Climate Finance (lending outstanding in EUR billion, year-end) 3 16.5 14.6 –
Number of customers that felt financially empowered (in million, year-end) 1 25.0 25.4 23.9
Common equity Tier 1 ratio fully loaded ING Group ~13.5% (Basel IV) 14.5% 14.7% 14.2%
3 For a description of ING’s Climate Finance and Social Impact Finance, please visit www.ing.com/18ar001 4 Scope is not comparable to availability reported for 2016.
5 Underlying figures are non-GAAP measures. These are derived from figures according to IFRS-EU by excluding the impact from special items and Insurance Other. For further explanation of non-GAAP measures, see "Other and additional Information" section of the Annual Report 6 Customer lending is defined as: loans & advances to customers -/- provision for loan losses.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > CEO statement
To earn that trust, we need to ensure that our operations meet the highest standards and that we fulfil our role as gatekeepers of the financial system. Not meeting these standards is unacceptable.
We are guided by our Think Forward strategy. In 2018, we made progress on a number of fronts to deliver the differentiating customer experience at the heart of our strategy.
We also continued to join forces with fintechs and other external parties to offer retail customers and wholesale banking clients new products and services that improve the customer experience. By harnessing the potential of partnerships with the new disruptors of the banking market, we can increase our own pace of innovation and provide third-party solutions that add value for
and other activities we carry out in our role as gatekeepers for the financial sector.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > CEO statement companies across countries and sectors forge common targets and ambitions. With our
We also support sustainable progress through our Climate Finance and Social Impact Finance portfolios. These measure the impact of our efforts to facilitate and finance society’s shift to sustainability by supporting clients and deals within ING Wholesale Banking that contribute to environmental, economic and social progress.
At the same time, the settlement with the Dutch authorities made it clear that we cannot serve our customers, benefit shareholders and other stakeholders and play our wider role in society without ensuring that our compliance and non-financial risk management capabilities are as much a part of our DNA as our financial risk management skills, and without unwavering commitment to the high standard of integrity that underpins our ING values.
This chapter will touch upon the themes that came out on top this year: the economy, the regulatory environment, innovation and transformation, data and IT, governance and culture, and climate change. The following infographic provides an overview of each topic and where in this report you can read more about it. With the exception of financial performance, the material topics in the following infographic are subject to limited assurance. See the ‘Independent auditor’s assurance report’.
Brexit negotiations took place throughout 2018 and the year ended without a ratified agreement on how the UK would leave the EU. ING continued to take steps throughout 2018 to prepare for various options, such as applying for a banking licence in the UK, taking actions for contract continuity and working to establish alternatives in the EU for those euro clearing activities that are expected to move from London following Brexit.
There was little progress on eurozone reform in 2018 given the diverse political interests involved.
Insurance Scheme (EDIS), as it is an absolute requirement for finishing the Banking Union.
The review of EU prudential rules, via CRR2/CRD5 (Capital Requirements Regulation/Capital
Requirements Directive) and BRRD2 (Bank Recovery and Resolution Directive), was discussed intensively during 2018 by the Council and the European Parliament. The package includes the introduction of new rules, for instance regarding NSFR (net stable funding ratio), a G-SIB (global systemically important bank) surcharge for the leverage ratio, interest rate risk in the banking book and internal MREL (minimum requirement for own funds and eligible liabilities).
Strong economic growth and an associated increase in interest rates contributed to a general US
We endeavour to limit the impact of volatility on the profitability of our operations in such emerging markets.
We continue to take a number of robust measures to strengthen our management of compliance risks, support a stronger risk culture and improve operational excellence in non-financial risk. We are committed to complying with all applicable laws, regulations and standards in each of the markets and jurisdictions we operate in. More information is in the ‘Risk and capital management’
Service related to previously disclosed investigations that found serious shortcomings in the execution of policies to prevent financial economic crime at ING in the Netherlands. You can find more information about this in the ‘Risk and capital management’ chapter.
Trust was damaged among various stakeholders mainly in the Netherlands after the Supervisory
Netherlands. It said that it will carefully assess how it can develop a sustainable and competitive remuneration policy to fulfil its duty to act in ING’s long-term interests. More information is in the
In addition to keeping data private, we aim to keep data secure. We recognise cybercrime as a threat and make customers aware of risks, while also training employees on preventive measures.
Read more about data privacy and security in the ‘Innovation and transformation’ chapter.
Read more in the ‘Our business’ and ‘Innovation and transformation’ chapters.
To respond quicker to changing customer demands, encourage an innovative mind-set and engage employees, we need to collaborate more easily across the organisation. Finding the right people –
We see it as our duty to society to help finance positive change through the role we play as a bank in the economic system.
Years of work came to fruition in 2018 as we announced our ambition to steer our loan book of €600 billion (year-end 2018) towards meeting the well-below two-degree goal. We call our strategy to get there the Terra approach. As part of this approach, we worked with the 2˚ Investing Initiative to create an innovative and effective way to measure our lending portfolio. This is the first time a global bank will use this measurement to commit to using science-based scenarios to steer business strategy.
As almost half of our loan book consists of mortgages, we announced that we are taking action to make our mortgage portfolio energy-positive. This means the homes in this portfolio will collectively produce more energy than they consume. To this end, we are developing retail products, tools and services to help homeowners make their houses more sustainable. As houses generally account for about 20 percent of CO2 emissions, we believe this could have a meaningful impact in the fight against climate change. At the same time, it will help our customers to lower their CO2 footprint and energy bill. We will start in our three biggest markets of the Netherlands,
United Nations Environment Programme Finance Initiative (UNEP FI). In 2018, ING and 27 other banks worked on the UN Principles for Responsible Banking, which articulate a common language and give banks a shared foundation on which to build a sustainable future, including climate resilience.
“Ultimately, Green as a Currency was unsuccessful. Our biggest challenge was the so-called green-intention behaviour gap, which is the phenomenon that as people we say we care a lot for our planet and are prepared to adopt a more sustainable lifestyle, but as consumers we’re led by price and convenience and buy stuff we don’t need. Green as a Currency fell victim to this paradox.
The Think Forward strategy has provided a blueprint for transforming the customer experience at a time when digitalisation is increasing and mobile devices are rapidly becoming our customers’
Strong customer satisfaction ratings and a continuing healthy increase in customer numbers show that we are succeeding in staying relevant to customers in a fast-changing market for banking services. The number of retail customers increased in 2018 by a million to 38.4 million. Primary relationships, where customers have a current account with recurring income and at least one other product, increased by more than a million to 12.5 million in 2018. And in net promoter scores
(NPS), customers ranked us number one in seven of our 13 retail markets. Ⓐ
Services activities have led to strong increases in lending and fees. And new propositions that add value for customers, like investment options that offer an alternative to low-yielding savings, have contributed to an increase in fee and commission income in our Retail businesses.
To compete with Big Tech and other platforms, banks will need to become platforms themselves.
At ING, we have three-fold approach to platforms. Firstly, we are developing our own go-to platform for customers’ financial needs and relevant offers beyond banking. Secondly, we are pursuing independent initiatives in partnership with others. And thirdly, we are participating on others’ platforms. For retail, we develop our own platforms, like Yolt, and only participate on other platforms if doing so drives traffic to ours. For wholesale, in addition to our own platforms, such as
Our Think Forward strategy was launched in 2014. It guides everything we do. This section describes the strategy and includes references to examples and additional information on how our strategy links to the material topics identified by our stakeholders.
Material topics: customer privacy, business ethics and culture, digitalisation and interconnectivity, cyber resilience.
Read more in the ‘Innovation and transformation’ and ‘ Our business’ chapters.
Simplify and streamline refers to ING’s aim to become a more effective, costefficient and agile organisation with the flexibility to respond to fast-changing customer needs and low-cost competitors. To facilitate the bank’s digital transformation and respond faster to changing customer needs we are introducing one Way of Working (WoW) across ING, which organises employees in multi-disciplinary, cross-functional ‘squads’. WoW has been introduced in the Netherlands,
We believe there are strong links between employee engagement, customer engagement and business performance. This is why we continually improve our performance culture by creating a differentiating employee experience and enhancing the capabilities of our leaders. By focusing on delivering a great employee experience and by stepping up our leadership capabilities we develop our employees’ capabilities and engagement to deliver on our purpose and strategy.
Step Up Performance Management is a comprehensive performance management process that also assesses people against ING’s Orange Code values and behaviours. It focuses on managing performance on a continuous basis, including through ‘continuous conversations’ between managers and their reports.
The Think Forward Leadership Programme (TFLP) aims to develop greater leaders and better managers who can engage staff and enhance team performance. The first phase of the programme was introduced in 2017, initially to senior leaders. It focused on the Orange Code, personal purpose and the Think Forward strategy. In 2018, it was extended to all people managers globally as the TFL Experience (TFLE), a four-day programme with follow-up learning activities. A
To help us recruit new talents we took steps in 2018 to upgrade our careers site and introduce a global approach. This includes further developing the global employer brand and introducing targeted cross-border sourcing to find suitable candidates for more difficult-to-fill profiles.
Wholesale Banking lending growth in our Challengers & Growth (C&G) Markets businesses and in our specialised Industry Lending franchise. In 2018, we continued to grow and diversify lending at healthy margins, with net core lending growth of €36.6 billion, or 6.4 percent.
Innovation and transformation play a major role in this one experience. This chapter outlines how
They’ve continually raised the bar when it comes to the user experience that people expect, whether it be to buy things, socialise, explore, learn, travel, entertain or be entertained. People expect platforms to meet their demand for goods and services. It is why people spend so much time on them and keep coming back.
In many ways, moving towards platform thinking isn’t a radical shift but rather an extension of what we’ve always done - empower people to take control of their own situations. Like traditional marketplaces, platforms connect suppliers with customers. The difference is that platforms are enabled by technology, which can be used to achieve huge scale at little cost. And it’s not just customers who benefit, it is also suppliers who are able to create value at scale. Platforms scale quickly and, as a result of all of that, provide lower-cost structures for supplier offerings. Then there’s the data that can be used to develop new products and services and personalise the user experience.
Secure a consumer loan? Two clicks. There’s not much room for a differentiating or superior customer experience here. So ING’s future depends on becoming a platform ourselves or building independent platforms. To make that happen, we have to give people very good reasons to come to us. Something very different from what they can get anywhere else. Something that empowers them to get ahead. And that’s what we’re aiming to do.
We need to build a single global foundation that is the same everywhere, one that has the same approach to data, the same IT infrastructure, the same processes and similar products and services.
• Welcome, to digitalise ING in Germany and create a go-to financial platform offering its own and third-party services.
Highlights: The first release of the Go2Place platform was launched among a host of features including shared navigation, full account overview, new search function, a money management tool, and a new digital current opening process for joint account holders.
(and digital) platform based on scalable IT infrastructure. The platform will be used to serve several countries with a consistent omnichannel experience, which will bring a strong improvement in experience for customers in the respective countries. A first version was launched in the Czech
• Wholesale Banking TOM, further digitalising and standardising Wholesale Banking products, processes and customer propositions across all continents.
Running a bank-wide transformation is complex. It involves many interdependencies between different workstreams and may involve trade-offs in local priorities or autonomy so that we prioritise what is best for the bank on a global level. Our transformation management method helps speed up decision-making, resolve issues when they arise and re-plan. All this needs to be done while minimising any adverse impacts and keeping the bank safe, secure and compliant.
Information technology remains crucial to ING’s platform ambitions. IT enables programmes such as ING Private Cloud and TouchPoint Architecture and contributes to major strategic programmes.
TPA helps simplify and standardise ING’s banking applications and supports the creation of a modular system with fewer constraints and limitations. This modularity is a big step towards a globally scalable banking platform that offers customers everywhere a consistent experience and truly global proposition. Aside from unlocking global scalability, TPA facilitates innovation across countries and business units and accelerates time-to-market. The use of web components provided as part of TPA further increased during 2018 and contributed to one user experience across the bank. They were used, for instance, in the Model Bank programme.
IPC is the digital platform used to store and process data and IT services such as mobile phone apps. It is one of the steps we take towards giving customers a consistent experience in a secure and reliable way. IPC standardises ING’s IT infrastructure, simplifies and streamlines existing processes, and brings an automated and self-service infrastructure to development and operations teams. The IPC has reduced time-to-delivery of infrastructure from an average of more than 10 days to less than an hour. It also reached 100 percent availability in 2018 allowing us to provide products to customers much quicker. In 2018, we expanded the service portfolio in the IPC and increased our global adoption of IPC, from around 3.5 percent of total global infrastructure in 2017 to over seven percent by the end of 2018.
1 The reported system availability for 2018 does not yet include the recent integration of Record Bank in Belgium.
However, raw data in itself has little value. To be meaningful, it needs to be sorted, harmonised and put into context. To do this in an efficient and effective way, ING developed a data management strategy in 2016 to standardise data definitions and data models. This strategy ensures the availability, quality, integrity, usability and control as well as global governance of our data. A
feature of this strategy was the introduction, in 2016, of common data language ING Esperanto.
We promise customers we’ll keep getting better. One way is by simplifying and standardising endto -end processes. Some processes are internal, such as HR and Compliance, others impact customers directly, like mortgages, lending and payments. Making them easier will lead to a superior customer experience, higher quality processes and greater efficiency.
Bratislava branch concentrates on daily banking operations support. Branches in Katowice and
Bucharest predominantly provide ING Tech services. The Manila branch is a multi-functional centre providing services to all domains with an extensive operational platform targeting Wholesale
Distributed Denial of Service (DDoS) attacks are increasing in size, frequency, and complexity. DDoS
Cybercriminals are also increasingly using advanced malware to gain access to the IT systems of banks and their customers. New gateways to access the internet for users and applications have been implemented to strengthen malware resilience and to prepare for open banking under the
Wholesale Banking, a chatbot called ‘Bill’ is integrated into our Inside Business platform. It answers
FAQs as well as questions on cut-off times, while in Germany the ‘pING’ chatbot has been integrated into ING’s search function answering FAQ’s and queries based on existing public web content.
The use of robotics is widespread throughout the bank, with ING in Poland, in particular, responsible for 700 of the 1,200 robots currently in use.
For ING, innovation is about the three Cs: empowering customers and creating a differentiating experience, taking ING’s culture of innovation to the next level and connecting ecosystems to boost innovation.
Employee-generated innovation has proved to be an excellent source of ideas with a number of the previous Innovation Bootcamp finalists making it to market including Easy Trading Connect on www.ing.com/18ar005, Buy Rely, Orange Assistant (debuted in Australia in 2018) on www.ing.com/18ar006 after being launched in Turkey in 2017), Direct Lease, Banking of Things and
Ideas originating from ING’s Legal team were recognised at the 2018 FT European Innovative
Last year, also saw the introduction of ING Labs, bringing disruptive ideas to market by combining the bank’s knowledge and network with the knowledge and skills of others. Labs in Amsterdam
You can find more innovation examples in the ‘Our Business’ chapter
Partnering with and investing in fintechs is an important element of ING’s innovation strategy. By the end of 2018, we had more than 150 different partnerships. In 2017, we set up ING Ventures
WeLab as well as ING-established companies such as Yolt, Cobase, Payconiq and Twyp. Four ING
“Our ambition is to become the go-to API platform for financial needs, offering the best and most relevant products, even if some of those are not our own.”
values and our commitment to the principle of integrity above all should always guide us in how we empower our customers and live up to our purpose and our responsibilities.
ING’s Retail business serves 38.4 million customers. The Wholesale Banking business serves corporate clients and financial institutions in more than 40 countries worldwide. ING also has stakes in the Bank of Beijing (China), TMB (Thailand) and Kotak Mahindra Bank (India).
More information about our Wholesale Banking services is available at www.ingwb.com 38.4 million Retail customers primary customers 40+ countries
Tapping into the growth of a cashless society and rising demand for mobile payments, ING
announced the merger in March 2018 of payments app company Payconiq with Bancontact to
Here we’re aiming for a full bank relationship, digitally distributed through low-cost retail platforms like Welcome in Germany and Model Bank in several European markets. We are also using our direct banking experience to grow consumer and SME lending, and our strong savings franchises to fund the expansion of Wholesale Banking in these markets.
Mortgages drew a substantial number of new customers to ING in Germany, pushing the volume of new mortgage business in Germany to record highs in 2018. As a result, ING in Germany announced a portfolio volume of mortgage loans of €73 billion for 2018, five percent more than the previous year.
ING in Poland teamed up with fintech Twisto to introduce the country’s first e-commerce payment gateway. It enables shoppers (not only ING customers, but from any bank) to buy online now and pay later, and get instant cashback if they return their purchases. Some 200 Polish merchants signed up for the pilot in April 2018, during which over 4,000 transactions were made. The Imoje payments gateway continues to grow by about 200 percent per month.
ING’s overall loan portfolio with global climate goals in the ‘Responsible Finance’ section below.
Launched in June 2018, Turkey’s Orange Extra (Turuncu Ekstra) programme was voted Most
Wholesale Banking is an important and integral contributor to ING's commercial performance. With a local presence in more than 40 countries, we provide corporate clients and financial institutions with advisory value propositions such as specialised lending, tailored corporate finance and debt and equity market solutions. We also serve their daily banking needs with payments and cash management, trade and treasury services.
In 2018, transaction services, payments and cash management, and lending all grew and we expect this to continue as we support our corporate clients with their business needs and with becoming more sustainable.
region and strengthening our international network by putting more resources (products and people) into Asia and the Americas. This, along with the introduction of a cross-border Strategic
In September 2018, as part of our commitment to fighting climate change, ING pledged to steer its entire lending portfolio towards the climate goals of the Paris Agreement (see ‘Responsible Finance’
In Retail Banking we define primary customers as those with multiple active ING products, of which one is a current account where they deposit a regular income such as a salary. For Wholesale
ING promises to make banking clear and easy, to provide services anywhere, at any time and to keep getting better. We are driven by our purpose to empower people to stay a step ahead in life and in business. We do this by constantly innovating to deliver a differentiating customer experience that aims to be smart, personal and easy.
