Net Present Value (NPV) at Risk NPV-at-Risk measures the impact of changing interest rates on value. The NPV-at-Risk is defined as the outcome of an instantaneous increase and decrease in interest rates applying currency specific scenarios. The NPV-at-Risk asymmetry between the downward and upward shock is primarily caused by convexity risk in the mortgage and savings portfolio. The NPV-at-Risk figures are also calculated using the updated approach for interest rate movements.
unfloored floored parallel ▼ parallel ▲ parallel ▼ +100 bps By accounting category Amortised costs -2,390 1,052 114 248 Available for Sale 2,839 -2,719 115 -2,153 Fair value through profit and loss 476 -406 -168 -21 Total 926 -2,073 61 -1,926
Year-on-year variance analysis The overall BPV decreased by EUR 3.4 million to EUR -18.3 million in 2017. This mainly results from longer term investments of own funds in Corporate Line (BPV impact of EUR -3.9 million).
2017 2016 Gross unrealised gains 2,478 2,675 Gross unrealised losses -4 -19 Total 2,474 2,656
2017 2016 2017 2016 Continent Sector Europe 827 969 Residential 72 104 Americas 25 36 Office 785 895 Australia 0 0 Retail 8 19 Asia 0 0 Industrial 12 18 Other 82 104 Other 57 72 Total 934 1,109 Total 934 1,108
With respect to the trading portfolios, FI-FM Risk focuses on the management of market risks of Wholesale Banking (mainly Financial Markets) as this is the only business line within ING where trading activities take place. Trading activities include facilitation of client business and market making. FI-FM Risk is responsible for the development and implementation of trading risk policies and risk measurement methodologies, the reporting and monitoring of risk exposures against approved trading limits and the validation of pricing models. FI-FM Risk also reviews trading mandates and limits, and performs the gatekeeper role in the product review process. The management of market risk in trading portfolios is performed at various organisational levels. FI-FM Risk Management Framework defines policies and procedures for the overall management of trading books. Trading activity is systematically reviewed and positions against the mandates are assessed jointly by first and second lines of defence.
All valuation models used are subject to a model governance framework. Model governance refers to a set of policies and procedures that have to be strictly followed and that cover the complete lifecycle of a model, i.e. its development, validation, approval, implementation, and maintenance. The pillars of the model governance framework are independent validation and periodic review. A periodic review aims to determine whether a model is still appropriate for its intended use. Where models are used for valuations, there can be uncertainty on the assumptions of the underlying models and/or parameters. In those cases where significant uncertainty on assumptions arises, a model risk valuation adjustment is applied.
To include credit risk in the fair valuation, ING applies both credit and debit valuation adjustments (hereafter referred to as respectively, CVA and DVA). Own issued debt and structured notes that are priced at Fair Value are adjusted for credit risk by means of an own credit adjustment. Additionally, derivatives valued at fair value are adjusted for credit risk by a credit valuation adjustment. This CVA is of a bilateral nature; both the credit risks on the counterparty as well as on ING are included in the adjustment. All market data that is used in the determination of the CVA is based on market implied data. Additionally, wrong-way risk (when exposure to a counterparty increases and the credit quality of that counterparty decreases) and right way risk (when exposure to a counterparty decreases and the credit quality of that counterparty decreases) are included in the adjustment. ING also includes the CVA component in its pricing of the credit risk for new external trades with counterparties. Risk limits and controls are in place to monitor and anticipate CVA risk on a daily basis. The CVA is managed by global risk governance, where the risk limits and controls for CVA are managed and monitored on a global level. The approach of ING on CVA risk management is driven by increased control, cost efficiency and the global scope of CVA.
Risk measurement ING uses a comprehensive set of methodologies and techniques to measure market risk in trading books: Value at Risk (VaR) and Stressed Value at Risk (SVaR), Incremental Risk Charge (IRC), and Event Risk (stress testing). Systematic validation processes are in place to validate the accuracy and internal consistency of data and parameters used for the internal models and modelling processes.
ING periodically assesses the compliance of the IRC model with the regulatory requirements by performing gap analyses, substantiating the modelling choices, and quantifying the impact of alternative approaches.
Risk profile The following chart shows the development of the overnight VaR under a 99% confidence interval and a 1-day horizon versus actual and hypothetical daily trading profits and losses. In calculation of the hypothetical daily profit and loss, the trading position is kept constant and only the market movement is taken into account. The overnight VaR is presented for the ING trading portfolio from 2013 to 2017.
1 CVA risk is not included in VaR. Reserves are not included in the P&L figures.
ING Group Annual Report 2017 279 amounts in EUR millions RWA Capital requirements RWA Capital requirements Outright products 1 Interest rate risk (general and specific) 2 Equity risk (general and specific) 3 Foreign exchange risk 1,074 86 1,081 87 4 Commodity risk Options 5 Simplified approach 6 Delta-plus method 7 Scenario approach 8 Securitization (specific risk) 9 Total 1,074 86 1,081 87
x multiplication factor (ms) (Article 366) 1,750 140 2,546 204 3 Incremental risk charge -IRC (higher of values a and b) 1,205 96 1,910 153 (a) Most recent IRC value (incremental default and migration risks section 3 calculated in accordance with Section 3 articles 370/371) 981 78 1,500 120 (b) Average of the IRC number over the preceding 12 weeks 1,205 96 1,910 153 4 Comprehensive Risk Measure – CRM (higher of values a, b and c) (a) Most recent risk number for the correlation trading portfolio (article 377) (b) Average of the risk number for the correlation trading portfolio over the preceding 12weeks (c) 8 % of the own funds requirement in SA on most recent risk number for the correlation
The decrease in market risk regulatory capital for trading as of 2017 is mainly due to a decrease in exposures to sovereign issuers and as a result of a decrease in IRC, and a change in risk positions during 2017 that resulted in decreases in VaR and SVaR. The main changes in risk positions throughout the year were in trading books within credit and interest rate asset classes, including CVA hedge portfolio. The CVA hedges are capitalized under market risk framework, while CVA is capitalized under credit risk framework according to Basel rules.
The following tables show the five largest trading foreign exchange positions, and interest rate and credit spread sensitivities. The credit spread sensitivities are furthermore split in different risk classes and sectors. Due to the nature of the trading portfolios, positions change from day to day.
Institutions Credit Spread (CSO11) Risk classes 1 (AAA) -20 -233 -3 -48 2–4 (AA) -5 -53 -21 26 5–7 (A) -83 -87 13 -9 8–10 (BBB) -127 -151 -126 -154 11–13 (BB) -78 -90 -104 -88 14–16 (B) -14 -2 -9 17–22 (CCC and NPL) -4 -1 -1 -2 Not rated 1 1 Total -331 -618 -241 -283 1 Credit Spread Sensitivity (CS01) measures the impact on value of a 1 basis point increase in credit spreads.
