The underlying exposures are senior loans to large corporations and financial institutions, and real estate finance loans, mainly in the Netherlands. These securitisations did not impact ING Group’s consolidated statement of financial position and profit or loss.
In the normal course of business, ING Group structures financing transactions for its clients by assisting them in obtaining sources of liquidity by selling the clients’ receivables or other financial assets to a Special Purpose Vehicle (SPV). The senior positions in these transactions may be funded by the ING administered multi seller Asset Backed Commercial Paper (ABCP) conduit; Mont Blanc
The liquidity facilities, provided to Mont Blanc are EUR 1,631 million (2018: EUR 1,173 million). The drawn liquidity amount is nil as at 31 December 2019 (2018: nil).
The fair value of the swap held by ING at 31 December 2019 amounted to EUR –45 million (2018: EUR –33 million); fair value changes on this swap recognised in the statement of profit or loss in 2019 were EUR 12 million (2018: EUR 8 million). Service fee income recognised, for the role as administrative agent, in the statement of profit or loss in 2019 amounted to EUR 2 million (2018: EUR 2 million). The cumulative income recognised in profit or loss since derecognition amounts to
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Subsequent events > 51 in EUR thousands
2 The collective fixed allowances consist of two savings allowances applicable to employees in the Netherlands; an individual savings allowance of 3.5% and a collective savings allowance to compensate for loss of pension benefits with respect to salary in excess of EUR 105,075.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Capital Management > 52 52 Capital Management
▪ Total capital – is Tier 1 capital, subordinated Tier 2 liabilities and regulatory adjustments. Total capital divided by risk-weighted assets equals the Total capital ratio.
▪ Leverage ratio – is defined as Tier 1 capital divided by the total exposure amount.
1) The interim profit not included in CET1 capital as per 31 December 2019 (EUR 43 million), of which EUR 42 million relates to the result of 4Q 2019. (Full Year 2019: EUR 2,689 million).
Besides assessing capital adequacy, ING also ensures the availability of sufficient capital above the set targets and limits for ING Group and ING Bank. Additionally, GT Capital Management ensures adherence to the set limits and targets by planning and executing capital management transactions. The ongoing assessment and monitoring of capital adequacy is embedded in the capital planning process within the ICAAP framework. As part of the dynamic business planning process, ING prepares a capital and funding plan on a regular basis for all its material businesses and assesses continuously the timing, need and feasibility for capital management actions in scope of its execution strategy. Sufficient financial flexibility should be preserved to meet important financial objectives. ING’s risk appetite statements set targets and are at the foundation of the capital plan. These limits are cascaded to the different businesses in line with our risk management framework.
References relate to the accompanying notes. These form an integral part of the Parent company financial statements.
Realised gains/losses transferred to the statement of profit or loss –33 –33
Realised gains/losses transferred to the statement of profit or loss –54 –54
Consolidated financial statements. Investments in Group companies are accounted for in the
The parent company financial statements are presented in euros, rounded to the nearest million, unless stated otherwise. Amounts may not add up due to rounding.
Revaluation reserve in the consolidated accounts, are presented in the Share of participating interests reserve in the parent company accounts; ▪ The reserve for cash flow hedges within consolidated Group companies, presented in Other reserves – Revaluation reserve in the consolidated accounts is included in the Share of participating interests reserve, in the parent company accounts on a net basis.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Investments in Group companies > 1 1 Investments in Group companies
Changes in ING Groep N.V. shares held by group companies 1 4 2 Receivables from Group companies
In 2019, ING Groep N.V. issued 5.0 million ordinary shares (2018: 5.9 million). These issues were made in order to fund obligations arising from share-based employee incentive programmes.
1,818 million (2018: EUR 1,638 million) related to the former Stichting Regio Bank and the former
The number of debentures held by Group companies as at 31 December 2019 is nil with a statement of financial position value of nil (2018: nil with a statement of financial position value of nil).
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Staff expenses > 6 6 Staff expenses
Included in Interest and other financial expenses is EUR 21 million (2018: EUR 7 million) related to
In the ordinary course of business ING Group have entered into a number of agreements whereby
ING Groep N.V. forms a fiscal unity with several Dutch banking entities for corporation tax purposes.
