30 June 2019 Pillar 3 report UBS Group and significant regulated subsidiaries and sub-groups Table of contents Contacts Switchboards Office of the Group Company For all general inquiries Secretary www.ubs.com/contact The Group Company Secretary receives inquiries regarding Introduction and basis for preparation Zurich +41-44-234 1111 compensation and related issues London +44- 207-567 8000 addressed to members of the Board New York +1-212-821 3000 of Directors. UBS Group AG Hong Kong +852-2971 8888 Singapore +65-6495 8000 UBS Group AG, Office of the 6 Section 1 Key metrics Group Company Secretary 8 Section 2 Risk-weighted assets Investor Relations P.O. Box, CH-8098 Zurich, UBS’s Investor Relations team Switzerland 12 Section 3 Credit risk supports institutional, professional 24 Section 4 Counterparty credit risk and retail investors from [email protected] 31 Section 5 Securitizations our offices in Zurich, New York and Krakow. +41-44-235 6652 36 Section 6 Market risk Shareholder Services 40 Section 7 Interest rate risk in the banking book UBS Group AG, Investor Relations P.O. Box, CH-8098 Zurich, UBS’s Shareholder Services team, 43 Section 8 Going and gone concern requirements Switzerland a unit of the Group Company and eligible capital Secretary Office, is responsible www.ubs.com/investors for the registration of UBS Group AG 50 Section 9 Total loss-absorbing capacity registered shares. 52 Section 10 Leverage ratio Zurich +41-44-234 4100 New York +1-212-882 5734 UBS Group AG, Shareholder Services 55 Section 11 Liquidity coverage ratio P.O. Box, CH-8098 Zurich, 57 Section 12 Requirements for global systemically Switzerland Media Relations important banks and related indicators UBS’s Media Relations team supports [email protected] global media and journalists from our offices in Zurich, London, +41-44-235 6652 New York and Hong Kong. US Transfer Agent Significant regulated subsidiaries and sub-groups www.ubs.com/media For global registered share-related inquiries in the US. 60 Section 1 Introduction Zurich +41-44-234 8500 60 Section 2 UBS AG standalone [email protected] Computershare Trust Company NA P.O. Box 505000 64 Section 3 UBS Switzerland AG standalone London +44-20-7567 4714 Louisville, KY 40233-5000, USA 70 Section 4 UBS Europe SE consolidated [email protected] Shareholder online inquiries: 71 Section 5 UBS Americas Holding LLC consolidated New York +1-212-882 5858 https://www-us.computershare.com/ [email protected] investor/Contact Hong Kong +852-2971 8200 Shareholder website: [email protected] www.computershare.com/investor Calls from the US +1-866-305-9566 Calls from outside the US +1-781-575-2623 TDD for hearing impaired +1-800-231-5469 TDD for foreign shareholders +1-201-680-6610 Imprint Publisher: UBS Group AG, Zurich, Switzerland | www.ubs.com Language: English © UBS 2019. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved. Introduction and basis for preparation Introduction and basis for preparation Introduction and basis for preparation Scope and location of Basel III Pillar 3 disclosures Significant BCBS and FINMA capital adequacy, liquidity and funding, and related disclosure requirements The Basel Committee on Banking Supervision (BCBS) Basel III capital adequacy framework consists of three complementary This Pillar 3 report has been prepared in accordance with FINMA pillars. Pillar 1 provides a framework for measuring minimum Pillar 3 disclosure requirements (FINMA Circular 2016/1, capital requirements for the credit, market, operational and non- “Disclosure – banks”) issued on 16 July 2018, the underlying counterparty-related risks faced by banks. Pillar 2 addresses the BCBS guidance “Revised Pillar 3 disclosure requirements” issued principles of the supervisory review process, emphasizing the in January 2015, the “Frequently asked questions on the revised need for a qualitative approach to supervising banks. Pillar 3 Pillar 3 disclosure requirements” issued in August 2016, the requires banks to publish a range of disclosures, mainly covering “Pillar 3 disclosure requirements – consolidated and enhanced risk, capital, leverage, liquidity and remuneration. framework” issued in March 2017 and the subsequent This report provides Pillar 3 disclosures for UBS Group AG and “Technical Amendment – Pillar 3 disclosure requirements – prudential key figures and regulatory information for UBS AG regulatory treatment of accounting provisions” issued in August standalone, UBS Switzerland AG standalone, UBS Europe SE 2018. consolidated and UBS Americas Holding LLC consolidated in the respective sections under “Significant regulated subsidiaries and Changes to Pillar 3 disclosure requirements sub-groups.” In line with BCBS and FINMA requirements, the