UBS : 31 December 2023 Pillar 3 Report – UBS Group and significant regulated subsidiaries and sub-groups (published March 28, 2024)

Pillar 3 Report

31 December 2023

UBS Group and significant regulated subsidiaries and sub-groups

Terms used in this report, unless the context requires otherwise

"UBS," "UBS Group," "UBS Group AG consolidated," "Group," "the Group," "we," "us" and "our"

UBS Group AG and its consolidated subsidiaries

"UBS Group excluding the Credit Suisse AG sub-group"

All UBS Group entities, excluding the Credit Suisse AG sub-group

"UBS AG" and "UBS AG consolidated"

UBS AG and its consolidated subsidiaries

"Credit Suisse AG" and "Credit Suisse AG consolidated"

Credit Suisse AG and its consolidated subsidiaries

"Credit Suisse Group" and "Credit Suisse Group AG consolidated"

Pre-acquisition Credit Suisse Group

"Credit Suisse"

Credit Suisse AG and its consolidated subsidiaries, Credit Suisse Services AG and other small former Credit Suisse Group entities now directly held by UBS Group AG

"UBS Group AG" and "UBS Group AG standalone"

UBS Group AG on a standalone basis

"Credit Suisse Group AG" and "Credit Suisse Group AG standalone"

Credit Suisse Group AG on a standalone basis

"UBS AG standalone"

UBS AG on a standalone basis

"Credit Suisse AG standalone"

Credit Suisse AG on a standalone basis

"UBS Switzerland AG" and "UBS Switzerland AG standalone"

UBS Switzerland AG on a standalone basis

"UBS Europe SE consolidated"

UBS Europe SE and its consolidated subsidiaries

"UBS Americas Holding LLC" and "UBS Americas Holding LLC consolidated"

UBS Americas Holding LLC and its consolidated subsidiaries

"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.

Table of contents

UBS Group

Significant regulated subsidiaries and sub-groups

Appendix

140 Abbreviations frequently used in our financial reports 142 Cautionary statement

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UBS Group

Introduction and basis for preparation

Scope of Basel III Pillar 3 disclosures

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

This report provides Pillar 3 disclosures for the UBS Group, including the acquired Credit Suisse Group, and prudential key figures and regulatory information for UBS AG consolidated and standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated, and UBS Americas Holding LLC consolidated, as well as Credit Suisse AG consolidated and standalone, Credit Suisse (Schweiz) AG consolidated and standalone, Credit Suisse International standalone, and Credit Suisse Holdings (USA), Inc. consolidated in the respective sections under "Significant regulated subsidiaries and sub-groups."

This Pillar 3 Report has been prepared in accordance with Swiss Financial Market Supervisory Authority (FINMA) Pillar 3 disclosure requirements (FINMA Circular 2016/1 "Disclosure - banks") as revised on 8 December 2021, the underlying BCBS guidance "Revised Pillar 3 disclosure requirements" issued in January 2015, the "Frequently asked questions on the revised Pillar 3 disclosure requirements" issued in August 2016, the "Pillar 3 disclosure requirements - consolidated and enhanced framework" issued in March 2017 and the subsequent "Technical Amendment - Pillar 3 disclosure requirements - regulatory treatment of accounting provisions" issued in August 2018.

As UBS is considered a systemically relevant bank (an SRB) under Swiss banking law, UBS Group AG, UBS AG, Credit Suisse AG and Credit Suisse (Schweiz) AG are required to comply with regulations based on the Basel III framework as applicable to Swiss SRBs on a consolidated basis.

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

Acquisition of the Credit Suisse Group

Impact of our acquisition of the Credit Suisse Group on Basel III Pillar 3 disclosures

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, and became the direct or indirect shareholder of all of the former direct and indirect subsidiaries of Credit Suisse Group AG. In the second quarter 2023 Pillar 3 report we included the impacts of the acquisition of the Credit Suisse Group in the scope of UBS Group AG consolidated, and we included significant regulated subsidiaries and sub-groups related to Credit Suisse. In this fourth quarter 2023 Pillar 3 report, the comparative periods ended 30 September 2023 and 30 June 2023 therefore include the impact of the acquisition of the Credit Suisse Group, while comparative periods prior to those ended 30 June 2023 reflect information prior to the acquisition of the Credit Suisse Group, unless explicitly stated otherwise.

