Loans and advances to customers1 165 138 12,622 14,656 588,063 567,016 600,850 581,810
▪ Changes in the fair value of Investment property are included in Investment income.
‘Financial instruments’ of Note 1 ‘Basis of preparation and accounting policies’.
Following the decision by global regulators to seek alternatives for current critical benchmarks in use in various jurisdiction in order to comply with the EU Benchmarks Regulation, the IBOR
transition program of ING was initiated in 2018 to prepare the Group for the reform.
ING applies fair value and cash flow hedge accounting in accordance with IAS 39, and interest rate and foreign currency risks are designated as hedged risks in various micro and macro models.
based cash flows from the hedging instrument and hedged item will remain unaffected.
Approximately 68% of the above notional amounts have a maturity date beyond 2021.
EUR 524 million (2018: EUR 650 million) respectively ‘Financial liabilities at fair value through profit or loss – Non-trading derivatives’ EUR 873 million (2018: EUR 1,035 million). The remaining derivatives are offset with other derivatives and collaterals paid or received.
The following table shows the net notional amount of derivatives designated in fair value hedging split into the maturity of the instruments. The net notional amounts presented in the table are a combination of payer (-) and receiver (+) swaps.
– Debt securities at fair value through other comprehensive income 23,281 n/a 357
The main sources of ineffectiveness are: ▪ differences in maturities of the hedged item(s) and hedging instrument(s); ▪ different interest rate curves applied to discount the hedged item(s) and hedging instrument(s); ▪ differences in timing of cash flows of the hedged item(s) and hedging instrument(s).
– Interest rate swaps –401 580 –2,591 –6,512 –5,541 –5,788 –5,364 –23,009 –48,627
Interest rate risk on; – Floating rate lending –940 1,395 357
Interest rate risk on; – Floating rate borrowing 51 5 –47
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Derivatives and hedge accounting > 39
As a result of interest rate developments in 2019 ING Group de-designated cash flow hedge accounting portfolios with a total notional value of approximately EUR 25 billion.
ING Group’s net investment hedges principally consist of derivatives (including currency forwards and swaps) and non-derivative financial instruments such as foreign currency denominated funding. When the hedging instrument is foreign currency denominated debt, ING Group assesses effectiveness by comparing past changes in the carrying amount of the debt that are attributable to a change in the spot rate with past changes in the investment in the foreign operation due to movement in the spot rate (the offset method).
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Assets by contractual maturity > 40
Loans and advances to banks 15,864 3,693 4,830 5,599 437 30,422
Loans and advances to customers 55,736 17,689 39,443 177,298 302,031 592,196
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Liabilities by maturity > 41 3 Included in remaining assets for which maturities are not applicable are property and equipment, and investments in associates and joint ventures. Due to their nature remaining assets consist mainly of assets expected to be recovered after more than 12 months 41 Liabilities by maturity
Non-financial liabilities are included based on a breakdown of the amounts per the statement of financial position, by expected maturity. Reference is made to the liquidity risk paragraph in ‘Risk
Management – Funding and liquidity risk’ for a description on how liquidity risk is managed.
Non-financial liabilities 7,916 820 2,361 1,101 1,061 13,259 Total liabilities 594,677 41,573 70,017 66,339 52,970 6,948 4,557 837,082
Debt securities in issue 4,066 20,961 30,282 41,068 21,413 1,961 119,751 Subordinated loans 0 1,713 6,497 5,339 176 13,724 Lease liabilities n/a n/a n/a n/a n/a n/a n/a n/a
Non-financial liabilities 10,560 899 2,496 1,198 831 15,983 Total liabilities 581,467 55,538 60,316 82,494 46,960 5,339 3,180 835,295
Financial liabilities at fair value through 1 The table includes the associated liabilities which are reported after offsetting, compared to the gross positions of the encumbered assets.
Loans and advances to customers Reverse repurchase, securities borrowing and similar agreements 223 –223 – – – –
Debit balances on customer accounts 161,730 –159,596 2,134 1,166 605 363
ING Group and its consolidated subsidiaries are involved in governmental, regulatory, arbitration and legal proceedings and investigations in the Netherlands and in a number of foreign jurisdictions, including the U.S., involving claims by and against them which arise in the ordinary course of their businesses, including in connection with their activities as lenders, broker-dealers, underwriters, issuers of securities and investors and their position as employers and taxpayers. In certain of such proceedings, very large or indeterminate amounts are sought, including punitive and other damages. While it is not feasible to predict or determine the ultimate outcome of all pending or threatened governmental, regulatory, arbitration and legal proceedings and investigations, ING is of the opinion that some of the proceedings and investigations set out below may have or have in the recent past had a significant effect on the financial position, profitability or reputation of ING and/or ING and its consolidated subsidiaries.
announced on 5 September 2018, ING has received a formal notification from the SEC that it has concluded its investigation. In the letter dated 4 September 2018 the Division of Enforcement states that, based on information as of the date thereof, it does not intend to recommend an SEC
ING announced steps in September 2018 to enhance its management of compliance risks and embed stronger awareness across the whole organisation. This programme started in 2017 and includes enhancing KYC files and working on various structural improvements in compliance policies, tooling, monitoring, governance, knowledge and behaviour.
