ING uses an internal model in line with the Advanced Measurement Approach (AMA) to determine the regulatory and economic capital amounts that are necessary to cover potential losses as a result of non-financial risks. This model predicts non-financial risk losses by combining a forward-looking and a backward-looking view on non-financial risk events. ING reports the outcome of its AMA model on a quarterly basis.
▪ Fraud is the deliberate abuse of procedures, systems, assets, data, products and/or services of
External fraud: acts of fraud or scams by individuals and/or parties excluding ING staff
From the start of the global outbreak of the Covid-19 virus in January 2020, ING’s priority has been to protect its employees and their families and to continue servicing its customers as before, and put extra effort into supporting them in difficult times. To ensure this ING employees have put immediate focus on ensuring the bank’s operational resilience and continuity. ING has mobilised a global crisis management organisation – engaging with all ING entities worldwide – to monitor and manage Covid19 related operational, health and safety challenges. In the first weeks of 2020 the bank was able to transfer around 80% of its employees, including external employees, to a working-from-home (WFH)
Controls and monitoring continue to be embedded in the organisation as part of the overall internal control framework and are continuously re-assessed against existing and new threats. The identification and monitoring of new threat actors and campaigns relevant to ING also informs this process as does the closer alignment between IT security and fraud teams. In addition, ING continues to strengthen its global cybercrime and fraud resilience through collaboration with financial industry peers, law enforcement authorities, government (e.g. National Cybersecurity Centre) and internet service providers (ISPs).
The further digitalisation of banking services, increasing electronic exchange of information via different consumer channels, use of and dependency on third-party vendors for services, and the implementation of PSD2 are likely to present ongoing cybercrime resilience, fraud management and
IT-security challenges; both in the short- and medium-term as criminal actors target financial and sensitive (payment) data, such as customer user credentials outside the traditional banking environment. Sensitive (payment) or personal data can be obtained by criminals via social forums such as WhatsApp and by screen scraping user credentials when a fallback procedure within PSD2 is allowed. In 2020, these challenges have further increased due to Covid-19, which resulted in more sophisticated phishing attempts, improved social engineering fraud attempts, an increased risk of external fraud in the lending portfolio and people working from home.
The drivers for ING’s data management come from the Think Forward strategy, where data management is one of the key enablers, and from the increasing regulatory focus on data.
ING has the enterprise data lake in place (part of the target infrastructure) and is implementing data management capabilities including data definitions, data quality, data governance and data ethics, for use by ING entities, to support, amongst others, statutory and regulatory reporting. ING is continuously improving its data governance, the execution of its data quality framework controls at a consistent level across the bank and prioritising the implementation of the target infrastructure to further simplify, standardise and modernise its activities.
In 2020, the Global Data Committee was established as a key Management Board Banking committee, to provide guidance to the global data function, comprising the chief data management officer and the data management organisations of all entities. Its purpose is consistent with BCBS239’s stipulation of
‘strong governance’ (Principle 1) as well as ING’s own ambition of being a data-driven bank. The Global
ERM assembles common risk principles for all risk types and domains: financial, non-financial (including compliance and model risks) and strategic risks. It aims to ensure standardisation of all risk frameworks and applies to all businesses lines and entities across ING.
As per 25 May 2018, the European General Data Protection Regulation (GDPR) became effective. ING is bound by the GDPR that affords greater protection to individuals and requires more control on data and transparency regarding the use of data by companies. In 2020, ING continued working on structural solutions to support further enhancing the data protection of our clients and employees.
In 2019, a renewed sourcing policy became effective, outlining the inherent critical and high risks that can materialise during the sourcing life-cycle. In addition, a sourcing guideline was issued to support updated requirements, issued by EBA in 2019. The controls defined in the support control framework
Conduct) and/or societal expectations. A failure to adequately mitigate compliance risk may lead to damage to ING’s reputation and/or legal/regulatory sanctions, and/or financial loss.
The mission of Compliance is to support ING in conducting its business activities in line with applicable laws and regulations, taking into account ING’s internal code of conduct and societal expectations.
Compliance wants to drive compliance risk management by desire and design throughout the organisation, unleashing the power of our data, risk expertise, and people to keep the bank safe and sound, and help drive new and sustainable ways of doing business.
▪ Conduct risk refers to the compliance risks arising from potential or perceived misconduct by
ING or its employees towards its customers, market integrity, business partners and other stakeholders.
▪ Organisational risk refers to the compliance risks arising from actual, potential or perceived flaws in the way that ING is organised and structured including its regulatory and reporting framework.
Geographical compliance (Challengers & Growth Markets / Wholesale Banking / Market Leaders)
Compliance is headed by the chief compliance officer (CCO) who reports directly to the CRO. The CCO
Knowing who we do business with helps us to prevent the financial system from being misused, and is an important obligation to help gain trust in the financial markets. As gatekeepers of the financial system we have an obligation to prevent criminals from misusing it or detect and respond when it is being misused. We believe we can be even more effective in safeguarding the financial system if we join forces and work with other banks and with national, European and global authorities and law enforcement agencies to tackle financial economic crime. In 2020, ING continued to execute and update policies and procedures to further enhance our know your customer (KYC) activities. In addition,
practices. One of the ways we do this is through our global KYC enhancement programme which aims to:
▪ Improve customer due diligence, perform on-going transaction monitoring and report on unusual activities should these be identified.
The large number of regulations impacting financial institutions shows no sign of slowing down, leading to an increasing need within the compliance function for innovative solutions to support our business processes. A notable area of interest is horizon scanning, covering the timely spotting of rules and regulations, identifying risks and obligations resulting from these regulations, and creating policies to support the organisation on being compliant. A wide range of innovative tooling (such as Ascent,
SparQ, Corlytics) is being assessed for horizon scanning and interoperability of solutions is a key factor in our consideration.
Regulators are showing a growing recognition of the value of RegTech solutions to manage
Financial crime risk refers to the risk of the bank’s products and services being abused for an illicit purpose; either generating or disguising FEC. Keeping ING safe, secure and compliant is a top priority.
Fighting financial crime in a constantly changing environment requires ongoing updates to regulations and requirements to keep banking safe. However, according to the European Banking Authority, increased regulations and scrutiny can also have unintended consequences, with some customers and clients no longer being able to get their financial needs met.
The KYC policy framework is mandatory and applies to all ING entities (i.e. all branches and majorityowned subsidiaries of ING Groep N.V. (including ING Bank N.V.) or where ING exercises control), their corporate functions and their branches, including outsourcing partners to whom ING entities have sourced KYC-related responsibilities. The KYC policy framework also reflects relevant national and international laws, regulations and industry standards related to business partners and overarching requirements with regards to record retention, training and awareness. ING entities have local procedures in place, aimed at enabling them to comply with local laws and regulations and the KYC
continues to believe that for business reasons doing business involving certain specified countries should be discontinued. In that respect, ING has a policy not to enter into new relationships with clients from these countries and processes remain in place to discontinue existing relationships involving these countries. At present, these countries are Cuba, Iran, North Korea, Sudan, Syria and Crimea region.
▪ Make structural improvements in five areas: policy and risk appetite statements, digital tooling, governance, monitoring and screening, and KYC knowledge and behaviour.
We changed the structure of our global KYC organisation introducing three pillars that oversee customer due diligence, transaction monitoring and screening. Each pillar has a dedicated team with expert leads. This brings greater focus, strengthens steering and ensures end-to-end responsibility.
Similarly, we are working with four banks and payment provider Isabel Group in Belgium to use the blockchain application KUBE to share corporate data as part of the KYC process. KUBE is currently being built and is expected to be operational next year, and will help streamline the verification and maintenance of corporate identities.
Leadership labs (workshops with senior leaders) were organised in APAC, EMEA and Americas to address impeding behavioural patterns identified in the assessments and develop the right conditions to manage risks.
We also conducted two Nudge Labs this year for Wholesale Banking globally, developing subtle triggers that encourage desired behaviours to further strengthen our KYC processes and execution. Cocreated by our Wholesale Banking and behavioural risk experts, the Nudge Labs are another follow-up from our KYC behavioural risk assessments.
As a gatekeeper to the financial system, we have an important role in the collective fight against financial economic crimes. By performing customer due diligence and monitoring transactions we aim to detect and prevent the financial system from being misused in criminal activities, including money laundering and terrorist financing, for the safety and security of our customers and society. We take this responsibility extremely seriously. As part of our ongoing anti-money laundering efforts, we assess relationships with customers and screen transactions. Potentially unusual/suspicious transactions are reviewed and, where applicable, reported to the relevant authorities. Over the past few years, we have increasingly discontinued customer relationships which do not fit our risk profile. This approach is also applied to acquisitions such as Payvision. ING was aware when it acquired Payvision that its customer base partly did not meet ING’s desired risk profile. Hence, arrangements were made during the acquisition to exit customers in the ‘adult’ entertainment and gambling segments. Steps were also needed to better align Payvision with ING’s risk profile, strengthening Payvision’s governance, policies and processes. For example, Payvision’s risk and compliance functions were reinforced, its chief risk officer is now a member of its board and there is a formal programme in place, including governance, to ensure that Payvision’s compliance meets requirements. The programme involves a series of initiatives, including working on various structural improvements in compliance, tooling, monitoring, governance, knowledge and conduct.
Keeping banking safe and secure for the longer term, requires staying ahead in the area of financial economic crime compliance. Hence, we are building on the foundation of our global KYC enhancement programme by organising and integrating all regulatory developments and activities in the area of financial crime compliance within our regular controls framework.
We expect all ING employees at every level of the organisation to always do business in accordance with the values and behaviours of our Orange Code. We have a zero-tolerance approach when it comes to bribery and corruption. Our zero tolerance statement and more information regarding our anti-bribery and corruption (AB&C) policy can be found on our website.
Bribery and corruption risks are part of our non-financial risk framework, are included in the client and third-party due diligence and monitoring measures in our KYC framework and will be integrated into our systematic integrity risk analysis alongside our KYC and other integrity risks in 2021. An enhancement programme to further improve our AB&C risk assessment, controls and reporting is in progress.
Financing Act (Wwft) in May 2020. Furthermore, in the battle against financial economic crime, including money laundering, the Dutch UBO-(ultimate beneficial owner) register went live in
September 2020. These developments have been incorporated in ING’s KYC policy framework.
Similarly, the Organisation for Economic Cooperation and Development (OECD) has developed a
Common Reporting Standard (CRS) and model competent authority agreement to enable the multilateral and automatic exchange of financial account information. CRS requires financial institutions to identify and report the tax residency and account details of non-resident customers to the relevant authorities in CRS-compliant jurisdictions. As of 29 September 2020, 109 jurisdictions
(‘signatory countries’), including the Netherlands, have signed a multilateral competent authority agreement to automatically exchange information pursuant to CRS. The majority of countries where
▪ Preventing Abuse of Residence by Investment (RBI) and Citizenship by Investment (CBI)
These measures are in the process of being implemented in local laws. With regard to the mandatory disclosure rules for EU jurisdictions, this was done via the amendment to Directive 2011/16 (DAC6).
Tax policies, procedures and a tax control framework have been implemented to support management in mitigating potential tax risks in a prudent manner. Internal monitoring, control and reporting of taxrelated risks take place on a continuous basis with regular reporting to various stakeholders. For 404/SOX purposes (section 404 of the Sarbanes-Oxley Act), an ‘effectiveness of internal control statement’ with respect to tax controls has been provided. Tax risk management is subject to
Corporate Audit testing and evaluation. In the Netherlands and also in other countries, ING’s position is to be cooperatively tax compliant, this implies to have transparency about and disclosure of relevant tax risks towards tax authorities. Tax risks not only refer to ING’s own tax position, but also to the risks in relation to the tax positions of our customers. In this respect, we have integrated a tax integrity assessment in our overall customer risk assessment process.
Code and the whistle-blower policy are key to managing our culture and ethics risk.
In 2020 the model was also further embedded in ING’s governance by adding the model to the Global
Compliance will cover the risk of running deals and operations in a way where personal or organisational interests prevail over the interest of the client (e.g. when related to personal account dealing).
Market conduct risk is defined as running deals and operations not in line with good capital markets functioning along the product/service life cycle (i.e., pre-trade, execution and post-execution). A
Under conduct risk, ING includes the risk related to treating customers unfairly and not having their best interests in mind throughout the product life cycle (from design to advice and claims handling).
Our focus in 2020 was on strengthening compliance with the Markets in Financial Services Directive
(MiFID). New key controls were rolled out throughout ING’s EU entities and an extensive assessment was carried out to further align the implementation of MiFID rules in all locations and to enhance training and guidelines. INGs global Client Protection and Product Approval Committee (CPAC) oversees the embedding and monitoring of ING’s global standards and risk appetite when offering investment services to our customers. Local and/or regional CPACs have been setup across the footprint representing Retail- and Wholesale Banking and allowing for a global framework that can be monitored and steered accordingly. 2020 also saw a big emphasis on the improvement of transaction reporting activities in order to fully align them with regulatory expectations.
A model is defined as: a quantitative method, system, or approach that applies statistical, economic, financial, or mathematical theories, techniques, and assumptions to process input data into quantitative estimates or whose inputs are partially or wholly qualitative or based on expert judgement.
The outcome of models depends directly on the data that is used as input. As described throughout this report many sectors have been hit hard by the consequences of the pandemic and governments have taken extraordinary support measures to counteract the negative economic circumstances these sectors are experiencing. The same measures also cloud to a certain extent the reliability of the data that currently is being used as input for models. The support measures interfere with normal economic circumstances meaning that data currently used may not reflect the true nature of economic circumstances and may be positively biased. The increased model risk that is associated with this phenomenon has been acknowledged and is being managed by a range of management actions, such as management overlays, and close monitoring of portfolio developments.
The growing complexity and number of models created and utilised every year for decision-making makes it important to manage and control the associated model risk accordingly. Within ING the overarching responsibility for this risk type lies within Model Risk Management (MoRM) department. The
Risk Model Validation, Trading Book Risk Model Validation and Data Science Model Validation.
In terms of composition and main activities within three model lines of defence (MLoD): ▪ The 1st MLoD is composed of the model owners, model users, data management and model development, and is accountable for, among others, the development, implementation and use of the models as well as monitoring the effectiveness of models’ performance; ▪ The 2nd MLoD is composed of model validation and model risk oversight, which owns the model risk management framework, proposes the model risk appetite and provides an independent validation of models used within ING; ▪ The 3rd MLoD is the internal audit, reviewing the quality of model risk management execution in all lines of defence and providing independent assurance.
Since models are by definition simplifications of reality, model risk is inherent in the use of models and therefore model risk must be identified and managed. Model risk management includes the identification, assessment, control (acceptance or mitigation) and monitoring (and reporting) of the risks related to applying models in various business processes.
Model development is a structured process that leads to a model that is ready for validation and subsequent use. Depending on the development approach these first stages can be separate or integrated. An example of the latter is data science based application development.
The model can only be used after formal validation and approval for use of the model.
Periodic validation: During the life time of a model its ongoing validity must be safeguarded. This is done by periodical independent (re)validation that assesses whether the model is still valid for its intended use. There are two types of validation: (1) periodic, such as annual, which is mandatory for regulatory models, or (2) ad hoc, for example triggered by changes in the model, the business or financial instruments etc. The actual frequency of periodic validation depends on the model risk, model type and applicable regulation.
Business risk for ING has been defined as the exposure to value loss due to fluctuations in volumes/margins, net fee and commission income as well as expenses. It is the risk inherent to strategy decisions, internal efficiency and the business environment. Business risk capital is calculated via the variance-covariance methodology for these risks, covering the risk that volume/margins, net fee and commission income and operating expenses will deviate from the expected expenses over the horizon of the relevant activities.
Wijers, chairman of the Supervisory Board, looks back on the year.
Is there one word or phrase that describes this year for you?
This also once again underlines that ING has the right ambition and strategy to become a leading data-driven digital bank. Without the many investments in ING’s transformation we would not have been able to move as quickly and as effectively as we did. We’re really proud of this achievement. We couldn’t have done this without the dedication of our people. They deserve to be complimented on the great job they’re doing, and for their agility, flexibility and commitment to ING and our customers in such difficult circumstances. We’re aware that it remains challenging, either in their personal lives or professionally.
The spread of Covid-19 has made the Think Forward strategy more relevant than ever. Through the transformation into a leading data-driven digital bank, ING is continuing to empower people to stay a step ahead in life and in business – also in a time of social and economic disruption. As the Supervisory
Board, it’s our task to oversee and constructively challenge the Executive Board in its ambition to transform into a leading data-driven digital bank, in line with the strategy. We guide and support the
Executive Board in this and together we discuss strategic, operational and risk topics. Having this open dialogue is very important to the relationship between our boards. Due to the coronavirus restrictions, we could not meet in person with the full Supervisory Board, but we succeeded in keeping the dialogue going in our virtual meetings.
Another important topic was ING’s new capital plan and dividend policy. We aim to offer a sustainable and attractive return to shareholders and have introduced a 50 percent pay-out ratio of resilient net profit, in the form of cash, or a combination of cash and share repurchases, with the majority in cash.
These changes and the related selection processes were certainly high on our agenda in 2020.
Board, we concluded that Steven has the right combination of experience, leadership skills and deep understanding of ING’s business to lead us through the next phase of our strategic direction. It was a smooth transition, thanks to the efforts of both Ralph and Steven.
Given Steven’s new role, ING needed to find a new chief risk officer and we’re very happy we were able to recruit Ljiljana Čortan, who started on 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
You can read more about our diversity policy in this Annual Report.
ING is well-positioned to face the external challenges and drive the required changes to implement our digital banking strategy.
We also experienced several changes to the Supervisory Board itself in 2020. Harold Naus, Herman
Hulst and Juan Colombás have succeeded Robert Reibestein, Hermann-Josef Lamberti and Eric Boyer de la Giroday. Robert, Hermann-Josef and Eric have served ING for many years in a very professional, committed way. On behalf of the Supervisory Board I want to thank them for their highly valued contribution to ING. We are convinced that Harold, Herman and Juan will prove to be worthy successors.
The impact of Covid-19 on the communities and customers that we serve is immense. However, because of the many uncertainties about the availability of vaccines, the speed of vaccination, the emergence of new strains of the virus and the various government support programmes, it remains difficult to assess the full impact of the crisis on our business. As such, a conservative approach is merited and this is reflected in our 2020 numbers, as well as in the decisions we’ve taken on capital distribution and remuneration.
as their bank for investment products. Risk costs, while significantly higher for the full year, dropped in the second half compared with the high provisioning in the first half of 2020, while operating expenses remained under control. ING’s CET1 ratio strengthened further to 15.5 percent. We also continued to see more customers choose ING, with primary customers growing by 578,000 over 2020.
What are the most important priorities for the Supervisory Board in the coming years?
