Reports

UBS Details Russia Exposures

Tom Burroughes, Group Editor, 8 March 2022

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The world's largest international wealth management firm, with invested assets standing at $3.3 trillion, has detailed its likely exposure – as at the time of writing – to Russia and clients from that country.

UBS yesterday said that it has identified a “small number” of global wealth management clients hit by recent sanctions imposed on Russia following Vladimir Putin’s decision to invade Ukraine, and the affected number of loans outstanding comes to less than $10 million.

In its annual report, the Zurich-listed bank set out its exposure to the actions governments have taken against Russia over its military operations in Ukraine.

Governments have taken out sanctions against several prominent Russians and have seized assets of oligarchs suspected of having links to Putin. These measures, market closures and other disruptions could push up exposures by the bank, it said. 

"We are working to implement sanctions imposed by Switzerland, the US, the EU, the UK and others – all of which have announced unprecedented levels of sanctions against Russia and certain Russian entities and nationals. These events, together with counter-sanctions and other measures taken by Russia, will have ongoing effects on the markets and the global economy," UBS said.

More broadly, UBS said its direct country risk exposure to Russia contributed $634 million to its total emerging market exposure of $20.9 billion as of 31 December 2021. That figure includes trade finance exposures in personal and corporate banking, a single loan in the investment bank with a non-Russian entity with key facilities spread globally including Russia and the Commonwealth of Independent States, Nostro and cash accounts balances, issuer risk on trading inventory within the investment bank, and derivatives within the investment bank, UBS said.

Switzerland’s biggest bank, and one of the world’s largest wealth managers, said its Russian exposures have been cut since the end of 2021. “Not included in this figure are net assets held in our Russian subsidiary, with a net asset value of $51 million,” it said.

The firm said it is monitoring settlement risk on “certain open transactions” with Russian banks and non-bank counterparties because market closures, the imposition of exchange controls, sanctions or other measures “may limit our ability to settle existing transactions or to realise on collateral, which may result in unexpected increases in exposures” it said.

Among other details, UBS said that, as of 3 March, it had about $200 million of exposure stemming from reliance on Russian assets as collateral on Lombard lending and other secured financing in its global wealth management arm.

“We had no material direct country risk exposures to Ukraine or to Belarus as of 31 December 2021 and no material reliance on Ukrainian or to Belarusian collateral within our Lombard portfolio,” the bank said. 

“The situation continues to evolve and broader implications for other counterparties of UBS, including financial institutions, are not possible to assess at this time; however, there were no material adverse effects on UBS’s financial statements as of 4 March 2022,” it said.

In early February UBS reported a full-year pre-tax profit of $9.484 billion, rising 16 per cent on a year ago, taking account of a net credit loss release of $148 million against net credit loss costs in the pandemic-hit year of 2020.

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