Claims regarding accounts with predecessors of ING Bank Turkey: ING Bank Turkey has received numerous claims from (former) customers of legal predecessors of ING Bank Turkey. The claims are based on offshore accounts held with these banks, which banks were seized by the Savings Deposit
Insurance Fund (SDIF) prior to the acquisition of ING Bank Turkey in 2007 from OYAK. SDIF has also filed various lawsuits against ING Bank Turkey to claim compensation from ING Bank Turkey, with
Committee of independent experts (the ‘Committee’) which has established a uniform recovery framework for Dutch SME clients with interest rate derivatives. ING has adopted this recovery framework and has reassessed individual files against this framework. ING has taken an additional provision for the financial consequences of the recovery framework. In 2017, ING has informed the majority of the relevant clients whether they are in scope of the recovery framework, and thus eligible for compensation, or not. Because implementation by ING of the uniform recovery framework encountered delay, ING has previously offered advance payments to customers out of the existing provision. As of December 2018, all customers in scope of the uniform recovery framework have received an offer of compensation from ING (including offers of no compensation).
A settlement with all the civil parties involved was reached in mid-2018. However, this settlement does not apply to the criminal conviction of ING Luxembourg. In January 2020, the Court of Appeal of Antwerp reformed the first judgment: ING Luxemburg benefitted from an ‘opschorting van de uitspraak/suspension du prononcé’ which means that the conviction has been upheld, but no penal sanction has been pronounced (penalties suspended). ING Luxembourg is analyzing the judgement.
In most court proceedings in first instance the expense clause of the relevant mortgage contract has been declared null and ING Spain has been ordered to reimburse all or part of the applicable expenses. The courts in first instance have applied in their rulings different criteria regarding the reimbursement of expenses. ING Spain has filed an appeal against a number of these court decisions. ING Spain has also been included, together with other Spanish banks, in two class actions filed by customer associations. The outcome of the pending litigation and similar cases that may be brought in the future is uncertain. A provision has been taken. However, the aggregate financial impact of the current and future litigation could change. In February 2018, the Spanish Supreme
Imtech claim: In January 2018, ING Bank received a claim from Stichting ImtechClaim.nl and
Imtech Shareholders Action Group B.V. on behalf of certain (former) shareholders of Imtech N.V.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Principal subsidiaries, investments in associates and joint ventures > 48 equity of EUR 87 million. In November 2019 ING Bank agreed to purchase the remaining 25%
The purchase price of Payvision in 2018 included contingent consideration in the form of future milestone payments. A total of EUR 16 million was paid in 2019.
1 The shares of the non-controlling interest stake of 25% are listed on the Warsaw Stock Exchange, for summarised financial information we refer to Note 35 ‘Information on geographical areas.
The structured entity issues securitised notes (traditional securitisations) which are eligible collateral for central bank liquidity purposes. In most programmes ING Group acts as investor of the securitised notes. ING Group continues to consolidate these structured entities if it is deemed to control the entities.
The structured entity issues securitisation notes in two or more tranches, of which the senior tranche obtains a high rating (AAA or AA) by a rating agency. The tranche can subsequently be used by ING Group as collateral in the money market for secured borrowings.
ING Group has entered into a covered bond programme. Under the covered bond programme ING
Capital Corp. (rated A-1/P-1). Mont Blanc Capital Corp. funds itself externally in the ABCP markets.
Group also provides support facilities (liquidity) backing the transactions funded by the conduit. The types of asset currently in the Mont Blanc conduit include trade receivables, consumer finance receivables and lease receivables.
Group include, among others, its subsidiaries, associates, joint ventures, key management personnel, and various defined benefit and contribution plans. For post-employment benefit plans, reference is made to Note 36 ‘Pension and other postemployment benefits’. Transactions between related parties include rendering or receiving of services, leases, transfers under finance arrangements and provisions of guarantees or collateral. All transactions with related parties took place at conditions customary in the market. There are no significant provisions for doubtful debts or individually significant bad debt expenses recognised on outstanding balances with related parties.
