Banking, Executive Board and is given final approval by the Supervisory Board.
Responsible finance is our way of measuring how we work with our clients to drive progress on climate and social impact.
As a global financial services company, our profitability, solvency and liquidity are influenced by the state of the economy and the market environment for business, liquidity, funding and capital. The year’s volatility had a marked impact on our performance.
Banking, adopted by more than 200 banks, representing a third of the world's banking assets.
Digital technology has connected the world in an unprecedented way. The Covid-19 outbreak highlighted just how much people rely on the internet to work, socialise and shop. At the same time, there are growing concerns about unequal access, a lack of governance, data privacy and increasingly sophisticated cyberattacks.
Safeguards include security and communication-monitoring capabilities that use behavioural analysis, machine learning and rules engines. We are also partnering with fintechs and others to facilitate security innovation for the bank and our industry. Read more in ‘How we make a difference’.
Payment Services Directive (PSD2) and the General Data Protection Regulation (GDPR). It requires financial institutions to walk the fine line between privacy protection and fostering data sharing.
Trust is about more than regulatory compliance and internal controls that ensure a company sticks to the rules. It’s built on the values and behaviours the company exhibits. ING’s Orange Code places integrity above all else. It defines the principles we stick to no matter what and the behaviours we are committed to. Our Orange Code also guides our decisions when we’re faced with dilemmas. In addition, all ING employees are expected to adhere to our global Code of Conduct. Introduced at the start of 2020, it builds on our Orange Code, giving employees tangible guidance on how to put it into practice. The global Code of Conduct is in addition to local codes of conduct in various countries.
We’re doing all of this while striving to live up to the highest possible standards of integrity. Being a safe, secure and compliant bank remains a top priority for ING. Our Orange Code of values and behaviours places integrity above all else.
including the Business Banking segment serving small and medium-sized businesses and midcorporate clients – under one global management team with one consistent unified approach. Their
The introduction in 2020 of our first global tagline ‘do your thing’ moved the ING brand another step closer to looking, sounding and feeling the same everywhere. It articulates ING’s purpose. We want to make banking frictionless, removing barriers to progress and giving people confidence in their ability to move forward.
Supporting our ambition to be the leading data-driven digital bank, we’re using a modular technology foundation to create business-wide propositions that are globally scalable. This includes an open technology platform called Touchpoint. The Touchpoint platform provides ready-made solutions, modular components and reusable services the business and IT can use to build and run scalable business services and global value propositions. They can also distribute these to a large third-party ecosystem. In this way we can share innovations, use and re-use standardised components, and bring new products to customers faster and in more countries.
New technologies enable new ways to do things and disrupt the status quo. To stay relevant it’s essential that we evolve too. This means coming up with disruptive products, services and experiences that support our strategic ambitions and keep ING a step ahead.
ING was recognised by Global Finance magazine as the most innovative bank in Western Europe at its
Funding is available to any employee who wants to turn a breakthrough idea into reality.
Unite be+nl involved, among other things, the large-scale integration of 600,000 Record Bank customers in Belgium in 2018, and the replacement of many existing IT systems with one digital platform. Integrating the back-end systems turned out to be more complicated. Yet despite the challenges and adjustments to the programme in response to changing circumstances, all our Belgian retail customers now use the same internet banking environment as the Netherlands (OneWeb) and 90 percent have migrated to the mobile OneApp used in the Netherlands and Germany. Unite be+nl runs until 1H 2021.
Building a universal digital bank requires a strong foundation that’s the same everywhere: the same approach to data, the same processes, same systems and infrastructure and the same way of working.
In July, we launched the third phase, which involves funding for projects to help communities recover sustainably in the longer term. In this ‘build back better’ phase, we will align with other stakeholders and focus on projects in areas such as financial health, digital skills and encouraging sustainable enterprise and employment. So far we have allocated around €3 million to support 17 initiatives for long-term corona recovery in 14 countries. These include: • Projects to promote financial health in the Netherlands, Poland and Spain. For example, in the
• The ING Nederlands Fonds supports around 25 projects with organisations like the Over Rood foundation, providing debt-relief training for self-employed freelancers. and the Youth Perspective
Crime Alliance (AFCA), a public-private partnership to foster the mutual exchange of information.
Criminals took advantage of the uncertainty during the coronavirus pandemic to target vulnerable people and organisations with cyberattacks, phishing scams, spoofing scams, malicious software and other types of fraudulent activities. ING’s operational structures proved their resilience and capacity to weather these unprecedented challenges. Keeping our customers, employees and business safe from these attempts remains a top priority.
Customers in all retail countries were offered mortgage holidays and deferrals on loans and credit card repayments. We granted 196,000 customers payment holidays totalling €19.4 billion since government measures were introduced in various countries to protect people impacted by job losses and loss of income during the lockdowns. Of these, 55 percent were for customers in the Netherlands and Belgium. By the end of the year, 93% of payment holidays had expired. We also provided around €1.5 billion of government-guaranteed facilities to support our business clients.