From the 30 June 2023 Pillar 3 report onward we have included the following disclosures as a result of the acquisition.

• - CR10 - Specialized lending

• - SEC1 - Securitization exposures in the banking book

• - SEC2 - Securitization exposures in the trading book

• - SEC3 - Securitization exposures in the banking book and associated regulatory capital requirements - bank acting as originator or as sponsor

• - SEC4 - Securitization exposures in the banking book and associated regulatory capital requirements - bank acting as investor - MR1 - Market risk under standardized approach - Significant regulated subsidiaries and sub-groups related to Credit Suisse › Refer to the "Acquisition and integration of Credit Suisse" section and "Note 2 Accounting for the acquisition of the Credit Suisse

  Group" in the "Consolidated financial statements" section of the UBS Group Annual Report 2023, available under "Annual reporting" atubs.com/investors,for more information

Legal structure integration

In December 2023, the Board of Directors of UBS Group AG approved the merger of UBS AG and Credit Suisse AG, and both entities entered into a definitive merger agreement. The completion of the merger is subject to regulatory approvals and is expected to occur by the end of the second quarter of 2024. We also expect to complete the transition to a single US intermediate holding company in the second quarter of 2024 and the planned merger of UBS Switzerland AG and Credit Suisse (Schweiz) AG in the third quarter of 2024.

Completing the mergers of our significant legal entities is a critical step in enabling us to unlock the next phase of the cost, capital and funding synergies that we expect to realize in 2025 and 2026. These significant-legal-entity mergers are a pre-requisite for the first wave of client migrations and will enable us to begin streamlining and decommissioning legacy Credit Suisse platforms in the second half of 2024.

IFRS 3 measurement period adjustments in the third and fourth quarters of 2023 for the acquisition of the Credit Suisse Group

UBS has reclassified certain loans and off-balance sheet loan commitments held by the newly established Non-core and Legacy business division to Measured at fair value through profit or loss in the third and fourth quarters of 2023. Refer to "Note 2 Accounting for the acquisition of the Credit Suisse Group" in the "Consolidated financial statements" section of the UBS Group Annual Report 2023, available under "Annual reporting" atubs.com/investors,for details on the accounting treatment, and respective adjustments to prior reporting periods. Comparative periods for CET1 capital information and for Pillar 3 disclosures where we disclose IFRS Accounting Standards carrying values have been restated accordingly. We have applied the amended classification and measurement for leverage ratio denominator and risk-weighted assets (RWA) calculation purposes prospectively from the third quarter and fourth quarter of 2023, i.e., from when they occurred.

Significant regulatory developments, disclosure requirements and other changes

Swiss Federal Council adopts amendments to the Capital Adequacy Ordinance

In November 2023, the Swiss Federal Council adopted amendments to the Capital Adequacy Ordinance (the CAO) for banks to incorporate the final Basel III standards adopted by the BCBS in Swiss law. The amended CAO will enter into force on 1 January 2025. The final degree of alignment between the Swiss implementation and those in other jurisdictions remains uncertain at this stage. Although EU legislators target implementation by January 2025, the implementation timelines in the UK and the US have been delayed until July 2025. The Swiss Federal Department of Finance will inform the Swiss Federal Council about the status of international implementation by the end of July 2024. We currently estimate that the revised Basel III framework, including the Fundamental Review of the Trading Book, will lead to a further net increase in RWA of approximately USD 25bn, of which USD 10bn is in Non-core and Legacy. This estimate is based on static balances and on our current understanding of the relevant standards before taking into account mitigating actions and not reflecting the impact of the output floor, which is phased in over time. It may change as a result of new or updated regulatory interpretations, appropriate conservatism in model calibration, the implementation of Basel III standards into national law, changes in business growth, market conditions, and other factors. The core business-led reductions in RWA, coupled with the run-down of positions in Non-core and Legacy during 2024 and 2025, are expected to more than offset the effects of revised Basel III standards.

