Pillar 3 Disclosure Report

Transcription

1 Pillar 3 Disclosure Report 30 June 2018 United Overseas Bank Limited Incorporated in the Republic of Singapore

2 Contents 1 INTRODUCTION KEY METRICS COMPOSITION OF CAPITAL LEVERAGE RATIO GEOGRAPHICAL DISTRIBUTION OF CREDIT EXPOSURES USED IN THE COUNTERCYCLICAL CAPITAL BUFFER OVERVIEW OF CREDIT QUALITY OF ASSETS CHANGES IN STOCK OF DEFAULTED LOANS AND DEBT SECURITIES OVERVIEW OF CRM TECHNIQUES SA(CR) AND SA(EQ) CREDIT RISK EXPOSURE AND CRM EFFECTS SA(CR) AND SA(EQ) EXPOSURES BY ASSET CLASSES AND RISK WEIGHTS IRBA CREDIT RISK EXPOSURES BY PORTFOLIO AND PD RANGE IRBA EFFECT ON OF CREDIT DERIVATIVES USED AS CRM IRBA FLOW STATEMENT FOR CREDIT RISK EXPOSURES IRBA SPECIALISED LENDING ANALYSIS OF COUNTERPARTY CREDIT RISK EXPOSURE BY APPROACH CVA RISK CAPITAL REQUIREMENTS STANDARDISED APPROACH CCR EXPOSURES BY PORTFOLIO AND RISK WEIGHTS IRBA CCR EXPOSURES BY PORTFOLIO AND PD RANGE COMPOSITION OF COLLATERAL FOR CCR EXPOSURES CREDIT DERIVATIVE EXPOSURES SECURITISATION EXPOSURES IN THE BANKING BOOK SECURITISATION EXPOSURES IN THE BANKING BOOK AND ASSOCIATED REGULATORY CAPITAL REQUIREMENTS UOB ACTING AS INVESTOR MARKET RISK UNDER STANDARDISED APPROACH COMPARISON OF VAR ESTIMATES WITH GAINS OR LOSSES INTEREST RATE RISK IN THE BANKING BOOK SUMMARY OF DISCLOSURE EXCLUDED ABBREVIATIONS Notes: 1 The pillar 3 disclosure report is presented in Singapore dollars. 2 Certain figures in this report may not add up to the respective totals due to rounding. 3 Amounts less than $500,000 in absolute term are shown as "0". Page 2

3 1 INTRODUCTION UOB Group's Pillar 3 Disclosure Report ( The Report ) is prepared in accordance with the Monetary Authority of Singapore ("MAS") Notice to Banks No. 637 "Risk Based Capital Adequacy Requirements for Banks Incorporated in Singapore". The Report is governed by the Group Pillar 3 Disclosure Policy which specifies the Group s Pillar 3 disclosure requirements, frequency of disclosure, medium of disclosure, and the roles and responsibilities of various parties involved in the disclosure reporting. The Policy is reviewed at least annually and approved by the Board. The Report facilitates an assessment of the Group's capital adequacy and provides an overview of the Group's risk profile. For capital adequacy ratios of the Group's major bank subsidiaries, please refer to the Group Financial Report, available on UOB website Page 3

4 2 KEY METRICS The table below provides an overview of the Group's key prudential metrics related to regulatory capital, leverage ratio and liquidity standards. Components as at 30 Jun Jun Mar Dec Sep Jun 2017 Available capital (amounts) 1 1 CET1 capital 29,921 30,206 30,134 29,392 28,821 2 Tier 1 capital 32,897 33,182 32,220 30,616 30,026 3 Total capital 37,803 37,986 37,348 36,636 37,292 Risk weighted assets (amounts) 1 4 Total 205, , , , ,276 Risk-based capital ratios as a percentage of 5 CET1 ratio () Tier 1 ratio () Total capital ratio () Additional CET1 buffer requirements as a percentage of 8 Capital conservation buffer requirement (2.5 from 2019) () Countercyclical buffer requirement () Bank G-SIB and/or D-SIB additional requirement () Total of bank CET1 specific buffer requirements () (row 8 + row 9 + row 10) CET1 available after meeting the Reporting Bank's minimum capital requirements () Leverage Ratio Total Leverage Ratio exposure measure 428, , , , , Leverage Ratio () (row 2/ row 13) Liquidity Coverage Ratio 15 Total High Quality Liquid Assets 44,722 42,773 39,255 39,471 40, Total net cash outflow 31,627 33,524 29,253 27,909 26, Liquidity Coverage Ratio 1 () Net Stable Funding Ratio 2 18 Total available stable funding 224, , Total required stable funding 205, , Net Stable Funding Ratio 1 () For Capital Adequacy, Leverage Ratios, Liquidity Coverage Ratio and Net Stable Funding commentaries, please refer to the Group Financial Report and Liquidity Coverage Ratio Disclosure available on UOB website at 2 Net Stable Funding Ratio requirement is effective January 2018 Page 4