Transactions with key management personnel (Executive Board, Management Board Banking and
The table above shows the fixed remuneration, expense allowances and attendance fees for the
Key management personnel compensation is generally included in Staff expenses in the statement of profit or loss. The total remuneration of the Executive Board and Management Board Banking is disclosed in the table above. Under IFRS, certain components of variable remuneration are not recognised in the statement of profit or loss directly, but are allocated over the vesting period of the award. The comparable amount recognised in Staff expenses in 2019 and included in Total expenses in 2019, relating to the fixed expenses of 2019 and the vesting of variable remuneration of earlier performance years, is EUR 11 million in 2019 (2018: EUR 12 million).
ING applies the following main capital definitions: ▪ Common Equity Tier 1 capital (CET1) - is defined as shareholders’ equity less regulatory adjustments. CET1 capital divided by risk-weighted assets equals the CET1 ratio.
▪ Tier 1 capital – is defined as CET1 capital, Additional Tier 1 (hybrid) securities and other regulatory adjustments. Tier 1 capital divided by risk-weighted assets equals the Tier 1 capital ratio.
The Group’s Tier 1 ratio (including grandfathered securities) increased from 16.2% to 16.7%, as of 31 December 2019. Compared with previous year, the Total capital ratio (including grandfathered securities) increased from 18.4% to 19.1%.
2) Including EUR 5,758 million which is CRR/CRD IV-compliant (2018: EUR 3,271 million) and EUR 994 million to be replaced as capital recognition is subject to CRR/CRD IV grandfathering rules (2018: EUR 1,907 million).
3) Including EUR 8,789 million which is CRR/CRD IV-compliant (2018: EUR 8,079 million), and EUR 153 million to be replaced as capital recognition is subject to CRR/CRD IV grandfathering rules (2018: EUR 168 million). In accordance with the applicable regulation, credit and operational risk models used in the capital ratios calculations are not audited.
ING Group’s dividend policy aims to pay a progressive dividend that will reflect considerations including expected future capital requirements, growth opportunities available to the Group, net earnings, and regulatory developments. The Executive Board proposes to pay a total cash dividend of EUR 2,689 million, or EUR 0.69 per ordinary share, over the financial year 2019. This is subject to the approval of shareholders at the Annual General Meeting in April 2020.
Directives, as implemented by the Dutch Central Bank (Dutch Central Bank until 3 November 2014, the ECB thereafter) for supervisory purposes. In 2010, the Basel Committee issued new solvency and liquidity requirements that superseded Basel II. The minimum requirements, excluding buffers, for the CET 1 ratio is 4.5%, the minimum Tier 1 requirement is 6% and the Total capital ratio is 8%
Conservation Buffer (CCB), a 0.08% Countercyclical Buffer (based on December 2019 positions) and the 3.0% Systemic Risk Buffer (SRB) that are set separately for Dutch systemic banks by the Dutch
Central Bank (De Nederlandsche Bank). Due to changes in the Countercyclical Buffer setting in some jurisdictions, ING expects an increase to 0.24% in 2020 (based on 4Q 2019 positions). This requirement excludes the Pillar II capital guidance, which is not disclosed.
The Maximum Distributable Amount (MDA) trigger level stood at 11.83% in 2019, based on stable
A security rating is not a recommendation to buy, sell or hold securities and each rating should be evaluated independently of other ratings. There is no assurance that any credit rating will remain in effect for any given period of time or that a rating will not be lowered, suspended or withdrawn entirely by the rating agency if, in the rating agency’s judgment, circumstances so warrant. ING
Changes in the composition of the group and other changes 69 –46 23
Realised and unrealised revaluations property in own use –2 3 1
The Parent company financial statements of ING Groep N.V. are prepared in accordance with the financial reporting requirements included in Part 9 of Book 2 of the Dutch Civil Code. In accordance with subsection 8 of section 362, Book 2 of the Dutch Civil Code, the recognition and measurement principles applied in these Parent company financial statements are the same as those applied in the Consolidated financial statements, reference is made to Note 1 ‘Accounting policies’ of the
▪ Foreign currency translation on consolidated Group companies, presented in Other reserves -
Receivables from Group companies include EUR 12,998 million subordinated loans provided by ING
Changes in composition of the group and other changes 432 432
Reference is made to the ING Group Consolidated financial statements, Note 19 ‘Subordinated loans’ and Note 20 ‘Equity’.
External advisory fees 7 1 8 Interest and other financial income
Included in Interest and other financial income is EUR 1074 million (2018: EUR 600 million) related to Group companies.