Without a doubt, 2021 will be another challenging year. There are many uncertainties and headwinds: macroeconomic developments, the development of Covid-19, regulatory changes, the negative interest environment, climate change and cybercrime. We don’t know what the future holds or how it will affect ING. But the Supervisory Board is convinced that we have the right digital, customer-focused strategy, a lot of opportunities to create more focus on delivering on our strategy and reducing our costs. And first and foremost, as 2020 has shown, we have more than 57,000 dedicated employees and a great leadership team to steer ING successfully towards new successes.
On behalf of my colleagues in the Supervisory Board I would like to express our appreciation for what the company has achieved, as well as thank our stakeholders for their contributions and, of course, thank all ING employees worldwide for their hard work and commitment in 2020.
In 2020, the Supervisory Board and its committees continued to focus on overseeing and constructively challenging management in their ambition to keep transforming into a leading data-driven digital bank in line with the Think Forward strategy. Another important focus was how
The Supervisory Board met 10 times in 2020 for its regular meetings. On average, 98 percent of the
Board members are continuously engaged with ING and are able to devote sufficient time and attention to overseeing ING’s affairs. Since 2018, the Supervisory Board discusses and reconfirms all of its members’ outside positions on an annual basis and approves any intended outside positions when they occur, among others to safeguard this level of engagement.
The Executive Board and Management Board Banking were present at each regular Supervisory Board meeting. For some parts of these meetings, depending on the nature of the topics discussed, only the chief executive officer was present. The Supervisory Board also had sessions with only its individual members, prior to its regular meetings when this was justified by the nature of the topics on the agenda. The purpose of these so-called pre-meetings and Supervisory Board-only meetings is to allow the Supervisory Board to reflect independently on and consider important matters in the absence of the Executive Board and Management Board Banking. The Supervisory Board aims to strike a balance between the interests of all stakeholders while maintaining an open dialogue with ING’s internal organisation and external supervisors.
In addition to the topics mentioned in the introduction, the Supervisory Board also focused on the progress and delivery of ING’s various transformation initiatives and how these relate to external developments in areas such as the regulatory domain. This is to ensure the right priorities continue to be set, with the appropriate allocation of resources. It became evident during the year that the challenging external environment requires ING to focus with increased rigour on ‘how’ and ‘where’ to deliver the Think Forward strategy. The strategic dialogues held in 2020 between the Supervisory Board and the Executive Board and Management Board Banking concluded that activities should be refocused to ensure the bank is making customer journeys simpler, faster and seamless and there is a continuously improving end-to-end digital customer experience.
Wholesale Banking (WB) – the impact of Covid-19 as has been detailed throughout this report, the impact of the continued negative interest rate environment on ING’s performance and its stakeholders, sustainability from a strategic perspective, the outcome of and follow-up to the European Central
Variable Remuneration Accrual Model (VRAM), ING’s financial risk, non-financial risk and compliance risks, the transformation programme of the compliance function resulting in the new integrated endto -end coverage and responsibility per compliance risk area, ING’s gatekeeper role and ensuring the security and compliance of the bank through enhancing and maturing ING’s know your customer (KYC)
priorities supported by structural solutions, the strong focus on further strengthening ING’s risk culture, the implementation of SRD II and several topical regulatory themes with a global ING scope such as
Furthermore, the Supervisory Board discussed the financing of the company in accordance with our capital and liquidity adequacy in line with our annually updated Risk Appetite Framework (RAF), business continuity in light of the pandemic, ING’s capital plan and ING’s dividend distribution policy and ongoing supervisory developments. In addition, the Supervisory Board discussed the Management
Board Banking and the Supervisory Board annual self-evaluation. For further details on ING’s AML/KYC
Haase 10/10 7/7 6/6 11/11 1. This SB attendance overview shows the regular SB (committee) meetings that took place during the year. In addition to the regular meetings, there were 14 internal SB meetings that took place this year in view of nomination and remuneration matters, with a total attendance of 97%. These are not shown separately in the overview for year-on-year, like-for-like comparison purposes.
7. Eric Boyer de la Giroday and Hermann-Josef Lamberti retired from the SB as per the end of the AGM on 28 April 2020. At this
8. The numbers exclude SB observers, if any. If SB members cannot join a meeting, they will – at all times – continue to receive the meeting materials to allow them to provide feedback prior to the meetings.
In consultation with and as approved by the Supervisory Board, ING also changed a number of aspects of the 2020 Annual General Meeting as a consequence of the Covid-19 pandemic. For details on this meeting and its organisation, read more in the Corporate Governance chapter.
ING aims to maintain continuous interaction with customers, shareholders, employees, society and other stakeholders. In general, the Supervisory Board has had periodic conversations with various internal and external stakeholders and it exercised its oversight role to ensure that necessary actions resulting from this cascaded down into the organisation and were followed up, including those actions related to risk culture and behaviour. Some 2020 examples in this respect relate to stakeholder interaction with regard to the new remuneration policies for the Executive Board and the Supervisory
Board and ING’s capital plan and distribution policy. The dialogue between ING and external supervisors was a standard agenda item for the Supervisory Board throughout the year. This included several discussions on the results of and follow-up to the annual SREP through which the ECB aims to promote
ING Group Annual Report 2020 190 a resilient banking system as a prerequisite for a sustainable and sound financing of the economy. The
Keeping ING safe, secure and compliant continues to be a top priority. Various initiatives have been launched to further enhance AML/KYC throughout the bank. Since November 2017, ING has been working to strengthen customer due diligence, transaction monitoring and screening and has become sustainably better in fighting financial economic crime through the global KYC enhancement programme. Among other things, this has led to standardised KYC policies, global KYC governance, consistent processes, tooling and training. Further developments are captured in the Financial
Economic Crime (FEC) Control Maturity Programme, which defines ING’s operational long-term FEC
The Supervisory Board, Executive Board and Management Board Banking also discussed ING’s global
AML/KYC governance and processes. Additional improvements were identified that are now being implemented. The boards reconfirmed their commitment to ensure ING continues to fulfil its gatekeeper role, complies with applicable regulatory requirements and continues taking the necessary actions to strengthen compliance risk management and culture throughout the organisation.
Throughout the year, a number of other educational sessions on specific topics were organised for and at the request of the Supervisory Board. For 2020 a balance was sought between sessions focused on
platforms, sourcing, open banking, managing capital and liquidity risk with Covid-19, credit decision models and managing and developing talent. Additionally, at the request of the Supervisory Board, several deep dive sessions were organised on selected recurring key topics, such as KYC, IT and cyber
ING Group Annual Report 2020 191 security, modelling, Credit Valuation Adjustment (CVA) hedging and the impact on capital. These sessions had a substantial risk management relevance and contributed to a more in-depth understanding of the matters discussed.
These visits and educational sessions provided ample opportunities for Supervisory Board members to interact with senior management and employees on location. Imposed Covid-19 measures have precluded dedicated speed-meet sessions since March 2020. The Supervisory Board will continue this practice in 2021 if the situation allows. Such interaction contributes to a better mutual understanding and alignment on what matters most to ING, both for its employees and for the Supervisory Board.
In late 2016, ING announced the acceleration of the implementation of the Think Forward strategy, focusing on investing in the bank’s digital transformation and creating a scalable banking platform.
ING’s strategy, together with the transformation programmes, executes multiple initiatives to further improve ING’s differentiating customer experience, earn primary customers, develop analytical skills to understand ING’s customers better, increase the pace of innovation to serve changing customer needs, enhance efficiency, and think beyond traditional banking to develop new services and business models while growing our lending capabilities. Throughout 2020, the Supervisory Board monitored and discussed the progress of the strategy and its transformation and, as part of this, had an active dialogue with the Executive Board and the Management Board Banking. The spread of Covid-19 has made the Think Forward strategy more relevant than ever. Through ING’s transformation into a dynamic digital player, ING is continuing to empower people to stay a step ahead in life and in business – also in a time of social and economic disruption. With the Terra approach ING is further trying to positively influence society by steering ING’s lending portfolio to align with the well-below two degrees goal of the Paris Climate Agreement.
Driving and delivering commercial momentum in a sustainable, safe and compliant way remains, among others, dependent on how ING allocates capital and resources, manages the transformation and manages (non-financial) risk. This is discussed at periodic meetings between the Supervisory Board and management. The Supervisory Board acknowledges it is important to take into account the duty of care towards those stakeholders of the bank who may be impacted by ING’s transition throughout the transformation.
From the dialogue with management, it became evident that the challenging external environment requires ING to focus with increased rigour on ‘how’ and ‘where’ to deliver the Think Forward strategy.
ING’s digital universal bank, ING will focus efforts on three things: the global use of ING’s technology foundation – which includes shared data lakes, cloud and modular IT building blocks; the reuse where possible of already developed mobile app components; and the rollout of global digital product offerings in the areas of insurance, investments and consumer lending. All this will be done in accordance with, and while continuing to progress delivery on, ING’s regulatory programmes; in line with our top priority to remain a safe, secure and compliant bank that places integrity above all else.
The Executive Board prepared the financial statements and discussed these with the Supervisory
The Supervisory Board approved the annual review of the Reward and Appointment Framework that reflects recent changes in regulatory requirements. Per standard practice, the Supervisory Board was informed in detail throughout the year of the potential financial and non-financial risks for ING, including the implications of Covid-19, subsequent political and economic developments in various countries and regions, updates on (upcoming) regulatory changes, and discussed how these could best be mitigated. As part of this ING undertook additional stress testing and the results were discussed with the Supervisory Board.
In 2020, the Supervisory Board self-evaluation was on the agenda multiple times. The topic was on the agenda at the start of the year to discuss the outcome over the previous year and to agree the positive points to keep and the points for further improvement. With regard to the latter, priorities and action points had been defined for follow-up during the year. The agreed 2020 priorities of the Supervisory
The Supervisory Board’s overall reflection is that it underwent significant change over the past period, with a positive impact on its performance in general, despite the many uncertainties and challenges for ING and its stakeholders caused by the Covid-19 pandemic. The Supervisory Board is of the opinion it gave the pandemic appropriate attention immediately, and that it was effective in doing so by adjusting its focus and priorities. As more generic positive points it identified with respect to its performance are, among others, the following: (1) The recent changes to the composition of the
Supervisory Board contributed to improved balance, with a more diversified spread in background,
ING Group Annual Report 2020 193 experience and competences, enhancing equal and candid contribution of all of its members and intensified interaction with the Executive Board [and Management Board Banking]; (2) The positive development of a further understanding of stakeholders’ requirements and needs as well the continued dialogue between the Supervisory Board and its stakeholders; (3) Role clarity, through redesigned charters, contributing to increased transparency on the role and responsibilities of the
To sustain and build on these positive points, the Supervisory Board’s spearhead objectives for 2021 will be, among others, to: (1) Further guide and support the Executive Board [and Management Board
All of the above contribute to continue helping ING in transforming into a leading data-driven digital bank, to ensure faster client delivery and a continuously improving end-to-end digital customer experience.
The Audit Committee discussed the quarterly results, the interim accounts and the financial statements. Judgemental accounting topics were also regular topics of discussion as well as key audit matters, as included in the auditors’ reports.
forms and the SOX 404 Report, and discussed and made recommendations for the approval of the internal and external audit plans.
intends to manage CET1 level well above this ambition level, while Covid-19-related uncertainties remain. ING’s distribution policy was another important topic. ING is introducing a new distribution policy of a 50 percent pay-out ratio of resilient net profit, in the form of cash or a combination of cash and share repurchases, to offer a sustainable and attractive return, with periodic reviews of whether there is structural excess capital available to return to shareholders. In execution of the new dividend policy, ING will comply with prevailing ECB recommendations on shareholder distributions.
Other topics were generic IFRS-related developments and their potential impact on ING’s disclosures, also in light of Covid-19, and legal proceedings. High priority and critical overdue issues, as reported by the internal audit function, were also discussed. The updated internal audit charter and the quarterly whistleblower report were also areas of attention. The Audit Committee performed a thorough assessment of the functioning of the external auditor and the scope and materiality of the audit plan and the principal risks identified in the audit plan. All relevant items discussed by the Audit Committee were reported to the Supervisory Board, with the Supervisory Board approving those items as required from a governance perspective.
Committee held separate sessions with the external auditor, the general manager of the internal audit
ING Group Annual Report 2020 194 department, the chief financial officer and the Group Controller. The chairperson also met with various senior managers.
Similar as for the other committees, all relevant items discussed by the Risk Committee were reported to the Supervisory Board, with the Supervisory Board approving those items as required from a governance perspective. While transforming its organisation, ING needs to ensure that integrity continues to come first and that critical non-financial risk areas stay top of mind, because this is an integral part of who ING is. ING needs to build strong foundations with structural solutions that continue to earn and maintain the trust of our stakeholders, including its customers and society at large. Given the ever increasing importance of risk and how this is managed and supervised, the Risk
In each quarterly Risk Committee meeting financial and model risks, non-financial and compliance risks were discussed, including the status of ING’s accompanying metrics such as for risks in the areas of solvency, liquidity and funding, credit, country, market, IT, non-financial risk and compliance. The non-financial and compliance risk discussions were supported by updates of the bank-wide KYC
In 2020, and as part of its annual work plan, the Risk Committee also discussed the annual review of the RAF and accompanying risk appetite statements, the update to the Recovery Plan, as well as the impact of upcoming regulations, and credit developments in certain countries and portfolios. Also on the agenda were the updates to the scope of ING’s key policies, the KYC policy, the global Code of
Conduct, the Compliance charter, the Investor Protection and Markets policy, and the implementation of the Conflicts of Interest policy.
During 2020, the Risk Committee also discussed the potential financial, non-financial and compliance risk implications of the Covid-19 outbreak. The discussions were supported by the different analyses conducted on the potential impact on ING’s credit portfolio, capital and liquidity position and updates on credit developments in certain countries and portfolios. The non-financial and compliance risk discussions around Covid-19 included, among others, risks related to business continuity, business resilience, the working from home control environment, HR, IT, cybercrime and KYC.
The Risk Committee’s feedback was also brought to bear on discussions regarding remunerationrelated matters and practices. Among others, it considers remuneration related proposals from a risk perspective in view of the remuneration policies for the Executive Board and the Supervisory Board and the Variable Remuneration Accrual Model introduced in 2018 (see also ‘Remuneration Committee meetings’ in this section).
It is ING’s aim to ensure that all of its boards’ are at all times adequately composed to perform its duties. As is standard practice the Nomination and Corporate Governance Committee therefore discussed medium- to long-term succession planning for the Executive Board, the Management Board
The Nomination and Corporate Governance Committee focuses on ING’s broader talent and succession planning in view of bench strength and improving diversity at the higher management levels – taking into account ING’s diversity policy (70 percent principle for mixed teams) as published on ing.com –
and accelerating refreshment where possible without jeopardising business continuity. A continuing conversation on Executive Board and Management Board Banking succession planning is facilitated by the chief human resources officer as part of its regular meetings in the form of deep dives by function and business line. The committee also holds periodic conversations outside of its regular meetings with internal talented individuals who are considered to have the potential to assume more senior and complex roles in the organisation over time. The results of these conversations are fed into the individuals’ coaching and development plans.
Banking Code. It also discussed the approach and agenda for the 2020 Annual General Meeting, including the impact of the Covid-19 pandemic. During the year, the committee discussed the suitability policy framework and its global implementation, which embeds clear criteria and a process for assessing and re-assessing governing bodies and key function holders by bringing together several existing policies and procedures. Standard topics on the committee’s agenda included board members’
In addition, the Remuneration Committee discussed the Executive Board and Management Board
ECB, in particular regarding the impact that such policies may have on the maintenance of a financial institution’s sound capital base.
Composition of the Executive Board, Management Board Banking and Supervisory Board
Steven van Rijswijk, formerly the chief risk officer, succeeded Ralph Hamers as chief executive officer and chairman of the Executive Board and Management Board Banking on 1 July 2020. Ralph Hamers stepped down from his position and left ING as per 30 June 2020. After 29 years at ING, Ralph Hamers joined another financial institution on 1 September 2020.
The Supervisory Board initiated the succession planning for a new chief risk officer resulting in Ljiljana
Group at the Annual General Meeting in April 2021. Until 1 January 2021, the day-to-day risk management activities were performed ad interim by Karst Jan Wolters, reporting to Tanate Phutrakul.
In 2020, the Supervisory Board proposed to appoint three new members to its board. This was driven by several factors, such as easing the possible consequences of the retirement schedule of the
Supervisory Board. The aim is to ensure that the Supervisory Board is at all times adequately composed to perform its duties.
Robert Reibestein resigned from the Supervisory Board with effect from 1 January 2020 and Mike Rees took over his role as chairman of the Risk Committee. Eric Boyer de la Giroday and Hermann-Josef
Lamberti (former vice-chairman of the Supervisory Board and chairman of the Audit Committee)
At the Annual General Meeting in April 2020, Juan Colombás, Herman Hulst and Harold Naus were appointed as new Supervisory Board members. All these appointments were approved by the ECB.
The members of the Supervisory Board are requested to assess annually whether or not they are independent as set out in the Corporate Governance Code and to confirm this in writing. On the basis of these criteria, according to the Supervisory Board, all members of the Supervisory Board, are to be regarded as independent on 31 December 2020. On the basis of the NYSE listing standards, all members of the Supervisory Board are also to be regarded as independent.
Executive experience •• •• • •• •• •• •• •• ••
Operations a/o IT •• •• • •• • • • •• ••
Corporate governance •• •• •• • •• •• •• •• ••
The purpose of this matrix is to provide ING’s stakeholders with an overview on the main aspects of diversity and competencies that ING considers to be the most relevant for its stakeholders. The contents of the matrix are subject to change in the light of ING’s continually changing situation, markets and environment. Furthermore, for the appointments of new corporate board members, all relevant competencies are also shared with the ING’s supervisors
Appreciation for the Executive Board, Management Board Banking and ING employees
Board Banking for their hard work in 2020. Important milestones were the further steps taken towards digitalising our offering and growing our customer and primary relationships. The Supervisory Board would also like to thank all ING employees for their contribution in realising these achievements and for continuing to serve the interests of customers, shareholders and other stakeholders of ING. This was all done during times of great uncertainty for the entire global community, predominantly caused by the Covid-19 pandemic, with ING focusing on helping customers, employees and communities safely through this. The Supervisory Board is fully aware that ING and its stakeholders are still going through challenging times, with ING employees making an effort to safeguard ING’s business continuity, its performance and its gatekeeper role in ensuring the continued security and compliance of the bank. The Supervisory Board would like to thank everyone again for their efforts and wishes everyone to stay safe and healthy.
ING’s application of the DCGC is described in the 2020 ‘Application of the Dutch Corporate Governance
• NYSE listing standards require a US company to have a compensation committee and a nominating/corporate governance committee, each composed entirely of independent directors (as determined under the NYSE listing standards). ING’s Nomination and Corporate Governance
• NYSE listing standards require that, when a member of the audit committee of a US company serves on four or more audit committees of public companies, the company should disclose (on its website, in its annual proxy statement or in its annual report filed with the SEC) that the board of directors has determined this simultaneous service would not impair the director’s service to the company. Dutch law does not require the Supervisory Board to make such a determination.