Assistant in Turkey and Australia; Dutch forecasting tool ‘Kijk Vooruit’; Smart saver in Australia and
In Wholesale Banking, the overall NPS score improved by 14 percent to 44.5 (on a scale of -100 to
+100), outperforming the industry benchmark. The strongest growth was in the client segment where we have the deepest relationships. This suggests clients appreciate our new approach (see
‘Client-led approach’ below). Overall satisfaction rose to 8.4 from 8.3 across all products (Financial
Markets, Transaction Services and Lending Services). We added a further 10 countries to the NPS
programme in 2018, which is now running in 21 Wholesale Banking markets. In 2019, NPS will play an even more prominent role in gauging client satisfaction in Wholesale Banking, with clearly defined KPIs and a more active feedback process.
To support this new client-led approach we introduced a new organisational structure in 2018. It is designed to enable the revised WB strategy we introduced at the end of 2017, which puts clients at the heart of our business and uses data and technology to anticipate their needs. One of the key elements in the new set-up is the emphasis on our deep sector knowledge, which is embedded in our client coverage.
Similarly, for our Wholesale Banking clients the Bank Mendes Gans (BMG) platform aggregates all the business companies do with different banks, not just ING. In 2018, we added new functionalities to the platform allowing clients to complete the KYC onboarding process online and arrange their own automated transfers between accounts to better optimise their cash flow.
privacy under the General Data Protection Regulation (GDPR), which came into force in Europe
Launched in the Netherlands, Belgium and Czech Republic in 2018, it will be rolled out in a further 12 countries by the end of 2020.
We partnered with Italian fintech Axyon to bring the power of artificial intelligence to the syndicated loans market. The SynFinance platform uses an algorithm to predict investor participation in a pending syndicated loan.
(e.g. lights left on after hours). With some 30,000 buildings in our Dutch Real Estate Finance portfolio, this could save up to €30 million in energy costs and 92,000 tonnes of CO2 emissions annually in the Netherlands alone.
These included one of the first legally binding securities lending transactions on a blockchain with fintech HQLAx. HQLAx used R3’s Corda open-source blockchain platform to swap baskets of securities worth €25 million between ING and Credit Suisse. This solution enables financial institutions to manage their buffers of high-quality liquid assets more efficiently, for example for regulatory purposes, and helps market participants redistribute liquidity more efficiently.
Labs, we are one of 15 partners involved in its development.
Agency to tell us what needs to shift, by how much and by when.
This approach is easier for clients too, as they won’t be required to provide any additional data themselves – we draw client data from global databases that track public and private companies worldwide in the sectors with the biggest influence on greenhouse gas emissions. These include energy (oil & gas, renewables and conventional power), automotive, shipping & aviation, steel, cement, residential homes (mortgages) and commercial real estate.
is working on this. We’re also working on bringing other banks on board in the belief that an industry-wide standard will increase transparency and be more effective. In December 2018, the global banks BBVA, BNP Paribas, Société Générale, and Standard Chartered joined ING in committing to align their loan portfolios with global climate goals using a similar approach.
The Terra approach is complemented by the other ways we work to combat climate change. We have committed to reducing our thermal coal exposure (www.ing.com/18ar008) to close to zero by 2025 and aim to double our Climate Finance portfolio by 2022 compared to 2017. We’ll do this by funding projects that advance renewable energy, energy efficiency and the circular economy.
We’ve also committed to doubling Social Impact financing for projects that lead to affordable housing, or improved infrastructure, for example, and to double lending to environmental, social and governance (ESG) industry leaders, all by 2022 compared to 2017.
This is both a challenge to find the right balance between stopping financing for certain things and increasing finance to others; and an opportunity for us to enter into strategic dialogues with clients to influence change. We talk about the challenges they face and help them identify ways to address these.
Philips loan we pioneered in 2017) and considers their overall ESG (environmental, social and governance) performance. We issued several of these loans in 2018, including to recycling company Renewi, nutrition and diversified chemicals company Royal DSM and real-estate company Gecina. The Gecina transaction was named bank loan of the year in 2018 by Property
Investor Europe, the first time it’s been awarded to a sustainable loan in the Real Estate Finance sector.
Alongside the growing number of green loans and bonds, ING marked a significant first in
In 2018, ING signed up to the United Nations Principles for Responsible Investment, committing us to incorporate environmental, social and corporate governance issues into our investment decisions, policies and processes.
ING offers responsible investment solutions to clients in Belgium, Luxembourg, Germany and the
We see a growing demand and opportunity for sustainable investment in the market and have an ambition to grow our sustainable assets under management (SAuM), which were €6.3 billion at the end of 2018 (2017: €4.8 billion.) This represents five percent of ING’s total assets under management.
Read more about sustainable assets under management in the ‘Non-financial appendix’.
(Youth Perspective Fund) to help young people get out of debt, and Hack your Future, which trains refugees as software developers. Through websites such as Italy’s VoceArancio and
During Global Money Week in March, colleagues around the world volunteered to return to the classroom to teach children about money matters. A social media campaign in Belgium and the
Netherlands in 2018 sought to engage youth to think about their financial future, while in Australia the Orange Everyday Youth account empowers teens to take control of their money. As a result of our financial empowerment interactions, 25 million people (65 percent of our customer base) felt financially empowered in 2018. In 2017, this was 25.4 million or 68 percent. Our ambition for 2022 is to for 32 million customers to feel financially empowered by ING (changed from 34 million due to changes in our customer base and updated forecast figures). Ⓐ
accelerator hub it partners with start-ups and scale-ups to develop new solutions to help people make better financial decisions.
The improvement in pre-tax result was mainly attributable to higher income, which more than offset a slight increase in expenses and higher risk costs. Underlying income rose 2.3 percent, primarily driven by higher income in the Retail Challengers & Growth Markets (supported by continued volume growth and a bigger retail customer base), partly offset by a decline in Retail
Treasury and the WestlandUtrecht Bank (WUB) run-off portfolio, net growth in Retail’s core lending book was €22.0 billion. Net customer deposits (also excluding Bank Treasury and currency impacts)
Underlying operating expenses increased 1.3 percent compared with 2017. Excluding regulatory costs, expenses were up 1.2 percent, mainly related to strategic projects and selective business growth in the Retail Challengers & Growth Markets, and higher external staff expenses in Retail
Risk costs rose to €457 million, or 29 basis points of average risk-weighted assets, from €391 million in 2017, reflecting higher risk costs in Retail Belgium and the Retail Other Challengers & Growth
Markets, while Retail Netherlands and Retail Germany recorded net releases from loan loss provisions.
WUB run-off portfolio and Bank Treasury-related products) grew by €1.9 billion as from 1 January 2018, of which €0.8 billion in mortgages and €1.1 billion in other lending. Net growth in customer deposits (excluding Bank Treasury) was €3.5 billion in 2018. Net fee and commission income rose by €53 million, or 8.8 percent, primarily due to higher daily banking fees. Investment and other income rose by €78 million, mainly attributable to higher allocated Bank Treasury revenues.
Net interest income declined 1.9 percent reflecting margin compression on mortgages and current accounts, and lower Bank Treasury-related interest income. This was only partly offset by higher margins on savings and deposits and volume growth in most products. Net core lending growth, which excludes Bank Treasury products, was €4.4 billion in 2018, of which €3.6 billion was in mortgages and €0.8 billion in consumer lending. Net inflow in customer deposits (excluding Bank
Treasury) was €5.0 billion, mainly driven by a promotional savings campaign in the fourth quarter of 2018. Net fee and commission income rose 4.7 percent, due to higher fee income on investment products and an improvement in fees on current accounts. Investment and other income rose to €76 million, mainly due to improved hedge ineffectiveness results from Bank Treasury.
Risk costs were €-27 million in 2018, compared with €-10 million in 2017, reflecting a benign credit environment in the German market and a review of the consumer lending portfolio.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Our business profit contribution from ING Bank’s 25% stake in TMB (which was mainly driven by one-offs), while previous year included a gain on the sale of MasterCard shares in Turkey.
The underlying result before tax of Bank Treasury & Other fell to a loss of €47 million compared with a gain of €47 million in 2017. This was mainly due to lower results in the run-off businesses
(including a €123 million loss recorded in the fourth quarter of 2018 on the intended sale of an
Net customer deposits (excluding currency impacts and Bank Treasury) shrank by €0.8 billion. The interest result rose 1.3 percent on 2017, whereas net fee and commission income increased 4.8 percent (supported by the inclusion of Payvision). Investment and other income fell by €246 million; this was almost fully attributable to the aforementioned one-off results in the lease and real estate run-off businesses. Underlying operating expenses increased 1.2 percent to €2,826 million due to higher regulatory costs. Expenses excluding regulatory costs were stable, mainly reflecting lower performance-related expenses and strict cost control, and despite the inclusion of Payvision. The underlying cost/income ratio increased to 48.9 percent from 47.1 percent in 2017.
ING’s workforce is evolving to keep pace with the capabilities needed to accelerate our Think Forward strategy in the fastchanging digital world. We strive to build the engagement and capabilities of our employees to deliver on our purpose, which is to empower people to stay a step ahead in life and in business.
Councils globally and locally with the aim of aligning our data-related decisions and ethical dilemmas with the Orange Code.
We have a comprehensive performance management practice in place, which also assesses employees against the Orange Code behaviours. Our new global Step Up performance management practice focuses on managing performance on a continuous basis. It includes
We further enhanced our feedback culture with a new continuous listening approach. We now carry out quarterly surveys among a proportion of employees to test the pulse of the organisation more frequently. In addition, we conduct a more detailed all-employee survey in the second half of each year. It focuses one year on employee engagement – the Winning Performance Culture (WPC)
ING succeed. As in previous years the response rate was high, with 71 percent of employees sharing their views.
Employees take personal responsibility for their own development. We provide a wide range of local and global training programmes to help them develop both professionally and personally.
In line with our digital ambitions, we are piloting a learning platform where subject experts can recommend and share knowledge and ensure our people continuously upgrade their skills and learn new ones in a virtual environment.
These decisions are made with care and consideration and with a full risk-assessment process.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Our people
Özyeğin University in Turkey to set up our own data science training and certification programme for employees. Close to 600 people applied, of which 55 were selected to participate in the first two training rounds. The one-year programme is a combination of online and classroom training and will count towards a future degree should they continue their studies. The programme reaffirms ING’s commitment to a data-driven future by cultivating its own talent pool and empowering employees to keep developing themselves professionally.
 Netherlands: the Work Energy Scan assesses individual and team wellbeing. Managers can use the outcomes to plan remedial action to help their teams cope better with stress at work.
Netherlands, Elsevier business magazine named ING as the number one Best Employer in Financial
It allows ING to grow a sustainable business while implementing the Think Forward strategy. In a dynamic environment, ING
The leverage ratio of ING Group according to the Delegated Act (including grandfathered securities)
takes into account the impact of grossing up the notional cash-pooling activities. The leverage ratio on 31 December 2018 was 4.4% versus 4.7% on 31 December 2017.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Risk and capital management interim dividend of €0.24 per ordinary share paid in August 2018, the final dividend will amount to €0.44 per ordinary share and will be paid fully in cash. The total amount of €1,712 million is completely covered by the remaining balance of ‘interim profits not included in CET1 capital’ at year-end 2018.
The process of balancing these strategic goals is captured in the Internal Capital Adequacy
Assessment Processes (ICAAP) Framework and is enabled by the building blocks and elements facilitating the internal adequacy and assessment process.
Group’s CET1 ratio, taking into account the existing regulatory provision shortfall and before any transition relief, was a reduction of 20 bps. This was mainly caused by the change in the classification and measurement of a portion of the portfolio invested in liquid assets.
Since its adoption by the European Parliament in 2014, the Bank recovery and resolution directive
ING has had a recovery plan in place since 2012. The plan includes information on crisis governance, recovery indicators, recovery options, and operational stability and communication measures. The plan enhances the bank’s readiness and decisiveness in case of a financial crisis. The plan is updated annually to make sure it stays fit for purpose. The completeness, quality and credibility of the updated plan is assessed each year by ING’s regulators.
Group at a consolidated level, as determined by the Single Resolution Board (SRB). This MREL
The total loss absorbing capacity (TLAC) requirement as set by the Financial Stability Board is in the process of being implemented in EU regulations through amendments to the Capital Requirements
understand the sensitivities of the core assumptions in our strategic and capital plans; and (iii)
In addition to running internal stress test scenarios to reflect the outcomes of the annual risk assessment, ING also participates in regulatory stress test exercises. ING participated in the 2018
Dutch central bank (DNB), the European Commission and the European Systemic Risk Board (ESRB).
Managing risks to enable a sustainable business while strengthening culture and resilience
Risk management at ING is directed and overseen by the independent Risk Management function.
ING monitors its capacity to take risks through its Risk Appetite Framework. Within the framework, we monitor a range of financial and non-financial risk metrics to ensure that our risk profile is in line with our risk appetite. ING’s risk appetite, which is approved by both the Supervisory Board and the
Netherlands, ING has opted for cooperative tax compliance (‘horizontaal toezicht’), which implies overall transparency and disclosure of relevant tax risks to the Dutch tax authorities.
Implementing the processes and procedures necessary for effective compliance has significant implications for IT systems and data, as people with the necessary knowledge and skills are scarce.
Further, ING is vitally dependent on its IT infrastructure for the reliability and continuity of its operations. Although IT and digitalisation are seen as opportunities for ING to distinguish itself from competitors, they also present risks. In 2018, ING continued to focus strongly on managing its IT
Risk Committee and the full Supervisory Board. The design and operation of internal controls over financial reporting are discussed annually with the Audit Committee and reported to the
ING’s risk and control structure is based on the three lines of defence model. This model aims to provide a sound governance framework for risk management by defining and implementing three different risk management layers with distinct roles, responsibilities and oversight.
Corporate Audit is our third line of defence. It provides an independent assessment of the internal controls over the risks to ING’s business processes and assets, including risk management activities performed in both the first and second lines of defence.
In September 2017, the European Banking Association (EBA) published new guidelines on internal governance for banks. These internal governance guidelines, which came into effect on 30 June 2018, include requirements for sound risk management across the three lines of defence. Following
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Risk and capital management discussions with the ECB, ING was asked to secure the autonomy of its compliance function in line with these requirements. This entailed the separation of the Compliance function from the NFR
In 2018, the macroeconomic environment was defined by uncertainty related to the Brexit negotiations, the economic and geo-political situation in Turkey leading to among others the depreciation of the Turkish lira, the looming trade war between the US and China, and growing nationalism throughout Europe. The bank also continued to operate in a low interest rate environment that has put pressure on net interest margins. Additionally, shifts in societal norms relating to climate change and sustainability have driven new initiatives and policy updates within the bank.
As of 1 January 2018, ING transitioned to reporting non-performing loans (NPLs) and provisions under the IFRS 9 methodology. The Stage 3 credit-impaired assets and the Stage 3 ratio (Stage 3 credit-impaired assets expressed as a percentage of total credit outstandings) have replaced the
Turkey. The stock of provisions decreased by €0.9 billion to €4.6 billion mainly due to reclassification of the Italian general lease run-off portfolio to assets held for sale, higher write-offs and exchange rate movements following the depreciation of the Turkish lira in Stage 3 files, and a positive trend of the asset quality in the Stages 1 and 2. ING Group’s Stage 3 provision coverage ratio decreased to 30.6% from 34.6% at the beginning of the year. ING Group’s loan portfolio consists predominantly of asset-based and secured loans, including residential mortgages, real estate finance, and projectbased finance.
Instruments Directive (MiFID), are recurring topics on the agenda of the business and senior
The KYC Enhancement Programme encompasses all client segments in all ING business units, leveraging on experiences from the enhancement programme already started in the Netherlands.
 Develop and rollout KYC communication and awareness initiatives and set up a behavioural risk department that performs risk assessments. In its internal communications, ING has made
Rights and the Organisation for Economic Cooperation and Development (OECD) Guidelines for
The ESR policy framework also provides guidance for compliance with new directives and government decisions to combat climate change and safeguard human rights. It applies to most of the financial products and services offered by ING. Nonetheless, the approach and scope of application may differ based on the nature of the service provided. The Wholesale Banking segment (31.5% of ING’s customer lending assets) is the initial focus of our assessments and is where we promote active ESR dialogue, since given their size and activities wholesale clients typically run a greater risk of facing environmental and social issues. We have been working with wholesale clients for more than 15 years to support them in understanding and managing their environmental and social impacts. A simplified version of the ESR policy framework, following the same rationale and principles, applies to ING’s non-lending activities (for example payment products and derivatives) and retail activities for mid-corporates and SMEs. The ESR policy framework is incorporated in ING’s KYC framework. The ESR framework minimum requirements are also included in ING’s procurement policy and apply to the screening of suppliers of ING’s procurement activities.
We screen Wholesale Banking corporate clients during the lifetime of our relationship. The ESR
Engagements categorised as ESR low 81% and medium risk 10% were managed by local and regional risk management, whereas engagements categorised as ESR high risk 9% required specialised advice by the ESR department headquartered in Amsterdam. In 2018, this department issued 349 recommendations following in-depth ESR assessments. Of these, 50.7% were positive, 29.5% were positive subject to conditions to improve social and/or environmental performance and 19.8% were negative. The conditions play an important role in helping clients transition towards improved environmental and social performance on the ground.
Following three additional hirings in 2018, the ESR department now consists of eight dedicated ESR
September 2018. Tobacco has been added as an area where the ESR exclusion policy restricts certain activities. ING will not provide financial services for activities that directly relate to the growing, trading, processing or manufacturing of tobacco products.
 ING and OECD: We continued our engagement in several Dutch multi-stakeholder platforms to implement the Dutch Banking Sector Agreement on International Responsible Business Conduct
are traded on the Euronext Amsterdam Derivative Markets and the Chicago Board Options
Own ordinary shares held by ING Group and its subsidiaries 1.1 0.9
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > ING shares
FTSE4Good Index Series Position: Included Position: Included Position: Included Position: Included
1 The lower scores compared to 2017 reflect the response to the settlement agreement with the Dutch authorities ING
2 May Publication results 1Q2019 9 May Payment date final dividend 2018 (NYSE)
1 August Publication results 2Q2019 5 August2 Ex-date for interim dividend 2019 (Euronext Amsterdam)
6 August2 Record date for interim dividend 2019 entitlement (Euronext Amsterdam)
The contents of ING’s integrated annual reports are compiled with active input from business experts, vetted by senior managers, discussed and approved annually by members of the Management Board Banking, Executive Board and Supervisory Board. The final approval is given by the Supervisory Board.
