ING’s purpose is empowering people to stay a step ahead in life and in business. This report describes how we live up to our purpose and create value as a bank, as an employer and in society. When assessing ING’s ability to create value in the short, medium and long term, our stakeholders look at our financial and non-financial performance.
We believe integrated reporting gives them a broad-based framework for making decisions that are forward looking and impactful.
Corporate governance, and the Dutch Corporate governance statement by the Executive Board together form the Report of the Executive Board. This integrated annual report also contains consolidated and parent company financial statements, and other information and appendices.
ING’s integrated annual report is compiled with active input from business experts and validated by senior managers. It is discussed and approved annually by members of the Management Board
In drawing up content for this report we take into account the topics that can impact our business, including risks, opportunities, regulations and sector trends.
As a global financial institution, we recognise ING has a direct economic, social and environmental impact, as well as a significant indirect impact through its lending and investment activities. We report data on these and other relevant key matters in the How we make a difference chapter of the
Read more about our 2020 material topics in the World around us’ chapter. The process for our 2020 materiality analysis is described in the Non-financial appendix.
Data relevant for rating agencies and investment analysts can be found in the Non-financial appendix and on ing.com.
ING reports on each material topic using the GRI indicators most material to our business in accordance with the GRI Standards Core option, including a disclosure on management approach
The Framework of the International Integrated Reporting Council (IIRC) serves as a reference in drawing up the content for this report, including for our value creation model.
Leverage ratio ING Group 1 Return on equity ING Group Cost/income ratio Dividend per share (in euros)2
Total assets Shareholder equity Customer lending 4 Customer deposits Risk-weighted assets 1 The leverage ratio of ING Group according to the Delegated Act (including grandfathered securities) takes into account the impact of grossing up the notional cash pool activities.
2 Amount for 2020 and 2019 is interim dividend. The final dividend distributions are intended after 30 September 2021, subject to prevailing ECB recommendation.
The result before tax declined 44% to €3.8 billion in 2020. This was mainly caused by higher risk costs and higher expenses (largely caused by incidental costs due to restructuring provisions and impairments). Although fee income increased, total income declined mainly due to margin pressure on liabilities and an impairment on our equity stake in TMB. Net core lending fell by €2.5 billion in 2020, while net customer deposits grew by €41.4 billion.
The CET1 ratio strengthened to 15.5% from 14.6% at year-end 2019, due to lower RWA and is well above our CET1 ratio ambition of around 12.5%. Total RWA decreased by €20 billion to €306 billion, mainly due to currency impacts, lower lending volumes and a better overall profile of the loan book.
We track the number of Retail Banking primary relationships and measure our efforts to improve the financial behaviour of our customers and society.
System availability1 Retail Banking system availability in the Netherlands and Belgium1
HCROI provides an indication of ING’s profitability in relation to total employee costs. In addition to
3 HCROI of 2018 re-calculated based on total results (was reported in 2019 Annual Report based on underlying results)
The authorised share capital of ING Groep N.V. consists of ordinary shares and cumulative preference shares. Currently, only ordinary shares are issued, while a right to acquire cumulative preference shares has been granted to the ING Continuity Foundation. Each share in the capital of ING Groep N.V.
ING’s ordinary shares are listed on the stock exchanges of Amsterdam, Brussels and New York (NYSE).
Own ordinary shares held by ING Group and its subsidiaries 0.6 0.9
Price/book value ratio1 0.55 0.77 0.72 1 Based on the share price at year-end and the earnings per ordinary share for the financial year.
Netherlands Rest of Europe Asia Rest of the world 1 Jan. 2020 1 Apr.2020 1 Jul. 2020 1 Oct. 2020 31 Dec. 2020
ING Euro Stoxx Banks Stoxx Europe 600 Banks Euro Stoxx 50
Position: 2nd in market cap peer group, 12th percentile of global banks
In January 2021, S&P Global Ratings assigned ING an ESG Evaluation Rating of 83 out of 100, rating ING’s environmental, social and governance (ESG) practices ‘strong’.
It has given us further opportunities to live up to our purpose of empowering people to stay a step ahead in life and in business. For example, by helping out people in need in the societies in which we are active – from donating computer equipment so that children could continue their education remotely to making our real estate available as extra hospital capacity if needed. Since the start of the pandemic, ING has raised and donated millions through initiatives in 25 countries, as well as contributing more than €2 million to UNICEF’s global coronavirus appeal.
You’ve covered customers and communities. How did we support ING colleagues through this challenging period?
The health and safety of our colleagues was top of mind for me and my fellow Board members throughout the year, and continues to be so. We kept a close eye on the wellbeing of our workforce through regular ‘pulse’ surveys, supplemented by informal check-ins by managers with their teams.
And we continued to serve our customers with a mostly virtual workforce, as on average 80 percent of our global workforce was working from home since mid-March. The speed with which we were able to move over to a remote-working model was truly impressive and is testament to our digital model and solid Tech foundation.
We are now applying learnings from this to design a way of working best suited to the
We have created global guiding principles that aim to balance the advantages of working from home and working from the office. We will test and pilot these guiding principles in several countries when local health guidelines allow, taking a step-by-step approach that provides flexibility in implementation and respects local labour laws.
The economic situation of course impacts our results. It affects our customers, and it therefore affects us. The economic damage we expect from the pandemic is reflected in the forward-looking loan loss provisions we took in 2020. It is also likely the very low interest rate environment is here to stay for the foreseeable future. This has meant continued pressure on our net interest income, exacerbated by weakened demand for consumer and business loans in a number of markets. Yet our results remained resilient throughout the year. We managed to further diversify our income, with good fee growth. In particular we saw strong results in investment products for retail customers, who turned to our accessible digital investment solutions in greater numbers during the pandemic, reinforcing our position in the mobile and online banking space. And we ended the year with improving cost control and a strong capital position.
I’m particularly pleased with the growth of primary customer relationships. Over the course of the year we saw our retail primary customers total grow by 578,000 to 13.9 million.
Promoter Score (NPS). In Wholesale Banking our NPS over the course of 2020 was 13 percent higher than the industry average.
Are you satisfied with further implementation of the Think Forward strategy in 2020?
Our purpose can be considered the ‘why’ of what we do, with our Think Forward strategy as the ‘what’.
My focus since becoming CEO is on the ‘how’ and ‘where’ of our strategy implementation. I want to steer ING to deliver on our strategic priorities with more certainty on execution delivery.
Wholesale Banking business line, with the announced closure of offices in South America and some in
These decisions will regrettably impact approximately 1,000 of our colleagues, mainly over the course
The number one priority for ING is to ensure that we are safe, secure and compliant. Data and end-toend digitalisation are key to our non-financial risk and know your customer enhancement efforts, and in 2020 we joined forces with four other Dutch banks to monitor transactions in the Netherlands in the collective fight against money laundering. We also stepped up our KYC training with an internationally recognised certification and connected all ING countries in scope to our digital pre-screening transaction tool as part of our standardisation efforts.
Being data-driven will bring many benefits for our customers and our organisation. At the same time, the basics need to be right, and so the focus in 2020 has been on further improving data quality and data accessibility, which means getting good-quality data properly ‘ingested’ into our shared data lakes. We now have the right governance in place, and we continue to work on the process, with the ambition to be ‘data-driven by design’. Part of this is, of course, data safety and security, ensuring that our own data and that entrusted to us by our customers, is secure and protected from loss, misuse or theft. These improvements are helping us to deliver on our external regulatory commitments.
To help make sure that our innovation efforts deliver tangible value at an increased pace, we’ll focus our efforts on solutions that either improve the customer experience or improve ING’s own internal processes and way of working. To support this more-focused approach, as of the beginning of 2021 we have brought all innovation initiatives under a new business area, ING Neo.
In 2020, we introduced several new innovative services such as CoorpID and Blacksmith, two solutions that digitalise the know your customer process for our corporate clients, and Dealwise, a shopping platform that offers cashback deals and discounts to consumers. We gave our innovation culture a boost by reintroducing the Innovation Bootcamp where employees can develop their innovative ideas into tangible products and services.
The coronavirus pandemic has arguably diverted the world’s attention away from a very pressing problem – that of climate change. How did ING contribute in 2020 to building back a better world?
We play a role by financing change, sharing knowledge and using our influence to encourage the transition of clients and peers to more sustainable business models. We continued to align our lending portfolio with the goals of the Paris Climate Agreement, guided by our Terra approach, which now covers nine carbon-intensive sectors most responsible for climate change. Terra helps us to put our technology expertise to work in combatting climate change, by assessing the sector-by-sector technology shift necessary to slow global warming and then measuring this against the actual technology clients are using – or plan on using in the future. We then advise on, support and finance the transitions clients need to make to their business models to ensure a sustainable future. And in 2020 we supported 33 sustainability improvement loans and 60 green, social and sustainability bonds.
This funding supports projects that advance renewable energy solutions, low-carbon buildings, lowcarbon transport and the circular economy, for example.
You were appointed as CEO half-way through 2020, after serving on the board as chief risk officer. How have you experienced your change in role?
Management Board Banking, and with full confidence in ING’s strategic direction and in the capabilities and commitment of colleagues all over the ING world.
I’d like to pay tribute to my predecessor Ralph Hamers, whose vision has put us on our strategic path – a digital and mobile-first path whose relevance was further confirmed in 2020. Ralph also led us through the first few months of the pandemic, overseeing our successful switch to a ‘work from home’ model.
Forward strategy with certainty, continuing our transformation into a leading universal data-driven digital bank.
This chapter will address some of the material topics as well as other important themes and developments in 2020: the Covid-19 pandemic, macroeconomic developments, climate change, financial crime risks, cybersecurity resilience, personal data protection, and culture and ethics.
The materiality assessment is subject to reasonable assurance by KPMG. See ‘Independent auditor’s assurance report’.
National and local governments across the world introduced measures aimed at preventing the further spread of the virus. These included the closure of schools, sports facilities, bars and restaurants; bans on public events; and travel restrictions and border controls. Such measures disrupted the normal flow of business operations in most countries, including those where ING operates. It affected global supply chains, manufacturing, tourism, consumer spending and asset prices, and has increased volatility and uncertainty across the global economy and in financial markets.
There were also regulatory developments in light of Covid-19. The European and other central banks took steps to help by relaxing rules on capital buffers that banks need to hold and made recommendations on paying dividends, which remain in effect until at least September 2021. This gives banks more buffer capital available to lend to businesses during coronavirus restrictions, and to absorb losses when businesses can’t repay those loans. The European Central Bank (ECB) also undertook various monetary policy measures to provide liquidity to the economy and banks in particular. See more in ‘Our performance’.
The Covid-19 pandemic threw the world economy into turmoil. The global economy shrank in 2020 as demand and supply, trade, and finance were severely disrupted. Although we started to see a recovery mid-year as lockdowns were relaxed, a second wave of the virus caused governments to slow reopening and/or re-impose lockdowns, and the economic recovery lost momentum. In most advanced economies, despite effective monetary and fiscal policy support, output remained substantially below pre-pandemic levels.
Western European economies were hit hard by the coronavirus pandemic and associated mobilityreducing measures. In Germany, the Netherlands and Belgium, economic activity in the first half of 2020 dropped by 10-15%. Economic activity in the second quarter of 2020 recorded the largest contractions since World War II.
Additional economic uncertainty came from continuing US-China trade tensions and the US elections in November. To help ING’s leadership in their strategic planning, we developed scenarios for various potential outcomes to these developments so we are better prepared for different possible futures. The ongoing negative interest rate environment is also making it a priority for ING to diversify our income.
Large amounts of fiscal stimulus deployed by governments worldwide in 2020 were combined with monetary stimulus. The US Federal Reserve lowered key interest rates and the ECB stepped up bond purchasing. In the eurozone, the yield curve flattened. In general, the euro appreciated compared with its main trading partners, reflecting perceived changes in global risk sentiment and interest rate developments. Towards the end of the year, positive news about vaccines improved financial market sentiment, although a strong eruption of new coronavirus cases and the emergence of new, more contagious variants are sobering the economic outlook.
Uncertainty around the future relationship between the European Union and the United Kingdom continued throughout the year, compounding the impact of Covid-19, which weakened the British pound vis-à-vis the euro. In July, we announced that due to Brexit we will move ING’s European trading activities from London to Amsterdam. The successful conclusion of an EU/UK-trade deal at year-end avoided economic disruption at the start of 2021.
China regained control of the outbreak of the coronavirus relatively swiftly by implementing strict sanitary and economic measures, and in the second half of the year almost all activities had restarted and exceeded pre-pandemic levels. However, the number of cases began increasing again towards the end of 2020 and beginning of 2021.
Australia was hit less severely by the coronavirus pandemic than other countries. The Australian authorities introduced considerable fiscal and monetary support to the economy. The central bank reduced its policy rate and three-year Australian government bond yield target to 0.1% and extended its long-term, low-cost funding to banks to boost business loans. The central bank also introduced an asset purchase programme targeted at long-term bonds to ease further financial conditions.
says it will have a potentially catastrophic environmental, human and economic toll if left unaddressed. We believe that ING can make the biggest impact in fighting climate change through our financing.
Our approach to climate action is collaborative and inclusive. We helped develop an open-source climate methodology with our partner, the 2˚ Investing Initiative (2DII). This was published in 2020 for all banks to use. We’re working with other banks to make this an industry-wide standard, as we believe this will lead to greater transparency and help the financial sector make a bigger impact. In December 2018, ING and four peers signed the Katowice Commitment and in September 2020 these same banks published a blueprint of how we’ll all use the methodology developed with 2DII.
Our work with the Katowice Commitment laid the groundwork for the Collective Commitment to
While our Terra approach helps measure the impact of our loans on the climate, we are increasingly aware of the risks associated with climate change. These include physical risks, which can be acute
(such as floods and wildfires) or chronic (temperature increases and rising sea levels); and transition risk, which is driven by policy, technology or market changes as we shift towards a low-carbon global economy and potentially lead to stranded assets. Our climate risk programme helps measure the impact of climate change on our loan book. Following a year of floods, droughts and wildfires, climaterelated risk again topped the World Economic Forum’s (WEF) 2020 global risk ranking in terms of likelihood of occurrence and impact. The IMF is examining the impact of climate on the world’s financial markets and whether it is priced into market valuations. The European Central Bank (ECB) published a guide in 2020 on how they expect banks to prudently manage and transparently disclose climaterelated and environmental risks under current prudential rules.
We are continuing to advance our understanding and approach to climate risks and opportunities. In 2020 ING published our first Climate Risk Report, setting out our approach to managing this emerging strategic and credit risk. We’re integrating climate risk into our risk management framework, governance and business strategy. Please see the Environmental, social and governance risk chapter for more information.
Next to this, improving customer due diligence and transaction monitoring activities are top priorities for ING. Since 2017, we’ve been running a programme to enhance our know your customer activities in all customer segments of all ING business units. This has led to standardised KYC policies, global governance and consistent processes, tools and training, which contribute to becoming sustainably better in the way we address money laundering risks and comply with laws and regulations.
KYC execution. Read more in ‘How we make a difference’ and ‘Risk management’.
Cybercrime is a growing threat to companies in general and to the financial system in particular. The expansion of mobile and online banking, and ING’s own reliance on cloud technology – especially at a time when many employees are working from home – have increased the risk of criminals gaining unauthorised access to ING networks. The global lockdowns due to the pandemic also presented opportunities for criminals to continue to target customers with phishing attacks, identity theft and online fraud.
Our multi-faceted approach aims to anticipate threats and prevent them from becoming reality.
Along with cybersecurity, safeguarding customer data and data privacy are also important responsibilities. This is required by an increasing legislative focus, for example through the EU’s second
An ING International Survey released in October 2020 found that while open banking – the sharing of financial data between service providers with the user’s permission – is providing more tools that make people’s financial lives easier, not everyone is using them. Carried out in 13 European countries, the survey revealed differing attitudes to sharing personal data and interacting with technology. In Austria and Germany, for example, around two-thirds of people were happy for companies to share their information with their consent. In the Netherlands, Belgium and the Czech Republic, this was only around one in 10 people.
There are also different attitudes to security around accessing data. This could range from simple passwords to voice, face and fingerprint recognition or a combination. The value of the global fingerprint-sensor market, for example, is expected to rise to $5.2 billion in 2026 from $2.9 billion today, according to market research. This is partly as a result of the increasing numbers of smartphones, tablets and wearable devices. Yet the survey found that just about a third of Europeans think fingerprint logins are ‘very secure’.
Trust in the financial sector has been rising since the financial crisis of 2008/2009 and rose in the first half of 2020 according to the Edelman Trust Barometer, driven by banks’ response to the Covid-19 outbreak. ING adheres to a comprehensive set of policies and rules designed to protect our customers and our bank from conduct that will jeopardise people’s trust in our business and our sector. This includes policies to prevent insider trading, price-fixing and market manipulation, as well as regulations to detect and prevent tax evasion, fraud and financial crime.
We will not ignore, tolerate or excuse behaviour that breaches our values. We encourage employees to speak up against discrimination and strive to create a diverse and inclusive workplace where everyone feels free to be themselves. Read more in ‘Our people’.
“I lead Terra at ING. Terra is all about change and transitioning our portfolio in line with the well-below two-degree goal of the Paris Climate Agreement. We do that by providing our clients with finance and insights to support them in their transition. And through the projects and sectors we choose to finance
ING’s Think Forward strategy is as relevant as ever. With our data-driven digital and mobile-first approach we’re continuing to empower people to stay a step ahead in life and in business – also at a time of social and economic disruption. The global coronavirus pandemic has illustrated just how digital society has become, reinforcing trends like the shift to mobile banking and contactless payments.
The spread of Covid-19, and the global measures to contain it, affected ING in a number of ways in 2020, impacting our customers, our employees and our communities. However, it was not the only factor influencing our business. The negative interest rate environment in the eurozone and low interest rates elsewhere, have posed a significant challenge to banks’ business models since 2016, eroding margins on customer deposits and putting pressure on net interest income. Until 2020, we were able to counter the effects of this mainly through profitable lending growth and a presence in non-eurozone countries.
That said, the impact of the global pandemic is still reverberating through societies worldwide. The second wave that surged through Europe and the US in the autumn continued to pile pressure on consumers, businesses, communities and economies. It has fundamentally changed the way people work, travel, shop and socialise and the expected economic consequences will be felt for some time yet. We are considering various post-coronavirus scenarios focused on the next two to five years that take account of the severity of the economic downturn and level of global cooperation in the recovery period.
Now we’re taking steps to deliver on our strategic priorities, not least to keep pace with society’s accelerated adoption of digital resources during the coronavirus. We’ve been working on transforming our organisation to become a mobile-first digital platform, offering all of our 39.3 million customers a harmonised customer experience everywhere. But there’s still work to do to become the leading datadriven digital bank we aspire to be.