• NYSE listing standards applicable to US companies require external auditors to be appointed by the audit committee. By contrast, Dutch law requires ING Group’s external auditors to be appointed by the General Meeting and not by the Audit Committee. The Audit Committee is responsible for preparing the Supervisory Board’s nomination to the General Meeting for the appointment and remuneration of ING Group’s external auditor, and annually evaluates the independence and functioning of, and developments in the relationship with, ING Group’s external auditor and informs the Supervisory Board of its findings and proposed measures.
• Under NYSE listing standards, shareholders of US companies must be given the opportunity to vote on all equity compensation plans and to approve material revisions to those plans, with limited exceptions set forth in the NYSE rules. The NYSE rules require a shareholder vote on all equity compensation plans applicable to any employee, director or other service provider of a company.
for members of the executive board and supervisory board, and not for equity compensation plans for other groups of employees.
ING Group’s authorised share capital consists of ordinary shares and cumulative preference shares.
Currently, only ordinary shares are issued. A call option to acquire cumulative preference shares has been granted to the ING Continuity Foundation (Stichting Continuïteit ING). The acquisition of cumulative preference shares pursuant to the call option is subject to the restriction that, immediately after the issuance of cumulative preference shares, the total amount of cumulative preference shares outstanding may not exceed one third of the total issued share capital of ING Group (see ING
Group. No current or former Executive Board member, Supervisory Board member, ING Group employee or permanent adviser to ING Group is on the board of the ING Continuity Foundation. The board of the ING Continuity Foundation appoints its own members, after consultation with the
Supervisory Board of ING Group, but without any requirement for approval by ING Group.
Association are amended. For flexibility purposes and in line with the Bank Resolution and Recovery
Directive (BRRD) requirement that the amount of authorised share capital should at all times be sufficient to permit the issuance of as many ordinary shares as necessary for a potential future bail-in,
ING Group seeks to set the authorised share capital in the Articles of Association at the highest level permitted by law, which is five times the actual issued share capital.
Share issuances are decided by the General Meeting, which may also delegate its authority. Each year, a proposal is made to the General Meeting to delegate authority to the Executive Board to issue new ordinary shares or to grant rights to subscribe to new ordinary shares, both with and without preemptive rights for existing shareholders.
The set-up and content of the currently applicable share issue authorisation have been discussed with many investors, proxy advisors and other stakeholders in the context of the corporate governance review of 2016 and in the Annual General Meetings of 2016 and subsequent years; their feedback has been taken into account. It enables the Executive Board to issue new ordinary shares (including the granting of rights to subscribe for ordinary shares, such as warrants or in connection with convertible debt instruments) for a period of 18 months, ending on 28 October 2021 subject to the following conditions and limits: • No more than 40 percent of the issued share capital in connection with a rights issue, being a share offering to all shareholders in proportion to their existing holdings of ordinary shares as nearly as may be practical. However, the Executive Board and Supervisory Board may exclude certain shareholders from such a share offering for practical or legal reasons such as record dates, fractional entitlements, treasury shares, applicable legal restrictions on share offerings or in the context of a syndicated rights issue; plus
• No more than 10 percent of the issued share capital, with or without pre-emptive rights of existing shareholders.
Specific approval by the General Meeting is required for any share issuance exceeding these limits.
As explained at the start of this paragraph, the purpose of this share issue authorisation is to delegate the power to issue new ordinary shares to the Executive Board, without first having to obtain the consent of the General Meeting, which in the Netherlands is subject to a statutory convocation period of at least 42 days. This authorisation gives ING Group flexibility in managing its capital resources, including regulatory capital, while taking into account shareholders’ interests to prevent dilution of their shares. In particular, it enables ING Group to respond promptly to developments in the financial markets, should circumstances require that. The Executive Board and Supervisory Board consider it in the best interest of ING Group to have the flexibility this authorisation provides.
Shares not included in the Securities Giro Transfer system (Wet Giraal Effectenverkeer system) are transferred by means of a deed of transfer between the transferor and the transferee. To become effective, ING Group has to acknowledge the transfer, unless ING Group itself is a party to the transfer.
Securities Giro Transfer Act (Wet Giraal Effectenverkeer). A shareholder, who wishes to transfer such shares, must instruct the securities intermediary where its shares are administered accordingly.
Executive Board and subject to the approval of the Supervisory Board, prior authorisation from the
Pursuant to this authorisation, no more than 10 percent of ING Group’s share capital may be held as treasury shares. When repurchasing shares, the Executive Board must observe the price ranges prescribed in the authorisation. For the ordinary shares, the authorisation currently in force stipulates a minimum price of one eurocent and a maximum price equal to the highest stock price on the
Amsterdam Stock Exchange on the date on which the purchase agreement is concluded or on the preceding day of stock market trading.
No special rights of control referred to in Article 10 of the directive of the European Parliament and the
A notification requirement also applies if a person’s capital interest or voting rights reaches, exceeds or falls below the above-mentioned thresholds as a result of a change in ING’s total issued share capital or voting rights. Such notification must be made no later than the fourth trading day after the AFM has published ING’s notification of the change in its issued share capital.
The notification will be recorded in a public register that is held by the AFM and published on afm.nl/en/.
Financial Supervision Act (or the predecessor of this legislation), are included in the ING shares chapter,
Non-compliance with the obligations of the Major Holdings Rules can lead to criminal prosecution or administrative law sanctions. In addition, a civil court can issue orders against any person who fails to notify or incorrectly notifies the AFM, in accordance with the Major Holdings Rules, including suspension of the voting right in respect of such person's ordinary shares.
ING Group is not aware of any investors (or potential shareholders) with an interest of three percent or more other than those shown in the ING shares chapter as per year-end 2020.
ADRs, or by a transaction creating or relating to any financial instrument where the effect or one of the effects of the transaction is to confer a financial advantage on the person entering into that transaction in the event of a change in the price of such shares or ADRs, is required to publicly notify, the AFM, in accordance with the provisions of the regulation if, as a result of such acquisition or disposal the person’s net short position reaches, exceeds or falls below 0.2 percent of the issued share capital of ING Group and each 0.1 percent above that. Each reported net short position equal to 0.5 percent of the issued share capital of ING Group and any subsequent increase of that position by 0.1 percent will be made public via the short selling register on afm.nl/en/.
ING Group encourages and recognises the importance of bilateral communication with the investment community. The Investor Relations department actively manages communications with existing and potential shareholders, holders of ADRs, bondholders, industry analysts and rating agencies.
ING generally hosts one Investor Relations Day every two to three years; there was no such event held in 2020. These events are announced in advance on ing.com, and presentation materials are made available in real time on ing.com. This is in accordance with the applicable regulatory requirements intended to ensure that all shareholders and other market participants have equal and simultaneous access to information that could potentially influence the price of ING Group’s securities. ING Group’s
Investor Relations Days can be accessed by means of live webcasts. ING Group may also participate in industry conferences. These Investor Relations Days or conferences will not take place during the period immediately prior to the publication of quarterly financial results.
ING Group strives to maintain an open and constructive dialogue with existing and potential investors, and with industry analysts. The scope of such bilateral communication may range from responding to single investor queries via email, to more elaborate discussions with analysts or institutional investors by telephone, teleconference, video conferencing or face-to-face. ING Group’s Investor Relations department is the main point of contact for these communications. Executive Board members,
Management Board Banking members or divisional management members may also participate in investor meetings. These meetings are not announced in advance, nor can they be followed by webcast or any other means. Information provided during such occasions or in any contacts with the press is limited to what is already publicly available.
If bilateral communication between ING Group and investors is organised and/or facilitated through a broker, then an analyst or specialist salesperson representing the broker may be present in the meeting.
ING Group may decide not to accommodate or accept any requests or invitations to enter into a dialogue with potential investors, or to accommodate or accept such request or invitation under specific conditions. It is ING’s policy not to initiate bilateral contacts or contacts with the press, investors or analysts during the period immediately prior to publication of regular quarterly results.
• Any other matters proposed by the Supervisory Board, the Executive Board or shareholders in accordance with the Articles of Association.
The main powers of the General Meeting are to decide on: • the appointment, suspension and dismissal of members of the Executive Board and members of the
In line with Dutch law, ING Group convenes its General Meetings by public notice via ing.com at least 42 days before the day of the General Meeting.
This period can be shortened to 10 days (in accordance with ING’s Articles of Association as provided for under Dutch law, implementing the BRRD) if i) ING Group meets the criteria for early intervention measures, ii) resolution can be avoided by means of a capital increase and iii) a General Meeting would be required to enable ING Group to issue the required number of shares.
Together with the notice, all information relevant for shareholders is made available via ing.com and through its head office. This information includes the notice of the General Meeting, the agenda, instructions on how to participate in the meeting (either in person or by proxy), the place and time of the meeting, explanatory notes to the agenda including the verbatim text of the proposals, as well as the reports of the Executive Board and the Supervisory Board.
Shareholders may propose items for the agenda of a General Meeting if they individually or jointly represent at least one percent of the issued share capital. Such proposals should be adequately substantiated under applicable Dutch law.
Shareholders have the opportunity to contact ING about the General Meeting, via a dedicated webpage on ing.com.
In accordance with Dutch law, the record date for attending a general meeting and voting on proposals at that general meeting is the 28th day before the day of the General Meeting. Only those holding shares on the record date may attend the General Meeting and may participate, vote and exercise any other rights attached to their shares in the General Meeting, regardless of any subsequent sale or purchase of shares. The record date is published in the notice for the General Meeting. If a shortened convocation of 10 days is applicable (see ‘Notice’ above), the record date is two days after the convocation date.
Each share entitles the holder to cast one vote at the General Meeting. The Articles of Association do not restrict the voting rights on any class of shares. ING Group is not aware of any agreement that restricts voting rights on any class of its shares.
Resolutions adopted at a General Meeting are generally published on ing.com within one week following the meeting. In accordance with the DCGC, the draft minutes of the General Meeting are made available to shareholders on ing.com no later than three months after the meeting.
Shareholders then have three months to react to the draft minutes. After that, the minutes are adopted by the chairman of the meeting and by a shareholder appointed by that meeting and are made available on ing.com. As an alternative to the minutes, a notarial record of the business transacted at the AGM can be made.
In the context of the coronavirus pandemic and in line with European Central Bank’s recommendations, the proposal to pay a final 2019 dividend (agenda item 3B) was not put up for a vote and was removed from the agenda. All other agenda items remained unchanged.
Members of the Executive Board are appointed, suspended and dismissed by the General Meeting. For the appointment of Executive Board members, the Supervisory Board may draw up a binding list, which may be rendered non-binding by the General Meeting. A resolution of the General Meeting to render this list non-binding, or to suspend or dismiss Executive Board members without this being proposed by the Supervisory Board, requires an absolute majority of the votes cast. Additionally, this majority must represent more than half of the issued share capital. The Articles of Association exclude the waiver of the latter requirement in a second General Meeting. This ensures that significant shareholders proposals 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.
Candidates for appointment to the Executive Board are subject to a suitability and reliability assessment by the Dutch Central Bank and European Central Bank (DNB and ECB) and must continue to meet these while in function.
ING Group aims for its Executive Board to have an adequate and balanced composition. The
Executive Board, which is available on ing.com. This profile among others includes guidelines that relate to the composition of the Executive Board.
In 2018, ING introduced a new principle in a bid to bolster diversity within our organisation. The 70 percent principle gives managers a basis for building mixed teams around appropriate dimensions of diversity (with a focus on gender, nationality and age group) and strives for a 30 percent difference in team composition. It is our ambition to adhere to this principle across the organisation within both local and global teams. This principle is incorporated into succession planning for the Executive Board.
Finding suitable candidates remains challenging, as there are numerous requirements to take into account, including gender to enhance the composition of the Executive Board and specific criteria for each function, including regulatory requirements.
As an example to demonstrate the aforementioned: with the departure of the CEO Ralph Hamers on 30 June 2020, the Supervisory Board was faced with the challenge of appointing a successor.
Hamers with effect from 1 July 2020. The Supervisory Board concluded that Steven van Rijswijk has the right combination of experience, leadership skills and deep understanding of ING’s business to lead ING
With the position change of Steven van Rijswijk on 1 July 2020, the CRO position became vacant.
ING appointed Ljiljana Čortan as CRO of ING and member of the Management Board Banking with effective date 1 January 2021. The Supervisory Board will propose to the shareholders to appoint
Ljiljana Čortan as member of the Executive Board at the AGM on 26 April 2021. In terms of the dimensions of diversity, Ljiljana Čortan will add both nationality and gender diversity to the Executive
Details of the remuneration of members of the Executive Board, including shares granted to them, together with additional information, are provided in the Remuneration report.
Group subsidiaries in the ordinary course of their business on terms that apply to all employees. In connection with the aforementioned, such loans do not include banking and financial products in which the granting of credit is of a secondary nature, e.g. credit cards and overdrafts in current account.
For an overview of loans granted to members of the Executive Board, see page 237 of the Remuneration report.
Audit Services. Steven van Rijswijk joined ING in 1995 in the Corporate Finance department holding various positions in the areas of Mergers and Acquisitions and Equity Markets. Before becoming a member of the Executive Board, he was global head of Client Coverage at Wholesale Banking.
CEO and chairman of the Executive Board of ING Groep N.V. and of the Management Board Banking of
Banken), member of the Board of Directors of the Institute of International Finance, Inc.
Management Board Banking of ING Bank on 7 February 2019. Subsequently, he was appointed as a member of the Executive Board of ING Groep N.V. at the AGM on 23 April 2019.
Board until the appointment of a successor to ING’s former CRO Steven van Rijswijk.
CFO and member of the Executive Board of ING Groep N.V., CFO and member of the Management
Executive Board of ING Group at the AGM on 26 April 2021 (see ‘Diversity and succession planning’
For the appointment of Supervisory Board members, the Supervisory Board may draw up a binding list, which may be rendered non-binding by the General Meeting.
A resolution of the General Meeting to render this list non-binding, or to suspend or dismiss Supervisory
Board members without this being proposed by the Supervisory Board, requires an absolute majority of the votes cast. Additionally, this majority must represent more than half of the issued share capital.
Candidates for appointment to the Supervisory Board are subject to a suitability and reliability assessment by the Dutch Central Bank and European Central Bank (DNB and ECB) and must continue to meet these while in function.
The function of the Supervisory Board is to supervise the policy (beleid) of the Executive Board and the general course of affairs of ING Group and the business connected with it, as well as to provide advice to the Executive Board.
Supervisory Board, all members of the Supervisory Board are required to: • be guided by the interests of ING Group and the business connected with it, thereby carefully balancing the interests of all stakeholders of ING and when drawing that balance, give paramount importance to the customer’s interest, as set out in the Dutch Banker’s Oath; • foster a culture focused on long-term value creation, financial and non-financial risk awareness, compliance with the Company’s risk appetite, responsible and ethical behaviour and stimulate openness and accountability within ING and its subsidiaries; • perform their duties without mandate and independent of any interest in the business of ING; • refrain from supporting one interest without regard to the other interests involved; and
In accordance with the Articles of Association ING Group indemnifies the members of the Supervisory
The Supervisory Board has drawn up a profile to be used as a basis for its composition. It is available on ing.com.
Supervisory Board of ING Group. Former Executive Board members must wait at least one year before becoming eligible for appointment to the Supervisory Board.
As a general rule, Supervisory Board members step down from the Supervisory Board in the 4th, 8th, 10th or 12th year after their initial appointment. They are eligible for re-appointment in the 4th year after their initial appointment and, with explanation, also in the 8th and 10th year.
Under special circumstances the Supervisory Board may, with explanation, deviate from this general rule, for instance to maintain a balanced composition of the Supervisory Board and/or to preserve valuable expertise and experience. The retirement schedule is available on ing.com.
CRD IV restricts the total number of supervisory board positions or non-executive directorships with commercial organisations that may be held by a Supervisory Board member to four, or to two, if the
Supervisory Board member also has an executive board position. The European Central Bank may, under special circumstances, permit a Supervisory Board member to fulfil an additional supervisory board position or non-executive directorship. Positions with, inter alia, subsidiaries or qualified holdings are not taken into account in the application of these restrictions. Such positions may not conflict with the interests of ING Group. It is the responsibility of the individual member of the Supervisory Board and the Supervisory Board collectively to ensure that the directorship duties are performed properly and are not affected by any other positions that the individual may hold outside ING Group.
Members of the Supervisory Board are to disclose material conflicts of interest (including potential conflicts of interest) and to provide all relevant information relating to them. The Supervisory Board –
In accordance with the DCGC, transactions with members of the Supervisory Board in which there are material conflicting interests will be disclosed in the Annual Report.
Any relation that a member of the Supervisory Board may have with an ING Group subsidiary as an ordinary, private individual is not considered a significant conflict of interest. Such relationships are not reported, with the exception of any loans that may have been granted.
The members of the Supervisory Board are requested to assess annually whether the criteria of dependence set out in the DCGC do not apply to them and to confirm this in writing. On the basis of these criteria, all members of the Supervisory Board are to be regarded as independent on 31
December 2020. On the basis of the NYSE listing standards, all members of the Supervisory Board are independent.
On 31 December 2020, the Supervisory Board had four permanent committees: the Risk Committee, the Audit Committee, the Nomination and Corporate Governance Committee and the Remuneration
The organisation, powers and conduct of the Supervisory Board are detailed in the Supervisory Board
Separate charters have been drawn up for the Risk Committee, the Audit Committee, the Nomination and Corporate Governance Committee and the Remuneration Committee. These charters are also available on ing.com. A short description of the duties of the four permanent committees follows below.
The Risk Committee assists and advises the Supervisory Board with performance of its duties in relation to overseeing (i) the setting and monitoring of the Company’s risk appetite and risk strategy for all types of risk including but not limited to financial and non-financial risk, (ii) the effectiveness of the internal risk management and control systems and (iii) other related risk management topics. The Risk
Committee shall prepare the discussions within and decisions of the Supervisory Board on such matters. On 31 December 2020, the members of the Risk Committee were: Mike Rees (chairman), Jan
The Nomination and Corporate Governance Committee assists the Supervisory Board with the performance of its duties in relation to selection and nomination of among others the Supervisory
Board members and Management Board members, talent management and the effectiveness of the Company’s governance arrangements and shall prepare the discussions with and decisions of the
The Remuneration Committee assists the Supervisory Board, with the performance of its duties in relation to remuneration policies and the application and compliance thereof and shall prepare the discussion within and decisions of the Supervisory Board on such matters. In doing so, the
The composition of the Supervisory Board committees can also be found on ing.com.
Remuneration of the members of the Supervisory Board is determined by the General Meeting and is not dependent on the results of ING Group. Details of remuneration are provided in the Remuneration report on page 239 Members of the Supervisory Board are permitted to hold shares in the share capital of ING Group for long-term investment purposes. Details are given on page 240. Transactions by members of the Supervisory Board in these shares are subject to the ING insider regulations, which are available on ing.com.
