IASB in 2020. In 2019, ING early adopted the Phase 1 amendments to IFRS which allowed ING to apply a set of temporary exceptions to continue hedge accounting even when there is uncertainty about contractual cash flows arising from the reform. Under these temporary exceptions, interbank offered rates are assumed to continue unaltered for the purposes of hedge accounting until such time as the uncertainty is resolved. Refer to Note 39 ‘Derivatives and hedge accounting’ for the disclosures relating to the application of the amendments as part of Phase 1.
The following table presents the currency exposures in the banking books for the most important currencies for the FX translation result. Positive figures indicate long positions in the respective currency. As a result of the strategy to hedge the CET1 ratio an open structural FX exposure exists.
In order to measure the sensitivity of the target CET1 ratio against FX rate fluctuations, an historical
Value-at-Risk approach is used. It measures the drop in the CET1 ratio based on historical FX rates. The impact is taken into account under the solvency RAS.
in EUR million Foreign Investments Hedges Net exposures 1 US Dollar net exposure move is mainly driven by EURUSD FX rate.
ING maintains a strategic portfolio with substantial equity exposure in its banking books. Local offices are responsible for the management of the equity investment positions. Financial Risk is responsible for monitoring the regulatory capital for equity investments on a monthly basis and acts independently from ING / local management when monitoring these positions.
1,862 million (2019: EUR 2,306 million). The value of equity securities held at FVOCI is directly linked to equity security prices with increases/decreases being recognised in the revaluation reserve.
Revaluation reserve equity securities at fair value through other comprehensive income (*) in EUR million 2020 2019
Real estate is a run-off business consisting of real estate development and real estate investment management activities which are being wound down by sale of assets, strict execution of contract maturity, or through portfolio sales.
ING continued its strategy of undertaking trading activities to develop its client-driven franchise and deliver a differentiating experience by offering multiple market and trading products.
Risk is responsible for the development and implementation of trading risk policies and risk measurement methodologies, and for reporting and monitoring risk exposures against approved trading limits. 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. The FI-FM Risk Management Framework defines policies and procedures for the overall management of trading books. Trading activity is systematically reviewed and positions against the mandates are assessed jointly by the first and second lines of defence.
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.
with a ten-day horizon the one-day risk factor shifts are scaled by the square root of ten and then used as an input for the revaluation. The same model is used for all legal entities within ING with market risk exposure in the trading portfolio.
The Stressed HVaR (SVaR) is intended to replicate the HVaR calculation that would be generated on the bank’s current portfolio with inputs calibrated to the historical data from a continuous 12-month period of significant financial stress relevant to the bank’s portfolio. To calculate SVaR, ING uses the same model that is used for 1DHVaR, with a ten-day horizon. The data for the 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 with market risk exposure in the trading portfolio.
The Incremental risk charge (IRC) for ING is an estimate of the default and migration risks for credit products (excluding securitisations) in the trading book, over a one-year capital horizon, with a 99.9%
confidence level. The same IRC model is used for all legal entities within ING with market risk exposure in the trading portfolio. Trading positions (excluding securitisations) of ING, which are subject to specific interest rate risk included in the internal model approach for market risk regulatory capital, are in scope of the IRC model. By model choice, equity is excluded from the model. For the calculation of IRC,
ING’s event risk policy is based on a large set of possible stress scenarios per risk type. In stress scenarios, shocks are applied to prices (credit spreads, interest rates, equity, commodities, and fx rates)
The following chart shows the development of the overnight HVaR under a 99% confidence level and a one-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 HVaR is presented for the ING trading portfolio from 2015 to 2020.
1d VaR for Internal Model Approach trading portfolios in EUR million Minimum Maximum Average Year end 1 For calculation of HVaR per risk class the full valuation is performed according to HVaR methodology using a set of scenario changes for the risk factors for the particular risk class, while risk factors for all other risk classes are kept unchanged.
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 the standardised approach with fixed risk weights. ING does not have a correlation trading portfolio or any other securitisations in the trading book.
EU MR1: Market risk under Standardised Approach in EUR million 2020 2019
Outright products 1 Interest rate risk (general and specific) 2 0 14 1 2 Equity risk (general and specific)
EU MR2-A: Market risk under Internal Model Approach in EUR million 2020 2019
(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 12-weeks
The following tables show the five largest trading positions in terms of sensitivities to foreign exchange, interest rate and credit spread risk factor movements. These largest exposures also reflect concentrations of risk in FX risk per currency, interest rate risk per currency, and credit spread risk per country, rating and sector. Due to the nature of the trading portfolios, positions in the portfolios can change significantly from day to day, and sensitivities of the portfolios can change daily accordingly.
Not rated 1 1 Credit Spread Sensitivity (CS01) measures the impact on value of a 1 basis point increase in credit spreads.
Funding and liquidity (F&L) risk is the risk that ING or one of its subsidiaries cannot meet its financial liabilities when they are due at reasonable cost and in a timely manner. ING incorporates funding and liquidity management in its business strategy and has established a funding and liquidity risk framework to manage risks within pre-defined boundaries.
Liquidity Adequacy Assessment Process (ICLAAP) and documents, as per the ICLAAP framework of ING, to the ICLAAP Committee. The ICLAAP Committee therefore focuses on technical liquidity documents and oversees business processes and deliverables concerning ILAAP. The EB, MBB, staff departments from the CRO and CFO domain as well as Group Treasury have oversight of and are responsible for managing funding and liquidity risks.
At the second line of defence, Financial Risk is responsible for developing and maintaining ING’s policies, standards and guidelines on F&L risk management as well as for setting the F&L risk appetite.
ING’s funding consists mainly of retail and corporate deposits contributing around 50 percent and 20 percent of total funding respectively. These funding sources provide a relatively stable funding base.
The remainder of the required funding is attracted primarily through a combination of long-term and short-term professional funding. Group Treasury manages the professional funding in line with the F&L
ING Group long-term debt maturity profile by currency (*) in EUR billion (nominal
ING distinguishes between several key drivers of future liquidity and funding needs: ▪ Refinancing needs resulting from maturing debt and asset growth; ▪ Current and future regulatory requirements; ▪ Risk appetite statements set by ING’s funding and liquidity risk function; ▪ The outcomes of various stress tests; ▪ Ability to distribute and transfer liquidity across the Group.
For each lens, ING has established a related set of risk appetite statements which define ING’s risk appetite commensurate with the principles of liquidity adequacy. These risk appetite statements are summarised in the next graph.
The LCR compares the volume of available high-quality liquid assets (HQLA) to net outflows (outflows minus inflows) over a 30-day stress scenario defined by the regulator. ING’s liquidity buffer forms a part of the counterbalancing capacity which serves as a liquidity cushion under normal and stressed conditions.
The macroeconomic environment comprises various exogenous factors over which ING has no control but which may have a material impact on ING’s F&L position. The main macroeconomic factors analysed on a regular basis include: ▪ Global and local economic performance: e.g. shifts in GDP, inflation rate, unemployment rates and public deficit/surplus; ▪ Changing geopolitical trends; ▪ Monetary policy with a focus on the unconventional monetary measures employed by central banks in recent years including the measures taken since the start of the Covid-19 crisis; and
Funding of longer term assets and investments must be done by stable and longer-term liabilities
Diversification must be in place of funding profile, across funds providers, instrument types, geographic markets, tenors and currencies
Funding and liquidity stress testing forms part of the overall F&L framework. It allows ING to examine the effects of exceptional but plausible future events on ING’s liquidity position and provides insight into which entities, business lines or portfolios are vulnerable to which types of risk or scenarios.
The stress-testing framework considers idiosyncratic, market-wide and combined (idiosyncratic plus market-wide) stress scenarios. Moreover, it differentiates between stress events that develop in a gradual and in a fast manner. The design of the framework is based on empirical evidence supplemented by expert judgment. The framework can be extended to additional ad hoc scenarios. For example, it can be used as input for firm-wide stress testing and reverse stress testing.
In response to the Covid-19 crisis, ING has developed a dedicated corona liquidity stress-test framework that focuses on the key vulnerabilities of the crisis and their potential impact on ING’s net liquidity position and LCR. The current framework calculates the impact of severe macroeconomic stress combined with turmoil on financial markets due to a prolonged lockdown.
risks launched recently which aims to incorporate ESG risks into the governance, risk management and supervision of credit institutions and investment firms. The effects of the recent pandemic also bring a renewed focus on the importance of health and safety measures on the ground for the projects we finance as well as for the workforce of our clients.
This includes integrating climate change as part of our risk appetite framework. We plan to commence integrating this progressively in the second half of 2021.
During 2020, ING has also cooperated with other banks and the Equator Principles (EP) working groups on the implementation of the EP 4, which brings a new set of requirements related to human rights, climate change, biodiversity and impacts on Indigenous Peoples.
The next table gives insight into the ESR policies that are part of the ESR framework and where they are applied.
A g ro co m m o d it ie s
Food, beverages & personal care 2,82% ● ● ● ● ● ● ● ● ●
The way the ESR Framework is applied in practice differs per product type. The largest potential environmental and social impacts come from large corporates within our Wholesale Banking (WB)
segment. WB is therefore the primary focus of our assessments and where we promote active ESR
dialogue and knowledge sharing. We have been working with wholesale clients for more than 15 years to support them in understanding and managing their environmental and social impact. A simplified version of the ESR policy framework, following the same rationale and principles, applies to ING’s midcorporate and small medium enterprise client segments. The ESR framework minimum requirements are also included in ING’s procurement policy and apply to the screening of suppliers of ING’s global procurement activities.
While we have a strong ESR policy framework and made progress in enhancing the automation of the checks and controls in the ESR assessment processes, we acknowledge that we need to further improve our processes in order to ensure accuracy and completeness of the data.
The ESR team mainly focuses on policy development and transaction advisory. However the team also provides training (both in-person and via webinars) to hundreds of colleagues around the world every year in risk, front-office, KYC and compliance teams, so that ESR knowledge is built on and spread.
(e.g. employment agencies). Such clients will be required to confirm their compliance with specific statements related to safeguarding labour rights and/or environmental regulations that are specific for that sector. The implementation of this initiative is expected to be finalised in 2021.
▪ Dutch Banking Sector Agreement: The Dutch multi-stakeholder platform to implement the
Human Rights formally came to an end in December 2019. The agreement was in place for three years and was finalised with a conclusive report published in August 2020 and a closing statement confirming that all agreed deliverables were completed. During the period covered by the agreement, we updated our human rights policy and published ING’s first human rights report in 2018. In 2019, we issued an update of the report, highlighting the pilot on proactive client engagement carried out and the actions resulting from this pilot. In 2020, a follow-up of the 2019 human rights report was shared, providing an update of the client engagement model presented in 2019 and the current human rights landscape.
▪ Thun Group: ING participates in the Thun Group, an informal group of banking representatives focusing on human rights. The group was initially established in 2011 to support the integration of the UN Guiding Principles on Business and Human Rights into banking activities, and is now further evolving as a formal group promoting human rights and sharing best practices among its participant members.
▪ OECD: ING’s active role in promoting and integrating human rights is reflected in our participation as a formal advisory member to the OECD Working Party on responsible business conduct in our sector. In 2020 we started to develop the third and final OECD due-diligence guidance documentation for asset based finance transactions. This guidance is expected to be finalised in 2021. We also participated in the Export Credit Agencies annual meetings for practitioners from financial institutions where we actively promoted ING’s ESR framework and due-diligence process with export credit agencies, EP financial institutions, commercial banks, and development institutions.
ING endorses the recommendations of the Financial Stability Board’s (FSB) Task Force on Climate-
ING’s Climate Change Committee (CCC) is mandated to oversee and set priorities for the implementation of the TCFD recommendations and other strategic climate-related topics that impact the group. For details please refer to our approach to climate governance (Sustainability governance)
In the course of 2020, we worked on further identifying climate risk within our portfolio. We use scenarios to understand the various climate pathways that can potentially affect sectors. In addition,
ING conducted an internal firm-wide stress test, including the assessment of both physical and transition risk. To better understand the potential impact across sectors we developed an initial transition risk heatmap. We also started to conduct pilots for specific portfolios, for instance on our global mortgages portfolio with the aim to identify potential exposure towards physical risks. These types of investigations can inform our approach towards incorporating climate risk in our risk management framework. For details please refer to our stand-alone ‘Climate Risk Report 2020’
We have set climate-related targets in our lending portfolio. This includes exiting thermal coal by 2025 and steering our portfolio towards meeting the Paris Agreement’s well-below two degree goal (Terra approach). Under Terra, we set one target per sector for each of the nine sectors. For details on the approach refer to our ‘2020 Terra Progress Report’ and for our approach to setting opportunity-related metrics and targets please refer to ‘Climate Finance’ both published on our corporate website ing.com.
Within the UNEP FI TCFD project we worked towards methodologies to translate the impact of climate change on financial rations.
In 2021, we aim to further progress with our efforts regarding climate-related risks and opportunities by refining our methodologies, working towards standard setting and expanding the scope. For instance, we aim to expand the scope of our physical risk assessment for real estate and investigate the impact of transition risk on various sectors.
Operational Risk Management (ORM), Information Risk Management (IRM), the Independent Validation
The head of Corporate ORM, Corporate IRM, IVU, CSI, ERM PPU and NFR Strategy, Central Services &
Digitalisation Unit report to the global head of NFR, who directly reports to the chief risk officer. The global head of NFR is responsible for developing the framework of NFR policies and standards within
ING categorises non-financial 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, the supporting IT systems, of 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 risk is 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); ▪ Processing risk is the risk of financial loss, regulatory sanctions or reputational damage due to failed (transaction) processing (input, execution, output) or failing process management; ▪ Unauthorised activity risk is the risk of financial loss, regulatory sanctions or reputational damage due to employees performing outside the normal course of their business, intentionally giving unauthorised approvals or overstepping their authority; ▪ Personal and physical security risk is the risk of financial loss, regulatory sanctions or reputational damage due to criminal and environmental threats that might endanger the security or safety of ING personnel at work, people in ING locations, ING assets or assets entrusted to ING, people at ING event locations, or might have an impact on ING organisation's confidentiality, integrity or availability; ▪ Employment practice risk is the risk of financial loss, regulatory sanctions or reputational damage due to acts that are inconsistent with employment, health and/or safety laws, regulations or agreements, from payment of personal injury claims, or from diversity/discrimination events; and
ING by those who intend to deceitfully or unlawfully benefit themselves and/or others. This definition of fraud is specified in the following two categories of fraud: Internal fraud: acts of fraud which involves at least one internal party performed by or in collusion with an ING employee or agent with the consequence of financial loss, regulatory fines, litigation loss, business disruption and/or reputational damage for ING.
(including contractors), with the consequence of financial loss, regulatory fines, litigation loss, business disruption and/or reputational damage for ING.
environment. Throughout the year, ING continued to monitor developments in employee well-being and local BCM threat levels and aimed to identify, monitor and manage Covid-19 related risks through specific risk assessments. In addition to internally focused risk assessments, risk assessments were also performed on critical suppliers of ING. The financial health of these suppliers has been monitored throughout the entire year.
Dealing with current and emerging fraud threats, especially given the ever-increasing use of digital and on-line banking, effectively requires continuous improvement of fraud management capabilities such as real-time transaction monitoring and response capabilities. In addition, better alignment and standardisation of cross-border fraud management across ING and related platforms as well as exchanging data cross border. With legislation such as EBA PSD2 and the continuing emphasis on duty of care, financial institutions are potentially becoming more and more responsible for losses incurred by clients, and taking on more of the burden of reclaiming those losses.
Data Committee, chaired by the CRO, oversees the global data function and its contribution to wider society by providing decisions, endorsements and priorities for ING’s data management strategy and data-related initiatives.
The enterprise risk management (‘ERM’) framework is the overarching risk management framework.
In 2020, the ERM Professional Practice Unit (PPU) was established to set standards for the management and implementation of the ERM framework and to assure consistent use of the policy governance and risk library for all risk domains within ING. The PPU is introducing ING’s global documentation governance by providing definitions and guidance for global policy documentation and global policy development, update and approval processes.
UAM is one of the focus areas of ING and an important element in our control framework to mitigate the risk of unauthorised and / or inappropriate access to systems, processes and the data and information contained therein. Consequently, the UAM processes, controls and practices are periodically reviewed, tested, adapted and improved by a dedicated UAM team to address ongoing developments both within and outside ING. In 2020, ING continued to mature, with attention to tooling, standardisation and harmonisation of processes and workflows and further automation of UAM
(SCF) sourcing have been implemented and tested. The scope of sourcing encompasses outsourcing to external providers as well as intra-group sourcing.
Data Aggregation and Risk Reporting (BCBS 239), which is adopted by the ECB and became effective for all Global Systemically Important Banks (G-SIBs) as of January 2016 and for all D-SIBs depending on the date of designation. In 2020, ING continued with the extension of scope, continuous implementation improvements and further embedding into business as usual.
Introduction Compliance risk is defined as a threat posed to ING’s standing resulting from failure to act in line with applicable laws and regulations, internal rules (including ING’s Orange Code and global Code of
Within ING, compliance risks are defined as those risks that are within the scope of the ING Compliance
Risk Catalogue. The following three risk categories apply: ▪ Financial crime risk refers to the risks of the bank’s products and services being abused for illicit purpose generating or disguising financial and/or economic crimes (FEC).
The Compliance organisation (comprised of four roles: Group Compliance, business segment compliance, geographical compliance and country compliance) is part of ING’s second line of defence refer to ‘Risk Governance’. Group Compliance together with business segment compliance set the priorities, standards and boundaries for the business segments (Retail and Wholesale Banking).
together with the functional lines in the countries are responsible for the execution of these priorities, standards and control framework, within the boundaries set.
In 2020 ING introduced measures to strengthen the compliance function. These measures were implemented as part of a multi-year, global compliance strategy and transformation programme that started in October 2019. The programme encompasses the whole compliance function and particularly aims at enhancing and integrating governance, an end-to-end framework and monitoring capabilities of the compliance function. As we operate in a dynamic and challenging environment we are continuously learning and improving while getting to a more sustainable and mature level within the compliance function.
ING set up a special taskforce to monitor transactions for financial economic crime related to Covid-19.
