Sustainable assets under management (in EUR billion, year-end) 6.3 4.8 3.3
Looking back on 2018, I see many things that we achieved as ING. We continued to empower customers with innovative solutions in many areas, including mobile and digital access, to make banking easier, faster and available anytime and anywhere. And we took important steps in our transformation to ensure ING provides a differentiating customer experience now and in the future.
Financial now manages the world’s biggest money market fund measured by assets. The newly enacted PSD2 European directive opening the payments market to non-bank entrants mean banks face an unlevel playing field when competing with these big new market entrants. But banks also have an opportunity to build on the trust that people put into them when it comes to handling their money and personal information. By building on that trust, we can create appealing propositions for users of our platform and profitable models for cooperating with other platforms, including Big
This transformation cannot be achieved without a culture of innovation and collaboration that supports it. To speed up delivery of customer and other innovations, one agile way of working is being rolled out in more and more parts of ING, most recently in Germany where ING is the first bank to introduce it.
Strong relationships with customers and robust commercial growth supported ING’s financial results in 2018. ING recorded a full-year 2018 net profit of €4,703 million, a decrease of 4.1 percent year-on-year, partly reflecting the impact of the €775 million settlement agreement with the
ING and our stakeholders. Limiting the rise of global temperatures to well below two degrees
Read more in the ‘The world around us’, ‘Innovation and transformation’ and ‘Our business’ chapters.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Innovation and transformation measures. Our all-staff online integrity programme is regularly updated with the latest cybercrime trends and prevention measures. In addition, special ‘risk days’ are organised for staff, highlighting specific risk themes and how to be resilient against them.
“My aim is to inspire developers and make it easy for them to find and use APIs so they can create awesome customer applications. Based on their needs, I shape the platform’s customer journey, improving its features and user experience.
At the request of the Dutch Authority for Financial Markets banks compensated SME customers in the Netherlands who had been sold interest rate derivatives during a defined period. The compensation framework (UHK or Uniform Herstelkader) was determined by an independent committee set up by the Dutch Finance Minister in 2016. Execution was challenging, with extreme complexity, limited estimated tolerances and high compliance standards under stringent supervision. In 2018, all relevant ING customers received a compensation offer. Of these, 77 percent had been accepted by the end of the year and we foresee high acceptance of the rest. The estimated costs have been recognised in the profit and loss account as part of a provision.
Britain’s pending exit from the European Union and the potential impact on financial markets saw many international banks forced to make contingency plans to relocate their operations away from London. ING centralised its Financial Markets in London in 2016. We are in an ongoing dialogue with the European Central Bank and the Bank of England’s Prudential Regulation Authority to safeguard business continuity, keeping a close eye on the conditions under which the UK exits the EU.
To provide the same customer experience everywhere we share best practices across the bank. We are combining our strengths in our various retail markets and moving towards shared digital banking platforms.
In early 2018, we implemented a uniform client segmentation framework that helps us tailor the services we offer clients through our daily banking and advisory value propositions. We also introduced ‘commercial passports’ that provide insight into what services we provide to each client, the regions where we serve them and who is involved (our virtual client team). In this way we can better support clients in their business activities with relevant advice, data-driven insights and customised, integrated solutions, ultimately saving them time, money and frustration.
In a broader social context, ING again renewed its partnership with UNICEF’s Power for Youth to equip young adults in less-developed countries with financial knowledge and 21st century skills to build a brighter future. The partnership reached 427,000 young people in 2018. To further empower youth for a better future, ING joined the United Nation’s Generation Unlimited partnership in 2018.
Risk costs declined to €200 million, or 13 basis points of average risk-weighted assets, from €284 million, or 19 basis points in 2017. The relatively low risk costs in 2018 were supported by several larger net releases for clients and only a few larger new additions. On top of that, risk costs for the
Furthermore, ING has an International Talent Programme that selects and develops top graduates with high growth potential. In 2018, we recruited 163 trainees from 16 countries/regions. Retention rates are high, with around 80 percent of the participants in the 2014 programme still at ING.
 Spain and Portugal: stress training and a psychological advisory service.