Athla Capital Management Ltd., non-executive chairman of Travelex Topco Limited and non-executive chairman of the board of Satsanga Fintech Holdings.
Former position: chief operating officer and executive board member of the board of directors of Lloyds
Former position: global vice chair EY Japan and member of Global Practice Group.
Former position: global head of Trading Risk Management and general manager Market Risk management of ING Bank N.V.
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V., CEO of Cardano Risk Management
(Born 1966, Dutch nationality, female; appointed in 2019, term expires in 2023)
Member of the supervisory board, member of the audit committee of Het Concertgebouw N.V, member of the advisory council of Goldschmeding Foundation and member of the Board of VNO-NCW
Eric Boyer de la Giroday and Hermann-Josef Lamberti retired from the Supervisory Board effective from the close of 2020 AGM. Juan Colombás, Herman Hulst and Harold Naus were appointed by the
ECB must be obtained by anyone wishing to acquire or hold a participating interest of at least 10 percent in ING Group and to exercise control attached to such a participating interest. Similarly, on the basis of indirect change of control statutes in the various jurisdictions where subsidiaries of ING Group are operating, permission from, or notification to, local regulatory authorities may be required for the acquisition of a substantial interest in ING Group.
ING Group is not a party to any material agreement that becomes effective or is required to be amended or terminated, in the event of a change of control of ING Group following a public bid as defined in section 5:70 of the Dutch Financial Supervision Act. ING Group subsidiaries may have customary change of control arrangements included in agreements related to various business activities, such as joint-venture agreements, letters of credit and other credit facilities, ISDAagreements, hybrid capital and debt instruments, insurance and reinsurance agreements and futures and option trading agreements. Following a change of control of ING Group (as a result of a public bid or otherwise) such agreements may be amended or terminated, leading, for example, to an obligatory transfer of the interest in the joint venture, early repayment of amounts due, loss of credit facilities or reinsurance cover, and liquidation of outstanding futures and option trading positions.
For purposes of calculating the amounts due, it is not relevant whether or not termination of the employment or commission contract is related to a public bid. Severance payments to the members of the Executive Board are limited to a maximum of one year’s fixed salary, in line with the Dutch
The General Meeting may resolve to amend the Articles of Association of ING Group, provided that the resolution is adopted based on a proposal of the Executive Board, which has been approved by the
The external auditor may be questioned at the AGM about its audit opinion on the financial statements. The external auditor will therefore attend and is entitled to address this meeting. In 2020, the external auditor attended the meetings of the Risk Committee and of the Audit Committee. It also attended and addressed the 2020 AGM, at which it was questioned on its audit opinion.
More information on ING Group’s policy on External Auditor Independence is available on ing.com.
Due to the listing of ING shares on the New York Stock Exchange, ING Group is required to comply with the SEC regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act, or SOX 404. These regulations require ING Group to report and certify on an annual basis on the effectiveness of its internal controls over financial reporting. The SOX 404 internal control activities are organised along the lines of the company´s governance structure, and involve the participation of senior management across ING.
ING’s internal controls over financial reporting includes those policies and procedures that: • pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of ING; • provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorisations of our management and directors; and
Committee of Sponsoring Organisations of the Treadway Commission (COSO) in Internal Reporting –
ING’s internal risk management and control is a process, effectuated by the Executive Board, senior management, and other personnel. It is designed to mitigate risks and provide reasonable assurance regarding the achievement of objectives in the following categories: • Effectiveness and efficiency of operations; • Reliability of financial and non-financial information; • Compliance with laws, regulations and internal policies, and the ING Values as part of the Orange Code; • Safeguarding of assets, identification and management of liabilities; and
Executive Board’s strategy. In addition ING has a process in place where, under the supervision and with the participation of the CEO and CFO, ING assesses the effectiveness of internal control over financial reporting, based on the criteria of the Committee of Sponsoring Organisations of the
The design and the operation of the internal risk management and control systems are discussed annually with the Risk Committee and the full Supervisory Board, whereas the design and the operation of internal control over financial reporting are discussed annually with the Audit Committee and the Supervisory Board. As part of this process, improvement in the bank-wide know your customer
(KYC) enhancement operations were discussed with the Risk Committee of the Supervisory Board.
We are continuing our global KYC enhancement operations, emphasising regulatory compliance as the key priority. The organisation continues to work hard on enhancing our customer due diligence files and on a number of structural solutions to bring our anti-money laundering activities to a sustainably better level.
• the report of the Executive Board in the ING Group Annual Report 2020 states those material risks and uncertainties that are relevant to the expectation of ING Groep N.V.’s continuity for the period of 12 months after the preparation of this report.
Association of ING Groep N.V. On acquisition of cumulative preference shares, at least 25 percent of the nominal value must be paid on said shares.
The composition of the Board is currently as follows: Sebastian Kortmann, chairman of the Board, Rob van den Bergh, Allard Metzelaar and Pieter Witteveen, who was appointed as of 12 May 2020 for a period of three years. Rob van den Bergh and Allard Metzelaar were reappointed for a period of three years respectively as of 10 February 2020 and as of 12 May 2020.
As required by section 5:25c paragraph 2(c) of the Dutch Financial Supervision Act, each of the signatories hereby confirms that to the best of his knowledge: ▪ the ING Groep N.V. 2020 Annual Accounts give a true and fair view of the assets, liabilities, financial position and profit or loss of ING Groep N.V. and the enterprises included in the consolidation taken as a whole; and
▪ the ING Groep N.V. 2020 Annual Report gives a true and fair view of the position at the balance sheet date, the development and performance of the business during the financial year 2020 of ING Groep N.V. and the enterprises included in the consolidation taken as a whole, together with a description of the principal risks ING Groep N.V. is being confronted with.
Our remuneration principles are important to achieve our strategy and our purpose – empowering people to stay a step ahead in life and in business. These principles apply to all employees, including members of the Executive Board.
The 2020 Remuneration Report is subject to an advisory vote at the AGM in April 2021. In the report we look back on the year 2020. We report on ING’s performance and how 2020 events such as the coronavirus pandemic impacted our business results and subsequently remuneration. We explain how the Executive Board and Supervisory Board remuneration policies are implemented and share details of remuneration awarded in 2020 to the Executive Board and to the Supervisory Board. In addition, we also set out the key performance indicators for the year ahead.
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 that the Executive Board members will not receive any variable remuneration related to the performance year 2020.
Additionally, the Supervisory Board decided not to increase the base salary of Executive Board members from 1 January 2021. The fees for the Supervisory Board will also be unchanged for 2021.
For all other eligible staff, variable remuneration is based on group, business line and individual performance criteria, is for at least 50% based on non-financial targets and comes in the form of discretionary and collective variable remuneration. The total amount awarded was significantly lower than for the previous year, reflecting declining financial performance and recognising broader stakeholder interests. The biggest reductions occur at the more senior levels of the organisation (see
Central Bank urging moderation with respect to awarding variable remuneration. Similarly, ING
In closing, I’d like to express my heartfelt gratitude to every ING employee, at every level of the organisation, for their ongoing commitment and dedication over the past year. It hasn’t always been easy to adapt to working at a distance, often while also juggling the demands of family life or recovering from illness. Yet even in the most challenging circumstances, they have shown true orange spirit and continued to take things on and make them happen for customers, for ING and for all stakeholders. Thank you.
Remuneration Report Executive Board and Supervisory Board FOR ADVISORY VOTE AT 2021 ING GROEP N.V. ANNUAL GENERAL MEETING (AGM)
This report is prepared in the spirit of the draft (non-binding) ‘Guidelines on the standardised presentation of the remuneration report’ from the European Commission published in March 2019.
The 2019 Remuneration Report was presented for an advisory vote at the AGM held on 28 April 2020
In addition to the 2019 Remuneration Report, the 2020 EB remuneration policy and 2020 SB
We remain aware of the fact that remuneration is an important topic for many stakeholder groups and that viewpoints on the topic may vary. The Supervisory Board is fully committed to ensuring that our approach to remuneration achieves a balance that aligns the best interest of ING and the viewpoints of our stakeholders. Stakeholder engagement is a key element in the formulation of our remuneration policies, as demonstrated by the extensive process we carried out in 2019. The
Until the appointment of a new CRO, Karst Jan Wolters, reporting to chief financial officer (CFO)
Management Board Banking effective 1 January 2021. The agreed remuneration package for Ljiljana
Shareholders at the 2020 AGM approved the appointment of Juan Colombás, Herman Hulst and
Harold Naus to the Supervisory Board. Robert Reibestein resigned from the Supervisory Board effective from 1 January 2020, because of persistent health issues, while Eric Boyer de la Giroday and Hermann-Josef Lamberti retired at the end of the 2020 AGM.
 no changes to the current remuneration structure for the Supervisory Board members will be made for 2021.
We aim to keep our peer group as constant as possible. In line with the requirements laid down in the
Dutch Banking Code the total direct compensation under the 2020 EB remuneration policy is below the median of the peer group. The calculation of the position towards the median of the peer group has been performed based on the actual fixed remuneration 2020 and the actual variable remuneration related to performance year 2019. Due to the fact that there was no variable remuneration related to the current performance year (2020), we use the variable remuneration related to the previous performance year (2019) for this calculation.
Geography ING is headquartered in the Netherlands, but has an international profile
Size ING acknowledges the importance of including companies that are broadly comparable in terms of size and complexity
ING is subject to the Dutch (financial services) regulatory framework and operates within a Dutch stakeholder environment
Executive Board member with reference to market practice. The Remuneration Committee reviews the individual base salaries of the Executive Board members each year and advises the Supervisory
The Supervisory Board pre-determines the performance criteria for the Executive Board each year to ensure alignment between ING's strategy, performance objectives and long-term interest.
Since 1 January 2015, all members of the Executive Board participate in the Collective Defined
Contribution pension plan, which is accrued on an annual salary of up to €110,111 for 2020. This is the same as for all employees working in the Netherlands without a supplementary pension scheme.
Executive Board members are compensated for the lack of pension accrual above this amount by means of a savings allowance (see 'Benefits'), to be annually determined, on the same terms that apply to other participants in the Dutch pension scheme. The set-up of this compensation for the lack of pension accrual is in line with best practices.
in the Netherlands);  tax and financial planning services to ensure compliance with the relevant legislative requirements.
Board is terminated. There is a three-month notice period for individual board members and a sixmonth period for ING. During this time the board member continues to work and in principle remains eligible for all agreed remuneration components.
limited to a maximum of one year of fixed base salary and under the condition that there should be no reward for failure). If an Executive Board member departs voluntarily or in circumstances involving fraud, gross negligence, wilful misconduct or any activity detrimental to ING, no severance payment or award of variable remuneration over the performance year will be made.
Periodic review of the Executive Board remuneration policy and the remuneration awarded
The Remuneration Committee’s responsibilities include preparing the Supervisory Board for decisions regarding the individual remuneration of members of the Executive Board. Remuneration proposals for individual Executive Board members are drawn up in accordance with the 2020 EB remuneration policy and cover the following aspects: remuneration structure, the amount of the fixed and variable remuneration components, the performance criteria used, scenario analyses that were carried out and, if and when considered appropriate stakeholder engagement, review of the EB remuneration policy, the pay ratios within the company and its affiliated enterprises. In the performance of its tasks the Remuneration Committee works closely together with the Risk Committee.
Board aims to minimise these payments and ensure they are compliant with regulatory requirements. This is in line with the 2020 EB remuneration policy. In 2020, there were none.
This section includes details of remuneration for current and former Executive Board members relating to the period served on the Executive Board in 2020.2
As was announced in February 2020, Ralph Hamers stepped down from his position as ING’s CEO and chairman of the Executive Board on 30 June 2020. As his departure was voluntary, no exit arrangements were agreed or paid, in line with the 2020 EB remuneration policy. All outstanding variable remuneration that was awarded in previous years and not yet vested before his departure, has lapsed. This means he will not receive any future pay-outs of variable remuneration related to previous performance years.
Board immediately after the AGM on 23 April 2019. Steven van Rijswijk was an Executive Board member for the full years 2018-2019. For 2020, a pro-rata method is applied to his remuneration as CEO from 1 July 2020.
Supervisory Board members), company performance and the average remuneration of an ING
Supervisory Board members is linked to company performance, since this is all and only dependant on attendance.
The relative performance of the company is presented on three different metrics over the last five years. The metrics consist of:  Retail primary relationships
Profit before Tax ING Group (continuing operations) (in mln) 3,809 -44% 0% -6% 23% -4%
Return on equity based on IFRS-EU Equity 4.8% -49% -4% -3% 6% -
Average fixed and annual variable remuneration 64 -1.7% 7% -1.1% - -
3 The fixed remuneration for the Executive Board did not change in 2019. Hence, the relative total compensation increase from 2018 to 2019 is fully attributed to the fact that no variable remuneration was awarded for performance year 2018. In addition, as
Tanate Phutrakul was not an Executive Board member for the full year, a comparison between 2018 and 2019 cannot be made.
4 Fixed remuneration for Executive Board members of ING is not linked to company performance but is predominantly based on a benchmark exercise and total direct compensation of Executive Board members should stay below the median of the benchmark, based on the Dutch Banking Code. This has a mitigating effect on the correlation with the company performance.
7 The decrease in the 2020 versus 2019 comparison for Hermann-Josef Lamberti and Eric Boyer de la Giroday is fully attributed to the fact that both retired after the AGM on 28 April 2020. The increase in this comparison for Mike Rees and Herna Verhagen is because they were appointed by the AGM on 23 April 2019 and therefore reflect a partial year as Supervisory Board members whereas 2020 is presented as a full year as a Supervisory Board member.
8 The decrease in the 2018 versus 2017 comparison for the CFO and CRO is fully attributed to the fact that for performance year 2018 no variable remuneration was awarded while over performance year 2017 variable remuneration was awarded.
The Executive Board performance process includes a number of key steps. This process serves as the foundation to determine the variable remuneration for Executive Board members.
 Non-financial performance measures including customer, people, strategy and sustainability measures.
Each performance measure is weighted and totals 100%. The Dutch Remuneration Policy for Financial
Executive Board to review their performance to date. While no formal assessments are completed, progress of performance measures is discussed and the extent to which progress is on track.
The process covers an assessment of their performance, based on individual performance scorecards.
It includes KPIs and targets agreed at the beginning of the performance year, along with risk assessments measured on an ex-ante and ex-post risk adjustment basis.
The integrated performance assessment process for determining variable remuneration also takes into account financial and operational performance, risk and compliance, as well as behaviour and conduct of each Executive Board member. This is supported by a robust framework for considering risk and conduct, which is in line with regulations. It includes the following elements: Check-ins quarterly during the financial year
 Risk tests and adjustments – Performance under three metrics (covering financial and nonfinancial risk) is considered against thresholds set at the beginning of the financial year, taking into account ING’s risk appetite statement framework. When these risk tests are not within the risk appetite it may lead to a downward variable remuneration adjustment.
Remuneration Committee and Risk Committee, decides on any risk adjustments (potentially to zero) to variable remuneration for Executive Board members.
As a final step in the process, in exceptional circumstances the Supervisory Board may apply its discretion to adjust upwards or downwards the variable remuneration of Executive Board members.
The base salary of all Executive Board members increased with 1.5% on 1 January 2020, as was announced in our 2019 Annual Report. This decision was based on reliable indexation reference points, including the (forecast) Consumer Prices Index 2020, in line with the 2020 EB remuneration policy. As stated in our 2019 Remuneration Report, the increase for Executive Board members is below the collective labour agreement CLA increase for employees in the Netherlands.4 4 The collective salary increase based on the Collective Labour Agreement in the Netherlands (agreed for the period from 1 January 2019 – 31 December 2020), per 1 September 2019 was 3% for all employees in the Netherlands. In addition, per 1 September 2020 another collective salary increase of 3% took place.
In 2020 the number of primary customers increased by 578,000 to 13.9 million. The increase was lower than projected at the beginning of 2020 and was impacted by the challenges related to Covid-19.
In 2020 the number of primary customers increased with 578,000 to 13.9m. The increase was lower than projected at the beginning of 2020 and was impacted by the challenges of Covid-
- The Wholesale TOM programme achieved cost, risk and income benefits and came to a natural close.
- Extended the roll out of ING’s Touchpoint platform, which gives new and existing business initiatives access to 25.2 million ING customers (65% of customer base).
Delivered identified regulatory commitments related to implementation of new regulations on time and at the required levels.
* Sustainability for the CRO has been focused on sustainable embedding of risk in the organisation.
Weighting Assessment Outcome Weighting Assessment Outcome Weighting Assessment Outcome * Due to rounding, percentages presented in the table may not add up precisely to the total percentages provided.
Executive Board against their set-targets is shown to illustrate the performance to stakeholders.
As Steven van Rijswijk had a split year as CRO and then CEO, his award was calculated against the CEO
Following the performance hurdles a thorough performance assessment has been completed including ex-ante risk tests. Based on this assessment and the overall achievements, the Supervisory Board has concluded that the Executive Board members delivered relatively strong results despite a challenging year due to Covid-19.
In addition, the Supervisory Board considered if any discretionary adjustment was required and they determined both the financial and non-financial results speak for themselves in the current environment. Furthermore the Supervisory Board considers the behaviour of the Executive Board members and following their assessment no discretionary adjustments were applied.
In the final step, the Supervisory Board reviewed the CRO’s assessment of ex-post risk adjustments.
Overall this would have equated to variable remuneration for the CEO at 10.6% of his maximum 20%
cap and a 34.1% reduction against target. For the CFO it would represent 9.0% of his maximum 20%
Steven van Rijswijk (CEO role) 888,100 - 888,100 11,600 242,000 1,141,700
5 The IRRF consists of the most important regulatory requirements with respect to remuneration to which all remuneration policies of majority owned entities have to adhere to. Furthermore, it consists of our general remuneration principles that apply to all staff globally working under the responsibility of ING.
The following tables (i.e. total direct compensation, pension costs and other emoluments) show the remuneration awarded to individual Executive Board members with respect to the performance years 2020, 2019 and 2018. The 2020 figures reflect a partial year as an Executive Board member for Ralph
Hamers. In addition, the figures for Steven van Rijswijk are divided between his two different roles on the Executive Board. The 2019 figures reflect a partial year as an Executive Board member for Tanate
All Executive Board remuneration is paid directly by ING with the exception of director’s fees for Tanate
Total aggregated number of shares - 58,259 1 Ralph Hamers stepped down as an Executive Board member on 30 June 2020. His base salary reflects the payments from 1 2 The number of shares is based on the average ING share price on the day the year-end results were published.
3 Steven van Rijswijk was appointed CEO as of 1 July 2020. His total direct compensation is divided between his role as CRO and then as CEO. The annualised base salary for Steven van Rijswijk as of 1 July 2020 is EUR 1,776,250 (this includes the 1.5% salary increase as per 1 January 2020).