It is important to continuously enhance our FEC controls framework given the dynamic nature of the threats and regulations. In 2020, the FEC controls maturity programme (FCMP) was initiated in order to further mature the framework over time.
At ING we attach great importance to a sound risk culture. ING’s risk culture determines the way in which employees identify, understand, discuss and act on the risks we are confronted with and the risks we take. In 2019, ING initiated a global risk culture project to understand and measure where our level on the mentioned aspects is. The Management Board Banking and Supervisory Board are closely involved in this project and are strongly committed to safeguarding a sound risk culture for ING. Key characteristics of ING’s risk culture are: ▪ Our Orange Code and global Code of Conduct define the most essential conduct principles expected from ING employees in their daily activities; (see ‘Conduct risk’)
▪ Our leadership plays an active role in offering an environment of open communication and challenge; ▪ Having a robust risk management framework is key; ▪ Managing non-financial risk is as important as managing financial risk; ▪ We take time to learn from best practices and incidents from the past; ▪ We all are accountable for sound risk management and take time to actively educate ourselves; and
▪ Our reward and remuneration system reflects our ING values and our desired risk culture.
The project includes specific enhancement assignments in areas such as monitoring risk culture, our escalation culture and further linking non-financial risk related topics to our purpose and strategy.
Solutions) and creation of home-grown solutions (e.g. CoorpID). Our focus is on RegTech solutions that create positive impact on compliance effectiveness and cost.
Know your customer (KYC) and financial crime compliance play a major role and aim to ensure we only engage and do business with people and companies that meet regulatory requirements and are within our risk appetite. This is important, not only for ING but for wider society, with governments around the globe having identified financial crime as a major concern in modern society.
(supra)national risk assessments, and industry standards related to: ▪ financial economic crime, covering money laundering, terrorist financing, bribery and corruption, export trade controls, proliferation financing, sanctions (economic, financial and trade), countries designated by ING as ultra-high-risk countries (UHRC)
▪ environmental and social risk (ESR) client assessment, specifically the initial customer screening for environmental and social risk. For more information see the Credit risk chapter.
policy framework. Where local laws and regulations are more stringent, these have to be applied.
As a result of frequent evaluation of the businesses from economic, strategic and risk perspectives, ING
practices. One of the ways we do this is through our global KYC enhancement programme which aims to: ▪ Improve customer due diligence files (documentation, data and identity verification), assess selected past transactions and report on unusual activities should these be identified.
ING updated its KYC policy in line with external regulatory developments in anti-money laundering and financial sanctions. We also updated our ESR framework to incorporate new policies on human rights, climate change and financing infrastructure projects. This framework updates and standardises our policies by expanding the list of restricted activities ING will not finance. It also clarifies roles, responsibilities as well as the products and clients in scope.
In addition, we refreshed and further enhanced our systematic integrated risk analysis (SIRA). This allows us to measure and monitor adherence to our KYC risk appetite and ensures consistent KYC
integrity risk assessments across the bank. Our risk appetite statements (RAS) which incorporate ING’s risk appetite and tolerance towards KYC integrity risks were also updated.
We also continued to introduce uniform global transaction monitoring solutions in 2020. These include standardised transaction monitoring tooling, supported by risk-based scenarios, handling alerts and reporting suspicious activities where required. The countries in scope have been connected to our global pre-transaction screening tool. Our adverse media screening tool is now available in most of the countries and will be available across the network of countries in early 2021. This allows us to continuously screen customers against news intelligence related to financial and economic crime. We implemented continuous name screening in several countries. Substituting local tools with centralised global tools enables us to further improve the way we onboard, monitor and screen customers using a consistent approach across the world.
In 2020, five Dutch banks, including ING, proceeded with Transaction Monitoring Netherlands (TMNL), following a successful proof of concept that explored the feasibility and effectiveness of joint transaction monitoring. Monitoring transactions with a combined database provides greater insights into potential criminal money flows and networks, which will further boost monitoring and alert detection.
In Germany, ING joined the public-private partnership Anti-Financial Crime Alliance (AFCA) to foster mutual exchange of information within the financial system. The alliance consists of 30 members, amongst them public authorities, the largest financial institutions as well as representatives from the real estate sector.
Criminals are harnessing technologies like artificial intelligence and machine learning to become ever more sophisticated. These same technologies can also help us to counter this threat. For example,
Hunter is an AI-powered anti-money laundering tool that has the predictive capability to detect
(emerging) suspicious patterns and entities. It helps identify clients with a high concentration of suspicious behaviour and points out hidden relationships, delivering on the promise to always be a step ahead. And we’ve developed a centralised digital vault where corporate clients can store and share their KYC documentation in a secure way. Similarly, the ING Lab in Singapore is working on a tool to help banks that serve other financial institutions eradicate the duplication of KYC documentation.
Increasing our knowledge of KYC, providing training and carrying out behavioural risk assessments aimed at detecting impeding behavioural patterns and intervening where necessary is also key.
A global KYC academy was set up last year to equip employees with the skills and knowledge they need to effectively protect customers, the bank and society against financial economic crimes. This year, the academy partnered with ACAMS (Association of Certified Anti-Money Laundering Specialists)
and developed learning modules for employees working on KYC to raise their KYC awareness. Almost 8,000 employees enrolled for these modules. Trainings on sanctions also took place.
Behavioural risk assessments were carried out to identify impeding behavioural patterns and their drivers and give direction to any necessary interventions. Since 2018, several KYC teams in various business lines have been assessed.
Fighting financial economic crime is a challenge the financial industry faces globally. The scope of the problem was illustrated in media reports in September 2020, in which several banks, including ING, were mentioned in respect of SARs filed some years ago.
In September 2020, Banca d’Italia announced that the ban on onboarding new customers at ING in
Italy, imposed in March 2019 was removed. The decision followed comprehensive steps undertaken by
ING in Italy to strengthen its processes and management of KYC compliance risks. Following an inspection by Banca d’Italia, which identified shortcomings in AML processes, ING in Italy was banned from taking on new customers in March 2019. Existing customers in Italy continued to be fully served throughout the period of the ban.
Corruption curbs economic growth and impedes the development of peaceful and sustainable societies. It undermines business confidence and corporate integrity, impedes fair business competition and harms international trade. It can also severely damage the reputation of companies and thus erode both public trust and investor confidence. We take these risks seriously and take steps in our organisation to identify and to minimise the risk of being involved in or associated with bribery or corruption.
Our people receive training which includes how to recognise warning signs of bribery and corruption and in order to ensure they understand our zero-tolerance approach and the mandatory control measures in place. Our training framework will be enhanced to provide more targeted and specialist training on bribery and corruption risks from 2021 onwards. We encourage employees to speak up if they have concerns relating to bribery and corruption.
Netherlands (TMNL) in the collective fight against money laundering and the financing of terrorism.
This organisation is a first of its kind: it is anticipated that within TMNL transactions of those banks are jointly monitored with advanced analytics techniques like network analytics and anomaly detection.
ING has a presence have committed to CRS. The EU has made CRS mandatory for all its member states.
A sound risk culture is paramount at ING as it determines the way in which employees identify, understand, discuss, and act on the risks we are confronted with and the risks we take. In 2020, ING
conducted a self-assessment of our risk culture and are working on developing the key characteristics of ING’s risk culture.
To further enhance our risk management in the area of risk culture, ING added culture and ethics risk to its compliance conduct risk scope. The proper embedding of our global Code of Conduct, Orange
Orange Code and our main policies. The global Code of Conduct further defines the most essential conduct principles expected from ING employees in their daily activities. It provides additional risk awareness and helps to better meet expectations stated in external rules and guidelines. To enhance monitoring on the global Code of Conduct, this code will be linked (like the Orange Code) to the employees’ performance management cycle to ensure a continuous attention and dialogue on how to apply the global Code of Conduct in the daily work practice of our employees.
To preserve risk awareness in the area of risk culture, ING continued its efforts towards embedding the
Orange Code decision making model (introduced in 2017) that supports ethical and well-balanced decision-making throughout ING. This included frequent training by Compliance towards the first line.
In 2020 our existing conflict of interest policy was revised in alignment with the standards as defined by enterprise risk management. The policy incorporates key requirements for both personal and organisational conflicts of interests in line with the EBA Guidelines on Internal Governance. Controls are defined in control standards owned by the first line of defence.
A tool or solution (a candidate model) is considered a model when: ▪ it covers quantitative approaches whose inputs are partially or wholly qualitative or based on expert judgement, provided that the output is quantitative in nature; ▪ it is used multiple times without changing or reconsidering the assumptions, model parameters or weighting factors; and
MoRM, is responsible for identifying, assessing, monitoring and reporting global model risk exposure at the aggregated level. The department sets and maintains a model risk management framework containing: (1) model governance, (2) model risk appetite, (3) model risk management policies and standards, and (4) the global model inventory tool. MoRM is responsible for providing independent validation of models in use within ING. For that purpose, the department has four specialised dedicated teams, each focusing on different family of models, namely: Credit Risk Model Validation, Banking Book
ING’s model risk and control structure is based on the three model lines of defence (MLoD) approach.
This approach aims to provide a sound governance framework for model risk management by defining and implementing three different management layers with distinct roles and oversight responsibilities.
(normally a 3rd LoD), e.g. to support prioritisation of their audits. In that case, both domains (risk or audit service) become 1st MLOD.
The model risk appetite is designed to determine the level of model risk ING is willing to accept in pursuit of its strategic objectives. The initial iteration of Model RAS was introduced in 2020 and it will be monitored and evaluated in 2021.
Model risk management is to be executed for each individual model through the model life cycle via processes such as: model classification, model risk identification and assessment, and model validation. On an aggregated level model risk is monitored via analysis of data from the global model inventory. The insights, from aggregated data analysis, are reported to the MoRMC and to the MBB for senior management to take well-informed decisions on acceptance or further mitigation of model risk.
Bank wide model risk management framework with, amongst others, governance, policies RAS, inventory
Initiation or change: The initiation of the development of a new model or change of an existing model can be triggered by different factors. These may be (i) internal, such as the introduction of a new product that cannot be handled by the existing models, a change in ING’s organisation, financial or commercial strategy or findings and issues by an auditor, validator or based on monitoring; or (ii)
external, such as innovation/new technology that becomes available (for example the Fintech models), new or upcoming supervisory regulations or ongoing technical developments.
Pre-approval validation is the independent confirmation that the model is valid for its intended use, before the new or changed model is submitted for use approval. To ensure objectivity and effective challenge, the model validator is independent from other model parties such as the model developer, model owner or model approver. Model validation applies equally to in-house developed and thirdparty models.
The objective of the model approval stage is approval for use. The model owner submits the model for formal consent by the internal approver before being deployed and used. The recommendations and validation report prepared by the model validator are key inputs for approval for use.
In the model use stage the model is applied by the users for the specific purpose it was designed for.
The objective of model performance monitoring is to regularly check if the model is performing as intended, also after possible changes in the commercial, organisational or legal environment. Model performance monitoring begins when model use has started and continues until the model has officially been decommissioned.
A model that is / will no longer be used must be decommissioned. Decommissioning disables the model. It can, for example, be triggered because (1) the product, organisation or risk the model is made for has changed considerably or no longer exists, (2) the model is outdated, underperforming or better alternatives are available, (3) the model became obsolete due to standardisation or (4) the external approver withdraws its approval for the model.
In what was an unprecedented year, the Supervisory Board had several important topics on its agenda, including ING’s response to the coronavirus and the appointment of a new CEO. In this interview, Hans
It was an exceptional year and incredibly demanding. It tested our flexibility to adapt and deal with change. For ING, as for everyone, 2020 was dominated by the impact of Covid-19, and by the changes in the leadership of our company.
An absolute highlight was how quickly ING adapted to the new situation and how our employees continued to work in often challenging circumstances. Within a very short time around 80 percent of employees worldwide had switched to working from home, from where they are continuing to serve our customers, are further digitalising the bank and improving anti-money laundering processes.
The topic that stood out for us this year was how ING could help customers, employees and communities safely through the Covid-19 pandemic, while taking into account our business continuity, performance and our gatekeeper role to ensure the bank’s continued security and compliance. For instance, ING participated in government-sponsored initiatives offering payment holidays to help people and manage the impact of the pandemic. As the Supervisory Board, we were also impressed by local ING initiatives to support their communities, for example by donating materials or raising funds with customers and colleagues.
Throughout 2020 we monitored and discussed the progress of the strategy and the associated transformation programmes. It became evident during the year that the challenging external environment required ING to place increased focus on ‘how’ and ‘where’ we put the strategy into practice. The increased focus on executing the strategic priorities with more certainty led to changes in the geographical and client footprint of our Wholesale Banking business and the decision to stop the
And while we needed to deal with the immediate challenges brought on by the coronavirus pandemic, we continued with our sustainability efforts, as we want to play our part in building back a better world. You can find many examples in this report.
In addition, we’ll periodically review whether there is structural excess capital available to return to shareholders. In executing the new distribution policy, ING will comply with the prevailing recommendation of the European Central Bank on shareholder distributions.
The Supervisory Board was pleased to appoint chief risk officer Steven van Rijswijk as CEO following a broad and rigorous selection process. With almost 25 years at ING, of which three on the Executive
Phutrakul. The Supervisory Board is grateful to all involved for the seamless transition in such a complex environment.
In addition, Isabel Fernandez, responsible for Wholesale Banking in the Management Board Banking, left on 31 December to continue her career outside of ING. We appreciate her high-energy leadership over the past four years. The Supervisory Board is actively looking to appoint her successor.
Finding suitable candidates for ING’s Executive Board and Management Board Banking remains challenging, as there are numerous requirements to take into account, including diversity to enhance the composition of the Boards, as well as specific criteria for each function, including regulatory requirements. In terms of the dimensions of diversity, Ljiljana Čortan will add both nationality and gender diversity to the Executive Board and Management Board in line with our 70 percent principle.
The Supervisory Board is convinced that with its new, diverse composition of the executive top team,
Stakeholder engagement is important for obtaining broad acceptance among our stakeholders with regards to decisions on important topics. We aim to maintain continuous interaction with supervisors, customers, shareholders, employees, NGOs and other stakeholders. We continued to do so in 2020, albeit taking into account the challenges in this respect due to the Covid-19 restrictions, which limited our direct interaction.
An example of our efforts to engage with stakeholders is on the new 2020 remuneration policies for the Executive Board and Supervisory Board, which helped to secure shareholder approval of 94 percent and 98 percent respectively at the AGM in 2020. Other examples of stakeholder engagement, which mainly took place through indirect and virtual channels, are ING’s capital plan and new distribution policy.
A deep economic recession in 2020 was avoided through extensive fiscal government programmes and large monetary impulses by the European Central Bank. Governments will have to continue to support their economies in 2021 to face the crisis and to recover from it.
Altogether, in view of the very difficult circumstances, 2020 was a tough year but our financial results remained resilient. There was a continued healthy demand for mortgages, although as people spent less during lockdown, we saw an increase in savings and a decline in demand for business and consumer loans. Fee and commission income grew in 2020 as considerably more customers chose ING
Supervisory Board agenda have all significantly increased the time commitment of our members. I’m happy to say the Supervisory Board has shown a lot of positive energy and dedication to help steer the company through these choppy waters.
Supervisory Board members were present at the meetings. This attendance rate is slightly higher compared to previous years. In addition, many extra meetings have been held in view of addressing the Covid-19 pandemic. See the attendance matrix for the Supervisory Board meetings and committee meetings for more details. The continued high attendance in 2020 demonstrates that Supervisory
The Supervisory Board also discussed the succession planning of the Executive Board and the
Management Board Banking – i.e. for the chief executive officer, chief risk officer and the head of
ICAAP, data (including strategy, management, quality, data ingestion and ethics), IT, sourcing, the suitability requirements for boards and key function holders and the global implementation thereof.
2. Additional RiCo meetings took place in 2020, three of which were in combination with the RemCo on remuneration matters that also required a risk view.
3. Additional NCGcom meetings took place in 2020, two of which were in combination with the RemCo, in view of medium to longer term board succession planning.
4. As of 2020, there is now an additional AC meeting, i.e. there are six instead of five standard AC meetings per year, to allow the AC to dedicate specific focus to thematic sessions on finance and audit related matters.
6. Mike Rees and Harold Naus each participated once in a NCGcom meeting in combination with the RemCo. Herna Verhagen participated three times in a RiCo meeting in combination with the RemCo.
AGM, Herman Hulst, Harold Naus and Juan Colombás were appointed to the SB. The appointment of Juan Colombás became effective on 1 October 2020. Their attendance is shown relative to their tenure.
The Covid-19 pandemic and its impact on ING was an important topic that was dealt with during the regular and additional meetings of the Supervisory Board and its committees. The Management Board
Banking and Executive Board provided the Supervisory Board with regular updates. Their discussions focused on how ING could help customers, employees and communities safely through the Covid-19 pandemic, while taking into account ING’s business continuity, performance and its gatekeeper role to ensure the bank’s continued security and compliance. In addition to discussions that took place during the meetings, the Management Board Banking and Executive Board provided interim written updates on the topic to the Supervisory Board. Outside of the collective meetings there was also frequent interaction between the chairs of the relevant Supervisory Board committees and the members of the
Executive Board to ensure that everyone was up-to-date on the most recent developments at all times.
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. Also, the topic of primary customer development and managing ING’s reputation and brand was dealt with during the Supervisory Board’s deliberations.
control framework to manage and mitigate financial and economic crime risks in a sustainable, riskbased way. The progress is being monitored by and discussed between the Supervisory Board, management and the relevant supervisors.
As part of the aforementioned efforts in view of KYC/AML and also part of the Supervisory Board’s programme of lifelong learning, the Supervisory Board participated in various sessions ranging from overarching deep dives and thematic sessions to business visits. With regard to the latter, before the start of the Covid-19 outbreak, the Supervisory Board among others visited ING’s local and centralised compliance/KYC operations in France and in the Netherlands. During these visits a dialogue took place with the teams involved, contributing to a better mutual understanding of the importance of the various initiatives and processes, the results of which led into subsequent discussions on the topic at group level.
