SecProbe.io

August 10, 2012

Via E -mail
Tom Naratil
Group Chief Financial Officer
UBS AG
Bahnhofstrasse 45
CH-8001 Zurich, Switzerland

Re: UBS AG
Form 20-F for the Fiscal Year Ended December 31, 2011
Filed March 15, 2012
Form 6 -K
Filed July 31, 2012
  File No. 001-15060

Dear Mr. Naratil :

We have reviewed your filing s and have the following comments.  In some of our
comments, we may ask you to provide us with information so we may better understand your
disclosure.

Please respond to this letter within ten business days by amending your filing s, by
providing the requested information, or by advising us when you will provide the requested
response.   If you do not believe our comments apply to your facts and circumstances or do not
believe an amendment is appropriate, please tell us why in your response.

After reviewing any amendment to your filings and the information you provide in
response to these  comments, we may have  additional comme nts.

Form 20 -F for Fiscal Year Ended December 31, 2011

Operating environment and strategy, page 15

Our strategy, page 22

1. We note your disclosure of your Basel III pro forma common equity ratio on page 22 as
well as your pro forma Basel III risk -weigh ted assets on page 25.  Tell us whether these
metrics are currently required to be disclosed by your home country bank regulator or
securities regulator. If these metrics are not currently required to be disclosed by IFRS,
Commission Rules or banking regul atory requirements, they would appear to be non -

Tom Naratil
UBS AG
August 10, 2012
Page 2

 GAAP measures .  If you are unable to support that these metrics do not meet the criteria
of a non -GAAP measure, please clearly label th ese measure s as non -GAAP in your future
filings  and provide the disclosur es required by Item 10(e) of Regulation S -K.  Refer to
General Instruction C (e) of Form 20 -F.

Financial and operating performance, page 57

Off-balance sheet, page 76

Non-consolidated securitization vehicles and collateralized debt, page 76

2. We note that the tab ular presentation on page 77 excludes residential and commercial
mortgage -backed securities backed by a US government agency or instrumentality or US
government -sponsored enterprise (i.e., GNMA, FNMA, and FHLMC).  You state that
such positions have been excluded due to the comprehensive involvement of the US
government in these organizations and their significantly lower risk profile. Given that
the purpose of this table appears to be to quantify the extent of your involvement with
non-consolida ted SPEs, we are unclear as to why you would exclude US agency/GSE
securities simply due to their lower risk profile.  Accordingly, please revise your future
filings to quantify the extent of your involvement with all non -consolidated SPEs,
including those  that are backed by US agencies or GSEs.  In this regard, consider
presenting US agency/GSE securities in a separate column in order to highlight their
lower risk profile.  As an alternative, you may also consider disclosure  in the footnotes to
the table .

Contractual obligations, page 79

3. We note that your contractual obligations table appears to exclude the related interest
expense on your long -term debt obligations which appears to be significant based on your
supplemental cash flow information disclosur e of cash paid for interest during each of the
three years presented.  Please revise this table in future filings to include estimated
interest payments on your long -term debt and disclose any assumptions you made to
derive these amounts.  To the extent th at you can reasonably estimate the amount and /or
timing of payments that you will be obligated to make under interest rate swaps or similar
derivatives you use to manage interest rate risk related to your long -term debt, please
ensure these amounts are inc luded in the table and disclose the fact that they are
considered in the obligations.   To the extent that you are unable to include these
derivatives in your disclosure, please clearly state that fact and provide quantification of
the amount of your long -term debt covered by these derivatives that have been excluded
from the table.   Finally, to the extent that you have excluded certain types of interest
payments from the table, such as for structured notes where payment obligations are
based on the performa nce of certain benchmarks or variable rate debt, please provide

Tom Naratil
UBS AG
August 10, 2012
Page 3

 quantification of the amount of long -term obligations that have these types of interest
rates and thus have been excluded from the table.

Risk, treasury and capital management, page 111

Cred it risk, page 116

Composition of credit risk – UBS Group, page 118

4. We note that you excluded portfolio hedges, such as index CDS, from your credit risk
disclosures on pages 119 and 122.   Please tell us and revise your disclosure in future
filings to exp lain why you have excluded such hedges from your credit exposure analysis.
Please also provide some context around the types of portfolio hedges that you enter into
and how these hedges impact your overall credit risk exposure.