Payconiq. And we extended ‘magician mode’ to Germany, which hides customers’ account information when they swipe their hand in front of their phone camera while using the app in public.
Following a successful pilot in 2019, ING now uses SWIFT gpi in nine ING countries to make international transfers quicker and easier. With SWIFT gpi around 80 percent of international money transfers are done on the same day, compared with three to five days previously.
Our efforts in this area are being recognised. In 2020, we were ranked as ‘climate action leader’ by the leading global environmental disclosure platform CDP for the seventh consecutive year. We also ranked first in our market-cap group by Sustainalytics and MSCI upgraded ING’s rating to ‘AA’, which
ING offers sustainable investment (SI) services to its Retail Banking customers in the Netherlands,
Operating expenses increased by €443 million. This was for €281 million caused by incidental items in 2020, mainly reflecting impairments and restructuring provisions related to the Maggie programme and our retail branch network as well as a goodwill impairment in Retail Belgium. Furthermore, expenses rose mainly due to higher regulatory costs, the impact of collective labour agreement (CLA)
Investment tool Inversión Naranja+ attracted €1 billion in assets under management, positioning it as a solid alternative for retail investors in Spain.
Commodity Finance as a result of lower average oil prices. Expenses rose 9.8 percent, mainly due to impairments on Payvision’s intangible assets.
"When the first case was detected in Lombardy in February, we started working on the crisis that same afternoon. I got a list of people who were supposed to travel for business, and literally called them away from the airport and, in a couple of cases, from their airplane seats. We had to respond quickly to assure the safety of our employees and the continuity of operations for 1.3 million Italian customers. I
We fully digitalised our development tools for managers, empowering them to drive performance and improve their managerial skills. These tools included additional webinars on topics such as motivating a team from a distance. Around 1,200 managers attended these webinars.
Management Board and the Supervisory Board. For more information, see the Corporate Governance chapter.
More than 10 countries annually – including the Netherlands, Belgium and Poland – review and monitor pay levels from a gender perspective, taking any necessary actions if disparities are identified.
TFLP in 2018, focused on sustained high performance, talent development and performance transparency (how can we lead courageously and create a culture of transparency). This was also extended to the TFLE audience in 2020.
Previously she was a board member of ING in Turkey and a non-executive member of the board of ING in Belgium. As head of Market Leaders she is responsible for
ING continuously monitors the developments and outlook in geopolitical risk and assesses what impacts these may have on our portfolios. Internal stress testing and scenario analyses are used to assess the potential impact and adjust the limits to exposures according to our risk appetite.
▪ The SB is responsible for supervising EB and MBB policy, the general course of affairs of ING
developments and challenges effectively, ING regularly reviews the set-up of its risk-management organisation. This allows for better support of the Bank’s Think Forward strategy and enhances the interconnectedness of the risk oversight responsibilities in business units with global risk functions. The following organisation chart illustrates the reporting lines in 2020 for the risk organisation: (*)
ING has a framework of risk management policies, procedures, and minimum standards in place to create consistency throughout the organisation, and to define requirements that are binding for all business units. The goal of the governance framework of the local business units is to align with ING’s framework and to meet local (regulatory) requirements. Senior management is responsible for the implementation of and adherence to policies, procedures and standards. Policies, procedures and standards are regularly reviewed and updated via the relevant risk committees to reflect changes in requirements, markets, products and practices.
behaviours (take it on and make it happen, help others to be successful, and always be a step ahead)
After each assessment the results are shared with the management teams of the assessed units and with the participants of the BRA in a so-called ‘feedback session’. This feedback session is followed up with a dialogue starter toolkit, enabling teams to reflect on the results, discuss opportunities for improvement and call for first steps towards sustainable solutions.
(RASs) into a single, coordinated approach to provide the business with a clear overview of the relevant risks and the tools to manage them. This view allows the Executive Board (EB), the Management Board
Growth Markets (C&G), CRO Netherlands and CRO Belux focus on specific risks in the geographical and/or business areas of their responsibilities. The Financial Risk department is a Tier 2 level risk function, which is responsible for the consolidated risk appetite setting, risk frameworks, model development and policies.
Risk ratings assigned to clients are reviewed at least annually, with the performance of the underlying models monitored regularly. Some of these models are global in nature, such as models for large corporates, commercial banks, insurance companies, central governments, local governments, funds, fund managers, project finance and leveraged companies. Other models are more regional- or country-specific: there are PD models for small medium enterprise (SME) companies in Central Europe, the Netherlands, Belgium, Luxembourg, as well as residential mortgage and consumer loan models in the various retail markets.
Administration (seen in Germany, France and Australia) and in Real Estate (Australia).
