from
such risk
are usually
the largest
component of
the overall
change in the fair value of the hedged position in transaction
currency.
Cross-currency
swaps
are
designated
as
fair
value
hedges
of
foreign
exchange
risk.
Foreign
exchange
forwards
and
foreign exchange swaps
are mainly designated
as hedges of
structural foreign exchange
risk related to
net investments
in foreign operations. In both cases the hedged risk arises solely from
changes in the spot foreign exchange rate.
The notional of the designated hedging instruments matches the
notional of the hedged items, except when
the interest
rate
swaps
are
designated
in
cash
flow
hedges
after
the
trade
date,
in
which
case
the
hedge
ratio
designated
is
determined based on the swap sensitivity.
Hedged items and hedge designation
Fair value hedges of interest rate risk related to
debt instruments and loan assets
Fair
value
hedges
of
interest
rate
risk
related
to
debt
instruments
and
loan
assets
involve
swapping
fixed
cash
flows
associated with loans to customers
(including long-term fixed-rate
mortgage loans in Swiss francs),
debt securities held,
customer deposits, funding from
UBS Group AG, debt
issued to floating cash flows
by entering into interest
rate swaps
that either pay fixed and receive floating cash flows or that receive fixed and pay floating cash flows. The floating future
cash flows are
based on the
following benchmark rates: Secured
Overnight Financing Rate
(SOFR), Effective Federal
Funds
Rate (EFFR),
Swiss Average Rate
Overnight (SARON),
Euro Interbank Offered Rate
(EURIBOR), Euro
Short-Term Rate (ESTR),
Sterling Overnight Index Average
(SONIA), AUD London Interbank
Offered Rate
(AUD LIBOR), Tokyo
Overnight Average
Rate (TONA), Singapore Overnight Rate Average
(SORA) and Norwegian Krona Overnight Index Swap (NOK
OIS).
Cash flow hedges of forecast transactions
UBS AG hedges
forecast cash
flows on
non-trading financial
assets and
liabilities that
bear interest
at variable
rates or
are expected
to be refinanced
or reinvested
in the future,
due to movements
in future
market rates.
The amounts and
timing of future
cash flows, representing both
principal and interest flows,
are projected on the
basis of contractual
terms
and
other
relevant
factors,
including
estimates
of
prepayments
and
defaults.
The
aggregate
principal
balances
and
interest
cash
flows
across
all
portfolios
over
time
form
the
basis
for
identifying
the
non-trading
interest
rate
risk
of
UBS AG, which is hedged with interest rate swaps, the maximum maturity of
which is 15 years. Cash flow forecasts and
risk exposures
are monitored
and adjusted
on an
ongoing basis,
and consequently
additional hedging
instruments are
traded and designated, or are terminated resulting
in a hedge discontinuance.
Fair value hedges of foreign exchange risk related to debt
instruments
Debt instruments denominated in currencies other than the US dollar are designated in fair value hedges of spot foreign
exchange
risk,
in
addition
to
and
separate
from
the
fair
value
hedges
of
interest
rate
risk.
Cross-currency
swaps
economically
convert
debt
instruments
denominated
in
currencies
other
than
the
US
dollar
to
US
dollars.
The
hedge
designations also
involve intragroup
debt
instruments that
are
eliminated upon
consolidation
but FX
gains and
losses
impact consolidated profit or loss.
Hedges of net investments in foreign operations
UBS AG applies hedge accounting for certain net investments in
foreign operations, which include subsidiaries, branches
and associates.
Upon maturity of
hedging instruments, typically
one to
three months, the
hedge relationship is
terminated
and new designations are made to reflect
any changes in the net investments in foreign operations.
Economic relationship between hedged item and hedging
instrument
The economic relationship
between the
hedged item and
the hedging
instrument is
determined based
on a qualitative
analysis
of
their
critical
terms.
In
cases
where
hedge
designation
takes
place
after
the
trade
date
of
the
hedging
instrument, a quantitative
analysis of the
possible behavior of
the hedging
derivative and the
hedged item
during their
respective terms is also performed.
Sources of hedge ineffectiveness
In
hedges
of
interest
rate
risk,
hedge
ineffectiveness
can
arise
from
mismatches
of
critical
terms
and
/
or
the
use
of
different curves to
discount the hedged item and
instrument, or from entering
into a hedge relationship
after the trade
date of the hedging derivative.
In hedges of foreign exchange risk related to debt instruments, hedge ineffectiveness can arise due
to the discounting of
the hedging
instruments and
undesignated risk
components and
lack of
such discounting
and risk
components in
the
hedged items.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
231
Note 25
Hedge accounting (continued)
In hedges of net investments in foreign operations, ineffectiveness is unlikely unless the hedged net assets fall below the
designated hedged amount.
The exceptions are
hedges where the
hedging currency is
not the same
as the currency
of
the foreign operation, where the currency basis may cause ineffectiveness.
Hedge ineffectiveness from financial instruments
measured at fair value through profit or loss
is recognized in
Other net
income from financial instruments measured at fair value
through profit or loss.
Derivatives not designated in hedge accounting relationships
Non-hedge-accounted
derivatives
are
mandatorily
held
for
trading
with
all
fair
value
movements
taken
to
Other
net
income from financial instruments
measured at fair value through
profit or loss
, even when held as an
economic hedge
or to
facilitate client
clearing. The
one exception
relates to
forward points
on certain
short- and
long-duration foreign
exchange and interest rate contracts acting as economic
hedges, which are reported in
Net interest income.
All hedges: designated hedging instruments
and hedge ineffectiveness
As of or for the year ended
31.12.24
Notional
amount
Carrying amount
Changes in
fair value of
hedging
instruments
1
Changes in
fair value of
hedged
items
1
Hedge
ineffectiveness
recognized in the
income statement
USD m
Derivative
financial
assets
Derivative
financial
liabilities
Interest rate risk
Fair value hedges
(
718
)
(
43
)
Cash flow hedges
(
1,458
)
(
5
)
Foreign exchange risk
Fair value hedges
2
(
749
)
(
28
)
Hedges of net investments in foreign operations
(
1,340
)
As of or for the year ended
31.12.23
Notional
amount
Carrying amount
Changes in
fair value of
hedging
instruments
1
Changes in
fair value of
hedged
items
1
Hedge
ineffectiveness
recognized in the
income statement
USD m
Derivative
financial
assets
Derivative
financial
liabilities
Interest rate risk
Fair value hedges
(
2,195
)
Cash flow hedges
(
35
)
Foreign exchange risk
Fair value hedges
2
(
151
)
(
19
)
Hedges of net investments in foreign operations
(
910
)
1 Amounts used as the basis
for recognizing hedge ineffectiveness for the period.
2 The foreign currency basis spread of cross-currency swaps designated
as hedging derivatives is excluded from the hedge
accounting
designation and accounted for as a cost of hedging with amounts deferred in Other comprehensive income within Equity.
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| Consolidated financial statements | UBS
AG consolidated financial statements
232
Note 25
Hedge accounting (continued)
Fair value hedges: designated hedged items
recognized on balance sheet
1
USD m
31.12.24
31.12.23
Interest rate
risk
FX risk
Interest rate
risk
FX risk
Loans and advances to customers
Carrying amount of designated loans
of which: accumulated amount of fair value hedge adjustment
(
508
)
of which: accumulated amount of fair value hedge adjustment subject
to amortization attributable to the
portion of the portfolio that ceased to be part of hedge
accounting
(
176
)
(
179
)
Other financial assets measured at amortized cost – debt securities
Carrying amount of designated debt securities
(
348
)
(
109
)
Customer deposits
Carrying amount of customer deposits
(
18
)
Funding from UBS Group AG and its subsidiaries
Carrying amount of designated debt instruments
(
5,820
)
(
3,174
)
Debt issued measured at amortized cost
Carrying amount of designated debt issued
(
412
)
1
In addition, as of 31 December 2024 UBS
AG designated in fair value hedges of
FX risk USD
bn (31 December 2023 USD
bn) of intragroup debt instruments that are
not recognized on consolidated balance
sheet but FX gains and losses on these instruments impact consolidated profit or loss.
Fair value hedges: profile of the timing of the
nominal amount of the hedging instrument
31.12.24
USD bn
Due within
1 month
Due between
1 and 3 months
Due between
3 and 12 months
Due between
1 and 5 years
Due after
5 years
Total
Interest rate swaps
Cross-currency swaps
31.12.23
USD bn
Due within
1 month
Due between
1 and 3 months
Due between
3 and 12 months
Due between
1 and 5 years
Due after
5 years
Total
Interest rate swaps
Cross-currency swaps
Cash flow hedge reserve on a pre-tax basis
USD m
31.12.24
31.12.23
Amounts related to hedge relationships for which hedge
accounting continues to be applied
(
2,514
)
(
2,349
)
Amounts related to hedge relationships for which hedge
accounting is no longer applied
(
714
)
(
1,331
)
Total other comprehensive income recognized directly in equity related to cash flow hedges, on a pre-tax basis
(
3,228
)
(
3,680
)
Foreign currency translation reserve on a pre-tax basis
USD m
31.12.24
31.12.23
Amounts related to hedge relationships for which hedge
accounting continues to be applied
(
690
)
Amounts related to hedge relationships for which hedge
accounting is no longer applied
Total other comprehensive income recognized directly in equity related to hedging instruments
designated as net investment hedges, on a pre-tax
basis
(
424
)
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
233
Note 26
Post-employment benefit plans
a) Defined benefit plans
UBS AG has
established defined benefit
plans for
its employees in
various jurisdictions in
accordance with local
regulations
and practices. The major plans are located in Switzerland,
with smaller plans mainly in UK, US and Germany. The level of
benefits depends on the specific plan rules.
Major Swiss pension plans
The major
Swiss pension
plans consist
of the
UBS Swiss
plan and
the Credit
Suisse Swiss
plan, covering
employees
of
UBS AG
in
Switzerland
and
employees
of
companies
in
Switzerland
that
have
close
economic
or
financial
ties
with
UBS AG, and
exceed the
minimum benefit
requirements
under Swiss
pension law.
A significant
number of
employees
are
employed by
UBS
Business
Solutions
AG and
Credit
Suisse Services
AG, which
are
subsidiaries of
UBS Group AG.
UBS AG,
UBS
Business
Solutions
AG
and
Credit
Suisse
Services
AG
each
are
legal
sponsors
of
the
Swiss
plans.
The
sponsoring entities apply proportionate defined benefit accounting,
i.e. the net pension cost and the net pension asset /
liability of the Swiss pension
plans are allocated proportionally
between UBS AG, UBS
Business Solutions AG and
Credit
Suisse Services AG based on the aggregated net pension cost
and defined benefit obligations related to their employees.
The Swiss
plans offer
retirement,
disability and
survivor benefits
and are
governed by
Pension Foundation
Boards. The
responsibilities
of
these
boards
are
defined
by
Swiss
pension
law
and
the
plan
rules.
The
UBS
Swiss
plan
covers
contributions
for
all
salary
levels.
The
Credit
Suisse
Swiss
plan
covers
contributions
up
to
a
salary
of
CHF
(USD
), and contributions above that salary
go into the Credit Suisse
Swiss 1e plan, which is
accounted for under
IFRS Accounting Standards as a defined contribution
plan.
Savings contributions
to the Swiss
plans are paid
by both the
employer and
the employee.
For the
UBS AG Swiss
plan,
depending on the
age of the
employee, UBS AG
pays a savings
contribution that ranges
between
% and
% of
the
contributory
base
salary
and
between
%
and
%
of
the
contributory
variable
compensation.
Employees
can
choose the level of
savings contributions paid
by them, which vary
between
% and
% of the contributory
base
salary and
between
% and
% of
the contributory
variable compensation,
depending on
age and
choice of
savings
contribution category. For
the Credit Suisse
Swiss plan, depending
on the age
of the employee,
UBS AG pays
a savings
contribution that ranges between
% and
% of the contributory base salary and
% of the contributory variable
compensation. Employees
can choose
the level
of savings
contributions paid
by them,
which vary
between
% and
% of the contributory base salary
and between
% and
% of the contributory variable compensation,
depending
on age and choice
of savings contribution category.
UBS AG also pays
risk contributions that
are used to fund
disability
and survivor benefits.
The plans offer to members at the
normal retirement age of
lump sum payment. Participants
can choose to draw
early retirement benefits starting
from the age of
, but they can
also continue employment
and remain active
members of
the plan until
the age of
. Employees can
make additional
purchases of benefits to fund early retirement benefits.
The pension amount
payable to a
participant is calculated
by applying a conversion
rate to the
accumulated balance of
the
participant’s
retirement
savings
account
at
the
retirement
date.
The
balance
is
based
on
credited
vested
benefits
transferred
from
previous
employers,
purchases
of
benefits,
employee
and
employer
contributions
made
to
the
participant’s
retirement
savings
account,
and
interest
accrued.
The
annual
interest
rate
credited
to
participants
is
determined by the Pension Foundation Boards at the
end of each year.
Although the Swiss plans are
based on a defined contribution
promise under Swiss pension
law, they are accounted for
as defined benefit plans
under IFRS Accounting
Standards, primarily because
of the obligation to
accrue interest on
the
participants’ retirement savings accounts and the payment of
lifetime pension benefits.
Actuarial valuations in accordance
with Swiss pension law
are performed regularly. Should an
underfunded situation on
this basis occur, the
Pension Foundation Board of the respective
plan is required to
take the necessary measures to
ensure
that full funding
can be expected
to be restored within
a maximum period
of
significantly
underfunded
on
a
Swiss
pension
law
basis,
additional
employer
and
employee
contributions
could
be
required. In this situation, the risk is shared between employer and employees, and the employer is
not legally obliged to
cover more than
% of the
additional contributions required.
As of 31 December
2024, the technical funding
ratio in
accordance with Swiss pension law was
% at a
% technical interest rate for the UBS Swiss plan and
% at
a
% technical interest rate
for the Credit Suisse Swiss
plan (UBS Swiss plan 31 December
2023:
% at a
%
technical interest rate).
The investment strategies of the
Swiss plans comply with Swiss pension
law, including the rules and regulations
relating
to diversification
of plan assets,
and are derived
from the
risk budget defined
by the Pension
Foundation Boards
based
on regularly
performed
asset and
liability management
analyses. The
Pension Foundation
Boards strive
for a
medium-
and long-term balance between assets and liabilities.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
234
Note 26
Post-employment benefit plans (continued)
As of 31 December
2024, the Swiss
plans were in
surplus situations on
an IFRS Accounting
Standards measurement basis,
as the fair value of the plan assets exceeded the defined benefit obligation (DBO) by USD
m for the UBS Swiss plan
and USD
m for the Credit Suisse Swiss plan (UBS Swiss plan 31 December 2023: USD
m). However, a surplus
is only
recognized on
the balance
sheet to
the extent
that it
does not
exceed
the estimated
future economic
benefit,
which equals the difference between
the present value of the estimated future
net service cost and the present value
of
the
estimated
future
employer
contributions.
As
of
both
31 December
2024
and
31 December
2023,
the
estimated
future economic benefit
of the UBS
Swiss plan was
zero and
therefore no net
defined benefit asset
was recognized
on
the
balance
sheet;
as
of
31 December
2024 a
net
defined
benefit
asset
of
USD
m
was
recognized
by
UBS
AG
for
prepaid contributions held at the Credit Suisse Swiss plan.
The regular employer
contributions in
2025 are estimated
at USD
m for the
UBS Swiss
plan and USD
m for the
Credit Suisse Swiss plan.
Financial information
The tables
below provide
an analysis
of the
movement
in the
net asset
/ liability
recognized
on the
balance sheet
for
defined benefit plans, as well as an analysis of amounts
recognized in net profit and in
Other comprehensive incom
e.
Net asset / liability of defined benefit
plans
USD m
Major Swiss plans
31.12.24
1
31.12.23
Defined benefit obligation at the beginning of the year
Defined benefit obligation recognized upon the merger
of UBS AG and Credit Suisse AG
2
Current service cost
Interest expense
Plan participant contributions
Remeasurements
of which: actuarial (gains) / losses due to changes in demographic
assumptions
of which: actuarial (gains) / losses due to changes in financial
assumptions
of which: experience (gains) / losses
3
Curtailments
(
71
)
(
3
)
Benefit payments
(
1,420
)
(
662
)
Foreign currency translation
(
1,257
)
Defined benefit obligation at the end of the year
of which: amounts owed to active members
of which: amounts owed to deferred members
of which: amounts owed to retirees
of which: funded plans
of which: unfunded plans
Fair value of plan assets at the beginning of the year
Fair value of plan assets recognized upon the merger of UBS AG and Credit Suisse AG
2
Return on plan assets excluding interest income
Interest income
Employer contributions
Plan participant contributions
Benefit payments
(
1,420
)
(
662
)
Administration expenses, taxes and premiums paid
(
15
)
(
8
)
Other movements
Foreign currency translation
(
1,527
)
Fair value of plan assets at the end of the year
Surplus / (deficit)
Asset ceiling effect at the beginning of the year
Asset ceiling effect recognized upon the merger of UBS AG and
Credit Suisse AG
2
Interest expense on asset ceiling effect
Asset ceiling effect excluding interest expense and foreign currency
translation on asset ceiling effect
(
955
)
(
1,332
)
Foreign currency translation
(
270
)
Asset ceiling effect at the end of the year
Net defined benefit asset / (liability) of major Swiss plans
Other plans
Net defined benefit asset / (liability) of other plans
4
(
105
)
Total net defined benefit asset / (liability)
(
105
)
of which: Net defined benefit asset
of which: Net defined benefit liability
5
(
691
)
(
487
)
1 Including Credit Suisse AG
from 31 May 2024.
