Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > ING at a glance
Net result per share Shareholders' equity per share (end of period)
The underlying net result declined 11% to €4.8 billion in 2019. This was mainly caused by higher risk costs, higher expenses (largely caused by higher KYC expenses and increased regulatory costs)
Our customer-centric approach helped us achieve a first-place ranking in seven countries, compared with two or more selected local peers. NPS surveys were held in 14 countries with retail banking activities Ⓐ.
Sustainable Investment services increased to €9.3 billion, from €6.3 billion in 2018. This underlines our clients’ appetite for products and services that integrate sustainability criteria.
In 2019 we saw a decrease in HCROI as our total operating and employee-related expenses grew faster than our revenues. In addition to HCROI, we monitor the results of our employee engagement and health surveys.
2019 was a year of challenges but also one in which we continued to grow and transform ourselves, inspired by our purpose to empower people to stay a step ahead in life and in business.
The ‘people’ part of that purpose is not just customer-focused. It also recognises the important role we play in society. That societal role includes facilitating an efficient economy and the safe and secure financial system it depends on, supporting people to be financially healthy, and fighting climate change. To me, that’s what responsible banking is all about.
And a platform that is ready for open banking that can be a go-to platform offering the best financial services, whether from ING or from competitors. In 2019, we took an important step to create this beyond banking platform when we launched the first protection products in a number of markets as part of our global insurance partnership with AXA.
The underlying net result, which in 2018 is excluding the settlement impact with the Dutch authorities and the net result from Insurance Other, dropped 11.3 percent. Net growth in our core lending book came to €17.2 billion, or 2.9 percent, and net growth in customer deposits was €23.4 billion in 2019. The lending growth was mainly realised in our retail markets, whereas net core
Going forward, ultra-low and negative interest rates, particularly in Europe, are challenging banks to maintain profitability as they try to mitigate the effects of lower rates on margins while balancing this with the interests of customers, particularly retail savings customers. At the same time, the economic stimulus effect is reversing as people save more to counter the impact of low rates on their savings and retirement goals. This makes it clear that new thinking is required from policymakers overseeing interest rate, spending and tax policies in order to keep the economy and financial sector on a sustainable footing.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > CEO statement and operations with the goals of the Paris Climate Agreement and the UN Sustainable Development
Goals (SDGs). And ING was recognised for its leadership role through the adoption of its climate ambition as the core of the Collective Commitment to Climate Action, which was signed by over 30 banks. Signatories agree to take concrete actions within a year to achieve these goals, to be publicly held accountable for our progress and to work together to share insights and tools.
There are many ways to measure a company’s performance, but I believe the most important way is to look at yourself through the eyes of your customers. It’s their satisfaction and loyalty that ultimately form the basis for your long-term success. I’m pleased that customers continued to turn to us in 2019 for their financial needs, as shown by the growth of our total number of customers by 2 percent to 38.8 million. And customers chose to deepen their relationship with us. The total number of primary retail relationships – customers who have current accounts with recurrent income and at least one other product – increased by more than 830,000 to 13.3 million, putting us on track to reach our goal of 16.5 million primary relationships by 2022.
IT, governance and culture, integrity, and climate change. The infographic on this page provides an overview of each topic. With the exception of financial performance, the material topics cited here are subject to limited assurance. See the ‘Independent auditor’s assurance report’.
Being a global financial services company, ING’s revenues and earnings are affected by the volatility and strength of the economic, business, liquidity, funding and capital markets environments specific to the geographic regions in which we do business. This includes operations in both advanced economies, as well as emerging economies.
Deteriorating economic sentiment and expectations about monetary policy easing drove bond yields down in most advanced economies. Yields on 10-year US government bonds fell to the lowest level since July 2016, and the yield on 10-year German government bonds reached a record low of -0.73 percent in August. As a result, sovereign yield curves were partially inverted in most advanced economies.
The historically low, and even negative, interest rates in the eurozone make it challenging for banks to maintain positive income in the form of a margin between traditional saving and lending activities.
ING took several steps to prepare for Brexit, making various adaptations to ensure a smooth transition. Following Brexit, the European Central Bank (ECB) was set to classify the UK as a non-EU
or third country. As a consequence, ING has made the decision to move a number of EU-related trading operations to a location within the EU. Brussels was chosen due to its existing infrastructure.
Wholesale Banking hubs. The UK centres of expertise, including Financial Markets, support ING’s clients and its teams in other countries and regions across the globe. The UK team will continue to be an important pillar for ING.
Cybercrime is a growing threat to companies in general and to the financial system specifically.
Cyberattacks are becoming more frequent, and more intense. At the same time, banks are becoming more exposed as they digitalise, rely more on cloud computing, and are increasingly connected to third-party providers.
Cybersecurity is a key concern for ING. Our objective is to anticipate cybercrime-related activities and prevent threats from becoming a reality. ING takes a multi-faceted approach to cyber security.
The regulatory framework for personal data is fundamentally shaped by the EU. It seeks to walk the fine line between privacy protection and fostering data sharing.
Further guidance is yet to follow on the role of banks in providing services around anti-money laundering (AML).
As digitalisation continues to increase, we are connecting more and more platforms via application programming interfaces (APIs). We believe the financial services industry will converge to an open structure in which APIs are the de facto standard for integrating with partners.
As we innovate to become the digital bank of the future, we must move fast. Digitalising our products and services is necessary as people expect their financial services company to use the latest technology. We made good progress in 2019. We introduced innovations that improve the digital customer experience and strengthen our mobile-first approach.
In Germany and Poland, we now offer features that help customers to better manage their money by notifying them of upcoming payments, similar to the ‘Kijk Vooruit’ feature we offer in the
Other initiatives such as compliance risk culture monitoring, global data ethics and the ‘i for integrity’ programme with the Netherlands and Belgium are continuing. Also, a behavioural risk team set up within ING in 2018 continued to perform additional behavioural risk assessments, develop interventions to support management and enhance behavioural risk management within
ING continues to have a whistleblower channel in place. Also open to third parties, it allows for the anonymous reporting of concerns, including those related to breaches of national and international business-conduct regulations, as well as our own policies and procedures. Our Whistleblower Policy protects informants from retaliation.
We take our role as a gatekeeper to the financial system seriously, and are taking important steps to boost our ability to keep the bank safe from criminal activities and protect our customers, the bank and society.
Financial economic crimes such as money laundering and tax evasion are not contained within a single country or jurisdiction, but are a global challenge that impact the entire financial system. A
recent study by Brigitte Unger, University of Utrecht, found that in the Netherlands alone, almost €13 billion worth of criminal money is laundered each year. At the same time, technology is advancing and criminals are becoming more sophisticated, which increases the risk that the growing number of digital card and payment transactions are used for fraud or money laundering purposes.
infringements by EU Financial Institutions. In July, it published three reports setting out the lessons learned from this exercise. The EU confirmed that financial institutions fell short in their compliance with requirements from AML legislation on a number of occasions. It also noted structural shortcomings in the control frameworks put in place by financial institutions, particularly for transaction monitoring and suspicious transactions reporting, in sectors with high volumes of transactions.
European Commission envisages setting up central supervision and harmonising standards for and formats to be used by authorities.
ING strives to respect people’s rights in accordance with the Universal Declaration of Human Rights.
We support clients and transactions with a positive climate and social impact, and steering our entire loan book to meeting the Paris Climate Agreement’s well-below two-degrees Celsius goal.
We believe climate risk is a strategic and credit risk. We’ve set out targets to ‘green’ our portfolio by reducing our financing to coal-power generation to close to zero by 2025. By the end of 2025, we will no longer finance new or existing clients in the utilities sector that are over five percent reliant on coal. We continue to support these clients’ non-coal energy projects. For details on our coalrelated exposure, please refer to the Non-financial appendix.
was doing. This led to 17 banks joining the pilot with 2˚ii. Four of these banks joined us in our overarching commitment to steer our loan book with what we called the Katowice Commitment in December 2018.
The strategic priorities that are the focus of the Think Forward strategy aim to create a differentiating customer experience. They do that by deepening the relationship with the customer, by providing us with tools to know our customers better and to anticipate their evolving needs, and by fostering an innovation culture that will ensure we are able to continuously adapt our offerings and business model to anticipate and meet those needs in future. And the Customer Promise –
Republic, France, Italy and Spain - similar to our successful digital approach in Germany based on a standardised omnichannel customer experience across mobile devices and web. We pursue a plugand -play approach to product development to ensure we can share innovations quickly across our businesses. Examples of this in practice include the One App now active in Belgium, Germany and the Netherlands, offering one mobile customer experience in those markets. And we’re evolving toward a uniform approach to data and its management, to processes and to one way of working to support this transformation and accelerate innovation.
Zuidoost, an initiative together with local government and educational institutions offering businesses, academics and innovators workspaces designed to co-create, learn, research and inspire in a collaborative atmosphere around the themes of urbanisation and digital identity.
AXA, distributed primarily through our mobile app. Examples in Wholesale Banking include Cobase, a platform that enables companies to manage accounts at multiple banks through one interface, and blockchain solutions in areas like trade finance that drastically reduce the time and complexity of trades.
In 2019, resources were devoted to improving our capabilities in the areas of know your customer and fighting financial economic crime, causing some reprioritisation related to the pace of implementation of innovation and transformation goals. However, our strategy and priorities in these areas remains unchanged.
To promote people’s financial health, we focus on giving them the knowledge and tools to make informed decisions, and we support initiatives that are developing awareness about the drivers behind how people arrive at financial decisions so better methods and tools can be developed in the future. And through our financing we seek to positively influence society’s transition to a more sustainable, low-carbon economy. One of the important ways we do that is through our Terra
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Our strategy and how we create value approach to steer the impact of our lending portfolio to support the Paris Climate Agreement’s goal to limit the rise of global temperatures to well below two degrees Celsius.
Wholesale Banking these are active clients with lending and daily banking products and at least one extra product generating recurring revenues over the last 12 months.
Material topics: innovation, usability and accessibility of our products, digitalisation and interconnectivity 4. Think beyond traditional banking to develop new services and business models
Persistent low interest rates and disruption from the rise of new non-bank entrants in the financial services sector are challenging banks’ traditional business models. Thinking beyond traditional banking is crucial if we are to find new ways to be relevant to our customers. Here, open banking offers opportunities. By partnering with others or developing our own digital platforms, we can offer customers new and complementary services that go beyond banking – and create new revenue streams for ING.
Read more in the ‘Innovation and transformation’ and ‘Our business’ chapters.
Four strategic enablers support the implementation of our strategy: simplifying and streamlining our organisation, operational excellence, enhancing our performance culture and diversifying our lending capabilities.
Operational excellence requires continuous focus. We need to ensure that ING’s operations provide a seamless and flawless customer experience and that our operations remain safe and secure so we can play our important role as gatekeepers to the financial system. We invest to provide stable
enhancement programme we are developing a global approach to how we deal with customer due diligence and transaction monitoring, supported by standardised tools, a uniform approach to data and clear governance.
We believe there are strong links between employee engagement, customer engagement and business performance. We aim to 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’ engagement and ability to deliver on our purpose and strategy.
Lending segments, as well as focusing on Wholesale Banking lending growth in our businesses in
Our 56,000+ employees put our customers first and are evolving to keep pace with the skills and capabilities needed to embrace a digital future.
We are creating financial and financerelated solutions for customers through their preferred platforms, or by becoming a platform ourselves. The number of primary relationships has increased with 6.7 percent to 13.3 million
We use the Terra Approach to steer our loan book of more than €600 bln towards the well-below two-degrees goal of the Paris Climate Agreement.
The availability of our online channels was 99.9 percent for wholesale clients globally, and 99.7 percent for retail customers in the Netherlands and Belgium.
We rely on innovation to develop truly disruptive products, services and experiences that can help
ING become the leading go-to platform for financial services and beyond and on our transformation to scale up and share these innovations across our businesses to create one user experience for all of our 38.8 million customers
FINN – Banking of Things, or become a producer on a third-party platform.
There are ING Labs in Amsterdam, Brussels (formerly Fintech Village), London and Singapore.
ING allocates €25 million each year through its Innovation Fund to accelerate innovation across the bank. Funding is available to any employee who wants to turn a breakthrough idea into reality.
ING collaborates with a wide range of partners including fintechs, its own customers, talented individuals and companies from other industries to develop innovative solutions for customers.
Amsterdam but shadowing ING’s geographic footprint of more than 40 countries, ING Ventures is a €300 million fund that not only drives innovation within ING, but also supports entrepreneurs with hands-on support, know-how, scaling expertise and access to ING’s distribution network.
PACE, developed internally, is central to providing a differentiating customer experience and uses a combination of Lean Start-up, Agile Scrum and Design Thinking methods.
Managing ING’s transformation is the responsibility of the chief transformation officer and the
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Innovation and transformation
ING Private Cloud (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 ING takes in giving customers a consistent experience in a secure and reliable way. IPC standardises our IT infrastructure, simplifies and streamlines existing processes, and brings an automated and self-service infrastructure to development and operations teams. The IPC has reduced our infrastructure time-to-delivery from an average of more than 10 days to less than an hour.
Cybercrime resilience is a major priority for ING to keep the bank secure and safeguard customer trust. This is especially relevant as ING pursues platform business models, expands mobile and other internet-based products/services, further digitalises processes and opens up PSD2 interfaces to the outside world.
Like other companies, ING is regularly the target of cyberattacks, like Distributed Denial of Service
These attacks could have an adverse effect on our business, reputation, revenues, operations or financial health especially when they breach data protection rules and jeopardise confidential information of our customers or partners.
Threats are closely monitored in cooperation with other banks and government institutions. ING
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Innovation and transformation trends and prevention measures. In addition, special risk days are organised for staff, highlighting specific themes and how to remain resilient against them.
In 2019, we also further standardised and automated our User Access Management (UAM)
When it comes to data ethics, ING acknowledges the importance of respecting the expectations of its stakeholders, for instance, when new processes or products are introduced to enhance the customer experience. ING’s data ethics approach is an integral part of our decision-making process and is embedded in ING's Orange Code. It consists of data ethics values and principles that apply to everyone in our organisation. Both global and local data ethics councils are in place to advise
ING business units and help ensure that complex queries or dilemmas on data ethics are dealt with properly.
Dutch companies for the Kickstart AI initiative which aims to accelerate and promote the development of AI technology and nurture AI talent. This effort will add educational capacity, foster the development of an AI community and reinforce the position of the Netherlands as a competitive and relevant AI hub.
Legal. This way, business units can benefit from a central compliant environment hosted by a global Tech squad.
Poland. A digital assistant for Operations and Customer Support, the RoboPlatform performs repetitive activities which leaves employees more time to interact with customers and complete more complex tasks. The RoboPlatform is now the standard in ING France and for several KYC
Operational, IT and support tasks are being centralised in shared service centres. In 2016, ING set up a fully owned service company ING Business Shared Services BV (IBSS) to consolidate all such centres in one specialised non-banking legal entity. Currently, IBSS has four foreign branches. The
Bratislava and Manila branches are multi-functional centres providing services to all domains with an extensive operational platform targeting Wholesale Banking, Retail and Group services.
was also set up in Warsaw with an emphasis on data analytics/risk modelling.
Overall, IBSS has become a professional services organisation that employs around six percent of all
To respond more quickly to changing demands and customer feedback, encourage an innovative mind-set and engage employees, ING’s one Way of Working (WoW) unites employees in multidisciplinary, cross-functional teams. End-to-end responsibility empowers employees to collaborate more easily and effectively across the organisation.
“Touchpoint is a technology platform that makes it possible for ING to build scalable business propositions we can share across borders,” says Danny Wijnand, global tribe lead Touchpoint.
(DLT), it standardises and automates the investment process. Assets are digitalised into security tokens for example, to make post-trade administration easier and cheaper. Applying
Our Growth Markets are universal banks with a full range of retail and wholesale banking services in countries whose economies have high growth potential. These include Poland, Romania and
We don’t only want our customers to do some of their banking with us, we want to be their first partner, where they deposit their salary, handle their payments and do most of their other banking business. At the moment, ING has 13.3 million primary relationships, and the target is to grow this to over 16.5 million by 2022.
Customer numbers continued to grow in 2019. Primary customer growth across retail segments in 2019 included 63,000 for the Benelux, 526,000 for the Challenger markets, and 242,000 for Growth
Banking doesn’t have to be difficult and time consuming. Clear products, plain language, fair prices and simple processes save customers time and money. ING promises to make banking clear and easy, to provide services anytime anywhere, and to keep getting better.
We added a further five countries to the NPS programme in 2019, which is now running in 26
In 2019, we remained focused on servicing our corporate clients with relevant advice, data-driven insights and customised, integrated solutions that make their day-to-day banking more efficient and support their business ambitions.
This is in line with the revised Wholesale Banking strategy we introduced in 2018 to enable us to adapt to and overcome a challenging and complex market environment, as well as increased regulatory requirements, evolving technology, greater competition and our clients’
We developed our sector strategy over the year, pairing local and global insight with sector knowledge and financial expertise. ‘Commercial passports’ give us insight into what services we provide to each client and the regions where we serve them, while our uniform client segmentation framework helps us tailor our daily banking and advisory value propositions to their specific needs.
We are making progress in achieving this in a number of ways, including by working internally to establish a truly cross-border banking platform that aims to provide one unique, uniform customer experience that is best in class and leverages scale, and by pursuing strategic platform initiatives.
Read more about our business transformation programmes in the ‘Innovation and transformation chapter’.
