withholding tax regulations could harm our reputation and could subject the Group to enforcement actions, fines and penalties, which could have a material adverse effect on our business, reputation, revenues, results of operations, financial condition and prospects. For additional information with respect to specific proceedings, see Note 47 ‘Legal proceedings’ to the consolidated financial statements.
(‘signatory countries’), including the Netherlands, have signed a multilateral competent authority agreement to automatically exchange information pursuant to CRS. The majority of countries where ING has a presence has committed to CRS. The EU has made CRS mandatory for all its member states. The first information exchange by the Netherlands (as for approximately half of the signatory countries) was executed in 2017. Other signatory countries commenced their information exchange in 2018.
(commonly referred to as ‘DAC6’) impose mandatory disclosure requirements for taxpayers and intermediaries involving the reporting of cross-border arrangements affecting at least one EU
Member State that fall within one of a number of “hallmarks”. These hallmarks are broad categories setting out particular characteristics identified as potentially indicative of aggressive tax avoidance.
Communication Network (CCN) between the Member States which will be set up by the EU.
In June 2012, the ‘Intervention Act’ (Wet bijzondere maatregelen financiële ondernemingen) came into force in the Netherlands, with retroactive effect from 20 January 2012. The Intervention Act mainly amended the Dutch Financial Supervision Act and the Dutch Insolvency Act allowing Dutch authorities to take certain actions with respect to a failing bank or insurer that cannot be wound up under ordinary insolvency rules due to concerns regarding the stability of the overall financial system. It comprised two categories of measures. The first category of measures related to banks or insurers facing serious financial difficulties and included measures related to the timely and efficient liquidation of the failing institution. This set of measures gave the DNB the power to transfer customer deposits, assets and/or liabilities other than deposits and issued shares of an entity to third parties or to a bridge bank if the DNB deemed that, in respect of the relevant institution, there were signs of adverse developments with respect to its funds, solvency, liquidity or technical provisions and it could be reasonably foreseen that such developments would not be sufficiently or timely reversed. The DNB was also granted the power to influence the internal decision-making of failing institutions through the appointment of an ‘undisclosed administrator’.
In addition, on 26 November 2015 the ‘Act on implementing the European framework for the recovery and resolution of banks and Investment firms’ (Implementatiewet Europees kader voor herstel en afwikkeling van banken en beleggingsondernemingen) came into force, implementing the ‘Bank Recovery and Resolution Directive’ (‘BRRD’) and partly amending the Intervention Act.
BRRD came into effect on 2 July 2014. It includes, among other things, the obligation for institutions to draw up a recovery plan and for resolution authorities in the Member States to draw up a resolution plan, the resolution authorities’ power to take early intervention measures and the establishment of a European system of financing arrangements. The BRRD confers extensive resolution powers on the resolution authorities, including the power to require the sale of (part of a)
Intervention Act, as described above. In addition, the BRRD stipulates, among the broader powers to be granted to the relevant resolution authority, that it will confer powers to the relevant resolution authority to amend or alter the maturity date or interest payment date of debt instruments, including by suspending payment for a temporary period, or to amend the interest amount payable under such instruments. None of these actions would be expected to constitute an event of default under those debt instruments or other eligible liabilities entitling holders to seek repayment.
Many of the rules implementing the BRRD are contained in detailed technical and implementing rules, the exact text of which is subject to agreement and adoption by the relevant EU legislative institutions. Therefore, for some rules, there remains 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 possible to assess the full impact of the BRRD 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 resolution authority contemplated in the BRRD 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.
were EUR 208 million. See ‘Regulatory costs’ under Note 28 ‘Other operating expenses’ to the consolidated financial statements. Contributions to the SRF are first allocated to national compartments of the SRF, however allocation of contributions to separate national compartments is being phased out and will be eliminated in 2023.
ING has a recovery plan in place to enhance 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 recovery plan is assessed annually by ING’s regulators. Since 2012, ING has worked together with the different resolution authorities to determine a resolution strategy and to identify potential impediments to resolution. This resulted in a resolvability assessment that is shared every year with the FSB and the preparation of a resolution plan by the SRB. In November 2016, ING concluded that ING Groep N.V. should be the designated resolution entity. At the end of January 2017, the SRB has informed ING that it supports the designation of ING Groep N.V. as the point of entry.
In addition to the adoption of the foregoing measures, regulators and lawmakers around the world are actively reviewing the causes of the financial crisis and exploring steps to avoid similar problems in the future. In many respects, this work is being led by the FSB, consisting of representatives of national financial authorities of the G20 nations. The G20 and the FSB have issued a series of papers and recommendations intended to produce significant changes in how financial companies, particularly companies that are members of large and complex financial groups, should be regulated. These proposals address such issues as financial group supervision, capital and solvency standards, systemic economic risk, corporate governance, including executive compensation and risk culture, and a host of related issues associated with responses to the financial crisis.