ING Group Annual Report 2020 23 focus will be on operational excellence through increased digitalisation, using our technology foundation globally – this includes shared data lakes, cloud and modular IT building blocks – and rolling out global digital product offerings.
Banking this means deepening our relationship with our core clients, reducing our geographic footprint in Asia and closing our offices in South America. In Retail Banking it means stopping the Maggie transformation programme (to standardise the customer experience and product offering in four
Recognising the need to move even faster if we want to stay a step ahead of the changes and evolutions in the world, we announced in 2020 that we are combining all our innovation activities into a dedicated business area called ING Neo. This will help sharpen our focus and create more impact, ultimately deepening our relationships with our customers as their primary bank for financial and other needs.
In an age of disruption and changing customer expectations we have to keep adapting our banking services to become clearer, easier and more accessible while empowering our growing global customer base to stay a step ahead in life and in business. Open banking creates opportunities for ING to add value for customers by connecting to the products and services of others, both within and beyond banking.
When it comes to platforms, we are developing our own solutions. We’re building digital channels on top of our technology platform, like ING’s mobile OneApp, which is used by customers in the
Among these are initiatives that have evolved into stand-alone platforms such as smart money app
ING to third parties through common architecture and shared application programming interfaces
By this we mean increasing the number of customers who have multiple ING products (including a current account into which a recurring income, such as a salary, is paid) or Wholesale Banking clients with anchor products such as lending and transaction services. It’s closely linked to customer experience and satisfaction: the more satisfied customers are, the more likely they’ll choose ING for additional products and services. Over the past five years we’ve consistently increased the number of primary customers.
Having the right data at our fingertips will enable us to achieve many of our strategic priorities. We use data to personalise our customer interactions and gain insights to deliver a differentiating experience. It also helps us make sound business decisions and drives innovation. At the same time, we want to protect people’s data and their privacy and are committed to handling data safely and being open about how we use it.
Material topics: innovation, usability and accessibility of our products, digitalisation and interconnectivity
Thinking beyond traditional banking to develop new services and business models
Persistent low/negative interest rates offer savers little incentive, challenging our traditional business model. Digital platforms are an opportunity to become relevant to customers by providing new products and services, also in areas beyond banking, which offer new revenue streams for ING
Data is the lifeblood of organisations like ING. We use data to personalise our customer interactions and gain insights to deliver a differentiating experience. It helps us make better business decisions, while being mindful of using our data responsibly and in line with people’s expectations. We rely on data-driven models to manage our capital and risk-weighted assets and improve risk management.
Becoming a truly data-driven organisation requires stepping up our analytics capabilities. This means promoting data fluency among our employees and strengthening our analytics delivery. ING’s
Our analytics delivery is focused on solutions in nine areas: customer interactions, customer dialogue, risk and pricing, financial crime and regulatory technology (Regtech), intelligent operations, innovation and beyond banking, people and finance, and Wholesale Banking. In 2020, we further accelerated our advanced analytics capabilities and delivered solutions to different domains.
For example, in the Regtech space, we’re using analytics solutions to identify potentially risky shell companies in corresponding networks. In the retail domain, we developed and implemented machine learning interest rate optimisation models for better-priced mortgages in Germany, Italy and the
Netherlands and Italy help us identify clients in financial difficulty and that need our support at an early stage.
Blockchain solutions in trade finance are helping to make trades faster and simpler, for example by reducing the processing time for letters of credit from around 10 days to under 24 hours. Read more about the Contour platform and other distributed ledger technology solutions in ‘Our business’.
When the coronavirus crisis first hit, our focus shifted towards adjusting our operations to accommodate the new, more digital environment. Radical innovation moved down the priority list and certain projects were shelved: for example, an initiative to digitalise aircraft financing. Other initiatives benefitted from the growing demand for digital solutions, such as the trade finance tools of our coowned blockchain-based software company Komgo.
Innovators 2020 awards. Our home-grown innovations in cash management (Zero Knowledge Proof
Innovative ideas come from inside and outside ING. All our employees are encouraged to think creatively and come up with ways of doing things faster, better and more efficiently. We stimulate their ideas through our bank-wide Innovation Bootcamp and local innovation ambassadors. For
Innovation Bootcamp 2020, we received 444 ideas in four areas: how to disrupt lending before others do; empowering customers to strengthen their financial health; delivering a unique digital customer experience; and creating a world-class employee experience. The winning idea was ImpactING, which aims to make it easy for customers to have a positive impact on the planet via a sustainable bank account that allows them to contribute to a good cause with every transaction.
ING’s customised innovation methodology, PACE, combines lean start-up, design thinking and agile scrum. Its key feature is customer validation. This ensures we develop only what customers really want. More than 10,000 employees have been trained in PACE to date.
In 2020, the ING Innovation Fund allocated €25 million to accelerate innovation across the bank.
ING Ventures is our €300 million fund investing in early-stage companies. It targets disruptive technologies that ensures customers and clients get access to best-in-class services. It also helps entrepreneurs with hands-on support, know-how and access to ING’s distribution network. We currently have 34 investments, including WeLab (automated consumer loans in China and Hong Kong),
Currently, ING has more than 200 partnerships. Not all our collaborations lead to new products or services, however, and we’ve ended over 110 so far, mostly after unsuccessful or unsatisfactory proofs of concept.
Cumulus Park innovation district in Amsterdam, where several ING buildings are located, Cumulus Park
ING Labs is our incubator for potential scale-ups. Here we work with external experts, combining corporate innovation and entrepreneurial experience. We believe this contributes to a higher success rate and greater impact than either could achieve alone. We have four Labs worldwide, each with its own specific value space that matches local expertise and ecosystems. These are trade (Singapore), property, real estate and regulatory processes (London), creating minimum viable companies that are ready to scale (Amsterdam) and proofs of concept with fintechs to bring new tech solutions to market faster (Brussels, formerly Fintech Village). Read more about innovation in ‘Our business’.
‘Laying the foundation’ and in ‘How we make a difference’ and ‘Risk management’
Performance culture Delivering a differentiating customer experience requires engaged employees who are motivated to go the extra mile. That’s why we strive to create a great employee experience and develop great leaders who can enhance performance and inspire our people to deliver on our strategy. Diversity and inclusion contribute to this – people perform better when they are free to be themselves. ING does not tolerate discrimination in any form. We are guided in everything we do by the values and behaviours in our Orange Code and global Code of Conduct.
Lending capabilities We are seeking opportunities to broaden and diversify our retail lending capabilities in the Business Banking and consumer lending segments. In Wholesale Banking we continue to build on our lending capabilities in our markets, combined with our sector lending franchises and product capabilities, to build primary relationships to be able to diversity our income by generating more fees. ING is considered a pioneer in sustainable finance, having introduced the first sustainability-linked loan and a made-to-measure sustainability improvement loan.
• Welcome to digitalise ING in Germany, which was completed in 2019.
• WTOM to optimise, digitalise and standardise our Wholesale Banking offering in all countries.
Given the coronavirus-related economic headwinds and our learnings from the complexities and costs of cross-border systems and product integration, we decided to refocus our activities in 2020 to ensure faster customer delivery and a continuously improving end-to-end digital customer experience.
To further develop our universal digital bank, we’ll focus instead on using our global technology foundation, reusing already developed mobile app components, and rolling out global digital product offerings in the areas of insurance, investments and consumer lending. When identifying areas to build cross-border capabilities we’ll weigh up impact versus complexity, always with the aim of increasing scalability and delivery speed. In this way we only need to develop once for multiple countries and can create a sustainable competitive advantage, accelerating customer engagement and business impact.
The creation in 2020 of one global retail management team was the next step in our journey to unify and harmonise our retail approach in all our markets. This will further reinforce alignment, improve prioritisation and drive a consistent retail strategy that aims to accelerate digitalisation, use our global technology foundation to enhance operational efficiency and excellence, and roll out global digital product offerings in areas such as insurance, investment and consumer lending.
At the heart of this is our IT strategy. ING is building a technology platform to facilitate our journey from a traditional bank to a data-driven digital bank. It is designed to create speed, scale and security as well as cost efficiency through programmes like ING Private Cloud, Touchpoint, the data lake
We continuously adjust and improve IT projects and programmes based on new insights, lessons learnt and the impact of developments such as the coronavirus. For example, at the start of the outbreak we had to increase our network capacity by 365 percent to facilitate the large numbers of users connecting from home: daily remote connections have grown by 285 percent since March.
ING Esperanto. Translating local data of all ING entities is a significant challenge as it requires both subject matter expertise of local businesses and regulations and knowledge of ING Esperanto to be able to create and benefit from aggregated data in a governed way.
Recognising the need for a strong engineering culture to achieve our Think Forward ambitions, we strive to develop and grow a global workforce of highly skilled engineers. We run global performance days, where we assess and calibrate engineers based on one engineering profile. The ING Tech
ING’s one Way of Working (WoW) is based on agile, purpose-driven teams and allows us to respond quickly to changing customer demands and feedback. We’ve implemented ING’s WoW in all retail countries as well as in Wholesale Banking and in many of our business support activities. Uniting so many different cultures requires a behavioural shift, guided by our Orange Code, and is supported by
WoW ambassadors, bootcamps and training programmes. The coronavirus pandemic has made it necessary to adapt to new ways of working and collaborating remotely. Read more in ‘Our people’.
Defence Centre, which is part of ING’s global Security Detection Response team. We’re a multidisciplinary team of cybersecurity specialists based in the Netherlands, Belgium, Poland and
Our job is making sure ING’s connections are safe from cybercriminals. We keep a close eye on what’s happening in the world around us and each day we go through the latest news about possible threats and attacks. One of the ways hackers try to gain access to our systems is through fake emails. They trick people into opening a link that spreads a virus or steals their login credentials. We investigate each incident to assess the severity and decide how serious the threat is and how we should respond so ING remains safe and secure.”
We seek to positively influence society’s transition to a more sustainable, low-carbon economy through our financing. For instance, through our Terra approach. Terra is based on collaboration and
In promoting a sustainable society we focus on financial health, giving people the knowledge and tools to make informed decisions about their finances. This is especially important at a time of economic uncertainty following the months of disruption to jobs and livelihoods caused by coronavirus-related measures. Read more about how we are supporting customers and communities to recover from the crisis in this chapter and ‘Our business’.
In 2020, we worked on a tool to analyse salient human rights risks within our portfolio, which are forced labour, child labour and land-related issues. Gathering this data on our clients will help us strengthen our non-financial portfolio. We can use it to expand our knowledge of human rights risks, as well as gain a better understanding of how our clients are performing on human rights.
ING published its third annual human rights update in December 2020. These publications outline our policies, programmes and management of human rights risks. We report on human rights using the
(SDGs) of the United Nations: promoting climate action (goal 13), sustainable consumption and production (goal 12) and sustainable and inclusive economic growth (goal 8). See ing.com for more information.
Financial capital €840 billion capital entrusted through equity, subordinated loans, debt securities issued and deposits. We strive to offer our providers of financial capital attractive returns
An advanced and reliable IT platform with high system availability. We use technology to better counter financial economic crime
A diverse global workforce of 57,000+ employees who can deliver a differentiated customer experience
We make banking clear and easy, available anytime and anywhere and we keep getting better
Customers creating a customer experience that is personal, easy and smart
••first place ranking in six countries according to our net promoter score ¹ ••system availability was 99.9% for wholesale clients globally and 99.6% for retail customers in NL and BE ¹ ••€2.5 billion in net results
••27.8 million people felt financially ••16 Covid-19 relief efforts ••38.5 million people reached through the TFI empowered 1 supported
The outbreak of the coronavirus pandemic showed the willingness of our people to support their communities through a number of initiatives: from using ING’s electric car pool in Poland to deliver groceries and medicine to those in need, to making face masks and raising money for local healthcare and disaster relief efforts. We used our digital skills to build tools to help solve challenges caused by the crisis. For example, we developed an IT solution for the Flemish government to make crisis payments to its citizens at short notice. In Germany, colleagues helped create an online platform where retailers with no web shop of their own could continue trading during the lockdown. These efforts were led by local ING teams in the various countries and supported with the creation of a global ING fund. We structured our support in three phases.
Dutch public-private collaboration Schuldhulproute aims to prevent and solve problematic debt
Extending our support beyond ING countries, we launched our second phase in April, teaming up with
UNICEF on the #Reimagine campaign to raise funds for critical medical and hygiene supplies to reduce transmission among children and vulnerable groups around the world. ING matched all donations made by customers and colleagues, contributing more than €2 million to UNICEF’s global appeal.
Germany, Australia, Belgium and France. Among these are ‘Open the circle’, where we’re partnering with Reach for Change in Bulgaria to support entrepreneurs with solutions that address the root causes of poverty and social exclusion. In France, we’re working with NGO Social Builder to empower women in the tech industry to generate revenue and become financially independent, particularly those economically impacted by the coronavirus.
In 2020, ING continued to maintain several partnerships that directly and indirectly support financial health in communities. These include: • Dutch debt prevention programme Schuldhulproute and its Geldfit website, which tests people’s financial fitness and links them to municipal debt assistance programmes if necessary. We referred 34,000 customers to geldfit.nl in 2020 and started referring business customers to Geldfit Zakelijk.
• In Romania we continued to work with Banometru, a free service providing mentoring to people in financial distress.
• Globally, ING continued to partner with UNICEF on Power for Youth, a long-standing programme to equip teenagers (aged 10-19) with financial, entrepreneurial and civic leadership skills. Since 2015, the partnership has directly empowered over 500,000 adolescents, benefiting more than 11 million young people indirectly. These activities were superseded in 2020 by our other fundraising efforts with UNICEF in response to the coronavirus.
In total, ING raised and donated over €24 million over the year, of which around €10 million was donated to coronavirus relief in ING countries (and excluding donations to UNICEF’s global appeal). See the Non-financial appendix.
The TFI Research Hub works with a global network of academics to develop insights into how people make financial decisions. The Accelerator Hub activates these insights through innovations and tools that will help consumers. The Community Hub promotes these activities and spreads TFI’s insights through its network.
In 2020, eight start-ups graduated in the Accelerator Hub’s Growth Track programme. These included: • Monkee, an app motivating people to save by setting defined goals and weekly targets
• Tully helps people to build a budget online and make the most of their money (tully.co.uk)
• Mitto, a prepaid card for young people from age 14 years (getmitto.com)
The coronavirus pandemic showed a growing reliance on digital banking, with the number of mobile card transactions more than doubling in 2020. With this comes an increasing risk that some of these interactions are used for criminal purposes. Digitalisation also brings other threats that could erode people’s trust in our business and our sector, such as identity theft, security breaches or IT system failures. One of our top priorities is to keep our bank safe, secure and compliant. It’s how we can contribute to the collective fight against financial economic crime and safeguard customers’ trust.
We take our responsibility as a gatekeeper to the financial system extremely seriously. Since 2017, ING
has been working to further enhance the management of compliance risks and embed stronger awareness across our organisation, especially when it comes to know your customer (KYC) and financial crime-related policies, procedures and processes.
ING and four other Dutch banks joined forces in 2020 to form Transaction Monitoring Netherlands
Netherlands – for indications of money laundering or terrorist financing. This is in addition to the banks’
individual monitoring activities. Initially they will start with monitoring business transactions in 2021.
To facilitate this, the Dutch government is proposing to amend the law to make it easier for the banks to share relevant payment details with each other as part of its anti-money laundering action plan. If approved, the proposed bill could pass into law in 2021.
TMNL follows a similar collaboration with banks and payment provider Isabel in Belgium. ING also works closely with the Dutch central bank (DNB), the Dutch Banking Association (NVB) and the Dutch
Financial Expertise Centre (FEC) to harmonise efforts to fight financial economic crime and strengthen the integrity of the financial sector in the Netherlands. In Germany, we are part of the Anti-Financial
In 2020, ING set up a financial and economic crime Covid-19 taskforce to assess whether the pandemic influenced payment patterns or created new channels for money laundering and to identify potential criminal schemes. This might inlcude companies misusing government aid or money launderers looking for alternate ways to channel illicit funds into the financial system during lockdown.
suspicious patterns and entities. It helps identify clients with a high concentration of suspicious behaviour and points out hidden relationships, delivering on the promise to always be a step ahead.
And we’ve developed a centralised digital vault where corporate clients can store and share their KYC
We assess our relationship with customers regularly and review potentially unusual transactions.
(documentation, data and identity verification) and making structural improvements to become sustainably better in the way we fight financial economic crime. These structural solutions include standardised KYC policies and digital tooling; global KYC governance to ensure consistent decisionmaking; and increasing employee knowledge and awareness of KYC. Transaction monitoring is another key part of the programme. This includes both looking back on selected past transactions as well as ongoing monitoring, and deploying consistent global tooling for adverse media screening and name screening of new and existing clients.
In September 2020, Banca d’Italia removed its ban on ING onboarding new customers in Italy, in recognition of the comprehensive steps taken to strengthen our KYC processes and the management of KYC compliance risks. The Italian central bank had imposed the ban in March 2019 after it found shortcomings in anti-money laundering processes. ING was also fined.
In 2020, we took steps to further professionalise our KYC organisation by providing internationallyrecognised training in conjunction with ACAMS (the Association of Certified Anti-Money Laundering
Specialists). This and other training are offered through ING’s KYC Academy and its Risk Academy, which aim to equip our employees with the skills and knowledge they need to effectively fight financial economic crime.
Furthermore, we launched a new KYC learning module for all employees in 2020, as well as training on cybersecurity, sanctions and anti-competitive conduct. We also launched a new global Code of
ING has dedicated cyber response teams to detect and respond to digital fraud, DDoS (distributed denial of service) and targeted attacks. We continuously test our cyber resilience and invite ‘white hat’
(ethical) hackers to share their observations via our Responsible Disclosure programme.
No major cybersecurity incidents occurred during 2020, despite the increasing sophistication and frequency of attacks. To an increasing degree ING had to respond to breaches at third parties or service providers, a trend seen across the financial industry. DDoS attacks are ‘business as usual’ for our cybersecurity teams. DDoS attacks in Turkey and Belgium this year had some impact. So far, ING has not experienced material impact or loss of data due to cybercrime, although the costs to protect our customers against cybercrime are rising.
Customers trust us with confidential information and their personal data. It is important that we maintain that trust and protect them against the loss or misuse of their data. In an environment that’s increasingly open and connected we have to be ever more vigilant.
Beyond regulatory compliance, we are sensitive to people’s expectations about the use of their data.
We are mindful that processing data could have an impact on their lives or their businesses. We consider this impact when making decisions about the use of data. We apply consistent ethical values across our organisation while local and global Data Ethics Councils help to ensure we use data responsibly.
