Think beyond traditional banking to develop new services and business models
If we want to keep improving the customer experience, we have to accelerate the innovation cycle so that we can identify more good ideas and introduce useful improvements and technologies sooner.
Our overall approach to innovation is based on deep understanding of our customers. That helps to ensure we focus on ideas that genuinely make customers’ lives better.
Economic contribution 1 Economic performance 2 Indirect economic impacts 3 Managing risks
We increased our focus on enhancing customer financial capabilities and stepped up our efforts.
The RoE improved from 9.0 percent, reflecting higher underlying net result combined with a modest decline in the average equity base of ING Bank, which was caused by dividend payments to ING Group in both years and the write-down in the net pension assets in 2014.
We have a mix of mature and growth businesses in our various countries (in Europe, Asia and Australia). We have market-leader positions in the Netherlands, Belgium and Luxembourg; solid positions in Australia, Austria, France, Germany, Italy and Spain; competitive positions in Poland and Romania, and a promising position in Turkey, and through our stakes in Bank of Beijing (China), TMB (Thailand) and ING Vysya Bank (India). In late November 2014, ING Vysya Bank and Kotak Mahindra Bank announced their intention to merge their respective businesses.
The specific needs of expatriates – an important segment of the workforce in Belgium – are also addressed. Even before arriving on Belgian soil, expats coming to Belgium can have their accounts set up and enjoy fully operational banking services upon arrival. Beyond traditional banking, the Bank also provides newly arrived expats with additional information and checklists about settling in Belgium. By the same token, the Bank assists expats returning to their home country with the relevant banking and non-banking procedures.
Aligning our processes more directly with customer priorities is also improving transparency. In the Netherlands, we are taking operational customer processes, such as applying for a credit card or opening an account, through a so-called washing lane to redesign it as the ideal process from the customer’s perspective. As a result, by end-year 2014, 95 percent of all retail processes in the Netherlands had been reviewed and optimised.
In this chapter we first explain the scope and scale of the Commercial Banking division, summarise business unit activities and highlight key developments. Second, we show how our activities are furthering ING strategy. Third, we discuss how we are contributing to a more sustainable economy. Finally, we highlight our 2014 performance.
TS performed well in 2014. Our achievements include a growth of WCS (with transactions undertaken for the first time for clients in Italy, Spain, Germany, Russia and Asia) and an increase in trade financing volumes with Financial Institutions. ING became a European SEPA bank in 2014 and successfully supported clients with their SEPA migration in the eurozone during the year.
The new portal has multi-country and multi-product capabilities. It includes real-time overviews, customised reporting and self-service features and is expected to be commercially launched in 2015.
ING Group 40 Report of the Executive Board Commercial Banking continued
With a new strategy and a changing external environment, we started a programme in 2014 to determine the values and behaviours we need to achieve our business goals and bring about a consistent way of working ING-wide.
The CRO is also part of the bank’s Board, which ensures risk is a continuing topic for the leadership team. The CRO steers a functional, independent risk organisation, which supports commercial departments and acts where necessary to keep the risk profile within the defined risk appetite.
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. These forward-looking statements are based on management’s current beliefs and assumptions about future activities and are subject to uncertainties. Therefore our assurance provider cannot assure these statements.
Corporate Governance Committee meetings The Corporate Governance Committee met twice with no absentees. The Committee discussed the agenda for the 2014 Annual General Meeting, including the publication on the application of the Dutch Banking Code and the Dutch Insurers’ Code. Apart from the annual review of the charters of the Supervisory Board and the Executive Board, the Committee also reviewed the draft charters of the Management Board and Supervisory Board of NN Group N.V. and ING Insurance Eurasia N.V. as well as the final governance structure of NN Group. In November the Committee advised on various recommendations regarding the 2015 Annual General Meeting and discussed possible corporate governance implications of CRD IV regulation as well as the proposal to integrate the Annual Report and the Sustainability Report for 2014.