ING Groep N.V., ING Bank N.V. and its banking subsidiaries that form part of the fiscal unity are jointly and severally liable for taxation payable by the fiscal unity. Settlements of corporate income tax paid or received are executed by ING Bank N.V.
At the disposal of the General Meeting of Shareholders pursuant to Article 37 (5) of the
The consolidated financial statements comprise: 1 the consolidated statement of financial position as at 31 December 2019; 2 the following consolidated statements for 2019: the statement of profit or loss, the statements of comprehensive income, changes in equity and cash flows; and 3 the notes comprising a summary of the significant accounting policies and other explanatory information.
We are independent of ING Groep N.V. in accordance with the ‘Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten’ (‘ViO’, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (‘VGBA’, Dutch Code of Ethics).
We agreed with the Audit Committee of the Supervisory Board that misstatements in excess of EUR 15 million which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.
Applying these scoping criteria led to a full or specific scope audit for 40 components globally, in total covering 14 countries. This resulted in a coverage performed by component auditors of 84% of profit before taxation from continuing operations and 90% of total assets. For the remaining 16% of profit before taxation from continuing operations and 10% of total assets, procedures were performed by the group audit team. The consolidation of the ING Group, the disclosures in the financial statements and certain accounting topics that are performed at group level, are audited by the group audit team. Procedures that are performed by the group audit team include, but are not limited to, substantive procedures with respect to equity, goodwill, certain elements of the Expected
All components in scope for group reporting are audited by KPMG member firms. We sent detailed instructions to all component auditors, covering significant areas including the relevant significant risks of material misstatement identified at group level, and set out the information required to be reported to the group audit team. We visited component auditors in the Netherlands, Belgium, Germany, United States of America, Italy and Luxembourg, where we performed local audit file reviews. For Australia, we reviewed the file remotely. For all components in scope of the group audit, we held conference calls and/or physical meetings with the auditors of the components. During these visits, meetings and calls, the planning, risk assessment, procedures performed, findings and observations reported to the group auditor were discussed in more detail and any further work deemed necessary by the group audit team was then performed.
As part of our risk assessment process, we have evaluated events or conditions that indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud (‘fraud risk factors’) to determine whether fraud risks are relevant to our audit. During this risk assessment, we made use of our own forensic specialists.
We communicated identified fraud risks throughout our team and remained alert to any indications of fraud throughout the audit. This included communication from the group to component audit teams of relevant fraud risks identified at group level.
We communicated our risk assessment and audit response to the Executive Board and the Audit Committee of the Supervisory Board. Our audit procedures differ from a specific forensic fraud investigation, which investigation often has a more in-depth character.
— Secondly, the Company is subject to many other laws and regulations where the consequences of non-compliance could have an indirect material effect on amounts recognised or disclosures provided in the financial statements, or both, for instance through the imposition of fines or litigation.
As disclosed in the Executive Board report, ING continued to deliver on the bank-wide Know Your Customer enhancement program (the ‘Enhancement program’) in order to improve governance, systems and tools around client due diligence and transaction monitoring as disclosed in the Executive Board report. We inquired senior management, ING Group legal counsel, ING Group compliance officer and Head of Internal Audit and inspected the progress reports in relation to the Enhancement program. We also evaluated and discussed internal audit reports in relation to compliance and instructed local auditors of selected components of ING Group to assess the progress of the remediation at component level. We observe that the required Enhancement program receives and will need ongoing attention from management, the Audit Committee and the Supervisory Board.
Our procedures to address compliance with laws and regulations did not result in the identification of a Key Audit Matter.
The more distant non-compliance with indirect laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.
Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements. We have communicated the Key Audit Matters to the Audit Committee of the Supervisory Board. The Key Audit Matters are not a comprehensive reflection of all matters discussed.
