Top NPS ranking Our customer-centric focus has resulted in seven countries achieving first place in NPS compared with two or more selected local peers. NPS surveys were held in 13 countries with retail banking activities.
Regulatory change In 2015, the fast pace of regulatory change continued. We recognise the importance of the regulatory changes introduced in response to the financial crisis and support them. Much has been accomplished to increase the resiliency of the financial sector and ensure that it can continue to reliably play its role in supporting customers and the development of economies. However, we are concerned about the scale of regulatory change, the multiple regulatory initiatives being pursued and the lack of clarity and coordination regarding the combined impact in the future on the financial sector and on consumers and businesses that depend on it. A continuing concern for ING as an international player is the lack of a level playing field in Europe, with Dutch regulations for instance requiring higher regulatory capital than regulations in other European countries.
Labour practices Q Diversity and equal opportunities, preventing discrimination R Remuneration of ING employees
Another way we earn the trust of stakeholders is by being transparent about our policies and how we follow them. For example, the ING Tax Principles set out a responsible approach to managing tax-related issues.
Innovation and competitive pricing As a bank, we are subject to a regulatory framework that focuses on structural measures to reduce systemic risk. This stricter regulation constrains our ability to allocate capital. Read more about this in the “Regulatory developments” chapter.
Balancing our responsibilities: innovation vs. competitive pricing section in the “What matters most to stakeholders” chapter.
Fintechs are developing rapidly and our customers’ expectations are evolving every day. It is up to us to adapt and innovate to remain relevant. We regularly add functionalities to our mobile services improving the digital experience. In 2015 we introduced a number of innovative products and services.
A good example of financially empowering our customers is our Financially Fit philosophy in the Netherlands. We aim to empower Dutch customers to make decisions that improve their financial situation. Many customers have answered one or more of the financial planning questions in the Financially Fit Guide, and a new question has recently been added to help increase customers’ awareness of their income after retirement. In 2015, Financially Fit tools were used more than one million times in the Netherlands.
Video identification With the video identification service, new customers in Germany can identify themselves to the bank without having to visit in person. Video identification is being used in a growing number of account openings. At ING, we’re always looking for the next step ahead.
Key challenges and dilemmas The business, market and regulatory environment in which we operated remained challenging in 2015, with several interrelated themes: the declining oil price, monetary policy measures in the US and the eurozone, and concerns over China’s economy.
More information on the implementation of the Dutch Banking Code at ING can be found on www.ing.com/15ar8
The three-day journey with pre- and post-activities provides leaders with a holistic view of the bank. Topics include an in-depth look at our strategy, key value drivers for both Retail and Wholesale Banking, how collaboration across functions and business units drives performance, and living the values and behaviours of the Orange Code.
For more information on the risk appetite and risk metrics, please refer to the section Risk Appetite Framework of the risk management chapter, part of the consolidated annual accounts of this Annual Report.
ING has set up an all-encompassing recovery plan to ensure the bank’s readiness and decisiveness to tackle financial crises on its own. Effective since 2012, the plan is updated annually to make sure it stays fit for purpose. The completeness, quality and credibility of the updated plan is assessed annually by ING’s regulators. Since 2012, ING has diligently worked together with the different resolution authorities to determine a resolution strategy and to identify potential impediments to resolution. This resulted in a first resolution assessment that was shared with the FSB and the preparation of a transitional resolution plan by the Single Resolution Board (SRB).
To receive press releases and other ING news, you can subscribe to the email service at www.ing.com. You can also access the latest financial information and press releases on our website at www.ing.com/ir.
Future-oriented statements In this integrated annual report we also look forward and share our vision, ambitions, strategy, opinion and plans for the future. These forward-looking statements can be recognised by terms such as: • expect • anticipate • intend • plan • believe • seek • see • will • would • target • forecast • of the opinion • or similar terms.