In 2019, we increased our stake in international payments platform Payvision to make it a wholly owned subsidiary. This is an important step towards becoming the preferred platform for business customers and strengthens ING’s digital payments business, especially in e-commerce. Payvision facilitates more than 80 payment methods in 150 currencies. In 2019, Payvision and ING
We also invested in multi-bank platform Cobase, which makes it easier and more efficient for international corporate clients to work with multiple banks. As a cloud solution, Cobase minimises the IT effort for clients and does not require investments or long-term contracts for licences or hardware.
Makelaarsland, which allows people to buy or sell homes online independently or with support of a local Makelaarsland agent, we achieved a number of milestones in 2019. These include successfully launching a home buying proposition, expanding the agent network to 20 agents – now covering half of the Netherlands – and creating strong links between ING’s mortgage advisors and
Our customer-facing platforms offer multiple touch points to interact with customers and collect data that we use to define customer journeys; for example when and where they choose to do their banking, the device they use and the services they prefer. We test these insights with feedback from customers to continuously improve our services.
ING include transparency, wider alignment, increased speed and predictability in product delivery and, most importantly, putting the customer first.
In November 2019, we held our first global customer experience (CX) day. The focus was on making banking frictionless through many small improvements that make it more personal, easy and smart, and by working to eliminate or minimise any compromises to the experience resulting from backlogs or other priorities.
For example, in Poland one result of CX day was an improvement to Moje ING that improves the communication process for entrepreneurs applying for a loan, making it clearer and more timely.
Banks list in 2019. The survey asked 40,000 customers in almost 24 countries about their opinions on the banks they use. ING was placed among the best-performing banks for customer-centricity in
We are using technology and our innovation skills to make improvements and rolling out global
We are also working with local authorities, law enforcement agencies and other financial institutions to fight financial and economic crime. In 2019, ING was one of five banks in the
Netherlands to join forces in the fight against money laundering. The ambition is to investigate the set-up of a cross-bank organisation that will monitor payment transactions: Transaction Monitoring
Netherlands (TMNL). Together with the Dutch Banking Association (NVB), we are involved in a feasibility study into the technical and legal challenges involved. In the proposed new plans, we are collectively looking for cooperation with Dutch authorities, including the Financial Intelligence Unit
This is in line with ING’s strategy to create innovative fintech solutions and then support them in becoming independent companies.
The advanced analytics platform can aggregate vast amounts of data from multiple sources to predict the price and identify the most promising trades. The results show traders using Katana win 20 percent more trades and their prices are 20 percent sharper. At the same time, it helps investment managers to make faster, better informed, data-driven investment decisions.
Payments Association and the Belgian Banking Federation. Funds now get credited to the beneficiary account within five seconds, giving customers immediate access to their funds and helping them optimise cash flows. We will extend this to the rest of Europe from 2020.
10 million. Instant payments make it possible to make payments 24/7, 365 days a year. There is no difference between ‘working days’ and ‘non-working days’.
In another exciting payments innovation, ING is collaborating with Dutch retailer Albert Heijn, which is piloting a fully digital supermarket. This physical store is packed with convenience-boosting and time-saving technological innovations. ING helped to develop these in our FABlab (fabrication laboratory), which focuses on cross-industry collaborative innovation. Shoppers use their bank cards to gain entry to the store. The items they select from the shelves are registered automatically. Payment, processed by ING, happens automatically when they leave.
We aim to ‘wow’ our customers with improvements to their service experience. In Turkey, we can now immediately identify when customers are having a problem at one of our ATMs; we call them at that moment to try and solve it. We also use our app to help customers in Turkey who are more than one kilometre away from an ING ATM by granting them the right to use other banks’ ATMs free of charge.
Our open-source software ‘FINN – Banking of Things’ was created within ING Labs and enables smart devices to pay for their own usage, such as allowing a car to pay for the car wash. We offer this software to our business clients, who can use it to ‘wow’ their own customers.
This includes breakthroughs in improving data privacy within distributed or shared ledgers using our open-source zero-knowledge range proof codes. Bulletproofs builds on these earlier codes, making them even faster, safer and easier to use, while our zero-knowledge proof notary service improves the privacy and security of transactions on the Corda blockchain platform. It evaluates the validity of a blockchain transaction without revealing anything about it, except that it’s valid –
like a notary whose job is to witness the signing of documents to validate them.
Blockchain is reinventing commodity trading, making it quicker, easier and more efficient. ING’s
Building on its success, we’ve tested a number of successful experiments on the platform. These include Vakt, announced in 2017, which manages physical energy transactions from trade entry to final settlement and Komgo, the blockchain-based platform that transmits commodity transactions in a secure environment. In August, we successfully executed our first oil trade on
Singapore into the USD 18 trillion global trade finance market. Contour was co-created by ING and seven other banks in 2018 to simplify letters of credit, reducing the amount of time needed to process them from five to 10 days to under 24 hours. The launch follows a series of live pilots in 14 countries and a global trial with more than 50 banks and corporates. Ninety-six percent of participants said Contour would accelerate their letters of credit process, improve efficiencies and reduce costs.
Digitalisation guides our investments and transformation efforts. Our ambition is to offer customers everywhere the same empowering and differentiating experience. We are going about this in several ways.
In 2019, we saw increased uptake of our Virtual Cash Management solution, enabling treasurers to manage their cash position via a single master account, while keeping local accounts across Europe for local operations without the burden of managing all those accounts individually.
Our digital portal, InsideBusiness, is a key enabler of our ‘digital first’ philosophy in Wholesale
A recent improvement was the launch of Corporate Administrator. This allows clients to decide for themselves which employees can do certain things in their account. Clients can appoint one or two of their own corporate administrators who can grant access rights. Already, around 40 percent of our corporate clients are using Corporate Administrator, which is ahead of our targets.
The SME & Mid-Corp segment aims to empower people to manage and accelerate their business.
ING is committed to contributing to a low-carbon and financially healthy society, both through our own efforts and by helping our clients to be more sustainable. As a bank, we make the most impact through our financing, via the loans we provide to clients. This is why we announced in September last year that we would steer our €600 billion lending portfolio towards meeting the well-below two-degree goal of the Paris Climate Agreement. Our strategy to get there is called the Terra approach.
While Terra is supporting our responsible finance business and will guide ING towards new opportunities to support our clients, Terra will also help us to build a more climate-resilient portfolio as it guides our strategies towards two-degree alignment. Terra, therefore, forms part of our alignment with the Taskforce for Climate-related Financial Disclosures (TCFD) recommendations.
Since its launch at ING’s offices in London in February 2019, more than 17 systemically important banks, including ING, have joined the 2˚ii PACTA pilot for banks. ING was also among the first signatories of the UNEP-FI Principles for Responsible Banking (PRB). In addition, ING co-chaired the sub-group that developed the PRB Collective Commitment on Climate Action which took ING’s
We were well on track in 2019. Climate finance increased 13 percent to €18.7 billion, and lending to industry ESG leaders grew slightly by 0.1 percent to €7.1 billion. Although social impact financing decreased 3 percent to €750 million due to repayments, we remain committed by lending to projects that lead to, for example, basic infrastructure improvements, community development or essential services.
▪ We have a recurrent mandate to help Spanish regional governments in their sustainability goals.
Almost half of our loan book consists of mortgages. Our ambition is to make our mortgage portfolio energy-positive by 2050. This means the homes in this portfolio will collectively produce more energy than they consume.
Sustainability is about planet and people. When it comes to people, we choose to focus on financial health, but that’s not all we do. We make more impact with what we do finance than with what we don’t finance. So we aim to increase our social impact finance portfolio by lending to projects that lead to, for example, basic infrastructure improvements, community development or essential services. And we’re working on making a positive contribution to human rights as financier, employer, taxpayer and driver of progress and prosperity. We are a founding signatory for the United Nations’ Principles for Responsible Banking, which aim to help the banking sector in making a positive contribution to society.
▪ Also in the Netherlands, we launched the 'Digitaal vooruit' initiative where Digicoaches are available in pop-up stores at several locations to answer any digital questions people may have.
▪ In Austria and Romania, we offer customers access to EmpowerCamp – a five-week programme to help customers understand their financial profile and take steps to improve their finances.
▪ In Spain and France, our digital investment advisors My Money Coach and Coach Epargne continued to offer customers precise and intelligent investment solutions.
▪ Also in the Netherlands we’re a founding partner in the debt-prevention programme
▪ Lastly in the Netherlands, we offered more than 250,000 lessons on digital skills for students in collaboration with organisations such as Bomberbot and DesignWeek@School.
Tully, which helps people to build a budget online so they can understand exactly what their financial situation is and work out a plan to make the most of their money.
TFI is a joint initiative with Deloitte, Dell Technologies, Amazon Web Services, IBM and the Centre for Economic Policy Research. Through its various channels and initiatives, it successfully connected with consumers on 15 million occasions in 13 countries in 2019. Its vision is to ultimately empower 100 million people to make better financial decisions.
Retail Banking showed good commercial performance, despite continued pressure from the low interest environment. However, net profit declined 7.8 percent to €3,347 million from €3,630 million in 2018. This was mainly caused by higher risk costs and higher expenses (largely caused by KYCrelated expenses and increased regulatory costs), whereas income increased marginally. No special items were excluded from the underlying results in both years, and Retail Banking’s net result is therefore equal to its underlying net result.
These increases were largely offset by a decline in Retail Netherlands, due mainly to lower net interest income on savings and current accounts. Total customer lending increased by €17.4 billion to €437.1 billion compared with year-end 2018. Adjusted for currency impacts, Treasury and the
Risk costs rose to €588 million, or 14 basis points of average customer lending, from €447 million, or 11 basis points, in 2018. Risk costs increased primarily in Retail Netherlands after net releases in 2018, but are still relatively low. Retail Germany continued to record a net release.
The underlying result before tax of Retail Netherlands decreased 14.2 percent to €2,204 million from €2,568 million in 2018. This was mainly due to lower income, mainly reflecting lower margins on customer deposits and lower revenues from Treasury, combined with higher risk costs.
Treasury) was €4.1 billion in 2019. Net fee and commission income increased 0.8 percent to €374 million. Investment and other income was €8 million lower, mainly due to lower Treasury-related revenues.
Risk costs increased by €22 million to € 186 million, or 21 basis points of average customer lending, from €164 million, or 19 basis points, in 2018. The increase was mainly caused by additional provisioning on individual mid-corporates files and higher collective provisions for consumer lending.
Net interest income declined 5.5 percent, mainly due to lower Treasury-related interest results
(with a partial offset in other income). Excluding Treasury, net interest income rose marginally, mainly reflecting volume growth in most products and improved margins on mortgages, offset by lower interest results on savings and deposits due to margin pressure. The net growth in core lending (excluding Treasury) was €3.0 billion in 2019, of which €2.4 billion was in mortgages and €0.6 billion in consumer lending. Net inflow in customer deposits (excluding Treasury) was €0.8 billion. Net fee and commission income rose 19.1 percent to €268 million, due to higher fees on mortgages and daily banking. Investment and other income rose by €62 million to €138 million, largely due to the aforementioned accounting asymmetry in Treasury revenues.
Total underlying income rose by €194 million, or 5.9 percent, to €3,509 million. This increase was driven by strong results across most of the countries, whereas 2018 included a higher profit from
Risk costs were €364 million, or 38 basis points of average customer lending, compared with €350 million, or 40 basis points, in 2018. The increase was mainly attributable to higher risk costs in Spain and Poland, while risk costs in Turkey and Italy declined.
Financial Markets recorded an underlying result before tax of €-121 million, compared with €-36 million in 2018. The drop was predominantly due to lower income, which was impacted by €228 million of negative valuation adjustments versus €-1 million in 2018, in part offset by lower expenses on the back of ongoing cost-efficiency measures. Excluding valuation adjustments, pretax result rose by €142 million compared with 2018, driven by higher client income. The underlying result before tax of Treasury & Other was €-123 million compared with €-70 million in 2018. This decline was mainly due to lower results from Treasury-related activities and Corporate
Investments, whereas the result of the run-off businesses improved after the €123 million loss on the intended sale of an Italian lease run-off portfolio recorded in 2018. Expenses increased mainly
(excluding currency impacts and Treasury) was €3.1 billion. Net interest income increased 2.9 percent, mainly driven by volume growth in Lending at lower margins and higher interest results in
Management. Net fee and commission income declined 1.5 percent. Investment and other income fell by €304 million, mainly due to lower valuation results in Financial Markets, while previous year included a gain on a bond transaction in Belgium and a loss on the intended sale of an Italian lease run-off portfolio.
Underlying operating expenses rose 6.0 percent to €2,937 million, in part due to higher regulatory costs. Excluding regulatory costs, expenses rose 4.7 percent, mainly attributable to higher KYC, IT
“Banking is becoming more and more digital, but many customers still prefer personal contact when it comes to making important financial decisions,” says Barbara Vanhauter, global lead human channels and digital assistance.
Convenience is the one thing customers will be looking for, and by offering this both digitally and physically, we can stay ahead of the game.”
Enhancing our digital competencies is essential to deliver on our Think Forward strategy. At the same time, traditional banking capabilities remain important. What counts is motivated people –
Maintaining this trust is crucial. We have a responsibility to protect our customers, society and our bank from financial or other crimes that could harm them or the financial system as a whole.
Everything we do at ING is guided by the values and behaviours that underpin our way of working.
Code values. Doing so could potentially put our customers at risk, erode the public’s confidence and damage our reputation. That’s why integrity is at the very foundation of our culture.
Ethics Councils to help us align these with the Orange Code.
The majority of employees were assessed in this way in 2019, with the full roll-out of Step Up expected to be completed in 2020. To further tailor performance management to employees’
To deliver on our purpose and strategy we need to have the right capabilities in place. Working with the business and ING’s leadership, we developed a comprehensive workforce strategy that identifies the capabilities we need now and in the future. These six capabilities are grouped into
‘distinctive’ capabilities – those we need to create value in the organisation – and ‘foundational’
Our distinctive capabilities are data fluency, customer experience management and leadership. The foundational capabilities are non-financial risk management, operations management and cybersecurity risk management. The workforce strategy details how we deploy and develop these capabilities through training, knowledge building and recruitment to ensure we’re best positioned from a people perspective to deliver on our goals.
When employees are impacted by the changes, we are committed to treating them with respect and care. We aim to help them develop their skills to find new job opportunities inside and outside
December 2019, fully embraces the principles of openness, transparency, collaboration and innovation: exactly what ING stands for. It sets the standard for the type of workplace we want for our employees. In addition, there is space for businesses, academics and innovators to collaborate on solutions for the future. This is part of a new innovation district we are jointly developing with the Amsterdam municipality and two academic institutions aimed at attracting talent to the area.
Support is tailored to local needs. Examples include: ▪ The Wellbeing Quotient (WQ) programme in the Netherlands. This is specifically designed for teams to motivate and support each other in becoming fitter, healthier versions of themselves –
▪ In Poland, ING provides fruit for employees to stimulate healthy eating, opened an on-site gym and started a cancer prevention programme in 2019.
As our business grows, we are serving increasingly diverse customers. To understand their needs and give them an unbeatable experience we need a workforce as diverse as they are. Studies show that teams with a healthy mix of contrasting perspectives are more creative, more inventive and adapt faster. At the same time, people perform better when they feel free to be themselves.
Managers choose their focus while keeping in mind our global priorities – gender, nationality and age group. Work in 2019 included deep-diving into diversity dimensions ING-wide and setting up and maintaining dashboards to help different areas of the business to monitor their progress.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Our people employees for work of equal value and we have policies in place that aim to safeguard against discrimination.
With regards to gender, in 2019, women in leadership positions remained stable at 37 percent of managers (38 percent in 2018) and 29 percent of managers of managers (30 percent in 2018).
are now female. However, the Management Board is not there yet. Nevertheless, in 2019, we announced the appointment of Pinar Abay to the Management Board with effect from 1 January 2020. This will take the number of women on the Management Board to two of its seven members.
As part of our commitment to a diverse and inclusive organisation, ING is a signatory to the United
Combatting LGBTI Discrimination in the Workplace. These standards guide our approach and are a source of learning for our own practices to combat discrimination and promote diversity and inclusion.
ING was a finalist for a Workplace Pride Gala Award for best media representation. We are a founding partner of the International Platform for Lesbian, Gay, Bisexual And Transgender (LGBT)
Inclusion at work. Its activities include the International Workplace Pride Global Benchmark, which scores companies in seven areas and identifies best practices. In 2019, ING significantly improved its score in the benchmark, placing us in the top tier and earning us recognition as Workplace
▪ Ranked by IT professionals as one of the top three favourite IT employers in the 2019 Dutch IT
“The Maggie programme aims to create one customer interaction platform serving over seven million customers in four countries. By its very nature it’s multinational and multicultural,”
We continually develop our risk and capital management to address political and economic developments, evolving regulatory requirements, changing customer expectations, emerging competitors and new technologies, all of which could potentially impact our business.
ING’s profit generating capacity remained strong, and after dividend reserves we included €2.1 billion of capital to our capital base.
Executive Boards. It defines our desired forward-looking risk profile and informs our strategic and financial planning. The framework is designed to withstand market volatility and stress while meeting regulatory requirements. We also have a process for internal control over financial reporting.
The potential financial impacts of extreme weather events such as hurricanes, floods and heatwaves are elevating the risks associated with climate change. Our business activities can both significantly influence communities and the environment and be impacted by climate risks. As such, we take our responsibility to help mitigate this risk seriously.