Funding and liquidity risk Introduction Funding and liquidity risk is the risk that ING Group or one of its subsidiaries cannot meet its financial liabilities when they come due, at reasonable cost and in a timely manner. ING incorporates funding and liquidity management in its business strategy, applying a funding and liquidity risk framework in order to manage such risks within pre-defined limits. The main objective of ING’s funding and liquidity risk management is to maintain sufficient liquidity to ensure safe and sound operations under normal market circumstances and in times of stress.
Governance Within ING, the EB and MBB, staff departments from the CRO and CFO domain, Capital Management and Bank Treasury have oversight of and are responsible for managing funding and liquidity risk.
Funding & Liquidity Management Framework The liquidity buffer ING holds is part of the counterbalancing capacity, i.e. the total of available sources and measures within ING to generate liquidity (including also limiting professional lending), and serves as a cushion for liquidity needs under normal and stressed conditions.
Liquidity risk appetite ING Group’s liquidity risk appetite expresses the level of liquidity risk ING is willing to take in pursuit of its strategic objectives. The Liquidity Risk Appetite Statements (RAS) are aligned with the ING strategy and are allocated to the ING entities by way of limits. Where relevant the RAS are cascaded down to specific regional and local levels.
Funding and Liquidity approach ING Group takes an integrated approach to assessing the adequacy of its funding and liquidity position in relation to its balance sheet profile and its operating environment, whilst taking into account the interests of its various stakeholders.
ING Group distinguishes several key drivers of – future – liquidity and funding needs: • The boundaries set by current and future regulatory requirements (EUR and USD); • The boundaries set by risk appetite statements (EUR and USD); • The findings from various stress tests; • The boundaries regarding the distribution and transferability of liquidity; and • Any funding/refinancing needs.
Non-Financial Risk Introduction The Non-Financial Risk (NFR) function encompasses the Operational Risk, Information Risk, Corporate Security & Investigations and Compliance Risk management functions. Risk controls for these functional areas have been implemented by means of policies and minimum standards which apply to ING’s business processes in the divisions. There is an infrastructure in place enabling management to track events and non-financial risk issues. ING has a system of internal controls, that is reviewed and updated periodically and as necessary. ING’s goal is to create an environment of continuous improvement in managing non-financial risks.
The yearly objective setting process for both business management and NFR professionals aims to keep improving the management of non-financial risk throughout ING to safeguard that ING stays in control of its current and future non-financial risks.
Legal risk is defined as the risk related to (i) a failure (or perceived failure) to adhere to applicable laws, regulations and standards, (ii) contractual liabilities or contractual obligations that are defaulted or cannot be enforced as intended, or are enforced in an unexpected or adverse way, and (iii) liability (tort) towards third parties due to an act or omission contributable to ING (potentially) resulting in impairment of ING’s integrity, leading to damage to ING’s reputation, legal or regulatory sanctions, or financial loss.
Main developments in 2017 Internal and external fraud The risk of clients and ING staff being targeted by fraudsters using social engineering techniques to execute payments is still increasing and CxO impersonation fraud (criminals investigate the senior management structure of an organisation and target key positions) and invoice fraud remain significant threats. Efforts are undertaken to mitigate the risk such as creating awareness for customers and staff, and sharing of lessons learned across ING. ING stringently monitors both this type of fraud and new emerging fraud methodologies. In addition, ING is increasingly using innovative methods such as big data analytics to further strengthen its fraud resilience.
Particularly threats from Distributed Denial of Service (DDoS), targeted attacks (also called Advanced Persistent Threats) and Ransomware intensify worldwide. ING builds on its cybercrime resilience, further enhancing the control environment to protect, detect and respond to e-banking fraud, DDoS and targeted attacks. Additional controls continue to be embedded in the organisation as part of the overall internal control framework and are regularly re-assessed against existing and new threats.
Notes to the Consolidated annual accounts of ING Group - continued
A bank-wide programme has been launched in the area of Know Your Customer (KYC). Its objective is twofold : (i) to enhance the information the bank is required to maintain about its clients, in line with the additional requirements stemming from the 4th AntiMoney Laundering directive, and (ii) to address the areas for improvement that have been identified about the effectiveness of the control framework applicable to the Financial Economic Crime domain, especially with respect to its Client Activity Monitoring capabilities and the integrated risk profiles of the clients. The programme aims to develop solutions of a structural nature to support a compliant-by-design approach. Other client-related policies are in scope of the KYC programme (e.g. FATCA, CRS). The programme is expected to run till end of 2020. With respect to specific proceedings, see Note 45 ‘Legal proceedings’ to the consolidated annual accounts.
Common Reporting Standard (CRS) Similarly, the Organisation for Economic Cooperation and Development (‘OECD’) has developed a 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 jurisdictions adhering to CRS. As 10 November 2017, 96 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 mandatory for all its member states. The first information exchange by the Netherlands (as for approximately half of the signatory countries) was executed in 2017. Other signatory countries commence their information exchange in 2018.
For 2018, the transitional (phased-in) SREP common equity Tier 1 requirement will be 10.43%. This requirement consists of a 4.5% Pillar 1 requirement, a 1.75% Pillar 2 requirement, a 1.875% CCB, countercyclical buffer of 0.06% (based on December 2017 positions) and the 2.25% SRB. This excludes Pillar 2 guidance, which is not disclosed.
ING Group continues to maintain a strong and high quality capital level, with a phased-in common equity Tier 1 ratio and a fullyloaded common equity Tier 1 ratio of 14.7% as at 31 December 2017, thereby ING is in compliance with the current fully-loaded requirement of 11.8%, assuming all capital buffers remain stable.
Capital ratios now reflects the impact of the interpretation of the EBA Q&A published on 3 November 2017. This Q&A relates to externally placed own funds from a subsidiary in conjunction with the availability to absorb losses at the consolidated level. Impact will mostly disappear in the coming years as ING Group going forward will be the issuing entity for all new capital instruments.
Dividend ING Group’s dividend policy aims to pay a progressive dividend that will reflect considerations including expected future capital requirements, growth opportunities available to the Group, net earnings, and regulatory developments. The Executive Board proposes to pay a total cash dividend of EUR 2.6 billion, or EUR 0.67 per ordinary share, over the financial year 2017. This is subject to the approval of shareholders at the Annual General Meeting in April 2018. Taking into account the interim dividend of EUR 0.24 per ordinary share paid in August 2017, the final dividend will amount to EUR 0.43 per ordinary share and will be paid fully in cash. The total amount of EUR 1.7 billion is completely covered by the remaining balance of 'interim profits not included in CET1 capital' at year-
Policies The activities of Capital Management are executed on the basis of established policies, guidelines and procedures. For the Capital Treasury there are additional policies and limits that guide the management of the balance sheets and the execution of capital market transactions.