The GRI index 2015 as published on www.ing.com is an integral part of the Report and is within our engagement scope. Other references in the Report (to www.ing.com, external websites and other documents) are outside the scope of our assurance engagement.
Nomination Committee meetings The Nomination Committee met four times in 2015 with no absentees.
Read more in the “ING Continuity Foundation” chapter. The ordinary shares are not used for protective purposes. The ordinary shares, which are all registered shares, are not listed on a stock exchange.
This delegation of authority allows ING Group to respond promptly to developments in the financial markets.
Such information includes the notice for the General Meeting, the agenda, the place and time of the meeting, the address of the website of ING Group, the verbatim text of the proposals with an explanation and instructions on how to participate in the meeting (either in person or by proxy), as well as the reports of the Executive Board and the Supervisory Board. More complex proposals, such as proposals to amend the Articles of Association, are normally not included in the notice, but are made available separately on the website of ING Group and at the ING Group head office.
Proposals by shareholders and holders of depositary receipts Proposals to include items on the agenda for a General Meeting that have been adequately substantiated under applicable Dutch law can be made by shareholders and holders of depositary receipts representing a joint total of at least 0.1 percent of the issued share capital or representing together a share value of at least EUR 50 million, calculated on the basis of the closing prices on the date of signature of the proposal, as published by Euronext Amsterdam N.V. Given the periods of notice required for proxy voting, proposals have to be submitted in writing at least 60 days before the date of the meeting.
Record date Pursuant to Dutch law, the record date for attending a general meeting and voting on the proposals at that general meeting is the 28th day before the day of the general meeting. Shareholders and holders of depositary receipts who hold shares and/or depositary receipts for shares at the record date are entitled to attend the general meeting and to exercise other rights related to the general meeting in question on the basis of their holding at the record date, notwithstanding any domain. If bilateral communication between ING Group and investors is organised and/or facilitated through a broker, an analyst or specialist salesperson representing the broker may be present in the meeting. ING Group does not provide brokers with any form of compensation for organising and/or facilitating such meetings.
Ancillary positions/conflicting interests No member of the Executive Board has corporate directorships at listed companies outside ING.
Corporate Governance – continued claims from third parties as far as permitted by law on the conditions laid down in an indemnity statement.
Other relevant ancillary positions: member of the Supervisory Board of Stichting World Wildlife Fund, member of the European Council on Foreign Relations (London).
Ancillary positions pursuant to CRD IV: member of the Supervisory Board of ING Groep N.V., member of the Supervisory Board of ING Bank N.V., member of the Supervisory Board of SACYR S.A.
On the next page, a table is included highlighting key achievements, collectively accomplished by the Executive Board in 2015 in the areas mentioned, against both the overall ambitions of ING and the specific performance targets agreed with the Supervisory Board at the beginning of 2015.
• Number of new retail customers up by 1.4 mln with the number of primary relationships up by almost 7% to 8.9 mln.
2 Upfront or deferred share units of Ralph Hamers are cash settled instruments of which the ultimate value will be based on ING Group’s share price at the vesting date.
As a consequence, the following amendments to the 2008 Supervisory Board remuneration policy are proposed: In addition, members of the Supervisory Board will be reimbursed for travel and business expenses.
In September 2015, NN Group repurchased 1.7 million ordinary shares from ING Group. This transaction reduced ING’s remaining interest in NN Group to 37.12%.
Financial instruments that have not had a significant increase in credit risk since initial recognition require, at initial recognition, a provision for expected credit losses associated with the probability of default events occurring within the next 12 months (‘12 month ECL’).
Use of estimates and assumptions The preparation of the consolidated financial statements necessitates the use of estimates and assumptions. These estimates and assumptions affect the reported amounts of the assets and liabilities and the amounts of the contingent liabilities at the balance sheet date, as well as reported income and expenses for the year. The actual outcome may differ from these estimates.
Deferred income tax Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets and liabilities are not discounted.
As at 31 December 2015, Trading assets include receivables of EUR 62,221 million (2014: EUR 50,692 million) with regard to reverse repurchase transactions.