The primary procedures we performed to address this Key Audit Matter, included the following: — We tested certain internal controls over the Company’s ECL process for loans and advances to customers and banks, including controls related to governance and monitoring of the ECL, review of the relevant loan inputs used in the collective provisioning models, determination of risk ratings, and the estimated future recovery cash flows of individual loan provisions. Furthermore, we tested certain internal controls with respect to the assessment of the PD, LGD, and EAD assumptions in credit risk models used to calculate the collective ECL, including the development of macro-economic scenarios, SICR criteria, and review of model outputs.
ING Group is dependent on its IT environment for the reliability and continuity of its operations and financial reporting. Inappropriate access or changes to an application or infrastructure could impact an automated control and therefore compromise reliability of financial data and continuity of ING Group’s operations. ING Group continued to make efforts to improve its IT systems and processes to increase the efficiency and effectiveness of the IT environment and the reliability and continuity of the IT processing as well as to remediate deficiencies identified in the previous year in access and change management areas.
The Executive Board of the Company is responsible for the preparation of the other information, including the information as required by Part 9 of Book 2 of the Dutch Civil Code.
We were engaged by the Annual General Meeting of Shareholders as auditor of ING Group on 11 May 2015, as of the audit for the year 2016 and have operated as statutory auditor ever since that financial year.
The Supervisory Board is responsible for overseeing the Company’s financial reporting process.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Articles of Association – Appropiation of results
Company may make distributions to the extent permitted by law after adoption of the financial statements by the Executive and Supervisory Boards. The Executive Board subject to approval of the Supervisory Board, determines what part of the result remaining after application of the provisions of article 37.3 is to be appropriated to reserves and that the remaining part of the result shall be at the disposal of the General Meeting of Shareholders. The General Meeting of the
Any of the risks described below could have a material adverse effect on the business activities, financial condition, results and prospects of ING. ING may face a number of the risks described below simultaneously and some risks described below may be interdependent. While the risk factors below have been divided into categories, some risk factors could belong in more than one category and investors should carefully consider all of the risk factors set out in this section.
Because we are a financial services company conducting business on a global basis, our revenues and earnings are affected by the volatility and strength of the economic, business, liquidity, funding and capital markets environments of the various geographic regions in which we conduct business, and an adverse change in any one region could have an impact on our business, results and financial condition.
‘–Interest rate volatility and other interest rate changes may adversely affect our business, results and financial condition’, ‘–Inflation and deflation may negatively affect our business, results and financial condition’, ‘–Market conditions, including those observed over the past few years and the application of IFRS 9 may increase the risk of loans being impaired and have a negative effect on our results and financial condition’ and ‘–Continued risk of political instability and fiscal uncertainty in Europe and the United States, as well as ongoing volatility in the financial markets and the economy generally have adversely affected, and may continue to adversely affect, our business, results and financial condition’.
▪ movements in risk weighted assets for the determination of required capital.
Europe (primarily Poland among others), Southern Europe (primarily Spain among others), East
Changes in prevailing interest rates may negatively affect our business, including the level of net interest revenue we earn, and the levels of deposits and the demand for loans. A sustained increase in the inflation rate in our principal markets may also negatively affect our business, results and financial condition. For example, a sustained increase in the inflation rate may result in an increase in nominal market interest rates. A failure to accurately anticipate higher inflation and factor it into our product pricing assumptions may result in mispricing of our products, which could materially and adversely impact our results. On the other hand, recent concerns regarding negative interest rates and the low level of interest rates generally may negatively impact our net interest income, which may have an adverse impact on our profitability.
A prolonged period of low interest rates has resulted in, and may continue to result in: ▪ lower earnings over time on investments, as reinvestments will earn lower rates; ▪ increased prepayment or redemption of mortgages and fixed maturity securities in our investment portfolios, as well as increased prepayments of corporate loans. This as borrowers seek to borrow at lower interest rates potentially combined with lower credit spreads.
ING’s depositors being forced to pay a premium to ING to hold cash deposits, some depositors may choose to withdraw their deposits in lieu of making such payments to ING, which would have an adverse effect on our reputation, business, results and financial condition.
The default of a major market participant could disrupt the markets and may have an adverse effect on our business, results and financial condition.