5 3 COMPOSITION OF CAPITAL Table 1 and Table 2 are mandatory disclosures prescribed in MAS Notice 637 requirements. Table 1 shows the reconciliation between the Group's published consolidated balance sheet and the regulatory capital components. Details of the regulatory capital components are set out in Table 2, as referenced. The scope of consolidation for accounting and regulatory purposes is similar, except that subsidiaries which carry out insurance business are not consolidated for regulatory purpose. The list of the Group's major insurance subsidiaries can be found in the Group's Annual Report. As at 30 June 2018, both the total assets and the total equities of each of these subsidiaries were less than $1 billion. Compared with 31 December 2017, key movements in the items under the column "Under regulatory scope of consolidation" were mainly from earnings in the first half of 2018, FY2017 final dividend payout and shares issued pursuant to the scrip dividend scheme. Table 1 - Reconciliation of Balance Sheet to Regulatory Capital as at 30 Jun 2018 Balance Sheet per Published Financial Statements Under regulatory scope of consolidation Reference in Table 2 Equity Share capital and other capital 7,967 of which paid-up ordinary shares 4,993 A of which AT1 capital instruments 2,974 B Retained earnings 20,681 20,555 C of which unrealised fair value gains/losses on financial liabilities and derivative liabilities 20 D1 arising from changes in own credit risk Other reserves 9,011 8,963 E of which unrealised fair value gains/losses on financial liabilities and derivative liabilities 101 D2 arising from changes in own credit risk Equity attributable to equity holders of the Bank 37,660 Non-controlling interests 190 of which NCI that meets criteria for inclusion in - CET1 capital 12 F1 - AT1 capital 2 F2 - T2 capital 2 F3 Total equity 37,850 Liabilities Deposits and balances of banks 17,161 Deposits and balances of customers 287,515 Bills and drafts payable 873 Other liabilities 13,108 Debts issued 27,756 of which T2 capital instruments 4,150 G Total liabilities 346,413 Assets Cash, balances and placements with central banks 29,450 Singapore Government treasury bills and securities 5,864 Other government treasury bills and securities 11,066 Trading securities 2,174 Placements and balances with banks 57,929 Loans to customers 246,392 of which provisions eligible for inclusion in T2 capital 753 H Investment securities 3 11,784 of which investments in PE/VC held beyond the relevant holding period 68 I Other assets 11,053 of which amount related to deferred tax assets (net of deferred tax liabilities, where permissible) 262 J Investment in associates and joint ventures 3 1,252 of which amount related to goodwill 13 K1 Investment properties 1,046 Fixed assets 2,114 Intangible assets 4,138 of which amount related to goodwill 4,138 K2 Total Assets 384,263 3 Note: This includes the Bank's major stake investments in financial institutions. Page 5

6 3 COMPOSITION OF CAPITAL (cont d) Table 2 lists the regulatory capital components and the corresponding regulatory adjustments. (a) 'Amount' refers to components of capital calculated in accordance with MAS Notice 637. (b) 'Reference in Table 1' links the respective line item to Table 1. Regulatory adjustments that are deducted against capital are reflected as positive numbers. Table 2 - Capital Components as at 30 Jun 2018 Amount Reference in Table 1 Common Equity Tier 1 capital: instruments and reserves 1 Paid-up ordinary shares and share premium (if applicable) 4,993 A 2 Retained earnings 20,555 C 3 # Accumulated other comprehensive income and other disclosed reserves 8,963 E 4 Directly issued capital subject to phase out from CET1 - (only applicable to non-joint stock companies) 5 Minority interest that meets criteria for inclusion 12 F1 6 Common Equity Tier 1 capital before regulatory adjustments 34,523 Common Equity Tier 1 capital: regulatory adjustments 7 Valuation adjustment pursuant to Part VIII of MAS Notice Goodwill, net of associated deferred tax liability 4,151 K1+K2 9 # Intangible assets, net of associated deferred tax liability - 10 # Deferred tax assets that rely on future profitability 262 J 11 Cash flow hedge reserve - 12 Shortfall of TEP relative to EL under IRBA - 13 Increase in equity capital resulting from securitisation transactions - 14 Unrealised fair value gains/losses on financial liabilities and derivative liabilities 121 D1+ D2 arising from changes in own credit risk 15 Defined benefit pension fund assets, net of associated deferred tax liability - 16 Investments in own shares - 17 Reciprocal cross-holdings in ordinary shares of financial institutions - 18 Investments in ordinary shares of unconsolidated financial institutions - in which the Reporting Bank does not hold a major stake 19 Investments in ordinary shares of unconsolidated financial institutions in which - the Reporting Bank holds a major stake (including insurance subsidiaries) (amount above 10 threshold) 20 # Mortgage servicing rights (amount above 10 threshold) - 21 # Deferred tax assets arising from temporary differences - (amount above 10 threshold, net of associated deferred tax liability) 22 Amount exceeding the 15 threshold - 23 of which investments in ordinary shares of unconsolidated financial institutions - in which the Reporting Bank holds a major stak e (including insurance subsidiaries) 24 # of which mortgage servicing rights - 25 # of which deferred tax assets arising from temporary differences - 26 National specific regulatory adjustments 68 26A PE/VC investments held beyond the relevant holding periods set out in MAS Notice I 26B Capital deficits in subsidiaries and associates that are regulated financial institutions - 26C Any other items which the Authority may specify - 27 Regulatory adjustments applied in calculation of CET1 Capital due to insufficient - AT1 Capital to satisfy required deductions 28 Total regulatory adjustments to CET1 Capital 4, Common Equity Tier 1 capital (CET1) 29,921 Additional Tier 1 capital: instruments Page 6

7 3 COMPOSITION OF CAPITAL (cont d) Table 2 - Capital Components as at 30 Jun 2018 Amount Reference in Table 1 30 AT1 capital instruments and share premium (if applicable) 2,974 B 31 of which classified as equity under the Accounting Standards 2, of which classified as liabilities under the Accounting Standards - 33 Transitional: Ineligible capital instruments (pursuant to paragraphs and 6.5.4) - 34 AT1 capital instruments issued by fully-consolidated subsidiaries that meet criteria 2 F2 for inclusion 35 of which instruments issued by subsidiaries subject to phase out - 36 Additional Tier 1 capital before regulatory adjustments 2,976 Additional Tier 1 capital: regulatory adjustments 37 Investments in own AT1 capital instruments - 38 Reciprocal cross-holdings in AT1 capital instruments of financial institutions - 39 Investments in AT1 capital instruments of unconsolidated financial institutions - in which Reporting Bank does not hold a major stake 40 Investments in AT1 capital instruments of unconsolidated financial institutions - in which the Reporting Bank holds a major stake (including insurance subsidiaries) 41 National specific regulatory adjustments which the Authority may specify - 42 Regulatory adjustments applied in calculation of AT1 Capital due to - insufficient Tier 2 Capital to satisfy required deductions 43 Total regulatory adjustments to Additional Tier 1 capital - 44 Additional Tier 1 capital (AT1) 2, Tier 1 capital (T1 = CET1 + AT1) 32,897 Tier 2 capital: instruments and provisions 46 Tier 2 capital instruments and share premium (if applicable) 4,150 G 47 Transitional: Ineligible capital instruments (pursuant to paragraphs and 6.5.4) - 48 Tier 2 capital instruments issued by fully-consolidated subsidiaries that meet criteria 2 F3 for inclusion 49 of which instruments issued by subsidiaries subject to phase out - 50 Provisions 753 H 51 Tier 2 capital before regulatory adjustments 4,905 Tier 2 capital: regulatory adjustments 52 Investments in own Tier 2 instruments - 53 Reciprocal cross-holdings in Tier 2 capital instruments of financial institutions - 54 Investments in Tier 2 capital instruments of unconsolidated financial institutions - in which the Reporting Bank does not hold a major stake 55 Investments in Tier 2 capital instruments of unconsolidated financial institutions - in which the Reporting Bank holds a major stake (including insurance subsidiaries) 56 National specific regulatory adjustments which the Authority may specify - 57 Total regulatory adjustments to Tier 2 capital - 58 Tier 2 capital (T2) 4, Total capital (TC = T1 + T2) 37, Floor adjusted total risk weighted assets 205,704 Capital ratios (as a percentage of floor-adjusted risk weighted assets) 61 Common Equity Tier 1 CAR Tier 1 CAR Total CAR 18.4 Page 7