Included in 2018 Valuation results, are valuation results on non-trading derivatives related to warrants on the shares of Voya and NN Group amounting to EUR 90 million. As at 31 December 2018 ING no longer holds any warrants on the shares of Voya and NN Group.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Result from Group companies and participating interests after taxation > 11 11 Result from Group companies and participating interests after taxation
or ESF) under section 5 (10) of the by-laws of this fund, where ING Bank N.V. indemnifies the
ING Group are provided and being provided indemnifications related to sale of our past businesses and agreements whereby ING Group made detailed arrangements regarding allocation and handling of claims.
For 2019, the Executive Board, with the approval of the Supervisory Board, has proposed a cash dividend of EUR 0.69 per ordinary share of EUR 0.01. In August 2019, an interim dividend of EUR
0.24 per ordinary share was paid. Therefore, a final dividend of EUR 0.45 per ordinary share remains. The final dividend will be paid entirely in cash after ratification of the proposal by the
We have audited the financial statements 2019 of ING Groep N.V. (the ‘Company’ or ‘ING Group’) based in Amsterdam. The financial statements include the consolidated financial statements and the parent company financial statements.
— Group materiality of EUR 300 million (2018: EUR 300 million).
— 84% of profit before taxation from continuing operations covered by audit procedures performed by component auditors (2018: 80%).
ING Group Annual Report 2019 KPMG Accountants N.V., registered with the trade register in the Netherlands under number 33263683, is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (‘KPMG International’), a Swiss entity. 401
ING Group is structured in segments: Retail Netherlands, Retail Belgium, Retail Germany, Retail Other, Wholesale Banking and Corporate Line Banking, covering different countries. Because we are ultimately responsible for the group audit engagement, we are responsible for directing, supervising and performing the group audit. In this respect, we have determined the nature and extent of the audit procedures to be carried out for components. Our group audit is mainly focused on significant components. These components are either individually financially significant due to their relative size compared to ING Group or because we identified a significant risk of material misstatement to one or more account balances of these entities. In addition, we included certain other non-significant components in the scope of our group audit in order to arrive at a sufficient coverage over all relevant significant account balances.
As part of our evaluation of any instances of fraud, we discussed with management incidents and follow-up by management.
— Firstly, the Company is subject to laws and regulations that directly affect the financial statementsincluding taxation and financial reporting (including related company legislation). We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
Auditing standards limit the required audit procedures to identify non-compliance with laws and regulations that have an indirect effect to inquiring of relevant management and inspection of regulatory and legal correspondence. Through these procedures, we did not identify any additional actual or suspected non-compliance other than those previously identified by the Company. We considered the effect of actual or suspected non-compliance as part of our procedures on the related financial statement items.
Assessment of Expected Credit Losses on loans and advances to customers and banks
ING Group Annual Report 2019 KPMG Accountants N.V., registered with the trade register in the Netherlands under number 33263683, is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (‘KPMG International’), a Swiss entity. 404
— With the assistance of Corporate Finance professionals and Real Estate Valuation professionals with specialised skills and knowledge, we assessed the methodologies, cash flows and collateral values used in expected future recovery cash flow assessments of provisions for impaired loans, including the Company’s judgements made.
The Executive Board is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS-EU and Part 9 of Book 2 of the Dutch Civil Code. Furthermore, the Executive Board is responsible for such internal control as the Executive Board determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, the Executive Board is responsible for assessing the Company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, the Executive Board should prepare the financial statements using the going concern basis of accounting unless the Executive Board either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The Executive Board should disclose events and circumstances that may cast significant doubt on the Company’s ability to continue as a going concern in the financial statements.
A further description of our responsibilities for the audit of the financial statements is included in the appendix of this auditor's report. This description forms part of our auditor’s report.
— evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant findings in internal control that we identify during our audit. In this respect, we also submit an additional report to the Audit Committee in accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audits of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor’s report.
In case one or more of the factors mentioned above adversely affects the profitability of our business, this might also result, among other things, in the following: ▪ reserve and provisions inadequacies, which could ultimately be realised through profit and loss and shareholders’ equity; Risk factors
Asia (primarily Singapore among others) and Australia which also present risks of economic downturn. In an economic downturn, we expect that higher unemployment, lower family income, lower corporate earnings, higher corporate and private debt defaults, lower business investments and lower consumer spending would adversely affect the demand for banking products, and that
ING may need to increase its reserves and provisions, each of which may result in overall lower earnings. Securities prices, real estate values and private equity valuations may also be adversely impacted, and any such losses would be realised through profit and loss and shareholders’ equity.
▪ (depending on the position) a significant collateral posting requirement associated with our interest rate hedge programs, which could materially and adversely affect liquidity and our profitability.
