Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > CEO statement lending growth in Wholesale Banking slowed. Underlying income increased 1.2 percent as pricing discipline and business growth, as well as higher net fee and commission income, helped counter the pressure of negative interest rates. We recorded a 4.5 percent rise in underlying expenses for 2019, which included a marked increase in regulatory costs, as well as higher costs related to our
Over the years, ING has been working to meet the needs of our customers by transforming to a global, digital organisation. This process is strongly driven by data. It’s at the heart of everything we do: getting to know our customers, giving them the tailored services they need, and ensuring their experience is personal, instant, relevant and seamless.
In September 2019, we were a founding signatory of the UN-backed Principles for Responsible
For more information, please refer to the ‘UNEP FI Principles for Responsible Banking’ section of the
Increasing the pace of innovation is a strategic priority and core to ensuring we remain relevant to our customers and can live up to our purpose to empower people to stay a step ahead in life and in business. And it is a prerequisite for realising our platform ambitions. We do this by fostering an internal culture of innovation through customised methodologies and by providing resources to our business through the ING Innovation Fund. And we collaborate with a wide range of fintechs and other external parties to accelerate the development of innovative solutions for customers.
We grew our net core lending by €17.2 billion and our net customer deposits by €23.4 billion. ING posted a net result of €4.8 billion over FY2019.
People entrust banks with confidential information that they expect to be kept safe. It is important that we maintain that trust and comply with our legal obligations around data protection, which can differ from country to country. ING is transparent about what it does with the personal data of customers, employees, suppliers and business partners, and only processes data for specific business purposes. Our approach can be summarised as: the right people use the right data for the right purpose.
We achieved good results in 2019 with solid profitability and healthy growth in both lending and deposits. Net core lending grew by €17.2 billion over the year, with net inflow of customer deposits growing by €23.4 billion. We added more than 830,000 primary customers, which shows that our customer experience continues to be differentiating and drives growth. With digital disruption changing customer expectations we’re looking for new ways to stand out from the crowd.
Our Yolt aggregator app was named Personal Finance App of the Year at the 7th Annual Payments
Net customer deposits (also excluding Treasury and currency impacts) grew by €20.2 billion in
Risk costs increased to €532 million, or 29 basis points of average customer lending, from a relatively low €210 million, or 12 basis points of average customer lending, in previous year. The increase was mainly attributable to a number of large individual files, including a sizeable provision for a suspected external fraud case.
Colleagues across ING are encouraged to take a proactive role in creating a more sustainable world.
In 2019, our capital position remained strong, despite higher capital requirements and additional risk-weighted asset growth from model impacts. ING’s CET1 ratio was 14.6% at the end of 2019, which was well above our CET1 ratio ambition of around 13.5%. The CET1 ratio at the end of the year improved as risk-weighted assets increased due to volume growth and model impacts, effects that were offset by profit retention and positive risk migration.
ING’s dividend policy aims to pay a progressive dividend that will reflect considerations including expected future capital requirements, growth opportunities available, net earnings, and regulatory developments. The Executive Board proposes to pay a total cash dividend of €2,689 million, or €0.69 per ordinary share, over the financial year 2019. This is subject to the approval of shareholders at the Annual General Meeting in April 2020.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Developments in risk and capital management first progress report on Terra, our pathway towards climate alignment in the sectors most responsible for climate change.
In 2019, the Supervisory Board and its committees continued to focus on overseeing and constructively challenging ING’s management in their efforts to implement the Think Forward strategy. Other important topics of attention included the preparations for updating the Executive Board and Supervisory
platforms and to develop independent initiatives in partnership with others will drive our opportunities. To continue unlocking the value embedded in our platform in a fast-changing world,
General Meeting is required for these repurchases. Under Dutch law, this authorisation lapses after 18 months. Each year, a proposal is made to the General Meeting to authorise the repurchase of shares by the Executive Board for a period of 18 months.
Non-compliance with the obligations of the Major Holdings Rules can lead to criminal prosecution or administrative law sanctions. In addition, a civil court can issue orders against any person who fails to notify or incorrectly notifies the Dutch Authority for the Financial Markets, in accordance with the Major Holdings Rules, including suspension of the voting right in respect of such person’s ordinary shares.