8 3 COMPOSITION OF CAPITAL (cont d) Table 2 - Capital Components as at 30 Jun 2018 Amount 64 Bank-specific buffer requirement of which: capital conservation buffer requirement of which: bank specific countercyclical buffer requirement of which: G-SIB and/or D-SIB buffer requirement (if applicable) - 68 Common Equity Tier 1 available after meeting the Reporting Bank's minimum capital requirements 8.0 National minima 69 Minimum CET1 CAR Minimum Tier 1 CAR Minimum Total CAR 10.0 Amounts below the thresholds for deduction (before risk weighting) 72 Investments in ordinary shares, AT1 capital and Tier 2 capital of unconsolidated financial institutions in which the Reporting Bank does not hold a major stake Investments in ordinary shares of unconsolidated financial institutions 2,305 Reference in Table 1 in which the Reporting Bank holds a major stake (including insurance subsidiaries) 74 Mortgage servicing rights (net of related tax liability) - 75 Deferred tax assets arising from temporary differences (net of related tax liability) - Applicable caps on the inclusion of provisions in Tier 2 76 Provisions eligible for inclusion in Tier 2 in respect of exposures 278 row 50 subject to standardised approach (prior to application of cap) 77 Cap on inclusion of provisions in Tier 2 under standardised approach Provisions eligible for inclusion in Tier 2 in respect of exposures 475 row 50 subject to internal ratings-based approach (prior to application of cap) 79 Cap for inclusion of provisions in Tier 2 under internal ratings-based approach 846 Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2013 and 1 Jan 2022) 80 Current cap on CET1 instruments subject to phase out arrangements - 81 Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities) - 82 Current cap on AT1 instruments subject to phase out arrangements Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities) - 84 Current cap on T2 instruments subject to phase out arrangements 2, Amount excluded from T2 due to cap (excess over cap after redemptions and - maturities) # These elements are subject to a more conservative definition relative to those set out under the Basel III capital standards. Page 8

9 The following disclosure is based on the prescribed template as set out in MAS Notice 637. This disclosure shall be updated on a semi-annual basis and to be read in conjunction with the notes at 3 COMPOSITION OF CAPITAL (cont d) Key Features of Capital Instruments as at 30 Jun Issuer United Overseas Bank Limited United Overseas Bank Limited United Overseas Bank Limited United Overseas Bank Limited 2 Unique Identifier (ISIN code) SG1M XS SG72C SG58I Governing law(s) of the instrument Singapore Singapore Singapore Singapore Regulatory treatment 4 Transitional Basel III rules Core Equity Additional Tier 1 Additional Tier 1 Additional Tier 1 5 Post-transitional Basel III rules Core Equity Additional Tier 1 Additional Tier 1 Additional Tier 1 6 Eligible at solo/group/group&solo Group & Solo Group & Solo Group & Solo Group & Solo 7 Instrument type Ordinary Share Perpetual Capital Security Perpetual Capital Security Perpetual Capital Security 8 Amount recognised in regulatory capital (in millions) S$4,993 million S$879 million S$748 million S$499 million 9 Principal amount (in millions) n.a. US$650 million S$750 million S$500 million 10 Accounting classification Equity Equity Equity Equity 11 Original date of issuance 20 July October May November Perpetual or dated Perpetual Perpetual Perpetual Perpetual 13 Original maturity date No maturity No maturity No maturity No maturity 14 Issuer call subject to prior supervisory approval n.a. Yes Yes Yes 15 Optional call date n.a. 19 October May November 2019 Tax/ regulatory event call n.a. Yes Yes Yes Redemption price n.a. Par Par Par 16 Subsequent call dates, if applicable n.a. Each distribution payment date thereafter Each distribution payment date thereafter Each distribution payment date thereafter Coupons / dividends 17 Fixed or floating (1) Discretionary dividend amount Fixed Fixed Fixed 18 Coupon rate and any related index n.a paid semi-annually on 19 April 4.00 paid semi-annually on 18 May 4.75 paid semi-annually on 19 May and 19 October and 18 November and 19 November 19 Existence of a dividend stopper n.a. Yes Yes Yes 20 Fully discretionary, discretionally or mandatory Fully discretionary Fully discretionary Fully discretionary Fully discretionary 21 Existence of step up or incentive to redeem n.a. No No No 22 Non-cumulative or cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative 23 Convertible or non-convertible n.a. Non-convertible Non-convertible Non-convertible 24 If convertible, conversion trigger n.a. n.a. n.a. n.a. 25 If convertible, fully or partially n.a. n.a. n.a. n.a. 26 If convertible, conversion rate n.a. n.a. n.a. n.a. 27 If convertible, mandatory or optional conversion n.a. n.a. n.a. n.a. 28 If convertible, specify instrument type convertible into n.a. n.a. n.a. n.a. 29 If convertible, specify issuer of instrument it converts into n.a. n.a. n.a. n.a. 30 Write-down feature n.a. Yes Yes Yes 31 If write-down, write-down triggers(s) n.a. Point of non-viability at the discretion of the Regulator Point of non-viability at the discretion of the Regulator Point of non-viability at the discretion of the Regulator 32 If write-down, full or partial n.a. Partial Partial Partial 33 If write-down, permanent or temporary n.a. Permanent Permanent Permanent 34 If temporary write-down, description of write-up mechanism n.a. n.a. n.a. n.a. 35 Position in subordination hierarchy in liquidation (instrument type immediately senior to instrument) Additional Tier 1 instruments Tier 2 instruments Tier 2 instruments Tier 2 instruments 36 Non compliant transitioned features No No No No 37 If yes, specify non compliant features n.a. n.a. n.a. n.a. (1) Details on re-fixing of the dividend/interest rate on the first call date are available in the UOB website. Page 9