Although the completion of these divestments may well extend until the end of 2016, the Executive Board and Supervisory Board have decided that a review of ING Group’s entire corporate governance will be conducted in 2015, including the depositary-receipts structure, and to put this item on the agenda of the 2016 Annual General Meeting.
Appointment and dismissal Members of the Executive Board are appointed by the General Meeting from a binding list to be drawn up by the Supervisory Board. The list will be rendered nonbinding if a resolution of the General Meeting to that effect is adopted by an absolute majority of the votes cast which majority represents more than one-third of the issued share capital. Candidates for appointment to the Executive Board must comply with the suitability and reliability requirements set out in the Dutch Financial Supervision Act and must continue to meet these while in office.
I. (Isabel) Martín Castellá (Born 1947, Spanish nationality, female; appointed in 2013, term expires in 2017)
In our opinion, ING Groep N.V. maintained, in all material respects, effective internal control over financial reporting as of 31 December 2014, based on the COSO criteria.
(3) After full repayment of the Dutch state aid on 7 November 2014, the base salary of the CFO and CRO was increased to EUR 900,000.
Focus on long-term value creation, risk and non-financial performance Variable remuneration is linked to long-term value creation and risk. It is based on individual, business line and company performance criteria. Performance measurement will increasingly account for estimated risks and cost of capital. There is a clear emphasis on longterm value creation by means of long-term incentives, deferral and clawback mechanisms.
Repayment of non-voting equity securities –750 –750 Repurchase premium –375 –375 –375 Dividends –13 –13 Impact of IPO Voya 14 –2,526 –2,526 4,348 1,822 Purchase/sale of treasury shares 378 378 378 Employee stock option and share plans 2 4 –84 –78 19 –59 Changes in the composition of the group and other changes 824 824 –112 712
Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) These amendments provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10 Consolidated Financial Statements. The exception to consolidate requires investment entities to account for subsidiaries at fair value through profit or loss. These amendments have no impact on ING, since ING Group does not qualify as an investment entity under IFRS 10.
In addition, the adequacy of insurance provisions and net of DAC, is evaluated regularly. The test involves comparing the established insurance provision with current best estimate assumptions about factors such as court decisions, changes in laws, social, economic and demographic trends, inflation, investment returns, policyholder behaviour, mortality and morbidity trends and other factors. The use of different assumptions in this test could lead to a different outcome.
Insurance provisions also include the impact of minimum guarantees which are contained within certain variable annuity products. This impact is dependent upon the difference between the potential minimum benefits payable and the total account balance, expected mortality and surrender rates. The determination of the potential minimum benefits payable also involves the use of assumptions about factors such as inflation, investment returns, policyholder behaviour, and mortality morbidity trends and other factors. The use of different assumptions about these factors could have a significant effect on insurance provisions and underwriting expenditure.
Credit risk management classification Credit risk management disclosures are provided in the section ‘Risk management’. The relationship between credit risk classifications in that section and the consolidated balance sheet classifications above is explained below: ING Group Annual Report 2014
Maximum credit risk exposure The maximum credit risk exposure for items on the balance sheet is generally the carrying value for the relevant financial assets. For the off-balance sheet items the maximum credit exposure is the maximum amount that could be required to be paid. Reference is made to Note 50 ‘Contingent liabilities and commitments’ for these off-balance sheet items. Collateral received is not taken into account when determining the maximum credit risk exposure.
Securities purchased under agreements to resell (‘reverse repos’) are recognised as Loans and advances to customers, Amounts due from banks, or Financial assets at fair value through profit and loss - Trading assets, as appropriate. The difference between the sale and repurchase price is treated as interest and amortised over the life of the agreement using the effective interest method.