The total amount of direct operating expenses (including repairs and maintenance) in relation to Real estate investments that generated rental income for the year ended 31 December 2015 is EUR 1 million (2014: EUR 4 million). The total amount of direct operating expenses (including repairs and maintenance) incurred on Real estate investments that did not generate rental income for the year ended 31 December 2015 is nil (2014: nil).
Notes to the Consolidated annual accounts of ING Group - continued 10 Intangible assets
Share premium In 2015, 2014 and in 2013, share premium increased with EUR 8 million, EUR 8 million and EUR 4 million respectively as a result of issuance of ordinary shares for share-based employee incentive programmes.
Impact of partial divestment of NN Group relates to the further divestment of NN Group in February 2015.
The repurchase premium of EUR 750 million was paid in relation to the repayment of the EUR 1,500 million non-voting equity securities to the Dutch State. Reference is made to Note 53 ‘Transactions with the Dutch State and the European Commission Restructuring Plan’.
ING Groep N.V. is subject to legal restrictions regarding the amount of dividends it can pay to the holders of its ordinary shares. Pursuant to the Dutch Civil Code, dividends can only be paid up to an amount equal to the excess of the company’s own funds over the sum of the paid-up capital, and reserves required by law.
In June 2015, a second tranche of EUR 337.5 million of the mandatorily exchangeable subordinated notes was exchanged into 13.6 million NN Group ordinary shares. The remaining tranche has been mandatorily exchanged in 2016. Reference is made to Note 20 ’Other liabilities’ and Note 54 ‘Other events’.
Notes to the Consolidated annual accounts of ING Group - continued 27 Other income
Other Included in Other operating expenses – Other in 2015, is a charge for a provision recognised in relation to floating interest rate derivatives that were sold in the Netherlands. Reference is made to Note 20 ‘Other liabilities’ and Note 48 ‘Legal proceedings’.
Net result from discontinued operations is as follows: Result before tax from discontinued operations 936 903 757
ING Group’s risk management (including liquidity) is explained in the section ‘Risk management – Funding and liquidity risk’.
Mauritius has no tax charge, due to an unrealised tax exempt result, following the merger of ING Vysya with Kotak in April 2015.
Other The actual return on the plan assets amounts to EUR 426 million (2014: EUR 1,410 million).
Changes in composition of the group and other changes In 2014, Changes in the composition of the group and other changes of the Defined benefit obligation included EUR –53 million related to the deconsolidation of ING Vysya and EUR –119 million related to the classification of NN Group as held for sale. Changes in the composition of the group and other changes of Other post-employment benefits included EUR –41 million as a result of the classification of NN Group as held for sale. Reference is made to Note 54 ‘Other events’.
In 2014, EUR 3,279 million was recognised in Transfer to Other reserves (pension settlement) related to the Dutch defined benefit plan settlement.
The weighted average statutory tax rate in 2014 compared to 2013 does not differ significantly.
Amounts recognised in the profit and loss account during the year 120 –15 –83 22
Included in the table above, are EUR 103 million Voya warrants and EUR 58 million NN Group warrants which are classified as Level 3 instruments. Reference is made to Note 4 ‘Financial assets at fair value through profit and loss’.
Also, this disclosure does not attempt to indicate or predict future fair value move. The numbers in isolation give limited information as in most cases these Level 3 assets and liabilities should be seen in combination with other instruments (for example as a hedge) that are classified as Level 2.
In 2015, the increase in Held-to-maturity investments (Level 1) is mainly as a result of the reclassification of Government bonds (EUR 3.5 billion from Available-for-sale investments.