For example, we’ve set ambitious targets to reduce financing for coal-power generation to close to zero by 2025, and no longer provide financing to new clients whose business is over 10 percent reliant on coal-fired power. By the end of 2025 we will not finance any clients in the utilities sector who are more than five percent reliant on coal. In addition, we are steering our loan portfolio to meet the well-below two-degrees goal of the Paris Climate Agreement. In 2019, we published our
We expect climate change to remain firmly on ING’s agenda, as well as the agendas of our customers and of regulatory and supervisory bodies around the world. We have committed to report in line with the recommendations of the Taskforce for Climate-related Financial Disclosures
Customers trust us with their money and, increasingly, with their data. We have a social responsibility and a duty to maintain that trust and to safeguard them against loss or misuse of their data. Our duty of care is not only towards our customers, but there is a wider social responsibility to act as gatekeepers to the financial system.
Directive (PSD2) give customers more choice by opening up payments and money management to new players, including non-banks. But PSD2 also obliges banks to share account information with licensed third parties if our customers authorise us to do so. Any data or IT breach, irrespective of whether anything is actually lost or stolen, could severely damage customers’ trust in our bank and in the entire sector. There may be legal, regulatory or compliance repercussions. This is an ever growing risk, given ING’s platform ambitions and increasing cooperation with third-party providers.
As a global financial institution, ING is at risk of being used to launder the proceeds of crime, finance terrorism or for other financial economic crimes such as transactions involving a sanctioned person or country, or trade-controlled exports. Criminals are becoming ever more sophisticated as they harness new technologies like AI and machine learning. Given the growing number of digital card and payment transactions – around 13 billion in 2019 – ING faces an increased risk that some of these interactions are used for fraud or for money laundering purposes.
Expertise Centre (FEC) to strengthen the integrity of the financial sector through preventative action to identify and combat threats.
In July 2019, we joined peers from other banks at the UK’s Financial Conduct Authority TechSprint to find better ways of detecting and preventing financial crime. ING Labs innovates with others to create solutions like CoorpID, a centralised digital vault for corporate customers to store, control and share their KYC documentation in a secure way. We’re also developing a platform to help
We believe that sharing knowledge across the financial industry and with the authorities will allow us to manage and control our own KYC activities and risks more effectively and improve our management of non-financial risks.
▪ Tooling: Develop and roll out a bank-wide digital KYC service platform, including standard processes and tools for customer due diligence, screening and monitoring.
▪ Governance: Install a global KYC governance to ensure consistent decision-making on standards, operations, customer acceptance and continuous improvements.
▪ Knowledge and behaviour: Increase employee knowledge of KYC, provide specialist training and set up a behavioural risk department to carry out risk assessments, detect high-risk behaviours and intervene where needed.
Given the crucial role of leaders in creating the right conditions for employees, interventions are first initiated at leadership level. Leadership labs address topics such as ‘governance and ownership’, ‘connection, alignment and trust’ and ‘collective learning’. Employee labs focus on implementing ideas identified during deep dives into behavioural drivers and solutions that require more development. The labs develop and test these ideas before they are implemented on a larger scale.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Developments in risk and capital management internal control statement’ has been provided. Tax risk management is subject to Corporate Audit testing and evaluation. In the Netherlands, ING has opted for cooperative tax compliance
Dutch tax authorities. Tax risks not only refer to ING’s own tax position, but also to the risks in relation to the tax positions of our customers. In this respect, we have integrated a tax integrity assessment in our overall customer risk assessment process.
ING’s Whistleblower policy enables employees to anonymously report any actual or suspected irregularity or misconduct that violates our Orange Code, ING’s internal policies or any law or regulation. This can be done via internal or external channels, alongside normal reporting channels.
ING has started using artificial intelligence to stay on top of the volume and increasing complexity of regulations that banks have to comply with. We are developing SPARQ, a platform that automates the process of turning regulation into policy. It gives insight into applicable regulations, identifies regulatory changes and links these directly to our policies, while documenting all the steps taken. This creates a clear and reliable audit trail that we can demonstrate to our regulators if necessary. In addition, in November we announced an investment in regtech firm Ascent, which uses machine learning to help companies improve regulatory compliance. The investment is via our fintech fund ING Ventures.
The authorised share capital of ING Group N.V. consists of ordinary shares and cumulative preference shares. Currently, only ordinary shares are issued, while a right to acquire cumulative preference shares has been granted to the ING Continuity Foundation. Each share in the capital of
are required to provide updated information on their holdings once they reach, exceed, or fall below threshold levels of 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75% and 95%. As of the publication date of this report, ING Group is not aware of shareholders, potential shareholders or investors with an interest of three percent or more in ING Group other than BlackRock Inc and
Price/book value ratio 0.77 0.72 1.18 1 Based on the share price at year-end and the earnings per ordinary share for the financial year.
Number of shares in issue and shares outstanding in the market
ING’s short- and long-term credit ratings are shown in the table below. Each of these ratings reflects only the view of the applicable rating agency at the time the rating was issued, and any explanation of the significance of a rating may be obtained only from the rating agency. A security rating is not a recommendation to buy, sell or hold securities and each rating should be evaluated independently of any other rating. There is no assurance that any credit rating will remain in effect for any given period of time or that a rating will not be lowered, suspended or withdrawn entirely by the rating agency if, in the rating agency’s judgement, circumstances so warrant. ING accepts no responsibility for the accuracy or reliability of the ratings.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > ING shares
As a large commercial bank, we recognise that we have a direct economic, social and environmental impact, but also a significant indirect impact through our lending and investment activities. ING’s non-financial data reporting protocol describes key performance indicators related to our material topics. We report data on these and other relevant key performance indicators in the Value Creation Model section of Our Strategy and How We Create Value chapter.
This report, including the Non-financial 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. In line with the Core option guidelines, we have included the Disclosure on
The Framework of the International Integrated Reporting Council (IIRC) served as a reference in drawing up the content for this report, including for our Value Creation Model. Moving to the Core option will allow us to focus on improving our report integration as per the IIRC framework.
The data with a footnote (1) in the Performance Highlights table is within the reasonable assurance scope. KPMG audited the financial statements 2019 of ING Group. See the ‘Independent auditor’s assurance report’.
We have: - reviewed the non-financial information in the Report of the Executive Board as defined on page 13 (excluding information related to financial performance), the ‘Environmental and Social Risk Framework’ section on page 183-186 of the Risk Management chapter and the Non-financial appendix (hereafter: 'the Non-Financial Information'); and - audited the ‘Understanding what matters most’ section (page 430 and 431), the data for the Net Promoter Score for Retail Banking, Feeling of Financial Empowerment and System Availability, marked with the symbol Ⓐ in the Report of the Executive Board, and the ‘Non-financial appendix’
A review is aimed at obtaining a limited level of assurance. An audit engagement is aimed at obtaining reasonable assurance.
We believe the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion about the Non-financial Information and our opinion on the Four Specific Topics.
By performing our assurance procedures at country level, together with additional assurance procedures at corporate level, we have been able to obtain sufficient and appropriate assurance evidence about the group’s reported information to provide a conclusion about the Non-financial Information and an opinion on the Four Specific Topics.
The Executive Board’s Responsibilities for the review of the Non-Financial Information and the audit of the Four Specific Topics
Topics reconcile with underlying records of the company; • reviewing, on a limited test basis, relevant internal and external documentation; • performing an analytical review of the data and trends; - evaluating the consistency of the Non-Financial Information and the Four Specific Topics with the information in the Annual Report which is not included in the scope of our review; - evaluating the overall presentation, structure and content of the Non-Financial Information and the Four Specific Topics; - evaluating whether the Non-Financial Information and the Four Specific Topics as a whole, including the disclosures, reflect the purpose of the reporting criteria used.
Brexit contributed to continued political uncertainty. And increasing demands in the areas of regulation and taxation also increased the complexity of the business environment for banks.
Despite this challenging context, ING performed well. And I’m pleased with the important steps it took to support the fight against climate change. These included ING’s role as a founding signatory of the Principles for Responsible Banking. Another important step was the publication of the first progress report on ING’s Terra initiative to steer its lending portfolio to support the Paris Climate
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Chairman’s statement made significant progress on ‘Unite be+nl’ to create one customer interaction platform in the
The Supervisory Board is continuously monitoring ING’s KYC and AML enhancement efforts. These are progressing well. We see the organisation taking this on, and in particular we see the development of a strong mindset based on the belief that this is an essential part of ING’s strategy and values.
Working separately, individual banks struggle to deal effectively with this issue. Efforts to counter criminal activity are hampered by the limited view that an individual institution has of the whole chain of a transactions across entities and borders. Tackling this at the country level, and preferably at the European level, is essential to countering money laundering in an effective and efficient way.
I want to stress here the importance of completing the Banking Union in Europe. It’s essential for safeguarding the competitiveness of European banks and creating a level playing field. It can also play an important part in achieving the cooperation in the area of financial economic crime that is so needed.
Slovakia and Romania, and we’ll continue visiting operations in 2020. These visits help us understand the frontline dilemmas and challenges of ING’s people, enhance our insight and understanding and give an important signal that compliance/KYC is taken seriously at the highest level within ING.
June 2020 to take up the position of Group Chief Executive Officer of UBS Group AG on 1 November
Directive (SRD II) requirements that take effect on 1 January 2020 and ING’s global AML/KYC priorities and discharge following the investigation by Dutch authorities.
Money Laundering to the appropriate level. These updates can be found, for example, in ING’s quarterly reporting and on the corporate website www.ing.com, under the ‘About us’ section.
The Supervisory Board, Executive Board and Management Board Banking are committed to rebuilding trust in ING and will continue to be open and transparent on these matters. The
Supervisory Board, Executive Board and Management Board Banking appreciate having the opportunity to interact with ING’s shareholders and other stakeholders—their views are invaluable to maintaining a constructive dialogue as ING moves forward.
2 Additional NCGcom meetings took place in 2019 in view of medium to longer term board succession planning.
4 The numbers 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 prior to the meetings.
Please note that (i) Henk Breukink stepped down as of the end of the AGM on 23 April 2019. Mike Rees and Herna Verhagen were appointed as of the same moment. Although Herna Verhagen’s appointment became effective on 1 October 2019, she already prepared for and participated in many Supervisory Board related meetings before this date as an observer.
Abbreviations used: SB = Supervisory Board; RiCo = Risk Committee; AC = Audit Committee; NCGcom = Nomination and
European Central Bank aims to promote a resilient banking system as a prerequisite for a sustainable and sound financing of the economy. The SREP involves a comprehensive assessment of banks’ strategies, processes and risks, and takes a forward-looking view to determine how much capital each bank needs to cover its risks.
Board and the Supervisory Board to the Annual General Meeting (AGM) of its shareholders in April 2020. This follows an extensive review of executive remuneration at ING, which was carried out in consultation with a broad range of stakeholders in 2019. It is also in line with the guidelines of the revised SRD II, which require listed companies to submit their remuneration policies to the AGM at least once every four years. The last year ING’s remuneration policies were submitted in full to the
On 4 September 2018, ING announced that it had reached a settlement agreement with Dutch authorities relating to an investigation that found serious shortcomings in the execution of customer due diligence and requirements related to fighting financial economic crime. Since the start of the investigation, various initiatives have been launched to further enhance AML/KYC
KYC, the Supervisory Board visited ING’s local and centralised compliance/KYC operations in Poland,
Following the settlement with the Dutch authorities in September 2018 and in consultation with the
Supervisory Board, Koos Timmermans stepped down from his position as CFO and member of the
Supervisory Board nominated Tanate Phutrakul for appointment as a member of the Executive
Board, subject to shareholder approval. The appointment was supported by 99.3 percent of shareholders at the Annual General Meeting on 23 April 2019 and was also approved by the
Roland Boekhout stepped down as member of the Management Board Banking and head of Market
Leaders on 11 July 2019 to become a member of the Board of managing directors with responsibility for the corporate clients segment at Commerzbank as of 1 January 2020. His board responsibilities for the Market Leaders segment were transferred to Ralph Hamers on an ad interim basis. Upon Supervisory Board approval and ECB approval, he was succeeded by Pinar Abay on 1 January 2020 as head of Market Leaders (also becoming a member of the Management Board
Banking), taking up the responsibility for ING’s operations in the Benelux.
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
As part of the annual business visit, the entire Supervisory Board, together with the Management
These visits and educational sessions provided ample opportunities for Supervisory Board members to interact with senior management and employees on location and to interact with senior
In late 2016, ING announced the acceleration of the implementation of the Think Forward strategy, focusing on investing in our digital transformation and creating a scalable banking platform. 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.
Throughout 2019, the Supervisory Board monitored and discussed the progress of the strategy and its transformation and, as part of this, had an active dialogue with the Executive Board and the
ING’s strategy, together with the transformation programmes, includes an overarching view on our transformation into a dynamic digital player. Underlying that are initiatives to further improve our differentiating customer experience, earn primary customers, develop analytical skills to understand our customers better, increase the pace of innovation to serve changing customer needs, enhance efficiency, and think beyond traditional banking to develop new services and business models while growing our lending capabilities.
Board and management during periodic meetings, which in 2019 also included a dedicated
The Executive Board has prepared the financial statements and discussed these with the
ING’s Annual Report is presented on integrated form for the fifth successive year. The financial statements will be submitted for adoption at the 2020 Annual General Meeting as part of the 2019
Management Board Banking (including the new head of Market Leaders) and the Supervisory
Supervisory Board approving those items as required from a governance perspective. Directly following the Audit Committee meetings, the members of the Audit Committee met with the internal and external auditors to seek confirmation that all relevant topics were discussed in the
The Risk Committee met eight times in 2019. On average, 93 percent of the members were present at the scheduled meetings. As with the meetings of the other committees, all relevant items discussed by the Risk Committee were reported to the Supervisory Board, with the Supervisory
In 2019 the Risk Committee also discussed the annual review of the Risk Appetite Framework and statements, the updated Recovery Plan and stress-testing scenarios, as well as the impact of upcoming regulations such as Basel IV. Enterprise risk management, credit developments in certain countries and portfolios, the investor protection and markets policy and ING’s new global code of conduct were also on the agenda. As in 2018, the Risk committee held an additional meeting to allow it to deal with high-priority issues such as the risks related to ING’s sourcing activities.
The Risk Committee’s feedback is also brought to bear on discussions regarding remuneration practices. It considers the implications of proposed new remuneration policies for the Executive
The Nomination and Corporate Governance Committee met 13 times in 2019. On average, 91 percent of the members were present at the scheduled meetings.
As was the case last year, periodic conversations with them took place outside regular meetings.
Corporate Governance Code, the Dutch Banking Code and further implementation of the renewed
Executive Board and Management Board Banking, as well as the individual variable remuneration proposals. Following the settlement with the Dutch authorities in September 2018, it was agreed that the Executive Board and Management Board Banking would forego their variable pay over 2018. It was also decided to considerably cut the bonus pool for the rest of the organisation, resulting in a significant reduction of the total bonus rewarded over 2018.
Remuneration Committee discussed and prepared proposed new remuneration policies for the
Executive Board and the Supervisory Board in consultation with the Risk Committee and taking into account the feedback obtained from extensive stakeholder consultation. The proposed policies are subject to approval by the Annual General Meeting of April 2020. For further details, see the
Identified Staff and High Earner-related remuneration matters, based on ING’s accompanying governance framework.
Supervisory Board members. Mike Rees’ membership became effective as per the end of the 2019
Annual General Meeting and 1 October 2019 she was already present at various Supervisory Board related meetings as an observer, including at the meetings of the Remuneration Committee of which she became the chairman as of 1 October 2019. As per that date she also became a member of the Nomination and Corporate Governance Committee. Mariana Gheorghe fulfilled the chairman role of the Remuneration committee on an interim basis in the period after the Annual General
Meeting until 1 October 2019, after which she also remained a member of the Remuneration
The Nomination and Corporate Governance Committee and the Supervisory Board will continue to strive for an adequate and balanced composition of the Supervisory Board when selecting and nominating new members for appointment, taking into account ING’s diversity policy and other factors. Read more in the ‘Corporate governance’ chapter on the composition of the Supervisory
The Supervisory Board would like to thank the members of the Executive Board and the
Banking Association in 2014, is applicable only to ING Bank N.V. and not to ING Group. The Banking
US companies under NYSE listing standards. ING Group believes the following to be the significant differences between its corporate governance practices and the NYSE corporate governance rules applicable to US companies: ▪ ING Group has a two-tier board structure, in contrast to the one-tier board structure used by most US companies. In the Netherlands, a public limited liability company with a two-tier board structure has an executive board as its management body and a supervisory board that advises
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Corporate Governance and supervises the executive board. Supervisory board members are often former state or business leaders and sometimes former members of the executive board. A member of the executive board or other officer or employee of the company cannot simultaneously be a member of the supervisory board. The supervisory board must approve specified decisions of the executive board.
▪ 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.
Currently, only ordinary shares are issued, while a call option to acquire cumulative preference shares has been granted to ING Continuity Foundation (Stichting Continuïteit ING). The acquisition of cumulative preference shares pursuant to the call option is subject to the restriction that, immediately after the issuance of cumulative preference shares, the total amount of cumulative preference shares outstanding may not exceed one third of the total issued share capital of ING
Read more in the ‘Report of the ING Continuity Foundation’ chapter.
ING Group’s authorised capital is the maximum amount of capital allowed to be issued under the terms of the Articles of Association. New shares in excess of this amount can only be issued if the
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 annual general meetings of 2016 and subsequent years; their feedback has been taken into account. It enables the Executive Board to issue new ordinary shares (including the granting of rights to subscribe for ordinary shares, such as warrants or in connection with convertible debt instruments) for a period of 18 months, ending on 23 October 2020 subject to the following conditions and limits: ▪ No more than 40 percent of the issued share capital in connection with a rights issue, being a share offering to all shareholders in proportion to their existing holdings of ordinary shares as nearly as may be practical. However, the Executive Board and Supervisory Board may exclude certain shareholders from such a share offering for practical or legal reasons such as record dates, fractional entitlements, treasury shares, applicable legal restrictions on share offerings or in the context of a syndicated rights issue; plus
▪ No more than 10 percent of the issued share capital, with or without pre-emptive rights of existing shareholders.