Changes in plan assets that effect Shareholders’ equity and/or Net result, include mainly: › return on plan assets using a high quality corporate bond rate at the start of the reporting period which are recognised as staff costs in the profit and loss account; and
Carrying value as at 31 December 14,419 633 Fair value as at 31 December 13,250 648 Unrealised fair value losses recognised in shareholders’ equity (before tax) as at 31 December –446 –8 Effect on shareholders’ equity (before tax) as at 31 December if reclassification had not been made –1,169 15 Effect on result (before tax) if reclassification had not been made nil nil Effect on result (before tax) for the year (mainly interest income) 390 28 Recognised impairments (before tax) nil nil Recognised provision for credit losses (before tax) nil nil
In 2014, the change in available-for-sale equity securities and debt securities includes EUR –5,620 million and EUR –55,394 million (EUR –5,954 million and EUR –63,295 million as per classification date) respectively, related to the classification of NN Group as held for sale. Reference is made to Note 12 ‘Assets and liabilities held for sale’ and Note 57 ‘Other events’.
12 Assets and liabilities held for sale Assets and liabilities held for sale includes disposal groups whose carrying amount will be recovered principally through a sale transaction rather than through continuing operations. This relates to businesses for which a sale is agreed upon but for which the transaction has not yet closed or a sale is highly probable at the balance sheet date but for which no sale has yet been agreed.
Cash and balances with central banks 6,239 2,264 1,342 Amounts due from banks 123 Financial assets at fair value through profit and loss 49,438 80,743 26,688
Impact of Voya relates to the IPO and second tranche sale of Voya as explained in Note 57 ‘Other events’.
Result for the year 4,362 4,362 Unrealised revaluations –79 –79 Changes in treasury shares 255 255 Transfer to share of associates and joint ventures reserve –236 236 Employee stock options and share plans 7 7 Repurchase premium –375 –375 Changes in composition of the group and other changes –675 –675
Dutch government guaranteed notes The following bonds were issued under the Credit Guarantee Scheme of the State of the Netherlands. These bonds were fully repaid in 2014. ING Group paid a fee of 84 basis points over the issued bonds to the Dutch State to participate in the Credit Guarantee Scheme: › ING Bank issued a 5 year EUR 4 billion fixed rate government guaranteed senior unsecured bond in February 2009. The issue was priced at a fixed rate of 3.375%, 75 basis points over mid-swaps. After the repurchase in 2013 (see below) there was a remaining amount of approximately EUR 2.72 billion outstanding on these bonds. These bonds were repaid on 3 March 2014; › ING Bank issued a 5 year USD 2.25 billion fixed rate government guaranteed senior unsecured bond in March 2009. The issue was priced at a fixed coupon of 3.90%, 145 basis points over USD mid-swaps. After the repurchase in 2013 (see below) there was a remaining amount of approximately USD 1.26 billion outstanding on these bonds. These bonds were repaid on 19 March 2014; and
In 2014, the change in Other borrowed funds includes EUR –3,476 million (EUR –5,225 million as per classification date) related to the classification of NN Group as held for sale and EUR –144 million related to the deconsolidation of Vysya. Reference is made to Note 12 ‘Assets and liabilities held for sale’ and Note 57 ‘Other events’.
Insurance and investment contracts, reinsurance contracts Provision net of reinsurance Reinsurance contracts Insurance and investment contracts
Opening balance 2,398 12,628 Changes in the composition of the group and other changes –2,422 –9,504
In 2013, Changes in the composition of the group and other changes includes EUR –10 million as a result of the classification of Voya as held for sale and nil as a result of the classification to continuing operations of ING Japan. Reference is made to Note 57 ‘Other events’. Additions to the reorganisation provision are mainly related to the restructurings for Retail banking in the Netherlands, Commercial banking.
In 2014, the decrease in total average assets, partly attributable to the deconsolidation of ING Vysya Bank and the additional transfers of assets of WestlandUtrecht Bank to NN Group, leads to a decrease of EUR 152 million in the interest result. In addition, an improvement of the interest margin of 9 basis points led to a EUR 755 million increase in the interest result.