10 3 COMPOSITION OF CAPITAL (cont d) Key Features of Capital Instruments as at 30 Jun Issuer United Overseas Bank Limited United Overseas Bank Limited United Overseas Bank Limited United Overseas Bank Limited 2 Unique Identifier (ISIN code) SG57A SG79A XS XS Governing law(s) of the instrument Singapore Singapore Singapore Singapore Regulatory treatment 4 Transitional Basel III rules Additional Tier 1 Tier 2 Tier 2 Tier 2 5 Post-transitional Basel III rules Additional Tier 1 Tier 2 Tier 2 Tier 2 6 Eligible at solo/group/group&solo Group & Solo Group & Solo Group & Solo Group & Solo 7 Instrument type Perpetual Capital Security Subordinated Debt Subordinated Debt Subordinated Debt 8 Amount recognised in regulatory capital (in millions) S$847 million S$744 million S$793 million S$113 million 9 Principal amount (in millions) S$850 million S$750 million US$600 million HK$700 million 10 Accounting classification Equity Liability Liability Liability 11 Original date of issuance 23 July February September August Perpetual or dated Perpetual Dated Dated Dated 13 Original maturity date No maturity 27 February March August Issuer call subject to prior supervisory approval Yes Yes Yes Yes 15 Optional call date 23 July February March August 2023 Tax/ regulatory event call Yes Yes Yes Yes Redemption price Par Par Par Par 16 Subsequent call dates, if applicable Each distribution payment date thereafter Not applicable. One time call only. Not applicable. One time call only. Not applicable. One time call only. Coupons / dividends 17 Fixed or floating (1) Fixed Fixed Fixed Fixed 18 Coupon rate and any related index 4.90 paid semi-annually on 23 January and 23 July 3.50 paid semi-annually on 27 February and 27 August 2.88 paid semi-annually on 8 March and 8 September 3.19 paid quarterly on 26 August, 26 November, 26 February and 26 May 19 Existence of a dividend stopper Yes No No No 20 Fully discretionary, discretionally or mandatory Fully discretionary Mandatory Mandatory Mandatory 21 Existence of step up or incentive to redeem No No No No 22 Non-cumulative or cumulative Non-cumulative Cumulative Cumulative Cumulative 23 Convertible or non-convertible Non-convertible Non-convertible Non-convertible Non-convertible 24 If convertible, conversion trigger n.a. n.a. n.a. n.a. 25 If convertible, fully or partially n.a. n.a. n.a. n.a. 26 If convertible, conversion rate n.a. n.a. n.a. n.a. 27 If convertible, mandatory or optional conversion n.a. n.a. n.a. n.a. 28 If convertible, specify instrument type convertible into n.a. n.a. n.a. n.a. 29 If convertible, specify issuer of instrument it converts into n.a. n.a. n.a. n.a. 30 Write-down feature Yes Yes Yes Yes 31 If write-down, write-down triggers(s) Point of non-viability at the discretion of the Regulator Point of non-viability at the discretion of the Regulator Point of non-viability at the discretion of the Regulator Point of non-viability at the discretion of the Regulator 32 If write-down, full or partial Partial Partial Partial Partial 33 If write-down, permanent or temporary Permanent Permanent Permanent Permanent 34 If temporary write-down, description of write-up mechanism n.a. n.a. n.a. n.a. 35 Position in subordination hierarchy in liquidation (instrument type Unsubordinated and unsecured Unsubordinated and unsecured Unsubordinated and unsecured Tier 2 instruments immediately senior to instrument) obligations obligations obligations 36 Non compliant transitioned features No No No No 37 If yes, specify non compliant features n.a. n.a. n.a. n.a. Page 10

11 3 COMPOSITION OF CAPITAL (cont d) Key Features of Capital Instruments as at 30 Jun Issuer United Overseas Bank Limited United Overseas Bank Limited United Overseas Bank Limited 2 Unique Identifier (ISIN code) XS SG6QD XS Governing law(s) of the instrument Singapore Singapore Singapore Regulatory treatment 4 Transitional Basel III rules Tier 2 Tier 2 Tier 2 5 Post-transitional Basel III rules Tier 2 Tier 2 Tier 2 6 Eligible at solo/group/group&solo Group & Solo Group & Solo Group & Solo 7 Instrument type Subordinated Debt Subordinated Debt Subordinated Debt 8 Amount recognised in regulatory capital (in millions) S$920 million S$498 million S$1,082 million 9 Principal amount (in millions) US$700 million (2) S$500 million US$800 million 10 Accounting classification Liability Liability Liability 11 Original date of issuance 16 & 24 March May March Perpetual or dated Dated Dated Dated 13 Original maturity date 16 September May September Issuer call subject to prior supervisory approval Yes Yes Yes 15 Optional call date 16 September May September 2019 Tax/ regulatory event call Yes Yes Yes Redemption price Par Par Par 16 Subsequent call dates, if applicable Not applicable. One time call only. Not applicable. One time call only. Not applicable. One time call only. Coupons / dividends 17 Fixed or floating (1) Fixed Fixed Fixed 18 Coupon rate and any related index 3.5 paid semi-annually on 16 March and 16 September 3.5 paid semi-annually on 22 May and 22 November 3.75 paid semi-annually on 19 March and 19 September 19 Existence of a dividend stopper No No No 20 Fully discretionary, discretionally or mandatory Mandatory Mandatory Mandatory 21 Existence of step up or incentive to redeem No No No 22 Non-cumulative or cumulative Cumulative Cumulative Cumulative 23 Convertible or non-convertible Non-convertible Non-convertible Non-convertible 24 If convertible, conversion trigger n.a. n.a. n.a. 25 If convertible, fully or partially n.a. n.a. n.a. 26 If convertible, conversion rate n.a. n.a. n.a. 27 If convertible, mandatory or optional conversion n.a. n.a. n.a. 28 If convertible, specify instrument type convertible into n.a. n.a. n.a. 29 If convertible, specify issuer of instrument it converts into n.a. n.a. n.a. 30 Write-down feature Yes Yes Yes 31 If write-down, write-down triggers(s) Point of non-viability at the discretion of the Regulator Point of non-viability at the discretion of the Regulator Point of non-viability at the discretion of the Regulator 32 If write-down, full or partial Partial Partial Partial 33 If write-down, permanent or temporary Permanent Permanent Permanent 34 If temporary write-down, description of write-up mechanism n.a. n.a. n.a. 35 Position in subordination hierarchy in liquidation (instrument type immediately senior to instrument) Unsubordinated and unsecured obligations Unsubordinated and unsecured obligations Unsubordinated and unsecured obligations 36 Non compliant transitioned features No No No 37 If yes, specify non compliant features n.a. n.a. n.a. (2) US$500m 3.5 subordinated notes were first issued on 16 March This was followed by a re-tap for US$200m on 24 March 2016, which was consolidated and formed a single series with the US$500m tranche issued on 16 March Page 11