As explained at the start of this paragraph, the purpose of this share issue authorisation is to delegate the power to issue new ordinary shares to the Executive Board. Accordingly, the Executive
Financiële Markten - AFM) immediately after the acquisition or disposal of the triggering interest in
Financial Supervision Act (or the predecessor of this legislation), are shown in the ‘ING shares’
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Corporate Governance a net short position relating to the issued share capital of ING Group, whether by a transaction in shares or ADRs, or by a transaction creating or relating to any financial instrument where the effect or one of the effects of the transaction is to confer a financial advantage on the person entering into that transaction in the event of a change in the price of such shares or ADRs, is required to publicly notify, the Dutch Authority for the Financial Markets, in accordance with the provisions of the above-mentioned regulation if, as a result of such acquisition or disposal the person’s net short position reaches, exceeds or falls below 0.2 percent of the issued share capital of ING Group and each 0.1 percent above that. Each reported net short position equal to 0.5% of the issued share capital of ING and any subsequent increase of that position by 0.1% will be made public via the short selling register on the website of the Dutch Authority for the Financial Markets.
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
Board; ▪ Any other items requiring shareholder approval pursuant to Dutch law; and
As provided for in the Dutch Civil Code, implementing the BRRD, ING Group’s Articles of Association permit this convocation period to be shortened to 10 days if (i) ING Group meets the criteria for early intervention measures; (ii) resolution can be avoided by means of a capital increase; and (iii) a general meeting would be required to enable ING Group to issue the required number of shares.
Shareholders are given the opportunity to contact ING about the Annual General Meeting, via the
(www.ing.com). By returning the form, shareholders give a proxy to an independent proxy holder (a public notary registered in the Netherlands) who will vote according to the instructions expressly given on the proxy form. The submission of these forms is subject to additional conditions specified on such forms.
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;
Resolutions adopted at a General Meeting are generally published on the website of ING Group
Governance Code, the draft minutes of the General Meeting are made available to shareholders on the website of ING Group (www.ing.com) no later than three months after the meeting.
The organisation, powers and modus operandi of the Executive Board are detailed in the Charter of the Management Board.
Currently, there are no female members of the Executive Board, although our ambition of gender diversity remains unchanged. The succession planning for Executive Board positions is continually worked on, balancing the career advancement of (female) senior managers, considering female candidates fit for the role and bringing in talents from outside the bank. In view of the appointment terms of the current Executive Board members (every four years) ING considers it likely that the preferred gender balance will not be achieved in the short term as replacements are not currently envisaged. We are therefore unable to set a clear deadline to reach this gender balance.
We are also looking long term and taking steps to improve the appointment of women in senior positions throughout the bank in line with our recently adopted diversity and inclusion principle.
Services. He joined ING in 1991 and has held various positions including global head Wholesale
and ING Bank N.V. until 30 June 2020 continuing to run the daily business and working with the
Tanate Phutrakul was appointed as chief financial officer of ING Groep N.V. and ING Bank N.V. and member of the Management Board Banking of ING Bank on 7 February 2019. Subsequently, he was appointed as a member of the Executive Board of ING Groep N.V. at the Annual General Meeting on
Steven van Rijswijk has been a member of the Executive Board since 8 May 2017. He was appointed
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Corporate Governance appointment to the Audit Committee is only possible if the individual in question resigned from the
Other diversity related aspects are also taken into consideration in light of the overall SB
Eric Boyer de la Giroday is not considered independent because of his former position as Chairman of the Board of Directors of ING Belgium SA/NV and his former positions as member of the Executive
as a whole as well as on the structure and operation of the internal risk management and control systems. On 31 December 2019, the members of the Risk Committee were: Robert Reibestein
The Nomination and Corporate Governance Committee’s tasks include advising the Supervisory
Gheorghe (chairman until 1 October 2019), Herna Verhagen (chairman from 1 October 2019),
The composition of the Supervisory Board Committees can be found on ING Group’s website www.ing.com.
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V.
Former position: member of the Executive Board of ING Groep N.V. and ING Bank N.V.
Non-executive director of the Board of Directors of the Instituts Internationaux de Physique et de
Member of the Advisory Council of the Bucharest Academy of Economic Studies, Romania.
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V. (effective per 1 May 2018), member of the Supervisory Board and chairwoman of the Audit Committee of Fraport AG, member of the Supervisory Board and chairwoman of the Audit Committee of Osram Licht AG and member of the Supervisory Board and chairwoman of the Audit Committee of Marquard & Bahls AG.
Mike Rees and Herna Verhagen were appointed during the Annual General Meeting of 23 April 2019. Henk Breukink retired from the Supervisory Board as per the end of the Annual General
ING Group’s internal controls over financial reporting. The SOX 404 internal control activities are organised along the lines of the company´s governance structure, and involve the participation of senior management across ING.
The General Meeting may resolve to amend the Articles of Association of ING Group, provided that the resolution is adopted based on a proposal of the Executive Board, which has been approved by the Supervisory Board. An amendment of the Articles of Association is required to be executed by notarial deed.
At the Annual General Meeting held on 23 April 2019, the extension of the audit mandate of KPMG
Committee and the Supervisory Board. As part of this process, improvement in the bank-wide Know
ING Group Annual Report 2019 KPMG Accountants N.V., registered with the trade register in the Netherlands under number 33263683, is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (‘KPMG International’), a Swiss entity. 131
Conformity statement pursuant to section 5:25c paragraph 2(c) of the Dutch
In these dialogues the most contentious point was the level of total direct compensation. Some investors were concerned about ING’s ability to attract the relevant talent. Other stakeholders were more critical about the general remuneration level. There was also criticism that the EURO STOXX
50 peer group, which ING uses as a benchmark for remuneration, includes too many companies that are not sufficiently comparable.
The insights gained from the stakeholder engagement process have significantly contributed to the quality of the remuneration policy that we intend to propose to shareholders at the next Annual
General Meeting (hereafter ‘AGM’) in April 2020. Both myself and my colleagues on the Supervisory
Based on the various viewpoints, interests, remarks and concerns, going forward we are proposing a moderate annual base salary increase linked to an external indexation reference point such as a consumer price index and ING’s CLA increases.
Board and Supervisory Board members will become effective retroactively from 1 January 2020.
As the discussions with stakeholders last year showed, remuneration is an important topic for many stakeholder groups, who raised varying viewpoints on the topic. Myself and my colleagues on the Supervisory Board are fully committed to making sure we get our approach to remuneration right – for now and in the future. It’s about achieving a balance that is right for ING, for customers, shareholders, other stakeholders and society at large.
This 2019 Remuneration Report is our first under the requirements of the Dutch Act implementing
After the very challenging year 2018, a majority of shareholders at the AGM in April 2019 voted against discharge of the Executive Board and Supervisory Board members from their potential liability against the company for their duties performed in 2018. The Supervisory Board and
Policy) complies with applicable laws and regulations and is in line with the remuneration principles that apply to all employees.
Since 1 January 2015, all members of the Executive Board have participated in the Collective
In accordance with the 2019 EB Remuneration Policy, the Supervisory Board annually determines the actual remuneration for members of the Executive Board, based on the advice given by the
The Remuneration Committee’s responsibilities include preparing the Supervisory Board for decisions regarding the remuneration of individual members of the Executive Board. Remuneration proposals for individual Executive Board members are drawn up in accordance with the 2019 EB
This section includes remuneration details for current and former Executive Board members relating to the period that they served on the Executive Board during 2019.1 3
Executive Board members compared to the average total direct compensation of all ING
ING’s contractual notice period of six months, he continued to advise the company until 31 August 2019. In line with applicable regulations a severance payment was granted. Although entitled to a maximum severance payment of one year’s fixed annual pay, the Supervisory Board at its discretion set the severance pay at a level of 50% of fixed annual pay (€601,800).
3 The internal ratio in 2018 for the CEO was 1:29, for the other Executive Board members this amounted to 1:20. In 2017, the internal ratio for the CEO was 1:33 and for the other Executive Board members this amounted to 1:23.
Profit before Tax ING Group (continuing operations) (in mln) 6,834 0% -6% 23% -4% 66%
the impact is less due to the fact that his fixed remuneration was increased by 2.2% in 2018 compared to 2017. The fixed remuneration for the CFO and CRO remained the same.
Dutch Banking Code. This has a mitigating effect on the correlation with the company performance.
6 Supervisory Board members do not receive any variable remuneration. Their remuneration is based on fixed fees related to their role and amount of meetings. The high fluctuations are caused by joining and leaving the Supervisory Board during the year, change of roles during the year and the difference in the amount of meetings. Hence there is no correlation between the SB remuneration and the company performance.
A growing share of Retail customers only interacts with ING on their mobile device, up from 26% in 2018 to 37% in 2019. Increase in conversion of customer interactions into sale, with seven times higher mobile sales in 2019 than in 2016.
▪ An advanced AI-based anomaly detection model to automatically analyse and detect new potentially suspicious behaviour in foreign currency clearing and settlement that ING executes on behalf of others.
Important steps taken in the major digital transformation programmes: ▪ Unite be+nl: Reduced the branch footprint and introduced two common digital channels across Belgium and Netherlands (OneApp and OneWeb)
▪ Welcome: ING in Germany completed the programme early 2019 after introducing a new mobile app (One App) and a Go2Place platform including e-signature, multi-banking account overview, forecasting, third-party services and end-to-end digital process for account opening, consumer loans and mortgages.
▪ Wholesale TOM: Improved the experience of the ING’s Wholesale Banking customers through the implementation of target solutions in Financial
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Remuneration report launched on the platform is home insurance, delivered by the ING mobile app in Italy. This is in addition to the six products launched outside the platform in 2019.
▪ Introduction of ApplePay to enhanced the experience of our mobile app users.
Major milestone achieved in the blockchain area: ▪ ING joined a consortium with MineHub to develop a blockchain-based platform that would help ING clients in the metals and mining sector to lower costs, increase transparency and contribute to sustainable production and trading.
Climate Alignment Dashboard (CAD) the report presents which sectors are on track for climate alignment and where work is still in progress. This climate change disclosure is a first for banks.
Total aggregated number of shares 59,812 31,743 1 The number of shares is based on the average ING share price (€10,34) on the day on which the year-end results were published.
2 Tanate Phutrakul was appointed to the Executive Board immediately following the 23 April 2018 AGM. This amount of variable remuneration reflects his period as an Executive Board member. Thus, for the period from 23 April 2019 – 31 3 Koos Timmermans left ING per 7 February 2019 as an Executive Board member. Until 31 August 2019 he received an advisor fee for the period in which he transferred his activities to his successor. Thus the base salary reflects the payments from 1 January 2019 – 31 August 2019. The amount of variable remuneration however, only reflects his period as an
Executive Board member. Thus, for the period from 1 January 2019 – 7 February 2019.
The other emoluments amounted in 2019, 2018 and 2017 to the following costs.
Executive Board (active on 31 December 2019), while serving on the Executive Board, amount to €2.4 million for the CEO, €1.1 million for the CFO and €1.7 million for the CRO.
Steven van Rijswijk 1,688 1,688 2.90 19 March 2009 19 March 2012 18 March 2019
For 2020 the following target areas will be taken into account.
The remuneration of Supervisory Board members is not paid out in equity (i.e. solely cash).
Mike Rees² 73,000 1 Henk Breukink stepped down as of 23 April 2019. The remuneration figures for 2019 reflect a partial year as a member of the Supervisory Board.
2 Mike Rees was appointed to the Supervisory Board by the 23 April 2019 AGM. His appointment became effective as of the end of the AGM. The remuneration figures for 2019 reflect a partial year as a member of the Supervisory Board.
Supervisory Board members may obtain banking and insurance services from ING Group and its subsidiaries in the ordinary course of their business and on terms that are customary in the sector.
Supervisory Board members are permitted to hold ING shares as a long-term investment. The table below shows the holdings by members of the Supervisory Board on 31 December 2019, 2018 and
The primary objective of ING’s remuneration principles is to enable ING to attract, motivate and retain qualified and expert leaders as well as senior staff (including Executive Board members) and other highly qualified employees. Our remuneration principles apply to all employees, including
The principles are an integral part of ING’s corporate strategy and risk profile. They maintain a sustainable balance between short and long-term value creation and build on ING’s long-term responsibility towards customers, society and other stakeholders.
ING operates a robust performance management process linked to remuneration to steer and motivate all employees to deliver on its strategic goals, aiming to reward success and prevent rewarding for failure.
We aim to reward for success and avoid rewarding for failure. That is why ING’s remuneration approach is strongly linked to a comprehensive performance management process. Outcomes of performance evaluations provide direct input for remuneration. This does not necessarily mean that performance is directly linked to variable remuneration since within ING not all employees are eligible for variable remuneration. In the Netherlands, for example the vast majority of the employees do not receive any variable remuneration.
Step Up Performance Management is our global performance management approach applicable to the majority of employees. It aims to improve people’s individual performance and thereby their team performance and ultimately ING's performance. Step Up Performance Management is one of our people practices that help to increase focus, alignment and transparency. We do this through continuous conversations between managers, employees and teams. To support these conversations, there are three formal moments to discuss performance during the year: target setting, mid-year review and year-end evaluation.
▪ For identified risk takers, risk mitigation measures may lead to a downwards adjustment of the performance outcome and negatively affect variable remuneration (a risk modifier can be applied).
Total direct compensation is the total of fixed and variable remuneration, excluding benefits such as pension and allowances.
of variable remuneration is deferred over a period of three to five years with a tiered vesting schedule. Furthermore, at least 50% of variable remuneration is awarded in equity (linked instruments).
To unlock the variable remuneration pools, regulatory and performance hurdles must be met.
The ex ante and/or ex post risk adjustments require Supervisory Board approval, taking into account the input of the Risk and Finance functions and the advice of the Risk and Remuneration
Supervisory Board and contributes directly to the advice made by its Remuneration Committee.
The feedback received from stakeholders was taken into account when drafting this proposed remuneration policy.
Executive Board member with reference to market practice. The below factors are given consideration in determining base salaries: ▪ the individual’s level of skill and performance; ▪ ING’s business performance, and market conditions; ▪ internal pay ratios and salary increases for other ING employees within the wider ING group; ▪ remuneration level within the external peer group; ▪ public indexation reference points (e.g. consumer price index); ▪ stakeholder views.
Size is a significant factor in the dynamics and complexity of a company. Therefore it is important to include companies in the peer group that are broadly comparable in terms of size and complexity. For this, potential peer group companies were assessed on the metrics of market capitalisation (where applicable), number of employees and revenue, with companies considered in the range of one quarter up to four times the size of ING. For general industry peers and for
The Supervisory Board intends to keep the peer group as stable as possible. Each year the appropriateness of the selected companies will be assessed against the guiding principles, which will not change. The peer group constituents will be reported in the Annual Report.5 7
After the performance year, the Supervisory Board reviews performance on the applicable criteria and determines the appropriate variable remuneration amount to be awarded. It uses input and support from the other Supervisory Board committees, such as the Risk Committee and the Audit
Committee. The outcomes for each quantitative performance measure are assessed on a linear 5 For more information on the peer group composition in 2020, we refer to the additional information on page 159.
With respect to pension, Executive Board members participate in ING’s general Collective Defined
Members of the Executive Board are appointed by the shareholders at the Annual General Meeting
In principle, in the event of an involuntary exit, the Executive Board member is eligible for a severance payment. If termination of the contract is based on mutual agreement, the Executive
The Remuneration Committee is responsible for annually reviewing the Supervisory Board remuneration policy and making recommendations to the Supervisory Board on amendments. The review takes into account at least the following: (i) ING's benchmark position, (ii) stakeholders'
The peer group will be disclosed annually in our Annual Report.
Supervisory Board (SB), and is cascaded throughout ING. The MBB is composed of the Executive
The heads of ING’s banking business & support functions and the heads of the country units, or their delegates, are the first line of defence. They have the primary ownership, accountability and responsibility for assessing, controlling and mitigating all financial and non-financial risks affecting their businesses, and, for the completeness and accuracy of the financial statements and risk reports with respect to their responsible areas. The COO is responsible and accountable for proper security and controls on global applications and IT platforms servicing the Bank and implementing proper processes.
for ING Bank) and the SB; both tiers play an important role in managing and monitoring the risk management framework.
ING’s regional and/or business unit management have primary responsibility for the management of risks (credit, market, funding and liquidity, operational, IT and compliance risks) that arise in their daily operations. They are accountable for the implementation and execution of appropriate risk frameworks affecting their businesses in order to comply with procedures and processes at the corporate level. Where necessary, the implementation is adapted to local requirements. The regional and/or business unit CROs are involved in these activities. The local (regional and BU) CRO is responsible for the analysis, control and management of risks across the whole value chain (from front to back office). The local risks are discussed in local risk committees that roll up to the key risk committees at executive level. Local Client Integrity Risk Committees (CIRCs) assess client integrity risk and they have a final decision on client acceptance or client off-boarding, from a risk-based perspective, in the areas of Financial Economic Crime (FEC), Foreign Account Tax Compliance Act
The scope of the ICF is the development and maintenance or update of global internal control documents: policies, minimum standards, product control frameworks, support control frameworks
(4) the model management inventory and tooling. MoRM monitors global model risk and model performance.
The validation teams provide independent model validation, which starts with the determination that a model is appropriate for its intended use. This is 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 enhance risk awareness we continued to support the business in the area of risk culture and monitor compliance risk. This included training by compliance and data experts to enhance balanced decision-making in line with the Orange Code dilemma model (introduced in 2017) to support well-balanced and integrity-led decision-making. This four-step model helps to delay judgment and aims to find out where the moral weight lies for a potential decision.
