FATCA. While the existence of IGAs will not eliminate the risk of the withholding described above, these agreements are expected to reduce that risk for financial institutions and investors in countries that have entered into IGAs. IGAs often require financial institutions in those countries to report information on their US account holders to the taxing authorities of those countries, who will then pass the information to the IRS.
Common Reporting Standard (‘CRS’) and model competent authority agreement to enable the multilateral and automatic exchange of financial account information. The CRS requires financial institutions to identify and report the tax residency and account details of non-resident customers to the relevant authorities in jurisdictions adhering to CRS. As of 29 October 2018, 104 jurisdictions
The need for account holders and investors to provide certain information may adversely affect the sales of certain of the Group’s products. In addition, compliance with the CRS, any regulations or other guidance promulgated thereunder, or any legislation promulgated under the CRS may substantially increase the Group’s compliance costs. Failure to comply with the CRS 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.
The measures included in EU Directive 2011/16 after amendment by EU Directive 2018/822
business, to establish a bridge institution, to separate assets and to take bail-in measures. The stated aim of the BRRD is to provide supervisory authorities and resolution authorities with common tools and powers to address banking crises pre-emptively in order to safeguard financial
In addition to a ‘write-down and conversion’ power and a ‘bail-in’ power, the powers granted to the resolution authority under the BRRD include the two categories of measures introduced by the
Finally, as part of the move towards a full banking union, on 19 August 2014, the Single Resolution
SRB works in close cooperation with the national resolution authorities such as the Dutch national resolution authority. The SRB is also in charge of the Single Resolution Fund (the ‘SRF’), a pool of funds financed by the banking sector which is set up to ensure that medium-term financial support is available for orderly resolution of a credit institution. The Group’s 2018 contributions to the SRF
SIB. The numbers are significant with the minimum standard requiring a G-SIB to hold TLAC of at least 16% of risk weighted assets and at least 6% of the leverage ratio denominator from 1
Securities for the purpose of Dutch Corporate Income Tax (25% rate) and (indirectly) dividend withholding tax purposes (15% non-grossed up rate). ING made interest payments in respect of the
The inability of counterparties to meet their financial obligations could have a material adverse effect on our results of operations.
Market conditions, including those observed over the past few years, may increase the risk of loans being impaired.
We are exposed to the risk that our borrowers (including sovereigns) may not repay their loans according to their contractual terms and that the collateral securing the payment of these loans may be insufficient. We may see adverse changes in the credit quality of our borrowers and counterparties, for example, as a result of their inability to refinance their indebtedness, with increasing delinquencies, defaults and insolvencies across a range of sectors. This may lead to impairment charges on loans and other assets, higher costs and additions to loan loss provisions. A
(‘Compensation Schemes’) have been implemented from which compensation may become payable to customers of financial services firms in the event the financial service firm is unable to pay, or unlikely to pay, claims against it. In many jurisdictions in which we operate, these
Compensation Schemes are funded, directly or indirectly, by financial services firms which operate and/or are licensed in the relevant jurisdiction. ING Bank is a participant in the Dutch Deposit
The first ex-ante DGS contribution has been charged in respect of the first quarter of 2016. The build-up of the ex-ante fund will take place in 34 quarters. See also ‘—We operate in highly regulated industries. Changes in laws and/or regulations governing financial services or financial institutions, the application of such laws and/or regulations or non-compliance with such laws and/or regulations governing our business may reduce our profitability’ and ‘—Bank Recovery and
We employ various economic hedging strategies with the objective of mitigating the market risks that are inherent in our business and operations. These risks include currency fluctuations, changes in the fair value of our investments, the impact of interest rates, equity markets and credit spread changes, the occurrence of credit defaults and changes in client behaviour. We seek to control these risks by, among other things, entering into a number of derivative instruments, such as swaps, options, futures and forward contracts, including, from time to time, macro hedges for parts of our business, either directly as a counterparty or as a credit support provider to affiliate counterparties. Developing an effective strategy for dealing with these risks is complex, and no strategy can completely insulate us from risks associated with those fluctuations. Our hedging strategies also rely on assumptions and projections regarding our assets, liabilities, general market factors and the creditworthiness of our counterparties that may prove to be incorrect or prove to be inadequate. Accordingly, our hedging activities may not have the desired beneficial impact on our results of operations or financial condition. Poorly designed strategies or improperly executed transactions could actually increase our risks and losses. Hedging strategies involve transaction costs and other costs, and if we terminate a hedging arrangement, we may also be required to pay additional costs, such as transaction fees or breakage costs. There have been periods in the past, and it is likely that there will be periods in the future, during which we have incurred or may incur losses on transactions, possibly significant, after taking into account our hedging strategies.