This report, including the Nonfinancial Appendix, is prepared in accordance with the GRI Standards: Core option and the Dutch Accounting Standard 400. The content and quality criteria specified by the guidelines, including sustainability context, stakeholder inclusiveness, materiality, completeness, balance, comparability, clarity, timeliness, accuracy and reliability, are integral to our reporting process. This year marks a change in GRI reporting option from Comprehensive previously. The Core option meets our reporting needs better and provides us with the opportunity to achieve more focus on only the material topics and related key performance indicators (KPIs)
indicators most relevant to our business. For some material topics, we have introduced new or additional indicators, as can be found in the GRI Content Index on www.ing.com/18ar030.
Through our materiality assessment we ensure that all economic, social and environmental topics relevant to our key stakeholders are addressed in this report. The report follows an annual cycle covering the period 1 January to 31 December. Our 2018 report is published on 7 March 2019. The data and content of this report and Non-financial Appendix aim to provide a concise, accurate and balanced account of ING’s economic, social and environmental performance in 2018. Our approach and performance are explained per topic either in text, by referring to our policies or by providing data and progress on targets.
We value the accuracy and reliability of all information and data in this report, both financial and non-financial. Therefore assurance for the non-financial information in the Report of the Executive
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Chairman’s statement
The first one was the Supervisory Board proposal to amend the Executive Board remuneration policy to bring the remuneration for the CEO position closer to peers within the Euro Stoxx benchmark. It met with strong criticism from the public, politicians and others, leading the
Since being appointed chairman of ING’s Supervisory Board, I have represented ING in meetings with politicians, government officials, the Works Council, investors, employees and clients.
Stakeholder management and a continuing dialogue with stakeholders are of critical importance to
One of the main priorities for the Supervisory Board, and for me personally, will be to monitor the progress of the various measures ING is implementing to strengthen compliance and risk management. Trust is ING’s most important asset in our relationship with our many customers and other stakeholders, and trust is essential for us to play our role in society. We will focus strongly on keeping ING safe, secure and compliant so we safeguard the interests of customers and stakeholders and fulfil our important role as a gatekeeper for the financial sector.
Progress was also made in an important transformation programme: ING’s Model Bank platform initiative to develop a harmonised retail customer proposition in five European countries (the Czech
These included the departure of CFO Koos Timmermans who in consultation with the Supervisory
And ING’s response to setbacks in 2018 show we have the ability to learn from mistakes and take steps to build a better future. These are things that give me confidence as I look ahead.
Board meeting. For part of the regular meetings only the chief executive officer was present; this was dependent on the nature of the topics addressed. The Supervisory Board also had sessions with Supervisory Board members only, in advance of the regular Supervisory Board meetings and when justified by the nature of the topics on the agenda. The purpose of pre-meetings and
Supervisory Board-only meetings is to allow the Supervisory Board independent reflection on, and consideration of, important matters without the attendance of the Executive Board and
Besides the Executive Board remuneration policy and the investigation by the Dutch authorities, the Supervisory Board’s main focus areas were the further acceleration of the Think Forward strategy, including the various transformation initiatives and partnering with fintechs, the anticipated impact of Basel IV and Brexit, updates on IFRS 9, the financing of the company in accordance with our capital and liquidity adequacy (in line with our annually updated Risk Appetite
Haase3 6/6 3/3 1 This SB attendance overview only shows the regular SB (committee) meetings that took place during the year. The 2018 additional and ad-hoc SB (committee) meetings specifically relating to the EB remuneration policy and the investigation by the Dutch authorities are not taken into account in this overview for comparison purposes with previous years.
2 Gheorghe became a member of the NCGcom as per the end of the 23 April 2018 AGM. 3 Haase’s membership of the AC and the SB became effective on 1 May 2018. Before this date she was present at these meetings as an observer. 4 The figures exclude observers, if any. In case an SB member cannot join a meeting, he/she will at all times continue to receive the meeting materials to allow him/her to provide feedback on these in advance.
Management Board Banking of ING. He was succeeded by Tanate Phutrakul, who was appointed as
CFO and member of the Management Board Banking effective 7 February 2019. The Supervisory
Permanent education and business visits are important for the members of the Supervisory Board as part of their continuous learning aimed at maintaining their expertise at the required level and expanding it where necessary. They also help to keep up-to-date with and gain in-depth insight into the global and local economic, financial and political landscape and to increase the Supervisory
ING in Milan and Madrid in September 2018. The visits allowed the Supervisory Board to get a better understanding of local business issues. There was also a special focus on Model Bank, the
Topics included the 2018 EBA stress test, the bank’s changing competitive landscape and partnering with fintechs, ING’s position on crypto currencies and tokens, pro-active balance sheet management, risk modelling, the pricing process , data ethics/security, dilemma management, the
Supervisory Board members to interact with senior management in speed-meet sessions. These conversations contribute to better mutual understanding and alignment on what matters most to
In late 2016, ING announced the acceleration of the implementation of the strategy (accelerate
Think Forward), focusing on investing in our digital transformation, creating a scalable banking platform and realising €900 million of gross costs savings by 2021. A global transformation programme was approved to realise the acceleration of the strategy. The basic starting point of the programme was ING’s value proposition, captured in multiple workstreams across the ING network.
financial needs, to participate on others’ platforms and to develop independent initiatives in partnership with others. Other aspects of the accelerated strategy programme were discussed and approved. Important drivers of the programme were addressed, such as the future of banking, the journey of convergence, maintaining commercial momentum, how to fund and drive the transformation and risk management. The Supervisory Board acknowledges it is important to take into account the duty of care towards those stakeholders of the bank who may be impacted by the transition.
At the Annual General Meeting held on 23 April 2018 ING’s proposal to pay a final dividend of €0.67 per share over the previous reporting year was approved. The proposal was based on ING being ahead of prevailing fully-loaded requirements and being well positioned for future regulatory uncertainties
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Report of the Supervisory Board functions, as well as the payment of an interim 2018 dividend of €0.24 per ordinary share, which was declared on 7 August 2018. In addition, elements of the draft agenda for the 2019 Annual
General Meeting were discussed and approved. The Supervisory Board approved the annual review of the risk appetite framework that reflects recent changes in regulatory requirements. This included updates to the solvency risk appetite statements (RAS), liquidity and funding RAS and concentration RAS. Per standard practice, the Supervisory Board was informed in detail throughout the year of the potential financial and non-financial risks for ING, including updates on Brexit, upcoming regulatory changes (such as Basel IV) and political and economic developments in various countries and regions, and discussed how these could best be mitigated.
As part of the standard procedures, KPMG declared itself independent from ING, in compliance with applicable rules and regulations. Based on the Audit Committee proposal, the Supervisory Board supported the audit plans of the internal and external auditor, the latter including the scope and materiality of the external audit. There has been a significant increase in regulatory reporting since the start of ECB supervision. Reporting timelines have become shorter and the granularity of the data being requested has increased. In addition, local requirements need to be met. ING aims to safeguard data quality and all reporting processes so these remain up to standard.
During the internal meetings of the Supervisory Board in 2018 (with the CEO in attendance, except when the annual self-evaluation of the Supervisory Board or matters concerning the CEO were discussed), the Executive Board and Management Board Banking performance assessments were discussed and approved. Furthermore the Executive Board and Management Board Banking annual targets were reviewed and approved. The future composition of the Executive Board (including the appointment of a new CFO), the Management Board Banking and the Supervisory Board, its committees and potential candidates were a recurring topic of discussion in light of various developments. ING’s talent and succession planning were also discussed, including the outcome of
As in previous years, the Supervisory Board conducted its annual self-assessment, facilitated by an independent external party and with input from several executives who regularly interact with the
Supervisory Board and its committees was considered to be stable since previous year’s selfassessment, acknowledging that the environment in which the Supervisory Board was operating had become more challenging, among others with reference to the 2018 events in light of CEO
Standard areas of attention of the Supervisory Board will be continued close monitoring and assessment of the developments in the areas of non-financial risk, compliance and internal control, as well as in the regulatory and external supervision landscape.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Report of the Supervisory Board organisation. With regard to the Supervisory Board’s meeting effectiveness focus will be on an improved balance between presentation and discussion, in favour of the latter, supported by document quality assurance and gathering feedback on meeting performance.
Report, and discussed and made recommendations for the approval of the internal audit plan.
Committee held separate sessions with the external auditor, the head of the internal audit department, with the CFO and with the Group Controller. He also met with various senior managers.
Supervisory Board and how to arrive at an appropriate balance in its representation of regions, age, gender, and financial and generalist expertise. In order to meet the requirements of various stakeholders a diversity and competence matrix was further developed and published for the members of the Executive Board, Management Board Banking and Supervisory Board to show how these various elements are represented in the composition of these boards (see the ‘Diversity and
Several candidates (internal talents) were identified who have potential to assume more senior roles in the organisation in the future, taking ING’s diversity policy (as published on www.ing.com)
Executive Board and Management Board Banking succession planning as part of its regular meetings by means of deep dives per function and business line. Focus areas included improving diversity at the higher management levels, senior management succession planning and accelerating refreshment. Attention was also paid specifically to regrettable losses among senior managers who left ING in 2018 for various reasons.
Internal Governance, including the required updates to the corporate board charters for ING in relation to these guidelines.
Aris Bogdaneris (MBB) 1963 M Canadian • • • • • • • • •
Roel Louwhoff (MBB) 1965 M Dutch • • • • • • • •
Mr Wijers (chair) 1951 M Dutch • • • • • • • • •
Ms Gheorghe 1956 F Romanian/British • • • • • • • • •
This chapter, including the parts of this Annual Report incorporated by reference, with the separate publication ‘ING’s application of the Dutch Corporate Governance Code’ dated 7 March 2019 (see www.ing.com), together comprise the ‘corporate governance statement’ as specified in section 2a of the decree with respect to the contents of the Annual Report (‘Besluit inhoud bestuursverslag’)2
Code can be downloaded from the website of the Dutch Banking Association (www.nvb.nl). Its application by ING Bank is described in ‘Application of the Dutch Banking Code by ING Bank N.V.’, available on ING Group’s website (www.ing.com/18ar014). ING Group voluntarily applies the principles of the Banking Code regarding remuneration of the members of its Executive Board. ING
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Corporate Governance
 NYSE listing standards generally require that a majority of board members be ‘independent’ as determined under the NYSE listing standards. Under the Corporate Governance Code, all members of the supervisory board, with the exception of not more than one person, should be
 NYSE listing standards applicable to US companies require that external auditors be appointed by the audit committee. By contrast, Dutch law requires that ING Group’s external auditors be appointed by the General Meeting and not by the Audit Committee. The Audit Committee is responsible for preparing the Supervisory Board’s nomination to the General Meeting for the appointment and remuneration of the Group’s external auditor, and annually evaluates the independence and functioning of, and the developments in the relationship with, the Group’s external auditor and informs the Supervisory Board of its findings and proposed measures.
ING Group. No (former) Executive Board member, (former) Supervisory Board member, (former) ING
The set-up and content of the currently applicable share issue authorisation have been discussed with many investors, proxy advisors and other stakeholders in the context of the corporate governance review of 2016 and in the general meetings of 2016 and subsequent years; their feedback has been taken into account. It enables the Executive Board to issue new ordinary shares
 No more than 10 percent of the issued share capital, with or without pre-emptive rights of existing shareholders.
Shares that are included in the Securities Giro Transfer system are transferred pursuant to the
Group as a result of which acquisition or disposal the percentage of his voting rights or capital interest, whether through ownership of shares, American depositary receipts (‘ADR’) or any other financial instrument, whether stock-settled or cash-settled, such as call or put options, warrants, swaps or any other similar contract, reaches, exceeds or falls below certain thresholds, is required to notify in writing the Dutch Authority for the Financial Markets (‘Autoriteit Financiële Markten’)
immediately after the acquisition or disposal of the triggering interest in ING Group’s share capital.
These thresholds are 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75% or 95% of the issued share capital or voting rights of ING Group. The notification will be recorded in a public register that is held by the Dutch Authority for the Financial Markets.
ING Group participates in several industry conferences and generally hosts one Investor Relations
Day every two to three years. These events are announced in advance on ING Group’s website, and presentation materials are made available in real time on the website. This is in accordance with the applicable regulatory requirements intended to ensure that all shareholders and other market participants have equal and simultaneous access to information that could potentially influence the price of ING Group’s securities. ING Group’s Investor Relations Days can be accessed by means of live webcasts. Investor Relations Days or conferences in which ING Group participates will not take place during the period immediately prior to the publication of quarterly financial results.
ING Group may decide not to accommodate or accept any requests or invitations to enter into a dialogue with potential investors, or to accommodate or accept such request or invitation under specific conditions. It is ING’s policy not to initiate bilateral contacts or contacts with the press during the period immediately prior to publication of regular quarterly results.
Approximately 25 analysts actively cover and generally issue reports on ING Group. A list of these analysts can be found under ‘Analyst Coverage’ in the Investor Relations section of ING Group’s website. During 2018, ING Group did not provide any form of compensation to parties that are directly or indirectly involved in the production or publication of analysts’ reports, with the exception of credit-rating agencies.
Supervisory Board, and to decide on:  The distribution of dividends or other distributions;  The appointment and/or reappointment of members of the Executive Board and the Supervisory
Board;  Any other items requiring shareholder approval pursuant to Dutch law; and
General Meetings are convened by public notice via the ING Group website (www.ing.com/18ar015)
at least 42 days before the day of the General Meeting.
Annual General Meeting dedicated web page on the site of ING Group (www.ing.com/18ar015)
The main powers of the General Meeting are to decide on:  the appointment, suspension and dismissal of members of the Executive Board and members of the Supervisory Board, subject to a binding nomination or a proposal of the Supervisory Board as set forth in the Articles of Association;  the adoption of the annual accounts;  the declaration of dividends, subject to the power of the Executive Board to allocate part or all of the profits to the reserves – with approval of the Supervisory Board – and the declaration of other distributions, subject to a proposal by the Executive Board and approved by the Supervisory
Association exclude the waiver of the latter requirement in a second General Meeting. This ensures that significant proposals of shareholders cannot be adopted in a General Meeting with a low attendance rate and can only be adopted with substantial support of ING Group’s shareholders.
The Executive Board is charged with the management of ING Group. This includes responsibility for setting and achieving ING Group’s strategy, objectives and policies, as well as the ensuing delivery of results. It also includes the day-to-day management of ING Group. The Executive Board is accountable for the performance of these duties to the Supervisory Board and the General Meeting.
The Supervisory Board has drawn up a profile to be used as a basis for selecting members of the
Executive Board. It is available on the website of ING Group www.ing.com/18ar023
Executive Board Profile. Based on this profile, the Supervisory Board is responsible for selecting and nominating candidates for appointment or reappointment to the Executive Board.
Members of the Executive Board are permitted to hold shares in the share capital of ING Group for long-term investment purposes. Transactions by members of the Executive Board in these shares are subject to the ING regulations for insiders. These regulations are available on the website of ING
Ralph Hamers has been a member of the Executive Board of ING Group since 13 May 2013 and was appointed CEO and chairman of the Executive Board and the Managing Board Banking on 1 October 2013. He is responsible for the proper functioning of the Executive Board, the Management Board
Legal, Corporate Strategy, Corporate HR, Corporate Communications and Corporate Audit Services.
He joined ING in 1991 and has held various positions including global head Wholesale Banking
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Corporate Governance of Science degree in Business Econometrics/Operations Research from Tilburg University, the
Member of the Management Board of the Nederlandse Vereniging van Banken (NVB), member of the Board of Directors of the Institute of International Finance, Inc., non-executive member of the board of Foundation Royal Concertgebouw Orchestra Amsterdam and member of UNICEF’s Global
Management Board of ING Bank N.V., member of the Management Board of ING Support Holding
Management Board Banking, succeeding Koos Timmermans on 7 February 2019. The Supervisory
The Supervisory Board has drawn up a profile to be used as a basis for its composition. It is available on the website of ING Group (www.ing.com/18ar025).
The Supervisory Board of ING shall consist of a mix of persons with executive experience, preferably gained in the banking sector, experience in corporate governance of large stock-listed companies and experience in the political and social environment in which such companies operate. In the selection of Supervisory Board members, ING is striving for a balance in nationality, gender, age, and educational and work background. In addition, there should be a balance in the experience and affinity with the nature and culture of the business of ING and its subsidiaries. More specifically ING
Under special circumstances the Supervisory Board may, with explanation, deviate from this general rule, for instance to maintain a balanced composition of the Supervisory Board and/or to preserve valuable expertise and experience. The schedule for resignation by rotation is available on the website of ING Group (www.ing.com/18ar026).
Any relation that a member of the Supervisory Board may have with ING Group subsidiaries as an ordinary, private individual is not considered a significant conflict of interest. Such relationships are not reported, with the exception of any loans that may have been granted.
Executive Board of ING Group and vice-chairman of the Management Board Banking of ING Bank
On 31 December 2018, the Supervisory Board had four permanent committees: the Risk
Nomination and Corporate Governance Committee and the Remuneration Committee. These charters are available on the website of ING Group www.ing.com/18ar060. A short description of the duties of the four permanent committees follows below.
Supervisory Board on improvements. On 31 December 2018, the members of the Nomination and
The composition of the Supervisory Board Committees can be found on ING Group’s website www.ing.com/18ar060.
Board and chairman of the Preparatory Committee and Selection & Appointment Committee of
Chairman of the Supervisory Board of Het Concertgebouw N.V., chairman of the board of
Vereniging Natuurmonumenten (the Netherlands) and member of the Temasek European Advisory
Non-executive director of the board of directors of the Instituts Internationaux de Physique et de
(Born 1950, Dutch nationality, male; appointed in 2007, term expires in 2019)
Jeroen van der Veer resigned from the Supervisory Board. As chairman, he was succeeded by
Our internal control over financial reporting includes those policies and procedures that:  pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of ING;  provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorisations of our management and directors; and
 provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of our assets that could have a material effect on our financial statements.