CRR/CRD IV grandfathering rules (4Q2016: EUR 4,654 million). 3 Including EUR 8,995 million which is CRR/CRD IV-compliant (4Q2016: EUR 7,347 million), and EUR 2,091 million to be replaced (by Group instruments) as capital recognition is subject to CRR/CRD IV grandfathering rules (4Q2016: EUR 2,141 million). 4 Regulatory adjustments include the interpretation of the EBA Q&A published on 3 November 2017.
Notes to the consolidated annual accounts of ING Group - continued
As at 31 December 2017 an amount of EUR 13,965 million (2016: EUR 8,566 million) is expected to be settled after more than one year from the balance sheet date.
Issued share capital as at 1 January 2016 3,870,183 928 Issue of shares 8,301 2
Opening balance Unrealised revaluations Realised gains/losses transferred to the statement of profit or loss Changes in cash flow hedge reserve Closing balance – – –
The Share of participating interests reserve includes the following components: Reserve for non-distributable retained earnings of participating interests of EUR 2,527 million (2016: EUR 2,235 million), Revaluation reserve of participating interests of EUR 2,258 million (2016: EUR 3,917 million) and Net defined benefit asset/liability remeasurement reserve of EUR –400 million (2016: EUR –371 million).
Changes in the composition of the group and other changes –125 –125 2016 Retained earnings
The Revaluation reserve, Share of participating interests reserve and Currency translation reserve cannot be freely distributed. Retained earnings can be freely distributed, except for an amount equal to the negative balance in each of the components of the Revaluation reserve, Share participating interests reserve and the Currency translation reserve. Unrealised gains and losses on derivatives, other than those used in cash flow hedges, are presented in the statement of profit or loss and are therefore part of Retained earnings and are not included in Share of participating interests reserve.
The total amount of non-distributable reserves, in accordance with the financial reporting requirements per Part 9 of Book 2 of the Dutch Civil Code, is EUR 7,678 million (2016: EUR 7,379 million).
In February 2017, ING Groep N.V. issued EUR 750 million securities that qualify as subordinated CRD IV Tier 2 notes with coupon of 2.50% until 24 February 2024. In September 2017, ING Groep N.V. issued EUR 1,000 million securities that qualify as subordinated CRD IV Tier 2 notes with coupon of 1.625% until 26 September 2024. In April 2017 ING Groep N.V. issued EUR 1,000 million subordinated CRD IV Tier 2 securities replacing EUR 1,000 million subordinated Tier 2 securities issued by ING Bank N.V. In 2017 ING Groep N.V. issued other private placements with total notional amounts of JPN 22,000 million and USD 260 million.
Remuneration of Senior Management, Executive Board and Supervisory Board The information on share-based payment plans and remuneration of the members of the Executive Board and the Supervisory Board is included in the Consolidated annual accounts. Reference is made to Note 49 ‘Related parties’ (page 220 up to and including page 222) and the Renumeration report (page 88 up to and including page 99).
Included in Interest and other financial income is EUR 514 million (2016: EUR 478 million) related to group companies.
10 Valuation results Included in Valuations results, are valuation results on non-trading derivatives related to warrants on the shares of Voya and NN Group amounting to EUR –52 million (2016: EUR 33 million).
Included in Interest and other financial expenses is EUR –51 million (2016: EUR –80 million) related to group companies.
As at 31 December 2017, ING Groep N.V. guarantees various US dollar debentures (that mature between 2023 and 2036) which were issued by a subsidiary of Voya Financial Inc. In the Shareholder’s agreement between ING Groep N.V. and Voya Financial Inc. it is agreed that the aggregate outstanding principal amount of the debentures will be reduced from EUR 167 million as at 31 December 2017 (2016: EUR 404 million; 2015: EUR 436 million) to no more than EUR 83 million as at 31 December 2018, and no more than EUR nil at 31 December 2019.
What we have audited We have audited the annual accounts 2017 of ING Groep N.V. (the ‘Company’ or ‘ING Group’) based in Amsterdam. The annual accounts include the consolidated annual accounts and the parent company annual accounts.
The consolidated annual accounts comprise: 1 The consolidated statement of financial position as at 31 December 2017. 2 The following consolidated statements for 2017: the statement of profit or loss, the statements of comprehensive income, changes in equity and cash flows. 3 The notes comprising a summary of the significant accounting policies and other explanatory information.
Materiality Based on our professional judgement we determined the materiality for the annual accounts as a whole at EUR 300 million (2016: EUR 240 million). The materiality is determined with reference to the profit before taxation from continuing operations. Materiality as percentage of profit before taxation from continuing operations remained stable at 4.1% (2016: 4.1%).
Scope of the group audit ING Group is at the head of a group of components. The financial information of this group is included in the consolidated annual accounts of ING Group. ING Group is structured in segments: Retail Netherlands, Retail Belgium, Retail Germany, Retail Other, Wholesale Banking and Corporate Line Banking, covering different countries.
Because we are ultimately responsible for the opinion, we are responsible for directing, supervising and performing the group audit. In this respect, we have determined the nature and extent of the audit procedures to be carried out for group entities. Our group audit mainly focused on significant group entities (‘components’). These components are either individually financially significant due to their relative size compared to ING Group or because we assigned a significant risk of material misstatement to one or more account balances of these entities. In addition, we included certain group entities in the scope of our group audit in order to arrive at a sufficient coverage over all relevant significant account balances.
Materiality • Group materiality of EUR 300 million • 4.1% of profit before taxation from continuing operations
GROUP AUDIT • 87% of total assets covered by audit procedures performed by component auditors • 86% of profit before taxation from continuing operations covered by audit procedures performed by component auditors
The group audit team has set component materiality levels, which ranged from EUR 25 million to EUR 90 million, based on the mix of size and financial statement risk profile of the components within the group to reduce the aggregation risk to an acceptable level. The consolidation of the group, the disclosures in the annual accounts and certain accounting topics that are performed at group level are audited by the group audit team. The accounting matters on which audit procedures are performed by the group audit team include, but are not limited to, goodwill impairment testing, equity, group financing and certain elements of: the loan loss provisioning process, corporate income tax for the Dutch fiscal unity and claims and litigations.