The destinations for the Supervisory Board/Executive Board/Management Board Banking annual business visits in 2020 would have been Australia (Sydney) and the Philippines (Manilla) in order to gain a better understanding of local business challenges, with specific focus on AML/KYC and data security, as well as on sourcing, including the role of ING’s shared service centres. Due to the global Covid-19 outbreak and measures imposed to prevent the spread, e.g. travel restrictions and social distancing, the Supervisory Board, the Executive Board and the Management Board Banking decided to postpone the physical business visits until further notice.
Compliance/KYC and other relevant topics, the latter including among others technology and IT
Thematic sessions were organised to focus specifically on certain themes that needed further attention and/or were looking forward at emerging risks and developments. For 2020 these related to the SREP interim status update, data plan and quality, ECAP/ICAAP including stress testing and economic capital, Quality Assurance and residual risk in file enhancement (regarding KYC), paymentrelated initiatives and challenges, and sustainability (energy transition and climate change).
The boards therefore concluded that refocusing activities should ensure faster delivery of products and services and a continuously improving end-to-end digital customer experience. In further developing
Board, including the SOX 404 Report in relation to the Annual Report on Form 20-F. ING’s Annual Report is presented in an integrated form for the sixth successive year. The financial statements will be submitted for adoption at the 2021 Annual General Meeting as part of the 2020 Annual Report.
In 2020, the quarterly results, including the relevant auditor reports and press releases, were discussed and approved in the months February, May, August and November. The full-year 2019 financial results were discussed and approved in March 2020. In consultation with the Supervisory Board important decisions were made in 2020 with regard to ING’s long-term CET1 ratio ambition level and
ING Group Annual Report 2020 192 dividend/capital policy. Read more in ‘Audit Committee meetings’ below. In addition, elements relevant to the draft agenda for the Annual General Meeting were discussed and decided on.
KPMG, in its role as ING’s external auditor, audited ING’s 2020 financial statements. As part of the standard procedures, KPMG declared itself independent from ING, in compliance with applicable rules and regulations. Based on the Audit Committee proposal, the Supervisory Board supported the audit plans of the internal and external auditor including a subsequent update due to Covid-19 impact, the latter including the updated scope and materiality of the external audit.
During the internal meetings of the Supervisory Board in 2020 (with the chief executive officer in attendance, except when matters concerning the chief executive officer were discussed), among others, the Executive Board and Management Board Banking annual targets and periodic performance assessments were reviewed and approved. Other recurring topics of discussion at these internal meetings were the future composition of the Executive Board (including the succession of the chief executive officer and chief risk officer), the Management Board Banking (including the succession of the head of WB) and the Supervisory Board (including its committee composition). ING’s broader talent and succession planning were also discussed in view of bench strength, including the outcome of ING’s annual Talent review. Other specific topics dealt with in 2020 concerned the approval and global implementation of ING’s suitability policy framework and the proposed new remuneration policies for the Executive Board and the Supervisory Board.
Furthermore, as in previous years, the Supervisory Board conducted its annual self-evaluation over the reporting year, facilitated by an independent external party and with input from several executives and senior managers who regularly interact with the Supervisory Board and attend Supervisory Board meetings. The self-assessment specifically addressed the ‘what’ (roles and responsibilities) and the
Supervisory Board and its committees as well as to the effectiveness with which they supervise, challenge and advise the Executive Board [and Management Board Banking]; and (4) Effective meetings, through a good distribution of work between the Supervisory Board and its committees, supported by a comprehensive annual cycle of work.
Banking] in building an effective new team, while safeguarding the continued segregation of duties between the various boards; (2) Continue paying dedicated attention to embedding an organisationwide change in (risk) culture mindset and behaviours, supported by a well-diversified employee base capable of delivering on ING’s purpose and strategy; (3) Further re-balance focus in meetings on strategy and sustainability, business and financial performance, risk management and regulatory requirements, taking into account the continuously evolving demands and expectations of various stakeholders in relation to these key topics; and (4) Continue investing in the Supervisory Board’s own lifelong learning, especially in the areas of technology, IT and cybersecurity in view of ING’s ambition.
In addition to financial results and accounts, the Audit Committee’s regular deliberations included financial reporting, the external auditor’s audit plan/engagement letter/independence and fees, the overall internal control environment, the internal controls over financial reporting, the internal and external auditor reports, review of the internal audit function, and matters related to the financing of the company, including the assessment of ING’s capital and liquidity position. The Audit Committee also reviewed the press releases related to the periodic results, the Annual Report, the 6-K and 20-F
Specific attention was paid to a variety of other related topics. These included ING’s long-term CET1 ratio ambition level which the Audit Committee advised could be adjusted downward, to be around 12.5%. This translates into a ~200 bps buffer over current minimum regulatory requirements. ING
Directly following the Audit Committee meetings, the members of the Audit Committee met in a closed meeting with the internal and external auditors to seek confirmation that – among others – all relevant topics were discussed in the Audit Committee meetings.
To properly prepare for the regular Audit Committee meetings, the chairperson of the Audit
Committee composition was expanded in 2020 to comprise almost all Supervisory Board members. In 2020, the number and length of periodic Risk Committee meetings was further increased: there are now 10 regular meetings per year, of which three are combined with the Remuneration Committee to address remuneration-related risk elements. In light of Covid-19, additional updates on financial, nonfinancial and compliance risk were provided.
enhancement and maturity efforts, a variety of topical dashboards (such as on KYC GDPR/GDPP, PSD2,
MiFID II, risk culture, sourcing and data quality) and the status of implementation of related regulatory programmes.
In addition, throughout the year, a number of deep dives and thematic sessions took place on specific topics such as compliance/KYC, including risk culture, IT and cybersecurity; modelling; SREP; ECAP/ICAAP; stress testing; CVA hedging and the impact on capital MiFID II; sourcing; data; payment initiatives, and the energy transition and climate change. These sessions were in principal presented from a risk management angle and where relevant also addressed the impact of the pandemic.
With regard to the Executive Board, specific attention was paid in 2020 to the succession of the chief executive officer and the chief risk officer and for the Management Board Banking this was the case for the head of WB. With regard to the Supervisory Board, the Nomination and Corporate Governance
Committee continued its search for potential suitable successors so as to maintain a balanced
Supervisory Board composition, taking into account the evolving role of supervisory boards in general, resulting in an updated composition following the 2020 Annual General Meeting. Finding suitable board succession candidates remains challenging, as numerous requirements must be met in view of board composition, including regulatory requirements, suitability considerations, diversity, banking and other industry knowledge, outside positions, independence, no conflicts of interest, availability, etc. Diversityrelated aspects that are being taken into account include the minimum and optimal size of a board and how to arrive at an appropriate balance in its representation of regions, age, gender, and knowledge and expertise. Read more on the boards’ composition in the Composition of the Executive
Board, Management Board Banking and Supervisory Board section that also includes a diversity and competence matrix.
In terms of corporate governance, the committee discussed the 2020 Annual Report and the accompanying booklets on ING’s application of the Dutch Corporate Governance Code and the Dutch
outside positions and the annual review and update of the corporate board charters, the latter which were re-written in 2020 with a new design for simplicity, transparency and consistency purposes. The charters were complemented with separate role descriptions.
As an annual recurring topic, the Remuneration Committee reviewed the remuneration policies and procedures of the Executive Board and the Management Board Banking. In 2020, the committee played a key role in finalising the new remuneration policies of the Executive Board and the
Banking annual targets for 2020. The periodic performance assessments over 2019 and mid-year 2020 were also reviewed and discussed. With regard to variable compensation and the application of ING’s accompanying Variable Remuneration Accrual Model, the committee received input and advice from the Risk Committee following strengthened risk management governance. This served as input for a review of the predefined thresholds above which the pool for variable remuneration may be unlocked for those eligible as well as the accompanying individual variable remuneration proposals, including potential cases for holdback of deferred compensation by way of malus.
In 2020, the committee paid specific attention to: • lessons learnt in relation to the application of the Variable Remuneration Accrual Model over 2019; • potential implications of the Covid-19 pandemic on ING’s target setting and remuneration policies, by closely monitoring developments in this regard. This includes the views and expectations of the
The Remuneration Committee reviewed the updates to ING’s Remuneration Regulations Framework as part of an annual review. Throughout the year it assessed Identified Staff and High Earner-related remuneration matters, based on ING’s accompanying governance framework.
Čortan (formerly chief risk officer of another financial institution) being appointed as ING’s chief risk officer and member of the Management Board Banking per 1 January 2021. The Supervisory Board will propose to shareholders to appoint her as member of the Executive Board and chief risk officer of ING
Pinar Abay was appointed head of Market Leaders and member of the Management Board Banking, effective from 1 January 2020. Isabel Fernandez, member of the Management Board Banking and head of ING Wholesale Banking, stepped down from her position as per 31 December 2020. Succession planning has been initiated for this role.
Haase took over the role of chairperson of the Audit Committee.
The membership of Herman Hulst became effective as per the end of the 2020 Annual General Meeting and he then also became a member of the Risk Committee and the Audit Committee. The membership of Harold Naus also became effective as per the end of the 2020 Annual General Meeting and he became a member of the Risk Committee and the Remuneration Committee. The membership of Juan
International experience •• •• •• •• •• •• •• • •
Please note the following: the competencies included in this matrix represent a non-exhaustive overview of the competencies that ING’s corporate board members had before joining ING and/or developed during their position(s) at ING.
DNB/ECB based on their suitability matrix to assess the collective competence of members of the management/supervisory body.
The Supervisory Board of ING Group is responsible for controlling management performance and advising, supervising and constructively challenging the Executive Board. All Supervisory Board members, with the exception of not more than one person, shall qualify as independent as defined in the best practice provision 2.1.8 of the Dutch Corporate Governance Code. All current members of the
Supervisory Board are qualified as independent. For the full list of members see ‘Our leadership’.
The Supervisory Board would like to thank the members of the Executive Board and the Management
More information can be found in the ‘Corporate governance’ chapter and the ‘Remuneration report’, which are deemed to be incorporated by reference here.
Governance Code, by ING Groep N.V. (ING Group), including information on ING Group’s share capital, control, Executive Board, Supervisory
This chapter, including the parts of this Annual Report incorporated by reference, along with the separate publication ‘ING’s application of the Dutch Corporate Governance Code’, comprise the
ING Group uses the Dutch Corporate Governance Code (DCGC) as reference for its corporate governance structure and practices.
Code by ING Groep N.V.’, dated 8 March 2021, available on ing.com. This is to be read in conjunction with this chapter and is deemed to be incorporated into this chapter.
The Dutch Banking Code (Banking Code), is only applicable to ING Bank N.V. (ING Bank) and not to ING
Group. However, ING Group voluntarily applies the principles of the Banking Code regarding remuneration to its Executive Board members and senior management. The application by ING Bank is 1 As required in Section 2a of the decree with respect to the contents of the Annual Report (Besluit inhoud bestuursverslag).
ING Group is a public limited liability company (naamloze vennootschap) organised under the laws of the Netherlands. It qualifies as a foreign private issuer under the US Securities and Exchange
Commission (SEC) rules and for the purposes of the New York Stock Exchange (NYSE) listing standards.
Under NYSE listing standards, listed companies that are foreign private issuers are permitted to follow home-country practice in some circumstances, in lieu of the provisions of the corporate governance rules contained in Section 303A of the NYSE Listed Company Manual applicable to US-listed companies.
In accordance with the requirements of the SEC and NYSE, ING Group must disclose in its Annual Report on Form 20-F any significant differences between its corporate governance practices and those applicable to 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 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 generally require a majority of board members to be ‘independent’ as determined under the NYSE listing standards. Under the DCGC, all members of the supervisory board, with the exception of not more than one person, should be ‘independent’ as determined under the DCGC. However, the definition of ‘independent’ under the DCGC differs in its details from the definition of ‘independent’ under the NYSE listing standards. In some cases, Dutch requirements
ING Group Annual Report 2020 200 are stricter; in other cases the NYSE listing standards are stricter. All members of ING’s Supervisory
• In contrast to the NYSE listing standards, the DCGC contains an ‘apply-or-explain’ principle, offering the possibility of deviating from the DCGC. For any deviations by ING Group, please refer to the paragraph ‘Dutch Corporate Governance Code’.
The results of such votes are advisory in nature rather than binding. Under Dutch law and the DCGC, binding shareholder approval is only required for equity compensation plans (or changes thereto)
Continuity Foundation report). The purpose of this call option is to protect the independence, continuity and identity of ING Group against influences that are contrary to its interests, its enterprise and the enterprises of its subsidiaries and all stakeholders (including, but not limited to, hostile takeovers). The ordinary shares are not used for protective purposes.
The board of ING Continuity Foundation comprises of four members who are independent of ING
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 Articles of
UK, where ING believed the vast majority of retail investors were located at that time); 4. Qualified or institutional investors in Canada and Australia.
The share issue authorisation that will be proposed to the 2021 Annual General Meeting will be similar to the current applicable authorisation described above.
The Articles of Association do not restrict the transfer of ordinary shares, whereas the transfer of cumulative preference shares is subject to prior approval of the Executive Board. ING Group is not aware of the existence of any agreement pursuant to which the transfer of ordinary shares or
Shares that are included in the Securities Giro Transfer system are transferred in accordance with the
Pursuant to section 5.3. of the Dutch Financial Supervision Act (Major Holdings Rules), any person who, directly or indirectly, acquires or disposes of an interest in the voting rights and/or the capital of (in short) a public limited company incorporated under the laws of the Netherlands with an official listing on a stock exchange within the European Economic Area, as a result of which acquisition or disposal the percentage of his voting rights or capital interest - whether through ownership of shares, American depositary receipts (ADRs) or any other financial instrument, whether stock-settled or cash-settled, such as call or put options, warrants, swaps or any other similar contract - reaches, exceeds or falls below 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75% or 95% is required to provide updated information on its holdings. With respect to ING, the Major Holdings Rules require any person whose interest in the voting rights and/or capital of ING reaches, exceeds or falls below those percentages whether through ownership of ordinary shares, ADRs or any other financial instruments whether stock settled or cash settled, such as call or put options, warrants, swaps or any other similar contract - to notify in writing the Dutch Authority for the Financial Markets (AFM) immediately after the acquisition or disposal of the triggering capital interest or voting rights.
Each person holding a gross short position in relation to the issued share capital of ING that reaches, exceeds or falls below any one of the above-mentioned thresholds must immediately give written notice to the AFM. If a person’s gross short position reaches, exceeds or falls below one of the abovementioned thresholds as a result of a change in ING’s issued share capital, such person must make a notification not later than the fourth trading day after the AFM has published the company’s notification in the public register of the AFM.
In addition, pursuant to Regulation (EU) no. 236/2012 of the European Parliament and of the Council on short-selling and certain aspects of credit default swaps, any person who acquires or disposes of a net short position relating to the issued share capital of ING Group, whether by a transaction in shares or
ING Group publishes a comprehensive quarterly disclosure package that includes detailed financial figures with relevant explanatory remarks. This information is discussed thoroughly on the day of the earnings release during media, analyst and investor conference calls. These are broadly accessible to interested parties. The publication dates of quarterly earnings releases are announced in advance on ing.com.
Approximately 25 analysts actively cover and generally issue reports on ING Group. A list of these analysts can be found under ‘Analyst Coverage’ in the Investor Relations section of ing.com. During 2020, ING Group did not provide any form of compensation to parties that are directly or indirectly involved in the production or publication of analysts’ reports, with the exception of credit-rating agencies.
ING’s Annual General Meeting (AGM) is normally held in April or May to discuss the course of business in the preceding financial year on the basis of the reports prepared by the Executive Board and the
Supervisory Board and to decide on: • The distribution of dividend or other distributions; • The appointment and/or reappointment of members of the Executive Board and the Supervisory
Board; • Any other items requiring shareholder approval pursuant to Dutch law; and
Supervisory Board, subject to a binding nomination or a proposal of the Supervisory Board as described in the Articles of Association; • the adoption of the annual accounts; • the declaration of dividends, subject to the power of the Executive Board to allocate part or all of the profits to the reserves – with approval of the Supervisory Board – and the declaration of other distributions, subject to a proposal by the Executive Board and approved by the
Supervisory Board; • the appointment of the external auditor; • an amendment of the Articles of Association, a legal merger or division of ING Group, and windingup of ING Group, all subject to a proposal made by the Executive Board with approval by the
Supervisory Board; • the issuance of shares or rights to subscribe for shares, the restriction or exclusion of pre-emptive rights of shareholders, and delegation of these powers to the Executive Board, subject to a proposal by the Executive Board that has been approved by the Supervisory Board; • the authorisation of a repurchase of outstanding shares and/or a cancellation of shares.
In accordance with US requirements, the depositary sets a record date for the ADRs, which determines which ADRs are entitled to give voting instructions. This record date can differ from the record date set by ING Group for shareholders.
Shareholders may attend a General Meeting in person or may grant a proxy in writing to a third party to attend the meeting and vote on their behalf. ING will make proxy forms available on ing.com before the General Meeting. For logistical reasons, attending the General Meeting, either in person or by proxy, is subject to the requirement that ING Group is notified in advance. Instructions for this are included in the notice for the General Meeting.
General Meetings are webcast on ing.com, so that shareholders who could not attend the General
ING Group provides proxy voting facilities for its investors via ing.com and solicits proxies from its ADR
Proxy voting forms are made available on ing.com. By returning the form, shareholders give a proxy to an independent proxy holder (a public notary registered in the Netherlands), to vote on their behalf, in accordance with instructions expressly given on the proxy form. Submitting these forms is subject to additional conditions as specified on such forms.
As from 3 September 2020, ING Group will send an electronic confirmation of receipt of the votes to the person that casts the vote. In addition, on request made within three months from the date of the
General Meeting, ING Group will confirm to the shareholder or a third person designated by the shareholder that the shareholder’s votes have been validly recorded and counted by ING Group, if this information is not already available to the shareholder directly.
This year, the AGM was held on 28 April 2020 at ING’s corporate head office in Amsterdam and was broadcast live on ing.com for shareholders who could not attend the AGM in person. Due to the coronavirus pandemic, the meeting was held in an adapted form in order to mitigate health risks for all participants and to comply with Dutch government directives.
