'Every person with a Russian passport is semi-sanctioned' – UBS CEO

Switzerland-based UBS Group AG is taking a very conservative approach to ensure compliance with global sanctions against Russia, but this has created an operational challenge that has to be managed daily, CEO Ralph Hamers said March 16.

The wealth manager is combing through its portfolio to find assets and accounts that are affected by the embargo measures, with new names added to sanction lists by authorities in Switzerland, the U.S., U.K. and EU every day, Hamers said at the Morgan Stanley European Financials conference.

UBS had identified $10 million of outstanding loans linked to wealth management clients subject to sanctions as of March 3, but Hamers said he cannot give an updated figure for that exposure because of the frequency with which new sanctions are still being imposed.

The group is also being very careful to avoid any accidental breaches that could stem from misinterpretation of the imposed measures. "Some [sanctions] are less clear in the way they are described than others," Hamers said. Being more conservative now helps UBS "manage the risk of being fined in a couple of years," the CEO said.

"In principle ... every person with a Russian passport is semi-sanctioned," Hamers said.

UBS is freezing all assets of sanctioned clients and reporting the accounts to the authorities, which then can decide to release or keep the assets frozen, Hamers said.

All remaining UBS activities with a direct link to Russia are geared toward reducing risk for clients and the group itself, the CEO said. In light of the tensions between Russia and Ukraine in early 2022, UBS had stopped doing new business in Russia even before the war began, Hamers said.

UBS reported $634 million in direct exposure to Russia as of the end of 2021 and $51 million in net assets held in its Russian subsidiary as of March 3.

The group said in its annual report published March 3 that it was monitoring settlement risk on open transactions with Russian banks, nonbank counterparties or underlying Russian assets as global sanctions and other measures could impair its ability to "settle existing transactions or to realize on collateral, which may result in unexpected increases in exposures".