Continued risk of political instability and fiscal uncertainty in Europe and the United
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Risk factors the negotiations between the UK and the EU following the Brexit decisions in UK parliament, increasing political instability, levels of unemployment, the availability and cost of credit, credit spreads, and the impact of continued quantitative easing within the Eurozone through bond repurchases and the ECB’s targeted longer-term refinancing operation (‘TLTRO’). In the United
Russia/Ukraine and North Korea may all contribute to adverse developments in the global capital markets and the economy generally.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Risk factors agreement is reached, the default scenario would be a non-negotiated Brexit. In the event of a non-negotiated Brexit, the UK will depart the EU with no agreements in place beyond any temporary arrangements which have been or may be put in place by the EU or individual EU
The London Interbank Offered Rate (‘LIBOR’), the Euro OverNight Index Average (‘EONIA’), the Euro
on the current basis cannot and will not be guaranteed after 2021. In addition, as of October 2019, the new euro risk-free rate euro short-term rate (€STR) is being published and the EONIA
Institute (EONIA’s administrator) has indicated that EONIA cannot be used in any contracts that will be outstanding as of 1 January 2022. Public authorities have initiated industry working groups in various jurisdictions to search for and recommend alternative risk-free rates that could serve alternatives if current benchmarks like LIBOR and EONIA cease to exist or materially change. The work of these working groups is still ongoing, though certain such organizations have advanced proposals for benchmark replacements. For example, the US Federal Reserve’s Alternative
July 2024. In case of failure of a Dutch bank, depositor compensation is paid from the DGS-fund. If the available financial means of the fund are insufficient, Dutch banks, including ING, may be required pay to extraordinary ex-post contributions not exceeding 0.5% of their covered deposits per calendar year. In exceptional circumstances and with the consent of the competent authority, higher contributions may be required. However, extraordinary ex-post contributions may be temporarily deferred if, and for so long as, they would jeopardise the solvency or liquidity of a bank.
Depending on the size of the failed bank, the available financial means in the fund, and the required additional financial means, the impact of the extraordinary ex-post contributions on ING may be material.
We are subject to detailed banking laws and government regulation in the jurisdictions in which we conduct business. Regulation of the industries in which we operate is becoming increasingly more extensive and complex, while also attracting scrutiny from regulators. Compliance with applicable and new laws and regulations is resources-intensive, and may materially increase our operating costs. Moreover, these regulations can limit our activities, among others, through stricter net capital, customer protection and market conduct requirements and restrictions on the businesses in which we can operate or invest.
We are subject to the regulatory supervision of the ECB and other regulators with extensive supervisory and investigatory powers.
We are subject to regulations that require us to comply with minimum requirements for capital
Committee on Banking Supervision (‘BCBS’), the Financial Stability Board (‘FSB’) and the European
The capital and liquidity requirements and leverage restrictions that apply to us result in various minimum capital ratios (of capital to risk-weighted assets) and liquidity ratios that we must maintain, and in a minimum leverage ratio (based on unweighted assets). A key capital ratio is the
Any changes may require us to maintain more capital or to raise a different type of capital by disqualifying existing capital instruments from continued inclusion in regulatory capital, requiring replacement with new capital instruments that meet the new criteria. Sometimes changes are introduced subject to a transitional period during which the new requirements are being phased in, gradually progressing to a fully phased-in, or fully-loaded, application of the requirements.
SEC has adopted regulations, among others, establishing registration, reporting, risk management, business conduct, and margin and capital requirements for security-based swaps. Such regulations are expected to be effective on or around September 1, 2021.Additionally, the CFTC recently reproposed, and is expected to adopt, capital requirements for swap dealers, although the specific requirements, and any available exemptions, have not been finalized. If these requirements are applicable to ING, and no exemptions are available, it is possible that these requirements will be difficult for ING to comply with and may, as a result, materially and adversely impact ING’s ability
ING’s position sizes in swaps referencing specified physical commodities and similarly limit the ability of counterparties to utilize certain of our products by narrowing the scope of hedging exemptions from position limits for commercial end users and the trading activity of speculators.
We are subject to several recovery and resolution regimes, including the Single Resolution
Mechanism (‘SRM’), the BRRD as implemented in national legislation, and the Dutch ‘Intervention
The Intervention Act confers wide-ranging powers to the Dutch Minister of Finance, including, among other things, in relation to shares and other securities issued by us or with our cooperation or other claims on us (including, without limitation, expropriation thereof) if there is a grave and immediate threat to the stability of the financial system.