This year, a notarial record of the business transacted at the AGM 2020 was made. The notarial record can be downloaded on ing.com.
The Executive Board is charged with the management of ING Group. This includes responsibility for setting and achieving ING Group’s strategy, objectives and policies, as well as ensuring the delivery of results. It also includes the day-to-day management of ING Group. The Executive Board is accountable for the performance of these duties to the Supervisory Board and the General Meeting. The responsibility for the management of ING Group is vested in the Executive Board collectively. The organisation, powers and modus operandi of the Executive Board are detailed in the Charter of the
In accordance with the Banker’s Oath that is taken by the members of the Executive Board, they must carefully consider the interests of all stakeholders of ING. In that consideration they must put the customer’s interests at the centre of all their activities.
ING aims for the Executive Board of ING to consist of a diverse selection of persons with executive experience, preferably gained in the banking sector, experience in corporate governance of large stocklisted companies and experience in the political and social environment in which such companies operate. In addition, there should be a good balance in the experience of and affinity with the desired nature and culture of the business of ING. ING strives to have at least 30 percent of the seats held by women, and at least 30 percent of the seats by men.
The Supervisory Board is responsible for selecting and nominating candidates for appointment or reappointment to the Executive Board, among others based on the Executive Board profile.
Considering all aspects the Supervisory Board appointed Steven van Rijswijk as the successor of Ralph
Board and Management Board in line with our 70 percent principle.
Succession planning for Executive Board positions is continuously worked on, balancing the career advancement of (female) senior managers, considering female candidates for the role and bringing in talents from outside the bank.
On 31 December 2020, there were no female members of the Executive Board. ING considers that the preferred gender balance will be achieved with the appointment of Ljiljana Čortan following the AGM
Members of the Executive Board are permitted to hold shares in the share capital of ING Group for long-term investment purposes. Transactions by members of the Executive Board in these shares are subject to the ING regulations for insiders. These regulations are available on ing.com.
In accordance with the DCGC, transactions with members of the Executive Board in which there are significant conflicts of interest will be disclosed in the Annual Report.
He is responsible for the proper functioning of the Executive Board, the Management Board Banking and its committees, formulating and implementing ING’s strategy and acting as main contact for the
Supervisory Board. He is also responsible for the following departments: Innovation, Legal, Corporate
Strategy, Corporate HR, Centre of Excellence Communications and Brand Experience and Corporate
He holds a master’s degree in business economics from Erasmus University Rotterdam (the
Tanate Phutrakul was appointed as CFO of ING Groep N.V. and ING Bank N.V. and member of the
As from 1 July 2020 Tanate Phutrakul temporarily assumed the responsibility for risk on the Executive
Board Banking of ING Bank N.V., and Non-executive member of the board of ING Belgium N.V./S.A.
In November 2020, ING announced the appointment of Ljiljana Čortan as CRO and member of the
Management Board Banking from 1 January 2021. In the interim, the day-to-day risk management activities were performed by Karst Jan Wolters, reporting to chief financial officer Tanate Phutrakul.
Ralph Hamers stepped down from his position as CEO and chairman of the Executive Board of ING
Groep N.V. and of the Management Board Banking of ING Bank N.V. as of 30 June 2020.
The Supervisory Board will propose to the shareholders to appoint Ljiljana Čortan as member of the
Members of the Supervisory Board are appointed, suspended and dismissed by the General Meeting.
This ensures that significant proposals of shareholders cannot be adopted in a General Meeting with a low attendance rate and can only be adopted with substantial support of ING Group’s shareholders.
In line with Dutch company law, the Articles of Association, the DCGC as well as the Charter of the
According to the Banker’s Oath that is taken by the members of the Supervisory Board, they must carefully consider the interests of all stakeholders of ING. In that consideration they must put the customer’s interests at the centre of all their activities. Certain resolutions of the Executive Board, specified in the Articles of Association, in the Charter of the Management Board and in the Charter of the Supervisory Board, are subject to approval by the Supervisory Board.
Board as far as legally permitted against direct financial losses in connection with claims from third parties lodged or threatened to be lodged against them by virtue of their service as a member of the
In view of their experience and the valuable contribution that former members of the Executive Board can make to the Supervisory Board, it has been decided, taking into account the size of the Supervisory
Board and ING’s wide range of activities that such individuals may become members of the
Supervisory Board members, ING is striving for a balance in nationality, gender, age, and educational and work background. In addition, there should be a balance in the experience and affinity with the nature and culture of the business of ING and its subsidiaries. More specifically ING strives to have at least 30 percent of the seats held by women, and at least 30 percent of the seats by men. These guidelines that relate to the composition of the Supervisory Board, are laid down in the Supervisory
Board Profile. Based on this profile, the Supervisory Board is responsible for selecting and nominating candidates for appointment or reappointment to the Supervisory Board.
With respect to gender diversity, three female members currently serve on the Supervisory Board: Mariana Gheorghe, Margarete Haase and Herna Verhagen, resulting in the Supervisory Board meeting its 30 percent gender diversity target.
We believe the Supervisory Board is well balanced in terms of other relevant diversity aspects. Overall, the preferred emphasis on members with a financial or banking background has been maintained. In terms of nationality, the ratio between Dutch and non-Dutch nationalities in 2020 was 56 - 44 percent.
Other diversity related aspects are also taken into consideration in light of the overall Supervisory
Members of the Supervisory Board may hold other positions, including directorships, either paid or unpaid.
excluding the member concerned – decides whether a conflict of interest exists.
Committee. An organisational chart of the four permanent committees of the Supervisory Board can be found above.
Peter Balkenende, Juan Colombás, Mariana Gheorghe, Margarete Haase, Herman Hulst, Harold Naus and Hans Wijers.
The Audit Committee assists and advises the Supervisory Board with the performance of its duties in relation to the integrity and quality of the Company’s financial reporting and the related effectiveness of the Company’s internal risk management and control systems and shall prepare the discussions within and the decisions of the Supervisory Board on such matters. On 31 December 2020, the members of the Audit Committee were: Margarete Haase (chairwoman), Juan Colombás, Herman
May 2018 and per that date Margarete Haase is considered a financial expert as defined by the SEC in its final rules implementing Section 407 of the Sarbanes-Oxley Act of 2002.
Supervisory Board on such matters. On 31 December 2020, the members of the Nomination and Corporate Governance Committee were: Hans Wijers (chairman), Mariana Gheorghe and
Remuneration Committee will take into account the adequacy of information provided to shareholders on remuneration policies and practices. On 31 December 2020 the members of the Remuneration
Committee were: Herna Verhagen (chairwoman), Mariana Gheorghe, Harold Naus and Hans Wijers.
Chairman of the Supervisory Board of ING Groep N.V./ING Bank N.V. and member of the supervisory board of Hal Holding N.V.
Member of the Temasek European Advisory Panel of Temasek Holdings Private Limited.
Vice-chairman of the Supervisory Board of ING Groep N.V./ING Bank N.V., non-executive chairman of
Foundation, chairman of the Board of Maatschappelijke Alliantie (the Netherlands) and chairman of the
(Born 1962, Spanish nationality, male, appointed in 2020, term expires in 2024)
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.
(Born 1955, Dutch nationality, male, appointed in 2020, term expires in 2024)
(Born 1969, Dutch nationality, male, appointed in 2020, term expires in 2024)
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V. CEO of PostNL N.V. and nonexecutive board member and chairwoman of the nomination committee of Rexel SA.
AGM of 28 April 2020. The appointments of Herman Hulst and Harold Naus became effective on this date. The appointment of Juan Colombás became effective on 1 October 2020.
The Supervisory Board and Executive Board are assisted by the company secretary Cindy van Eldert-Klep.
The contracts entered into with the members of the Executive Board provide for severance payments that become due upon termination of the applicable member’s contract, including if termination occurs in connection with a public bid as defined in section 5:70 of the Dutch Financial Supervision Act.
Supervisory Board. An amendment of the Articles of Association is required to be executed by notarial deed.
KPMG has been the external auditor for ING Group since 2016. At the AGM held on 23 April 2019, KPMG
was re-appointed for this role for the financial years 2020 through 2023. This appointment includes the responsibility to audit the financial statements of ING Group for the financial year 2020; to audit the effectiveness of internal control over financial reporting on 31 December 2020; to report on the outcome of these audits to the Executive Board and the Supervisory Board; and to provide an audit opinion on the financial statements of ING Group. Additionally, KPMG performs a review of the sustainability information in the annual report to obtain limited assurance and for a number of nonfinancial KPI’s reasonable assurance, about whether this information is free from material misstatement. As sustainability is of strategic importance to ING, KPMG is involved in providing assurance on this information.
Audit Committee, in line with the ING Group policy on External Auditor Independence.
ING´s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
• provide reasonable assurance regarding the prevention or timely detection of unauthorised acquisition, use or disposition of assets that could have a material effect on the financial statements.
In accordance with best practice provision 1.4.3 of the 2016 Dutch
The Risk Management section as part of the Report of the Executive Board elaborates on ING’s identified financial and non-financial risks (such as credit risk, solvency risk, market risk, operational risk, IT risk, model risk, compliance risk, funding and liquidity risk, environmental, social and governance risk and business risk) and how these risks are managed. These chapters provide insight into the potential impact on the results of ING Groep N.V. that come forth from these identified risks. The design and functioning of the internal risk management and control systems is based on the Risk Appetite
Framework and the Non-Financial Risk Framework. Both frameworks, explained in detail in the Risk
Treadway Commission (COSO) in Internal Reporting – Integrated Framework (2013 Framework).
In discharging the responsibility for ING’s internal risk management and control systems, the Executive
There are a number of risks in areas where applicable regulations may be unclear, subject to multiple interpretations or under development, or where regulations may conflict with one another, or where regulators revise their previous guidance or courts overturn previous rulings.
Despite our efforts to maintain effective compliance procedures and to comply with applicable laws and regulations we therefore cannot rule out the risk of non-compliance with applicable standards.
Report of ING Continuity Foundation Stichting Continuïteit ING (ING Continuity Foundation), a foundation organised under the laws of the
ING Continuity Foundation is entitled to acquire cumulative preference shares to be newly issued, provided that, following the issue, the number of cumulative preference shares issued may be no more than one third of the total number of shares issued. This entitlement is vested in the Articles of
Naturally, it also affected our business performance, which has a direct impact on the way we recognise and reward many of our employees. In this context there will be no changes to remuneration for the Executive Board and the Supervisory Board in 2021 and the Executive Board will forgo their variable remuneration for performance year 2020.
ING’s approach to remuneration is designed to attract, motivate and retain people with the skills, abilities, values and behaviours needed to achieve its strategy. At the same time, we have a responsibility to be balanced and fair, taking into account all our stakeholders in what was, and continues to be, a difficult environment.
That’s why we aim to have an ongoing dialogue with our regulators, customers, shareholders , works councils and other stakeholder groups. Due to the Covid-19 restrictions, we engaged with our stakeholders in 2020 mainly through indirect and online channels. This included consultations in preparation for this year’s remuneration approach, strengthening the link between performance and remuneration outcomes. We will continue these interactions in 2021.
ING seeks to effectively reward success and avoid rewarding for failure. We aim to offer well-balanced remuneration that focuses on creating short- and long-term value for all our stakeholders. We make our biggest contribution to society through our business: processing payments, providing loans and protecting people’s money. At the same time, as a gatekeeper to the financial system we have responsibility to keep our bank safe, secure and compliant. Achieving the balance between our function as a bank and managing the inherent risks this brings, is reflected in our remuneration approach.
Halfway through the year, Steven van Rijswijk succeeded Ralph Hamers as chief executive officer. The same remuneration principles apply to him as did to his predecessor. As such, Steven’s remuneration until 1 July 2020 is reflected in his previous role as chief risk officer, and in the second half of the year as CEO.
This 2020 Remuneration Report is the first to reflect ING’s new Executive Board and Supervisory Board remuneration policies, which came into effect on 1 January 2020. The policies were drawn up based on the various viewpoints, interests, remarks and concerns of our stakeholder groups. When presented in March 2020, stakeholders were largely positive. At the Annual General Meeting (AGM) in April 2020, shareholders approved the Executive Board and Supervisory Board remuneration policies with 94.4%
The impact of the global coronavirus pandemic reverberated across all of our businesses in all locations. While 2020 was a tough year, ING’s financial results remained resilient and we continued to attract more primary customers, even during the wide-spread lockdowns that took place around the world. At the same time, the economic headwinds required us to remain flexible and sharpen our focus on activities that will ensure ING delivers on its strategic priorities. And of course, there is a link between performance and remuneration.
‘2020 specifics’ for more information). This is in line with the recommendations of the European
This Remuneration Report explains the 2020 Executive Board remuneration policy (hereafter called the 2020 EB remuneration policy) and 2020 Supervisory Board remuneration policy (hereafter called the 2020 SB remuneration policy) and how these have been implemented. Both these policies were approved at the 2020 AGM. This section of the report (p. 223 – p. 240) is the Remuneration Report as referred to in the Dutch act implementing the Shareholder Rights Directive II (SRD II). It will be presented to shareholders at the 2021 AGM for an advisory vote. An explanation of how the results of this vote are taken into account will be included in the 2021 Remuneration Report.
Although the finalised guidelines were expected to be published in 2020, these were not available at the time of preparing this report. In that context therefore, 2020 should still be considered a transitional year though with increased transparency where possible. This is for instance processed in the paragraphs ‘2020 Executive Board performance assessment & reward process’ and ‘2020
Executive Board performance evaluation’. In the 2021 Remuneration Report we aim to disclose fully in line with the final guidelines (if available).
(hereafter called the 2020 AGM). The outcome was that 93.4% of shareholders were in favour of the report. There were no additional comments or questions on the advisory vote, aside from the ask for additional transparency on variable remuneration of the Executive Board. As explained at the 2020
Remuneration Report aims to provide greater transparency regarding the Executive Board performance, as also promised during our stakeholder consultation.
Supervisory Board will continue to foster a transparent dialogue on remuneration and future policy amendments.
Ralph Hamers stepped down as chief executive officer (CEO) and member of the Executive Board of
ING Group on 30 June 2020. The Supervisory Board appointed Steven van Rijswijk as his successor from 1 July 2020. Steven van Rijswijk, who was ING’s chief risk officer (CRO), was already a member of the Executive Board. The agreed remuneration package for Steven van Rijswijk is the same as for the previous CEO and in line with the 2020 EB remuneration policy.
Tanate Phutrakul, carried out the day-to-day risk management activities ad interim. On 6 November 2020 it was announced that Ljiljana Čortan was appointed as the new CRO and member of the
To summarise, the following decisions have been made in relation to remuneration for 2021:  no changes to the 2020 EB and SB remuneration policies will be proposed;  the Supervisory Board and Executive Board jointly agreed that the Executive Board members will not receive any variable remuneration related to the performance year 2020;  the Supervisory Board decided not to increase the base salary of the Executive Board members from 1 January 2021; and
The 2020 EB remuneration policy complies with applicable laws and regulations and is in line with the remuneration principles that apply to all ING employees.
The 2020 EB remuneration policy is disclosed in full on ing.com under the section ‘Remuneration’.
Should policy changes be proposed, we will first engage with our stakeholders to inform and discuss the proposed changes, after which a revised version of the 2020 EB remuneration policy will be submitted for adoption by shareholders at the General Meeting before it becomes effective. Please note that the following paragraphs, until page 227, present a brief summary of the current applicable 2020 EB remuneration policy.
remuneration policy. This peer group is based on five guiding principles, reflecting ING’s current profile, and further explained in the 2020 EB remuneration policy. These principles can be described as follows.
1 The exact composition of the peer group is disclosed in the Annual Report annually retroactively.
Talent market ING is increasingly experiencing a cross-pollination of talent across sectors/industries, not limited to traditional banking competitors
Balancing ING acknowledges the importance of retaining sight of relevant peer companies that do not match on the other criteria
The individual base salaries are set according to the role, responsibilities and experience of each
Variable remuneration for Executive Board members is limited to a maximum of 20% of base salary in line with legislative requirements. At least 50% of this is based on non-financial performance criteria. The 2020 EB remuneration policy provides for an at-target variable remuneration of 16% of base salary. If performance criteria are exceeded, the Supervisory Board can increase the variable component to the maximum. If performance is below target, the variable component will be decreased, potentially to zero. All variable remuneration is awarded fully in shares. There is a minimum holding period of five years from the award date plus an additional holding year as of the vesting date. This combination (i.e. all shares plus a long holding period) fosters alignment with shareholders and a focus on the long term.
For further details on the pay-out of variable remuneration please see the 2020 EB remuneration policy which is disclosed in full on ing.com under the section ‘Remuneration’.
* Fully delivered in shares. ** All awards subject to holdback and clawback provisions and a minimum five-year holding period from award.
Deferred 60% vests pro-rata (12%) each year 12-month holding period **
Executive Board members are eligible for additional benefits, such as:  the use of a company car;  contributions to company savings plans;  individual savings allowance;  expatriate allowances (if applicable);  banking and insurance benefits from ING (on the same terms as for other employees of ING
Members of the Executive Board are appointed by shareholders at the AGM for a maximum period of four years. They may be reappointed by shareholders at the General Meeting in line with ING’s
Articles of Association and applicable rules and regulation. Executive Board members have a commission contract for an indefinite period. ING has the option to terminate the contract if a member is not reappointed by shareholders at the AGM, or if their membership of the Executive
In accordance with the 2020 EB remuneration policy, the Supervisory Board annually determines the actual remuneration for members of the Executive Board, based on advice from the Remuneration
The Remuneration Committee takes note of the views of individual Executive Board members with regard to the amount and structure of their own remuneration, including the aspects mentioned above.