Estimation uncertainty with respect to the impairment losses on loans and advances to customers and banks Description ING Group’s portfolio of loans and advances to customers and loans and advances to banks amounts to EUR 574.5 billion and EUR 28.8 billion, respectively, as at 31 December 2017. These loans and advances are measured at amortised cost, less a provision for loan losses (EUR 4.6 billion). Several aspects of the accounting for loan losses require significant judgement of management, such as the identification of loans that are deteriorating, the assessment of objective evidence for impairment, the valuation of collateral received and the estimation of the recoverable amount. Our response Our audit approach included testing both the effectiveness of internal controls around determining loan loss provisions and substantive audit procedures. Our procedures over internal controls focused on the governance over the process, controls around the accuracy of loan and collateral data, the determination of risk ratings and the process for identifying arrears. In our audit, we also considered the process around the data flows through the information systems, application controls and calculations, and the implementation and validation of the credit risk models used to calculate the collective loan loss provisions, the analysis of the collective provision results, and reviews performed on impaired loans that have been individually assessed. We assessed collective impairment methodologies, focusing on the most significant portfolios from a size and credit risk perspective. With the assistance of our financial risk management specialists, data analysis specialists, and information technology specialists, we have evaluated the models, assumptions, data, and information systems used by ING Group for the collective provisions. We have assessed the methodology and framework designed and implemented by ING Group to assess whether the collective provision model outcomes should be adjusted to better reflect the current circumstances of the portfolio performance and economic conditions. With the assistance of corporate finance specialists and real estate valuation specialists we have tested the methodologies, cash flows, and collateral values used in individual assessments of provisions for impaired loans, including management judgements made during the process such as various recovery scenarios and probabilities of those scenarios occurring.
Estimation uncertainty with respect to the provision of a legal matter Description As disclosed in Note 45, ING Bank N.V. is subject of criminal investigations by Dutch authorities regarding various requirements related to the client onboarding, money laundering and corrupt practices. ING Groep N.V. has also received related information requests by the US authorities (hereafter ‘the investigations’). Management concluded under IFRS that it is more likely than not that a present obligation per 31 December 2017 exists and that an outflow of resources is probable. However, management was not able to estimate reliably the possible timing, scope or amounts of any fines, penalties and/or other outcome, which could be significant. Our response Our audit procedures included the testing of controls over the evaluation and measurement of potential obligations arising from the legal matter. We considered whether an obligation exists, the appropriateness of provisioning and/or disclosure based on the facts and circumstances available. In order to assess the facts and circumstances with respect to the investigations, we assessed underlying documentation of internal investigations performed and other relevant documents. We evaluated and discussed internal audit reports in relation to compliance and inspected correspondence with regulators. We also obtained and inspected external lawyers’ letters, legal opinions, read minutes from relevant committees, attended audit committee meetings and supervisory board meetings where this topic was discussed. We inquired with senior management and interviewed ING Group’s legal counsel and external lawyers of ING Group. We have involved forensic specialists to assist us in these procedures. We also assessed the adequacy of the disclosure regarding the investigations as included in Note 45. Our observation Overall, the nature and extent of disclosure in Note 45 of this legal matter in the annual accounts is adequate.
Estimation of the impact of IFRS 9 accounting standard Our response We evaluated the disclosure against the criteria of IAS 8. As part of our substantive procedures we independently tested the business model and solely payment of principal and interest criteria over a sample of financial instruments. In addition, with the assistance of our financial risk management specialists, we have evaluated the significant models, assumptions and data used by ING Group for the expected credit loss measurements. Furthermore, we have assessed the methodology and framework designed and implemented by ING Group as to whether the provision model outcomes and stage allocations appear reasonable and reflective of ING’s forecasts of future economic conditions. Our observation ING has almost completed the implementation of IFRS 9. The main procedures that are in the process of being finalised are the transfer of project activities to the business, further embedding internal controls in their processes and the completion of the remaining model validations. Overall, we conclude that the IAS 8 disclosures accurately reflect ING’s implementation status and estimated impact of adopting the new standard.
Report on the Other information included in the annual report In addition to the annual accounts and our auditor’s report thereon, the annual report contains other information that consists of: • The Report of the Executive Board.
We have read the Other information. Based on our knowledge and understanding obtained through our audit of the annual accounts or otherwise, we have considered whether the Other information contains material misstatements.
The Executive Board is responsible for the preparation of the Other information, including the information as required by Part 9 of Book 2 of the Dutch Civil Code.
A further description of our responsibilities for the audit of the financial statements is located at the website of the Koninklijke Nederlandse Beroepsorganisatie van Accountants (NBA, Royal Netherlands Institute of Chartered Accountants) at: This description forms part of our auditor’s report.
Appropriation of results The result is appropriated pursuant to Article 37 of the Articles of Association of ING Groep N.V. The Company may make distributions to the extent permitted by law after adoption of the annual accounts by the Executive and Supervisory Boards. The Executive Board subject to approval of the Supervisory Board, determines what part of the result remaining after application of the provisions of article 37.3 is to be appropriated to reserves and that the remaining part of the result shall be at the disposal of the General Meeting of Shareholders. The General Meeting of the Shareholders, on a motion of the Executive Board with approval of the Supervisory Board may resolve to distribute from the reserves to ordinary shareholders a dividend or other form of distribution to the registered Shareholder on a date determined by the Executive Board and approved by the Supervisory Board.
These conditions have generally resulted in greater volatility, widening of credit spreads and overall shortage of liquidity and tightening of financial markets throughout the world. These concerns have since expanded to include a broad range of fixed income securities, including those rated investment grade and especially the sovereign debt of some EEA countries and the US, the international credit and interbank money markets generally, and a wide range of financial institutions and markets, asset classes, such as public and private equity, and real estate sectors. As a result of these and other factors, sovereign governments across the globe, including in regions where the Group operates, have also experienced budgetary and other financial difficulties, which have resulted in changes in economic policy including the implementation of austerity measures, downgrades in credit rating by credit agencies, planned or implemented bail-out measures and, on occasion, civil unrest (for further details regarding sovereign debt concerns, see ‘ —US Sovereign Credit Rating’ and ‘ — European sovereign debt crisis and the United Kingdom’s withdrawal from the European Union below). As a result, the market for fixed income instruments has experienced decreased liquidity, increased price volatility, credit downgrade events, and increased probability of default. In addition, the confluence of these and other factors has resulted in volatile foreign exchange markets. Securities that are less liquid are more difficult to value and may be hard to dispose of. International equity markets have also continued to experience heightened volatility and turmoil, with issuers, including ourselves, that have exposure to the real estate, mortgage, private equity and credit markets particularly affected. These events and market upheavals, including high levels of volatility, have had and may continue to have an adverse effect on our revenues and results of operations, in part because we have a large investment portfolio and extensive real estate activities around the world.
In addition, the confidence of customers in financial institutions is being tested. Consumer confidence in financial institutions may, for example, decrease due to our or our competitors’ failure to communicate to customers the terms of, and the benefits to customers of, complex or high-fee financial products. Reduced confidence could have an adverse effect on our revenues and results of operations, including withdrawal of deposits. Because a significant percentage of our customer deposit base is originated via Internet banking, a loss of customer confidence may result in a rapid withdrawal of deposits over the Internet.