“I feel an immense sense of privilege in being able to give back to those in need”
I’m a volunteer for Invisible Hands Deliver (invisiblehandsdeliver.org). It’s a not-for-profit organisation founded by three university students in response to the coronavirus pandemic. We deliver groceries and other essentials to people in need, or who are at risk of getting sick. At the start of the outbreak, my team delivered primarily to the Bronx, a New York City borough with pockets of severe poverty and which had the city’s second-highest number of Covid-19 cases. In its first month, IHD made over 3,000 deliveries! Since then, it’s expanded into other cities and states, often partnering with food banks across the country to fight food insecurity and support those most impacted by Covid. Over the weekends, I make contactless grocery runs and food bank deliveries for individuals in need. I’ve completed more than 100 so far, and counting. Coming from Italy, but having lived in New York for 17 years, I’m painfully aware of the differences in social support available in the US. I feel an immense sense of privilege in being able to give back and support those who are in need. The toughest part for
ING’s accessible digital retail investment products. We ended the year with improving cost control and a strong capital position, contributing to a full-year result before tax of €3,809 million. For more about our financial results see ‘Our Performance’.
Recognising the growing demand for digital and platform services, we took steps in 2020 to increase the pace of end-to-end digitalisation across our business and make our products and processes even easier, smarter and more efficient, from onboarding new customers to instant payments.
ING serves over 39.3 million individual customers as well as small and medium-sized businesses up to multinational corporations and financial institutions.
• Cross-border customer interaction platform with mobile-first customer experience and cost efficiency
We offer: • Payments, savings, insurance, investments and lending products and services to individuals, SMEs and mid-corporate clients
• Daily banking and strategic finance and advisory propositions to corporate clients
The Covid-19 crisis impacted our customers in many ways. Across our business we took action to help them navigate the economic headwinds and stay in control of their finances during this turbulent time.
ING’s support began with the basics: aiming to provide uninterrupted access to our mobile and digital channels when customers need them most and making their lives easier with digital tools such as contactless payments.
To ensure the continuity of services our Wholesale Banking clients rely on, certain business-critical operations such as Financial Markets, Treasury, and Payments, were split across different locations during global lockdowns.
In countries such as the Netherlands, Spain, Belgium, Germany and Turkey, we increased the daily limit for contactless payments so customers could use this option more often and made it free to withdraw cash from ATMs (in some countries this is already a free service). Customers in Poland can use their mobile phones to make contactless ATM transactions. Also in Poland, it’s now possible to open a new account from home using just a mobile phone and an ID card.
Netherlands. For primary customers in Australia, ING maintained a higher savings interest rate even when they did not reach the salary deposit requirement.
In some countries, a limited number of branches remained open for customers who wanted in-person advice. In our branches we took precautions to ensure the safety of customers and employees, such as installing plexiglass screens, making hand sanitisers available, splitting teams and limiting visits to by appointment only.
In addition, ING worked closely with business clients to understand the direct impact on their individual situations. Some industries, such as travel, hospitality and transport, were more severely affected than others. In the most heavily affected sectors governments also stepped in to protect companies and jobs with measures such as tax payment holidays and compensation schemes. Between March and
In Turkey, ING worked with the World Bank and Turk Eximbank on a €380 million loan to support exporters with financing during the crisis.
These tailored solutions included ways of easing their short-term liquidity needs with funding set apart for Covid-19 facilities. ING’s capital markets teams placed €39 billion of bonds via active bookrunner roles for corporates and financial institutions and approved around 70 new liquidity facilities for topsegmented clients. By converting Covid-19 facilities into capital market mandates we believe we helped clients secure longer term funding more easily while lessening the risks for our bank by shifting exposure to the institutional market.
In May, ING collaborated with French bond issuer Caisse Francaise de Financement Local (CAFFIL) on
Europe’s first Covid-19-related bond to raise financing for French public hospitals.
Using our knowledge of innovation and digitalisation, we put insights about people and money into products, tools, research and education that help contribute to a financially healthy society. We believe that the right information at the right time can help people make better financial decisions. We are delivering that through forecasting tools, such as ‘Kijk Vooruit’ which gives Dutch customers an overview of upcoming payments. With Everyday Roundup, available in Australia, Poland and Romania, we help customers save while they spend (see ‘Differentiating customer experience’ below). In
These considerations informed the decision to reduce the geographical footprint of our Wholesale
Banking business and to stop Maggie, our transformation programme to simplify and harmonise the product offering and experience of retail customers in four Challengers markets. Instead, as we develop our universal digital bank, we will focus on the global use of ING’s technology foundation to build scalable cross-border products and a consistent end-to-end digital customer experience in all our markets
The accelerated shift to mobile and online banking in 2020 increased the urgency of stepping up the end-to-end digitalisation of our products and services. Linked to this is the need for good quality data to drive the engaging and personalised customer experience we are aiming for.
Innovation is essential here. To increase the impact of our innovation and speed up execution, ING has created a new dedicated business area, ING Neo, which combines all of our initiatives and activities in this area. See ‘Our strategy’ for more information, and ‘Continuing to innovate’ below.
Among the new mobile features introduced in 2020 is a single sign-on that allows customers in the
For visually impaired customers, ING is the first bank in the Netherlands to provide a bank card with a notch in the side so they can easily recognise it and insert it correctly into an ATM.
Across our business we’re helping customers stay in control of their finances during this turbulent time
ING’s Everyday Roundup (ERU) product is helping to make saving simpler. First introduced in Poland, then in Australia and Germany, it is now also available in Romania. More countries will follow in 2021.
In Wholesale Banking, do your thing is linked to ‘changemakers’ – companies and people that ignite and lead sustainable change in a responsible way.
For Business Banking customers, ING added a bulk payment functionality to its payment initiation application programme interface (API), making it possible to pay up to 5,000 recipients simultaneously.
Making life easier for commuters on the go, ING is piloting Invisible Tickets, a Dutch initiative that allows them to seamlessly pay for public transport using mobile phone sensors. It is aimed at countries where the use of public transport is high, such as Germany, France, Italy, the UK and the Netherlands.
experience. To remain relevant to our customers we need to be on the digital platforms where they are spending their time shopping, socialising and working.
Yolt, which now has over 1.6 million registered users in the UK, Italy and France, added new features in 2020, such as Money Jar, which helps customers save while they spend. Yolt Pay, currently in beta, uses open banking APIs to initiate money transfers between users’ accounts and to pay others. The app also links to partners like MoneySuperMarket, PensionBee and Wealthify so they can invest, save on household bills and grow their savings. In 2020, Yolt was named the best personal finance app at the Wealth and Finance Fintech Awards.
ING can also add value for our customers by connecting to relevant products and services on thirdparty platforms. In 2020, we strengthened our SME offering as the first bank in Germany to offer loans through Amazon’s sellers platform, which is mainly used by SME companies. ING’s banking platform offers these clients access to the digital lending solution of fintech Lendico, which provides loan approvals within 48 hours.
In Belgium, we partnered with Minna Technologies on a subscription service for customers. Using the
The integration of international payments platform Payvision strengthens ING’s digital payments business, especially in e-commerce. Payvision is a subsidiary of ING that facilitates more than 80 payment methods in 150 currencies. Its combined e-commerce and in-store solution helps merchants to offer their shoppers a seamless checkout experience across all channels. Since acquiring Payvision in 2018, ING is exiting Payvision clients that no longer fit our risk profile.
Lendico SME lending platform in Germany and the Minna Technologies subscription management app in Belgium. In daily banking, APIs boost treasury departments by delivering real-time cash and liquidity management.
In Poland, ING introduced the first aggregator service that allows customers to manage multiple bank accounts from their ING Moje account. The new service is available through ING’s online banking channel and the mobile app.
One such example is InsideBusiness – ING’s digital banking portal that provides Wholesale Banking clients with a single point of access to a growing range of products and services around the globe. It is accessible anytime and anywhere via web, mobile app and tablet. In 2020, there was rapid growth in the adoption of the InsideBusiness app: user numbers doubled from around 2,500 to nearly 6,000 unique users, while usage went up by 96 percent. We also doubled the number of self-service processes clients can initiate from InsideBusiness.
In the Netherlands and Belgium, where ING is already a market leader, we are uniting our respective strengths to deliver an even better and more consistent experience across all channels for our combined 11 million customers. In the second quarter, customers in Belgium were migrated to the
Similarly, ING+Deals in Belgium and ING Punten in the Netherlands are shopping platforms offering customers exclusive deals in partnership with various A-brands. In addition to promoting customer loyalty, these shopping platforms help to increase interactions with ING’s own digital channels.
ING+Deals, with over 200,000 users generated more than €5 million revenue for our merchants in 2020, while ING Punten delivered a turnover of €45 million from the sale of 1.4 million products.
ING moved steadfastly on its housing strategy across Dutch and German markets with disruptive concepts like Scoperty and Makelaarsland. The near-term objective is to independently grow these and invest in synergistic business models. Makelaarsland is a property platform empowering people in the
Netherlands to buy and sell their homes online themselves or with the support of a local agent.
In Germany, ING partnered with Sprengnetter on Scoperty, a real-estate platform connecting buyers and sellers of more than 35 million properties. The pre-qualification process for mortgages is aligned with that of Interhyp, ING’s independent mortgage brokerage platform in Germany and Austria.
We want our customers to do more than just some of their banking with us; we want to be their first partner, where they deposit their salary, handle their payments and do most of their other banking business.
One of the ways we measure our progress is through the Net Promoter Score (NPS), which indicates customer satisfaction and loyalty (whether they would recommend ING to others). The score is calculated as the difference between the percentage of promoters (who rate ING as 9 or 10 out of 10)
In the Business Banking segment, we measure NPS in four markets. These are the Netherlands,
Belgium, Poland and Romania. The NPS for mid-corporate clients in the Netherlands improved to +18.4
However, there is room for improvement to make the digital customer experience easier and more personal, especially for Dutch SMEs and self-employed clients, where our NPS among both client groups declined to -26 from -20 and -18 respectively. In Poland, the combined NPS for SME and midcorporate clients improved to +43 (from +30 in 4Q 2019). As we revised our methodology in Belgium we don’t have comparable figures for 2020. Although slightly lower than in 2019, the NPS for micro clients and SMEs in Romania is still a high +43 and +54 for mid-corporates.
‘Unleashing sector potential’ above) and that Wholesale Banking is succeeding in its strategy to focus on core clients, with as a result more resources allocated to a smaller group of clients and higher client satisfaction.
Recognising our efforts, Global Finance magazine named ING as the best consumer digital bank in
Innovation Awards. In the Forbes list of the world’s best banks, ING ranked among the top five in seven countries in 2020.
Global Finance also named ING as the most innovative bank in Western Europe. Three ING innovations also won Innovators 2020 Awards: Zero Knowledge Proof Notary (cash management category),
CoorpID (corporate finance sector) and FINN – Banking of things (payments sector).
Initiatives that have benefitted from this include the trade finance tools of the blockchain-based software company Komgo, which grew out of ING’s Innovation Bootcamp (see ‘Distributed ledger technology and blockchain’ below). Also in trade finance, ING teamed up in 2020 with AI-driven trade platform Tradeteq, the first electronic platform that allows banks and institutional investors to transact trade assets. Tradeteq uses advanced analytics and artificial intelligence to derive more accurate risk scores, helping investors to better evaluate opportunities and offers an end-to-end solution covering portfolio management, risk analytics and securitisation-as-a-service.
has started using for Wholesale Banking clients in Asia, provides banks with a single platform for digitally managing KYC requirements, connecting to trusted data sources, generating tailored KYC files for its clients and quickly implementing regulatory changes. Loan Optics is a platform for digitallynative loans. It reduces operational costs by streamlining the primary and secondary loan implementation processes. Stemly is creating an autonomous decision system for supply chain and finance processes.
ING’s zero-knowledge proof notary service, a solution aimed at improving the privacy and security of
DLT-based transactions, received an Innovators 2020 Award from Global Finance magazine in the cash management category. Built specifically to address the privacy requirements of R3’s Corda platform, the capability is our latest development in this field of cryptography, following a suite of open-source privacy tools released in previous years.
ING entered into several fintech partnerships this year that help our businesses execute our strategy.
Through our investment arm, ING Ventures, we invest in companies with a strategic relevance for ING.
These are start-ups with disruptive technologies that have the potential to improve the customer experience or ING’s operational efficiency.
A number of partnerships are focused on enhancing our data analytics capabilities. One example is
London-based Eigen Technologies, which is working on natural language processing (NLP) models tailored to the financial industry’s need for data extraction. The partnership is applying NLP and machine learning in areas such as corporate lending, trade finance and SME banking to automate processes and reduce risk and cost.
Dutch SMEs find the right loan for their business. FinCompare gives German corporate customers a quick and independent overview of their financing options. TransferMate provides SME customers and corporate clients with faster, cheaper and easier payment solutions. We are also exploring new business models. Countingup, a mobile banking app for self-employed entrepreneurs and freelancers, combines accounting and banking features into one seamless solution, greatly reducing operating complexity and cost.
On the topics of aggregation, PSD2 and open banking, ING is working with an ING-initiated company,
In the area of operational excellence, we’re working with fintech Duco on a reconciliation solution that strongly improves time to market in building reconciliations and lowers the cost of carrying these out.
In the Philippines, ING teamed up with the UNICEF Innovation Office to support fintech start-ups working on financial inclusion challenges (www.fintechforimpact.com). The Fintech for Impact initiative will provide financial support and mentoring for five projects: an app to bring affordable healthcare to rural communities; a tool to help migrant workers manage their finances; a platform connecting farmers and fishermen directly to buyers; an app connecting students to education loans; and an AIenabled platform to deliver grassroots insurance to low-income families.
ING’s Terra sets out our approach for aligning our lending portfolio with the Paris climate goals in the nine sectors most responsible for climate change. Since 2019, we have made significant progress in further developing, refining and applying the Terra approach. In October 2020, we released our second progress report on Terra. It included quantitative results and targets for all of these nine sectors, fulfilling the commitment we made the previous year.
One of the targets included in the report is our aim to reduce financing to upstream oil and gas by 19 percent by 2040 from 2019 levels. We’ll align this portfolio both by decreasing exposure and engaging with clients to help them shift to low-carbon technology. The measurement is based on three indicators: emission intensity, an absolute reduction in financing and a relative transition of the financing mix from high-carbon to low-carbon and renewable energy. This target is also aligned with the SDS scenario, which is not static. If more or quicker action is needed and this scenario is adjusted, our target will adjust accordingly.
We believe that working together to achieve an industry-wide standard will increase transparency and ultimately help the entire financial sector to make a bigger impact. We also believe in an inclusive approach to climate alignment, as we work with our clients to facilitate and finance their shift to lowcarbon technology.
Investment Bank on the implementation of the European Green Deal and we’re providing input for proposals by the Network for Greening the Financial System on sustainable stress testing to assess the resilience of the financial system to climate-related shocks.
Sustainability is about planet and people. We believe we can make more impact with what we do finance than what we don’t. So when it comes to people, we aim to increase our social impact finance portfolio by lending to projects that lead to, for example, basic infrastructure improvements, community development or essential services. And we’re working on making a positive contribution to human rights as financier, employer, taxpayer and driver of progress and prosperity. This is also in line with the United Nations’ Principles for Responsible Banking, of which ING was a founding signatory
We have an inclusive approach to driving sustainable business. We work with our clients to facilitate and finance the shift to low-carbon technology. This includes environmental, social and governance
(ESG) checks to ensure that our financing is in line with our own sustainability goals. Read more about our environmental and social risk policy framework at www.ing.com/Sustainability/Sustainablebusiness /Environmental-and-social-risk-policies.htm
Social impact financing for projects that lead to, for example, basic infrastructure improvements, community development or essential services, decreased by 29 percent to €533 million. Please see the
Despite the decline in demand, we continued to shape sustainable finance in 2020 with the introduction of an innovative financing method to make inland shipping in the Netherlands more sustainable. A pay-per-use financing structure for renewable battery containers makes it easier for ship owners to transition from diesel-powered barges to electrical power without the need for a large up-front investment. ING and partners formed a new company called Zero Emissions Services (ZES) to facilitate the transformation. The Dutch transport sector is responsible for 21 percent of the country’s
ING broke new ground with Europe’s first Covid-19-related bond, which raised financing for French public hospitals. ING was the joint bookrunner in the €1 billion deal with French bond issuer Caisse
Francaise de Financement Local (CAFFIL). Issued in May, it was the first negative yield bond launch since the end of February when the pandemic triggered a global sell-off and closed the primary market. ING’s previous collaboration with CAFFIL on the first French social covered bond was a winner at Environmental Finance’s Bond Awards 2020.
Housing Finance Corporation; as joint bookrunner in the €1 billion social bond for CaixaBank; and joint lead manager on the €500 million bond for the Export-Import Bank of Korea (KEXIM).
Our current carbon intensity measurement covers our Dutch and German mortgage portfolio, with a combined outstanding lending amount of roughly €180 billion (60 percent of total mortgage outstandings) and more than one million financed homes. See the latest Terra report on ing.com for information on the underlying measurement.
We are developing retail products, tools and services to help homeowners make their houses more sustainable. Customers can use these products to finance solar panels, for example, or insulate their homes. In Germany, we provide green mortgages through development bank KfW.
In addition to financial solutions, we help to raise awareness on the topic. Consumers in the
Belgium, Luxembourg and Germany. In 2020, ING’s retail brokerage division recorded €13.2 billion in sustainability assets under management, up from €9.3 billion in 2019. This underlines our clients’
In 2020, ING changed its CET1 ambition from around 13.5 percent to around 12.5 percent, reflecting among others a structural reduction of capital requirements and increased visibility of expected regulatory risk-weighted assets inflation. This new ambition level is comfortably above the current maximum distributable amount (MDA) level of 10.51 percent, implying a management buffer of ~200 basis points. ING also changed its dividend policy from a progressive dividend to a pay-out ratio of 50 percent of resilient net profit (which is defined as net profit adjusted for significant items not linked to the normal course of business) and additional return of structural excess capital.
Art.104a in CRD V. Further to these instruments, to build up our minimum requirements for own funds and eligible liabilities (MREL) capacity, ING Group issued multiple Senior HoldCo transactions in 2020 for a total amount of about €2.2 billion.
In 2020, Retail Banking results were resilient. However, the net result fell 31.8 percent to €2,281 million from €3,347 million in 2019, strongly affected by the impact of the Covid-19 pandemic, which resulted in higher risk costs reflecting the worsened macroeconomic environment, as well as by impairments in both income and expenses, and some other incidental items.
run-off portfolio, Retail’s net core lending book grew by €2.4 billion as growth in mortgages more than offset a decline in business lending. Net customer deposits (also adjusted for Treasury and currency impacts) grew by €37.0 billion in 2020.
Risk costs rose to €1,322 million, or 30 basis points of average customer lending, from €588 million, or 14 basis points, in 2019. Risk costs in 2020 included €398 million of collective provisions related to the worsened macroeconomic indicators, including management adjustments to reflect a delay in observed defaults that are still expected and provisioning related to loans subject to a payment holiday.
The result before tax of Retail Netherlands decreased 5.7 percent to €2,078 million from €2,204 million in 2019. This decline was mainly attributable to higher risk costs reflecting the worsened macroeconomic environment and an increase in regulatory costs.