Risk Committee of the Supervisory Board. Both financial and non-financial risk reports are reviewed in detail, including the status of ING’s metrics with regard to solvency, liquidity, funding, credit, market risk and non-financial risks. In 2018, as part of this process, the Risk Committee and the full
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Risk and capital management it clear that non-financial risk and compliance are just as important as financial risk and need to be embedded in ING’s DNA. An online training module to enhance awareness of KYC was rolled out to all employees worldwide. MBB members spent a considerable amount of time engaging with staff to explain and discuss our responsibility as gatekeepers of the financial system. In these meetings, the impact of the settlement, the root causes, the shortcomings and our commitment and efforts to enhance were discussed. ING started behavioural risk assessments during which more than 100 interviews were held and more than 200 surveys were done to understand better how people, teams and departments interact and work together. Based on these insights, actions for improvement will be considered.
ING makes a positive contribution to global economic growth by incorporating and promoting responsible lending and investment practices. Transparency and openness are important topics, both for our stakeholders and for ourselves. ING’s environmental and social risk (ESR) policy framework guides, in a consistent and transparent manner, the choices we make about how, where and with whom to do business.
policy framework incorporates assessment tools that are used in ING’s mainstream processes and systems. It is therefore fully integrated into regular client and transaction reviews. The ESR policy framework covers ESR-sensitive sectors and also includes explicit restrictions on activities not in line with ING’s values (for example, companies involved in manufacturing cluster munitions), which we will not finance.
Sustainability rating agencies and analysts can find data on non-financial key performance indicators in the ‘Non-financial appendix’ and at www.ing.com.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > About this report
A highlight in 2018 of a different order involved ING taking up its social and economic responsibility to fight climate change. With the Terra approach, ING is supporting the Paris Climate agreement’s goal of keeping global warming well below two degrees Celsius by co-creating an innovative, accurate way to measure the climate impact of its lending portfolio. Read more about Terra in this annual report.
Throughout the year, a number of other educational sessions on specific topics were organised for and at the request of the Supervisory Board, including some covering regulatory requirements.
Board’s evaluation of the decision-making process after the item was withdrawn from the 2018
Retail investors in Canada and Australia and investors in Japan will not be included in such a share offering.
Rijswijk holds a master’s degree in business economics from Erasmus University Rotterdam (the
In line with Dutch company law, the Articles of Association, the Dutch Corporate Governance Code as well as the Supervisory Board Charter, all members of the Supervisory Board are required to:  act in accordance with the interests of ING Group and the business connected with it, taking into account the relevant interests of all stakeholders of ING Group;  perform their duties without mandate and independent of any interest in the business of ING
We believe that the Supervisory Board, diversity wise, is well balanced in terms of other relevant diversity aspects. Overall, the preferred emphasis on members with a financial or banking background has been maintained. In terms of nationality, the ratio between Dutch and non-Dutch nationals in 2018 was 50%-50%.
The Remuneration Committee’s tasks include advising the Supervisory Board on the terms and conditions of employment (including remuneration) of the members of the Executive Board and on the policies and general principles on which the terms and conditions of employment of the members of the Executive Board and of senior managers of ING Group and its subsidiaries are based. On 31 December 2018 the members of the Remuneration Committee were: Henk Breukink
The General Meeting may resolve to amend the Articles of Association of ING Group, provided that the resolution is adopted based on a proposal of the Executive Board, which has been approved by the Supervisory Board. An amendment of the Articles of Association is required to be passed by notarial deed.
ING’s internal risk management and control is a process, effectuated by the Executive Board, senior management, and other personnel. It is designed to mitigate risks and provide reasonable assurance regarding the achievement of objectives in the following categories:  Effectiveness and efficiency of operations;  Reliability of financial and non-financial information;  Compliance with laws, regulations and internal policies, and the ING Values as part of the Orange
 the report of the Executive Board in the ING Group Annual Report 2018 states those material risks and uncertainties that are relevant to the expectation of ING Groep N.V.’s continuity for the period of twelve months after the preparation of this report.
France and Italy as part of the ambition to build a pan-European money platform
• Improved underlying cost/income ratio to 54.8% from 55.5% in 2017.
December 2018 there are no loans and advances outstanding to Supervisory Board members.