ECB must be obtained by anyone wishing to acquire or hold a participating interest of at least 10 percent in ING Group and to exercise control attached to such a participating interest. Similarly, on the basis of indirect change of control statutes in the various jurisdictions where subsidiaries of ING
ING Group is not a party to any material agreement that becomes effective or is required to be amended or terminated, in case of a change of control of ING Group following a public bid as defined in section 5:70 of the Dutch Financial Supervision Act. ING Group subsidiaries may have customary change of control arrangements included in agreements related to various business activities, such as joint-venture agreements, letters of credit and other credit facilities, ISDAagreements, hybrid capital and debt instruments, insurance and reinsurance agreements and futures and option trading agreements. Following a change of control of ING Group (as a result of a public bid or otherwise) such agreements may be amended or terminated, leading, for example, to an obligatory transfer of the interest in the joint venture, early repayment of amounts due, loss of credit facilities or reinsurance cover, and liquidation of outstanding futures and option trading positions.
The contracts entered into with the members of the Executive Board provide for severance payments that become due upon termination of the applicable Executive Board member’s contract, including if termination occurs in connection with a public bid as defined in section 5:70 of the Dutch Financial Supervision Act. For purposes of calculating the amounts due, it is not relevant whether or not termination of the employment or commission contract is related to a public bid.
More information on ING Group’s policy on External Auditor Independence is available on www.ing.com/18ar061.
In discharging the responsibility for ING’s internal risk management and control systems, the
The composition of the Board is currently as follows: Sebastian Kortmann, chairman of the Board,
Rob van den Bergh, Allard Metzelaar and Wim van Vonno. Wim van Vonno was reappointed as of 1
Conformity statement pursuant to section 5:25c paragraph 2(c) of the Dutch Financial
Subsequently, the ING Group Supervisory Board noted the reactions of various Dutch stakeholders following the proposal to amend the Executive Board remuneration policy. In light of this, the Supervisory Board reconsidered the proposal and decided not to put it up for a vote at the Annual General Meeting. The Supervisory Board is now performing an extensive review of
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Remuneration report
In line with our Orange Code values and behaviours, ING acts responsibly and treats staff fairly across the globe.
Step Up Performance Management is ING’s global performance management approach. It aims to improve personal, and thereby ING's, performance by realising a real-time improvement practice.
The Step Up Performance Management framework consists of three dimensions: • Job: the impact employees have in their daily role on an individual and team level, based on factors such as qualitative job description, dynamic planning and selected specific quantitative priorities
ING aims to provide total direct compensation levels for expected business and individual performance which, on average, are at the median of the markets in which we operate, benchmarked against relevant peer groups. To ensure we adhere to this policy, we regularly monitor and benchmark salary levels across ING looking at different countries.
For Identified Staff (i.e. staff that is considered to have a material impact on the risk profile of
ING applies measures to mitigate risk relating to variable remuneration. Our global remuneration policy takes into consideration risk, capital, liquidity and the likelihood and timing of earnings.
Pre-award risk assessment takes place on a couple of levels. Initially, at the time of determining the variable remuneration pool. This year, after consultation with the ECB and in line with the EBA
In determining the overall size of the variable remuneration pool, ex-ante measures are applied to reduce for current year and prior year increases in the risk profile, as well as for any known future potential risk profile changes, which are reflected in the use of the ROE. An ex-ante risk adjustment can be made by the Management Board with the approval of the Supervisory
In 2018, there were 7 employees, working in the Corporate Staff, Wholesale Banking and Retail
Impact of 2018 settlement agreement The 2018 settlement agreement with the Dutch Public Prosecution Service was considered an important factor as part of this process.
• On 12 May 2014 with respect to pensions for the Executive Board
2 Total direct compensation comprises fixed base salary and variable remuneration, excluding benefits such as pension arrangements, and allowances.
In 2018 the Supervisory Board decided to increase the base salary of the CEO by 2.2% with effect from 1 January 2018, as communicated in our remuneration report 2017. AGM approval was not required since the increase of the base salary was in line with the remuneration policy for the Executive Board as approved at the AGM at an earlier stage. The base salary of the other Executive Board members remained the same in 2018.
• Proceeding on digital transformation programmes to improve customer experience and realise further efficiency gains.
Operational control • 2018 was dominated by the €775 million settlement agreement with the Dutch Public Prosecution Service related to the previously disclosed criminal investigations that found serious shortcomings in the execution of customer due diligence requirements to prevent financial economic crime at ING Netherlands in the period investigated (20102016 ).
• The implementation and execution of policies related to Anti Money
Dutch central bank (DNB) with regular updates on the progress made.
 Expansion of Yolt, the money management platform in the UK, to
• ING was named to CDP’s Climate A-List of 126 companies leading on climate change action. CDP is a leading global non-profit that uses measurement and disclosure to improve the way companies and governments manage environmental risks.
• Achieved net profit of EUR 4,703 million, down 4.1% from 2017.
Underlying net profit is EUR 5,389 million, up 8.7% from 2017 (EUR
In the light of the settlement agreement with the Dutch Public Prosecution Service, the members of the Executive Board of ING Group, in consultation with the Supervisory Board, find it appropriate to forego their variable remuneration related to performance year 2018. For more information please refer to the press release.
Variable remuneration (fully in shares)¹ - - 104,000 6,612 - -
Variable remuneration (fully in shares)¹ - - 104,000 6,584 - -
Even though there was no indication of personal wrongdoing or individual culpability, the Supervisory
Total direct compensation of the individual members of the Executive Board
The other emoluments amounted in 2018, 2017 and 2016 to the following costs.
Outstanding as at 31 December 2017 Exercised in 2018 Waived or expired
Ralph Hamers¹ LSPP² 27 March 2014 27 March 2018 6,215 5,385 830 0 € 13.68
Koos Timmermans¹ LSPP 13 May 2015 13 May 2018 30,012 24,009 6,003 0 € 13.40
Member (active on 31 December 2017), whilst serving on the Executive Board, amount to EUR
2.6 million for the CEO, EUR 2.5 million for the CFO and EUR 1.8 million for the CRO.
The remuneration policy for the Supervisory Board, as approved at the AGM on 25 April 2016, aims to: • Provide a simple and transparent structure
Loans and advances to the individual members of the Executive Board – 2017
Loans and advances to the individual members of the Executive Board – 2016
The table below shows the remuneration, including attendance fees per Supervisory Board member.
Loans and advances to banks 3 30,422 28,811 Customer deposits 14 555,812 539,799
Financial assets at fair value through profit or loss 4 Financial liabilities at fair value through profit or loss 15
Securities at amortised cost 6 47,276 n/a Other liabilities 17 13,510 16,064
Deferred tax assets 38 841 818 Share capital and share premium 17,088 17,045
Interest income using effective interest rate method 25,268 n/a n/a Addition to loan loss provisions 7 656 676 974
Total interest income 27,766 43,958 44,182 Other operating expenses 28 5,262 4,627 5,575
Other interest expense –2,615 n/a n/a Result before tax from continuing operations 6,838 7,268 5,903
Net interest income 21 13,916 13,714 13,241 Net result from continuing operations 4,811 4,987 4,285
Fee and commission expense –1,442 –1,155 –1,148 Net result from disposal of discontinued operations 441
Net fee and commission income 22 2,798 2,710 2,433 Total net result from discontinued operations – – 441
Basic earnings per ordinary share from continuing operations 1.21 1.26 1.09
Net change in fair value of equity instruments at FVOCI –461 n/a n/a
Equity holders of the parent 4,206 3,106 4,390 1 The amounts for the period ended 31 December 2018 have been prepared in accordance with IFRS 9, the adoption of IFRS 9 led to new presentation requirements; prior period amounts have not been restated.
Effect of change in accounting policy 1 –653 –390 –1,043 –14 –1,057
Net change in fair value of debt instruments at fair value through other comprehensive income –163 –163 0 –163
Realised and unrealised revaluations property in own use –2 3 1 –0 1
Remeasurement of the net defined benefit asset/liability 37 6 6 6
Changes in the composition of the group and other changes 2 –96 –96 31 –65 1 Changes per type of Reserve components are presented in Note 1 ‘Accounting policies’, 1.3.1.1. IFRS 9 ‘Financial instruments’ – Impact of adoption.
Consolidated statement of changes in equity for the years ended 31 December
Realised and unrealised revaluations property in own use 26 26 26
– Addition to loan loss provisions 656 676 974 – Held-to-maturity investments n/a 2,675 630
– Net change in Trading assets and Trading liabilities 9,910 –11,187 11,322 – Loans sold 206 1,815 1,295
– Loans and advances to customers –31,253 –20,505 –29,656 – Other investments – 9 9
Investments and advances: Proceeds from issuance of subordinated loans 1,859 2,331 2,070
– Available-for-sale investments n/a –21,601 –27,003 Dividends paid –2,607 –2,564 –2,521
– Securities at amortised cost –17,985 n/a n/a Net cash flow 28,349 2,553 –4,370
Consolidated annual accounts, except for changes in IFRS 9 that became effective in 2018.
Group changed its accounting policies as a result of adopting IFRS 9 ‘Financial Instruments’.
IFRS 16 ‘Leases’ was issued by the IASB in January 2016 and endorsed by the EU in October 2017.
IASB has also issued IFRS 17 ‘Insurance Contracts’ effective in 2021, however it is not applicable for ING Group.
Group opted to continue applying the hedge accounting rules of IAS 39 under the EU-carve out as explicitly permitted by IFRS 9. Notwithstanding, the revised hedge accounting disclosures as required by IFRS 7 ‘Financial Instruments: Disclosures’ as per 1 January 2018 have been implemented.
Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively. Comparative periods have not been restated. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognised in retained earnings and reserves as at 1 January 2018. Accordingly, the information presented for 2017 does not reflect the requirements of IFRS 9 and therefore is not comparable to the information presented for 2018 under IFRS 9.
The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application:  The determination of the business model within which a financial asset is held;  The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at Fair Value Through Profit or Loss (FVPL);  The designation of certain investments in equity instruments not held-for-trading as at Fair
In 2018 ING Group continued to test and refine the new processes, internal controls and governance framework necessitated by the adoption of IFRS 9. This has given rise to a minor change in estimation of the IFRS 9 impact, compared to what was presented in the ING Group
Loans and advances at FVPL C, E 2,500 54,082 31 56,613
Furthermore, there are certain portfolios for which only the classification on ING’s Consolidated statement of financial position has changed, without impacting equity: D. For strategic equity instruments, ING elected to apply the option to irrevocably designate these at FVOCI, instead of the IFRS 9 default measurement of FVPL. FVOCI equity investments will no longer recycle revaluation reserves to the Statement Of Profit Or Loss (SOPL) upon disposal. For these instruments only dividend income continues to be recognised in the SOPL; and
(reclassification). The remeasurement impact of EUR 377 million (other assets EUR 300 million and other liabilities EUR -77 million) includes the remeasurement impact on deferred and current tax assets and liabilities (EUR 344 million respectively EUR 72 million), the remeasurement of
Associates (EUR -28 million) and the provision on off-balance positions (EUR -11 million).
Financial assets at AC - in EUR million IAS 39 Reclassfication1 Remeasurement IFRS 9
Loans and advances from banks - To Securities at AC -264 -264 - Recognition of expected credit losses 2 2
Trading assets - To Loans and advances at FVPL -52,730 -52,730
Carrying amount 31 December 2017 - From Loans and advances to customers 3,125 225 3,350
Cash and balances with central banks 2 Amortised cost 21,989 21,992 Amortised cost Cash and balances with central banks
Other assets 11 Amortised cost 18,587 14,667 Amortised cost Other assets
Customer deposits 14 Amortised cost 539,799 539,852 Amortised cost Customer deposits
Financial liabilities at FVPL 15 0 0 Financial liabilities at FVPL
Subordinated loans 19 Amortised cost 15,968 16,209 Amortised cost Subordinated loans
model. As a result, on transition, the LLP increased by EUR 795 million.
Allowance on - in EUR million; IAS 39 Reclassfication Remeasurement IFRS 9
The breakdown of ECL between different stages of ING Group’s portfolio is further detailed in the table below. The increase in the LLP on transition to IFRS 9 is mainly the result of Stage 2 assets for which a life-time ECL was calculated.
Total net impact of transition to IFRS 9 on opening balance equity
Reclassification of own credit risk for financial liabilities designated as at FVPL¹ -190
‘split interest’) for trading derivatives, trading securities and trading loans / deposits (mainly repo’s)
SPPI. Interest includes consideration for the time value of money, credit risk and also consideration
In assessing whether the contractual cash flows are SPPI, ING Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making the assessment, terms such as the following are considered, with an example of an SPPI failure for each consideration:  prepayment terms. For example a prepayment of an outstanding principal amount plus a penalty which is not capped to three or six months of interest;  leverage features, which increase the variability of the contractual cash flows with the result that they do not have the economic characteristics of interest. An example is a Libor contract with a multiplier;  terms that limit ING Group’s claim to cash flows from specified assets - e.g. non-recourse asset arrangements. This could be the case if payments of principal and interest are met solely by the cash flows generated by the underlying asset, for example instances in real estate, shipping and aviation financing; and
Interest income from these financial assets is included in Interest income using the EIR method.
Group’s right to receive payments is established. Impairment requirements are not applicable to equity investments classified and measured as FVOCI.
Other remaining equity investments are measured at FVPL. All changes in the fair value are recognised in Valuation result and Net trading income in the Consolidated statement of profit or loss as applicable.
 the remaining amount of change in the fair value is presented in profit or loss.
A financial guarantee contract is a contract that requires ING Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Such a contract is initially recognised at fair value and is subsequently measured at the higher of (a) the amount determined in accordance with impairment provisions of IFRS 9 (see section “Impairment of financial assets”) and (b) the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with the revenue recognition principle of IFRS 15.
Embedded derivatives are separated from financial liabilities and other non-financial contracts and accounted for as a derivative if, and only if: a) the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract; b) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and c) the combined instrument is not measured at fair value with changes in fair value reported in profit or loss.
(or proportions) to be viewed in combination and jointly designated as the hedging instrument and removes some of the limitations in fair value hedge accounting relating to hedging core deposits and under-hedging strategies. Under the EU carve-out, hedge accounting may be applied to core deposits and ineffectiveness only arises when the revised estimate of the amount of cash flows in scheduled time buckets falls below the designated amount of that bucket.
ING Group also applies fair value hedge accounting for portfolio hedges of interest rate risk (macro hedging) under the EU carve-out to its retail operations. The net exposures of retail funding (savings and current accounts) and retail lending (mortgages) are hedged. The hedging activities are designated under a portfolio fair value hedge on the mortgages. Changes in the fair value of the derivatives are recognised in the statement of profit or loss, together with the fair value adjustment on the mortgages (hedged items) insofar as attributable to interest rate risk (the hedged risk).
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Accounting policies > 1 result. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the statement of profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is transferred immediately to the statement of profit or loss.
ING Group relies on a number of qualitative indicators to identify and assess SICR. These include:  Forbearance status;  Watch List status. Loans on the Watch List are individually assessed for Stage 2 classification;  Intensive care management;  Substandard Internal rating; and
An asset that is in stage 3 will move back to stage 2 when, as at the reporting date, it is no longer considered to be credit-impaired. The asset will migrate back to stage 1 when its credit risk at the reporting date is no longer considered to have increased significantly since initial recognition.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Accounting policies > 1 house prices, commodity prices, and short-term interest rates. Applying market consensus in the baseline scenario ensures unbiased estimates of the expected credit losses.
 ING Group releases a legal (monetary) claim it has on its customer.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Accounting policies > 1 these judgements are considered key sources of estimation uncertainty. The sensitivity of these estimates is assessed in the credit risk section of Note 53, Risk Management.
Scenarios Team and the Macroeconomics Scenarios Expert Panel, were established for this purpose.
Finance. The use of alternate forward-looking macroeconomic scenarios can produce significantly different estimates of ECL. This is demonstrated in the sensitivity analysis in Note 53, where the unweighted ECL under each of the three scenarios for some significant portfolios is disclosed.
The following is applicable to periods prior to 1 January 2018 for financial instruments accounted for under IAS 39, to the extent not already discussed earlier in this section. Comparative periods were not restated for the adoption of IFRS 9.
Available-for-sale financial assets are subsequently measured at fair value. Interest income from debt securities classified as available-for-sale is recognised in Interest income in the statement of profit or loss. Dividend income from equity instruments classified as available-for-sale is recognised in Investment income in the statement of profit or loss when the dividend has been declared.
If there is objective evidence that an impairment loss on an asset carried at AC has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account (loan loss provision) and the amount of the loss is recognised in the statement of profit or loss under Addition to loan loss provision. If the asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Accounting policies > 1 performance obligations are satisfied. Agreed performance obligations are individual promises made to the customer that deliver benefit from the customer’s perspective. Revenue should either be recognised at a point-in-time or over-time depending on the service being delivered to the customer. The adoption of IFRS 15 had no significant impact on ING Group’s results or financial position.
Reference is made to Note 22 ‘Net fee and commission income’ which includes disaggregated revenue categories based on the type of services provided. Note 35 ‘Segments’ includes Net fee and commission income, as reported to the Executive Board of ING Group and the Management
Board of ING Bank, disaggregated by line of business and by geographical segment.
ING Group has identified areas that require management to make significant judgements and use critical accounting estimates and assumptions based on the information and financial data that may change in future periods. These areas are:  The determination of the fair values of financial assets and liabilities;  Loan loss provisions; and
9 Financial instruments - Accounting policies applied from 1 January 2018’, 1.5 ‘Principles of
A list of principal subsidiaries is included in Note 49 ‘Principal subsidiaries’.
Items included in the annual accounts of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The Consolidated annual accounts are presented in euros, which is Group’s presentation currency.
includes goodwill identified on acquisition. The Group’s share of its associates and joint ventures post-acquisition profits or losses is recognised in the statement of profit or loss, and its share of post-acquisition changes in reserves is recognised in equity. The cumulative post-acquisition changes are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate or joint venture equals or exceeds its interest in the associate or joint venture, including any long-term interests in the associate like uncollateralised loans that are neither
Land and buildings held for own use are stated at fair value at the balance sheet date. Increases in the carrying amount arising on revaluation of land and buildings held for own use are credited to the revaluation reserve in shareholders’ equity. Decreases in the carrying amount that offset previous increases of the same asset are charged against the revaluation reserve directly in equity; all other decreases are charged to the statement of profit or loss. Increases that reverse a revaluation decrease on the same asset previously recognised in net result are recognised in the statement of profit or loss. Depreciation is recognised based on the fair value and the estimated useful life (in general 20–50 years). Depreciation is calculated on a straight-line basis. On disposal, the related revaluation reserve is transferred to retained earnings.