Special employment conditions, for example to secure the recruitment of new executives, may be used in exceptional circumstances subject to approval by the Supervisory Board. The Supervisory
In line with the Dutch Corporate Governance Code, ING calculates an internal ratio of remuneration for Executive Board members and a representative reference group. Deemed most relevant for this ratio is the total direct compensation of the CEO compared to the average total direct compensation of all ING employees. On this basis, the internal ratio in 2020 was 1:28 (2019: 1:31, 2018: 1:29). For the sake of transparency we also calculate the ratio of total direct compensation for other Executive
Board members compared to the average total direct compensation of all ING employees. On that basis the internal ratio in 2020 was 1:19 (2019: 1:21, 2018: 1:20).3 The lower ratios for 2020 compared to 2019, are mainly because the Supervisory Board and the Executive Board jointly agreed that the Executive Board members will not receive any variable remuneration award related to the performance year 2020.
employee. This is carried out by showing the development of the remuneration for Executive Board and Supervisory Board members over the last five years presented in percentages. With respect to the remuneration of the Supervisory Board, it should be noted that there is no link to company performance in order to safeguard its independent role. No component of the remuneration of the
Finally, we present the development of the remuneration on average (per employee). For this number we use the same data as is used to determine the internal ratio. As ING has only disclosed the internal ratio since 2017, no comparison for 2016 and 2015 is presented.
Due to the strict regulations on variable remuneration in the Netherlands (i.e. 20% bonus cap) and to the fact that Executive Board members were not awarded any variable remuneration for performance year 2020, the link between remuneration and company performance is correlated but limited. Furthermore, the requirement that variable remuneration must be based on at least 50%
non-financial targets means there is only a partial relationship between the company’s financial performance and the remuneration of Executive Board members.
3 Total direct compensation comprises fixed base salary and variable remuneration, excluding benefits such as pension arrangements, and allowances.
Amount in thousands of euros unless otherwise stated FY 2020 FY 2020 vs FY 2019 6, 7 FY 2019 vs FY 2018 FY 2018 vs FY 2017 8 FY 2017 vs FY 2016 FY 2016 vs FY 2015
Retail primary relationships (in mln) 13.9 5% 7% 10% 9% 14%
Eric Boyer de la Giroday 38 -64.8% 0% 1.9% -7% 23.9%
1 The remuneration of the Executive Board consists of base salary and variable remuneration (total direct compensation).
2 Variable remuneration of the Executive Board is included in the year in which the performance was delivered i.e. prior to the year in which it is paid out.
5 Supervisory Board members do not receive any variable remuneration. Their remuneration is based on fixed fees related to their role and number of meetings. The high fluctuations are caused by members joining or leaving the Supervisory Board during the year, role changes during the year, and differences in the number of meetings. Hence there is no correlation between the Supervisory Board remuneration and the company performance.
6 The decrease in the 2020 versus 2019 comparison for Ralph Hamers is due to the fact that his remuneration is only for the period from 1 January 2020 until 30 June 2020, when he stepped down as an Executive Board member. The increase for Tanate Phutrakul in this comparison is because he was appointed by the AGM on 23 April 2019 and therefore his 2019 remuneration reflects a partial year as an Executive Board member while the 2020 remuneration presents a full year as an Executive Board member. The increase for Steven van Rijswijk in this comparison is caused by his appointment as CEO as of 1 July 2020 and the higher remuneration package.
Enterprises Act (Wet Beloningsbeleid Financiële Ondernemingen, WBFO) specifies that at least 50% of variable remuneration metrics must be based on non-financial targets. The performance measures for the CEO and CFO are based on group performance. The measures for the CRO are based 75% on functional key performance indicators (KPIs) and 25% on group results, in line with regulations for control functions.
Throughout the year, regular conversations take place between the Supervisory Board and the
At the end of the year, the Risk Committee and Remuneration Committee are both responsible for providing input into and assessing the performance of the Executive Board members to determine the variable remuneration to be awarded. They jointly advise the Supervisory Board on the recommendations to get final approval of the awards. This follows a multi-step and integrated process that closely aligns with the way that variable remuneration is determined for the wider ING workforce.
The core performance scorecard for each Executive Board member consists of both quantitative and qualitative-based KPIs. Quantitative-based KPIs are assessed on a primarily formulaic basis where the expected target performance level must be achieved before the on-target pay-out can be earned.
Qualitative-based KPIs are assessed using a standard three-point rating scale: 1 = maximum = exceeding expectations; 2 = target = meeting expectations; 3 = threshold = not meeting expectations. The overall outcome of the performance scorecard assessment based on the above is the ‘starting point’ for determining the variable remuneration of the Executive Board members.
 Ex-post risk assessment – Adjustments may be made based on risk management performance, including events that had a financial or reputational impact on ING. Risk and
Human Resources also assess potential holdbacks or clawbacks impacting variable remuneration.
The CRO is responsible for recommending any risk-adjustments to variable remuneration awards. The final decision is at the level of the Supervisory Board. The Supervisory Board, based on the advice of the
The Executive Board is evaluated along the following performance target areas: Financial
This section includes more details on the financial and non-financial performance of the Executive
Board members. Key financial achievements, collectively accomplished by the Executive Board in 2020 in the predefined target areas are summarised in one table. The non-financial, individual performance of each the Executive Board members is summarised in separate tables.
The performance assessment and outcome of the Executive Board members is summarised in the tables below.
In October 2020 the second progress report on Terra was published. Five of the sectors
are outlined in comparison to 2019. An additional four sectors - fossil fuels, aviation, steel and shipping - were added, in line with the target to cover all nine sectors in scope in 2020, including quantitative results and targets. The report’s Climate Alignment Dashboard shows most sectors are on track for climate alignment, with progress still needed in some.
Delivered regulatory commitments related to implementation of new regulations on time and at the required levels.
Green issuance In 2Q a US$1 billion green bond was issued to fund loans for renewable energy and green buildings, which was beyond the agreed target.
Deliver on the strategic priorities - Migrated all private individual customers in Belgium to the OneApp/OneWeb services.
- Stopped the Maggie transformation programme and refocused our activities to ensure faster customer delivery and a continuously improving end-to-end digital customer experience.
- Introduced innovative services such as CoorpID and Blacksmith, which digitalise the know your customer process for corporate clients.
Digitalisation of retail credit risk Standardisation and digitalisation of retail credit risk processes in line with target.
Elements of compliance and non-financial risk have been digitalised and robotised in line with target, improving sustainable embedding of compliance and NFR processes.
Manage credit- market and non-financial risk within Board approved risk appetite
Credit risk, market risk and non-financial risk effectively managed within ING’s risk appetite profile.
The Organisational Health Pulse survey for 2020 was focused on progress against three priorities – direction, leadership and innovation & learning. ING reached significant improvement across all business lines with all priorities in the top decile or top quartile.
In light of the economic headwinds and the pressure Covid-19 placed on our business, our customers and on society, the Supervisory Board and the Executive Board jointly agreed for the Executive Board to forgo their variable remuneration related to the performance year 2020. Although it was decided to forgo variable remuneration, in the table on the left the individual performance of the members of the
In the second half of the year, risk management reported into CFO Tanate Phutrakul ad interim, in addition to his role as CFO. As such, his variable remuneration award was calculated against the CFO
performance results for the full year, also taking into consideration the CRO performance results for the second half of the year.
Whilst the Global KYC program has made clear progress in 2020 and has delivered on most milestones it was considered a 90% modifier (10% discount) to the CEO portion of his 2020 variable remuneration award would be applied.
Following this performance assessment process the resulting variable remuneration awards for Steven van Rijswijk would have been €158,139 and for Tanate Phutrakul €109,338.
cap and a 44.8% reduction against target. The ratio between base salary and total direct compensation is 100% (for 2020).
Awards made to Executive Board members reflect the Supervisory Board’s assessment of each of the
Steven van Rijswijk (CRO role) 610,800 - 610,800 11,600 169,000 791,400
As recognised in the profit or loss statement of 2020, the expenses for each Executive Board member
(active on 31 December 2020), relating to their role on the Executive Board, amount to €2.0 million for the CEO and €1.6 million for the CFO. These amounts include deferred elements from previous years, paid out in 2020.
4 The variable remuneration percentage for the Executive Board members are as follows: CEO 15%, CFO 15% and CRO 16%. The applicable percentage for the CFO is the full percentage for 2019, partially in his capacity as a Management Board Banking member and since 23 April 2019 in his capacity as an Executive Board member.
5 The 2019 details for Tanate Phutrakul reflect a partial year as an Executive Board member.
Steven van Rijswijk (CRO role) 3 11,600 23,000 26,000 1 Pension accrual only applies to salary up to an annually set amount (i.e. EUR 105,075 for 2018, EUR 107,593 for 2019 and EUR
4 The 2019 emoluments for Tanate Phutrakul reflect a partial year as an Executive Board member.
Officers indemnity, costs associated with a company car and for expats, the costs associated with housing and schooling.
The other emoluments in 2020, 2019 and 2018 amounted to the following costs.
Steven van Rijswijk (CRO role) 3 169,000 367,000 369,000 1 The 2020 emoluments reflect the partial year as an Executive Board member for Ralph Hamers.
3 Steven van Rijswijk was appointed as CEO from 1 July 2020. His emoluments are divided between his role as CRO and then as
Long-term incentives to the Executive Board members in previous years are disclosed in the table ‘ING
The table below contains information on outstanding employee stock options and movements during the financial year of employee stock options held by the members of the Executive Board on 31
December 2020. This includes employee stock options awarded prior to their appointment to the
Deferred shares are shares conditionally granted subject to a tiered vesting over a period of five years
The main condition for exercise is that these require continued employment through vesting date.
LSPP 11 May 1 All the outstanding deferrals of Ralph Hamers lapsed when he voluntarily stepped down as an Executive Board member.
4 Deferred share units of Tanate Phutrakul are cash settled instruments. The value of these are based on ING Group’s share price at the vesting date. No retention period applies.
Total value of vested and unvested shares of Executive Board members - 2020
Amounts in euros (rounded figures) Vested shares Unvested shares Share price in euros1
Total value in euros 1 The opening share price on 31 December 2020.
The table below presents the loans and advances provided to Executive Board members that were outstanding on 31 December 2020, 2019 and 2018. Since Ralph Hamers was no longer an Executive
o Increase number of primary customers as it leads to deeper relationships, greater customer satisfaction and, ultimately, customers choosing ING for more of their financial needs o Increase mobile sales per 1,000 active customers o Increase percentage of personal interaction with customers
 People o Strengthen organisational health with a focus on four priority areas: direction, leadership, innovation & learning and role clarity o Strengthen ING’s leadership cadre o Increase gender balance in ING’s leadership cadre
adopted the SB remuneration policy with retroactive effect from 1 January 2020 until the 2024 AGM at the latest. The 2020 SB remuneration policy is disclosed in full on ing.com in the section
The Supervisory Board remuneration levels for 2020, similar to 2019, are shown below: Supervisory Board remuneration structure
Board members can maintain independence. The Supervisory Board members are not eligible for retirement benefits nor any other benefits in relation to their position on the Supervisory Board.
Members of the Supervisory Board are reimbursed for their travel and ING-related business expenses.
Boyer de la Giroday who received payments from ING Belgium for his role in the Supervisory Board of
Eric Boyer de la Giroday 1 38,000 108,000 108,000 1 Hermann-Josef Lamberti and Eric Boyer de la Giroday retired after the AGM on 28 April 2020. The remuneration figures for 2020 reflect a partial year as a member of the Supervisory Board.
2 Mike Rees became vice-chairman after the AGM on 28 April 2020.
3 Juan Colombás was appointed to the Supervisory Board by the AGM on 28 April 2020 and became effective on 1 October 2020. The remuneration figures for 2020 reflect a partial year as a member of the Supervisory Board.
4 Herman Hulst and Harold Naus were appointed to the Supervisory Board by the AGM on 28 April 2020 with effect from that date. The remuneration figures for 2020 reflect a partial year as a member of the Supervisory Board.
Harold Naus 1,645 1 Since both Hermann-Josef Lamberti and Eric Boyer de la Giroday retired after the 2020 AGM on 28 April 2020, there is no information included for 2020.
General information for all staff FOR INFORMATION ONLY AT 2021 ING GROEP N.V. ANNUAL GENERAL MEETING (AGM)
The remuneration principles are an integral part of ING’s 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 its employees, customers, shareholders and other stakeholders. Our approach to the remuneration principles did not change in 2020.
Framework (IRRF) and our people offer (OPO). Introduced in 2020, OPO sets out ING’s differentiating offer as an employer in the marketplace and states what we ask of our people in return. It gives guidance to our global people practices, while supporting our Think Forward Strategy. The IRRF and
ING’s remuneration principles contribute to long-term value creation and support a focus on the long-term interests of its stakeholders, including employees, customers and shareholders.
ING operates a fair, objective and transparent 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.
ING supports the sustainable recruitment, engagement and retention of all employees.
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 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.
The Step Up Performance Management approach consists of three dimensions:  Job: the impact employees have in their daily work on an individual and team level, based on factors such as qualitative job description, dynamic planning and specific selected quantitative priorities.
 Stretch ambitions: at ING, we believe high performance requires stretch and investment (to achieve the stretch). Therefore we ask people to set ambitions beyond their day-to-day role and connect their personal passion, expertise or interest with the long-term success of ING.
 For all employees in control functions (Legal, Risk, Finance, Compliance, Audit and Human
Management Board Banking are on or slightly above the median. Due to their ING-specific roles it is difficult to have a good comparison inside and outside of the financial industry in the Netherlands as well as abroad. There are limited comparable positions for these roles. To ensure we adhere to our 2020 EB remuneration policy, we regularly monitor and benchmark salary levels across ING.
In 2020, the Management Board Banking and the Supervisory Board approved the Variable
Within each of these three elements specific criteria are used to measure performance (e.g. profit, return on equity, customer, people, strategy, sustainability as well as financial and non-financial risk).
The proposal for the variable remuneration pool is prepared by Human Resources, Risk and Finance, and follows the VRAM’s step-by-step process and construct including CEO discretion to adjust the proposed variable remuneration pool. The CEO considers several factors when making this decision.
This discretion is checked by the Supervisory Board and requires their approval.
The total variable remuneration pool (for individual and collective variable remuneration), encompasses all employees eligible for variable remuneration globally, including Identified Staff.
ING takes a multi-step approach to determine whether to award variable remuneration in a given performance year and the maximum amount of the pool. Within this process, a range of risk elements is assessed at various levels and, where appropriate, risk adjustments are made to the variable remuneration pools.
To unlock the discretionary variable remuneration pools, both of the following performance hurdles must be met. These are:  The Common Equity Tier 1 (CET1) ratio must be at or above the threshold established by applicable regulations;  The return on equity (underlying RoE) is equal to or higher than the percentage determined at the beginning of each performance year by the Management Board Banking and the
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 Committee and Remuneration
CRD IV. These risk requirements set the minimum standards to be met during the performance year.
At the 2017 AGM, shareholders approved to apply an increased maximum percentage of up to 200%
ING awards variable remuneration across the global organisation in line with our remuneration principles, global and local legislation and market practices. The awarding of variable remuneration, where applicable, is based on group, business line and individual performance criteria, both financial and non-financial, and comes in the form of discretionary and collective variable remuneration.
The award of discretionary variable remuneration is based on a clear, transparent and verifiable mechanism for measuring performance and applying adjustments for risks (the Variable
Remuneration Accrual Model or VRAM). The starting point is an aggregate of the individual target incentive amounts from all eligible employees across the group. The next step is to unlock the discretionary pool based on the results of the performance hurdles. First, the underlying RoE was calculated and this performance hurdle passed. The underlying RoE, in line with the VRAM Policy and approved by governing bodies, has been adjusted for macro-economic and pandemic events during performance year 2020. The CET1 performance hurdle was also calculated and passed. Subsequent to the results of these performance hurdles the discretionary pool was unlocked. This ‘discretionary pool’
In 2020 the impact of COVID-19 presented unprecedented challenges for ING. While considerations around staff well-being and the wider societal impact of the pandemic are paramount, these circumstances have led to weaker performance results and this led to a negative adjustment to the discretionary pool. Furthermore, in line with our policy, executive discretion was applied to further adjust the pool amount downwards in light of declining financial performance and recognising broader stakeholder interests. Overall, these adjustments accounted for a downward adjustment of the discretionary pool amount by approximately 26% from target discretionary pool and resulting in approximately 20% decline versus the previous performance year. A differentiated approach was taken in the allocation of the discretionary variable remuneration, with a significantly larger reduction for senior leaders than for junior employees (on average 30% reduction for senior leaders).
ING’s works councils are elected by employees to represent and promote their interests and ensure alignment with ING’s purpose and strategy. The works councils advise management on important company decisions, such as reorganisations, and provide consent on behalf of employees, for example to make changes to social benefits.
ING has local works councils in several countries where we operate, including the Netherlands, Belgium and Spain. The Dutch Central Works Council (COR) represents around 14,000 employees in the
Netherlands. ING also has a cross-border European Works Council (EWC), which is consulted when decisions are made that affect employees in multiple countries and cannot be negotiated locally.
Working from home can have an impact on colleagues’ wellbeing. The division between work and private life is made more complicated and creates a new type of work pressure for both employees and for ING as an employer. The COR strongly advises management to continue paying attention to this topic and to invest in it.
The importance of communication and staying connected to employees at a time when they are physically distant from ING was also addressed. This became even more significant during the year as working from home added a new dimension to what was already a challenge. In addition, it’s vital to keep employees involved in the many changes taking place across the organisation as ING works towards becoming a universal digital bank. The COR finds it important that ING empowers managers and team leads to become better at meeting the changing needs of their teams in this new situation.
European Works Council The EWC represents ING employees in all the EU countries with more than 50 employees, in line with the EU directive for European works councils. It currently has 28 members from 15 ING countries. The
EWC meets twice a year with ING’s Management Board Banking (MBB) and other business managers to discuss topics of international and significant interest. It aims to be a sounding board for management decisions and bring balance to the decision-making process.