US Sovereign Credit Rating In 2011, Standard & Poor’s Ratings Services (‘S&P’) lowered its long-term sovereign credit rating on the US from AAA to AA+. Although other ratings agencies have not similarly lowered the long-term sovereign credit rating of the US, they have put that credit rating on watch. Amid the lingering uncertainty over the long-term outlook for the fiscal position and the future economic performance of the US within the global economy and potential future budgetary restrictions in the US, there continues to be a perceived risk of a future sovereign credit ratings downgrade of the US government, including the rating of US Treasury securities. On 15 October 2013, Fitch Ratings placed the US’s AAA credit rating under ‘rating watch negative’ in response to the financial crisis, a step that would precede an actual downgrade, which was however upgraded again to ‘stable’ in March 2014. It is foreseeable that the ratings and perceived creditworthiness of instruments issued, insured or guaranteed by institutions, agencies or instrumentalities directly linked to the US government could also be correspondingly affected by any such downgrade. Instruments of this nature are key assets on the balance sheets of financial institutions and are widely used as collateral by financial institutions to meet their day-to-day cash flows in the short-term debt market. The impact of any further downgrades to the sovereign credit rating of the US government or a default by the US government to satisfy its debt obligations likely would create broader financial turmoil and uncertainty, which would weigh heavily on the global financial system and could consequently result in a significant adverse impact to the Group.
• (depending on the position) a significant collateral posting requirement associated with our interest rate hedge program; Inflation and deflation may negatively affect our business. A sustained increase in the inflation rate in our principal markets would have multiple impacts on us and may negatively affect our business, solvency position and results of operations. For example, a sustained increase in the inflation rate may result in an increase in market interest rates, which may: • decrease the estimated fair value of certain fixed income securities that we hold in our investment portfolios, resulting in: • reduced levels of unrealised capital gains available to us, which could negatively impact our solvency position and net income, and/or
In its capacity as principal bank supervisor in the European Union, the ECB has extensive supervisory and investigatory powers, including the ability to issue requests for information, to conduct regulatory investigations and on-site inspections, and to impose monetary and other sanctions. For example, under the SSM, the regulators with jurisdiction over the Group, including the ECB, may conduct stress tests and have discretion to impose capital surcharges on financial institutions for risks that are not otherwise recognised in risk-weighted assets or other surcharges depending on the individual situation of the bank and take or require other measures, such as restrictions on or changes to the Group’s business. Competent regulators may also, if the Group fails to comply with regulatory requirements, in particular with minimum capital requirements (including buffer requirements) or with liquidity requirements, or if there are shortcomings in its governance and risk management processes, prohibit the Group from making dividend payments to shareholders or distributions to holders of its regulatory capital instruments. Generally, a failure to comply with the new quantitative and qualitative regulatory requirements could have a material adverse effect on the Group’s business, financial condition and results of operations.
In order to make capital levels more comparable and to reduce variability in banks’ internal models, the European Central Bank (ECB) introduced the Targeted Review of Internal Models (TRIM) in June 2017 to assess reliability and comparability between banks’ models. The TRIM aims to create a level playing field by harmonising the regulatory guidance around internal models, and the ultimate goal is to restore trust in the use of internal models by European banks. The operating consequences of the TRIM exercise have been significant. The TRIM is expected to finalise in 2019, and could impact ING through more stringent regulation on internal models. There is also heightened supervisory attention for the credit quality of loans to corporates and/or households. These exercises could impact the RWA we recognise for certain assets.
Dodd-Frank Act On 21 July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (‘Dodd-Frank’ or ‘Dodd-Frank Act’) was signed into law in the US The Dodd-Frank Act effects comprehensive changes to the regulation of financial services in the US and has implications for non-US financial institutions with a US presence or that transact with US counterparties, such as ING. Dodd-Frank directs existing and newly created government agencies and bodies to perform studies and promulgate a multitude of regulations implementing the law, most of which are in place. Because some of the regulations have only recently taken effect or are yet to be finalized, we cannot predict with certainty how such regulations will affect the financial markets generally and impact the Group’s business, credit rating, results of operations, cash flows or financial condition or liquidity. Key aspects of Dodd- Frank that we have identified to date as possibly having an impact on the Group include the aspects set out below: Title VII of Dodd-Frank created a new framework for regulation of the over-the-counter derivatives markets and certain market participants which has affected and could continue to affect various activities of the Group and its subsidiaries. ING Capital Markets LLC, a wholly-owned indirect subsidiary of ING Bank N.V., has registered with the US Commodity Futures Trading Commission (‘CFTC’) as a swap dealer. The SEC is expected to adopt regulations establishing registration and margin and capital requirements for securitybased swaps. Along with the still indeterminate effective date for SEC regulations on, among others, reporting, registration, and internal and external business conduct with respect to security-based swaps, these are likely to materially impact ING. Additionally, the CFTC is expected to adopt capital requirements for swap dealers, although the specific requirements, and any available exemptions, have not been finalized. If these requirements are applicable to ING, and no exemptions are available, it is possible that these requirements will be difficult for ING to comply with and may, as a result, materially and adversely impact ING's ability to operate as a swap dealer in the US Other CFTC regulatory requirements, already implemented, include registration of swap dealers, business conduct rules imposed on swap dealers, requirements that some categories of swaps be centrally executed on regulated trading facilities and cleared through regulated clearing houses, and initial and variation margin requirements for uncleared swaps. In addition, new position limits requirements for market participants that have been proposed and may be contained in final regulations to be adopted by the CFTC could limit ING’s position sizes in swaps referencing specified commodities and similarly limit the ability of counterparties to utilize certain of our products by narrowing the scope of hedging activity that is permitted for commercial end users and the trading activity of speculators. All of the foregoing areas of regulation of the derivative markets and market participants will likely result in increased cost of hedging and other trading activities, both for ING and its customers, which could expose our business to greater risk and could reduce the size and profitability of our customer business. In addition, the imposition of these regulatory restrictions and requirements, could result in reduced market liquidity, which could in turn increase market volatility and the risks and costs of hedging and other trading activities.
On 10 December 2013, various federal agencies approved a final rule implementing Section 619 of Dodd-Frank, commonly referred to as the ‘Volcker Rule’ and which places limitations and restrictions on the ability of US FDIC insured depository institutions and non-US banks with branches or agencies in the US that become subject to the US Bank Holding Company Act, as well as their affiliates, to engage in certain proprietary trading or sponsor and invest in private equity and hedge funds. As a general matter, such organisations have until July 2017 to comply with the prohibition on certain fund activities and until July 2015 to comply with the proprietary trading prohibitions. In the event that we or one of our affiliates becomes subject to the Volcker Rule, our trading and investment activities could be so restricted. It is expected that we will experience significant additional compliance and operational costs and may be prohibited from engaging in certain activities we currently conduct if the Volcker Rule becomes applicable to us and our affiliates.
