annual-report-ubs-group-2023.pdf

Annual Report

2023

UBS Group

Our external reporting approach

The scope and content of our external reports are determined by Swiss legal and regulatory requirements, accounting

standards, relevant stock and debt listing rules, including regulations promulgated by the Swiss Financial Market

Supervisory Authority (FINMA), the SIX Swiss Exchange, the US Securities and Exchange Commission (the SEC) and other

regulatory requirements, as well as by our financial reporting policies.

At the center of our external reporting approach is the annual report of the UBS Group, which consists of disclosures for

UBS Group AG and its consolidated subsidiaries. Due to the acquisition of the Credit Suisse Group in 2023 and our Group

structure as of 31 December 2023, we also provide separate annual reports for UBS AG and for Credit Suisse AG, on a

sub-consolidated basis. The aforementioned three annual reports are the basis for the corresponding 2023 SEC Form

20-F filings for each entity.

Annual Reports

The UBS Group Annual Report 2023, UBS AG Annual Report 2023 and Credit Suisse AG Annual Report 2023 include

the consolidated financial statements of UBS Group AG, UBS AG and Credit Suisse AG, respectively, and together provide

comprehensive information about our Group, including strategy, businesses, financial and operating performance, and

other key information.

The consolidated financial statements of UBS Group AG and UBS AG have been prepared in accordance with IFRS

Accounting Standards. The sections within “Risk, capital, liquidity and funding, and balance sheet“ include certain

audited financial information, which forms part of the consolidated financial statements. The UBS Group and UBS AG

reports are presented in US dollars.

The consolidated financial statements of Credit Suisse AG have been prepared in accordance with US generally accepted

accounting principles (GAAP). The Credit Suisse AG report is presented in Swiss francs.

The UBS Group Annual Report 2023 is partly translated into German, with the German translation available under

“Annual reporting” at ubs.com/investors.

Sustainability Report

The UBS Group Sustainability Report 2023 provides disclosures on environmental, social and governance topics for the

UBS Group, UBS AG, Credit Suisse AG. UBS Switzerland AG, UBS Europe SE. Selected information on environmental,

social and governance is also included in our annual reports.

Standalone reports of UBS Group AG and significant regulated entities

We publish separate statutory financial statements 2023 of UBS Group AG, which are the basis for our appropriation of

profit and the proposed distribution of dividends, subject to shareholder approval at the Annual General Meeting. We

also publish standalone reports for UBS AG, UBS Switzerland AG, Credit Suisse AG and Credit Suisse (Schweiz) AG.

Selected financial and regulatory key figures for our significant regulated subsidiaries and sub-groups are also included

in this report.

Pillar 3 Report of UBS Group AG including significant regulated entities and sub-groups

The Pillar 3 Report as of 31 December 2023 provides detailed quantitative and qualitative information about risk, capital,

leverage and liquidity and funding for the UBS Group and prudential key figures and regulatory information for our

significant regulated subsidiaries and sub-groups. Scopes subject to disclosure are UBS Group AG consolidated, UBS AG

consolidated and standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated, UBS Americas Holding LLC

consolidated, Credit Suisse AG consolidated and standalone, Credit Suisse (Schweiz) AG consolidated and standalone,

Credit Suisse International standalone, Credit Suisse Holdings (USA), Inc. consolidated.

Annual Reports Pillar 3 ReportSustainability Report

Standalone legal entity reports

Contents

Letter to shareholders

Our key figures

Our Board of Directors

Our Group Executive Board

Our evolution

Our strategy, business model and

environment

Acquisition and integration of Credit Suisse

Our strategy

Targets, capital guidance and ambitions

Our businesses

Our environment

How we create value for our stakeholders

Regulation and supervision

Regulatory and legal developments

Risk factors

Financial and

operating performance

Accounting and financial reporting

Group performance

Global Wealth Management

Personal & Corporate Banking

Asset Management

Investment Bank

Non-core and Legacy

Group Items

Risk, capital, liquidity and funding,

and balance sheet

Risk management and control

158

Capital, liquidity and funding, and balance sheet

Corporate governance

and compensation

184

Corporate governance

222

Compensation

Financial

statements

271

Consolidated financial statements

Significant regulated subsidiary and sub-

group information

413

Financial and regulatory key figures for our significant

regulated subsidiaries and sub-groups

Additional

regulatory information

417

UBS Group AG consolidated supplemental disclosures

required under SEC regulations

Appendix

425

Alternative performance measures

430

Abbreviations frequently used in our financial reports

432

Information sources

433

Cautionary statement

Annual Report 2023 | Letter to shareholders 2

Dear shareholders,

2023 was a defining moment in the 162-year history of UBS. The acquisition of the Credit Suisse Group (Credit Suisse)

was momentous as the first-ever combination of two global systemically important financial institutions (G-SIFIs). As that

extraordinary weekend in March 2023 unfolded, the Swiss financial center was a source of worry, even embarrassment,

for many in the country. One of its largest banks was on the brink of collapse after years of reputational and financial

distress. Two days later, with UBS, the government found a Swiss solution that will benefit our stakeholders and

strengthen Switzerland’s role as a global leader in wealth management.

Thanks to our strategy focused on delivering outstanding client services, sustainable profitability, financial strength and

sound risk management, we were able to answer the call to help stabilize the financial system at home and abroad. The

Swiss government did not have to execute a resolution plan under the too-big-to-fail regulation, nationalize Credit Suisse

or call a foreign bank to the rescue. Aside from the idiosyncratic failure of Credit Suisse, the resilience of UBS and other

large institutions is a testament to the substantial regulatory reforms introduced, and coherently implemented, over the

past decade.

The transaction succeeded not just in restoring financial stability and preventing contagion. We are confident it will also

create enduring value for you, our shareholders. The acquisition vaulted us into a new league by giving us a highly

complementary footprint in our key markets and increased scale and capabilities. To that end, the acquisition has

accelerated – not changed – our existing strategy.

By adding client assets equivalent to seven to ten years’ worth of organic growth, the acquisition solidified our primacy

as a leading and truly global wealth manager and the leading bank in Switzerland, with stronger asset management and

investment bank franchises. The scale we achieve with the combination and the efficiencies we expect to create will

enable us to deepen our relationships with clients at every level in every geography. And as we position our firm to deliver

sustainably higher returns and long-term growth, we are committed to maintaining our UBS culture at the heart of

everything we do.

Building on a proven track record

Following the transaction, the Board of Directors asked Sergio Ermotti, who had previously served as Group CEO from

2011 to 2020, to return in April 2023. Sergio has committed to stay at least until the completion of the integration

process, if not longer. Additionally, he is supported by an executive team with a proven track record in managing and

executing complex restructuring and a qualified and experienced Board of Directors.

We recognize the extraordinary responsibility with which we have been entrusted with the Credit Suisse acquisition.

Although we expect to forego until 2027 the levels of profitability we have previously delivered, it reinforces the promising

long-term trajectory for our firm, our clients, our industry and the communities where we live and work.

The need to build scale and efficiencies to enhance capabilities and services for clients, often through inorganic growth,

is a reality for every company in every industry, and we are no exception. Dating back to its founding as The Bank in

Winterthur in 1862, UBS can claim a heritage of consolidation encompassing more than 500 different firms, from

cantonal and regional banks that needed saving, to wealth managers and Wall Street brokerages. Many of these

enterprises contribute to the DNA of today’s UBS. Credit Suisse, adding its own legacy brands such as Schweizerische

Kreditanstalt, First Boston, Bank Leu and Swiss Volksbank, joins a family of historic franchises, including PaineWebber,

S.G. Warburg, Swiss Bank Corporation and Union Bank of Switzerland, to name just a few.

Integration at pace

Since the acquisition closed in June 2023, we have been off to a strong start in enabling Credit Suisse’s market-

competitive franchises and talented people to flourish and make us even stronger. Our immediate focus was on stabilizing

Credit Suisse’s client base and employees. At the same time, we began swiftly executing our integration plans, which we

aim to substantially complete by the end of 2026.

We made significant progress on these ambitions in 2023. We decided to integrate Credit Suisse (Schweiz) AG, following

a careful review of strategic options, and defined the new Non-core and Legacy perimeter.

Annual Report 2023 | Letter to shareholders 3

We experienced robust momentum in our client win-back initiatives, as evidenced by net new assets of USD 77 billion in

Global Wealth Management and USD 77 billion of net new deposits across Global Wealth Management and Personal &

Corporate Banking since the close. This enabled us to terminate and hand back Swiss government support at the end of

August. We also repaid Credit Suisse’s emergency liquidity facilities, generating substantial funding cost efficiencies. We

were also encouraged by the high demand for our first additional tier 1 capital bond issue since the acquisition.

The support that investors extended to us during 2023 has given us confidence and energy as we embark on the next

phase of the integration. Total shareholder returns in 2023 were 56%

including dividends, compared to a 7% return

for the Swiss Market Index

and 20% for the STOXX Europe 600 / Banks.

In addition, our cost of funding improved,

with 5-year credit default swap spreads for UBS AG tightening from 78 basis points at year-end 2022 to 53 basis points

at year-end 2023.

In 2024, we will continue to restructure and optimize the assets we acquired. Completing the merger of our significant

legal entities by the end of the third quarter of 2024, subject to regulatory approvals, is a key 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.

Our financial performance and capital position in 2023

UBS achieved underlying profitability in 2023, despite the fact that Credit Suisse was, and remains, structurally loss

making. Following the publication of our unaudited fourth quarter 2023 financial report on 6 February 2024, we have

refined our acquisition-date fair value estimates. This has resulted in certain adjustments to our financials. Full-year profit

before tax therefore stood at USD 28.7 billion, including USD 27.7 billion of negative goodwill. Capital strength is a key

pillar of our strategy, and we remain committed to maintaining a balance sheet for all seasons. Our common equity tier 1

(CET1) capital ratio increased to 14.4% at year-end, comfortably above our guidance as we expect to maintain a CET1

capital ratio of around 14% throughout the integration timeline. Our year-end CET1 ratio supports us in building capacity

for higher capital returns while, at the same time, it prepares us to absorb integration charges as we integrate Credit

Suisse. The CET1 leverage ratio was 4.6%, also in excess of our guidance. We maintained healthy liquidity buffers with

a liquidity coverage ratio of 216% and a net stable funding ratio of 125%.

Setting UBS’s trajectory for years to come

UBS today boasts an appealing business mix that stands out among global peers. The integration of Credit Suisse has

further shifted us toward Global Wealth Management, Asset Management and Personal & Corporate Banking. Over a

third of our risk-weighted assets (RWA) are dedicated to our Global Wealth Management and Asset Management

businesses, which are attractive from a risk, growth and capital perspective. These businesses generated 60% of our

revenues in 2023. Roughly another third of our RWA are in Personal & Corporate Banking in Switzerland, a prosperous,

stable and well-diversified economy with low historic credit losses.

In the Investment Bank, we have gained accretive expertise in global banking in key sectors such as technology, health-

care and financial sponsors. In markets, we bolstered our capabilities in services that are most relevant to our clients,

including execution and research coverage. While we now have a broader and more diversified business, we reduced the

overall weighting of the Investment Bank to no more than 25% of group RWA.

Our complementary footprints in Asia Pacific have reinforced our leading position in the fastest-growing wealth market.

With USD 645 billion in invested assets in Global Wealth Management, we have scale as the largest wealth manager in

the region, supported by our premium brand, a strong Investment Bank with leading research capabilities and our

significant China presence. We expect Global Wealth Management margins in the region to eventually exceed 40% as

we capture the benefits of our leadership positions and integration-related synergies.

In the US, our other key wealth management growth market, we have scope to improve our profitability, also thanks to

our strengthened investment bank and asset management franchises. In addition, over the next three years, we will build

out our core banking infrastructure in the US to provide clients with a more comprehensive loan and deposit offering,

and roll out more products and services to ultra high net worth, family and institutional wealth clients.

We will further leverage our advisory capabilities in the US through our global Chief Investment Office platform. Our

international clients who have interests in the US will benefit from better access to our American advisors and products.

These actions will help produce mid-teen profit margins by the end of 2026 and put us in a position to explore

opportunities to further narrow the gap to our peers.

1 Total shareholder returns based on shares in Swiss francs

2 Swiss Market Index SMI TR (SMIC), source: SIX Group AG

3 Based on delta price, source: FactSet

Annual Report 2023 | Letter to shareholders 4

Colm Kelleher

Chairman of the Board of Directors

Sergio P. Ermotti

Group Chief Executive Officer

Fit for the future

We intend to remain at the forefront of technological change, providing a more personalized, relevant, on-time and

seamless experience for our clients. We will continue to invest and innovate to benefit our clients and shareholders.

While we remain focused on providing world-class digital-led solutions, recent geopolitical, macroeconomic and societal

shifts have highlighted the relevance of our core values such as superior service, security and stability. We are convinced

that technology will continue to boost our ability to help our clients manage risks and capture opportunities in good

times as well as during moments of economic uncertainty and geopolitical instability.

Most importantly, however, it will be our employees that determine our future success as they continue to shape our

bank for clients and shareholders today and generations to come. We want our employees to be able to build long and

successful careers, driving innovation for our stakeholders. Investing in our people and culture therefore remains a key

priority. Together with Credit Suisse, we invested more than USD 100 million in training activities in 2023.

Our targets and capital returns

While our financial progress in the integration of Credit Suisse will not be delivered in a straight line, our ambitions are

clear. We aim to realize an underlying return on CET1 capital of around 15% and a cost-to-income ratio of less than

70% as we exit 2026. By the end of 2028, we endeavor to achieve a return on CET1 capital of around 18%. We expect

the execution of our integration plans and the run-down of Non-core and Legacy to result in around USD 13 billion in

gross cost saves by the end of 2026, with around 45% of the cumulative gross cost reductions expected by the end of

2024. This will provide us with capacity to invest in talent, products and services, and reinforce the resilience of our

infrastructure.

As we follow through on the integration, we remain focused on client retention and win-back initiatives, while also

taking actions to improve capital efficiency. We will aim to capture around USD 100 billion of net new assets per annum

through 2025, building to around USD 200 billion per annum by 2028 and surpassing USD 5 trillion of invested assets in

Global Wealth Management by the end of 2028.

In 2023, we bought back USD 1.3 billion of our shares before the acquisition required us to temporarily suspend share

repurchases. In 2024, we expect to repurchase up to USD 1 billion of our shares, commencing after the completion of

the merger of UBS AG and Credit Suisse AG, which is expected to occur by the end of the second quarter of 2024.

At the upcoming Annual General Meeting (AGM), the Board of Directors intends to propose an ordinary dividend per

share of USD 0.70 for the 2023 financial year, a 27% year-on-year increase. We remain committed to progressive

dividends and are accruing for a mid-teen percentage increase in the dividend per share for the 2024 financial year. Our

goal is for share repurchases to exceed our pre-acquisition levels by 2026.

Annual Report 2023 | Letter to shareholders 5

Our sustainability ambition

We remain steadfast in our ambition to be a global leader in sustainability. This is underpinned by our continued

commitment to supporting our clients in the transition to a low-carbon world, leading by example in our own operations,

and sharing our lessons learned along the way.

Recognizing the acquisition of Credit Suisse has increased our exposures to certain carbon-intensive sectors, we have

expanded our Sustainability & Climate Risk framework and associated processes to reflect the full suite of activities of the

combined business and ensure a consistent approach. We have also moved swiftly to transition portfolios in carbon-

intensive sectors that do not align with our approach and risk appetite into Non-Core and Legacy to be managed off our

balance sheet over time.

In addition, we have established new baselines and set decarbonization targets for 2030 across seven key sectors: fossil

fuels, power generation, iron and steel, cement, Swiss residential real estate, Swiss commercial real estate, and shipping,

using the latest science-based pathways available to us. We believe these targets are among the most ambitious in the

industry. By way of example, our target for the fossil fuel sector is to reduce our absolute financed emissions by 70%

from the 2021 baseline to 2030.

We are proud of the progress we have made so far. We remain committed to our ambition to achieve net-zero

greenhouse gas (GHG) emissions across our scope 1 and 2, and specified scope 3 activities by 2050, with decarbonization

targets for 2025, 2030 and 2035. At the same time, we fully acknowledge we have more work to do, in phasing in

additional scope 3 activities and further embedding our new targets. For more information, please refer to our UBS Group

Sustainability Report 2023.

By working collectively, philanthropists and public and private organizations have the potential to create lasting change

and maximize a positive impact for people and planet. To this end, we also provide comprehensive advice, insights and

execution services, working with our clients and finding ways to tackle some of the world’s most pressing social and

environmental problems. We aim to mobilize USD 1 billion in philanthropic capital and positively impact more than

26.5 million people by 2025 (cumulative total since 2021).

In 2023, the UBS Optimus network of foundations raised USD 328 million in donations, including UBS matching

contributions, and committed USD 306 million in grants from Optimus. Our engagement addressed humanitarian crises

around the globe in 2023. Optimus also continued to distribute the USD 56 million raised for the Ukraine Relief Fund

launched in 2022. To date, USD 43 million has been granted to our partners on the ground.

Lessons learned

The failure of Credit Suisse and some US regional financial institutions in the first half of 2023 will unquestionably provide

global investors, managers, policymakers and regulators alike with important lessons. Most of the post-mortems from

regulators and expert bodies since March 2023 have devised specific recommendations in the areas of supervision, stress

testing, liquidity and accountability. We endorse many of these targeted adjustments and will continue to actively

contribute to this discussion.

But having analyzed the causes of Credit Suisse’s troubles following the takeover, we have some clear takeaways. First,

there can be no regulatory solution for a broken business model. That is a job for executives and managers who must

also be held accountable by engaged shareholders. And second, trust cannot be regulated.

Furthermore, it was not a lack of capital that forced Credit Suisse into a historic weekend rescue. The capital requirements

for G-SIFIs have been transformed over the past 15 years, bolstering the resilience of the world’s largest banks and the

safety of the financial system. Effective loss-absorbing capacity increased around 20-fold since the 2008 global financial

crisis, and at our firm now is around USD 200 billion.

The fact that we were in a position to rescue Credit Suisse, despite both firms operating under the same regulatory

regime, shows the framework and capital requirements were not the problem. This has also been confirmed by various

international and domestic experts. Therefore, we welcome the ongoing analysis by the Swiss parliamentary commission

into the collapse of Credit Suisse, so that appropriate and focused actions can be taken both in respect of how regulation

is potentially fine-tuned and subsequently implemented.

Annual Report 2023 | Letter to shareholders 6

A pillar for Switzerland

There has been much debate about our size relative to the Swiss economy and its impact on competition. We are

convinced that our size and business model are fit for the purpose for which they are intended: to act as an engine of

credit creation and prosperity to our clients and the economies we serve.

It is important to consider the composition and risk profile of the balance sheet, as not every position represents the same

risk. We hold around 20% of total assets in high-quality liquid assets and another 15% in private client mortgages, which

bear very low risk. When looking at the risk profile of a balance sheet, it is crucial to look at risk-weighted assets, which

totaled around USD 547 billion at year-end and are expected to further decrease. We expect our Group RWA to be at

around USD 510 billion by the end of 2026, which are supported by our strong capital position, including around

USD 200 billion of loss-absorbing capacity.

The collapse of Credit Suisse unleashed an extraordinary race for clients, talent and market share in the Swiss banking

market. This is the ultimate proof that the competition provided by both domestic and foreign banks active in Switzerland

is robust.

Over the past decade, UBS, Credit Suisse and our combined staff paid around CHF 25 billion in Swiss taxes and bought

some CHF 3.5 billion in goods and services in Switzerland as well. Last year we collectively offered more than 2,300

trainee positions – a number we pledge to maintain in 2024 as well.

We are convinced that the acquisition will make us an even better diversified and stronger pillar in Switzerland, and an

even more reliable economic partner, employer and taxpayer in the communities where we operate.

The 2024 Annual General Meeting

At the upcoming AGM, we are proposing Gail Kelly for election to the Board of Directors as Dieter Wemmer will not

stand for re-election after eight years of Board membership. We thank him for his invaluable collaboration and significant

contribution to the strong governance at our firm. Gail has an outstanding reputation as one of the most influential

voices in the Asia-Pacific financial industry and an acknowledged leader. She is recognized as an excellent bank CEO who

successfully navigated a merger. You will also be asked to vote on our first combined UBS Group Sustainability Report

and the proposed increase in dividends.

We are excited about our long-term value proposition. Our strategy is clear and augmented by the acquisition of Credit

Suisse. We have an opportunity to create an even better experience for clients while generating sustainably higher returns

on capital and allowing us to provide you, our shareholders, with attractive shareholder returns.

Thank you for your support in one of the most decisive years in our history. We look forward to your feedback and to

welcoming you to the 2024 AGM, which will take place on 24 April in Basel, Switzerland.

Yours sincerely,

Colm Kelleher Sergio P. Ermotti

Chairman of the Board of Directors Group Chief Executive Officer

Corporate information

UBS Group AG is incorporated and domiciled in Switzerland and operates

under Art. 620ff. of the Swiss Code of Obligations as an Aktiengesellschaft, a

corporation limited by shares. Its registered office is at Bahnhofstrasse 45,

CH-8001 Zurich, Switzerland, telephone +41-44-234 11 11, and its corporate

identification number is CHE-395.345.924. UBS Group AG was incorporated

on 10 June 2014 and was established in 2014 as the holding company of the

UBS Group. UBS Group AG shares are listed on the SIX Swiss Exchange and

on the New York Stock Exchange (ISIN CH0244767585; CUSIP H42097107).

UBS Group AG owns 100% of the outstanding shares in UBS AG and Credit

Suisse 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

[email protected]

London +44-20-7567 4714

[email protected]

New York +1-212-882 5858

[email protected]

Hong Kong SAR +852-2971 8200

[email protected]

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

[email protected]

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

[email protected]

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 Group AG

More information about future publication dates is available at

ubs.com/global/en/investor-relations/events/calendar.html

Imprint

Publisher: UBS Group AG, Zurich, Switzerland | ubs.com

Language: English

Annual Report 2023 9

Our key figures

As of or for the year ended

USD m, except where indicated

31.12.23

31.12.22

31.12.21

Group results

Total revenues

40,834

34,563

35,393

Negative goodwill

27,748

Credit loss expense / (release)

1,037

(148)

Operating expenses

38,806

24,930

26,058

Operating profit / (loss) before tax

28,739

9,604

9,484

Net profit / (loss) attributable to shareholders

27,849

7,630

7,457

Diluted earnings per share (USD)

8.45

2.25

2.06

Profitability and growth

2,3,4

Return on equity (%)

37.4

13.3

12.6

Return on tangible equity (%)

41.3

14.9

14.1

Underlying return on tangible equity (%)

4.1

12.8

Return on common equity tier 1 capital (%)

42.3

17.0

17.5

Underlying return on common equity tier 1 capital (%)

4.2

14.6

Return on leverage ratio denominator, gross (%)

2.9

3.3

3.4

Cost / income ratio (%)

95.0

72.1

73.6

Underlying cost / income ratio (%)

5,6

87.2

74.5

Effective tax rate (%)

3.0

20.2

21.1

Net profit growth (%)

265.0

2.3

13.7

Resources

Total assets

1,717,246

1,104,364

1,117,182

Equity attributable to shareholders

86,108

56,876

60,662

Common equity tier 1 capital

78,485

45,457

45,281

Risk-weighted assets

546,505

319,585

302,209

Common equity tier 1 capital ratio (%)

14.4

14.2

15.0

Going concern capital ratio (%)

16.9

18.2

20.0

Total loss-absorbing capacity ratio (%)

36.5

33.0

34.7

Leverage ratio denominator

1,695,403

1,028,461

1,068,862

Common equity tier 1 leverage ratio (%)

4.6

4.4

4.2

Liquidity coverage ratio (%)

215.7

163.7

155.5

Net stable funding ratio (%)

124.7

119.8

118.5

Other

Invested assets (USD bn)

3,9,10

5,714

3,981

4,614

Personnel (full-time equivalents)

112,842

72,597

71,385

Market capitalization

11,12

107,355

65,608

66,684

Total book value per share (USD)

26.83

18.30

17.84

Tangible book value per share (USD)

24.49

16.28

15.97

1 Refer to “Share information and earnings per share” in the “Consolidated financial statements” section of this report for more information. 2 Refer to the “Targets, capital guidance and ambitions” section of this

report for more information about our performance targets. 3 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method. 4 Profit or loss information

for 2023 includes seven months (June to December 2023, inclusive) of Credit Suisse data for the return measures. 5 Refer to the “Group performance” section of this report for more information about underlying

results. 6 Negative goodwill is not used in the calculation as it is presented in a separate reporting line and is not part of total revenues. 7 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. 8 The disclosed ratios represent averages for the fourth quarter of each year presented, which were

calculated based on an average of 63 data points in the fourth quarter of 2023, 63 data points in the fourth quarter of 2022 and 66 data points in the fourth quarter of 2021. Refer to the “Capital, liquidity and

funding, and balance sheet” section of this report for more information. 9 Consists of invested assets for Global Wealth Management, Asset Management and Personal & Corporate Banking. Refer to “Note 32

Invested assets and net new money” in the “Consolidated financial statements” section of this report for more information. 10 Starting with the second quarter of 2023, invested assets include invested assets from

associates in the Asset Management business division, to better reflect the business strategy. Comparative figures have been restated to reflect this change. 11 Refer to “UBS shares” in the “Capital, liquidity and

funding, and balance sheet” section of this report for more information. 12 In the second quarter of 2023, the calculation of market capitalization was amended to reflect total shares issued multiplied by the share

price at the end of the period. The calculation was previously based on total shares outstanding multiplied by the share price at the end of the period. Market capitalization has been increased by USD 7.8bn as of

31 December 2022 and by USD 5.5bn as of 31 December 2021 as a result.

Adjustment made within the IFRS 3 measurement period after publication of the fourth quarter 2023

report

The acquisition of the Credit Suisse Group in the second quarter of 2023 resulted in provisional negative goodwill of

USD 28.9bn. Following the publication of the unaudited fourth quarter 2023 report on 6 February 2024, UBS has

refined its acquisition-date fair value estimates in accordance with the 12-month measurement period requirements

provided by IFRS 3, Business Combinations. This has resulted in an adjustment of USD 1.2bn, decreasing the negative

goodwill to USD 27.7bn. As a result, 2023 operating profit before tax and 2023 net profit attributable to shareholders

decreased by USD 1.2bn, basic earnings per share decreased by USD 0.38 to USD 8.83 and diluted earnings per share

decreased by USD 0.36 to USD 8.45. In addition, the CET1 capital ratio decreased to 14.4% from 14.5%.

› Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section

of this report for more information

Annual Report 2023 10

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. We report a number of APMs in the discussion of the financial and operating

performance of the Group, our business divisions and Group Items. We use APMs to provide a more complete picture of

our operating performance and to reflect management’s view of the fundamental drivers of our 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. Our APMs may qualify as non-GAAP measures as defined by US

Securities and Exchange Commission (SEC) regulations. Our underlying results are APMs and are non-GAAP financial

measures.

› Refer to the ”Group performance” section of this report and to “Alternative performance measures” in the appendix to this report

for additional information about underlying results

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 Group excluding Credit Suisse” and “UBS sub-group”

All UBS Group entities, excluding 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 AG,” “UBS AG consolidated“ and “UBS AG sub-

group”

UBS AG and its consolidated subsidiaries

“Pre-acquisition UBS”

UBS before the acquisition of the Credit Suisse Group

“Credit Suisse AG,” “Credit Suisse AG consolidated”

and “Credit Suisse AG sub-group”

Credit Suisse AG and its consolidated subsidiaries

“Credit Suisse Group” and “Credit Suisse Group AG

consolidated”

Credit Suisse Group AG and its consolidated subsidiaries,

before the acquisition by UBS

“Credit Suisse” and “Credit Suisse sub-group”

Credit Suisse AG, 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”

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

“Pre-acquisition Global Wealth Management”

The UBS Global Wealth Management business division

before the acquisition of the Credit Suisse Group (data, if

any, from before the date of the acquisition of the Credit

Suisse Group)

“UBS AG Global Wealth Management”

The Global Wealth Management business division of UBS

AG and its consolidated subsidiaries

“Wealth Management (Credit Suisse)”

The Wealth Management business division of Credit

Suisse AG and its consolidated subsidiaries

Annual Report 2023 11

Terms used in this report, unless the context requires otherwise (continued)

“Pre-acquisition Personal & Corporate Banking”

The Personal & Corporate Banking business division

before the acquisition of the Credit Suisse Group (data, if

any, from before the date of the acquisition of the Credit

Suisse Group)

“UBS AG Personal & Corporate Banking”

The Personal & Corporate Banking business division of

UBS AG and its consolidated subsidiaries

“Swiss Bank (Credit Suisse)”

The Swiss Bank business division of Credit Suisse AG and

its consolidated subsidiaries

“Pre-acquisition Asset Management”

The Asset Management business division before the

acquisition of the Credit Suisse Group (data, if any, from

before the date of the acquisition of the Credit Suisse

Group)

“UBS AG Asset Management”

The Asset Management business division of UBS AG and

its consolidated subsidiaries

“Asset Management (Credit Suisse)”

The Asset Management business division of Credit Suisse

AG and its consolidated subsidiaries

“Pre-acquisition Investment Bank”

The Investment Bank business division before the

acquisition of the Credit Suisse Group (data, if any, from

before the date of the acquisition of the Credit Suisse

Group)

“UBS AG Investment Bank”

The Investment Bank business division of UBS AG and its

consolidated subsidiaries

“Investment Bank (Credit Suisse)”

The Investment Bank business division of Credit Suisse AG

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.

12–13

1. Colm Kelleher

Chairman of the Board of Directors / Chairperson of the

Corporate Culture and Responsibility Committee /

Chairperson of the Governance and Nominating Committee

2. Lukas Gähwiler

Vice Chairman of the Board of Directors /

member of the Governance and Nominating Committee /

member of the Risk Committee

3. Julie G. Richardson

Chairperson of the Compensation Committee /

member of the Risk Committee

4. Mark Hughes

Chairperson of the Risk Committee / member of the

Corporate Culture and Responsibility Committee

5. Jeremy Anderson

Senior Independent Director / Chairperson of the

Audit Committee / member of the Governance and

Nominating Committee

6. Nathalie Rachou

Member of the Governance and Nominating Committee /

member of the Risk Committee

7. Fred Hu

Member of the Governance and Nominating Committee

8. Dieter Wemmer

Member of the Audit Committee /

member of the Compensation Committee

9. Jeanette Wong

Member of the Audit Committee /

member of the Compensation Committee

10. William C. Dudley

Member of the Corporate Culture and

Responsibility Committee / member of the Risk Committee

11. Claudia Böckstiegel

Member of the Corporate Culture and

Responsibility Committee

12. Patrick Firmenich

Member of the Audit Committee / member of the

Corporate Culture and Responsibility Committee

Our Board of Directors

The Board of Directors of UBS Group AG (the BoD), led by the Chairman, consists of between 6 and 12 members, as per our Articles

of Association. The BoD decides on the strategy of the Group, upon recommendation by the Group Chief Executive Ofcer (the

Group CEO), and is responsible for the overall direction, supervision and control of the Group and its management. It is also respon-

sible for supervising compliance with applicable laws, rules and regulations. The BoD exercises oversight over UBS Group AG and its

subsidiaries, and is responsible for establishing a clear Group governance framework to provide eective steering and supervision of

the Group, taking into account the material risks to which UBS Group AG and its subsidiaries are exposed. The BoD has ultimate re-

sponsibility for the success of the Group and for delivering sustainable shareholder value within a framework of prudent and eective

controls. It approves all nancial statements and appoints and removes all Group Executive Board (GEB) members.

14 –15

Our Group Executive Board

UBS Group AG operates under a strict dual-board structure, as mandated by Swiss banking law, and therefore the BoD delegates the

management of the business to the GEB. As of 31 December 2023, the GEB, under the leadership of the Group CEO, consisted of

16 members. It has executive management responsibility for the steering of the Group and its business, develops the strategies of the

Group, business divisions and Group Items, and implements the BoD-approved strategies.

› Refer to “Board of Directors” and “Group Executive Board” in the “Corporate governance” section of this report or to ubs.com/bod and

ubs.com/geb for the full biographies of the members of the BoD and the GEB

1. Sergio P. Ermotti

Group Chief Executive Ofcer

2. Naureen Hassan

President UBS Americas

3. Suni Harford

President Asset Management

4. Robert Karofsky

President Investment Bank

5. Iqbal Khan

President Global Wealth Management

6. Sabine Keller-Busse

President Personal & Corporate Banking and

President UBS Switzerland

7. Beatriz Martin Jimenez

Head Non-core and Legacy and

President UBS Europe, Middle East and Africa

8. Barbara Levi

Group General Counsel

9. Edmund Koh

President UBS Asia Pacic

10. Mike Dargan

Group Chief Operations and Technology Ofcer

11. Stefan Seiler

Head Group Human Resources &

Group Corporate Services

12. Michelle Bereaux

Group Integration Ofcer

13. Todd Tuckner

Group Chief Financial Ofcer

14. Christian Bluhm

Group Chief Risk Ofcer

15. Markus Ronner

Group Chief Compliance and Governance Ofcer

16. Ulrich Körner

CEO of Credit Suisse AG

Annual Report 2023 16

Our evolution

Since our origins in the mid-19th century, more than 500 different firms have become part of the history of our firm and

helped shape our development. 1998 was a major turning point: two of the three largest Swiss banks, Union Bank of

Switzerland and Swiss Bank Corporation (SBC), merged to form UBS. Both banks were well established and successful in

their own right. Union Bank of Switzerland had grown organically to become the largest Swiss bank. In contrast, SBC

had grown mainly through strategic partnerships and acquisitions, including S.G. Warburg in 1995.

In 2000, we acquired PaineWebber, a US brokerage and asset management firm with roots going back to 1879,

establishing us as a significant player in the US. Since 1964, we have been building our strong presence in the Asia Pacific

region, where we are by far the largest wealth manager,

with asset management and investment banking capabilities.

After incurring significant losses in the 2008 financial crisis, we sought to return to our roots, emphasizing a client-centric

model that requires less risk-taking and capital. In 2011, we started a strategic transformation of our business model to

focus on our traditional businesses: wealth management globally, and personal and corporate banking in Switzerland.

In 2014, we began adapting our legal entity structure in response to too-big-to-fail requirements and other regulatory

initiatives. First, we established UBS Group AG as the ultimate parent holding company for the Group. In 2015, we

transferred personal and corporate banking and Swiss-booked wealth management businesses from UBS AG to the

newly established UBS Switzerland AG. That same year, we set up UBS Business Solutions AG as the Group’s service

company. In 2016, UBS Americas Holding LLC became the intermediate holding company for our US subsidiaries and

our wealth management subsidiaries across Europe were merged into UBS Europe SE, our Germany-headquartered

European subsidiary. In 2019, we merged UBS Limited, our UK-headquartered subsidiary, into UBS Europe SE.

2023 was another defining moment in our 162-year history as we acquired the Credit Suisse Group, a global systemically

important financial institution and a major wealth manager headquartered in Switzerland that was founded in 1856. The

acquisition followed a request from the Swiss Federal Department of Finance, the Swiss National Bank and the Swiss

Financial Market Supervisory Authority (FINMA) to UBS Group AG and Credit Suisse Group AG to duly consider the

acquisition in order to restore necessary confidence in the stability of the Swiss economy and banking system and to

serve the best interests of the shareholders and stakeholders of UBS and Credit Suisse.

The acquisition strengthened our position today as a leading and truly global wealth manager, the leading bank in

Switzerland, a global, large-scale and diversified asset manager, and a focused investment bank.

The chart below gives an overview of our principal legal entities and our legal entity structure.

› Refer to

ubs.com/history

for more information

› Refer to the “Risk factors” and “Regulatory and legal developments” sections of this report for more information

› Refer to the “Acquisition and integration of Credit Suisse” section of this report for more information

The legal structure of the UBS Group

1 Asian Private Banker, 23 January 2024.

1 Other non-US subsidiaries are generally held either directly by UBS AG or indirectly through UBS Switzerland AG or UBS Asset Management AG. 2 Of which 98% held by Credit Suisse AG and 2% held by UBS

Group AG.

3 Of which 99% directly held by UBS Americas Inc. and 1% held by UBS Americas Holding LLC. 4 Other US subsidiaries are generally held either directly by UBS Americas Inc. or indirectly through

UBS Financial Services Inc.

5 And other small former Credit Suisse Group entities now directly held by UBS Group AG.

100%

UBS Business

Solutions AG

Credit Suisse

Services AG

UBS AG

Credit Suisse AG

100%

UBS

Switzerland AG

Credit Suisse

(Schweiz) AG

UBS Americas

Holding LLC

Credit Suisse

Holdings (USA), Inc.

UBS Europe SE

UBS Asset

Management AG

100%

98%

UBS Americas Inc.

100%

UBS Bank USA

UBS Business

Solutions US LLC

UBS Financial

Services Inc.

UBS Securities LLC ³

UBS Group AG

Credit Suisse AG (sub-)consolidated

Other

participations

Credit Suisse

International²

Other non-US

subsidiaries¹

Other US

subsidiaries

Other

subsidiaries

UBS AG (sub-)consolidated

Annual Report 2023 | Our strategy, business model and environment | Acquisition and integration of Credit Suisse 17

Our strategy, business model

and environment

Management report

Acquisition and integration of Credit Suisse

Acquisition 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, and became the direct or indirect shareholder of all of the former direct and

indirect subsidiaries of Credit Suisse Group AG (the Transaction).

The acquisition followed a request from the Swiss Federal Department of Finance, the Swiss National Bank and the Swiss

Financial Market Supervisory Authority (FINMA) to both firms to duly consider the Transaction in order to restore necessary

confidence in the stability of the Swiss economy and banking system and to serve the best interests of the shareholders

and stakeholders of UBS and Credit Suisse. As a result of further negotiations and supported by distinct government

guarantees and measures, the firms subsequently entered into a merger agreement on 19 March 2023.

Upon the completion of the Transaction, each outstanding registered Credit Suisse Group AG share converted to the

right to receive, subject to the payment of certain fees to the Credit Suisse Depositary in the case of Credit Suisse

American depositary shares (ADS), a merger consideration consisting of 1/22.48 UBS Group AG shares. In aggregate,

Credit Suisse Group AG shareholders received 5.1% of the outstanding UBS Group AG shares on the acquisition date,

with a purchase price of USD 3.7bn.

UBS has accounted for the acquisition as a business combination under IFRS 3, Business Combinations, applying the

acquisition method of accounting.

› Refer to “Note 1 Summary of material accounting policies” and “Note 2 Accounting for the acquisition of the Credit Suisse Group”

in the “Consolidated financial statements” section of this report

Integration of Credit Suisse

We are successfully executing our integration plans. We have stabilized the franchise and successfully won back, retained

and grown client assets, as we have been entrusted with USD 77bn of net new assets since the acquisition. We achieved

underlying profitability, which enabled us to pay down the extraordinary liquidity support and to voluntarily terminate

the loss protection agreement guaranteed by the Swiss government, reducing our funding costs by around USD 550m

per quarter. On 22 March 2024, Credit Suisse (Schweiz) AG repaid loans drawn under the Emergency Liquidity Assistance

(ELA) facility, reducing the amount of loans outstanding under the ELA from CHF 38bn to CHF 19bn as of that date. We

achieved around USD 4bn in exit rate gross cost savings as of the end of 2023 compared with the full year 2022 for UBS

and the Credit Suisse Group combined. We established the perimeter for Non-core and Legacy, and our strategy for the

wind-down of Non-core and Legacy led to reductions of USD 12bn in risk-weighted assets, nearly 80% of which came

from unwinds. We also provided important clarity for all of our stakeholders as we finalized our target operating model

and initiated the restructuring phase. We aim to substantially complete the integration by the end of 2026.

Beginning with the third quarter of 2023, we report five business divisions, reflecting the way we manage our businesses

and engage with clients: Global Wealth Management, Personal & Corporate Banking, Asset Management, the Investment

Bank, and Non-core and Legacy. We separately report Group Items.

Non-core and Legacy includes positions and businesses not aligned with our strategy and policies. Those consist of the

assets and liabilities that prior to the acquisition were reported as part of the Capital Release Unit (Credit Suisse) and

certain assets and liabilities of the Investment Bank (Credit Suisse), Wealth Management (Credit Suisse), Swiss Bank

(Credit Suisse) and Asset Management (Credit Suisse) divisions, as well as of the Corporate Center (Credit Suisse). Also

included are the remaining assets and liabilities of UBS’s Non-core and Legacy Portfolio, previously reported in Group

Functions, and smaller amounts of assets and liabilities of UBS’s business divisions that we have assessed as not strategic

in light of the acquisition of the Credit Suisse Group.

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.

Annual Report 2023 | Our strategy, business model and environment | Acquisition and integration of Credit Suisse 18

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 prerequisite 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.

Material weaknesses in internal control over financial reporting of the Credit Suisse Group

As a registrant with the US Security and Exchange Commission (the SEC), UBS Group 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.

In March 2023, prior to acquisition by UBS, the Credit Suisse Group and Credit Suisse AG disclosed that their respective

management had identified three material weaknesses in internal control over financial reporting, as a result of which

each of Credit Suisse Group and Credit Suisse AG concluded that, as of 31 December 2022, their internal control over

financial reporting was not effective and, for the same reasons, had reached the same conclusion regarding their internal

control over financial reporting as of 31 December 2021. The material weaknesses 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 Credit Suisse 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 the

company’s 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’s management did not design and maintain effective controls over the

classification and presentation of the consolidated statement of cash flows under US Generally Accepted Accounting

Principles (“US GAAP”). Specifically, certain control activities over the completeness and the classification and

presentation of non-cash items in the consolidated statement of cash flows were not performed on a timely basis or at

the appropriate level of precision. This material weakness resulted in the revisions to Credit Suisse Group’s consolidated

financial statements for the three years ended 31 December, 2021 as disclosed in its 2021 Annual Report.

Following the identification of the material weaknesses, Credit Suisse management initiated a remediation program and

further enhanced its processes and controls over financial reporting, with the key remediation steps to date as follows.

With respect to the material weakness relating to the US GAAP consolidated statement of cash flows, Credit Suisse

management performed a review of the process to produce the statement, including a third-party review and, as a result,

enhanced controls within the process and implemented additional controls, including senior management reviews. Based

on the work completed to date, Credit Suisse management has assessed that the changes to internal control made to

address the material weakness relating to the classification and presentation of the consolidated statement of cash flows

are designed effectively, but that additional time is required to conclude that these controls are operating effectively on

a sustainable basis.

With respect to the material weaknesses on risk assessment of internal control and severity assessment of control

deficiencies, Credit Suisse has implemented an enhanced severity assessment framework and additional management

oversight of severity assessments. The changes to the severity assessment process include updated training and guidance

on the assessment of the severity of control deficiencies as well as increased management oversight and quality assurance

over these assessments. In addition, Credit Suisse has augmented its risk assessment process and increased its testing of

controls. UBS has determined to complete remediation of the internal control risk identification and severity assessment

weaknesses by integrating Credit Suisse into the UBS internal control risk assessment and evaluation framework in 2024.

The operating effectiveness of the risk and severity assessment processes will be assessed based on an evaluation of the

2024 risk assessment and control testing process. In light of the above, Credit Suisse management has concluded that

the material weaknesses at Credit Suisse were not fully remediated at 31 December 2023.

The material weaknesses result in a risk that a material error may not be detected by Credit Suisse’s internal controls that

could result in a material misstatement to Credit Suisse’s reported financial results, which are consolidated in UBS Group

AG’s results.

Annual Report 2023 | Our strategy, business model and environment | Acquisition and integration of Credit Suisse 19

Following the acquisition, UBS commenced a review of the processes and systems giving rise to the material weaknesses

and the remediation program. In addition to the measures taken by Credit Suisse to remediate the material weaknesses

described above, UBS has taken measures to mitigate the risk that internal control deficiencies at Credit Suisse could

result in material misstatements to the UBS Group financial statements. UBS has separately tested Credit Suisse internal

controls deemed higher risk, established processes for production, control and review of IFRS financial data from Credit

Suisse’s US GAAP based accounting systems for inclusion in the UBS Group consolidation process (including a separate

process for preparation and control of the UBS Group consolidated statement of cash flows), and conducted detailed

asset level valuation and substantiation reviews in connection with its purchase accounting.

Under guidance published by the SEC, companies are permitted to exclude the processes and controls of certain acquired

businesses from their assessment of internal control over financial reporting during the year of acquisition. Accordingly,

UBS has excluded Credit Suisse entities from UBS management’s assessment of internal control over financial reporting

as of 31 December 2023.

Our strategy

UBS – who we are

UBS is a leading and truly global wealth manager, enhanced by synergetic investment banking and asset management

capabilities, and the leading bank in Switzerland. We enable people, institutions and corporations to achieve their goals

by providing financial advice and solutions. We have a unique capital-generative and well-diversified business model with

a strong competitive position in our target markets and an attractive long-term outlook on return on capital. Our business

model, our strong culture, our respected brand with over 160 years of history and our capital prudence have made it

possible to both grow profits and deliver high return on equity.

We are focused on driving sustainable long-term growth while maintaining risk and cost discipline

Our objective is to generate value for our shareholders and clients by driving sustainable long-term structural growth, as

well as capital returns. To accomplish this, we are building on our scale, content and solutions, while remaining disciplined

on capital, risk and costs. Maintaining a balance sheet for all seasons remains the foundation of our success. This will

give us the capacity to invest strategically and will enable us to deliver against our financial targets and commercial

ambitions, which are outlined in the “Targets, capital guidance and ambitions” section of this report.

We benefit from an attractive business mix, with more than one-third of our risk-weighted assets (RWA) in our global

asset-gathering Global Wealth Management and Asset Management business divisions, which are structurally attractive

from the risk, growth and capital consumption perspectives and generate more than half of our revenues. Roughly

another third of our RWA are in Personal & Corporate Banking in Switzerland, an attractive, stable and well-diversified

economy with low historic credit losses. Furthermore, we operate a capital-efficient Investment Bank business division,

which is limited to less than 25% of Group RWA (excluding Non-core and Legacy).

Moreover, we are aiming to maximize our impact and that of our clients to create long-term sustainable value. We also

have a responsibility toward the communities we serve and our employees. We have outlined selected environmental,

social and governance (ESG) aspirations, which should support our financial and commercial targets.

The acquisition of the Credit Suisse Group is accelerating our strategy

The acquisition of the Credit Suisse Group enhances our client franchises by increasing scale while adding complementary

capabilities and gaining talent. Our strategic focus remains on building out our leading global investment platform. The

acquisition of the Credit Suisse Group enables us to combine and optimize our resources and to target investments that

enable us to provide superior levels of client service. Our geographical growth segments will remain the Americas and

Asia Pacific, with Switzerland remaining our home market. The acquisition of the Credit Suisse Group will further shift

our business mix toward wealth management, asset management and our Swiss business. The acquisition also

strengthens our investment banking capabilities, without compromising our model, as the Investment Bank will consume

a limited share of the Group’s RWA.

Annual Report 2023 | Our strategy, business model and environment | Our strategy 20

We have a global, diversified business model

Our invested assets of more than USD 5trn are regionally diversified across the globe. We give our clients access to a

broader, more relevant and customizable range of solutions, which, together with our thought leadership and

capabilities, position us well to become their partner of choice. Our strategic ambitions are a reflection of the outlook on

long-term demographic and social trends affecting wealth distribution, product demand and client experience.

Regionally, more than half of our wealth management clients’ invested assets are in the US, which is the largest wealth

pool globally, with solid wealth generation. Here we are a top player, and we are focused on improving scale and

profitability by deepening our relationships with core clients and by building out our digital-supported capabilities and

banking platform.

In Asia Pacific, which is the fastest-growing wealth market, we are by far the largest wealth manager,

and we are

building on that scale to drive growth. We are further developing our businesses in China and working to offer our

capabilities in a more cohesive way to our clients in Southeast Asia.

In EMEA, we are focused on improving profitability and driving focused growth by optimizing our domestic footprint and

providing holistic coverage for entrepreneurs.

Finally, in Switzerland, we have a highly integrated business and aim to reinforce our position as the leading bank. We

are driving our digital transformation, improving the client experience and focusing on capturing selected growth

opportunities.

Our growth plans are underpinned by cross-divisional collaboration

We want to serve our clients as one firm. The collaboration between our business divisions is critical to the success of our

strategy and is a source of competitive advantage. This collaboration also provides further revenue growth potential and

enables us to better meet client needs in our core wealth and global family and institutional wealth (GFIW) segments

alike. Our Asset Management business division provides clients with a broad offering and exclusive access to premium

personalized services, while our investment banking capabilities support our growth plans across the client franchise with

unique insights, execution, and risk management. Close collaboration between our businesses adds value for clients,

including access to private markets, alternatives and ESG products, and we are continuously striving to enhance our

holistic client offering.

Clients are at the center of everything we do

Helping clients to achieve their financial and personal goals is the essence of what we do. We aim to differentiate our

service by delivering a client experience that is personalized, relevant, on-time and seamless. This is our promise to clients.

With evolving client needs, we are adapting by making our wealth coverage more needs-based, digital and effective. In

wealth management, our focus remains on our core wealth and GFIW clients, while expanding our coverage of

entrepreneurs, women and the next generation of wealthy individuals. We are launching and scaling digitally

customizable services, enhancing personally advised wealth with digital support, and expanding our custom offerings for

GFIW to cater for the different needs of our clients.

› Refer to “Clients” in the “How we create value for our stakeholders” section of this report for more information

Sustainability drives our ambitions

We partner with our clients to help them mobilize their capital toward a more sustainable world. Our aim is to meet

clients’ demands for credible sustainable offerings. We want to be the financial provider of choice for clients that wish

to mobilize capital toward the achievement of the United Nations Sustainable Development Goals and the orderly

transition to a low-carbon economy, including in Switzerland, where, as the leading bank, we are helping to finance this

transition.

We are investing in our technology as an enabler for client experience, simplicity and efficiency

The trusted and personal relationship with our clients across our businesses is evolving. Today, our clients expect us to

provide our services more seamlessly across the firm in a personalized, relevant and timely fashion, with increasing

demand for services that are digital first and available anytime and anywhere. This presents an opportunity for us to fully

embrace technology, through which we aim to differentiate the firm.

We continue to invest in technology, such as Artificial Intelligence, with the goals of improving efficiency and

effectiveness, driving and enhancing growth and better serving our clients. We believe the continued optimization of our

processes, our platforms, our organization and our capital resources will help us to achieve this.

1 Asian Private Banker, 23 January 2024.

Annual Report 2023 | Our strategy, business model and environment | Targets, capital guidance and ambitions 21

Targets, capital guidance and ambitions

In February 2024, we announced our performance targets and capital guidance for the Group, based on our execution

of the integration of Credit Suisse to date and the completion of our annual business planning process. We have also set

ambitions for each of the business divisions that collectively are building blocks toward achieving our targets.

The graphic below shows our updated financial targets, capital guidance and long-term ambitions.

We also aim to deliver exit rate gross cost savings of approximately USD 13bn by the end of 2026 compared with the full

year 2022 for the combined organizations. Gross cost savings will create capacity to reinvest for growth and to enhance

the resilience of our infrastructure.

We expect Group risk-weighted assets (RWA) to be around USD 510bn by the end of 2026, assuming constant foreign

exchange rates, including an estimated USD 25bn day-1 increase for the finalization of Basel III in 2025 (of which

USD 10bn in Non-core and Legacy) and an increase of around USD 10bn in our core businesses from the alignment of

Credit Suisse’s risk models to those of UBS. We expect to offset these increases with RWA reductions in Non-core and

Legacy, with the remaining portfolio there representing around 5% of Group RWA at the end of 2026. We also expect

a further net decrease in RWA of around USD 15bn resulting from business-led actions to optimize returns on RWA in

our core businesses.

Additionally, we expect up to USD 1bn of funding cost savings by 2026 compared with 2023 levels.

Our business divisions aim to achieve the following.

– Global Wealth Management: surpass USD 5trn of invested assets over the next five years, with around USD 100bn of

net new assets annually through 2025, building to around USD 200bn annually by 2028, and an underlying cost /

income ratio of less than 70% by the end of 2026 (exit rate).

– Personal & Corporate Banking: an underlying cost / income ratio of less than 50% by the end of 2026 (exit rate).

– Asset Management: an underlying cost / income ratio of less than 70% by the end of 2026 (exit rate).

– The Investment Bank: an underlying return on attributed equity of approximately 15% through the cycle, while

operating with no more than 25% of the Group’s RWA (excluding Non-core and Legacy).

– Non-core and Legacy: an underlying pre-tax loss of less than USD 1bn (exit rate), underlying costs of less than USD 1bn

(exit rate) and a share of around 5% of Group RWA, all by the end of 2026.

Our aspirations on environmental, social and governance (ESG) matters are set forth in “Our focus on sustainability and

climate” in the “How we create value for our stakeholders” section of this report.

Performance against targets, capital guidance and ambitions is taken into account when determining variable

compensation.

› Refer to “Society” and “Our focus on sustainability and climate” in the “How we create value for our stakeholders” section and to

the “Corporate governance” section of this report for more information about ESG

› Refer to the “Compensation” section of this report for more information about variable compensation

› Refer to “Alternative performance measures” in the appendix to this report for definitions of and further information about our

performance measures

Financial

targets

Capital

guidance

Ambitions

long term

~15%

<70%

Underlying return on

CET1¹ capital

2026 exit rate

Underlying cost / income

ratio

2026 exit rate

~14%

4.0%

CET1¹ capital ratio

CET1¹ leverage ratio

5trn

Reported return on

CET1¹ capital

by 2028

Invested assets in Global

Wealth Management, in USD

by 2028

1 Common equity tier 1.

Annual Report 2023 | Our strategy, business model and environment | Our businesses 22

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 support and control functions are allocated to the business

divisions, leaving a residual amount that we refer to as Group Items in our segment reporting. Disclosures in this report

may refer to Group functions as Group Items.

We see joint efforts as key to our growth, both within and between business divisions. We combine our strengths to

provide our clients with better, innovative solutions and differentiated offerings, for example, our Global Family &

Institutional Wealth offering with integrated global coverage.

Global Wealth Management

We are a leading and truly global wealth manager and strive to help our clients pursue what matters most to them. We

are focused on serving the needs of ultra high and high net worth individuals through trusted relationships with our

advisors, while expanding our specialized services. We offer clients our global reach, our advisory approach led by the

Chief Investment Office (the CIO) and access to our platform with its broad array of solutions, alongside our premium

brand.

The acquisition of the Credit Suisse Group extended our leading global position, by contributing approximately

USD 680bn in invested assets and more than 1,500 client advisors globally to our business,

across all regions.

Organizational changes

During the first half of 2023, we took several steps to simplify our organizational structure into four regions: Americas,

EMEA, Asia Pacific and Switzerland. We also unified key solutions and functions under global leads. This will facilitate

further convergence and simplification of our global operating model, while retaining the flexibility for local and regional

differences.

In June 2023, the new Global Wealth Management leadership team overseeing the combined business division following

the acquisition of the Credit Suisse Group was announced, including the creation of a new business unit, Global Wealth

Management Strategic Clients, which is focused on enabling and delivering to our strategic clients globally, working in

partnership with our regional business leaders and supported by senior client coverage teams.

How we do business

Our distinctive approach to wealth management helps our clients pursue what matters most to them by offering advice,

expertise and solutions, and delivering on our client promise.

Our 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 more than USD 1.6trn in fee-generating

assets globally. Since September 2023, the full breadth of CIO content has been made available to clients and advisors

across the entire firm, including Credit Suisse.

We make available to 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 alternative investments offering gives clients access to private markets, including equity, real estate and other real

assets, and investments in private equity funds and hedge funds. We offer our own private equity multi-manager

investments and enable clients to access selected single-manager funds and open-ended programs.

To complement this advice, 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.

Our Global Family & Institutional Wealth service model, in collaboration with the Investment Bank, provides specialized

services to meet the needs of family offices and ultra high net worth clients. For clients with institutional-level trading,

execution and clearing needs, our Unified Global Markets offers access to the full capabilities of the Global Markets

business of the Investment Bank.

Annual Report 2023 | Our strategy, business model and environment | Our businesses 23

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. Advice Compass enables advisors to

conveniently identify the most relevant ideas and solutions for clients during one-to-one meetings. It should be noted

that the aforementioned products relate to the UBS AG sub-group only.

To provide our clients with the full breadth of investment management products and solutions, our Global Lending Unit

offers extensive mortgage, securities-based and structured lending expertise, catering to sophisticated client lending

needs.

› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for more

information about sustainability matters

Our newly established Global Wealth Management Strategic Clients unit aims to deliver the best advice and guidance to

our strategic client segments, including business owners, female clients, the next generation of wealthy clients, athletes

and entertainers, and multi-cultural investors. To this end, we have developed a dedicated approach and resources with

specialized teams supporting our clients in achieving their goals.

We are investing in our operating platforms and tools to better serve our clients’ needs, improve their experience, enhance

overall advisor productivity and improve our operational resilience. We aim to make our services faster and more

responsive and offer more convenience to our clients. For example, our Global Wealth Management clients have invested

more than USD 9bn in UBS My Way, our discretionary mandate solution that enables clients to customize their portfolio

themselves via the UBS mobile banking app. Additionally, we continue to broaden our offering across asset classes and

themes, collaborating with best-in-class managers across the most relevant strategies. We are making continuous

improvements to our direct-to-client digital offerings and have rolled out innovative new solutions, such as UBS My Way

on mobile, a next-generation discretionary mandate solution that now enables clients to tailor their investments within

their risk profile to their individual preferences via their mobile devices.

We also closely collaborate across business divisions to deliver our best capabilities to clients. Joint efforts with the

Investment Bank, Asset Management and selected external partners enable us to offer clients broad access to financing,

global capital markets and bespoke portfolio solutions. For example, in the US market, the SMA initiative with Asset

Management continues to gain momentum, with USD 158bn in assets under management.

Design of solutions

Solutions aligned with

the UBS House View:

discretionary and advisory

mandates, alternatives,

structured solutions, etc.

Communications

Transmission to clients

and advisors.

Ideas in a

UBS House View

context

Well-researched

investment advice,

thought leadership.

Implementation

and execution

Positioning of solutions

by advisors, seamless

execution. Tailored advice

to clients.

The investment advice for and management of more than USD 1.6trn in fee-generating assets globally,

underpinned by robust risk management.

Clients

Listening to our clients’ views and considering their risk proles and their investment goals

Chief Investment Ofce-led value chain

Note: The Chief Investment Ofce develops a clear, concise and consistent investment assessment, the UBS House View, consisting of strategic asset allocation and

tactical asset allocation.

Annual Report 2023 | Our strategy, business model and environment | Our businesses 24

Competition

Our main competitors fall into two categories: competitors with a strong position in the Americas but more limited global

footprints, such as Morgan Stanley, JPMorgan Chase 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 and HSBC. We also compete with fintech

firms in some regions and products. We have strong positions in the largest region (the US) and the fastest-growing

regions (Asia Pacific and the Middle East). The size of our global franchise, bespoke cross-divisional solutions and premium

brand and reputation set us apart and would be difficult to replicate.

1 As of 30 June 2023.

Personal & Corporate Banking

As the leading bank in Switzerland, we provide a comprehensive range of financial products and services to private,

corporate and institutional clients. Personal & Corporate Banking is the core of our bank in Switzerland, the only country

where we operate in all of our business areas. We are fully committed to our home market, as our leading position in

Switzerland is crucial in terms of sustaining our global brand and the stability of our profits. Drawing on a broad network

of branches 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 corporations.

Organizational changes

Following the acquisition of Credit Suisse Group AG in June 2023 and based on a thorough strategic review, UBS

announced on 31 August 2023 its decision to fully integrate Credit Suisse (Schweiz) AG with UBS Switzerland AG

through a merger of the two banks. The legal merger of the two entities is expected to be completed in the third quarter

of 2024.

The Swiss Bank (Credit Suisse) division is being integrated into Personal & Corporate Banking, and the newly combined

Swiss business is led by the President UBS Switzerland and President Personal & Corporate Banking. For the time being,

the Credit Suisse brand will remain in use in Switzerland and the Swiss Bank (Credit Suisse) division will continue to offer

comprehensive advice and a wide range of financial solutions to private, corporate and institutional clients primarily

domiciled in Switzerland. The Swiss Bank (Credit Suisse) private clients business franchise serves high net worth, affluent,

retail and small business clients. In addition, consumer finance services are provided through the BANK-now subsidiary

and credit card brands through our investment in Swisscard AECS GmbH. The corporate and institutional clients business

of Swiss Bank (Credit Suisse) serves large corporate clients, small and medium-sized enterprises, institutional clients,

financial institutions, and commodities traders. Part of the Swiss Bank (Credit Suisse) private clients business is expected

to be shifted to Global Wealth Management as part of the integration progress.

As of or for the year ended 31 December 2023

USD 7bn of net interest

income, 32% of growth

Integrated UBS House View

across all Global Wealth

Management platforms

85% of our clients are very or

extremely satised with UBS,

up 2% year on year

(UBS client survey)

USD 132bn of net new assets

Best Global

Private Bank

(PWM / The Banker, 2023)

USD 3.85trn in invested assets

2023 selected highlights

Annual Report 2023 | Our strategy, business model and environment | Our businesses 25

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. In 2023, UBS was named “Best

Bank in Switzerland” by Euromoney for the ninth time since 2012. 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 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.

Personal & Corporate Banking works 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 2023, we continued to support our clients’ sustainability ambitions. In the corporate client segment, we further

expanded our client-centric approach and focused on supporting our clients by advising them as part of a strategic

dialogue and launching a sustainability-linked loan for multi-national corporations. We also took positive steps in

providing transparency and sustainability insights to our private clients. With the launch of the carbon tracker in the UBS

key4 mobile banking app, clients can see an estimated carbon footprint for their purchases with UBS credit and debit

cards and through UBS TWINT, helping them navigate the carbon footprints of their purchases in a relatively simple

manner.

› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for more

information about sustainability matters

We are building stronger relationships with our clients during the life cycle of their property ownership and providing

services along the value chain. With our strategic partner Baloise, we offer Houzy, a leading homeowner platform in

Switzerland with a nationwide network of qualified craftsmen and comprehensive services through buying, renovation,

maintenance and sale of property. Services relating to property transactions and promotion financing are provided

through our partner, Brixel. Our exclusive partnership with SMG Swiss Marketplace Group enables us to extend our

ecosystem network to Switzerland’s largest real estate portals, such as Homegate and Immoscout24.

Our operations and our competitors

We operate primarily in our Swiss home market, where we are 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.

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 globally active 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 in competition with globally active foreign banks. No other Swiss bank offers its corporate clients

local banking capabilities abroad.

As of or for the year ended 31 December 2023

2023 selected highlights

1 Based on approximately 200 largest Swiss companies. 2 Number of Swiss households served by UBS divided by the total number of Swiss households according

to the Swiss Federal Statistics Ofce.

>90%

of large Swiss corporations

served¹

> A third

of Swiss households served²

Market Leader

Cash Management

Switzerland

(Euromoney, 2023)

Best Bank in

Switzerland

(Euromoney, 2023)

Best Private Bank

Switzerland

(Euromoney, 2023)

Market Leader

Trade Finance

Switzerland

(Euromoney, 2023)

Annual Report 2023 | Our strategy, business model and environment | Our businesses 26

Asset Management

Asset Management is a global, large-scale and diversified asset manager. We offer investment capabilities and styles

across all major traditional and alternative asset classes, as well as advisory support to institutions, wholesale

intermediaries and our Global Wealth Management clients.

Our strategy is focused on capitalizing on the areas where we have a leading position and differentiated capabilities

(including alternatives, sustainability, indexed customization, separately managed accounts (SMAs) and key markets in

Asia Pacific) in order to further drive profitable growth, while building on our strong business division partnerships across

the Group.

Organizational changes

The acquisition of the Credit Suisse Group

Following UBS’s acquisition of the Credit Suisse Group in 2023, we are now one of the leading Europe-based asset

managers, with total invested assets of USD 1.6trn. The combination of our highly complementary businesses strengthens

our positioning across key asset classes and growth markets, with greater scale in customized indexing, an enhanced

offering in alternative investments (including a leading credit franchise) and an increased presence in the US and Asia.

We are bringing our two organizations operationally together, with a clear goal to provide our clients with the full breadth

of our combined offering while ensuring a seamless transition and exceptional service.

Other organizational changes

In October 2023, we completed the sale of our 51% stake in UBS Hana Asset Management Co., Ltd. to Hana Securities,

after that firm exercised its buyout option. Hana Securities now owns 100% of UBS Hana Asset Management Co., Ltd.

In addition, we completed the acquisition of the 40% minority interest in our real estate joint venture with Aventicum

and now own 100% of the business. In December 2023, we announced the sale of our Brazilian real estate fund

management business to Patria Investments; the transaction is subject to the approval of the investors in the relevant

funds and customary anti-trust approvals. We also transferred the management of our three funds in Mexico to Catena

Activos Alternativos and, with this sale, exited the asset management business in this market.

How we do business

We offer clients a wide range of investment products and services across all major traditional and alternative asset classes,

in the form of segregated, pooled or advisory mandates, as well as registered investment funds in various jurisdictions.

Our capabilities include equities, fixed income, hedge funds (single- and multi-manager), real estate and private markets,

and indexed and alternative beta strategies, including exchange-traded funds (ETFs), as well as sustainable- and impact-

investing products and solutions.

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.

We continue to develop our award-winning

Indexed business globally, with a focus on customization, and provide client

solutions across equities, fixed income and commodities, as well as sustainability-focused products. Our offering also

includes a wide range of ETFs in Europe, Switzerland and Asia.

In our Real Estate & Private Markets business, we continue to build on our global scale, leading core capabilities and

highly differentiated sustainable-investing and specialized-thematic offering, including our Cold Storage, Energy Storage

and Life Sciences strategies. We also continue to expand our leading multi-manager capabilities across real estate,

infrastructure and private equity, including the development of new products to meet the growing demand from wealth

management clients.

Sustainable and impact investing remain key areas of interest for our clients. In 2023, we further expanded our offering

across asset classes and themes, including new net-zero ambition products. We launched our first sustainability-focused

fund of hedge funds strategy, created in close collaboration with Global Wealth Management. We also partnered again

with Aon to launch the UBS Global Emerging Markets Equity Climate Transition Fund, which tilts toward emerging market

companies supporting the transition to a low-carbon economy, while factoring in important social considerations.

Stewardship is a fundamental element of our sustainability strategy. In 2023, we sharpened our five-year climate

engagement program’s focus and also aligned our voting policy to our evolved climate engagement objectives. In

addition, to support our increasing focus on natural capital, we became a founding member of the Nature Action 100

collaborative engagement initiative and joined the Principles for Responsible Investment’s Stewardship Advisory

Committee for its initiative on nature.

› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for more

information about sustainability matters

Annual Report 2023 | Our strategy, business model and environment | Our businesses 27

We also continue to build on our joint efforts with the other business divisions, enabling our teams to draw on the best

ideas, solutions and capabilities from across the firm in order to deliver high-quality investment performance and

experiences for our clients. For example, in 2023 we continued to expand our separately managed accounts (SMA)

offering as part of our joint initiative with Global Wealth Management in the US. In support of this initiative, we launched

the SMA Hub, a new self-service portal that enables financial advisors to generate custom client reports or proposals in

only minutes.

Geographically, we are building on our extensive and long-standing presence in the Asia Pacific region, including China,

where we continue to capitalize on our on- and offshore products and market presence, including our joint ventures.

To support our growth, we are focused on disciplined execution of our operational excellence initiatives. This includes

further automation, simplification, process optimization and offshoring or nearshoring of selected activities,

complemented by continued enhancements to our platform and development of our analytics and data capabilities. One

example is our Portfolio Engineering & Trading initiative, which will streamline trading and portfolio implementation

across our active and index capabilities through an integrated technology architecture. It will harmonize processes and

enable further scalability of customization across asset classes.

Our operations and our competitors

Our business division is organized into five areas: Client Coverage; Investments; Real Estate & Private Markets; Products;

and the COO area. We cover the main asset management markets globally, and have a local presence in 25 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.

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, SSGA Funds Management and T. Rowe Price, as well as firms with

a specific market or asset-class focus.

1 Best ESG Fund House (Passive), ESG Clarity Awards 2023; Best ESG Emerging Market Equity Fund (Passive), ESG Clarity Awards 2023.

As of or for the year ended 31 December 2023

1 Sustainable investing. 2 Separately managed accounts. 3 Hedge fund businesses, real estate and private markets.

2023 selected highlights

USD 213bn

assets invested in

alternatives³

USD 1.6trn

total invested assets

No.1

Europe-based

index player

Second largest

asset manager

of SI¹ assets

(Morningstar)

USD 14.3bn

net new money from the

SMA² initiative

No.1 collateralized

loan obligation

manager

(Creditux)

Annual Report 2023 | Our strategy, business model and environment | Our businesses 28

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 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 with a disciplined approach to balance sheet deployment and costs.

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.

Organizational changes

The acquisition of the Credit Suisse Group

The acquisition of the Credit Suisse Group represented an acceleration of 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.

An ambitious integration timeline for the Investment Bank has been set, and significant progress has been made with

the creation of the newly established Non-core and Legacy division, which has started the process of divesting assets.

We are working at pace to migrate clients and positions to the UBS platform and have concluded our workforce plans

for the combined Investment Bank.

The Credit Suisse franchise helps us to build a more sustainable market share in a range of products and markets. It will

enhance our capabilities, core products and services and enable us to deliver these products and services to an expanded

institutional and corporate client base. The Investment Bank will be better positioned to serve Global Wealth

Management, offering differentiated investment banking capabilities, and further enhance the connectivity with ultra

high net worth and Global Family & Institutional Wealth clients.

The combination is expected to drive changes in our future revenue footprint. Our increased scale will enhance our

competitive positioning within each region and product set and rebalance our footprint. The Investment Bank has

historically been strong in both equities and in the Asia Pacific region, while having a smaller footprint across fixed

income, global banking, and the Americas. The integration of the Investment Bank (Credit Suisse) strengthens our

presence in the Americas, particularly in global banking, and represents an acceleration of our growth strategy in the

region.

In Global Markets, we see the potential to gain market share in cash equities. We will also aim to capture market share

in global equity derivatives, with a specific focus on flow derivatives, quantitative investment strategies and corporate

derivatives.

In Switzerland and EMEA, the combination will reinforce our strong position in our domestic market. Meanwhile, in Asia

Pacific, there is a complementarity between UBS’s strength in China and Australia and Credit Suisse’s broader capabilities

across Southeast Asia.

Other organizational changes

In June 2023, Michael Ebert joined the Investment Bank Management Forum as Head of Credit Suisse for the Investment

Bank, as well as Head of Americas for the Investment Bank. In August 2023, Marco Valla joined the Investment Bank

Management Forum as Co-Head of Global Banking.

In October 2023, we launched our Strategic Insights and Advisory team in Global Banking, our content and advisory

offering that brings together the expertise of the UBS Strategic Insights group and the Credit Suisse Corporate Insights

group.

In December 2023, we announced the formation of our Executive Client Group, which is aimed at advising our clients at

the C-suite level on strategic matters and is intended to drive a broad array of transactions to enhance the impact of our

Global Banking coverage teams.

Annual Report 2023 | Our strategy, business model and environment | Our businesses 29

How we do business

Our business division consists of two areas: Global Banking and Global Markets, which are supported by Investment Bank

Research. Our global coverage model utilizes our international industry expertise and product capabilities to meet clients’

emerging needs.

Our Global Banking business 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.

Our Global Markets business 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.

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 3,400 stocks in 49 different countries

The Strategic Insights team provides timely and relevant information and insights to help clients quickly make decisions

regarding their most important questions.

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 our clients global advice and access to the world’s primary, secondary and private capital

markets, including through an extensive array of sustainability-focused advice, products, research and events. The

Investment Bank is focused on meeting clients’ needs, including those 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 carbon emissions solutions, our clients continued to access solutions that are linked to the recently launched

UBS Constant Maturity Commodity Index emissions index, as well as those that are available via our execution and

clearing capabilities for carbon emissions futures. We continued to scale the number of portfolio certificates linked to a

range of sustainability and climate investment themes, despite challenging market conditions throughout 2023.

UBS is a founding member of Carbonplace, a marketplace platform that seeks to build infrastructure to scale voluntary

carbon markets, with the aim of enabling firms such as UBS to offer clients the ability to buy, sell, hold and retire voluntary

carbon credits.

In Global Banking, ESG is a core component of many corporate business strategies and a key tool in achieving

sustainability in business and corporate operating models. As pressure from regulators and other key stakeholder groups,

such as customers, investors and employees, is increasing, so is the need for transformation. The ESG Advisory group

provides the necessary lens helping UBS’s clients assess ESG topics throughout the corporate life cycle.

UBS arranged USD 53.7bn in green, social, sustainability and sustainability-linked themed (GSSS) bonds through 102

deals during 2023.

We also solidified our market position in the Swiss franc-denominated market with a combined

market share of nearly 50%.

We have also built a strong position in the ESG-labelled local debt market in Brazil.

Our independent ESG research team collaborates with UBS sector analysts and UBS Evidence Lab primary research

experts, providing data-driven insights into ESG-relevant questions. The ESG research team works to identify touchpoints

between markets, society and the environment, and to respond to ESG issues as they move to the center of investors’

agendas. UBS sector lead analysts authored a variety of our flagship ESG Sector Radar reports, as well as a broad range

of ESG Company Radar reports.

Our ESG Company Radar research reports, which we launched in 2022, assess the impact of ESG factors at company

level, and we continued to see a very positive client response to those reports. Other types of ESG content include

thematic and cross-sectoral collaborations, ESG Keys (which covers sustainable investing topics), and an increasing

number of regional perspectives from our expanded ESG team, which works out of our offices in New York, London, the

Hong Kong SAR, Tokyo and Sydney.

› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for more

information about sustainability matters

Annual Report 2023 | Our strategy, business model and environment | Our businesses 30

Our digital strategy harnesses technology to provide access to sources of unique, global liquidity, personalized advice and

differentiated content. The Investment Bank strives to be the digital investment bank of the future, focused on delivering

innovation-led solutions, and efficiencies for our clients. As the world around us changes, our digital capabilities aim to

harness emerging technologies and create new products and solutions, which enable 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 on our new Global Family & Institutional Wealth 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.

Our operations and our competitors

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 global reach gives 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, opportunities arise mainly from expected market internationalization and growth in China, where we plan to

grow by strengthening our presence, both onshore and offshore. In EMEA, we plan to leverage our strong base and

brand recognition even further.

Competing firms operate in many of our markets, but our strategy differentiates us, with our focus on 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). We also compete with boutique investment banks and fintech firms in certain regions and products.

1 Statement relates to the UBS AG sub-group only.

As of or for the year ended 31 December 2023

2023 selected highlights

1 Foreign exchange products that are traded over electronic platforms. 2 Record is from 2013 onward. 3 Combined with UBS AG and Credit Suisse AG.

Record full-year

per for mance in Financing

with revenues of

USD 1.98bn, up 9% on 2022

Our Private Funds

Group was ranked the

most active placement

rm globally for 2023

(Private Equity International)

Best Investment Bank

for Asia, Best Bank for

Australia and Best M&A

House Asia

(FinanceAsia, 2023)

No. 1 ranking in Asia

Pacic M&A in 4Q23,

with a 9.2% share of

wallet

(Dealogic)³

Arranged USD 54bn in

GSSS-themed bonds

through >100 deals

during 2023

Strongest full-year

eFX¹ performance on

record, with revenues

up 19% on 2022²

Annual Report 2023 | Our strategy, business model and environment | Our businesses 31

Non-core and Legacy

In 2023, we created Non-core and Legacy, which includes positions and businesses not aligned with our strategy and

policies. Those consist of the assets and liabilities reported as part of the former Capital Release Unit (Credit Suisse) and

certain assets and liabilities of the former Investment Bank (Credit Suisse), Wealth Management (Credit Suisse), Swiss

Bank (Credit Suisse) and Asset Management (Credit Suisse) divisions, as well as of the former Corporate Center (Credit

Suisse). Non-core and Legacy also includes the remaining assets and liabilities of UBS’s Non-core and Legacy Portfolio,

previously reported in Group Functions (now renamed to Group Items), and smaller amounts of assets and liabilities of

UBS’s business divisions that we have assessed as not strategic in light of the acquisition of the Credit Suisse Group.

At the end of the second quarter of 2023, the positions included in Non-core and Legacy represented USD 83.8bn of

risk-weighted assets (RWA) and USD 208.7bn of leverage ratio denominator (LRD). Since then, Non-core and Legacy has

made significant progress against its capital reduction goals by reducing RWA by USD 11.8bn, or 14%, to USD 72.0bn

and reducing the LRD by USD 71.6bn, or 34%, to USD 137.1bn, by the end of 2023.

Our key priorities and operations

We are actively reducing the assets of Non-core and Legacy in order to reduce operating costs and financial resource

consumption, 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 are as follows.

– Reduce RWA and LRD, freeing up capital for the UBS Group. We aim to achieve a share of around 5% of Group RWA

by the end of 2026. Non-core and Legacy will continue to actively pursue acceleration of the natural roll-off through

active unwinds when economically accretive.

– Reduce operating costs and financial resource consumption by simplifying and decommissioning infrastructure,

accelerate integration where accretive, and minimize the size of the legal entity footprint.

– Protect the client franchise by partnering with colleagues across the business divisions.

Non-core and Legacy includes assets, operating expenses and funding costs related to the following Credit Suisse

businesses: loans primarily related to corporate bank 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 prime services businesses, electronic trading, equity swaps, share back-lending positions, legacy

structured renewables-linked positions and the residual credit business. Non-core and Legacy 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 arising from businesses transferred to it at the time of its formation.

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, Corporate Services, Compliance, Regulatory & Governance, Finance, Risk Control, Human Resources,

Communications & Branding, Legal, the Group Integration Office, Group Sustainability and Impact, and Chief Strategy

Office) and Group Treasury.

Group Services

The vast majority of the support and control functions are fully aligned or shared among the business divisions, where they

have full management responsibility. By keeping the activities of the businesses and support and control functions closely

aligned, we improve efficiency and create a working environment built on accountability and collaboration. Virtually all costs

incurred by the support and control 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.

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.

Organizational changes

As a result of the acquisition of the Credit Suisse Group, Corporate Center (Credit Suisse), including Treasury, has become

a part of Group Items. In addition, the former Non-core and Legacy Portfolio unit was transferred to the new Non-core

and Legacy business division.

Annual Report 2023 | Our strategy, business model and environment | Our environment 32

Our environment

Market environment

Global economic developments in 2023

The global economy was resilient in 2023, in spite of the steep interest rate rises by major central banks designed to curb

inflation from the multi-decade highs reached in 2022.

Global growth slowed only slightly, to 3.2%, in 2023, down from 3.4% in 2022. This partly reflected the strength of the

US economy, where growth withstood higher interest rates, tightening bank lending standards, and mediocre real

income growth. US GDP growth increased to 2.5% in 2023, up from 1.9% in 2022, as job security and relatively strong

balance sheets encouraged higher spending by middle-income consumers. Economies in Europe also expanded in 2023,

though at a slower pace. Growth in the Eurozone slowed to 0.5% in 2023, down from 3.4% in 2022, as the European

Central Bank (the ECB) repeatedly raised interest rates. Growth in the Swiss economy slowed to 0.7% in 2023, down

from 2.7% in 2022. UK GDP growth slowed to 0.1% in 2023, down from 4.3% in 2022, as high inflation and interest

rate rises also limited growth.

Growth in China increased to 5.2% in 2023, compared with 3% in 2022, when its economy was slowed by pandemic

restrictions that were in place until late in that year. However, cautious spending by domestic consumers meant that the

rebound in growth was weaker than had been expected. Growth in India remained robust at 7% in 2023, down only

slightly from 7.2% in 2022.

Inflation eased across developed economies, especially in the second half of 2023, as supply chains continued to recover

from COVID-19 disruptions, energy prices were lower than 2022 and central bank interest rate rises increased the cost

of borrowing. US consumer price inflation slowed to an annual 3.4% in December 2023, from 6.4% in January 2023.

Inflation decelerated even more markedly in the Eurozone, to 2.9% year over year in December 2023, compared with

8.5% in January 2023. This trend enabled the Federal Reserve and the ECB to signal late in 2023 that monetary tightening

had probably come to an end.

The MSCI All Country World Index returned a 22.2% gain in 2023, with close to half of that gain coming in the final two

months of the year. The S&P 500 rose by 26.3%, lifted by optimism that innovations in artificial intelligence will boost

profits and hopes that the Federal Reserve will cut rates swiftly in response to falling inflation. The FANG+ index, which

tracks the 10 most traded US tech stocks, increased 96% over the year. The MSCI Japan was the best-performing major

market in local currency terms in 2023, with a return of 28.6%, its highest in a decade. In Europe, the MSCI EMU returned

18.8%. Although the Swiss and UK markets lagged behind global stocks, both ended the year in positive territory, with

returns of 5.3% and 7.7%, respectively. The weakest performance by a major market came from the MSCI China, which

lost 10.7% amid disappointment over the pace of the economic recovery from pandemic restrictions and more limited-

than-expected stimulus.

Economic and market outlook for 2024

Our baseline scenario for 2024 is for a soft landing in the US and subdued but positive growth in the Eurozone. We

expect growth in China to enter a new normal of lower, but potentially higher-quality, growth.

We believe inflation will continue falling toward central bank targets, and, as a result, we believe policymakers will feel

confident enough to lower interest rates starting around the middle of 2024. We expect cuts from the Federal Reserve,

the ECB, the Swiss National Bank and the Bank of England. In contrast, with Japanese deflation coming to an end, we

expect the Bank of Japan to raise rates into positive territory for the first time since late 2015.

With regard to growth, we expect the US to slow to a sustainable long-term rate of growth, due to declining housing

affordability and the withdrawal of some government support measures that helped households during the COVID-19

pandemic. However, middle-income consumers still appear to have spending power, as well as relatively strong balance

sheets, and we expect demand for labor to remain resilient. Overall, we expect US GDP growth to remain positive, at

around 1.1% in 2024. We expect growth to be weak in the Eurozone, at 0.6%, due to the lagged effect of higher

interest rates. We also expect UK GDP to increase by 0.6% in 2024, while GDP growth in Switzerland is expected to

increase to 1.2% in 2024.

Geopolitical events and elections also have the potential to play an outsized role in 2024. The US presidential election,

the ongoing Israel–Hamas and Russia–Ukraine wars, and the tension between the US and China could all affect markets

globally. In addition, more than four billion people in more than 40 countries are set to go to the polls in 2024, including

in the US, India and, potentially, the UK.

1 Based on sources: Haver Analytics, CEIC, National Statistic and UBS.

Annual Report 2023 | Our strategy, business model and environment | Our environment 33

Industry trends

Although our industry has been significantly affected by various regulatory developments in the past decade,

technological transformation and changing client expectations are further emerging as key drivers of change today,

increasingly affecting the competitive landscape, as well as our products, service models and operations. In parallel, our

industry continues to be materially driven by changes in financial markets and macroeconomic and geopolitical

conditions.

Digitalization

Digitalization continues to accelerate in our industry. Clients demand a seamless and personalized technology experience

that involves both innovative and sustainable solutions. The rising rate of digital adoption can be seen across all regional,

demographic and client segments. The ascent of artificial intelligence (AI) has created an opportunity to significantly

improve both employee efficiency and client service. Financial institutions are finding ways to accelerate the adoption of

AI in a risk- and regulatory-compliant manner and with ethical considerations in place. As a result, the shift from

digitalizing and automating existing processes to digital-as-default solutions is well underway, while also taking into

consideration human interaction, a component that continues to be an important competitive factor.

Keeping pace with emerging technologies is key; themes such as generative AI have progressed significantly and are

expected to continue growing at pace. Generative AI offers the potential to democratize the use of AI well beyond data

scientists, broadening the scope for its application and its associated benefits. As the technology evolves, so does the

associated risk landscape, but the focus remains on safeguarding our clients and their data, with the evolution of AI

governance as an area of strategic importance.

Digital communication, with clients and employees alike, has established new remote ways of working, enabling financial

services providers to attract an even wider array of talent than before. The digitalization of the financial services sector

has led to a structural shift in the workforce: more and better engineers are required to keep banks at the forefront of

technology.

Continuous investment in technology is driving automation and simplification of labor-intensive processes, improving

banks’ operational efficiency, and freeing up resources to focus on client needs. Decision-making is becoming increasingly

data-driven, with advanced analytics and AI enabling banks to address client needs in an even more targeted manner. In

a consistently connected, open, and location-independent financial services ecosystem, the focus lies on adopting open-

source technology, including cloud-native and modular architecture, to drive innovation and open exchange.

An open-finance environment combined with a shift in business models from in-person to digital channels bears the risk

of increased digital vulnerability. Clients and other stakeholders expect ethical, responsible and secure data management

practices. This makes the protection of the firm’s data and the optimization of its cybersecurity capabilities a continued

priority and focus.

Distributed ledger technology applications, including digital cash solutions, are gradually being adopted by the banking

industry. Decentralized finance solutions are expected to mature over the coming years and may reshape our industry.

They provide opportunities to overcome friction within the existing financial system, increase banking efficiency, broaden

access to underserved communities and make previously unviable products or services available to the financial services

sector. They also further enable early-stage concepts, such as Web 3.0 and the metaverse, which could lead to an

enhanced digital user experience.

Sustainability

The continued decarbonization of the global economy will require governments, regulators, all industries and consumers

to move in the same direction. A series of recent legislative acts, including the rollout of the Inflation Reduction Act in

the US and the EU’s Green Deal Industrial Plan, along with rising regulatory requirements, encourage investment into

sustainable solutions, including infrastructure.

Meanwhile, policymakers and regulators increasingly require corporations to embed and disclose environmental, social

and governance considerations. For example, the EU’s Corporate Sustainability Reporting Directive, which came into

force in 2023, is intended to provide greater transparency and reliability of information to investors.

During 2023, flows into sustainable funds remained modestly positive, while traditional funds faced outflows impacted

by the equity and bond market volatility and worsening geopolitical tensions.

Throughout the year investors also

expanded their sustainable investment allocations into alternative asset classes, including hedge funds, real estate and

infrastructure. Following the subdued issuances in 2022, green, social, sustainability and sustainability-linked (GSSS) bond

supply rebounded in 2023.

Our view is that the long-term growth trajectory for sustainable finance plays to our strengths, as we continue to build

on our offering and develop the innovative products and solutions that our institutional and private clients need both to

manage the risks and capture the opportunities presented by the transition to a low-carbon economy.

› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for more

information about sustainability matters

Annual Report 2023 | Our strategy, business model and environment | Our environment 34

Client expectations

As technology progresses, clients more rapidly redefine the way they live, work and interact with others. This is reshaping

clients’ expectations toward financial services firms, as their reference points are increasingly influenced by experiences

with companies outside the sector, where technology-supported and data-driven solutions are progressively enabling a

more personalized, relevant, on-time and seamless client experience. These services often focus on convenience,

flexibility, transparency and personalization, and drive toward holistically addressing clients’ needs and facilitating

community building. Therefore, our industry needs to evolve, as clients measure us against new standards.

While the industry’s overall focus still remains on digital-led solutions, recent geopolitical, macroeconomic and societal

shifts have highlighted values such as security, trust, stability and a credible plan toward a sustainable future, leading to

an increased demand in investment, financing and advisory products and services that fit clients’ own sustainability

preferences and ambitions.

Consolidation

Many regions and businesses in the financial services sector are still highly fragmented. We expect further consolidation,

with the key drivers being ongoing margin pressure, capital constraints (e.g., due to pressure on asset prices in a higher-

interest-rate environment), a push for cost efficiencies and increasing scale advantages resulting from fixed technology

costs and regulatory requirements. Many stakeholders in the financial services sector continue to seek increasing exposure

and access to regions with attractive growth profiles, such as Asia and other emerging markets, through local acquisitions

or partnerships, as well as acquiring new capabilities addressing changes in market dynamics and overall client demands.

The increased focus on core capabilities and geographical footprint, as well as the ongoing simplification of business

models to reduce operational and compliance risks, is likely to drive further disposals of non-core businesses and assets.

While banks already face increasing challenges from digitalization needs and intensified competition, potential tightening

in macroeconomic and geopolitical conditions across major economies may create further pressure.

New competitors

Our competitive environment is evolving. In addition to traditional competitors in the asset-gathering businesses, new

entrants are targeting selected parts of the value chain. We have recently observed a growing supply of private credit

from private debt funds, facilitating an industry shift in lending volumes for high-yield lending products. However, we

have not yet seen a fundamental unbundling of the value chain and client relationships, which might ultimately result in

the further disintermediation of banks by new competitors. Over the long term, we believe large platform companies

entering the financial services sector could pose a larger competitive threat, given their strong client franchises and access

to client data, if they decide to broaden the scope of their services. While fintech firms continue to gain momentum,

recent macroeconomic developments have slowed this trend, as funding appetite and valuations have trended

downward. Although we expect the industry to recover in the future, we do not expect a material disruption to our asset-

gathering businesses. As fintech firms mature, their success will inevitably depend on their ability to navigate our

regulatory landscape, build customer trust and maintain innovation. The trend for forging partnerships between new

entrants and incumbent banks will therefore continue, as technology and innovation help banks overcome new

challenges.

Wealth development

General overview of wealth development

As of the end of 2022, global financial wealth is estimated at USD 255trn and is expected to continue to grow. After

more than a decade of steady expansion, the growth of global financial wealth slowed for the first time in 2022,

decreasing to USD 255trn, a 3.5% decrease compared with 2021. The decrease was mainly driven by various

macroeconomic and geopolitical factors. However, this decrease is expected to be temporary, and wealth development

is projected to continue in an upward trajectory in the coming years.

Challenges such as persistent inflation, the resulting rise in interest rates (which contributed to lower equity market

performance) and a weaker-than-expected recovery in China, as well as geopolitical tensions and armed conflicts,

persisted throughout 2023. However, global financial wealth is expected to continue growing at an average of 5% per

year until 2027.

Almost half of the world’s financial wealth was concentrated in the Americas (48%), followed by Asia Pacific (28%),

Europe (21%) and the Middle East and Africa (3%).

Looking at our invested assets, almost half of those were concentrated in the Americas (49%), while the remaining half

was almost equally distributed between Asia Pacific, Europe and the Middle East and Africa (approximately 17% per

region).

Annual Report 2023 | Our strategy, business model and environment | Our environment 35

Wealth segment view

At the beginning of 2023, wealth was still highly concentrated. Approximately one-third of global high net worth

individual (HNWI) wealth was controlled by 1% of the HNWI population (those with wealth in excess of USD 30m).

Around a quarter of global HNWI wealth was held by 9% of the HNWI population (those with wealth ranging from

USD 5m to USD 30m), while the remainder of the HNWI wealth was held by 90% of the HNWI population, i.e., those

with wealth between USD 1m and USD 5m.

Specifically, when looking at the billionaire wealth segment, wealth recovered from its post-pandemic fall, growing by

9% in nominal terms, while the billionaire population rose by 7% globally.

Wealth transfer

Between 2020 and 2030, more than USD 18trn of collective wealth is expected to be transferred globally by individuals

with USD 5m or more in net worth to their next-in-line heirs or spouses.

North America and Europe are the regions with

the largest expected wealth transfers, with the US alone responsible for approximately 60% of all transfers.

When looking at the billionaire wealth segment, based on the findings of UBS’s latest Billionaire Ambitions Report, for

the first time in 10 years new billionaires in the 12 months to April 2023 accumulated more wealth through inheritance

than entrepreneurship. This is expected to increase during the next 20 to 30 years, as more than 1,000 billionaires pass

an estimated USD 5.2trn to their heirs. This is of great significance, as this new generation of billionaires has fresh views

about business, investments and philanthropy. Many are redirecting the large pools of private wealth they control to new

business opportunities, and possibly away from their families’ businesses.

While this wealth transfer poses a challenge for wealth managers to retain current assets, it also creates opportunities to

capture new assets from competitors, as well as to start building relationships with the next generation and to cater to

their evolving needs. UBS provides clients with tailored services and solutions depending on client profiles and

jurisdictions, while facilitating succession planning, a highly significant and challenging topic for many clients.

Female investors

Today, women are creating wealth faster than ever before and doing so at a faster pace than men, due to factors such

as shifting global wealth distribution, cultural attitudes, intergenerational wealth transfers and a rise in businesses owned

by women. This trend will likely gain further momentum in the years to come. In 2022, 12% of all billionaires worldwide

were women, worth a total of USD 1.56trn, an increase of 2% compared with the prior year.

To address this segment,

UBS has created a dedicated approach tailored to female investors, adapting its offering to the specific needs of each

client. UBS was recently highly commended in the Best Private Bank for Wealthy Women category at the PWM / The

Banker 2023 awards.

Entrepreneurs

With an expected compounded annual growth rate of 6% between 2020 and 2025, entrepreneurs represent the largest

and fastest-growing contributors to the global wealth management revenue pool and are expected to account for almost

one-third of total wealth management revenues by 2025.

We are addressing the opportunities entrepreneurs present by leveraging our global footprint and capabilities to address

their evolving needs at every stage of the business life cycle. Additionally, we have created the Industry Leader Network,

an exclusive peer-to-peer entrepreneur network that offers opportunities for connecting through content-rich events,

through a dedicated digital platform and through regular information exchanges.

Long-term investment trends resilient in the face of market uncertainty

2023 saw turbulence in the global financial markets, as a combination of varying expectations about the level of interest

rates, inflation, and geopolitical tensions caused equity and fixed income performance to fluctuate several times across

the course of the year. There was increased investor appetite for fixed income, accompanied by outflows from equity

funds.

Inflation has decreased across most major markets globally, and while hopes of a softer landing have risen, inflation

remains above target, including in the US. This continues to be a challenge across Europe, given continued low growth.

In our view, despite the uncertainty, the opportunity has significantly improved for investors looking to build diversified,

risk-aware portfolios, and the long-term trend toward shifts into illiquid alternatives that can deliver compelling longer-

term, risk-adjusted returns and into low-cost, efficient passive strategies across liquid markets has not changed. The

breadth of our investment expertise and capabilities enables us to find the right solutions for clients as the environment

evolves.

1 Global Sustainable Fund Flows: Q4 2023 in Review, Morningstar.

2 Based on BCG’s Global Wealth Report 2023, which refers to the 2022 financial year; wealth concentration is based on financial assets by regions, and excludes real assets and liabilities.

3 Wealth Management Top Trends 2023, Capgemini, considering HNWI financial wealth and population in Europe, Asia Pacific and North America; the HNWI population defined as individuals with investable assets

greater than USD 1m, excluding primary residence, collectibles, consumables and consumer durables.

4 UBS Billionaire Ambitions Report 2023, November 2023.

5 Preservation and Succession: Family Wealth Transfer 2021, Wealth-X.

6 Women as the next wave of growth in US wealth management, McKinsey (July 2020); quoting that in 70% of cases where widows inherit wealth, they change their banking relationship within a year.

7 UBS Investor Watch, October 2022.

8 McKinsey Global Wealth Pools, 2020, UBS analysis; client types considered are high-income employees, self-employed professionals, entrepreneurs, multi-generation families and retirees.

Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders 36

How we create value for our stakeholders

Clients

Our clients are the heart of our business. We are committed to building and sustaining long-term relationships based on

mutual respect, trust and integrity. Understanding our clients’ needs and expectations enables us to best serve their

interests and to create value for them.

A combined firm with expanded reach and capabilities for clients

With the acquisition of the Credit Suisse Group in 2023, our client offering, expertise and geographical reach have

expanded significantly.