None of these actions would be expected to constitute an event of default under our securities entitling holders to seek repayment. If these powers were to be exercised in respect of us, there
Failure to comply with FATCA and/or QI requirements and regulations could also harm our reputation and could subject the Group to enforcement actions, fines and penalties, which could have a material adverse effect on our business, reputation, revenues, results, financial condition and prospects. For additional information with respect to specific proceedings, see Note 47 ‘Legal proceedings’ to the consolidated financial statements.
Like other financial institutions and global companies, we are regularly the target of cyberattacks.
Advanced Persistent Threats) and Ransomware intensify worldwide, and attempts to gain unauthorised access and the techniques used for such attacks are increasingly sophisticated. We have faced, and expect to continue to face, an increasing number of cyberattacks (both successful and unsuccessful) as we have further digitalized. This includes the continuing expansion of our mobile- and other internet-based products and services, as well as our usage and reliance on cloud technology. In 2019 we experienced continuous DDoS attacks, of which one DDoS attack breached
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Risk factors our DDoS defences (compared to two attacks in 2018). This DDoS attack caused an outage of approximately four-hours, which affected customers of ING in Romania. In addition, ING Philippines experienced one virus infection on a vendor-supplied server for two hours, which had no customer impact. Furthermore, due to our reliance on national critical infrastructure and interconnectivity with third-party vendors, exchanges, clearing houses, financial institutions and other third parties, we could be adversely impacted if any of them is subject to a successful cyberattack or other information security event.
ING may be exposed to the risks of misappropriation, unauthorised access, computer viruses or other malicious code, cyberattacks and other external attacks or internal breaches that could have a security impact. These events could also jeopardise our confidential information or that of our clients or our counterparties and this could be exacerbated by the increase in data protection requirements as a result of GDPR. These events can potentially result in financial loss and harm to our reputation, hinder our operational effectiveness, result in regulatory censure, compensation costs or fines resulting from regulatory investigations and could have a material adverse effect on our business, reputation, revenues, results, financial condition and prospects. Even when we are successful in defending against cyberattacks, such defence may consume significant resources or impose significant additional costs on ING.
In recent years, however, competition in emerging markets, such as Latin America, Asia and
We may also be subject to claims made by third parties for (1) patent, trademark or copyright infringement, (2) breach of copyright, trademark or licence usage rights, or (3) misappropriation of trade secrets. Any such claims and any resulting litigation could result in significant expense and liability for damages. If we were found to have infringed or misappropriated a third-party patent or other intellectual property right, we could in some circumstances be enjoined from providing certain products or services to our customers or from utilizing and benefiting from certain methods, processes, copyrights, trademarks, trade secrets or licences. Alternatively, we could be required to enter into costly licensing arrangements with third parties or to implement a costly workaround.
We routinely execute a high volume of transactions, such as unsecured debt instruments, derivative transactions and equity investments with counterparties and customers in the financial services industry, including brokers and dealers, commercial and investment banks, mutual and hedge funds, insurance companies, institutional clients, futures clearing merchants, swap dealers, and other institutions, resulting in large periodic settlement amounts, which may result in our having significant credit exposure to one or more of such counterparties or customers. As a result, we could face concentration risk with respect to liabilities or amounts we expect to collect from specific counterparties and customers. We are exposed to increased counterparty risk as a result of recent financial institution failures and weakness and will continue to be exposed to the risk of loss if counterparty financial institutions fail or are otherwise unable to meet their obligations. A default by, or even concerns about the creditworthiness of, one or more of these counterparties or customers or other financial services institutions could therefore have an adverse effect on our results or liquidity.
Ratings are important to our business for a number of reasons, and a downgrade or a potential downgrade in our credit ratings could have an adverse impact on our results and net results.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Risk factors an adverse effect on our liquidity. We have credit ratings from S&P, Moody’s Investor Service and
ING’s business and operations. The success of ING Group’s operations is dependent, among other things, on its ability to attract and retain highly qualified personnel. Competition for key personnel in most countries in which ING Group operates, and globally for senior management, is intense. ING
ING Group’s ability to retain or attract key personnel, which, in turn, may affect our business and results.
Our risk management policies and guidelines may prove inadequate for the risks we face.
We have developed risk management policies and procedures and will continue to review and develop these in the future. Nonetheless, our policies and procedures to identify, monitor and manage risks may not be fully effective, particularly during extremely turbulent times. The methods we use to manage, estimate and measure risk are partly based on historic market behaviour. The methods may, therefore, prove to be inadequate for predicting future risk exposure, which may be different than suggested by historical experience. For instance, these methods may not predict the losses seen in the stressed conditions in recent periods, and may also not adequately allow prediction of circumstances arising due to government interventions and stimulus packages, which increase the difficulty of evaluating risks. Other methods for risk management are based on evaluation of information regarding markets, customers, catastrophic occurrence or other information that is publicly known or otherwise available to us. Such information may not always be accurate, complete, updated or properly evaluated. Management of operational, compliance, legal and regulatory risks requires, among other things, policies and procedures to record and verify large numbers of transactions and events. These policies and procedures may not be fully effective, resulting in a material and adverse impact on our competitive position, reputation, business, results and financial position.