January 2019, and at least 18% and 6.75% respectively from 1 January 2022 on. In November 2016, the EC proposed amendments to the CRR and BRRD to implement the FSB’s minimum TLAC
Governments in The Netherlands and abroad have also intervened over the past few years on an unprecedented scale, responding to stresses experienced in the global financial markets. Some of the measures adopted subject us and other institutions for which they were designed to additional restrictions, oversight or costs.
(‘FTT’) under the enhanced cooperation procedure, to be levied on transactions in financial instruments by financial institutions if at least one of the parties to the transaction is established in the financial transaction tax zone (‘FTT-zone’) or if the instrument which is the subject of the transaction is issued within the territory of a Member State in the FFT-Zone. 10 Member States have indicated they wish to participate in the FTT (Austria, Belgium, France, Germany, Greece, Italy,
FTT remains subject to negotiation between the participating Member States and currently it is uncertain whether and in what form and by which Member States the FTT will be adopted. The implementation date of any FTT will thus depend on the future approval by participating Member
Netherlands could have a substantial adverse effect on ING’s business and results.
As of 1 October 2012, banks that are active in the Netherlands are subject to a bank tax pursuant to a tax regulation that also includes measures to moderate bonuses awarded to executives at such banks. Increased bank taxes in countries where the Group is active result in increased taxes on
AT1 Securities of EUR 90 million for the year 2015, EUR 135 million for 2016, EUR 170 million for 2017 and EUR 175 million for 2018. For 2015, 2016, 2017 and 2018 the amounts were treated by
Dutch dividend withholding tax purposes. However, there is a risk that the EC will take the view, and that court would uphold such view if contested, that the tax deductibility of interest payments on the AT1 Securities was in contravention of the EC’s temporary state aid rules for assessing public support to financial institutions during the crisis (the ‘Revised State Aid Guidelines’). The Revised
State Aid Guidelines provide for strengthened burden-sharing requirements, which require banks with capital needs to obtain shareholders’ and subordinated debt holders’ contributions before resorting to certain state aid measures. If the EC makes a determination that deduction of interest payments on AT1 Securities and other similar securities is inconsistent with the Revised State Aid
Guidelines, then ING would be required to pay to the Dutch State any amounts with respect to interest payments that ING previously treated as an expense for Dutch corporate income tax purposes and that have been paid free of withholding taxes (‘AT1 Revised State Aid Guidelines
Payment’). For the years 2015, 2016, 2017 and 2018, the aggregate possible AT1 Revised State Aid
Revised State Aid Guidelines) or after 5 years or 10 years (depending on the series) after their date of issuance. Following an amendment of the Dutch Corporate Income Tax Act, interest payments on AT1 Securities are no longer deductible on the basis of Article 29a of the Dutch Corporate
Asia and Central and Eastern Europe, has also increased as large financial services companies from more developed countries have sought to establish themselves in markets which are perceived to offer higher growth potential, and as local institutions have become more sophisticated and competitive and proceeded to form alliances, mergers or strategic relationships with our competitors. The Netherlands is our largest market. Our main competitors in the banking sector in the Netherlands are ABN AMRO Bank and Rabobank.
Economic and other factors could lead to contraction in the residential mortgage and commercial lending market and to decreases in residential and commercial property prices, which could generate substantial increases in impairment losses. Additionally, continuing low oil prices could have an influence on the repayment capacity of certain corporate borrowers active in the oil and oil related services industries.
ING Groep N.V. is a holding company and, therefore, depends on dividends, distributions and other payments from its subsidiaries to fund dividend payments and to fund all payments on its obligations, including debt obligations. Many of our subsidiaries, including our bank subsidiaries, are subject to laws that restrict dividend payments or authorize regulatory bodies to block or reduce the flow of funds from those subsidiaries to ING Groep N.V.
Fitch Ratings. Each of the rating agencies reviews its ratings and rating methodologies on a recurring basis and may decide on a downgrade at any time.
We use assumptions in order to model client behaviour for the risk calculations in our banking books. Assumptions are used to determine the interest rate risk profile of savings and current accounts and to estimate the embedded option risk in the mortgage and investment portfolios. The realisation or use of different assumptions to determine client behaviour could have a material adverse effect on the calculated risk figures and, ultimately, future results.