2 Refer to Note
2 for more information about
the merger of UBS AG and
Credit Suisse AG.
3 Experience (gains) /
losses are a component of
actuarial remeasurements
of the defined benefit obligation and reflect the effects
of differences between the previous actuarial assumptions and
what has actually occurred.
4 Mainly relates to UK, US and German
plans.
5 Refer to Note
19c.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
235
Note 26
Post-employment benefit plans (continued)
Income statement – expenses related to defined benefit plans
1
USD m
Major Swiss plans
31.12.24
2
31.12.23
Current service cost
Interest expense related to defined benefit obligation
Interest income related to plan assets
(
369
)
(
393
)
Interest expense on asset ceiling effect
Administration expenses, taxes and premiums paid
Curtailments
(
71
)
(
3
)
Other movements
Net periodic expenses recognized in net profit for major Swiss plans
Other plans
Net periodic expenses recognized in net profit for other plans
3
Total net periodic expenses recognized in net profit
1 Refer to Note 7.
2 Including Credit Suisse AG from 31 May 2024.
3 Includes differences between actual and estimated performance award accruals.
Other comprehensive income – gains / (losses) on defined benefit plans
USD m
Major Swiss plans
31.12.24
1
31.12.23
Other comprehensive income recognized upon the merger
of UBS AG and Credit Suisse AG
2
Remeasurement of defined benefit obligation
(
2,657
)
(
1,901
)
of which: change in discount rate assumption
(
2,102
)
(
1,332
)
of which: change in rate of salary increase assumption
(
168
)
(
42
)
of which: change in rate of pension increase assumption
of which: change in rate of interest credit on retirement savings
assumption
of which: change in life expectancy
of which: change in other actuarial assumptions
(
17
)
(
46
)
of which: experience gains / (losses)
3
(
628
)
(
688
)
Return on plan assets excluding interest income
Asset ceiling effect excluding interest expense and foreign currency translation
Total gains / (losses) recognized in other comprehensive income for major Swiss plans
(
56
)
Other plans
Total gains / (losses) recognized in other comprehensive income for other plans
4
(
83
)
(
47
)
Total gains / (losses) recognized in other comprehensive income
(
53
)
(
103
)
of which: attributable to other comprehensive income
recognized upon the merger of UBS AG and Credit Suisse AG
2
of which: attributable to other comprehensive income
recognized for defined benefit plans during the period
5
(
106
)
(
103
)
1 Including Credit Suisse AG
from 31 May 2024.
2 Refer to Note
2 for more information about
the merger of UBS AG and
Credit Suisse AG.
3 Experience (gains) /
losses are a component of
actuarial remeasurements
of the defined benefit obligation
and reflect the effects of
differences between the previous actuarial
assumptions and what has
actually occurred.
4 Mainly relates to UK,
US and German plans.
5 Refer to the
“Statement of comprehensive income”.
The table below provides information about the duration
of the DBO and the timing for expected benefit payments.
Major Swiss defined benefit plans
31.12.24
31.12.23
Duration of the defined benefit obligation (in years)
1
Maturity analysis of benefits expected to be paid
USD m
Benefits expected to be paid within 12 months
Benefits expected to be paid between 1 and 3 years
Benefits expected to be paid between 3 and 6 years
Benefits expected to be paid between 6 and 11 years
Benefits expected to be paid between 11 and 16 years
Benefits expected to be paid in more than 16 years
1 The duration of the defined benefit obligation represents a weighted average across the UBS
and Credit Suisse plans.
Actuarial assumptions
The
actuarial
assumptions
used
for
the
defined
benefit
plans
are
based on
the
economic
conditions
prevailing
in the
jurisdiction in
which they
are
offered.
Changes in
the defined
benefit obligation
are
most sensitive
to changes
in the
discount rate. The discount
rate is based on
the yield of high-quality
corporate bonds quoted
in an active market
in the
currency
of
the
respective
plan.
A
decrease
in
the
discount
curve
increases
the
DBO.
UBS AG
regularly
reviews
the
actuarial assumptions used in calculating the DBO to determine
their continuing relevance.
›
Refer to Note 1a item 5 for a description
of the accounting policy for defined benefit plans
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
236
Note 26
Post-employment benefit plans (continued)
The tables below show the significant actuarial assumptions
used in calculating the DBO at the end of the year.
Significant actuarial assumptions of
major Swiss defined benefit plans
In %
31.12.24
1
31.12.23
Discount rate
Rate of salary increase
Rate of pension increase
Rate of interest credit on retirement savings
1 Represents weighted average across the UBS and Credit Suisse plans.
aged 65
aged 45
Swiss mortality table: BVG 2020 G with CMI 2023 projections
1
31.12.24
31.12.23
31.12.24
31.12.23
Life expectancy at age 65 for a male member currently
Life expectancy at age 65 for a female member currently
1 In 2023, BVG 2020 G with CMI 2022 projections was used.
Sensitivity analysis of significant actuarial assumptions
The table
below presents
a sensitivity
analysis for
each significant
actuarial assumption,
showing how
the DBO
would
have been affected
by changes in
the relevant
actuarial assumption that
were reasonably
possible at the
balance sheet
date.
Unforeseen
circumstances
may
arise,
which
could
result
in
variations
that
are
outside
the
range
of
alternatives
deemed
reasonably
possible.
Caution
should
be
used
in
extrapolating
the
sensitivities
below
on
the
DBO,
as
the
sensitivities may not be linear.
Sensitivity analysis of significant actuarial
assumptions of major Swiss defined
benefit plans
1
Increase / (decrease) in defined benefit obligation
USD m
31.12.24
31.12.23
Discount rate
Increase by 50 basis points
(
1,667
)
(
857
)
Decrease by 50 basis points
Rate of salary increase
Increase by 50 basis points
Decrease by 50 basis points
(
167
)
(
117
)
Rate of pension increase
Increase by 50 basis points
Decrease by 50 basis points
–
2
–
2
Rate of interest credit on retirement savings
Increase by 50 basis points
Decrease by 50 basis points
(
252
)
(
144
)
Life expectancy
Increase in longevity by one additional year
1 The sensitivity analyses are based on a change in one assumption while
holding all other assumptions constant, so that interdependencies between the assumptions are excluded.
2 As the assumed rate of pension
increase was
% as of 31 December 2024 and as of 31 December 2023, a downward change in assumption is not applicable.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
237
Note 26
Post-employment benefit plans (continued)
Composition and fair value of Swiss defined
benefit plan assets
31.12.24
31.12.23
Fair value
Plan asset
allocation %
Fair value
Plan asset
allocation %
USD m
Quoted
in an active
market
Other
Total
Quoted
in an active
market
Other
Total
Cash and cash equivalents
Equity securities
Bonds
Real estate / property
Domestic
Foreign
Investment funds
Equity
Domestic
Foreign
Bonds
1
Domestic, AAA to BBB–
Domestic, below BBB–
Foreign, AAA to BBB–
Foreign, below BBB–
Real estate
Domestic
Foreign
Other
Other investments
Total fair value of plan assets
31.12.24
31.12.23
Total fair value of plan assets
of which: Investments in UBS Group AG
instruments
2
Bank accounts at UBS Group AG
UBS Group AG debt instruments
UBS Group AG shares
Securities lent to UBS Group AG
3
Property occupied by UBS Group AG
Derivative financial instruments, counterparty UBS Group
AG
3
(
83
)
1 The bond credit ratings
are primarily based on SP’s credit
ratings. Ratings AAA to BBB– and
below BBB– represent investment grade and non-investment
grade ratings, respectively.
In cases where credit ratings
from other rating agencies were used, these were converted to the equivalent rating in SP’s rating classification.
2 Bank accounts at UBS AG encompass accounts in the name of the Swiss pension funds. The other
positions disclosed
in the
table encompass
both direct
investments in
UBS AG
instruments and
UBS Group
AG shares
and indirect
investments, i.e.
those made
through funds
that the
pension fund
invests in.
3 Securities lent to UBS AG and derivative
financial instruments are presented gross of any
collateral. Securities lent to UBS AG
were fully covered by collateral as
of 31 December 2024 and 31 December 2023.
Net
of collateral, derivative financial instruments amounted to negative USD
m as of 31 December 2024 (31 December 2023: negative USD
m).
b) Defined contribution plans
UBS AG sponsors
several defined
contribution
plans, with
the most
significant plans
in the
US and
the
UK. UBS
AG’s
obligation is limited to its contributions made
in accordance with each plan, which
may include direct contributions and
matching contributions.
Employer contributions
to defined
contribution plans
are
recognized as
an expense
and were
USD
m in 2024 and USD
m in 2023.
›
Refer to Note 6 for more information
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
238
Note 26
Post-employment benefit plans (continued)
c) Related-party disclosure
UBS AG is the principal provider of
banking services for the pension
funds of UBS and Credit Suisse in
Switzerland. In this
capacity,
UBS AG is engaged
to execute most
of the pension
funds’ banking activities.
These activities can
include, but
are not
limited to, investment
management fees,
trading, securities lending
and borrowing
and derivative
transactions.
The non-Swiss
UBS AG pension
funds do
not have
a similar
banking relationship
with UBS AG.
During 2024,
UBS AG
received USD
m in fees for
banking services from the major
UBS AG plans (2023:
USD
m). As of 31
December 2024,
the Swiss, UK and US post-employment benefit plans held
USD
m in UBS shares (31 December 2023: USD
m).
›
Refer to the “Composition and fair value of
Swiss defined benefit plan assets” table in Note
26a for more information about fair
value of investments in UBS AG and UBS Group
AG instruments held by the major Swiss pension
funds
Note 27
Employee benefits: variable compensation
a) Plans offered
UBS has
several share-based
and other
deferred compensation
plans that
align the
interests of
Group Executive
Board
(GEB) members and other employees with the interests
of investors.
Share-based awards are granted
in the form of
notional shares and, where
permitted, carry a dividend
equivalent that may be
paid in notional shares or cash. Awards are settled by delivering UBS shares at vesting, except in jurisdictions
where this is not
permitted for legal or tax reasons.
Deferred
compensation
awards
are
generally
forfeitable
upon,
among
other
circumstances,
voluntary
termination
of
employment with UBS. These compensation plans are also designed to meet
regulatory requirements and include special
provisions
for
regulated
employees.
For
the
majority
of
variable
compensation
awards
granted
under
such
plans
to
employees of UBS AG, the
grantor entity is UBS
Group AG. Expenses associated
with these awards
are charged by
UBS
Group AG to UBS AG. For the purpose of this Note, refere
nces to shares refer to UBS Group AG shares.
The most significant deferred compensation plans
are described below.
›
Refer to Note 1a
item 4 for a description of the accounting
policy related to share-based and other deferred compensation plans
Mandatory deferred compensation plans
Long-Term Incentive Plan
The Long-Term
Incentive Plan
(the LTIP)
is a
mandatory deferral
plan for
GEB members
and Managing
Directors (MDs)
reporting to the GEB and their direct
reports at MD level.
The number of notional shares delivered at vesting depends on two equally weighted
performance metrics over a three-
year performance period: return
on common equity tier
1 (CET1) capital
and relative total shareholder return (TSR),
which
compares the TSR of UBS
with the TSR of
an index consisting of
listed Global Systemically Important Banks as
determined
by
the
Financial
Stability
Board
(excluding
UBS).
The
final
number
of
shares
vest
over
three
years
following
the
performance
period for
GEB
members
and
cliff
vest
in
the
year
following the
performance
period for
selected
senior
management.
Equity Ownership Plan / Fund Ownership Plan
The Equity Ownership Plan (the EOP) is the deferred share-based compensation plan for employees whose deferral is not
within the scope of the LTIP.
EOP awards generally vest over three
years.
Certain Asset
Management employees
receive some
or all of
their EOP
in the form
of notional
funds (Fund
Ownership
Plan or FOP, previously
named AM EOP).
This plan is
generally delivered in
cash and vests
over three years.
The amount
delivered depends on the value of the underlying investment
funds at the time of vesting.
Deferred Contingent Capital Plan
The Deferred Contingent
Capital Plan (the DCCP)
is a deferred
compensation plan for all
employees who are
subject to
deferral requirements.
Such employees
are
awarded
notional additional
tier 1
(AT1)
capital instruments,
which, at
the
discretion of UBS, can be settled in cash or a perpetual, marketable AT1 capital instrument. DCCP awards generally bear
notional
interest
paid
annually
(except
for
certain
regulated
employees)
and
vest
in
full
after
five
years.
Awards
are
forfeited if a viability
event occurs (i.e. if
the Swiss Financial Market
Supervisory Authority (FINMA) notifies
the firm that
the DCCP
awards must
be written
down to
mitigate the
risk of
insolvency,
bankruptcy or
failure of
UBS) or
if the
firm
receives a commitment of extraordinary support from the public sector that is necessary to prevent such an event. DCCP
awards are also written down if
the Group’s CET1 capital ratio falls
below a defined threshold. In
addition, GEB members
forfeit
% of DCCP awards for each loss-making year
during the vesting period.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
239
Note 27
Employee benefits: variable compensation
(continued)
Deferred compensation plans awarded to employees of Credit
Suisse
Existing compensation plans offered to employees of Credit Suisse
prior to the acquisition
Credit Suisse offered
a range of compensation plans to its
employees. Generally,
outstanding deferred awards
continue
to vest
according to
their original
terms. Awards
referenced
to shares
of the
Credit Suisse
Group were
converted into
units over UBS Group shares according to the exchange ratio applied
to the merger transaction (1 share in UBS
for
shares in Credit Suisse).
Unvested awards include upfront
cash awards, share awards
and other deferred awards
settled in cash and
continue to
be expensed over the future service period.
Upfront
cash
awards
are
subject
to
repayment
(clawback)
by
the
employee
in
the
event
of
voluntary
resignation,
termination for
cause or
other specified
events within
three years
from the
grant date.
The expense
is recognized
over
the three-year service period according to the clawback
provisions.
Share awards that were granted
as part of the
annual performance incentive typically vest over
three years with one-third
of the award vesting on each of the three anniversaries of the
grant date.
Retention awards
were offered
to selected employees
of the Credit
Suisse Group
in 2023 prior
to the acquisition
date.
These awards were contingent on
the completion of the acquisition
and were delivered
% in cash (in general vesting
% in
shares (in
general vesting
on the
first anniversary
of the
completion of the acquisition). Vesting periods are longer
for certain regulated employees.
Financial advisor variable compensation
In line with market practice for US wealth management businesses, the compensation for US financial advisors in Global
Wealth Management consists of
cash compensation, determined
using a formulaic approach
based on production, and
deferred awards.
Cash
compensation
reflects
a
percentage
of
the
compensable
production
that
each
financial
advisor
generates.
Compensable production is generally based on transaction revenue and investment advisory fees and may reflect further
adjustments. The percentage rate generally varies based
on the level of the production and firm tenure.
Financial advisors may
also be granted
deferred awards. These
amounts generally vest
over a six-year
period. The deferred
award takes into account the overall percentage rate
and production.
Cash compensation and deferred awards may be reduced for, among other things, errors, negligence
or carelessness, or
failure to comply with the firm’s rules, standards, practices
and / or policies, and / or applicable laws and regulations.
Financial
advisors
may
also
participate
in
additional
programs
to
support
promoting
and
developing
their
business
or
supporting the transition of
client relationships where appropriate.
Financial advisor compensation also includes
expenses
related to compensation commitments with financial advisors
entered into at the time of recruitment that are
subject to
vesting requirements.
b) Effect on the income statement
Effect on the income statement for the financial year and
future periods
The table
below provides
information about
compensation
expenses
related to
total variable
compensation that
were
recognized in the financial year ended 31 December 2024,
as well as expenses that were
deferred and will be recognized
in the income statement
for 2025 and
later. Deferred expenses
related to compensation
plans granted to employees
of
Credit Suisse
in 2023
and earlier
years are
presented under
Variable compensation
– other.
The expense
recognized in
2024 associated with
these awards was USD
m for outstanding deferred
compensation plans that existed
on the date
of the acquisition.
The majority
of expenses
deferred to
2025 and
later that
are related
to the
2024 performance
year pertain
to awards
granted in February 2025. The total unamortized compensation expense for unvested share-based awards granted up to
31 December 2024 will be recognized in future periods
over a weighted average period of
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
240
Note 27
Employee benefits: variable compensation
(continued)
Variable compensation
Expenses recognized in 2024
Expenses deferred to 2025 and later
1
USD m
Related to the
2024
performance
year
Related to prior
performance
years
Total
Related to the
2024
performance
year
Related to prior
performance
years
Total
Non-deferred cash
(
59
)
Deferred compensation awards
of which: Equity Ownership Plan
of which: Deferred Contingent Capital Plan
of which: Long-Term Incentive Plan
of which: Fund Ownership Plan
Variable compensation – performance awards
Variable compensation – financial advisors
2
of which: non-deferred cash
(
1
)
of which: deferred share-based awards
of which: deferred cash-based awards
of which: compensation commitments with recruited financial
advisors
Variable compensation – other
3
Total variable compensation
4
1 Estimate as of 31 December 2024. Actual amounts to be expensed in future periods may vary; e.g. due to forfeiture of awards
.
2 Financial advisor compensation consists of cash compensation, determined using
a formulaic approach based
on production, and
deferred awards. It
also includes expenses related
to compensation commitments
with financial advisors
entered into at the
time of recruitment that
are subject to
vesting requirements.