We need liquidity to pay our operating expenses, interest on our debt and dividends on our capital stock, maintain our securities lending activities and replace certain maturing liabilities. Without sufficient liquidity, we will be forced to curtail our operations and our business will suffer. The principal sources of our funding include a variety of short-and long-term instruments, including deposit fund, repurchase agreements, commercial paper, medium- and long-term debt, subordinated debt securities, capital securities and shareholders’ equity.
reduce, cancel or postpone payment of dividends on our shares, (iii) reduce, cancel or postpone interest payments on our other securities, (iv) issue capital of different types or under different terms than we would otherwise, or (v) incur a higher cost of capital than in a more stable market environment. This would have the potential to decrease both our profitability and our financial flexibility. Our results, financial condition, cash flows, regulatory capital and rating agency capital position could be materially adversely affected by disruptions in the financial markets.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Risk factors inefficiencies in the cost of managing our liquidity and solvency, and hinder our efforts to integrate our balance sheet. An example of such trapped liquidity includes our operations in Germany where
As a holding company, ING Groep N.V. is dependent for liquidity on payments from its subsidiaries, many of which are subject to regulatory and other restrictions on their ability to transact with affiliates.
Furthermore, ING Groep N.V. has in the past and may in the future guarantee the payment obligations of certain of its subsidiaries, including ING Bank N.V., subject to certain exceptions. Any such guarantee may require ING Groep N.V. to provide substantial funds or assets to its subsidiaries or their creditors or counterparties at a time when ING Groep N.V. or its subsidiaries are in need of liquidity to fund their own obligations.
Because we are incorporated under the laws of the Netherlands and many of the members of our Supervisory and Executive Board and our officers reside outside of the United States, it may be difficult to enforce judgments against ING or the members of our Supervisory and Executive Boards or our officers.
Therefore, a final judgment for the payment of money rendered by any federal or state court in the
United States based on civil liability, whether or not predicated solely upon the U.S. federal securities laws, would not be enforceable in the Netherlands unless the underlying claim is relitigated before a Dutch court. However, under current practice, the courts of the Netherlands may be expected to render a judgment in accordance with the judgment of the relevant U.S. court, provided that such judgment (i) is a final judgment and has been rendered by a court which has established its jurisdiction on the basis of internationally accepted grounds of jurisdictions, (ii) has not been rendered in violation of elementary principles of fair trial, (iii) is not contrary to the public policy of the Netherlands, and (iv) is not incompatible with (a) a prior judgment of a Netherlands court rendered in a dispute between the same parties, or (b) a prior judgment of a foreign court rendered in a dispute between the same parties, concerning the same subject matter and based on the same cause of action, provided that such prior judgment is not capable of being recognized in the Netherlands. It is uncertain whether this practice extends to default judgments as well.
U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws.
The Executive Board and the Supervisory Board share the ultimate responsibility for reviewing and approving our annual report, including disclosures on material topics. For more information on our annual reporting governance refer to the About This Report chapter. Information on data collection, scope, bounderies and definitions can be found in the GRI & SASB Index.
The overarching principles governing our approach to sustainability are set out in our global
The Board’s overall responsibility for social and environmental risks and opportunities is formalised in our Executive Board Charter.
ING identifies topics which have the most impact on our business and are the highest priority for stakeholders in our value chain. This process allows us to prioritise and focus on the most material topics and effectively address these in our policies, programmes and targets.
The table below provides an overview of our direct financial contributions to some of our key stakeholders. Related key performance indicators are available in our value creation model in Our
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September 2019 by more than 130 banks representing more than $47 trillion in assets. The six principles provide a framework for a sustainable banking system, on topics including alignment, target-setting and transparency.
Agreement goals and is a good example of how the Principles for Responsible Banking can be made actionable.
Progress Report; ▪ ING is advancing its approach to measuring customers’
This demonstrates a robust set of definitions, measurement processes and reporting.
▪ In 2019, we recorded growth in Climate Finance and lending to ESG Leaders (13 percent and 0.1 percent, respectively); ▪ ING reports our performance in our two business segments
Principle 3: Clients and Customers 3.1 Provide an overview of the policies and practices the bank has in place and/or is planning to put in place to promote responsible relationships with its customers. This should include high-level information on programmes and actions implemented (and/or planned), their scale and, where possible, the results thereof.