Treasury- related revenues. Net core lending (which excludes Treasury products and a €1.1 billion decline in the WUB run-off portfolio) decreased by €3.2 billion in 2020, of which €0.8 billion was in residential mortgages and €2.4 billion in other lending. Net customer deposits (excluding Treasury)
grew by €15.3 billion, predominantly in current accounts. Net fee and commission income increased by €7 million, or 1.0 percent, primarily due to higher investment product fees. Investment and other income was €11 million lower.
The net addition to loan loss provisions was €157 million, or 10 basis points of average customer lending, compared with €91 million, or 6 basis points, in 2019. Risk costs in 2020 included €118 million of collective provisions related to the worsened macroeconomic indicators, including provisioning related to loans subject to a payment holiday.
The result before tax of Retail Belgium fell to €122 million, compared with €647 million in 2019. The decline was attributable to higher risk costs reflecting the worsened macroeconomic environment, combined higher expenses and lower income.
Flemish government to make crisis payments to its citizens at short notice
Using new channels to advise customers during lockdown e.g. video meetings, customer webinars and remote investment advice
Pandemic relief measures for Spanish customers included free ATM withdrawals, contactless PIN payments, advances on unemployment benefits and payment holidays
Retail Other consists of the other Challengers & Growth Markets, including the bank stakes in Asia.
Turkey, which was partly offset by increases in most of the other countries. Excluding the aforementioned impairment, investment and other income rose by €21 million.
The net addition to loan loss provisions increased by €229 million on 2019 to €593 million, or 61 basis points of average customer lending. Risk costs in 2020 included €114 million of collective provisions related to worsened macroeconomic indicators, including provisioning related to loans subject to a payment holiday, as well as a €59 million provision for expected losses on CHF-indexed mortgages in
Poland. The increase versus 2019 was mainly visible in Poland, Romania and Australia, whereas risk costs in Turkey declined.
The full-year 2020 results for Wholesale Banking were also strongly affected by the impact of the
Daily Banking, Trade Finance and Lending. The net core lending book (adjusted for currency impacts and excluding Treasury and the Lease run-off portfolio) declined by €4.9 billion in 2020. The inflow in net customer deposits (excluding currency impacts and Treasury) was €4.4 billion. Net interest income decreased 2.0 percent, mainly due to lower margins on current accounts and lower average lending volumes. This decline was largely offset by higher interest results from Treasury (with an offset in other income). Net fee and commission income decreased 5.8 percent on 2019, mainly due to lower syndicated deal activity in Lending and lower fees in Trade & Commodity Finance. Investment and other income rose by €240 million, primarily due to higher valuation results in Financial Markets, partly offset by Treasury.
The net addition to loan loss provisions rose to €1,351 million, or 75 basis points of average customer lending, compared with €532 million, or 29 basis points, in 2019. The increase was predominantly due to various individual Stage 3 provisions, including a sizeable provision for an alleged external fraud case in 2020, and high collective Stage 1 and Stage 2 provisions as a result of the economic impact of the
US$75 million loan to Cleantech Solar, one of the largest-yet loans in the
Financial Markets recorded a result before tax of €230 million, compared with a loss of €121 million in 2019. The increase was predominantly due to higher income, which included €73 million of positive valuation adjustments versus €-228 million in 2019, and lower expenses in part due to lower staff expenses and regulatory costs. Excluding valuation adjustments, pre-tax result rose by €50 million compared with 2019, mainly in the global Capital Markets business.
The result before tax of Treasury & Other was €-339 million compared with €-123 million in 2019. This decline was mainly explained by a €260 million goodwill impairment and €95 million of restructuring provisions and related impairments following the announced refocusing of activities, partly offset by higher Treasury income.
worked practically non-stop for a month. My four-year-old daughter now says 'daddy is working with the ears', as I constantly have headphones on. We actually moved from Milan to a village in the mountains for the lockdown. We stayed there until September; we had to return when the schools started again. Personally, I'm most proud of the birthday party we organised for our eight-year-old daughter, with video call celebrations with her grandparents and great-grandparents in Milan and
Business continuity and our ability to keep serving our customers relied on rapidly transforming our way of working into a work-from-home model. This required quickly putting the necessary infrastructure and processes in place to support up to around 80 percent of our global workforce working from home.
locations, which strived to follow the highest health and safety standards. This included restricting business travel and taking measures to create a safe work environment in our offices and branches.
As the virus outbreak worsened, the majority of our workforce switched to working from home. To ensure our employees remain engaged and are equipped to do their jobs remotely, we provide tools and guidance for remote working, support best-practice sharing and help them to create an optimal work environment.
Our global Talent and Learning team put in place a number of virtual development and training tools, tailored to the various workforce levels. On top of the coaching already included in the Think Forward
Leadership Programme, we offered 400 of our top leaders one-to-one consultation sessions with external wellbeing coaches. We also introduced a virtual version of the Think Forward Leadership
For employees, a fully digital offering was created with more than 100 tools and resources focused largely on personal effectiveness. Topics included: • Embracing new working conditions
Local businesses came up with a range of creative solutions to help employees stay strong in difficult times. The support varied from tips and tricks on nutrition and how to stay fit, to online wellbeing coaches, psychological support, tips on how to deal with stress and workload and advice on the importance of taking a holiday – even when your trip is cancelled.
Some examples of the many local initiatives include ‘Wellbeing Friday’ and a wellness intranet page called Frenkie (Australia), a health week and virtual sports challenges (Poland), a wellbeing handbook and online workouts on emotional and mental health (Romania), online meditation courses and yoga lessons (Italy), personal trainer videos (Germany) and online talks on nutrition, mindfulness and the importance of sleep (Turkey). Employees in the Netherlands and Belgium could follow a newsletter series with expert advice on performing during the coronavirus period. We also launched a series of webinars for employees in the Netherlands and Belgium focused on developing a positive mindset, concentrating under pressure and creating moments of relaxation.
The Wellbeing Quotient (WQ) programme in the Netherlands and Belgium, aiming to improve the wellbeing of individuals and teams, went digital this year. The WQ programme comprises training courses on energy management, performing under pressure and mental power. Since its launch in
Leaders and managers at all levels stepped up their communication efforts to keep their teams up to date and motivated in uncertain times. As well as virtual stand-ups and other meetings to discuss formal, business-related topics, there were also informal virtual get-togethers, from pub quizzes to wellness workshops and webinars.
Internal communication became vital to keep staff engaged. On global and local intranets and in social communities, people told stories and shared photos and videos of their working from home experiences. External experts featured in an article series on the global intranet, ‘Home coach’.
To monitor the progress on these priorities, we introduced two OHI Pulse surveys for all employees in 2020. The global results of the OHI Pulse survey held in May showed significant improvement across all business lines in the three priority areas. More colleagues indicated ING’s purpose is communicated clearly and that they understood more how they contribute to ING's success. More colleagues felt their views were included in decision-making and more felt leaders showed concern for the welfare of employees. Also, more colleagues felt ING was doing well in innovation.
The outcomes of the OHI Pulse survey in November, compared to May, showed that leaders continued their high level of support and caring for employees’ welfare. Scores on direction declined slightly while those on innovation & learning remained generally stable versus May.
The next full organisational health survey will be run in 2Q 2021.
Our business centres on people and trust. People trust us with their money and with their data.
The Orange Code is a manifesto that describes our way of working, putting integrity above all. It is comprised of our values and our behaviours.
ING values are the principles we stick to, no matter what.
ING behaviours are commitments we make to each other and the standards by which we measure each other’s performance.
We expect everybody to demonstrate our Orange Code behaviours every day. ING colleagues showed this during the crisis by continuing to serve customers from home: they took things on and made them happen. And they helped each other to be successful; for example by supporting colleagues who had to combine work tasks with home schooling. The Orange Code behaviours drive our success.
The Orange Code values are the promises we make. It’s our policy not to ignore, tolerate or excuse any behaviour that is not in line with these values. Doing so could potentially put our customers at risk, erode the public’s confidence and damage our reputation. That’s why integrity is at the very foundation of our culture.
ING’s existing policies, minimum standards and guidelines to keep ING safe, secure and compliant. The global Code of Conduct is in addition to local codes of conduct in various countries. Important elements are the ‘speak-up’ principle, encouraging employees to report any misconduct, and the principle that every ING employee is entitled to a safe working environment. ING does not tolerate discrimination, harassment, bullying, sexual or other forms of intimidation, aggression or violence.
We strive for no group or level to comprise more than 70 percent of the same gender, nationality or age group. Managers are ultimately responsible for building mixed teams and choosing the dimensions of diversity they focus on. They are guided by the 70 percent principle and our global priorities (gender, nationality and age).
Like many other financial organisations, getting the right mix of people – especially in leadership positions – remains a challenge. There is more to be done to redress imbalances that still exist. ING is committed to making progress in this area.
When looking at the composition of our Management Board and Supervisory Board we look at diversity in a broad sense, striving for factors such as nationality, gender, age, education and work background.
The diversity and competence matrix in the Supervisory report reflects the composition of the
At the level below the Management Board Banking there is still work to be done to make the necessary progress, particularly in terms of gender. At this level, 27 percent of our leaders are female. In terms of nationality we see more diversity at this level with 43 percent of leaders of non-Dutch nationality. We are addressing this as part of our annual talent review process, which aims to create a more balanced pipeline by including more diverse candidates on succession lists for around 400 of our top roles, and through regular discussions around these appointments at Management Board level.
Looking more broadly, the number of female managers remained stable at 37 percent of managers (37 percent in 2019) and 30 percent of managers of managers (29 percent in 2019).
‘Banking on inclusion’ training programme for managers and HR professionals. By the end of 2020, 683
ING managers had enrolled in the training. All employees globally could already follow an online unconscious bias e-learning, which was introduced in 2019.
As an inclusive employer, ING wants its benefits to be inclusive as well. In 2020, we performed a worldwide review of our benefits packages. After a first round covering 40 countries, we did a deeper assessment in eight countries, comprising 65 percent of the ING population. In several cases the benefits packages were assessed as ‘above-market’. In terms of inclusivity, some themes emerged that we may consider focusing on in the future, including family leave (e.g. equal paternity/maternity leave), financial education and wellbeing.
We make a conscious effort to include all people, no matter what their cultural background, experience, religion, sexual orientation or political viewpoints. Any distinction, exclusion or preference not based on the inherent requirements of the job is deemed to be discrimination. We are working together to create an inclusive workplace and, in turn, play our part in building an inclusive world.
While we aspire to conduct this exercise globally in the future, we will need to roll out a consistent job framework model and implement one global HR system across all ING countries before this is possible.
At ING we manage our people’s performance on a continuous basis. Called Step Up, our global performance management practice centres around so-called ‘continuous conversations’ between employees and their managers. ‘Continuous conversations’ are informal, regular, on-the-job chats between employees and their manager so employees know what they’re supposed to do, how they’re doing and what they can improve. These discussions should encompass the employee’s job, ‘stretch’
ambitions and our Orange Code behaviours. In addition to these informal conversations there are also three formal check-ins during the year – target setting, mid-year review and year-end evaluation.
This year we introduced ‘our people offer’. This document – based on extensive research – sets out our differentiating offer as an employer in the marketplace and states what we ask of our people in return.
To deliver on our purpose and strategy ING needs to have the right capabilities in place. Working with the business, we identified six clear capabilities we need now and in the future to deliver on our business strategy – both as an organisation and as individuals. These six capabilities, collectively known as the ‘Big 6’ capabilities, are important for all ING colleagues irrespective of role, level, country or department.
The Big 6 will bring additional focus to both the development needs of the ING workforce and the many learning resources we have available. The capabilities were launched in 2020 in the Netherlands and
My Learning is ING’s new intelligent digital learning platform where employees can find our complete offering of learning content in one location. The new platform is live in Netherlands and Belgium and all employees in these countries have access. The roll-out of My Learning to other countries will continue
My Learning organises search results in channels and so-called learning plans, with learning activities on the same subject being grouped in a channel. Official ING content curated by our learning experts are ‘recommended channels’. Employees can also create their own channels.
The first phase of the programmes focused on self-awareness, personal ownership and collaboration.
Other subjects covered were the Orange Code and the Think Forward strategy. Phase 2, launched for
The first full digital version of the TFLE went live in September. The content focused on topics like psychological safety, micro agressions/messages, radical candour and sustainable high performance; priming ourselves and our team for performance. These topics are even more relevant in the context of working from home and the acceleration in change we are all experiencing. In 2020, a total of 840 managers joined these sessions. Feedback was positive with an overall peer recommendation score of 4.2 out of 5 and a 4.6 out of 5 score in response to the question: ‘The skills and insights I gained are relevant for leaders at ING’.
While in many areas, recruitment was much less of a focus, ING still needs key specialist profiles in some locations to realise our digital ambitions. To improve the way we attract talent we are redesigning our global recruitment operating model, particularly with regards to our sourcing and screening approach for niche or hard-to-fill roles.
The tool was launched for ING’s shared-services centre in Manila, followed by the Netherlands later in the year.
These principles complement ING’s one Way of Working and promote one global standard with a degree of flexibility for local implementation.
Based on the initial analysis, we envisage that in the future employees will spend around 50 percent of their time working remotely and will be empowered to work much more flexibly. This is not set in stone, but is an indication of our current thinking and our starting point for the ‘new normal’. It will require re-thinking many aspects of the way we work – for instance office space, collaboration, travel –
ING’s ambition to transform into a leading data-driven digital bank remains firm. The challenging external environment requires us to remain flexible in how and where we deliver our Think Forward strategy. At the same time, customer behaviour is changing as we become more digital in our approach to banking. This can impact the way we operate and the skills and capabilities we need. This means we sometimes need to make organisational changes or refocus our activities. These decisions can impact our people and roles can, for example, change or no longer exist.
In July, ING in the Netherlands announced its intention to close 42 branches over the coming year, moving services to other ING branches or service points. ING in the Netherlands has 134 branch offices and 246 service points (December 2020). In December, ING in Belgium announced plans to close 62 branches out of a branch network of 552 branches (December 2020). This is because we’re seeing customers are increasingly using digital channels rather than visiting our branches. Covid-19 has accelerated these changes and the speed of digitalisation. The vast majority of colleagues affected by the announced changes are expected to find new roles in other parts of our business.
Decisions like these are not made lightly. We are committed to treating employees impacted by the changes with respect and care. We aim, as far as possible, to help them develop their skills or find new job opportunities inside and outside ING.
Steven van Rijswijk (50) has been a member of the Executive Board and
Management Board Banking since 8 May 2017. He succeeded Ralph Hamers as chief executive officer and chairman of the Executive Board and the Management
Board Banking on 1 July 2020. Before this, he was ING’s chief risk officer. As chief executive officer and chairman he is primarily responsible for the proper functioning of the Executive Board and Management Board Banking, as well as formulating and delivering ING’s strategy, proper decision-making, results, governance and culture. Related to this he ensures the communication with the Nomination & Corporate Governance Committee, Remuneration
Tanate Phutrakul (55) was appointed chief financial officer and a member of the
Aris Bogdaneris (57) was appointed as a member of the Management Board
Banking on 1 June 2015. As head of Challengers & Growth Markets he is responsible for all markets outside the Benelux where ING is active in both retail and wholesale banking.
Roel Louwhoff (55) was appointed chief operations officer and a member of the
Our conclusion on the Non-Financial Information and our opinion on the Four Specific Topics
We have: — reviewed the non-financial information in ‘ING at a Glance’ on pages 5-10 and in the sections ‘Strategy and performance’ on pages 11-79, the ‘Environmental social and governance risk’ section on pages 164-166 of the Risk Management chapter, and the Non-financial appendix (hereafter: ‘the Non-Financial Information’). The non-financial information in scope is defined on page 15 in the table ‘Material Topics 2020’ (excluding information related to financial performance); and
Based on our procedures performed, nothing has come to our attention that causes us to believe that the Non-Financial Information is not prepared, in all material respects, in accordance with the Sustainability Reporting Standards of the Global Reporting Initiative (‘GRI’) and supplemental reporting criteria as described in the section ‘About this report’.
We believe the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion about the Non-Financial Information and our opinion on the Four Specific Topics.
The reporting criteria used for the preparation of the Non-Financial Information and the Four Specific Topics are the Sustainability Reporting Standards of the Global Reporting Initiative (‘GRI’) and the supplemental reporting criteria as disclosed in the section ‘About this report’.
ING Group is the parent company of a group of entities. The Non-Financial Information and the Four Specific Topics incorporate the consolidated information of this group of entities to the extent as specified in section ‘About this report’. Our group assurance procedures consisted of both assurance procedures at ING Group corporate level and at country level. Our selection of countries in scope of our assurance procedures is primarily based on the country’s individual contribution to the consolidated information.
Furthermore, the Executive Board is responsible for such internal control as it determines is necessary to enable the preparation of the Non-Financial Information and the Four Specific Topics to be free from material misstatement, whether due to fraud or error.
Our examination on the Four Specific Topics has been performed with a high, but not absolute, level of assurance, which means we may not have detected all material misstatements due to fraud or error.
We apply the ‘Nadere Voorschriften Kwaliteitssystemen’ (‘NVKS’, Regulations for Quality management systems) and accordingly maintain a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.
Our examination included among others: — performing an analysis of the external environment and obtaining an understanding of relevant social themes and issues, and the characteristics of ING Group; — evaluating the appropriateness of the reporting criteria used, their consistent application and related disclosures in the Non-Financial Information and the Four Specific Topics. This includes the evaluation of the results of the stakeholders’ dialogue and the reasonableness of estimates made by the Executive Board; — obtaining an understanding of the reporting processes for the Non-Financial Information and Four Specific Topics, including obtaining a general understanding of internal control relevant to our review on the Non-Financial Information and our audit on the Four Specific Topics; — identifying areas of the Non-Financial Information and Four Specific Topics with a higher risk of misleading or unbalanced information or material misstatements, whether due to fraud or error; — designing and performing further assurance procedures aimed at determining the plausibility of the Non-Financial Information and Four Specific Topics responsive to this risk analysis. These procedures included among others: • interviewing management and relevant staff at corporate level responsible for the non-financial strategy, policy and results; • interviewing relevant staff responsible for providing the information for, carrying out internal control procedures on, and consolidating the data in the Non-Financial Information and Four Specific Topics; • obtaining assurance information that the Non-Financial Information and the Four Specific Topics reconcile with underlying records of ING Group; • reviewing, on a limited test basis, relevant internal and external documentation; — evaluating the consistency of the Non-Financial Information and the Four Specific Topics with the information in the Annual Report which is not included in the scope of our review on the Non-Financial Information and our audit on the Four Specific Topics; — evaluating the overall presentation, structure and content of the Non-Financial Information and the Four Specific Topics; — evaluating whether the Non-Financial Information and the Four Specific Topics as a whole, including the disclosures, reflect the purpose of the reporting criteria used.
