The Group utilizes various lending-related financial instruments in order to meet the financial needs of its customers. The Group issues commitments to extend credit, standby and other letters of credit, guarantees, commitments to ­enter into repurchase agreements, note issuance facilities and revolving underwriting facilities. Guarantees represent irrevocable assurances, subject to the satisfaction of certain conditions, that the Group will make payment in the event that customers fail to fulfill their obligations to third parties. The Group also enters into commitments to extend credit in the form of credit lines that are available to secure the liquidity needs of customers but have not yet been drawn on by them, the majority of which range in maturity from one month to five years. The maximum amount at risk for the Group if customers fail to meet their obligations is 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. For the years ended 31 December 2006, 2005 and 2004 the Group recognized net credit loss recoveries of CHF 10 million, CHF 39 million and CHF 31 million respectively, related to obligations incurred for contingencies and commitments. Provisions recognized for guarantees, documentary credits and similar instruments were CHF 76 million at 31 December 2006 and CHF 109 million at 31 December 2005. See also Note 21 Provisions.

The Group generally enters into sub-participations to ­mitigate the risks from commitments and contingencies. 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. The Group retains the contractual relationship with the obligor, and the sub-participant has only an indirect relationship. The Group will only enter into sub-participation agreements with banks to which UBS ascribes a credit rating equal to or better than that of the obligor.

Effective 1 January 2006, Swiss Banking Law and the newly established deposit insurance system require Swiss banks and securities dealers to jointly guarantee an amount of up to CHF 4 billion for privileged client deposits in the event that another Swiss bank or securities dealer becomes insolvent. For the period from 1 January 2006 to 30 June 2007, the Swiss Federal Banking Commission estimates UBS?s share in the deposit insurance system to be CHF 953 million. The deposit insurance is a guarantee and exposes UBS to additional ­credit risk which is not reflected in the table on the next page. UBS ­considers the probability of a loss due to this contingency to be remote.

UBS is a member of numerous securities and futures exchanges and clearinghouses. Associated with some of those memberships, UBS may be required to pay a share of the financial obligations of, or otherwise be exposed to additional financial obligations as a result of, another member who defaults. While the membership rules vary, obligations generally would arise only if the exchange or clearinghouse had exhausted its resources. The maximum exposure to credit loss is not reflected in the table on the next page. UBS considers the probability of a material loss due to such obligations to be remote.

As part of its trading and market making activities, UBS writes put options on a broad range of underlyings. The writing of put options is subject to UBS‘s risk control framework. For writing put options, UBS receives a premium, re­presenting the fair value of the option at inception, which is recognized as negative replacement value on the balance sheet. A written put option is considered a market price guarantee issued, because the option holder is entitled to make UBS purchase the underlying at the stated exercise price. The contract volume, which is the number of units of the underlying multiplied by the exercise price per unit, therefore represents the maximum potential payment UBS could be required to make upon exercise of the puts. The total ­negative replacement value of written put options is significantly lower than the underlying total contract volume. It changes over time with changes in market parameters. ­Accordingly, neither the underlying total contract volume nor the negative replacement value is indicative of the actual risk exposure arising from written put options. The market value of guarantees in the form of written put options and other forms of market value guarantees amounted to CHF 481,656 million at 31 December 2006 and CHF 317,973 million at 31 December 2005.

Other commitments

The Group enters into commitments to fund external private equity funds and investments, which typically expire within five years. The commitments themselves do not involve ­credit or market risk as the funds purchase investments at market value at the time the commitments are drawn. The maximum amount committed to fund these investments at 31 December 2006 and 31 December 2005 was CHF 766 million and CHF 884 million respectively.