3 Consists
of existing deferred
awards and
retention awards
granted to
Credit Suisse
employees as
well as
replacement payments,
forfeiture credits,
severance payments,
retention plan
payments and interest expense
related to the Deferred Contingent
Capital Plan.
4 Includes USD
m in expenses related
to share-based compensation (performance awards:
USD
m; other variable compensation:
USD
m; financial advisor compensation: USD
m). A further USD
m in expenses related to share-based compensation was recognized
within other expense categories included in Note 7 (salaries: USD
m
related to role-based allowances; social security: USD
m; other personnel expenses: USD
m related to the Equity Plus Plan).
Variable compensation (continued)
Expenses recognized in 2023
Expenses deferred to 2024 and later
1
USD m
Related to the
2023
performance
year
Related to prior
performance
years
Total
Related to the
2023
performance
year
Related to prior
performance
years
Total
Non-deferred cash
(
36
)
Deferred compensation awards
of which: Equity Ownership Plan
of which: Deferred Contingent Capital Plan
of which: Long-Term Incentive Plan
of which: Fund Ownership Plan
Variable compensation – performance awards
Variable compensation – financial advisors
2
of which: non-deferred cash
(
4
)
of which: deferred share-based awards
of which: deferred cash-based awards
of which: compensation commitments with recruited financial
advisors
Variable compensation – other
3
Total variable compensation
4
1 Estimate as of 31 December 2023. Actual
amounts expensed may vary; e.g.
due to forfeiture of awards.
2 Financial advisor compensation consists of cash compensation,
determined using a formulaic approach
based on production,
and deferred awards.
It also includes
expenses related to
compensation commitments with
financial advisors entered
into at the
time of recruitment
that are subject
to vesting requirements.
3 Consists of replacement payments, forfeiture credits, severance payments,
retention plan payments and interest expense related to the Deferred Contingent Capital Plan.
4 Includes USD
m in expenses related
to share-based
compensation (performance
awards:
USD
m; other
variable compensation:
USD
m; financial
advisor compensation:
USD
m). A
further USD
m in
expenses related
to share-based
compensation was recognized within
other expense categories included
in Note 7 (salaries: USD
m related to role-based allowances;
social security: USD
m; other personnel expenses: USD
m related to the
Equity Plus Plan).
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
241
Note 27
Employee benefits: variable compensation
(continued)
Variable compensation (continued)
Expenses recognized in 2022
Expenses deferred to 2023 and later
1
USD m
Related to the
2022
performance
year
Related to prior
performance
years
Total
Related to the
2022
performance
year
Related to prior
performance
years
Total
Non-deferred cash
(
9
)
Deferred compensation awards
of which: Equity Ownership Plan
of which: Deferred Contingent Capital Plan
of which: Long-Term Incentive Plan
of which: Fund Ownership Plan
Variable compensation – performance awards
Variable compensation – financial advisors
2
of which: non-deferred cash
of which: deferred share-based awards
of which: deferred cash-based awards
of which: compensation commitments with recruited financial
advisors
Variable compensation – other
3
Total variable compensation
4
1 Estimate as of 31 December 2022. Actual
amounts expensed may vary; e.g.
due to forfeiture of awards.
2 Financial advisor compensation consists of cash
compensation, determined using a formulaic approach
based on production,
and deferred awards.
It also includes
expenses related to
compensation commitments with
financial advisors entered
into at the
time of recruitment
that are subject
to vesting requirements.
3 Consists of replacement payments, forfeiture credits, severance payments,
retention plan payments and interest expense related to the Deferred Contingent Capital Plan.
4 Includes USD
m in expenses related
to share-based
compensation (performance
awards:
USD
m; other
variable
compensation: USD
m; financial
advisor compensation:
USD
m).
A further
USD
m in
expenses related
to share-based
compensation was recognized
within other expense
categories included in Note
7 (salaries: USD
m related to role-based
allowances; social security:
USD
m; other personnel expenses:
USD
m related to the
Equity Plus Plan).
c) Outstanding share-based compensation awards
Share and performance share awards
Movements in
outstanding share
-based awards
granted by
UBS AG and
its subsidiaries
to employees
during 2024
and
2023 are provided in the table below.
Movements in outstanding share-based compensation
awards
Number of shares
2024
Weighted
average grant
date fair
value (USD)
Number of shares
2023
Weighted
average grant
date fair
value (USD)
Outstanding, at the beginning of the year
Share obligations assumed at merger with Credit Suisse
AG
Awarded during the year
Distributed during the year
(
1,202,448
)
(
132,770
)
Forfeited during the year
(
219,425
)
(
4,043
)
Outstanding, at the end of the year
of which: shares vested for accounting purposes
The
total
carrying
amount
of
the
liability
related
to
cash-settled
share-based
awards
as
of
31 December
2024
and
31 December 2023 was USD
m and USD
m, respectively.
d) Valuation
UBS share awards
UBS measures compensation expense
based on the average market
price of UBS shares
on the grant date as quoted
on
the SIX
Swiss Exchange,
taking into
consideration post-vesting
sale and
hedge restrictions,
non-vesting conditions
and
market conditions, where
applicable. The fair
value of
the share awards subject
to post-vesting sale
and hedge restrictions
is discounted on
the basis of
the duration of
the post-vesting restriction
and is referenced
to the cost
of purchasing
an
at-the-money European
put option
for the
term of
the transfer
restriction. The
grant date
fair value
of notional
shares
without dividend
entitlements also
includes a
deduction for
the present
value of
future
expected dividends
to be
paid
between the grant date and distribution.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
242
Note 28
Interests in subsidiaries and other entities
a) Interests in subsidiaries
UBS AG
defines its significant subsidiaries
as those entities
that, either individually
or in aggregate, contribute
significantly
to UBS AG’s
financial position or
results of
operations, based
on a number
of criteria, including
the subsidiaries’ equity
and
contribution
to
UBS
AG’s
total
assets
and
profit
or
loss
before
tax,
in
accordance
with
the
requirements
set
by
IFRS 12, Swiss regulations and the rules of the US Securities
and Exchange Commission (the SEC).
Individually significant subsidiaries
The table below lists UBS AG’s individually significant subsidiaries as of 31 December 2024. Unless otherwise stated, the
subsidiaries listed below
have share capital consisting
solely of ordinary
shares held entirely by
UBS AG
and the proportion
of ownership interest held is equal to the voting
rights held by UBS AG.
The
country
where
the
respective
registered
office
is located
is also
the
principal
place
of business.
UBS
AG operates
through a
global branch
network and
a significant
proportion of
its business
activity is
conducted outside
Switzerland,
including in the UK,
the US, Singapore, the Hong
Kong SAR and other countries. UBS
Europe SE has branches
and offices
in a number of EU Member
States, including Germany, France,
Italy, Luxembourg and Spain. Share
capital is provided in
the currency of the legally registered office.
Individually significant subsidiaries
of UBS AG as of 31 December 2024
1
Company
Registered office
Primary business
Share capital in million
Equity interest accumulated in %
USD
USD
2
USD
CHF
USD
EUR
USD
USD
3
CHF
1 Includes direct and indirect subsidiaries of UBS AG.
2 Consists of common share capital of USD
bn.
3 Consists of common share capital of USD
and non-voting preferred share capital of USD
bn.
Other subsidiaries
The table below
lists other direct
and indirect subsidiaries
of UBS AG
that are not
individually significant but
contribute
to
UBS
AG’s
total
assets
and
aggregated
profit
before
tax
thresholds
and
are
thus
disclosed
in
accordance
with
requirements set by the SEC.
Other subsidiaries of UBS AG as of 31
December 2024
Company
Registered office
Primary business
Share capital in million
Equity interest
accumulated in %
BRL
GBP
USD
USD
USD
JPY
USD
GBP
USD
USD
CHF
EUR
AUD
1
HKD
JPY
JPY
1 Includes a nominal amount relating to redeemable preference shares.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
243
Note 28
Interests in subsidiaries and other entities
(continued)
Consolidated structured entities
Consolidated
structured
entities
(SEs)
include
certain
investment
funds,
securitization
vehicles
and
client
investment
vehicles. UBS AG has no individually significant subsidiaries that
are SEs.
In 2024 and 2023, UBS
AG did not enter into any
contractual obligation that could
require UBS AG to provide
financial
support to
consolidated SEs.
In addition,
UBS AG
did not
provide support,
financial or
otherwise, to
a consolidated
SE
when UBS
AG was not
contractually obligated
to do so,
nor does
UBS AG currently
have any intention
to do
so in the
future.
Furthermore,
UBS
AG
did
not
provide
support,
financial
or
otherwise,
to
a
previously
unconsolidated
SE
that
resulted in UBS AG controlling the SE during the reporting period.
b) Interests in associates and joint ventures
As of
31 December
2024 and
31 December
2023, no
associate or
joint venture
was
individually
material to
UBS AG.
Also, there were no significant restrictions on the ability of associates or joint ventures to transfer funds to UBS AG or its
subsidiaries as cash dividends or
to repay loans or advances
made. There were no quoted market
prices for any associates
or joint ventures of UBS AG.
Investments in associates and joint ventures
USD m
2024
2023
Carrying amount at the beginning of the year
Balance recognized upon the merger of UBS AG and Credit Suisse
AG
1
Additions
Disposals
(
6
)
Share of comprehensive income
(
180
)
of which: share of net profit / (loss)
2
(
163
)
of which: share of other comprehensive income
3
(
17
)
Share of changes in retained earnings
(
3
)
(
1
)
Dividends received
(
31
)
(
35
)
Foreign currency translation
(
73
)
Carrying amount at the end of the year
of which: associates
of which: SIX Group AG, Zurich
4
of which: other associates
of which: joint ventures
5
1 Refer to
Note 2 for
more information about
the merger of
UBS AG and
Credit Suisse AG.
2
For 2024,
consists of USD
m from associates
and USD
m from joint
ventures (for 2023,
consists of negative
USD
m from associates).
3 For 2024, consists of
USD
m from associates (for 2023, consists
of negative USD
m from associates).
4 In 2024, UBS AG’s
legal equity interest amounted to
% (for 2023,
UBS AG’s legal equity interest amounted
to
%). UBS AG is represented on the Board of
Directors.
5 In October 2024, UBS AG entered into an agreement
to sell its
% interest in Swisscard AECS GmbH. Refer
to Note 29 for more information.
c) Unconsolidated structured entities
UBS AG is considered to
sponsor another entity if, in addition
to ongoing involvement with
that entity,
it had a key role
in establishing that
entity or in
bringing together relevant counterparties
for a transaction
facilitated by that
entity. During
2024,
UBS
AG
sponsored
the
creation
of various
SEs
and
interacted
with a
number
of non-sponsored
SEs,
including
securitization vehicles, client vehicles and certain
investment funds, that UBS AG did not consolidate
as of 31 December
2024 because it did not control them.
Interests in unconsolidated structured entities
The table below
presents UBS AG’s
interests in and
maximum exposure
to loss from
unconsolidated SEs, as
well as the
total
assets
held
by
the
SEs
in
which
UBS
AG
had
an
interest
as of
year-end,
except
for
investment
funds
and
other
vehicles sponsored by third
parties, for which
the carrying amount
of UBS AG’s
interest as of
year-end has been
disclosed.
As a
consequence of
the merger
of UBS
AG and
Credit Suisse
AG and
the resulting
increase in
interests in
structured
entities, interests
in client
vehicles sponsored
by UBS
AG are
presented separately
to other
vehicles sponsored
by third
parties, to clearly distinguish the different types of entities
that UBS AG is involved with.
Sponsored unconsolidated structured entities in which UBS
AG did not have an interest at year-end
During 2024 and 2023, UBS AG did not earn material
income from sponsored unconsolidated
SEs in which UBS AG did
not have an interest at year-end.
During 2024 and
2023, UBS AG
and third parties
did not transfer
any assets into
sponsored securitization vehicles created
in the year. UBS AG
and third parties transferred assets, alongside deposits and
debt issuances (which are assets from the
perspective
of
the
vehicle),
of
USD
bn
and
USD
bn,
respectively,
into
sponsored
client
vehicles
created
in
2024
(2023:
USD
bn
and
USD
bn,
respectively).
For
sponsored
investment
funds,
several
new
open
ended
and
close
ended funds were created
during the year
with further transfers
arising from management
of the strategy
and investor
activity, which,
when combined
with market
movements, resulted
in a
net asset
value movement
of USD
bn in
2024
(2023: USD
bn).
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
244
Note 28
Interests in subsidiaries and other entities
(continued)
Interests in unconsolidated structured entities
31.12.24
USD m, except where indicated
Securitization
vehicles
1
Client vehicles
sponsored by
UBS AG
2
Investment
funds
Other vehicles
sponsored by
third parties
3
Total
Maximum
exposure to loss
4
Financial assets at fair value held for trading
Derivative financial instruments
Loans and advances to customers
Financial assets at fair value not held for trading
Financial assets measured at fair value through other
comprehensive income
Other financial assets measured at amortized cost
Total assets
Derivative financial instruments
Total liabilities
Assets held by the unconsolidated structured entities in which UBS
AG had an interest (USD bn)
5
6
7
8
31.12.23
USD m, except where indicated
Securitization
vehicles
1
Client vehicles
sponsored by
UBS AG
2
Investment
funds
Other vehicles
sponsored by
third parties
3
Total
Maximum
exposure to loss
4
Financial assets at fair value held for trading
Derivative financial instruments
Loans and advances to customers
Financial assets at fair value not held for trading
Financial assets measured at fair value through other
comprehensive income
Other financial assets measured at amortized cost
Total assets
Derivative financial instruments
Total liabilities
Assets held by the unconsolidated structured entities in which UBS
AG had an interest (USD bn)
5
6
7
1 Includes loans with a
high LTV
and credit-impaired loans to pre-securitization
warehouse structured entities managed
by third parties, as
well as securities issued by
securitization structured entities sponsored
by
both UBS AG and third parties.
2 Client vehicles sponsored by UBS AG
are structured entities that do not qualify
as a securitization in line with regulatory
requirements and are not considered an investment
fund.
3 Other vehicles sponsored
by third parties
are structured entities
that do not
qualify as a
securitization in line
with regulatory
requirements and are
not considered an
investment fund. Interests
in other vehicles
sponsored by third parties included loans with a high LTV and credit-impaired loans provided to
third-party structured entities.
4 For the purpose of this disclosure, maximum exposure to loss amounts
do not consider
the risk-reducing effects
of collateral
or other
credit enhancements.
5 Represents
the principal
amount outstanding.
6 Represents the
market value
of total assets.
7 Represents the
net asset
value of
the
investment funds sponsored by UBS AG
and the carrying amount of UBS
AG’s interests in
the investment funds not sponsored
by UBS AG.
8 Represents the carrying amount
of UBS AG’s interest
in other vehicles
sponsored by third parties.
UBS AG
retains
or purchases
interests in
unconsolidated SEs
in the
form of
direct
investments, financing,
guarantees,
letters
of
credit
and
derivatives,
as
well
as
through
management
contracts.
UBS
AG’s
maximum
exposure
to
loss
is
generally equal to the
carrying amount of UBS
AG’s interest in
the given SE, with
this subject to change
over time with
market
movements.
Guarantees,
letters
of
credit
and
credit
derivatives
are
an
exception,
with
the
given
contract’s
notional amount, adjusted for losses already incurred,
representing the maximum loss that
UBS AG is exposed to.
The
maximum
exposure
to
loss
disclosed
in
the
table
above
does
not
reflect
UBS
AG’s
risk
management
activities,
including
effects
from
financial
instruments
that
may
be
used
to
economically
hedge
risks
inherent
in
the
given
unconsolidated SE or risk-reducing effects of collateral or
other credit enhancements.
In
2024
and
2023,
UBS
AG
did
not
provide
support,
financial
or
otherwise,
to
any
unconsolidated
SE
when
not
contractually obligated to do so, nor does UBS AG currently
have any intention to do so in the future.
In 2024
and 2023,
income and
expenses from
interests in
unconsolidated SEs
primarily resulted
from mark-to-market
movements
recognized
in
Other
net
income from
financial
instruments
measured
at
fair
value
through
profit or
loss
,
which were generally hedged with other financial instruments, as well as fee and commission income received from UBS
AG-sponsored funds.
Interests in securitization vehicles
As
of
31 December
2024
and
31 December
2023,
UBS
AG
held
interests,
both
retained
and
acquired,
in
various
securitization vehicles
that relate to
financing, underwriting, secondary
market and
derivative trading activities.
In addition
to the
interests disclosed
in the
table above,
UBS AG manages
the assets
of certain
securitization vehicles
and receives
fees based, in
whole or in
part, on the
asset value of
the vehicles. Interest
in such vehicles,
as a result
of the merger
of
UBS AG
and Credit Suisse AG,
is not represented by
the on-balance sheet
fee receivable but
rather by the
future exposure
to variable
fees. The
net asset
value of
such vehicles
was USD
bn as
of 31 December
2024 and
has been
excluded
from the table above.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
245
Note 28
Interests in subsidiaries and other entities
(continued)
The numbers outlined in the table
above may differ from the securitization
positions presented in the 31 December 2024
Pillar 3
Report,
available
under
“Pillar 3
disclosures”
at
ubs.com/investors,
synthetic
securitizations
transacted
with
entities
that
are
not
SEs
and
transactions
in
which
UBS
AG
did
not
have
an
interest
because
it
did
not
absorb
any
risk;
(ii) a
different
measurement
basis
in
certain
cases
(e.g.