As a global financial institution with a strong European base, offering banking services, ING is exposed to a variety of risks. We manage these risks through a comprehensive risk management framework that integrates risk management into daily business activities and strategic planning. This safeguards
This chart provides high-level information on the risks arising from ING’s business activities: Risk profile
Testing Framework and the Risk Appetite Framework. The sequence in which the risks are presented below is not indicative of their likelihood of occurrence or the potential magnitude of their financial consequences.
Covid-19 was declared a global pandemic by the World Health Organization on 11 March 2020. Various countries and local governmental authorities across the world have introduced measures aimed at preventing the further spread of Covid-19. Read more in ‘The world around us‘.
The risk management section contains information relating to the nature and extent of the risks of financial instruments as required by International Financial Reporting Standards
(IFRS) 7 'Financial Instruments: Disclosures'. These disclosures are an integral part of ING
This risk management section also includes additional disclosures beyond those required by
Examples of such differences include the exclusion of accrued interest and certain costs and fees from risk data, and timing differences in exposure values (IFRS 9 models report expected credit loss on underlying exposures). Disclosures in accordance with Part Eight of the CRR
and CRD IV, and as required by the supervisory authority, are published in our ‘Additional
Increased attention is being paid to our financial risks. This was especially true during the initial phases of the pandemic, which included high frequency calls between senior management of the bank, as well as with external stakeholders like the ECB, to intensely monitor developments relating to liquidity, market and credit risks. ING also performed several types of stress tests and sectoral reviews to assess the potential impact on its financial position, which helped ING to get further insights into the potential impact and to define appropriate mitigating actions. Read more in ‘Credit risk’, ‘Market risk’ and
ING is monitoring the evolving Covid-19 pandemic carefully to understand the impact on its people and business. A central ING team has been set up to monitor the situation globally and provide guidance on health and safety measures, travel advice, and business continuity for our company. In addition, a situation in which most or some of ING’s employees continue working from home may raise operational risks, including with respect to information security, data protection, availability of key systems and infrastructure integrity. Read more in ‘Non-financial risk’.
ING`s business and portfolios are exposed to geopolitical risks such as political instability, social unrest or military conflicts, which could adversely affect our operations. Global tensions over trade, technology and ideology pose challenges and have negative effects for economic growth. The Covid19 pandemic could accelerate and amplify the negative impact, with divergence both between and within countries leading to increased inequality.
UK financial services have become subject to unilateral equivalence decisions. The EU and UK
regulators have taken measures to address overall financial stability risks (e.g. extension to recognition of UK CCPs).
Cybercrime remains a continuous threat to companies in general and to financial institutions in particular. Both the frequency and the intensity of attacks are increasing on a global scale. Threats from distributed denial of service (DDoS) attacks, targeted attacks (also called advanced persistent threats) and ransomware have intensified worldwide.
Protection Regulation (GDPR) and the Basel Committee for Banking Supervision (BCBS 239) principles.
ING is increasingly aware of the risks associated with climate change. This includes physical risk and transition risk. Physical risk can be acute, such as flood and wildfires, or chronic, such as increase in temperature and sea level rise. Transition risk can be driven by policy, technological or market changes occurring as we shift towards a low-carbon global economy and potentially lead to stranded assets.
Effective risk management requires firm-wide risk governance. ING’s risk and control structure is based on the ‘three lines of defence’ governance model. Each line has a specific role and defined responsibilities, with the execution of tasks being distinct from the control of these same tasks. The three lines work closely together to identify, assess, and mitigate risks.
This governance framework is designed in such a way that risk is managed in line with the risk appetite approved by the Management Board Banking (MBB), the Executive Board (EB) and the Supervisory
The heads of ING’s banking business and support functions and the heads of the country units, or their delegates, are the first line of defence. They have the primary ownership, accountability and responsibility for assessing, controlling and mitigating all financial and non-financial risks affecting their businesses, and, for the completeness and accuracy of the financial statements and risk reports with respect to their responsible areas. The COO is responsible and accountable for proper security and controls on global applications and IT platforms servicing the Bank and implementing proper processes.
The internal audit function forms the third line of defence. It provides an independent assessment of the effectiveness of internal controls over the risks to ING’s business processes and assets, including risk management activities performed in both the first and second lines of defence. To protect its independent nature, decisions regarding the appointment, re-appointment or dismissal from office as well as the remuneration package of the head of the internal audit function require Supervisory Board approval.
BU risk managers -t ie r b o a rd s tr u ct u re 1st line of defence 2nd line of defence 3rd line of defence
ING has a two-tier board structure consisting of a Management Board (EB for ING Group and MBB for
Group, ING Bank and its business (including its financial policies and corporate structure). For risk management purposes the SB is advised mainly by the Risk Committee, which assists and advises in monitoring the risk profile and approving the overarching risk appetite of the company as well as the structure and effective operation of the internal risk management and control systems.
responsibilities include ensuring that internal risk management and control systems are effective and that ING Group and ING Bank comply with relevant legislation and regulations. On a regular basis, the EB and MBB report on these issues and discuss the internal risk management and control systems with the SB. On a quarterly basis, the EB and MBB report on
The key risk committees described below act within the overall risk policy and delegated authorities granted by the MBB: ▪ Global Credit and Trading Policy Committee (GCTP) discusses and approves policies, methodologies, and procedures related to credit, trading, country, and reputation (i.e.
▪ The Model Risk Management Committee (MoRMC) discusses and steers, on a monthly basis, the overall model strategy. MoRMC discusses and approves policies and methodologies related to model risk management.
ING’s regional and/or business unit management have primary responsibility for the management of risks (credit, market, funding and liquidity, operational, IT, compliance and model) that arise in their daily operations. They are accountable for the implementation and execution of appropriate risk frameworks affecting their businesses in order to comply with procedures and processes at the corporate level. Where necessary, the implementation is adapted to local requirements.
(FATCA), Common Reporting Standard (CRS) and environmental and social risk (ESR).
Over the past years, banks have been faced with regulatory and public pressure with regard to their risk management policies, processes and systems. A raft of new requirements and regulations has been introduced and implemented. To address these internal and external (market and regulatory)
ING has organised its internal control framework (ICF) so as to translate regulations and internal requirements into policies articulating specific risks and control objectives. These policies form the basis for translation into process control standards, which are used by the business to support and promote an effective risk and control environment. The ICF includes binding principles, definitions, process steps, and roles and responsibilities to create consistent bank-wide policies and control standards.
The process of developing policy and process control standard documents includes the following steps: identify the document owner, determine the relevant stakeholders, define a risk-based approach, perform an impact assessment, involve relevant stakeholders and (local) entities for sounding on key and expected controls, and determine an approval body. This overall process is currently being further strengthened by implementing an updated Regulatory Management Process also covering horizon scanning.
At the end of 2019, the ICF gatekeeper function was split into a first and a second LoD gatekeeper function. The 2nd LoD gatekeeper oversees the policy design process, while the first LoD gatekeeper oversees the design process for the process control standard. The principal role of these gatekeepers is to provide quality assurance and to advise on the relevant approval bodies. The ICF gatekeepers challenge document owners on the alignment of internal control documents with the agreed methodology and risk taxonomy, and verify that the development and communication of those documents are in line with the agreed process.
The Orange Code is the sum of two parts, the ING values and ING behaviours, with integrity being the overarching principle. The ING values (being honest, prudent and responsible) are designed to be nonnegotiable promises we make to the world, principles we seek to stick to, no matter what. The ING
To reinforce the values and behaviours in our Orange Code, which puts integrity above all, we invite all
Code of Conduct, Sanctions, Getting Data Protection Right and Keeping up with KYC.
To enhance risk awareness, we continued to support monitoring risk culture and compliance risk in the business. This included training by compliance and data experts to enhance balanced decision-making in line with the Orange Code decision-making model (introduced in 2017) to support moral learning and well-balanced decision-making. This four-step model helps to delay judgement and aims to find out where the moral weight lies for a potential decision.
The model is already embedded in some decision-making processes (such as the data ethics governance process and the global Product Approval and Review Process policy) and we are exploring how to embed it in other decisive governance processes within the bank. Compliance is continuing to train experts in this area within the local Compliance teams to support the organisation in properly applying the model in practice in their respective countries.
Data ethics is key for an enhanced and sustainable trusted relationship with ING customers and society. Our vision is to integrate data ethics as part of our culture, behaviours and decision-making process. We have defined values that should guide our employees’ behaviours. Furthermore, we have set up data ethics councils that help ensure we use data responsibly.
In 2020 we continued to strengthen and expand our learning offering on risk topics and the governance around this. The learning focuses on compliance, non-financial risk and risk.
(around 400 a month) can still take the Banker’s Oath in timely fashion and in a meaningful ceremony.
ING aims to align its remuneration policy with its risk profile and the interests of all stakeholders. For more information on ING’s compensation and benefits policies and its relation to the risk taken, please refer to the Capital Requirements Regulation (CRR) Remuneration Disclosure published on the corporate website ing.com.
At ING, behavioural risk management (BRM) is positioned in the second line of defence, reporting directly to the CRO. The global BRM Centre of Expertise not only assesses behavioural risk in the organisation, but also has the mandate to direct, challenge and support business owners to intervene on behavioural patterns and their underlying drivers.
Based on the results of the executed behavioural risk assessments (BRAs), BRM mitigates behavioural risk in a focused manner. Effective mitigation requires a deep understanding of what drives undesired behaviours. Theory and evidence-based techniques and tools developed in behavioural science play an important role in designing and evaluating interventions. Given the crucial role of leaders in creating the right conditions for employees, interventions are first initiated at leadership level. These include leadership labs, which address topics such as ‘connection, alignment and trust’, as well as bringing together the ‘whole system in the room’. Here senior leaders delve into the outcomes of the assessments, identifying deeply rooted and often complex issues for improvement.
In addition, interventions are also set in motion that focus on enabling employees to build awareness on behavioural risk and support them in initiating solutions to mitigate the potential behavioural risks.
The cycle recurs in two ways. First, the identification, assessment, review, and update of mitigating measures are repeated periodically. Second, this periodic monitoring exercise may indicate emerging risks, known risks that are changing, risk levels that are changing, or current control measures that are not effective enough. Further analyses of these findings may then result in renewed and more frequent risk identification, and/or assessment, and/or change of mitigating measures.
Risk identification is performed periodically. In case of material internal or external change, additional ad hoc risk identification can be performed.
The importance of a risk is based on both the likelihood that the risk materialises and the subsequent financial or reputational impact that may occur should the risk arise. Unlikely risks with a potentially high impact need to be controlled. A risk that is likely to happen regularly but expected to have a modest financial impact may not need to be mitigated if the consequences are accepted by management.
ING monitors the risk-control measures by checking if they are executed, complied with and have the expected mitigating effects and by following the development of the risks and their risk levels. Risk reporting provides senior and local management with the information they need to manage risks.
The RAF policy states the overarching global risk appetite. Within the RAF, ING monitors a range of financial and non-financial risk metrics to ensure that our risk profile is in line with our risk appetite while executing our strategy. ING’s RAF, which is approved by the Supervisory Board (SB), defines the desired risk profile that is to be integrated in the strategic decision-making and financial planning process. It is designed to be able to withstand market volatility and stress, while meeting regulatory requirements. The framework, including underlying assumptions and metrics, is regularly reviewed so that it remains relevant. The RAF combines various financial and non-financial risk appetite statements
Known risks are re-assessed either to confirm risk levels or to take account of potential changes. The assessment is contextualised by the current set of risk appetite statements.
Based on ING’s risk assessment and risk purpose, boundaries for the overarching risk frameworks are set. Once the overarching risk appetite thresholds have been set and approved by EB/MBB and subsequently by SB, the statements are translated into risk-type-specific statements and lower level thresholds which are set and approved by senior risk committees, ALCO Bank, GCTP and Bank NFRC.
(Risk Committee of the) SB. Moreover every quarter the financial plan is checked for potential limit breaches within a one-year horizon, where in the strategic dialogue the MBB can take mitigating measures or adjustments to the dynamic plan can be made.
Stress testing is an important risk management tool that provides input for strategic decisions and capital planning. The purpose of stress testing is to assess the impact of plausible but severe stress scenarios on ING’s capital and liquidity position. Stress tests provide complementary and forwardlooking insights into the vulnerabilities of certain portfolios, with regards to adverse macroeconomic circumstances, stressed financial markets, and changes in the (geo)political climate. Since the outbreak of the Covid-19 pandemic, ING assessed the potential impact on its financial position via different types of stress tests. In addition to assessing P&L, capital and liquidity position of ING for a range of different scenarios, idiosyncratic risks were also included. The outcome of these Covid-19 stress tests helped management to get insight into the potential impact and to define actions to mitigate this potential impact.
Within ING, different types of stress tests are performed. The most comprehensive type of stress tests are the firm-wide scenario analyses, which involve setting scenario assumptions for all the relevant macroeconomic and financial market variables in all countries relevant to ING. These assumptions usually follow a qualitative narrative that provides a background to the scenario. In addition to firmwide scenario analyses, ING executes scenario analyses for specific countries or portfolios.
The stress testing process of ING consists of several stages, which are:  Risk identification and risk assessment: It identifies and assesses the risks ING or the relevant entity is facing when executing its strategy based on the current and possible future economic, political, regulatory and technological environment. It provides a description of the main risks and risk drivers related to the nature of ING’s business, activities and vulnerabilities.
 Impact calculation and aggregation: Based on the quantitative description of the stress scenarios determined in the previous step, the impact is determined for the relevant scenario, scope and horizon. The impact calculation and aggregation can be part of a recurring process or part of a specific process set-up for one-off stress tests.
 Scenario reporting: For each stress test, a report is prepared after each calculation which describes the results of the scenario, and gives a recap of the scenario with its main assumptions and parameters. The stress test report is sent to the relevant risk committees and/or senior management. It is complemented, if needed, with advice for management action based on the stress testing results.
Detailed and comprehensive models are used to calculate the impact of the scenarios. In these models, statistical analysis is combined with expert opinion to make sure that the results adequately reflect the scenario assumptions. The methodologies are granular and portfolio-specific and use different macroeconomic and market variables as input variables. The calculations are in line with our accounting and regulatory reporting frameworks. The stress-testing models are subject to review by
European post-crisis regulatory reforms, drawing on a number of international standards agreed by the Basel Committee, the Financial Stability Board and the G20. CRDV was implemented in Dutch law in 2020. The Banking Reform Package updates the framework of harmonized rules established following the financial crisis of 2008 and introduces changes to the CRR, CRDIV, the Bank Recovery and
Reform Package covers multiple areas, including the Pillar 2 framework, the introduction of a leverage ratio requirement of 3% and a leverage ratio buffer requirement of 50% of the G-SIB buffer requirement (applicable per 1 January 2023), a binding Net Stable Funding (NSFR) ratio based on the
"Basel III Reform" or "Basel IV”. In Europe, this will be implemented through the ‘CRR III’ / ‘CRD VI’ in the coming years. With this long implementation phase and the transposition into EU regulation still pending, some question marks remain on how this will shape up.
June 2017 the European Central Bank (ECB) introduced the Targeted Review of Internal Models (TRIM)
In July 2019, the ECB published the final chapters of the guide to internal models, covering credit risk, market risk and counterparty credit risk. These risk-type-specific chapters are intended to ensure a common and consistent approach to the most relevant aspects of the regulations on internal models for banks directly supervised by the ECB. Additionally, they provide transparency on how the ECB
understands the regulations on the use of internal models to calculate own funds requirements for the three risk types. Impact on ING is through more stringent regulation on the end-to-end process and governance around internal models as well as an increase of risk weighted assets (RWA).
In 2020, the last TRIM ECB inspection ended. Per rating system the ECB has sent and will send final TRIM
decision letters, which will include obligations that ING shall remediate. Also certain limitations such as restrictions on PD and/or LGD, effectively resulting in higher capital requirements, have or might be put in place until these obligations are fully addressed and closed.
Solvency risk is the risk of lacking sufficient capital to fulfil the business objectives, regulatory requirements or market expectations. A bank that is completely insolvent is unable to pay its debts and will be forced into bankruptcy.
The continued strength of ING’s capital position, the adequacy of the financial position and the risk management effectiveness are essential for achieving the Think Forward strategy. ING’s ICAAP
Managing ING’s capital requirements and allocation entails finding a balance between the forces governing supply and demand. The uncertainties surrounding these factors are a reflection of changing market circumstances and continuous unpredictability in regulatory and macroeconomic forces. The process of balancing these strategic goals is captured in the ICAAP framework and enabled by the building blocks and elements facilitating the ICAAP. The following building blocks have been defined in the ICAAP Framework, which are applied for both the ‘normative’ and ‘economic’ perspective as defined in the ECB Guide to ICAAP that was published in November 2018: • Risk identification and assessment
ING’s capital management and solvency risk management starts with the risk identification & risk assessment process. Its main purpose is to detect potential new risks and to identify changes in the potential impact of known risks. On an annual basis, ING performs a thorough review of its solvency risks or risks to capital. Within this assessment, bottom-up assessments are combined with top-down assessments, including a questionnaire and interviews with senior management. The results of the risk assessment are discussed in ALCO Bank which comprises almost the full Management Board Banking.
Among the solvency management tools the formulation of the CET1 ambition forms a key element.
The target ratio which is based on the management buffer concept enables ING’s senior management to steer, benchmark and assess the bank’s current and future capital levels much more efficiently while the ambition level clearly supports trust building among ING’s key stakeholders (e.g. regulators, investors, customers and clients).
Solvency stress testing allows a bank to examine the effect of exceptional but plausible future events on the solvency position and provides insight into which entities or portfolios are vulnerable to which type of risks or in which type of scenarios. Solvency stress testing is an important tool in identifying, assessing, measuring and controlling risks to capital, providing a complementary and forward-looking perspective to other solvency risk management tools.
Contingent capital events are unexpected situations or business conditions that may increase the risk with respect to ING’s capital position. These events may be ING-specific, or arise from external factors.
• The ability to meet internal and external requirements in the case of stressed events or should a risk materialise.
ING’s credit risk strategy is to maintain an internationally diversified loan and bond portfolio, while avoiding large risk concentrations. The emphasis is on managing business developments within the business lines by means of a top-down risk appetite framework, which sets concentration limits for countries, individual clients, sectors, products, secondary risk (collateral/guarantees) and investment activities. The aim is to support relationship-banking activities, while maintaining internal risk/reward guidelines and controls.