Total amount recognised directly in other comprehensive income –1,682 –117 –1,799 27 –1,772
NN Group;  Disposal and redemptions – Available-for-sale investment; EUR 1,375 million proceeds on the divestment of the remaining shareholding in NN Group in April 2016;  Repayments of subordinated loans of EUR 128 million related to the third and final tranche of mandatory exchangeable subordinated notes from the Anchor investors into NN Group ordinart shares in February 2016.
Except for the amendment to IFRS 9 regarding prepayment features with negative compensation,
Principal and Interest (SPPI) test, the classification and measurement of the following portfolios has changed: A. The Available-For-Sale (AFS) investment portfolio was split into a portfolio classified at
Financial liabilities at FVPL - in EUR million IAS 39 Reclassfication¹ Remeasurement IFRS 9
 Historical experience, updated for current events where necessary, provides evidence that a proportion of a group of assets is impaired although the related events that represent impairment triggers are not yet captured by ING Group’s credit risk systems.
For interests in structured entities, the existence of control requires judgment as these entities are designed so that voting or similar rights are not the dominant factor in deciding who controls the entity. This judgment includes, for example, the involvement in the design of the structured entity, contractual arrangements that give rights to direct the structured entities relevant activities and commitment to ensure that the structured entity operates as designed.
As at 31 December 2018, the non-subordinated receivables amount to EUR 30,422 million (2017: EUR 28,768 million). Following IFRS 9 classification the subordinated receivables of 2017 related to securities at amortised cost amounting to EUR 43 million are classified as Securities at amortised cost.
Other non-trading derivatives mainly includes interest rate swaps and foreign exchange currency swaps for which no hedge accounting is applied.
More than 4 years but less than 5 years 6,288 5,411
AFS and other Equity securities at FVOCI Debt instruments at FVOCI Cash flow hedge Credit liability Property in own use
Not included in cash and cash equivalents: – Deposits from banks –28,811 –28,258 –22,155
Other Challengers Australia, France, Italy, Spain, Portugal, Czech Republic and UK Legacy runoff portfolio
The sensitivity analysis calculates the financial impact on the defined benefit obligation of an increase or decrease of the weighted averages of each significant actuarial assumption, all other assumptions held constant. In practice, this is unlikely to occur, and some changes of the assumptions may be correlated. Changes to mortality, expected rate of salary increase, and indexation would have no material impact on the defined benefit obligation. The most significant impact would be from a change in the discount rate. An increase or decrease in the discount rate of 1% creates a financial impact of EUR -415 million and EUR 534 million, respectively.
Sale of assets –120 –326 –166 –92 –1,677 – –1 –5 –43 –1,969 –462
– Loans and advances 2,379 n/a Present value techniques Prepayment rate 6% 6%
As at 31 December 2018 Less than 1 month 1 to 3 months 3 to 12 months 1 to 2 year 2 to 3 years 3 to 4 years 4 to 5 years >5 years Total
– Debt securities at fair value through other comprehensive income 18,471 n/a 1
ING Group’s cash flow hedges mainly consist of interest rate swaps and cross-currency swaps that are used to protect against the exposure to variability in future cash flows on non-trading assets and liabilities that bear interest at variable rates or are expected to be refunded or reinvested in the future. The amounts and timing of future cash flows, representing both principal and interest flows, are projected for each portfolio of financial assets and liabilities, based on contractual terms and other variables including estimates of prepayments. These projected cash flows form the basis for identifying the notional amount subject to interest rate risk or foreign currency exchange rate risk that is designated under cash flow hedge accounting.
Hedge ineffectiveness recognised in the statement of profit or loss, gain(+) / Loss(-)
Imtech would have suffered. ING Bank responded to the claimants denying any and all responsibility in relation to the allegations made in the relevant letters. In September 2018, the trustees in the bankruptcy of Imtech claimed from various financing parties, including ING, payment of what the security agent has collected following bankruptcy or intends to collect, repayment of all that was repaid to the financing parties, as well as compensation for the
The deferred tax liability comprises the deferred tax resulting from the initial recognition of intangible assets in the business combination. The other liabilities mainly include merchant payables that are part of the normal course of business of Payvision.
On 20 February 2018 ING acquired 90% of the shares of Makelaarsland B.V. for a total consideration of EUR 14 million. The acquisition of Makelaarsland B.V. led to a recognition of goodwill of EUR 14 million.