IFRS
Accounting
Standards carrying amount within
the table above
compared with net
exposure amount at default
for Pillar 3 disclosures);
and (iii) different classification of vehicles viewed as sponsored
by UBS AG versus sponsored by third parties.
›
Refer to the 31 December 2024 Pillar 3 Report,
available under “Pillar 3 disclosures” at
ubs.com/investors,
for more information
Interests in client vehicles sponsored by UBS AG
UBS
AG-sponsored
client
vehicles
are
established
predominantly
for
clients
to
gain
exposure
to
specific
assets
or
risk
exposures. Such vehicles
may enter into derivative
agreements, with UBS
AG or a third
party,
to align the cash flows
of
the entity with the investor’s intended investment objective,
or to introduce other desired risk exposures.
As of 31 December 2024 and 31 December 2023, UBS AG retained interests in
client vehicles sponsored by UBS AG that
relate to financing, secondary market and derivative
trading activities, and to hedge structured product offerings.
Interests in investment funds
Investment funds have a collective
investment objective, and are
either passively managed, so
that any decision-making
does not have a substantive effect
on variability,
or are actively managed and investors
or their governing bodies do not
have substantive voting or similar rights.
UBS AG holds interests in a number
of investment funds, primarily resulting from
seed investments or in order to
hedge
structured product
offerings.
In addition
to the
interests disclosed
in the
table
above,
UBS AG
manages
the assets
of
various pooled investment funds and receives fees based, in whole or in part, on the net asset value of the fund and / or
the performance of the fund. The specific fee structure is determined based on various market
factors and considers the
fund’s nature and the
jurisdiction of incorporation, as
well as fee schedules
negotiated with clients. These
fee contracts
represent an
interest in
the fund,
as they
align UBS
AG’s exposure
with investors,
providing a
variable return
based on
the performance
of the
entity. Depending
on the
structure of
the fund,
these fees
may be
collected directly
from the
fund’s assets and / or from
the investors. Any amounts
due are collected on a
regular basis and are generally
backed by
the fund’s assets.
Therefore, interest
in such funds
is not represented
by the on-balance
sheet fee receivable
but rather
by
the
future
exposure
to
variable
fees.
The
net
asset
value
of
such
funds
were
USD
bn
and
USD
bn
as
of
31 December 2024 and 31 December
2023, respectively, and has
been excluded from the
table above. UBS AG
did not
have any material exposure to loss from these interests as
of 31 December 2024 or as of 31 December 2023.
Interests in other vehicles sponsored by third parties
Interests in other vehicles sponsored by third parties
include loans with a high LTV
and credit-impaired loans provided to
third-party structured entities.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
246
Note 29
Changes in organization and acquisitions and disposals
of subsidiaries and businesses
Disposals of subsidiaries and businesses
Agreement to sell Select Portfolio Servicing
On 13
August 2024,
UBS AG
entered
into an
agreement
to sell
Select
Portfolio Servicing,
the
US mortgage
servicing
business
of
Credit
Suisse,
which
is
managed
in
Non-core
and
Legacy.
Completion
of
the
transaction
is
subject
to
regulatory
approvals
and
other
customary
closing
conditions.
As
of
31 December
2024,
the
associated
assets
and
liabilities
were
presented
as
Assets
of
disposal
groups
held
for
sale
Liabilities
of
disposal
groups
held
for
sale
,
respectively,
and
amounted
to
USD
m
and
USD
m,
respectively.
UBS
AG
does
not
expect
to
recognize
a
material profit or loss upon completion of the transaction.
Agreement to sell Swisscard AECS GmbH
In October
2024, UBS
AG entered into
an agreement to
sell to
American Express Swiss
Holdings GmbH
(American Express)
its
% interest
in Swisscard
AECS GmbH
(Swisscard),
a joint
venture
in Switzerland
between UBS
AG and
American
Express, subject to certain
closing conditions. Also in
October 2024, UBS AG
entered into an agreement
with Swisscard
to transition the Credit
Suisse-branded card portfolios
to UBS AG. In January
2025, UBS AG completed the
purchase of
the
card
portfolios,
with
the
actual
client
migration
expected
to
take
place
over
the
following
quarters.
The
two
transactions will
result
in similar
profit and
loss effects
over the
course of
2025 and,
therefore,
on a
net basis
are
not
expected to have a material
impact for UBS AG. In
the fourth quarter of 2024, UBS
AG recorded an expense of USD
m
in connection with the termination of the Swisscard
joint venture.
Changes in organization
Legal structure integration
On 31
May
2024, the
merger
of UBS
AG
and
Credit
Suisse
AG was
completed.
UBS
AG
succeeded
to all
rights
and
obligations of Credit Suisse AG, including all outstanding
Credit Suisse AG debt instruments.
›
Refer to Note 2 for more information about the
merger of UBS AG and Credit Suisse AG
On 7 June 2024, the transition to a single US intermediate
holding company was completed.
On 1 July 2024, the merger of UBS Switzerland AG and Credit Suisse (Schweiz) AG was completed. UBS Switzerland AG
succeeded to all rights and obligations of Credit Suisse
(Schweiz) AG.
Note
30
Related parties
Related parties of UBS AG are:
–
entities
within
UBS Group,
i.e.
the
parent
entity,
UBS Group AG,
and
fellow
subsidiaries
consolidated
within
UBS Group (including Credit Suisse subsidiaries from the date
of the acquisition of the Credit Suisse Group);
–
associates
(entities
that
are
under
the
significant
influence
of
UBS AG
or
other
group
entities
consolidated
within
UBS Group);
–
joint
ventures
(entities
in
which
UBS AG
or
other
group
entity
consolidated
within
UBS Group
shares
control
with
another party);
–
post-employment benefit plans for the benefit of UBS AG’s employees
or employees of entities related to UBS AG;
–
key management personnel and close family members of
key management personnel; and
–
entities over which key management personnel or their
close family members have solely or jointly a direct
or indirect
significant influence.
Key management personnel are those persons having authority
and responsibility for planning, directing, and controlling
the activities of the Group, directly or indirectly.
UBS AG considers the members of the Board of Directors
(the BoD) and
the Executive Board
(the EB) of
UBS AG and the
members of the
Board of Directors
(the BoD) and the
Group Executive
Board (the GEB) of UBS Group AG to
constitute key management personnel.
a) Remuneration of key management personnel
The
Vice Chairman
of the
BoD
has a
specific
management
employment
contract
and receives
pension
benefits
upon
retirement.
Total
remuneration
of the
Chairman and
the
Vice Chairman
of the
BoD
and all
EB and
GEB
members
(as
defined above) is included in the table below.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
247
Note 30
Related parties (continued)
Remuneration of key management
personnel
USD m, except where indicated
31.12.24
31.12.23
31.12.22
Base salaries and other cash payments
1
Incentive awards – cash
2
Annual incentive award under DCCP
Employer’s contributions to retirement benefit plans
Benefits in kind, fringe benefits (at market value)
Share-based compensation
3
Total
Total (CHF m)
4
1 For 2023 and 2022, may include role-based allowances
in line with market practice and regulatory requirements.
For 2024, role-based allowances for
EB/GEB members were eliminated.
2 The cash portion may
also include blocked shares in line
with regulatory requirements.
3 Compensation expense is based
on the share price on
grant date taking into account performance
conditions. Refer to Note 27 for
more information.
For EB/GEB members,
share-based compensation for
2024, 2023 and 2022
was entirely composed
of LTIP
awards. For
the Chairman and the
Vice-Chairman of the
BoD, the share-based
compensation for 2024,
2023 and 2022 was entirely composed of
UBS shares.
4 Swiss franc amounts disclosed represent the respective US
dollar amounts translated at the applicable performance
award currency exchange rates (2024:
USD / CHF
; 2023: USD / CHF
; 2022: USD / CHF
).
The
independent
members
of
the
BoD,
including
the
Chairman,
do
not
have
employment
or
service
contracts
with
UBS AG, and thus are not
entitled to benefits upon termination
of their service on
the BoD. Payments to
these individuals
for
their
services
as
independent
members
of
the
BoD
amounted
to
USD
m
(CHF
m)
in
2024,
USD
m
(CHF
m) in 2023 and USD
m (CHF
m) in 2022.
b) Equity holdings of key management personnel
Equity holdings of key management personnel
1
31.12.24
31.12.23
Number of UBS Group AG shares held by members of the
BoD, EB and parties closely linked to them
2
1 No options were held in 2024
and 2023 by non-independent members
of the BoD or any EB member
or any of their related parties.
2 Excludes shares granted under variable
compensation plans with forfeiture
provisions.
Of the share totals above, no shares were held by close family members of key management personnel on 31 December
2024 and 31 December 2023.
No shares were held
by entities that
are directly or indirectly controlled or
jointly controlled
by
key
management
personnel
or
their
close
family
members
on
31 December
2024
and
31 December
2023.
As
of
31 December
2024,
no
member
of
the
BoD
or
EB
was
the
beneficial
owner
of
more
than
1%
of
the
shares
in
UBS Group AG.
c) Loans, advances, mortgages and deposit balances
with key management personnel
The non-independent
members
of the
BoD and
EB members
are
granted loans,
fixed advances
and mortgages
in the
ordinary
course
of
business
on
substantially
the
same
terms
and
conditions
that
are
available
to
other
employees,
including interest rates and
collateral, and neither
involve more than the
normal risk of
collectability nor contain
any other
unfavorable features for the firm. Independent BoD members are granted loans and mortgages in the ordinary course of
business at general market conditions.
Outstanding balances with key management personnel were
as follows.
Loans, advances and mortgages to key management
personnel
1
USD m, except where indicated
2024
2023
Balance at the beginning of the year
Balance at the end of the year
2
Balance at the end of the year (CHF m)
2
1 All loans are secured loans.
2 Swiss franc amounts disclosed represent the respective US dollar amounts translated at the relevant
year-end closing exchange rate.
In
addition,
there
were
outstanding
deposit
balances
with
key
management
personnel
that
amounted
to
USD
m
(CHF
m) as of 31 December 2024 and USD
m (CHF
m) as of 31 December 2023.
d) Other related-party transactions with entities controlled
by key management personnel
In 2024 and 2023, UBS AG did not
enter into transactions with entities over
whom key management personnel or
their
close
family
members
have
solely
or
jointly
a
direct
or
indirect
significant
influence
and
as
of
31 December
2024,
31 December
2023
and
31 December
2022
there
were
no
outstanding
balances
related
to
such
transactions.
Furthermore, in 2024 and 2023, such entities did not sell any goods or
provide any services to UBS AG and therefore did
not receive any fees from UBS AG. UBS AG also did not provide services to such entities in 2024 and
2023 and therefore
also received no fees.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
248
Note 30
Related parties (continued)
e) Transactions with associates and joint ventures
Loans to and outstanding receivables from associates
and joint ventures
USD m
2024
2023
Carrying amount at the beginning of the year
Additions¹
Reductions
(
440
)
(
716
)
Foreign currency translation
(
34
)
Carrying amount at the end of the year
of which: unsecured loans and receivables
1 Additions in 2024 include balances of USD
m recognized upon the merger of UBS AG and CS AG.
Other transactions with associates and
joint ventures
As of or for the year ended
USD m
31.12.24
31.12.23
Payments to associates and joint ventures for goods and services received
Fees received for services provided to associates and joint ventures
Liabilities to associates and joint ventures
In addition to the items in the table above, transactions with associates and joint ventures
also include off-balance sheet
exposures of USD
bn, which are provided on an arm’s length basis.
›
Refer to Note 28 for an overview of investments
in associates and joint ventures
f) Receivables and payables from / to UBS Group AG
and other subsidiaries of UBS Group AG
USD m
31.12.24
31.12.23
Receivables
Amounts due from banks
1
Cash collateral receivables on derivative instruments
Loans and advances to customers
Other financial assets measured at amortized cost
Financial assets at fair value held for trading
Derivative financial instruments
Payables
Amounts due to banks
Cash collateral payables on derivative instruments
Customer deposits
Funding from UBS Group AG measured at amortized cost
Other financial liabilities measured at amortized cost
Derivative financial instruments
Other financial liabilities designated at fair value
2
1 Reflects funding provided to Credit Suisse.
2 Mainly represents funding recognized from UBS Group AG that is designated at fair value.
Refer to Note 19b for more information.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
249
Note 31
Invested assets and net new money
The following
disclosures
provide
a breakdown
of UBS AG’s
invested assets
and a
presentation
of their
development,
including net new money,
as required by the Swiss Financial Market
Supervisory Authority (FINMA).
Invested assets
Invested assets consist of all
client assets managed by or
deposited with UBS AG for investment purposes. Invested
assets
include managed
fund assets,
managed institutional
assets, discretionary
and advisory
wealth management
portfolios,
fiduciary deposits, time deposits, savings accounts, and
wealth management securities or brokerage
accounts. All assets
held
for
purely
transactional
purposes
and
custody-only
assets,
including
corporate
client
assets
held
for
cash
management and transactional purposes,
are excluded from
invested assets, as UBS AG only
administers the assets and
does not offer
advice on how
they should be
invested. Also excluded
are non-bankable
assets (e.g. art
collections) and
deposits from third-party banks for
funding or trading purposes.
Discretionary assets are defined
as client assets
that UBS AG decides how
to invest. Other invested
assets are those where
the client ultimately
decides how the
assets are invested.
When a single
product is created
in one business
division and
sold
in another,
it is
counted
in
both
the
business
division
managing
the
investment
and the
one
distributing
it. This
results
in
double
counting
within
UBS AG’s
total
invested
assets
and
net
new
money,
as
both
business
divisions
are
independently providing a service to their respective clients,
and both add value and generate revenue.
Net new money
Net new money in a reporting
period is the amount of invested assets
entrusted to UBS AG by new and
existing clients,
less those withdrawn by existing clients and clients who terminated
relationships with UBS AG.
Net new
money is
calculated using the
direct method,
under which
inflows and
outflows to
/ from
invested assets are
determined at
the client level,
based on transactions.
Interest and dividend
income from
invested assets
are not counted
as
net new money inflows.
Market and currency
movements, as well
as fees, commissions
and interest on loans
charged, are
excluded from net new money,
as are effects resulting
from any acquisition or divestment
of a UBS subsidiary or business.
Reclassifications between invested
assets
and
custody-only assets
as
a
result of
a
change
in
service level
delivered are
generally treated as net new
money flows. However, where the change
in service level directly results from an
externally
imposed regulation
or a strategic
decision by
UBS AG to exit
a market or
specific service
offering, the
one-time net
effect is
reported as
Other effects
.
The Investment Bank does not track
invested assets and net new money. However,
when a client is transferred from the
Investment Bank
to another
business division,
this may
produce net
new money
even though
the client’s
assets
were
already with UBS AG.
Invested assets and net new money
As of or for the year ended
USD bn
31.12.24
31.12.23
Fund assets managed by UBS
Discretionary assets
Other invested assets
Total invested assets
1
of which: double counts
Net new money
1,2
1 Includes the share of net new money and invested assets relating to associates in the Asset Management business division.
2 Includes double counts.
Development of invested assets
USD bn
31.12.24
31.12.23
Total invested assets at the beginning of the year
1,2
Net new money
Market movements
3
Foreign currency translation
(
126
)
Invested assets recognized upon the merger of
Credit Suisse AG with UBS AG
4
Other effects
(
23
)
(
37
)
of which: acquisitions / (divestments)
(
4
)
(
25
)
Total invested assets at the end of the year
1,2
1 Includes the share of net new money and invested assets relating to associates in the Asset Management business
division.
2 Includes double counts.
3 Includes interest and dividend income.
4 Invested assets
recognized upon the merger of UBS AG and Credit Suisse AG were measured and reported as of 31 May
2024, the merger effective date, in alignment with UBS AG’s
accounting policies.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
250
Note 32
Currency translation rates
The
following
table
shows
the
rates
of
the
main
currencies
used
to
translate
the
financial
information
of
UBS
AG’s
operations with a functional currency other than the
US dollar into US dollars.
Closing exchange rate
Average rate
1
As of
For the year ended
31.12.24
31.12.23
31.12.24
31.12.23
31.12.22
1 CHF
1 EUR
1 GBP
100 JPY
1 Monthly income statement items of
operations with a functional currency
other than the US dollar
are translated into US dollars
using month-end rates.
Disclosed average rates for
a year represent an average
of
twelve month-end rates, weighted according to the income and expense
volumes of all operations of UBS AG with the
same functional currency for each month. Weighted average rates for
individual business divisions
may deviate from the weighted average rates for UBS AG.
Note 33
Main differences between IFRS Accounting Standards
and Swiss GAAP
The consolidated financial statements of UBS AG are prepared in accordance with IFRS Accounting Standards. The Swiss
Financial
Market
Supervisory
Authority
(FINMA)
requires
financial
groups
presenting
financial
statements
under
IFRS
Accounting Standards
to provide
a narrative
explanation
of the
main differences
between
IFRS Accounting
Standards
and Swiss
generally accepted
accounting principles
(GAAP)
(the FINMA
Accounting Ordinance,
FINMA Circular
2020/1
“Accounting – banks”
and the Banking
Ordinance (the
BO)). Included in
this Note are
the significant differences
in the
recognition and
measurement between
IFRS Accounting
Standards and
the provisions
of the
BO and
the guidelines
of
FINMA governing true and fair view financial statement reporting
pursuant to Art. 25 to Art. 42 of the BO.
1. Consolidation
Under
IFRS
Accounting
Standards,
all
entities
that
are
controlled
by the
holding
entity
are
consolidated.