For instance, ING Group’s wholly owned subsidiary, ING Bank, may at some point in time consider whether to establish a branch office in the US If ING Bank were to establish a US branch, we would be subject to supervision and regulation by the Federal Reserve under various laws and various restrictions on our activities under those laws, including the Bank Holding Company Act of 1956, as amended, and the International Banking Act of 1978, and, as a consequence, such supervision and regulation, including such restrictions on activities could materially impact our operations. These would include, among others, the Volcker Rule and heightened supervisory requirements and prudential standards. Dodd-Frank also includes various securities law reforms that may affect the Group’s business practices and the liabilities and/or exposures associated therewith, including a provision intended to authorise the SEC to impose on broker-dealers’ fiduciary duties to their customers, as applied to investment advisers under existing law, which new standard could potentially expose certain of ING’s US broker-dealers to increased risk of SEC enforcement actions and liability. In 2011, the SEC staff released a study on this issue, and members of the SEC’s Investor Advisory Committee voted in November 2013 to recommend the proposal implementing a uniform fiduciary standard for most brokers and registered investment advisers to the SEC.
Foreign Account Tax Compliance Act and other US withholding tax regulations Under provisions of US tax law commonly referred to as FATCA, non-US financial institutions are required to provide certain information on their US account holders and/or certain US investors to the US Internal Revenue Service (“IRS”). A 30% withholding tax is imposed on ‘withholdable payments’ made to non-compliant non-US financial institutions. In addition to FATCA, non-US financial institutions are required to comply with other US withholding and reporting requirements on certain payments. The Group intends to take all necessary steps to comply with FATCA and other US withholding tax regulations. ING is for example updating and strengthening its withholding compliance programme and reviewing, amending and filing the necessary tax returns and information reports.
Many countries, including the Netherlands, have entered into agreements (‘intergovernmental agreements’ or ‘IGAs’) with the US to facilitate the type of information reporting required under FATCA. While the existence of IGAs will not eliminate the risk of the withholding described above, these agreements are expected to reduce that risk for financial institutions and investors in countries that have entered into IGAs. IGAs will often require financial institutions in those countries to report information on their US account holders to the taxing authorities of those countries, who will then pass the information to the IRS.
Common Reporting Standard Similarly, the Organisation for Economic Cooperation and Development (‘OECD’) has developed a Common Reporting Standard (‘CRS’) and model competent authority agreement to enable the multilateral and automatic exchange of financial account information. The CRS will require financial institutions to identify and report the tax residency and account details of non-resident customers to the relevant authorities in jurisdictions adhering to CRS. As of 2 November 2016, more than 100 jurisdictions, including the Netherlands, have signed a multilateral competent authority agreement to automatically exchange information pursuant to the CRS. The majority of countries where ING has a presence has committed to CRS. The EU has made CRS mandatory for all its member states. The first information exchange by the Netherlands (as for most of the signatories) occurred in 2017.
The powers granted to resolution authorities under the BRRD include, among others, the introduction of a statutory ‘write-down and conversion’ power and a ‘bail-in’ power, which gives the relevant resolution authority the power to, inter alia, (i) cancel existing shares and/or dilute existing shareholders by converting relevant capital instruments or eligible liabilities into shares of the surviving entity, (ii) cancel all or a portion of the principal amount of, or interest on, certain unsecured liabilities (which could include certain securities that have been or will be issued by ING) of a failing financial institution or group and/or (iii) convert certain debt claims (which could include certain securities that have been or will be issued by ING) into another security, including ordinary shares of the surviving group entity, if any. None of these actions would be expected to constitute an event of default under those securities entitling holders to seek repayment.
In February 2013, the EC adopted a proposal setting out the details of a financial transaction tax (‘FTT’) under the enhanced cooperation procedure, to be levied on transactions in financial instruments by financial institutions if at least one of the parties to the transaction is established in the financial transaction tax zone (‘FTT-zone’) or if the instrument which is the subject of the transaction is issued within the territory of a Member State in the FFT-Zone. 10 Member States have indicated they wish to participate in the FTT (Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain). The initial proposal contemplated that the FTT would enter into effect on 1 January 2014, which would have then required us to pay a tax on transactions in financial instruments with parties (including Group affiliates) located in such FTT-zone. However, the FTT remains subject to negotiation between the participating Member States and currently it is uncertain whether and in what form and by which Member States the FTT will be adopted. The implementation date of any FTT will thus depend on the future approval by participating Member States in the Council, consultation of other EU institutions, and the subsequent transposition into local law. Depending on its final form, the introduction of an FTT in the Netherlands or outside the Netherlands could have a substantial adverse effect on ING’s business and results.
Currently, the EU is discussing the introduction of a pan-European deposit guarantee scheme, (partly) replacing or complementing national compensation schemes in two or three phases. Proposals contain elements of (re)insurance, mutual lending and mutualisation of funds. The new model is intended to be ‘overall cost-neutral’. A more definitive proposal is expected in 2018.
As a holding company, ING Groep N.V. is dependent for liquidity on payments from its subsidiaries, many of which are subject to regulatory and other restrictions. ING Groep N.V. is a holding company and, therefore, depends on dividends, distributions and other payments from its subsidiaries to fund dividend payments and to fund all payments on its obligations, including debt obligations. Many of our subsidiaries, including our bank subsidiaries, are subject to laws that restrict dividend payments or authorize regulatory bodies to block or reduce the flow of funds from those subsidiaries to ING Groep N.V.
The requirements for ING Groep N.V. to develop and submit recovery and resolution plans to regulators, and the incorporation of feedback received from regulators, may require us to increase capital or liquidity levels or issue additional long-term debt at ING Groep N.V. or particular subsidiaries or otherwise incur additional or duplicative operational or other costs at multiple entities, and may reduce our ability to provide ING Groep N.V. guarantees for the obligations of our subsidiaries or raise debt at ING Groep N.V. Resolution planning may also impair our ability to structure our intercompany and external activities in a manner that we may otherwise deem most operationally efficient. Furthermore, arrangements to facilitate our resolution planning may cause us to be subject to additional costs such as resolution planning related taxes and funds. Any such limitations or requirements would be in addition to the legal and regulatory restrictions described above on our ability to engage in capital actions or make intercompany dividends or payments.
ING may be exposed to business, operational, regulatory, reputational and other risks in connection with climate change. Climate change is a challenge which may expose ING to significant risks. The perception of climate change as a risk by civil society, shareholders, governments and other stakeholders continues to increase, including in relation to the financial sector’s operations and strategy, and international actions, such as the Paris agreement on CO2 emissions, may also result in financial institutions coming under increased pressure from such stakeholders regarding the management and disclosure of their climate risks and related lending and investment activities. Additionally, rising climate change concerns may lead to additional regulation that could increase our operating costs or negatively impact the profitability of our investments. There may be substantial costs in complying with current or future laws and regulations relating to climate change. Any of these risks may result in changes in our business activities or other liabilities or costs, including exposure to reputational risks, any of which may have a material and adverse impact on our business, results of operation or financial condition.