▪ Pre-settlement (PS) risk: arises when a client defaults on a transaction before settlement and
ING must replace the contract by a trade with another counterparty at the then prevailing
For the reconciliation between credit risk outstandings categories and financial assets, refer to the table below:
Reconciliation between credit risk categories and financial position (*) Credit risk categories Mainly relates to: Notes in the financial statements
Lending risk -Cash and balances with central banks Note 2 Cash and balances with central banks -Loans and advances to banks Note 3 Loans and advances to banks -Loans and advances to customers Note 4 Financial assets at fair value through profit or loss -Off-balance sheet items e.g. obligations under financial guarantees and letters of credit and undrawn Note 5 Financial assets at fair value through other comprehensive income credit facilities Note 7 Loans and advances to customers
Pre-settlement (PS) risk -Financial assets at fair value through profit or loss (trading assets and non-trading derivatives) Note 4 Financial assets at fair value through profit or loss -Financial liabilities at fair value through profit or loss (trading assets and non-trading derivatives) Note 14 Financial liabilities at fair value through profit or loss -Securities financing Note 43 Offsetting financial assets and liabilities
Credit risk appetite is set at different levels within ING and specifies the scope and focus of the credit risk of ING, and the composition of the credit portfolio, including its concentration and diversification objectives in relation to business lines, sectors and products.
▪ Sector strategy and risk appetite papers: These are detailed analyses of defined products and/or industries. They identify the major risk drivers and mitigants, the internal business mandate, and propose the risk (including business) parameters – and potentially the maximum product and/or portfolio limit - to undertake that business. A sector strategy and risk appetite paper is always prepared by the front office responsible for the internal business mandate and requires an approval from the designated approval authority. Sector strategy and risk appetite papers may carry various names and/or may have geographical and/or business limitations
▪ Credit approval process: The purpose of the credit approval process is that individual transactions and the risk associated with these transactions are assessed on a name-by-name basis. For each type of client there is a dedicated process with credit risk managers specialised along the business lines of ING, including the use of automated decision-making in certain cases. The credit approval process is supported by a risk rating system and exposure monitoring system. Risk ratings are used to indicate a client’s creditworthiness which translates into a probability of default. This is used as input to determine the maximum risk appetite that
ING has for a given type of client (reference benchmark). The determination of the delegated authority (the amount that can be approved at various levels of the organisation) is a function of the risk rating of the client and ING’s credit risk exposure on the client. Where necessary, underwriting standards were reviewed and refined to limit the credit risk to portfolios particularly sensitive to Covid-19.
Within ING, internal Basel compliant models are used to determine probability of default (PD), exposure at default (EAD) and loss given default (LGD) for regulatory and economic capital purposes. These models also form the basis of ING’s IFRS 9 loan loss provisioning (see ‘IFRS 9 models’ below). Bank-wide,
ING has implemented around 100 credit risk models, for regulatory capital, economic capital and loan loss provisioning purposes.
There are two main types of PD, EAD and LGD models used throughout the Bank: ▪ Statistical models are created where a large set of default or detailed loss data is available.
They are characterised by a sufficient number of data points that facilitate meaningful statistical estimation of the model parameters. The model parameters are estimated with statistical techniques based on the data set available; ▪ Hybrid models contain characteristics of statistical models combined with knowledge and experience of experts from risk management and front-office staff, literature from rating agencies, supervisors and academics. These models are especially appropriate for ‘low default portfolios’, where limited historical defaults exist.
In principle, all risk ratings are based on a Risk Rating (PD) Model that complies with the minimum requirements detailed in CRR/CRDIV, ECB Supervisory Rules and EBA guidelines. This concerns all borrower types and segments.
ING’s PD rating models are based on a 1-22 scale (1=highest rating; 22=lowest rating) referred to as the
‘Master scale’, which roughly corresponds to the rating grades that are assigned by external rating agencies, such as Standard & Poor’s, Moody’s and Fitch. For example, an ING rating of 1 corresponds to an S&P/Fitch rating of AAA and a Moody’s rating of Aaa; an ING rating of 2 corresponds to an S&P/Fitch rating of AA+ and a Moody’s rating of Aa1, and so on.
The 22 grades are composed of the following categories: ▪ Investment grade (risk rating 1-10); ▪ Non-investment grade (risk rating 11-17); ▪ Sub-standard (risk rating 18-19); and
Rating models for retail clients are predominantly statistically driven and automated, such that ratings can be updated on a monthly basis. Rating models for large corporates, institutions and banks include both statistical characteristics and manual input, with the ratings being manually updated on at least an annual basis. During 2020, portfolios and clients most at risk of being affected by the pandemic were subject to more frequent (e.g. quarterly) reviews to closely monitor the development of credit risk.
The acceptance, maintenance, measurement, management and reporting of credit risks at all levels of
ING is executed through single, common credit risk data standards using shared credit risk tools that support standardised and transparent credit risk practices. ING has chosen to develop credit risk tools centrally with the philosophy of using a single source of data in an integrated way. This includes applying a combination of the ING policy, the regulatory environment in which we operate and the daily processes that are active throughout the Group. Disciplined application in these three areas is essential for achieving high data quality standards.
ING’s credit exposure is mainly related to lending to individuals and businesses followed by investments in bonds and securitised assets, and money market. Loans to individuals are mainly mortgage loans secured by residential property. Loans (including guarantees issued) to businesses are often collateralised, but may be unsecured based on the internal analysis of the borrower’s creditworthiness. Bonds in the investment portfolio are generally unsecured, but predominantly consist of bonds issued by central governments and EU and/or OECD based financial institutions.
Secured bonds, such as mortgage backed securities and asset backed securities are secured by the underlying diversified pool of assets (commercial or residential mortgages, car loans and/or other assets) held by the securities issuer. For money market, exposure is mainly deposits to central banks.
4 The prior period outstandings by economic sector (industry) have been updated reflecting improved classification of clients.
impact mainly due to the weakening of the US dollar against euro.
Foreign exchange rate changes had a negative impact on portfolio growth and reduced total outstanding by €13.9 billion. This was driven by the depreciation of the US dollar (-8.45%), Polish new zloty (-6.64%), New Turkish lira (-26.65%) and the British pound (-5.36%) against the euro.
In 2020, governments and banks introduced numerous measures to financially support individuals and businesses during the Covid-19 pandemic. These support measures in many case prevent or delay financial difficulties of customers. As a result, Covid-19 did not materially affect the overall rating distribution in the portfolio per 31 December 2020. Refer to ‘Covid-19 sensitive sectors’ for the impact on the portfolios most sensitive to Covid-19.
Overall, the rating class concentration slightly improved. The share of investment grade rating classes increased from 68.7% to 72.8%, while the share of non-investment grade decreased, from 29.3% to 25.0%. Substandard grade outstanding remained stable at 0.7% of total portfolio, whereas the nonperforming loans (NPL) grade increased share from 1.3% to 1.5%.
In Retail Challengers & Growth Markets, the increase in AAA-rating was explained by increased reserve deposits the central banks of Germany and Australia. Similarly, rating class A increased due to exposures to Banco de Espana. Further, the increase in AA is partially explained by Australian residential mortgages . In Germany residential mortgage loans grew steadily, mainly in rating classes
Corporate line decreased concentration in AAA rating class due to the transfer of the reserve deposit with the Dutch central bank (DNB) to Wholesale Banking.
The industry composition within Retail is concentrated in private individuals with 67% for Retail Benelux and 73% for Retail Challengers & Growth. Dutch residential mortgages continued to decrease driven by run-off at Westland Utrecht bank and higher regular repayments, partly mitigated by stable new production at Domestic Bank NL throughout 2020. In Belgium, residential mortgages slightly decreased in total volume, while an increase was seen with lease products in Belgium mid-corporate portfolio.
Within Wholesale Banking, the sector development in Central Banks is consistent with the development in the investment grade category above. Exposures towards Central Governments increased due to higher bond investments with Italy, Poland and France, while Commercial Banks decreased exposure, driven by lower volumes of trade-related transactions, seen in Australia.
The most noticeable reduction in Wholesale Banking was seen in Natural Resources, where exposures decreased significantly, most visible in Singapore, Luxembourg, US, UK and UAE. Outstanding to
Transportation & Logistics also decreased, seen in the Netherlands, Hong Kong and Belgium, partly mitigated by an increase in Germany. Apart from the above ING Wholesale increased its exposure to
Aviation (Transportation & Logistics): exposure amounted to €4.6 billion outstanding (0.52% of total portfolio). In terms of rating, the distribution of outstanding worsened compared to 2019, with main concentration shifting from BBB to BB and B rating classes. Substandard grade outstanding increased to 1.2% from 0% of Aviation portfolio, whereas the non-performing grade increased to 4.5% from 0%.
Hospitality & Leisure (Services and Food, Beverages & Personal Care): exposure amounted to €5.9 billion outstanding (0.67% of total portfolio). Rating distribution worsened compared to 2019, with outstanding shifting from BBB and BB ratings into B, CCC and CC rating classes. Substandard grade increased to 9.7% from 1.8%, whereas the NPL grade increased to 6.2% from 2.5%.
Outstandings by economic sectors and geographical area (*) 1 in EUR million Region Total
In Germany, Spain and Poland, residential mortgages increased due to strong market position and stable business volume growth. Germany, Spain and Australia also showed increased exposures to central banks.
Rating distribution in Germany improved: the share of investment grade increased (central banks), while non-investment grade slightly decreased. Substandard grade (0.4%) also reduced share, while
In Luxemburg despite the reduced overall exposure to central banks and Natural Resources, the rating distribution remained stable: investment grade at 77.1%, non-investment grade slightly decreased to 21.8%. Substandard grade increased to 0.8% from 0.3%, while NPL grade remained at 0.3%.
Singapore and UAE), which was partially offset by increased exposure to Technology industry.
In terms of rating distribution for America region the share of investment grade increased to 66.3%
from 61.1%, while non-investment grade decreased to 31.1% from 36.7%. Substandard grade remained at 0.7%, while NPL slightly increased to 1.8% from 1.6%. For Asia, investment grade moved slightly up to 75.4%, non-investment and substandard decreased to 22.5% and 0.2% respectively, while the NPL increased its share to 1.9% from 0.3% of outstanding in Asia. Australia’s rating distribution remained stable with slight shift of outstanding from non-investment to investment grade.
Switzerland (€10,494 million), Turkey (€9,579 million), Romania (€8,484 million) and Russian Federation
ING uses various credit risk mitigation techniques and instruments to mitigate the credit risk associated with an exposure and to reduce the losses incurred subsequent to a default by a customer. The most common terminology used in ING for credit risk protection is ‘cover’. While a cover may be an important mitigant of credit risk and an alternative source of repayment, generally it is ING’s practice to lend on the basis of the customer’s creditworthiness rather than exclusively relying on the value of the cover.
Within ING, there are two distinct forms of covers. First, where the asset has been pledged to ING as collateral or security, ING has the right to liquidate it should the customer be unable to fulfil its financial obligation. As such, the proceeds can be applied towards full or partial compensation of the customer's outstanding exposure. This may be tangible (such as cash, securities, receivables, inventory, plant and machinery, and mortgages on real estate properties) or intangible (such as patents, trademarks, contract rights and licences). Second, where there is a third-party obligation, indemnification or undertaking (either by contract and/or by law), ING has the right to claim from that third party an amount if the customer fails on its obligations. The most common examples are guarantees (such as parent guarantees and export credit insurances) or third-party pledged mortgages.
The valuation method also depends on the type of covers. For asset collateral, the valuation sources can be the customer’s balance sheet (e.g. inventory, machinery and equipment), nominal value (e.g.
cash and receivables), market value (e.g. securities and commodities), independent valuations
This section provides insight into the types of cover and the extent to which exposures benefit from collateral or guarantees. The disclosure differentiates between risk categories (lending, investment, money market and pre-settlement). The most relevant types of cover include mortgages, financial collateral (cash and securities) and guarantees. ING obtains cover that is eligible for credit risk mitigation under CRR/CRDIV, as well as cover that is not eligible. Collateral covering financial market transactions is valued on a daily basis, and as such not included in the following tables. To mitigate the credit risk arising from Financial Markets transactions, the bank enters into legal agreements governing the exchange of financial collateral (high-quality government bonds and cash).
The next table gives an overview of the collateralisation of the ING’s total portfolio.
Total Lending, Investment and Money Market 803,258 729,171 24,981 120,236 333,326 31.4% 15.0% 53.5%
In 2020, the collateralisation level of the portfolio slightly decreased as a result of an increase in unsecured Central Bank reserves which are included in Business lending. Excluding the pre-settlement portfolio, 50.4% of ING’s outstandings were fully collateralised in 2020 (2019: 53.5%). Since investments traditionally do not require covers, the percentage for ‘no covers’ in this portfolio is above 90%. However, 99% of the investment outstanding is investment grade. Improved economic conditions in ING’s main markets contributed to improved collateral valuations, observed in consumer lending.
Germany (25.9%), Belgium and Luxembourg (13.4%) and Australia (10.7%). Given the size of the Dutch mortgage portfolio, the valuation methodology to determine the cover values for Dutch residential mortgages is provided below.
In case of newly built houses usually the building /purchase agreement is sufficient as valuation. In the case of existing houses three types of valuations are allowed. If the LTMV is below 90 percent, either
Onroerend Goed – Association of Real Estate Brokers), VastgoedPRO (Association of Real Estate
Residential Mortgages 1 Consists mainly of residential mortgages to small one man business clients
The collateralisation levels of the consumer lending portfolio continued to improve during 2020. The rise in collateralisation levels was due to rising housing prices observed in different mortgage markets, specifically noticeable in the Netherlands.
(10.3%). In 2019 the increases where respectively 3.1%, 14.8% and 23.2%. Mortgage outstanding in the
Netherlands decreased slightly (2.3%). For the residential mortgages portfolio, the cover type guarantees relate to mortgages covered by governmental insurers under the Dutch national mortgage guarantee (NHG) scheme in the Netherlands. The NHG guarantees the repayment of a loan in case of a forced property sale.
Cover values including guarantees received - Business lending portfolio (*)1 in EUR million 2019 Cover type Value to Loan
Broken down by industry, the largest increase in outstanding is attributable to Central Banks (€37.4 billion, 88.8%) followed by Utilities (€1.0 billion, 6.2%). The largest decrease in outstanding was observed in Natural Resources (€10.6 billion), where the total cover percentage increased.
The proportion of the business lending portfolio in Australia and Switzerland with no cover decreased substantially year-on-year, respectively from 37.3% to 26.4% and from 35.7% to 27.2% in 2019. Most industry types experienced an increase in total covers. The largest increases in outstanding in absolute figures were seen in the Netherlands (23.9%) and Germany (90.9%). The increase in Germany (€16.7 billion) was primarily due to increases in regulatory reserve deposits and nostro accounts. As these deposits and nostro accounts are not collateralised, this increase had only a small impact on total cover amounts.
moratoria guidelines and classified as in default, as well as the implementation of new definition of default for secured consumer lending.
Retail Banking continuously measures its portfolio in terms of payment arrears and on a monthly basis determines if there are any significant changes in the level of arrears. This methodology is principally extended to loans to private individuals, such as residential mortgage loans, car loans and other consumer loans, as well as business lending. An obligation is considered ‘past due’ if a payment of interest or principal is more than one day late. ING aims to help its customers as soon as they are past due by communicating to remind them of their payment obligations. In its contact with the customers,
ING aims to solve the (potential) financial difficulties by offering a range of measures (e.g. payment arrangements, restructuring). If the issues cannot be cured, for example because the customer is unable or unwilling to pay, the contract is sent to the recovery unit. The facility is downgraded to risk rating 20 (non-performing) when the facility or obligor – depending on the level at which the nonperforming status is applied - is more than 90 days past due and to risk rating 21 or 22 when the contract is terminated.
Further, Wholesale Banking has an individual name approach, using early warnings indicators to signal possible future issues in debt service.
Ageing analysis (past due but performing): Consumer lending portfolio, outstandings 1 (*) in EUR million 2020 2019
Past due for 61–90 days 88 163 1 Based on consumer lending. The amount of past due but performing financial assets in respect of non-lending activities was not significant.
Africa 1 Based on consumer lending. The amount of past due but performing financial assets in respect of non-lending activities was not significant.
The consumer lending decrease in past due but performing was distributed as follows; Retail Benelux
(€-0.4 billion) and Retail Challengers & Growth Markets (€-0.3 billion). Within Retail Benelux the decrease was noticeable in the 1-30 days bucket for Belgium (€-0.2 billion) mainly driven by the implementation of the new definition of default via the introduction of the unlikely to pay assessment by which short arrears result in defaults, as well as the Covid-19 related payment holidays granted after which days past due counting stops, and the Netherlands (€-0.1 billion), due to the good payment behaviour of our clients which is facilitated by strict underwriting rules, low interest rates, low unemployment and low bankruptcy, as well as the financial aid measures granted by the Dutch government to employees and employers because of the Covid-19 pandemic. Within Retail
Challengers & Growth Markets the largest decrease was mainly witnessed in the 31-60 days bucket for
Ageing analysis (past due but performing): Business lending, outstandings (*) in EUR million 2020 2019
Watch List, Restructuring and Recovery accounts are reviewed at least quarterly by the front office,
For business customers, ING mainly applies forbearance measures to support clients with fundamentally sound business models that are experiencing temporary difficulties with the aim of maximising the client’s repayment ability and therewith avoiding a default situation or helping the client to return to a performing situation.
For ING retail units, clear criteria have been established to determine whether a client is eligible for the forbearance process. Specific approval mandates are in place to approve the measures, as well as procedures to manage, monitor and report the forbearance activities.
All exposures are eligible for forbearance measures, i.e. both performing (Risk Ratings 1-19) and nonperforming (Risk Ratings 20-22) exposures. ING uses specific criteria to move forborne exposures from non-performing to performing or to remove the forbearance statuses that are consistent with the corresponding EBA standards. An exposure is reported as forborne for a minimum of two years. An additional one-year probation period is observed for forborne exposures that move from nonperforming back to performing.
During 2020, ING supported clients affected by the Covid-19 pandemic among others by providing payment holidays. In line with European Banking Authority (EBA) Guidelines, exposures subject to these payment holidays are not classified as forborne. Refer to ‘Payment holidays’ below for more information on payment holidays.
December 2019 to €19.8 billion, largely as a result of the Covid-19 crisis, driven by both Wholesale and
Wholesale Banking: Forborne portfolio by geographical area (*) 1 in EUR million 2020 2019
Wholesale Banking: Forborne portfolio by economic sector (*)1, 2 in EUR million 2020 2019
2 The prior period outstandings by economic sectors (industry) have been updated reflecting improved classification of clients.
Wholesale Banking forborne assets increased by €5.5 billion compared to 2019, of which the performing forborne assets increased by €5.1 billion. The increase of the performing forborne assets was visible across all industries and locations, as a result of the pandemic outbreak.
Wholesale Banking forborne assets were mainly concentrated in Natural Resources, Food Beverages &
Personal Care- and Transportation & Logistics. Together they accounted for 52% of the total Wholesale
General Industries with 58% of the total Wholesale Banking forborne. A significant increase in forborne assets was visible in the Food, Beverages & Personal Care industry (€+1.1 billion) during 2020, followed by Transportation & Logistics (€+0.8 billion) and Natural Resources (€+0.8).
