Liquidity and funding management

UBS continuously tracks its liquidity position and asset / ­liability profile. This involves monitoring its contractual and behavioral maturity profiles, projecting and modeling its ­liquidity exposures under various stress scenarios and monitoring its secured funding capacity. The results are then factored into the overall contingency plans of UBS. The underlying assumptions in the analysis encompass the characteristics that have emerged in the present market turmoil, such as continued risk aversion and dislocation in terms of money markets and market liquidity being limited to a very narrow range of asset classes. The assumptions incorporated into UBS's current stress scenario analysis exceed the conditions that have thus far been experienced since the onset of the current crisis.

UBS seeks to preserve at all times a prudent liquidity and funding profile and a balanced asset / liability profile. This has been possible throughout the current financial crisis due to the broad diversity of UBS's funding sources, its contingency planning processes and its global scope. UBS has continued to maintain its substantial multi-currency portfolio of unencumbered high-quality short-term assets, but reduced its size during the second quarter in view of the considerable balance sheet and exposure reductions and the relative improvements in overall market conditions.

While UBS experienced some additional net outflows of client assets during the second quarter, this did not have any significant impact on UBS's liquidity situation since only the cash component of these outflows constitutes a direct loss of liquidity for the firm. UBS has been able to readily compensate for any such liquidity outflows by its continued reduction of balance sheet assets and, moreover, has been able to access ample funding from alternative sources within its diversified funding base.