▪ ING Think – a Retail engagement platform on financial empowerment; ▪ Think Forward Initiative (TFI) – a cross-sector initiative focused on the behaviour behind financial decisionmaking. TFI aims to harness those insights to help people make better financial decisions; ▪ Select engagement case studies; ▪ The View - a Wholesale Banking engagement platform on sustainable finance.
We have instituted Board-level oversight of environmental, social and governance issues. This includes: ▪ Sustainability governance; ▪ Climate Change Committee, chaired by our CRO and cochaired by our Board member overseeing sustainability
(p.59 of our 2019 Terra Progress Report); ▪ Human Rights Steering Committee (see Human Rights
PRB, including: a) target-setting and actions to achieve targets set b) remedial action in the event of targets or milestones not being achieved or unexpected negative impacts being detected.
Other NA NA 10.9 1 Total leavers headcount in 2019 divided by headcount on 1 January 2019 2 Mainly Turkey employees who did not give their consent before their departure in percentage of employees 2019 2018 2017 in percentage of employees 2019 2018 2017 in percentage of employees Female Male Female Male Female Male 1 Deviations from 100% in the sum of category totals are due to employee gender not recorded.
South and Mid-America 107 in percentage of employees 2019 2018 2017
▪ We maintained carbon-neutral operations in 2019 by offsetting emissions caused by business travel and grey energy use.
▪ We maintained ISO14001 certification on the environmental programme including its compliance at the head-office in the Netherlands.
Total carbon per FTE in tonne 0.8 0.9 1.0 1 The carbon total is the sum of scope 1, 2 and 3 emissions. The total can deviate from the sum of all categories due to rounding-up to kilotonnes. Our calculation methodology and scope are defined in ING’s Non-financial data reporting protocol.
2 Scope 1 comprises emissions from our use of natural gas and fuel oil.
Programme for Financial Institutions (UNEP FI). We seek external direction and validation of our sustainability priorities by endorsing international standards such as the UN Global Compact, the
We define stakeholders as individuals or organisations who may be directly or indirectly impacted by ING’s activities or individuals or organisations who may have an impact on ING’s activities or ability to provide products and services. ING identifies, selects and continually monitors our stakeholders. Stakeholders who temporarily manifest themselves on certain topics can also have a relevant input. Throughout the year, challenges and issues are discussed with and brought to our attention by various stakeholders. Below we highlight some key issues addressed in 2019.
In March 2019, in a letter posted on the Business & Human Rights Resource Centre ING provided a response to NGO concerns following the January 2019 tailings dam collapse in Mina do Feijao,
Mina do Feijao or Fundao. It is our policy to discuss with our clients cases impacting their operations. Due to confidentiality agreements, we cannot communicate the nature or outcomes of our client dialogues.
In the March-May 2019 period, NGOs expressed their concern about ING financing the construction of the Trans Adriatic Pipeline project. TAP is a 870km long natural gas pipeline running from Greece to Italy. TAP is part of a bigger infrastructure, bringing gas from Azerbaijan to Europe. TAP will connect to the EU infrastructure supplying natural gas all over Europe, including Austria, Germany,
Overall, the project should not have any direct effect on Climate Change, because it is an alternative source of gas and does not intend to cover any new demand.”
Based on these considerations and after an ESR screening, ING decided to support the project.
Palm oil is used as an ingredient in a range of products, from toothpaste and soap, to food items like crisps and biscuits. The growing demand for palm oil across global supply chains raises concerns about the environmental and social sustainability of palm oil plantations. ING shares these concerns and welcomes the opportunity to elaborate on our approach in an NCP-facilitated dialogue.
A bank can either be ‘linked to’ the adverse impacts of its clients, or ‘contribute to’ these impacts.
It is our policy to discuss with our clients major events affecting their operations. Due to client confidentiality we are not able to communicate the nature or the outcomes of these dialogues.
Insurance Other reflects (former) insurance related activities that are not part of the discontinued operations.
▪ Result of Insurance Other, reflecting the result on the warrants on Voya and NN Group shares, amounting to EUR 90 million after tax. ING had sold its last warrants related to its former insurance activities in November 2018.
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US including potential consequences of a downgrade of the sovereign credit rating of the US
changes in the availability of, and costs associated with, sources of liquidity such as interbank funding, (24) changes affecting currency exchange rate, (25) changes in ownership that could affect the future availability to us of net operating loss, net capital and built-in loss carry forwards,
Any forward looking statements made by or on behalf of ING speak only as of the date they are made, and ING assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or for any other reason.