Other initiatives such Global Data Ethics and the I-for-integrity programme within the Netherlands and Belgium are continuing. In addition, new employees undergo a series of e-learnings on topics such as KYC, compliance, dealing with dilemmas, data risk and integrity in practice.
For more information on ING’s compensation and benefits policies and its relation to the risk taken, please refer to the ‘Capital Requirements Regulation (CRR) Remuneration disclosure’ published on the corporate website ing.com.
At ING, BRM is positioned in the second line of defence, reporting directly to the chief risk officer.
‘governance and ownership’ and ‘alignment and trust’, as well as bringing together the ‘whole system in the room’. Here senior leaders delve into the outcomes of the assessments, identifying deeply rooted and often complex issues for improvement.
Compliance to align on and embed desired leadership and risk behaviours (i.e. speak up, psychological safety, communication, guiding leadership).
The recurrence is twofold. Firstly, the identification, assessment, review, and update of mitigating measures are done periodically. Secondly, the periodic monitoring exercise may indicate emerging risks, known risks that are changing, risk levels that are changing, or current control measures that are not effective enough. Further analyses of these findings may result in renewed and more frequent risk identification, and/or assessment, and/or change of mitigating measures.
ING monitors the risk control measures by checking if they are executed, complied with and have the expected mitigating effects and by following the development of the risks and their risk levels.
The RAF policy states the overarching global risk appetite. Within the RAF, ING monitors a range of financial and non-financial risk metrics to ensure that our risk profile is in line with our risk appetite while executing our strategy. ING’s RAF, which is approved by the Supervisory Board (SB), defines our desired risk profile that is integrated in the strategic decision-making and financial planning process. It is designed to be able to withstand market volatility and stress, while meeting regulatory requirements. The framework including underlying assumptions and metrics, is regularly reviewed so that it remains relevant. The RAF combines various financial and non-financial risk appetite
The RAF and underlying limit allocation is reviewed 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, 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 Boundary and the underlying metrics supporting the boundaries which need EB and MBB
Based on ING’s risk assessment and risk purpose, boundary for the overarching risk frameworks are set. Once the overarching risk appetite thresholds have been set and approved by EB/MBB and subsequent SB, the statements are translated into risk-type specific statements and lower level thresholds which are set and approved by senior risk committees ALCO Bank, GCTP and NFRC Bank.
The stress testing process of ING consists of several stages, which are: ▪ Risk identification & risk assessment: It identifies & assesses the risks ING or the relevant entity is facing when executing its strategy based on the current and possible future economic, political, regulatory and technological environment. It provides a description of the main risks related to the nature of ING’s business, activities and vulnerabilities.
▪ Scenario definition & parameterisation: Based on the outcome of the previous step, a set of scenarios should be determined where the relevant scope and set of risk drivers is determined for each scenario, as well as the severity, the key assumptions and input parameters. The output of this phase includes a quantitative description of the stress scenarios to be analysed, the relevant output metrics and, when applicable, a narrative description.
▪ Impact calculation and aggregation: Based on the quantitative description of the stress scenarios determined in the previous step, the impact is determined for the relevant scenario, scope and horizon. The impact calculation and aggregation can be part of a recurring process or are part of a specific process set-up for one-off stress tests.
▪ Scenario control & management assessment: Depending on the outcomes of the stress test and the likelihood of the scenario, mitigating actions may be proposed. Mitigating actions may include, but are not limited to, sales or transfers of assets and reductions of risk limits.
The key changes introduced by the banking reform package consist of among others a binding
Leverage Ratio (LR) requirement, independent from the riskiness of the underlying exposures, as a backstop to risk-weighted capital requirements, and a Net Stable Funding Ratio (NSFR) based on the
In July 2019, the ECB published final chapters of the guide to internal models, covering credit risk, market risk and counterparty credit risk. These risk type-specific chapters are intended to ensure a common and consistent approach to the most relevant aspects of the regulations on internal models for banks directly supervised by the ECB. Additionally, they provide transparency on how the ECB understands the regulations on the use of internal models to calculate own funds requirements for the three risk types. Impact on ING is through more stringent regulation on internal models as well as an increase of Risk Weigthed Assets (RWA).
The topics have emerged as part of the annual Risk Assessment that is performed as part of the
In 2019, we continued to implement and execute policies and procedures to further enhance our
To further strengthen understanding and adoption of TCFD recommendations, ING has joined the
Risk Assessment process in place, helping us to adjust risk appetite and policies to reflect external environment management.
ING’s Environmental and Social Risk (ESR) management process evaluates risks on a client and transaction basis. In 2019, we updated our ESR policy and implemented a standalone climate change policy which aims to limit deal-specific potential negative climate impacts. (refer to ESR
The credit risk function encompasses the following activities: ▪ Measuring, monitoring and managing credit risks in the bank’s portfolio; ▪ Challenging and approving new and modified transactions and borrower reviews; ▪ Managing the levels of provisioning and risk costs, and advising on impairments; and
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 credit risks by setting a risk limit per client. Due to the short-term nature (typically one day), ING does not hold provisions or capital for settlement risk. Although a
For the reconciliation between credit risk outstandings categories and financial assets, refer to table below: Credit risk categories Mainly relates to: Notes in the Consolidated financial statements
Pre-settlement (PS) risk -Financial assets at fair value through profit or loss (trading assets and non-trading derivatives) Note 4 Financial assets at fair value through profit or loss -Financial liabilities at fair value through profit or loss (trading assets and non-trading derivatives) Note 15 Financial liabilities at fair value through profit or loss -Securities financing Note 44 Offsetting financial assets and liabilities
Settlement risk -Financial assets at fair value through profit or loss (trading assets and non-trading derivatives) Note 4 Financial assets at fair value through profit or loss -Financial liabilities at fair value through profit or loss (trading assets and non-trading derivatives) Note 11 Other assets -Amounts to be settled Note 15 Financial liabilities at fair value through profit or loss
(including business) parameters – and potentially the maximum product and/or portfolio limit to undertake that business. A sector policy is always prepared by the front office responsible for the internal business mandate and requires an approval from the designated approval authority.
▪ Reference benchmarks: The maximum credit risk appetite per obligor group is expressed as a
ING’s environmental and social risk (ESR) policy framework helps us make transparent choices about how, where and who we do business with. In 2019 we renewed our ESR Framework based on input from different stakeholders including clients, peers, NGOs and our own colleagues. Through regular updates like these we keep abreast of societal norms and regulation relating to sustainability and challenge our own increasingly strong commitments on the topics of human rights and climate change.
It includes explicit restrictions on activities not in line with ING’s values and harmful to people or the environment (for example companies involved in manufacturing cluster munitions), which we will not directly finance.
The way the Framework is applied in practice differs per product type. Generally the largest potential environmental and social impacts come from large corporates within our Wholesale
ESR is applied in practice in different ways, including an ESR client assessment during KYC
onboarding, an ESR transaction assessment for Wholesale Banking, separate in-depth advice from the global ESR team for ESR high-risk WB transactions and name screening for transactions with fully restricted clients. These ESR check and controls are integrated into our client and transaction due diligence processes.
Credit risk portfolio per economic sector and application of ESR framework
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Credit risk important role in helping clients transition towards improved environmental and social performance on the ground.
Incorporating these helps us to determine which transactions require further analysis and action, and provides our stakeholders with a better understanding of our approach to human rights and climate change when assessing transactions. The updated ESR policy also encourages clients to identify and be transparent about how human rights and/or environmental issues affect their supply chains. They should provide evidence of proper monitoring and where relevant, translate these findings into acceptance criteria for partners and suppliers.
Our ESR approach helps us and our clients to gradually enhance the implementation of key standards like the UN Guiding Principles on Human Rights and the Organisation for Economic
also co-leads the capacity building and training working group, which resulted in the roll-out of an online EP learning tool to ING risk and front-office employees last year. The tool is used by other EP banks globally.
▪ OECD: ING’s active role in promoting and integrating human rights is reflected in our participation as a formal advisory member to the OECD on responsible business conduct in our sector. In 2019 the OECD published the Due Diligence for Responsible Corporate Lending and Securities
▪ United Nations Human Rights Office: In May, at the request of the UN Human Rights Office of the High Commissioner, ING hosted a meeting with Dutch private sector industrials and the UN
High Commissioner for Human Rights, Ms Michelle Bachelet, during her first official visit to the
Other models are more regional- or country-specific: there are PD models for Small Medium
For regulatory capital, pre-settlement (PS) exposure is calculated using a marked to market (MtM)
During 2019, ING’s portfolio size increased by EUR 22.3 billion (2.69%) to EUR 854 billion outstanding, driven by volume growth and foreign exchange rate changes. The net volume growth was concentrated in the Lending risk category. FX rate movements contributed to EUR 3.2 billion of the total growth, driven by the appreciation of the US dollar (+1.8%), British pound (+5.5%),
Australian dollar (+1.5%) and Polish new zloty (+0.9%), partially off-set by the depreciation of New
Turkish Lira (-9.0%) and New Romania Leu (-2.7%) against the Euro.
Overall the rating class concentration improved. The share of Investment grade rating classes increased from 67.2% to 68.7%, while the share of non-investment grade slightly decreased, from 30.8% to 29.3%. Substandard grade outstanding remained stable at EUR 5.5 billion whereas the
Corporate line decreased concentration in AAA rating class due to a reduction in the reserve deposit with De Nederlandsche Bank.
Apart from the movements against the financial counterparties, ING Wholesale increased its exposure to Food, Beverages & Personal Care industry (in Brazil and Hong Kong); to Natural
Resources (UK and Singapore), and to Utilities (Luxemburg and the UK). Exposure decreased in Real
portfolio. The share of Netherlands in the overall portfolio decreased further from 25.9% to 24.6%.
Germany increased mainly due to residential mortgage lending, instalment loans and central bank exposures.
to 25%, >25% to 50%, >50% to 75%, >75% to <100%, and ≥ 100%.
A significant part of ING’s residential mortgage portfolio is in the Netherlands (37.9%), followed by
Non-performing 1 Consists mainly of residential mortgages to small one man business clients.
The collateralisation of the consumer lending portfolio continued to improve during 2019. The rise in collateralisation levels was due to rising housing prices observed in different mortgage markets, specifically noticeable the Netherlands.
Poland (23.2%). Mortgage outstanding in the Netherlands decreased slightly (0.8%). For the residential mortgages portfolio, the cover type guarantees relate to mortgages covered by governmental insurers under the Nationale Hypotheek Garantie (NHG) in the Netherlands. The NHG
Business lending accounts for 44.3 percent of ING’s total outstanding (44.0 percent in 2018). In line with our objective to give stakeholders insight into the portfolio, we present the business lending portfolio per industry breakdown in accordance with the NAICS definition and per region and main market. Business Lending presented in this section does not include pre-settlement, investment and money market exposures, which are outlined in the next sections.
Cover values including guarantees received – Consumer lending portfolio - 2018
The proportion of the business lending portfolio in Africa and the Netherlands with no cover decreased substantially year-on-year, respectively from 15.5% to 9.2% and from 43.4% to 37.4% in 2019. All industry types experienced an increase in total covers, but while the industries’ cover levels grew, only the outstanding for Utilities grew slightly faster.
Cover values including guarantees received - Business lending portfolio – 2018
Past due for 61–90 days 163 265 1 Based on consumer lending. The amount of past due but performing financial assets in respect of non-lending activities was not significant.
Total past due, but performing exposure, for consumer loans decreased by EUR 1.1 billion. The improvement was mainly visible in the 1-30 days bucket driven by Belgium and the Netherlands residential mortgages due to macro-economic factors (low unemployment, low inflation and increasing house prices). This was partially offset by the increase in Australia. Less significant decreases were witnessed in the 31-60 and 61-90 days past due buckets mainly driven by the
ING uses three distinct statuses to categorise the management of clients with (perceived)
deteriorating credit risk profiles, i.e. there is doubt as to the performance and the collectability of the client’s contractual obligations: ▪ Watch List: Usually, a client is first classified as Watch List when there are concerns of any potential or material deterioration in credit risk profile that may affect the ability of the client to adhere to its debt service obligations or to refinance its existing loans. Watch List status requires more than usual attention, increased monitoring and quarterly reviews. Some clients with a
Watch List status may develop into a Restructuring status or even a Recovery status.
Challengers & Growth and Wholesale Banking. The increase in Challengers & Growth was due to a combination of various smaller items, while the increase in Wholesale Banking was mainly driven by Food, Beverages & Personal Care and Natural Resources. This was largely offset by a significant decrease in Real Estate NPL outstandings. The largest increases were witnessed in Belgium in the services industry, the natural resources industry in the Americas and in Australia over various smaller items. The largest decreases were visible in the Netherlands in real estate and private individuals.
As per December 2019 ING’s total forborne assets decreased by EUR 0.6 billion (6%) against
December 2018 to EUR 9.5 billion, mainly driven by Wholesale Banking (-EUR 0.5 billion).
(2018: 22%) of the total Wholesale Banking forborne assets and 21% (2018: 23%) of the total nonperforming forborne assets.
Wholesale Banking forborne assets were mainly concentrated in Natural Resources, Transportation
Banking forborne assets and 59% of the total Wholesale Banking non-performing forborne assets.
As per end of December 2019, Retail Banking forborne assets amounted to a total of EUR 4.9 billion, which represented 1.1% of the total Retail Banking portfolio.
The IFRS 9 models leverage the advanced internal rating-based (AIRB) models (PD, LGD, EAD), which include certain required conservatism. In order to include IFRS 9 requirements, such regulatory conservatism is removed from the ECL parameters (PD, LGD and EAD). The IFRS9 models apply two types of adjustments to the ECL parameters: (1) to economic outlook and (2) for stage 2 and stage 3 assets only, to the lifetime horizon. The IFRS9 model parameters are estimated based on statistical techniques and supported by expert judgement.
As shown in the table below, 94.0% of the total gross carrying amounts is classified as stage 1, mainly composed of investment grade, while stage 2 and 3 make up 4.7% and 1.3% of total amounts, respectively.
2 For a reference to the Notes in the consolidated financial statements, we refer to the table ‘Reconciliation between credit risk categories and financial position’, page 181.
Foreign exchange and other movements -1 -3 -41 -45 1 At the end of December 2019, the Gross carrying amounts included loans and advances to central banks (EUR 51.2 billion), loans and advances to banks (EUR 35.1 billion), financial assets at FVOCI (EUR 32.2 billion), securities at amortised cost (EUR 46.1 billion), loans and advances to customers (EUR 616.4 billion) and contingent liabilities (credit replacements) in scope of IFRS 9 (EUR 115.7 billion) and excludes receivables related to securities in reverse repurchase transaction (EUR -9.9 billion), cash collateral in respect of derivatives (EUR -10.2 billion), the value adjustment hedged items in respect of portfolio hedges (EUR -3.9 billion), a receivable that is offsetted by a liquidity facility (EUR -1.3 billion), de-netting of cash pool balances (EUR -1.8 billion) and other differences amounting to EUR -0.3 billion.
2 Stage 3 Lifetime credit impaired includes EUR 1 million Purchased or Originated Credit Impaired (2018: EUR 2 million).
The downside scenario sees a relatively synchronised global downturn with economic growth in advanced economies falling close to zero, and emerging markets suffering a pronounced slowdown. The upside scenario sees economic growth returning to rates not seen since the financial crisis and a return to pre-crisis unemployment rates.
The relevance and selection of macro-economic variables is defined by the ECL models under credit risk model governance. The scenarios are reviewed and challenged by two panels. The first panel consists of economic experts from Global Markets Research and Risk and Modelling specialists, while the second panel consists of relevant senior managers.
Following the survey results, the distribution of forecast errors (that is being used for determining the scenarios) may be skewed.
For the downside scenario, ING has chosen for the 90th percentile of that distribution because this corresponds with how within risk management earnings at risk is defined within the Group. The upside scenario is represented by the 10th percentile of the distribution. The distribution of the scenarios, taking into account the applicable percentile of the distribution, results in the upside and downside scenario being weighted at 20% each. Consequently, the base case scenario has a 60%
Real GPD, unemployment rate and HPI (in that order) are considered the variables with the largest impact on the LLP. Exposure class based the largest impact is observed in Corporates, followed by
Retail Mortgages, SMEs and Retail non-SMEs. This is supported by statistical analysis. These forward-looking macroeconomics (among others) are used in the calculation of the Group’s unweighted ECLs, to which are applied the probability-weightings as disclosed, to arrive at the reportable ECL for collectively-assessed assets. While 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.
All assets and off-balance sheet items are 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 scenario weighted average PD being assessed against a set of PD threshold bandings, which determines the appropriate staging and ECL. Stage 2 is triggered when either a threshold for absolute change in lifetime PD or relative change in lifetime
Speculative grade assets. The Group reports total ECL collective-assessment of EUR 1,291 million
The setting of PD threshold bandings requires management judgement, and is a key source of estimation uncertainty. To demonstrate the sensitivity of the ECL to these PD thresholds bandings,
function, where ALCO Bank is the highest approval authority and sets the market risk appetite.