12 4 LEVERAGE RATIO The Basel III framework introduced Leverage Ratio as a non-risk-based backstop limit to supplement the riskbased capital requirements. It aims to constrain the build-up of excess leverage in the banking sector, with additional safeguards against model risk and measurement errors. Leverage ratio is expressed as Tier 1 Capital against Exposure Measure, which comprises on- and off-balance sheet items. Other than the difference in scope for consolidation and aggregation under SFRS and MAS Notice 637, there are no material differences between total balance sheet assets (net of on-balance sheet derivative and SFT assets) as reported in the financial statements and Exposure Measure of on-balance sheet items. As at 30 June 2018, the Group's leverage ratio was 7.7, down 0.5 quarter-on-quarter, primarily from asset growth. Tier 1 capital Exposure measure Leverage ratio 30 Jun Mar Dec Sep ,897 33,182 32,220 30, , , , , The following disclosure is presented in prescribed templates under MAS Notice 637 Annex 11F and 11G. Reconciliation of Balance Sheet Assets to Exposure Measure 30 Jun Total consolidated assets as per published financial statements 384,263 2 Adjustment for investments in entities that are consolidated for accounting purposes but (599) are outside the regulatory scope of consolidation 3 Adjustment for fiduciary assets recognised on the balance sheet in accordance with the - Accounting Standards but excluded from the calculation of the exposure measure 4 Adjustment for derivative transactions 4,152 5 Adjustment for SFTs Adjustment for off-balance sheet items 45,307 7 Other adjustments (4,602) 8 Exposure measure 428,845 Page 12

13 4 LEVERAGE RATIO (cont d) Exposure Measure Components 30 Jun Mar Exposure measures of on-balance sheet items On-balance sheet items (excluding derivative transactions and SFTs, but 359, ,073 2 including on-balance sheet collateral for derivative transactions or SFTs) Asset amounts deducted in determining Tier 1 capital (4,602) (4,532) 3 Total exposure measures of on-balance sheet items 354, ,541 4 (excluding derivative transactions and SFTs) Derivative exposure measures Replacement cost associated with all derivative transactions 5,303 5,634 (net of the eligible cash portion of variation margins) 5 Potential future exposure associated with all derivative transactions 5,773 6,013 6 Gross-up for derivative collaterals provided where deducted from the - - balance sheet assets in accordance with the Accounting Standards 7 Deductions of receivables for the cash portion of variation margins provided in derivative transactions CCP leg of trade exposures excluded Adjusted effective notional amount of written credit derivatives Further adjustments in effective notional amounts and deductions from potential future exposures of written credit derivatives Total derivative exposure measures 11,310 11, SFT exposure measures Gross SFT assets (with no recognition of accounting netting), after adjusting for sales accounting 17,111 13, Eligible netting of cash payables and cash receivables SFT counterparty exposures SFT exposure measures where a Reporting Bank acts as an agent in the SFTs Total SFT exposure measures 17,435 14, Exposure measures of off-balance sheet items Off-balance sheet items at notional amount 197, , Adjustments for calculation of exposure measures of off-balance sheet items (152,062) (143,167) 19 Total exposure measures of off-balance sheet items 45,307 41, Capital and Total exposures Tier 1 capital 32,897 33, Total exposures 428, ,608 Leverage ratio 22 Leverage ratio Page 13

14 5 GEOGRAPHICAL DISTRIBUTION OF CREDIT EXPOSURES USED IN THE COUNTERCYCLICAL CAPITAL BUFFER To achieve the broader macroprudential goal of protecting the banking sector from periods of excess aggregate credit growth, the Basel III standards introduced the Countercyclical Capital Buffer (CCyB) framework. The CCyB is applied on a discretionary basis by banking supervisors in the respective jurisdictions. Parallel with the Capital Conservation Buffer, a CCyB of up to 2.5, is to be maintained in the form of CET1 capital and phased in from 1 January 2016, capped at per year, till 1 January The Group's countercyclical buffer is computed as the weighted average of effective CCyB in jurisdictions where the Group has private sector credit exposures and the geographical distribution of the private sector credit exposures is based on where the ultimate risk of the exposure resides. Following mandatory disclosure under MAS Notice 637 provides an overview of the Group's private sector credit exposures by geographical breakdown. (a) (b) (c) (d) Geographical breakdown Country-specific countercyclical buffer requirement for private sector credit exposures used in the computation of the countercyclical buffer Bank-specific countercyclical buffer requirement Countercyclical buffer amount Hong Kong ,497 Sweden United Kingdom ,258 Sum 18,757 Total 163, Page 14

15 6 OVERVIEW OF The table below lists the Group's by risk type and approach, as prescribed under MAS Notice 637. The minimum capital requirement is stated at 10.0 of. The Group's comprises credit (88.4), operational (7.0) and market (4.6). Total at 30 June 2018 was $205.7 billion, or $3.4 billion higher quarter-on-quarter mainly due to asset growth. (a) (b) (c) Minimum capital requirements As at As at As at 30 June Mar June Credit risk (excluding CCR) 169, ,089 16,901 2 of which SA(CR) and SA(EQ) 22,005 18,689 2,201 3 of which IRBA and IRBA(EQ) for equity 147, ,399 14,701 exposures under the PD/LGD method 4 CCR 4,373 5, of which Current Exposure Method 2,209 2, of which CCR Internal Models Method IRBA(EQ) for equity exposures under the - 4,604 - simple risk weight method or the IMM 8 Equity investments in funds look through approach 9 Equity investments in funds mandatebased 2,331 2, approach 10 Equity investments in funds fall back approach 10a Equity investment in funds partial use of an approach 11 Unsettled transactions Securitisation exposures in the banking book 13 of which SEC-IRBA of which SEC-ERBA Including IAA of which SEC-SA Market risk 9,550 9, of which SA(MR) 9,550 9, of which IMA Operational risk 14,344 14,087 1, of which BIA of which SA(OR) 14,344 14,087 1, of which AMA Amounts below the thresholds for 5,761 6, deduction (subject to 250 risk weight) 24 Floor adjustment Total 205, ,286 20,570 Page 15