Apart from that, lower volumes of residential mortgage loans were visible, as well as lower bond exposures towards the Dutch Central Government. For Belgium the increase in exposures towards the central bank was partially offset by reduced outstanding to Lower Public Administration and slight decrease in residential mortgage volumes.
of which Total Non-performing 7,856 2,600 281 2,643 6,305 32.6% 3.6% 7.9% 9.2% 16.5% 30.2%
Cover values including guarantees received - Business lending portfolio (*) 2019 Cover type Value to Loan
(2019: 7%) of the total Wholesale Banking forborne assets and 6% (2019: 4%) of the total nonperforming forborne assets.
Financial assets that have been derecognised -116,035 -85 -6,987 -107 -897 -236 -123,919 -428
Financial assets that have been derecognised -126,082 -103 -9,108 -162 -1,659 -137 -136,849 -402
2 Stage 3 Lifetime credit impaired includes €1 million Purchased or Originated Credit Impaired.
The relevance and selection of macroeconomic variables is defined by the ECL models under credit risk model governance. The scenarios are reviewed and challenged by two panels. The first panel consists of economic experts from Global Markets Research and risk and modelling specialists, while the second panel consists of relevant senior managers.
Financial Institutions – Financial Markets (FI-FM) Risk. FR and FI-FM Risk are the designated departments of the second line of defence that report to the CRO function and are responsible for the design and execution of the bank’s market risk and counterparty credit risk management functions in support of the ALCO function. FR focuses on the market risks in the banking books, whereas FI-FM Risk is responsible for counterparty credit risk and market risks resulting from the Financial Markets trading books. FR and FI-FM Risk are responsible for determining adequate policies and procedures for actively managing market risk in the banking and trading books and for monitoring ING’s compliance with these guidelines.
framework as approved by ALCO Bank. This framework describes roles, responsibilities, risk metrics, and the policies and procedures related to interest rate risk management. Furthermore ALCO Bank sets the risk appetite for interest rate risk, which is then translated into limits for the interest rate risk metrics.
ING distinguishes between three types of activities that generate interest rate risk in the banking book: ▪ Investment of own funds; ▪ Commercial business; and
benchmarks, the reform will include replacing current LIBOR rates with alternative, nearly risk-free rates. For example RFR Working Groups in the US and UK have recommended to replace USD LIBOR and
Stress testing and event risk are valuable risk management tools. In addition to the bank-wide stress test framework as described in the stress-testing section, FI-FM Risk performs additional assessments, specific to the Trading Book, with various frequencies: sensitivity analyses (single-risk factor and multirisk factor), ad-hoc stress tests (e.g. Covid-19 scenarios) and structured stressed scenario tests under the event risk framework - to monitor market risks under extreme market conditions. Event risk is calculated because HVaR in general does not produce an estimate of the potential losses that can occur as a result of extreme market movements, i.e. beyond the confidence level. Event risk evaluates the bank’s financial stability under severe but plausible stress scenarios and assists in decision-making aimed at maintaining a financially healthy going-concern institution after a severe event occurs. Event risk is based on historical as well as hypothetical extreme scenarios. The result is an estimate of the profit and loss caused by a potential event and its worldwide impact for ING. The event risk number for
In the graph below, it can be seen that the market volatility in March 2020 lead to a sharply increased
(b) Average of the IRC number over the preceding 12 weeks 967 77 1,278 102 4 Comprehensive Risk Measure – CRM (higher of values a, b and c)
For the third line of defence Corporate Audit Services is responsible for independently assessing the design, effectiveness and implementation of the funding and liquidity framework.
risk appetite to ensure a sufficiently diversified and stable funding base.
The F&L risk appetite statements are translated into a number of metrics with appropriate boundaries and instruments which are used to measure and manage ING’s funding and liquidity risk.
The Bank should be able to meet payment and settlement obligations on a timely basis
Principles, and improved transparency through regular human rights reporting. We continue to work within the framework of this agreement; we are currently in the process of developing a tool that will help assess portfolio and client exposure to salient human rights issues, enabling identification of issues and client engagement. The tool is expected to be launched in 2021.
Credit risk portfolio per economic sector and application of ESR framework in percentage 2020 outstandings
E n v ir o n m e n ta l co m p li a n ce
By taking part in the above-mentioned initiatives, we aim to contribute our viewpoint and those of our clients, employees and other stakeholders to help form a consensus and develop clear guidelines that can serve as a standard for our industry.
Unit (IVU), Professional Practice Unit (ERM PPU) and Corporate Security & Investigations (CSI).