ING Group held an Investor Day on 25 March 2019 in Offenbach am Main, near Frankfurt, Germany.
To encourage participation at the General Meeting, ING provides the EVO (e-voting) platform, an online facility through which shareholders can register for a meeting or appoint a proxy.
Before his appointment to the Executive Board, he was ING Group controller in Amsterdam and between 2015-2018 he was the CFO of ING in Belgium.
Board Banking of ING Bank N.V., and non-executive member of the board of ING Belgium N.V./S.A.
Verhagen in 2019 the Supervisory Board has met its 30 percent gender diversity target.
The Audit Committee assists and advises the Supervisory Board in monitoring the integrity of the financial statements of ING Group and ING Bank N.V., in monitoring compliance with legal and regulatory requirements and in monitoring the independence and performance of ING Group’s internal and external auditors. On 31 December 2019, the members of the Audit Committee were: Hermann-Josef Lamberti (chairman), Eric Boyer de la Giroday, Margarete Haase, Robert Reibestein and Hans Wijers.
Board on the composition of the Executive Board and Supervisory Board and assisting the
(including senior business adviser of Advent International GmbH) and director of Frankfurt
Shareholder Rights Directive II (SRD II). This report is also drafted in the spirit of the draft (nonbinding ) guidelines for disclosure from the European Commission. As such, 2019 should be considered a transitional year. In 2020, we aim to disclose fully in line with these final guidelines.
▪ Development of SparQ, a global platform that uses AI to automate the process of turning regulation into policy. It gives insight into applicable regulations, identifies changes, helps analyse documents and can link regulation directly to our policies.
▪ First client transaction completed on Komgo, a platform that digitalises and streamlines trade and commodity finance.
People The Organisation Health Index (OHI) survey carried out 2019 showed room for improvement. The overall health score is a performance indicator measuring organisational health relative to a global benchmark of 1,900 companies.
▪ If only one (or none) of the two tests is met, in principle, no bank-wide variable remuneration pool is released.
Performance Management framework. In addition, managers have the discretionary power to lower the proposed variable remuneration if risk taking is perceived as inappropriate. In this way, variable remuneration is aligned with any additional risks identified during the performance year on an individual basis.
Any variable remuneration awarded to the Executive Board members is fully paid in ING shares. In combination with long-term deferral and holding requirements this ensures alignment with ING's strategy, long-term performance and sustainability goals and with long-term stakeholder interests.
The actual individual performance measures and the actual outcome of the review of the performance measures are disclosed retrospectively in the Remuneration Report. The Supervisory
Compliance and Legal policies, minimum standards, procedures and guidelines, development of tools, methods, and key parameters (including major changes) for risk identification, measurement, mitigating and monitoring/ reporting. NFRC Bank meetings are at least quarterly; and
Detailed and comprehensive models are used to calculate the impact of the scenarios. In these models, statistical analysis is combined with expert opinion to make sure that the results adequately reflect the scenario assumptions. The methodologies are granular and portfolio-specific and use different macroeconomic and market variables as input variables. The calculations are in line with our accounting and regulatory reporting frameworks. The stress testing models are subject to review by Model Risk Management.
As the situation differs from country to country, we are following local government guidelines in our response to the virus. Also the potential economic implications for the countries and sectors where ING is active in are being assessed and discussed in order to identify possible mitigating actions.
Know Your Customer (KYC) activities. We continued to work on the global KYC enhancement programme that started at ING in 2017 and which we built on in 2018 and 2019. The programme encompasses all customer segments in all ING business units. For more information on FEC and KYC
▪ Single name and industry sector concentration: ING has established a credit concentration risk framework in order to identify, measure and monitor single name concentration and industry sector concentration (systemic risk). The same concept of boundaries and instruments are applied.
▪ Product and secondary risk concentration: ING has established a concentration framework to identify, measure and monitor product concentration and secondary risk.
Rating models for retail clients are predominantly statistically driven and automated, such that ratings can be updated on a monthly basis. Rating models for large corporates, institutions and banks include both statistical characteristics and manual input, with the ratings being manually updated on at least an annual basis.