ING Group supports the commercial paper programmes by providing the SPV Mont Blanc Capital
The liquidity facilities, provided to Mont Blanc are EUR 1,173 million (2017: EUR 1,139 million). The drawn liquidity amount is nil as at 31 December 2018 (2017: nil).
ING Group offers various investment fund products to its clients. ING Group does not invest in these investment funds for its own account nor acts as the fund manager.
operational and compliance risks. The ING Group Chief Risk Officer (CRO) is also the CRO of ING Bank.
Forward strategy (empowering countries) and as such support and promote an effective risk and control environment. The framework includes binding principles, definitions, process steps and roles and responsibilities to create consistent bank-wide policies and standards.
The Orange Code is the sum of two parts, the ING Values and ING Behaviours, with integrity being an important principle. The ING Values (being honest, prudent and responsible) are designed to be non-negotiable promises we make to the world, principles we seek to stick to, no matter what. The
In addition to the above, a new Centre of Excellence (CoE) on Behavioural Risk was recently set up.
 Scenario control & management assessment: Depending on the outcomes of the stress test and the likelihood of the scenario, mitigating actions may be proposed. Mitigating actions may include, but are not limited to, sales or transfers of assets and reductions of risk limits.
Wholesale Banking (WB), CRO Challengers & Growth Markets (C&G), CRO Netherlands and CRO
Credit risk uses the following risk categories to differentiate between the different types of credit risk:  Lending risk: arises when ING grants a loan to a client, or issues guarantees on behalf of a client.
Money market (MM) risk -Cash and balances with central banks Note 2 Cash and balances with central banks -Loans and advances to banks Note 3 Loans and advances to banks -Loans and advances to customers Note 7 Loans and advances to customers
(including business) parameters – and potentially the maximum product and/or portfolio limit to undertake that business. A sector policy is always prepared by the front office responsible for
Cover values including guarantees received – Consumer lending portfolio - 2017
The Group’s consensus view of the baseline scenario suggests economic growth will level off over the initial (three year) forecast period, as the pace of expansion in the main advanced economies and emerging markets is likely to wane. For the Eurozone, as output gaps close and monetary policy begins to normalize, growth is expected to decline. For the US, the near-term outlook is still positive, but over the forecast period we expect growth to fall below the recent trend as the impact of tax cuts and of higher interest rates begin to take effect. The Group continues to monitor the potential escalation of an international trade conflict, and the likely outcome of any Brexit deal, which, at present remains unclear.
ING recognises the importance of sound market risk management and bases its market risk management framework on the approach to identify, assess, control and manage market risks.
Wholesale Banking for the approval of policies, models, methodologies and parameters related to credit risk and trading risk, and for the consideration of risk appetite and risk governance.
and MBB, the senior executive management of the CRO function, and the senior executive management of related business functions.
The Event Risk number for the ING trading activity is generated on a weekly basis. Like VaR, Event
The NFR and Compliance functions use a layered functional approach within divisions to support a systematic and consistent implementation of the framework of policies and minimum standards within ING. To avoid potential conflicts of interests, it is imperative that staff in this function are independent and objective when advising business management on non-financial or compliance risk matters in their business unit or business line. To facilitate this, a functional reporting line to the next higher level within Operational Risk Management (ORM), Information Risk Management (IRM)
Non-financial risk is the risk of financial loss, legal or regulatory sanctions, or reputational damage due to inadequate or failing internal processes, people and systems; a failure to comply with laws, regulations and standards; or external events. ING has a framework for non-financial risks that supports and governs the process of identifying, measuring, mitigating, monitoring and reporting non-financial and compliance risks. It reflects the stages described in the Enterprise Risk
Your Client (KYC) Policy, incorporating also KYC-related requirements of the FATCA/CRS policy, as well as certain elements of the Environmental Social Risk policy. The main changes in this Directive
(including grandfathered securities) of ING Groep N.V. decreased from 18.5% to 18.4% and 19.1%
Regulatory adjustments Tier –1,136 –2,517 –1,325 –4,001 1 The interim profit not included in CET1 capital as per 31 December 2018 (€1,712 million) includes €135 million for 4Q 2018
Europe related to sovereign debt and the banking sector continue to be a threat to global capital markets and remains a challenge to global financial stability. In the event of any default or similar event with respect to a sovereign issuer, some financial institutions may suffer significant losses, following which they would require additional capital, which may not be available. Market and economic disruptions stemming from the crisis in Europe also have affected, and may continue to affect, consumer confidence levels and spending, bankruptcy rates, levels of incurrence of, and default on, consumer debt and home prices, among other factors.