16 7 CREDIT QUALITY OF ASSETS The table below provides an overview of the credit quality of the Group s on- and off-balance sheet assets. A default on the obligor is considered to have occurred when either or both of the followings have taken place: The obligor is unlikely to pay its credit obligations to the Group in full, without recourse by the bank to actions such as realising security (if held). The obligor is past due more than 90 days on any credit obligation to the Group. Overdrafts will be considered as being past due once the outstanding has breached an advised limit. (a) (b) (c) (d) Gross carrying amount of Total Defaulted Non-defaulted impairment Net values exposures exposures allowances (a+b-c) 1 Loans 4, ,531 3, ,392 2 Debt securities 44 24, ,067 3 Off-balance sheet exposures , ,068 4 Total 4, ,713 3, ,527 8 CHANGES IN STOCK OF DEFAULTED LOANS AND DEBT SECURITIES The table below provides the change in defaulted exposures, the flows between non-defaulted and defaulted exposure categories and reductions in the defaulted exposures due to write-offs. 1 Defaulted loans and debt securities at end of the previous semi-annual reporting period (a) 4,266 Loans and debt securities that have defaulted since the previous semi-annual 2 reporting period Returned to non-defaulted status (107) 4 Amounts written-off (247) 5 Other changes (404) 6 Defaulted loans and debt securities at end of the semi-annual reporting period ( /-5) 4,252 The decrease in defaulted loans and debt securities in the first half of 2018 was due to the higher outflow of defaulted loans from recoveries, write-off and returned to non-defaulted status relative to the inflow of new defaulted loans. Page 16

17 9 OVERVIEW OF CRM TECHNIQUES The following table provides information on the extent of usage of CRM techniques. (a) (b) (c) (d) (e) Exposures Exposures Exposures Exposures Exposures secured by secured by secured by Unsecured Secured financial credit collateral guarantees derivatives 1 Loans 117, , ,736 13,187-2 Debt Securities 23, Total 140, , ,736 13,285-4 Of which defaulted 1,641 1,653 1, SA(CR) AND SA(EQ) CREDIT RISK EXPOSURE AND CRM EFFECTS The following table illustrates the effects of CRM on the calculation of Group s capital requirements for credit exposures under SA(CR) and SA(EQ). Compared with 31 December 2017, was higher mainly due to inclusion of SA(EQ) for Equity portfolio following approval from MAS. (a) (b) (c) (d) (e) (f) Exposures before CCF and CRM On-balance sheet amount Off-balance sheet amount Exposures post-ccf and post-crm On-balance sheet amount Off-balance sheet amount and density Asset classes and others density 1 Cash items 1,490-1, Central government and 1,473-1, central 3 PSE 1, , MDB Bank Corporate 7,971 12,458 6,574 2,059 8, Regulatory retail 1,790 1,531 1, , Residential mortgage 1, , CRE 1,930 1,310 1, , Equity - SA(EQ) 1, , , Past due exposures Higher-risk categories Other exposures 8,593 1,419 6, , Total 28,709 18,036 24,929 2,584 22, Page 17

18 11 SA(CR) AND SA(EQ) EXPOSURES BY ASSET CLASSES AND RISK WEIGHTS The following table provides a breakdown of Group s credit risk exposures under SA(CR) and SA(EQ) by asset class and risk weight. (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) Total Risk weight credit exposure Asset classes and others amount (post-ccf and Others post-crm) 1 Cash items 1, ,490 2 Central government and central bank 1, ,473 3 PSE ,063 4 MDB Bank Corporate , ,633 7 Regulatory retail , ,494 8 Residential mortgage , ,953 9 CRE , , Equity - SA(EQ) ,286 1, Past due exposures Higher-risk categories Other exposures , , Total 3, ,753 1,044 1,513 17, ,286 27,513 Page 18

19 12 IRBA CREDIT RISK EXPOSURES BY PORTFOLIO AND PD RANGE The following table provides the main parameters used for the calculation of capital requirements for credit exposures under IRBA. Compared with 31 December 2017, increased mainly due to higher exposures to Corporate and Specialised lending - IPRE asset class. This is in line with asset growth. PD range (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) Original onbalance sheet gross exposures Offbalance sheet exposures pre-ccf CCF EAD post-crm and post-ccf PD Number of Obligors LGD Maturity Years Sovereign asset sub-class 0.00 to < ,978 1, , , to < to < to < to < to < to < (Default) Sub-total 37,553 1, , , Bank asset sub-class 0.00 to < ,424 5, , , to <0.25 3, , , to <0.50 3, , , to < to < to < to < (Default) Sub-total 43,175 6, , , density EL TEP Page 19

20 12 IRBA CREDIT RISK EXPOSURES BY PORTFOLIO AND PD RANGE (cont d) PD range (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) Original onbalance sheet gross exposures Offbalance sheet exposures pre-ccf CCF EAD post-crm and post-ccf PD Number of Obligors LGD Maturity Years Corporate asset sub-class 0.00 to < ,099 2, , to <0.25 8,172 13, , , to < ,885 22, , , to <0.75 7,108 14, , , to < ,489 32, , , , to < ,037 8, , , to < ,787 2, , , (Default) 1, , Sub-total 66,713 96, , , , ,430 Corporate small business asset sub-class 0.00 to < to < , to < , , to < , , to < ,597 7, , , , to < ,385 4, , , , to < , (Default) Sub-total 15,237 17, , , , density EL TEP Page 20

