Business Context and Reporting Period
This Form 6-K filing contains the 30 June 2023 Pillar 3 Report for UBS Group AG and significant regulated subsidiaries. The reporting period covers the second quarter of 2023, a period defined by the formal acquisition of Credit Suisse Group AG on 12 June 2023. The report details regulatory capital, risk-weighted assets (RWA), liquidity, and leverage metrics under Basel III and Swiss Systemically Relevant Bank (SRB) frameworks. The acquisition resulted in a significant consolidation of assets, liabilities, and risk profiles, with Credit Suisse assets remeasured at fair value under IFRS 3.
Key Financial Metrics (as of 30 June 2023)
| Metric | Value (USD) | Change vs. 31 Mar 2023 |
|---|---|---|
| Common Equity Tier 1 (CET1) Capital | $80.3 billion | +$35.7 billion |
| Total Tier 1 Capital | $93.3 billion | +$35.6 billion |
| Total Risk-Weighted Assets (RWA) | $556.6 billion | +$234.9 billion |
| CET1 Ratio | 14.42% | +0.56 percentage points |
| Basel III Leverage Ratio | 5.56% | -0.13 percentage points |
| Total Loss-Absorbing Capacity (TLAC) | $196.0 billion | +$85.7 billion |
| Liquidity Coverage Ratio (LCR) | 175.2% | +13.3 percentage points |
| Net Stable Funding Ratio (NSFR) | 117.6% | -0.1 percentage points |
Note: The filing does not provide revenue, profit, or cash flow figures for the period; these are regulatory capital and liquidity disclosures.
Material Changes vs. Prior Period
- Acquisition Impact: The acquisition of Credit Suisse Group was the primary driver of all metric changes. It added approximately $237.7 billion to RWA and $36.1 billion to CET1 capital (including transitional purchase price allocation adjustments).
- Capital Ratios: Despite the massive increase in RWA, the CET1 ratio increased to 14.42% due to the substantial capital injection from the acquisition and a $10 billion reduction in operational risk RWA resulting from the aggregation of advanced measurement approach (AMA) models.
- Liquidity: High-quality liquid assets (HQLA) increased by $26.9 billion to $257.1 billion, largely due to Credit Suisse's cash and government bond holdings. Net cash outflows increased by $2.8 billion, primarily attributable to Credit Suisse's deposit and derivative outflows.
- Leverage: The leverage ratio denominator increased by $663.4 billion to $1.68 trillion, driven by the acquisition, resulting in a slight decrease in the leverage ratio to 5.56%.
Guidance, Outlook, and Risks
- Regulatory Capital Requirements: UBS will be subject to higher "too-big-to-fail" capital requirements for market share and total exposure. The phase-in of these increased requirements will commence at the end of 2025 and be completed by the beginning of 2030.
- Transitional Adjustments: A transitional CET1 capital treatment has been applied to certain fair value adjustments from the acquisition (specifically own-credit-related effects). This treatment is subject to linear amortization and will reduce to nil by 30 June 2027.
- Public Liquidity Backstop: The Swiss Federal Council is consulting on a public liquidity backstop for systemically important banks, expected to come into force by January 2025 if adopted.
- Review of Acquisition: The Swiss Federal Department of Finance is reviewing the circumstances leading to the acquisition. Findings are expected in Q3 2023 and will be considered in the bi-annual "too-big-to-fail" review report by April 2024.
- US Regulatory Environment: US regulators are consulting on final Basel III implementation, which may end the use of the internal model approach for credit risk for the largest banking organizations, potentially impacting UBS Americas Holding LLC.
Key Facts for Investor Verification
- Capital Adequacy: Verify that the CET1 ratio of 14.42% and TLAC ratio of 35.22% comfortably exceed the Swiss SRB and G-SIB minimum requirements, including the 1.0% G-SIB buffer.
- RWA Composition: Confirm the breakdown of the $556.6 billion RWA, noting that Credit risk RWA increased by $121.4 billion and Operational risk RWA increased by $64.0 billion (net of the $10 billion diversification benefit).
- Liquidity Resilience: Assess the LCR of 175.2% and NSFR of 117.6% to ensure the combined entity maintains robust liquidity buffers above FINMA prudential requirements.
- Transitional Accounting: Monitor the $5.0 billion net-of-tax transitional CET1 adjustment related to the acquisition, which will amortize over four years, potentially impacting future capital ratios.
- Future Capital Add-ons: Track the timeline for the phase-in of higher too-big-to-fail capital requirements starting in late 2025.