The wealth management businesses of UBS AG and Credit Suisse AG have largely complementary footprints across

locations and client segments, that support one of the core pillars of our client value proposition in Global Wealth

Management: the ability to serve clients regardless of where they are and what they need. Following the acquisition, all

of our Global Wealth Management clients now have access to the UBS House View by our Chief Investment Office. We

are continuing to align our wealth management product and solution offerings, helping clients to grow, protect and

transfer their wealth.

We are the leading bank In Switzerland, leveraging the strength of the newly combined Swiss business to broaden our

services and to promote innovation to our clients. The legal merger of two entities, Credit Suisse (Schweiz) AG and UBS

Switzerland AG, is expected to be completed in the third quarter of 2024, with the Swiss Bank (Credit Suisse) division

being integrated into Personal & Corporate Banking. We are taking on the integration with the utmost care and intend

to spend the time needed to achieve the best possible outcome for our clients, our employees and the Swiss financial

center.

Following the acquisition of the Credit Suisse Group, we are bringing together our highly complementary asset

management businesses and enhancing the value that we provide to clients through expanded capabilities across key

asset classes and growth markets. This includes greater scale in customized indexing, an enhanced offering in alternatives

including a leading credit franchise, and an increased presence in the US and Asia.

The acquisition of the Credit Suisse Group strengthens the Investment Bank’s coverage. It deepens our capabilities in

core products and services, enabling us to deliver services to a broader institutional- and corporate-client base, while

bringing us critical mass in key markets. The Investment Bank will also be better positioned to serve Global Wealth

Management clients, offering differentiated investment banking capabilities and further enhancing connectivity with

ultra high net worth and Global Family & Institutional Wealth clients.

Engaging with our clients

Our clients’ needs and their preferred communication channels continually evolve. Our objective is to engage with clients

in the ways most convenient for them. We use a variety of channels to engage with clients, including regular client

relationship and service meetings, as well as various corporate roadshows and dedicated events, and we have established

a mix of hybrid and in-person events.

Global Wealth Management interacted with clients via various settings in 2023, from personalized private briefings with

subject matter experts to segment-specific virtual and in-person events and large-scale initiatives. We utilize marketing

campaigns, events, advertising, publications and digital-only solutions to help drive greater awareness of UBS among

prospective clients and reinforce trust-based relationships between advisors and clients. We proactively engaged with

clients to reassure them about the acquisition and highlighted the benefits of the combined organization. This was done

through individual meetings and calls, and, as the acquisition progressed, we were able to open up some of our flagship

events and conferences to clients of the combined firm.

Personal & Corporate Banking holds regular client events (leveraging a number of formats, such as webcasts and in-

person, virtual or hybrid events), covering a wide range of topics. In 2023, we enhanced our digital engagement strategies

to reach more clients and strengthen relationships with existing ones. We utilize various channels, including social media,

online displays, and search engines.

In Asset Management, we had a consistent program of client events and engagement activities throughout 2023. These

included our flagship conferences, such as the annual UBS Reserve Management Seminar, and we held our first global

in-person outlook roadshow in multiple locations across the world. Alongside this, our teams continued the high level of

interaction with clients globally, supported by digital tools and our publication of macro insights. We also hosted a broad

range of hybrid events, including our investment series, to help our clients better understand market challenges and

opportunities, and we continued to engage with clients through our social media and online channels.

Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders 37

The Investment Bank hosted more than 180 investor conferences and educational seminars globally in 2023, covering a

broad range of macro, sector, regional and regulatory topics. Almost all of those conferences were held virtually. We

leverage our intellectual capital and relationships and use our execution capabilities, differentiated research content,

bespoke solutions, client franchise model and global platform to expand coverage across a broad set of clients. UBS Neo

Question Bank is the largest global database of market-related questions asked by professional investors, and UBS Live

Desk, built within the UBS Neo platform, provides clients with a stream of fast-paced commentary from UBS traders. The

UBS Analytical Research Community (UBS-ARC) is a proprietary, interconnected research network of industry leaders,

subject matter specialists, executives, academics and analysts in the Americas region.

How we measure client satisfaction

We continue to use multiple techniques to regularly assess our achievements and the satisfaction of our clients. Global

Wealth Management is increasingly using technology and analytics capabilities to collect and respond to client feedback.

Personal & Corporate Banking

has conducted annual surveys of clients in Switzerland since 2008, consistently covering

most private and corporate-client segments annually since 2015. In Asset Management, we have an integrated process

to record and manage client feedback through our client relationship management tool, and we also conduct regular

surveys. The Investment Bank closely monitors client satisfaction via individual product coverage points. Direct client

feedback is actively captured and tracked in our systems. The Investment Bank also closely monitors external surveys,

which provide feedback across a range of investment banking services.

1 Refers to UBS AG Personal & Corporate Banking.

Investors

We aim to create sustainable, long-term value for our investors by executing our strategy, growth and integration plans

while maintaining risk and cost discipline, and delivering attractive shareholder returns through the cycle.

Investor base

Our investor base is well diversified. A substantial proportion of our institutional shareholders are based in the US, the

UK and Switzerland.

› Refer to the “Corporate governance” section of this report for more information about disclosed shareholdings

Alignment of interests

We aim to align the interests of our employees with those of our equity and debt investors, and this approach is reflected

in our compensation philosophy and practices.

› Refer to “Our compensation philosophy” in the “Compensation” section of this report for more information

We are focused on driving sustainable long-term growth while maintaining risk and cost discipline

Our objective is generating value for all of our stakeholders by driving sustainable growth across the cycle. In the short

term, our main priorities are the integration of Credit Suisse, positioning the firm for efficient long-term growth by right-

sizing the cost base, optimizing the balance sheet and investing strategically in order to achieve our long-term growth

ambitions. By the end of 2026 and beyond, this will enable us to deliver significant value for all our stakeholders and

remain a reliable economic partner, employer and taxpayer in the communities where we operate. Moreover, we are

aiming to maximize our impact and that of our clients to create long-term sustainable value.

Our primary measurement of the Group’s financial performance is return on common equity tier 1 (CET1), as regulatory

capital is our binding constraint and drives our ability to return capital to shareholders.

› Refer to the “Targets, capital guidance and ambitions” section of this report for more information

› Refer to “Our focus on sustainability and climate” in this section for more information about our environmental, social and

governance aspirations

Balancing resilience, growth and attractive capital returns

Capital strength is a key pillar of our strategy, and we are committed to maintaining a balance sheet for all seasons. This

includes our strong capitalization, in line with our capital guidance of maintaining a CET1 capital ratio of around 14%

and a CET1 leverage ratio of greater than 4.0%.

We are committed to investing for sustainable growth. Our balance sheet provides ample capacity for return-accretive,

sustainable growth. We plan to fund this growth organically from the capital released from the unwinding of the Non-

core and Legacy business division, as well as capital optimization measures in our core divisions.

Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders 38

We intend to distribute excess capital to shareholders, in the form of a progressive dividend and share buybacks. For the

2023 financial year, the Board of Directors plans to propose a dividend to UBS Group AG shareholders of USD 0.70 per

share, a 27% increase year on year. We remain committed to progressive dividends and are accruing for a mid-teen

percentage increase in the dividend per share for the 2024 financial year. We are committed to distributing excess capital

to shareholders in the form of share repurchases and plan to reinstate share repurchases of up to USD 1bn during 2024,

commencing after the completion of the merger between UBS AG and Credit Suisse AG, which is expected by the end

of the second quarter of 2024. It is our ambition for share repurchases in 2026 to exceed the 2022 levels of USD 5.6bn.

› Refer to “UBS shares” in the “Risk, capital, liquidity and funding, and balance sheet” section of this report for more information

Communications

Our Investor Relations (IR) function is the primary point of contact between UBS and our shareholders. Our senior

management and IR regularly interact with institutional investors, financial analysts and other market participants, such

as credit rating agencies. Clear, transparent and relevant disclosures, and regular direct interactions with existing and

prospective shareholders, form the basis for our communications. The IR team relays the views of and feedback on UBS

from institutional investors and other market participants to our senior management.

IR and our Corporate Responsibility function work together and interact with investors interested in sustainability topics

relevant to UBS and wider society.

› Refer to the first part of the “Corporate governance” section of this report and “Information policy” in that same section for more

information

› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for more

information

Employees

We are dedicated to being a world-class employer and a place where people can unlock their full potential. Our

employees execute our business strategy and deliver the products and services our clients need. We therefore continued

to invest in measures to strengthen our culture in 2023 and to provide a framework for employee growth and well-being

within our overarching people management approach.

countries

nationalities languages

spoken

years of service,

on average

52 166 171 8.5

Women

Men

115,038

59% 41%

67,93 8 47,10 0

employees

Our workforce in a nutshell¹

Calculated as of 31 December 2023 on a head-count basis of 115,038 internal employees only (112,842 FTE). The number of external staff as of

31 December 2023 was 25,619 (workforce count).

age <30

18%

age 30–50

61%

age >50

21%

Switzerland

32%

Americas

23%

Asia Paciﬁ c

24%

EMEA

20%

Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders 39

The three keys and our corporate culture

Our culture, which is the foundation of our identity, is based on our three keys to success: our Pillars, Principles and

Behaviors. Together, these keys drive our business decisions and our people management processes. Generally speaking,

the employee cultures of UBS and Credit Suisse are based on similar foundations: integrity, collaboration and high levels

of engagement are the norm for both organizations. In the second half of 2023, familiarizing our new colleagues with

our three keys principles and building a unified culture across our combined organization were top priorities. A culture

integration forum was established to oversee and support the cultural integration efforts across the combined firm.

Employee integration progressed throughout 2023, starting with senior leadership decisions and continuing down to

individual teams, seeking to bring talented individuals together in a fair, consistent and meritocratic approach. Those

efforts, and the employee engagement and development initiatives that support the integration, will continue, and even

increase, in 2024.

Culture-building behavior is promoted through a number of Group-wide, divisional and regional initiatives. One example

is Three Keys on Air. In 2023, this Group-wide series of webcast employee events highlighted key aspects of our culture,

including maximizing performance, psychological safety in high-performing teams and excellence in risk management.

In addition, the Group Franchise Awards (GFA) program recognizes employees for cross-divisional collaboration and for

suggesting innovative or simplification ideas. In 2023, more than 1,800 ideas were submitted for consideration. The

global peer-to-peer appreciation program (called Kudos) makes it easy for employees to recognize and appreciate their

colleagues’ above-and-beyond behavior. This serves to promote excellence and increase engagement and employee

satisfaction. In 2023, our employees gave nearly 439,000 Kudos recognitions. Credit Suisse employees participated in

Recognizing and Valuing Excellence (RAVE), a similar peer-to-peer recognition program. The GFA program and Kudos

will be rolled out to the entire organization starting in 2024.

› Refer to

ubs.com/global/en/our-firm/our-culture.html

for details about our three keys to success

› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for more

information

Hiring, developing and retaining talent

We hired a total of 11,435 external candidates across the combined firm in 2023 and developed more than 3,700

graduates and other trainees, apprentices and interns around the globe. We actively promote multi-year apprenticeship

programs in Switzerland and the UK, along with summer internship programs in the US, EMEA, Asia Pacific and

Switzerland.

In 2023, most employees were eligible to work partially from home, depending on their role, regulatory restrictions and

location, as well as divisional or functional requirements. Already similar, the hybrid-working programs of the UBS sub-

group and the Credit Suisse sub-group will be aligned over the course of the integration. These measures, along with

options such as part-time working, job sharing and partial retirement, help us attract and retain diverse top talent.

› Refer to

ubs.com/global/en/careers/awards.html

for employer ratings and recognitions

Personnel by region

As of

% change from

Full-time equivalents

31.12.23

31.12.22

31.12.21

31.12.22

Americas

27,638

21,819

21,317

of which: USA

26,024

21,032

20,537

Asia Pacific

27,638

16,489

15,618

Europe, Middle East and Africa (excluding Switzerland)

22,686

14,342

14,091

of which: UK

8,970

6,234

6,051

of which: rest of Europe (excluding Switzerland)

13,085

7,823

7,826

of which: Middle East and Africa

631

285

215

121

Switzerland

34,880

19,947

20,359

Total

112,842

72,597

71,385

Talent management and development

We want our employees to be able to build long and successful careers. Our systematic approach to talent management

includes annual talent and succession reviews that help ensure we have strong talent pipelines and succession plans.

Group-wide talent programs are offered across the organization and supplemented by specific programs in the business

divisions, business areas or functions and regions. Programs range from those targeting senior leaders to those targeting

junior talent, in addition to those open to women and employees from diverse backgrounds.

Internal mobility is a key component of our approach, with line managers expected to support individual development

and mobility. In 2023, 38.8% of all open roles at our firm were filled by internal candidates. Employees can explore career

paths, search for jobs and short-term rotations, and connect with mentors on our Career Navigator platform. Credit

Suisse employees are expected to have full access during 2024.

Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders 40

All internal training is delivered via our UBS University platform. Our offering includes client advisor certification and

regulatory, business, and line manager training, alongside modules on topics such as sustainable finance, data literacy,

and well-being. Credit Suisse employees transitioned onto the UBS University platform in January 2024. Across the

combined firm in 2023, employees completed more than 2.3 million learning activities (including mandatory training) for

an average of 1.91 training days per employee. Together with Credit Suisse we invested more than USD 100m in training

activities in 2023.

Performance management

Our performance management approach (MyImpact) reflects our strategy and supports our high-performance culture.

We consider both performance and behavior-related objectives because we value what an employee accomplishes and

how our Behaviors (accountability with integrity, collaboration and innovation) are demonstrated. Regular check-ins,

along with an embedded feedback app, enable employees to give and receive ongoing feedback, supporting continuous

improvement.

Credit Suisse employees were fully integrated into this performance management approach before the start of year-end

reviews, and the same process was applied across the entire organization. Active involvement from managers and matrix

managers, along with feedback from across the combined organization, ensured a consistent and fair performance

review approach.

Fair and equitable pay

Fair and consistent pay practices are designed to ensure employees are appropriately rewarded for their contribution. We

pay for performance, and we take pay equity seriously. We have embedded clear commitments in our global

compensation policies and practices. We regularly conduct internal reviews and independent external audits on pay

equity, and our statistical analyses show a differential between men and women in similar roles across our major locations

of less than 1%. Beginning in 2020, UBS was certified (through 2023) by the EQUAL-SALARY Foundation for our human

resources (HR) practices, including compensation, in Switzerland, the US, the UK, the Hong Kong SAR and Singapore,

covering more than two-thirds of our global employee population.

All of our HR policies are global, and we apply the same standards across all locations. Furthermore, we review our

approach and policies annually to support our continuous improvement. We also aim to ensure that all employees are

paid at least a living wage.

We regularly assess employees’ salaries against local living wages, using benchmarks defined

by the Fair Wage Network. In 2023, all employees’ salaries were at or above the respective benchmarks.

› Refer to the “Compensation” section of this report

for more information

Diversity, equity and inclusion

Our employee diversity, equity and inclusion (DE&I) strategy is built on four pillars: how we hold ourselves accountable,

how we hire, how we develop talent and how we build a culture of belonging. We leverage all four pillars as we move

toward achieving our ambitious gender and ethnic diversity aspirations and creating an inclusive culture for all.

In 2020, we outlined specific intentions to increase our female and ethnic minority representation, especially among

management. We aspire to have by 2025 30% of Director level and above roles globally held by women and 26% of

Director level and above roles in the US and the UK held by ethnic minority talent, along with additional regional

aspirations. Our DE&I aspirations remain unchanged for the combined organization and the Credit Suisse DE&I aspirations

have been retired.

As of the end of 2023, women accounted for 40.9% of our workforce and 29.5% of our Director level and above

population, up from 27.8% in 2022 and 26.7% in 2021.

Women also held 30.5% of management positions, of which

22.6% were in revenue-generating functions. Furthermore, 37.5% of members of the Group Executive Board (the GEB)

and 33.3% of members of the Board of Directors (the BoD) were women, as were 30.3% of senior managers who

reported directly to a member of the GEB.

Due to variations in legal requirements and other factors, we take a country-specific approach to increasing

representation of ethnic minorities and place particular focus on making progress in the UK and the US. As of the end of

2023, employees from ethnic minority backgrounds held 24.3% of Director level and above roles in the UK, up from

23.4% in 2022 and 21.9% in 2021. In the same year, employees from ethnic minority backgrounds held 25.1% of

Director level and above roles in the US, up from 20.5% in 2022 and 20.1% in 2021.

Our 64 employee networks are vital to building a sense of belonging and strengthening our inclusive culture. The Credit

Suisse sub-group and the UBS sub-group employee networks were integrated by the end of 2023, enabling us to combine

programming and resources, and to extend our networks’ impact to a much larger audience.

We build connections with colleagues and clients with disabilities through our association with The Valuable 500, a global

collective of companies actively supporting disability inclusion. Initiatives in 2023 included training for employees and HR

specialists, sponsoring disability-focused employee networks and groups, and further increasing physical and digital

accessibility for employees and clients alike.

› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, and

ubs.com/diversity

for more information about DE&I at UBS

Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders 41

Employee engagement and support

We regularly conduct employee life-cycle surveys, analyses of specific business issues and short “pulse” surveys to learn

about employees’ views and concerns. One such pulse survey, conducted across the combined organization in November

2023, found that 87% of respondents reported experiencing a professional and respectful work environment, and 83%

reported that their function collaborates well with different areas. Furthermore, 77% of respondents felt empowered to

make decisions and 86% felt able to speak up and raise concerns.

All of these results are above the financial services

benchmark.

We are committed to being a responsible employer, and that includes supporting our employees’ overall health and well-

being. Social, physical, mental and financial well-being elements are woven into our HR policies and practices, as well as

into initiatives to increase awareness and educate employees. In early 2023, UBS became a founding partner of

#WorkingWithCancer to better support employees who are impacted by cancer. During the second half of the year, we

provided information and support to help employees adapt to changes related to the acquisition of the Credit Suisse

Group.

› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for more

information about our workforce, our people management approach and relevant data

1 Excluding our US-based financial advisors as their compensation is primarily based on a formulaic approach.

2 For all data in the DE&I section of this report, 2023 data reflects the combined organization, and prior-year data reflects pre-acquisition UBS only, unless otherwise stated.

3 The result shown is the sum of respondents that “strongly agree” and “agree.”

4 Benchmarks provided by Ipsos Karian and Box as of the third quarter of 2023.

Society

With a clear focus on people, planet and partnerships, Social Impact has continued to be a strong differentiator for the

firm, with our activities underpinning our sustainability strategy. With our acquisition of the Credit Suisse Group and the

ongoing integration, we will continue to put clients and people first across the combined organization and help clients

maximize their impact locally and globally. Credit Suisse’s long-standing commitment to society and philanthropic support

to communities complements and strengthens our global impact footprint.

Our vision is to contribute to and scale an impact economy, an economy that values the well-being of all people and the

planet. This means building partnerships that drive greater impact transparency, more impact ventures and innovative

ways of financing and paying for impact.

Philanthropy services and collective impact

We believe that by working collectively, philanthropists and public and private organizations have the potential to create

lasting change and maximize a positive impact for people and planet. We provide comprehensive advice, insights and

execution services, working with our clients and finding ways to tackle some of the world’s most pressing social and

environmental problems. We aim to mobilize USD 1bn in philanthropic capital and positively impact more than

26.5 million people by 2025 (cumulative total since 2021).

Collective impact

The power of philanthropic partnerships will be critical in achieving systemic scalable change. We have three Collectives,

where philanthropists, led by our in-house philanthropy team, are working together, bringing together their efforts, skills

and resources during a two-year learning journey. By combining our expertise and investor capital, our aim is to fund

initiatives that address (i) child protection, (ii) climate change and (iii) health- and education-related issues. Each Collective

provides investors with an opportunity to work alongside peers and expert practitioners to achieve systemic change.

Helping our clients structure their philanthropy: donor-advised funds

Donor-advised funds offer clients an alternative charitable-giving vehicle to set up their own foundations, offering greater

choice and personalization, and are managed in line with their usual investment approach. Their charitable donations

can be invested within the parameters they select (such as capital, growth or income), helping them to grow their fund

to give grants at a later date. Administration fees are borne by UBS. UBS offers these services in Switzerland, Singapore

and the UK, and in 2023 they were launched in the Hong Kong SAR, with USD 318m in donations in 2023.

UBS Global Visionaries

Through our UBS Global Visionaries program, we aim to (i) create opportunities for clients and prospective clients to

connect with leading social entrepreneurs and (ii) help the best entrepreneurs focusing on social and environmental issues

to scale their positive change by expanding their network, building capacity and raising awareness about their work.

Since the program started in 2016, we have onboarded and supported 85 entrepreneurs to accelerate their impact.

Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders 42

The UBS Optimus network of foundations

The UBS Optimus network of foundations also aims to contribute to an impact economy that meets the long-term needs

of children and preserves the natural environment. It connects clients with programs that are making a measurable, long-

term difference to the most serious and enduring social and environmental problems. It has been operating for 24 years

now and it is focused on incubating impact ventures, scaling impact through partnerships and achieving impact

transparency. In 2023, the UBS Optimus network of foundations had a presence in nine global locations. It is now working

on harmonizing the Credit Suisse program portfolio. This effort includes Credit Suisse’s four corporate foundations

supporting the Americas, EMEA, Asia Pacific and Switzerland.

In 2023, the UBS Optimus network of foundations raised USD 328m in donations, including UBS matching contributions,

and committed USD 306m in grants from the foundations.

Highlights in 2023

Social and blended finance

The UBS Optimus network of foundations is actively developing larger-scale investment vehicles, in partnership with other

parts of UBS, by using a blended finance approach. In 2023, it secured major investor commitments for a USD 100m

SDG Outcomes blended finance initiative with Bridges Outcomes Partnerships, British International Investment (the UK’s

development finance institution) and the US International Development Finance Corporation. These anchor investors

participated alongside private investors, including Legatum, family offices (such as the Tsao Family Office) and other high

net worth individuals.

Emergency philanthropy

The UBS Optimus network of foundations and UBS Social Impact teams raise funds and support partners providing

emergency relief in response to disaster situations, and we sometimes launch dedicated appeals to support these efforts.

In 2023, the UBS Optimus network of foundations raised and started to distribute more than USD 25m for the Turkey

and Syria earthquake, the Hawaiian wildfires, flooding in Pakistan and Italy, and people affected by the humanitarian

crisis in Israel and Gaza. The UBS Optimus network of foundations also continued to distribute the USD 56m raised for

the Ukraine Relief Fund launched in 2022. To date, USD 43m has been granted to our partners on the ground.

UBS’s charitable contributions

Communities

We aim to maximize our impact in local communities. We recognize that our long-term success depends on the health

and prosperity of the communities that we are part of. We have a strategic focus on education and the development of

skills, as we believe these topics are where our resources can make the most impact. We regard our long-term investment

in these areas as central to furthering the economic and social inclusion of people that our activities support.

Our direct cash contributions (including through partnerships in the communities that we operate in) and UBS’s affiliated

foundations in Switzerland, as well as contributions to the UBS Optimus network of foundations, amounted to USD 63m

in 2023.

› Refer to “Charitable contributions” in the Supplement to the UBS Group Sustainability Report 2023, available under “Annual

reporting” at

ubs.com/investors

, for an overview of UBS’s charitable contributions in 2023

Employee volunteering

Our well-established employee volunteering model has been adapted to meet the needs of our new hybrid ways of

working, with both face-to-face and virtual opportunities to support our local communities. We have global targets for

employee engagement through volunteering, which are built bottom-up and on a best-efforts basis. In 2023, we

successfully engaged 38% of our global workforce in volunteering, and 45% of the 199,633 volunteer hours were skills-

based.

Volunteering not only has a positive impact on our NGO partners and the populations they serve, it also contributes to

corporate culture and creates a sense of belonging. UBS and Credit Suisse regional employee volunteering teams started

to offer joint assignments in July 2023 to support team-building efforts across the firm.

1 Figures provided for the UBS Optimus network of foundations and donor-advised funds are based on unaudited management accounts and information available as of January 2024. Audited financial statements for

the UBS Optimus network of foundations and donor-advised foundation entities are produced and available per local market regulatory guidelines.

2 Reported numbers only account for UBS employee volunteers, Credit Suisse volunteers that participated in joint volunteering events are not reflected in the reported numbers.

Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders 43

Our focus on sustainability and climate

At UBS, we are committed to working toward the 17 United Nations Sustainable Development Goals (the SDGs) and the

orderly transition to a low-carbon economy, as well as assisting our clients to do so. Finance has an important role to

play as companies and individuals consider how best to approach the transition to a more sustainable global economy.

As the world shifts to a low-carbon economy, the regulatory environment continues to evolve, as do the associated

capital-raising and investment opportunities.

Our Code of Conduct and Ethics

In our Code of Conduct and Ethics (the Code), the Board of Directors (the BoD) and the Group Executive Board (the GEB)

set out the principles and practices that define our ethical standards, and the way we do business, which apply to all

aspects of our business. All employees must affirm annually that they have read and will adhere to the Code and other

key policies, supporting a culture where ethical and responsible behavior is part of our everyday operations. In our Code,

we make a commitment to acting with the long term in mind and creating value for clients, employees, communities

and investors. We aspire to play our part in creating a fairer and more prosperous society, championing a healthier

environment and addressing inequalities. This ethos is in line with our external commitments, such as our pledge to help

make progress toward the SDGs. Following a substantial revision of the Code in 2021, we made further adjustments in

our 2022 and 2023 reviews of it, mainly focused on clarifying, simplifying and aligning language used.

› Refer to the Code of Conduct and Ethics of UBS, available at

ubs.com/code

, for more information

Our sustainability and impact governance

Sustainability activities, including climate, are overseen at the highest level of UBS, by the BoD and the GEB, and are

grounded in our Code.

› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for more

information about sustainability activities

The BoD is responsible for setting UBS’s values and standards for the purpose of ensuring that the Group’s obligations

to shareholders and other stakeholders are met. The Chairman of the BoD, together with the Group CEO, takes

responsibility for UBS’s reputation and is closely involved in and responsible for ensuring effective communication with

shareholders and other stakeholders, including government officials, regulators and public organizations. All BoD

committees have specific responsibilities pertaining to environmental, social and governance (ESG) matters. For example,

the Compensation Committee is responsible for ESG-related compensation topics, the Risk Committee supervises the

integration of ESG in risk management, the Governance and Nominating Committee supports the Board in establishing

best practices in corporate governance and the Audit Committee has oversight of the control framework underpinning

ESG metrics.

The Corporate Culture and Responsibility Committee (the CCRC) of the BoD is the body primarily responsible for

corporate culture, responsibility and sustainability. The CCRC oversees our Group-wide sustainability and impact strategy

and key activities across environmental and social topics. This includes climate, nature and human rights. Annually, it

considers and approves our sustainability and impact objectives. Each year, the CCRC considers and approves our

sustainability and impact objectives. The CCRC’s function is forward looking, in that it monitors and reviews societal

trends and transformational developments and assesses their potential relevance for the Group. In undertaking this

assessment, it reviews stakeholder concerns and expectations pertaining to the societal performance of UBS and to the

development of UBS’s corporate culture. The CCRC is also responsible for conducting the annual review process for the

Code and for proposing amendments to the BoD. This review process includes a prior review of the Code by the GEB

and is led by the Group CEO.

The Group CEO has delegated responsibility for setting the sustainability and impact strategy and developing Group-

wide sustainability and impact objectives, in agreement with fellow GEB members, to the GEB Lead for Sustainability and

Impact, Beatriz Martin Jimenez. On behalf of the GEB, the GEB Lead for Sustainability and Impact proposes the strategy

and objectives to the CCRC. Progress against strategy and the associated targets are reviewed at least once a year by the

GEB and the CCRC. The GEB Lead for Sustainability and Impact also manages the Group Sustainability and Impact (GSI)

organization and, together with our Chief Sustainability Officer (the CSO), co-chairs our Sustainability and Climate Task

Force (the SCTF), which oversees the implementation of the Group’s sustainability activities and its climate action plan,

including its net-zero program. Senior representatives from across our firm, including from the business divisions, Risk,

Compliance and Finance, attend the SCTF’s regular meetings. Both the GEB Lead for Sustainability and Impact and the

CSO attend the meetings of the CCRC.

The GEB also resolves overarching matters relating to sustainability and climate risks, including risk management

framework, policies, and disclosure.

› Refer to “Board of Directors” in the “Corporate governance” section of this report for more information about the CCRC

Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders 44

Group Sustainability and Impact

The GSI organization consists of the Chief Sustainability Office and the Social Impact Office, headed by the CSO and the

Head Social Impact, respectively. The CSO is responsible for driving the implementation of the Group-wide sustainability

and impact strategy, net-zero strategy across all in-scope activities, and the ESG data strategy. In addition, the CSO has

responsibility for supporting the business divisions and Group Items in the design of sustainability frameworks,

implementation of sustainability regulations and development of training on sustainability. The CSO also manages

external relationships, industry advocacy and the annual sustainability disclosure.

The Head Social Impact is responsible for driving and implementing the social impact strategy, including Community

Impact, Philanthropy Services and UBS Global Visionaries. Reporting to the Head Social Impact, the regional Heads of

Social Impact and Philanthropy are responsible for extending the reach of and maximizing the impact of our social impact

activities locally, nationally and globally. In addition, they have responsibility for all our programs’ operations and risk

management, client engagement, and employee volunteering.

Progress made in implementing Group-wide sustainability and impact objectives is reported as part of UBS’s annual

sustainability disclosure. UBS is certified against the ISO 14001 standard for its products, services and activities in all

business divisions and locations. To this extent, UBS seeks to continuously improve environmental and sustainability

performance, as well as pollution prevention across UBS. The GSI governance and framework document complements

the Code, and together they govern UBS’s environmental management system, according to ISO 14001.

› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for more

information about our sustainability and impact governance

Our sustainability and impact strategy

To help us maximize our impact, we focus on three key areas to drive the sustainability transition: planet, people and

partnerships.

– Planet: We acknowledge that achieving the orderly transition to a low-carbon economy is highly ambitious.

Nonetheless, we are committed to doing our part, which is why the shift to a lower-carbon future is a priority for UBS

and a key focus of our sustainability strategy.

– People: We believe in a diverse, equitable and inclusive society. We are taking action to get there, within our own

workplace and beyond.

– Partnerships: By working in partnership with other thought leaders and standard setters, our goal is to help change

on a global scale.

› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for more

information about how UBS is advancing sustainability in the financial sector and beyond

Our approach to climate

Our approach to climate outlines three key objectives to support our overarching ambitions.

Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders 45

Our approach to climate

Key objectives

of our approach

to climate

Supporting our clients’

low-carbon transition

Reducing our climate

impact

Managing the risks of climate

change to our business

– Mobilizing capital toward an

orderly transition to a

low-carbon economy.

– Aligning our in-scope

lending and investment

portfolios to the objectives

of the Paris Agreement.

– Supporting the transition of

our ﬁ nancing and investing

clients to low-carbon and

climate-resilient business

models.

– Embedding climate

considerations into our

ﬁ nancing, investment and

capital markets offering.

– Minimizing our own

operational footprint and

utilizing resources in an

efﬁ cient and sustainable way.

– Measuring and managing

our travel footprint, including

reduction of air-travel-related

emissions.

– Engaging our suppliers on

emissions reductions and

managing our supply chain

responsibly.

– Address our ﬁ nanced emissions

by aligning speciﬁ ed sectors to

decarbonization pathways.

– Aim to align, by 2030, 20% of

UBS AG Asset Management’s

total assets under

management with net zero.

– USD 400bn invested assets in

sustainable investments in UBS

AG by 2025.

– Disclosure of facilitated

emissions for selected carbon-

intensive sectors.

– Minimize our scope 1 and 2

emissions through energy

ef ﬁ ciencies and by switching

to more sustainable energy

sources. After which, procure

credible carbon removal credits to

neutralize any residual emissions

down to zero by 2025.³

– Reduction of our own energy

consumption by 15% from 2019

levels by 2025.

– 100% renewable electricity

coverage.

– Offset historical emissions from

own operations back to 2000 by

2025.

– Engage with our GHG key

ven dors, for 100% of them to

declare their emissions and set

net-zero-aligned goals by 2026,

and reduce their scope 1 and 2

emissions in line with net-zero

trajectories by 2035.

– Identifying, measuring, monitor-

ing, managing and reporting

sustainability and climate risks

(including nature-related risks).

– Applying sustainability and

climate risk appetite as codiﬁ ed

in UBS Group’s Sustainability and

Climate Risks Policy.

– Continue integrating sustainability

and climate risk regulatory

requirements into ﬁ nancial risk

management and stress-test

frameworks.

– Ensuring the sustainability and

climate risk framework is embed-

ded into our activities at Group and

legal entity level compliance, the

Credit Suisse integration strategy

and UBS’s target operating model.

– Exposure to climate-sensitive

sectors (transition and

physical).

– Exposure to nature-related

risks.

– Climate-related materiality

assessment.

Key enablers

Training and

culture

Engagement and

partnerships

Governance and

accountabilities

Climate data

and analytics

Current metrics

and targets

Ambition

We will support clients through the world’s transition to a low-carbon economy and embed considerations of

climate change risks and opportunities in our bank for the beneﬁ t of our stakeholders, now and in the future .

This Pre-acquisition UBS aspiration will be reassessed in 2024.

As part of the integration of Credit Suisse, UBS has retired the Pre-acquisition UBS sus-

tainable investing aspiration of USD 400bn in SI invested assets.

3 Scope 2 emissions are market-based emissions. The remaining scope 1 and 2 emissions may

be in excess of the approximately 5–10% residuals required for net zero (per the deﬁ nition of a “net-zero target” by the ESRS E1 Climate Change per delegated act,

adopted on 31 July 2023), which is our ambition for 2050. In 2024, we will be reviewing our 2025 scope 1 and 2 target for achievability for the combined organization

and alignment with latest guidance.

Target applies to UBS Group excluding Credit Suisse.

In 2024, we may review our targets for GHG key vendors for

the combined organization and alignment with the latest guidance. Our GHG key vendors are those vendors that collectively account for more than 50% of

our estimated vendor GHG emissions.

Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders 46

We understand the deep interrelationships that exist between climate and nature. Our approach to climate, including

our ambition to achieve net zero, also forms part of our approach toward managing nature-related risks and

opportunities.

› Refer to the UBS Group Climate and Nature Report 2023, available at

ubs.com/sustainability-reporting

, for a full description of

UBS’s approach to climate and nature

Our approach to sustainable finance

We are committed to supporting our clients’ sustainability ambitions, whether they focus on reducing the carbon

emissions footprint of their business or portfolios or seek to encourage a more equitable and more prosperous society.

› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for more

information about our sustainability and impact strategy and activities

Defining sustainable finance

It is important to set out how we define sustainable finance, as no uniformly accepted definition currently exists in the

industry. We consider sustainable finance to include any financial product or service (including both investing and

financing solutions) that aims to explicitly align with and / or contribute to sustainability-related objectives, while targeting

market-rate risk-adjusted financial returns. Sustainability-related objectives may include, but are not limited to, the SDGs

identified in the United Nations 2030 Agenda for Sustainable Development.

Our approach to sustainable finance is also reflected in the Group sustainable investing framework, which specifically

defines “sustainability focus” and “impact investing” products.

Both categories reflect a defined and explicit sustainability intention of the underlying investment strategy. This

intentionality differentiates them from traditional investment products or those that consider sustainability-related aspects

but do not actively and explicitly pursue any specific sustainability objective, such as ESG integration or exclusions-only

approaches.

Our sustainable finance ambitions

Through our sustainable finance product and service offerings, we target four key objectives in serving our clients.

– The power of choice: we want to give our investing clients the choices they need to meet their specific sustainability

objectives.

– An orderly transition: we aim to support our clients in their transition to a low-carbon economy, for instance by offering

innovative sustainable financing and investment solutions.

– Managing risks and identifying opportunities: we offer research and thematic insights, as well as data and analytics

services. Combined with targeted advice, these are designed to help clients better understand and mitigate risks and

identify new opportunities.

– Making sustainable finance an everyday topic: we want to make sustainability topics tangible throughout our

interactions with clients. To help us do that, we provide support in the form of tools, platforms and education.

Investment approaches

UBS’s deﬁnition of sustainable investments

Traditional investing

– No explicit sustainability objectives

– Manage sustainability and all risks

related to investment performance

– May use ESG tools, but these do

not drive the strategy

Sustainability focus

– Target market-rate investment

returns

– Have explicit sustainable intentions

or objectives that drive the strategy

– Underlying investments may

contribute to positive sustainability

outcomes through products,

services and / or proceeds

Impact investing

– Target market-rate investment

returns

– Have explicit intentions to generate

measurable, veriﬁ able, positive

sustainability outcomes

– Impact attributable to investor

action and / or contribution

Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders 47

Sustainable finance

We continued to support the sustainability ambitions of our corporate and institutional clients via our financing solutions.

We helped facilitate USD 53.7bn of green, social, sustainability and sustainability-linked bond deals, such as structuring

and support of Western Australia Treasury Corporation’s inaugural AUD 1.9bn green bond. We introduced sustainability-

linked loans for multi-national corporations and further supported our clients with ESG advisory services and tools, such

as the renovation and subsidies calculators for clients in Switzerland.

Sustainable investing

Similarly to the overall markets, our sustainable investing (SI) invested assets continued to grow in 2023. We continued

to expand the SI product offering for our clients, including, among others, new net-zero ambition portfolios, sustainable

hedge funds and private-market impact solutions, as well as low-carbon investing modules.

› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for more

information about our approach to sustainable investing and financing

Sustainable investments

For the year ended

% change from

USD bn, except where indicated

31.12.23

31.12.22

31.12.21

31.12.22

Total invested assets (UBS Group)

5,714.1

3,980.9

4,614.5

of which: total invested assets (UBS AG)

4,504.7

3,980.9

4,614.5

Sustainable investments (UBS AG)

Sustainability focus

270.4

246.9

222.7

Impact investing

21.8

19.2

28.1

Total sustainable investments

5,6,7

292.3

266.0

250.8

SI proportion of total invested assets (%)

6.5

6.7

5.4

1 The table above details UBS AG Sustainable Investing Invested Assets (IA) and the evolution thereof. This table does not contain any Credit Suisse products and associated IA classified under the Credit Suisse

Sustainable Investing Framework (SIF). Credit Suisse IA in accordance with the SIF are reported separately as figures are not directly comparable with the UBS figures due to material differences in the underlying

sustainable investment frameworks and definitions being applied. Refer to “Appendix 3 – Entity-specific disclosures for Credit Suisse AG” in the UBS Group Sustainability Report 2023, available under “Annual

reporting” at ubs.com/investors, for more information. 2 We focus our sustainable investment reporting on those investment strategies exhibiting an explicit sustainability intention. 3 Strategies that have explicit

sustainable intentions or objectives that drive the strategy. Underlying investments may contribute to positive sustainability outcomes through products / services / use of proceeds. 4 Strategies that have explicit

intentions of generating measurable, verifiable and positive sustainability outcomes. Impact generated is attributable to investor action and/or contributions. 5 Certain products have been reclassified during 2023

for reasons including, but not limited to, an evolving regulatory environment, periodic monitoring of the product shelf, and developing internal classification standards. Impact of these movements on sustainable

investment invested assets was a net reduction by USD 7bn in UBS AG Global Wealth Management Americas and a net reduction by USD 6bn in UBS AG Asset Management. 6 In line with general market practice,

IA reported for sustainable investments include limited amounts of instruments not classified as sustainable investment, including cash and cash-like instruments that each fund and portfolio hold for liquidity

management purposes, as well as, subject to clear, limiting restrictions, client-directed investments included in sustainable investing mandates managed by UBS Asset Management. 7 The impact investing and total

sustainable investments (UBS AG) disclosures for 31 December 2022 and 31 December 2021 reporting periods have been restated to remove investments that were duplicated in the disclosed values. As a result, the

values disclosed for 31 December 2022 and 31 December 2021 for both categories have each decreased by USD 1.6bn and USD 0.4bn, respectively. 8 Total invested assets (UBS AG) are used to calculate the SI

proportion.

This was also reflected in our clients’ continued interest in SI solutions. Over the course of 2023, UBS AG’s SI invested

assets rose to USD 292.3bn as of 31 December 2023, compared with USD 266bn at the end of 2022, representing a

year-on-year increase of 10%. A combination of factors contributed to this growth, including new product launches, net

new money inflows as well as market performance. SI invested assets accounted for 6.5% of UBS’s total invested assets

at year-end 2023.

› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for more

information about our approach to sustainable investing and financing

In accordance with our ambitions, our sustainable

ﬁ nance product offering is evolving across four areas:

Investing

Sustainable investing

solutions for private and

institutional investors

Financing

Sustainable ﬁ nancing

solutions for real estate

and corporate purposes

Research and advisory

Solutions guiding our

clients on their sustainability

transition journey

Data, platforms and

client Interactions

ESG analytics, scoring, reporting,

tools and client support through

our interactions

Sustainable ﬁ nance ambitions

Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders 48

Managing sustainability and climate risks

Helping to further the Group’s broader sustainability goals with due consideration to our responsibility to manage risk,

we manage sustainability and climate risk under a pragmatic and robust policy. That policy incorporates our risk

management framework and related standards and guidelines and applies to our own operations, our balance sheet,

our clients’ assets and our supply chain.

Our approach to managing sustainability, climate and nature-related risk helps us identify and manage potential adverse

impacts on the climate, on the environment and to human rights, as well as the associated risks affecting our clients and

us. We define sustainability and climate risk as the risk that UBS negatively impacts, or is impacted by, climate change,

natural capital, human rights, and other ESG matters. Sustainability and climate risks may manifest as credit, market,

liquidity and / or non-financial risks for UBS, resulting in potential adverse financial, liability and / or reputational impacts.

These risks extend to the value of investments and may also affect the value of collateral (e.g., real estate). Climate risks

can arise from either changing climate conditions (physical risks) or from efforts to mitigate climate change (transition

risks). Physical and transition risks from a changing climate contribute to a structural change across economies and,

consequently, can affect banks and the financial sector through financial and non-financial impacts.

› Refer to “Sustainability and climate risk” in the “Risk management and control” section of this report

› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for a full description

of our sustainability and climate risk policy framework

Our aspirations and progress

We work with a long-term focus on providing appropriate returns to our stakeholders in a responsible manner. We are

committed to providing transparent aspirations or targets and reporting on the progress made against them. Following

the acquisition of the Credit Suisse Group, our exposure increased accordingly, so we reviewed our aspirations.

Amendments that arose from this review process were considered by the GEB and the CCRC. This table reflects the

overall outcomes of this process with more detailed information provided in the UBS Group Sustainability Report 2023.

› Refer to the UBS Group Sustainability Report 2023, available under “Annual Reporting” at

ubs.com/investors

, for more detailed

information on our aspirations and our progress

Our aspirations and progress

Our priorities

Our aspirations or targets

Our progress in 2023

Planet, people,

partnerships

Sustainable investments.

Increased invested assets in sustainable investments in UBS AG to

USD 292.3bn (compared with USD 266bn in 2022).

Following the acquisition of the Credit Suisse Group, we

refined the UBS Group lending sector decarbonization

targets to reflect the activities of the combined

organization and evolving standards and methodologies.

Reduce emissions intensity associated with UBS in-scope

lending by 2030 from 2021 levels for:

– Swiss residential real estate by 45%;

– Swiss commercial real estate by 48%;

– power generation by 60%;

– iron and steel by 27%; and

– cement by 24%.

Reduce absolute financed emissions associated with UBS

in-scope lending by 2030 from 2021 levels for:

– fossil fuels by 70%.

Continue disclosing in-scope ship finance portfolios

according to the Poseidon Principles decarbonization

trajectories with the aim of aligning therewith.

Calculated progress against pathways for revised targets.

Changes in emissions intensity associated with UBS in-scope lending (end of

2022 vs. 2021 baseline):

– Swiss residential real estate reduced by 6%;

– Swiss commercial real estate increased by 2%;

– power generation reduced by 13%;

– iron and steel reduced by 4%; and

– cement reduced by 1%.

Changes in absolute financed emissions associated with UBS in-scope

lending (end of 2022 vs. 2021 baseline) for:

– fossil fuels reduced by 29%.

In-scope ship finance portfolio remains below the existing International

Maritime Organization (IMO 50) decarbonization trajectory.

Aim, by 2030, to align 20% of UBS AG Asset

Management’s total assets under management (AuM)

with net zero. This pre-acquisition UBS aspiration will be

reassessed in 2024.

Aligned 2.9% of UBS AG Asset Management’s total AuM with net zero.

Planet

Minimize our scope 1 and 2 emissions through energy

efficiencies and switching to more sustainable energy

sources. After which, procuring credible carbon removal

credits to neutralize any residual emissions down to zero

by 2025.

Reduced net GHG footprint for scope 1 and 2 emissions by 21% and energy

consumption by 8% (compared with 2022); continued replacing fossil fuel

heating systems and monitored delivery of contracted carbon removal

credits; achieved 96% renewable electricity coverage in line with RE100

despite challenging market conditions.

Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders 49

Offset historical emissions back to the year 2000 by

sourcing carbon offsets (by year-end 2021) and by

offsetting credit delivery and full retirement in registry (by

year-end 2025). The scope is UBS Group excluding Credit

Suisse.

Continued to follow up on credit delivery and retirement of sourced

portfolio.

Engage with our greenhouse gas (GHG) key vendors, for

100% of them to declare their emissions and set net

zero-aligned goals by 2026, and reduce their scope 1 and

2 emissions in line with net-zero trajectories by 2035.

We invited the vendors that accounted for 67% of our annual vendor spend

to disclose their environmental performance through CDP’s Supply Chain

Program, with 70% of the invited vendors completing their disclosures in the

CDP platform.

65% of GHG key vendors (defined as those vendors that collectively account

for more than 50% of our estimated vendor GHG emissions) have declared

their emissions on CDP and set net-zero-aligned goals.

By 2025, 30% of worldwide roles at Director level and

above held by women.

Increased to 29.5% (2022: 27.8%) of worldwide roles at Director level and

above held by women.

By 2025, 26% of US roles at Director level and above

held by employees from ethnic minority backgrounds.

Increased to 25.1% (2022: 20.5%) of US roles at Director level and above

held by employees from ethnic minority backgrounds.

By 2025, 26% of UK roles at Director level and above

held by employees from ethnic minority backgrounds.

Increased to 24.3% (2022: 23.4%) of UK roles at Director level and above

held by employees from ethnic minority backgrounds.

By 2025, 4% of UK roles at Director level and above held

by black employees.

Stable at 2.1% (2022: 2.2%).

By 2025, 25% of Americas financial advisor / client

advisor roles held by women (UBS Group excluding

Credit Suisse).

Increased to 16.8% (2022: 16.6%).

By 2025, 18.8% of US financial advisor / client advisor

roles held by employees from racial / ethnic minority

backgrounds (UBS Group excluding Credit Suisse).

Decreased to 12.2% (2022: 12.4%).

People

(aspirations)

Raise USD 1bn in donations to our client philanthropy

foundations and funds and reach 26.5 million

beneficiaries by 2025 (cumulative for 2021–2025).

Achieved a UBS Optimus network of foundations donation volume of

USD 328.0m in 2023, totaling USD 763.9m since 2021 (both figures include

UBS matching contributions).

Reached 7 million beneficiaries in 2023 and 18.5 million beneficiaries across

our social impact activities since 2021.

Continue to position UBS as a leading facilitator of

discussion, debate and idea generation.

Delivered a variety of insights, including through interviews with subject-

matter experts, individual research reports and comprehensive white papers,

via the UBS Sustainability and Impact Institute, including key publications The

Rise of the Impact Economy and Rethink, rebuild, reimagine.

Co-organized, with the Institute of International Finance, the second

Wolfsberg Forum for Sustainable Finance.

Partnerships

Drive standards, research and development, and

product development.

Co-led financial-sector-specific working group of the Taskforce on Nature-

related Financial Disclosures (the TNFD) and supported the launch of the

TNFD framework.

Co-chaired the UNEP FI Principles for Responsible Banking Nature working

group that developed initial guidance on nature target setting for financial

institutions.

1 As part of the integration of Credit Suisse, UBS has retired the pre-acquisition UBS sustainable investing aspiration of USD 400bn in SI invested assets. 2 While we continue to take steps to align our business

activities to our targets, it is important to note that progress towards our targets may not be linear and that the realization of our own targets and aspirations is dependent on various factors which are outside of our

direct influence. We will continue to adjust our approach in line with external developments and evolving best practices for the financial sector and climate science. Refer to the Supplement to the UBS Group

Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for more information about parts of the value chain within sectors covered by metrics and targets. Metrics are based on gross

exposure, which includes total loans and advances to customers, fair value loans and guarantees, and irrevocable loan commitments. Exclusions from the scope of analysis primarily include financial services, credit

card and other exposure to private individuals. 3 As part of our ship finance strategy, ships in scope of Poseidon Principles (PP) are assessed on criteria which aim at aligning portfolios to the PP decarbonization

trajectories. The PP are a framework for assessing and disclosing, on an annual basis, the climate alignment of in-scope ship finance portfolios to the ambition of the International Maritime Organization (the IMO),

including its 2023 Revised GHG Strategy for GHG emissions from international shipping to decrease to net zero by or around 2050 (compared with 2008 levels). 4 Refer to the “Environment” section of the UBS

Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for further information. The inherent one-year time lag between the as-of date of our lending exposure and the as-of date

of emissions can be explained by two factors: corporations disclose their emissions in annual reporting only a few months after the end of a financial year; and specialized third-party data providers take up to nine

months to collect disclosed data and make it available to data users. Consequently, the baselines for our decarbonization targets are calculated on year-end 2021 lending exposure and 2020 emissions data. Our 2022

emissions actuals are based on year-end 2022 lending exposure and 2021 emissions data. For asset financing (e.g., real estate, shipping) there is no time lag, and exposure and emissions actuals refer to the same

year. 5 The 20% alignment goal amounted to USD 235bn at the time of pre-acquisition Asset Management’s commitment in 2021. By 2030, the weighted average carbon intensity of funds is to be 50% below the

carbon intensity of the respective 2019 benchmark. 6 Scope 2 emissions are market-based emissions. The remaining scope 1 and 2 emissions may be in excess of the approximately 5–10% residuals required for net

zero (per the definition of a “net-zero target” by the ESRS E1 Climate Change per delegated act, adopted on 31 July 2023), which is our ambition for 2050. In 2024, we will be reviewing our 2025 scope 1 and 2

target for achievability for the combined organization and alignment with latest guidance. 7 In 2024, we may review our targets for GHG key vendors for the combined organization and alignment with latest

guidance. Our GHG key vendors are those vendors that collectively account for more than 50% of our estimated vendor GHG emissions. 8 Figures provided for the UBS Optimus network of foundations are based on

unaudited management accounts and information available as of January 2024. Audited financial statements for UBS Optimus network of foundations entities are produced and available per local market regulatory

guideline.

Cautionary note: We have developed methodologies that we use to set our climate-related targets and identify climate-related risks and which underly the metrics that are disclosed in this report. Standard-setting

organizations and regulators continue to provide new or revised guidance and standards, as well as new or enhanced regulatory requirements for climate disclosures. Our disclosed metrics are based upon data available

to us, including estimates and approximations where actual or specific data is not available. We intend to update our disclosures to comply with new guidance and regulatory requirements as they become applicable

to UBS. Such updates may result in revisions to our disclosed metrics, our methodologies and related disclosures, which may be substantial, as well as changes to the metrics we disclose.

Annual Report 2023 | Our strategy, business model and environment | How we create value for our stakeholders 50

Reporting to our stakeholders on our sustainability strategy and activities

Further information about our sustainability efforts and commitments is provided in the UBS Group Sustainability Report

2023, available under “Annual reporting” at ubs.com/investors. The content of the UBS Group Sustainability Report 2023

has been prepared in accordance with Global Reporting Initiative (GRI) standards, with the German rules implementing

the EU Directive on disclosure of non-financial and diversity information (2014/95/EU) and the Swiss Code of Obligations

(Art. 964a et. seq.). UBS is in the process of implementing a combined and aligned sustainability-and-climate-risk dataset

across UBS Group and including Credit Suisse AG. For this reason, UBS will publish UBS Group and Credit Suisse AG

sustainability and climate risk metrics required pursuant to FINMA Circular 2016/1 “Disclosure – banks”, Annex 5, in a

supplement to the UBS Group Annual Report and the UBS Group Sustainability Report in line with the publication timeline

for the semi-annual Pillar 3 disclosures in the third quarter of 2024. All climate- and nature-related information contained

in the UBS Group Sustainability Report 2023 is also made available through a separate UBS Group Climate and Nature

Report 2023. The latter report follows the structure recommended by the Task Force on Climate-related Financial

Disclosures (the TCFD) and also leverages the framework of the Taskforce on Nature-related Financial Disclosures (the

TNFD). Our reporting on sustainability has been reviewed on a limited assurance basis by Ernst & Young Ltd against the

GRI Standards.

› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for an overview of

non-financial disclosures in accordance with the German rules implementing EU Directive 2014/95 and the Swiss Code of

Obligations (Art. 964a et. Seq.), and for information about the disclosures of UBS AG and UBS Europe SE pursuant to Art. 8 of the

EU Taxonomy Regulation

› Refer to “Sustainability and climate risk” in the “Risk management and control” section of this report, for the UBS AG

sustainability and climate risk metrics disclosures as required by FINMA Circular 2016/1 "Disclosure – banks," Annex 5

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). Our entities are also regulated and supervised by authorities in each country

where we conduct business. Through UBS AG, Credit Suisse AG, UBS Switzerland AG and Credit Suisse (Schweiz) 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.

As a global systemically important bank (a G-SIB), as designated by the Financial Stability Board, and a systemically

relevant bank (an SRB) in Switzerland, we are subject to stricter regulatory requirements and supervision than most other

Swiss banks.

› Refer to the “Our evolution” 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 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), we are subject to capital and total loss-absorbing

capacity (TLAC) requirements that are based on both risk-weighted assets and the leverage ratio denominator, and are

among the most stringent in the world. We are also subject to Swiss SIB liquidity requirements and to minimum long-

term funding requirements.

› 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 coverage ratio” in the “Risk, capital, liquidity and funding, and balance sheet” section of this report for more

information about liquidity coverage 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, UBS AG and Credit Suisse AG are subject to the Bank Holding

Company Act, pursuant to which the Federal Reserve Board has supervisory authority over our US operations.

Annual Report 2023 | Our strategy, business model and environment | Regulation and supervision 51

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). Credit Suisse AG New York

Branch is authorized and supervised by the New York Department of Financial Services. UBS AG and Credit Suisse

International are registered as swap dealers with the Commodity Futures Trading Commission (the CFTC), and UBS AG,

Credit Suisse AG and Credit Suisse International are registered as securities-based swap dealers with the Securities and

Exchange Commission (the SEC).

UBS Americas Holding LLC, the intermediate holding company for our operations in the US outside of the UBS AG branch

network, as required under the Dodd–Frank Act, 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. Credit Suisse Holdings (USA), Inc., the intermediate holding

company for Credit Suisse’s US operations, is subject to the same Federal Reserve Board requirements and is expected to

be integrated into UBS Americas Holding LLC in June 2024.

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 and several other US subsidiaries of UBS, as well as US subsidiaries of Credit

Suisse Holdings (USA), Inc., 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. Our regulated subsidiaries that provide asset management services, including Credit Suisse Asset Management Ltd,

are authorized and regulated by the FCA. UBS Asset Management Life Ltd, 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.

Regulation and supervision in Germany and the EU

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, Italy, Luxembourg, the

Netherlands, Poland, Spain, Sweden and Switzerland, and is subject to conduct supervision by authorities in all those

countries.

Credit Suisse AG has four banking subsidiaries in Europe: in Italy, Credit Suisse (Italy) S.p.A. is supervised by the Bank of

Italy and the Commissione Nazionale per le Società e la Borsa (Consob); in Spain, Credit Suisse Bank (Europe) SA is

supervised by the Bank of Spain, the Comisión Nacional del Mercado de Valores (the CNMV) and the Servicio Ejecutivo

de la Comisión de Prevención del Blanqueo de Capitales e Infracciones Monetarias (Sepblac); in Luxembourg, Credit

Suisse (Luxembourg) S.A. is supervised by the Commission de Surveillance du Secteur Financier (the CSSF), the

Commissariat aux Assurances (the CAA) and the Banque de Luxembourg; and in Germany, Credit Suisse

(Deutschland) AG is supervised by BaFin and the Bundesbank. Credit Suisse (Luxembourg) S.A. operates branches in

France, Ireland and Portugal and is subject to conduct supervision by authorities in all those countries. Credit Suisse Bank

(Europe) S.A. operates branches in France, Italy, the Netherlands and Sweden and is subject to conduct supervision by

authorities in all those countries.

We expect to wind down or consolidate the European banking subsidiaries of Credit Suisse AG 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 AG Singapore Branch and Credit Suisse (Singapore) Limited are supervised by the Monetary

Authority of Singapore.

Annual Report 2023 | Our strategy, business model and environment | Regulation and supervision 52

In the Hong Kong SAR, UBS AG Hong Kong Branch and Credit Suisse AG Hong Kong Branch are 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 and Credit Suisse AG Sydney Branch are 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 and Credit Suisse AG Tokyo Branch are 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

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 its most recent assessment, which

was published in April 2023 and based on year-end 2022 information, FINMA re-confirmed that UBS’s Swiss emergency

plan is effective, that the recovery plan has been approved and that UBS fulfills all resolvability criteria. The same was

confirmed for Credit Suisse. This assessment did not reflect the combined organization and the respective plans will need

to be amended and approved for the new and combined Group. FINMA will review its resolvability assessment of the

combined UBS Group as the integration progresses. A new, interim assessment is expected to be published by FINMA at

the end of the second quarter of 2024.

Annual Report 2023 | Our strategy, business model and environment | Regulation and supervision 53

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 (the PONV), 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.

Credit Suisse AG and its subsidiaries also maintain a separate crisis management framework, including processes,

governance and responsibilities, which will be in place as long as those legal entities exist and are subject to standalone

recovery and resolution requirements. The standards and processes applied have been harmonized with the UBS

framework to the extent possible.

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.

UBS crisis management framework

Incident management Risk and crisis management Recovery and resolution

Governance body

Group Crisis Task Force GEB and BoD

Global task forces Recovery task forces

Execution body

Incident management teams

Support / infrastructure

Business as usual

Business continuity management teams

Level of stress

Recovery Resolution

Scale of response needed

Operational risk

framework triggers

Liquidity

triggers

Recovery

triggers

Point of non-viability

Plans Monitoring and early-

warning indicators

Crisis

management

protocols and

playbooks

Contingency

funding plans

Recovery

plans

Resolution

strategies

Annual Report 2023 | Our strategy, business model and environment | Regulation and supervision 54

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 remaining 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 or Credit Suisse 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 plans demonstrate 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 separate legal entities and by maintaining sufficient capital and liquidity to ensure their continued operation. Until the

merger of Credit Suisse (Schweiz) AG into UBS Switzerland AG, UBS will maintain two separate Swiss emergency plans

to cater for differences in the organizational setup and differences in infrastructure.

The US resolution plans set out the steps that could be taken to resolve the US intermediate holding companies (the US

IHCs) i.e., UBS Americas Holding LLC and Credit Suisse Holdings (USA), Inc., and their subsidiaries if they suffered material

financial distress and the UBS Group was unable or unwilling to provide financial support. As required by US regulations,

our US plans contemplate that the US IHCs will commence US bankruptcy proceedings. Prior to this, the plans envisage

the US IHCs downstreaming financial resources to their respective subsidiaries to facilitate an orderly wind-down or

disposal of businesses. Following the expected integration of Credit Suisse Holdings (USA), Inc. into UBS Americas Holding

LLC in 2024, only the resolution plan of UBS Americas Holding LLC will be maintained.

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. In addition,

several Credit Suisse subsidiaries in Europe will maintain local recovery plans until the Credit Suisse entities are integrated

into the UBS intermediate parent undertaking.

UBS operates a UK banking subsidiary with Credit Suisse International, which is subject to the UK Resolvability Assessment

Framework (the UK RAF). Under the UK RAF, Credit Suisse International is required to assess its recovery planning and

resolvability planning capabilities against the standards defined in the UK RAF on an annual basis and confirm its

compliance to the BoE and PRA.

Other local recovery and resolution plans exist for various Group entities and jurisdictions.

Regulatory trends

In 2023, regulatory policy was strongly impacted by the banking turmoil in March, with financial stability concerns

returning to the forefront, followed by renewed discussions around the effectiveness of too-big-to-fail / resolution

frameworks and subsequent initial lessons drawn being discussed throughout the year. While the reviews by

supranational standard-setters and in Switzerland generally upheld the appropriateness of the international regulatory

and resolution frameworks, certain themes requiring further attention were identified with additional analyses ongoing.

The digitalization of banking and corresponding policy responses continued throughout 2023, with attention paid to

systemic risks, market integrity, investor protection and cross-border aspects related to digital assets. Initial policy efforts

started on decentralized finance. In the meantime, most major central banks increased their engagement related to

central bank digital currencies. New capabilities and wider adoption of artificial intelligence (AI) have resulted in increased

regulatory focus on the topic, particularly regarding sound governance frameworks, safety and fairness. The large-scale

use of both traditional and non-traditional data by AI models has given rise to questions around the adequacy of existing

data legislation and in some jurisdictions will likely result in enhanced protections. Separately, many jurisdictions

continued to make data more available across sectors, with a focus on open finance.

Sustainable finance and climate-related financial risks remained a key focus for policymakers in 2023, where we observed

noteworthy activity in the areas of corporate and product disclosures for climate-related financial risks, specifically relating

to banks’ governance, strategy, and risk management, as well as efforts to standardize and harmonize regulations across

different jurisdictions. Policymakers advanced guidelines related to nature and biodiversity topics by intensifying the focus

on disclosures, risk management, and quantification methodologies. Furthermore, we observed ongoing regulatory policy

related to net-zero financing while transition planning started to become an important focus topic for policymakers. On

the topic of products regulation, regulatory initiatives continued to focus on carbon and carbon markets and addressing

issues related to greenwashing. Lastly, we saw increased regulatory attention paid to solutions related to social impact

investing and blended finance.

Annual Report 2023 | Our strategy, business model and environment | Regulation and supervision 55

The national implementation of the Basel III requirements continued to be an important focus area. The authorities in

Switzerland issued rules to implement the final standards into Swiss law, and US banking regulators launched a public

consultation in 2023. Switzerland has confirmed the effective date for the revised rules as 1 January 2025. Although the

EU is still targeting implementation by January 2025, the UK and the US have delayed the application until July 2025,

with the US also including a three-year transition timeline. Differences in the implementation timelines and in the content

of the provisions remain a challenge for globally active banks.

In addition, regulatory authorities continued to refine existing regulations, including efforts to strengthen the anti-money-

laundering guidelines on beneficial ownership and work on enhancing third-party risk management with operational

resilience remaining a key issue. The focus on retail investor protection sharpened, in particular in asset management. In

the US, retail investor protection features became a component of an ongoing broader equity market reform. In the UK,

reviews of the Senior Managers and Certification Regime focused on determining whether the regime delivers against

its original aim and how it can be improved. Finally, in light of increasing risks, non-bank financial intermediation

remained a topic of concern with national and supranational policymakers.

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 changes to the regulatory environment. We trust that our strengthened

position as a combined organization will allow 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 and the banking turmoil in March 2023

Key developments in Switzerland

Based on the emergency ordinance issued by the Swiss Federal Council in connection with the acquisition of the Credit

Suisse Group on 16 March 2023, as amended on 19 March 2023, (the Emergency Ordinance), UBS Group AG entered

into a loss protection agreement (an LPA) with the Swiss Confederation, with an effective date of 12 June 2023. As part

of this agreement, the Swiss Confederation would have borne up to CHF 9bn of losses, if realized, on a designated

portfolio of Credit Suisse’s non-core assets after the first CHF 5bn of losses, which would have been borne by UBS.

Under the Emergency Ordinance, UBS AG and Credit Suisse AG also had access to additional liquidity assistance loans,

the Emergency Liquidity Assistance Plus (ELA+) loans, provided by the Swiss National Bank (the SNB) of up to CHF 100bn

on a combined basis, with the loans under the facility having preferential rights in bankruptcy proceedings. The Credit

Suisse Group was also allowed to borrow up to an additional CHF 100bn from the SNB backed by a Swiss federal default

guarantee, the Public Liquidity Backstop (the PLB), with the loans having preferential rights in bankruptcy proceedings.

On 11 August 2023, UBS Group AG voluntarily terminated the LPA and the PLB. After reviewing all assets covered by

the LPA since the closing of the Transaction in June 2023 and taking the appropriate fair value adjustments, UBS

concluded that the LPA was no longer required. All loans under the PLB were fully repaid by the Credit Suisse Group as

of the end of May 2023 and Credit Suisse AG fully repaid the outstanding ELA+ loans on 10 August 2023. As of

31 December 2023, Credit Suisse (Schweiz) AG had a total of CHF 38bn outstanding under the Emergency Liquidity

Assistance facility, which is fully collateralized by Swiss mortgages.

In parallel with the measures taken by the Swiss Confederation in March 2023, the Swiss Financial Market Supervisory

Authority (FINMA) also ordered a write-off of CHF 15.8bn principal amount of Credit Suisse Group AG’s additional tier 1

(AT1) instruments.

In May 2023, the Swiss Federal Department of Finance mandated a group of experts on banking stability to assess the

role of banks and the legal and regulatory framework related to the stability of the Swiss financial center. The

corresponding report, published in September 2023, 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.

Annual Report 2023 | Our strategy, business model and environment | Regulatory and legal developments 56

In June 2023, the Swiss Parliament formed a parliamentary inquiry committee that is mandated to investigate the

legitimacy, expediency and effectiveness of the management of the competent authorities and bodies in the context of

the events involving the Credit Suisse Group. The committee will report to the Swiss Parliament on the results of its

investigation and will propose measures to remedy any identified deficiencies. We expect the results to be published in

the fourth quarter of 2024. The conclusions by the inquiry committee may include potentially significant

recommendations, which could result in more stringent regulation.

In December 2023, FINMA published a report on the case of Credit Suisse that analyzed the development of Credit Suisse

in recent years and examined its supervisory work with the bank. In addition, FINMA noted in its report a number of

lessons to be learned, calling for a stronger legal basis, specifically for instruments such as a Senior Managers Regime,

the power to impose fines, and more stringent rules regarding corporate governance. Furthermore, FINMA explained

that it will adapt its supervisory approach in certain areas and will step up its review of whether stabilization measures

are ready to be implemented.

The findings of the group of experts and the lessons drawn by FINMA include recommendations that could result in more

stringent regulation, and will be considered by the Swiss Federal Council in its next report on systemically important

banks, which is to be presented by April 2024.

Key developments in the US

In May 2023, the Federal Reserve Board and the Federal Deposit Insurance Corporation (the FDIC) released reports that

covered the circumstances leading to the closing of certain banking organizations following the events in the banking

market in March 2023. The reports noted shortcomings in the supervisory agencies’ execution of examination programs,

including escalation of supervisory issues and staffing. They also raised concerns related to the regulatory framework,

including the Federal Reserve’s Tailoring Rule and other topics, such as interest rate risk management. UBS expects these

developments to impact the regulatory environment in the US, where UBS has significant operations.

In November 2023, the FDIC approved a final rule to implement a special assessment to recover losses incurred by the

Deposit Insurance Fund in connection with the failures of Silicon Valley Bank and Signature Bank in March 2023. The

assessment is based on the estimated uninsured deposits of each depository institution at the end of 2022. The

assessment will be collected over an eight-quarter period that started in January 2024. In the fourth quarter of 2023,

UBS Bank USA recorded a charge for the full amount of its estimated assessment of USD 60m.

Key developments at the supranational level

In October 2023, the Basel Committee on Banking Supervision (the BCBS) released a report on the causes of the 2023

banking turmoil. The BCBS argues that while the distress of various banks in March 2023 reflected idiosyncratic factors,

recurring themes can be grouped into three broad categories: bank risk-management practices and governance

arrangements; strong and effective supervision; and robust regulatory standards.

Also in October 2023, the Financial Stability Board (the FSB) identified in a review several areas related to the effective

operationalization and implementation of the international resolution framework that merit further attention as part of

future work, but concluded that recent events demonstrate the soundness of the framework.

No concrete changes to the Basel standards or the FSB framework are proposed at this stage, but the follow-up work is

particularly focused on strengthening supervisory effectiveness, liquidity risk, interest rate risk in the banking book and

the effectiveness of the resolution frameworks.

Developments regarding capital and liquidity adequacy and TBTF frameworks

Developments related to liquidity adequacy

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. 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 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.

Annual Report 2023 | Our strategy, business model and environment | Regulatory and legal developments 57

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 systemically important banks.

Furthermore, FINMA communicated in the third quarter of 2023 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.

Developments related to capital adequacy

In July 2023, US banking regulators, including the Federal Reserve Board, the FDIC and the Office of the Comptroller of

the Currency (the OCC), issued a public consultation on a proposal that would implement the final components of the

Basel III capital standards for US banking organizations and foreign-owned intermediate holding companies, such as UBS

Americas Holding LLC and Credit Suisse Holdings (USA), Inc. Among other matters, the proposed rules would end the

use of the internal model approach for credit risk by the largest banking organizations and would introduce instead a

new standardized approach. In addition, the proposed rules for operational risks would replace the advanced

measurement approach with a standardized measure. The proposal calls for a three-year transition period, starting on

1 July 2025, and full implementation by 1 July 2028. We currently estimate that the proposed rule changes would result

in increased capital requirements for our US-based intermediate holding companies if implemented as proposed.

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 will lead to a further net increase in risk-weighted assets of approximately USD 25bn,

of which USD 10bn is in Non-core and Legacy. This estimate is based on static balances, before taking into account

mitigating actions, as well as not reflecting the impact of the output floor, which is phased in over time.

Developments related to TBTF frameworks

In August 2023, the Federal Reserve Board and the FDIC issued joint proposals on long-term debt requirements and

resolution planning guidance for large banks. The long-term debt proposal would require certain large bank-holding

companies, intermediate holding companies and insured depositories with USD 100bn or more in total assets to maintain

a minimum amount of long-term debt, intended to enhance the resilience and resolvability of such organizations. Large

banking organizations would also be prohibited from certain activities that could complicate the resolution or would lead

to contagion risks. If the proposals are implemented, UBS Bank USA would be subject to the long-term debt requirement,

which would be incremental to the requirements already imposed upon its parent organization, UBS Americas Holding

LLC. The resolution planning guidance proposed by US banking regulators would cover our US-based entities and calls

for certain enhancements in the requirements of the submitted resolution plans.

In November 2023, 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.

In February 2024, the FSB published its Peer Review of Switzerland, which examines Switzerland’s implementation of the

FSB’s 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.

Annual Report 2023 | Our strategy, business model and environment | Regulatory and legal developments 58

Developments regarding climate-related financial risks and sustainable finance

In 2023, the Swiss National Council discussed the revision of the Act on the Reduction of CO

Emissions (the CO

Act),

which contains measures to halve greenhouse gas emissions by 2030 compared with 1990. The proposal is based on

supplementing the existing CO

Act with additional incentives to reduce emissions in different industry sectors of the

economy. For the financial sector, it contains a provision mandating FINMA and the SNB to regularly assess climate-

related financial risks in the financial sector and to report the results, as well as potential measures, to the Swiss

government. FINMA is currently collecting the data from the financial sector in order to be able to carry out the

assessment in 2024. It is expected that the proposal will be formally adopted by the Swiss Parliament in spring 2024.

In June 2023, the Swiss electorate voted in favor of the new Climate and Innovation Act (the CI Act). The CI Act defines

a net-zero-by-2050 target for Switzerland, including interim targets for selected sectors of the Swiss economy covering

scope 1 and 2 emissions. In addition, each Switzerland-domiciled company is required to set a net-zero target by

1 January 2025. The CI Act also contains provisions for public funding to replace aged heating systems in buildings and

for application of innovative technologies within companies. Article 9 of the CI Act requires the financial sector to make

an effective contribution to the transition to net zero and sets the general goal of the alignment of financial resources to

climate-friendly outcomes. Specific measures to achieve the targets will be proposed in the CO

Act.

In December 2023, the Swiss Parliament added a provision on greenwashing to the Unfair Competition Act under which

companies are required to make truthful and clear statements in relation to their climate impact that can be substantiated

by objective and verifiable bases.

Also in December 2023, the Swiss Federal Council announced that it intends to further improve climate transparency for

financial products and to further develop the voluntary Swiss Climate Scores (the SCS), which were introduced in 2022.

The SCS provide investors with information about the extent to which their financial investments are compatible with

climate goals. The updated SCS, which will apply from 1 January 2025, will continue to prescribe disclosures by financial

institutions on climate alignment and climate change mitigation characteristics of financial products and will newly

prescribe disclosure of exposures to renewable energy. UBS has committed to the voluntary use of the SCS.

In October 2023, the Federal Reserve Board, the OCC and the FDIC approved guidance on the principles for climate-

related financial risk management. The final principles describe how climate-related risks can be addressed in the

management of traditional financial risks. The principles cover six areas: governance; policies, procedures and limits;

strategic planning; risk management; data, risk measurement and reporting; and scenario analysis. The guidance applies

to our US-based operations. UBS is evaluating the guidance to ensure the principles are addressed by the relevant Group

practices.

In June 2023, the International Sustainability Standards Board (the ISSB) finalized its first set of requirements for corporate

disclosures regarding sustainability matters: IFRS S1 and IFRS S2. IFRS S1 addresses the disclosure of a company’s

sustainability-related risks and opportunities. IFRS S2 addresses the disclosures for the governance processes, controls

and procedures an entity uses to monitor, manage and oversee climate-related risks and opportunities and the entity’s

strategy for managing risks and opportunities. The standards incorporate the recommendations of the Task Force on

Climate-related Financial Disclosures (the TCFD). These ISSB standards have been available for use from January 2024

onward. UBS’s implementation of the standards will depend, among other factors, on whether the standards are adopted

in jurisdictions in which UBS files financial reports.

In October 2023, the EU finalized the first set of cross-sectoral European Sustainability Reporting Standards (the ESRS)

under the Corporate Sustainability Reporting Directive. In addition to general disclosures and requirements, the ESRS set

out disclosure requirements, which are subject to a materiality assessment that is contingent on external assurance,

effectively allowing companies to focus on reporting sustainability factors that are material to their businesses. Companies

that were previously subject to the Non-Financial Reporting Directive and large non-EU listed companies with more than

500 employees, including UBS, are required to begin reporting under the ESRS for the 2024 financial year, with the first

reports to be published in 2025. The European Commission will develop and adopt additional sector-specific reporting

standards by June 2026.

In March 2024, the US Securities and Exchange Commission (the SEC) released the final rules regarding climate-related

disclosures for investors. The rules will require certain firms, including UBS, to disclose qualitative and quantitative

information on the firm’s exposures to climate-related risks and risk management practices. The rules are anticipated to

be effective for filings for the 2025 financial year.

Annual Report 2023 | Our strategy, business model and environment | Regulatory and legal developments 59

Other developments in Switzerland

In June 2023, the Swiss electorate voted in favor of the introduction of a minimum corporate tax rate of 15% applicable

to companies with a consolidated turnover of more than EUR 750m, as stipulated by the Global Anti-Base Erosion Model

Rules (Pillar Two) of the Organisation for Economic Co-operation and Development. In December 2023, the Swiss Federal

Council decided on a partial adoption in Switzerland, by way of an ordinance, and, as a result, a domestic minimum top-

up tax regime became effective from 1 January 2024, ensuring a Swiss local minimal tax burden of at least 15%.

Switzerland will not implement any top-up tax regime in 2024 with respect to non-Swiss taxation below 15%. The Swiss

Federal Council will further observe international developments and decide at a later stage if and when any top-up tax

with respect to non-Swiss taxation below 15% will be introduced in Switzerland. UBS does not expect the implementation

of global minimum taxation in Switzerland to materially impact its effective tax rate.

In August 2023, the Swiss Federal Council launched a consultation on a bill to strengthen the Swiss anti-money-

laundering framework, with the aim of reinforcing the integrity and competitiveness of Switzerland as a financial and

business location. The measures aim to comply with the international standards of the Financial Action Task Force (the

FATF). Among other matters, key elements of the proposal include the introduction of a non-public register managed by

the Federal Department of Justice and Police containing information about the beneficial owners of companies and other

legal entities in Switzerland, as well as due diligence requirements for activities with an increased risk of money

laundering. In the context of the Swiss anti-money-laundering framework, the FATF also acknowledged in October 2023

the progress made by Switzerland, especially with the revision of the Anti-Money Laundering Act adopted in March 2021.

In November 2023, the Swiss Federal Council adopted an amendment to the Financial Market Infrastructure Act that

enacts a measure aimed at protecting the Swiss stock exchange infrastructure into Swiss law with effect from 1 January

2024. This ruling followed the EU’s decision to withdraw equivalence for the Swiss stock exchange regulation in 2019.

The protective measure enables EU firms to trade Swiss shares on the Swiss trading venues, even without EU equivalence.

In the event of equivalence recognition by the EU, the measure may be deactivated at any time.

In the first quarter of 2023, the Swiss Federal Council implemented the remaining measures of the 9th and 10th sanctions

packages imposed by the EU against Russia in December 2022 and February 2023, respectively. The measures include

additional export restrictions and more detailed reporting obligations with regard to frozen assets.

In August 2023, the Swiss Federal Council adopted the EU’s 11th package of sanctions against Russia, which was partially

adopted by Switzerland in June 2023 by expanding the sanction lists. As part of the 11th sanctions package, the EU has

created a specific legal basis for an instrument to prevent the evasion of sanctions. The Swiss Federal Council emphasized

its determination to take effective action against the evasion of sanctions and will examine the implementation of this

instrument in the event of its actual application by the EU. In addition, Switzerland joined the EU in imposing sanctions

at Moldova’s request and against Belarus, in view of its continued involvement in Russia’s ongoing military aggression

against Ukraine.

In September 2023, the Swiss Federal Council issued sanctions measures in connection with the delivery of Iranian drones

to Russia. The sale, supply, export and transit of components used in the construction and production of drones is now

prohibited. In January 2024, the Swiss Federal Council adopted the measures of the EU’s 12th sanctions package relevant

to Switzerland, following the expansion of the sanction lists by Switzerland in December 2023. The measures include

import bans on certain goods that generate significant revenue for Russia, as well as certain bans in the financial and

services sectors. In February 2024, the Federal Department of Economic Affairs, Education and Research adopted

measures of the EU’s 13th sanctions package, which target, among others, individuals, entities and organizations that

are operating in Russia’s military-industrial complex and that are involved in supplying defense equipment from the

Democratic People’s Republic of Korea, as well as officials from the occupied territories of Ukraine.

UBS’s sanctions programs are designed to comply with sanctions across multiple jurisdictions, including those imposed

by the United Nations, Switzerland, the EU, the UK and the US.

The revised Swiss Federal Data Protection Act and the corresponding Data Protection Ordinance entered into force on

1 September 2023. The revised law represents a fundamental reform that strengthens the rights of consumers regarding

their data by enhancing the transparency and accountability rules for companies processing data, among other measures.

In addition, it seeks to align Swiss data protection law with the EU General Data Protection Regulation, in order to ensure

continued cross-border transmission of data with EU Member States.

Other developments in the US

In October 2023, the Federal Reserve Board, the FDIC and the OCC adopted revisions to their regulations implementing

the Community Reinvestment Act (the CRA). The CRA encourages banks to meet the credit needs of the communities in

which they do business, with a focus on low- and moderate-income communities. The final rule will implement separate

evaluations for retail lending, retail services and products, community development financing, and community

development services for banks with over USD 2bn in total assets. For large banks with over USD 10bn in total assets,

the evaluation of retail services and products will cover digital delivery systems. The final rule also updates requirements

on the reporting of exposures. The rule has an implementation date of 1 April 2024, with additional phase-in periods for

general provisions and reporting that extend out to April 2027. UBS Bank USA expects a modest level of increased

monitoring and reporting requirements.

Annual Report 2023 | Our strategy, business model and environment | Regulatory and legal developments 60

In October 2022, the SEC adopted rules requiring US national securities exchanges, including the New York Stock

Exchange (the NYSE) and Nasdaq, to adopt listing standards that require issuers to adopt and enforce a policy to recover

from executive officers incentive compensation received based on attainment of a financial reporting measure in the

event that the issuer is required to prepare an accounting restatement of financial statements due to material non-

compliance with financial reporting requirements. The SEC approved the listing standards promulgated by the NYSE and

Nasdaq in June 2023 and the clawback policy requirement came into effect as of 1 December 2023. Under the listing

standards, an issuer must recover the amount of incentive-based compensation that would not have been received if it

had been determined based on the restated financial information. UBS Group AG, UBS AG and Credit Suisse AG each

have securities listed on US national securities exchanges and have adopted a policy to comply with the listing standards.

In September 2023, the new rules from the SEC to enhance and standardize disclosure requirements related to

cybersecurity incidents and cybersecurity risk management, strategy and governance became effective. Among other

changes, the rules require foreign private issuers, including UBS Group AG, UBS AG and Credit Suisse AG, to annually

report material information regarding their cybersecurity risk management, strategy and governance on Form 20-F. The

Form 20-F disclosures are applicable with annual reports for fiscal years ending on or after 15 December 2023.

Other developments in Europe

US securities markets will transition to one business day after the trade date (T+1) settlement of most transactions in May

2024. In October 2023, the European Securities and Markets Authority (ESMA) launched a call for evidence on shortening

the standard settlement cycle for securities transactions from two business days after the trade date (T+2) to T+1. ESMA

aims to perform an assessment of the costs and benefits linked to the potential reduction of the securities settlement

cycle in the EU and intends to submit the results of its assessment to the European Commission and publish a final report

in the fourth quarter of 2024, at the latest. The UK Treasury has also established an Accelerated Settlement Taskforce to

consider whether the UK should follow the US and transition to a T+1 settlement. The UK task force is expected to

publish its findings in 2024, with further work expected during 2024. UBS is implementing and testing required

enhancements based on the US rules and will prepare for further implementation according to the evolving rules and

market practice in the UK, the EU and Switzerland.

In May 2023, the European Commission presented draft legislative proposals aimed at empowering retail investors to

make investment decisions that are aligned with their needs and preferences and ensuring that they are treated fairly

and duly protected. The proposals also aim to encourage greater participation in EU capital markets and to enable a

greater volume of funds to flow more easily into EU capital markets. The package revises EU capital markets rules, which,

once agreed and in force, could have significant implications and require significant implementation efforts by UBS across

business divisions.

In June 2023, legislators in the EU reached a provisional agreement on amendments to the Capital Requirements

Regulation and the Capital Requirements Directive. The provisional agreement includes, alongside measures to implement

the remaining elements of the Basel III standard, a framework that would require non-EU firms to establish a physical

presence within the EU when providing certain banking services to EU-domiciled clients and counterparties (including

deposit-taking and commercial lending), unless they are subject to an exemption. The changes will affect the cross-border

provision of certain banking services and will require UBS to adapt its approaches to providing such services to clients in

the EU. The requirement is expected to become effective in late 2026, with grandfathering provisions for contracts already

in existence at the date of introduction.

In December 2023, the Swiss Confederation and the UK signed a mutual recognition agreement (an MRA) for financial

services to facilitate cross-border financial activities. The MRA is supplemented by measures to enhance supervisory

cooperation and coordination. The MRA envisages a memorandum of understanding between FINMA and the Bank of

England on resolution arrangements, and it is expected to enable Swiss banks to provide cross-border investment services

to high net worth UK-domiciled clients and to broadly allow UK and Swiss over-the-counter derivatives counterparties to

choose whether to rely on Swiss or UK risk mitigation rules (except for physically settled foreign exchange swaps and

forwards). The agreement is expected to apply from 2026, depending on the completion of parliamentary approval in

both countries.

Annual Report 2023 | Our strategy, business model and environment | Risk factors 61

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 to heightened litigation risk and regulatory scrutiny and

entails significant additional costs, liabilities and business integration risks

UBS acquired Credit Suisse Group AG under exceptional circumstances of volatile financial markets 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 direct and indirect subsidiaries of

Credit Suisse Group AG. 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, as

described in further detail below.

We have incurred substantial transaction fees and costs in connection with the transaction and will continue to incur

substantial integration and restructuring costs. 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 integrate 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 successfully integrate 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;

– reverse outflows of deposits and client invested assets at Credit Suisse, particularly in its Wealth Management division

and in Switzerland, and to attract additional deposits and other client assets to the combined firm;

– achieve cost reductions at the levels and in the time frame we plan;

– enhance, integrate and, where necessary, remediate risk management and financial control and other systems and

frameworks, including to remediate the material weaknesses in Credit Suisse’s internal controls over financial

reporting;

– simplify the legal structure of the combined firm in an expedited manner, through the planned mergers of UBS AG

and Credit Suisse AG and of UBS Switzerland AG and Credit Suisse (Schweiz) AG, as well as the creation of a single

intermediate holding company (an IHC) for the combined firm in the US, other entity mergers and consolidations and

asset dispositions, including obtaining regulatory approvals and licenses required to implement such changes;

– retain staff and to 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; and

– resolve outstanding litigation, regulatory and similar matters, including matters relating to Credit Suisse, on terms that

are not significantly adverse to the UBS Group, as well as to successfully remediate outstanding regulatory and

supervisory matters and meet other regulatory commitments.

Further investigation and planning for integration is taking place, and risks that we do not currently consider to be

material, or of which we are not currently aware, could also adversely affect us.

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 past financial performance of each of UBS Group AG and Credit Suisse may not be indicative of their

future financial performance. In addition, the financial effects of management decisions and transactions will likely differ

between UBS Group and Credit Suisse as a result of the application of the acquisition method of accounting under IFRS

by UBS Group, including valuation adjustments recorded by UBS Group, as well as other differences between US GAAP

accounting principles applied by Credit Suisse and IFRS Accounting Standards applied by UBS Group. 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 2023 | Our strategy, business model and environment | Risk factors 62

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.

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, such as the substantial loss we incurred from the

unauthorized trading incident announced in September 2011. 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 significant 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’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.

Annual Report 2023 | Our strategy, business model and environment | Risk factors 63

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 systems or data or those of a service provider 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.

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, US 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 disruption in the infrastructure that supports our businesses and the communities in which we operate. This may

include 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. In the recent past, the Credit Suisse Group has suffered very significant losses from the default of the US prime

brokerage client, the losses in supply chain finance funds (SCFF) 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.

Annual Report 2023 | Our strategy, business model and environment | Risk factors 64

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 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.

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 Group Executive Board (GEB), as well as certain other employees. UBS will also be required to

introduce and enforce provisions requiring UBS to recover from GEB members and certain other executives a portion of

performance-based incentive compensation in the event that the UBS Group 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 Board of Directors (the BoD) and the GEB each year. If our shareholders fail to approve the

compensation for the GEB or the BoD, this could have an adverse effect on our ability to retain experienced directors and

our senior management.

Annual Report 2023 | Our strategy, business model and environment | Risk factors 65

As UBS Group AG is a holding company, its operating results, financial condition and ability to pay dividends and other

distributions and / or to pay its obligations in the future depend on funding, dividends and other distributions received

directly or indirectly from its subsidiaries, which may be subject to restrictions

UBS Group AG’s ability to pay dividends and other distributions and to pay its obligations in the future will depend on

the level of funding, dividends and other distributions, if any, received from UBS AG and other subsidiaries. The ability of

such subsidiaries to make loans or distributions, directly or indirectly, to UBS Group 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 Group AG’s direct and indirect subsidiaries, including UBS AG, Credit Suisse

AG, UBS Switzerland AG, Credit Suisse (Schweiz) 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 Group 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.

Our capital instruments may contractually prevent us from proposing the distribution of dividends to shareholders, other

than in the form of shares, and from engaging in repurchases of shares, if we do not pay interest on these instruments.

Furthermore, UBS Group AG may guarantee some of the payment obligations of certain of the Group’s subsidiaries from

time to time. These guarantees may require UBS Group AG to provide substantial funds or assets to subsidiaries or their

creditors or counterparties at a time when UBS Group AG is in need of liquidity to fund its own obligations.

The credit ratings of UBS Group AG or its subsidiaries used for funding purposes could be lower than the ratings of the

Group’s operating subsidiaries, which may adversely affect the market value of the securities and other obligations of

UBS Group AG or those subsidiaries on a standalone basis.

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.

Annual Report 2023 | Our strategy, business model and environment | Risk factors 66

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: Terrorist activity and escalating armed conflict in the Middle East, as well as the continuing Russia–

Ukraine war, 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.

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.

Annual Report 2023 | Our strategy, business model and environment | Risk factors 67

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 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), 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’s net interest income. However, as returns on alternatives to deposits increase with rising

interest rates, such as returns on money market funds, UBS 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 to obtain

alternative funding, which would likely be more costly than customer deposits.

Our shareholders’ equity and capital are also affected by changes in interest rates.

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 our Group 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.

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, as noted above, 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 such as the ongoing SCFF matter. 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 by the court of first instance in

France. This award was reduced to an aggregate of EUR 1.8bn 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. Failure to obtain such

waivers, or any limitation, suspension or termination of licenses, authorizations or participations, 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 the LIBOR-related, foreign exchange and precious metals regulatory resolutions. We have also

undertaken extensive efforts to implement new regulatory requirements and meet heightened expectations.

Annual Report 2023 | Our strategy, business model and environment | Risk factors 68

Credit Suisse and UBS have become the target of lawsuits, and may become the target of further litigation, in connection

with the merger transaction and / or the regulatory and other actions taken in connection with the merger transaction,

all of which could result in substantial costs. Since the close of the acquisition, various litigation claims have been lodged

against UBS under Swiss merger law alleging that Credit Suisse Group AG shareholders received disadvantaged treatment

in the acquisition. In addition, numerous cases have been lodged against the Swiss Financial Market Supervisory Authority

(FINMA) in respect of the write-down of the Credit Suisse Group’s additional tier 1 (AT1) bonds ordered by FINMA. UBS

Group AG, as the successor to Credit Suisse Group AG, is participating in proceedings as an aggrieved party. The

cumulative effects of the litigations to which UBS has succeeded and the claims related to the acquisition and the

circumstances surrounding it, may have material adverse consequences for the combined Group.

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.

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 our acquisition of Credit Suisse 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. In addition, 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. This could put Swiss banks, such as UBS, at a disadvantage

when competing with peer financial institutions subject to more lenient regulation or 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 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 are working on lessons learned from the Credit Suisse and the US

regional bank failures, which might result in additional requirements regarding resolution planning and early intervention

tools for authorities.

Capital and prudential standards: As an internationally active Swiss systemically relevant bank (an SRB), 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.

Annual Report 2023 | Our strategy, business model and environment | Risk factors 69

We expect our risk-weighted assets (RWA) to further increase as the effective date for additional capital standards

promulgated by the Basel Committee on Banking Supervision (the BCBS) draws nearer. 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 SRBs, 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, and such increase may

be substantial.

Increases in capital and liquidity standards could significantly curtail our ability to pursue strategic opportunities or to

return capital to shareholders.

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 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 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.

If we experience financial difficulties, FINMA has the power to open restructuring or liquidation proceedings or impose

protective measures in relation to UBS Group AG, UBS AG or UBS Switzerland AG, and such proceedings or measures

may have a material adverse effect on our shareholders and 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, Credit Suisse AG, UBS Switzerland AG and Credit

Suisse (Schweiz) 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 Group AG, UBS AG, UBS Switzerland AG, Credit Suisse AG or Credit Suisse (Schweiz) 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 2023 | Our strategy, business model and environment | Risk factors 70

If restructuring proceedings are opened with respect to UBS Group AG, UBS AG, UBS Switzerland AG, Credit Suisse AG

or Credit Suisse (Schweiz) 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 / or (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. Shareholders and 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 the equity and 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 have set ambitious goals for ESG matters. These goals include our ambitions for environmental sustainability in our

operations, including carbon emissions, in the business we do with clients and in products that we offer. They also include

goals or aspirations for diversity in our workforce and supply chain, and support for the United Nations Sustainable

Development Goals. 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

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 control 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 Credit Suisse’s internal controls that could result in a material misstatement to Credit Suisse’s reported financial results,

which are consolidated with UBS Group AG’s results.

Annual Report 2023 | Our strategy, business model and environment | Risk factors 71

The material weaknesses that were identified relate to the failure to design and maintain an effective risk assessment

process to identify and analyze the risk of material misstatements in our 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.

Credit Suisse subsequently started a remediation program to address the identified material weaknesses and has

implemented additional controls and procedures Based on the work completed to date, Credit Suisse management has

assessed that the changes to internal control made to address the material weakness relating to the classification and

presentation of the consolidated statement of cash flows are effective in design, but that additional time is required to

conclude that these controls and processes are operating effectively on a sustainable basis. The remaining material

weaknesses at Credit Suisse relate to the risk and severity assessment of internal controls. Credit Suisse has implemented

an enhanced severity assessment framework and additional management oversight of severity assessments. UBS has

determined to remediate the internal control risk identification weakness by integrating Credit Suisse into the UBS internal

control risk assessment and evaluation framework in 2024. The operating effectiveness of the of both the risk and severity

assessment processes will be assessed based on an evaluation of the 2024 risk assessment and control testing process.

In light of the above, Credit Suisse management has concluded that these material weaknesses were not fully remediated

at 31 December 2023.

In addition, since the acquisition, UBS has commenced a review of the processes and systems giving rise to the material

weaknesses and the remediation program undertaken. This review is ongoing, and UBS and Credit Suisse expect to adopt

and implement further controls and procedures following the completion of the review. In the course of this review, UBS

and Credit Suisse may become aware of facts that cause UBS to broaden the scope of the review.

UBS Group AG management and UBS AG management have assessed that, as of 31 December 2023, UBS’s internal

control over financial reporting was effective. Under guidance published by the SEC, companies are permitted to exclude

the processes and controls certain acquired businesses from their assessment of internal control over financial reporting

during the year of acquisition. Accordingly, UBS Group AG has excluded Credit Suisse entities, from UBS Group AG and

UBS AG management’s assessments of internal control over financial reporting as of 31 December 2023.

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 2023 | Our strategy, business model and environment | Risk factors 72

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. These risks could reduce the

amount of capital available for return to shareholders and hinder our ability to achieve our capital returns target of a

progressive cash dividend coupled with a share repurchase program.

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’ equity in regulatory

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 increase 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 remeasures DTAs could affect UBS’s effective tax

rate, particularly in the year in which the change is made.

Annual Report 2023 | Our strategy, business model and environment | Risk factors 73

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 acquisition of the Credit Suisse Group

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. As a result of the acquisition of the Credit Suisse Group, tax acquisition

costs of participations held by Credit Suisse Group AG and its subsidiaries have been transferred to the UBS Group. 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’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’s holding company 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 Group AG to “A” from “A+” and 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 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 2023 | Financial and operating performance | Accounting and financial reporting 74

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 the Group, 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):

– provisional amounts of identifiable assets acquired and liabilities assumed in connection with the acquisition of the

Credit Suisse Group (refer to “Note 2 Accounting for the acquisition of Credit Suisse Group”);

– 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 27 Post-employment benefit plans”);

– goodwill (refer to Note 13 Goodwill and intangible assets”); and

– consolidation of structured entities (refer to “Note 29 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

Adjustment made within the IFRS 3 measurement period after publication of the fourth quarter 2023 report

The acquisition of the Credit Suisse Group in the second quarter of 2023 resulted in provisional negative goodwill of

USD 28.9bn. Following the publication of the unaudited fourth quarter 2023 report on 6 February 2024, UBS has refined

its acquisition-date fair value estimates in accordance with the 12-month measurement period requirements provided by

IFRS 3, Business combinations. This has resulted in an adjustment of USD 1.2bn, decreasing the negative goodwill to

USD 27.7bn. As a result, 2023 operating profit before tax and 2023 net profit attributable to shareholders decreased by

USD 1.2bn, basic earnings per share decreased by USD 0.38 to USD 8.83 and diluted earnings per share decreased by

USD 0.36 to USD 8.45. In addition, the CET1 capital ratio decreased to 14.4% from 14.5%.

› Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of

this report for more information

Non-adjusting post balance sheet event

In March 2024, we have entered into agreements with entities and funds managed by affiliates of Apollo Global

Management (collectively, Apollo) and Atlas SP Partners (Atlas) to conclude the investment management agreement

under which Atlas has managed Credit Suisse’s retained portfolio of assets of its former securitized products group

(SPG). Following this agreement, the assets previously managed by Atlas will be managed in Non-core and Legacy. The

parties have also agreed to conclude the transition services agreement under which Credit Suisse has provided services

to Atlas. In addition, Credit Suisse AG has entered into an agreement to transfer to Apollo approximately USD 8bn of

senior secured asset-based financing. As part of the loan transfer, Credit Suisse AG will extend a one-year USD 750m

swingline facility to the borrowers under the transferred financing facilities. In UBS Group, we expect to recognize a net

gain in the first quarter of 2024 of around USD 0.3bn and Credit Suisse AG is expected to recognize a net loss of around

USD 0.9bn from the conclusion of the investment management agreement and assignment of the loan facilities. The

differences reflect adjustments UBS Group made under IFRS as part of the purchase price allocation at the closing of the

acquisition of Credit Suisse Group, as well as provisions in the second and third quarter of 2023 that are not recognized

under Credit Suisse AG’s US GAAP accounting policies.

Annual Report 2023 | Financial and operating performance | Group performance 75

Group performance

Income statement

For the year ended

% change from

USD m

31.12.23

31.12.22

31.12.21

31.12.22

Net interest income

7,297

6,621

6,705

Other net income from financial instruments measured at fair value through profit or loss

11,583

7,517

5,850

Net fee and commission income

21,570

18,966

22,387

Other income

384

1,459

452

(74)

Total revenues

40,834

34,563

35,393

Negative goodwill

27,748

Credit loss expense / (release)

1,037

(148)

Personnel expenses

24,899

17,680

18,387

General and administrative expenses

10,156

5,189

5,553

Depreciation, amortization and impairment of non-financial assets

3,750

2,061

2,118

Operating expenses

38,806

24,930

26,058

Operating profit / (loss) before tax

28,739

9,604

9,484

199

Tax expense / (benefit)

873

1,942

1,998

(55)

Net profit / (loss)

27,866

7,661

7,486

264

Net profit / (loss) attributable to non-controlling interests

(49)

Net profit / (loss) attributable to shareholders

27,849

7,630

7,457

265

Comprehensive income

Total comprehensive income

28,857

3,167

5,119

811

Total comprehensive income attributable to non-controlling interests

Total comprehensive income attributable to shareholders

28,836

3,149

5,106

816

Annual Report 2023 | Financial and operating performance | Group performance 76

Selected financial information of our business divisions and Group Items

For the year ended 31.12.23

USD m

Global Wealth

Management

Personal &

Corporate

Banking

Asset

Management

Investment

Bank

Non-core and

Legacy

Group Items

Negative

goodwill

Total

Total revenues as reported

21,190

8,436

2,639

8,661

741

(833)

40,834

of which: accretion of PPA adjustments on financial

instruments and other effects

719

1,013

583

(35)

2,280

of which: losses related to investment in SIX Group

(190)

(317)

(508)

Total revenues (underlying)

20,661

7,741

2,639

8,078

741

(798)

39,062

Negative goodwill

27,748

Credit loss expense / (release)

147

501

190

193

1,037

Operating expenses as reported

17,454

4,787

2,321

8,515

5,290

440

38,806

of which: integration-related expenses

988

383

205

692

1,772

438

4,478

of which: acquisition-related costs

202

of which: amortization from newly recognized intangibles

resulting from the acquisition of the Credit Suisse Group

Operating expenses (underlying)

16,466

4,338

2,116

7,823

3,518

(200)

34,061

Operating profit / (loss) before tax as reported

3,589

3,148

318

(44)

(4,741)

(1,279)

27,748

28,739

Operating profit / (loss) before tax (underlying)

4,048

2,902

522

(2,969)

(603)

3,963

For the year ended 31.12.22

USD m

Global Wealth

Management

Personal &

Corporate

Banking

Asset

Management

Investment

Bank

Non-core and

Legacy

Group Items

Total

Total revenues as reported

18,967

4,302

2,961

8,717

237

(622)

34,563

of which: net gain from disposals

848

of which: gains from sales of subsidiary and business

219

of which: losses in the first quarter of 2022 from

transactions with Russian counterparties

(93)

of which: litigation settlement

of which: gain from sales of real estate

Total revenues (underlying)

18,748

4,302

2,114

8,810

175

(690)

33,459

Credit loss expense / (release)

(12)

Operating expenses as reported

13,989

2,452

1,564

6,832

104

(12)

24,930

Operating profit / (loss) before tax as reported

4,977

1,812

1,397

1,897

131

(611)

9,604

Operating profit / (loss) before tax (underlying)

4,758

1,812

550

1,990

(679)

8,500

1 During 2023, Non-core and Legacy became a separate reportable segment and Group Functions has been renamed Group Items. Prior periods have been restated to reflect these changes.

Integration-related expenses by business division and Group Items

For the year ended

USD m

31.12.23

Global Wealth Management

988

Personal & Corporate Banking

383

Asset Management

205

Investment Bank

692

Non-core and Legacy

1,772

Group Items

438

Total net integration-related expenses

4,478

of which: personnel expenses

2,192

of which: general and administrative expenses

1,436

of which: depreciation, amortization and impairment of non-financial assets

850

1 During 2023, Non-core and Legacy (previously reported within Group Functions) became a separate reportable segment and Group Functions has been renamed Group Items. Prior periods have been restated to

reflect these changes.

Annual Report 2023 | Financial and operating performance | Group performance 77

2023 compared with 2022

The acquisition of the Credit Suisse Group had a significant impact on the results for 2023, including the recognition of

negative goodwill, impacts from accretion of purchase price allocation (PPA) adjustments on financial instruments, and

integration-related costs. As the integration of the UBS and Credit Suisse businesses continues, from the third quarter of

2023 onward, a new business division, Non-core and Legacy, became a reportable segment containing assets and

liabilities that have been assessed as not strategic in light of the acquisition.

› Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of

this report for more information

Underlying results

In addition to reporting our results in accordance with IFRS Accounting Standards, we report underlying results that

exclude items of profit or loss that management believes are not representative of the underlying performance.

In 2023, underlying revenues exclude accretion of PPA adjustments on financial instruments measured at amortized cost,

including off-balance sheet positions and other related effects, arising from the acquisition of the Credit Suisse Group.

Accretion of PPA adjustments on financial instruments is accelerated when the related financial instrument is terminated

or disposed of before its contractual maturity. No adjustment is made for accretion of PPA adjustments on financial

instruments within the Non-core and Legacy due to the nature of the business model. Underlying revenues also exclude

losses relating to our investment in SIX Group.

Underlying expenses exclude integration-related 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 incurred by Credit Suisse also included expenses associated with

restructuring programs that existed prior to the acquisition.

Acquisition-related costs consist of costs directly attributable to the acquisition of the Credit Suisse Group and mainly

include consulting and legal fees.

Results

In 2023, reported net profit attributable to shareholders increased by USD 20,219m to USD 27,849m, which included

negative goodwill of USD 27,748m relating to the acquisition of the Credit Suisse Group and a net tax expense of

USD 873m.

Operating profit before tax increased by USD 19,135m to USD 28,739m, primarily reflecting negative goodwill and an

increase in total revenues, partly offset by higher operating expenses and net credit loss expenses. Operating expenses

increased by USD 13,876m, or 56%, to USD 38,806m, largely due to the consolidation of Credit Suisse expenses of

USD 10,598m, and included integration-related expenses of USD 4,478m. This increase was mainly driven by a

USD 7,219m increase in personnel expenses and a USD 4,967m increase in general and administrative expenses.

Depreciation, amortization and impairment of non-financial assets increased by USD 1,689m. Net credit loss expenses

were USD 1,037m, compared with USD 29m in 2022. Total revenues increased by USD 6,271m, or 18%, to

USD 40,834m, driven by the consolidation of Credit Suisse revenues of USD 7,566m, and included USD 2,280m of

accretion resulting from PPA adjustments on financial instruments and other effects. Total combined net interest income

and other net income from financial instruments measured at fair value through profit or loss increased by USD 4,743m

and net fee and commission income increased by USD 2,604m. These increases were partly offset by a USD 1,075m

decrease in other income, largely attributable to the prior year including a gain of USD 848m in Asset Management on

the sale of our shareholding in our Japanese real estate joint venture, Mitsubishi Corp.-UBS Realty Inc.

Underlying results 2023 vs 2022

For 2023, underlying results exclude negative goodwill of USD 27,748m, USD 2,280m of accretion impacts resulting

from PPA adjustments on financial instruments and other effects, as well as losses of USD 508m from our investment in

SIX Group. We have also excluded from operating expenses integration-related expenses of USD 4,478m, acquisition-

related costs of USD 202m and USD 65m of amortization from newly recognized intangibles resulting from the

acquisition of the Credit Suisse Group.

On an underlying basis, profit before tax decreased by USD 4,537m, or 53%, to USD 3,963m, reflecting a USD 9,131m

increase in underlying operating expenses and an increase in net credit loss expenses of USD 1,008m, partly offset by a

USD 5,603m increase in underlying total revenues.

Annual Report 2023 | Financial and operating performance | Group performance 78

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 4,743m to USD 18,880m, mainly driven by the consolidation of USD 4,302m of Credit

Suisse revenues, and included USD 1,533m of accretion of PPA adjustments on financial instruments and other effects.

Personal & Corporate Banking increased by USD 3,381m to USD 6,066m, largely attributable to the consolidation of

USD 2,451m of Credit Suisse revenues, and included USD 917m of accretion of PPA adjustments on financial instruments

and other effects. The remaining increase was mainly driven by higher deposit margins, which resulted from higher

interest rates, and higher loan revenues, partly offset by lower deposit fees. 2022 included a benefit from the Swiss

National Bank deposit exemption. Excluding accretion effects, underlying net interest income was USD 4,387m.

Global Wealth Management increased by USD 1,969m to USD 8,324m, largely attributable to the consolidation of

USD 1,718m of Credit Suisse revenues, and included USD 671m of accretion of PPA adjustments on financial instruments

and other effects. The remaining increase was mainly driven by higher deposit margins, resulting from higher interest

rates, partly offset by the effects of shifts to lower-margin deposit products. Excluding accretion effects, underlying net

interest income was USD 6,294m.

Non-core and Legacy increased by USD 273m to USD 391m, mainly due to the transfer of assets and liabilities into Non-

core and Legacy following the acquisition of the Credit Suisse Group. Revenues included net gains from position marks

and unwinds, along with net carry from securitized products and credit products.

Investment Bank decreased by USD 734m to USD 5,035m, despite the consolidation of USD 34m of Credit Suisse

revenues. The decrease was mainly attributable to lower revenues in the Derivatives & Solutions business, mostly driven

by Equity Derivatives, Rates and Foreign Exchange, due to lower levels of both volatility and client activity. This was partly

offset by an increase in Financing, reflecting higher client balances.

› 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

31.12.23

31.12.22

31.12.21

31.12.22

Net interest income from financial instruments measured at amortized cost and fair value through other

comprehensive income

3,527

5,218

5,274

(32)

Net interest income from financial instruments measured at fair value through profit or loss and other

3,770

1,403

1,431

169

Other net income from financial instruments measured at fair value through profit or loss

11,583

7,517

5,850

Total

18,880

14,137

12,555

Global Wealth Management

8,324

6,355

5,341

of which: net interest income

6,965

5,273

4,244

of which: transaction-based income from foreign exchange and other intermediary activity

1,359

1,082

1,097

Personal & Corporate Banking

6,066

2,685

2,557

126

of which: net interest income

5,304

2,191

2,120

142

of which: transaction-based income from foreign exchange and other intermediary activity

762

494

437

Asset Management

(2)

(23)

(13)

(92)

Investment Bank

5,035

5,769

5,067

(13)

Non-core and Legacy

391

118

232

Group Items

(935)

(767)

(404)

1 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. 2 Investment Bank

information is provided at the business line level rather than by financial statement reporting line in order to reflect the underlying business activities, which is consistent with the structure of the management discussion

and analysis in the “Investment Bank” section of this report.

Net fee and commission income

Net fee and commission income increased by USD 2,604m to USD 21,570m and included USD 747m of accretion of PPA

adjustments on financial instruments, which was included in other fee and commission income, mainly in the Investment

Bank.

Fees for portfolio management and related services increased by USD 1,614m to USD 10,673m, largely due to the

consolidation of USD 1,583m of Credit Suisse revenues.

Excluding the consolidation of Credit Suisse revenues, investment fund fees decreased by USD 212m, driven by Global

Wealth Management and Asset Management, mainly reflecting negative market performance.

Excluding the consolidation of Credit Suisse revenues, net brokerage fees decreased by USD 204m, driven by lower levels

of client activity in Global Wealth Management and lower market volumes of cash equities in Execution Services in the

Investment Bank.

› Refer to “Note 5 Net fee and commission income” in the “Consolidated financial statements” section of this report for more

information

Annual Report 2023 | Financial and operating performance | Group performance 79

Other income

Other income decreased by USD 1,075m to USD 384m, largely due to a USD 380m decrease in share of net profits from

associates and joint ventures, which included USD 508m losses relating to our investment in SIX Group, partly offset by

higher recognition of recurring share of net profits. These losses reflected UBS’s share of impairments taken by SIX Group

on its investment in Worldline and on goodwill related to its Bolsas y Mercados Españoles (BME) subsidiary. This was

partly offset by USD 174m of mortgage servicing rights fees, attributable to the consolidation of Credit Suisse revenues,

as well as a USD 62m increase in gains recognized on repurchases of UBS’s own debt instruments. In contrast, in 2022,

other income included gains from disposals of associates and subsidiaries, including a gain of USD 848m in Asset

Management on the sale of our shareholding in our Japanese real estate joint venture, Mitsubishi Corp.-UBS Realty Inc.,

gains in Global Wealth Management of USD 133m on the sale of our domestic wealth management business in Spain,

USD 86m on the sale of UBS Swiss Financial Advisers AG and USD 41m on the sale of our US alternative investments

administration business.

› Refer to “Note 6 Other income” in the “Consolidated financial statements” section of this report for more information

› Refer to “Note 30 Changes in organization and acquisitions and disposals of subsidiaries and businesses” in the “Consolidated

financial statements” section of this report for more information about the gains from disposals of associates and subsidiaries

Credit loss expense / release

Total net credit loss expenses were USD 1,037m in 2023, reflecting net credit loss expenses of USD 593m related to

stage 1 and 2 positions and net credit loss expenses of USD 445m related to credit-impaired (stage 3 and purchased

credit-impaired) positions. Expected credit loss (ECL) expenses of USD 593m for the performing loans were predominantly

attributable to the initial recognition of ECL allowances and provisions after the date of the acquisition of the Credit

Suisse Group. Credit-impaired net expenses amounted to USD 445m, of which USD 325m was within the Credit Suisse

portfolio and USD 120m was within the UBS portfolio. As per IFRS 9, no ECL allowances and provisions had to be

recognized on the acquisition date for credit-impaired exposures, after the fair valuation as per the PPA.

› 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

Purchased

Total

For the year ended 31.12.23

Global Wealth Management

108

147

Personal & Corporate Banking

290

183

501

Asset Management

(1)

Investment Bank

110

190

Non-core and Legacy

193

Group Items

Total

593

378

1,037

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

For the year ended 31.12.21

Global Wealth Management

(28)

(1)

(29)

Personal & Corporate Banking

(62)

(24)

(86)

Asset Management

Investment Bank

(34)

Non-core and Legacy

Group Items

Total

(123)

(25)

(148)

1 Starting with the third quarter of 2023, Non-core and Legacy became a separate reportable segment and Group Functions has been renamed Group Items. Prior periods have been restated to reflect these changes.

Annual Report 2023 | Financial and operating performance | Group performance 80

Operating expenses

Personnel expenses

Personnel expenses increased by USD 7,219m to USD 24,899m, mainly due to the consolidation of Credit Suisse expenses

of USD 6,330m, and included integration-related expenses of USD 2,192m covering post-employment benefit plans,

awards granted to employees to support retention and operational stability, severance expenses, and the alignment of

Credit Suisse processes to the UBS variable compensation framework. Salaries and variable compensation increased by

USD 5,843m due to the aforementioned effects and also salary adjustments, higher variable compensation, and foreign

currency effects. Social security costs also increased by USD 529m. Pension and other post-employment benefit plans

increased by USD 567m as a result of the aforementioned factors and included an increase in the pension plan obligation

of the Swiss pension plan of Credit Suisse following the decision to align that Swiss pension plan to UBS’s Swiss pension

plan, which resulted in a pre-tax loss of USD 245m (CHF 207m) in the fourth quarter of 2023 and an offsetting gain in

other comprehensive income due to the asset ceiling.

› Refer to the “Compensation” section of this report for more information

› Refer to “Note 7 Personnel expenses,” “Note 27 Post-employment benefit plans” and “Note 28 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 4,967m to USD 10,156m, largely due to the consolidation of

Credit Suisse expenses of USD 3,000m, and included total integration-related expenses of USD 1,436m, mainly from

higher consulting and real estate costs, as well as acquisition-related costs of USD 202m, also mainly related to consulting

fees. Excluding the aforementioned effects, general and administrative expenses increased by USD 1,050m, mainly due

to a USD 665m increase in provisions related to the US residential mortgage-backed securities litigation matter, as well

as an increase in technology costs of USD 190m.

We believe that the industry continues to operate in an environment in which expenses associated with litigation,

regulatory and similar matters will remain elevated for the foreseeable future, and we continue to be exposed to a

number of significant claims and regulatory matters. The outcome of many of these matters, the timing of a resolution,

and the potential effects of resolutions on our future business, financial results or financial condition are extremely

difficult to predict.

› 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 1,689m to USD 3,750m, largely due

to the consolidation of Credit Suisse expenses of USD 1,268m, and included total integration-related expenses of

USD 850m, mainly attributable to impairment and accelerated depreciation of right-of-use assets associated with real

estate leases, as well as a USD 206m impairment of software projects in progress resulting from a reprioritization of

software development activity in the context of the acquisition. Excluding the aforementioned effects, depreciation,

amortization and impairment of non-financial assets increased by USD 146m, mainly due to higher depreciation of

internally developed software, reflecting a higher level of capitalized costs.

Operating expenses

For the year ended

% change from

USD m

31.12.23

31.12.22

31.12.21

31.12.22

Personnel expenses

24,899

17,680

18,387

of which: salaries

10,997

7,045

7,339

of which: variable compensation

9,845

7,954

8,280

of which: performance awards

3,986

3,205

3,190

of which: financial advisors

4,549

4,508

4,860

of which: other

1,310

241

229

444

of which: other personnel expenses

4,058

2,681

2,768

General and administrative expenses

10,156

5,189

5,553

of which: net expenses for litigation, regulatory and similar matters

809

348

911

133

of which: other general and administrative expenses

9,347

4,841

4,642

Depreciation, amortization and impairment of non-financial assets

3,750

2,061

2,118

Total operating expenses

38,806

24,930

26,058

1 Consists of cash and deferred compensation awards and is based on compensable revenues and firm tenure using a formulaic approach. 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 873m were recognized for the Group in 2023, representing an effective tax rate of 3.0%,

compared with USD 1,942m for 2022, which represented an effective tax rate of 20.2%. The income tax expenses for

2023 included Swiss tax expenses of USD 1,035m and a non-Swiss net tax benefit of USD 162m.

The Swiss tax expenses included current tax expenses of USD 883m in respect of taxable profits of UBS Switzerland AG

and other Swiss entities and deferred tax expenses of USD 152m that primarily related to the amortization of deferred

tax assets (DTAs), as deductions related to temporary differences were made against profits.

Annual Report 2023 | Financial and operating performance | Group performance 81

The non-Swiss net tax benefit included current tax expenses of USD 684m that related to expenses of USD 100m in

respect of US corporate alternative minimum tax (CAMT) and USD 584m in respect of other taxable profits of non-Swiss

subsidiaries and branches. However, these were more than offset by a net deferred tax benefit of USD 846m that primarily

related to a benefit of USD 754m in respect of remeasurements of DTAs, which included USD 480m in respect of net

upward revaluations of DTAs for certain entities in connection with the Group’s business planning process and USD 274m

in respect of an increase in DTAs that resulted from an increase in the expected value of future tax deductions for deferred

compensation awards due to an increase in the Group’s share price during the year. In addition, the net deferred tax

benefit included a benefit of USD 100m in respect of the recognition of DTAs for tax credits carried forward in respect

of CAMT, which was partly offset by a net deferred tax expense of USD 8m.

The low effective tax rate for the year of 3.0% primarily reflects that the negative goodwill gain that was recorded in the

income statement did not result in any tax expense, as well as the aforementioned tax benefit of USD 754m in respect

of the remeasurement of DTAs. However, these benefits were partly offset by the impact of operating losses that were

incurred by certain entities, reflecting integration-related expenses and restructuring costs, that did not result in any tax

benefits because they cannot be offset with profits of other group entities and they did not result in any DTA recognition.

If further such operating losses are incurred in 2024, the Group’s tax expense for the year may be significantly higher

than the Group’s structural rate of 23% but, the Group’s effective tax rate is expected to decrease towards the structural

rate in subsequent years, as such losses decrease.

› 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

Total comprehensive income attributable to shareholders

In 2023, total comprehensive income attributable to shareholders was USD 28,836m, reflecting net profit of

USD 27,849m, which included the recognition of negative goodwill on the acquisition of the Credit Suisse Group of

USD 27,748m, and other comprehensive income (OCI), net of tax, of USD 986m.

Foreign currency translation OCI was USD 1,456m, mainly due to the significant strengthening of the Swiss franc (10%)

and the euro (3%) against the US dollar.

OCI related to cash flow hedges was USD 1,275m, mainly reflecting net losses on hedging instruments that were

reclassified from OCI to the income statement.

Defined benefit plan OCI, net of tax, was positive USD 40m. Total net pre-tax OCI related to the Credit Suisse Swiss

pension plan was positive USD 217m. This reflected losses of USD 1,161m from the defined benefit obligation (DBO)

remeasurement, more than offset by an increase in the plan assets of USD 443m and a decrease in the effect of the asset

ceiling under IFRS Accounting Standards of USD 935m. These changes include an increase in the pension plan obligation

of the Swiss pension plan of Credit Suisse following the decision to align the Swiss pension scheme to that of UBS, which

resulted in a pre-tax loss of USD 245m (CHF 207m) in the fourth quarter of 2023 and an offsetting gain in OCI due to

the asset ceiling. Total pre-tax OCI related to the UBS Swiss pension plan was negative USD 93m, reflecting losses of

USD 3,285m from the DBO remeasurement, almost entirely offset by an increase in the plan assets of USD 791m and a

decrease in the effect of the asset ceiling under IFRS Accounting Standards of USD 2,401m. The DBO remeasurement

loss of USD 3,285m was mainly driven by a loss of USD 2,358m due to a decrease in the applicable discount rate and an

experience loss of USD 1,140m, reflecting the effects of differences between the previous actuarial assumptions and

what actually occurred. These losses were partly offset by gains of USD 366m resulting from a decrease in the expected

rate of interest credit on retirement savings.

Total pre-tax OCI related to our non-Swiss pension plans was negative USD 15m, mostly driven by the UK and German

pension plans, which recorded negative net pre-tax OCI of USD 41m and USD 16m, respectively, partly offset by the US

pension plans, which had a positive OCI of USD 45m, and the remaining pension plans.

OCI related to own credit on financial liabilities designated at fair value was negative USD 1,769m, primarily due to a

tightening of our own credit spreads.

› Refer to “Statement of comprehensive income” in the “Consolidated financial statements” section of this report for more

information

› Refer to “Note 21 Fair value measurement” in the “Consolidated financial statements” section of this report for more information

about own credit on financial liabilities designated at fair value

› Refer to “Note 26 Hedge accounting” in the “Consolidated financial statements” section of this report for more information about

cash flow hedges of forecast transactions

› Refer to “Note 27 Post-employment benefit plans” in the “Consolidated financial statements” section of this report for more

information about OCI related to defined benefit plans

Annual Report 2023 | Financial and operating performance | Group performance 82

Sensitivity to interest rate movements

As of 31 December 2023, we 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 1.8bn in the first year after such a

shift. Of this increase, approximately USD 1.1bn, 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

decrease in annual net interest income of approximately USD 1.9bn in the first year after such a shift, showing similar

currency contributions as for the aforementioned increase in rates.

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 2023 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 a forecast of net interest income variability.

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 the Group. 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 95.0%, compared with 72.1%, mainly reflecting an increase in operating expenses, partly

offset by an increase in total revenues. The operating loss incurred by Credit Suisse entities is reflected in the overall

increase of the ratio for the UBS Group. On an underlying basis, the cost / income ratio was 87.2%, compared with

74.5%, mainly reflecting an increase in operating expenses on an underlying basis, partly offset by an increase in total

revenues on an underlying basis.

Return on common equity tier 1 capital

The annualized return on our common equity tier 1 (CET1) capital was 42.3%, compared with 17.0%, reflecting a

USD 20,219m increase in net profit attributable to shareholders, with a partly offsetting effect driven by a USD 20.9bn

increase in average CET1 capital. On an underlying basis, the return on CET1 capital was 4.2%, compared with 14.6%.

CET1 capital

CET1 capital increased by USD 33.0bn to USD 78.5bn as of 31 December 2023, predominantly due to an operating profit

before tax (excluding negative goodwill) of USD 1.0bn, the acquisition of the Credit Suisse Group, which resulted in an

increase of USD 34.9bn as of the acquisition date (including transitional CET1 PPA adjustments of USD 5.0bn, net of tax),

an increase in eligible DTAs on temporary differences of USD 1.9bn and positive effects from foreign currency translation

of USD 1.5bn, partly offset by dividend accruals of USD 2.2bn, current tax expenses of USD 1.6bn, share repurchases of

USD 1.3bn under our share repurchase programs, amortization of transitional CET1 PPA adjustments (interest rate and

own credit) of USD 0.7bn (net of tax), and an increase in compensation- and own share-related capital components of

USD 0.3bn.

Risk-weighted assets

Risk-weighted assets (RWA) increased by USD 226.9bn to USD 546.5bn, primarily due to a USD 237.7bn increase

resulting from the acquisition of the Credit Suisse Group. Excluding that acquisition, RWA decreased by USD 10.8bn,

primarily driven by decreases of USD 19.0bn due to asset size and other movements and USD 3.7bn due to model updates

and methodology changes, partly offset by an increase of USD 11.8bn due to currency effects.

CET1 capital ratio

Our CET1 capital ratio increased to 14.4% from 14.2%, reflecting the aforementioned increase in CET1 capital, partly

offset by a USD 226.9bn increase in RWA.

Annual Report 2023 | Financial and operating performance | Group performance 83

Leverage ratio denominator

During 2023, the leverage ratio denominator (LRD) increased by USD 666.9bn to USD 1,695.4bn, primarily due to a

USD 644.4bn increase resulting from the acquisition of the Credit Suisse Group. Excluding that acquisition, the LRD

increased by USD 53.8bn due to currency effects, partly offset by USD 31.3bn due to asset size and other movements.

CET1 leverage ratio

Our CET1 leverage ratio increased to 4.6% from 4.4%, due to the aforementioned increase in CET1 capital, partly offset

by the USD 666.9bn increase in the LRD.

Personnel

The number of personnel employed was 138,462 (workforce count) as of 31 December 2023, a net increase of 50,246

compared with 31 December 2022, predominantly due to the onboarding of Credit Suisse staff to the UBS Group. The

number of internal personnel employed as of 31 December 2023 was 112,842 (full-time equivalents), a net increase of

40,245 compared with 31 December 2022, and included 39,032 (full-time equivalents) employed by the Credit Suisse

sub-group. The number of external staff was approximately 25,619 (workforce count), a net increase of 10,001 compared

with 31 December 2022.

Equity, CET1 capital and returns

As of or for the year ended

USD m, except where indicated

31.12.23

31.12.22

31.12.21

Net profit

Net profit attributable to shareholders

27,849

7,630

7,457

Equity

Equity attributable to shareholders

86,108

56,876

60,662

Less: goodwill and intangible assets

7,515

6,267

6,378

Tangible equity attributable to shareholders

78,593

50,609

54,283

Less: other CET1 deductions

107

5,152

9,003

CET1 capital

78,485

45,457

45,281

Return on equity

Return on equity (%)

37.4

13.3

12.6

Return on tangible equity (%)

41.3

14.9

14.1

Underlying return on tangible equity (%)

4.1

12.8

Return on CET1 capital (%)

42.3

17.0

17.5

Underlying return on CET1 capital (%)

4.2

14.6

Annual Report 2023 | Financial and operating performance | Global Wealth Management 84

Global Wealth Management

As of or for the year ended

% change from

USD m, except where indicated

31.12.23

31.12.22

Results

Net interest income

6,965

5,273

Recurring net fee income

10,793

10,282

Transaction-based income

3,569

3,137

Other income

(137)

275

Total revenues

21,190

18,967

Credit loss expense / (release)

147

Operating expenses

17,454

13,989

Business division operating profit / (loss) before tax

3,589

4,977

(28)

Underlying results

Total revenues as reported

21,190

18,967

of which: gains from sales of subsidiary and business

219

of which: accretion of PPA adjustments on financial instruments and other effects

719

of which: losses related to investment in SIX Group

(190)

Total revenues (underlying)

20,661

18,748

Credit loss expense / (release)

147

Operating expenses as reported

17,454

13,989

of which: integration-related expenses

988

Operating expenses (underlying)

16,466

13,989

of which: expenses for litigation, regulatory and similar matters

122

244

(50)

Business division operating profit / (loss) before tax as reported

3,589

4,977

(28)

Business division operating profit / (loss) before tax (underlying)

4,048

4,758

(15)

Performance measures and other information

Pre-tax profit growth (year-on-year, %)

(27.9)

4.1

Cost / income ratio (%)

82.4

73.8

Average attributed equity (USD bn)

22.8

20.0

Return on attributed equity (%)

15.8

24.9

Financial advisor compensation

4,548

4,508

Net new fee-generating assets (USD bn)

n.m.

60.1

Fee-generating assets (USD bn)

1,619

1,271

Net new assets (USD bn)

131.7

89.2

Net new money (USD bn)

65.0

40.5

Invested assets (USD bn)

3,850

2,815

Loans, gross (USD bn)

284.3

225.0

Customer deposits (USD bn)

466.9

348.2

Impaired loan portfolio as a percentage of total loan portfolio, gross (%)

2,5

0.4

0.3

Advisors (full-time equivalents)

10,027

9,215

Underlying performance measures

Pre-tax profit growth (year-on-year, %)

(14.9)

1.6

Cost / income ratio (%)

79.7

74.6

1 Information reflects Global Wealth Management as reported on in the Annual Report 2022. 2 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.

We started to report fee-generating assets and net new fee-generating assets on a consolidated basis, including Credit Suisse data, from the fourth quarter of 2023 onward. 3 Relates to licensed professionals with

the ability to provide investment advice to clients in the Americas. Consists of cash and deferred compensation awards and is based on compensable revenues and firm tenure using a formulaic approach. It 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 1,754m

as of 31 December 2023. 4 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.

5 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures. Excludes loans to financial advisors.

2023 compared with 2022

Results

Profit before tax decreased by USD 1,388m, or 28%, to USD 3,589m, mainly due to higher operating expenses, largely

driven by the acquisition of the Credit Suisse Group, partly offset by higher total revenues. The prior year included a

USD 133m gain from the sale of our domestic wealth management business in Spain, an USD 86m gain from the sale of

UBS Swiss Financial Advisers AG and a USD 41m gain from the sale of our US alternative investments administration

business. Underlying profit before tax was USD 4,048m, after excluding USD 719m of accretion of purchase price

allocation (PPA) adjustments on financial instruments and other effects, losses of USD 190m related to our investment in

SIX Group and integration-related expenses of USD 988m.

Annual Report 2023 | Financial and operating performance | Global Wealth Management 85

Total revenues

Total revenues increased by USD 2,223m, or 12%, to USD 21,190m, largely driven by the consolidation of Credit Suisse

revenues, and included the aforementioned USD 719m of accretion of PPA adjustments on financial instruments and

other effects. The increase was partly offset by the aforementioned losses of USD 190m, as well as the aforementioned

gains from the sales in 2022. Excluding accretion effects and the aforementioned losses, underlying total revenues were

USD 20,661m.

Net interest income increased by USD 1,692m, or 32%, to USD 6,965m, largely attributable to the consolidation of Credit

Suisse net interest income, and included USD 672m of accretion of PPA adjustments on financial instruments and other

effects, with the remaining increase mainly driven by higher deposit margins, resulting from higher interest rates, partly

offset by the effects of shifts to lower-margin deposit products. Excluding accretion effects, underlying net interest

income was USD 6,293m.

Recurring net fee income increased by USD 511m, or 5%, to USD 10,793m, mainly driven by the consolidation of Credit

Suisse recurring net fee income, partly offset by negative market performance.

Transaction-based income increased by USD 432m, or 14%, to USD 3,569m, mainly driven by the consolidation of Credit

Suisse transaction-based income, and included USD 47m of accretion of PPA adjustments on financial instruments and

other effects, partly offset by lower levels of client activity, particularly in Americas and Asia Pacific. Excluding accretion

effects, underlying transaction-based income was USD 3,522m.

Other income was negative USD 137m, compared with positive other income of USD 275m, mainly as 2022 included

gains from the sales of our domestic wealth management business in Spain, UBS Swiss Financial Advisers AG and our US

alternative investments administration business. 2023 included the aforementioned losses of USD 190m related to our

investment in SIX Group. Excluding these losses of USD 190m, underlying other income was positive USD 53m.

Credit loss expense / release

Net credit loss expenses were USD 147m, compared with net expenses of USD 0m, reflecting net credit loss expenses of

USD 108m related to stage 1 and 2 positions and net credit loss expenses of USD 40m related to credit-impaired (stage 3

and purchased credit-impaired) positions. Stage 1 and 2 expected credit loss (ECL) expenses of USD 108m were

predominantly attributable to the initial recognition of ECL allowances and provisions on the date of the acquisition of

the Credit Suisse Group.

Operating expenses

Operating expenses increased by USD 3,465m, or 25%, to USD 17,454m, largely due to the consolidation of Credit

Suisse expenses, integration-related expenses and higher technology expenses. In addition, 2023 included a charge of

USD 60m for the special assessment by the US Federal Deposit Insurance Corporation (the FDIC) to recover losses incurred

by the Deposit Insurance Fund in connection with the failures of Silicon Valley Bank and Signature Bank. These effects

were partly offset by lower provisions for litigation, regulatory and similar matters. Excluding integration-related expenses

of USD 988m, underlying operating expenses were USD 16,466m.

Pre-tax profit growth

Pre-tax profit growth was negative 27.9%, compared with positive 4.1%.

Cost / income ratio

The cost / income ratio increased to 82.4% from 73.8%, as higher operating expenses more than offset higher total

revenues.

Invested assets

Invested assets increased by USD 1,035bn, or 37%, to USD 3,850bn, mainly driven by the consolidation of Credit Suisse

invested assets, positive market performance (excluding interest and dividends, which are now included in net new assets)

of USD 249bn, net new asset inflows of USD 132bn and positive foreign currency effects of USD 34bn, partly offset by

a reclassification of USD 38bn related to non-strategic relationships and a transfer of USD 5bn to Non-core and Legacy.

Loans

Loans increased by USD 59.3bn to USD 284.3bn, mainly driven by the consolidation of Credit Suisse loans and positive

foreign currency effects, partly offset by net new loan outflows of USD 20.7bn.

› Refer to the “Risk management and control” section of this report for more information

Annual Report 2023 | Financial and operating performance | Global Wealth Management 86

Customer deposits

Customer deposits increased by USD 118.7bn to USD 466.9bn, mainly driven by the consolidation of Credit Suisse

customer deposits, net inflows into fixed-term deposit products, and positive foreign currency effects, partly offset by

continued shifts into money market funds and US-government securities.

Regional breakdown of performance measures

As of or for the year ended 31.12.23

USD bn, except where indicated

Americas

Switzerland

EMEA

Asia Pacific

Global

Global Wealth

Management

Total revenues (USD m)

10,386

2,829

4,424

3,003

548

21,190

Operating profit / (loss) before tax (USD m)

1,057

1,209

1,196

661

(534)

3,589

Operating profit / (loss) before tax underlying (USD m)

1,057

1,214

1,207

669

(99)

4,048

Cost / income ratio (%)

89.7

57.1

72.7

77.4

82.4

Cost / income ratio underlying (%)

89.7

56.9

72.5

77.2

79.7

Loans, gross

97.3

76.9

63.4

45.8

0.9

284.3

Net new loans

(8.2)

(1.9)

(3.7)

(6.8)

0.0

(20.7)

Net new money

5.4

23.3

4.9

32.6

(1.3)

65.0

Net new assets

43.4

29.9

15.0

44.6

(1.3)

131.7

Fee-generating assets

933

173

361

152

1,619

Invested assets

1,888

663

649

645

3,850

Advisors (full-time equivalents)

6,117

988

1,737

1,101

10,027

1 Including the following business units: United States and Canada; and Latin America. 2 In the third quarter of 2023, the invested assets of Global Financial Intermediaries were transferred from EMEA and Asia

Pacific to the Switzerland region, to better align it to the management structure. These changes were applied prospectively and had no impact on previous periods. 3 Includes minor functions, which are not included

in the four regions individually presented in this table, and also includes impacts from accretion of purchase price allocation adjustments on financial instruments and other effects and integration-related expenses.

4 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method. 5 Loans include customer brokerage receivables, which are presented in a separate reporting

line on the balance sheet.

Regional comments: 2023 compared with 2022

Americas

Profit before tax decreased by USD 691m to USD 1,057m. Total revenues decreased by USD 248m, or 2%, to

USD 10,386m, driven by lower net interest income, transaction-based income and other income, partly offset by the

consolidation of Credit Suisse revenues in 2023. In addition, 2023 included the aforementioned charge of USD 60m for

the special assessment by the FDIC. The cost / income ratio increased to 89.7% from 83.7%. Loans decreased 4%

compared with 2022, to USD 97.3bn, mainly reflecting USD 8.2bn of net new loan outflows. Net new asset inflows were

USD 43.4bn.

Switzerland

Profit before tax increased by USD 392m to USD 1,209m. Total revenues increased by USD 970m, or 52%, to

USD 2,829m, driven by the transfer of the Global Financial Intermediaries business to the Switzerland region, as well as

the consolidation of Credit Suisse revenues in 2023. The cost / income ratio increased to 57.1% from 55.2%. Loans

increased 71% compared with 2022, to USD 76.9bn, as USD 1.9bn of net new loan outflows were offset by the transfer

of the Global Financial Intermediaries business to the Switzerland region, as well as the consolidation of Credit Suisse

loans. Net new asset inflows were USD 29.9bn.

EMEA

Profit before tax decreased by USD 294m to USD 1,196m. Total revenues increased by USD 511m, or 13%, to

USD 4,424m, largely driven by the consolidation of Credit Suisse revenues, partly offset by the transfer of the Global

Financial Intermediaries business to the Switzerland region. In addition, 2022 included gains from the aforementioned

sales. The cost / income ratio increased to 72.7% from 61.9%. Loans increased 46% compared with 2022, to

USD 63.4bn, driven by the consolidation of Credit Suisse loans and partly offset by the transfer of the Global Financial

Intermediaries business to the Switzerland region, as well as USD 3.7bn of net new loan outflows. Net new asset inflows

were USD 15.0bn.

Asia Pacific

Profit before tax decreased by USD 282m to USD 661m. Total revenues increased by USD 447m, or 17%, to USD 3,003m,

mainly driven by the consolidation of Credit Suisse revenues and increases in net interest income. The cost / income ratio

increased to 77.4% from 63.2%. Loans increased 33% compared with 2022, to USD 45.8bn, driven by the consolidation

of Credit Suisse loans, partly offset by USD 6.8bn of net new loan outflows. Net new asset inflows were USD 44.6bn.

Global

Operating loss before tax was USD 534m, mainly including USD 964m of integration-related expenses and losses of

USD 190m related to our investment in SIX Group, partly offset by USD 719m of accretion of PPA adjustments on

financial instruments and other effects.

Annual Report 2023 | Financial and operating performance | Personal & Corporate Banking 87

Personal & Corporate Banking

Personal & Corporate Banking – in Swiss francs

As of or for the year ended

% change from

CHF m, except where indicated

31.12.23

31.12.22

Results

Net interest income

4,727

2,087

126

Recurring net fee income

1,349

812

Transaction-based income

1,663

1,154

Other income

(198)

Total revenues

7,541

4,099

Credit loss expense / (release)

450

Operating expenses

4,267

2,337

Business division operating profit / (loss) before tax

2,824

1,726

Underlying results

Total revenues as reported

7,541

4,099

of which: accretion of PPA adjustments on financial instruments and other effects

896

of which: losses related to investment in SIX Group

(267)

Total revenues (underlying)

6,912

4,099

Credit loss expense / (release)

450

Operating expenses as reported

4,267

2,337

of which: integration-related expenses

337

of which: amortization from newly recognized intangibles resulting from the acquisition of the Credit Suisse Group

Operating expenses (underlying)

3,872

2,337

of which: expenses for litigation, regulatory and similar matters

(8)

(12)

(31)

Business division operating profit / (loss) before tax as reported

2,824

1,726

Business division operating profit / (loss) before tax (underlying)

2,591

1,726

Performance measures and other information

Pre-tax profit growth (year-on-year, %)

63.6

8.8

Cost / income ratio (%)

56.6

57.0

Average attributed equity (CHF bn)

13.9

8.8

Return on attributed equity (%)

20.3

19.5

Loans, gross (CHF bn)

283.6

142.9

Customer deposits (CHF bn)

273.0

167.2

Impaired loan portfolio as a percentage of total loan portfolio, gross (%)

2,3

0.9

0.8

Underlying performance measures

Pre-tax profit growth (year-on-year, %)

50.1

11.1

Cost / income ratio (%)

56.0

57.0

1 Information reflects Personal & Corporate Banking as reported on in the Annual Report 2022. 2 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.

3 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures.

Annual Report 2023 | Financial and operating performance | Personal & Corporate Banking 88

2023 compared with 2022

Results

Profit before tax increased by CHF 1,098m, or 64%, to CHF 2,824m, mainly due to the acquisition of the Credit Suisse

Group. Underlying profit before tax was CHF 2,591m, after excluding CHF 896m of accretion of purchase price allocation

(PPA) adjustments on financial instruments and other effects, losses of CHF 267m related to our investment in SIX Group,

integration-related expenses of CHF 337m, and CHF 58m of amortization from newly recognized intangibles resulting

from the acquisition of the Credit Suisse Group.

Total revenues

Total revenues increased by CHF 3,442m, or 84%, to CHF 7,541m, mainly due to the consolidation of Credit Suisse

revenues, and included CHF 896m of accretion of PPA adjustments on financial instruments and other effects. The

remaining increase largely reflected increases across almost all income lines, predominantly in net interest income, partly

offset by the aforementioned losses of CHF 267m in other income. Excluding the aforementioned accretion effects,

underlying total revenues were CHF 6,912m.

Net interest income increased by CHF 2,640m, or 126%, to CHF 4,727m, largely attributable to the consolidation of

Credit Suisse net interest income, and included CHF 811m of accretion of PPA adjustments on financial instruments and

other effects, with the remaining increase mainly driven by higher deposit margins, which resulted from higher interest

rates, and higher loan revenues, partly offset by lower deposit fees. 2022 included a benefit from the Swiss National

Bank deposit exemption. Excluding accretion effects, underlying net interest income was CHF 3,916m.

Recurring net fee income increased by CHF 537m, or 66%, to CHF 1,349m, mainly attributable to the consolidation of

Credit Suisse recurring net fee income, with the remaining increase mostly driven by higher revenues from account and

custody fees.

Transaction-based income increased by CHF 509m, or 44%, to CHF 1,663m, largely attributable to the consolidation of

Credit Suisse transaction-based income, and included CHF 85m of accretion of PPA adjustments on financial instruments

and other effects, with the remaining increase mainly driven by higher income from Corporate & Institutional Clients.

Excluding accretion effects, underlying transaction-based income was CHF 1,578m.

Other income was negative CHF 198m, compared with positive other income of CHF 46m, mainly reflecting the losses

of CHF 267m related to our investment in SIX Group.

Credit loss expense / release

Net credit loss expenses were CHF 450m, compared with net expenses of CHF 36m, reflecting net credit loss expenses

related to stage 1 and 2 positions and net credit loss expenses related to credit-impaired (stage 3 and purchased credit-

impaired) positions. Stage 1 and 2 expected credit loss (ECL) expenses were predominantly attributable to the initial

recognition of ECL allowances and provisions on the date of the acquisition of the Credit Suisse Group.

Operating expenses

Operating expenses increased by CHF 1,930m, or 83%, to CHF 4,267m, largely due to the consolidation of Credit Suisse

expenses, with the remaining increase mostly reflecting integration-related expenses, as well as higher technology

expenses and accruals for variable compensation. Excluding integration-related expenses of CHF 337m and CHF 58m of

amortization from newly recognized intangibles resulting from the acquisition of the Credit Suisse Group, underlying

operating expenses were CHF 3,872m.

Cost / income ratio

The cost / income ratio decreased to 56.6% from 57.0%, as an increase in total revenues more than offset an increase

in operating expenses.

Annual Report 2023 | Financial and operating performance | Personal & Corporate Banking 89

Personal & Corporate Banking – in US dollars

As of or for the year ended

% change from

USD m, except where indicated

31.12.23

31.12.22

Results

Net interest income

5,304

2,191

142

Recurring net fee income

1,511

852

Transaction-based income

1,859

1,212

Other income

(238)

Total revenues

8,436

4,302

Credit loss expense / (release)

501

Operating expenses

4,787

2,452

Business division operating profit / (loss) before tax

3,148

1,812

Underlying results

Total revenues as reported

8,436

4,302

of which: accretion of PPA adjustments on financial instruments and other effects

1,013

of which: losses related to investment in SIX Group

(317)

Total revenues (underlying)

7,741

4,302

Credit loss expense / (release)

501

Operating expenses as reported

4,787

2,452

of which: integration-related expenses

383

of which: amortization from newly recognized intangibles resulting from the acquisition of the Credit Suisse Group

Operating expenses (underlying)

4,338

2,452

of which: expenses for litigation, regulatory and similar matters

(9)

(13)

(31)

Business division operating profit / (loss) before tax as reported

3,148

1,812

Business division operating profit / (loss) before tax (underlying)

2,902

1,812

Performance measures and other information

Pre-tax profit growth (year-on-year, %)

73.8

4.7

Cost / income ratio (%)

56.7

57.0

Average attributed equity (USD bn)

15.5

9.3

Return on attributed equity (%)

20.3

19.5

Loans, gross (USD bn)

336.9

154.6

118

Customer deposits (USD bn)

324.3

180.8

Impaired loan portfolio as a percentage of total loan portfolio, gross (%)

2,3

0.9

0.8

Underlying performance measures

Pre-tax profit growth (year-on-year, %)

60.2

6.9

Cost / income ratio (%)

56.0

57.0

method. 3 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures.

Annual Report 2023 | Financial and operating performance | Asset Management 90

Asset Management

As of or for the year ended

% change from

USD m, except where indicated

31.12.23

31.12.22

Results

Net management fees

2,507

2,050

Performance fees

104

Net gain from disposals

848

(97)

Total revenues

2,639

2,961

(11)

Credit loss expense / (release)

Operating expenses

2,321

1,564

Business division operating profit / (loss) before tax

318

1,397

(77)

Underlying results

Total revenues as reported

2,639

2,961

(11)

of which: net gain from disposals

848

Total revenues (underlying)

2,639

2,114

Credit loss expense / (release)

Operating expenses as reported

2,321

1,564

of which: integration-related expenses

205

Operating expenses (underlying)

2,116

1,564

of which: expenses for litigation, regulatory and similar matters

Business division operating profit / (loss) before tax as reported

318

1,397

(77)

Business division operating profit / (loss) before tax (underlying)

522

550

(5)

Performance measures and other information

Pre-tax profit growth (year-on-year, %)

(77.3)

35.7

Cost / income ratio (%)

88.0

52.8

Average attributed equity (USD bn)

2.0

1.7

Return on attributed equity (%)

15.6

81.2

Gross margin on invested assets (bps)

4,5

Underlying performance measures

Pre-tax profit growth (year-on-year, %)

(5.0)

(46.6)

Cost / income ratio (%)

80.2

74.0

Information by business line / asset class

Net new money (USD bn)

Equities

(4.0)

(12.8)

Fixed Income

17.8

36.5

of which: money market

22.3

26.3

Multi-asset & Solutions

2.2

(1.3)

Hedge Fund Businesses

(4.2)

2.3

Real Estate & Private Markets

2.7

0.2

Total net new money excluding associates

14.6

24.8

of which: net new money excluding money market

(7.7)

(1.6)

Associates

1.1

7.7

Total net new money

15.7

32.5

Invested assets (USD bn)

Equities

644

456

Fixed Income

445

296

of which: money market

134

119

Multi-asset & Solutions

274

155

Hedge Fund Businesses

Real Estate & Private Markets

156

102

Total invested assets excluding associates

1,577

1,064

of which: passive strategies

715

443

Associates

205

Total invested assets

1,649

1,088

Annual Report 2023 | Financial and operating performance | Asset Management 91

Asset Management (continued)

As of or for the year ended

% change from

USD m, except where indicated

31.12.23

31.12.22

Information by region

Invested assets (USD bn)

Americas

402

298

Asia Pacific

211

173

Europe, Middle East and Africa (excluding Switzerland)

354

263

Switzerland

682

354

Total invested assets

1,649

1,088

Information by channel

Invested assets (USD bn)

Third-party institutional

939

606

Third-party wholesale

177

116

UBS’s wealth management businesses

461

342

Associates

205

Total invested assets

1,649

1,088

1 Information reflects Asset Management as reported on in the Annual Report 2022. 2 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. 3 Only includes items that are deemed material. 4 Refer to “Alternative

performance measures” in the appendix to this report for the definition and calculation method. 5 Starting with the second quarter of 2023, net new money and invested assets include net new money and invested

assets from associates, to better reflect the business strategy. Comparative figures have been restated to reflect this change. 6 A net new money inflow of USD 4.1bn was recognized in the fourth quarter of 2022

for the provision of hedge fund services to Global Wealth Management Americas. 7 The invested assets and net new money amounts reported for associates are prepared in accordance with their local regulatory

requirements and practices.

2023 compared with 2022

Results

Profit before tax decreased by USD 1,079m, or 77%, to USD 318m, primarily due to 2022 including a gain of USD 848m

from the sale of our shareholding in the Mitsubishi Corp.-UBS Realty Inc. joint venture. Excluding integration-related

expenses of USD 205m, underlying profit before tax was USD 522m.

Total revenues

Total revenues decreased by USD 322m, or 11%, to USD 2,639m, primarily due to 2022 including the aforementioned

gain of USD 848m. The decrease was partly offset by higher revenues due to the consolidation of Credit Suisse revenues

and net gain from disposals of USD 27m, mainly from the completion of the sale of a majority stake in UBS Hana Asset

Management Co., Ltd.

Net management fees increased by USD 457m, or 22%, to USD 2,507m, largely due to the consolidation of Credit Suisse

net management fees, partly offset by negative market performance, continued margin compression and negative pass-

through fees, with the corresponding offset in performance fees.

Performance fees increased by USD 40m, or 63%, to USD 104m, mainly attributable to the consolidation of Credit Suisse

performance fees, the effect of the aforementioned pass-through fees and increases in Hedge Fund Businesses, partly

offset by decreases in Real Estate & Private Markets and Equities.

Operating expenses

Operating expenses increased by USD 757m, or 48%, to USD 2,321m, mainly reflecting the consolidation of Credit Suisse

expenses. The increase was also due to integration-related expenses, adverse foreign currency effects and increases in

technology expenses, control function expenses, and outsourcing costs, partly offset by lower personnel expenses.

Excluding integration-related expenses of USD 205m, underlying operating expenses were USD 2,116m.

Cost / income ratio

The cost / income ratio increased to 88.0% from 52.8%, reflecting both higher operating expenses and lower total

revenues.

Invested assets

Invested assets increased by USD 561bn to USD 1,649bn, reflecting the consolidation of Credit Suisse invested assets,

positive market performance of USD 108bn, positive foreign currency effects of USD 51bn and positive net new money

of USD 16bn, partly offset by a reduction of USD 24bn related to divestments, primarily the sale of UBS Hana Asset

Management Co., Ltd., and a reduction of USD 5bn due to the elimination of the cross-investments of the UBS Asset

Management sub-group and the Credit Suisse Asset Management sub-group, as UBS policy does not allow for double

counting of assets within the same reporting segment. Excluding money market flows and associates, net new money

was negative USD 8bn.

Annual Report 2023 | Financial and operating performance | Asset Management 92

Investment performance

As of year-end 2023, Morningstar assigned a four- or five-star rating to 61% of our retail and institutional funds assets

under management (AuM) (both actively managed and passive), on an AuM-weighted basis. Furthermore, 51% of our

actively managed open-ended retail and institutional funds AuM are ranked, on an AuM-weighted basis over a three-

year investment period, above their respective peer median.

Investment performance as of 31 December 2023

In %

Total traditional

investments

Equities

Fixed Income

Multi-asset

% of UBS Asset Management fund assets rated as 4- or 5-star

1,2

% of UBS Asset Management fund assets above peer median over a 3-year investment period

1,3

1 Morningstar® Essentials Quantitative Star Rating & Rankings; © Morningstar 2024, extract date 10 January 2024. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and / or its

content providers; (2) may not be copied or distributed; (3) is not warranted to be accurate, complete or timely; and (4) does not constitute advice of any kind, whether investment, tax, legal or otherwise. User is

solely responsible for ensuring that it complies with all laws, regulations and restrictions applicable to it. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use

of this information, except where such damages or losses cannot be limited or excluded by law in your jurisdiction. Past performance is no guarantee of future results. For more detailed information about the

Morningstar Rating, including its methodology, please go to: https://s21.q4cdn.com/198919461/files/doc_downloads/othe_disclosure_materials/MorningstarRatingforFunds.pdf. 2 Percentage of AuM to which

Morningstar has assigned a four- or five-star rating. AuM reflect the AuM of Asset Management’s retail and institutional funds (both actively managed and passive) across all domiciles for which Asset Management

owns the investment performance, i.e., Asset Management is either the sole portfolio manager or co-portfolio manager. Universe is approximately 37% of all active and passive traditional assets of Asset Management

(Equities, Fixed Income excluding money market, and Multi-asset) as of 31 December 2023. 3 Percentage of AuM above peer median over a three-year investment period. AuM reflect the AuM of Asset Management’s

actively managed open-ended retail and institutional funds across all domiciles for which Asset Management owns the investment performance, i.e., Asset Management is either the sole portfolio manager or co-

portfolio manager. Universe is approximately 29% of all active traditional assets of Asset Management (Equities, Fixed Income excluding money market, and Multi-asset) as of 31 December 2023.

Investment Bank

As of or for the year ended

% change from

USD m, except where indicated

31.12.23

31.12.22

Results

Advisory

746

733

Capital Markets

1,649

854

Global Banking

2,395

1,587

Execution Services

1,578

1,643

(4)

Derivatives & Solutions

2,707

3,665

(26)

Financing

1,981

1,822

Global Markets

6,265

7,129

(12)

of which: Equities

4,546

4,970

(9)

of which: Foreign Exchange, Rates and Credit

1,720

2,160

(20)

Total revenues

8,661

8,717

(1)

Credit loss expense / (release)

190

(12)

Operating expenses

8,515

6,832

Business division operating profit / (loss) before tax

(44)

1,897

Underlying results

Total revenues as reported

8,661

8,717

(1)

of which: accretion of PPA adjustments on financial instruments

583

of which: losses in the first quarter of 2022 from transactions with Russian counterparties

(93)

Total revenues (underlying)

8,078

8,810

(8)

Credit loss expense / (release)

190

(12)

Operating expenses as reported

8,515

6,832

of which: integration-related expenses

692

Operating expenses (underlying)

7,823

6,832

of which: expenses for litigation, regulatory and similar matters

122

(36)

Business division operating profit / (loss) before tax as reported

(44)

1,897

Business division operating profit / (loss) before tax (underlying)

1,990

(97)

Performance measures and other information

Pre-tax profit growth (year-on-year, %)

(102.3)

(27.9)

Cost / income ratio (%)

98.3

78.4

Average attributed equity (USD bn)

13.8

13.0

Return on attributed equity (%)

(0.3)

14.6

Underlying performance measures

Pre-tax profit growth (year-on-year, %)

(96.8)

(43.0)

Cost / income ratio (%)

96.8

77.6

1 Information reflects the Investment Bank as reported on in the Annual Report 2022. 2 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.

Annual Report 2023 | Financial and operating performance | Investment Bank 93

2023 compared with 2022

Results

Loss before tax was USD 44m, compared with profit before tax of USD 1,897m in 2022, mainly due to higher operating

expenses associated with the acquisition of the Credit Suisse Group, and included integration-related expenses, as well

as lower total revenues. Excluding USD 583m of accretion of purchase price allocation (PPA) adjustments on financial

instruments and integration-related expenses of USD 692m, underlying profit before tax was USD 64m.

Total revenues

Total revenues decreased by USD 56m, or 1%, to USD 8,661m, due to lower Global Markets revenues, which decreased

by USD 864m, or 12%, partly offset by higher Global Banking revenues, which increased by USD 808m, or 51%. Prior-

year total revenues included USD 93m of losses in the first quarter of 2022 from transactions with Russian counterparties.

The consolidation of Credit Suisse revenues included USD 583m of accretion of PPA adjustments on financial instruments.

Excluding the aforementioned accretion effects, underlying total revenues were USD 8,078m.

Global Banking

Global Banking revenues increased by USD 808m, or 51%, to USD 2,395m, mainly due to the consolidation of Credit

Suisse revenues, and included USD 580m of accretion of PPA adjustments on financial instruments. Excluding accretion

effects, underlying Global Banking revenues increased by USD 228m, or 14%. The relevant market fee pool

1,2

decreased

16%.

Advisory revenues increased by USD 13m, or 2%, to USD 746m, mainly due to higher merger and acquisition transaction

revenues. The relevant global fee pool

decreased 25%.

Capital Markets revenues increased by USD 795m, or 93%, to USD 1,649m, partly due to the consolidation of Credit

Suisse revenues, and included USD 580m of the aforementioned accretion effects. Excluding accretion effects, underlying

Capital Markets revenues increased by USD 215m, or 25%, mainly due to prior-year mark-to-market losses. Capital

Markets fee-pool-comparable revenues increased 2% year on year. The relevant global fee pool

1,2

decreased 7%.

Global Markets

Global Markets revenues decreased by USD 864m, or 12%, to USD 6,265m, primarily driven by lower Derivatives &

Solutions revenues.

Execution Services revenues decreased by USD 65m, or 4%, to USD 1,578m, due to lower market volumes in Cash

Equities, partly offset by higher revenues from foreign exchange products that are traded over electronic platforms.

Derivatives & Solutions revenues decreased by USD 958m, or 26%, to USD 2,707m, mostly driven by Equity Derivatives,

Rates and Foreign Exchange, due to lower levels of both volatility and client activity.

Financing revenues increased by USD 159m, or 9%, to USD 1,981m, reflecting higher client balances.

Equities

Global Markets Equities revenues decreased by USD 424m, or 9%, to USD 4,546m, mainly driven by lower Equity

Derivatives and Cash Equities revenues.

Foreign Exchange, Rates and Credit

Global Markets Foreign Exchange, Rates and Credit revenues decreased by USD 440m, or 20%, to USD 1,720m, primarily

driven by lower Foreign Exchange and Rates revenues.

Credit loss expense / release

Net credit loss expenses were USD 190m, compared with net releases of USD 12m, reflecting net credit loss expenses of

USD 110m related to stage 1 and 2 positions and net credit loss expenses of USD 80m related to credit-impaired (stage 3

and purchased credit-impaired) positions. Stage 1 and 2 expected credit loss (ECL) expenses of USD 110m were

predominantly attributable to the initial recognition of ECL allowances and provisions on the date of the acquisition of

the Credit Suisse Group.

Operating expenses

Operating expenses increased by USD 1,683m, or 25%, to USD 8,515m, largely due to integration-related expenses, the

consolidation of Credit Suisse expenses, and higher technology expenses. Excluding integration-related expenses of

USD 692m, underlying operating expenses were USD 7,823m.

Cost / income ratio

The cost / income ratio increased to 98.3% from 78.4%, reflecting both higher operating expenses and lower total

revenues.

1 UBS fee-pool-comparable revenues consist of revenues from: merger-and-acquisition-related transactions; Equity Capital Markets, excluding derivatives; Leveraged Capital Markets, excluding the impact of mark-to-

market movements on loan portfolios; and Debt Capital Markets, excluding revenues related to debt underwriting of UBS instruments.

2 Source: Dealogic, as of 29 December 2023.

Annual Report 2023 | Financial and operating performance | Non-core and Legacy 94

Non-core and Legacy

As of or for the year ended

% change from

USD m

31.12.23

31.12.22

Results

Total revenues

741

237

212

Credit loss expense / (release)

193

Operating expenses

5,290

104

Operating profit / (loss) before tax

(4,741)

131

Underlying results

Total revenues as reported

741

237

212

of which: litigation settlement

Total revenues (underlying)

741

175

323

Credit loss expense / (release)

193

Operating expenses as reported

5,290

104

of which: integration-related expenses

1,772

Operating expenses (underlying)

3,518

104

of which: expenses for litigation, regulatory and similar matters

637

(12)

Operating profit / (loss) before tax as reported

(4,741)

131

Operating profit / (loss) before tax (underlying)

(2,969)

Performance measures and other information

Average attributed equity

5.2

1.1

390

Risk-weighted assets (USD bn)

72.0

13.0

454

Leverage ratio denominator (USD bn)

137.1

6.3

1 Starting with the third quarter of 2023, Non-core and Legacy represents a separate reportable segment and includes positions and businesses not aligned with our strategy and policies. 2 Information reflects

Non-core and Legacy Portfolio as reported on in Group Functions in the Annual Report 2022. 3 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method.

Composition of Non-core and Legacy

RWA

Total assets

LRD

USD bn

31.12.23

31.12.22

31.12.23

31.12.22

31.12.23

31.12.22

Exposure category

Equities

3.1

20.0

13.4

Macro

9.3

1.9

55.7

9.3

24.8

2.4

Loans

11.2

13.0

14.8

Securitized products

13.5

1.0

26.2

2.2

27.6

2.1

Credit

2.8

5.2

4.9

High-quality liquid assets

50.5

1.8

50.5

1.8

Operational risk

30.0

10.1

Other

2.0

2.3

1.1

Total

72.0

13.0

172.9

13.4

137.1

6.3

1 During the fourth quarter of 2023, we have revised allocations and aligned methodologies across UBS and Credit Suisse.

2023 compared with 2022

Results

Loss before tax was USD 4,741m, compared with profit before tax of USD 131m. Excluding integration-related expenses

of USD 1,772m, underlying loss before tax was USD 2,969m.

Total revenues

Total revenues increased by USD 504m to USD 741m, mainly due to the transfer of assets and liabilities into Non-core

and Legacy following the acquisition of the Credit Suisse Group. Revenues included net gains from position marks and

unwinds, along with net carry from securitized products and credit products.

Credit loss expense / release

Net credit loss expenses were USD 193m, compared with net expenses of USD 2m, reflecting net credit loss expenses of

USD 78m related to stage 1 and 2 positions and net credit loss expenses of USD 116m related to credit-impaired (stage 3

and purchased credit-impaired) positions. Stage 1 and 2 expected credit loss (ECL) expenses of USD 78m were

predominantly attributable to the initial recognition of ECL allowances and provisions on the date of the acquisition of

the Credit Suisse Group.

Annual Report 2023 | Financial and operating performance | Non-core and Legacy 95

Operating expenses

Operating expenses were USD 5,290m, compared with USD 104m, and included integration-related expenses of

USD 1,772m, driven by onerous contract provisions, real estate impairments and personnel costs. Excluding integration-

related expenses, underlying operating expenses were USD 3,518m.

Risk-weighted assets and leverage ratio denominator

Risk-weighted assets increased by USD 70.8bn to USD 83.8bn at the end of the second quarter of 2023, mainly driven

by the transfer of assets and liabilities into Non-core and Legacy following the acquisition of the Credit Suisse Group.

Similarly, the leverage ratio denominator increased by USD 202.4bn to USD 208.7bn at the end of the second quarter of

2023. Since then, Non-core and Legacy has made significant progress against its capital reduction goals by reducing risk-

weighted assets by USD 11.8bn, or 14%, to USD 72.0bn and reducing the leverage ratio denominator by USD 71.6bn,

or 34%, to USD 137.1bn.

Group Items

As of or for the year ended

% change from

USD m

31.12.23

31.12.22

Results

Total revenues

(833)

(622)

Credit loss expense / (release)

Operating expenses

440

(12)

Operating profit / (loss) before tax

(1,279)

(611)

109

Underlying results

Total revenues as reported

(833)

(622)

of which: accretion of PPA adjustments on financial instruments

(35)

of which: gain from sales of real estate

Total revenues (underlying)

(798)

(690)

Credit loss expense / (release)

Operating expenses as reported

440

(12)

of which: integration-related expenses

438

of which: acquisition-related costs

202

Operating expenses (underlying)

(200)

(12)

of which: expenses for litigation, regulatory and similar matters

(27)

Operating profit / (loss) before tax as reported

(1,279)

(611)

109

Operating profit / (loss) before tax (underlying)

(603)

(679)

(11)

1 Starting with the third quarter of 2023, Group Items reflects the integration of Group Functions and the Corporate Center (Credit Suisse) and excludes UBS’s Non-core and Legacy Portfolio, which was previously

reported within Group Functions. 2 Information reflects Group Functions as reported on in the Annual Report 2022, excluding Non-core and Legacy Portfolio. 3 Refer to “Alternative performance measures” in the

appendix to this report for the definition and calculation method.

2023 compared with 2022

Results

Loss before tax was USD 1,279m, compared with a loss of USD 611m, mainly due to the acquisition of the Credit Suisse

Group. Excluding USD 35m of accretion of purchase price allocation adjustments on financial instruments, integration-

related expenses of USD 438m and acquisition-related costs of USD 202m, underlying loss before tax was USD 603m,

compared with USD 679m in 2022, excluding a gain of USD 68m from the sale of real estate.

Income from Group hedging and own debt, including hedge accounting ineffectiveness, was net positive USD 247m,

compared with net negative income of USD 375m. The results in the prior year were driven by mark-to-market effects

on portfolio-level economic hedges due to rising interest rates and cross-currency-basis widening. Income related to

centralized Group Treasury risk management was negative USD 256m, compared with negative USD 4m in 2022.

In addition, 2023 included a USD 272m increase in funding costs related to deferred tax assets, partly offset by

remeasurement losses in 2022 of USD 46m on properties held for sale.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet 96

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 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 97

Risk management and control

Table of contents

Overview of risks arising from our business activities

Risk categories

100

Top and emerging risks

101

Risk governance

103

Risk appetite framework

106

Internal risk reporting

106

Model risk management

107

Risk measurement

110

Credit risk

126

Market risk

135

Country risk

137

Sustainability and climate risk

153

Non-financial risk

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 98

Risk management and control

Overview of risks arising from our business activities

Key risks by business division and Group Items

Business divisions and Group Items

Key financial risks arising from business activities

Global Wealth Management

Credit risk from collateralized lending primarily against securities, private equity and hedge fund interest,

investors’ uncalled capital commitments, and residential and commercial real estate, other real assets

such as ships and aircraft, as well as from derivatives trading. Also includes corporate lending and other

unsecured lending.

Market risk from municipal securities and taxable fixed-income securities. Interest rate risk in the

banking book related to Global Wealth Management is transferred to and managed by Group Treasury.

Personal & Corporate Banking

Credit risk from mortgages (owner-occupied and income-producing), secured and unsecured corporate

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

Credit risk and market risk on client assets invested in Asset Management funds can impact

management and performance fees and cause heightened fund outflows, liquidity risk and losses on our

seed capital and co-investments.

Small amounts of credit and market risk for on-balance sheet items.

Investment Bank

Credit risk from lending (take-and-hold, as well as temporary loan underwriting activities), derivatives

trading and securities financing.

Market risk from primary underwriting activities and secondary trading.

Non-core and Legacy

Credit risk arising from large, less-liquid structured financing transactions, including some with

residential 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 from structured trades, large portfolios of loans and securitized products, and both complex

and simple credit, interest rate and equity derivative transactions.

Group Items

Credit and market risk arising from management of the Group’s balance sheet, capital, profit or loss

and liquidity portfolios.

Structural risk arising from asset and liability management and liquidity and funding risk (managed by

Group Treasury).

Non-financial risks consist of compliance risks (including employment and conduct risks), financial crime, operational risk (including model risks and cyber-

and information-security risks), legal risks and reputational risks. These are an inevitable consequence of being in business and can arise as a result of our past

and current business activities across all business divisions and Group Items.

› Refer to “Risk categories” in this section for more information about other financial and non-financial risks relevant to UBS

Key risk developments

Upon the legal close of the acquisition of the Credit Suisse Group, we have applied existing UBS prudent risk management

practices to material risks of Credit Suisse. Positions and businesses not aligned with the core strategy and policies of UBS

have been ring-fenced in the Non-core and Legacy business division, with the aim of ensuring a timely and orderly wind-

down. UBS’s transactional approval authorities were applied to Credit Suisse and a set of risk standards and escalation

protocols were put in place to ensure the application of the UBS risk appetite to the combined organization. Our risk

governance continued to operate along our three lines of defense, and our organizational structure has been adapted,

with the aim of facilitating robust oversight of the combined business throughout the integration. A significant portion

of our risk policies have been reviewed and harmonized. We are continuing to focus on aligning our policies while moving

toward a fully integrated risk framework, which is expected to be achieved by the end of 2025.

Due to the acquisition of the Credit Suisse Group, we saw an increase in total net credit loss expenses to USD 1,037m

and an increase in credit-impaired exposure to USD 6.4bn. Our banking products exposure increased to USD 1,179bn

and our traded products exposure increased to USD 64bn. For UBS Group excluding Credit Suisse, market risk remained

at low levels, as a result of our focus on managing tail risks, while Credit Suisse continues with the strategic migration of

positions to UBS and de-risking within Non-core and Legacy.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 99

Risk categories

We categorize the risk exposures of our business divisions and Group Items as outlined in the table below. Our 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 to meet its

contractual obligations toward UBS. This includes settlement risk, loan underwriting risk and step-in risk.

Settlement risk:

the risk of loss resulting from transactions that involve exchange of value (e.g.,

security versus cash) where we must deliver without first being able to determine with certainty that

we will receive the consideration.

Loan underwriting risk:

the risk of loss arising during the holding period of financing transactions

that are intended for further distribution.

Step-in risk:

the risk that UBS may decide to provide financial support to an unconsolidated entity

that is facing stress in the absence of, or in excess of, any contractual obligations to provide such

support. 

Business divisions

Risk Control

Audited | Market risk (traded and non-traded): the risk of loss resulting from adverse movements in

market variables. 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:

the risk of loss that would occur if an issuer to which we are exposed through tradable

securities or derivatives referencing the issuer was subject to a credit-related event.

Investment risk:

issuer risk associated with positions held as financial investments. 

Business divisions and

Group Treasury

Risk Control

Country risk: the risk of loss resulting from country-specific events. This includes the risk of sovereign

default and also 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.

Business divisions

Risk Control

Sustainability and climate risk: the risk that UBS negatively impacts, or is impacted by, climate

change, natural capital, human rights, and other environmental, social and governance matters. Climate

risks can arise from either changing climate conditions (physical risks) or from efforts to mitigate climate

change (transition risks). Sustainability and climate risks may manifest as credit, market, liquidity,

business and non-financial risks for UBS 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).

Business divisions

Risk Control

Treasury risk: the risks associated with asset and liability management and our liquidity and funding

positions, as well as structural exposures including pension risks.

Group Treasury

Risk Control

Audited |

Liquidity risk:

the risk that the firm will not be able to efficiently meet both expected and

unexpected current and forecast cash flows and collateral needs without affecting either daily

operations or the financial condition of the firm. 

Audited |

Funding risk:

the risk that the firm will be unable, on an ongoing basis, to borrow funds in

the market on an unsecured (or even secured) basis at an acceptable price to fund actual or

proposed commitments, i.e., the risk that UBS’s funding capacity is not sufficient to support the

firm’s current business and desired strategy. 

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 Group-wide

netting while leaving the business divisions with margin management.

Structural foreign exchange risk:

the risk of decreases in our capital due to changes in foreign

exchange rates with an adverse translation effect on capital held in currencies other than the

US dollar.

Pension risk:

the risk of a negative impact on our capital as a result of deteriorating funded status

from 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, rate of pension increase) and / or changes to plan designs.

Group Treasury and

Human Resources

Risk Control

and Finance

Business risk: the potential negative impact on earnings from lower-than-expected business volumes

and / or margins, to the extent they are not offset by a decrease in expenses. For example, changes in

the competitive landscape, client behavior or market conditions can potentially have a negative impact.

Business divisions

Risk Control

and Finance

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 100

Risk managed by

Independent

oversight by

Non-financial risks

Compliance risk: the risk of failure to comply with laws, rules and regulations, internal policies and

procedures, and the firm’s Code of Conduct and Ethics.

Business divisions

Group Compliance,

Regulatory &

Governance (GCRG)

Employment risk:

the risks arising from acts inconsistent with laws, rules and regulations or the

firm’s human resources policies governing employment practices, discrimination, compensation and

employee-related taxes and benefits.

Human Resources

Conduct risk:

the risk that the conduct of the firm or its individuals unfairly impacts clients or

counterparties, undermines the integrity of the financial system or impairs effective competition to

the detriment of consumers.

GCRG

Financial crime risk: the risk of failure to prevent financial crime (including money laundering, terrorist

financing, sanctions or embargo violations, internal and external fraud, bribery, and corruption).

Business divisions and

Financial Crime

Prevention

GCRG

Operational risk: the risk resulting from inadequate or failed internal processes, people or systems, or

from external causes (deliberate, accidental or natural).

Business divisions

GCRG

Cybersecurity and information-security risk:

the risk of a malicious internal or external act, or a

failure of IT hardware or software, or human error, leading to a material impact on confidentiality,

integrity or availability of UBS’s data or information systems.

Business divisions and

the Group Operations

and Technology Office

GCRG

Model risk:

the risk of adverse consequences (e.g., financial loss, due to legal matters, operational

loss, biased business decisions, or reputational damage) resulting from decisions based on incorrect /

inadequate or misused model outputs and reports.

Model owner

Risk Control

Legal risk: the risk of: (i) being held liable for a breach of applicable laws, rules or regulations; (ii) being

held liable for a breach 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’s interests; and (iv) being

party to a claim or investigated by an external regulator or 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: the risk of an unfavorable perception of UBS or a decline in the firm’s reputation

from the point of view of clients, shareholders, regulators, employees or the general public, which may

lead to potential financial loss and / or loss of market share.

All businesses and

functions

All control functions

Top and emerging risks

The top and emerging risks disclosed below reflect those that we currently think have the potential to materialize within

one year and which could significantly affect the Group. 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 we consider 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.

– We remain 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, conflicts in the Middle East and US–China trade relations.

Geopolitical tensions will continue to create uncertainty and complicate the energy price outlook. We are closely

watching elections in several key markets in 2024.

– Inflation has abated to some extent in major Western economies, though there are still concerns regarding future

developments, and central banks’ monetary policy is in the spotlight. The potential for “higher-for-longer” interest

rates raises the prospect of a global recession, particularly as the growth of China’s economy has been muted. This

combination of factors translates into a more uncertain and volatile environment, which increases the risk of financial

market disruption.

– We are exposed to a number of macroeconomic issues, 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 our business activities and related financial results, primarily through reduced margins

and revenues, asset impairments and other valuation adjustments. Accordingly, these macroeconomic factors are

considered in the development of stress-testing scenarios for our ongoing risk management activities.

– We are monitoring the downturn in the commercial real estate sector. Adverse effects on valuations from higher

interest rates and structural decline in demand for office and retail space may trigger broader impacts given bank and

non-bank lenders’ material balance sheet exposure to the sector.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 101

– We are exposed to substantial changes in the regulation of our businesses that could have a material adverse effect

on our 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, we are subject to many different legal, tax and regulatory regimes and extensive

regulatory oversight. We are exposed to significant liability risk, and we are 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 we consider significant is disclosed in “Note 18

Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report.

– 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 business disruption 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 our businesses, we are continually exposed to operational

resilience scenarios such as process error, failed execution, system failures and fraud.

– Conduct risks are inherent in our businesses. Achieving fair outcomes for our clients, upholding market integrity and

cultivating the highest standards of employee conduct are of critical importance to us. Management of conduct risks

is an integral part of our risk management framework. Financial crime (including money laundering, terrorist financing,

sanctions violations, fraud, bribery, and corruption) presents significant risk. Heightened regulatory expectations and

attention require investment in people and systems, while emerging technologies and changing geopolitical risks

further increase the complexity of identifying and preventing financial crime.

› 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

– Sustainability and climate risks continue to be in the focus of regulators and stakeholders, with further emphasis put

on measurement of nature-related risk and management of greenwashing risks in 2023. To address these emerging

risks, UBS has enhanced its nature-related risk methodology and established guidelines for sustainable lending, bonds

and GHG Emissions Trading to address potential greenwashing risks.

› Refer to “Sustainability and climate risk” in this section of the report for more information

› Refer to “Appendix 2 – Governance” to the UBS Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for a full description of our sustainability and climate risk policy framework

– In addition, industry guidelines and regulations are emerging simultaneously in various jurisdictions, leading to an

increased risk of divergence, which in turn increases the risk that UBS may not comply with all relevant regulations.

› Refer to “Sustainability and climate risk” and “Non-financial risk” sections of this report

– New risks continue to emerge. For example, client demand for distributed ledger technology, blockchain-based assets

and virtual currencies creates new risks, to which we currently have limited exposure and for which relevant control

frameworks are continuously enhanced and implemented.

Risk governance

Our risk governance framework operates along three lines of defense.

Our first line of defense, business management, owns its risks and is accountable for maintaining effective processes and

systems to manage them in compliance with applicable laws, rules and regulations, as well as internal standards, including

identifying control weaknesses and inadequate processes.

Our second line of defense, control functions, is separate from the business and reports directly to the Group Chief

Executive Officer (the Group CEO). Control functions provide independent oversight, challenge financial and non-financial

risks arising from the firm’s business activities, and establish independent frameworks for risk assessment, measurement,

aggregation, control and reporting, protecting against non-compliance with applicable laws, rules and regulations.

Our third line of defense, Group Internal Audit (GIA), reports to the Chairman and to the Audit Committee. This function

assesses the design and operating effectiveness and sustainability of processes to define risk appetite, governance, risk

management, internal controls, remediation activities and processes to comply with legal and regulatory requirements

and internal governance standards.

The key roles and responsibilities for risk management and control are shown in the chart below and described further

below.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 102

Audited | The Board of Directors (the BoD) approves the risk management and control framework of the Group, including

the Group and business division overall risk appetite. The BoD is supported by its Risk Committee, which monitors and

oversees the Group’s risk profile and the implementation of the risk framework approved by the BoD, and approves the

Group’s risk appetite methodology. The Corporate Culture and Responsibility Committee (the CCRC) helps the BoD meet

its duty to safeguard and advance UBS’s reputation for responsible and sustainable conduct, reviewing stakeholder

concerns and expectations pertaining to UBS’s societal contribution and corporate culture. The Audit Committee assists

the BoD with its oversight duty relating to financial reporting and internal controls over financial reporting, and the

effectiveness of whistleblowing procedures and the external and internal audit functions.

The Group Executive Board (the GEB) has overall responsibility for establishing and implementing a risk management and

control framework in the Group, managing the risk profile of the Group as a whole.

The Group CEO has responsibility and accountability for the management and performance of the Group, has risk

authority over transactions, positions and exposures, and allocates risk authority delegated by the BoD to the business

divisions and Group functions.

The business division Presidents and Group functional heads are responsible for the operation and management of their

business divisions and Group functions, including controlling the risk appetite of the business divisions.

The regional Presidents ensure cross-divisional collaboration in their regions and are mandated to inform the GEB about

any regional activities and issues that may give rise to actual or potentially material regulatory or reputational concerns.

Risk governance

Audited

Group Internal Audit (third line of defense)

Board of Directors

Corporate Culture and

Responsibility Committee

Governance and

Nominating Committee

Compensation

Committee

Audit

Committee

Risk

Committee

1 Our Group functions are support and control functions that provide services for the business divisions and include the following major areas: Group Services

(which consists of the Group Operations and Technology Ofce, Corporate Services, Compliance, Regulatory & Governance, Finance, Risk Control, Human

Resources, Communications & Branding, Legal, the Group Integration Ofce, Group Sustainability and Impact, and Chief Strategy Ofce) and Group Treasury.

2 Including the Cyber Information Security Ofce. ▲

Group Executive Board (acting as risk council)

Group Chief Executive Ofcer

Second line of defense (Group functions¹ – control functions)

First line of

defense

(business and

Group functions

management)

Group Risk

Control

Group

Compliance,

Regulatory &

Governance

(GCRG)

Group

Finance

Group

Legal

Group Human

Resources

and Group

Corporate

Services

Divisional,

regional and legal

entity Presidents

Group function

Heads

Group Chief

Compliance

and

Governance

Ofcer

Group

General

Counsel

Head Group

Human

Resources &

Group Corporate

Services

Group Chief

Risk Ofcer

(CRO)

Group Chief

Financial

Ofcer (CFO)

Central Risk

functions

Global Market

Risk CRO / Trea-

sury CRO

Divisional Heads

Compliance &

Operational Risk

Control (C&ORC)

Central GCRG

functions

Central Finance

functions

Central Legal

functions

HR functions

Divisional CROs

(incl. CRO

Sustainability) /

IB Chief Credit

Ofcer

Divisional CFOs Divisional

General Counsels

HR Business

Partners

(divisional /

Group functions)

Regional / legal

entity General

Counsels

Regional / legal

entity CFOs

Regional / legal

entity Heads

GCRG / C&ORC

Regional / legal

entity CROs

Group Integration

Ofce / Group

Sustainability and

Impact / Group

Operations and

Technology Ofce²

Group Treasury

Divisional

Presidents

Regional / legal

entity Presidents

Risk and asset and liability committees

HR regions

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 103

The Group Chief Risk Officer (the Group CRO) is responsible for developing the Group’s risk management and control

framework (including risk principles and risk appetite) for credit, market, country, treasury, model and sustainability and

climate risks. This includes risk measurement and aggregation, portfolio controls, risk reporting, and taking decisions on

transactions, positions, exposures, portfolio limits and allowances in accordance with the risk control authorities

delegated to the Group CRO.

The Group Chief Compliance and Governance Officer is responsible for developing the Group’s risk management and

control framework (including taxonomies and risk appetite) for non-financial risks, as well as implementing independent

control frameworks for these risks.

The Group Chief Financial Officer (the Group CFO) is responsible for transparency in assessing the financial performance

of the Group and the business divisions, and for managing the Group’s financial accounting, controlling, forecasting,

planning and reporting. Additional responsibilities include managing and controlling UBS’s tax affairs, treasury and capital

management, including regulatory ratios, asset and liability management, and developing UBS’s inorganic strategy

(mergers and acquisitions) in collaboration with the GEB.

The Group Chief Operations and Technology Officer is responsible for driving Group-wide digitalization, delivering

technology services, infrastructure and operations, including cybersecurity and information security, for our clients and

employees, and providing Group-wide data governance.

The Group General Counsel manages the Group’s legal affairs, ensuring effective and timely assessment of legal matters

impacting the Group or its businesses, and managing and reporting all litigation matters.

The Head Group Human Resources & Group Corporate Services defines and executes a human resources strategy aligned to UBS’s

objectives, supplies real estate infrastructure and controls supply and demand management activities.

The Group Integration Officer develops UBS’s integration strategy with regard to Credit Suisse within agreed design

principles and in accordance with UBS’s strategy and coordinates with integration teams to ensure coherent and

consistent execution of integration plans and milestones.

GIA independently assesses the soundness of UBS’s risk and control culture and reliability of financial and operational

information. GIA also assesses the design, operating effectiveness and sustainability of processes to define strategy and

risk appetite, governance processes, risk management, internal controls, remediation activities and processes to comply

with legal and regulatory requirements and internal documents. The Head GIA reports to the Chairman of the BoD. GIA

also has a functional reporting line to the BoD Audit Committee.

Some of these roles and responsibilities are replicated for significant entities of the Group. Designated entity risk officers

oversee and control financial and non-financial risks for significant entities of UBS as part of the entity control framework,

which complements the Group’s risk management and control framework. 

Risk appetite framework

We have a defined Group-level risk appetite, covering financial and non-financial risk types, via a complementary set of

qualitative and quantitative risk appetite statements. This is reviewed and recalibrated annually and presented to the

BoD for approval.

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. The “Risk appetite framework” chart below shows the key elements

of the framework, which is described in detail in this section.

Qualitative risk appetite statements aim to ensure we maintain the desired risk culture. Quantitative risk appetite

objectives are designed to enhance UBS’s resilience against the effects of potential severe adverse economic or

geopolitical events. These risk appetite objectives cover minimum capital and leverage ratios, solvency, earnings, liquidity

and funding, and are subject to periodic review, including the yearly business planning process. These objectives are

complemented by a standardized set of quantitative firm-wide non-financial risk appetite objectives established at the

Group and business division levels. Non-financial risk events exceeding predetermined risk tolerances, expressed as

percentages of UBS’s total operating income, must be escalated as per the firm-wide escalation framework.

The quantitative risk appetite objectives are supported by a comprehensive suite of risk limits set at a portfolio level to

monitor specific portfolios and to identify potential risk concentrations.

The status of our quantitative risk appetite objectives is evaluated each month and reported to the BoD and the GEB. As

our risk appetite may change over time, portfolio limits and associated approval authorities are subject to periodic reviews

and changes, particularly in the context of our annual business planning process.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 104

Our risk appetite framework is governed by a single overarching policy and conforms to the Financial Stability Board’s

Principles for an Effective Risk Appetite Framework. The former UBS risk appetite framework is applied to the combined

UBS Group.

Risk principles and 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. These principles are supported by a range of initiatives

covering employees at all levels, for example the UBS House View on Leadership, which is a set of explicit expectations

that establishes consistent leadership standards across UBS, and our Principles of Good Supervision, which establish clear

expectations of managers and employees regarding supervisory responsibilities, specifically: to take responsibility; to

know and organize their business; to know their employees and what they do; to create a good risk culture; and to

respond to and resolve issues.

› Refer to “Employees” in the “How we create value for our stakeholders” section of this report for more information about our

Pillars, Principles and Behaviors

› Refer to the Code of Conduct and Ethics of UBS at

ubs.com/code

for more information

Risk management and control principles

Protection of financial strength

Protecting UBS’s financial strength by controlling our 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 our reputation through a sound risk culture characterized by a holistic and integrated view of

risk, performance and reward, and through full compliance with our standards and principles, particularly

our Code of Conduct and Ethics.

Business management accountability

Maintaining management accountability, whereby business management owns all risks assumed

throughout the Group 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.

Whistleblowing policies and procedures exist to encourage an environment where staff are comfortable raising concerns.

There are multiple channels via which individuals may, either openly or anonymously, escalate suspected breaches of

laws, regulations, rules and other legal requirements, our Code of Conduct and Ethics, policies or relevant professional

standards. We are committed to ensuring there is appropriate training and communication to staff and legal entity

representatives, including information about new regulatory requirements.

Mandatory training programs cover various compliance-related and risk-related topics, including operational risk and

anti-money laundering. Additional specialized training is provided depending on employees’ specific roles and

responsibilities, e.g., credit risk and market risk training for those working in trading areas.

Risk appetite framework

Risk appetite statements

Risk principles, governance, roles and responsibilities Risk objectives, measures and controls

Risk reporting and disclosure, including internal, regulatory and external reporting

– Risk management and control principles

– Code of Conduct and Ethics

– Total Reward Principles

– Organization regulations / policies

– Roles and responsibilities

– Group-wide risk appetite objectives

– Non-nancial risk appetite objectives

– Risk measurement frameworks

– Authorities and limits

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 105

Quantitative risk appetite objectives

Our quantitative risk appetite objectives aim to ensure that our aggregate risk exposure remains within desired risk

capacity, based on capital and business plans. The specific definition of risk capacity for each objective is aimed at ensuring

we have sufficient capital, earnings, funding and liquidity to protect our businesses and exceed minimum regulatory

requirements under a severe stress event. The risk appetite objectives are evaluated during the annual business planning

process and approved by the BoD. The comparison of risk exposure with risk capacity is a key consideration in decisions

on potential adjustments to the business strategy, risk profile, and the level of capital returns to shareholders.

In the annual business planning process, UBS’s business strategy is reviewed, the risk profile that our operations and

activities result in is assessed, and that risk profile is stressed. We use both scenario-based stress tests and economic

capital risk measurement techniques to assess the effects of severe stress events at a firm-wide level. These

complementary frameworks capture exposures to material risks across our business divisions and Group Items.

The BoD has approved the following risk appetite objectives for the combined UBS Group.

› Refer to “Risk measurement” in this section for more information about our stress testing and economic capital measures

Our risk capacity is underpinned by performance targets and capital guidance as per our business plan. When determining

our risk capacity in case of a severe stress event, we estimate projected earnings under stress, factoring in lower expected

income and expenses. We also consider capital impacts under stress from deferred tax assets, pension plan assets and

liabilities, and accruals for capital returns to shareholders.

Quantitative risk appetite objectives

Granular limit framework

Minimum capital objectives

CET1 capital is sufcient to meet

minimum RWA-based capital

requirements even if a severe stress

event were to occur.

Earnings objectives

Losses do not exceed average

historical earnings even if a severe

stress event were to occur.

Minimum leverage ratio objectives

CET1 capital is sufcient to meet

minimum leverage-ratio-based capital

requirements even if a severe stress

event were to occur.

Liquidity objectives

Ensure that the rm has sufcient

liquidity to survive a severe three-

month idiosyncratic and market-

wide liquidity stress event without

government support, allowing for

discrete management actions.

Solvency objectives

CET1 capital plus contingent capital

is sufcient to ensure that the

probability of loss for the rm’s debt

holders is consistent with the rm’s

target credit rating.

Funding objectives

Ensure that the rm has sufcient

long-term funding to maintain

franchise assets at a constant level

under stressed market conditions for

up to one year without government

support, allowing for discrete

management actions.

Risk capacity

Projected earnings

adjusted to reect

business risk

Capital

adjusted to reect

stress impact on capital-

relevant elements

Risk exposure

Economic capital measures

earnings-at-risk, capital-at-risk, risk-based capital

Stress measures

combined stress test

Credit risk

Country risk

Liquidity and

Pension risk

Market risk¹ Non-nancial risk

funding risk

Structural foreign-

exchange risk

Quantitative risk appetite objectives

1 Includes interest rate risk. Refer to “Risk categories” in this section for more information.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 106

Risk appetite objectives define the aggregate risk exposure acceptable at the firm-wide level, given our risk capacity. The

maximum acceptable risk exposure is supported by a full set of risk limits, which are cascaded to businesses and portfolios.

These limits aim to ensure that our risks remain in line with risk appetite.

Risk appetite statements at the business division level are derived from the firm-wide risk appetite. They may also include

division-specific strategic goals related to that division’s activities and risks. Risk appetite statements are also 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.

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.

Since the acquisition of the Credit Suisse Group, the Group Risk Summary report provides a monthly overview of the

combined risk profile across UBS AG and Credit Suisse AG, covering both financial and non-financial risks. The report

recently also included the status of our risk appetite objectives and the results of firm-wide stress testing. With respect

to financial risks, the Group Risk Summary includes a view of aggregated risk exposures, to the extent metrics are broadly

comparable. The Group Risk Summary is distributed internally to the BoD, the GEB and senior members of Risk Control

and GIA. In parallel, respective senior management continues to be informed about the two parent banks’ risks in more

detail via the UBS AG Risk Report (formerly the Group Risk Report), the Credit Suisse AG Financial Risk Report and the

Credit Suisse AG Non-Financial Risk Report.

Monthly divisional risk reports are supplemented with daily or weekly reports, at various levels of granularity, covering

market and credit risks for the business divisions to enable risk officers and senior management to monitor and control

the Group’s risk profile.

Our internal risk reporting covers financial and non-financial risks and is supported by risk data and measurement systems

that are also used 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 GIA, following a risk-based audit

approach.

Model risk management

Introduction

We rely on models to inform risk management and control decisions, to measure risks or exposures, value instruments

or positions, conduct stress testing, assess adequacy of capital, and manage clients’ assets and our own assets. Models

may also be used to measure and monitor compliance with rules and regulations, for surveillance activities, or to meet

financial or regulatory reporting requirements.

Model risk is defined as the risk of adverse consequences (e.g., financial losses or reputational damage) resulting from

incorrect or misused models.

Model governance framework

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 they can be granted approval for use, all our models are independently validated.

Once validated and approved for use, a model is subject to ongoing model monitoring and regular model confirmation,

ensuring that the model is only used if it continues to be found fit for purpose. All models are subject to periodic model

re-validation.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 107

Our model risk governance framework follows our overarching risk governance framework, with the three lines of

defense (LoD) assigned as follows.

– First LoD: individuals responsible for development, maintenance and appropriate use of the models, within business

units and Group functions.

– Second LoD: individuals responsible for independent review of and effective challenge to the models, the Model Risk

Management & Control function headed by the Chief Model Risk Officer.

– Third LoD: Group Internal Audit.

An important difference as compared with how LoD are usually defined in financial and non-financial risk is that some

models are owned by traditionally second LoD functions, such as Risk Control, Finance or Compliance.

Model risk appetite framework and statement

The model risk appetite framework sets out the model risk appetite statement, defines the relevant metrics and lays out

how appropriate adherence is assessed.

Model oversight

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 CRO 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.

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

The text below describes the scenario-based stress testing and economic capital measures of UBS AG on a consolidated

basis during 2023. As part of the ongoing integration of Credit Suisse, we have made significant progress in the

evaluation and alignment of our stress testing and economic capital approaches and results. We will continue to integrate

our risk methodologies and measurements as Credit Suisse portfolios migrate to UBS infrastructure.

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 GEB. As described in “Risk appetite framework,” stress testing, along

with economic capital measures, has a central role in our risk appetite and business planning processes.

Our stress testing framework has three pillars: (i) combined stress tests; (ii) an extensive set of portfolio- and risk-type-

specific stress tests; and (iii) reverse stress testing.