The monitoring and control of market risk is the responsibility of the Financial Risk (FR) department and Financial Institutions – Financial Markets (FI-FM) Risk. FR and FI-FM Risk are the designated departments of the second line of defence that report to the CRO function and are responsible for the design and execution of the bank’s market risk and counterparty credit risk management functions in support of the ALCO function. FR focuses on the market risks in the banking books, whereas FI-FM Risk is responsible for counterparty credit risk and market risks resulting from the
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Market risk take appropriate actions to reduce the risk position. To adhere to the established limit framework,
Committee (MRMC) is the dedicated authority within ING for the approval of all trading and banking risk models, methodologies and parameters related to market risk. The Trading Pricing Model
Committee (TPMC) approves pricing models for trading and banking books. Financial Risk and FI-FM
The following market risk paragraphs elaborate on the various elements of the risk management framework for: ▪ Market risk economic capital (trading and banking books); ▪ Market risks in banking books; and
Real estate price risk includes the market risks in both the real estate investment and the development portfolio of the ING Wholesale Banking business line. The economic capital for real estate price risk is calculated by stressing the underlying market variables.
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 scheme below presents the transfer and management process of market risks in the banking books:
Linear interest rate risk is transferred from the commercial business to the treasury book (Group
During 2019, the following refinements to the risk measurement for Interest Rate Risk in the
The NII-at-Risk asymmetry between the downward and upward ramped scenarios (gradual shock ≈
The change in NPV-at-Risk for Retail Banking Benelux was driven by updates in the savings model to reflect the most recent market developments in The Netherlands and Belgium. The internal view on capital replication of the own funds long-term investments is included in the NPV-at-Risk figures.
Interbank offered rates, such as Euribor and Libor, are widely used as benchmarks to set interest rates across a broad range of financial products and contracts. The financial markets are going through a significant reform and financial institutions are obligated to implement a replacement of these major interest rate reference rates. In line with recommendations from the Financial Stability
ING is currently making the necessary preparations for the potential cessation and transition of
The following interest rate benchmarks are in scope of ING’s IBOR transition program: GBP LIBOR,
ING is pro-actively reaching out to industry participants, counterparties and clients to create awareness and support on the upcoming transition.
CET1 capital and risk-weighted assets are equally sensitive in relative terms to changing FX rates.
entity. In 2019, we reviewed and updated our methodology for specific CET1 deductibles. This drives the move in GBP net exposure and applies to the calculation of the FX Translation figures in the above table hence has no impact on the reported CET1 figure itself. ING sold its stake in Kotak
Mahindra in February 2019 and therefore no longer has exposure on Indian Rupee.
2,306 million (2018: EUR 3,228 million). The value of equity securities held at FVOCI is directly linked to equity security prices with increases/decreases being recognized in the revaluation reserve.
FI-FM Risk uses the historical simulation VaR methodology (Hvar) as its primary risk measure. The
uses the same model that is used for 1DHVaR, with a ten-day horizon. The data for historical stress period used currently includes the height of the credit crisis around the fall of Lehman Brothers, and this choice is reviewed regularly. The historical data period is chosen so that it gives the worst scenario loss estimates for the current portfolio. The same SVaR model is used for management purposes and for regulatory purposes. The same SVaR model is used for all legal entities within ING
According to the Capital Requirements Regulation (CRR/CRD IV), regulatory capital (own funds requirements) for market risk can be calculated using the standardised approach or an internal model approach. ING received regulatory approval to use an internal model to determine the regulatory capital for the market risk in all trading books of ING. Market risk capital of trading books is calculated according to the CRR, using internal HVaR, SVaR, and IRC models, where diversification is taken into account. Capital for foreign exchange risk from the banking books and for Collective
Investment Undertakings (CIUs) exposures in trading books are calculated using Standardised 1d VaR for Internal Model Approach trading portfolios3
Average of the daily VaR (Article 365(1)) on each of the preceding sixty business days
(VaRavg) x multiplication factor ((mc) in accordance with 2 SVaR (higher of values a and b) 3,011 241 3,217 257
(b) Average of the IRC number over the preceding 12 weeks 1,278 102 767 61
Japanese Yen –10 South Korean Won 14 amounts in EUR thousands 2019 2018
United Kingdom 72 France 151 1 Basis Point Value (BPV) measures the impact on value of a portfolio due to a 1 basis point increase in interest rates. The figures include commodity risk in banking books.
Exposures to supranational institutions are not assigned to a specific country.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Funding and liquidity risk
ICLAAP processes and documents as per the ICLAAP Framework of ING Group towards the Internal
ING’s liquidity risk framework is based on the three lines of defence concept whereby risk principles are implemented, monitored and controlled in conjunction with both first and second line of defence functions.
Group Treasury and the business lines are the first line of defence functions. Group Treasury’s main responsibility is to manage ING’s (regulatory) liquidity and funding position by executing ING’s funding plan, maintaining access to both the short and the long term professional funding markets
The main objective of ING’s funding and liquidity risk management is to maintain sufficient liquidity to fund the commercial activities of ING both in normal and stressed market circumstances across various geographies, currencies and tenors. This requires a diversified funding structure considering relevant opportunities and constraints.
ING’s long-term professional funding is well diversified across maturities and currencies. The main part of it is EUR and USD denominated which is in line with the currency composition of customer lending.
Taking into consideration the abovementioned factors, ING Group assesses its current and future liquidity adequacy and, if deemed necessary, takes steps to further improve ING’s liquidity position and to ensure sufficient counterbalancing capacity. That is achieved through the quarterly update of the Liquidity adequacy statement and the execution of the ILAAP process.
ING’s Funding and Liquidity framework aims to ensure sufficient liquidity under normal, adverse and stressed market circumstances. ING assesses its F&L adequacy through three lenses: (i) Stress,
(idiosyncratic, market-wide or a combination of the two) which is characterised by customer deposit outflows and/or deterioration of funding markets access; ii) Through the Sustainability lens ING assesses the extent to which its customers, professional counterparties and investors are comfortable extending funding in tenors, currencies and instruments necessary to sustainably fund ING under a going-concern situation; (iii) Through the Regulatory lens ING ascertains that it is in a position to meet both current and future regulatory requirements.
The strategic ambitions of ING, together with the design and execution of the funding plan, are assessed under both current and projected market conditions. Key emphasis is placed on understanding overall market trends and developments, credit rating changes and peer comparison.
The stress testing framework encompasses the funding and liquidity risks of the consolidated balance sheet of ING Group including all entities, business lines as well as on and off-balance sheet positions. The Net liquidity position and Time-to-survive are the two main stress testing output metrics. Both metrics are impacted differently under specific F&L stress scenarios with related parameterisation.
The outcomes of the stress testing are taken into account in all the key aspects of ING’s F&L risk framework and F&L risk management: ▪ risk appetite framework (through risk appetite statements); ▪ risk identification and assessment; ▪ monitoring of the liquidity position; ▪ contingency funding plan; ▪ early warning indicators.
The contingency funding measures are developed in conjunction with the ING recovery plan and are tested on a regular basis.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Non-financial risk
The head of Corporate ORM, Corporate IRM, IVU, CSI, Professional Practice Unit and Strategy, Central
CRO.. The global head of Non-Financial Risk is responsible for developing the framework of nonfinancial risk policies and standards within ING, and for monitoring the quality of non-financial risk management in the ING entities.
ING uses its AMA model for regulatory capital calculation purposes and reports the regulatory capital numbers on a quarterly basis. The bank is currently not using any insurance or risk transfer mechanisms for the mitigation of risk in the context of the AMA capital calculation.
ING categorises NFR risks in a number of areas: ▪ Information (Technology) risk is the risk of financial loss, regulatory sanctions or reputational damage due to breaches of confidentiality, integrity or availability within business processes or information or lack of information quality; ▪ Continuity risk is the risk of financial loss, regulatory sanctions or reputational damage due to business disruptions (loss of people, processes, systems, data, premises); ▪ Control and processing risk are the risks of financial loss, regulatory sanctions or reputational damage due to ineffective organisational structures and governance procedures (including unclear roles and responsibilities and inadequate reporting structure), failed (transaction)
Concerns over the potential impact of insider threats continues to increase with specific information relating to external instances or trends in the financial industry remaining limited, albeit collaboration within the financial sector is improving.
The increasing use of third party vendors for services and the implementation of PSD2 are likely to present ongoing fraud management and IT security challenges; both in the short- and mediumterm as criminal actors target financial and broader PII data outside the traditional banking environment.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Non-financial risk standardization, harmonisation of processes via standardized workflows and further automation of
As per 25 May 2018, the European General Data Protection Regulation (GDPR) became effective.
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.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Compliance risk
(CCO), who is the global head of Compliance Risk Management. This is an independent function that is amongst others responsible for developing and establishing bank-wide policies and minimum standards for managing compliance risks. The CCO assists the Supervisory Board, Executive Board and Management Board Banking in managing ING’s compliance risks and control framework. The
ING categorises compliance risk into four conduct-related integrity risk areas: ▪ Client/third party conduct refers to the compliance risks arising from the relationship with or generated by the conduct of our customers and/or business partners, like money laundering or terrorist financing. Those risks are generally defined within ING as financial economic crimes.
▪ Organisational conduct refers to the compliance risks arising from the way the bank is organising itself to develop its activities. This category covers among others the licences required to perform its regulated banking activities, the operating effectiveness of its information barriers, organisation conduct conflicts of interest, anti-competitive conduct, record retention.
ING is committed to the preservation of its reputation and integrity through compliance with applicable laws, regulations and ethical standards in each of the markets in which it operates. All employees are expected to adhere to these laws, regulations and ethical standards, and management is responsible for ensuring such compliance. Compliance is therefore an essential ingredient of good corporate governance. As gatekeepers of the financial system we have obligations to safeguard trust in that system and prevent misuse. For example a recent study by
In addition to addressing financial economic crime-related requirements, the KYC policy framework also reflects KYC-related requirements of the FATCA/CRS policy, as well as certain elements of the
In September 2018, ING announced that it had reached a settlement agreement with the Dutch
Please refer to Note 46 ‘Legal proceedings’ to the consolidated financial statements for more information.
In 2019, as part of our commitment to enhance the way we manage compliance risks and embed stronger awareness across the whole organisation, we also took the following steps across our five
KYC pillars: ▪ Policies and risk: This pillar focuses on the development and roll-out of a global KYC policy, a global KYC risk appetite statements and KYC risk assessments on customers, capability structure and maturity assessments.
▪ In 2019, we updated the new KYC policy, which integrated all existing policies related to antimoney laundering, financial economic crime and customer due diligence. It came into effect in July. (See section ‘KYC policy framework’ above).
‘Environmental and social risk framework’ in the credit risk chapter for more information)
▪ We implemented a systematic integrated risk approach (SIRA) in all business lines globally.
▪ Innovating to automate and improve KYC processes. In 2019, we developed a ‘smurfing’ tool, which uses artificial intelligence to detect instances of smurfing when large fraudulent transactions are broken up into smaller transactions that will not be flagged by conventional monitoring systems. And we are developing a virtual alerts handler that uses artificial intelligence to reduce the number of false positives, freeing up KYC staff to concentrate on those alerts that do require attention.
▪ In 2019, we introduced the new standard transaction monitoring tooling in the first countries.
▪ In May 2019, the first version of the global transaction monitoring (TM) control guidance came into effect. It outlines the adoption of a uniform TM methodology framework to mitigate financial economic crime risks.
Dutch central bank and are a member of the public-private partnership council of the Dutch
Committee, which drives improvements and ensures alignment between KYC-related projects and activities. It also monitors all KYC-related costs, helps prioritise activities and steers decisions on KYC-related issues and developments.
▪ Knowledge and behaviour: This pillar focuses on increasing knowledge about KYC, providing training and carrying out behavioural risk assessments to detect high-risk behaviours, intervening where necessary.
In addition, the 5th AML Directive will be implemented in the Netherlands. The 5th AML Directive was originally adopted by the EU Council in June 2018, with the aim of addressing means of terrorist financing, increasing transparency to combat money laundering and helping to strengthen the fight against tax avoidance. The most important aspects of the 5th AML Directive involve the (anti money-laundering) risks relating to the use of virtual currencies, the improvement of information exchange between supervising authorities, and the introduction of beneficial ownership registers for corporate and other legal entities.
If the Group cannot rely on IGA or satisfy the requirements, certain payments to the Group may be subject to withholding under FATCA. Certain payments may also be subject to other US withholding tax regulations. The possibility of such withholding and the need for account holders and investors to provide certain information may adversely affect the sales of certain of the Group’s products. In addition, compliance with the terms of such IGAs and with FATCA, any regulations or other guidance promulgated thereunder, or any legislation promulgated under an IGA, and offering products that generate ‘withholdable payments’, may substantially increase the Group’s compliance costs.
Common Reporting Standard (‘CRS’) and model competent authority agreement to enable the multilateral and automatic exchange of financial account information. CRS requires financial institutions to identify and report the tax residency and account details of non-resident customers to the relevant authorities in CRS-compliant jurisdictions. As of 19 September 2019, 109 jurisdictions (‘signatory countries’), including the Netherlands, have signed a multilateral competent authority agreement to automatically exchange information pursuant to CRS. The majority of countries where ING has a presence have committed to CRS. The EU has made CRS
▪ Preventing Abuse of Residence by Investment (RBI) and Citizenship by Investment (CBI) Schemes to Circumvent the CRS.
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
Integrity and transparency in financial markets are essential for public and investor confidence. The revised Markets in Financial Instruments Directive European legislation (MiFID II/MiFIR) came into effect in January 2018 and had a major impact on ING and the markets in which it operates. A
central programme continued in 2019 to support ING’s commitment to further embed the revised legislation throughout the organisation.
A model is defined as a quantitative method, system, or approach that applies statistical, economic, financial, or mathematical theories, techniques, and assumptions to process input data into quantitative estimates.
A candidate model is considered a model when: ▪ the outcome is used for a decision: by the customer, community, business / colleagues, and / or other internal or external stakeholders, such as regulators or shareholders, and
The Model Risk Management Committee (MoRMC) has been established to align the overall model strategy and the model risk appetite, and approve model policies, procedures and methodologies.
In terms of composition and main activities: ▪ The 1st LoD is composed of the model owners (mainly the business), data management and model development, accountable for, among others, the development, implementation and use of the models as well as monitoring the effectiveness of the models; ▪ The 2nd LoD is composed of model validation and model risk management, which owns the model risk management framework and the risk appetite; and
Model performance monitoring begins when model use has started and continues until the model has officially been decommissioned.
ING applies an explicit Risk Appetite Statement regarding business risk, focusing on earnings stability and diversification of the business mix. Avoiding putting all eggs in one basket reduces the risk that volumes and/or margins will suddenly drop due to unexpected changes in the business environment for certain markets and products. Furthermore, the underlying risk types (expense risk and volume-margin risk) are mitigated and managed differently. Expense risk is monitored and managed via the financial performance of the bank and the local units, whereby the reported expense numbers are compared on a quarterly basis with the projected cost/income ratio.
Notes to the consolidated statement of cash flows 31 Net cash flow from operating activities 318 32 Changes in liabilities arising from financing activities 318 33 Cash and cash equivalents
Loans and advances to customers 7 611,765 592,196 Other liabilities 17 12,829 13,510
Property and equipment 9 3,172 1,659 Subordinated loans 19 16,588 13,724
Total assets 891,744 887,030 Total liabilities and equity 891,744 887,030 1 The amounts for the period ended December 2019 have been prepared in accordance with IFRS 16. The right-of-use-assets are presented under line-item 'Property and Equipment' and the lease liability is included in line-item 'Other liabilities'. Prior period amounts have not been restated.
Interest income using effective interest rate method 25,347 25,268 n/a Addition to loan loss provisions 7 1,120 656 676
Total interest income 28,454 28,148 44,064 Other operating expenses 28 4,598 5,262 4,627
Other interest expense –3,084 –2,997 n/a Result before tax from continuing operations 6,834 6,838 7,268
Net interest income 21 14,079 13,916 13,714 Net result from continuing operations 4,879 4,811 4,987
Fee and commission expense –1,571 –1,442 –1,155 Net result (before non-controlling interests) 4,879 4,811 4,987
Net fee and commission income 22 2,868 2,798 2,710 Net result attributable to Non-controlling interests 99 108 82
Net result attributable to shareholders of the parent 4,781 4,703 4,905
Effect of change in accounting policy due to the implementation of IFRS 9 –653 –390 –1,043 –14 –1,057
Employee stock option and share plans 44 19 63 0 63
Changes in the composition of the group and other changes1 –96 –96 31 –65 1 Includes an amount for the initial recognition of the redemption liability related to the acquisition of Payvision Holding B.V. and Makelaarsland B.V. that reduces the Retained earnings of the Group. Future remeasurements of the redemption liability are recognised in the statement of profit or loss.
Consolidated statement of changes in equity - continued in EUR million
Adjusted for: – Depreciation and amortisation 789 520 520 – Available-for-sale investments n/a n/a 32,788
– Loans and advances to customers –16,687 –31,253 –20,505 – Other investments 34 9
– Associates and joint ventures –507 –97 –79 Repayments of principal portion of lease liabilities 2 –271 n/a n/a
– Held-to-maturity investments n/a n/a –3,609 Dividends paid –2,679 –2,607 –2,564
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Basis of preparation and accounting policies > 1 1 Basis of preparation and accounting policies 1.1 Reporting entity
The Executive Board may decide to amend the financial statements as long as these are not adopted by the General Meeting of Shareholders. The General Meeting of Shareholders may decide not to adopt the financial statements, but may not amend these.
International Accounting Standards Board (IASB) and the IFRS Interpretations Committee (IFRIC)
The ING Group Consolidated financial statements have been prepared on a going concern basis.
ING Group early adopted the amendments to IAS 39 ‘Financial Instruments: Recognition and
These amendments are early adopted retrospectively to hedging relationships that existed at the start of the reporting period or were designated thereafter. The amendments provide temporary relief from applying specific hedge accounting requirements to hedging relationships directly affected by IBOR reform. The amendments require certain additional disclosures and have no further impact. Refer to paragraph 1.6.5 of Note 1 and to Note 39 ‘Derivatives and hedge accounting’ for more information on the adoption of these amendments.
