UBS Group AG Form 6-K Summary: Basel III Pillar 3 Disclosure
Business Context and Reporting Period
This Form 6-K, filed on October 22, 2019, contains the Basel III Pillar 3 disclosure report for UBS Group AG and its significant regulated subsidiaries as of September 30, 2019. UBS is classified as a Systemically Relevant Bank (SRB) under Swiss banking law. The report details capital adequacy, leverage, liquidity, and risk-weighted assets (RWA) in accordance with FINMA and BCBS requirements.
Key Financial Metrics (UBS Group Consolidated)
| Metric | Value (USD) | Ratio / % |
|---|---|---|
| Common Equity Tier 1 (CET1) Capital | $34.7 billion | 13.10% of RWA |
| Total Tier 1 Capital | $50.7 billion | 19.16% of RWA |
| Total Capital | $56.4 billion | 21.31% of RWA |
| Risk-Weighted Assets (RWA) | $264.6 billion | - |
| Leverage Ratio Exposure | $901.9 billion | 5.62% (Tier 1 / Exposure) |
| Total Loss-Absorbing Capacity (TLAC) | $88.2 billion | 33.33% of RWA |
| Liquidity Coverage Ratio (LCR) | - | 138% (Average 3Q19) |
| High-Quality Liquid Assets (HQLA) | $167.9 billion | - |
Material Changes vs. Prior Period (Q2 2019)
- Capital: CET1 capital decreased by $0.3 billion to $34.7 billion, driven by capital returns, share repurchases, and foreign currency effects, partially offset by operating profit. Tier 1 capital increased by $0.7 billion to $50.7 billion due to issuances of high-trigger loss-absorbing AT1 instruments.
- Risk-Weighted Assets: RWA increased by $2.5 billion to $264.6 billion. This was primarily due to a $5.0 billion increase in credit risk RWA (driven by asset size in Corporate Client Solutions), partially offset by a $1.8 billion decrease in market risk RWA.
- Leverage: Leverage ratio exposure decreased by $9 billion to $901.9 billion, predominantly driven by a reduction in on-balance sheet exposures.
- Liquidity: HQLA decreased by $8.3 billion to $167.9 billion, reflecting lower cash at central banks due to higher funding consumption and reduced debt issuance. The LCR decreased 7 percentage points to 138%, remaining above the 110% minimum requirement.
Outlook, Commentary, and Risks
Management Commentary: The increase in credit risk RWA was driven by growth in traded loans and term loans. The decrease in market risk RWA was attributed to model updates regarding Value-at-Risk (VaR) parameters. The comprehensive risk measure (CRM) is no longer applicable as UBS no longer holds eligible correlation trading positions.
Regulatory Requirements: UBS continues to meet all Swiss SRB going and gone concern requirements. The TLAC available as of September 30, 2019, includes CET1, AT1, and Tier 2 capital instruments eligible under the TLAC framework.
Risks and Contingencies: The filing notes that new regulations for calculating RWA for exposures to central counterparties and investments in funds will be implemented by January 1, 2020. Additionally, the filing highlights that numbers may not add up precisely due to rounding.
Key Facts for Investor Verification
- CET1 Ratio: Verify the 13.10% CET1 ratio against the minimum requirement plus buffers (Total buffer requirements were 3.60% of RWA).
- Share Repurchases: Confirm the impact of the share repurchase program on the $0.3 billion decrease in CET1 capital.
- AT1 Issuances: Review the details of the AUD 700 million and SGD 750 million high-trigger loss-absorbing AT1 instrument issuances that boosted Tier 1 capital.
- Liquidity Buffer: Note the LCR of 138% is well above the 110% FINMA minimum, but monitor the trend of decreasing HQLA.
- Subsidiary Metrics: UBS AG standalone CET1 ratio was 16.98%, and UBS Switzerland AG standalone CET1 ratio was 11.10%.