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. We implement each scenario through the expected evolution of market indicators and

economic variables under that scenario and then estimate the overall loss and capital implications were the scenario to

occur. Following the existing UBS AG scenario governance, 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.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 108

We provide detailed stress loss analyses to the Swiss Financial Market Supervisory Authority (FINMA) and regulators of

our legal entities in accordance with their requirements.

Our Enterprise-wide Stress Forum (the ESF) aims to ensure the consistency and adequacy of the assumptions and scenarios

used for firm-wide stress measures. As part of its responsibilities, the ESF, with input from the Think Tank, a panel of

senior representatives from the business divisions, Risk Control and Economic Research, seeks to ensure that the set of

stress scenarios adequately reflects current and potential developments in the macroeconomic and geopolitical

environment, current and planned business activities, and actual or potential risk concentrations and vulnerabilities in our

portfolios.

Each scenario captures a wide range of macroeconomic variables, including GDP, equity prices, interest rates, foreign

exchange rates, commodity prices, property prices and unemployment. We use assumed changes in these

macroeconomic and market variables in each scenario 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 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 variables are updated periodically to account for changes in the current and

possible future market environment.

In 2023, 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.

As part of the CST framework, we routinely monitored three additional stress scenarios throughout 2023:

– The global crisis scenario assumes a fall in global trade, which particularly hits China and leads to a hard landing.

Combined with political, solvency and liquidity concerns, this results in a sharp sell-off of emerging markets sovereign

debt and some emerging markets default. The macroeconomic and market impacts amplify concerns about peripheral

European sovereign debt, causing Greece and Cyprus to default.

– The global depression scenario explores a global risk-off market with a combination of political, solvency and liquidity

concerns around emerging markets sovereign debt, causing several large emerging markets to default. Several

European economies also default, and some leave the Eurozone. A negative feedback loop between collapsing

demand, declining asset values and commodity prices, and disruption in the banking system leads to a deep and

prolonged recession across the globe.

– The US monetary crisis scenario explores a loss of confidence in the US, which leads to a sell-off of US dollar-

denominated assets, sparking an abrupt and substantial depreciation of the US dollar. The US economy is hit hard,

financial markets enter a period of high volatility and other industrialized countries replicate the cyclical pattern of the

US. Regional inflation trends diverge as the US experiences significant inflationary pressures while other developed

markets experience deflation.

Portfolio-specific stress tests are measures tailored to the risks of specific portfolios. Our portfolio stress loss measures are

derived from data on past events, but also include forward-looking elements (e.g., we derive the expected market

movements in our liquidity-adjusted stress metric using a combination of historical market behavior, based on an analysis

of historical events, and forward-looking analysis, including consideration of defined scenarios that have never occurred).

Results of portfolio-specific stress tests may be subject to limits to explicitly control risk-taking or may be monitored

without limits to identify vulnerabilities.

Reverse stress testing starts from a defined stress outcome (e.g., a specified loss amount, reputational damage, a liquidity

shortfall or a breach of minimum capital ratios) and works backward to identify macroeconomic scenarios and / or

idiosyncratic events that could result in such an outcome. As such, reverse stress testing is intended to complement

scenario-based stress tests by assuming “what if” outcomes that could extend beyond the range normally considered,

and thereby potentially challenge assumptions regarding severity and plausibility.

We also routinely analyze the effect of increases or decreases in interest rates and changes in the structure of yield curves.

Within Group Treasury, 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

Economic capital measures

We complement the scenario-based CST measures with economic capital stress measures to calculate and aggregate

risks using statistical techniques to derive stress events at chosen confidence levels.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 109

This framework is used to derive a loss distribution, considering effects on both income and expenses, based on the

simulation of historically observed financial and economic risk factors in combination with the firm’s actual earnings and

relevant risk exposures. From that, we determine earnings-at-risk (EaR), measuring the potential shortfall in earnings (i.e.,

the deviation from forecast earnings) at a 95% confidence level and evaluated over a one-year horizon. EaR is used for

the assessment of the earnings objectives in our risk appetite framework.

We extend the EaR measure, incorporating the effects of gains and losses recognized through other comprehensive

income, to derive a distribution of potential effects of stress events on common equity tier 1 capital. From this distribution,

we derive our capital-at-risk (CaR) buffer measure at a 95% confidence level to assess our capital and leverage ratio risk

appetite objectives, and derive our CaR solvency measure at a 99.9% confidence level to assess our solvency risk appetite

objective.

We use the CaR solvency measure as a basis for deriving the contributions of the business divisions to risk-based capital

(RBC). RBC measures the potential capital impairment from an extreme stress event at a 99.9% confidence level.

Portfolio and position limits

UBS maintains a comprehensive set of risk limits across its major risk portfolios. These portfolio limits are set based on

our risk appetite and periodically reviewed and adjusted as part of the business planning process.

Firm-wide stress and statistical metrics are complemented by more granular portfolio and position limits, triggers and

targets. Combining these measures provides a comprehensive framework for control of the key risks of our business

divisions, as well as significant legal entities.

UBS AG and Credit Suisse AG apply limits to a variety of exposures at the portfolio level, using statistical and stress-based

measures, such as value-at-risk, liquidity-adjusted stress, loan underwriting limits, economic value sensitivity and portfolio

default simulations for loan books. These are complemented with a set of controls for net interest income sensitivity,

mark-to-market losses on available-for-sale portfolios, and the effect of foreign exchange movements on capital and

capital ratios.

Portfolio measures are supplemented with counterparty- and position-level controls. Risk measures for position controls

are based on market risk sensitivities and counterparty-level credit risk exposures. Market risk sensitivities include

sensitivities to changes in general market risk factors (e.g., equity indices, foreign exchange rates and interest rates) and

sensitivities to issuer-specific factors (e.g., changes in an issuer’s credit spread or default risk). We monitor numerous

market and treasury risk controls on a daily basis. Counterparty measures capture the current and potential future

exposure to an individual counterparty, considering collateral and legally enforceable netting agreements.

Since the legal close of the acquisition of the Credit Suisse Group in June 2023, UBS has implemented a set of combined

portfolio limits applied to UBS Group AG to oversee the aggregate risk profile, while UBS AG and Credit Suisse AG

continue to operate under their existing risk management and limit frameworks until the merger of the two entities in

the second quarter of 2024. This initial set of combined limits was further reviewed and extended to cover additional

main risk portfolios of the Group in January 2024.

› Refer to “Credit risk” in this section for more information about counterparty limits

› Refer to “Risk appetite framework” in this section for more information about the risk appetite framework

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’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. This includes an assessment of, for example, the provider of the hedge and market liquidity where

the hedge might be traded. 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 is when

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” and “Market risk” in this section for more information about the composition of our portfolios

› Refer to the “Risk factors” section of this report for more information

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 110

Credit risk

Audited | Main sources of credit risk

– Global Wealth Management credit risk arises from collateralized lending, primarily against securities, private equity

and hedge fund interest, investors’ uncalled capital commitments, residential and commercial real estate, and other

real assets such as ships and aircraft, as well as from derivatives trading. In addition, risk also arises from its corporate

lending and other unsecured lending.

– A substantial portion of lending exposure arises from Personal & Corporate Banking, which offers mortgage loans,

secured mainly by owner-occupied properties and income-producing real estate, as well as corporate loans, and

therefore depends on the performance of the Swiss economy and real estate market.

– The Investment Bank’s credit exposure 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 within Non-core and Legacy relates to large, less-liquid structured financing transactions, including some

with residential and commercial real estate collateral, a material corporate loan portfolio and a counterparty credit

trading portfolio with lending against securities collateral and derivatives. 

Credit loss expense / release

Total net credit loss expenses were USD 1,037m in 2023, reflecting net credit loss expenses of USD 593m related to

stage 1 and 2 positions and net credit loss expenses of USD 445m related to credit-impaired (stage 3 and purchased

credit-impaired) positions. Expected credit loss (ECL) expenses of USD 593m for the performing loans were predominantly

attributable to the initial recognition of expected credit loss allowances and provisions after the date of the acquisition

of the Credit Suisse Group. Credit-impaired net expenses amounted to USD 445m, of which USD 325m was within the

Credit Suisse portfolio and USD 120m was within the UBS portfolio. As per IFRS 9, no ECL allowances and provisions had

to be recognized at the acquisition date for credit-impaired exposures, after the fair valuation as per the purchase price

allocation.

› Refer to “Note 1 Summary of material accounting policies,” “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 IFRS 9 and expected credit losses

Credit loss expense / (release)

Performing positions

Credit-impaired positions

USD m

Stages 1 and 2

Stage 3

Purchased

Total

For the year ended 31.12.23

Global Wealth Management

108

147

Personal & Corporate Banking

290

183

501

Asset Management

(1)

Investment Bank

110

190

Non-core and Legacy

193

Group Items

Total

593

378

1,037

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

For the year ended 31.12.21

Global Wealth Management

(28)

(1)

(29)

Personal & Corporate Banking

(62)

(24)

(86)

Asset Management

Investment Bank

(34)

Non-core and Legacy

Group Items

Total

(123)

(25)

(148)

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 111

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 Group CEO, the Group 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 Group-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

/ operational controls that constrain risk concentrations at portfolio, sub-portfolio or counterparty levels for sector

exposure, country risk and specific product exposures. 

Credit risk profile of the Group

The exposures detailed in this section are based on management’s view of credit risk, which differs in certain respects

from the ECL measurement requirements of IFRS Accounting Standards.

Internally, we put 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 (ETDs) and securities financing transactions (SFTs), consisting of securities borrowing and lending, and

repurchase and reverse repurchase agreements.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 112

Banking and traded products exposure in our business divisions and Group Items

31.12.23

USD m

Global

Wealth

Management

Personal &

Corporate

Banking

Asset

Management

Investment

Bank

Non-core

and Legacy

Group

Items

Total

Banking products

1,2

Gross exposure

409,711

481,821

1,700

96,878

50,223

138,884

1,179,217

of which: loans and advances to customers (on-balance sheet)

279,360

336,916

16,993

8,106

155

641,542

of which: guarantees and loan commitments (off-balance sheet)

21,344

58,618

36,094

3,149

18,569

137,834

Traded products

2,3,4

Gross exposure

11,812

4,748

47,630

64,191

of which: over-the-counter derivatives

8,397

4,116

12,400

24,913

of which: securities financing transactions

371

23,044

23,434

of which: exchange-traded derivatives

3,045

613

12,186

15,844

Other credit lines, gross

70,130

88,279

4,714

127

163,256

Total credit-impaired exposure, gross

1,681

3,045

469

1,169

6,367

of which: stage 3

1,012

2,640

408

290

4,352

of which: PCI

668

405

879

2,014

Total allowances and provisions for expected credit losses

390

1,234

358

271

2,261

of which: stage 1

166

372

133

700

of which: stage 2

255

416

of which: stage 3

590

146

158

993

of which: PCI

153

31.12.22

USD m

Global

Wealth

Management

Personal &

Corporate

Banking

Asset

Management

Investment

Bank

Non-core

and Legacy

Group

Items

Total

Banking products

1,2

Gross exposure

334,621

236,508

1,454

76,585

804

37,182

687,152

of which: loans and advances to customers (on-balance sheet)

219,385

154,643

(1)

12,754

1,212

388,003

of which: guarantees and loan commitments (off-balance sheet)

13,147

28,610

12,920

7,483

62,163

Traded products

2,3

Gross exposure

8,328

320

34,370

43,018

of which: over-the-counter derivatives

6,416

304

11,218

17,938

of which: securities financing transactions

17,055

of which: exchange-traded derivatives

1,912

6,097

8,024

Other credit lines, gross

12,084

23,092

6,105

109

41,390

Total credit-impaired exposure, gross

757

1,380

312

2,455

of which: stage 3

757

1,380

312

2,455

of which: PCI

Total allowances and provisions for expected credit losses

215

701

168

1,091

of which: stage 1

138

259

of which: stage 2

156

267

of which: stage 3

406

564

of which: PCI

1 IFRS 9 gross exposure for banking products includes the following financial assets 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 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. 4 Credit Suisse traded products are presented

before reflection of the impact of the purchase price allocation performed under IFRS 3, Business Combinations, following the acquisition of the Credit Suisse Group by UBS. The acquisition date adjustment is less

than USD 1bn and, if applied, would lead to a reduction in our reported traded products exposure. 5 Unconditionally revocable committed credit lines.

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

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 113

Global Wealth Management

Gross banking products exposure within Global Wealth Management increased by USD 75bn to USD 410bn in 2023 due

to the acquisition of the Credit Suisse Group.

Our Global Wealth Management loan portfolio is mainly secured by securities (Lombard loans) and by residential real

estate. Most of our USD 182bn of Lombard loans, including traded products collateralized by securities, were of high

quality, with 93% 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 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 2023, the Lombard book, including traded products,

increased by approximately 19% due to the acquisition of the Credit Suisse Group, with no material losses recorded.

The mortgage book (residential and commercial real estate) increased by approximately 31% due to the acquisition of

the Credit Suisse Group, mainly driven by higher volumes of mortgage loans within the Swiss residential and commercial

real estate portfolios.

Other financing represents approximately 12% of the total banking products exposures and is consolidated in a corporate

and other portfolio that more than doubled in 2023, mainly due to the acquisition of the Credit Suisse Group. Through

this acquisition, Other financing now includes ship, yacht and export financing totaling USD 10bn, as well as an expanded

corporate lending portfolio of USD 5bn.

› 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

Global Wealth Management

Personal & Corporate Banking

USD m, except where indicated

31.12.23

31.12.22

31.12.23

31.12.22

Secured by collateral

271,890

216,993

295,954

138,851

Residential real estate

80,051

62,200

235,878

110,500

Commercial / industrial real estate

8,370

4,955

45,050

19,795

Cash

36,163

30,514

3,919

3,036

Equity and debt instruments

120,672

107,253

5,072

2,228

Other collateral

26,634

12,071

6,034

3,293

Subject to guarantees

2,180

144

6,999

2,758

Uncollateralized and not subject to guarantees

5,290

2,247

33,963

13,034

Total loans and advances to customers, gross

279,360

219,385

336,916

154,643

Allowances

(184)

(138)

(984)

(559)

Total loans and advances to customers, net of allowances

279,176

219,247

335,932

154,084

Collateralized loans and advances to customers in % of total loans and advances to customers, gross (%)

97.3

98.9

87.8

89.8

1 Collateral arrangements generally incorporate a range of collateral, including cash, securities, real estate and other collateral. For the purpose of this disclosure, UBS 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. Credit Suisse applies a risk-based approach

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 within Personal & Corporate Banking increased by USD 245bn to USD 482bn in

2023 due to the acquisition of the Credit Suisse Group. As illustrated in the “Personal & Corporate Banking:

distribution of banking products exposure across internal UBS ratings and loss given default (LGD) buckets” table

below, the majority was classified as investment grade and a significant portion of the exposure is categorized in the

lowest LGD bucket, i.e., 0–25%.

As of 31 December 2023, 88% of loans and advances to customers were secured by collateral, mainly residential and

commercial property. Of the total unsecured amount, 81% related to cash-flow-based lending to corporate

counterparties and 3% related to lending to public authorities.

Our Swiss corporate banking products take-and-hold portfolio exposure was USD 93bn (CHF 78bn) and increased by

USD 57bn compared with 2022 due to the acquisition of the Credit Suisse Group. The portfolio consists of loans,

guarantees and loan commitments to multi-national and domestic counterparties. The small and medium-sized entity

(SME) 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 11bn (CHF 9bn) as of 31 December

2023, compared with USD 7bn (CHF 7bn) in 2022, due to the acquisition of the Credit Suisse Group. A considerable part

of the exposure correlates with commodity prices.

› Refer to “Credit risk models” in this section for more information about loss given default, rating grades and rating agency

mappings

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 114

Swiss mortgage loan portfolio

Our Swiss mortgage loan portfolio secured by residential and commercial real estate in Switzerland continues to be our

largest loan portfolio. These mortgage loans (including loans on self-used commercial real estate), totaling USD 352bn

(CHF 297bn), mainly originate from Personal & Corporate Banking, but also from Global Wealth Management Region

Switzerland.

As illustrated in the “Swiss mortgages: distribution of exposure across exposure segments and loan-to-value (LTV)

buckets” table below, USD 262bn (CHF 220bn) of these mortgage loans related to residential properties that the

borrower was either occupying or renting out, with full recourse to the borrower. USD 70bn (CHF 59bn) related to

income-producing real estate. Of the aggregate amount of Swiss residential mortgages, 99.9% would continue to be

covered by the real estate collateral even if the value assigned to that collateral were to decrease 20%, and more than

99% would remain covered by the real estate collateral even if the value assigned to that collateral were to decrease

30%.

Personal & Corporate Banking: distribution of banking products exposure across internal UBS ratings and loss given

default (LGD) buckets

USD m, except where indicated

31.12.23

31.12.22

LGD buckets

Internal UBS rating

Exposure

0–25%

26–50%

51–75%

76–100%

Weighted

average

LGD (%)

Exposure

Weighted

average

LGD (%)

Investment grade

293,090

184,710

83,321

19,583

5,477

123,358

Sub-investment grade

109,084

37,295

43,077

18,859

9,853

62,219

of which: 6−9

93,684

34,424

39,199

16,275

3,786

56,774

of which: 10−13

15,400

2,871

3,878

2,584

6,067

5,445

Defaulted / Credit-impaired

3,419

268

2,015

1,020

116

1,380

Banking products exposure

405,592

222,273

128,412

39,462

15,446

186,957

1 Excluding balances at central banks and Group Treasury reallocations and for Credit Suisse including only loans and advances to customers and guarantees and loan commitments presented before reflection of the

impact of the purchase price allocation adjustments. 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.

Personal & Corporate Banking: loans uncollateralized and not subject to guarantees, by industry sector

31.12.23

31.12.22

USD m

Construction

452

1.3

172

1.3

Financial institutions

10,294

30.3

3,878

29.8

Hotels and restaurants

247

0.7

135

1.0

Manufacturing

5,092

15.0

1,715

13.2

Private households

5,429

16.0

1,473

11.3

Public authorities

861

2.5

416

3.2

Real estate and rentals

1,643

4.8

547

4.2

Retail and wholesale

4,555

13.4

2,230

17.1

Services

4,606

13.6

2,242

17.2

Other

784

2.3

226

1.7

Exposure, gross

33,963

100.0

13,034

100.0

Swiss mortgages: distribution of exposure across exposure segments and loan-to-value (LTV) buckets

USD bn, except where indicated

31.12.23

31.12.22

LTV buckets

Exposure segment

≤30%

31–50%

51–60%

61–70%

71–80%

81–100%

>100%

Total

Exposure

160.4

70.8

19.5

8.7

2.1

0.3

0.1

261.6

144.0

Residential mortgages

as a % of row total

100

Exposure

46.0

18.1

4.0

1.5

0.2

0.0

0.1

70.0

21.9

Income-producing real estate

as a % of row total

100

Exposure

13.4

4.2

0.9

0.5

0.3

0.2

19.8

10.6

Corporates

as a % of row total

100

Exposure

0.8

0.3

0.1

0.0

1.1

1.0

Other segments

as a % of row total

100

Exposure

220.4

93.4

24.5

10.7

2.5

0.4

0.5

352.3

177.5

Mortgage-covered exposure

as a % of total

100

Exposure

113.2

46.7

11.4

4.7

1.2

0.3

0.1

177.5

Mortgage-covered exposure 31.12.22

as a % of total

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. 2 Comparative

period has been restated to reflect a change in the measure used to disclose Swiss mortgages exposures.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 115

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 increased by USD 20bn to USD 97bn in 2023 due to the acquisition of the Credit Suisse

Group. As illustrated in the “Investment Bank: distribution of banking products exposure across internal UBS ratings and

loss given default (LGD) buckets” table below, banking products exposure is approximately equally split between

investment grade and sub-investment grade and the vast majority had an estimated LGD below 50%.

In the Investment Bank, mandated temporary loan underwriting exposure as of the end of 2023 was USD 2.1bn,

compared with USD 2.6bn at the end of the prior year. USD 50m of commitments had not yet been distributed as

originally planned as of 31 December 2023. Loan underwriting exposures are classified as held for trading, with fair

values reflecting market conditions at the end of 2023.

› Refer to “Credit risk models” in this section for more information about LGD, rating grades and rating agency mappings

Investment Bank: distribution of banking products exposure across internal UBS ratings and loss given default (LGD)

buckets

USD m, except where indicated

31.12.23

31.12.22

LGD buckets

Internal UBS rating

Exposure

0–25%

26–50%

51–75%

76–100%

Weighted

average

LGD (%)

Exposure

Weighted

average

LGD (%)

Investment grade

28,309

5,570

16,658

2,849

3,232

15,878

Sub-investment grade

33,530

8,534

16,853

6,219

1,924

15,522

of which: 6−9

18,956

4,664

7,815

6,019

458

9,174

of which: 10−13

14,574

3,870

9,038

200

1,466

6,348

Defaulted / Credit-impaired

462

332

112

312

Banking products exposure

62,301

14,436

33,623

9,083

5,160

31,712

external ratings” table in this section.

Investment Bank: banking products exposure, by geographical region

31.12.23

31.12.22

USD m

Asia Pacific

5,405

8.7

4,766

15.0

Latin America

791

1.3

1,209

3.8

Middle East and Africa

413

0.7

183

0.6

North America

40,542

65.1

15,409

48.6

Switzerland

168

0.3

461

1.5

Rest of Europe

14,983

24.0

9,684

30.5

Exposure

62,301

100.0

31,712

100.0

impact of the purchase price allocation adjustments.

Investment Bank: banking products exposure, by industry sector

31.12.23

31.12.22

USD m

Banks

5,281

8.5

4,409

13.9

Chemicals

1,752

2.8

583

1.8

Electricity, gas, water supply

843

1.4

363

1.1

Financial institutions, excluding banks

17,543

28.2

14,587

46.0

Manufacturing

8,220

13.2

1,361

4.3

Mining

1,548

2.5

878

2.8

Public authorities

1,356

2.2

259

0.8

Real estate and construction

2,491

4.0

1,685

5.3

Retail and wholesale

5,667

9.1

1,654

5.2

Technology and communications

8,234

13.2

2,324

7.3

Transport and storage

1,160

1.9

499

1.6

Other

8,206

13.2

3,110

9.8

Exposure

62,301

100.0

31,712

100.0

impact of the purchase price allocation adjustments.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 116

Non-core and Legacy

Gross banking products exposure in Non-core and Legacy increased by USD 49bn to USD 50bn in 2023, mainly due to

the acquisition of the Credit Suisse Group. This included positions and businesses not aligned with the Group’s strategy

and policies.

In Non-core and Legacy, mandated temporary loan underwriting exposure as of the end of 2023 was USD 1.0bn. These

commitments had not yet been distributed as originally planned as of 31 December 2023. Loan underwriting exposures

are classified as held for trading, with fair values reflecting market conditions at the end of 2023.

› Refer to “Balance sheet assets” in the “Capital, liquidity and funding, and balance sheet” section of this report for more

information

› Refer to “Our businesses” in the “Our strategy, business model and environment” section of this report for more information

› Refer to “Non-core and Legacy” in the “Financial and operating performance” section of this report for more information

Group Items

Gross banking products exposure within Group Items, which arises primarily in connection with treasury activities,

increased by USD 102bn to USD 139bn in 2023, primarily due to the acquisition of the Credit Suisse Group and an

increase for UBS AG from Group Treasury reflecting higher levels of high-quality liquid assets held, funding provided to

Credit Suisse and an increase in sponsored repo clearing.

› 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 or similar master netting agreements, which generally

allow for 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. Regulations on margining

uncleared OTC derivatives have generally expanded the scope of bilateral derivatives activity subject to initial margining

and increased the amounts of initial margin received from, and posted to, certain bilateral trading counterparties,

resulting in lower close-out risk over time. 

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

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 117

Investment Bank, Non-core and Legacy, and Group Treasury: traded products exposure

USD m

OTC derivatives

SFTs

ETDs

Total

31.12.23

31.12.22

Total exposure, before deduction of credit valuation adjustments and hedges

12,400

23,044

12,186

47,630

34,370

Less: credit valuation adjustments and allowances

(24)

(1)

(24)

(35)

Less: credit protection bought (credit default swaps, notional)

(327)

(109)

Net exposure after credit valuation adjustments, allowances and hedges

12,049

23,044

12,186

47,279

34,226

1 Credit valuation adjustments and allowances are deducted only for UBS Group excluding Credit Suisse

Investment Bank, Non-core and Legacy, and Group Treasury: distribution of net OTC derivatives and SFT exposure

across internal UBS ratings and loss given default (LGD) buckets

USD m, except where indicated

31.12.23

31.12.22

LGD buckets

Internal UBS rating

Exposure

0–25%

26–50%

51–75%

76–100%

Weighted

average

LGD (%)

Exposure

Weighted

average

LGD (%)

Net OTC derivatives exposure

Investment grade

10,709

179

8,080

1,251

1,199

10,757

Sub-investment grade

1,341

504

330

451

318

of which: 6−9

1,081

372

221

449

285

of which: 10−12

of which: 13 and defaulted

223

115

106

Total net OTC derivatives exposure, after credit valuation adjustments

and hedges

12,049

235

8,584

1,580

1,650

11,075

Net SFT exposure

Investment grade

22,807

200

19,317

2,700

591

16,682

Sub-investment grade

238

373

Total net SFT exposure

23,044

200

19,367

2,795

681

17,055

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.

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

31.12.23

31.12.22

31.12.23

31.12.22

USD m

Asia Pacific

1,638

13.6

1,249

11.3

2,840

12.3

4,906

28.8

Latin America

349

2.9

117

1.1

0.3

0.2

Middle East and Africa

236

2.0

615

5.6

437

1.9

483

2.8

North America

4,555

37.8

2,200

19.9

3,243

14.1

3,177

18.6

Switzerland

1,029

8.5

1,055

9.5

3,939

17.1

466

2.7

Rest of Europe

4,243

35.2

5,839

52.7

12,517

54.3

7,988

46.8

Exposure

12,049

100.0

11,075

100.0

23,044

100.0

17,055

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

31.12.23

31.12.22

31.12.23

31.12.22

USD m

Banks

1,829

15.2

1,288

11.6

3,008

13.1

869

5.1

Chemicals

0.2

0.6

0.0

Electricity, gas, water supply

116

1.0

118

1.1

0.0

Financial institutions, excluding banks

8,577

71.2

8,614

77.8

16,143

70.1

14,865

87.2

Manufacturing

0.4

0.9

0.0

Mining

0.1

0.2

0.0

Public authorities

993

8.2

655

5.9

3,890

16.9

1,320

7.7

Retail and wholesale

0.2

0.3

0.0

Transport, storage and communication

174

1.4

115

1.0

0.0

Other

255

2.1

0.6

0.0

Exposure

12,049

100.0

11,075

100.0

23,044

100.0

17,055

100.0

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 118

Credit risk mitigation

Audited | We actively manage credit risk in our portfolios by taking collateral against exposures and by utilizing credit

hedging. 

Lending secured by real estate

Audited | We use 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–

75%, depending on the type and age of the property, and the amount of renovation work needed.

Audited | The value we assign 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. 

Separate models provided by a market-leading external vendor are used to derive property valuations for owner-occupied

residential properties (ORPs) and IPRE. We estimate the current value of an ORP using regression models (hedonic models)

based on statistical comparison against current transaction data. We derive the value of a property from the characteristics

of the real estate itself, as well as those of its location. In addition to the initial valuation, values for ORPs are updated

regularly over the lifetime of the loan using region-specific real estate price indices or hedonic valuation. The price indices

are sourced from external vendors and subject to internal benchmarking. We use these valuations regularly to compute

indexed LTV for all ORPs. Portfolio-specific monitoring systems consider these along with other risk measures (e.g., rating

and behavioral information) to identify higher-risk loans.

For IPRE, the capitalization rate model is used to determine the property valuation by discounting estimated sustainable

future income using a capitalization rate based on various attributes. These attributes consider regional and specific

property characteristics, such as market and location data (e.g., vacancy rates), benchmarks (e.g., for running costs), and

certain other standardized input parameters (e.g., property condition). Updated information regarding rental income

from IPRE is requested from the client at least once every three years. Our portfolio-specific monitoring system alerts us

to changes in rental income and other risk measures (e.g., LTV, rating, behavioral information).

To take market developments into account for these models, the 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 | We similarly apply underwriting guidelines for our 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, loan size, and purpose. The maximum LTV allowed within the standard approval process ranges from 45–80%. 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.

For our mortgage loan portfolio in the Global Wealth Management regions of EMEA and Asia Pacific, we apply global

underwriting guidelines with regional variations 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 30% to

70%, depending on the type and location of the property, as well as other factors. Collateral sufficiency is often 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 our Swiss mortgage portfolio

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 119

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 and equities), 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.

We derive lending values 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.

We assess concentration and correlation risks across collateral posted at a counterparty level, and at a divisional level

across counterparties. We also perform targeted Group-wide reviews of concentration. 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 is always

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.

We conduct stress testing of collateralized exposures 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 | We use single-name credit default swaps (CDSs), credit-index CDSs, structured hedging, 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.

We have strict guidelines with regard to taking credit hedges into account for credit risk mitigation purposes. For example,

when monitoring exposures against counterparty limits, we do 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. Buying credit protection also creates credit exposure with regard to the protection provider. We monitor and

limit exposures to credit protection providers, and also monitor the effectiveness of credit hedges as part of our overall

credit exposures to the relevant counterparties, which are typically collateralized. For credit protection purchased to hedge

the lending portfolio, this includes monitoring mismatches between the maturity of credit protection purchased and the

maturity of the associated loan. Such mismatches result in basis risk and may reduce the effectiveness of the credit

protection. Mismatches are routinely reported to credit officers and mitigating actions are taken when necessary. 

› Refer to “Note 11 Derivative instruments” in the “Consolidated financial statements” section of this report for more information

Mitigation of settlement risk

To mitigate settlement risk, we reduce actual settlement volumes by using multi-lateral and bi-lateral 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.

Foreign exchange transactions are our most significant source of settlement risk. We are a member of Continuous Linked

Settlement (CLS), 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 our overall credit

risk management of OTC derivatives.

Credit risk models

Basel III – A-IRB credit risk models

Audited | We have 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. We also use models to derive the portfolio

credit risk measures of EL, statistical loss and stress loss. 

› Refer to the 31 December 2023 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

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 120

Key features of our main credit risk models

Portfolio in scope

Major asset classes

Model

approach

Number of

main models

Main drivers

Number of

years of loss

data

Probability of default

Sovereigns and central banks

Central governments and

central banks, Corporates:

other lending

Scorecard

Political, institutional and economic indicators including

qualitative factors

>15

Banks and other financial

institutions

Banks & Securities dealer,

Corporates: other lending

Scorecard

Financial data including balance sheet ratios, profit and

loss data and qualitative factors

>15

Funds

Corporates: other lending

Scorecard

Financial data and ratios constructed from it (such as net

asset value, volatility of returns), qualitative factors

>15

Large corporates and

internationals

Corporates: other lending

Scorecard,

market data

Financial data including balance sheet ratios and profit

and loss, market data and qualitative factors

>15

Enterprises in Switzerland

Corporates: other lending,

Retail: other retail

Scorecard

Financial data including balance sheet ratios and profit

and loss, behavioral data and qualitative factors

>20

Commodity traders

Corporates: specialized

lending

Scorecard

Financial data including balance sheet ratios and profit

and loss, as well as non-financial criteria. Volume,

liquidity and duration of financed commodity

transactions

>20

Ship finance

Corporates: specialized

lending

Scorecard

Freight rates, ship market values, operational expenses

and group information

>20

Owner-occupied mortgages &

other wealth-management

financing

Retail: residential

mortgages, Corporates:

other lending

Scorecard

Behavioral data, affordability relative to income, property

type, loan-to-value, assets and qualitative factors

>10

Income producing real estate

mortgages

Retail: residential

mortgages, Corporates:

specialized lending

Scorecard

Loan-to-value, debt-service-coverage, financial data (for

large corporates only), behavioral data and qualitative

factors

>20

Lombard lending and

concentrated equity based

lending (CEL)

Retail: other retail,

Corporates: other lending

(CEL)

Simulation

approach based

on historical

returns

Lending value ratio, collateral asset class, historical asset

returns, counterparty factors

>10

Credit cards, consumer loans and

leases in Switzerland

Retail: qualifying revolving

retail and other retail,

Corporates: other lending

Scorecard

Client type and characteristics and behavioral data

Other portfolios

Corporates: other lending,

Public sector entities and

Multilateral development

banks, Corporate:

specialized lending

Scorecard,

pooled rating

approach,

rating template

Financial data including balance sheet ratios and profit

and loss, market data and qualitative factors. Separate

models for Commercial Real Estate loans, Debt REITs,

Mortgage originators, Public sector entities and

Multilateral development banks/Supranationals

>15

Loss given default

Investment Bank – all

counterparties

Across the asset classes

Statistical

model

Counterparty and facility specific, including industry

segment, region, collateral, seniority, legal environment,

bankruptcy procedures and macro-economic factors

>20

Swiss corporate and mortgage

lending portfolios

Corporates: other lending,

Corporates: specialized

lending, Retail: residential

mortgages

Statistical

model

Collateral type and client segment, Loan-to-value, time

since last valuation, location indicator

>10

Ship finance

Corporates: specialized

lending

Statistical

model

Loan-to-value of ship and financial collaterals

>20

International residential

mortgages & other wealth-

management financing

Retail: residential

mortgages, Retail: other

retail, Corporates: other

lending

Statistical

model

Loan-to-value, market value shock

>10

Lombard lending and

concentrated equity based

lending (CEL)

Retail: other retail,

Corporates: other lending

(CEL)

Simulation

approach based

on historical

returns

Loan-to-value, collateral asset class and liquidity,

historical asset returns, counterparty factors

>10

Credit cards, consumer loans and

leases in Switzerland

Retail: qualifying revolving

retail and other retail,

Corporates: other lending

Statistical

model

Collateral, accrued interests, client & product

characteristics, changes in original payment plan

Exposure at default

Banking products

Across the asset classes

Statistical

model

Facility type and product type, commitment type,

headroom, and client characteristics

Traded products

Across the asset classes

Statistical

model

Product specific market drivers, e.g. interest rates.

Separate models for OTC/ETD and SFT that generate the

simulation of risk factors used for the credit exposure

measure

n/a

1 Table captures the model landscape of UBS Group AG, which also includes the models that are only applied to Credit Suisse.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 121

Audited |

Internal UBS rating scale and mapping of external ratings

Internal UBS rating

1-year PD range in %

Description

Moody’s Investors

Service mapping

S&P mapping

Fitch mapping

0 and 1

0.00–0.02

Investment grade

Aaa

AAA

0.02–0.05

Aa1 to Aa3

AA+ to AA–

0.05–0.12

A1 to A3

A+ to A–

0.12–0.25

Baa1 to Baa2

BBB+ to BBB

0.25–0.50

Baa3

BBB–

0.50–0.80

Sub-investment grade

Ba1

BB+

0.80–1.30

Ba2

1.30–2.10

Ba3

BB–

2.10–3.50

B+

3.50–6.00

6.00–10.00

B–

10.00–17.00

Caa1 to Caa2

CCC+ to CCC

>17

Caa3 to C

CCC- to C

Counterparty is in default

Default

Defaulted



Probability of default

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 “Key features of

our main credit risk models” table above gives an overview of the approaches used for our main asset classes and presents

the main drivers of the PD.

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 S&P, 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 S&P 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

Exposure at default (EAD) is the amount we expect to be owed by a counterparty at the time of possible default. We

derive EAD 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, we derive EAD by modeling the range of possible exposure outcomes at various points in time using a

simulation based on a scenario-consistent technique. We assess the net amount that may be owed to us or that we may

owe to others, taking into account the effect of market movements over the potential time it would take to close out

positions.

We assess 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 our traded products exposure (wrong-way risk), and we have

established specific controls to mitigate such risks.

Loss given default

Loss given default (LGD) is the magnitude of the likely loss if there is a default. Our LGD estimates, which consider

downturn conditions, include loss of principal, interest and other amounts less recovered amounts. We determine 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. Our estimates are supported by internal loss data and external

information, where available. If we hold collateral, 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

We use the concept of expected loss to quantify future credit losses that may be implicit in our current portfolio. The

expected loss for a given credit facility is a product of the three components described above, i.e., PD, EAD and LGD. We

aggregate the expected loss for individual counterparties to derive expected portfolio credit losses.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 122

IFRS 9 – ECL credit risk models

Expected credit loss

Expected credit loss (ECL) is defined as the difference between contractual cash flows and those UBS 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 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 our 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 expenses in 2023

were USD 593m and respective allowances and provisions as of 31 December 2023 were USD 1,115m. This included

ECL allowances and provisions of USD 923m related to positions under the Basel III advanced internal ratings-based

(A-IRB) approach. Basel III EL for non-defaulted positions was USD 1,620m.

› 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 (advanced internal ratings-based 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 to reflect lifetime cash

shortfalls that will result if a default event occurs in the 12 months

after the reporting date (or a shorter period if the expected lifetime

is less). 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 over the 12-month

period, irrespective of the actual maturity of a particular

transaction. The credit conversion factor includes downturn

adjustments.

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

over the life of the transaction without including downturn

assumptions and the prepayment factor. In both cases, the time

period is capped at 12 months, unless an SICR has occurred.

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 will be 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

n / a

Multiple forward-looking scenarios have to be taken into account

to determine a probability-weighted ECL.

Further key aspects of credit risk models

Stress loss

We complement our 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 our portfolios, under which key credit risk

parameters are assumed to deteriorate substantially. Where we consider it appropriate, we apply limits on this basis.

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 our stress testing framework

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 123

Credit risk model confirmation

Our 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. We therefore perform

regular analyses of the evolution of portfolios to identify such changes in the structure and credit quality of portfolios.

› Refer to “Model risk management” 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 2023.

In Personal & Corporate Banking and Global Wealth Management for UBS AG’s models, we recalibrated the risk

parameters for the income-producing real estate mortgages in Switzerland and implemented a model update for the

Swiss corporate PD model. In addition, we recalibrated the PD and LGD models for the commodity trade finance business

within Personal & Corporate Banking and updated the LGD model for corporate clients and financial institutions. In

Global Wealth Management, we also implemented a model update for the standard Lombard model.

In the Investment Bank, new PD models for UBS AG for banks, corporations, insurance companies and managed funds

went live. In addition, certain RWA multipliers were recalibrated as a result of improvements to models.

Within Credit Suisse, updated models for the Swiss income-producing real estate portfolio (IPRE LGD, private client IPRE

PD and corporate client IPRE PD) were rolled out. In addition, dedicated A-IRB models were introduced for the Swisscard

credit card portfolio, as well as the BANK-now consumer loans and car leasing portfolios, which had previously been

treated on a pooled basis.

Where required, changes to models and model parameters were approved by FINMA before being made.

› 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

Future credit risk-related regulatory capital developments

In December 2017, the Basel Committee on Banking Supervision (the BCBS) announced the finalization of the Basel III

framework. In November 2023, the Swiss Federal Council published the national implementation of the final Basel III

standards, which is expected to enter into force by January 2025. The updated framework makes 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 large and medium-sized corporate clients, 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, revisions to the credit valuation adjustment (CVA) framework were

published in November 2023, including the removal of the advanced CVA approach. UBS has a close dialogue with

FINMA to discuss in detail the implementation objectives and prepare for a smooth transition of the capital regime for

credit risk.

› Refer to “Capital management objectives, planning and activities” 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

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 124

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 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 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. 

Forbearance (credit restructuring)

Audited | If payment default is imminent or default has already occurred, we may grant concessions to borrowers in financial

difficulties that we would otherwise not consider 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

our risk tolerance.

Contractual adjustments when there is no evidence of imminent payment default, or where changes to terms and

conditions are within our usual risk tolerance, are not considered to be forborne. 

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., we expect 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 at 22 basis points as of 31 December 2023, 1 basis

point higher than on 31 December 2022. The combined stage 1 and 2 ratio of 11 basis points was 1 basis point higher

than on 31 December 2022; the stage 3 ratio was 21%, 1 percentage point lower than on 31 December 2022 and PCI

ratio was 7%.

› The majority of the credit-impaired exposure relates to loans and advances in our Swiss domestic business. 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

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 125

Loss history statistics

USD m, except where indicated

31.12.23

31.12.22

31.12.21

31.12.20

31.12.19

Banking products, core exposure and off-balance sheet, gross

966,469

509,024

517,866

497,313

423,771

of which: amounts due from banks and loans and advances to customer (gross)

662,715

402,801

414,099

396,049

340,003

Credit-impaired exposure, gross (stage 3 & PCI)

6,367

2,455

2,610

3,778

3,113

of which: credit-impaired amounts due from banks and loans and advances to customer (stage 3 & PCI)

5,445

2,012

2,150

2,945

2,309

Non-performing amounts due from banks and loans and advances to customer

5,806

2,333

2,387

3,176

2,466

ECL allowances and provisions for credit losses

2,261

1,091

1,165

1,468

1,029

of which: core loan exposure (all stages)

2,097

1,043

1,132

1,426

987

of which: amounts due from banks and loans and advances to customer (all stages)

1,710

789

857

1,076

770

of which: amounts due from banks and loans and advances to customer (stage 3 & PCI)

990

474

572

703

559

Write-offs (stage 3 & PCI)

137

356

142

of which: write-offs for amounts due from banks and loans and advances to customer

118

348

122

Credit loss expense / (release)

1,037

(148)

694

Ratios

Credit-impaired amounts due from banks and loans and advances to customer as a percentage of amounts due

from banks and loans and advances to customer (gross)

0.8

0.5

0.7

Non-performing amounts due from banks and loans and advances to customer as a percentage of amounts due

from banks and loans and advances to customer (gross)

0.9

0.6

0.8

0.7

ECL allowances for amounts due from banks and loans and advances to customer as a percentage of amounts

due from banks and loans and advances to customer (gross)

0.3

0.2

0.3

0.2

Write-offs as a percentage of average amounts due from banks and loans and advances to customer (gross)

outstanding during the period

0.0

0.1

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 Comparatives

have been restated to include amounts due from banks 3 Includes provisions for ECL of guarantees and loan commitments and allowances for securities financing transactions. 4 Includes credit loss expense /

(release) for other financial assets at amortized cost, guarantees, loan commitments, and securities financing transactions.

Exposure categorization

Stage 1

Credit exposures with no signicant

increase in the risk of default since

initial recognition

Stage 3¹

(credit-impaired)

Credit exposures that are classied

as in default

More than 90 days past due (more

than 180 days for certain exposures)

Forbearance / credit restructuring

Credit exposures where concessions

exceeding our risk tolerance have

been granted under imminent

payment default or in default

Performing

Non-performing

Credit exposures where full collection

of initial contractual claims has been

doubtful since initial recognition

Purchased credit-impaired (PCI)

Credit exposures classied as PCI at initial recognition

for which the credit situation has subsequently improved

91–180 days

past due

(certain exposures)

0–30 days past due

31–90 days past due

Stage 2

(signicant increase in credit risk)

Credit exposures with a signicant

increase in the risk of default since

initial recognition

1 Excluding purchased credit-impaired instruments.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 126

Market risk

Audited | Main sources of market risk

Market risks arise from both trading and non-trading business activities.

– Trading market risks are 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

are mainly from structured trades, large portfolios of loans and securitized products and both complex and simple

credit, interest rate and equity derivative transactions. In Global Wealth Management, they are from our municipal

securities trading business.

– 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 also covered in the risks

controlled by 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 Credit Suisse portfolios can differ from

UBS Group excluding Credit Suisse, as set out below.

– 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, available operational capacity, valuation uncertainty, 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 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.

Our CRO Treasury function applies a holistic risk framework, setting the appetite for treasury-related risk-taking activities

across the Group. 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 Group-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 by business

management and Risk Control and regular monitoring and reporting. They are also included in Group-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.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 127

Liquidity-adjusted stress

Liquidity-adjusted stress is our primary stress loss measure for Group-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 the Group’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. UBS Group excluding Credit Suisse uses an unweighted five-year look-back window, and Credit Suisse uses

an exponentially weighted two-year window. 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, Credit Suisse uses historical simulation to model specific risk; however, both UBS Group excluding

Credit Suisse and Credit Suisse rely upon factor models to distinguish systematic and idiosyncratic returns. UBS Group

excluding Credit Suisse simulates idiosyncratic returns through a Monte Carlo simulation, aggregating the sum of

systematic and residual returns in such a way that systematic and residual risk are consistently captured. Credit Suisse

uses the available distribution of idiosyncratic returns to determine an extreme scenario for a given risk factor’s specific

risk. The resultant Credit Suisse VaR and extreme scenario loss for a given risk factor are aggregated using a zero-

correlation assumption. Correlations among risk factors are implicitly captured via historical simulation approaches. When

modeling risk factor returns, we consider the stationarity properties of the historical time series of risk factor changes.

Depending on the stationarity properties of the risk factors within a given factor class, the factor returns are modeled

using absolute returns, proportional or logarithmic returns. Risk factor return distributions are updated fortnightly for

UBS Group excluding Credit Suisse and weekly for Credit Suisse.

Risk factor returns are converted into profit or loss values via sensitivities and full revaluation grids sourced from front-

office systems, enabling us to capture material non-linear effects. Credit Suisse uses full revaluation models for its financial

products that are materially sensitive to the risks of co-factor movements (e.g., basket options). Both UBS Group excluding

Credit Suisse and Credit Suisse use VaR models 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 95% confidence level for UBS

Group excluding Credit Suisse and 98% for Credit Suisse, 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 99% confidence level using a 10-day holding

period. To calculate a 10-day holding period VaR, we use 10-day risk factor returns.

Additionally, 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 (99%). For

SVaR, both UBS Group excluding Credit Suisse and Credit Suisse identify the most significant one-year period of financial

stress from a historical dataset covering the period from 1 January 2007 to the present. SVaR is computed at least once

a week. 

› Refer to the 31 December 2023 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

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 128

Management VaR for the period

UBS Group excluding Credit Suisse continued to maintain management VaR at low levels, with average VaR increasing

to USD 15m from USD 11m in 2023, mainly driven by the Investment Bank’s Global Markets business.

Credit Suisse’s average management VaR stood at USD 29m as of the end of 2023, decreasing in the second half of

2023 due to continued strategic migration of positions to UBS and de-risking within Non-core and Legacy.

Audited |

Management value-at-risk (1-day, 95% confidence, 5 years of historical data) of our business divisions and Group

Items excluding Credit Suisse components by general market risk type

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

2,3

(6)

(7)

(1)

(5)

(4)

(1)

For the year ended 31.12.22

USD m

Equity

Interest

rates

Credit

spreads

Foreign

exchange

Commodities

Min.

Max.

Average

31.12.22

Total management VaR

Average (per business division and risk type)

Global Wealth Management

Personal & Corporate Banking

Asset Management

Investment Bank

Group Functions (including Non-core and Legacy Portfolio)

Diversification effect

2,3

(5)

(1)

(3)

(4)

(1)

Management value-at-risk (1-day, 98% confidence, 2 years of historical data) of the Credit Suisse components of our

business divisions and Group Items by general market risk type

1,4

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

2,3

(7)

(1)

(9)

1 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 value-at-risk (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. 2 The difference between the sum of the standalone VaR for the business divisions and Group Items and the total VaR.

3 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. 4 In the second quarter of 2023, Credit Suisse

AG consolidated introduced an enhanced approach to measure management VaR for individual risk types. The enhanced approach is applied to each risk type using a collection of risk factors included within the

respective risk type only, ignoring the cross-risk effects. This change in the measurement approach for individual risk types particularly affected standalone management VaR for equity risk and foreign exchange risk,

with no impact on the total management VaR. 5 Non-core and Legacy management VaR consists of exposures of the previously reported Capital Release Unit (Credit Suisse) and Investment Bank (Credit Suisse).



Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 129

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 (10-day 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 (P&L). We compute backtesting VaR using a 99% confidence level and 1-day holding period for the

regulatory VaR population. Since 99% VaR at UBS is defined as a risk measure that operates on the lower tail of the P&L

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.

USD m

125

100

(25)

(50)

Jan Apr Jul OctFeb May Aug NovMar Jun Sep Dec

Backtesting revenues Actual trading revenues

Backtesting VaR (1-day, 99% condence = 1% negative tail)

1 Excludes non-trading revenues, such as valuation reserves, commissions and fees, and revenues from intraday trading. 2 Includes backtesting revenues and revenues

from intraday trading. 3 Based on Basel III regulatory VaR, excludes CVA positions and their eligible hedges, which are subject to the standalone CVA charge.

UBS Group excluding Credit Suisse: development of regulatory backtesting revenues¹ and actual trading revenues²

against backtesting VaR³ (1-day, 99% condence)

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 130

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.

For UBS Group excluding Credit Suisse, the number of negative backtesting exceptions within a 250-business-day

window decreased to zero at the end of 2023 from one at the end of 2022. For Credit Suisse, the number of negative

backtesting exceptions within a 250-business-day window increased to three at the end of 2023 from one at the end of

2022.

The Swiss Financial Market Supervisory Authority (FINMA) VaR multiplier derived from backtesting exceptions for market

risk RWA was unchanged compared with 2022, at 3.0, for both UBS Group excluding Credit Suisse and Credit Suisse.

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 P&L 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

VaR model developments in 2023

Audited | In the fourth quarter of 2023, we amended the Credit Suisse credit spread VaR model by significantly enhancing

the coverage of single-name-issuer bond and CDS spread curves. Although the model change is considered significant

from a risk management perspective, the quantitative impact on risk management VaR was not material. No material

changes were made to UBS Group excluding Credit Suisse VaR model in 2023. 

Future market risk-related regulatory capital developments

In January 2019, the Basel Committee on Banking Supervision (the BCBS) published the final standards on the minimum

capital requirements for market risk (the Fundamental Review of the Trading Book). In December 2022, the Swiss State

Secretariat for International Finance changed the expected date on which the final Basel III guidelines are to enter into

force, from 1 July 2024 to 1 January 2025. As a result, the Swiss implementation timeline would be aligned to the

currently expected implementation timeline in the EU. 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 Federal Department of Finance (FDF) will inform the Federal Council again about the status

of international implementation by the end of July 2024.

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 it being a credible fallback method for an internal model-based approach; and (iii) a revised boundary between

the trading book and the banking book. UBS maintains a close dialogue with FINMA to discuss the implementation

objectives in more detail and to provide a smooth transition of the capital regime for market risk.

1 Excludes non-trading revenues, such as valuation reserves, commissions and fees, and revenues from intraday trading. 2 Includes backtesting revenues and

revenues from intraday trading. 3 Based on Basel III regulatory VaR, excludes CVA positions and their eligible hedges, which are subject to the standalone CVA

charge. 4 Two negative VaR backtesting exceptions were recorded for Credit Suisse AG consolidated in June and July, driven by fair value adjustments to certain

positions in the trading inventory as a result of the acquisition of the Credit Suisse Group by UBS, reecting purchase price allocation, which do not count against

the total exceptions relevant for the capital multiplier.

Credit Suisse: development of regulatory backtesting revenues¹ and actual trading revenues² against backtesting VaR

3, 4

(1-day, 99% condence)

USD m

Backtesting revenues Actual trading revenues

Backtesting VaR (1-day, 99% condence = 1% negative tail)

125

100

(25)

(50)

(600)

(700)

Jan Apr Jul OctFeb May Aug NovMar Jun Sep Dec

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 131

In September 2021, FINMA mandated UBS Group excluding Credit Suisse to hold an RWA add-on for the omission of

time decay in regulatory VaR and SVaR. The add-on reflects the outcome of discussions with FINMA, which started in

late 2019. The integration of time decay into the regulatory VaR model for UBS Group excluding Credit Suisse, which

would replace the add-on, went live in January 2024.

› 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 derivatives, 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.

Our 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 our 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 we apply hedge accounting. 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 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.

We actively manage 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 Group Asset and Liability Committee (the ALCO) and, where relevant, ALCOs at a legal entity level perform

independent oversight over the management of IRRBB, which is also subject to Group Internal Audit and model

governance.

› Refer to “Group Internal Audit” in the “Corporate governance” section of this report and to “Risk measurement” in this section for

more information

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.

Our external issuances are discounted using UBS’s 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.

We use 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. 

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 132

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

Recognition

Shareholders’ equity

CET1 capital

Timing

Income statement / OCI

Gains

Losses

Gains

Losses

Loans and deposits at amortized cost

2,3

Gradual

Income statement



Other financial assets and liabilities measured at amortized cost

Gradual

Income statement



Debt issued measured at amortized cost

2,3

Gradual

Income statement



Receivables and payables from securities financing transactions

Gradual

Income statement



Financial assets at fair value not held for trading

Immediate

Income statement



Financial assets at fair value through other comprehensive income

Immediate

OCI



Derivatives designated as cash flow hedges

Immediate

OCI



Derivatives designated as fair value hedges

Immediate

Income statement



Derivatives transacted as economic hedges

Immediate

Income statement



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 the banking book to a +1-basis-point parallel shift in yield curves was negative USD 30.1m

as of 31 December 2023, compared with negative USD 25.0m as of 31 December 2022. This excludes the sensitivity of

USD 4.9m from AT1 capital instruments (as per specific FINMA requirements) in contrast to general BCBS guidance. The

exposure in the banking book of the UBS Group increased in 2023, due to the acquisition of the Credit Suisse Group

and interest rate risk hedges of the recent AT1 capital instrument issuances.

The majority of our interest rate risk in the banking book is a reflection of the net asset duration that we run to offset

our modeled sensitivity of net USD 24.3m (31 December 2022: USD 19.6m) assigned to our equity, goodwill and real

estate, with the aim of generating a stable NII contribution. Of this, USD 17.6m and USD 5.6m are attributable to the US

dollar and the Swiss franc portfolios, respectively (31 December 2022: USD 14.0m and USD 4.8m, respectively).

In addition to the sensitivity mentioned above, we calculate the six interest rate shock scenarios prescribed by FINMA.

The “Parallel up” scenario, assuming all positions were fair valued, was the most severe and would have resulted in a

change in EVE of negative USD 5.7bn, or 6.1%, of our tier 1 capital (31 December 2022: negative USD 4.6bn, or 7.9%),

which is well below the 15% threshold as per the BCBS supervisory outlier test for high levels of interest rate risk in the

banking book.

The immediate effect on our tier 1 capital in the “Parallel up” scenario as of 31 December 2023 would have been a

decrease of USD 0.9bn, or 0.9% (31 December 2022: USD 0.4bn, or 0.6%), reflecting the fact that the vast majority of

our 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.

UBS also applies granular internal interest rate shock scenarios to its banking book positions to monitor the banking

book’s specific risk profile.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 133

Net interest income sensitivity

The main NII sensitivity in the banking book resides in Global Wealth Management and Personal & Corporate Banking.

We assign a target duration to our 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 we have set and monitor thresholds for the NII sensitivity to immediate parallel

shocks of –200 and +200 basis points under the assumption of constant balance sheet volume and structure. 

› Refer to the “Group performance” section of this report for more information about sensitivity to interest rate movements

Audited |

Interest rate risk – banking book

31.12.23

USD m

Effect on EVE

– FINMA

Effect on EVE

– BCBS

Scenarios

CHF

EUR

GBP

USD

Other

Total

Additional tier 1 (AT1) capital

instruments

Total

+1 bp

(3.7)

(0.6)

0.1

(26.0)

0.2

(30.1)

4.9

(25.2)

Parallel up

(548.9)

(119.3)

16.2

(5,027.2)

(0.9)

(5,680.2)

904.6

(4,775.5)

Parallel down

561.8

124.3

(29.2)

5,216.0

2.8

5,875.7

(1,044.5)

4,831.3

Steepener

(305.3)

(13.1)

(11.9)

(1,037.0)

(33.8)

(1,401.1)

93.4

(1,307.6)

Flattener

189.6

(5.0)

14.0

(124.2)

30.8

105.2

109.6

214.8

Short-term up

(27.3)

(39.4)

19.4

(2,171.3)

23.9

(2,194.7)

486.3

(1,708.4)

Short-term down

26.5

41.8

(21.8)

2,312.1

(26.8)

2,331.9

(507.8)

1,824.1

31.12.22

USD m

Effect on EVE

– FINMA

Effect on EVE

– BCBS

Scenarios

CHF

EUR

GBP

USD

Other

Total

Additional tier 1 (AT1) capital

instruments

Total

+1 bp

(4.0)

(0.7)

0.1

(20.4)

(0.1)

(25.0)

3.4

(21.6)

Parallel up

(574.6)

(117.0)

33.2

(3,944.3)

(26.3)

(4,629.1)

649.7

(3,979.4)

Parallel down

642.3

148.1

(45.4)

4,074.9

21.9

4,841.7

(699.8)

4,141.9

Steepener

(257.0)

(92.8)

(28.2)

(1,027.4)

(3.3)

(1,408.7)

(46.8)

(1,455.5)

Flattener

145.4

74.1

32.6

94.4

(2.5)

344.0

189.9

533.9

Short-term up

(83.0)

34.3

42.2

(1,519.0)

(13.8)

(1,539.2)

438.6

(1,100.6)

Short-term down

86.9

(33.1)

(42.5)

1,658.5

13.4

1,683.1

(455.5)

1,227.6

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

We are exposed to changes in UBS’s own credit reflected in the valuation of financial liabilities designated at fair value

when UBS’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

Equity investments and investment fund units

Audited | We make direct investments in a variety of entities and buy equity holdings in both listed and unlisted companies,

with the aim of supporting our business activities and delivering strategic value to UBS. This includes investments in

exchange and clearing house memberships, as well as minority investments in early-stage fintechs and technology

companies via UBS Next. We may also make investments in funds that we manage in order to fund or seed them at

inception or to demonstrate that our interests align with those of investors. We also buy, and are sometimes required by

agreement or regulation to buy, securities and units from investment vehicles that we have sold to clients.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 134

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, we generally do 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

by business management and Risk Control, portfolio and concentration limits, and regular monitoring and reporting to

senior management. They are also included in our Group-wide statistical and stress-testing metrics, which flow into our

risk appetite framework.

As of 31 December 2023, we held equity investments and investment fund units totaling USD 7.2bn, of which USD 4.8bn

was classified as Financial assets at fair value not held for trading and USD 2.4bn as Investments in associates. 

› Refer to “Note 21 Fair value measurement” and “Note 29 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 2023 were measured at fair value with changes in fair value recorded through Equity, and 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. Our

exposures may be included in market risk limits or be subject to specific monitoring and interest rate sensitivity analysis.

They are also included in our Group-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 2.2bn as of 31 December 2023, compared with USD 2.2bn as of 31 December 2022. 

› 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 Group-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 27 Post-employment benefit plans” in the “Consolidated

financial statements” section of this report for more information about defined benefit plans

UBS own share exposure

Group Treasury holds UBS Group AG shares to hedge future share delivery obligations related to employee share-based

compensation awards, and also holds shares purchased under the share repurchase program. In addition, the Investment

Bank holds a limited number of UBS Group AG shares, primarily in its capacity as a market-maker with regard to UBS

Group AG shares and related derivatives, and to hedge certain issued structured debt instruments.

› Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 135

Country risk

Country risk framework

Country risk includes all country-specific events occurring in a sovereign jurisdiction that may lead to impairment of UBS’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, on the one hand, increased and multiple counterparty and issuer default risk (systemic

risk) and, on the other hand, events that may affect a country’s standing, such as adverse shocks affecting political

stability or institutional and / or legal frameworks.

We assign a country rating to each country, which reflects our view of its 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. We use 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 our 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. We may limit the extension of credit, transactions in traded products or positions in securities based on

a country risk ceiling even if our exposure to a counterparty is otherwise acceptable.

Our country risk framework differs across UBS Group, and alignment is part of the ongoing integration of Credit Suisse.

For internal measurement and control of country risk, we also consider 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. We use 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 our internal risk view, where the basis for measuring exposures depends on the

product category in which we classify the exposures. In addition to the classification of exposures into banking products

and traded products, covered in “Credit risk profile of the Group” in this section, for UBS Group excluding Credit Suisse

the trading inventory is also shown. Issuer risk on securities such as bonds and equities, as well as risk relating to

underlying reference assets for derivative positions, is 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, however, floored at zero per issuer in the figures presented in the following tables. As a result,

potentially offsetting benefits of certain hedges and short positions across issuers are not recognized.

We do 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 we deduct 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, we show 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 Group excluding Credit Suisse only). This approach allows us 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 (CDSs) and other credit derivatives.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 136

CDSs are primarily bought and sold in relation to our trading businesses, and, to a much lesser degree, used to hedge

credit valuation adjustments. Holding CDSs for credit default protection does not necessarily protect the buyer of

protection against losses, as contracts only pay out under certain scenarios. The effectiveness of our CDS protection as a

hedge of default risk is influenced by several factors, including the contractual terms under which a given CDS was

written. Generally, only the occurrence of credit events as defined by the CDS contract’s terms (which may include,

among other events, failure to pay, restructuring or bankruptcy) results in payments under the purchased credit protection

contracts. For CDS contracts on sovereign obligations, repudiation can also be deemed as a default event. The

determination as to whether a credit event has occurred is made by the relevant International Swaps and Derivatives

Association (ISDA) determination committees (composed of various ISDA member firms) based on the terms of the CDS

and the facts and circumstances surrounding the event.

Top 20 country risk exposures

The table below shows our 20 largest country exposures by product type, excluding our home country, as of 31 December

2023 compared with 31 December 2022.

Compared with the prior year, our net exposure generally increased due to the acquisition of the Credit Suisse Group.

The list of our top 20 countries remained broadly unchanged, with five new entries (Ireland, Spain, Brazil, Qatar and the

Cayman Islands) at the bottom of the list, with the exposure to each of those five not exceeding USD 4.0bn. Based on

the sovereign rating categories, as of 31 December 2023, 83% of our emerging market country exposure was rated

investment grade, compared with 87% as of 31 December 2022.

Israel

As of 31 December 2023, our direct country risk exposure to Israel was USD 439m, mainly from lending and collateralized

over-the-counter derivates exposure within the Investment Bank. Our direct exposure to Gulf Cooperation Council

countries was USD 6.8bn. We have limited direct exposure to Egypt, Jordan and Lebanon, and we have no direct exposure

to Iran, Iraq or Syria.

Russia

Our direct country risk exposure to Russia contributed USD 256m to our total emerging market exposure of USD 44.5bn

as of 31 December 2023. This included loans and trade finance exposures in Non-core and Legacy and Personal &

Corporate Banking, as well as aviation finance in Global Wealth Management.

We had no material direct country risk exposures to Belarus or to Ukraine as of 31 December 2023 and no material

reliance on Russian, Belarusian or Ukrainian collateral.

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

Net long per issuer

31.12.23

31.12.22

31.12.23

31.12.22

31.12.23

31.12.22

31.12.23

31.12.22

United States

303,410

138,933

234,226

81,875

35,853

27,559

33,331

29,499

United Kingdom

58,202

32,163

33,934

10,887

22,602

19,786

1,666

1,490

Germany

30,634

20,115

14,151

8,255

10,364

6,959

6,118

4,901

Luxembourg

26,161

3,423

25,034

2,717

959

280

169

427

Japan

20,354

22,221

14,338

13,251

5,446

8,559

571

410

Australia

14,972

8,895

8,168

1,365

4,765

5,834

2,038

1,696

France

14,740

10,641

4,844

2,056

5,444

3,980

4,453

4,605

Singapore

12,405

12,137

4,025

3,038

3,555

3,767

4,827

5,332

Canada

11,093

7,832

2,369

274

3,293

3,730

5,431

3,827

China

9,781

4,709

5,720

1,347

918

1,379

3,144

1,983

Netherlands

7,420

5,964

3,490

1,074

2,989

3,767

941

1,123

South Korea

6,139

3,896

1,147

388

1,764

1,042

3,228

2,466

Hong Kong SAR

4,602

3,666

2,636

938

959

1,843

1,007

885

Sweden

4,269

2,283

1,152

158

1,628

1,322

1,490

803

Italy

3,540

1,492

2,501

628

801

703

238

161

Ireland

3,525

199

3,068

388

113

Spain

3,431

1,032

2,456

630

649

201

325

200

Brazil

3,385

1,057

2,380

568

673

249

332

240

Qatar

2,627

641

2,296

302

448

Cayman Islands

2,425

436

1,958

100

315

170

152

166

Total top 20

543,115

281,735

369,892

129,693

103,391

91,340

69,832

60,700

1 Before deduction of IFRS 9 ECL allowances and provisions. 2 Comparative period has been restated to reflect a change in the measure used to disclose country risk exposures. 3 Trading inventory exposures are

for UBS Group excluding Credit Suisse only. 4 Excluding Switzerland and supranationals, global funds for UBS Group excluding Credit Suisse, and shipping finance exposures for Credit Suisse.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 137

Emerging markets¹ net exposure², by internal UBS country rating category

USD m

31.12.23

31.12.22

Investment grade

36,851

21,996

Sub-investment grade

7,654

3,173

Total

44,505

25,169

1 We classify countries as emerging markets based on per capita GDP, historical real GDP growth, alignment with international institutions (such as BIS, World Bank, IMF, 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 Group excluding Credit Suisse only. Before deduction of IFRS 9 ECL allowances and provisions. 3 Comparative

period has been restated to reflect a change in the measure used to disclose country risk exposures.

Sustainability and climate risk

Managing sustainability and climate risk is a key component of our corporate responsibility. We define sustainability and

climate risk as the risk that UBS negatively impacts, or is impacted by, climate change, natural capital, human rights, and

other environmental, social and governance (ESG) matters. Sustainability and climate risks may manifest as credit, market,

liquidity, business and non-financial risks for UBS, resulting in potential adverse financial, liability and reputational

impacts.

Group Risk Control is responsible for our firm-wide sustainability and climate risk framework and the management of

exposure to sustainability and climate (financial) risks on an ongoing basis as a second line of defense, while our Group

Compliance, Regulatory & Governance function monitors the adequacy of our control environment for non-financial

risks, applying independent control and oversight. We manage sustainability and climate risk under a dedicated risk

management framework.

Our firm-wide sustainability and climate risk management framework and related policy standards and guidelines

underpin our management practices and control principles, enabling us to identify and manage potential adverse impacts

on the climate, the environment and human rights, as well as the associated risks affecting us and our clients while

supporting the transition toward a net-zero future. Overseen by senior management, the framework applies to the

balance sheet, our own operations and our supply chain. In 2023, we worked to revise this framework and our processes

across UBS, following the acquisition of the Credit Suisse Group.

Recognizing that it is imperative to have a consistent approach to managing sustainability and climate risk across the

combined Group, we have merged the sustainability and climate risk teams under the Sustainability CRO. We also

developed a combined Group policy for sustainability and climate risks, including risk appetite standards. Furthermore,

we continued to work toward consolidating our sustainability and climate risk metrics and quantitative approaches across

the combined entity, while enhancing our analytical capabilities and further integrating sustainability and climate risk

considerations into traditional financial and non-financial risks, for example, by enriching our risk management processes

and reporting around nature-related risks.

The current inventory of quantitative sustainability and climate risk metrics, including exposure to carbon-related assets,

climate-sensitive sectors and nature-related risks for UBS Group excluding Credit Suisse is disclosed in this section. UBS

is in the process of implementing a combined and aligned sustainability-and-climate-risk dataset across UBS Group and

including Credit Suisse AG. For this reason, UBS will publish UBS Group and Credit Suisse AG sustainability and climate

risk metrics required pursuant to FINMA Circular 2016/1 “Disclosure – banks", Annex 5, in a supplement to the UBS

Group Annual Report 2023 and the UBS Group Sustainability Report 2023, in line with the publication timeline for the

semi-annual Pillar 3 disclosures in the third quarter of 2024.

› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting” at

ubs.com/investors

, for more

information about our sustainability and climate risk investment approach

› Refer to “Sustainability and climate risk policy framework” in the Supplement to the UBS Group Sustainability Report 2023,

available under “Annual reporting” at

ubs.com/investors

, for more information

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 138

Risk identification and measurement

On an annual basis, an assessment of the materiality of sustainability- and climate-driven risks is carried out in accordance

with the ISO 14001 standard for environmental management systems.

We aim to identify sustainability and climate risks at divisional and cross-divisional levels, both through the assessment

mentioned above and, increasingly, by integrating them into the firm-wide traditional risk identification and

measurement process. This approach is also applied to significant Group entities under UBS Group AG.

Our risk identification methodologies collectively define UBS’s materiality-driven approach, focus areas and key risk

drivers. The outputs of these efforts define our sustainability and climate risk management strategy by:

– identifying concentrations of climate- and nature-sensitive exposures that may make UBS vulnerable to financial and

non-financial risks, enabling prioritization of resources toward enhanced risk quantification and subsequent

management actions;

– supporting the delivery of a client-centric business strategy, where we assist clients with their sustainability transition

(e.g., low-carbon transition) finance, identifying clients that could benefit from sustainability-focus UBS products and

services; and

– providing information to senior management to support more-informed decision-making on sustainability- and

climate-driven risks, along with providing decision-useful information to stakeholders through our external disclosures.

› Refer to “Managing sustainability and climate risks” in the UBS Group Sustainability Report 2023, available under “Annual

reporting” at

ubs.com/investors

, for more information

Sustainability and climate risk management framework

Related toolkit

Management and control processes ensure

that material

sustainability and

climate risks

are identiﬁ ed, measured, monitored and

escalated in a timely manner

Overview of scenario analysis and stress-testing exercises disclosed, further development underway.

Implemented, further development underway.

Under development.

– Sustainability and climate risk content

included in the UBS Group, divisional

and relevant regional and legal entity

risk reports

– External disclosures of sustainability and

climate risk in annual and sustainability

reports¹

– Integrate sustainability and climate risk

considerations into decision-making

processes and related policies

– Build in-house capacity to enhance risk

management, including specialized

training and further research and

development of tools

– Centralize and execute ESG data

strategy

Risk management

and control

Risk reporting

and disclosure

Monitoring and risk

appetite setting

Sustainability and climate risks are identiﬁ ed

and their materiality is measured

– Annual sustainability and climate risk

materiality assessment

– Sustainability and climate risk heatmaps,

sector-level

– Scenario-based climate and nature-

related analysis and stress-testing

exercises, including the development of a

stress-testing framework

– Sustainability and climate risk scorecards,

company-level

Sustainability and climate risk exposures,

emerging risks and regulations are monitored

and metrics reported internally to enable risk

appetite setting

Identiﬁ cation and

measurement

– Monitoring of sustainability and climate

risks (including regulatory monitoring)

– Sustainability and climate risk metrics

– Qualitative sustainability and climate

risk appetite

– Quantitative sustainability and climate

risk appetite

Key sustainability and climate risks

considerations are included in internal

reporting and external disclosures

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 139

Transition risk

Climate-driven transition risks arise from the efforts to mitigate the effects of climate change. They cover the financial

impact on our clients or on UBS itself through the credit worthiness of our counterparties or the value of collateral

we hold. The financial impacts from climate transition risk could materialize through three key risk factors:

– climate policies, affecting operating expenses (e.g., carbon taxes), analyzed both directly and indirectly;

– low-carbon technologies and their potential for disruption, affecting capital expenditure requirements and / or market

share due to low-cost competition; and

– shifts in consumer or investor sentiment, affecting revenues (shifts in consumer demand) or market-perceived value.

To calculate our exposure to climate transition risks, we have analyzed economic sectors within our classification

taxonomy with a view to define segments that share similar characteristics in their vulnerability to the risk factors

identified above. The approach consists of grouping companies into these segments under an adverse risk scenario. This

scenario is defined as an immediate and disorderly approach toward meeting the well-below-2˚C Paris goal over the zero-

to-three-year time horizon (reflecting the business planning horizon). The outcome of this process is a sector-level

transition risk heatmap, where the risk ratings ranging from “Low” to “High”, and “climate-sensitive” include the top

three ratings (Moderate, Moderately High and High).

The transition risk heatmap shows that, at the end of 2023, UBS Group excluding Credit Suisse exposure to climate-

sensitive sectors and related activities was relatively stable. Climate-driven transition-risk-sensitive exposure accounted

for 12.1% of total customer lending exposure (up from 11.7% in 2022), mainly driven by an increase in exposure to

commercial real estate in Switzerland. This risk exposure can be associated with the passage of the Climate and Innovation

Act in Switzerland and the expected zero-to-three-year impact on energy-efficiency rules in the commercial real estate

sector. A slight reduction in exposure can be observed in the fossil fuels trading and mining conglomerates sectors.

› Refer to “Managing sustainability and climate risks” in the UBS Group Sustainability Report 2023, available under “Annual

reporting” at

ubs.com/investors

, for more information

Climate risk heatmap (transition risk) for UBS Group excluding Credit Suisse

1,2,3

In USD billion

1 Total customer lending exposure consists of total loans and advances to customers and guarantees, as well as irrevocable loan commitments (within the scope of expected credit loss) and is based on consolidated and standalone IFRS numbers.Total and subtotal exposure calculation is subject to rounding to two decimal

places, hence potential deviation from actual. 2 UBS continues to collaborate to resolve methodological and data challenges, and seeks to integrate both impacts to and dependency on a changing natural and climatic environment, in how it evaluates risks and opportunities. 3 Climate- and nature-related risks are scored

between 0 and 1, based on sustainability and climate risk transmission channels, as outlined in the Supplement to the UBS Group Sustainability Report 2023. Risk ratings represent a range of scores across ﬁ ve-rating categories: low, moderately low, moderate, moderately high, and high. The climate- or nature-sensitive

exposure metrics are determined based upon the top three of the ﬁ ve rated categories: moderate to high. 4 Methodologies for assessing climate- and nature-related risks are emerging and may change over time. As the methodologies, tools, and data availability improve, we will further develop our risk identiﬁ cation and

measurement approaches. Lombard lending rating is assigned based on the average riskiness of loans. 5 The credit exposure includes portfolio adjustment bookings, which are either directly impacting the metrics, and have been reﬂ ected in the heatmaps, or are impact assessed and immaterial to the metrics representation.

6 Not classiﬁ ed represents the portion of UBS’s business activities where methodologies and data are not yet able to provide a rating, e.g. private Individuals.

Industrials

1.99

Utilities

1.31

Agriculture

0.01

Fossil fuels

0.06

High

3.88

Real estate

25.51

Transportation

3.06

Fossil fuels

1.37

Industrials

7.21

Moderately

high

74.85

Fossil fuels

4.07

Real estate

3.64

Transportation

0.57

Metals and mining

0.16

Sovereigns

0.09

Utilities

0.45

Moderate

27.93

359.37 (75.20%)

Moderately low

57.44 (12.02%)

Low

3.02 (0.63%)

Not classiﬁ ed

Agriculture 2.21

Food and beverage production2.21

Metals and Mining 2.61

Mining conglomerates (including trading)2.06

Production of steel and iron0.28

Production of other mined metals and raw materials0.28

Fossil Fuels 1.37

Conventional oil (on-/offshore)0.16

Gas processing (including LNG)0.08

Integrated oil and gas0.32

Wholesale and trading: crude oil and natural gas

0.81

Real Estate 25.51

Commercial real estate23.12

Development and management of real estate2.40

Industrials 7.21

Machinery and related parts manufacturing3.24

Plastics and petrochemicals manufacture0.82

Consumer durables manufacturing0.97

Pharmaceuticals2.12

Chemicals0.06

Moderately high

Transportation 3.06

Airlines – cargo1.66

Automobile manufacture (high-carbon fuels)0.09

Sea-based shipping (high-carbon fuels)0.09

Transportation parts and equipment supply0.64

Land-based shipping high-carbon (trucks)0.51

Airlines – commercial0.07

Utilities 0.22

Power production: regulated and high-carbon fuels0.06

Wastewater treatment0.16

42.21 (8.83%)

Moderately

high

Utilities

0.22

Metals and mining

2.61

Agriculture

1.73

Sovereigns 0.09

Sovereigns0.09

Transportation 0.57

Automobile manufacture (high-carbon fuels)0.02

Passenger ships0.55

Industrials 1.77

Clothing manufacture0.67

Machinery and related parts manufacturing0.02

Other consumer goods manufacturing0.98

Plastics and petrochemicals manufacture0.09

Fossil Fuels 4.07

Downstream oil and gas distribution0.16

Transportation and storage (gas)0.17

Wholesale and trading: reﬁ ned petroleum products3.74

Utilities 0.45

Grid operation and transmission0.33

Waste disposal and recycling0.11

Wholesale and trading: electricity and power0.01

Agriculture 1.73

Food and beverage production0.01

Livestock – other0.01

Crops – high emissions intensity0.15

Other agricultural services0.07

Food and beverage wholesale/retail1.50

Metals and Mining 0.16

Metal ore mining not elsewhere classiﬁ ed0.12

Production of steel and iron0.01

Production of other mined metals and raw materials0.03

Moderate

Real Estate 3.64

Commercial real estate1.63

Construction – non-infrastructure1.91

Construction of buildings and related activities0.03

Development and management of real estate0.07

477.89 USD bn

4,5,6

Total exposure

12.48 (2.61%)

Moderate

3.37 (0.71%)

High

Agriculture

2.21

Industrials

1.77

Utilities 1.31

Power production: regulated and high-carbon fuels

1.31

Agriculture 0.01

Livestock – beef extensive grazing0.01

Industrials 1.99

Chemicals1.64

Cement or concrete manufacture

0.35

Fossil fuels 0.06

Coal0.04

High

Shale gas0.02

140–141

Sector score

Lower risk

Higher risk

Transition risk

477.89 USD bn

4,5

Total exposure

Industrialized

3.37 (0.71%)

High

42.21 (8.83%)

Moderately high

12.48 (2.61%)

Moderate

3.02 (0.63%)

Not classiﬁ ed

359.37 (75.20%)

Moderately low

57.44 (12.02%)

Low

Transition risk, by sector and geographic classiﬁ er of market maturity

Climate risk heatmap (transition risk) for UBS Group excluding Credit Suisse

1,2,3

In USD billion

Marker size indicates relative exposure magnitude

Colour indicates transition risk level

HighLow

Sector transition risk

Emerging

Financial services

Fossil fuels

Private individuals

Services and technology

Industrials

Agriculture

Lombard

Sovereigns

Metals and mining

Commercial real estate

Transportation

Real estate (other)

Utilities

Services and technology

Private individuals

Financial services

Lombard

Residential real estate

Commercial real estate

Sovereigns

Transportation

Agriculture

Industrials

Real estate (other)

Metals and mining

Fossil fuels

Utilities

decimal places, hence potential deviation from actual. 2 UBS continues to collaborate to resolve methodological and data challenges, and seeks to integrate both impacts to and dependency on a changing natural and climatic environment, in how it evaluates risks and opportunities. 3 Climate- and nature-related

risks are scored between 0 and 1, based on sustainability and climate risk transmission channels, as outlined in the Supplement to the UBS Group Sustainability Report 2023. Risk ratings represent a range of scores across ﬁ ve-rating categories: low, moderately low, moderate, moderately high, and high. The climate- or

nature-sensitive exposure metrics are determined based upon the top three of the ﬁ ve rated categories: moderate to high. 4 Methodologies for assessing climate- and nature-related risks are emerging and may change over time. As the methodologies, tools, and data availability improve, we will further develop our

risk identiﬁ cation and measurement approaches. Lombard lending rating is assigned based on the average riskiness of loans. 5 Not classiﬁ ed represents the portion of UBS’s business activities where methodologies and data are not yet able to provide a rating, e.g. private Individuals. 6 Market maturity is reﬂ ected

in the internal country classiﬁ cation to facilitate identiﬁ cation of diversiﬁ cation of policy stringency across developing and industrialised countries. 7 Displayed ratings represent exposure-weighted averages for a given sector scope.

Residential real estate

The graph below shows that the majority of UBS Group excluding Credit Suisse exposure is rated moderately

low, and climate-sensitive exposure accounts for 12.1% of the total customer lending exposure, driven by

UBS's lending footprint in industrialized countries. The majority of exposure is concentrated in lower-risk sec-

tors, such as residential real estate and ﬁ nancial services.

142–143

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 144

Physical risk

Climate-driven physical risks arise from acute hazards, which are increasing in severity and frequency, and chronic climate

risks 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.

Our physical risk heatmap methodology groups together corporate counterparties based on exposure to key physical risk

factors (risk segmentation), by rating sectoral, sub-sectoral and geographical vulnerabilities to climate-driven physical

risks. These vulnerabilities were identified using a proprietary in-house UBS model. The model, developed in 2023, is a

significant advancement from the historical physical risk heatmapping methodology that UBS published in 2021 and

2022. By leveraging over a billion data points, UBS analyzed cross-sector information on asset-level data (sub-company

level), third-party climate hazard ratings through geospatial datasets, and academic insights into how hazards and

production methods may be aggravated or complementary (transmission channels). The analyses were then quantitatively

aggregated across assets, transmission channels (including value chains) and hazards at a sub-sector / country or sub-

country level of granularity.

The refined heatmap methodology shows that our physical risk vulnerability remained, on average, moderately low year

on year. Given UBS’s business profile, the key drivers for UBS’s climate-sensitive lending (physical risk) are financial

intermediation activities and, collectively, the services, agriculture and transportation sectors. In its current state, the

model takes a conservative approach in its key assumptions, limiting full incorporation of geographical and sectorial

sources of variability, which may either further amplify or mitigate financial vulnerability. We are committed to addressing

these and other limitations by continuously improving the modeling approach in parallel with the industry, as it continues

to standardize the disclosure of physical climate risk data, integrates regionalized scientific climate models, specializes in

its impact on sectors and assets, and collaborates with a view to more informed decision-making. More specifically, in

2024 and beyond, UBS will seek to expand its use of vendor data through both diversification and refinement, further

address the limitations presented due to key assumptions in the model, and develop approaches to address data

limitations in other types of assets (e.g., real estate). We will also explore the link between the changing climate and

nature-related financial risks, which may result in intensified compounding vulnerabilities. Companies and activities that

depend on natural-capital assets may be adversely affected by a changing climate, whose relationships have proven to

either reduce or augment ecosystem services like fresh water or biodiversity.

The physical risk heatmap below shows that, at the end of 2023, UBS Group excluding Credit Suisse exposure to climate-

sensitive sectors was 9.7% (up from 8.4% in 2022). This increase was driven by exposure to the services sector, which

includes financial services activities in emerging markets. Most of the climate-sensitive physical risk exposure is located in

countries that have high adaptive capacity to physical risk hazards, which is an important aspect to consider when

assessing the 9.7% exposure to physical risk.

› Refer to “Managing sustainability and climate risks” in the UBS Group Sustainability Report 2023, available under “Annual

reporting” at

ubs.com/investors

, for more information

Physical risk, by sector and country adaptive capacity

Climate risk heatmap (physical risk) for UBS Group excluding Credit Suisse

1,2,3

In USD billion

10.26 (2.15%)

Moderately high

35.92 (7.52%)

Moderate

3.02 (0.63%)

Not classiﬁ ed

204.45 (42.78%)

Moderately low

224.25(46.92%)

Low

Physical risk

477.89

USD bn

4,5

Total exposure

0.00 (0.00%)

High

Marker size indicates relative exposure magnitude

Colour indicates physical risk level

decimal places, hence potential deviation from actual.

2 UBS continues to collaborate to resolve methodological and data challenges, and seeks to integrate both impacts to and dependency on a changing natural and climatic environment, in how it evaluates risks and opportunities. 3 Climate- and nature-related

nature-sensitive exposure metrics are determined based upon the top three of the ﬁ ve rated categories: moderate to high.

4 Methodologies for assessing climate- and nature-related risks are emerging and may change over time. As the methodologies, tools, and data availability improve, we will further develop our

risk identiﬁ cation and measurement approaches. Lombard lending rating is assigned based on the average riskiness of loans.

5 Not classiﬁ ed represents the portion of UBS’s business activities where methodologies and data are not yet able to provide a rating, e.g. private Individuals. 6 Country adaptive capacity is

represented by a sector exposure weighted-average based on the sovereign's segment score for the country of risk. 7 Displayed ratings represent exposure-weighted averages for a given sector scope.

HighLow

Low

High

Lombard

Sovereigns

Fossil fuels

Commercial real estate

eal estate (other)

Industrials

Metals and mining

Financial services

Utilities

Transportation

Services and technology

Agriculture

Climate-sensitivity threshold

Private individuals

Country adaptive capacity

Sector physical risk

Residential real estate

Sector score

Lower risk

Higher risk

145–146

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 147

Nature-related risks

Nature-related risks refer to how humans and organizations depend on and impact the natural environment. Natural

resources are referred to as natural capital that, in combination, provides the ecosystem services that benefit people and

the planet. Below we describe our understanding of how UBS’s business model may depend on or impact those services,

resulting in financial and non-financial risk for UBS.

Biodiversity is presented as a function of various natural-capital assets providing life on earth with a range of services

(ecosystem services), categorized and rated for its role in the development of medicines, technologies and more. UBS‘s

development of insights in biodiversity, among other nature-related risks, is discussed in the context of improving data

and methodology. Similar to the collaborative effort that UBS has made on climate-related risks in earlier years, we have

contributed to global efforts to raise awareness of and exchange knowledge about nature-related risk assessment

methodologies. UBS has made these contributions through its role as a member of the Taskforce on Nature-related

Financial Disclosures since 2021 and the United Nations Environment Programme Finance Initiative (the UNEP FI) working

group on nature-related risks (since 2018). As a key member of the UNEP FI working group, UBS has supported the

development of a methodology to assess nature-related risks from both the dependency and impact perspectives to the

natural environment. UBS took part in the collaborative work to develop the Exploring Natural Capital Opportunities,

Risks and Exposure toolkit (ENCORE), which has been a central input to UBS’s initial nature-related risk analysis. The UNEP

FI coordinated this working group in partnership with the World Conservation Monitoring Centre, Global Canopy, the

Swiss State Secretariat for Economic Affairs and the Swiss Federal Office for the Environment.

In 2022, we initially piloted a quantification approach for nature-related risks solely based on dependency of our clients

on the natural environment, using the ENCORE methodology. This approach enabled us to assess vulnerability to nature-

sensitive economic activities by our clients, which may drive financial risks for UBS, such as reduced creditworthiness of

our clients or the value of companies’ debt or of equity posted as collateral for lending activities. In 2023, we expanded

the definition of our “nature-sensitive metric” to now include both dependencies and impacts on nature, its assets, and

the ecosystem services nature provides to sustain human activities. Our methodology assigns ratings on the same scale

and granularity as our climate-driven sector-level heatmaps. As in the case of the climate-driven heatmap assumptions,

UBS takes a conservative approach in assigning the overall nature-sensitive risk rating to each of the UBS industry codes.

The key assumption here is driven by taking the higher of the two values between the ENCORE-defined impact and the

dependency ratings.

Our enhanced nature-related risk heatmap below shows that at the end of 2023, UBS Group excluding Credit Suisse

exposure to nature-sensitive sectors was 15.1% (up from 14.4% in 2022) of our total customer lending exposure.

Sensitivity is driven by sectors that either have a high impact or a high dependency on the natural environment. These

include metals and mining, utilities, and agriculture. Our business activities are concentrated in Lombard lending and the

financial services sector, which are rated as relatively low. A strong correlation can be observed between climate risk

sensitivity (both transition risk and physical risk) and nature-related risks, with a heightened correlation identified in

climate-sensitive sectors.

› Refer to “Managing sustainability and climate risks” in the UBS Group Sustainability Report 2023, available under “Annual

reporting” at

ubs.com/investors

, for more information

Nature-related risk,

by sector and alignment to average of transition and physical risk

Marker size indicates relative exposure magnitude

Color indicates Nature-related risk level

High

Average climate risk

Low

High

Climate risk heatmap (nature risk) for UBS Group excluding Credit Suisse

1,2,3,4

In USD billion

Sector nature-related risk

Not classiﬁ ed

4.62 (0.97%)

High

63.14 (13.21%)

Moderate

3.02 (0.63%)

Not classiﬁ ed

396.80 (83.03%)

Low

4.21 (0.88%)

Moderately high

6.10 (1.28%)

Moderately low

Nature risk

477.89

USD bn

5,6

Total exposure

Private individuals

Financial services

Sovereigns

Lombard

Residential real estate

Services and technology

Commerical real estate

Industrials

Agriculture

Utilities

Real estate (other)

Transportation

Metals and mining

Fossil fuels

Commercial

nature-sensitive exposure metrics are determined based upon the top three of the ﬁ ve rated categories: moderate to high. 4 Nature-related risk metric methodology has been further strategically enhanced, as part of an ongoing collaboration between UBS and UNEP-FI. 5 Methodologies for assessing climate- and

nature-related risks are emerging and may change over time. As the methodologies, tools, and data availability improve, we will further develop our risk identiﬁ cation and measurement approaches. Lombard lending rating is assigned based on the average riskiness of loans. 6 Not classiﬁ ed represents the portion of

UBS’s business activities where methodologies and data are not yet able to provide a rating, e.g. private Individuals. 7 Displayed ratings represent exposure-weighted averages for a given sector scope.

Sector score

Lower risk

Higher risk

148–149

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 150

Climate scenario analysis

We use scenario-based approaches to assess our exposure to physical and transition risks stemming from climate change.

We have introduced a series of assessments performed through industry collaborations in order to harmonize approaches

for addressing methodological and data gaps. We have performed top-down balance sheet stress testing (across pre-

acquisition UBS), as well as a targeted bottom-up analysis of specific sector exposures covering short-, medium- and long-

term time horizons.

The work performed includes regulatory scenario analysis and stress-test exercises, including the Climate Risk Stress Test

of the European Central Bank, which is used to assess banks’ preparedness for dealing with financial and economic

shocks stemming from climate risk; and the Bank of England 2021 Climate Biennial Exploratory Scenario: Financial risks

from climate change, which has enabled UBS to assess management actions in response to different scenario results, as

well as perform counterparty-level analysis.

While these exercises showed mild losses and low exposure to climate risk for the entities in scope, the analysis enabled

UBS to enhance climate risk scenario analysis and stress testing, further developing our capabilities for assessing risks and

vulnerabilities from climate change.

In 2023, we further advanced our capabilities surrounding internal climate risk scenario analysis and stress testing for

UBS Group excluding Credit Suisse. We enhanced and refined our climate risk scenarios, with a focus on both transition

and physical risk projections across 30 years. Furthermore, we have been developing additional corresponding climate

risk models to amend the coverage of major risk types and have enhanced consistent modeling approaches in the

context of real estate energy performance and location-specific physical risks. For details on Credit Suisse’s approach

to climate scenario analysis, refer to the UBS Group Sustainability Report 2023.

› Refer to “Managing sustainability and climate risks” in the UBS Group Sustainability Report 2023, available under “Annual

reporting” at

ubs.com/investors

, for more information

› Refer to “Entity-specific disclosures for Credit Suisse AG” in the UBS Group Sustainability Report 2023, available under “Annual

reporting” at

ubs.com/investors

, for more information

Monitoring and risk appetite setting

As a part of the sustainability and climate risk monitoring process, we have developed methodologies and metrics to

assess our ongoing exposure to carbon-related assets and climate-sensitive sectors. In developing our metrics, we consider

the inputs and guidance provided by standard-setting organizations, as well as new or enhanced regulatory requirements

for climate disclosures. In 2023, we continued working on methodologies covering climate transition, physical and

nature-related risk. Examples of such enhancements include issuer and traded risk products in our risk monitoring and

reporting capabilities. We have newly expanded reporting scopes and enhanced methodologies, which, together with

the underlying metrics, are illustrated in the table below.

› Refer to “Climate-related materiality assessment” in the UBS Group Sustainability Report 2023, available under “Annual

reporting” at

ubs.com/investors

, for more information

The table below includes climate- and nature-related risk metrics for UBS Group excluding Credit Suisse and UBS AG on

standalone basis, as well as for UBS Switzerland AG and UBS Europe SE, both on a standalone basis. Respective climate-

and nature-related risk metrics will be published for UBS Group and Credit Suisse AG in a supplement to the UBS Group

Annual Report 2023 and the UBS Group Sustainability Report 2023, in line with the publication timeline for the semi-

annual Pillar 3 disclosures in the third quarter of 2024.

Carbon-related assets proportion of total customer lending exposure for UBS Group excluding Credit Suisse decreased

to 7.2% in 2023 from 7.5% in 2022. In 2023, the share of climate-sensitive sectors for UBS Group excluding Credit

Suisse was 12.1% for transition risk and 9.7 % for physical risk of our total customer lending exposure.

The main driver for transition risk was an increase in exposure to commercial real estate in Switzerland. This risk exposure

was associated with the passing of the Climate and Innovation Act in Switzerland and the expected zero-to-three-year

impact on energy-efficiency rules in the commercial real estate sector. The key driver for physical risk was exposure to

the services sector, which includes financial services activities in emerging markets. Most of the climate-sensitive physical

risk exposure was located in countries that have high levels of capacity to adapt to physical risk hazards.