Composition of credit ris k – business divisions, page 120

Wealth Management & Swiss Bank, page 120

5. We note your disclosure that approximately 75% of Wealth Management & Swiss Bank’s
loan portfolio is secured by real estate and that the majority of this real estate exposure is
secured by Swiss residential property, which has  typically exhibited a low risk profile.
We further note your disclosures on pages 117 – 118 that state that loan -to-value (LTV)
ratios are a key factor in both your probability of default and loss given defau lt measures.
Given the importance of LTV ratios in your assessment of credit risk within your
residential real estate loan portfolio, we believe that additional disclosure around these
measures is warranted, particularly given recent concerns over a poten tial future housing
price correction in Switzerland. Accordingly, please revise your future filings as follows:

 Describe your underwriting standards for residential real estate loans, including
whether you have strict guidelines concerning LTV ratios at origination.  If possible,
disclose the average LTV ratio at origination for this portfolio.
 Provide quantitative information reflecting the current LTV ratios for your residential
real estate loan portfolio. In this regard, consider providing a breakdown of this
portfolio by LTV bucket (100 % +, 80% –100%, and below 80%).
 Describe how current LTV ratios are calculated for your residential real estate
portfolio (e.g., whether they are based on updated appraisals, housing price indexes or
a combination thereof ).

6. We note your disclosure on page 120 that the significant shift in your net banking
products exposure from sub -investment grade to investment grade in 2011 was mainly
due to the introduction of a new rating methodology for the retail mortgage segment.
Please tell us and revise your disclosure in future filings to describe in more detail the

Tom Naratil
UBS AG
August 10, 2012
Page 4

 changes that were made to your ratings methodology.  In this respect, clarify whether
there was any actual improvement in credit quality and if not, the primary reas ons for the
improved ratings under your revised methodology.  Please also describe the extent to
which your revised rating methodology impacted your allowance for loan losses and
provide quantification of the impact of this change, if practicable.

Investm ent Bank, page 122

Loan to BlackRock Fund, page 123

7. On page 124  you indicate  that developments through t he year ended December 31, 2011
did not alter your conclusion that the loan to the BlackRock Fund is not impaired and that
consolidation is not requir ed.  Please tell us the developments you considered in  forming
your conclusion .

Impairment and default – distressed claims, page 125

8. We note that you con sider a reclassified security as an  impaired loan if the carrying value
at the balance sheet date is, on a cumulative basis, 5% or more below the carrying value
at the reclassification date adjusted for redemptions.  Please clarify this disclosure in light
of the fact that you disclose on p age 302 that impairment is recognized on reclassified
securities upon adverse revisions in cash flow estimates related to credit events.  For
example, clarify whether there could be a situation where you recognize credit loss
expense on a reclassified secu rity due to an adverse change in cash flows but you do not
consider the reclassified security to be impaired.  If so, please explain your rationale.

Market risk, page 133

9. We note your discussion on page 134 regarding the limitations of the historical
simulation VaR methodology. In light of these limitations, please tell us whether you
considered using a Monte Carlo simulation  or an alternative methodology  which
randomly generates new market factors based on a chosen distribution, instead of the
historical  simulation model that uses historical moves for each market factor replayed
exactly how they occurred.

10. We note that you continue to review the performance of your VaR implementation,
including a review of risks not included in VaR, and that you will cont inue to make
enhancements to your VaR model as needed.  Please respond to the following and expand
your disclosure in future filings as appropriate:

 Tell us the number of different VaR models that are used to determine your total
trading VaR , and discuss the drivers regarding the need to use multiple different
models.

Tom Naratil
UBS AG
August 10, 2012
Page 5

  Tell us how all of the different VaR models used are aggregated to arrive at your total
trading VaR as well as the individual market risk categories disclosed. For example,
clarify whether you simply aggregate the outputs from the different models or
whether adjustments are made, and if so, how the adjustments are determined.
 Discuss the type of risks excluded from your VaR calculation and the reasons why
such risks are exclude d.
 We note that you use the same VaR model for both internal management and
regulatory capital purposes, except for the confidence level and holding period.  Tell
us what drives the need to use different confidence levels and holding periods for
your inter nal management VaR versus your regulatory capital VaR.
 Discuss the process and validation procedures in place prior to implementing
significant model and assumption changes. For example, discuss the approval process
required, back -testing procedures perfo rmed, and periods of parallel model runs
before implementation.
 Given that your VaR models are evolving over time, tell us how you consider when
disclosure is required under Item 11(a)(4) of Form 20 -F regarding model,
assumptions and parameter changes.