Operational risks, such as systems disruptions or failures, breaches of security, cyber attacks, human error, changes in operational practices or inadequate controls including in respect of third parties with which we do business may adversely impact our business, results of operation and reputation. We face the risk that the design and operating effectiveness of our controls and procedures may prove to be inadequate. Operational risks are inherent to our business. Our businesses depend on the ability to process a large number of transactions efficiently and accurately. In addition, we routinely transmit, receive and store personal, confidential and proprietary information by email and other electronic means. Although we endeavour to safeguard our systems and processes, losses can result from inadequately trained or skilled personnel, IT failures (including due to a computer virus or a failure to anticipate or prevent cyber attacks or other attempts to gain unauthorised access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or impairing operational performance, or security breaches by third parties), inadequate or failed internal control processes and systems, regulatory breaches, human errors, employee misconduct, including fraud, or from natural disasters or other external events that interrupt normal business operations. We depend on the secure processing, storage and transmission of confidential and other information in our computer systems and networks. The equipment and software used in our computer systems and networks may not always be capable of processing, storing or transmitting information as expected. Despite our business continuity plans and procedures, certain of our computer systems and networks may have insufficient recovery capabilities in the event of a malfunction or loss of data. We are currently in the process of replacing our IT/operational systems in some of our subsidiaries as contemplated by our Think Forward strategy and any failure or delay in implementation or integration of the new IT/operational systems on the anticipated time schedule or a failure of these systems to operate as anticipated could affect our ability to efficiently serve our clients, process, store or transmit information as well as our ability to implement our Think Forward strategy in the manner and time frame currently contemplated. Like other financial institutions and global companies, we are regularly the target of attempted cyber attacks, particularly threats from Distributed Denial of Service (DDoS), targeted attacks (also called Advanced Persistent Threats) and Ransomware intensify worldwide, and attempts to gain unauthorised access and the techniques used for such attacks are increasingly sophisticated. We have faced, and expect this trend to continue, an increasing number of attempted cyber attacks as we have expanded our mobile- and other internet-based products and services, as well as our usage of mobile and cloud technologies. In addition, due to our interconnectivity with third-party vendors, exchanges, clearing houses, financial institutions and other third parties, we could be adversely impacted if any of them is subject to a successful cyber attack or other information security event. Whilst we have policies and processes to protect our systems and networks, and strive to continuously monitor and develop them to protect our technology infrastructure and data from misappropriation, they may be vulnerable to unauthorised access, computer viruses or other malicious code, cyber attacks and other external attacks or internal breaches that could have a security impact and jeopardise our confidential information or that of our clients or our counterparties. These events can potentially result in financial loss and harm to our reputation, hinder our operational effectiveness, result in regulatory censure, and could have a material adverse effect on our business, reputation, revenues, results of operations, financial condition and prospects.
The high-priority material topics identified and disclosed in our materiality analysis are reported on in the relevant sections of the Annual Report, including this appendix. For a detailed description of data-gathering scope and process on specific data points, please refer to the ING Non-financial Data Reporting Protocol www.ing.com/ar2017. This provides the definitions on performance indicators and describes the internal data collection process.
• Financial empowerment interactions with customers and noncustomers increased in 2017 to 25.4 million (23.9 million in 2016). a
• We aim to increase our sustainable assets under management (SAuM).
• We will reduce our global CO2e emissions by 30% by 2017 and 50% by 2020 (compared to 2014).
• We will procure 100% renewable electricity for all ING buildings where we have management control worldwide by 2020.
Business Most of ING Bank’s activities serve the financing and investment needs of households and companies, other financial institutions and governments. We allocate 39.8 percent of our credit risk portfolio to private individuals in the form of mortgages and other types of loans; this exposure has minimal environmental risk implications. Some 35.7 percent of our assets is allocated to meet the financing needs of corporates. In response to what stakeholders and society ask of us with regard to transparency, the tables on the next pages provide insight into the different sectors we finance and the applicability of our Environmental and Social Risk Framework.
Corporates Consumer lending Netherlands 6.7% Residential mortgages – NL 15.1% Belgium 4.9% Residential mortgages – ROW3 21.8% United States 3.5% Other consumer lending 3.0% Poland 1.8% United Kingdom 1.6% Turkey 1.4% ROW3 15.9% Total 35.7% Total 39.8%
1 The symbols above each column represent our different ESR framework policies. 2 Gambling and Pornography are excluded activities only and not sector policies. 3 A Responsible Finance sector strategy identifies sustainability-related developments in a specific sector. It outlines how best to pursue the opportunities that arise from them and provides solutions for best-in-class clients and best practices that are outstanding in their environmental performance relative to their sector.
Policy into practice Energy policy In December 2017, ING decided to accelerate the reduction of our financing to coal power generation, reducing our exposure to close to zero by 2025. This decision sharpens ING’s coal-financing policy in support of society’s transition to a low-carbon economy. In practice this means that ING supports new clients in the utilities sector only when their reliance on coal is 10 percent or less and they have a strategy to reduce their coal percentage to close to zero by 2025. By that year, we expect to no longer finance clients in the utilities sector that are over 5 percent reliant on coal-fired power in their energy mix. We will however continue to finance non-coal energy projects for these clients in support of their energy transition.
Overall, given our sharpened policy, we expect to continue to report annual reductions in our overall credit exposure to thermal coal-related businesses. In terms of exposure to thermal coal we define the categories in the following table: In addition, we acknowledge coal being used in the energy mix of Diversified Utility Companies (DUCs) that operate various energy sources (typically coal, gas, nuclear, and/or renewables) to generate power. Within this category however, the exact energy mix used is currently not known to ING. ING’s power generation lending portfolio to DUCs reached EUR 2.1 billion at YE2017.
The table below provides an overview of EP transactions in accordance with EPIII reporting requirements, which refer to funded deals or advisory roles that have been mandated to ING in 2017.
EP risk category1 EP risk category Sector A B C Total A B C Total
Project Finance Advisory ING was mandated on one Project Finance Advisory service in the sector ‘Other’ for a project located in the ’Europe Middle East & Africa’ region.
Our climate change governance Climate resilience is one of our two main strategic focus areas within our new Sustainability Direction, which is overseen by the Vice Chairman/CFO of ING. Within this focus area, we are addressing both climate-related risks and opportunities across our business and have set various related ambitions. One such ambition which addresses climate-related opportunities is to double our climate finance portfolio by 2022 against 2017 totals (see p. 35). Responsibility for this ambition falls with the Board member responsible for Wholesale Banking and is cascaded throughout the organisation in the form of KPIs for deal teams. Another ambition, which addresses climaterelated risk, is to reduce our exposure to coal to close to zero by 2025. Our Management Board, chiefly the CRO, is responsible for ensuring that this target is embedded in risk processes and achieved. The Board’s responsibility for social and/or environmental risks and opportunities is also formalised in our Executive Board Charter available on www.ing.com/17ar11.