Financial Stability Board updates list of global systemically important banks

In November 2023, the Financial Stability Board (the FSB) published the 2023 list of global systemically important banks (G-SIBs). UBS has been moved from Bucket 1 to Bucket 2, corresponding to an increased FSB common equity tier 1 capital surcharge requirement of 1.5% from 1.0%, effective from 1 January 2025. Credit Suisse has been removed from the list. As UBS is subject to higher requirements under the Swiss CAO, the change does not affect the capital requirements applicable to UBS.

Introduction of a public liquidity backstop in Switzerland

In September 2023, the Swiss Federal Council adopted a dispatch and draft legislation on the introduction of a public liquidity backstop for systemically important banks (SIBs), which was initially implemented as part of the emergency ordinance of March 2023 (the Emergency Ordinance). The proposed legislative changes aim to establish the public liquidity backstop as part of ordinary law in order to enable the Swiss government and the Swiss National Bank (the SNB) to support an SIB domiciled in Switzerland with liquidity in the process of resolution, in line with other financial centers. The introduction of the public liquidity backstop is intended to increase the confidence of market participants in the ability of SIBs to be successfully recapitalized and remain solvent in a crisis. Furthermore, the draft legislation provides that SIBs will pay the Swiss Confederation an annual fee to mitigate a potential impact on competition and to compensate the Swiss Confederation for its guarantee to the SNB of the public liquidity backstop, if required.

In addition to the public liquidity backstop, the proposed legislative changes would enact into ordinary law additional provisions contained in the Emergency Ordinance, including mandated clawback of variable compensation in the event that government support is provided to an SIB.

The legislative changes are expected to come into force by January 2025, at the earliest, as in November 2023, the Swiss Parliament suspended discussions on the public liquidity backstop until the presentation of the Swiss Federal Council's report on SIBs.

Findings of the group of experts on banking stability

In September 2023, a group of experts on banking stability, mandated by the Swiss Federal Department of Finance, published a report considering the role of banks and the legal and regulatory framework related to the stability of the Swiss financial center. The report concluded that Swiss capital regulations are working as intended and that there is no need for a major revision. However, the report sees a need for reforms with regard to banking supervision and proposes that the relevant authorities be granted broader powers. Furthermore, the report suggests improvements regarding liquidity regulations, including a proposal to extend the supply of liquidity in the case of a crisis. The report also suggests that Swiss authorities should make improvements with regard to crisis preparation and management.

Revisions to the Swiss Liquidity Ordinance

In the third quarter of 2023, FINMA communicated the liquidity requirements arising from the revisions to the Swiss Liquidity Ordinance, with the aim of strengthening the resilience of SIBs in Switzerland. The affected legal entities of the UBS Group are compliant with these requirements, which became effective on 1 January 2024.

Financial Stability Board Peer Review of Switzerland

In February 2014, the FSB published its Peer Review of Switzerland, which examines Switzerland's implementation of the FSB's too-big-to-fail (TBTF) reforms for G-SIBs. The review states that although Swiss authorities have made important steps toward implementing an effective TBTF regime for G-SIBs, additional steps can be taken to further strengthen the Swiss TBTF framework. Recommendations include increasing supervisory resources, strengthening early intervention powers and enhancing the recovery and resolution regime.

Significant BCBS consultation papers

Recalibration of shocks for interest rate risk in the banking book

In December 2023, the BCBS issued a public consultation on proposed adjustments to its standard on interest rate risk in the banking book (IRRBB). The Committee proposes to make a set of adjustments to the specified interest rate shocks in the IRRBB standard, consistent with commitments in the standard to periodically update their calibration. It also proposes to make targeted adjustments to the current methodology used to calculate the shocks. These changes are needed to address problems with how the current methodology captures interest rate changes during periods when rates are close to zero.

Disclosure of climate-related financial risks

In November 2023, the BCBS issued a public consultation paper on a Pillar 3 disclosure framework for climate-related financial risks. This work forms part of the BCBS's holistic approach to address climate-related financial risks to the global banking system. The BCBS is analyzing how a Pillar 3 disclosure framework for climate-related financial risks would further its mandate to strengthen the regulation, supervision and practices of banks worldwide, with the purpose of enhancing financial stability, and the potential design of such a framework.