Depreciation of property and equipment 326 345 361 326 345 361
Insurance businesses in Hong Kong, Macau and Thailand of EUR 945 million and the divestment loss of EUR 989 million on the sale of ING Life Korea.
Diluted earnings from discontinued operations –1,406 495 1,280 3,856.0 3,833.5 3,802.4 –0.36 0.13 0.34 35 Dividend per ordinary share
Underlying expenditure – Operating expenses 8,558 8,558 – Additions to loan loss provision 2,288 2,288 – Other impairments 136 136 Total underlying expenses 10,983 10,983
40 Information on geographical areas ING Group’s business lines operate in seven main geographical areas: the Netherlands, Belgium, Rest of Europe, North America, Latin America, Asia and Australia. The Netherlands is ING Group’s country of domicile. Geographical distribution of income is based on the origin of revenue. A geographical area is a distinguishable component of the Group engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments. The geographical analyses are based on the location of the office from which the transactions are originated.
Profit and loss account – Pension and other staff-related benefit costs
To include credit risk in the fair valuation, ING applies both credit and debit valuation adjustments (CVA, DVA). Own issued debt and structured notes that are valued at fair value are adjusted for credit risk by means of a DVA. Additionally, derivatives valued at fair value are adjusted for credit risk by a CVA. The CVA is of a bilateral nature as both the credit risk on the counterparty as well as the credit risk on ING are included in the adjustment. All market data that is used in the determination of the CVA is based on market implied data.
Net asset value Price (%) 118% 118% Loan pricing model Credit spread (bps) 696 696
ING Group 206 Consolidated annual accounts Notes to the consolidated annual accounts of ING Group continued
For more detail on the valuation of fair valued instruments, refer to the section Risk Management, paragraph Fair values of financial assets and liabilities in this document.
Fair value through profit and loss Equity (equity derivatives, structured notes) 106 Interest rates (Rates derivatives, FX derivatives) 115 Credit (Debt securities, Loans, structured notes, credit derivatives) 21 Available-for-sale Equity 19 28
ING Group 208 Consolidated annual accounts Notes to the consolidated annual accounts of ING Group continued
Accounting ineffectiveness recognised in the profit and loss account for the year ended 31 December 2014 on derivatives and nonderivatives designated under net investment hedge accounting was EUR 0 million (2013: nil).
Less than 1–3 months 3–12 months 1–5 years Over 5 years
Asia - Joint venture ING-BOB Life In July 2013, the 50% interest in the Chinese insurance joint venture ING-BOB Life Insurance Company was agreed to be sold to BNP Paribas Cardif, the insurance arm of BNP Paribas. The transaction closed on 30 December 2014 and does not have a significant impact on the NN Group or ING Group results.
(2) The gain/loss on disposal comprises the sales proceeds, the net assets disposed, the expenses directly related to the disposal and the realisation of unrealised reserves.
ING Bank N.V. The Netherlands 100% 100% Bank Mendes Gans N.V. The Netherlands 100% 100% ING Lease (Nederland) B.V. The Netherlands 100% 100% ING Corporate Investments B.V. The Netherlands 100% 100% ING Vastgoed Management Holding B.V. The Netherlands 100% 100% WestlandUtrecht Bank N.V. The Netherlands 100% 100% ING België N.V. Belgium 100% 100% ING Luxembourg S.A. Luxembourg 100% 100% ING DiBa A.G. Germany 100% 100% ING Bank Slaski S.A. Poland 75% 75% ING Financial Holdings Corporation United States of America 100% 100% ING Vysya Bank Limited India 43% ING Direct N.V. (1) Spain, Italy 100% ING Bank A.S. Turkey 100% 100% ING Bank (Australia) Ltd Australia 100% 100% ING Bank (Eurasia) Z.A.O. Russia 100% 100%
Credit risk is the risk of potential loss due to default by ING Bank’s debtors (including bonds) or trading counterparties
Step 1. Identify & assess ING Bank’s key risks Setting the Risk Appetite Framework starts with a multi-dimensional step to identify & assess the risks ING Bank is facing when executing its strategy. This step includes the following actions that are performed on an annual basis: › detect unidentified risks that are not yet controlled within ING Bank’s risk management function & assess their potential impact, › benchmark current risk framework versus regulatory developments, › re-assess known risks to confirm risk level or detect potential changes, › reflect on the current set of Risk Appetite Statements.