This risk is sometimes referred to as ‘systemic risk’ and may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchanges with whom we interact on a daily basis and financial instruments of sovereigns in which we invest.
States, political uncertainty, US national debt levels and changes in US trade and foreign investment policies (including tensions with China and Eurozone) may result in adverse economic developments. In addition, geopolitical issues, including with respect to the Middle East,
downgrade of US Treasury securities could also impact the ratings and perceived creditworthiness of instruments issued, insured or guaranteed by institutions, agencies or instrumentalities directly linked to the US government. US Treasury securities and other US government-linked securities are key assets on the balance sheets of many financial institutions and are widely used as collateral by financial institutions to meet their day-to-day cash flows in the short-term debt market. The impact of any further downgrades to the sovereign credit rating of the US government or a default by the US government on its debt obligations would create broader financial turmoil and uncertainty, which would weigh heavily on the global financial system and could consequently result in a significant adverse impact to the Group’s business and operations.
Any of these general developments in global financial and political conditions could negatively impact to our business, results and financial condition in future periods.
Union may have adverse effects on our business, results and financial condition.
withdrew from the EU on January 31, 2020, though the relationship between the UK and the EU
Given ING’s significant pre-existing EU-licensed banking network and the various scenario analyses performed by ING on its Brexit sensitive clients and sectors, ING believes that it is positioned to largely avoid, or has taken significant steps to mitigate, potential direct adverse effects of Brexit.
The potential discontinuation of the LIBOR and EONIA benchmarks or any other benchmark, or changes in the methodology or manner of administration of any benchmark, could result in a number of risks for the Group, its clients, and the financial services industry more widely. These risks include legal risks in relation to changes required to documentation for new and existing transactions may be required. Financial risks 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
Inflation and deflation may negatively affect our business, results and financial condition.
sustained decline in equity markets may: ▪ result in impairment charges to equity securities that we hold in our investment portfolios and reduced levels of unrealised capital gains available to us which would reduce our net income, and
▪ lower the value of our equity investments impacting our capital position.
significant increase in the size of our provision for loan losses could have a material adverse effect on our business, results and financial condition.
IFRS 9 ‘Financial Instruments’ became effective as per 1 January 2018 and results in loan loss provisions that may be recognized earlier, on a more forward looking basis and on a broader scope of financial instruments than was previously the case under IAS 39. ING has applied the
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Risk factors classification, measurement, and impairment requirements retrospectively by adjusting the opening balance sheet and opening equity as at 1 January 2018. As a result of applying IFRS 9 going forward, a shift in the forward looking consensus view of economic conditions may materially impact the models used to calculate loan loss provisions under IFRS 9 and cause more volatility in, or higher levels of, loan loss provisions, any of which could adversely affect the Group’s results, financial condition or regulatory capital position.
While prudential regulation is intended to minimize the risk of bank failures, in the event such a failure occurs, given our size, we may incur significant compensation payments to be made under the Dutch Deposit Guarantee Scheme (DGS), which we may be unable to recover from the bankrupt estate, and therefore the consequences of any future failure of such a bank could be significant to
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Risk factors penalties or other disciplinary action, which could materially harm our results and financial condition. If we fail to address, or appear to fail to address, any of these matters appropriately, our reputation could be harmed and we could be subject to additional legal risk, which could, in turn, increase the size and number of claims and damages brought against us or subject us to enforcement actions, fines and penalties.
We are subject to additional legal and regulatory risk in certain countries where we operate with less developed or predictable legal and regulatory frameworks.
In its capacity as principal bank supervisor in the EU, the ECB has extensive supervisory and investigatory powers, including the ability to issue requests for information, to conduct regulatory investigations and on-site inspections, and to impose monetary and other sanctions. For example, under the SSM, the regulators with jurisdiction over the Group, including the ECB, may conduct stress tests and have discretion to impose capital surcharges on financial institutions for risks that are not otherwise recognised in risk-weighted assets or other surcharges depending on the individual situation of the bank and take or require other measures, such as restrictions on or changes to the Group’s business. Competent regulators may also, if the Group fails to comply with regulatory requirements, in particular with minimum capital requirements (including buffer requirements) or with liquidity requirements, or if there are shortcomings in its governance and risk management processes, prohibit the Group from making dividend payments to shareholders or
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Risk factors distributions to holders of its regulatory capital instruments. Generally, a failure to comply with the new quantitative and qualitative regulatory requirements could have a material adverse effect on the Group’s business, results and financial condition.