Under
Swiss
GAAP controlled
entities deemed
immaterial to a
group or
those held only
temporarily are
exempt from
consolidation,
but
instead
are
recorded
as
participations
accounted
for
under
the
equity
method
of
accounting
or
as
financial
investments measured at the lower of cost or market
value.
2. Classification and measurement of financial assets
Under
IFRS
Accounting
Standards,
debt
instruments
are
measured
at
amortized
cost,
fair
value
through
other
comprehensive
income
(FVOCI)
or
fair
value
through
profit
or
loss
(FVTPL),
depending
on
the
nature
of
the
business
model within which the
particular asset is
held and the characteristics
of the contractual cash
flows of the
asset. Equity
instruments are accounted for
at FVTPL by
UBS. Under Swiss GAAP, trading assets and derivatives are
measured at FVTPL,
in
line with
IFRS
Accounting
Standards.
However,
non-trading
debt
instruments
are
generally
measured
at
amortized
cost, even
when the
assets are
managed on
a fair
value basis.
In addition,
the measurement
of financial
assets in
the
form of securities
depends on
the nature
of the asset:
debt instruments
not held to
maturity,
i.e. instruments
available
for sale, and equity instruments with no permanent
holding intent, are classified as
Financial investments
at the lower of
(amortized) cost or market
value. Market value adjustments
up to the original
cost amount and realized
gains or
losses upon
disposal
of the
investment are
recorded
in the
income statement
as
Other income
from
ordinary
activities.
Equity
instruments
with
a
permanent
holding
intent
are
classified
as
participations
in
Non-consolidated
investments
in
subsidiaries
and
other
participations
recorded in the
income statement as
Impairment of investments
in non-consolidated subsidiaries
and other participations.
Reversals of impairments up to the original cost amount and realized gains or losses upon disposal of the investment are
recorded as
Extraordinary income / Extraordinary expenses
.
3. Fair value option applied to financial liabilities
Under IFRS
Accounting Standards,
UBS applies
the fair
value option
to certain
financial liabilities
not held
for trading.
Instruments for which the fair value option is applied are accounted for at FVTPL. The
amount of change in the fair value
attributable to
changes in
UBS’s own
credit is
presented in
Other comprehensive
income
Retained earnings
.
The fair value option is applied primarily to issued structured
debt instruments, certain non-structured
debt instruments,
certain payables under repurchase agreements and cash collateral on securities lending agreements, amounts due under
unit-linked investment contracts, and brokerage
payables.
Under Swiss
GAAP, the
fair value
option can
only be
applied to
structured debt
instruments consisting
of a
debt host
contract and
one or
more embedded
derivatives that
do not
relate to
own equity.
Furthermore, unrealized
changes in
fair value
attributable to
changes in
UBS’s own
credit are
not recognized,
whereas realized
own credit
is recognized
in
Net trading income
.
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
251
Note 33
Main differences between IFRS Accounting Standards
and Swiss GAAP (continued)
4. Allowances and provisions for credit losses
Swiss GAAP permit use
of IFRS Accounting Standards for
accounting for allowances and
provisions for credit losses based
on an expected credit loss (ECL) model. UBS has chosen to
apply the IFRS 9 ECL approach to those exposures
that are in
the ECL scope of both frameworks, IFRS Accounting Standards
and Swiss GAAP.
For the small residual
exposures within the scope
of Swiss GAAP ECL
requirements, which are
not subject to ECL
under
IFRS Accounting Standards due to classification differences,
UBS applies alternative approaches.
–
For exposures for which Pillar 1 internal ratings-based models are applied to measure credit risk, ECL is determined by
the regulatory expected loss (EL), with an
add-on for scaling up to the
residual maturity of exposures maturing beyond
the next
12 months,
as appropriate.
For detailed
information on
regulatory EL,
refer to
the “Risk
management and
control”
section of this report.
–
For exposures for
which the
Pillar 1 standardized
approach is
used to
measure credit
risk, ECL is
determined using
a
portfolio approach
that derives
a conservative
probability of
default (PD)
and a
conservative loss
given default
(LGD)
for the entire portfolio.
5. Hedge accounting
Under IFRS Accounting
Standards, when cash
flow hedge accounting is
applied, the fair value
gain or loss
on the effective
portion of
a derivative
designated
as a
cash flow
hedge
is recognized
initially in
equity and
reclassified
to the
income
statement when
certain conditions
are met.
When fair
value hedge
accounting is
applied, the
fair value
change of
the
hedged item attributable to the hedged risk is reflected in the measurement of the hedged item and is recognized in the
income statement
along with
the change
in the
fair value
of the
hedging derivative.
Under Swiss
GAAP,
the effective
portion of the fair value change of a derivative
instrument designated as a cash flow
or as a fair value hedge is deferred
on the balance sheet as
Other assets
Other liabilities
. The carrying amount of the hedged item designated in fair value
hedges is not adjusted for fair value changes attributable
to the hedged risk.
6. Goodwill and intangible assets
Under IFRS Accounting Standards,
goodwill acquired in a
business combination is not amortized
but tested annually for
impairment. Intangible
assets with
an indefinite
useful life
are
also not
amortized but
tested annually
for impairment.
Under Swiss GAAP,
goodwill and intangible assets with indefinite useful lives are
amortized over a period not exceeding
, unless a longer
useful life, which may not
exceed
, can be justified.
In addition, these assets are
tested
annually for impairment.
7. Post-employment benefit plans
Swiss GAAP
permit the
use of
IFRS Accounting
Standards
or Swiss
accounting standards
for post-employment
benefit
plans, with the election made on a plan-by-plan basis.
UBS has elected to
apply IAS 19 for the
non-Swiss defined benefit
plans in the UBS AG
standalone financial statements
and Swiss
GAAP (FER 16)
for the
Swiss pension
plan in
the UBS
AG and
the UBS
Switzerland
AG standalone
financial
statements. The
requirements of
Swiss GAAP
are better
aligned with
the specific
nature of
Swiss pension
plans, which
are hybrid in
that they combine
elements of defined
contribution and
defined benefit
plans, but are
treated as defined
benefit plans
under IFRS
Accounting Standards
.
Key differences
between
Swiss GAAP
and IFRS
Accounting Standards
include
the
treatment
of
dynamic
elements,
such
as
future
salary
increases
and
future
interest
credits
on
retirement
savings, which are not considered under the
static method used in accordance with
Swiss GAAP. Also, the discount rate
used to determine the defined
benefit obligation in accordance with
IFRS Accounting Standards is based
on the yield of
high-quality corporate bonds of the market in the respective pension plan country. The discount rate used in accordance
with Swiss GAAP (i.e. the technical
interest rate) is determined by the
Pension Foundation Board based on the
expected
returns of the Board’s investment strategy.
For defined benefit plans, IFRS Accounting Standards
require the full defined benefit obligation net of the
plan assets to
be
recorded
on
the
balance
sheet
subject
to
the
asset
ceiling
rules,
with
changes
resulting
from
remeasurements
recognized
directly
in
equity.
However,
for
non-Swiss
defined
benefit
plans
for
which
IFRS
Accounting
Standards
are
elected, changes
due to
remeasurements are
recognized in
the income
statement
of UBS
AG standalone
under Swiss
GAAP.
Swiss GAAP require
employer contributions
to the pension
fund to be
recognized as personnel
expenses in the
income
statement. Swiss GAAP
also require an
assessment of whether,
based on
the pension fund’s
financial statements prepared
in accordance
with Swiss
accounting standards
(FER 26),
an economic
benefit to,
or obligation
of, the
employer arises
from
the
pension
fund
that
is
recognized
in
the
balance
sheet
when
conditions
are
met.
Conditions
for
recording
a
pension asset
or liability
would be
met if,
for example,
an employer
contribution reserve
is available or
the employer
is
required to contribute to the reduction of a pension deficit
(on an FER 26 basis).
Annual Report 2024
| Consolidated financial statements | UBS
AG consolidated financial statements
252
Note 33
Main differences between IFRS Accounting Standards
and Swiss GAAP (continued)
8. Leasing
Under
IFRS
Accounting
Standards,
a
single
lease
accounting
model
applies
that
requires
UBS
to
record
a
right-of-use
(RoU) asset
and a
corresponding lease
liability on
the balance
sheet when
UBS is
a lessee
in a
lease arrangement.
The
RoU asset
and the
lease liability
are recognized
when
UBS acquires
control of
the physical
use of
the asset.
The lease
liability
is
measured
based
on
the
present
value
of
the
lease
payments
over
the
lease
term,
discounted
using
UBS’s
unsecured borrowing
rate. The
RoU asset
is recorded
at an
amount equal
to the
lease liability
but is
adjusted for
rent
prepayments, initial direct costs, any
costs to refurbish the leased
asset and / or lease
incentives received. The RoU asset
is depreciated over the shorter of the lease term or the
useful life of the underlying asset.
Under
Swiss
GAAP,
leases
that
transfer
substantially
all
the
risks
and
rewards,
but
not
necessarily
legal
title
in
the
underlying assets, are
classified as finance
leases. All other
leases are
classified as operating
leases. Whereas finance
leases
are
recognized
on
the
balance
sheet
and
measured
in
line
with
IFRS
Accounting
Standards,
operating
leases
are
not
recognized on
the balance
sheet, with
payments recognized
as
General and
administrative
expenses
basis over the lease term, which commences with control of the physical use of the asset. Lease incentives are treated as
a reduction of rental expense and recognized on a consistent
basis over the lease term.
9. Netting of derivative assets and liabilities
Under IFRS Accounting Standards
,
derivative assets, derivative liabilities
and related cash collateral
not settled to market
are
reported
on
a
gross
basis
unless
the
restrictive
netting
requirements
under
IFRS
Accounting
Standards
are
met:
(i) existence
of
master
netting
agreements
and
related
collateral
arrangements
that
are
unconditional
and
legally
enforceable,
in both
the normal
course of
business and
the event
of default,
bankruptcy
or insolvency
of UBS
and its
counterparties;
and
(ii) UBS’s
intention
to
either
settle
on
a
net
basis
or
to
realize
the
asset
and
settle
the
liability
simultaneously. Under Swiss GAAP,
derivative assets, derivative liabilities and related cash collateral not settled to
market
are
generally
reported
on
a
net
basis,
provided
the
master
netting
and
the
related
collateral
agreements
are
legally
enforceable in the event of default, bankruptcy
or insolvency of UBS’s counterparties.
10. Negative interest
Under IFRS Accounting
Standards, negative
interest income
arising on a
financial asset
does not meet
the definition
of
interest
income
and,
therefore,
negative
interest
on
financial
assets
and
negative
interest
on
financial
liabilities
are
presented
within interest
expense and
interest
income,
respectively.
Under Swiss
GAAP,
negative interest
on financial
assets is presented
within interest income and
negative interest on financial
liabilities is presented within
interest expense.
11. Extraordinary income and expense
Certain non-recurring
and non-operating
income and
expense items,
such as realized
gains or
losses from
the disposal
of participations, fixed and intangible
assets, and reversals of impairments of
participations and fixed assets, are classified
as extraordinary items under Swiss GAAP.
This distinction is not available under IFRS Accounting Standards.
Note 34
Supplemental guarantor information
In 2015, the Personal Corporate Banking
and Wealth Management businesses booked in Switzerland were transferred
from
UBS AG
to UBS
Switzerland
AG through
an asset
transfer
in accordance
with the
Swiss Merger
Act. Under
the
terms of the asset transfer agreement,
UBS Switzerland AG assumed joint liability for
contractual obligations of UBS AG
existing on
the asset
transfer date, including
the full and
unconditional guarantee of
certain SEC-registered debt securities
issued by UBS AG. The joint
liability of UBS Switzerland AG for
contractual obligations of UBS AG
decreased in 2024 by
USD
bn to
USD
bn as
of 31 December
2024. The
decrease
substantially relates
to a
combination of
contractual
maturities, fair value movements and foreign currency
effects.
UBS AG,
together with
UBS Group
AG, has
fully and
unconditionally guaranteed
the outstanding
SEC-registered
debt
securities of Credit
Suisse (USA)
LLC, which
as of 31
December 2024
consisted of
a single outstanding
issuance with
a
balance of USD
m maturing in July 2032. Credit Suisse (USA) LLC is an indirect, wholly owned subsidiary of UBS AG.
UBS AG assumed Credit Suisse AG’s obligations under the guarantee as of 31 May 2024 (i.e. the date of the merger). In
accordance with
the guarantee, if
Credit Suisse
(USA) LLC
fails to
make a timely
payment under
the agreements governing
such debt
securities, the
holders of
the debt
securities may
demand payment
from either
UBS Group
AG or
UBS AG,
without first p
roceeding against Credit Suisse (USA) LLC.
Annual Report 2024
| Consolidated financial statements | Comparison
between UBS AG consolidated and UBS
Group AG consolidated
253
Comparison between UBS AG consolidated and
UBS Group AG consolidated
The
table
below
provides
a
comparison
of
selected
financial
and
capital
information
of
UBS AG
consolidated
and
of
UBS Group AG consolidated.
UBS AG
and
UBS Group
AG
both
prepare
consolidated
financial
statements
in
accordance
with
IFRS
Accounting
Standards.
UBS Group
AG
has
applied
acquisition
accounting
as
defined
by
IFRS 3,
Business
Combinations
,
to
the
acquisition of the
Credit Suisse Group.
The merger of
UBS AG and Credit
Suisse AG on 31 May 2024
has been accounted
for as a business combination under
common control,
as defined in IFRS 3, using
the historic carrying values of the assets
and liabilities
of Credit
Suisse AG as
at the
date of
the transaction
(31 May 2024),
determined under
IFRS Accounting
Standards. Therefore,
differences exist
between the
accounting treatments
applied at
the UBS Group
AG and
UBS AG
consolidated levels. There are also certain scope and presentation
differences,
as noted below.
›
Refer to Note 2 for more information about the accounting
for the merger of UBS AG and Credit Suisse AG
Assets, liabilities,
revenues, operating
expenses and
tax expenses
/ (benefits)
relating to
UBS Group AG and
its directly
held
subsidiaries,
including
UBS
Business
Solutions AG,
are
reflected
in
the
consolidated
financial
statements
of
UBS
Group AG but
not
in
those
of
UBS AG.
UBS AG’s
assets,
liabilities,
revenues
and
operating
expenses
related
to
transactions with UBS Group AG and its directly held subsidiaries, including UBS Business Solutions AG and other shared
services subsidiaries, are
not subject to
elimination in the
UBS AG consolidated financial
statements, but are
eliminated
in the UBS Group AG consolidated financial statements.
In 2024, UBS AG consolidated
recognized a net
profit of USD 1,533m,
while UBS Group AG
consolidated recognized
a
net profit of USD 5,146m. The
USD 3,613m difference was
mainly due to certain purchase
price allocation (PPA)
effects
recognized at the
UBS Group AG
level upon the
acquisition of
the Credit
Suisse Group.
These resulted
in net accretion
income at the UBS Group AG level, net of tax effects, whereas UBS AG
has not applied acquisition accounting and does
not
have
the
PPA
effects
or
the
corresponding
net
income.
UBS
Group
AG
also
has
lower
expenses
for
litigation,
regulatory and similar
matters than UBS
AG as a result
of the PPA effects
recognized at the
UBS Group AG
level. Other
differences in net profit mainly arise as Credit Suisse AG was merged into UBS AG on 31
May 2024, whereas UBS Group
AG included
the results
of the
former Credit
Suisse
AG for
the full
year, and
as UBS
Business Solutions
AG and
other
shared services subsidiaries
of UBS Group AG
charge other legal
entities within the
UBS AG consolidation scope
a markup
on costs incurred for services provided.
The
equity
of
UBS Group
AG
consolidated
was
USD 9.1bn
lower
than
the
equity
of
UBS AG
consolidated
as
of
31 December 2024. This difference was
mainly driven by PPA
effects of USD 5.1bn recognized at
the UBS Group AG level
upon the acquisition of the Credit Suisse Group that did not impact UBS AG consolidated,
primarily related to loans and
loan commitments measured at amortized cost and contingent liabilities recognized under IFRS 3 for
litigation, as well as
consolidation scope differences of USD 3.9bn.
The
going
concern
capital
of
UBS Group
AG
consolidated
was
USD 1.9bn
lower
than
the
going
concern
capital
of
UBS AG
consolidated
as
of
31 December
2024, reflecting
the
common
equity
tier 1
(CET1)
capital
of
UBS Group
AG
being
lower
by
USD 2.4bn,
partly
offset
by
its
going
concern
loss-absorbing
additional
tier 1
(AT1)
capital
being
USD 0.5bn higher.
The USD 2.4bn lower CET1 capital of UBS Group AG
consolidated was primarily due to UBS Group AG consolidated IFRS
equity being USD 9.1bn lower,
compensation-related regulatory capital accruals at the
UBS Group AG level of
USD 2.8bn
and
a
USD 0.8bn
effect
from
eligible
deferred
tax
assets
on
temporary
differences,
partly
offset
by
a
USD 10.2bn
difference in dividend accruals between UBS Group AG and
UBS AG.