Credit risk Introduction The credit risk section provides information on how ING Bank manages, measures and monitors credit risk and will give an insight into the ING Bank portfolio from a credit risk perspective. Prior to providing insight into the portfolio, we will explain how ING Bank ensures that credit risk is properly addressed and managed within ING Bank.
Commercial Banking Structured Finance as well as Transaction Services have seen an increase in 2014. FX had a material impact on these significantly USD denominated portfolios, but, excluding FX these portfolios registered a volume increase. Financial Markets and especially derivatives were impacted by the introduction of CRR/CRDIV resulting in increased READ, RWA density and higher capital requirements (increased Credit RWA by EUR 5.5 billion and additional CVA RWA of EUR 6.2 billion).
Risk governance per business activity There is a split between Commercial Banking and Retail Banking. In practice, in 2014 Credit Risk Management (CRM) consisted of the following units; Commercial Banking CRM (CB), Global Credit Restructuring (GCR), Credit Capitals and Retail Risk Management (CC&RRM), Information Management Services (IMS) and Strategy and Business Management (S&BM).
Credit approval process The credit approval process ensures that individual transactions are assessed on a name-by-name basis. For each type of counterparty (corporate, banks/financial institution, structured products clients) there is a separate process. The line credit risk managers are organised along the business lines of ING Bank and are specialised in the relevant area of expertise. The credit approval process is supported by, amongst others, a credit approval system which ensures consistency and completeness; a risk rating system which contains all the risk rating models to ensure a proper rating is given to a counterparty and a limit and exposure monitoring system which subsequently feeds into the credit approval system. The rating model is used to indicate a counterparty’s creditworthiness translated into a probability of default (PD), and to determine the maximum risk appetite that ING Bank may have for a given type of counterparty (reference benchmark). The determination of the delegated authority (the amount that can be approved at various levels of the organisation) also depends on the risk rating. ING Bank has a rating system with in total 22 grades (1=highest rating; 22=lowest rating) and are split in the following categories: › Investment grade (Risk Rating 1-10); › Non-investment grade (Risk Rating 11-17); › Restructuring (Risk Rating 1-19); › Problem (Risk Rating 20-22).
Exposure at Default (EAD): The second element is the counterparty’s exposure at default. These models are intended to estimate the outstanding amount or obligation at the moment of default in the future. Since the fact that a counterparty will go into default is not known, and the level of outstanding that may occur on that date is also not known, ING Bank uses a combination of statistical, expert and hybrid models to estimate the Exposure at Default. With the exception of guarantees and letters of credit, the EAD is always
Next to the model choice, the definition of default is an important starting point for model building. ING Bank uses a framework that integrates elements of the regulatory definition of ‘Default’ and the loan loss provisioning indicators under IAS 39. The rationale is that several indicators are very close to the indications of an obligor’s ‘unlikeliness to pay’ under European regulation (CRR/CRDIV) and similar regulations. Integration of both frameworks makes it possible to use the regulatory risk components PD, LGD and EAD in the collective provisioning process under IAS 39, further enhancing ING Bank’s compliance with the CRR/CRDIV ‘use test’. Key differences between the parameters used for Loan Loss Provisioning and Regulatory Capital calculations are that Regulatory Capital parameters are typically through the cycle while Loan Loss parameters tend to be more point in time. Additionally, the LGD for Regulatory Capital calculations is based on a down-turn LGD.