Failure to meet minimum capital and other prudential regulatory requirements as applicable to us from time to time may have a material adverse effect on our business, results and financial condition and on our ability to make payments on certain of our securities.
Any failure to comply with these requirements may have a material adverse effect on our business, results and financial condition, and may require us to seek additional capital. It may also prohibit us from making payments on certain of our securities. Our business, results and financial condition may also be adversely affected if these requirements change, which may also require us to seek additional capital or a different type of capital. Because implementation phases and transposition into EU or national regulation where required may often involve a lengthy period, the impact of changes in capital, liquidity and leverage regulations on our business, results and financial condition, and on our ability to make payments on certain of our securities, is often unclear.
Our US commodities and derivatives business is subject to CFTC and SEC regulation under the Dodd-Frank Act.
All of the foregoing areas of regulation of the derivative markets and market participants will likely result in increased cost of hedging and other trading activities, both for ING and its customers, which could expose our business to greater risk and could reduce the size and profitability of our customer business. In addition, the imposition of these regulatory restrictions and requirements, could result in reduced market liquidity, which could in turn increase market volatility and the risks and costs of hedging and other trading activities.
We are subject to the ‘Bank Recovery and Resolution Directive’ (‘BRRD’) among several other bank recovery and resolution regimes that include statutory write down and conversion as well as other powers, which remains subject to significant uncertainties as to scope and impact on us.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Risk factors could be a material adverse effect on us and on holders of our securities, including through a material adverse effect on credit ratings and/or the price of our securities. Investors in our securities may lose their investment if resolution measures are taken under current or future regimes.
We may be subject to withholding tax if we fail to comply with the Foreign Account
made to the branch/subsidiary, regardless of whether the branch/subsidiary is the beneficial owner of such payment or is acting as an intermediary for customers/payees.
requirements, then it would not be commercially feasible for ING to offer certain products to customers.
ING is exposed to the risk of claims from customers who feel misled or treated unfairly because of advice or information received.
ING if the products do not meet their expectations. Customer protection regulations, as well as changes in interpretation and perception by both the public at large and governmental authorities of acceptable market practices, influence customer expectations.
Operational risks, such as systems disruptions or failures, breaches of security, cyber attacks, human error, changes in operational practices, inadequate controls including in respect of third parties with which we do business, natural disasters or outbreaks of communicable diseases may adversely impact our reputation, business and results.
We face the risk that the design and operating effectiveness of our controls and procedures may prove to be inadequate. Operational risks are inherent to our business. Our businesses depend on the ability to process a large number of transactions efficiently and accurately. In addition, we routinely transmit, receive and store personal, confidential and proprietary information by email and other electronic means. Although we endeavour to safeguard our systems and processes, losses can result from inadequately trained or skilled personnel, IT failures (including due to a computer virus or a failure to anticipate or prevent cyberattacks or other attempts to gain unauthorised access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or impairing operational performance, or security breaches by third parties), inadequate or failed internal control processes and systems, regulatory breaches, human errors, employee misconduct, including fraud, or from natural disasters or other external events that interrupt normal business operations. Such losses may adversely affect our reputation, business and results. We depend on the secure processing, storage and transmission of confidential and other information in our computer systems and networks. The equipment and software used in our computer systems and networks may not always be capable of processing, storing or transmitting information as expected. Despite our business continuity plans and procedures, certain of our computer systems and networks may have insufficient recovery capabilities in the event of a malfunction or loss of data. As part of our Accelerated Think Forward strategy, we are consistently managing and monitoring our IT risk profile globally. ING is subject to increasing regulatory requirements including EU General Data Protection Regulation (‘GDPR’) and EU Payment
There is substantial competition in the Netherlands and the other countries in which we do business for the types of wholesale banking, retail banking, investment banking and other products and services we provide. Customer loyalty and retention can be influenced by a number of factors, including brand recognition, reputation, relative service levels, the prices and attributes of products and services, scope of distribution, credit ratings and actions taken by existing or new competitors
(including non-bank or financial technology competitors). A decline in our competitive position as to one or more of these factors could adversely impact our ability to maintain or further increase our market share, which would adversely affect our results. Such competition is most pronounced in our more mature markets of the Netherlands, Belgium, the rest of Western Europe and Australia.