ING is continuously working to strengthen its implementation of KYC and build sustainable KYC
Compliance Risk. In response, ING is running a diverse portfolio of RegTech initiatives. This ranges from making investments (e.g. Ascent, Eigen), close collaboration on solutions (e.g. Privitar, DuCo, Regtek
ING strives to play its part in safeguarding the integrity of the financial system by combatting financial crime through utilisation of an overarching policy and control framework which is continuously enhanced. The KYC policy and related control standards (the KYC policy framework) set the minimum requirements and control objectives for all ING entities to guard against involvement in financial crime activity. The KYC policy Framework reflects relevant national and international laws, regulations, guidance documents and guidelines from national, European and international authorities,
Looking ahead, ING keeps abreast and takes relevant action on other external developments. In this context, reference is made, among other things, to the 6th AML Directive, as well as regulatory proposals from the European Commission following from its action plan for a comprehensive union policy on preventing money laundering and terrorism financing. Moreover, the execution of the Dutch action plan for the prevention of money laundering through the Dutch financial system and for tracking and prosecuting criminals and their enablers is in progress. This action plan was presented by the Dutch Minister of Justice and Security and Minister of Finance. Anticipating regulatory developments in this area, ING and four other Dutch banks established Transaction Monitoring
smooth functioning of markets and public confidence in markets are crucial for economic growth and wealth. The 2016 market abuse policy was revised to incorporate EU Regulation 2019/2115, which changed the requirements on market soundings for small and medium-sized enterprises. Furthermore, a full-fledged review of the 2016 market abuse policy was also conducted.
The Model Risk Management Committee (MoRMC) is in place to align the overall model strategy and approve the model risk appetite, model risk management policies and methodologies. MoRMC is mandated by the MBB and chaired by the CRO of ING, the MoRMC meets monthly.
An important difference with the financial and non-financial risk lines of defence is that models can also be owned by risk (normally a 2nd LoD), e.g. for bank-wide stress testing, or by the audit service
The next figure provides a schematic overview of the model lifecycle, where orange represents the activities of the 1st MLoD, grey represents the 2nd MLoD and light grey is the 3rd. The objectives of the different processes are outlined below (reference).
In February, Ralph Hamers announced his decision leave ING. There were also other changes in the Executive Board and Supervisory Board to address?
ING could help customers, employees and communities safely through the Covid-19 pandemic. ING’s risk culture and the priority to further strengthen its global anti-money laundering (AML) and know your customer (KYC) activities remained key attention areas.
Bank’s (ECB) Supervisory Review and Evaluation Process (SREP), the results of and learnings from the
5. These additional SB meetings (that took place this year in view of Covid-19) were complemented by bi-weekly written updates.
The annual Supervisory Board Knowledge Days, which took place in Amsterdam on 16 and 17 January 2020, were combined with regular Supervisory Board meetings and focused on the compliance maturity plan, AML/KYC, WB strategy update, Organisational Health Index and governance related matters (including the evolving role of the boards, suitability and risk culture).
Members of the Supervisory Board that are not Risk Committee members received a standing invitation and they participated in several of these sessions.
All relevant items discussed by the committee were reported to the Supervisory Board, with the
International experience • •• •• •• •• •• • sufficient relevant knowledge/experience in the area
described in the 2020 publication ‘Application of the Dutch Banking Code by ING Bank N.V.’, dated 8
In line with market practice, ING Group currently intends to include the following categories of shareholders in such a rights issue: 1. Qualified and retail investors in the Netherlands and the US (SEC registered offering); 2. Qualified investors in EU member states (and potentially the UK); 3. Retail investors in EU member states (and potentially the UK) where ING has a significant retail investor base, provided that it is feasible to meet local requirements (in ING’s 2009 rights offering, shares were offered to existing shareholders in Belgium, France, Germany, Luxembourg, Spain and the
Shareholders who are not allowed, do not elect, or are unable to subscribe to a rights offering, are entitled to sell their rights in the market or receive any net financial benefit upon completion of a rump offering after the exercise period has ended.
ING is still looking long term and taking steps to improve the appointment of women in senior positions throughout the bank in line with the adopted diversity and inclusion principle.
CEO and chairman of the Executive Board and the Management Board Banking with effect from 1 July 2020. Prior to this he was ING’s CRO. The Supervisory Board will propose to the shareholders to reappoint him as member of the Executive Board and CEO of ING Group at the AGM on 26 April 2021.
The Articles of Association exclude the waiver of the latter requirement in a second General Meeting.
For an overview of loans granted to members of the Supervisory Board, see the Remuneration report.
All services of the external auditor to ING Group and its subsidiaries are subject to approval by the
We're committed to conducting our business with integrity, and regulatory compliance remains the priority for 2021 and beyond.
In 2020, the board of ING Continuity Foundation (the Board) held three meetings, on 30 January, 11 May and 1 December.
Under the 2020 policy, and in line with the requirements laid down in the Dutch Banking Code, the total direct compensation of the Executive Board is below the median of our peer group. This group is selected on the basis of geography, talent market, size and governance framework, as well as a balancing factor to ensure relevance of our benchmark. Our peer group in 2020 consists of eight comparable Dutch companies and eight relevant European financial services providers, which are listed in the ‘Total direct compensation’ paragraph.