The world around us, Financing energy vs climate change, p. 14
Risk and capital management, Environmental and Social Risk management, p. 46
C Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organisation’s overall risk management.
B Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks.
Sustainable Assets under Management in EUR million 1 Net growth (improved assessment) 2017: EUR 308 million Net growth attributed to improved processes, methodology and assessment scope for identifying SAuM within our existing portfolio. 2 Net growth (new business) 2017: EUR 1,138 million
Percentage of employees covered by Collective Bargaining (headcount) in percentage of employees 2017 2016 2015
Total number of employees by ING employment contract (full-time and part-time), by gender (headcount)
Total number of employees by ING employment contract (permanent and temporary), by region (headcount)
Reach through UNICEF programmes1 1 We achieved our target of reaching 1 million children through UNICEF education programmes in 2005-2015. Since 2015 we are supporting a new UNICEF programme, Power for Youth, that aims to empower 335,000 adolescents by 2018. The Power for Youth programme is active in six countries: Indonesia, Kosovo, Montenegro, Nepal, The Philippines and Zambia.
Community Investment The tables below provide an overview of charitable donations by ING and volunteering of ING employees.
We also maintained carbon-neutral operations in 2017 by offsetting emissions caused by business travel and grey energy use. We offset 100% of our operational carbon emissions through the purchase of Voluntary Carbon Units (VCUs), with the majority originating from a high impact REDD+ project in Borneo. This project preserves carbon-dense tropical peat swamp by helping to halt deforestation of roughly 47,000 hectares of forest which were originally slated for conversion to palm oil plantations. The project focuses on both community development and biodiversity conservation, particularly the protection of the endangered Borneo orangutan. In order to deliver on its goals, the project actively engages local communities to improve food security, water conservation, income opportunities, health care and education. In addition to conservation, the project also engages in land enrichment activities with a goal to plant one million trees. The Rimba Raya project is verified and validated to the Verified Carbon Standard (VCS), and has achieved Gold Level status under the Climate Community and Biodiversity (CCB) Standard.
In MWh and kilotonne CO2e MWh x 1.000 Kilotonne MWh x 1.000 Kilotonne MWh x 1.000 Kilotonne
Total energy per FTE in MWh and in tonne 6.0 0.5 6.9 0.6 7.3 1.0
2 Scope 1: comprises emissions from our use of natural gas and fuel oil; Scope 2: comprises emissions from our use of electricity, renewable electricity and district heating; Scope 3: comprises emissions from our business travel by air and car. While scope 3, category 15 (emissions through lending and investments) is material to ING’s indirect emissions footprint, due to measurement complexity and lack of quality data, ING is not able accurately to measure and disclose this figure. See section on Climate Strategy above.
Sustainable Procurement With more than EUR 4 billion in global procured spend and 25,000 suppliers worldwide, we have a real opportunity to drive our sustainability agenda through our supply chain. By encouraging suppliers to share our standards and work towards continual improvement, we believe we can make a demonstrable impact while mitigating risks.
Financing coal-fired power plants Throughout the year, NGOs and newspapers reported on the involvement of ING in financing coal-fired power plants being: • Cirebon Electric Power II, a coal-fired power plant in
We have been working to counter this over the past 12 months with pro-active communication, openness, transparent procedures and discussions with unions, several contacts at the highest political level, as well as regular internal updates. ING offered generous packages to employees affected.
ING announced, that the bank will use its growth and cost advantage to avoid charging customers for opening new accounts or other services as long as it can.
ING does not provide any services whatsoever to companies that produce cluster munition. ING also does not finance nuclear weapons. There are companies partially involved in producing nuclear weapons while primarily engaged in non-defence activities. ING doesn’t finance the nuclear weapons activities of these companies.
We recognise climate change is an unparalleled challenge for our world, one where banks also have a role to play. We play our part in various ways. One way is the strenghtening of our coal policy. We announced in December 2017 the ambition to stop our lending to individual coal-fired power plants by the end of 2025.
ING continued to be commended for its ESR policy framework, restrictions of controversial activities and due diligence processes.
More information can be found on our webpage Our Stance: www.ing.com/17ar27
National Contact Point (NCP) for the OECD Guidelines in the Netherlands
• Result of Insurance Other, reflecting the result on the warrants on Voya and NN Group shares, amounting to EUR –52 million after tax.
Total income (continuing operations) (d) 17,773 17,491 16,845 -/- Income from divestments/special items 121 367 -/- Income from insurance other and eliminations ING Bank/NN Group –53 33 –73
This Annual Report contains the Reports of the Executive Board and Supervisory Board as well as the Annual Accounts and other information for the financial year 2017 in their original language (English).
Designed by Smidswater, Den Haag Dennis Dean Animation & Design, Amsterdam
Disclaimer Certain of the statements contained herein are not historical facts, including, without limitation, certain statements made of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to a number of factors, including, without limitation: (1) changes in general economic conditions, in particular economic conditions in ING’s core markets, (2) changes in performance of financial markets, including developing markets, (3) potential consequences of European Union countries leaving the European Union or a break-up of the euro, (4) changes in the availability of, and costs associated with, sources of liquidity such as interbank funding, as well as conditions in the credit and capital markets generally, including changes in borrower and counterparty creditworthiness, (5) changes affecting interest rate levels, (6) changes affecting currency exchange rates, (7) changes in investor and customer behaviour, (8) changes in general competitive factors, (9) changes in laws and regulations and the interpretation and application thereof, (10) geopolitical risks and policies and actions of governmental and regulatory authorities, (11) changes in standards and interpretations under International Financial Reporting Standards (IFRS) and the application thereof, (12) conclusions with regard to purchase accounting assumptions and methodologies, and other changes in accounting assumptions and methodologies including changes in valuation of issued securities and credit market exposure, (13) changes in ownership that could affect the future availability to us of net operating loss, net capital and built-in loss carry forwards, (14) changes in credit ratings, (15) the outcome of current and future legal and regulatory proceedings, (16) operational risks, such as system disruptions or failures, breaches of security, cyberattacks, human error, changes in operational practices or inadequate controls including in respect of third parties with which we do business, (17) the inability to protect our intellectual property and infringement claims by third parties, (18) the inability to retain key personnel, (19) business, operational, regulatory, reputation and other risks in connection with climate change, (20) ING’s ability to achieve its strategy, including projected operational synergies and cost-saving programmes and (21) the other risks and uncertainties detailed in this annual report of ING Groep N.V. (including the Risk Factors contained therein) and ING’s more recent disclosures, including press releases, which are available on www.ING.com. Many of those factors are beyond ING’s control