Customer deposits and other funds on deposit 444,421 23,375 21,600 8,892 2,462 27 500,777
Amounts due from banks Reverse repurchase, securities borrowing and similar agreements 151 151 151 154 –3 151 – 151 – Financial assets at fair value through profit and loss
Amounts due to banks Repurchase, securities lending and similar agreements 678 678 677 1
In July 2011, the Interest Group ING General Managers’ Pensions (Belangenvereniging ING Directiepensioenen), together with a number of individual retired Dutch General Managers of ING, instituted legal proceedings against ING’s decision not to provide funding for indexing Dutch General Managers’ pensions directly insured with Nationale-Nederlanden in 2010 and 2011. This claim was rejected by the District Court of Amsterdam on 22 October 2012. Appeal against this District Court decision was rejected by the Amsterdam Court of Appeal on 28 July 2015 which became final on 28 October 2015.
Loss on disposal4,5 –1,224 –2,005 1 This table includes the disposal transactions that resulted in the loss of control of NN Group and Voya which took place in May 2015 and March 2014 respectively.
Assets from ING Bank N.V. and NN Group N.V. mainly comprise long-term funding. Liabilities to ING Bank N.V. mainly comprise shortterm deposits.
The valuation method of the 20% Alt-A securities in the IFRS-EU balance sheet is not impacted by the IABF. The methodology used to determine the fair value for these assets in the balance sheet under IFRS-EU is disclosed in Note 40 ‘Fair value of assets and liabilities’.
The calling or buy-back of Tier 2 capital and Tier 1 Hybrid Securities continued to be proposed for authorisation to the European Commission on a case by case basis until the full repayment of the core Tier 1 securities to the Dutch State, but ultimately until 18 November 2014, whichever date came first. Notwithstanding this restriction, ING was allowed to call the EUR 1.25 billion Hybrid originally issued by ING Verzekeringen N.V. on 21 December 2012. With full repayment of the core Tier 1 securities to the Dutch State on 7 November 2014, these restrictions ended as of that date.
The 2012 amended Restructuring Plan included a repayment schedule for the remaining core Tier 1 securities to the Dutch State as described in the above-mentioned section ‘Repayment non-voting equity shares’. As indicated, on 7 November 2014 the repayment of the core Tier 1 securities to the Dutch State was completed.
ING Group committed to divest and create NN Bank – as part of NN Group – as a viable, stand-alone and competitive business with a broad product portfolio and a growth path to become a mid-sized player in the Dutch market. Several detailed commitments needed to be met, including targets for mortgage production and consumer credit production as well as the commitment that NN Bank should be sufficiently capitalised to execute its long-term growth plan and in any case to ensure growth to about 2016, which included a commitment to make available to NN Bank additional capital up to an amount of EUR 120 million if and when needed but ultimately just before the date on which ING Group has deconsolidated NN Group (if the Basel III leverage ratio becomes mandatory or when NN Bank needs capital to execute its business plan).
Market risk in trading books Within the trading portfolios, positions are maintained in the professional financial markets. These positions are often a result of transactions with clients and may serve to benefit from short-term price movements. Market risk arises in the trading portfolios through exposure to various market risk factors, including interest rates, equity prices, foreign exchange rates and credit spreads.
The Management Board Bank defines the funding and liquidity strategy, target funding and liquidity position and the risk appetite based on recommendations from Bank Treasury, Capital Management, Balance Sheet Risk and Finance.
The size and composition of the Liquidity buffer depends on ING Bank’s Risk Appetite (risk tolerance) and regulatory liquidity standards. In the buffer, only assets that are included that are ‘unencumbered’ and freely available for liquidity purposes. Bank Treasury ensures functional management of all liquidity buffers within ING Bank, both buffers at Bank level and buffers at local business unit level.
Regulator relationships The Bank Compliance Risk Management function continued its policy of investing in pro-active relationship building with regulators in the jurisdictions where ING Bank operates, by striving for an open two-way approach to communication and cooperation in identifying and mitigating compliance risks for ING Bank as well as seeking to contribute to the regulatory debate going forward.
Legal and statutory reserves 5,717 11,351 1 Other reserves, as at 31 December 2014, is adjusted as a result of the change in accounting approach for the NN Group Anchor investment transaction (page 116).