Commercial Banking: for business loans (governments, institutions, corporates); ING Bank has adopted a policy to classify the obligor as a non-performing loan as quickly as possible upon the occurrence of a payment default or even before. These are the default triggers: ING Group 282 Risk management ING Bank Risk Management continued
Within ING Bank, there are two distinct forms of covers: assets and third party obligations.
Cover values including guarantees received - Business Lending portfolio – 2014 (1)(2)
By accounting category Amortised Cost –1,203 1,292 –1,115 923 Fair value through equity 1,234 –2,920 2,459 –2,347 Fair value through profit and loss 135 –90 78 –85
Year-on-year variance analysis During the year ended 31 December 2014 the revaluation reserve relating to equity securities held in the available-for-sale portfolio fluctuated between a month-end low amount of EUR 996 million (2013: EUR 1,038 million) and a high amount of EUR 2,019 million (2013: EUR 1,483 million).
› Liquidity buffers: ALCO Bank ensures that sufficient liquidity is maintained, in accordance with Bank- and regulatory rules and standards, including a buffer of unencumbered, high quality liquid assets, to withstand stress events, such as those involving the loss or impairment of both unsecured and secured funding sources.
Transfer to share of associates and joint ventures reserve –180 180 Employee stock option and share plans 4 8 10 22 Repayment of non-voting equity securities –1,500 –1,500 Repurchase premium –750 –750 Impact of NN Group –4,263 –4,263 Impact of deconsolidation of Voya –496 481 102 87 Purchases/sales of treasury shares –14 –14 Changes in the composition of the group and other changes –983 968 264 249
In 2014, Disposal of group companies includes the further divestment in Voya resulting in the loss of control over Voya. The 18.9% remaining interest in Voya is included in ‘Other assets’ as an available-for-sale equity investment. Reference is made to Note 2 ‘Other assets’.
The reserve adequacy test of the Netherlands’ individual life and group pension business requires the application of significant judgement in the setting of the longevity, expense and reinvestment rate assumptions. Further, the valuation of guarantees in the Japan Closed Block Variable Annuity business involves exercising judgement on policyholder behaviour assumptions in response to developments in financial markets.
We need liquidity to pay our operating expenses, insurance claims, interest on our debt and dividends on our capital stock, maintain our securities lending activities and replace certain maturing liabilities. Without sufficient liquidity, we will be forced to curtail our operations and our business will suffer. The principal sources of our funding include a variety of short- and long-term instruments, including deposit funds repurchase agreements, commercial paper, medium- and long-term debt, subordinated debt securities, capital securities and stockholders’ equity.
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
Many of the rules implementing the Bank Recovery and Resolution Directive will be contained in detailed technical and implementing rules, the exact text of which is subject to agreement and adoption by the relevant EU legislative institutions. There remains, therefore, uncertainty regarding the ultimate nature and scope of these resolution powers and, when implemented, how they would affect us and the securities that have been issued or will be issued by us. Accordingly, it is not yet possible to assess the full impact of the Bank Recovery and Resolution Directive on ING and on holders of any securities issued or to be issued by ING, and there can be no assurance that, once it is fully implemented, the manner in which it is applied or the taking of any actions by the relevant Dutch resolution authority contemplated in the Bank Recovery and Resolution Directive would not adversely affect the rights of holders of the securities issued or to be issued by ING, the price or value of an investment in such securities and/or ING’s ability to satisfy its obligations under such securities.
Credit risk 26 Understanding the credit risk profile, including significant risk concentration 370 - 374 27 Policies for identifying impaired or non-performing loans and forbearance 119 -120; 283 - 288 28 Flow statements of non-performing or impaired loans and stock of loan losses 283 – 288; 382 - 385 29 Quantitative and qualitative analysis of counterparty credit risk 386 – 388 30 Qualitative and quantitative information on credit risk mitigation, including collateral 288 – 297; 388 – 390
Sovereigns Institutions Corporate Residential Mortgages Other Retail Total 2014 Total 2013
Corporate credit risk disclosure This table presents READ, segmented by relevant factors, and the analysis for the exposure class ‘Corporates’. The Industry breakdown for this table is based on the NAICS system (North American Industry Classification System).