Institutions (EUR 9.1 billion, 43.1%), followed by Central Banks (EUR 7.7 billion, 22.5%), with low covers. The largest decrease in outstanding was observed in Chemicals, Health & Pharmaceuticals
In Wholesale Banking, ING classifies the relevant obligors for business loans (governments, institutions, and corporates) as non-performing when any of the following default triggers occur: ▪ The borrower has failed in the payment of principal or interest/fees and such payment failure has remained unresolved for the following periods: ▪ for corporates: more than 90 days; ▪ for financial institutions and governments – from day 1. However, a period of 14 calendar days will be observed in order for ING to establish whether the payment default was due to non-operational reasons (i.e. the deteriorated credit quality of the financial institution) or due to operational reasons. The latter does not trigger default.
Wholesale Banking forborne assets decreased by EUR 0.5 billion compared to 2018, of which the performing forborne assets decreased by EUR 0.4 billion. The decrease of the performing forborne assets was attributed mostly to a few cured large entities which exited forborne status.
Group Treasury exposures, and from the investment of our own funds (core capital). Both the commercial products and the products used to hedge market risk exposures in these products are intended to be held until maturity, or at least for the long-term.
Below the three activities are described in more detail: Group Treasury is responsible for managing the investment of own funds (core capital), more information can be found in the Capital Management section. Capital is invested for longer periods to keep earnings stable.
▪ Governance: Under this pillar we are setting up a global KYC governance to ensure decisionmaking on standards, operations, customer acceptance and continuous improvements.
Since models are by definition simplifications of reality, model risk is inherent in the use of models and therefore model risk must be identified and managed. Model risk management includes the identification, assessment, control (acceptance or mitigation) and monitoring (and reporting) of the risks caused by applying models.
Depending on the development approach these first stages can be separate or integrated. An example of the latter is data science based application development.
Cash and cash equivalents at beginning of year 33 47,529 18,977 16,164
The ING Group Consolidated financial statements have been prepared in accordance with
A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a corresponding liability representing its obligation to make lease payments at the date at which the leased asset is available for use by ING Group. Each lease payment is allocated between the repayment of the liability and finance cost. The finance costs are charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Under the ECL model ING Group calculates the allowance for credit losses (loan loss provision, LLP)
Financial assets that have not had a significant increase in credit risk since initial recognition (i.e.
Equipment is stated at cost less accumulated depreciation and any impairment losses. The cost of the assets is depreciated on a straight line basis over their estimated useful lives, which are generally as follows: for data processing equipment two to five years, and four to ten years for fixtures and fittings. Expenditure incurred on maintenance and repairs is recognised in the
Share of results from associates and joint ventures as presented in the statement of profit or loss includes, besides above mentioned share of results, also impairments.
Dividend Discount model using four year management approved plans. When estimating the VIU of a CGU, local conditions and requirements determine the capital requirements, discount rates, and terminal growth rates. These local conditions and requirements determine the ability to upstream excess capital and profits to ING Group. The discount rate calculation includes other inputs such as equity market premium, country risk premium, and long term inflation which are based on market sources and management’s judgement. The long term growth rate for EU-countries is based on long-term risk-free rate by reference to the yield of a composite index consisting of Euro generic government bonds, with a maturity of 30 years. For other countries, the growth rate includes long term inflation rate obtained from market sources.
Total interest income using effective interest rate method 25,347 25,268 n/a Interest expense on non-trading derivatives (hedge accounting) 4,615 4,826 5,946
Included in Addition/(unused amounts reversed) provision for reorganisations in 2019, is an increase in relation to the reorganisation relating to ING’s Agile transformation in Germany.
Public Prosecution Service of EUR 775 million. The settlement related to previously disclosed investigations regarding various requirements for client on-boarding and the prevention of money laundering and corrupt practices. Reference is made to Note 46 ‘Legal proceedings’.
Additions to loan loss provision 1,120 0 1,120 1,120 656 0 656 656 676 676 676
Net result IFRS attributable to equity holder of the 1 Comprises for the most part capital management activities of ING Groep N.V. (Holding).
The tables below provide additional information, for the years 2019, 2018 and 2017 respectively, on names of principal subsidiaries and branches, nature of main activities and average number of employees on a full time equivalent basis by country/tax jurisdiction.