Netherlands is our largest market. Our main competitors in the banking sector in the Netherlands are ABN AMRO Bank and Rabobank.
Increasing competition in the markets in which we operate (including from non-banks and financial technology competitors) may significantly impact our results if we are unable to match the products and services offered by our competitors. Future economic turmoil may accelerate additional consolidation activity. Over time, certain sectors of the financial services industry have become more concentrated, as institutions involved in a broad range of financial services have been acquired by or merged into other firms or have declared bankruptcy. These developments could result in our competitors gaining greater access to capital and liquidity, expanding their ranges of products and services, or gaining geographic diversity. We may experience pricing pressures as a result of these factors in the event that some of our competitors seek to increase market share by reducing prices.
We may be exposed to business, operational, regulatory, reputational and other risks in connection with climate change.
Climate change is an area of significant focus for governments and regulators, investors and ING’s customers, and developments with respect to climate change topics may expose ING to significant risks. The perception of climate change as a risk by civil society, shareholders, governments and other stakeholders continues to increase, including in relation to the financial sector’s operations and strategy, and international actions regulating or restricting CO2 emissions, such as the Paris agreement, may also result in financial institutions coming under increased pressure from such stakeholders regarding the management and disclosure of their climate risks and related lending and investment activities. Additionally, rising climate change concerns may lead to additional regulation that could increase our operating costs or negatively impact the profitability of our investments and lending activities, including those involving the natural resources sector. ING may incur substantial costs in complying with current or future laws and regulations relating to climate change, including with respect to international actions regulating or restricting CO2 emissions or changes in capital requirements regulations in response to climate change. In addition, ING is exposed to transition risks related to climate change, which result from changes in the behaviour of economic and financial actors in response to the implementation of energy policies or technological changes. Any of these risks may result in changes in our business activities or other liabilities or costs, including exposure to reputational risks, any of which may have a material and adverse impact on our business, results or financial condition.
We use quantitative methods, systems or approaches that apply statistical, economic financial, or mathematical theories, techniques and assumptions to process input data into quantitative estimates. Errors in the development, implementation, use or interpretation of such models, or from incomplete or incorrect data, can lead to inaccurate, noncompliant or misinterpreted model outputs, which may adversely impact our reputation and results. In addition, we use assumptions in order to model client behaviour for the risk calculations in our banking books. Assumptions are used to determine the interest rate risk profile of savings and current accounts and to estimate the embedded option risk in the mortgage and investment portfolios. Assumptions based on past client behaviour may not always be a reliable indicator of future behaviour. The realisation or use of different assumptions to determine client behaviour could have a material adverse effect on the calculated risk figures and, ultimately, our future results or reputation. Furthermore, we may be subject to risks related to changes in the laws and regulations governing the risk management practices of financial institutions. For further information, see ‘Risks related to the regulation and supervision of the Group – Changes in laws and/or regulations governing financial services or financial institutions or the application of such laws and/or regulations may increase our operating costs and limit our activities’ above.
Our hedging strategy additionally relies on the assumption that hedging counterparties remain able and willing to provide the hedges required by our strategy. Increased regulation, market shocks, worsening market conditions (whether due to the ongoing euro crisis or otherwise), and/or other factors that affect or are perceived to affect the financial condition, liquidity and creditworthiness of ING may reduce the ability and/or willingness of such counterparties to engage in hedging contracts with us and/or other parties, affecting our overall ability to hedge our risks and adversely affecting our business, results and financial condition.