The year-end 2023 exposure to nature-sensitive sectors of the UBS Group was 15.1% of the total customer lending

exposure. For nature-related risk, sensitivity was driven by sectors that either have a high impact or a high dependency

on the natural environment. These include metals and mining, utilities, and agriculture. Our business activities are

concentrated in Lombard lending and the financial services sector, which are rated as having relatively low sensitivity to

nature risk. A strong correlation can be observed between climate risk sensitivity (both transition and physical) and nature-

related risks, with a heightened correlation in climate-sensitive sectors.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 151

Risk management – climate- and nature-related metrics

For the year ended

% change from

31.12.23

31.12.22

31.12.21

31.12.22

Climate- and nature-related metrics (USD bn)

1, 2

Carbon-related assets UBS Group excluding Credit Suisse

1, 2, 3, 4, 5

34.2

33.6

36.0

1.7

Carbon-related assets proportion of total customer lending exposure, gross (%)

1, 2, 3, 4, 5

7.2

7.5

7.8

Carbon-related assets: UBS AG (standalone)

1, 2, 3, 4, 5

8.5

8.6

9.9

(1.5)

Carbon-related assets: UBS Switzerland AG (standalone)

1, 2, 3, 4, 5

26.6

24.6

25.6

8.0

Carbon-related assets: UBS Europe SE (standalone)

1, 2, 3, 4, 5

0.0

(25.7)

Exposure to climate-sensitive sectors, transition risk UBS Group excluding Credit Suisse

1, 2, 4, 5, 6

58.1

52.5

52.4

10.6

Climate-sensitive sectors, transition risk, proportion of total customer lending exposure, gross (%)

1, 2, 4, 5, 6

12.1

11.7

11.4

Exposure to climate-sensitive sectors, transition risk: UBS AG (standalone)

1, 2, 4, 5, 6

9.9

9.2

9.6

7.8

Exposure to climate-sensitive sectors, transition risk: UBS Switzerland AG (standalone)

1, 2, 4, 5, 6

47.5

41.2

41.1

15.1

Exposure to climate-sensitive sectors, transition risk: UBS Europe SE (standalone)

1, 2, 4, 5, 6

0.0

(0.1)

Exposure to climate-sensitive sectors, transition risk: Traded products, UBS Group excluding Credit Suisse

1, 2, 4, 5, 6, 7

0.9

Exposure to climate-sensitive sectors, transition risk: Issuer risk, UBS Group excluding Credit Suisse

1, 2, 4, 5, 6, 8

4.6

Exposure to climate-sensitive sectors, physical risk UBS Group excluding Credit Suisse

1, 2, 4, 5, 6

46.2

38.0

36.7

21.4

Climate-sensitive sectors, physical risk, proportion of total customer lending exposure, gross (%)

1, 2, 4, 5, 6

9.7

8.4

8.0

Exposure to climate-sensitive sectors, physical risk: UBS AG (standalone)

1, 2, 4, 5, 6

52.7

44.8

42.1

17.7

Exposure to climate-sensitive sectors, physical risk: UBS Switzerland AG (standalone)

1, 2, 4, 5, 6

15.7

14.8

16.0

5.8

Exposure to climate-sensitive sectors, physical risk: UBS Europe SE (standalone)

1, 2, 4, 5, 6

0.0

122.3

Exposure to climate-sensitive sectors, physical risk: Traded products, UBS Group excluding Credit Suisse

1, 2, 4, 5, 6, 7

7.2

Exposure to climate-sensitive sectors, physical risk: Issuer risk, UBS Group excluding Credit Suisse

1, 2, 4, 5, 6, 8

15.7

Exposure to nature-related risks UBS Group excluding Credit Suisse

1, 4, 5, 6, 9

72.0

64.6

67.3

11.4

Exposure to nature-related risks, proportion of total customer lending exposure, gross (%)

1, 4, 5, 6, 9

15.1

14.4

14.7

Exposure to nature-related risks: UBS AG (standalone)

1, 4, 5, 6, 9

14.4

12.0

12.7

20.1

Exposure to nature-related risks: UBS Switzerland AG (standalone)

1, 4, 5, 6, 9

56.3

49.8

49.7

13.0

Exposure to nature-related risks: UBS Europe SE (standalone)

1, 4, 5, 6, 9

0.1

0.0

205.1

Exposure to nature-related risks: Traded products, UBS Group excluding Credit Suisse

1, 5, 7, 9

1.2

Exposure to nature-related risks: Issuer risk, UBS Group excluding Credit Suisse

1, 5, 8, 9

3.5

1 Methodologies for assessing climate- and nature-related risks are emerging and may change over time. As the methodologies, tools, and data availability improve, we will further develop our risk identification and

measurement approaches. Lombard lending rating is assigned based on the average riskiness of loans. 2 Metrics are calculated and restated based on the 2023 methodology, across three years of reporting, 2021–

2023. 3 As defined by the Task Force on Climate-related Financial Disclosures (the TCFD), in its expanded definition published in 2021, UBS defines carbon-related assets through industry-identifying attributes of

the firm’s banking book. UBS further includes the four non-financial sectors addressed by the TCFD, including, but not limited to, fossil fuel extraction, carbon-based power generation, transportation (air, sea, rail,

and auto manufacture), metals production and mining, manufacturing industries, real estate development, chemicals, petrochemicals, and pharmaceuticals, building and construction materials and activities, forestry,

agriculture, fishing, food and beverage production, as well as including trading companies that may trade any of the above (e.g., oil trading or agricultural commodity trading companies). This metric is agnostic of risk

rating, and therefore may include exposures of companies that may be already transitioning or adapting their business models to climate risks, unlike UBS climate-sensitive-sectors methodology, which takes a risk-

based approach to defining material exposure to climate impacts. 4 Total customer lending exposure consists of total loans and advances to customers and guarantees, as well as irrevocable loan commitments

(within the scope of expected credit loss) and is based on consolidated and standalone IFRS numbers. The credit exposure includes portfolio adjustment bookings, which are either directly impacting the metrics, and

have been reflected in the heatmaps, or are impact assessed and immaterial to the metrics representation. 5 UBS continues to collaborate to resolve methodological and data challenges, and seeks to integrate both

impacts to and dependency on a changing natural and climatic environment in how it evaluates risks and opportunities. 6 Climate- and nature-related risks are scored between 0 and 1, based on sustainability and

climate risk transmission channels, as outlined in the Supplement to the UBS Group Sustainability Report 2023. Risk ratings represent a range of scores across five-rating categories: low, moderately low, moderate,

moderately high, and high. The climate- or nature-sensitive exposure metrics are determined based upon the top three of the five rated categories: moderate to high. 7 Traded products are newly disclosed for 2023.

Risk exposures consist of receivables from securities financing transactions, cash collateral receivables on derivative instruments and financial assets measured at amortized cost. 8 Issuer risk, is newly disclosed for

2023. Risk exposures consist of high-quality liquid assets assets, debt securities, bonds and liquidity buffer securities. 9 Nature-related risk metric methodology has been further strategically enhanced, as part of an

ongoing collaboration between UBS and UNEP FI.

The table below presents a view of UBS’s risk profile and year-on-year changes, when compared with 2022, within sectors

and across climate- and nature-related risks. It shows UBS Group excluding Credit Suisse’s total exposure to and trends

in each sector, followed by an exposure-weighted risk rating, the trend in the underlying quantitative score year on year,

and, finally, the total absolute exposure, rated as moderate, moderately high or high, within that sector. This is presented

for all three risk types. Exposures may appear under one or more of the risk types and, therefore, cannot be added

together; this is because the methodologies are distinct in their approach and application.

Overall, UBS Group excluding Credit Suisse had a moderate or moderately low outlook across the three risk categories

as of the end of 2023. We found that most year-on-year fluctuations were driven by an increase in lending and changes

in the risk profile relating to commercial real estate activities, especially in Switzerland. The changes in the risk profile can

be attributed to regulatory action in Switzerland regarding climate policies.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 152

Risk exposures by sector for UBS Group excluding Credit Suisse

1, 2, 3, 4, 5

Transition risk

Physical risk

Nature-related risk

Sector / Sub-sector

2023

exposure

(USD bn)

2022–

2023

exposure

trend

Weighted

average

transition risk

rating 2023

2022–

2023

weighted

average

transition

risk trend

2023

transition

risk

climate-

sensitive

exposure

(USD

bn)

Weighted

average

physical risk

rating 2023

2022 risk-

rating

category

2023

physical

risk

climate-

sensitive

exposure

(USD

bn)

Weighted

average nature-

related risk

rating 2023

2022–

2023

weighted

average

nature-

risk trend

2023

nature-

risk

climate-

sensitive

exposure

(USD

bn)

Agriculture

Agriculture, fishing and forestry

0.30

↑

Moderate

→

0.23

Moderate

→

0.08

High

→

0.30

Food and beverage

3.72

↑

Moderately high

→

3.72

Moderate

→

2.08

Moderate

→

3.71

Financial services

60.72

↑

Moderately low

↓

0.00

Moderate

→

17.47

Low

→

0.06

Fossil fuels

Downstream refining, distribution

0.25

↓

Moderately high

→

0.25

Moderate

→

0.16

Moderately high

→

0.24

Integrated oil and gas

0.32

↓

Moderately high

→

0.32

Moderately low

→

0.00

High

→

0.32

Midstream transport, storage

0.17

↑

Moderate

→

0.17

Moderate

→

0.17

Moderately low

→

0.00

Trading fossil fuels

4.55

↓

Moderately high

→

4.55

Moderate

→

0.57

Moderate

→

4.44

Upstream extraction

0.21

↑

High

→

0.21

Moderate

↓

0.18

High

→

0.21

Industrials

Cement or concrete manufacture

0.35

↑

High

→

0.35

Moderate

→

0.13

High

→

0.35

Chemicals manufacture

1.71

↑

High

→

1.71

Moderate

→

0.39

Moderately high

↓

1.71

Electronics manufacture

2.08

↑

Moderately low

→

0.00

Moderate

→

0.53

Moderate

→

0.82

Goods and apparel manufacture

2.63

↑

Moderately high

→

2.63

Moderate

→

1.58

Moderate

→

2.55

Machinery manufacturing

3.73

↑

Moderately high

→

3.26

Moderate

→

0.59

Moderately high

→

3.72

Pharmaceuticals manufacture

2.12

↑

Moderately high

→

2.12

Moderate

→

0.89

Moderate

→

2.10

Plastics and petrochemicals

manufacture

0.91

→

Moderately high

→

0.91

Moderate

→

0.28

Moderate

→

0.51

Metals and mining

Mining conglomerates (incl.

trading)

2.06

↓

Moderately high

→

2.06

Moderate

→

0.05

Moderate

→

2.06

Mining and quarrying

0.43

→

Moderate

→

0.12

Moderate

→

0.37

High

→

0.43

Production of metals

0.59

↑

Moderately high

→

0.59

Moderate

→

0.39

Moderately high

↓

0.25

Private lending

Lombard

122.76

↓

Moderately low

→

0.00

Moderately low

→

0.00

Low

→

0.00

Private lending, credit cards,

others

2.90

↓

Not classified

→

0.00

Not classified

→

0.00

Not classified

→

0.00

Real estate

Development and management

4.58

↓

Moderately high

→

4.40

Moderately low

→

0.42

Moderately high

→

4.58

Commercial real estate

55.09

↑

Moderate

→

24.75

Moderately low

→

2.87

Moderately low

→

26.71

Residential real estate

176.70

↑

Moderately low

→

0.00

Low

→

0.00

Low

→

0.00

Services and technology

19.10

↑

Moderately low

→

0.00

Moderate

→

11.24

Moderate

→

10.49

Sovereigns

2.77

→

Moderate

→

0.09

Moderately low

→

0.04

Low

→

0.00

Transportation

Air transport

1.72

→

Moderately high

→

1.72

Moderate

→

1.58

Moderately high

→

1.72

Automotive

0.41

↑

Moderate

→

0.11

Moderate

→

0.36

Moderate

→

0.41

Rail freight

0.50

↑

Low

→

0.00

Moderate

→

0.39

Moderate

→

0.49

Road freight

0.51

→

Moderately high

→

0.51

Moderate

→

0.43

Moderately high

→

0.51

Transit

0.59

→

Moderately low

→

0.00

Moderate

→

0.54

Moderate

→

0.23

Transportation parts and

equipment supply

0.65

↑

Moderately high

→

0.65

Moderate

↓

0.34

Moderate

→

0.65

Water transport

0.64

↑

Moderately high

→

0.64

Moderate

→

0.64

Moderately high

→

0.64

Utilities

Power generation

1.73

→

High

→

1.71

Moderate

↓

1.36

Moderately high

→

1.73

Waste treatment

0.27

↑

Moderately high

↑

0.27

Moderate

→

0.05

Moderately low

↓

0.02

Not classified

0.12

↑

Not classified

→

0.00

Not classified

→

0.00

Not classified

→

0.00

Grand total

477.89

↑

Moderate

→

58.05

Moderately low

→

46.18

Moderately low

→

71.97

2023. 3 Total customer lending exposure consists of total loans and advances to customers and guarantees, as well as irrevocable loan commitments (within the scope of expected credit loss), and is based on

consolidated and standalone IFRS Accounting Standards numbers. The credit exposure includes portfolio adjustment bookings, which are either directly impacting the metrics, and have been reflected in the heatmaps,

or are impact assessed and immaterial to the metrics representation. 4 UBS continues to collaborate to resolve methodological and data challenges, and seeks to integrate both impacts to and dependency on a

changing natural and climatic environment in how it evaluates risks and opportunities. 5 Climate- and nature-related risks are scored between 0 and 1, based on sustainability and climate risk transmission channels,

as outlined in the Supplement to the UBS Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors. Risk ratings represent a range of scores across five-rating categories: low,

moderately low, moderate, moderately high, and high. The climate- or nature-sensitive exposure metrics are determined based upon the top three of the five rated categories: moderate to high. 6 As a material

change in risk profile (discrete risk score, weighted average per sub-sector) is considered a >5% shift up, or down, year on year. Similarly, for absolute exposure. 7 Displayed ratings represent exposure-weighted

averages for a given sector scope. 8 Nature-related risk metric methodology has been further strategically enhanced, as part of an ongoing collaboration between UBS and UNEP FI. 9 Not classified represents the

portion of UBS’s business activities where methodologies and data are not yet able to provide a rating, e.g., private individuals.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 153

Non-financial risk

Non-financial risk is the risk of undue monetary loss and / or non-monetary adverse consequences resulting from

inadequate or failed internal processes, people and / or systems, failure to comply with laws and regulations and internal

policies and procedures, or external events (deliberate, accidental or natural) that have an impact on UBS, its clients or

its markets.

Key developments

We have identified nine non-financial risk themes as being currently key to us. These are:

– governance and legal structure integration;

– financial and regulatory reporting;

– operational resilience, stability and cybersecurity;

– data life cycle;

– investor protection and market interaction;

– strategic growth initiatives and cross-divisional interaction;

– the evolving nature of anti-money laundering (AML), know your client (KYC), sanctions, anti-bribery and corruption

(ABC), and fraud;

– employee conduct, capacity and culture; and

– environmental, social and governance (ESG) risks.

UBS continues to actively manage the non-financial risks emerging from the acquisition of the Credit Suisse Group,

including the current operation of dual corporate structures, and the scale, pace and complexity of the required

integration activities. These activities continue to be managed by the program run by our Group Integration Office. The

integration of Credit Suisse requires data to be migrated into the UBS environment and we aim to ensure that we have

robust controls to preserve data integrity, quality and availability to mitigate data migration risks and to meet regulatory

expectations.

Through this period of change, we place an increased focus on maintaining and enhancing our control environment and

continue to cooperate with regulators in relation to the submission and execution of implementation plans to meet

regulatory expectations, including remediation requirements applicable to Credit Suisse AG. In addition, the Group is

closely monitoring non-financial risk indicators to detect any potential for adverse impacts on the control environment.

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 an enlarged group of entities. This is combined with the increasingly dynamic threat

environment, which is intensified by current geopolitical factors and evidenced by the increased volumes and

sophistication of cyberattacks against financial institutions globally.

Cyberattacks on third-party vendors have affected our operations in the past and continue to be a source of residual risk

to our business. We remain on heightened alert to respond to and mitigate elevated cyber- and information-security

threats. 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. Following a post-incident review, we are improving our frameworks for managing

third parties that support our important business services and are taking actions to enhance our cyber-risk assessments

and controls over third-party vendors. We continue to invest in improving our technology infrastructure and

information-security governance to improve our defense, detection and response capabilities against cyberattacks.

In addition, we are working to enhance our operational resilience to address these heightened risks and to meet

regulatory deadlines through 2026. 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 parties,

including vendors, 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 use of artificial intelligence (AI) and machine learning, is

opening up new questions related to the fairness of AI algorithms, data life-cycle management, data ethics, data privacy

and security, and records management. In addition, new risks continue to emerge, such as those that result from the

demand from our clients for distributed ledger technology, blockchain-based assets and cryptocurrencies; however, we

currently have limited exposure to such risks, and relevant control frameworks for them are implemented and reviewed

on a regular basis as they evolve.

Competition to find new business opportunities, products and services across the financial services sector, both for firms

and for customers, is increasing, particularly during periods of market volatility and economic uncertainty. Thus, suitability

risk, product selection, cross-divisional service offerings, quality of advice and price transparency remain areas of

heightened focus for UBS and for the industry as a whole.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 154

Evolving ESG regulations and major legislation, such as the Consumer Duty regulation in the United Kingdom, the Swiss

Financial Services Act (FIDLEG) in Switzerland, Regulation Best Interest (Reg BI) in the US and the Markets in Financial

Instruments Directive II (MiFID II) in the EU, all significantly affect the industry and have required adjustments to control

processes.

Cross-border risk (including 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, and taxation of US persons. We maintain a series of controls designed to address these risks, and we are increasing

the number of controls that are automated.

Financial crime, including money laundering, terrorist financing, sanctions violations, fraud, bribery and corruption,

continues to present 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 AML, KYC 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 prevent circumvention risks, while the conflicts in the Middle East may increase

terrorist-financing risks.

Achieving fair outcomes for our clients, upholding market integrity and cultivating the highest standards of employee

conduct are of critical importance to us. 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. On

5 January 2024, we integrated the UBS and Credit Suisse conduct risk frameworks to align our handling of conduct risk

across the firm.

In September 2022, the US Securities and Exchange Commission (the SEC) and the Commodity Futures Trading

Commission (the CFTC) issued settlement orders relating to communications recordkeeping requirements in our US

broker-dealers and our registered swap dealers. In response to shortcomings identified in that context, we continued

work on a global remediation program started in 2022.

Non-financial risk framework

We follow a Group-wide non-financial risk framework that establishes requirements for identifying, managing, assessing

and mitigating operational, compliance and financial crime risks to achieve an agreed balance between risk and return.

It is built on the following pillars:

– classifying inherent risks through 19 non-financial risk taxonomies, which define the universe of material 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 a financial risk appetite statement at the Group, UBS AG and

business division levels for non-financial risk events) through quantitative metrics and thresholds and qualitative

measures, 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.

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.

Compliance & Operational Risk Control (C&ORC) is responsible for providing an independent and objective view of the

adequacy of non-financial risk management across the Group, and ensuring that compliance risk, financial crime risk and

operational risk are understood, owned and managed in accordance with our risk appetite. C&ORC business- or function-

aligned teams sit within the Group Compliance, Regulatory & Governance function, reporting to the Group Chief

Compliance and Governance Officer, who is a member of the Group Executive Board.

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 C&ORC activities intended to ensure we are able to demonstrate

compliance with applicable laws, rules and regulations.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 155

Group Compliance, Regulatory & Governance started working under integrated governance in June 2023, and progress

has been made with the rolling out of the non-financial risk framework methodology and standards, which will be further

aligned during 2024. To date, a unified non-financial risk framework policy and selected related guidance documents for

the combined organization have been rolled out, with data, reporting and risk assessments being manually combined,

or presented separately, until systems and processes are fully aligned.

In 2023, we successfully executed on the framework enhancements designed in 2022, with, for example, several cycles

of risk appetite assessments performed on the basis of the Group-wide non-financial risk appetite statements across all

taxonomies. We focused on improving effectiveness by simplifying and digitalizing the non-financial risk framework and

respective processes.

All functions within UBS are required to periodically assess the design and operating effectiveness of key internal non-

financial risk controls. The output of these reviews supports the assessment and testing scope of internal controls over

financial reporting as required by the Sarbanes–Oxley Act, Section 404 (SOX 404).

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.

Cybersecurity

Risk management and strategy

Cyber- and information security 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’s data or

information systems.

Cybersecurity is a key operational risk facing UBS and we devote considerable resources to establishing and maintaining

processes for assessing, identifying and managing cybersecurity risk through our global workforce and cyber-operations

centers around the world.

› Refer to “Risk governance” in this section for information about our approach to risk management, including our risk governance

framework

Governance

In line with our overall non-financial risk management framework, we take a cross-functional approach to addressing

cybersecurity risk, with the Group Operations and Technology Office (GOTO), business divisions, Group Compliance,

Regulatory & Governance (GCRG), Group Risk Control, Group Legal, and Group 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. Group Compliance, Regulatory & Governance (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 cybersecurity

framework and implementation. As the third line of defense, Group Internal Audit conducts independent reviews and

validates the first-line and second-line processes and functions.

The Cyber- and Information Security Committee (the CIS-C) is the primary decision-making body with oversight of and

accountability for the Group-wide cyber- and information security (CIS) program. The committee is jointly chaired by the

Group Chief Operations and Technology Officer and the Group Chief Compliance and Governance Officer. The Head

Group Internal Audit is a standing guest. The committee meets on a monthly basis and serves as a platform for interaction

across all business divisions, Group functions and the three lines of defense for the identification and effective governance

of CIS strategy, risks and regulatory obligations. The CIS-C governance structure is intended to streamline decision-

making and, where necessary, escalation to the Board of Directors (the BoD) and Group Executive Board (GEB), who

maintain overall responsibility for overseeing UBS.

Because Credit Suisse and UBS still have separate digital platforms, Credit Suisse maintained much of its pre-acquisition

cyber- and information security governance during 2023, but was increasingly aligned to the UBS CIS risk governance

framework. Credit Suisse’s CIS program is led by the Credit Suisse Chief Information Security Officer, who reports to the

Credit Suisse Chief Technology Officer and the UBS Group Chief Information Security Officer (the Group CISO). In

addition, the Credit Suisse Chief Technology Officer and Credit Suisse Chief Operations Officer report to the Group Chief

Operations and Technology Officer.

› Refer to “Cybersecurity governance” in “Board of Directors” in the “Corporate governance” section of this report for more

information

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 156

Our cyber- and information security program

Our CIS program is led by the Group CISO, who reports both to the Group Chief Operations and Technology Officer and

the Group 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, as well as

management personnel overseeing the CIS program, all have substantial relevant expertise in the areas of cyber- and

information security. Our CIS program includes the following elements:

– Threat intelligence: We systematically gather threat information and monitor threat alerts from external sources. Our

cyber-threat intelligence team analyzes such information and uses it to enhance existing defense capabilities, to

respond to identified threats and to adjust our cybersecurity strategy where needed.

– Preventative and detection controls: We use layered firm-wide controls to prevent and detect cyberattacks. Defenses

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 cybersecurity threats and attacks. 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.

– Third-party risk: Vulnerabilities in the cyber-risk environment of third parties represent a particular threat to our CIS

and our ability to maintain our business services. We follow a risk-based approach to assess and mitigate cybersecurity

risks related to third parties. Third-party services and processes are monitored and checked on an ongoing basis, with

appropriate supervision from the CIS-C. This is a key component of our third-party risk management program,

notwithstanding the challenges we face in imposing the same levels of protection to the systems and data of third

parties that we rely on ourselves.

– Monitoring and testing: Effective incident response and problem management processes are complemented by

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. 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 to isolate and contain threats that are detected to allow for effective

incident response and analysis.

Our cybersecurity assessment framework

Our cybersecurity 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 cybersecurity program, and provide guidance on operating and

improving the CIS 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 cybersecurity controls to meet developing threats. We

have ongoing programs that are intended to increase our cybersecurity 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 GEB receive regular presentations and reports throughout the year from our Group

Chief Operations and Technology Officer and our Group CISO on internal and external cybersecurity developments,

threats and risks. In addition, on a quarterly basis, the BoD receives reports on the performance of cybersecurity risk

appetite metrics, including metrics on vulnerabilities and third-party cybersecurity risks and incidents, and is notified

promptly if a Board-level cybersecurity risk limit is breached. The Risk Committee of the BoD and the GEB also receive

regular updates on CIS strategy, risks and alignment with regulatory requirements.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Risk management and control 157

Operational resilience and incident response

Our business continuity and resilience framework is designed to limit the disruption cybersecurity events cause to our

business activities. In accordance with the firm’s cyber-incident response framework, the CIS-C, including the incident

response team, tracks, documents, responds to and analyzes cybersecurity threats and incidents, including those

experienced by the firm’s third-party service providers that may impact the firm. Additionally, we maintain established

procedures for responding to, and escalating, cybersecurity and other system availability incidents. These are regularly

practiced, including tabletop exercises up to and including the GEB and BoD levels.

Our cybersecurity and data confidentiality contingency plans include event playbooks and escalation procedures designed

to support a structured assessment of potential incidents and timely escalation and reporting of incidents based on the

assessed potential impact. Incidents assessed to have 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, which provides pre-established cross-functional task forces to

manage the incident, ensure appropriate and timely regulatory, market and client communications and robust oversight

by management, with escalation frameworks to inform and ensure oversight by the GEB and the BoD.

› Refer to “Crisis management framework” in the “Regulation and supervision” section of this report for more information about

our crisis management framework

Advanced measurement approach model

The non-financial risk framework outlined above 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.

We measure Group operational risk exposure and calculate operational risk regulatory capital using the advanced

measurement approach (AMA) in accordance with Swiss Financial Market Supervisory Authority (FINMA) and

international requirements. In 2023, we introduced an aggregation of the AMAs for UBS AG and Credit Suisse AG to

report on total operational-risk-related risk-weighted assets (RWA) for the UBS Group. The related diversification effect,

agreed with FINMA, resulted in a USD 10bn reduction for reported RWA from the second quarter of 2023 onward.

An entity-specific AMA model has been applied for UBS Switzerland AG, while for other regulated entities the basic

indicators or standardized approaches are adopted for regulatory capital in agreement with local regulators. Also, the

methodology of the UBS AMA is leveraged for entity-specific internal capital adequacy assessment processes.

AMA model calibration and review

A key assumption when calibrating data-driven frequency and severity distributions is that historical losses form a

reasonable proxy for future events. In line with regulatory expectations, the AMA methodology utilizes both historical

internal losses and external losses suffered by the broader industry for model calibration purposes.

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.

Our model is reviewed regularly to maintain risk sensitivity and recalibrated at least annually. Any changes to regulatory

capital as a result of a recalibration or methodology changes are presented to FINMA for approval prior to use for

disclosure purposes.

The Group- and entity-specific AMA models are subject to an independent validation performed by Model Risk

Management & Control in line with the Group’s model risk management framework.

The AMA is expected to be replaced by the standardized approach for regulatory capital determination purposes in line

with the relevant Basel Committee for Banking Supervision Basel III capital regulations. UBS is interacting closely with the

relevant Swiss authorities to discuss the implementation details and related implementation timeline.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet 158

Capital, liquidity and funding, and balance sheet

Table of contents

159

Capital management

159

Capital management objectives, planning and activities

160

Swiss SRB total loss-absorbing capacity framework

163

Total loss-absorbing capacity

167

Risk-weighted assets

168

Leverage ratio denominator

170

Liquidity and funding management

170

Strategy, objectives and governance

170

Liquidity and funding stress testing

171

Funding management

172

Liquidity coverage ratio

173

Too-big-to-fail liquidity requirements

173

Net stable funding ratio

173

Balance sheet and off-balance sheet

173

Balance sheet

177

Off-balance sheet

179

Cash flows

180

Currency management

180

UBS shares

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management 159

Capital management

Capital management objectives, planning and activities

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 2023, our CET1 capital ratio was 14.4% and our CET1 leverage ratio 4.6%, each above our capital

guidance and also above the requirements for Swiss systemically relevant banks (SRBs) and the Basel Committee on

Banking Supervision (the 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.

The BCBS announced the finalization of the Basel III framework in December 2017, and published the final rules on the

minimum capital requirements for market risk from the Fundamental Review of the Trading Book (the FRTB) in January

2019. 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 into 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 FRTB, will lead to a further increase in risk-

weighted assets (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 the Non-core and Legacy business division during 2024

and 2025, are expected to more than offset the effects of revised Basel III standards.

› Refer to the “Our strategy” and “Targets, capital guidance and ambitions” sections of this report for more information about our

capital and resource guidelines

› 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

Capital planning and activities

Audited | We manage our balance sheet, RWA, leverage ratio denominator (LRD) and TLAC ratio levels based on our

regulatory requirements, within our internal limits and targets, and our externally provided guidance. Our strategic focus

is on achieving an optimal attribution and use of financial resources between our business divisions and Group Items, as

well as between our legal entities, while remaining within the limits defined for the Group and allocated to the business

divisions by the Board of Directors (the BoD). These resource allocations, in turn, affect business plans and earnings

projections, which are reflected in our capital plans.

The annual strategic planning process includes a capital planning component that is key in defining our capital targets.

It is based on an attribution of Group RWA and LRD internal limits to the business divisions.

Limits and targets are established at the Group and business division levels, and are approved by the BoD at least annually.

In the target-setting process we take into account the current and potential future TLAC requirements, our aggregate

risk exposure in terms of capital-at-risk and the effect of expected accounting policy changes. 

Monitoring is based on these internal limits and targets and provides indications if any changes are required. Any breach

of limits in place triggers a series of required remediating actions.

Group Treasury plans for and monitors consolidated TLAC information on an ongoing basis, reflecting business and legal

entity requirements, as well as regulatory developments in capital regulations. In addition, capital planning and

monitoring are performed at the legal entity level for our significant subsidiaries and sub-groups that are subject to

prudential supervision and must meet capital and other supervisory requirements.

› Refer to “Capital and capital ratios of our significant regulated subsidiaries” in this section for more information

› Refer to “Economic capital measures” in the “Risk management and control” section of this report for more information about

capital-at-risk

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management 160

Swiss SRB total loss-absorbing capacity framework

The disclosures in this section are provided for UBS Group 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 Group AG on a consolidated basis are provided in our 31 December 2023

Pillar 3 Report. The Pillar 3 Report also includes information relating to our significant regulated subsidiaries and sub-

groups (UBS AG consolidated, UBS AG standalone, UBS Switzerland AG standalone, UBS Europe SE consolidated,

UBS Americas Holding LLC consolidated, Credit Suisse AG consolidated, Credit Suisse AG standalone, Credit Suisse

(Schweiz) AG consolidated, Credit Suisse (Schweiz) AG standalone, Credit Suisse International standalone and Credit

Suisse Holdings (USA), Inc. consolidated) as of 31 December 2023 and is available under “Pillar 3 disclosures” at

ubs.com/investors.

Capital and other regulatory information for UBS AG consolidated in accordance with the Basel III framework, as

applicable to Swiss SRBs, is provided in the UBS AG consolidated Annual Report 2023, available under “Annual

reporting” at ubs.com/investors.

Regulatory framework

The Basel III framework came into effect in Switzerland on 1 January 2013 and is embedded in the Swiss Capital

Adequacy Ordinance (the CAO). The CAO also includes the too-big-to-fail (TBTF) provisions applicable to Swiss SRBs.

Under the Swiss SRB framework, going and gone concern requirements represent the Group’s TLAC requirement. TLAC

encompasses regulatory capital, such as CET1, 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. RWA calculations are based on the applicable rules and models approved by the Swiss Financial Market

Supervisory Authority (FINMA) for the respective legal entities.

Capital and other instruments contributing to our total loss-absorbing capacity

In addition to CET1 capital, the following instruments contribute to our loss-absorbing capacity:

– loss-absorbing AT1 capital instruments (high- and low-trigger);

– non-Basel III-compliant tier 2 capital instruments; and

– TLAC-eligible senior unsecured debt instruments.

Under the Swiss SRB rules, going concern capital includes CET1 and high-trigger loss-absorbing AT1 capital instruments.

Our existing outstanding low-trigger loss-absorbing AT1 capital instruments are available to meet the going concern

capital requirements 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 senior 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 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,

for more information about the eligibility of capital and senior

unsecured debt instruments and key features and terms and conditions of capital instruments

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management 161

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 and LRD add-on requirements for UBS 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. As a result of the acquisition of the Credit Suisse Group, the UBS Group

will be subject to higher TBTF capital requirements for market share and LRD after an appropriate transition period to be

agreed with FINMA. The phase-in of these increased capital requirements will commence from the end of 2025 and will

be completed by the beginning of 2030, at the latest.

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 our minimum CET1 capital requirement by 33 basis

points as of 31 December 2023. We also continued to apply countercyclical buffer requirements introduced in other

BCBS member jurisdictions, which resulted in an additional buffer requirement of 14 basis points as of 31 December

2023. Overall, countercyclical capital buffers contributed 47 basis points to our minimum CET1 capital requirement as of

31 December 2023.

The UBS going concern requirements include the FINMA Pillar 2 capital add-on of USD 800m related to supply chain

finance funds matter at Credit Suisse. This Pillar 2 capital add-on results in an additional CET1 capital ratio requirement

of 15 basis points and an additional CET1 leverage ratio requirement of 5 basis points as of 31 December 2023.

The total going concern capital requirements applicable are 14.92% of RWA (including countercyclical buffer

requirements) and 5.05% of LRD. Furthermore, of the total going concern capital requirement of 14.92% of RWA, at

least 10.62% 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 5.05%, at least 3.55% 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 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 will have 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)

based on obstacles to an SIB’s resolvability identified in future resolvability assessments. Our total gone concern

requirements remained substantially unchanged in 2023.

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 2023, UBS did not use any higher-quality capital instruments to fulfill gone concern requirements.

From 1 January 2022 onward, the gone concern requirement after 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 2023.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management 162

Swiss SRB going and gone concern requirements and information

As of 31.12.23

RWA

LRD

USD m, except where indicated

in %

Required going concern capital

Total going concern capital

14.92

81,530

5.05

85,570

Common equity tier 1 capital

10.62

58,031

3.55

60,139

of which: minimum capital

4.50

24,593

1.50

25,431

of which: buffer capital

5.50

30,058

2.00

33,908

of which: countercyclical buffer

0.47

2,580

Maximum additional tier 1 capital

4.30

23,500

1.50

25,431

of which: additional tier 1 capital

3.50

19,128

1.50

25,431

of which: additional tier 1 buffer capital

0.80

4,372

Eligible going concern capital

Total going concern capital

16.90

92,377

5.45

92,377

Common equity tier 1 capital

14.36

78,485

4.63

78,485

Total loss-absorbing additional tier 1 capital

2.54

13,892

0.82

13,892

of which: high-trigger loss-absorbing additional tier 1 capital

2.32

12,678

0.75

12,678

of which: low-trigger loss-absorbing additional tier 1 capital

0.22

1,214

0.07

1,214

Required gone concern capital

Total gone concern loss-absorbing capacity

4,5,6

10.73

58,613

3.75

63,578

of which: base requirement including add-ons for market share and LRD

10.73

58,613

3.75

63,578

Eligible gone concern capital

Total gone concern loss-absorbing capacity

19.60

107,106

6.32

107,106

Total tier 2 capital

0.10

538

0.03

538

of which: non-Basel III-compliant tier 2 capital

0.10

538

0.03

538

TLAC-eligible senior unsecured debt

19.50

106,567

6.29

106,567

Total loss-absorbing capacity

Required total loss-absorbing capacity

25.64

140,143

8.80

149,148

Eligible total loss-absorbing capacity

36.50

199,483

11.77

199,483

Risk-weighted assets / leverage ratio denominator

Risk-weighted assets

546,505

Leverage ratio denominator

1,695,403

1 Includes applicable add-ons of 1.59% for risk-weighted assets (RWA) and 0.55% for leverage ratio denominator (LRD), of which 15 basis points for RWA and 5 basis points for LRD reflect the Swiss Financial

Market Supervisory Authority (FINMA) Pillar 2 capital add-on of USD 800m related to the supply chain finance funds matter at Credit Suisse. 2 Our minimum CET1 leverage ratio requirement of 3.55% 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 0.05% Pillar 2 capital

add-on related to the supply chain finance funds matter at Credit Suisse. 3 Includes outstanding low-trigger loss-absorbing additional tier 1 capital instruments, which are available under the Swiss systemically

relevant bank framework to meet the going concern requirements 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 will have the authority to impose a surcharge of up to 25% of the

total going concern capital requirements 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.

Transitional purchase price allocation adjustments for regulatory capital

As part of the acquisition of the Credit Suisse Group, the assets acquired and liabilities assumed, including contingent

liabilities, were recognized at fair value as of the acquisition date in accordance with IFRS 3, Business Combinations. The

purchase price allocation (PPA) fair value adjustments required under IFRS 3 are recognized as part of negative goodwill

and include effects on financial instruments measured at amortized cost, such as fair value impacts from interest rates

and own credit, that are expected to accrete back to par through the income statement as the instruments are held to

maturity. Similar own-credit-related effects have also been recognized as part of the PPA adjustments on financial

liabilities measured at fair value. As agreed with FINMA, a transitional CET1 capital treatment has been applied for certain

of these fair value adjustments, given the substantially temporary nature of the IFRS-3-accounting-driven effects. As such,

equity reductions under IFRS Accounting Standards of USD 5.9bn (pre-tax) and USD 5.0bn (net of tax) as of the

acquisition date have been neutralized for CET1 capital calculation purposes, of which USD 1.0bn (net of tax) relates to

own-credit-related fair value adjustments. The transitional treatment is subject to linear amortization and will reduce to

nil by 30 June 2027. In 2023, the amortization of transitional CET1 PPA adjustments (interest rate and own credit) was

USD 0.7bn (net of tax).

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management 163

Total loss-absorbing capacity

Swiss SRB going and gone concern information

USD m, except where indicated

31.12.23

31.12.22

Eligible going concern capital

Total going concern capital

92,377

58,321

Total tier 1 capital

92,377

58,321

Common equity tier 1 capital

78,485

45,457

Total loss-absorbing additional tier 1 capital

13,892

12,864

of which: high-trigger loss-absorbing additional tier 1 capital

12,678

11,675

of which: low-trigger loss-absorbing additional tier 1 capital

1,214

1,189

Eligible gone concern capital

Total gone concern loss-absorbing capacity

107,106

46,991

Total tier 2 capital

538

2,958

of which: low-trigger loss-absorbing tier 2 capital

2,422

of which: non-Basel III-compliant tier 2 capital

538

536

TLAC-eligible senior unsecured debt

106,567

44,033

Total loss-absorbing capacity

199,483

105,312

Risk-weighted assets / leverage ratio denominator

Risk-weighted assets

546,505

319,585

Leverage ratio denominator

1,695,403

1,028,461

Capital and loss-absorbing capacity ratios (%)

Going concern capital ratio

16.9

18.2

of which: common equity tier 1 capital ratio

14.4

14.2

Gone concern loss-absorbing capacity ratio

19.6

14.7

Total loss-absorbing capacity ratio

36.5

33.0

Leverage ratios (%)

Going concern leverage ratio

5.4

5.7

of which: common equity tier 1 leverage ratio

4.6

4.4

Gone concern leverage ratio

6.3

4.6

Total loss-absorbing capacity leverage ratio

11.8

10.2

Audited |

Reconciliation of equity under IFRS Accounting Standards to Swiss SRB common equity tier 1 capital

USD m

31.12.23

31.12.22

Total equity under IFRS Accounting Standards

86,639

57,218

Equity attributable to non-controlling interests

(531)

(342)

Defined benefit plans, net of tax

(965)

(311)

Deferred tax assets recognized for tax loss carry-forwards

(3,039)

(4,077)

Deferred tax assets for unused tax credits

(97)

Deferred tax assets on temporary differences, excess over threshold

(64)

Goodwill, net of tax

(5,750)

(5,754)

Intangible assets, net of tax

(894)

(150)

Compensation-related components (not recognized in net profit)

(2,186)

(2,287)

Expected losses on advanced internal ratings-based portfolio less provisions

(713)

(471)

Unrealized (gains) / losses from cash flow hedges, net of tax

3,109

4,234

Own credit related to (gains) / losses on financial liabilities measured at fair value that existed at the balance sheet date, net of tax

1,291

(523)

Own credit related to (gains) / losses on derivative financial instruments that existed at the balance sheet date

(89)

(105)

Prudential valuation adjustments

(368)

(201)

Accruals for dividends to shareholders

(2,240)

(1,683)

Transitional CET1 purchase price allocation adjustments, net of tax

4,316

Other

(29)

Total common equity tier 1 capital

78,485

45,457

1 Includes goodwill related to significant investments in financial institutions of USD 20m as of 31 December 2023 (31 December 2022: USD 20m) presented on the balance sheet line Investments in associates.



Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management 164

Total loss-absorbing capacity and movement

Our total loss-absorbing capacity increased by USD 94.2bn to USD 199.5bn as of 31 December 2023.

Going concern capital and movement

Audited | Our 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.

Our CET1 capital increased by USD 33.0bn to USD 78.5bn as of 31 December 2023, predominantly due to an operating

profit before tax (excluding negative goodwill) of USD 1.0bn, the acquisition of the Credit Suisse Group, which resulted

in an increase of USD 34.9bn as of the acquisition date (including transitional CET1 purchase price allocation adjustments

of USD 5.0bn, net of tax), an increase in eligible deferred tax assets on temporary differences of USD 1.9bn, primarily in

connection with our business planning process and an election to capitalize compensation-related costs for US tax

purposes, and positive effects from foreign currency translation of USD 1.5bn, partly offset by dividend accruals of

USD 2.2bn, current tax expense of USD 1.6bn, share repurchases of USD 1.3bn under our share repurchase programs,

amortization of transitional CET1 PPA adjustments (interest rate and own credit) of USD 0.7bn (net of tax), and an

increase in compensation- and own shares-related components of USD 0.3bn.

› Refer to “UBS shares” in this section for more information about our share repurchase programs

Our loss-absorbing AT1 capital increased by USD 1.0bn to USD 13.9bn, mainly reflecting two issuances of AT1 capital

instruments of USD 3.5bn and positive impacts from interest rate risk hedge, foreign currency translation and other

effects. These increases were partly offset by USD 3.0bn equivalent of AT1 capital instruments that ceased to be eligible

as going concern capital when we issued notice of redemption of the instruments during 2023. 

AT1 capital instruments issued from the beginning of the fourth quarter of 2023 are currently subject to write-down

upon occurrence of a trigger event or a viability event. The notes provide, however, that, following approval of a minimum

amount of conversion capital by UBS Group AG’s shareholders at the 2024 Annual General Meeting, upon the occurrence

of a trigger event or a viability event, the notes will be converted into UBS Group AG ordinary shares rather than being

subject to a write-down.

Gone concern loss-absorbing capacity and movement

Audited | Our total gone concern loss-absorbing capacity increased by USD 60.1bn to USD 107.1bn as of 31 December 2023

and included USD 106.6bn of TLAC-eligible senior unsecured debt. 

The increase of USD 60.1bn mainly reflected the acquisition of the Credit Suisse Group, as USD 53.6bn equivalent of

TLAC-eligible senior unsecured debt instruments originally issued by the Credit Suisse Group were assumed as gone

concern capital by the UBS Group, and new issuances of USD 13.4bn equivalent of TLAC-eligible senior unsecured debt

instruments. The aforementioned increases were partly offset by the redemption of USD 6.0bn equivalent of TLAC-

eligible senior unsecured debt instruments, amortization of a USD 0.8bn senior unsecured debt instrument that ceased

to be TLAC-eligible as its residual time to maturity fell below one year, and a partial repurchase of two TLAC-eligible

senior unsecured debt instruments under a tender offer (in light of the acquisition of the Credit Suisse Group, UBS

announced on 22 March 2023 a tender offer to repurchase two TLAC-eligible senior unsecured debt instruments, both

issued on 17 March 2023, with an initial nominal amount totaling EUR 2.8bn, at their respective re-offer prices; the

nominal amounts of the two instruments bought back under the tender offer totaled an equivalent of USD 0.8bn). In

addition, a USD 2.4bn low-trigger loss-absorbing tier 2 capital instrument ceased to be eligible as gone concern capital

as it had less than one year to maturity.

Loss-absorbing capacity and leverage ratios

Our CET1 capital ratio increased to 14.4% from 14.2%, reflecting the aforementioned increase in CET1 capital, partly

offset by a USD 226.9bn increase in RWA.

Our CET1 leverage ratio increased to 4.6% from 4.4% due to the increase in CET1 capital, partly offset by a USD 666.9bn

increase in the LRD.

Our gone concern loss-absorbing capacity ratio increased to 19.6% from 14.7%, due to an increase in gone concern

loss-absorbing capacity of USD 60.1bn, partly offset by the aforementioned increase in RWA.

Our gone concern leverage ratio increased to 6.3% from 4.6%, driven by the aforementioned increase in gone concern

loss-absorbing capacity, partly offset by the increase in the LRD.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management 165

Swiss SRB total loss-absorbing capacity movement

USD m

Going concern capital

Swiss SRB

Common equity tier 1 capital as of 31.12.22

45,457

Operating profit before tax excluding negative goodwill

991

Current tax (expense) / benefit

(1,567)

Share repurchase program

(1,279)

Foreign currency translation effects, before tax

1,473

Compensation- and own share-related capital components

(285)

Deferred tax assets on temporary differences

1,919

Accruals for proposed dividends to shareholders

(2,240)

CET1 capital acquired from Credit Suisse Group as of the acquisition date

29,874

Transitional CET1 purchase price allocation adjustments as of the acquisition date, net of tax

5,005

Amortization of transitional CET1 purchase price allocation adjustments, net of tax

(689)

Other

(174)

Common equity tier 1 capital as of 31.12.23

78,485

Loss-absorbing additional tier 1 capital as of 31.12.22

12,864

Issuance of high-trigger loss-absorbing additional tier 1 capital

3,455

Call of high-trigger loss-absorbing additional tier 1 capital

(3,023)

Interest rate risk hedge, foreign currency translation and other effects

596

Loss-absorbing additional tier 1 capital as of 31.12.23

13,892

Total going concern capital as of 31.12.22

58,321

Total going concern capital as of 31.12.23

92,377

Gone concern loss-absorbing capacity

Tier 2 capital as of 31.12.22

2,958

Debt no longer eligible as gone concern loss-absorbing capacity due to residual tenor falling to below one year

(2,437)

Interest rate risk hedge, foreign currency translation and other effects

Tier 2 capital as of 31.12.23

538

TLAC-eligible senior unsecured debt as of 31.12.22

44,033

TLAC-eligible senior unsecured debt acquired from Credit Suisse

53,556

Issuance of TLAC-eligible senior unsecured debt

13,403

Call of TLAC-eligible senior unsecured debt

(5,971)

Debt no longer eligible as gone concern loss-absorbing capacity due to residual tenor falling to below one year

(791)

Debt bought back under the tender offer

(792)

Interest rate risk hedge, foreign currency translation and other effects

3,128

TLAC-eligible senior unsecured debt as of 31.12.23

106,567

Total gone concern loss-absorbing capacity as of 31.12.22

46,991

Total gone concern loss-absorbing capacity as of 31.12.23

107,106

Total loss-absorbing capacity

Total loss-absorbing capacity as of 31.12.22

105,312

Total loss-absorbing capacity as of 31.12.23

199,483

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. 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 Group Asset and Liability Committee, a committee of the Group Executive Board, has mandated Group Treasury to

adjust the currency mix of CET1 capital, within limits set by the BoD, 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.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management 166

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

24bn and our CET1 capital by USD 2.6bn as of 31 December 2023 (31 December 2022: USD 13bn and USD 1.4bn,

respectively) and decreased our CET1 capital ratio by 13 basis points (31 December 2022: 13 basis points).

Conversely, a 10% appreciation of the US dollar against other currencies would have decreased our RWA by USD

21bn and our CET1 capital by USD 2.4bn (31 December 2022: USD 12bn and USD 1.3bn, respectively) and increased

our CET1 capital ratio by 13 basis points (31 December 2022: 13 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 114bn as of 31 December 2023 (31 December 2022: USD 63bn) and decreased our CET1 leverage ratio by 15 basis

points (31 December 2022: 12 basis points). Conversely, a 10% appreciation of the US dollar against other currencies

would have decreased our LRD by USD 103bn (31 December 2022: USD 57bn) and increased our CET1 leverage ratio by

15 basis points (31 December 2022: 12 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.

Estimated effect on capital from litigation, regulatory and similar matters subject to provisions and contingent liabilities

We have estimated the loss in capital that we could incur as a result of the risks associated with the matters described in

“Note 18 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report. We have

employed for this purpose the advanced measurement approach (AMA) methodology that we use when determining

the capital requirements associated with operational risks, based on a 99.9% confidence level over a 12-month horizon.

The methodology takes into consideration UBS and industry experience for the AMA operational risk categories to which

those matters correspond, as well as the external environment affecting risks of these types, in isolation from other areas.

On this basis, we estimate the maximum loss in capital that we could incur over a 12-month period as a result of our

risks associated with these operational risk categories at USD 4.0bn as of 31 December 2023. This estimate is not related

to and does not take into account any provisions recognized for any of these matters and does not constitute a subjective

assessment of our actual exposure in any of these matters.

› Refer to “Non-financial risk” in the “Risk management and control” section of this report for more information

› Refer to “Note 18 Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report for more

information

Capital and capital ratios of our significant regulated subsidiaries

UBS Group AG is a holding company conducting substantially all operations through UBS AG, Credit Suisse AG and

subsidiaries thereof. UBS Group AG, UBS AG and Credit Suisse AG have contributed a significant portion of their

respective capital to, and provided substantial liquidity to, 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 this report. 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 2023 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 resolution 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 2023, the liability of UBS Switzerland AG amounted to CHF 2.8bn (USD 3.3bn), a decrease of

CHF 1.2bn (USD 1.0bn) compared with 31 December 2022. The respective liability of UBS AG has been substantially

extinguished.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management 167

Risk-weighted assets

RWA development in 2023

During 2023, RWA increased by USD 226.9bn to USD 546.5bn, primarily due to a USD 237.7bn increase resulting from

the acquisition of the Credit Suisse Group. Excluding that acquisition, RWA decreased by USD 10.8bn, primarily driven

by decreases of USD 19.0bn due to asset size and other movements and USD 3.7bn due to model updates and

methodology changes, partly offset by an increase of USD 11.8bn due to currency effects.

› Refer to the 31 December 2023 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

Movement in risk-weighted assets, by key driver

USD bn

RWA as of

31.12.22

Currency

effects

Model updates

and

methodology

changes

Asset size and

other

of which:

Acquisition of

the Credit

Suisse Group

on 30.6.23

RWA as of

31.12.23

Credit and counterparty credit risk

200.5

11.0

1.5

132.3

152.4

345.3

Non-counterparty-related risk

24.2

0.8

9.3

6.7

34.4

Market risk

13.5

(0.2)

8.1

9.5

21.4

Operational risk

81.4

(5.0)

69.0

145.4

Total

319.6

11.8

(3.7)

218.8

237.7

546.5

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 2023 Pillar 3 Report, available under

“Pillar 3 disclosures” at ubs.com/investors. 2 Reflects the RWA acquired from the Credit Suisse Group as on 30 June 2023. Subsequent changes in this portfolio in the second half of 2023 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 144.8bn to USD 345.3bn as of 31 December 2023, primarily

due to a USD 152.4bn increase resulting from the acquisition of the Credit Suisse Group.

Excluding that acquisition, credit and counterparty credit risk RWA decreased by USD 7.6bn, driven by a USD 20.1bn

decrease related to asset size and other movements, mainly due to lower RWA in Non-core and Legacy, primarily driven

by an accelerated roll-off arising from our actions to actively unwind the portfolio, in addition to the natural roll-off, as

well as lower RWA from loans in Global Wealth Management and Personal & Corporate Banking. These decreases were

partly offset by currency effects of USD 11.0bn and an increase of USD 1.5bn from model updates and methodology

changes, driven by increases related to various updates, most notably due to updates for private equity and hedge fund

financing trades, as well as for derivatives and securities financing transaction models, partly offset by decreases related

to the recalibration of certain multipliers as a result of our 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 2023 Pillar 3 Report, available under “Pillar 3 disclosures” at

ubs.com/investors,

for more information

about credit and counterparty credit risk developments

Non-counterparty-related risk

Non-counterparty-related risk RWA increased by USD 10.1bn, primarily due to a USD 6.7bn increase resulting from the

acquisition of the Credit Suisse Group. Excluding that acquisition, non-counterparty-related risk RWA increased by

USD 3.4bn, mainly driven by higher RWA from deferred taxes on temporary differences.

Market risk

Market risk RWA increased by USD 7.9bn to USD 21.4bn as of 31 December 2023, primarily due to a USD 9.5bn increase

resulting from the acquisition of the Credit Suisse Group. Excluding that acquisition, market risk RWA decreased by

USD 1.6bn, driven by a decrease of USD 1.4bn from asset size and other movements and a decrease of USD 0.2bn related

to ongoing parameter updates of the value-at-risk (VaR) model. FINMA approved the integration of time decay into

regulatory VaR and stressed VaR, which went live on 12 January 2024.

› 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 2023 Pillar 3 Report, available under “Pillar 3 disclosures” at

ubs.com/investors,

for more information

about market risk developments

Operational risk

Operational risk RWA increased by USD 64.0bn to USD 145.4bn as of 31 December 2023, primarily due to a USD 69.0bn

increase resulting from the acquisition of the Credit Suisse Group. The aggregation of the advanced measurement

approach (AMA) model considering diversification effects resulted in a USD 10.0bn reduction in RWA, of which

USD 5.0bn was reflected in the acquisition balance of the Credit Suisse Group and USD 5.0bn was included as a model

update.

› Refer to “Advanced measurement approach model” in the “Risk management and control” section of this report for more

information about the AMA model

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management 168

Outlook

We expect that model updates will result in an RWA increase of around USD 10bn in 2024 and 2025, primarily as a result

of the migration of Credit Suisse portfolios to UBS models. The extent and timing of RWA changes may vary as model

updates are completed and receive regulatory approval, along with changes in the composition of the relevant portfolios.

In addition, we currently estimate that the revised Basel III framework, including the Fundamental Review of the Trading

Book, will lead to a further 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 the Non-core and Legacy business

division, are expected to more than offset the effects of model updates and revised Basel III standards in 2024 and 2025.

Risk-weighted assets, by business division and Group Items

USD bn

Global Wealth

Management

Personal &

Corporate

Banking

Asset

Manage-

ment

Investment

Bank

Non-core and

Legacy

Group

Items

Total

RWA

31.12.23

Credit and counterparty credit risk

90.4

137.8

7.6

65.0

34.3

10.2

345.3

Non-counterparty-related risk

6.8

3.4

0.8

3.8

2.5

17.1

34.4

Market risk

1.7

0.1

12.5

5.1

1.9

21.4

Operational risk

57.5

19.5

7.2

25.0

30.0

6.2

145.4

Total

156.5

160.8

15.6

106.3

72.0

35.3

546.5

31.12.22

Credit and counterparty credit risk

68.4

64.9

3.0

57.7

2.2

4.3

200.5

Non-counterparty-related risk

5.9

1.9

0.6

3.7

0.0

12.1

24.2

Market risk

1.6

0.0

10.1

0.7

1.1

13.5

Operational risk

37.6

9.1

3.2

21.3

10.1

81.4

Total

113.5

75.9

6.7

92.8

13.0

17.6

319.6

31.12.23 vs 31.12.22

Credit and counterparty credit risk

22.1

72.9

4.5

7.3

32.2

5.8

144.8

Non-counterparty-related risk

0.9

1.5

0.2

0.1

2.5

4.9

10.1

Market risk

0.1

2.4

4.5

0.8

7.9

Operational risk

19.9

10.4

4.1

3.7

19.9

6.2

64.0

Total

43.0

84.9

8.9

13.5

59.0

17.7

226.9

1 Starting with the third quarter of 2023, Non-core and Legacy represents a separate reportable segment and Group Functions has been renamed Group Items. Prior periods have been revised to reflect these changes.

Operational Risk RWA was fully allocated to Non-core and Legacy as of 31.12.2022. 2 Includes settlement risk, credit valuation adjustments, equity exposures in the banking book, investments in funds and

securitization exposures in the banking book. 3 Non-counterparty-related risk includes deferred tax assets recognized for temporary differences (31 December 2023: USD 16.4bn; 31 December 2022: USD 11.4bn),

as well as property, equipment, software and other items (31 December 2023: USD 18bn; 31 December 2022: USD 12.9bn).

Leverage ratio denominator

During 2023, the LRD increased by USD 666.9bn to USD 1,695.4bn, primarily due to a USD 644.4bn increase resulting

from the acquisition of the Credit Suisse Group. Excluding that acquisition, the LRD increased by USD 53.8bn due to

currency effects, partly offset by USD 31.3bn due to asset size and other movements.

Movement in leverage ratio denominator, by key driver

USD bn

LRD as of

31.12.22

Currency

effects

Asset size and

other

of which: Acquisition of

the Credit Suisse Group

as on 30.6.23

LRD as of

31.12.23

On-balance sheet exposures (excluding derivatives and securities financing transactions)

816.0

49.5

463.7

464.2

1,329.2

Derivatives

90.3

0.1

37.7

48.8

128.1

Securities financing transactions

98.6

1.4

65.5

63.5

165.4

Off-balance sheet items

34.4

2.5

43.0

64.6

79.9

Deduction items

(10.8)

0.3

3.3

3.4

(7.2)

Total

1,028.5

53.8

613.1

644.4

1,695.4

1 Reflects the LRD acquired from the Credit Suisse Group as at 30 June 2023. Subsequent changes in this portfolio in the second half of 2023 are shown under currency effects or asset size and other changes.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Capital management 169

The LRD movements described below exclude currency effects.

On-balance sheet exposures (excluding derivatives and securities financing transactions) increased by USD 463.7bn,

primarily due to a USD 464.2bn increase resulting from the acquisition of the Credit Suisse Group. Excluding that

acquisition, on-balance sheet exposures decreased by USD 0.5bn, mainly due to lower lending balances, partly offset by

higher central bank balances and trading portfolio assets.

Derivatives exposures increased by USD 37.7bn, primarily due to a USD 48.8bn increase resulting from the acquisition of

the Credit Suisse Group. Excluding that acquisition, derivative exposures decreased by USD 11.0bn, mainly reflecting

market-driven movements and lower trading volumes across products.

Securities financing transactions exposures increased by USD 65.5bn, primarily due to a USD 63.5bn increase resulting

from the acquisition of the Credit Suisse Group. Excluding that acquisition, security financing transactions increased by

USD 2.0bn.

Off-balance sheet items exposures increased by USD 43.0bn, primarily due to a USD 64.6bn increase resulting from the

acquisition of the Credit Suisse Group. Excluding that acquisition, off-balance sheet items exposures decreased by

USD 21.6bn, mainly due to a decrease in loan commitments in Non-core and Legacy, following the accounting

reclassification of loan commitments from accrual to fair value.

› Refer to “Balance sheet and off-balance sheet” in this section for more information about balance sheet movements

Leverage ratio denominator by business division and Group Items

USD bn

Global Wealth

Management

Personal &

Corporate

Banking

Asset

Management

Investment

Bank

Non-core and

Legacy

Group Items

Total

31.12.23

On-balance sheet exposures

428.3

442.4

5.8

217.2

95.0

140.5

1,329.2

Derivatives

8.1

3.0

0.0

90.3

23.6

3.1

128.1

Securities financing transactions

36.4

28.3

0.1

39.9

17.7

43.1

165.4

Off-balance sheet items

20.3

38.5

0.2

18.3

1.6

1.1

79.9

Items deducted from Swiss SRB tier 1 capital

(4.7)

4.3

(1.2)

(0.4)

(0.7)

(4.5)

(7.2)

Total

488.4

516.6

4.9

365.2

137.1

183.2

1,695.4

31.12.22

On-balance sheet exposures

364.8

223.4

4.0

189.5

2.9

31.3

816.0

Derivatives

5.4

1.5

0.0

80.0

2.5

0.9

90.3

Securities financing transactions

20.5

10.8

0.1

40.4

0.9

26.0

98.6

Off-balance sheet items

8.8

16.6

6.9

0.0

2.1

34.4

Items deducted from Swiss SRB tier 1 capital

(5.2)

(0.2)

(1.2)

(0.4)

0.0

(3.9)

(10.8)

Total

394.4

252.1

2.9

316.6

6.3

56.3

1,028.5

31.12.23 vs. 31.12.22

On-balance sheet exposures

63.5

219.0

1.8

27.6

92.1

109.2

513.2

Derivatives

2.7

1.6

0.0

10.3

21.1

2.2

37.9

Securities financing transactions

15.9

17.6

0.0

(0.6)

16.8

17.1

66.8

Off-balance sheet items

11.5

21.9

0.2

11.4

1.6

(1.0)

45.5

Items deducted from Swiss SRB tier 1 capital

0.5

4.5

0.0

(0.7)

3.6

Total

94.0

264.5

2.0

48.6

130.9

126.9

666.9

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management 170

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 acquisition of the Credit Suisse Group, Credit Suisse became part of the overall liquidity

and funding management of the UBS Group. Credit Suisse now leverages the market access of UBS and engages in

secured intercompany transactions to facilitate funding between entities.

The UBS Group is managed as an aggregate of UBS AG and Credit Suisse AG. The subsections on liquidity and funding

stress testing and funding management describe the management implemented at UBS AG. The underlying frameworks

and models have been materially aligned and are subject to further alignment as the integration progresses. For details

on the management of Credit Suisse AG, please refer to the Credit Suisse AG Annual Report 2023.

Strategy, objectives and governance

Audited | Our management of liquidity and funding has the overall objective of protecting our business franchises and

prudently managing our internal and regulatory liquidity and funding requirements. 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 requirements, primarily expressed through the liquidity coverage ratio (the LCR) and the net stable

funding ratio (the NSFR). Our liquidity and funding strategy is proposed by Group Treasury and approved by the Group

Asset and Liability Committee (the Group ALCO), which is a committee of the Group Executive Board (the GEB) 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 Group and, where

appropriate, at legal entity and business-division levels. Key limits (under BoD authority) and indicators linked to

these limits are reviewed and reconfirmed at least once a year by the BoD, the GEB, the Group ALCO, the Group

Chief Financial Officer, the Group Chief Risk Officer 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. 

› 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 close control of both our cash and collateral, including our high-

quality liquid assets (HQLA), and centralizes the Group’s access to wholesale cash 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 to define procedures throughout the crisis continuum. Group Treasury reports on

the Group’s liquidity and funding status and position, at least monthly, to the Group ALCO and the Risk Committee of

the BoD.

Liquidity and funding stress testing

Audited | Our liquidity and funding risk management aims to ensure that the firm has sufficient liquidity and funding to

survive a severe idiosyncratic and market-wide liquidity and funding stress event without government support, 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 and subsidiary liquidity and funding requirements. 

Our liquidity and funding stress testing covers two main stress scenarios: a combined (market and idiosyncratic) scenario

and a structural market-wide scenario. We continuously refine stress-testing assumptions.

› Refer to “Risk measurement” in the “Risk management and control” section of this report for more information about stress

testing

› Refer to “Liquidity and funding stress testing” in the “Liquidity and funding management” section of the Credit Suisse AG Annual

Report 2023 for more information about liquidity and funding stress testing at Credit Suisse AG

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management 171

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.

The risk appetite objective of this stress test is to ensure that UBS keeps 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.

Structural market-wide scenario

In this scenario, UBS is subject to a significant deterioration of macroeconomic and financial market conditions globally,

resulting in a requirement for long-term funding to survive the liquidity drain and support the franchise of the business.

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.

The risk appetite objective of this stress test is to ensure that UBS maintains 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 stressed liquidity inflows and outflows under the scenario.

Funding management

Audited | Group Treasury monitors our funding position, including concentration risk, aiming to ensure that we maintain a

well-balanced and diversified liability structure. Our funding management team 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 Group 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 Group ALCO.

› 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 2023

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 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 incentivize that we have the right balance of assets and

liabilities in currencies and tenors.

Credit ratings

Credit ratings can affect the cost and availability of funding, especially from wholesale unsecured sources. Our 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 2023, in the event of a one-notch reduction in our long-term credit ratings, we would

have been required to provide USD 0.5bn in cash or other collateral. In the event of a two-notch reduction, it would have

been USD 0.9bn and for a three-notch downgrade USD 1.4bn. In the two- and three-notch scenarios the collateral

requirements predominantly relate to OTC derivative positions.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management 172

In March 2023, following the announcement of the planned acquisition of the Credit Suisse Group, rating agencies took

the following actions regarding UBS Group AG’s ratings: S&P Global Ratings Europe Limited (S&P) placed its “A–”‘ Long-

term Issuer Credit Rating on Negative outlook, Fitch Ratings Ireland Limited (Fitch) placed its “A+” Long-Term Issuer

Default Rating (IDR) on Rating Watch Negative and Moody’s Investors Service Limited (Moody’s) changed the outlook on

its “A3” Long-term Issuer Default Rating to Negative. Upon the close of the acquisition in June 2023, Fitch downgraded

UBS Group’s Long-Term IDR to A from A+ and changed the outlook to Stable, while Moody’s changed the outlook on

UBS Group’s Long-term IDR to Positive. In February 2024, S&P affirmed their ratings and outlook for UBS Group.

› Refer to “Liquidity and funding management are critical to UBS’s ongoing performance” in the “Risk factors” section of this report

for more information

› Refer to “Funding Management” in the “Liquidity and funding management” section of the Credit Suisse AG Annual Report 2023

for more information about funding management at Credit Suisse AG

Contingency Funding Plan

Audited | We maintain our Contingency Funding Plan as a preparation and action plan, aiming to ensure we maintain

sufficient liquidity to meet payment obligations in a period of liquidity and funding stress. 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 the

management.

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, 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. Group

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 the Group 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 Group HQLA. On this basis, USD 42.3bn of

assets were excluded from our daily average Group HQLA for the fourth quarter of 2023. Amounts held in excess of local

liquidity requirements that are not subject to other restrictions are generally available for transfer within the Group.

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 allow banks to use their HQLA and let their LCR 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 for the fourth quarter of 2023 was 215.7%, compared with 163.7% in the fourth quarter of

2022, remaining above the prudential requirement communicated by FINMA.

The movement in the average LCR was primarily driven by an increase in HQLA of USD 177.0bn to USD 415.6bn, primarily

related to Credit Suisse HQLA and higher cash available from debt issued and customer deposits in UBS Group excluding

Credit Suisse. The increase in HQLA was partly offset by a USD 46.8bn increase in net cash outflows to USD 192.8bn,

largely attributable to Credit Suisse’s net cash outflows related to customer deposits and credit commitments. These

outflows were partly offset by lower outflows from customer deposits of UBS Group excluding Credit Suisse.

› Refer to the 31 December 2023 Pillar 3 Report, available under “Pillar 3 disclosures” at

ubs.com/investors,

for more information

about the LCR

› Refer to the “Significant regulated subsidiary and sub-group information” section of this report

for more information about the

LCR of UBS AG and UBS Switzerland AG

Liquidity coverage ratio

USD bn, except where indicated

Average 4Q23

Average 4Q22

High-quality liquid assets

415.6

238.6

Total net cash outflows

192.8

146.0

Liquidity coverage ratio (%)

215.7

163.7

1 Calculated based on an average of 63 data points in the fourth quarter of 2023 and 63 data points in the fourth quarter of 2022. 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.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management 173

Too-big-to-fail liquidity requirements

The too-big-to-fail (TBTF) liquidity requirements communicated by the Swiss Financial Market Supervisory Authority

(FINMA) in the third quarter of 2023 became effective on 1 January 2024. The affected legal entities of the UBS Group

are compliant with these requirements.

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%.

As of 31 December 2023, the NSFR increased 4.9 percentage points to 124.7%, remaining above the prudential

requirement communicated by FINMA.

Available stable funding increased by USD 365.0bn to USD 926.4bn, predominantly driven by the acquisition of the

Credit Suisse Group, mainly reflecting debt issued, customer deposits and regulatory capital. The increase in UBS Group

excluding Credit Suisse was predominantly driven by higher customer deposits and debt issued.

Required stable funding increased by USD 274.7bn to USD 743.2bn, substantially reflecting the acquisition of the Credit

Suisse Group. This balance predominantly includes lending assets and, to a lesser extent, trading portfolio assets and

derivative balances. Required stable funding in UBS Group excluding Credit Suisse increased, mainly driven by higher

lending assets, including currency effects, and higher trading portfolio assets.

› Refer to the 31 December 2023 Pillar 3 Report, available under “Pillar 3 disclosures” at

ubs.com/investors,

for more information

about the NSFR

› Refer to the “Significant regulated subsidiary and sub-group information” section of this report

for more information about the

NSFR of UBS AG and UBS Switzerland AG

Net stable funding ratio

USD bn, except where indicated

31.12.23

31.12.22

Available stable funding (ASF)

926.4

561.4

Required stable funding (RSF)

743.2

468.5

Net stable funding ratio (%)

124.7

119.8

Balance sheet and off-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 our financial position. For more

information about the effects of the acquisition of the Credit Suisse Group on our balance sheet and off-balance sheet,

refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements”

section of this report.

Balance sheet

Balance sheet assets

As of 31 December 2023, balance sheet assets totaled USD 1,717.2bn, an increase of USD 612.9bn compared with

31 December 2022, which was mainly driven by the acquisition of the Credit Suisse Group, which contributed

USD 604.1bn in June 2023.

Cash and balances at central banks increased by USD 144.7bn to USD 314.1bn. The acquisition of the Credit Suisse

Group in June 2023 contributed USD 93.0bn, mainly in balances with the Swiss National Bank (the SNB) and the Federal

Reserve. Excluding the effects of that acquisition, balances with central banks increased by USD 51.7bn during 2023,

driven by inflows from higher customer deposits, lower lending and net new issuances of short-term debt and debt issued

designated at fair value, as well as currency effects. These inflows were partly offset by repayment of funding from the

SNB and other outflows.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet 174

Lending assets increased by USD 259.0bn to USD 661.0bn, predominantly reflecting the acquisition of the Credit Suisse

Group, which added USD 260.8bn in June 2023. Excluding the increase from the addition in June, Lending assets

decreased by USD 1.8bn during 2023, mainly reflecting net new loan outflows of USD 37.0bn, partly offset by currency

effects. Securities financing transactions at amortized cost increased by USD 31.2bn to USD 99.0bn, of which

USD 26.2bn related to balances acquired from the Credit Suisse Group in June 2023. Excluding the effects of that

acquisition, the increase mainly reflects net new excess cash reinvestment trades. Trading assets increased by USD 61.7bn

to USD 169.6bn, including USD 56.2bn reflecting the acquisition of the Credit Suisse Group in June 2023. Excluding the

additions from that acquisition, the increase mainly reflected higher inventory held to hedge client positions and market-

driven movements, partly offset by the wind-down of the Credit Suisse business in Non-Core and Legacy.

Derivatives and cash collateral receivables on derivative instruments increased by USD 41.1bn to USD 226.2bn. The

increase related mainly to the acquisition of the Credit Suisse Group, which added USD 83.0bn in June 2023, including

USD 20.9bn of cash collateral receivables. Excluding the effects of that acquisition, balances decreased by USD 42bn,

mainly in Derivatives & Solutions and Financing in the Investment Bank, predominantly reflecting decreases in foreign

exchange contracts, where the contracts in place at the end of 2023 had lower fair values than the contracts in place at

the end of 2022, as well as decreases in interest rate contracts, mainly reflecting valuation effects due to decreases in

long-term interest rates. In addition, the unwinding of the Credit Suisse business in Non-core and Legacy contributed to

the decrease.

Other financial assets measured at amortized cost increased by USD 12.2bn to USD 65.5bn, mostly related to the

acquisition of the Credit Suisse Group, which added USD 13.4bn, reflecting finance lease receivables, as well as cash

collateral provided to exchanges and clearing houses to secure securities trading activity through those counterparties.

Other financial assets measured at fair value increased by USD 44.3bn to USD 106.3bn. Excluding the effects of the

acquisition of the Credit Suisse Group, which added USD 54.2bn in June 2023, balances decreased by USD 9.9bn, mainly

reflecting the wind-down of the Credit Suisse business in Non-core and Legacy, partly offset by higher securities financing

transactions measured at fair value in Group Treasury. Non-financial assets increased by USD 15.3bn to USD 54.5bn,

mainly driven by positions acquired from the Credit Suisse Group, which were USD 16.8bn as of the acquisition date and

mainly included leased and owned properties and equipment, investments in associates, and prepaid expenses, as well

as physical holdings of precious metals.

Assets

As of

% change from

USD bn

31.12.23

31.12.22

Cash and balances at central banks

314.1

169.4

Lending

661.0

402.0

Securities financing transactions at amortized cost

99.0

67.8

Trading assets

169.6

107.9

Derivatives and cash collateral receivables on derivative instruments

226.2

185.1

Brokerage receivables

21.0

17.6

Other financial assets measured at amortized cost

65.5

53.3

Other financial assets measured at fair value

106.3

62.0

Non-financial assets

54.5

39.2

Total assets

1,717.2

1,104.4

of which: Credit Suisse

583.2

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. 3 Refer to "Note 2 Accounting for the acquisition of the Credit Suisse Group" in the "Consolidated financial statements" section of this report for more information.

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 our high-quality liquid assets and unencumbered positions in our trading

portfolio. In addition, unencumbered assets include 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 the Group as a whole.

› Refer to “Note 23 Restricted and transferred financial assets” in the “Consolidated financial statements” section of this report for

more information

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet 175

Asset encumbrance as of 31 December 2023

Encumbered

USD bn

Assets pledged

as collateral

Assets

otherwise

restricted and

not available to

secure funding

Unencumbered

assets

Assets that

cannot be

pledged as

collateral

Total Group

Balance sheet

Cash and balances at central banks

1.0

0.4

312.8

314.1

Amounts due from banks

2.9

18.2

0.1

21.2

Receivables from securities financing transactions measured at amortized cost

99.0

Cash collateral receivables on derivative instruments

9.5

40.5

50.1

Loans and advances to customers

127.4

0.3

512.2

639.8

Other financial assets measured at amortized cost

7.6

4.7

43.5

9.7

65.5

Total financial assets measured at amortized cost

136.0

17.8

886.7

149.4

1,189.8

Financial assets at fair value held for trading

83.7

0.2

85.8

169.6

Derivative financial instruments

176.1

Brokerage receivables

21.0

Financial assets at fair value not held for trading

3.1

18.2

45.0

37.7

104.0

Total financial assets measured at fair value through profit or loss

86.8

18.4

130.7

234.8

470.8

Financial assets measured at fair value through other comprehensive income

1.8

0.4

2.2

Non-financial assets

0.0

25.8

28.6

54.5

Total balance sheet assets as of 31 December 2023

222.8

38.0

1,043.6

412.9

1,717.2

Total balance sheet assets as of 31 December 2022

77.5

27.3

697.1

302.5

1,104.4

Off-balance sheet

Fair value of securities accepted as collateral as of 31 December 2023

382.3

5.3

189.0

576.6

Fair value of securities accepted as collateral as of 31 December 2022

331.8

5.6

96.6

434.0

Total balance sheet assets and off-balance sheet securities accepted as collateral as of

31 December 2023

605.1

43.3

1,232.6

412.9

2,293.8

of which: Credit Suisse

134.3

7.0

401.0

129.1

671.3

Total balance sheet assets and off-balance sheet securities accepted as collateral as of

31 December 2022

409.3

33.0

793.7

302.5

1,538.4

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 2023: 443.0bn; 31 December 2022: 238.6bn). 3 Refer to "Note 2 Accounting for the acquisition of the Credit Suisse Group"

in the "Consolidated financial statements" section of this report for more information.

Balance sheet liabilities

Total liabilities as of 31 December 2023 were USD 1,630.6bn, an increase of USD 583.5bn compared with 31 December

2022, which was mainly driven by the acquisition of the Credit Suisse Group.

Short-term borrowings increased by USD 68.2bn to USD 109.5bn. The acquisition of the Credit Suisse Group added

USD 112.9bn in June 2023, including USD 97.2bn of funding from the SNB. Excluding the effects of the addition of

Credit Suisse balances, short-term borrowings decreased by USD 44.7bn, mainly driven by the repayment of USD 56.5bn

of funding from the Swiss National Bank. This decrease was partly offset by net new issuances of commercial paper and

certificates of deposit in Group Treasury, as well as an increase in funding obtained from the US Federal Home Loan

Banks. Securities financing transactions at amortized cost increased by USD 10.2bn to USD 14.4bn, mainly driven by the

acquisition of the Credit Suisse Group, which added USD 11.9bn in June 2023.

Customer deposits increased by USD 266.9bn to USD 792.0bn. The acquisition of the Credit Suisse Group contributed

USD 183.1bn in June 2023. Excluding the effects of that acquisition, the increase of USD 83.8bn was mainly due to

currency effects of approximately USD 31.3bn and net inflows into fixed-term deposit products in Global Wealth

Management and Personal & Corporate Banking, partly offset by continued shifts into money market funds and US-

government securities.

Debt issued designated at fair value and long-term debt issued measured at amortized cost increased by USD 169.0bn

to USD 327.6bn. The increase mainly related to the acquisition of the Credit Suisse Group, which added USD 150.1bn

to the Group. Excluding the effects of the acquisition of the Credit Suisse Group, Debt issued designated at fair value

and long-term debt issued measured at amortized cost increased by USD 18.9bn, mainly reflecting net new issuances of

Debt issued designated at fair value in Derivatives & Solutions, as well as net new issuances of senior unsecured debt,

including total loss-absorbing capacity (TLAC)-eligible instruments, and loss-absorbing tier 1 capital instruments.

In December 2023, we announced our intention to call one high-trigger loss-absorbing tier 1 capital instrument of

USD 2.5bn, which was redeemed in January 2024.

› Refer to “Capital management” in this section for more information

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet 176

Derivatives and cash collateral payables on derivative instruments increased by USD 42.4bn to USD 233.8bn, including

USD 78.7bn recognized in June 2023 with the acquisition of the Credit Suisse Group, of which USD 10.9bn was cash

collateral payables. Excluding that acquisition, balances decreased by USD 36.3bn, reflecting the same drivers as on the

asset side.

Other financial liabilities measured at amortized cost increased by USD 11.3bn to USD 20.9bn. The balances of USD 8.0bn

added with the acquisition of Credit Suisse Group in June 2023 mainly included accrued expenses and lease liabilities.

Excluding the effects of that acquisition, balances increased mainly due to higher interest accruals. Non-financial liabilities

increased by USD 14.1bn to USD 26.3bn. The increase mainly related to the acquisition of the Credit Suisse Group, which

added USD 13.8bn in June 2023, mainly representing provisions and contingent liabilities, compensation-related liabilities

and deferred tax liabilities.

Equity

Equity attributable to shareholders increased by USD 29,232m to USD 86,108m as of 31 December 2023.

The increase of USD 29,232m was mainly driven by total comprehensive income attributable to shareholders of

USD 28,836m, reflecting net profit of USD 27,849m, which included the recognition of negative goodwill on the

acquisition of the Credit Suisse Group of USD 27,748m, and other comprehensive income (OCI) of USD 986m. OCI mainly

included OCI related to foreign currency translation of USD 1,456m, cash flow hedge OCI of USD 1,275m and negative

OCI related to own credit on financial liabilities designated at fair value of USD 1,769m. In addition, deferred share-based

compensation awards of USD 1,097m were expensed in the income statement, increasing share premium.

Net treasury share activity increased equity by USD 745m. This was mainly due to the consideration of USD 3,547m used

to acquire the Credit Suisse Group, largely offset by share repurchases with an acquisition cost of USD 1,279m under

our 2022 share repurchase program and purchases of USD 1,258m from the market to hedge our share delivery

obligations related to employee share-based compensation awards.

These increases were partly offset by distributions to shareholders of USD 1,679m, reflecting a dividend payment of

USD 0.55 per share.

In the second quarter of 2023, we canceled 62,548,000 shares purchased under our 2021 share repurchase program, as

approved by shareholders at the 2023 Annual General Meeting (the AGM). The cancellation of shares resulted in

reclassifications within equity but had no net effect on our total equity attributable to shareholders.

At the 2023 AGM, the shareholders also approved the change of the share capital currency of UBS Group AG from the

Swiss franc to the US dollar. As a result, the nominal value per share has changed from CHF 0.10 to USD 0.10, resulting

in a reclassification between share capital and capital contribution reserve (presented as share premium in the

consolidated financial statements). Total equity reported was not affected by this change.

› Refer to the “Group 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

› Refer to “UBS shares” in this section for more information about our share repurchase programs

Liabilities and equity

As of

% change from

USD bn

31.12.23

31.12.22

Short-term borrowings

1,2

109.5

41.3

165

Securities financing transactions at amortized cost

14.4

4.2

243

Customer deposits

792.0

525.1

Debt issued designated at fair value and long-term debt issued measured at amortized cost

327.6

158.6

107

Trading liabilities

34.2

29.5

Derivatives and cash collateral payables on derivative instruments

233.8

191.3

Brokerage payables

42.5

45.1

(6)

Other financial liabilities measured at amortized cost

20.9

9.6

118

Other financial liabilities designated at fair value

29.5

30.2

(2)

Non-financial liabilities

26.3

12.3

114

Total liabilities

1,630.6

1,047.1

of which: Credit Suisse

475.7

Share capital

0.3

Share premium

13.2

13.5

(2)

Treasury shares

(4.8)

(6.9)

(30)

Retained earnings

74.9

50.0

Other comprehensive income

2.5

(0.1)

Total equity attributable to shareholders

86.1

56.9

Equity attributable to non-controlling interests

0.5

0.3

Total equity

86.6

57.2

Total liabilities and equity

1,717.2

1,104.4

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 USD 57.5bn of debt instruments previously issued by Credit Suisse Group AG (transferred to UBS Group AG as part of the acquisition of the Credit Suisse Group), USD 14.8bn of

borrowings from UBS AG, USD 3.4bn of fiduciary placements where UBS Switzerland AG acts as the fiduciary, and other minor intercompany positions. Refer to “Note 2 Accounting for the acquisition of the Credit

Suisse Group” in the “Consolidated financial statements” section of this report for more information. 4 Excludes other comprehensive income related to defined benefit plans and own credit, which is recorded

directly in Retained earnings.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet 177

Liabilities by product and currency

USD equivalent

All currencies

of which: USD

of which: CHF

of which: EUR

USD bn

31.12.23

31.12.22

31.12.23

31.12.22

31.12.23

31.12.22

31.12.23

31.12.22

Short-term borrowings

109.5

41.3

49.2

23.3

41.5

3.8

8.3

4.4

of which: amounts due to banks

71.0

11.6

20.4

4.2

41.1

3.7

3.1

1.1

of which: short-term debt issued

1,2

38.5

29.7

28.8

19.0

0.3

0.1

5.2

3.3

Securities financing transactions at amortized cost

14.4

4.2

7.8

3.6

2.4

0.0

3.3

0.2

Customer deposits

792.0

525.1

311.8

226.6

328.0

198.5

80.6

53.6

of which: demand deposits

240.9

180.8

57.4

47.1

114.9

71.4

38.3

37.3

of which: retail savings / deposits

186.1

149.3

28.9

24.6

152.6

119.0

4.5

5.6

of which: sweep deposits

41.0

69.2

41.0

69.2

0.0

of which: time deposits

324.0

125.7

184.4

85.7

60.5

8.1

37.8

10.6

Debt issued designated at fair value and long-term debt issued measured at amortized

cost

327.6

158.6

185.8

98.4

44.7

16.9

69.6

29.6

Trading liabilities

34.2

29.5

12.6

12.1

1.1

0.8

9.3

8.1

Derivatives and cash collateral payables on derivative instruments

233.8

191.3

181.0

160.4

9.9

3.8

26.7

15.8

Brokerage payables

42.5

45.1

31.5

32.3

0.7

0.4

2.4

3.2

Other financial liabilities measured at amortized cost

20.9

9.6

11.3

4.9

3.9

1.6

2.0

1.0

Other financial liabilities designated at fair value

29.5

30.2

6.8

11.4

0.1

3.5

3.8

Non-financial liabilities

26.3

12.3

13.2

4.7

4.2

1.5

4.4

2.9

Total liabilities

1,630.6

1,047.1

810.9

577.7

436.5

227.6

210.0

122.6

of which: Credit Suisse

475.7

176.8

185.5

66.6

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. 3 Refer to “Note 2 Accounting for the acquisition of the Credit Suisse Group” in the “Consolidated financial statements” section of this report for more information.

Off-balance sheet

In the normal course of business, we enter into transactions where, pursuant to IFRS Accounting Standards, the maximum

contractual exposure may not be recognized in whole or in part on our balance sheet. These transactions include

derivative instruments, guarantees, loan commitments and similar arrangements.

When we incur an obligation or become entitled to an asset through these arrangements, we recognize 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 29 in the “Consolidated financial

statements” section of this report and in the 31 December 2023 Pillar 3 Report, available under “Pillar 3 disclosures” at

ubs.com/investors.

Asset funding UBS Group

USD bn, except where indicated

As of 31 December 2023

Cash, balances at central banks and

amounts due from banks

Securities nancing transactions

at amortized cost

Trading assets

Brokerage receivables

Loans and advances to customers

Other

Assets

335

170

640

276

Long-term debt issued measured at

amortized cost¹

Short-term borrowings

Securities nancing transactions at amortized cost

Trading liabilities

Brokerage payables

Demand deposits

Retail savings / deposits

Debt issued designated at fair value

Other (including net derivative liability)

Total equity

109

792 241

186

Time deposits324

128

199

134

Sweep deposits41

Customer deposits

Liabilities

and equity

124% coverage

USD 152bn

surplus

1 The classication of debt issued measured at amortized cost into short- 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 classication does not consider any early redemption features.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet 178

Guarantees, loan commitments and similar arrangements

In the normal course of business, we issue various forms of guarantees, commitments to extend credit, standby and other

letters of credit to support our 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, we will make payments

if our clients fail to fulfill their obligations to third parties. As of 31 December 2023, the net exposure (i.e., gross values

less sub-participations) from guarantees and similar instruments was USD 43.9bn, compared with USD 20.6bn as of

31 December 2022. The increase of USD 23.3bn was mainly driven by the acquisition of the Credit Suisse Group and an

increase in sponsored repo clearing in Group Treasury. Fee income from issuing guarantees compared with total net fee

and commission income is insignificant for both 2023 and 2022.

We also enter into commitments to extend credit in the form of credit lines available to secure the liquidity needs of

clients. The majority of irrevocable loan commitments range in maturity from one month to three years. During 2023,

Irrevocable loan commitments increased by USD 51.6bn to USD 91.6bn and Committed unconditionally revocable credit

lines increased by USD 121.9bn to USD 163.3bn, with both predominantly driven by the acquisition of the Credit Suisse

Group. Forward starting reverse repurchase agreements increased by USD 14.6bn to USD 18.4bn, mainly reflecting

fluctuations in levels of business division activity in short-dated securities financing transactions.

Off-balance sheet

As of

% change from

USD bn

31.12.23

31.12.22

Guarantees

1,2

43.9

20.6

113

Irrevocable loan commitments

91.6

40.0

129

Committed unconditionally revocable credit lines

163.3

41.4

294

Forward starting reverse repurchase agreements

18.4

3.8

385

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, our maximum exposure to credit risk 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 2023, we recognized net credit loss expenses of USD 142m 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 3m in 2022. Provisions recognized for irrevocable loan commitments, guarantees and

other credit facilities in the scope of expected credit loss measurement were USD 350m as of 31 December 2023,

compared with USD 201m as of 31 December 2022.

› 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, we enter 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. We retain the

contractual relationship with the obligor, and the sub-participant has only an indirect relationship. Generally, we only

enter into sub-participation agreements with banks to which we ascribe a credit rating equal to or better than that of

the obligor.

We also provide representations, warranties and indemnifications to third parties in the normal course of business.

Support provided to non-consolidated investment funds

In 2023, the Group did not provide material support, financial or otherwise, to unconsolidated investment funds when

the Group was not contractually obligated to do so, nor does it currently have an intention to do so.

Clearing house and exchange memberships

We are a member of numerous securities and derivative exchanges and clearing houses. In connection with some of

these memberships, we may be required to pay a share of the financial obligations of another member who defaults, or

we 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. We consider 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 8bn for privileged client deposits in the event that a Swiss bank or securities dealer becomes

insolvent. As of 31 December 2023, FINMA estimates our share in the deposit insurance system to be CHF 1.8bn. This

represents a contingent payment obligation and exposes us to additional risk. As of 31 December 2023, we considered

the probability of a material loss from our obligations to be remote.

UBS 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 2023 from any other material scheme.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet 179

Material cash requirements

The Group’s material cash requirements as of 31 December 2023 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 the table are debt issued designated at fair value (USD 149.8bn) and debt issued measured at amortized cost

(USD 279.3bn). The amounts represent estimated future interest and principal payments on an undiscounted basis.

In the normal course of business, we also issue or enter into various forms of guarantees, 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. Refer to “Guarantees, loan commitments and

similar arrangements” in this section for more information.

Cash flows

As 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 “Liquidity and funding management” in this section for more information

Cash and cash equivalents

As of 31 December 2023, cash and cash equivalents totaled USD 340.3bn, an increase of USD 145.0bn compared with

31 December 2022, driven by net cash inflows from investing and operating activities and positive foreign exchange

effects, largely reflecting the depreciation of the US dollar against the Swiss franc in 2023. These effects were partly

offset by net cash outflows used in financing activities in amount of USD 58.3bn.

Operating activities

Net cash inflows from operating activities were USD 86.1bn in 2023, compared with USD 14.6bn in 2022. The net change

in operating assets and liabilities of 88.3bn was mainly driven by a USD 52.8bn increase in customer deposits, a

USD 27.9bn decrease in loans and advances to customers and a USD 9.9bn change in financial assets and liabilities at

fair value not held for trading and other financial assets and liabilities. These effects were partly offset by smaller

movements in other operating assets and liabilities and adjustments 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 103.2bn in 2023, compared with a net outflow of USD 12.4bn

in 2022, primarily reflecting the effect of cash acquired upon the acquisition of the Credit Suisse Group in the amount

of USD 108.5bn, partly offset by outflows from purchases of debt securities measured at amortized cost of USD 3.8bn.

Financing activities

Financing activities resulted in a net cash outflow of USD 58.3bn in 2023, compared with an outflow of USD 9.1bn in 2022,

mainly due to the repayment of USD 56.5bn of funding from the Swiss National Bank, net cash used to repurchase treasury

shares of USD 2.8bn and a dividend distribution to shareholders of USD 1.7bn. These outflows were partly offset by net

issuance proceeds from short-term debt measured at amortized cost of USD 3.2bn and from debt designated at fair value

and long-term debt measured at amortized cost of USD 0.3bn.

›

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

31.12.23

31.12.22

Net cash flow from / (used in) operating activities

86.1

14.6

Net cash flow from / (used in) investing activities

103.2

(12.4)

Net cash flow from / (used in) financing activities

(58.3)

(9.1)

Effects of exchange rate differences on cash and cash equivalents

14.0

(5.7)

Net increase / (decrease) in cash and cash equivalents

145.0

(12.6)

Cash and cash equivalents at the end of the year

340.3

195.3

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | Currency management 180

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. Group Treasury also manages structural currency composition across three scopes: UBS

Group AG consolidated, UBS AG consolidated and Credit Suisse AG consolidated.

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, we follow the principle of

matching the currencies of our assets and liabilities for funding purposes. This avoids profits and losses arising from the

translation of non-US-dollar assets and liabilities.

UBS Group AG consolidated and UBS AG consolidated apply net investment hedge accounting to non-US-dollar core

investments, while Credit Suisse AG consolidated applies it to its non-Swiss Franc 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 26 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 our active management of sensitivity to currency

movements and the effect thereof on our key ratios

Sell-down of non-US-dollar reported profits and losses

Income statement items of group entities 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 and Credit Suisse AG

branches and subsidiaries follow a similar monthly sell-down process into their own functional currencies. The retained

earnings in subsidiaries and branches with a functional currency other than the US dollar are integrated and managed as

part of the UBS Group’s net investment hedge accounting program.

Hedging of anticipated non-US-dollar profits and losses

The Group Asset and Liability Committee may at any time instruct Group Treasury to execute hedges to protect

anticipated future profits and losses in foreign currencies against possible adverse trends of foreign exchange rates.

Although intended to hedge future earnings, these transactions are accounted for as open currency positions and subject

to internal market risk limits for value-at-risk and stress loss limits.

Dividend distribution

UBS Group AG declares dividends in US dollars. Shareholders holding shares through SIX SIS AG will receive dividends in

Swiss francs, based on a published exchange rate calculated up to five decimal places, on the day prior to the ex-dividend

date. Shareholders holding shares through DTC or Computershare will be paid dividends in US dollars.

› Refer to the UBS Group AG Standalone financial statements and regulatory information for the year ended 31 December 2023 for

more information about the proposed dividend distribution of UBS Group AG for the 2023 financial year

UBS shares

UBS Group AG shares

Audited | As of 31 December 2023, equity attributable to shareholders under IFRS Accounting Standards amounted to

USD 86,108m, represented by 3,462,087,722 shares issued. Shares issued decreased by 62,548,000 shares in 2023 as the

shares acquired under the 2021 share repurchase program after 18 February 2022 were canceled by means of a capital

reduction, as approved by shareholders at the 2023 Annual General Meeting (the AGM).

In the second quarter of 2023, the share capital currency of UBS Group AG was changed from the Swiss franc to the US

dollar, as approved by shareholders at the 2023 AGM. As a result, the nominal value per share has changed from CHF 0.10

to USD 0.10, resulting in a reclassification between share capital and capital contribution reserve (presented as share

premium in the consolidated financial statements).

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | UBS shares 181

Each share carries one vote if entered into the share register as having the right to vote, and also entitles the holder to a

proportionate share of distributed dividends. All shares are fully paid up. As the Articles of Association of UBS Group AG

indicate, there are no other classes of shares and no preferential rights for shareholders. 

› Refer to “Share information and earnings per share” in the “Consolidated financial statements” section of this report for more

information about the conversion of our share capital currency in 2023, which was approved by shareholders at the 2023 AGM

› Refer to the “Corporate governance” section of this report for more information about UBS shares

UBS Group share information

As of or for the year ended

% change from

31.12.23

31.12.22

Shares issued

3,462,087,722

3,524,635,722

(2)

Treasury shares

253,233,437

416,909,010

(39)

of which: related to share repurchase program 2021

62,548,000

of which: related to share repurchase program 2022

120,506,008

233,901,950

(48)

Shares outstanding

3,208,854,285

3,107,726,712

Basic earnings per share (USD)

8.83

2.34

278

Diluted earnings per share (USD)

8.45

2.25

276

Equity attributable to shareholders (USD m)

86,108

56,876

Less: goodwill and intangible assets (USD m)

7,515

6,267

Tangible equity attributable to shareholders (USD m)

78,593

50,609

Ordinary cash dividends per share (USD)

3,4

0.70

0.55

Total book value per share (USD)

26.83

18.30

Tangible book value per share (USD)

24.49

16.28

Share price (USD)

31.01

18.61

Market capitalization (USD m)

107,355

65,608

1 Based on a settlement date view. 2 Refer to “Share information and earnings per share” in the “Consolidated financial statements” section of this report for more information. 3 Dividends and / or distributions

out of the capital contribution reserve are normally approved and paid in the year subsequent to the reporting period. 4 Refer to “Statement of proposed appropriation of total profit and dividend distribution out of

total profit and capital contribution reserve” in the “UBS Group AG standalone financial statements” section of the UBS Group AG Standalone financial statements and regulatory information for the year ended

31 December 2023 report, available under “Holding company and significant regulated subsidiaries and sub-groups” at ubs.com/investors, for more information. 5 Represents the share price as listed on the SIX

Swiss Exchange, translated to US dollars using the closing exchange rate as of the respective date. 6 The calculation of market capitalization has been amended in the second quarter of 2023 to reflect total shares

issued multiplied by the share price at the end of the period. The calculation was previously based on total shares outstanding multiplied by the share price at the end of the period. Market capitalization has been

increased by USD 7.8bn as of 31 December 2022 as a result.

Holding of UBS Group AG shares

Group Treasury holds UBS Group AG shares to hedge future share delivery obligations related to employee share-based

compensation awards, and also holds shares purchased under share repurchase programs. As of 31 December 2023, we

held a total of 253,233,437 treasury shares (31 December 2022: 416,909,010).

Our 2021 share repurchase program was concluded on 29 March 2022 with the purchase of an additional 87.7m shares

in 2022 for an acquisition cost of USD 1,637m (CHF 1,516m). The 177.8m shares repurchased under this program from

its inception until 18 February 2022 for a total acquisition cost of USD 3,022m (CHF 2,775m) were canceled by means

of a capital reduction in 2022, as approved by shareholders at the 2022 AGM. The remaining 62,548,000 shares

purchased under the 2021 program were canceled by means of a capital reduction in 2023, as approved by shareholders

at the 2023 AGM.

On 31 March 2022, we commenced a new, 2022 share repurchase program of up to USD 6bn. Shares acquired under

this program totaled 298.5m as of 31 December 2023 for a total acquisition cost of USD 5,245m (CHF 5,010m). A total

of 178m shares repurchased under this program and originally intended for cancellation purposes were repurposed for

the acquisition of the Credit Suisse Group and 176m shares were transferred to Credit Suisse Group shareholders in an

exchange of shares as consideration for the acquisition of the Credit Suisse Group. The remaining 121m shares, with a

total acquisition cost of USD 2,277m (CHF 2,138m), are intended to be canceled by means of a capital reduction, pending

approval by the shareholders at a future AGM.

A new, two-year share repurchase program of up to USD 6bn was approved by shareholders at the 2023 AGM. We have

temporarily suspended repurchases under the share repurchase programs due to the acquisition of the Credit Suisse

Group, but we plan to repurchase up to USD 1bn of our shares in 2024, commencing after the completion of the merger

of UBS AG and Credit Suisse AG.

Treasury shares held to hedge our share delivery obligations related to employee share-based compensation awards

totaled 131m shares as of 31 December 2023 (31 December 2022: 119m). Share delivery obligations related to employee

share-based compensation awards totaled 196m shares as of 31 December 2023 (31 December 2022: 178m) and are

calculated on the basis of undistributed notional share awards, taking applicable performance conditions into account.