In addition, the International Accounting Standards Board (‘IASB’) has issued and proposed certain amendments to several International Financial Reporting Standards (‘IFRS’) standards during the course of 2012 and 2013, whose changes include a package of amendments to the accounting requirements for financial instruments announced in November 2013. These amendments introduced a new hedge accounting model addressing the so-called ‘own credit’ issue that was already included in IFRS 9 Financial Instruments. As of July 2014, IFRS 9 replaced IAS 39, the accounting standard heavily criticised in the wake of the financial crisis, for annual periods beginning on or after 1 January 2018, with early adoption permitted. Such changes could also have a material impact on our reported results and financial condition, as well as on how ING manages its business, internal controls and disclosure.
In 2010, the Basel III Accord was adopted and consequently translated into regulation by the EU in the Capital Requirement Regulation (CRR) and a Capital Requirement Directive IV (CRD IV). The CRR is binding for all EU member states and became effective per 1 January 2014. For more information, please refer to the chapter ‘Regulatory environment’ in the Risk Management Paragraph.
(14) of Regulation (EU) No 575/2013) 7 Other adjustments1 145,010 146,666 8 Total leverage ratio exposure 1,071,518 1,073,174 1 The adjustment for Receivables for cash variation margin provided in derivatives transactions has been included in the line Other adjustments.
• Book size: The portfolio growth, excluding divestments/de-consolidations and FX fluctuations, led to a EUR 7.6 billion higher RWA, mainly driven by the Wholesale Banking and Challenger & Growth portfolios. Growth was seen in the Corporates and Structured Finance book, as well as in the mortgage portfolios in Belgium and DiBa Germany. In Australia, the white label mortgage portfolio was sold in Q2, decreasing the portfolio but this was partially compensated by growth in own label in the second half year of 2015. Growth was partially compensated by volume decline witnessed in the Dutch mortgage portfolio.
Exposure classes The Basel Accord has developed the concept of ‘Exposure Classes’. These are essentially groupings of credit risks associated with a common obligor type or product type. For the AIRB and Standardised Approach, most of the exposure classes have subcategories. • Central Governments & Central Banks (hereafter Sovereigns) include Sovereign Government entities, Central Banks, CRR/CRD IV
Exposures before and after risk mitigation for the SA portfolio The table below shows how credit risk mitigation (CRM) in the SA portfolio is distributed over the exposure classes. ING Bank’s exposure value is shown before and after credit risk mitigation. There are two principal methods for reducing or mitigating Credit Risk: i) by reduction of Credit Risk through the acceptance of pledged financial assets as collateral or ii) mitigation or shifting of credit risks to a lower risk weighting group by accepting guarantees from unrelated third parties. ING Bank uses both methods to take CRM effects into account. For financial markets collateral, ING Bank uses the Financial Collateral Comprehensive Method to allow for mitigation effects.
Past due loans ING Bank considers past due loans to be those loans where any payment of interest of principal is more than one day past due. The methodology is principally applied to loans to private individuals, such as residential mortgage loans, car loans and other consumer loans. For business loans (Sovereigns, Institutions, Corporates), ING Bank has adopted a policy to classify the obligor as a nonperforming loan as quickly as possible upon the occurrence of a payment default. Therefore, the concept of past due loans does not exist for these types of obligors and hence the reason why the business exposure classes are not included.
Designated Country 2 23 1 26 2 2 Non-Designated Country 1 2 3 3 3 1 7 Total 3 25 1 29 3 5 1 9
A qualifying insurance policy is an insurance policy issued by an insurer that is not a related party of the reporting enterprise, if the proceeds of the policy: • can be used only to pay or fund employee benefits under a defined benefit plan; and • aren’t available to the reporting enterprise’s own creditors
Regulatory capital (RC) The minimum amount of capital that a bank is required to hold in order to absorb unexpected losses. RC is calculated using regulatory approved internal models.