following As UBS is considered a systemically relevant bank (SRB) under disclosures are published for the first time, effective as of Swiss banking law, UBS Group AG and UBS AG are required to 30 June 2019: comply with regulations based on the Basel III framework as – “TLAC1 – TLAC composition for G-SIBs (at resolution group applicable to Swiss SRBs on a consolidated basis. Capital and level)” applicable to UBS Group AG consolidated; other regulatory information as of 30 June 2019 for UBS Group – “TLAC3 – Resolution entity – creditor ranking at legal entity AG consolidated is provided in the “Capital management” level” applicable to UBS Group AG at a legal entity level; section of our second quarter 2019 report and for UBS AG – “IRRBBA – IRRBB risk management objective and policies – consolidated in the “Capital management” section of the UBS qualitative requirements” applicable to UBS Group AG AG second quarter 2019 report, which are available under consolidated; “Quarterly reporting” at www.ubs.com/investors. – “IRRBB1 – Quantitative information on IRRBB” applicable to Local regulators may also require the publication of Pillar 3 UBS Group AG consolidated; and information at a subsidiary or sub-group level. Where applicable, – “IRRBBA1 – Quantitative disclosures relating to the position these local disclosures are provided under “Holding company structure and interest rate reset of IRRBB risk” applicable to and significant regulated subsidiaries and sub-groups” at UBS Group AG consolidated. www.ubs.com/investors. We currently expect to provide the "TLAC2 – Material subgroup entity – creditor ranking at legal entity level” disclosure in our 31 December 2019 Pillar 3 report. The “CR1 – Credit quality of assets” table in this report has been revised to address additional disclosure requirements with regard to the allocation of the accounting provisions for credit losses between the standardized approach and the internal ratings-based approach, as required by the aforementioned BCBS Technical Amendment issued in August 2018. 2 Significant BCBS requirements to be adopted in the In line with the FINMA-specified disclosure frequency and second half of 2019 or later requirements for disclosure with regard to comparative periods, we provide quantitative comparative information as of 31 March BCBS initial margin offset in the leverage ratio and new 2019 for disclosures required on a quarterly basis, and as of disclosure requirements 31 December 2018 for disclosures required on a semiannual The BCBS agreed to align the leverage ratio measurement of basis. Where specifically required by FINMA and/or BCBS, we client-cleared derivatives with the standardized approach to disclose comparative information for additional reporting dates. measuring counterparty credit risk exposures (SA-CCR). We The new TLAC1, TLAC3 and IRRBB disclosures are provided for expect these provisions will become effective as of 1 January the first time as of 30 June 2019 in this report without 2022. This treatment permits both cash and non-cash forms of comparative information. The IRRBB disclosure will be provided segregated initial margin, as well as cash and non-cash variation on an annual basis from 31 December 2019 onward. margin, received from a client to offset the replacement cost Where required, movement commentary is aligned with the and potential future exposure for client-cleared derivatives only. corresponding disclosure frequency required by FINMA and This will help to mitigate any potential effect on the leverage always refers to the latest comparative period. Throughout this ratio denominator from the finalization of the Basel III capital report, signposts are displayed at the beginning of a section, framework, which takes effect from 1 January 2022. table or chart – Annual | Semiannual | Quarterly | – indicating whether The BCBS also introduced a new disclosure standard, effective the disclosure is provided annually, semiannually or quarterly. A as of 1 January 2022, which sets out additional requirements for triangle symbol – – indicates the end of the signpost. banks to disclose their leverage ratios based on quarter-end and Refer to our 31 March 2019 Pillar 3 report, which is available daily average values of securities financing transactions. under “Pillar 3 disclosures” at www.ubs.com/investors, for more information about previously published quarterly Frequency and comparability of Pillar 3 disclosures movement commentary FINMA has specified the reporting frequency for each disclosure, as outlined in the table on pages 5 and 6 of our 31 December 2018 Pillar 3 report, which is available under “Pillar 3 disclosures” at www.ubs.com/investors. 3 UBS Group AG UBS Group AG Section