Combinations’, IFRS 11 ‘Joint Arrangements’, IAS 12 ‘Income Taxes’, IAS 23 ‘Borrowing Costs’
(issued on 12 December 2017); ▪ Amendments to IAS 19 ‘Employee Benefits’: Plan Amendment, Curtailment or Settlement (issued on 7 February 2018); ▪ Amendments to IAS 28 ‘Investments in Associates and Joint Ventures’: Long-term Interests in
▪ IFRIC 23 ‘Uncertainty over Income Tax Treatments’ (issued on 7 June 2017).
The amendments to IFRS 9 ‘Financial Instruments’: Prepayment Features with Negative
Compensation and Modifications of Financial Liabilities (issued on 12 October 2017) were early adopted by ING Group in 2018.
IFRS 16 replaces IAS 17 ‘Leases’, IFRIC 4 ‘Determining whether an Arrangement contains a Lease’,
The following table reconciles the future rental commitments for operating lease contracts under
(Less) discounting effect using ING’s incremental borrowing rate at 1-1-2019 -108
Lease liability recognised under IFRS 16 at 1 January 2019 1,301
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. This rate is approximated by using the risk free rate applicable to the lease term, the currency of the lease payment and jurisdiction, with the Fund Transfer Pricing (FTP) rate as an add-on. The FTP rate is used to transfer interest rate risk and funding and liquidity risk positions between the ING Group business and treasury departments. It is determined by either ING Group or Local Asset and Liability Committee
When ING Group acts as a lessor, a distinction should be made between finance leases and operating leases. For ING Group as a lessor these are mainly finance leases. The present value of the lease payments is recognised as a receivable under Loans and advances to customers or Loans and advances to banks. The difference between the gross receivable and the present value of the receivable is unearned finance lease income. Lease income is recognised over the term of the lease using the net investment method (before tax), which reflects a constant periodic rate of return.
Under this Standard a distinction was made between finance leases and operating leases. A lease
At initial recognition, ING Group measures a financial asset at its fair value plus, in the case of a financial asset not at FVPL, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss (FVPL)
SPPI. Interest includes consideration for the time value of money, credit risk and also consideration for liquidity risk and costs associated with holding the financial asset for a particular period of time.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are SPPI.
Based on the entity’s business model for managing the financial assets and the contractual terms of the cash flows, there are three measurement categories into which ING Group classifies its debt instruments: ▪ Amortised Cost (AC): Debt instruments that are held for collection of contractual cash flows under a HtC business model where those cash flows represent SPPI are measured at AC. Interest income from these financial assets is included in Interest income using the EIR method. Any gain or loss arising on derecognition is recognised directly in profit or loss. Impairment losses are presented as a separate line item in the Consolidated statement of profit or loss.
ING Group reclassifies debt investments when, and only when, its business model for managing those assets changes. Such changes in business models are expected to be very infrequent. There have been no reclassifications during the reporting period.
Adjustment (DVA) impact does not recycle from OCI to profit or loss; and
All financial assets and liabilities are recognised initially at fair value. Subsequently, except for financial assets and financial liabilities measured at amortised cost, all the other financial assets and liabilities are measured at fair value.
and right-way risk (when exposure to a counterparty is increasing and the credit quality of that counterparty improves) are taken into account in the measurement of the valuation adjustment.
Reference is made to Note 38 ‘Fair value of assets and liabilities’ and Market risk paragraph in the
The maximum credit risk exposure for items in the statement of financial position is generally the carrying value for the relevant financial assets. For the off-balance sheet items the maximum credit exposure is the maximum amount that could be required to be paid. Reference is made to Note 45
The manner in which ING Group manages credit risk’ and determines credit risk exposures for that purpose is explained in the Credit risk paragraph ‘Credit Risk Appetite and Concentration Risk
(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. ING Group 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).
ING Group also applies macro cash flow hedge accounting to hedge the variability in future cash flows of non-trading assets and liabilities due to the interest rate risk and foreign currency exchange rate risk. The designated hedged items are floating rated assets or liabilities, such as floating rate mortgages and corporate loans. The effective portion of changes in the fair value of the derivatives are recognised in the Other Comprehensive Income.
Income 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 the Other Comprehensive Income is transferred immediately to the statement of profit or loss.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Basis of preparation and accounting policies > 1
When performing the retrospective assessment hedges are allowed to pass the assessment even if actual results are outside the 80-125% range, during the period of uncertainty arising from the
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
The alternative scenarios are based on observed forecast errors in the past, adjusted for the risks affecting the economy today and the forecast horizon. The probabilities assigned are based on the likelihoods of observing the three scenarios and are derived from confidence intervals on a probability distribution. The forecasts for the economic variables are adjusted on a quarterly basis.
ING Group applies a collective assessment method to measure ECL for performing (Stage 1), underperforming (Stage 2), and certain non-performing (Stage 3) assets. Other non-performing assets subject to ECL measurement apply the individual assessment method, and are all in Stage 3.
In determining the scenarios, all relevant factors impacting the future cash flows are taken into account. These include expected developments in credit quality, business and economic forecasts, and estimates of if/when recoveries will occur and taking into account ING’s restructuring/recovery strategy.
POCI assets are financial assets that are credit-impaired on initial recognition. Impairment on a
▪ ING Group releases a legal (monetary) claim it has on its customer.
1.7 Financial instruments prior to 1 January 2018 under IAS 39
1.7.1 Classification and measurement of financial assets and financial liabilities (IAS
Investments (including loans quoted in active markets) are classified either as held-to-maturity or available-for-sale. Investment debt securities and loans quoted in active markets with fixed maturity where management has both the intent and the ability to hold to maturity are classified as held-to-maturity. Investment securities and quoted loans intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices, are classified as available-for-sale financial assets.
At each balance sheet date, ING Group assesses whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the specific case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the assets are impaired. Significant and prolonged are interpreted on a case-by-case basis for specific equity securities; generally 25% and six months are used as triggers. If any objective evidence exists for available-for-sale debt and equity investments, the cumulative loss, measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in net result, is removed from equity and recognised in the statement of profit or loss. Impairment losses recognised on equity instruments can never be reversed. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the statement of profit or loss, the impairment loss is reversed through the statement of profit or loss.
A subsidiary which ING Group has agreed to sell but is still legally owned by ING Group may still be controlled by Group at the balance sheet date and therefore, still be included in the consolidation.
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 planned nor likely to be settled in the foreseeable future, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture.
Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value. Contingent consideration arrangements classified as an asset or a liability, are subsequently measured at fair value and the changes in fair value will be recognised in the statement of profit or loss. Changes in the fair value of the contingent consideration classified as equity, are not recognised.
The initial accounting for the fair value of the net assets of the companies acquired during the year may be determined only provisionally as the determination of the fair value can be complex and the time between the acquisition and the preparation of the Financial statements can be limited.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Basis of preparation and accounting policies > 1 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.
A provision is a present obligation arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits, however the timing or the amount is uncertain. Provisions are discounted when the effect of the time value of money is significant using a pre-tax discount rate.
The defined benefit obligation is calculated by internal and external actuaries through actuarial models and calculations using the projected unit credit method. This method considers expected future payments required to settle the obligation resulting from employee service in the current and prior periods, discounted using a high quality corporate bond rate. Inherent in these actuarial models are assumptions including discount rates, rates of increase in future salary and benefit levels, mortality rates, consumer price index and the expected level of indexation. The assumptions are based on available market data as well as management expectations and are updated regularly. The actuarial assumptions may differ significantly from the actual results due to changes in market conditions, economic and mortality trends, and other assumptions. Any changes in these
Fees and commissions are generally recognised as the service is provided. Loan commitment fees for loans that are likely to be drawn down are deferred (together with related direct costs) and recognised as an adjustment to the effective interest rate on the loan. Loan syndication fees are recognised as income when the syndication has been completed and the Group has retained no part of the loan package for itself or has retained a part at the same effective interest rate as the other participants. Commission and fees arising from negotiating, or participating in the negotiation of, a transaction for a third party – such as the arrangement of the acquisition of shares or other securities or the purchase or sale of businesses – are recognised on completion of the underlying transaction. Portfolio and other management advisory and service fees are recognised based on the applicable service contracts as the service is provided. Asset management fees related to investment funds and investment contract fees are recognised on a pro-rata basis over the period the service is provided. The same principle is applied for wealth management, financial planning and custody services that are continuously provided over an extended period of time. Fees received and paid between banks for payment services are classified as commission income and expenses.
‘Commission expenses’ if they are specific, incremental, directly attributable and identifiable to generate commission income.
Reference is made to Note 42 ‘Assets not freely disposable’ for restrictions on Loans and advances to banks.
Loans include balances (mainly short-term deposits) with central banks amounting to EUR 3,185 million (2018: EUR 4,713 million).
As at 31 December 2019, all loans and advances to banks are non-subordinated.
Mandatorily measured at fair value through profit or loss 41,600 64,783
Reference is made to Note 43 ‘Transfer of financial assets’ for information on transferred assets which were not derecognised.
A significant part of the derivatives in the trading portfolio is related to servicing corporate clients in their risk management to hedge for example currency or interest rate exposures. In addition, ING
provides its customers access to equity and debt markets for issuing their own equity or debt securities (securities underwriting). Although these are presented as Trading under IFRS, these are directly related to services to ING’s customers.
Derivatives used in - hedges of net investments in foreign operations 23 41
For details on ING Group’s total exposure to debt securities reference is made to Note 6 ‘Securities at amortised cost’.
Loans and advances1 1,680 2,379 1 Debt securities include an amount of EUR -7 million (2018: EUR -6 million) and the Loans and advances includes EUR -3 million (2018: EUR -5 million) of Loan loss provisions.
As at 31 December 2019 ING holds approximately 13% (2018: 13%) of the shares of Bank of Beijing, a bank listed on the stock exchange of Shanghai. Following a change in regulatory requirements set by China Banking and Insurance Regulatory Commission, ING, as a shareholder holding more than 5% or more of the shares, is required to supply additional capital when necessary. No request for additional capital was received in 2019 (2018: not applicable).
Debt securities at fair value through other comprehensive income and amortised cost 76,592 72,893
Debt securities at fair value through profit or loss 3,067 3,218
ING Group’s total exposure to debt securities (excluding debt securities held in the trading portfolio)
A. There are no borrowed debt securities recognised in the statement of financial position.
As at 31 December 2019, Loans and advances to customers – corporate loans include receivables with regard to securities which have been acquired in reverse repurchase transactions amounting to EUR 180 million (2018: EUR 266 million).
Expected credit losses for uncollectable finance lease receivables of EUR 136 million as at 31
December 2019 (2018: EUR 150 million) is included in the loan loss provision. The loan loss provision for finance lease receivables is classified into the following loan loss provision stages; stage 1: EUR 2 million (2018: EUR 5 million), stage 2: EUR 6 million (2018: EUR 11 million), and stage 3: EUR 128 million (2018: EUR 134 million).
Effect of change in accounting policy due to the implementation of IFRS 9 –28
Changes in the composition of the group and other changes –4 0 – –4
Net carrying value as at 31 December 1,323 96 57 1,476
Retail Growth Markets 1 Values in use 10.47% 3.34% 209 231
EUR 61 million to Wholesale Banking (2018: EUR 230 million to Retail Growth Markets and EUR 67 million to Wholesale
In 2018 changes in the goodwill relate to the acquisition of 75% of the shares of Payvision Holding
Software, includes internally developed software amounting to EUR 741 million (2018: EUR 624 million).
No impairment of indefinite useful life asset was recognised in 2019 (2018: nil).
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Reference is made to Note 39 ‘Derivatives and hedge accounting’ for information on derivatives used for hedge accounting.
As at 31 December 2019, the change in the fair value of financial liabilities designated at fair value through profit or loss attributable to changes in credit risk is EUR 139 million (2018: EUR 18 million)
on a cumulative basis. This change has been determined as the amount of change in fair value of the financial liability that is not attributable to changes in market conditions that gave rise to market risk (i.e. mainly interest rate risk based on yield curves).
In 2018, changes in the reorganisation provisions were mainly attributable to existing initiatives following the digital transformation programmes of ING Bank. These initiatives are implemented over a period of several years and the estimate of the reorganisation provisions is inherently uncertain. The provision at the balance sheet date represents the best estimate of the expected redundancy costs and are expected to be sufficient to cover these costs.
Designated at fair value through profit or loss by type Provisions by type
Reference is made to Note 46 ‘Legal proceedings’ for developments in litigation provisions.
Disclosures in respect of Net defined benefit liabilities are provided in Note 36 ‘Pension and other post-employment benefits’.
More than 2 years but less than 3 years 9,527 10,267
More than 3 years but less than 4 years 6,321 8,228
More than 4 years but less than 5 years 2,836 6,288
More than 4 years but less than 5 years 144 1,563
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Subordinated loans issued by ING Groep N.V. include bonds issued to raise Tier 1 and lower Tier 2
For additional information, reference is made to the Parent company financial statements, Note 4
Other reserves - Revaluation reserve: Available-for-sale and other n/a n/a 3,447 - Revaluation reserve: Equity securities at FVOCI 1,580 1,914 n/a - Revaluation reserve: Debt instruments at FVOCI 299 363 n/a - Revaluation reserve: Cash flow hedge 1,208 604 263 - Revaluation reserve: Credit liability –114 8 n/a - Revaluation reserve: Property in own use 253 204 203 - Net defined benefit asset/liability remeasurement reserve –336 –394 –400 - Currency translation reserve –2,079 –2,043 –1,663 - Share of associates and joint ventures and other reserves 3,189 2,940 2,527 - Treasury shares –10 –11 –15
As at 31 December 2019, 0.9 million ordinary shares (2018: 1.1 million and 2017: 0.9 million) of ING
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.
ING mainly hedges floating rate lending with interest rate swaps. Due to decrease in interest rate yield curve in 2019 the interest rate swaps had a positive revaluation of EUR 604 million which is recognised in cash flow hedge reserve.
Effect of change in accounting policy due to the implementation of IFRS 9 –390
In 2019 ING acquired the additional 23% of shares in Payvsion. Given that ING already had control over Payvision, the acquisition of the shares in 2019 represents a shareholder transaction and resulted in a transfer between Non-controlling interest and Retained earnings within Shareholders equity of EUR 24 million. Reference is made to Note 47, 'Consolidated companies and businesses acquired and divested', 'Acquisitions'.
For further information, reference is made to Note 30 ‘Dividend per ordinary share’.
Non distributable reserves, determined in accordance with the financial reporting requirements included in Part 9 of Book 2 of the Dutch Civil Code, from ING Group’s subsidiaries, associates and joint ventures are as follows: Furthermore there are restrictions to the ability of subsidiaries, associates and joint ventures to distribute reserves to ING Groep N.V. as a result of minimum capital requirements that are imposed by industry regulators in the countries in which the subsidiaries operate.
Interest income on non-trading derivatives (hedge accounting) 4,319 4,497 n/a Interest expense on subordinated loans 660 711 784
Negative interest on liabilities 422 453 500 Negative interest on assets 349 412 407
Interest income on other trading portfolio n/a n/a 1,028 Interest expense on other trading liabilities n/a n/a 744
Total Net interest income of EUR 14,079 million (2018: EUR 13,916 million) includes interest income and expense for instruments calculated using the effective interest rate method and other interest income and interest expense. IFRS 9 resulted in changes to IAS 1 for the presentation of Interest income for instruments calculated using the effective interest rate method, which ING reports as a separate line item in the consolidated statement of profit or loss as from 2018.
The new interest presentation was applied prospectively together with the other presentation requirements of IFRS 9 as from 2018.
Customers’. Reference is made to Note 34 ‘Segments’ which includes net fee and commission income, as reported to the Executive Board and the Management Board Banking, disaggregated by line of business and by geographical segment.
Change in fair value of assets and liabilities (hedged items) 395 –52 –793
Valuation results on assets and liabilities designated at FVPL (excluding trading) –358 366 –109
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does not always allow netting of these positions in the statement of financial position. Reference is made to Note 4 ‘Financial assets at fair value through profit or loss’ and Note 15 ‘Financial liabilities at fair value through profit or loss’ for information on trading liabilities.
(excluding trading) include fair value adjustments on own issued notes amounting to EUR -424 million (2018: EUR 302 million; 2017: EUR -107 million). In 2017, DVA adjustment on own issued notes amounting to EUR -79 million was included in Valuation results. Starting 2018, in accordance with IFRS 9, the DVA adjustment on own issued notes is recognised in Other Comprehensive Income
Interest income from trading assets in 2019 amounted to EUR15,187 million (2018: EUR 13,924 million). Interest expense from trading liabilities in 2019 amounted to EUR 14,922 million (2018: EUR
Realised gains/losses on disposal of debt instruments measured at FVOCI 46 77 n/a
Realised gains/losses and impairments of debt instruments measured at FVOCI 46 77 67
In 2019, 2018 and 2017, Dividend income mainly consists of dividend received from ING’s equity stake in Bank of Beijing.
In 2019 the Result on disposal of group companies is mainly impacted by the sale of ING’s stake in
Ltd, for which a full reimbursement is expected to be received from NN Group.
Share-based compensation arrangements include EUR 38 million (2018: EUR 46 million; 2017: EUR
Every year, the ING Group Executive Board decides whether the option and share schemes are to be continued and, if so, to what extent. In 2010, the Group Executive Board decided not to continue the option scheme as from 2011. The existing option schemes will run off in the coming year as the option rights will expire in 2020.