Other developments

Capital returns

In 2023, we bought back USD 1.3bn of shares before we announced the acquisition of the Credit Suisse Group. In 2024, we plan to repurchase up to USD 1bn of our shares commencing after the completion of the merger of UBS AG and Credit Suisse AG. Our ambition is for share repurchases to exceed our pre-acquisition levels by 2026.

For 2023, the Board of Directors plans to propose a dividend to UBS Group AG shareholders of USD 0.70 per share. Subject to approval at the Annual General Meeting, scheduled for 24 April 2024, the dividend will be paid on 3 May 2024 to shareholders of record on 2 May 2024. The ex-dividend date will be 30 April 2024.

Frequency and comparability of Pillar 3 disclosures

The table below summarizes the reporting frequency for each disclosure as per the current FINMA requirements applicable to UBS.

In line with the FINMA-specified disclosure frequency and requirements for disclosure with regard to comparative periods, we provide quantitative comparative information as of 30 September 2023 for disclosures required on a quarterly basis and as of 30 June 2023 for disclosures required on a semi-annual basis. Both these comparative periods include Credit Suisse information as a result of the aforementioned acquisition date on 12 June 2023. Where specifically required by FINMA and / or the BCBS, we disclose comparative information for additional reporting dates. Comparative periods prior to 30 June 2023 do not include information related to Credit Suisse, unless explicitly stated.

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

› Refer to our 31 March 2023, 30 June 2023 and 30 September 2023 Pillar 3 Reports, available under "Pillar 3 disclosures" atubs.com/investors,for more information about previously published quarterly movement commentary › Refer to our 30 June 2023 Pillar 3 Report, available under "Pillar 3 disclosures" atubs.com/investors,for more information about previously published semi-annual movement commentary

The table below outlines the annual, semi-annual and quarterly disclosure requirements that are satisfied in this report for UBS Group and significant regulated subsidiaries and sub-groups as applicable. For specific disclosures, this report may refer to the UBS Group Annual Report 2023.

Annual disclosure requirements

• - Breakdown of exposures by industry

• - Breakdown of exposures by geographical area

• - Breakdown of exposures by residual maturity

• - Policies for past due, non-performing and credit-impaired claims

• - Credit-impaired exposures by industry

• - Credit-impaired exposures by geographical area

• - Past due exposures

• - Breakdown of restructured exposures between credit-impaired and non-credit-impaired

Semi-annual disclosure requirements

Credit quality of assets

CR2

Changes in stock of defaulted loans, debt securities and off-balance sheet exposures

Section 5 Credit risk Section 5 Credit risk

21 21

Credit risk mitigation techniques - overview

25-26

CR4

Standardized approach - credit risk exposure and credit risk mitigation (CRM) Section 5 Credit risk effects

27

Standardized approach - exposures by asset classes and risk weights

IRB - credit risk exposures by portfolio and PD range

CR7

Qualitative statement about the impact of credit derivatives used as CRM techniques on IRB credit risk RWA

28 29-38 39

Specialized lending

Section 5 Credit risk 52

IRB (equities under the simple risk-weight method) 53

Analysis of counterparty credit risk (CCR) exposure by approach

Credit valuation adjustment (CVA) capital charge

Qualitative statement about the materiality of counterparty credit risk exposures subject to standardized risk weights

55 55 55

IRB - CCR exposures by portfolio and PD scale

Composition of collateral for CCR exposure

56-58 59

Credit derivatives exposures

Exposures to central counterparties

60 61

Securitization exposures in the banking book

Section 8 Securitizations 68

Securitization exposures in the trading book 69

Securitization exposures in the banking book and associated regulatory 70-71

capital requirements - bank acting as originator or as sponsor 72-73 Securitization exposures in the banking book and associated regulatory capital requirements - bank acting as investor

MR1

74

IMA values for trading portfolios

Comparison of VaR estimates with gains / losses

CC1

Composition of regulatory capital

Section 12 Going and gone concern requirements and eligible capital

77 78-79 89-90

CC2

Reconciliation of accounting balance sheet to balance sheet under the regulatory scope of consolidation

Section 12 Going and gone concern requirements and eligible capital

87-88

CCA

Main features of regulatory capital instruments and other total loss-absorbing n/a - The CCA table is published on our website. Refer tocapacity (TLAC)-eligible instruments

the document titled "Capital and total loss-absorbing capacity instruments of UBS Group AG (consolidated), UBS AG and Credit Suisse AG (both consolidated and standalone) - key features" under "Bondholder information" atubs.com/investors,for more information.