During the third quarter, a large increase of the Romanian LTV ratio is reported. This is due to the newly implemented property price index model with more conservative numbers which resulted in a decrease of the underlying collateral value of the mortgages. The implementation of the index model is in line with the strategy of ING to value property in accordance with local house price indices.
Average estimated PD under the Advanced AIRB approach versus the actual default rate per exposure class
Credit quality This section focusses on non-performing loans, which are loans where there is a reasonable probability that ING Bank may end up with a loss, unless ING Bank intervenes with specific and significant actions. In other words, in this category, an account or portfolio requires a more intensified approach, which may include renegotiations of terms and conditions and/or business/financial restructuring. This section should be read in conjunction with the Risk Management paragraph sections on: Risk Appetite Framework and Credit Quality.
Reconciliation of non-performing loans disclosures The table below shows the reconciliation of non-performing loans segmented by the lines of businesses used internally by ING Bank. A narrative explanation on these business lines is given in the Risk Management paragraph.
Impaired loan book movements Impaired loans at 1 January 2014 (1) 6,417 7,233 2,271 15,921 Classified as impaired during the year (²) 2,277 3,351 930 6,558 Outflow from impaired excluding write-offs –1,856 –1,277 –587 –3,720 Amounts written off –715 –716 –298 –1,729 Changes in composition of the bank –272 –272 Exchange rate and other movements (3) 122 1 7 130
The ING Bank portfolio is characterised by significant amounts of secured lending especially in the key areas of residential and commercial mortgages, structured finance and leasing. Amount of collateral often has a significant impact on provisioning and LGD which directly affects risk density. The cover values are pre-haircut but indexed values and exclude any cost of liquidation. Covers can either be valid for all limits, sub-limits or a particular outstanding of a borrower, the latter being the most common.
The large increase in outstandings is mainly related to growth. Investment exposure to Sovereigns and lending exposure to Corporates increased during the year which is mainly visible in the long term tenor buckets.
Regulatory capital method used and Rating Agencies ING Bank has implemented the AIRB approach for credit risk. As a consequence, ING Bank uses the Rating Based Approach (RBA) for investments in tranches of asset-backed securities (ABS) and mortgage-backed securities (MBS) which have been rated by external rating agencies. Rating agencies which are used by ING Bank under the RBA include Standard & Poor’s, Fitch, Moody’s and DBRS. The securitisation exposure for which each rating agency is used is given in the following table.
Investor securitisations ING Bank’s goal is to maintain a portfolio of high quality liquid assets that meets the regulatory requirements of CRR/CRD IV and final Delegated Act of October 2014 regarding liquidity. In line with ING’s internal rating policy, securitisation exposures are rated using the worst external rating provided by either Fitch, Moody’s or S&P. ING keeps close track of the securitisation investment positions via monthly monitoring reports. During 2014 and as a result of the inclusion of high quality Residential Mortgage Backed Securities (RMBS) and Asset Backed Securities (ABS) in Level 2B of the EU liquidity framework, ING has invested in a limited amount of high quality Auto-ABS’s.
Accident (calendar) year All claims relating to events (insured losses) that occurred in a certain calendar year are grouped together, irrespective of when they are actually reported or paid and regardless of the year in which the insurance cover commenced. Accident year information matches claims incurred in a year with the premium earned in that year.
› The item has a cost or value that can be measured reliably.
Total Loss-Absorbency Capacity (TLAC) Total Loss Absorbency Capacity (TLAC) is a concept proposed by the Financial Stability Board in November 2014 meant to ensure that G-SIBs have sufficient capacity in order to absorb losses both before and during resolution, to continue critical functions without requiring taxpayer support or threatening financial stability.