Members of the Executive Board participate in the Collective Defined Contribution (CDC) pension plan. In 2020, pension accrual applied to salary up to an amount of € 110,111. The table below shows the pension costs of the individual members of the Executive Board in 2020, 2019 and 2018.
2 Ralph Hamers stepped down as an Executive Board member on 30 June 2020. His pension costs reflect the period from 1 3 Steven van Rijswijk was appointed as CEO from 1 July 2020. Therefore his pension costs for 2020 are divided between his role of CRO and then as CEO.
The individual members of the Executive Board receive other emoluments, including savings allowances to compensate for the loss of pension benefits on salary above € 110,111 in 2020, employer contributions to savings schemes, reimbursement of costs related to home/work commute, costs relating to tax and financial planning services, costs related to reimbursement of the Directors &
2 The 2019 emoluments for Tanate Phutrakul reflect a partial year as an Executive Board member.
4 This amount does not consist of any exit arrangements due to the fact his departure was voluntary and therefore nothing has been agreed or paid, which is fully in line with the 2020 EB remuneration policy.
5 The prior period has been updated to improve consistency and comparability.
(CRO role) 2 1 The 2020 emoluments reflect the partial year as an Executive Board member for Ralph Hamers.
2 Steven van Rijswijk was appointed as the new CEO as of 1 July 2020. The emoluments are divided between his role as CRO
3 Other amounts includes the following elements: personnel facility (mortgage), tax and financial planning, reimbursement of costs under the Directors & Officers indemnity provided by ING, redemption of the holiday allowance for Ralph Hamers and payment of director’s fees for Tanate Phutrakul as non-executive director at ING Belgium.
shares held by Executive Board members’. In line with the 2020 EB remuneration policy we do not operate (active) long-term incentive plans anymore.
Executive Board. Please note that all unexercised options lapsed in 2020 when the applicable stock option plans reached the end of their 10-year lifespan.
(for awards in 2020 and before), with the ultimate value of each deferred share based on ING’s share price on the vesting date. This is conditional on there being no holdback.
3 All current Executive Board members participate in the ING Group Long-term Sustainable Performance Plan (LSPP) and receive their shares under its plan rules.
5 Number of shares granted includes both the deferred and upfront part awarded at the granting date.
7 The number of shares granted is split between the service period Tanate Phutrakul was a Management Board member and
Board member on 31 December 2020, there is no information included for 2020. These loans were provided on market conditions with due observance of the applicable policies within ING.
ING shares held by Executive Board members 1 Since Ralph Hamers was no longer an Executive Board member on 31 December 2020, there is no information included for 2021 Executive Board remuneration
The Supervisory Board decided not to increase the base salary of the Executive Board members from 1
 Strategy o Deliver on digitalisation initiatives o Deliver on innovation initiatives
In line with the Dutch act implementing SRD II, the 2020 SB remuneration policy was presented to shareholders at the 2020 AGM. Based on the result of the binding vote (98.6% in favour), the 2020 AGM
All fees are paid out fully in cash. No variable remuneration is provided to ensure that the Supervisory
The table below shows the remuneration, including attendance fees for each Supervisory Board member. All fees for the Supervisory Board are paid directly by ING. The only exception to this is for Eric
Compensation of former members of the Supervisory Board not included in the table above amounted to nil in 2020, €176,000 in 2019 and €333,000 in 2018.
Supervisory Board members may obtain banking and insurance services from ING Group and its subsidiaries in the ordinary course of their business and on terms that are customary in the sector. The
Supervisory Board members do not receive privileged financial services. On 31 December 2020, there were no loans and advances outstanding to Supervisory Board members.
ING shares and employee stock options held by Supervisory Board members
Supervisory Board members are permitted to hold ING shares as a long-term investment. The table below shows the holdings by members of the Supervisory Board on 31 December 2020, 2019 and
Employee stock options on ING Groep N.V. shares held by members of the Supervisory Board on 31 December 2020
The Supervisory Board decided not to change the fees for 2021.
The primary objective of ING’s remuneration principles is to attract, motivate and retain qualified and expert leaders as well as senior staff (including Executive Board members) and other highly qualified staff who have the desired Orange Code values and behaviours, skills and knowledge to deliver on ING’s purpose and Think Forward strategy in a sustainable way.
Our remuneration principles apply to all staff and are embedded in ING’s Remuneration Regulations
Our remuneration principles apply to all employees and comprise the following: Aligned with business strategy
Risk management is an enabler of long-term value creation. ING ensures its remuneration principles are properly correlated with its risk profile and stakeholder interests.
 Orange Code behaviours: how employees do their work and how effective their behaviour is as a professional and colleague. We expect all employees to act in line with ING’s Orange Code.
All targets are agreed between the employee and their manager, as well as within management teams, to ensure consistency across the bank. ING uses three labels to evaluate performance: excellent, well done and improvement required.
Step Up Performance Management does not prescribe the targets employees should set. However, the following regulatory requirements apply to specific groups:  For employees eligible for variable remuneration, a minimum of 50% non-financial priorities.
Resources), no individual financial KPIs are allowed, unless required by local law.
 For identified risk takers, risk mitigation measures may lead to a downwards adjustment of the performance outcome and negatively affect variable remuneration (a risk modifier can be applied).
ING aims to provide total direct compensation or expected business and individual performance at levels which, on average, are at the median of the markets in which we operate, benchmarked against relevant peer groups. In line with the Dutch Banking Code, the current remuneration levels of the
Executive Board are below the median of the peer group introduced with the 2020 EB remuneration policy. This year, remuneration levels for members of the Management Board Banking were also benchmarked against the same peer group as the Executive Board. The Executive Board and the other members of the Management Board Banking are on average below the median. Three members of the
Fixed remuneration represents a sufficiently high proportion, in line with the level of expertise and skills, and allows a fully flexible variable remuneration award. When no variable remuneration is awarded, the compensation level is still enough for a decent standard of living. Variable remuneration is performance driven, subject to regulatory caps and prevents excessive risk taking, where applicable.
The awarding of variable remuneration, where applicable, is based on group, business line and individual performance criteria unless local legislation prescribes otherwise. In all ING countries, we adhere to the applicable variable remuneration caps.
For Identified Staff (i.e. staff considered to have a material impact on ING’s risk profile), at least 40% of variable remuneration is deferred over a period of three to five years with a tiered vesting schedule.
Remuneration Accrual Model (VRAM) set-up and approach to determine the 2020 discretionary riskadjusted variable remuneration pools.
The Management Board Banking reviews the variable remuneration pool on behalf of the Supervisory
Board, taking into account the advice of the Risk Committee and the Remuneration Committee.
Supervisory Board. Underlying RoE, in line with the VRAM Policy (as established in PY 2019) and approved by governing bodies, can be adjusted due to one-time charges or infrequent occurrences, such as but not limited to macro-economic events and pandemic events, during a given performance year.
A variable remuneration pool is also separately accrued for staff in control functions and support functions and for those employees subject to a collective variable remuneration plan. The amount is defined by the Management Board Banking and approved by the Supervisory Board.
To establish appropriate risk-adjusted variable remuneration pools, ex ante risk adjustments are made based on measures used to assess the bank’s current and future risks and whether performance sufficiently aligns with risk appetite levels. The risk adjustment assessment includes measurements on
‘forward looking’ capital, liquidity and non-financial risk, where adjustments are made on deviation from risk appetite.
In addition, ex post risk adjustments are a key element in the process of determining both final variable remuneration pools and individual awards. Here, the CRO may provide additional input at a more granular level to adjust ING’s overall, business line and/or country variable remuneration pools based on their risk management performance.
The final risk adjustment measure lies in the individual performance assessment itself. An employee’s performance is extensively assessed before variable remuneration is proposed and awarded. Every manager carefully assesses the performance delivered by their individual team members on the basis of pre-agreed performance priorities and in line with the Step Up Performance Management framework. In addition, managers have the discretionary power to lower the proposed variable remuneration if risk taking is perceived as inappropriate. In this way, variable remuneration is aligned with any additional risks identified on an individual basis during the performance year.
ING’s remuneration policies comply with international and local legislation and regulations. Under the
Dutch WBFO (which sets various requirements on remuneration), financial institutions are permitted to set a variable remuneration cap higher than 100% (but not higher than 200%) of fixed remuneration for employees outside of the European Economic Area (EEA), provided that the higher cap is approved by shareholders and does not conflict with ING’s capital adequacy requirements.
Collective variable remuneration is based on collective labour agreements and/or profit sharing schemes that are driven by regulation, law and/or workers council agreements in various countries.
Over the past years the total amount of collective variable remuneration has been relatively stable and typically accounted for around 25% of the total amount of variable remuneration.
is then subject to a number of adjustments including for financial and non-financial performance and for risk.
The total actual amount of both discretionary and collective variable remuneration awarded to all eligible employees globally for 2020 was €314.2 million (€93.6 million in collective variable remuneration), compared to total staff expenses of €5,812 million. For 2019, the total amount was €378.0 million (€98.0 million in collective variable remuneration) on €5,755 million staff expenses and €303.1 million (€93.9 million in collective variable remuneration) out of €5,420 million in 2018.
In 2020, two employees – excluding members of the Management Board Banking – were awarded total annual remuneration (including employer pension contributions and excluding severance payments made) of €1 million or more.
Looking back on 2020, it was a challenging year and the works councils worked closely with ING’s management to find solutions for issues impacting employees. Many of these arose from the coronavirus outbreak and the subsequent measures that were taken to contain it, not least working from home.
The Central Works Council comprises representatives from each of the six local works councils in the
Netherlands, each representing a different employee group. The COR is the overarching body that engages with management on issues that impact all employees in the Netherlands in areas such as diversity, wellbeing, communication, conduct and social benefits.
proposal, which recognises the company’s responsibility to ensure the health and safety of its workforce, employees received a personal budget of €1,000 to set up an ergonomically sound workplace at home.
At the end of 2019, the EWC looked into ways to encourage its members to become more actively involved and make its meetings, presentations and discussions more effective by making them shorter and more frequent. This was put into practice in 2020, when it became clear the Covid-19 pandemic was going to make it impossible to meet in person.
Banking and several ING business lines also took place online. On the agenda were presentations and
Netherlands: Jordy Leber, Sofiane Maktouf, Jaap van Amsterdam, Jeroen van der Veer, deputy chairman
Notes to the consolidated statement of financial position 2 Cash and balances with central banks 284 3 Loans and advances to banks 284 4 Financial assets at fair value through profit or loss 284 5 Financial assets at fair value through other comprehensive income 286 6 Securities at amortised cost 287 7 Loans and advances to customers 288 8 Investments in associates and joint ventures 289 9 Property and equipment 291 12 Deposits from banks 295 14 Financial liabilities at fair value through profit or loss 296 17 Debt securities in issue 298
Notes to the consolidated statement of profit or loss 20 Net interest income 305 21 Net fee and commision income 306 22 Valuation results and net trading income 306 24 Result on disposal of group companies 308 25 Net result on derecognition of financial assets measured at amortised cost 308 28 Other operating expenses 310 29 Earnings per ordinary share 312 30 Dividend per ordinary share 312
Cash and balances with central banks 2 111,087 53,202 Deposits from banks 12 78,098 34,826
– Designated as at fair value through profit or loss 4,126 3,076 – Designated as at fair value through profit or loss 48,444 47,684
– Mandatorily at fair value through profit or loss 44,305 41,600 Current tax liabilities 342 554
Investments in associates and joint ventures 8 1,475 1,790 Debt securities in issue 17 82,065 118,528
Interest income using effective interest rate method 20,854 25,347 25,268 Addition to loan loss provisions 7 2,675 1,120 656
Other interest income 1,843 3,107 2,880 Staff expenses 27 5,812 5,755 5,420
Other interest expense -1,605 -3,084 -2,997 Result before tax from continuing operations 3,809 6,834 6,838
Net interest income 20 13,604 14,079 13,916 Net result from continuing operations 2,563 4,879 4,811
Fee and commission income 4,514 4,439 4,240 Net result (before non-controlling interests) 2,563 4,879 4,811
Fee and commission expense -1,503 -1,571 -1,442 Net result attributable to Non-controlling interests 78 99 108
Valuation results and net trading income 22 832 754 1,124 in EUR
Investment income 23 152 188 183 Basic earnings per ordinary share 0.64 1.23 1.21
Net result on derecognition of financial assets measured at amortised cost 25 189 38 18 Basic earnings per ordinary share from continuing operations 0.64 1.23 1.21
Items that will not be reclassified to the statement of profit or loss: Realised and unrealised revaluations property in own use -7 58 1
Remeasurement of the net defined benefit asset/liability 36 28 58 6
Net change in fair value of debt instruments at fair value through other comprehensive income 31 31 5 36
Realised gains/losses on debt instruments at fair value through other comprehensive income reclassified to the statement of profit or loss -33 -33 -1 -34
Remeasurement of the net defined benefit asset/liability 36 28 28 28
Share of other comprehensive income of associates and joint ventures and other income -37 43 6 6
Change in fair value of own credit risk of financial liabilities at fair value through profit or loss -3 -16 -19 -19
Total amount recognised directly in other comprehensive income net of tax -1,760 114 -1,645 55 -1,590
Employee stock option and share plans 11 11 22 0 22
Changes in individual Reserve components are presented in Note 19 ‘Equity’.
Net change in fair value of debt instruments at fair value through other comprehensive income -31 -31 1 -30
Change in fair value of own credit risk of financial liabilities at fair value through profit or loss -123 6 -116 -116
Effect of change in accounting policy due to implementation of IFRS 9 -653 -390 -1,043 -14 -1,057
Net change in fair value of equity instruments at fair value through other comprehensive income -518 56 -461 0 -461
Realised gains/losses on debt instruments at fair value through other comprehensive income reclassified to the statement of profit or loss -54 -54 -2 -56
Remeasurement of the net defined benefit asset/liability 36 6 6 6
Share of other comprehensive income of associates and joint ventures and other income 283 -270 14 14
Changes in the composition of the group and other changes 1 -96 -96 31 -65 1 Includes an amount for the initial recognition of the redemption liability related to the acquisition of Payvision Holding B.V.
and Makelaarsland B.V. that reduces the Retained earnings of the Group.
Cash flows from operating activities 31 Disposals and redemptions: – Associates and joint ventures 24 67 116
Result before tax 3,809 6,834 6,838 – Disposal of subsidiaries, net of cash disposed -3
Adjusted for: – Depreciation and amortisation 829 789 520 - Financial assets at fair value through other
– Customer deposits 39,740 18,040 19,753 Cash flows from financing activities
Cash flows from investing activities Repayments of subordinated loans -2,786 -933 -4,646
Investments and advances: - Acquisition of subsidiaries, net of cash acquired -17 -111 Repayments of principal portion of lease liabilities 1 -273 -271 n/a - Associates and joint ventures -24 -507 -97 Purchase/sale of treasury shares 5 1 4 - Financial assets at fair value through other - Securities at amortised cost -37,522 -12,268 -17,985 Other financing -1 2
Effect of exchange rate changes on cash and cash equivalents -425 95 204
Cash and cash equivalents at end of year 33 111,566 54,031 47,529 1 The amounts for the period ended 31 December 2020 and 2019 have been prepared in accordance with IFRS 16. 2018 period amounts have not been restated.
Consolidated statement of cash flows - continued As at 31 December 2020, Cash and cash equivalents includes cash and balances with central banks of
1 Includes dividends received as recognized within Investment Income, from equity securities included in the Financial assets at fair value through profit or loss, Financial assets at fair value through OCI, and from Investments in associates and joint ventures. Dividend paid and received from trading positions have been included.
Amsterdam, number 33231073. These Consolidated financial statements, as at and for the year ended 31 December 2020, comprise ING Groep N.V. (the Parent company) and its subsidiaries, together referred to as ING Group. ING Group is a global financial institution with a strong European base, offering a wide range of retail and wholesale banking services to customers in over 40 countries.
The ING Group Consolidated financial statements, as at and for the year ended 31 December 2020, were authorised for issue in accordance with a resolution of the Executive Board on 8 March 2021.
Under the EU carve-out, ING Group applies fair value hedge accounting to portfolio hedges of interest rate risk (macro hedging). For further information, reference is made to paragraph 1.7.4
‘Derivatives and hedge accounting’ of this note and to note 39 ‘Derivatives and hedge accounting’.
Group has sufficient buffers to withstand certain adverse scenarios without breaching currently applicable and likely future requirements.
To improve transparency, reduce duplication and present related information in one place, certain disclosures of the nature and extent of risks related to financial instruments required by IFRS 7
In Wholesale Banking the main schemes are being offered in the Netherlands (Corporate Finance
(Polish State Development Bank) to support clients with individual guarantee schemes, provided by
In November 2020 ING Group announced an initiative with European Investment Bank to lend nearly
EUR 800 million on favorable terms to Dutch small and medium-sized enterprises that are affected by the economic impact of Covid-19. Loans originated under this program will be recognized on the statement of financial position of ING Group as from 2021.
The various measures by governments and ING to alleviate the impact of Covid-19 also impacts the classification of assets as forborne. Based on European Banking Authority (EBA) Guidelines, assets that were subject to Covid-19 payment holidays granted before 30 September 2020 were not classified as forborne. As a result, these payment holidays did not automatically trigger recognition of lifetime Expected Credit Loss (ECL). Payment holidays granted that were outside the scope of these Guidelines or granted after 30 September 2020 did trigger the recognition of lifetime ECL.
Reference is made to ‘Credit risk’ paragraph of ‘Risk management’ section for further information.
(including the need for management overlays), non-financial assets and associated companies, and the determination of the fair values of financial assets and liabilities. Reference is made to paragraph 1.5 ‘Significant judgements and critical accounting estimates and assumptions’ for further explanation.
EUR 59.5 billion under the TLTRO III program during 2020. Reference is made to paragraph 1.6 ‘Other
ING Group has consistently applied its accounting policies to all periods presented in these
Consolidated financial statements, except for changes due to the introduction of IFRS 16 ‘Leases’ in 2019. Comparatives were not restated when applying IFRS 16.
(Phase 1) amendments to IAS 39 ‘Financial Instruments: Recognition and Measurement’ and IFRS 7
‘Financial Instruments: Disclosures’. These amendments have been adopted retrospectively to hedging relationships that existed at the start of 2019 or were designated thereafter. The amendments provide temporary relief from applying specific hedge accounting requirements to
‘Derivatives and hedge accounting’ for more information on the adoption of these amendments.
ING Group has not early adopted any other standard, interpretation or amendment in 2020 which has been issued, but is not yet effective.
The following published amendments are not mandatory for 2020 and have not been early adopted by ING Group. ING Group is still currently assessing the detailed impact of these amendments.
However, the implementation of these amendments is expected to have no significant impact on ING
Group’s Consolidated financial statements, apart from IBOR Phase 2 amendments, the impact of which is explained below.