These groups of CGUs represent the lowest level at which goodwill is monitored for internal management purposes. Goodwill is tested for impairment by comparing the carrying value of the group of CGUs to the recoverable amount of that group of CGUs. The carrying value is determined as the IFRS net asset value including goodwill. In compliance with IAS 36 ‘Impairment of assets’, the carrying value is determined on a basis that is consistent with the way in which the recoverable amount of the CGU is determined. When the carrying values need to be allocated between Retail and Wholesale, solvency (risk-weighted assets) are used as a basis. The recoverable amount is estimated as the higher of fair value less costs of disposal and value in use. Several methodologies are applied to arrive at the best estimate of the recoverable amount. Impairment of goodwill, if applicable, is included in the statement of profit or loss in Other operating expenses.
Computer software that has been purchased or generated internally for own use is stated at cost less amortisation and any impairment losses. Amortisation is calculated on a straight-line basis over its useful life. This period will generally not exceed five years. Amortisation is included in Other operating expenses.
Income tax on the result for the year comprises current and deferred tax. Income tax is recognised in the statement of profit or loss but it is recognised directly in equity if the tax relates to items that are recognised directly in equity.
Consolidated statement of profit or loss are restated and presented as discontinued operations for all periods presented. Furthermore, the individual assets and liabilities are presented in the
Consolidated statement of financial position as Assets and liabilities held for sale and are no longer included in the usual line items in the Consolidated statement of financial position. Changes in assets and liabilities as a result of classification as held for sale are included in the notes in the line
A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of ING Group; or a present obligation that arises from past events but is not recognised because it is either not probable that an outflow of economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured reliably.
ING Group is the lessor are divided into an interest component (recognised as interest income) and a repayment component.
Earnings per ordinary share is calculated on the basis of the weighted average number of ordinary shares outstanding. In calculating the weighted average number of ordinary shares outstanding:  Own shares held by group companies are deducted from the total number of ordinary shares in issue;  The computation is based on daily averages; and
 In case of exercised warrants, the exercise date is taken into consideration.
The non-voting equity securities are not ordinary shares, because their terms and conditions
For the purposes of the statement of cash flows, Cash and cash equivalents comprise balances with less than three months’ maturity from the date of acquisition, including cash and balances with central banks, treasury bills and other eligible bills, amounts due from other banks, and deposits from banks. Investments qualify as a cash equivalent if they are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Cash and balances with central banks > 2 2 Cash and balances with central banks
Cash advances, overdrafts and other balances 1 1 3 3 3 4
Loans and receivables in the trading portfolio mainly relate to (reverse) repurchase agreements, which are comparable to collateralised lending. From a risk perspective, the gross amount of trading assets must be considered together with the gross amount of trading liabilities, which are presented separately on the statement of financial position. However, IFRS does not always allow netting of these positions in the statement of financial position.
Reference is made to Note 15 ‘Financial liabilities at fair value through profit or loss’ for information on trading liabilities.
As at 31 December 2018, Other non-trading derivatives no longer includes balances related to warrants on the shares of Voya Financial Inc. and NN Group N.V. (2017: EUR 51 million and EUR 2 million respectively). In 2018, ING sold its 7 million remaining warrants on shares in Voya and 35 million remaining warrants on shares in NN Group. Reference is made to Note 23 ‘Valuation results and net trading income’.
For details on ING Group’s exposure to debt securities reference is made to Note 6 ‘Securities at amortised cost’.
The following table presents changes in fair value of equity securities and debt instruments at fair value through other comprehensive income. The comparative amounts include equity securities and debt instruments that were classified as Available-for- sale investments under IAS 39.
Opening balance as at 1 January 3,983 4,024 65,747 78,888 69,730 82,912
2 Changes in unrealised revaluations include changes on hedged items which are recognised in the statement of profit or loss.
Debt securities at fair value through other comprehensive income and amortised cost 72,893 80,454
Debt securities at fair value through profit or loss 3,218 1,739
At 1 January 2018, the classification of certain Loans and advances to banks and Loans and advances to customers has changed to Securities at amortised cost based on the characteristics of these instruments.
Loan loss provisions –6 –11 –17 n/a 1 Amounts have been restated to conform to the current year presentation.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Loans and advances to customers > 7 7 Loans and advances to customers
Financial assets that have been derecognised –101 –145 –341 –0 –588
IAS 37 non-credit replacement off-balance positions (EUR 32 million included in Note 16
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Investments in associates and joint ventures > 8 8 Investments in associates and joint ventures
TMB Public Company Limited (TMB) is an associate in which ING Group holds a 30% ownership interest. TMB is a financial institution providing products and services to Wholesale, Small and
Significant influence for associates in which the interest held is below 20%, is based on the combination of ING Group’s financial interest and other arrangements, such as participation in the
In 2018, Share of results from associates and joint ventures of EUR 146 million as presented in the statement of profit or loss and the table above, is mainly attributable to results of TMB of EUR 117 million.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Property and equipment > 9
Accumulated amortisation as at 31 December –1,487 –1,225 –5 –23 –1,492 –1,248
Accumulated impairments as at 31 December –4 –29 –2 –2 –6 –31
Holdings Ltd related to the years 2007-2013, for which a full reimbursement is expected to be received from NN Group. As of 31 December 2018 the receivable due from NN Group including interest amounts to EUR 107 million.
The assets held for sale are composed of lease receivables that were previously classified as Loans and advances to customers.
(TLTRO) with EUR 10.7 billion in 2016 and an additional EUR 7 billion in 2017. The TLTRO aims to stimulate lending to the real economy in the Eurozone. The interest rate on the TLTRO’s is fixed over the life of each operation at the benchmark rate of the European Central Bank.
As at 31 December 2018, financial liabilities designated as at fair value through profit or loss include funds entrusted of EUR 49,010 million with regard to repurchase transactions.
In 2018, Other provisions – other includes provisions related to contingent liabilities amounting to
Reference is made to Note 28 ‘Other operating expenses’ and Note 47 ‘Legal proceedings’.
More than 1 year but less than 2 years 7,766 7,084
More than 2 years but less than 3 years 1,587 1,341
More than 3 years but less than 4 years 1,234 278
More than 4 years but less than 5 years 1,563 3,673
Total debt securities¹ 119,751 96,086 1 Per 1 January 2018 the debt securities in issue includes accrued interest (EUR 0.7 billion), reference is made to Note 1
In 2018, the increase in Debt securities in issue of EUR 22.9 billion is mainly attributable to an increase in commercial paper of EUR 12.9 billion, long term maturity bonds of EUR 9.7 billion, certificates of deposit of EUR 1.7 billion and covered bonds of EUR 0.9 billion, partially offset by a decrease in other Debt securities in issue of EUR 2.3 billion.
In March 2018 ING Groep N.V. issued EUR 750 million and USD 1,250 million securities that qualify as subordinated CRD IV Tier 2 notes with coupon of 2.00% until 22 March 2030 and 4.70% until 22
For additional information, reference is made to the Parent company annual accounts, Note 4
Additional Tier 1 Contingent Convertible Capital Securities which can, in accordance with their terms and conditions, convert by operation of law into ordinary shares if the conditions to such conversion are fulfilled. As a result of this conversion, the issued share capital can increase by no more than 111 million ordinary shares. Reference is made to Note 19 ‘Subordinated loans’ and to the Parent company annual accounts, Note 4 ‘Subordinated loans’.
Realised gains/losses transferred to the statement of profit or loss –90 –146 –54
Available-for-sale revaluation reserve recognised in Equity of EUR 154 million. Reference is made to
In 2018, the Equity securities at FVOCI revaluation reserve decreased by EUR 517 million, mainly due to the revaluation of shares in Bank of Beijing EUR –549 million, partly offset by revaluation of shares in Kotak Mahindra Bank EUR 71 million. The EUR -56 million is a transfer of revaluation reserve to retained earnings.
Reference is made to Note 37 ‘Pension and other post-employment benefits’.
Furthermore, ING Groep N.V. is subject to legal restrictions with respect to repayment of capital to holders of cumulative preference shares. Capital may be repaid to the holders of cumulative preference shares pursuant to (i) an amendment of ING Groep N.V.’s Articles of Association whereby the cumulative preference shares are written-down or (ii) a resolution to redeem and cancel the cumulative preference shares.
Interest income using effective interest rate method 25,268 n/a n/a Interest expense on non-trading derivatives (hedge accounting) 4,826 5,946 6,720
Interest income other 25 138 130 Other interest expense 2,615 n/a n/a
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Valuation results and net trading income > 23 23 Valuation results and net trading income
The Valuation results on assets and liabilities designated at fair value through profit or loss include fair value changes on certain issued debt securities. Valuation results on assets and liabilities designated at fair value through profit or loss were mainly due to changes in the fair value of financial liabilities driven by changes in market conditions and changes in own credit risk as
Interest expense from trading liabilities in 2018 amounted to EUR 13,976 million.
Realised gains/losses on disposal of debt instruments measured at FVOCI 77 n/a n/a
Realised gains/losses and impairments of debt instruments measured at FVOCI 77 67 107
Realised gains/losses on disposal of Available-for-sale equity securities n/a 48 236
In 2016, Realised gains/losses on disposal of equity securities included EUR 163 million mainly comprising the gain on disposal of the shares held in VISA Europe Limited. For further information
In 2018, Other income of EUR 136 million (2017: EUR 350 million; 2016: EUR 173 million) is mainly impacted by positive results on the sale of commodity goods and property and upfront income of independent agents. In 2017 an amount of EUR 121 million is included related to a tax charge at
ING’s performance over that period. Upfront and deferred shares awarded to the Management
Board members of ING Group as well as identified staff, have a retention obligation that must be adhered to upon vesting, a minimum retention of 12 months applies. ING has the authority to apply a hold back to awarded but unvested shares and a claw-back to vested shares.
Groep N.V., 80,036 share awards (2017: 104,449; 2016: 170,749) were granted to the Management
13.65 (2017: EUR 13.81; 2016: 10.43). All option rights are vested.
Addition/(unused amounts reversed) of provision for reorganisations and relocations 4 –5 1,189
In both 2017 and 2018, reversals of impairments on property and equipment relate to impairments previously recognised in the statement of profit or loss and mainly include impairments on property in own use that were reversed following the sale process of office buildings.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Discontinued operations > 29 settlement agreement with the Dutch Public Prosecution Service relating to previously disclosed investigations regarding various requirements for client on-boarding and the prevention of money laundering and corrupt practices. Under the terms of the agreement ING has agreed to pay a fine of EUR 675 million and EUR 100 million for disgorgement. Reference is made to Note 47 ‘Legal proceedings’.
Effect of dilutive instruments: Stock option and share plans 1.5 2.8 3.5
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Dividend per ordinary share > 31 31 Dividend per ordinary share
Net change in Trading assets and Trading liabilities 9,910 –11,187 11,322
– Other financial liabilities at fair value through profit or loss 10,522 –565 –432
Treasury bills and other eligible bills included in trading assets 17 5 126
Treasury bills and other eligible bills included in AFS investments n/a 386 386
Treasury bills and other eligible bills included in FVOCI n/a n/a
Included in cash and cash equivalents: – Deposits from banks –8,520 –8,563 –9,809
ING Group’s risk management (including liquidity) is explained in note 53 ‘Risk management –
The geographical segments for the Banking results are presented on page 226.
Banking. The Corporate Line Banking is a reflection of capital management activities and certain expenses that are not allocated to the banking businesses. The Corporate Line Banking includes the isolated legacy costs (mainly negative interest results) caused by the replacement of short-term funding with long-term funding during 2013 and 2014. ING Group applies a system of capital charging for its banking operations in order to create a comparable basis for the results of business units globally, irrespective of the business units’ book equity and the currency they operate in.
IFRS, underlying result as presented by ING may not be comparable to other similarly titled measures of performance of other companies. The underlying result of ING’s segments is reconciled to the Net result as reported in the IFRS Consolidated statement of profit or loss below.
This note does not provide information on the revenue specified to each product or service as this is not reported internally and is therefore not readily available.
Net result IFRS attributable to equity holder of the parent 4,703 4,905 4,651
3 Insurance Other comprises the net result relating to warrants on the shares of Voya Financial and NN Group. In March 2018 ING sold its remaining part of warrants on the shares of Voya Financial. In November 2018 the warrant agreement between NN Group and ING was terminated.
ING Group’s business lines operate in seven main geographical areas: the Netherlands, Belgium,
The tables below provide additional information, for the years 2018, 2017 and 2016 respectively, on names of principal subsidiaries and branches, nature of main activities and average number of employees on a full time equivalent basis by country/tax jurisdiction.
Mexico ING Consulting, S.A. de C.V. Wholesale 8 8 7 1 1 1 2 2 2 –2 –2 –1
India Branch of ING Bank N.V. Wholesale 1 1 2 2 1 –0
Philippines and South Korea all have lower tax charges due to prior year adjustments.
Brazil has a low tax charge due to the combination of relatively high exempt income with a decreased profit.
Mauritius has no tax charge as the partial sale of Kotak Mahindra Bank shares in September 2016 was tax exempt.
Most group companies sponsor defined contribution pension plans. The assets of all ING Group’s defined contribution plans are held in independently administered funds. Contributions are generally determined as a percentage of remuneration. For the defined contribution scheme in the
ING does not manage the pension funds and thus receives no compensation for fund management, however for some funds ING does provide administration services for which ING
Effect of curtailment or settlement –3 –2 –1 –1 –3 –2
Market yields of high quality corporate bonds reflect the yield on corporate bonds with an AA rating for durations where such yields are available. An extrapolation is applied in order to determine the yield to the longer durations for which no AA-rated corporate bonds are available. As a result of the limited availability of long-duration AA-rated corporate bonds, extrapolation is an important element of the determination of the discount rate. The weighted average discount rate applied for net defined benefit asset/liability for 2018 was 2.3% (2.0% in 2017) based on the pension plan in the Netherlands, Germany, Belgium, The United States of America, and the United Kingdom. The average discount rate applied for Other post-employment benefits was 3.9% (3.2% in 2017).
The benefit payments for defined benefit and other post-employment benefits expected to be made by the plan between 2019-2023 are estimated to be between EUR 94 million and EUR 125 million per annum. From 2024 to 2028 the total payments made by the plan are expected to be
Deferred taxes are recognised on all temporary differences under the liability method using tax rates applicable in the jurisdictions in which ING Group is subject to taxation.
Unused tax losses carried forward not recognised as a deferred tax asset 1,010 1,074
Unused tax losses carried forward recognised as a deferred tax asset 763 658
More than 1 year but less than 5 years 2 350 2 38
The above mentioned deferred tax of EUR 156 million (2017: EUR 128 million) and the related unused tax losses carried forward exclude the deferred tax liability recorded in the Netherlands with respect to the recapture of previously deducted UK tax losses in the Netherlands for the amount of EUR –105 million (2017: EUR –136 million).
The table above includes a breakdown of certain net deferred tax asset positions by jurisdiction for which the utilisation is dependent on future taxable profits whilst the related entities have incurred losses in either the current or the preceding year.
As at 31 December 2018 and 31 December 2017, ING Groep N.V. had no significant temporary differences associated with the parent company’s investments in subsidiaries as any economic benefit from those investments will not be taxable at parent company level.
Belgium, recorded under ‘Impact on deferred tax from change in tax rates’; and
Total income tax related to components of other comprehensive income –29 253 2
Certain items per the statement of financial position are not included in the table, as they do not meet the definition of a financial asset or liability. The aggregation of the fair values presented below does not represent, and should not be construed as representing, the underlying value of ING
(e.g. volatilities, correlations and credit ratings), and customer behaviour are taken into account.
Derivatives contracts can either be exchange-traded or over the counter (OTC). The fair value of exchange-traded derivatives is determined using quoted market prices in an active market and those derivatives are classified in Level 1 of the fair value hierarchy. For those instruments not actively traded, fair values are estimated based on valuation techniques. OTC derivatives and derivatives trading in an inactive market are valued using valuation techniques because quoted market prices in an active market are not available for such instruments. The valuation techniques and inputs depend on the type of derivative and the nature of the underlying instruments. The principal techniques used to value these instruments are based on (amongst others) discounted cash flows option pricing models and Monte Carlo simulation. These valuation models calculate the present value of expected future cash flows, based on ‘no-arbitrage’ principles. These models are commonly used in the financial industry. Inputs to valuation models are determined from observable market data where possible. Certain inputs may not be observable in the market directly, but can be determined from observable prices via valuation model calibration procedures.
The inputs used include for example prices available from exchanges, dealers, brokers or providers of pricing, yield curves, credit spreads, default rates, recovery rates, dividend rates, volatility of underlying interest rates, equity prices, and foreign currency exchange rates. These inputs are determined with reference to quoted prices, recently executed trades, independent market quotes and consensus data, where available.
Revaluation recognised in other comprehensive income during the period 2 –131 –5 –131 –5
Transfers out of Level 3 –839 –37 –23 –37 –319 –249 –13 –1,125 –392
Changes in the composition of the group and other changes 0 –1 –1 –1 –1 1 Net gains/losses were recorded in income from trading activities in continuing operations herein as ‘Valuation results and net trading income’ in the statement of profit or loss. The total amounts includes EUR -5 million of unrealised gains on losses recognised in the statement of profit or loss.
2 Revaluation recognised in other comprehensive income is included on the line ‘Unrealised revaluations Available-for-sale investements and other revaluations’.
In 2018, financial assets transferred out of Level 3 mainly relate to swap positions revised to Level 2 based on the ability to demonstrate independent sourcing of observable inputs for swap pricing requirements.
Changes in the composition of the group and other changes 2 2 1 Net gains/losses were recorded in income from trading activities in continuing operations included herein as ‘Valuation results and net trading income’ in the statement of profit or loss. The total amount includes EUR -58 million of unrealised gains and losses recognised in the statement of profit or loss.
Financial liabilities measured at fair value in the statement of financial position as at 31 December 2018 of EUR 93 billion includes an amount of EUR 0.9 billion (1.0%) which is classified as Level 3 (31
December 2018 are disclosed above in the table ‘Changes in Level 3 Financial liabilities’.