Ireland Branch of ING Bank N.V. Wholesale 48 47 43 71 68 57 2,575 2,868 2,337 58 65 47 8 8 6
Valuation processes are governed by various governance bodies, which include Local Parameter
Valuation adjustments are an integral part of the fair value. They are included as part of the fair value to provide better estimation of market exit value on measurement date. ING considers various valuation adjustments to arrive at the fair value including Bid-Offer adjustments, Credit
Valuation techniques used for Level 2 assets and liabilities range from discounting of cash flows to various industry standard valuation models such as option pricing model and Monte Carlo simulation model, where relevant pricing factors including the market price of underlying reference instruments, market parameters (volatilities, correlations, and credit ratings), and customer behaviour are taken into account.
Financial assets at fair value through other comprehensive income 32,165 27,218 343 1,256 1,961 2,749 34,468 31,223
The same assumption is used while assessing the likelihood of occurrence of the forecast transaction that are subject to cash flow hedges. The cash flow hedges directly impacted by the
– Other trading liabilities 4,075 1,318 1,465 888 1,655 286 9,687 – Trading derivatives 1,711 1,873 3,680 6,855 6,035 1,374 21,528 – Non-trading derivatives 458 312 252 988 866 –577 2,299 – Designated at fair value through profit or loss 34,914 11,753 4,115 3,519 4,921 –43 59,179
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Offsetting financial assets and liabilities > 44
Impact of enforceable master netting arrangements or similar arrangements1 Derivatives -5,464 5,773 -309 1 The line ‘Impact of enforceable master netting agreements or similar arrangements’ contains derivative positions under the same master netting arrangements being presented in different statement of financial position line items.
Mortgage expenses claims: ING Spain has received claims and is involved in procedures with customers regarding reimbursement of expenses associated with the formalisation of mortgages.
In the normal course of business, ING Group enters into transactions with structured entities as counterparty. Predominantly in its structured finance operations, ING can be instrumental in facilitating the creation of these structured entity counterparties. These entities are generally not included in the consolidated financial statements of ING Group, as ING facilitates these transactions as administrative agent by providing structuring, accounting, funding, lending, and operation services.
1) The interim profit not included in CET1 capital as per 31 December 2019 (EUR 1,754 million) includes EUR 42 million for 4Q
The CET1 requirement for ING Group at a consolidated level was set at 11.83% in 2019. This requirement is the sum of a 4.5% Pillar I requirement, a 1.75% Pillar II requirement, a 2.5% Capital
As at 31 December 2019, ING Groep N.V. guarantees various US dollar debentures (that mature between 2023 and 2036) which were issued by a subsidiary of Voya Financial Inc. In the
IT audit specialists assessed the reliability and continuity of the IT environment, when needed for the scope of our audit of the financial statements. We examined the framework of governance over ING Group’s IT organisations and the IT general controls, access to programs and data, program changes and IT operations, including compensating controls where those were required.
Based on the following procedures performed, we conclude that the other information: — is consistent with the financial statements and does not contain material misstatements; and — contains the information as required by Part 9 of Book 2 of the Dutch Civil Code.
▪ (depending on the position) a significant collateral posting requirement associated with our interest rate hedge program.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Risk factors to operate as a swap dealer in the US. Other CFTC regulatory requirements, already implemented, include registration of swap dealers, business conduct rules imposed on swap dealers, requirements that some categories of swaps be centrally executed on regulated trading facilities and cleared through regulated clearing houses, and initial and variation margin requirements for uncleared swaps. In addition, new position limits requirements for market participants that have been proposed and may be contained in final regulations to be adopted by the CFTC could limit
We are subject to different tax regulations in each of the jurisdictions where we conduct business, and are exposed to changes in tax laws, and risks of noncompliance with or proceedings or investigations with respect to, tax laws.
We may not always be able to protect our intellectual property developed in our products and services and may be subject to infringement claims, which could adversely impact our core business, inhibit efforts to monetize our internal innovations and restrict our ability to capitalize on future opportunities.
Accounting Standards Board (SASB) and resulted in a list of material topics.
According to Friends of the Earth, “ING’s clearest recourse to cease its contribution to the harms is to divest from the industrial palm oil sector and specifically the named companies”, an opinion stated in the notification.
NGOs request that ING take action after bribery claims at Indonesian power plant