Furthermore, regulatory liquidity requirements in certain jurisdictions in which we operate are becoming more stringent, undermining our efforts to maintain centralised management of our liquidity. These developments may cause trapped pools of liquidity and capital, resulting in
‘ring fence’ or maintain internal total loss-absorbing capacity at such entities in order to protect clients and creditors of such entities in the event of financial difficulties involving such entities. The result has been and may continue to be additional limitations on our ability to efficiently move capital and liquidity among our affiliated entities, thereby increasing the overall level of capital and liquidity required by ING on a consolidated basis.
ING’s AT1 Securities may, under certain circumstances, convert into equity securities, and such conversion would dilute the ownership interests of existing holders of ING shares and such dilution could be substantial. Additionally, any conversion, or the anticipation of the possibility of a conversion, could depress the market price of ING shares. Furthermore, we may undertake future equity offerings with or without subscription rights. In case of equity offerings with subscription rights, holders of ING shares in certain jurisdictions, however, may not be entitled to exercise such rights unless the rights and the related shares are registered or qualified for sale under the relevant legislation or regulatory framework. Holders of ING shares in these jurisdictions may suffer dilution of their shareholding should they not be permitted to, or otherwise chose not to, participate in future equity offerings with subscription rights.
Our annual report integrates financial and non-financial performance data. We report on areas of our business and operations where we can have a material impact both inside the organisation and externally.
Sustainability Direction. Our global head of Sustainability reports directly to Management Board
The aggregation of these inputs resulted in preliminary results which were validated in a peer and media-analysis. The process received reasonable assurance from audit firm KPMG.
Responsible finance Responsible finance remains a critical strategic growth area for us. We’re strongly committed to supporting the transition of our clients around the globe to drive progress on climate action and financial health. We do this through various financial instruments, including green loans, sustainable improvement loans, bonds and advisory.
’Other’ includes advice reports covering the policy areas animal welfare, chemicals and manufacturing.
ING is a founding signatory of the Principles for Responsible Banking, adopted in New York in
▪ In our choice of SDG focus areas we’ve considered our most significant exposure; ▪ Our Terra Approach focuses on the sectors in our loan book that are responsible for most greenhouse gas emissions: - As a global bank ING’s approach is guided by global frameworks – the UN Sustainable Development Goals
(SDGs) and the Paris Climate Agreement; - ING conducted a saliency analysis in line with the
Provide the bank’s self-assessment statement. ING meets the requirements under Principle 2.1.
UNEP FI Principles for Responsible Banking UNEP FI Principles for Responsible Banking
Principle 2: Impact and Target Setting 2.3 Show that the bank has defined actions and milestones to meet the set targets. Show that the bank has put in place the means to measure and monitor progress against the set targets.
Provide the bank’s self-assessment statement. ING meets the requirements under Principle 2.3.
Wholesale and Retail Banking, specifically: - Climate Finance; - Social Impact Finance; - Sustainable investing brokerage; - Number of customers who felt financially empowered.
▪ Our Human Rights Update 2019 provides a follow-up on client engagements on the salient issues identified in 2018; ▪ Our sector-level climate alignment as measured by Terra is available in Climate Alignment Dashboards (CAD) – see p.
Provide the bank’s self-assessment statement. ING meets the requirements under this Principle.
Principle 4: Stakeholders 4.1 Describe which stakeholders (or groups/types of stakeholders) the bank has consulted, engaged, collaborated or partnered with for the purpose of implementing these Principles and improving the bank’s impacts. This should include a high-level overview of how the bank has identified relevant stakeholders and what issues were addressed/results achieved.
5.3 Show that the bank has a governance structure in place for the implementation of the
Oversight of the Principles for Responsible Banking implementation has been integrated into our sustainability governance, meaning that it is now a board-level mandate.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Non-financial appendix number of employees Permanent Temporary Total
Our commitments: ▪ We’ll reduce our CO2e emissions by 50 percent by 2020 (base year 2014).
▪ Our residual waste was reduced by 17 percent in 2019 relative to our base year.
▪ We maintained our proportion of renewable electricity consumption at 98 percent of total electricity consumption. We aim to achieve our 100 percent renewable electricity target in 2020.