Debt securities 807 386 3 Price based Price (%) 0% 0% 105% 161%
(Reverse) repo's 481 424 Present value techniques Price (%) 3% n/a 4% n/a
For securities where market prices are not available fair value is measured by comparison with observable pricing data from similar instruments. Prices of 0% are distressed to the point that no recovery is expected, while prices significantly in excess of 100% or par are expected to pay a good yield.
Also, this disclosure does not attempt to indicate or predict future fair value movement. 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.
Loans and advances to customers1, 3 138 14,656 19,870 567,016 543,619 581,810 563,489
ING Group’s non-financial assets comprise Investments in associates and joint ventures, Property in own use, Investment property as included in the statement of financial position in the line items
Investments in associates and joint ventures, Property and equipment, and Other assets respectively.
 Changes in the fair value of Investment property are included in Investment income.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Derivatives and hedge accounting > 40 40 Derivatives and hedge accounting
Derivatives that qualify for hedge accounting under IFRS are classified and accounted for in accordance with the nature of the instrument hedged and the type of IFRS hedge model that is applicable. The three models applicable under IFRS are: fair value hedge accounting, cash flow hedge accounting, and hedge accounting of a net investment in a foreign operation. How and to what extent these models are applied are described under the relevant headings below. The company’s detailed accounting policies for these three hedge models are set out in Note 1
The derivatives used for fair value hedge accounting are included in the statement of financial position line-item ‘Financial assets at fair value through profit or loss – Non-trading derivatives’ for
– Other interest derivatives –11 –53 –101 –55 –228 –325 –325 –51 –1,148
As noted above for fair value hedges, by using derivative financial instruments to hedge exposures to changes in interest rates and foreign currency exchange rates, ING Group exposes itself to credit risk of the derivative counterparty, which is not offset by the hedged items. This exposure is managed similarly to that for fair value hedges.
The derivatives used for cash flow hedge accounting are included in the statement of financial position line-item ‘Financial assets at fair value through profit or loss – Non-trading derivatives’ EUR
– Interest rate swaps –107 –2,546 –7,107 –5,591 –9,883 –7,928 –8,980 –29,629 –71,771
ING Group’s net investment hedges principally consist of derivatives (including currency forwards and swaps) and non-derivative financial instruments such as foreign currency denominated funding. When the hedging instrument is foreign currency denominated debt, ING Group assesses effectiveness by comparing past changes in the carrying amount of the debt that are attributable to a change in the spot rate with past changes in the investment in the foreign operation due to
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Derivatives and hedge accounting > 40 movement in the spot rate (the offset method).
Less than 1 month 1 to 3 months months 1 to 2 year 2 to 3 years 3 to 4 years 4 to 5 years >5 years Total
Carrying amount net investment hedge reserve at the end of the reporting period
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Assets by contractual maturity > 41 2018 Less than 1 month 1 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Total
Loans and advances to banks 13,929 5,137 5,224 3,931 590 28,811
Loans and advances to customers 62,842 18,414 40,350 163,360 289,569 574,535
4 The amounts for the period ended 31 December 2017 have been prepared in accordance with IAS 39, the adoption of IFRS 9 led to new presentation requirements for 2018; prior period amounts have not been restated Reference is made to Note 1 ‘Accounting policies’ for information on Changes in accounting principles, estimates and presentation of the consolidated annual accounts and related notes.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Liabilities by maturity > 42 42 Liabilities by maturity
Non-financial liabilities 10,560 899 2,496 1,198 831 – – 15,983 Total liabilities 581,467 55,538 60,316 82,494 46,960 5,339 3,180 835,295
Coupon interest due on financial liabilities 1,005 846 2,340 7,778 4,661 287 16,918
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Assets not freely disposable > 43 43 Assets not freely disposable
Germany to EUR 12 billion (2017: EUR 12 billion), in Belgium EUR 12 billion (2017: EUR 10 billion), in
Impact of enforceable master netting arrangements or similar arrangements1 1 The line ‘Impact of enforceable master netting agreements or similar arrangements’ contains derivative positions under the same master netting arrangements being presented in different statement of financial position line items.
Gross amounts of recognised financial assets offset in the statement of financial position
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Contingent liabilities and commitments > 46 46 Contingent liabilities and commitments
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Legal proceedings > 47 the United Kingdom in previous years. The existence of this obligation will be confirmed only by the occurrence of future profits in the United Kingdom.
Furthermore, ING Group leases assets from third parties under operating leases as lessee. The future rental commitments to be paid under non-cancellable operating leases are as follows: 47 Legal proceedings
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Legal proceedings > 47
The arbitration court dismissed ING’s prayers for relief. At this moment it is not possible to assess the outcome of these procedures nor to provide an estimate of the (potential) financial effect of these claims.
VEB Fortis claim: In January 2011, the Dutch Association of Stockholders (Vereniging van
Criminal proceedings regarding cash company financing: In June 2017, a Belgian criminal Court ruled that ING Luxembourg assisted third parties in 2000 to commit a tax fraud in the context of the purchase of the shares of a cash company. The Court convicted ING Luxembourg, among others, and ordered ING to pay a penal fine of EUR 120,000 (suspended for half of the total amount). The court also ordered ING Luxembourg jointly and severally with other parties, to pay
Groep N.V., ING Bank Mexico S.A. and ING Financial Markets LLC (“ING”) as defendants to a complaint that had previously been filed against multiple other financial institutions. The complaint alleges that the defendants conspired to fix the prices of Mexican Government Bonds.
The share purchase agreement includes also an arrangement for possible acquisition of the remaining 25% shares of Payvision. This consists of a put option exercisable by the original shareholders as well as a call option exercisable by ING. In summary, the put is exercisable after 3 years with an exercise price of fair market value (FMV) unless the fair value of the total business is less than EUR 210 million, then the exercise price is EUR 1. The call option by ING has similar terms but is only exercisable after 5 years. In addition, there are some early redemption features at various prices at various times. The put option, exercisable by the non-controlling interest shareholders, is reported as financial liability with initial recognition through shareholders’ equity of
In December 2018, reached an agreement to sell part of the ING Lease Italy business. Under the terms agreed, ING will receive EUR 500 million cash consideration and a EUR 1 billion Senior Loan facility for the portfolio of lease receivables. The Italian lease business was previously included in the business line segment Wholesale Banking and geographical segment Other Challengers. The carrying amount of the lease receivables, previously classified as loans and advances per transaction date amounted to EUR 1,389 million. The sale is expected to take place during 2019, with a negotiated long stop date of 31 December 2019.
For the principal investments in associates and joint ventures ING Group has significant influence but not control. Significant influence generally results from a shareholding of between 20% and 50% of the voting rights, but also the ability to participate in the financial and operating policies through situations including, but not limited to one or more of the following:  Representation on the board of directors;  Participation in the policymaking process; and
The principal subsidiaries, investments in associates and joint ventures of ING Groep N.V. and their statutory place of incorporation or primary place of business are as follows:
2 The shares of the non-controlling interest stake of 25% are listed on the Warsaw Stock Exchange, for summarised financial information we refer to ‘Note 35 ‘Segments’.
ING Group enters into liquidity management securitisation programmes in order to obtain funding and improve liquidity. Within the programme ING Group sells ING originated assets to a structured entity. The underlying exposures include residential mortgages in the Netherlands, Belgium, Spain,
In 2018, there are no non-controlling interests as part of the securitisation structured entities that are significant to ING Group. ING Group for the majority of the securitisation vehicles provides the funding for the entity except for EUR 5 billion.
Commercial Paper (ABCP) conduit; Mont Blanc Capital Corp. (rated A-1/P-1). Mont Blanc Capital
In its role as administrative agent, ING Group facilitates these transactions by acting as administrative agent, swap counterparty and liquidity provider to Mont Blanc Capital Corp. ING
Group also provides support facilities (i.e. liquidity) backing the transactions funded by the conduit.
In 2013 ING transferred financial assets (mortgage loans) for an amount of approximately EUR 2 billion to a newly established special purpose entity (SPE). The transaction resulted in full derecognition of the financial assets from ING’s statement of financial position. The derecognition did not have a significant impact on net result. Following this transfer ING continues to have two types of on-going involvement in the transferred assets: as counterparty to the SPE of a nonstandard interest rate swap and as servicer of the transferred assets. ING has an option to unwind the transaction by redeeming all notes at their principal outstanding amount, in the unlikely event of changes in accounting and/or regulatory requirements that significantly impact the transaction.
Group include, among others, its subsidiaries, associates, joint ventures, key management personnel, and various defined benefit and contribution plans. For post-employment benefit plans, reference is made to Note 37 ‘Pension and other postemployment benefits’. Transactions between
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Related parties > 51 related parties include rendering or receiving of services, leases, transfers under finance arrangements and provisions of guarantees or collateral. All transactions with related parties took place at conditions customary in the market. There are no significant provisions for doubtful debts or individually significant bad debt expenses recognised on outstanding balances with related parties.
Reference is made to Note 49 ‘Principal subsidiaries’ for a list of principal subsidiaries and their statutory place of incorporation.
Supervisory Board) and post-employment benefit plans are transactions with related parties. These transactions are disclosed in more detail as required by Part 9 Book 2 of the Dutch Civil Code in the remuneration report included in the annual report. The relevant sections of the remuneration report therefore form part of the annual accounts.
4 The collective fixed allowances consist of two savings allowances applicable to employees in the Netherlands; an individual savings allowance of 3.5% and a collective savings allowance to compensate for loss of pension benefits with respect to salary in excess of EUR 103,317.
 Transparent communication is provided to internal and external stakeholders on risk management.
Effective risk management requires firm-wide risk governance. ING’s risk and control structure is based on the ‘three lines of defence’ governance model, whereby each line has a specific role and defined responsibilities in such a way that the execution of tasks is separated from the control of the same tasks. At the same time, they have to work closely together to identify, assess, and mitigate risks. This governance framework is designed such that risk is managed in line with the risk appetite as approved by the Management Board Banking (MBB), the EB and the SB, and is cascaded
The second line of defence consists of oversight functions (a.o. Finance, Legal, HR, Risk) with a major role for the risk management organisation headed by the Chief Risk Officer (CRO). Risk
Management is responsible for (i) the development of overall policies and guidance, (ii) objectively challenge the execution, management, and control processes and (iii) coordinate the reporting of risks and controls by the first line of defence. It also has an escalation/veto power in relation to business activities that are judged to present unacceptable risks to ING.
The graph below illustrates the different key senior management level committees in place in the risk governance structure.
The key risk committees described below act within the overall risk policy and delegated authorities granted by the MBB:  Global Credit & Trading Policy Committee (GCTP) discusses and approves policies, methodologies, and procedures related to credit, trading, country, and reputation (Environmental and Social Risk or ESR) risks. The GCTP meets on a monthly basis. In addition, the Credit & Trading Risk Policy
Board Banking, authorised to discuss and approve policies, methodologies, and procedures related to Credit Risk;  Global Credit Committee – Transaction Approval (GCC(TA)) discusses and approves transactions which entail taking credit risk (including investment risk), country, legal, and ESR risk. The GCC(TA)
meets twice a week;  Asset and Liability Committee Bank (ALCO Bank) discusses and steers, on a monthly basis, the overall risk profile of all ING Bank’s balance sheet and capital management risks. ALCO Bank discusses and approves policies, methodologies and procedures regarding solvency, market risk in the banking book and funding and liquidity risks;  Non-Financial Risk Committee Bank (NFRC Bank) is accountable for the design and maintenance of the Non-Financial Risk Management Framework including Operational Risk Management,
The process of developing internal control documents is standardised for each type of internal control document. Domain owners should adhere to the standardised process, that includes the following steps: domain owner identification, risk-based approach, impact assessment, approval body and involvement of local entities for sounding on key and expected controls. The gatekeeper oversees the steps above.
Model Risk Management (MoRM) departments, dedicated risk committees approve new and changed models. After approval by the applicable risk committee, and where necessary by the regulator, the risk model is implemented. In addition, MoRM re-validates models on a regular basis.
Last but not least, the validation teams provide independent model validation which starts with the determination that a model is appropriate for its intended use followed by an on-going process whereby the reliability of the model is verified at different stages during its lifecycle: at conception, before approval, periodically after implementation and when significant changes to the model are made. The validation process contains a mix of developmental evidence assessment, process verification and outcome analysis. When model validation identifies model risks, it provides recommendations to address those.
To support the further embedding of risk culture into business practices, ING has initiated different programmes and issued several guidelines. Risk awareness is to be alert to potential threats that can occur during day-to-day business, which can be specific to the sector, the region or the clients
Promoting Integrity Programme (PIP), which is a long-term, global, educational, and behavioural change programme supported by the EB and MBB for all ING employees. With the programme, ING
The purpose of this CoE is to strengthen ING’s management of risks by assessing behaviours within our organisation that could potentially impact our reputation and performance. This CoE will be responsible for carrying out assessments on risk behaviour to identify, analyse and intervene in high-risk behaviours. These Behavioural Risk Assessments (BRAs) aim to accomplish the same objective: to assess the risk culture within ING and to provide support in improving if needed.
In the Netherlands, employees of all financial institutions – and that includes ING – are required to take the Banker’s Oath. This legal requirement came into force on 1 April 2015 as part of the joint approach from all banks, known as ‘Future-oriented Banking.'
Risk identification is performed periodically. In case of material internal or external change, additional ad-hoc risk identification can be performed.
Each identified risk is assessed to determine the importance, or risk level. This enables ING to decide which of the identified risks need control measures and how strict or tolerant these measures should be. Known risks are re-assessed to either confirm the risk level or detect change.
The RAF is approved by the SB on an annual basis, or more frequently if necessary, based on their quarterly review in the EB, the MBB and the SB. It is therefore a top-down process, which bases itself on the ambition of the bank in terms of its risk profile and is a function of the capital and liquidity levels and ambitions, the regulatory environment, and the economic context. The set of limits used are split based on the approval level needed for them. The limits that need SB approval are called
Setting the RAF starts with a multi-dimensional step to identify and assess the risks ING is facing when executing its strategy, including detecting unidentified risks that are not yet controlled within
 have a risk profile that compares favourably to its main banking peers.
The suite of risk appetite statements serve as inputs for the MTP process as well as for the establishment of key performance indicators and targets for senior management.
Within ING, different types of stress tests are performed. The most comprehensive type of stress tests are the firm-wide scenario analyses, which involve setting scenario assumptions for all the relevant macroeconomic and financial market variables in all countries relevant to ING. These assumptions usually follow a qualitative narrative that provides a background to the scenario. In addition to firm-wide scenario analyses, ING executes scenario analyses for specific countries or portfolios. Furthermore, sensitivity analyses are performed, which focus on stressing one or more risk drivers; usually without an underlying scenario narrative. Finally, ING performs reverse stress tests, which aim to determine scenarios that could lead to a pre-defined severe adverse outcome.
 Scenario reporting: For each stress test, a report is prepared after each calculation which describes the results of the scenario, gives a recap of the scenario and its main assumptions and parameters. It is complemented, if needed, with an advice for management action based on the stress testing results.
regulation through the CRR II / CRD V, which is expected to be formalised in the first half of 2019.
The economic environment was marked in 2018 by accelerated economic growth in the United
remains a major political and economic event that continues to effect sentiment. Brexit negotiations took place throughout 2018 and the year ended without an agreement on how the UK
Distributed Denial of Service (DDoS), targeted attacks (also called Advanced Persistent Threats) and
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Risk Management > 53 may have business interests. There are also risks inherent to the transition to a low-carbon economy and/or resulting from the implementation of the Paris Accord. These may impact the financial sector as a result of transition policy and technological developments. The market for green finance is also changing, creating new opportunities and threats. ING is working to improve its understanding of physical and transition risks related to climate change. We are increasingly aware of these risks and are taking steps in the right direction. For example, ING already announced plans to achieve “greener” commercial real estate and mortgage portfolios. Another example is the development of the Terra approach, where ING’s sector portfolios are compared with relevant climate scenarios to identify gaps and inform strategy, will greatly contribute to this process.
Credit analysis at the transactional level focuses on the risk amount, tenor, structure of the facility and profile of the borrower. ING’s credit risk managers make use of publicly available information, information provided by the client, transaction data of the client via ING account, peer group comparisons, industry comparisons and quantitative techniques.
Within ING, the ultimate approval authority for credit proposals resides with the MBB. The MBB has delegated authorities based on amounts, tenors and risk ratings to lower levels in the organisation.
 The GCC(TA) is mandated to approve transactions with credit risks.
 The Model Development Committee (MDC) serves as a technical advisor to the CTRC and is a planning body for future model development. The committee has a delegated mandate to approve credit risk models which cover smaller portfolios.
This includes term loans, mortgages, revolving credits, overdrafts, guarantees, letters of credit, etc. The risk is measured as the accounting value of the financial obligation that the client has to repay to ING, excluding any accrued and unpaid interest, discount/premium amortisations or impairments.
(possibly unfavourable) market price. This credit risk category is associated with derivatives transactions (exchange traded derivatives, Over The Counter (OTC) derivatives and securities financing transactions).
ING has given irrevocable instructions to pay or has paid or delivered its side of the trade. The risk is that ING delivers but does not receive delivery from its counterparty. ING manages settlement risk in the same way as other risks including a risk limit structure per borrower. Due to the short term nature (1 day), ING does not hold provisions or capital for specific settlement risk. Although a relatively low risk, ING increasingly uses DVP (Delivery versus Payment) and safe settlement payment techniques to reduce settlement risk.
Lending risk -Cash and balances with central banks Note 2 Cash and balances with central banks -Loans and advances to banks Note 3 Loans and advances to banks -Loans and advances to customers Note 7 Loans and advances to customers
Credit risk appetite is present across different levels within ING, at portfolio level as well as transaction level. The various credit risk appetite components at the portfolio and transaction levels together result in the credit risk appetite framework.
The credit risk appetite and concentration risk framework is composed of:  Country risk concentration: Country risk is the risk that arises due to events in a specific country
(or group of countries). In order to manage the maximum country event loss ING is willing to accept, boundaries are approved by the SB that ensure ING’s consolidated 3-year average result before tax can absorb an estimated country event loss due to a country risk occurrence. The estimated level is correlated to the risk rating assigned to a given country. By means of instruments, actual country limits are set (each of which should not exceed the country’s boundary), reviewed monthly and updated when needed. In the case of countries with elevated levels of geopolitical or severe economic cycle risk, the monitoring is performed on a more frequent basis with strict pipeline and exposure management to protect ING from adverse impacts.