We have developed risk management policies and procedures and will continue to review and develop these in the future. Nonetheless, our policies and procedures to identify, monitor and manage risks may not be fully effective, particularly during extremely turbulent times. The methods we use to manage, estimate and measure risk are partly based on historic market behaviour. The methods may, therefore, prove to be inadequate for predicting future risk exposure, which may be significantly greater than suggested by historical experience. For instance, these methods may not predict the losses seen in the stressed conditions in recent periods, and may also not adequately allow prediction of circumstances arising due to government interventions and stimulus packages, which increase the difficulty of evaluating risks. Other methods for risk management are based on evaluation of information regarding markets, customers, catastrophic occurrence or other information that is publicly known or otherwise available to us. Such information may not always be accurate, complete, updated or properly evaluated. Management of operational, compliance, legal and regulatory risks requires, among other things, policies and procedures to record and verify large numbers of transactions and events. These policies and procedures may not be fully effective.
Forward strategy, we are consistently managing and monitoring our IT risk profile globally. ING is subject to increasing regulatory requirements including EU General Data Protection Regulation
(’GDPR’) and EU Payment Services Directive (‘PSD2’). Failure to appropriately manage and monitor our IT risk profile could affect our ability to comply with these regulatory requirements, to securely and efficiently serve our clients or to timely, completely or accurately process, store and transmit information.
Like other financial institutions and global companies, we are regularly the target of cyber attacks.
Advanced Persistent Threats) and Ransomware intensify worldwide, and attempts to gain unauthorised access and the techniques used for such attacks are increasingly sophisticated. We have faced, and expect to continue to face, an increasing number of cyber attacks (both successful and unsuccessful) as we have further digitalized including by expanding our mobile- and other internet-based products and services, as well as our usage and reliance on cloud technology. In 2018 we experienced continuous DDoS attacks, of which two DDoS attacks breached our DDoS
defences. These two DDoS attacks caused outages of approximately one-hour each, which affected customers of ING in the Netherlands. In addition, due to our reliance on national critical infrastructure and interconnectivity with third-party vendors, exchanges, clearing houses, financial institutions and other third parties, we could be adversely impacted if any of them is subject to a successful cyber attack or other information security event.
Cybersecurity and data privacy have become the subject of increasing legislative and regulatory focus. GDPR is an example of a regulation that was implemented in 2018. In certain locations where
ING is active, there are additional regulatory requirements that must be followed for business conducted in that jurisdiction. We may become subject to new legislation or regulation concerning cybersecurity or the privacy of information we may store or maintain. Compliance with such legislation or regulation could increase the Group’s compliance costs and failure to comply with new and existing legislation or regulation could harm our reputation and could subject the Group to enforcement actions, fines and penalties.
In certain countries in which we operate, judiciary and dispute resolution systems may be less developed. As a result, in case of a breach of contract, we may have difficulties in making and enforcing claims against contractual counterparties and, if claims are made against us, we might encounter difficulties in mounting a defence against such allegations. If we become party to legal proceedings in a market with an insufficiently developed judicial system, it could have an adverse effect on our operations and net results.
country) are not limited to the 20% cap but can apply to the higher CRD IV caps (e.g. 100%, or up to 200% with shareholder approval).
Adverse publicity, claims and allegations, litigation and regulatory investigations and sanctions may have a material adverse effect on our business, revenues, results of operations, financial condition and/or prospects.
ING Group. With respect to specific proceedings, see Note 47 ‘Legal proceedings’ to the consolidated financial statements.
Our banking products and advice services for third-party products are exposed to claims from customers who might allege that they have received misleading advice or other information from advisers (both internal and external) as to which products were most appropriate for them, or that the terms and conditions of the products, the nature of the products or the circumstances under which the products were sold, were misrepresented to them. When new financial products are brought to the market, ING engages in a multidisciplinary product approval process in connection with the development of such products, including production of appropriate marketing and communication materials. Notwithstanding these processes, customers may make claims against
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Risk factors securities analysts, as well as to the high volatility in the securities markets generally and more aaparticularly in shares of financial institutions.
There can be no assurance that we will pay dividends on our Ordinary Shares in the future.
It is ING’s policy to pay dividends in relation to the long-term underlying development of cash earnings. Dividends can only be declared by shareholders when the Executive Board considers such dividends appropriate, taking into consideration the financial conditions then prevailing and the longer-term outlook. The Executive Board proposes to pay a total cash dividend of EUR 2,646 million, or EUR 0.68 per ordinary share, over the financial year 2018. This is subject to the approval of shareholders at the Annual General Meeting in April 2019. Taking into account the interim dividend of EUR 0.24 per ordinary share paid in August 2018, the final dividend will amount to EUR
Our materiality assessment is based on continuing trend and media analyses and stakeholder input. In 2018, we conducted a survey across seven stakeholder groups, covering six ING markets.
Netherlands, Belgium, Poland and Turkey;  Investors, including shareholders;  Civil society organisations;  Employees;  Government and public policy professionals.
For a list of material topics, please refer to the World Around Us chapter. For a materiality analysis process description, please refer to ING’s 2018 Non-financial data reporting protocol, available.