It forced the EWC to take a pragmatic and flexible approach as it welcomed new members from several countries and held its first-ever online election of a new EWC Select Committee in November 2020. In May and November, both plenary meetings with representatives of the Management Board
Notes to the consolidated statement of cashflows 31 Net cash flow from operating activities 313 32 Changes in liabilities arising from financing activities 313 33 Cash and cash equivalents 313
Additional notes to the consolidated financial statements 36 Pension and other post-employment benefits 321 38 Fair value of assets and liabilities 328 39 Derivatives and hedge accounting 340 40 Assets by contractual maturity 349 41 Liabilities and off-balance sheet commitments by maturity 42 Transfer of financial assets, assets pledged and received as collateral 354 43 Offsetting financial assets and liabilities 355 44 Contingent liabilities and commitments 360 46 Consolidated companies and businesses acquired and divested
Loans and advances to banks 3 25,364 35,136 Customer deposits 13 609,642 574,433
Financial assets at fair value through profit or loss 4 Financial liabilities at fair value through profit or loss 14
Loans and advances to customers 7 598,176 611,765 Other liabilities 16 11,609 12,829
Property and equipment 9 2,841 3,172 Subordinated loans 18 15,805 16,588
Other assets 11 5,893 7,018 Share capital and share premium 17,128 17,117
Total interest income 22,698 28,454 28,148 Other operating expenses 28 5,341 4,598 5,262
Net fee and commission income 21 3,011 2,868 2,798 Net result attributable to shareholders of the parent 2,485 4,781 4,703
Share of result from associates and joint ventures 8 66 82 146 Diluted earnings per ordinary share 0.64 1.23 1.21
Result on disposal of group companies 24 -3 117 -123 Earnings per ordinary share from continuing operations 29
Net change in fair value of equity instruments at FVOCI -335 139 -461
Change in fair value of own credit risk of financial liabilities at FVPL -19 -116 199
Items that may subsequently be reclassified to the statement of profit or loss: Net change in fair value of debt instruments at FVOCI 36 -30 -163
Realised gains/losses on debt instruments at FVOCI reclassified to the statement of
Comprehensive income attributable to: Shareholders of the parent 839 5,422 4,206
Realised and unrealised revaluations property in own use -33 26 -7 -0 -7
Changes in the composition of the group and other changes -1 -1
Net change in fair value of equity instruments at fair value through other comprehensive income -335 472 137 1 139
Share of other comprehensive income of associates and joint ventures and other income 69 -69
Changes in the composition of the group and other changes 23 23 -23 -0
Consolidated statement of changes in equity - continued For the years ended 31 December in EUR million
Realised and unrealised revaluations property in own use -2 3 1 -0 1
Total amount recognised directly in other comprehensive income net of tax -287 -211 -498 24 -474
Total comprehensive income net of tax -127 4,333 4,206 132 4,337
– Addition to loan loss provisions 2,675 1,120 656 - Securities at amortised cost 31,918 13,001 18,709
– Other non-cash items in Result before tax 1,261 32 -1,763 – Property and equipment 75 81 17
Changes in: – Net change in Loans and advances to/from banks, not available/payable on demand 53,078 -3,911 -211 – Other investments 12 34
– Net change in Trading assets and Trading liabilities 2,566 -2,568 9,910 Net cash flow from/(used in) investing activities -8,487 -2,495 5,451
– Other31 -3,856 11,752 4,067 Proceeds from debt securities 65,308 90,793 152,543
Net cash flow from/(used in) operating activities 101,243 13,055 6,915 Repayments of debt securities -99,212 -94,497 -131,170
– Property and equipment -287 -355 -286 Net cash flow from/(used in) financing activities -34,796 -4,154 15,983
Cash and cash equivalents at beginning of year 33 54,031 47,529 18,977
EUR 111,087 million (2019: EUR 53,202 million; 2018: EUR 49,987 million). The increase in cash and balances with central banks were mainly driven by ING’s participation of EUR 59.5 billion in the targeted longer-term refinancing operations (TLTRO III) in 2020, which were mainly placed on deposit with the ECB as at 31 December (reported as Cash and balances with Central Banks) and by increased customer deposits. Reference is made to Note 33 ‘Cash and cash equivalents’.
Interest received, interest paid and dividends received are included in operating activities in the
Consolidated statement of cash flow. Dividend paid is included in financing activities in the
Notes to the Consolidated financial statements 1 Basis of preparation and accounting policies 1.1 Reporting entity and authorisation of the Consolidated financial statements
ING Groep N.V. is a company domiciled in Amsterdam, the Netherlands. Commercial Register of
International Accounting Standards Board (IASB) and the IFRS Interpretations Committee (IFRIC) with some limited modifications such as the temporary ‘carve-out’ from IAS 39 ‘Financial
The ING Group Consolidated financial statements have been prepared on a going concern basis and there are no significant doubts about the ability of ING Group to continue as a going concern. In 2020
ING Group’s capital and liquidity position remained strong despite the Covid-19 impact and ING
These disclosures are an integral part of ING Group Consolidated financial statements and are indicated in the ‘Risk management’ section by the symbol (*). Chapters, paragraphs, graphs or tables within the risk management section that are indicated with this symbol in the respective headings or table header are considered to be an integral part of the consolidated financial statements.
In Retail Banking these facilities include in the Netherlands the SME Credit Guarantee Scheme
(“BMKB-C”) and the small credit facility (“Klein Krediet Corona” or KKC) for self-employed individuals.
Loans that have been originated under the above programs have been recognized on the consolidated statement of financial position of ING Group. Depending on the scheme, the guarantees received are either integral or non-integral to the origination of these loans. Following this, the guarantees are either reflected in the expected credit losses (ECL) associated with these loans or as separate reimbursement asset, respectively. In either case, such guarantees have a similar impact on the statement of profit or loss and both reduce the amount presented as ‘addition to loan loss provisions’.
Governments in almost all countries where ING Retail bank is active have adopted measures providing for payment holidays to private individuals and small business loans. As of the end of
The modification of contractual terms of loans subject to payment holiday arrangements does not automatically result in derecognition of the financial assets. Where applicable, the carrying amount of the financial asset has been recalculated as the present value of the renegotiated or modified contractual cash flows, discounted at the original effective interest rate and a gain or loss was recognized. This did not have a material impact on the profit or loss statement of ING Group.
As a result of the economic effects of Covid-19 estimation uncertainty and level of management judgement increased in 2020 in the areas of impairment assessment of loan loss provisions
Over the course of 2020 the European Central Bank (ECB) decided on a number of modifications to the terms and conditions of its Targeted Longer-term Refinancing Operations (TLTRO III) in order to support further the provision of credit to households and firms in the face of the current economic disruption and heightened uncertainty caused by the Covid-19 pandemic. ING Group has borrowed
Furthermore, ING Group has already early adopted in 2019 the Interest Rate Benchmark Reform
ING Group Annual Report 2020 260 hedging relationships directly affected by IBOR reform. The amendments require certain additional disclosures and have no further impact. Refer to paragraph 1.7.4 of this note and to note 39
In 2020 ING Group presented separately on the face of the Statement of Profit or Loss the following two lines (including comparatives): ‘Impairment of associates and joint ventures’ and ‘Net result on derecognition of financial assets measured at amortised cost’. These lines were not presented separately in prior years given the size of the amounts, but were included in ‘Share of result from associates and joint ventures’ and ‘Other income’ respectively.
The changes in IFRS that became effective in 2020 did not have a significant impact on ING Group’s accounting policies, ING Group’s results or financial position: • Amendments to IFRS 3 ‘Business Combinations’: Definition of a Business (issued in October 2018); • Amendments to IAS 1 and IAS 8: ‘Definition of Material’ (issued in October 2018); and
• Amendments to References to the Conceptual Framework in IFRS Standards (issued in March
‘Financial Instruments: Disclosures’: ‘IBOR Reform and its Effects on Financial Reporting – Phase 2’.
Phase 2 amendments relate mainly to accounting for changes in the basis for determining the contractual cash flows of financial assets and liabilities due to the IBOR reform and impact on hedge accounting when an existing benchmark rate is reformed or replaced with an alternative risk free rate. Specifically, for ING Group, the main elements of the Phase 2 amendments are that the effective interest rate on debt financial instruments will be adjusted, and hedge accounting will continue on transition to risk free rates, but only to the extent that the modifications made to financial instruments are those necessary to implement IBOR Reform and that the new basis for calculating cash flows is ‘economically equivalent’ to the previous basis. When ING Group applies these amendments, ING Group would avoid recognising modification gains and losses on debt instruments that would otherwise be required in the absence of Phase 2 amendments. In addition, when ING Group applies Phase 2 amendments, ING Group will avoid hedge accounting discontinuations when modifying both hedged items and hedging instruments as a consequence of
IBOR reform that would otherwise be required in the absence of Phase 2 amendments. When ING
Effective in 2022: • Amendments to IFRS 3 ‘Business Combinations’: Reference to the Conceptual Framework (issued in May 2020).
Contracts — Cost of Fulfilling a Contract (issued in May 2020).
• Annual improvements to IFRS Standards 2018-2020 Cycle: Amendments to IFRS 1 ‘First-time
Adoption of International Financial Reporting Standard’, amendments to IFRS 9 ‘Financial
Effective in 2023: • Amendments to IAS 1 ‘Presentation of Financial Statements’: Classification of Liabilities as Current or Non-current (issued in January 2020).
• Amendments to IAS 1 ‘Presentation of Financial Statements’: Disclosure of Accounting Policies
• Amendments to IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’: Definition of Accounting Estimates (issued in February 2021).
The process of setting assumptions is subject to internal control procedures and approvals.
ING Group has identified areas that require management to make significant judgements and use critical accounting estimates and assumptions based on the information and financial data that may change in future periods. These areas are: ▪ Loan loss provisions (financial assets); ▪ The determination of the fair values of financial assets and liabilities; ▪ Impairment assessment of non-financial assets; ▪ Impairment assessment of an investment in associate; ▪ Provisions; and
In light of Covid-19 the estimation uncertainty and level of management judgement to determine the loan loss provisions and the fair values of financial assets and liabilities further increased in 2020.
The negative effects of Covid-19 gave rise to new significant judgements and critical accounting estimates and assumptions in 2020: ‘Impairment assessment of non-financial assets’ where estimates and judgements became more sensitive; and ‘Impairment assessment of an investment in associate’ where impairment indicators arose for the first time. In addition, ING Group’s participation in 2020 in a new series of Targeted Longer-Term Refinancing Operations (TLTRO III) also led to a new area of significant judgements. Recognition and measurement of provisions remained an area of significant judgement and estimation uncertainty in 2020 consistent with prior years.
ING Group has historically aligned the Definition of Default for regulatory purposes with the definition of ‘credit-impaired’ financial assets under IFRS 9 (Stage 3). To comply with new regulatory technical standards (RTS) and EBA guidelines ING updated its Definition of Default in 1Q 2020. Consequently,
In 2020 ING Group participated in a new series of Targeted Longer-Term Refinancing Operations
(TLTRO III) and repaid outstanding amounts under TLTRO II, reference is made to Note 12 ‘Deposits from banks’.
ING Group considers TLTRO funding provided by the ECB to banks to be on market terms on the basis that the ECB has established a separate market with TLTRO programmes. They have specific terms which are different from other sources of funding available to banks, including those provided by the
ING interprets the whole rate set by the ECB under TLTRO as a floating rate on the financial liability, being the market rate for each specific period in time. This results in discrete rates for discrete interest periods over the life of TLTRO. The change in the applicable rate between interest periods is seen as a change in the floating rate and is accounted for prospectively. Similarly, if the ECB
Reference is made to note 12 ‘Deposits from banks’ and to note 20 ‘Net interest income’ for the presentation of ING Group’s participation in TLTRO programmes.
ING Group continuously monitors the actual and forecasted development of eligible loans under
Financial assets are recognised in the balance sheet when ING Group becomes a party to the contractual provisions of the instrument. For a regular way purchase or sale of a financial asset, trade date and settlement date accounting is applied depending on the classification of the financial asset.
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. In addition, interest can include a profit margin that is consistent with a basic lending arrangement.
In assessing whether the contractual cash flows are SPPI, ING Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making the assessment, terms such as the following are considered, with an example of an SPPI failure for each consideration: ▪ prepayment terms. For example a prepayment of an outstanding principal amount plus a penalty which is not capped to three or six months of interest; ▪ leverage features, which increase the variability of the contractual cash flows with the result that they do not have the economic characteristics of interest. An example is a Libor contract with a multiplier; ▪ terms that limit ING Group’s claim to cash flows from specified assets - e.g. non-recourse asset arrangements. This could be the case if payments of principal and interest are met solely by the cash flows generated by the underlying asset, for example instances in real estate, shipping and aviation financing; and
and all other debt instruments that do not meet the criteria for AC or FVOCI (presented separately as Mandatorily at FVPL). ING Group may in some cases, on initial recognition, irrevocably designate a financial asset as classified and measured at FVPL. This is the case where doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise on assets measured at AC or FVOCI. Fair value movements on trading securities, trading loans and deposits (mainly reverse repo’s) are presented fully within valuation result and net trading income, this also includes interest. The interest arising on financial assets designated as at FVPL is recognised in profit or loss and presented within Interest income or
Interest expense in the period in which it arises. The interest arising on a debt instrument that is part of a hedge relationship, but not subject to hedge accounting, is recognised in profit or loss and presented within Interest income or Interest expense in the period in which it arises.
There is no subsequent recycling of fair value gains and losses to profit or loss following the derecognition of investments if elected to be classified and measured as FVOCI. Dividends from such investments continue to be recognised in profit or loss as Investment income when ING Group’s right to receive payments is established. Impairment requirements are not applicable to equity investments classified and measured as FVOCI. However, the cumulative gain or loss is transferred within equity to retained earnings on derecognition of such equity instruments.
FVPL are presented as follows: ▪ the amount of change in the fair value that is attributable to changes in own credit risk of the liability designated at FVPL is presented in OCI. Upon derecognition this Debit Valuation
▪ the remaining amount of change in the fair value is presented in profit or loss in ‘Valuation results and net trading income’. Interest on financial liabilities at FVPL is also recognised in the valuation result, except for items voluntarily designated as FVPL for which interest is presented within ‘Other interest income (expense).
A financial guarantee contract is a contract that requires ING Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Such a contract is initially recognised at fair value and is subsequently measured at the higher of (a) the amount determined in accordance with impairment provisions of IFRS 9 ‘Financial instruments’ (see section “Impairment of financial assets”) and (b) the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with the revenue recognition principle of IFRS 15 ‘Revenue from contracts with customers’.
To include credit risk in fair value, ING Group applies both Credit and Debit Valuation Adjustments
To include the funding risk, ING Group applies an additional ‘Funding Valuation Adjustment’ (FVA) to the uncollateralised derivatives based on the market price of funding liquidity.
ING Group also applies to certain positions other valuation adjustments to arrive at the fair value: Bid-
Group observed large volatility in the market resulting in widened spreads, markets distortion and illiquidity in some specific markets which has stressed ING Group’s valuation processes and movements in level classifications. The volatility in the market has stabilised in the course of 2020 and has largely returned to pre-pandemic levels. Financial Assets and Liabilities, including Level 3, continued to be valued using agreed methodologies and ING Group continued to limit the unobservable input to arrive at the most appropriate Fair Market value.
Reference is made to note 38 ‘Fair value of assets and liabilities’ and to ‘Market risk’ paragraph in the
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently measured at fair value. Fair values are obtained from quoted market prices in active markets, including market transactions and valuation techniques (such as discounted
ING Group Annual Report 2020 267 cash flow models and option pricing models), as appropriate. All derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative. Fair value movements on derivatives are presented in profit or loss in Valuation result and net trading income, except for derivatives in either a formal hedge relationship and so-called economic hedges that are not in a formal hedge accounting relationship where a component is presented separately in interest result in line with ING Group’s risk management strategy.
The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. ING Group designates certain derivatives as hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedge), hedges of highly probable future cash flows attributable to a recognised asset or liability or a forecast transaction (cash flow hedge), or hedges of a net investment in a foreign operation. Hedge accounting is used for derivatives designated in this way provided certain criteria are met.
ING Group applies also 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.
ING Group Annual Report 2020 268 sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in the Other Comprehensive Income at that time remains in the Other Comprehensive
Other Comprehensive Income are included in the statement of profit or loss when the foreign operation is disposed.
IBOR Transition - specific policies applicable from 1 January 2019 for hedges directly affected by IBOR reform
Financial assets and financial liabilities are offset, and the net amount reported, in the statement of financial position when ING Group has a current legally enforceable right to set off the recognised amounts and intends to either settle on a net basis or to realise the asset and settle the liability simultaneously. Offsetting is applied to certain interest rate swaps for which the services of a central clearing house are used.
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 44
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
(i.e. no Stage 2 or 3 triggers apply). Assets are classified as Stage 1 upon initial recognition
Financial assets that are credit-impaired. Also for these assets ECL is determined over the remaining maturity of the asset.
The main determinate of SICR is a quantitative test, whereby the lifetime Probability of Default (PD)
and instead are assigned a lifetime ECL. Items can return to Stage 1 if there is sufficient evidence that there is no longer a significant increase in credit risk.
ING Group view. A baseline, up-scenario and a down-scenario are determined to reflect an unbiased and probability-weighted ECL amount. As a baseline scenario, ING Group applies the market-neutral view combining consensus forecasts for economic variables such as unemployment rates, GDP
growth, house prices, commodity prices, and short-term interest rates. Applying market consensus in the baseline scenario ensures unbiased estimates of the expected credit losses.
ING Group applies a collective assessment method to measure ECL for Stage 1, Stage 2, and certain
and exposure at default (EAD), adjusted for the time value of money. Assets that are collectively
ING Group Annual Report 2020 271 assessed are grouped on the basis of similar credit risk characteristics, taking into account loan type, industry, geographic location, collateral type, past due status and other relevant factors. These characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated and the loss in case the debtor is not able to pay all amounts due.
For the purpose of ECL, ING Group’s expected credit loss models (PD, LGD, EAD) used for regulatory purposes have been adjusted. These adjustments include removing embedded prudential conservatism (such as floors) and converted through-the-cycle estimates to point-in-time estimates.
For most financial assets, the expected life is limited to the remaining maturity. For overdrafts and certain revolving credit facilities, such as credit cards, the maturity is estimated based on historical data as these do not have a fixed term or repayment schedule.
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 taking into account ING Group’s restructuring/recovery strategy.