21 12 IRBA CREDIT RISK EXPOSURES BY PORTFOLIO AND PD RANGE (cont d) PD range (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) Original onbalance sheet gross exposures Offbalance sheet exposures pre-ccf CCF EAD post-crm and post-ccf PD Number of Obligors LGD Maturity Years Specialised lending asset sub-class - IPRE 0.00 to < to <0.25 8,949 3, , , to < ,232 3, , , to <0.75 4, , , to < ,027 3, , , to < , , , to < (Default) Sub-total 52,979 11, , , , Total (FIRB portfolios) 215, , , , , ,874 2,430 density EL TEP Residential mortgage asset sub-class 0.00 to < , to < , , , to < ,165 2, , , , to < , , , , to < , , , , to < , , , , to < , , , , (Default) , Sub-total 72,523 5, , , , Page 21

22 12 IRBA CREDIT RISK EXPOSURES BY PORTFOLIO AND PD RANGE (cont d) PD range (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) Original onbalance sheet gross exposures Offbalance sheet exposures pre-ccf CCF EAD post-crm and post-ccf PD Number of Obligors LGD Maturity Years QRRE asset sub-class 0.00 to < , , , to < , , to < , , , to < , , , to < , , , to < , to < , (Default) , Sub-total 3,869 14, , ,018, , Other retail exposures asset sub-class (excluding exposures to small business) 0.00 to < , to <0.25 1, , , to < to <0.75 5, , , to < , , , to < , to < , (Default) , Sub-total 11,041 2, , , , density EL TEP Page 22

23 12 IRBA CREDIT RISK EXPOSURES BY PORTFOLIO AND PD RANGE (cont d) PD range (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) Original onbalance sheet gross exposures Offbalance sheet exposures pre-ccf CCF EAD post-crm and post-ccf PD Number of Obligors LGD Maturity Years Other retail small business exposures asset sub-class 0.00 to < to < , to <0.50 2,148 1, , , to < , , to < , , , , to < , , , to < , (Default) Sub-total 8,314 3, , , , Total (Retail Asset Class) 95,747 25, , ,270, , density EL TEP Page 23

24 13 IRBA EFFECT ON OF CREDIT DERIVATIVES USED AS CRM As at 30 June 2018, the Group does not use credit derivatives as credit risk mitigant for exposures under IRBA. (a) (b) 1 Sovereign F-IRBA Pre-credit derivatives 1,994 Actual 1,994 2 Sovereign A-IRBA Banks F-IRBA 8,784 8,784 4 Banks A-IRBA Corporate F-IRBA 56,048 56,048 6 Corporate A-IRBA Corporate small business F-IRBA 14,059 14,059 8 Corporate small business A-IRBA Specialised lending F-IRBA 44,473 44, Specialised lending A-IRBA High Volatility Commercial Real Estate F-IRBA High Volatility Commercial Real Estate A-IRBA Retail QRRE 2,759 2, Retail residential mortgage 9,732 9, Retail small business 2,985 2, Other retail exposures 2,196 2, Equity F-IRBA Equity A-IRBA Purchased receivables F-IRBA Purchased receivables A-IRBA Total 143, , IRBA FLOW STATEMENT FOR CREDIT RISK EXPOSURES The following table presents changes in corresponding to credit risk only (excluding CCR) over the quarterly reporting period for each of the key drivers. The Group's increased by $5.6 billion quarter-on-quarter mainly driven by asset growth. (a) amounts 1 as at end of previous quarter 141,399 2 Asset size 5,501 3 Asset quality (1,337) 4 Model updates (64) 5 Methodology and policy (42) 6 Acquisitions and disposals - 7 Foreign exchange movements 1,549 8 Other - 9 as at end of quarter 147,007 Page 24

25 15 IRBA SPECIALISED LENDING The following table provides the exposure amount and of the Group s specialised lending portfolio under Supervisory Slotting Criteria. Specialised lending Other than HVCRE Exposure amount Onbalancbalance Off- Regulatory Remaining sheet sheet Risk categories maturity amount amount weight PF OF CF IPRE Total EL Strong < 2.5 years , , , years , , Good < 2.5 years 347 2, years , Satisfactory Weak (0) Default Total 3,696 17,226 2, , ,385 3, ANALYSIS OF COUNTERPARTY CREDIT RISK EXPOSURE BY APPROACH The following table provides the EAD, and parameters used to calculate the Group s CCR regulatory requirements. Compared with 31 December 2017, the increase in CCR s EAD and were mainly driven by higher repo exposures. 1 Current Exposure Method (for derivatives) (a) (b) (c) (d) (e) (f) Replacement cost Potential future exposure Effective EPE α used for computing regulatory EAD EAD (post-crm) 2,743 3,679 6,076 2,209 2 CCR internal models method (for derivatives and SFTs) FC(SA) (for SFTs) FC(CA) (for SFTs) 21, VaR for SFTs Total 3,003 Page 25

26 17 CVA RISK CAPITAL REQUIREMENTS The following table provides the Group s CVA risk capital requirements calculated under Standardised Approach. EAD (post-crm) Total portfolios subject to the Advanced CVA capital requirement (i) VaR component (including the three-times multiplier) - 2 (ii) Stressed VaR component (including the three-times multiplier) - 3 All portfolios subject to the Standardised CVA capital requirement 5,209 1,127 4 Total portfolios subject to the CVA risk capital requirement 5,209 1,127 (a) (b) 18 STANDARDISED APPROACH CCR EXPOSURES BY PORTFOLIO AND RISK WEIGHTS The following table provides a breakdown of the Group s CCR exposures under SA(CR) by asset class and risk weight. (a) (b) (c) (d) (e) (f) (g) (h) (i) Risk weight Total Credit Asset classes Others Exposure Central government and central bank PSE MDB Bank Corporate Regulatory retail Other exposures Total Page 26

27 19 IRBA CCR EXPOSURES BY PORTFOLIO AND PD RANGE The following table sets out the relevant parameters used for the calculations of CCR capital requirements for IRBA models. Compared with 31 December 2017, the increase in CCR s EAD and were mainly due to higher repo exposures. PD range Sovereign asset sub-class (a) (b) (c) (d) (e) (f) (g) EAD post- CRM PD Number of obligors LGD maturity Years density 0.00 to < , to < to < to < to < to < to < (Default) Sub-total 3, Bank asset sub-class 0.00 to < , to <0.25 1, to <0.50 1, to < to < to < to < (Default) Sub-total 15, Corporate asset sub-class 0.00 to < to <0.25 1, to <0.50 1, to <0.75 1, to < , to < to < (Default) Sub-total 7, , Page 27