As per year-end 2020, Retail Banking forborne assets amounted to a total of €9.6 billion, which represented 2.0% of the total Retail Banking portfolio.
Retail Banking: Forborne portfolio by geographical area (*) 1 in EUR million 2020 2019
The main concentration of forborne assets in a single country was in the Netherlands with 46% (2019: 46%) of the total Retail Banking forborne assets and 29% (2019: 39%) of the non-performing forborne assets. Belgium followed with 28% (2019: 24%) of the total Retail Banking forborne assets.
Netherlands and Belgium. At the end of 2020, 93% of granted payment holidays had expired.
Credit Loss (ECL) either. A small number of payment holidays were granted outside this scheme and were flagged as forborne. ING followed the EBA guidelines and when a payment holiday was provided to a customer as part of a “general payment moratorium”, ING did not consider this measure to classifiable as forbearance. EBA further extended these guidelines in the first week of December 2020, valid until 31 March 2021, with certain extra conditions. ING decided not to make use of the extension of these guidelines and has taken a prudent decision to treat all payment holiday requests under new or extended schemes (after September 2020) as stage 2 or stage 3 exposures.
Non-performing Loans: outstandings by economic sector and business lines (*)1, 2 in EUR million Wholesale
3 Economic sectors not specified in above overview are grouped in Other.
Retail Challengers & Growth, the increase is explained by private individuals, whereas in Wholesale the main increase is visible in the sector Natural Resources, in Transportation and Logistics, and in Other.
(ECL) of IFRS 9, which is designed to be forward-looking. The IFRS 9 impairment requirements are applicable to on-balance sheet financial assets measured at amortised cost or fair value through other comprehensive income (FVOCI), such as loans, debt securities and lease receivables, as well as offbalance sheet items such as undrawn loan commitments, certain financial guarantees, and undrawn committed revolving credit facilities.
ING has aligned the definition of default for regulatory purposes with the definition of ‘credit-impaired’
financial assets under IFRS 9 (Stage 3). To comply with the new regulatory technical standards (RTS)
updated this definition also for IFRS 9 purposes. More information can be found in section 1.6 of the
The table below describes the portfolio composition over the different IFRS 9 stages and rating classes.
Gross carrying amount per IFRS 9 stage and rating class (*)1,2,3 in EUR million 12-month ECL (Stage 1)
(€9.5 billion) and to a lesser extent to other triggers such as 30 Days Past Due and the significant lifetime PD trigger, primarily in Wholesale Banking and Retail Market Leaders;
Foreign exchange and other movements -28 -42 -226 -297 1 At the end of December 2020, the gross carrying amounts included loans and advances to central banks (€109.2 billion), loans and advances to banks (€25.4 billion), financial assets at FVOCI (€34.0 billion), securities at amortised cost (€50.6 billion), loans and advances to customers (€604.0 billion) and contingent liabilities (credit replacements) in scope of IFRS 9 (€118.4 billion) and excludes receivables related to securities in reverse repurchase transaction (€-6.4 billion), cash collateral in respect of derivatives (€-8.3 billion), the value adjustment hedged items (€-5.2 billion), a receivable that is offset by a liquidity facility (€-2.2 billion), on-demand bank balances (€-2.2 billion) and other differences amounting to €-0.3 billion.
Changes in gross carrying amounts and loan loss provisions (*)1,2,3 in EUR million 12-month ECL (Stage 1) Lifetime ECL not credit impaired (Stage 2)
Foreign exchange and other movements -1 -3 -41 -45 1 At the end of December 2019, the gross carrying amounts included loans and advances to central banks (€51.2 billion), loans and advances to banks (€35.1 billion), financial assets at FVOCI (€32.2 billion), securities at amortised cost (€46.1 billion), loans and advances to customers (€616.4 billion) and contingent liabilities (credit replacements) in scope of IFRS 9 (€115.7 billion) and excludes receivables related to securities in reverse repurchase transaction (€-9.9 billion), cash collateral in respect of derivatives (€-10.2 billion), the value adjustment hedged items (€-3.9 billion), a receivable that is offset by a liquidity facility (€-1.3 billion), on-demand bank balances (€-1.8 billion) and other differences amounting to €-0.3 billion.
3 At the end of December 2019, the stock of provisions included provisions for loans and advances to central banks (€1 million), loans and advances to banks (€9 million), financial assets at FVOCI (€10 million), securities at amortised cost (€10 million), provisions for loans and advances to customers (€4,590 million) and provisions for contingent liabilities (credit replacements) recorded under Provisions (€25 million).
Modification of financial assets The table below provides the following information: - Financial assets that were modified during the year (i.e. qualified as forborne) while they had a loss allowance measured at an amount equal to lifetime ECL.
Modifications that have been provided in 2020 under general payment moratoria (payment holidays)
are not included in this analysis. For details refer to the section ‘payment holidays’.
Our methodology in relation to the adoption and generation of macroeconomic scenarios is described in this section. We continue to follow this methodology in generating our probability-weighted ECL, with consideration of alternative scenarios and management adjustments supplementing this ECL
Two alternative scenarios are taken into account; an upside and a downside scenario. The alternative scenarios have, to a large extent, a technical character as these are based on the forecast errors of the
To understand the baseline level of uncertainty around any forecast, Oxford Economics keeps track of all its forecast errors of the past 20 years. The distribution of forecast errors for GDP, unemployment, house prices and share prices is applied to the baseline forecast creating a broad range of alternative outcomes. In addition, to understand the balance of risks facing the economy in an unbiased way,
For the downside scenario, ING has chosen for the 90th percentile of that distribution because this corresponds with the way risk management earnings-at-risk is defined within the Group. The upside scenario is represented by the 10th percentile of the distribution. The applicable percentiles of the distribution imply a 20% probability for each alternative scenario. Consequently, the baseline scenario has a 60% probability weighting. Please note that, given their technical nature, the downside and upside scenarios are not based on an explicit specific narrative.
economy may not reach that level before the third quarter of 2021 and the eurozone not before the second quarter of 2022. Lagging the economic recovery, unemployment in a number of countries may continue to increase up to the third quarter of 2021 as government policy measures to preserve jobs may end. Most countries are expected to end the forecast period with higher unemployment rates than observed before the outbreak of the coronavirus pandemic. Further out in the forecast horizon, the unemployment rate is generally expected to fall back as the economic recovery continues (3.8%
When compared to the June 2020 consensus forecast, used for the second quarter interim reporting, the December forecast assumes a smaller shrink in 2020 global GDP (-3.6% compared to -4.8%)
following a generally stronger than expected economic rebound. The fourth quarter re-imposition of lockdown measures to contain the spread of the coronavirus results, compared to June, in a less strong global recovery in 2021 (5.0% versus 5.1%) but the likely roll-out of an effective vaccine brightens the outlook further out (global growth in 2022 3.8% versus 3.2% in June).
When compared to the consensus forecast used for the final 2019 reporting, the current outlook is substantially different as at that time no assumptions with respect to the possible consequences of the spread of the coronavirus have been incorporated. The baseline scenario at the time assumed continued world economic growth close to 2.5% per year in 2020-2022.
To reflect the heightened uncertainty, the dispersion of the forward-looking distributions – from which the alternative scenarios are being derived – has been increased while maintaining a downward skew following on from the outcomes of Oxford Economics’ Global Risk Survey. Specifically, the forecast bandwidths projected for the end of the forecast horizon have now been applied to the near term as well.
The downside scenario, while being equally technical in nature, represents an even more pronounced near-term global downturn than expected in the baseline scenario. The downside scenario reflects the risk of the coronavirus pandemic not only posing significant risks to the near-term outlook but also having longer-lasting negative effects on economic growth (e.g. because of faster de-leveraging and weaker productivity growth).
As mentioned above, per the guidance from EBA, Covid-19 related payment holidays granted until
September 2020 have not automatically been classified as forbearance, and hence, have not automatically triggered recognition of lifetime ECL in stage 2. Looking forward, it is expected that the phasing out of the support measures in the course of 2021 could lead to more business insolvencies and unemployment. This could lead to more clients that have currently taken payment holidays getting into financial difficulties and to higher levels of defaults. To the extent ING believes that this elevated risk is not yet covered in the IFRS 9 models, a management adjustment has been recognised.
In addition, as the oil price remains volatile, as well as exposed to the impact of the Covid-19 crisis and subject to political decisions, ING recognised a management adjustment for the upstream oil book of
The table below presents the analysis on the sensitivity of key forward-looking macroeconomic inputs used in the ECL collective-assessment modelling process and the probability-weights applied to each of the three scenarios. The countries included in the analysis are the most significant geographic regions, in terms of both gross contribution to reportable ECL, and sensitivity of ECL to forward-looking macroeconomics. Accordingly, ING considers these portfolios to present the most significant risk of resulting in a material adjustment to the carrying amount of financial assets within the next financial year. ING also observes that, in general, the Wholesale Banking business is more sensitive to the impact of forward-looking macroeconomic scenarios.
In the table below the Real GDP is presented in percentage year-on-year change, the unemployment in percentage of total labour force and the house price index (HPI) in percentage year-on year change.
While the table does give a high-level indication of the sensitivity of the outputs to the different scenarios, it does not provide insight into the interdependencies and correlations between different macroeconomic variable inputs. On total ING level, the unweighted ECL for all collective provisioned clients in the upside scenario was €2,770 million, in the baseline scenario €3,082 million and in the downside scenario €4,362 million compared to €3,276 reportable collective provisions currently accounted for (including time lag overlay, excluding other management adjustments).
When compared to the sensitivity analysis of 2019 the macroeconomic inputs are substantially different, as at that time no assumptions with respect to the possible consequences of the spread of the coronavirus had been incorporated. The macroeconomic inputs used in the 2020 sensitivity analysis reflect that, after declining sharply in 2020, a bounce back in Real GDP is expected in 2021 and 2022. Furthermore the downside scenario has an increased downward skew, reflecting the continuing uncertainty related to the impact of Covid-19.
Downside scenario 1 Sensitivity does only include the effect of time lag overlay, other management adjustments are excluded.
ECL if deemed to belong in stages 2 and 3. An asset belongs in stage 2 if it is considered to have experienced a significant increase in credit risk since initial origination or purchase. The stage allocation process involves an asset’s derived scenario weighted average PD being assessed against a set of PD
Market risk is the risk that movements in market variables, such as interest rates, equity prices, foreign exchange rates, credit spreads and real estate prices negatively impact the bank’s earnings, capital, market value or liquidity position. Market risk either arises through positions in banking books or trading books. The banking book positions are intended to be held for the long term (or until maturity)
or for the purpose of hedging other banking book positions. The trading book positions are typically held with the intention of short-term trading or in order to hedge other positions in the trading book.
function, where ALCO Bank is the highest approval authority and sets the market risk appetite. ALCO
Bank monitors ING’s adherence to the risk appetite for market risk and sets additional limits where appropriate. These limits are cascaded through the organisation through lower level ALCOs. This ALCO
structure facilitates top-down risk management, limit setting, and the monitoring and control of market risk.
The monitoring and control of market risk is the responsibility of the Financial Risk (FR) department and
FR and FI-FM Risk also maintain a limit framework in line with ING’s Risk Appetite Framework. The businesses are responsible for adhering to limits that are ultimately approved by the ALCO Bank. Limit excesses are reported to senior management on a timely basis and the business is required to take appropriate actions based on management decisions. To adhere to the established limit framework,
The organisational structure facilitates top-down risk management by recognising that risk taking and risk management to a large extent occur at the regional/local level. Bottom-up reporting from regional/local units to head office units allows each management level to fully assess the market risks relevant at the respective levels.
Risk Model Committee (MRMC) is the dedicated authority within ING for the approval of all trading and banking risk models, methodologies and parameters related to market risk. The Trading Pricing Model
Committee (TPMC) approves pricing models for trading and banking books. Financial Risk and FI-FM Risk departments provide systematic risk reporting to the EB and MBB, the ALCO Bank and the senior executive management of related business functions.
For the trading books and the linear interest rate risk and equity investments in the banking books, the
Value at Risk (VaR) is taken as a starting point for the economic capital calculations for market risk. The
To arrive at the economic capital for market risk, a simulation-based model is used which includes scaling to the required confidence level and holding period. In determining this scaling factor, other factors are also taken into account like the occurrence of large market movements (events).
Embedded options, e.g. the prepayment option and offered rate option in mortgages in the banking books, result in non-linear interest rate risk in the banking books. Embedded options are economically hedged using a delta-hedging methodology, leaving the mortgage portfolio exposed to convexity risk, volatility risk and model risk. For the calculation of economic capital for this non-linear interest rate risk, ING performs a Monte Carlo simulation.
ING makes a distinction between the trading and banking (non-trading) books. Positions in banking books originate from the market risks inherent in commercial products that are sold to clients, Group
Treasury exposures, and from the investment of our own funds (core capital). Both the commercial products and the products used to hedge market risk exposures in these products are intended to be held until maturity, or at least for the long term.
An important element of the management of market risks in the banking book is the risk transfer process. In this process the interest rate, FX, funding and liquidity risks are transferred from the commercial books through matched funding to Group Treasury, where it is centrally managed. The scheme below presents the transfer and management process of market risks in the banking books: (*)
(that capture the products sold to clients) to globally managed interest rate risk books. This enables a clear demarcation between commercial business results and results based on unhedged interest rate positions.
▪ Wholesale Banking loans typically do not experience interest rate dependent prepayment behaviour; these portfolios are matched-funded taking the constant prepayment model into account. They typically do not contain significant convexity risk. Wholesale banking loans can have an all-in rate floor or a floor on a reference rate.
Customer behaviour in relation to mortgages, loans, savings and demand deposits is modelled, based on extensive research. Per business unit and product type, exposures are typically segmented into different portfolios based on expected client behaviour. For each of the segments, model parameters
ING Group Annual Report 2020 147 for example for the pass-through rate and customer behaviour are determined based on historical data and expert opinion. Models are backtested and updated when deemed necessary in an annual procedure. Model parameters and the resulting risk measures are approved by (local) ALCO.
Linear risk transfers take place from commercial business books to the treasury book (Group Treasury), if necessary, by using estimations of customer behaviour. The originating commercial business is ultimately responsible for estimating customer behaviour, leaving convexity risk and (unexpected)
customer behaviour risk with the commercial business. Risk measurement and the risk transfer process take place on a monthly basis. However, if deemed necessary additional risk transfers can take place, for instance due to volatile markets.
In the following sections, the interest rate risk exposures in the banking books are presented. ING uses risk measures based on both an earnings and a value perspective. Net interest income (NII)-at-risk is used to provide the earnings perspective and the net present value (NPV)-at-risk and basis point value
During 2020, the following refinements to the risk measurement for IRRBB were made: ▪ Review of the risk appetite for IRRBB; ▪ Further insights in sub-risk types such as vega optionality risk, tenor basis risk and a client behaviour risk earnings and value metrics
▪ Annual review of the interest rates scenarios used for calculating NII-at-Risk and NPV-at-Risk; ▪ Savings/ current account model updates and prepayment model updates for market developments; and
The change in NII-at-Risk is primarily visible for Retail Challengers & Growth Markets and Wholesale
Banking. This is driven by balance sheet developments, the low interest rate environment and savings model updates for market developments mainly in ING Germany, ING Spain and ING Poland. The annual update of the interest rate scenarios also led to a limited increase in the NII-at-Risk for year one.
NPV-at-Risk measures the impact of changing interest rates on value. The NPV-at-Risk is defined as the outcome of an instantaneous increase and decrease in interest rates from applying currency-specific scenarios. The NPV-at-Risk asymmetry between the downward and upward shock is mainly caused by convexity risk in the mortgage and savings portfolio. The NPV-at-Risk figures are also calculated using the updated interest rate scenarios.
The prior period has been updated to improve consistency and comparability.
The change in NPV-at-Risk is primarily visible for Retail Challengers & Growth Markets and Wholesale
Interbank offered rates, such as EURIBOR and LIBOR, are widely used as benchmarks to set interest rates across a broad range of financial products and contracts. In line with recommendations from the
EONIA will cease to be published by 3 January 2022 and the European Money Markets Institute
(EONIA’s administrator) has indicated that EONIA cannot be used in any contracts that may be outstanding as of 1 January 2022. The transition of existing contracts and products that still rely on
EONIA is ongoing. As both EONIA and €STR are overnight rates and the spread between them was established in 2019 this transition is considered less complex than that for LIBOR.
During 2020 the financial sector issued a number of interim targets, guidance papers and other initiatives to help phase in key components of this transition. For example significant progress was made to address deficiencies in existing derivative fallback clauses. ISDA issued an IBOR fallbacks supplement that sets out how the transition to alternative benchmark rates (e.g. SOFR, SONIA) will be accomplished. The effect of the supplement is to create clear fallback rates that will apply on the permanent discontinuation of certain key IBORs. From the effective date of 25 January 2021, all new derivatives that reference these ISDA definitions include these robust fallbacks. The Group and many other parties have also adhered to a protocol to implement these fallbacks into derivative contracts that were entered into before the effective date. If both counterparties adhere to the protocol, these new fallbacks will be automatically implemented into existing derivative contracts. For loans, various recommendations have been made to help drive consistent use of robust fallbacks for new contracts.
government announced that it would grant powers to the FCA to enable continued publication of a
‘’synthetic’’ LIBOR using a different methodology and inputs, and therefore could reduce disruption to any holders of these tough legacy contracts. However, there is no certainty as to whether the FCA will exercise these powers or what form the revised methodology would take, and the FCA has consequently encouraged users of LIBOR to renegotiate or amend as many contracts as possible before the relevant LIBOR. There is no guarantee that regulators will implement measures to address such legacy contracts, or that such measures will be effective in avoiding business disruption or contractual disputes.
ING Group, its customers, and the financial services industry more widely. These risks include legal risks in relation to changes required to documentation for new and existing transactions that may be required. Financial risks (predominantly limited to interest rate risk) may also arise from any changes in the valuation of financial instruments linked to benchmark rates, and changes to benchmark indices could impact pricing mechanisms on some instruments. Changes in valuation, methodology or documentation may also result into complaints or litigation. The Group may also be exposed to operational risks or incur additional costs due to the potential requirement to adapt IT systems, trade reporting infrastructure and operational processes, or in relation to communications with clients or other parties and engagement during the transition period. Particularly, one of the main risks to which the Group is exposed as a result of IBOR reform is operational. For example, the renegotiation of loan contracts through bilateral negotiation with customers, updating of contractual terms, updating of systems that use IBOR and revision of operational controls related to the reform.
The ING IBOR programme has a robust governance in place, with progress being tracked by business line steering committees reporting into a central IBOR steering committee. The programme assesses and coordinates the actions necessary to manage the required changes to internal processes and systems, including pricing, risk management, legal documentation, hedge arrangements, as well as the impact on our customers. ING continues to monitoring market developments, and the outcome of several remaining uncertainties such as the availability of term rates, to anticipate the impact on the program, our customers and any related risks.