In certain circumstances ING Group grants borrowers postponement, reduction of loan principal and/or interest payments on a temporary period of time to maximise collection opportunities, and if possible, avoid default, foreclosure, or repossession. When such postponement, reduction of loan principal and/or interest payments is executed based on credit concerns it is also referred to as forbearance (refer to the ‘Risk Management’ section of the Annual Report for more details). In such cases, the net present value of the postponement, reduction of loan principal and/or interest payments is taken into account in the determination of the appropriate level of ECL. If the forbearance results in a substantial modification of the terms of the loan, the original loan is derecognised and a new loan is recognised at fair value at the modification date. ING Group determines whether there has been a substantial modification using both quantitative and qualitative factors.
ECL for financial assets measured at AC are deducted from the gross carrying amount of the assets.
Group to make various assumptions about the risk of default, the credit loss rates in case of a default and expected future cash flows. These assumptions are based on a combination of ING Group’s past history, existing market conditions and forward-looking estimates at the end of each reporting period. Changes in these assumptions may lead to changes in the LLP over time. Given they are subjective and complex in nature, and because the LLP and the underlying exposures subject to ECL
‘Risk Management’ section of the Annual Report, where the un-weighted ECL under each of the three scenarios for some significant portfolios is disclosed. The uncertainty around the expected macroeconomic recovery once Covid-19 induced lockdowns are lifted increased the judgement necessary in using macroeconomic scenarios. Furthermore, the specific nature of the Covid-19 crisis, which leads to a time lag between the effects of macroeconomic outlooks on model produced ECL
and observed defaults, has further increased the judgements required in the use of forward-looking macroeconomic scenarios in 2020.
This is a management judgement that ultimately requires estimation and consideration of the range of possibilities. This ensures a consensus view on the likelihood of each scenario materialising is appropriately reflected in the weights applied by ING Group for collectively assessed ECL. The sensitivity analysis in the ‘Risk Management’ section of the Annual Report discloses these weights used.
When determining whether the credit risk on a financial asset has increased significantly, ING Group considers reasonable and supportable information to compare the risk of default occurring at reporting date with the risk of a default occurring at initial recognition of the financial asset. Whilst judgement is required in applying a PD rating to each financial asset, there is significant judgement used in determining the Stage allocation PD banding thresholds. The process of comparing a financial asset’s PD with the PD banding thresholds determines its ECL Stage. Assets in Stage 1 are allocated a 12 month ECL, and those in Stage 2 are allocated a lifetime ECL, and the difference is often significant. As such, the judgement made in assigning financial asset PDs and the PD banding thresholds constitute a significant judgement. Analysis of the sensitivity associated with the assessment of significant increase in credit risk is presented in the ‘Risk Management’ section of the
Annual Report. During 2020 ING Group provided many customers with payment holidays. Traditional risk drivers in models used to determine LLP that are based on customers’ payment behaviour may be ineffective for these assets, because customers with payment holidays are not required to make regular material payment and limited (if any) additional information is available. Hence, judgement was required to appropriately reflect the effect of payment holidays on LLP.
The existence and effect of potential voting rights that are currently exercisable or convertible are considered in assessing whether ING Group controls another entity.
For interests in structured entities, the existence of control requires judgement as these entities are designed so that voting or similar rights are not the dominant factor in deciding who controls the entity. This judgement includes, for example, the involvement in the design of the structured entity, contractual arrangements that give rights to direct the structured entities relevant activities and commitment to ensure that the structured entity operates as designed.
A subsidiary which ING Group has agreed to sell but is still legally owned by ING Group may still be controlled by ING Group at the balance sheet date and therefore, still be included in the
ING Groep N.V. and its Dutch group companies are subject to legal restrictions regarding the amount of dividends they can pay to their shareholders. The Dutch Civil Code contains the restriction that dividends can only be paid up to an amount equal to the excess of the company’s own funds over the sum of the paid-up capital and reserves required by law. Certain Group companies are also subject to other restrictions in certain countries, in addition to the restrictions on the amount of funds that may be transferred in the form of dividends, or otherwise, to the parent company.
geographical area is a distinguishable component of ING Group engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments.
The CODM examines ING Group’s performance both by line of business and geographic perspective and has identified five reportable segments by line of business and six by geographical area. The geographical analyses are based on the location of the office from which the transactions are originated.
Exchange rate differences on non-monetary items, measured at fair value through profit or loss, are reported as part of the fair value gain or loss. Non-monetary items are retranslated at the date the fair value is determined. Exchange rate differences on non-monetary items measured at fair value through other comprehensive income are included in other comprehensive income and get accumulated in the revaluation reserve in equity.
Exchange rate differences in the statement of profit or loss are generally included in ‘Valuation results and net trading income’. Reference is made to Note 22 ‘Valuation results and net trading income’, which discloses the amounts included in the statement of profit or loss. Exchange rate differences relating to the disposal of debt and FVPL equity securities are considered to be an inherent part of the capital gains and losses recognised in Investment income. As mentioned below, in Group companies relating to the disposals of group companies, any exchange rate difference deferred in equity is recognised in the statement of profit or loss in ‘Result on disposal of group companies’. Reference is also made to Note 19 ‘Equity’, which discloses the amounts included in the statement of profit or loss.
▪ All resulting exchange rate differences are recognised in a separate component of equity.
Joint ventures are entities over which ING Group has joint control. Joint control is the contractually agreed sharing of control over an arrangement or entity, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Joint control means that no party to the agreement is able to act unilaterally to control the activity of the entity. The parties to the agreement must act together to control the entity and therefore exercise the joint control.
ING Group’s investment in associates and joint ventures (net of any accumulated impairment loss)
includes goodwill identified on acquisition. ING 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 postacquisition changes in reserves is recognised in equity. The cumulative post-acquisition changes are adjusted against the carrying amount of the investment. When the ING 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, ING Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture.
Investments in associates and joint ventures are assessed at each reporting date and tested for impairment when there is an indication that the investment may be impaired. Goodwill on acquisitions of interests in associates and joint ventures is not tested separately for impairment, but is assessed as part of the carrying amount of the investment. Reversal of impairment is considered when the indicators of impairment no longer exist and the recoverable amount has improved above the carrying amount. The reversal of impairment cannot exceed the original impairment loss.
Key assumptions used in estimating TMB’s value in use and the sensitivity of the value in use calculations to different assumptions are described in Note 8 ‘Investments in associates and joint ventures’.
IFRS 16 ‘Leases’ – Accounting policies applied from 1 January 2019
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 (ALCO).
Subsequent to initial recognition, the right-of-use asset amortises using a straight-line method to the income statement over the life of the lease. The lease liability increases for the accrual of interest and decrease when payments are made. Any remeasurement of the lease liability due to a lease modification or other reassessment results in a corresponding adjustment to the carrying amount of the right-of-use asset.
The comparative figures presented for 2018 are accounted for using the previous Standard, IAS 17
(including assumed debt) and the Group’s interest in the fair value of the acquired assets, liabilities and contingent liabilities as at the date of acquisition, is capitalised as an intangible asset. Goodwill is only recognised separately on acquisitions. The results of the operations of the acquired companies are included in the statement of profit or loss from the date control is obtained.
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 acquisitiondate 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.
(risk-weighted assets) are used as a basis. The recoverable amount is estimated as the higher of fair value less costs of disposal and value in use. Several methodologies are applied to arrive at the best estimate of the recoverable amount. Impairment of goodwill, if applicable, is included in the statement of profit or loss in ‘Other operating expenses’.
Computer software that has been purchased or generated internally for own use is stated at cost less amortisation and any impairment losses. Amortisation is calculated on a straight-line basis over its useful life. This period will generally not exceed five years. Amortisation is included in ‘Other operating expenses’.
Significant judgements and critical accounting estimates and assumptions: Impairment test of non-financial assets, mainly related to the assessment for potential impairment of goodwill and intangible assets, largely software, involves estimation of their recoverable amounts.
The future cash flows of the CGUs are sensitive to the cash flows projected for the periods for which forecasts are available and to assumptions regarding the long-term pattern of sustainable cash flows thereafter. The accuracy of the forecasted cash flows is subject to a high degree of uncertainty.
The rates used to discount future expected cash flows can have a significant effect on their valuation and are based on the costs of capital assigned to individual CGUs. Cost of capital is subject to fluctuations in external market rates and economic conditions beyond management’s control.
Deferred income tax is provided in full, using the liability method, for temporary differences arising between the tax basis of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets and liabilities are not discounted.
Fair value remeasurements of debt and equity instruments measured at FVOCI and cash flow hedges are recognised directly in equity. Deferred tax related to this fair value remeasurement is also recognised directly in equity and is subsequently recognised in the statement of profit or loss together with the deferred gain or loss.
Uncertain tax positions are assessed continually by ING Group and in case it is probable that there will be a cash outflow; a current tax liability is recognised.
Upon classification as held for sale, the disposal group is measured at the lower of its carrying amount and fair value less costs to sell, except where specifically exempt from IFRS 5 ‘Non-current
Assets Held for Sale and Discontinued Operations. An impairment loss is recognised for any initial or subsequent write-down of the disposal group to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of the disposal group, but not in excess of any
A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of ING Group; or a present obligation that arises from past events but is not recognised because it is either not probable that an outflow of economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured reliably. Contingent liabilities are not recognised in the statement of financial position, but are rather disclosed in the notes unless the possibility of the outflow of economic benefits is remote.
ING Group may become involved in governmental, regulatory, arbitration and legal proceedings and investigations. The degree of uncertainty and the method of making the accounting estimate depends on the individual case, its nature and complexity. Such cases are usually one of a kind.
Judgement is required to assess whether a present obligation exists and to estimate the probability of an unfavourable outcome and the amount of potential loss. For the assessment of related provisions ING Group consults with internal and external legal experts. Even taking into consideration legal experts’ advice, the probability of an outflow of economic benefits can still be uncertain and the provision recognised can remain sensitive to the assumptions used. Reference is made to Note 15
‘Provisions’. For proceedings where it is not possible to make a reliable estimate of the expected financial effect, that could result from the ultimate resolution of the proceedings, no provision is recognised, however disclosure is included in the financial statements. Reference is made to Note 45
Changes in plan assets that effect Shareholders’ equity and/or Net result, include mainly: ▪ Return on plan assets using a high quality corporate bond rate at the start of the reporting period which are recognised as staff costs in the statement of profit or loss; and
Interest income and expense are recognised in the statement of profit or loss using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability.
When calculating the effective interest rate, ING Group estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses.
The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.
Interest results on instruments classified at Amortised Cost, assets measured at FVOCI and derivatives in a formal hedge accounting relationship is presented in ‘Interest income (expense) using effective interest rate method’. Interest result on financial assets and liabilities voluntarily designated as at FVPL and derivatives in so called economic hedges and instruments designated at fair value are presented in ‘Other interest income (expense)’. Interest result on all other financial assets and liabilities at FVTPL is recognised in ‘Valuation results and net trading income’.
Group is the lessor are divided into an interest component (recognised as interest income) and a repayment component based on a pattern reflecting a constant periodic rate of return on the lessor’s net investment in the lease.
ING Group Annual Report 2020 283 1.21 Earnings per ordinary share
The statement of cash flows is prepared in accordance with the indirect method, distinguishing cash flows from operating, investing and financing activities. In the net cash flow from operating activities, the result before tax is adjusted for those items in the statement of profit or loss and changes in items per the statement of financial position, which do not result in actual cash flows during the year.
Liabilities arising from financing activities are debt securities and subordinated loans.
The movement in Cash and balances with central banks reflects ING’s active liquidity management.
ING participated in a series of Targeted Longer-Term Refinancing Operations (TLTRO III) for EUR 4.5 billion in March 2020, EUR 55.0 billion in June 2020 and repaid EUR 17.7 billion on previous TLTRO.
Loans include balances (mainly short-term deposits) with central banks amounting to EUR 2,519 million (2019: EUR 3,185 million).
As at 31 December 2020, Loans include receivables related to finance lease contracts amounting to
Mandatorily measured at fair value through profit or loss 44,305 41,600
Financial assets at fair value through profit or loss includes securities lending and sales and repurchase transactions which were not derecognised, because ING Group continues to be exposed to substantially all risks and rewards of the transferred financial asset. For repurchase agreements the gross amount of trading assets must be considered together with the gross amount of related trading liabilities, which are presented separately on the statement of financial position since IFRS does not always allow netting of these positions in the statement of financial position.
> 4 Financial assets at fair value through profit or loss
Funds entrusted measured at designated at fair value through profit or loss 41,177 38,492
Reference is made to Note 42 ‘Transfer of financial assets, assets pledged and received as collateral’ for information on transferred assets which were not derecognised.
Trading assets include assets that are classified under IFRS as Trading, but are closely related to servicing the needs of the clients of ING Group. ING offers institutional clients, corporate clients, and governments, products that are traded on the financial markets. 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).
> 5 Financial assets at fair value through other comprehensive income
The notional value of the related credit derivatives is EUR 1,077 million (2019: EUR 1,672 million). The cumulative change in fair value of the credit derivatives attributable to changes in credit risk since the financial assets were first designated, amounts to EUR -16 million (2019: EUR 29 million) and the change for the current year amounts to EUR -45 million (2019: EUR -52 million).
These have been calculated by determining the changes in credit spread implicit in the fair value of bonds issued by entities with similar credit characteristics.
Loans and advances1 1,056 1,680 1 Debt securities include an amount of EUR -12 million (2019: EUR -7 million) and the Loans and advances includes EUR -2 million (2019: EUR -3 million) of Loan loss provisions.
Equity securities designated as at fair value through other comprehensive income
The following table presents changes in financial assets at fair value through other comprehensive income.
Opening balance as at 1 January 2,306 3,228 32,163 27,995 34,468 31,223
2 Changes in unrealised revaluations of FVOCI debt instruments include changes on hedged items which are recognised in the statement of profit or loss. Reference is made to Note 19 ‘Equity’ for details on the changes in revaluation reserve.
In the first quarter of 2019, ING sold its last tranche of shares in India’s Kotak Mahindra Bank (Kotak) for
Debt securities at fair value through other comprehensive income 32,977 30,483
Debt securities at fair value through other comprehensive income and amortised cost 83,564 76,592
Debt securities at fair value through profit or loss 4,274 3,067
Total debt securities at fair value through profit or loss 9,457 9,323
EUR 87,838 million (31 December 2019: EUR 79,659 million) is specified as follows:
Loans to, or guaranteed by, public authorities 24,292 25,340 17,210 16,849 41,502 42,190
For details on credit quality and loan loss provisioning, refer to ‘Risk management – Credit risk’
Included in Loans and advances to customers 9,958 9,987 1 The prior period has been updated to improve consistency and comparability of the amounts per maturity of finance lease receivables.
The finance lease receivables mainly relate to the financing of equipment and are part of corporate loans. To a lesser extent, the finance lease receivables relate to real estate for third parties, where ING
The reporting dates of certain associates and joint ventures can differ from the reporting date of the
TMB is accounted for as an investment in associate based on the size of ING shareholding and representation on the Board. IFRS requires to test its investment in TMB for impairment when there is an indication that impairment might exist.
In 2020, the fair value of ING’s investment in TMB significantly declined below the purchase cost. This indicator triggered ING to perform an impairment test on the recoverability of the investment of TMB.
The impairment test performed led to an impairment at 30 September 2020 of EUR 230 million, as the recoverable amount of EUR 1,181 million, as determined by a Value in Use calculation, was below the carrying amount of EUR 1,411 million at that point in time. The impairment test at year end resulted in no further impairments.
The recoverable amount is determined as the higher of the fair value less costs of disposal and Value in
Dividend Discount Model (DDM) where distributable equity, i.e. future earnings available to ordinary shareholders, is used as a proxy for future cash flows. The valuation looks at expected cash flows into perpetuity resulting in two main components to the VIU calculation: i) the estimation of future earnings over a 5 year forecast period; and ii) the terminal value being the extrapolation of earnings into perpetuity applying a long term growth rate. The earnings that are used for extrapolation represent the stable long term financial results and position of TMB, i.e. a steady state. The terminal value comprises the majority of the total VIU.
The terminal growth rate and the discount rate are interdependent. Following the use of the long term government bond yield as a basis for terminal growth rate at year-end, cost of equity was adjusted accordingly (reducing cost of equity). This change did not have a significant impact on value in use as at 31 December 2020. Furthermore, following the approval of vaccines and improvement in the share price of TMB observed in the last quarter of the year, in line with the general market, the level of confidence in the forecasted cash flows of TMB increased compared to 30 September 2020. This allowed ING to remove the additional forecasting risk factor from cost of equity at year-end compared to 30 September 2020. Even if the additional forecasting risk factor remained in the cost of equity as at 31 December 2020, this would not have resulted in impairment at year-end in addition to the impairment already recognised at 30 September 2020.
At year end 2020 the model was tested for reasonably possible changes to key assumptions in the model. This reflects the sensitivity of the VIU to each key assumption on its own and it is possible that more than one favourable and/or unfavourable change may occur at the same time. Holding the other key assumptions constant, a reduction in all of the forecasted annual cashflows, including terminal value, of 17.6% would reduce the recoverable amount to the carrying amount. A 589bps decrease in long term growth rate or a 153bps increase in the discount rate would cause the VIU to equal the carrying amount.
The associates and joint ventures of ING are subject to legal and regulatory restrictions regarding the amount of dividends it can pay to ING. These restrictions are for example dependent on the laws in the country of incorporation for declaring dividends or as a result of minimum capital requirements that are imposed by industry regulators in the countries in which the associates and joint ventures operate.
In addition, the associates and joint ventures also consider other factors in determining the appropriate levels of equity needed. These factors and limitations include, but are not limited to, rating agency and regulatory views, which can change over time.