AGM, the 2019 Remuneration Report included a new approach for Executive Board variable remuneration also setting out how this links to performance as of performance year 2020. The 2020
remuneration policy were up for a binding vote at the 2020 AGM. To come to a balanced proposal we incorporated feedback from the broad stakeholder consultation carried out in the autumn and winter of 2019. This extensive stakeholder reach-out was essential before any decision over 2020 was taken. The vote was 94.4% in favour of the EB remuneration policy and 98.6% in favour of the SB
remuneration policy. Both policies were adopted by shareholders and became effective retroactively from 1 January 2020 until the 2024 AGM at the latest.
Total direct compensation for the Executive Board members is determined and reviewed periodically by the Supervisory Board. In line with the 2020 EB remuneration policy, the Executive Board’s total direct compensation for 2020 was compared to a new peer group as formulated in the 2020 EB
In line with the Dutch Banking Code, the peer group should consist of both financial and non-financial companies, taking into account the relevant international context. In addition, the Supervisory Board decided to exclude the UK and Switzerland from our peer group, due to very different pay structures in their financial sectors. Smaller banks and companies were also excluded because these are less complex compared to a large enterprise like ING. The composition of the peer group is explicitly not included in the 2020 EB remuneration policy. In 2020, the peer group comprised:1
Board on this. The Supervisory Board has the discretion to increase the individual base salaries annually. The below factors are given consideration in determining their base salaries:  the individual’s level of skill and performance;  ING’s business performance, and market conditions;  internal pay ratios and salary increases for other employees within ING;  remuneration level at the external peer group;  public indexation reference points (e.g. consumer price index); and
On the right, is a visual illustrating the potential pay-out scheme of variable remuneration for
At the start of the performance year, the Supervisory Board approves the financial and non-financial performance measures applicable to Executive Board members for the upcoming financial year:  Financial performance measures including profit-based and return-based measures.
 Performance hurdles – Executive Board members are only eligible for consideration for variable remuneration if both of the performance hurdles are met. This is line with all employees who are eligible for discretionary variable remuneration. See ‘Performance hurdles’ for further details.
Deliver on the regulatory commitments Delivered regulatory commitments related to implementation of new regulations on time and at the required levels.
The performance assessment and outcome of the Executive Board members is summarised in the tables below, taking into account the pre- and post award risk assessment.
Phutrakul. The 2018 and 2019 figures reflect a full year as Executive Board members for Ralph Hamers and Steven van Rijswijk.
Eric Boyer de la Giroday - - - - – 113,479 2021 Remuneration Supervisory Board
Furthermore, at least 50% of variable remuneration is awarded in equity (or equity-linked instruments unless local legislation prescribes otherwise).
Deviation from these standards may lead to downward adjustment of the variable remuneration, a socalled risk modifier. This process is run independently by the Risk function for which the CRO is ultimately responsible. Within the Executive Board, risk modifiers were applied to the CEO for the performance year 2020. The Supervisory Board, advised by its Risk Committee, is responsible for risk modifiers within the Management Board Banking.
for employees outside the EEA for a period of five performance years until end-2021. For 2020, it was applied to zero employees worldwide. At the 2021 AGM, we will ask for a new mandate to apply an increased maximum percentage of up to 200% for employees outside the EEA for a further period of five performance years, from 2022 until 2026. This mandate is rarely used by ING and was applied to zero employees worldwide in 2018 and 2019.
Q&A sessions with experts from areas like Human Resources, Finance, Wholesale Banking and
Notes to the consolidated financial statements 1 Basis of preparation and accounting policies 258
Securities at amortised cost 6 50,587 46,108 Provisions 15 691 688
Other income 26 20 214 118 Diluted earnings per ordinary share from continuing operations 0.64 1.23 1.21
Share of other comprehensive income of associates and joint ventures and other
Net change in fair value of debt instruments at fair value through other comprehensive income -163 -163 0 -163
The General Meeting of Shareholders may decide not to adopt the financial statements, but may not amend these.
After the outbreak of the Covid-19 pandemic, various governments issued programs offering guarantee schemes for borrowers impacted by Covid-19. As at 31 December 2020 ING Group provided approximately EUR 1.5 billion of loans under these programs.
December 2020, approximately 196 thousand customers were granted payment holidays in the context of the Covid-19 pandemic. The total exposure of loans for which a payment holiday is granted amounts to EUR 19.4 billion as at 31 December 2020.