28 19 IRBA CCR EXPOSURES BY PORTFOLIO AND PD RANGE (cont d) PD range (a) (b) (c) (d) (e) (f) (g) EAD post- CRM Corporate small business asset sub-class PD Number of obligors LGD maturity Years density 0.00 to < to < to < to < to < to < to < (Default) Sub-total Specialised lending asset sub-class - IPRE 0.00 to < to < to < to < to < to < to < (Default) Sub-total Total (sum of portfolios) 26, , , COMPOSITION OF COLLATERAL FOR CCR EXPOSURES The following table provides the breakdown of all types of collateral posted or received by the Group to support or reduce the CCR exposures related to derivative transactions or to SFTs. (a) (b) (c) (d) (e) (f) Collateral used in derivative transactions Collateral used in SFTs Fair value of collateral Fair value of collateral Fair value of Fair value of received posted collateral collateral Segregated Unsegregated Segregated Unsegregated received posted Cash - domestic currency - 1, ,295 Cash - other currencies ,177 2,737 15,757 Domestic sovereign debt , Other sovereign debt ,340 1,311 Government agency debt Corporate bonds ,085 1,592 Total - 2,091-1,943 20,893 21,541 Page 28

29 21 CREDIT DERIVATIVE EXPOSURES The following table shows the breakdown of Group s exposures to credit derivative transactions by protection bought or sold. (a) (b) Protection bought Protection sold Notionals 1 Single-name credit default swaps Index credit default swaps 55-3 Total return swaps 1,460-4 Total notionals 1, Fair values 5 Positive fair value (asset) Negative fair value (liability) 2-22 SECURITISATION EXPOSURES IN THE BANKING BOOK The following table shows the Group s securitisation exposures in the Banking Book. (a) (b) (c) UOB acts as investor Traditional Synthetic Sub-total 1 Total retail of which: residential mortgage of which: credit card Total wholesale of which: commercial mortgage Note: The group does not have any securitisation exposures where it acts as sponsor or originator. Page 29

30 23 SECURITISATION EXPOSURES IN THE BANKING BOOK AND ASSOCIATED REGULATORY CAPITAL REQUIREMENTS UOB ACTING AS INVESTOR The following table shows the exposure amounts, and capital requirements of the Group s securitisation exposures in the Banking Book where the Group acts as an investor. (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) (o) (p) (q) Exposure values (by risk weight bands) Exposure values (by regulatory approach) (by regulatory approach) Capital charge after cap 20 RW >20 to 50 RW >50 to 100 RW >100 to <1250 RW 1250 RW SEC-IRBA SEC-ERBA SA(SA) 1250 SEC-IRBA SEC-ERBA SA(SA) 1250 SEC-IRBA SEC-ERBA SA(SA) Total exposures Traditional securitisation of which: securitisation of which: retail underlying of which: wholesale of which: resecuritisation of which: senior of which: non-senior Synthetic securitisation of which: securitisation of which: retail underlying of which: wholesale of which resecuritisation of which: senior of which: non-senior Page 30

31 24 MARKET RISK UNDER STANDARDISED APPROACH The table below shows the components of the capital requirement under the standardised approach for market risk. Compared with 31 December 2017, the increase in was mainly due to higher interest rate risk. (a) Products excluding options 1 Interest rate risk (general and specific) 2,166 2 Equity risk (general and specific) Foreign exchange risk 5,663 4 Commodity risk 730 Options 5 Simplified approach - 6 Delta-plus method - 7 Scenario approach Securitisation - 9 Total 9, COMPARISON OF VAR ESTIMATES WITH GAINS OR LOSSES Standardised Approach The Group currently adopts the SA for the calculation of regulatory market risk capital but uses the Internal Models Approach to measure and to control trading market risks. The financial products which are warehoused, measured and controlled with internal models include FX and FX options, plain vanilla interest rate contracts and interest rate options, government and corporate bonds, equities and equity options, commodities contracts and commodity options. Internal Model Approach The Group estimates a daily Value-at-Risk (VaR) within a 99 per cent confidence interval, using the historical simulation method, as a control for market risk. The method assumes that possible future changes in market rates may be implied by observed historical market movements. Page 31

32 25 COMPARISON OF VAR ESTIMATES WITH GAINS OR LOSSES (cont d) Group Trading Backtesting Chart (Hypothetical daily profit and loss versus VaR at 99 confidence interval) As VaR is the statistical measure for potential losses, the VaR measures are backtested against profit and loss of the trading book to validate the robustness of the methodology. The backtesting process analyses whether the exceptions are due to model deficiencies or market volatility. All backtesting exceptions are tabled at the ALCO with recommended actions and resolutions. To complement the VaR measure, we perform stress and scenario tests to identify the Group s vulnerability to event risk. These tests serve to provide early warnings of plausible extreme losses for which proactive management of market risk is taken. The Group s daily VaR on 30 June 2018 was $7.76 million. Page 32

33 25 COMPARISON OF VAR ESTIMATES WITH GAINS OR LOSSES (cont d) Group Trading VaR for Market Risk by Risk Class 26 INTEREST RATE RISK IN THE BANKING BOOK Interest rate risk is the impact to earnings and economic value of the Group due to fluctuations in interest rates. Interest rate exposure arises from differences in the maturity and repricing dates of assets, liabilities and offbalance sheet items. These mismatches are actively monitored and managed as part of the overall interest rate risk management process which is conducted in accordance with the Group s policies as approved by the ALCO. The economic value of equity ( EVE ) sensitivity at 100 and 200 basis points parallel interest rate shocks were negative $259 million and $497 million respectively, computed based on the worst case of upward and downward parallel shifts of each yield curve. EVE is the present value of assets less present value of liabilities of the Group. The repricing profile of loans is generally based on the earliest possible repricing dates, taking into account the notice period to be served to the customers. Loan prepayment is estimated based on past statistics and trends where possible and material. Behavioural assumptions based on historical trends are applied where appropriate, for deposits that do not have maturity dates. There may be some differences in the assumptions across geographical locations due to variation in local conditions. Page 33