These factors, combined with volatile oil prices, reduced business and/or consumer confidence have negatively affected the economy of main geographic regions where we conduct our business. Our results of operations, liquidity position, capital position and investment portfolio are exposed to these risks and may be adversely affected as a result.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Risk factors
As a holding company, ING Groep N.V. is dependent for liquidity on payments from its subsidiaries, which are subject to restrictions, as described in ‘—As a holding company, ING Groep N.V. is dependent for liquidity on payments from its subsidiaries, many of which are subject to regulatory and other restrictions.’. Furthermore, regulatory liquidity requirements in certain jurisdictions in which we operate are generally becoming more stringent, including those forming part of the
‘Basel III’ requirements discussed further below under ‘—We operate in highly regulated industries.
All these effects may be amplified in a negative rate environment. In such environment there may also be the risk that a rate is to be paid on assets, while there is no comparable rate paid on the liabilities. This will reduce our results of operations then.
FCA announced that it will no longer persuade or compel banks to submit rates for the calculation of the LIBOR benchmark after 2021. The announcement indicates that the continuation of the
In December 2010, the Basel Committee on Banking Supervision (‘BCBS’) announced higher global minimum capital standards for banks and introduced a new global liquidity standard and a new leverage ratio. The BCBS’s package of reforms, collectively referred to as the ‘Basel III’ rules, will,
Mechanism (‘SRM’) came into effect, with the aim to have a Single Resolution Board (‘SRB’) to be responsible for key decisions on how a bank subject to SSM supervision is to be resolved if a bank is failing or likely to fail and cannot be wound up under normal insolvency proceedings without destabilizing the financial system. The SRB is the European resolution authority for the Banking
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Risk factors are and will continue to be subject to the risk of deterioration of the commercial and financial soundness, or perceived soundness, of sovereigns and other financial services institutions. This is particularly relevant to our franchise as an important and large counterparty in equity, fixed income and foreign exchange markets, including related derivatives.
There is a trend towards increased regulation and supervision of our subsidiaries by the governments and regulators in the countries in which those subsidiaries are located or do business.
We face the risk that the design and operating effectiveness of our controls and procedures may prove to be inadequate. Operational risks are inherent to our business. Our businesses depend on the ability to process a large number of transactions efficiently and accurately. In addition, we routinely transmit, receive and store personal, confidential and proprietary information by email and other electronic means. Although we endeavour to safeguard our systems and processes, losses can result from inadequately trained or skilled personnel, IT failures (including due to a computer virus or a failure to anticipate or prevent cyber attacks or other attempts to gain unauthorised access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or impairing operational performance, or security breaches by third parties), inadequate or failed internal control processes and systems, regulatory breaches, human errors, employee misconduct, including fraud, or from natural disasters or other external events that interrupt normal business operations. We depend on the secure processing, storage and transmission of confidential and other information in our computer systems and networks. The
In particular, threats from Distributed Denial of Service (‘DDoS’), targeted attacks (also called
Therefore, we may not be able to enforce in the Netherlands a final judgment for the payment of money rendered by any US federal or state court based on civil liability, even if the judgment is not based only on the US federal securities laws, unless a competent court in the Netherlands gives binding effect to the judgment.
ING contributes to the economies of over 40 countries where we operate. The table below provides an overview of our direct financial contributions to some of our key stakeholders. Related key performance indicators are available in our value creation model in Our Strategy and How We
- Responsible finance, Our Business - Environmental and Social Risk, Risk and capital management - Energy policy in practice, Non-financial appendix - Our Stance on Energy (www.ing.com/18ar037)
Association and the Ellen MacArthur Foundation for circular economy. We seek external direction and validation of our sustainability priorities by endorsing international standards such as the UN
In 2018 stakeholders expressed concern about ING’s involvement in the palm oil sector through lending and asset management.