January 2021, but in June 2020 the IASB has published an Amendment confirming 1 January 2023 as the new effective date. ING Group is currently assessing the detailed impact of IFRS 17.
announces changes in the rate for the amounts already drawn under the existing TLTRO, then such changes also represent a change in a floating rate. Following this, such changes lead to the recognition of an increased interest in the relevant period of life of the exposure, rather than by the recognition of an immediate modification gain or loss at the moment of the change of terms by the
Furthermore, the change in the TLTRO rate driven by changes in expectations of meeting the targets is also seen as a change in the floating rate. However, in this case, the effective interest rate is updated not only prospectively, but also partially retrospectively. As a result, the effect of the revised effective interest rate for the period that already passed until the moment when the change in expectations occurs, is recognised as a catch up adjustment in P&L. This change occurs only when
TLTRO programmes to assess the appropriate interest recognition in the statement of profit or loss and to minimise the risk of potential interest reversals due to the use of outdated or incorrect assumptions.
The contractual cash flows of a financial asset are assessed to determine whether they represent
Financial liabilities are classified and subsequently measured at AC, except for financial guarantee contracts, derivatives and liabilities designated at FVPL. Financial liabilities classified and measured at
Credit risk management disclosures are provided in the ‘Credit risk’ paragraph ‘Credit risk categories’
An Expected Credit Loss (ECL) model is applied to financial assets accounted for at AC or FVOCI such as loans, debt securities and lease receivables, as well as off-balance sheet items such as undrawn loan commitments, certain financial guarantees, and undrawn committed revolving credit facilities.
Financial assets are classified in one of the below three Stages at each reporting date. A financial asset can move between Stages during its lifetime. The Stages are based on changes in credit quality since initial recognition and defined as follows: Financial assets that have not had a significant increase in credit risk since initial recognition
An asset (other than a POCI asset) that is in Stage 3 will move back to Stage 2 when, as at the reporting date, it is no longer considered to be credit-impaired. The asset will migrate back to Stage 1 when its credit risk at the reporting date is no longer considered to have increased significantly since initial recognition.
The models assess ECL on the basis of forward-looking macroeconomic forecasts and other inputs.
Favourable changes are recognised as an impairment gain even if the lifetime ECL at the reporting date is lower than the estimated lifetime ECL at origination.
Items included in the financial statements of each of ING Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The Consolidated financial statements are presented in euros, which is ING Group’s presentation currency.
Unrealised gains on transactions between ING Group and its associates and joint ventures are eliminated to the extent of ING Group’s interest in the associates and joint ventures. Unrealised losses are also eliminated unless they provide evidence of an impairment of the asset transferred.
The fair values of land and buildings are based on regular appraisals performed by independent qualified valuers or by internal valuers. Subsequent expenditure is included in the asset’s carrying amount when it is probable that future economic benefits associated with the item will flow to the
ING Group’s acquisitions are accounted for using the acquisition method of accounting. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued in exchange for control of the acquiree. Goodwill, being the difference between the cost of the acquisition
Expenses are recognised in the statement of profit or loss as incurred or when a decrease in future economic benefits related to a decrease in an asset or an increase in a liability has arisen that can be measured reliably. Fee and commission expenses are generally a result from a contract with ING
ING considers valuations from third party experts in determining the fair values of property in own use.
Accumulated depreciation as at 31 December -1,207 -1,171 -1,734 -1,774 -2,940 -2,946
Disclosures in respect of Net defined benefit liabilities are provided in Note 36 ‘Pension and other postemployment benefits’.
The total cash outflow for leases in 2020 was EUR 273 million (2019: EUR 271 million).
Realised revaluations transferred to retained earnings -1 -472 -56 16 -6 -26 -9 -2
Interest income other 32 30 25 Interest expense on non-trading derivatives (no hedge accounting) 1,029 1,311 1,387
Net result on derecognition of financial assets measured at amortised cost
In 2020, Other income of EUR 20 million (2019: EUR 214 million; 2018: EUR 118 million) includes the positive recovery of defaulted receivables of EUR 27 million (2019: EUR 32 million). In addition, Other income is impacted by positive and negative non-recurring results, including a loss of EUR 58 million following a settlement with the Australian Tax Authorities related to former insurance activities, that were fully indemnified by NN Group. This was offset by a tax profit for the same amount resulting from the release of the provision for uncertain tax positions in current tax liabilities. In 2019, Other income also included the recognition of EUR 79 million receivable related to the insolvency of a financial institution.
In 2010, the Group Executive Board decided not to continue the option scheme as from 2011. The existing option schemes have run off during the year as the option rights have expired.
Fees as disclosed in the table above relate to the network of the Group’s auditors and are the amounts related to the respective years, i.e. on an accrual basis. The increase in audit fees 2020 follow from the re-appointment of the current auditor that also triggered a revision of the audit fees. In 2019, the increase primarily relates to audit activities for the implementation of IFRS 16, new statutory audits and new IT systems in scope.
Reference is made to Note 9 ‘Property and equipment’ and Note 10 ‘Intangible assets’ .