Resolution Fund (SRF), local bank taxes and local resolution funds. Included in Regulatory costs for 2019, are contributions to DGS of EUR 362 million (2018: EUR 364 million; 2017: EUR 341 million)
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Impairment losses on software and intangible assets in 2019 relate to rescoping of IT
transformation programs. 2018 and 2017 impairments include software that was impaired to its
Included in Addition/(unused amounts reversed) of other provisions in 2019, are movements mainly in the litigation provision. Reference is made to Note 16 ‘Provisions’ and Note 46 ‘Legal proceedings’.
Changes in: – Loans and advances to banks, not available on demand –1,338 –777 –3,126
Net change in loans and advances to/ from banks, not available/
– Assets designated at fair value through profit or loss –7 –725 441
– Assets mandatorily at fair value through profit or loss 23,343 -6,968 n/a
– Other financial liabilities at fair value through profit or loss –12,235 10,522 –565
Cashflows: Redemptions / Disposals –94,497 –131,170 –933 –4,646 –271 –95,700 –135,816
Cash and cash equivalents at end of year 54,031 47,529 18,977
Included in cash and cash equivalents: – Deposits from banks –8,519 –8,520 –8,563
Cash and cash equivalents includes deposits from banks and loans and advances to banks that are on demand.
Income from wholesale banking activities. The main activities are: lending, debt capital markets, working capital solutions, export finance, daily banking solutions, treasury and risk solutions, and corporate finance.
Special items include items of income or expense that are significant and arise from events or transactions that are clearly distinct from the regular operating activities. Disclosures on comparative periods also reflect the impact of divestments. Insurance Other reflects (former)
Banking. The Corporate Line Banking is a reflection of capital management activities and certain income and expenses that are not allocated to the banking businesses, including a higher VAT
Furthermore, 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.
Colombia ING Capital Colombia S.A.S. Wholesale 3 3 2 1 1 1 2 2 2
Netherlands, the premium paid is also dependent on the interest rate developments and the methodology of the Dutch Central Bank for determining the ultimate forward rate. These plans do not give rise to provisions in the statement of financial position, other than relating to short-term timing differences included in other assets/liabilities.
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Changes in the present value of the defined benefit obligation and other post-employment benefits for the period were as follows: Plan assets and defined benefit obligation per country
Remeasurements: Actuarial gains and losses arising from changes in demographic assumptions –6 2
In 2019 EUR 274 million remeasurement of plan assets recognized as a gain in Other comprehensive income is driven by higher yields on investments. The EUR -206 million actuarial gains and losses arising from changes in financial assumptions in the calculation of the defined benefit obligation are mainly due to a decrease in discount rates.
ING Group’s subsidiaries should fund the cost of the entitlements expected to be earned on a yearly basis.
For 2020 the expected contributions to defined benefit pension plans are EUR 44 million.
– Deferred tax assets 841 730 1 The prior period has been updated to improve consistency and comparability.
Effect of changes in accounting policies due to the implementa tion of IFRS 9
Presented in the statement of financial position as: – Deferred tax liabilities –752 –640
Changes in the Composition of the Group and other changes include the deferred tax liability
Unused tax losses carried forward recognised as a deferred tax asset 764 763
More than 5 years but less than 10 years 92 83 0 1
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▪ The recapture of previously deducted UK tax losses in the Netherlands due to increased profitability in the United Kingdom, recognised under ‘Current tax from previously unrecognised amounts’.
The contingent liability (also disclosed in note 45 ‘Contingent liabilities’) in connection with taxation in the Netherlands refers to a possible obligation arising from the deduction from Dutch taxable profit of losses incurred by ING Bank in 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.
– Assets designated as at fair value through profit or loss 3,076 2,887 3,076 2,887
When a group of financial assets and financial liabilities are managed on the basis of their net risk exposures, are measured the fair value of a group of financial assets or liabilities on net portfolio level.
Committee (MDC), Trading Pricing Model Committee (TPMC). All relevant committees meet on a quarterly basis or more frequent as required. Key valuation controls including product approval process (PARP), IPV, valuation adjustments, and model use is monitored.
The fair values of receivables from banks are generally based on quoted market prices or, if unquoted, on estimates based on discounting future cash flows using available market interest rates including appropriate spreads offered for receivables with similar characteristics, similar to
For uncollateralised OTC derivatives, ING applies Credit Valuation Adjustment to correctly reflect the counterparty credit risk in the valuation. See section CVA/DVA/BVA for more details regarding the calculation.
For loans and advances that are repriced frequently and have had no significant changes in credit risk, carrying amounts represent a reasonable estimate of the fair value. The fair value of other loans is estimated by discounting expected future cash flows using a discount rate that reflects credit risk, liquidity, and other current market conditions. The fair value of mortgage loans is
The other assets are stated at their carrying value which is not significantly different from their fair value.
The fair values of payables to banks are generally based on quoted market prices or, if not available, on estimates based on discounting future cash flows using available market interest rates and credit spreads for payables to banks with similar characteristics.
The other liabilities are stated at their carrying value which is not significantly different from their fair value.
The fair value of debt securities in issue is generally based on quoted market prices, or if not available, on estimated prices by discounting expected future cash flows using a current market interest rate and credit spreads applicable to the yield, credit quality and maturity.
(unadjusted) quoted prices in an active market (Level 1), valuation techniques with observable inputs (Level 2) or valuation techniques that incorporate inputs which are unobservable and which have a more than insignificant impact on the fair value of the instrument (Level 3). Financial assets in Level 3 include for example illiquid debt securities, complex derivatives, certain complex loans
Sale of assets3 –53 –120 –3 –166 –832 –1,677 –212 – –680 –557 –1,780 –2,521
Transfers out of Level 3 –72 –839 –88 –37 –53 –249 –214 –1,125
Changes in the composition of the group and other changes 0 2 1 –1 3 –1 1 Net gains/losses were recorded as ‘Valuation results and net trading income’ in the statement of profit or loss. The total amounts includes EUR 43 million of unrealised gains and losses recognised in the statement of profit or loss.
(31 December 2018: EUR 5.4 billion, being 3.6%). Changes in Level 3 from 31 December 2018 to 31
December 2019 are detailed above in the table Changes in Level 3 Financial assets.
Financial liabilities measured at fair value in the statement of financial position as at 31 December 2019 of EUR 78 billion includes an amount of EUR 0.5 billion (0.6%) which is classified as Level 3 (31
(Reverse) repo's 3 481 1 424 Present value techniques Price (%) 4% 3% 4% 4%
Assets Liabilities Valuation techniques Significant unobservable inputs Lower range Upper range
Credit spread is the premium above a benchmark interest rate, typically LIBOR or relevant Treasury instrument, required by the market participant to accept a lower credit quality. Higher credit spreads indicate lower credit quality and a lower value of an asset.
Volatility is a measure for variation of the price of a financial instrument or other valuation input over time. Volatility is one of the key inputs in option pricing models. Typically, the higher the volatility, the higher value of the option. Volatility varies by the underlying reference (equity, commodity, foreign currency and interest rates), by strike, and maturity of the option. The minimum level of volatility is 0% and there is no theoretical maximum.
Correlation is a measure of dependence between two underlying references which is relevant for valuing derivatives and other instruments which have more than one underlying reference. For example, correlation between underlying equity names may be a relevant input parameter for basket equity option pricing models. High positive correlation (close to 1) indicates strong positive
High negative correlation, on the other hand, implies that underlyings typically move in opposite directions.
Examples of interest rate related unobservable inputs are prepayment rates, reset rates and inflation rates.
Prepayment rate and reset spread are key inputs to mortgage linked prepayment swaps valuation.
Dividend yield is an important input for equity option pricing models showing how much dividends a company is expected to pay out each year relative to its share price. Dividend yields are generally expressed as an annualised percentage of share price.
Where the fair value of a financial instrument is determined using inputs which are unobservable and which have a more than insignificant impact on the fair value of the instrument, the actual value of those inputs at the balance date may be drawn from a range of reasonably possible alternatives. In line with market practice the upper and lower bounds of the range of alternative input values reflect a 90% level of valuation certainty. The actual levels chosen for the unobservable inputs in preparing the financial statements are consistent with the valuation methodology used for fair valued financial instruments.
In practice valuation uncertainty is measured and managed per exposure to individual valuation inputs (i.e. risk factors) at portfolio level across different product categories. Where the disclosure looks at individual Level 3 inputs the actual valuation adjustments may also reflect the benefits of portfolio offsets.
The possible impact of a change of unobservable inputs in the fair value of financial instruments at fair value through other comprehensive income are estimated to be immaterial.
Investments in associates and joint ventures are accounted for using the equity method. For further information, reference is made to Note 8 ’Investments in associates and joint ventures’.
As at 31 December 2019, the estimated fair value of Property in own use and Investment property amounts to EUR 757 million (2018: EUR 780 million) and EUR 46 million (2018: EUR 54 million)
Amounts recognised in the statement of profit or loss relating to unrealised gains and losses during the year that relate to Level 3 non-financial assets are included in the statement of profit or loss as follows: ▪ Impairments on Property in own use are included in Other operating expenses - Impairments and reversals on property and equipment and intangibles ; and
ING Group early adopted the amendments to IAS 39 issued in September 2019 to these hedging relationships directly affected by IBOR reform. This excludes EURIBOR hedges as EURIBOR is
December 2019 that are used in the Group's hedge accounting relationships for which the amendments to IAS39 were applied:
ING Group’s fair value hedges principally consist of interest rate swaps that are used to protect against changes in the fair value of fixed-rate instruments due to movements in market interest rates. ING Group’s approach to manage market risk, including interest rate risk, is discussed in ‘Risk management – Market risk’. ING Group’s exposure to interest rate risk is disclosed in paragraph
By using derivative financial instruments to hedge exposures to changes in interest rates, ING
ING Group uses the following derivative financial instruments in a fair value hedge accounting relationship: Assets Liabilities Assets Liabilities
Gross carring value of derivatives designated under fair value hedge accounting
– Customer deposits and other funds on deposit 3,233 –43 –13
– Customer deposits and other funds on deposit 3,454 119 –11
As a result of interest rate developments in 2019 ING Group de-designated fair value hedge accounting portfolios with a total notional value of approximately EUR 25 billion.
ING Group’s approach to manage market risk, including interest rate risk and foreign currency exchange rate risk, is discussed in ‘Risk management – Credit risk and Market risk’. ING Group determines the amount of the exposures to which it applies hedge accounting by assessing the potential impact of changes in interest rates and foreign currency exchange rates on the future cash flows from its floating-rate assets and liabilities. This assessment is performed using analytical techniques.
ING Group uses the following derivative financial instruments in a cash flow hedge accounting relationship: Assets Liabilities Assets Liabilities
For the main currencies the average fixed rate for interest rate swaps used in cash flow hedge accounting are 0.54% (2018: 1.21%) for EUR, 2.38% (2018: 2.53%) for PLN, 2.51% (2018: 2.49%) for
Gross Carrying amount cash flow hedge reserve at the end of the reporting period
Hedge ineffectiveness recognised in the statement of profit or loss, gain (+) / Loss (-)
Combined interest and currency exchange rate risk on; – Floating rate lending –22 –42 –498
Total combined interest and exchange rate risk –10 –28 –517 –1 475 3
Combined interest and currency exchange rate risk on; – Floating rate lending 53 –60 –377
ING Group. This risk may have a significant impact on ING Group’s financial statements. ING Group’s policy is to hedge these exposures only when not doing so be expected to have a significant impact on the regulatory capital ratios of ING Group and its subsidiaries.
The derivatives used for net investment 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 23 million (2018: EUR 41 million) respectively ‘Financial liabilities at fair value through profit or loss – Non-trading derivatives’ EUR 51 million (2018: EUR 17 million). The remaining derivatives are offset with other derivatives and collaterals paid or received.
The effect of the net investment hedge accounting in the statement of profit or loss and other comprehensive income is as follows: Gross carrying value of derivatives used for net investment hedging
Gross Carrying amount net investment hedge reserve at the end of the reporting period
Amounts presented in these tables by contractual maturity are the amounts as presented in the statement of financial position and are discounted cash flows. Reference is made to ‘Risk
Loans and advances to customers 55,138 18,586 45,871 184,708 307,462 611,765
Remaining assets (for which maturities are not applicable) 3 4,962 4,962
The tables below include all financial liabilities by maturity based on contractual, undiscounted cash flows. Perpetual liabilities are included in column ‘Maturity not applicable’. Furthermore, the undiscounted future coupon interest on financial liabilities payable is included in a separate line and in the relevant maturity bucket. Derivative liabilities are included on a net basis if cash flows are settled net. For other derivative liabilities the contractual gross cash flow payable is included.
Deposits from banks 9,903 847 12,011 10,280 1,965 –180 34,826 Customer deposits 540,544 13,892 13,784 3,724 2,381 108 574,433 Financial liabilities at fair value through profit or loss – Other trading liabilities 4,666 646 436 568 333 68 6,717 – Trading derivatives 1,589 1,492 3,312 7,771 7,011 151 21,325 – Non-trading derivatives 379 91 152 616 440 539 2,215 – Designated at fair value through profit or loss 27,048 10,467 1,885 2,938 5,089 7 251 47,684 Debt securities in issue 2,616 13,278 35,915 36,895 26,592 3,231 118,528
Coupon interest due on financial liabilities 574 692 1,482 5,790 4,355 379 13,271
Deposits from banks 10,506 1,068 1,940 21,571 2,242 2 37,330 Customer deposits 515,177 17,354 16,086 4,695 2,500 555,812 Financial liabilities at fair value through profit or loss
4 Prior period amounts for coupon interest have been updated to improve consistency and comparability.
In addition, in some jurisdictions ING Bank N.V. has an obligation to maintain a reserve with central banks. As at 31 December 2019, the minimum mandatory reserve deposits with various central banks amount to EUR 9,975 million (2018: EUR 9,359 million).
The table does not include assets relating to securities lending as well as sale and repurchase transactions. Reference is made to Note 43 ‘Transfer of financial assets’.
2 The prior period amount has been updated to improve consistency and comparability.
Deposits from banks Repurchase, securities lending and similar agreements 36 –36 –0 –0
In the normal course of business, ING Group is party to activities where risks are not reflected in whole or in part in the consolidated financial statements. In response to the needs of its customers, the Group offers financial products related to loans. These products include traditional off-balance sheet credit-related financial instruments.
Guarantees issued by ING Groep N.V. 319 364 319 364 1 The prior period has been updated to improve consistency and comparability of the amounts per maturity of guarantees.
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Reference is made to Parent company financial statements – Notes to the parent company financial statements, Note 12 ‘Other’ for further information on Guarantees issued by ING Groep
Findings regarding AML processes: As previously disclosed, after its September 2018 settlement with Dutch authorities concerning Anti-Money Laundering matters, and in the context of significantly increased attention on the prevention of financial economic crime, ING has experienced heightened scrutiny by authorities in various countries. The interactions with such regulatory and judicial authorities have included, and can be expected to continue to include, onsite visits, information requests, investigations and other enquiries. Such interactions, as well as
ING’s internal assessments in connection with its global enhancement programme, have in some cases resulted in satisfactory outcomes, and also have resulted in, and may continue to result in,
Also as previously disclosed in March 2019, ING Italy was informed by the Banca d’Italia of their report containing their conclusions regarding shortcomings in AML processes at ING Italy, which was prepared based on an inspection conducted from October 2018 until January 2019. ING Italy has been engaged in discussions with Banca d’Italia and Italian judiciary authorities. In February 2020 the Italian court confirmed and approved a plea bargain agreement with the Italian judiciary authorities. As a consequence, ING Italy has paid an administrative fine and disgorgement of profit.
Litigation regarding products of a former subsidiary in Mexico: Proceedings in which ING is involved include complaints and lawsuits concerning the performance of certain interest sensitive products that were sold by a former subsidiary of ING in Mexico. A provision has been taken in the past.
Offer Rate (‘SOR’). The lawsuit refers to investigations by the Monetary Authority of Singapore
Interest rate derivatives claims: ING is involved in several legal proceedings in the Netherlands with respect to interest rate derivatives that were sold to clients in connection with floating interest rate loans in order to hedge the interest rate risk of the loans. These proceedings are based on several legal grounds, depending on the facts and circumstances of each specific case, inter alia alleged breach of duty of care, insufficient information provided to the clients on the product and its risks and other elements related to the interest rate derivatives that were sold to clients. In some cases, the court has ruled in favour of the claimants and awarded damages, annulled the interest rate derivative or ordered repayment of certain amounts to the claimants. The total amounts that need to be repaid or compensated in some cases still need to be determined. ING may decide to appeal against adverse rulings. Although the outcome of the pending litigation and similar cases that may be brought in the future is uncertain, it is possible that the courts may ultimately rule in favour of the claimants in some or all of such cases. Where appropriate a provision has been taken.
(‘Imtech’). Furthermore, on 28 March 2018, ING Bank received another claim on the same subject matter from the Dutch Association of Stockholders (Vereniging van Effectenbezitters, “VEB”). Each of the claimants allege inter alia that shareholders were misled by the prospectus of the rights issues of Imtech in July 2013 and October 2014. ING Bank, being one of the underwriters of the rights issues, is held liable by the claimants for the damages that investors in Imtech would have suffered. ING Bank responded to the claimants denying any and all responsibility in relation to the allegations made in the relevant letters. In September 2018, the trustees in the bankruptcy of
Mexican Government Bond litigation: A class action complaint was filed adding ING Bank N.V., ING
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. ING is defending itself against the allegations. Currently, it is not possible to provide an estimate of the (potential)
Unitrust B.V. (ISW Group) for a total consideration of EUR 18 million. The acquisition of ISW Group resulted in the recognition of goodwill of EUR 17 million.