11. As a related matter, we note that you present management VaR at both the Group and
Investment Bank level on page 134.  We further note your disclosure of Group Treasury
management VaR on page 152.  Please revise your disclosure in future filings to show
how the management VaR calculations for individual divisions aggregate to total Group
VaR.

Backtesting, page 135

12. Your disclosure on page 134 indicates that you use a 1 -day 99% VaR for backtesting as
required by Basel 2.5 and FINMA.  We also note that you e xperienced three backtesting
exceptions during 2011.  Please tell us whether you also perform backtesting of your
internal management VaR model (1 -day 95% VaR) and why the results of this
backtesting have not been disclosed.  Given that you have chosen to present your 1 -day
95% VaR for market risk disclosure purposes, we would expect your disclosure of
backtesting exceptions to be made on a consistent basis.   Refer to  Item 11 of Form 20 -F.

Liquidity and funding management, page 144

13. We note your disclosure  that your major sources of liquidity are channeled through
entities that are fully consolidated.  Please revise your future filings to disclose the nature
of any restrictions on the ability of your consolidated subsidiaries to transfer funds to the
parent  company in the form of cash dividends, loans or advances.

Tom Naratil
UBS AG
August 10, 2012
Page 6

 Consolidated financial statements, page 284

Notes to the consolidated financial statements, page 297

Note 1 – Summary of significant accounting policies, page 297

a) Significant accounting policies, page 297

10) Loans and Receivables – Renegotiated Loans, page 301

14. We note your accounting policy for renegotiated loans as disclosed on page 301 as well
as your disclosure on page 302 that nonperforming loans include those that have been
restru ctured on concessionary terms.  We further note your disclosure on page 125 stating
that certain renegotiated loans with new terms and conditions that met normal market
criteria for the quality of the obligor and type of loan were reclassified from impaire d to
performing in both 2011 and 2010.  Please respond to the following:

 Tell us and revise your future filings to clarify your definition of a renegotiated loan.
In this regard, clarify whether there are any instances in which a restructured or
modified  loan is not considered “renegotiated” and if so, the reasons why.
 Revise your future filings to disclose the amount of renegotiated loans at each balance
sheet date and, if material, provide a quantitative roll -forward of such loans for each
period prese nted so that a reader may understand the various drivers of changes in the
balances of those loans.
 Describe the key features of your loan modification programs, including a description
of the typical terms modified.
 Clarify your policy for classifying re negotiated loans as impaired loans at the time of
modification.  In this regard, your disclosure on page 125 indicates there are
situations in which a loan is renegotiated on terms which are not considered
concessionary and that such loans are therefore no t considered impaired.
 Clarify your policy for removing renegotiated loans initially classified as impaired
from impaired status. In this regard, you disclose that renegotiated loans continue to
be subject to impairment assessment, calculated using the loa ns original EIR.  Clarify
whether there are any situations in which a renegotiated loan is removed from
impaired status (e.g., due to performance under the modified terms for a specified
period of time) and if so, whether impairment of such loans continues  to be measured
on an individual basis or is included in your collective assessment of impairment.

15. As a related matter, we note your disclosure on page 302 that the restructuring of a
financial asset could result in the original loan being derecognized and a new loan being
recognized.  Please revise your future filings to disclose the following:

Tom Naratil
UBS AG
August 10, 2012
Page 7

  Describe the specific factors considered when determining that a new agreement is
made on substantially different terms or that the new instrument is a substant ially
different instrument.
 Clarify the types of loans that qualify for this accounting treatment (e.g., mortgages,
commercial loans, etc.).
 Clarify whether these loans remain impaired loans or whether these loans are
included within the general collecti ve pools for the purposes of measuring credit
losses and discuss how you concluded this policy was appropriate.

Note 16 – Goodwill and intangible assets, page 336

16. We note that you consider your business segments to be separate cash -generating units
(CGUs) for purposes of your goodwill impairment testing and that the carrying amount
for each segment is determined by reference to the equity attribution framework.  We
also note your disclosure on page 157 that in November 2011, your Board approved a
refinement in the methodology of equity attribution due in part to measure the return on
attributed equity (RoaE) of each busi