The following table specifies the segments by line of business and main sources of income of each of the segments:
Luxemburg ING Luxembourg S.A. Wholesale / Retail 855 841 791 300 322 315 15,335 16,634 13,313 120 153 198 30 37 50 24 17 23
Czech Republic Branch of ING Bank N.V. Wholesale / Retail 355 339 306 83 94 104 3,851 4,486 6,272 -3 16 37 0 3 9 4 5 6
Slovakia Branch of ING Bank N.V. Wholesale 878 703 571 18 14 14 385 587 487 7 2 0 3 0 1 1 -1 1
Latin America Brazil Branch of ING Bank N.V. Wholesale 89 89 88 30 43 35 1,813 2,921 1,974 3 27 16 19 6 9 4 7 3
Funded status (Net defined benefit asset/liability) 3,583 3,377 3,208 3,151 375 226
ING does not manage the pension funds and thus receives no compensation for fund management.
United States of America, and the United Kingdom. The average discount rate applied for Other postemployment benefits was 2.7% (2019: 3.3%).
Financial assets and liabilities at FVPL 43 11 2 -2 54
Total income tax related to components of other comprehensive income 37 -181 -29
executes valuation methodology and processes at a local level. The Market Data Committee approves and reviews all pricing inputs for the calculation of market parameters.
Fair value hierarchy: Government bonds and financial institutions bonds are generally traded in active markets, where quoted prices are readily and regularly available and are hence, classified as Level 1.
Of the total amount of financial liabilities classified as Level 3 as at 31 December 2020 of EUR 0.4 billion
Furthermore, Level 3 financial liabilities includes approximately EUR 0.1 billion (31 December 2019: EUR
Reset spreads are key inputs to mortgage linked prepayment swaps valuation. Reset spread is the future spread at which mortgages will re-price at interest rate reset dates.
Revaluation recognised in other comprehensive income during the period 2 –46 155 –46 155
Reference is made to note Risk management/ IBOR Transition for more information on to what rates
The derivatives used for net investment hedge accounting are included in the statement of financial position line-item ‘Financial assets at fair value through profit or loss – Non-trading derivatives’ EUR 69 million (2019: EUR 23 million) respectively ‘Financial liabilities at fair value through profit or loss – Non trading derivatives’ EUR 98 million (2019: EUR 51 million). The remaining derivatives are offset with other derivatives and collaterals paid or received.
Financial assets at fair value through profit or loss 14,772 16,350
Germany to EUR 12,512 million (2019: EUR 13,222 million), in Belgium EUR 23,060 million (2019: EUR
Financial liabilities at fair value through profit or 1 The table includes the associated liabilities which are reported after offsetting, compared to the gross positions of the encumbered assets.
3 At 31 December 2020, the total amount of ‘Loans and advances to customers’ excluding repurchase agreements is EUR 597,551 million of which EUR 2,646 million is subject to offsetting.
(rated A-1/P-1). Mont Blanc Capital Corp. funds itself externally in the ABCP markets.
The Executive Board of ING Groep N.V., the Management Board Banking and the Supervisory Board are considered Key Management personnel of ING Group. In 2020 and 2019, the three members of the
Transactions with key management personnel, including their compensation are included in the tables below.
 Common equity Tier 1 ratio ambition – is built on the CET1 requirements specified for ING, uncertainty of expected regulatory RWA inflation, potential increase in the regulatory requirement of the Countercyclical Buffer and the potential impact of a standardised and predetermined 1-in-10-year stress event (i.e. at a 90% confidence level with a 1-year horizon).
In 2020, as a reaction to the Covid-19 pandemic, relevant regulators introduced a number of changes to the regulatory capital requirements applicable to ING, including structural reductions. The structural reductions of capital requirements reflect the application of Art.104a in CRD V, which allowed ING to replace CET1 capital with additional Tier 1 / Tier 2 securities to meet the Pillar II requirement, and a reduction in the overall systemic buffer (i.e. the Systemic Risk Buffer plus the highest of the O-SII and G-
Main credit ratings of ING at 31 December 2020 Standard & Poor’s Moody’s Fitch
Change in fair value of own credit risk of financial liabilities at fair value through profit or loss –3 –16 –19
Realised and unrealised revaluations property in own use –33 26 –7
Changes in the composition of the group and other changes 114 114
We have audited the financial statements 2020 of ING Groep N.V. (the ‘Company’ or ‘ING Group’) based in Amsterdam. The financial statements include the consolidated financial statements and the parent company financial statements.
Based on our professional judgement, we determined the materiality for the financial statements as a whole at EUR 250 million (2019: EUR 300 million) which represents 5.7% (2019: profit before taxation from continuing operation 4.4%) of normalised profit before taxation from continuing operations. The materiality is determined with reference to the normalised profit before taxation from continuing operations and excludes goodwill impairment (EUR 310 million) and impairment of associates and joint ventures (EUR 235 million).