The list of upcoming changes to IFRS, which are applicable for ING Group: Effective in 2021: In May 2020 the IASB issued amendments to IFRS 16 ‘Leases’: ‘Covid-19-Related Rent Concessions’ to provide lessees with an exemption from assessing whether a Covid-19-related rent concession is a lease modification. The amendments, endorsed by the EU, are effective for annual reporting periods beginning on or after 1 June 2020, with early application permitted. Once they become effective for
ING Group in 2021, the amendments will not have material impact on ING Group’s accounting policies, ING Group’s results or financial position. In 2020 ING Group did not receive rent concessions as a lessee. This is why the amendments were not relevant and, hence, not early adopted by ING
In August 2020, the IASB issued amendments to IFRS 9 ‘Financial Instruments’, IAS 39 ‘Financial
Instruments: Recognition and Measurement’, IFRS 16 ‘Leases’, IFRS 4 ‘Insurance Contracts’ and IFRS 7
Group applies Phase 2 amendments, certain additional disclosures will need to be provided.
The Phase 2 amendments are effective for annual reporting periods beginning on or after 1 January 2021, with early application permitted and have been endorsed by the EU.
ING Group did not early adopt Phase 2 amendments in 2020 as Phase 2 reliefs were largely not yet relevant for ING Group. During 2021, ING Group commenced the process of amending contracts
ING Group Annual Report 2020 261 which reference LIBORs that are at risk, with a focus on those being decommissioned by 31
December 2021 with alternative benchmark rates. This is the period when Phase 2 amendments will become relevant (and mandatorily effective) for ING Group.
• Amendments to IAS 16 ‘Property, Plant and Equipment’: Proceeds before Intended Use (issued in
• Amendments to IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’: Onerous
Instruments’ and amendments to IFRS 16 ‘Leases’ (issued in May 2020).
Although ING Group is currently assessing the detailed impact of the above amendments, it is expected that they will not have a significant impact on ING Group’s accounting policies, ING Group’s results or financial position.
For further discussion of the significant judgements and critical accounting estimates and assumptions in these areas, reference is made to the relevant parts in paragraph 1.7 ‘Financial instruments’ (specifically 1.7.3 for ‘Fair values of financial assets and liabilities’ and 1.7.8 ‘Impairment of financial assets’), 1.11 ‘Investments in associates and joint ventures’, 1.13 ‘Acquisitions, goodwill and other intangible assets’, 1.17 ‘Provisions, contingent liabilities and contingent assets’ of this note, section 1.6 ‘Other developments’, ‘Accounting for Targeted Longer-Term Refinancing Operations
ECB. Consequently, the rate under TLTRO is considered to be a market conforming rate and TLTRO
ING Group has a reasonable expectation that the lending targets will be met.
Significant judgements and critical accounting estimates and assumptions: Significant management judgement is exercised in determining the accounting treatment of TLTRO
transactions. In particular, ING Group applied judgement in: • assessing and concluding that in ING Group’s view the rate under TLTRO is considered to be a market conforming rate and, hence, accounting for TLTRO in accordance with IFRS 9; • selecting accounting policies regarding the calculation of the effective interest rate under TLTRO, including treatment of changes in expectations of meeting the lending targets; • defining the moment when ING Group has a reasonable expectation of meeting the targets;
• estimating future expected lending growth, which includes estimations around client behaviour.
ING Group classifies its financial assets in the following measurement categories: ▪ those to be measured subsequently at fair value (either through OCI, or through profit or loss); and
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows at initial recognition.
▪ FVOCI: Debt instruments that are held for collection of contractual cash flows and for selling the financial assets under a HtC&S business model, where the assets’ cash flows represent SPPI, are measured at FVOCI. Movements in the carrying amount are recognised in OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and presented in Investment income or Other income, based on the specific characteristics of the business model. Interest income from these financial assets is included in Interest income using the EIR method. Impairment losses are presented as a separate line item in the
▪ FVPL: Debt instruments that do not meet the criteria for AC or FVOCI are measured at FVPL. This includes debt instruments that are held-for-trading (presented separately as Trading assets)
option to investments which are considered strategic, consisting of investments that add value to
All financial assets and liabilities are recognised initially at fair value. The fair value of a financial instrument on initial recognition is generally its transaction price (that is, the fair value of the consideration given or received). However, if there is a difference between the transaction price and the fair value of financial instruments whose fair value is based on a valuation technique that uses significant unobservable inputs, the entire day one difference (a ‘Day One profit or loss’) is deferred and recognised in the statement of profit or loss over the life of the transaction until the transaction matures or until the observability changes. In all other cases, ING Group recognises the difference as a gain or loss at inception.
For certain financial assets and liabilities, quoted market prices are not available. For such instruments, fair value is determined using valuation techniques. These range from discounting of cash flows to various valuation models, where relevant pricing factors including the market price of underlying reference instruments, market parameters (volatilities, correlations and credit ratings), and customer behaviour are taken into account. ING Group maximises the use of market observable inputs and minimises the use of unobservable inputs in determining the fair value. It can be subjective dependent on the significance of the unobservable input to the overall valuation. All valuation techniques used are subject to internal review and approval. Most data used in these valuation techniques are validated on a daily basis when possible.
(CVA, DVA, also known as Bilateral Valuation Adjustments or BVA). Own issued debt and structured notes that are designated at FVPL are adjusted for ING Group’s own credit risk by means of a DVA.
Group (DVA) are included in the adjustment. All input data that is used in the determination of the
BVA is based on market implied data. Additionally, wrong-way risk (when exposure to a counterparty is increasing and the credit quality of that counterparty deteriorates) and right-way risk (when exposure to a counterparty is increasing and the credit quality of that counterparty improves) are taken into account in the measurement of the valuation adjustment.
If an embedded derivative is separated, the host contract is accounted for as a similar free-standing contract.
At the inception of the transaction ING Group documents the relationship between hedging instruments and hedged items, its risk management objective, together with the methods selected to assess hedge effectiveness. ING Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of the hedged items.
ING Group applies fair value hedge accounting to portfolio hedges of interest rate risk (macro hedging) under the EU carve-out. The EU carve-out macro hedging enables a group of derivatives (or proportions) to be viewed in combination and jointly designated as the hedging instrument and removes some of the limitations in fair value hedge accounting. ING Group applies fair value hedge accounting for portfolio hedges of interest rate risk (macro hedging) under the EU carve-out to its retail operations. The net exposures of retail funding (savings and current accounts) and retail lending (mortgages) are hedged. The hedging activities are designated under a portfolio fair value hedge on the mortgages. Changes in the fair value of the derivatives are recognised in the statement of profit or loss, together with the fair value adjustment on the mortgages (hedged items) insofar as attributable to interest rate risk (the hedged risk).
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in the Other Comprehensive Income. The gain or loss relating to the ineffective portion is recognised immediately in the statement of profit or loss. Amounts accumulated in the Other Comprehensive Income are recycled to the statement of profit or loss in the periods in which the hedged item affects net result. When a hedging instrument expires or is
Hedges of net investments in foreign operations are accounted for in a similar way to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in the Other Comprehensive Income and the gain or loss relating to the ineffective portion is recognised immediately in the statement of profit or loss. Gains and losses accumulated in the
As further explained in the ‘IBOR transition’ paragraph in the ‘Risk management’ section, the financial markets are going through a significant reform of interbank offered rates (IBOR) and financial institutions are obligated to implement a replacement of major interest rate reference rates. This process is at different stages, and is progressing at different speeds, across several major currencies.
Standards Board (IASB) has undertaken a two phase project. Phase 1 addresses those issues that affect financial reporting before the replacement of an existing benchmark (Phase 1 amendments to
IFRS were issued by the IASB in 2019). Phase 2 focuses on issues that may affect financial reporting when the existing benchmark rate is reformed or replaced Phase 2 amendments to IFRS were issued by the IASB in 2020.
In 2019, ING Group early adopted the Phase 1 amendments to IFRS which allowed ING Group 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.
More specifically, the following temporary reliefs are part of the Phase 1 amendments: ▪ Highly probable requirement for cash flow hedges
When performing the retrospective assessment hedges are allowed to pass the assessment even if actual results are outside the 80-125% range, during the period of uncertainty arising from the IBOR reform.
The amendments are relevant given that ING Group hedges and applies hedge accounting to benchmark interest rate exposure part of IBOR reform. Hedging instruments and most of hedged items continue to be indexed by the IBOR benchmark rates. Therefore, there is still uncertainty in 2020 over the timing and the amount of the replacement rate cash flows and, thus, temporary exceptions under Phase 1 continued to be relevant for ING Group in 2020. ING Group will cease to apply the amendments when this uncertainty is no longer present or when the hedging relationship is discontinued. Reference is made to note 39 ‘Derivatives and hedge accounting’ for the disclosures relating to the application of the amendments as part of Phase 1.
In 2020 ING Group did not early adopt Phase 2 amendments. Reference is made to paragraph 1.4.2
Derivative instruments that are used by ING Group as part of its risk management strategies, but which do not qualify for hedge accounting under ING Group’s accounting policies, are presented as non-trading derivatives. Non-trading derivatives are measured at fair value with changes in the fair value taken to the statement of profit or loss.
Securities purchased under agreements to resell (reverse repos), securities borrowings and similar agreements are not recognised in the consolidated statement of financial position. The consideration paid to purchase securities is recognised as Loans and advances to customers, Loans and advances to banks, Other financial assets at FVPL or Trading assets, as appropriate. The difference between the sale and repurchase price is treated as interest and amortised over the life of the agreement using the effective interest method for instruments that are not measured at FVPL.
Under the ECL model ING Group calculates the expected credit losses (ECL) by considering on a discounted basis the cash shortfall it would incur in case of a default and multiplying the shortfall by the probability of a default occurring. The ECL is the sum of the probability-weighted outcomes. The
ECL estimates are unbiased and include reasonable and supportable information about past events, current conditions, and forecasts of future economic conditions. ING Group’s approach leverages the
Advanced Internal Ratings Based (AIRB) models that are used for regulatory purposes. Adjustments are applied to make these models suitable for determining ECL. ECL is recognised on the balance sheet as loan loss provisions (LLP).
(with the exception of purchased or originated credit impaired (POCI) assets) and ECL is determined by the probability that a default occurs in the next 12 months (12 months ECL); ▪ Stage 2
Financial assets showing a significant increase in credit risk since initial recognition. For assets in Stage 2 ECL reflects an estimate on the credit losses over the remaining maturity of the asset (lifetime ECL); or
ING Group established a framework, incorporating quantitative and qualitative indicators, to identify and assess significant increases in credit risk (SICR). This is used to determine the appropriate ECL
of an asset at each reporting date is compared against its lifetime PD determined at the date of initial recognition. If the delta is above pre-defined absolute or relative thresholds the item is considered to have experienced a SICR. Consequently, the item moves from Stage 1 to Stage 2
(unless the item is credit-impaired). In these instances, items are no longer assigned a 12 month ECL
The definition of credit-impaired under IFRS 9 (Stage 3) is aligned with the definition of default used by ING Group for internal risk management purposes, which is also the definition used for regulatory purposes.
ING Group has established a quarterly process whereby forward-looking macroeconomics scenarios and probability weightings are developed for the purpose of ECL. ING Group applies data predominantly from a leading service provider (Oxford Economics (OE)) enriched with the internal
Stage 3 assets. Other credit-impaired assets subject to ECL measurement apply the individual assessment method.
For collective assessed assets, ING Group applies a model-based approach. ECL is determined by, expressed simplistically, multiplying the probability of default (PD) with the loss given default (LGD)
ING Group estimates ECL for individually significant credit-impaired financial assets within Stage 3 on an individual basis. ECL for these Individually assessed assets are determined using the discounted expected future cash flow method. To determine expected future cash flows, one or more scenarios are used. Each scenario is analysed based on the probability of occurrence and include forward looking information.
The best estimate of ECL is calculated as the weighted-average of the shortfall (gross carrying amount minus discounted expected future cash flow using the original EIR) per scenario, based on best estimates of expected future cash flows. Recoveries can arise from, among others, repayment of the loan, collateral recovery and the sale of the asset. Cash flows from collateral and other credit enhancements are included in the measurement of ECL of the related financial asset when it is part of or integral to the contractual terms of the financial asset and the credit enhancement is not recognised separately. For the individual assessment, with granular (company or asset-specific)
scenarios, specific factors can have a larger impact on the future cash flows than macroeconomic factors.
When a financial asset is credit-impaired, interest is no longer recognised based on the accrual income based on the gross carrying amount of the asset. Rather, interest income is calculated by applying the original EIR to the AC of the asset, which is the gross carrying amount less the related loan loss provision.
asset is determined based on lifetime ECL from initial recognition. POCI assets are recognised initially at an amount net of LLP and are measured at AC using a credit-adjusted effective interest rate. In subsequent periods any changes to the estimated lifetime ECL are recognised in profit or loss.
Debt forgiveness (or debt settlement) involves write-off but additionally involves the forgiveness of a legal obligation, in whole or in part. This means that ING Group forfeits the legal right to recover the debt. As a result, the financial asset needs to be derecognised. Distinction is made in situations where ING Group ends the relationship with the client and situations where ING Group (partially)
For debt instruments at FVOCI, the ECL is recognised in OCI, instead of deducted the carrying amount of the asset. ECL also reflects any credit losses related to the portion of the loan commitment that is expected to be drawn down over the remaining life of the instrument. The ECL on issued financial guarantee contracts, in scope of IFRS 9 and not measured at FVPL, are recognised as liabilities and presented in Other provisions. ECL are presented in profit or loss in Addition to loan loss provision.
Significant judgements and critical accounting estimates and assumptions: Considerable management judgement is exercised in determining the amount of LLP for financial assets assessed on both a collective and an individual basis. The need for management judgement has increased even further due to the Covid-19 pandemic. In particular, this judgement requires ING
are material, these assumptions are considered critical accounting assumptions. The sensitivity of these assumptions is assessed in the credit risk section of the ‘Risk Management’ section in the
The use of forward-looking macroeconomic scenarios in both collective and individual impairment assessments
Forward-looking macroeconomic scenarios are uncertain in nature. The process ING Group follows involves two internal groups, the Macroeconomics Scenarios Team and the Macroeconomics
Scenarios Expert Panel. The latter team consists of senior management representatives from the
Business, Risk and Finance. These groups review inputs obtained from a third party provider and subject these to internal expert challenge to ensure the inputs used in the models reflect ING Group’s view on the macro economy. The use of alternate forward-looking macroeconomic scenarios can produce significantly different estimates of ECL. This is demonstrated in the sensitivity analysis in the
Judgement is exercised in management’s evaluation of whether there is objective evidence that larger exposures are credit-impaired. Management judgement is required in assessing evidence of credit-impairment.
The increased uncertainty around ECL arising from Covid-19 in the use of forward-looking macroeconomic scenarios and determining significant increases in credit risk resulted in Covid-19 related management overlays and adjustments to the model-based ECL. The management adjustment related to payment holidays and management overlay related to time lag in expected defaults are EUR 638 million in total. Reference is made to the Credit risk paragraph in the ‘Risk management’ section of the Annual Report.
ING Group comprises ING Groep N.V. (the Parent Company), ING Bank N.V. and all other subsidiaries.
A list containing the information referred to in Section 379 (1), Book 2 of the Dutch Civil Code has been filed with the office of the Commercial Register of Amsterdam, in accordance with Section 379
An operating segment is a distinguishable component of ING Group, engaged in providing products or services, whose operating results are regularly reviewed by the Executive Board of ING Group and the Management Board Banking (together the Chief Operating Decision Maker (CODM)) to make decisions about resources to be allocated to the segments and assess its performance. A
The results and financial positions of all group companies that have a functional currency different from the presentation currency are translated into the presentation currency as follows: ▪ Assets and liabilities included in each statement of financial position are translated at the closing rate at the date of that statement of financial position; ▪ Income and expenses included in each statement of profit or loss are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
Significant judgements and critical accounting estimates and assumptions: The most significant estimates and assumptions relate to the assessment of impairment of the investment in TMB which involves estimations of value in use.
Management’s best estimate of TMB’s expected future earnings are based on forecasts derived from broker consensus over the short to medium term and TMB observable targets for steady state earnings into perpetuity. A capital maintenance charge is applied, which is management’s forecast of the earnings that need to be withheld in order for TMB to meet target regulatory requirements over the forecast period. Both of these factors are subject to a high degree of uncertainty.
Group and the cost of the item can be measured reliably.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: ▪ Fixed payments (including in-substance fixed payments), less any lease incentives receivable; ▪ Variable lease payments that are based on an index or a rate; ▪ Amounts expected to be payable by the lessee under residual value guarantees; ▪ The exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. This rate is approximated by using the risk free rate applicable to the lease term, the currency of the lease payment and jurisdiction, with the
The right-of-use asset is included in the statement of financial position line-item ‘Property and equipment’, the lease liability is included in the statement of financial position line-item ‘Other liabilities’. Refer to Note 9 ‘Property and equipment’ and Note 16 ‘Other liabilities’.
‘Leases’. Under this Standard a distinction was made between finance leases and operating leases for both lessees and lessors. A lease was considered a finance lease if it transfers substantially all risks and rewards of the ownership of the asset. All other leases were considered to be operating leases.
Leases entered into by ING Group as a lessee were primarily operating leases and therefore not recognised on the balance sheet. The total payments under operating leases were recognised in the statement of profit or loss on a straight-line basis over the period of the lease.
The initial accounting for the fair value of the net assets of the companies acquired during the year may be determined only provisionally as the determination of the fair value can be complex and the time between the acquisition and the preparation of the Financial statements can be limited. The initial accounting shall be completed within a year after acquisition. Adjustments to the fair value as at the date of acquisition of acquired assets and liabilities, that are identified within one year after acquisition are recognised as an adjustment to goodwill; any subsequent adjustment is recognised as income or expense. On disposal of group companies where control is lost, the difference between the sale proceeds and carrying value (including goodwill) and the unrealised results (including the currency translation reserve in equity) is included in the statement of profit or loss.
(that is, the group of cash generating units or CGUs) for the purpose of impairment testing. These groups of CGUs represent the lowest level at which goodwill is monitored for internal management purposes. Goodwill is tested for impairment by comparing the carrying value of the group of CGUs to the recoverable amount of that group of CGUs. The carrying value is determined as the IFRS net asset value including goodwill. In compliance with IAS 36 ‘Impairment of assets’, the carrying value is determined on a basis that is consistent with the way in which the recoverable amount of the CGU is determined. When the carrying values need to be allocated between Retail and Wholesale solvency
The review of impairment of non-financial assets reflects management’s best estimate of the future cash flows of the CGUs and the rates used to discount these cash flows, both of which are subject to uncertain factors.
Key assumptions used in estimating goodwill and software impairment are described in Note 10
Income tax on the result for the year consists of current and deferred tax. Income tax is recognised in the statement of profit or loss but it is recognised directly in equity if the tax relates to items that are recognised directly in equity.