Geographical distribution of credit exposures used in the countercyclical capital buffer

Section 12 Going and gone concern requirements and eligible capital

86

• TLAC1 TLAC composition for G-SIBs (at resolution group level)

  Section 13 Total loss-absorbing capacity

  92

• TLAC2 Material sub-group entity - creditor ranking at legal entity level

  Significant regulated subsidiaries and sub-groups:Section 6 UBS Americas Holding LLC consolidated 118

  Section 11 Credit Suisse International standalone 136

  Section 12 Credit Suisse Holdings (USA), Inc. consolidated 139

• TLAC3 Creditor ranking at legal entity level for the resolution entity, UBS Group AG

93

Net Stable Funding Ratio (NSFR)

99

Quarterly disclosure requirements

Format of Pillar 3 disclosures

As defined by FINMA, certain Pillar 3 disclosures follow a fixed format, whereas other disclosures are flexible and may be modified to a certain degree to present the most relevant information. Pillar 3 requirements are presented under the relevant FINMA table / template reference (e.g., OVA, OV1, LI1, etc.). Pillar 3 disclosures may also include row labeling (1, 2, 3, etc.) as prescribed by FINMA. Naming conventions used in our Pillar 3 disclosures are based on FINMA guidance and may not reflect UBS naming conventions.

The FINMA-defined asset classes used within this Pillar 3 Report are as follows:

• - Central governments and central banks, consisting of exposures relating to governments at the level of the nation state and their central banks. The European Union is also treated as a central government.

• - Banks and securities dealers, consisting of exposures to legal entities holding banking licenses and securities firms subject to adequate supervisory and regulatory arrangements, including risk-based capital requirements. Securities firms can only be assigned to this asset class if they are subject to a supervision equivalent to that of banks.

• - Public-sector entities and multi-lateral development banks, consisting of exposures to institutions established on the basis of public law in different forms, such as administrative entities or public companies and regional governments, the Bank for International Settlements, the International Monetary Fund, and eligible multi-lateral development banks recognized by FINMA.

• - Corporates: specialized lending, consisting of exposures relating to income-producing real estate and high-volatility commercial real estate, commodities finance, project finance, and object finance.

• - Corporates: other lending, consisting of all exposures to corporates that are not specialized lending. This asset class includes private commercial entities, such as corporations, partnerships or proprietorships, insurance companies and funds (including managed funds).

• - Retail: residential mortgages, consisting of residential mortgages, regardless of exposure size, if the owner occupies or rents out the mortgaged property.

• - Retail: qualifying revolving retail exposures, consisting of unsecured and revolving credits to individuals that exhibit appropriate loss characteristics relating to credit card relationships at UBS.

• - Retail: other, consisting primarily of Lombard lending that represents loans made against the pledge of eligible marketable securities or cash, as well as exposures to small businesses, private clients and other retail customers without mortgage financing.

• - Equity, consisting of instruments that have no stated or predetermined maturity and represent a residual interest in the net assets of an entity.

• - Other assets, consisting of the remainder of exposures that UBS is exposed to, mainly non-counterparty-related assets.

Governance over Pillar 3 disclosures

The Board of Directors (the BoD) and senior management are responsible for establishing and maintaining an effective internal control structure over the disclosure of financial information, including Pillar 3 disclosures. In line with BCBS and FINMA requirements, we have a BoD-approved Pillar 3 disclosure governance policy in place, which includes information about the key internal controls and procedures designed to govern the preparation, review and sign-off of Pillar 3 disclosures. UBS's Pillar 3 framework has been amended to take account of the Group structure post the acquisition of the Credit Suisse Group and will continue to be refined as the integration progresses. This Pillar 3 Report has been verified and approved in line with UBS's Pillar 3 framework.

Risk management framework

Our Group-wide risk management framework is applied across all risk types. The table below presents an overview of risk management disclosures that are provided separately in the UBS Group Annual Report 2023, available under "Annual reporting" atubs.com/investors.

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UBS Group AG published this content on 26 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 March 2024 06:49:08 UTC.