We identified the assessment of goodwill impairment as a Key Audit Matter. There was a high degree of estimation uncertainty due to the sensitivity of assumptions used in the VIU-calculations and in identifying events or changes in circumstances that could be an indicator of impairment requiring complex auditor judgement.
• Market conditions, including those observed over the past few years, and the application of IFRS
• The regulatory consequences of the United Kingdom’s withdrawal from the European Union may have adverse effects on our business, results and financial condition.
• ING is exposed to the risk of claims from customers who feel misled or treated unfairly because of advice or information received.
• The inability of counterparties to meet their financial obligations or our inability to fully enforce our rights against counterparties could have a material adverse effect on our results.
In 2020, the Covid-19 pandemic affected all of our businesses, including lower or negative interest rates, lower oil prices and credit deterioration of loans to ING’s customers. These effects have also resulted in an increase in the allowance for credit losses and impairments on non-financial assets, and reduced net interest income due to lower interest rates. While these effects were partly offset by resilient fee and commission income in 2020, this level of activity may not persist in future periods.
▪ prepayment losses if prepayment rates are lower than expected or if interest rates increase too rapidly to adjust the accompanying hedges; and/or
Public authorities have also recognised that certain LIBOR contracts do not contain any alternatives, contain inappropriate alternatives, or cannot be renegotiated or amended prior to the expected cessation of LIBOR. In response to this challenge the FCA, as the supervisor of LIBOR, plans to make use of the proposed powers granted to them to enable continued publication of a “synthetic” LIBOR using a different methodology and inputs, which may help reduce disruption to holders of tough legacy contracts. However, there is no certainty as to whether the FCA will exercise these powers or what form the revised methodology would take, and the FCA has consequently encouraged users of LIBOR
Any failure to comply with these requirements, or to adapt to changes in such requirements, may have a material adverse effect on our business, results and financial condition, and may require us to seek additional capital. Failures to meet minimum capital or other prudential requirements may also result in ING being prohibited from making payments on certain of our securities. Because implementation phases and transposition into EU or national regulation where required may often involve a lengthy period, the impact of changes in capital, liquidity and leverage regulations on our business, results and financial condition, and on our ability to make payments on certain of our securities, is often unclear.
FATCA, which requires ING to provide certain information for the US Internal Revenue Service (“IRS”)
Persistent Threats) and Ransomware intensify worldwide, and attempts to gain unauthorised access and the techniques used for such attacks are increasingly sophisticated. We have faced, and expect to continue to face, an increasing number of cyber attacks (both successful and unsuccessful) as we have further digitalized. This includes the continuing expansion of our mobile- and other internet-based products and services, as well as our usage and reliance on cloud technology. In particular, ING is regularly subject to DDoS attacks, which are becoming increasingly sophisticated. For example, in 2020
Management Board Banking (MBB). Specific responsibilities are delegated, via the global
Show that these targets are linked to and drive alignment with and greater contribution to appropriate Sustainable Development Goals, the goals of the Paris Agreement, and other relevant international, national or regional frameworks. The bank should have identified a baseline (assessed against a particular year) and have set targets against this baseline.
Report on your bank’s progress over the last 12 months (up to 18 months in your first reporting after becoming a signatory) towards achieving each of the set targets and the impact your progress resulted in. (where feasible and appropriate, banks should include quantitative disclosures)
▪ ING.COM->Sustainability->Sustainability Direction- >Sustainable business->Environmental and social risk policies; ▪ ING Group 2020 Annual Report->Risk Management- >Credit risk->Credit risk portfolio per economic sector and application of ESR framework; ▪ ING.COM->Sustainability->Our Stance; ▪ The View (view.ingwb.com); ▪ ING.COM->Sustainability->The world around us- >Reporting->2020 Human rights update; Principle 4: Stakeholders
Committee which includes ING Group’s CFO. Also in place is a
▪ We will preferably procure green energy from local renewable projects: electricity supplied by energy sources that are naturally and continually replenished, such as wind, solar power, geothermal and hydropower.
▪ We reached 100 percent proportion of renewable electricity consumption as a percentage of total electricity consumption.
ING’s activities or who may have an impact on ING’s activities or ability to provide products and services, as well as their legitimate representatives. ING continually engages stakeholders, including those who temporarily manifest themselves or express interest in a topic can also have a relevant input. Throughout the year, challenges and issues are discussed with various stakeholders. Below we highlight some key issues addressed in 2020.
Ecuador takes place in the Amazon Sacred Headwaters region in the western Amazon; one of the birthplaces of the Amazon River and home to more than 500,000 Indigenous people, of some of which are living in voluntary isolation on their ancestral lands.
discontinuation of or changes in ‘benchmark’ indices (8) inflation and deflation in our principal markets