On a day-to-day basis we actively engage with our customers and other stakeholders, including investors, government officials and NGOs, on relevant topics, issues and challenges, both at an expert level and at a (senior) management and Board level. In revising our ESR policies, we follow a structured consultation process and proactively seek input from relevant stakeholders. In line with our Sustainability Direction we contribute to multiple international initiatives and cooperate as a member in platforms such as the Equator Principles Association and the UN Environmental
OECD Guidelines for Multinational Enterprises and the Global Reporting Initiative. An up-to-date overview of partnerships, memberships and endorsements can be found online.
Brumadinho, in Brazil’s state of Minas Gerais. The Centre invited 21 business partners and investors of the mine’s owner – Brazilian company Vale – to respond to letters from global NGOs raising concerns about the impacts and human rights violations related to the Mina do Feijao dam disaster of 25 January 2019. The NGO letters also address the case of the rupture of the Fundao dam in 2015, considered one of the worst dam disasters in Brazil. The dam was owned by Samarco, a joint venture of Vale and BHP.
While Vale is a client of ING, we do not and have not provided finance for either of the two sites -
Find our mining sector policy in our Environmental and Social Risk (ESR) framework.
The report explores the links between 56 Brazilian companies fined for environmental offences in the Amazon since 2017, and global commodity traders and financiers.
The report lists companies involved in the production and sourcing of soy, beef, leather, timber and sugar in Brazil, as well as their shareholders and a number of global banks like ING working with these sectors. In a response to the NGO report shared with the Business and Human Rights
Resource Centre, ING clearly states its zero tolerance to the facilitation of deforestation and/or the burning down of tropical forests, a stance embedded in ING’s forestry and agricultural commodities sector policy.
notification. The notification, filed in 2017 by NGOs Oxfam Novib, Greenpeace, BankTrack and
Friends of the Earth, alleged that ING’s climate policy was in breach of the OECD Guidelines.
The NCP is an institution that monitors whether companies comply with the corporate social responsibility guidelines of the OECD, the organisation for economic cooperation between industrialised countries. Find out more about the work of the NCP.
The final statement of the NCP describes ING’s approach to climate action (the Terra approach) as
However, replacing oil palms with another type of oil crop would increase the demand for agriculture land seven to nine times. In April 2019, the World Wildlife Fund (WWF) released a statement calling on banks and institutional investors to address deforestation, climate change and human rights abuses in the sector. According to WWF, “divestment is not the answer”.
This view is in line with those of the Dutch government and other reputable stakeholders, such as the International Union for Conservation of Nature (IUCN) and NGO Solidaridad.
This classification is most relevant as it defines the responsibility, and thus actions required, of the bank. Much depends on a bank’s due diligence processes and its leverage applied seeking to address adverse impacts. ING considers it is ‘linked to’ the alleged adverse impacts of its clients.
In July 2019, NGO Fair Finance Guide published a study into Dutch banks and insurance companies’
ING believes that the use of plastics is an essential aspect of modern life, not only in food packaging but also medical instruments like syringes. Its properties help people and companies reduce food waste, CO2 emissions and enable advances in healthcare. At the same time, we believe we need to take action to reduce plastics waste. ING has endorsed the New Plastics Economy (NPEC) Global
We have focused our plastics commitment on plastic packaging and helping eliminate plastic waste and pollution, as that’s where we believe we can have the most impact. We aim to reduce, reuse and recycle plastic packaging within our own operations as well as to support our clients in the packaging and recycling parts of the plastics value chain.
ING’s progress reflects our implementation of the UNGP, which we began in 2018, and our follow-up on salient human rights risks in 2019. ING’s Human Rights Update, published in November 2019, gives an update on the steps we’ve taken to improve human rights.
IFRS the following: special items; the impact of divestments and Insurance Other.
Net result attributable to Equity holders of the parent (a) 4,781 4,703 4,905 -/- Net result from special items –775 0 -/- Net result Insurance Other 90 –52
ING Group's total return on equity (a / c) 9.4% 9.8% 10.1%
-/- Income from special items 121 -/- Income from Insurance Other 89 –53 -/- Operating expenses from special items 775