Annual Report 2024
| Consolidated financial statements | Comparison
between UBS AG consolidated and UBS
Group AG consolidated
254
Comparison between UBS AG consolidated and UBS Group AG consolidated
As of or for the year ended 31.12.24
USD m, except where indicated
UBS AG
consolidated
UBS Group AG
consolidated
Difference
(absolute)
Income statement
Total revenues
Credit loss expense / (release)
Operating expenses
Operating profit / (loss) before tax
Net profit / (loss)
Balance sheet
Total assets
Total liabilities
Total equity
Capital information
Common equity tier 1 capital
Going concern capital
Risk-weighted assets
Common equity tier 1 capital ratio (%)
Going concern capital ratio (%)
Total loss-absorbing capacity ratio (%)
Leverage ratio denominator
Common equity tier 1 leverage ratio (%)
Liquidity coverage ratio (%)
1
Net stable funding ratio (%)
1 The disclosed ratios represent averages for the fourth quarter of each year presented, which were calculated based on an average
of 64 data points in the fourth quarter of 2024. Refer to the “Capital, liquidity and
funding, and balance sheet” section of this report for more information.
Annual Report 2024 |
Additional regulatory information
255
Additional regulatory
information
Table of contents
256
256
256
256
257
257
257
258
258
258
260
262
262
263
263
263
es
Annual Report 2024 |
Additional regulatory information | UBS
AG consolidated supplemental disclosures
required under SEC regulations
256
UBS AG consolidated supplemental disclosures
required under SEC regulations
A
–
The
following
pages
contain
supplemental
UBS
AG
disclosures
that
are
required
under
US
Securities
and
Exchange
Commission (SEC) regulations. UBS
AG’s consolidated financial statements have
been prepared in accordance
with IFRS
Accounting
Standards
as
issued
by
the
International
Accounting
Standards
Board
(the
IASB)
and
are
denominated
in
US dollars.
The
merger
of
UBS
AG
and
Credit
Suisse
AG
was
completed
on
31 May
2024.
UBS
AG
succeeded
to
all
rights
and
obligations of Credit
Suisse AG, including
all outstanding Credit
Suisse AG debt
instruments. The merger
effected with
no consideration payable by UBS AG constitutes a business combination under common control accounted for based on
the
accounting
policies
set
out
in
“Note
1
Summary
of
material
accounting
policies”
in
the
“Consolidated
financial
statements” section of this report.
›
Refer to “Note 2 Accounting for the merger of
UBS AG and Credit Suisse AG” in the “Consolidated
financial statements” section of
this report for more information about the accounting for
the merger of UBS AG and Credit Suisse AG
B – Selected financial data
Dividends received from investments in subsidiaries and associates
In 2024, UBS
AG received
dividends of USD 6,275m
(2023: USD 5,430m; 2022:
USD 6,465m) from
its subsidiaries and
associates. This
includes dividends
received
from
its Credit
Suisse subsidiaries
since
the merger
of UBS
AG and
Credit
Suisse
AG in
2024. Dividends
disclosed
have
been
translated
to US
dollars from
the
functional currency
of the
entity
paying the dividend, using the closing exchange rate
of the month the dividend was received.
Annual Report 2024 |
Additional regulatory information | UBS
AG consolidated supplemental disclosures
required under SEC regulations
257
Balance sheet data
USD m
31.12.24
31.12.23
31.12.22
Assets
Cash and balances at central banks
Amounts due from banks
Receivables from securities financing transactions at amortized cost
Cash collateral receivables on derivative instruments
Loans and advances to customers
Other financial assets measured at amortized cost
59,279
54,334
53,389
Total financial assets measured at amortized cost
Financial assets at fair value held for trading
of which: assets pledged as collateral that may be sold or repledged
by counterparties
38,532
Derivative financial instruments
Brokerage receivables
Financial assets at fair value not held for trading
Total financial assets measured at fair value through profit or loss
Financial assets measured at fair value through other comprehensive income
Investments in associates
Property, equipment and software
Goodwill and intangible assets
Deferred tax assets
Other non-financial assets
Total assets
Liabilities
Amounts due to banks
Payables from securities financing transactions at amortized cost
Cash collateral payables on derivative instruments
Customer deposits
749,476
555,673
527,171
Funding from UBS Group AG measured at amortized cost
Debt issued measured at amortized cost
Other financial liabilities measured at amortized cost
21,762
12,713
10,391
Total financial liabilities measured at amortized cost
Financial liabilities at fair value held for trading
Derivative financial instruments
Brokerage payables designated at fair value
Debt issued designated at fair value
Other financial liabilities designated at fair value
Total financial liabilities measured at fair value through profit or loss
Provisions
Other non-financial liabilities
Total liabilities
Equity attributable to shareholders
Equity attributable to non-controlling interests
Total equity
Total liabilities and equity
C – Information about the company
Property, plant and equipment
As
of
31
December
2024,
UBS
AG
operated
in
about
725
business
and
banking
locations
worldwide,
of
which
approximately
40% were
in Switzerland,
44%
in the
Americas, 8%
in the
rest
of Europe,
the Middle
East and
Africa,
and 8% in Asia Pacific.
Of the business and banking locations in
Switzerland, 25% were owned directly by UBS AG, with
the
remainder,
along
with
most
of UBS
AG’s
offices
outside
Switzerland,
being
held
under
commercial
leases.
These
premises are
subject to
continuous maintenance
and upgrading
and are
considered
suitable and
adequate for
current
and anticipated operations.
Annual Report 2024 |
Additional regulatory information | UBS
AG consolidated supplemental disclosures
required under SEC regulations
258
D – Information required by Subpart 1400 of Regulation
S-K
Selected statistical information
The
tables
below
set
forth
selected
statistical
information
regarding
UBS
AG’s
banking
operations
extracted
from
its
financial statements. Unless otherwise indicated,
average balances for the
years ended 31
December 2024, 31 December
2023 and
31 December 2022
are calculated from
monthly data.
From 31
May 2024
to 31
December 2024,
the calculation
includes the effect of the
merger of UBS AG with Credit Suisse
AG. Unless otherwise indicated, the
distinction between
domestic (Swiss) and foreign (non-Swiss) is generally
based on the booking location.
Average balances and interest rates
The tables below set forth average interest-earning assets and average interest-bearing liabilities, along with the average
yield, for
2024, 2023
and 2022.
Refer to
“Note 4
Net interest income and other net income from financial instruments
measured at fair value through profit or loss” in the “Consolidated financial statements”
section of this
report for
more
information about interest income and interest
expense.
For the year ended
31.12.24
31.12.23
31.12.22
USD m, except where indicated
Average
balance
Interest
income
Average
yield (%)
Average
balance
Interest
income
Average
yield (%)
Average
balance
Interest
income
Average
yield (%)
Assets
Balances at central banks
Domestic
Foreign
Amounts due from banks
Domestic
Foreign
Receivables from securities financing transactions measured
at amortized cost
1
Domestic
Foreign
Loans and advances to customers
Domestic
Foreign
Financial assets at fair value
1,2
Domestic
Foreign
Other interest-earning assets
Domestic
Foreign
Total interest-earning assets
3
Net interest income on swaps
Interest income on off-balance sheet securities and other
Interest income and average interest-earning assets
4
4
4
Non-interest-earning assets
5
Total average assets
1 Reverse repurchase agreements are presented on a gross basis and therefore, for the purpose of this disclosure, do not reflect the effect of netting permitted under IFRS Accounting Standards.
2 Includes financial
assets at fair
value held for
trading, financial assets
at fair value
not held for
trading, financial assets
at fair value
through other comprehensive
income and brokerage
receivables.
3 Non-taxable positions and
amounts were not material for the years presented.
4 For the purpose of this disclosure, negative interest income on assets is presented as
a reduction to interest income, while in the consolidated income statement
negative interest
income on
assets is
presented as
interest expense.
Refer to
“Note 4
Net interest
income and
other net
income from
financial instruments
measured at
fair value
through profit
or loss”
in the
“Consolidated financial statements” section of this report for more information.
5 Mainly includes derivative financial instruments, equity instruments at fair value held for trading and financial assets for unit-linked
investment contracts.
Annual Report 2024 |
Additional regulatory information | UBS
AG consolidated supplemental disclosures
required under SEC regulations
259
Average balances and interest rates (continued)
For the year ended
31.12.24
31.12.23
31.12.22
USD m, except where indicated
Average
balance
Interest
expense
Average
interest
rate (%)
Average
balance
Interest
expense
Average
interest
rate (%)
Average
balance
Interest
expense
Average
interest
rate (%)
Liabilities and equity
Amounts due to banks
Domestic
Foreign
Payables from securities financing transactions measured at
amortized cost
1
Domestic
Foreign
Customer deposits
Domestic
of which: demand deposits
of which: savings and sweep deposits
of which: time deposits
Foreign
of which: demand deposits
of which: savings and sweep deposits
of which: time deposits
Funding from UBS Group AG
Domestic
Foreign
Commercial paper
Domestic
Foreign
Other short-term debt issued measured at amortized cost
Domestic
Foreign
Long-term debt issued measured at amortized cost
Domestic
Foreign
Financial liabilities at fair value (excluding debt issued
designated at fair value)
1,2
Domestic
Foreign
Debt issued designated at fair value
Domestic
Foreign
Other interest-bearing liabilities
Domestic
Foreign
Total interest-bearing liabilities
Swap interest on hedged debt instruments and other
swaps
Interest expense on off-balance sheet securities and other
Interest expense and average interest-bearing liabilities
3
3
3
Non-interest-bearing liabilities
4
Total liabilities
Total equity
Total average liabilities and equity
Net interest income
Net yield on interest-earning assets
1 Repurchase agreements are presented on a gross
basis and therefore, for the purpose of this disclosure, do not reflect
the effect of netting permitted under IFRS Accounting Standards.
2 Includes financial liabilities
at fair value held for trading, other financial liabilities
designated at fair value and brokerage payables designated at fair value.
3 For the purpose of this disclosure, negative interest expense on
liabilities is presented
as a reduction to interest expense, while in the consolidated income statement negative interest
income on liabilities is presented as interest income. Refer to “Note 4 Net interest
income and other net income from
financial instruments measured at fair value through
profit or loss” in the “Consolidated financial statements” section
of this report for more information.
4 Mainly includes derivative financial instruments,
equity
instruments at fair value held for trading and financial liabilities related to unit-linked investment
contracts.
The percentage of total average interest-earning assets attributable
to foreign activities was 55% for 2024 (2023: 61%;
2022: 61%).
The
percentage
of total
average
interest-bearing
liabilities
attributable
to foreign
activities
was
59% for
2024 (2023: 61%;
2022: 60%). All
assets and liabilities
are translated into
US dollars
at uniform
month-end rates. Interest
income and expense are translated at monthly average
rates.
Average rates earned and
paid on assets and
liabilities can change from
period to period based
on the changes in
interest
rates in
general, but
are also
affected by
changes in
the currency
mix included
in the
assets and
liabilities. Tax-exempt
income is
not recorded
on a
tax-equivalent basis.
For all
three years
presented, tax-exempt
income is
considered to
be
insignificant, and the effect from such income is therefore
negligible.
Annual Report 2024 |
Additional regulatory information | UBS
AG consolidated supplemental disclosures
required under SEC regulations
260
Analysis of changes in interest income and expense
The tables below
provide information,
by categories of
interest-earning assets and
interest-bearing liabilities,
about the
changes in
interest income
and expense
due to
changes in
volume and
interest rates
for the
year ended
31 December
2024 compared with the year ended 31 December 2023, and for the year ended 31 December 2023 compared with the
year
ended 31 December
2022. The
change in
average volume
represents
the change
in the
current
average balance
compared with the average balance from the prior year with respect to the average rate of the prior year.
The change in
average rate represents the
difference between the net
change in interest
income and expense
and the change
in average
volume.
2024 compared with 2023
2023 compared with 2022
Increase / (decrease)
due to changes in
1
Increase / (decrease)
due to changes in
1
USD m
Average
volume
Average
interest rate
Net
change
Average
volume
Average
interest rate
Net
change
Interest income from interest-earning assets
Balances at central banks
Domestic
Foreign
Amounts due from banks
Domestic
Foreign
Receivables from securities financing transactions measured at amortized
cost
Domestic
Foreign
Loans and advances to customers
Domestic
Foreign
Financial assets at fair value
Domestic
Foreign
Other interest-earning assets
Domestic
Foreign
Interest income
Domestic
Foreign
Total interest income from interest-earning assets
Net interest income on swaps
Interest income on off-balance sheet securities and other
Total interest income
1 Currency effect is included within the variances disclosed in this table.
Annual Report 2024 |
Additional regulatory information | UBS
AG consolidated supplemental disclosures
required under SEC regulations
261
Analysis of changes in interest income and expense
(continued)
2024 compared with 2023
2023 compared with 2022
Increase / (decrease)
due to changes in
1
Increase / (decrease)
due to changes in
1
USD m
Average
volume
Average
interest rate
Net
change
Average
volume
Average
interest rate
Net
change
Interest expense on interest-bearing liabilities
Amounts due to banks
Domestic
Foreign
Payables from securities financing transactions measured at amortized cost
Domestic
Foreign
Customer deposits
Domestic
of which: demand deposits
of which: savings and sweep deposits
of which: time deposits
Foreign
of which: demand deposits
of which: savings and sweep deposits
of which: time deposits
Funding from UBS Group AG
Domestic
Foreign
Commercial paper
Domestic
Foreign
Other short-term debt issued measured at amortized cost
Domestic
Foreign
Long-term debt issued measured at amortized cost
Domestic
Foreign
Financial liabilities at fair value (excluding debt issued designated
at fair value)
Domestic
Foreign
Debt issued designated at fair value
Domestic
Foreign
Other interest-bearing liabilities
Domestic
Foreign
Interest expense
Domestic
Foreign
Total interest expense on interest-bearing liabilities
Swap interest on hedged debt instruments and other swaps
Interest expense on off-balance sheet securities and other
Total interest expense
1 Currency effect is included within the variances disclosed in this table.
Annual Report 2024 |
Additional regulatory information | UBS
AG consolidated supplemental disclosures
required under SEC regulations
262
Deposits
The table below analyzes average deposits and
average rates on each deposit category for the
years ended 31 December
2024, 31 December 2023 and 31 December 2022.
For the purpose of this
disclosure, foreign deposits represent deposits
from
depositors
who
are
based
outside
of
Switzerland.
Deposits
by
foreign
depositors
in
domestic
offices
were
USD 87,497m as of 31 December 2024 (31 December
2023: USD 60,596m; 31 December 2022: USD 59,897m).
31.12.24
31.12.23
31.12.22
USD m, except where indicated
Average
deposits
Average
rate (%)
Average
deposits
Average
rate (%)
Average
deposits
Average
rate (%)
Due to banks
Domestic
Demand deposits
Time deposits
Total domestic
Foreign
Demand deposits
Time deposits
Total foreign
Total due to banks
1
Customer deposits
Domestic
Demand deposits
Savings and sweep deposits
Time deposits
Total domestic
Foreign
Demand deposits
Savings and sweep deposits
Time deposits
Total foreign
Total customer deposits
1
1 For the
purpose of this
table, the distinction
between foreign and
domestic deposits is
based on the
domicile of the
depositor, while
foreign and domestic
deposits disclosed in
previous tables are
based on the
booking location.
Uninsured deposits
From the
combined total
of Due
to banks
and Customer
deposits as
of 31 December
2024, total
estimated uninsured
deposits were
USD 570bn (31
December
2023: USD 415bn;
31 December
2022: USD
365bn).
Uninsured
deposits are
deposits that
are in excess
of local
deposit insurance
or protection
scheme limits
in the
key locations
in which
UBS AG
operates, calculated based
on the respective
local regulations, as
well as deposits
in uninsured accounts.
The main deposit
insurance
schemes
applicable
to
UBS
AG
deposits
are
the
Swiss
depositor
protection
scheme
in
Switzerland
(which
protects
applicable
deposits
up
to
a
maximum
of
CHF 100,000
per
client
and
per
bank
or
securities
firm),
the
Compensation Scheme of German Banks in combination with the Deposit Protection Fund of the
Association of German
Banks in Germany (which
protects applicable deposits up to
a maximum of EUR 5m per client
and EUR 50m per
business)
and the Federal Deposit Insurance Corporation (the FDIC) scheme in the Americas (which
protects applicable deposits up
to a maximum of USD 250,000 per depositor, per insured bank,
for each account ownership category).
The table below presents the maturity of
estimated uninsured time deposits as of 31 December 2024. Where a
depositor
holds multiple accounts, which in aggregate are
in excess of a deposit insurance or protection
limit, the insured amount
is first allocated to the account with the shortest time to
maturity.
USD m
1
Within 3 months
3 to 6 months
6 to 12 months
Over 12 months
Total uninsured time deposits as of 31 December 2024
1 Amounts are estimated based on the methodologies defined in each local jurisdiction. As of 31 December 2024, there were no US time deposits subject to the FDIC scheme that
were in excess of the FDIC insurance
limit.
Annual Report 2024 |
Additional regulatory information | UBS
AG consolidated supplemental disclosures
required under SEC regulations
263
Investments in debt instruments
The table below presents the
carrying amount and weighted
average yield of debt
instruments presented within Financial
assets measured
at fair
value through
other comprehensive
income and
Other financial
assets
measured
at amortized
cost on the balance sheet by contractual maturity bucket. The yield for each
range of maturities is calculated by dividing
the annualized interest
income by the average
balance of the investment
per contractual maturity
bucket. The maturity
information presented does not consider any early
redemption features.
Within 1 year
1 to 5 years
5 to 10 years
Over 10 years
USD m, except where indicated
Carrying
amount
Yield (%)
Carrying
amount
Yield (%)
Carrying
amount
Yield (%)
Carrying
amount
Yield (%)
Total carrying
amount
Debt instruments measured at fair value through
other comprehensive income
Corporate and other
Subtotal as of 31 December 2024
Debt securities measured at amortized cost
Asset-backed securities
Government bills / bonds
Corporate and other
Subtotal as of 31 December 2024
Total as of 31 December 2024
Loan portfolio
The table below provides the
maturity profile of UBS AG’s
core loan portfolio as of
31 December 2024. The contractual
maturity
is
based
on
carrying
amounts
and
includes
the
effect
of
callable
features.