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
CET1 capital and risk-weighted assets are equally sensitive in relative terms to changing FX rates. For a selection of emerging market currencies ING decided not to enter into foreign currency hedges as allowed under the policy.
2 The net exposure move in Pound Sterling is related to capital injection in UK Branch.
Equity price risk arises from the possibility that an equity security’s price will fluctuate, affecting the values of the equity security itself as well as other instruments whose value react similarly to the particular security, a defined basket of securities, or a securities index. ING’s equity exposure mainly consists of the investments in associates and joint ventures of EUR 1,475 million (2019: EUR 1,790 million) and equity securities held at fair value through other comprehensive income (FVOCI) of EUR
The revaluation reserve relating to equity securities at FVOCI moved from EUR 1,580 million per yearend 2019 to EUR 1,181 million per year-end 2020. In 2020 the securities at FVOCI decreased by EUR
443 million. This was mainly due to the revaluation of shares in Bank of Beijing (EUR -339 million).
Real estate price risk arises from the possibility that real estate prices fluctuate. This affects both the value of real estate assets and the earnings related to real estate activities.
Within the trading portfolios, positions are maintained in the financial markets. These positions are often a result of transactions with clients and may benefit from short-term price movements. In 2020,
Wholesale Banking (mainly Financial Markets) as this is the only business line within ING where trading activities take place. Trading activities include facilitation of client business and market making. FI-FM
ING uses a comprehensive set of methodologies and techniques to measure market risk in trading books: Value at Risk (VaR) and Stressed Value at Risk (SVaR), Incremental Risk Charge (IRC), and Event
FI-FM Risk uses the historical simulation VaR methodology (HVaR) as its primary risk measure. The
HVaR for market risk quantifies, with a one-sided confidence level of 99%, the maximum overnight loss that could occur in the trading portfolio of ING due to changes in risk factors (e.g. interest rates, equity prices, foreign exchange rates, credit spreads, implied volatilities) if positions remain unchanged for a time period of one day. Next to general market movements in these risk factors, HVaR also takes into account market data movements for specific moves in e.g. the underlying issuer of securities. A single model that diversifies general and specific risk is used. In general, a full revaluation approach is applied, and for a limited number of linear trading positions and risk factors in commodity and equity risk classes a sensitivity-based approach is applied. The potential impact of historical market movements on today’s portfolio is estimated, based on equally weighted observed market movements of the previous year (260 days). When simulating potential movements in risk factors, depending on the risk factor type, either an absolute or a relative shift is used. The data used in the computations is updated daily. ING uses HVaR with a one-day horizon for internal risk measurement, management control, and backtesting, and HVaR with a ten-day horizon for determining regulatory capital. To compute HVaR
Although HVaR models estimate potential future trading results, estimates are based on historical market data. In a backtest, the actual daily trading result (excluding fees and commissions) is compared with the one-day HVaR. In addition to using actual results for backtesting, ING also uses hypothetical results, which exclude the effects of intraday trading, fees, and commissions. When an actual or a hypothetical loss exceeds the HVaR, an ‘outlier’ occurs. Based on ING’s one-sided confidence level of 99%, an outlier is expected once in every 100 business days. On an overall level in 2020 there were four outliers for hypothetical P&L and five outliers for actual P&L. Following the approval of ECB, the March 2020 backtest outliers caused by market volatility of Covid-19 has been excluded from capital multiplier calculations as of 30 June 2020. This applies to four hypothetical and four actual outliers for ING Group. ING reports backtesting results on a quarterly basis to the ECB.
ING performs a Monte-Carlo simulation based on a Gaussian copula model. The asset correlations used in the Gaussian copula model are determined using the IRB correlation formula. The rating change is simulated for all issuers over the different liquidity horizons (i.e. time required to liquidate the position or hedge all significant risks) within one year. Movements across different rating categories and probabilities of default are governed by a credit-rating transition matrix. An external transition matrix is obtained from Standard & Poor’s (S&P). The financial impact is then determined for the simulated migration to default, or for the simulated migration to a different rating category, based on LGD or credit spread changes, respectively.
The liquidity horizon has been set to the regulatory minimum of three months for all positions in scope.
ING trading activity is generated on a weekly basis. As with HVaR, the risk appetite for event risk is limited by ALCO Bank.
and volatilities. Depending on the type of the stress test, additional scenario assumptions can be made, for example on correlations, dividends, or recovery rates. For equity products, for example, both a crisis scenario (prices decrease) as well as a bull scenario (prices increase) are assumed. Scenarios are calculated based on events happening independently, jointly by region, or in all countries simultaneously. This way, for each risk type, a large set of scenarios is calculated. The worst scenarios per market are combined across markets by assessing both independent events per market, and the worst events happening in all markets at the same time.
HVaR and event risk limits are the most important limits to control the trading portfolios. Additionally, limits have been set on SVaR and IRC. Furthermore, ING uses a variety of other controls to supplement these limits. Position and sensitivity limits are used to prevent large concentrations in specific issuers, sectors, or countries. Moreover, other risk limits are set with respect to the activities in complex derivatives trading. The market risk of these products is controlled by product-specific limits and constraints.
HVaR as the new scenarios entered the 1 year history. In addition it shows significant P&L volatility with the largest loss coming from a significant increase in Valuation Adjustments booked end of March 1 CVA risk is not included in VaR.
Average 1D/10D HVaR, 10D SVaR over 2020 increased compared to 2019, due to the increase in market volatility, while IRC remained in line with 2019. The average for interest rate and credit spread increased compared to 2019, both driven mainly by market movements. The VaR at the period end of 2020 increased to 22 mln from 13 mln at period end of 2019, the main driver of the move was the increased market volatility throughout 2020. The main components of the risk were interest rate and credit spread.
EU MR3: Internal Model Approach values for trading portfolios in EUR million 2020 2019
Options 5 Simplified approach 6 Delta-plus method 7 Scenario approach 8 Securitization (specific risk)
The MRWA under standardised approach slightly decreased compared to end of 2019. The FX exposure continued to be lower than the 2% own funds threshold. According to Art. 351 CRR, in such a case, the calculation of Market Risk regulatory capital is not required. As of the third quarter of 2020, collective investment undertakings are capitalised in market risk under standardised approach under interest rate risk and foreign exchange risk.
Market risk regulatory capital increased during 2020 compared to 2019. The increase is driven by an increase in HVaR and SVaR due to increased market volatility as a result of the Covid-19 pandemic, while IRC slightly decreased.
Capital requirements 1 HVaR (higher of values a and b) 3,214 257 1,261 101
(a) Previous day's VaR (Article 365(1) (VaRt-1)) 744 60 404 32
(b) Average of the daily VaR (Article 365(1)) on each of the preceding sixty business days (VaRavg) x multiplication factor ((mc) in accordance with 2 SVaR (higher of values a and b) 4,419 354 3,011 241
(b) Average of the SVaR (Article 365(2) during the preceding sixty business days (sVaRavg) x multiplication factor (ms) (Article 366) 4,419 354 3,011 241 3 Incremental risk charge -IRC (higher of values a and b) 1,113 89 1,278 102
(a) Most recent IRC value (incremental default and migration risks section 3 calculated in accordance with Section 3 articles 370/371) 1,113 89 799 64
(c) 8 % of the own funds requirement in SA on most recent risk number for the correlation trading portfolio (Article 338(4))
Most important foreign exchange year-end trading positions (*) in EUR million 2020 2019
Most important interest rate and credit spread sensitivities at year-end (*)
Credit spread sensitivities per risk class and sector at year-end (*) 2020 2019 in EUR thousand Corporate
Funding and liquidity risk management within ING falls under the supervision of the ALCO Bank function that approves the funding and liquidity risk appetite and subsequently cascades it throughout the organisation. ALCO Bank has delegated the responsibilities concerning the Internal Capital and
ING’s funding and liquidity risk governance is based on the three lines of defence structure to ensure a clear division of responsibilities as well as an independent risk control challenging process.
Group Treasury and the business lines have the first line of defence functions. Group Treasury’s main responsibility is to manage ING’s (regulatory) liquidity and funding position by executing ING’s funding plan, maintaining access to both the short- and the long-term professional funding markets and managing the liquidity buffer. Business lines are responsible for managing the funding and liquidity positions from the originated business, a large part of which is replicated with Group Treasury.
Furthermore, the Financial Risk function measures funding and liquidity risks, executes stress testing, provides management information and controls the liquidity and funding requirements on commercial products. The Finance function is responsible for management information and regulatory reporting related to funding and liquidity risk management.
The main objective of ING’s funding and liquidity risk management is to maintain sufficient liquidity to fund the commercial activities of ING both under normal and stressed market circumstances across various geographies, currencies and tenors. This requires a diversified funding structure considering relevant opportunities and constraints.
ING Group long-term debt maturity profile by currency at year-end 2019 (*) in EUR billion (nominal
Taking into consideration the abovementioned factors, ING regularly assesses its current and future liquidity adequacy and, if deemed necessary, takes steps to further improve ING’s liquidity position and to ensure sufficient counterbalancing capacity. A liquidity adequacy statement is formulated at least quarterly to substantiate and reflect the management’s view on the current funding and liquidity position as well as the potential future challenges. The quarterly adequacy statement is an important part of ING’s ILAAP process.
ING assesses its F&L adequacy through three lenses – stress, sustainability and regulatory: ▪ ING evaluates its ability to withstand a period of prolonged F&L stress (idiosyncratic, market-wide, combined idiosyncratic and market-wide) which is characterised by customer deposit outflows, deterioration of funding markets access and lower liquidity value of the counterbalancing capacity; ▪ ING assesses the extent to which its customers, professional counterparties and investors are comfortable with extending funding in tenors, currencies and instruments necessary to sustainably fund ING under a going-concern situation; ▪ ING ascertains that it is in a position to meet both current and future regulatory requirements.
The risk appetite with respect to the stress lens is set to ensure there is sufficient counterbalancing capacity under various internally defined stress scenarios. Regarding the sustainability perspective, an internally defined stable funding to loans (SFL) ratio (supplemented by other metrics) is used to ensure a diversified funding base and to prevent overreliance on professional funding. Finally, the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR) regulatory metrics are monitored in terms of both ING’s risk appetite and regulatory requirements.
The liquidity buffer consists mainly of Level 1 assets such as government and central bank assets and are of the highest liquidity quality. Only assets that are freely available (not pledged under existing contracts) for liquidity purposes are included in the buffer. The size and composition of the liquidity buffer are driven by ING’s internal risk appetite limits as well as by regulatory requirements.
The macroeconomic and market environment are also important considerations in ING’s funding and liquidity framework.
The bank’s counter-balancing capacity should be sufficient in adverse and stressed market circumstances
The ‘time to survive’ in a F&L stress situation must be sufficient
Funding of short term assets may not lead to too much dependency on short-term professional markets
Geographic dependencies with respect to intra-group funding are to be limited
We comply with home and host regulatory funding and liquidity requirements
The stress-testing framework encompasses the funding and liquidity risks of the consolidated balance sheet of ING Group including all entities, business lines as well as on and off-balance sheet positions.
The net liquidity position and time-to-survive are the two main stress-testing measures. Both measures may be impacted differently under specific F&L stress scenarios and parameterisation.
The outcomes of the stress testing are taken into account in all the key aspects of ING’s F&L risk framework and F&L risk management: ▪ Risk Appetite Framework (through risk appetite statements); ▪ risk identification and assessment; ▪ monitoring the liquidity and funding position; ▪ business actions (if needed); ▪ contingency funding plan; and
The funding and liquidity stress-testing framework is also subject to regular internal validation.
In line with supervisory expectations, ING’s liquidity position is stress tested at least monthly using scenarios that form part of the F&L risk appetite statement. In addition, the results of all internal stress scenarios are monitored and assessed on a regular basis. They also serve as input in the decision on additional contingency measures.
Contingent F&L risks are addressed in the contingency funding plan with a focus on early warning indicators as well as organisation and planning of liquidity management in times of stress. The contingency funding measures are developed in conjunction with the ING Recovery Plan and are tested on a regular basis.
Regulatory changes in relation to environmental, social and governance (ESG) risk practices have continued at an accelerated pace since the UN Paris Agreement and the United Nations Sustainable
Development Goals (UN SDGs) were signed by world leaders in 2015. The G20 Taskforce on Climaterelated Financial Disclosures (TCFD) Working Group has outlined a set of principles for financial entities, while the European Commission released an Action Plan for Financing Sustainable Growth and most recently, the new Green Deal, which provides an action plan to boost the efficient use of resources by moving to a clean, circular economy, restoring biodiversity and cutting pollution. Since the introduction of the United Nations Guiding Principles and the OECD Guidelines for Multinational Enterprises there is a clear shift towards a more regulated environment and impact management on social risks. Legislation aimed at preventing human rights violations along the supply chain is being introduced in several countries, including a proposal at EU level for mandatory human rights due diligence.
Other key developments in the regulatory landscape include the latest EU Taxonomy Regulation that requires compliance to minimum social and governance safeguards and the EBA consultation on ESG
Since 2017, ING has been communicating its progress on climate risks and opportunities according to the TCFD in its Annual Report. Further, ING has set its climate risk management ambition based on other relevant materials, such as the ECB’s recent Guide on Climate-related and Environmental risks.
Meanwhile, the Dutch Banking Sector Agreement on Human Rights (DBA) was successfully completed in 2019. ING updated its human rights policy to reflect its commitment to the United Nations Guiding
ING’s ESR policy framework helps us make transparent choices about how, where and with whom we do business. In 2019 we released the updated ESR Framework based on input from internal as well as external stakeholders while during 2020 we also made several updates, which are briefly summarised in the next section. Through these regular updates we keep abreast of social norms and regulation relating to sustainability and challenge our own increasingly strong commitments on the topics of human rights and climate change.
The ESR policy framework includes standards and best practice guidance for ESR-sensitive sectors. It includes explicit restrictions on activities not in line with ING’s values and harmful to people or the environment (for example companies involved in clearance of primary forest), which we do not finance.
C o n d u ct a n d e th ic s
G e n e ri c e n g in e e ri n g
Chemicals, health & pharmaceuticals 1,80% ● ● ● ● ● ● ●
2 Includes policies on Oil and Gas, Coal, Nuclear Energy and Power Generation.
The ESR policy framework is incorporated in ING’s KYC policy framework, meaning the ESR client assessment is part of regular client on-boarding and review. The ESR policy framework also triggers a dedicated ESR transaction assessment to corporate clients which will indicate if such transaction is categorised as ‘ESR high risk’, and thus require a separate in-depth advice from the ESR team.
Of all Wholesale Banking engagements in scope of the ESR policy framework in 2020, 83 percent were considered ESR low-risk, 8 percent ESR medium-risk and 9 percent ESR high-risk. ESR high-risk cases require specialised advice from the global ESR team. The team now consists of 11 dedicated ESR
advisors, 10 of whom are in Amsterdam and one in Geneva. The ESR advice assesses the specific product offered and environmental and social impacts associated with it, the sector, operating context and geography of the engagement and other relevant factors. Based on this in-depth research, a binding advice is given that can only be overruled at Global Credit Committee level. Of the 292 ESR
advices given in 2020, which are related to new requests, 60 percent were positive, 25 percent positive subject to conditions and 15 percent negative. Conditions can play an important role in helping clients transition towards improved environmental and social performance on the ground.
The renewed ESR framework incorporates the updates that took place in December 2019 and July 2020, respectively. The new release, includes the following updates in the policy:
▪ ESR restriction on small arms and light weapons (SALW) was strengthened. For more information please see the ESR framework published on the corporate website ing.com.
▪ Equator Principles: We have adopted EP4 in line with the new updated EP guidelines.
In 2020, the ESR team, together with the retail business, started the implementation of a new ESR selfdeclaration approach for business banking. The concept is already approved by GCTP and it entails an alternative ESR client assessment implementation for business banking clients where lending and presettlement limits exceed €1 million and where the client is active in any of the pre-identified sectors
Following any key ESR policy updates on restrictions, we engage with affected existing clients and provide them with the opportunity to reduce their exposure to the new restrictions; in case a reduction is not feasible, we implement an exit strategy.
Our ESR approach helps us and our clients to gradually enhance the implementation of key standards like the UN Guiding Principles on Business and Human Rights and the Organisation for Economic
Cooperation and Development (OECD) Guidelines for Multinational Enterprises. But beyond stimulating better environmental and social performance in our own portfolio, ING actively collaborates with other institutions, peers and regulators to address the environmental, social and human rights challenges we face: ▪ ING and the Equator Principles (EPs): The EPs are an environmental and social risk management framework adopted by 110 financial institutions worldwide. The EPs were updated in 2019, and the new version (EP4) became effective in October 2020. EP4 contains new and stronger commitments on human rights, climate change, Indigenous Peoples and biodiversity, as well as an increased scope. ING is active in several EP working groups covering social risks, climate change and scope. ING also co-leads the capacity building and training workgroup, which is focussing on updating the EP learning tool with the changes included in
Related Financial Disclosures. This voluntary disclosure outlines the progress made to date. To further strengthen our understanding and adoption of the TCFD recommendations, ING is part of the UNEP FI
Climate change impacts companies and companies have an impact on climate change. As banks, we need to understand the risk climate change poses for our clients and be ready to safeguard our business by taking the implications of climate change into account in our risk processes. We also have a role to play in financing the transition to a low-carbon, climate-resilient economy. At ING, we have chosen an integrated strategy that allows us to translate the risks associated with climate change into opportunities.
In 2017, we started to develop in-house energy transition scenarios based on the drivers of policy and technology. These scenarios formed the basis for the energy transition assessment we undertook for particularly sensitive sectors within the Transportation, Industrials, Power and Real Estate sectors. ING
is committed to continuously reviewing and monitoring its policies and strategies as climate-related risks and opportunities emerge. As a result of transition risk ING further refined its coal policy in 2017, targeting near-zero coal exposure by 2025.
In 2020, we published our second Terra Progress Report that provided an update on how we steer our lending portfolio in line with the goals of the Paris Agreement for all nice sectors in scope, including quantitative results. For an overview of how we capitalise on climate-related opportunities, please refer to Responsible Finance (section ‘Our performance and strategy’).
At ING we already have several processes in place to identify and assess climate-related risks. An example is our environmental and social risk (ESR) framework, including its climate change policy, reviewing risk on a client and transaction basis. We also monitor sector-specific developments associated with the energy transition. For upstream oil and gas, our credit assessments include a strong focus on production costs. By focusing on low-cost production, we work with our clients to ensure their businesses are resilient to the risk of stranded assets.
Non-financial risk (NFR) is defined as the risk of financial loss, legal or regulatory sanctions, or reputational damage due to inadequate or failing internal processes, people and systems; a failure to comply with laws, regulations and standards; or external events. The NFR function encompasses
ING, and for monitoring the quality of non-financial risk management in the ING entities.