4 Refer to note 28 and 38 of the ING Group Consolidated Annual Accounts 2018
A n im a l h u sb a n d ry
Climate Agreement and relevant national and regional frameworks. We will focus our efforts where we have the most significant impact - ING at a Glance - Our Strategy and How We Create Value
- ING at a Glance -Our Sustainability Direction (www.ing.com/18ar034): targets and ambitions -Our Value Creation Model: outcomes and outputs -Sustainable business: how we measure (www.ing.com/18ar047)
-Environmental and Social Risk section in Risk and Capital Management chapter -The Equator Principles (www.ing.com/18ar036)
ING will be a user of the data that will come online as our clients start implementing the recommendations. However, ING is also committed to aligning its own disclosures with the final
recommendations as a ‘preparer’. It is estimated that it will take several years for companies like
The table below outlines how ING has addressed climate-related risk and opportunity disclosures in its 2018 Annual Report and where you can read more about this. In the past year, we have strengthened the governance, processes, ambitions and disclosures surrounding climate-related risk and opportunity management, and we expect to continue to improve our TCFD disclosures.
G o ve rn a n ce A Describe the board’s oversight of climaterelated risks and opportunities.
- Environmental and Social Risk, Risk and capital management - Consolidated Annual Accounts, Climate change risk, Note 53 - Risk Management
Other climate finance 147 154 1 Circular Economy is also one of the sub-categories under Climate Finance, however, as of year-end 2018, our exposure to
2 The amounts reported under the two categories and under Industry ESG Leaders may overlap with one another. For example, a transaction may be both environmentally and socially impactful. The portfolio totals should not be added up.
3 The portfolio total is calculated before rounding-up on the category level and can thus deviate from the sum of categories by margins of 1mln.
in EUR million Per FTE in EUR million Per FTE in EUR million Per FTE
• We will reduce our water footprint by 20 percent by 2020 (base year 2014).
Our EMS, which applies globally, has helped us to make progress against our 2020 targets. Relative to our 2014 base, our carbon footprint decreased by 44 percent in 2018 as a result of as a result of increasing our renewable electricity consumption to 98 percent of total electricity consumption and by reducing global energy consumption, including heating oil, natural gas and district heating, by 28 percent compared to 2014. Our residual waste was reduced by 36 percent in 2018 relative to our base year.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Non-Financial appendix in kilotonne CO2e
More information can be found in our stance on Palm Oil (www.ing.com/18ar050).
ING continued to be commended for its strong environmental and social risk policies, with our lending due diligence processes excluding coal-fired power plants and tar sand operations. ING ranked 2nd out of 36 global banks, but that does not mean we are complacent. We recognise climate change is an unparalleled challenge for our world, one where banks also have a role to play. We are committed to understanding the impact of our lending on the climate and to steering our business in the right direction. We have a loan book of over €600 billion across many sectors, which we have started steering towards meeting the Paris Agreement’s well-below two-degree goal.
financing of nuclear weapons producers and the second - on investments in cluster munitions producers
Some 600,000 Record Bank customers were migrated to ING in 2018. The collaboration with independent agents of Record Bank was discontinued.
Netherlands (Eerlijke Bankwijzer) “does not paint an honest picture of the current situation in the sector.” Consequently, banks featured in the FFG including
The FFG published a report on the human rights issues in extractives industry and the finance practices of the three big Dutch banks.
published some 30,000 signatures of citizens concerned about animal welfare and ING’s involvement in the agriculture sector.
More information can be found in our stance on Animal Welfare (www.ing.com/18ar059).
We review our pricing policy on a regular basis to ensure the sustainability of our operations and our ability to support our clients and the economy. The pricing of some of our products and services had to be adapted to include related costs. An example is the use of ATMs as cash management is a large cost centre for a bank. Belgian customers were informed via our channels of this fee change. This included the update of our tariffs brochure (online and in print), a message in customers’ bank account statements (online and in print), and via letter.
Underlying result is used to monitor the performance of ING Group at a consolidated level and by segment. The Executive Board and Management Board of ING Bank consider this measure to be relevant to an understanding of the Group's financial performance because it gives better insight into the commercial developments of the company. Underlying result is derived by excluding from
ING will not claim a tax deduction in connection with these payments.
Net result attributable to ING Group’s shareholders (a) 4,703 4,905 4,651 -/- Net result attributable to ING Group’s shareholders from discontinued operations 441
Total income (continuing operations) (d) 18,176 17,773 17,491 -/- Income from special items 121 -/- Income from insurance other 89 –53 33
potential consequences of the United Kingdom leaving the European Union or a break-up of the euro, (4) changes in the fiscal position and the future economic performance of the US including potential consequences of a downgrade of the sovereign credit rating of the US government, (5)