Treasury shares held are delivered to employees at exercise or vesting. As of 31 December 2023, up to 122m

UBS Group AG shares (31 December 2022: 122m) could have been issued out of conditional capital to satisfy share

delivery obligations of any future employee share option programs or similar awards.

Annual Report 2023 | Risk, capital, liquidity and funding, and balance sheet | UBS shares 182

The Investment Bank also holds a limited number of UBS Group AG shares, primarily in its capacity as a market-maker

with regard to UBS Group AG shares and related derivatives, and to hedge certain issued structured debt instruments.

The table below outlines the market purchases of UBS Group AG shares by Group Treasury. It does not include the

activities of the Investment Bank.

Treasury share purchases

Share repurchase programs

Other treasury shares purchased

Month of purchase

Number of shares

Average price

in USD

Remaining volume of

2022 share repurchase

program in USD m

at month-end

Number of shares

Average price in

USD

January 2023

28,143,000

20.66

1,453

February 2023

1,453

23,305,000

21.71

March 2023

35,343,000

19.73

755

3,820,000

21.64

April 2023

755

May 2023

755

June 2023

755

July 2023

755

August 2023

755

September 2023

755

October 2023

755

November 2023

755

16,401,362

25.92

December 2023

755

8,598,638

28.39

1 UBS has an active share repurchase program to buy back up to USD 6bn of its own shares over the two-year period started in March 2022 and ending at the latest on 29 March 2024. The share buybacks were

transacted in Swiss francs on a separate trading line on the SIX Swiss Exchange. A new, two-year share repurchase program of up to USD 6bn was approved by shareholders at the 2023 AGM. However, we have

temporarily suspended repurchases under the share repurchase programs due to the acquisition of the Credit Suisse Group. 2 This table excludes purchases for the purpose of hedging derivatives linked to UBS Group

AG shares and for market-making in UBS Group AG shares. The table also excludes UBS Group AG shares purchased by post-employment benefit funds for UBS employees, which are managed by a board of UBS

management and employee representatives in accordance with Swiss law. UBS’s post-employment benefit funds purchased 509,075 UBS Group AG shares during the year and held 13,478,820 UBS Group AG shares

as of 31 December 2023. 3 Based on the transaction date of the respective treasury share purchases.

Trading volumes

For the year ended

1,000 shares

31.12.23

31.12.22

31.12.21

SIX Swiss Exchange total

2,102,613

2,433,051

2,514,259

SIX Swiss Exchange daily average

8,377

9,579

9,899

New York Stock Exchange total

170,875

186,468

137,366

New York Stock Exchange daily average

684

743

545

Source: Reuters

Listing of UBS Group AG shares

UBS Group AG shares are listed on the SIX Swiss Exchange (SIX). They are also listed on the New York Stock Exchange

(the NYSE) as global registered shares. As such, they can be traded and transferred across applicable borders, without

the need for conversion, with identical shares traded on different stock exchanges in different currencies.

During 2023, the average daily trading volume of UBS Group AG shares was 8.4m shares on SIX and 0.7m shares on the

NYSE. SIX is expected to remain the main venue for determining the movement in our share price, because of the high

volume traded on this exchange.

During the hours in which both SIX and the NYSE are simultaneously open for trading, price differences between these

exchanges are likely to be arbitraged away by professional market-makers. Accordingly, the share price will typically be

similar between the two exchanges when considering the prevailing US dollar / Swiss franc exchange rate. When SIX is

closed for trading, globally traded volumes will typically be lower. However, the specialist firm making a market in

UBS Group AG shares on the NYSE is required to facilitate sufficient liquidity and maintain an orderly market in

UBS Group AG shares throughout normal NYSE trading hours.

Ticker symbols UBS Group AG

Security identification codes

Trading exchange

SIX / NYSE

Bloomberg

Reuters

ISIN

CH0244767585

SIX Swiss Exchange

UBSG

UBSG SW

UBSG.S

Valoren

24 476 758

New York Stock Exchange

UBS

UBS UN

UBS.N

CUSIP

CINS H42097 10 7

Annual Report 2023 | Corporate governance and compensation 183

Corporate governance and

compensation

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.

Annual Report 2023 | Corporate governance and compensation | Corporate governance 184

Corporate governance

Table of contents

185

Corporate governance

186

Group structure and shareholders

187

Share capital structure

191

Shareholders’ participation rights

193

Board of Directors

209

Group Executive Board

218

Change of control and defense measures

218

Auditors

220

Information policy

Annual Report 2023 | Corporate governance and compensation | Corporate governance 185

Corporate governance

UBS Group AG is subject to, and complies with, all relevant Swiss legal and regulatory requirements regarding corporate

governance, including the SIX Swiss Exchange’s Directive on Information relating to Corporate Governance (the SIX Swiss

Exchange Corporate Governance Directive) and the standards established in the Swiss Code of Best Practice for Corporate

Governance.

Following a revision of the Swiss Code of Obligations that entered into force on 1 January 2023, the correspondingly

amended Articles of Association of UBS Group AG (the AoA) were approved by the Annual General Meeting (the AGM)

on 5 April 2023. The key amendments of the AoA are amendment of the threshold to convene extraordinary general

meetings, the introduction of the basis to hold hybrid and virtual general meetings, and changes in connection with the

external mandates of the Board of Directors (the BoD) and the Group Executive Board (the GEB), as well as compensation-

related changes and clarifications with regards to publications and notices.

As a non-US company with shares listed on the New York Stock Exchange (the NYSE), UBS Group AG also complies with

all relevant corporate governance standards applicable to foreign private issuers.

The Organization Regulations of UBS Group AG, adopted by the BoD based on Art. 716b of the Swiss Code of Obligations

and Art. 25 and 27 of the AoA, constitute UBS Group AG’s primary corporate governance guidelines.

› Refer to the Articles of Association of UBS Group AG and to the Organization Regulations of UBS Group AG, available at

ubs.com/governance

and

ubs.com/ubs-ag-governance,

for more information

› The SIX Swiss Exchange Corporate Governance Directive is available at

ser-ag.com/content/dam/

serag/downloads/regulation/listing/directives/dcg-en.pdf,

the Swiss Code of Best Practice for Corporate Governance at

economiesuisse.ch/en/publications/swiss-code-best-practice-corporate-governance

and the NYSE rules at

nyseguide.srorules.com/listed-company-manual

Differences from corporate governance standards relevant to US-listed companies

The NYSE standards on corporate governance require foreign private issuers to disclose any significant ways in which their

corporate governance practices differ from those that have to be followed by US companies. The key differences are

discussed below.

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 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 Group 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, our Compensation Committee, together with the BoD, proposes for shareholder approval at the

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.

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 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 the establishing of and material revisions to all equity compensation

plans. 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.

› Refer to “Board of Directors” in this section for more information about the BoD’s committees

› Refer to “Share capital structure” in this section for more information about UBS Group AG’s capital

Annual Report 2023 | Corporate governance and compensation | Corporate governance 186

Group structure and shareholders

Operational Group structure

As of 31 December 2023, the operational structure of the UBS Group 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. After the acquisition of the Credit Suisse Group in June 2023, its global divisions (Wealth

Management (Credit Suisse), the Investment Bank (Credit Suisse), Swiss Bank (Credit Suisse) and Asset Management

(Credit Suisse)) were integrated into the Group.

› Refer to the “Our businesses” section of this report for more information about our business divisions and Group functions

› Refer to “Financial and operating performance” and to “Note 3a Segment reporting” in the “Consolidated financial statements”

section of this report for more information

› Refer to the “Our evolution” section of this report for more information

Listed and non-listed companies belonging to the Group

The Group includes a number of consolidated entities, of which only UBS Group AG shares are listed. All Credit Suisse

Group AG shares were exchanged for shares in UBS Group AG in June 2023 based on a share exchange.

UBS Group AG’s registered office is at Bahnhofstrasse 45, CH-8001 Zurich, Switzerland. UBS Group AG shares are listed

on the SIX Swiss Exchange (ISIN CH0244767585) and on the NYSE (CUSIP H42097107).

› Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for information about UBS

Group AG’s market capitalization and shares held by Group entities

› Refer to “Note 29 Interests in subsidiaries and other entities” in the “Consolidated financial statements” section of this report for

more information about the significant subsidiaries of the Group

Significant shareholders

General rules

Under the Swiss Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading

of 19 June 2015 (the FMIA), anyone who directly, indirectly or acting in concert with third parties, acquires or disposes

of shares in a company listed in Switzerland or holds other purchase or sale positions relating to such shares, and, thereby,

directly, indirectly or in concert with third parties reaches, falls below or exceeds one of the following percentage

thresholds: 3, 5, 10, 15, 20, 25, 33

⁄

, 50 or 66

⁄

% of the voting rights in such company, regardless of whether or not

such rights may be exercised, must notify the company and the Swiss stock exchange on which such shares are listed.

Nominee companies that cannot autonomously decide how voting rights are exercised are not required to notify the

company and such stock exchange if they reach, exceed or fall below the aforementioned thresholds.

Shareholders subject to FMIA disclosure notifications

According to the mandatory FMIA disclosure notifications filed with UBS Group AG and SIX Swiss Exchange (SIX), as of

31 December 2023, the following entities held more than 3% of the total voting rights of UBS Group AG: Norges Bank,

Oslo, which disclosed a holding of 4.79% on 4 December 2023; BlackRock Inc., New York, which disclosed a holding of

5.01% on 30 November 2023; and Artisan Partners Limited Partnership, Milwaukee, which disclosed a holding of 3.03%

on 29 March 2023.

In accordance with the FMIA, the aforementioned holdings are calculated in relation to the voting rights associated with

the total share capital of UBS Group AG entered into the commercial register at the time of the respective disclosure

notification.

Information on disclosures under the FMIA is available at ser-ag.com/en/resources/notifications-market-

participants/significant-shareholders.html.

Cross-shareholdings

UBS Group AG has no cross-shareholdings where reciprocal ownership would be in excess of 5% of capital or voting

rights with any other company.

Annual Report 2023 | Corporate governance and compensation | Corporate governance 187

Share capital structure

Ordinary share capital

On 5 April 2023, the AGM approved the conversion of the share capital currency of UBS Group AG from the Swiss franc

to the US dollar. To obtain a Swiss franc nominal value per share equaling USD 0.10 after the conversion, the AGM also

approved a CHF 25,896,416.16056 reduction of the ordinary share capital, and this reduction resulted in a corresponding

allocation to the capital contribution reserve on UBS Group AG’s standalone financial statements. At the end of 2023,

UBS Group AG had 3,462,087,722 issued shares with a nominal value of USD 0.10 each, equating to a share capital of

USD 346,208,772.20.

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. In addition,

under the Swiss Banking Act, shareholders of a Swiss top holding company of a financial group or of a Swiss bank must

approve, in a general meeting of shareholders, the introduction of conversion capital or reserve capital.

In 2023, the shareholders of UBS Group AG were asked to approve a reduction of share capital by way of canceling

62,548,000 registered shares repurchased under the 2021 share repurchase program.

In 2023, the shareholders of UBS Group AG were not asked to approve the creation of conditional capital or the

introduction of conversion capital, capital band or reserve capital. As of the date of this report, UBS Group AG has no

conversion capital, capital band or reserve capital.

No shares were issued out of UBS Group AG’s existing conditional capital in 2023, as there were no employee options

or stock appreciation rights outstanding.

Following the permanent write down of Credit Suisse Group AG’s additional tier 1 (AT1) instruments in March 2023,

UBS Group AG has issued AT1 instruments with terms that provide for an equity conversion feature (instead of the

existing write-down feature) as soon as UBS Group AG has a minimum amount of conversion capital in place. In relation

to AT1 instruments with equity conversion features, the BoD will propose at the 2024 AGM that the shareholders approve

the introduction of conversion capital in a maximum amount equivalent to 700 million shares.

› Refer to “Share information and earnings per share” in the “Consolidated financial statements” section of this report for

information about the conversion of the share capital currency

Distribution of UBS Group AG shares

As of 31 December 2023

Shareholders registered

Shares registered

Number of shares registered

Number

% of shares issued

1–100

68,848

27.2

2,667,746

0.1

101–1,000

114,217

45.1

49,049,169

1.4

1,001–10,000

63,425

25.1

177,203,347

5.1

10,001–100,000

5,924

2.3

136,419,449

3.9

100,001–1,000,000

483

0.2

135,910,660

3.9

1,000,001–5,000,000

0.0

198,179,947

5.7

5,000,001–34,620,877 (1%)

0.0

246,038,682

7.1

1–2%

0.0

98,317,626

2.8

2–3%

0.0

3–4%

0.0

134,570,286

3.9

4–5%

0.0

Over 5%

0.0

256,797,945

7.4

Total shares registered

253,020

100.0

1,435,154,857

41.5

Shares not registered

2,026,932,865

58.5

Total

100.0

3,462,087,722

100.0

1 On 31 December 2023, the US securities clearing organization DTC (Cede & Co.), New York, was registered with 7.42% of all UBS shares issued and is not subject to the 5% voting limit as a securities clearing

organization. 2 Of the total shares registered, 115,991,129 shares did not carry voting rights. 3 Shares not entered in the UBS share register as of 31 December 2023.

Annual Report 2023 | Corporate governance and compensation | Corporate governance 188

Conditional share capital

At year-end 2023, the following conditional share capital was available to UBS Group AG’s BoD.

– A maximum of USD 38,000,000 represented by up to 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 by UBS Group AG or another member

of the Group 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 AGM

of UBS AG on 14 April 2010. The BoD has not made use of such allowance.

– A maximum of USD 12,170,583 represented by 121,705,830 fully paid registered shares with a nominal value of

USD 0.10 each, to be issued upon exercise of employee options and stock appreciation rights issued to employees and

members of the management and of the BoD of UBS Group AG and its subsidiaries. This conditional capital allowance

was approved by the shareholders at the same EGM in 2014.

› 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

ubs.com/governance

› Refer to the “Our evolution” section of this report for more information

Conditional capital of UBS Group AG

As of 31 December 2023

Maximum number of shares to

be issued

Year approved by Extra-

ordinary General Meeting

% of shares issued

Employee equity participation plans

121,705,830

2014

3.52

Conversion rights / warrants granted in connection with bonds

380,000,000

2014

10.98

Total

501,705,830

14.49

Capital band, conversion capital and reserve capital

As of 31 December 2023, UBS Group AG had not introduced any capital band, any conversion capital or any reserve

capital.

› Refer to “Ordinary share capital” in this section for more information about a proposal for the shareholders to approve the

introduction of conversion capital at the 2024 AGM

Changes in capital

In accordance with IFRS Accounting Standards, Group equity attributable to shareholders was USD 86.1bn as of

31 December 2023 (2022: USD 56.9bn; 2021: USD 60.7bn). The equity of UBS Group AG shareholders was represented

by 3,462,087,722 issued shares as of 31 December 2023 (31 December 2022: 3,524,635,722; 31 December 2021:

3,702,422,995 shares).

› Refer to “Statement of changes in equity” in the “Consolidated financial statements” section of this report for more information

about changes in shareholders’ equity over the last three years

Ownership

Ownership of UBS Group AG shares is widely spread. The tables in this section provide information about the distribution

of UBS Group AG shareholders by category and geographic location. This information relates only to shareholders

registered in the UBS share register and cannot be assumed to be representative of UBS Group AG’s entire investor base

or the actual beneficial ownership. Only shareholders registered in the UBS share register as “shareholders with voting

rights” are entitled to exercise voting rights.

› Refer to “Shareholders’ participation rights” in this section for more information

Annual Report 2023 | Corporate governance and compensation | Corporate governance 189

As of 31 December 2023, 1,319,163,728 UBS Group AG shares were registered in the UBS share register and carried

voting rights, 115,991,129 shares were registered in the UBS share register without voting rights, and 2,026,932,865

shares were not registered in the UBS share register. As of the same date, all such shares were fully paid up and eligible

for dividends. There are no preferential rights for shareholders, and no other classes of shares have been issued by UBS

Group AG.

Shareholders, legal entities and nominees: type and geographical distribution

Shareholders registered

As of 31 December 2023

Number

Individual shareholders

248,076

98.0

Legal entities

4,777

1.9

Nominees, fiduciaries

167

0.1

Total shares registered

253,020

100.0

Shares not registered

Total

253,020

100.0

Individual shareholders

Legal entities

Nominees

Total

Number

Americas

1,849

0.7

112

0.0

2,038

0.8

of which: USA

1,313

0.5

0.0

1,451

0.6

Asia Pacific

6,043

2.4

0.0

6,140

2.4

Europe, Middle East and Africa

14,792

5.8

264

0.1

0.0

15,100

6.0

of which: Germany

4,586

1.8

0.0

4,630

1.8

of which: UK

5,501

2.2

0.0

5,515

2.2

of which: rest of Europe

4,274

1.7

209

0.1

0.0

4,515

1.8

of which: Middle East and Africa

431

0.2

0.0

440

0.2

Switzerland

225,392

89.1

4,314

1.7

0.0

229,742

90.8

Total shares registered

Shares not registered

Total

248,076

98.0

4,777

1.9

167

0.1

253,020

100.0

At year-end 2023, UBS owned 253,233,437 UBS Group AG shares, which corresponded to 7.31% of the total share

capital of UBS Group AG. At the same time, UBS had acquisition positions relating to 273,216,729 voting rights of UBS

Group AG and disposal positions relating to 211,212,648 such rights, corresponding to 7.89% and 6.10% of the total

voting rights of UBS Group AG, respectively. Of the disposal positions, 196,620,932 related to voting rights on shares

deliverable in respect of employee awards. The calculation methodology for the acquisition and disposal positions is

based on the Ordinance of the Swiss Financial Market Supervisory Authority on Financial Market Infrastructures and

Market Conduct in Securities and Derivatives Trading, which states that all future potential share delivery obligations,

irrespective of the contingent nature of the delivery, must be considered.

Employee share ownership

Employee share ownership is encouraged and made possible in a variety of ways. Our Equity Plus Plan is a voluntary plan

that provides eligible employees with the opportunity to purchase UBS Group AG shares at market value and receive, at

no additional cost, one notional UBS Group AG share for every three shares purchased. Additional shares vest after a

maximum of three years, provided the employee remains employed by UBS and has retained the purchased shares

throughout the holding period. The Equity Ownership Plan (the EOP) is a mandatory deferral plan for all employees that

are subject to deferral requirements (regulatory-driven or total compensation greater than USD / CHF 300,000) but do

not receive LTIP awards. EOP recipients receive a portion of their deferred performance award in notional shares (or

notional funds for employees in Investment Areas within Asset Management). GEB members and most Managing

Directors reporting to the GEB and their direct reports at MD level

receive the equity-based Long-Term Incentive Plan

(the LTIP) instead of the EOP. Both the EOP and LTIP include employment conditions and malus conditions that allow the

firm to reduce or fully forfeit unvested deferred awards under certain circumstances, pursuant to performance and

harmful acts provisions. In addition, forfeiture is triggered in cases where employment has been terminated for cause.

Underlining our emphasis on sustainable performance and risk management, and to support delivering on our ambitious

integration goals and business / financial targets, LTIP awards will only vest if predetermined performance conditions are

met.

On 31 December 2023, UBS employees held at least 7.4% of UBS shares outstanding (including approximately 5.36%

in unvested deferred notional shares from our compensation programs). These figures are based on known shareholding

information from employee participation plans, personal holdings with UBS and selected individual retirement plans. At

the end of 2023, at least 25.2% of all employees held UBS shares through the firm’s employee share participation plans.

› Refer to the “Compensation” section of this report for more information

1 Excluding all Managing Directors in Asset Management Investment Areas who will continue to receive the Fund Ownership Plan instead of LTIP.

Annual Report 2023 | Corporate governance and compensation | Corporate governance 190

Trading restrictions in UBS shares

UBS employees with regular access to unpublished price-sensitive information about the firm are subject to specific

restrictions in respect to UBS financial instruments, including, but not limited to, pre-clearance requirements and regular

blackout periods. Such UBS employees are not permitted to trade UBS financial instruments in the period starting from

the close of business in New York on the seventh business day of the final month of the financial quarter of UBS Group

AG and ending on the day of the publication of the quarterly financial results.

Shareholders, legal entities and nominees: type and geographical distribution (continued)

Shares registered

As of 31 December 2023

Number

Individual shareholders

374,815,823

10.8

Legal entities

480,301,558

13.9

Nominees, fiduciaries

580,037,476

16.8

Total shares registered

1,435,154,857

41.5

Shares not registered

2,026,932,865

58.5

Total

3,462,087,722

100.0

Individual shareholders

Legal entities

Nominees

Total

Number of shares

Americas

2,067,728

0.1

57,732,878

1.7

348,096,597

10.1

407,897,203

11.8

of which: USA

799,567

0.0

49,919,559

1.4

347,889,103

10.0

398,608,229

11.5

Asia Pacific

17,531,252

0.5

8,396,840

0.2

5,581,441

0.2

31,509,533

0.9

Europe, Middle East and Africa

39,304,594

1.1

26,433,295

0.8

218,929,280

6.3

284,667,169

8.2

of which: Germany

11,236,871

0.3

2,126,558

0.1

8,451,911

0.2

21,815,340

0.6

of which: UK

16,913,865

0.5

152,510

0.0

186,227,060

5.4

203,293,435

5.9

of which: rest of Europe

9,862,166

0.3

23,861,879

0.7

24,095,431

0.7

57,819,476

1.7

of which: Middle East and Africa

1,291,692

0.0

292,348

0.0

154,878

0.0

1,738,918

0.1

Switzerland

315,912,249

9.1

387,738,545

11.2

7,430,158

0.2

711,080,952

20.5

Total shares registered

374,815,823

10.8

480,301,558

13.9

580,037,476

16.8

1,435,154,857

41.5

Shares not registered

2,026,932,865

58.5

Total

374,815,823

10.8

480,301,558

13.9

580,037,476

16.8

3,462,087,722

100.0

Shares and participation certificates

UBS Group 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). Each registered share has a nominal value of CHF 0.10 and carries one vote,

subject to the restrictions set out under “Transferability, voting rights and nominee registration” below.

We have no participation certificates outstanding.

UBS Group AG shares are listed on the SIX Swiss Exchange and also on the NYSE as global registered shares. As such,

they can be traded and transferred across applicable borders, without the need for conversion, with identical shares

traded on different stock exchanges in different currencies.

› Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information

Distributions to shareholders

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.

At the 2024 AGM, the BoD is proposing to shareholders for approval a dividend of USD 0.70 per share for the 2023

financial year. Shareholders whose shares are held through SIX SIS AG will receive dividends in Swiss francs, based on an

exchange rate published on the day prior to the ex-dividend date. Shareholders holding shares through The Depository

Trust Company in New York or Computershare will be paid dividends in US dollars.

In compliance with Swiss tax law, 50% of the dividend will be paid out of retained earnings and the balance will be paid

out of the capital contribution reserve. Dividends paid out of capital contribution reserves are not subject to Swiss

withholding tax. The portion of the dividend paid out of retained earnings will be subject to a 35% Swiss withholding

tax. For US federal income tax purposes, we expect that the dividend will be paid out of current or accumulated earnings

and profits.

Provided that the proposed dividend distribution out of retained earnings and out of the capital contribution reserve will

be approved at the AGM on 24 April 2024, the payment of USD 0.70 (or the Swiss franc equivalent) per share will be

made on 3 May 2024 to holders of shares on the record date 2 May 2024. The shares will be traded ex-dividend as of

30 April 2024 and, accordingly, the last day on which the shares may be traded with entitlement to receive the dividend

will be 29 April 2024.

In January 2023, the BoD announced a new two-year share repurchase program. At the 2023 AGM, the shareholders

authorized the BoD to repurchase shares for cancellation purposes in an aggregate value of up to USD 6bn until the

2025 AGM. Any shares repurchased under the program are intended to be canceled by way of capital reduction, which

will be subject to shareholder approval at one or several subsequent AGMs. In the interim period, the acquisition and

holding of such shares are not subject to the 10% threshold for UBS Group AG’s own shares within the meaning of Art.

659 para 2 of the Swiss Code of Obligations.

Annual Report 2023 | Corporate governance and compensation | Corporate governance 191

Looking ahead, the 2022 share repurchase program will be concluded at the end of its two-year term by end of March

2024, and the repurchased shares are intended to be canceled by means of a capital reduction, pending approval by the

shareholders at a future AGM. 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 under the new 2023 share repurchase program approved by

the shareholders at the 2023 AGM.

› Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information about

the share repurchase programs

Transferability, voting rights and nominee registration

We do not apply any restrictions or limitations on the transferability of UBS Group AG shares. Voting rights may be

exercised without any restrictions by shareholders entered into the UBS share register if they expressly render a declaration

of beneficial ownership according to the provisions of the AoA.

We have special provisions for the registration of nominees. Nominees are entered in the UBS share register with voting

rights up to a total of 5% of all issued UBS Group AG shares if they agree to disclose, upon our request, beneficial owners

holding 0.3% or more of all issued UBS Group AG shares. An exception to the 5% voting limit rule is in place for securities

clearing organizations, such as The Depository Trust Company in New York.

› Refer to “Shareholders’ participation rights” in this section for more information

Convertible bonds and options

As of 31 December 2023, there were no conditional capital securities or convertible bonds outstanding requiring the

issuance of new shares. However, as of the same date, AT1 instruments issued by UBS Group AG in an aggregate principal

amount of USD 3.5bn were outstanding, and such instruments have terms that provide for an equity conversion feature

(instead of the existing write-down feature) as soon as UBS Group AG has a minimum amount of conversion capital in

place.

› Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information about our outstanding

capital instruments

As of 31 December 2023, there were no employee options or stock appreciation rights outstanding. Option-based

compensation plans are sourced by issuing new shares out of UBS Group AG’s conditional capital. As of 31 December

2023, UBS Group AG had USD 12,170,583 in conditional share capital available for the issuance of new shares for this

purpose.

› Refer to “Conditional share capital” in this section for more information

› Refer to “Note 28 Employee benefits: variable compensation” in the “Consolidated financial statements” section of this report for

more information about outstanding options and stock appreciation rights

Shareholders’ participation rights

We are committed to shareholder participation in decision-making processes. Our online voting platform offers registered

shareholders a convenient log-in and online voting process. Registered shareholders are sent personal invitations to the

general meetings. Together with the invitation materials, they receive a personal one-time password and a QR code to

easily log into the online voting platform, where they can enter their voting instructions or order an admission card for

the general meeting.

Shareholders who choose not to receive the comprehensive invitation materials are informed of upcoming general

meetings by a short letter containing a personal one-time password, a QR code for online voting and a reference to

ubs.com/agm, where all information for the upcoming meeting is available.

General meetings offer shareholders the opportunity to raise questions for the BoD, the GEB and internal and external

auditors.

Voting rights, restrictions and representation

We place no restrictions on share ownership and voting rights. However, pursuant to general principles formulated by

the BoD, nominees, which normally represent a large number of individual shareholders and may hold an unlimited

number of shares, have voting rights limited to a maximum of 5% of all issued UBS Group AG shares if they agree to

disclose, upon our request, beneficial owners holding 0.3% or more of all issued UBS Group AG shares. This 5% limit

has been implemented to avoid large shareholders being entered in the UBS share register via nominee companies so as

to exercise influence without directly registering their shares with UBS. An exception to the 5% voting limit rule is in

place for securities clearing organizations, such as The Depository Trust Company in New York.

Shareholders can exercise voting rights conferred by shares only if they are registered in our share register with voting

rights. To register, shareholders must confirm that they have acquired UBS Group AG shares in their own name and for

their own account.

Annual Report 2023 | Corporate governance and compensation | Corporate governance 192

All shareholders registered with voting rights are entitled to participate in general meetings. If they do not wish to attend

in person, they may issue instructions to support, reject or abstain for each individual item on the meeting agenda, either

by giving instructions to an independent proxy in accordance with article 14 of the AoA or by granting a written power

of attorney to a third person of their choice (which does not need to be a shareholder) to vote on their behalf.

Alternatively, registered shareholders may issue their voting instructions to the independent proxy electronically through

our online voting platform. Nominee companies normally submit the proxy material to the beneficial owners and forward

the collected votes to the independent proxy.

› Refer to article 14 of the AoA, available at

ubs.com/governance

, for more information about the issuing of instructions to

independent voting right representatives

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.

Votes and elections are generally conducted electronically to ascertain the exact number of votes represented. Voting by

a show of hands is possible if a clear majority is predictable. Shareholders representing at least 3% of the votes

represented may request that a vote or election be carried out electronically or by written ballot. To allow shareholders

to clearly express their views on all individual topics, each agenda item is separately put to a vote and BoD members are

elected on a person-by-person basis.

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 2024, the AGM will

take place on 24 April.

Extraordinary general meetings (EGMs) may be convened whenever the BoD or the auditors consider it necessary.

Shareholders individually or jointly representing at least 5% 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.

A personal invitation, including a detailed agenda, is made available to every registered shareholder at least 20 days

ahead of each scheduled general meeting. The items on the agenda are also published in the Swiss Official Gazette of

Commerce, as well as at ubs.com/agm.

Placing of items on the agenda

Pursuant to the AoA, shareholders individually or jointly representing shares with an aggregate minimum nominal value

of USD 62,500 may submit requests for items to be placed on the agenda for consideration at the next general meeting

of shareholders or for motions relating to agenda items to be included in the notice to convene the general meeting.

In January of each year, the invitation to submit such agenda items or motions relating to agenda items is published in

the Swiss Official Gazette of Commerce and at ubs.com/agm. Requests for motions relating to agenda items and items

to be placed on the agenda must include the actual motions to be put forward, together with a short explanation. Such

requests must be submitted to the BoD no later than the deadline published by UBS Group AG, including a statement

from the depository bank confirming the number of shares held by the requesting shareholder(s) and that these shares

are blocked from sale until the end of the general meeting of shareholders. The BoD formulates opinions on such requests

from shareholders, which are published together with the motions from the BoD.

Registrations in the UBS share register

The UBS share register, where around 254,000 UBS Group AG shareholders are directly registered as of 28 March 2024,

is an internal, non-public register subject to statutory confidentiality, secrecy, privacy and data protection regulations

protecting registered shareholders. In general, third parties and shareholders have no inspection rights with regard to

data related to other shareholders. Disclosure of such data is permitted only in specific and limited instances. In line with

the Swiss Federal Act on Data Protection, the disclosure of personal data as defined thereunder is only allowed with the

consent of the registered shareholder and in cases where there is an overriding private or public interest or if explicitly

provided for by Swiss law. The Swiss Federal Act on Financial Market Infrastructures and Market Conduct in Securities

and Derivatives Trading contains specific reporting duties, such as in relation to significant shareholders (refer to

“Significant shareholders” in this section for more information). Disclosure may also be required or requested by a court

of a competent jurisdiction, by any regulatory body that regulates the conduct of UBS Group AG or by other statutory

provisions.

Annual Report 2023 | Corporate governance and compensation | Corporate governance 193

The general rules for entry into our Swiss share register with voting rights are described in article 5 of our AoA. The same

rules apply to our US transfer agent that operates the US share register for all UBS Group AG shares in a custodian

account in the US, where some 234,000 US shareholders are indirectly registered via nominee companies as of 28 March

2024. In order to determine the voting rights of each shareholder, our share register generally closes two business days

prior to a general meeting. Our independent proxy agent processes voting instructions from shareholders as long as

technically possible, generally also until two business days before a general meeting. Such technical closure of our share

register facilitates the determination of the actual voting rights of every shareholder that issued a voting instruction.

Irrespective of this technical closure, shares that are registered in our share register are never immobilized and such

closure does not affect the tradability of such shares at any time, irrespective of any issued voting instructions.

› Refer to article 5 of our AoA, available at

ubs.com/governance

, for more information about the general rules for entry into the

UBS share register

Board of Directors

The Board of Directors of UBS Group AG (the BoD), led by the Chairman, consists of between 6 and 12 members, as per

our AoA.

The BoD decides on the strategy of the Group, upon recommendation by the Group Chief Executive Officer (the Group

CEO), and is responsible for the overall direction, supervision and control of the Group and its management. It is also

responsible for supervising compliance with applicable laws, rules and regulations. The BoD exercises oversight over UBS

Group AG and its subsidiaries, and is responsible for establishing a clear Group governance framework to provide

effective steering and supervision of the Group, taking into account the material risks to which UBS Group AG and its

subsidiaries are exposed. The BoD has ultimate responsibility for the success of the Group and for delivering sustainable

shareholder value within a framework of prudent and effective controls. It approves all financial statements and appoints

and removes all GEB members.

Members of the Board of Directors

At the AGM on 5 April 2023, Colm Kelleher, was re-elected as Chairman of the Board and Lukas Gähwiler, Jeremy

Anderson, Claudia Böckstiegel, William C. Dudley, Patrick Firmenich, Fred Hu, Mark Hughes, Nathalie Rachou, Julie G.

Richardson, Dieter Wemmer and Jeanette Wong were re-elected as members of the BoD. At that same AGM, Julie G.

Richardson, Dieter Wemmer and Jeanette Wong were re-elected as members of the Compensation Committee. ADB

Altorfer Duss & Beilstein AG was re-elected as independent proxy agent. Following their election, the BoD appointed

Lukas Gähwiler as Vice Chairman and Jeremy Anderson as Senior Independent Director of UBS Group AG. On 12 January

2024, the BoD announced that Dieter Wemmer would not stand for re-election at the forthcoming AGM, after serving

on the BoD for eight years, and that Gail Kelly would be nominated for election to the BoD at the same AGM. She served

as the Group CEO and Managing Director for two banks in Australia, St. George Bank (2002 to 2007) followed by

Westpac Banking Corporation (2008 to 2015). Gail Kelly acted as Senior Global Advisor for UBS from 2016 to 2023.

Article 31 of our AoA limits the number of mandates that members of the BoD may hold outside UBS Group to four

mandates in listed companies and five additional mandates in non-listed companies. Mandates in companies that are

controlled by us or that control us are not subject to this limitation. In addition, members of the BoD may hold no more

than 10 mandates at UBS’s request and 10 mandates in associations, charitable organizations, foundations, trusts, and

employee welfare foundations without commercial purpose. As of 31 December 2023, no member of the BoD reached

any of these thresholds.

The following biographies provide information about the BoD members who were in office after the 2023 AGM and the

Group Company Secretary. In addition to information on mandates, the biographies include information on memberships

or other activities or functions, as required by the SIX Swiss Exchange Corporate Governance Directive.

No member of the BoD currently carries out operational management tasks within the Group. All members of the BoD

are therefore non-executive members. Except for Lukas Gähwiler, no member of the BoD has carried out operational

management tasks within the Group over the past three years.

As a result of the acquisition of the Credit Suisse Group in 2023, to ensure compliance with our governance principles

and to facilitate a smooth integration into UBS, Lukas Gähwiler was appointed chairman of the board of Credit Suisse

AG, Jeremy Anderson was appointed vice chairman of that board and Mark Hughes a member of it.

Annual Report 2023 | Corporate governance and compensation | Corporate governance 194

Colm Kelleher

Chairman of the Board of Directors and non-executive member of

the Board since 2022

– Chairperson of the Corporate Culture and Responsibility Committee

since 2022

– Chairperson of the Governance and Nominating Committee since

2022

Nationality: Irish | Year of birth: 1957

Colm Kelleher was elected Chairman of UBS in April 2022. 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 geographic 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

risk and finance committee)

Other activities and functions

– Chairman of the Board of Directors of UBS 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 2023 | Corporate governance and compensation | Corporate governance 195

Lukas Gähwiler

Vice Chairman and non-executive member of the Board since 2022

– Member of the Governance and Nominating Committee since 2023

– Member of the Risk Committee since 2023

Nationality: Swiss | Year of birth: 1965

Lukas Gähwiler brings a wealth of industry experience and an in-depth

understanding of UBS to the Board. He served as Chairman of the Board of

UBS Switzerland AG for five years and was a member of the Group Executive

Board of UBS and President UBS Switzerland from 2010 to 2016, 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.

Professional experience

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

– Chairman of the Board of Directors of Credit Suisse AG

– Vice Chairman of the Board of Directors of UBS 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

Senior Independent Director since 2020 and non-executive

member of the Board since 2018

– Member of the Governance and Nominating Committee since 2019

– Chairperson of the Audit Committee since 2018

Nationality: British | Year of birth: 1958

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)

Other activities and functions

– Vice Chairman of the Board of Directors of Credit Suisse AG

– Member of the Board of Directors of UBS AG

– 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, cybersecurity

Leadership experience

– Executive board leadership

Annual Report 2023 | Corporate governance and compensation | Corporate governance 196

Claudia Böckstiegel

Non-executive member of the Board since 2021

– Member of the Corporate Culture and Responsibility Committee

since 2022

Nationality: Swiss and German | Year of birth: 1964

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 management

positions in the legal sector in Switzerland. Ms. Böckstiegel brings a wealth

of know-how in a highly regulated sector. Her responsibilities at Roche

Holding AG include a broad range of additional topics, such as safety,

health and environment, patents, audit and risk advisory, compliance, and

sustainability.

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 AG

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

Non-executive member of the Board since 2019

– Member of the Corporate Culture and Responsibility Committee

since 2019

– Member of the Risk Committee since 2019

Nationality: American (US) | Year of birth: 1953

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, Federal Reserve Bank of New York

2007 – 2009

Executive Vice President and Head Markets Group,

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 Board of Treliant LLC

– Member of the Advisory Board of Suade Labs

Other activities and functions

– Member of the Board of Directors of UBS 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

Annual Report 2023 | Corporate governance and compensation | Corporate governance 197

Patrick Firmenich

Non-executive member of the Board since 2021

– Member of the Audit Committee since 2021

– Member of the Corporate Culture and Responsibility Committee

since 2021

Nationality: Swiss | Year of birth: 1962

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

2014 – 2016

Vice Chairman of the Board, Firmenich International SA

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 nomination

committee)

Other activities and functions

– Member of the Board of Directors of UBS AG

– Member of the Board of Directors of INSEAD and INSEAD World

Foundation

– 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

Non-executive member of the Board since 2018

– Member of the Governance and Nominating Committee since 2020

Nationality: Chinese | Year of birth: 1963

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. 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 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

2003 – 2004

Managing Director and Co-Head, Investment Banking,

China, Goldman Sachs

2000 – 2003

Managing Director and Chief Economist and Strategist,

Greater 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 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

– Director and member of the Executive Committee of China Venture

Capital and Private Equity Association Ltd

Key competencies

– Investment banking, capital markets

– Risk management, compliance and legal

– Technology, cybersecurity

– Regulatory authority, central bank

Leadership experience

– CEO, Chairman

Annual Report 2023 | Corporate governance and compensation | Corporate governance 198

Mark Hughes

Non-executive member of the Board since 2020

– Chairperson of the Risk Committee since 2020

– Member of the Corporate Culture and Responsibility Committee

since 2020

Nationality: Canadian, British and American (US) | Year of birth: 1958

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 visiting lecturer at Leeds

University 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 AG

– Member of the Board of Directors of UBS Americas Holding LLC

– Member of the Board of Directors of Credit Suisse 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, cybersecurity

Leadership experience

– Executive board leadership

Nathalie Rachou

Non-executive member of the Board since 2020

– Member of the Governance and Nominating Committee since 2022

– Member of the Risk Committee since 2020

Nationality: French | Year of birth: 1957

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 and is currently on the boards of two other listed companies,

including the pan-European bourse, Euronext N.V.

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 Veolia Environnement SA

(chair of the audit committee)

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 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

Annual Report 2023 | Corporate governance and compensation | Corporate governance 199

Julie G. Richardson

Non-executive member of the Board since 2017

– Chairperson of the Compensation Committee since 2019

– Member of the Risk Committee since 2017

Nationality: American (US) | Year of birth: 1963

Julie G. Richardson spent more than 25 years on Wall Street as a senior

investment banker 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

of the New York office of Providence Equity Partners. Throughout her

career, 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.

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)

– 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.

– Member of the Board of Checkout.com (stepped down in January

2024)

Other activities and functions

– Member of the Board of Directors of UBS AG

Key competencies

– Investment banking, capital markets

– Risk management, compliance and legal

– Human resources management, including compensation

– Technology, cybersecurity

Dieter Wemmer

Non-executive member of the Board since 2016

– Member of the Audit Committee since 2019

– Member of the Compensation Committee since 2018

Nationality: Swiss and German | Year of birth: 1957

Dieter Wemmer began his highly successful career in the insurance sector with

the Zurich Group in 1986, retiring in 2017 as CFO of Allianz. As a long-serving

CFO of two large multi-national companies in the financial services sector, he

has deep experience across a broad range of highly relevant topics. Mr.

Wemmer brings to the BoD knowledge covering accounting, finance and

audit, including capital markets, investments and risk management, as well as

asset management. His know-how includes hands-on experience in mergers

and acquisitions, and management of large organizations with a focus on

strategy.

Professional experience

2013 – 2017

CFO, Allianz SE

2012 – 2013

Member of the Board of Management, responsible for the

insurance business in France, Benelux, Italy, Greece and

Turkey and for the “Global Property & Casualty” Center of

Competence, Allianz SE

2007 – 2011

CFO, Zurich Insurance Group

2010 – 2011

Regional Chairman of Europe, Zurich Insurance Group

2004 – 2007

CEO of the Europe General Insurance business and

member of Zurich’s Group Executive Committee, Zurich

Insurance Group

2003 – 2004

COO of Europe General Insurance, Zurich Insurance Group

1999 – 2003

Head of Mergers and Acquisitions, Zurich Insurance Group

1997 – 1999

Head of Financial Controlling, Zurich Insurance Group

Education

– Master’s degree and doctorate, mathematics, University of Cologne

Listed company boards

– Member of the Board of Ørsted A/S

(chair of the audit and risk committee)

Non-listed company boards

– Chairman of Marco Capital Holdings Limited, Malta and subsidiaries

Other activities and functions

– Member of the Board of Directors of UBS AG

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

– Executive board leadership

Annual Report 2023 | Corporate governance and compensation | Corporate governance 200

Jeanette Wong

Non-executive member of the Board since 2019

– Member of the Compensation Committee since 2020

– Member of the Audit Committee since 2019

Nationality: Singaporean | Year of birth: 1960

Jeanette Wong has spent more than 30 years working 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. Prior to that, she held

the position of CFO at DBS Bank. 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 Jurong Town Corporation

– 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 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

Group Company Secretary since 2017

Nationality: Swiss | 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 Group

Company Secretary and Chief of Staff.

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 2023 | Corporate governance and compensation | Corporate governance 201

Elections and terms of office

Shareholders annually elect each member of the BoD individually, as well as the Chairman and the members of the

Compensation Committee, based on proposals from the BoD.

As set out in the Organization Regulations, BoD members are normally expected to serve for at least three years. BoD

members are limited to serving for a maximum of 10 consecutive terms of office; in exceptional circumstances, the BoD

may extend that limit.

› Refer to “Skills, expertise and training of the Board of Directors” in this section for more information

Organizational principles and structure

Following each AGM, the BoD meets to appoint one or more Vice Chairmen, a Senior Independent Director, the BoD

committee members (other than the Compensation Committee members, who are elected by the shareholders) and the

respective committee Chairpersons. At the same meeting, the BoD appoints the Group 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. The presence of either the Chairman, one of the Vice Chairmen or the Senior Independent Director,

as well as the majority of the members of the BoD, is required to pass valid BoD resolutions. In 2023, a majority of

meetings were held in person. During 2023, a total of 33 BoD meetings were held, 14 of which were attended by GEB

members. The average participation in the BoD meetings was 99%. In addition to the BoD meetings attended by GEB

members, the Group CEO regularly attended some of the meetings of the BoD without the participation of other GEB

members. The meetings had an average duration of 87 minutes.

The acquisition of the Credit Suisse Group led to a significant increase in the number of ad hoc calls and meetings. In the

period leading up to the announcement, to support the BoD’s decision making, and afterwards, to provide oversight for

the integration of Credit Suisse, 28 extra meetings or calls were held. In the second half of the year, the respective tasks

were folded back into the standard meeting cycle. In 2023 the BoD held a total of 61 meetings, which lasted for

approximately 100 hours.

The BoD held a two-day strategy workshop, which focused on the integration of Credit Suisse, included updates from

each business division and region and focused on the planning for the first 90 days after the legal close of UBS’s

acquisition of the Credit Suisse Group.

At the BoD meetings, each committee Chairperson provides the BoD with an update on current activities of his or her

committee and important committee issues. We also continued with the coordination and exchange of information

between UBS Group AG and its significant group entities. Joint meetings between the BoD of UBS Group AG and the

boards of directors of the significant group entities, as well as between the respective chairs of the risk and audit

committees, have been held. As in prior years, an annual workshop for non-executive board members of all significant

group entities was held and included representatives from the Credit Suisse legal entities.

Board of Directors

Members in 2023

Meeting attendance

without GEB

Meeting attendance

with GEB

Key responsibilities include:

Colm Kelleher, Chairman

19/19

100%

14/14

100%

Lukas Gähwiler

19/19

100%

14/14

100%

Jeremy Anderson

19/19

100%

14/14

100%

Claudia Böckstiegel

19/19

100%

14/14

100%

William C. Dudley

19/19

100%

14/14

100%

Patrick Firmenich

19/19

100%

14/14

100%

Fred Hu

18/19

95%

14/14

100%

Mark Hughes

19/19

100%

14/14

100%

Nathalie Rachou

19/19

100%

14/14

100%

Julie G. Richardson

19/19

100%

14/14

100%

Dieter Wemmer

19/19

100%

14/14

100%

Jeanette Wong

19/19

100%

13/14

93%

The BoD has ultimate responsibility for the success of the Group and for

delivering sustainable shareholder value within a framework of prudent

and effective controls. It decides on the Group’s strategy and the

necessary financial and human resources, upon recommendation of the

Group CEO, and sets the Group’s values and standards to ensure that

the Group’s obligations to shareholders and other stakeholders are met.

› Refer to the Organization Regulations of UBS Group AG,

available at

ubs.com/governance

, for more information

1 Additionally, nine calls and meetings took place in 2023. 2 Additionally, nine calls and meetings took place in 2023.

Annual Report 2023 | Corporate governance and compensation | Corporate governance 202

Performance assessment

In spring 2024, the BoD self-assessment was conducted in-house, with an in-depth questionnaire, and it confirmed that

the BoD operated efficiently and effectively. Every third year, an external assessment of the effectiveness of the BoD is

performed. The most recent external review was conducted in 2022 and concluded that the BoD and its committees

operate effectively, in line with best practices, and meet the highest standards also in comparison with leading

international peers. The next external review will take place in 2025.

BoD committees

The committees listed below assist the BoD in fulfilling its responsibilities. These committees and their charters are

described in our Organization Regulations, available at ubs.com/governance. The committees meet as often as their

business requires, but no less than four times a year in the case of the Audit Committee, the Risk Committee and the

Compensation Committee, and no less than twice a year in the case of the Corporate Culture and Responsibility

Committee (the CCRC) and the Governance and Nominating Committee. Topics of common interest or affecting more

than one committee are discussed at joint committee meetings.

During 2023, a total of 10 joint committee meetings were held. The Audit Committee met four times with the Risk

Committee and three times with the CCRC. The Risk Committee met twice with the CCRC and once with the

Compensation Committee.

Audit Committee

Throughout 2023, the Audit Committee consisted of the same four independent BoD members. 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 2023, 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 Group 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.

During 2023, the Audit Committee held 14 committee meetings, with a participation rate of 100%. The meetings had

an average duration of approximately 120 minutes. Additional attendees included the Group CFO, the Group Controller,

the Chief Accounting Officer, the Head Group Internal Audit (GIA) and the external auditors. The Chairman of the BoD,

the Vice Chairman and the Group CEO attended most meetings. The Chairperson and the committee continued to

maintain regular contact with core supervisory authorities.

Audit Committee

Members in 2023

Meeting attendance

Key responsibilities include:

Jeremy Anderson (Chairperson)

14/14

100%

Patrick Firmenich

14/14

100%

Dieter Wemmer

14/14

100%

Jeanette Wong

14/14

100%

The function of the Audit Committee is to support the BoD in fulfilling its oversight duty relating

to financial reporting and internal controls over financial reporting, the effectiveness of the

external and internal audit functions, and the effectiveness of 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.

› Refer to the Organization Regulations of UBS Group AG,

available at

ubs.com/governance

, for more information

Annual Report 2023 | Corporate governance and compensation | Corporate governance 203

Compensation Committee

Throughout 2023, the Compensation Committee consisted of the same three independent members. In addition to the

key responsibilities indicated in the table below, the Compensation Committee reviews the compensation disclosures

included in this report.

During 2023, the Compensation Committee held eight meetings, with a participation rate of 96%. The meetings had an

average duration of approximately 95 minutes. All meetings in 2023 were held in the presence of the Chairman, the

respective Group CEOs and external advisors. In 2023, the Chairperson met regularly with core supervisory authorities.

› Refer to “Compensation for the Board of Directors” in the “Compensation” section of this report for more information about the

Compensation Committee’s decision-making procedures

Compensation Committee

Members in 2023

Meeting attendance

Key responsibilities include:

Julie G. Richardson (Chairperson)

8/8

100%

Dieter Wemmer

8/8

100%

Jeanette Wong

7/8

88%

The Compensation Committee is responsible for:

(i) supporting the BoD in its duties to set guidelines on compensation and benefits;

(ii) approving the total compensation for the Chairman and the non-independent BoD members;

(iii) proposing, upon proposal of the Chairman, financial and non-financial performance targets

and objectives for the Group CEO for approval by the BoD and reviewing, upon the proposal

of the Group CEO, the performance framework for the other GEB members;

(iv) proposing, upon proposal of the Chairman, the Group CEO’s performance assessment for

approval by the BoD, as well as informing the BoD of the performance assessments of

all GEB members, including the Group CEO;

(v) proposing, upon proposal of the Chairman, the total compensation for the Group CEO for

approval by the BoD; and

(vi) proposing, upon proposal of the Group CEO, the individual total compensation for the other

GEB members for approval by the BoD.

› Refer to the Organization Regulations of UBS Group AG,

available at

ubs.com/governance

, for more information

1 Additionally, the Compensation Committee held three ad hoc calls.

Corporate Culture and Responsibility Committee

Throughout 2023, the CCRC consisted of the same five independent BoD members. The Chairman chaired the

committee. Additional attendees included the Group CEO, the Group Chief Risk Officer, the GEB Lead for Sustainability

and Impact, the Group General Counsel and the Chief Sustainability Officer. During 2023, five meetings were held, with

a participation rate of 100%. The average duration of each of the meetings was approximately 75 minutes.

Corporate Culture and Responsibility Committee

Members in 2023

Meeting attendance

Key responsibilities include:

Colm Kelleher (Chairperson)

5/5

100%

Claudia Böckstiegel

5/5

100%

William C. Dudley

5/5

100%

Patrick Firmenich

5/5

100%

Mark Hughes

5/5

100%

The CCRC supports the BoD in its duties to safeguard and advance the Group’s reputation for

responsible and sustainable conduct. Its function is forward-looking in that it monitors and reviews

societal trends and transformational developments and assesses their potential relevance for the

Group.

In undertaking this assessment, it reviews stakeholder concerns and expectations pertaining to the

societal performance of UBS and to the development of its corporate culture. The CCRC’s function

also encompasses the monitoring of the current state and implementation of the programs and

initiatives within the Group pertaining to corporate culture and corporate responsibility, including

sustainability.

› Refer to the Organization Regulations of UBS Group AG,

available at

ubs.com/governance

, for more information

Annual Report 2023 | Corporate governance and compensation | Corporate governance 204

Governance and Nominating Committee

Before the 2023 AGM, the Governance and Nominating Committee, chaired by the Chairman, consisted of four

independent members and, after the AGM, the Vice Chairman joined the committee. During 2023, six meetings were

held, with a participation rate of 100%. The average duration of each of the meetings was approximately 30 minutes.

The Group CEO attended meetings as appropriate.

Governance and Nominating Committee

Members in 2023

Meeting attendance

Key responsibilities include:

Colm Kelleher (Chairperson)

6/6

100%

Lukas Gähwiler

4/4

100%

Jeremy Anderson

6/6

100%

Fred Hu

6/6

100%

Nathalie Rachou

6/6

100%

The function of the Governance and Nominating Committee is to support the BoD in fulfilling its

duty to establish best practices in corporate governance across the Group, including conducting a

BoD assessment, establishing and maintaining a process for appointing new BoD and GEB

members, as well as for the annual performance assessment of the BoD.

› Refer to the Organization Regulations of UBS Group AG,

available at

ubs.com/governance

, for more information

1 Additionally, the Governance and Nominating Committee held one ad hoc call. 2 Lukas Gähwiler became a member of this committee after the 2023 AGM; indicated are his attended and total meetings.

Risk Committee

In 2023, the Risk Committee consisted of four independent members before the AGM. After the AGM, the Vice Chairman

joined the committee. During 2023, the Risk Committee held 10 committee meetings, with a participation rate of 100%.

The average duration of each of the meetings was approximately 130 minutes. The Chairman of the BoD, the Vice

Chairman, the Group CEO, the Group CFO, the Group Chief Risk Officer, the Group Chief Operations and Technology

Officer, the Group Treasurer, the Group Chief Compliance and Governance Officer, the Group General Counsel, the

Head GIA, and the external auditors attended the meetings as required. In 2023, the Chairperson and the full committee

met with core supervisory authorities.

Risk Committee

Members in 2023

Meeting attendance

Key responsibilities include:

Mark Hughes (Chairperson)

10/10

100%

Lukas Gähwiler

8/8

100%

William C. Dudley

10/10

100%

Nathalie Rachou

10/10

100%

Julie G. Richardson

10/10

100%

The function of the Risk Committee is to oversee and support the BoD 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;

(ii) balance sheet, treasury and capital management, including funding,

liquidity and equity attribution.

› Refer to the Organization Regulations of UBS Group AG,

available at

ubs.com/governance

, for more information

1 Additionally, the Risk Committee held two ad hoc calls. 2 Lukas Gähwiler became a member of this committee after the 2023 AGM; indicated are his attended and total meetings.

Ad hoc committees

The Special Committee and the Strategy Committee are two ad hoc committees, which have a standing composition and

hold meetings as and when required.

In 2023, the Special Committee was chaired by Jeremy Anderson, with Colm Kelleher, Lukas Gähwiler, Claudia

Böckstiegel, Nathalie Rachou and Julie G. Richardson as its members. Its primary purpose is to oversee activities related

to key litigation and investigation matters, review management’s respective proposals and provide to the BoD

recommendations for decisions. Additional attendees included the Group CEO and the Group General Counsel. During

2023, three meetings of the Special Committee were held.

In 2023, the Strategy Committee was chaired by Colm Kelleher, with William C. Dudley, Fred Hu, Julie Richardson and

Dieter Wemmer as its members. Lukas Gähwiler became a member of this committee after the 2023 AGM. The primary

purpose of this committee is to support management and the BoD with regard to the assessment of strategic

considerations and to prepare decisions on behalf of the BoD. During 2023, two meetings of the Strategy Committee

were held early in the year in relation to the acquisition of the Credit Suisse Group. The Group CEO and other members

of the GEB and management participated in these meetings as required.

Annual Report 2023 | Corporate governance and compensation | Corporate governance 205

Roles and responsibilities of the Chairman of the Board of Directors

At the 2023 AGM, Colm Kelleher was re-elected as the full-time Chairman of the BoD. The Chairman coordinates tasks

within the BoD, calls BoD meetings and sets the meeting agendas. He presides over all general meetings of shareholders,

chairs the Governance and Nominating Committee, as well as the CCRC, and works with the committee Chairpersons

to coordinate the work of all BoD committees. Together with the Group CEO, the Chairman undertakes responsibility

for UBS’s reputation, and is responsible for effective communication with shareholders and other stakeholders, including

government officials, regulators and public organizations. This is in addition to establishing and maintaining close working

relationships with the Group CEO and other GEB members, and providing advice and support when appropriate.

› Refer to “Employees” in the “How we create value for our stakeholders” section of this report for information about our Pillars,

Principles and Behaviors

In 2023, the Chairman met regularly with core supervisory authorities of all major locations where UBS is active. Meetings

with important supervisory authorities were scheduled on an ad hoc or needs-driven basis.

Roles and responsibilities of the Vice Chairmen and the Senior Independent Director

The BoD appoints one or more Vice Chairmen and a Senior Independent Director. If the BoD appoints more than one

Vice Chairman, at least one of them must be independent. Both the Vice Chairman and the Senior Independent Director

support the Chairman with regard to his responsibilities and authorities and provide him with advice. In conjunction with

the Chairman and the Governance and Nominating Committee, they facilitate good Group-wide corporate governance,

as well as balanced leadership and control within the Group, the BoD and the committees.

Lukas Gähwiler was appointed as Vice Chairman following the 2022 AGM. Jeremy Anderson was re-appointed the Senior

Independent Director and has held that post since 2020. The Vice Chairman is required to lead meetings of the BoD in

the temporary absence of the Chairman. Together with the Governance and Nominating Committee, either the Senior

Independent Director or the Vice Chairman is tasked with the ongoing monitoring and the annual evaluation of the

Chairman. The Vice Chairman also represents UBS on behalf of the Chairman in meetings with internal or external

stakeholders. In particular, Lukas Gähwiler represents UBS across a broad range of associations and industry bodies in

Switzerland.

The Senior Independent Director enables and supports communication and the flow of information among the

independent BoD members. At least twice a year, he organizes and leads a meeting of the independent BoD members

without the participation of the Chairman. In 2023, two independent BoD meetings were held with an average

participation rate of 95% and an average duration of approximately 105 minutes. The Senior Independent Director also

relays to the Chairman any issues or concerns raised by the independent BoD members and acts as a point of contact for

shareholders and stakeholders seeking discussions with an independent BoD member.

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 our BoD members have management or independent board responsibilities. The

Governance and Nominating Committee determines in each instance whether the nature of the Group’s business

relationship with such a company might compromise our BoD members’ capacity to express independent judgment.

Our Organization Regulations require three-quarters of the 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 2023, our BoD met the standards of the Organization Regulations for the percentage of directors who are considered

independent under the criteria described above. No current BoD member has either an employment contract or a

significant business connection to UBS or any of its subsidiaries. No BoD member currently carries out operational

management tasks within the Group. Except for the Vice Chairman, no BoD member has carried out operational

management tasks within the Group over the past three years.

All relationships and transactions with UBS Group 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.

› Refer to “Note 31 Related parties” in the “Consolidated financial statements” section of this report for more information

Annual Report 2023 | Corporate governance and compensation | Corporate governance 206

Checks and balances: the Board of Directors and the Group 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 GEB is clearly defined in the Organization Regulations. The BoD decides on the strategy of the

Group, upon recommendations by the Group CEO, and exercises ultimate supervision over management; whereas the

GEB, headed by the Group CEO, has executive management responsibility. The functions of Chairman and Group CEO

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 the Group, for which

responsibility is delegated to the GEB. No member of one board may simultaneously be a member of the other.

Supervision and control of the GEB remain with the BoD. The authorities and responsibilities of the two bodies are

governed by the AoA and the Organization Regulations.

Skills, expertise and training of the Board of Directors

The BoD is well-diversified and composed of members with a broad spectrum of skills, educational backgrounds,

experience, and expertise from a range of sectors that reflect the nature and scope of the firm’s business. The Governance

and Nominating Committee maintains a competencies and experience matrix to identify gaps in the competencies and

experiences considered most relevant to the BoD, taking into consideration the firm’s business exposure, risk profile,

strategy and geographic reach.

In recent years, the composition of the BoD has been systematically shaped along the identified requirements. The

appointment of a new Chairman and Vice Chairman in 2022, as well as the nomination of Gail Kelly in January 2024,

were important elements in this continuous process. We maintain and update a list of potential candidates for UBS Group

AG.

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

– human resources management, including compensation

– technology, cybersecurity

– regulatory authority, central bank

– environmental, social and governance (ESG)

Leadership experience

– experience as a CEO or chairperson

– executive board leadership experience (e.g., as CFO, chief risk officer or COO of a listed company)

The Governance and Nominating Committee reviews these categories and ratings annually to confirm that the BoD

continues to possess the most relevant experience and competencies to perform its duties.

With regard to the composition of the BoD after the 2023 AGM, the BoD members thereof identified all of the target

competencies as being their key competencies. Particularly strong levels of experience and expertise existed in these

areas:

– financial services

– risk management, compliance and legal

– finance, audit, accounting

Furthermore, 10 of the 12 BoD members have held or currently hold chairperson, CEO or other executive board-level

leadership positions.

Moreover, we consider the continuous education of our BoD members to be an important priority and support their

attendance to various training sessions. In addition to a comprehensive induction program for new BoD members,

continuous training and topical deep dives are part of the BoD agenda.

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 technology risk updates, and (ii) dedicated deep-dives on specific cybersecurity topics, including

summaries and 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 the Risk

Committee regularly organizes education and training sessions, including cyber exercises, for all BoD members.

› Refer to “Risk governance” in the “Risk management and control” section of this report for information about our risk

governance framework

› Refer to “Non-financial risk” in the “Risk management and control” section of this report for information about cybersecurity

Annual Report 2023 | Corporate governance and compensation | Corporate governance 207

Succession planning

Succession planning is one of the key responsibilities of both the BoD and the GEB. Across all divisions and regions, an

inclusive talent development and succession planning process is in place that aims to foster the personal development

and Group-wide mobility of our employees. Although the recruiting process for BoD and GEB 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.

In 2022, the GEB launched several strategic initiatives with the close involvement of the BoD and with the aim of further

strengthening internal succession planning at UBS. This included the early identification of talents and their systematic

development, including international and cross-divisional rotations. The succession plans for the GEB and the

management layers below it are managed under the lead of the Group CEO and are reviewed and approved by the BoD.

Moreover in 2023, to cater to the challenges posed by the acquisition of the Credit Suisse Group, the composition of the

GEB was complemented with new members.

For the BoD, the Chairman leads a systematic succession planning process as illustrated in the chart below. Our strategy

and the business environment constitute the main drivers in our succession planning process for new BoD members, as

they define the key competencies required on the BoD. Taking the diversity and the tenure of the existing BoD into

account, the Governance and Nominating Committee defines the recruiting profile for the search. Both external and

internal sources contribute to identifying suitable candidates. The Chairman and the members of the Governance and

Nominating Committee meet with potential candidates and, with the support of the full BoD, nominations are submitted

to the AGM for approval. New BoD members follow an in-depth onboarding process designed to enable them to

integrate efficiently and become effective in their new role. Due to this succession planning process, the composition of

the BoD is in line with the demanding requirements of a leading global financial services firm.

The smooth and effective succession at the GEB level and the appointments of internal talent as new GEB members

demonstrates the strength of the succession planning at UBS. The BoD and the GEB remain committed to the continuous

focus on developing a high-quality bench of succession candidates at all levels in the organization.

1 Terms of office until the 2024 AGM. 2 In the case of dual-nationals, the domicile applies. 3 In accordance with the 30% gender quota of the revised Swiss Corporate Law.

4 The number of BoD members identifying a key competency as one of his / her key competencies; each member identified up to four key competencies (although not every

sub-area of the respective competency might be applicable), plus one leadership experience.

5 Wealth management, asset management, and personal and corporate

banking.

6 Environmental, social and governance. 7 For example, a CFO, chief risk officer or COO of a listed company.

Competencies and experience

Terms of office¹

Geographic diversity ² Gender³

3 years

8 3

–

6 years

2 7

–

9 years

33% Switzerland

25% Europe and the UK

25% USA / Canada

17% Asia

67% male

33% female

Key competencies

Banking

and insurance

Investment banking, capital markets

Finance, audit, accounting

Risk management, compliance and legal

HR management, including compensation

Technology, cybersecurity

Regulatory authority, central bank

ESG

Leadership experience

Chief executive officer or chairman

Executive board

0 2 4 86

0 2 4 86 10

Annual Report 2023 | Corporate governance and compensation | Corporate governance 208

Information and control instruments with regard to the Group Executive Board

The BoD is kept informed of the GEB’s activities in various ways, including regular meetings between the Chairman, the

Group CEO and GEB members. The Group CEO and other GEB members also participate in BoD meetings to update its

members on all significant issues. The BoD receives regular comprehensive reports covering financial, capital, funding,

liquidity, regulatory, compliance and legal developments, as well as performance against plan and forecasts for the

remainder of the year. For important developments, BoD members are also updated by the GEB in between meetings. In

addition, the Chairman receives the meeting material and minutes of the GEB meetings.

BoD members may request from other BoD or GEB members any information about matters concerning the Group that

they require in order to fulfill their duties. When these requests are raised outside BoD meetings, such requests must go

through the Group Company Secretary and be addressed to the Chairman.

The BoD is supported in discharging its governance responsibilities by GIA, which independently assesses whether risk

management, control and governance processes are designed and operating sustainably and effectively.

The Head GIA reports directly to the Chairman. In addition, GIA has a functional reporting line to the Audit Committee

in accordance with its responsibilities as set forth in our Organization Regulations. The Audit Committee assesses the

independence and performance of GIA and the effectiveness of both the Head GIA and GIA as an organization, approves

GIA’s annual audit plan and objectives and monitors GIA’s discharge of these objectives. The committee is also in regular

contact with the Head GIA.

GIA issues quarterly reports that provide an overview of significant audit results and key issues, as well as themes and

trends, based on results of individual audits, continuous risk assessment and issue assurance. The reports are provided to

the Chairman, the members of the Audit and the Risk Committees, the GEB and other stakeholders. The Head GIA

regularly updates the Chairman and the Audit Committee on GIA’s activities, processes, audit plan execution, resourcing

requirements and other important developments. GIA issues an annual Activity Report, which is provided to the Chairman

and the Audit Committee to support their assessment of GIA’s effectiveness.

› Refer to “Group Internal Audit” in this section for more information

› Refer to “Internal risk reporting” in the “Risk management and control” section of this report for information about reporting to

the BoD

Strategy / Environment

Existing board composition

Selection

AGM election

Onboarding

Succession

planning process

Board of Directors’ succession planning process

Annual Report 2023 | Corporate governance and compensation | Corporate governance 209

Group Executive Board

The BoD delegates the management of the business to the Group Executive Board (the GEB).

Responsibilities, authorities and organizational principles of the Group Executive Board

As of 31 December 2023, the GEB, under the leadership of the Group CEO, consisted of 16 members. It has executive

management responsibility for the steering of the Group and its business, develops the strategies of the Group, business

divisions and Group functions, and implements the BoD-approved strategies. The GEB is also the risk council of the

Group, with overall responsibility for establishing and supervising the implementation of risk management and control

principles, as well as for managing the risk profile of the Group, as determined by the BoD and the Risk Committee.

In 2023, the GEB held a total of 57 meetings.

› Refer to the Organization Regulations of UBS Group AG, available at

ubs.com/governance

, for more information about the

authorities of the Group Executive Board

Changes to the Group Executive Board

On 29 March 2023, the BoD named Sergio P. Ermotti as its new Group CEO, effective 5 April 2023. The BoD made the

decision in light of UBS’s new priorities following its planned acquisition of the Credit Suisse Group. Sergio P. Ermotti

had been the Group CEO from 2011 to 2020. Ralph Hamers, who had succeeded Sergio P. Ermotti in 2020, agreed to

step down and remained at UBS during a transition period to ensure a successful closure of the transaction and a smooth

handover. At the time of his re-appointment as Group CEO, Sergio P. Ermotti was Chairman of Swiss Re and remained

in that post until his resignation therefrom on 30 April 2023 to facilitate an orderly transition at Swiss Re.

On 24 April 2023, UBS announced that Christian Bluhm had agreed to remain in his role as Group Chief Risk Officer and

member of the GEB for the foreseeable future, considering the planned acquisition of the Credit Suisse Group, therefore

delaying the handover to Damian Vogel that was originally planned for 1 May 2023.

On 9 May 2023, UBS Group AG announced a new operating model and changes to the GEB: CEO of Credit Suisse Group

AG, Ulrich Körner, would join the GEB and Todd Tuckner would succeed Sarah Youngwood as Group CFO; both

appointments came into effect at the close of the transaction on 12 June 2023. With immediate effect on 9 May 2023,

Beatriz Martin Jimenez was named Head Non-core and Legacy and President UBS Europe, Middle East and Africa,

Michelle Bereaux was named Group Integration Officer, and Stefan Seiler was appointed Head Group Human Resources

& Group Corporate Services.

On 24 January 2024, UBS announced that Suni Harford would step down, and Aleksandar Ivanovic was appointed

President Asset Management effective 1 March 2024. It was also announced that Beatriz Martin Jimenez would take on

the responsibility as GEB Lead for Sustainability and Impact from Suni Harford, effective 1 March 2024.

As a result of the acquisition of the Credit Suisse Group in 2023, and to ensure compliance with our governance principles

and to facilitate a smooth integration into UBS, in June 2023, Michelle Bereaux and Stefan Seiler were elected as members

of the board of Credit Suisse AG.

The biographies below provide information about the GEB members in office as of 31 December 2023. The biographies

of Ralph Hamers and Sarah Youngwood can be found on pages 187 and 192 of the UBS Group AG Annual Report 2022,

available under “Annual reporting” at ubs.com/investors. In addition to information on mandates, the biographies

include memberships and other activities or functions, as required by the SIX Swiss Exchange Corporate Governance

Directive.

In line with Swiss law, article 36 of our AoA limits the number of mandates that GEB members may hold outside UBS

Group to one mandate in a listed company and five additional mandates in non-listed companies. Mandates in companies

that are controlled by UBS or that control UBS are not subject to this limitation. In addition, GEB members may not hold

more than 10 mandates at one time at the request of the company and more than eight mandates in associations,

charitable organizations, foundations, trusts and employee welfare foundations without commercial purpose. On

31 December 2023, no member of the GEB reached the aforementioned thresholds.

Responsibilities and authorities of the Asset and Liability Committee

The Asset and Liability Committee of UBS Group AG (the GALCO) is responsible for managing assets and liabilities in line

with the strategy, risk appetite, regulatory commitments and the interests of shareholders and other stakeholders. The

GALCO proposes the framework for capital management, capital allocation, and liquidity and funding risk, and proposes

limits and indicators for the Group to the BoD for approval. It oversees the balance sheet management of the Group, its

business divisions and Group functions. In 2023, the GALCO held 10 meetings.

Management contracts

We have not entered into management contracts with any companies or natural persons that do not belong to the

Group.

Annual Report 2023 | Corporate governance and compensation | Corporate governance 210

Sergio P. Ermotti

Group Chief Executive Officer, member of the GEB from 2011 to

2020 and since April 2023

Nationality: Swiss | Year of birth: 1960

Sergio P. Ermotti has been Group CEO of UBS Group AG and President of

the Executive Board of UBS AG since April 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 April 2023. Prior to joining UBS

in 2011, he was at UniCredit Group, where from 2007 to 2010 he served

as Group Deputy Chief Executive Officer and Head of Corporate &

Investment Banking and Private Banking, prior to that he served as Head

of the Markets & Investment Banking Division. Between 1987 and 2004,

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 Chief Executive Officer, UBS

2011 – 2011

Chairman and CEO UBS Group Europe, Middle East and

Africa, and member of the Group Executive Board, UBS

2007 – 2010

Group Deputy Chief Executive Officer 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

– President of the Executive Board of UBS 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

Michelle Bereaux

Group Integration Officer, member of the GEB since May 2023

Nationality: British and Trinidadian & Tobagonian | Year of birth: 1964

Michelle Bereaux was appointed Group Integration Officer in May 2023

and is responsible for the development and execution of our integration

strategy, working closely with all GEB members and integration

workstream leads. 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

May 2023 – date

Group Integration Officer, UBS Group AG and 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 – 2011

Global Strategic Projects at CEO Management Office,

UBS Investment Bank

2009 – 2010

Chief of Staff and Joint Global COO, UBS Investment

Bank

Education

– Law, the University of Cambridge

– Politics, Economics and Law, the University of Buckingham

Other activities and functions

– Member of the Executive Board of UBS AG

– Member of the Board of Directors of Credit Suisse AG

Annual Report 2023 | Corporate governance and compensation | Corporate governance 211

Christian Bluhm

Group Chief Risk Officer, member of the GEB since 2016

Nationality: Swiss and German | Year of birth: 1969

Christian Bluhm has been Group Chief Risk Officer since 2016. He held

several positions in academia before starting his banking career in 1999

with Deutsche Bank in credit risk management, and subsequently working

for Hypovereinsbank and Credit Suisse in the same area. Before joining

UBS, he used his expertise and skills as Chief Risk & Financial Officer at

FMS Wertmanagement. Mr. Bluhm is responsible for the development of

the Group’s risk management and control framework for various risk

categories and implementation of its independent control frameworks.

Professional experience

2016 – date

Group Chief Risk Officer, UBS Group AG, and Chief Risk

Officer, UBS AG

2012 – 2015

Spokesman of the Executive Board,

FMS Wertmanagement

2010 – 2015

Chief Risk & Financial Officer, FMS Wertmanagement

2004 – 2009

Managing Director, Credit Risk Management (Switzerland

and Private Banking worldwide), Credit Suisse

2008 – 2009

Head Credit Risk Management Analytics & Instruments,

Credit Suisse

2004 – 2008

Head of Credit Portfolio Management, Credit Suisse

2001 – 2004

Head Structured Finance Analytics, Group Credit Portfolio

Management, Hypovereinsbank

Education

– Master’s degree, mathematics and informatics, and doctorate,

mathematics, University of Erlangen-Nuremberg

Non-listed company boards

– Chairman of the Board of Christian Bluhm Photography AG

Other activities and functions

– Member of the Executive Board of UBS AG

– Member of the Foundation Board International Financial Risk Institute

Mike Dargan

Group Chief Operations and Technology Officer, member of the

GEB since 2021

Nationality: British | Year of birth: 1977

Mike Dargan was appointed Group Chief Operations and Technology

Officer in May 2023 and is responsible for delivering digital platforms,

technology services, infrastructure, and operations, including cyber and

information security. Previously, he was Group Chief Digital and

Information Officer (CDIO), after leading our Group Technology function

since joining UBS in 2016. In addition to this remit, he was also 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.

Professional experience

May 2023 – date

Group Chief Operations and Technology Officer, UBS

Group AG, and Chief Operations and Technology

Officer, UBS AG

2021 – 2023

Group CDIO, UBS Group AG, and CDIO, UBS AG

2021 – date

President of the Executive Board,

UBS Business Solutions 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 M&A, Global

Markets, Standard Chartered Bank

2005 – 2009

Head Corporate Strategy & M&A, 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 Executive Board of UBS 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

Annual Report 2023 | Corporate governance and compensation | Corporate governance 212

Suni Harford

President Asset Management, member of the GEB since 2019

(until 29 February 2024)

Nationality: American (US) | Year of birth: 1962

Suni Harford was appointed President Asset Management in 2019 and

stepped down in February 2024. She was the Chair of UBS Optimus

Foundation from 2019 to 2024. Ms. Harford was the UBS GEB Lead for

Sustainability and Impact from 2021 to 2024. She started her Wall Street

career at Merrill Lynch & Co., in investment banking, before embarking

on a 24-year career at Citigroup Inc., the last nine years of which she was

the Regional Head of Markets for North America. Ms. Harford joined UBS

in 2017, bringing with her a broad experience from across the industry,

including in research, client coverage and risk management, and

successfully led UBS Asset Management’s integrated investments

capabilities, driving performance for its clients.

Professional experience

2019 – Feb.

2024

President Asset Management, UBS Group AG

and UBS AG

2017 – 2019

Head of Investments, Asset Management, UBS

2008 – 2017

Regional Head of Markets for North Americas,

Citigroup Inc.

2004 – 2008

Global Head of Fixed Income Research, Citigroup Inc.

Education

– Bachelor’s degree, physics and mathematics, Denison University, Ohio

– MBA, Tuck School of Business, Dartmouth College, New Hampshire

Other activities and functions

– Member of the Executive Board of UBS AG

– Chairman of the Board of Directors of UBS Asset Management AG

– Chair of the Board of UBS Optimus Foundation

– Member of the Board of Directors of the Bob Woodruff Foundation

Naureen Hassan

President UBS Americas, member of the GEB since October 2022

Nationality: American (US) | Year of birth: 1971

Naureen Hassan was appointed President UBS Americas and CEO of UBS

Americas Holding LLC in 2022. She joined UBS from the Federal Reserve

Bank of New York, where she was COO and First Vice President. After

starting her career at McKinsey & Company, Ms. Hassan held various

business transformation, strategy and operational leadership roles at

Charles Schwab Corporation and was a member of that company’s

Executive Committee. Subsequently, as Chief Digital Officer at Morgan

Stanley Wealth Management, she led the digital strategy and executed

digital transformation of the wealth management business to grow the

business, improve client experience and increase financial advisor

effectiveness and efficiency.

Professional experience

2022 – date

President UBS Americas, UBS Group AG and UBS AG,

and CEO, UBS Americas Holding LLC

2021 – 2022

First Vice President and COO, Federal Reserve

Bank of New York

2016 – 2020

Chief Digital Officer, Wealth Management,

Morgan Stanley

2014 – 2016

Executive Vice President, Investor Services, Charles

Schwab Corporation

2012 – 2014

Senior Vice President, Advisor Services Client Experience

& Strategic Integration, Charles Schwab Corporation

2010 – 2012

COO and Board Director, Charles Schwab Bank

2003 – 2010

Various senior positions, Charles Schwab Corporation

Education

– Bachelor’s degree, economics, Princeton University

– Master’s degree, business administration, Stanford University

Graduate School of Business

Other activities and functions

– Member of the Executive Board of UBS AG

– Member of the Board and CEO of UBS Americas Holding LLC

– Member of the Board of the Securities Industry and Financial Markets

Association (stepped down in January 2024)

– Member of the Board of Governors of FINRA (as of February 2024)

– Member of the Board of Ownership Works

– Member of the Board of the American Swiss Foundation

– Member of the Board and Executive Committee of The Partnership for

New York City

Annual Report 2023 | Corporate governance and compensation | Corporate governance 213

Robert Karofsky

President Investment Bank, member of the GEB since 2018

Nationality: American (US) | Year of birth: 1967

Robert Karofsky was appointed Co-President of the Investment Bank in

2018 and reshaped that division, realigning efforts around clients’

evolving needs, focusing resources on opportunities for profitable growth

and reinvesting in UBS’s digital transformation. He became sole President

of the Investment Bank in 2021 and was President UBS Securities LLC from

2015 to 2021. Before joining UBS, he acquired know-how in investment

banking as an analyst and trader, working for various financial institutions

such as Morgan Stanley, Deutsche Bank and AllianceBernstein. He then

became Global Head of Equities at UBS, responsible for driving UBS’s

growth strategy for equities globally.

Professional experience

2021 – date

President Investment Bank, UBS Group AG and UBS AG

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, University of Chicago’s Booth School of

Business

Other activities and functions

– Member of the Executive Board of UBS AG

– Member of the Board of UBS Americas Holding LLC

– Member of the Board of UBS Optimus Foundation

Sabine Keller-Busse

President Personal & Corporate Banking and

President UBS Switzerland, member of the GEB since 2016

Nationality: Swiss and German | Year of birth: 1965

Sabine Keller-Busse was appointed President Personal & Corporate

Banking and President UBS Switzerland in 2021, heading the leading

universal bank in Switzerland. In her previous role as Group COO, she

oversaw global functions such as technology, operations, human

resources and corporate services. She has been pivotal in driving business

alignment, and digital and cultural transformation, while also facilitating

business growth as President UBS Europe, Middle East and Africa. Ms.

Keller-Busse also brings in-depth experience regarding financial market

infrastructure, having served on the Board of SIX Group for nine years.

Professional experience

2021 – date

President Personal & Corporate Banking and

President UBS Switzerland, UBS Group AG

2021 – date

President of the Executive Board, UBS Switzerland AG

2019 – 2021

President UBS Europe, Middle East and Africa, UBS

2018 – 2021

Group COO of UBS and President of the Executive

Board, UBS Business Solutions AG

2016 – 2021

Member of the Executive Board of UBS AG

2014 – 2017

Group Head Human Resources, UBS

2010 – 2014

COO UBS Switzerland, UBS

Education

– Master’s degree, economic sciences, University of St. Gallen

– Ph.D., economic sciences (Dr. oec.), University of St. Gallen

Listed company boards

– Member of the Board of Zurich Insurance Group

Other activities and functions

– President of the Executive Board of UBS Switzerland AG

– Chairwoman of the Foundation Board of the UBS Pension Fund

– Member of the Foundation Council of the UBS International Center

of Economics in Society

– Member of the Board and Board Committee of Zurich Chamber

of Commerce

– Member of the Board of the University Hospital Zurich Foundation

– Member of the Board of Trustees of the Swiss Entrepreneurs

Foundation

Annual Report 2023 | Corporate governance and compensation | Corporate governance 214

Iqbal Khan

President Global Wealth Management, member of the GEB since

2019

Nationality: Swiss | Year of birth: 1976

Iqbal Khan has been President Global Wealth Management since October

2022 and was President UBS Europe, Middle East and Africa from 2021

to 2023. From 2019 until September 2022, he was Co-President Global

Wealth Management. Mr. Khan 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. In 2013, he moved to Credit Suisse, holding senior

leadership positions as CFO Private Banking & Wealth Management and

later CEO International Wealth Management.

Professional experience

2022 – date

President Global Wealth Management, UBS Group AG

and UBS AG

2021 – May 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 degree (LL.M.),

University of Zurich

Other activities and functions

– Member of the Executive Board of UBS AG

– Member of the Board of UBS Optimus Foundation

Edmund Koh

President UBS Asia Pacific, member of the GEB since 2019

Nationality: Singaporean | Year of birth: 1960

Edmund Koh has been President UBS Asia Pacific since 2019. He is a

financial sector veteran, with more than 30 years in senior roles in financial

services, including as Head Wealth Management Asia Pacific, Country

Head Singapore and Head Wealth Management South-East Asia and Asia

Pacific Hub for UBS. He joined UBS from Taiwan-based Ta Chong Bank,

where he served as President and Director. Before working for DBS Bank

in Singapore, Mr. Koh was CEO for Prudential Assurance and Alverdine

Pte Ltd, both companies based in Singapore.

Professional experience

2019 – date

President UBS Asia Pacific, UBS Group AG and UBS AG

2016 – 2018

Head Wealth Management Asia Pacific, UBS

2012 – 2018

Country Head Singapore, UBS

2012 – 2015

Head Wealth Management South-East Asia and

Asia Pacific Hub, UBS

2008 – 2012

President and Director, Ta Chong Bank, Taiwan

2001 – 2008

Managing Director and Regional Head, Consumer Banking

Group, DBS Bank, Singapore

Education

– Bachelor’s degree, psychology, University of Toronto

Non-listed company boards

– Member of the Board of Trustees of the Wealth Management

Institute, Singapore

– Member of the Board of Next50 Limited, Singapore

– Member of the Board of Medico Suites (S) Pte Ltd, Singapore

– Member of the Board of Curbside Pte Ltd, Singapore

– Member of the Board of the Philanthropy Asia Alliance Ltd, Singapore

Other activities and functions

– Member of the Executive Board of UBS AG

– Member of a sub-committee of the Singapore Ministry

of Finance’s Committee on the Future Economy

– Member of the Financial Centre Advisory Panel of the Monetary

Authority of Singapore

– Council member of the Asian Bureau of Finance and Economic

Research, Singapore

– Member of the Board of Trustee of the Cultural Matching Fund,

Singapore

– Member of University of Toronto’s International Leadership

Council for Asia

Annual Report 2023 | Corporate governance and compensation | Corporate governance 215

Ulrich Körner

CEO of Credit Suisse AG, member of the GEB since June 2023

Nationality: Swiss and German | Year of birth: 1962

Ulrich Körner was appointed CEO of Credit Suisse AG in June 2023, when

the Credit Suisse Group AG was acquired by UBS Group AG. Prior to the

acquisition, he was CEO of Credit Suisse Group AG. Before that he was

CEO Asset Management at Credit Suisse Group AG. From 2009 to 2020,

he held various leadership positions, such as President Asset Management,

President UBS Europe, Middle East and Africa, and Group COO, at UBS

Group AG and was a member of the Group Executive Board. With his

knowledge of both organizations, Mr. Körner will be responsible for

ensuring Credit Suisse’s operational continuity and client focus while

supporting the integration process.

Professional experience

June 2023 – date

CEO of Credit Suisse AG, UBS Group AG

2022 – June 2023

Group CEO of Credit Suisse Group AG, Credit Suisse

2021 – 2022

CEO Asset Management, Credit Suisse

2019 – 2020

Senior Advisor to the Group CEO, UBS

2009 – 2020

Member of the Group Executive Board, UBS

2015 – 2019

President Asset Management and President UBS

Europe, Middle East and Africa, UBS

2014 – 2015

CEO Global Asset Management, UBS

2011 – 2015

CEO UBS Group Europe, Middle East and Africa, UBS

2009 – 2013

Group COO, UBS

2002 – 2009

Various senior management positions, Credit Suisse

Education

– Master’s degree, economics, University of St. Gallen

– Doctorate, economics, University of St. Gallen

Listed company boards

– Vice President of the Board of Lyceum Alpinum Zuoz AG

Barbara Levi

Group General Counsel, member of the GEB since 2021

Nationality: Italian | Year of birth: 1971

Barbara Levi has been Group General Counsel since 2021. 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. 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, M&A 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, 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 Executive Board of UBS 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

Annual Report 2023 | Corporate governance and compensation | Corporate governance 216

Beatriz Martin Jimenez

Head Non-core and Legacy and President UBS Europe, Middle East

and Africa, member of the GEB since May 2023

Nationality: Spanish | Year of birth: 1973

Beatriz Martin Jimenez became Head Non-core and Legacy, as well as

President UBS Europe, Middle East and Africa of UBS Group AG, in May

2023. She has also been the UBS Chief Executive for the UK since 2019.

Her previous UBS roles included Group Treasurer for UBS Group AG, Chief

Transformation Officer for UBS Group AG, COO for UBS Investment Bank,

and Chief of Staff to the CEO for UBS Investment Bank. Before joining

UBS in 2012, Ms. Martin held various roles in fixed income sales and

trading at Morgan Stanley and Deutsche Bank. With her experience in

markets, Ms. Martin has a deep understanding of the industry and has

built an extensive network and credentials globally, in addition to her

restructuring experience, as well as a thorough knowledge of our

Investment Bank.

Professional experience

2023 – date

Head Non-core and Legacy and President UBS Europe,

Middle East and Africa, UBS Group AG and UBS AG

2020 – June 2023

Group Treasurer, UBS Group AG

2019 – date

UK Chief Executive, UBS AG London Branch

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

– Masters in Business Administration, Universidad Autónoma de Madrid,

Madrid

– Erasmus Exchange programme, Hochschule für Bankwirtschaft,

Frankfurt

Non-listed company boards

– Member of the Leadership Council, TheCityUK, London (stepped

down in February 2024)

Other activities and functions

– Member of the Executive Board of UBS AG

– Member of the Supervisory Board of UBS Europe SE

– Member of the Advisory Board of the Frankfurt School of Finance &

Management

Markus Ronner

Group Chief Compliance and Governance Officer,

member of the GEB since 2018

Nationality: Swiss | Year of birth: 1965

Markus Ronner has been Group Chief Compliance and Governance

Officer since 2018. He 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 at the Group level for the control of all non-financial risks,

governmental and regulatory affairs, and investigations and governance

matters. From 2022 until October 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 – Oct. 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 Executive Board of UBS AG

Annual Report 2023 | Corporate governance and compensation | Corporate governance 217

Stefan Seiler

Head Group Human Resources & Group Corporate Services,

member of the GEB since May 2023

Nationality: Swiss | Year of birth: 1974

Stefan Seiler has been Head Group Human Resources & Group Corporate

Services of UBS Group AG and UBS AG since May 2023. He leads the

combined Group Human Resources and Corporate Services function,

ensuring effective and efficient alignment of our people, real estate and

vendor management strategies. He 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

May 2023 – date

Head Group Human Resources & Group 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 Executive Board of UBS AG

– Member of the Foundation Board of the UBS Swiss Pension Fund

– Member of the Board of Directors of Credit Suisse AG

– Member of the UBS Center for Economics in Society at the University

of Zurich Foundation Council

– 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

Todd Tuckner

Group Chief Financial Officer, member of the GEB since May 2023

Nationality: American (US) | Year of birth: 1965

Todd Tuckner was appointed to the GEB of UBS Group AG in May 2023

and became Group CFO after the acquisition of the Credit Suisse Group

in June 2023. 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. He

brings both an in-depth knowledge of UBS and experience across multiple

areas of finance, including tax, controlling, accounting, reporting, risk

management and business advisory.

Professional experience

June 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 Executive Board of UBS AG

Annual Report 2023 | Corporate governance and compensation | Corporate governance 218

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.

Duty to make an offer

Pursuant to the Swiss Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives

Trading of 19 June 2015, anyone who has acquired (whether directly, indirectly or in concert with third parties) more

than 33

⁄

% of all voting rights of a company listed in Switzerland, whether such rights are exercisable or not, is

required to submit a takeover offer for all listed shares outstanding. We have not elected to change or opt out of

this rule.

Clauses on change of control

Neither the terms regulating the BoD members’ mandate nor any employment contracts with GEB members or employees

holding key functions within the Group contain change of control clauses.

All employment contracts with GEB members stipulate a notice period of six months. During the notice period, GEB

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.

› Refer to the “Compensation” section of this report for more information

Auditors

Audit is an integral part of corporate governance. While safeguarding their independence, the external auditors closely

coordinate their work with Group Internal Audit (GIA). The Audit Committee and, ultimately, the BoD supervises the

effectiveness of audit work.

› Refer to “Board of Directors” in this section for more information about the Audit Committee

External independent auditors

The 2023 Annual General Meeting (the AGM) re-elected Ernst & Young Ltd (EY) as auditors for the Group for the 2023

financial year. The audit of the Group encompasses the consolidated results of Credit Suisse AG and its subsidiaries from

the date of its acquisition on 12 June 2023. EY assumes virtually all auditing functions according to laws, regulatory

requests and the AoA. Robert Jacob is the EY 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. 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.

PricewaterhouseCoopers AG served as auditors for Credit Suisse entities for the 2023 financial year. Following the

election of auditors at the 2024 AGM, UBS Group intends to cause EY to be appointed as the auditors of Credit Suisse

AG and its subsidiaries for the 2024 financial year.

During 2023, the Audit Committee held 14 meetings with the external auditors.

Review of UBS Group AG audit engagement

Mazars has been appointed as auditors of UBS Europe SE, an indirect subsidiary of UBS Group AG, as EU rules require 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 Group 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.

Annual Report 2023 | Corporate governance and compensation | Corporate governance 219

Fees paid to external independent auditors

UBS Group AG and its subsidiaries (for 2023 including UBS AG and Credit Suisse AG) paid the following fees (including expenses) to

their external independent auditors.

For the year ended

USD m

31.12.23

31.12.22

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

1 As published in the Annual Report 2022 for UBS Group AG prior to the acquisition of the Credit Suisse Group.

Special auditors for potential capital increases

At the AGM on 8 April 2021, 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.

Services performed and 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 above. In addition, EY received USD 31m in 2023 (USD 35m in 2022) for services performed on

behalf of our investment funds, many of which have independent fund boards or trustees.

Audit work includes all services necessary to perform the audit for the Group 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 2023 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.

Group Internal Audit

GIA performs the internal auditing role for the Group. 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. In 2023, after the acquisition of the Credit Suisse Group, GIA operated with an average headcount of 1,009 full-

time equivalent employees, including Credit Suisse employees.

Annual Report 2023 | Corporate governance and compensation | Corporate governance 220

GIA supports the BoD in discharging its governance responsibilities by taking a dynamic approach to audit, issue assurance

and risk assessment, drawing attention to key risks in order to drive action to prevent unexpected loss or damage to the

firm’s reputation. To support the achievement of UBS’s objectives, GIA independently, objectively and systematically

assesses the:

(i) soundness of the Group’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 the Group’s constitutional

documents and contracts.

Audit reports that include significant issues are provided to the Group CEO, relevant GEB 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, GIA 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. GIA also cooperates

closely with risk control functions and internal and external legal advisors on investigations into major control issues.

To ensure GIA’s independence from management, the Head GIA reports to the Chairman of the BoD and to the Audit

Committee, which assesses annually whether GIA has sufficient resources to perform its function, as well as its

independence and performance. In the Audit Committee’s assessment, GIA is sufficiently resourced to fulfill its mandate

and complete its auditing objectives. GIA’s role, position, responsibilities and accountability are set out in our Organization

Regulations and the Charter for GIA, available at ubs.com/governance. GIA 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. GIA also conducts special audits at the request of the Audit Committee, or other BoD members,

committees or the Group CEO in consultation with the Audit Committee.

GIA enhances the efficiency of its work through coordination and close cooperation with the external auditors.

Information policy

We provide regular information to our shareholders and to the wider financial community.

Financial reports for UBS Group AG are expected to be published on the following dates:

First quarter 2024

7 May 2024

Second quarter 2024

31 July 2024

Third quarter 2024

30 October 2024

The annual general meetings of the shareholders of UBS Group AG will take place on the following dates:

2024

24 April 2024

2025

11 April 2025

› Refer to the corporate calendar available at

ubs.com/investors

for the dates of the publication of financial reports and other key

dates, including the dates of the publication of UBS AG’s financial reports

We meet with institutional investors worldwide throughout the year and regularly hold results presentations, attend and

present at investor conferences, and, from time to time, host investor days. When appropriate, investor meetings are

hosted by senior management and are attended by members of our Investor Relations team. We use various technologies,

such as webcasting, audio links and cross-location videoconferencing, to widen our audience and maintain contact with

shareholders globally.

Annual Report 2023 | Corporate governance and compensation | Corporate governance 221

We make our publications available to all shareholders simultaneously to provide them with equal access to our financial

information.

Our annual and quarterly publications are available in a fully digital and .pdf format at ubs.com/investors, under “Financial

information.” We no longer provide printed copies of our Annual Report and our Compensation Report in any language.

› Refer to

ubs.com/investors

for a complete set of published reporting documents and a selection of senior management industry

conference presentations

› Refer to the “Information sources” section of this report for more information

› Refer to “Corporate information” and “Contacts” of this report for more information

Financial disclosure principles

We fully support transparency and consistent and informative disclosure. We aim to communicate our strategy and results

in a manner that enables stakeholders to gain a good understanding of how our Group operates, what our growth

prospects are, and the risks that our businesses and our strategy entail. We assess feedback from analysts and investors

on a regular basis and, where appropriate, reflect this in our disclosures. To continue achieving these goals, we apply the

following principles in our financial reporting and disclosure:

– transparency that enhances the understanding of economic drivers and builds trust and credibility;

– consistency within each reporting period and between reporting periods;

– simplicity that allows readers to gain a good understanding of the performance of our businesses;

– relevance, by focusing not only on what is required by regulation or statute but also on what is relevant to our

stakeholders; and

– best practice that leads to improved standards.

We regard the continuous improvement of our disclosures as an ongoing commitment.

Financial reporting policies

We report our Group’s results for each financial 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.

Each quarter, we publish quarterly financial reports for UBS Group AG, on the same day as the earnings releases.

The consolidated financial statements of UBS Group AG and UBS AG are prepared in accordance with International

Financial Reporting 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

We are committed to maintaining the transparency of our reported results and allowing analysts and investors to make

meaningful comparisons with prior periods. If there is a major reorganization of our business divisions or if changes to

accounting standards or interpretations lead to a material change in the Group’s reported results, our results are restated

for previous periods as required by applicable accounting standards. These restatements show how our results would

have been reported on the new basis and provide clear explanations of all relevant changes.

