Capital management

UBS implemented Basel II, the new international capital adequacy standard formulated by the Basel Committee on Banking Supervision, on 1 January 2008. Therefore, the analysis in this section compares Basel II figures from 31 March 2008 with Basel I figures from previous periods. See the sidebar "Capital measurement under Basel II" for further details on UBS's implementation of Basel II.

Capital ratios

On 31 March 2008, UBS's BIS Tier 1 capital ratio stood at 6.9% and its BIS total capital ratio was 10.7%, down from 8.7% and 11.9% respectively on 31 December 2007. During this period, risk-weighted assets (RWA) decreased by CHF 39 billion, or 10.5%, driven equally by a reduction in exposures and lower risk weightings under the Basel II framework. Furthermore, in comparison with fourth quarter 2007, the first quarter BIS total capital was down CHF 8.6 billion and the BIS Tier 1 capital was down CHF 9.5 billion, both heavily impacted by the quarterly losses recorded on positions related to the US residential mortgage market. These decreases were partially offset by the issuance of mandatory convertible notes (MCNs) of CHF 13 billion.

Including the rights issue of CHF 15 billion expected to take place by the end of second quarter 2008, and the issue of EUR 1 billion of perpetual preferred securities on 11 April 2008, UBS's eligible Tier 1 capital would have amounted to CHF 39.5 billion on 31 March 2008, resulting in a Tier 1 capital ratio of 11.8% and a total capital ratio of 15.6%.