Deferred tax assets are recognised when it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided for temporary differences arising from investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by ING Group and it is probable that the difference will not reverse in the foreseeable future. The tax effects of income tax losses available for carry forward are recognised as an asset where it is probable that future taxable profits will be available against which these losses can be utilised.
ING Group Annual Report 2020 280 cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the disposal group is recognised at the date of derecognition. Assets within the disposal group are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised. The assets of the disposal group classified as held for sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet.
Consolidated statement of profit or loss are restated and presented as discontinued operations for all periods presented. Furthermore, the individual assets and liabilities are presented in the Consolidated statement of financial position as Assets and liabilities held for sale and are no longer included in the usual line items in the Consolidated statement of financial position. Changes in assets and liabilities as a result of classification as held for sale are included in the notes in the line ‘Changes in composition of the group and other changes’.
Reorganisation provisions include employee termination benefits when ING Group is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage voluntary redundancy.
Critical accounting estimates and assumptions for the reorganisation provision are in estimating the amounts and timing of cash flows as the announced transformation initiatives are implemented over a period of several years. Reference is made to Note 15 ‘Provisions’.
The defined benefit obligation is calculated by internal and external actuaries through actuarial models and calculations using the projected unit credit method. This method considers expected future payments required to settle the obligation resulting from employee service in the current and prior periods, discounted using a high quality corporate bond rate. Inherent in these actuarial models are assumptions including discount rates, rates of increase in future salary and benefit levels, mortality rates, consumer price index and the expected level of indexation. The assumptions are based on available market data as well as management expectations and are updated regularly. The actuarial assumptions may differ significantly from the actual results due to changes in market conditions, economic and mortality trends, and other assumptions. Any changes in these assumptions could have a significant impact on the defined benefit plan obligation and future pension costs.
For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as staff expenses in the profit or loss when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
Some group companies provide other post-employment benefits to former employees. The entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment using an accounting methodology similar to that for defined benefit pension plans.
The proceeds from leasing out assets under operating leases are recognised on a straight-line basis over the life of the lease agreement. Lease payments received in respect of finance leases when ING
service providers in order to perform the service for ING Group’s customers. Costs are generally presented as ‘Commission expenses’ if they are specific, incremental, directly attributable and identifiable to generate commission income.
ING Group only engages in share-based payment transactions with its staff and directors. Sharebased payment expenses are recognised as a staff expense over the vesting period. A corresponding increase in equity is recognised for equity-settled share-based payment transactions. A liability is recognised for cash-settled share-based payment transactions. The fair value of equity-settled share-based payment transactions are measured at the grant date, and the fair value of cashsettled share-based payment transactions are measured at each balance sheet date. Rights granted will remain valid until the expiry date, even if the share based payment scheme is discontinued. The rights are subject to certain conditions, including a pre-determined continuous period of service.
The parent company accounts of ING Groep N.V. are prepared in accordance with the financial reporting requirements included in Part 9 of Book 2 of the Dutch Civil Code. In accordance with subsection 8 of section 362, Book 2 of the Dutch Civil Code, the recognition and measurement principles applied in the Parent company accounts are the same as those applied in the Consolidated financial statements.
Notes to the Consolidated statement of financial position 2 Cash and balances with central bank
Further details are reported in Note 12 ‘Deposits from Banks’ and in the consolidated statement of
Reference is made to Note 42 ‘Transfer of financial assets, assets pledged and received as collateral’ for restrictions on Cash balances with central banks.
Cash advances, overdrafts and other balances 0 0 6 4 6 5
EUR 6 million (2019: EUR 24 million). Reference is made to Note 7 ‘Loans and advances to customers’
As at 31 December 2020, all loans and advances to banks are non-subordinated.
ING Group’s exposure to (reverse) repurchase transactions is included in the following lines in the statement of financial position:
Loans and receivables measured at mandatorily measured at fair value through profit or loss 41,735 38,985
Securities purchased under agreements to resell (reverse repos), securities borrowings and similar agreements are not recognised in the consolidated statement of financial position. Based on the business model assessment and counterparty, the consideration paid to purchase securities is recognised as Loans and advances to customers, Loans and advances to banks, Other financial assets at FVPL or Trading assets.
Securities sold subject to repurchase agreements (repos), securities lending and similar agreements continue to be recognised in the consolidated statement of financial position. The counterparty liability is measured at FVPL (designated) and included in Other financial liabilities at FVPL if the asset is measured at FVPL. Otherwise, the counterparty liability is included in Deposits from banks, Customer deposits, or Trading, as appropriate.
Derivatives used in - hedges of net investments in foreign operations 69 23
‘Financial assets designated at fair value through profit or loss’ is partly economically hedged by credit derivatives. The hedges do not meet the criteria for hedge accounting and the loans are recorded at fair value to avoid an accounting mismatch. The maximum credit exposure of the loans and receivables included in ‘Financial assets designated at fair value through profit or loss’ approximates its carrying value. The cumulative change in fair value of the loans attributable to changes in credit risk is not significant.
Financial assets at fair value through other comprehensive income by type
As at 31 December 2020 ING holds approximately 13% (2019: 13%) of the shares of Bank of Beijing, a bank listed on the stock exchange of Shanghai. As per regulatory requirements set by China Banking and Insurance Regulatory Commission, ING, as a shareholder holding more than 5% or more of the shares, is required to supply additional capital when necessary. No request for additional capital was received in 2020 (2019: nil).
Changes in the composition of the group and other 1 Fair value through other comprehensive income debt instruments includes both debt securities and loans and advances.
In 2020, changes in unrealised revaluations of equity securities decreased mainly related to negative revaluation of the stake in Bank of Bejing following a decline in share price (EUR -339 million).
In 2020, transfers and reclassifications of EUR -107 million mainly relates to ING’s investment in Visa preference series C shares (EUR -116 million) that have been reclassified from equity at fair value through other comprehensive income to debt securities at mandatorily fair value through profit or loss'
ING Group’s exposure to debt securities is included in the following lines in the statement of financial position: Exposure to debt securities
ING Group’s total exposure to debt securities (excluding debt securities held in the trading portfolio) of
Approximately 81% (2019: 90%) of the exposure in the ABS portfolio is externally rated AAA, AA or A, and the remaining positions are largely unrated. There are no borrowed debt securities recognised in the statement of financial position.
Loans and advances to customers and Loans and advances to banks include finance lease receivables and are detailed as follows: Finance lease receivables
Expected credit losses for uncollectable finance lease receivables of EUR 164 million as at 31 December 2020 (2019: EUR 136 million) is included in the loan loss provision. The loan loss provision for finance lease receivables is classified into the following loan loss provision stages; stage 1: EUR 8 million (2019: EUR 2 million), stage 2: EUR 25 million (2019: EUR 6 million), and stage 3: EUR 131 million (2019: EUR
ING Group has a 23% investment in TMB Bank Public Company Limited (hereafter: TMB), a bank listed on the Stock Exchange of Thailand. TMB is providing products and services to Wholesale, Small and
Medium Enterprise (SME), and Retail customers. In December 2019 TMB merged with Thanachart Bank and became Thailand’s sixth largest bank.
Use (‘VIU’). Fair value less costs of disposal is based on observable share price. The VIU calculation uses discounted cash flow projections based on management’s best estimates. VIU is derived using a
Key assumptions used in the VIU calculation as at 31 December 2020 (and as at 30 September 2020 resulting in impairment)
The value in use is determined using a valuation model which is subject to multiple management assumptions. The key assumptions, i.e. those to which the overall result is most sensitive to, are the following:  Expected future earnings of TMB: based on forecasts derived from broker consensus over the short to medium term and TMB observable targets for steady state earnings into perpetuity. A capital maintenance charge is applied, which is management’s forecast of the earnings that need to be withheld in order for TMB to meet target regulatory requirements over the forecast period;  Terminal growth rate: 1.6% for periods after 2024, consistent with current long term government bond yield in Thailand as a proxy for a risk-free rate (30 September 2020: 3.0% consistent with long term forecasts of GDP growth in Thailand);  Discount rate (cost of equity): 8.49%, based on the capital asset pricing model (CAPM) calculated for TMB, using current market data (30 September 2020: 9.8%).
Included in Other investments in associates and joint ventures are mainly financial services and financial technology funds or vehicles operating predominantly in Europe.
Other investments in associates and joint ventures represents a number of associates and joint ventures that are individually not significant to ING Group.
Share of results from associates and joint ventures of EUR 66 million (2019: EUR 82 million) as included in the table above is mainly attributable to results of TMB of EUR 70 million (2019: EUR 77 million).
‘Share of results from associates and joint ventures’ and ‘impairments of associates and joint ventures’
are presented separately in the face of the consolidated statement of profit or loss. In 2020 impairments is predominantly attributable to TMB.
Amounts recognised in the statement of profit or loss for the year -12 -7
The purchase costs amounted to EUR 948 million (2019: EUR 940 million). Cost or the purchase price less accumulated depreciation and impairments would have been EUR 435 million (2019: EUR 417 million) had property in own use been valued at cost instead of at fair value.
Accumulated impairments as at 31 December -2 -1 -3 -1 -5 -1
Net carrying value as at 31 December 281 307 561 633 842 940
Effect of changes in accounting policy due to the implementation of IFRS 16 1,138 70 72 1,280
Net carrying value as at 31 December 1,129 1,323 89 96 38 57 1,255 1,476
Right-of-use assets relate to leased land and buildings, cars, data-processing equipment and other leases.
The reported impairment losses of EUR 35 million result from change in use of right-of-use property and the anticipation of a change in the post-pandemic way of working.
Accumulated amortisation as at 31 December -1,621 -1,641 -9 -7 -1,630 -1,648
Accumulated impairments as at 31 December -310 -175 -9 -37 -2 -522 -11
Net carrying value as at 31 December 533 907 846 958 15 52 1,394 1,916 1 Impairments of intangible assets are presented within Other operating expenses in the statement of Profit or Loss.
Goodwill is tested for impairment annually in the fourth quarter by comparing the recoverable amount of each goodwill-carrying CGU with its carrying amount. The key assumptions used in the calculation of the recoverable amounts are included in the table above. In addition ING Group tests goodwill whenever a triggering event is identified.
Belgium segment and EUR 8 million in Corporate Line segment) and on the CGU Wholesale Banking of
For both CGUs the impairment resulted from the negative developments in the macro-economic outlook in the context of the Covid-19 pandemic. In addition, the applicable discount rate is also affected by the deteriorated economic and risk environment. The discount rate used to estimate the value in use of the CGU Belgium as at 30 June 2020 was 9.54 % (31 December 2019: 6.94 %). The discount rate used to estimate the value in use of CGU Wholesale Banking, which is based on the weighted average of the discount rates of various local businesses as Wholesale Banking is a global business line, was at 30 June 9.38% (31 December 2019: 7.29%). The terminal growth rate used to estimate the value in use of the CGU Belgium was 0.00% at 30 June 2020 and it was not changed compared to Q4 2019 (31 December 2019: 0.00 %). The terminal growth rate used to estimate the value in use of CGU Wholesale Banking was at 30 June 0.85% (31 December 2019: 0.69%).
For each of the other groups of CGUs the recoverable amount exceeds the carrying value of the CGUs as at 31 December 2020 and therefore no impairment is required.
VIU of a CGU, local conditions and requirements determine the capital requirements, discount rates, and terminal growth rates. These local conditions and requirements determine the ability to upstream excess capital and profits to ING Group. The discount rate calculation includes other inputs such as equity market premium, country risk premium, and long term inflation which are based on market sources and management’s judgement. The long term growth rate for EU-countries is based on long term risk-free rate by reference to the yield of a composite index consisting of Euro generic government bonds, with a maturity of 30 years. For other countries, the growth rate includes long term inflation rate obtained from market sources.
Other changes in goodwill in 2020 relate to changes in currency exchange rates of CGUs Wholesale
Deposits from banks includes non-subordinated debt from banks, except for amounts in the form of debt securities.
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 of the previous TLTRO (TLTRO II).
Under the conditions of the program, interest rates can be as favorable as 50 basis points below the average interest rate on the Deposit Facility rate, but in any case not higher than -1%. Such a rate would apply to all TLTRO III operations outstanding over the discrete periods between 24 June 2020 and 23 June 2021 (special interest period 1), and between 24 June 2021 and 23 June 2022 (special interest period 2), for banks that show growth in lending volumes equal to or above 0% between 1
Main Refinancing Operations rate over the same period. In the period preceding and following the special interest periods the interest will be in a corridor between the Deposit Facility and Main
Refinancing Operations rates, depending to what extent ING meets the lending growth conditions of the TLTRO III program. Special interest period 2 was announced by the ECB in its press release in
EUR 164 million was recognised in the statement of profit and loss (please refer to Note 20 Net interest income). Interest income recognised in 2020 for TLTRO III is based on -50 bps (the Main Refinancing
Operations rate minus 50 bps), which is in substance an unconditional rate during June 2020 – June 2021 and does not depend on whether the lending targets are achieved. At 31 December 2020 ING
assessed that it is not yet highly probable that lending targets will be met. Any conditional benefit from TLTRO III has not been included yet.
As at 31 December 2020, the change in the fair value of financial liabilities designated at fair value through profit or loss attributable to changes in credit risk is EUR 141 million (2019: EUR 139 million) on a cumulative basis. This change has been determined as the amount of change in fair value of the financial liability that is not attributable to changes in market conditions that gave rise to market risk
In 2020, Other provisions – other includes provisions of EUR 17 million (2019: EUR 25 million) that relate to credit replacement facilities and EUR 75 million (2019: EUR 93 million) that relate to non-credit replacement off balance facilities.
As at 31 December 2020, amounts expected to be settled within twelve months amount to EUR 139 million (2019: EUR 146 million). The amounts included in Other provisions are based on best estimates with regard to amounts and timing of cash flows required to settle the obligation.
Lease liabilities includes primarily liabilities relating to Right of use assets. Reference is made to Note 9
More than 1 year but less than 2 years 8,339 10,358
More than 3 years but less than 4 years 2,731 6,321
More than 1 year but less than 2 years 3,050 3,126
More than 2 years but less than 3 years 1,526 3,041
More than 4 years but less than 5 years 91 144
Subordinated loans issued by ING Groep N.V. include bonds issued to raise Tier 1 and Tier 2 (CRD IV
Tier 2 securities via a tender. ING Groep N.V. redeemed USD 1 billion 6.000% Perpetual Additional Tier 1
Contingent Convertible Capital Securities and USD 700 million 6.125% Perpetual Debt Securities in April.
The average interest rate on subordinated loans is 3.73% (2019: 4.38%). The interest expense during the year 2020 was EUR 612 million (2019: EUR 660 million).
Other reserves - Revaluation reserve: Equity securities at FVOCI 1,181 1,580 1,914 - Revaluation reserve: Debt instruments at FVOCI 296 299 363 - Revaluation reserve: Cash flow hedge 1,450 1,208 604 - Revaluation reserve: Property in own use 221 253 204 - Net defined benefit asset/liability remeasurement reserve -307 -336 -394 - Share of associates and joint ventures and other reserves 3,246 3,189 2,940
Perpetual Additional Tier 1 Contingent Convertible Capital Securities which can, in accordance with their terms and conditions, convert by operation of law into ordinary shares if the conditions to such conversion are fulfilled. As a result of this conversion, the issued share capital can increase by no more than 83 million ordinary shares (2019: 306 million ordinary shares). Reference is made to Note 18
All ordinary shares are registered. No share certificates have been issued. The par value of ordinary shares is EUR 0.01. The authorised ordinary share capital of ING Groep N.V. currently consists of 14,729 million ordinary shares. As at 31 December 2020, 3,901 million ordinary shares were issued and fully paid.
As at 31 December 2020, 0.6 million ordinary shares (2019: 0.9 million and 2018: 1.1 million) of ING
Beijing EUR 35 million and shares in EquensWorldLine EUR 101 million. The EUR -472 million transfer of revaluation reserve to retained earnings is mainly related to the sale of shares in Kotak Mahindra Bank
In 2018, the Equity securities at FVOCI revaluation reserve decreased by EUR 517 million, mainly due to the revaluation of shares in Bank of Beijing EUR -549 million, partly offset by revaluation of shares in
Realised gains/losses transferred to the statement of profit or loss -1 -138
The Share of associates, joint ventures and other reserves includes non-distributable profits from associates and joint ventures of EUR 644 million (2019: EUR 624 million). Other reserves includes a statutory reserve of EUR 1,912 million (2019: EUR 1,818 million) related to the former Stichting Regio
Bank and the former Stichting Vakbondsspaarbank SPN and a legal reserve of EUR 688 million (2019: EUR 736 million) related to own developed software.
Changes in the composition of the group mainly relate to Payvision. In 2018 ING Bank obtained control over Payvision Holding B.V. (Payvision) by acquiring 75% of its shares. The share purchase agreement included a put option exercisable by the original shareholders and a call option exercisable by ING for the remaining 25% shares. The put and call option led to the recognition of a financial liability with initial recognition through shareholders’ equity of EUR 87 million related to Payvision.
As at 31 December 2020, an amount of EUR 1,912 million (2019: EUR 1,818 million; 2018: EUR 1,638 million) related to the former Stichting Regio Bank and the former Stichting Vakbondsspaarbank SPN is included.
In addition to the legal and regulatory restrictions on distributing dividends from subsidiaries, associates and joint ventures to ING Groep N.V. there are various other considerations and limitations that are taken into account in determining the appropriate levels of equity in the Group’s subsidiaries, associates and joint ventures. These considerations and limitations include, but are not restricted to, minimum capital requirements that are imposed by industry regulators in the countries in which the subsidiaries, associates and joint ventures operate, or other limitations which may exist in certain countries and may or may not be temporary in nature. It is not possible to disclose a reliable quantification of these limitations. For an overview of the minimal capital requirements of ING Group refer to the ‘Capital Management’ section.
Without prejudice to the authority of the Executive Board to allocate profits to reserves and to the fact that the ordinary shares are the most junior securities issued by ING Groep N.V., no specific dividend payment restrictions with respect to ordinary shares exist. The European Central Bank has recommended banks in December 2020 to limit dividend distributions out of cumulative 2019 and 2020 profits, given the persisting uncertainty over the economic impact the Covid-19 pandemic.
Pursuant to the Articles of Association of ING Groep N.V. the authorised cumulative preference share capital consists of 4.6 billion cumulative preference shares, of which none have been issued. The par value of these cumulative preference shares is EUR 0.01.
Euro short-term rate (€STR) as calculated by the European Central Bank during the financial year for which the distribution is made; this percentage being weighted on the basis of the number of days for which it applies, and increased by 2.585 percentage points.