Gross carrying amount as at 31 December 1,489 1,479 2,297 2,408 3,786 3,886
Gross carrying amount as at 31 December 1,519 1,503 152 135 65 69 1,737 1,707
Gross carrying amount as at 31 December 843 907 2,642 2,608 60 61 3,545 3,575
Goodwill is allocated to groups of cash generating units (CGUs) as follows: Goodwill allocation to group of CGUs
Wholesale Banking1 Values in use 9.58% 0.75% 268 1 Goodwill from acquisition related to Growth Countries is allocated across two groups of CGUs, EUR 153 million to Retail
Growth Markets and EUR 0 million to Wholesale Banking (2019: EUR 209 million to Retail Growth Markets and EUR 61 million to
Covid-19 has resulted in adverse changes in the market and economic environment. Due to the impact of the significant deterioration in the economic environment on the cash flow outlook of our businesses, we also completed a goodwill impairment review across ING Group in the second quarter of
Goodwill impairment test performed in the second quarter resulted in the recognition of goodwill impairments on the CGU Retail Belgium of EUR 50 million (of which EUR 43 million is reported in Retail
In line with IFRS, the recoverable amount is determined as the higher of the fair value less costs of disposal and Value in Use (VIU). The VIU calculation is based on a Dividend Discount model using three year management approved plans, updated for the expected impact of Covid-19. When estimating the
Key assumptions in the goodwill impairment test model are the projected locally available cash flows
(based on local capital requirements and projected profits), discount rates (cost of equity), and long term growth rates.
A decrease in the available cash flows of 10%, an increase in the discount rate of 1 percent point or a reduction of future growth rate to zero are considered reasonably possible changes in key assumptions.
If the aforementioned changes occur to the above key assumptions holding the other key assumptions constant, goodwill of the remaining CGUs will continue to be recoverable and no impairment will occur.
Software, includes internally developed software amounting to EUR 688 million (2019: EUR 741 million).
Following the decision to discontinue the Maggie programme an impairment of EUR 141 million was recognised in 2020, primarily related to capitalised software development costs. In addition, an impairment of EUR 19 million with regards software in the payments and cash management business was recognised. The rest of the software impairment relates to various, individually immaterial items.
In 2020 an impairment of an indefinite useful life asset of EUR 14 million was recognised, related to brand names (2019: nil) and additional EUR 20 million was recognised related to intangible assets from a previous acquisition (customer relationships), following a re-evaluation of the business plan.
Other relates to various receivables in the normal course of business, amongst others, short term receivables relating to mortgage issuance and other amounts receivable from customers.
Deposits from banks includes ING’s participation in the Targeted Longer-Term Refinancing Operations of EUR 59.5 billion (2019: EUR 17.7 billion). ING participated in a new series of Targeted Longer-Term
The TLTRO III funding is granted for a period of three years with an early repayment option after one year with the earliest date of September 2021. The three new participation windows introduced by the
ECB press release in December 2020, can be repaid quarterly from June 2022. Interest under TLTRO III
will be settled on maturity of each TLTRO III operation or on early repayment. The interest rate on
TLTRO III depends on the lending volumes granted to corporates (excluding financial institutions) and households (excluding mortgages).
March 2020 and 31 March 2021 (observation period 1) and 1 October 2020 and 31 December 2021
The amount of interest income recognised during the period on the TLTRO III depends on a reasonable expectation of whether the conditions will be met. Interest income on ING’s participation in TLTRO III of
> 14 Financial liabilities at fair value through profit or loss
Derivatives used in: - hedges of net investments in foreign operations 98 51
The amount that ING Group is contractually required to pay at maturity to the holders of financial liabilities designated at fair value through profit or loss excluding repurchase agreements is EUR 6,682 million (2019: EUR 8,634 million).
Reference is made to Note 45 ‘Legal proceedings’ for developments in litigation provisions.
Other staff-related liabilities includes vacation leave provisions, variable compensation provisions, jubilee provisions, and disability/illness provisions.
Costs payable relates to costs attributable to 2020, which will be paid in subsequent periods.
Amounts to be settled includes primarily transactions not settled at the balance sheet date. The nature of these transactions is short term and these are expected to settle shortly after the closing date of the balance sheet.
Debt securities in issue relates to debentures and other issued debt securities with either fixed interest rates or interest rates based on floating interest rate levels, such as certificates of deposit and accepted bills issued by ING Group, except for subordinated items. Debt securities in issue does not include debt securities presented as Financial liabilities at fair value through profit or loss. ING Group does not have debt securities that are issued on terms other than those available in the normal course of business. The maturities of the debt securities are as follows: Debt securities in issue – maturities
More than 2 years but less than 3 years 6,193 9,527
More than 4 years but less than 5 years 3,685 2,836
More than 3 years but less than 4 years 138 1,541
In 2020 Debt securities in issue decreased by EUR 36.5 billion because of lower funding needs driven by increased TLTRO funding and the strong growth of customer deposits. This decrease is mainly explained by a reduction of EUR 18.2 billion in commercial paper, a reduction of EUR 8.1 billion in certificates of deposits, a reduction of EUR 8.6 billion in matured long term bonds and a reduction of
eligible) capital for ING Bank N.V. Under IFRS these bonds are classified as liabilities and for regulatory purposes, they are considered capital. Subordinated loans issued by ING Group companies comprise, for the most part, subordinated loans which are subordinated to all current and future liabilities of ING
In 2020 ING Groep N.V. issued in February USD 750 million 4.875% Perpetual Additional Tier 1
Contingent Convertible Capital Securities and in May EUR 1.5 billion 2.125% Subordinated Tier 2 Notes.
In 2020 ING Bank N.V. bought back USD 1 billion in February and USD 190 million in December 5.800%
In 2020, 2019 and 2018 respectively, ING Groep N.V. issued USD 750 million, USD 2,750 million and nil
Effect of change in accounting policy due to the implementation of IFRS 9 2,432 580 -3,447 -190
Realised gains/losses transferred to the statement of profit or loss -33 -33 -54
In 2020, the unrealised revaluations of EUR -337 million includes revaluation of shares in Bank of Beijing for EUR -339 million. Other changes of EUR -62 million is related to prior years revaluations of Visa shares, which are reclassified to Financial assets at fair value through profit or loss and for which the unrealized revaluation up until 2019 is transferred to retained earnings. Reference is made to note 5
In 2019, the unrealised revaluations of EUR 137 million are due to the revaluation of shares in Bank of
ING mainly hedges floating rate lending with interest rate swaps. Due to decrease in interest rate yield curve in 2020 the interest rate swaps had a positive revaluation of EUR 242 million which is recognised in cash flow hedge reserve.
Unrealised revaluations relates to changes in the value of hedging instruments that are designated as net investment hedges. The hedging strategy is to hedge the CET1 ratio. The net decrease of unrealized revaluations and Exchange rate differences of EUR -1,557 million is related to several currencies including USD (EUR -536 million), TRY (EUR -406 million) PLN (EUR -137 million) and RUB (EUR
In 2019 realised gains/losses transferred to the statement of profit or loss is related to the sale of shares in Kotak Mahindra Bank (EUR -119 million) and the effect of the merger transaction of TMB (EUR
Effect of change in accounting policy due to the implementation of IFRS 9 -28
Effect of change in accounting policy due to the implementation of IFRS 9 -390
Changes in composition of the group and other changes 6 23 -96
November 2019 and April 2020 for a total consideration of EUR 90 million. Given that ING already had control over Payvision, the acquisition of 23% of the shares in 2019 and 2% in 2020 represents a
ING Group Annual Report 2020 303 shareholder transaction and resulted in a transfer between Non-controlling interest and Shareholders equity of EUR 24 million in 2019 and EUR 2 million in 2020.
Moreover, ING Groep N.V.’s ability to pay dividends is dependent on the dividend payment ability of its subsidiaries, associates and joint ventures. ING Groep N.V. is legally required to create a nondistributable reserve insofar as profits of its subsidiaries, associates and joint ventures are subject to dividend payment restrictions which apply to those subsidiaries, associates and joint ventures themselves.
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: Non-distributable reserves
Furthermore, ING Groep N.V. is subject to legal restrictions with respect to repayment of capital to holders of ordinary shares. Pursuant to the Dutch Civil Code, capital may only be repaid if none of ING
Groep N.V.’s creditors opposes such a repayment within two months following the announcement of a resolution to that effect.
The dividend on the cumulative preference shares will be equal to a percentage, calculated on the amount compulsorily paid up or yet to be paid up. This percentage shall be equal to the average of the
Interest income on non-trading derivatives (hedge accounting) 3,392 4,319 4,497 Interest expense on subordinated loans 612 660 711
Interest income on financial assets at fair value through profit or loss 658 1,897 1,795
Total other interest income 1,843 3,107 2,880 Interest expense on lease liabilities 18 25 n/a
Total net interest income amounts to EUR 13,604 million (2019: EUR 14,079 million). The decrease is mainly caused by continued margin pressure on customer deposits on both savings and current accounts due to lower reinvestment yields. In addition, average liability volumes increased over the year whereas customer lending volumes decreased. Negative interest on liabilities in 2020, amounting to EUR 678 million (2019: EUR 422 million) includes interest income on ING’s participation in TLTRO III of
EUR 164 million and TLTRO II of EUR 24 million (2019: TLTRO II EUR 57 million). Any conditional benefit from TLTRO III on net interest income has not been included yet.
Other fee and commission income mainly consists of commission fees in respect of bank guarantees of EUR 187 million (2019: EUR 202 million; 2018: EUR 207 million), in respect of underwriting syndication loans of EUR 16 million (2019: EUR 10 million; 2018: EUR 4 million), in respect of structured finance fees of EUR 126 million (2019: EUR 141 million; 2018: EUR 129 million), and in respect of collective instruments distributed but not managed by ING of EUR 163 million (2019: EUR 167 million; 2018: EUR 165 million).
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) -183 395 -52
ING. ING offers products that are traded on the financial markets to institutional clients, corporate clients, and governments. ING Group’s trading books are managed based on internal limits and comprise a mix of products with results which could be offset. A significant part of the derivatives in the trading portfolio are related to servicing corporate clients in their risk management to hedge for example currency or interest rate exposures. From a risk perspective, the gross amount of trading assets must be considered together with the gross amount of trading liabilities, which are presented separately on the statement of financial position. However, IFRS does not always allow netting of these positions in the statement of financial position. Reference is made to Note 4 ‘Financial assets at fair value through profit or loss’ and Note 14 ‘Financial liabilities at fair value through profit or loss’ for information on trading assets and trading liabilities respectively.
In general, the fair value movements are influenced by changes in the market conditions, such as stock prices, credit spreads, interest rates and currency exchange rates. Following the increased concerns about the Covid-19 pandemic, the global financial markets experienced more volatility than usual in the first half of 2020 which had considerable impact on the results. Aided by substantial central bank intervention, markets have recovered and stabilised during the second half of 2020 and volatility has largely returned to pre-pandemic levels.
In 2020, Derivatives trading results include EUR 17 million CVA/DVA adjustments on trading derivatives
‘Valuation results on assets and liabilities designated at fair value through profit or loss’ include fair value changes on financial liabilities driven by changed market conditions as disclosed in Note 14
(excluding trading) include fair value adjustments on own issued notes amounting to EUR -1 million
Interest income from trading assets in 2020 amounted to EUR 13,412 million (2019: EUR 15,187 million; 2018: 13,924 million). Interest expense from trading liabilities in 2020 amounted to EUR 13,052 million (2019: EUR 14,922 million; 2018: 13,976 million).
Realised gains/losses on disposal of debt instruments measured at FVOCI 44 46 77
In 2020, 2019 and 2018 dividend income mainly consists of dividend received from ING’s equity stake in Bank of Beijing.
ING Group Annual Report 2020 308 24 Result on disposal of group companies
Kotak Mahindra Bank by ING Mauritius during 1Q 2019. ING Mauritius is in the process of being liquidated and consequently, the release of the currency translation reserve (CTA) and the release of the Net Investment Foreign Entities reserve resulted in a one-off gain of EUR 119 million.
Net result on derecognition of financial assets measured at amortised cost 189 38 18 1 Net result on derecognition of financial assets measured at amortised cost was included in note 26 Other income in prior years.
In 2020, driven by exceptional market circumstances in the first quarter, ING realised a profit on the sale of debt securities at amortised cost of EUR 186 million.
Share-based compensation arrangements include EUR 17 million (2019: EUR 38 million; 2018: EUR 46 million) relating to equity-settled share-based payment arrangements and EUR 2 million (2019: EUR 3 million; 2018: EUR 3 million) relating to cash-settled share-based payment arrangements.
ING grants various types of share awards, namely deferred shares, performance shares and upfront shares, which form part of the variable remuneration offering via the Long-term Sustainable
In addition to the LSPP share awards, ING paid a number of senior employees fixed shares. The number of shares were determined each month from a cash value that forms part of the employee fixed remuneration. The shares were immediately vested to the employee, but had a minimum holding requirement of two years before the employee can dispose of the shares. The fixed shares are not subject to holdback or clawback.
The share awards granted in 2020 relate to the performance year 2019. In 2020, 63,837 share awards
(2019: 0; 2018:31,743) were granted to the members of the Executive Board of ING Groep N.V., and 122,338 share awards (2019: 2,837; 2018: 80,036) were granted to the Management Board Banking. To senior management and other employees 3,678,776 share awards (2019: 2,167,817; 2018: 3,989,214)
The obligations with regard to share plans are funded by newly issued shares at the discretion of ING
Share awards (in numbers) Weighted average grant date fair values (in euros)
As at 31 December 2020, total unrecognised compensation costs related to share awards amount to
Impairments and reversals of impairments of tangible and intangible assets 558 59 19
Addition to / (unused amounts reversed of) other provisions 39 29 -13 1 Includes depreciation expenses of right-of-use assets as recognised under IFRS 16 in 2020 and 2019.
(2018: EUR 375 million). This was caused by a decrease of EUR 10 million in Romania following abolishment of its bank tax in 2020. Excluding this effect, total bank taxes increased with EUR 4 million.
Software and other intangible assets 202 61 12 202 61 12
Impairment losses on property and equipment in 2020 follow from the changes in intended use of right-of-use property due to the changes in the future way of working post-pandemic.
In 2018, impairment losses on property development mainly relate to impairments in Spain and Italy due to lower expected net realisable values.
The reversals of impairments on property and equipment in 2018 relate to impairments previously recognised in the statement of profit or loss and mainly include impairments on property in own use that were reversed following the sale of office buildings.
Goodwill impairment test performed in the second quarter of 2020 resulted in goodwill impairment losses for EUR 310 million in the CGUs Retail Belgium and Wholesale Banking.
Impairment losses on software and other intangible assets in 2020 mainly include software that was impaired for an amount of EUR 141 million following the decision to discontinue Project Maggie
(previously called Model Bank). This is primarily related to capitalised software development costs. In addition, impairment losses of EUR 19 million were recognised related to purchased software and of
Included in Addition to / (unused amounts reversed of) provision for reorganisations in 2020 are increases due to refocusing of ING’s activities in Wholesale Banking and decisions on the Maggie project, as well as additional restructuring costs in Retail Benelux and Other Challengers & Growth
Diluted earnings per share is calculated as if the stock options and share plans outstanding at the end of the period had been exercised at the beginning of the period and assuming that the cash received from exercised stock options and share plans is used to buy own shares against the average market price during the period. The net increase in the number of shares resulting from exercising stock options and share plans is added to the average number of shares used for the calculation of diluted earnings per share.
Dividends on ordinary shares: In respect of 2018 - Interim dividend, paid in cash in August 2018 0.24 934 - Final dividend, paid in cash in May 2019 0.44 1,714
In respect of 2019 - Interim dividend, paid in cash in August 2019 0.24 935
The table below shows a detailed overview of the net cash flow from operating activities.
Net change in Trading assets and Trading liabilities 2,566 -2,568 9,910
– Assets mandatorily at fair value through profit or loss -1,963 23,343 -6,968
Treasury bills and other eligible bills included in securities at AC 43 142
Included in Cash and cash equivalents, are minimum mandatory reserve deposits to be held with various central banks. Reference is made to Note 42 ‘Transfer of financial assets, assets pledged and received as collateral’ for restrictions on Cash and balances with central banks.
The Executive Board of ING Group and the Management Board Banking set the performance targets, approve and monitor the budgets prepared by the business lines. Business lines formulate strategic, commercial, and financial plans in conformity with the strategy and performance targets set by the
Retail Other Income from retail banking activities in the rest of the world, including the
Income from wholesale banking activities. The main products are: lending, debt capital markets, working capital solutions, export finance, daily banking solutions, treasury and risk solutions, and corporate finance.
ING Group monitors and evaluates the performance of ING Group at a consolidated level and by segment. The Executive Board and the Management Board Banking consider this to be relevant to an understanding of the Group’s financial performance, because it allows investors to understand the primary method used by management to evaluate the Group’s operating performance and make decisions about allocating resources.
ING Group reconciles the total segment results to the total result using Corporate Line. The Corporate
Line is a reflection of capital management activities and certain income and expenses that are not allocated to the banking businesses, including the recognition of value-added tax (VAT) refunds in the
Group’s segments was based on a non-GAAP financial performance measure called underlying.
Net result IFRS attributable to shareholder of the parent 2,415 70 2,485 4,843 -63 4,781 4,607 96 4,703 1. Comprises for the most part the funding charges of ING Group N.V. (Holding). In 2018, Other also includes former Insurance activities result of EUR 90 million (2020 and 2019: nil).
– Net fee and commission income 681 413 437 412 1,069 -1 3,011 674 374 268 423 1,135 -6 2,868 664 371 225 395 1,152 -8 2,798
3. As from 2020 reporting, results of former Insurance activities are included in geographical segment Other (Corporate Line); prior period figures have been adjusted.
ING Group Annual Report 2020 319 35 Information on geographical areas
In order to increase ING Group’s tax transparency, additional financial information on a per country basis has been included in this disclosure: Tax paid represents all income tax paid to and/or received from tax authorities in the current year, irrespective of the fiscal year to which these payments or refunds relate.
The table below provide additional information, for the years 2020, 2019 and 2018 respectively, on names of principal subsidiaries and branches, nature of main activities and average number of employees on a full time equivalent basis by country/tax jurisdiction.
activity Average number of employees at full time equivalent basis Total Income Total assets Result before tax Taxation Tax paid 2020 2019 2018 2020 2019 2018 2020 2019 2018 2020 2019 2018 2020 2019 2018 2020 2019 2018 Netherlands Netherlands ING Bank N.V. Wholesale / Retail 15,201 14,415 13,600 5,413 5,565 5,911 286,014 269,564 261,466 925 1,763 1,754 420 530 624 588 684 528