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 and Chief Accounting Officer. Based on that evaluation, the Group CEO and

the Group CFO concluded that our disclosure controls and procedures were effective as of 31 December 2023. 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. Management has excluded Credit Suisse, which UBS acquired in

2023, from the scope of its assessment of internal control over financial reporting, as permitted by SEC guidance for

acquired businesses.

› Refer to the “Consolidated financial statements” section of this report for more information

Advisory vote | Corporate governance and compensation | Compensation 222

Compensation

Table of contents

223

Compensation

227

2023 key compensation themes

231

Say-on-pay

233

Compensation philosophy and governance

240

Compensation for GEB members

248

Group compensation

255

Compensation for the Board of Directors

258

Supplemental information

Advisory vote | Corporate governance and compensation | Compensation 223

Compensation

Julie G. Richardson

Chairperson of the

Compensation Committee

of the Board of Directors

Dear Shareholders,

The Board of Directors (the BoD) and I wish to thank you for your support once again at last year’s Annual General

Meeting (the AGM) and for sharing your views on our compensation practices over the past year.

Throughout 2023, the BoD Compensation Committee continued to oversee the compensation process, aiming to ensure

that reward reflects performance, risk-taking is appropriate and employees’ interests are aligned with those of our

stakeholders. As the Chairperson of the Compensation Committee, I am pleased to present our Compensation Report

for 2023.

A cornerstone year in terms of integrating Credit Suisse while achieving underlying profitability

2023 was one of the most defining years in the firm’s long history with the acquisition of the Credit Suisse Group. Our

accomplishments and achievements in 2023 were extensive. Our strategy, focused on delivering outstanding client

services, sustainable profitability, financial strength and sound risk management, supported the successful navigation

through a period of significant change and uncertainty. The acquisition of the Credit Suisse Group further expands our

market leading client franchise and creates significant value for our shareholders.

– We were called on to acquire the Credit Suisse Group and have subsequently stabilized their client franchise, risk

management and operations. We have further grown our combined franchise through new client acquisition and

share-of-wallet gains, as well as the continued success of our client retention and client win-back strategy. Clients

have entrusted us with USD 77bn of net new assets since the closing of the acquisition and have relied on our advice

in a challenging geopolitical environment. We have made significant progress with the integration, strengthening our

position as a leading global wealth manager, including completing the acquisition within three months, making key

management appointments and taking steps toward an integrated and unified bank.

– While focused on the intense work of integrating Credit Suisse, we achieved underlying profitability at Group level

despite the challenging macroeconomic environment marked by global concerns about interest rates and economic

growth. We stayed close to our clients, helping them to navigate uncertainties and maintaining their trust in our

products and offerings.

– We have formulated our strategy and integration goals for the next three years and indicated what an even stronger

UBS can sustainably deliver in the long term. While there is much to be done, we have set out the course to successfully

deliver on our integration plans and have assembled the resources and talent to make that happen.

We are optimistic about our future as we build an even stronger version of the UBS that was called upon to stabilize the

Swiss financial system in March 2023 and one that all of our key stakeholders can be proud of.

› Refer to the “Acquisition and integration of Credit Suisse” section of this report for further details about our integration efforts

Executing an integrated one firm approach to performance, promotion and compensation

– We executed an integrated year-end process with all employees subject to one unified system leveraging the long-

standing UBS approach to performance, promotion and compensation. This is a significant milestone for our

combined firm, and is aimed at accelerating our cultural journey.

– In terms of aligning the cultures of the two firms, our performance management approach – with its focus on

impact and outcomes, consideration of both objectives and behaviors (reflecting both the what and the how),

emphasis on sustainable high performance, and the resulting link to compensation decisions – is paramount to

employees understanding what matters most and working together to deliver the firm’s strategic and integration

objectives.

– In line with our existing commitment to fair pay and diversity, equity and inclusion, we took great care to support

fairness and equity across the organization, with a focus on like-for-like outcomes for comparable roles and

performance across the Group.

– In light of the ongoing integration of Credit Suisse, we also considered the complexity of the transaction, as well

as the need to retain key talent, support pay fairness across the entire organization and stabilize the franchise

during the integration period via our compensation decisions. While many of the synergies of the transaction relate

to rightsizing the overall headcount of the company, the upside potential of the transaction will not be realized if

we cannot also retain the right talent throughout the organization during the transition and thereafter.

Advisory vote | Corporate governance and compensation | Compensation 224

Key acquisition-related accomplishments

In 2023, we made tremendous progress with the integration of Credit Suisse. Following the announcement of the

acquisition of the Credit Suisse Group, we focused on stabilizing the client franchise, managing risks and bringing

operational stability to Credit Suisse. Key accomplishments include the following.

– Closing the transaction in three months.

– Delivering an early repayment of the Public Liquidity Backstop and Emergency Liquidity Assistance Plus and returning

the Loss Protection Agreement.

– Achieving around USD 4bn in exit rate gross cost savings (compared with full year 2022 for combined UBS and Credit

Suisse), as we restructured our operations and continued to optimize our cost base by leveraging synergies between

the combined entities.

– Accelerating the wind-down of Non-core and Legacy by reducing risk-weighted assets by USD 12bn since finalizing its

perimeter in the second quarter of 2023, releasing over USD 1.5bn of common equity tier 1 (CET1) capital.

– Re-composing and augmenting the Group Executive Board (the GEB) to successfully support the integration.

Financial Performance

Our performance in 2023 reflected the costs from the integration of Credit Suisse, the challenging operating conditions

for the financial industry, and the uncertainty and market volatility resulting from continued geopolitical tensions. On a

consolidated basis, reported profit before tax was USD 28,739m, including USD 27,748m of negative goodwill related

to the acquisition, as well as integration-related expenses of USD 4,478m, and negative goodwill related pull to par

accretion and other purchase price allocation effects. On an underlying basis, pre-tax profit for the combined businesses

was USD 3,963m.

› Refer to the “Financial and operating performance” section of this report for further details about the Group and business

division performance

81.1

108.3

34%

GEB performance award poolGroup performance award pool

Pro t before tax Return on CET1 capital Cost / income ratio

CHF m

Per capita GEB performance award pool

CHF mUSD bn

USD bn in % in %

2022

UBS

pool

2022

CS³

2022 pro

forma

UBS / CS

pools

2023

Group

pool

2022 2023 2022 2023

6.6

6.2

5.3

3.3

0.9

1.1

4.5

(14%) (6%)

1 UBS underlying results exclude items of proﬁ t or loss that management believes are not representative of the underlying performance. 2 Includes

UBS AG and its consolidated subsidiaries. For context, the UBS AG consolidated results are on a reported basis and therefore include integration-related

expenses of USD 1,392m. 3 Includes Credit Suisse variable incentive compensation pool of USD 1.1bn (CHF 1.0bn) as well as other variable compensation

awards of total USD 944m (CHF 899m, including retentions (CHF 367m), transformation awards (CHF 350m), attrition-related retentions (shares / cash

CHF 68m) and supplemental cash allowance awards (CHF 114m)). Source: Credit Suisse Group Compensation Report 2022. Swiss franc amounts have

been translated into US dollars at the currency exchange rate reported in the UBS Group fourth quarter 2022 report of CHF / USD 1.05.

2022

72.1

87.2

95.0

86.2

2023

UBS AG

cons.

reported²

2023

Group

reported

2023

Group

under -

lying¹

22.9ppts

15.1ppts

2022

17.0

4.2

42.3

7.6

2023

UBS AG

cons.

reported²

2023

Group

reported

2023

Group

under -

lying¹

25.3ppts

(12.8ppts)

2022

9.6

4.0

28.7

4.5

2023

UBS AG

cons.

reported²

2023

Group

reported

2023

Group

under -

lying¹

199%

(59%)

Advisory vote | Corporate governance and compensation | Compensation 225

Commitment to return capital to shareholders

Capital strength is a key pillar of our strategy, and we remain committed to maintaining a balance sheet for all seasons.

The year-end CET1 capital ratio was 14.4%, and the CET1 leverage ratio was 4.6%, both in excess of our guidance of

~14% and >4.0%, respectively. For 2023, the Board of Directors plans to propose a dividend to UBS Group AG

shareholders of USD 0.70 per share. We remain committed to progressive dividends and are accruing for a mid-teen

percentage increase in the dividend per share for the 2024 financial year.

In 2023, we bought back USD 1.3bn of shares before we announced the acquisition, at which point we paused our share

repurchases. In 2024, we expect to repurchase up to USD 1bn of shares, commencing after the merger of the UBS AG

and Credit Suisse AG legal entities, which is expected before the end of the second quarter of the year. Our ambition is

for share repurchases to exceed our pre-acquisition levels by 2026.

2023 Group performance award pool

Over the past years, our performance award pool has consistently reflected our pay-for-performance philosophy and our

disciplined approach in managing compensation over business cycles and in alignment to shareholder interests.

Accordingly, we carefully assessed the financial results and excluded both the positive and negative one-time financial

impacts of the acquisition of the Credit Suisse Group.

The table below provides more information on the key factors we considered for the UBS sub-group and the Credit Suisse

sub-group when determining the performance award pool. Overall, it was important to balance like-for-like pay

outcomes for comparable roles and performance to support the long-term value creation of the integrated franchise.

2023 Group performance award pool development

UBS sub-group

– Reflects our usual pay-for-performance approach beginning with the financial results for the UBS sub-group.

– In addition to financial business performance, we regularly consider individual business-related measures, risk and remediation

activities as well as competitive market considerations.

Credit Suisse

sub-group

– Given the extraordinary circumstances, we were not able to apply our usual process to determine the Credit Suisse pool. We

considered other factors, such as the need to retain key talent to support realization of the value of our investment, support pay

fairness across the entire organization and stabilize the franchise during the integration period.

– We also considered that 2022 compensation for the Credit Suisse Group reflected a significantly reduced variable compensation

pool compared with 2021 awards including other variable compensation.

We further balanced our performance award pool decisions with specific retention awards delivered in both deferred

cash and deferred equity. As in most merger situations, these retention awards were a necessary step to support the

protection of the client franchise, risk management and operational stability. Furthermore, to support our client win-back

strategy and promote client growth, we also introduced a client-acquisition and retention award for certain producers,

which is fully deferred and the final value is linked to the retention of client assets. Retention efforts were targeted and

limited to certain client roles and critical roles necessary to support operational stability. Overall, the amounts of

USD 736m are modest by industry standards for an integration of this magnitude. These awards account for 3% of our

total personnel expenses recognized in 2023.

The UBS compensation framework and approach provides competitive pay for performance, further supporting

operational stability going forward. Our decisions continue to reflect our diligent approach to considering a balanced

allocation of profit between shareholders and employees over the cycle, as well as supporting strong capital returns,

including reflecting the appropriate risk awareness in our business decisions.

Based on the factors above, the 2023 group performance award pool was USD 4.5bn, a reduction of 14% compared

with the pro forma aggregate 2022 pool of USD 5.3bn for the combined entities (which includes the UBS performance

award pool, the Credit Suisse variable incentive compensation pool and other variable compensation awards related to

the 2022 performance year).

The GEB pool overall increased by 34% to CHF 108m, which reflected the changes in GEB composition to support the

merger, including the addition of four GEB members. The GEB per capita performance award decreased by 6% compared

with the previous year.

Separately, we are also grateful for certain members of the BoD who took on additional board roles in significant

subsidiary entities. These nominations were critical to providing strong governance and oversight of the newly acquired

subsidiaries, particularly prior to the merger of these legal entities with their UBS counterparts. This approach ensures

parent company board representation that otherwise would not have existed and promotes governance in line with UBS

Group AG’s governance principles.

Advisory vote | Corporate governance and compensation | Compensation 226

Continuity of our overall compensation framework

Following a comprehensive annual review, we confirmed that our Total Reward Principles and overall compensation

framework continue to be aligned with our purpose and remain relevant to the Group’s commitment to delivering long-

term shareholder value. It is imperative that our pay approach equally recognizes and supports the economic and cultural

integration of Credit Suisse to create long-term value for the combined firm.

Overall, the compensation framework for all employees, including the GEB, remains broadly unchanged. With respect to

the equity component of our deferred compensation plan, we have historically granted the GEB equity with performance

conditions and a payout that varies depending on the performance of the company (the Long-Term Incentive Plan (LTIP)),

while other employees have received shares with time vest requirements only (the Equity Ownership Plan (EOP)). During

the integration period, we have expanded the group that will receive LTIP (in replacement of EOP) to include Managing

Directors (MDs) reporting to the GEB and their direct reports at MD level. This will further align the long-term focus of a

broader group of senior leaders with shareholders while supporting appropriate risk taking and awareness.

Going forward, we will continue to monitor market practice and regulatory developments and, as part of our annual

review, make any modifications required to ensure our Total Reward Principles and compensation framework remain

aligned with the interests of our shareholders.

The 2024 Annual General Meeting

At the 2024 AGM on 24 April, we will seek your support on the following compensation-related items:

– the maximum aggregate amount of compensation for the BoD for the period from the 2024 AGM to the 2025 AGM;

– the retroactive incremental amount of compensation for the BoD for the period from the 2023 AGM to 2024 AGM

– the maximum aggregate amount of fixed compensation for the GEB for 2025;

– the aggregate amount of variable compensation for the GEB for 2023; and

– shareholder endorsement in an advisory vote for this Compensation Report.

On behalf of the Compensation Committee and the BoD, I thank you again for your feedback and we respectfully ask

for your continued support at the upcoming AGM.

Julie G. Richardson

Chairperson of the Compensation Committee of the

Board of Directors

Advisory vote | Corporate governance and compensation | Compensation 227

2023 key compensation themes

The feedback that we seek from our shareholders about compensation-related topics is very important to us, as we are

committed to maintaining a strong link between the interests of our employees and those of our shareholders. We

continued engaging with shareholders during 2023 and received overall positive feedback about our

compensation framework. The below summarizes key compensation themes for 2023 and provides answers to the

questions we most frequently receive from shareholders.

Summary of 2023 key compensation themes / responses to frequently asked questions

How did the failure of the Credit Suisse Group impact deferred compensation of Credit Suisse Group

employees?

On 19 March 2023, we announced the acquisition of the Credit Suisse Group. Until that date, the value of the

outstanding deferred compensation of Credit Suisse Group employees had already been negatively impacted by the

significant decline in the price of Credit Suisse Group shares.

Furthermore, on 23 May 2023, the Federal Department of Finance (the FDF) issued an order canceling or reducing the

outstanding unvested variable remuneration for the top levels of management of the Credit Suisse Group. In addition,

the Swiss Financial Market Supervisory Authority (FINMA) ordered the cancellation of outstanding contingent capital

awards (CCA) in line with the write-down of Credit Suisse additional tier 1 (AT1) debt.

The following charts provide an overview of the total change in the value of Credit Suisse deferred compensation awards

in accordance with share price movements and the FDF- and FINMA-canceled amounts.

– Approximately CHF 2.8bn (a decrease of 75% compared with the initial grant value) of deferred compensation was

lost by Credit Suisse Group employees. After the cancellations, CHF 947m remained outstanding, including awards

that continued to be at risk, subject to the achievement of performance conditions, and subject to malus or clawback

provisions.

– Of the CHF 2.8bn mentioned above, approximately CHF 1.4bn (a decrease of 94% compared with the initial grant

value) of deferred compensation was lost by Credit Suisse Group employees impacted by the FDF- and FINMA-related

cancellations, leaving a remaining value of CHF 87m (including awards that continued to be at risk as described above).

Overall, these reductions of CHF 2.8bn in the value of deferred compensation demonstrate the impact of negative

business developments, risk events and share price movements.

Change in the value of Credit Suisse Group deferred compensation awards

All awards of former Credit Suisse Group employees

CHF m

Awards in scope of FDF- and FINMA-related cancellations

CHF m

Value of deferred

compensation

awards at grant price

Value of deferred

compensation

awards at grant price

Change in value due to

share price movements¹

Change in value due to

share price movements¹

FDF-canceled amounts¹

FINMA-canceled

CCA amounts²

FINMA-canceled

CCA amounts²

Remaining amount of

deferred

compensation awards

Remaining amount of

deferred

compensation awards

3,735

1,497

2,372

993

−75%

−94%

356

947

Notes:

Unless otherwise stated, all data are based on awards outstanding per 18 May 2023.

1 Based on the 19th March 2023 merger offer share price of CHF 0.76. 2 Value of CCA write-down amounts are based on CCA valuation as at 28 February

2023. 3 Includes awards that continued to be at risk, subject to the achievement of performance conditions, and subject to malus or clawback provisions.

Advisory vote | Corporate governance and compensation | Compensation 228

What is the impact of the Federal Department of Finance order on UBS?

On 11 August 2023, UBS voluntarily terminated the CHF 9bn loss protection agreement (the LPA) and the public liquidity

backstop (the PLB) with the Swiss National Bank of up to CHF 100bn, guaranteed by the Swiss government. After

reviewing all assets covered by the LPA since the closing of the transaction involving the acquisition of the Credit Suisse

Group in June 2023 and taking the appropriate fair value adjustments, UBS concluded that the LPA was no longer

required.

All loans under the PLB were fully repaid by the Credit Suisse Group as of the end of May 2023 and Credit Suisse AG

fully repaid outstanding Emergency Liquidity Assistance Plus loans on 10 August 2023.

Due to the termination of the LPA and release of the guarantee, the implementation of the UBS-related FDF order was

no longer required. Nevertheless, our analysis had confirmed that the key aspects related to the remuneration system

requirements under the FDF order were already embedded in our Total Reward Principles and compensation framework.

This relates in particular to consideration of both financial and non-financial performance, including risk considerations.

Why is UBS seeking retroactive approval for an incremental Board of Directors compensation amount of

CHF 2.2m?

As a result of the integration of Credit Suisse, in 2023 we expanded the roles of certain members of the Board of Directors

of UBS Group AG (the BoD) to take on additional responsibilities in the boards of directors of significant subsidiary

entities. These nominations were and remain critical to providing strong governance and oversight of the subsidiaries, in

a manner consistent and in compliance with UBS Group AG’s governance principles, as well as to facilitating the

integration of Credit Suisse entities into UBS. As the integration progresses, we will continue to review the composition

of the boards of directors of significant entities. Without these appointments, UBS would not have had parent company

board representation on these significant subsidiary entities and would have had difficulty maintaining legally required

independent roles across all entities.

– Lukas Gähwiler was appointed as chairman of Credit Suisse AG.

– Jeremy Anderson was nominated as vice chairman of Credit Suisse AG and chair of the audit committee of Credit

Suisse AG and, in addition, appointed as a member of the board of directors of Credit Suisse International (UK).

– Mark Hughes was appointed as a member of the board of directors of Credit Suisse AG, a member of the risk

committee of Credit Suisse AG and, effective 1 December 2023, chair of the risk committee of that board. In addition,

Mr. Hughes was appointed as a member of the board of directors of UBS Americas Holding LLC.

Considering the significant increase in the scope, responsibility and complexity of their mandate, these three BoD

members will be entitled to receive additional board fees aligned with other non-executive directors on the respective

subsidiary entity boards.

Neither the acquisition of the Credit Suisse Group nor the appointments to subsidiary board roles were anticipated when

the maximum amount for BoD fees of CHF 13m was submitted at the 2023 Annual General Meeting (the AGM). As a

result, while the spend for the BoD of UBS Group AG is within the approved amount, at the 2024 AGM we will request

that the shareholders approve a retroactive incremental amount of CHF 2.2m for the period from the 2023 AGM to the

2024 AGM to support the additional subsidiary board fees amount that exceeds the original approval at the 2023 AGM.

The payment of these subsidiary board fees is therefore subject to shareholder approval.

As a reminder, shareholders of UBS Group AG and Credit Suisse Group AG had approved at their respective 2023 AGM

an aggregate amount for board of director compensation of combined total CHF 26m. The estimated total BoD spend

in the period from the 2023 AGM to the 2024 AGM is CHF 18.1m, of which CHF 15.2m for the Board of Directors of

UBS Group AG (as shown in the chart below) and the remaining amount for the board of directors of Credit Suisse Group

AG (pre-merger close) and Credit Suisse AG (post-merger close). As a result, the overall BoD spend is CHF 7.9m lower

compared with the combined approved aggregate amount.

Approved UBS Group AG BoD compensation and spend for the period from the 2023 AGM to the 2024 AGM

CHF m

Spend for UBS

Group AG BoD fees

Planned spend for signiﬁcant

subsidiary entity board fees

of UBS Group AG members

Total spend Approved / proposed

amounts

Proposed retroactive

incremental amount

at 2024 AGM

Approved amount at

2023 AGM¹

2.7

2.2

15.2

13.0

15.2

12.5

Does not include the amount of CHF 13m for Credit Suisse Group AG BoD fees approved at Credit Suisse AGM 2023.

Advisory vote | Corporate governance and compensation | Compensation 229

How did UBS adjust reported financial results to calculate the Group and GEB performance award pools as

well as the LTIP 2020/21 valuation?

The Compensation Committee determined to use UBS sub-group results as the starting point but made adjustments to

exclude both the positive and negative one-time financial impacts of the acquisition of the Credit Suisse Group. The specific

adjustments include the impact of gains on the transaction, which means the negative goodwill, or gain, of USD 27.7bn

had no impact on the Group and GEB performance award pools or the 2020 LTIP achievement level. Other adjustments

relate to factors such as integration- and acquisition-related costs, increased CET1 capital requirements, and the exclusion

of certain unplanned one-off items that would otherwise not have occurred, including higher litigation costs. These

cumulative negative adjustments from reported results reflect the rigorous internal review as well as the judgment of the

Compensation Committee. We have applied these adjustments in our considerations of pay and performance across the

Group, including for the GEB, and, as a net result, the achievement level of the 2020/21 LTIP is below the maximum of

100%.

What is the impact of the integration on outstanding deferred compensation plans across both entities?

After the acquisition, the outstanding deferred compensation of both UBS and Credit Suisse employees generally

continues to vest according to the original plan delivery schedule and subject to applicable performance conditions.

UBS conducted a detailed review of Credit Suisse’s deferred compensation plans and aligned the performance metrics to

those of UBS deferred compensation plans where applicable. Furthermore, where applicable, share-based plans of Credit

Suisse were converted reflecting the merger conversion rate, to align with the Credit Suisse shareholder experience.

This approach underlines our philosophy to align the interests of employees with those of shareholders. Furthermore, it

demonstrates a consistent treatment of employees with outstanding deferred compensation awards and ultimately

supports operational stability and the economic and cultural integration of Credit Suisse.

What retention activities have supported the integration of Credit Suisse into UBS?

Performance management and reward play an important part in supporting the economic and cultural integration of

Credit Suisse into UBS. We have therefore reviewed our Total Reward Principles and confirmed that they remain fully

aligned with our purpose and support our strategic objectives. In the short-to-medium term, they also enable UBS to

drive the economic and cultural integration of Credit Suisse and the long-term value creation of the combined firm.

Furthermore, we have swiftly implemented an integrated performance and reward year-end process for the combined

firm, which supports our sustainable high performance culture and reflects our well-established approach to pay for

performance. The compensation decisions for all employees were governed by the same Total Reward Principles. This

integrated approach supported a one-firm employee experience and our emphasis on like-for-like outcomes for

comparable performance and roles.

To support operational stability, manage risks and protect the client franchise, we have deployed specific additional

measures. Retention awards were delivered in both deferred cash and deferred equity awards. Furthermore, to support

our client win-back strategy and promote client growth, we also introduced a client acquisition and retention award for

certain producers, which is fully deferred and the final value is linked to the retention of client assets. Retention efforts

were targeted and limited to certain client roles and critical roles necessary to support operational stability. Overall, the

amounts of USD 736m are modest by industry standards for an integration of this magnitude. These retention awards

account for 3% of our total personnel expenses recognized in 2023.

In addition, we provided indications of 2023 incentive levels to a number of Credit Suisse employees, primarily in client-

facing roles, to emphasize that their compensation going forward would reflect appropriate levels of pay for performance.

The UBS compensation framework and approach provides competitive pay for performance, further supporting stability

going forward. Beyond financial compensation-related measures, our merger-related activities included non-financial

aspects, such as a broad-based communication approach with Credit Suisse employees.

How did UBS support employees during the integration process?

Supporting employee health and well-being remained a priority in 2023. Resources to support holistic well-being included

a range of programs, benefits and workplace resources, along with a bespoke eLearning curriculum that aimed to help

our employees manage their health, foster well-being, strengthen their resilience and support the sustainability of the

organization. In the context of the integration of Credit Suisse, we expanded our offering to include guidelines and

instructor-led sessions on managing organizational change, uncertainty and resilience.

In 2023, we announced that existing social plans or support during redundancy at UBS and Credit Suisse had been

aligned globally (where applicable) to ensure that all employees were treated equally.

As an example, employees in the Swiss labor market affected by the restructuring are entitled to a program with a key

focus on redeployment within UBS, and we have significantly increased the budget for education and training. Outside

of the Swiss labor market, we provide severance payments that are governed by location-specific severance policies. At

a minimum, we offer severance terms which comply with the applicable local laws. In many locations, we may provide

severance packages negotiated with our local social partners that go beyond these minimum legal requirements or offer

additional time in order to find a new position. In certain locations, we may also offer redeployment support from our

internal recruiters or via external outplacement firms for employees affected by redundancies.

Advisory vote | Corporate governance and compensation | Compensation 230

Did UBS change the compensation framework for 2023?

We are convinced that our compensation framework remains best-in-class for our industry. Therefore, it remained broadly

unchanged for 2023. The compensation approach reflects a substantial deferral into equity- and debt-based vehicles that

support alignment with our shareholders and debtholders. Furthermore, the vesting period over five years remains one

of the longest in the industry, providing for long employment and performance conditions.

For 2023, we will award the equity-aligned portion of compensation as part of the Long-Term Incentive Plan (LTIP, as a

replacement for the EOP) for the GEB and Managing Directors (MDs) reporting to the GEB and their direct reports at MD

level. These senior leaders receive the equity portion of their 2023 performance award in LTIP to support delivering on

our ambitious integration goals and business / financial targets. This further mitigates the need for a distinct integration

award typical for a transaction of this nature.

What has changed in the 2023 LTIP (awarded in 2024)?

We maintain our overall LTIP with the same two equally weighted performance metrics (reported RoCET1 and relative

Total Shareholder Return (rTSR)) over a three-year performance period, while making adjustments to the performance

range of the RoCET1 metric.

For the 2023 LTIP award (granted in 2024), the reported RoCET1 metric reflects the impact of the acquisition and our

ambitious integration objectives, as well as the communicated financial ambitions over the cycle. As a consequence, we

continue to use the reported basis for our RoCET1 metric, as this also considers the underlying business results and

integration costs. For the 2023 performance year, we awarded the LTIP at a value of 50% of the maximum, to further

align the maximum opportunity with the stretching nature of our financial ambitions.

The maximum reported RoCET1 of 10% corresponds with a 100% payout aligned with our stretch target. In contrast,

the minimum reported RoCET1 of 5% corresponds with a 33% payout aligned with sustainable results in the context of

the integration. Below the threshold of 5% reported RoCET1, the award is subject to full forfeiture.

The unchanged rTSR performance range of ±25 percentage points of UBS TSR compared with a peer group index TSR

continues to demonstrate our ambition of delivering attractive relative returns to shareholders. The peer group consists

of all listed Global Systemically Important Banks, which were independently defined by the Financial Stability Board in

2023, and reflects companies with a comparable risk profile and impact on the global economy.

During the integration period, we have expanded the group that will receive LTIP to include Managing Directors (MDs)

reporting to the GEB and their direct reports at MD level. We will continue to review the LTIP design, including the

RoCET1 performance range, in consideration of our integration progress and financial ambitions.

What is the achievement level of the LTIP granted in 2021 for 2020 performance?

The deferred portion of the performance award granted in 2021 (for the 2020 financial performance year) to members

of the GEB and selected senior management was in part delivered through the LTIP award. The three-year performance

period concluded at the end of 2023, with the 2020 LTIP achieving 92.55% of the maximum opportunity (of up to

100%).

As explained above, the Compensation Committee made certain adjustments to the financial results used to determine

the 2020 LTIP achievement level. As noted, if the Compensation Committee had not made these adjustments but had

applied reported UBS Group AG financial results, the achievement level would have been 100%.

We believe alignment of our senior leadership with our shareholders is important for long-term success. Our LTIP is

designed to support alignment of compensation with the execution of our strategy, financial performance and long-term

growth.

Performance

metrics

Overall 2020 LTIP achievement level

RoCET1

(Weight: 50%)

Threshold Threshold

−25ppts

Maximum Maximum

+25ppts

rTSR

(Weight: 50%)

Performance metric outcome 2020 LTIP achievement level

Achievement:

100%

Overall achievement:

92.55%

Outcome:

15.3%

100%

Achievement:

85.1%

Outcome:

+75.36ppts

Outcome

below

threshold:

full forfeiture

Outcome

above

maximum:

achievement

capped at

100%

6% 33%

33% 100%

18%

Performance achievement for the 2020 LTIP awarded in 2021

Advisory vote | Corporate governance and compensation | Compensation 231

Say-on-pay

Say-on-pay votes at the AGM

In line with the Swiss Code of Obligations, we seek binding shareholder approval for the aggregate compensation

awarded to the Group Executive Board (the GEB) and the Board of Directors (the BoD). Prospective approval of the fixed

compensation of the BoD and GEB provides the firm and its governing bodies with the certainty needed to operate

effectively. Retrospective approval of the GEB’s variable compensation aligns their compensation with performance and

contribution.

The table below outlines our compensation proposals, including supporting rationales, that we plan to submit to the

2024 Annual General Meeting (the AGM) for binding votes, in line with the Swiss Code of Obligations and our Articles

of Association.

These binding votes on compensation and the advisory vote on our Compensation Report reflect our commitment to

shareholders having their say on pay.

› Refer to “Provisions of the Articles of Association related to compensation” in the “Supplemental information” section of this

report for more information

Audited |

Approved GEB fixed compensation and BoD compensation

At the 2022 AGM, the shareholders approved a maximum aggregate fixed compensation amount of CHF 33.0m for GEB

members for the 2023 performance year. This budget reflects base salaries, role-based allowances in response to EU

Capital Requirements Directive V, and estimated standard contributions to retirement benefit plans, as well as

other benefits. The aggregate fixed compensation paid in 2023 to GEB members was below the approved amount for

2023.

At the 2023 AGM, the shareholders approved a maximum aggregate amount of compensation of CHF 13.0m for the

members of the BoD for the period from the 2023 AGM to the 2024 AGM. At the 2024 AGM, we will ask shareholders

to exceptionally approve a retroactive incremental amount of CHF 2.2m of BoD compensation for the period from the

2023 AGM to the 2024 AGM as outlined below. 

› Refer to “2023 total compensation for the GEB members” in the “Compensation for GEB members” section of this report

› Refer to “Remuneration details and additional information for BoD members” in the “Compensation for the Board of Directors”

section of this report

Advisory vote | Corporate governance and compensation | Compensation 232

Compensation-related proposals for binding and advisory votes at the 2024 AGM

Item

Approved at the 2023

AGM

BoD proposals for the

2024 AGM

Rationale

GEB variable

compensation

Shareholders approved

CHF 81,100,000 for the

2022 financial year

1,2,3

(vote “for”: 87.1%)

The BoD proposes an

aggregate amount of

variable compensation of

CHF 108,286,300 for the

members of the GEB for

the 2023 financial year.

In 2023, we added four GEB members to successfully support the integration. The

GEB performance award pool takes into account the changes in GEB composition

and reflects the significant progress in the integration, including bringing

operational stability to Credit Suisse after the announcement of the acquisition. It

also reflects that the Group achieved underlying profitability following the closing

of the acquisition and maintained the Group’s strong capital position. On a per

capita basis, the GEB performance award pool decreased by 6%.

GEB fixed

compensation

Shareholders approved

CHF 33,000,000 for the

2024 financial year

1,2,3

(vote “for”: 89.3%)

The BoD proposes a

maximum aggregate

amount of fixed

compensation of

CHF 33,000,000 for the

members of the GEB for

the 2025 financial year.

The proposed amount is unchanged compared with last year despite the increase

in the number of GEB members in 2023. It further reflects unchanged base salaries

for the Group CEO and other GEB members.

Besides the base salaries, the amount also includes estimated standard contributions

to retirement benefit plans, as well as other benefits. The proposed amount provides

flexibility in light of potential changes of GEB composition or roles, competitive

considerations as well as other factors (e.g., changes in FX rates or benefits).

n. a.

The BoD proposes an

incremental amount of

compensation of

CHF 2,200,000 for the

members of the BoD for

the period from the 2023

AGM to the 2024 AGM.

As a result of the integration of Credit Suisse, in 2023 we expanded the roles of

certain members of the Board of Directors of UBS Group AG to take on additional

responsibilities in the boards of directors of significant subsidiary entities. These

nominations are critical to providing strong governance and oversight of the

subsidiaries, in a manner consistent and in compliance with UBS Group AG’s

governance principles, as well as to facilitating the integration of Credit Suisse

entities into UBS.

Neither the acquisition of the Credit Suisse Group nor the appointments to

subsidiary board roles were anticipated when the maximum amount for BoD fees

of CHF 13m was submitted at the 2023 AGM. As a result, while the spend for the

BoD of UBS Group AG is within the approved amount, we propose that

shareholders approve a retroactive incremental amount of CHF 2.2m for the period

from the 2023 AGM to the 2024 AGM to support the additional subsidiary board

fees amount that exceeds the original approval at the 2023 AGM.

As a reminder, shareholders of UBS Group AG and Credit Suisse Group AG had

approved at their respective 2023 AGM an aggregate amount for board of director

compensation of combined total CHF 26m. The estimated total BoD spend in the

period from the 2023 AGM to the 2024 AGM is CHF 18.1m, of which CHF 15.2m

for the Board of Directors of UBS Group AG and the remaining amount for the

board of directors of Credit Suisse Group AG (pre-merger close) and Credit Suisse

AG (post-merger close). As a result, the overall BoD spend is CHF 7.9m lower

compared with the combined approved aggregate amount.

BoD

compensation

Shareholders approved

CHF 13,000,000 for the

period from the 2023

AGM to the 2024

AGM

1,2,4

(vote “for”: 88.0%)

The BoD proposes a

maximum aggregate

amount of compensation

of CHF 16,500,000 for the

members of the BoD for

the period from the 2024

AGM to the 2025 AGM.

The proposed amount reflects all BoD fees, including the total compensation of the

Chairman and the Vice Chairman role, as well as subsidiary fees of certain UBS

Group AG members for their mandates in significant subsidiary entities. The overall

amount is higher compared with the previous period which reflects the fees to

certain BoD members for their continued critical roles in the board of directors of

significant subsidiary entities. It also includes a higher fee for the Chairman to reflect

the significantly increased scope, responsibility and complexity following the

acquisition of Credit Suisse. The fees for other BoD members including the Vice

Chairman remain unchanged.

Advisory vote

on the

Compensation

Report

Shareholders approved the

UBS Group AG

Compensation Report

2022 in an advisory vote

(vote “for”: 85.6%)

The BoD proposes that the

UBS Group AG

Compensation Report

2023 be ratified in an

advisory vote.

Our Total Reward Principles and overall compensation framework continue to be

aligned with our purpose and remain relevant to the Group’s commitment to

delivering long-term shareholder value. It is imperative that our pay approach

equally recognizes and supports the economic and cultural integration of Credit

Suisse to create long-term value for the combined firm. Overall, the compensation

framework for all employees, including the GEB, remains broadly unchanged and

our decisions continue to reflect our diligent approach to considering a balanced

allocation of profit between shareholders and employees over the cycle, as well as

supporting strong capital returns, including reflecting the appropriate risk

awareness in our business decisions.

1 Local currencies are converted into Swiss francs at the 2023 performance award currency exchange rates. 2 Excludes the portion related to the legally required employer’s social security contributions. 3 As stated

in “Group Executive Board” in the “Corporate governance” section of this report, 16 GEB members were in office on 31 December 2023 and twelve GEB members were in office on 31 December 2022. 4 Twelve BoD

members were in office on 31 December 2023 and on 31 December 2022.

Advisory vote | Corporate governance and compensation | Compensation 233

Compensation philosophy and governance

Our compensation philosophy

Total Reward Principles

Our Total Reward Principles provide a strong link to our strategic imperatives and encourage employees to live our strong

and inclusive culture that is grounded in our three keys to success: our Pillars, Principles and Behaviors. These guiding

principles underpin our approach to compensation and define our compensation framework. Following a comprehensive

review in 2023, we concluded that our Total Reward Principles and compensation framework are well aligned with our

purpose and support our strategic imperatives. This aims to ensure that the interests of our employees are aligned with

those of our clients and other stakeholders. In the short-to-medium term, they also enable UBS to drive the economic

and cultural integration of Credit Suisse and the long-term value creation of the combined firm.

Therefore, our compensation approach supports our capital strength and risk management and provides for simplification

and efficiency. It encourages employees to focus on client centricity, connectivity and sustainable impact in everything

we do. Moreover, we reward behaviors that help build and protect the firm’s reputation, specifically Accountability with

integrity, Collaboration and Innovation. Compensation for each employee is based on individual, team, business division

and Group performance, within the context of the markets in which we operate.

Total Reward Principles

Our Total Reward Principles apply to all employees globally but vary in certain locations according to local legal

requirements, regulations and practices. The table below provides a summary of our Total Reward Principles.

Support our purpose and strategy

Our compensation approach supports the firm’s purpose and strategy, fosters engagement among

employees and aligns their long-term interests with those of clients and stakeholders.

Attract, retain and connect a diverse,

talented workforce

We embrace a culture of diversity, equity and inclusiveness. Pay at UBS is fair, reflects equal treatment and

is competitive. In this way, our investment in a connected workforce supports the sustainability of the

organization.

Apply a pay-for-performance approach to

promote development and our ways of

working

The setting of clear objectives, as well as a thorough evaluation of what was achieved and how it was

achieved, combined with effective communication, promotes clarity, accountability and establishes a

strong link between pay and performance. This approach emphasizes our Behaviors, which are

Accountability with integrity, Collaboration and Innovation.

Reinforce sustainable growth and support

long-term value creation

Compensation is appropriately balanced between fixed and variable elements and delivered over an

adequate period to support our growth ambitions and sustainable performance.

Support risk awareness and appropriate

risk-taking

Our compensation structure encourages employees to have a focus on risk management and behave

consistently with the firm’s risk framework and appetite, thereby anticipating and managing risks

effectively to protect our capital and reputation.

Our Total Reward approach

At UBS, we apply a holistic Total Reward approach, generally consisting of fixed compensation (base salary and role-

based allowances, if applicable), performance awards, pension contributions and benefits. Our Total Reward approach is

structured to support sustainable results and growth ambitions.

For employees whose total compensation exceeds certain levels, performance awards are delivered in a combination of

cash, deferred contingent capital awards and deferred share-based awards.

A substantial portion of performance awards is deferred and vests over a five-year period (or longer for certain regulated

employees). This deferral approach supports alignment of employee and investor interests, our capital base and the

creation of sustainable shareholder value.

› Refer to “Compensation elements for all employees” in the “Group compensation” section of this report for more information

Total Reward

Total compensation

Pension

and

beneﬁts

Base

salary / ﬁxed

compensation

Performance award

Deferred Contingent Capital Plan

Deferred share-based awards:

– Long-Term Incentive Plan (GEB members and Managing Directors reporting to the GEB and their direct

reports at Managing Director level (as applicable))

– Equity Ownership Plan (all other employees, as applicable)

Cash

Note: illustrative Shorter-termLonger-term

Advisory vote | Corporate governance and compensation | Compensation 234

Compensation governance

Board of Directors and Compensation Committee

The Board of Directors (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 of Association (the AoA).

As determined in the AoA and the firm’s 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 and to scrutinize executive performance. The Compensation Committee consists of independent BoD

members, who are elected annually by shareholders at the Annual General Meeting (the AGM), and is responsible for

governance and oversight of our compensation process and practices. This includes the alignment between pay and

performance, and ensuring that the compensation framework supports appropriate risk awareness and management, as

well as appropriate risk-taking. In 2023, to additionally support the connection between the Compensation Committee

and the Risk Committee, the Compensation Committee Chairperson was also a member of the Risk Committee.

Annually, and on behalf of the BoD, the Compensation Committee:

– reviews our Total Reward Principles;

– approves key features of the compensation framework and plans for the non-independent BoD members and

members of the Group Executive Board (the GEB);

– reviews performance award funding throughout the year and proposes, upon proposal of the Group CEO, the final

annual Group performance award pool to the BoD for approval;

– upon proposal of the Group CEO, reviews the performance framework for the other GEB members;

– upon proposal of the Group CEO, proposes the performance assessments and the individual total compensation for

the other GEB members for approval by the BoD;

– upon proposal of the Chairman, for the Group CEO, proposes the financial and non-financial performance targets and

objectives, the performance assessment and the total compensation for approval by the BoD;

– approves the total compensation for the Chairman and the non-independent BoD members;

– upon proposal of the Chairman, proposes the remuneration / fee framework for independent BoD members for

approval by the BoD;

– upon proposal of the Chairman and the Group CEO, approves the remuneration / fee frameworks for external

supervisory board members of Significant Group Entities and is informed of remuneration / fee frameworks for external

supervisory board members of Significant Regional Entities;

– proposes to the BoD for approval the annual compensation report and approves other material public disclosures on

UBS compensation matters; and

– proposes to the BoD, for approval by the AGM, the maximum aggregate amounts of BoD compensation and GEB

fixed compensation and the aggregate amount of variable compensation for the GEB.

The Compensation Committee is required to meet at least four times each year. All meetings in 2023 were held in the

presence of the Chairman, the respective Group CEOs and external advisors. In addition, three ad hoc calls took place,

most of which were attended by the Chairman and by external advisors. Individuals, including the Chairman and the

Group CEO, are not permitted to attend a meeting or participate in a discussion on their own performance and

compensation.

After the meetings, the Chairperson of the Compensation Committee reports to the BoD on the Compensation

Committee’s activities and discussions and, if necessary, submits proposals for approval by the full BoD. Compensation

Committee meeting minutes are also sent to all members of the BoD. On 31 December 2023, the members of the

Compensation Committee were Julie G. Richardson (Chairperson), Dieter Wemmer and Jeanette Wong.

› Refer to “Board of Directors” in the “Corporate governance” section of this report for more information

Advisory vote | Corporate governance and compensation | Compensation 235

External advisors

The Compensation Committee may retain external advisors to support it in fulfilling its duties. In 2023, HCM International

Ltd. (HCM) provided independent advice on compensation matters. HCM holds no other mandates with UBS.

Additionally, Willis Towers Watson provided the Compensation Committee with data on market trends and pay levels.

Various subsidiaries of Willis Towers Watson provide similar information to UBS’s human resources department in relation

to compensation for employees, including advisory services and secondments to UBS on benefits and year-end

compensation activities. Willis Towers Watson holds no other compensation-related mandates with UBS.

The Risk Committee’s role in compensation

The Risk Committee, a committee of the BoD, works closely with the Compensation Committee with the goal of ensuring

that our compensation framework appropriately reflects risk awareness and management, and supports appropriate risk-

taking. It supervises and sets appropriate risk management and risk control principles and is regularly briefed on how risk

is factored into the compensation process. It also monitors the involvement of Group Risk Control and Compliance and

Operational Risk in compensation and reviews risk-related aspects of the compensation process.

› Refer to

ubs.com/governance

for more information

Compensation Committee 2023 / 2024 key activities and timeline

April

May

July

Sept

Oct¹

Nov

Dec¹

Jan

Mar

Strategy, policy and governance

Total Reward Principles



Integration-related compensation matters



Sustainability / ESG, pay fairness and diversity, equity & inclusion (DE&I) in the

compensation process



Compensation disclosure and stakeholder communication matters



AGM reward-related items



Compensation Committee governance



Annual compensation review

Accruals and full-year forecast of the performance award pool funding



Performance targets and performance assessment of the Group CEO and GEB members



Group CEO and GEB members’ salaries and individual performance awards



Update on market practice, trends and peer group matters



Pay for performance, including governance on certain higher-paid employees, and formulaic

compensation arrangements



Board of Directors remuneration



Compensation framework

Compensation framework and deferred compensation matters



Risk and regulatory

Risk management in the compensation approach



Joint meeting with the BoD Risk Committee



Regulatory activities impacting employees and engagement with regulators



1 The Compensation Committee held two meetings in October and December 2023.

Compensation governance

The table below provides an overview of compensation governance by specific role.

Recipients

Compensation recommendations proposed by

Approved by

Chairman of the BoD and

Vice Chairman of the BoD

Compensation Committee

Other BoD members

Compensation Committee and Chairman of the BoD

BoD

Group CEO

Compensation Committee and Chairman of the BoD

BoD

Other GEB members

Compensation Committee and Group CEO

BoD

Key Risk Takers (KRTs) /

senior employees

Respective GEB member and functional management

team

Individual compensation for KRTs and senior employees:

Group CEO

1 Aggregate variable compensation and maximum aggregate amount of fixed compensation for the GEB, as well as maximum aggregate remuneration for the BoD, are subject to shareholder approval.

Advisory vote | Corporate governance and compensation | Compensation 236

Environmental, social and governance considerations

Environmental, social and governance objectives in the compensation process

Our compensation determination process considers environmental, social and governance (ESG) objectives in objective

setting, performance award pool funding, performance evaluation and individual compensation decisions.

ESG-related objectives have been embedded in our Pillars and Principles since they were established in 2011. In 2021,

we introduced explicit sustainability objectives in the non-financial goal category of the Group CEO and GEB performance

scorecards. In 2023, we further enhanced the GEB performance scorecard framework by establishing separate

Environmental & Sustainability and People & Governance categories. The objectives in these categories are linked to our

sustainability priorities, and their progress is measured via robust quantitative metrics and qualitative criteria. The table

below provides an overview of our metrics and progress achieved in 2023, including climate-related goals under the

priority “Planet.” Sustainability objectives are assessed for each GEB member on an individual basis, directly impacting

their respective performance assessments and compensation decisions.

The determination of the Group performance award pool funding also takes into account ESG factors. Aside from

financial performance, an assessment of progress is made against objectives linked to our focus areas of Planet, People

(including progress made against our diversity aspirations) and Partnerships, alongside other key non-financial

considerations. Therefore, ESG is taken into consideration when the Compensation Committee assesses performance

and compensation of each GEB member. Additionally, the assessment impacts the overall performance award pool for

the Group.

Going forward, we will continue to review and refine the role of ESG considerations in our performance and

compensation framework, to ensure they remain aligned to our strategic priorities and the sustainable growth of

shareholder value.

› Refer to “GEB performance assessments” in the “Compensation for GEB members” section of this report for more information

about the GEB performance measurement process

› Refer to “Our focus on sustainability and climate,” “Employees” and “Society” in the “How we create value for our stakeholders”

section of this report for more information

› Refer to

ubs.com/gri

for more information about ESG-related topics

Fair and equitable pay

Pay equity and equal opportunity are fundamental to achieving our purpose. The diversity of our employees in terms of

experiences, perspectives and backgrounds is critical to our success. Factors such as gender, race, ethnicity or part-time

status should not impact opportunities available to our employees.

Fair and consistent pay practices are designed to ensure that employees are appropriately rewarded for their contribution.

We pay for performance, and we take pay equity seriously. We have embedded clear commitments in our global

compensation policies and practices. We regularly conduct internal reviews and independent external audits on pay

equity, and our statistical analyses show a differential between men and women in similar roles across our major locations

of less than 1%.

In 2020, we completed an equal pay analysis in Switzerland, as required by the Swiss Federal Act on Gender Equality.

The results confirmed that we are fully compliant with Swiss equal pay standards. Beginning in 2020, UBS was certified

(through 2023) by the EQUAL-SALARY Foundation for our HR practices, including compensation, in Switzerland, the US,

UK, the Hong Kong SAR and Singapore, covering more than two-thirds of our global employee population. All of our HR

policies are global, and we apply the same standards across all locations. Furthermore, we review our approach and

policies annually to support our continuous improvement. In 2023, we fully integrated former Credit Suisse Group

employees into all of our fair pay practices and continued to monitor and improve our pay equity position in our leading

countries.

We also aim to ensure that all employees are paid at least a living wage. We regularly assess employees’ salaries against

local living wages, using benchmarks defined by the Fair Wage Network. Excluding our US financial advisor staff (as their

compensation is primarily based on a formulaic approach), our analysis in 2023 showed that employees’ salaries were at

or above the respective benchmarks.

Advisory vote | Corporate governance and compensation | Compensation 237

Our aspirations and progress

Following the acquisition of the Credit Suisse Group, our exposure increased accordingly, so we reviewed our aspirations.

Amendments that arose from this review process were considered by the Group Executive Board and the UBS Group

Board of Directors’ Corporate Culture and Responsibility Committee. This table reflects the overall outcomes of this

process with more detailed information provided in the UBS Group Sustainability Report 2023.

Our priorities

Our aspirations or targets

Our progress in 2023

Planet, people,

partnerships

Sustainable investments.

Increased invested assets in sustainable investments in UBS AG to

USD 292.3bn (compared with USD 266bn in 2022).

Following the acquisition of the Credit Suisse Group, we

refined the UBS Group lending sector decarbonization

targets to reflect the activities of the combined

organization and evolving standards and methodologies.

Reduce emissions intensity associated with UBS in-scope

lending by 2030 from 2021 levels for:

– Swiss residential real estate by 45%;

– Swiss commercial real estate by 48%;

– power generation by 60%;

– iron and steel by 27%; and

– cement by 24%.

Reduce absolute financed emissions associated with UBS

in-scope lending by 2030 from 2021 levels for:

– fossil fuels by 70%.

Continue disclosing in-scope ship finance portfolios

according to the Poseidon Principles decarbonization

trajectories with the aim of aligning therewith.

Calculated progress against pathways for revised targets.

Changes in emissions intensity associated with UBS in-scope lending (end

of 2022 vs. 2021 baseline):

– Swiss residential real estate reduced by 6%;

– Swiss commercial real estate increased by 2%;

– power generation reduced by 13%;

– iron and steel reduced by 4%; and

– cement reduced by 1%.

Changes in absolute financed emissions associated with UBS in-scope

lending (end of 2022 vs. 2021 baseline) for:

– fossil fuels reduced by 29%.

In-scope ship finance portfolio remains below the existing International

Maritime Organization (IMO 50) decarbonization trajectory.

Aim, by 2030, to align 20% of UBS AG Asset

Management’s total assets under management (AuM)

with net zero. This pre-acquisition UBS aspiration will be

reassessed in 2024.

Aligned 2.9% of UBS AG Asset Management’s total AuM with net zero.

Minimize our scope 1 and 2 emissions through energy

efficiencies and switching to more sustainable energy

sources. After which, procuring credible carbon removal

credits to neutralize any residual emissions down to zero

by 2025.

Reduced net GHG footprint for scope 1 and 2 emissions by 21% and

energy consumption by 8% (compared with 2022); continued replacing

fossil fuel heating systems and monitored delivery of contracted carbon

removal credits; achieved 96% renewable electricity coverage in line with

RE100 despite challenging market conditions.

Offset historical emissions back to the year 2000 by

sourcing carbon offsets (by year-end 2021) and by

offsetting credit delivery and full retirement in registry (by

year-end 2025). The scope is UBS Group excluding Credit

Suisse.

Continued to follow up on credit delivery and retirement of sourced

portfolio.

Planet

Engage with our greenhouse gas (GHG) key vendors, for

100% of them to declare their emissions and set net

zero-aligned goals by 2026, and reduce their scope 1 and

2 emissions in line with net-zero trajectories by 2035.

We invited the vendors that accounted for 67% of our annual vendor

spend to disclose their environmental performance through CDP’s Supply

Chain Program, with 70% of the invited vendors completing their

disclosures in the CDP platform.

65% of GHG key vendors (defined as those vendors that collectively

account for more than 50% of our estimated vendor GHG emissions)

have declared their emissions on CDP and set net-zero-aligned goals.

By 2025, 30% of worldwide roles at Director level and

above held by women.

Increased to 29.5% (2022: 27.8%) of worldwide roles at Director level

and above held by women.

By 2025, 26% of US roles at Director level and above

held by employees from ethnic minority backgrounds.

Increased to 25.1% (2022: 20.5%) of US roles at Director level and

above held by employees from ethnic minority backgrounds.

By 2025, 26% of UK roles at Director level and above

held by employees from ethnic minority backgrounds.

Increased to 24.3% (2022: 23.4%) of UK roles at Director level and

above held by employees from ethnic minority backgrounds.

By 2025, 4% of UK roles at Director level and above held

by black employees.

Stable at 2.1% (2022: 2.2%).

By 2025, 25% of Americas financial advisor / client

advisor roles held by women (UBS Group excluding Credit

Suisse).

Increased to 16.8% (2022: 16.6%).

By 2025, 18.8% of US financial advisor / client advisor

roles held by employees from racial / ethnic minority

backgrounds (UBS Group excluding Credit Suisse).

Decreased to 12.2% (2022: 12.4%).

People

(aspirations)

Raise USD 1bn in donations to our client philanthropy

foundations and funds and reach 26.5 million

beneficiaries by 2025 (cumulative for 2021–2025).

Achieved a UBS Optimus network of foundations donation volume of

USD 328.0m in 2023, totaling USD 763.9m since 2021 (both figures

include UBS matching contributions).

Reached 7 million beneficiaries in 2023 and 18.5 million beneficiaries

across our social impact activities since 2021.

Advisory vote | Corporate governance and compensation | Compensation 238

Partnerships

Continue to position UBS as a leading facilitator of

discussion, debate and idea generation.

Delivered a variety of insights, including through interviews with subject-

matter experts, individual research reports and comprehensive white

papers, via the UBS Sustainability and Impact Institute, including key

publications The Rise of the Impact Economy and Rethink, rebuild,

reimagine.

Co-organized, with the Institute of International Finance, the second

Wolfsberg Forum for Sustainable Finance.

Drive standards, research and development, and

product development.

Co-led financial-sector-specific working group of the Taskforce on Nature-

related Financial Disclosures (the TNFD) and supported the launch of the

TNFD framework.

Co-chaired the UNEP FI Principles for Responsible Banking Nature working

group that developed initial guidance on nature target setting for financial

institutions.

Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for more information about parts of the value chain within sectors covered by metrics and targets. Metrics are based on gross

Group Sustainability Report 2023, available under “Annual reporting” at ubs.com/investors, for further information. The inherent one-year time lag between the as-of date of our lending exposure and the as-of date

2022 emissions actuals are based on year-end 2022 lending exposure and 2021 emissions data. For asset financing (e.g., real estate, shipping) there is no time lag, and exposure and emissions actuals refer to the

same year. 5 The 20% alignment goal amounted to USD 235bn at the time of pre-acquisition Asset Management’s commitment in 2021. By 2030, the weighted average carbon intensity of funds is to be 50%

below the carbon intensity of the respective 2019 benchmark. 6 Scope 2 emissions are market-based emissions. The remaining scope 1 and 2 emissions may be in excess of the approximately 5–10% residuals

required for net zero (per the definition of a “net-zero target” by the ESRS E1 Climate Change per delegated act, adopted on 31 July 2023), which is our ambition for 2050. In 2024, we will be reviewing our 2025

scope 1 and 2 target for achievability for the combined organization and alignment with latest guidance. 7 In 2024, we may review our targets for GHG key vendors for the combined organization and alignment

with latest guidance. Our GHG key vendors are those vendors that collectively account for more than 50% of our estimated vendor GHG emissions. 8 Figures provided for the UBS Optimus network of foundations

are based on unaudited management accounts and information available as of January 2024. Audited financial statements for UBS Optimus network of foundations entities are produced and available per local

market regulatory guideline.

to UBS. Such updates may result in revisions to our disclosed metrics, our methodologies and related disclosures, which may be substantial, as well as changes to the metrics we disclose.

› Refer to the UBS Group Sustainability Report 2023, available under “Annual reporting“ at

ubs.com/investor

s, for more

information

Build a diverse, equitable and inclusive workplace

Increasing our gender and ethnic diversity is a strategic priority. We want to support and enable more women to build

long and satisfying careers with UBS, and we are committed to increasing the representation of women at senior levels.

Equally, investing in attracting, supporting and advancing our ethnically diverse employees is a key focus for the firm. We

take a multi-pronged approach, examining the process, culture and organization design elements around hiring,

promoting and retaining women and ethnic minority background employees at all levels, and senior management are

accountable for driving change.

Efforts towards progressing our aspirations are considered in the determination of the annual performance award pool

and included in the sustainability objectives under “People and Governance” and “Environmental and Sustainability” for

the GEB, as outlined in the table above.

› Refer to the “People and culture make the difference“ section of the UBS Group AG Sustainability Report 2023, available under

“Annual reporting” at

ubs.com/investors

, for more information about DE&I

Performance award pool funding

Our compensation philosophy focuses on balancing performance with appropriate risk-taking, retaining talented

employees and shareholder returns. Our overall performance award pool funding percentage decreases as financial

performance increases. In years of strong financial performance, this prevents excessive compensation and results in an

increased proportion of profit before performance awards being available for distribution to shareholders or growing the

Group’s capital. In years where performance declines, the performance award pool will generally decrease; however, the

funding percentage may increase.

Advisory vote | Corporate governance and compensation | Compensation 239

Our performance award pool funding framework is based on Group and business division performance, including

achievements against defined performance measures. For the avoidance of doubt, we have excluded the positive and

negative financial impacts generated by the acquisition of the Credit Suisse Group (such as the negative goodwill of

USD 27.7bn) from consideration in our performance award pool determination process. In assessing performance, we also

consider relative performance versus peers, market competitiveness of our pay position, as well as progress against our

strategic and integration objectives, including returns, risk-weighted assets and cost efficiency. The Risk and Compliance

functions support our holistic reflection and consideration of the financial and non-financial impact (including reputation)

of risk matters. We further consider the firm’s risk profile and culture, the extent to which operational risks and audit issues

have been identified and resolved, and the success of risk reduction initiatives including accountability for significant events.

The funding for Group functions is linked to overall Group performance and also reflects factors such as headcount and

workforce location. For each functional area, quantitative and qualitative assessments evaluate service quality, risk

management and financial achievements.

Our decisions regarding the total Group performance award pool also balance consideration of financial performance

with a range of factors, including DE&I and other ESG metrics, the impact of litigation, regulatory costs, the effect of

changes in financial accounting standards, capital returns and relative total shareholder return.

In 2023, in light of the acquisition of the Credit Suisse Group, we have also considered the complexity of the transaction

as well as the need to retain key talent and stabilize the franchise during the integration period. Furthermore, and in line

with our existing commitment to fair pay and diversity, equity and inclusion, we took great care to support fairness and

equity across the organization, with a focus on like-for-like outcomes for comparable roles and performance across the

Group. Overall, this further supports our sustainable high performance culture and reflects our well-established approach

to pay for performance. As the integration progresses, we may consider further adjustments in the future to support

near-term targets and progress toward the completion of the integration.

Before making its final proposal to the BoD, the Compensation Committee considers the Group CEO’s proposals and can

apply a positive or negative adjustment to the performance award pool.

› Refer to “2023 Group performance outcomes” in the “Group compensation” section of this report

› Refer to the “Group performance” section of this report for more information about our results

Performance award funding process – illustrative overview

Business division The starting point for the funding process is the business division ﬁnancial performance, which may be adjusted

for items that are not reective of the underlying business division performance.

Predetermined business division-speciﬁc funding rates are applied to risk-adjusted performance, which excludes

items that are not reective of the underlying business performance.

Each division is assessed based on speciﬁc measures (e.g., net new fee generating assets, return on attributed

equity). In the short-to-medium term, to support the economic and cultural integration of Credit Suisse and the

creation of long-term value of the combined ﬁrm for our shareholders, our decision making also reects the prog-

ress on and the complexity of the transaction, including the need to retain key talent, support pay fairness across

the entire organization, and stabilize the franchise during the integration period.

Decision-making considers the ﬁrm’s risk proﬁle and the extent to which operational risks and audit issues have

been identiﬁed and resolved. Diversity, equity and inclusion and other ESG metrics and the impact of litigation

and regulatory costs are also considered. The Risk and Compliance functions support our holistic reection and

consideration of the ﬁnancial and non-ﬁnancial impact (including reputation) of risk matters.

Performance is assessed relative to our peers, including ﬁnancial performance, returns and relative total

shareholder return.

Market intelligence, based on external advisors, helps assess the competitiveness of our pay levels and

compensation structure. It also provides a prospective view of market trends in terms of absolute compensation

levels, compensation framework and industry practice.

The business division performance award pool determination process, based on quantitative and qualitative

assessments, results in a proposal from the Group CEO (after consultation with the GEB) to the Compensation

Committee for consideration.

nancial performance

Risk-adjusted business

division performance

award pool

Strategic / integration /

business division

measures

Qualitative, risk,

regulatory and

sustainability

assessment

Relative performance

versus peers

Market position

and trends

Recommended business

division performance

award pools

Final Group

performance award

pool

The Compensation Committee considers the proposal in the context of the factors outlined above and veriﬁes that

it is in line with our strategy and our Total Reward Principles to create sustainable shareholder value and support

our growth ambitions. The Committee may alter the proposal of the Group CEO (upward or downward, including

proposing a zero award) before making its ﬁnal proposal to the BoD.

Financial

performance

Business

division

nancial

performance

Risk

adjustment

Risk-adjusted

business

division

performance

award pool

Quantitative and qualitative adjustments

Consultation of

Group CEO with

GEB members

Recommended

business

division

performance

award pools

CompCo / BoD

governance and

decision

Final Group

performance

award pool

Qualitative,

risk, regulatory

and

sustainability

assessment

Strategic /

integration /

business

division

measures

Market

position

and trends

Relative

performance

versus peers

Advisory vote | Corporate governance and compensation | Compensation 240

Compensation for GEB members

GEB compensation framework

In 2023, the Compensation Committee reviewed the GEB compensation framework and concluded that it remains well

suited to support the alignment of compensation with the execution of our strategy, sustainable performance and the

delivery of our integration goals. The chart below illustrates the compensation elements, pay mix and key features for

GEB members. Of the annual performance award, 20% is paid in the form of cash and 80% is deferred over a period of

five years,

with 50% of the annual performance awards granted under the Long-Term Incentive Plan (the LTIP) and 30%

under the Deferred Contingent Capital Plan (the DCCP).

› Refer to “Our deferred compensation plans” in the “Group compensation” section of this report for more information

› Refer to the “Group Compensation” section of this report for more information

› Refer to “Regulated staff” in the “Supplemental information” section of this report for more information

2023 compensation framework for GEB members (illustrative example)

– Notional additional tier 1 (AT1) instruments

– Award vests in year 5 after grant year, subject to a write-down if a viability event

occurs or the CET1 capital ratio falls below 10% (i.e., a trigger event)

– Award is subject to 20% forfeiture for each ﬁnancial year that UBS does not

achieve a Group proﬁt before tax, adjusted for disclosed items generally not

representative of underlying business performance

– Award is subject to employment conditions and harmful acts provisions

Key features

– Notional shares

– Award vests in equal installments in years 3, 4 and 5 after grant year, depending

on the achievement of RoCET1 and rTSR measured over a three-year

performance period

– Award is subject to employment conditions and harmful acts provisions

GEB

30%

DCCP

30%

~17%

LTIP

50%

three-year

performance

period

Cash

20%

Base

salary

year

2023 2024

grant

year

~17%

1 Performance awards to GEB members who are SMF / MRT are subject to additional deferral and vesting requirements.

Advisory vote | Corporate governance and compensation | Compensation 241

Pay-for-performance safeguards for GEB members

Performance

award caps

– Cap on the total GEB performance award pool (2.5% of profit before tax)

– Caps on individual performance awards (for the Group CEO capped at five times the annual fixed compensation rate and at seven times

for the other GEB members). Going forward, the GEB, including the Group CEO, will be subject to a cap of seven times their annual fixed

compensation rate.

– Cap of 20% of performance award in cash

Delivery and

deferral

– 80% of performance awards are at risk of forfeiture

– Long-term deferral over five years (or longer for certain regulated GEB members)

– Alignment with shareholders (through the LTIP) and bondholders (through the DCCP)

– Final payout of equity-based LTIP award (50% of performance award) subject to absolute and relative performance conditions (three-

year performance period)

Contract

terms

– No severance terms

– Notice period between six and twelve months

Other

safeguards

– Share ownership requirements

– No hedging allowed

– GEB variable compensation subject to clawback in line with US regulatory requirements

1 The Compensation Committee may consider adjustments to profit for items that are not reflective of underlying performance including integration items.

Effective 2 October 2023, we have implemented a clawback policy for current and former GEB members based on the

US Securities and Exchange Commission (SEC) requirement for listed companies on US national securities exchanges /

associations. This clawback policy is applied if UBS is required to prepare an accounting restatement of financial

statements due to material non-compliance with financial reporting requirements. In that event, UBS would consider

recovering the amount of variable compensation that exceeds the amount that would have been determined based on

the restated financial statements (the final amount will be determined at the discretion of the Compensation Committee).

GEB share ownership requirements

To align the interests of GEB members with those of our shareholders and to demonstrate personal commitment to the

firm, we require all GEB members including the Group CEO to hold a substantial number of UBS shares. GEB members

must reach their minimum shareholding requirements within five years from their appointment and retain it throughout

their tenure. The total number of UBS shares held by a GEB member consists of any vested or unvested shares, including

privately held shares. At the end of 2023, all GEB members met their share ownership requirements, except for those

appointed within the last three years, who still have time to build up and meet the required share ownership.

As of 31 December 2023, our GEB members held shares with an aggregate value of approximately USD 388m.

Share ownership requirements

Group CEO

min. 1,000,000 shares

Other GEB members

min. 500,000 shares

Must be built up within five years from their appointment and retained throughout

their tenure

GEB base salary and role-based allowance

Each GEB member receives a fixed base salary, which is reviewed annually by the Compensation Committee. The 2023

annual base salary for the Group CEO role was CHF 2.5m and has remained unchanged since 2011. The other GEB

members each received a base salary of CHF 1.5m (or local currency equivalent), also unchanged since 2011.

Regarding the fixed compensation of the former members of the Credit Suisse Executive Board (the ExB), after the

acquisition and considering the change in roles of former ExB members, we have reduced their fixed compensation

following their contractual notice period to align with UBS fixed compensation levels for below Group Executive Board

(GEB) employees. For the former CEO of Credit Suisse Group AG, who became a GEB member after the acquisition, the

fixed compensation was also reduced to align with UBS fixed compensation levels for other GEB members.

Over the course of 2023, two GEB members held a UK Senior Management Function (an SMF) role for one of our UK

entities and one GEB member was identified as a UK-regulated Material Risk Taker (an MRT). In addition to base salary,

a role-based allowance was part of their fixed compensation.

At the Annual General Meeting (the AGM), the shareholders are asked to approve the maximum aggregate amount of

fixed compensation for GEB members for the following financial year.

› Refer to the “Supplemental information” section of this report for more information about MRTs and SMFs

› Refer to the “Say-on-pay” section of this report for more information about the AGM vote on fixed compensation for the GEB

Advisory vote | Corporate governance and compensation | Compensation 242

Caps on the GEB performance award pool

The size of the GEB performance award pool may not exceed 2.5% of the Group’s profit before tax. This limits the overall

GEB compensation based on the firm’s profitability. For 2023, the total GEB performance award pool was CHF 108.3m

and below the 2.5% cap, when applying profit before tax on an adjusted basis to exclude both the positive and negative

one-time financial impacts of the Credit Suisse acquisition (as explained in the 2023 key compensation themes section

of this report). These adjustments from reported results reflect the rigorous internal review as well as the judgment of

the Compensation Committee.

In line with the individual compensation caps on the proportion of fixed pay to variable pay for all GEB members

(introduced in 2013), the Group CEO’s granted performance award (at communicated value) is capped at five times his

annual fixed compensation rate. Granted performance awards (at communicated value) of other GEB members are

capped at seven times their annual fixed compensation rate. For 2023, performance awards (at communicated value)

granted to all GEB members including the Group CEO were, on average, 3.8 times their fixed compensation (in Swiss

franc terms, excluding one-time replacement awards, benefits and contributions to retirement plans). Going forward,

the GEB, including the Group CEO, will be subject to a cap of seven times their annual fixed compensation rate.

› Refer to “Performance award pool funding” in the “Compensation philosophy and governance” section of this report for more

information

GEB employment contracts

GEB members’ employment contracts do not include severance terms and are subject to a notice period of between six

and twelve months. A GEB member leaving UBS before the end of a performance year may be considered for a

performance award. Such awards are subject to approval by the BoD, and ultimately by the shareholders at the AGM.

Benchmarking for GEB members

When recommending performance awards for the Group CEO and the other GEB members, the Compensation

Committee reviews the respective total compensation for each role against a financial industry peer group. The peer

group is selected based on comparability of their size, business mix, geographic presence and the extent to which they

compete with us for talent. The Compensation Committee considers our peers’ strategies, practices and pay levels, as

well as their regulatory environment; it also periodically reviews other firms’ pay levels or practices, including both

financial and non-financial sector peers, as applicable. The total compensation for a GEB member’s specific role considers

the compensation paid by our peers for a comparable role and performance within the context of our organizational

profile. The Compensation Committee periodically reviews and approves the peer group composition.

The table below presents the composition of our peer group as approved by the Compensation Committee for the 2023

performance year.

Bank of America

HSBC

Barclays

JPMorgan Chase

BlackRock

Julius Baer

BNP Paribas

Morgan Stanley

Citigroup

Standard Chartered

Deutsche Bank

State Street

Goldman Sachs

Advisory vote | Corporate governance and compensation | Compensation 243

GEB performance assessments

We assess each GEB member’s performance against a set of Group financial targets, non-financial objectives and

Behaviors. For 2023, we revised the non-financial objectives to increase focus on the integration. Specifically, we updated

and consolidated the categories to focus on delivering integration- and strategy-related initiatives, client centricity, risk

and regulatory, environmental and sustainability, and people- and governance-related objectives. This approach

continues to foster a focus on GEB priorities, including delivering the integration objectives and the success of the Group,

and promotes strong individual accountability.

The Compensation Committee exercises its judgment with respect to the performance achieved relative to the prior year,

our strategic plan and our competitors, and considers the Group CEO’s proposals. The Compensation Committee’s

proposals are subject to approval by the BoD.

The Compensation Committee, and then the full BoD, follows a similar process for the Group CEO, except that the

proposal comes from the Chairman of the BoD.

The compensation for the Group CEO and the other GEB members is governed by a rigorous process under Compensation

Committee and BoD oversight. The chart below shows how compensation for all GEB members is determined.

The Compensation Committee is involved at all stages of the performance and total compensation decision-making

process for the Group CEO and the other GEB members, for review and approval by the BoD.

When determining actual pay levels,

the Compensation Committee

factors in:

–

ﬁnancial performance;

performance assessment;

relative performance versus peers;

and

compensation market benchmarks

and trends.

Final compensation decisions for GEB

members consider the Group CEO’s

proposal (the Group CEO makes no

proposal on his own awards) and

compensation market benchmarks

and trends.

–

Objective setting

Financial targets are based on Group

performance measures.

Non-ﬁnancial objectives are related

to Integration and Strategy, Clients,

Risk and Regulatory, Environmental

and Sustainability and People and

Governance.

Behaviors objectives are related

to the three UBS Behaviors of

Accountability with integrity,

Collaboration and Innovation.

Financial targets weight: 60%

Non-ﬁnancial objectives weight: 30%

Behavior objectives weight: 10%

Together with the BoD Chairman,

proposes performance targets and

objectives for the Group CEO for

approval by the BoD.

Together with the Group CEO,

reviews the performance framework

for the other GEB members.

Performance assessment

Financial results are assessed

quantitatively based on full-year

ﬁnancial results versus predetermined

targets and plan ﬁgures.

Non-ﬁnancial objectives are

assessed predominantly based on

achievements relative to quantitative

key performance indicators.

Behaviors objectives are assessed

qualitatively.

The achievements of non-ﬁnancial

measures and Behaviors are

determined in three performance

categories, outlined on the next page.

The total of all weighted achievement

scores cannot exceed 100%.

Together with the BoD Chairman,

proposes the Group CEO’s

performance assessment for approval

by the BoD.

Together with the Group CEO,

proposes the performance

assessments of the other GEB

members for approval by the BoD.

Proposes to the BoD for approval:

together with the BoD Chairman,

the total compensation for the

Group CEO; and

together with the Group CEO, the

individual total compensation for

the other GEB members.

–

The ﬁnal decision on the aggregate

amount is subject to shareholder

approval.

Decision-making process

Role of the

Compensation Committee

Compensation determination

Overview of the GEB compensation determination process

Advisory vote | Corporate governance and compensation | Compensation 244

Overview of performance assessment measures

We apply a range of quantitative measures to assess GEB member performance against financial and non-financial

objectives, while Behaviors are assessed qualitatively. The table below provides a summary of the main metrics and

measures used for 2023.

Financial measures

(60%)

– Group profit before tax

– Group cost / income ratio

– Group return on CET1 capital

Integration and Strategy

– Progress on Group strategic and integration priorities

– Delivery on division- / function-specific strategic programs and initiatives

Clients

– Foster delivery of the whole firm to our clients

– Promoting collaboration across the combined organization

– Delivery on specific key client initiatives

Risk and Regulatory

– Operating within risk appetite

– Progress on delivering on risk initiatives and regulatory commitments

Environmental and

Sustainability

– Refer to the “Planet” and “Partnership” sections in the ”Our aspirational goals and progress” table in

the ”Environmental, Social and Governance considerations” section of this report

Non-

financial

measures

(30%)

People and Governance

– Progress toward meeting 2025 ambitions for female representation and for ethnic minority

representation (as per ESG disclosure)

– People development, mobility, turnover and succession plan metrics

– Employee listening / sentiment results and feedback on engagement and culture

Accountability with integrity

– Responsible for what they say and do

– Takes ownership and makes things happen

– Steps up and acts when something is not right

Collaboration

– Trusts others and helps them to be successful

– Delivers One UBS, together with their colleagues

– Fosters a diverse, inclusive and equitable work environment

Behaviors

(10%)

Innovation

Qualitative assessment

against expected

Behaviors:

– Challenges perspectives and looks at every opportunity to improve

– Actively seeks and provides feedback

– Learns from every success and failure

Performance assessment categories

The table below presents the three performance categories for the assessment of the performance against non-financial

objectives and Behaviors. The achievement score represents the maximum percentage, and the Compensation

Committee may apply downward adjustments.

Non-financial measures

Needs focus

Good contribution

Excellent contribution

Achievement score: up to 33%

Achievement score: up to 66%

Achievement score: up to 100%

Behaviors

Needs focus

Expected behavior

Exemplary behavior

Achievement score: up to 33%

Achievement score: up to 66%

Achievement score: up to 100%

Advisory vote | Corporate governance and compensation | Compensation 245

2023 performance for the Group CEO

The performance award for the Group CEO is based on the achievement of financial performance targets and non-

financial objectives and Behaviors, as described earlier in this section.

These objectives were set to reflect the strategic priorities determined by the Chairman and the BoD.

› Refer to “GEB compensation framework” in this section of this report for more information

Performance assessment for the Group CEO

Sergio Ermotti joined UBS on 1 April 2023 and took on accountability as Group CEO on 5 April 2023. The Board of Directors

(the BoD) recognizes Mr. Ermotti’s excellent performance in a defining year in UBS’s history and strong progress in delivering

on integration priorities. He was instrumental in quickly stabilizing the client franchise, managing risks, and bringing

operational stability to Credit Suisse after the announcement of the acquisition. He successfully led the closing of the

transaction in three months, the early repayment of the Public Liquidity Backstop and Emergency Liquidity Assistance Plus

and the termination of the Loss Protection Agreement. His vision, drive and ambition for this transaction have resulted in

an ambitious integration plan. Throughout the year, Mr. Ermotti was an extremely effective ambassador internally and

externally for the combined firm and the significant value we can deliver in the future for all our stakeholders.

While the 2023 financial results were impacted by the acquisition of the Credit Suisse Group, we achieved underlying

profitability following the closing of the acquisition and maintained the Group’s strong capital position with both the CET1

capital ratio and the CET1 leverage ratio in excess of our guidance. Our capital strength enabled us to buy back USD 1.3bn

of shares in 2023 and to propose to the shareholders a dividend of USD 0.70 per share, a 27% increase year-on-year.

The BoD also acknowledges that Mr. Ermotti was a role model in promoting client centricity. He personally remained

engaged with clients and focused the organization on serving clients and putting them at the heart of everything we do.

This resulted in strong momentum with our clients as evidenced by positive net new money and net new deposits across

Global Wealth Management and Personal & Corporate Banking since the closing of the acquisition in 2023.

Further, Mr. Ermotti set a clear tone from the top on risk culture and risk management. He demonstrated a strong

oversight on risk remediation items including addressing those resulting from the integration, challenged appropriately

and kept the Group focused on adhering to our well-established risk management and control principles.

Mr. Ermotti swiftly and successfully re-composed the Group Executive Board (the GEB) to effectively manage the

ambitious integration targets. He also took decisive action to stabilize the organization on the people side and to focus

on maintaining operational stability, protecting the client franchise and managing risks. In addition, Mr. Ermotti made it

a priority to drive cultural aspects into the combined organization by personally championing the Three Keys culture

program. He also continued to successfully progress on the Group’s sustainability strategy with its key focus areas Planet

(including net zero commitments), People (including progress on diversity, equity and inclusion ambitions) and

Partnerships.

As explained above, the Compensation Committee made certain adjustments to the financial results used to determine

the Group CEO performance award for 2023. If the Compensation Committee had not made these adjustments but had

applied reported UBS Group AG financial results, i.e., including all acquisition-related effects, the achievement level for

the Group PBT and RoCET1 performance measures would have been 100% and the weighted assessment score across

all financial performance measures would have been higher. This would not have been representative of the achievements

versus the targets defined for the 2023 performance year prior to the acquisition.

The table below illustrates the assessment criteria used to evaluate the achievements of Mr. Ermotti in 2023.

Financial performance

2023 Results

Weight

Performance

measures

UBS Group

(underlying)

UBS AG

consolidated

(reported)

Achieve-

ment

Weighted

assess-

ment

2023 commentary

20%

Group PBT

USD 4.0bn

USD 4.5bn

79%

16%

– Profit before tax declined and was below target as higher

operating expenses more than offset higher revenues,

primarily due to the operating loss incurred by Credit Suisse

entities.

20%

Group C/I ratio

87.2%

86.2%

92%

18%

– The cost / income ratio increased and was below its

performance target as higher operating expenses was only

partly offset by an increase in total revenues.

20%

RoCET1

4.2%

7.6%

78%

16%

– RoCET1 declined and was below its performance target,

reflecting lower net profit due to operating loss incurred by

Credit Suisse entities and higher average CET1 capital.

1 Achievement score capped at 100% and based on UBS sub-group (reported) results adjusted for integration-related effects (as explained above). 2 For the assessment of the cost / income ratio, the

percentage change of result versus plan is subtracted from the maximum achievement level (100%).

Advisory vote | Corporate governance and compensation | Compensation 246

Performance assessment for the Group CEO (continued)

Non-financial performance and Behaviors

Weight

Performance

measures

Achieve-

ment

Weighted

assess-

ment

2023 commentary

30%

Non-financial

objectives

(Integration and

Strategy,

Clients, Risk and

Regulatory,

Environmental

and

Sustainability,

People and

Governance)

Excellent

contribution

27%

The evaluation of each non-financial objective considers quantitative metrics that are assessed

against internal targets / plan.

– Stabilized Credit Suisse, completed closure of the transaction in three months, defined a

detailed integration plan and developed a comprehensive strategic plan for the next three

years.

– Delivered early voluntary termination of the Loss Protection Agreement and the Public

Liquidity Backstop, repaid the Credit Suisse Emergency Liquidity Assistance Plus loan.

– Achieved underlying profitability following closing of the acquisition, maintained a balance

sheet for all seasons and strong capital position.

– Prioritized personal engagement with clients to support stabilizing the client franchise,

building trust and confidence in the combined firm.

– Promoted a strong risk management and control culture across the combined organization,

remained focused on risk remediation and made progress with the litigation portfolio.

– Effectively re-composed the GEB and managed leadership transitions, supported strong

Group-wide senior leader succession and talent pipeline.

– Championed the Three Keys Culture program to support a successful long-term integration

of Credit Suisse.

– Made progress on group diversity, equity and inclusion ambitions.

See ESG metrics and progress in separate table in this report.

10%

Behaviors

(Accountability

with integrity,

Collaboration,

Innovation)

Exemplary

behavior

10%

The assessment of the Behavior objectives is qualitative and has resulted in the following

summary assessment.

– Acted as a role model for the UBS behaviors. Led by example and demonstrated exemplary

accountability, decisiveness and determination to achieve strong and sustainable short- and

long-term results.

– Strengthened collaboration across the combined organization to focus on client needs,

stabilize the franchise and progress with the ambitious integration targets.

– Continuously challenged the organization to think differently about the business evolution,

accelerated the process of moving Artificial Intelligence technology from experimentation to

implementation.

Total weighted assessment

(maximum 100%)

87%

The BoD approved the proposal by the Compensation Committee to grant Mr. Ermotti a performance award of

CHF 12.25m, resulting in a total compensation for 2023 of CHF 14.1m (excluding benefits and contributions to his

retirement benefit plan).

Aligned with the GEB compensation framework, the Group CEO’s performance award will be delivered 20%

(CHF 2.45m) in cash and the remaining 80% (CHF 9.8m) subject to deferral and forfeiture provisions, as well as meeting

performance conditions over the next five years.

Advisory vote | Corporate governance and compensation | Compensation 247

2023 total compensation for the GEB members

At the 2024 AGM, shareholders will vote on the aggregate 2023 total variable compensation for the GEB in Swiss francs.

The tables below provide the awarded compensation for the Group CEO and the GEB members in Swiss francs and, for

reference, the total amounts in US dollars for comparability with financial performance. The individual variable

performance awards for each GEB member will only be confirmed upon shareholder approval at the AGM.

› Refer to “Deferred compensation” in the “Supplemental information” section of this report for more information about the

vesting of outstanding awards for GEB members

› Refer to “Provisions of the Articles of Association related to compensation” in the “Supplemental Information” section of this

report for more information

Audited |

Total compensation for GEB members

CHF, except where indicated

USD (for reference)

For the

year

Base salary

Contribution

to retirement

benefit plans

Benefits

Total fixed

compensa-

tion

Cash

Performance

award

under LTIP

Performance

award

under

DCCP

Total

variable

compensa-

tion

Total fixed

and vari-

able com-

pensation

Total fixed

compensa-

tion

Total

variable

compensa-

tion

Total fixed

and vari-

able com-

pensation

Highest Paid Executive (for 2023 Sergio Ermotti and for 2022 Ralph Hamers excluding replacement awards)

2023

1,875,000

186,240

84,078

2,145,317

2,450,000

6,125,000

3,675,000

12,250,000

14,395,317

2,368,204

13,522,709

15,890,913

2022

2,500,000

242,239

198,378

2,940,617

1,940,000

4,850,000

2,910,000

9,700,000

12,640,617

Aggregate of all GEB members (excluding replacement awards)

7,8,9,10,11,12

2023

28,677,051

2,120,421

1,238,708

32,036,180

21,398,036

54,305,166

32,583,098

108,286,300

140,322,480

35,364,567

119,536,663

154,901,230

2022

23,318,410

1,796,872

693,473

25,808,756

16,220,000

40,550,000

24,330,000

81,100,000

106,908,756

1 Swiss franc amounts have been translated into US dollars for reference at the 2023 performance award currency exchange rate of CHF / USD 1.10389. 2 All benefits are valued at market price. 3 For GEB members

who are also MRTs or SMFs, the cash portion includes blocked shares. 4 LTIP awards for performance year 2023 were awarded at a value of 50.00% of maximum which reflects our best estimate of the value of the

award. The maximum number of shares is determined by dividing the awarded amount by the estimated value of the award at grant, divided by CHF 24.435 or USD 27.936, the average closing price of UBS shares

over the last ten trading days leading up to and including the award date in February. 5 The amounts reflect the amount of the notional additional tier 1 (AT1) capital instrument excluding future notional interest.

6 Excludes the portion related to the legally required employer’s social security contributions for 2023 and 2022, which are estimated at grant at CHF 7,291,554 and CHF 4,675,424, respectively, of which CHF 897,679

and CHF 841,402, respectively, are for the highest-paid GEB member (excluding replacement awards). The legally required employees’ social security contributions are included in the amounts shown in the table

above, as appropriate. 7 The 2022 total compensation of Sarah Youngwood, the former Group CFO, including both the one-time replacement awards of her compensation forfeited upon joining UBS as well as her

compensation for the 2022 performance year, amounts to a total of CHF 13,475,863 (which makes her the highest paid executive for 2022 including replacement awards). 8 As stated in “Group Executive Board”

in the “Corporate governance” section of this report, 16 GEB members were in office on 31 December 2023 and twelve GEB members were in office on 31 December 2022. 9 Includes compensation paid under

employment contracts during notice periods for GEB members who stepped down during the respective years. 10 Includes compensation for newly appointed GEB members for their time in office as GEB members

during the respective years. 11 Base salary may include role-based allowances in line with market practice in response to regulatory requirements. 12 For 2022, the one-time replacement awards of CHF 7,206,683

for Sarah Youngwood and CHF 65,229 for Naureen Hassan are not included in the above table; including these, the 2022 total aggregate compensation of all GEB members is CHF 114,180,668.



Total realized compensation for the Group CEO

The realized compensation for the Group CEO reflects the total amount paid out in the year. It includes the base salary,

cash performance award payments, and all deferred performance awards vested in the year. As such, realized pay is the

natural culmination of awards granted and approved by shareholders in previous years.

To illustrate the effect of our long-term deferral approach, which has been in place since 2012, we disclose the annual

realized compensation of Mr. Ermotti, including a comparison with his total awarded compensation.

Total realized compensation vs awarded compensation for Sergio Ermotti

CHF

Realized

Awarded

For the year

Base salary

Cash award

Performance

award under

equity plans

Performance

award under

DCCP

Total realized

fixed and variable

compensation

Total awarded

fixed and variable

compensation

2023

1,875,000

14,125,000

1 Includes compensation for 9 months as Sergio Ermotti joined UBS in April 2023. 2 Excludes dividend / interest payments. 3 Excludes contributions to retirement benefit plans and benefits. Includes social security

contributions paid by Sergio Ermotti but excludes the portion related to the legally required social security contributions paid by UBS.

Advisory vote | Corporate governance and compensation | Compensation 248

Group compensation

Compensation elements for all employees

All elements of pay are considered when making our compensation decisions. We regularly review our principles and

compensation framework in order to remain competitive and aligned with stakeholders’ interests. In 2023, our

compensation framework remained broadly unchanged. We will continue to review our approach to salaries and

performance awards, considering market developments, our performance and our commitment to deliver sustainable

returns to shareholders.

Base salary and role-based allowance

Employees’ fixed compensation (e.g., base salary) reflects their level of skill, role and experience, as well as local market

practice. Base salaries are usually paid monthly or fortnightly, in line with local market practice. We offer competitive

base salaries that reflect location, function and role. Salary increases generally consider promotions, skill set, performance

and overall responsibility.

In addition to base salary, and as part of fixed compensation, some employees may receive a role-based allowance. This

allowance is a shift in the compensation mix between fixed and variable compensation, not an increase in total

compensation. It reflects the market value of a specific role and is fixed, non-forfeitable compensation. Unlike salary, a

role-based allowance is paid only if the employee is in a specific role. Similar to previous years, 2023 role-based allowances

consisted of a cash portion and, where applicable, a blocked UBS share award.

Pensions and benefits

We provide access to a range of benefit plans, such as retirement benefits and health insurance, aiming to provide

financial protection in case of significant life events, and support our employees’ well-being and diverse needs. Retirement

and other benefits are set in the context of local market practice and regularly reviewed for competitiveness.

Pension plan rules in any one location are generally the same for all employees in similar circumstances, including GEB

members and other management. Under the Switzerland Pension Fund rules of UBS legal entities, there are no enhanced

or supplementary pension contributions for the GEB. The CEO of Credit Suisse AG, who became a GEB member after

the legal close of the acquisition, participates in the Switzerland Pension Fund for Credit Suisse legal entities.

Performance award

Most of our employees are eligible for an annual performance award. The level of this award, where applicable, generally

depends on the firm’s overall performance, the employee’s business division, team and individual performance, and

behavior, reflecting their overall contribution to the firm’s results. These awards are in line with applicable local

employment conditions and at the discretion of the firm.

In addition to the firm’s Pillars and Principles, Behaviors related to Accountability with integrity, Collaboration and

Innovation are part of the performance management approach. Therefore, when assessing performance, we consider

not only what was achieved but also how it was achieved.

Our deferred compensation plans

Underlining our emphasis on sustainable performance and risk management, and our focus on achieving our growth

ambitions, we deliver part of our employees’ annual variable compensation through deferred compensation plans. We

believe that our approach, with a single incentive decision and mandatory deferral framework, is transparent and well

suited to implementing our compensation philosophy and delivering sustainable performance. This aligns the interests of

our employees and shareholders and appropriately links compensation to longer-term sustainable performance.

Our mandatory deferral approach applies to all employees with regulatory-driven deferral requirements or total

compensation greater than USD / CHF 300,000. Certain regulated employees, such as Senior Management Functions

(SMFs) and Material Risk Takers (MRTs), are subject to additional requirements (e.g., more stringent deferral requirements

and additional blocking periods). In addition, SMFs and MRTs receive 50% of their cash portion in the form of immediately

vested shares, which are blocked for 12 months after grant.

The deferred amount increases at higher marginal rates in line with the value of the performance award. The effective

deferral rate therefore depends on the amount of the performance award and the amount of total compensation.

We believe our deferral regime has one of the longest vesting periods in the industry. The weighted average deferral

period for non-regulated employees is 4.4 years for GEB members, 3.8 years for MDs receiving LTIP and 3.5 years for

other employees. Additionally, from time to time, we may utilize alternative deferred compensation arrangements to

remain competitive in specific business areas.

Advisory vote | Corporate governance and compensation | Compensation 249

To further promote sustainable performance, all of our deferred compensation plans include employment conditions and

malus conditions. These enable the firm to reduce or fully forfeit unvested deferred awards under certain circumstances,

pursuant to performance and harmful acts provisions. In addition, forfeiture is triggered in cases where employment has

been terminated for cause.

Upon vesting of the notional share awards, we fulfill our share delivery obligations by delivering treasury shares purchased

in the market.

› Refer to “Note 28 Employee benefits: variable compensation” in the “Consolidated financial statements” section of this report for

more information

› Refer to the “Supplemental information” section of this report for more information about MRTs and SMFs

Long-Term Incentive Plan

The Long-Term Incentive Plan (the LTIP) granted for 2023 performance is a mandatory deferral plan for GEB members

and Managing Directors (MDs) reporting to the GEB and their direct reports at MD level.

These senior leaders receive

the equity portion of their 2023 performance award in LTIP to support delivering on our ambitious integration goals and

business / financial targets. This further mitigates the need for a distinct integration award typical for a transaction of this

nature. For the 2023 performance year, we awarded the LTIP to 18 GEB members and 940 MDs in office during 2023,

at a value of 50.0% of the maximum, to further align the maximum opportunity with the stretching nature of our

financial ambitions.

The performance metrics of the share-based LTIP awards are average reported return on CET1 capital (RoCET1) and

relative total shareholder return (rTSR) over a three-year performance period starting on 1 January in the year of grant.

Performance outcomes and actual payout levels will be disclosed at the end of the performance period.

The three-year average reported RoCET1 metric (50% weighting) with a performance range of 5% to 10% reflects the

impact of the acquisition and our ambitious integration objectives, as well as the communicated financial ambitions over

the cycle:

– the maximum reported RoCET1 of 10% corresponds with a 100% payout aligned with our stretch target;

– the minimum reported RoCET1 of 5% corresponds with a 33% payout aligned with sustainable results in the context

of the integration; and

– the linear payout between the threshold and maximum levels supports our focus on delivering sustainable performance

without encouraging excessive risk-taking.

The rTSR performance metric (50% weighting) over the three-year period further aligns the interests of employees with

those of shareholders. This metric compares the total shareholder return (the TSR) of UBS with the TSR of an index

consisting of listed Global Systemically Important Banks (G-SIBs):

– the maximum payout outcome is reached when rTSR is 25 percentage points or more above the index, to mitigate the

potential for excessive risk-taking;

– there is zero payout if rTSR is 25 percentage points or more below the index; and

– the linear payout between the threshold and maximum levels further supports appropriate risk-taking

This G-SIBs index is independently determined by the Financial Stability Board (excluding the UBS Group), our index

includes all publicly traded G-SIBs and reflects companies with a comparable risk profile and impact on the global

economy. The index is equally weighted, calculated in Swiss francs and maintained by an independent index provider, so

as to ensure independence of the TSR calculation.

1 Excluding MDs in Asset Management Investment Areas who will continue to receive the Fund Ownership Plan (FOP) instead of the LTIP

Variable compensation elements by employee category

1 Employees in investment areas within Asset Management typically receive notional funds (Fund Ownership Plan, previously named AM EOP) in lieu of

EOP / LTIP to align their compensation more closely with fund performance, industry standards and regulatory requirements.

Employee category

GEB members and Managing Directors reporting to the GEB and

their direct reports at Managing Director level (as applicable)

Employees subject to mandatorydeferral framework

Cash LTIP EOP DCCP

Deferred compensation elements

Advisory vote | Corporate governance and compensation | Compensation 250

G-SIBs that are listed companies

Agricultural Bank of China

Goldman Sachs

Santander

Bank of America

Groupe Crédit Agricole

Société Générale

Bank of China

HSBC

Standard Chartered

Bank of Communications

ICBC

State Street

Bank of New York Mellon

ING

Sumitomo Mitsui FG

Barclays

JPMorgan Chase

Toronto-Dominion

BNP Paribas

Mitsubishi UFJ FG

Wells Fargo

China Construction Bank

Mizuho FG

Citigroup

Morgan Stanley

Deutsche Bank

Royal Bank of Canada

1 As of November 2023. Excludes the UBS Group.

Dividend equivalents (granted where applicable regulation permits) are subject to the same terms as the underlying LTIP

award.

LTIP awards reflect the long-term focus of our compensation framework. The final number of shares as determined at

the end of the three-year performance period will vest in three equal installments in each of the three years following

the performance period for GEB members (i.e., years 3, 4 and 5 after grant) and will cliff-vest for other award recipients

after the performance period (i.e., year three after grant), although longer deferral periods may apply for regulated GEB

and other regulated employees.

LTIP payout illustration

Performance metric: average RoCET1 (50% of award)

Below threshold (<5%)

Threshold (5%) up to

maximum (<10%)

Maximum and above (>10%)

Full forfeiture

(payout 0%)

Partial vest

(payout between 33% and <100%)

Full vest

(payout 100%)

Performance metric: rTSR vs G-SIBs index (50% of award)

Below threshold (<–25 ppts)

Threshold (–25 ppts) up to

maximum (+25 ppts)

Maximum and above (>+25 ppts)

– The final number of notional

shares vesting will vary based on

the achievement versus the

performance metrics.

– Linear payout between threshold

and maximum performance.

– Achievement levels are a

percentage of the maximum

opportunity of the LTIP and

cannot exceed 100%.

– Full forfeiture for performance

below the predefined threshold

levels.

– UK Senior Management Function

holders (SMFs) and UK Material

Risk Takers (UK MRTs) are subject

to an additional non-financial

metric based on a conduct

assessment with a potential

downward adjustment of up to

100% of the entire award.