Interest income on loans 15,763 19,318 18,985 Interest expense on deposits from banks 177 361 362
Interest income on financial assets at fair value through OCI 512 615 554 Interest expense on customer deposits 1,417 2,957 2,671
Interest income on debt securities at amortised cost 508 673 780 Interest expense on debt securities in issue 1,732 2,350 2,254
Negative interest on liabilities 678 422 453 Negative interest on assets 353 349 412
Total interest income using effective interest rate method 20,854 25,347 25,268 Interest expense on non-trading derivatives (hedge accounting) 3,198 4,615 4,826
Total interest expense using effective interest rate method 7,489 11,291 11,235
Interest income on non-trading derivatives (no hedge accounting) 1,154 1,181 1,059 Interest expense on financial liabilities at fair value through profit or loss 514 1,695 1,578
Total interest income 22,698 28,454 28,148 Interest expense other 44 54 33
Valuation results on assets and liabilities designated at FVPL (excluding trading) -123 -358 366
Securities trading results includes the results of market making in instruments such as government securities, equity securities, corporate debt securities, money-market instruments, and interest rate derivatives such as swaps, options, futures, and forward contracts.
The portion of trading gains and losses relating to trading securities still held as at 31 December 2020 amounts to EUR -690 million (2019: EUR -82 million; 2018: EUR 396 million).
Other trading results include the results of trading loans and funds entrusted.
Furthermore, derivatives trading results is also impacted by fair value movements arising from changes in credit spreads (CVA and DVA), bid offer spreads, model risk and incremental cost of funding on derivatives (FVA and CollVA). As result of the economic consequences of the Covid-19 pandemic,
ING also observed significant widening of the spreads resulting in increased negative fair value changes. As markets stabilised in the second half of 2020 and spreads tightened, the fair value changes decreased again.
In 2020, Valuation results on assets and liabilities designated at fair value through profit or loss
Income from and fair value gains/losses on investment properties 1 27 4
In 2020 ING realized a EUR -3 million loss on the sale of Cel Data Services N.V. against net assets disposed of EUR 4 million. Cel Data Services N.V. is active in ATM services including cash loading and ICT
managed services for ING’s Belgian retail branches, other Belgian financial institutions and retail shops.
The Result on disposal of group companies includes the result (fair value less cost to sell) on the sale of part of the ING Lease Italy business amounting to EUR -123 million, which was recognised in 2018 and a final result of EUR -2 million recognised in 2019.
25 Net result on derecognition of financial assets measured at amortised cost
ING Groep N.V. has granted option rights on ING Groep N.V. shares and conditional rights on shares to a number of senior executives (members of the Executive Board, general managers and other officers nominated by the Executive Board), and to a considerable number of employees of ING Group. The purpose of the option and share schemes, apart from promoting a lasting growth of ING Group, is to attract, retain and motivate senior executives and staff.
Performance Plan (LSPP). The entitlement to the LSPP share awards is granted conditionally. If the participant remains in employment for an uninterrupted period between the grant date and the vesting date, the entitlement becomes unconditional, with the exception of the upfront shares which are immediately vested upon grant. Additionally, a condition before vesting is applied to performance shares until 2018. As of 2019, this performance condition is no longer applicable. Upfront and deferred shares awarded to the Management Board members of ING Group as well as identified staff, have a retention obligation that must be adhered to upon vesting, typically a minimum retention of 12 months applies. ING has the authority to apply a holdback to awarded but unvested shares and a clawback to vested shares.
The fair value of share awards granted is recognised as an expense under Staff expenses and is allocated over the vesting period of the share awards. The fair value calculation takes into account the current stock prices, expected volatilities and the dividend yield of ING shares.
EUR 10 million (2019: EUR 15 million; 2018: EUR 29 million). These costs are expected to be recognised over a weighted average period of 1.6 years (2019: 1.4 years; 2018: 1.4 years).
The weighted average share price at the date of exercise for options exercised during 2020 is EUR 5.73
Addition to / (unused amounts reversed of) provision for reorganisations 149 6 4
Resolution Fund (SRF), local bank taxes and local resolution funds. Included in Regulatory costs for 2020, are contributions to DGS of EUR 413 million (2019: EUR 362 million; 2018: EUR 364 million) mainly related to the Netherlands, Germany, Belgium, Poland, and Spain and contributions to the SRF and local resolution funds of EUR 277 million (2019: EUR 239 million; 2018: EUR 208 million).
In 2020 local bank taxes decreased by EUR 6 million from EUR 420 million in 2019 to EUR 414 million
Fees of Group’s auditors 1 The Group’s auditors did not provide any non-audit services.
EUR 35 million related to intangible assets in the payments and cash management business.
2019 and 2018 impairment losses on software and intangible assets relate to rescoping of IT
Included in Addition to / (unused amounts reversed of) other provisions in 2020 are movements mainly in the litigation provision and the general provision for cybercrime in the Netherlands. Reference is made to Note 15 ‘Provisions’ and Note 45 ‘Legal proceedings’.
Public Prosecution Service of EUR 775 million. The settlement related to previously disclosed investigations regarding various requirements for client on-boarding and the prevention of money laundering and corrupt practices. Reference is made to Note 45 ‘Legal proceedings’.
ING Group Annual Report 2020 312 29 Earnings per ordinary share
Effect of dilutive instruments: Stock option and share plans 2.2 0.5 1.5
In respect of 2020 - Interim dividend, paid in February 2021 0.12 468
In March 2020, ING Group announced that it will suspend any payment of dividends until 1 October 2020 following an industry wide recommendation of the ECB. The ECB subsequently updated their recommendation, lastly in December 2020, extending the timeframe to 1 October 2021. Final dividend 2019 was therefore not paid in 2020.
ING paid in February 2021 a cash-only interim dividend of EUR 468 million (EUR 0.12 per share). This amount is equal to 15% of adjusted net profit for 2020, in line with the ECB recommendation of 15
Refer to note 51 Capital Management for more information about the change in ING’s dividend policy and the ECB recommendations regarding dividend payments
ING Group Annual Report 2020 313 31 Net cash flow from operating activities
Adjusted for: - Depreciation and amortisation 829 789 520 - Addition to loan loss provisions 2,675 1,120 656 - Other non-cash items included in result before tax 1,261 32 -1,763
Changes in: – Loans and advances to banks, not available on demand 10,033 -1,338 -777
– Deposits from banks, not payable on demand 43,044 -2,574 566
– Assets designated at fair value through profit or loss -1,369 -7 -725
– Other financial liabilities at fair value through profit or loss 1,189 -12,235 10,522
Net cash flow from/(used in) operating activities 101,243 13,055 6,915 32 Changes in liabilities arising from financing activities
Cash and cash equivalents at end of year 111,566 54,031 47,529
Treasury bills and other eligible bills included in trading assets 0 0 17
Included in cash and cash equivalents: – Loans and advances to banks 9,266 9,304 5,903
Not included in cash and cash equivalents: – Loans and advances to banks 16,098 25,832 24,519
ING Group’s segments are based on the internal reporting structures by lines of business.
Segments of the Banking results by line of business Main source of income
Corporate Line includes the isolated legacy costs (mainly negative interest results) caused by the replacement of short-term funding with long-term funding during 2013 and 2014. ING Group applies a system of capital charging for its banking operations in order to create a comparable basis for the results of business units globally, irrespective of the business units’ book equity and the currency they operate in.
As from the financial year 2020 the information presented to the Executive Board is no longer based on underlying results but on IFRS as endorsed by the EU. Previously monitoring and evaluation of ING
Underlying result was derived by excluding from IFRS the following: special items, the impact of divestments and results from former insurance related activities. In 2020 and 2019 no special items, divestments or results from former insurance related activities were recorded anymore. 2018 included a special item of EUR 775 million related to the aforementioned settlement agreement, as well as a
The information presented in this note is in line with the information presented to the Executive Board of ING Group and Management Board Banking.
– Net fee and commission income 3,011 -0 3,011 2,868 -0 2,868 2,803 -5 2,798
– Total investment and other income 1,034 -12 1,022 1,352 8 1,360 1,350 112 1,462
– Addition to loan loss provisions 2,675 -0 2,675 1,120 0 1,120 656 0 656
– Addition to loan loss provisions 157 514 57 593 1,351 2 2,675 91 186 -53 364 532 -0 1,120 -41 164 -27 350 210 -1 656 1. As of 2020 consolidated results of ING Group are based on IFRS as adopted by the European Union (IFRS-EU), and not on underlying results anymore; prior period figures have been adjusted to conform to current year presentation.
2. As from 2020 reporting, results of former Insurance activities are included in Corporate Line; prior period figures have been adjusted.
2. As from 2020 financials of Philippines are reported in Growth Markets, while previously Wholesale Banking in Philippines was reported in WB Rest of World; prior period figures have been adjusted.
Europe, North America, Latin America, Asia and Australia. A geographical area is a distinguishable component of the 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 geographical areas operating in other economic environments. The geographical analyses are based on the location of the office from which the transactions are originated and do not include countries where ING only has representation offices. The Netherlands is ING Group’s country of domicile.
Belgium Belgium ING België N.V. Wholesale / Retail 7,397 7,694 8,248 2,581 2,721 2,807 133,843 122,546 120,589 156 735 866 61 236 275 66 258 71
Rest of Europe Poland ING Bank Slaski S.A Wholesale / Retail 9,425 8,968 8,829 1,399 1,344 1,229 40,928 37,220 33,040 438 533 525 131 141 128 232 166 169
Spain Branch of ING Bank N.V. Wholesale / Retail 1,228 1,233 1,201 679 706 600 29,899 26,118 23,757 104 249 195 37 72 71 52 90 61
Russia ING Bank (Eurasia) Z.A.O. Wholesale 297 293 277 51 93 82 1,035 1,499 1,449 3 68 25 0 22 3 -3 49 13
Hungary Branch of ING Bank N.V. Wholesale 131 138 141 43 24 40 1,092 1,299 1,227 6 -7 5 2 2 3 1 2 2
Ukraine PJSC ING Bank Ukraine Wholesale 108 111 109 26 43 36 335 481 368 16 31 22 3 9 3 3 6 4
Austria Branch of ING DiBa A.G. Wholesale / Retail 332 279 235 75 80 85 1,840 1,441 753 0 0 18 -5 1 6 -14 1 -12
Ireland Branch of ING Bank N.V. Wholesale 50 48 47 72 71 68 2,051 2,575 2,868 66 58 65 8 8 8 8 7 6
Switzerland Branch of ING Bank N.V. Wholesale 256 257 244 187 234 257 7,939 8,577 8,266 88 126 169 13 -36 35 14 22 6 1 Public subsidies received, as defined in article 89 of the CRD IV, amounts to EUR 0.3 million (2019: EUR 0.3 million; 2018: EUR 0.5 million).
Average number of employees at full time equivalent basis Total Income Total assets Result before tax Taxation Tax paid
Japan Branch of ING Bank N.V. Wholesale 32 33 32 29 31 36 3,104 5,109 2,300 -1 22 19 -1 8 5 2 10 3
Singapore Branch of ING Bank N.V. Wholesale 608 592 546 353 349 340 24,498 27,982 32,222 42 76 176 8 13 21 7 22 12
Macau Payvision Macau Ltd. Wholesale 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Hong Kong Branch of ING Bank N.V. Wholesale 122 128 122 92 96 110 7,030 7,350 6,975 -9 38 52 -1 7 8 15 2 12
Taiwan Branch of ING Bank N.V. Wholesale 34 34 33 36 26 23 3,160 2,873 2,839 19 10 7 4 0 0 1 3 -2
Indonesia PT ING Securities Indonesia In liquidation 0 0 3 0 0 0 5 6 6 0 0 0 0 0 0 0 0 0
Malaysia Branch of ING Bank N.V. Wholesale 6 5 5 1 1 1 141 166 139 -1 0 0 0 0 0 0 0 0
Other Mauritius ING Mauritius Ltd. In liquidation 0 0 0 0 1 0 1 920 0 0 1 0 0 0 0 0 0
The lower tax charge in Australia is caused by a release of a tax provision after concluding a settlement with the Australian Tax Authorities on an issue related to former Insurance activities, which issue was fully indemnified by NN Group.
The higher tax charges in Poland and Belgium are mainly caused by non-deductible regulatory- and other costs.
Additional notes to the Consolidated financial statements 36 Pensions and other post-employment benefits
Most group companies sponsor defined contribution pension plans. The assets of all ING Group’s defined contribution plans are held in independently administered funds. Contributions are generally determined as a percentage of remuneration. Contributions, including the defined contribution plan in the Netherlands, are principally determined as a percentage of renumeration. These plans do not give rise to provisions in the statement of financial position, other than relating to short-term timing differences included in other assets/liabilities.
ING Group provides other post-employment benefits to certain former employees. These are primarily discounts on ING products.
Presented as: The most recent (actuarial) valuations of the plan assets and the present value of the defined benefit obligation were carried out as at 31 December 2020. The present value of the defined benefit obligation, and the related current service cost and past service cost, were determined using the projected unit credit method.
Changes in the fair value of plan assets for the period were as follows: Changes in fair value of plan assets
Remeasurements: Return on plan assets excluding amounts included in interest income 246 274
Groep N.V. (2019: nil). During 2020 and 2019 there were no purchases or sales of assets between ING
Changes in the present value of the defined benefit obligation and other post-employment benefits for the period were as follows:
In 2020, EUR 246 million remeasurement of plan assets that is recognised as a gain in other comprehensive income is driven by higher yields on investments.
The EUR -190 million actuarial losses arising from changes in financial assumptions in the calculation of the defined benefit obligation are mainly due to a decrease in discount rates.
The accumulated amount of remeasurements recognised directly in Other comprehensive income is
The discount rate is the weighted average of the discount rates that are applied in different regions where ING Group has defined benefit pension plans (weighted by the defined benefit obligation). The discount rate is based on a methodology that uses market yields on high quality corporate bonds of the specific regions with durations matching the pension liabilities as key input. Market yields of high
ING Group Annual Report 2020 324 quality corporate bonds reflect the yield on corporate bonds with an AA rating for durations where such yields are available. An extrapolation is applied in order to determine the yield to the longer durations for which no AA-rated corporate bonds are available. As a result of the limited availability of long-duration AA-rated corporate bonds, extrapolation is an important element of the determination of the discount rate. The weighted average discount rate applied for net defined benefit asset/liability for 2020 was 1.0% (2019: 1.5%) based on the pension plan in the Netherlands, Germany, Belgium, The
The sensitivity analysis calculates the financial impact on the defined benefit obligation of an increase or decrease of the weighted averages of each significant actuarial assumption, all other assumptions held constant. In practice, this is unlikely to occur, and some changes of the assumptions may be correlated. Changes to mortality, expected rate of salary increase, and indexation would have no material impact on the defined benefit obligation. The most significant impact would be from a change in the discount rate. An increase or decrease in the discount rate of 1% creates an impact on the defined benefit obligation of EUR-461 million and EUR 586 million, respectively.
For 2021 the expected contributions to defined benefit pension plans are EUR 31 million.
The benefit payments for defined benefit and other post-employment benefits expected to be made by the plan between 2021-2025 are estimated to be between EUR 110 million and EUR 138 million per year. From 2026 to 2030 the total payments made by the plan are expected to be EUR 724 million.
Presented in the statement of financial position as: – deferred tax liabilities -640 -695
‘Other’ a deferred tax amount for right-of-use assets of EUR 370 million (1 January 2019: EUR 320 million) and a deferred tax amount for lease liabilities of EUR -376 million (1 January 2019: EUR -323 million).
More than 5 years but less than 10 years 92 92 8 0
As at 31 December 2020 and 31 December 2019, ING Groep N.V. had no significant temporary differences associated with the parent company’s investments in subsidiaries as any economic benefit from those investments will not be taxable at parent company level.
The weighted average statutory tax rate in 2020 (25.6%) is comparable to that of 2019.
Included in “Adjustments to prior periods” is a release of a tax provision of EUR -68 million after concluding a settlement with the Australian tax authorities on an issue related to former insurance activities, which issue was fully indemnified by NN Group.
The weighted average statutory tax rate in 2019 was equal to the rate of 25.9% in 2018.
The effective tax rate of 28.6% in 2019 was higher than the weighted average statutory tax rate. This was mainly caused by a high amount of expenses non-deductible for tax purposes with respect to interest on additional Tier 1 securities and non-deductible bank tax in the Netherlands and regulatory expenses non-deductible for tax purposes in some other European countries.
The effective tax rate of 29.6% in 2018 was significantly higher than the weighted average statutory tax rate. This was mainly caused by a high amount of expenses non-deductible for tax purposes (tax amount: EUR 346 million).
The contingent liability (also disclosed in note 44 ‘Contingent liabilities’) in connection with taxation in the Netherlands refers to a possible obligation arising from the deduction from Dutch taxable profit of losses incurred by ING Bank in the United Kingdom in previous years. The existence of this obligation will be confirmed only by the occurrence of future profits in the United Kingdom.
The estimated fair values represent the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is a market-based measurement, which is based on assumptions that market participants would use and takes into account the characteristics of the asset or liability that market participants would take into account when pricing the asset or liability.
The Covid-19 pandemic impacted the global financial markets in 2020. In the beginning of 2020, ING
Pricing Model Committee (TPMC) and Model Risk Management Committee (MRMC). All relevant committees meet on a regular basis (monthly/quarterly), where agenda covers the aforementioned valuation controls.
Valuation adjustments are an integral part of the fair value. They are included as part of the fair value to provide better estimation of market exit value on measurement date. ING considers various valuation adjustments to arrive at the fair value including Bid-Offer adjustments, Model Risk adjustments, Credit Valuation Adjustments (CVA), Debt valuation Adjustments (DVA), including DVA on derivatives and own issued liabilities and Collateral Valuation Adjustment (CollVA) and Funding
Bid-Offer adjustments are required to adjust mid-market values to appropriate bid or offer value in order to best represent the exit value, and therefore fair value. It is applicable to financial assets and liabilities that are valued at mid-price initially. In practice this adjustment accounts for the difference in valuation from mid to bid and mid to offer for long and short exposures respectively. In principle assets are valued at the bid prices and liabilities are valued at the offer price. For certain assets or liabilities, where a market quoted price is not available, the price used is the fair value that is most representative within the bid-offer spread.
ING recognises two types of Debit Valuation Adjustments, namely DVA on derivatives, as aforementioned and DVA on own issued financial liabilities. The application of DVA on own issued financial liabilities are measured at fair value through profit or loss, if the credit risk component has not been included in the prices. In this DVA calculation, the default probability of the institution are estimated based on the ING Funding spread.
Collateral Valuation Adjustment is a derivative valuation adjustment capturing specific features of CSA
Non-standard CSA features may include deviations in relation to the currency in which ING posts or receives collateral, deviations in remuneration rate on collateral which may pay lower or higher rate than overnight rate or even no interest at all. Other deviations can be posting securities rather than cash as collateral.
ING applies an additional ‘Funding Valuation Adjustment’ (FVA) to address the funding costs associated with the collateral funding asymmetry on uncollateralized or partially collateralized derivatives in the portfolio. This adjustment is based on the expected exposure profiles of the uncollateralized or partially collateralized OTC derivatives and market-based funding spreads.