 Sector policies: being detailed analyses of defined products and/or industries. They identify the major risk drivers and mitigants, the internal business mandate, and propose the minimum risk
Given the nature of the retail business, roles and responsibilities of the local credit risk policy are delegated to local retail credit risk management. However, the global retail risk policy prescribes no-go criteria and minimum standards for underwriting. Lending standards, including material changes to those standards, should be approved by the global head of retail risk.
The ESR policy framework is reviewed every three years on the basis of significant changes identified in the sectors that are more vulnerable to environmental and social risks and impacts. In 2018, a full review of the ESR policy framework was conducted to achieve more clarity on the scope, governance and due diligence. This was done with the active participation of internal stakeholders (per industry sector) and guidance from external stakeholders (clients, peer banks and
Environmental and social risks for all lending transactions are reviewed during the periodic credit reviews. ESR transactions, where funds will be used for asset based finance, may require enhanced
ESR due diligence e.g. application of the Equator Principles. Such enhanced ESR evaluation is also required for any high-risk transaction, such as those that impact indigenous people etc.
Pillar 2 ING uses the IMM for FX and interest rate derivative exposures.
The capital impact from the implementation of approved models is reported to the ECB in a quarterly report. In addition, MoRM validates each model on a periodic basis. During such periodic validation, the model performance is analysed through back-testing and performance assessment.
The 22 grades are composed of the following categories:  Investment grade (Risk Rating 1-10);  Non-investment grade (Risk Rating 11-17);  Sub-standard (Risk Rating 18-19); and
The IFRS 9 models determine expected credit loss (ECL) based on which collective loan loss provisions are determined. The IFRS 9 models leverage on the AIRB models (PD, LGD, EAD). For this purpose, regulatory conservatism is removed from the ECL parameters (PD, LGD and EAD). The IFRS
9 models apply two types of adjustments to the ECL parameters, namely 1) adjustment for economic outlook and 2) adjustment for lifetime horizon, the latter which is only applicable for stage 2 and stage 3 assets. The IFRS9 model parameters are estimated based on statistical techniques and supported by expert judgement.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Risk Management > 53 framework outlines roles and responsibilities relevant for the credit risk lifecycle and data quality assurance.
The governance related to data delivery and exchange is described in various data agreements between data users and data suppliers.
The scope of credit risk data is the data set determined and assigned for ING’s external and internal reporting requirements as well as our credit risk modelling requirements. Principally, data can be categorised into one of the two following types:  Atomic data: the lowest level of detail and provides the base data for all data transformations.
Data Quality Assurance: establishes data quality management with the primary focus on how credit risk data quality is managed throughout the credit risk data lifecycle. It covers the data quality cycle, data quality criteria and relevant activities through the stages.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Risk Management > 53 after data processing and calculation stage. The last stage is the continuous improvement of data quality which can be split into two categories:  One-off issues and reoccurring issues that are identified, prioritised and subject to resolution;  The periodic review of data quality rules and improvements based on lessons learned from solving issues, audits and best practices.
United Kingdom (EUR 28,610 million), Luxemburg (EUR 23,540 million) and Italy (EUR 19,948 million).
During 2018, the total ING portfolio size increased by 7.5% to EUR 832 billion outstandings, mainly driven by net volume growth and by foreign exchange rate changes. The net volume growth was mainly visible in risk categories Lending (+8.9%) and Pre-Settlement (+15.5%), partially offset by a reduced outstandings in Investment (-5.6%). The increase related to foreign exchange rate movements was mostly due to the appreciation of US Dollar (+5.0%) against the Euro, which was largely offset by the depreciation of the Australian Dollar (-5.4%), New Turkish Lira (-25.1%) and
Central bank exposure within Europe and Americas increased across business lines contributing to the growth observed in AAA/AA rated assets. The concentration in the BBB rating class for
Wholesale Banking increased largely driven by an increased outstandings to corporates and a downgrade for one German financial institution shifting exposure from rating class A to BBB.
BBB. Further positive risk migration in Retail Benelux was due to decreased defaulted exposures (9. 6%), mostly driven by the reduced defaulted exposures in Netherlands Retail (-18.7%). A
Increased outstandings in Belgium was mainly due to increased Securities Financing and Money
United States. In Asia/Pacific, the concentration of outstandings remained relatively stable, with noticeable increase of outstandings in Hong Kong, Republic of Korea, Singapore and Japan, partly offset by a reduction of outstandings in China and Taiwan.
ING’s lending and investment businesses are subject to credit risk. As such, the creditworthiness of our customers and investments is continually monitored for their ability to meet their financial obligations to ING. In addition, to determine the credit quality and creditworthiness of the customer, ING uses various credit risk mitigation techniques and instruments to mitigate the credit risk associated with an exposure and to reduce the losses incurred subsequent to an event of default on an obligation a customer may have towards ING. The most common terminology used in ING for credit risk protection is ‘cover’. While a cover can be an important mitigant of credit risk and an alternative source of repayment, generally it is ING’s practice to lend on the basis of the customer’s creditworthiness rather than exclusively relying on the value of the cover. Within ING, there are two distinct forms of covers: assets and third party obligations.
These general guidelines also require that the value of the cover needs to be monitored on a regular basis. Covers are revalued periodically and whenever there is reason to believe that the market is subject to significant changes in conditions. The frequency of monitoring and revaluation depends on the type of covers.
The valuation method also depends on the type of covers. For asset collateral, the valuation sources can be the customer’s balance sheet (e.g. inventory, machinery, and equipment), nominal value (e.g. cash, receivables), market value (e.g. securities and commodities), independent valuations (commercial real estate) and market indices (residential real estate). For third party obligations, the valuation is based on the value which is attributed to the contract between ING and that third party.
Markets transactions, the bank enters into legal agreements governing the exchange of financial collateral (high quality government bonds and cash).
The cover values are presented for the total portfolio of ING, both the performing and nonperforming portfolio. The non-performing definition is explained in detail in the section ‘Credit
Exposures are categorised into different Value to Loan (VTL) buckets that give insight in the level of collateralisation of ING’s portfolio. VTL is calculated as the cover value divided by the outstandings at the balance sheet date. The cover values are indexed where appropriate and exclude any cost of liquidation. Covers can either be valid for all or some exposures or a particular outstandings of a borrower, the latter being the most common. For the purpose of aggregation, the coverage of all outstandings is capped at 100%. Over-collateralisation is ignored in this overview for the VTL. Each limit is subsequently assigned to one of the six defined VTL buckets: no cover, >0% to 25%, >25% to 50%, >50% to 75%, >75% to <100%, and ≥ 100%. As the nature of the Pre-settlement portfolio determines that collateral is netted, these VTL buckets are not shown.
Total Bank 773,636 1 More information on the credit risk mitigants can be found in the Pre-settlement section.
Cover values including guarantees received – Total ING Bank - 2018
Cover values including quarantees received – Total ING Bank - 2017
In case of newly built houses mostly the building /purchase agreement is sufficient as valuation. In the case of existing houses three kind of valuations are allowed. If the LTMV is below 90% a (1) WOZ
(fiscal market value, determined by government authorities) or an (2) automated model valuation
(the Calcasa ING Valuation) is permitted. In most cases a valuation is performed by (3) certified valuators that are registered at one of the organisations accepted by ING. In addition, the valuator must be a member of the NVM (Nederlandse Vereniging van Makelaars – Dutch Association of Real
For the residential mortgages portfolio, the cover type guarantees relates to mortgages covered by governmental insurers under the Nationale Hypotheek Garantie (NHG) in the Netherlands. The NHG
Broken down by industry, the largest increase in outstandings is attributable to Central Banks
America (17.3%). The increase in the Netherlands was primarily due to a large increase in revolving loans in the form of regulatory reserve deposits. As these deposits are not collateralised, this increase had no effect in total cover amounts.
Accounting provisioning Stage 1/2 Stage 1/2 Stage 2/3 Stage 3 1 More information on the Restructuring and Non-performing categories can be found in the Credit restructuring section.
Past due for 61–90 days 265 163 1 Based on consumer lending. The amount of past due but performing financial assets in respect of non-lending activities was not significant.
(3) Significant fraud (affecting the company’s ability to service its debt)
ING uses three distinct statuses in categorizing the management of clients with (perceived)
Non-Performing portfolio decreased within ING Bank over 2018. The overall outstandings decrease in non-performing loans were due to positive risk migration and repayments. The biggest decrease was witnessed in Netherlands Retail and Netherlands WB portfolio. In Netherlands Retail, the biggest decrease was observed in residential mortgages portfolio.
(amongst others) are used in the calculation of the Group’s un-weighted ECLs, which are applied the probability-weightings as disclosed, to arrive at the reportable ECL for collectively-assessed assets. Whilst the table does give a high-level indication of the sensitivity of the outputs to the different scenarios, it does not provide insight on the interdependencies and correlations between different macroeconomic variable inputs. Furthermore, in addition to forward-looking macroeconomics, there are a number of other model inputs and processes which contribute to the calculation of un-weighted ECLs. Any sensitivity analysis which relies on this data should consider these complexities.
Downside scenario 1 Real GDP, in % year-on-year change 2 Unemployment in % of total labour force 3 House price index (HPI) in % year-on-year 4 Sensitivity does not include the effect of manual adjustments, which are not material
 Criteria for identifying a significant increase in credit risk All assets in scope of IFRS 9 impairment and which are subject to collective ECL assessment are allocated a 12 month ECL if deemed to belong in Stage 1, or a lifetime ECL if deemed to belong in Stages 2 and 3. An asset belongs in Stage 2 if it is considered to have experienced a significant increase in credit risk since initial origination or purchase. The stage allocation process involves an asset’s derived PD being assessed against a set of PD threshold bandings, which determines the appropriate staging and ECL. The Group reports total ECL collective-assessment of EUR 1,391 million.
Forbearance occurs when a client is considered to be unable to meet their financial commitments under their contract due to financial difficulties and ING decides to grant concessions towards the client. Forborne exposures are exposures in respect of which forbearance measures have been granted. Forbearance measures can be either modifications to existing contractual terms and conditions or total or partial refinancing. Within ING, forbearance is based on the EBA Standards.
Exposures with forbearance measures can be either performing (Risk Ratings 1-19) or nonperforming (Risk Ratings 20-22). ING uses specific criteria to move forborne exposures from nonperforming to performing and to remove the forbearance statuses that are consistent with the corresponding EBA standards. An exposure is reported as forborne for a minimum of two years. An additional one year probation period is observed for forborne exposures that move from nonperforming back to performing.
As per December 2018 ING’s total forborne portfolio decreased by EUR 1.7 billion (14%) to EUR 10.1 billion, mainly driven by Wholesale Banking (EUR -1.0 billion). The scope of forbearance has been narrowed down in accordance with the policy ”Managing Special Assets: Watch List Restructuring and Recovery”, and as from 2Q18 financial guarantees and letters of credit are excluded, reducing total forborne portfolio by EUR 249 million.
(2017: 26%) of the total Wholesale Banking forborne portfolio, and 23% (2017: 23%) of the total non-performing forborne portfolio.
As per end of December 2018, Retail Banking forborne portfolio amounted to a total of EUR 5.0 billion, which represented 1.2% of the total Retail Banking portfolio.
ING’s goal is to maintain a portfolio of high quality liquid assets that meet the regulatory requirements of CRR/CRD IV and the Delegated Act of October 2014 regarding liquidity. ING invests in high quality Asset Backed Securities (ABS) keeping close track of the securitisation investment positions via monthly monitoring reports and weekly update calls. Additionally, ING may invest in securitisation positions in order to facilitate client business from its Disintermediation & Asset
ING occasionally originates its own securitisation transactions for economic and regulatory capital purposes, as well as liquidity and funding purposes. Securitisations originated by a company may only be considered for balance sheet derecognition when the requirements for significant credit risk transfer have been fulfilled. ING has executed a very limited number of external transactions as originator.
(rated A-1/P-1). Mont Blanc Capital Corp. funds itself externally in the ABCP markets. In its role as administrative agent, ING facilitates these transactions by providing structuring, accounting, funding and operations services. ING also provides support facilities (liquidity facilities) backing the transactions funded by the conduit. Mont Blanc Capital Corp. is fully consolidated into the ING
 Risk identification is a joint effort of the first and second lines of defence out of the three lines of the defence. See the Risk Governance paragraph under the General risk Management section for details of the “three line of defence” governance model. The goal of risk identification is to detect potential new risks and any changes in known risks;  Identified risks are assessed and measured by means of various risk metrics to determine the importance of the risk to ING and subsequently to identify the control measures needed;  Risk control measures used by ING include policies, procedures, minimum standards, limit frameworks, buffers and stress tests;  Risk monitoring occurs to check if the implemented risk controls are executed, complied with across the organisation, and are effective; and
ING makes a distinction between the trading and banking (non-trading) books. Positions in banking books originate from the market risks inherent in commercial products that are sold to clients,
An important element of the management of market risks in the banking book is the risk transfer process. In this process the interest rate, FX, funding and liquidity risks are transferred from the commercial books through matched funding to Group Treasury, where it is centrally managed. The
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Risk Management > 53 scheme below presents the transfer and management process of market risks in the banking books: The merge of Bank Treasury and Capital Management into Group Treasury was completed by the end of June 2018.
ING distinguishes between three types of activities that generate interest rate risk in the banking book:  Investment of own funds (by Group Treasury);  Commercial business (e.g. Retail business); and
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Risk Management > 53 depending on the nature of the underlying product characteristics. Customer behaviour risk is defined as the potential future value loss due to deviations in the actual behaviour of clients versus the modelled behaviour towards the embedded options in commercial products. General sources of customer behaviour risk include the state of the economy, competition, changes in regulation, legislation and tax regime, and developments in the housing market. Since these risk factors cannot be (fully) mitigated, ING holds capital to be able to absorb possible losses as a result of changed customer behaviour.
During 2018 ING implemented the following refinements to the risk measurement for Interest Rate
The overall BPV reduced by EUR 5.5 million to EUR -12.8 million in 2018.
Historical Value at Risk is used based on historical series of last year’s FX rates. It measures the drop in the CET1 ratio from the target based on historical FX rates. Based on these time series and with a probability of 1%, the drop in the CET1 ratio would be 0.23%.
ING maintains a strategic portfolio with substantial equity exposure in its banking books. Local offices are responsible for the management of the equity investment positions. Financial Risk is responsible for monitoring the regulatory capital for equity investments on a monthly basis and acts independently from ING’s / Local management when monitoring these positions.
split on the Real Estate exposure per continent and sector based on the risk management view is shown below.
FI-FM Risk Management Framework defines policies and procedures for the overall management of trading books. Trading activity is systematically reviewed and positions against the mandates are assessed jointly by the first and second lines of defence.
Event Risk (stress testing). Systematic validation processes are in place to validate the accuracy and internal consistency of data and parameters used for the internal models and modelling processes.
A single model that diversifies general and specific risk is used. In general a full revaluation approach is applied, only for a limited number of linear trading positions and a limited number of risk factors in commodity and equity risk classes a sensitivity-based approach is applied. The potential impact of historical market movements on today’s portfolio is estimated, based on equally weighted observed market movements of the previous year (260 days). When simulating potential movements in risk factors, depending on the risk factor type, either an absolute or a relative shift is used. The data used in the computations is updated daily. ING uses VaR with a 1-day horizon for internal risk measurement, management control, and backtesting, and VaR with a 10day horizon for determining regulatory capital. To compute VaR with a 10-day horizon the one day risk factor shifts are scaled by the square root of ten and then used as an input for the revaluation.
The same model is used for all legal entities within ING with market risk exposure in the trading portfolio.
The IRC for ING is an estimate of the default and migration risks for unsecuritised credit products in the trading book, over a one-year capital horizon, with a 99.9% confidence level. The same IRC
ING periodically assesses the compliance of the IRC model with regulatory requirements by performing gap analyses, substantiating the modelling choices, and quantifying the impact of alternative approaches.
Stress Testing and Event Risk are valuable risk management tools. Event Risk evaluates the bank’s financial stability under severe but plausible stress scenarios and assists in decision-making aimed at maintaining a financially healthy going-concern institution after a severe event occurs. In addition to the bank-wide stress test framework as described in the stress testing section, FI-FM
Risk performs separate stressed scenario tests under the Event Risk framework to monitor market risks under extreme market conditions. Since VaR in general does not produce an estimate of the potential losses that can occur as a result of extreme market movements, ING uses structured stressed scenario tests to calculate Event Risk for monitoring the market risk under these extreme conditions. Event Risk is based on historical as well as hypothetical extreme scenarios. The result is an estimate of the profit and loss caused by a potential event and its world-wide impact for ING.
The following chart shows the development of the overnight VaR under a 99% confidence interval and a 1-day horizon versus actual and hypothetical daily trading profits and losses. In calculation of the hypothetical daily profit and loss, the trading position is kept constant and only the market movement is taken into account. The overnight VaR is presented for the ING trading portfolio from 1 CVA risk is not included in VaR. Reserves are not included in the P&L figures.
In order to make sure that all the tables in the Market risk in trading books are aligned, the scope of all the tables has been set to include all portfolios that are part of the trading book regulatory capital for both 2018 and 2017. In the Annual report of 2017 the table above included only the portfolios that are part of ING’s Financial Markets business line.
Position changes in the portfolio led to higher minimum, average and maximum values for both the 10 day Historical VaR and 10 day Stressed VaR in 2018 compared to the statistics over the whole of 2017. The overall decrease in IRC in 2018 was largely caused by decreased debt exposures to a number of sovereigns and commercial banks.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Risk Management > 53 amounts in millions of euros 2018 2017
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Risk Management > 53 amounts in EUR millions RWA
(a) Previous day's VaR (Article 365(1) (VaRt-1)) 529 42 209 17
(VaRavg) x multiplication factor ((mc) in accordance with 2 SVaR (higher of values a and b) 3,217 257 1,750 140
Netherlands 164 Supranational –92 1 Basis Point Value (BPV) measures the impact on value of a 1 basis point increase in interest rates. The figures include commodity risk in banking books.
A high level overview of the F&L framework is provided in this graph.