Full forfeiture

(payout 0%)

Partial vest

(payout between 33% and <100%)

Full vest

(payout 100%)

Performance achievement of the 2020 LTIP granted in 2021

The 2020 LTIP was granted in 2021 (for 2020 performance) at a fair value of 65.9% of a maximum of 100%. The final

performance achieved is 92.55% of a maximum of 100%. This achievement reflects the outcome of the two equally

weighted performance metrics, RoCET1 and rTSR, both measured over the three-year performance period from 1 January

2021 to 31 December 2023. The achievement level of this 2020 LTIP award (granted in 2021) applies to 13 current GEB

members and 68 other plan participants.

We achieved a three-year average RoCET1 performance of 15.3% against the performance range of 6% to 18%, and

an rTSR performance of +75.36 percentage points versus the index of listed G-SIBs.

As explained above, the Compensation Committee made certain adjustments to the financial results used to determine

the 2020 LTIP achievement level. As noted, if the Compensation Committee had not made these adjustments but had

applied reported UBS Group AG financial results, i.e., including all acquisition-related effects, the achievement level for

the RoCET1 metric would have been 100%.

For GEB members, the first of the three equal installments of the 2020 LTIP vests on 28 March 2024 and the second and

third installments will vest in March 2025 and 2026; while for selected senior management, the 2020 LTIP cliff vests on

28 March 2024 (later dates may apply for regulated employees).

Advisory vote | Corporate governance and compensation | Compensation 251

Equity Ownership Plan / Fund Ownership Plan

The Equity Ownership Plan (the EOP) is the deferred compensation plan for employees that are subject to deferral

requirements but do not receive LTIP awards. For the 2023 performance year, we granted EOP awards to 4,661

employees.

Delivering sustainable results is a key objective for UBS. Our EOP creates a direct link with shareholder returns as a notional

equity award and has no upward leverage. This approach promotes growth and sustainable performance. EOP awards

generally vest over three years.

In place of EOP, employees in investment areas within Asset Management receive some or all of their EOP in the form of

notional funds (the Fund Ownership Plan (the FOP), previously named AM EOP) to align their compensation more closely

with industry standards. This plan is generally delivered in cash and vests over three years.

› Refer to “Vesting of outstanding awards granted in prior years subject to performance metrics and thresholds” in the

“Supplemental information” section of this report for more information

Deferred Contingent Capital Plan

The Deferred Contingent Capital Plan (the DCCP) is a key component of our compensation framework and supports

alignment of the interests of our senior employees with those of our stakeholders.

All employees subject to deferral requirements receive DCCP awards. For the 2023 performance year, we granted DCCP

awards to 5,562 employees.

The DCCP is consistent with many of the features of the loss-absorbing bonds that we issue to investors and may be paid

at vesting in cash or, at the discretion of the firm, as a perpetual, marketable additional tier 1 (AT1) capital instrument.

Employees can elect to have their DCCP awards denominated in Swiss francs or US dollars.

DCCP awards vest in full after five years (longer deferral periods may apply for regulated employees). DCCP awards bear

notional interest paid annually (except as limited by regulation for MRTs), subject to review and confirmation by the

Compensation Committee. The notional interest rate for grants in 2024 was 4.6% for awards denominated in Swiss

francs and 8.3% for awards denominated in US dollars. These interest rates are based on the current market rates for

similar AT1 capital instruments issued by the UBS Group.

Awards are forfeited if a viability event occurs (i.e., if FINMA notifies the firm that the DCCP awards must be written

down to mitigate the risk of an 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 for GEB members if the Group’s CET1 capital ratio falls below 10% and for all other employees if it falls below 7%.

In addition, GEB members forfeit 20% of DCCP awards for each loss-making year during the vesting period. This means

100% of the award is subject to risk of forfeiture. The forfeiture features of DCCP create a strong alignment with our

debt holders and support the sustainability of the firm.

Over the last five years, USD 1.97bn of DCCP awards have been issued, contributing to the Group’s total loss-absorbing

capacity (TLAC). Therefore, DCCP awards not only support competitive pay but also provide a loss absorption buffer that

protects the firm’s capital position. The following table illustrates the contribution of the DCCP to our AT1 capital and

the effect on our TLAC ratio.

› Refer to the “Supplemental information” section of this report for more information about performance award and personnel-

related expenses

› Refer to the “Supplemental information” section of this report for more information about longer vesting and clawback periods

for MRTs and SMFs

Performance

metrics

Overall 2020 LTIP achievement level

RoCET1

(Weight: 50%)

Threshold Threshold

−25ppts

Maximum Maximum

+25ppts

rTSR

(Weight: 50%)

Performance metric outcome 2020 LTIP achievement level

Achievement:

100%

Overall achievement:

92.55%

Outcome:

15.3%

100%

Achievement:

85.1%

Outcome:

+75.36ppts

Outcome

below

threshold:

full forfeiture

Outcome

above

maximum:

achievement

capped at

100%

6% 33%

33% 100%

18%

Performance achievement for the 2020 LTIP awarded in 2021

Advisory vote | Corporate governance and compensation | Compensation 252

Contribution of the Deferred Contingent Capital Plan to our loss-absorbing capacity

USD m, except where indicated

31.12.23

31.12.22

Deferred Contingent Capital Plan (DCCP), eligible as high-trigger loss-absorbing additional tier 1 capital

1,935

1,794

DCCP contribution to the total loss-absorbing capacity ratio (%)

0.4

0.6

1 Refer to “Bondholder information” at ubs.com/investors for more information about the capital instruments of UBS Group AG and UBS AG both on a consolidated and a standalone basis.

Other variable compensation components

To support hiring and retention, particularly at senior levels, we may offer other compensation components, such as:

– retention payments to key employees to induce them to stay, particularly during critical periods for the firm, such as a

sale or wind-down of a business;

– on a limited basis, guarantees that may be required to attract individuals with certain skills and experience, these

awards are fixed incentives subject to our standard deferral rules and limited to the first full year of employment;

– awards granted to employees hired late in the year to replace performance awards that they would have earned at

their previous employer but have foregone by joining UBS, these awards are generally structured with the same level

of deferral as for employees at a similar level at UBS; and

– in exceptional cases, sign-on awards may be offered to candidates to increase the chances of them accepting our

offer.

These other variable compensation components are subject to a comprehensive governance process, which may involve

the Compensation Committee, depending on the amount or type of such payments.

To support operational stability, manage risks and protect the client franchise, we have deployed specific additional

measures. Retention awards were delivered in both deferred cash and deferred equity awards. Furthermore, to support

our client win-back strategy and promote client growth, we also introduced a client acquisition and retention award for

certain producers, which is fully deferred and the final value is linked to the retention of client assets. Retention efforts

were targeted and limited to certain client roles and critical roles necessary to support operational stability. Overall, the

amounts of USD 736m are modest by industry standards for an integration of this magnitude. These retention awards

account for 3% of our total personnel expenses recognized in 2023.

Employees outside of the GEB that are made redundant may receive severance payments. Our severance terms comply

with the applicable local laws (legally obligated severance). In certain locations, we may provide severance packages that

are negotiated with our local social partners and may go beyond the applicable minimum legal requirements (standard

severance). Such payments are governed by location-specific severance policies. In addition, we may make severance

payments that exceed legally obligated or standard severance payments where we believe these are aligned with market

practice and appropriate under the circumstances (supplemental severance). GEB members do not receive severance

payments.

Replacement awards and forfeitures

In line with industry practice, our compensation framework and plans include provisions generally requiring reduction /

forfeiture of a terminated employee’s unvested or deferred awards. In particular, these provisions apply if the terminated

employee joins another financial services organization and / or violates restrictive covenants, such as solicitation of clients

or employees.

Conversely, to attract external top talent, market practice dictates that we consider replacing their forfeited compensation

from their prior employer. In select situations and based on careful consideration, we replace the lost compensation of

senior hires. The replacement awards are subject to UBS’s harmful acts provisions. Their value is subject to independent

review as part of the “Report of the statutory auditor on the compensation report” to support the like-for-like nature of

the replacement and to confirm that these awards do not represent sign-on payments (i.e., there are no “golden hellos”).

Based on a thorough review of available documentation, we aim to mirror the type, conditions and timing of the forfeited

compensation, based on actual facts and circumstances. Replacement awards can include cash payments and / or

deferred awards, including EOP share awards and DCCP awards. Where payments are made in cash, there is typically a

clawback period if the employee leaves UBS voluntarily within 12 months of the start of employment. The replacement

awards do not exceed the commercial or fair value of the compensation actually forfeited by the individual and, in case

of GEB members, are disclosed transparently. The total 2023 forfeitures of USD 1,903m of previously awarded deferred

compensation offset the 2023 total sign-on payments, replacement payments and guarantees of USD 216m.

Advisory vote | Corporate governance and compensation | Compensation 253

Sign-on payments, replacement payments, guarantees and severance payments

Total 2023

of which: non-deferred

cash

of which: deferred

compensation

awards

Total 2022

Number of beneficiaries

USD m, except where indicated

2023

2022

Total sign-on payments

of which: Key Risk Takers

Total replacement payments

145

116

110

422

452

of which: Key Risk Takers

Total guarantees

of which: Key Risk Takers

Total severance payments

1,5

485

233

4,389

1,745

of which: Key Risk Takers

1 GEB members are not eligible for sign-on or severance payments. Sign-on awards exclude one-time payments for junior associate hires into the Investment Bank. Including these, the total sign-on payments are

USD 4m for 2023 and USD 1m for 2022. All one-time payments for junior associate hires are subject to a 12-month clawback condition. 2 Expenses for Key Risk Takers are full-year amounts for individuals in office

on 31 December 2023. Key Risk Takers as defined by UBS, including all employees with a total compensation exceeding USD / CHF 2.5m (Highly Paid Employees). 3 No GEB member received a replacement payment

in 2023. In 2022, amounts include replacement payments for two GEB members. Total amounts include awards granted to employees hired late in the year to replace performance awards that they would have earned

at their previous employers, but have foregone by joining UBS. 4 No GEB member received a guarantee in 2023 or 2022. 5 Includes legally obligated and standard severance payments, as well as payments in lieu

of notice.

Forfeitures

Total 2023

Total 2022

USD m, except where indicated

Total forfeitures

1,903

188

of which: former GEB members

of which: Key Risk Takers

293

1 For notional share awards (excluding Credit Suisse legacy plan awards), forfeitures are calculated as units forfeited during the year, valued at the share price on 31 December 2023 (USD 30.90) for 2023. The 2022

data is valued using the share price on 31 December 2022 (USD 18.67). For LTIP the forfeited units reflect the fair value awarded at grant. For the notional funds awarded to Asset Management employees under the

AM EOP/FOP, this represents the forfeiture credits recognized in 2023 and 2022. For the DCCP, the fair value at grant of the forfeited awards during the year is reflected. Credit Suisse legacy awards (including Credit

Suisse notional fund awards) are calculated using value at grant and include the explicit adjustments resulting from the cancellation and reduction order issued by the Federal Department of Finance (FDF) of Switzerland.

The 2022 data excludes Credit Suisse legacy award forfeitures. All values shown exclude DCCP interest and CCA coupon forfeitures. Numbers presented may differ from the effect on the income statement in accordance

with IFRS. 2 Key Risk Takers as defined by UBS, including all employees with a total compensation exceeding USD / CHF 2.5m (Highly Paid Employees) and excluding former GEB members who forfeited awards in

2023 or 2022.

Employee share ownership

According to available records on employee shareholdings, including unvested deferred compensation, as of

31 December 2023, employees held at least USD 7.9bn of UBS shares (of which approximately USD 5.3bn were

unvested), representing approximately 7.4% of our total shares issued.

The Equity Plus Plan is our employee share purchase program. It allows employees at Executive Director level and below

to voluntarily invest up to 30% of their base salary and / or regular commission payments to purchase UBS shares. In

addition (where offered), eligible employees can invest up to 35% of their performance award under the program.

Participation in the program is capped at USD / CHF 20,000 annually. Eligible employees may purchase UBS shares at

market price and receive one additional share for every three shares purchased through the program. Additional shares

vest after a maximum of three years, provided the employee remains employed by UBS and has retained the purchased

shares throughout the holding period.

› Refer to “Note 28 Employee benefits: variable compensation” in the “Consolidated financial statements” section of this report for

more information

Compensation for US financial advisors in Global Wealth Management

In line with market practice for US wealth management businesses, the compensation for US financial advisors in Global

Wealth Management consists of cash compensation and deferred compensation awards, determined using a formulaic

approach based on production.

The monthly cash compensation is determined using an overall percentage rate for each financial advisor. It reflects a

percentage of the compensable production that each financial advisor generates during that month. 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, supporting growth and

alignment with the investment strategy and goals of our clients.

Financial advisors may also be granted annual deferred compensation. These amounts generally vest over a six-year

period. The annual deferred compensation amount reflects their overall percentage rate and production, as previously

outlined.

Cash compensation and deferred compensation 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.

Advisory vote | Corporate governance and compensation | Compensation 254

2023 Group performance outcomes

Performance awards granted for the 2023 performance year

The “Variable compensation” table below shows the amount of variable compensation awarded to employees for the

2023 performance year, together with the number of beneficiaries for each type of award granted. In the case of deferred

awards, the final amount paid to an employee depends on performance conditions and consideration of relevant

forfeiture provisions. The deferred share award amount is based on the market value of these awards on the date of

grant.

Variable compensation

Expenses recognized

in the IFRS

Accounting

Standards income

statement

Expenses deferred to

future periods

Adjustments

Total

Number of beneficiaries

USD m, except where indicated

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

Non-deferred cash

2,859

2,276

333

(18)

3,192

2,259

97,265

59,570

Deferred compensation awards

523

364

777

605

1,327

1,026

5,489

4,349

of which: Equity Ownership Plan

155

202

263

310

452

568

4,177

4,042

of which: Deferred Contingent Capital Plan

180

129

312

245

493

375

5,448

4,206

of which: Long-Term Incentive Plan

164

160

(6)

5,6

318

954

of which: Fund Ownership Plan

371

295

Variable compensation – performance award pool

3,382

2,640

777

605

360

4,519

3,285

97,290

59,590

Variable compensation – financial advisors

3,761

3,799

1,236

1,290

4,997

5,089

5,804

6,245

Variable compensation – other

784

169

384

237

(190)

(146)

978

260

Total variable compensation

7,927

6,608

2,398

2,131

170

(106)

10,495

8,634

1 Financial advisor compensation consists of cash and deferred compensation awards and is based on compensable revenues and firm tenure using a formulaic approach. 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 retention awards granted to Credit Suisse employees to support the

completion of the transaction and the early phase of the integration, replacement payments, forfeiture credits, severance payments, retention plan payments and interest expense related to the Deferred Contingent

Capital Plan. 3 Estimates as of 31 December 2023 and 2022. Actual amounts to be expensed in future periods may vary; e.g., due to forfeiture of awards. 4 Includes the 2023 cash bonus liability recognized as

of the date of the acquisition of Credit Suisse, of USD 351m, relating to pre-acquisition service as well as currency translation adjustments. 5 Represents estimated post-vesting transfer restriction and permanent

forfeiture discounts. 6 Adjustments for LTIP include a difference of USD 53m between the estimated amount to be expensed under IFRS 2 and the communicated value included in the performance award pool.

7 Included in expenses deferred to future periods is an amount of USD 190m (2022: USD 146m) in interest expense related to the Deferred Contingent Capital Plan. As the amount recognized as performance award

represents the present value of the award at the date it is granted to the employee, this amount is excluded. 8 Excludes awards that are part of Variable compensation – other.

2023 performance award pool and expenses

The performance award pool, which includes performance-based variable awards for 2023, was USD 4.5bn, reflecting

an increase of 38% compared with 2022 (or a reduction of 14% compared with the pro forma aggregate 2022 pool of

USD 5.3bn for the combined entities, which includes the UBS performance award pool, the Credit Suisse variable

incentive compensation pool and other variable compensation awards related to the 2022 performance year).

Performance award expenses for 2023 increased to USD 4.0bn, mainly reflecting increased performance award expenses

accrued in the performance year as a result of the acquisition of the Credit Suisse Group. The “Performance award pool

and expenses” table below compares the performance award pool with performance award expenses.

Performance award pool and expenses

USD m, except where indicated

2023

2022

% change

Performance award pool

4,519

3,285

of which: expenses deferred to future periods and adjustments

2,3

1,137

645

Performance award expenses accrued in the performance year

3,382

2,640

Performance award expenses related to prior performance years

604

566

Total performance award expenses recognized for the year

3,986

3,205

1 Excluding employer-paid taxes and social security. 2 Estimate as of the end of the performance year. Actual amounts expensed in future periods may vary, e.g., due to forfeiture of awards. 3 Refer to details in

the preceding "Variable compensation" table for more information. 4 Refer to “Note 28 Employee benefits: variable compensation” in the “Consolidated financial statements” section of this report for more

information

Advisory vote | Corporate governance and compensation | Compensation 255

Compensation for the Board of Directors

Chairman of the BoD

Under the leadership of the Chairman, Colm Kelleher, the BoD determines, among other things, the strategy for the

Group, based on recommendations by the Group CEO, exercises ultimate supervision over management and appoints all

GEB members.

The Chairman leads all general meetings and BoD meetings and works with the committee Chairpersons to coordinate

the work of all BoD committees. Together with the Group CEO, the Chairman is responsible for effective communication

with shareholders and stakeholders, including clients, government officials, regulators and public organizations. The

Chairman works closely with the Group CEO and other GEB members, providing advice and support when appropriate,

and continues to strengthen and promote our culture through the three keys to success: our Pillars, Principles and

Behaviors.

As an independent director, the Chairman’s total compensation for the period from Annual General Meeting (AGM) to

AGM consists of a fixed fee without any variable component, which is delivered 50% in cash and 50% in shares (blocked

for four years). For the current period, from the 2023 AGM to the 2024 AGM, his fixed fee was CHF 4.7m and consisted

of a cash payment of CHF 2.35m and a share component of CHF 2.35m, consisting of 96,173 UBS shares at CHF 24.435

per share. The share component aligns the Chairman’s pay with the Group’s long-term performance. The Chairman does

not receive performance awards, severance payments or pension contributions in addition to his fixed fee, but, given the

full-time nature of his role, he is eligible for employee conditions on UBS products and services. Effective from the 2024

AGM, we will increase the Chairman’s annual fixed fee to CHF 5.5m, to reflect the significantly increased scope,

responsibility and complexity following the acquisition of the Credit Suisse Group.

› Refer to “Board of Directors” in the “Corporate governance” section of this report for more information about the responsibilities

of the Chairman

Vice Chairman of the BoD

As the Vice Chairman of the BoD, Lukas Gähwiler leads the BoD in the absence of the Chairman and, together with the

Senior Independent Director, he also supports the Chairman in all aspects of corporate governance and oversight across

the Group. In particular, he represents UBS across a broad range of associations and industry bodies in Switzerland. In

2023, Lukas Gähwiler took on additional responsibilities as the chairman of the board of Credit Suisse AG, a subsidiary

of UBS Group AG. This nomination is critical to provide strong governance and oversight of the subsidiary, in a manner

consistent and in compliance with UBS Group AG governance principles, and also to facilitate the integration of Credit

Suisse AG into UBS.

The Vice Chairman’s total compensation for his services in the UBS Group AG Board for the period from AGM to AGM

consists of a fixed fee without any variable component, which is delivered 50% in cash and 50% in shares (blocked for

four years). For the current period, from the 2023 AGM to the 2024 AGM, his fixed fee was CHF 1.5m, excluding benefits

and pension fund contributions. The fixed fee consisted of a cash payment of CHF 0.75m and a share component of

CHF 0.75m, consisting of 30,693 UBS shares at CHF 24.435 per share.

As a non-independent director, Mr. Gähwiler is entitled to pension fund contributions. Including these, his total reward

for his service as Vice Chairman for the current period was CHF 1,881,368.

Serving in a subsidiary board is a substantial increase in the scope, responsibility and complexity of his mandate and was

urgently required to support the merger. Therefore, Mr. Gähwiler will be entitled to receive an additional board member

fee aligned with his role as Chairman of Credit Suisse AG and with other non-executive directors on the respective

subsidiary entities. The payment of this subsidiary board fee is subject to shareholder approval as part of an incremental

amount at the 2024 AGM.

The Vice Chairman’s fee for his services in the Credit Suisse AG board for the period from AGM to AGM consists of a

fixed fee without any variable component, which is delivered 100% in cash. For the current period, from the 2023 AGM

to the 2024 AGM, his total reward for his services as chairman in the Credit Suisse AG board was CHF 1,000,000.

The Vice Chairman is not eligible for performance awards, severance terms or supplementary contributions to pension

plans. The pension contributions and benefits for the Vice Chairman, in his capacity as non-independent director, are

consistent with all UBS employees and aligned with local market practice.

› Refer to “Board of Directors” in the “Corporate governance” section of this report for more information about the responsibilities

of the Vice Chairman

› Refer to “Say-on-pay” section of this report for more information about compensation-related proposals at the AGM 2024

Advisory vote | Corporate governance and compensation | Compensation 256

Other BoD members

BoD members, except the Chairman and Vice Chairman, receive fixed fees for their services on the BoD and its

committees. These fees are unchanged from the last AGM-to-AGM period. BoD members do not receive performance

awards, severance payments, benefits or pension contributions (the benefit eligibility of the Chairman and that of the

Vice Chairman are described above).

BoD members other than the Chairman and the Vice Chairman must use a minimum of 50% of their fees to purchase

UBS shares, which are blocked for four years, and they may elect to use 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.

In 2023, in order to facilitate the integration of Credit Suisse into UBS, two independent BoD members served on the

boards of directors of subsidiaries. UBS Group AG Board members who have additional roles on the boards of significant

subsidiary entities receive respective fees for the significant increase in the scope, responsibility and complexity of their

mandates. These fees are aligned with other non-executive directors of the respective subsidiary entities. The payment

of these subsidiary board fees is subject to shareholder approval as part of an incremental amount at the 2024 AGM.

The total remuneration of other UBS Group AG members, including fees from subsidiaries, is summarized in the

“Remuneration details and additional information for BoD members” table below.

At each AGM, shareholders are invited to approve the aggregate amount of BoD remuneration, including the

compensation for the Chairman and Vice Chairman, which applies until the next AGM. The chart and the tables below

provide details on the fee structure for the BoD members.

Approval governance for BoD compensation

The Chairperson of the Compensation Committee proposes and the Compensation Committee approves the

compensation of the Chairman and that of the Vice Chairman annually for the upcoming AGM-to-AGM period, taking

into consideration fee or compensation levels for comparable roles based on our core financial industry peers and other

relevant leading Swiss companies included in the Swiss Market Index.

The fee structure for the other BoD members is reviewed annually based on the Chairman’s proposal to the

Compensation Committee, which in turn submits a proposal to the BoD for approval. In our regular review of the BoD

fee structure, we concluded that our overall approach for BoD member compensation remains appropriate and thus

unchanged.

› Refer to “Compensation Governance” in the “Compensation philosophy and governance” section of this report for more

information about the remuneration responsibilities of the BoD and Compensation Committee

Remuneration framework for UBS Group AG BoD members

The Chairman and the Vice Chairman do not receive committee or other fees in addition to their annual ﬁxed fee. Their ﬁxed fee is

delivered 50% in cash and 50% in shares (blocked for four years). See above for the beneﬁt eligibility of the Chairman and Vice Chairman.

At least 50% of the total amounts must be used to purchase UBS shares, which are blocked for four years, but other BoD members can elect to

use 100% of their remuneration to purchase blocked UBS shares.

Pay mix

Blocked

Cash

50%

Delivery

AGM-

to-AGM

period

grant

year

year 1 year 2 year 3 year 4

CHF

Annual xed fees¹

Chairman

Vice Chairman

4,700,000

1,500,000

2023 AGM to 2024 AGM

Audit Committee

Compensation Committee

Governance and Nominating Committee

Corporate Culture and Responsibility

Committee

Risk Committee

300,000 200,000

Chair Member

200,000 100,000

100,000

50,000

200,000350,000

Fees for other BoD members²

Fixed base fee

Senior Independent Director

300,000

150,000

Advisory vote | Corporate governance and compensation | Compensation 257

Audited |

Remuneration details and additional information for BoD members

Period 2023 AGM to 2024 AGM

CHF, except where indicated

Name, function

Audit Committee

Compensation Committee

Corporate Culture and

Responsibility Committee

Governance and Nominating

Committee

Risk Committee

Base fee

Committee

fee(s)

Additional

payments

Benefits

Total

percentage

Number of

6,7

Subsidiary

entity board

fees

Total

including

subsidiary

fees

Colm Kelleher, Chairman

4,700,000

12,830

4,712,830

96,173

4,712,830

Lukas Gähwiler, Vice

Chairman

1,500,000

381,368

1,881,368

30,693

1,000,000

2,881,368

Jeremy Anderson, Senior

Independent Director

300,000

400,000

150,000

850,000

100

26,624

893,215

1,743,215

Claudia Böckstiegel, member

300,000

50,000

350,000

7,161

350,000

William C. Dudley, member

300,000

250,000

550,000

11,254

550,000

Patrick Firmenich, member

300,000

250,000

550,000

100

16,672

550,000

Fred Hu, member

300,000

100,000

400,000

100

12,105

400,000

Mark Hughes, member

300,000

400,000

700,000

14,323

795,677

1,495,677

Nathalie Rachou, member

300,000

600,000

12,277

600,000

Julie G. Richardson, member

300,000

400,000

700,000

14,323

700,000

Dieter Wemmer, member

300,000

600,000

100

23,549

600,000

Jeanette Wong, member

300,000

600,000

100

18,194

600,000

Aggregate of all BoD members 2023/2024

12,494,198

15,183,090

Aggregate of all BoD members 2023/2024 in USD (for reference)

13,792,316

16,760,560

Period 2022 AGM to 2023 AGM

CHF, except where indicated

Name, function

Audit Committee

Compensation Committee

Corporate Culture and

Responsibility Committee

Governance and

Nominating Committee

Risk Committee

Base fee

Committee

fee(s)

Additional

payments

Benefits

Total

percentage

Number of

6,7

Subsidiary

entity board

fees

Total

including

subsidiary

fees

Colm Kelleher, Chairman

4,700,000

86,494

4,786,494

116,961

Lukas Gähwiler, Vice

Chairman

1,500,000

379,010

1,879,010

37,328

Jeremy Anderson, Senior

Independent Director

300,000

400,000

150,000

850,000

21,152

Claudia Böckstiegel, member

300,000

50,000

350,000

8,709

William C. Dudley, member

300,000

250,000

550,000

13,687

Patrick Firmenich, member

300,000

250,000

550,000

100

26,130

Fred Hu, member

300,000

100,000

400,000

100

14,722

Mark Hughes, member

300,000

400,000

700,000

17,419

Nathalie Rachou, member

300,000

600,000

14,931

Julie G. Richardson, member

300,000

400,000

700,000

17,419

Dieter Wemmer, member

300,000

600,000

14,931

Jeanette Wong, member

300,000

600,000

100

22,127

Aggregate of all BoD members 2022/2023

12,565,504

Legend: C = Chairperson of the respective Committee, M = Member of the respective Committee

1 Twelve BoD members were in office on 31 December 2023 and on 31 December 2022. 2 These payments are associated with the Senior Independent Director role. 3 For the period from the 2023 AGM to the

2024 AGM, benefits amount is an estimate. For the Vice Chairman, the benefits include the portion related to UBS’s contribution to the statutory pension scheme. 4 Excludes UBS’s portion related to the legally

required social security contributions, which for the period from the 2023 AGM to the 2024 AGM (including the Chairman, Vice Chairman and UBS Group AG members with a role in subsidiaries) is estimated at grant

at CHF 1,000,000 and which for the period from the 2022 AGM to the 2023 AGM was estimated at grant at CHF 731,329. The legally required social security contributions paid by the independent BoD members are

included in the amounts shown in this table, as appropriate. 5 For the Chairman and Vice Chairman, fees are paid 50% in cash and 50% in blocked UBS shares. Other BoD members must use a minimum of 50% of

their fees to purchase UBS shares, which are blocked for four years. 6 For 2023, UBS shares were valued at CHF 24.435 (average closing price of UBS shares over the last 10 trading days leading up to and including

the grant date). For 2022, UBS shares were valued at CHF 20.092 (average closing price of UBS shares over the last 10 trading days leading up to and including the grant date). These shares are blocked for four years.

7 Number of shares is reduced in case of the 100% election to deduct legally required contributions. All remuneration payments are, where applicable, subject to social security contributions and / or withholding tax.

8 The payment of the subsidiary board fees for the period 2023 AGM to 2024 AGM are subject to shareholder approval as part of an incremental amount at the 2024 AGM. 9 The Chairman and the Vice Chairman

do not receive committee fees in addition to their annual fixed fee. 10 Swiss franc amounts have been translated into US dollars for reference at the 2023 performance award currency exchange rate of CHF /

USD 1.10389.



Advisory vote | Corporate governance and compensation | Compensation 258

Supplemental information

Fixed and variable compensation for GEB members

1,2,3

Total for 2023

Not deferred

Deferred

Total for 2022

CHF m, except where indicated

Amount

Total compensation

Amount

137

104

Number of beneficiaries

Fixed compensation

5,6

Cash-based

Equity-based

Variable compensation

108

Cash

Long-Term Incentive Plan (LTIP)

Deferred Contingent Capital Plan (DCCP)

1 The figures include all GEB members in office during the respective years. 2 Includes compensation paid under the employment contract during the notice period for GEB members who stepped down during the

respective years. 3 Includes compensation for newly appointed GEB members for their time in office as a GEB member during the respective years. 4 Based on the specific plan vesting and reflecting the total

award value at grant, which may differ from the expense recognized in the income statement in accordance with IFRS Accounting Standards. 5 Excludes benefits and employer’s contributions to retirement benefit

plans. Includes social security contributions paid by GEB members but excludes the portion related to the legally required social security contributions paid by UBS. 6 Includes base salary and role-based allowances,

rounded to the nearest million. 7 Includes allocation of vested but blocked shares, in line with the remuneration section of the UK Prudential Regulation Authority Rulebook. 8 For the GEB members who are also

MRTs or SMFs, the awards do not include dividend and interest payments. Accordingly, the amounts reflect for the LTIP the fair value of the non-dividend-bearing awards and for the DCCP the fair value of the granted

non-interest-bearing awards.

Regulated staff

Key Risk Takers

Key Risk Takers (KRTs) are defined as those employees that, by the nature of their roles, have been determined to

materially set, commit or control significant amounts of the firm’s resources and / or exert significant influence over its

risk profile. This includes employees working in front-office roles, logistics and control functions. Identifying KRTs globally

is part of our risk control framework and an important element in ensuring we incentivize only appropriate risk-taking.

For 2023, in addition to GEB members, 1,038 employees were classified as KRTs throughout the UBS Group globally,

including all employees with a total compensation exceeding USD / CHF 2.5m (Highly Paid Employees), who may not

have been identified as KRTs during the performance year. Compared with 2022, the increase in the number of KRTs

has been driven by the inclusion of Credit Suisse employees in the identification process.

In line with regulatory requirements, the performance of employees identified as KRTs during the performance year is

evaluated by the control functions. In addition, KRTs’ performance awards are subject to a mandatory deferral rate of at

least 50%, regardless of whether the deferral threshold has been met (excluding KRTs with de minimis performance

awards below a predetermined threshold where standard deferral rates apply). Consistent with all other employees, the

deferred portion of a KRT’s compensation is also subject to forfeiture or reduction if the KRT commits harmful acts.

Fixed and variable compensation for Key Risk Takers

Total for 2023

Not deferred

Deferred

Total for 2022

USD m, except where indicated

Amount

Total compensation

Amount

1,801

100

1,147

654

1,292

Number of beneficiaries

1,038

699

Fixed compensation

4,5

668

100

438

Cash-based

665

435

Equity-based

Variable compensation

1,133

479

654

855

Cash

479

353

Long-Term Incentive Plan (LTIP) / Equity Ownership

Plan (EOP) / Fund Ownership Plan (FOP)

396

306

Deferred Contingent Capital Plan (DCCP)

258

196

1 Includes employees with a total compensation exceeding USD / CHF 2.5m (Highly Paid Employees), excludes payments made to individuals related to their time as GEB member. 2 Based on the specific plan vesting

and reflecting the total value at grant, which may differ from the expense recognized in the income statement in accordance with IFRS Accounting Standards. 3 The 2022 data excludes Credit Suisse. 4 Excludes

benefits and employer’s contributions to retirement benefits plan. Includes social security contributions paid by KRTs but excludes the legally required social security contributions paid by UBS. 5 Includes base salary

and role-based allowances. 6 Includes allocation of vested but blocked shares, in line with regulatory requirements where applicable. 7 KRTs who are also MRTs do not receive dividend and interest payments.

Accordingly, the amounts for the EOP / LTIP reflect the fair value of the non-dividend-bearing awards and for the DCCP the fair value of the granted non-interest-bearing awards.

Advisory vote | Corporate governance and compensation | Compensation 259

Deferred compensation of the GEB and KRTs

The table below shows the current economic value of unvested outstanding deferred variable compensation awards

subject to ex post adjustments. For share-based plans, the economic value is determined based on the closing share price

on 31 December 2023. For notional funds, it is determined using the latest available market price for the underlying

funds at year-end 2023, and for deferred cash plans, it is determined based on the outstanding amount of cash owed to

award recipients.

Deferred compensation of the GEB and KRTs

1,2,3

USD m, except where indicated

Relating to awards

for 2023

Relating to

awards for prior

years

Total

of which: exposed to

ex post explicit and /

or implicit adjustments

Total deferred

compensation

year-end 2022

Total amount of

deferred compensation

paid out in 2023

GEB

Deferred Contingent Capital Plan

117

153

100%

111

Equity Ownership Plan (including notional funds

and Credit Suisse legacy plans)

100%

Long-Term Incentive Plan

262

322

100%

160

KRTs

Deferred Contingent Capital Plan

258

925

1,183

100%

1,104

133

Equity Ownership Plan (including notional funds)

183

1,344

1,527

100%

1,210

415

Long-Term Incentive Plan

213

180

393

100%

184

Credit Suisse legacy plans

195

100%

n/a

Total GEB and KRTs

750

3,080

3,830

2,814

744

1 Based on the specific plan vesting and reflecting the economic value of the outstanding awards (grant value for legacy Credit Suisse notional funds), which may differ from the expense recognized in the income

statement in accordance with IFRS. Year-to-year reconciliations would also need to consider the impacts of additional items including off-cycle awards, FX movements, population changes, and dividend equivalent

reinvestments. 2 Refer to “Note 27 Employee benefits: variable compensation” in the “Consolidated financial statements” section of this report for more information. 3 GEB members and KRTs who are also MRTs

do not receive dividend and interest payments. Accordingly, the amounts for the EOP / LTIP reflect the fair value of the non-dividend-bearing awards and for the DCCP the fair value of the granted non-interest-bearing

awards. 4 Where applicable, amounts are translated into US dollars at the performance award currency exchange rate. LTIP values reflect the fair value awarded at grant. 5 Takes into account the ex post implicit

adjustments, given the share price movements since grant. Where applicable, amounts are translated from award currency into US dollars using FX rates as of 31 December 2023. LTIP values reflect the fair value

awarded at grant. 6 The 2022 data excludes Credit Suisse legacy awards. 7 Valued at distribution price and FX rate for all awards distributed in 2023 (this excludes interests on DCCP).

The table below shows the value of actual ex post explicit and implicit adjustments to outstanding deferred compensation

in the 2023 financial year for GEB members and KRTs.

Ex post adjustments occur after an award has been granted. Explicit adjustments occur when we adjust compensation

by forfeiting deferred awards. Implicit adjustments are unrelated to any action taken by the firm and occur as a result of

price movements that affect the value of an award.

GEB and KRTs ex post explicit and implicit adjustments to deferred compensation

Ex post explicit adjustments

to unvested awards

Ex post implicit adjustments

to unvested awards

USD m

31.12.23

31.12.22

31.12.23

31.12.22

GEB

Deferred Contingent Capital Plan

Equity Ownership Plan (including notional funds and Credit Suisse legacy

plans, if applicable)

(1)

Long-Term Incentive Plan

119

KRTs

Deferred Contingent Capital Plan

(2)

(8)

Equity Ownership Plan (including notional funds)

(6)

(4)

530

129

Long-Term Incentive Plan

(1)

Credit Suisse legacy plans

(285)

n/a

(108)

n/a

Total GEB and KRTs

(294)

(13)

648

201

1 For notional share awards (excluding Credit Suisse legacy plan awards), ex post explicit adjustments are calculated as units forfeited during the year, valued at the share price on 31 December 2023 (USD 30.9) for

2023 (which may differ from the expense recognized in the income statement in accordance with IFRS). The 2022 data is valued using the share price on 31 December 2022 (USD 18.67). For LTIP, the forfeited units

reflect the fair value awarded at grant. For the notional funds awarded to employees in investment areas within Asset Management under the FOP, this represents the forfeiture credits recognized in 2023 and 2022.

For DCCP, the fair value at grant of the forfeited awards during the year is reflected. Credit Suisse legacy plan awards (including Credit Suisse notional fund awards) are calculated using value at grant and include the

explicit adjustments resulting from the cancellation and reduction order issued by the Federal Department of Finance (FDF) of Switzerland. The 2022 data excludes Credit Suisse legacy award forfeitures. All values

shown exclude DCCP interest and CCA coupon forfeitures. 2 Ex post implicit adjustments for UBS shares are calculated based on the difference between the weighted average grant date fair value and the share

price at year-end while Credit Suisse legacy plans are calculated based on comparing the value at 31 December 2023 to the value at 31 December 2022. The amount for UBS notional funds is calculated using the

mark-to-market change during 2023 and 2022. The 2022 data excludes implicit adjustments related to the Credit Suisse legacy awards. For the GEB members who were appointed to the GEB during 2023, awards

have been fully reflected in the GEB categories.

Advisory vote | Corporate governance and compensation | Compensation 260

Material Risk Takers

For relevant EU- or UK-regulated entities, we identify individuals who are deemed to be Material Risk Takers (MRTs) based

on sectorial and / or local regulatory requirements, including the respective EU Commission Delegated Regulation, the

fifth iteration of the EU Capital Requirements Directive (CRD V) and equivalent UK requirements, as applicable. This group

consists of senior management, risk takers, selected staff in control or support functions and certain highly compensated

employees. For 2023, UBS identified 1,321 MRTs in relation to its relevant EU or UK entities. The increase in the number

of MRTs compared with last year has been driven by the MRT population identified in relation to Credit Suisse legal

entities.

Subject to individual or legal-entity level proportionality considerations, variable compensation awarded to MRTs is subject

to additional deferral and other requirements. For CRD-relevant entities, these include a minimum deferral rate of 40% or

60% (depending on role / variable compensation level) on performance awards and delivery of at least 50% of any upfront

performance award in UBS shares that are vested but blocked for 12 months after grant. Deferred awards granted to MRTs

under UBS’s deferred compensation plans for their performance in 2023 are subject to 6- or 12-month blocking periods

post vesting and do not pay out dividends or interest during the deferral period.

Additionally, MRTs are subject to a maximum ratio between fixed and variable pay. Across EU locations, the maximum

variable to fixed compensation ratio is set to 200%, based on approval through relevant shareholder votes.

For UK-regulated MRTs, the maximum ratio was set by UBS taking into account the business activities and prudential and

conduct risks of the relevant legal entities. In addition, the maximum ratios were set considering the scenario that the

relevant legal entities might exceed their financial objectives.

The maximum ratio for all UK-regulated MRTs was approved by the compensation committees of the relevant entities in

December 2023.

For up to seven years after grant, performance awards granted to MRTs are subject to clawback provisions, which allow

the firm to claim repayment of both the upfront and the vested deferred element of any performance award if an

individual is found to have contributed substantially to significant financial losses for the Group or corporate structure in

scope, a material downward restatement of disclosed results, or engaged in misconduct and / or failed to take expected

actions, thus contributing to significant reputational harm.

LTIP awards granted to UK MRTs and SMFs are subject to an additional non-financial conduct-related metric as required

by UK regulation.

UK Senior Managers and Certification Regime

The Senior Managers and Certification Regime (the SMCR) of the UK Prudential Regulation Authority and Financial

Conduct Authority requires that individuals with specified responsibilities, performing certain significant functions and /

or those in certain other identified categories be designated as SMFs.

Subject to de minimis and other compensation-related considerations, variable compensation awards made to SMFs must

comply with specific requirements, including longer deferral, blocking and clawback periods. The deferral period for SMFs

is seven years, with the deferred performance awards vesting no faster than pro rata from years 3 to 7, except those that

have total compensation below GBP 500,000 and variable incentive accounting for less than 33% of total compensation,

for whom a five-year deferral period (instead of a seven-year period) applies. Such awards are also subject to a 12-month

blocking period post vesting. The clawback policy for SMFs permits clawback for up to 10 years from the date of

performance award grants (applicable if an individual is subject to an investigation at the end of the initial seven-year

clawback period). All SMFs are also MRTs and, as such, subject to the same prohibitions on dividend and interest payments.

Control functions and Group Internal Audit

Our control functions must be independent in order to monitor risk effectively. Therefore, their compensation is

determined separately from the revenue areas that they oversee, supervise or monitor. Their performance award pool is

based not on the performance of these businesses, but on the performance of the Group as a whole. We also consider

other factors, such as how effectively the function has performed and our market position. Decisions on individual

compensation for the senior managers of the control functions are made by the function heads and approved by the

Group CEO. Decisions on individual compensation for the members of Group Internal Audit (GIA) are made by the Head

GIA and approved by the Chairman. Following a proposal by the Chairman, total compensation for the Head GIA is

approved by the Compensation Committee.

Advisory vote | Corporate governance and compensation | Compensation 261

2023 Group personnel expenses

The number of personnel employed as of 31 December 2023 increased by 40,241 to 112,842 (full-time equivalents)

compared with 31 December 2022.

The table below shows our total personnel expenses for 2023, including salaries, pension expenses, social security

contributions, variable compensation and other personnel costs. Variable compensation includes cash performance

awards paid in 2024 for the 2023 performance year, amortization of unvested deferred awards granted in previous years

and the cost of deferred awards granted to employees that are eligible for retirement in the context of the compensation

framework at the date of grant.

The performance award pool reflects the value of performance awards granted relating to the 2023 performance year,

including awards that are paid out immediately and those that are deferred. To determine our variable compensation

expenses, the following adjustments are required in order to reconcile the performance award pool to the expenses

recognized in the Group’s Financial Statements prepared in accordance with IFRS Accounting Standards:

– a reduction for expenses deferred to future periods (amortization of unvested awards granted in 2024 for the 2023

performance year) and accounting adjustments; and

– an addition for the 2023 amortization of unvested deferred awards granted in prior years.

As a large part of compensation consists of deferred awards, the amortization of unvested deferred awards granted in

prior years forms a significant part of the IFRS Accounting Standards expenses in both 2023 and 2024. The expenses

related to prior performance years and total expenses recognized in 2023 include deferred compensation granted under

Credit Suisse Group compensation plans in previous years, which have to be expensed from 2023 onward due to the

integration of Credit Suisse into UBS.

› Refer to “Note 7 Personnel expenses” and “Note 28 Employee benefits: variable compensation” in the “Consolidated financial

statements” section of this report for more information

Personnel expenses

Expenses recognized in the IFRS Accounting Standards income statement

USD m

Related to the

performance year 2023

Related to prior

performance years

Total expenses

recognized in

2023

Total expenses

recognized in

2022

Total expenses

recognized in

2021

Salaries

10,997

7,045

7,339

Non-deferred cash

2,859

(52)

2,807

2,260

2,373

Deferred compensation awards

523

656

1,179

945

817

of which: Equity Ownership Plan

155

330

485

437

363

of which: Deferred Contingent Capital Plan

180

241

421

349

297

of which: Long-Term Incentive Plan

164

204

of which: Fund Ownership Plan

116

Variable compensation – performance awards

3,382

604

3,986

3,205

3,190

Variable compensation – financial advisors

3,761

788

4,549

4,508

4,860

Variable compensation – other

784

526

1,310

241

229

Total variable compensation

7,927

1,918

9,845

7,954

8,280

Contractors

334

323

381

Social security

1,362

111

1,473

944

978

Pension and other post-employment benefit plans

1,361

794

833

Other personnel expenses

862

890

621

576

Total personnel expenses

22,843

2,056

24,899

17,680

18,387

1 Includes role-based allowances. 2 Financial advisor compensation consists of cash and deferred compensation awards and is based on compensable revenues and firm tenure using a formulaic approach. 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 Refer to “Note 28 Employee benefits: variable compensation” in the “Consolidated financial statements” section of this report for more information. 5 Refer to “Note 27 Post-employment benefit plans” in the

“Consolidated financial statements” section of this report for more information.

Advisory vote | Corporate governance and compensation | Compensation 262

Deferred compensation

Vesting of outstanding awards granted in prior years subject to performance metrics and thresholds

The tables below show the extent to which the performance metrics and thresholds for awards granted in prior years

have been met and the related vesting in 2024.

Long-Term Incentive Plan (LTIP) 2019 (performance period 2020–2022)

Performance metrics

Performance achievement

Vesting

Return on common equity tier 1 capital

(RoCET1) and relative Total Shareholder

Return (rTSR)

The overall achievement level is 98% of

the maximum opportunity (of up to

100%), based on outcomes for rTSR

(weighted 50%) and RoCET1 (weighted

50%).

– For GEB, the first and second installments vested in 2023 and

2024, respectively, and the remaining tranche will vest in 2025

accordingly. As outlined in our 2019 Compensation Report, up to

CHF 7.3m, or 30%, of the 2019 LTIP awards at grant for GEB

members active in March 2017 continues to be at risk and directly

linked to the final resolution of the French cross-border matter.

– For other select senior management, the full award vested in

2023.

1 As disclosed in our Compensation Report 2019, LTIP awards for the 2019 performance year were awarded at a value of 62.25% of maximum, which reflected our best estimate of the fair value of the award. The

maximum number of shares was determined by dividing the awarded amount by the fair value of the award at the date of grant, divided by CHF 12.919 or USD 13.141, the average closing price of UBS shares over

the last ten trading days leading up to and including the grant date.

Long-Term Incentive Plan (LTIP) 2020 (performance period 2021–2023)

Performance metrics

Performance achievement

Vesting

Return on common equity tier 1 capital

(RoCET1) and relative Total Shareholder

Return (rTSR)

The overall achievement level is 92.55%

of the maximum opportunity (of up to

100%), based on outcomes for rTSR

(weighted 50%) and RoCET1 (weighted

50%).

– For GEB, the first installment will vest in 2024 and the remaining

tranches will vest in 2025 and 2026 accordingly.

– For other select senior management, the full award will vest in

2024.

1 As disclosed in our Compensation Report 2020, LTIP awards for the 2020 performance year were awarded at a value of 65.90% of maximum, which reflected our best estimate of the fair value of the award. The

maximum number of shares was determined by dividing the awarded amount by the fair value of the award at the date of grant, divided by CHF 13.89 or USD 15.411, the average closing price of UBS shares over

the last ten trading days leading up to and including the grant date.

› Refer to “Performance achievement of the 2020 LTIP granted in 2021” in the “Group compensation” section of this report for more

information

The below EOP and DCCP thresholds have been set to support the sustainability of the organization and represent

minimum performance levels to retain the awards.

Equity Ownership Plan (EOP) 2018 / 2019, EOP 2019 / 2020, EOP 2020 / 2021 and EOP 2021 / 2022

Thresholds

Threshold achievement

Vesting

Return on common equity tier 1 capital

(RoCET1) and divisional return on

attributed equity

The Group and divisional thresholds have

been satisfied.

The following installments vest in full:

– for EOP 2018 / 2019, the third and final installment for the GEB

members, and certain other employes

– for EOP 2019 / 2020, the second installment for SMFs

– for EOP 2020 / 2021, the second installment for all other

employees covered under the plan; and

– for EOP 2021 / 2022, the first installment for all other employees

covered under the plan.

1 Performance may be adjusted for disclosed items generally not representative of underlying business performance.

Deferred Contingent Capital Plan (DCCP) 2018 / 2019

Thresholds

Threshold achievement

Vesting

Common equity tier 1 (CET1) capital ratio,

viability event and, additionally for GEB,

Group profit before tax

The thresholds have been satisfied.

– DCCP 2018 / 2019 vests in full.

1 Performance may be adjusted for disclosed items generally not representative of underlying business performance.

Advisory vote | Corporate governance and compensation | Compensation 263

Outstanding Credit Suisse Group awards granted in prior years subject to performance conditions

The tables below show the extent to which the performance metrics and thresholds for awards granted by the Credit

Suisse Group in prior years have been met and the related impact of the 2023 results.

As a result of the acquisition by UBS Group AG of Credit Suisse Group AG, many of the financial measurements applicable

to legacy Credit Suisse Group awards are no longer available or are not fully comparable to previous performance periods,

therefore revised metrics have been adopted as set out in the table below.

Performance Share Awards (PSA) 2016/2017, 2017/2018, 2018/2019, 2019/2020, 2020/2021, 2021/2022

Thresholds

Amended threshold

Threshold achievement

2023 impact

Under the legacy Credit Suisse Group

plan rules, negative adjustment if:

– Credit Suisse Group AG has

negative RoE or

– divisional pre-tax loss

Negative adjustment if reported UBS

Group AG return on CET1 capital

(RoCET1) is negative.

The amended threshold has been

satisfied.

No negative adjustment applied in

respect of PSAs outstanding on

31 December 2023.

1 Performance may be adjusted for disclosed items generally not representative of underlying business performance.

Strategic Delivery Plan Awards (SDP) 2021/2022

Thresholds

Amended threshold

Threshold achievement

2023 impact

Under the legacy Credit Suisse Group

plan rules, cancellation in full if either:

– CET1 capital ratio is below a

statutory minimum on

31 December 2022, 2023 or 2024

– Leverage ratio is below 3.7% on

31 December 2022, 2023 or 2024

Cancellation in full if reported UBS

Group AG CET1 ratio is less than 7%

on 31 December 2023 or 2024

The amended threshold has been

satisfied.

No cancellation of SDP awards based

on 2023 financial results.

1 Performance may be adjusted for disclosed items generally not representative of underlying business performance.

Transformation Awards share component 2022/23

Share price condition and

performance metrics

Amended threshold

Performance achievement

2023 impact

Under legacy Credit Suisse Group

plan rules:

– Credit Suisse Group share price of

CHF 3.82 (on 31 December 2025)

– Credit Suisse Group RoTE of

between 5% and 7.5% (FY 2025)

– Credit Suisse Group cost base

between CHF 15bn threshold and

CHF 14bn (FY 2025)

– Underlying UBS Group AG RoCET1

of 8% minimum (FY 2025)

– UBS Group AG share price of

CHF 85.87 (on 31 December 2025)

Not applicable, share price condition

and performance metric only apply

for 2025.

No impact. Share price condition and

performance metric only apply for

2025.

All outstanding Contingent Capital Awards (CCAs) granted in previous years

Thresholds / conditions

Threshold / conditions outcome

Vesting

Credit Suisse CET1 capital ratio, Credit

Suisse viability event, Credit Suisse

contingency event

Viability event triggered during 2023.

All outstanding CCAs were canceled on 16 May 2023.

Advisory vote | Corporate governance and compensation | Compensation 264

Audited |

Share ownership / entitlements of GEB members

Name, function

31 December

Number of

unvested

shares / at

risk

Number of

vested shares

Total number

of shares

Potentially

conferred

voting

rights in %

2023

1,218,685

1,220,864

2,439,549

0.185

Sergio Ermotti, Group Chief Executive Officer

2022

2023

Ralph A.J.G. Hamers, former Group Chief Executive Officer

2022

349,441

5,238

354,679

0.023

2023

100,618

0.008

Michelle Bereaux, Group Integration Officer

2022

2023

715,033

715,084

0.054

Christian Bluhm, Group Chief Risk Officer

2022

707,979

0.046

2023

408,308

56,024

464,332

0.035

Mike Dargan, Group Chief Operations and Technology Officer

2022

386,141

17,955

404,096

0.026

2023

1,226,219

128,081

1,354,300

0.103

Suni Harford, President Asset Management

2022

1,028,210

44,202

1,072,412

0.070

2023

48,861

0.004

Naureen Hassan, President UBS Americas

2022

0.000

2023

1,116,181

446,655

1,562,836

0.118

Robert Karofsky, President Investment Bank

2022

1,037,028

364,914

1,401,942

0.092

2023

998,319

460,442

1,458,761

0.111

Sabine Keller-Busse, President Personal & Corporate Banking and President UBS Switzerland

2022

973,150

566,106

1,539,256

0.101

2023

1,118,165

32,287

1,150,452

0.087

Iqbal Khan, President Global Wealth Management

2022

960,301

0.063

2023

906,095

530,000

1,436,095

0.109

Edmund Koh, President UBS Asia Pacific

2022

724,865

579,937

1,304,802

0.085

2023

314,134

15,126

329,260

0.025

Ulrich Körner, CEO of Credit Suisse AG

2022

2023

462,894

76,075

538,969

0.041

Barbara Levi, Group General Counsel

2022

407,195

45,818

453,013

0.030

2023

381,209

81,823

463,032

0.035

Beatriz Martin Jimenez, Head Non-core and Legacy and President UBS EMEA

2022

2023

642,528

3,129

645,657

0.049

Markus Ronner, Group Chief Compliance and Governance Officer

2022

586,283

0.038

2023

270,359

0.020

Stefan Seiler, Head Group Human Resources & Group Corporate Services

2022

2023

219,246

338,962

558,208

0.042

Todd Tuckner, Group Chief Financial Officer

2022

2023

Sarah Youngwood, former Group Chief Financial Officer

2022

299,729

0.020

2023

10,146,854

3,389,519

13,536,373

1.026

Total

2022

7,460,322

1,624,170

9,084,492

0.593

1 Includes all vested and unvested shares of GEB members, including those held by related parties. No options were held in 2023 and 2022 by any GEB member or any of its related parties. Refer to “Note 27 Employee

benefits: variable compensation” in the “Consolidated financial statements” section of this report for more information. 2 Includes shares granted under variable compensation plans with forfeiture provisions. For

the 2019/20 and 2020/21 LTIP awards, the values reflect the final value. For all other LTIP awards, the values reflect the fair value awarded at grant. The actual number of shares vesting in the future will be calculated

under the terms of the plans. Refer to “Group compensation” in the “Compensation” section of this report for more information about the plans.



Audited |

Total of all vested and unvested shares of GEB members

1,2

Total

of which: vested

of which: vesting

2024

2025

2026

2027

2028

2029

Shares on 31 December 2023

13,536,373

3,389,519

3,215,832

3,063,794

2,210,296

1,063,396

542,441

51,095

2023

2024

2025

2026

2027

2028

Shares on 31 December 2022

9,084,492

1,624,170

1,572,210

1,952,123

2,020,881

1,281,201

599,733

34,174

1 Includes shares held by related parties. 2 Includes shares granted under variable compensation plans with forfeiture provisions. The actual number of shares vesting in the future will be calculated under the terms

of the plans. Refer to the “Group compensation” section of this report for more information.



Advisory vote | Corporate governance and compensation | Compensation 265

Audited |

Number of shares of BoD members

Name, function

on 31 December

Number of shares held

Voting rights in %

2023

456,045

0.035

Colm Kelleher, Chairman

2022

339,084

0.022

2023

342,248

0.026

Lukas Gähwiler, Vice Chairman

2022

283,907

0.019

2023

140,812

0.011

Jeremy Anderson, Senior Independent Director

2022

119,660

0.008

2023

16,523

0.001

Claudia Böckstiegel, member

2022

7,814

0.001

2023

80,333

0.006

William C. Dudley, member

2022

66,646

0.004

2023

53,405

0.004

Patrick Firmenich, member

2022

27,275

0.002

2023

112,265

0.009

Fred Hu, member

2022

97,543

0.006

2023

65,916

0.005

Mark Hughes, member

2022

48,497

0.003

2023

46,057

0.003

Nathalie Rachou, member

2022

31,126

0.002

2023

155,623

0.012

Julie G. Richardson, member

2022

138,204

0.009

2023

147,251

0.011

Dieter Wemmer, member

2022

132,320

0.009

2023

115,567

0.009

Jeanette Wong, member

2022

93,440

0.006

2023

1,732,045

0.131

Total

2022

1,385,516

0.090

1 Includes blocked and unblocked shares held by BoD members, including those held by related parties. No options were granted in 2023 and 2022. 2 Includes 127,386 unvested shares granted under variable

compensation plans with forfeiture provisions as part of Lukas Gähwiler’s compensation for his executive roles previously held at UBS.



Audited |

Total of all blocked and unblocked shares of BoD members

Total

of which:

unblocked

of which: blocked until

2024

2025

2026

2027

Shares on 31 December 2023

1,732,045

674,707

275,425

263,853

192,544

325,516

2023

2024

2025

2026

Shares on 31 December 2022

1,385,516

472,981

207,155

250,165

262,671

192,544

1 Includes shares held by related parties. 2 Includes 127,386 unvested shares granted under variable compensation plans with forfeiture provisions as part of Lukas Gähwiler’s compensation for his executive roles

previously held at UBS.



Audited |

Loans granted to GEB members

Pursuant to article 38 of the Articles of Association of UBS Group AG (the AoA), GEB members may be granted loans.

Such loans are made in the ordinary course of business on substantially the same terms as those granted 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. The total amount of such loans must not exceed CHF 20m per GEB

member.

CHF, except where indicated

USD

(for reference)

Name, function

on 31 December

Loans

2,3,4

Loans

2,3,4

Ulrich Körner, CEO of Credit Suisse AG (highest loan in 2023)

2023

12,490,000

14,839,119

Christian Bluhm, Group Chief Risk Officer (highest loan in 2022)

2022

6,927,000

2023

50,980,299

60,568,674

Aggregate of all GEB members

2022

30,752,035

1 Swiss franc and US dollar amounts disclosed represent local currency amounts translated at the relevant year-end closing exchange rate. 2 All loans granted are secured loans. 3 Excludes two unused uncommitted

credit facilities in 2023 of CHF 11,840,766 (USD 14,067,847) that have been granted to two GEB members. No unused uncommitted credit facilities in 2022. 4 No loans have been granted to related parties of the

GEB members at conditions not customary in the market.



Advisory vote | Corporate governance and compensation | Compensation 266

Audited |

Loans granted to BoD members

Pursuant to article 33 of the AoA, loans to independent BoD members are made in the ordinary course of business at

general market conditions. The Vice Chairman, given the full-time nature of his role, may be granted loans in the ordinary

course of business on substantially the same terms as those granted to employees, including interest rates and collateral.

Such loans neither involve more than the normal risk of collectability nor contain any other unfavorable features for the

firm. The total amount of such loans must not exceed CHF 20m per BoD member.

CHF, except where indicated

USD

(for reference)

on 31 December

Loans

2,3,4

Loans

2,3,4

2023

690,000

819,775

Aggregate of all BoD members

2022

Claudia Böckstiegel (independent BoD member) in 2023 and no loans in 2022. 4 No loans have been granted to related parties of the BoD members at conditions not customary in the market.



Audited |

Compensation paid to former BoD and GEB members

The compensation and benefits in the table below relate to payments made to former BoD and GEB members. Variable compensation paid to GEB members who stepped down during

the respective years is included in the GEB performance award pool (see table “Total compensation for GEB members“)

CHF, except where indicated

2, 4

USD

(for reference)

For the year

Compensation

Benefits

Total

2023

3,493

4,150

Former BoD members

2022

2023

676,342

803,548

Aggregate of all former GEB members

2022

89,657

2023

679,835

807,698

Aggregate of all former BoD and GEB members

2022

89,657

1 Compensation or remuneration that is related to the former members’ activity on the BoD or GEB or that is not at market conditions. 2 Swiss franc and US dollar amounts disclosed represent local currency amounts

translated at the relevant year-end closing exchange rate. 3 Includes benefit payments in 2023 for three former GEB members and in 2022 to two former GEB members. 4 Excludes the portion related to the legally

required employer’s social security contributions for 2023 and 2022, however, the legally required employees’ social security contributions are included in the amounts shown in the table above, as appropriate.



Advisory vote | Corporate governance and compensation | Compensation 267

GEB and BoD member mandates outside the Group

In line with the Swiss Code of Obligations, we disclose the mandates of GEB and BoD members outside of the Group in

the tables below. Further information on background and biographies, including mandates in UBS entities, are available

in the “Corporate governance” section of this report.

Audited |

BoD member mandates outside the Group

Name, function

Mandates

Colm Kelleher, Chairman

– Member of the Board of Norfolk Southern Corporation (chair of the risk and finance committee)

– 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)

Lukas Gähwiler, Vice Chairman

– Vice Chairman of the Board of Directors of Pilatus Aircraft Ltd

– Member of the Board of Directors of Ringier 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

Jeremy Anderson, Senior Independent Director

– Member of the Board of Prudential plc (chair of the risk committee)

– Trustee of the UK’s Productivity Leadership Group

Claudia Böckstiegel, member

– Member of the Enlarged Executive Committee of Roche Holding AG

William C. Dudley, member

– Member of the Board of Treliant LLC

– Member of the Advisory Board of Suade Labs

– 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

Patrick Firmenich, member

– Vice Chairman of the Board of dsm firmenich (chair of the nomination committee)

– Member of the Board of Directors of INSEAD and INSEAD World Foundation

– Member of the Advisory Council of the Swiss Board Institute

Fred Hu, member

– 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)

– Chairman of Primavera Capital Ltd

– 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

– Director and member of the Executive Committee of China Venture Capital and Private Equity

Association Ltd.

Mark Hughes, member

– Chair of the Board of Directors of the Global Risk Institute

– Senior advisor to McKinsey & Company

Nathalie Rachou, member

– Member of the Board of Euronext N.V. (chair of the remuneration committee)

– Member of the Board of Veolia Environnement SA (chair of the audit committee)

– Member of the Board of the African Financial Institutions Investment Platform

– Member of the Board of Directors of Fondation Léopold Bellan

Julie G. Richardson, member

– Member of the Board of Yext (chair of the audit committee)

– Member of the Board of Datadog (chair of the audit committee)

– Member of the Board of Fivetran

– Member of the Board of Coalition, Inc.

– Member of the Board of Checkout.com (stepped down in January 2024)

Dieter Wemmer, member

– Member of the Board of Ørsted A/S (chair of the audit and risk committee)

– Chairman of Marco Capital Holdings Limited, Malta and subsidiaries

Jeanette Wong, member

– Member of the Board of Prudential plc

– Member of the Board of Singapore Airlines Limited

– Member of the Board Risk Committee of GIC Pte Ltd

– Member of the Board of Jurong Town Corporation

– Member of the Board of PSA International

– Member of the Board of Pavilion Capital Holdings Pte Ltd

– Chairman of the CareShield Life Council

– Member of the Securities Industry Council

– Member of the Board of Trustees of the National University of Singapore



› Refer to “Board of Directors” in the “Corporate governance” section of this report for more information

Advisory vote | Corporate governance and compensation | Compensation 268

Audited |

GEB member mandates outside the Group

Name, function

Mandates

Sergio Ermotti, Group Chief Executive Officer

– Member of the Board of Ermenegildo Zegna N.V. (Lead Non-Executive Director)

– Member of the Board of Società Editrice del Corriere del Ticino SA

– 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

Michelle Bereaux, Group Integration Officer

– None

Christian Bluhm, Group Chief Risk Officer

– Chairman of the Board of Christian Bluhm Photography AG

– Member of the Foundation Board International Financial Risk Institute

Mike Dargan, Group Chief Digital and Information Officer

– None

Suni Harford, President Asset Management

– Member of the Board of Directors of the Bob Woodruff Foundation

Naureen Hassan, President UBS Americas

– Member of the Board of the Securities Industry and Financial Markets Association

(stepped down in January 2024)

– Member of the Board of Governors of FINRA (as of 16 February 2024)

– Member of the Board of Ownership Works

– Member of the Board of the American Swiss Foundation

– Member of the Board and Executive Committee of The Partnership for New York

City

Robert Karofsky, President Investment Bank

– None

Sabine Keller-Busse, President Personal & Corporate Banking and

President UBS Switzerland

– Member of the Board of Zurich Insurance Group

– Chairwoman of the Foundation Board of the UBS Pension Fund

– Member of the Foundation Council of the UBS International Center

of Economics in Society

– Member of the Board and Board Committee of Zurich Chamber of Commerce

– Member of the Board of the University Hospital Zurich Foundation

– Member of the Board of Trustees of the Swiss Entrepreneurs Foundation

Iqbal Khan, President Global Wealth Management and

President EMEA

– None

Edmund Koh, President Asia Pacific

– Member of the Board of Trustees of the Wealth Management Institute, Singapore

– Member of the Board of Next50 Limited, Singapore

– Member of the Board of Medico Suites (S) Pte Ltd, Singapore

– Member of the Board of Curbside Pte Ltd, Singapore

– Member of the Board of the Philanthropy Asia Alliance Ltd., Singapore

– Member of a sub-committee of the Singapore Ministry of Finance’s Committee on

the Future Economy

– Member of the Financial Centre Advisory Panel of the Monetary Authority of

Singapore

– Council member of the Asian Bureau of Finance and Economic Research,

Singapore

– Member of the Board of Trustee of the Cultural Matching Fund, Singapore

– Member of University of Toronto’s International Leadership

Council for Asia

Ulrich Körner, CEO of Credit Suisse AG

– Vice President of the Board of Lyceum Alpinum Zuoz AG

Barbara Levi, Group General Counsel

– 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 EMEA

– Member of the Advisory Board of the Frankfurt School of Finance & Management

– Member of the Leadership Council, TheCityUK, London (stepped down in February

2024)

Markus Ronner, Group Chief Compliance and Governance Officer

– None

Stefan Seiler,

Head Group Human Resources & Group Corporate Services

– Member of the UBS Center for Economics in Society at the University of Zurich

Foundation Council

– 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

Todd Tuckner, CFO

– None



› Refer to “Group Executive Board” in the “Corporate governance” section of this report for more information

Advisory vote | Corporate governance and compensation | Compensation 269

Provisions of the Articles of Association related to compensation

Swiss say-on-pay provisions give shareholders of companies listed in Switzerland significant influence over board and

management compensation. At UBS, this is achieved by means of an annual binding say-on-pay vote in accordance with

the following provisions of the AoA.

Say on pay

In line with article 43 of the AoA, the General Meeting approves proposals from the BoD in relation to:

a) the maximum aggregate amount of compensation of the BoD for the period until the next AGM;

b) the maximum aggregate amount of fixed compensation of the GEB for the following financial year; and

c) the aggregate amount of variable compensation of the GEB for the preceding financial year.

The BoD may submit for approval by the General Meeting deviating or additional proposals relating to the same or

different periods. If the General Meeting does not approve a proposal from the BoD, the BoD will determine, taking into

account all relevant factors, the respective (maximum) aggregate amount or (maximum) partial amounts and submit the

amount(s) so determined for approval by the General Meeting. UBS Group AG or companies controlled by it may pay or

grant compensation prior to approval by the General Meeting, subject to subsequent approval.

Principles of compensation

In line with articles 45 and 46 of the AoA, compensation of the members of the BoD includes base remuneration and

may include other compensation elements and benefits. Compensation of the members of the BoD is intended to

recognize the responsibility and governance nature of their role, to attract and retain qualified individuals, and to ensure

alignment with shareholders’ interests.

Compensation of the members of the GEB includes fixed and variable compensation elements. Fixed compensation

includes the base salary and may include other compensation elements and benefits. Variable compensation elements

are governed by financial and non-financial performance measures that take into account the performance of UBS Group

AG and / or parts thereof, targets in relation to the market, other companies or comparable benchmarks, short- and

long-term strategic objectives, and / or individual targets. The BoD or, where delegated to it, the Compensation

Committee, determines the respective performance measures, the overall and individual performance targets, and their

achievement. The BoD or, where delegated to it, the Compensation Committee, aims to ensure alignment with

sustainable performance and appropriate risk-taking through adequate deferrals, forfeiture conditions, caps on

compensation, harmful acts provisions and similar means with regard to parts of or all of the compensation. Parts of

variable compensation are subject to a multi-year vesting period.

Additional amount for GEB members appointed after the vote on the aggregate amount of compensation by the AGM

In line with article 46 of the AoA of UBS Group AG, if the maximum aggregate amount of compensation already approved

by the General Meeting is not sufficient to also cover the compensation of a person that becomes a member of or is

being promoted within the GEB after the General Meeting has approved the compensation, UBS Group AG, or companies

controlled by it, is authorized to pay or grant each such GEB member a supplementary amount during the compensation

period(s) already approved. The aggregate pool for such supplementary amounts per compensation period cannot exceed

40% of the average of total annual compensation paid or granted to the GEB during the previous three years.

› Refer to

ubs.com/governance

for more information

Advisory vote | Corporate governance and compensation | Compensation 270

Ernst & Young Ltd

Aeschengraben 27

P.O. Box

CH-4002 Basel

Phone: +41 58 286 86 86

www.ey.com/ch

To the General Meeting of

UBS Group AG, Zurich

Opinion

We have audited the Compensation Report of UBS Group AG (the Company) for the year ended 31 December 2023. The audit was limited to the

information pursuant to Art. 734a-734f of the Swiss Code of Obligations (CO) in the tables marked “audited” of the Compensation report:

Approved GEB fixed compensation and BoD compensation, Total compensation for GEB Members, Remuneration details and additional

information for BoD members, Share ownership / entitlements of GEB members, Number of shares of BoD members, Loans granted to GEB

members, Loans granted to BoD members, Compensation paid to former BoD and GEB members and GEB and BoD member mandates outside the

Group.

In our opinion, the information pursuant to Art. 734a-734f CO in the Compensation report complies with Swiss law and the Company’s articles of

incorporation.

Basis for opinion

We conducted our audit in accordance with Swiss law and Swiss Standards on Auditing (SA-CH). Our responsibilities under those provisions and

standards are further described in the “Auditor’s responsibilities for the audit of the Compensation Report” section of our report. We are

independent of the Company in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, and we have

fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other information

The Board of Directors is responsible for the other information. The other information comprises the information included in the annual report,

but does not include the tables referenced above in the Compensation Report, the consolidated financial statements, the stand-alone financial

statements and our auditor’s reports thereon.

Our opinion on the Compensation Report does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the Compensation Report, our responsibility is to read the other information and, in doing so, consider whether the

other information is materially inconsistent with the audited financial information in the Compensation Report, or our knowledge obtained in the

audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report

that fact. We have nothing to report in this regard.

Board of Directors’ responsibilities for the Compensation Report

The Board of Directors is responsible for the preparation of a Compensation Report in accordance with the provisions of Swiss law and the

Company's articles of incorporation, and for such internal control as the Board of Directors determines is necessary to enable the preparation of a

Compensation Report that is free from material misstatement, whether due to fraud or error. The Board of Directors is also responsible for

designing the compensation system and defining individual compensation packages.

Auditor's responsibilities for the audit of the Compensation Report

Our objectives are to obtain reasonable assurance about whether the information pursuant to Art. 734a-734f CO is free from material

misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of

assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and SA-CH will always detect a material misstatement

when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably

be expected to influence the economic decisions of users taken on the basis of this Compensation Report.

As part of an audit in accordance with Swiss law and SA-CH, we exercise professional judgment and maintain professional scepticism throughout

the audit. We also:

 Identify and assess the risks of material misstatement in the Compensation Report, whether due to fraud or error, design and perform

audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis f or our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve

collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

 Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made.

We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit

and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical requirements

regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our

independence, and where applicable, actions taken to eliminate threats or safeguards applied.

Ernst & Young Ltd

Basel, 27 March 2024

Eveline Hunziker

Licensed audit expert

Maurice McCormick

Licensed audit expert

(Auditor in charge)

Annual Report 2023 | Financial statements | Consolidated financial statements 271

Financial statements

Consolidated financial statements

Table of contents

272

Management’s report on internal control over financial

reporting

273

Reports of the statutory auditor / independent registered

public accounting firm

274

Report of independent registered public accounting firm

on internal control over financial reporting

276

Report of independent registered public accounting firm

on the financial statements

283

Statutory auditor’s report on the audit of the consolidated

financial statements

290

UBS Group AG consolidated financial statements

290

Primary financial statements and share information

290

Income statement

291

Statement of comprehensive income

292

Balance sheet

293

Statement of changes in equity

295

Share information and earnings per share

297

Statement of cash flows

299

Notes to the UBS Group AG consolidated financial

statements

299

Summary of material accounting policies

316

Accounting for the acquisition of the Credit Suisse

Group

322

Segment reporting

324

Segment reporting by geographic location

325

Income statement notes

325

Net interest income and other net income from

financial instruments measured at fair value through

profit or loss

325

Net fee and commission income

326

Other income

326

Personnel expenses

327

General and administrative expenses

327

Income taxes

330

Balance sheet notes

330

Financial assets at amortized cost and other

positions in scope of expected credit loss

measurement

334

Derivative instruments

336

Property, equipment and software

336

Goodwill and intangible assets

338

Other assets

339

Customer deposits

339

Debt issued designated at fair value

340

Debt issued measured at amortized cost

340

Provisions and contingent liabilities

353

Other liabilities

354

Additional information

354

Expected credit loss measurement

366

Fair value measurement

380

Offsetting financial assets and financial liabilities

381

Restricted and transferred financial assets

384

Maturity analysis of assets and liabilities

387

Interest rate benchmark reform

387

Hedge accounting

390

Post-employment benefit plans

398

Employee benefits: variable compensation

402

Interests in subsidiaries and other entities

406

Changes in organization and acquisitions and

disposals of subsidiaries and businesses

407

Related parties

408

Invested assets and net new money

409

Currency translation rates

410

Events after the reporting period

410

Main differences between IFRS Accounting

Standards and Swiss GAAP

Annual Report 2023 | Financial statements | Consolidated financial statements 272

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 Group AG (UBS) are responsible for establishing and maintaining

adequate internal control over financial reporting. UBS’s internal control over financial reporting are 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’s internal control

over financial reporting include those policies and procedures that:

UBS’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 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 2023

UBS management has assessed the effectiveness of UBS’s internal control over financial reporting as of 31 December

2023 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, management believes that, as

of 31 December 2023, UBS’s internal controls over financial reporting were effective. Management has excluded Credit

Suisse, which UBS acquired in 2023, from the scope of its assessment of internal control over financial reporting, as

permitted by SEC guidance for acquired businesses. The total assets of Credit Suisse as of 31 December 2023 represented

approximately 34% of UBS total assets as of such date, and revenues associated with Credit Suisse for the period from

acquisition to 31 December 2023 represented approximately 19% of UBS revenues for the year ended 31 December

2023.

Credit Suisse material weaknesses

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 by UBS, Credit Suisse Group AG and Credit Suisse AG had each identified certain material

weaknesses in their internal controls over financial reporting, as a result of which they had concluded that, as of

31 December 2022, Credit Suisse Group’s and Credit Suisse AG’s internal controls over financial reporting were not

effective and, for the same reasons, had reached the same conclusion regarding the situation as of 31 December 2021.

The material weaknesses identified related to the failure to design and maintain an effective risk assessment process to

identify and analyze the risk of material misstatements in Credit Suisse 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 the company’s 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. Specifically, certain control activities over the completeness and the classification and presentation of non-cash

items in the consolidated statement of cash flows were not performed on a timely basis or at the appropriate level of

precision. This material weakness resulted in the revisions to Credit Suisse Group’s consolidated financial statements for

the three years ended 31 December 2021, as disclosed in its 2021 Annual Report.

› Refer to “Material weaknesses in internal control over financial reporting of the Credit Suisse Group” in the “Acquisition and

integration of Credit Suisse” section of this report for additional information about the material weaknesses at Credit Suisse

The effectiveness of UBS’s internal control over financial reporting as of 31 December 2023 has been audited by Ernst &

Young Ltd, UBS’s independent registered public accounting firm, as stated in their Report of the independent registered

public accounting firm on internal control over financial reporting, Report of the independent registered public

accounting firm on internal control over financial reporting, which expresses an unqualified opinion on the effectiveness

of UBS’s internal control over financial reporting as of 31 December 2023.

Annual Report 2023 | Financial statements | Consolidated financial statements 273

Reports of the statutory auditor / independent registered public accounting firm

The accompanying reports of the independent registered public accounting firm on the consolidated financial statements

Report of the independent registered public accounting firm on the consolidated financial statements and internal control

over financial reporting Report of the independent registered public accounting firm on internal control over financial

reporting of UBS Group are included in our filing on 28 March 2024 with the Securities and Exchange Commission on

Form 20-F pursuant to US reporting obligations.

The accompanying statutory auditor’s report on the audit of the consolidated financial statements of UBS Group AG

Statutory auditor’s report on the audit of the consolidated financial statements, in addition to the aforementioned

reports, is included in our Annual Report 2023 available on our website and filed on 28 March 2024 with all other

relevant non-US exchanges.

Annual Report 2023 | Financial statements | Consolidated financial statements 274

Ernst & Young Ltd

Aeschengraben 27

P. O. B o x

4002 Basel

Phone: +41 58 286 86 86

www.ey.com/en_ch

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of UBS Group AG

Opinion on Internal Control over Financial Reporting

We have audited UBS Group AG and subsidiaries’ internal control over financial reporting as of 31 December 2023,

based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring

Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, UBS Group AG

and subsidiaries (“the Group”) maintained, in all material respects, effective internal control over financial reporting

as of 31 December 2023, based on the COSO criteria.

As indicated in the accompanying Management’s report on internal control over financial reporting, management’s

assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the

internal controls of Credit Suisse AG, which is included in the 2023 consolidated financial statements of the Group

and constituted approximately 34% of total assets as of December 31, 2023 and approximately 19% of revenues for

the year then ended. Our audit of internal control over financial reporting of the Group and our conclusion above did

not include an evaluation of the internal control over financial reporting of Credit Suisse AG.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United

States) (PCAOB), the consolidated balance sheets of the Group as of 31 December 2023 and 2022, the related

consolidated income statements, statements of comprehensive income, statements of changes in equity and

statements of cash flows for each of the three years in the period ended 31 December 2023, and the related notes

and our report dated 27 March 2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Group’s management is responsible for maintaining effective internal control over financial reporting and for its

assessment of the effectiveness of internal control over financial reporting included in the accompanying

Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on

the Group’s internal control over financial reporting based on our audit. We are a public accounting firm registered

with the PCAOB and are required to be independent with respect to the Group in accordance with the U.S. federal

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and

perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting

was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a

material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on

the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We

believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance

regarding the reliability of financial reporting and the preparation of financial statements for external purposes in

accordance with generally accepted accounting principles. A company’s internal control over financial reporting

includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,

accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable

assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance

with generally accepted accounting principles, and that receipts and expenditures of the company are being made

only in accordance with authorizations of management and directors of the company; and (3) 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.

Annual Report 2023 | Financial statements | Consolidated financial statements 275

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.

Ernst & Young Ltd

Basel, 27 March 2024

Annual Report 2023 | Financial statements | Consolidated financial statements 276

Ernst & Young Ltd

Aeschengraben 27

P. O. B ox

4002 Basel

Phone: +41 58 286 86 86

www.ey.com/en_ch

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of UBS Group AG

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of UBS Group AG and subsidiaries (“the

Group”) as of 31 December 2023 and 2022, the related consolidated income statements, statements of

comprehensive income, statements of changes in equity and statements of cash flows for each of the three

years in the period ended 31 December 2023, and the related notes to the consolidated financial statements,

including the information identified as “audited” as described in Note 1 (collectively referred to as the

“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all

material respects, the financial position of the Group at 31 December 2023 and 2022, and the results of its

operations and its cash flows for each of the three years in the period ended 31 December 2023, in conformity

with the IFRS Accounting Standards as issued by the International Accounting Standards Board.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board

(United States) (PCAOB), the Group’s internal control over financial reporting as of 31 December 2023, based

on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring

Organizations of the Treadway Commission (2013 framework) and our report dated 27 March 2023

expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Group’s Board of Directors. Our responsibility is to

express an opinion on the Group’s financial statements based on our audits. We are a public accounting firm

registered with the PCAOB and are required to be independent with respect to the Group in accordance with

the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange

Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we

plan and perform the audit to obtain reasonable assurance about whether the financial statements are free

of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing

procedures that respond to those risks. Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the

accounting principles used and significant estimates made by management, as well as evaluating the overall

presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial

statements that were communicated or required to be communicated to the audit committee and that: (1)

relate to accounts or disclosures that are material to the financial statements and (2) involved our especially

challenging, subjective or complex judgments. The communication of critical audit matters does not alter in

any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by

communicating the critical audit matters below, providing separate opinions on the critical audit matters or on

the accounts or disclosures to which they relate.

Annual Report 2023 | Financial statements | Consolidated financial statements 277

Purchase price allocation over Credit Suisse acquisition

Description of

the Matter

As described in Note 2 to the consolidated financial statements, the Group acquired Credit

Suisse Group AG (CS) on 12 June 2023. The transaction has been accounted for as a

business combination under IFRS 3 and accordingly, the assets acquired, and liabilities

assumed from CS were recorded at fair value as of the acquisition date, resulting in the

recognition of negative goodwill of USD 27.7 billion. Purchase price allocation (PPA)

adjustments were recognized on financial instruments and other asset and liability

categories, including litigation provisions and contingent liabilities to derive the fair values.

Additionally, the Group has begun to recognize the accretion of fair value adjustments

applied to certain financial instruments that will be recognized over their expected lives in the

income statement.

How We

Addressed the

Matter in Our

Audit

Auditing the Group’s fair value estimate of certain assets and liabilities, particularly financial

instruments and litigation provisions and contingent liabilities, was complex due to the

significant judgment required by management in developing the estimates due to illiquid

instruments with unobservable market inputs, uncertain expected future cash flows, complex

underlying collateral, and the uncertain amount and probability that an outflow of resources

will be required for certain litigation matters. Additionally, auditing the Group’s calculation of

accretion of certain fair value adjustments was complex due to judgments around the

appropriate methodology applied (including whether certain assets/liabilities should be

subject to accretion), operational challenges and changes in credit conditions or maturity of

an underlying in terms of treating defaults or repayments, in part or in whole. These factors

contributed to a high degree of auditor judgment and effort in performing procedures and

evaluating audit evidence obtained.

We obtained an understanding, evaluated the design and tested the operating effectiveness

of the Group’s process for estimating the fair value of certain financial instruments and other

asset and liability categories, and estimating the litigation provisions and contingent liabilities,

including management’s controls over: 1) completeness of input data, 2) review and

approval of the PPA valuation, 3) process for determining litigation provisions and contingent

liabilities upon acquisition, 4) monitoring and reporting of potential triggers of a PPA

reassessment, and 5) calculating and recording PPA accretion.

To test the significant PPA adjustments, our audit procedures included, among others, the

assessment of management’s methodology and significant assumptions used in measuring

the fair value of the acquired financial instruments and other asset and liability categories,

and litigation provisions and contingent liabilities, including the use of valuation specialists

for certain financial instruments. For example, we involved our specialists to, on a sample

basis, assess the valuation methodology, and perform independent fair value adjustment

calculations to compare to the Group’s estimates. Additionally, we tested, on a sample basis,

completeness and accuracy of the underlying data provided by management that was used

in the valuations. Lastly, we searched for and evaluated information that corroborates or

contradicts management’s selected assumptions.

Annual Report 2023 | Financial statements | Consolidated financial statements 278

Regarding accretion, our audit procedures included assessing UBS’ accretion policy, testing

that the policy was appropriately implemented, and on a sample basis, testing the

completeness and accuracy of accretion calculations.

We also assessed management’s disclosure regarding the accounting for the acquisition of

Credit Suisse Group AG (within Note 2 to the consolidated financial statements).

Valuation of complex or illiquid instruments at fair value

the Matter

Description of

How We

Addressed

the Matter in

Our Audit

At 31 December 2023, as explained in Notes 1 and 21 to the consolidated financial

statements, the Group held financial assets and liabilities measured at fair value of USD

478,966 million and USD 426,635 million, respectively, including financial instruments that did

not trade in active markets. These instruments are reported within the following accounts:

financial assets and liabilities at fair value held for trading, derivative financial instruments,

financial assets at fair value not held for trading, debt issued designated at fair value,

brokerage payables designated at fair value, and other financial liabilities designated at fair

value. In determining the fair value of these financial instruments, the Group used valuation

techniques, modelling assumptions, and estimates of unobservable market inputs which

required significant management judgment.

Auditing management’s judgments and assumptions used in the estimation of the fair value

of these instruments was complex due to the highly judgmental nature of valuation techniques,

key modelling assumptions and significant unobservable inputs. Auditing the valuation of

complex or illiquid instruments at fair value included consideration of any incremental risks

arising from the impact of current macroeconomic influences on valuation techniques and

inputs, such as geopolitics and inflation. The valuation techniques that required especially

complex judgment were comprised of discounted cash flow and earnings-based valuation

techniques. Highly judgmental modelling assumptions result from a range of different models

or model calibrations used by market participants. Valuation inputs which were particularly

complex and subjective included those with a limited degree of observability and the

associated extrapolation, interpolation or calibration of curves using limited and proxy data

points. Examples of such inputs included unobservable credit spreads and bond prices, and

volatility.

We obtained an understanding, evaluated the design and tested the operating effectiveness

of the controls over management’s financial instrument valuation processes, including controls

over market data inputs, model and methodology governance, and valuation adjustments.

We tested the valuation techniques, models and methodologies, and the inputs used in those

models, as outlined above, by performing an independent revaluation of certain complex or

illiquid financial assets and liabilities with the support of specialists. We used independent

models and inputs and compared inputs to available market data among other procedures.

We also independently challenged key judgments in relation to a sample of fair value

adjustments.

We also assessed management’s disclosures regarding fair value measurement (within Notes

1 and 21 to the consolidated financial statements).

Annual Report 2023 | Financial statements | Consolidated financial statements 279

Legal provisions and contingent liabilities

the Matter

Description of

How We

Addressed

the Matter in

Our Audit

At 31 December 2023, the Group’s provisions for litigation, regulatory and similar matters and

contingent liabilities (legal provisions) were USD 7,852 million. As explained in Note 18 to the

consolidated financial statements, the Group operates in a legal and regulatory environment

that is exposed to significant litigation and similar risks arising from disputes and regulatory

proceedings. Such matters are subject to many uncertainties and the outcomes may be

difficult to predict. These uncertainties inherently affect the amount and timing of potential

outflows with respect to the legal provisions which have been established.

Auditing management’s assessment of legal provisions was complex and judgmental due to

the significant subjectivity involved in management’s estimate of the amount and probability

that an outflow of resources will be required for existing legal matters, including inquiries

regarding cross-border wealth management businesses (Note 18b A.1), mortgage-related

matters (Note 18b B.1), tax and securities law matters (Note 18b B.2), customer account

matters (Note 18b B.6), and supply chain finance funds matters (Note 18b B.11). The legal

provisions for these matters are based on management’s estimation of the amount and

likelihood of the occurrence of certain scenarios.

We obtained an understanding, evaluated the design and tested the operational effectiveness

of management’s controls over the legal provision process. Our procedures included testing

management’s review of the accuracy of the inputs to the estimation of the amount and

likelihood of the occurrence of certain scenarios.

Where appropriate, assessed the methodologies on which the provision amounts were based

with the involvement of specialists, recalculated the provisions and tested the underlying

information. We inspected internal and external legal analyses of the matters supporting the

judgmental aspects impacted by legal interpretations. We obtained correspondence directly

from external legal counsel to assess the information provided by management and performed

inquiries with external counsel as necessary.

We also assessed management’s disclosure regarding legal provisions (within Note 18 to the

consolidated financial statements).

Annual Report 2023 | Financial statements | Consolidated financial statements 280

Recognition of deferred tax assets

Description of

the Matter

How We

Addressed the

Matter in Our

Audit

At 31 December 2023, the Group’s deferred tax assets (“DTAs”) were USD 10,682 million

(see Note 9 to the consolidated financial statements). DTAs are recognized to the extent it is

probable that taxable profits will be available, against which applicable deductible temporary

differences or the carryforward of unused tax losses within the loss carryforward period can

be utilized. There is significant judgment exercised when estimating future taxable income

that is not based on the reversal of taxable temporary differences. Management’s estimate

of future taxable profits is based on its strategic plan that is sensitive to the assumptions

made in estimating future taxable income.

Auditing management’s assessment of the recognition of the Group’s DTAs was complex

due to the highly judgmental nature of estimating future taxable profits. Estimating future

profitability is inherently subjective as it is sensitive to future economic, market and other

conditions, which are difficult to predict, such as the impact of geopolitics, inflation, and

interest rates. Specifically, some of the more subjective key macro-economic assumptions

used included gross domestic product growth rates, equity market performance, and interest

rate expectations.

We obtained an understanding, evaluated the design, and tested the operating effectiveness

of management’s controls over DTA valuation, which included the assumptions used in

developing the strategic plans and estimating future taxable income.

We assessed the completeness and accuracy of the data used for the estimations of future

taxable income. This included recalculating the outputs of models applied to the recognition

process for DTAs.

We involved specialists to assist in assessing the key economic assumptions embedded in

the strategic plans. We compared key assumptions used to forecast future taxable income

to externally available historical and prospective data and assumptions and assessed the

sensitivity of the outcomes using reasonably possible changes in assumptions.

We also assessed management’s disclosure regarding recognized and unrecognized

deferred tax assets (within Note 9 to the consolidated financial statements).

Expected credit losses

Description of

the Matter

At 31 December 2023, the Group’s allowances and provisions for expected credit losses

(“ECL”) were USD 2,261 million. As explained in Notes 1, 10 and 20 to the consolidated

financial statements, ECL is recognized for financial assets measured at amortized cost,

financial assets measured at fair value through other comprehensive income, fee and lease

receivables, financial guarantees, and loan commitments not measured at fair value. ECL is

also recognized on the undrawn portion of committed unconditionally revocable credit lines,

which include the Group’s credit card limits and master credit facilities. The allowances and

provisions for ECL consists of exposures that are in default which are individually evaluated

for impairment (stage 3), as well as losses inherent in the loan portfolio that are not

specifically identified (stage 1 and stage 2). Management’s ECL estimates represent the

difference between contractual cash flows and those the Group expects to receive,

Annual Report 2023 | Financial statements | Consolidated financial statements 281

How We

Addressed the

Matter in Our

Audit

discounted at the effective interest rate. The method used to calculate ECL is based on a

combination of the following principal factors: probability of default (“PD”), loss given default

(“LGD”) and exposure at default (“EAD”).

Auditing management’s estimate of the allowances and provisions for ECL was complex due

to the highly judgmental nature of forward-looking economic scenarios that form the basis of

the ECL calculation, their probability weightings, related post-model adjustments, and the

credit risk models used to estimate stage 1 and stage 2 ECL. The macroeconomic

developments during 2023, including persisting geopolitical tensions and inflation,

contributed to further uncertainty and complexity in estimating ECL. As a result, the ECL

estimation required higher management judgment, specifically within the following two areas:

(i) scenario selection, including assumptions about the scenario severity, underlying

macroeconomic variables, and the number of scenarios necessary to sufficiently cover the

bandwidth of potential outcomes, as well as related scenario weights and post-model

adjustments; and (ii) credit risk models, since the output from historic data based models

may not be indicative of current or future conditions.

Additionally, auditing the measurement of individual ECL for stage 3 was complex due to the

high degree of judgment involved in management’s process for estimating ECL based on

assumptions. These assumptions take 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.

We obtained an understanding, evaluated the design and tested the operating effectiveness

of management’s controls over the ECL estimate, including management’s choice of forward-

looking economic scenarios used to measure ECL and the probability weighting assigned to

such scenarios. We evaluated management’s methodologies and governance controls for

developing and monitoring the economic scenarios used and the probability weightings

assigned to them, and related post-model adjustments. Supported by specialists, we

assessed the key macroeconomic variables used in the forward-looking scenarios, such as

real gross domestic product growth, unemployment rate, interest rates and house price

indices, and evaluated the modelled correlation and translation of those macroeconomic

factors to the ECL estimate. We further assessed the appropriateness of the post-model

adjustments by considering management’s governance process, assumptions used and

sensitivity analysis.

We also obtained an understanding, evaluated the design and tested the operating

effectiveness of controls over credit risk models used in the ECL estimate, including controls

over the completeness and accuracy of model input data, calculation logic, and output data

used in the overall ECL calculation. With the support of specialists, on a sample basis, we

performed an evaluation of management’s models and tested the model outcomes by

inspecting model documentation, reperforming model calculations, and comparing data used

as inputs to management’s forecast to external sources, among other procedures.

For the measurement of stage 3, we obtained an understanding, evaluated the design and

tested the operating effectiveness of controls over management’s process, including an

evaluation of the assumptions used by management regarding the future cash flows from

Annual Report 2023 | Financial statements | Consolidated financial statements 282

debtors’ continuing operations and/or the liquidation of collateral. Supported by specialists in

certain areas, we additionally tested collateral valuation, cash flow assumptions and exit

strategies by performing inquiries of management, inspecting underlying documents, such

as loan contracts, financial statements, covenants, budgets and business plans, and by re-

performing discounted cash flow calculations among other procedures, on a sample basis.

We also assessed management’s disclosure regarding financial assets at amortized cost and

other positions in scope of expected credit loss measurement (within Notes 1, 10 and 20 to

the consolidated financial statements).

Ernst & Young Ltd

We have served as the Group’s auditor since 1998.

Basel, Switzerland

27 March 2024

Annual Report 2023 | Financial statements | Consolidated financial statements 283

Ernst & Young Ltd

Aeschengraben 27

P. O . B o x

CH-4002 Basel

Phone: +41 58 286 86 86

www.ey.com/en_ch

To the General Meeting of

UBS Group AG, Zurich

Basel, 27 March 2024

Statutory auditor’s report on the audit of the consolidated financial statements

Opinion

We have audited the consolidated financial statements of UBS Group AG and its subsidiaries (“the Group”),

which comprise the consolidated balance sheets as of 31 December 2023 and 31 December 2022, and the

consolidated income statements, statements of comprehensive income, statements of changes in equity

and statements of cash flows for each of the three years in the period ended 31 December 2023, and the

related notes to the consolidated financial statements, including the information identified as “audited” as

described in Note 1 (collectively referred to as the “consolidated financial statements”).

In our opinion, the accompanying consolidated financial statements give a true and fair view of the

consolidated financial position of the Group as at 31 December 2023 and 31 December 2022, and of its

consolidated financial performance and its consolidated cash flows for each of the three years in the period

ended 31 December 2023 in accordance with IFRS Accounting Standards and comply with Swiss law.

Basis for opinion

We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISA) and Swiss

Standards on Auditing (SA-CH). Our responsibilities under those provisions and standards are further

described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of

our report.

We are independent of the Group in accordance with the provisions of Swiss law, together with the

requirements of the Swiss audit profession, as well as those of the International Ethics Standards Board for

Accountants’ International Code of Ethics for Professional Accountants (including International

Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in

accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our

opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our

audit of the consolidated financial statements of the current period. These matters were addressed in the

context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon,

and we do not provide a separate opinion on these matters. For each matter below, our description of how

our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the

consolidated financial statements section of our report, including in relation to these matters. Accordingly,

our audit included the performance of procedures designed to respond to our assessment of the risks of

material misstatement of the consolidated financial statements. The results of our audit procedures,

including the procedures performed to address the matters below, provide the basis for our audit opinion on

the accompanying consolidated financial statements.

Annual Report 2023 | Financial statements | Consolidated financial statements 284

Purchase price allocation over Credit Suisse acquisition

Area of focus