For
loans
due
after
one
year,
a
breakdown between fixed and adjustable or floating
interest rates is also provided.
USD m
31.12.24
Within 1 year
1 to 5 years
5 to 15 years
Over 15 years
Total
of which: over 1 year
Fixed rate
Adjustable or
floating rate
Private clients with mortgages
Real estate financing
Large corporate clients
SME clients
Lombard
Credit cards
Commodity trade finance
Ship / aircraft financing
Consumer financing
Other loans and advances to customers
Loans to financial advisors
Total
Allowance for credit losses
For the
years ended
31 December
2024, 31
December 2023
and 31
December 2022,
the ratio
of net
charge-offs
(i.e.
write-offs
of
expected
credit
loss
allowances
to
gross
carrying
amount
of
the
average
loans
outstanding)
during
the
period was
not material
for UBS
AG’s core
loan portfolio,
both on
an overall
basis and
on an
individual loan
category
basis.
Total
write-offs
for
31 December
2024
were
USD 380m
(31 December
2023:
USD 77m,
31 December
2022:
USD 95m). Refer to the coverage ratio tables in “Note 10 Financial assets at
amortized cost and other positions in scope
of expected credit
loss measurement”
in the “Consolidated
financial statements”
section of this
report for
the ratio of
expected credit loss allowances to total loans
outstanding at each period end.
Annual Report 2024 |
Appendix
264
Appendix
Alternative performance measures
An alternative
performance measure (an
APM) is
a financial
measure of
historical or
future financial
performance, financial
position
or
cash
flows
other
than
a
financial
measure
defined
or
specified
in
the
applicable
recognized
accounting
standards
or
in
other
applicable
regulations.
A
number
of
APMs
are
reported
in
the
discussion
of
the
financial
and
operating performance
of the
external reports
(annual, quarterly
and other
reports). APMs
are used
to provide
a more
complete picture of operating performance and
to reflect management’s view of
the fundamental drivers of the business
results.
A
definition
of
each
APM,
the
method
used
to
calculate
it
and
the
information
content
are
presented
in
alphabetical order
in the table
below. These
APMs may
qualify as non-GAAP
measures as
defined by US
Securities and
Exchange Commission (SEC) regulations.
APM label
Calculation
Information content
Cost / income ratio (%)
Calculated as operating expenses divided by
total
revenues.
This measure provides information about the
efficiency of the business by comparing operating
expenses with total revenues.
Cost of credit risk (bps)
Calculated as total credit loss expense / (release)
(annualized for reporting periods shorter than
12 months) divided by the average balance
of lending
assets for the reporting period, expressed in basis
points. Lending assets include the gross amounts
of
Amounts due from banks and Loans and advances
to
customers.
This measure provides information about the total
credit loss expense / (release) incurred in relation to
the average balance of gross lending assets for the
period.
Credit-impaired lending assets as a
percentage of total lending assets,
gross (%)
Calculated as credit-impaired lending assets divided
by total lending assets. Lending assets includes
the
gross amounts of Amounts due from banks and
Loans and advances to customers. Credit-impaired
lending assets refers to the sum of stage 3 and
purchased credit-impaired positions.
This measure provides information about the
proportion of credit-impaired lending assets in the
overall portfolio of gross lending assets.
Fee-generating assets (USD)
– Global Wealth Management
Calculated as the sum of discretionary and
nondiscretionary wealth management portfolios
(mandate volume) and assets where generated
revenues are predominantly of a recurring nature, i.e.
mainly investment, mutual, hedge and private-market
funds where we have a distribution agreement,
including client commitments into closed-ended
private-market funds from the date that recurring
fees are charged. Assets related to our Global
Financial Intermediaries business are excluded, as
are
assets of sanctioned clients.
This measure provides information about the volume
of invested assets that create a revenue stream,
whether as a result of the nature of the contractual
relationship with clients or through the fee structure
of the asset. An increase in the level of fee-generating
assets results in an increase in the associated revenue
stream. Assets of sanctioned clients are excluded from
fee-generating assets.
Gross margin on invested assets (bps)
– Asset Management
Calculated as total revenues (annualized for reporting
periods shorter than 12 months) divided by
average
invested assets.
This measure provides information about the total
revenues of the business in relation to invested assets.
Impaired loan portfolio as a percentage
of total loan portfolio, gross (%)
– Global Wealth Management,
Personal Corporate Banking
Calculated as impaired loan portfolio divided by
total
gross loan portfolio.
This measure provides information about the
proportion of impaired loan portfolio in the total gross
loan portfolio.
Integration-related expenses (USD)
Generally include costs of internal staff
and
contractors substantially dedicated to integration
activities, retention awards, redundancy costs,
incremental expenses from the shortening of useful
lives of property, equipment and software, and
impairment charges relating to these assets.
Classification as integration-related expenses does
not
affect the timing of recognition and measurement of
those expenses or the presentation thereof in the
income statement. Integration-related expenses
incurred by Credit Suisse also included expenses
associated with restructuring programs that existed
prior to the acquisition.
This measure provides information about expenses
that are temporary, incremental and directly related to
the integration of Credit Suisse into UBS.
Annual Report 2024 |
Appendix
265
APM label
Calculation
Information content
Invested assets (USD and CHF)
– Global Wealth Management,
Personal Corporate Banking,
Asset Management
Calculated as the sum of managed fund
assets,
managed institutional assets, discretionary and
advisory wealth management portfolios, fiduciary
deposits, time deposits, savings accounts,
and wealth
management securities or brokerage accounts.
This measure provides information about the volume
of client assets managed by or deposited with
UBS for
investment purposes.
Net interest margin (bps)
– Personal Corporate Banking
Calculated as net interest income (annualized for
reporting periods shorter than 12 months) divided by
average loans.
This measure provides information about the
profitability of the business by calculating the
difference between the price charged for lending and
the cost of funding, relative to loan value.
Net new assets (USD)
– Global Wealth Management
Calculated as the net amount of inflows and
outflows
of invested assets (as defined in UBS policy) recorded
during a specific period, plus interest and dividends.
Excluded from the calculation are movements due to
market performance, foreign exchange translation,
fees, and the effects on invested assets of strategic
decisions by UBS to exit markets or services.
This measure provides information about the
development of invested assets during a
specific
period as a result of net new asset flows, plus the
effect of interest and dividends.
Net new assets growth rate (%)
– Global Wealth Management
Calculated as the net amount of inflows and
outflows
of invested assets (as defined in UBS policy) recorded
during a specific period (annualized for reporting
periods shorter than 12 months), plus
interest and
dividends, divided by total invested assets
at the
beginning of the period.
This measure provides information about the growth
of invested assets during a specific period
as a result
of net new asset flows.
Net new fee-generating assets (USD)
– Global Wealth Management
Calculated as the net amount of fee-generating
asset
inflows and outflows, including dividend
and interest
inflows into mandates and outflows from mandate
fees paid by clients during a specific period.
Excluded
from the calculation are the effects on fee-generating
assets of strategic decisions by UBS to exit
markets or
services.
This measure provides information about the
development of fee-generating assets during
a
specific period as a result of net flows, excluding
movements due to market performance and
foreign
exchange translation, as well as the effects on fee-
generating assets of strategic decisions by UBS
to exit
markets or services.
Net new money (USD)
– Global Wealth Management,
Asset Management
Calculated as the net amount of inflows and
outflows
of invested assets (as defined in UBS policy) recorded
during a specific period. Excluded from the calculation
are movements due to market performance, foreign
exchange translation, dividends, interest and fees,
as
well as the effects on invested assets of strategic
decisions by UBS to exit markets
or services. Net new
money is not measured for Personal Corporate
Banking.
This measure provides information about the
development of invested assets during a specific
period as a result of net new money flows.
Net profit growth (%)
Calculated as the change in net profit attributable
to
shareholders from continuing operations between
current and comparison periods divided by net profit
attributable to shareholders from continuing
operations of the comparison period.
This measure provides information about profit
growth since the comparison period.
Operating expenses (underlying)
(USD)
Calculated by adjusting operating expenses
as
reported in accordance with IFRS Accounting
Standards for items that management believes
are
not representative of the underlying performance of
the businesses.
›
Refer to the “Group performance” section of the
UBS Group Annual Report 2024
for more
information
This measure provides information about the amount
of operating expenses, while excluding items
that
management believes are not representative of the
underlying performance of the businesses.
Operating profit / (loss) before tax
(underlying) (USD)
Calculated by adjusting operating profit / (loss) before
tax as reported in accordance with IFRS Accounting
Standards for items that management believes
are
not representative of the underlying performance of
the businesses.
›
Refer to the “Group performance” section of the
UBS Group Annual Report 2024
for more
information
This measure provides information about the amount
of operating profit / (loss) before tax, while excluding
items that management believes are not
representative of the underlying performance of the
businesses.
Pre-tax profit growth (%)
– Global Wealth Management,
Personal Corporate Banking,
Asset Management,
the Investment Bank
Calculated as the change in net profit before tax
attributable to shareholders from continuing
operations between current and comparison periods
divided by net profit before tax attributable to
shareholders from continuing operations of the
comparison period.
This measure provides information about pre-tax
profit growth since the comparison period.
Annual Report 2024 |
Appendix
266
APM label
Calculation
Information content
Pre-tax profit growth (underlying) (%)
– Global Wealth Management,
Personal Corporate Banking,
Asset Management,
the Investment Bank
Calculated as the change in net profit before tax
attributable to shareholders from continuing
operations between current and comparison periods
divided by net profit before tax attributable to
shareholders from continuing operations of the
comparison period. Net profit before tax attributable
to shareholders from continuing operations excludes
items that management believes are not
representative of the underlying performance of the
businesses and also excludes related tax impact.
This measure provides information about pre-tax
profit growth since the comparison period, while
excluding items that management believes
are not
representative of the underlying performance of the
businesses.
Recurring net fee income
(USD and CHF)
– Global Wealth Management,
Personal Corporate Banking
Calculated as the total of fees for services provided
on
an ongoing basis, such as portfolio management
fees,
asset-based investment fund fees and custody
fees,
which are generated on client assets, and
administrative fees for accounts.
This measure provides information about the amount
of recurring net fee income.
Return on attributed equity
1
Calculated as business division operating profit before
tax (annualized for reporting periods shorter than
12 months) divided by average attributed
equity.
This measure provides information about the
profitability of the business divisions in relation to
attributed equity.
Return on common equity tier 1
capital
1
Calculated as net profit attributable to shareholders
(annualized for reporting periods shorter than
12 months) divided by average common equity
tier 1
capital.
This measure provides information about the
profitability of the business in relation to common
equity tier 1 capital.
Return on equity
1
Calculated as net profit attributable to shareholders
(annualized for reporting periods shorter than
12 months) divided by average equity attributable
to
shareholders.
This measure provides information about the
profitability of the business in relation to equity.
Return on leverage ratio denominator,
gross (%)
Calculated as total revenues (annualized for reporting
periods shorter than 12 months) divided by
average
leverage ratio denominator.
This measure provides information about the revenues
of the business in relation to the leverage ratio
denominator.
Return on tangible equity
1
Calculated as net profit attributable to shareholders
(annualized for reporting periods shorter than
12 months) divided by average equity attributable
to
shareholders less average goodwill and intangible
assets.
This measure provides information about the
profitability of the business in relation to tangible
equity.
Tangible book value per share
(USD)
Calculated as equity attributable to shareholders less
goodwill and intangible assets divided by the
number
of shares outstanding.
This measure provides information about tangible net
assets on a per-share basis.
Total book value per share
(USD)
Calculated as equity attributable to shareholders
divided by the number of shares outstanding.
This measure provides information about net assets
on a per-share basis.
Total revenues (underlying)
(USD)
Calculated by adjusting total revenues as reported in
accordance with IFRS
Accounting Standards for items
that management believes are not representative of
the underlying performance of the businesses.
›
Refer to the “Group performance” section of the
UBS Group Annual Report 2024
for more
information
This measure provides information about the amount
of total revenues, while excluding items that
management believes are not representative of the
underlying performance of the businesses.
Transaction-based income
(USD and CHF)
– Global Wealth Management,
Personal Corporate Banking
Calculated as the total of the non-recurring portion
of
net fee and commission income, mainly composed
of
brokerage and transaction-based investment fund
fees, and credit card fees, as well as fees for payment
and foreign-exchange transactions, together with
other net income from financial instruments
measured at fair value through profit or loss.
This measure provides information about the amount
of the non-recurring portion of net fee and
commission income, together with other net
income
from financial instruments measured at fair value
through profit or loss.
Underlying cost / income ratio (%)
Calculated as underlying operating expenses
(as
defined above) divided by underlying total
revenues
(as defined above).
This measure provides information about the
efficiency of the business by comparing operating
expenses with total revenues, while excluding items
that management believes are not representative of
the underlying performance of the businesses.
Underlying net profit growth (%)
Calculated as the change in net profit attributable
to
shareholders from continuing operations between
current and comparison periods divided by net profit
attributable to shareholders from continuing
operations of the comparison period.
Net profit
attributable to shareholders from continuing
operations excludes items that management
believes
are not representative of the underlying performance
of the businesses and also excludes related tax
impact.
This measure provides information about profit
growth since the comparison period, while excluding
items that management believes are not
representative of the underlying performance of the
businesses.
Annual Report 2024 |
Appendix
267
APM label
Calculation
Information content
Underlying return on attributed equity
1
(%)
Calculated as underlying business division
operating
profit before tax (annualized for reporting periods
shorter than 12 months) (as defined above)
divided by
average attributed equity.
This measure provides information about the
profitability of the business divisions in relation to
attributed equity, while excluding items that
management believes are not representative of the
underlying performance of the businesses.
Underlying return on common equity
tier 1 capital
1
Calculated as net profit attributable to shareholders
(annualized for reporting periods shorter than
12 months) divided by average common equity
tier 1
capital. Net profit attributable to shareholders
excludes items that management believes
are not
representative of the underlying performance of the
businesses and also excludes related tax impact.
This measure provides information about the
profitability of the business in relation to common
equity tier 1 capital, while excluding items that
management believes are not representative of the
underlying performance of the businesses.
Underlying return on tangible equity
1
(%)
Calculated as net profit attributable to shareholders
(annualized for reporting periods shorter than
12 months) divided by average equity attributable
to
shareholders less average goodwill and intangible
assets. Net profit attributable to shareholders excludes
items that management believes are not
representative of the underlying performance of the
businesses and also excludes related tax impact.
This measure provides information about the
profitability of the business in relation to tangible
equity, while excluding items that management
believes are not representative of the underlying
performance of the businesses.
1
Profit or loss information for 2024 includes seven months (June
to December 2024) of post-merger consolidated data and five months of pre-merger UBS AG data only
(January to May 2024). Profit or loss information
for 2023 includes pre-merger UBS AG data only.
This is a general list of the APMs used in our
financial reporting. Not all of the APMs
listed above may appear in
this particular report.