Treasury’s main responsibility is to manage ING’s (regulatory) liquidity and funding position by executing and maintaining access to the short and long term professional funding and by managing the liquidity buffer. Commercial Business lines are responsible for managing the funding and liquidity requirements from the originated business.
The second line Financial Risk function, both locally and at group level, is responsible for developing and maintaining ING’s policies, standards, guidelines and risk appetite for F&L risk management.
The main objective of ING’s funding and liquidity risk management is to maintain sufficient liquidity to fund the commercial activities of ING under both normal market circumstances and in times of
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Risk Management > 53 stress across various geographies, maturities and currencies. This requires a diversified funding structure that takes into account all relevant opportunities and constraints.
The long term debt is diversified across maturities and currencies. The main part of it is EUR or USD
Ratio) are monitored to comply with ING’s risk appetite and with regulatory requirements.
Shifts in the macroeconomic environment are exogenous factors that ING has no control over but which may have a material impact on the F&L position both in terms of the strategic goals and in terms of the risk framework. The main macroeconomic factors which are analysed on a regular basis include:  Global and local economic performances such as shifts in GDP, the inflation rate, unemployment rates and public deficit/surplus;  Changing geopolitical trends;  Monetary policy with special focus on the impact of eventual reversal of unconventional measures taken by central banks in recent years on ING’s F&L position; and
The scope of the Funding & Liquidity Stress Testing framework includes the funding and liquidity risks of the consolidated balance sheet of ING Group N.V. including all entities, business lines, onand off-balance sheet positions as well as contingent assets and liabilities. The Net Liquidity
F&L risk framework and liquidity management:  risk appetite framework (through risk appetite statements);  risk identification and assessment;  monitoring of the liquidity position;  the contingency funding plan; and
Crime Compliance) and RCC (Regulatory Compliance & Conduct) teams. Risk controls for these functional areas have been implemented by means of policies and minimum standards which apply to ING’s business processes in the entities. ING has a system of internal controls that is reviewed and updated periodically and when necessary. ING’s goal is to create an environment of continuous improvement in managing non-financial and compliance risks. There is an infrastructure in place enabling management to track events, compliance and non-financial risk issues.
Orange Code is a manifesto that describes our way of working and sets the foundation for the ethical standards ING expects from all its employees, business activities, and partners. It is comprised of ING Values, requiring all staff to act with integrity, whilst being honest, prudent and responsible - and the ING Behaviours - our way of being that makes us different from our competitors.
MBB in managing ING’s compliance risks and control framework. The CCO is a permanent participant of the Risk Committee of the Supervisory Board. The CCO and the Global Head of Non-
Financial Risks meet regularly the Chairman of the Risk Committee of the SB.
Management model of COSO (Committee of Sponsoring Organisations of the Treadway
Analysis of internal non-financial loss data assists in identifying, quantifying, mitigating and monitoring operational risk exposure. It provides insight into causes and effectiveness of associated controls. Supporting the creation and sharing of Lessons Learned for significant internal events is one of the means by which NFR enhances the internal control framework of ING.
Assessments (RCSAs) to identify and assess risks. These are conducted with involvement of the business and their ORM, IRM, Compliance and/or Legal departments. Based on the results of the risk assessment, response measures should be determined for the identified risks beyond the risk appetite.
(input, execution, output) or failing process management; monitoring and enforcement of risk mitigating measures; and risk culture;  Internal fraud risk is the risk of financial loss, regulatory sanctions or reputational damage due to deliberate abuse of procedures, systems, assets, products and/or services of ING by employees
 Employment practice risk is the risk of financial loss, regulatory sanctions or reputational damage due to acts that are inconsistent with employment, health and/or safety laws, regulations or agreements, from payment of personal injury claims, or from diversity/discrimination events.
 Controls continue to be embedded in the organisation as part of the overall internal control framework and are continuously re-assessed against existing and new threats. The identification and monitoring of threat actors and campaigns relevant to ING also informs this process as does the closer alignment between IT security and fraud teams. In addition, ING
 The increasing use of third party vendors for services and the implementation of PSD2 is likely to represent fraud management and IT security challenges in the short term as criminal actors target financial data outside the traditional banking environment.
 Dealing with current and upcoming fraud threats effectively requires continuous improvement of fraud prevention methodologies, automated fraud detection and better alignment of cross border fraud response across ING.
In 2018, a new Sourcing Policy became effective which outlines the inherent critical and high risks that can materialise during the sourcing life-cycle and the control objectives to effectively mitigate these risks. In addition the Support Control Framework (SCF) Sourcing defines the controls that have to be implemented and tested to effectively mitigate the risks. The scope of sourcing encompasses outsourcing to external providers as well as intra-group sourcing. In the second half of 2018, ING
Code. We aim to effectively manage compliance risks that could expose ING to reputational damage, fines, civil and criminal penalties, payment of damages, court orders and suspension or revocation of licenses that would adversely impact our customers, staff, shareholders and other stakeholders.
 Organisational conduct refers to the compliance risks arising from the way the Bank is organising itself to develop its activities. This category covers for instance the licences required to perform its regulated banking activities.
Sudan, and Syria are identified by the US as state sponsors of terrorism and are subject to US
Compliance with applicable laws and regulations is resource-intensive. Banks continue to be faced with new and increasingly onerous regulatory requirements, and we expect the scope and extent of regulations in the jurisdictions in which we operate to generally increase further.
The 4th AML Directive, as issued by the European Union, has been incorporated into the update of the ING Financial Economic Crime Policy and Minimum Standards, which has been renamed Know
actively participates in public-private partnerships to combat FEC, such as participating in the FEC
In December 2018, the US IRS released proposed regulations that aim to reduce taxpayer burden with respect to certain requirements under Chapter 3 and Chapter 4 (FATCA) of the US code.
DAC6 imposes 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. The reporting obligations apply to “intermediaries” (financial institutions like ING may fall under this term) or, in some circumstances, the taxpayer itself. There will be a mandatory automatic exchange of information on such reportable cross-border schemes via the Common Communication Network
The Promoting Integrity Programme was started in 2010 and consists of e-learning modules on key bank-wide topics that can be followed-up with dialogue sessions in which managers discuss the issues raised with their teams. The programme is sponsored by board members and senior managers and is created for the benefit of every employee in every part of ING to enhance the understanding of how their actions and behaviour can help earn and retain customer and stakeholder trust. In 2018, integrity led behaviour was addressed by means of the mandatory PIP
Business Risk for ING has been defined as the exposure to value loss due to fluctuations in volumes/margins as well as expenses. It is the risk inherent to strategy decisions and internal efficiency. Business risk capital is calculated via the variance-covariance methodology for expense risk, covering the risk that expenses will deviate from the expected expenses over the horizon of the relevant activities. This risk primarily relates to the (inflexibility) to adjust expenses, when that is needed. Expense risk only concerns non-financial expenses (e.g. staff and IT expenses); financial expenses are not in scope.
 Total capital – is Tier 1 capital including subordinated Tier 2 liabilities and regulatory adjustments. Total capital divided by risk-weighted assets equals the Total capital ratio.
Consequently, the Maximum Distributable Amount (MDA) trigger level is expected to rise from 10.43% in 2018 to 11.83% in 2019, based on stable Pillar II capital requirements. In the event that
Institution (G-SII) ING is expected to meet the TLAC requirement alongside the other minimum regulatory requirements set in EU regulation. The TLAC requirement is expected to consist of 16%
The activities of Capital Management are executed on the basis of established policies, guidelines and procedures. For Debt and Capital Issuance there are additional policies and limits that guide the execution of capital market transactions.
also participates in regulatory stress test exercises. ING participated in the 2018 EU-wide stress test conducted by EBA.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Capital management > 54
Interim profit not included in CET1 capital1 –1,712 –1,670 –1,712 –1,670
(Full year 2018: €2,646 million) minus a ING Group interim dividend payment of €934 million paid out in Aug 2018.
Capital adequacy and the use of required regulatory capital are based on the guidelines developed by the Basel Committee on Banking Supervision (The Basel Committee) and the European Union
Investments in group companies 1 44,358 43,832 Share capital 39 39
Receivables from group companies 2 34,902 21,212 Unappropriated result 4,543 4,752
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices in EUR million 2018 2017
Result from (disposal of) group companies and participating interests after taxation 11 4,631 5,028
The total amount of equity in the Parent company annual accounts equals Shareholders’ equity
(parent) in the consolidated annual accounts. Certain components within equity are different as a result of the following presentation differences between the parent company accounts and consolidated accounts:  Unrealised revaluations within consolidated Group companies, presented in Other reserves -
 Revaluations on investment property and certain participations recognised in income and consequently presented in Retained earnings in the consolidated accounts, is presented in the Share of participating interests reserve in the parent company accounts.
The Parent company annual accounts of ING Groep N.V. are prepared in accordance with the financial reporting requirements included in Part 9 of Book 2 of the Dutch Civil Code. In accordance with subsection 8 of section 362, Book 2 of the Dutch Civil Code, the recognition and measurement principles applied in these Parent company annual accounts are the same as those applied in the
Consolidated annual accounts, reference is made to Note 1 ‘Accounting policies’ of the
In order to fully comply with the Resolution formats financial statements (Besluit modellen jaarrekening), the following adjustments have been made compared to the Consolidated statement of financial position.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Investments in Group companies > 1 1 Investments in Group companies
Receivables from Group companies include EUR 10,334 million subordinated loans provided by ING
The Share of participating interests reserve includes the following components: Reserve for nondistributable retained earnings of participating interests of EUR 2,940 million (2017: EUR 2,527 million), Revaluation reserve of participating interests of EUR 1,051 million (2017: EUR 2,258
Interest rate Year of issue Due date Notional amount in original currency 2018 2017
In March 2018, ING Groep N.V. issued EUR 750 million and USD 1,250 million securities that qualify as subordinated CRD IV Tier 2 notes with coupons of 2.00% until 22 March 2030 and 4.70% until 22
Reference is made to the ING Group Consolidated annual accounts, Note 19 ‘Subordinated loans’
ING Group has issued certain guarantees as participant in collective arrangements of national banking funds and as a participant in required collective guarantee schemes. For example, ING
Groep N.V. provided a guarantee to the German Deposit Guarantee Fund
As at 31 December 2018, ING Groep N.V. guarantees various US dollar debentures (that mature between 2023 and 2036) which were issued by a subsidiary of Voya Financial Inc. In the
Addition to reserves pursuant to Article 37 (4) of the Articles of Association 2,057
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Authorisation of Parent Company annual accounts
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Independent auditor’s report
The result is appropriated pursuant to Article 37 of the Articles of Association of ING Groep N.V. The
Supervisory Board, determines what part of the result remaining after application of the provisions of article 37.3 is to be appropriated to reserves and that the remaining part of the result shall be at the disposal of the General Meeting of Shareholders. The General Meeting of the Shareholders, on a motion of the Executive Board with approval of the Supervisory Board may resolve to distribute from the reserves to ordinary shareholders a dividend or other form of distribution to the registered
Company is not presently aware, or that are currently viewed as less material than the risks described below, could also affect the business operations of ING and have a material adverse effect on ING’s business activities, financial condition, results of operations and prospects. The market price of ING shares or other securities could decline due to any of those risks including the risks described below, and investors could lose all or part of their investments. The sequence in which the risk factors are presented below is not indicative of their likelihood of occurrence or the potential magnitude of their financial consequences.
 additional costs related to maintenance of higher liquidity buffers and/or collateral placements.
government. US Treasury securities and other US government-linked securities are key assets on the balance sheets of many financial institutions and are widely used as collateral by financial institutions to meet their day-to-day cash flows in the short-term debt market. The impact of any further downgrades to the sovereign credit rating of the US government or a default by the US
In addition, the confidence of customers in financial institutions is being tested. Consumer confidence in financial institutions may, for example, decrease due to our or our competitors’
Any of these general developments in global financial and political conditions could negatively impact to our shareholders’ equity, solvency position, liquidity, financial condition or profit and loss accounts in future periods.
The United Kingdom’s withdrawal from the European Union Although the UK is not a member state of the Eurozone, the decision of the UK to leave the EU
(commonly referred to as ‘Brexit’) remains a major political and economic event and may further destabilize the Eurozone. There continues to be uncertainty with respect to the process surrounding
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Risk factors agencies take negative actions against us. If our internal sources of liquidity prove to be insufficient, there is a risk that we may not be able to successfully obtain additional financing on favourable terms, or at all. Any actions we might take to access financing may, in turn, cause rating agencies to re-evaluate our ratings.
Interest rate volatility and other interest rate changes may adversely affect our profitability.
Consequently, we may be required to reinvest the proceeds into assets at lower interest rates;  lower profitability as the result of a decrease in the spread between client rates earned on assets and client rates paid on savings, current account and other liabilities;  higher costs for certain derivative instruments that may be used to hedge certain of our product risks;  lower profitability since we may not be able to fully track the decline in interest rates in our savings rates;  lower profitability since we may not always be entitled to impose surcharges to customers to compensate for the decline in interest rates;  lower profitability since we may have to pay a higher premium for the defined contribution scheme in the Netherlands for which the premium paid is dependent on interest rate developments and DNB's methodology for determining the ultimate forward rate;
sustained decline in equity markets may: • result in impairment charges to equity securities that we hold in our investment portfolios and reduced levels of unrealised capital gains available to us which would reduce our net income, and
On the other hand, deflation experienced in our principal markets may also adversely affect our financial performance. In recent years, the risk of low inflation and even deflation (i.e., a continued period with negative rates of inflation) in the Eurozone has materialized. Deflation may erode collateral values and diminish the quality of loans and cause a decrease in borrowing levels, which would negatively affect our business and results of operations.
Interbank Offered Rate (‘EURIBOR’) and other interest rates or other types of rates and indices which are deemed to be ‘benchmarks’ are the subject of ongoing national and international regulatory reform. Following the implementation of any such potential reforms, the manner of administration of benchmarks may change, with the result that they may perform or be calculated differently than in the past, or benchmarks could cease to exist entirely, or there could be other consequences which cannot be predicted. On 8 June 2016, the EU adopted a Regulation (the
LIBOR on the current basis cannot and will not be guaranteed after 2021. In addition, after review of
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.
Netherlands, in the EU and the US as well as in a multitude of jurisdictions where we conduct our business continue to consider new mechanisms to limit the occurrence and/or severity of future economic crises (including proposals to restrict the size of financial institutions operating in their jurisdictions and/or the scope of operations of such institutions). Furthermore, we are subject to different tax regulations in each of the jurisdictions where we conduct business. Changes in tax laws (including case law) could increase our taxes and our effective tax rates and could materially impact our tax receivables and liabilities as well as deferred tax assets and deferred tax liabilities, which could have a material adverse effect on our business, results of operations and financial condition. Changes in tax laws could also make certain ING products less attractive, which could have adverse consequences for our businesses and results.
Compliance with applicable laws and regulations is resources-intensive, and changes in laws and regulations may materially increase costs. We expect the scope and extent of regulation in the jurisdictions in which we conduct our business, as well as regulatory oversight and supervision, to generally continue to increase. However, we cannot predict whether or when future legislative or regulatory actions may be taken, or what impact, if any, actions taken to date or in the future could have on our business, results of operations and financial condition. Regulation is becoming increasingly more extensive and complex and the industries in which we operate are increasingly coming under the scrutiny of regulators, and affected companies, including ING, are required to meet the demands, which often necessitate additional resources. These regulations can limit our activities, among others, through stricter net capital, customer protection and market conduct requirements and restrictions on the businesses in which we can operate or invest.
entered into force on 28 June 2013 and the CRD IV entered into force on 17 July 2013, and all banks and investment firms in the EU (as opposed to the scope of the Basel III requirements, which apply to ‘internationally active banks’) were required to apply the new rules from 1 January 2014 in phases, and these rules were required to be fully implemented as of 1 January 2019. The full impact of these rules, and any additional requirements for SIFIs or G-SIFIs, if and as applicable to the Group, depend on how the CRD IV is transposed into national laws in each Member State, including the extent to which national regulators and supervisors set more stringent limits and additional capital requirements or surcharges. In the Netherlands, the CRD IV has been implemented through amendments to the Financial Supervision Act. In the next phase for regulatory requirements for banks’ risk and capital management, the regulators are focusing on the required capital calculations across banks. Since the start of the financial crisis there has been much debate on the risk-weighted capitalisation of banks, and specifically on whether internal models are appropriate for such purposes. These developments have suggested that stricter rules may be applied by a later framework. The BCBS released several consultative papers, containing proposals to change the methodologies for the calculation of capital requirements and is expected to issue further standards in this respect. Within these proposals BCBS suggests methods to calculate RWA using more standardised or simpler methods in order to achieve greater comparability, transparency and consistency. As discussed above, in November 2016, the EC
DNB will still continue to play a big role in the supervision of ING Group and ING Bank.
These exercises could impact the RWA we recognise for certain assets.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (‘Dodd-Frank’ or ‘Dodd-Frank Act’)
Title VII of Dodd-Frank created a new framework for regulation of the over-the-counter derivatives markets and certain market participants which has affected and could continue to affect various activities of the Group and its subsidiaries. ING Capital Markets LLC, a wholly-owned indirect subsidiary of ING Bank N.V., has registered with the US Commodity Futures Trading Commission
Dodd-Frank also includes various securities law reforms that may affect the Group’s business practices and the liabilities and/or exposures associated therewith, including a provision intended to authorise the SEC to impose on broker-dealers’ fiduciary duties to their customers, as applied to investment advisers under existing law, which new standard could potentially expose certain of
staff released a study on this issue, and members of the SEC’s Investor Advisory Committee voted in November 2013 to recommend the proposal implementing a uniform fiduciary standard for most brokers and registered investment advisers to the SEC.
In 2017, the US Secretary of Treasury issued several reports, after consultation with other financial regulatory agencies, evaluating the current financial regulatory framework against core principles set out by the new US administration. The reports have recommended some revisions to Dodd-
Foreign Account Tax Compliance Act and other US withholding tax regulations
Under provisions of US tax law commonly referred to as FATCA, non-US financial institutions are required to provide certain information on their US account holders and/or certain US investors to the US Internal Revenue Service (“IRS”). A 30% withholding tax is imposed on ‘withholdable payments’ made to non-compliant non-US financial institutions. In addition to FATCA, non-US