Our hedging strategy additionally relies on the assumption that hedging counterparties remain able and willing to provide the hedges required by our strategy. Increased regulation, market shocks, worsening market conditions (whether due to the ongoing euro crisis or otherwise), and/or other factors that affect or are perceived to affect the financial condition, liquidity and creditworthiness of ING may reduce the ability and/or willingness of such counterparties to engage in hedging contracts with us and/or other parties, affecting our overall ability to hedge our risks and adversely affecting our business, operations, financial condition and liquidity.
We are subject to a variety of regulatory risks as a result of our operations in certain countries.
Any such regulatory initiative could have an adverse impact on our ability to protect our economic interest, for instance in the event of defaults on residential mortgages.
The negative publicity associated with any sales practices, any compensation payable in respect of any such issues and regulatory changes resulting from such issues, has had and 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.
The share price of ING shares has been, and may continue to be, volatile.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Non-financial appendix
Wholesale Banking who has overall responsibility for meeting this ambition. It is being implemented across the organisation through KPIs for deal teams. We also have the ambition to reduce our exposure to coal to close to zero by 2025. Our MBB as a whole is responsible for ensuring that this target is translated to policy and adhered to within our risk processes. The Board’s responsibility for social and environmental risks and opportunities is formalised in our Executive Board Charter
The initial long list of issues and our engagement approach align with the guidelines and standards of the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB).
We intend to report on these material topics for the next two reporting periods in line with our three-year materiality cycle. Our disclosures on key performance indicators along our material topics are referenced in ING’s 2018 GRI Content Index (www.ing.com/18ar030).
Governments Corporate income tax and bank taxes4 2,402 2,661 1,970 1 Refer to note 28 of the ING Group Consolidated Annual Accounts 2018. Includes: IT-related expenses, office expenses, travel and accommodation expenses, advertising and public relations, external advisory fees, audit and non-audit services, and postal charges.
3 Refer to the P&L of the ING Group Consolidated Annual Accounts 2018 in the Annual Report 2018.
Transportation & logistics 3.6% ● ● ● ● ● ● ●
*** Includes policies on Oil and Gas, Coal, Nuclear Energy and Power Generation.
Credit risk portfolio per economic sector and application of ESR framework*
By that year, we expect to no longer finance clients in the utilities sector that are over 5 percent reliant on coal-fired power in their energy mix. We will continue to finance non-coal energy projects for these clients in support of their energy transition.
ING. ING’s power generation lending portfolio to DUCs reached EUR 2.3 billion at YE2018.
Principles. ING is a founding bank and among the first to report using the new framework. The index table below provides an overview of ING disclosures along the framework’s six principles.
We will align our business strategy to be consistent with and contribute to individuals’
We will work responsibly with our clients and our customers to encourage sustainable practices and enable economic activities that create shared prosperity for current and future generations.
United Nations Environment Programme Finance Initiative (UNEP FI) Principles for Responsible Banking (PRB)
-Sustainability and climate change governance of Note 53 – ING Group Risk Management -Sustainability governance of Non-financial Appendix -Climate Change Committee, Note 53 – ING Group Risk Management .
We will periodically review our individual and collective implementation of these
United Nations Environment Programme Finance Initiative (UNEP FI) Principles for Responsible Banking (PRB) (continued)
We believe transparency will encourage investors and banks to shift to more low-carbon and climate-smart options as companies become more open about reporting on the current and potential financial implications of climate change – an important step towards delivering on the commitments of the Paris Agreement to keep global warming below two degrees Celsius. As such,
TCFD Recommended Disclosures ING 2018 Annual report and other Public Disclosure
- Consolidated Annual Accounts, Climate change risk (governance), Note 53 - Risk Management - Sustainability governance, Non-financial appendix - Risk committee meetings, Report of the Supervisory Board
- Consolidated Annual Accounts, Climate change risk, Note 53 - Risk Management - Risk factors, Appendices - Societal Challenges, The World Around Us - Material topics, The World Around Us - Fighting climate change, Our Business - Risk developments in 2018, Risk and Capital Management
A Describe the organization’s processes for identifying and assessing climate-related risks.
B Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas
Responsible Finance is a set of strengthened ambitions that replaced in 2017 our Sustainable
Transitions Financed (STF) portfolio ambition. We aim to double our funding to companies and sectors that are making a significant contribution to the low-carbon and self-reliant society of the future. We will do this by increasing our Climate Finance portfolio twofold by 2022 compared to 2017. We will also double our Social Impact finance by lending to projects that lead to, for example, basic infrastructure or essential services. And we will double lending to environmental, social and governance (ESG) Industry Leaders by 2022 compared to 2017. The tables below provide a breakdown of our Environmental and Social Impact Finance as of December 2018.
in percentage of employees 2018 2017 2016 in percentage of employees 2018 2017 2016 in percentage of employees Female Male Female Male Female Male 1 Deviations from 100% in the sum of category totals are due to employee gender not recorded.
South and Mid-America 107 0 107 in percentage of employees 2018 2017 2016
• We will remain carbon neutral by offsetting operational carbon emissions.
KM x 1 million kilotonne CO2e 1 Business travel comprises travel by air and by road for business purpose only.
ING is not able accurately to measure and disclose this figure.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Non-Financial appendix
On a day-to-day basis we actively engage with our customers and other stakeholders, including investors, government officials and NGOs, on relevant topics, issues and challenges, both at an expert level and at a (senior) management and Board level. Our global head of Sustainability is actively engaged in strategic dialogue with stakeholders both internally and externally. In revising our ESR policies, we follow a structured consultation process and proactively seek input from relevant stakeholders. In line with our Sustainability Direction we contribute to multiple international initiatives and cooperate as a member in platforms such as the Equator Principles
Initiative. An up-to-date overview of partnerships, memberships and endorsements can be found online (www.ing.com/18ar032).
Report Card 2018, a report on fossil fuel finance by 36 global banks.
Overall, the reports were positive about ING’s policies and management of the issues. The NGO expressed the opinion that ING should apply its exclusion policy comprehensively to all its markets and to all its financial products, including funds following an index. In both reports ING was ranked as runner-up. We invited PAX to discuss their findings.
ING does not finance nuclear weapons. There are companies partially involved in producing nuclear weapons while primarily engaged in non-defence activities such as building airplanes, thermostats, or elevators. ING does not finance the nuclear weapons activities of these companies, but may finance the production of these non-defence items that we all use.
More information can be found on our Diversity and Inclusion (www.ing.com/18ar053).
The integration of Record Bank clients was executed as a seamless transition. Clients were informed of each step in the process. Closing out the contracts with independent agents of Record Bank and determining the related indemnity payments was a complex legal process. Relationships with most of the independent agents were terminated in an amicable way, but in a limited number of cases no agreement was reached and legal proceedings started.
Dutch banks are compared against a set of expectations. ING's score in the report remains stable compared to the 2016 results, while we have strengthened our policies.
(transportation, shipping and aviation); gas (electricity production and heating); livestock farming (food production). Our response to this particular FFG
Netherlands. Self-regulation means that advertisers, ad agencies and the media in cooperation with the
(Milieudefensie) in the Netherlands. The NGOs complaint related to ING’s measuring and disclosure of its indirect carbon footprint and alignment of lending with a 1.5-degree scenario. The complaint procedure was ongoing as of March 2019.
Net result attributable to ING Group’s shareholders from continuing operations 4,703 4,905 4,210 -/- Net result from special items –775 0 –799 -/- Net result insurance Other 90 –52 33
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > General information
‘benchmark’ indices, (14) changes in laws and regulations and the interpretation and application thereof, (15) changes in compliance obligations including, but not limited to, those posed by the implementation of DAC6, (16) geopolitical risks, political instabilities and policies and actions of governmental and regulatory authorities, (17) changes in standards and interpretations under