Annual Report 2024 |
Appendix
268
Abbreviations frequently used in our financial reports
A
ABS
asset-backed securities
AG
Aktiengesellschaft
AGM
Annual General Meeting of
shareholders
AI
artificial intelligence
A-IRB
advanced internal ratings-
based
ALCO
Asset and Liability
Committee
AMA
advanced measurement
approach
AML
anti-money laundering
AoA
Articles of Association
APM
alternative performance
measure
ARR
alternative reference rate
ARS
auction rate securities
ASF
available stable funding
AT1
additional tier 1
AuM
assets under management
B
BCBS
Basel Committee on
Banking Supervision
BIS
Bank for International
Settlements
BoD
Board of Directors
C
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
CDS
credit default swap
CEO
Chief Executive Officer
CET1
common equity tier 1
CFO
Chief Financial Officer
CGU
cash-generating unit
CHF
Swiss franc
CIO
Chief Investment Office
CORC
Compliance Operational
Risk Control
CRM
credit risk mitigation
CRO
Chief Risk Officer
CST
combined stress test
CUSIP
Committee on Uniform
Security Identification
Procedures
CVA
credit valuation adjustment
D
DBO
defined benefit obligation
DCCP
Deferred Contingent
Capital Plan
DFAST
Dodd–Frank Act Stress Test
DM
discount margin
DOJ
US Department of Justice
DTA
deferred tax asset
DVA
debit valuation adjustment
E
EAD
exposure at default
EB
Executive Board
EC
European Commission
ECB
European Central Bank
ECL
expected credit loss
EGM
Extraordinary General
Meeting of shareholders
EIR
effective interest rate
EL
expected loss
EMEA
Europe, Middle East and
Africa
EOP
Equity Ownership Plan
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
F
FCA
UK Financial Conduct
Authority
FDIC
Federal Deposit Insurance
Corporation
FINMA
Swiss Financial Market
Supervisory Authority
FMIA
Swiss Financial Market
Infrastructure Act
FRTB
Fundamental Review of the
Trading Book
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
G
GAAP
generally accepted
accounting principles
GBP
pound sterling
GCRG
Group Compliance,
Regulatory and Governance
GDP
gross domestic product
GEB
Group Executive Board
GHG
greenhouse gas
GIA
Group Internal Audit
GRI
Global Reporting Initiative
G-SIB
global systemically
important bank
H
HQLA
high-quality liquid assets
I
IA
Internal Audit
IAS
International Accounting
Standards
IASB
International Accounting
Standards Board
IBOR
interbank offered rate
IFRIC
International Financial
Reporting Interpretations
Committee
IFRS
accounting standards
Accounting
issued by the IASB
Standards
IRB
internal ratings-based
IRRBB
interest rate risk in the
banking book
ISDA
International Swaps and
Derivatives Association
ISIN
International Securities
Identification Number
Annual Report 2024 |
Appendix
269
Abbreviations frequently used in our financial reports (continued)
K
KRT
Key Risk Taker
L
LAS
liquidity-adjusted stress
LCR
liquidity coverage ratio
LGD
loss given default
LIBOR
London Interbank Offered
Rate
LLC
limited liability company
LoD
lines of defense
LRD
leverage ratio denominator
LTIP
Long-Term
Incentive Plan
LTV
loan-to-value
M
MA
mergers and acquisitions
MRT
Material Risk Taker
N
NII
net interest income
NSFR
net stable funding ratio
NYSE
New York Stock Exchange
O
OCA
own credit adjustment
OCI
other comprehensive
income
OECD
Organisation for Economic
Co-operation and
Development
OTC
over-the-counter
P
PCI
purchased credit impaired
PD
probability of default
PIT
point in time
PPA
purchase price allocation
Q
QCCP
qualifying central
counterparty
R
RBC
risk-based capital
RbM
risk-based monitoring
REIT
real estate investment trust
RMBS
residential mortgage-
backed securities
RniV
risks not in VaR
RoCET1
return on CET1 capital
RoU
right-of-use
rTSR
relative total shareholder
return
RWA
risk-weighted assets
S
SA
standardized approach or
société anonyme
SA-CCR
standardized approach for
counterparty credit risk
SAR
Special Administrative
Region of the People’s
Republic of China
SDG
Sustainable Development
Goal
SEC
US Securities and Exchange
Commission
SFT
securities financing
transaction
SIBOR
Singapore Interbank
Offered Rate
SICR
significant increase in credit
risk
SIX
SIX Swiss Exchange
SME
small and medium-sized
entities
SMF
Senior Management
Function
SNB
Swiss National Bank
SOR
Singapore Swap Offer Rate
SPPI
solely payments of principal
and interest
SRB
systemically relevant bank
SVaR
stressed value-at-risk
T
TBTF
too big to fail
TCFD
Task
Force on Climate-
related Financial Disclosures
TIBOR
Tokyo
Interbank Offered
Rate
TLAC
total loss-absorbing capacity
TTC
through the cycle
U
USD
US dollar
V
VaR
value-at-risk
VAT
value added tax
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.
Annual Report 2024 |
Appendix
270
Information sources
Reporting publications
Annual publications
UBS AG Annual
Report
: Published in
English,
this report provides
descriptions of: the
UBS AG
(consolidated) performance;
the
strategy
and
performance
of
the
business
divisions
and
Group
functions;
risk,
treasury
and
capital
management;
corporate governance; and financial information, including the
financial statements.
Compensation Report
: This report discusses the
compensation framework and provides information about compensation
for
the
Board
of
Directors
and
the
Group
Executive
Board
members.
It
is
available
in
English
and
German
(
“Vergütungsbericht
”) and represents a component of the UBS Group Annual
Report.
Sustainability
Report
:
Published
in
English,
the
Sustainability
Report
provides
disclosures
on
environmental,
social
and
governance topics related to the UBS Group. It also provides
certain disclosures related to diversity, equity and inclusion.
Quarterly publications
Quarterly
financial
report
:
This
report
provides
an
update
on
performance
and
strategy
(where
applicable)
for
the
respective quarter. It is available in English.
The
annual and
quarterly
publications
are
available
in
.pdf
and
online
formats
at
ubs.com/investors
,
under
“Financial
information”.
Printed copies, in any language, of the aforementioned
annual publications are no longer provided.
Other information
Website
The “Investor Relations”
website at
ubs.com/investors
releases;
financial
information,
including
results-related
filings
with
the
US
Securities
and
Exchange
Commission
(the
SEC);
information
for
shareholders,
including
UBS
dividend
and
share
repurchase
program
information,
and
for
bondholders, including rating agencies
reports; the corporate calendar;
and presentations by management for
investors
and financial analysts. Information is available online in
English, with some information also available in German.
Results presentations
Quarterly
results
presentations
are
webcast
live.
Recordings
of
most
presentations
can
be
downloaded
from
ubs.com/presentations
.
Messaging service
Email
alerts
to
news
about
UBS
can
be
subscribed
for
under
“UBS
News
Alert”
at
ubs.com/global/en/investor-
relations/contact/investor-services.html
. Messages are sent in English, German, French or Italian, with an option to select
theme preferences for such alerts.
Form 20-F and other submissions to the US Securities
and Exchange Commission
UBS files
periodic
reports
with
and submits
other
information
to
the
SEC.
Principal
among
these
filings
is the
annual
report on Form 20-F, filed pursuant to
the US Securities Exchange Act of 1934.
The filing of Form 20-F is structured
as a
wraparound document. Most sections of the filing
can be satisfied by referring to the
UBS AG Annual Report. However,
there is a
small amount of
additional information in Form 20-F
that is not
presented elsewhere and is
particularly targeted
at readers in the US. Readers are encouraged to refer to this additional disclosure. Any document that filed with the SEC
is available on the SEC’s website:
sec.gov
. Refer to
ubs.com/investors
Annual Report 2024 |
Appendix
271
Cautionary statement
regarding forward-looking statements
|
not limited to management’s
outlook for UBS’s financial performance,
statements relating to the
anticipated effect of
transactions and strategic initiatives on
UBS’s
business and
future
development and
goals
or
intentions to
achieve climate,
sustainability and
other social
objectives.
While
these
forward-looking
statements represent
UBS’s judgments,
expectations and
objectives concerning the
matters described,
a number
of risks,
uncertainties and
other important
factors could cause actual
developments and results to
differ materially from UBS’s
expectations. In particular, the global economy
may be negatively affected
by
shifting political circumstances, including
increased tension between world powers,
conflicts in the Middle East,
as well as the continuing Russia–Ukraine
war. In
addition, the
ongoing conflicts
may continue
to cause
significant population
displacement, and
lead to shortages
of vital commodities,
including energy
shortages
and food
insecurity outside
the areas
immediately involved
in armed
conflict. Governmental
responses to
the armed
conflicts, including
successive sets
of sanctions
on Russia and
Belarus, and Russian
and Belarusian entities
and nationals, and
the uncertainty
as to whether
the ongoing conflicts
will further widen
and intensify,
may have significant adverse effects on
the market and macroeconomic conditions,
including in ways that cannot
be anticipated. UBS’s acquisition of the
Credit
Suisse Group has materially changed its outlook and strategic direction and introduced new
operational challenges. The integration of the Credit Suisse entities
into the UBS structure is expected to continue through 2026
and presents significant operational and execution
risk, including the risks that UBS may be
unable
to achieve the cost reductions and business benefits contemplated by the transaction, that it may incur higher costs to execute
the integration of Credit Suisse
and that the
acquired business may
have greater risks
or liabilities than
expected. Following the failure
of Credit Suisse,
Switzerland is considering significant
changes to its
capital, resolution and regulatory
regime, which, if
proposed and adopted, may
significantly increase our capital
requirements or impose
other
costs on UBS.
These factors create greater uncertainty
about forward-looking statements.
Other factors that may
affect UBS’s performance and
ability to achieve
its plans, outlook
and other objectives
also include, but
are not limited
to: (i) the degree
to which UBS
is successful in
the execution
of its strategic
plans, including
its cost
reduction and
efficiency initiatives
and its
ability to
manage its
levels of
risk-weighted assets
(RWA) and
leverage ratio
denominator (LRD),
liquidity
coverage ratio and other financial resources,
including changes in RWA assets
and liabilities arising from higher market volatility and
the size of the combined
Group; (ii) the
degree to
which UBS
is successful
in implementing
changes to
its businesses
to meet
changing market,
regulatory and
other conditions;
(iii) inflation
and interest rate volatility in
major markets; (iv) developments in
the macroeconomic climate and
in the markets in which
UBS operates or to which
it is exposed,
including movements in securities prices or liquidity, credit
spreads, currency exchange rates, residential and commercial real estate markets, general economic
conditions, and changes to national
trade policies on the financial
position or creditworthiness of UBS’s
clients and counterparties, as well
as on client sentiment
and levels of activity;
(v) changes in the availability of
capital and funding, including any
adverse changes in UBS’s
credit spreads and credit
ratings of UBS, as
well as availability and cost of funding to
meet requirements for debt eligible for total loss-absorbing
capacity (TLAC); (vi) changes in central
bank policies or the
implementation of financial legislation and regulation
in Switzerland, the US,
the UK, the EU
and other financial centers
that have imposed, or
resulted in, or
may do so in the future, more stringent or entity-specific capital, TLAC, leverage ratio, net stable funding ratio, liquidity and funding requirements, heightened
operational resilience requirements, incremental tax requirements, additional levies, limitations on permitted activities, constraints on remuneration, constraints
on transfers
of capital
and liquidity
and sharing
of operational
costs across
the Group
or other
measures, and
the effect
these will
or would
have on
UBS’s
business activities; (vii) UBS’s ability to successfully implement resolvability and related regulatory requirements and the potential need to make further changes
to the legal structure
or booking model of UBS
in response to legal and
regulatory requirements and any additional requirements
due to its acquisition of the
Credit Suisse Group, or other developments;
(viii) UBS’s ability to maintain
and improve its systems and controls
for complying with sanctions in
a timely manner
and for the detection and prevention
of money laundering to meet evolving regulatory
requirements and expectations, in particular in
the current geopolitical
turmoil; (ix) the uncertainty arising from domestic stresses in certain major economies; (x) changes in UBS’s competitive position, including whether differences
in regulatory capital and other requirements among the
major financial centers adversely affect UBS’s
ability to compete in certain lines of
business; (xi) changes
in the standards of conduct applicable to its businesses that may result from new regulations or
new enforcement of existing standards, including measures to
impose new and enhanced duties when interacting with customers and
in the execution and handling of customer transactions; (xii) the
liability to which UBS
may be
exposed, or
possible constraints
or sanctions
that regulatory
authorities might
impose on
UBS, due
to litigation,
contractual claims
and regulatory
investigations, including the
potential for disqualification
from certain businesses,
potentially large fines
or monetary penalties,
or the loss of
licenses or privileges
as
a
result
of
regulatory or
other governmental
sanctions, as
well as
the effect
that litigation,
regulatory and
similar matters
have on
the operational
risk
component of its RWA; (xiii) UBS’s
ability to retain and attract the
employees necessary to generate
revenues and to manage, support
and control its businesses,
which may
be affected
by
competitive factors;
(xiv) changes in
accounting or
tax standards
or policies,
and
determinations or
interpretations affecting
the
recognition of gain or loss, the valuation of goodwill,
the recognition of deferred tax assets and other matters; (xv) UBS’s
ability to implement new technologies
and business methods,
including digital services,
artificial intelligence and other
technologies, and ability to
successfully compete with both
existing and new
financial service
providers, some
of which may
not be
regulated to
the same
extent; (xvi) limitations on
the effectiveness of
UBS’s internal processes
for risk
management, risk control,
measurement and modeling,
and of financial
models generally;
(xvii) the occurrence of
operational failures,
such as fraud,
misconduct,
unauthorized trading, financial crime, cyberattacks, data leakage and systems failures, the risk of which is increased with persistently high levels of cyberattack
threats; (xviii) restrictions on the
ability of UBS
Group AG,
UBS AG and
regulated subsidiaries of UBS
AG to make payments
or distributions, including due
to
restrictions on the
ability of its
subsidiaries to make
loans or distributions,
directly or indirectly, or, in the case
of financial difficulties,
due to the
exercise by FINMA
or
the
regulators
of
UBS’s
operations
in
other
countries
of
their
broad
statutory
powers
in
relation
to
protective
measures,
restructuring
and
liquidation
proceedings; (xix) the degree to which changes in
regulation, capital or legal structure, financial results
or other factors may affect UBS’s ability
to maintain its
stated capital return objective; (xx) uncertainty
over the scope of actions that
may be required by UBS, governments
and others for UBS to achieve goals
relating
to climate, environmental and social matters, as well as the evolving
nature of underlying science and industry and the possibility of conflict
between different
governmental standards and regulatory regimes; (xxi) the ability of UBS to access capital markets; (xxii) the ability of UBS to successfully recover from
a disaster
or other business continuity problem
due to a
hurricane, flood, earthquake, terrorist attack, war,
conflict, pandemic, security breach, cyberattack, power
loss,
telecommunications failure or
other natural or man-made
event; and (xxiii) the
effect that these or other
factors or unanticipated
events, including media reports
and speculations, may have on its reputation and the additional consequences that this may have on its business and performance. The sequence in which the
factors above are
presented is not
indicative of their
likelihood of occurrence
or the potential
magnitude of their
consequences. UBS’s business and
financial
performance could be affected
by other factors identified
in its past
and future filings
and reports, including
those filed with the
US Securities and
Exchange
Commission (the SEC).
More detailed information
about those factors
is set forth
in documents furnished
by UBS and
filings made by
UBS with the
SEC, including
the UBS Group AG and
UBS AG Annual Reports
on Form 20-F for
the year ended 31 December
2024. UBS is not
under any obligation to
(and expressly disclaims
any obligation to) update or alter its forward-looking
statements, whether as a result of new information,
future events, or otherwise.
Rounding |
disclosed in text and tables are
calculated on the basis of unrounded
figures. Absolute changes between reporting periods disclosed in
the text, which can be
derived from numbers presented in related tables, are calculated on
a rounded basis.
Tables |
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.
Values
that are zero on a rounded basis can be either negative
or positive on an actual basis.
Websites |
of any such websites into this report.
UBS AG
P.O. Box, CH-8098 Zurich
P.O. Box, CH-4002 Basel
ubs.com
TABLE OF CONTENTS
Item 10. Additional InformationItem 19. ExhibitsPart Due To The Broader Integration and Migration Efforts Underway, Is Required To Conclude That These Controls AreNote 1 Summary Of Material Accounting PoliciesNote 1 Summary Of Material Accounting Policies (continued)Item 2J in This Note For More Information)Item and Recognized in The Income Statement Along with The Change in The Fair Value Of The Hedging Instrument. TheNote 2 Accounting For The Merger Of Ubs Ag and Credit Suisse AgNote 1 To These Financial StatementsNote 2 Accounting For The Merger Of Ubs Ag and Credit Suisse Ag (continued)Note 3A Segment ReportingNote 3A Segment Reporting (continued)Note 3B Segment Reporting By Geographic LocationNote 4 Net Interest Income and Other Net Income From Financial Instruments Measured At Fair Value Through Profit Or LossNote 4 Net Interest Income and Other Net Income From Financial Instruments Measured At Fair Value ThroughNote 5 Net Fee and Commission IncomeNote 6 Other IncomeNote 7 Personnel ExpensesNote 8 General and Administrative ExpensesNote 9 Income TaxesNote 9 Income Taxes (continued)Note 10 Financial Assets At Amortized Cost and Other Positions in Scope Of Expected Credit Loss MeasurementNote 11 Derivative InstrumentsNote 11 Derivative Instruments (continued)Note 12 Property, Equipment and SoftwareNote 13 Goodwill and Intangible AssetsNote 13 Goodwill and Intangible Assets (continued)Note 14 Other AssetsNote 14 Other Assets (continued)Note 15 Amounts Due To Banks, Customer Deposits, and Funding From Ubs Group AgNote 15 Amounts Due To Banks, Customer Deposits, and Funding From Ubs Group Ag (continued)Note 16 Debt Issued Designated At Fair ValueNote 17 Debt Issued Measured At Amortized CostNote 18 Provisions and Contingent Liabilities A) Provisions The Table Below Presents An Overview Of Total ProvisionsNote 18 Provisions and Contingent LiabilitiesNote 18 Provisions and Contingent Liabilities (continued)Note 19 Other Liabilities A) Other Financial Liabilities Measured At Amortized CostNote 19 Other LiabilitiesNote 20 Expected Credit Loss MeasurementNote 20 Expected Credit Loss Measurement (continued)Note 21 Fair Value MeasurementNote 21 Fair Value Measurement (continued)Note 22 Offsetting Financial Assets and Financial LiabilitiesNote 22 Offsetting Financial Assets and Financial Liabilities (continued)Note 23 Restricted and Transferred Financial AssetsNote 23 Restricted and Transferred Financial Assets (continued)Note 24 Maturity Analysis Of Assets and LiabilitiesNote 24 Maturity Analysis Of Assets and Liabilities (continued)Note 25 Hedge AccountingNote 25 Hedge Accounting (continued)Note 26 Post-employment Benefit PlansNote 26 Post-employment Benefit Plans (continued)Note 27 Employee Benefits: Variable CompensationNote 27 Employee Benefits: Variable Compensation (continued)Note 28 Interests in Subsidiaries and Other EntitiesNote 28 Interests in Subsidiaries and Other Entities (continued)Note 29 Changes in Organization and Acquisitions and Disposals Of Subsidiaries and BusinessesNote 30 Related Parties (continued)Note 31 Invested Assets and Net New MoneyNote 32 Currency Translation RatesNote 33 Main Differences Between Ifrs Accounting Standards and Swiss GaapNote 33 Main Differences Between Ifrs Accounting Standards and Swiss Gaap (continued)Note 34 Supplemental Guarantor Information